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AK Intertie Agreements-Legislation & Relavent Correspondence 2002
INTERTIE AGREEMENTS, LEGISLATION,AND RELEVANT CORRESPONDENCE g-ECEIVERee AIDEA/AEA SETTLEMENT AGREEMENT AND RELEASE - THIS SETTLEMENT Agreement and Release ("Agreement”J'is made and entered into as ofthe _day of August 2002,(the "Effective Date”)by and between Matanuska Electric Association,Inc.("MEA”),and the Alaska Energy Authority ("the Authority”).These parties shall be collectively referred to as the "Parties,”or individually as a "Party.” This Agreement is for the full settlement,compromise and release of claims that have been asserted or could have been asserted by,among,and between the Parties in,or related to, the specific case now pending in the Superior Court for the State of Alaska,at Anchorage,entitled: MATANUSKA ELECTRIC ASSOCIATION,INC.,Plaintiff v.ALASKA ENERGY AUTHORITY:Defendant,Case No.3AN-96-9164 (the "Litigation”). The Litigation invoives a dispute between the Parties over the appropriate rate to be applied or charged under the Transmission Services Agreement ("TSA”).The TSA is an agreement between the Parties which,among other things,compensates MEA for use of a portion of its transmission lines as part of the Alaska Intertie.Prior to 1996,the rate under the TSA was .38 mills ($.00038)per kilowatt hour.In the Litigation,MEA claimed that the appropriate rate,beginning with its invoice dated January 8,1996,should be .58 mills ($.00058)per kilowatt hour.The Authority denied and disputed MEA's calculation of the rate and asserted a counterclaim against MEA that the rate should be approximately .15 mills ($.00015)per kilowatt hour.The Parties haveeachdisputedanddeniedtheclaimsandcounterclaimsagainstthem. Subject to the terms and conditions of this Agreement,the Parties desire to settle and resolve fully their differences related to or arising out of the matters set forth in the preceding paragraph and accordingly enter into this Agreement.Therefore,the Parties agree as follows: 1.Consideration.The Parties acknowledge and agree that the consideration given for this Agreement ts for the purpose of resolving further controversy and to avoid continued litigation between the Parties and that none of the Parties admit any liability of any sort except as otherwise expressly noted herein. a.Payment.MEA shall be paid the sum of TWENTY-SIX THOUSAND STX-HUNDRED FOURTEEN AND 24/100 DOLLARS ($26,614.24),plus $3,523.15 in agreeduponinterest,for a total payment to MEA of $30,137.39,0 itIp 'eeyyhWs.'b."Rate Under the TSA."The rate.under the TSAnis fixed at "38,"mills .t($.00038)per kilowatt hour through the Effective Date of:this Agreement.Both..Parties «acknowledge and agree that the rate cannot be increased,decréased or challenged for.anytimeperiodpriortoandincludingtheEffectiveDate.The Parties further agree that the rate shall''stay,at.38 mills ($.00038)per kilowatt hour hereafter until such time as either,Party.notifies'the.otherParty,in accordance with terms of the TSA,that*the rate should be changed from.38amills.($.00038)per kilowatt hour.The rate may be changed.only.as providedin:the TSA,and,ANY,Tatechangeshallbeprospectiveonly.No Party.may seek a retroactive rate change.,annev4 SETTLEMENT AGREEMENT &RELEASE:Sa "+PAGE! Cc.Dismissal of Litigation and Partial Summary Judgment.Upon the execution of this Agreement,the Parties shall dismiss with prejudice the Litigation,in accordance with Paragraph 3 below.The Parties intend and agree that the dismissal of the Litigation shall be effective as to all claims,counterclaims,and existing orders,including but not limited to the order dated February 6,2000 granting MEA partial summary judgment. 2.Release of Claims.All of the releases described in this section shall take effect as of the Effective Date of this Agreement.These releases are intended to,and do,extinguish the pastclaimsbetweentheParties.HOWEVER,it is the intent of the Parties that this Agreement does not release or extinguish any claims by either Party based on a prospective rate adjustment under the TSA,ie.,from the Effective Date of this Agreement forward.Each Party reserves the right to assert any such claims (and any counterclaims or defenses thereto)prospectively from the Effective Date, without prejudice or limitation,EXCEPT that no Party may seek a retroactive rate adjustment,i.e., for any time period prior to and inciuding the Effective Date.It is the intent of the Parties that, should a future dispute arise as to the appropriate rate under the TSA,that the day after the Effective Date of this Agreement shall be the earliest date from which any rate adjustment shall be calculated. a.In consideration of the covenants and conditions of this Agreement and other good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged, MATANUSKA ELECTRIC ASSOCIATION.INC.,and all of its affiliates,subsidiaries,partners, related companies,and present and former representatives,agents,employees,directors,officers, members,shareholders,partners,attorneys,successors and assigns,if any,and any entity or person claiming through it by subrogation or otherwise,hereby forever completely,absolutely, unconditionally,and fully waive,release and forever discharge the ALASKA ENERGY AUTHORITY,and all of its affiliates,subsidiaries,parents,related companies,and present and former representatives,agents,employees,directors,officers,members,shareholders,partners, insurers,reinsurers,sureties,claims administrators,attorneys,successors and assigns,and any entity or person claiming through them by subrogation or otherwise,from any and all past,present or future demands,claims,obligations,claims for reimbursement or payment of expenses including without limitation any causes of action,rights,defenses,costs,contribution,indemnity,lawsuits and liabilities of any kind and nature whatsoever (hereinafter collectively referred to as the "Claims”), resulting from,arising out of,or in any way related to or connected with the events,relationships or conduct described in the Litigation or this Agreement,whether such Claims are based on federal or state statute,common law,federal or state constitution,or any other theory of recovery,and whether such Claims are for compensatory or punitive damages,and whether any such Claims are now existing or hereafter arising,conditional or unconditional,liquidated or unliquidated,contingent or matured,known or unknown,suspected or unsuspected,disclosed or undisclosed,EXCEPT as otherwise specifically noted in this Agreement. b.In consideration of the covenants and conditions of this Agreement and other good and valuable consideration,the receipt and sufficiency of which are hereby acknowledged,the ALASKA ENERGY AUTHORITY,and all of its affiliates,subsidiaries,partners,related companies,and present and former representatives,agents,employees,directors,officers,members, shareholders,partners,attorneys,successors and assigns,if any,and any entity or person claiming SETTLEMENT AGREEMENT &RELEASE PAGE2 through it by subrogation or otherwise,hereby forever completely,absolutely,unconditionally,and fully waive,release and forever discharge MATANUSKA ELECTRIC ASSOCIATION,INC.,and all of its affiliates,subsidiaries,parents,related companies,and present and former representatives, agents,employees,directors,officers,members,shareholders,partners,insurers,reinsurers,sureties, claims administrators,attorneys,successors and assigns,and any entity or person claiming through them by subrogation or otherwise,from any and all past,present or future demands,claims, obligations,claims for reimbursement or payment of expenses including without limitation any causes of action,rights,defenses,costs,contribution,indemnity,lawsuits and liabilities of any kind and nature whatsoever (hereinafter collectively referred to as the "Claims”),resulting from,arising out of,or in any way related to or connected with the events,relationships or conduct described in the Litigation or this Agreement,whether such Claims are based on federal or state statute,common law,federal or state constitution,or any other theory of recovery,and whether such Claims are for compensatory or punitive damages,and whether any such Claims are now existing or hereafter arising,conditional or unconditional,liquidated or unliquidated,contingent or matured,known or unknown,suspected or unsuspected,disclosed or undisclosed,EXCEPT as otherwise specifically noted in this Agreement. 3.Dismissal of Action.Upon the execution of this Agreement,the Parties shall promptly dismiss with prejudice all claims and causes of action asserted in the Litigation,by executing and filing the Stipulation for Dismissal attached hereto as Exhibit A. 4.Attorneys'Fees and Costs.Each Party shall pay its own costs and attorneys'fees associated with the Litigation and this settlement and Agreement. 5.No Admissions.The matters set forth herein are stated solely for purposes of settlement of any dispute between the Parties and shall not constitute admissions by any Party as to any matters. 6.Effective Date.This Agreement shall not become effective until all of the Parties have executed this Agreement.Upon full execution,this Agreement shall be effective as of the date stated in the opening paragraph of the Agreement (the "Effective Date”). 7.Counterparts.This Agreement may be executed in counterparts,each of which shall be identical in context,and in which case,all such counterparts shall constitute one and the same Agreement. 8.Entire Agreement.This Agreement constitutes the entire agreement and understanding among and between the Parties with respect to the subject matter hereof,and supersedes all prior agreements and understandings,both written and oral,concerning such matters. 9.Binding Effect.This Agreement shall be binding upon and inure to the benefit of each of the Parties hereto,their heirs,administrators,executors,personal representatives,other legal representatives,successors,and permitted assigns. 10.Captions.Any captions used in this Agreement are for convenience of reference SETTLEMENT AGREEMENT &RELEASE PAGE 3 only and shall not be construed as part of the Agreement. 11.Construction of Agreement.This Agreement has been negotiated by the Parties and their respective legal counsel,if any,and the Parties expressly intend and agree that any legal or equitable principles that might require the construction of this Agreement or any provision of it against the party drafting the Agreement will not apply in the construction or interpretation of this Agreement. 12.Governing Law,Venue and Jurisdiction.This Agreement shall be governed, construed and enforced 1n accordance with the laws of the State of Alaska.The Parties expressly agree that should litigation or any legal proceeding be necessary under this Agreement,the same shall be commenced exclusively in the state court in Anchorage,Alaska. 13.Authority and Advice of Counsel.The Parties represent that all necessary proceedings and conditions to authorize this Agreement have been duly performed and complied with,and that this Agreement constitutes a valid,legal,and binding obligation of the Parties and each of them,enforceable in accordance with its terms.Each of the Parties acknowledges and agrees that it has had the opportunity to receive advice of independent counsel regarding this Agreement,and freely and voluntarily enters into this Agreement,as a binding obligation enforceable in accordance with its terms. 14._-_-Risk of Mistake or Unknown Risks.Each Party acknowledges and assumes all risk,chance,or hazard that the damages suffered or claimed may be different,or become progressive,greater,or more extensive than is now known,anticipated,or expected.Except to the extent otherwise specifically reserved herein in Section 1,the Parties intend to discharge any and all liability,as described in this Agreement,for all known and unknown damages relating to the events and relationships described in this Agreement.The Parties each release any right or future right they may have to reform,rescind,modify,or set aside this Agreement because of mutual or unilateral mistakes.The risk of such uncertainty of mistake is assumed by the Parties in consideration for the payments,releases,and other consideration described in this Agreement.The Parties acknowledge that they are familiar with the decision of the Alaska Supreme Court in Witt v. Watkins,579 P.2d 1065 (Alaska 1978),and it is the intention of the parties to assume the obligations contained in this Agreement,despite the risk of mistake,changes in the damages,and discovery of new or different damages. 15.Economic Duress.The Parties expressly represent that they have entered into this Agreement freely and voluntanly,without economic coercion or duress.The Parties acknowledge that they are familiar with the case of Totem Marine Tug and Barge v.Alyeska Pipeline Service Company,584 P.2d 15 (Alaska 1978),and that they expressly waive the protection set forth therein. 16.Amendment and Modification.This Agreement may be amended,modified and supplemented only by written agreement signed by all the parties.Any waiver must be in writing, and any waiver by any party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of that provision or any other provision of this Agreement. SETTLEMENT AGREEMENT &RELEASE PAGE 4 17.No Partnership/Third Party Beneficiaries.Nothing in this Agreement shall be intended or deemed to create a partnership,joint venture,association,or other similar relationship between the parties hereto.This Agreement does not create,and shall not be construed as creating, any rights enforceable by any person not a party to this Agreement. 18.Severability.If any clause or term of this Agreement shall be deemed invalid by any court of law,the validity and enforcement of the other clauses and terms of the Agreement shall be unaffected. IN WITNESS WHEREOF,the Parties hereto have executed this Agreement as of the respective dates set forth below. MATANUSKA ELECTRIC ASSOCIATION INC. f ”.\ooDATED:/}he 9 ZO deo By:fy Jasphe-O.!arama Lyei, Its enerel [Via nn ger ALASKA ENERGY AUTHORITY DATED:By: Its STATE OF ALASKA ) )ss. THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this "day of August 2002,before me,the undersigned,a Notary Publicin and for theState of Alaska,duly commissioned and sworn as such,personally appeared 24yAe Dd.CAgmans,who executed the foregoing instrument as Gezt KL Ka anyLeite SETTLEMENT AGREEMENT &RELEASE PAGE 5 STATE OF ALASKA ) )ss. THIRD JUDICIAL DISTRICT ) THIS IS TO CERTIFY that on this _day of August 2002,before me,the undersigned,a Notary Public in and for the State of Alaska,duly commissioned and sworn as such, personally appeared ,who executed the foregoing instrument as for ALASKA ENERGY AUTHORITY and acknowledged to me that he/she signed the same freely and voluntarily on behalf of ALASKA ENERGY AUTHORITY. Notary Public in and for Alaska _My Commission Expires: SETTLEMENT AGREEMENT &RELEASE PAGE 6 Aug 20-02 03:16pm From-FOSTER { :R RUBINI &REEVES LLC +190722271 98 T-579 «=P.08/08 =F-421 17,No Partnership/Third Party Beneficiaries.Nothing in this Agreement shal]be intended or deemed to create a partnership,Joint venture,association,or other similar relationship berween the parties hereto.This Agreement does not create,and shall not be construed as creating, any rights enforceable by any person not 4 party to this Agreement. 18.Severability.If any clause or term of this Agreement shall be deemed invalid byanycourtoflaw,the validity and enforcement of the other clauses and terms of the Agreement shall be unaffected. IN WITNESS WHEREOF,the Parties hereto have executed this Agreement as of the respective dates set forth below. MATANUSKA ELECTRIC ASSOCIATION INC. DATED:By: Its ALASKA ENERGY-AUTHORITY DATED:Gf 2/obos By: Its Exce cfive a Drecfer STATE OF ALASKA ) )ss. THIRD JUDICIAL DISTRICT +) THIS IS TO CERTIFY that on this day of August 2002,before me,the undersigned,a Notary Public in and for the State of Alaska,duly commissioned and sworn as such, personally appeared ,who executed the foregoing instrument as for MATANUSKA ELECTRIC ASSOCIATION,INC.and acknowledged to me that he/she signed the same freely and voluntarily on behalf of MATANUSKA ELECTRIC ASSOCIATION,INC. Notary Public in and for Alaska My Commission Expires: SETTLEMENT AGREEMENT &RELEASE PAGE 5 +19072227198 1-579 «=P.07/09 =-F-421Aug-20-02 03:17pm -From-FOSTER |"R RUBIN]&REEVES LLC STATE OF ALASKA ) )ss. THIRD JUDICIAL DISTRICT -) THIS IS TO CERTIFY that on this ax day of August 2002,before me,the undersigned,a Notary Public in and for the State of Alaska,duly commissioned and swarn as such,personally appeared Rabuch Poo -Se,__,who executed the foregoing instrument as Lice vaya Dnecker for ALASKA ENERGY AUTHORITY and acknowledged to me that he/she signed the same freely and voluntarily on behalf of ALASKA ENERGY AUTHORITY. ality.ruglyWDdeeTKDSESS , BS %<2,Notary Publi¢in ard for Alaskaeed:lye .O Zs "y V.on 7 . :toi NOTARY +$2 My Commission Expires:(Zystat 17 2008Ei=t :*==sS *P LIC;=ae oot SSGPsyedESCagleOFRe SETTLEMENT AGREEMENT &RELEASE PACE 6 Agreement No. 10 11 12 INTERTIE AGREEMENT AND RELEVANT CORRESPONDENCE INDEX Description Intertie Grant Agreement Grant Transfer Delegation Agreement 1993 Alaska Intertie Project Participants Agreement Grant Administration Agreement Intertie Participants Group Northern Intertie System Agreement 1993 Alaska Intertie Project Construction Management Agreement 2000 Agreement Settling the Anchorage- Kenai Intertie Phase 1 Funding Dispute 2002 Letter of Agreement between AIDEA and GVEA Concerning Disbursement of Funds -Under the Grant Administration Agreement Alaska Intertie Maintenance Agreement between Alaska Power Authority and Alaska Electric Generation and Transmission Cooperative,Inc. Transmission Services Agreement between Matanuska Electric Association,Inc.,and Alaska Power Authority Alaska Intertie Maintenance Agreement for the Intertie Facilities Located in the Teeland Substation of Chugach Electric Association, Inc.,between Alaska Power Authority and Chugach Electric Association,Inc. Alaska Intertie Maintenance Agreement between Alaska Power Authority and Golden Valley Electric Association,Inc. Page 1 of 2 Intertie Northern &Southern Northern &Southern Northern &Southern Northern &Southern Northern Northern Southern Northern Alaska Alaska Alaska Alaska Agreement No. 13 14 15 16 17 18 19 Legislation Description Alaska Intertie Agreement among Alaska Power Authority Municipality of Anchorage, Alaska d.b.a.Municipal Light and Power; Chugach Electric Association,Inc.;City of Fairbanks,Alaska,Municipal Utilities System; and Golden Valley Electric Association,Inc.; and Alaska'Electric Generation and Transmission Cooperative,Inc. Joint Use Agreement with MEA -January 1984 Agreement of ML&P appeal dated December 15,1994 Agreement for Intertie Testing -December 1985 SCADA Agreement with ML&P -April 1986 SCADA Agreement with GVEA -January 1986 Douglas Substation Agreement -March 30, 1984 Chapters 18 and 19 SLA 1993 H:\ALL\sdean\intertie Agreements and Relevant Corres.doc Page 2 of 2 Intertie Northern Southern Alaska Alaska Alaska Alaska Alaska Alaska Alaska Northern &Southern Proposed Private/Utility Owned Existing Alaska Intertie or Northern Intertie Under Construction Southern Intertie _CEA/ML&P/MEA Anchorage-Fairbanks Intertie e Kenai Anchorage Willow Healy Fairbanks -_Ul kl Slee elle Ci"'a e@ COMMUNITIES OOVNOAUNAUN-GENERATION _PLANTS BELUGA (CEA)30BERNICELAKE(CEA)COOPER LAKE HYDRO (CEA)EIELSON AFB (US AIR FORCE)EKLUTNA HYDRO (APA)FORT GREELY (US ARMY)GLENNALLEN (CVEA)HEALY (GVEASEWARD(SES,SOLOMON GULCH HYDRO (AEA)VALDEZ (CVEA)SOLDOTNA (AEG&T)BRADLEY LAKE (AEA) SUBSTATIONS ANCHOR POINT (HEA)CANTWELL (AEA)CARNEY (GVEA)DAVES CREEK (CEA)DIAMOND RIDGE (HEA)DOUGLAS (MEA)FRITZ CREEK (HEA)GIRDWOOD (CEA)HEALY (GVEA)HOPE (CEA)INDIAN (CEA)JARMS CREEK (GVEA)JOHNSON ROAD (GVEA)KASILOF (HEA)LAWING (SES)MEALS (AEA)NENANA EnPORTAGE(CEAPUMPSTATION 11 (AEA (GVEA) PUMP STATION 12 (AEA QUARTZ CREEK (CEA)SOLDOTNA (HEA)TEELANOD (CEA)O'NEILL (MEA) TRANSMISSION LINES DESIGNED OPERATED 345 KV e¢138 KV 230 KV e 69 KV MmMOOW»{PFE NIKISHKA 13 19Ce 3 HOMER (SEE DETAIL) Drawing:J:\TransLines\AEA_ANC-FBX\Alaska_Intertie_upgrade-2.DWG Oct 09,2002 --8:18am D 24 ROWOOCOADAe FAIRBANKS (SEE DETAIL) SNOW LOAD IMPACTS (70 MILES) 138 KV 36 a)15 KV . 69 KV 2x6 8 ANCHORAGE (SEE DETAIL) 25 E 6 CENTRAL ALASKA GLENNALLEN DELTA JUNCTION 32 33 N | ALASKA TRANSMISSION LINES Z-TO CANTWELL 138kV TEELAND TO HOLLYWOOD ROAD (5 MILES) TO BELUGA COOK INLET ©SUTTON 115kV HOLLYWOOD ROAD TO DOUGLES (19 MILES) WASILLA ¢PALMER 15 14 m GENERATION PLANTS 1 INTERNATIONAL (CEA)2 PLANT1 (ML&P3PLANT2(ML&P 14 EKLUTNA HYDRO (APA) A SUBSTATIONS 4 ANCHORAGE (APA)5 EAST TERMINAL (CEA)6 POINT MacKENZIE (cen7POINTWORONZOF(CEA 8 UNIVERSITY (CEA)9 WEST TERMINAL (CEA) 10 "1 12 13 15 CEA 230 KV SUB (CEA)TEELAND (CEA)O'NEILL (MEA) DOUGLAS (MEA) PALMER (MEA) - TRANSMISSION LINES DESIGNED | A 345 KV a SUBMARINE CABLES B 230 KV.d_115 KV (OPERATED) C 138 KV D E KNIK ARM 115 KV 69 KV mee:SOUTH CENTRAL ALASKA TRANSMISSION LINES TO INDIAN Drawing:J:\TransLines \AEA_ANC FBx'\\Alaska_Intertie_upgrade-1.DWG Oct 09,2002 -8:17am . Sara Fisher-Goad om:Jim McMillan nt:Tuesday,February 18,2003 12:58 PM To:Lynn Kenney Ce:Sara Fisher-Goad;Valorie Walker Subject:FW:Questions about the Southern Intertie James A.McMillan Deputy Director-Credit Alaska Industrial Development and Export Authority/Alaska Energy Authority 813 W.Northern Lights Blvd.Anchorage,AK 99503-2407 Phone:(907)269-3030 Fax:(907)269-3044 Email:jmcmillan@aidea.org Website:http://www.aidea.org SatietenOriginal Message----- From:Con Bunde [mailto:Senator_Con_Bunde@Legis.state.ak.us] Sent:Monday,February 03,2003 8:16 AM To:Jim McMillan Subject:Re:Questions about the Southern Intertie Mr.McMillan, Thank you. snator Con Bunde Jim McMillan wrote: Senator Bunde, I wanted to acknowledge receipt of your email and inquiry on the Southern Intertie.We are in the process of researching the answers to the questions you posed and will respond as soon as we can. Jim McMillan James A.McMillan Deputy Director-Credit Alaska Industrial Development and Export Authority/Alaska Energy Authority 813 W.Northern Lights Blvd.Anchorage,AK 99503-2407 Phone:(907)269-3030 Fax:(907)269-3044 Email:jmcmillan@aidea.org Website:http://www.aidea.org ae Original Message----- From:Con Bunde [mailto:SenatorConBunde@Legis.state.ak.us]Sent:Thursday,January 30,2003 9:45 AM To:jmcmillan@aidea.org Subject:Questions about the Southern IntertieVVVVVVVVVVVVVVVVVVVVVVVV Mr.McMillan,VvI received the following questions from a constituent regarding the Southern Intertie project.I would appreciate your assistance in >answering them.Vv VVVVVVVVVVVVVVVVVVYVVVVVV8In 1993,the legislature appropriated $46,800,000 as a designated grant for the purposes of constructing the Anchorage-Kenai Peninsula Intertie.The appropriation language designated the Department of Administration as the grant administrator and specifically required the participating utilities to agree to pay the design and construction costs for the Anchorage-Kenai Peninsula power transmission intertie that exceed $46,800,000.There was no language authorizing the use of any accrued interest to be included in the grant amount. In November 1993,DOA delegated the grant administration to AIDEA thru a Grant Transfer and Delegation Agreement.The agreement states "The AIDEA shall exercise the delegation granted by this agreement according to all the statutes and regulations applicable to the administration of grants to named recipients under AS 37.05.316 by the Department of Administration."Are not the interest earnings of the grant subject to AS 37.05.170 requiring an appropriation or expenditure authorization by the legislature? Today,the Anchorage-Kenai Peninsula intertie grant,including the accrued interest,has been reported to be approximately $70,000,000. Please advise as to what legislative authority DOA,or its delegated grant administrator,have to include the accrued interest in the Intertie grant without legislative approval. Thanks for your assistance. Senator Con Bunde STATE OF ALASKA ant nsun ane DEPARTMENT OF LAW P.O.BOX 110300 123 4™ST,6TH,FLR.,DIMOND COURT HOUSE JUNEAU,ALASKA 99811-0300 _PHONE:(907)465-3600OFFICEOFTHEATTORNEYGENERALfareooneesarss ;FAMEAWEPRFebruary11,2003 |D \|e lu iE i Vi IE ||4 i$};\Lt cme ot AAR i beTheHonorableConBundePLTEStaGeos Alaska State Senate . co State Capitol,Room 506 . men Juneau,Alaska 99801 Re:Southern Intertie Grant Administration Questions Dear Senator Bunde: In e-mail dated January 30 to Jim McMillan you requested information from the Alaska Industrial Development and Export Authority (AIDEA)regarding the expenditure of a grant made to finance part of the southern intertie project.In sec.2,ch.19 SLA 1993,the legislature made a named recipient grant under AS 37.05.316 to ChugachElectricAssociationforthebenefitofallutilitiesparticipatinginthesouthemiintertie.Mr.McMillan has asked that I respond to your question. The administration of this grant presented significant legal questions concerning use of the grant money.There was uncertainty among the participating utilities concerning the scope of authority of Chugach Electric Association to finance the intertie on their behalf.It was also anticipated that there would be delay occasioned while the ownership interest of the utilities in the project was sorted out and the feasibility of the project studied.The legislature conditioned the grant appropriation on the making of an agreement among AIDEA,the Department of Administration,Chugach,and other utilities,which provided for the financing of the intertie project.To avoid any dispute between the utilities over grant administration and to reduce any devaluation of grant funds through inflation,it was agreed to pay the grant to AIDEA acting as custodian for the grantee utilities. A formal grant administration agreement was made among AIDEA,the participating utilities,and the Department of Administration.Attachment 1.It was agreed that the Department of Administration would pay out the grant money to AIDEA, which would hold the grant money as funds of the authority as custodian for the utilities. When the grant money was paid to AIDEA,the grant appropriation contained in ch.19wasfullyexpended.By operation of AS 44.88.190(b)the grant money became "funds, income,or receipts of the authority [as custodian for the utilities]...[that]may not be considered or constitute money of the state....”) .«Hon.Con Bunde February 12,2003 Re:Southern Interie ,Page 2 AIDEA has the power to invest using the powers conferred by AS 37.10.071, AS 44.88.060 and 44.88.080(10).AIDEA also has the power under AS 44.88.080 (9), (11),and (17)to make agreements with state agencies and private enterprises regarding the use of money the authority holds as custodian.By operation of these powers the grant money was accepted,invested,and earnings accumulated awaiting development of the project.Under this agreement,the parties would use interest earned on the grant to pay the costs of the intertie project,custodial fees,or if the project is abandoned,repay the state treasury.According to AS 44.88.205,only the operating budget of AIDEA is subject to appropriation under the Executive Budget Act (AS 37.07).An expenditure of interest earnings authorized by the grant administration agreement for the southern intertie would not appear in AIDEA's operating budget.Therefore the appropriation requirement of AS 37.05.170 would not apply to these expenditures. The condition set out in sec.2(b)(1)of ch 19 SLA 1993 does not limit the power of the grantee utilities from using amounts for other sources to finance a part of the -intertie project.Under the terms of the grant administration agreement,accrued interest on grant proceeds became the property of the grantees,which must either be used for the project or returned to state. I hope that the foregoing helps you in answering the questions of your constituent. Sincerely, GREGG D.RENKES ATTO Y GENERALLowZallBy:James L.Baldwin Assistant Attorney General JLB/cal cc:Jim McMillan an.-ce Alaska Industrial Development and Export Authority September 18,2002 Intertie Participants Group and Participating Utilities: Steve Haagenson,President &CEO,Golden Valley Electric Association Joe Griffith,General Manager,Chugach Electric Association Norm Story,Operations Manager,Alaska Electric Generation &Transmission Cooperative, Inc. Michael Scott,General Manager,Municipal Light &Power Re:Northern Intertie Project Dear Sirs: Golden Valley Electric Association requested that we forward to you a copy of the enclosed letter relating to the State's single audit requirement. Sincerely,Prowl f TagheledfrvalorieF.{JaglaledjDeputyDirector-Finance VEW:bfH:\ALL\bfuglestac\F INANCE\VFWiNorthern Intertie single audit.doc Enclosure - cc:Patti Anderson,Golden Valley Electric Association Wayne D.Carmony,Matanuska Electric Association Norm Story,Homer Electric Association 813 West Northern Lights Boulevard *Anchorage,Alaska 99503 )RAR PA rR RARA - eal ed Alaska Industrial Development and Export Authority August 16,2002 Mr.John Grubich Vice President and Chief Financial Officer Golden Valley Electric Association P.O.Box 71249 Fairbanks,Alaska 99707-1249 Re:-Northern Intertie Project Dear Mr.Grubich: Several conversations |had with Patti Anderson lead me to write to help clarify any confusionoverGVEA's obligations to comply with state audit requirements (2 AAC 45.010)regarding theNorthernIntertieProject.To date,AIDEA has not received copies of any annual audits relating to Northern Intertie Project expenditures. Under Section 5.01 of the Grant Administration Agreement,all parties to the Northern and Southern Intertie projects.acknowledged that "audit requirements of 2 AAC 45.010 apply to the Intertie Grants,Intertie Funds,and the use of such monies for the purposes set forth in [the Grant Administration Agreement].”.In the original Grant Administration Agreement,the Participating Utilities,through the IPG,agreed to have the audits performed for both the Northern and Southern Intertie projects.Under Amendment No.1 to the Grant Administration Agreement,GVEA agreed to have performed the annual audits required under 2 AAC 45.010 for the Northern Intertie,while the Participating Utilities retain that obligation for the Southern Intertie. Regarding annual audits required prior to Amendment No.1,GVEA (potentially with the IPG) should aiso determine whether GVEA had an obligation to prepare an annual audit under 2 AAC 45.010,either under provisions of applicable agreements or under 2 AAC 45.010.As one example,we observe that 2 AAC 45.010(j)imposes obligations that might be applicable to GVEA's role regarding the Northern Intertie Project: (j)A third party that receives financial assistance through an entity,in an amount described in this section,is subject to the applicable requirements of this section.An entity that disburses $300,000 or more in state financial assistance to a third party shall ensure that the third party complies with the requirements of this section.That entity shall also ensure that appropriate corrective action is taken within six months after a third party's noncompliance with an applicable state statute or regulation,or financial assistance agreement,is disclosed. Section 5.01 of the Grant Administration Agreement also requires that the audits under 2 AAC 45.010 be accomplished on an annual basis,and that a copy of each audit be transmitted to AIDEA.Please transmit a copy of each annual audit GVEA and/or the IPG had prepared for the 813 West Northern Lights Boulevard *Anchorage.Alaska 9952 Mr.John Grubich August 16,2002 Page 2 Northern Intertie Project from the inception of the project to date.For any year that no audit was required,please confirm (or have IPG confirm)that fact,including disclosure of the reason no audit was required for that year.Also,please disclose if GVEA and/or the IPG failed to have performed an annual audit required under 2 AAC 45.010 or the Grant Administration Agreement for any given year,and GVEA's and/or the IPG's plans for correcting the deficiency. Please inform us if GVEA desires that we also forward this request directly to the IPG and Participating Utilities. Please let me know if there is any way |can be of assistance. Sincerely, Valorie F.Walker Deputy Director -Finance VEW:bif . H:\MAliibfugiestad\FINANCE\VFWiGrant Audit Letter to GVEA.doc Cc:Patti Anderson,GVEA DEN VALLEY ELECTRIC ASSOCIATION INC.Po Box 71249 ©Fairbanks,Alaska 99707-1249.+907-452-1151 »www.gvea.com February 26,2002 Mr.Robert Poe Executive Director AIDEA 813 W.Northem Lights Blvd Anchorage,AK 99503-6690 bol -,aatiDearNp-Poe: 'Great news!The Intertie agreements have been signed and are now fully complete.These agreements have been in the mill about three years,so some of you may not recognizethem.With final execution of these agreements,the construction funds have been released for the Norther Intertie. Enclosed is.an original signed copy of (1)Amendment No.1 to the Grant AdministrationAgreement;and (2)Ament .1 to the Intertie Grant Agreement for your files. é/deSérve a thankyou for their efforts in completion of theseagreementstoallowthereleaseoftheNorthemIntertiegrantfunds.The Northem Intertie, including the Battery Energy Storage System,is under construction and is scheduled for completion in the second quarter of 2003. 'Thank you for your support of this important project as another step toward the building of a strong electrical infrastructure in Alaska. Sincerely, a steven H.Haagenson,P.E. President &CEO Enclasuras (2) To:AIDEA Board From:Robert Poe Jr. Subject:Conditions for Release of Northern Intertie Funds AIDEA is the administrator for a 1993 State grant for the proposed Northern Intertie (Healy to Fairbanks)under a delegation from the Department of Administration.As the grant administrator,AIDEA must ensure that grant conditions are met before funds are released.The original amount of the grant was $43,200,000.The current balance of the grant after disbursements for Phase I (design)costs and with interest earned amounts to approximately $56,600,000. GVEA has asked AIDEA to begin releasing Phase II (construction)funds for the project.AIDEA staff and legal advisors have reviewed the various grant agreements,related information,and legal requirements to determine whether GVEA has sufficiently complied with grant conditions to make the release of Phase II]funding appropriate at this time. Although many grant conditions have been satisfactorily met,there are a few remaining issues, most of which merely require further clarification or confirmation.Only one matter appears to remain in dispute -open access on a non-discriminatory basis for commercial fiber optics that might be installed on the intertie. 1.GVEA should provide additional information to clarify that it has the ability to acquire all short-term and long-term financing commitments needed to supplement State grantfunds to complete intertie construction. Discussion.GVEA has submitted documents indicating that it has substantial lines of credit.A complete,detailed project budget is necessary to demonstrate that the lines of credit GVEA has obtained are sufficient to finance all Northern Intertie project construction costs beyond the State grant funds.Further,the line of credit documentation received does not indicate whether the financingis short-term or long-term,whether it is dedicated solely for intertie and batteryconstructioncosts,whether the credit will be available throughout the project development schedule anticipated by GVEA,or the terms of repayment. Needed action.GVEA should submit a detailed project budget to allow AIDEA to evaluate the adequacy of GVEA's financing.GVEA should also clarify the terms of the financing commitments it has obtained,including allowable uses,interest rates,and repayment schedules, and verify that such financing will be available until the project is completed and operational. GVEA should also submit its finance plan (developed in Phase I)for these additional costs, 'including a discussion of how project financing and operation will affect rates and,if a rate adjustmentis anticipated,whether RCA approval of such rate adjustment iis required.AIDEAwillthenconductaduediligencereviewofthesematerials. 2.GVEA should clarify its proposed plan for addressing how the pending appeal challenging DNR's issuance of the right-of-way for the Northern Intertie may impact the project. Discussion.GVEA,at its sole risk,commenced certain clearing and other preliminary activities - on the Northern Intertie under an early entry permit from the Department of Natural Resources ("DNR”).DNR granted a public utility right-of-way permit to GVEA for constriction of theNorthernIntertieonMarch1,2001.On March 5,three plaintiffs claiming to be public interest litigants filed an appeal in the Superior Court in Fairbanks challenging the issuance of the right ofway,and requesting that a short segment of the intertie be relocated.It is unclear whether the relocation of this small portion will actually require relocation of a significant portion of the entire right-of-way. The plaintiffs also moved on March 5 for a stay of issuing the right-of-way permit,but did not move for a stay of clearing..DNR has opposed the motion for stay.GVEA reportedly moved to intervene to file its own opposition to the motion for stay on April 25,but GVEA apparently has not yet filed its opposition brief. Needed action.GVEA should clarify its proposal for addressing the pending appeal.GVEA should describe the consequences that may result if there is an adverse outcome.GVEA should also describe its plans for dealing with those consequences and the possibility of protracted litigation.The plan should include whether GVEA plans to stage clearing,construction,or other activities pending final resolution,and provide GVEA's budget for these anticipated activities.In addition,GVEA should clarify that its financial plan demonstrates its capability of bearing the additional costs that might arise from an adverse decision.GVEA should also keep AIDEA informed of developments in the appeal,by agreeing to send copies of pleadings as they are filed in the appeal,and to provide AIDEA with informational updates whenever changed circumstances warrant. 3.GVEA needs to confirm and document that open access to the Northern Intertie will be providedfor power transmission.Disputes regarding open access at non- discrimintory rates forfiber optics must be resolved. Discussion.State grants to named recipients must provide demonstrable public benefit.As to the Northern Intertie,this requirement is satisfied primarily through open access to the transmission line.GVEA has promised to incorporate open access into its requests for RCA approval of agreements after the project is completed.AIDEA must confirm that access for power transmission at reasonable rates determined by the RCA will be provided not only for Participating Utilities but also for other electric utilities,independent power producers,and AIDEA. In addition to open access for the transmission of power,counsel for AIDEA and GVEA have undertaken lengthy discussions regarding the need to provide for open access for commercialfiberopticsthatmightbeattachedtothetransmissionline.GVEA currently asserts it has no present plan to incorporate commercial fiber optics,and suggests that such discussions are premature.AIDEA believes that these issues should be resolved before construction funding. Needed action.If the RCA does not approve open access to the transmission line before construction (see paragraph 3 above),GVEA should confirm and document its obligation to provide open access to the transmission line.Further,ALDEA believes GVEA should commit that,if fiber is installed on the line,that it will adopt an open access policy with pricing derived from the marginal costs associated with the inclusion and operation of the fiber (i.e.that the benefits of the fiber be available on an equal and non-discriminatory basis). 4.AIDEA must review the additional information GVEA has promised to provide,and confirm that it adequately demonstrates that the proposed intertie design that incorporates a battery system satisfies project requirements. Discussion.The grant provides for the design and construction of an intertie "of at least 138 kilovolts between Healy and Fairbanks.”Preliminary design studies indicated that the reactive compensation needed for the intertie to function properly would be provided through the installation of "static var compensators”(SVC)at an estimated cost of $8 million.GVEA proposes instead to install a large battery system that,at an estimated cost of $35 million,would provide the necessary reactive compensation and other significant benefits as well.On April 27, 2001,GVEA informed AIDEA that it developed the alternative system in conjunction with the Intertie Participants'Group ("IPG”)Technical Committee,and offered to provide AIDEA with backup data and other information regarding why the IPG Technical Committee recommended this battery system approach.GVEA has agreed to provide information that it believes confirms that the proposed battery system will allow the intertie to function no less effectively than it would if SVC equipment were installed as originally planned. Needed action.AIDEA must review the additional information regarding the battery system that GVEA has promised to provide..To be acceptable to AIDEA,the additional information must adequately analyze and demonstrate the merit of the proposal,and clearly conclude that the performance of the proposed battery system will equal or exceed the expected performance of SVC equipment for purposes of intertie functional capability.If,in AIDEA's judgment,the additional information does not meet these requirements,then GVEA should submit a written report by a qualified third party that does provide such analysis and conclusions on the basis of thorough technical analysis.; ) 5.In light of other participating utilities'desire to withdraw from the Northern Intertie project,GVEA and AIDEA need to amend various agreements to provide for the withdrawal and to address grant requirements,such as providing an alternative to the technical and budgetary review by the IPG. Discussion,The participating utilities have requested to withdraw from the Northern Intertie project.GVEA proposed amendments to various agreements to accomplish this approximately one year ago,which amendments have been subject to AIDEA review and ongoing discussions on issues such as open access. The original grant and related agreements preclude other participating utilities from withdrawing from the Northern Intertie project until one year after that segment becomes commercially operable.The other participating utilities have requested to amend original agreements so that they may withdraw from the project before construction commences.The participating utilities, as the-IPG,were to perform various responsibilities including technical and budgetary oversight for the project.If the IPG members are permitted to withdraw,some alternative oversight appears necessary.; Needed action.AIDEA and GVEA must document and incorporate into appropriate agreements the withdrawal of other participating utilities and must provide an alternative technical and budgetary review to substitute for the IPG. STAFF RECOMMENDATION Staff therefore recommends that the Board approve commencing the release of the Phase II grant funds subject to satisfactory resolution of the five items identified above,in the discretion of the Executive Director.The Executive Director shall develop an appropriate disbursal schedule under which GVEA is provided funding as construction progresses under established milestones. November 20,1995 William R.Snell E b e V_DExecutiveDirectoray8pane Alaska Industrial Development and Export Authority wees 480 West Tudor Road Alaska- Anchorage,Alaska 99503 anc iz]caxslonnAenAuthorp"y Re:Northern Intertie Project Dear Mr.Snell: The Intertie Participants Group (IPG)met on November 6,1995.The IPG selected me as chairmanofthegroupforthecomingyearandaskedthatIinformyouoftheactionstakenbythegroupatitsmostrecentmeeting. The Intertie Participants are pleased to inform you that they have voted unanimously to resolve certain issues involving the allocation of benefits of the Northern Intertie Project.In addition,the IPG unanimously adopted a Northern Intertie Project budget,scope,and schedule which will be documented as exhibits to the Northern Intertie Construction Management Agreement.Finally,the representatives of the Intertie Participants have finalized and agreed upon a Northern Intertie Construction Management Agreement and a Northern Intertie System Agreement and have recommended that those two agreements be executed as soon as possible by the respective governing boards,councils,and assemblies of the Intertie Participants.Duplicate original copies of those documents are currently being circulated for execution.I have arranged to provide AIDEA with copies of these final agreements as soon as they have been executed by the parties. If you have any questions,please feel free to contact me at 224-4071. Sincerely yours, Ne OLAS a raDaveCalvert,Chairman CC:IPG Members CC:&S4Db --_-- ALASKA INDUSTRIAL DEVELOPMENT «_AND EXPORT AUTHORITY ==>ALASKA @m-=ENERCY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 /561-8050 FAX 907 {561-8998 July 14,1995 Mr.Thomas R.Stahr General Manager and Chairman IPG Municipal Light &Power 1200 East First Avenue Anchorage,Alaska 99501-1685 aawyBi€,af ) mee x z ae Subject:-_Intertie Financing Dear Mr.Stahr: |am writing in response to your letter to me dated June 13,1995,relating to the recent Intertie Participants Group (IPG)action to begin work on the southern intertie.|am pleased with IPG's desire to initiate work on the southern intertie.Your letter also provides a timely opportunity to assess the progress made to date on the intertie projects. Initially,|would like to note that through informal discussion with the various participants,it is AIDEA perception that although fair progress has been made on preliminary engineering and related tasks on the Northern Intertie,many fundamental issues remain unresolved on both intertie projects.|believe we have reached a juncture where such issues need be specifically addressed and resolved in order to maintain progress on the intertie projects. With the foregoing objectives in mind,|invite you to respond to the following. First,my letter to you dated November 2,1994,addressed the intended scope of the intertie project and confirms the view that the intertie must have the benefits and functionality envisioned under the AEA feasibility study.Your response of January 12 on behalf of the IPG accepted this view in principle,though it left for resolution in "construction agreements"such critical issues as whether such a line would be developed in phases,or to what extent each participating utility would be responsible for project costs.|understand that the referenced agreements have not as yet,been adopted by the participating utilities.|believe a date should be set by which such issues will be resolved,and |invite your suggestion as to an appropriate deadline. Second.In my letter of November 2,1994,|noted that AIDEA asked its bond counsel,(Foster, Pepper &Shefelman law firm),to address whether the ownership structure provided for under the Intertie Grant Agreement would enable AIDEA to issue bonds to finance all or part of the participant's share of project costs.|recently received a draft legal opinion which concludes that,for purposes of a public financing,AIDEA would require a legislative revision to the underlying debt-issuance authorization (Sec.29 and 30,Ch.18,SLA 1993),since that authorization references intertie ownership by,respectively,Golden Valley Electric Association (GVEA)and Chugach Electric Association (CEA).|!add that counsel also notes that the Mr.Thomas R.Stahr July 14,1995 Page 2 ownership structure set out in the Intertie Grant Agreement would,assuming specific legislative authorization,enhance the use of tax-exempt financing. There are,of course,several different ways to proceed in response to the legal opinion.For example,the utilities may maintain the current ownership structure and simply finance the participant's share absent AIDEA involvement.Alternatively,the utilities may want to revert back to the ownership structure specifically envisioned by the underlying legislation,which would enable AIDEA to be the issuer without further legislative action.Finally,the utilities may prefer that AIDEA seek legislative approval of the requisite revision to Sections 29 and 30. While |believe such approval would be viewed as ministerial if supported by all utilities,| recognize that,particularly absent full consensus among the utilities on the various unresolved issues,the prospect of legislative involvement may be troubling. |would appreciate an immediate response whether the IPG requests that AIDEA seek legislative action to facilitate an AIDEA financing under the current ownership structure.If no legislative action is desired,please advise how the IPG intends to proceed and how each participant intends to finance its proportionate share of costs. Third.Item No.4 in our respective letters of November 2,1994 and January 12,1995, addressed the enforceability of the various agreements.While |appreciate that final project costs are not as yet known with certainty and,perhaps more importantly,significant issues with substantial economic ramifications remain for resolution in the "construction agreements," nevertheless,|believe it essential to confirm that each of the participating utilities have the requisite intent and legal capacity to enter into a binding obligation to bear their proportionate share of the project costs in accordance with the ownership interests established in the Intertie Grant Agreement and related documents. As questions continue to arise in informal discussions regarding these matters,|request an unqualified cpinion letter from legal counsel for each of the participating utilities confirming the legal capacity of each entity to enter into such agreements and further confirming that the obligations arising under said agreement,including the obligation to bear a proportionate share of project costs,are fully enforceable.|also request that counsel for FMUS and the City of Seward address the applicability of any requirement of voter approval with respect to these financial obligations. Fourth.Both the Grant Administration Agreement and the Grant Transfer and Delegation Agreement envisioned prompt notification of which matters and obligations arising in connection with the development and financing of the interties need be submitted to the Alaska Public Utilities Commission (APUC).As you know,to the extent such approval is required,APUC approval is a precondition to the expenditure of grant monies.|believe it timely to reach a common understanding of prospective APUC matters.Accordingly,counsel for each of the participating utilities should also address in the requested opinion letters of counsel which,if any,of the obligations arising in connection with the various intertie agreement,require APUC consideration. The Authority believes the time has come for the participating utilities to resolve basic questions of ownership,management and participation in the intertie projects.While |appreciate that the "unreasonably delayed”standard under Section 3.03 of the Grant Administration Agreement Mr.Thomas R.Stahr July 14,1995 Page 3 does not offer a "bright line”test,|am concerned that,absent substantial progress on these core development issues in the near future,the availability of grant monies is subject to review. In light of the foregoing,the Authority believes it would be inappropriate to authorize the release of full Phase 1 funding on the southern intertie before core development issues are resolved. Accordingly,the Authority will make available $500,000 in grant funds for initial work on the southern intertie.No additional funds will be advanced absent settlement of the outstanding differences among the participating utilities or,in the alternative,execution of a reimbursement agreement in the event that the final development of the intertie is not undertaken.Similarly, the Authority intends to restrict use of grant funds on the northern intertie to the pending engineering and permitting work,until a comparable resolution of core development issues are resolved. |look forward to working with you and the other participating utilities toward development of the intertie projects. Sincerely, William R.Snell Executive Director cc:Jim Ayers,Chief of Staff,Office of the Governor Wilson Hughes,AIDEA Board Member WRS:bif:ks hiall\ojfiboare\stahripg CONF DENT VA FOSTER PEPPER &SHEFELMAN * A Law PARTNERSHIP INCLUDING PROFESSIONAL SERVICE CORPORATIONS tt THIRD AVENUE SUITE 3490; BELLEVUE.WASHINGTON OFFICE SEATTLE.WASHINGTON 98101 PORTLAND.OREGON OFFICE (206)451-0500 (206)447-440)($03)221-0607 TELECOPIER:(206)485-5487 . TELECOPIER.1503)221-1510 TELECOPIER;-DIRECT DIAL:(206)447-8967 (206)447-9700 »(206)447-9283 ' February 8,1995 fc iCi>a}WsWilliamR.Snell eG &ly c Executive Director coR 497995AlaskaIndustrialDevelopment&PEE 2 0 1989 Export Authority Alaska Industrial Development and Export Authority 2/i3/4> 480 W.Tudor Road Anchorage,AK 99503 Jonathan Rubini,Esq.Yy bry602WestFifthAvenue,Suite 500 . Anchorage,AK 99501 Wo athe )4 tralRe:__Electric Power Intertie Financing SOK y,cont: Dear Riley and Jon:WWmu VAS Enclosed is a draft letter that summarizes the conclusions we have reached based on our work thus far on the referenced matter.We hope this is in useful form for your purposes,and, in any event,we wanted to provide you with some tangible evidence of our efforts in reviewing these questions. Very truly yours, FOSTER PEPPER &SHEFELMAN William G.Tonkin WGT:djr cc:Hugh Spitzer Dan Dixon 0171717.WP O Q 'we ow AOE, DRAFT February 4,1995 William R.Snell Executive Director Alaska Industrial Development &Export Authority 480 W.Tudor Road Anchorage,AK 99503 Re:Preliminary Conclusions on Review of Potential Intertie Financing by AIDEA Dear Riley: The purpose of this letter is to briefly summarize the conclusions that our firm has reached following our review of the documents you and Jcnathan Rubini furnished to us last fall relating to the electrical transmission interties for which the Alaska Legislature in 1993 SLA CH.18 (the "bond authorization statute")and 1993 SLA CH.19 (the "grant appropriation statute"), among other things,authorized AIDEA to issue bonds and appropriated certain grant funds,subject to the terms of those statutes. The documents reviewed included the Intertie Grant Agreement dated October 26,1993,by and among the participating utilities(described below),the State of Alaska,Department of Administration,and AIDEA;the Grant Transfer and Delegation Agreement dated November 5,1993,by and among the same parties; the 1993 Alaska Intertie Project Participants Agreement (the"Participants Agreement")dated January 24,1994,by and amongAlaskaElectricGeneration&Transmission Cooperative,Inc.,TheMunicipalityofAnchoraged/b/a Municipal Light and Power ("ML&P"), Chugach Electric Association,Inc.,The Municipality of Fairbanksd/b/a Fairbanks Municipal Utilities System ("FMUS"),Golden ValleyElectricAssociation,Inc.,The City of Seward d/b/a SewardElectricSystem("SES")(collectively,the "participatingutilities"),and Homer Electric Association,Inc.,and Matanuska Electric Association,Inc.(the "additional parties");and the Gr inistration Agreement te 1994,by and among AIDEA and the participating utilities.For convenience,ML&P,FMUS and SES are sometimes referred to as the "municipal utilities,"and the participating utilities other than ML&P,FMUS and SES are sometimes referred to as the "private utilities." 0169379.01 William R.Snell February 8,1995 Page 2 We also made a preliminary review of certain Alaska statutes other than the bond authorization statute and the grant 'appropriation statute and applicable provisions of the InternalRevenueCodeof1986,as amended (the "Code"),and certain regulations that are currently applicable,or that are proposed tobeapplicable,to tax-exempt bonds,including the proposedregulationsonthedefinitionofprivateactivitybondsunder section 141 of the Code that were published in the Federal Register on December 30,1994. 1.Ownership Structure.The principal question that arisesunderthebondauthorizationstatuteiswhetherAIDEAisauthorized by the terms of that statute to issue bonds to finance the cost ofintertieprojectsthatareownedbytheparticipatingutilitiesastenantsincommon,with each participating utility holding an undivided percentage ownership interest in all of the real and personal property comprising a project,as required by the Participants Agreement. The question arises because section 29 of the bond authorization statute provides in part that AIDEA may issue bonds to finance the acquisition,design,and construction of a power transmission intertie of at least 138 kilovolts between Healy and Fairbanks and owned,forthebenefitofalltheutilitiesparticipatinginthe intertie,by Golden Valley Electric Association,Inc. (Emphasis ours.) Similarly,section 30 of the bond authorization statute provides in part that AIDEA may issue bonds to finance the acquisition,design,andconstructionofapowertransmissionintertieofatleast138kilovoltsbetweenAnchorageandtheKenaiPeninsulatobeowned,for the benefit of all _of the utilitiesparticipatingintheinterties,by Chugach Electric Association,Inc.(Emphasis ours.) At the same time,section 5(a)of the Participants Agreement provides: Ownership As Tenants In Common.The Participants shall be owners of each Segment of the Project (including all personal and real property interests thereof)as tenantsincommon,with undivided interests and obligations withrespecttoallProjectSegmentassetsandliabilitiesintheproportionateamountsoftheirrespectiveParticipants'Shares.Except as otherwise provided 0169379.01 William R.Snell February 8,1995 Page 3 hereunder,the Participants shall share in the Project Clearly, Segments's benefits,burdens,and risks only in proportion to their respective Participants's Shares,notwithstanding that the IPG {the Intertie Participants Group]may select one or more individual Participants to manage,design,build,finance,operate,and/or maintain the Project Segment or portions thereof on behalf of theParticipantscollectively. this provision of the Participants Agreement does not provide or contemplate that Golden Valley Electric Association, ("GVEA"),will "own"the northern segment of the intertieproject"for the benefit of"all of the participating utilities, and also does not provide or contemplate that Chugach Electric Inc. Association,Inc.("Chugach"),will "own"the southern segment oftheintertieproject"for the benefit of"all of the participatingutilities.Although the Participants Agreement is not explicit onthepoint,under general real property law,title to property beingacquiredbypersonsastenantsincommonwouldbeconveyedtothosepersonsinthenamesofalltenantsincommonastotheir respective percentage ownership interests. participating utilities. We considered whether it would be possible to interpret the bond authorization statute in a manner that would result in treating ownership of the intertie project by the participatingutilitiesastenantsincommonasthelegalequivalentofownership by GVEA or Chugach,as applicable,for the benefit of the However,that interpretation,we believe, would give essentially no meaning to the portion of the bondauthorizationstatutethatrequirestheprojecttobe"owned by"either GVEA or Chugach,as applicable.At a minimum,to invest those words with any meaning,we believe legal title to the realandpersonalpropertycomprisingtheprojectswouldhavetobetakenbyeitherGVEAorChugach,as applicable,which then wouldresultineachparticipatingutilityhavingabeneficialownershipinterestintheproject. with to share the benefits, That kind of ownership structure arguably would be consistent the second sentence of section 5(a)of the Participants Agreement,which makes it clear that each participating utility is burdens and risks of the project only inproportiontoitsparticipant's share (or percentage of ownership). However,even that sentence,though it makes express reference to the fact that one or more participating utilities may be selected to manage,design,build,finance,operate and/or maintain the projects "on behalf of the Participants collectively,"fails t °make any reference to the possibility that less than all of tne |participating utilities would hold title to the project. 0169379.01 William R.Snell February 8,1995 Page 4 We also considered whether treating the existing ownership structure under the Participants Agreement as the legal equivalent of the kind of ownership structure contemplated by the bond authorization statute would be supported by any language contained in the grant appropriation statute,on the theory that both laws were enacted at the same time and both dealt with power transmission interties.However,reference to the grant appropriation statute actually appears to reinforce aninterpretationofthebondauthorizationstatutethatwouldrequiretheprojecttobeownedbyoneofthedesignatedparticipatingutilities,rather than by all of the participating utilities astenantsincommon.This is because section 1 of the grantappropriationstatuteprovides,e.g.,"for payments as a grantunderAS37.05.316 to Golden Valley Electric Association for the benefit of all the utilities participating in the intertie...."(Emphasis ours.) As will be discussed below,the ownership structure currently provided by the Participants Agreement is helpful,if not essential,to the ability to reach favorable conclusions on otherimportantlegalquestions,principally (i)the question whether the provision in section 10(d)(1)of the Participants Agreement requiring each participating utility to meet its Annual PaymentObligations,Energy Charges and Assessments "whether or not theProjectiscompletedoritsoperationisterminated,interrupted or suspended in whole or in part,"is valid under Alaska law,and (ii) the question whether the shares of the project held by the municipal utilities may be financed with tax-exempt bonds. Therefore,we believe it would be preferable to amend the bond authorization statute in a manner that makes it consistent with the existing oOwnership-structure establishedby the participatingutilitiesicipantsAgreement,rather than to change the _ownership structure.For example,the bondauthorizationstatutecouldbeamendedtoprovidethatAIDEAmay issue bonds to finance power transmission interties "owned by theparticipatingutilitiesastenantsincommon."Absent such achangeinthebondauthorizationstatute,we would be unable to provide an approving opinion on bonds issued by AIDEA to financetheprojecthavingthecurrentownershipstructure(which,as noted above,may be the optimum structure for all other purposes), especially in view of the legal standard that bond counsel must apply,i.e.,an approving opinion cannot be rendered unless it is determined that it would be unreasonable for a court to hold to the contrary. 2.Validity of Section 10(d)(1)of Participants Agreement. As mentioned above,another important legal question is whether each of the participating utilities may lawfully agree,as provided 0169379.01 William R.Snell February 8,1995 Page 5 in section 10(d)(1)of the Participants Agreement,to make the required annual payments regardless of whether the Project is operational.In Chemical Bank v.WPPSS ("WPPSS"),99 Wn.2d 772, 666 P.2d 329 (1983),the Washington Supreme Court held that Washington public utility districts and cities were not authorized to enter into a joint financing agreement similar to the Participants Agreement containing a so-called "dry hole"provision requiring the participants to make payments regardless of whether the projects were operational. In WPPSS,the court reasoned that,while each of the participating municipalities had statutory authority to purchase electricity,the "unconditional obligation to pay for no electricity is hardly the purchase of electricity,"but rather was an agreement to purchase project capability.Id.at 784.TheWashingtonmunicipalitiesalsowereauthorizedunderstatelawto construct,acquire and operate electric generating facilities. However,the Washington court held that these provisions did not authorize the construction or acquisition of "a project in which the participants did not have an ownership interest."Id.at 785. The court noted that,under the participants'agreement involved inWPPSS,the participating municipalities did not retainan ownershipinterestintheproject.Moreover,based on provisions of theparticipants'agreement relating to management of the jointundertaking,the court concluded that the participating municipalities "did not retain sufficient control over the project to constitute the equivalent of an ownership interest."Id,at 785.Thus,the agreements of the municipalities were held to be ultra-vires and void.. The participants in the intertie projects here consist of municipal utilities operated by home rule cities and privateutilitiesoperatedbyelectriccooperatives.Unlike the municipalities in WPPSS,Alaska home rule municipalities have considerable autonomy.In particular,under Article x,Section 11 of the Alaska Constitution,a home rule city may exercise alllegislativepowersnotprohibitedbylaworcharter.We havereviewedAlaskastatutesandthechartersofthemunicipalitiesof Anchorage,Fairbanks and Seward,and found no provisions that wouldprohibitthosemunicipalitiesfromenteringintotheParticipants Agreement. Electric cooperatives are authorized by AS 10.25.020 to "generate,manufacture,purchase,acquire,accumulate,and transmit electric energy."(Emphasis ours.)By analogy to the WPPSS analysis,the electric cooperatives also may be required to have an ownership interest in the project. 0169379.01 William R.Snell February 8,1995 Page 6 If the tenants-in-common ownership structure currently provided by the Participants Agreement is retained,each participating utility would have an actual ownership interest in the project,and the principal basis for the WPPSS holding would not exist here.If the ownership structure were changed to comply with the bond authorization statute as currently written,the participating utilities other than GVEA and Chugach would not have an actual ownership interest in the project.In that case,an ownership interest might be implied based on the degree of management control over the project exercised by the participating utilities through the Participants Agreement.However,we cannot conclude with certainty that it would be unreasonable for a court to hold to the contrary on that issue. As one of the conditions to the issuance of any bonds tofinancetheproject,AIDEA should require each participatingutilitytoprovidetoAIDEAanopinionofcounselstatingthattheparticipanthasfulllegalauthoritytoenterintotheParticipants Agreement,and that the terms of the Participants Agreement(including an explicit reference to section 10(d)(1)thereof) represent legal and valid obligations of the participating utility and are enforceable against it. 3.Potential Tax-Exempt Financing of Portions of the Interties Owned and Used by Municipal Utilities.We believe that the portions of the interties that will be owned and used by themunicipalutilities(i.e.,by ML&P,FMUS and SES)can be "inancedwithtax-exempt governmental bonds,subject to the favorable resolution of various subsidiary issues that are briefly summarizedbelow.We base this preliminary conclusion primarily upon existing Treasury Regulations §1.103-7(b)(5)and Example (13)under that regulation,IRS Private Letter Ruling 9247012 (the so-called "Grant County Public Utility District"ruling,and Proposed Treasury Regulations §§1.141-6 and 1.141-7.The latter proposed regulations on the definition of private activity bonds provide,in essence,that proceeds of tax-exempt bonds may be specifically allocated to the expenditures for a discrete portion of a mixed use facility,which may consist of an undivided ownership interest in an output facility,distribution facilities or any similar utility system.The Preamble to the proposed regulations specifically recognizes the changing nature of the electric generation and transmission industry,and notes that the proposed regulations attempt to address those changes by,e.g.,providing guidance on allocations of use of transmission facilities. The following subsidiary federal tax issues would have to be favorably resolved before the issuance of any tax-exempt bonds. First,the exact undivided percentage ownership shares of themunicipally-owned portions of the interties would have to be *0169379.01 William R.Snell February 8,1995 Page 7 finally determined and be reasonably expected to remain fixed in those portions for the term of the bonds.This means that the procedures contained in the Participants Agreement allowing certain utilities to withdraw from participation in cne or both segments oftheinterties,and allowing or requiring other utilities toincreasetheirsharesaccordingly,must have fully run their course.Only then will it be possible to determine the extent of the discrete portions of the project that are to be owned by the municipal utilities and permitted to be financed with tax-exempt bonds. The use of the project also must be consistent with thepercentageownershipinterestsheldbythemunicipalutilitiesandfinancedwithtax-exempt bonds.In this respect,we would need toconfirmourunderstandingoftheprovisionsofsection11ofthe Participants Agreement,which appear to provide that use of the project,at least when capacity is or may be constrained,must beavailabletotheparticipatingutilitiesinaccordancewiththeirrespectiveparticipantshares.Thus,it appears that the relative extent of use of the project by private and municipal utilities canbeexpectedtobeconsistentwiththerespectiveownershipshares of the private and municipal utilities,but this would have to be confirmed. The Participants Agreement provides that GVEA will be the O&MManagerofthenorthernsegmentoftheprojectandChugachwillbetheO&M Manager of the southern segment of the project.GVEA and Chugach are treated as private businesses under section 141 of the Code.Uniess it can be determined that neither of the O&M Agreements contemplated by the Participants Agreement constitutesa"management or service contract"for the purposes of the private business use test under Section 141 of the Code,it would be necessary to alter the duration and compensation and termination provisions of those contracts to conform with the requirements of Proposed Treasury Regulations §1.141-3(c)for "qualifiedmanagementcontracts"that will not be treated as private business use by those O&M Managers.For example,one of the requirements for a management contract providing that 100%of the manager'scompensationduringthetermofthecontractwillbebasedona periodic fixed fee is that the term of the contract may not exceed the lesser of 50%of the expected useful life of the related property or 15 years. However,it may be possible to determine that neither of the O&M Agreements is a "management contract"for these purposes underProposedTreasuryRegulations§1.141-3(c)(6)(vi),which providesinpartthat: 0169379.01 *Be, William R.Snell February 8,1995 .Page 8 A contract to provide for the operation of a mixed use facility described in 1.141 -6(b)(2)(i)(B)(relating to certain undivided ownership interests [in an output facility,distribution facilities or a similar utility system]))is not a management contract if the only compensation is the reimbursement of the actual and direct expenses paid by the service provider.(Emphasis ours.) Section 10(b)of the Participants Agreement provides in part that the project operating budget shall include costs attributable to overhead or administrative and general costs of the O&M Manager...only to the extent that said costs are approved by the IPG before they are incurred,are reasonably incurred for labor directly employed by that O&M Manager in performance of its duties under the O&M Agreement,and would not have been incurred but for the activities undertaken as O&M Manager. It is not entirely clear whether the compensation payable to the O&M Manager pursuant to the O&M Agreement thus contemplated by the Participants Agreement is limited solely to "reimbursement of the actual and direct expenses paid by the service provider [O&M ManagerjJ"as required by the Proposed Treasury Regulations.It does appear,however,that the participating utilities do desire tostrictlylimittheamountspayabletotheO&M Manager,and perhaps the O&M Agreement itself can limit compensation payable to the O&M Manager in a manner that would allow the O&M Agreements to be disregarded for purposes of applying the private business test under section 141 of the Code. As you know,there are numerous other requirements that must be satisfied for interest on bonds to be,and remain,tax-exempt under the Code,and,for the purposes of this preliminary analysis, we assume those other requirements.could be satisfied in ordinary course.These would include all applicable arbitrage requirements, for example.We also would have to confirm,based on opinions of counsel for the participating utilities,that the IPG itself would not be treated as an association taxable as a corporation under the Code,as intended by the participating utilities.Otherwise,the project would be treated as used for a private business use by that association,with adverse consequences for the ability to issue tax-exempt bonds for any portion of the project. 0165379.01 William R.Snell February 8,1995 Page 9 ' 4.Approvalof Project and Agreements by Alaska PublicUtilitiesCommission. Under Section 4.01(b)of the Grant Administration Agreement, disbursement of the grant funds is conditioned on receipt by AIDEA of written notice that the participants have determined and agreed upon which contractual obligations related to the Intertie Grants and Intertie Funds must be submitted to the Alaska Public Utilities Commission for its review and approval. Section 4.02(b)of the Grant Administration Agreement also provides that grant funds will not be applied to reimburse costs incurredforPhaseIIactivities,...until...(b)final approval, not subject to further judicial appeal,of matters submitted to the Alaska Public Utilities Commission related to the financing or use of the intertie(s).(Emphasis ours.) As discussed above,the participants consist of municipal utilities and private utilities,both of which may or may not be"public utilities"subject to the jurisdiction of the Alaska PublicUtilitiesCommission(the "PUC")depending on whether the utility meets any of the various requirements for an exemption under the public utilities statute (AS 42.05).Utilities that are generallyexemptfromthepublicutilitiesstatutearenotexemptedfromthe requirement of a obtaining from the PUC a "certificate of convenience and necessity"under AS 42.05.221 through 42.05.281. AS 42.05.3111 provides that a public utility may for areasonablecompensationpermitanotherpublicutilitytousedistributionortransmissionfacilitiesundercertain circumstances.If the public utilities fail to agree upon thejointuseorinterconnectionoffacilitiesortheconditionsfor compensation,either public utility may apply to the PUC for an order requiring the interconnection.AS 42.05.321.So long as each of the participants agree to the terms of the Participants Agreement,the PUC would not have jurisdiction over the 'Participants Agreement under this provision. Pursuant to AS 42.05.431(b),any "wholesale power agreement between public utilities is subject to advance approval"by thepuc.Assuming that some (if not all)of the participants are regulated public utilities,the Participants Agreement would besubjecttoadvanceapprovalofthePUCifitisa"wholesale power agreement."Unfortunately,the term "wholesale power agreement"is 0169379.01 William R.Snell February 8,1995 Page 10 not defined in the statute;nor has it been interpreted by the Alaska courts. To comply with Sections 4.01(b)and 4.02(b)of the Participants Agreement,the participants,among other things,must determine whether a "certificate of convenience andnecessity"must be obtained from the Puc for the intertie projects.The participants also mustdetermine whether the Participants Agreement is a "wholesale power agreement"subject to advance approval of the Puc,and whether any other aspects of the projects are subject toPUCapproval.Section 4.02(b)of the Grant AdministrationAgreementprohibitsthedisbursementoffundsuntilallrequired approvals are final,subject to no further judicial appeal,and the same condition should be imposed on the issuance of any bonds tofinancetheproject. 0169379.01 NZ Municipal Light &Power 1200 East First Avenue Anchorage,Alaska 99501-1685(907)279-7671,Telecogrers:(907)276-2961,277-2272 -_POI Eu tieJanuary12,1995 in mu Sy S|}tang”7 {oN / William R.Snell end Excor:tuthotry Executive Director Alaska Industrial Development &Ce,Vand. Export Authority Ovum 480 W.Tudor Road Wes Anchorage,AK 99503 Son @. Re:Intertie Letter of November 2,1994 Dear Riley: By unanimous action of the IPG,the Intertie Participants want to respond to the points raised inyourlettertoTomStahr. 1.We are pleased that AIDEA may be available as a financing option for the Project. 2.'We understand that your concerns regarding the joint ownership arrangement arise only inthecontextofpossibledebtfinancingbyAIDEAanddonotaffectAIDEA's previous acceptancesofthejointownershiparrangementforpurposesofthegrant.If you determine that thisarrangementcreatesaseriousproblemforAIDEAfinancing,please advise us as soon as possible.We are prepared to explore other methods of financing the costs in excess of the grant.We arecommittedtomovingforwardinamannerthatpreservestherespectiverightsandresponsibilitiesoftheParticipantssetforthintheexistingagreements., 3.We agree that the \ntertie wil)provide benefits consistent with the project envisioned by theAEAreports.We commit to provide all funding in excess of the grant in accordance with prioragreements.The construction agreements will be the vehicles for setting project budgets andestablishingtherespectiverolesandlevelsofparticipationinindividualprojectphasesor components. Putting Energy Into Anchorage William R.Snell,Executive Director January 12,1995 Page Two 4,The utilities believe the terms of the various existing agreements,including the Participants'Agreement and the Construction Management Agreements,can certainlybeenforcedaswrittenforallparties.Subject to the termination provisions of those agreements,the utilities are collectively committed to proceed with design and construction of both the Northern and Southern Intertie Projects.The Construction Management Agreements will be the vehicle for setting Project budgets and establishing the respective roles and levels of participation in individual Project phases or components. ieIntértieParticipantsGroup Thomas R.Stahr,Chairman -- we be .(\le ALASKA INDUSTRIAL DEVELOPMENT =AND EXPORT AUTHORITY /==>ALASKAqa_ =ENERGY AUTHORITY 480 WEST TUDOR ANCHORAGE,ALASKA 99503 907 {|561-8050 FAX 907 /561-8998 November 2,1994 Mr.Thomas R.Stahr General Manager and Chairman,IPG MUNICIPAL LIGHT &POWER 1200 East First Avenue Anchorage,Alaska 99501-1685 Re:Intertie Financina Dear Tom: Your letter to me of August 16,1994 inquired whether, without further legislative authorization,AIDEA or AEA is in a position to finance the Participant's share of the intertie costs. In a related vein,I recently received an inquiry from Golden Valley Electric Association,a copy of which is attached.As you know,I have also participated in discussions among AIDEA staff and consultants,as well as with several of the participating utilities,on matters generally relating to these two inquiries. 'While I believe there are several issues which require further analysis and consideration,I thought it advisable to offer my preliminary thoughts for the IPG's consideration. 1.In light of the specific legislative authorization, we believe that,as between AIDEA or AEA,AIDEA is the appropriate issuer. 2.Several parties have raised questions regarding whether the form of ownership provided for under the Intertie Grant Agreement requires legislative action.As you know,the language in Chapters 18 and 19 refer to interties owned,respectively,by Golden Valley and Chugach Electric "for the benefit"of all the participating utilities.In the context of our collective efforts to satisfy the grant preconditions,it was determined that the form of collective ownership provided under the Intertie Grant Agreement (and other related documents)was an acceptable alternative for purposes of the grant.As the question of ownership structure has been renewed in the context of a possible public financing,I have asked that AIDEA bond counsel for the intertie financing consider this issue. ac:BWR SES ji Mr.Thomas R.Stahr General Manager and Chairman,IPG MUNICIPAL LIGHT &POWER November 2,1994 Page 2 3.GVEA's recent letter,as well as our earlier discussions,present questions regarding the scope of the intertie project.As I understand the issue,the:IPG is considering a phased development of the intertie,with the initial phase limited to only a "basic line."I have requested that AIDEA's legal counsel review whether,and under what circumstances,a scaled-down project,or phased development,is consistent with the grant appropriation and debt issuance authorization set out in Chapters 18 and 19. As I anticipate that this issue is likely to beconsideredbytheIPGbeforethelegalreviewbyoutsidecounsel and the Department of Law is complete,I thought it instructive to offer AIDEA's view on this issue.We believe that Chapters 18 and 19,read together,envision a roughly "equal"sharing of cost between the utilities and the State.The broader scope of the intertie project is also consistent with the AEA feasibility studies presented to the Legislature at various times.Finally, our analysis is that the basic line,standing alone,would not result in the scope of intended benefits to warrant use of grant funds.While a phased approach to development may well be prudent and acceptable,AIDEA staff concludes that the availability of grant funds will likely require binding monetary commitments with respect to subsequent project development phases. 4.In several of my meetings with utilityrepresentatives,questions have arisen as to the enforceabilityorbindingnatureofobligationsarisingundertheIntertieGrant Agreement and related contracts.This issue is particularly troubling as the Intertie Grant Agreement was itself the basis for the State's determination that the preconditions to the intertie grants had been satisfied.While I do not believe these questions directly relate to your inquiry of whether further legislative action is necessary,I.have asked legal counsel to address whether use Of grant funds is affected were the Intertie Grant Agreement to include unenforceable provisions. With these comments in mind,it is,in my view,uncertain whether AIDEA is now in a position to proceed with a financing absent further legislative authorization or clarification.If the IPG,or the participating utilities,have comments or opinions which they would like considered as AIDEA and its counsel addresses these matters,I invite any party to submit such comments for our Mr.Thomas R.Stahr General Manager and Chairman,IPG MUNICIPAL LIGHT &POWER November 2,1994 Page 3 consideration.And while this letter addresses only the relatively narrow question of whether further legislative action is required, there are various other issues which need be resolved before a public financing can be concluded. As I trust you appreciate,in anticipation of the change in administration and the new legislative session,AIDEA desires to resolve issues relating to scope and financial participation in the immediate future.We request that the IPG advise AIDEA as promptly as possible,but no later than January 13,if questions remain regarding which utilities desire to participate in each of therespectiveinterties,and if so,a schedule for how each of theutilitiesintendtoresolveanyprerequisiteactions(e.g.voter approval)if such actions are deemed necessary to enter into binding financial commitments. I look forward to discussing these issues with you and your colleagues in the near future. Sincerely, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY {iliam R:°Snell Executive Director /ke Enc. cc:Jim Baldwin,Esq. Keith Laufer,Esq. Jonathan Rubini,Esq. | |"an -V2 3/7¢ a Municipality of Anchorage |Municipal Light &PowerTomFink,Mayor 1200 East First Avenue Anchorage,Alaska 99501-1685(907)279-7671,YECEIVE 9272) | "August 16,1994 vieWilliamR.Snell AUG 13 1994 Executive Director . Alaska Industrial Development Alaska grcustral Development&Export Authority and Exgort Authority 480 W.Tudor Road Anchorage,AK 99503-6690 Re:tertie Financin Dear Riley: We had earlier talked about the possibility of AIDEA providing the additionalfinancingnecessarytocompletethenorthernandsouthernsegmentsoftheParticipantsIntertieProject.The Intertie Participants Group ("IPG”)at its last meeting directed me,as chairman,toformallyaskyoutodeterminewhetheryouareinaposition,without further legislativeauthorization,to finance the Participants'share of the additional cost of these projects,either asAIDEAorthroughAEA. If you determine that you are in a position to arrange for the joint financing of theParticipants'additional cost of these projects,the IPG would like to request that you take thosepreliminarystepswhicharenecessarytodeterminetheconditionsandcostsofthisjointfinancingoftheproject. The IPG is anxious to determine whether joint financing through AIDEA or AEA isanoptionandtherelativefinancingcostofthisoptiontotheParticipants.Please feel free tocontactmeifyouhaveanyquestionsorrequirefurtherinformationfromtheprojectParticipants. Sincerely yours, ° , AL LIGHT &POWER "”? omas R.Stahr General Manager and Chairman,IPG TRS:Ika " cc:Norm Story,HEAJamesN.Woodcock,MEA Dave Calvert,City of Seward Vince Mottola,FMUS Robert Hufman,AEG&T Gene Bjornstad,CEA Mike Kelly,GVEA . Putting Energy Into Anchorage "or JEN VALLEY ELECTRIC A980 Se oe.Peas SUMTES Ganebanks,Alaska 98707-1249,Phone 907-452-1151 PeatGEER Sy oFfox;ted} o @ October 27,1994 William R.Snell Executive Director AIDEA 480 West Tudor SO Anchorage,Alaska 99503-6650 Re:Healy-to-Fairbanks tntertic Dear Riley: As we discussed at our recent breakfast meeting,some membersoftheIPGseeminclinedtubrez#zk the Northern Intertie projectintophasesbyreducingthescopeoftheinitialconstructionefforttobuildonlyabasictransmissionlinewithoutvoltagecompensationorbatteryenersystorage.A basic line will notdeliverthebenefitswhichwerepredictedbythe1991AEAfeasibilitystudy.our consultant predicts that only a 4 megawattpowertransferincreasewillresult.Additionally,there is no present contractual commitment to any future "phases", It would be most helpful if you will tell us at our meeting inFairbanksonNovember1whetherAIDEAwillallowapplicationofthe$45 miliion grant for the Northern Intertie against the roughly $55millioncostofabasiclinewithoutautilitycommitmenttofundthefullproject.This decision wil]help the IPG in consideringwhethertoproceedwiththepresentpreliminaryscopeandbudget(line plus battery energy storage at approximately $75 million)orareducedscopeandbudget. In spite of the difficulties experienced by the IPG,we areprogressingsmoothlywiththedesignoftheNorthernIntertie.rfthescopeisreduced,some members will proceed with thecompensationorbatterystorageseparatelysoIamnottryingto lobby you one way or the other. See you on Tuesday. Best Regards,Hikw (we Michael P.KeYly Golden Valley ect Jon Rubini Ze ECON »Bors JS pinttsanks,Alasku 99707-12438,Phone 907-452-1151 Syl GOLDEN VALLEY ELECTRY 2°Ser ore" October 27,1994 William R.Snell Executive Director AIDEA - 480 West Tudor Anchorage,Alaska $9503-66¢0 Re:Healy-to-Fairbanks Intertic Dear Riley: As we discussed at our recent breakfast meeting,some members of the IPG seem inclined to break the Northern Intertie projectintophasesbyreducingthescopeoftheinitialconstruction effort to build only a basic transmission line without voltagecompensationorbatteryenersystorage.A basic line will notdeliverthebenefitswhicnwerepredictedbythe1991AEAfeasibilitystudy.our consultant predicts that only a 4 megawatt power transfer increase wil]result.Additionally,there is no, present contractual commitment to any future "phases". It would be most helpful if you will tell us at our meeting inFairbanksonNovember1whetherAIDEAwillallowapplicationofthe$45 million grant for the Northern Intertie against the roughly $55millioncostofabasiclinewithoutautilitycommitmenttofund the full project.This decision will help the IPG in consideringwhethertoproceedwiththepresentpreliminaryscopeandbudget(line plus battery energy storage at approximately $75 million)or a reduced scope and budget. In spite of the difficulties experienced by the IPG,we are progressing smoothly with the design of the Northern Intertie.Ifthescopeisreduced,some members will proceed with thecompensationorbatterystorageseparatelysoIamnottryingto lobby you one way or the other. Sea you on Tuesday. Best Regards, H pk (ue Michael P.KeYly Golden Valley e¢:Jon Rubini a SWB S i re a 0 ee ee ee ee Goldman,Sachs &Co.|85 Broad Sifeet |New York,New York 10904 TO Obe OO elsTel:212-802-6417 ; bi lO Francis J.ingrassia Vice President Municipal Finance Depanment September 26,1994 Mr.William R.Snell Executive Director Alaska Industrial Development and Export Authority 480 West Tudor Road Anchorage,Alaska 99503-6690 Dear Riley, In response to your request for our thoughts on major credit issues relating to Intertiefinancing,we have identified three major categories you should think about:general creditissues;credit issues related specifically to AIDEA authorization;and tax issues.We examine each area briefly below.ae mene peniperenare on) General Credit Issues: Regardless of whether the Intertie is financed directly by the participants through formationofajointactionagencyorwhethertheparticipantsjointlyobligatethemselvestomake conduit payments to AIDEA as bond issuer,identical credit issues arise.Therefore,the maincreditrequirementsofsuchafinancingincludethefollowing: 1)Each participant needs clear APUC authorization to enter into what ever financing arrangements are taken and authorization to make payments over time; 2)Regardless of the existing language in the participants'agreement,a core, creditworthy group of obligors must remain obligated from the closing of financing onward; 3)Appropriate and customary joint action agency step up clauses need to be ineffecttoprovideforpartidpantdefaults,if they occur; 4)Annual charges to participants need to provide by formula for proper allocation of benefits of tax-exempt financing among participants,if any. AIDEA Authoritzation Issues: Assuming that the underlying credit can be structured in a manner acceptable to AIDEA,AIDEA may wish to provide conduit financing with a state moral obligation.However,to New York |Lonuon |Tokyo |Bastion |Chivago |Gallas |Frankiunt |Hong Kong {Housion |Loe AngeleeMempha|Mami|Moewres!|Osaka|Paris |Prtsosiphia |San Francisco |Singapore |Sydnoy |Toronto|Zurich, 101saa mere')f 0ty.issue bonds,AIDEA will need its bond counsel to opine that the bonds are validly authorizedbythestatelegislature.Therefore,the conflicting provisions regarding intertie ownership must be resolved. Tax Issues: AIDEA's bond counsel should immediately confer with tax counsel for the participant group to determine on what basis tax-exempt debt could be structured as part of the overall intertie financing.Wohlforth's review should include whether the Grant County ruling can be relied upon. While the above briefly summarizes the major issues,we would like to discuss each withyouinmoredetail.Please feel free te call when you are free. Sincerely, Fnanh- Francis J.Ingrassia th, -"a - 4 Financial and investment Advisors 1000 SW Broadway,Suite 1500 Portland,Oregon 97205-3067 503-223-3385 (Fax)503-223-7002 September 23,1994 TO:Riley Snell Valorie Walker FROM:Pat Clancy Scott Clements RE:Intertie Financing We have completed our review of the documents you provided us on the Intertie Financing.We concur with your observation that there are a number of issues that need resolved prior to proceeding with a financing.Here is a list of the issues we believe nced to be resolved.As these issues pet resolved,in all likelihood,new issues will emerge. 1,Authority of the various parties to enter into this long term agreemcnt.In reviewing the _problems of the Washington Public Power Supply System financings,the mostimportant %assumption -which proved wrong -was clear authority on the part of the participants to enterintothesupplyagreement,We would suggest that each participant provide,up front,an opinion letter from their counsel as to their authority to enter into the Intertie agreement 2.Clear asreement on who will participate in the financing.It is unclear that AIDEA can issue tax-exempt bonds for this project with Chugach and GVEA as participants.Therefore,FMUS and ML&P would become liabis for a stream of payments for taxable bonds.It seems unlikely that ML&P would agres to this situation.On the other hand,if a tax-exempt participant issues bonds separately,itis not clear what happens ta those.bonds if they stop parucipating in the Agreement because the project would all be taxable and the payments would now be coming from non-exem=t parties.A different type of arrangement may be needed.Le?)'Increasing concentration of debt burde:.On the Healy -Fairbanks Intertie,the only participants that cannot withdraw are GVEA and FMUS.Given the debt burden of the Healy Clean Coal Project,it is not clear that GVEA can maintain its "investment grade"status. This is even more the case for FMUS which is already a struggling utility.In a worst case, all the debt ends up on these two parties and it is not clear they can handle i.We need to develop a financial analysis (or have ore developed by the participants)that shows the effect of all the debt being with the last partics on those parties and assess the financial viability of financing based on that analysis. of the potential last shareholders with a liability of almost 15%.The utility is not healthy4.Analysis of what happens with a bankruptcy of one of the remaining parties.FMUS is one Jandhastakenon-going supportof the City to continuc to operate.We should prepare an Adana Austin Boston Denver Fort Myers Harlsborg Houston Los Angeles Memphis Minneapolis New York Orlando Philadephia Portland San Francisco 2ZC/S)An Affiliate cf Marine Midland Bans,NA.: PUBLIC FINANCIAL MANAGEMENT,INC.|a Nee AIDEA Intertie Financing ce!;' weaie Page 2 Loa teaeawnie:. analysis of what would happen if only GVEA and FMUIS were left and then PMU3 wentbankrupt. 5.Legal analysis of APUC authority for rate increases related to the Intertie system.To theextentthepaymentsexceedtherevenuesproducedbythe1.5 mil rate increases antharized UY"the Intertic Ayiecuent,Wil née APUC grant rate increases to accommodate the increased debt payments?' 6.Effect of rate increases on electricity rates in Fairbanks.The rates need to stay compctitive Yorthedemandforelectricitymaydrop.Long term conversion to altemative heating and energy sources would be detrimental to the ability of GVEA and FMUS to meet the long term payment obligations. 7.Unlimited exposure to future assessments.Section 106¢of the Participants Agreement leaves the participants with an unlimited exposure to future assessments.Without a clear mechanism for financing those assessments (bonding authority may be used up by then)itis not clear thar all of the participants have the capacity to pay cash as needed.A mechanism for financing future assessments should be explored especially for the weaker of the participants. Please feel free to call either of us to discuss any of these points.It is our opinion that the documents may form a base for a financing but we do not believe the project would be viable without the use of the moral obligation of the State.We suggest stronger agreements on the part of the parties involved and 4 clear picture of who is in and who is out before proceeding with more analysis. INTRODUCTION PURPOSE OF THE MEETING The Alaska Industrial Development and Export Authority (AIDEA),on behalf of the Intertie Participating Group for the Healy to Fairbanks and Anchorage to the Kenai Peninsula Power Transmission Interties,anticipates issuance of bonds to finance a portion of the costs of the Healy to Fairbanks Intertie in the near future.Although the primary purpose of this meeting is to determine the requirements to develop and issue a bond offering for that project,this effort will provide a blue print for three other potential projects. PROJECTS AND BOND AUTHORIZATIONS In the 1993 session of the Alaska Legislature,AIDEA was authorized to issue bonds for the acquisition,design and construction of four power transmission interties.Those interties,AIDEA bonding authority and the parties responsible for construction are: Healy to Fairbanks $60,000,000 Golden Valley Electric ;Association,Inc.(GVEA) Anchorage to Kenai Peninsula $60,000,000 Chugach Electric Association,Inc.(CEA) Sutton to Glennallen $25,000,000 Copper Valley Electric Association,Inc.(CVEA) Swan Lake to Tyee Lake $40,000,000 Ketchikan Public Utilities © (KPU) GRANTS AND LOANS The Healy to Fairbanks and Anchorage to Kenai Peninsula Interties (hereinafter Northern and Southern Interties)received grants from the legislature in the amounts of $43,200,000 and $46,800,000,respectively. AIDEA is the grant administrator for those two grants.. The Department of Community and Regional Affairs,Division of Energy (DCRA/DOE)received appropriations and authorization to loan CVEA $35,000,000 at 0%interest payable over 50 years,and to loan KPU $20,000,000 at 3%over 15 years. In addition KPUis receiving grants from DCRA under the Southeast EnergyFund.In FY 94 KPU received a grant of $4.4 Million.KPU anticipates an addition $4.0 Million in FY 95.The 1993 legislation establishing theSoutheastEnergyFundallocated,subject to appropriation,approximately $4 Million per year to the Fund to be used for power projects,and payments onloansandbonds. -CURRENT STATUS OF PROJECTS Healyto Fairbanks Design is underway.Final environmental approval,initial construction and ordering of long lead time items are scheduled for April 1995.Project completion is presently scheduled for March 1997.The current construction estimate is $75,330,000. Anchorage to Kenai Peninsula Corridor identification is expected to be complete by the third quarter of 1895,with route selection and design scheduled beginning the third quarter of 1995 and ending the second quarter 1997.Construction completion is scheduled for the end the third quarter of 2001.The preliminary costestimateis$84,100,000. Sutton to Glennallen . , The legislatively mandated feasibility study has been completed.DCRA/DOE has authorized the project to go forward subject to completion of a financing plan as required by the legislation.The financial analysis is in its final stages.Project design is anticipated to start late 1994,with an anticipated construction periods of late 1996 through spring 1998.Total construction cost is currently projected at $53.6 Million. Swan Lake to Tyee Lake a , Contracts to start the environmental process should be awarded next month,with design scheduled to commence fall 1995.Construction is anticipated between May 1997 and November 1998.Construction costs "are estimated at $65,000,000. PACKAGE MATERIALS This package includes the applicable legislative provisions authorizing the sale of bonds as well as the grants by the legislature.Also enclosed are the various agreements relating to the Intertie Participating Group for the Northern and Southern Interties,along with a list of those items AIDEA believes need to be prepared by the Participating Utilities.A list of general issues has also been identified for discussion. PARTICIPANTS REQUIRED WORK PRODUCTS Cost Estimate a.Design and Construction Costs b.Reserves Schedules a.Remaining Design &Environmental b.Construction Cash Flow Requirements a.Grant Funds b.Bond Funds Project Analyses a.Capacity and Load Analysis b.Reliability Analysis Cc.Renewal and Replacement Analysis d.Maximum Probable Loss Analysis Replacement/Loss Provisions a.Insurance b.R&C Cc.Self Insured Retentions Pro-Forma Operating Statement Revenues Operating Expenses Reserves Debt Service Additional Contributionseaoc9 Feasibility Analysis a.Financial Feasibility b.Economic Benefits Analysis Cc.Sensitivity Analysis Collective Financing Agreement GENERAL ISSUES What is APUC's role in regulating the projects,how will contributions in excess of 1.5 mills per kWH charged to the purchasing utility be - handled,and what authorizations are required from APUC to proceed with construction and financing? Automatic withdrawal provisions,Section 4(b)(3). The potential exists for all but GVEA and FMUS to withdraw from participation in Northern Intertie one year after commercial operation. Other participants may be liable for payments under a bond resolution or financing agreement,however,under the agreement as written, GVEA could ultimately have responsibility for 85%of the project. With its HCCP obligations coming on line in the near future GVEA's financial rating may be affected. Section 4(b)(6)Authorizes assignments for security purposes.Does blanket financing,i.e.bonds or REA mortgages,automatically include the participant's share?If so what subordination or other provisions are required? In the event total project costs,including financing,exceed grant funds and AIDEA bond authorization,how will the overruns be financed and repaid by the participating utilities? Intertie Grant Agreement AMENDMENT NO.1 TO INTERTIE GRANT AGREEMENT THIS AMENDMENT NO.1 TO THE INTERTIE GRANT AGREEMENT dated the 26th of October 1993 ("Grant Agreement")is entered into this day of ,1999,by and among the Parties hereto,namely The MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT &POWER, CHUGACH ELECTRIC ASSOCIATION,INC.("CEA"),The CITY OF FAIRBANKS,GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.("GVEA"),The CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM,the ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC.,on behalf of its members HOMER ELECTRIC ASSOCIATION,INC.,and MATANUSKA ELECTRIC ASSOCIATION,INC.,"Additional Parties"("Participating Utilities") and the STATE OF ALASKA,DEPARTMENT OF ADMINISTRATION AND THE ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY. The parties agree to amend the Intertie Grant Agreement as follows: 1.Effective Date of Amendment.This Amendment shall become effective at 24:00 hours on the first date that it has been executed by all of the parties. 2.Section 3 is replaced with the following section: 3.Ownership.Pursuant to this and any other necessary agreements,the Participating Utilities shall hold undivided ownership interest in the Anchorage-Kenai Peninsula intertie as tenants in common in the proportion set forth in Attachment 1 to this Agreement,such proportions being based on the relationship of the Participants'1990/1991/1992 three-year average non-coincident peak demand to the sum of the Participating Utilities'1990/1991/1992 three-year average non- coincident system peak demands,unless the Participating Utilities agree to a different allocation of specific project capacity in the Participation Agreement.GVEA shall own 100%of the Healy-Fairbanks intertie.All intertie costs relating to the Anchorage-Kenai Peninsula intertie shall be borne by those Participating Utilities which executed the Participation Agreement.All intertie costs relating to the Healy-Fairbanks intertie shall be borne by GVEA. P=t4 1 -AMENDMENT NO.1 TO INTERTIE GRANT 32846/1/LGH/052273-0072 AGREEMENT In Section 4.1,strike "the design and construction costs of the Healy-Fairbanks transmission intertie that exceed $43,200,000 4.2 O&M Costs.The Participating Utilities agree to pay the operation and maintenance (O&M)costs for the Anchorage- Kenai Peninsula intertie and GVEA agrees to pay the O&M Utilities agree to contract with CEA to design and construct the design and construct the Healy-Fairbanks intertie,subject to the availability of adequate financing and in accordance with Prudent Utility Practices and construction agreements which _contain provisions for adequate oversight to maintain quality Anchorage-Kenai Peninsula intertie do not exceed amounts budgeted by the Participant'Group and its Participating Utility understood that GVEA and CEA,as contractors,will be free to subcontract all or any portion of the work associated with the Anchorage-Kenai Peninsula intertie,the Participating Utilities may contract for construction with one or more of the other 32846/1/LGH/052273-0072 3.Section 4 is amended as follows: (a) and".Add a second sentence "GVEA agrees to pay the design and construction costs of the Healy-Fairbanks transmission intertie that exceed $43,200,000. (b)Revise Section 4.2 as follows: costs for Healy-Fairbanks intertie. 4.Section 5 is amended and replaced as follows: 5.Design and Construction Management.The Participating Anchorage-Kenai Peninsula intertie and GVEA agrees to and cost control,and to ensure that total cost of the members. Consistent with the above conditions,it is agreed and design and construction of the above projects.If,for any reason CEA elects not to act as the contractor of the Participating Utilities or Additional Parties. 5.Section 6 is amended as follows: P=t+2 AMENDMENT NO.1 TO INTERTIE GRANT AGREEMENT (a)Replace "interties"with "Anchorage-"Kenai Peninsula intertie”inthe first line of thectiret:-paragraph : ce ee (b)Delete "GVEA and"in the second line and the last line of the third paragraph. (c)Replace "interties"with "Anchorage-Kenai Peninsula intertie" in the first and third lines of the fourth paragraph. IN WITNESS WHEREOF,the parties have caused this Amendment No.1 to the Intertie Grant Agreement to be executed on the day and year first above written. MUNICIPALI By:Ve Title:MUNICIPAL MANAGER'S OFFICE CHUGACH ELECTRIC ASSOCIATION,INC. CITY OF FAIRBANSn ueTitleNousaRuhand|GOLDEN vale ELECTRIC ASSOCIATION,ay aBy:NA 7 | P=}3 -AMENDMENT NO.1 TO INTERTIE GRANT 32846/1 /LGH/052273-0072 AGREEMENT Title:Penae P=t%4 -AMENDMENT NO. AGREEMENT NARD-EKECTRIC SYCo PGE(--Eee $4 A¢,a ALASKA ELECTRIC GENERATION& TRANSMISSION COOPERATIVE,INC. By:-EATitle:Gpad.Lge HOMERL024ASS{oe ON,INC.Title: MATANUSKA ELECTRIC ASSOCIATION,INC. By:Li Maspeth):CarersTitle:_Gaverdd Mow papa STATE OF ALASKA,DEPARTMENT OF ADMINISTRATIONy Vy. 1 TO INTERTIE GRANT 32846/1/LGH/052273-0072 THE ALASKA INDUSTRIAL DEVELOPMENT AND EXPO UY,RITY AMENDMENT,NO. AGREEMENT By: Title:Exetice Direehr 1 TO INTERTIE GRANT 32846/1/LGH/052273-0072 INTERTIE GRANT AGREEMENT Tr This Agreement is entered into this_2@ day of October,1993,by Golden Valley Electric Association,Inc.("GVEA"),Fairbanks'Municipal Utilities System ("FMUS"), Municipality of Anchorage d/b/a Anchorage Municipal Light and Power ("ML&P"),ChugachElectricAssociation,Inc.("CEA"),Alaska Electric Generation and Transmission Cooperative,Inc. (""AEG&T"),on behalf of its members (Matanuska Electric Association,Inc.("MEA"),and Homer Electric Association,Inc.("HEA"),"Additional Parties"),and City of Seward ("Seward") ("Participating Utilities"within the meaning of Section 2 of SB 126),and the State of Alaska,Department of Administration ("DOA"),and the Alaska Industrial Development and Export Authority (""AIDEA”). The parties agree as follows: 1.Purpose.The purpose of this Agreement is to satisfy the statutoryconditionsprecedenttoDOA's transfer of the grant funds and to provide for the expeditious transfer of such funds to the grant recipients for the purpose of partial funding of the design andconstructionofnewelectrictransmissionintertiesbetweenHealyandFairbanksandbetween Anchorage and the Kenai Peninsula.Specifically,this Agreement is intended to satisfy theconditionsofSB126§§1(b)and (c)and §§2(b)and (c). 2.Additional Agreements.The Participating Utilities hereby agree that any additional agreements (whether among the Participating Utilities or with other entities)that may benecessaryorusefultocarryoutthepurposesofthisAgreementandSB126shallbenegotiatedingoodfaith.Such additional agreement(s)shall address ownership participation ("Participation Agreement"),project management,and project operation. 3.Ownership.Pursuant to this and any other necessary agreements,theParticipatingUtilitiesshallholdundividedownershipinterestastenantsincommonintheproportionsetforthinAttachment1tothisAgreement,such proportions being based on therelationshipoftheParticipants'1990/1991/1992 three-year average non-coincident peak demand to the sum of the Participating Utilities'1990/199 1/1992 three-year average non-coincident systempeakdemandsunlesstheParticipatingUtilitiesagreetoadifferentallocationofspecificprojectcapacityintheParticipationAgreement.All intertie costs shall be borne by those Participating Utilities which execute Participation Agreements with respect to such Interties. 4.Statutory Conditions.The Participating Utilities hereby agree to the conditions of SB 126,specifically set forth below. 4.1.Design and Construction Costs.The Participating Utilities agree topaythedesignandconstructioncostsoftheHealy-Fairbanks transmission intertie that exceed$43,200,000 and the design and construction costs for the Anchorage-Kenai Peninsula transmission intertie that exceed $46,800,000 [SB 126 §§1(b)(1)and 2(b)(1)]. 4.2 O&M Costs.The Participating Utilities agree to pay the operationandmaintenance(O&M)costs for the Healy-Fairbanks and the Anchorage-Kenai Peninsula.interties (SB 126 §§1(b)(2)and 2(b)(2)]. 4.3.Rates.The costs of construction of the Anchorage-Kenai Peninsulaintertieinexcessof$46,800,000 plus accrued interest,the cost of operation and maintenance ofthatintertie,and other costs approved by the Participants shall first be recovered through a1.5 mill/kWh charge for all energy generated by the Bradley Lake Hydroelectric Project. The costs of construction of the Healy-Fairbanks intertie in excess of$43,200,000 plus accrued interest,the cost of operation and maintenance of that intertie,and othercostsapprovedbytheParticipantsshallfirstberecoveredthrougha1.5 mill/kWh charge for oe oe energy generated by the Bradley Lake Hydroelectric Project for the benefit of receiving utilities inFairbanksandanadditional1.5 mill/kWh charge to be paid by the receiving utility for 60 percentofthenon-Bradley Lake energy transmitted on the existing GVEA transmission line and the newnorthernintertiebetweenHealyandFairbanks. Remaining costs of the two interties not recovered by the above 1.5mill/kWh charges shall be allocated among the Participating Utilities in the proportion set forth inAttachmentI. 4.4 Access and Wheeling.All Participating Utilities agree to provide theotherParticipatingUtilitiesaccessbothonthenewintertieandovertheParticipatingUtilities'systems to and from the intertie for the purpose of assured access to resources,economy energytransactions,and other similar uses.Terms and rates for such access shall be resolved in the Participation Agreement.Resulting rates will be submitted to the Alaska Public UtilitiesCommission,if required,but this Agreement is not conditional upon APUC approval of such rates. 4.5.Warranties.The Participating Utilities hereby represent and warrant .that they have either resolved all material terms and conditions relating to the development,use,and operation of the interties and to the access to the systems to and from the interties or haveappropriateforumsorprocedures,as applicable,to resolve such issues in a fair and equitablefashion. 5.Design and Construction Management.The Participating Utilities agree tocontractwithGVEAtodesignandconstructtheHealy-Fairbanks power transmission intertie andagreetocontractwithCEAtodesignandconstructtheAnchorage-Kenai Peninsula powertransmissionintertie,subject to the availability of adequate financing and in accordance withPrudentUtilityPracticesandconstructionagreementswhichcontainprovisionsforadequateoversighttomaintainqualityandcostcontrol,and to ensure that total project costs do not exceed amounts budgeted by the Participants'Group and its Participating Utility members. Consistent with the above conditions,it is agreed and understood that GVEA andCEA,as contractors,will be free to subcontract all or any portion of the work associated with thedesignandconstructionoftheaboveprojects.If,for any reason,GVEA and/or CEA elect not to act as the contractors of the interties,the Participating Utilities may contract for construction withoneormoreoftheotherParticipatingUtilitiesorAdditionalParties. 6.Intertie Participants Group.As common owners of the interties,theParticipatingUtilitiesagreetoformtheIntertieParticipantsGroup(IPG)for the purpose ofexercisingtheirrightsandresponsibilitiesasowners.Each Participating Utility shall be represented on the IPG,and the IPG shall form a technical advisory subcommittee on which eachParticipatingUtilityshallberepresented,except that MEA and HEA shall be represented on theIPGandanysubcommittees,each of which shall be a voting member,and AEG&T shall not beadditionallyrepresented.The Participation Agreement shall resolve and adopt voting rights andproceduralrulesfortheoperationoftheIPG. Total project cost and financing shall be addressed in the Participation Agreement.Intertie design,construction,construction management,and operation and maintenance,amongotherissues,shall be resolved by the IPG in accordance with its rules and procedures. Relative to design and construction issues,the IPG and its technical advisorysubcommitteeshallberesponsibleforoversightofGVEAandCEAconstructionefforts.Such INTERTIE GRANT AGREEMENT Page 2 oversight shall include approval of at least project scope (including routing and points ofinterconnection),cost estimates and budget,approval of construction agreements,significantchangeorders,receipt and review of at least monthly reports,and auditing of design andconstructionfunds.Neither the IPG nor any individual Participating Utility shall |attempt to makeclaimsagainstGVEAandCEAforanydecisionsmadebytheIPG. Upon completion and commercial operation of the interties,the IPG shall be responsible for all decisions relating to the ongoing operations,maintenance,repair,andimprovementoftheinterties. 7.Transfer of Grant Funds.DOA hereby transfers the grant funds of $43,200,000 to GVEA and $46,800,000 to CEA to be held by Alaska Industrial Development & Export Authority (AIDEA).GVEA and CEA agree that such funds shall be held by AIDEA for thebenefitofallParticipatingUtilities,with instructions to AIDEA that no funds are to be released, encumbered,assigned,or pledged until a Participation Agreement and a Grant AdministrationAgreement,each in a form satisfactory to AIDEA,have been executed by all of the ParticipatingUtilitiesand,as applicable,the Authority.Pursuant to.AS 44.88.190(b),grant funds held byAIDEAandallinterestearnedthereonshallnotbeorconstitutemoniesoftheState.The Participating Utilities agree to negotiate in good faith with the intent of executing a ParticipationAgreementbyNovember30,1993.The Participating Utilities and the Authority agree to negotiateingoodfaithwiththeintentofexecutingaGrantAdministrationAgreementbyNovember30,1993.In the event that the Healy-Fairbanks intertie is not,for any reason,constructed,GVEAagreesthatAIDEAshallreturnanyunexpendedfundsandanyinterestearnedthereontoDOA.IntheeventthattheAnchorage-Kenai Peninsula intertie is not,for any reason,constructed,CEA agrees that AIDEA shall return any unexpended funds and any interest earned thereon to DOA.NoParticipatingUtilityshallunreasonablydelayprogresstowardcompletionoftheinterties. 8.Use of Funds.The parties agree to use funds described in paragraph 7solelyforthepurposesofdesignandconstructionoftheHealy-Fairbanks and Anchorage-KenaiPeninsulainterties,including all acts necessary for completion of these projects.The partiesfurtheragreetoreturntotheStateanyunexpendedgrantfundsandanyinterestearnedthereonnotneededforthispurpose. IN W ITNESS WHEREOF,the parties have caused this Agreement to be executedonthedatefirstabovewritten. STATE PARTIES: STATE OF ALASKA,DEPARTMENT OF AD STRATION re By:CAGEZZEE Zan ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY ADMINIS TION©otlee»v Is // INTERTIE GRANT AGREEMENT Page 3 INTERTIE GRANT AGREEMENT Page 4 ADDITIONAL PARTIES: MATANUSKA ELE RIC ASSOCIATION,INC. By:; V t Cc HOMER ELECTRIC ASSOCIATION,INC. ZLZO ARTICIPATING UTILITIES: GOLDEN VALLEY ELECTRIC ASSOCIATION, .aha PilFAIRBANKSMUNICIPALUTILITIESLe CHUG 2 hee ers Attachment 1 INTERTIE GRANT AGREEMENT Page 5 ALASKA ELECTRIC GENERATION & _TRANSMISSION COOPERATIVE,INC. py Pot SKfnors FS nO ZS_-EL)oo MUNICIPALITY OF ANCHORAGE d/b/a ANCHORAGE MUNICIPAL LIGHT & POWER »tm Led.wo eee ete Attachment I INTERTIE OWNERSHIP INTERESTS Golden Valley Electric Association,Inc.15.41% Fairbanks Municipal Utilities System a 4.70% Anchorage Municipal Light and Power 22.43% Chugach Electric Association,Inc.30.23% Alaska Electric Generation &Transmission Cooperative,Inc.25.79% Matanuska Electric Association,Inc.14.19% Homer Electric Association,Inc.11.60% City of Seward 1.44% TOTAL 100.00% NOTE:The above percentage ownership interests are subject torecomputationintheParticipationAgreementutilizingconsistentsystempeakdataandmethodologyunlesstheParticipatingUtilitiesagreetoadifferentallocationofspecificprojectcapacity(Section 3 of this Agreement). INTERTIE GRANT AGREEMENT Page 6 Grant Transfer and Delegation Agreement GRANT TRANSFER AND DELEGATION AGREEMENT I.RECITALS 1.1 The legislature appropriated the sum of $43,200,000 to Golden Valley Electric Association for the purpose of constructing a power transmission intertie between Healy and Fairbanks to benefit all utilities participating in the intertie.The appropriation is to be administered as a designated grant under AS 37.05.316.The appropriation named the Department of Administration as the grantor agency. 1.2 The legislature appropriated the sum of $46,800,000 to Chugach Electric Association for the purpose of constructing a power transmission intertie between Anchorage and the Kenai Peninsula to benefit all utilities participating in the intertie. The appropriation is to be administered as a designated grant under AS 37.05.316.The appropriation named the Department of Administration as the grantor agency. 1.3 The grant appropriations contain conditions which must be satisfied before the grants can be made.The grant appropriation requires that these conditions be established in an agreement executed by and between the Department,AIDEA and the participating utilities. 1.4 The designated grant recipients and the participating utilities have executed an Intertie Grant Agreement which,among other matters,addresses the statutory preconditions.The department and AIDEA have determined that the Intertie Grant Agreement substantially satisfies the statutory preconditions. 1.5 Upon execution of the Intertie Grant Agreement by the Department and AIDEA,the Department is legally authorized to make the grants to the designated grant recipients. 1.6 In accordance with the Department's grant administration responsibilities,the Department determines that it is essential to establish terms and conditions with respect to the obligation or expenditure of grant funds.The Department further determines that the Authority possesses the expertise necessary to establish and administer appropriate terms and conditions with respect to administration of the grants. 1.7 The department and the participating utilities have determined that the purpose of the grant appropriations and the intent of the legislature can best be accomplished if AIDEA is designated as the custodian for the full amount appropriated. AIDEA will provide for custody and administration of the grant appropriation. 1.8 The department has the authority to make this agreement under AS 37.05.316,AS 37.05.170,among other provisions of law. AIDEA has the authority to make this agreement under AS 44.88.080(9),(11),and (17),among other provisions of law. II.AGREEMENT In consideration of the promises set out below,the parties agree as follows: 2.1 The Department and AIDEA hereby agree to execute the Intertie Grant Agreement. 2.2 Upon execution of the Intertie Grant Agreement by all Participating Utilities,the Department and the Authority,and subject to the limitations and conditions described herein,the grants authorized in sec.1 and 2 of ch.19 SLA 1993 are hereby made,respectively,to Golden Valley Electric Association and to Chugach Electric Association for the benefit of the Participating Utilities. 2.3 AIDEA is delegated all powers and duties of the Department of Administration associated with the administration of the grant appropriations made in secs.1 and 2 of ch.19 SLA 1993. 2.4 The AIDEA shall exercise the delegation granted by this agreement according to all statutes and regulations applicable to the administration of grants to named recipients under AS 37.05.316 by the Department of Administration.In addition,no grant funds may be disbursed until the Authority and the Participating Utilities enter into a Grant Administration Agreement which addresses,among other matters: (a)a disbursement schedule which establishes ceilings, subject to upward adjustment by the Authority for phases of Project development; (b)the reimbursement of unobligated or unexpended grant funds to the extent development of an intertie project is unreasonably delayed by the Participating Utilities; (c)the submittal of a Participation Agreement among the Participating Utilities; (d)a determination by the Participating Utilities of which,if any,of the contractual obligations relating to the grant(s)will be submitted to the Alaska Public Utilities Commission;and (e)a schedule which limits the expenditure of grant funds until the participating utilities have demonstrated the ability to raise all additional.amounts needed to complete construction of the intertie(s). 2.5 The Participating Utilities hereby request that AIDEA agree to serve as custodian on behalf of the recipients of the grant appropriations made in secs.1 and 2,ch.19 SLA 1993.As custodian,AIDEA will,on behalf of the grant recipients,hold the sums appropriated.AIDEA may designate an institutional trustee to accomplish this purpose. 2.6 Pursuant to AS 44.88.190(b),the grant funds held by AIDEA and any interest or other income thereon shall not be or constitute money of the State.However,amounts held in custody Y LD Nr Ven Sul unéer this agreement will be invested consistent with the principles set out in AS 37.10.071.AIDEA will consult with the Grant recipients before adopting an investment strategy for the amount in custody. 2.7 Interest earned from investment of the amount in custody will be retained by AIDEA,kept separate from all other funds and accounts of AIDEA and expended for the purposes of the grants, expended for the costs of any custodial arrangements with a private financial institution or,if the purpose of a grant cannot be accomplished,returned to the state treasury. The parties set out below execute this agreement on this _5th day of November ,1993 in Anchorage,Alaska. Department of Administration AIDEA. Nancy Bedr Usera,Commissioner Riley Snell Executive Director Chugach Electric Association Golden Valley Electric yi AssociationLG-aMatanuskaAssociationHomerSfMi,associaionLh, 'ars Municipal Light &Power Alaska ElectricLob ti & TransmissionTinbadRSHadron Fairbanks Municipal Utilities System _..----*. f Fs \AIDEA\ENERGY \KAE0962 Seward Electric Utility °wos _-Co LELC AMENDMENT NO.1 TO INTERTIE GRANT AGREEMENT HIS AMENDMENT NO.1 TO THE INTERTIE GRANT AGREEMENT dated the 26th of October 1993 ("Grant Agreement")is entered into this 1orn_day of December _,1999,by and among the Parties hereto,namely The MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT &POWER, CHUGACH ELECTRIC ASSOCIATION,INC.("CEA"),The CITY OF FAIRBANKS,GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.("GVEA"),The CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM,the ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC.,on behalf of its members HOMER ELECTRIC ASSOCIATION,INC.,and MATANUSKA ELECTRIC ASSOCIATION,INC.,"Additional Parties"("Participating Utilities") and the STATE OF ALASKA,DEPARTMENT OF ADMINISTRATION AND THE ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY. The parties agree to amend the Intertie Grant Agreement as follows: A.Effective Date of Amendment.This Amendment shall become effective at 24:00 hours on the first date that it has been executed by all of the parties. 2.Section 3 is replaced with the following section: 3.Ownership.Pursuant to this and any other necessary agreements,the Participating Utilities shall hold undividedownershipinterestintheAnchorage-Kenai Peninsula intertie © as tenants in common in the proportion set forth in Attachment 1 to this Agreement,such proportions being based on the relationship of the Participants'1990/1991/1992 three-year average non-coincident peak demand to the sum of the Participating Utilities'1990/1991/1992 three-year average non- coincident system peak demands,unless the Participating Utilities agree to a different allocation of specific project capacity in the Participation Agreement.GVEA shall own 100%of the Healy-Fairbanks intertie.All intertie costs relating to the Anchorage-Kenai Peninsula intertie shall be borne by those Participating Utilities which executed the Participation Agreement.All intertie costs relating to the Healy-Fairbanks intertie shall be borne by GVEA. P=t+1 -AMENDMENT NO.1 TO INTERTIE GRANT 92846/1/LGH/052273-0072 AGREEMENT (a) (b) Section 4iIs amended as follows:a wert eee pee ee ie ers =In Section 4.1,strike "the design and construction costs of theHealy-Fairbanks transmission intertie that exceed $43,200,000 and".Add a second sentence "GVEA agrees to pay the design and construction costs of the Healy-Fairbanks transmission intertie that exceed $43,200,000. Revise Section 4.2 as follows: 4.2 O&M Costs.The Participating Utilities agree to pay the operation and maintenance (O&M)costs for the Anchorage- Kenai Peninsula intertie and GVEA agrees to pay the O&M costs for Healy-Fairbanks intertie. 4.Section 5 is amended and replaced as follows: 5.Design and Construction Management.The Participating Utilities agree to contract with CEA to design and construct the Anchorage-Kenai Peninsula intertie and GVEA agrees to design and construct the Healy-Fairbanks intertie,subject to the availability of adequate financing and in accordance with Prudent Utility Practices and construction agreements whichcontainprovisionsforadequateoversighttomaintainqualityandcostcontrol,and to ensure that total cost of the Anchorage-Kenai Peninsula intertie do not exceed amounts budgeted by the Participant'Group and its Participating Utility members. Consistent with the above conditions,it is agreed and understood that GVEA and CEA,as contractors,will be free to subcontract all or any portion of the work associated with the design and construction of the above projects.If,for any reason CEA elects not to act as the contractor of the Anchorage-Kenai Peninsula intertie,the Participating Utilities may contract for construction with one or more of the other Participating Utilities or Additional Parties. 5.Section 6 is amended as follows: 2 -AMENDMENT NO.1 TO INTERTIE GRANT 32846/1/LGH/052273-0072 AGREEMENT (a)Replace ''interties"with Anchorage-"Kenai Peninsula intertie" (b)Delete "GVEA and"in the second line and the last line of the third paragraph. (c)Replace "interties"with "Anchorage-Kenai Peninsula intertie" in the first and third lines of the fourth paragraph. IN WITNESS WHEREOF,the parties have caused this Amendment No.1 to the Intertie Grant Agreement to be executed on the day and year first above written. Title:"MUNICIPAL MANAGER'S OFFICE CHUGACH ELECTRIC ASSOGIATION,INC. py:Cone VN (Se Title: CITY OF FAIRBAN Neier Tit!NOL OA of"Adana\V GOLDEN VALLEY ELECTRIC ASSOCIATION, INC.. '1|QZ 'A5.AA AGA\ P=+4 3 -AMENDMENT NO.1 TO INTERTIE GRANT 32846/1/LGH/052273-0072 AGREEMENT _in thecfiret line of thecfirst paragraph...a ve Title:pun ' ALASKA ELECTRIC GENERATION & TRANSMISSIO i INC.By:G26,|-tT Title: HOMER ELECTRIC yi INC.By:Lez Title:-§Ker,fa)Z MATANUSKA ELECTRIC ASSOCIATION,INC.wy WwD CossTitle:Gewarsd VV \paar STATE OF ALASKA,DEPARTMENT OF Pity 4 -AMENDMENT NO.1 TO INTERTIE GRANT 32846/1/LGH/052273-0072 AGREEMENT AMENDMENT.NO. AGREEMENT THE ALASKA INDUSTRIAL DEVELOPMENT .FF 4 Title: Exervetiie.Dine bor 1 TO INTERTIE GRANT 32846/1/LGH/052273-0072 1993 Alaska Intertie Project Participants Agreement COPY 1993 ALASKA INTERTIE PROJECT PARTICIPANTS AGREEMENT by and among ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC., The MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT &POWER, CHUGACH ELECTRIC ASSOCIATION,INC., The MUNICIPALITY OF FAIRBANKS d/b/a FAIRBANKS MUNICIPAL UTILITIES SYSTEM, GOLDEN VALLEY ELECTRIC ASSOCIATION,INC., The CITY OF SEWARD d/b/a/SEWARD ELECTRIC SYSTEM, ("Participants") and _HOMER ELECTRIC ASSOCIATION,INC., MATANUSKA ELECTRIC ASSOCIATION,INC., ("Additional Parties") Sndunay X Z 1997 et IndexofSections Section -Page Recitals oo...eeeesesssssscsessscsscscseccesecseseceesesceeeeoseecesesoessosssaesecesesenessseceeessesassaseeseeeeseeaeesasesasenseeses I Section 1.Parties oc.ecssscsssssssssesesssscsecnccsesssceescesecestsceseneesessatseeeeesesaeeaeesseneesseseuesenseeessstessens I Section 2.Term of Agreement ............cccccssscsssecesssscesssscesseesessscesnecessesescenseceesseesseeeeeseeseneeeesnes 2 Section 3.Definition and Scope of the Project .......c.ccsssssssssesssssscssscscscsesesesceesscesssenereesesesteesenees 2 Section 4.The Participants ...0......cccscssscscssseseerseseseesececceceecscscesaceeseceecscecneaeeneeesseseceeseesscsesaeas 3 Section 5.Rights &Obligations of Participants ...........:.cssccscssssceeseecsesseressesceessessssseesaeensssneessenss 7 Section 6.Decision Making by the Participants ........c.cscceccssssssssscssessesecseccesessessenseasceueeusereserseens 8 Section 7.Construction Matters .......:..cccsssssssssssscecseesceseseccsssssscseseseceessecessseeseeseseseeaeeseessseeeeeess 13 Section 8.Construction Financing ..........ccsscsscssssccssesceesecssesssesscseasessesessesesaeesesseassaeesseesesreasease 15 Section 9.Operation &Maintenance;Related Matters .........ccscsssssessssssesseesessecceeeeseceeesseseeseees 18 Section 10.Project Costs &Cost Recovery oo...cesssscsssssssessssscsecssseseeeccenseeeereessseesseeseeeseeerses 18 Section 11.Use of Project Capacity ..........ccsccssccssscsseececsscecesseecesserseseensesesseseteceeetenseseseeeeeaeenees 22 JAdhri15289-00.005\Pan09cl.doc Section 12.Miscellaneous Provisions..........::.-s:sssccccccescecscceesenscecsncencccceccccssesescuecensssnncraacseeneces 24 Section 13.Definitions 0...ceeeeseeecseneeeeessacsessessecesceceescsessnseceseseceseseeseaeseeseseceeseonesesseaescues 28 JAdhrAl $289-00.005\Part09cl.doc PARTICIPANTS AGREEMENT THIS AGREEMENT ("Agreement")dated as of December __,1993,is entered into by and among the Parties hereto,namely the ALASKA ELECTRIC GENERATION & TRANSMISSION COOPERATIVE,INC.,The MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT &POWER,the CHUGACH ELECTRIC ASSOCIATION,INC.,The MUNICIPALITY OF FAIRBANKS d/b/a FAIRBANKS MUNICIPAL UTILITIES SYSTEM, the GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.,The CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM,each of which shall be a "Participant,"and the HOMER ELECTRIC ASSOCIATION,INC.,and the MATANUSKA ELECTRIC ASSOCIATION,INC., each of which shall be an "Additional Party." WITNESSETH: WHEREAS,the State of Alaska ("State")has by statute authorized,and has partially funded,the design and construction of two segments of high voltage electric power transmission line,namely (1)a Healy-Fairbanks Segment,and (2)an Anchorage-Kenai Peninsula Segment (said two Segments referred to collectively as "the Project");and WHEREAS,the State's action is intended to benefit the general public through greater electnc power reliability and improved efficiency of electric power.supply for consumers served by electric utilities that agree,collectively,to provide the remaining funds needed to design,con- struct,operate and maintain the Project;and WHEREAS,each Party hereto is an electric utility or operates as an electric utility,and is entitled under the relevant State statutes to be a party to this and other contractual agreements that are necessary to the Project;and WHEREAS,each Party hereto has already executed the Intertie Grant Agreement ("Grant Agreement")and Grant Transfer And Delegation Agreement for the Project,which are attached to this Agreement as Exhibits A(1)and A(2);and WHEREAS,each Party has independently determined that its participation in the Project under the terms and conditions set forth in this and related Agreements is prudent under the circumstances,and that over its expected useful life the Project is likely to produce net economic benefits (directly and through improved reliability)for the electric ratepayers served by that Party; NOW THEREFORE,IN CONSIDERATION of the mutual covenants set forth herein,the Parties agree as follows: Section 1.PARTIES (a)Participants And Additional Parties As Parties To This Agreement.The Parties to this Agreement are the Participants,as defined in Section 1(b),and the Additional Parties,as defined in Section I(c).As further set forth in Section 5(a)and in other provisions of this Agreement,the Participants will own (as tenants in common)certain transmission facilities that PARTICIPANTS AGREEMENT --Page 1 eee Steroid are the subject of this Agreement,and will exercise the rights and bear the responsibilities of such ownership.The Additional Parties are electric utilities who collectively constitute Alaska Electric Generation and Transmission Cooperative,Inc.,one of the Participants,and whose systems will be electrically interconnected with,and will affect and be affected by,the transmission facilities that.are the subject of this Agreement.The Additional Parties will participate in the governance and control of the Project,but will not be among the owners of such facilities. (b)Participants.The Participants are the ALASKA ELECTRIC GENERATION & TRANSMISSION COOPERATIVE,INC.("AEG&T"),The MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT &POWER (""ML&P"),the CHUGACH ELECTRIC ASSOCIATION,INC.("Chugach"),The MUNICIPALITY OF FAIRBANKS d/b/a FAIRBANKS MUNICIPAL UTILITIES SYSTEM ("FMUS"),the GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.("GVEA"),and The CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM ("SES"). (c)Additional Parties.The Additional Parties are the HOMER ELECTRIC ASSOCI- ATION,INC.("HEA")and the MATANUSKA ELECTRIC ASSOCIATION,INC.,("MEA"). Section 2,TERM OF AGREEMENT (a)Effective Date.This Agreement shall become effective at 24:00 hours on the first date that it has been executed by all of the Parties ("Effective Date"). (b)Expiration Date.Unless earlier terminated pursuant to other provisions of this Agreement,this Agreement shall expire at 24:00 hours on the first date that the Project has reached the end of its actual useful life ("Expiration Date"),as reasonably determined by the Intertie Participants Group ("IPG"). Section 3.DEFINITION AND SCOPE OF THE PROJECT (a)The Healy-Fairbanks Segment.The Healy-Fairbanks Segment of the Project shall -consist of a 138-kV (minimum)electric power transmission line between Healy,Alaska,and the proposed Wilson Substation in south Fairbanks,Alaska,the routing and design of which will be approved by the IPG,and a description of which will thereafter be attached hereto as Exhibit B and incorporated by reference herein.The proposed Wilson Substation shall be designed to accommodate appropriate direct interconnection for FMUS,and FMUS shall interconnect to the Project at that location within 18 months of the Date of Commercial Operation of the Healy- Fairbanks Segment. (b)The Anchorage-Kenai Peninsula Segment.The Anchorage-Kenai Peninsula Segment of the Project shall consist of a 138-kV (minimum)electric power transmission line between Anchorage,Alaska,and the Kenai Peninsula of Alaska,the routing and design of which will be approved by the IPG,and a description of which will thereafter be attached hereto as Exhibit C and incorporated by reference herein. PARTICIPANTS AGREEMENT --Page 2 a Section 4.THE PARTICIPANTS (a)Participants'Shares.Each Participant's nights to Project capacity,and each Partici- pant's responsibility for Project costs,shall be determined as set forth in this Agreement on the basis of that Participant's Share of each Project Segment.The Parties have computed and agreed upon the respective individual Participants'Shares in a manner consistent with applicable statutory provisions.Unless otherwise changed in accordance with this Agreement,each Participant's Share with respect to both Segments shall initially be as follows: 7US)6 (.2 25.79% of which: HEA......ccsscecesseessreees 11.60% MEA0...eceseecceteeee 14.19% MLP oe ecccccsessneeesseceestesessnee 22.43% Chugach.........cccceccessescscsseceestseees 30.23% FMUS 0c eeccesesessesesesseeeeeeeeceeees 4.70% GVEA00...eecccesssscccesseeccsneceensenees 15.41% 1S)Shs 1.44% (b)Changes In Participants'Shares.Except as otherwise specifically provided herein, changes in Participants'Shares shall be subject to the terms and conditions set forth in this Section 4(b).If either or both Additional Parties change their Shares independently of one another,then the Share of AEG&T shall be divided into separate Shares of HEA and MEA in accordance with their interests in each Segment of the Project as applicable at the time of such division.In the _event of such division and for the purposes of this Section 4(b),the Additional Parties shall be deemed Participants. (1)General Conditions. (A)Except as provided in Sections 4(b)(3),4(b)(4),and 4(b)(6),no Participant's Share or any portion thereof shall be assigned or transferred, voluntarily or involuntarily,to any entity,unless said entity: (i)is capable of being a "participating electric utility"for purposes of Sections 1 and 2 of chapter 19 SLA 1993,which authorize and partially fund the Project;and (ii)is capable of carrying out all the electric utility services,duties,- obligations,and functions of a Participant,as reasonably determined by the IPG; (iii)has validly assumed,in writing,all of the transferring Participant's obligations hereunder,provided that such assignment or transfer shall not relieve the transferring Participant of its obligations under this Agreement (although said transferring Participant may become PARTICIPANTS AGREEMENT --Page 3 secondarily liable and the transferee may become primarily liable)without the express written approval of the IPG;and (iv)has provided the Parties with an opinion of counsel that this Agreement is enforceable against the transferee or assignee. (2)Consent,Except as provided in sections 4(b)(3)and 4(b)(4),no Participant's Share shall be changed (i.e.,increased or decreased,including eliminated or reduced to zero),either voluntarily or involuntarily,by assignment or otherwise,except with the prior written consent of: (A)each and every Participant,which consent shall not be unreasonably withheld; (B)any Project lender,bondholder,bond fund trustee,or other party whose consent is a precondition to any such a change by that Participant as a result of agreements or arrangements entered into by that Participant for the purpose of financing the Project;and (C)if applicable,any lender or regulatory agency whose consent the Participant(s)may require in order to increase,decrease,or eliminate its (their) respective Participant's Share(s). (3)Limited automatic rights of withdrawal. (A)Generally.Each Participant other than GVEA and FMUS shall have a limited automatic right of withdrawal from participation in the Healy-Fairbanks Segment,and each Participant (including GVEA and FMUS)shall be entitled to withdraw from participation in the Anchorage-Kenai Peninsula Segment,but,in each case,only in accordance with the provisions of this Section 4(b)(3). (B)Timing.A Participant that withdraws from participation in either Segment may do so only by delivering written notice to the other Participants on or before a particular date (hereinafter the "decision date")reasonably established by the IPG.The decision date shall be a date certain,after completion of the requisite Anchorage-Kenai Peninsula Segment route studies and cost estimates,on which a final decision will be made to proceed or not to proceed with constructionofthatSegmentalongaparticularrouteandwithparticularendpoints.The Participants will cooperate with one another in good faith to help devise and implement such additional procedures,including reasonable meeting and notification schedules,as the IPG may adopt to facilitate decisionmaking on the potential transfers and assumptions of rights and obligations among Participants that may occur pursuant to this Section 4(b)(3). (C)Effect _of withdrawal on Participant Shares and_related obligations.The Participant's Share of any withdrawing Participant shall be PARTICIPANTS AGREEMENT --Page 4 reallocated among other Participants in accordance with paragraph (D)below. The withdrawal of any Participant from the Healy-Fairbanks Segment,however, shall become effective only one year after the Date of Commercial Operation of that Segment,or,if later,one year after the date of that Participant's withdrawal. notice.Until its withdrawal becomes effective,such Participant shall remain liable for all costs and obligations associated with its Participant's Share of the Healy- Fairbanks Segment.The withdrawal of any Participant from the Anchorage-Kenal Peninsula Segment shall become effective sixty (60)days after the decision date, subject to the last sentence of Section 4(b)(3)(D)(ii). (D)Reallocation of the Participant's Share of a withdrawing Participant. (i)Healy-Fairbanks Segment.The Participant's Share of a Participant that withdraws from the Healy-Fairbanks Segment shall first be offered to other Participants in that Segment in proportion to the respective Participant's Shares of such other Participants in that Segment:Any por- tion of the withdrawing Participant's Share that remains available after this first-round offer shall next be accepted by FMUS and GVEA in proportion to their respective Participant's Shares,provided,that FMUS shall not be required to accept said portion to the extent FMUS's total Participant's Share of the Healy-Fairbanks Segment would thereby exceed 15%.If any portion of the withdrawing Participant's Share remains available after this second-round offer,then that portion shall be accepted by GVEA. (ii)Anchorage-Kenai Peninsula Segment.The Participant's Share of a Participant that withdraws from the Anchorage-Kenai Peninsula Segment shall first be offered to all remaining Participants in that Segment, in proportion to their respective Shares in that Segment.Any portion of the withdrawing Participant's Share that remains available after this first- round offer shall next be offered to all Participants in that Segment that have committed to withdraw from the Healy-Fairbanks Segment ("South- only Participants").If and to the extent that the South-only Participants -decline to accept this second-round offer,then the withdrawing Participant's Share (or any remaining portion thereof)shall again be offered to all remaining Participants in that Segment (including the South-only Participants)in proportion to the respective Participant's Shares of such Participants in that Segment.Each such Participant shall either accept such third-round offer,obtain agreement from another Participant to accept such third-round offer,or shall itself withdraw from participation in that Segment.In the event this process leads one.or more additional Participants to withdraw from participation in that Segment,then their Participant's Shares shall be offered to the remaining Participants in a like first-round,second-round,and third-round manner.If,at the conclusion of this process,one or more Participants have accepted Participant's Shares in the Anchorage-Kenai Peninsula Segment that total one hundred percent PARTICIPANTS AGREEMENT --Page 5 eee ne ted (100%),then construction of the Segment shall commence and there shall be no further automatic rights of withdrawal available to any Participant; otherwise this Project Segment shall be considered Abandoned and all Participants in it (notwithstanding the attempted withdrawal of any of them under this paragraph)shall proceed,in accordance with procedures the IPG shall adopt,to wind up this Project Segment.No Participant shall in that event be excused from its Participant's Share of any obligations associated with this Project Segment until all such obligations have been satisfied. (E)Financial arrangements with a Participant that withdraws from participation in the Healy-Fairbanks Segment.Upon acceptance of a transfer and assumption by one or more other Participants of the rights and obligations associated with the Participant's Share of a Participant that withdraws from participation in the Healy-Fairbanks Segment,and after such withdrawal becomes effective pursuant to Section 4(b)(3)(C),the Participant(s)assuming such rights and obligations shall proceed to pay the withdrawing Participant's Annual Payment Obligations and Assessments for that Project Segment.Such payment shall include any then-unamortized amounts of the transferring Participant's Share of such Design and Construction Costs as may exceed the sum total of the Grant Funds plus available interest thereon for that Segment.In the event that the withdrawing Participant's Share of Design and Construction Costs for that Segment has not been financed through a collective financing arrangement,then the Participant(s)assuming such Share shall pay the withdrawing Participant directly,over a period of twenty-five (25)years (unless otherwise agreed)and ona mutually-agreed amortization schedule,for amounts that would at that time be unamortized,assuming said withdrawing Participant's Share had been financed by means of a collective financing arrangement or other loan. (F)In the event a Participant exercises the limited right of withdrawal pursuant to Section 4(b)(3),then each remaining Participant shall continue to be a Member with a single vote,notwithstanding its assumption of the transferring Participant's Share,but the Share of said remaining Participant shall be increased by the amount transferred for all other purposes,including for purposes of determining the affirmative vote of Members whose percentage Shares exceed 50%under Section 6(e)(3)(a). (4)Default and Step-up.If,by reason of a Participant's default or otherwise byoperationoflaw(includingby order of any regulatory body with jurisdiction),a Participant's Share is reduced or eliminated,or a Participant ceases to be a Participant and ceases to pay the costs associated with its Participant's Share,then the Shares of the remaining Participants shall be proportionately increased so that the total of all Shares continues to equal 100%.No Party shall initiate or otherwise seek such an order reducing or eliminating its Share or terminating its role as a Participant. (5)Voluntary Transfers.In the event that a Participant transfers or assigns its Share or portion thereof to another Party,the Share of the transferee shall be increased PARTICIPANTS AGREEMENT --Page 6 accordingly,but it shall continue to be a Member with a single vote on the IPG.In the event that a Participant transfers or assigns its Share or portion thereof to an entity that is not a Party,the transferee may become a Member with a single vote on the IPG. (6)Assignment for Security Purposes.Nothing in this Agreement shall prevent an assignment of a Party's rights hereunder for security purposes only,or shall prevent a financing entity with recorded or secured rights from exercising all nghts and remedies available to it under law or contract,provided that performance of this Agreement is not thereby impaired.The Parties shall have the mght to be reasonably notified by the financing entity prior to the time of exercise that it is exercising such rights or remedies. Section 5.RIGHTS &OBLIGATIONS OF PARTICIPANTS (a)Ownership As Tenants In Common.The Participants shall be owners of each Segment of the Project (including all personal and real property interests thereof)as tenants in common,with undivided interests and obligations with respect to all Project Segment assets and liabilities in the proportionate amounts of their respective Participants'Shares.Except as otherwise provided hereunder,the Participants shall share in the Project Segment's benefits, burdens,and risks only in proportion to their respective Participants'Shares,notwithstanding that _the IPG may select one or more individual Participants to manage,design,build,finance,operate, and/or maintain the Project Segment or portions thereof on behalf of the Participants collectively. (b)Waivers. (1)Right of partition.Each Participant hereby waives (on behalf of itself and of any assignee or transferee of all or any portion of its respective Participant's Share)any right or power that a tenant in common might otherwise possess to compel a partition of the Project or any element thereof as commonly held property;provided,that this provision shall not prevent the Additional Parties or any other Parties from seeking to divide AEG&T's Participant's Share into two Participant's Shares in proportion to the actual interests of said Additional Parties applicable at that time. (2)Claims against other Parties,Each Party shall be entitled to enforce this Agreement;provided,that no Party shall be entitled,without the prior approval of the IPG,to assert claims against a Participant based on or arising out of that Participant's acts or omissions as a Construction Manager or an O&M Manager. (c)Payment Obligations.Each Participant shall (1)meet in timely fashion each and all of its obligations under this Agreement,including without limitation its obligations to make payments of money for or with respect to the Project,and (2)make such payments of money in such amount,in such manner,and at such time as may be required by this Agreement,or by operation of law. (d)Rights And Duties Regarding Use OfParty's Facilities. PARTICIPANTS AGREEMENT --Page 7 (1)Duty of Parties to allow use of their own transmission capacity.Each Party shall make available to the other Parties,on a just and reasonable and nondiscrimi- natory basis,and in the manner and subject to the conditions set forth in this Section 5(d), Capacity in that Party's own non-Project electric power transmission facilities for the purpose of affording the Participants access to/from the Project in order that each may make use of the Project. (2)Initial terms and conditions governing Chugach facilities.Subject to approval by the Alaska Public Utilities Commission ("Commission"),the use of Chugach's facilities for access to/from the Anchorage-Kenai Peninsula Segment by other Parties shall be governed initially by the terms and conditions,including rates,described in Exhibit D(1),attached hereto and incorporated by this reference herein.Chugach shall submit said terms and conditions to the Commission for review and shall seek approval thereof. (3)Terms and conditions governing GVEA_facilities.The terms and conditions governing use of GVEA facilities are set forth in Exhibit D(2),attached hereto and incorporated by this reference herein. (4)Other terms and conditions.When appropriate to effect the duty set forth in Section 5(d)(1)under circumstances other than those described in Sections 5(d)(2)and 5(d)(3),the Parties shall promptly negotiate in good faithin an effort to reach agreement on reasonable terms and conditions,including rates,that will apply when a particular Party provides to Participants access to/from either Project Segment over its non-Project transmission facilities.Any such terms and conditions that become effective shall be set forth in Exhibit D,and shall be attached hereto and incorporated by reference herein during such time as they remain effective. (5)Submission of terms and conditions to the Commission.If despite the good faith negotiation efforts of the Parties,agreement is not reached on the terms and conditions governing the Participants'use of any particular Party's non-Project transmis- sion facilities,then that Party shall submit to the Commission for review and approval the terms and conditions,including rates,which that Party proposes with respect to its facilities. (6)Additions to Exhibit D.Any terms and conditions,including rates,that ultimately become effective through order of the Commission or of a reviewing court shall be set forthin Exhibit D,and shall be attached hereto and incorporated by reference hereinduringsuchtimeastheyremaineffective. Section 6.DECISION MAKING BY THE PARTICIPANTS (a)Nature of the IPG. (1)Each Participant or Additional Party,as the case may be,shall exercise certain of its rights and carry out certain of its responsibilities with respect to the design,planning, construction,operation,management and,as appropriate,partial funding of the Project by PARTICIPANTS AGREEMENT --Page 8 an ree aed rey acting through the IPG in accordance with this Agreement or with rules adopted by the IPG pursuant to this Agreement.When used in this Agreement,the term "IPG"refers to the Participants and Additional Parties acting collectively as set forth herein.Nothing in this Agreement is intended to establish the IPG as a separate entity,nor do the Parties intend to delegate any authority or confer any powers or impose any obligations on the IPG,apart from the authority,powers and obligations of each Participant and Additional Party expressly conferred pursuant to this Agreement.The IPG shall have no power or authority to take actions which modify,directly or indirectly,the terms and conditions of this Agreement. (2)The IPG,in making certain decisions and carrying out certain Project activities with respect to the ownership and management of the Project,shall at all times act in accordance with voting procedures and rules set forth in or adopted pursuant to this Agreement. (b)Membership.The IPG shall consist of the following initial members ("Members"), each of which shall be entitled to one vote as further set forth herein:ML&P,Chugach,FMUS, GVEA,SES,HEA,and MEA.No Member shall obtain an additional vote through merger with, acquisition of,or assignment from any other Member.In the event a Party ceases to have a Share,either directly or,in the case of an Additional Party,indirectly,then said Party shall cease to be a Member.° (c)Designation of representatives.Each Member shall designate one representative and one alternative representative to the IPG.Each Member shall notify all other Members in writing of the names,addresses,and telephone numbers of its representative and designated alter- nate.Any Member may change its designated representative or alternate representative at any time and shall promptly provide written notice of such change to the Members.The alternative representative shall serve as the designated representative in the absence of the designated repre- sentative. (d)Meetings, (1)Annual Meeting.The annual meeting of the IPG shall be the first regular meeting of each Project Year,and shall be convened for the purpose of electing officers and transacting such other business as may come before the meeting. (2)Regular Meetings.Regular meetings shall be held at least quarterly,with the specific date and time to be determined by the IPG. (3)Special Meetings.Special meetings of the IPG may be called by the Chairman or by three Members at any time by so advising the Secretary of the IPG.Business at a special meeting of the IPG shall be limited to the purpose stated in the notice of such special meeting. (4)Quorum.At all meetings of the IPG,the presence of the representatives of any five Members shall constitute a quorum for the transaction of business. PARTICIPANTS AGREEMENT --Page 9 the (e)Manner ofActing. (1)IPG actions may be taken by any reasonable voting method,provided that any Member may request an open roll call vote.A Member may not vote on a matter solely or primarily affecting a Segment of which said Member does not hold a Share,either directly or,in the case of an Additional Party,indirectly.Telephonic participation shall constitute _ presence at a meeting of the IPG.All actions taken via teleconferencing shall be taken by roll call vote. (2)Except 2s otherwise provided herein,all actions ofthe IPG that are decided by vote shall require a majority vote of the Members,such vote to be taken during a meeting at a time when a quorum is present. (3)The actions listed in this Section 6(e)(3)shall require (a)the affirmative vote of a majority of the Members,and (b)the affirmative vote of those Members whose Participant's Shares of Project capacity total greater than 50%("double majority"),but only if at least three Members are eligible to vote on such actions.Otherwise the actions listed in this Section 6(e)(3) shall require the affirmative vote of those Members whose Participant's Shares total greater than 50%,and shall be made in good faith and consistent with Prudent Utility Practice for the benefit of both Segment Participants. (A)Approval and modification of Construction Budget. (B)For each Project Segment,selection,removal,or replacement of the Construction Manager and the O&M Manager,subject to the requirements of Sections 7 and 9,and approval of terms and conditions of the Construction and O&M Agreements. (C)Adoption and modification of the budget of Annual Project Costs. (D)Establishing for each Project Year the estimated Annual Payment Ob- ligation of each Participant,together with a schedule for each Participant of payments that such Participant shall be required to make during the year. (E)Determination after the conclusion of each Project Year of the actual Annual Project Costs for that Year. (F)Evaluation of necessity for and scheduling for major change orders, Required Project Work and Optional Project Work;provided,that Optional Project Work may be undertaken only if all Parties agree that said Work is consistent with the terms of this Agreement,including Section 6(a)hereof. (G)Determination of the appropriate amount of and method for obtaining insurance for or related to the Project. (H)Creation of specific Project accounts or funds,if any,and deter- mination of minimum funding amounts for the same. PARTICIPANTS AGREEMENT --Page 10 (I)Adoption or amendments of procedural rules of the IPG (except for procedures for dispute resolution,which shall be adopted or amended by unanimous agreement). (J)Final approval of maintenance schedules,breaker settings,and similar protocols for each Segment (to be proposed to the IPGiin the first instance by theO&M Managers). (K)Determination of when the Project has reached the end of its actual useful life. (L)Determination of whether claims may be asserted against any PartyprovidingProjectservicesunderarelatedagreement. (M)Adoption of procedures for Assessments pursuant to Section 10(e)(2). (N)Approval of material routing and design decisions for each Project Segment.The IPG shall select among potential alternative routings and end points for the Project Segments reasonably and in good faith in order to (1)satisfy such reasonable objectives for electric reliability,transfer capability,safety,feasibility, environmental quality,and similar objectives as the IPG may adopt for the Project consistent with Prudent Utility Practice,at (2)the lowest reasonably expected Project cost;provided,that the northern terminus of the Healy-Fairbanks Segment shall be located at the proposed Wilson substation and designed to accommodate direct interconnection by FMUS unless FMUS expressly and in writing approves a different location or design. (O)Relief ofa Participant of its obligations pursuant to this Agreement as a consequence of assignment or transfer. (P)Adoption of standards and procedures pursuant to which a Party may be compensated by the others for any reasonable cost,expense,or loss (or portion thereof)that (i)such Party would not have incurred but for the Project,and (ii) should properly be considered a cost of the Project. (Q)All other matters that this Agreement would otherwise allow to be decided by a simple majority of the Members,but that the IPG decides,by double majority vote,should require the affirmative vote of a double majority. (4)All significant actions or determinations of the IPG shall be reduced to writing and promptly disseminated among the Participants in the form of meeting minutes or IPG Resolutions,provided that failure to comply strictly with this provision shall not by itself render said action or determination invalid. PARTICIPANTS AGREEMENT --Page 11 *eran (5)Decisions on which only two Members are eligible to vote shall be subject to notice and opportunity to comment by the minority Participant,and to appeal to the Commission for consistency with good faith and Prudent Utility Practice for the benefit of both Segment Participants. (f)Committees. (1)Designation.The IPG may appoint committees from time to time,subject to such conditions as may be prescribed by the IPG.The designation of any such commit- tee shall not relieve the IPG or any Member of any responsibility by law or the Agreement. (2)Powers.Any delegation of decisionmaking authority by the IPG to any committee,officer,or other individual shall be evidenced in writing. (g)Officers. (1)Number.The officers of the IPG shall initially consist of a Chairman,a Vice Chairman,a Secretary,and a Treasurer,who shall serve at the pleasure of the IPG.The IPG may reduce the number of its officers and may elect such other officers and agentsas it shall deem necessary,who shall hold office for such terms and shall exercise such powers and perform such duties consistent with this Agreement as shall be determined from time to time by the IPG.The IPG may,by separate resolution,provide for the indemnification of its officers,Members,and the members of any special purpose commit- tees appointed by the IPG. (2)Election and Term of Office.Officers shall be elected by the IPG at its annual meeting.Only designated representatives of Members shall be eligible to serve as officers.Each officer shall hold office until a successor is elected and accepts office unless the officer resigns or is removed by the IPG. (3)Vacancies.In the event any vacancy occurs in any elected office of the IPG, the remaining members of the IPG shall elect a successor to the office at the next regular or special meeting of the IPG.os (h)Auditing Standards and Procedures. (1)Unless otherwise waived by the IPG,an annual audit of each Project Segment shall be performed by qualified independent auditors selected by the IPG.The primary purpose of the audits shall include verification of Project expenses and determination of amounts to be carried forward or collected pursuant to an annual true-up of Project costs. (2)In accordance with rules established by the IPG,the IPG shall (a)keep or cause to be kept complete and accurate records and accounts for each Segment of the Project,which records and accounts shall be subject at reasonable times to inspection by any Participant,and (b)require Construction Managers and O&M Managers to provide PARTICIPANTS AGREEMENT --Page 12 progress reports,transaction records,Project certifications,or other information that the IPG reasonably deems relevant to Project ownership or operation. Section 7.CONSTRUCTION MATTERS (a)Construction Manager.GVEA shall serve as the Construction Manager of the Healy-Fairbanks Segment,and Chugach shall serve as the Construction Manager of the An- chorage-Kenai Peninsula Segment,unless said Managers elect to withdraw or are removed pursuant to Section 7(j).Each Construction Manager shall be responsible for the preparation of its Project Segment's design for approval by the IPG and shall be responsible for the construction of its respective Segment of the Project utilizing Prudent Utility Practices and subject to con- struction budgets approved by the IPG..Each Construction Manager shall be responsible for selecting and supervising any design engineering firms or subcontractors necessary for the suc- cessful completion of construction of its Segment of the Project. (b)Project Schedules/Commercial Operation.Each Construction Manager shall,upon execution of the apposite Construction Agreement,proceed with the design,right-of-way acquisition,permits,and construction with due diligence and in accordance with Prudent Utility Practice;provided,that detailed design and construction of the Anchorage-Kenai Peninsula Segment shall not commence until after completion of the process described in Section 4(b)(3). Each Construction Manager shall submit a Project schedule to the IPG,and shall use its reasonable best efforts to achieve the scheduled dates of commercial operation,but shall not beresponsiblefordelayswhicharebeyonditsreasonablecontrol. (c)Project Budgets/Construction Costs.Each Construction Manager shall, immediately upon execution of the apposite Construction Agreement,prepare a budget of the total estimated Design and Construction Costs of the Healy-Fairbanks or Anchorage-Kenai Peninsula Segments,as the case may be,and submit that Construction Budget to the IPG, together with Construction Budgets for the 1994 calendar year,for approval by the IPG; provided,that in the case of the Anchorage-Kenai Peninsula Segment,the first such budget shall be prepared for submission to the IPG only after the Segment's routing and end points have first been selected.Thereafter,no less than one hundred and twenty (120)days before the beginning of each succeeding Construction Year,each Construction Manager shall submit to the IPG for its approval a budget (or,as the case may be,a revised budget)for each succeeding Construction Year.The IPG shall approve a budget or revised budget no less than 60 days before the beginning of each succeeding Construction Year. The Construction Managers shall not without the express approval of the IPG incur costs or obligate funds beyond those amounts contained in an approved budget. The Construction Managers shall not make material intra-budget transfers without the IPG's approval. The Construction Managers shall not be compensated for their services as Construction Managers,except that each Construction Manager may include within the Project budget a reasonable amount for labor (i.e.,compensation,including associated payroll benefits)to the PARTICIPANTS AGREEMENT --Page 13 20 Sl extent directly assigned to the Project by that Construction Manager.Any such costs contained in Project budgets shall be set out in sufficient detail so as to allow the IPG to assess the reasonableness of those costs.The Construction Managers may also include within the Project Budget an amount for its general and administrative overhead,including construction overhead, of 0.5 %of Design and Construction Costs. (d)Advancement of Funds.The IPG shall instruct the administrator under the Grant Administration Agreement ("Grant Administrator")to advance funds to each Construction Manager (1)either upon the submission of progress payment invoices from subcontractors certified as to accuracy by said Construction Manager or direct labor invoices submitted by said Construction Manager showing personnel and hours involved in connection with the Project,or (2)otherwise in accordance with the Grant Administrative Agreement. (e)Change Orders.The Construction Managers may not enter into or agree to major change orders without the prior approval of the IPG.Each Construction Manager may,however, agree to minor change orders without the approval of the IPG;the Construction Manager shall report all such minor change orders in that Construction Manager's next applicable construction report to the IPG.Minor change orders are defined as those changes to the design or construction of the Project which are not expected to affect the Project capacity,general routing, points of interconnection,or basic design of the structures,and which are not expected to exceed $50,000 individually or,in the aggregate,exceed the approved budget for that phase of the design or construction. (f)Separate Books and Records.Each Construction Manager shall maintain separate books and records for the design and construction of its Segment of the Project.Such books and records shall be available to the Participants for their inspection.Copies of such books and re- cords shall be made available to any Participant upon request provided that such Participant reimburses the Construction Manager for the reasonable cost of reproducing or otherwise making available such books and records. (g)Monthly Reports.During construction,each Construction Manager shall submit monthly reports to the IPG setting out in sufficient detail the status of the design and construction of its Segment of the Project so as to allow the IPG to compare the percentage of completion of the Project with total expenditures as a percentage of budgeted amounts.Each Construction Manager shall immediately inform the members of the IPG by fax of any design or construction problems encountered which,in that Construction Manager's opinion,might result in significant future litigation,the request for a major change order,or a significant deviation from the Project schedule.The IPG may from time to time establish standards and criteria for determining what constitutes "significant"litigation and "major"change orders for purposes of this provision. (h)Audit.The IPG,or any Participant,shall have the right to audit the books and records of each Construction Manager at any time.The costs of such an audit shall be borne by the party requesting the audit unless such audit discloses that the Construction Manager has (1) failed in some significant manner or (2)acted in bad faith,in performing its obligations under the Construction Agreement,in which case the Construction Manager shall pay the reasonable costs of the audit. PARTICIPANTS AGREEMENT --Page 14 (i)Liability of Construction Manager.The Participants are entitled to compel each Construction Manager to disgorge any unjust enrichment gained in connection with its performance under the Construction Agreement.Each Construction Manager shall also be responsible for the consequences of its own intentional or willful misconduct,or of its grossly negligent action in performance of its obligations under the Construction Agreement (including such actions by its officers,employees,or agents);provided,that the Construction Manager shall not be liable (except with other Participants,and to the extent ofits Participant's Share of Projectliabilities)for: (1)Damages resulting from design or construction decisions presented to and approved by the IPG;and/or (2)The intentional or negligent acts of engineering design firms or subcontractors .retained by the Construction Manager,provided that the Construction Manager has madeagood-faith effort to supervise and inspect the activities of such engineering design firmsorsubcontractors,and/or (3)Damages or other costs and expenses resulting from the Construction Manager's ordinary negligence in the performance of its duties as Construction Manager. The Participants shall treat such damages,costs,and expenses as costs of the Project,to be recovered from all Participants in proportion to their Participant's Shares;provided,that the Construction Manager shall remain obligated as a Participant to pay its Participant's Share of any Project costs,including the costs of any indemnification. (j)Removal or Withdrawal of Construction Manager.The IPG may remove the Construction Manager for reasonable cause,and may replace that Construction Manager with another Party;provided that the IPG gives the Construction Manager at least thirty (30)days' prior notice in writing and reasonable opportunity to cure.All Members of the IPG may participate in the vote for such removal and replacement.The Construction Manager may,for any reason,voluntarily withdraw from its duties as Construction Manager if written notice thereof is tendered no less than 60 days prior to the anticipated date of commencement of construction. After commencement of construction,the Construction Manager may withdraw from said duties only upon reasonable notice (but not less than 90 days)and only for good cause shown.In either event,the Construction Manager shall use its reasonable best efforts to cooperate with the new Construction Manager,and to mitigate any costs arising from the withdrawal and replacement of the Construction Manager. (k)Duty to Negotiate Construction Agreement.The Parties shall negotiate in good faith in an effort to reach agreement on reasonable terms and conditions for,and to enter into,a Construction Agreement containing terms and conditions substantially as set forth in this Section 7. Section 8.CONSTRUCTION FINANCING PARTICIPANTS AGREEMENT --Page 15 (a)Disbursement _of Grant Funds.Grant Funds deposited to each Intertie Grant Account established pursuant to the Grant Administration Agreement shall be disbursed and expended for the design and construction of the appropriate Segment of the Project in accordance with the provisions of this Section 8,the Construction Agreement,and the Grant Administration Agreement. (1)The Participants shall exercise overall control over the disbursement of Grant Funds through the IPG,which shall act in accordance with its rules,the Construction Agreement,and the Grant Administration Agreement.Upon approval by the IPG,Grant Funds shall be disbursed for the purpose of undertaking preliminary investigation and design work,including but not limited to environmental and route studies.No Grant Funds shall be disbursed for the actual construction of the Project unless and until the IPG has considered and approved the construction budget and schedule,as provided for in Sections 6 and 7,whereupon the Participants shall cause the appropriate Construction Manager to commence design and construction of its Segment of the Project as set forth in the Construction Agreement. (2)Thereafter,and from time to time until the Date of Commercial Operation,the IPG shall consider and either approve or disapprove (i)any design or construction activities required by the IPG to be approved prior to commencing said activities,(11)any payments or reimbursements to the Construction Manager for costs incurred and expenditures made that are not in accordance with the approved construction budget and schedule,and (iii)any changes to the construction budget and schedule.The procedure for such consideration and approval shall be as set forth in rules and procedures duly adopted by the IPG as provided for in Section 6. .(3)Payments and reimbursements from the Intertie Grant Accounts shall be made only for costs incurred and expenditures made pursuant to the approved construction budget and schedule or otherwise as approved by the IPG.Documentation required to make draws against the appropriate Intertie Grant Account shall be provided in the manner determined by the IPG in accordance with the Grant Administration Agreement, and shall be evidenced by a certification executed by the Chairman or Treasurer of the IPG,or otherwise as the IPG may by rule determine. (4)The Participants,through the IPG,shall consider and act upon such modifications and amendments to the construction budget and schedule as are proposed by the appropriate Construction Manager or on the initiative of any Participant. (5)Each Participant hereby pledges all Grant Funds received to payment of Design and Construction Costs,except as provided in paragraph (c)of this section. "Design and Construction Costs"means all capital costs of the Project,including but not limited to planning,permitting,design,acquisition of real property interests,construction, equipment,testing,and insurance costs,but not administrative and general costs of any Participant,State agency,political subdivision,or Construction Manager,except pursuant to Section 7(c),unless such costs are expressly approved by the IPG prior to being incurred. PARTICIPANTS AGREEMENT --Page 16 (b)Additional Financing.Notwithstanding any other provision of this Agreement,and in order to complete the Project,each Participant shall pay its Participant's Share of any Design and Construction Costs that exceed the sum total of the Grant Funds plus available interest thereon ("Additional Costs"). (1)The Parties recognize the possibility of completing the Project through collective financing arrangements,including bonds issued by AIDEA or other State agency,as may be provided by separate agreement. (2)If the Parties agree unanimously,each in its own discretion,to participate in a collective financing arrangement and to approve the Bond Resolution adopted to imple- ment said collective financing arrangement,then amounts required to be paid during each Project Year by the Participants pursuant to said Bond Resolution shall be included in Annual Project Costs.Each Participant shall discharge its obligation,in whole or in part, to pay its Participant's Share of Additional Costs through payment of its Participant's Share of Annual Debt Service and certain other Annual Project Costs in accordance with Section 10 and any applicable Bond Resolution. (3)Each Participant reserves the right to finance separately its Participant's Share of Additional Costs,or any other payments required by this Agreement.Such separate financing shall not impair any Party's legal rights or obligations under this Agreement.In the event the Parties do not agree to a collective financing arrangement,then each Party shall pay,by any lawful means,its own Participant's Share of Additional Costs and other payments required by this Agreement. (4)The time and manner of payment of such Additional Costs shall be determined by the IPG in accordance with its rules.Each Participant shall pay its Participant's Share of Additional Costs upon receipt of certification in the same manner as is provided in paragraph 8(a)(3)for the disbursement of Grant Funds by the Trustee. (5)The IPG may take appropriate actions to facilitate collective financing among some or all of the Parties,but the costs of collective financing arrangements undertaken by less than all of the Participants shall not be considered Project Costs or be borne by other Participants. (c)Disposition of Unexpended Grant Funds.To the extent permitted by applicable law,any Grant Funds that remain unexpended after the Date of Commercial Operation each Segment of the Project shall be held and applied for use in connection with the Project for the benefit of the Participants,as provided for in rules to be adopted by the PG.Any Grant Funds that remain unexpended after Abandonment of the Project and discharge of outstanding obligations in connection therewith shall be deposited to the account of AIDEA for return to the State. (d)Insurance.The Participants shall obtain and maintain insurance on the Project during design and construction if and as determined by the IPG in accordance with Section 6. PARTICIPANTS AGREEMENT --Page 17 Section 9.OPERATION &MAINTENANCE:RELATED MATTERS (a)Selection Of O&M Managers.GVEA shall serve as the O&M Manager for the Healy-Fairbanks Segment,and shall be removable only for reasonable cause,after reasonable notice and opportunity to cure.Chugach shall be the initial O&M Manager for the Anchorage- Kenai Peninsula Segment for a period of three (3)years from and after the Date of Commercial Operation of that Segment;during such period,the IPG may remove Chugach for reasonable cause after reasonable notice and opportunity to cure,and thereafter the IPG may remove Chugach after reasonable notice by the affirmative vote of Members whose Participant's Shares in total exceed fifty percent (50%).Chugach shall subcontract with AEG&T and/or HEA to provide some or all of the Project maintenance services for Project facilities located on the Kenai Peninsula,if and to the extent that doing so will reduce Project expenses.The Parties shall negotiate in good faith in an effort to reach agreement on reasonable terms and conditions for, and to enter into,an O&M Agreement containing terms and conditions consistent with this Agreement.The rights and obligations of the O&M Manager(s)and of the IPG and its Members with respect to the Project shall also be governed by the O&M Agreement(s)for the Project. (b)Duties Of Parties Re:Electrical Connection &Coordination.Because each Par- ty's own facilities will be electrically interconnected,directly or indirectly,with the Project,each Party shall operate and maintain its own facilities in a prudent and reasonable manner.The Parties agree that: (1)they will negotiate in good faith to reach agreement on such protocols as may be necessary to ensure that the efficient operation of the Project is consistent with and adequately supported by (A)the Parties'interconnected systems,and (B)reasonable coordination of the Parties'respective system operations;and (2)each Party shall in good faith operate its own system in a manner that will reasonably accommodate operation of the Project,but nothing in this Agreement shall obligate any Party to (A)operate its system in a manner inconsistent with its own needs and requirements,or (B)incur solely for the benefit of the Project or its operation,or for the benefit of the other Parties,any uncompensated cost,expense,or loss in the design, construction,maintenance,or operation of that Party's own system. (c)Intervening Taps &Other Connections.No Party or other entity shall be allowed to establish an intervening tap or other electrical connection to the Project except in accordance with standards and rules promulgated by the IPG to protect the Project's operation,financing, capability,and electric integrity. Section 10.PROJECT COSTS &COST RECOVERY (a)Funds &Accounts.The following funds and accounts shall be ownedby the Participants in proportion to their Participants'Shares,or,if established through Participants' contributions,then in proportion to said contributions.Said funds and accounts shall be held and PARTICIPANTS AGREEMENT --Page 18 administered in accordance with the provisions of this Agreement,with rules adopted by the IPG, or with applicable requirements set forth in any controlling Bond Resolution: (1)Grant Account.All Grant Funds,including available interest thereon,as described in Section 8(a)above. (2)Funds and Accounts established pursuant to any applicable Bond Resolution. (3)Operating Fund,including a Working Capital Account therein. (b)Operating Budget. (1)The IPG shall adopt in each Operating Year (and revise as necessary or prudent during such Operating Year),in accordance with its rules,an Operating Budget of Annual Project Costs for that Operating Year,which budget shall be in an amount estimated by the IPG to be sufficient to pay all Annual Project Costs.Such budget of Annual Project Costs shall be composed of separate budgets for each Segment of the Project,and shall be broken down into categories approved by the IPG.No less than 120 days prior to the beginning of each Operating Year the O&M Managers for each Segment shall prepare and submit to the IPG an annual budget of costs,which budget (or a revised budget)the IPG shall approve or disapprove no later than sixty (60)days prior to the beginning of said Operating Year;.provided,that the annual budget shall include costs attributable to overhead or administrative and general costs of the O&M Manager,any Participant,or any agency or political subdivision of the State only to the extent that said costs are approved by the IPG before they are incurred,are reasonably incurred for labor directly employed by that O&M Manager in performance of its duties under the O&M Agreement,and would not have been incurred but for the activities undertaken as O&M Manager. (2)In accordance with mules established by the IPG,the Participants shall establish for each Operating Year the estimated Annual Payment Obligation of each Participant, together with a schedule for each Participant of payments that such Participant shall be required to make during the Operating Year pursuant to Section 10(d)of this Agreement, which payment schedule shall be (i)designed to recover such estimated Annual Payment Obligation from that Participant during the Operating Year,and (ii)revised during such Operating Year to reflect any revisions to the Operating Budget.After the conclusion of each Operating Year,the IPG shall determine the actual Annual Project Costs for that Project Year,the actual Annual Payment Obligation of each Participant for that Operating Year,and the amount of any additional payment required from (or the amount of any refund to be returned to)each Participant to ensure that the total of all payments received from each Participant for each Operating Year is equal to that Participant's Annual Payment Obligation for that Operating Year.Said payment or refund shall be made in periodic installments as an adjustment to the Participants'billing statement over the next succeeding Operating Year,unless otherwise determined by the IPG. PARTICIPANTS AGREEMENT --Page 19 (c)Expenditure of Project Funds. (1)The Participants shall exercise overall control over the disbursement of funds to pay Annual Project Costs through the IPG,which shall act in accordance with its rules, the Operation and Maintenance Agreement,and any applicable Bond Resolution.The .Participants shall exercise their powers as members of the IPG to consider and either approve or disapprove (i)any activities related to managing the Project that are required by the IPG to be approved prior to commencing said activities,(ii)any payments or reimbursements to the O&M Manager for costs incurred and expenditures made that are not in accordance with the approved operating budget,and (iii)any changes to the operating budget,as provided for in Section 6. (2)Payments and reimbursements for Annual Project Costs shall be made only for costs incurred and expenditures made pursuant to the approved annual budget or otherwise as approved by the IPG.Documentation required to make draws against the Operating Fund shall be provided in the manner determined by the IPG in accordance withtheO&M Agreement,and shall be evidenced by a certification executed by the Chairman or Treasurer of the IPG,or otherwise as the IPG may by rule determine. (3)The Participants,through the IPG,shall also consider and act upon such modifications and amendments to the budget as are proposed by the O&M Manager or on the initiative of any Participant.Any revisions to the operating budget shall be made in accordance with Section 9(b)(2)of this Agreement. (d)Recovery of Annual Project Costs. (1)Each Participant agrees and is hereby obligated to pay all Annual Payment Obligations,Energy Charges and Assessments for the appropriate Project Segment,as set forth in this Section 10(d).To the extent provided in the Bond Resolution,if any,each Participant shall make said payment whether or not the Project is completed or its operation is terminated,interrupted or suspended in whole or in part._A Participant's Annual Payment Obligation for each Project Segment equals the actual Annual Project "costs for that Sezment less the total amount of actual Energy Charges incurred by 2ParticipantsduringeachProjectYearforthatSegment,and less any revenues receivedunngsaidProjectYearthatareallocabletosaidSegment,multiplied by the Participant's Percentage Share in that Segment.Such Annual Payment Obligation is exclusive of anyAssessmentsforthatSegmentdulyadoptedbytheParticipantsactingthroughtheIPG. (2)"Annual Project Costs"for each Project Segment means costs and expenses of every type,except as provided in subsection (3)of this Section 10(d),resulting from the ownership,operation and maintenance of that Segment,that are incurred or paid by the Participants,acting through the IPG,during each Project Year in connection with that segment,including but not limited to the following: (A)Operation and maintenance costs relating to the Project ("O&M"); PARTICIPANTS AGREEMENT --Page 20 (B)Other costs,reimbursements or compensation as may be allowed under any O&M Agreement; (C)Insurance,as determined by the IPG in accordance with Section 6 of this Agreement; (D)Amounts required to be set aside by the Participants for the paymentofdebtservice,or for any reserve or contingency fund,by any Bond Resolution; (E)Professional services,including accountants and auditors,insurance consultants,attorneys,engineers,arbitration or alternative dispute resolution professionals; (F)Costs of the IPG,but only to the extent approved by the IPG prior to being incurred;and ) (G)Other necessary and appropriate costs,but only to the extent approved by the PG. (3)"Annual Project Costs”shall exclude: '(A)Design and Construction costs financed under Section 8 of this Agreement (but not the costs of debt service and related expenses associated with such financing); (B)Renewals and replacements funded by insurance proceeds or by Assessment or any specially-dedicated funds or accounts. (4)From and after the Date of Commercial Operation of each Segment,each Participant shall make payment,in a manner to be provided by IPG resolution,for thatindividualParticipant's Energy Charge amounts. (A)"Energy Charge"means (i)for the Anchorage-Kenai segment of the Project,a 1.5 mill/kwh charge for all energy generated by the Bradley Lake Hydroelectric Project, to be paid by each Participant for its Bradley Lake energy (including,in the case of AEG&T,for the Bradley Lake energy of HEA and MEA);and (ii)for the Healy-Fairbanks segment of the Project,a 1.5 mill/kwh charge for energy generated by the Bradley Lake Hydroelectric Project for"Feceipt by utilities in Fairbanks,and an additional 15 mill/kwh charge to bepaidbythereceivingutilityfor60percentofthenon-Bradley Lake energy transmitted on the existing GVEA transmission line and the Healy- Fairbanks segment of the Project,in each case net of losses. PARTICIPANTS AGREEMENT --Page 21 (B)The IPG may provide by resolution for the Participants to pay Energy Charges in advance,in which case the IPG Treasurer shall estimate each Participant's Energy Charges for the upcoming Operating Year.The Treasurer may rely on historical data,energy transfer forecasts,or other relevant information in preparing such estimates. (C)The IPG shall establish procedures for collecting information regarding each Participant's Energy Charges due,and the manner of their payment. (5)Prior to the beginning of each Project Year,the Treasurer of the IPG shall prepare and mail to each Participant a pro forma statement showing a detailed estimate of the Annual Project Costs,a detailed estimate of the Participant's Annual Payment Obligation,and the amount of equal payments to be made by the Participant in the upcom- ing Project Year.Said statement may be in lieu of the issuance of periodic bills to each Participant. (6)The IPG shall adopt all other procedures for billing and collection,including accounting for extraordinary receipts. (e)Assessments, (1)The Participants agree to fund by Assessment amounts that the Participants determine are needed to pay for the prevention or correction of any major loss or damage, and for major replacements or renewals,to keep each Project Segment in good operating condition to the extent that such costs are not covered by insurance or by borrowed money,the debt service of which is included in Annual Project Costs."Assessment" means the Participants'duly-approved obligation to pay the total amount,according to each Participant's Share and any agreed schedule,of any such contingency. (2)When a Construction Manager,O&M Manager,or Participant requests an Assessment for any contingency or renewal and replacement,the IPG shall consider such request at its next regular or special meeting.The IPG may,in its discretion,continue consideration of such request to future meetings.The IPG shall approve an Assessment pursuant to the procedures established in Section 6 of this Agreement. Section 11.USE OF PROJECT CAPACITY (a)Use Of Project Capacity When No Transmission Capacity Constraint Exists.At all times after the Date of Commercial Operation of each Project Segment when (1)that Segment's facilities and any parallel utility-owned transmission facilities are both in normal operation,and (2)the total combined transfer capabilities of those facilities are sufficient to allow all desired transmission by all Participants to take place simultaneously between,respectively, Healy and Fairbanks,and Anchorage and the Kenai Peninsula (i.e.,at all times when parallel facilities are in operation and no transmission capacity constraint exists),then no distinction will be made between power transmitted over the facilities of that Project Segment and power transmitted over the parallel utility-owned transmission facilities,and,instead,all such power shall PARTICIPANTS AGREEMENT --Page 22 be deemed to move over the facilities of the Project Segment.Transmission access to/from the facilities of the Project Segment over the facilities of any Participant shall be in accordance with the applicable terms and conditions set forth in Section 5(d). (b)Operation For Stability.If,on either Segment,the Project facilities and the parallel utility-owned transmission facilities are both in operation,then the combined total transfer capability or operating limit of the parallel transmission facilities will be the stability-limited amount,not the thermal limit of those facilities,as reasonably established through agreement between the IPG and the owner of the parallel utility-owned facilities.If,on either Segment, either the Project facilities or the parallel utility-owned transmission facilities are not in operation, then the operating limit of the remaining facilities shall be that which is reasonably established,as _the case may be,by the IPG for the relevant Project Segment,or by the owner of the parallel utility-owned transmission facilities,under the circumstances as they exist at that time. (c)Fixed Capacity Shares When Capacity Is Or May Be Constrained. (1)If either Project Segment is in operation but the parallel utility-owned transmission facilities are not,then each Participant shall be entitled to its Participant's Share of the transfer capability of the facilities of that Project Segment,as established by the IPG. (2)If the parallel utility-owned transmission facilities are in operation but the facilities of the Project Segment are not,then the owner of the parallel utility-owned transmission facilities will provide wheeling and related services to the other Participants under the applicable terms and conditions set forth in Section 5(d). (3)Ifthe Project facilities and the parallel utility-owned transmission facilities are both in operation,but for either Segment their total combined transfer capabilities are not sufficient to allow all desired transmission by all Participants to take place simultaneously (i.e.,if Project and parallel facilities are both in operation but a transmission capacity con- straint exists),then so long as such constraint exists the available transmission capacity shall be allocated between the applicable Project facilities and the parallel utility-owned facilities by one of the following methods: (A)The IPG and the owner of the parallel utility-owned facilities may byagreementestablishanyreasonableallocationofsuchcapacity,or (B)The parallel utility-owned facilities shall be deemed to have the transfer capability that they would have if operated alone,Jess some amount reasonably adopted by the IPG to reflect the reliability/stability benefits such facilities receive from the existence of the parallel Project facilities.The remainder of the total combined transfer capability shall be deemed to be that of the Project facilities,and shall be available to each Participant in accordance with its Participant's Share. PARTICIPANTS AGREEMENT --Page 23 ioe (d)No Duty To Transmit Power For Ultimate Consumers.The Project represents a bulk power transmission facility whose benefits are made possible by the agreement of the Participants to assume responsibility for various costs on behalf of their respective customers collectively.The Project is not a common carrier.No Party has assumed any duty to use its Participant's Share of Project capacity to transmit power for individual users/consumers or for non-utility generators. Section 12.MISCELLANEOUS PROVISIONS (a)Waiver Not Continuing.Any waiver at any time by any Party to this Agreement of its rights with respect to any default of another Party,or with respect to any other matter arising in connection with this Agreement,shall not be considered a waiver with respect to any prior or subsequent default,nght or matter. (b)Applicable Law.The laws of the State of Alaska (including without limitation the equal opportunity laws set forth in AS 18.80.220,as the same may be amended from time to time) shall govern the interpretation and application of this Agreement and the actions of the parties hereunder. (c)Section Headings.The Section headings in this Agreement are for convenience only, and do not purport to and shall not be deemed to define,limit or extend the scope or intent of the section to which they pertain. (d)No Third Party Beneficiaries.In promising performance to one another under this Agreement,the Parties intend to create binding legal obligations to and nghts of enforcement in (a)one another,and (b)such assignees or successors in interest of the Parties as may enjoy a night . to enforce this Agreement by virtue of provisions of this Agreement that expressly create such a right in such assignees or successors in interest.By entering into this Agreement,the Parties expressly do not intend to create any obligation or liability,or promise any performance to,any third party,nor have the Parties created for any third party any nght to enforce this Agreement. (e)Execution In Counterparts.This agreement may be executed in any number of counterparts,and each such counterpart shall be deemed to be an original instrument,but all such counterparts together shall constitute one agreement. (f)Severability;Effect Of Partial Invalidity.If after this Agreement has become effective any article,paragraph,clause or provision of this Agreement shall be finally adjudicated by a court of competent jurisdiction or a regulatory agency with jurisdiction over the parties to be invalid or unenforceable,or if any administrative agency with authority over the parties shall require changes to this Agreement,then the parties shall in good faith meet promptly to negotiate lawful amendments or modifications to this Agreement that will effectuate the original intent of this Agreement and retum the parties as nearly as possible to the position that each would haveenjoyedintheabsenceofsuchjudicial,regulatory,or administrative action. (gz)Notices &Computation Of Time.Any notice required by this Agreement to be given to any Party shall be effective when it is received by such Party,and in computing any PARTICIPANTS AGREEMENT --Page 24 period of time from such notice,such period shall commence at 12:01 p.m.prevailing time at the place of receipt on the date of receipt of such notice.Whenever this Agreement calls for notice to or notification by any Party the same (unless otherwise specifically provided)shall be in writing and directed to the General Manager of the Party notified.If the date for making any payment or performing any act is a day on which banking institutions are closed in the place where payment is to be made or a legal holiday,payment may be made or the act performed on the next succeeding day which is neither a legal holiday nor a day when banking institutions are closed in such place. (h)Inspection Of Facilities.For purposes of this Agreement,each Party may,but shall not be obligated to,inspect any other Party's facilities relating to the Project at any time upon reasonable notice,but such inspection or failure to inspect shall not render the inspecting party,its officers,agents or employees,liable or responsible for any injury,loss,damage,or accident resulting from defects in such electric installation,or for violation of this Agreement. (i)Remedies Cumulative.No remedy conferred upon or reserved to the Parties hereto is intended to be exclusive of any other remedy or remedies available hereunder or now or hereafter existing at law,in equity,by statute or otherwise,but each and every such remedy shall be cumulative and shall be in addition to every other such remedy., (j)Covenant of good faith and fair dealing.In order to permit this Agreement, throughout its term,to be fully effective in accordance with the original intent of the Parties,each Party agrees that it shall at all times act in good faith and with fair dealing in performing its obligations and in exercising its rights under this Agreement. (k)Exhibits Incorporated Bv Reference.The exhibits attached to this Agreement shall be incorporated by reference into this Agreement if the provisions of this Agreement identifying such exhibits so specify,but otherwise shall be attached for convenience only. (1)Successors &Assigns.Subject to section 4(b)(6)governing assignment for security purposes,this Agreement and all of the terms and provisions hereof shall be binding upon and inure to the benefit of the respective successors and assignees of the Parties. (m)Performance Pending Resolution Of Disputes.Pending resolution of any dispute, each Party shall continue to perform its obligations under this Agreement,including but not limited to the obligation to make the payments required by this Agreement.All Parties shall be entitled to seek immediate judicial enforcement of this continued performance obligation notwith- standing the existence of a dispute.Application for such enforcement shall be made to the Superior Court for the State of Alaska,at Anchorage. (n)Force Majeure.In the event any Party,by reason of an Uncontrollable Force,is rendered unable,wholly or in part,to perform its obligations under the Agreement (other than its obligations to pay money),then upon said Party giving notice and particulars of such Uncontrollable Force,its obligation to perform shall be suspended or correspondingly reduced during the continuance of any inability so caused,but in no greater amount than required by the Uncontrollable Force and for no longer period,and the effects of such cause shall,so far as possible,be remedied with all reasonable and prompt dispatch.The affected Party shall not be PARTICIPANTS AGREEMENT --Page 25 Penoe responsible for its delay in performance under this Agreement during delays caused by the Uncontrollable Force. (0)Other Agreements.Except as otherwise expressly provided herein,this Agreement does not modify,alter,or amend any other contract or agreement that may exist between or among any of the Parties. (p)Amendment Of Agreement.This Agreement may be amended,extended,or terminated at any time by the written consent of all Parties,but no such amendment,extension,or termination shall be effective unless approved by the federal and state agencies (if any)whose approval is required at the time. (q)Records.The Parties shall make available to each other,for inspection and copying during business hours,all books,records,plans and other information relating to the Project; including but not limited to information relating to its cost,construction and operation,and any calculation or determination made pursuant to this agreement.In addition to meter records,the Parties shall keep log sheets and other records as may be needed for the purposes of this Agreement.In keeping books of account,each Party will,to the extent that different rules are not prescribed by this Agreement or by federal and state laws or agencies,follow the system of accounts prescribed for public utilities and licensees by the Federal Energy Regulatory Commis- sion,except that as long as a Party is a borrower from REA then it shall follow the system of accounts prescribed by REA for its electric borrowers. (r)Obligations Several.Notwithstanding any Party's failure to perform its obligations under this Agreement,or any IPG action or inaction under this Agreement,each Party's obligation to perform as called for by this Agreement,including the obligation to make payments under the terms of this Agreement,shall be absolute and unimpaired.Except where specifically stated in the Agreement to be otherwise,the duties,obligations and liabilities of the parties are intended to be several and not joint or collective.Nothing contained in this Agreement shall ever by construed to create an association,trust,partnership or joint venture or to impose a trust or partnership duty,obligation or liability on or with regard to any party.Each party shall be individually and severally liable for its own obligations under this Agreement. (s)Mutual Covenants &Warranties. (1)Retail rate approval.Each Party will affirmatively and promptly pursue all administrative and judicial remedies necessary to secure Commission approval of retail rates required to meet the terms of this Agreement where Commission approval is required.) (2)Compliance with law.Each Party will take all necessary steps to comply with applicable federal and state laws and regulations,licenses and permits relating to the use and operation of the Party's System. (3)Licenses and permits.The Parties will take all necessary steps within their control to comply with applicable federal and state laws and regulations,and to obtain and PARTICIPANTS AGREEMENT --Page 26 thereafter comply with all applicable licenses and permits relating to the construction,use and operation of the Project. (4)Sales and mergers.No Party shall abandon,sell,mortgage,lease or otherwise dispose of a substantial portion of the Party's system (including by sale to or merger with any other utility),unless such disposal is evaluated by a consultant approved by the IPG and that consultant certifies that,taking into account the other obligations of the Party, that Party will have (a)substantially the same or greater ability to produce sufficient revenues to meet its payment obligations as would the Party absent the transaction,and (b)the ability to perform all obligations under this Agreement. (t)Indemnification.To the extent permitted by applicable law,each Party shall protect, indemnify,defend and hold harmless every other Party,its officers,directors,employees,agents, attorneys,contractors,subcontractors,and successors and assigns from and against any and all liabilities,damages,claims,demands,judgments,losses,harm,costs,expenses,suits or actions, including but not limited to appeals and reasonable attorneys'fees,to the extent caused by the negligent or wrongful acts or omissions of the indemnifying Party,its officers,directors, employees,agents,attorneys,contractors,subcontractors,and successors and assigns arising out _of or as a result of this Agreement or the performance of any obligations hereunder;provided,that the indemnification set forth in this Section is subject to Section 7(i)and shall not require the Construction Manager to indemnify other Parties in any manner inconsistent with Section 7(i). (u)Guarantees by Additional Parties.If AEG&T at any time fails to meet any of its obligations under this Agreement,then to the extent of such failure by AEG&T and for so long as such failure continues,HEA and MEA shall each be obligated to meet directly its respective Share of AEG&T's payment obligation and every other obligation in the same manner as if HEA and MEA were individual Participants obligated to make payments and perform other obligations in accordance with this Agreement.All rights and remedies available to the other Parties against AEG&T shall also be available to the other Parties against HEA and/or MEA,as applicable.For purposes of this Section 12(u),HEA's Share and MEA's Share of Project capacity shall be as set forth in Section 4(a),as modified by Section 4(b). (v)Relationship To The Transmission Services Agreement.The Transmission Services Agreement (attached as Exhibit E to this Agreement for reference only)shall not be terminated by this Agreement,but from and after: (1)January 1,1997,any Party may elect to pay Chugach for wheeling services the applicable Chugach wheeling rate as approved by the Commission pursuant to Section 5(d)and Exhibit D(1)of this Agreement,in lieu of paying the applicable Chugach wheeling rate computed in accordance with the Transmission Services Agreement;and (2)the Effective Date,the provisions of the Transmission Services Agreement requiring Chugach to provide free Bradley Lake energy storage services in Chugach's Cooper Lake reservoir will no longer apply. PARTICIPANTS AGREEMENT --Page 27 (w)Consideration Of Other Benefits Facilitated By The Project.In order to ensure that all potentially beneficial uses of the Project are appropriately investigated,the Parties agree that,promptly after this Agreement becomes effective,they will begin to meet periodically in order to discuss and explore in good faith potential mutually agreeable opportunities to reduce the costs of providing electric power service to their respective consumers through power pooling, transmission pooling,reserve sharing,exchanges,economic dispatch,hydrothermal coordination, maintenance of competitive economy energy markets,and other arrangements. Section 13.DEFINITIONS. The following terms shall,for purposes of this Agreement,have the meaning specified. (a)"Additional Costs"shall have the same meaning given to it in Section 8(b)of this Agreement. (b)"Additional Parties"shall have the same meaning given to it in Section 1 of this Agreement. (c)"Agreement"means this 1993 Alaska Intertie Project Participants Agreement,also referred to herein as Participants Agreement. (d)"Annual Debt Service"means the amount payable by a Participant in or for a Project Year pursuant to the Bond Resolution. (e)"Annual Payment Obligation"shall have the same meaning given to it in Section 10(d)(1)of this Agreement. (f)"Annual Project Cost"shall have the same meaning given to it in Section 10(d)(2)of this Agreement. (g)'Assessment™shall have the same meaning given to it in Section 10(e)(1)of this Agreement. (h)"Bond Resolution"means a resolution,ordinance,indenture,or similar instrument, approved by all of the Parties,pursuant to which bonds,notes or other evidences of indebtedness (including refunding bonds),are issued,the proceeds of which are used to pay or reimburse Additional Costs,pursuant to a collective financing arrangement entered into by all Parties under Section 8(b). (i)"Construction Agreement"means an agreement entered into pursuant to Section 7(k)between the Construction Manager of a Project Segment and the Participants acting through the IPG setting forth the rights and obligations of the Construction Manager and of the IPG and its Members and such details regarding the design and construction of that Project Segment as the Construction Manager and the IPG determine to be necessary. PARTICIPANTS AGREEMENT --Page 28 wee (j)"Construction Budget"means the annual budget for Design and Construction Costs for a Project Segment as adopted or in effect for a particular Construction Year,and amended or supplemented from time to time as provided for in this Agreement. (k)"Construction Manager"means the Participant that,for the benefit of all of the Participants,manages or carries out the design and construction of either Segment of the Project. As provided in Section 7(a)of this Agreement,Golden Valley Electric Association,Inc.shall be the Construction Manager of the Healy-Fairbanks Segment and Chugach Electric Association, Inc.shall be the Construction Manager of the Anchorage-Kenai Peninsula Segment (unless and until either is replaced by another Participant by action of the IPG pursuant to Section 7(j)),and may be referred to collectively herein as Construction Managers. (1)"Construction Schedule"means a projection of significant design and construction milestones marking progress from the Effective Date of this Agreement to the projected Date of Commercial Operation of a Project Segment,to be prepared by the Construction Manager for that Segment. (m)"Construction Year"means a Project Year during which a Project Segment is being designed or is under construction.The first Construction Year starts on the Effective Date of this Agreement and corresponds to the first Project Year.The last Construction Year for a Project Segment shall be that portion of the twelve-month period between the last full (1.e.twelve month)Project Year and the Date of Commercial Operation.The Construction Year for both Project Segments shall nin concurrently,except that the conclusion of the last Construction Year for one of the Project Segments (when it reaches its Date of Commercial Operation)shall not affect the calculation of Construction Years for the other Project Segment,which shall continue until that segment reaches its Date of Commercial Operation. (n)"Date of Commercial Operation"means the date on which a Construction Manager reasonably declares that a Segment of the Project is fully available to be operated on a commercial basis and in accordance with this Agreement. (0)"Design and Construction Costs"means all capital costs of the Project,including but not limited to planning,permitting,design,acquisition of real property interests,construction, equipment,testing,and insurance costs,but not administrative and general costs of any Participant,State agency,political subdivision,or Construction Manager,except pursuant to Section 7(c),unless such costs are expressly approved by the IPG prior to being incurred. (p)"Effective Date"shall have the same meaning given to it in Section 2(a)of this Agreement. (q)"Energy Charge"shall have the same meaning given to it in Section 10(d)(4). (r)"Expiration Date"shall have the same meaning given to it in Section 2(b)of this Agreement. PARTICIPANTS AGREEMENT --Page 29 (s)"Grant Account"means the Healy-Fairbanks Intertie Account or the Anchorage- Kenai Intertie Account,or both,as established by section 2.02 of the Grant Administration Agreement. (t)"Grant Administration Agreement"means the agreement dated among the Alaska Industrial Development and Export Authority and the Parties to this Agreement setting forth the terms and conditions governing the administration of Grant Accounts. (u)"Grant Funds"means the $43,200,000 appropriated by section 1 of ch.19,SLA 1993,for payment as a grant under AS 37.05.316 for construction of the Healy-Fairbanks Segment and the $46,800,000 appropriated by section 2 of ch.19,SLA 1993,for payment as a grant under AS 37.05.316 for construction of the Anchorage-Kenai Peninsula Segment. (v)"Intertie Grant Agreement"means the agreement dated October 26,1993 among the Parties to this Agreement,the Alaska Industrial Development and Export Authority and the State of Alaska,Department of Administration (DOA)satisfying the statutory conditions precedent to DOA's transfer of the Grant Funds and providing for DOA's transfer of such Grant Funds. (w)"IPG"is an abbreviation for "Intertie Participants Group"and means the Participants and Additional Parties acting collectively as set forth in this Agreement.As provided elsewhere in this agreement,AEG&T,while a Participant,is not a Member of the IPG.The Additional Parties to this Agreement,HEA and MEA,collectively constitute AEG&T and are individually Members of the IPG. (x)"Member"means a member of the IPG.The members of the IPG are identified in Section 6(b). (y)"Operating Budget"means the budget for Annual Project Costs as adopted or in effect for a particular Operating Year,and amended or supplemented from time to time as provided for in this Agreement. (z)"Operating Fund"means a fund established pursuant to Section 10(a)of this Agreement,consisting of Annual Payment Obligations,Energy Charges,Assessments,insurance proceeds and other revenues available to pay Annual Project Costs. (aa)"Operating Year"means that Project Year,and is a period used for computation of Annual Project Costs for a Project Segment or both Segments and preparation of annual budgets for recovery of the same pursuant to Section 10 of this Agreement.The initial Operating Year for each Segment shall start on the Date of Commercial Operation of that Segment and continue through and include the last day of that Project Year.Subsequently,the Operating Year for that Segment shall be the Project Year. (bb)"Operation &Maintenance Agreement"may also be referred to herein as O&M Agreement and means an agreement pursuant to Section 9(a)between the O&M Manager of the.Project or a Project Segment and the Participants acting through the IPG detailing the nghts and PARTICIPANTS AGREEMENT --Page 30 obligations of the O&M Manager and of the IPG and its members with regard to the operation and maintenance of the Project or relevant Project Segment. (cc)"Operation &Maintenance Manager"may also be referred to herein as O&M Manager and means the Participant selected by the IPG pursuant to Section 9(a)of this Agreement to be responsible for the operation and maintenance of the Project or a Project Segment,for the benefit of all of the Participants.The O&M Manager may exercise this responsibility by conducting operation and maintenance activities with its own personnel,or by supervising a contractor selected by the O&M Manager expressly for the purpose of conducting such activities. - (dd)"Optional Project Work"means project repairs,renewals and replacements, improvements,betterments,additions,or expansions that do not constitute Required Project Work.- (ee)"Participants"shall have the same meaning given to it in section 1 of this Agreement. (ff)Participant's Share"means the percentage interest a Participant holds in the Project or a Project Segment under the terms of this Agreement.A Participant's Share is used to calculate its Annual Payment Obligation,including its share of Annual Project Costs,and to determine its share of Assessments,Additional Costs,or Annual Debt Service,and includes a Participant's Energy Charges. (gg)"Project"means the Intertie Project to be designed,constructed,operated and maintained pursuant to this Agreement,which shall consist of two Segments;the Healy-Fairbanks Segment defined by Section 3(a)of this Agreement and the Anchorage-Kenai Peninsula Segment defined by Section 3(b)of this Agreement,which may also be referred to individually herein as a Project Segment. (hh)"Project Year"means that calendar year unless and until the IPG converts the calculation of the Project Year to a fiscal year consisting of a twelve-month period starting on such date as the IPG shall select.The initial Project Year for purposes of this Agreement shall start on the Effective Date of this Agreement and continue through and include December 31, 1994.When and if calculation of the Project Year is converted to a fiscal year,the IPG shall provide for a transition from calendar year to fiscal year by shortening or lengthening the firstProjectYearcalculatedonafiscalbasis.The last Project Year for purposes of this Agreement shall be that portion of the twelve-month period between the end of the last full (i.e.twelve -month)Project Year and the expiration of this Agreement.For each Project Segment,those Project Years,or portions thereof,prior to the Date of Commercial Operation are designated Construction Years (see the definition of Construction Years,above)and those Project Years,or portions thereof,following the Date of Commercial Operation are designated Operating Years (see the definition of Operating Years,above). (ii)"Prudent Utility Practice"means at a particular time any of the practices,methods and acts engaged in or approved by a significant portion of the electric utility industry at such PARTICIPANTS AGREEMENT --Page 31 time,or which,in the exercise of reasonable judgment in light of facts known at such time,could have been expected to accomplish the desired results at-the lowest reasonable cost consistent with good business practices,reliability,safety and reasonable expedition.Prudent Utility Practice is not required to be the optimum practice,method or act to the exclusion of all others,but rather to be a spectrum of possible practices,methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability,safety and expedition.Prudent Utility Practice includes due regard for manufacturer's warranties and the requirements of governmental agencies of competent jurisdiction and shall apply not only to functional parts of the Project,but also to appropriate structures,landscaping,painting,signs,lighting and other facilities. (jj)'Required Project Work"means repairs,maintenance,renewals,replacements, improvements,or betterments required by federal or state law,a licensing or regulatory agency with jurisdiction over the Project,or this Agreement,or otherwise necessary to keep the Project in good and efficient operating condition,consistent with (1)sound economics for the Project and (2)Prudent Utility Practice... (kk)"Segment"means either of the two electric power transmission lines and associated facilities constituting the Project to be designed,constructed,operated and maintained under thetermsofthisAgreement. (il)"Uncontrollable Force"means any cause beyond the control of a Party hereto and which by the exercise of due diligence that Party is unable to prevent or overcome,including but not limited to an act of God,fire,flood,volcano,earthquake,explosion,sabotage,and act of the public enemy,civil or military authority,including court orders,injunctions and orders of governmental agencies of competent jurisdiction,insurrection or not,an act of the elements, failure of equipment,or the inability to obtain or ship equipment or materials because of the effect of similar causes on carriers or shippers.Strikes,lockouts,and other labor disturbances shall be considered Uncontrollable Forces,and nothing in this Agreement shall require any Party to settle a labor dispute against its best judgment;provided,that during any labor dispute all Parties shall make all reasonable efforts under the circumstances,including,to the extent permitted by law,the use of replacement personnel and or management personnel and/or other personnel under the provisions of a mutual aid agreement,to ensure,if possible the continued ability of the Parties to carry out their obligations under this Agreement. (mm)"Working Capital Account"means an account within the Operating Fund which is to be managed so that funds from that account are available to meet reasonable current expenses and contingencies as they arise in the course of the design,construction,operation and maintenance of the Project. Section 14.DEFAULTS AND REMEDIES. (a)Each of the following shall constitute an Event of Default: (1)A material breach in performance of this Agreement by a Party,which breach has continued for a period in excess of sixty (60)days after the defaulting Participant has PARTICIPANTS AGREEMENT --Page 32 been notified in writing that such breach will,unless corrected within such 60-day period, constitute an Event of Default;such material breaches shall include,but not be limited to, the failure to make any payments required by this Agreement,including but not limited to Annual Payment Obligation,Energy Charges,Assessments,and Additional Costs; (2)A continual or repeated failure or refusal by a Party to perform,substantially in accordance with this Agreement,all or any of its obligations under this Agreement, thereby materialiy impairing the value of this Agreement to the other Parties,which failure or refusal recurs after the breaching Party has been notified in writing that such breach will,if repeated,constitute an Event of Default; (3)A filing by a Party to seek protection under any applicable bankruptcy, /., Feorganization,insolvency,dissolution or liquidation law,which filing has not been dismissed within 90 days; (4)Default under the Bond Resolution or separate financing instrument used by a Participant to finance all or part of its obligation under this Agreement. (b)Upon the occurrence of any Event of Default by a Party,any other Party may exercise any remedy or combination of available remedies,including but not limited to the following: (1)Termination of this Agreement with respect to that defaulting Party,provided however that said termination shall not be effective to increase the Annual Payment Obligations or Assessments of non-defaulting Parties unless termination is first approved in writing by all Members whose Annual Payment Obligations or Assessments would be increased as a consequence of said termination; (2)Suspension or expulsion of the defaulting Party from the IPG and loss of the defaulting Party's night to use the Project; (3)An action to recover compensatory or other damages provided by law,or to seek specific performance of any and all obligations required under this Agreement. (c)The remedies provided herein for Events of Default are not exclusive and the Parties retain all rights of action that exist at law and in equity,or pursuant to this Agreement,to remedy any breach,irrespective of whether said breach constitutes an Event of Default or results in termination of the Agreement. PARTICIPANTS AGREEMENT --Page 33 wat seme _IN WITNESS WHEREOF,the Parties have caused this Agreement to be executed the day and year first above written.. ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC. By ORS Hohner ow2?The MUNICIPALITY OF ANCHORAGE d/b/a/MUNICIPAL LIGHT &POWER _ »ToaFA As SOAP bfa- CHUGACH ELECTRIC ASSOCIATION,INC. ee As Oeweger Newt a6d ee The MUNICIPALITY OF FAIRBANKS db/a FAIRBANKS MUNICIPAL UTILITIES SYSTEM "Nf.By >As >CO Mfaw ng cee -LEAN fb rp GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. PARTICIPANTS AGREEMENT --Page 34 ar ead The CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM ZZOTTetepTia Gl fr"As Zl ipsLU Mites,<LELoy HOMER ELECTRIC ASSOCIATION,INC. MATANUSKA ELECTRIC ASSOCIATION,INC. Tp (i.As 'Genera!Mauk&eGy PARTICIPANTS AGREEMENT --Page 35 ote mee EXHIBIT D(1) INITIAL CHUGACH WHEELING RATES &RELATED MATTERS The following rates,terms,and conditions shall apply pursuant to Section 5(d)(2)for use of Chugach's facilities under Section 5(d)(1): 1.Effective date and term.The wheeling rates and related terms and conditions de- scribed herein shall become effective on January 1,1997 and shall remain in effect for fifteen (15) years,i.e.,through December 31,2011. 2.Applicability. (a)The rates and related terms and conditions described herein will apply to electric power transmitted to or from the Anchorage-Kenai Peninsula Segment (i)by Participants in,or Additional Parties who are participating through a Participant in,that Segment,and (ii)from generators already existing as of December 1,1993. (b)If for any reason the Segment is not completed but is instead terminated/abandoned by the Participants,then the rates and related terms and conditions described herein will apply under the Transmission Services Agreement,during the term described in Paragraph 1 of this Exhibit D()),to electric power that is: (i)the power of a Wheeling Utility (as defined in the Transmission Services Agreement)that is also a Participant in the Healy-Fairbanks Segment of the Project at the time; (ii)generated either: (A)by the Bradley Lake Hydroelectric Project,or, (B)by the Soldotna No.1 generating unit,if and to the extent that power generated by such unit is eligible to receive wheeling services under the terms and conditions set forth in Section 8(f)of the Transmission Services Agreement;and (iii)transmittéd from the Soldotna Substation to that Wheeling Utility's Delivery Point,as the latter is defined in the Transmission Services Agreement. (c)For wheeling services not within the scope of Paragraphs 2(a)or 2(b)of this Exhibit D(1)and not within the scope of the Transmission Services Agreement,Chugach will prepare (on request and/or periodically)and will submit to the Commission fcr review and approval, nondiscriminatory and just and reasonable (i)wheeling rates,and (ii)terms and conditions governing such wheeling services.Such rates,terms,and conditions may be revised from time totime, PARTICIPANTS AGREEMENT --Page 36 3.Basic wheeling rate.In each year,the basic wheeling rate,"R,"will be computed in accordance with the formula set forth in Appendix A of the Transmission Services Agreement, with the exception that the value of "K"in such formula shall be established at "0.50"in each year, 4.Cost review and control. (a)Standard.After the effective date,the costs of any new transmission in- vestment by Chugach shall be added to the costs used to compute the wheeling rate only ifandtotheextentthatsuchtransmissioninvestmentsupportsChugach's bulk power network transmission system,and not Chugach's retail distribution system.If anyinvestmentsupportsbothsuchsystems,then the costs of that investment shall be allocated equitably and reasonably between such systems for purposes of applying the foregoing standard. (b)Procedure.Chugach will provide reasonable notice to the Participants of the costs of any new transmission investment that Chugach proposes to add to the costs used to compute the wheeling rate.With such notice,Chugach will also explain in writing why the inclusion of such-costs in the wheeling rate meets the standard set forth above.On request,Chugach will meet with the Participants to discuss these matters.If,after such meeting,any Participant believes that including any such costs (hereinafter "disputed costs")in the wheeling rate would violate the standard set forth above,that Participant shall so notify Chugach and provide a written explanation for that Participant's position. In response to any such notice and explanation,and before Chugach makes any final decision to include any such disputed costs in the wheeling rate,Chugach may,but shall not be obligated to,offer to engage in further discussions with that Participant,and/or afford that Participant additional opportunities to present its position to the Chugach staff and/or Board,or to a joint Board or other inter-utility panel that Chugach may elect to convene. (c)Review.Chugach's final decision to include or not include any such costs in the wheeling rate,if disputed,shall be submitted to the Commission for resolution.Each Participant shall be entitled to challenge Chugach's decision before the Commission,but only if and to the extent that such Participant took part in the pre-filing discussions and presentations described in Paragraph 4(b)above. 5.Rate applies during Intertie outages."R"would apply to transmission even at times when the Segment,having been completed,is out of service and Chugach's parallel transmission facilities alone are available for wheeling services. 6.Other services.Under the Transmission Services Agreement,Chugach will continue to provide (a)assured wheeling services,for periods of up to two weeks at a time,at a rate computed in the same manner as the basic wheeling rate but using a value of "1.15"for the constant "K,"and (b)displacement energy purchase services for the Bradley Lake energy of Wheeling Utilities that cannot be transmitted from the Kenai Peninsula.From and after the PARTICIPANTS AGREEMENT --Page 37 Effective Date of this Agreement,Chugach will no longer continue to provide free reservoir storage for such energy in Cooper Lake. 7.Other terms and conditions.Such matters as the scheduling of transmission or displacement purchase services,accounting for line losses,the effect of offsetting flows,and other matters dealt with in the Transmission Services Agreement (including Chugach's duties, limitations on such duties,and priority use of its own facilities),as reasonably applicable to the circumstances.of this Agreement,will continue to be governed by the Transmission Services Agreement. 8.Reciprocal services.Each Participant and Additional Party agrees that,at Chugach's request,it will make wheeling services available to Chugach over its system,subject to like conditions and limitations as those set forth in this Exhibit D(1),at a rate no higher than the rate computed in accordance with the following formula: Rate = CfEx0.5 Where "C"represents the applicable utility's annual costs of bulk power network transmission investments,and "E"represents the firm energy and Bradley Lake energy transmitted annuallyoverthatutility's system. PARTICIPANTS AGREEMENT --Page 38 OTN EXHIBIT D(2) GVEA WHEELING RATES AND RELATED MATTERS The following rates,terms and conditions shall apply pursuant to Section 5(d)}{3): (a)Wheeling Rate.The wheeling rate for any use of the GVEA system shall initially be 1.5 mills/'kwh for the period commencing with the Date of Commercial Operation of the Healy- Fairbanks Segment,and shall remain in effect at least until the third anniversary thereof. Thereafter,the rate may be revised either by mutual agreement of GVEA and FMUS or by the Commission in a proceeding initiated by either GVEA or FMUS. (b)Use of Lines and Calculation of Charges.For purposes of computing wheeling charges,GVEA and FMUS are deemed to transmit 60%of energy transmitted from Healy to Fairbanks on the Healy-Fairbanks Segment,and 40%on the existing GVEA transmission line.At any time the GVEA line is inoperable,FMUS shall pay to the IPG 1.5 mills/kwh for 100%of power transmitted.At any time the new Healy-Fairbanks Segment is inoperable,FMUS shall pay to GVEA the then-current rate for 100%of power transmitted.During any period in which FMUS is not directly connected to the Wilson substation,FMUS shall be responsible for payment of wheeling charges to GVEA for 100%of energy transmitted and to the IPG for 60%of energy transmitted. (c)Losses. (1)Existing GVEA Line.FMUS losses shall be incremental on the existing GVEA line. (2)Healy-Fairbanks Segment.FMUS and GVEA losses on the Healy-Fairbanks Segment shall be computed on an average basis. PARTICIPANTS AGREEMENT --Page 39 GOLDEN VALLEY ELECTRIC ASSOCIATION INC.PO Box 71249 «Fairbanks,Alaska 99707-1249 e 907-452-1151 «www.gvea.com January 14,2002 Mr.Robert Poe Executive Director Alaska Industrial Development and Export Authority 813 W.Northern Lights Blvd. Anchorage,AK 99503 Re:Letter of Agreement Between Alaska Industrial Development &Export Authority (AIDEA)and Golden Valley Electric Association,Inc.(GVEA)Concerning Disbursement of Funds Under the Grant Administration Agreement Dear Mr.Poe: This Letter of Agreement has been prepared in order to set forth the understanding between AIDEA and GVEA regarding the manner that funds made available under AS 37.05.316 for the purpose of constructinga power transmission intertie between Healy and Fairbanks ("Healy-Fairbanks Intertie"or "Northern Intertie")will be distributed. Under the terms of the Intertie Grant Agreement and the Grant Administration Agreement,AIDEA is the custodian and administrator of the grants for the benefit of GVEA with respect to the funds applicable to the Northern Intertie. AIDEA requested a clarification of why Paragraph 4 of Amendment No.1 to the Intertie Grant Agreement describes GVEA as being a contractor for the Norther Intertie Project.GVEA represents that it has acted as contractor for the other participating utilities on the Northern Intertie Project.When Amendment No.1 to the Grant Administration Agreement and Amendment No.1 to the Intertie Grant Agreement become effective,GVEA will become the 100%owner of the Northern Intertie and will then cease to be the contractor for the remainder of the project.GVEA warrants that it has not been,and will not become,a contractorforAIDEA regarding the Northern Intertie. Under the terms of Amendment No.1 to Grant Administration Agreement,GVEA is required to submit,on a monthly basis,all invoices to AIDEA for payment.In order to assist with the administration of the funds applicable to the Northern Intertie,GVEA shall submit invoices and requests for reimbursement from AIDEA in the following manner: Letter to:Robert Poe Page 2 January 14,2002 1.GVEA shall retain all invoices supporting requests for - reimbursement for and on behalf of AIDEA,at no cost to AIDEA. 2.AIDEA shall instruct GVEA regarding the manner GVEA shall make the invoices available for inspection or audit by AIDEA and its agents.Upon reasonable advance notice,AIDEA and its agents shall have the right to inspect and audit such records during GVEA's regular business hours for inspection or audit purposes,including applicable public records requests. Further,if requested,GVEA shall deliver to AIDEA or its agent,at no cost to AIDEA or its agent,one copy of each invoice supporting a request for reimbursement by GVEA. 3.GVEA shall submit certified requests for reimbursement to AIDEA in conformance with the schedule of maturity of grant investments. 4.GVEA shall certify in each request that the work for which reimbursementis requested: (a)is supported by invoices retained by GVEA; (b)is properly chargeable to a specific phase (or phases) of the Northern Intertie to allow AIDEA to properly charge the requested amounts against the appropriate project phase;and (c)has been completed and either (i)paid for by GVEA or (it)will be paid for with the proceeds of the reimbursement. 5.GVEA shall disclose in each request for reimbursement the total project costs incurred to date,amounts previously reimbursed from grant proceeds,and the current amount requested. 6.GVEA shall retain records of work and payment for at least a period of seven (7)years from the date of completion of the project. If a properly certified request for reimbursement is submitted with the foregoing,AIDEA shall pay such request for reimbursement within fifteen (15)days of the later of receipt of the request,or funds becoming available pursuant to the schedule of maturity of grant investments.Any disbursal of grant funds related to the Northern Intertie shall be subject to the availability of funds pursuant to the schedule of maturity of grant investments that will be supplied to GVEA by AIDEA.AIDEA will update the schedule Letter to:Robert Poe Page 3 January 14,2002 of maturity of grant investments if changes occur (such as the early call of an investment). Please signify your acceptance of the terms and conditions as set forth in this Letter of Agreement by signing in the area below.|have sent two original letters so that you may keep one for your files and return the other to us.Thanks,Bob. Sincerely, AEA LE Steve Haagenson President &Chief Executive Officer ACCEPTED AND AGREED this +*day of January,2002. LZ AEStevenH.Haagenson,President &Chief Executive Officer Golden Valley Electric Association,Inc. Robert Poe,Jr.,Executive Director Alaska Industrial Development and Export Authority Grant Administration Agreement 2 AMENDMENT NO.1 TO GRANT ADMINISTRATION AGREEMENT THIS AMENDMENT NO.1 TO THE GRANT ADMINISTRATION AGREEMENT dated August 30,1994is entered into this _1oth day ofDecember_-,1999,by and amongthe Parties hereto,namely the ALASKAINDUSTRIALDEVELOPMENT&EXPORT AUTHORITY ("AIDEA"),the MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT &POWER, CHUGACH ELECTRIC ASSOCIATION,INC.("CEA"),the CITY OF FAIRBANKS, GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.("GVEA"),the CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM,the ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC.,on behalf of its members HOMER ELECTRIC ASSOCIATION,INC.,and MATANUSKA-ELECTRIC ASSOCIATION,INC.,"Additional Parties"(hereinafter collectivelyreferredtoasthe"Participating Utilities") 'WHEREAS,GVEA has agreed with.the other Participating Utilities andAIDEAtoassumethefullresponsibilityforthedesign,construction,operation,and maintenance of the Fairbanks-Healy intertie to the extent the intertie is not funded by Grant Funds;and WHEREAS,the oversight of the Anchorage-Kenai Peninsula intertie will - continue to be the responsibility of the Intertie Participants Group. The parties agree to amend the Grant Administration Agreement asfollows: 1.Effective Date of Amendment.This Amendment shall becomeeffectiveat24:00 hours on the first date that it has been executed by ail of theParties. 2.Section 1 is amended by replacing the third sentence with the following sentence:"AIDEA hereby accepts and agrees to act as custodian and administrator of the Intertie Grants for the benefit of the Participating Utilities with respect to the grant funds applicable to the Anchorage-Kenai Intertie,and for the -benefit of GVEA with respect to the grant funds applicable to the Healy-Fairbanks Intertie,subject to the terms and conditions of,and authority and powers granted by,this Agreement and applicable law,including but not limited to those statutes P=+%1 -AMENDMENT NO.1 TO GRANT ADMINISTRATION 32847/1/LGH/052273-0072 AGREEMENT and regulations applicable to the administration of grants to named recipients | under AS 37.05.316.” 3.Section 2.03(b)is amended by replacing the last sentence with the following sentence:"The IPG and GVEA shall submit a schedule for the Anchorage-Kenai Intertie and the Healy-Fairbanks Intertie,repectively,a schedule for the use of grant funds,and any amendments or changes thereto as necessary from time to time,to assist AIDEA in developing the Investment Strategy. 4.Section 4.02 is amended as follows: (a)The second sentence of subsection (a)is revised as follows: The IPG shall submit to the Authority a proposed budget for subsequent phases of development for the Anchorage-KenaiIntertieandGVEAshallsubmitaproposedbudgetfor_subsequent phases of development for the Healy-Fairbanks Intertie,for the Authority's review and approval. (b)The fourth sentence of subsection(a)is revised as follows: The parties agree that the IPG is authorized to request amendments to Schedule A with respect to the Anchorage- Peninsula Intertie and GVEA is authorized to request amendments to Schedule A with respect to the Healy- Fairbanks Intertie,both subject to AIDEA's approval,to provide for upward adjustment only of the ceilings set for the intertie phases.. (c)Insert "or GVEA,as appropriate,"after "IPG"in lines 3,5,10 and 12 of subsection (a). 3.Section 4.03 is amended as follows: (a)Insert "related to the Anchorage-Kenai Peninsula intertie"after "invoices"in the first line of (a). (b)Replace the second sentence of paragraph (b)with the following sentence:Each invoice shall be referenced to a P=+4 2 -AMENDMENT NO.1 TO GRANT ADMINISTRATION 32847/1/LGH/052273-0072 AGREEMENT momen catcamenvneine op ne mye anesot P=24 3 - specific phase of the Anchorage-Kenai Intertie to allow AIDEA to properly charge the invoice the appropriate project phasenatndotaentiuthorized.DuIsl rantto.the-om eer ees eterance emnareenste enerceme D rytinmmmeemateaet105-lo-estermine-i-paymeZAKI "BRIN OMZS ao Ka Ske Intertie Appropriation or the appropriate disbursement schedules set forth in Section 4.02. (d)GVEA shall submit,on a monthly basis,all invoices toAIDEAforpayment.Eachinvoice shall be referenced to a specific phase of the Healy-Fairbanks Intertie to allow AIDEA to properly charge the invoice against the appropriate project phase and to determine if payment is authorized pursuant to the Intertie Appropriation or disbursement schedules set forth in Section 4.02. AIDEA may request further documentation or explanation from GVEA with respect to any invoice and is authorized to withhold payment until documentation, acceptable to AIDEA,is submitted.If payment of the invoice is authorized in accordance with the foregoing,AIDEA shall pay such invoice within fifteen (15)days of receipt of ine invoice.- Section 5.01 is amended by revising the second sentence as follows: The Participating Utilities,through the IPG,with respect to the Anchorage-Kenai Peninsula intertie,and GVEA with respect to the Healy-Fairbanks intertie,agree to have performed annual audits as required by 2 AAC 45.010 on the departments,agencies,or establishments of that entity which actually received,spent,or otherwise administered the grant funds,and to submit to the state coordinating agency,as such term is defined in 2 AAC 45.010(0)(4), separate audit reports as required by and in accordance wiih 2 AAC 45.010,on an annual basis,for both the Healy-Fairbanks intertie (Intertie Project)and the Anchorage-Kenai Peninsula intertie (Intertie Project). Insert "and GVEA"after "The Participating Utilities"in the lastsentence. AMENDMENT NO.+TO GRANT.ADMINISTRATION 32847/1/LGH/052273-0072 AGREEMENT IN WITNESS WHEREOF,the parties have caused this Amendment No.1 to the Participants Agreement to be executed on the day ¢and year first abovesonponememenSNAESrittien-Oe Tenet Tit RI eaALASKANOUSTRIAL DEVELOPMENT && EXPO yd.By:-Lt TO Title:Eee vAie.ove ter MUNICIPALITY OF ANCHORAGE = --__--By: Title:MUNICIPAL MANAGER'SOFFICE CHUGACH neta ASSOCIATION,INC.By:SZoe l seTitle: CITY OF FAIRBANKS [tech P=+s 4 --AMENDMENT NO.1 TO GRANT ADMINISTRATION -92847/i/LGH/052273-0072AGREEMENT Pity 5 - GOLDEN VALLEY ELECTRIC ASSOCIATION, INC. By._ViAAaY 7 \.AWTitle:Vic ; ritlee cee raz LLY,:i 7 |J c ALASKA ELECTRIC GENERATION & |Ao RATIVE,INC.By:LLLGECLS ."Title:-_22d.Boh.AE 4 HOMER 57 4 AS ye INC.By: ) | Title:G LY.QZ?.CF MATANUSKA ELECTRIC ASSOCIATION,INC. By:verre everest Title:lor on aQ WM puna 10s AMENDMENT NO.1 TO GRANT ADMINISTRATION $2847/1/LGH/052273-0072 AGREEMENT GRANT ADMINISTRATION AGREEMENT THIS AGREEMENT (the "Agreement")is made and entered intothis30dayofBEEa4,by and between the ALASKA INDUSTRIAL DEVELOPMENT &EXPORT AUTHORITY ("AIDEA"),GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.("GVEA"),FAIRBANKS MUNICIPAL UTILITIES SYSTEM ("FMUS"),ANCHORAGE MUNICIPAL LIGHT AND POWER ("ML&P"),CHUGACH ELECTRIC ASSOCIATION,INC.("CEA"),ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE,INC.("AEG&T")on behalf of its members (Matanuska Electric Association,Inc.and Homer'Electric Association,Inc.),and the CITY OF SEWARD ("Seward")(ML&P,CEA, AEG&T and Seward hereinafter collectively referred to as the "Southern Participating Utilities";GVEA and FMUS hereinafter collectively referred to as the "Northern Participating Utilities"; the Southern Participating Utilities and the Northern Participating Utilities hereinafter collectively referred to as the "Participating Utilities"). RECITALS WHEREAS,pursuant to Section 1 ch.19,SLA 1993,the Legislature appropriated $43,200,000 to the Department of Administration ("DOA")for payment as a grant under AS 37.05.316 to GVEA for the purpose of constructing a power transmission intertie between Healy and Fairbanks ("Healy-Fairbanks Intertie")to benefit all utilities participating in the intertie;and WHEREAS,pursuant to Section 2 of ch.19,SLA 1993 (Sections 1 and 2 of ch.19,SLA 1993 hereinafter referred to as the Grant Administration Agreement Page 1 "Intertie Appropriation"),the Legislature appropriated $46,800,000 to DOA for payment as a grant under AS 37.05.316 to CEA for the purpose of constructing a power transmission intertie between ) Anchorage and the Kenai Peninsula ("Anchorage-Kenai Intertie")to benefit all utilities participating in the intertie (the two intertie appropriations are hereinafter collectively referred to as the "Intertie Grants");and WHEREAS,pursuant to Section 1(b)and (c)and Section 2(b)and (c)of the Intertie Appropriation,DOA,AIDEA,and the Participating Utilities were to enter into a written agreement satisfying certain statutory conditions precedent to DOA's transfer of the Intertie Grants;and WHEREAS,in order to satisfy such requirement,DOA, AIDEA,and the Participating Utilities have entered into an Intertie Grant Agreement (the "Intertie Grant Agreement"),which among other things,provides that the Intertie Grants are to be transferred to AIDEA for the benefit of the Participating Utilities,and that certain conditions are to be met prior to AIDEA releasing any of the grant funds to the Participating Utilities; and WHEREAS,also as part of the Intertie Grant Agreement, the Participating Utilities have agreed to form an Intertie Participants Group ("IPG")to,among other things,oversee the construction of the interties and address grant expenditure matters;and Grant Administration Agreement Page 2 WHEREAS,pursuant to the Intertie Grant Agreement,DOA and AIDEA have entered into a Grant Transfer and Delegation Agreement ("Grant Transfer Agreement")whereby the Intertie Grants were transferred to AIDEA to act as custodian and administrator of the Intertie Grants;and WHEREAS,Section 7 of the Intertie Grant Agreement requires that AIDEA and the Participating Utilities enter into a Grant Administration Agreement which shall set forth the terms and conditions to be satisfied by the Participating Utilities in order for there to be a disbursement of the Intertie Grants,and which shall also provide for AIDEA's obligations with respect to the Intertie Grants. AGREEMENT NOW,THEREFORE,in consideration of the recitals above (which are hereby incorporated into and shall be deemed part of this Agreement),and of the covenants and agreements hereinafter set forth,it is agreed by and between the parties hereto as follows: Section 1.Custodian and Administrator.The parties acknowledge that pursuant to the Grant Transfer Agreement,DOA has delegated all its powers and duties with respect to the administration of the Intertie Grants to AIDEA and that the Intertie Grants have been transferred from DOA to AIDEA for the benefit of -the Participating Utilities.The Participating Utilities have requested that AIDEA serve as custodian and Grant Administration Agreement Page 3 administrator of the Intertie Grants.AIDEA hereby accepts such appointment and agrees to act as custodian and administrator of the Intertie Grants for the benefit of the Participating Utilities, subject to the terms and conditions of,and authority and powers granted by,this Agreement and applicable law,including but not limited to those statutes and regulations applicable to the administration of grants to named recipients under AS 37.05.316 by the DOA. Section2.Custody/Investment of Grant Funds. 2.01.Appropriation 'Accounts.AIDEA shall establish two appropriation accounts to account for and to disburse the Intertie Grants.One account shall be designated the "Healy- Fairbanks Intertie Account"which shall be comprised of the $43,200,000 appropriation made by Section 1 of the Intertie Appropriation and all interest and other income to be earned thereon.The other account shall be designated the "Anchorage- Kenai Intertie Account"which shall be comprised of the $46,800,000 appropriation made by Section 2 of the Intertie Appropriation and all interest and other income to be earned thereon (the monies collectively comprising the Healy-Fairbanks Intertie Account and the Anchorage-Kenai Intertie Account hereinafter referred to as the "Intertie Funds").AIDEA shall have the authority to create and a@esignate subaccounts for these two accounts as it deems necessary from time to time. Grant Administration Agreement Page 4 2.02.Institutional Custodian.In order to carry out its custodial duties under this Agreement,AIDEA may designate and hire one or more institutional trustees to act as custodian for all or any portion of the Intertie Funds and any securities which such funds may be invested in.Such institutional custodian shall hold the Intertie Funds and any securities subject to the terms and conditions of this Agreement and applicable law.AIDEA shall ensure that any institutional custodian provide the appropriate procedures to separately account for the monies,and interest and other income earned thereon,in each of the intertie accounts established pursuant to Section 2.01. 2.03.Investment of Intertie Funds. (a)Generally.AIDEA shall develop and implement an investment strategy (the "Investment Strategy")in cooperation with GVEA and CEA for the investment of the 'Intertie Funds.In developing the Investment Strategy,AIDEA may also consult with and hire the services of professional investment advisers.AIDEA is hereby authorized,on behalf of the Participating Utilities,to make,execute,acknowledge and deliver any and all documents or instruments that may be necessary or appropriate,to exercise all other rights and powers,and to take all appropriate actions which it deems necessary,to implement the Investment strategy. (b)Limitations.The Investment Strategy shall be consistent with the principles set out in AS 37.10.071.Investment of the Intertie Funds shall be limited to United States Treasury Grant Administration Agreement Page S debt obligations,or obligations insured by or guaranteed by the United States or agencies or instrumentalities of the United States.The Investment Strategy shall take into consideration the cash flow needs of the Participating Utilities.The IPG shall submit to AIDEA a schedule for the use of grant funds,and any amendments or changes thereto as necessary from time to time,to assist AIDEA in developing the Investment Strategy. (c)Institutional Investor.In order to implement the Investment Strategy,AIDEA may designate and hire either the institutional custodian hired pursuant to Section 2.02 or another institutional entity to invest the Intertie Funds pursuant to the Investment Strategy,the terms and conditions of this Agreement and applicable law.AIDEA shall provide the necessary direction to provide for the investment of the Intertie Funds. Section 3.Use of Intertie Funds. 3.01.Healy-Fairbanks Intertie Account.Monies in the Healy Fairbanks Intertie Account and any designated subaccounts of such account shall only be used for the following purposes: (a)all costs reasonably related to the design, permitting,and construction of the Healy-Fairbanks Intertie; (b)to pay the costs associated with any institutional custodian and/or investor hired pursuant to Sections 2.02 and 2.03(c);and Grant Administration Agreement Page 6 (c)to pay the costs associated with any professional investment adviser hired pursuant to Section 2.03(a). 3.02.Anchorage-Kenai Intertie Account.Monies in 'the Anchorage-Kenai Intertie Account and anydesignated subaccounts of such account shall only be used for the following purposes: (a)all costs reasonably related to the design, permitting,and construction of the Anchorage-Kenai Intertie; (b)to pay the costs associated with any institutional custodian and/or investor hired pursuant to Sections 2.02 and 2.03(c)?;and (c)to pay the costs associated with any professional investment adviser hired pursuant to Section 2.03(a).. 3.03.Unexpended Funds. (a)Project Completion.Any monies remaining in either the Healy-Fairbanks Intertie Account or the Anchorage-Kenai Intertie Account at the completion of the respective intertie project and payment of all outstanding obligations for the applicable project shall be returned to DOA and deposited in the State General Fund. (b)No Construction of Project.As required by Section 7 of the Intertie Grant Agreement,in the event the IPG Grant Administration Agreement Page 7 notifies AIDEA that one or both of the intertie projects will not be constructed,the monies in the account associated with the respective intertie,after the payment of all outstanding obligations,shall be returned to DOA and deposited in the State General Fund. (c)Unreasonable Delay of Projects.As required by -Section 2.4(b)of the Grant Transfer Agreement,in the event that AIDEA determines,in its reasonable discretion,that development of either intertie project is unreasonably delayed by the affected Participating Utilities,the unobligated and unexpended monies in the account associated with the respective intertie shall be returned to DOA and deposited in the State General Fund.AIDEA shall give fifteen (15)days prior notice of such decision to the affected Participating Utilities. Section 4.Disbursement of Intertie Funds.Except for the payments of costs incurred by the Authority under Sections 3.01(b),3.01(c),3.02(b),and 3.02(c),any disbursement,release, encumbrance,assignment or pledge (hereinafter collectively referred to as "disbursement"for purposes of this Section 4)of the Intertie Funds from the intertie accounts shall be subject to the procedures,conditions precedent,and limitations/ceilings set forth in this Section 4. 4.01.Conditions Precedent.The disbursement of ete Intertie Funds for the purposes described in Section 3.01(a)and Grant Administration Agreement Page 8 3.02(a)is not permitted until the following conditions precedent have been satisfied by the Participating Utilities: (a)the Participating Utilities have entered into and executed a Participation Agreement,in a form satisfactory to AIDEA,as required by and in accordance with the Intertie Grant Agreement and Section 2.4(c)of the Grant Transfer Agreement,and transmitted a copy of the signed and executed agreement to AIDEA; and (b)the Participating Utilities have determined and agreed upon which contractual obligations related to the Intertie Grants and Intertie Funds must be submitted to the Alaska Public Utilities Commission for its review and approval,and provided written notice to AIDEA of such determination and agreement. 4.02.Disbursement Schedules.Any disbursement of the Intertie Funds shall be subject to the limits and ceilings set forth in this Section 4.02. (a)Project Phases Ceilings.The Schedule A,which is attached to and hereby incorporated into this Agreement,and has been approved by AIDEA and the IPG,sets forth certain dollar ceilings for the initial phase of development for each of the intertie projects.The IPG shall submit to the Authority,for the Authority's review and approval,a proposed budget for subsequent phases of development.No disbursement of Intertie Funds for each of the respective interties which exceeds the established ceilings set forth in Schedule A shall be permitted.The parties agree that Grant Administration Agreement Page 9 the IPG is authorized to request amendments to Schedule A,subject to AIDEA's approval,to provide for upward adjustment only of the ceilings set for the project phases.The IPG shall submit any requests for amendments to Schedule A to AIDEA in writing.The submittal shall include appropriate findings and an explanation as to why the existing ceiling is not sufficient.AIDEA agrees to consider any request for amendment within fifteen (15)days of the receipt of such request.No amendment shall be effective until approved by AIDEA. | (b)Limitation on Phase II Expenditures.Except as may be approved by the Authority,grant funds will not be applied to reimburse costs incurred for Phase II activities,as described in Schedule A,until (a)the Participating Utilities have demonstrated,to the satisfaction of AIDEA,the ability to raise all additional amounts needed to complete construction of the intertie(s),and (b)final approval,not subject to further judicial appeal,of matters submitted to the Alaska Public Utilities Commission related to the financing or use of the intertie(s). 4.03.Disbursement Procedures.Subject to the conditions,limitations,and ceilings set forth in Sections 4.01 and 4.02,and the terms and conditions of this Agreement, disbursement of the Intertie Funds shall be subject to the following procedures: Grant Administration Agreement Page 10 (a)All invoices shall be initially submitted to the IPG for its review and approval. (b)After IPG review and approval,the IPG shall submit,on a monthly basis all approved invoices to AIDEA for payment.Each invoice shall be referenced to a particular intertie project and a specific phase for that project to allow AIDEA to properly charge the invoice against the appropriate project and to determine if payment is authorized pursuant to the Intertie Appropriation or the disbursement schedules set forth in Section 4.02.AIDEA may request further documentation or explanation with respect to any invoice and is authorized to withhold payment until documentation,acceptable to AIDEA,is submitted. (c)If payment of an invoice is authorized in accordance with (b),AIDEA shall pay such invoice within fifteen (15)days of receipt of the invoice.. Section 5.Audit Requirements. 5.01.General.The parties acknowledge that the audit requirements of 2 AAC 45.010 apply to the Intertie Grants, Intertie Funds,and the use of such monies for the purposes set forth in this Agreement.The Participating Utilities,through the IPG,agree to have performed annual audits as required by 2 AAC 45.010 on the departments,agencies,or establishments of that entity which actually received,spent,or otherwise administered the grant funds,and to submit to the state coordinating agency,as such term is defined in 2 AAC 45.010(0)(4),separate audit reports, Grant Administration Agreement Page 11 as required by and in accordance with 2 AAC 45.010,on an annual basis,for both the Healy-Fairbanks Intertie project and the Anchorage-Kenai Intertie project.Each audit and the resulting audit report shall cover the preceding calendar year,and the audit report shall be submitted no later than April 15 of each year, beginning on April 15,1995.A copy of each audit report shall be transmitted to AIDEA at the same time each audit report is transmitted to the state coordinating agency.The Participating Utilities shall also submit copies to the state coordinating agency to the extent required by 2 AAC 45.010(h). 5.02.Audit Standards and Report Contents.The audits required by Section 5.01 shall be conducted by an independent auditor in»accordance with the audit standards set forth in 2 AAC 45.010(c).The audit reports shall address at a minimum the items set forth in 2 AAC 45.010(d)through (g). 5.03.Additional Requirements.The audits and audit reports required by this Section 5 shall comply fully with all requirements imposed by 2 AAC 45.010,and any amendments or modifications thereto,regardless of whether such requirements are specifically set forth in this Agreement.In addition,the Participating Utilities shall ensure that the requirements of 2 AAC 45.010(j)are satisfied by any applicable third party recipients. 5.04.Books and Records.In addition to complying with the audit réquirements of Sections 5.01-5.03,the Participating Utilities and the IPG shall permit AIDEA to have Grant Administration Agreement Page 12 aw 'reasonable access upon request to all books and records (except those protected by law or court rule,such as attorney-client or work product privilege)related to the (a)design,permitting and construction of the interties;(b)Intertie Grants;and (c) Intertie Funds. Section 6.Waiver of Liability/Indemnification. 6.01.Waiver ofLiability/Indemnificationon Custodial/Investment Duties.The Participating Utilities,and all their successors and assigns,hereby waive and release AIDEA,and all its officers,directors and employees,from any and all claims and liabilitiesof any nature and kind whatsoever which are related to or may arise out of AIDEA's obligations and duties as custodian and investor under this Agreement,except those which may arise from the gross negligence or willful misconduct of AIDEA.The Participating Utilities agree to and shall indemnify,defend and hold harmless AIDEA,and all its officers,directors and employees, from and against,any and all demands,claims,causes of action, losses,fines,penalties,judgments,damages (including punitive and consequential damages),or liabilities of any nature and kind whatsoever (including attorney's fees,and other legal fees and expenses)incurred in connection with or resulting from or arising out of or in any way related to AIDEA's obligations and duties as custodian and investor under this Agreement,except those which may arise from the gross negligence or willful misconduct of AIDEA. Grant Administration Agreement Page 13 6.02.Indemnification on Contractor Claims.The Participating Utilities agree to and shall indemnify,defend and hold harmless AIDEA,and all its officers,directors and employees, from and against,any and all demands,claims,causes of action, losses,fines,penalties,judgments,damages (including punitive and consequential damages),or liabilities of any nature and kind whatsoever (including attorney's fees,and other legal fees and expenses)incurred in connection with or resulting from or arising out of or in any way related to the design and construction of the interties,which may be asserted against AIDEA,or its officers, directors or employees,by any contractor,subcontractor, consultant,or third party or entity. Section 7.Miscellaneous/General Terms. 7.01.No Third-Party Beneficiaries.Nothing in _this Agreement shall be interpreted or construed as creating any rights or privileges of any kind whatsoever in persons or entities who are not parties to this Agreement. 7.02.Applicable Law and Venue.This Agreement shall be construed under the laws of the State of Alaska and any dispute shall be resolved in the Superior Court for the State of Alaska,Third Judicial District,at Anchorage,Alaska. 7.03.No Strict Construction.This Agreement was drafted in accordance with the wishes of all parties and after negotiation and discussion between all parties,and all parties have been represented by counsel in such negotiations.The rule of Grant Administration Agreement Page 14 em construction that a contract shall be construed against the party who drafted it shall not apply to construction of this Agreement. 7.04.Counterparts.This Agreement may be executed in counterparts,in which case all such counterparts shall constitute one and the same Agreement. 7.05.Successors and Assigns.This Agreement shall be binding upon the parties and their successors and assigns. 7.06.Modifications/Amendments.This Agreement may not be modified or amended except by a writing signed by all the parties. 7.07.Captions/Headings.All captions and headings used in this Agreement are for the convenience of reference only and shall not be construed as part of the Agreement. IN WITNESS WHEREOF,the parties have caused this 'Agreement to be executed on the date first above written. ALASKAW USTRIAan NT &EXPORT AUTHORITYBy:ShIts:YM.fo GOLDEN VALLEY ELECTRIC Hy INC.By:AY lalgsone K y Its:General Manager \/FAIRBANKS MUNICIPAL ormiries SYSTEMeeMauCoNanay Grant Administration Agreement Page 15 Fs \AIDEA\ENERGY \KAE2364 ANCHORAGE MUNICIPAL LIGHT AND POWER Its:Mayor,Municipality of Anchorage CHUGACH ELECTRIC ASSOCIATION,INC. ay:Se AM Its:C \General Manhoer =ao ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE,INC.on behalf of its members (Matanuska Electric Association,Inc.and Homer Electric Association,Inc.) py:RS Kt4Its:Gp Fano"AYE, CITY OF SEWARD py:_Ane JVoe<>Its:C4.Ato soe Grant Administration Agreement Page 16 Re presentative Lesx(erieAlaska'State'LegislatureSak,Wesel oD pcb cea Swe ae el RT! www.akdemocrats.org FOR IMMEDIATE RELEASE «February 14,2003 CONTACT:Jordan Marshall «(907)465-3842,Toll-free (888)465-4919,Cell:321-3682 Fax:465-5125,Jordan_Marshali@iegis.state.ak.us Gara Finds $27 Million State Savings Putting Alaskans First 2003 JUNEAU -Today Representative Les Gara (D-Anchorage)requested that the Governor seek the return from AIDEA of approximately $27 million to the General Fund.The money is interest on a decade-old appropriation to a group of power companies.A recent memo from the state's Legislative Legal department confirms that giving this money to these companies would be "an unauthorized use of public moncy.” "We shouldn't give away state money when we are struggling to fund our schools,our senior housing system, our public safety departments,and even our foster care system,”said Gara."And we shouldn't give away scarce public money to subsidize projects like the one involved here,”Gara says. The $27 million is interest the State earned on a $46.8 million appropriation made in 1993 for the construction of the Southern Intertie.The account where the appropriation is held has earned roughly $27 million in interest since 1993.According to the Legislative Legal department and a 1985 formal Attorney General's opinion, interest earned on a state account cannot be spent without a legislative appropriation.AIDEA,nonetheless,has agreed to give this money to Chugach Electric in the event the Southern Intertie is ever built.Gara objects to this improper giveaway of state moncy.To date the electric utilitics have not begun construction of the project, which Chugach itself has recently conceded will cost far more than it will ever benefit the public.The best estimates are that the project will cost upwards of $130 million to $140 million or more,but produce a public benefit of only approximately $60 million. Last week the Attorney General's Office issued a short |1/2-page memo siding with AIDEA,without referencing the contradictory 1985 Attorney General's opinion. Gara has asked that the Governor reconsider that advice in light of the law,the Constitutional prohibition against spending money without a legislative appropriation,the 1985 opinion,and what he calls a "comprehensive legal analysis from the Legislature's attorney.”Gara researched the issue and also came to the conclusion that the $27 million in interest belongs in the General Fund. For more information,and copies of the Legislative Legal department opinion,please contact Rep.Les Gara at 465-2647. HHA Putting Alaskans First «Moving Alaska Forward 2003 Sen.Bettye Davis,Sen.Johnny Ellis,Sen.Kim Elton,Sen.Lyman Hoffman,Sen.Hollis French,Sen.Gretchen Guess,Sen.Georgianna Lincoln, Sen.Donny Olson,Rep.Ethan Berkowitz,Rep.Sharon Cissna,Rep.Harry Crawford,Rep.Eric Croft,Rep.Les Gara,Rep.Max Gruenberg, Rep.David Guttenberg,Rep.Reggie Joule,Rep.Mary Kapsner,Rep.Beth Kerttula,Rep.Albert Kookesh,Rep.Carl Moses ALASKA STATE LEGISLATURE oF TipJSS REPRESENTATIVE LES GARA February 14,2003 Hon.Frank Murkowski State Capitol Juneau,AK 99801 Ron Miller,Executive DirectorAIDEA 813 W.Northem Lights Blvd. Anchorage,AK 99503 Dear Governor Murkowski and Mr.Miller: Iam writing to express my concern over roughly $27 million I believe belongs in the State's General Fund,but that AIDEA has indicated it might give to a private power company without legislative approval.This state has a large budget deficit and $27 million is a very significant amount of money.Such an amount might be used wisely to help properly fund our schools,our foster care and public safety systems,and other important services Alaskans rely upon.It is my hope that you will take action to ensure this money is returned to the General Fund.As is stated by the Legislature's counsel,"use of [this]grant money to generate additional revenue for the grant recipient would be an unauthorized use of public money.”Cook Memo at p.2 (2/7/03). The moneyI refer to is interest the state has earned on a $46.8 million appropriation the State made in 1993 for the construction of the Southern Intertie.Since 1993 roughly $27 million in interest has been earned in the state account where the appropriation is being held.Interest earnedonastateaccountbelongstothestateandcannotbespentwithoutalegislativeappropriation.Yet AIDEA has agreed to give this money to a private power company,Chugach Electric Cooperative,in the event the Southern Intertie is ever built.The best estimates are that the project will cost upwards of $130-140 million or more,but produce a public benefit of only approximately $60 million.Surely,even if we wished to spend the money on a southcentral power project,we could come up with a cost-effective one. I understand the Attorney General's office has recently sided with AIDEA's action giving this $27 million in interest to Chugach.I hope you'll take another look at the issue,as it seems to contradict a "Formal”position the Attorney General's Office has taken,in a formal written opinion,in 1985.A.G,Opinion,File No.366-341-85.Feel free to call if I may be of any help. Sincerely,GQaraRep.Les G January-May:State Capitol «Juneau,AK 99801-1182 ¢(907)465-2647 ©Fax (907)465-3518 June-December:716 W.4th Avenue «Anchorage,AK 99501¢(907)269-0106¢Fax (907)269-0109 Representative_Les_Gara@legis.state.ak.us ¢adVd GISE S97 L06 I:Xva Pies]Gatyepuasaider =Wy CE:60 [ea €0-P1-Gag LEGAL SERVICES DIVISION OF LEGAL AND RESEARCH SERVICES LEGISLATIVE AFFAIRS AGENCY (907)465-3887 or 465-2450 STATE OF ALASKA State Capitol FAX (907)465-2029 Juneau,Alaska 99801-1182 Mail Stop 3101 Deliveries to:129 6th St.,Rm.329 MEMORANDUM February7,2003 SUBJECT:Treatment of interest earned on grant money for southern power transmission intertie under ch.19,SLA 1993 (Work Order No.23-LS0507) TO:Representative Les Gara Attn:Cindy Smith FROM:Tamara Brandt Cook pyDirectorA You ask whether interest earned on money appropriated under sec.2,ch.19,SLA 1993 for construction of a southem power transmission intertie may be used for the intertie without a further appropriation of that interest.It appears that it may not. Applicability of 3 AAC 153.020(b):As a preliminary matter,you have directed my attention to language in 3 AAC 155.020(b),stating:"Interest must be appropriatedbeforeitwillbeallocatedtoindividualgrantaccountsbythedepartment."That regulation applies only to grants made by the Department of Community and Economic Development under the unincorporated community capital project matching grant program.(AS 37.06.020)A similar regulation applies to the municipal capital project matching grant program.(AS 37.06.010;3 AAC 154.020)The intertie appropriation was for a grant under AS 37.05.316 to a named recipient,so the regulation you have identified has no application. Let me hasten to note that AS 37.05.316(a)was substantially amended in 1997. Obviously,the grant authorized under sec.2,ch.19,SLA 1993 is subject to AS 37.05.316(a)as it read at that time.This was the following: (a)When an amount is appropriated or allocated to a department as a grant for a named recipient that is not a municipality,the department to which the appropriation or allocation is made shall promptly notify the named recipient of the availability of the grant and request the named recipient to submit a proposal to provide the goods or services specified in the appropriation act for which the appropriation or allocation is made.At the same time,the department may issue a request for proposals from other qualified persons to provide the same goods or services in the same area.The department shall award the grant to the named recipient unless the office of the governor,with due regard for the local expertise or €a0¥d SISE S97 L06 I:Xva Pred "[@argequaseidaz =WY CE:EQ [Ha €0-P]-Gag Representative Les Gara February 7,2003 Page 2 experience of those making proposals,determines that an award to a different party would better serve the public interest.If the grant is awarded to a party other than that named by the legislature,the basis of that action shall be stated in writing at the time the grant is issued and a copy of the written statement shall be sent to the legislative budget and audit committee.A grant agreement must be executed within 60 days after the effective date of the appropriation or allocation. AS 37.05.316 did not and stili does not address the treatment of interest that may be earned on grant money.Furthermore,the treatment of interest under a grant to a named recipient cannot be addressed in regulation under AS 37.05.318,which was in effect in 1993 and has not been amended.It states: Sec,37.05.318.Further regulations prohibited.Notwithstanding the Administrative Procedure Act (AS 44,62),the Fiscal Procedures Act (AS 37.05),and the Executive Budget Act (AS 37.07),a state agency may not adopt regulations or impose additional requirements or procedures to implement,interpret,make specific,or otherwise carry out the provisions of AS 37.05.315 -37.05.317 unless required by the federal government for participation in federal programs. Use of grant money to generate additional revenue for the grant recipient would be an unauthorized use of public money:The fact that the treatment of interest earned on money awarded as a grant under AS 37.05.316 is not addressed in statute or regulationdoesnotmeanthattheinterestmaysimplybetreatedasthepropertyofthegrantcebythe administering agency.In an opinion dealing with a grant for a hospital facility,the Attomey General concluded that interest income earned on grant money is generally considered an unrestricted receipt of the state.Use of grant money to generate additional revenue for the grant recipient would be an unauthorized use of public money,absent specific statutory authority to do so.Even money paid to a grantee is to be used only for the purposes of the grant and not "for the grantee to invest and earn interest at the expense of the treasury.”Furthermore,this rule "applies whether the grantee is a public or private agency."(A.G.Opinion,File No.366-341-85,March 18,1985;copy previously provided) The Attorney General's Opinion notes that AS 37.05.315(d)does authorize advance payment of a portion of grant money to municipal recipients,but concludes that even that provision does not permit the municipality to use grant money for investment purposes. AS 37.05.316,under which money appropriated for the southern intertie is to be granted, does not,in any case,contain a provision authorizing advance payment of grant money. Under the reasoning of this opinion,interest earned on the money appropriated under sec,2,ch.19,SLA 1993 may not be used for the grant purposes without specific authorization to do so.The language of that appropriation section does not contain that authorization,nor does AS 37.05.316.Therefore,the interest that has been generated may not be used for the southern intertie until it is specifically appropriated by the b 9DVd BIGE S97 106 J:Xv¥d Pies]aaryequasaidaz =WY GE:60 [4d €0-pI-Gad Representative Les Gara February 7,2003 Page 3 legislature.(For an example of an appropriation of interest eared on money previously appropriated to the Alaska Railroad Corporation,a public corporation,for a capital project,see sec.145,ch.208,SLA 1990,asamended by secs.55 and 56,ch.100,SLA 1997) Continuing appropriation:To the extent that the Attorney General's Opinion discussed above suggests that the legislature could authorize the use of interest eamed on appropriated money on an ongoing basis by substantive law or in an appropriation act, this may not be true with respect to future receipts of interest.A superior court has © determined that a continuing appropriation,that is,money appropriated during a current year from future fiscal year receipts,violates the prohibition against dedicated funds.. (Trustees for Alaska v.State,3-AN-84-12053 Civ.(Aug.30,1985))The case was not appealed to the Supreme Court and the rationale behind it is not entirely clear from the court's decision.However,the case does cast doubt on the legislature's ability to "appropriate”for any specific purpose money that is to be receivedin future years. Consequently,while the legislature can appropriate interest earned on the intertie grant money during past years,it may not be able to appropriate interest that may be earned in future years. Intertie grant funds are money of the state:The appropriation under sec.2,ch.19, SLA 1993 was made to the Department of Administration.The department delegated the administration of the grant to the Alaska Industrial Development and Export Authority (AIDEA)under a "Grant Transfer and Delegation Agreement."You have supplied part of that agreement to me and directed my attention to secs.2.4,2.5,and 2.6.In summary, sec,2.4 requires AIDEA to exercise the delegation "according to all statutes and regulations applicable to the administration of grants to named recipients under AS 37.05.316";sec.2.5 contains a request by the Participating Utilities that AIDEA "serve as custodian on behalf of the recipients of the grant appropriations...";and sec.2.6 states:"Pursuant to AS 44.83,190(b),the grant funds held by AIDEA and any interest or other income thereon shall not be or constitute money of the State."Despite these provisions,I think that it is more likely than not that a court would treat interest earned on the grant money as part of the state treasury for purposes of the appropriation requirement under Art.LX,sec.13,Constitution of the State of Alaska. 'The Attorney General has been faced with the question of whether money can be appropriated from another public corporation,the Alaska Housing Finance Corporation (AHFC),which,like AIDEA has a legal existence independent of the state. (AS 18.56.020)The Attorney General concluded that the legislature can appropriate unencumbered money from a public corporation.(A.G.Opinion No.366-463-85,1985) The Alaska Supreme Court has cited that opinion with approval and has specificallyrecognizedthatmoneyappropriatedfromAHFCmustbecountedas"availableforappropriation"for purposes of applying Art.IX,sec.17,relating to the budget reservefund.(Bickel vy.Cowper,874 P.2d 922 (Alaska 1994)footnotes 11 and 23)This conclusion necessarily presupposes that the legislature has the power to makeappropriationsofunencumberedassetsfrompubliccorporations.A statute such as G Vd BISE S97 106 I xVd PARR]Oarzequasaidaz ©WY 96:60 IHd €0-pl-aay Representative Les Gara February 7,2003 Page 4 AS 44.88,190(b)might make AIDEA money something other than "money of the state” for some purposes,but cannot alter the constitutional appropriation requirements ofArt.IX,sec.13.Therefore,the interest earned on intertie grant money must be appropriated before it may be spent.Since it has not been appropriated,arguably,neither the Department of Administration nor AIDEA may encumber the interest by contract because such a contractual provision is simply void under Art.IX,sec.13. Aside from the constitutional problem,it is doubtful that AS 44.88.190(b)applies to the intertie grant money because that money does not constitute "funds,income,or receipts of the authority...".AIDEA has only been delegated the responsibility to administer the grant funds for the Department of Administration. Satisfaction of the contingencies:Although you are particularly concemed with the use of interest earned on the southern intertie grant money,it appears to me at least possible that the entire appropriation might be challenged for failure to meet the contingency set out in sec.2(c),ch.19,SLA 1993.That subsection states: (c)The appropriation made by (a)of this section is contingent upon the execution of a written agreement between the electric utilities participating in the intertie and the department in which Chugach Electric Association agrees to provide the other participating utilities access to the intertie for the purpose of assured access to resources,economy energy transactions, and other similar uses. I do not have a complete copy of the agreement referred to,so I am not considering whether the substance of the required agreement has been met.The same is true of the contingency under subsection (b)and the agreement referred to in it,for that matter.I did notice,however,from material you sent me that the "Participants Agreement"appears not to have been executed by the Department of Administration.With your permission,I have contacted Mr.Don Zoerb and he was able to tell me that the agreement was executed by certain utilities,but not by either the Departmentof Administration or by AIDEA.While it is possible that a court might find some sort of substantial compliance,as a literal matter,this does not meet the condition set out in subsection (c).Fora discussion of the validity of contingencies attached to appropriations and of the possible consequences of a finding that a contingency is invalid or has not been satisfied,see Alaska Legislative Council v.Knowles,21 P.3d 367 (Alaska 2001). Delegation by the Department of Administration to AIDEA:If the appropriation under sec,2,ch.19,SLA 1993 becomes the subject of litigation,it is possible that the delegation from the Department of Administration to AIDEA of the responsibility to administer the southern intertie grant could be called into question.A principal department of the executive branch and an independent public corporation might be viewed as so different with respect to oversight by both the legislature and the governor as to defeat the validity of the delegation on grounds that it did not conform to the legislative intent in appropriating the grant money to the department.AS 37.05.316, 9 40Vd SIGE S9p L06 1:x¥d exeB P GArpequagaider =Wy 16:60 Ted €0-pl-Gay Representative Les Gara February 7,2003 Page 5 under which the grant was administered,also provides for grant administration by state departments,not independent public corporations.As the Attorney General has noted, statutes that authorize monetary grants must be strictly construed to protect public finds and a grant agreement made in defiance of grant requirements imposed by law is void. (A.G.Informal Opinion,File Nos.366-026-85,366-549-85,and 366-021-86,November 21,1985) Conclusion:As the interest eamed on money appropriated for a grant under sec.2, ch.19,SLA 1993 has not been authorized for use by law,it may not be used for grant purposes.Contract agreements to the contrary are probably void.The interest earned to date may be appropriated for the grant purposes,but an appropriation of future interest might be a continuing appropriation of the type found by a superior court to violate the prohibition against dedicated funds.The grant interest could be appropriated for otherpurposes.[f this is done,that action might be challenged as.an impairment of the grantcontract,but it is more likely than not that the appropriation would survive challenge.It is also possible that the entire grant amount in the possession of AIDEA could besuccessfullyappropriatedforotherpurposesifitisdetermined(1)that the southem intertie is not feasible and that the money has not been further encumbered by utility participants;or (2)that the original appropriation is void because of failure by the Department of Administration to adhere to the terms of the appropriation. TBC:med 03-121.med L W¥d GISE S97 L06 1:XVd exee '[Garyequaseidal =Wy 16°60 [Hd €0-p]-aaa Office of the Attorney General State of Alaska File No.366-463-85 April 24,1985 Legislative power of appropriation over funds of public corporations Hon.Al Adams Chairman House Finance Committee Alaska House of Representatives Pouch V Juneau,AK 99811 Dear Representative Adams: You have requested our advice whether the legislature's power of appropriation includes thé power to appropriate money administered by the Alaska Housing Finance Corporation (AHFC).AHFC was created to administer a state enterprise consisting almost entirely of making housing loans or providing a secondary mortgage market for housing loans originated by private lending institutions.AHFC is a state agency with the power to incur indebtedness if repayment is secured by pledging revenue earned from AHFC enterprises.See Alaska Const.art.IX,§11.The pledge is secured by dedicating money,including revenues earned from the loan enterprise,to special accounts established for the benefit of bondholders.You desire to know whether the legislature may appropriate directly from AHFC's Alaska housing finance revolving loan fund (AS 18.52.082)for a purpose unrelated to AHFC.In ition,you ask if the unobligated balance of an appropriation from the general fund to the revolving fund may be reappropriated for wuvther purpose. First,we believe there is little doubt that the legislature may reappropriate the unencumbered and unobligated balance of an existing appropriation.See Inf.Op.Att'y Gen.(Sept.26;366-132-81).The legislature is merely reducing the authorization to spend money.The formal act of appropriating money does not invest a person or entity with the right to ultimately expend the money unless a valid,binding contract is made with that entity.It is very doubtful that a political subdivision of the state being entirely a creature of statute could claim a vested right to expend money under an appropriation absent the intervention of innocent third parties.Based on these principles,we conclude that the unexpended and unobligated balance of an appropriation to the AHFC revolving fund may be appropriated for purposes unrelated to AHFC. We next turn to the more difficult question of whether the balance of the AHFC revolving fund may be appropriated by the legislature for a purpose unrelated to AHFC.The AHFC revolving fund serves as a central pool of money consisting of the following: (1)appropriations from the legislature; (2)assets transferred there by AHFC;and (3)unrestricted repayments of principal on loans made or purchased by AHFC. The assets of the revolving fund are transferred to separate funds when necessary to satisfy covenants made with bondholders. Amounts remaining in the fund do not secure specific bond issues of AHFC and remain unrestricted for use by AHFC 'for the purposes of the corporation.'Id. The answer to your question turns on whether the revolving fund is within the state treasury or,failing that,if the fund is an +t of the state which may be appropriated by the legislature.Revolving funds administered by state agencies are generally included ie state treasury for financial reporting purposes.However,the AHFC revolving fund is not carried on the state's ledgers as an asset of the state treasury.Rather,the revolving fund is an asset of AHFC.In a recent appropriation Act,the legislature has specifically appropriated to the AHFC revolving fund interest earned on loans made or purchased by AHFC on deposit in the fund. See sec.1,ch.129,SLA 1984.This was done to remove any question that AHFC had improperly dedicated an unrestricted revenue source of the state for a special purpose in violation of the dedicated fund prohibition set out in section 7.article IX of the Alaska Constitution.This provides some evidence that the legislature considers unrestricted earnings of AHFC to be subject to appropriation. itis important to note that we have identified these earnings as 'unrestricted.'This means that the rights of innocent third parties to retain'the fund balance as security for the payment of debt service on bonds have not intervened to restrict the ability of AHFC to spend them.We believe that the AHFC revolving fund is not in the state treasury.The effect of this conclusion is that AHFC may spend money in the fund without further appropriation.However,money eared from investments or assets of the fund have customarily been considered a state asset which may be transferred and deposited into the general fund. 4295 The question then becomes:if the AHFC revolving fund is not in the state treasury,but is an asset of a state agency,is the fund subject to appropriation?We believe that unrestricted money in the fund is probably available for appropriation.No specific authority was located to support this conclusion.We base our opinion on a belief that the legislative power of appropriation will be liberally construed by the courts.The appropriation power is often described as plenary.That is,the power to appropriate is limited only by express provisions set out in the Alaska Constitution.Judicial decisions reciting this principle are legion.See,e.g.,San Francisco Labor Council v.Regents of University of California,608 P.2d 277 (Cal.1980);City of Sand Springs v.Department of Public Welfare,608 P.2d 1139,1148 (Okla.1980).Absent a specific prohibition in the Alaska Constitution against appropriating assets of an executive branch agency held outside the state treasury,we believe that the legislature may do so.This opinion does not hold that the legislature must appropriate revenue of a public corporation before it can be spent,only that the legislature may exercise control over unrestricted assets of a public corporation.To deny this power would establish an entity capable of segregating unrestricted state revenue forever.At some point,this would do violence to the dedicated fund prohibition set out in article IX,section 7 of the Alaska Constitution. We believe it is also our responsibility to inform you that there is a contrary view on this subject.The argument could be made on behalf of bondholders that AHFC has undertaken certain obligations to bondholders which are binding on AHFC and the legislature.AHFC bonds are issued as general obligations of the corporation.Typically,AHFC covenants in its indenture that it will 'defend,preserve and protect the pledge of the program obligations,pledged revenues,and other assets.'Bondholders could attack any direct appropriation of the AHFC revolving fund as a violation of the covenant to preserve assets.We believe this covenant will not restrict legislative appropriations of unrestricted assets of AHFC which are unnecessary to secure the repayment of debt service on bonds.See Opinion ofthe Justices,313 N.E.2d 882 (Mass 1977);Opinion ofthe Justices,136 N.E.2d 223 (Mass 1956).This means that the directors of AHFC must be certain that an appropriation of corporation assets will not jeopardize its ability to pay debt service on outstanding bonds. To prepare for and meet any challenge to the appropriation of AHFC assets,we recommend that the legislature not only appropriate the asset but also amend the enabling Act of AHFC to assure bondholders that an impairment of their security will not occur.Under this approach,a valid transfer of assets requires not only an appropriation from the AHFC revolving fund but also an amendment to AS 18.56.020 which provides authority for AHFC to transfer unrestricted surplus to the general find.(FNal)} Authorization by general law for the transfer of assets of public corporations has been used in the past.In 1980,the legislature transferred the assets of the Alaska State Development Corporation (AS 44.59.010),the Small Business Development Corporation (AS 44.60.020),and the Alaska Toll Bridge Authority (AS 44.57.010)to the Alaska Industrial Development Authority.Sec.42,ch.106, SLA 1980.The transfer was made not in an appropriations bill,but in a bill proposing the enactment of general law.It is curious to note that no corresponding appropriation was made.This approach is consistent with another familiar adage of public finance law that _appropriation bills may not be used to amend substantive Law.Legislative Budget &Audit Committee v.Hammond,No. 1JU-80-1163 CIV (Alaska Super.,May 25,1983).It could be argued that AS 18.56.020 implies that the assets of AHFC will be transferred to the state treasury only upon termination.Because an appropriation cannot amend existing law,a transfer from the fund before dissolution of AHFC would be subject to question. While we believe that a direct appropriation of surplus AHFC assets is legally defensible,to avoid any question as to the validity of a transfer appropriation,we recommend that the legislature (1)enact an amendment to AS 18.56.020 authorizing interim transfers of unrestricted surplus assets of AHFC to the general fund; (2)provide that the board of directors shall annually determine the amount of surplus available for transfer;and (3)appropriate the assets from the fund to the general fund in accordance with the transfer authorization. 4296 We hope this memorandum has answered your questions. Sincerely yours, Norman C.Gorsuch Attorney General By:James L.Baldwin sistant Attorney General (ENal).AS 18.56.020 provides: ALASKA HOUSING FINANCE CORPORATION.The Alaska Housing Finance Corporation is a public corporation and government instrumentality within the Department of Revenue,but having a legal existence independent of and separate from the state.The corporation may not be terminated as long as it has bonds,notes or other obligations outstanding.Upon termination of the corporation,its rights and property pass to the state. Office of the Attorney General State of Alaska File No.366-341-85 March 18,1985 Payment of lump sum appropriations for hospital construction Hon.John Pugh Commissioner Department of Health &Social Services You have asked if it is permissible for the Department of Health and Social Services (DHSS)to pay money granted to the City of Cordova for hospital construction in a lump sum.The city admits that it is not prepared to begin work on the hospital project.The city is requesting this advance in the form of an endowment so that it can invest the money and obtain interest income.The city believes it can,through investment of the endowment,increase the amount ultimately available for hospital construction. We believe that the investment of public grant money during a delay pending implementation of the purpose of the grant is an unauthorized use.The appropriation was made to DHSS to finance renovation and repair of various public health facilities.Sec.4, Ch.24,SLA 1984,p.55,1.15.The department finances grants for the construction of health care facilities under AS 18.25 from accounts credited with amounts from the appropriation.We believe the legislature did not intend'to appropriate money to capitalize an investment program for the grant recipient.Use of public grant money for investment capital constitutes a diversion from the purpose assigned by the legislature for the appropriation made to finance the grant.A state certifying officer who authorizes a payment cher for the disbursement of money to a grantee with knowledge that the grantee intends of diversion is subject to the duties unposed by AS 37.10.303(3),37.10.040 and the criminal penalties imposed by AS 44.21.050. We recognize that it is reasonable for a grantee to temporarily secure grant money in some way pending disbursement for the purpose of the grant.It would be wasteful to penalize grantees for productive use of the money pending disbursement.However,it is not proper for a grantee to unduly delay the disbursement of grant money in its possession.Traditionally,interest earned on advances of public grant money during a period of 'undue'delay is considered property of the grantor.1 R.Cappalli,Federal Grants and Cooperative Agreements §5.11 (1982).In his treatise,Cappalli observes:'Nothing preordains this result except its historical respectability.'Id.,ch.5,p.23.This view is probably one that will be adopted by the Alaska courts.Some indication of the Alaska Supreme Court's philosophy may be found in Ellis v.City of Valdez,686 P.2d 700 (Alaska 1974).In Ellis,the court declared 'discretion to spend or not to spend within the parameters set by the legislature,rests with the agericy for whose use the funds have been appropriated.'686 P.2d at 705 (citation omitted).By this the court meant that the power to choose the means to accomplish the purpose assigned by the legislature is up to the administering state agency.This places squarely upon the administering agency the responsibility to prevent the diversion of an appropriation for unauthorized purposes. The legislative purpose assigned by law for the Cordova Hospital is "DHSS renovation and repair.'Sec.4,ch.24,SLA 1984,p. 55,line 15.Use of the money to generate further revenue for the grant recipient,absent specific statutory authority,would be an unauthorized use of public money.If the money in the state treasury exceeds the amount necessary to finance obligations,the commissioner of revenue invests it in accordance with AS 37.10.070.The interest income earned is credited to the treasury and is considered an unrestricted receipt available for appropriation for any purpose. State court decisions precisely on this issue were not located.It is probable that fiscal procedures and interpretations applied by the federal government constitute persuasive authority because nearly all of the statutes applicable to government fund accounting are derived from the days when Alaska was a federal territory.The federal comptroller general has consistently held that interest earned bv a grantee on money advanced by the United States under a grant agreement belongs to the United States rather than to the grantee. interest is required to be accounted for as money of the United States,and must be deposited in the treasury as miscellaneous aweipts under 31 U.S.C.484.42 Comp.Gen.289 (1962);40 Comp.Gen.81 (1960). 4324 This general rule applies whether the grantee is a public or private agency.Exceptions to this rule may only be authorized by law.For example,states are specifically permitted by 42 U.S.C.4213 to retain interest earned on grant money held awaiting disbursement.The rationale for the prohibition is that statutes authorizing grant programs contemplate that recipients may not profit --other'than in the manner and to the extent provided by law.Money paid to a grantee is not to be held,but is to be applied promptly to the grant purposes.1 Comp.Gen.652 (1922).In other words,money is paid out to a grantee to accomplish the grant purposes,not for the grantee to invest the money and earn interest at the expense of the treasury. Care should be taken when applying the advice given in this opinion to other grant programs established under authority other uw.AS 18.25.It appears that AS 37.05.315(d)authorizes advance payment of a municipal grant.The department is required to disburse 20 percent of the grant upon execution of the grant agreement.Further disbursements are payable based upon the previous month's expenditures.Another provision allows the department to make lump sum payment of a grant.However,our conclusion regarding the ownership of interest earned on advances of municipal grant money remains the same.The intent of the lump sum payment authorization is to accommodate municipalities making bulk purchases of materials and equipment to meet transportation and delivery schedules dictated by weather conditions.For each request for lump sum payment of municipal grant money,the commissioner of administration must determine that the money will be disbursed by the grantee without undue delay.A state agency may disburse grant money only if it determines that the grantee has an intent to proceed with execution of the purpose of the grant. The Department of Health and Social Services has adopted 7 AAC 78.210 which appears to apply to the grant now under review.This regulation confers broad powers on a grantee to retain grant income if it is spent for the purposes of the grant.However, the term 'grant income'is defined to mean 'income earned by a grant project during the grant period.'7 AAC 78.320(10)(emphasis added).The regulations apparently do not authorize investment activity separate from that earned by the project financed by the grant. Rather,7 AAC 78.190 requires monthly or quarterly disbursements of grant money to a grantee and makes no provision for advance payment of grant money.From this we conclude that existing regulations would not permit the disbursement requested by Cordova. We recommend that your department carry out its responsibility required by AS 18.25.100(2)and amend 7 AAC 78 to specifically establish fiscal and accounting procedures and controls necessary to prevent the investment activity proposed by the city and other similarly situated grantees. We hope this memo has answered your question.Please call if you need further assistance. Norman C.Gorsuch Attorney General --es L.Baldwin Assistant Attorney General Governmental Affairs-Juneau MO, " . SCHEDULE A-1 HEALY-FAIRBANKS INTERTIE 1.PHASE DESCRIPTION Phase I -Design Phase I -Construction These phases will be conducted sequentially.However,efficient performance will dictatesomeoverlappingofphases. 2.PHASE I]-DESIGN a.The Phase I ceiling shall be $6.64 million. b.Phase I includes the project permitting,engineering,and design including bothprojectdefinitionanddetaileddesignactivities.Specifically,Phase I shall include: (1)Environmental Assessment °DVG Survey System °Archaeological Investigation (2)Line -Engineering and Design *Geotechnical °Easements and Land Rights (3)Substation Design )(4)Energy Storage System Design °System Studies for Scoping (5)APUC and/or REA Approvals (6)Develop Finance Plan (7)Develop and Issue Bid Documents (8)Development of the Phase II Ceiling for Submission to AEIDA for Approval 3.PHASE If -CONSTRUCTION a.Phase I ceiling shall be $J _ db.|Phase I shall include the procurement and receipt of equipment and materials at thejobsitesandsitemanagementforinstallation,checkout,and start-up. c.Specifically,Phase I shall include: (1)Transmission Line Construction Link 1 Link 2 Link 3 Link 4 Link 5 Construction Management Right-of-Way Clearing (2)Substation °Wilson Substation °Healy Substation °Construction Management (3)Energy Storage System Fabrication Installation 1 To be determined pursuant to 2(b)(8),above. wont,SCHEDULEA-2 ANCHORAGE-KENAI INTERTIE 1.PHASE DESCRIPTION -Anchorage-Kenai 138 kV Intertie ($84.1 Million) PhaseI Phase I -Route Selection and Preliminary Design -Final Design and Construction These phases will be conducted sequentially.However,efficient performance will dictate some overlapping of phases. 2. a. b. HASE I -O SELECTION &PRELIMINARY DESIGN The Phase I ceiling shall be $5.1 million. Phase J includes the following: Development and Approval of Project TeamPreliminaryEnvironmentalAssessment Preliminary Geotechnical and Archaeological Investigation Preliminary Easement Investigation Identify Corridors,Determine Alternate Route Alignments Prepare Route Selection Report Investigate Design Alternatives Approval of Line Route End Points and Preliminary Design Development of the Phase If Ceiling for Submission to AIDEA for Approval 3.PHASE Tf -FINAL DESIGN AND CONSTRUCTION a. b. The Phase II ceiling will be $J Phase II includes the completion of the following tasks: Final Environmental,Geotechnical,and Archaeological Investigations Selection of Specific Location of Facilities Procurement of Easements Design Modifications to Bernice Lake Substation Design Submarine Cable Terminal Stations Design Submarine Cable Crossing Specifications Preparation of Functional Design,Drawings,Specifications, and Bid Documents and Award Preparation of Construction and Material Contracts Right-of-Way Clearing To be determined pursuant to 2(b)(9),above. (10) (11) (12) (13) (14) Transmission Line Construction °South Kenai Line °North Kenai Line °Anchorage LineModificationofBernice Lake Substation Submarine Cable Terminal Stations Submarine Cable Crossing Commissioning and Project Closeout HOV-1-95 WED 15:44 ALASKA AL ELECTRIC |=FAX NO,561554-P,02/04 INTERTIE PARTICIPANTS GROUP NORTHERN INTERTIE SYSTEM AGREEMENT Whereas;the Intertie Participants Group (IPG)intends to settle the issues of the Healy- Fairbanks Project Segment of the Norther Intertie System related to: (a)Capacity allocations . (b)Scope of the project segment,and (¢)Budget for the project segment in order to permit the timely execution of the Construction Management Agreement; Therefore The Parties Agree: 1,The existing Healy-Fairbanks 138 kV line owned by Golden Valley Electric we tNAssociation(GVEA)and used for transfers north by GVEA and Fairbanks Municipal ©OAUsilitySystem(FMUS),shall have a transfer capacity of 100 MW into Faisbanks,All \\°''pletransfercapacityinexcessof100MWofthecombinedlJealy-Fairbanks lines after : construction of the new line shall belongto the IPG.All southbound transmission "A,iYcapacityoftheexistingAlaskaIntertieshallbelongtoAvaskaElectricGeneration&to c,'_Transmission Cooperative (AEG&T),Chugach Electric Association (CEA)and Wr Anchorage Municipal Light &Power (ML&P)as provided in the Alaska Intertie 1 ot iAgreement.GVEA and FMUS agree thst all southbound transfer rights on the existing 4 AASGVEAtransmissionlineinexcessofthetransferrequirementstheyhavetoservetheir own retail loads shall belong to AEG&T,CEA and ML&P,TC -- 2.The Healy-Fairbenks Project Segment shall consist of 1230 kV line energized at 138 kV and a40 MW battery,The line shall be a "freeway"zs specified in the Participants Agreement and capacity shares shall be bi-directional.However,the battery spinning reserve benefits shall be divided by IPG shares. 3.The budget for the Healy-Fairbanks Project Segment will be $75 million. 4.The parties will fully cooperate to achieve expeditiously all necessary approvals by the -Alaska Public Utilides Commission (APUC). 5.The parties will pursue financing at the lowest reasonable cost and will seek technical endments to existing legislation if necessary. 6.The parties will continue to cooperate to achieve fest-tracking of the construction schedule.The goal is to begin construction during the first quarter of 1996. te 7D tad BIA T ERA OTR TE ee LN TLIO OFA co tO neat Nov-1-85 WED 15:44 ALASKA |L BLEVIKIU |PHA NU.DOLDOHT be uur us 7.The parties will support the following after completicn of the Healy-Fairbanks Project Segment: (a)Future upgrades resultinginincreased transfer capacity of the Alaska Net ERGIntertieandincreaserojectSegmentshallbeaidforandallocatedbasedonAlaskaIntertieshares. "This provision forincreasing shares of transfer capacity shall remain in effect until the potential transfer capacity of this project sepment is realized.GVEA and the IPG commit that when both their lines between Healy and Fairbanks are operational,FMUS will be assured delivery to Fairbanks of their "minimum intertie transfer capacity right"(MITCR)over the Alaska Intertie. When iroprovements to the Alaska Intertie resultin an increased MITCR for EMUS,this provision will apply so long es there is an increase in Healy-Fairbanks delivery capability at least equal to theincrease on the Alaska Intertie. (b)When the existing GVEA 138 kV Healy-Fairbanks line is upgraded, participants in the Healy-Fairbanks Pi :ject Segment shall he offered an 'Opportunity to participate in proportion to their IPG shares.Any increased transfer capacity and increased stable/secure capacity shall be shared on the basis of each utility's participation.If any paricipant declines the opportunity to participate in the upgrade of the GVEA line,that participant's share shall be offered,on a pro rata basis,to the other participants in the Healy-FairbanksProjectSegment.If any participant declines its portion of this declined share, that portion shall revert to GVEA. (c)The Northern Intertie System shall be operate]in the stability/secure mode. However,participant utilities may access the additional transfer capacity increment and the increased additional transfer capacity increment resulting from future upgrades of the Alaska Intertie or the Healy-Fairbanks Project Segment,provided they employ sufficient IPG approved rapid load shed or *equivalent to return immediately to the stable/secure transfer limit following a afirstcontingency.The parties intend that the Northern Intertie System maybe {operated above the secure limit Itis further the intent of GVEA andFMU5 eethat,wi ealy-Fairbanks Project Seement,they will install equipment necessary to permit the above mentioned rapid load shed. Bett NOILYYLSINIWGY YAAD Ws2S?€B2 Te VassiLELEVINIU!rHA NU 90109045NuV-I-¥>HED 1p HLHDAH |NOV TAY BAL "PS,ger 4san Guea..athisTRATGON:|FAK NO,5615547 P23 8.The parties will expedite IPG action undertheParticipzuts Apreementne t exped}oessary ta support this 2preement and to approve related exhibits to the Northem InterieConstructionManagementAgteement. 9,GVEA hereby re-states its strong intent to participer in the Ancho ; x rage-RerialPeninsulaProjectSegmentandlooksforwardtodesignandconstructionprosecding anafasttrack. PROPOSED ON 10-31-95 BY: MUNICIPALITY OF ANCHORAGE GOLDEN VALLEY ELECTRI é.b.a.MUNICIPAL LIGHT &POWER SOCIATION,INC. ° ..nt BE by:hd SA NOTIHAMISTNTLIGH HAAN Wee oA CO TR AMPsPid 44/11/95 =treosonw@503 226 'T9 TER WYNNE -Wnotisn to ."a Apo wu «teble hk°Awt \Vrwe et mr .(Tine 1).Vy iig-4e 1993 ALASKA INTERTIE PROJECT -CONSTRUCTION MANAGEMENT AGREEMENT BETWEEN 2008/03] DRAFT 4/11/95 ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC., THE MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT &POWER, DES)Sat CHUGACH ELECTRIC ASSOCIATION,INC., THE MUNICIPALITY OF FAIRBANKS 'd/b/a FAIRBANKS MUNICIPAL UTILITIES SYSTEM, THE CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM AND GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. ("PARTIES") AND HOMER ELECTRIC ASSOCIATION,INC MATANUSKA ELECTRIC ASSOCIATION,INC. ("ADDITIONAL PARTIES") te ee a 04/11/95 15:54 =S03 22°TE \TER WYNNE @0047032 DRAFT 4/11/95 CONSTRUCTION MANAGEMENT AGREEMENT THIS AGREEMENT ("Agreement")is made and entered into this day of ,1995,by and between:ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC.("AEG&T),THE MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT &POWER ("ML&P"),CHUGACH ELECTRIC ASSOCIATION,INC.("Chugach"),THE MUNICIPALITY OF FAIRBANKS d/b/a FAIRBANKS MUNICIPAL UTILITIES SYSTEM ("FMUS"),THE CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM ("Seward"),HOMER ELECTRIC ASSOCIATION,INC,("HEA"), MATANUSKA ELECTRIC ASSOCIATION,INC.("MEA")and GOLDEN VALLEY ELECTRIC ASSOCIATION,INC,("GVEA").AEG&T,ML&P, :Chugach,FMUS,Seward and GVEA are sometimes referredto individually as As,"Party”and collectively as "Parties."HEA and MEA are referred to as "Additional Parties". WITNES SETH: WHEREAS,the Stateof Alaska ("State")has by statute authorized,and has partially funded,the design and construction of a 138 kV (minimum). transmission line between Healy and Fairbanks,Alaska (hereinafter called the "Healy-Fairbanks Segment”or "Segment");and WHEREAS,the Parties and the Additional Parties and the State,acting through the Department of Administration and the Alaska Industrial Development and Export Authority,have entered into the Intertie Grant Agreement ("Intertie Grant Agreement”),dated October 26,1993 under which the Participating Utilities have agreed to contract with GVEA to design and construct the Healy-Fairbanks Segment and requires that the Intertie Participants Group ("IPG")be formed by the Participating Utilities for the purpose of exercising the rights and responsibilities of the owners and to provide oversight of GVEA's construction efforts;and 1 -CONSTRUCTION MANAGEMENT AGREEMENT PE/8*d MINT PRM EPOTAITLITH BAN fmm.Ce eT Lh 94/11/95 15:54 @503 226 «79 TER WYNNE 005/031 DRAFT 4/11/95 WHEREAS,the Participating Utilities have entered into the Participants Agreement,dated January 24,1994 ("Participants Agreement")which designates GVEA as the Construction Manager of the Healy-Fairbanks Segment,forms the IPG and provides for the basic requirements for budgeting and oversight by the IPG regarding GVEA's design and construction of the Healy-Fairbanks Segment and provides for a means of financing the remaining cost of the Segment by AIDEA or the Participants; and WHEREAS,the Participants have entered into the Grant Administration Agreement dated August 30,1994 ("Grant Administration Agreement"), which provides the terms and conditions to be satisfied prior to disbursement of Grant Account funds and provides for AIDEA's obligations with respect to the administration of the Grant Account;and WHEREAS,in order to assure that the Participating Utilities and GVEA meet their obligations under the Intertie Grant Agreement and the Participants Agreement,the Parties and Additional Parties desire to detail GVEA's responsibilities as Construction Manager for the Healy-Fairbanks Segment and the procedures necessary to assure that the IPG provides oversight of the design and construction of the Healy-Fairbanks Seqment. NOW,THEREFORE,IN CONSIDERATION of the mutual covenants set forth herein,the Parties and Additional Parties agree as follows: SECTION 1.TERM. .Unless otherwise provided in this Agreement,this Agreement shall become effective on May 10,1995 and shall continue until the Final Acceptance Date or terminated as provided for herein;provided,that all obligations incurred hereunder shall be preserved until satisfied. 2 -CONSTRUCTION MANAGEMENT AGREEMENT PEE '%d MOTIRSEC Tim UDANR btm eR FR oer O4711/85 15:55 3503 22°79 TER WHE Bo006/031 DRAFT 4/11/95 SECTION 2.DEFINITIONS. Whenever used in this Agreement the following terms shall have the meaning stated below: (a2)"Additional Costs”means approved Project construction costs in excess of available Grant Funds as defined in the Participants Agreement. (b)"Agreement"shall mean this Construction Management Agreement. (c)"Commercial Operation Date”means the date that the IPGreceivesanopinionfromtheProjectEngineer(s)that the Healy- Fairbanks Seaqmentis fully available to operate at rated capacity on acommercialbasis. (d)"Construction Budget"means the budget for Design andConstructionCostsspprovedbytheIPGinaccordancewiththisAgreement. {e)"Construction Manager”means GVEA. (f)"Construction Manager's Design and Construction Costs"means all capital costs of the Healy-Fairbanks Segment incurred under and consistent with the Participants Agreement,Section 11 of this Agreement and the Construction Budget approved by the IPG, including but not limited to planning,permitting,design,acquisition of real property interest,construction,equipment,testing,and insurance costs and payment of claims,regulatory activities,judgments, settlements,or claims,legal and consulting costs,GVEA's labor costs directly assigned to the Project (including associated payroll benefits) and equipment costs related to design and construction and GVEA administrative and general!overhead,including construction overhead, of 0.5%of the sum of the above direct Construction Manager's Design and Construction Costs contained in an approved Construction Budget. The Parties and Additional Parties recognize the IPG will incur 3 -CONSTRUCTION MANAGEMENT AGREEMENT PESAT SA TINT ULSITerresart cea tee and aw See 04711795 15:55 503 27°1079 ATER WYNNE Woorsoa1 DRAFT 4/11/95 additional Design and Construction Costs as defined in the ParticipantsAgreement., {g)"Construction Schedule"means the schedule prepared by GVEA under Section 6(a). (h)"Contract Year"means calendar year,except that the initial Contract Year shall begin on the effective date of this Agreement and the final Contract Year shall end on the termination of this Agreement. (i)"Final Acceptance Date"means the date GVEA notifies the IPG . that all design and construction of the Project has been completed,all invoices submitted ta the IPG have been paid and GVEA has made final payment to its contractors for the design and construction and the IPG determines that the Project has been completed. {j)"Grant Funds”means the $43,200,000 appropriated by Section 1 of Ch.19,SLA 1993,for payment as a grant under AS 37,05.316 Tor construction of the Healy-Fairbanks Segment and accrued interest. (k)"Major Equipment and Construction Contracts”means contracts for the acquisition of equipment,design or construction in the categories listed in Exhibit D that commit expenditures for the Project in excess of $100,000,as such Exhibit D may be revised from time to time by GVEA and approved by the IPG in accordance with Section 6(e)(3)of the Participants Agreement. (1)"Participant's Share”means Participant's Share as determined in Section 4 of the Participant's Agreement. (m)"Project”means the design and construction of the Healy-Fairbanks Segment as described in Project Scope. (n)"Project Engineer(s)"means the engineering firm of national reputation engaged by GVEA to provide preliminary and final engineering design and specifications for the Project and provide construction liaison and oversight for the Project. 4 -CONSTRUCTION MANAGEMENT AGREEMENT *vE/TTI d RINT IRI CTerriiss WA PT af a ee el| 04/11/95 15:56 503 228 "979 ATER WYNNE W608/031 DRAFT 4/11/95 (0)"Project Scope”means the description of the Northern Intertie Scope attached hereto as Exhibit A,as revised from time to time pursuant to this Agreement. (p)"Prudent Utility Practice"means at a particular time any of the practices,methods and acts engaged in or approved by a significantportionoftheelectricutilityindustryatsuchtime,or which,in the exercise of reasonable judgment in light of facts known at such time, could have been expected to accomplish the desired results at the lowest reasonable cost consistent with good business practices, reliability,safety and reasonable expedition.Prudent Utility Practice is not required to be the optimum practice,method or act to the exclusion of all others,but rather to be a spectrum of possible practices,method or acts which could have been expected to accomplish the desired result at the Jowest reasonable cost consistent with reliability,safety and expedition.Prudent Utility Practice includes due regard for manufacturers'warranties and the requirements of governmental agencies of competent jurisdiction and shall apply not only to functional parts of the Healy-Fairbanks Segment,but also to appropriate structures,landscaping,painting,signs,lighting and other facilities. (r)}"Trustees"means AIDEA or the successor to AIDEA named by the State. (s)"Uncontrollable Force”means any cause beyond the control of a Party hereto and which by the exercise of due diligence that Party is unable to prevent or overcome,including the following causes,if they cannot be overcome by due diligence,but not limited to,an act of God,fire,flood,volcano,earthquake,explosion,sabotage,and act of the public enemy,civil or military authority,including court orders, injunction and orders of governmental agencies of competentjurisdiction,insurrection riot,an act of the elements,failure of equipment,or the inability to obtain or ship equipment or materials because of the effect of similar causes on carriers or shippers.Strikes, Jockouts,and other labor disturbances shall be considered Uncontrollable Forces,and nothing in this Agreement shall require either Party to settle a labor dispute against its best judgment: 5 -CONSTRUCTION MANAGEMENT AGRE:SMENT PEs2T'A SIAT IU Tt oar.1mm ee -<--Pr a eo) O4v1isss 15:56 503 226 1079 ATER WYNNE 009/031 DRAFT 4/11/95 provided,that during any labor dispute each Party shall make allreasonableeffortsunderthecircumstances,including,to the extent permitted by law and collective bargaining agreements,the use of replacement personnel end or management personnel and/or other personnel under the provisions of a mutual aid agreement,to ensure,if possible the continued ability of the Parties and Additional Parties to carry out their obligations under this Agreement. SECTION 3.CONSTRUCTION MANAGER. (a)GVEA as Construction Manager.GVEA shall serve as the Construction Manager on behalf of the Parties and the Additional Parties of the Healy-Fairbanks Segment for the term hereof,unless either GVEA gives written notice to the IPG of termination,or the IPG removes GVEA as Construction Manager pursuant to the terms of Section 9(b)of this Agreement.GVEA,as Construction Manager,shall be responsible for (i)selection and supervising of qualified contractors employed to design or construct the Healy-Fairbanks Segment,subject to the oversight and approval of the IPG as provided in this Agreement and (ii)the administration of all contracts to insure compliance with all contract plans,specifications and the Construction Budget.All contracts between GVEA and a contractor shall contain an assignment clause in favor of the Parties and Additional Parties in the event that this Agreement is terminated. (b)Management of Desian and Construction.GVEA shall manage the design and construction of the Healy-Fairbanks Seqment in accordance with Prudent Utility Practice and the requirements of the IPG as described in this Agreement. (c)Reports tothe IPG.GVEA shall submit monthly reports to the IPG members setting out in sufficient detail the status of the design and construction of the Healy-Fairbanks Segment.Monthly reports shall be in such detail as is requested from time to time by the IPG but shall,at a minimum,allow the IPG members to compare the percentage of completion of the Project with total expenditures as a percentage ofbudgeteditems.GVEA shall promptly inform,so as to allow the Parties and the Additional Parties to protect their interests,the 6 -CONSTRUCTION MANAGEMENT AGREEMENT PEVET dd IAT EUNDIOTIITHIAU Liman Imm eR me Le 04/11/95 15:57 503 25 79 NTER WYNNE Go107031 DRAFT 4/11/95 members of the IPG or,in the case of litigation or significant potential litigation,the legal representatives designated by each Party by fax regarding eny design or construction problems encountered which,in the opinion of GVEA,might result in significant litigation,require aaNsignificantChangeOrderorasignificantdeviationintheschedule for(4 completion of the Segment.For the purposes of this section,Q significant shall mean potential litigation or a Change Order whichKy'_GVEA determines has-a-reasonablelikelihood_of resulting Jiability.or-<est-of $50,000 or an increase in the cost of a Major Equipment or Construction Contract of 10%,whichever is lower,or a delay itn the proposed Commercial Operating Date of 30 days or more.The IPG,its members and the Parties and the Additional Parties shall treat as exempt from public disclosure any commercial or financial information Turnished pursuant to this Agreement that Is privileged or confidential and is so designated by GVEA.In the event a third party seeks disclosure under any applicable Alaska Jaw,the IPG,its members and the Parties and the Additional Parties shall notify GVEA of such effort and to protest such disclosure.The {PG,the Parties and the Additional Parties shall use their best efforts to avoid disclosure of any privileged or confidential information. (d)GVEA shall include in all of its construction contracts and any engineering contracts or amendments entered into after the date of this Agreement,provisions for insurance and bonding naming the Parties and the Additional Parties as additional insureds or third party beneficiaries to protect the Parties and Additional Parties fromm contractor negligence and willful misconduct and other risks normally included in construction contracts. 7 -CONSTRUCTION MANAGEMENT AGREEMENT HO eeTo a 04/11/93 15:58 3503 22'79 ATER WYNNE 011/032 DRAFT 4/11/95 SECTION 4..OVERSIGHT. The IPG acting on behalf of the Parties and the Additional Parties shallberesponsibleforoversightofGVEAconstructionefforts.Such oversight shall include approval of: (a)Any material revisions to Project Scope including: (1)selection of final segment routing; (2)changess in Project design voltage; (3)changes in final location and specifications for points of interconnection; (4)changes in design criteria for reliability and transfer capability; (5)substation one line drawings and major equipment ratings: and (6)ratings and operational limits of station compensation and capacity. (b)Construction Budget,including any revision thereof. (c)Selection of Project Engineer(s),Major Equipment and Construction Contracts. (d)Construction Schedule. SECTION 5.SCOPE OF PROJECT,PRELIMINARY DESIGN OF SEGMENT,CONSTRUCTION CONTRACT. {a}Project Scope.The Project Scope is attached hereto as Exhibit A.Project Scope may be amended from time to time by the IPG to reflect the results of design and engineering studies undertaken 8 -CONSTRUCTION MANAGEMENT AGREEMENT Pe -ct *at 04/11/95 15:58 @503 226 9 TER WYNNE (012/031 DRAFT 4/11/95 as part of Phase 1 of the Construction Budget,including,but not limited to: (1)final segment routing; (2)interconnection location and design specifications; (3)Project design voltage;and (4)System voltage compensation and stability facilities. (b)Preliminary Desian of Seqment.Subject to the terms of this Agreement,GVEA shall proceed with the selection of the Project Engineer(s),preliminary engineering,design survey of the Segment and related environmental and geotechnical studies detailed in Exhibit B. Prior to the execution of this Agreement,the IPG approved GVEA proceeding with preliminary contracts for services to allow GVEA to prepare the Construction Budget attached as Exhibit C. (c)Final Design and Construction of Project.Upon approval of Phase 2 of the Constructian Budget,GVEA shall proceed as appropriate with contracting for detailed construction design,purchase of equipment and material and construction of the Segment.GVEA shall submit the Major Equipment and Construction Contracts to the IPG for approval prior to their execution. SECTION 6.CONSTRUCTION BUDGET. (a)Initial Construction Budget.The initial Construction Budget for the Project,including a Construction Schedule,is attached hereto as Exhibit C.The Construction Schedule may be revised from time totimewiththeconcurrenceoftheIPGwithoutfurtherchangetotheWSConstructionScheduleattachedheretoaspartofExhibitC.GVEApewshallnot,without the express approval of the IPG,incur costs or0obligatefundsbeyondthoseamountscontainedinandapproved for_each line item of the Construction Budget,adiusted for Change Ordersasprovidedinsubsection(d)below and intra-budget transfers as provided in subsection (e)below.Prior to the completion of Phase 1 of 9 -CONSTRUCTION MANAGEMENT AGREEMENT Fo vaAT*4 O4/22/35 «15:59 =503 226g ATER WYNNE @o13/032 DRAFT 4/11/95 the Construction Budget,GVEA shall provide the IPG a revised Phase 2 estimate and Construction Schedule for approval.The Project Schedule shall be detailed showing the commencement and completion dates of major Project componentsand a projected cash flow by months for each phase of the Project. (b)GVEA Direct Labor and Related Direct Expenses.The Construction Budget may separately itemize a reasonable amount for GVEA's direct labor,including normal associated payroll benefits and related direct expenses during the design and construction of the Project to the extent such labor was directly assigned to the Project by the Construction Manager.GVEA's other administrative and general expenses shall not be included as part of such direct labor and related direct expenses.Direct labor includes all hours actually worked on the Project by GVEA employees,excepting the General Manager,even though the employee performing the work may be employed less than 100%on the Project;provided,that the claim is supported by itemized descriptions of the work performed and the time taken to perform the work. (c)Working Capital and IPG Expenses.The estimated amount cfWorkingCapitalneededtocoverGVEA's estimated contractual payment obligations for each month of the Contract Year and the IPG expenses allocated to the Project by the IPG shall be separately designated in the Construction Budget. (dq)Annual Revisions to the Construction Budget.GVEA shall provide the IPG a revised Construction Budget,including a revised Project Schedule and Project Scope,if appropriate,120 days prior to the beginning of each Contract Year.The IPG shall approve or disapprove within 60 days any revision to the Construction Budget.Proposed revisions or modifications must be submitted in sufficient detail or with sufficient explanation so as to clearly show the scope and justification for the requested expenditure or revision.If the IPG disapproves the revised Construction Budget,it shall provide GVEA an explanation of the items disapproved and an alternative that would be acceptable to the IPG. 10 -CONSTRUCTION MANAGEMENT AGREEMENT pE72I'd KIAT THAISTAITICN BRAD Ihunmeem fe eT Sone O4711/95 15:59 89503 226k TER WYNNE (0147031 DRAFT 4/11/95 (e)Limits on Intra-Budget Transfers.GVEA may make intra-budget transfers,not to exceed $50,000 to any single budget item;provided, that GVEA shall report such intra-budget transfers at the next IPG meeting.Any proposed intra-budget transfer over that amount shall be submitted by GVEA as a proposed Change Order as provided in subsection (f)below. (f)Change Orders.GVEA may approve Change Orders to its agreements with design or construction contractors if: (i)the Change Order does not exceed $50,000 or the aggregate of all Change Orders in the Contract Year do not increase the applicable line item in the Construction Budget,and (ii)the Change Orders do not affect the Project Scope,including Project capacity,general routing,points of interconnection,or basic design of the structures:and (iii)the total of all Change Orders in the Contract Year does not cause the budgeted costs for that phase of the Project toincrease.. GVEA may proceed with the above Change Orders it determines are required to maintain the Project Schedule;provided,that GVEA shall report all such Change Orders to the IPG on its next regular monthly report. SECTION 7.FUNDING OF THE HEALY-FAIRBANKS SEGMENT. (a)Funding of Preliminary Costs.GVEA costs and expenses incurred or obligated by GVEA and approved by the IPG pursuant to Section 4(a)and approved IPG expenses shall be funded from Grant Funds held by Trustee for the account of GVEA under the Intertie Grant Agreement,subject to the availability of such Grant Funds. (b)Financing Plan and Funding of Costs in Excess of Grant Funds. Each Party shall notify the IPG prior to July 1,1995,of its decision regarding the source of funding for its Participant's Share of Additional 11 -CONSTRUCTION MANAGEMENT AGREEMENT bo vOT+1 4/11/95 16:00 503 226 4 ATER WYNNE 015/031 DRAFT 4/11/95 Costs.If such Party elects to finance its share separately,such notice shall include an financing plan demonstrating that such plan is a feasible method to assure the funding of that Party's Participant's Share of Additional Costs,provided,that the costs of financing arrangements which do not finance all Participant'Shares shall not be considered Project costs or be born by the Participants.If the Parties and Additional Parties elect to jointly finance such Additional Costs, each Party shall act in good faith to enter into agreements with the issuer within 30 days after GVEA submits its revised Phase 2 estimate pursuant to Section 6(a)to allow timely funding of Additional Costs.if (c)Assurance of Adequate Funding,The Parties and Additional Parties shall use their best efforts to secure adequatefinancingofthe Healy-Fairbanks Segment and cooperate with AIDEA,if AIDEA is requested by any IPG member to issue bonds to finance all or a part of the remaining cost of the Segment. SECTION &.INVOICING AND PAYMENT, (a)Invoicing.GVEA shall prepare and submit an invoice to the IPG, or its designee,by the twentieth of each month stating the amounts paid to its contractors for progress payments for work accomplished in the prior month,the amount of additional Working Capital,if any, needed to cover the ensuing month's estimated costs,the amounts to be paid to GVEA for direct labor and other related direct costs and the amount of authorized overhead (0.5 percent of direct Design and Construction costs)and any other Design and Construction Cost relating to the Healy-Fairbanks Segment.GVEA shall maintain copies of all invoices subject te audit and include copies of invoices in excess of $10,000 submitted by such contractors and a summary statement of invoices that are less than $10,000 and certify their accuracy and that the invoice is consistent with the Construction Budget and the terms of this Agreement.The GVEA invoice shall also detail the hours of direct labor and other related direct costs provided by GVEA personnel involved in support of the design and construction of the Healy-Fairbanks Segment and any other Design and Construction Cost expended by GVEA.GVEA shall certify that all progress payments and invoices submitted for IPG approval are accurate and in conformance 12 -CONSTRUCTION MANAGEMENT AGREEMENT ar .mwes 4/11/95 16:00 S09 226 3 KTER WYNNE Z016/031 DRAFT 4/11/95 with contract and budget requirements.All invoices submitted shall conform to the requirements of the Grant Administration Agreement. (b)Review of Invoice.The IPG or its designee shall review GVEA's invoice and approve the invoice in whole or in part or disapprove any -Part not consistent with the Construction Budget or not conforming to the requirements of the Grant Administrative Agreement at the next IPG meeting.The approved invoice or the approved parts of the invoice shall then be forwarded to AIDEA authorizing payment to GVEA.Once grant funds available from AIDEA are fully committed, GVEA's invoice shall be forwarded to AIDEA or the individual IPG -Mmember for payment of its proportionate share of such invoice,AIDEA or individual IPG members will reimburse GVEA upon approval of the invoice by the IPG. (c)Working Capital.{f authorized in the Grant Administration Agreement,in addition to costs actually incurred,GVEA may include in each invoice an amount to maintain working capital at the level provided in the Construction Budget for the ensuing month approved by the IPG solely for Project purposes.Working Capital shall be adjusted for each monthin such Contract Year to an amount requested by GVEA,but not to exceed the highest estimated monthly payment to GVEA estimated in the approved Construction Budget.Interest earned by GVEA on Working Capital shall be credited to Working Capital and used solely for Project purposes.To the extent Grant Funds are not available to pay Working Capital,each Party shall pay,as its share ofAdditionalCosts,within 15 days of approval by the IPG its Participants Share of the amount to maintain Working Capital at the level provided in the Construction Budget for the ensuing month as approved by the IPG,, SECTION &.TERMINATION AND DEFAULT. (a)Termination by GVEA.GVEA may,for any reason,terminate this Agreement ff written notice of such termination is tendered no fess than 60 days prior to the anticipated date of commencement of construction specified in the notice to proceed.If such notice js not given,GVEA may terminate this Agreement upon reasonable notice 13 -CONSTRUCTION MANAGEMENT AGREEMENT PE /AD*H Dem no ow me mm 04/11/85 16:01 503 226 "sg \TER WYNNE 017/031 DRAFT 4/11/95 (not less than 90 days)if GVEA can demonstrate that termination is for good cause shown.In either event,GVEA shall use its reasonable best efforts to transfer Project files,contracts and responsibilities andcooperatewith,the new construction manager selected by the IPG,and mitigate any costs arising from the termination of this Agreement and the transfer of responsibility to the new construction manager. (b}Removal of Construction Manager.The IPG may remove GVEA as Construction Manager and terminate this Agreement for reasonable cause provided that the IPG gives GVEA at least 30 days'prior notice in writing and reasonable opportunity to cure.Reasonable cause shall include,but not be limited to,the unavailability of adequate financing to complete the Segment,substantial cost overruns in any phase of the Project,significant threatened or pending litigation or claims,material discrepancies in the books and records of GVEA,or negligence of GVEA,irrespective of whether GVEA would be liable for any of the above causes under this Agreement. (c)Notification of Material Breach or Default.!f a Party is in material breach of or default under this Agreement (Defaulting Party),the other Party or Parties (Terminating Party)may notify in writing the Defaulting Party that it is in material breach or default.Such notice shall be effective upon its receipt by the Defaulting Party.For the purpose of this section,material breach or default under this Agreement includes, but is not limited to: (1)removal,withdrawal or termination as set out above; {2)Insolvency,/e.,a Party is unable to meet its obligations as they become due; {3)general assignment of substantially all of a Party's assets for the benefit of it creditors,filing of a petition for bankruptcy or reorganization or seeking other relief under any applicable insolvency laws;and (4)material failure of a Party to meet its obligations under this Agreement. 14 -CONSTRUCTION MANAGEMENT AGREEMENT PE/ST2°d PINT PUNE EO TET mL im em an ee 04/11/35 16:01 503 226 «3 ATER WYSNE @o18/031 DRAFT 4/11/95 Notwithstanding the foregoing,this Agreement shall not be terminated as a result of an Uncontrollable Force. (d)Right to Cure. (1)The Defaulting Party shall have the right to cure the material breach or default within 60 calendar days of the mailing date of notification of the material breach or default. (2)In the case of a material breach or default which may not reasonably be cured within 60 calendar days,the Defaulting Party shall have the right to provide the Terminating Party with a plan for the appropriate actions to cure the breach or default.Within this 60 calendar days, the Defaulting Party must commence diligently pursuing oy appropriate action under the plan to cure the default and continue until the default is cured. (e)Payments Upon Termination.Upon receipt of notice of termination,GVEA shall not incur additional cost obligations without the approval of the IPG and shall limit additional cost to those absolutely necessary to maintain essential project management pending determination of allowable close-out costs.Such allowable close-out costs shall include costs irrevocably incurred by GVEA in accordance with this Agreement,costs of terminating related contracts not assigned to the new construction manager and,subject to negotiation and agreement of GVEA and the IPG,GVEA's direct costs associated with the close-out of its obligations as Construction Manager.GVEA shall be reimbursed from Grant Funds or from Additional Funds for such allowable close-out costs,in accordance with subsection (f),less GVEA/'s share of such costs.GVEA shall submit to the IPG within 30 days of termination asummary of its obligations and an estimate of such costs.Any obligation of AIDEA or the Participants for reimbursement of GVEA shall survive termination and shall remain in full force and effect until satisfied. 15 -CONSTRUCTION MANAGEMENT AGREEMENT pos a>?.t "04/11/95 16:02 503 22 g hTER WINNE 018/032 DRAFT 4/11/95 (Ff)In any event,GVEA shall use its best efforts to cooperate with a new construction manager selected by the IPG and to mitigate any costs arising from the removal,withdrawal,or replacement of GVEA and the transfer of responsibilities to a new construction manager, including the immediate transfer of all Project records and books and the immediate assignment of any subcontracts entered into by GVEA in connection with the Project. SECTION 10.IPG DECISIONS DURING CRITICAL CONSTRUCTION PERIODS. The Construction Manager shall use its best efforts to anticipate construction problems,and bring matters related to such problems that require action or could require action by the IPG under this Agreement to the IPG for decision at regularly scheduled meetings of the IPG. During critical construction periods,designated by GVEA and agreed to in advance Fy the IPG,the members of the IPG shall each designate one or more representatives,fully empowered to vote on behalf of that member,who shall be available by telephone.These voting representatives shall be available to decide matters that cannot wait for consideration until the next scheduled meeting of the IPG without exposure to delay claims or substantial additional cost.Diligent efforts as are reasonable under the circumstances shall be made to convene an emergency telephonic meeting of the IPG. SECTION 11,LIABILITY. GVEA shall defend,indemnify and hold harmless the IPG,AIDEA and Project Participants,their agents,employees,and consultants from and against all liability,damages,claims,lawsuits,dermands,causes of action and expenses (including.but not limited to,reasonable attorneys'fees)resulting from GVEA's,its directors',agents',officers',staff's,or employees'grossly negligent acts or intentional orwillfulmisconductinperformanceofGVEA's obligations under thisAgreement.Except that GVEA shall not be liable (except with otherParticipantsundertheParticipantsAgreement,and to the extent of its Participant's Share of Project liabilities )for: 16 -CONSTRUCTION MANAGEMENT AGREEMENT PE s/OD *a eT ee ae "04/11/95 16:03 Bios 726 eng ATER WYRXE 020/031 DRAFT 4/11/95 ...oy 4(a)Damages resulting from design or construction decisions \ presented to and approved by the IPG;and/or =. (b)The intentional or negligent acts of engineering design firms or contractors retained by GVEA;and/or (c)Damages or other costs and expenses resulting from GVEA's ordinary negligence in the performance of its duties as Construction Manager. All such damages,costs,and expenses other than those indemnified by GVEA under this Section shall be Construction Costs and Expenses. To the maximum extent allowed by Jaw,each signatory recognizes the principles of law contained in Alaska Statutes Section 45.45.900 and agrees that no part of this Agreement shall be construed so as to be invalid or unenforceable because of those or similar principles. SECTION 12.MISCELLANEOUS PROVISIONS. (a)Audit.The Parties and Additional Parties,acting through the IPG,may conduct an annual audit,the cost of which shall be a Design and Construction Cost as defined in the Participants Agreement. GVEA shail cooperate with the IPG in the conduct of the annual audit or final audit of funds disbursed pursuant to this Agreement as required in 2 AAC 45,010 and the Grant Administration Agreernent and such audit shall be submitted to the IPG for submission to the Alaska State Coordinating Agency designated by AIDEA. Any Party or Additional Party shall have the right to audit the books and records of GVEA relating to GVEA's performance of this Agreement at any time upon reasonable notice to GVEA.The cost of such audit shall be borne by the requesting Party,unless such audit discloses that GVEA has (1)failed to account for Construction Manager's Design and Construction Costs in some significant manner or (2)acted in bad faith,in performing its obligations under this Agreement,in which case GVEA shall pay the reasonable costs of the 17 -CONSTRUCTION MANAGEMENT AGREEMENT Pere?A °ae oh cr 04/11/85 16:03 503 7's o0t9 ATER WYNNE 0217031 DRAFT 4/11/95 audit.The right to audit shall extend for a period of three years following the Commercial Operation Date . (b)Separate Books and Records.GVEA shall maintain separate books and records for the design and construction of the Healy- Fairbanks Segment.Such books and records shall be available to the Parties and Additional Parties for their inspection.Copies of such books and records shall be made available to any such entity upon request;provided,that such entity reimburses GVEA for the reasonable cost of reproducing or otherwise making available such books and records, (c)Waiver Not Continuing.Any waiver at any time by a Party of its rights with respect to any default of the other Party,or with respect to any other matter arising in connection with this Agreement,shall not be considered a waiver with respect to any prior or subsequent default, right or matter. (d)Applicable Lew.The laws of the State of Alaska (including without limitation the equal opportunity laws set forth in AS 18.80.220,as the same may be amended from time to time)shall govern the interpretation and application of this Agreement and the actions of the Parties and the Additional Parties hereunder. (e)Assianment.Each Party and Additional Party agrees that it shall not sell,assign or transfer its interest,rights,or obligations under this Agreement to any other entity without the written permission of the IPG. (7)Section Headings.The Section headings in this Agreement are for convenience only,and do not purport to and shall not be deemed to define,limit or extend the scope or intent of the section to which they pertain. (g)Third Party Beneficiaries.By entering into this Agreement,the Parties and the Additional Parties expressly do not intend to create any obligation or liability,or promise any performance to any other third 18 -CONSTRUCTION MANAGEMENT AGREEMENT 'Eelam:1 |RIAT Poem it Woke.sae em Fe oe 8 04/11/95 16:04 503 °*6 org TER WYNNE 022/031 DRAFT 4/11/95 party,nor have the Parties and the Additional Parties created for anyotherthirdpartyanyrighttoenforcethisAgreement. (h)Severability.If after this Agreement has become effective eny article,paragraph,clause or provision of this Agreement shall be finally adjudicated by a court of competent jurisdiction or a regulatory agency with jurisdiction over the Parties or the Additional Parties to be invalid or unenforceable,or if any administrative agency with authority over the Parties or the Additional Parties shall require changes to this Agreement,then the Parties and the Additional Parties shall in good faith meet promptly to negotiate lawful amendments or modification to this Agreement that will effectuate the original intent of this Agreement and return the Parties and the Additional Parties as nearly as possible to the position that each would have enjoyed in the absence of such judicial,regulatory,or administrative action. (i)Notices and Computation of Time.Any notice required by this Agreement to be given to a Party or Additional Party shall be effective when mailed,and in computing any period of time from such notice, such period shall commence at 12:01 p.m.prevailing time at the place of receipt on the date of mailing of such notice.Whenever this Agreement calls for notice to or notification by a Party the same (unless otherwise specifically provided)shall be in writing and directed to the General Manager of GVEA or the members of the IPG as appropriate.If the date for making any payment or performing any act is a day on which banking institutions are closed in the place where payment Is to be made or a legal holiday,payment may be made or theactperformedonthenextsucceedingdaywhichisneitheralegal holiday nor a day when banking institutions are closed in such place. (j)Inspection of Facilities.For purposes of this Agreement,the Parties and the Additional Parties or designees may,but shall not be obligated to,inspect GVEA's plans and specifications related to theHealy-Fairbanks Segment and to visit the construction sites related thereto at any time upon reasonable notice,but such inspection or failure to inspect shall not render the Parties,the Additional Parties or their designees,liable or responsible for any injury,loss,damage,or 19 -CONSTRUCTION MANAGEMENT AGREEMENT .PEs9>*4 MIT PEP OTRITEITH BAA pec FO et 8 04/11/85 16:04 sar §26 0073 hTER WYNNE {023/031 DRAFT 4/11/95 accident resulting from defects in such plans and specifications or construction of the Healy-Fairbanks Segment. (k)Covenant of Good Faith and Fair Dealing.In order to permit this Agreement,throughout its term,to be full effective in accordance with the original intent of the Parties and the Additional Parties,each Party and Additional Party agrees that it shall et all times act in good faith and with fair dealing in performing its obligations and in exercising its rights under this Agreement. (1)Exhibits.The exhibits attached to this Agreement shall be incorporated by reference into this Agreement. (m)Performance Pending Resolution of Dispute.Pending resolution of any dispute,each Party shall continue to perform its obligations under this Agreement,including but not limited to the obligation to make the payments required by this Agreement.A Party shall be entitled to seek immediate judicial enforcement of this continued performance obligation notwithstanding the existence of a dispute. Application for such enforcement shall be made to the Superior Court for the State of Alaska,at Fairbanks or Anchorage. (n)Other Agreements,The Parties have entered into an Intertie Grant Agreement,a Grant Transfer and Delegation Agreement,and a Participants Agreement in connection with the design and construction of the Project.In addition,the Parties contemplate entering into a Grant Administration Agreement and a Project Financing Agreement in -the near future.This Construction Agreement has been entered into pursuant to Section 7(k)of the Participants Agreement between the Parties,and it should be interpreted and construed in harmony with the Participants Agreement,the Intertie Grant Agreement,and the GrantAdministrationAgreementandisintendedtoimplementtheprovisions of Section 7 of the Participants Agreement.Except as otherwise - expressly provided herein,this Agreement does not modify,alter,or 20 -CONSTRUCTION MANAGEMENT AGREEMENT DELI?4 VIAT PIO TAITLIMH WOAD tninti.e Rm oe eT sone 04/11/85 18:03 502 26 0079 KYER WYNNE 024/031 DRAFT 4/11/95 amend any other contract or agreement that may exist between oramonganyofthePartiesorAdditionalParties. IN WITNESS WHEREOF,the Parties and the Additional Parties have caused this Agreement to be executed the day and year first above written. ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC. By: As: THE MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT &POWER By; As: CHUGACH ELECTRIC ASSOCIATION,INC, By: AS: 21 -CONSTRUCTION MANAGEMENT AGREEMENT io ° . PEO?'MINT Pere roti WOAD twat era FR Mt O4/11/95 «16:05 =50°26 0078 TER WYNNE 025/031 e DRAFT 4/11/95 THE MUNICIPALITY OF FAIRBANKS d/b/a FAIRBANKS MUNICIPAL UTILITIES SYSTEM By: AS: THE CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM By: As: GOLDEN VALLEY ELECTRIC ASSOCIATION,IJNC. By: AS: ADDITIONAL PARTIES: HOMER ELECTRIC ASSOCIATION,INC. By: As: 22 -CONSTRUCTION MANAGEMENT AGREEMENT MIAT EEC TAIT Ean tna en cs eT Yow 04/11/95 16:06 @se *26 vo79 |TER WYNKE 026/031 DRAFT 4/11/95 MATANUSKA ELECTRIC ASSOCIATION,INC. By: AS: 23 -CONSTRUCTION MANAGEMENT AGREEMENT LGH\c5 Sigh.agr HO sree APRS 'S5 4:42PM GVE.SNGINEERING riers 7! Exhibit A (page1 of 3) t | | t | April 6,1995 |NORTHERN INTERTIE SCOPE |Healy to Fairbanks TRANSMISSION LINZ t .. Several;sub-routes have been added to the existing alternativerouteswhichwereselectedfortheHF-138 transmission line.All the proposed routes are shown on the attached map.The proposedlineisplannedtobeconstructedof230KYtowerswhichwillmeinly¢onsist of weathering steel Xeframe structures.Although thelineisplannedtobeconstructedfor230kv,the line willinitiallybeoperatedat138kV.All river crossings will beaccomplishedwithoverheadspansandarenotproposedtoincludeanysubmarinecrossingsoranyundergroundsections.Short sactionsoftransmissionlineswillberequiredtointerconnecttheWilsonSubatationtotheexistingGoldenValleyandFMUStransmission system. SUBSTATIONS substation modifications to accommodate the new breaker bay are proposed to be added at Healy Substation. A new substation (Wilson Sub.)is proposed near Van Horn andCushman!at the North Star Terminals,located by the existing GVEA€9 kV and 138 kV lines,and the FMUS 69 kV.back door tie.The newsubstationwillbethenorthernterminaloftheintertie,and site of the:Battery Energy Storage System (BESS).The proposedsubstationwillhavefive138kVbreakersbayswithtwotiestotheexistingGVEAGHS-FWS 138 kV line,one to the new intertie,one forthenew|40MW BESS installation,and one for a 60/80/100 MvA,138 kvto69kytransformer,The 69 kV portion of the substation will havefour69|kV breaker bays with one for the transformer,one to GoldHill,one to Ft.Wainwright,and one to the FMUS back door tie.Seeattachedsketch. | ENERGY STORAGE and REACTIVE COMPENSATION A new Battery Energy Storage System will be installed at thenerthernterminal.of the intertie in the North Star BuildingadjacenttoWilsonsubstation.The Wilson BESS is proposed to besizedat40MW/MVAR for 20 minutes,(14.1 MWh).The BESS will bedesignetoprovideprimarilyreactivecompensationduringnormalopezationinlieuofstaticvarcompensation,and in additionstoredjenergyduringtransmissiondisturbancestoreduceflows,black start and spinning reserves for generation loss. DE TO DIA EE ONDE NL ome tower co es SUD-RCI.XLS ais'°o the N EY XN3WEfs69kVtoSouthSideInterconnectionDrawingfortheNorthenTerminaloffheNorthemIntorieax138kVfoGoldHil138kVfoFt.Worlranight or 0 case eso sao cwemee Ot ee2 reeeee ere co UY]pa mH >R@ 69 KV ta Pa Peger Road 40 MVA fet 20 minules 4 Battery Eneigy a g a Storage Systumn wi 2 LA Ae Hofsploy3 4 130 KV « as)"{=069KV7 bi ,60/30/100MIVA xtnir 8=oO td|kdv P- it y M Fulure 230 kV area a |rd) :1%) 0 230k¥Northern Inlestia from Heoly to Foltbanks th (cperofed at 138 kV) Ww 69 KV fo South Foltsanbs eeTLovesowy 04/11/95 16:06 50 .26 0079peetemeete|PreK eS =>842122 GV.ENG NEERING ||A |Jon:tom toe es ;>- A : |S J Falrbenkal Agreement settling the Anchorage-Kenai Intertie Phase I funding dispute This agreement ("Agreement”)is entered into effective November 20,2000 by and among the Parties hereto,namely the ALASKA INDUSTRIAL DEVELOPMENT & EXPORT AUTHORITY (AIDEA),GOLDEN VALLEY ELECTRIC ASSOCIATION, INC.,ANCHORAGE MUNICIPAL LIGHT &POWER,CHUGACH ELECTRIC ASSOCIATION,INC.,ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE,INC.,on behalf of its member Homer Electric Association,Inc.and theCITYOFSEWARDhereinreferredtocollectivelyasSettlingUtilities. RECITALS 1.AIDEA and the Settling Utilities are'parties to that certain Grant Administration Agreement dated August 30,1994 (the "Grant Administration Agreement”). 2.Pursuant to Section 4.02(a)of the Grant Administration Agreement,the Participating Utilities have requested that AIDEA approve an increase in the Phase I funding ceiling for the Anchorage-Kenai Intertie (the "Southern Intertie”). 3.The Parties.to this Agreement have a dispute over the authority of AIDEA to restrict use of grant funds for the Southern Intertie. 4.AIDEA has reviewed the progress to date with respect to the Southern Intertie and found it to be adequate.An Environmental Analysis (EVAL)dated July 1999 has been completed by the applicant in coordination with the Rural Utilities Service (RUS)and U.S.Fish and Wildlife Service (USFWS).Work to date has followed stringent guidelines in accordance with the National Environmental Policy Act (NEPA)process.The next steps include completion of the draft environmental impact statement (DEIS),final EIS and Record of Decision (ROD)under the guidance of RUS as lead agency and USFWSandtheCorpsofEngineersascooperatingagencies. 5.The Construction Manager has apprised AIDEA monthly of its progress and will continue to include a detailed schedule of events in each monthly report.The currentschedule(Monthly report for September 2000)anticipates a Record of Decisionin mid 2002.However,requests for supplemental data,appeals from third parties,potential litigation and other events are difficult to control and could impact this schedule. 6."Delay of the project could cause additional costs which electric customers couldultimatelybear. ; 7.Settlement under the terms set out in this Agreement will better serve the public than continuing the dispute. AGREEMENT SETTLING THE AN CHORAGE-KENAI INTERTIE PHASE I -1 FUNDING DISPUTE ° AGREEMENT In consideration of the recitals above (which are a part of this Agreement)the Parties agree as follows: 1.Neither AIDEA nor the Settling Utilities shall be considered to have waived rights or arguments they may have to support their position in any future disagreements over issues not specifically covered by this Agreement. The Parties agree that this Agreement shall not be used as evidence in any proceeding except one brought to enforce this Agreement and specifically that this Agreement does not constitute evidence in support of a conclusion as to the merits of the dispute over AIDEA's authority. The Settling Utilities,agree to pay from their own funds 25%of the remaining costs of Phase I of the Southern Intertie (as defined in Schedule A-2 to the Grant Administration Agreement)provided the total costs of Phase I do not exceed $10 million.Specifically, the Settling Utilities have agreed among themselves to pay the above 25%of the remaining Phase I costs and any costs pursuant to paragraph 6,below,according to the following allocations among them: Chugach Electric 35.230% City of Seward 01.678% GVEA 23.435% HEA 13.518% ML&P 26.139% These amounts paid under this Agreement shall be recognized as contributions by each contributing Participant of Design and Construction costs and shall be considered an -advance of additional financing by each contributing Participant for Design andConstructionCoststhatexééedthesumtotaloftheGrantFundsplusavailableinterest thereon as provided under Section 8(b)of the Participants Agreement. AIDEA agrees to release grant funds for 75%of the remaining costs of Phase I of the Southern Intertie provided the total costs of Phase I do not exceed $10 million. Subject to limitations on Phase II Expenditures set forth in Section 4.02(b)of the Grant Administration Agreement,in the event the Southern Intertie project proceeds to Phase II, AIDEA agrees that the Participating Utilities will not be required to fund Phase II expenditures for the Southern Intertie until after the Southern Intertie grant principal and interest have been exhausted. The Settling Utilities agree to indemnify,defend and hold AIDEA harmless with respect to any actions,damages and claims of whatever nature brought by Matanuska Electric Association,Inc.with respect to this Agreement,including,without limitation,claims AGREEMENT SETTLING THE ANCHORAGE-KENAI INTERTIE PHASEI 2 FUNDING DISPUTE with respect to AIDEA's release of project funds in accordance with this Agreement, claims that this Agreement or performance in accordance with this Agreement is inconsistent,violates,or creates a breach under the Grant'Administration Agreement and/or claims that this Agreement or performance under this Agreement is inconsistent with statutory requirements related to the Southern Intertie grant ALASKA INDUSTRIAL DEVELOPMENT &EXPORT AUTHORITY »Ltd) Its Fgeceets veo "CUSTODIAN AND ADMINISTRATOR OF INTERTIE GRANTS” dD.Dy ecto:” THE CITYOF SEWARD d/b/a SEWARD ELECTRIC SYSTEM 2,a)0Its_Cr &LF besos A HOMER ELECTRIC ASSOCIATION, INC.(for itself and on behalf of its interest AEG&T)»AhoytseerroralGK,aS CHUGACH ELECTRIC ASSOCIATION, INC. to aD Haan"CONSTRUCTION MANAGER® GOLDEN VALLEY ELECTRICASSOCIATION,INC.ae diac?Its Citietat 1D THE MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT &POWER By &the}Onn[tts Cencte/Mara "PARTICIPANTS” AGREEMENT SETTLING THE ANCHORAGE-KENAT INTERTIEFUNDINGDISPUTE PHASE I 2 GOLDEN VALLEY ELECTRIC ASSOCIATION INC.PO Box 71249 »Fairbanks,Alaska 99707-1249 »907-452-1151 »www.gvea.com January 14,2002 Mr.Robert Poe Executive Director Alaska Industrial Development and Export Authority 813 W.Northern Lights Blvd. Anchorage,AK 99503 Re:-Letter of Agreement Between Alaska Industrial Development &Export Authority(AIDEA)and Golden Valley Electric Association,Inc.(GVEA)Concerning Disbursement of Funds Under the Grant Administration Agreement Dear Mr.Poe:- This Letter of Agreement has been prepared in order to set forth the understanding between AIDEA and GVEA regarding the manner that funds made available underAS37.05.316 for the purpose of constructinga power transmission intertie betweenHealyandFairbanks("Healy-Fairbanks Intertie"or "Northern Intertie")will be distributed. Under the terms of the Intertie Grant Agreement and the Grant Administration Agreement,AIDEA is the custodian and administrator of the grants for the benefit ofGVEAwithrespecttothefundsapplicabletotheNorthernIntertie. AIDEA requested a clarification of why Paragraph 4 of Amendment No.1 to the IntertieGrantAgreementdescribesGVEAasbeingacontractorfortheNorthernIntertie Project.GVEA represents that it has acted as contractor for the other participating utilities on the Northern Intertie Project.When Amendment No.1 to the Grant Administration Agreement and Amendment No.1 to the Intertie Grant Agreement become effective,GVEA will become the 100%owner of the Northern Intertie and will then cease to be the contractorfor the remainder of the project.GVEA warrants that it has not been,and will not become,a contractor for AIDEA regarding the Northern Intertie. Under the terms of Amendment No.1 to Grant Administration Agreement,GVEA is required to submit,on a monthly basis,all invoices to AIDEA for payment.In order to assist with the administration of the funds applicable to the Northern Intertie,GVEA shall submit invoices and requests for reimbursement from AIDEA in the following manner: Letter to:Robert Poe 'Page 2 January 14,2002 1.GVEA shall retain all invoices supporting requests for reimbursement for and on behalf of AIDEA,at no cost to AIDEA. 2.AIDEA shall instruct GVEA regarding the manner GVEA shall make the invoices available for inspection or audit by AIDEA and its agents.Upon reasonable advance notice,AIDEA and its agents shall have the right to inspect and audit such records during GVEA's regular business hours for inspection or audit purposes,including applicable public records requests. Further,if requested,GVEA shall deliver to AIDEA or its agent,at no costtoAIDEAoritsagent,one copy of eachinvoice supporting a request for reimbursement by GVEA. 3.GVEA shall submit certified requests for reimbursement to AIDEA in conformance with the schedule of maturity of grant investments. 4.GVEA shall certify in each request that the work for which reimbursement is requested: (a)is Supported by invoices retained by GVEA; (b)is properly chargeable to a specific phase (or phases) of the Northern Intertie to allow AIDEA to properly charge the requested amounts against the appropriate project phase;and (c)has been completed and either (i)paid for by GVEA Or (ii)will be paid for with the proceeds of the reimbursement. 5.GVEA shall disclose in each request for reimbursement the total project costs incurred to date,amounts previously reimbursed from grant proceeds,and the current amount requested. 6.GVEA shall retain records of work and payment for at least a period of seven (7)years from the date of completion of the project. lf a properly certified request for reimbursement is submitted with the foregoing,AIDEA shall pay such request for reimbursement within fifteen (15)days of the later of receipt of the request,or funds becoming available pursuant to the schedule of maturity of grant investments.Any disbursal of grant funds related to the Northern Intertie shall be subject to the availability of funds pursuant to the schedule of maturity of grant investments that will be supplied to GVEA by AIDEA.AIDEA will update the schedule Letter to:Robert Poe Page 3 January 14,2002 of maturity of grant investments if changes occur (such as the early call of an investment).| Please signify your acceptance of the terms and conditionsas set forth in this Letter of Agreement by signing in the area below.|have sent two original letters so that you may keep one for your files and return the other to us.Thanks,Bob. Sincerely, Steve Haagenson President &Chief Executive Officer ACCEPTED AND AGREED this 2*day of January,2002. Steven H.Haagenson,President &Chief Executive Officer Golden Valley Electric Association,Inc. Robert Poe,Jr.,Executive Director Alaska Industrial Development and Export Authority Recerd Copy Pile #LF ten 4.7 (ow ALASKA INTERTIE MAINTENANCE AGREEMENT BETWEEN _ALASKA POWER AUTHORITY AND ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC. 1726/488/1 TABLE OF CONTENTS Article Title Page I Definitions 1 Effective Date and Termination II!Maintenance of Intertie Facilities 2 IV Maintenance Plan,Schedule and Budget 5 V Payment 6 VI Accounts,Records and Audits -7 VIL Extraordinary Maintenance and Equipment 8 Replacement Costs VIII Insurance and Liability 8 IX Representation 11 X -Indemnity 11 XI Uncontrollable Forces 12 XII Waivers -12 XIII Successors and Assigns 13 XIV Governing Law 13 XV Captions 13 XVI Notices 13 XVII Amendments 14 XVITI Contract Work Hours and Safety Standards 14 XIX Equal Employment Opportunity 14- XX Exclusivity of Contract 14 XXI Severability 15 XXII 15ApprovalsandConditionsofObligations TAN 12ANKN IA EXHIBIT "A"ABBREVIATIONS AND DEFINITIONS EXHIBIT "B"MAJOR EQUIPMENT A7I"NLIANH HA . :22 ALASKA INTERTIE MAINTENANCE AGREEMENT BETWEEN ALASKA POWER AUTHORITY AND .ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC. This agreement (hereinafter referred to as Agreement),is made andenteredintothis23"°day of January,,197 by and be-tween ALASKA POWER AUTHORITY ("APA"),a public corporation of the State of Alaska and ALASKA ELECTRIC GENERATION AND TRANSMISSION CO- OPERATIVE,INC.("AEG&T"),a non-profit electric cooperative mem- bership corporation of the State of Alaska of which Homer Electric Association,Inc.and Matanuska Electric Association,Inc.are mem- bers.- WITNESSETH WHEREAS,APA has constructed electrical transmission Intertie Fa- cilities in order to interconnect certain electrical ytilities innorthcentralandsouthcentralAlaska. WHEREAS,APA is the owner of the Intertie Facilities and has,inaccordancewiththeAlaskaIntertieAgreement,the responsibilityfortheoperationandmaintenanceoftheIntertieFacilities; WHEREAS,APA desires to contract with Parties for the maintenance of defined portions of the Intertie Facilities; WHEREAS,AEG&T is an Intertie Participant in the Alaska Intertie Agreement,and WHEREAS,AEG&T owns,operates and maintains transmission facilities in southcentral Alaska,and the AEG&T is willing to maintain a defined portion of the Intertie Facilities; NOW,THEREFORE,IN CONSIDERATION of the mutual covenants hereincontainedthePartiesheretoagreeasfollows: ARTICLE I Definitions Section l. 1.1 Definitions are specified as Exhibit "A"attached hereto and incorporated herein by this reference. TTIPRJARRIA 1. Section1. 1.1 Section 2. 2.1 ARTICLE II Effective Date and Termination Effective Date This Agreement shall become effective on the date set forth above and shall continue in effect until terminated as provided for in Section 2 of this Article. Termination Either Party may terminate this contract by: 2.1.1 Delivering written notice to the other Party atleast12monthspriortothedateoftermina- tion stated in the notice,or 2.1.2 Delivering written notice to the other Party ofamaterialbreachoftheAgreement.If theotherPartyfailstorectifythematerial breach within 90 days after receiving notice of the breach,the Agreement ts automatically ter-minated.; 2.2 All liabilities occurring under this Agreement prior to Section 1. 1.1 Section 2. 2.1 its:termination shall be and are hereby preserved. ARTICLE ITI Maintenance of Intertie Facilities General Responsibilities AEG&T shall be responsible for maintaining the Southern portion of the Intertie Facilities,including but not limited to the Douglas Substation facilities,and the In- tertie transmission line from the Teeland Substation to the Midpoint of the Intertie as described in Exhibit "B" of this Agreement. Specific Responsibility for Maintaining the Southern Portion of the Intertie Facilities AEG&T represents and warrants to APA that it will: 2.1.1.Coordinate all maintenance schedules involving Intertie Facilities with the Participants oftheAlaskaIntertieAgreement; 2.1.2 Provide maintenance schedules in accordance with Article IV of this Agreement; 1726/488/6 2.1.3. 2.1.4 2.1.5 2.1.6 2.1.7 2.1.8 2.1.9 2.1.10 2.1.11 Provide maintenance budgets and records in accordance with Articles IV and V of this Agreement; Develop maintenance procedures,maintenance training,and preventive maintenance programs; Conduct scheduled inspections and those in- spections required by the annual maintenance plan agreed upon by the Parties under Article IV of this Agreement.AEG&T shall issue an inspection report of findings and recommen- dations to APA within 20 working days of com- pleting all inspections; Provide notification and description of allchangestoAPA-owned permanent records and drawings to show all alterations or replace- ments to Intertie Facilities.Modifications to Intertie facilities shall be shown on mylar or sepia drawings and forwarded to APA. Read all revenue metering devices within three days of the last day of each month,record such readings on standard forms approved by APA,and forward such forms to APA within 5 working days following the readings; -Maintain Intertie recording and totalizing meters and forward relevant graphs and/or mag- netic tapes to APA as required by APA.All op- erational records maintained in conjunction with or related to this Agreement shall be available for inspection by APA's representa- tive upon reasonable notice; Log any action of protective relays or alarms, including the causes of such action and the re-medial actions taken by AEG&T.AEG&T =shallsubmittoAPAareport,including alarm logs, documenting the causes of any system distur- bance or failure and the remedial actions tak- en; Cooperate with APA to install additional protective relaying,instrumentation,control systems or other apparatus required by APA; Protect equipment,personnel,and the general public from hazards which arise from equipmentfailure(e.g.,electrical faults,vandalism, Section 3. 3.1 3.2 3.3 Section 4. 4.1 and mechanical failure).AEG&T wil repair andreportdamagedfacilitiesduevandalismornegligenceofotherParties.AEG&T will notify APA as soon as possible after each equipment failure or repair; 2.1.12 Maintain al]equipment within the guidelines set by the manufacturer unless otherwise di- rected by APA;, 2.1.13 Respond to operational and maintenance requests or directives from APA; 2.1.14 Maintain the Intertie Facilities consistent with Prudent Utility Practice,National Elec- tric Safety Code;and other applicable codes, federal and state laws,regulations,require- ments and standards,and the Alaska Intertie Maintenance Program Guide.SS 2.1.15 Provide,stock,and make available such ,equipment,materials,tools and parts as are described in the Alaska Intertie Maintenance Program Guide for maintaining the Intertie Fa- cilities. .Responsibility of Intertie Owner APA will make disbursements to AEG&T and provide for an annual budget sufficient to satisfy the Intertie mainte- nance costs incurred by AEG&T under this Agreement to the extent budgeted by AEG&T and approved in advance by APA. APA will reimburse AEG&T for the costs of labor,mate- rials,supplies,equipment,training and administration, as defined in Articles V and VII of this Agreement; APA agrees to make available to AEG&T the specialized tools or other equipment required to perform under this Agreement,as defined in the Alaska Intertie Maintenance Program Guide. Inter-Project Assistance AEG&T agrees to make available to APA on demand itsskilledlabor,equipment,and materials which are not im-mediately required by the AEG&T but which are required by APA to remedy a major defect or emergency at any location on the Alaska Intertie. 1726/488/7 .-4- 4.2 Section 5. 5.1 §.2 $ i} AEG&T agrees to assist as it determines it is able,in manpower,equipment and supplies with GVEA and CEA duringtimeswhenmajordisastersoremergenciesariseinvolvingtheAlaskaIntertieFacilitiesthatGVEAand/or CEA is under contract to maintain, Prior Authorization AEG&T will secure written authorization from APA to make permanent alterations or replacements to Intertie Facil- ities except in emergency situations affecting the avail- ability of the Intertie and not otherwise provided for in the annual approved budget,as outlined in Article VII. AEG&T will secure written authorization from APA to modi- fy or adjust the settings of the Intertie's protective relays or alarms except in emergency situations.AEG&T shall notify APA and the Operating Committee within 72 _hours of all modifications,adjustments and changes. 5.3 Section 1. 1.1 1.2 1.3 AEG&T will secure written authorization from APA for any changes to recording,totalizing meters and associated instrument transformer settings., ARTICLE IV -Maintenance Plan,Schedule and Budget Maintenance Plan and Schedule Requirements AEG&T shall develop annually a plan and schedule for maintenance of its portion of the Intertie Facilities. This plan and schedule shall be used for planning and tracking maintenance activities and as the basis for bud- get submittals to APA. The plan and schedule shall run from July first to June thirtieth of each year. AEG&T shall submit the annual plan,schedule and estimat- ed maintenance budget to APA no later than March 1 each year.The plan,schedule and budget may be modified through negotiations between the AEG&T and APA.If agreement cannot be reached by the Parties,the matter shall be submitted to the Operating Committee established under the Alaska Intertie Agreement for the Operating Committee's review and recommendations.If the Parties do not reach an agreement on the plan,schedule and bud-get resulting from the Operating Committee's recommenda-tions,either AEG&T or APA may terminate this Agreementbygiving90dayswrittennoticetotheotherParty. AWAP FARA IA - 1.4 AEG&T shall prepare and annually submit a three year planandbudgetofproposedmajormaintenanceandimprovementsnotdoneonanannualbasis,e.g.,major equipment re- placement,and other projects deemed by AEG&T to be required to insure a continued safe and economical Proj- ect.The three year plan shall be revised annually andsubmittedwiththeestimatedannualmaintenanceplan. 1.5 AEG&T may subcontract maintenance work on the Intertie Facilities on the southern portion of the Intertie as defined in Exhibit "B"using its standard practices and procedures for obtaining such subcontractors.If AEG&T is unable to perform by itself or through its subcontrac-tors,APA shall have the right to perform the work. 1.6 AEG&T shall prepare and submit to APA a maintenance plan and budget for the first Fiscal Year of Intertie opera- tion or portion thereof within 60 days of signing this contract. ARTICLE V Payment Section 1.General 1.1 APA.will pay the amounts approved under the annual main- tenance budget in 12 equal installments on the first day of each month. 1.2 Should AEG&T's total actual costs for a Fiscal Year be less than the annual maintenance budget,AEG&T will pay APA the difference between the estimated and actual costs within 90 days after the end of the Fiscal Year.Should AEG&T's actual costs for a Fiscal Year be more than the annual maintenance budget,APA will pay AEG&T the differ- ence between the estimated and actual costs within 90 days after the end of the Fiscal Year. Section 2.Reconciliation 2.1 On the fifteenth day of each month,AEG&T will provide APA with a statement of the costs incurred and the expen- ditures for the previous month.The statements will con-, sist of cost summaries,invoices,and supporting docu- ments sufficient to provide an audit trail of the expen-ditures made under this Agreement and shall be broken down into the applicable categories utilized in the sys-tem of accounts required of public utilities and licens- ees for electric plants by the Federal Energy Regulatory _Commission.: 1726/488/9 -f- Section 3. 3.1 Section 1. 1.1 1.2 1.3 Billing Disputes APA shall pay the full amount of the charges even where APA disputes:all or any part of the charges submitted pursuant to this Agreement.Within 90 days after AEG&T submits a disputed charge,APA shall notify AEG&T in writing of the amount in dispute and the basis for the dispute.If the Parties cannot settle the dispute in- formally,or by agreement through the Operating Committee either Party may file an action in the Alaska Superior Court for the Third Judicial District to obtain a deci- sion resolving such dispute and to obtain any other remedy permitted by law.Pending final resolution of anysuchdisputethePartiesshallcontinuetoperformunderthisAgreement. ARTICLE VI Accounts,Records and Audits _Accounts,Records and Audits j In keeping books of accounts for maintenance of the In- tertie Facilities,AEG&T will follow the system of ac- counts prescribed for public utilities and licensees required by the Federal Energy Regulatory Commission for electric plants.AEG&T shall allow its books of ac- counts,records,correspondence,accounting procedures and practices and any other supporting evidence relating to this agreement to be audited by APA or an agent of APA's choice and if made,such an audit shall be made be- fore the expiration of 2 years after the close of anyFiscalYear.,Such audits shall be performed at such times and in'such manner mutually agreeable to APA and AEG&T. AEG&T will furnish APA or other Parties designated by APA such operating and financial statements relating to main- tenance of the Intertie Facilities as may be reasonably requested by APA.If receipt of such operating and fi- nancial statements is unduly delayed,APA may,with its own staff or agents,perform all work necessary to col-lect such data as is reasonably desired,but such work shall be performed at such times and in such manner as ismutuallyconvenienttoAPAandAEG&T.AEG&T shall reim- burse APA for the cost of preparation of such statements. Records of the accounting system shall be maintained at the offices of AEG&T in Palmer,Alaska. 1726/482/1N . -7. 1.4 APA shall coordinate the establishment and maintenance of the records and accounts for the maintenance of the In- tertie Facilities with CEA,AEG&T and GVEA.This shall be done so as to provide uniform records,accounts and procedures for the Intertie. ARTICLE VII Extraordinary Maintenance and Equipment Replacement Costs Section l. 1.1 1.2 Section 2. 2.1 Section 1. 1.1 Definition Extraordinary Maintenance and Equipment Replacement Costs shall be those costs which are not included in the annual maintenance budget,but which must be incurred in order to insure the safe,economical and reliable transfer af electric power and energy on the Intertie Facilities. When AEG&T learns of an equipment failure or other con- tingency which,in AEG&T's judgment,necessitates incur- ring an Extraordinary Maintenance and Equipment Replace- ment Cost,AEG&T shall promptly notify APA of the circum- stances.AEG&T shall obtain APA's written approval prior to incurring an Extraordinary Maintenance and EquipmentReplacementCost..However,if in AEG&T's judgment,emer-gency circumstances require AEG&T to incur such a costpriortoobtainingAPA's approval,AEG&T shall notify APA of the circumstances within 72 hours after discovery oftheemergencysituation.AEG&T shall make no extraordi- nary maintenance and equipment replacement expenditureforwhichtheapprovaloftheAPAhasbeenrequestedandexpresslydeniedinwriting. Reimbursement Within 30 days of receiving the billing,APA shall reim- burse AEG&T for all Extraordinary Maintenance and Equip- ment Replacement Costs incurred by AEG&T,except thoseexpenditureswhichAPAexpresslydisapproved. ARTICLE VIII Insurance and Liability Requirements During the term of this Agreement,AEG&T shall purchase and maintain with a carrier or carriers satisfactory to APA,insurance covering injury to persons or property suffered by any Participant or a third party,as a result"of errors,omissions,or operations which arise both out eaPWnAr samen sae =- 1.2 1.3 Section 2. 2.1 of and during the course of this contract by the AEG&T or by any of its subcontractors.The coverage shall also provide protection against injuries to all employees of the AEG&T and the employees of any of its subcontractors engaged in work under this Agreement.If approved by the APA,AEG&T may self-insure for the Worker's CompensationInsuranceand,up to a maximum of $250,000,for the other types of insurance required by this Article.A copy oftheinsurancepoliciesandundertakingtoself-insure,if any,will be furnished to the APA before beginning work under this Agreement. The AEG&T will bear the cost of the required insurance.Insurance required to be maintained under this Article may be maintained as part of any other policy or policiesoftheAEG&T.so long as the coverage of such policy orpoliciesissubstantiallythesameasifsuchcoverage were maintained under a separate policy. These policies must provide that any cancellation, non-renewal or material change be upon 30 days notice to all named insured.AEG&T must provide the APA with evi- dence of insurance.Insurance companies,or self- insurers,shown on the certificate of insurance must have financial ratings acceptable to the APA.Failure to fur- nish satisfactory evidence of insurance or lapse of the policy is a material breach of this Agreement. Types of Insurance The following insurance must be purchased by AEG&T to cover the work of the AEG&T performed under this Agree- ment: 2.1.1.Worker's Compensation Insurance:AEG&T shall provide and maintain,for all employees of AEG&T engaged in work under this Agreement, Workers'Compensation Insurance as required byAS23.30.045.The AEG&T is responsible for Workers Compensation Insurance for any of its subcontractors who directly or indirectly pro- vide services under this Agreement.Each in- surance policy must include: 2.2.1.1 Statutory coverage for states in which employees are engaging in work; 2.2.1.2.Employer's Liability Protection in_the amount of $2,000,000 per occur- rence; 17947000119 -ae 2.2.2 1794 /A00119 2.2.1.3 2.2.1.4 2.2.1.5 Broad Form All States Endorsement; Coverage as required by all State and Federal Acts where applicable; Voluntary Compensation Endorsement. The Worker's Compensation Insurance policyshallcontainawaiverofsubrogationinfavorofAPA.Any Participant who is self-insured hereby waives subrogation in favor of APA. Comprehensive General Liability Insurance: AEG&T shall purchase and maintain comprehensive general liability insurance subject to the fol- lowing limits of liability: 2.2.2.1 2.2.2.2 Bodily Injury and Property DamageLiabilityofaminimumof$5,000,000 Combined Single Limits each occur- rence and affording insurance for Premises-Operations,Owners and Con- tractors'Protective,Independent Contractors,Products/Completed Op- erations,Blanket Contractual Liabil- ity,Broad Form Property Damage,Per- sonal Injury Liability,Incidental Errors and Omissions. Automobile Liability Insurance covering all vehicles.Such insur- ance shall provide coverage of notTessthan$5,000,000 Combined Single Limit each occurrence for Bodily In- jury and Property Damage Liability. Owned Aircraft (if applicable)and Non-Owned Aircraft with seating ca- pacity of five seats or less,except for commercial,scheduled flights, with limits of liability not less than:$5,000,000 -Bodily Injury per occurrence;$1,000,000 for PassengerLiabilityperseat;and $5,000,000 for Property Damage Liability per oc-currence.Coverage must includeSlungCargoExposures.If an air- craft with more than five seat capac- ity is used,special coverage and limits must be obtained and approved by APA. 2.2.2.4 Owned Watercraft (if applicable)andNon-Owned Watercraft tn applicable) with limits of liability not lessthan$5,000,000 per occurrence asprovidedinthe"In Rem Endorsement" under "Maritime Coverage 8B". 2.2.2.5 The APA shall be included as additional insured in insurance required under this Article and shall not by its inclusion be . responsible to the insurance carrier for payment of premiums therefore.These in- 'surance policies must also contain a cross liability or severability of interest en- dorsement. ARTICLE IX Representation Section 1.Authorized Representative . 1.1 The Parties shall each designate one representative to carry out the provisions of this Agreement.Within 30 days after execution of this Agreement,each Party shall 'notify the other Party in writing of its designated rep- Section l. 1.1 Section 2. 2.1 resentative.Any Party may change its representative at any:time and shall promptly provide written notice of such change to the other Party. ARTICLE X Indemnity Indemnity Each party as indemnitor shall,defend,indemnify,save and hold harmless the other party,its agents,servants, employees and officers as indemnitee from liability,in- cluding costs and expenses for claims for injuries or damages sustained by any person or property due to the indemnitor's acts or omissions under this contract. Comparative Negligence Each Party agrees that any liability,including costs ofdefenseandattorney's fees,for claims arising from theconcurrentnegligenceofthepartieswillbeapportioned according to the respective percentage of fault attribut-able to each Party as determined by agreement or by thetrieroffact. 1726/488/14 -ll - Section l. 1.1 Section 1. aa 17PR/ARRI1 ARTICLE XI Uncontrollable Forces Neither Party shall be considered in default in perfor- mance of any obligation hereunder,other than theobligationtomakepaymentsasprovidedinthisAgree- ment,if failure of performance is due to uncontrollable forces and without the fault or negligence of either Par- ty.Strikes,lockouts and other labor disturbances are considered uncontrollable forces and nothing in this Agreement will require either Party to settle a labor dispute against its better judgment.If a party to this Agreement,by reason of an uncontrollable force,is ren- dered unable,wholly or in part,to perform its obliga-tions under this Agreement (other than its obligations topaymoney),then upon said Party giving notice and par- ticulars of such uncontrollable force,its obligation to perform shall be suspended during the continuance of anyinabilitysocaused,but for no longer peridéd,and theeffectsofsuchcauseshall,so far as possible,be rem- edied with all reasonable dispatch;provided,however, that the settlement of labor disputes shall be considered wholly within the discretion of the Party involved.The affected Party will not be responsible for its delays in performance under this Agreement during delays caused by an uncontrollable force,nor shall such uncontrollable force give rise to claim for damages or constitute de- fault. ARTICLE XII Waivers Any waiver at any time by a Party of its rights with re- spect to a default under this Agreement,or with respecttoanyothermatterarisinginconnectionwiththis Agreement,shall not be deemed a waiver with respect toanyotherdefaultormatter.Any delay short of the statutory period of limitations in asserting or enforcing any right shall not be deemed a waiver of such right. &q -19. Section l. 1.1 1.2 Section 1. 1.1 Section 1. 1.1 Section 1. 1.1 177A /ARR/1 ARTICLE XIII Successors and Assigns This Agreement shall be binding upon and inure to the benefit of the successors,legal representatives,or as- signs of the respective Parties.Neither Party,however, shall assign this Agreement nor any part hereof without the written consent of the other Party. The provisions of this Agreement shall not create anyrightsinfavorofanyperson,corporation,or asso- ciation not a Party to this Agreement,and the obliga- tions herein assumed are solely for the use and benefit of the Parties to this Agreement. ARTICLE XIV Governing Law This Agreement is made subject to and shall be governed and construed in accordance with the laws of the State of Alaska and the authority granted to the individual Parties thereunder. ARTICLE XV Captions Captions of the various articles herein are intended for convenience of reference only and shall not define or limit any of the terms or provisions hereof. ARTICLE XVI Notices - Any notice or demand required by this Agreement shall be deemed properly given if sent by registered or certifiedmailandaddressedtotheExecutiveDirector,Alaska Pow- er Authority,P.0.Box 190869,Anchorage,Alaska 99519; and General Manager,Alaska Electric Generation & Transmission Cooperative,.Inc.,3977 Lake Street,Homer, Alaska 99603 with a copy to General Manager,Matanuska A -12. Electric Association,Inc.,P.0.Box 1148,Palmer,Alaska 99645.The foregoing designations of the name or address to which notices or demands are to be directed may be changed at any time by written notice given by one PartytotheotherParty. Section 2. 2.1 Any notice or,request not otherwise provided for in thisAgreementshallbegiveninsuchmannerastheParties agree. ARTICLE XVII Amendments Section 1. 1.1 Neither this Agreement nor any part hereof may be ter- minated,amended,supplemented,waived,or modified ex- cept.by an instrument in writing signed by both Parties. ARTICLE XVIII Contract Work Hours and Safety Standards Section 1. 1.1 The Parties to this Agreement and any subcontractor con-tractingfor any part of.the work under this Agreementaresubjecttoallapplicableprovisionsofstateand federal law concerning work hours and safety standards. ARTICLE XIX Equal Employment Opportunity Section 1. 1.1 The Parties to this Agreement and any subcontractor con- tracting for any part of the work under this Agreement are subject to all applicable provision of state and fed- eral law concerning Equal Employment Opportunity. ARTICLE XX Exclusivity of Contract Section 1. 1.1 This Agreement and the exhibits attached to it set forththefullintentoftheParties.This Agreement does not "1726/488/17 |14 - Section1. 1.1 supercede other agreements between the Intertie Partici- pants and is to be interpreted consistently with them. ARTICLE XXI Severability If any provision of this Agreement shall be finally adju- dicated by a court of competent jurisdiction to be inval- id or unenforceable,the remainder of this Agreementshallbeunaffectedbytheadjudicationandallthere- maining provisions of this Agreement shall remain in full 'force and effect as if the invalid proviston had not been included herein. ARTICLE XXII Approvals and Conditions of Obligation .: In WITNESS WHEREOF,the Parties hereto have caused this Agreementtobeexecutedinquintupletbytheirdulyauthorizedofficersorrepresentativesandtheircorporatesealstobehereuntoaffixedas of the day and year first above written. SUBSCRIBED AND SWORN TO before me thi 1985 last written."6 APPROVED AS TO FORM ATTORNEY GENERAL 1 Spaalin)ShesDATE?/-J1-37 V MeierAUTHORITY 179K /4RR/1R -1h . ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE, "President(Title) SUBSCRIBED AND SWORN TO before me this yh day of+983 last written. (987 |va)Ela:2 £@ gotaryublic,Stateo as realMyCommissionExpires5-7-7090 1726/488/19 -16 - EXHIBIT A ALASKA INTERTIE MAINTENANCE AGREEMENT BETWEEN ALASKA POWER AUTHORITY;AND "ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC. ABBREVIATIONS AND DEFINITIONS Abbreviations .APA -Alaska Power Authority CEA -Chugach Electric Association.GVEA -Golden Valley Electric Association . AEG&T -Alaska Electric Generation &Transmission Cooperative, Inc.,a non-profit electric cooperative membership corporationoftheStateofAlaskaofwhichHomerElectricAssociation,Inc.and Matanuska Electric Association,Inc.are members.PWM°Definitions $ 1.Fiscal Year -That period of time from July first through Junethirtiethofeachyear. 2.Intertie -The transmission facilities owned by or under con- tract to the Alaska Power Authority interconnecting the Inter- tie Participants.These facilities basically consist of ap-proximately 170 miles of 345 kV designed (initially to be op-erated at 138 kV)transmission line and five substation facil- ities located at Gold Hill,Healy,Cantwell,Douglas andTeeland. 3.Intertie Agreement -The Alaska Intertie Agreement between the Intertie Participants for the interconnection and operation of electric utility systems. 4,Intertie Facilities -All of the physical facilities located within the confines of the Intertie system which provide or support the transmission of electrical energy. 5.Intertie Participants -The Participants of the Alaska Inter- tie Agreement including the following: . ALASKA POWER AUTHORITY; MUNICIPALITY OF ANCHORAGE,ALASKA,DBA, ANCHORAGE MUNICIPAL LIGHT AND POWER; CHUGACH ELECTRIC ASSOCIATION,INC.3 CITY OF FAIRBANKS,ALASKA,DBA, MUNICIPAL UTILITIES SYSTEM; 1726/488/20 EXHIBIT A -1 of 3 GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.;and ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC. 6.Maintenance Program Guide -APA standard that sets the re- quirements andschedules for the maintenance of the Alaska In- tertie. Midpointofthe Intertie -The midpoint of the Intertie is atStructureNo.382.The structure is Type E,a 45°L,three- guyed deadend structure.It is located approximately 84.6milesfromtheinitiationpointattheDouglasSubstation. Operating Committee -The committee established by Article 9 of the Alaska Intertie Agreement. Prudent Utility Practices -Prudent Utility Practices at a 'particular time means any of the practices,methods and acts which,in the exercise of reasonable judgment in the light ofthefacts(including but not limited to the practices,methods and acts engaged in or approved by a significant portion oftheelectricalutilityindustrypriorthereto)known at thetimethedecisionwasmade,would have been expected to accom- plish the desired result at the lowest reasonable cost consis- tent with reliability,safety and expedition.In applying thestandardofPrudentUtilityPracticestoanymatterunderthis Agreement,equitable considerations should be given to the circumstances,requirements and obligations of each of the Parties and there shall be taken into consideration the fact that the Parties are a cooperative or public corporation and political subdivision of the State of Alaska with prescribed statutory powers,duties and responsibilities.It is recog-nized that Prudent Utility Practice is not intended to be lim- ited to the optimum practices,methods or acts to the exclu- sion of all others,but rather is a spectrum of possible prac-tices,methods or acts which could have been expected to ac- complish the desired result at the lowest reasonable cost con- sistent with reliability,safety and expedition.Prudent Utility Practices'include due regard for manufacturers'war-ranties and the requirements of governmental authorities hav- ing jurisdiction. Notary Public,State of Alaska 1726/488/21 EXHIBIT A -2 of 3 SUBSCRIBED AND SWORN TQ before me this yh day ofIsaslastwritten.1987 1726/488/22 1985 last written. ELECTRIC GENERATION AND TRANSMI p S a Wy NC. BtVisBhpL .QtLie otary Public,State o My Commission Expires EXHIBIT A -3 of 3 C - aska$-7-%O EXHIBIT B ALASKA INTERTIE MAINTENANCE AGREEMENT |BETWEEN ALASKA POWER AUTHORITY AND ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC. MAJOR EQUIPMENT MAJOR EQUIPMENT OWNED BY APA TO BE MAINTAINED AS PART OF THE INTERTIE IN THE DOUGLAS SUBSTATION Quantity Description 1 Transformer w/LTC,12/16/20 MVA,Westinghouse 1 Circuit Switcher 1200 A,8,000 A.I.C., S&C Electric Co.(TD-200)' 1 Gas Circuit Breaker,169 kV,1200 A.I.C.,Westinghouse (DG-138-B1) 1:Disconnect Switch 1600 A,with Motor Operator_(DB-138-283) 3 161 KV Disconnect Switch 3 P.S.T.Vertical Break,1600 A,with Crank Type Operator (DB-138-1S1),(DG-138-1S2),(0G-138-1S3),(DG-138-T1S1),(DG-138-T2S1) 3 Surge Arrester,Intermediate Class,88 KV,MCOV, Type VI 3 |Voltage Transformer,80.5 kV,1200/700:1 Ratio Relay and Control Panels 1 Panel 1 -Healy Line 1 Panel 2 -Transfer Trip and Sync. 1 Panel 3 -Teeland Line 1 Panel 4 -Rev.Metering and Alarm 1 Lot RTU (Remote Terminal Unit) 1 Lot Communications 1726/488/23 EXHIBIT B -1 of 2 a 1566/468(1)| TRANSMISSION SERVICES AGREEMENT BETWEEN MATANUSKA ELECTRIC ASSOCIATION,INC. AND ALASKA POWER AUTHORITY TRANSMISSION SERVICE AGREEMENT . BETWEEN - MATANUSKA ELECTRIC ASSOCIATION,INC. ALASKA POWER AUTHORITY Page ARTICLE I DEFINITIONS 1 ARTICLE II TERM AND EFFECTIVE DATE 2 ARTICLE III GENERAL , 2 ARTICLE IV OPERATING RESPONSIBILITIES 3 ARTICLE V TRANSMISSION SERVICE 3 ARTICLE VI TRANSMISSION LINE OPERATION 4 ARTICLE VII COMPENSATION 5 ARTICLE VIII BILLING AND PAYMENTS 5 ARTICLE IX REPRESENTATION 7 ARTICLE X INDEMNITY 7 ARTICLE XI UNCONTROLLABLE FORCES 7 ARTICLE XII WAIVERS 8 ARTICLE XIII SUCCESSORS AND ASSIGNS 8 ARTICLE XIV GOVERNING LAW 8 ARTICLE XV CAPTIONS 8 ARTICLE XVI NOTICES 9 ARTICLE XVII AMENDMENTS 9 ARTICLE XVIII MULTIPLE COPIES 9 ARTICLE XIX APPROVALS AND CONDITIONS OF OBLIGATIONS 9 , Exhibit "A"-Definitions A-1 Exhibit "B"-Transmission Service B-1 Rate Calculations &Methodology Exhibit "C"-Illustration of Facilities C-l1 1566/468(2) TRANSMISSION SERVICE AGREEMENT BETWEEN|MATANUSKA ELECTRIC ASSOCIATION,INC. AND ALASKA POWER AUTHORITY This agreement (hereinafter referred to as Agreement),is made and entered into this Cuhiecat day Of December »,198&by and betweenALASKAPOWERAUTHORITY,a public corporation of the State of Alaska(hereinafter referred to as APA)and MATANUSKA ELECTRIC ASSOCIATION INC.,a non-profit electric cooperative membership corporation oftheStateofAlaska(hereinafter referred to as MEA). WITNESSETH WHEREAS,in 1981 the legislature directed the APA to construct the Alaska Intertie; WHEREAS,APA has constructed the Alaska Intertie to interconnect the electric utilities in Northcentral and Southcentral Alaska; WHEREAS,MEA owns and operates electric transmission facilities and is engaged in the transmission,purchase,and sale of electric power and energy; WHEREAS,MEA owns electrical transmission facilities that can be utilized to transmit electrical power and energy and serve as part of the Alaska Intertie; WHEREAS,MEA as Alaska Electric Generation and Transmission Cooperative,Inc.and APA have entered into the "Alaska Intertie Agreement”along with other utility participants;and WHEREAS,APA desires to fully utilize existing transmission facilities to distribute electrical power and energy to and from the Participants of the Intertie Agreement;. NOW,THEREFORE,IN CONSIDERATION of the mutual covenants herein contained,the Parties agree as follows: ARTICLE I Definitions Section1 1.1 Definitions are specified in Exhibit "A"of this Agreement and incorporated herein by this reference. 1544 /46R1 3)1 of 10 ARTICLE II Term &Effective Date Section 1.Term of agreement 1.1 This agreement shall become effective on the date set forth above and shall continue in effect until terminated as provided for in Section2 of this Article. Section 2 -Termination of Agreement 2.1 This Agreement may,be terminated at any time by mutual consentofthePartiesinwriting. 2.2 Either Party may terminate its participation in this AgreementeffectiveJuly1,2004,or on July 1 of any year thereafter,by giving 12 months advance written notice to the other Party. 2.3 Notwithstanding Section 2.2 of this Article,APA may terminate this Agreement by giving 48 months advance written notice of such termination when APA determines that such termination (i)is in the best interests of the Alaska Power Authority or (ii) is for other reasonable cause. 2.4 No liability or breach of or obligation previously incurred to make payment under this Agreement shall be extinguished by atermination. ARTICLE III General Section 1 -General Responsibilities 1.1 APA has constructed a 345 kV transmission line (to be initially operated at 138 kV)and associated facilities to interconnect the electrical utilities in Southcentral Alaska, in the area of Anchorage.The MEA-TLS connected with asectionoftheAPAowned138kVtransmissionlinefromMEA'sfacilitiesatHollywoodRoadtotheTeelandSubstation,will provide an electrical transmission path and shall serve as a portion of the Alaska Intertie from the Douglas Substation totheTeelandSubstation. Section 2 -Previous Contracts and Agreements 2.1 The provisions of this Agreement are not intended,nor shall they be construed to alter or modify any previous contacts or agreements of either Party or preclude either Party from performing existing obligations. 1566/468(4)2 of 10 ARTICLE IV Operating Responsibilities Section 1 -Operation Standards and Criteria 1.1 1.2 1.3 The Parties shall operate their electric transmission systems in an interconnected manner and shall cooperate intransmitting.through the Point(s)of Interconnection of their systems,quantities of electric power and energy in accordance with the terms and provisions of this Agreement and the Alaska Intertie Agreement. APA shall operate or cause to have operated the Alaska Intertie in a manner consistent with Prudent Utility Practices.APA shall utilize good faith and such reasonable best efforts as would be exercised by a responsible party consistent with the standards and practices of the electric industry so as not to cause detrimental effects to the operation of MEA's electrical system. If,during the term of this Agreement,the Alaska Intertie Agreement is modified or replaced by a similar agreement the Alaska Intertie Agreement criteria,procedures,terms, conditions,and the like applicable to this Agreement in effect at the time of such termination,shall remain in full force and effect until such time as revisions or substitutions are mutually agreed upon by the Parties. ARTICLE V Transmission Service -Section 1 -Transmission Service To Be Provided to APA 1.1 MEA shall make exclusively available to APA on the MEA-TLS all excess transmission service capacity over and above thetransmissioncapacity(demand)required for MEA''s consumer loads served from MEA's Douglas Substation or other existing and future MEA substations served directly from the MEA-TLSline.This excess capacity (in Megawatts)shall be determined and reported to APA at least monthly and whenever this value is changed due to normal or emergency operating conditions. Section 2 -Transmission Losses 2.1 Power and Energy losses created by MEA transfers and transfersundertheAlaskaIntertieAgreementontheMEA-TLS shall beprovidedbythePartyorParticipantsupplyingthePowerand Energy transfer. 1566/468(5)3 of 10 MEH BEF ThbrsentsomArtiboli 2.2 2.3 Losses shall be determined through engineering studies,calculation and Power Flow programs,and proceduresestablishedbytheIntertieOperatingCommittee.MEA losses shall be calculated using MEA transfers on the MEA-TLS as the base load on the transmission line.Losses of the Intertie Participant will be calculated using Participant transfers as an addition to the MEA base load existing on the transmission line during the same schedule period. Each Party or Participant shall provide the real and reactiveenergy(MWh &MVARh respectively)it is determined that it is responsible for on the MEA-TLS at the time of the transfer or in a time period agreed to by the Parties or Participants prior to the transfer. ARTICLE VI Transmission Line Operation Section 1 -Continuity Of Service 1.1 The Parties agree that M.E.A.shall not be liable for damagesresultingfroman_interruption along MEA's electrictransmissionsystemformaintenanceorcausebeyondMEA''s reasonable control.If an outage on MEA's”electric transmission system affects transmission service under this Agreement,service will be restored as soon as it can reasonably be accomplished,and MEA will at all times endeavor to maintain the highest level of service as is reasonably practical and consistent with Prudent Utility Practices. Section 2 -Scheduling 2.1 APA or its delegated representative shall coordinate a1] scheduling of Intertie Transactions involving the MEA-TLS with the MEA dispatchers or other persons designated in writing by MEA.As a result of these relationships,scheduling of this MEA-TLS will be handled as part of the Intertie operation,but shall be coordinated with MEA's dispatcher. Section 3 -Maintenance 3.1 3.2 The Alaska Intertie &MEA-TLS Systems shall be operated and maintained in accordance with Prudent Utility Practices to minimize a disturbance originating in the system of one Party impairing the system of the other Party.All Scheduled OutageswhichaffectserviceonMEA-TLS transmission line section shall be coordinated through the Intertie Operator. MEA shall be responsible for the maintenance of the MEA-TLS. All costs incurred by MEA for maintenance of MEA-TLS can only by recovered from APA as provided for in Article VII of this Agreement. IOQERIAEQIRY 4 af 10 coho bls Lo $5eF PtoAsle Ener7Schedule Mer, pin Msfirg,y,/, Sent ct AVidal AGES y ARTICLE VII Compensation Section 1 -Transmission Losses 1.1 Power and Energy losses created by transfers on the MEA-TLS shall be provided for in accordance with Article V.There shall be no financial compensation for transmission losses. Section 2 -Metering 2.1 Metering of the electrical transfers on the MEA-TLS shall be: 2.1.1 For MEA Transfers,the metering equipment located in the Douglas Substation and on any future tap of the MEA-TLS serving MEA consumer loads. 2.1.2 For APA transfers,the metering equipment located in the Douglas Substation metering the electrical transfers on the Intertie between the Douglas and Healy Substations. Section 3 -Transmission Service Rate 3.1 The Transmission Service Rate shall be derived as a portion of the annual projected costs based on the cost of service for 'providing excess capacity transmission service on this MEA-TLS.The cost of transmission service shall be comprised of a portion of the levelized fixed costs and the estimated variable operation and maintenance expenses. 3.1.1 The calculations,formula and methodology for developing the Transmission Service Rate is provided in Exhibit "B"of this Agreement and incorporated herein by reference. 3.2 The Transmission Service Rate shall take effect on the effective date of this Agreement. 3.3 The MEA-TLS Transmission Service Billing Charge shall be theTransmissionServiceRatemultipliedbytheKWHquantities obtained from the meters described in Section 2.1.2 of thisArticle. ARTICLE VIII Billing and Payments Section 1 -Billing 1.1 MEA shall submit bills under this Agreement not later than 15 days after the end of the calendar month to which such bills TEER IACQITY 5 of 10 1.2 1.3 are applicable.Billings,.shall consist of cost summaries,invoices and supporting documents and shall be broken down into the applicable categories utilized in the system of accounts required of public utilities and licensees for electric plants by the Federal Energy Regulatory Commission. Bills shall be due and payable within 30 days from the date such bills are received., In keeping separate books of accounts for functions performed under this Agreement,MEA shall follow the system of accounts prescribed for public utilities and licensees by the Federal Energy Regulatory Commission for transmission lines.Upon reasonable notice,MEA shall allow the APA or it's authorized representative to audit MEA's books,records,correspondence and any other supporting evidence related to the Project for a period of three years following the close of a Fiscal Year. The audit shall be performed at such times and in such manner as will not unreasonably interfere with MEA's operations under this Agreement. MEA will furnish APA or other Parties designated by APA such operating and financial information or data as may be reasonably requested by APA for the purpose of verifying actions undertaken in performing under this Agreement.If receipt of such operating and financial statements is unduly delayed,APA may with its own staff or agents,perform all necessary to collect such data as is reasonably desired,but such work shall be performed at such times and in such manner as is mutually convenient to APA and MEA.MEA shall reimburse APA for the cost of preparation of such statements.- SECTION 2 -Billing Disputes 2.1 If a Party disputes a charge submitted by the other Party,the existence of the unresolved dispute shall not excuse the disputing Party from making payment for the charge under Section 1 of this article.Within 90 days of the date thebillisreceived,the disputing party must serve written notice stating the grounds on which the charge is disputed andtheamountindispute.If the Parties cannot settle the dispute informally or by agreement through the OperatingCommitteeeftherPartymayfileanactioninStateSuperior Court of the Third Judicial District to obtain a decision resolving such dispute and to obtain any other remedypermittedbylaw.Pending final resolution of any such dispute the Parties shall continue to perform under this Agreement. TERA /AKR(R)6 of 10 oy,ARTICLE IX Representation Section 1 -Authorized Representatives 1.1 1.1 1.2 1.3 1.1 The Parties shall each designate one representative to carry out the provisions of this Agreement.Within 30 days after execution of this Agreement,each Party shall notify the other Party in writing of its designated representative.Any Partymaychangeitsrepresentativeatanytimeandshallpromptly provide written notice of such change to the other Party. ARTICLE X Indemnity Section 1 -Indemnity Each Party as indemnitor shall defend,idemnify,save and hold harmless its agents,servants,employees and officers as indemnitee from liability including costs and expenses for claims for injuries or damages sustained by any person or property due to the indemnitors acts or omissions under this Agreement. Each party to this Agreement agrees that liability for claims including costs of defense and attorney's fees for claims, arising from the concurrent negligence of both Parties to this Agreement shall be apportioned according to the percentage offaultattributabletoeachPartyasdeterminedbyagreementor by the trier of.fact. The tort liability under this section of each Party to the other Party shall be limited to the proceeds of applicable insurance coverage.This section does not limit the liability of one Party to the other when the loss,damage or injury is due to a Party's criminal acts or gross negligence. ARTICLE XI Uncontrollable Forces Section 1 A Party is excused from performance of any obligation under this Agreement,other than the obligation to make payment if failure of performance shall be due to Uncontrollable Forces. Strikes,lockouts and other labor disturbances are considered Uncontrollable Forces and nothing contained in this Agreement will require a party to settle a labor dispute against its better judgement. 1566/468(9)7 of 10 ARTICLE XI] Waiver Section 1 1.1 Any waiver by a Party of its rights with respect to performance or default under this Agreement shall not be deemed a waiver with respect to any other performance or default under this Agreement.Limitations in asserting orenforcinganyrightsshallnotbedeemedawaiverofsuch right. ARTICLE XIII Successors and Assigns Section 1 1.1 This Agreement shall be binding upon and insure to the benefit of the successors,legal representatives,or assigns of the respective Parties.Neither Party,however,shall assign this Agreement nor any part hereof without the written consent of the other Party. 1.2 The provisions of this Agreement shall not create any rights in favor'of any person,corporation,or association not a Party to this Agreement. ARTICLE XIV Governing Law Section 1 1.1 The laws of the State of Alaska shall govern the interpretation and application of this Agreement. ARTICLE XV Captions Section1 1.1 The article and section headings in this Agreement are for convenience only and do not define,limit or extend the scope or intent of the section to which they pertain. 1566/468(10)8 of 10 ARTICLE XVI Notices Section 1 1.1 Any notice required by this Agreement shall be effective ifsentbyregisteredorcertifiedmailandaddressed(a)in the case of the APA,to Executive Director,Alaska Power Authority,P.0.Box 190869,Anchorage,Alaska 99519-0869,and(b)in the case of the MEA,to General Manager,Matanuska Electric Association,Inc.,P.O.Box 2929,Palmer,Alaska "99645.The name or address to which notices are to be directed may be changed by written notice. 1.2 Any notice or request not otherwise provided for in this Agreement shall be given in such manner as the Parties agree. ARTICLE XVII . Amendments Section 1 -Amendments '1.1 This Agreement may not be amended except by written consent of the Parties. ARTICLE XVIII Multiple Copies Section 1 1.1 This Agreement shall be executed in several counterparts,each of which shall be an original,but all of which shallconstituteoneandthesameinstrument ARTICLE XIX Approvals and Conditions of Obligations IN WITNESS WHEREOF,the Parties hereto have caused this Agreementtobeexecutedinduplicatebytheirdulyauthorizedofficersor representatives and their corporate seals hereunto affixed as of the day and year first above written. 1566/468(11)9 of 10 APPROVED AS TO FORM -ATTORNEY GENERAL BY pee es-re= DATE 27>7-?% ATTEST ALASKA POWER AUTHORITY BY TLEEceubveTabavhe SUBSCRIBED AND SWORN to before me this pM day of Qecember_,1986 last written ° ovary PullYict"Atate of Alaska My Commission Expires MATANUSKA ELECTRIC ASSOCIATION,INC. BY fesrdewt SUBSCRIBED AND SWORN TO before me this Ue day of Acemhen '1986 last written 1566/468(12)10 of 10 EXHIBIT A TRANSMISSION SERVICE CONTRACT BETWEEN MATANUSKA ELECTRIC ASSOCIATION AND ALASKA POWER AUTHORITY Abbreviations and Definitions Abbreviations: AEG&T -Alaska Electric Generation &Transmission Cooperative 2.AMLP -Anchorage Municipal Light and Power 3.APAdm -Alaska Power Administration 4.APA -Alaska Power Authority 5.CEA -Chugach Electric Association 6. FMUS -Fairbanks Municipal Utilities System 7.GVEA -Golden Valley Electric Association 8.HEA -Homer Electric Association .MEA -Matanuska Electric Association Definitions: 1.Commercial Operation -When Intertie construction,testing, and energization are complete;AMLP and GVEA are initially interconnected in synchronous operation,and supportingrelaying,metering,and control systems are adequate to allowreliabletransmissionofpowerandenergyacrosstheIntertie. 2. Eneray (Electric)-Energy is the ability to do work;theproductofforceanddistance.As commonly used in theelectricutilityindustry,electric energy is measured inkiloWatthours(kWh)or MegaWatt hours (MWh). Intertie -The transmission facilities owned by or under contract to the APA interconnecting the Northern Group with the Southern Group. 4.Intertie Agreement -The Alaska Intertie Agreement between the Intertie Participants for the interconnection of electric utility systems. 1566/468(13)A-1 10. 11. 12. 13. Intertie Operating Committee -The committee established under the Alaska Intertie Agreement tasked with the establishment and regulation of operating procedures and standard practicesfortheoperatingoftheAlaskaIntertie. Intertie Operators -The control centers of AMLP and GVEA which have been delegated the operational responsibility of the Intertie by APA. Intertie Participants -The Participants of the Alaska Intertie Agreement including the following: ALASKA POWER AUTHORITY; MUNICIPALITY OF ANCHORAGE,ALASKA,DBA ANCHORAGE MUNICIPAL LIGHT AND POWER; CHUGACH ELECTRIC ASSOCIATION,INC.; CITY OF FAIRBANKS,ALASKA,DBA MUNICIPAL UTILITIES SYSTEM; GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.;and ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC. Intertie Transaction -Transfer of Electric Energy or a commitment to provide reserve capacity between the signatories to the Alaska Intertie Agreement in the Northern Group and the Southern Group. MEA-TLS -Section of 138 kV electrical transmission line of Matanuska Electric Association,from the point at the Douglas Substation located in Section 4,Township 19N,Range 4W,where MEA-TLS connects to 138 kV bus of the Douglas Substation and the point where Matanuska Electric Association-Transmission Line Section is connected to Alaska Power Authority Transmission Line in the proximity of Hollywood Road in Section 24,Township,17N,Range 3W.The length of this transmission line section is approximately 20 miles.The location of the transmission facilities involved is further defined in Exhibit C attached and is incorporated as part of this agreement by this reference. Northern Group -FMUS,GVEA. Party or Parties -Alaska Power Authority and/or Matanuska Electric Association,as defined in this Agreement. Planned Maintenance -Any anticipated and scheduled outage of generating or transmission facilities that is planned in advance of the equipment being removed from service. Power (Electric)-The time rate of change of generation,transmission or distribution of Electric Energy,expressed inkiloWatts(kW)or MegaWatts (MW). 1566/468(14)A-2 OS.fen, 14. 15. 16. 17. 18. Prudent Utility Practices -Any of the practices,methods and acts which,in the exercise of.reasonable judgement in thelightofthefacts(including but not limited to the practices,methods,and acts engaged in and approved by a significant portion of the electrical utility industry priorthereto)known at the time the decision was made,would have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability,safety,andexpedition.In applying the standard of Prudent Utility -Practices to any matter under this Agreement,equitable considerations should be given to the circumstances, requirements,and obligations of each of the Participants and there shall be taken into consideration the fact that the fact that Participants are a cooperative or public corporation and political subdivision of the State of Alaska with prescribed statuatory powers,duties,and responsibilities.It is recognized that Prudent Utility Practice is not intended to be limited to the optimum practices,methods,or acts to the exclusion of all others,but rather is a spectrum of possible practices,methods,or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability,safety,and expedition.Prudent Utility Practices include due regard for manufacturers' warranties and the requirements of governmental authorities having jurisdiction. Scheduled Outage-Any outage of generating or transmissionfacilitieswhichisscheduledinadvancetobeoutofservice. Southern Group -AMLP,CEA,AEGTC,APAdm Transmission Service -Service provided by the use of the transmission system of a Participant directly connected to the Intertie for wheeling of power and energy through its system for another Participant. Uncontrollable Force -Any cause beyond the control of the Party affected,including but not limited to,flood, earthquake,storm,fire,lightning,epidemic,war,riot,civil disturbance,labor dispute,sabotage,restraint by court order or other public authority,injunctions and restraint by governmental agencies with proper jurisdiction prohibiting orfailingtoapproveactsnecessarytoperformancehereunderorpermittinganysuchactonlysubjectofunreasonable conditions,and failure of equipment or inability to obtain orshipmaterialsorequipmentbecauseoftheeffectofsimilar causes on suppliers or carriers,which by the exercise of due diligence it shall be unable to overcome. 1566/468(15);A-3 EXHIBIT 8 -TRANSMISSION SERVICE AGREEMENT BETWEEN MATANUSKA ELECTRIC ASSOCIATION,INC. AND ALASKA POWER AUTHORITY Transmission Service Rate 'Section 1.0 The Transmission Service Rate shall be developed in accordance withtherateformulaprovidedinSection2ofthisExhibit.The Transmission Service Rate shall be developed using the most recent rate test period data approved for rate making purposes. Section 2.0 -Transmission Service Rate Formula 2.1 Calculation of the MEA-TLS Transmission Service Rate shall be in accordance with the following rate formula and the definitions in Section 2.2 of this Exhibit. 2.1.1 Transmission Service Rate (¢/KWH)formula = d+e at+bt+tc+F f 2.2 Transmission Service Rate Definitions a.Operating and Maintenance Expenses -(0&8 Expenses) shall be those expenses associated with the transmission facilities used in providing the Transmission Service as.defined in the Federal Energy Regulatory Commission (FERC)Uniform System of Accounts,j.e. 556 System Control-and Load Dispatching . 560 Operation Supervision and Engineering 561 Load Dispatching 562 Station Expenses 563 Overhead Line Expense 564 Underground Line Expense 565 Miscellaneous Transmission Expense 567 Rents 568 Maintenance Supervision and Engineering 569 Maintenance Structures 570 Maintenance of Station Equipment 571 Maintenance of Overhead Lines 572 Maintenance of Underground Lines 573 Maintenance of Miscellaneous Transmission Plant 1566/468(16)B-1 Administrative and General Expenses -(A&G Expenses) shall be thoses 'expenses as associated with the transmission facilities used in providing theinvolvedTransmissionService,as defined in the Federal Regulatory Commission (FERC)Uniform System of Accounts,i.e. 920 Administration and General Salaries 921 Office Supplies and Expenses 923 Outside Services Employed 924 Property Insurance 925 Insurance and Damages 926 Employee Pension and Benefits 930.2 Miscellaneous General Expense 932 Maintenance of General Plant Tax Expenses -shall be those tax expenses,other than income taxes,as defined in Federal EnergyRegulatoryCommissionAccount408.1 and directly associated with the transmission facilities utilized in providing the Transmission.Service. Depreciation Expense -shall be the annual depreciation expenses defined in Federal Energy Regulatory Commissfon Account 403 and 407 that are associated with the transmission facilities utilized in providing the Transmission Service. Capital Costs -shall be the annual interest expenses defined in Federal Energy Regulatory Commission Account 427 on the transmission plant of all capitalized costs associated with the transmission facilities utilized in providing the Transmission Service. Kilowatt Hours -At transmission system input to be transferred shall bethe total annual kilowatt hourstransferredbythetransmissionfacilitiesusedin providing this Transmission Service for the rate test perfod referred to fn Section 1.0 of this Exhibit 8. ALASKA POWER AUTHOR BY SUBSCRIBED ANO SWORN TO before me this IS aay ofDecemlur_, 1566/468(17)B-2 1986 last written. ry ."wy Omission Expires lat MATANUSKA ELECTRIC ASSOCIATION,INC. SUBSCRIBED AND SWORN TO before me this 7%day of Socambens1986lastwritten. 'y aMyCommission"expires tf lifes 1566/468(18)8-3 an |-ae ,on | od : EXHISITCTRANSMISSIONSERVICEAGREEMENT -? BETWEEN ..MATANUSKA ELECTRIC ASSOCTATION,INC, ; . AND -ALASKA POWER AUTHORITY .a ILLUSTRATION OF PACILITIES ET wen3 | gwalaQS= bee ; t ||t_-:pe LI cee crncutt1,2int--y Ut.Sasi'Mm 1s sey CIRCUITHc1Wools!. wa!spat wusFCOLORTCL LEGEND, emmeasewe BOUNDARY OF APA INTERTIE FACILITIES _cecececsencnee COUMDARY OF FACILITIES OWNEDounaBYPARTICIPATINGCOMPANIES ¥ -enor :apa '}wa lingie:!=m cam ome mmeame ane eame ose ane a{i rE«©(COR Io |'i mi §rea ;m2 {"ta ++,. i=San!i ot)et ! a a ;CANTWELL re Le momeaens : -;i (-rcever113ecyieiree*.rceneeTOMOORScATOCLIN1abnvats|LE i La TCU 3 _ .1 5 t 16 any .t bec ARAL MATANUSEA i DOUGLAS .i 3 LLomere paar)pA2CHUCACHEAPAod . Wo pt,wacctezit TEELANO : tf ALASKA INTERTIE MAINTENANCE AGREEMENT FOR THE INTERTIE FACILITIES LOCATED IN THE TEELAND SUBSTATION OF CHUGACH ELECTRIC ASSOCIATION,INC. BETWEEN ALASKA POWER AUTHORITY AND CHUGACH ELECTRIC ASSOCIATION,INC. TABILE OF CONTENTS Article Title I Definitions Il Effective Date &Termination III Maintenance of Intertie Facilities Iv Maintenance Plan,Schedule and Budget V Payment for Maintenance of Intertie Facilities VI Accounts,Records,and Audits VII Extraordinary Maintenance and EquipmentReplacementCosts VIIL-Insurance IX Indemnity for Liability X Uncontrollable Forces XT Waivers XII Successors and Assigns XIII Governing Law XIV Notices XV Anendments XVI Contract Work Hours and Safety Standards XVII Equal Employment Opportunity XVILI Exclusivity of Contract XIX Severability XX Approvals and Conditions of Obligation EXHIBIT ''A''DEFINITIONS EXHIBIT "'B''LLLUSTRATION OF FACILITIES A-1 ALASKA INTERTIE MAINTENANCE AGREEMENT -BETWEEN ALASKA PCWER AUTHORITY:AND CHUGACH ELECTRIC ASSOCIATION,INC. This agreenent (hereinafter referred to as agreement),is madeandenteredintothisdayof,19 by andbetweenALASKAPOWERAUTHORITY,a public corporacion of the StateofAlaska("the APA");and CHUGACH ELECTRIC ASSOCIATION,INC.,anon-profit electric cooperative membership corporation of theStateofAlaska("CEA"). WITNESSETH WHEREAS,APA is constructing electrical transmission intertiefacilitiesinordertointerconnectcertainelectricalutilities in northcentral Alaska with certain other electrical utilities in southcentral Alaska; WHEREAS,APA is the owner of the Intertie Facilities,and has,inaccordancewiththeAlaskaIntertieAgreement,the responsibilityforthemaintenanceoftheIntertieFacilities; WHEREAS,APA desires to contract for the maintenance of defined portions of the Intertie Facilities; WHEREAS,CEA is an Intertie Participant in the Alaska Intertie Agreement,and WHEREAS,CEA owns,operates and maintains transmission facilitiesinsouthcentralAlaskaandiswillingtomaintainadefinedportionoftheIntertieFacilities; NOW,THEREFORE,IN CONSIDERATION of the mutual covenants herein contained the parties agree as follows: ARTICLE I Definitions Section l. 1.1 Definitions are specified in the general definitionlistinginExhibit"A"attached hereto and incorporatedhereinbythisreference. ARTICLE ITI Effective Date &Termination Section lL.Effective Date 1.1 Section 2. This Agreement shall become effective on the day °,19 Termination 2.1 2.2 Section l. Either party may terminate this contract by: 2.1.1 Delivering written notice to the other partyatleast12monthspriortochedateof termination stated in the notice,or 2.1.2 Delivering written notice to theotherPartyofamaterialbreach of theAgreement.If the .other party fails to rectify the material breach within 60 davsafterreceivingnoticeofthebreach,the agreement is automatically terminated. All liabilities occurring under this Agreement prior to its termination shall be and are hereby preserved. ARTICLE [I1I. Maintenance of Intertie Facilities General Responsibilities 1.1 Section 2. CEA shall be responsible for maintaining the IntertieFacilitieslocatedwithintheTeelandSubstation including the substation facilities,communicationfacilities,and the Static Var System as described inExhibic"B"of this Agreement. Specific Responsibility for Maintaining the 2.1 Intertie Facilities located within the Teeland Substation CEA represents and warrants to APA that it willmaintaintheIntertieFacilitieslocatedwithinTeeland Substation consistent with Prudence Uriliry Practices and: 2.1.1 Coordinate all maintenance schedules involving Intertie facilities with theParticipantsoftheAlaskaIntertie. Agreemenr.; 2.1.2 Provide maintenance schedules in accordance with Article IV of this Agreement; 2 tw1.5 2.1.6 2.1.7 2.1.8 2.1.9 2.1.10 2.1.11 Provide maintenance budgets and records in accordance with Articles IV and V of this Agreement; Develop maintenance procedures,maintenancetraining,and preventive maintenance programs; Conduct scheduled inspections and,as aminimum,those inspections required hy theannualmaintenance.-plan agreed upon by thepartiesunderArticleIVofthisagreement.-CEA shall issue an inspection report offindingsandrecommendationstotheAPAwithin20workingdaysofcompletingthe inspection;. Update permanent records and drawings to show all alterations or replacements to Intertie Facilities and provide a copy to APA. Read all revenue metering devices on the lastdayofeachmonth,record such readings onstancardformsapprovedbyAPA,and forwardsuchformstoAPAwithinsevendaysfollowing the readings; Maintain Intertie recerding and totalizingmetersandforwardrelevantgraphsand/or magnetic tapes to APA as required by APA.All operational records maintained inconjunctionwithorrelatedtothisAgreementshallbeavailableforinspecticnbyAPA's representative upon reasonable notice. Log and submit to APA any action ofprotectiverelaysoralarms,including thecausesofsuchactionandcheremedial actions taken by CEA; Cooperate with APA to install additionalprotectiverelaying,instrumentation,controlsystemsorotherapparatuspurchasedbyAPA; Protect equipment,personnel,and the generalpublicfromhazardswhicharisefronequipmentfailuree.g.,electrical faults,vandalism,and mechanical failure.CEA willrepairandreportdamagedfacilitiesduetovandalismornegligenceo£other parties. Section 3. CEA will notifv APA as soon as possible aftereachequipmentfailureorrepair; 2.1.12 ©Operate all equipment within thelimitssetbychemanufacturer'unlessotherwisedirectedbyAPA; 2.1.13 Respond to operational and maintenancerequestsordirectivesfromAPA. 2.1.14 Maintain the Intertie Facilities consistence with Prudent Utility Practice,NationalElectricSafetyCode;and other applicablecodes,federal and state laws,regulations, requirements and standards; 2.1.15 Provide,stock,and make available such equipment,materials,tools and parts asdescribedinExhibitCofthisAgreementfor maintaining the Intertie Facilities. APA agrees to:-Cee? 3.1 3.2 3.3 3.4 Provide consultation services to establish systen' capabilities and standard voltage levels,and set andcoordinateprotectiverelaysystems; ._Make disbursements to CEA and provide for an annual budget sufficient to satisfy the Intertie maintenance.costs incurred by CEA under this Agreement; Reimburse CEA for the costs of labor,materials,supplies,equipment,training anc administration,asdefinedinArticlesVandVIIofthisAgreement; Provide che initial training program on operating the'specialized equipment of the Static Var Svstem and the 3.5 SF-6 breakers to be located within the Teeland Substation as part of the Intertie Facilities.APAshallparticipateintrainingCEA's personnel toaccomplishthemaintenanceprogramasdefinedinArticleIVofthisAgreement. Make available to CEA the specialized tools or otherequipmentrequiredtoperformunderthisAgreement. Responsibility of Intertie Owner he aielacer” Section 4.Prior Authorization 4.1 4,2 4.3 Secrion l. CEA will secure authorization from APA to make permanent alterations or replacements to IntertiefacilitiesexceptinemergencysituationsaffectingtheavailabilityoftheIntertieandnototherwiseprovidedforintheannualapprovedhudgec. CEA will secure authorization from APA to modifv,tamper with,or adjuse the sectings of the Intertie'sprotectiverelaysoralarmsexceptinemergencysituations. CEA will secure authorization from APA for any changestorecording,totalling meters and associated instrument transformer settings.: ARTICLE IV Maintenance Plan,Schedule and Budget Maintenance Plan and Schedule Requirements 1.1 1.2 1.3 1.4 CEA shall develop annually a plan and schedule formaintenanceofthe[Intertie Facilities within the Teeland Substation.This plan and schedule shall beusedforscopingandtrackingmaintenanceactivitiesandasthebasisforbudgetsubmittalstoAPA. The plan and schedule shall run from July first to June30thofeachyear., CEA shall submit the annual plan,schedule and estimated maintenance budget to APA by August Ist ofeachyearforthenextfiscalvear.The plan,scheduleandbudgetmaybemodified.If agreement cannot bereached,the matter shall be submitted to the OperatingCommitteeestablishedundertheAlaska_IntertieAgreementfortheCommittee's review andrecommendations.If the parties do not -adopt cheOperatingCommittee's recommendations,either party mavterminatetheAgreementbvdelivering90davswrittennoticetotheotherparty. CEA shall prepare and annually submit a three vear planandbudgetofproposedmajormaintenance'andimprovementsnotdoneonanannualbasis,e.g.,maiorequipmentreplacemenc,and other projects deemed by CEAtoberequiredtoinsureacontinuedsafean¢deconomicalProject.The three year plan shall be 5 revised annually and submitted with the estimatedannualmaintenancebudget. 1.5 CEA may subcontract maintenance work on the IntertiefacilityatTeelandSubstationusingitsstandardpracticesandproceduresfor'obtaining suchsubcontractors,If CEA is unable to perform bv itselforthroughicssubcontractors,APA shall have the righttoperform.the work. 1.6 CEA shall prepare and submit to APA a maintenance planandbudgetforthefirstfiscalyearofintertieoperationorportionthereofwithin60davsofsigningthiscontract. ARTICLE V . Payment for the Maintenance of Intertie Facilities Section 1.Payment 1.1 APA will pay the amounts approved under the annualmaintenancebudgetin12equalinstallmentsonthefirstdayofeachmonth.If the APA fails to make a pavment due CEA within 30 days after receiving CEA's-billing,APA shall pay interest to CEA on the amountdueatthehighestprevailingratepermittedbyAS36.90.001(b). 1.2 Should CEA's actual costs for a fiscal year be less .than the annual maintenance budget,the APA shallreducethe12thpayment,and additional payments forthesubsequentfiscalyear,by the difference betweentheestimatedandactualcosts.Should CEA's actual costs for a fiscal year be more than che annualmaintenancebudget,APA will pay CEA the differencebetweentheestimatedandactualcostswithinninety'days after the end of the fiscal year. Section 2.Reconciliation 2.1 On the fifteenth day of each month,CEA will provideAPAwithaStatementofthecostsincurredorthe Section 3. expenditures for the previous month.The statementswillconsistofcostsummaries,invoices,andsupportingdocumentssufficienttoprovideanaudittrailoftheexpendituresclaimedunderthisAgreementandshallbebrokendownintotheapplicablecatezoriesutilizedinthesystemofaccountsrequiredofpublicutilitiesandlicenseesforelectricplantsbvtheFederalEnergyRegulatoryCommission. Billing Disputes 3.1 Section l. APA shall pay the full amount of the charges even whereAPAdisputesalloranypartofthechargessubmittedpursuanttothisAgreement.Within 90 davs after CEAsubmitsadisputedcharge,APA shall notifv CEA inwritingoftheamountindisputeandthebasisforthedispute.If the parties cannot settle the disputeinformally,either party may file an action in theSuperiorCourtoftheThirdJudicialDistricttoobtain a decision resolving such dispute and to obtain anyotherremedypermittedbylaw.Unless the partiesdetermineotherwise,such action shall be an originalactiononthemeritsinwhicheachpartyshallhavetherighttointroduceevidenceconcerninganysuchmatterindispute,including the result of the adjudication,and each party shall be entitled to a full hearing onthematter.Pending final resolution of anv suchdisputethepartiesshallcontinuetoperformunderthisAgreement. ARTICLE VI Accounts,Records,and Audits 1.1 1.2 Tn keeping records for maintenance of the IntertieFacilities,CEA will follow the accounting svstenrequiredofpublicutilitiesandlicenseesbytheFederalEnergyRegulatoryCommission'for electricplants.CEA shall make its records availablefor auditbytheAPAwithinfourmonthsafterthecloseofeachfiscalvear.For two years following the close of aFiscalYear,CEA will retain copies of invoices, payroll records and other'supporting documentssufficientforanauditoftheexpenditures. CEA will furnish APA or other parties designated by APAsuchoperatingandfinancialstatementsrelatingtomaintenanceoftheIntertieFacilitiesasmavbereasonablyrequestedbyAPA.If receipc of such 7 -operating and financial stacements is unduly delaved, APA may,with its own staff or agents,perform all worknecessary.to collect such data as is reasonablvdesired,but such work shall be performed ar such timesandinsuchmanneraswillnotunreasonablyinterferewithCEA's operations under che Agreement. 1.3 Records of the accounting systen pertaining to this Agreement shall be maintained at CEA's offices in Anchorage,Alaska. ARTICLE VII Extraordinary Maintenance and Equipment Replacement Costs Section 1.Definition . 1.1 Extraordinary maintenance and equipment replacementcostsshallbethosecostswhicharenotincluded intheannualmaintenancebudget,but which must heincurredinordertoinsurethesafe,economical and reliable transfer of electric power and energy on theIntertieFacilitieslocatedintheTeelandSubstation. 1.2 If CEA learns of an equipmenc failure or othercontingencywhich,in CEA's judgment,necessitates incurring an extraordinary maintenance and equipmentreplacementcost,CEA shall prompcly notify the APA ofthecircumstances.CEA shail obtain the APA's approval prior to incurring an extraordinary maintenance andequipmentreplacementcost.However,if in CEA''sjudgment,emergency circumstances require CEA to incursuchacostpriortoobtainingAPA's approval,CEAshallnotifytheAPAofthecircumstanceswithin72hoursafterdiscoveryoftheemergencysituation.CEAshallmakenoextraordinarymaintenanceandequipmentreplacementexpenditureforwhichtheapprovaloftheAPAhasbeenrequestedandexpresslydeniedinwriting. Section 2.Reimbursement 2.1 Within 30 davs of receiving the billing,-APA shallreimburseCEAforallextraordinarymaintenanceandequipmentreplacementcostsincurredbyCEA,exceptthoseexpenditureswhichtheAPAexpresslydisapproved.If the APA fails to pav within 30 davs after receivingCEA's billing,APA shall pav interest on the amount dueatthehighestprevailingratepermittedbyAS 36.90.C01(b) Section l. ARTICLE VIII Insurance Insurance Requirements 1.1 1.2 Insurance.During the life of this Agreement,CEAshallpurchaseandmaintainwithacarrierorcarriers satisfactory to APA,insurance covering iniury topersonsorpropertysufferedbvAPAorathirdpartv,as a result of errors or omissions or operations by CEAorbyanySubcontractorwhicharisebothoutofand during the course of this contract.CEA shall requireallsubcontractorsprovidingservicesdirectlyorindirectlyunderthisAgreementtoprovideallandthesameinsurancerequiredofCEA.Coverage shall alsoprovideprotectionagainstiniuriestoallemploveesofCEAanctheemployeesofanySubcontractorengagedinworkunderthisAgreement.A copy of the insurancepolicieswillbefurnishedtoAPApriortobeginningworkunderthisAgreement.These policies will showevidenceofcoverageandprovidefor90davsnoticeofwrittencancellation,non-renewal or material change inthecoverage.Insurance companies providing coverageshallhavefinancialratingsacceptabletoAPA.Failure to furnish satisfactory evidence o£insurance or lapse of the policy is a material breach and groundsforterminationofthisAgreement. "Types of Insurance.CEA shall purchase the followinginsuranceto'cover its operatioqns performed inconnectionwiththeworkunderthisAfreement: 1.2.1 Worker's Compensation Insurance:CEA shallprovideandmaintainWorkers'CorpensationInsuranceasrequiredbyAS23.20.045 for aliemploveesofCEAengagedinworkunderthisAgreement.Such insurance shall include: 1.2.1.1 Statutory coverage for states inwhichemployeesareengaged in work; 1.2.1.2 Employers Liability Protection intheamountof$2,000,009 _per occurrence; 1.2.1.3 Broad Form All States Endorsement; 1.2.1.4 Al!State and Federal Acts where applicable; Qa 1.2.1.5 Veluntary Compensation Endorsemenrc. The Worker's Compensation insurance'shall contain a waiver of subrogation in favor ofAPA. Comprehensive General Liability Insurance: CEA shall purchase and maintain comprehensive general liability insurance subdiect to thefollawingLimitsofliabilirv: 1.2.2.1 Bodily Iniurvy and Property DamageLiability$20,000,000 Combined Single Limits each occurrence and affording insurance for Pre- mises-Operations,Quwners and Contractors'Protective,Indepen- dent Contractors,Products/ Completed Operations,BlanketContractualLiabilitv,Broad Ferm Propertv Damage,Personal IniurvLiability,Incidental Errors and Omissions. 1.2.2.2 Autemobile Liability Insurancecoveringallvehicies,Such insurance shall provide coveragenotlessthanthatorthe8usiness Autemobile Policy in limits noc less than $10,000,900 Combined Single Limit each.occurrence forRodilyInjuryaridPropertyDamage Liability. 1.2.2.3 Owned Aircraft (if applicable)and,Non-Owned Aircrafe with Limits of liability not less than: $10,600,000 -Bodily Injurv per occurrence$1,000,GCQ -Passenger Liability per seat ; $10,000,000 -Preperty Damage Liability ver occurzenceCoverageshallnocexclude Slung Cargo Exposures.°tfte°=Owned Wactercrafnr (if applicable)and Non-Owned Uatererafe with limits of liabilitv not less than $10,000,CQ0 per occurrence,any one vessel,any one tow.Coverage to 10 include:Atl Maritime Liabilities including Protection and Indemnity. APA shall be included as an additional insured in insurance reauired in this Section 1.2.2 and shall not hv its inclusion be directly responsible to the insurance carrierforpremiums.These policies shall also'contain a cross liability or severability of interest endorsement. 1.3 The cost of any insurance coverage allocable to the Intertie Facilities located within the Teeland Substation shall be included in CEA''s Intertie faintenance Budget vrepared in accordance with articleIV.Anv insurance required to be maintained under thisarticlemaybemaintainedaspartofanvotherpolicvorpoliciesofCEAsolongasthecoverageofsuchpolicyorpeliciesissubstantiallythesameasifsuchcoverageweremaintainedunderaseperatepolicy. ARTICLE IX indemnity for Liability Section l.Indemnity for Liability 1.1 Each Party (as ""Indemnitor")agrees to and shallindemnifyanddeferdtheotherPartv,its officers,emplovees,and agents (as "Jndemnitee")for tortliabilityforallclaimsfordamagesandiniuriesofanycharacterornaturewhatsoeverarisingfromthe sole negligence of the Indemnitor including itsofficers,employees or agents in relation toperformanceurderthisAgreement.Indemnitor agrees toassumethedefensethereofandtopavallexpenses(including attorney's fees)connected therewith and alljudgmentsthatmayheobtainedagainstIncdemnitee.Forpurposesofthissection,"sole negligence'shallincludeactsoromissionsoftheIndemnitor,its officers,emplovees,or agents,or anv combinationthereof,and situations where such acts or omissions,in combination with the negligence.o£third parties,combines to cause iniury or damage to persons orproperty.[It shall not include situations where theactsoromissionsoftheIndemnitor,its officers, emplovees,or agents combines with the negligence ofIndemniteetocausesuchinjury,which situations shailhegovernedbvtheprovisionsofsuhsecrion1.2 belowrelatingtoconcurrentnegligence. i 1.3 Section l. Each party agrees thet liabilicy (including costs ofdefenseandattornev's fees)for clains arising frontheconcurrentnegligenceofhoth'Parties shall be apportioned eccording to the respective nercentage offaultattributabletoeachPartyasdeterminedbvagreementorhwthetrieroffact. The liabilities of each Party tn che other Partv pursuant to this section shall be Limited to theproceedsofapplicableinsurancecoverageexceptwhentheloss,damage or injury giving rise to a liabilityisduetocriminalactsorgrossnegligence. ARTICLE X Uncontrollable Forces 1.1 None of the Parties shall be considered to be in default in performance of any obligation hereunder,other than the obligation to make payments as providedinthisAgreement,if failure of performance shall be due to uncontrollable forces and without the fault or negligence of either Party.Strikes,lockouts,andother,labor disturbances shall be considered uncontrollable forces and notching in this Agreemencshallrequireeitherpartytosettlealabordisputeagainstitsbetterjudgment. If either party,by reason of an uncontrollable force,is rendered unable,wholly or in part,to perforn itsobligationsunderthisAgreement(other chan itsobligatienstopaymonev),then upen said party givingnoticeandparticularsofsuchuncontrollableforce,its obligation to perform shall be suspended during thecontinuanceofanyinabilitysocaused,but.'for nolongerperiod,and the effects of such cause shall,sofaraspossible,be remedied with all reasonabledispatch;provided,however,chat the settlement cflaborcisputesshallbeconsiceredwhollvwithinthediscretionofthepartvinvolved.The affected partyshallnotberespensibleforitsdelavinperformanceunderthisAgreementduringdelavscausedbyanuncontroltableforee,nor shall such uncontrollable force give rise to clain for damages or constitute default. ARTICLE XI Waivers Section l.. 1.1 Any waiver at any time by a Party of its rights wirhrespecttoadefauleunderthisAgreement,or with respect to any other matter arising in connection with'this Agreement,shall not.be deemed a waiver with respect to any other default or matter.Anv delavshortofthestatutoryperiodoflimitationsinassertingorenforcinganyrightshallnocbedeemedawaiverofsuchright? ARTICLE XI . Successors and Assigns Section l. 1.1 This Agreement shaii he hinding upon and inure to thebenefitofthesuccessors,legal representatives,orassignsoftherespectiveParties.No Parctv,however,shall assign this Agreement nor any part hereof withour'the written consent of the other Party. 1.2 The provisions of this Agreemenc shall not create anvrightsinfavorofanyperson,corporation,or association not a Party to this Agreement and theobligationshereinassumedaresolelyfortheuseandbenefitofthePartiestothisAgreement. ARTICLE XIIT Coverning Law Section l. 1.1 This Agreement is made subject to and shall he governec"and construed in accordence with the lavs of the StateofAlaskaandcheauthoritygrantedtotheincividual Parties thereunder. ARTICLE XIV Nocices Section 1. 12 "a1 Section l. Any notice or demand involving a claim of default or major breach of this agreement shall be sent bvregisteredorcertifiedmailand.addressed tn the Executive Direcror,Alaska Power Authority,334 WestFilthAvenue,Anchorage,Alaska 99501;General Manager,Chugach Electric Association,Inc.,Pouch 6300,5641MinnesotaPrive,Anchorage,Alaska 99501.Theforegoingdesignationsofthenameoraddresstowhich notices or demands are to be directed may be changed atanvtimebywrittennoticegivenbyanyPartvtotheotherParty. ARTICLE XV Amendments 1.1 Section l. Neither this Agreement nor anv part hereof may beterminated,amended,supplemented,waived,or modified except by an instrument in writing signed bv hothParties. ARTICLE XVI Contract Work Hours and Safety Standards 1.1 Section 1. The Parties to this Agreement and anv Subcontrector(s)contracting for any part of the'work under chisAgreementaresubjecttoallapplicableprovisionsofstateandfederallawcencerningworkhoursandsafetystandards.. ARTICLE XVII Equal Employment Opportunity 1.1 The Parties to this Agreement and any SubcontractorscontractingforanypartoftheworkunderthisAgreementaresubjecttoallapplicableprovisionsofstateandfederallawconcerningEqualEmplovment Opportunity. 14 we Section l. ARTICLE XVIII Exclusivity of Contract 1.1 Section l. The terms of this Agreement and anv provisions adoptedbyreferenceorotherwiseincorporatedintothisAgreementsectforththefullintentoftheParties. ARTICLE XIX Severability 1.1 If any provision of this Agreement shall be finallyadjudicatedbyacourtofcompetentjurisdictiontobeinvalidorunenforceable,the remainder of this Agreement shall be unaffected by such adjudication andalltheremainingprovisionsofthisAgreementshallremaininfullforceandeffectasifsuchprovisionsoadjudicatedtobeinvalidhadnecheenincludedherein. ARTICLE XX Approvals and Conditions of Obligarion In WITNESS WHEREOF,the Parties hereto have caused this Agreementtobeexecutedinquincupletbvtheirculyauthorizedofficersorrepresentativesandtheircorporatesealstobehereuntoaffixedasofthedayandyearfirstabovewritten. ALASKA POWER AUTEORITY wt »Fl MOCoufal CHUGACH ELECTRIC ASSOCIATION,INC. 1 KW Pie Gu KOLA Sense 1S =e,0 feo,basteBES 1. 2. 1. 2. 4. Se EXHIBIT A ALASKA INTERTIE MAINTENANCE AGREEMENT -FOR THE INTERTIE FACILITIES LOCATED IN THE TEELAND SUBSTATION OF CHUGACH ELECTRIC ASSOCIATION,INC. ABBREVIATIONS AND DEFINITIONS Abbreviations APA Alaska Power AuthorityCEA-Chugach Electrie Assocation Definitions ry Intertie -The transmission facilities owned by or under contract to the Alaska Power Authority interconnecting the Intertie Participants. Intertie 'Agreement -The Alaska Intertie Agreement between the Intertie Participantsfortheinterconnectionofelectricutilitysystems.° Intertie Facilities-All of the physical facilities of the Intertie located within the.confines of the Intertie system which provide or support the transmission of electrical energy. Intertie Participants -The Participants of the Alaska Intertie Agreement including thefollowing: ae ALASKA POWER AUTHORITY;- b.MUNICIPALITY OF ANCHORAGE,ALASKA; C.ANCHORAGE MUNICIPAL LIGHT AND POWER; d.CHUGACH ELECTRIC ASSOCATION,INC.; e.CITY OF FAIRBANKS,ALASKA; f.MUNICIPAL UTILITIES SYSTEM;and g-GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. Prudent Utility Practices -Prudent Utility Practices at a particular time means any ofthepractices,methods and acts which,in the exercise of reasonable judgment in the light of the facts (including but not limited to the practices,methods and acts engaged inotapprovedbyasignificantportionoftheelectricalutilityindustrypriorthereto)knownatthetimethedecisionwasmade,would have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability,safety and expedition.In applying the standard of Prudent Utility Practices to any matter under this Agreement,equitable considerations should be given to the circumstances,requirements andobligationsofeachofthePartiesandthereshallbetakenintoconsiderationthefactthatthePartiesareacooperativeorpubliccorporationandpoliticalsubdivisionofthe "A'"-1 of 2 State of Alaska with prescribed statutory.powers,duties and responsibilities.It is recogilized that Prudent Utility Practice is not intended to be limited to the optimum practices,methods or acts to the exclusion of all others,but rather is a spectrum of possible practices,methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability,safety and expedition.Prudent Utility Practices include due regard for manufacturers'warranties and the requirements of governmental authorities having jurisdiction. ATTEST .ALASKA POWER AUTHORITY ' -B EXEQVTIVE OIREEAOR ATTEST CHUGACH ELECTRIC ASSOCIATION,INC. ¥ A (ys:#.ALE ee BY i 2021/516/1 ALASKA INTERTIE MAINTENANCE AGREEMENT BETWEEN ALASKA POWER AUTHORITY AND GOLDEN VALLEY ELECTRIC ASSOCIATION,INC, TABLE OF CONTENTS Article Title T Definitions II Effective Date and Termination II!Maintenance of Intertie Facilities IV Maintenance Plan,Schedule and Budget V Payment VI Accounts,Records and Audits VII Extraordinary Maintenance and Equipment Replacement Costs VIII Insurance and Liability IX Representation X Indemnity XI Uncontrollable Forces XII Waivers XIII Successors and Assigns XIV Governing Law Captions XVI Notices XVII Amendments XVIII Contract Work Hours and Safety Standards XIX Equal Employment Opportunity XX Exclusivity ofContract XXI Severability XXII Approvals and Conditions of Obligations 2021/516/2 EXHIBIT "A"ABBREVIATIONS AND DEFINITIONS EXHIBIT ""B"MAJOR EQUIPMENT 2021/516/3 i ALASKA INTERTIE MAINTENANCE AGREEMENT BETWEEN ALASKA POWER AUTHORITY AND GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. This agreement ihereingfter referred to as Agreement),is made andenteredintothisday»19 B87 by and be-tween ALASKA POWER UTRORIT Y at 4 a public corporation of the State of Alaska and GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.("GVEA"),a non-profit electric cooperative membership corporation of the State of Alaska. WITNESSETH WHEREAS,APA has constructed electrical transmission Intertie Fa- cilities in order to interconnect certain electrical utilities in northcentral and southcentral Alaska. WHEREAS,APA is the owner of the Intertie Facilities and has,in accordance with the Alaska Intertie Agreement,the responsibility for the operation and maintenance of the Intertie Facilities; WHEREAS,APA desires to contract with Parties for the maintenance of defined portions of the Intertie Facilities; WHEREAS,GVEA is an Intertie Participant in the Alaska Intertie Agreement,and WHEREAS,GVEA owns,operates and maintains transmission facilities in northcentral Alaska,and GVEA is willing to maintain a defined portion of the Intertie Facilities; NOW,THEREFORE,IN CONSIDERATION of the mutual covenants herein contained the Parties hereto agree as follows: ARTICLE I Definitions Section I, 1.1 Definitions are specified as Exhibit "A"attached hereto and incorporated herein by this reference. 2012/516/4 -l- >ARTICLE I! Effective Date and Termination Section 1.Effective Date 1.1 This Agreement shall become effective on the date set forth above and shall continue in effect until terminated as provided for in Section 2 of this Article. Section 2.Termination 2.1 Either Party may terminate this contract by: 2.1.1 Delivering written notice to the other Party at least 12 months prior to the date of termina- tion stated in the notice,or 2.1.2 Delivering written notice to the other Party of: a material breach of the Agreement.If the other Party fails to rectify the material breach within 90 days after receiving notice of the breach,the Agreement is automatically ter- minated,a 2.2 All liabilities occurring under this Agreement prior to its termination shall be and are hereby preserved. ARTICLE ITI Maintenance of Intertie Facilities Section 1.General Responsibilities 1.1 GVEA shall be responsible for maintaining the Northern portion of the Intertie Facilities,including but not limited to the Healy,Cantwell and Gold Hill Substation facilities,and the Intertie transmission line from the Healy substation to the Midpoint of the Intertie as shown in Exhibit "B"of this Agreement. Section 2.Specific Responsibility for Maintaining the Northern portion of the Intertie Facilities 2.1 GVEA represents and warrants to APA that it will: 2.1.1 Coordinate all maintenance schedules involving Intertie Facilities with the Participants of the Alaska Intertie Agreement; 2012/516/5 7 =e 2 "s 2.1.2 Provide maintenance schedules in accordance with Article IV of this Agreement; 2.1.3 Provide maintenance budgets and records in ac- cordance with Articles IV and V of this Agree- ment; 2.1.4 Develop maintenance procedures,maintenance training,and preventive maintenance programs; 2.1.5 Conduct scheduled inspections and,those inspec- tions required by the annual maintenance plan agreed upon by the Parties under Article IV of this Agreement.GVEA shall issue an inspection report of findings and recommendations to APAwithin.20 working days of all completing inspec-tions; 2.1.6 Provide notification and description of all changes to APA-owned permanent records and -drawings to show all alterations or replace- ments to Intertie Facilities.Modifications to Intertie facilities shall be shown on mylar or sepia drawings and forwarded to APA. 2.1.7 Read all revenue metering devices within three days of the last day of each month,record such readings on standard forms approved by APA,and forward such forms to APA within 5 working days following the readings; 2.1.8 Maintain Intertie recording and totalizing meters and forward relevant graphs and/or mag- netic tapes to APA as required by APA.All op- erational records maintained in conjunction with or related to this Agreement shall be available for inspection by APA's representa- tive upon reasonable notice; 2.1.9 Log any action of protective relays or alarms, including the causes of such action and the re- medial actions taken by GVEA.GVEA shat]sub- mit to APA a report,including alarm logs, documenting the causes of any system disturb- ance or failure and the remedial actions taken; 2.1.10 Cooperate with APA to install additional 'protective relaying,instrumentation,control systems or other apparatus required by APA; 2.1.11 Protect equipment,personnel,and the general 2012/516/6 -3- \, orc Section 3. public from hazards which arise from equipmentfailure(e.g.electrical faults,vandalism,and mechanical failure).GVEA will repair and re- port to APA,damaged facilities due to vandal- ism or negligence of other Parties.GVEA will notify APA as soon as possible after each equipment failure or repair; 2.1.12 Maintain all equipment within the guidelines set by the manufacturer unless otherwise di- rected by APA; 2.1.13 Respond to operational and maintenance requests or directives from APA; 2.1.14 Maintain the Intertie Facilities consistent with Prudent Utility Practice,National Elec- tric Safety Code,other applicable codes,fed- eral and state laws,regulations,requirements and standards,and the Alaska Intertie Mainte- nance Program Guide. 2.1.15 Provide,stock,and make available such equipment,materials,tools and parts as are described in the Alaska Intertie Maintenance Program Guide for maintaining the Intertie Fa- cilities. Responsibility of Intertie Owner 3.1 APA will make disbursements to GVEA and provide for an 3.2 3.3 Section 4. 4.1 2012/516/7 annual budget sufficient to satisfy the Intertie mainte- nance costs incurred by GVEA under this Agreement to the extent budgeted by GVEA and approved in advance by APA. APA will reimburse GVEA for the costs of labor,mate- rials,supplies,equipment,training and administration, as defined in Articles V and VII of this Agreement; APA agrees to make available to GVEA the specializedtoolsorotherequipmentrequiredtoperformunderthisAgreementasdefinedintheAlaskaIntertieMaintenanceProgramGuide. Inter-Project Assistance GVEA agrees to make available to APA on demand its skilled labor,equipment,and materials which are not im- mediately required by GVEA but which are required by APA to remedy a major defect or emergency at any location on the Alaska Intertie. -4.2 GVEA agrees to assist,as it determines it is able,inmanpower,equipment and supplies with AEG&T and CEA during times when major disasters or emergencies ariseinvolvingtheAlaskaIntertieFacilitiesthatAEG&T and/or CEA is under contract to maintain. Section 5.Prior Authorization 5.1 GVEA will secure written authorization from APA to make permanent alterations or replacements to Intertie Facil- ities except in emergency situations affecting the avail- - cability of the Intertie and not otherwise provided for in the annual approved budget,as outlined in Article VII. 5.2 GVEA will secure written authorization from APA to modify or adjust the settings of the Intertie's protective re- lays or alarms except in emergency situations.GVEA shall notify APA and the Operating Committee within 72 hours of such modifications,adjustments and changes. 5.3 GVEA will.secure written authorization from APA for any changes to recording,totalizing meters and associated instrument transformer settings. ARTICLE IV Maintenance Plan,Schedule and Budget Section 1.Maintenance Plan and Schedule Requirements 1.1 GVEA shall develop annually a plan and schedule for main- tenance of its portion of the Intertie Facilities.This plan and schedule shall be used for planning and trackingmaintenanceactivitiesandasthebasisforbudgetsub-mittals to APA. 1.2 The plan and schedule shall run from July first through June thirtieth of each year. 1.3 GVEA shall submit the annual plan,schedule and estimatedmaintenancebudgettoAPAnolaterthanMarch1eachyear.The plan,schedule and budget may be modifiedthroughnegotiationsbetweenGVEAandAPA.If agreementcannotbereachedbytheParties,the matter shall be submitted to the Operating Committee established under the Alaska Intertie Agreement for the Committee's reviewandrecommendations.If the Parties do not reach an agreement on the plan,schedule and budget resulting fromtheOperatingCommittee's recommendations,either GVEA orAPAmayterminatethisAgreementbygiving90dayswrit- ten notice to the other Party. 2012/516/8 -5- 1.4 1.5 1.6 Section 1. 1.1 1.2 Section 2. 2.1 2012/516/9 GVEA shall prepare and annually submit a three year ptap and budget of proposed major maintenance and improvenerts not done on an annual basis,e.g.,major equipment re- placement,and other projects deemed by GVEA tu be re quired to insure a continued safe and economical lrojeci. The three year plan shall be revised annually and submit- ted with the estimated annual maintenance piai. GVEA may subcontract maintenance work on the Intcrtie fa- cilities on the northern portion of the Intertic @:se- fined in Exhibit "B"using its standard practices and procedures for obtaining such subcontractors.Jf GVFA is unable to perform by itself or through its subcontrac- tors,APA shall have the right to perform the work. GVEA shall prepare and submit to APA a maintenance plan and budget for the first Fiscal Year of Intertie uxre-tion or portion thereof within 60 days of signina this contract. ARTICLE V Payment General APA will pay the amounts approved under the antuwei vit tenance budget in 12 equal installments on "ta i:.2.chy of each month. Should GVEA's total actual costs for @.Fisca@?"uv he less than the annual maintenance budget,GVEA wit'.picyAPAthedifferencebetweentheestimatedancaciurtcori within 90 days after the end of the Fisca?oui.ofnul.GVEA's actual costs fora Fiscal Year be more than iheannualmaintenancebudget,APA will pay GVEA the differ- ence between the estimated and actual costs within 90 days after the end of the Fiscal Year. Reconciliation On the fifteenth day of each month,GVEA will provide APA with a statement of the costs incurred and the expendi- tures for the previous month.The statements will coi- sist of cost summaries,invoices,and supporting docu- ments sufficient to provide an audit trail of the expern-ditures made under this Agreement and shall he broken down into the applicable categories utilized in tle sys- tem of accounts required of public utilities and licens-ees for electric plants by the Federal Energy Regulatory Commission. -6- -Section 3. 3.1 Section l. 1.1 1.3 Ade 1.4 Billing Disputes APA shall pay the full amount of the charges even where' APA disputes all or any part of the charges submitted pursuant to this Agreement.Within 90 days after GVEA submits a disputed charge,APA shall notify GVEA in writ- ing of the amount in dispute and the basis for the dis- pute.If the Parties cannot settle the dispute infor- mally or by agreement through the Operating Committee, either Party may file an action in the Alaska Superior Court for the Third Judicial District to obtain a de- cision resolving such dispute and to obtain any other remedy permitted by-law.Pending final resolution of any such dispute the Parties shall continue to perform under this Agreement. ARTICLE VI Accounts,Records and Audits Accounts,Records and Audits In keeping books of accounts for maintenance of the In- tertie Facilities,GVEA will follow the system of ac- counts prescribed for public utilities and licensees re- quired by the Federal Energy Regulatory Commission forelectricplants.GVEA shall allow its books of accounts, records,correspondence,accounting procedures and prac- tices and any other supporting evidence relating to thisAgreementto-be audited by APA or an agent of APA's choice and if made,such an audit shall be made before the expiration of 2 years after the close of any Fiscal Year.Such audits shall be performed at such times and in such manner mutually agreeable to APA and GVEA. GVEA will furnish APA or other Parties designatedby APAsuchoperatingandfinancialstatementsrelatingtomain- tenance of the Intertie Facilities as may be reasonablyrequestedbyAPA.If receipt of such operating and fi- nancial statements fis unduly delayed,APA may,with its own staff or agents,perform all work necessary to col-lect such data as is reasonably desired,but such work shall be performed at such times and in such manner as is mutually convenient to APA and GVEA.GVEA shall reim- burse APA for the cost of preparation of such statements. Records of the accounting system shall be maintained at the offices of GVEA in Fairbanks,Alaska. APA shall coordinate the establishment and maintenance of the records and accounts for the maintenance of the 2012/516/10 a7 -Intertie Facilities with CEA,AEG&T and GVEA.This shall be done so as to provide uniform records,accounts and procedures for the Intertie. ARTICLE VII Extraordinary Maintenance and Equipment Replacement Costs Section 1,Definition 1.1 Extraordinary Maintenance and Equipment Replacement Costs shall be those costs which are not included in the annual maintenance budget,but which must be incurred in order to insure the safe,economical and reliable transfer of electric power and energy on the Intertie Facilities. 1.2 When GVEA learns of an equipment failure or other contin- gency which,in GVEA's judgment,necessitates incurringanExtraordinaryMaintenanceandEquipmentReplacement Cost,GVEA shall promptly notify APA of the circum- Stances.GVEA shall obtain APA's written approval prior to incurring an Extraordinary Maintenance and EquipmentReplacementCost.However,if in GVEA's judgment,emer- gency circumstances require GVEA to incur such a cost prior to obtaining APA's approval,GVEA shall notify APAofthecircumstanceswithin72hoursafterdiscoveryoftheemergencysituation.GVEA shall make no extraordi- nary maintenance and equipment replacement expenditureforwhichtheapprovaloftheAPAhasbeenrequestedand expressly denied in writing. Section 2._Reimbursement 2.1 Within 30 days of receiving the billing,APA shall reim- burse GVEA for all Extraordinary Maintenance and Equip- ment Replacement Costs incurred by GVEA,except those ex- penditures which APA expressly disapproved. ARTICLE VIII Insurance and Liability Section 1.Requirements 1.1 During the term of this Agreement,GVEA shall purchase and maintain with a carrier or carriers satisfactory to the APA,insurance covering injury to persons or property suffered by any Participant or a third party,as a result of errors,omissions,or operations which arise both out of and during the course of this contract by GVEA or by any of its subcontractors.The coverage shall also 2012/516/11 -8- provide protection against injuries to all employees of GVEA and the employees of any of its subcontractors engaged in work under this Agreement.If approved by the APA,GVEA may self-insure for the Worker's Compensation Insurance and,up to a maximum of $250,000,for the other types of insurance required by this Article.A copy of the insurance policies and undertaking to self-insure,if any,will be furnished to the APA before beginning workunderthisAgreement. 1.2 GVEA will bear the cost of the required insurance.In- surance required to be maintained under Article VI may be maintained as part of any other policy or policies of GVEA so long as the coverage of such policy or policies is substantially the same as if such coverage were main- tained under a separate policy. 1.3.These policies must provide that any cancellation,non- renewal or material change be upon 30 days notice to all named insured.GVEA must provide the APA with evidence of insurance.Insurance companies,or self-insurers, shown on the certificate of insurance must have financial ratings acceptable to the APA.Failure to furnish satisfactory evidence of insurance or lapse of the policy is a material breach of this Agreement. Section 2.Types of Insurance: 2.1 The following insurance must be purchased by GVEA to cover the work of GVEA performed under this Agreement: 2.2.1 Worker's Compensation Insurance:GVEA shail provide and maintain,for all employees of GVEA engaged in work under this Agreement,Workers' Compensation Insurance as required by AS 23.30.045.GVEA is responsible for Worker's Compensation Insurance for any of its subcontractors who directly or indirectly pro- vide services under this Agreement.Each in- surance policy must include: 2.2.1.1 Statutory coverage for states in which employees are engaging in work; 2.2.1.2 Employer's Liability Protection intheamountof$2,000,000 per occur- rence; 2.2.1.3 Broad Form All States Endorsement; 2.2.1.4 Coverage as required by all State and 2012/516/12 -9- ES. 2.2. 2012/516/13 Federal Acts where applicable; 2.2.1.5 Voluntary Compensation Endorsement. The Worker's Compensation Insurance policy shall contain a waiver of subrogation in favor of APA.Any Participant who is self-insured hereby waives subrogation in favor of APA. Comprehensive General Liability Insurance: GVEA shall purchase and maintain comprehensive general liability insurance subject to the fol- lowing limits of liability: 2.2.2.1 Bodily Injury and Property Damage Liability of a minimum of $5,000,000 Combined Single Limits each occur- rence and affording insurance for Premises-Operations,Owners and Con- tractors'.Protective,Independent Contractors,Products/Completed Op- erations,Blanket Contractual Liabil- 'ity,Broad Form Property Damage,Per- sonal Injury Liability,Incidental Errors and Omissions. 2.2.2.2 Automobile Liability Insurance covering all vehicles.Such insur- ance shall provide coverage of not less than $5,000,000 Combined SingleLimiteachoccurrence.for 8odily In-jury and Property Damage Liability. 2.2.2.3 Owned Aircraft (if applicable)and Non-OQwned Aircraft with seating ca- pacity of five seats or less,except for commercial,scheduled flights, with limits of liability not less than:$5,000,000 -Bodily Injury per occurrence;$1,000,000 for Passenger Liability per seat;and $5,000,000forPropertyDamageLiabilityperoc-currence.Coverage must include Slung Cargo Exposures.If an air- craft with more than five seat capac- ity is used,special coverage and limits must be obtained and approved by APA. 2.2.2.4 Owned Watercraft (if applicable)and -10- Non-Owned Watercraft (if applicable) with limits of liability not less than $5,000,000 per occurrence as 'provided in the "In Rem Endorsement" under "Maritime Coverage B". 2.2.2.5 The APA shall be included as additional insured in insurance re- quired under this Article and shall not by its inclusion be responsible to the insurance carrier for payment of premiums therefore.These _insurance policies must also contain across liability or severability of interest endorsement. ARTICLE IX Representation Section 1.Authorized Representative i 1.1 The Parties shall each designate one representative to carry out the provisions of this Agreement.Within 30daysafterexecutionofthisAgreement,each Party shall notify the other Party in writing of its designated rep-resentative.Any Party may change its representative at any.time and shall promptly provide written notice of such change to the other Party. ARTICLE X Indemnity Section l.Indemnity 1.1 Each party as indemnitor shall,defend,indemnify,save and hold harmless the other party,its agents,servants, employees and officers as indemnitee from liability,in- cluding costs and expenses for claims for injuries or damages sustained by any person or property due to theindemnitor's acts or omissions under this contract. Section 2.Comparative Negligence 'ph akVo .2012/516/14 5 4 fiyiee BM 2.1 Each Party agrees that any liability,including costs of defense and attorney's fees,for claims arising from the concurrent negligence of the parties will be apportioned according to the respective percentage of fault attribut- able to each Party as determined by agreement or by the trier of fact. t+coo.baat tala ARTICLE XI Uncontrollable Forces Section 1, 1.1 Neither Party shall be considered in default in perfor- mance of any obligation hereunder,other than the obli- gation to make payments as provided in this Agreement,if failure of performance is due to uncontrollable forces and without the fault or negligence of either Party. Strikes,lockouts and other labor disturbances are con- sidered uncontrollable forces and nothing in this Agree- ment will require either Party to settle a labor dispute against its better judgment.If a Party to this Agree- ment,by reason of an uncontrollable force,is rendered unable,wholly or in part,to perform its obligations un-der this Agreement (other than its obligations to paymoney),then upon said Party giving notice and particu- lars of such uncontrollable force,its obligations to perform shall be suspended during the continuance of any inability so caused,but for no longer period,and the effects of such cause shall,so far as possible,be rem- edied with all reasonable dispatch;provided,however,that the settlement of labor disputes shall be considered wholly within the discretion of the Party involved.The affected Party will not be responsible for its delays in performance under this Agreement during delays caused by an uncontrollable force,nor shall such uncontrollable force give rise to claim for damages or constitute de- fault. ARTICLE XII Waivers Section 1. 1.1 Any waiver at any time by a Party of its rights with re- spect to a default under this Agreement,or with respect to any other matter arising in connection with thisAgreement,shall not be deemed a waiver with respéct to any other default or matter.Any delay short of the statutory period of limitations in asserting or enforcing any right shall not be deemed a waiver of such right. 2012/516/15 _i2- Section 1. 1.1 1.2 Section l. 1.1 Section 1. 1.1 Section 1. 1.1 ARTICLE XIII Successors and Assigns This Agreement shall be binding upon and inure to the benefit of the successors,legal representatives,or as- signs of the respective Parties.Neither Party,however, shall assign this Agreement nor any part hereof without the written consent of the other Party. The provisions of this Agreement shal]not create any rights in favor of any person,corporation,or associa- tion not a Party to this Agreement,and the obligations herein assumed are solely for the use and benefit of the Parties to this Agreement. ARTICLE XIV Governing Law This Agreement is made subject to and shall be governed and construed in accordance with the laws of the State of Alaska and the authority granted to the individual Parties thereunder. ARTICLE XV Captions Captions of the various articles herein are intended for convenience of reference only and shall not define or limit any of the terms or provisions hereof. ARTICLE XVI Notices Any notice or demand required by this Agreement shall be deemed properly given if sent by registered or certified mail and addressed to the Executive Director,Alaska Pow- er Authority,P.O.Box 190869,Anchorage,Alaska 99519; and General Manager,Golden Valley Electric Association, P.O.Box 1249,Fairbanks,Alaska,99707.The foregoing 2012/516/16 -13 - Section 2. designations of the name or address to which notices or demands are to be directed may be changed at any time by written notice given by one Party to the other Party. 2.1 Any notice or request not otherwise provided for in this Section 1. 1.1 Section 1. 1.1 Section 1. 1.1 Section 1. 1.1 Agreement shall be given in such manner as the Parties agree. ARTICLE XVII Amendments Neither this Agreement nor any part hereof may be ter- minated,amended,supplemented,waived,or modified ex- cept by an instrument in writing signed by both Parties. ARTICLE XVIII Contract Work Hours and Safety Standards t The Parties to this Agreement and any subcontractor con- tracting for any part of the work under this Agreement are subject to all applicable provisions of state andfederallawconcerningworkhoursandsafetystandards. ARTICLE XIX Equal Employment Opportunity The Parties to this Agreement and any subcontractor con- tracting for any part of the work under this Agreementaresubjecttoallapplicableprovisionofstateandfed-eral law concerning Equal Employment Opportunity. ARTICLE XX Exclusivity of Contract This Agreement and the exhibits attached to fit set forth the full intent of the Parties.This Agreement does not 2012/516/17 -14- Section 1. 1.1 supercede other agreements between the Intertie Partici- pants and is to be interpreted consistently with them. ARTICLE XXI Severability If any provision of this Agreement shall be finally adju- dicated by a court of competent jurisdiction to be inval- id or unenforceable,the remainder of this Agreement shall be unaffected by the adjudication and all the re- .maining provisions of this Agreement shall remain in full force and effect as if the invalid provision had not been included herein. 2012/516/18 -15 - ARTICLE XXII Approvals and Conditions of Obligation In WITNESS WHEREOF,the Parties hereto have caused this Agreement to be executed in quintuplet by their duly authorized officers or representatives and their corporate seals to be hereunto affixed as of the day and year first above written. APPROVED AS TO FORM ATTORNEY GENERAL ana i AUTHORITY :wht a Lew Executive Director (Title) SUBSCRIBED AND SWORN TO before me this 7th day of January ,1988 last written.7 (| No Pu Tlic,Stata pf Ajaskamedietdonehiney8/31/90 GOLDEN VALLEY ELECTRIC ShiteWw AUl.Micheal taty”\eeSUBSCRIBEDANDSWORNTObeforemethishikedayofAdve.-5198%last written. My ami ssion Expires 2012/516/19 -16 - >WWPDEXHIBIT A ALASKA INTERTIE MAINTENANCE AGREEMENT BETWEEN ALASKA POWER AUTHORITY;AND GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. ABBREVIATIONS AND DEFINITIONS Abbreviations APA -Alaska Power Authority CEA -Chugach Electric Association GVEA -Golden Valley Electric Association AEG&T -Alaska Electric Generation &Transmission Cooperative, Inc. Definitions Fiscal Year -That period of time from July first through Junethirtiethofeachyear. Intertie -The transmission facilities owned by or under con- tract to the Alaska Power Authority interconnecting the Inter-tie Participants.These facilities consist of approximately170milesof345kV(initially to be operated at 138 kV) transmission line and five substation facilities located at Gold Hill,Healy,Cantwell,Douglas and Teeland. Intertie Agreement -The Alaska Intertie Agreement between the Intertie Participants for the interconnection and operation ofelectricutilitysystems. Intertie Facilities -All of the physical facilities located within the confines of the Intertie system which provide orsupportthetransmissionofelectricalenergy. Intertie Participants -The Participants of the Alaska Inter- tie Agreement including the following: ALASKA POWER AUTHORITY MUNICIPALITY OF ANCHORAGE,ALASKA,DBA; ANCHORAGE MUNICIPAL LIGHT AND POWER; CHUGACH ELECTRIC ASSOCIATION,INC.; 2012/516/20 EXHIBIT A -1 of 3 aealeyASE Es CITY OF FAIRBANKS,ALASKA;DBA; MUNICIPAL UTILITIES SYSTEM, GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.;and ALASKA ELECTRIC GENERATION &TRANSMISSION COOPERATIVE,INC. Maintenance Program Guide -APA standard that sets the re- quirements and schedules for the maintenance of the Alaska Intertie. Midpoint of the Intertie -The midpoint of the Intertie is at Structure No.382.The structure is Type E,a 45°L,three guyed.deadend structure.It is located approximately 84.6miles(along the transmission line)from the initiation point at the Douglas Substation. Operating Committee -The Committee established by Article 9 of the Alaska Intertie Agreement. Prudent Utility Practice -Prudent Utility Practices is de- fined as any practices,methods and acts which,in the exer- cise of reasonable judgment in the light of the facts (includ- ing but not limited to the practices,methods and acts engaged in or approved by a significant portion of the electricalutilityindustrypriorthereto)known at the time the decision was made,would have been expected to accomplish the desiredresultatthelowestreasonablecostconsistentwithreliabil- ity,safety and expedition.In applying the standard of Pru-dent Utility Practices to any matter under this Agreement,eq-uitable considerations should be given to the circumstances,requirementsand obligations of each of the Parties and thereshallbetakenintoconsiderationthefactthatthePartiesareacooperativeorpubliccorporationandpoliticalsubdivi- sion of the State of Alaska with prescribed statutory powers, duties and responsibilities.It is recognized that Prudent Utility Practice is not intended to be limited to the optimum practices,methods or acts to the exclusion of all others,but rather is a spectrum of possible practices,methods or actswhichcouldhavebeenexpectedtoaccomplishthedesiredre- sult at the lowest reasonable cost consistent with reliabil- ity,safety and expedition.Prudent Utility Practices includedueregardformanufacturers'warranties and the requirementsofgovernmentalauthoritieshavingjurisdiction. ALASKA POWER AUTHORITY0MLLEE Executive Director (Title) 2012/516/21 EXHIBIT A -2 of 3 SUBSCRIBED AND SWORN TO beforeme this qth198%last written. GOLDEN VALLEY ELECTRIC (NG..ov MA AU MichaelP.Kelly(T SUBSCRIBED AND SWORN TO before me this __//'*"aay of Mee|,198%last written. 2012/516/22 Hephettt bhciln,.Notgry Public,State o#Alaska My Commission Expires EXHIBIT A -3 of 3 EXHIBIT B ALASKA INTERTIE MAINTENANCE AGREEMENT BETWEEN ALASKA POWER AUTHORITY AND GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. MAJOR EQUIPMENT MAJOR EQUIPMENT OWNED BY APA TO BE MAINTAINED AS PART OF THE INTERTIE IN THE HEALY,CANTWELL AND GOLDHILL Quantity SUBSTATIONS Descriptions HEALY SUBSTATION 1 2021/515/23 Power transformer (HLS-T8) 20/26.7/33.3MVA,138 GRDY-12KV,3 phase,60HZ, Federal Pacific . Circuit switcher (HLS-1S28} 161KV,1200A,3 phase,60HZ,S&C Electric Company Gas circuit breaker (HLS-1B17) 169KV,1200A,3 phase,60HZ,Westinghouse Disconnect switch with motor operator (HLS-3S26,HLS-3S27)161KV,1600A,3 phase,60HZ Disconnect switch (HLS-3S24,HLS-3S25) 161KV,1600A,3P.S.T.,vertical break with crank type operator Static Var system 12KV metalclad switchgear Voltage transformers 80,500-115/67.08V Remote terminal unit (RTU) Bubble memory recorder Relays and meters EXHIBIT B -1 of 3 -ol Synchronizing equipment 1 Sequential event recorder Cantwell Substation 2 Motor operated disconnect switch (CWS-3S1,CWS-3S2) 161KV,1200A,3 phase,60HZ 1 Circuit switcher (CWS-1B1) 161KV,1200A,3 phase,60HZ,S&C Electric Company 1 Transformer (CWS-T1) SMVA,138 -24.9Y/14.4KV with LTC,60 HZ 3 Circuit reclosers (CWS-1R1,CWS-1R2,CWS-1R3) 24.9KV,560A,3 phase,60HZ,McGraw-Edison 1 Control Building -Control panels,battery and battery charger -AC and DC panelboards,remote ter- minal unit (RTU)and communication equipment Goldhill Substation l.Power transformer (GHS-T1) 60/80/100MVA,138-69-13.8KV,3 phase,60HZ, Westinghouse 2.13.8KV metalclad switchgear 3.,Static Var system 4,Remote terminal unit (RTU) 5.Synchronizing equipment 6.Sequential event recorder 7.Relays and meters 2021/515/24 EXHIBIT B -2 of 3 SO Ty,Seepa es Sees ALAS OWER AUTHORITYwae,LA Executive Director (Title) SUBSCRIBED AND SWORN TO before me this _7th day of January,198%last written.|tlPubyic skaiisston'Et*ehpitdssda th _GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. Wh.KY, MichaelP.Kelly (Title SUBSCRIBED AND SWORN TO before me this [1 T™aay of Adee,19 ilastwritten. ow My Commission Expires 2021/515/25 EXHIBIT B -3 of 3 ESOS gory ALASKA INTERTIE AGREEMENT Among :ALASKA POWER AUTHORITY MUNICIPALITY OF ANCHORAGE,ALASKA d.b.a.MUNICIPAL LIGHT AND POWER; CHUGACH ELECTRIC ASSOCIATION,INC.; CITY OF FAIRBANKS,ALASKA, MUNICIPAL UTILITIES SYSTEM;and GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.; and ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE,INC. Article Article Article Article Article 5. Article Article Article 8.WWWfeWNHHCoCOCOC&WheTABLE OF CONTENTS Definitions Term and Effective Date 2.1 Effective Date 2.2 Termination General Interconnected Operation Utility Responsibility Curtailment of Service Other Agreements Utility Participant Associate Participant Associate ParticipantAssociateParticipant's Participation Addendum No.1 to the Agreement Reserve Capacity Agreement Signatories Minimum Rights of the Utilities to Use the Intertie Facilities Minimum Intertie Transfer Capability Rights (MITCR)Determination of the Minimum Intertie Transfer Capability Rights (MITCR) Intertie Transfer CapabilityModificationsandAdditions to the Intertie Cantwell Tap Susitna Construction Power Bradley Lake Hydro Electric Generation Project Cost to Utility Participants for Intertie Transfer Capability Rights Intertie Costs Calculation of Unit Intertie Costs , Initial Calculation of Unit Intertie Costs Allocation of Intertie Costs rdWoke)ite)coOoCOs)LoLes)boBhbehoF:cy)tHopOoOo Article Article Article Article Article Article 9. TABLE OF CONTENTS (Cont'd) Operating Committee Establishment of the Operating CommitteeProceduralResponsibilitiesofthe Operating Committee Operating Committee Authority,Procedures and Appeal Procurement of Services Waiver of Payment or Right to Recourse Operation of the Intertie Responsibility for Operation of the Intertie Suspension of Work in Performance of Duties of the Intertie Budget for Operation of the Intertie Accounting and Records Audits Payment of Operators Scheduling of Power and Energy on the Intertie Scheduling Responsibility Power and Energy Schedules Intertie Schedule Limitations Maintenance of the Intertie Facilities Maintenance Responsibility Maintenance Budget and Costs Measurement of Electric Power and Energy Metering Transmission Losses Intertie Transmission and Transmission Service Intertie Transmission Loss Compensation Losses Transmission Service Transmission Service to Access the Intertie Provision for Adequate Transmission Service Facilities Compensation for Transmission Service Transmission Service Rates , Li Article Article Article Article Article Article Article Article Article Article Article Article Article anyWNHEe22.1 22.2 27. 28. Addendum No.1 Article A TABLE OF CONTENTS (Cont'd) Reserve CapacityAnnualAccredited Capability Responsibility iii Page Billing and Payments 32 Billing 7 32 Dispute of Billing 32 Insurance and Liability 33 Insurance 33 Types of Insurance 33 Other Insurance Coverage Requirements 35 Indemnity 35 Indemnity 35 Comparative Negligence 36 Warranty Denial and Exlusivity of Contract 36 APA Denial of Warranty 36 Exclusivity of Contract 36 Uncontrollable Forces 36 Waivers 37 Successors and Assigns 37 Successors and Assigns 37 Third-Party Beneficiaries 38 Governing Law 38 Captions 38 Notices 38 Amendments 39 Agreement Approvals and Transmittal 39 Construction of Agreement 39 1-17 TABLE OF CONTENTS (Cont'd) Article B Responsibility for Operating Reserves B-2.1 Operating ReserveB-2.2 Total Operating Reserve ObligationB-2.3 Utility Participants Allocation of Operating ReserveB-2.4 Operating Reserve Calculation. Exhibit Exhibit Exhibit Exhibit "A"Abbreviations and Definitions (Abbreviations:1-9) (Definitions:1-43) "B"Tllustration of Intertie Facilities "C"Alaska Intertie Operating Agreement Transmission Service Rates APA "D'"Minimum Intertie Transfer Capability Rights Determination Example iv ALASKA INTERTIE AGREEMENT Among ALASKA POWER AUTHORITY; MUNICIPALITY OF ANCHORAGE,ALASKA, d.b.a.MUNICIPAL LIGHT AND POWER; CHUGACH ELECTRIC ASSOCIATION,INC.; CITY OF FAIRBANKS,ALASKA, MUNICIPAL UTILITIES SYSTEM; GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.;ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE,INC. This agreement (hereinafter "Agreement"),is made and enteredintothis32.3,,/day of Prcmn,4q-__»1985,between ALASKAPOWERAUTHORITY,public corporation of the State of Alaska("APA");THE MUNICIPALITY OF ANCHORAGE,ALASKA,d.b.a.MUNICIPALLIGHTANDPOWER,a municipal corporation (C"AMLP");CHUGACHELECTRICASSOCIATION,INC.,a non-profit electric cooperativemembershipcorporationoftheStateofAlaska("CEA");THE CITY OF FAIRBANKS,ALASKA,MUNICIPAL UTILITIES SYSTEM,a municipalcorporation("FMUS");GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.,.anon-profit electric cooperative membership corporation of theStateofAlaska.("GVEA");and ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE,INC.,("AEGTC")of which Homer Electric Association,Inc.("HEA")and Matanuska Electric Association, Inc.("MEA")are members.These entities are sometimes hereinafter referred to individually as "Participant"orcollectivelyas"Participants".The Participants other than APAaresometimesreferredtoindividuallyas"Utility Participant"or collectively as "Utility Participants.' WITNESSETH WHEREAS,AMLP,CEA,FMUS,GVEA,and AEGTC each own and operate electric utility facilities,or will in the future,and are each engaged in the business of providing electric Power and Energy to customers,and WHEREAS,APA is constructing the electrical transmission facilities to interconnect the Utility Participants in Northcentral Alaska with the Utility Participants in SouthcentralAlaska("Intertie")and is willing to make these electricaltransmissionfacilitiesavailabletotheUtilityParticipantsfor electrical Power and Energy transactions to improve reliabilityandeconomicalPowerandEnergydeliveriestotheUtility Participants'customers under the Alaska Energy ProgramestablishedbyA.S.44.83.380;and WHEREAS,the Utility Participants desire to improve theirreliabilityandengageintransactionsofelectricalPowerand -l- Energy with each other under individual contractual arrangementsbetweentheUtilityParticipantsusingtheIntertie;and - WHEREAS,the Intertie will interconnect the electric utility systems so that they will be operated in electrical synchronism; and WHEREAS,the Utility Participants desire to establish individualrightsforthetransfercapabilityoftheIntertieandamethodofdeterminingcostsfortheserights;and . WHEREAS,AMLP,CEA,FMUS,GVEA,and AEGTC have,in addition, entered into a separate agreement providing for Reserve CapacityandOperatingReserveResponsibilitywhichisincludedasAddendumNo.1 to this Alaska Intertie Agreement,the purpose oftheAddendumbeingtoprovideaseparateagreementoftheUtility Participants with respect to Reserves; NOW,THEREFORE,IN CONSIDERATION.of the mutual covenants in thisAgreement,the Participants agree as follows: ARTICLE 1 Definitions Definitions are specified as Exhibit "A"attachedheretoandincorporatedhereinbythisreference.Exhibit "A"shall remain in effect during the term of this Agreement,but may be amended as agreed in writing by all the Participants. ARTICLE 2 Term and Effective Date Section 2.1 Effective Date This Agreement will become effective as of thedatesetforthaboveandwill,unless otherwise terminated as provided for in this Agreement,continue in effect until terminated as provided for in Section 2.2 of this Article.No costs will be assessed against the Participants under thisAgreementuntiltheIntertieisinCommercialOperation.No Participant assumes any obligationbysigningthisAgreementuntilallnamed Participants have signed. Section 2.2 Termination 2.2.1 .This Agreement may be terminated at any timé by 2.2.2 2.2.3 Section 3.1 3.1.1 3.1.2 3.1.3 mutual consent of all Participants. Any Participant may terminate its participation inthisAgreementbygivingatleast48monthsadvancewrittennotice.APA may terminate thisAgreementbygivingatleast48monthsadvance written notice when APA determines such action to be required to improve Power systems serving theAlaskaRailbeltUtilities.Unless it is otherwise agreed any Participant which terminates its participation will continue to be liable only forIntertie-related costs due and payable before thedateofitstermination. Any Participant shall have the right to terminateitsparticipationinthisAgreementwithin30calendardaysfollowingAPA's encumbrance of anydebtobligationwhichisacostrecoverablebyAPAunderArticle8ofthisAgreement.APA shallnotifyallParticipantsinwritingatleast90calendardaysinadvanceofanencumbranceofsuch debt obligation,including the amount and terms oftheobligation.Each Participant shall notify APAinwritingofitsintentioneithertoterminateor not to terminate its participation in this Agreement within 60 calendar days followingreceiptofsuchAPAnoticeofitsintentionto encumber a debt obligation. ARTICLE 3 General Interconnected Operation Participants shall cooperate and assist in atimelymannerintheenergization,testing and operation of the Intertie so as not to impair or delay the interconnected operation of the Intertie. Participants shall operate their electrictransmissionsystemsinterconnectedand_shallcooperateinfurnishingorreceivingthroughthepoint(s)of interconnection of their systems such quantities of electric Power and Energy as mayfromtimetotimeberequiredbyagreementbetweentheParticipantsinaccordancewiththetermsand provisions of this Agreement.. The systems of the Participants shall operateinterconnectedcontinuouslyundernormal 3.1.4 3.1.5 3.1.6 3.1.7 3.1.8 conditions and the Participants shall cooperate in keeping the frequency of the interconnectedsystemsoftheParticipantsat60Hzascloselyaspracticable,and in keeping the interchange ofPowerandEnergybetweenthesystemsoftheParticipantsascloselyaspracticabletothescheduledamounts.If synchronous operations of the Participants'systems are interrupted,the Participants shall cooperate to remove the causeoftheinterruptionassoonaspracticableandrestoretheirsystemstonormalinterconnected operating condition. Participants shall maintain standards establishedbytheOperatingCommitteeforthecontroloftimeerrorandshalltakeappropriatecorrectiveaction to reduce time error upon receipt of a time errorcorrectionnotification.The Intertie Operator of the Southern Group has the responsibility toimplementthetimeerrorcorrectionproceduresasdevelopedbytheOperatingCommitteeestablished under Article 9.In addition,the Intertie Operator of the Southern Group will coordinate each time correction to assure that it will start and end at the same time and will be made at the same rate by all interconnected systems. The systems of the Participants shall normally beoperatedandmaintainedtominimize,in accordance-with Prudent Utility Practices,the likelihood ofadisturbanceoriginatinginthesystemofoneParticipantcausingimpairmenttotheserviceofthesystemofanotherParticipantorofanyothersystemwithwhichanyParticipantis interconnected.; Each Participant shall be responsible for thereactivevolt-ampere requirements of its system.Reactive volt-amperes may be interchanged betweensystemsfromtimetotime,subject to agreement between the Participants. Each Participant shall maintain voltage levels onitssystematanypointofinterconnectionasaredeemedappropriatebytheOperatingCommitteeandarecompatiblewithinterconnectedoperationswith other systems. To the extent it can be controlled,no Participant shall impose any abnormal load upon the facilitiesofanotherParticipant.If emergency conditionsariseonthesystemofoneParticipantwhich -h- 1.9 overload the facilities of another Participant, the Participant upon whose system the emergency arises shall take steps immediately to reduce the load on such overloaded facilities to their safe and proper capacity,even though this may require that Participant to drop load. Unintentional interchange of Power and Energybetweeninterconnectedsystemswilloccurbecause of the impossibility of continuously controllinggeneration.exactly to equal the load.It isrecognizedthat,due to the manner in which the systems of the Participants are interconnected ormaybeinterconnectedwitheachotherandwith other systems,a portion of the Power and Energy scheduled for delivery between two such interconnected systems may not flow directly from the supplier to the receiver over the intendedroutethroughthetransmissionsystemsoftheParticipants,but may resultin inadvertent flowsthroughothersystems.Therefore,because of these conditions: 3.1.9.1 All intentional Power and =Energydeliveriesbetweenthesystemofone Participant and the system of another Participant will be scheduled in advance. 3.1.9.2 It shall be the responsibility of each Participant to maintain the net PowerandEnergyflowingintoandoutofitssystemduringeachhour so_thatdeliveriesare,as near as practicable, equal to the net scheduled amount.Thedifferencebetween.the net scheduled deliveries and the actual net deliveries will be balanced out in-kind in accordance with principles and practices established by the Operating Committee. 3.1.9.3 When there is a scheduled Power and Energy delivery by one Participant toanotherParticipant,and a portion of the scheduled Power and Energy actually flows through other systems which are not part of the scheduled transmissionpath,the portion of the Power andEnergyflowingthroughsuch_othersystemswillbeconsideredashavingbeendeliveredbythescheduledsupplier by the scheduled transmission path. -5- 3.1.10 3.1.11 3.1.12 3.1.9.4 It is not the intent to grant any Participant any right generally to use the system of any other Participant as an intermediary in Power and Energy flows,mor will the consent by aParticipanttoanysuchinadvertentflow through its system in a particular case create any right for the continuance of such flows.When such inadvertent flow is objectionable to a Participant experiencing the flow,the Participants shall cooperate to prevent such flow from occurring normally and to minimize inadvertent flows of this character. Each Participant shall provide on its electric system the necessary communications,telemeteringandcontrolfacilitiesatthepointsof interconnection and other appropriate locations. In addition to meter records,the Participants shall keep such log sheets and other records (as determined by the Operating Committee)as may beneededtoaffordaclearhistoryofthevarious scheduled and actual movements of Power and Energy into and out of the systems of the Participants.The originals of all such meter records,logsheetsandotherrecordsshallbeopento inspection during normal business hours'byrepresentativesofeachParticipant.EachParticipantshallfurnishtotheOperatingCommitteeappropriatedatafrommeterregistrationsandothersourcesonthetimebasisrequiredbytheOperatingCommitteewhensuchdataisusefulforsettlements,special tests, operating records or for other purposes not inconsistent with this Agreement. All Intertie Power and Energy transfers between the Participants shall be scheduled in advance andallIntertiebillingsshallbebasedonthoseschedulesratherthanonmeteredquantities.Each Participant will notify the Intertie Operatordispatcher(s)and other Participants with which itisdirectlyinterconnectedbeforeintentionally taking Power or Energy.Additions or modifications to these established schedules may be made by the dispatchers of the ParticipantspursuanttocriteriaestablishedbytheOperating Committee. Section 3.2 3.2.1 3.2.2 3.2.3 3.2.4 3.2.5 Utility Responsibility Each Utility Participant is responsible for itsownrealandreactiveload,plus'reservesnecessaryandadequatetomeetitsrespectiveobligations,and will operate and maintain its system and perform all duties and exercise all rights under this Agreement in a manner consistentwithPrudentUtilityPractices. Each Utility Participant will be responsible foritsReserveCapacityObligationandaportionoftherequiredinterconnectedsystemOperatingReservesasprovidedforinAddendumNo.1 to this Agreement. Each Utility Participant will implement =anautomaticloadsheddingsysteminaccordancewith the criteria developed by the Operating Committee.When such criteria require installation of acoordinatedautomaticloadsheddingprogramapplicabletoaUtilityParticipantanditswholesaleelectricutilitycustomers,the UtilityParticipantmustseethatsuchaprogramisimplementedonthewholesaleelectricutilitycustomer's system.In the alternative,if such aprogramisnotimplemented,the UtilityParticipantmustprovidetheequivalentofthewholesaleelectricutility's program requirementandinstallitontheUtilityParticipant's ownutilitysystem,which may include,if the wholesale utility customer is not participating intheprograminafashionthatmeetssuchcriteria, automatic shedding of the wholesale utility'stotalsystemifnecessary.In accordance with the guidelines established by the Operating Committee, Utility Participants shall coordinate,operate and set automatic load shedding systems to achieve maximum benefits to Participants. Through the Operating Committee,Participantsshallcoordinatethesettingandoperationof protective relays and control devices so as to maximize protection of facilities without unnecessarily restricting Power flow or inhibiting system reliability. Utility Participants shall regulate the intercon- nected system real and reactive Power flow and voltage as required by the Imntertie Operators, which shall be in accordance with the procedures set down by the Operating Committee. -7- Section 3.3 Section 3.4 Section 4.1 4.1.1 4.1.2 Curtailment of Service Except as otherwise specifically prohibited,anyUtilityParticipantwillhavetherighttorefuse to deliver Power or Energy under this Agreement,or,having begun such delivery,to curtail, restrict or discontinue such delivery,whenever,in such Utility Participant's judgment,suchdeliverywillendangeritsfacilitiesorinterferewithitsobligations,now existing or hereafter created consistent with this Agreement,to its customers or to other electric utilities. Other Agreements The respective systems of the Participants are nowormaybeinterconnectedwithothersystems,andotheragreementsforinterconnection,mutual assistance,pooling,Power supply and transmission services may exist.Future agreements may beenteredintobetweenParticipantsandother systems provided they are not in conflict with anyprovisionofthisAgreement.The ParticipantsagreetoconductoperationsunderanyexistingagreementstoavoidaconflictwiththisAgreement.While the Participants intend toassisteachotherwhenrequested,such other agreements may limit the capabilities available to the Participants to provide assistance under thetermsofthisAgreement. ARTICLE 4 Utility Participant Utility Participant An electric utility holding a Certificate ofPublicConvenienceandNecessityfromtheAlaska Public Utilities Commission,or an organization whose members hold such a certificate and normally operate interconnected with a Participant or Participants signatory to this Agreement,may at its option become a Utility Participant under this Agreement.APA will become a Utility Participant at such time as it sells Power to a party that is not a Participant and is connected to theParticipants'interconnected system. An electric utility seeking Utility Participantstatusshallgive48monthswrittennoticetothe Participants of its intention.Such changes or modifications to this Agreement necessary to -8- 4.1.3 Section 5.1 5.1.1 5.1.2 5.1.3 Section 5.2 5.2.1 provide for an additional Utility ParticipantshallbemadebyanaddendumtothisAgreementsignedbyallparties. An electric utility can have Participant statusandrepresentationthroughoneorganizationorcorporateentityonly.No Participant is to havemorethanonevoteorrepresentativedirectlyorindirectlythroughanotherorganizationwithwhichitisaffiliated.It is the intent of this Section to limit Participant representation and voting so that no Participant can control or exercise control through any organizationalstructuremorethanitssingleParticipantstatus. ARTICLE 5 Associate Participant Associate Participant An electric utility holding a Certificate ofPublicConvenienceandNecessityfromtheAlaskaPublicUtilitiesCommission,or an organizationwhosemembersholdsuchacertificateandnormallyoperateinterconnectedwithaParticipantmaybecomeanAssociateParticipantbycomplyingwithSubsection5.1.2 of this Section.The Alaska Power Administration may become an AssociateParticipantbycomplyingwithSubsection5.1.2 ofthisSection. An electric utility desiring Associate ParticipantstatusshallnotifyAPAinwriting.In the notice,the Associate Participant must designate the name and address of a person to receivecorrespondence. Upon receiving written notice of an electric utility desiring Associate Participant status,APAshallnotifyallParticipants.The Associate Participant shall receive all subsequent notices, meeting minutes,reports,all correspondence pertaining to this Agreement,and will be notified of the scheduled meetings on a timely basis. Associate Participant's Participation An Associate Participant will have the right to attend all meetings and receive copies of notites, meeting minutes and reports on the activities involving this Agreement. 5.2.2 An Associate Participant may participate in themeetings,but its vote or input on the activities andoperationsoftheIntertiewillbethroughaUtilityParticipantwithwhomtheAssociateParticipantisdirectlyinterconnected. ARTICLE 6 Addendum No.1 to the Agreement Section 6.1 Reserve Capacity Agreement Signatories. Utility Participants who sign this Agreement shallalsosignAddendumNo.1,Reserve Capacity andOperatingReserveResponsibility,attached to thisAgreement.If additional Utility ParticipantssignthisAgreement,they must also sign AddendumNo.l. ARTICLE 7 Minimum Rights of the Utilities to Use the Intertie Facilities Section 7.1 Minimum Intertie Transfer Capability Rights 1l.1 7.1.2 7.1.3 ("MITCR"). Utility Participants shall have the right of firstrefusaltoanallocatedportionofthemaximumIntertietransfercapabilityplusanallotmentofcapabilitynotscheduledorusedbytheotherParticipantsforthepurposeoftransmittingorreceivingPowerandEnergyovertheIntertie. The Intertie transfer capability shall be sharedinproportiontothesizeoftheUtility Participants of the Northern and Southern GroupsasdescribedinSection7.2 of this Article.If a Utility Participant is not using all or part of its MITCR in each direction,other Utility Participants have the right to use that unused part to make transfers across the Intertie,either as a purchase or sale of Power and/or Energy.Inadditiontoitsminimumrights,each Utility Participant shall have a right to an allocation of any unscheduled or unused MITCR of the other Participants. During emergencies when it is necessary to use theIntertietotransferEnergytomaintainsystemintegrity,a Participant's MITCR will be adjusted until such Energy is rescheduled as Scheduled Outage service.To the extent practical such MITCR adjustment shall be shared proportionally among the Participants. -10- Section 7.2 7.2.1 7.2.2 7.2.3 Determination of the MITCR The Operating Committee shall determine the MITCR by June first each year,or when a new ParticipantbecomesapartytothisAgreement.The MITCR ofeachParticipantshallbecalculatedasfollows: The MITCR shall be determined by June 1 each year based on the average of thethreemostrecentAnnualSystemDemands of the Utility Participants.The MITCR for the remaining portion of the initial fiscal year is set out in Exhibit D.Temporary reductions of MITCR may berequiredforinterimperiodsduetomaintenance,safety or equipmentfailure.The MITCR shall be determined separately for the Utility Participants of the.Northern Group and of theSouthernGroup.A Utility Participant'sMITCRshallbetheratioofitsaverage Annual System Demand to the sum of theaverageAnnualSystemDemandsofitsrespectivegroupmultipliedbytheIntertietransfercapabilityofthe Intertie.(Exhibit D of this Agreement contains a determination of the initial MITCR.) The minimum Intertie transfer capability not scheduled or used by a Participant shall beavailabletotheotherParticipantsinthesame group (i.e.,Northern or Southern)on an allocatedbasisinthesameproportionastheirMITCRisto the total MITCR of their group.A Participant whose unused MITCR is being used by other Participants shall have the right to make use ofitsfullentitlementimmediatelyuponnotification of the Participants who are using all or a portion of its MITCR. A Participant has the right to transfer on acontractbasisallorpartofitsMITCRtootherParticipantswithreasonablewrittennoticetoallParticipants.A Participant whose unused MITCR isbeingusedbyanotherParticipantshallbepaidatitsrequestbytheusingParticipantaproratedamountoftheIntertieCapacityRatedeterminedby the following formula:* -1l1- Section 7.3 Nb 3 paseVRSOM,1.15 Section 7.4 7.4.1 7.4,2 P =ICR x CP x HR/THR "P -is the monthly payment due the Participant whose MITCR,or portion thereof,is being used by another Participant; ICR -is the Intertie Capacity Rate defined in Section 8.2.6 of this Agreement; CP -is the average amount of capacity in kilowatts which is used by another Participant; HR -is the number of hours in the month during which the unused MITCR was scheduled by another Participant; THR -is the total number of hours in the month. Intertie Transfer Capability The maximum Intertie transfer capability of the Intertie is 70 MW.The Operating Committee,with the approval of APA,may establish a differentmaximumIntertietransfercapability.NoprovisionofthisAgreementshallprohibitAPAfromreducingthemaximumIntertietransfercapabilityduringperiodsformaintenance,equipment failure,safety considerations or otherreasonablecausesinvolvingPrudentUtility Practices.Such temporary reductions of maximumIntertietransfercapabilityshallproportionallyreducetheMITCRofeachUtilityParticipantfor that temporary period. Modifications and Additions to the Intertie Modifications and additions to the Intertie shall be designed and constructed so as not to reducetheIntertiereliability,subject to Prudent Utility Practice and reasonable economics.Designforsuchmodificationsshallbesubmittedtothe Operating Committee for review and comment.ThecommentsoftheOperatingCommitteeshallbe incorporated into the design of the modificationsandadditionsastheyrelatetotheoperationand reliability of the Intertie. APA shali have the right to make additions, deletions or changes to the Intertie includingtapstothelinetoprovideelectricalservicesatlocationswhichitdeemsbeneficialand -12- 7.4.3 7.4.4 Section 7.5 Section 7.6 reasonable.Costs related to modifications or additions covered by this Section 7.4.2 will notbechargedtotheParticipantsasacostof Intertie use unless such modifications are of direct benefit to the Participants as determined in advance by the Operating Committee. Participants shall have the right to requestadditions,deletions or changes to the Intertie. The request shall be in writing to APA with justification for the addition,deletion or change.APA will not unreasonably withhold makingsuchadditions,deletions or changes.Anymodificationshallbeattheexpenseofthe requesting Participant(s)unless such modification is of direct benefit to other or all ParticipantsasdeterminedinadvancebytheOperating Committee,in which case the Operating CommitteeshalldeterminehowtheUtilityParticipantswillsharethecost. APA shall give reasonable notice to all Participants before making any modification as provided herein. Cantwell Tap The electric utility serving the community ofCantwell,Alaska located along the route of the Intertie transmission line shall have the right to'use Intertie capacity to provide electric service>to Cantwell customers.When the utility is a Participant to this agreement,such requiredcapacitywillbeprovidedbythatParticipant's.MITCR.The cost of this service to this utility will be the same as for the Participants under Article 8 of this Agreement.The cost of a substation and associated facilities necessary to provide transmission access to the Intertie shall not be borne by the Utility Participants as part of the cost of the Intertie. Susitna Construction Power APA is responsible for providing Power and Energy for construction of the Susitna Hydro Electric Project.APA reserves the right to tap the Intertie and use Intertie capacity as required forconstructionPowerfortheSusitnaProject.Terms and conditions applicable to such a tap shall be subject to negotiation and agreement by all Participants. -13- Section 7.7 Section 8.1 8.1.1 Bradley Lake Hydro Electric Generation Project APA shall have the right to transfer'to participants in the Bradley Lake Project Power and Energy on the Intertie subject to the terms of this Agreement. ARTICLE 8 Cost to Utility Participants for Intertie Transfer Capability Rights Intertie Costs Costs incurred in operating and maintaining theIntertieandtheAnnualDebtServiceonanybonds or other debt issued by APA for the initial Intertie facilities,including the debt incurred on renewals and replacement of those facilities, shall be shared by the Utility Participants. Intertie costs shall be shared by the Utility Participants in accordance with Alaska Statute 44,83.398(£)which includes,at a minimum,the following costs: 8.1.1.1 "Operation and Maintenance Costs"are -all operation costs as provided for in'Article 10 of this Agreement and all maintenance costs as provided for in Article 12 of this Agreement,plus anyapplicabletaxes,but excluding.uninsured liability resulting from deductible provisions of propertyinsurancepolicies.The cost ofTransmissionServicefortheIntertie Facilities owned by Matanuska Electric Association as provided for under the "Transmission Service Agreement between Matanuska Electric Association,Inc., which is a member of AEGTC,and Alaska Power Authority,"dated »shall be a part of the Operation and Maintenance Costs under this Article 8. 8.1.1.2 "Extraordinary Maintenance and Replace- ment Costs''are uninsured liability resulting from deductible provisions ofpropertyinsurancepolicies,costs offacilitymaintenance,renewals,andreplacements.- 8.1.1.3 "Annual Debt Service Cost"is interest on,and amortization charges sufficient -14- 8.1.2 8.1.3 Section 8.2 8.2.1 8.2.2 to retire,any bonds or other debt issued by APA for construction of the Intertie,plus the debt service coveragefactordeterminedbyAPAtobenecessaryforthemarketabilityofitsbonds. It is anticipated that all costs for construction of the initial Intertie facilities will be paidthroughdirectappropriationfromthelegislatureoftheStateofAlaska.However,any amount notappropriatedwillbesubjecttorecoveryinaccordancewithSection8.1.1 of this Agreement. Intertie costs will be estimated and budgetedannuallybyAPAfortheensuingfiscalyear,JulyIsttoJune30.APA shall annually develop apreliminaryIntertiebudgetfromtheIntertie maintenance budget,the Intertie operating budget,the Annual Debt Service costs and APA's administrative expense associated with the Intertie.The preliminary Intertie budget shallbeprovidedtotheParticipants13monthsbefore the first day of the budget fiscal year for theirreviewandcomment.Written comments of the Participants shall be submitted to APA by July15thofyearprecedingthebudgetfiscalyear.Based on the preliminary Intertie budget and thecommentsfromtheParticipants,APA shall annuallyestablishtheIntertiebudgetandsubmitittothe APA Board of Directors for approval. Calculation of Unit Intertie Costs On or before March Ist of each year the Utility Participants shall submit,to APA projected usage of the Intertie in kwh on a monthly basis for the following fiscal year. APA shall prepare a preliminary Intertie annual usage estimate in kwh''s and provide the same to the Participants by April lst of the same year. The preliminary Intertie annual usage estimate provided under this Section,with the use of other historic or relevant information shall in no event be less than the amount equal to 30 percent of thekwh's that could be transferred by continuous operation of the Intertie at the maximum rated transfer capacity,(initially established at 70 MW)of the Intertie during that fiscal year.Theprojectedusageinkwh's when in excess of the 30 percent described above shall not exceed the total projected usage of the Participants. -15- 8.2.5 8.2.6 Section 8.3 Section 8.4 8.4.1 Utility Participants shall provide,by each Maylst,their written comments to APA on _thepreliminaryIntertieannualusageestimate. Based on the preliminary Intertie annual usageestimatesoftheParticipantsandcommentsreceived,APA shall establish the estimated annual Intertie usage in kwh's for the following fiscal year. The ""Intertie Energy Rate"for the followingfiscalyear,expressed in cents per kwh shall becalculatedbydividing83.5 percent of the totalannualcostoftheIntertieasbudgetedinthe Intertie budget under Section 8.1 of this Article by the annual Intertie usage as established underSection8.2.4 of this Article. The "Intertie Capacity Rate"for the followingfiscalyearexpressedindollarsperkwshallbecalculatedbydividing16.5 percent of the totalannualcostoftheIntertieasbudgetedintheIntertiebudgetunderSection8.1 of this Article,by the sum of the Participant's MITCR,as determined under Section 7.2 of Article 7. Initial Calculation of Unit Intertie Costs Following execution of this Agreement,sufficient time may not be available to establish initial Intertie budget,usage and unit Intertie costs inaccordancewithsections8.1 and 8.2 of this Article.Accordingly,such initial budget,usage,and unit Intertie costs for the initial fiscal year,or portion thereof,shall be determined by Allocation of Intertie Costs Each Utility shall be obligated to reimburse APA monthly the sum of the following: 8.4.1.1 The receiving Participant's scheduleduseoftheIntertieforthemonth multiplied by the Intertie Energy Rate in effect for that period;plus 8.4.1.2 The Participant's MITCR in accordance with Section 7.2 of Article 7 multipliedbyone-twelfth of the Intertie CapacityRateineffectforthatperiod. -16- 8.4.2 8.4.3 8.4.4 8.4.5 8.4.6 Section 9.1 9.1.1 A Utility Participant's obligation to pay inaccordancewiththisSectionmaybereducedifit can be demonstrated that APA has not met its responsibility to maintain the transmission line in accordance with Prudent Utility Practices. Such payment reduction shall be limited to aprorationfortheperiodofreducedIntertietransfercapacity. For billing purposes only,the scheduled use oftheIntertieinanymonthshallbetheproductof the scheduled Intertie transfer at the Intertie Point of Interconnection and the number of hours each schedule was in effect during that calendar month. For billing purposes only,the Participant'sscheduleduseoftheIntertieforeachhourofa day shall be the final schedule for delivery submitted to the Intertie Operator of its group. Should APA's annual revenues received under Subsection 8.4.1 of this Section exceed actual annual Intertie costs,revenues in excess of the Intertie costs shall be refunded to the contributing Participants in proportion to the amount of dollars billed to Participants to thetotaldollarsbilledforuseoftheIntertiein _the fiscal year in which the revenues wereaccrued. Should APA's revenues received under Subsection 8.3 of this Section be less than the actual Intertie costs,tthe revenue deficiency shall beallocatedamongtheUtilityParticipantsinthesameproportionastheUtilityParticipants'MITCRaresharedasdefinedunderArticle7ofthis Agreement.APA shall bill the UtilityParticipantstheirproportionateshareofthis deficiency. ARTICLE 9 Operating Committee Establishment of the Operating Committee The Participants hereby establish an operatingcommittee,the "Operating Committee".TheOperatingCommitteeshallconsistof"onerepresentativeofeachParticipant,designated inwritingbyeachParticipant,and each Participantmayalsodesignateanalternatewhomayactinthesteadoftherepresentativeatthe-option of that -17- 9. Section 9.2 1.2 9.2.1 9.2.2 9.2.3 Participant.A Participant may at any time changeitsrepresentative,or alternate,on the OperatingCommitteeandshallpromptlynotifyinwritingtheotherparticipantsofanychangeinsuchdesignation.The members of the OperatingCommitteeshalldesignatetheChairmanofthe Operating Committee annually at the first meetingofeachcalendaryear.Recommendations and decisions of the Operating Committee shall be adopted if approved by 75 percent majority vote of the total membership.Only Utility ParticipantsshallhavetherighttovoteontheOperatingCommitteeonissuescoveredbyAddendumNo.1 and on automatic load shedding issues. The Operating Committee shall establish operating procedures and standard practices with respect to this Agreement for the guidance of dispatchers and other employees as to matters affecting Intertie operations pursuant to this Agreement and shall recommend arrangements -for metering,communications and other services and facilities. The Operating Committee has no authority to modifyanyoftheprovisionsofthisAgreementortomodifyorsetratesunlessexpresslyprovidedfor herein.The establishment of any procedure or practice or determination by the OperatingCommittee,within the scope of the Operating .-Committee's responsibility,shall be effective when signed by the designated representatives of at least 75 percent of the Participants. Procedural Responsibilities of the Operating Committee The Operating Committee shall meet at leastquarterlyeachyearandatsuchtimesasdeemednecessarybytheChairmanoranytwoofthe Participants. Written minutes shall be kept for all meetings of the Operating Committee,and major decisions or agreements made by the Operating Committee shall be reduced to writing. The Operating Committee shall prepare and submit an expense budget to APA under section 10.3 of this agreement annually to provide for CommitteeexpensesotherthantheexpensesofeachCommittee member,which shall be borne by the represented Participant.. -18- Section 9.3 9.3.1 9.3.2 Operating Committee Authority,ProceduresandAppeal. The representatives constituting the OperatingCommitteeshallhaveequalauthority,and alldecisionsmadeanddirectiongivenmustbeby75percentmajorityvoteofthetotalmembersofthe Committee.A Participant casting a negative voteinanapproveddecisionoftheOperatingCommitteeshallhavetherighttoappealthedecisioninaccordancewith9.3.2 of this Article.An appealmustbedeliveredinwritingtothechairmanoftheOperatingCommitteewithinfiveworkingdaysofcastingthenegativevote. If the Operating Committee is unable to agree onamatterwithinitsjurisdiction,such matter shallberesolvedbyunanimousagreementoftheGeneralManagersoftheUtilityParticipantsandthe Executive Director of the Alaska Power Authorityortheirdesignatedrepresentatives.Should theGeneralManagersoftheUtilityParticipantsandtheExecutiveDirectoroftheAlaskaPower Authority or their representatives fail to reach an unanimous agreement within 20 working days, then the matter shall be submitted to bindingarbitrationinthefollowingmanner. 9.3.2.1 Arbitration shall be conducted before a board of three arbitrators selected under the guidelines of the American Arbitration Association and the arbitration shall be conducted in accordance with the commercial arbitration rules of the American Arbitration Association then in effect. In addition,the arbitrators must have education and experience in the particular matter being arbitrated. 9.3.2.2 The Participant(s)desiring arbitration shall demand arbitration by giving written notice to the other Participants.The notice shall conform to the procedures of the American Arbitration Association and shall include a statement of the facts or circumstances causing the controversy and the resolution,determination or relief sought. -19- Section 9.4 Section 9.5 9.3.2.3 Before the matter is presented to theBoardofArbitrators,a conference shall be held by the Participants to attempttoresolvethecontroversyor,if resolution is not possible,to stipulate to as many facts as possible,to clarifyandnarrowtheissues,and to agree in writing to the issues to be submitted to arbitration. 9.3.2.4 The Board of Arbitrators shall have no authority,power or jurisdiction to alter,amend,change,modify,add to,or delete any of the provisions of this Agreement,nor to consider any issues arising other than from the language in,and authority derived fron,this Agreement.The opinion and findings of the Board of Arbitrators shall be reduced to writing and shall be bindingontheParticipants15daysafterthe Board of Arbitrators issues a decision unless all Participants jointly agree onanalternatesolution. 9.3.2.5 The costs incurred in connection with the arbitration shall be apportioned by the Board of Arbitrators as it deems appropriate. Procurement of Services The Operating Committee shall have the right to directly procure services the Committee requiressolongas_sufficient budgeted funds areavailable. Waiver of Payment or Right to Recourse Except for the provisions of Section 9.3 of thisArticle,nothing contained in this Agreement shallbeconstruedtoconstituteawaiverorsurrender by any Participant of its right to any action,inlaworequity,to enforce all provisions of this Agreement and its rights hereunder. Notwithstanding the foregoing,in the event of a referral of a matter to a Board of Arbitrators pursuant to this Agreement,or a judicial oradministrativeproceedingonaccountof"anydisputedmatter,all Participant(s)shall continuetomakepaymentsinaccordancewiththisAgreementuntilthematterhasbeenfinallydetermined,at -20- Section 10.1 10.1.1 10.1.2 10.1.3 which time any necessary adjustments shall be made as provided for in Article 16 of this Agreement. ARTICLE 10 Operation of the Intertie Responsibility for Operation of the Intertie With the concurrence of the other Participants,APA delegates and AMLP and GVEA assume the responsibility for the operation of the Intertie under the guidelines of this Agreement and the Operating Committee. AMLP shall operate the southern one-half of the Intertie including,but not limited to,theterminalfacilities,communication facilities,and the Intertie transmission line to the Midpoint of the transmission line between the Douglas and Healy Substations (more specifically illustratedanddefinedintheIntertiefacilitiesdiagraminExhibitBofthisAgreement)within AMLP's ControlArea,and the midpoint of the Intertie transmission line shall be deemed to be the point of interconnection between GVEA and AMLP. 10.1.2.1 APA will contract with MEA,which is a member of AEGTC,for use of a portion ofMEA's transmission facilities to provide,along with other facilities provided by APA,transmission facilities that will be a part of the IntertiebetweentheDouglasandTeeland-Substations.This being a part of the Intertie,APA delegates to AMLP,andAMLPassumes,APA's responsibility for operation under the APA -MEA Agreement for these transmission facilities. GVEA shall operate the northern one-half of theIntertie,including but not limited to,the terminal facilities,communication facilities,and the Intertie transmission line to the Midpoint of the Intertie transmission line between the Douglas and Healy Substations (more specifically illustrated and defined in the Intertie facilities diagram in Exhibit "B"of this Agreement)within "GVEA's Control Area,and the Midpoint of the Intertie transmission line shall be deemed td be the point of interconnection between AMLP and GVEA. -21- 10.1.4 AMLP and GVEA acting in concert shall: 10.1.4.1 10.1.4.2 10.1.4.3 10.1.4.4 10.1.4.5 10.1.4.6 10.1.4.7 10.1.4.8 Closely and continually coordinate alltheactivitiesandtransactions involving the Intertie operation; Coordinate the Intertie Transactions to insure that at all times,to the extent possible,the Intertie System isoperatedtoprovidereliableand economic service; Coordinate the scheduling of all Intertie Transactions by the Participants in the Northern and Southern Groups in accordance with the provisions of this Agreement,and inform all Participants of the scheduled transactions; Develop the procedures for restorationofserviceontheIntertiefor interruptions due to either Scheduled orForcedOutages,and have _personneltrainedtocarryoutsuchoperationalprocedurestoinsuretheIntertie reliability; Maintain communications with each other and the other Participants usingadequatemethodsofdataacquisitionsufficientforreliablesystemcontroloftheoperationoftheIntertie; Maintain complete and accurate hourlyrecordsofalloperations,Intertie Transactions and activities involving the Intertie,and promptly publish and distribute such records to allParticipantsatregularintervalsas established by the Operating Committee. Any Participants who desire it shall be provided,at their own expense,direct access to all telemetry gathered from the Intertie; Coordinate the responsibilities delegated to them in this Agreement to minimize duplication;* Abide by the terms and conditions of other contracts or agreements involving -22- Section 10.2 10.2.1 10.2.2 10.2.3 the operation of the Intertie System,solongastheydonotconflictwiththis Agreement; 10.1.4.9 At all times operate the Intertie in asafeandresponsiblemannerconsistent with Prudent Utility Practices and thedirectivesandinstructionsofthe Operating Committee.; Suspension of Work in Performance of Duties of the Intertie Suspension for Convenience.The APA may orderAMLPand/or GVEA in writing to suspend,delay,orinterruptall.or any part of the work involved in operation of the Intertie for such period of time as the Operating Committee determines to be appropriate for the convenience of,and in the best interest of,Intertie operation. Adjustments of Cost.If the performance of all or any part of the work is,for an unreasonable period of time,suspended,delayed,or interruptedbyanactofAPA,or by the failure of APA to act |within a reasonable time,an adjustment shall be made for any increase in the cost of performanceofthisAgreementnecessarilycausedbysuchunreasonablesuspension,delay or interruption.However,no adjustment shall be made under this Section for any suspension,delay or interruptiontotheextent: 10.2.2.]1 That performance would have been so suspended,delayed or interrupted by anyothercause,including the fault or negligence of AMLP or GVEA;or 10.2.2.2 That an adjustment is provided for or excluded under any other provision of this Agreement. Time Restriction on Claim.No claim under this Article shall be allowed: 10.2.3.1 For any costs incurred more than 20 days before AMLP or GVEA shall have notified APA in writing of the act or failure toactinvolved(but this requirement shall not apply as to a claim resulting from asuspensionorder);and : Section 10.3 10.3.1 10.3.2 10.3.3 10.3.4 10.3.5 10.2.3.2 Unless the claim is asserted in writingassoonas_practicable after the termination of such suspension,delay, or interruption,but not later than the date of final payment under'this Article. Budget for Operation of the Intertie For purposes of calculation of unit Intertie costspursuanttoArticle8,Section 8.2 of thisAgreement,and to provide information required toobtainoperationsbudgetappropriationsfromthelegislature,AMLP and GVEA shall develop annuallyandsubmittoAPAasuggestedscopeofoperationsandbudgetforoperationoftheIntertienolaterthan14monthsbeforethefirstdayofthebudget fiscal year.The budget developed by the Intertieoperatorsmayincludealldirectexpensesandan allocated portion of such other expenses as interest,depreciation and margin requirements,among others.All costs allocated to the Intertie Operator budget shall be consistent with generallyacceptedutilityaccountingprinciples.APA shallestablishapreliminaryscopeofoperations'and budget,based on the Operating Committee,AMLP and GVEA submittals,and provide it to the UtilityParticipants13monthsbeforethefirstdayofthe.budget fiscal year for their review and comments.. Utility Participants shall provide writtencommentsonthepreliminaryscopeofoperationsandbudgettoAPA12monthsbeforethefirstday-of the budget fiscal year. Based on the preliminary scope of operations andbudgetandthecommentsreceived,APA _shallestablishtheIntertieoperatingbudget,which is the final scope of operations and budget. With the written approval of all Participants,thefinalscopeofoperationsandbudgetwillbedeemedtobethefixedcostfeeforoperationof the Intertie for the ensuing fiscal year.APA will pay AMLP and GVEA under section 10.6 of thisArticle10foroperationofttheIntertie,one-twelfth of the fixed fee thus established. If the Participants are unable to agreeunanimouslythatthefinalscopeofoperationsandbudgetisthefixedcostfeeforoperationoftheIntertie,then AMLP and GVEA shall each determine, -24- 10.3.6 Section 10.4 Section 10.5 10.5.1 using records and accounts maintained underSection10.4 of this Article 10,the cost to its system to provide operation of the Intertie in accordance with this Agreement and shall bill APA monthly for these services.APA will then reimburse AMLP and GVEA under section 10.6 of this Article 10. APA shall present the final operations budget to the Alaska Legislature in a manner consistent with the Executive Budget Act (AS 37.07 and amendments),and shall take all steps necessary to secure an appropriation,or appropriations,fromthelegislatureinanamountadequatetocoverthebudgetsubmittedandapprovedunderthis Agreement. Accounting and Records In maintaining accounts for operation of the Intertie,AMLP and GVEA will follow the system ofaccountsprescribedforpublicutilitiesand licensees by the Federal Energy RegulatoryCommission.AMLP and GVEA will furnish the APA such operating and financial statements relatingtooperationoftheIntertieasmaybereasonablyrequestedbytheAPA.If receipt of such operating and financial statements is undulydelayed,the APA may,with its own staff,performallworknecessarytocollectsuchdataas reasonably desired.Such work shall be performed at a time and in a manner to prevent unreasonable interference with AMLP and GVEA operations. Audits At the discretion of APA or by request of a majority of the Participants,an audit shall beconductedwithrespecttothemattersprovidedfor in this Agreement by independent auditors according to such programs and procedures as agreed to by the Participants,and all Participants shall be furnished copies of the report.The cost of making such audits shall be shared by the Participants in the same proportion as the MITCR were shared during the period covered by the audit.The Participants,contract agents and any other party involved with the operation oftheIntertieshallprovideand/or make available the information and records required for the audit.The cost of any audit required by a Participant beyond the scope of the above audit shall be borne by such Participant. -25- 10.5.2 "Section 10.6 AMLP and GVEA shall allow their books of accounts to be audited with respect to matters provided forinthisAgreementbysuchstateofficialsor agencies as may be authorized and directed by lawtomakethoseaudits.To the extent permitted bylaw,Participants shall have the same authority toauditthebooksofaccountsoftheAPAwith respect to the operation of the Intertie. Payment of Operators. If a fixed cost fee for operation of the Intertieisestablishedundersection10.3.4 of this article,then within 30 days of the end of eachmonthAPAwillpaytoAMLPandGVEAone-twelfth ofthefixedcostfeeforoperationoftheIntertie.If the Participants have not agreed upon a fixedcostfeeforoperationoftheIntertieunder section 10.3.4 of this article,then the APA will reimburse AMLP and GVEA within 30 days of thereceiptoftheirinvoices.However,suchreimbursementissubjecttoadjustmentupondiscoveryofanerror,dispute of billing,oraudit. ARTICLE 11 Scheduling of Power and Energy on the Intertie Section 11.1 11.1.1 11.1.2 11.1.3 Section 11.2 11.2.1 Scheduling Responsibility AMLP shall have the responsibility for schedulingthetransfersontheIntertiefortheParticipantsoftheSouthernGroupandcoordinatingthemwith GVEA under the provisions of this Agreement andthedirectionoftheOperatingCommittee. GVEA shall have the responsibility for schedulingthetransfersontheIntertiefortheParticipants of the Northern Group and coordinating them with AMLP under the provisions of this Agreement and the direction of the Operating Committee. AMLP and GVEA shall each have the responsibilityforcoordinatingscheduleswithintheirrespective Groups. Power and Energy Schedules The amount of electric Power and Energy td be transferred on the Intertie under this Agreement will be based upon hourly schedules provided bytheParticipantsmakingtheIntertieTransaction. -26- 11.2.2 11.2.3 11.2.4 11.2.5 Section 11.3 Section 12.1 12.1.1 These schedules shall be provided to,andcoordinatedwith,AMLP and GVEA.AMLP and GVEA will timely inform all Utility Participants of thetransferschedulesontheIntertie. Power and Energy shall be scheduled on an hourlybasisandtheschedulesmaybemadeforthenexthour(s),day(s),week(s)or month(s)in advance. Schedules for all transfers on the Intertie shall be furnished to the respective Intertie Operatorsbefore3:00 P.M.prevailing local time each dayforPowerandEnergytobedeliveredacrosstheIntertieforeachclockhourofthefollowing24-hour period.This schedule shall be updated eachdayandanadditionalone-day schedule will be furnished to provide a continuing seven-dayschedule. Short-term schedules of transfers on the Intertie may not be made or changed on an hour-by-hourbasisunlesscoordinatedinadvancewiththe Intertie Operators. Provisions of this Section may be modified byactionoftheOperatingCommitteeasprovidedforunderthisAgreement. Intertie Schedule Limitations The maximum schedule of Power and Energy of any Participant on the Intertie shall be limited to the Participant's MITCR unless additional MITCRareallocatedfromtheunscheduledand/or unused Intertie Transfer Capability Rights of otherParticipants.MITCR not.being used by theParticipantholdingthemmaybeusedbyother Participants needing them to make additionaltransfersoverandabovetheirallocationofMITCR under Article 7 of this Agreement.. ARTICLE 12 Maintenance of the Intertie Facilities Maintenance Responsibility APA will maintain the Intertie facilities which itowns.APA may provide for the maintenance of the Intertie facilities by contracting with qualified -27- 12.1.2 Section 12.2 12.2.1 12.2.2 parties to perform maintenance on its behalf orprovideitbyqualifiedstaffunderthedirection of APA.Maintenance shall be scheduled, coordinated and accomplished in accordance with Prudent Utility Practices so as to minimizedisturbanceontheIntertiethatwouldimpairserviceoftheParticipants'systems. The Intertie shall be maintained in good workingcondition,optimizing the availability of theIntertiewithinpracticalandcostconstraints.After a failure of the Intertie,it shall be returned to service in the shortest possible time within the constraints of practical maintenance procedures. Maintenance Budget and Costs APA shall develop an Intertie maintenance budget,an annual budget and schedule for the maintenanceoftheIntertie,each year based on the budgetsdevelopedbyanycontractorsprovidingthe Intertie maintenance.This budget will be reviewed with the Participants sufficiently inadvanceofthecommencementofthefiscalyearinvolvedsothateachParticipantwillbeabletosubmititscommentsforconsiderationpriortofinalizationofthebudget.Budgets for more thanoneyearwillberequiredfortheParticipants'long range fiscal requirements.APA will prepareandfurnishtheParticipantsacopyofsuchlongrangefiscalrequirements. APA will maintain complete and accurate records of costs associated with maintenance of the Intertie. Maintenance of the Intertie will follow the system of accounts prescribed for public utilities and licensees by the Federal Energy Regulatory Commission. ARTICLE 13 Measurement of Electric Power and Energy Section 13.1 13.1.1 13.1.2 Metering The electric Power and Energy delivered through interconnection facilities of the Intertie shall be measured by nonreversible watt-hour meters "and 15-minute interval demand meters. APA shall be responsible for installation, -28- 13.1.3 Section 14.1 14.1.1 14.1.2 ownership,operation and maintenance of initialfacilitiesnecessary,as determined by APA,to interface with AMLP and GVEA equipment presently installed or being installed.The AMLP and GVEA equipment shall be that necessary to provide for the initial Intertie operation only.The initial facilities shall be provided directly by APA or through a separate,reimbursable agreement with the Participant involved.Participants shall permit other Participants to use the available metered data for the purpose of telemetering the data as required for their operations. The Operating Committee shall agree upon Intertie related metering equipment before its installa- tion.Each Participant hereby grants to all other Participants the right to install and maintain attheotherParticipants'cost,equipment in the other Participants'substations.Each Participant has the right to install and maintain at its cost,equipment in another Participant's substation if the equipment is necessary to perform Intertie functions under this Agreement.The installationandmaintenanceshallbecoordinatedwithstaffof the Participant owning and operating the facilities on which the meters are to be intalled. Ingress and egress shall be granted to the other Participants to install,remove or maintain theequipment.Each Participant shall coordinate suchactivitiesthroughtheotherParticipant's dispatcher. ARTICLE 14 Transmission Losses Intertie Transmission and Transmission Service Losses Losses in the Intertie System created by IntertietransfersshallbedeterminedbytheIntertie Operators through engineering studies,calculation and Power flow programs,and procedures as established by the Operating Committee. The Participant supplying Power and Energy shallalsoprovidePowerandEnergylosseswhichoccurfromthetransfer.Such losses shall be providedatthetimeofthetransferunlessotherwise agreed by the affected Participants. -29- 14.1.3 Section 14,2 14.2.1 14.2.2 Section 15.1 Transfer schedules shall include losses for such transfers.When transfers reduce losses in a Participant's system which is not a part of the Intertie,the losses in that system caused by thetransfershallbeconsideredzero. Intertie Transmission Loss Compensation. The Intertie Facilities located on the AMLP side of the Intertie Point of Interconnection will be operated in AMLP's Control Area;thus the losses that occur on Intertie Facilities on the AMLP side will occur in AMLP's Control Area as part ofAMLP's system losses. The Intertie Facilities located on the GVEA side of the Intertie Point of Interconnection will be operated in GVEA's Control Area;thus the losses that occur on Intertie Facilities on the GVEA side will occur in GVEA's Control Area as part ofGVEA's system losses. ARTICLE 15 Transmission Service Transmission Service to Access the Intertie Each Participant shall have the right to schedule, on the intervening transmission systems of another Participant,transfers of Power and Energy to andfromtheAlaskaIntertie.This right may be exercised when the rated.capacity of theinterveningParticipant's transmission facilities available to transfer Power and Energy is determined by the intervening Participant to have adequate capacity to accommodate the transfer.A determination of adequate capacity shall not be unreasonably withheld by the interveningParticipant.If the intervening Participant determines capacity to be inadequate,this determination shall be documented in writing to the requesting Participant with the justificationforthelimitationofcapacityinitstransmission system.The intervening Participant reserves theright,within the exercise of Prudent Utility Practice,to interrupt or curtail such service hereunder at any time the transfer capability of the transmission facilities involved,in the opinion of the intervening Participant,is less -30- Section 15.2 Section 15.3 15.3.1 than the actual or proposed loading of the facilities.Such interruptions or curtailments, other than for the intervening Participant's own internal transmission requirements for its system load,shall be shared pro rata among all Power and Energy schedules that reduce the transfercapabilityoftheinterveningParticipant's transmission system at the time oof such interruption or curtailment.The rated transfercapacityofanyinterveningParticipant's transmission system shall be determined in advance by the intervening Participant,or by anengineeringanalysisacceptabletothe Participants involved. Provision for Adequate Transmission Service Facilities The Participants shall not limit,through inadequate facilities,Transmission Service access to the Intertie.If a Participant that is providing,or is to provide Transmission Service to other Participants for the transmission of Power and Energy across its system for transfer on the Intertie,determines that its transmission system does not have adequate capacity for the desired level of transfer,a Participant desiring a higher level of transfer may request'the .intervening Participant to provide or construct .additional transmission capability for therequestingParticipant's use.This request shallbe-granted,at least to the level of therequestingParticipant's MITCR.The additionalfacilitiesmayrequirespecialcompensationbytherequestingParticipant.The arrangement for andcostsharingofsuchfacilitieswillbeprovidedforunderaseparateagreementbetween'the Participants involved,and shall be based on cost of service principles. Compensation for Transmission Service The Participant providing Transmission Serviceshallbecompensatedmonthlyfortheuseofthe Transmission Service Facilities.The Transmission Service billing shall be the appropriateTransmissionServiceRatedefinedinExhibitCof this Agreement,multiplied by the appropriatequantitiesmeteredatthepointofinterconnectionoftheParticipants.Monthly demand billings shall be the product of the Contract TransmissionServicecapabilityratetimesthetransfercapabilitycontractedforduringthebilling period. -31- 15.3.2 Losses that occur as a result of the Transmission Service transfers shall be supplied inkindbytheresponsibleParticipantunderArticle14ofthisAgreement. Section 15.4 15.4.1 15.4.2 Section 16.1 Section 16.2 Transmission Service Rates Exhibit C of this Agreement sets out the formulaforcalculatingtheTransmissionServiceRates.Exhibit C may be amended in writing under Article15ofthisAgreement. The Participant providing Transmission Serviceshallmakeavailablereasonableexpenseand operating information necessary to verify actionsundertakenunderArticle15ofthisAgreement. ARTICLE 16 Billing and Payments Billing A supplying Participant shall bill the receivingParticipantmonthly,normally not later than 15 days after the end of the calendar month to which the bills apply.Bills shall be due and payablewithin15daysfromdatethebillsarepostmarked or hand-delivered.Interest on any unpaid amount from the date due until the date payment is received shall accrue at the annual legal rate under Alaska law for post-judgment interest,or pro rata fraction thereof. Dispute of Billing If a purchasing Participant disputes the charges submitted by a supplying Participant under thisAgreement,the purchasing Participant shallneverthelesspaythefullamountwhendueand payable and give notification in writing,within 90 days of the date the bill is rendered,to the supplying Participant stating the grounds on whichchargesaredisputedandtheamountindispute.If settlement of the dispute results in a refund, the refund shall include interest at the annual legal rate under Alaska law for post-judgment interest,or pro rata fraction thereof,fromthe date of overpayment to the date of refund. 32- Section 17.1 Section 17.2 17.2.1 ARTICLE 17 Insurance and Liability Insurance During the term of this Agreement,eachParticipantshallpurchaseandmaintaininsurancewithacarrierorcarrierssatisfactorytothe Operating Committee and the APA,covering injury to persons or property suffered by any Participantorathirdparty,as a result of errors,omissions,or operations which arise both out of and during the course of this contract by theParticipantorbyanyofitssubcontractors.The coverage shall also provide protection againstinjuriestoallemployeesoftheUtility Participant and the employees of any of itssubcontractorsengagedinworkunder'this Agreement.If approved by the Operating Committee and the APA,a Participant may self-insure for theWorker's Compensation Insurance and,up to amaximumof$250,000,for the other types of insurance required by this Article.A copy of theinsurancepoliciesandundertakingtoself-insure,if any,will be furnished to the Operating Committee and the APA before beginning operations under this Agreement. Types of Insurance The following insurance must be purchased by eachParticipanttocoverthoseoperationsoftheParticipantperformedunderthisAgreement: Worker's Compensation Insurance:Each Participantshallprovideandmaintain,for all employees oftheParticipantengagedinworkunderthisAgreement,Workers'Compensation Insurance asrequiredbyAS23.30.045.The Participant isresponsibleforWorkers'Compensation InsuranceforanyofitssubcontractorswhodirectlyorindirectlyprovideservicesunderthisAgreement.Each insurance policy must include: (a)Statutory coverage for states in which employees are engaging in work; (b)Employer's Liability Protection in the amountof$2,000,000 per occurrence;* (c)Broad Form All States Endorsement; (d)Coverage as required by all State and Federal 33- 17.2.2 Acts where applicable; (e)Voluntary Compensation Endorsement. The Worker's Compensation Insurance policy shallcontainawaiverofsubrogationinfavorofthe other Participants.Any Participant who is self-insured hereby waives subrogation in favor of the other Participants. Comprehensive General Liability Insurance:EachParticipantshallpurchaseandmaintaincomprehensivegeneralliabilityinsurancesubject to the following limits of liability: (a)Bodily Injury and Property Damage Liabilityofaminimumof$10,000,000 Combined Single LimitseachoccurrenceandaffordinginsuranceforPremises-Operations,Owners and Contractors' Protective,Independent Contractors, Products/Completed Operations,Blanket Contractual Liability,Broad Form Property Damage,Personal Injury Liability,Incidental Errors and Omissions. '(b)Automobile Liability Insurance covering all vehicles.Such insurance shall provide coverageofnotlessthat$10,000,000 Combined Single Limit each occurrence for Bodily Injury and Property Damage Liability., (c)Owned Aircraft (if applicable)and Non-OwnedAircraftwithseatingcapacityoffiveseatsor less,except for commercial,scheduled flights,with limits.of liability not'less than:$5,000,000 -Bodily Injury per _occurrence;$1,000,000 for Passenger Liability per seat;and$5,000,000 for Property Damage Liability per occurrence.Coverage must include Slung CargoExposures.If an aircraft with more than fiveseatcapacityisused,special coverage and limitsmustbeobtainedandapprovedbytheOperating Committee. (d)Owned Watercraft (if applicable)andNon-Owned Watercraft (if applicable)with limitsofliabilitynotlessthat$5,000,000 peroccurrenceasprovidedinthe"In Rem Endorsement"under "Maritime Coverage B". The other Participants shall be included as additionalinsuredsininsurancerequiredinthisSection17.2.2ofArticle17andshallnotbytheirinclusionbe responsible to the insurance carrier for payment ofpremiumstherefor.These insurance policies must also-34- 38contain a cross liability or severability of interest endorsement. Section 17.3 17.3.1 17.3.2 Section 18.1 18.1.1 18.1.2 Other Insurance Coverage Requirements Each Participant will bear the cost of therequiredinsurance.Insurance required to bemaintainedunderthisArticle17maybemaintained as part of any other policy or policies of theParticipantsolongasthecoverageofsuchpolicyorpoliciesissubstantiallythesameasifsuchcoverageweremaintainedunderaseparatepolicy. These policies must provide that anycancellation,non-renewal or material change be upon 30 days notice to all named insureds.EachParticipantmustprovidetheOperatingCommitteeandtheAPAwithevidenceofinsurance.Insurance companies,or self-insurers,shown on thecertificateofinsurancemusthavefinancial ratings acceptable to the APA.Failure to furnish satisfactory evidence of insurance or lapse of thepolicyisamaterialbreachofthisAgreement. ARTICLE 18 Indemnity Indemnity Each Participant shall,as to all actions takenpursuanttoorundercolorofthisAgreement,defend and indemnify the other Participants,theiragents,servants,employees and officers,from allcostsincludingwithoutlimitationattorneyfees,court costs,any amounts arising or recoveredundertheWorkman's Compensation Act or other law or decree,and any other amounts which the other Participants,their agents,servants,employeesandofficersbecomeobligatedtopayonaccountofanydemands,claims,liabilities or losses arisingorallegedlyarisingoutof,or in any wayconnectedwith,the acts or omissions of the indemnifying Participant,its agents,servants, employees or officers. Each Participant shall defend and indemnify theotherParticipantsfromandagainstanyclaimorliability,including any related loss or cost,caused by or resulting from the _design,construction,installation,operation ormaintenanceofanyoftheelectricfacilities owned,operated or maintained by the indemnifyingParticipant,or by reason of the acts or omissionsofitsagents,servants or employees in connection therewith. -35- Section 18.2 Comparative Negligence Each Participant agrees that any liability,including costs of defense and attorney fees,forclaimsarisingfromtheconcurrentnegligenceof two or more Participants will be apportionedaccordingtotherespectivepercentageoffaultattributabletoeachParticipantasdeterminedbyagreementorbythetrieroffact. ARTICLE 19 Warranty Denial and Exclusivity of Contract Section 19.1 Section 19.2 Section 20.1 20.1.1 20.1.2 APA Denial of Warranty APA does not warrant the Intertie facilities it owns as fit for their intended use or the reliability or availability of the Intertie forintendedoperationscoveredbythisAgreement. Exclusivity of Contract The terms of this Agreement and any provisionsadoptedbyreferenceorotherwiseincorporatedintothisAgreementsetforththefullintentof the Participants regarding the matters covered bythisAgreement.However,this Agreement does not supercede related Intertie written agreements,such as the maintenance agreements between the APA and Intertie Participants,but is to be interpreted consistently with them. ARTICLE 20 Uncontrollable Forces A Participant will not bée in default in perfor- mance of any obligation hereunder,other than the obligation to make payments as provided in this Agreement,if failure of performance is due to uncontrollable forces and without the fault or negligence of that Participant.Strikes,lockouts and other labor disturbances are considered uncontrollable forces and nothing in this Agreement will require a Participant to settle a labor dispute against its better judgment. If a Participant,by reason of an uncontrollable force,is rendered unable,wholly or in part,to - 36- perform its obligations under this Agreement (other than its obligations to pay money),then upon that Participant giving notice and particulars of the uncontrollable force,its obligation to perform will be suspended during thecontinuanceofanyinabilitysocaused,but for no longer period,and the effects of such cause shall,so far as possible,be remedied with allreasonabledispatch;provided,however,that the settlement of labor disputes shall be considered wholly within the discretion of the Participant involved.The affected Participant will not be responsible for its delay in performance under this Agreement during delays caused by an uncontrollable force,nor will such uncontrollable force give rise to claim for damages or constitute default. ARTICLE 21 Waivers Any waiver at any time by a Participant of itsrightswithrespecttoadefaultunderthis Agreement,or with respect to any other matterarisinginconnectionwiththisAgreement,shallnotbedeemedawaiverwithrespecttoanyother default or matter.Any delay short of thestatutoryperiodoflimitationsinassertingorenforcinganyrightshallnotbedeemedawaiver of such right. ARTICLE 22 Successors and Assigns;No Third Party Beneficiaries Section 22.1 Successors and Assigns This Agreement shall be binding upon and inure tothebenefitofthesuccessors,legal representatives or assigns of the respectiveParticipants.However,no Participant shallassignthisAgreementnoranyparthereofwithouttheexpresswrittenconsentofthe_otherParticipants,which consent shall not _beunreasonablywithheld.Nor shall a Participant berelievedofitsobligationshereunderbyan assignment of less than all of the benefits andburdenshereunderorimposeadditionalobligationsorburdensontheotherParticipantsby™an assignment of this Agreement or any part hereof. -37- Section 22.2 Section 25.1 25.1.1 No Third-Party Beneficiaries The provisions of this Agreement shall not create any rights in favor of any person,corporation,or association not a Participant in this Agreement,and the obligations herein assumed are solely fortheuseandbenefitoftheParticipantstothisAgreement. ARTICLE 23 Governing Law This Agreement is made subject to,and shall be. governed by and construed in accordance with,thelawsoftheStateofAlaskaandtheauthoritygrantedtotheindividualParticipantsthereunder. ARTICLE 24 Captions Captions of the various articles herein are intended for convenience of reference only andshallnotdefineorlimitanytermsorprovisions. ARTICLE 25 Notices Any notice or demand under this Agreement isproperlygivenifsentbyregisteredorcertified mail and addressed to the General Manager,Municipality of Anchorage,Alaska,Municipal Light and Power,1200 East First Avenue,Anchorage,Alaska 99501;Executive Director,Alaska Power Authority,334 W.Fifth Avenue,Anchorage,Alaska99501;General Manager,Chugach Electric|Association,Inc.,Pouch 6300,Anchorage,Alaska 99503 or 5601 Minnesota Avenue,Anchorage,Alaska99502;General Manager,City of Fairbanks,Municipal Utilities System,P.O.Box 2215,645 Fifth Avenue,Fairbanks,Alaska 99707;General Manager,Golden Valley Electric Association,Inc., P.O.Box 1249,Fairbanks,Alaska 99707 or 758 Illinois Street,Fairbanks,Alaska 99701;and Interim General Manager,Alaska ElectricGenerationandTransmissionCooperative,Ine., P.O.Box 1148,Palmer,Alaska 99645.The -38- foregoing designations of the name or address towhichnoticesordemandsaretobedirectedmaybe changed at any time by written notice given by any Participant to all others. 25.1.2 Any notice or request of a routine character inconnectionwiththedeliveryofPowerandEnergy,or in connection with the operation of facilities, shall be given in the manner the Operating Committee,or the authorized representatives of the Participants,from time to time arranges. ARTICLE 26 Amendments Neither this Agreement nor any part hereof may be terminated,amended,supplemented,waived or modified except by an instrument in writing signed by all the Participants. ARTICLE 27 Agreement Approval and Transmittal This agreement shall not be effective until theAdministratorof-the Rural Electrification Administration grants any required approval.TheAPAwilltransmitthisagreementwiththeAlaska Public Utilities Commission.By signing this agreement,a Participant does not subject itselftorateregulationbytheAlaskaPublicUtilities Commission. ARTICLE 28 Construction of Agreement Each Participant has participated fully in thedraftingandnegotiationofthisAgreement.Accordingly,the Agreement will not be construedagainstanyparticularParticipant,orParticipants,as the drafter. IN WITNESS WHEREOF,the Participants have caused this Agreementtobeexecutedinquintupletbytheirdulyauthorizedofficersorrepresentativesasofthedayandyearfirstabovewritten. -39- ALASKA POWER AUTHORITY Approved as to form: Office of t Attorney Genera By:Ll lb yy SUBSCRIBED AND SWORN TO before me this 194 day of(owmblac ,1985 last written. miission Expire MUNICIPALITY OF ANCHORAGE, ALASKA dba MUNICIPAL LIGHT & POWER By: 4 -a .oe--ltunie pal.Mavager SUBSCRIBED AND SWORN TO before me this 93?day of ,1985 last written. y : My Commission Expires:SLESof CHUGACH ELECTRIC ASSOCIATION, INC.tidal Aa PGeneralae) SUBSCRIBED AND SWORN TO before me this fo £0 day ofiDotonbix7,1985 last written.. ]Latte Opiclianaor)"Notary Public,State of AlaskaMyCommissionExpires://-$--8S -40- CHUGACH ELECTRIC ASSOCIATION, INC,By:rape LY)Rteohras -President of the Board 'SUBSCRIBED AND SWORN TO before me this ype:day ofWerenbt-1985 last written. Notary Public,State of Alaska_My Commission Expires:/-7-&%&% CHUGACH ELECTRIC ASSOCIATION, INC. Vice-President of the Board ”SuEsparED AND SWORN TO before me this [474 day of»1985 last written. Notary Pablic®State of prtMyCommissionExpires://-+f.ta CITY OF F BANKS,ALASKA ITATIES SYSTEM NAL c NX iN vverry MANAGER/(Title) SUBSCRIBED AND SWORN TO before me this 19 LL,day ofLN2bonve,1985 last written. - Notgry Pu Tic,Stat of Alaska My Commission Expires:sy-/7-37 -41- GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.Nhl.a)By:Avs LL,Coin.Me Vv.(Title)Q) SUBSCRIBED AND SWORN TO before me this Me vA day ofDerounber,1985 last written. wale . otary Pu State o askaMyCommis¢ion Expires:My Commission Expires:January 11,1987 (Title) SUBSCRIBED AND SWORN TO before me this /7 xh day of\Necembex »1985 last written. -42- ADDENDUM NOG.1 TO THE ALASKA INTERTIE AGREEMENT RESERVE CAPACITY AND OPERATING RESERVE RESPONSIBILITY This Addendum No.1 is made this _93,-/day of Decn Sa 1 GES,+964;by the Utility Participants,THE MUNICIPALITY OF ANCHORAGE,ALASKA,d.b.a.MUNICIPAL LIGHT &POWER;CHUGACH ELECTRICASSOCIATION,INC.;THE CITY OF FAIRBANKS,ALASKA,MUNICIPALUTILITIESSYSTEM;GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.;and ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE,INC.,signatories to the Alaska Intertie Agreement,dated,1985,hereinafter referred to as "Agreement".Thesignatorypartiesarehereinafterreferredtoas"UtilityParticipants". WITNESSETH WHEREAS THE MUNICIPALITY OF ANCHORAGE,ALASKA,d.b.a.MUNICIPAL LIGHT &POWER;CHUGACH ELECTRIC ASSOCIATION,INC.;THE CITY OFFAIRBANKS,ALASKA,MUNICIPAL UTILITIES SYSTEM;GOLDEN.VALLEYELECTRICASSOCIATION,INC.;and ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE,INC.are all Utility Participants andsignatoriestotheAlaskaIntertieAgreement;and WHEREAS the ALASKA POWER AUTHORITY is a Participant and signatorytotheAlaskaIntertieAgreement;and WHEREAS the signatories to the Alaska Intertie Agreement desiretohaveaseparateagreementinvolvingonlyUtilityParticipantswithreserverequirementresponsibilityontheinterconnected system; NOW THEREFORE,the Utility Participants agree as follows: ARTICLE A Reserve Capacity Section A-l.1 A-1.1.1 Each Utility Participant expects and is expectedtomaintainutilityresponsibilityforitsownloadand,as a part of such responsibility,shallmaintainorotherwiseprovideforannually,Accredited Capability in an amount equal to or greater than its maximum System Demand for such year plus such Utility Participant's Reserve Capacity Obligation,as set forth in SubsectionA-1.1.2 of this Section., A-1.1.2 The Reserve Capacity Obligation of a UtilityParticipant,for any year,shall initially be Addendum No.1 -1 of 8 A-1.1.3 Section B-2.1 B-2.1.1 B-2.1.2 Section B-2.2 B-2.2.1 equal to thirty (30)percent of the projectedAnnualSystemDemandofthatUtilityParticipant.The Reserve Capacity Obligation of the Participants may be adjusted from time to time by the Operating Committee. The Operating Committee may determine the annual Accredited Capability for each Utility Participant. ARTICLE B Responsibility for Operating Reserve Operating Reserve Each Utility Participant shall provide Spinning Reserve and Non-Spinning Reserve as required bySectionB-2.2 of this Article equal to or greater than the Operating Reserve Obligation of the Participant.As soon as practicable,but not to exceed four hours,after the occurrence of an incident which uses Operating Reserves,each Utility Participant shall restore its Operating . Reserve Obligation by the procedures determined bytheOperatingCommittee. The Operating Reserves,Operating ReserveObligationandUtilityParticipant's Allocationmaybemodifiedoradjustedfromtimetotimeby the Operating Committee. Total Operating Reserve Obligation The Total Operating Reserve Obligation at any timeshallinitiallybeanamountequalto150percent of the capability of the largest generating unit contingency in operation on the interconnected systems of the Utility Participants. B-2.2.1.1 The Spinning Reserve portion of the total Intertie System shall not be less than an amount equivalent to 100 percent of the Declared Capability of the largest generating unit contingency in operation on the interconnected systems of the Utility Participants.The Declared Capability will be as determined by the Utility Participant. B-2.2.1.2 The balance of the Total Operating Reserve Obligation shall be maintained with Non-Spinning Reserve. Addendum No.1 -2 of 8 B-2.2.2 B-2.2.3 Section B-2.3 B-2.3.1 Section B-2.4 B-2.4.1 Generating unit capability for Operating Reserves shall be determined by the following criteria: a.It shall not be less than the load on the machine at any particular time nor greater than (b)below. b.It shall not exceed that maximum amount of load (MW)that the unit is capable ofcontinuouslysupplyingforatwo-hour.period,or immediately supplying through action of automatic governor controls. The criteria specified in this section may be modified or changed by the Operating Committee. Utility Participant's Allocation of Operating Reserves The Operating Reserve Obligation of a UtilityParticipantshallbethatpercentageoftheTotal Operating Reserve Obligation determined by theOperatingCommitteeinaccordancewiththefollowingformulabasedonthecapabilityof largest generating unit contingency in operation at each Utility Participant. B-2.3.1.1 Individual Utility Participant Reserve Allocation Formula IOR =TOR x Us/Ut IOR Individual Utility Participant Operating Reserve Requirement TOR =Total Operating Reserve Requirement Us =A Utility Participant largeston-line generation unit capability Ut =Sum of each Utility Participant's Us Operating Reserve Calculation System Spinning Reserve shall be calculated at anygiveninstantasthedifferencebetweenthesumof'the net capability of all generating units on lineintherespectivesystemandtheintegratedSystemsDemandofthesysteminvolved. Addendum No.1 -3 of 8 B-2.4.2 B-2.4.3 B-2.4.4 B-2.4.5 B-2.4.6 B-2.4.7 A Utility Participant's Spinning Reserve may besatisfiedbyanautomaticallycontrolledload shedding program.The load shedding program shall assure that controlled load can be dropped to meet the requirements of Spinning Reserve and in such a manner as to maintain system stability and notcauseobjectionablesystemconditionsorcascadingeffectsinotherUtilityParticipants'systems. The Operating Committee shall review and approvetheUtilityParticipant's load shedding programthatwillbeusedtosatisfyitsSpinningReserve requirements. The Operating Committee may establish procedurestoassurethattheOperatingReserveisavailable on the systems of the Participants at all times. Whenever a Participant is unable to meet its Operating Reserve Obligation,that UtilityParticipantwillimmediately,within two hours, advise all other Utility Participants and make arrangements to restore its Operating ReserveObligation. Prudent Utility Practices shall be followed in distributing Operating Reserve,taking intoaccounteffectiveutilizationofcapacityinan emergency,time required to be effective, transmission limitations and local area requirements., A Participant may arrange for one or more otherUtilityParticipantstosupplypartorallofits Operating Reserve requirement. In an emergency,any Utility Participant,upon request by another Utility Participant,shall supply to such requesting Utility Participant partorallofitsOperatingReserveuptothefullamountofitsAvailableAccreditedCapability.A Utility Participant experiencing an emergency is not required to maintain its Operating ReserveObligation.There shall be no obligation of a Utility Participant to supply Operating Reserve if the requesting Utility Participant is not making full use of its Available Accredited Capability. Except as otherwise agreed,a Utility ParticipantsupplyingaportionorallofanotherUtilityParticipant's Operating Reserve during any mdnth shall be paid by the purchasing Utility Participant an amount equal to whichever is greater of the following: Addendum No.1 -4 of 8 B-2.4.8 B-2.4.7.1 110 percent of the Incremental Cost of supplying such service;or B-2.4.7.2 The Incremental Cost of supplying such service plus one-half of the overallsavingsinvolvedinsuchtransaction, which overall savings shall be equal to the difference between the Incremental Cost of the selling Utility Participant and the Decremental Cost of the purchasing Utility Participant. If a Utility Participant fails to provide adequate Operating Reserve,other than because of a forcedoutage,during any such period the deficient Participant shall pay to the other Utility Participants an amount equivalent to two times the cost avoided by the deficient Utility Participantfornotstartingand/or operating any generating unit or units which would ordinarily be used to provide adequate Operating Reserve.Should the Utility Participant not have adequate Accredited Capability to provide the Operating Reserves,it shall pay the other Utility Participants two times the cost for starting and operating the highest cost generating unit on the deficient Utility Participant's system.This payment shall be shared by the other Utility Participants in thesameproportionthattheirindividualAnnualSystemDemandistothenon-deficient UtilityParticipants'total Annual System Demand.Payments under this section B-2.4.8 of thisArticleBshallbewaivedforthefirstyearof operation of the Intertie. IN WITNESS WHEREOF,the Utility Participants have executed thisAddendumNo.1 to the Alaska Intertie Agreement in quintuplet bytheirauthorizedofficersorrepresentativesasofthedayand year first above written. MUNICIPALITY OF ANCHORAGE, ALASKA dba MUNICIPAL LIGHT & -Ch amBy:Asvwpel,-7 : 1985.LK)SUBSCRIBED AND SWORN TO before me on the 537%dayofJbumle' Addendum No.1 -5 of 8 7 : My Commission Expires:<¢LLG CHUGACH ELECTRIC ASSOCIATION, INC. General Manager- UBSCRIBED AND SWORN TO before me on the /Y"A”day |of luen ber.1985. Notary Public,State of AlasMyCommissionExpires:1-2 CHUGACH ELECTRIC ASSOCIATION, INC. By:Ones MxckrUY= XA President of the BoardUBSCRIBEDANDSWORNTObeforemeonthe17v4 dayofpuntery1985.° 'Notary Public,State of a My Commission Expires ://-£-§5 CHUGACH ELECTRIC ASSOCIATION, INC. #Vice-President of the Board Addendum No.1 -6 of 8 ,1985.SUBSCRIBED AND SWORN TO before me on the Jy 44.dayofpurowLek - "Notary Public,State of AlaskMyCommissionExpires:/-fe By: LslityMANAGER '(Title) SUBSCRIBED AND SWORN TO before me on the _/f2ZZ%dayofDecorsbax»1985. men he CPL of AlaskaMyCommissionExpires:fo-f2-37 GOLDEN VALLEY ELECTRIC AS MkINC.By:NA.All, daySUBSCRIBEDANDSWORNTObeforemeontheofKpeomier,1985. GuthNotaryPubic\/State of;cd aeckaa Expires:My Commission Expires:_Janvary 11,1987 Addendum No.1 -7 of 8 ALASKA ELECTRIC GENERATION and ON COQ@PERATIVE,INC. Y BLQAAvTite)"s UBSCRIBED AND SWORN TO before me on the _//*%4__day fe)Ee ,1985, Addendum No.1 -8 of 8 NDWWNF&FWWbdEXHIBIT A ALASKA INTERTIE AGREEMENT ABBREVIATIONS AND DEFINITIONS ABBREVIATIONS AMLP -Municipality of Anchorage,Alaska d.b.a., Municipal Light and Power APAdm -Alaska Power Administration APA -Alaska Power Authority CEA -Chugach Electric Association FMUS -Fairbanks Municipal Utilities System GVEA -Golden Valley Electric Association AEGTC -Alaska Electric Generation and Transmission Cooperative,Inc.,of which Homer Electric Association,Inc.and Matanuska Electric Association,Inc.are members. Definitions Accredited Capability of a Participant -The (a)netgeneratingcapabilityofaParticipant,plus (b)thevalueinkilowattsassignedtothatParticipant'spurchasesand/or firm commitments for Power fromelectricsuppliersundercontractsnowexistingorhereaftercreated,and minus (c)the value in kilowattsassignedtoanycommitmentofthatParticipanttodeliverpowertoanyelectricsupplierorsupplierspursuanttoanyvalidorderorunderseparatecontractorcontractsnowexistingorhereaftercreated.TheAccreditedCapabilityofaParticipantmaybe determined and assigned by the Operating Committee in accordance with the provisions of this Agreement. Annual System Demand -The highest System Demandoccurringduringthe12-month period ending with thecurrentmonth. Available Accredited Capability of a Participant -Accredited Capability adjusted for generating capacity out of service for maintenance or repair. Exhibit A -1 of 10 Commercial Operation -That date and time Intertie construction,testing,and energization is complete and AMLP and GVEA are initially interconnected in synchro-nous operation and supporting relaying,metering andcontrolsystemsareadequatetoallowreliabletrans- mission of power and energy across the Intertie. Contract Power -Power and Energy to be available at all times during the period covered by the commitment,except that such Power and Energy may be interrupted in the event conditions arise during the period covered by the commitment which in the judgment of the supplier would require curtailment of electric service to the supplier's own system. Contract Transmission Service -A service providing fortransmissionofelectricPowerandEnergyinbulkfromoneutilitythroughtheutility's transmission system providing the transmission service to another utility. This service is intended to be available at all times during the period covered by the commitment;provided however,if the transmission system involved has experienced a reduction in transmission capability requiring a reduction in transfers,the utility supplying the transmission service has the right to notify and require the receiving utility to reduce itstransferinthesamepercentageasthereductionin transmission system transfer capability. Control Area -An interconnected system of one or more utilities which manually or automatically controls all generation to meet the total load,plus or minus thepowerit'is delivering or receiving from neighboring systems. Control Area Service -Exercising operating control of the resources necessary to meet the loads within acontrolareaonaninstantaneousandcontinuousbasis. The Participant exercising operating control for Control Area Service shall; a.Regulate generating facilities and other power resources to effect instantaneous and continuous supply of the power requirements of the loads within the Control Area. b.Regulate generating facilities to assist in the control of frequency and time correction. c.Monitor continuously the power flows between itsControlAreaandtheControlArea(s)with which it is interconnected. Exhibit A -2 of 10 10. ll. 12. 13. 14. Declared Capability -The current capability of ageneratingunitwhichisnotgreaterthanthepublishedcapabilityoftheunit. Decremental Cost -The cost of fuel,operating laborandmaintenancewhichwouldhavebeenincurredto provide the Operating Reserves at any time and which are avoided by the other Participant,including thecostofavoidingthestartingandoperatingofa generating unit or units and a proportional amount of the annual debt service on the capital investment ofthehighestcost(per kw)generating unit on thereceivingParticipant's system.The decremental costofOperatingReservesshallbethetotalofsuch avoided costs to the:receiving Participant.In situations where a Participant would have incurredreplacementfuelcostswhicharehigherthanthecostofexistingfuelsupply,replacement costs shall be utilized. Decremental Energy Cost -The cost of fuel,operatinglaborandmaintenancewhichwouldhavebeenincurredto generate the next unit of Energy required at any time and which is avoided by the purchase of Energy from the other Participant,including the cost of avoiding the starting and operating of a generating unit or units. The decremental cost per kilowatt hour for any particular transaction shall be the total of such costs divided by the kilowatt hours scheduled for delivery to the receiving Participant.In situations where a Participant would have incurred replacement fuel costswhicharehigherthanthecostofexistingfuelsupply, replacement costs shall be used. Economy Energy -Energy that is delivered from a utility with a lower incremental production cost to a utility to displace generation at a higher incremental cost.This Energy schedule may usually be interrupted with little or no notice. Emergency Energy -Energy that is delivered to autilitywhichdoesnot,as a resultof a Forced Outage,have sufficient generating capacity,either on its own system or arranged for from other utilities,to carry its customer load responsibility. Emergency Outage (Forced Outage)-Any unanticipated,unscheduled outage of generating or transmission facilities for other reasons than planned maintenance.Such outage classification shall not exceed a period offourhours. Exhibit A -3 of 10 15. 17. 18. 19. 20. 21. Energy (Electric)-As commonly used in the electric utility industry,electric energy means kilowatt hours(kwh). Incremental Cost -The cost of fuel,operating labor,maintenance and a proportional amount of the annual debt service on the capital investment of the next generating unit that would be used to provide the required capability and Energy.It shall include the cost of starting and operating any generating unitrequiredtoprovidesuchEnergy.The incremental cost of supplying Operating Reserve shall be the total of such costs for the period of time involved.In situations where a Participant will incur replacement fuel costs which are higher than the cost of the existing fuel supply,replacement costs shall be used. Incremental Energy Cost -The cost of fuel,operating labor and maintenance to.generate the next unit of Energy required at any time,including the cost of starting and operating any generating unit which must be started as a result of supplying such Energy.The incremental cost per kilowatt hour for any particular transaction shall be the total of such costs divided bythekilowatthoursscheduledfordeliverytothereceivingParticipant.In situations where aParticipantwillincurreplacementfuelcostswhicharehigherthanthecostofexistingfuelsupply, replacement costs shall be used. Interruptible Transmission Service -A service provid-ing for transmission of electric Energy in bulk fromoneutilitysystemthroughtheutility's transmissionsystemprovidingthetransmissionservicetoanotherutility.This service is made available with theunderstandingthatitcanbecurtailedorinterrupted at any time with little or no notice at the discretion of the supplier. Intertie -The transmission facilities owned by or under contract to the Alaska Power Authority intercon- necting the Northern Group with the Southern Group. Intertie Point of Interconnection -The Midpoint of the Intertie transmission line between the Healy SubstationandDouglasSubstation,which is also the point ofinterconnectionbetweenAMLP's and GVEA's Control Areas. Intertie Operators -The operators at the controlcentersofAMLPandGVEA,which are the utilities that have operational responsibility for the Intertie. Exhibit A -4 of 10 22. 23. 25. 26. 27. 28. 29. 30. 31. 32. 33. Intertie System -The Participants of the Alaska Intertie Agreement functioning as an interconnectedelectricalsystem. Intertie Transaction -Transfer of electric energy or acommitmenttoprovidereservecapacitybetweentheutilitiessignatorytotheAlaskaIntertieAgreementin the Northern Group and the Southern Group using the Intertie. Midpoint of the Intertie -The midpoint of the Intertie is at structure No.382.The structure is Type E,a45°L,three-guyed deadend structure.It is located approximately 84.6 miles from the initiation point at the Douglas Substation. MITCR -Minimum Intertie Transfer Capability RightsdiscussedinArticle7. Net Generating Capability -That amount of kilowatts, less station use,that all the generating facilities ofasystemcouldnormallysupplysimultaneouslyunder criteria established by the Operating Committee.Thecapabilityofthegeneratingunitswhicharetempo- rarily out of service for maintenance or repair shallbeincludedintheNetGeneratingCapability. Non-Spinning Reserve -All unloaded generating capabil- ity not meeting the Spinning Reserve criteria that can be made fully effective in 45 minutes. Northern Group -FMUS,GVEA. Operating Committee -The committee established by Article 9 of this agreement. Operating Reserve -The sum of Spinning =andNon-Spinning Reserves. Operating Reserve Obligation -That amount of Spinning Reserve and Non-Spinning Reserve which a Participant isobligatedunderthetermsofthisAgreementtoprovide for the purpose of maintaining continuity of service. Planned Maintenance -Any anticipated and scheduled outage of generating or transmission facilities that isplannedinadvanceoftheequipmentbeingremovedfrom service. Participant -Any entity which is a Participant to this Agreement. Exhibit A -5 of 10 34. 36. 37. 38. 39. 40. Power (Electric)-The time rate of generating,trans-ferring or using electric Energy,usually expressed inkilowatts. Prudent Utility Practices -Prudent Utility Practicesataparticulartimemeansanyofthepractices,methods and acts which,in the exercise of reasonable judgment in light of the facts known at the time the decision was made,would have been expected toaccomplishthedesiredresultatthelowestreasonablecostconsistentwithreliability,safety andexpedition,including but not limited to the practices,methods and acts engaged in or approved by asignificantportionoftheelectricalutilityindustrypriorthereto.In applying the standard of Prudent Utility Practices to any matter under the Agreement, equitable consideration should be given to_thecircumstances,requirements and obligations of each oftheParticipants,and the fact that the Participants are cooperatives,public corporations,or politicalsubdivisionsoftheStateofAlaskawithprescribed statutory powers,duties and responsibilities.It is recognized that Prudent Utility Practice are not in-tended to be limited to the optimum practices,methodsoractstotheexclusionofallothers,but rather is a spectrum of possible practices,methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability,safety and expedition.Prudent UtilityPracticesincludedueregardformanufacturers' warranties and the requirements of governmental author- ities having jurisdiction. Reserve Capacity -The excess in kilowatts of asystem's Net Generating Capability over its maximum System Demand for any period. Reserve Capacity Obligation -The capacity which aParticipantisobligatedtoreserveanduseforthepurposeofmaintainingcontinuityofservice. Scheduled Outage -Any outage of generating or trans- mission facilities which is scheduled in advance to be out of service. Southern Group -AMLP,CEA,AEGTC,APAdm. Spinning Reserve -The amount of unloaded generating capability of a Participant connected to and synchronized with the interconnected system of the Participants and ready to take load.Spinning Reserve allocation to any generator shall not exceed the amount Exhibit A -6 of 10 of generation increase that can be realized immediatelyfromnormalgovernorcontrol. 41.System Demand -That number of kilowatts which is equaltothekilowatt-hours required in any clock hour,attributable to Energy required during such hour forsupplyofEnergytoasystem's consumers,includingsystemlosses,and also including any wheeling losses occurring on other systems and supplied for trans-mission of such Energy,but excluding generatingstationusesandexcludingwheelinglossessuppliedbyanothersystem. 42.Total Operating Reserve Obligation -That amount of Spinning Reserve and Non-Spinning Reserve of the Participants collectively required to maintain conti- nuity of service. 43.Transmission Service -Service provided by the use ofthetransmissionsystemofaParticipantdirectlyconnectedtotheIntertieforwheelingofpowerandenergythroughitssystemforanotherParticipant. 44,Transmission Service Facilities -The integratedtransmission.facilities of the transmitting utility, excluding power plant step-up transformation and radiallinestoloadsorgenerators. 45.Utility Participant -Any Participant other than APA until APA becomes a Utility Participant under Article 4 of the Agreement. ALASKA POWER AUTHORJTY Approved as to form: . Office of the Attorney General ar biedor(Title) UBSCRIBED AND SWORN TO before me this 29 day of ,1985 last written. Exhibit A -7 of 10 MUNICIPALITY OF ANCHORAGE, ALASKA dba MUNICIPAL LIGHT & POWER By: t al Vhaw 1 SUBSCRIBED AND SWORN TO before me this 3?dayof,1985 last written. CHUGACH ELECTRIC ASSOCIATION, INC. By:x General Manager SYBSCRIBED AND SWORN TO before me this Vie dayof»1985 last written.© Notary Public,State of AlaskaMyCommissionExpires:/-£-&f CHUGACH ELECTRIC ASSOCIATION, INC. ay:hres2BcEyJJCJ President of the Board SUBSCRIBED AND SWORN TO before me this jh dayofOnan»1985 last written. Exhibit A -8 of 10 r (- Serer J Cbiticnacr!"Notary Public,State ofAlaskaMyCommissionExpires:Wf-£28 CHUGACH ELECTRIC ASSOCIATION, INC. i a a -€:, Vice-President of the Board SUBSCRIBED AND SWORN TO before me this [72 day of ,1985 last written. Notary Public,State of Alaska-My Commission Expires://-§-€ CITY OF FAIRB MUNICIPAL U S,ALASKA IES SYSTEM By: MANAGER /(Title) Exhibit A -9 of 10 SUBSCRIBED AND SWORN TO before me this /¢&dayofLoecbombarry,1985 Last written. otary Pu ic,State o aska My Commission Expires:/o-/7-¥7 GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. ef By: SUBSCRIBED AND SWORN TO before me this /£*4 dayofLottambun,1985 last written. Lf p AL Notary PubAi State of AlaskaMyCommissionExpires:My Commission Expires:January 11,1987 q ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE,INC. his ret dayUBSCRIBEDANDSWORNTObeforeme of ,1985 last written. Exhibit A -10 of 10 aesetrALASKA INTERTIE AGREEMENT EXHIBIT B INTERTIE FACILITIES DIAGRAM"j Tiatv ae 34.5KY 5 OWNERSHIP OF INTERTIE PACILITIES;aso owe |nas |j rem .be |xii.Peg OH LIM sey cracuiTa 2 *-4--)4 wastationiatMS1!:CEA LIME cary crreuirwo,|MS moll,3 {» :PAs 4CeaUES aseGOLDHILL 'LEGEND . ommeemomm BOUNDARY OF APA INTERTIE FACILITIES sesssosvessons BOUNDARY OF FACILITIES OWNEDwuBYPARTICIPATINGCOMPANIES srccccceewons APA LINE mmm--GVEA LINE mecwewmes MEA TT+1)awweeeeeeFEY{*ease asf ----)3 ;|-r Js}emir ememeaty hse , °+xa i-,ato.wa o-oo eae awe ame as ame 'FeeDcn a=e : S iead reat Py :{Fecora st '2Qn¥§FEEDER 4-CUEMTOR TRANSFER !2s =3 APATataiits324mYMaleBSLws"35 | sul siti cantwett HEALY =ne ou Lomo -MIOPOINT OF INTERTIE coma = all 4 AMLEP ip2 aA pimiaememene APA MEA 4 rf i FECDER wm,4 i *U-retorr wm.2:L1SKy LISKY Prrevreewrercceeeee +Tees -!l +i FEEDER a,3:10 MORSOW MCRAE TO RUINS ;§Fy 1 TH ruruRe3.>. -:!§neaeLosesnsoALE=.)so.ryt Ej pOuct t i 4 ».c .e ip essOOo8¢nsWeweetTEELAND EXHIBIT B-1 of 2 1, 2. 0 0 EXHIBIT C ALASKA INTERTIE AGREEMENT TRANSMISSION SERVICE RATES The Transmission Service Rates shall be developed inaccordancewiththerateformulasprovidedinSection2ofthisExhibitC.Such Transmission Service Rates shall bedevelopedusingthemostrecenttestperiodapprovedforratemakingpurposes.The formulas as provided in thisexhibitshallremainineffectuntilchangedbytheParticipantstotheIntertieAgreement. Transmission Service Rate Formulas 2.1 Calculation of the Interruptible Transmission Service Rate shall be in accordance with the following rateformulaandthedefinitionsinSection2.3 of this Exhibit C. 2.1.1 Interruptible Transmission d+e Service Rate (¢/kwh)formula=a+b+ec+t+4 £ 2.2 The Contract Transmission Service Rate will be a two part rate:(1)an energy rate and (2)a demand rateandbecalculatedinaccordancewiththefollowingrateformulasandthedefinitionsinSection2.3 of thisExhibitC. The demand rate formula is developed as an annual rate. For periods less than a year,the rate shall be proportionally reduced. 2.2.1 Contract Transmission Service Rate formulas: 2.2.1.1 Energy Rate (¢/kwh)=a+t+bt+tea 2.2.1.2 Annual Demand Rate =dt+e g&($/kw) 2.2.1.3.Monthly Demand Rate =d+t+e($/kw)-"2g 2.3 Transmission Service Rate Definitions a="Operating and Maintenance Expenses"(0 &M Expenses)shall be those expenses defined in the Exhibit C -1 of 6 Federal Energy Regulatory Commission (FERC)Uniform System of Accounts that are associated with the transmission facilities used in providingtheinvolvedTransmissionService.The accounts to be used in the appropriate proportions todeterminetheTransmissionServiceRateareas follows: 556 System control and load dispatching560Operationsupervisionandengineering561Loaddispatching 562 Station expenses 563 Overhead line expense564Undergroundlineexpense566Miscellaneoustransmission expense567Rents 568 Maintenance supervision and engineering569Maintenancestructures 570 Maintenance of station equipment571Maintenanceofoverheadlines 572 Maintenance of underground lines 573 Maintenance of miscellaneous transmission plant Administrative and General Expenses"(A &GExpenses)shall be those expenses defined in the Federal Energy Regulatory Commission (FERC) Uniform.System of Accounts that are associated with the transmission facilities used in providing the involved Transmission Service.The accounts to be used in the appropriate proportions to determine the Transmission Service Rate are as follows:) 920 Administration and general salaries 921 Office supplies and expenses923Outsideservicesemployed924Propertyinsurance 925 Insurance and damages 926 Employee pension and benefits 930.2 Miscellaneous general expense 932 Maintenance of general plant "Tax Expenses''shall be those tax expenses defined in the Federal Energy Regulatory Commission Account 408.1 directly associated with the transmission facilities used in providing the Transmission Service other than income taxes. "Depreciation Expense"shall be the annual Exhibit C -2 of 6 ,depreciation expenses defined in Federal EnergyRegulatoryCommissionAccount403and407thatare associated with the transmission facilities used in providing the Transmission Service. e ="Capital Costs"shall be the annual interest expenses defined in Federal Energy RegulatoryAccount427onthetransmissionplantofallcapitalizedcostsassociatedwiththetransmission facilities used in providing the Transmission Service. f ="Kilowatt hours"shall be the total annual kilowatt hours at transmission system input to betransferredbythetransmissionfacilitiesusedinprovidingtheTransmissionServiceforthetest period referred to in section 1.0 of this Exhibit Cc. g ="Kilowatts of transfer capacity"shall be the peakloadinkwonthetransmissionfacilities providing the Transmission Service for the test period referred to in section 1.0 of this Exhibit C. MUNICIPALITY OF ANCHORAGE,ALASKA dba MUNICIPAL LIGHT AND POWER By: ly Ch- Title) yy SUBSCRIBED AND SWORN TO before me this _wg7day of,1985 last written. ALASKA POWER AUTHORITY By:LIL DZADifeefek(Title) Exhibit C -3 of 6 ( \y SUBSCRIBED AND SWORN TO before me this zy day of(,1985 last written. CHUGACH ELECTRIC ASSOCIATION, INC. 'General Marater 7)SUBSCRIBED AND SWORN TO before me this WEG day of,1985 last written. Notary Public,State of AlaskaMyCommissionExpires:/-f-J7) CHUGACH ELECTRIC ASSOCIATION, INC. By:ez YIPPAY President of the Board SUBSCRIBED AND SWORN TO before me this yA day ofMmtex_-__,1985 last written.Susser?fristienton)otary Public,State of AlaskaMyCommissionExpires:H-&<<5 -CHUGACH ELECTRIC ASSOCIATION, INC. By: Vice-President ot the Board Exhibit C -4 of 6 SUBSCRIBED AND SWORN TO before me this SIH aay ofVE2__,1985 last written. otary Public,My Commission Expires:/-"IIE ANKS,ALASKAMUNICIPILITIESSYSTEM By: CITY MANAGER '(Title) SUBSCRIBED AND SWORN TO before me this VBL day ofLotetnbis,1985 last written. No y Public,StateofAlaskaMyCommissionExpires:/g -/7-¥7 GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. By:LhWikMaw (Title)és SUBSCRIBED AND SWORN TO before me this /b&¥A day ofDargmnde,1985 last written. My Commission xp ires:My Commission Expires:eanuary TOR Exhibit C -5 of 6 ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE,INC. Drow rSek(Title)- SUBSCRIBED AND SWORN TO before me this Are day of om hie ,1985 last written. ( o State of A My Commission Expires:P Exhibit C -6 of 6 EXHIBIT D Minimum Intertie Transfer Capability -Rights Determination Minimum Intertie Transfer Capability Rights (MITCR)for theUtilityParticipantsfortheyears1985-86,1986-87,and 1987-88 will be as set out below. Annual System Demand (mw)(June Ist -May 31st) Three Year 1981-82 1982-83 1983-84 Average AMLP 114 121 127 120.67 121 MW CEA 214.6 223 224.4 220.37 220 MW AEGTC 134.6 149.3 156.6 146.8 147 MW Southern Group Utility Participants Total 468 MW FMUS 26.5 28.2 28,2 27.6 28 MW GVEA 67.9 72.2 74.6 71.56 72 MW Northern Group Utility Participants Total 100 MW The following table lists the percentages by which Intertie usewillbeallocatedifthereisaconflict. AMLP 121 =248 =.25 488 CEA 220 =-450 =.45 488 FMUS 28 =28 =.28 GVEA 72 =72 =.72 AEGTC 147 =301 =.30 G88 EXHIBIT D -1 of 4 Minimum Intertie Transfer Capability Rights (MITCR)of eachUtilityParticipantfortheyears1985-86,1986-87 and 1987-88 issetoutbelowbasedontheIntertieTransferCapabilityof70mw. Utility Participant'sMinimumIntertieTransfer Capability Rights AMLP 25 X 70 mw =17.5 mw CEA -45 X 70 mw =31.5 mw FMUS .28 X 70 mw =19.6 mw GVEA ./2 X 70 mw =50.4 mw AECTC 30 X 70 mw =21.0 mw 140.0 mw ALASKA R AUTHORITY Exeutwve Ween (Title) SUBSCRIBED AND SWORNyfO beforejyme thi 23d day ofnk"=Notary Public,iStdatle of a3 kaMydolmiscionExpites:e138,T I CITY OF PAT S,ALASKA MUNICIPAL IJITIES SYSTEM BY 7 CITY MANAGER Title) SUBSCRIBED AND SWORN TO-before me this 7s day ofLectselas,_,1985. Notar ublic,State/of Alaska My Commission Expires:;/,-/7.¥"”7 EXHIBIT D -2 of4 MUNICIPALITY OF ANCHORAGE, ALASKA dba MUNICIPAL LIGHT & POWER BY f= SUBSCRIBED AND SWORN TO before me thisLey,1985. GOLDEN VALLEY ELECTRIC»2cWa?M "amee SUBSCRIBED AND SWORN TO before me this [ot day ofDocomben,an |Ket Q.OHANotaryPublié,]State of Alaska My CommisSion Expires:ott eee es;Janvary 1h,1967 CHUGACH ELECTRIC ASSOCIATION,INC. General Managex” 7)SUBSCRIBED AND SWORN TO before me this SSL day of1985.Mesar 4 -e } é Notary Public,State of Alaska -My Commission Expires:/A §-£S& EXHIBIT D -3 of 4 CHUGACH ELECTRIC ASSOCIATION,INC. BY Omer Dp feenreoa President of the Board f),SUBSCRIBED AND SWORN TO before me this LL day of1985, Notary Public,State o askaMyCommissionExpires://-£8G CHUGACH ELECTRIC ASSOCIATION,I}c. Ld BY ee fae Vice-President of the Board f)SUBSCRIBED AND SWORN TO before me this /7h "day.of -1985.->'N otary Public,State of AlaskaMyCommissionExpires:)/-§/-££ ALASKA ELECTRIC GENERATION and '(Title) " SUBSCRIBED AND SWORN T this s7#day of\Necembe ,1985. State or Ala My Commission Expires:Lite ee/ EXHIBIT D -4 of 4 AMENDMENT NO.1 TO THE ALASKA INTERTIE AGREEMENT ARTICLE 17 -INSURANCE AND LIABILITY This Amendment No.1 is made this 29th day of Maren1991,by the Participants,ALASKA POWER AUTHORITY,now the AlaskaEnergyAuthority,a public corporation of the State of Alaska("AEA");the MUNICIPALITY OF ANCHORAGE,ALASKA d/b/a MUNICIPAL LIGHT &POWER ("AML&P");CHUGACH ELECTRIC ASSOCIATION,INC. ("Chugach");THE CITY OF FAIRBANKS,ALASKA,MUNICIPAL UTILITIES SYSTEM ("FMUS");GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. ("GVEA");and ALASKA ELECTRIC GENERATION AND TRANSMISSIONCOOPERATIVE,INC.("AEG&T"),signatories to the Alaska Intertie Agreement,dated December 23,1985,hereinafter referred to as "Agreement."The.signatory parties are hereinafter referred to as "Participants.” WITNESSETH WHEREAS THE MUNICIPALITY OF ANCHORAGE,ALASKA,d/b/a MUNICIPAL LIGHT &POWER;CHUGACH ELECTRIC ASSOCIATION,INC.;THE CITY OF FAIRBANKS,ALASKA,MUNICIPAL UTILITIES SYSTEM;GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.;and ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE,INC.,are all Utility Participants and signatories to the Alaska Intertie Agreement;and WHEREAS the AEA is a Participant and signatory to the AlaskaIntertieAgreement;and WHEREAS the signatories to the Alaska Intertie Agreement desire to have Article 17 amended; NOW THEREFORE,the Participants agree as follows: _ARTICLE 17InsuranceandLiability Section 17.1 Insurance During the term of this Agreement,each Participant shall purchase and maintain insurance with a carrier orcarrierssatisfactorytotheOperatingCommitteeandtheAEAcoveringinjurytopersonsorpropertysufferedbyanyParticipantorathirdparty,as a result of errors,omissions,or operations which arise both out of and during the course of this contract by the Participant or by any of its subcontractors.Thecoverageshallalsoprovideprotectionagainstinjuries to all employees of the Utility Participant and the employees of any of its subcontractors engaged in work under this Agreement. If approved by the Operating Committee and the AEA, _AML&P,FMUS and the AEA may qualify for certain levelsofself-insurance.Any such undertaking to self-insure will be furnished to the Operating Committee and theAEAbeforebeginningoperationsunderthisAgreement.' As an additional alternative,group policies shall be acceptable under Section 17.2 of this Agreement if such policies meet the expressed coverage requirements individually and collectively for the signatories of this Agreement.Any other alternative allowed under Sections 17.2 must provide identical or better limits of coverages required for each of the exposures,as specified in that Section 17.2. Section 17.2 Types of Insurance 17.2.1 The following insurance must be provided by each Participant to cover those operations of the Participants performed under this Agreement: Worker's Compensation Insurance:Each Participant shall provide and maintain,for all employees of the Participant engaged in work under this Agreement, Worker's Compensation Insurance as required by AS 23.30.045.Statutory worker's compensation coveragemaybeprovidedthroughpurchaseofinsurance,self-insurance (in the case of AML&P,FMUS and the AEA only)or a combination of both.A self-insurance program must provide a high level of statutory excess over the self-insured level. Each Participant shall require Worker's Compensation Insurance for any of its subcontractors who directly or indirectly provide services under this Agreement.Each insurance policy must include: - (a).Statutory coverage for states in which employeesareengaginginwork;- (b)Employer's Liability Protection of not less than $500,000 per occurrence; 2 Where in this Article 17 the AEA is entitled to self- insurance and there are requirements for approval by theOperatingCommitteeandAEAforsuchself-insurance,the AEAshallnotparticipateinsuchapproval. -2- (C)Broad Form All States Endorsement; (d)Coverage as required by all State and Federal Acts where applicable; The Worker's Compensation Insurance policy shall contain a waiver of subrogation in favor of the otherParticipants.Any Participant who is'self-insuredherebywaivessubrogationinfavoroftheother Participants. AML&P,FMUS and the AEA may self-insure for Worker's Compensation Insurance up to the maximum filed and approved with the State Department of Labor. A copy of the insurance policies and/or descriptions of self-insurance program will be furnished to the Operating Committee and the AEA on February 1 of eachyear. 17.2.2 Comprehensive General Liability Insurance:Each Participant shall purchase and maintain comprehensive general liability insurance subject to the following limits of liability: (a)Bodily Injury and Property Damage Liability of a minimum of $5,000,000 Combined Single Limits each occurrence and affording insurance for Premises- Operations,Owners'and Contractors'Protective, Independent Contractors,Products/Completed Operations,Blanket Contractual Liability,Broad Form Property Damage,and Personal InjuryLiability. (b)Automobile Liability Insurance covering all vehicles.Such insurance shall provide coverage of not less than $5,000,000 Combined Single LimiteachoccurrenceforBodilyInjuryandPropertyDamageLiability. (c)Owned Aircraft (if applicable)and Non-OwnedAircraftwithseatingcapacityoffiveseats orless,except commercial,scheduled flights,withlimitsofliabilitynotlessthan:$5,000,000 - Bodily Injury per occurrence;$1,000,000 for Passenger Liability per seat;and $5,000,000 for Property Damage Liability per occurrence. Coverage must include Slung Cargo exposures.If an aircraft with more than five-seat capacity is used,special coverage and limits must be.obtained and approved by the Operating Committee. (d)Owned Watercraft (if applicable)and Non-Owned Watercraft (if applicable)with limits of liability not less than $5,000,000 per single occurrence as provided in the "In Rem Endorsement” under "Maritime Coverage B.* If approved by Operating Committee and the AEA,AML&P, FMUS and the AEA may self-insure any or all of the required coverages in (a),(b),(cc),and (d)above. Participants intending to pursue this alternative coverage must provide proof of solvency to be approved annually by the Operating Committee and the AEA.The Operating Committee and the AEA shall establish the guidelines to insure such solvency.Members who have in place approved alternative coverage shall notify the Operating Committee and the AEA on semi-annual basis of any fluctuation(s)that may reduce or limit their solvency as originally approved by the Operating Committee and the AEA. The other Participants shall be included as additional insured as respects insurance required in this Section 17.2.2 of Article 17 and shall not by their inclusion be responsible to the Insurance carrier for payment of premium therefor.These insurance policies must also contain a cross liability or severability of interest endorsement. Section 17.3 Other Insurance Coverage Requirements 17.3.1 Each Participant will bear the cost of the required insurance.Insurance required to be maintained under this Article 17 may be maintained as part of any other policy or policies of the Participant so long as the coverage of such policy or policies is substantially the same as if such coverage were maintained under a separate policy. 17.3.2 These policies must provide that any cancellation, non-renewal or material change be upon 30 days'notice to all named insured.Each Participant must provide the Operating Committee and the AEA with evidence of insurance.Insurance companies,or self-insurers,shown on the certificate of insurance must have financial ratings acceptable to the AEA.Failure to furnish satisfactory evidence of insurance or lapse of the policy is a material breach of this Agreement. IN WITNESS WHEREOF,the Participants have executed this AmendmentNo.1 to the Alaska Intertie Agreement in several counterparts by their authorized officers or representatives as of the day andyearfirstabovewritten. i?AUTHORITYCpetadShin2125-7 ;L ”thea.Office 'of theAttorney Genera --Lo .Ero rube.bie b=Title ° SUBSCRIBED AND SWORN TO before me this au day of lebruakey '(| Approved as to form: 199¢. Notary Publ My Commissi ,State of Alaska Expires:Oct 13,1993 MUNICIPALITY OF ANCHORAGE,ALASKAa/b/a MUNICIPAL LIGHT POWER he.f /[-By:Ltetl fFreeMANagnorTitle- 1999.AND SWORN TO before me this aus day of Genaup -199¢. My Commission Expires:2-39-¢2_ CHUGACH INC. CTRIC ASSOCIATION, SUBSCRIBED AND SWORN TO before me this /i,-day of 74ewf4yY_,1996.oO Notary Public,State of Alaska My Commission Expires:3°/3-22 CHUGACH ELECTRIC ASSOCIATION, INC ° By -_A Va 02,0PrésidentoftheBoard SUBSCRIBED AND SWORN TO before me this "x day of Aeuyey_,1999.7 - Létmonars?Notary Public,State of Alaska My Commission Expires:.4-/#-a2 CHUGACH ELECTRIC ASSOCIATION, INC e Lf By: Gee: x :avaesidentofthe BottyaaaANDSWORNTObeforeme'this "@<day of Afwewney _,1999.: 'Notary Public,State of@Alaska My Commission Expires:4 7-Z2 CITY OF FAIRBANKS,ALASKA MUNICIPAL UTILITIES SYSTEM By?-<---=Penk Mleorngcee Hid Pe i pa AND SWORN TO before me this 77%day of 7"?2%' Kapha,Oo hn Notary Public,State of AlaskaMyCommissionExpires:Rely ford GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. By:"Wik,4 GnMichelP.KellyGeneralMan TitleSUBSCRIBEDANDSWORN'TO before me this _/7 re,of OP hn '1990.-) Notary Public,State 2f Alaska My Commission Expires: 4-277-72 ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE,INC. 7SUBSCRIBEDANDSWORNTObeforemethisAf'"day Derek '1996495/, Notaty Public,Stat@of AlaskaMyCommissionExpires:/%-a7z_G2 -7-LG8\gma450.doc JOINT USE AGREEMENT THIS AGREEMENT is between the Alaska Power Authority (hereinafter called the "Power Authority")and Matanuska Electric Association (hereinafter called "MEA"),witnesseth, that, WHEREAS in 1981 the legislature directed the Power Authority to construct the Anchorage-Fairbanks Transmission Intertie (Sec.14,Ch.118,SLA 1981,as amended by Sec.19, Ch.133,SLA 1982);and WHEREAS the purpose of the intertie project is to connect the electrical power transmission facilities of Southcentral Alaska with Interior Alaska;and WHEREAS to carry out this purpose it is necessarytotransmitelectricalpowerbetweenTeelandSubstationand Willow Substation;and .WHEREAS MEA owns and operates an electrical trans- _Mission system in Southcentral Alaska;and WHEREAS MEA designed,owns,and operates a 115 kV transmission line from Willow Substation to Teeland Substa- tion:and . WHEREAS all but 5.5 miles of that line are capable of transmitting 138 kV as required for the intertie operation; and ; WHEREAS MEA is willing to provide the right-of-wayforthedesignandconstructionof5.5 miles of a 138 kVelectricaltransmissionline(hereinafter called the "Project”);and WHEREAS the Power Authority is willing to design and construct the Project in return for ownership of the Project and permission to use the MEA right-of-way to build, operate and maintain the Project;and WHEREAS the Power Authority is willing to allow MEA to transmit power to MEA loads at no cost to MEA;and WHEREAS the Power Authority will transfer owner-ship of the Project and relinquish the permit to MEA whenthePowerAuthoritydeterminesthatitnolongerrequires the electrical transmission line, NOW THEREFORE,it is agreed as follows: ARTICLE I Section 1.MEA warrants that it has obtained all rights-of-way,easements,and/or permits reasonably required for the construction,operation,and maintenance of the Project and hereby grants a license and permit to the Power Authority to utilize said rights in real property to construct, operate,and maintain the Project at no cost to the Power Authority.Said license and permit shall terminate upon the transfer described in Section 9 hereof but in all events no later than October 1,2018. Section 2.The Power Authority shall comply with the terms of all MEA rights-of-way,easements and permits affecting the Project,copies of which are attached hereto and made a part of this Agreement.(Attachment A). Section 3.The Power Authority shall accomplish all engineering and construction services necessary for the complete engineering design and the construction of the Project.The Power Authority shall design and construct the Project so as to permit the installation of three-phase underbuild distribution which is to be reasonably compatible with MEA's existing system. Section 4.MEA shall not be responsible for operation and maintenance of the Project unless this Agree-- ment is terminated or title to the Project is transferred to MEA. Section 5.The Power Authority shall indemnify and hold MEA harmless from any claims or actions of any kind arising from the design,construction,operation,and main- tenance of the Project and/or the failure to comply with the terms of all MEA rights-of-way,easements,and permits by the Power Authority or its agents,contractors,or assigns.However,in no event shall the Power Authority indemnify MEA for MEA''s own negligence,or for the negligence of MEA'sagents,contractors or assigns.Furthermore,the Power Authority shall have no obligation to indemnify for claims brought after October 1,2018,or after the transfer of title described in Section 9 below.. Section 6.MEA may design,construct,operate, and maintain reasonable underbuilt electrical distribution lines utilizing the structural components of the transmis- sion line.All such underbuild construction shall be designed and constructed in accordance with REA and NESC requirements and shall receive Power Authority design approval prior to construction.The design,construction, operation,and maintenance costs for the underbuilt will be borne by MEA.There shall be no underbuild along the Sunset Boulevard to the Hollywood Road segment beginning at the east end of the lake located in the Northwest One-Quarter (NW1/4)of Section 31. Section 7.MEA shall indemnify and hold the Power Authority harmless from any claims or actions of any kind arising from MEA's design,construction or operation and maintenance of its underbuilt distribution lines. Section 8.It is understood that the new trans- mission line will be a portion of the existing MEA trans- mission system required to serve the MEA load north of the Teeland Substation.Accordingly,it is agreed that MEA shall have the primary right at all times to utilize the new transmission line capacity to transmit power to such MEA loads at no cost to MEA.Such rights will have precedence over all other uses.The Power Authority will make all reasonable efforts to ensure that the line is available for use at all times but offers no guarantee of availability or reliability of the new transmission line.The Power Authority_will not be liable for direct or consequential damagesresultingfromlinefailure.All energy losses resulting from utilization herein specified shall be supplied and paidforbyMEA.For the purposes of determining said losses,engineering estimation shall be used and shall assume only MEA loading of the line.Utilization of the line by MEA at ' Page 2 of 4 any given instance shall not exceed forty (40)megawatts,which is that amount of transmission capacity lost to MEA by incorporation of this new transmission line into the existingMEAtransmissionsystem. Section 9.When the Power Authority determines that it no longer requires the electrical transmission line as a component part of the Anchorage-Fairbanks Intertie Project,the Power Authority will transfer title to the .transmission line to MEA at no cost as part of the compensa- tion for the performance of this contract by MEA and Power Authority usage of the MEA right-of-way. Section 10.In the event this Agreement expires or is terminated,the Power Authority shall have the right to utilize the Project for intertie operations within the limitations of Section 8,above,and MEA shall assess charges based only upon maintenance costs of the Project as constructed by the Power Authority. ARTICLE II Section 1.As used herein,the term:. A."Project"means the physical facilities necessary to transmit three-phase electrical energy not to exceed 138 kV from a take-off structure located at Teeland Substation,a distance of approximately 5.5 miles to HollywoodRoadasdepictedonAttachmentBhereto,including,without limitation,wooden poles,conductors,insulators,anchors, guy wires,take-off structures,and related equipment. B."Construction"means all labor,equipment, supplies,and services necessary to place the Project in commercial operation,including,but not limited to,clearingtheright-of-way to permit installation and maintenance of the Project,in accordance with the Project's design. Section 2.It is specifically agreed between the parties executing this Agreement that it is not intended by any of the provisions of any part of the contract to create in the public or any member thereof a third-party beneficiary hereunder,or to authorize anyone not a party to this Agree- ment to maintain a suit for personal injuries or propertydamagepursuanttothetermsorprovisionsofthisAgreement. Section 3.This Agreement represents the entire agreement between the parties concerning the Project.The parties agree that all other agreements written or.oral concerning the Project are merged with this Agreement. _Section 4.This Agreement may only be modified in writing which must be signed by the appropriate officers of each party to this Agreement. Section 5.Nothing in this Agreement shall be interpreted to make the Power Authority the agent of MEA or MEA the agent of the Power Authority. ALASKA POWER AUTHORITY DATED:lary ravu lo,1984 Page 3 of 4 / MATANUSKA ELECTRIC ASSOCTATION,INC. DATED:Klos A MPL, STATE OF ALASKA ) :SS. THIRD JUDICIAL DISTRICT ) The foregoing Agreement was acknowledged before methislo?day of January,1984,by Larry D.Crawford,theExecutiveDirectoroftheAlaskaPowerAuthority,an Alaskan corporation,on behalf of the corporation. LSge?So Z Gevecme.2 civ Pubric for theSh thing Bheskaassionexpires: STATE OF ALASKA ) :SS. THIRD JUDICIAL DISTRICT ) The foregoing Agreement wa wledged before methisjvdayofJanuary,1984,by Mh Mer»the of Matanuska Electric cliatiion,anAlaskancorporation,on behalf of the corporation. *: Page 4 of 4 _ELECTRIC LINE RIGHT OF WAY EASENe" . a KNOW ALL MEN BY THESE PRESENTS that we the underes'JOHN G.(GARY)HAGGITT,WILLIAM H.MCKILLOP,JOHN D.HAGGITy*\MARGARET E.HAGGITT,and PHYLLIS TATE,for a good and valuable”'consideration,the receipt whereof is hereby acknowledged,do ijthereby grant unto MATANUSKA ELECTRIC ASSOCIATION,INC.,a seeps atee corporation (hereinafter called the "Association"),whose post office address is P.O.Box 1148,Palmer,Alaska(99645,and to its successors or assigns,the right to enter upon"the lands of the undersigned,more particularly described asifollows: . 4 i i The North One Hundred Feet (100') Ho .'Of the Northeast One Quarter (NE 1/4) i of Section 32,Township 17 North, Bo Range 2 West,Seward Meridian,Palmer .Recording District,Third Judicial District,State of Alaskaiandtoconstruct,reconstruct,rephase,repair,operate,and[maintain on or under the above-described lands and/or in,upon,or under all.streets,roads,or highways abutting said lands,an'electric transmission and/or distribution line or system;to'inspect and make such repairs,changes,alterations,improvements,removals from,substitutions,and additions to its facilities as the Association may from time to time deem advisable,including,bY way of example and not by way of limitation,the right toincreaseordecreasethenumberofconduits,wires,cables,hand"holes,manholes,connection boxes,transformers,and transformersenclosures;to cut,trim,and control the growth by chemical;means,machinery,or otherwise of trees and shrubbery locatedywithinfifty(50).feet of the center line of said line or system,or that may interfere with or threaten to endanger the operationjandmaintenanceofsaidlineorsystem(including any control ofjthegrowthofothervegetationintherightofwaywhichmay,incidentally and necessarily result from the means of control,employed);to keep the easement clear of all buildings,structures'or other obstructions;and to license,permit or otherwise agreeitothejointuseoroccupancyofthelines,system,or,if any:of said system is placed underground,of the trench and related'underground facilities,by any other person,association,or»Corporation.of .. The undersigned agree 'that all poles,wires and otherfacilities,including any main service entrance equipment ,installed in,upon,or under the above-described lands at theAssociation's expense shall remain the property of the Associa- ,tion,removable at the option of the Association., The undersigned covenant that they are the owners of"the above-described lands,and that the said lands are free and clear of encumbrances and liens..IN WITNESS WHEREOF,the undersigned have set their"hands and seals.DATED this 13.day of LxLh hoe,ve.LfhecS Lh wtJORNG.HAGGITT //7 ELECTRIC LINE RIGHT OF /WAY EASEMENT -PAGE 1 of 3 / 000035 or 37 ,ia"se :SS. E+:*GHIRD;JUDICIAL DISTRICT ) The foregoing instrument was acknowledged before meADebber,1982,by John G.Haggitt. p Notary PAblic for the Sta of Alaska :My commission expires:LL,TV ALIES "/"DATED this 27 day ot egTiaiien /,1982. 5 WILLIAM H.MCKI P * STATE OF ALASKA ) Lo -of,:SS. THIRD*JUDICIAL DISTRICT ) geo""the foreg ing instrument was acknowledged before me74dayofeptember,1982,by William H.McKillop. AHN Ded) Notary Public for the State of Alaska My commission expires: DATED this 292 day of Leer ber +1982. 7 . Sn DezePHYLLISTATE f STATE OF ALASKA ) ':ss. \THIRD JUDICIAL DISTRICT ) og 'The foregoing instrument was acknowledged before mePthisg@rr_day of ChepZionluts 1982,by Phyllis Tate. Notary 'Public for the State of Alaska My commission expires:Churn a3./9SH GF - Page 2 of 3 000036 oF ae S7 Agreement reached by the General Managers of the Utility Participants onDecember15,1994. The General Managers unanimously agree in settlement of the ML &P Appeal of July 17,1992 as follows 1.Motions 1 and 2 of the December 12,1994 letter from ML &P on the matter of the Appeal are referred back to the IOC for further consideration and recommendation to the General Managers. 2.The selling of energy generated from a Utility Participant's required spinning reserve by the loading of the unit(s)designated as maintaining spinning reserve capacity may only occur if the provisions for spinning reserves or load shed in lieu of the spin,as written in B-2.4.2 of Addendum No.|of the Intertie Agreement,are complied with by purchasers or sellers. 3.The Utility Participants shall beginning Jan.1,1995 maintain a daily record of spinning reserves on an hourly basis,power quality,and continuity of Intertie power transfer.The daily report shall be compiled by the Northern and Southern Intertie Operators from inputs received from their respective Utility Participants.The format,criteria,and specific contents shall be as directed by the IOC.The report shall be summarized quarterly and submitted in writing by the Northern and Southern Intertie Operators to the IOC for review for contract compliance and for other purposes of the Utility Participants. 4,It is understood that this agreement shall prevent any Utility Participant from making any and all claims against any other Utility Participant as relates to past operations under the terms of the Alaska Intertie Agreement,its Addendum and Exhibits. Signed, Thomas R.Stahr Ndjorpstad General Manager General Manager Municipal Light &Power WidElectricAssociationM4An General Manager Golden Valley Electric Association 4 S46 Vincenzo Mottola Robert Hufman Electric Utility Executive a General Manager AEG &T Fairbanks Municipal Utility SystemsZocrman[by teNormanStoryWayneCarmony General Manager General Manager Homer Electric Association Matanuska Electric Association (Member of AEG &T)(Member of AEG &T) OPERATING AGREEMENT FOR TESTING THE ALASKA INTERTIE This Operating Agreement for Testing the Alaska Intertie("Testing Agreement")is made between the ALASKA POWERAUTHORITY,a public corporation of the State of Alaska ("APA");and some or all of the following utilities:-the MUNICIPALITY OFANCHORAGE,ALASKA,d.b.a.MUNICIPAL LIGHT AND POWER,a municipalcorporation("'AMLP"');CHUGACH ELECTRIC ASSOCIATION,INC.,a non-profit electric cooperative membership corporation of theSTATEOFALASKA("CEA");THE CITY OF FAIRBANKS,ALASKA,MUNICIPAL UTILITIES SYSTEM,a municipal corporation ("FMUS");GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.,a non-profit electric cooperativemembershipcorporation.of the State of Alaska ("GVEA");and ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE,INC., ("AEGTC'')of which HEA (Homer Electric Association,Inc.)and MEA (Matanuska Electric Association,Inc.)are members;all of which plan to be signatories to the Alaska Intertie Agreement dated23+ok becemfy 1985,hereafter referred to as "Agreement". WITNESSETH WHEREAS,AMLP,CEA,FMUS,GVEA and AEGTC each plans to become a Utility Participant and signatory to the Agreement;and WHEREAS,the APA also will become a.Participant and signatory to the Agreement;and ° ; WHEREAS,some or all of the Participants who will becomesignatorytotheAgreementdesiretohaveanagreementfortheoperationandmaintenancefortestingtheIntertieuntilAPAhas declared the Intertie in Commercial Operation as defined in the Agreement; NOW THEREFORE,the Participants signatory to this InterimOperatingAgreement(hereafter referred to as "signatories'") agree as follows. ARTICLE AA Definitions The definitions of the draft Alaska Intertie Agreement, Exhibit A to this Testing Agreement,are incorporated into this Testing Agreement. ARTICLE BB Term and Effective Date Section BB-1l This Testing Agreement will become effective as of the date APA,AMLP,GVEA,CEA and AEGTC have signed it,and will continue in effect until terminated as providedforinSection2.2 of the Agreement or until the APA declares the Intertie is in Commercial Operation. However,this Testing Agreement will terminate no later than January 31,1986 unless APA,AMLP,CVEA,CEA,and AEGTC agree to extend it for 90 days. Section BB-2 The signatories will be responsible for and direct alloperation,maintenance,or other activities in a safemannersoastocomplywiththeNESCandotherprudent safety standards. ARTICLE CC Testing Intertie Capability Section CC-2.1 CC-2.1.1 The Intertie capability under this Testing . Agreement for a transfer of power to the North is20MWandtotheSouthis20MW.However;when approved by the APA a two-day test will be allowedwithpowertransfersuptoamaximumof70MW. CC-2.1.2 The use of the Intertie will be by a pro ratasharingofMinimumIntertieTransferCapability Rights ("MITCR")up to the testing maximumcapabilitystatedinSectionCC-2.1.1.TheapplicablepercentagesarelistedinSection cc-2.1.3. CC-2.1.3 The following table lists the percentages by whichIntertieusewillbeallocatedifthereisa conflict. AMLP 121 =248 =(25 488 CEA 220 =-450 = 45 G88 'FMUS 28 =.28 =.28 100 GVEA 72 =.72 =72T00 AEGTC 147 =.301 =.30 488 INTERIM OPERATING AGREEMENT -2 of 10 ARTICLE DD Costs to Signatories During Testing Section DD-3.1 DD-3.1.1 APA will reimburse the signatories':scheduled maintenance costs for the Intertie during testingoperation,up to the amount of the testingmaintenancebudgetestimatessubmittedbythesignatoriesandapprovedbytheAPA.The APA will approve or disapprove maintenance budget estimateswithin21daysaftertheestimatesaresubmitted. DD-3.1.2 Except for the operating costs of the Intertie Operators,no signatory will bill any other 'signatory or the APA for its operating or wheelingcostsforuseoftheIntertieunderthisTestingAgreement. ARTICLE EE Insurance Liability Section EE-1 Insurance During the term of this Testing Agreement,each signatory must purchase and maintain insurance with a reliable carrier.or carriers coveringinjurytopersonsorpropertysufferedbyanyParticipantorathirdparty,as a result of errors,omissions,or operations which arise both out of and during the course of.this contract by the signatory or by any of its subcontractors. The coverage shall also provide protection against injuries to all employees of the signatory and the employees of any of its subcontractors engaged in work under this Testing Agreement.If approved by the APA,a signatory may self-insure for the Worker's Compensation Insurance and,up to amaximumof$250,000,for the other types of insurance required by this Article.A copy of the insurance policies and undertaking to self-insure, if any,will be furnished to the other signatories before beginning operations under this Testing Agreement. INTERIM OPERATING AGREEMENT -3 of 10 Section EE-2 EE-2.1 EE-2.2 Types of Insurance The following insurance must be purchased by eachsignatorytocoverthoseoperations:of the signatory performed under this Testing Agreement: Worker's Compensation Insurance:Each signatory'shall provide and maintain,for all employees ofthesignatoryengagedinworkunderthisTestingAgreement,Workers'Compensation Insurance as required by -AS 23.30.0045.The signatory'isresponsibleforWorkers'Compensation InsuranceforanyofitssubcontractorswhodirectlyorindirectlyprovideservicesunderthisTestingAgreement..Each insurance policy must include: (a)Statutory coverage for states in whichemployeesareengaginginwork;- (b)Employer's Liability Protection in the amountof$2,000,000 per occurrence; (c)Broad Form All States Endorsement; (d)Coverage as required by all State and Federal Acts where applicable; (e)Voluntary Compensation Endorsement. The Worker's Compensation Insurance policy shall contain a waiver of subrogation in favor of the other signatories.Any signatory who is self-insured hereby waives subrogation in favor oftheothersignatories.- Comprehensive General Liability Insurance:Each signatory shall purchase and.maintain comprehensive general liability insurance subject to the following limits of liability: (a)Bodily Injury and Property Damage Liabilityofaminimumof$10,000,000 Combined Single Limits each occurrence and affording insurance for Premises-Operations,Owners and Contractors' Protective,Independent _Contractors, Products/Completed Operations,Blanket Contractual Liability,Broad Form Property Damage,Personal Injury Liability,Incidental Errors and Omissions. (b)Automobile Liability Insurance covering all vehicles.Such insurance shall provide coverage INTERIM OPERATING AGREEMENT -4 of 10 of not less that $10,000,000 Combined Single Limit:each occurrence for Bodily Injury and PropertyDamageLiability. (c)Owned Aircraft (if applicable)and Non-OwnedAircraftwithseatingcapacityoffiveseatsorless,except for commercial,scheduled flights,with limits of liability not less than:$5,000,000 -Bodily Injury per occurrence;$1,000,000 for Passenger Liability per seat;and$5,000,000 for Property Damage Liability per occurrence.Coverage must include Slung CargoExposures.If an aircraft with more than fiveseatcapacityisused,special coverage and limits must be obtained and approved by the other signatories. (d)Owned Watercraft (if applicable)andNon-Owned Watercraft (if applicable)with limits-of liability not less that $5,000,000 peroccurrenceasprovidedinthe"In Rem Endorsement"under "Maritime Coverage B"'. The other Participants shall be included as additional insureds in insurance required in this Section EE-2.2ofArticleEEandshallnotbytheirinclusionbe responsible to the insurance carrier for payment ofpremiumstherefor.These insurance policies must also contain a cross liability or severability of interest endorsement.: Section EE-3 EE-3.1 EE-3.2 Other Insurance Coverage Requirements Each signatory will bear the cost of the requiredinsurance,Insurance required to be maintained under this Article EE may be maintained as part of any other policy or policies of the signatory so long as the coverage of such policy or policies is substantially the same as if such coverage were maintained under a separate policy. These policies must provide that any cancellation, non-renewal or material change be upon 30 days notice to all named insureds.Each signatory must provide the others with evidence of insurance. Insurance companies,or self-insurers,shown on the certificate of insurance must have financial ratings acceptable to a prudent business person.Failure to furnish satisfactory evidence of INTERIM OPERATING AGREEMENT -5 of 10 Section FF-1 FF-1.1 FF-1.2 Section FF-2 insurance or lapse of the policy is a material breach of this Testing Agreement. ARTICLE FF Indemnity Indemnity Each signatory shall,as to all actions taken pursuant to or under color of this TestingAgreement,defend and indemnify the othersignatories,their agents,servants,employees and officers,from all costs including without limitation attorney fees,court costs,any amountsarisingorrecoveredundertheWorkman'sCompensationActorotherlaw'or decree,and any other amounts which the other signatories,theiragents,servants,employees and officers become obligated to pay on account of any demands,” claims,liabilities or losses arising or allegedly arising out of,or in any way connected with,the acts or omissions of the indemnifying signatory, its agents,servants,employees or officers. Each signatory shall defend and indemnify theothersignatoriesfromandagainstanyclaimor liability,including any related loss or cost,caused by or resulting from the design, construction,installation,operation or maintenance of any of the electric facilitiesowned,operated or maintained by the indemnifying signatory,or by reason of the acts or omissions of its agents,servants or employees in connection therewith. Comparative Negligence Each signatory agrees that any liability,including costs of defense and attorney fees,forclaimsarisingfromtheconcurrentnegligenceof two or more signatories will be apportionedaccordingtotherespectivepercentageoffaultattributabletoeachsignatoryasdeterminedby agreement or by the trier of fact. ARTICLE GG Warranty Denial and Exclusivity of Contract Section GG-]1 APA Denial of Warranty INTERIM OPERATING AGREEMENT -6 of 10 APA does not warrant the Intertie facilities it owns as fit for their intended use.or the reliability or availability of the Intertie forintendedoperationscoveredbythisTestingAgreement. Section GG-2 Exclusivity of Contract The terms of this Testing Agreement and anyprovisionsadoptedbyreferenceorotherwiseincorporatedintothisTestingAgreementsetforththefullintentofthesignatoriesregardingthe matters covered by this Testing Agreement. However,this Testing Agreement does not supercederelatedIntertiewrittenagreements,such as themaintenanceagreementsbetweentheAPAand Intertie Participants,but is to be interpretedconsistentlywiththem.° ARTICLE HH Approval by Rural Electrification Administration Section HH-1 Participation in this Interim Operating Agreement by entities subject to Rural Electrification Administration ("REA")regulation is subject to any approval required by the REA. IN WITNESS WHEREOF,the Participants have executed this Interim Operating Agreement in counterparts by their authorized officers or representatives as of the date written above. ALASKA POWER AUTHORIby:Lh biExcautvebicedwe(Title) econo'Seesertess and sworn to before me this 23 day of,1985 last write ne Br Uivton uateot ATEINTERIMOPERATINGAGREEMENT-7 of 10 MUNICIPALITY OF ANCHORAGE, _ALASKA dba MUNICIPAL LIGHT & POWER»CbdMuneaetTDhynxrneh.'WTitle)' :SUBSCRIBED AND SWORN TO before me on the 977%day3)f cee fe}1985., CHUGACH ELECTRIC ASSOCIATION,INC. :LlbudBet1 General Manager £,:)y)BUPSCRIBED AND SWORN TO before me on the AF Lh dayfe)1985., - Notary Public,State of AlaskaMyCommissionExpires:/-f{-/f CHUGACH ELECTRIC ASSOCIATION,INC. By:eee y LH?Pig le,OU W/.ral President of the Board SUBSCRIBED AND SWORN TO before me on the /7 LR dayofOceomten1985.'7 'Wy .-e .Stary sh State of SpdMyCommissionExpires://-f£fS INTERIM OPERATING AGREEMENT -8 of 10 CHUGACH ELECTRIC ASSOCIATION,INC. By:2 Vice-President of the Board SUBSCRIBED AND SWORN TO before me on the /72%YA dayofUleromber,1985.,/. Notary Public.State of AlaskaMyCommissionExpires:/-S-GS8lease CITY OF FAI MUNICIPAL By: (Title SUBSCRIBED AND SWORN TO before me on the /Y@K_dayofne»1985. Notar ublic,State ot AlaskaMyCommissionExpires:/4o-/7.¥/ GOLDEN VALLEY ELECTRIC, ASSOCTIATION,-INC. By:Hide. G LS ae LAs ra(Titlex}' SUBSCRIBED AND SWORN TO before me on the /H'"%-dayoffhaamler,1985.aAiict.O-Sn tleNotaryPuplics/State of AlaskaMyCommissionExpires:-*?"en Exniros:fo otaseveweo.y INTERIM OPERATING AGREEMENT -9 of 10 of:. ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE,ING)oT Ma Sau VY -,,1985, INTERIM OPERATING AGREEMENT -10 of 10 NDBWWF&FWOLYEXHIBIT A OPERATING AGREEMENT FOR TESTING THE ALASKA INTERTIE EXHIBIT A ALASKA INTERTIE AGREEMENT ABBREVIATIONS AND DEFINITIONS ABBREVIATIONS AMLP -Municipality of Anchorage,Alaska d.b.a.,Municipal Light and Power APAdm -Alaska Power Administration APA -Alaska Power Authority CEA -Chugach Electric Association FMUS -Fairbanks Municipal Utilities System GVEA -Golden Valley Electric Association _ AEGTC -Alaska Electric Generation and TransmissionCooperative,Inc.,of which Homer Electric Association,Inc.and Matanuska Electric Association,Inc.are members. Definitions Accredited Capability of a Participant -The (a)netgeneratingcapabilityofaParticipant,plus (b)the valueinkilowattsassignedtothatParticipant's purchases and/orfirmcommitmentsforPowerfromelectricsuppliersundercontractsnowexistingorhereaftercreated,and minus (c)the value in kilowatts assigned to any commitment of thatParticipanttodeliverpowertoanyelectricsupplierorsupplierspursuanttoanyvalidorderorunderseparatecontractorcontractsnowexistingorhereaftercreated. The Accredited Capability of a Participant may be determined and assigned by the Operating Committee inaccordancewiththeprovisionsofthisAgreement. Annual System Demand -The highest System Demand occurringduringthe12-month period ending with the current month. Available Accredited Capability of a Participant - Accredited Capability adjusted for generating capacity outofserviceformaintenanceorrepair. Commercial Operation -That date and time Intertie construction,testing,and energization is complete and AMLPandGVEAareinitiallyinterconnectedinsynchronousoperationandsupportingrelaying,metering and control systems are adequate to allow reliable transmission of powerandenergyacrosstheIntertie.Contract Power -Power and Energy to be available at alltimesduringtheperiodcoveredbythecommitment,exceptthatsuchPowerandEnergymaybeinterruptedintheeventconditionsariseduringtheperiodcoveredbythecommitmentwhichinthejudgmentofthesupplierwouldrequirecurtailmentofelectricservicetothesupplier's own system. Contract Transmission Service -A service providing fortransmissionofelectricPowerandEnergyinbulkfromone>utility through the utility's transmission system providingthetransmissionservicetoanotherutility.This service is intended to be available at all times during the period covered by.the commitment;provided however,if the transmission system involved has experienced a reduction in transmission capability requiring a reduction in transfers, the utility supplying the transmission service has the righttonotifyandrequirethereceivingutilitytoreduceits transfer in the same percentage as the reduction in transmission system transfer capability. Control Area -An interconnected system of one or more utilities which manually or automatically controls all generation to meet the total load,plus or minus the power it is delivering or receiving from neighboring systems. Control Area Service -Exercising operating control of the resources necessary to meet the loads within a control area on an instantaneous and continuous basis.The Participant exercising operating control for Control Area Service shall; a.Regulate generating facilities and other power resources to effect instantaneous and continuous supply of the power requirements of the loads within the Control Area. b.Regulate generating facilities to assist in the controloffrequencyandtimecorrection. Exhibit A -2 of 10 10. 11. 12. 13. c.Monitor continuously the power flows between itsControlAreaandtheControlArea(s)with which it isinterconnected. Declared Capability -The current capability of a generatingunitwhichisnotgreaterthanthepublishedcapabilityoftheunit. Decremental Cost -The cost of fuel,operating labor andmaintenancewhichwouldhavebeenincurredtoprovidetheOperatingReservesatanytimeandwhichareavoidedbytheotherParticipant,including the cost of avoiding thestartingandoperatingofageneratingunitorunitsandaproportionalamountoftheannualdebtserviceonthe capital investment of the highest cost (per kw)generatingunitonthereceivingParticipant's system.The decrementalcostofOperatingReservesshallbethetotalofsuch' avoided costs to the receiving Participant.In situationswhereaParticipantwouldhaveincurredreplacementfuelcostswhicharehigherthanthecostofexistingfuelsupply,replacement costs shall be utilized. Decremental Energy Cost -The cost of fuel,operating laborandmaintenancewhichwouldhavebeenincurredtogeneratethenextunitofEnergyrequiredatanytimeandwhichisavoidedbythepurchaseofEnergyfromthe_otherParticipant,including the cost of avoiding the starting andoperatingofageneratingunitorunits.The decremental cost per kilowatt hour for any particular transaction shallbethetotalofsuchcostsdividedbythekilowatthours scheduled for delivery to the receiving Participant.In situations where a Participant would have incurred replacement fuel costs which are higher than the cost of existing fuel supply,replacement costs shall be used. Economy Energy -Energy that is delivered from a utilitywithalowerincrementalproductioncosttoautilityto displace generation at a higher incremental cost.This Energy schedule may usually be interrupted with little or no notice. Emergency Energy -Energy that is delivered to a utility which does not,as a result of a Forced Outage,have sufficient generating capacity,either on its own system or arranged for from other utilities,to carry its customer load responsibility. Exhibit A -3 of 10 14. 15. 16. 17. 18. 19. 20. Emergency Outage (Forced Outage)-Any unanticipated,unscheduled outage of generating or transmission facilitiesforotherreasonsthanplannedmaintenance.Such outageclassificationshallnotexceedaperiodoffourhours. Energy (Electric)-As commonly used in the electric utilityindustry,electric energy means kilowatt hours (kwh). Incremental Cost -The cost of fuel,operating labor,maintenance and a proportional amount of the annual debt service on the capital investment of the next generatingunitthatwouldbeusedtoprovidetherequiredcapabilityandEnergy.It shall include the cost of starting andoperatinganygeneratingunitrequiredtoprovidesuchEnergy.The incremental cost of supplying Operating Reserveshallbethetotalofsuchcostsfortheperiodoftimeinvolved.In situations where a Participant will incur'replacement fuel costs which are higher than the cost of theexistingfuelsupply,replacement costs shall be used. Incremental Energy Cost -The cost of fuel,operating laborandmaintenancetogeneratethenextunitofEnergyrequiredatanytime,including the cost of starting and operating any generating unit which must be started as a result of supplying such Energy.The incremental cost per.kilowatt hour for any particular transaction shall be the total ofsuchcostsdividedbythekilowatthoursscheduledfor delivery to the receiving Participant.In situations where a Participant will incur replacement fuel'costs which are higher than the cost of existing fuel supply,replacement costs shall be used. Interruptible Transmission Service -A service providing for transmission of electric Energy in bulk from one utility system through the utility's transmission system providing the transmission service to another utility.This service is made available with the understanding that it can be curtailed or interrupted at any time with little or no notice at the discretion of the supplier. Intertie -The transmission facilities owned by or under contract to the Alaska Power Authority interconnecting the Northern Group with the Southern Group. Intertie Point of Interconnection -The Midpoint of the Intertie transmission line between the Healy Substation and Douglas Substation,which is also the point of interconnection between AMLP's and GVEA's Control Areas. Exhibit A -4 of 10 21. 22. 23. 24, 25. 26. 27. 28. 29. 30. 31. Intertie Operators -The operators at the control centers of AMLP and GVEA,which are the utilities that have operationalresponsibilityfortheIntertie. Intertie System -The Participants of the Alaska IntertieAgreementfunctioningasaninterconnectedelectrical system. Intertie Transaction -Transfer of electric energy or acommitmenttoprovidereservecapacitybetweentheutilities signatory to the Alaska Intertie Agreement in the Northern Group and the Southern Group using the Intertie. Midpoint of the Intertie -The midpoint of the Intertie is at structure No.382.The structure is Type E,a 45°L,three-guyed deadend structure.It is located approximately84.6 miles from the .initiation point at the Douglas-Substation. MITCR -Minimum MIntertie Transfer Capability RightsdiscussedinArticle7. Net Generating Capability -That amount of kilowatts,less station use,that all the generating facilities of a systemcouldnormallysupplysimultaneouslyunder'criteria established by the Operating Committee.The capability of the generating units which are temporarily out of serviceformaintenanceorrepairshallbeincludedintheNet Generating Capability. Non-Spinning Reserve -All unloaded generating capability not meeting the Spinning Reserve criteria that can be made fully effective in 45 minutes. Northern Group -FMUS,GVEA. Operating Committee -The committee established by Article 9 of this agreement. Operating Reserve -The sum of Spinning and Non-Spinning Reserves. Operating Reserve Obligation -That amount of Spinning Reserve and Non-Spinning Reserve which a Participant is obligated under the terms of this Agreement to provide for the purpose of maintaining continuity of service. Exhibit A -5 of 10 32. 33. 34. 35. 36. 37. 38. 39. Planned Maintenance -Any anticipated and scheduled outageofgeneratingortransmissionfacilitiesthatisplannedinadvanceoftheequipmentbeingremovedfromservice. Participant -Any entity which is a Participant to this Agreement. Power (Electric)-The time rate of generating,transferringorusingelectricEnergy,usually expressed in kilowatts. Prudent Utility Practices -Prudent Utility Practices at aparticulartimemeansanyofthepractices,methods and actswhich,in the exercise of reasonable judgment in light ofthefactsknownatthetimethedecisionwasmade,.wouldhavebeenexpectedtoaccomplishthedesiredresultatthelowestreasonablecostconsistentwithreliability,safetyandexpedition,including but not limited to the practices,>methods and acts engaged in or approved by a significantportionoftheelectricalutilityindustrypriorthereto.In applying the standard of Prudent Utility Practices to anymatterundertheAgreement,equitable consideration should be given to the circumstances,requirements and obligationsofeachoftheParticipants,and the fact that the Participants are cooperatives,public corporations,orpoliticalsubdivisionsoftheStateofAlaskawith prescribed statutory powers,duties and responsibilities. It is recognized that Prudent Utility Practice are not in- tended to be limited to the optimum practices,methods or acts to the exclusion of all others,but rather is a spectrum of possible practices,methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability,safety and expedition.Prudent Utility Practices include due regard for manufacturers'warranties and the requirements ofgovernmentalauthoritieshavingjurisdiction. Reserve Capacity -The excess in kilowatts of a system's Net Generating Capability over its maximum System Demand for anyperiod. Reserve Capacity Obligation -The capacity which a Participant is obligated to reserve and use for the purpose of maintaining continuity of service. Scheduled Outage -Any outage of generating or transmission facilities which is scheduled in advance to be out of service. Southern Group -AMLP,CEA,AEGTC,APAdm. Exhibit A -6 of 10 40. 41. 42. 43. 44, 45. A Spinning Reserve -The amount of unloaded generatingcapabilityofaParticipantconnectedtoandsynchronizedwiththeinterconnectedsystemoftheParticipantsandreadytotakeload.Spinning Reserve allocation to any generatorshallnotexceedtheamountofgenerationincreasethatcanberealizedimmediatelyfromnormalgovernorcontrol. System Demand -That number of kilowatts which is equal tothekilowatt-hours required in any clock hour,attributable to Energy required during such hour for supply of Energy toasystem's consumers,including system losses,and also including any wheeling losses occurring on other systems andsuppliedfortransmissionofsuchEnergy,but excluding generating station uses and excluding wheeling lossessuppliedbyanothersystem. Total Operating Reserve Obligation -That amount of Spinning:Reserve and Non-Spinning Reserve of the Participantscollectivelyrequiredtomaintaincontinuityofservice. Transmission Service -Service provided by the use of thetransmissionsystemofaParticipantdirectlyconnectedtotheIntertieforwheelingofpowerandenergythroughits system for another Participant. Transmission Service Facilities -The integratedtransmissionfacilitiesofthetransmittingutility,excluding power plant step-up transformation and radial lines to loads or generators.: Utility Participant -Any Participant other than APA untilAPAbecomesaUtilityParticipantunderArticle4ofthe Agreement. ALASKA POWER AUTHORITY Office of the Attorney General By:heplislExeqiweeh'(Title) ( \y.SUBSCRIBED AND SWORN TO before me this Z23@ day ofnCerdy-bd»1985 last writte Ss2)xpExhibit A -7 of 10 MUNICIPALITY OF ANCHORAGE, ALASKA dba MUNICIPAL LIGHT & POWER By:ExhLe Muwie Dal yy amet |(Title UBSCRIBED AND SWORN TO before me this a37%day of»1985 last written. CHUGACH ELECTRIC ASSOCIATION, INC. By: General ManagerSUBSCRIBEDANDSWORNTObeforemethisS74 say of,1985 last written. Notary Public,State o APSMyCommissionExpires:/f/- CHUGACH ELECTRIC ASSOCIATION, INC. By:ted MW)ag A,mii wo President of the Board Exhibit A -8 of 10 ;-fSUBSCRIBEDANDSWORNTObeforemethisJTE say ofWoopbee»1985 last written. Notary Public,State of AlaskaMyCommissionExpires://-f-£f CHUGACH ELECTRIC ASSOCIATION, INC. By:yal Vice-President of the Board / ”SUBSCRIBED AND SWORN TO before me this /ath day ofhtcomLery,»1985 last written. Vaan)UnriskienerrKZ Notary Public,State of AlaskaMyCommissionExpires://-5-f& TY MANAGER (Title)2 SUBSCRIBED AND SWORN TO before me this (GH day.ofLectbars,1985 last written. Exhibit A -9 of 10 L ot ic,State/o asMyGumissionExpires:/g --/7.-v7 GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. By:hk L Lt Cy MA fae Ni ar |(Title)q hy SUBSCRIBED AND SWORN TO before me this /(%day of-OU.1985 last written. e Pa Notary YubjJic,State of AlaskaMyCommissionExpires:_"Y"rmisicn Zsiroe. web 4 SP ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE,INC. (Title) -SUBSCRIBED AND SWORN _TO before me this /7kA day of=cEm Kee ,f Exhibit A -10 of 10 November 4,1985 .Bek i Mr.Robert Hertin,Jr. General Hanager Chugach Electric Association,lac. Pouch 6300 Anchorage,Alaska 99502-0300 pe em,ie ee AOS EEO SPELL re es -Tet Dear-Bob SER a VL Cth ee to ane ee VM Lats.nat.a weTke Mak,se Mr.Tom Martin has informed the Power Authority tnat a statement was required on the source of funding for the Alaska Intertie before ChugachElectricAssociation(CEA)will execute the Intertie Agreements.My intent in this letter is to satisfy that requirement and to sive CEA their requested assurance, The Alaska Intertie was funded as follows: S.L.A. Appropriation #Year ;Amount Chapter 50 1980 §3,000,000 Chapter 52 1981 36 ,500 ,006 Chapter 92 1981 40 ,C00 ,GoC* Chapter 107 1983 25 ,000 ,COG Chapter 171 1984 18 ,660 ,Coo TOTAL $122 ,606 ,000 *fvailable for Fiscal Year 1982, It has been constructed for $122.6 million and is nearing commercial operation,The total capital cost of the Alaska Intertie has been funded by the grant appropriations and will not be recovered in any rates or charges for use of the Intertie.The project cost includes the settlement with the Ahtna Corpcration for the use of thefr lands and rights to access over thefr lands.- Article 8 of the Alaska Intertie Agreement provides that the Annual Debt Service on bonds or any other debt by APA for the initial Intertie facilities shall be shared by the Utility participants.The Authority has not {ssued bonds or other debt for the Intertie and does not contemplate doing so.Other costs incurred as enumerated in Article 8 will be pafd by Utility Participants. 1587/478/1 Vva I trust that this letter is sufficient for your purposes and invite your questions and comments if it is not sufficient. Sincerely, Robert 0D.Heath Executive Director EM/RDH/tg ”"eet "Michael Kelly;GoldenValley Electric Association,Fairbanks James F.Palin,Matanuska Electric Assoctation,Palmer Virgil Gillespte,Fairbanks Municipal Utility System,Fairbanks Thomas Stahr,Anchorage Muncipal Light &Power,Anchorage Kent Wick,Homer Electrical Assoctation,Homer Tom Martin,Chugach Electric Association Hargia MacNeille,Chugach Electric Association Mike Nassin,Anchorage Municipal Light &Power,Anchorage Sam Mathews,Homer Electric Association,Homer Ken Ritchey,Matanuska Electric Association,Palmer John Marshall,Chugach Electric Association,Anchorage -. Larry Colp,Fairbanks Hunicipal Utility System,Fairbanks Robert Orr,Golden Valley Electric Association,Fairbanks Everett Diener,City ofSeward,Seward Bob Cross,Alaska Power Administration,Juneau Ed Morris,Alaska Power Authority Gleoia Manni,Alaska Power AuthorityR.E.Ethertdge,Alaska Power Authority ea 1$87/478/2 Municipal Light &Power «¢ \Since 1932XNse1200EASTFIRSTAVENUE-ANCHORAGE.ALASKA 99501-1685 Sw” Tony Knowles.TELEPHONE (907)279-7671 . Mayor October 14,1985 .= Mr.Robert D.Heath Executive Director Alaska Power Authority 334 West Fifth Avenue Anchorage,Alaska 99501 Dear Mr.Heath: Here is a fully executed copy of the Letter of Non-Objection, Alaska Intertie Limited Operation.I have also enclosed,for your information,a copy of the Memorandum of Understanding between ML&P and GVEA which providesfor economy sales of energy over the Intertie.oe A SSThomasR.Stahr General ManagerMunicipalLight &Power Sincere slg encls/2 PROVIDE FOR TOMORROW,SAVE ENERGY TODAY. ALASKA POWER AUTHORITY 334 WEST Sth AVENUE -ANCHORAGE,ALASKA 99501 Phone:(907)276-0001 October 4,1985 Mr.Thomas Stahr General Manager Anchorage Municipal Light and Power 1200 East First Avenue Anchorage,Alaska 99501 SUBJECT:Alaska Intertie Limited Operation Letter of Non-Objection Dear Mr.Stahr: Golden Valley Electric Association (GVEA)and Municipal Light &Power (ML&P),("the Utilities")have requested authorization toenergizeandtransferapproximately15MWthroughtheAlaskaIntertieTransmissionLinepriortoexecutionofthe"Intertie Agreement"or "Testing Agreement".This letter constitutes notice of Alaska Power Authority's non-objection to such utilization provided that GVEA and ML&P agrees to the following provisions governing such utilization: 1.GVEA and ML&P will be responsible for and direct all such operation in a safe manner so as to comply with the NESC andothersafetystandards.2.utilities will pay all direct or indirect costs of such operation. 3.APA assumes no liability directly or indirectly from such action and GVEA and ML&P agrees to defend,.indemnify,save and hold APA harmless from all claims related to such operation. APA,however,shall not hold utilities liable for failure or damage of the transmission line or substations,except to the extent that such failure or damage results from their actions. 4,Utilities will maintain insurance covering intended operation and employees involved with limits and coverage not less than the insurance each presently maintains for its current overall operations.Such insurance shall name the APA as an additional insured. 5.APA offers no warranty of fitness of the line or substation for the intended purpose. 6.GVEA and ML&P retains any and all obligation to their consumers and agrees to inform Intertie connected utilities that service may be interrupted at any time to facilitate 1323/471 Mr.Stahr October 4,1985 Page 2 10. Intertie Testing,Start-Up or Maintenance.This agreement shall not be construed by the parties to create any legal duty on the part of APA to provide or maintain continuity of service to utilities or consumers. 'This non-objection may be terminated by APA at any time for just cause. This non-objection shall expire upon the effective date of a formal "Intertie Agreement,""Testing Agreement"or on notice by either utility. GVEA and ML&P agree not to interfere either directly or indirectly with ongoing Alaska Intertie activities associated with the remaining construction,testing,operation and acceptance of the intertie electrical systems and further agree to provide proper interface and coordination with those entities now involved with work associated with the Alaska Intertie. This non-objection is subject to written indication of agreement with the terms of this letter prior to utilization. If you have any questions regarding this letter of non-objection, please contact Mr.Howard Thacke of this office. Robert D.Heath Executive Director HT/RH:fs cc:David Eberle R.E.Etheridge Howard Thacke Ed Morris Afzal Khan All Utilities, See Distribution List. 1323/471 Mr.Stahr October 4,1985 Page 3 1323/471 Terms and conditions are hearby acknowledged and accepted: . L Jo)/F5 Michael Kelly "J'Dats General Manager,GVEA are pp for esTomStahrDate General Manager,ML&P . Mr.Stahr October 4,1985 Page4 DISTRIBUTION LIST 10/4/85 Mr.Michael Kelly General Manager P.O.Box 1249 Golden Valley Electric Association Inc. Fairbanks,Alaska 99707 Mr.Robert Martin,Jr. General Manager Chugach Electric Association,Inc. P,0.Box 196300 Anchorage,Alaska 99519-6300 Mr.James F.Palin General Manager Matanuska Electric Association,Inc. P.O.Box 1148 Palmer,Alaska 99645 Mr.Virgil Gillespie. General Manager Fairbanks Municipal Utilities System P.QO.Box 2215 Fairbanks,Alaska 99707 Mr.Kent Wick General Manager Homer Electric Association,Inc. P.0.Box 429 Homer,Alaska 99603 1323/471 emerteeeeesmeeoese°SCADA _AGREEMENT THIS Agreement is between the ALASKA POWER AUTHORITY ("PowerAuthority")and ANCHORAGE MUNICIPAL LIGHT AND POWER ("AML&P"). WITNESSETH: WHEREAS,in 1981 the legislature of the State of Alaska directedthePowerAuthoritytoconstructtheAlaskaIntertiebetweenAnchorageandFairbanks("Intertie")(Sec.14,Ch.118,SLA 1981,.as amended by Sec.19,ch.133,SLA 1982); WHEREAS,the purpose of the Intertie is to connect the electrical power transmission facilities of Southcentral Alaska with InteriorAlaska; WHEREAS,to carry out this purpose it is necessary to transmit,monitor and control electrical power between Healy Substation andWillowSubstations WHEREAS,AML&P owns and operates an electrical transmission systeminSouthcentralAlaska; WHEREAS,AML&P designed,purchased and installed a system wide-Supervisory Control and Data Acquisition (SCADA)System which inAML&P's opinion incorporated all the features,additions andmodificationsrequiredtooperateandcontrolthesouthernhalfoftheAnchorage-Fairbanks Intertie Project;and :19 WHEREAS,the Power Authority is willing to reimburse AML&P for suchadditionsandmodificationsnecessaryforIntertieoperation,including related design,purchase,and installation costs, NOW,THEREFORE,it {fs agreed as follows: ARTICLE T AML&P Responsibilities Section 1. AML&P shall perform the work specified in Exhibit "A"in accordance with existing contract specifications of vendorsandcontractorsorothercontractspecificationsdevelopedby AML&P and approved by the Power Authority. Section 2, AML&P will provide the Power Authority with a copy of the as-built plans and specifications of the additions and modi- fications required by Exhibit "A."Where AML&P fs prohibitedthroughlicense,copyright or other agreement from providingcopiesoftheas-buiits,the Power Authority may inspect theas-builts at AML&P's office. Section 3. AML&P will give to the Power Authority,reasonable notice of the date,time and place of all acceptance tests or inspec-tions .related to Exhibit "A,".and a representative of the Power Authority shall be allowed to attend all such tests and/or inspection. 9027/368 ele ARTICLE II Alaska Power Authority's Rights Section l. The Power Authority retains the right to approve modification of equipment or systems to be provided by this Agreement. Section 2. The Power Authority may instal]al]communications equipmentitdeemsnecessarytooperatetheIntertie.The installed,equipment will be compatible with AML&P SCADA systems. ARTICLE ITT Constderation In consideration of cost reimbursement for the additions and modifications set out in Exhibit "A,"AML&P agrees to operate, maintain,and make available the additions and modifications specified in Exhibit "A,"as required by the Authority foroperationoftheIntertie.The Power Authority shall reim- burse AML&P for the operation and maintenance costs related to the additions and modifications set out in Exhibit "A"subject to the same terms and conditions and the annual budget ap-proval process as set forth in the "Alaska Intertie Agreement":-which governs the utilization of the Anchorage-Fairbanks Intertie.Title of all items listed on Exhibit "A"will be deemed transferred to AML&P upon written notice from the PowerAuthoritywithin60daysafterthePowerAuthoritydeterminesthattheworkcoveredbyExhibit"A"is complete,and inoperation., ARTICLE IV Time for Performance All additions and modifications covered by this Agreementshallbesubstantiallycompleteandtestedinaccordancewith the specification by October 31,1986. ARTICLE V Terminatfon The Power Authority may terminate this Agreement by giving AML&P 12 months advance written notice.However,such ter- mination may not occur until until 5 years after the executiondateofthisAgreementbybothparties.AML&P may terminatethisAgreement35yearsfromthedateofitsexecution.If one party materially breaches the terms of this Agreement,the other party may give written notice of the breach.If the breach has not been cured within 60 days of receipt of the notice,the non-breaching party may terminate this Agreement. Failure to give notice of breach.shall not constitute a waiver of the breach. ARTICLE VI Payments and Recordkeeping Section 1. The Power Authority will reimburse AML&P for all reasonable costs incurred in providing additions and modifications to theAML&P SCADA System and for all tests,inspections and start-ups associated with the additions and modifications up to the maximum anfounts itemized in Exhibit "A." 9027/368 -2- eeeeeeaeeeee=Section2, The Power Authority shall not be liable for costs which exceed$451,086.00 Section 3. Reimbursable costs are: A.Payroll Costs: (1)The salaries paid to personnel for time worked |directly on the Project plus fringe benefits includ- ing all payroll taxes and insurance,vacation,holiday,and sick leave,and retirement benefits. In any case,mark-up charged by AML&P for fringebenefitsshallnotexceed55%,excluding overtime. (2)Overtime paid to said personnel,which is in excess of the base hourly rate,shall not be subject tomark-up for fringe benefits or overhead. B.Overhead Costs: Overhead costs cover those items of doing business whicharenotdirectlychargedtotheProjectsuchasoffice-:space and equipment,insurance and taxes other thanpayrolltaxes,executive and adm's'strative expenses.Overhead costs will be based only upon direct payrollcostsasdefinedinSubsectionA(1)above,and will be paid at a rate not to exceed 9%.4 C.Ofrect Non-Salary Costs: The Power Authority will pay AML&P for non-salary costswhicharedirectlyattributabletoworkincluding: (1)The costs of all materials and supplies. (2)Costs for reproduction of plans,specifications, reports and other data. (3)Long-distance communication costs. (4)Costs incurred for travel and subsistence of person-nel. Section 4.° AML&P shall submit invoices to the Power Authority for costs paid by AML&P under Section 2 of this Article.Billings shal} reflect actual.expenditures and shall provide full support documentation.In case of discrepancy,the Power Authoritymay,at its option,withhold payment to the extent of thediscrepancyorpaytheinvoiceandrequireAML&P to provide supporting documentation and/or corrective action within thenextthirty(30)days.The Power Authority will not compen- sate AML&P for any reduction in billing until AML&P has cleared the discrepancy to the satisfaction of the Power Authority. Section 5._ The Power Authority shall pay invoices for costs incurred andpaidforbyAML&P for work under Exhibit "A,"within 30 days of receipt of such invoices by the Power Authority.However, 9027/368 -3- 3 -eepayments for software development,loading and testing(excluding Item 2 of Exhibit "A")will not be made untilevidenceofsuccessfulfactoryorfieldtestingandacceptancebyAML&P has been provided to the Power Authority.Where the Power Authority fails to pay an invoice not in dispute within30daysofreceipt,such unpaid balance will be subject tointerestinaccordancewithAS45.45.010(a). Section 6. AML&P shall maintain books and accounts of the reimbursable costs attributable to the work performed under this Agreement.For three years after the completion of the particular ser- vices to which the costs relate,the Power Authority shallhaveaccesstothesebooksandaccountsduringAML&P's normalbusinesshours. ARTICLE VII General Provisions Section 1. It is specifically agreed between the parties executing thisAgreementthatitisnotintendedbyanyoftheprovisionsof any part of this Agreement to create in the public or anymemberthereofathird-party beneficiary relationship thereun--der,or to authorize anyone not a party to this Agreement tomaintainasuitforpersonalinjuriesorpropertydamagepursuanttothetermsorprovisionsofthisAgreement. Section 2.'4 Nothing in this Agreement shall be deemed a warranty by AML&P that the work performed under this Agreement will meet all Intertie operational requirements. Section 3. This Agreement represents the entire agreement between thepartiescoveringcompletionoftheadditionsandmodifica- tions. Section 4. This Agreement may be modified only in writing. Section 5. Nothing in this Agreement shal?be interpreted to make the Power Authority the agent of AML&P or AML&P the agent of the Power Authority. APPROVED AS TO FORM: mre eeSe general Dated this F Hh day of fipri|,1986,at Anchorage,Alaska. 9027/368 -4- ALASKA POWER AUTHORITYBy:WG. Robért D.Heath Executive Director STATE OF ALASKA )\ss.THIRD JUDICIAL DISTRICT J The fore m4 Agreement was acknowledged before me this qh dayofritah,1986,by Robert D.Heath,the ExecutiveDirectoroftheALASKAPOWERAUTHORITY,an Alaska corporation,onbehalfofthecorporation.a ; Not ubTif in My s expfred< DATED this /7_day of Aavek.,1986,atAnchorage,Alaska. ANCHORAGE MUNICIPAL LIGHT &POWER,NC By:omas Stahr °General Manager STATE OF ALASKA )$s. THIRD JUDICIAL DISTRICT The foregoing Agreement was acknowledged before me this 9 day . of »1986,by Thomas Stahr,the General-. Manager o L LIGHT &POWER,INC.,an.Alaskan aecorporation,on behalf of the corporation.:i,Vy 0% 1 i wont ent '.°Tig, otary Public in and/or Alaska > My commission expires:Y/g9/P7 -.. %»hayPvccoes 9027/368 256 Item ExhibitA COSTS OF INTERTIE SCADA HARDWARE,SOFTWARE AND SERVICES THE ALASKA POWER AUTHORITY WILL REIMBURSE MUNICIPAL LIGHT AND POWER UTILITY Description Reimbursement Cost 1. 1.1 1.2 1.3 1.4 1.5 1.6 1.7 Hardware Douglas RTU Provide supervisory control of Intertie based on100%Reimbursement of Costs......sccscccccsccccses $22,850 Teeland RTU Provide supervisory control of Intertie and / SVS System,based on 100%Reimbursement of Costs..$22,850 Dual Data Link Interface to Dec 11/44'sFourOMR11-AA interface (two per processor)...$69,400(additional backplanes),two switches and cables and additional space in the WDT. Based on 100%reimbursement of costs. Dual Bell 209 or equal modems Furnished by ADT 0 Dual Bell modems for Teeland/Douglas data link " Based 1/8 cost of machine's communication 19,812 and interface equipment ....eee eceeceeve $2,477 System Allowance . Based on estimate of data base loading due to fntertie presently set at 25%or hardware costs.. Based on 25%of 373,115.00 ..2.2 ewe ww wo $93,278 RTU communications furnished by ADT/CEA 0 Additional 1 MBYTE of memory (1 per processor) .additional 0Z board cabling,watchdog timer and 2.15 2.2 2.3 2.4. panel switches necessary to implement off premiseinstallationofCRT(see 2.4)..cccccccccccccccccscsees$285344 Software DEC net link support softwareBasedon100%reimbursement of software costs...$69,400 Software to provide data transmission schedule maintenance,old flag status and systemrequirementsdefinition..ccccccesccccccscscccssccccesesd 14,031 Intertie display support softwareCustomsoftwaredevelopedtohandle the intertiedisplaysandRTU's.Estimated at 20 man days @70/hr.$11,200 Tie Line Accounting Not determined at this time..1...2.2 eee eee Additional software modifications to provideoffpremiseCRT(see 1.8)cccccccccccccccccccccccsssseed 28,344 9027/368 -6- 2.9 2.6 3.2 3.3 3.4 3.5 3.6 Modifications to existing software to provide data base save/store of status flags for UNtErtie....cccccccecccacscccescccceccscccccccsccsssssd 940 Modifications to password system to allow offpremiseCRT's eS 980 Services RTU Services Includes all costs for ordering and Engineering of the Teeland and Douglas RTU's. 'Based on 100%of cost .2.2 1 0 ew ow oe ow ww ew 0h 95424 RTU Installation Includes al?costs for installing the RTU's at Teeland and Douglas.Based on 100%reimburse- ment of costs .2 6.2 ee ew we we ww ww 8 wo wt 0 $325380 Data Base Development For development of Displays and Data Base for the related Intertie function based on an estimate of 10 displays assuming 1 day per display and 3 daysforeachRTU.16 days @ $560/day.Based on 100%reimbursement e e e e e e e e e e e e e e e ®e s e $8,960 ' Data Line Requirement definition and coordination for services to implement and support the data link.Includes two trips to Palo Alto to coordinate plus estimate of 20 man days.'Based on 100%reimbursement........2.-$16,200 Maintenance Agreement DEC supplied maintenance Not yet quoted,based on 25%of actual costCost$20 112 /year..cccccccccccccccvcccccccsseccseceed 5,028 Additional CRTs for IntertieBasedon3CRTsdedicatedfor Intertie operation.Est.4500/CRT e e eo e s e *e e e e e e e e °e e e $15,000 9027/368 -7- SCADA AGREEMENT January 10,1984 THIS Agreement is between the ALASKA POWER AUTHORITY (hereinafter called the "Power Authoritv")and GOLDEN VALLEY ELECTRIC ASSO- CIATION,INC.(hereinafter'called '"'GVEA"). WITNESS ETH: WHEREAS,in 1981 the legislature of the State of Alaska directed the Power Authority to construct the Anchorage-Fairbanks Trans- mission Intertie (Sec,14,Ch.118,SLA 1981,as amended by Sec. 19,Ch.133,SLA 1982),and WHEREAS,the purpose of the Intertie Project is to connect the electrical power transmission facilities of Southcentral Alaska with Interior Alaska,and WHEREAS,to carry out this purpose it is necessary to transmit, monitor and control electrical power between the Healy Substation and the Willow Substation,and WHEREAS,GVEA owns and operates an electrical transmission system in Interior Alaska,and WHEREAS,GVEA 'committed in 1982 to participate in the Anchorage-Fairbanks Intertie Project by designing,purchasing and installing a system wide Supervisory Control and Data Acquisition (SCADA)System which in GVEA's opinion incorporated all the features,additions and modifications required to implement and control the northern half of the Anchorage-Fairbanks Intertie -Project (Project),and aa'a WHEREAS,the Power Authority is willing to reimburse GVEA for such additions and modifications necessary for Intertie operation,including related design,purchase,and installation costs,- NOW,THEREFORE,it is agreed as follows: ARTICLE I Section 1. GVEA shall perform the work specified in Exhibit A in accordance with existing contract specifications of vendors and contractors or other contract specifications developed by GVEA and approved by the Power Authority. Section 2. The additions and modifications and the allowable reimburse- ment amounts are those set out in Exhibit A of this Agreement. #¢ ARTICLE IT Section 1, The Power Authority shall not be liable for costs which. exceed $901,188. Section 2. Ownership and maintenance responsibility for all additions and modifications purchased or installed under this Agree- ment is determined by the following provisions: A.In consideration of cost reimbursement for the additions and modifications set out in Exhibit "A", GVEA agrees to operate,maintain,and make available the additions and modifications specified in Exhibit aay Section 3, "A",as required by the Authority for operation of the Incertic.The Power Authority shall reimburse GVEA)for the operation and maintenance costs related to the additions and modifications set out in Exhibit "A"in accordance with the terms and conditions of a separate agreement, The Power Authority will notify GVEA in writting within 60 days after the Power Authority determines that the work covered by Exhibit A is complete and operational. Title of all Power Authority funded items listed.on Exhibit A will be deemed transferred to GVEA upon such notice, The Power Authority retains the right to approve modifica- ron tion of equipment or systems to be provided by this Agreement. Section 4, [ The costs of tests,inspections and start-ups 'associated with the additions and modifications required by Exhibit A are included in the itemized amounts given in Exhibit A. Section 5§, The Power Authority may install all communications equipment it deems necessary to operate the Intertie.The installed f>equipment will be compatible with GVEA SCADA Systems. Section 1, GVEA ee the ARTICLE III will give to the Power Authority,reasonable notice of date,time and place of all acceptance tests or inspections related to Exhibit A,and a representative of -3- the Power Authority shall be allowed to attend all such tests and/or inspections.a Section 2, GVEA will provide the Power Authority with a copy of the as-built plans and specifications of the additions and a modifications required by Exhibit A.Where GVEA is | prohibited through license,copyright or other agreement from providing copies of the as-builts,the Power Authority may inspect the as-builts at GVEA's office.4 Section 3, The Power Authority may terminate this Agreement at anv time by giving GVEA 12 months advance written notice.GVEA may terminate this Agreement 35 years from the date of its execution.If one party materially breaches the terms of this Agreement,the other party may give written notice of. the breach,If the breach has not been cured within 60 days of receipt of the notice,the non-breaching partv may terminate this Agreement.Failure to give notice of breach shall not constitute a waiver of the breach. ARTICLE IV Section 1, The Power Authority will reimburse GVEA for all reasonable costs incurred in providing additions and modifications to the GVEA SCADA System up to the maximum amounts itemized in Exhibit A, Section 2, Reimbursable costs arer Cc A,Payroll Costs O Section 3. (1)The salaries paid to personnel for time worked directly on the Project plus fringe benefits including all payroll taxes and insurance;vaca- tion,holiday,and sick leave,and retirement benefits,In any case,mark-up charged by GVFA for fringe benefits shall not exceed 55%, excluding overtime. (2)Overtime paid to said personnel,which is in excess of the base hourly rate,shall not be subject to mark-up for fringe benefits or overhead. Overhead Costs Overhead costs cover those items of doing business which are not directly charged to the Project such as office space and equipment,insurance and taxes other than payroll taxes,executive and administrative expenses.Overhead costs will be based only upon direct payroll costs as defined in Subsection A(1l) above,and will be paid at a rate not to exceed 9.7%. Direct Non-Salary Costs ar) The Power Authority will pay GVEA for non-salary costs which are directly attributable to the work including: (1)The costs of all materials and supplies, (2)Costs for reproduction of plans,specifications, reports and other data. (3)Long-distance communication costs. (4)Costs associated with outside consultants,subcon- tractors,and other outside services and facilities. (5)Costs incurred for travel and subsistence of personnel. GVEA shall maintain books and accounts of the reimbursable costs attributable to the work performed under this Agree- ment.For the duration of this Agreement,and for a period of three years after the completion of the particular services to which the costs relate,the Power:Authority shall have access to these books and accounts during GVEA's normal business hours to verify the reimbursable costs. Section 4. GVEA shall submit invoices to the Power Authority for costs paid by GVEA under Section 2 of this Article.Billings shall reflect actual expenditures and shall provide full support documentation.In case of discrepancy,the Power Authority may,at its option,withhold payment to the extent of the discrepancy or pay the invoice and require GVEA to provide supporting documentation and/or corrective action within the next thirty (30)days.If supporting documenta- tion and/or corrective action is not taken by GVEA,the Power Authority will reduce the next invoice by the amounts in dispute.The Power Authority will not compertsate GVEA for any reduction in billing until GVEA has cleared the discrepancy to the satisfaction of the Power Authority. Section 5, The Power Authority shall pay invoices for costs incurred and paid for by GVEA for work under Exhibit A,within 30 days of receipt of such invoices by the Power Authority.However, payments for software development,loading and testing (excluding item 2 of Exhibit A)will not be made until evidence of successful factory or field testing and acceptance by GVEA has been provided to the Power Authority.Where the Power Authority fails to pay an invoice not in dispute within 30 days of receipt, such unpaid balance will be subject to interest in accordance with AS 45.45.010(a). _- Section 6. All additions and modifications covered by this Agreement shall be substantially complete and tested in accordance with the specification by March 1,1985. ARTICLE V Section 1, Ic is specifically agreed between the parties executing this Agreement that it is not intended by any of the provisions of any part of this Agreement to create in the public or any member thereof a third-party beneficiary relationship thereunder,or to authorize anyone not a party to this Agreement to maintain a suit for personal injuries or property damage pursuant to the terms or provisions of this Agreement, Section 2, Nothing in this Agreement shall be deemed a warranty hy GVEA that the work performed under this agreement will'meet all Intertie operational requirements. Section 3. This Agreement represents the entire agreement hetween the parties covering completion of the additions and modifications, Section 4, This Agreement may be modified only in writing. Section 5. Nothing in this Agreement shall be interpreted to make the aesv22Power Authority the agent of GVEA or GVEA the agent of the Power Authority.ia Approved as to form 4 4 -S77ES As:s7 orney'Genéya Date DATED this sv day of Lrwriy ,1985,atAnchorage,Alaska.)v ALASKA POWER AUTHORITY ay By:Keen MleudyprdLarry@,Crawford Executive Director STATE OF ALASKA THIRD JUDICIAL DISTRICT oTheforegoingAgreementwasacknowledgebefare.me fh aGin davof|uewdy ,1985,by ur "Sci ,theExeuitiePaveGio”of the Alaska7 Power Authority,an ) )ss. ) Alaska corporation,on behalf of thet corporatian. My ah Pubji¢"inia d Ria:AlaskaPub}exp Silk, DATED this ple day of Gn wee ,(1198S,at aska,Anchorage,Al GOLDEN VALLEY yf ASSOCTATIOBy:LhMichaelNA. General Manager STATE OF ALASKA ) )ss. THIRD JUDICIAL DISTRICT ) The roregoing AgrAgreement was aero aged before me this [EB aay,19gsr 4?ai Li »theeseetSeteheGol.en ey ic Associ-ation,Inc.,an Alaska corporation,on behalf of the.corporation, Novary Public in and for Alaska - My commission expires:" "-;-S Oo Item EXHIBIT A ADDITIONS AND MODIFICATIONS TO THE GVEA SCADA SYSTEM 3 INCLUDING ALLOWABLE REIMBURSIBLE AMOUNTS BY ITEM Description Reimbursement Cost 1.2 1.3 1.4 1.5 1.6 HARDWARE Anchorage-Fairbanks Remote Terminal Unit:$13,291 Equipped to provide supervisory control of Intertie switchgear and the SVS unit and Intertie metering.Based on 100%Reimbursement of $13,291. Healy Power Plant Remote Terminal Unit: | 2,153 Equipped to provide a portion of the Intertie metering and status reporting requirements.m Based on 22%Reimbursement of $9,786. Gold Hill Remote Terminal Unit:5,262 Equipped to provide supervisory control]of the SVS Unit. Based on 36%Reimbursement of $14,617. Cantwell Remote Terminal Unit:8,405 Equipped to provide SCADA requirements at Cantwell site.Based on 100%Reimbursement of $8,405. Dual Data Link Interface Hardware to VAX 11/750 Processors:34,515 Four OMR 11-AA unibus interfaces (two per processor), two DOII-DK backplanes,two peripheral switches and one lot miscellaneous cables. Based on 100%Reimbursement of $34,515. System Upgrade from POP 11 Base to VAX Base:"*994,002 To execute real time penalty factor calculation,fast load shedding,reserve monitoring and tie-line accounting andsupportlargerdatabase.Based on 27.7%Reimbursement of $810,000.'Determined by analyzing CPU utilization required for Intertie related functions. 66-A5/APA-GVEA Costing 1 of 4 EXHIBIT A o ARELODTAGALRABLEKEOMOURSIAE AMOUNTSBY TER Item Description Reimbursement Cost 1.7.RTU Communications:$10,865 For RTU communications from Healy and Gold Hill to Zehnder based on installed system costs for microwave equipment to as these sites and the proportion of the channel capacity 'utilized (1/48th of cost in both cases). Based on 2.1%Reimbursement of $521,520. 1.8 Healy Power Plant Interface Cabinet:Included in 3.1 &3.2 Included in engineering service estimate. 1.9 Gold Hill Interface Cabinet:Included in 3.1 &3.2 Included in engineering service estimate. 1.10 Spare Parts:19,019 in Based on 27.7%(Determined by CPU Utilization) "*'Reimbursement of $68,660. 2.SOFTWARE 2.1 Data Link Support Software:198,123 Includes DECnet and MSI data base interface software Based on 100%Reimbursement of $198,123. 2.2 Intertfe Display Support Software:33,000 o "Custom software development to support man-machine interface:requirements related to Intertie data transfers.1 4 Based on 100%Reimbursement of $33,000. 2.3 Power Flow for Real Time Penalty Factor Calculation:24,170 Based on 30%Reimbursement of $80,966.Determined from GVEA Resources in which the Intertie can supply 25%.An allocation of 5%was added for GVEA's responsibilities and accommodations for the control complexities of the Intertie. ae) " 66-A5/APA-GVEA Costing 2 of 4 Item EXHIBIT A ADOITIONS AND MODIFICATIONS TO THE GVEA SCADA SYSTEM 14 INCLUDING ALLOWABLE REIMBURSIBLE AMOUNTS BY ITEM Description Reimbursement Cost 2.4 2.5 2.6 2.7 2.8 Economy A and B Interchange Transaction Analysis:$0 Based on 0%Reimbursement of $42,032.Based on previous agree- ments by the Intertie Participants to be responsible for their own economic dispatch and analysis.This function is also not critical for the operaticn of the Intertie.Transactions to be covered in bilateral agreements not part of Intertie Agreement. Fast Load Shedding/Load Restoration::29,186 Based on 50%Reimbursement of $58,372.Based on the benefit received by GVEA and Intertie equally.This function will be used by GVEA to remove and add load during and after systemdisturbanceswhilemaintainingsystemintegrity.Intertie wil]benefit via the maintained operation of the Intertie duringsystemdisturbances,GVEA currently uses load shedding andplanonexpandingitinthefuturetomaintainthesystem during sudden load increases in lieu of carrying reserves. SVS Control:7,096 Based on 100%Reimbursement of $7,096. Reserve Monitoring:8,400 Based on 30%Reimbursement of $28,000.Determined from GVEA resources in which the Intertie can supply 25%.An allocationof5%was added for GVEA's responsibilities and accommodations for the control complexities of the Intertie. Tie-Line Accounting:27,300 Based on 30%Reimbursement of $91,000.Determined from GVEA - resources in which the Intertie can supply 25%.An allocation of 5%was added for GVEA's responsibilities and accommodations for the control complexities of the Intertie.. SERVICES RTU Engineering:3,250 Includes all costs for preparing engineering drawings for RTU installation and interface cabinet design where appro- 66-A5/APA-GVEA Costing 3 of 4 mre'eghnsOS™aeNee.oe Item EXHIBITA ADDITIONS AND MODIFICATIONS TO THE GVEA SCADA SYSTEM INCLUDING ALLOWABLE REIMBURSIBLE AMOUNTS BY ITEM Description Reimbursement Cost f7 3.2 3.3 3.4 Wa:ek3.5 3.6 & priate for the Anchorage-Fairbanks,Healy Power Plant,Gold Hill and Cantwell RTUs.(Total of 65 hours at $50/hr.) Based on 100%Reimbursement of $3,250. RTU Installation: Includes all costs for installing RTUs and interface cabinets where appropriate for the Anchorage-Fairbanks, Healy Power Plant,Gold Hil]and Cantwell RTUs.Based on average installation cost of $16,867 per site and APA participation factors for the first 3 RTUs and $6,967 for Cantwell.Based on 100%Reimbursement of $33,616. Data Base Development: For development of displays for Intertie data and SCADAtablesforIntertieRTUs.Based on development of 19 displays assuming one day per display and 3 days foreachRTUusingAPAparticipationfactors.Based on 100% Reimbursement of $10,640. Data Link Requirements Definition and Coordination for consulting services used to support the development ofdatalinkrequirements.Based on 27.7%(determined byCPUutilization)reimbursement of $484,000 for SCADA/EMS consultant plus 100%reimbursement of $9,741 for consultingservicestosupportthedevelopmentofthedatalinkrequirements. 100%reimbursement of $12,000 for additional consultingservicestosupportthedevelopmentofDataLinkrequire- ments as modified subsequent to the expenditures of Item 3.4. That amount of capitalized interest during construction oftheGVEASCADAProjectthatcanbeallocatedinaccordance with standard accounting principles to the amount and work Coy ons by this Exhibit.This amount shall not exceed53,086. TOTAL REIMBURSEMENT 66-AS/APA-GVEA Costing 4 of 4 we TtgeSRwren$33,616 10,640 143,809 $901,188 DOUGLAS SUBSTATION AGREEMENT °'March 30,1984 . ._THIS AGREEMENT is between the ALASKA POWER AUTHORITY _(hereinafter called the "Power Authority")and MATANUSKA ELECTRICASSOCIATION,INC.(hereinafter called "MEA"). WITNESSETHRH: WHEREAS,in 1981 the legislature of the State of Alaska directed the Power Authority.to construct 'the Anchorage-FairbanksTransmissionIntertie(Sec.14,Ch.118,SLA 1981,.as amended bySec.19,Ch.133,SLA 1982);and WHEREAS,the purpose of the Intertie Project is to connect the electrical .power transmission.facilities -ofSouthcentralAlaskawithInteriorAlaska;and .WHEREAS,to _carry out this purpose it is "necessary totransmit.electrical power between the Healy Substation and -theWillowSubstation;and WHEREAS,MEA owns and operates an electrical transmissionsysteminSouthcentralAlaska;and . 'WHEREAS,MEA owns and "operates 'a -transmission JinesubstationatDouglas;and . . : WHEREAS,the 'Douglas Substation must have certainadditions'and modifications made to it.in order to implement the Anchorage-Fairbanks Intertie Project,including but not Timited torelayandcontroladditionsandmodifications.as required forIntertieprotectionand.operation (heretnafter called "theProject");and Co,. WHEREAS,the Power Authority fs willing to design andconstructcertainequipmentrelevanttothe|operation andprotectionoftheIntertie;|- -NOW,THEREFORE,it is agreed as.follows: ARTICLE I Section 1.MEA shall review,within thirty (30)days,'-_all future engineering design modifications,additions or changes"of the Project as more fully described in.this Article and mayrejectany'design 'which fs not:compatible with the design, operation,or efficient maintenance of the MEA system.Any suchreviewbyMEAisforthebenefitofMEAonlyanddoesnotrelievethe-Power Authority.of the Authority's full responsibility to,design.and construct the improvements in compliance with allapplicablecodesorotherrequirementsandtoassumefull responsibility for the successful operation of the improvements, Section 2...The construction contracts and all other maps,drawings,plans and specifications,contract forms,addenda,estimates,studies and other documents to be prepared shal]conformtotheapplicablestandardspecificationsandformsoftheRural-Electrification .Administration and all applicable codes =and'industry standards,° Section 3.The improvements to be accomplished under.this Agreement are those depicted inthe one--line diagram.(Attachment A)which is made part of this Agreement.'The plans and 591/192/D2/F1 "DOUGLAS1s supstAQn ac'AGREEMENT.en ce]March 30,1984 an Page 2 - specifications to accomplish this work are those Power Authority .Bidding Documents entitled Alaska Power Authority Invitation to BidAPA83-R-0017.. ARTICLE I] Section 1.The Power Authority'shall provide a1]equipment "and all materials necessary for the Project,including:all materials listed on Attachment A,B,and C,al]at its solecost,including but not limited to all fabrication,delivery and .installation costs,and will design and construct the Project.. .Section 2.Ownership and 'maintenance:responsibility -for all materials and equipment purchased'or installed under this-Agreement is determined by the following provisions: A,Attachment Bs made part .of this "Agreement,lists..°separately that equipment or improvements installedbythePowerAuthorityunderthisProjectwhichshallbepartoftheIntertieandowned.by the Power_-Authority,and that equipment and improvementsinstalledbythePowerAuthoritywhichshallbe -transferred to MEA at no cost and owned by MEA after construction'of the Project is completed.Attachment C made part of this Agreement,lists therelativeownershipofimprovementsandequipmentatterminationof.this Agreement in accordance with'Subsection 2B,below. 'B.Upon termination of this Agreement,MEA may requestthePower:Authority to transfer to MEA any or aj)equipment listed in Attachment.C,Column II and not-then owned by MEA.Such equipment shall be -.transferred at ne cost to the Power Authority or-MEA,. C.After MEA.has made "its selections and ownership has. '|transferred under Subsection.2B,-above,the Power°'Authority'may choose to salvage all or part 'of thatequipmentwhichislistedinAttachment-C,Column I,'vand the remaining equipment listed in Attachment C, CoTumn II..1f.the Power Authority does not salvage-all or portions of the equipment,it may be oSabandonedinplacesubjecttoMEAapproval.” ”Section 3,'The Power Authority.retains the right to-'repair or upgrade any equipment necessary for the operation of theInterttethroughoutthetermofthisAgreement.: "Section 4.°Throughout the term of this Agreement,.the:Power Authority ts granted a right-of-entry to occupy and perform ° necessary work for the construction,testing,and maintenance of_the Project.'The following provisfons will:apply to this section: -A.MEA personnel.will have-priority over Power”'Authority personnel except 'where a bona-fideemergencyjeopardizingthePower.Authority's©operation of the Intertie exists.: B.All work will be scheduled and coordinated with MEAmanagementwheneverpossible.. Cc.Access to .substation equipment.shall 'not beunreasonablywithheldbyMEA(subject to the terms of Subparagraph A and B,of this section). "591/192/D2/F1 DOUGLAS suastbn AGREEMENT lgMarch30,1984 . Page 3° D.There wil)be no cost to the Power Authority forsuchaccess... "Section 5.MEA agrees to furnish labor necessary tocoordinate.and/or participate in scheduled.outages,testing and©start-up at no cost to the Power Authority. Section 6.Throughout the life of this Agreement,the-Power Authority shall be liable to MEA for costs incurred by MEA asaresultofunscheduledoutagesordamagesresultingfromthenégligenceofthePowerAuthority's 'contractors or.personnel as.related to activities under this Agreement.Such costs shall.include lost -profits,if any.In no event shall the Power -Authority be liable for any claims from third parties.or MEAconsumersfordamagesresulting.from such unscheduled outages.However,nothing in this section shall relieve the Power Authority :from its 'obligation to indemnify MEA from.the Power Authority'snegligenceas,defined in Article III,Section 4., 'Section 7._MEA reserves the right to assign to theproject-'during construction an MEA coordinator if MEA determines|that work'by the Power Authority or .its contractor is not being ©performed in a safe manner or as prescribed by applicable codes and.regulations..Such person:shall have full authority to act on'behalf of MEA.for matters relating to construction activitieswithinthesubstationsite,and shall become the sole MEA point.ofcontactforsuchmatters.:. Section.8..The Power Authority may install all-communications equipment _it deems necessary to operate theIntertie,including SCADA.The installed equipment shail be compatible with MEA operations and the terms and conditions of such_installation shall be by separate agreement between the Power'Authority and.MEA, ARTICLE ITT,;Section 1,"MEA:may,but is.not required to,inspect -oval materfals and the workmanship incorporated into'the Project.Any such inspection "by MEA is for MEA''s sole use and such-"dnspection does not in any way subject MEA to liability for design,-construction,or operation.of the Project,nor does.such inspection ;-yeljeve the Power Authority of the Power Authority's sole.responsibility to design,.construct and operate the Project. Section.2..The Power 'Authority'will.obtain ail -permits requfred for construction of the Project and will.assign toMEA.those permits which:are required for MEA's operations "andmaintenance.. .. Section 3.The Power Authority reserves the right toperformnecessaryoperationsand.maintenance.for the.operation oftheIntertiebyreasonablemethods. Section 4,The .Power Authority shalt:indemnify andsaveharmlessMEA,its officers and employees,from all.suits,actions,or claims "of any character brought because of.any injuries-or damage received or sustained by any person,persons,or property on account of Power Authority's operation or maintenance of theProjectbefore,during,or after construction of the Project,as a-result of any 'neglect in safeguarding the Power Authority's work,' or through use.of unacceptable material in the Power Authority's:work,or because of any action or omission,neglect,or misconductofthePowerAuthority,or from any claims or amounts arising or -§91/192/D2/F1 DOUGLAS SUBSTARDINA'AGREEMENT,.'@March30,1984. Page 4 recovered under the "Workmen's "Compensation Acti",or any.other law,ordinance,order,or decree.MEA will hold the Power Authority harmless for claims for: personal injury by MEA employees while working on MEA owned'andmaintainedequipmentlocatedwithinMEA's Douglas Substation.°Section.5.Representatives of MEA will be'provided ;with reasonable notice of the date,time and place of allacceptancetestsorinspections,and a representative of MEA shaJlbeallowedtoattendallsuchtestand/or inspections. ,'Section 6.-The Power Authority.will provide finalas-built drawings to MEA..'an ,, : .Section 7..This Agreement may be terminated by the |Power Authority at such time.as the Power Authority abandonsoperationoftheIntertieProjectattheDouglasSubstation,and inanycasemaybeterminatedbyMEAThirty:Five (35)years.from thedateofexecutionhereof. an Section 8.°MEA shall not,in the event this Agreementexptresofjsterminated,assess wheeling charges to the -Power -Authority for 'continued Intertie Operation based upon capital.investments for improvements made by the Power Authority,but mayassesswheelingchargesbasedin.part upon.maintenance costs of..such improvements.; -ARTICLE IV As compensation to:MEA for costs incurred by MEA as a result of this Agreement and the Power Authority's construction,operation and maintenance of the Project as described by Invitation.-"to Bid APA 83-R-0017,including but not limited to costs related toArticleI,Section I,Article II,Sections 5 and 7,and Article'TIT,Sections.1 and 5,the Power.Authority shall,within fourteen(143 'days.of execution 'of.this Agreement,make a.1ump 'sum payment._to MEA in the amount of Seven Thousand Five 'Hundred and No/100©'Dollars ($7,500.00).°Such payment,however,shall not relieve the_.Power Authority from the liabilities or costs which may result fromunscheduledpoweroutagesor._Samages as addressed in Article II,'Section 6..._ ARTICLE V Section 1.It is specifically agreed between the-parties executing”this Agreement that-it is not intended by any oftheprovisionsofanypartoftheAgreementtocreateinthepublicoranymemberthereofathird-party beneficiary relationshiphereunder,or to authorize anyone not a party to.this Agreement tomaintainasuitforpersonalinjuriesorpropertydamagepursuant'It to the terms or provisions of this Agreement.- "Section 2.This.Agreement represents the entireagreementbetweenthepartiesconcerningtheProject.The partiesagreethatallotheragreements,written or oral,concerning this-portion of the Project,are merged into this Agreement: Section 3.This Agreement may be modified only 'inwritingwhichmustbesignedbytheappropriateofficersofeach'.party to this Agreement., -§91/192/D2/F1 as.THIRD SUDICIAL DISTRICT d. DOUGLAS suas ADDN A'AGREEMENT '@March30,1984.. Page 5 - Section 4.Nothing in this-Agreement shall beinterpretedtomakethePowerAuthoritytheagentofMEAorMEAthe __agent of the Power Menor ity._DATED this __gahc="day of Legnk dF,atAnchorage,Alaska.oo ' ALASKA POWER AUTHORITY Ang Maid ade_Its:Executive Director _DATED this J -day of ocd ,I9AZ,at:Anchorage,Alaska.a . MATANUSKA ELECTRIC ASSOCIATION,INC. )Its:Lxesileul STATE.OF ALASKA;Ss) The foregoing Agreement was acknowledged before me this.Eas of AERIL ,19 s.by.bea Scie ouee Zathe*O the aska ower"Authority.an Alaska corporation.on be alf of the corps Conmni ssion expires:Ff RISER cor*Cetohoy 22,1228 STATE OF ALASKA ye_THIRD JUDICIAL DISTRICT:):A The foregoin Agreement was tchnowtedged-beforg methis.eef.Gayo Lonel ;19 by vetaek_L.Xucdad»the ©P 7].0 ata ectricpeteAssociation,'an Alaska."corporation,on behalf of the.corporation.. "§91/192/D2/F1 ATTACHMENT way '_One-Line Diagram. §91/192/D2/F1 591/192/D2/F1 ATTACHMENT upu : Initial Substation Equipment Qwnership Lot Lot Lot tot. Lot Lot Lot' Lot . ALASKA POWER AUTHORITYDOUGLASSUBSTATIONIMPROVEMENTS Description Transformer 138/115-24.9/14,4 kY W/LTC 20 MYA"161 k¥Circuft Switcher (1D-200) 169 k¥G.C.8.(06-138-B1)161 k¥'H.0.A.8.S.-{D6-138-153) -16)k¥Disconnect Switch (0G-138-151,0G-138-152,0G-138-153,0G-138-T1$1,DG-138-T2S1)80.5 k¥Yol tage Transformer.86 k¥(ncov)Intermediate Class Surge.Arrester 163 KYStation Post Insulators138kY¥Bus and Fittings Cable Trough and Fittings _Grounding and Fittings Fence Extension. Circuit Breaker for,Ext sting AC Panel..DC PanelStation Power Transformer 50 kVA Battery Charger _- Batteries and Rack Cable.Tray and FittingsControlandPower.Cable . Control afd Relay Panels *Pane?1 Healy-Line : Panel 2 Transfer Trip:and Sync 'Panel 3 Teeland Line.Pane?4 Rev Metering.and Alarm” Column 1Initial APAOwnership x x x: x x ><ttmMColum Il.Initial MEA, Ownership MOKKOOemeeememK "DOUGLAS SUBSTATION IMPROVEMENTS (CONTINUED)- -.item.oi SS : No.Quantity .oo Description 2.Ttot -Structures re 22°.Fkot _Foundations COLUMNIInitial APA 'Ownership COLUMN.IT Inttial MEA Ownership x a x - e@ aa ATTACHMENT nce " -”Retained Substation Equipment Ownership , 591/192/D2/F1 1 Quantity ot,aaryLot Lot Lot Lot Lot: Lot Lot) Lot _ALASKA POWER AUTHORITY DOUGLAS SUBSTATION IMPROVEMENTS Description -|Transformer 138/115-24,9/14.4 KY W/LTC 20 HVA16)k¥Circuit 'Switcher (TD-200)i69 k¥G.C.8.(DG-138-Bl}. 161 KY H.0,.A.B.S.(DG-138-153)461 KY Oisconnect Switch (DG-138-151,DG-138-152,06-138-153,0G-138-T1S1,0G-138-T2ST} 80.5 kY-Yol tage Transformera8kY-(HCO)laternedia te Class Surge Arrester161k¥Station Post lasulators 138k¥Bus and FittingsCableTrough'and Fittings Grounding arid Fittings a 'Fence ExtensionCircuitSreaker for Existing AC Pane!DC Pane}. . Station Power Transformer 50 k¥ABatteryChargeroeBatteriesandRack- Cable Tray and Fittings © Control and Power Cable -Control and Relay Panels -Pane)1 Healy Line.Pane?2 Transfer Trip and Sync.Pane?3 Teeland Line':.Panel 44 Rev Metering.and Alarm., COLUMNI _APAOwnership Retained soerene|"ous HEA "Ounerstifp x(a). GQ)aonEnEgEoEgEoEeI Quantity Tlot - 1 Lot "DOUGLAS SUBSTATION'IMPROVEMENTS (CONTINUED) Structures: 'Foundations Description -COLUMN I APA _Qwnershtp Retained COLUMNII MEA. Ownership ,UC ').osr ioe eed Amendment No.1 to. DOUGLAS SUBSTATION AGREEMENT Executed April 3,1984 between the Alaska Power Authority (herein-after called "the Power Authority")and Matanuska Electric Assacia-tion,Inc.(hereinafter call "MEA"),the Douglas Substation Agree-ment is amended to include the following: .Article 1,Section 4.The improvements to be accomplished underthisAgreementalsoincludetheconstruction,operation and mainte-nance of a microwave facility,fts reJated tower,hardware,buiid-ing and fence which wil]be limited to that area depicted in theDouglasSubstationLocationPlan(Attachment D).This work will beaoewithbythePowerAuthority,its agent(s)or its contrac-tor(s Attachmerits B and C are hereby amended accordingly... DATED this GE day of ' »19 »atAnchorage,Alaska. ALASKA PQWER AUTHORI By: Its:Executive Director . DATED this 12th day of June sg «19.84,at MATANUSKA ELECTRIC ASSOCIATION,INC. By:re :_ Anchorage,Alaska. Its:president STATE OF ALASKA ) ' .2:SS. THIRD JUDICIAL DISTRICT ) dayof ™»1984_,by Larry D.Crawford,the Executive Director of the Authority,an }corporation,on behalf of th . STATE QF ALASKA ) ;2 SS. THIRD JUDICIAL DISTRICT ) The foregoing Agreement was ack ge Wy.dedte"day”of "\__s/eve ry 19 2 s by .MS:'xlthe_frép cle h .OF tanhuska ectricAt Association,Incr,an Alaska'copforation,”on behalf of the corporation., Approved as to form. --[Aé) "§91/192/D2/F1 with close coordination with MEA's engineering personnel.. +h The foregoing Agreement was acknowledged before me this | no eden" Chapter 102 designated beneficiary as defined under _Code)[PERSON WHO HAS RIGHTS [ION PAYMENT CONTRACT AND WHO T OR WHO WILL BE A RESIDENT [S UNDER AN ADVANCE COLLEGE T;OR LEGAL WARD OF A RESIDENT OR OF RSITY];. ud of Regents of the university; |institution"has the meaning given in Jot ve isk nce college tuition payment fund formal plan for administration of an advance vaid tuition scholarship program adopted by ans the [A]person who isnamedintheedupon_2 purchaser [MAKES ORIS TUITION PAYMENTS]under an advance vaste ucati enses"has the 1e : sans the University of Alaska,including 'a iversity. ander AS 01.10.070(c);LS 1 2 "oew1997 SLA CH.103 481 Chapter 103 AN ACT. Relating to revenue bonds issued by the Alaska Industrial Development and Export Authority for interties between Healy and Fairbanks and between Anchorage and the Kenai Peninsula; and providing for an effective date. *Section 1.Section 29,ch.18,SLA 1993,is amended to read:. Sec.29.The Alaska Industrial Development and Export Authority may issue transmission intertie of at least 138 kilovolts between Healy and Fairbanks [AND OWNED,FOR THE BENEFIT OF ALL OF THE UTILITIES PARTICIPATING IN THE INTERTIE,BY GOLDEN VALLEY ELECTRIC ASSOCIATION,INC}.The principal amount of the bonds may not exceed $60,000,000. *Sec.2.Section 30,ch.18,SLA 1993,is amended to read: -l-SB 175 oe. 482 Eff. 7/3/97 1997 SLA CH.103 Chapter 103 onanAW&WVNioSec.30.The Alaska Industrial Development and Export Authority may issue revenue bonds for the benefit of the utilities participating in the intertie,or for the transmission intertie of at least 138 kilovolts between Anchorage and the Kenai Peninsula (TO BE OWNED,FOR THE BENEFIT OF ALL OF THE UTILITIES PARTICIPATING IN THE INTERTIES,BY CHUGACH ELECTRIC ASSOCIATION,INC].The principal amount of the bonds may not exceed $60,000,000. *Sec.3.This Act takes effect immediately under AS 01.10.070(c). -41 Relating to hospice care. *Section 1.AS 18 is am Ch Artic Sec.18.18.005 of hospice programs s without unduly burden financial resources tha furtherance of this po programs that recogni: to voluntary hospice minimum program sta Sec,18.18.01 association,or corpor: Legislation (Chapters 18 &19 SLA 1993) 10 11 (0,-eo.e .Chapter 18 AN ACT Transferring certain projects of and amending and rransferring programs of the Alaska Energy Authority to the Deparment of Community and Regional Affairs:relating to the Alaska Energy Authority;permitting the Alaska Industrial Development and Export Authority to issue revenue bonds for certain plants or facilides for energy resources:permicting uclides to form joint action agencies:authorizing the Alaska Industrial Development and Export Authoriry to issue revenue bonds for power transmission interes;relating to rates for a public uciliry that sends of receives power over certain power transmission interties:relating to the power cost equalization and capital improvement fund;amending the purpose of the Railbelt energy fund. *Section 1.FINDINGS AND INTENT.(a)The legislamure finds thar adequate,reliable. electric service at affordable rates is a necessary ingredient of a modern society and a prosperous developing economy.The legislature further finds that at the current stage of social and economic developrnent in the state,direct participation by the stare is necessary to assist in the development of a regional elecxric cransmission infrastructure and to assist in holding rates in high cost service areas to affordable levels. *Sec.4.AS 42.05.431 is amended by adding a new subsection to read: (h)When serting or rewiewing rates for a public utiliry thar sends or receives power over the power transmission interties between Fairbanks and Healy or berween Anchorage and the Kenai Peninsula,the commission shall coasider those costs that have not been directly assigned to other individual generating utilities by the utiliry responsible for the construction of the intertie to have been incurred for the systern existing on the effective date of this subsection.) HCS CSSB 106(FIN) ; 2. SERRENEBRER"NANOW&WwWWNeHChapter 18 Sec.42.45.040.SOUTHEAST ENERGY FUND.The Southeast energy fund is established as a separate fund.The fund consists of money transferred to it under AS 42.45.050,The deparment may make grants from the Southeast energy fund to utilities participating in the power transmission imertie between the Swan Lake and Tyee Lake hydroelectric projects for power projects,for repayment of loans,and for Payrnents on bonds. Sec.42.45.050.FOUR DAM POOL TRANSFER FUND.(a)The four dam pool transfer fund is established in the department.The fund consists of repayments of principal and income thar would have been deposited in the former power development revolving loan fund under former AS 44.83.500. (6)Subject wo appropriation,the department shall transfer the balance of the four dam pool transfer fund each month in accordance with this subsection.Subject to appropriation (1)40 percent of the balance in the four dam pool transfer fund shallbetransferredtothepowercostequalizationandruralelectriccapitalizationfundto be used for power cost equalization and rural electric projects; (2)40 percent of the balance in the four darn pool transfer fund shall be wansferred to the Southeas:energy fund to be used for power projects for utilides parucipating in the power transmission intertie berween the Swan Lake and Tyee Lake hydroelectric projects;and (3)20 percent of the balance in the four dam pool transfer fund shall be transferred to the power project fund to be used for statewide utility projects. *Sec.23.AS 44.88.105(d)is amended to read: (d)The chairman of the authoriry shall annually,no later than January 2, certify in wridng to the governor and the legislarure the amount,if any,required to restore a capital reserve fund to the capital reserve fund requirement The legislanre May appropriate to the authoriry the amount certified by the chairman of the authority. The authority shall deposit the amounts appropriated under this subsection during a fiscal year in the proper capital reserve fund.Nothing in this section creates a debt or liabiliry of the state.In this subsection,"capital reserve fund”means a capital reserve fund thar (1)is created under this section on or before Januzry 1,1989;[,OR] (2)secures refunding bonds if the refuncting bonds are issued to refund bonds that are secured by 2 capital reserve fund created under this section on or before January 1,1989;o¢ fer fective dzte of this section for a power tresemizsion intertie. *Sec.24.AS 44.88.155(d)is amended to read: (d)A loen participation purchased by the authoriry with assets of the enterprise development account or with proceeds of bonds secured by assets of the enterprise development account (2)may not be purchasedunless (A)the project applicant is not,or,if the applicant is no a single proprietorship,all members of the basiness enterprise or eaterprises constituting the project applicant are nox,in default on another loen made by -33-HCS CSSB 106(FIN) woco §HDDA&@|NHPeOOOoeeod-_SSFeriaanasabukesSBRRARRGE31 Chapter 18 "the state or by a public corporarion of the stare:and (B)at least 20 percent of the principal amount of the loan is retained by the loan originator, (3)may no be purchased if the loan to be purchased exceeds the cosz of the project or 75 percent of the appraised value of the project,whichever is less, unless the amount of the loan in excess of this limit is federally insured or guaranteed "or is insured by a qualified mortgage insurance company; (4)may not be purchased if the participarion in the loan to be purchased is for a term longer than chree-quarters of the authority's estimate of the Life of the project or 25 years from the date the loan is made,whichever is earlier, however,in the i n id f r igsion_intertie,the term than $0 v ig made: (5)may be made only if the participation in the losn to be purchased contains amortization provisions;the amortization provisions (A)must be complete and satsfactory to the authority and require periodic payments by the borrower, (B)may allow the loan originstor to amortize the portion ofthe loan retained by the loan ociginator using a shorter amortization schedule than the amortization schedule for the portion of the loan held by the authority if (i)in the authority's opinion,the project financed can support the increased debt service;and (ii)the accelerated amortization schedule is required to induce the originator to make the loan: (6)may be made only if the participation in the loan w be purchased'is in the form and contains the terms and provisions with respect to insurance,repairs, alterations,payment of taxes and assessments,default reserves,delinquency charges, default remedies,acceleration of maruritry,secondary liens,and ocher maners the authority prescribes;and (7)may be made only if the participation in the loan to be purchased is secured as to repayment by a moctgzge or other security inserument in the manner the authority determines is feasible to assure dimely repayment under a loen agreement HCS CSSB 106(FIN)34 Chapcer18 1 entered into with the borrower. 2 *Sec.28.AS 44.88.155(g)is arnended to read: 3 (g)Notwithstanding any ocher provision of this section,the authority may 4 waive or modify the requirements of this section as it considers appropriate and 5 prudent in order to finance a project if the authority intends to own the project or in 6 order to finance a power transmission intertie project. 7 *Sec.26.AS 44.88.900(10)is amended to read: 8 (10)"project”means 9 (A)a plant or facility used or intended for use in connection 10 with making,processing,preparing,tansporting,or producing in any manner, 11 goods,products,or substances of any kind or namure or in connection with 12 developing or uclizing a narural resource,oc extracting,smelting,transporting, 13 converting,assembling,or producing in any manner,minerals,raw mazerials, 14 chemicals,compounds,alloys,fibers,cornmodities and materials,products,or 15 substances of any kind or nature; 16 (B)a plant o¢facility used or intended for use in connection 17 with a business enterprise; 18. .(C)commercial activity by a small enterprise; 19 (D)a plant or facility demonszrating technological advances of 20 new methods and procedures and prowxype commercial applications for the 21 explocation,development,production,transportation,conversion,and use of 22 energy resources; . 23 (E)infrascrucorre for a new tourism desdnation facility or for 24 the expansion of a tourism destination faciliry; 25 (F)__a_ptantorfacility,other then a ptent or facility 26 Sescribed in (D)of this parsgraph,for the penergtion,transmission, -35-HCS CSSB 10&FLN) a .7 -- *Sec.29.The Alaska Induscial Development and Export Authority may issue bonds to finance the acquisition,design,and consrruction of a power transmission intertie of at least 138 kilovolts between Healy and Fairbanks and owned,for the benefit of all of the utilities participating in the intertie,by Golden Valley Electric Association,Inc.The principal amount of the bonds may not exceed $60,000,000. *Sec.30.The Alaska Induscial Development and Export Authority may issue bonds to finance the acquisition,design,and construction of a power transmission intertie of at least 138 kilovolts between Anchorage and the Kenai Peninsula to be owned,for the benefit of all of the utilides participaring in the interties,by Chugach Electric Association,Inc.The principal amount of the bonds may nox exceed $60,000,000. . *Sec.31.The Alaska Indusrial Developrnent and Export Authoriry may issue bonds to finance the acquisition,design,and construction of a power transmission intertie of at least 115 kilovolts berween the Swan Lake and Tyee Lake hydroelectric projects and owned,for the benefit of all of the utilines participating in the intertie,by Ketchikan Public Utilities.The principal amount of the bonds may nor exceed $40,000,000. *Sec.32.The Alaska Induscial Developrnent and Export Authoriry may issue bonds to finance the acquisition,design,and construction of a power transmission intertie of at least 138 kilovolts berween Sutton and Glennallen and owned,for the benefit of all of the utilities participating in the intertie,by Copper Valley Electric Association.The principal amount of the bonds may not exceed $25,000,000. ©Sec.33,APPLICABILITY.'The repeal of scarutes by sec.28 of this Act does not affectexistingbondsoractionsthathavebeentakenundertherepealedprovisions. ----een ee HCS CSSB 10&F1N)-36- Chapter 19 AN ACT Making appropriations for grants and loans for hydroelectric projects including power transmission interties,to capitalize certain funds for energy grant and loan programs in the state,including the power cost equalization and rural electric capitalization fund,to the Department of Community and Regional Affairs for operating costs related to power projects and programs and to capitalize the Railbelt energy fund. *Section 1.(a)Subject to the conditions set out in (b)and (c)of this section,the sum of $43,200,000 is appropriated from the Railbelt intertie reserve (sec.159,ch.208,SLA 1990) to the Department of Administration for payments as a grant under AS 37.05.316 to Golden Valley Electric Association for the benefit of all the utilities participating in the intertie for design and construction of a power transmission intertie of at least 138 Kilovolts berween Healy and Fairbanks. Chapter 19 (b)The appropriation made by (a)of this section is contingent upon the execution of a written agreement between the electric utilities participating in the Healy-Fairbanks power transmission intertie,the Department of Administration.and the Alaska Industrial Development and Export Authority that provides that the participating utility or utilities agree to ) (1)pay the design and construction costs for the Healy-Fairbanks power transmission intertie that exceed $43,200,000: (2)pay the operation and muintenance costs of the Healy-Fairbanks power transmission intertie;and (3)allocate,in proportion to the system peak demands of the utilities participating in the intertie,less a 1.5 mill per kilowatt hour charge for all energy assessed to the line paid by the receiving utiliry, (A)the costs of construction that exceed the amount of the grant under this section; (B)the operation and maintenance costs;and (C)the costs that may reasonably be charged for services provided. 'including transmission to the intertie. (c)The appropriation made by (a)of this section is contingent upon the execuuon of a written agreement between the electric utilities participating in the intertie and the deparment in which Golden Valley Electric Association agrees to provide the other participating utilities access to the intertie for the purpose of assured access to resources, economy energy transactions,and other similar uses. *Sec.2.(a)Subject to the conditions set out in (b)and (c)of this section,the sum of $46,800,000 is appropriated from the Railbelt intertie reserve (sec.159,ch.208,SLA 1990) to the Department of Administration for payment as a grant under AS 37.05.316 to Chugach Electric Association for the benefit of all the utilities participating in the intertie for design and construction of a power transmission intertie of at least 138 kilovolts between Anchorage and the Kenai Peninsula. (b)The appropriation made by (a)of this section is contingent upon the execution of a written agreement between the electric utilities participating in the Anchorage-Kenai Peninsula power transmission intertie,the Department of Administration,and the Alaska HCS CSSB 126(FIN)-2- woonHDNH&WwWwaNHDnH&WwWWY=©Chapter 19 Industrial Development and Export Authority that provides that the participating utility or uulities agree to | (1)pay the design and construction costs for the Anchorage-Kenai Peninsula power transmission intertie that exceed $46,800,000: (2)pay the operation and maintenance costs of the Anchorage-Kenai Peninsula power transmission intertie;and (3)allocate,in proportion to the system peak demands of the utilities participating in the intertie less a 1.5 mill per kilowatt hour charge for all energy generated by the Bradley Lake hydroelectric project purchased by the receiving unlity, (A)the costs of construction that exceed the amount of the grant under this section; (B)the operation and maintenance costs;and .|(C)the costs thar may reasonably be charged for services provided, including transmission to the intertie. (c)The appropriation made by (a)of this section is contingent upon the execution of a written agreement between the electric utilities participating in the intertie and the | department in which Chugach Electric Association agrees to provide the other participating utilities access to the intertie for the purpose of assured access to resources,economy energy transactions,and other similar uses. *Sec.3.The balance in the Railbelt intertie reserve,after the appropriations made by secs.|and 2 of this Act are paid,is appropriated to the Railbelt energy fund (AS 37.05.520). *Sec.4.(a)Subject to the conditions set out in (b)-(d)of this section,the sum of $35,000,000 is appropriated from the Railbelt energy fund (AS 37.05.520)for deposit in the power project fund (AS 42.45.010)for payment as a loan under AS 42.45.010 to the participating utilities for the design and construction of a power transmission intertie of at least 138 kilovolts between Sutton and Glennallen. (b)Notwithstanding AS 42.45.01Qg),repayments of principal and interest on the loan for which an appropriation is made under (a)of this section are appropriated to the Railbelt energy fund (AS 37.05.520). (c)The appropriation made by (a)of this section is contingent on the parncipating utility or utilities and the Deparment of Community and Regional Affairs entering into an 3.HCS CSSB 126(FIN) woOoNYHDaABR|WWNeeeeeeChapter 19 agreement for a loan at zero interest for a tern of 50 years. (d)The appropriation made by (a)of this section is contingent upon the completion of a feasibility study and finance plan satisfactory to the Department of Community and Regional Affairs as set out in former AS 44.83.181. (e)In this section,"participating utlides”means the utlity or unlidies participating in the design,construction,operation,and maintenance of the power transmission intertie berween Sutton and Glennallen. *Sec.5.(a)Subject to the conditions set out in (b)and (c)of this section,the sum of $20,000,000 is appropriated from the Railbelt energy fund (AS 37.05.520)for deposit in the power project fund (AS 42.45.010)for payment as a loan under AS 42.45.010 to the participating utilities for design and construction of a power transmission interte of at least 115 kilovolts between the Swan Lake and Tyee Lake hydroelectric projects. (b)Notwithstanding AS 42.45.010(g),repayments of principal and interest on the loan for which an appropriation is made under (a)of this section are appropriated to the Railbel energy fund (AS 37.05.520). (c)The appropriation made by (a)of this section is contingent on the participating utility or utilities and the Department of Community and Regional Affairs entering into an agreement for a loan at three percent interest for a term of 15 years. | (d)In this section,"participaring utilities”mean the utilities participating in the design, constuction,operation,and maintenance of the power transmission intertie between the Swan Lake and Tyce Lake hydroelectric projects.