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Intertie Managment Commitee Meetings 02-11-2014 2
Alaska Intertie Management Committee DRAFT MEETING MINUTES Tuesday,February 11,2014 Anchorage,Alaska 1.CALL TO ORDER Chair Brad Evans called the meeting of the Alaska Intertie Management Committee to order on February 11,2014 at 9:00 a.m.A quorum was established. 2.ROLL CALL Members present:Bradley Evans (Chugach Electric Association);Cory Borgeson (Golden Valley Electric Association);Joe Griffith (Matanuska Electric Association);Dan Kendall (Anchorage Municipal Light &Power);and Gene Therriault (AEA). 3.PUBLIC ROLL CALL Public present in Anchorage:Louis Agi (Anchorage Municipal Light &Power (AML&P)); Brian Bjorkquist (Department of Law);Mark Johnson (Chugach Electric Association (CEA)); Burke Wick (CEA);Bernie Smith (Regulatory Commission of Alaska (RCA));Bob Day (Homer Electric Association (HEA));Kirk Warren (AEA);Teri Webster (AEA);Kirk Gibson (McDowell Rackner &Gibson PC-phone);Brian Hickey (CEA-phone);and Miranda Studstill (Accu-Type Depositions). 4.AGENDA COMMENTS/MOTION FOR APPROVAL MOTION:Mr.Borgeson made a motion to approve the agenda as amended.Motion seconded by Mr.Kendall.The motion was approved unanimously. 5,PRIOR MINUTES -November 1,2013;November 12,2013 MOTION:Mr.Griffith made a motion to approve the prior minutes November 1,2013 and November 12,2013.Motion seconded by Mr.Borgeson.The motion was approved unanimously. 6.PUBLIC COMMENT There were no public comments. 7.OPERATOR REPORTS 7A.Asset Status AIMC Draft Meeting Minutes-February 11,2014 Page 1 of 14 Mr.Wick reported the intertie is in service and no outages are scheduled for this time.Chair Evans asked if there have been any problems.Mr.Wick noted there have been no problems. 7B.System operations status Mr.Wick reported the system is operating at close to capacity almost around the clock with sales and Bradley energy to GVEA.The SVCs are in service.There are other SVC projects scheduled for later in 2014,which are on the railbelt maintenance schedule. Mr.Griffith asked what is the level that is being sent north.Mr.Wick advised it was about 70 megawatts when he left the office. 8.OLD BUSINESS 8A.Spinning Reserves Chair Evans noted this item was added to reengage on the spinning reserve issue.He requested the operators group look at whether or not any changes need to be made to how the spinning reserve is allocated and to specifically review responsibilities of the operating entities that are interconnected to the pool,who are otherwise unrecognized by the pool since open access has been established,including the military,the University,Doyon,and Tesoro.The interconnected MVA capability of all of those entities needs to be determined.Chair Evans suggested status quo is maintained until there is agreement to any changes. Mr.Griffith asked if this issue is covered under the resolution previously passed.Chair Evans recognized the status quo was affirmed and believes these issues are organic and it is time to review these issues again.Open access has been incorporated and those entities need to be held to the open access language and the resulting responsibilities.Chair Evans reported this is not occurring in each load balancing area and should be remedied. Mr.Griffith suggested Mr.Wick explain how these issues were addressed in the past.Chair Evans noted this has not occurred in the past because of the narrow issue of open access.Mr. Griffith informed there have been years where the largest utility used the largest unit.Chair Evans agreed the utilities are following the protocols and his concern is with the entities who are online because of the open access system.Mr.Kendall commented AML&P is carrying the biggest load of the spinning reserve. Mr.Therriault asked to which of the subcommittees or working groups is Chair Evans tasking this issue.Chair Evans assigned this task to the Operating Committee (OC).Mr.Griffith reported Mr.Warner heads up the Operating Committee.Mr.Kendall noted Mr.Warner would be more than happy to address the issues raised by Chair Evans.Chair Evans requested the OC review the cost of spinning reserves because the IMC will have to address the benefits other are receiving and not paying for. Mr.Griffith asked if bills are being sent out to the entities who are not paying.Chair Evans stated that needs to be reviewed.Mr.Kendall commented if another unit is started,bills may be sent out. AIMC Draft Meeting Minutes-February 11,2014 Page 2 of 14 Chair Evans noted another issue regarding the spinning reserves for the OC to review is the battery.This is a very substantial asset in the system that provides a benefit to everybody,but may not be totally recognized.Chair Evans requested GVEA provide additional information to the OC regarding the battery and its ongoing O&M.There may be more of these devices entering the system and there could be an increase in demand for those kinds of devices to maintain the quality of the operational characteristics of the system.Chair Evans requested the OC write up a specific scope of this issue to bring to the IMC. Chair Evans noted these will be committee assignments under Item 11 in the agenda. 8B.Expenses cost allocation methodology for non-asset costs (GVEA) Mr.Borgeson reported yesterday,GVEA sent the documentation for information on Resolution 14.2,the expense cost allocation methodology for non-asset costs.These are operational costs and not maintenance costs.The intertie is evolving,changing and additional studies are necessary.The regulatory efforts that may have to be taken for the operation of the intertie with the open access rules,reliability standards,and the enforcement of those reliability standards places a greater administrative burden on the intertie.GVEA proposes costs would be shared equally among the participants and users.If an entity came onto the intertie as a participant or as a user,the entity would share in the administrative costs. Mr.Borgeson provided a working red line draft version of the amended and restated Alaska Intertie agreement.Mr.Borgeson advised the resolution provides Mr.Gibson would work with AEA to prepare the appropriate amendments to the Alaska Intertie agreement that would effectuate the desired changes.The changes would come back before the IMC for approval.No changes would be approved at today's meeting. Chair Evans asked if Mr.Borgeson is suggesting an actual algorithm at this point.Mr.Borgeson stated no algorithm is being suggested today and this resolution is a process to move forward. He is hoping to bring the changes to the IMC at the next meeting.Chair Evans asked if GVEA has any pride of authorship on the names of the cost elements.Mr.Borgeson stated they are open for the names of the cost elements. Chair Evans commented intertie administration costs and intertie operating costs seem to be the same and what needs to be addressed at a later point are the interconnected system costs.He noted the final recommendation can come back before the IMC with delineations for different cost elements. Mr.Griffith asked who will bring the final recommendation back before the IMC.Chair Evans and Mr.Borgeson stated the attorneys,Mr.Gibson and Mr.Bjorkquist,will change the contract language.Mr.Borgeson advised every organization would have a chance to review the changes and provide feedback. Mr.Griffith believes the relevant issue is determining the allocation algorithm.He asked if GVEA has a proposed algorithm to provide now or if the algorithm will be provided later.Mr. AIMC Draft Meeting Minutes-February 11,2014 Page 3 of 14 Borgeson reported the algorithm currently proposed is the administrative costs would be shared equally among the participants and users,no including AEA.The operational costs will continue to be shared the way they are set out in the agreement. Mr.Griffith asked how capital costs will be treated.Mr.Borgeson advised capital costs are included in the operational costs and will be shared using the current manner of sharing,with GVEA having the bulk of those costs. Mr.Therriault expressed his appreciation for the work GVEA has completed on this resolution in trying to maintain the existing list of charges for the operational costs and create a separate list of charges for the administrative costs.The allocation of costs would be even distributed among participants and users.Mr.Therriault noted between now and the next meeting,staff will need to clarify language for the budget establishing a charge based on the number of participants at the beginning of the fiscal year.Language needs to be included which anticipates and addresses a recalculation of the cost share if a new participant joins any time after the beginning of the fiscal year. Chair Evans believes the attention to details will make the process work better.He recommended including flexibility in the changes so the IMC does not have to continually update the changes.This would include a situation where benefiting entities,who are not members,would be charged eventually depending on RCA decisions.Chair Evans agreed there needs to be a forward-looking charge to get started and requested an estimate of that charge. Mr.Borgeson clarified the definition of intertie administrative costs includes AEA's administrative expenses associated with the intertie,legal expenses association with IMC activities,regulatory costs associated with the IMC activities,and costs associated with developing,monitoring and administering operating reliability standards for the intertie and the IMC.Mr.Borgeson believes this definition is broad enough to include the reliability reports, standards and review of those types of activities.Chair Evans agreed that is a good list and any other cost elements identified can be included to that list. MOTION:Mr.Borgeson made a motion to approve Resolution 14-2.Motion seconded by Mr.Therriault. Mr.Griffith asked if the approval of the resolution includes approval of the red-line version on the contract.Mr.Therriault stated his understanding is the final be it resolved notes the attorneys will work on the language.The red-line version is the suggested starting point for that discussion.Chair Evans agreed the amendments are not being approved by this resolution. Amendments will have to come back before the IMC.This resolution provides adequate time for the IMC to review amendments.Chair Evans requested the amendments get circulated to members prior to the next meeting in about a month so voting can occur at the next meeting. Mr.Warren reported he will be scheduling a Budget Subcommittee meeting in less than a month to determine the budget for the next fiscal year.He noted it would be nice to have synergy and guidance for the Budget Subcommittee prior to their meeting.Chair Evans noted there are a AIMC Draft Meeting Minutes-February 11,2014 Page 4 of 14 couple of efforts underway that have some initial cost estimates and other efforts that would need provide their cost estimates. The motion was approved unanimously. Chair Evans advised any contract amendment resolutions will be taken by roll call vote. 9.NEW BUSINESS 9A.Pool Participation from Utility non-members Chair Evans stated this issue was anticipated when the agreement changed.The subject matter is a recognition not everyone operating in the interconnected system is a member.The IMC needs to address that diversity in the system.The rules have to be observed to enjoy the benefits of the system.Chair Evans noted there are some entities on the system who are operating in a fashion as if they do not know there are rules. Chair Evans commented this is a discussion for the IMC to frame the issues which gives entities the opportunity to use the system without being part of the agreement,while having to follow the established rules of the system.He noted the business framework for this accountability needs to be created.Chair Evans requested input from IMC members. Mr.Griffith stated currently there is the reliability and reserve criteria and the amended and restated agreement addressing some of the issues.The IMC has a position on spinning reserves. Mr.Griffith believes the above criteria would apply to the whole system and are good starting points.He noted there has been some push-back on the reliability and reserve criteria.Mr. Griffith does not know if it is the OC or this Committee who will state all entities on the intertie have to abide by the same rules.He believes it is a difficult task to value the ability to be interconnected. Chair Evans stated this issue cannot be ignored.Mr.Griffith agreed.Chair Evans noted it is time to assign individuals the task to push it forward.Mr.Griffith noted CEA is providing all of MEA's power.Chair Evans stated MEA is paying their portion of those bills and that situation is going to come to an end relatively quickly.Mr.Griffith believes the crucial question is how many load balancing areas are there going to be in the railbelt;one,two,three,five or six?This is the heart of the whole issue. Mr.Borgeson asked if IMC or any of the utilities able to measure and know whether the entities who are producing energy are providing the spinning reserves required under the Alaska Intertie standards,specifically Doyon.Chair Evans does not believe Doyon is providing any spinning reserves.Chair Evans stated he suspects there are times when other entities,like the University or the military,are not fully loaded and probably at times do have some reserve capability.He does not know if they have reserve capability when they are on peak. Mr.Borgeson asked if GVEA is providing spinning reserves for the entities like Doyon.Chair Evans stated the point is GVEA's members are paying for reserves that other entities are getting the benefit of.Mr.Borgeson asked if this issue is as simple as determining a rate for providing AIMC Draft Meeting Minutes-February 11,2014 Page 5 of 14 spinning reserves,setting the rate with the RCA,and then sending the entities a bill.Chair Evans agreed that is the direction he would like.If an entity is deficient,they will receive a bill.Mr. Griffith agreed. Mr.Kendall asked if these standards will be set as cooperative standards or RCA standards. Chair Evans noted the standards would be established by the IMC determining the contribution of spin for the members.There will have to be a tariff for the deficiencies.If a benefit is being provided to other entities without compensation,the IMC is not doing its job.Open access does not mean free access. Mr.Kendall stated open access is a new path for the intertie and issues with entities like the hospital will have to be addressed.Chair Evans expressed the rules need to be clear.He does not know if the IMC would address issues regarding benefits provided to entities who are self- generating at a small level.Mr.Kendall advised the IMC is still acting as the backup for these entities. Mr.Griffith believes if the IMC starts pricing the intertie,then that issue will have to be addressed as to how much value is there to the utilities providing the reserves,similar to the water park issue that occurred at the Commission.Mr.Borgeson commented that was a standby rate.Chair Evans noted some of the value may already be in their rate.He stated he is trying to solve the wholesale level problem first and then draw the complicated dividing retail line. Mr.Griffith stated he is experiencing a similar situation with the water plant on the hill.They are swinging on CEA's generation and not paying for it.Chair Evans explained these are the issues the IMC needs to address.He stated he does not have the answers,but knows there is a huge problem the IMC needs to focus resources on to resolve. Mr.Griffith asked what are the next steps in this process.Chair Evans recommended to first identify the issues.Next,some form of the OC group works with the Regulatory Committee and develops a regulatory approach to these long-term systemic issues that are currently being left unaddressed. Mr.Griffith asked if the IMC organizational structure has been populated.Chair Evans noted he has internally,but he has not sent his correspondence to Ms.Webster.Chair Evans requested each member complete the housekeeping of sending to Ms.Webster their representatives and organizational structure.Mr.Griffith asked if the organizational structure was approved by the IMC.Chair Evans stated the organizational structure was approved by the IMC and is organic. Any changes that need to be made can be brought in front of the IMC.Mr.Griffith suggested Mr.Warren and the Budget Committee be assigned to address these issues. Mr.Borgeson believes there should be a special committee who addresses these issues.Chair Evans noted the committee would become a special committee,including subject matter experts. Mr.Borgeson believes the committee may need regulatory counsel and IMC counsel.It will take real effort to come to the resolution.Mr.Borgeson agreed the IMC has to develop a plan, including what entities are involved,and provide the resources for top-notch people to be AIMC Draft Meeting Minutes-February 11,2014 Page 6 of 14 involved.Chair Evans stated this will be part of the block budgeting item for administrative costs.He believes the issues need to be addressed at the wholesale level first. Mr.Griffith noted if rules are established on the wholesale bulk power level,it is highly likely some of the same criteria will flow to the distribution level. Mr.Therriault informed the IMC he has to go to Juneau to give a presentation on transmission to the House Energy Committee tomorrow.Chair Evans asked if Mr.Therriault would like to provide the IMC with a preview of his presentation.Mr.Griffith reported there are people already awaiting Mr.Therriault's presence.Mr.Therriault advised the presentation will primarily discuss the work that has been completed by AEA on the suggested upgrades and the cost benefit analysis.There could be a line of questioning coming from the policy-makers on the governance of the structure.The discussion occurring today highlights the difficulties the utilities have and the IMC has in creating governance which applies to the whole system,when the IMC is only empowered to impact and directly control the Alaska Intertie,which is owned outright by the state. Chair Evans disagreed with Mr.Therriault's characterization because this is a voluntary organization and its scope far exceeds the direct asset of the intertie.Mr.Therriault noted the decisions that have been made by the IMC have been applied system-wide,but it has been through voluntary action.Chair Evans noted he would not characterize the IMC has had such a narrow window on the world.Mr.Therriault commented the IMC has no outright authority and it is important for policy-makers to understand if this system is to be aggregated and operated as a system,they need to give some thought to what the governance structure should be for it.He believes this is likely to be an area of discussion at the House Energy Committee tomorrow. Mr.Therriault expressed his appreciation for the work the utility members on the IMC have completed to make the system work.Mr.Griffith noted the utilities have been operating for 27 years pretty effectively. Mr.Borgeson commented the regulated utilities are governed in some sense by the RCA.If the government goes further,it would constitute a taking of the utilities'assets.If the state wants to pay the utilities $400 million or $500 million for the transmission lines,then the state can own it and govern it.Mr.Borgeson understands how government has the ability to regulate the transmission lines,but the lines are the property of the utilities,encumbered by the debt of the utilities,and the utilities are governing their own assets. Chair Evans advised Mr.Therriault to be very careful about the governance model for the utilities because if something is done wrong and is not recognized in the industry,it could jeopardize the utilities access to capital.If the governance structure is adverse,the utilities will get locked out of the capital market.Chair Evans does not know of any of the bodies in the Lower 48 who utilize a special purpose government agency for governance.Most of those bodies are bound to regulation and are the subject matter experts on tariffs.The assets cannot be transferred in many cases and some of the debt is not callable.Chair Evans cautioned the formation of a governance model that impacts the utilities financially,operationally,and could be counter to what industry expects.Chair Evans advised Mr.Therriault to be careful what he AIMC Draft Meeting Minutes-February 11,2014 Page 7 of 14 talks about and to the extent anything Mr.Therriault says is reported in the paper,Chair Evans will get a phone call from a rating agency because they watch for issues like these,especially coming out of Juneau. Mr.Therriault stated he is sensitive to those comments and concerns.In looking at some of the models across the nation where there has been success,there was no forced aggregation and a realization that a lot of things had to be negotiated in contractual language between entities.The process takes some time and is not something the policy-makers can just impose.The policy- makers need to be aware of all of those nuances and possibly consider a structure that would allow the discussions and negotiations to take place. Mr.Borgeson commented one of the questions regarding governance is the ability of the RCA to oversee the regulations and enforcement of the rules being imposed on the transmission lines. To the extent the discussion about governance is taking place with policy-makers,he requested making sure the RCA is empowered to regulate and provide tariffs for the intertie system, including the Alaska Intertie.Mr.Borgeson stated the Alaska Intertie is probably exempt from regulatory oversight,but that should be changed if the RCA can oversee the governance on the intertie.There needs to be a body that can enforce the open access rules and regulations the IMC has adopted.Mr.Borgeson believes the utilities anticipate filing their own tariffs.He recommended the group that sets the rules and regulations for the intertie operations is certain to have authority to take those regulations and create a tariff over them. Mr.Griffith suggested Mr.Therriault take with him the reliability and reserve criteria so the Legislature knows action is being taken.Mr.Therriault said he anticipated taking that paperwork,as well as the letter received from the RCA expressing thanks for filing that was made and they realized it is a complex document.He noted the IMC is moving forward incrementally and trying to keep the regulators aware of the actions. Mr.Griffith noted he has not seen the letter from the RCA.Mr.Therriault reported the letter was distributed in an email yesterday.Ms.Webster stated she can make copies,if necessary.Mr. Therriault explained the letter was an acknowledgment from RCA saying thank you for the filing and we appreciate the complexity of work that has been done.Chair noted he has not seen the letter yet.Mr.Therriault stated he will make sure copies are distributed. Mr.Griffith asked if this issue was assigned or if it will be assigned later.Chair Evans noted he will make assignments under Item 11 Committee Assignments.He stated there are currently standing committee assignments and these assignments will be additional.Chair Evans advised he is going to leave it up to the Chair of the assigned group to decide how to populate the working group,whether it is a combination of two or let the RCA take the lead and have individual members decide on their representatives. 9B.HEA Reliability complaints as registered with the BPMC regarding Bradley Lake Operations and interconnected reliability standards Chair Evans reported issues were raised by the Bradley Lake operator regarding reliability compliance.Chair Evans noted he will make this issue a committee assignment. AIMC Draft Meeting Minutes-February 11,2014 Page 8 of 14 Mr.Griffith asked for clarification of the issue.Chair Evans stated there was a lot of confusion and misunderstandings on how to follow the reliability criteria.The group assigned needs to review the issues and report back to the Bradley Lake Project Management Committee (BPMC) with recommendations.Chair Evans noted he intends to assign this to the OC. Mr.Borgeson expressed he is surprised Chair Evans is not tasking this issue with a BPMC committee.Chair Evans noted the issue is with the compliance to the IMC reliability standards. So if a voice of authority is sought,the OC would be that guiding group.Chair Evans stated he is open for discussion at this time. Mr.Kendall understands the IMC is setting standards for cooperation to send electricity north. Mr.Griffith disagreed and said it is more than just sending electricity north.It is for sending electricity everywhere.Mr.Kendall agreed there have to be standards to send electricity anywhere.He noted he is starting with a narrow focus of the question and asked if HEA is proposing to sell electricity to the north.Chair Evans commented this issue has nothing to do with HEA.Chair Evans stated IMC promulgated reliability standards,which include certain interconnection requirements and there were questions about how those rules applied to the Bradley Lake operation.Chair Evans noted the IMC was the source of the rules and he believes the IMC should be a voice of authority on interpretation. Mr.Kendall commented the issues are about standards and how the system is operated.He asked if Bradley Lake is included because the system is tied together.Chair Evans agreed and noted Bradley Lake adopted the standards and are trying to figure out how to comply to the standards.Mr.Kendall asked if the standards are voluntary.Chair Evans stated the standards have been adopted by the IMC and by Bradley Lake.Bradley Lake has technical questions about how certain standards work in a particular case.These issues would normally be handled by the OC if an interconnected entity asked the same questions about compliance in their circumstance. Mr.Borgeson commented some of the issues that HEA raised in their complaints had to do with the dispatching of power from Bradley Lake,which would be a contractual complaint based upon the Bradley Lake agreements.Chair Hirsch gave an example of one of the issues regarding how the plant was supposed to be interconnected to the system and did there need to be a ring bus at Bradley Junction to comply with the interconnected standards.Chair Hirsch noted that kind of question is appropriate for the IMC to review.He believes it is appropriate for the IMC to review any questions brought to the BPMC with regard to the compliance of the reliability standards.He noted that is the extent of the assignment and it is a very narrow issue. Mr.Borgeson agreed with the scope of that assignment and believes some of the issues that were raised properly belong in front of the BPMC.Mr.Griffith noted the BPMC accepted and adopted the reliability criteria.Mr.Griffith requested additional clarification on Item 9B.and how it addresses HEA's complaints.Chair Evans stated he may have used the wrong word when he characterized the issues as complaints.HEA brought issues forward to be reviewed in terms of complying with the reliability standards. AIMC Draft Meeting Minutes-February 11,2014 Page 9 of 14 Mr.Therriault asked who would be tasked with going through the document and identifying the issues that need clarification.Chair Evans stated he would task this to the OC and let them work with the specific groups identified to resolve the issue.If there is an engineering issue,then the OC would engage with the engineering group.It would all depend on what subject matter the is confusion about.There could be multiple subject matter experts looking at the questions. Mr.Therriault asked if the first step is going through the stated issue and identifying the individual specifics of the questions.Chair Evans agreed and noted the issues identified are only as they apply to the reliability standards and compliance with those by the project.Chair Evans noted if there is no objection,he will make that assignment to the OC.No objections were voiced. 10.COMMITTEE REPORTS 10A.Regulatory Committee -RCA Reliability Standards filing Mr.Gibson advised the letter and the attached operations and reliability standards was filed with the RCA on January 28,2014.According to comments from Mr.Therriault,there was a letter of acknowledgement of the receipt sent out.Mr.Gibson has not seen it yet.Mr.Gibson reported he had an opportunity to speak with Chair Patch,who mentioned he had received the operations and reliability standards filing and he had no substantive questions at that time,but did have a question regarding confidentiality.Mr.Gibson advised there is not a confidentiality issue. Mr.Gibson advised the next step will be how the individual utilities want to adopt and embrace the standards and the process that entails.He noted there have been discussions about the utilities individually filing their tariffs and having them approved.Mr.Gibson stated ML&P has a different idea on how to proceed.Mr.Gibson suggested the utilities meet to discuss and decide on a process the utilities will follow. Mr.Therriault reported copies of the letter filed with the RCA and RCA's response letter are being passed out to those in attendance.The third sentence in the RCA letter does clarify the filing has been made a public record,which means it was posted on the RCA website. Chair Evans noted there will be follow-up on the RCA filing based on the committee assignments.Mr.Griffith requested Chair Evans send the list of committee assignments to everyone on the IMC because he sometimes has trouble keeping a list.Chair Evans noted the assignments are made part of the record as Item 11.At that point,the assignments will be reviewed and agreed upon.Chair Evans noted if any clarifications are subsequently made,they will be provided to the members. 10B.Operational compliance conflict matters IOC) Mr.Kendall reported an email was sent indicating the subcommittee met on the 29th and the 31st and commenced working on the assigned task.There was no specific report included,but the subcommittee is moving forward. AIMC Draft Meeting Minutes-February 11,2014 Page 10 of 14 Mr.Wick noted the Dispatch Subcommittee has been detailed with developing compliance reporting standards in order to have a uniform format that everyone agrees to. Chair Evans advised that task has to be completed because there are already violations occurring and the IMC needs to be filing complaints to the RCA regarding those violations.Mr.Wick stated John Johnson of CEA is the Chair of the Dispatch Subcommittee. Chair Evans noted there were two assignments under this item,one of which was to prioritize the IMC's compliance program beginning with the most important issues first.Chair Evans believes the data is collected and any violations are addressed,but the reporting matter needs to be worked on.There are system violations occurring currently and the documentation needs to be filed at the RCA. Mr.Griffith commented he hopes he does not have to testify on the system violations because he does not know what they are.Chair Evans stated part of the problem is the violations need to be documented.Mr.Griffith requested more information about where the conflicts are and will defer to Mr.Borgeson. Mr.Borgeson stated addressing the issues discussed today,including spinning reserves,pool participants,and compliance,is going to take a significant effort and the IMC may have specified oversight staff to ensure there is compliance.The individual collective utilities undertaking these activities will create potentially a haphazard selective enforcement.Chair Evans noted there are currently designated groups to ensure compliance.Mr.Borgeson understands and believes how this work gets divided to make sure there is a fair application and consistency of the rules throughout the entire railbelt. Chair Evans noted when he was part of the group documenting issues,he created 300 to 400 reports on every individual disturbance of the system,which was a requirement of the job.There is a northern controller and a souther controller who are supposed to marshall that work and it is not being completed like it used to be.There used to be a much greater effort,which has softened over time. Mr.Borgeson noted HEA has expressed caution on this issue.Mr.Borgeson asked when GVEA starts up Healy Unit 2,who is going to ensure GVEA and MEA are compliant with the rules and regulations regarding backup.He asked who is going to ensure that any independent power producer who comes onto the system is compliant with the rules and regulation.Mr.Borgeson commented the rules and regulations have broadened under the standards and that is going to require a lot of oversight. Chair Evans expressed he understands Mr.Borgeson's concerns and the reporting needs to be communicated as to what units are running and what units are running for backup.One of the issues this Committee needs to address is entities trying to cheat the system and what happens when they get caught.Chair Evans does not believe it is appropriate for the members of this Committee to start writing what the entities need to do.It is a lot of work and is part of the pool cost. AIMC Draft Meeting Minutes-February 11,2014 Page 11 of 14 Mr.Griffith asked again if there are going to be five LBA's or three LBA's,because having five LBA's will be difficult to watch and additional instrumentation will be necessary.Chair Evans noted there was a time where every single disturbance was placed on the agenda and reviewed at the committee level.The structure is different now and hopes the OC is reviewing the disturbances now. Mr.Griffith requested an overview of how well the transmission system is operating.Chair Evans noted the OC has an opportunity to report that to the Committee.Mr.Borgeson stated the OC can present a one-page summary disturbance report to the Committee,but advised it takes work,effort and all the staff is busy.Mr.Griffith commented his staff would have trouble defining what is occurring on the transmission system on an hourly or a daily basis,but will have to begin that monitoring soon. Mr.Kendall noted these issues bring friction between the utilities.When one utility reports another utility is out of compliance,the utility who is purported to be out of compliance has to document in self defense they were or were not in compliance.Mr.Kendall stated the utilities have to monitor their own facilities and be able to respond to complaints from adjacent utilities. This will be a long paperwork documentation trail.Chair Evans commented the monitoring was characterized as a trust,but verify system and there was a healthy tension knowing the utilities were very concerned compliance.Chair Evans stated North American Electric Reliability Corporation (NERC)is not going to give friendly audits anymore.There are fines associated with any things they find wrong.Compliance in the system has become an issue. Mr.Griffith asked how does the independent system operator (ISO)concept fit into this discussion.Chair Evans believes the ISO will assure compliance by all the generating facilities if it is a generating reliability issue.The information is being collected and there may be some areas where information collection can be improved.Chair Evans commented there is a gap between standards and compliance that needs to be closed. 10C.IMC OC under frequency loadshed study and update Mr.Griffith noted Mr.Jeff Warner provided a report requesting funding for a special group to be tasked with the study.Chair Evans noted it is the responsibility of the participants to populate the engineering group who will actively engage on the under frequency loadshed study.Mr. Griffith reviewed Mr.Warner's report and noted data should be collected by February 15th. Mr.Hickey stated the Special Purpose Group has been formed and has met with the System Studies Subcommittee (SSS)to update the model.Mr.Hickey and Mr.Warner will manage the Special Purpose Group,consisting of representatives from ML&P and CEA.He noted the project will be augmented with resources from TPI (sp)and Power Engineers.A formal scope, schedule and budget should be defined by March 15th.Mr.Hickey noted the goal is to get the project substantially completed by the first of August. Mr.Griffith asked what timeframe was the model updated to.Mr.Hickey stated the 2009 loads were scaled up by a couple of percent to get to 2017 (ph)loads.The study will be 2017.The model has been updated to integrate the current studies.Several corrections were made to the AIMC Draft Meeting Minutes-February 11,2014 Page 12 of 14 system,including a data error by Postmark Substation.Mr.Griffith commented this is important information and is eager to compare the updated PSSE model with the one that was run initially. Mr.Griffith asked if an request for proposal (RFP)will be provided by the SSS by March 15th. Mr.Hickey explained a scope,schedule and budget will be developed by March 15th.The current plan is to use as much railbelt staff as possible and perhaps contract with PTI and Power Engineers to provide technicians to actually perform some of the runs,because there are many, many runs to be created.This will also bring the engineers on the railbelt up to speed on how the new system is going to work.Chair Evans and Mr.Griffith agreed it is a good idea to utilize the engineers. Mr.Griffith asked if MEA has anyone involved in Mr.Hickey's group.Mr.Hickey noted the SSS was met with and Bruno (unidentified last name)attended from MEA.Each utility, including HEA,had a representative at the meeting and were all invited to participate.The study needs to be executed by the end of the summer.Mr.Hickey noted Mr.Dan Bishop attended the meeting from GVEA.Chair Evans encouraged Mr.Borgeson engage Alan (unidentified last name)on this process because it is a really good learning experience. 11.COMMITTEE ASSIGNMENTS Chair Evans noted the assignments for the Regulatory Committee are as follows;1)meet and discuss tariffs and further coordination with the RCA regarding compliance with reliability standards and operating requirements,2)examine the issue of non-utility generation operation, 3)examine the issue of a way forward on compliance with standards and operating protocols with the RCA and decide how best to populate that effort with a combination of subject matter experts from other areas of the organizational structure. Mr.Griffith asked who is the Chair of the Regulatory Committee.Chair Evans stated the Regulatory Committee needs to meet and decide on the Chair.Mr.Griffith noted MEA will send a representative to the meeting,but does not know where the meeting is going to occur or who to contact to find out.Chair Evans temporarily designated Mr.Mark Johnson as lead of the Regulatory Committee until a Chair is decided upon. Chair Evans noted coordination will be through Mr.Johnson.Mr.Griffith asked if the Regulatory Committee representative should be a technical person.Chair Evans suggested the Regulatory Committee meet and discuss questions like that.He noted there may be multiple special meetings that focus on different issues like tariffs,operating costs,or compliance with standards and it is the responsibility of the Regulatory Committee to determine how to run those meeting and who is requested to attend those meetings. Chair Evans noted the assignments to the Operating Committee are as follows;1)review the issues raised by HEA as regards to compliance with the Bradley Lake project with reliability standards,2)continue with the trust and verify manner of documenting operating parameters of disturbances;3)continue documentation of compliance issues. AIMC Draft Meeting Minutes-February 11,2014 Page 13 of 14 Mr.Griffith asked if the issues reflect operating protocols.Chair Evans explained these are operating details,including if everybody carried their spin,how much spin did they carry,and how to trust and verify that information. Chair Evans continued assignments for the Operating Committee;4)increase the effort on creating a summary report on disturbance analytics and provide to the IMC. Mr.Griffith asked if that assignment was tasked to Mr.Warner.Chair Evans noted that assignment will be headed up by Mr.Warner. Chair Evans continued assignments for the Operating Committee;5)regarding status reporting, the OC is to review all of the reliability standards,determine how to comply to those standards, what reporting is necessary and what is the process for compliance.The previous instructions were to begin with the most important matter of spinning reserve first and then address further matters in order of importance.The end in mind of this assignment is to ensure a process is being followed,compliance is being maintained,and there is a robust system capable of monitoring. Chair Evans does not believe he needs to give the SSS any further guidance because they seem to be well underway according to their report. Chair Evans requested all members provide Ms.Webster correspondence designating contact individuals for the various organizational needs so she can distribute information to the appropriate people. 12.NEXT MEETING DATE Chair Evans recommended meeting monthly until significant progress is made on these issues. The next meeting is scheduled for March 11,2014,at 9:00 am,in Anchorage,Alaska. 13.ADJOURNMENT There being no further business of the AIMC,the meeting adjourned at 10:35 am. Bradley Evans,Chairman Gene Therriault,Secretary AIMC Draft Meeting Minutes-February 11,2014 Page 14 of 14 Alaska Intertie Management Committee MEETING MINUTES Tuesday,November 12,2013 Anchorage,Alaska 1.CALL TO ORDER Chair Brad Evans called the meeting of the Alaska Intertie Management Committee to order on November 12,2013 at 1:41 p.m.A quorum was established. 2.ROLL CALL Members present:Bradley Evans (Chugach Electric);Jim Posey-Anchorage Municipal Light &Power (ML&P);Joe Griffith-Matanuska Electric Association (MEA);Cory Borgeson -Golden Valley Electric Association (GVEA);and Gene Therriault -Alaska Energy Authority(AEA).gg 3.PUBLIC ROLL CALL Public present in Anchorage:Jeff Warner and Louis Agi (Anchorage Municipal Light &Power);Burke Wick,Brian Hickey,and Mark Johnson (Chugach Electric);Tom DeLong(Golden Valley Electric Association);Bernie Smith (Regulatory Commission of Alaska);BobDay(Homer Electric Association);Kirk Warren,Sara Fisher-Goad,Kelli Veech,-and Teri Webster (AEA);Henri Dale (AEA consultant-phone);Brian Bjorkquist (Department of Law);Kirk Gibson (McDowell Rackner &Gibson PC-phone);Sunny Morrison (Accu-TypeDepositions);Miranda Studstill (Aceu-Type Deposttons).4.PUBLIC.COMMENT 'Thereswere no30 publiccomments5.AGENDA COMMENTS/MOTION FOR APPROVALMOTION:Mr.Posey made aa'motion to approve the agenda.Motion seconded by Mr.Borgeson.The motion was approved unanimously.6.OLD BUSINESS. 6A.Open Access Methodology Incorporation MOTION:Mr.Griffith made a motion to adopt the third amendment of the amended and restated Alaska Intertie agreement as amended.Motion seconded by Mr.Posey.The motion was approved unanimously. Mr.Hickey advised that dutifully and as promised,Mr.Bjorkquist produced the open access item last weekend.Mr.Hickey and Mr.Agi reviewed the open access item.Mr.Hickey believes it is headed in the right direction,but would like some time to really go through and IMC Meeting Minutes-November 12,2013 Page 1 of 6 look at every section here and how it applies to section 16.3.4 in the 2011 agreement and make sure that the language is consistent.Mr.Hickey does not believe there are any major discrepancies,but wants further review.Comments will be produced by December 15,2013,for the Committee.The Committee will need to have approval the week of the 20th of January. Chair Evans asked if any of the issues noted are material issues or is it just ensuring there is no conflicting language.Mr.Hickey noted he wants to review the language.Chair Evans asked if the document ever says that open access is free access.Mr.Hickey stated the document specifically says open access is not free access. Mr.Griffith asked if the document says you can seize private property.Mr.Hickey advised thedocumentdoesnotsaythat.é Mr.Bjorkquist encouraged this type of scrutiny of the document and requested Mr.Hickey inform him if there are any issues.Mr.Bjorkquist advised Mr.Hickey not to assume thatanythingwaspurposefulifthereisaninconsistency." €%, Mr.Bjorkquist advised he sees one correction 'necessary for the motion,under Paragraph 4.0 onpagetwo,inserted after September 1,2013,should be "or November 15,2013."September 1 relates to the first amendment and November 15,2013,relates to the second amendment.Mr. Griffith and Mr.Posey accepted the friendly amendment.Mr.Borgeson requested Mr.Bjorkquist give.a summary ofthe voting process on the open accessrules.He asked if the open access rules have been voted on or has that been delayed three times now.Mr.Bjorkquist 'said his recollectionis they have been delayed three times now.Thereasonsforhavingtheamendmentsisthat.the agreement has open access provisions to beadoptedbyadatecertain'and the amendments have given more time to adopt those open accessrulesandextendingthetimeintheagreementtodoso. 7.NEW BUSINESS TA.Under frequency load shed Chair Evans requested a brief update to see if there are any points that need to be workedthrough.Mr.Warner provided a written load shed study update,including a timeline and outline of what the System Study Subcommittee will perform during the study.He noted the final report is scheduled for November 1,2014.The preliminary cost estimate for the project is $150,000 and the method of payment has not yet been determined by the Intertie Management Committee. Chair Evans commented that issue is addressed later on the agenda. Mr.Griffith inquired who the keeper is of the power system simulator/electrical model.Mr. Warner believes the state is the keeper of the power system simulator/electrical model.Mr. Griffith inquired if it was AEA.Mr.Warner thinks AEA is the owner of the power system simulator/electrical model and each utility has members and different engineering groups who perform the studies.Mr.Griffith stated he asked the question because he does not know who is in charge of keeping it current.Mr.Warner believes that GVEA pays the yearly fee and then the IMC Meeting Minutes-November 12,2013 Page 2 of 6 other utilities reimburse them.Chair Evans asked if the studies are both load flow and stability. Mr.Warner stated as far as he knows,it is both load flow and stability. Mr.Hickey commented the System Study Subcommittee is responsible for updating the model and the most recent model was updated by Dr.Jim Cote for AEA when they did the Railbelt Integrated Resources Plan and it has a 2015 and a 2020 base case in it right now.Chair Evans advised there was a reason for the effort because all these changes need to be studied and if we need to make changes to the basic under frequency load shed scheme,then better now than later. Mr.Hickey noted each utility's dynamics models need to be updated with recent test data.Chair Evans commented that was supposed to be part of this effort.Mr.Griffith asked if Electric Power Systems used the model also in their study last summer.Chair Evans confirmed they did. Mr.Dale inquired if there is a master version of the database or.document control and who haspossessionofthat.Mr.Hickey stated thereis a copy but does not believe thereis an officialdocumentcontrolonit.Mr.Hickey stated Mr.Cody has been the master of maintaining the database.Mr.Griffith commented the model he received for Matanuska Electric Association'sstudiesclearlywasnotcurrentandthatiswhyhestartedaskingthequestionofwhokeepsthemodelcurrent.aa.Se Mr.Warner advised the Machine RatingSubcommittee has been asked to meet to assist with theeffortasfarasminutedata,static data,and dynamic data.Mr.Griffith asked if thesubcommitteewillbenchmarkthatdataagainstactual,encountered conditions iin order to know ifitdoesreplicatethesystem:Mr.Warner agreed."s : 7B.2014 Ist quarter challenges of pool utilities -Chair Evans stated the purpose of this agenda ititem is to identify the pool challenges and todevelopaworkplantoaddresstheissues,which can include energy accounting issues,reserveaccountingissues,incorporating others into the intertie through the open access rule.ChairEvans'advised thereis a regulatory compliance hearingin January on non-dispatchableresources. Mr.Griffith beligves the modeling Mr.Warner has proposedis going to address the upcomingchallenges.Mr.Griffith does not believe anyone on the Committee has a completeunderstandingoftheimplicationsofchangingthegenerationsuites.Heis looking forward to theoutcomeofthemodeling.° Mr.Borgeson asked if AEA has any concerns for the intertie and what challenges they might see. Chair Evans stated the entire pool is being challenged from different areas.He recommended one of the ways of meeting these challenges is looking at the structure of the Intertie Management Committee and what committees are present.He suggested adding a more formal compliance committee.Chair Evans stated there is currently an Operating Committee,but compliance is usually not the same committee as the Operating Committee. Chair Evans encouraged the Intertie Management Committee members to create a resolution changing some of the committee structure in the Intertie Management Committee to align itself IMC Meeting Minutes-November 12,2013 Page 3 of 6 more closely with the Lower 48 and what is a more modern committee structure.Chair Evans commented it is important for the Intertie Management Committee to prepare and align the group to address issues in the event an entity brought forth a proposal that was deleterious to the system and would impair the operation.He requested the Committee think about how to handle that kind of situation and how the Committee would represent itself. Chair Evans advised he is going to make some formal proposals and requested the Committee members consider providing draft recommendations. Mr.Griffith asked if a chapter was written on this topic in the Intertie Management Committeeagreementorwasitremoved.Chair Evans stated he wants to review the contract to see whattypeofsupportisincluded.He noted everybody here working ;at the tableis doing the rightthingwithinthereliabilitygroupandtheassetmanagementgroup.He noted the Stateis coordinating and cooperating on implementing reliabilityrules and rational open access rules.Chair Evans commented more still could be done to address these issues. Mr.Griffith stated the Intertie Management Committee will be accused of throwing barriersinfrontofprogress.Chair Evans added there are a lot of peoplein this room that were responsibleforthegreatstridesandimprovementinreliabilityofthesystem.He stated the system has somestructuralproblems,but we do not have the funds tosolve those.Chair Evansasked how theIntertieManagementCommitteewillTepresentthereliabilitystandardsinaregulatoryproceeding,because thereis no regulatory committee.He asked if the Intertie ManagementCommitteeshouldhavearegulatorycommittee...Mr.Griffith stated he does not have an answernow,but will think about it.»Mr.Griffith recommended the Intertie Management Committee filethereliabilitycriteriaasplanned.He suggested someone pay close attention to the processthroughthecommissionbecausetheapprovalisnotautomatic,Chair Evans inquired how doestheIntertieManagementCommitteesupportthateffort,because that usually means having abudget.a teh 7C._Raliabiity/Operating reserves:Ma -Mr.Griffith asked if Matanuska Electric Association's big outage,the one where the jumpercameoff,caused any problems.'Mr.Warren said it took out the equipment line until such timeasitcouldbeisolated.Chair Evans recommended the operating group review the unit trips andensurethereisatichdatabase,so we are capturing the data we need.Chair Evans stated therearemanyopportunitiestoutilizefielddataasbenchmarks.He emphasized the importance of theoperatinggrouppayingcloseattentiontodatacollection.Mr.Griffith asked if the hi gh performance response units are working the way they should be. He noted he has not seen any problems.Chair Evans asked if the largest unit has been tripped lately.Mr.Wick stated a big unit has not been tripped.He noted the last big trip was due to a gas compressor issue and shut down the entire Static Var Compensation System (SVS).Chair Evans noted it is not so much what caused the outage versus the response of the system.Mr. Wick noted there were some system response problems during that trip that have since been remedied.He advised no repeat of those kinds of system response problems have occurred. Chair Evans inquired if the monitors are digital and if they are capturing data at key points.Mr. Wick agreed.Chair Evans noted that in the past,the monitors did not record properly when IMC Meeting Minutes-November 12,2013 Page 4 of 6 there was a voltage problem.He asked if this problem has been remedied and if they have their own uninterruptible stand-by power systems.Mr.Wick agreed.Chair Evans asked if this issue needs to be reviewed,does there need to be more of them,and are they in the right places.Chair Evans requested those questions be reviewed and answered by the Operating Committee or a working group of the Operating Committee. Mr.Borgeson explained GVEA has been utilizing the intertie significantly more in 2013 than they did in 2012.Mr.Borgeson commented the intertie has functioned very well for GVEA. Some issues have occurred with recloser actions or failures when the SVS went down,but GVEA is very satisfied with the overall operation and use of the line. Mr.Griffith asked Mr.Posey if the reasons for the transmission outages have been determined. Mr.Griffith reported Matanuska Electric Association replaced three or four insulators and asked if that solved the problem.Mr.Posey believes the lines are coming out tomorrow.They werescheduledacoupleofweeksago,but because of the SVS work,the replacement will occurtomorrow.ce Chair Evans advised the work at the Hope Substation has been completed with breakers,relaysandthelinewillbesectionalized.Mr.Griffith commentedit isa nice looking substation.ChairEvanshopesitportendsmoreimprovementsforthefuture'Itis a fairly long linein the ChugachElectricsystemandabigimprovement.Chair Evans advised that being able to have the lineautomaticallysectionalizewillraisereliabilityforthosepeople|that are on the line.The projectcameinaheadofschedule.He expressed his appreciation to the State on moving some money toassistwiththegetawaystructuresbecausetheywerenotpartofthesubstation,but rather the lineitself.He noted that was a really great effort:and thanked all thosewho supported thatimprovement.a 7D.Budget for Reliability expense -_ &.%sChairEvansrecommendedexpandingthisagendaitem because it could be budget for non-intertie.related expenses,including regulatory,tariff or complianceissues.Chair Evans noted thealgorithmsneedtobedevelopedtoincludethoseissues.Chair Evans commented the IntertieManagement|Committeeis already being asked to fund a study whichis at least $150,000.ChairEvansrequestedMr.Borgeson 1volunteer to draft the proposal for an algorithm of sharing thesebudgetexpenses.Chair Evans emphasized the reason of this particular algorithm determinationneedstobeclearlyexplainedbecauseitlikelywillnotbethesamealgorithmusedfortheallocationofspinningreserves.Chair Evans does not believe the algorithm for this budget expense should necessarily follows the logic around the largest unit.Mr.Borgeson accepted theappointmentandappreciatestheopportunity.He stated he will work toward creating a system and will communicate with everyone to get input. Chair Evans recommended Mr.Borgeson propose a budget amendment for what the Intertie Management Committee has already put in the budget.Chair Evans asked Mr.Warner if there is currently an adequate budget for the work he is doing on the study.Mr.Warner responded that there is not an adequate budget.Chair Evans requested the state of Alaska be included and assist with determining an equitable way of sharing effort here where there is not an easily identifiable common denominator on who should pay more or who should pay less. IMC Meeting Minutes-November 12,2013 Page 5 of 6 Ms.Fisher-Goad volunteered herself and Ms.Veech to work with Mr.Borgeson specifically on this budget issue and particularly on the necessary budget amendment. Chair Evans believes it is not well-known in the public that just to have the debate,costs the Intertie Management Committee money and they have to turn around and charge our members for this.Chair Evans commented all of this work is not free and there is a huge amount of money that gets spent under the line for advice from lawyers and consultants to formulate opinions on issue and somewhere along the line,that cost is going to have to be recognized. Mr.Griffith quipped that he believes the answer is to "underground”everything.Chair Evans stated he is not sure that is going to help.Mr.Posey reported that current distribution problems in downtown Anchorage right now are underground/underwater.Mr.Griffith commented it is out of sight,out of mind.Chair Evans said it is time to formalize this budget with the rightstructuretorecognizetheamountofworkthatisbeingdone.*_ Chair Evans asked Mr.Warner if there was anything outstanding that caused a problem with theoperatingbudget,the intertie and the revenue.Mr.Warner agreed everything iis balanced out andisfine.. 8.NEXT MEETING DATE > The next meeting will be scheduled in the first part of December.A meeting notice will be sent 9.|ADJOURNMENT-«. Bradley Evans,Chairman Be Gene Therriault,Secretary IMC Meeting Minutes-November 12,2013 Page 6 of 6 AGENDA INTERTIE MANAGEMENT COMMITTEE Regular Meeting 9:00 a.m.,Tuesday,February 11,2014 Alaska Energy Authority J 813 W Northern Lights Blvd,Anchorage,Alaska (rum Hee re snub 1.CALL TO ORDER awe Beas en StKMLSoePBRAPOSE GIP2.ROLL CALL (for committee members)Je fF want Opes _Jv7.-Cue ot UR Yo Is3.PUBLIC ROLL CALL (for all others present)Be Ny ae Anes hoses 4.AGENDA COMMENTS/MOTION FOR APPROVAL "Ea\¥-race ITER svedDeeFouteDanBesophes5PRIORMINUTES-November 1,2013;November 12,2013 Jeti 4 Broan Yo marcy?_plan ws [56.PUBLIC COMMENT reyMes woudgeh b>7 OPERATOR REPORTS pri ke ¢A.Asset statusa A -rB.System operations status &Coaprec Fy Most fo Gea TCMw 8.OLD BUSINESS vA.Spinning Reserves .. A.Expenses cost allocation methodology for non-asset costs (GVEA)'*)?e reves (escluhom 9.NEW BUSINESS SA.Pool Participation from Utility non-members /B.HEA Reliability complaints as registered with the BPMC regarding Bradley Lake Operations and interconnected reliability standards +?COMMITTEE REPORTS G LOK NMEnT ,fey ™/A.Regulatory Committee -RCA Reliability Standards filingi,etioc dize eo mpbance B.Operational compliance conflict matters(IOC) §amd Ale Lind1.COMMITTEE ASSIGNMENTS gu"ance repork wes faites odoodl (8 "OS*ote je pysy w%do,TE aod ve heplaG bw,12.NEXT MEETING DATE Werctction ewer "23.ADJOURNMENT possible 10 yt participate via teleconference,dial 1-800-315-6338,enter code 3074#.,latory a -U Le *l recy Comm ttt ribt +Rea Com pllance VS |Re (std £Oper Stds2,CXamtine Non ull ty epiretion || 3.te 4 Goerphance wl ord doperosins pretscols iw]REAVianwentdpopulate.AGWr struct.Mace Johnson (eal -omoss gp Se meet ar each bemx46'X Cperubing Comm.HER ve Ww Compl ance relate Std s |L -quar ner 2,Conkiun wl doc prucess ONS pera te proto pk str tec ep eeLock&Rel Stds How wm eomyly tepuct Start Mest Im pork Fist.Spinniny eee PROOF OF MOTOR VEHICLE CHAPTE INSURA R 24 SLA va HB 146 NCE HIGGINS 13 5/29/2013 TRA SIS TASK SADDLE R35 SLA FORCE R 13 6/3/2013 HSS INS STAMPE DE STATE RECREA TION GUTTEN AREA BERG (H)RES =3/1/2013 RES,FIN HB 149 HTER LEDOUX (H)L&C 3/1/2013 L&C,FIN ATIONA L EDUCAT ION PROGRA NEUMA HB150 M N (H)FIN 4/6/2013 L&C,FIN SCHOOL GRADIN G SYSTEM REINBO HB151 6S LD (H)EDC =3/1/2013 EDC,FIN PERS TERMIN ATION THOMPS HB 152.COSTS ON Pp L&C =3/4/2013 L&C,FIN OMSP WU)9) Vee L,Ne Lipper fr?nI Wwa $5719 VOD JROS SAQWEY av BiG 'OB.MYA TD 7 NE 4 <OFYe2) ?ODOSe lod,y =OT ALASKA ENERGY AUTHORITY x, ..ouIntertieManagementCommitteeaeOs y 4 \™\Ugh sehVeh74c v VU °rn .NIMC:Feb.11,2014 gu «4 0%NX 4 :a)+ Roll call from top to bottom ending with Chair Rottcal Agenda Minutes Kes 4-02 Yes No Yes No Yes No Yes No Yes No Golden Valley Electric Association A \\\\ Matanuska Electric Association '\Y \'s\vi \UY Alaska Energy Authority wv”<M J NS x nS iy Municipal Light &Power Yv Oy ,yw \\DAK "Co Chugach Electric Association vA '}Y \\SS Y |AP wv) TOTAL I Al I I Roll call from top to bottom ending with Chair Yes No Yes No Yes No Yes No Yes No Golden Valley Electric Association Matanuska Electric Association Alaska Energy Authority Municipal Light &Power Chugach Electric Association |TOTAL Next Meeting: NAYPYDY10. 11. AGENDA INTERTIE MANAGEMENT COMMITTEE Regular Meeting 9:00 a.m.,Tuesday,February 11,2014 Alaska Energy Authority 813 W Northern Lights Blvd,Anchorage,Alaska CALL TO ORDER ROLL CALL (for committee members) PUBLIC ROLL CALL (for all others present) AGENDA COMMENTS/MOTION FOR APPROVAL PRIOR MINUTES -November 1,2013;November 12,2013 PUBLIC COMMENT OPERATOR REPORTS A.Asset status B.System operations status OLD BUSINESS A.Spinning Reserves B.Expenses cost allocation methodology for non-asset costs (GVEA) NEW BUSINESS A.Pool Participation from Utility non-members B.HEA Reliability complaints as registered with the BPMC regarding Bradley Lake Operations and interconnected reliability standards COMMITTEE REPORTS A.Regulatory Committee -RCA Reliability Standards filing B.Operational compliance conflict matters (IOC) COMMITTEE ASSIGNMENTS NEXT MEETING DATE ADJOURNMENT To participate via teleconference,dial 1-800-315-6338,enter code 3074# Alaska Intertie Management Committee DRAFT MEETING MINUTES Friday,November 1,2013 Anchorage,Alaska 1.CALL TO ORDER Chair Brad Evans called the meeting of the Alaska Intertie Management Committee to order on November 1,2013 at 3:00 p.m.A quorum was established. 2.ROLL CALL Members present:Bradley Evans (Chugach Electric);Jim Posey -Anchorage Municipal Light &Power (ML&P);Joe Griffith -Matanuska Electric Association (MEA);Cory Borgeson - Golden Valley Electric Association (GVEA);and Gene Therriault -Alaska Energy Authority (AEA). 3.PUBLIC ROLL CALL Public present in Anchorage:Jeff Warner and Louis Agi (ML&P);Burke Wick,Brian Hickey and Mark Johnson (Chugach Electric);Allen Gray (GVEA-phone);Gary Kuhn (MEA);Bernie Smith and T.W.Patch (Regulatory Commission of Alaska);Kirk Warren,Teri Webster and Sara Fisher-Goad (AEA);Brian Bjorkquist (Department of Law);Henri Dale (AEA consultant- phone);Sonya Hewes (Accu-Type Depositions). 4.PUBLIC COMMENT There were no public comments. 5.AGENDA COMMENTS/MOTION FOR APPROVAL MOTION:Mr.Griffith made a motion to approve the agenda as amended.Motion seconded by Mr.Posey.The motion was approved unanimously. 6.APPROVAL OF PRIOR MEETING MINUTES -August 27,2013 MOTION:Mr.Griffith made a motion to approve the minutes of August 27,2013.Motion seconded by Mr.Posey.The motion was approved unanimously. 7.OLD BUSINESS 7A.Reliability Standards -Resolution 13-3 -Operating and Reliability Standards Language Clean-up Chair Evans noted Resolution 13-3 is an action item and requested Mr.Therriault explain the resolution. IMC Draft Meeting Minutes-November 1,2013 Page 1 of 5 Mr.Therriault stated this resolution reflects the technical corrections made to the Reliability Standards.Mr.Dale and Mr.Hickey assisted in making the technical corrections.The resolution also repeals Resolution 13-1 and 13-2 with no substantive changes. Mr.Posey asked if this resolution included a sunset provision.Mr.Therriault stated there is no sunset provision in resolution 13-3 and he is comfortable with the language in the updated Reliability Standards being sent to the Regulatory Commission of Alaska. Mr.Posey inquired how many public comments were submitted during this four-month revision period.Mr.Therriault stated no public comments were received and it was more a matter of having a very thorough process.He stated no complaints were provided.Mr.TherriaultremindedtheCommitteethatAEA's original sunset suggestion |was for 6 months and since fourmonthshadnowelapsed,the state's goal of allowing adequate time to consider possibleunintendedconsequencesofadoptingtheReliabilityStandardshadbeenachieved.Chair Evansaskediftheopenprocesswasnon- discriminatory and Mr.Therriault confirmed it was non-discriminatory.' :* '¢;"Mr.Borgeson asked who came forward during the public process.Mr.'Theriault stated no onecameforwardduringthepublicprocess.Mr.Posey commented that his previous question abouthowmanymembersofthepublicparticipatedduringthefour-month revision period wasfacetious.Chair Evans noted,to be fair,the process gave AEA more time to engage on the subject matter and to find their own comfort level.Chair Evans believes this was a very necessary step andis happy with the results.Mr.'Posey expressed his appreciation to all the staffwhoworkedonthisresolution.:.Cy Mr.Borgeson asked Mr.Bjorkquist how additional amendments would be agreed to if thisresolutionpasseswithoutasunset.,Mr.Bjorkquist noted the intertie agreement would stillrequirethesuper-majority votes plus the affirmative vote of AEA for adoption of amendments.Chair Evans stated the reliability standards are organic and have been changing over the decadesandexpectstherecouldbemoresubstantialchanges...This forces examination of issues,such asthereserves,how they are shared,what limitations are in place and the transmission restrictionsandhowthey,affect the reserve Pool.Mr.Griffithnoted these standards will bessent to the Regulatory Commission of Alaska for theirperusalandexecution.Mr.Borgeson asked AEA why they object to the sanctions portions oftheenforcementmechanismontheintertiemanagementagreement.Mr.Therriault explained AEA is not sure of the authority to enforce the sanctions and believe there are additional pieces that need to be developed before that portion can become effective.Mr.Borgeson asked why AEA does not believe they have authority.Mr.Bjorkquist stated it is the combination of the authority and the status of the sanctions and all of the details being incorporated within the written document.AEA is not comfortable with the sanction provisions taking effect and how the sanctions would be implemented. Mr.Dale reminded the Committee this resolution was to realign with the North American Electric Reliability Corporation's standards.Chair Evans asked Mr.Dale to explain the reserve obligations and discuss the pyramid of priority in verification for these standards.Mr.Dale noted priorities are assigned following the North American Electric Reliability Corporation's guides with Priority 1 being the biggest priority.Chair Evans commented he is looking forward IMC Draft Meeting Minutes-November 1,2013 Page 2 of 5 to task assignments because the enforcement on the larger details is what matters the most.He believes the reserve pool is the biggest continuous benefit of this relationship. Mr.Bjorkquist advised the modification exempting the sanctions also provides that until it is separately approved by the Intertie Management Committee,there is nothing that would preclude incremental adoption of sanctions.If there were certain sanctions that would be more important to have adopted,the Intertie Management Committee could address that on an incremental basis. Mr.Bjorkquist noted the concern AEA had was with the sanctions being adopted in the entirety of the document and unintended consequences flowing from that. Chair Evans recommended this issue be addressed expeditiously.Mr.Therriault stated AEAagreeswithaddressingthisissueexpeditiously.Mr.Therriault noted Mr.Dale is speaking to the Intertie Management Committee today,not as a member of the©public,but as a consultant for the Mr.Griffith asked what happens if the Regulatory Commission of Alaska does not agree the sanctions portion should not be included in this resolution.Chair Evans noted that positionwouldbeaproblemfortheIntertieManagementCommittee,but does not believe thereisanybodypresentwhocananswerthatquestion.Mr.Griffith askedif it is theresolution or thedocumentthatiscontrollinghere.Mr.Johnson stated his opinion was whatever order theRegulatoryCommissionofAlaskaprovideswillhavetobeaddressedtotheextentthatthey aretheapprovingbodyandmayapproveonaconditionalbasis.Mr.Johnson advised theRegulatoryCommissionofAlaskacouldrecommendchanges,at which time the IntertieManagementCommitteeeitheradoptsthechangesorwithdrawsthefiling.Mr.Johnson believestheRegulatoryCommissionofAlaskawillbereviewingthepolicyquestionsinvolvedandnotnecessarilythetechnicaldetailsofthefiling.="Mr.Griffith asked for further explanation on the filing process with the Regulatory CommissionofAlaska..Mr.Johnson advised if the action is taken thatis before the Committee today,then aformalfilingtransmittingthedocumenttotheRegulatoryCommissionofAlaskawouldhavetobepreparedprovidingthe:appropriate rationale and explanation of the specific relief being MOTION:Chair Evans called for a rollcall vote on Resolution 13-3-Operating andReliabilityStandardsLanguageClean-up.The motion was approved unanimously.7B.Open Access iscussion * Mr.Therriault explained there was a small working group of interested parties which met and discussed this issue.He noted the group recommends the Intertie Management Committee reconvene on November 15th to perhaps take some action on the open access concept.Mr. Therriault believes the working group has developed an acceptable proposal to forward to the Intertie Management Committee.Chair Evans believes preexisting rights need to be addressed before the proposal can move forward.Chair Evans stated open access does not mean free access.He requested the language reflect a bright line regarding this negotiation of terms and conditions of open access and can function on principle. IMC Draft Meeting Minutes-November 1,2013 Page 3 of 5 Mr.Griffith commented the risk faced by carving out the AEA intertie open access is the inevitability of others saying there has already been open access over a major section of the link and therefore,there is open access over existing systems.Mr.Griffith stated he does not know how to get around that from happening.Chair Evans stated this language cannot become the guiding light for all other matters.He noted there is an ongoing cost to the existing members of the pool and questioned what standards and contributions should be set up to allow anyone new to enter the pool. Mr.Bjorkquist advised he has been tasked with drafting the agreement and is a little bit behind where he had hoped to be at this point.He encouraged the utilities review the next draft and give feedback on how to address any issues.Mr.Therriault appreciated the Intertie Management Committee's sensitivity to the military issue.Chair Evans believes all the existing parties todayarehappywithmovingthisforward,but does not want this to be the precedent for everythinggoingforward.Chair Evans stated he was optimistic the schedule can be met as it is now.It wasagreeduponthatattheNovember12meeting,the deadline could be extended,if needed.Mr.Borgeson noted the new draft has the potential forr significant impact to Golden ValleyElectricbecausetheyareusingabout96%of the intertie.He requested this process be given asignificantefforttobecompletedpyththeNovember15thdeadline." 9.NEXT MEETING DATE |,%eS 1:30 p.m.The next meeting will be November'2,on Chair Evans requested members discuss agenda ii ms for the next meeting.He said the openaccessissuewillbeaddressedeitherbytaking|an action orby tabling.Chair Evans would like toaddresstheunder-fréquency load Shed status and havea report on thatissue.Chair Evansrequestedidentifyinginformationareasforaproper"study of theunder-frequency load shedstatus.Mr.Griffith asked whois performing that study.Mr.Warner noted the system studysubcommitteeisperformingtheproject..The planis to develop a request for proposal byFebruary14,2014,with a deadline of May 1,2014 for the utilities to present the dynamic datafortheirunits.The final report will be delivered November 1,2014.Chair Evans suggested Mr.Warnerprovide a progress report to the Intertie Management Committee with the updatedinformation.,Chair Evans noted this iissuewill also be placed on the agendain case furtherdiscussionisneeded., " Chair Evans noted another iissueto'be placed on the agendais in regard to the challenges the poolwillfaceinthefirstquarterof2014.Theissues will include next steps and work assignments onaddressingtheutilitythatiisnotpartofthepool.Chair Evans does not believe thisissueconcernstheAlaskaintertie;but does concern the interconnected system.Mr.Griffith believes thisissue does concern the intertie,even though it does not touch the Alaska intertie.Mr. Griffith asked if a working paper should be drafted on this issue.Chair Evans recommended a work group meet and discuss next steps.The work group includes Mr.Hickey,Mr.Agi,Mr. Kuhn and Mr.Dale.Mr.Griffith noted there is currently a good outline that needs to be crafted into language. Chair Evans suggested the next item to be placed on the agenda is determining the most appropriate sanctions for the reliability operating reserves.Mr.Therriault recommended that before the next meeting,each utility make their priority list from the document and see if there is IMC Draft Meeting Minutes-November 1,2013 Page 4 of 5 general consensus among the utilities.Mr.Hickey suggested the utilities review the North American Electric Reliability Corporation documents related to requirements of audits. Chair Evans believes the verifications and sanctions need to be completed from the highest priority to the lowest priority.Mr.Borgeson commented sanctions could be placed only on the Priority 1 issues,which would provide a smaller subset to address.Chair Evans agreed that would be a good starting point,but wants to be clear the utilities are currently addressing the larger issues.Mr.Hickey commented that currently the data is required to be recorded and stored,so that if there is a problem,it can be solved. 10.ADJOURNMENT There being no further business of the IMC,the meeting adjourned at 3:51 pm. fi Yaad a Bradley Evans,Chairman Gene Therriault,Secretary IMC Draft Meeting Minutes-November 1,2013 Page 5 of 5 INTERTIE MANAGEMENT COMMITTEE Resolution No.2014-02 Allocation of Intertie Costs WHEREAS,the Amended and Restated Alaska Intertie Agreement dated,November 18,2011 ("Amended AIA”),established the Intertie Management Committee ("IMC”)and provided the IMC with primary responsibility for the governance,control,operation,maintenance,repair,and improvement of the Alaska Intertie;and WHEREAS,pursuant to that authority,the IMC has also adopted operating policies and procedures,and reliability standards for the Alaska Intertie;and, WHEREAS,pursuant to that authority,the IMC has also moved forward with the adoption of Open Access policies for the Alaska Intertie;and, WHEREAS,the IMC acknowledges that there may be circumstances in the future under which the IMC incurs capital,consulting,and other identifiable costs and expenses directly associated with maintaining and operating the Alaska Intertie under its Open Access policies,its operating policies and procedures,and reliability standards;and, WHEREAS,the IMC acknowledges that the cost allocation methodology contained in Amended AIA does not properly capture and allocate the costs among the Participants and User of the Alaska Intertie that are incurred in maintaining and operating the Alaska Intertie under the new Open Access policies,operating policies and procedures,and reliability standards;and, WHEREAS,the IMC wishes to amend the manner which the Intertie Costs are allocated by and between the Participants and Users of the Alaska Intertie to better align the cost and benefits received by the Participants and Users of the Alaska Intertie under the circumstances where Open Access policies,operating policies and procedures,and reliability standards are in place. NOW,THEREFORE, BE IT RESOLVED THAT the IMC has determined that the manner which the Intertie Costs are allocated by and between the Participants and Users of the Alaska Intertie shall be changed to better align the cost and benefits received by the Participants and Users of the Alaska Intertie BE IT RESOLVED ALSO THAT,the costs incurred for the governance,control,operation, maintenance,repair,and improvement of the Alaska Intertie should be categorized as either Intertie Operating Costs or Intertie Administration Costs;and, BE IT RESOLVED ALSO THAT,the Intertie Operating Costs shall continue to include the costs set forth in Section 7.1.1 Cost to Be Shared by Participants and Users of the Amended AIA;and, BE IT RESOLVED ALSO THAT,the Intertie Administration Costs shall include costs incurred in administering the legal and regulatory affairs of the IMC,the costs associated with the development,monitoring,and administration of the operating and reliability standards and the Alaska Energy Authority's ("AEA”)administrative expense associated with the Alaska Intertie; and, BE IT RESOLVED ALSO THAT,the Intertie Operating Costs shall continue to be allocated as set forth in Article 7 of the Amended AIA;and, BE IT RESOLVED ALSO THAT,the Intertie Administration Costs shall be allocated in equal shares for all Participants and Users;and, BE IT RESOLVED ALSO THAT,all Participants and Users are obligated to pay their respective share of annual Intertie Costs (i.e.,Intertie Operating Costs and Intertie Administration Costs) irrespective of the amount or length of use of the Alaska Intertie and any excess amounts paid or deficiencies needed to be funded will be handled in accordance with the provisions of Section 7.3 Allocation of Intertie Costs,of the Amended AIA;and, BE IT RESOLVED ALSO THAT,the changes contemplated by this Resolution 14-1 be made effective with the beginning of the current fiscal year,July 1,2013;and, BE IT RESOLVED ALSO THAT,the attorney for the IMC is directed to work with the attorney for AEA to prepare the appropriate amendments to the Amended AIA. Dated this 10th day of February,2014. Bradley Evans,Chairman Gene Therriault,Secretary 2014-02 Cost Allocation PRELIMINARY DRAFT OF IMC RESOLUTION 2014-02 CHANGES FOR PURPOSES OF REVIEW AND DISCUSSION ONLY RED-LINED 2/10/14 AMENDED AND RESTATED ALASKA INTERTIE AGREEMENT Among ALASKA ENERGY AUTHORITY; MUNICIPALITY OF ANCHORAGE,ALASKA d.b.a.MUNICIPAL LIGHT AND POWER; CHUGACH ELECTRIC ASSOCIATION,INC.; GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.; ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE,INC. November 18,2011 TABLE OF CONTENTS Table of Contents.........00...ccc ccc nce nce ceeceeeeeeceneerec testes eseaseeseeeeshenseeteseeseesseuenaeaeenes 1-8 Incorporated Exhibits List..............ccccccsecceeceeeeeeecneenceeeeeeneeeeseeseeeeeeetesensensenseaeeeenues 9 Recitals.......c cece ccc ecescecc ete eec ence ee eee nen een e eee eeee snes eee eens ee eee eeeeeeseseeeeneeeasusenseseess 10 Article 1.Definitions 0.0.0...eee eecesccecseeeceeccesseesscecseseeseeeceseseesseeesessessenseseesessessesseeseeesseenees 124242 Article 2.Term and Effective Date 0.0...cc eeesesecssseecesetecsecssaesueesaeescescssesseessesensenseeserensens 121242 Section 2.1 Effective Date..........ccccsssccssssccesssscssccessnceesscsesneccsssesaccessessesssccesseseesesenees 122 Section 2.2 Termimation .........ce cesessscssesecsesssesecesccsscessscasceascseesscesesessssesceseescsssssesneeees RRR 2.2.1 Mutual Consent.000.0...csscscssssscssseseecscescseecseseesssessseesecesenesescessssesssssessesneeees 12k 2.2.2 Participant and AEA............ssescesecscsssecesesesesessscenessersesecseseesssensnescnssssesasenees 1242 2.2.3 AEA Financial Obligations.2.0.0.0...eeeseeeeeessceeseeenseeesnareessecessssaessseseesaeeees 12h» 2.2.4 Limitation for Financing............ccsecseecseeeeececsesecteeceseeecesssscsntesseesereeeeeseesss 12 Article 3.Operating and Reliability Standards and Enforcement..............:ccsscsscesecessessesenees BBB Section 3.1 Adoption of Operating Policies and Procedures,and Reliability Standards 134343 3.1.1 AEA Responsibilities............:cccsccscssssecsscessesssscessceessecessseesaseeseeseneeeseceeseesses 1B8B 3.1.2 Notice Required............c.csccssscsssesceseccsecsssessscecesenseessceesesssensseseseesesenseceeesenea 13BB Section 3.2 Compliance with Standards...eesssecssesececesscccsonseesssssessecsecensesseeeseeass 13B8B Section 3.3.Implementation -Participants and USers...........eessssseecssessesscsreceseneeesesesees 144444 Section 3.4 Replacement of Reliability Standards .0...........csssssccsscccssssssessccsecsseseesssecnes 1444 Section 3.5 Operating COMMittee .......ce essccsssescsccssesecnsesssecsscesscesecsssssesessesensecseenses 144444 Section 3.6 Required Data SubMISSIONS.............cccseccestseesseseccenecsesesssnnecensesssceseseesseeesees 144444 Section 3.7 AEA Power Project Compliance...........cseessssssscesscesscseescessccessesssesnseeesses 144444 Article 4,Participant .0.........ccccsscsssccsssssssccssecesseesssscsesseseceseessaeesecesacencesessecsesesesecseseeseseessers 1545155 Section 4.1 Participant Defined...ee cesscseccessceecceesensescessecsecesssseesseeesseasesseesesenes 154555 Section 4.2 New Participant ...........ce ecseeecssssesecssceessecssecseeessessssesccessssecesseessesssesseeensesees 1545455 Section 4.3 Membership in IMC .0........ccesssccsssecesenseccsessccessescneesessesensessssceseseeeeeesstessees 154545 Article 5.Withdrawal of AEG&T and Other Participant and User Status ..............csesceseees 154545 Section 5.1 Withdrawal of AEG&T ou...ccssssssssesssssessssessenessseesessesesnsecssesscesseensesees 154545 Section 5.2 Substitution of HEA and MEA,and Admission of City of Seward and the United States APM .......cc eeseesscscssecessesesenceenescesscesscevceessceesnaessnsessusessserscesseesseees 161616 Article 6.Minimum Rights of the Participants and Users to Use Intertie Facilities............164616 Section 6.1 Minimum Intertie Transfer Capability Rights (SMITCR”)............:esseseees 161616 Page 1 of 53 -Amended and Restated Alaska Intertie Agreement 6.1.1 Right of First Refusal.20.0.0...sccssccsssccssccsseessessecssseeessseseaessreessesnesesseesseeesees 1614646 6.1.2 Allocation of Transfer Capability..............cccssesscssssssscscsssccsreesseesseeseeesseeees 164646 6.1.3 Emergency Operations..........cssccssscssecssscsccescessscessessesecseeesesesesssenseeeeseseesees 164616 Section 6.2 Determination of MITCR........cccssecesseesssccesseceecssesseseessceeseceessascsecensess 174447 6.2.1 Methodology..........csssscscssssscesssececssssecccssssseesesssesssseessseesesesecesseeceessssceesseeess 17447 6.2.2 Unused MITCR..0......cececscssesesscseccsecesscessessecscesessesssssessecesssecseessseeesenareses 174447 6.2.3 Right to Contractually Transfer MITCR............cscessscsesessesssesssscesssenseseeees 17447 6.2.4 IMC Authority to Change Capacity Allocation Methodology...............00 184848 6.2.5 New State Power Projects............cssccccsssssccsssnescsscseccesssssseesecsssescesscececesseseees 1848148 Section 6.3.Maximum Intertie Transfer Capability...............cccsssssssccessesssestcesseessreereeees 184848 Section 6.4 Improvements to the Intertie 00...eeeseeeeeeeesetesceeeceeescesseessesseasesesesens 394919 6.4.1 Development of Improvement..............:csscsssccscesessseseesecesseeseceneeesseeesseeses 194949 6.4.2 Requests for Improvement...........ccceecsesseceecessscssssccesscessescesssssessacesrsenseees 194949 6.4.3 Responsibility for Cost of Improvements............:cccscssssscetsssessssseesseseeenees 202920 6.4.4 Right to Make Improvements -Required Work.............ccccscseessssccseseeseeeees 202920 6.4.5 NOtice........ccssscssssssccecescssnsesessccsessscccesssseeessessceesessnseccsssesauseesssseesesaeseeesensees 202029 Section 6.5 Additional Project Taps.............ccsscccssssceesssceccesssreesesscsscsecessceesssneeseessneeeees 202020 Article 7.Costs for Intertie Transfer Rights..............:ccccsssssssccsstecensesseesesesssesesseececcesesesscesces 212474 Section 7.1 Intertie Costs.............ccsssssssssscsssreccceessecesssnecccssnececsesscsessesssssesessaseeseseeeeeess 2124 7.11 Costs to Be Shared by Participants and USe?S............:ccssccessesesseeeseeeseeeess 212444 7.1.2 Annual Budget and Fiscal Year..........ce.esssscssccesscsccesssssssseesesssesseesseeeeseees 222222 Section 7.2 Calculation of Intertie Costs and Rates .............c:sscccssssscssscesssessesssescsssenscees 232322 7.2.1 Participant and User Estimates,Participant Historical Data...............se008 232322 7.2.2 IMC Estimates............c:ccccssssccssssrcccesssetecsssseccessnsseeeseasseaceecssesecesseesscneseeseceee 232322 7.2.3 COMMEMS.........csccsscesssecccesssscesesscecssseescessnesecessssesesssassecssecssecesessececeesseeessess 232323 7.2.4 IMC Determination of Estimated Intertie Usage............cseeesccsseteeesseeeeses 232323 7.2.5 Energy Rate........cccsescsssesscssssccssceessseseessceesssesecsneesseceseseneessssessesesssaseeeeneeees 232323 7.2.6 Capacity Rate......ccccscccsssecssssssescsssessssecessesssnensesesacssseeesssessseseseeseseseseoees 232323 Section 7.3 Allocation of Intertic Costs ............ccssccsssessessccsssceseseessescesscseccessessesecessseeees 242423 7.3.1 Participant and User Payment..0......ccsscscssescsersscessssseesseesensesesssesenseneesees 242423 7.3.2 Annual Payment of Intertie Costs.20.0...teeseessesceseseccescecsceteceeceesecesseseenes 242424 Page 2 of 53 -Amended and Restated Alaska Intertie Agreement 7.3.3 Monthly USE..........ceescesececesreesercseecsessessecsssceeessseesssssssaescassosceesesesesersecneeene 252524 7.3.4 Excess Revenues.........ccscsscccsssessscesctsssssessrssssecssesesssscseeseneseesseseeosssenseeeeees 252524 7.3.5 Revenue Deficiencies.........ssccsesscssssssssscecesscssessasessnssceseesseeeessesssasossessees 252524 Article 8.Intertie Management Committee...esesecsscsscssccseccseesscsstsesesessscessesseseasonese 252524 Section 8.1 Establishment of the Intertie Management Committee,Right to Vote.......252524 8.1.1 Eligibility to Vote.........sccsccssscsscesersessssssssecsssssessescsrescssssesssesessesossssssesones 252525 8.1.2 Minutes........::cssccsssccssscessccsscessecsecsecesesneessseesscecsssceeesecsssssessseesecaeeneseeseeetees 262625 Section 8.2 Adoption of Procedural Rules or BylawS.........c.ccesssessscsesssseessesesnseceseeaces 262625 Section 8.3 Effect of 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Audit.0.0...ccccccsccsesscsssscessesseseessesesssessessssscsssscssetscsaseneteceeeseees 353534 10.5.2 State AUdit .accssssussssssssnssssnssesssnsssesesseeesteesseestnetasetnstnsstasenssent 353535 Page 4 of 53 -Amended and Restated Alaska Intertie Agreement Section 10.6 Payment of Operators...cscesecsscssesrscsscesscssscsesessssessresssseessessesesseresets 363635 Section 10.7 Change in Ownership or Control............scccessssccsesesseeseecessesssesecesasesesseeenees 363635 Section 10.8 Critical Repairs and Maintenance 0.0.0...cecseeecssssssssseeesessesssesseosesseeenes 363635 Article 11.Scheduling of Capacity and Energy on the Intertie ..0.......ce eeesssseceeeeeeeeeeeenes 363635 Section 11.1 Scheduling Responsibility...escscssecssseescssssesseescnsscsesesasesssoesssees 363635 11.1.1 Southern Group..........cccescsessssssscssecessesseseeccssessscsessessonesserevesssneccsssoessstesoesenes 363635 11.1.2 Northern 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Section 11.4 Transmission Service to Access the Intertic............cccccscssscssseccsessreessseeeee 373-7 Article 12.Maintenance of the Intertie Facilities..............cccssssccsseececeeeeceesssereeseeeeeneeeetasersees 383837 Section 12.1 Maintenance Responsibility ..........ccc cicseeseceesessesssssesrensecssssessscsesesaseseenes 383837 12.1.1 Responsibility for Maintenance Practices........ccccccsseeseseeesseesseeseseetesseeenes 383837 12.1.2 Availability.00...eescssecssescessensscsscsevesescsssessseussssesesesenerensesssssssosesseeees 383837 Section 12.2 Maintenance Budget and Costs .0........ceeseesssssscessteccreesessessseessessssenseseneees 383837 12.2.1 Development of Budget...ce cessessssssserssersssscsecssessesssesseessessnssssenseesoes 383837 12.2.2 Cost Records........ccccscsssssccessstessecssesssecssesecenssssecsesseeseeeesseseesseseasecessesssareeess 383837 Article 13.Measurement of Electric Power and Energy...........::ccsssssscerseceseceesccenscesenseeeneeee 383838 Section 13.1 Required Metering Facilities ..........ccc sscscsssssresseesssseeessesersessssasesseseeesseees 383838 Section 13.2 Access to Metering Facilities and Data.............sesscsccsecsetessssssrscssssseeeees 393938 Section 13.3 Installation and Maintenance..............cccsscccsssssscssssccsecceccsssssneesceccesessesscsseess 393938 Article 14.Transmission LOSSES .........ccccccccccccssssscesnssssecssesssnecsssecessecessenseesseseesasscsesseneasaaeees 393938 Section 14.1 Intertie Transmission and Transmission Service LOSSES...........:::cccccessesseees 393938 14.1.1 Method of Determination of LOSSES..........cccssseccsssseseeeeesneeeesestsceessesesanesens 393938 14.1.2 Compensation for LOSSES...........s:cssssssesseesseseeseseeseonesvecsstistseeesisesnte 393939 Page 5 of 53 -Amended and Restated Alaska Intertie Agreement 14.1.3 Schedules...ccessssesscssssssscsssscsesssssscsscssceesssessssesssssssresesesesscseeseaseseeseeeeess 393939 Section 14.2 Intertie Transmission Loss Compensation ............:ccsscssessecessesceseseessceseeesees 404039 Article 15.Rights of Users.........cccccsccccsseccsssssesscecssssenseceenscesssecsssessessssssaeesessececsseseneeessesees 404039 Article 16.Open Access Principles...cescssssesessecccsecenecesesesseceseeseesecseeestsesenesensssetennsenes 404039 Section 16.1 Definition...ec cesecsseecesscscseceesneceeseecsseceesseesseescasesecesansesseseeseeseesecssaees 404639 Section 16.2 PUrpose oo...cescsssccssscessscssccsessessessccsscessssessesesseesesecesseceesesessesasesssessesesees 404939 Section 16.3 Implementation of Capacity Allocation Methodology...........:ccscsssseesreeeees 404040 16.3.1 New Method ology..........csccccsscccssrsessnscssnecssseeccssseecsecsssssesessceceseeessecssesecssaees 4048406 16.3.2 Statutory Conditions.............ccssecessssssscscescesscessesesecsoeteeseesssesessscsssecsseeaeeses 414440 16.3.3 Priority for AEA Contracts..........ceeeesssssscescessecesssesesssseessscsseceessesssesseevenss 414449 16.3.4 Alternative Allocation of Intertie Capacity...........ccccescccssssssseessesesecseeenes 414446 16.3.5 Federal Acquisition Regulations..............ccsscessscssccsssesssccesescessessacesseesseeesees 4242414 Section 16.4 Public Process............ssssssssscccessssssssccccessnsncsseccecessnsnseeeecssesscesesneesevsesssanaceasas 424244 Section 16.5 Availability of Information .............ccssessccnecesceeeceesesecesssssnsssssecseesssesenes 424244 Section 16.6 Review of Methodology ............ccsssssssssscccsssecssecesssceesssseccessseesseessseesesseeeenes 424244 Article 17.Billing and Payment 00.0.0...sesccsscsscssersccessconsseesseesssessssescecesceeesseseseesseseeees 4242.42 Section 17.1 Billing...ee eecessceessccessseeteceecssccescccesseceesseessseeesesseeseceresereeseeeeenseeeeenes 424242 Section 17.2 Billing Disputes...tescescsecsseceescsesscsecesssesccessessseseessecsseesnssersesseeseaes 434342 Section 17.3 Payment of Sanctions...ccccsccssesscesseeseeeeseccesessssseeeesssceseesessensessaeesaes 434342 Article 18.Insurance and Liability...ccseccssssccsssccsnccessssscsserassccorssecescesseeesneeeseeeeeseees 434342 Section 18.1 Insurance ..............cesssssssssccccessesssseccecesssnncccseeesesesssacscsaccececessscasssecceseseeceees 434342 Section 18.2 Types of Insurance ..........ce esessseescscssecscessccececescseccesessssscesssasensssnssnsssseesses 434343 18.2.1 Workers'Compensation Insurance............ccccccsscssscesscsssssessssceesessteessecseeeeees 444443 18.2.2 Comprehensive General Liability Insurance...0.........ceccssseereccreeeeseessseeses 444443 Section 18.3 Other Insurance Coverage Requirements..............c:ccsssscccessseeesstesssssenseeeees 444443 18.3.1 Participants'Cost Responsibility.0.0...ese eeeeseseceeecescoeeesesneesseenneeneenees 444443 18.3.2 Users'Insurance Requirement............csscccsscccseceeseseccssssecsssessecenseseseseseeenes 444443 18.3.3 Coverage and Certificates.......ces ceesscseesssesseessesseeceseceseseeetsecaseanesssetaeeneees 444443 Article 19.Review of Decision ...........ccsccccsssccsesserssescssecscneceessccersaseessseesseessccctecesnecseneeeesens 444444 Section 19.1 Review of IMC DeciSion............::cccssccesssccsseccesseccestesscsescessateseseessseeeessereenes 444444 Section 19.2 Initiation Of REViCW............c::sccccssscccssssscsssscecceccsesscesssscsersecssssesecessseeeesssaeeess 454544 Page 6 of 53 -Amended and Restated Alaska Intertie Agreement Section 19.3 Review ProcesS...........cccccsssssssssssssvscscorecsscsssssccsscesscecscsccussesessescsacsceseeeeeseaeces 454544 19.3.1 Settlement Conference.0.0.0.0...cesssssssssssecssssescssessssensesecsassssesssesseseseseseesseres 454544 19.3.2 Disposition Of Dispute.........cee essscsssscssccsecsscessessesscsesscessssssensoeasesseseaseess 454544 Article 20.Indemnity .............ccccesscsscssceseseseesscesscessaseccseceasssessessseosssossosssssscssssesesecseseseeauees 454545 Section 20.1 Responsibility;Cost of Indemnity...ce cecsssssesscnssseesseceeseesessescnserseoees 454545 20.1.1 Costs of Indemnity,0.0.0...ce ecsssessecseseesseessesesssssssscsssseessesesesoeessoeasensesseseate 454545 20.1.2 Participant Indemnity,............ceeesssecssscssesssscsscnssseceeseeecnscsesscesesseesseeaseasoes 464645 20.1.3 IMC Indemnity.............cceeseseesecesceressessccssessensssesessessscsscsssoseessssesssseeeeseeaseess 464645 20.1.4 User Agreements...........sscsssscssssscssssessscssresssccnsecessesersossseesorsssnscessssonsaseaeoes 464645 Section 20.2 Comparative Negligence .........cscssecssssscssessscsssssssesecsssssssesscsssasesesssecssorsesees 464645 Article 21.Warranty Denial and Exclusivity of Contract...ccc escsscssescsessssesssseseeseseeseees 464646 Section 21.1 AEA Denial of Warranty............escceesssesecessesesaessccessessesesseeeasseasesreeescesenes 464646 Section 21.2 Exclusivity of Contract...ccc.scsssssssssesessssessccsssessssscessesesssssasessasssseesecees 464646 Article 22.Uncontrollable Forces ..0........ccccccccsssssscccccssccescsseeteesscsccsesstseesessesceseesessssntoceeeasenes 474746 Section 22.1 Limited Excuse of Performance...........ccscccsssssecsesssscesscssceesssscsccseceesesssassees 474746 Section 22.2 Suspension of Performance............ccescsseceesseseessesssessessssesesesssesseseosessseeues 474446 Article 23.Waiver ..........csscsccccccsssssscccescscnscenessssnseececesesescssnsesesusseeseeeeesececseececeesenenseeeeseseees 474746 Article 24.Successors and Assigns;No Third Party Beneficiaries «0.0.0.0...csesesssseeeseteeees 474747 Section 24.1 Successors and ASSIgQMS ............:esecssseesssessssessseseconeseteesesseesseesssesessteecseeecees 474747 Section 24.2 No Third-Party Beneficiaries 0.0.0.0...scsscccesscesscscersesseessessecesensessceesseoenes 484847 Article 25.Governing Law.............ssccssssccesssssscssncesesssssseseesasececcesessecesssceeseceeceseessccessecesseeeons 484847 Article 26.Captions,Merger of Addenda and Exhibits...tessceecsecsecssereeessseseessesoees 484847 Section 26.1 Captions........cccsccsscsssescscsecssccssessescsssassscsssscessesssescesssnsssecssssssesssssssasosoeaee 484847 Section 26.2 Merger ..........sscccsssscsssssesesssesssssscscsseecssscesssssessesssnsssssesscsssecsssseseesesessoneesonenes 484847 Article 27.Notices............cccscccscccscssssccccecssssneceesssncasecesnececsssseeseeseesseessaeecesssseseeenesesussseceesnsees 494948 Section 27.1 Notices..........ccccsssssccssssccscccessssseceeccssesseecsnscessseescesscaesesssacscesseseneeecssesssaseeees 494948 27.1.1 APES......cccccssssseeccssccseececsessscscccesssscssensusecessatsescesseassesaesecsesssnassececessneeseesees 494948 27.1.2 Means Of Notice.........::ccccccssssseccsssssssssssceccssesseecsssccesensnsecessseceeensssssaeeessense 505949 Article 28.Amendment ..............cssscccesssssnseccesssnssccceccsscessnsuevsssacacssessoesesssscesonsseeeassessseeases 505049 Article 29.Mutual Right of Entry...ceeescesseseecsessseeesseseeeesensscesssssesassessessssssaseesoneneeoes 505949 Article 30.Agents 20.0...cece eecsscscenscsseeessecseeseecessesssssesassssssessacossssesssessscesseeneseeeenesesssoassoes 5035049 Page 7 of 53 -Amended and Restated Alaska Intertie Agreement Article 31.Agreement Approval and Transmittal ..............scscsssssesessssseessesesesssteeseetsessesesore 515459 Article 32.Construction of Agreement .............cccesscssesssssssesestcsscessecsssssececsecsessssescessessceaseses 52 Exhibit A -Former AS 44.83.380 Exhibit B -Definitions Exhibit C -Form of New Participant Addendum Exhibit D -Former AS 44.83.398(f) Exhibit E -Intertie Facilities Diagram Exhibit F -Form of User Agreement Exhibit G -Sample MITCR Calculation Exhibit H -Reserve Capacity and Operating Reserve Responsibility Agreement Page 8 of 53 -Amended and Restated Alaska Intertie Agreement Incorporated Exhibits Exhibit A -Former AS 44.83.380 Exhibit B -Definitions Exhibit C -Form of New Participant Addendum Exhibit D -Former AS 44.83.398(f) Exhibit E -Intertie Facilities Diagram Exhibit F --Form of User Agreement Exhibit G --Sample MITCR Calculation Exhibit H -Reserve Capacity and Operating Reserve Responsibility Agreement Page 9 of 53 -Amended and Restated Alaska Intertie Agreement AMENDED AND RESTATED ALASKA INTERTIE AGREEMENT Among ALASKA ENERGY AUTHORITY; MUNICIPALITY OF ANCHORAGE,ALASKA d.b.a.MUNICIPAL LIGHT AND POWER; CHUGACH ELECTRIC ASSOCIATION,INC.; GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.; ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE,INC. This agreement ("Agreement”),is made and entered into this 18 day of November,2011 ("Effective Date”),between ALASKA ENERGY AUTHORITY,a public corporation of theStateofAlaska("AEA”);MUNICIPAL LIGHT AND POWER,a department of THE MUNICIPALITY OF ANCHORAGE,ALASKA,("AML&P”);CHUGACH ELECTRIC ASSOCIATION,INC.,a not-for-profit electric cooperative membership corporation of the State of Alaska ("CEA”);GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.,a not-for-profit electric cooperative membership corporation of the State of Alaska ("GVEA”);ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE,INC.,a not-for-profit electric cooperative membership corporation of the State of Alaska ("'AEG&T”).These entities, other than AEA,and subsequent qualifying signatories to this Agreement shall be referred to individually as "Participant”or collectively as "Participants.” WITNESSETH WHEREAS,AML&P,CEA,GVEA,and AEG&T each own and operate electric utility facilities and/or are engaged in the business of providing Capacity and Energy to customers;and WHEREAS,it is expected that entities other than the Participants will also use the Intertie;and WHEREAS,the State of Alaska funded and AEA constructed the Intertie and made these electrical transmission facilities available to the Utility Participants under the Original Agreement for Capacity and Energy transactions to benefit Railbelt customers,ensure delivery of energy from State-owned projects,and improve reliability and economical Capacity and Energy deliveries to the Utility Participants'customers under the former Alaska Energy Program established by former AS 44.83.380 (attached as Exhibit A);and WHEREAS,the Participants entered into the Original Agreement to improve the reliability of their interconnected electrical systems and engage in transactions for electrical Capacity and Energy with each other under individual contractual arrangements between the Participants using the Intertie;and Page 10 of 53 -Amended and Restated Alaska Intertie Agreement WHEREAS,the Intertie interconnected the Railbelt electric utility systems so that they operate in electrical synchronism;and WHEREAS,AEA and the Participants desire to establish the Intertie Management Committee ("IMC”)and provide it with primary responsibility for the governance,control,operation, maintenance,repair,and improvement of the Intertie;and WHEREAS,AEA and the Participants desire to set forth the responsibilities and rights of all users of the Intertie ("Users”);and WHEREAS,it is desirable to maintain the reliable operation of the Alaska Intertie for all Users; and WHEREAS,it is desirable to have uniformly applicable standards for maintaining and enforcing reliability on the Intertie;and WHEREAS,the Utility Participant Parties to the Original Agreement are also Parties to the Reserve Capacity and Operating Reserve Responsibility Agreement,a separate and independent contract that was made Addendum No.1 to the Original Agreement in order to provide for the 'reliable operation of the Intertie and the interconnected Railbelt electrical system;and WHEREAS,it is desirable for all Users to execute an Intertie User Agreement ("User Agreement”)under the same terms and conditions and to be subject to the same operating policies and procedures,Reliability Standards,and compliance measures in keeping with Open Access principles;and WHEREAS,the IMC is the appropriate organization to transition Intertie operations and policies to Open Access principles;and WHEREAS,the management of the Intertie will be most effective if the IMC membership is made up of representatives of AEA and electric utilities who are qualifying Participants;and WHEREAS,AEG&T shall be allowed to terminate its Participant status immediately upon its execution of this Agreement;and WHEREAS,the members of AEG&T,Homer Electric Association,Inc.a not-for-profit electric cooperative membership corporation of the State of Alaska ("HEA”)and,Matanuska Electric Association,Inc.a not-for-profit electric cooperative membership corporation of the State of Alaska ("MEA”)individually shall have the one-time opportunity to become Participants immediately upon their timely execution of a New Participant Addendum;and WHEREAS,the United States Army and the City of Seward individually shall be allowed to become a Participant immediately upon their timely execution of a New Participant Addendum; THEREFORE,in consideration of the mutual covenants in this Agreement,AEA and the Participants agree as follows: Page 11 of 53 --Amended and Restated Alaska Intertie Agreement Article 1. DEFINITIONS Definitions are as specified in Exhibit B,attached hereto and incorporated herein by this reference.Exhibit B shall remain in effect during the term of this Agreement,but may be amended from time to time in the manner provided in Article 27,AMENDMENTS. Article 2. TERM AND EFFECTIVE DATE Section 2.1 Effective Date This Agreement supersedes the Original Agreement,and shall become effective immediately upon its execution by AEA and the Participants.This Agreement shall remain in full force and effect unless otherwise terminated as provided herein. Section 2.2 Termination 2.2.1 Mutual Consent.This Agreement may be terminated at any time by the mutual consent of all Participants. 2.2.2 Participant and AEA.Any Participant may terminate its participation in this Agreement by giving at least thirty-six (36)months advanced written notice and paying or settling all of its outstanding obligations for Intertie Costs existing before the effective date of its termination,and including any other obligations related to Intertie financing or other funding or sanctions for non- compliance with Reliability Standards.AEA may terminate this Agreement by giving at least thirty-six (36)months advance written notice,and,if applicable,paying any amounts it is obligated to pay that were due and owing before the effective date of its termination.Termination of this Agreement is conditional upon AEA making a determination that such action is required to improve power systems serving utilities in the Railbelt.Unless it is otherwise agreed in writing,any Participant that terminates its participation shall be liable only for those Intertie Costs and other obligations that existed before the effective date of its termination,as set out above. 2.2.3.AEA Financial Obligations.In the event AEA incurs,or intends to incur, financial obligations that are recoverable from the Participants pursuant to Article 7,COSTS FOR INTERTIE TRANSFER RIGHTS,the Participants' requirement to provide advanced written notice of termination shall be thirty (30)calendar days.Termination under this Section shall not be effective until the terminating Participant has satisfied the requirements of Section 2.2.2, Participant and AEA. 2.2.4 Limitation for Financing.The Participants and AEA may agree to limit their respective rights under Sections 2.2.1,2.2.2,and 2.2.3 to terminate this Page 12 of 53 -Amended and Restated Alaska Intertie Agreement Agreement in conjunction with bond or debt financing for repairs or improvements to the Intertie.To be effective,any such limitation agreed to pursuant to this Section 2.2.4 shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA. Article 3. OPERATING AND RELIABILITY STANDARDS AND ENFORCEMENT Section 3.1 Adoption of Operating Policies and Procedures,and Reliability Standards The IMC shall determine the operating policies and procedures for handling the obligations and responsibilities for providing Reserve Capacity and Operating Reserves for the Intertie.The IMC shall have the authority to adopt and implement operating policies and procedures, Reliability Standards for the Intertie,and enforcement processes,including sanctions and other remedies.All Participants and Users shall be obligated to comply with all operating policies and procedures and Reliability Standards adopted by the IMC.All operating policies and procedures and Reliability Standards shall be adopted,applied and enforced by the IMC in a uniform,non- preferential,just and reasonable manner that is not unjustly discriminatory.The adoption, amendment,or modification of operating policies and procedures shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC.The adoption,amendment,or modification of Reliability Standards and enforcement processes,including sanctions and other remedies shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA. 3.1.1 AEA Responsibilities.AEA shall have the authority to void any operating policies and procedures or Reliability Standards that AEA reasonably believes would adversely affect the safe operation of the Intertie,breach AEA's statutory mandates,or directly jeopardize AEA-owned Intertie assets in a manner that would be inconsistent with Prudent Utility Practices. 3.1.2 Notice Required.Except in the case of an emergency,AEA shall provide the IMC at least ten (10)business days prior written notice of its decision to void any operating policy and procedure or Reliability Standard. Section 3.2.Compliance with Standards In the event a User fails to comply with the Intertie operating policies and procedures or Reliability Standards,the User may be subject to any sanctions or other enforcement policies adopted by the IMC applicable to such non-compliance.Compliance with Intertie operating policies and procedures and Reliability Standards is a material obligation of this Agreement and the User Agreement. Page 13 of 53 -Amended and Restated Alaska Intertie Agreement Section 3.3.Implementation -Participants and Users All Users shall execute any necessary agreements and take such reasonable actions as may be requested by the IMC in order to implement operating policies and procedures or Reliability Standards and any sanctions for non-compliance approved by the IMC.Each Participant or User shall require or be responsible for all non-residential customers or generation projects on the Participant's or User's system to comply with all applicable operating policies and procedures or Reliability Standards approved by the IMC as a condition of connection to the Participant's or User's system.The IMC,excluding AEA,shall assist in the enforcement of this provision. Section 3.4 Replacement of Reliability Standards In the event Reliability Standards adopted by the IMC are replaced or superseded in whole or in part by the order of a state or federal regulatory agency or by the terms of a state or federal regulation or statute,the IMC shall make amendments to or terminate the Reliability Standards to the extent the IMC deems prudent or necessary upon such change in accordance with Section 3.1,Adoption of Operating Policies and Procedures,and Reliability Standards. Section 3.5 Operating Committee The Operating Committee,established under Article 9,OPERATING COMMITTEE,shall advise the IMC on setting operating policies and procedures for the Intertie.The members of the Operating Committee shall have experience and expertise in the operation of electric utility transmission and distribution systems and the Railbelt's transmission system.The IMC shall give consideration to the group's proposals and take action to adopt,modify or reject any such proposal within one-hundred-twenty (120)calendar days. Section 3.6 |Required Data Submissions. Each Participant and User (or their designated agent or Designated Contractor)shall submit to the IMC all data as reasonably requested by the IMC,whether related to any operating policies and procedures,Reliability Standards,or otherwise.A Participant or User shall notify the IMC of its designation of an agent or Designated Contractor prior to having that agent submit any data on behalf of the Participant or User. Section 3.7 |AEA Power Project Compliance AEA anticipates that Users engaging in Intertie Transactions for transporting power from state projects (such as AEA's Bradley Lake Hydroelectric Project or future state-owned projects)will contractually assume responsibility for compliance with all applicable Intertie operating policies and procedures or Reliability Standards,and accept responsibility for any sanctions or other duties required of such Users by any operating policies and procedures or Reliability Standards.If Users transporting power from state projects assume those responsibilities,AEA or the state agency owning a power project shall not be directly or indirectly responsible for such compliance or sanctions absent their written agreement to assume such responsibility. Page 14 of 53 -Amended and Restated Alaska Intertie Agreement Article 4. PARTICIPANT Section 4.1 Participant Defined Participants will be responsible for the governance of the Intertie through participation in the IMC in accordance with Section 4.3 Membership In IMC.For purposes of this Agreement,a Participant is:an electric public utility with at least an Annual System Demand of 5MW of retail load,holding a Certificate of Public Convenience and Necessity from the Regulatory Commission of Alaska,or having other equivalent authority;and,having a certificated service territory,or other equivalent authority,with physical or contractual access to the Alaska Intertie for the transport of electric power.A Participant must also meet all of the requirements of and agree to comply with the terms of this Agreement.Participants shall execute a User Agreement to have the right to transport power on the Intertie. Section 4.2.New Participant An entity seeking Participant status shall execute a New Participant Addendum to this Agreement in the form attached as Exhibit C,and such other agreements as may be required by the IMC from time to time.The entity shall also be required to execute a User Agreement to have the right to transport power on the Intertie.The entity shall then give twenty-four (24) months written notice to AEA and the Participants of its intention to become a Participant.The entity shall become a Participant upon expiration of the twenty-four (24)month notice period required in this section and the IMC's determination that all of the requirements of this Agreement have been completely satisfied.The IMC's determination under this section shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC, including the affirmative vote of AEA. Section 4.3.Membership in IMC An entity with Participant status shall be allowed,but not required,to appoint one member to the IMC.IMC members'voting rights shall be as provided in Article 8,INTERTIE MANAGEMENT COMMITTEE. Article 5. WITHDRAWAL OF AEG&T AND OTHER PARTICIPANT AND USER STATUS Section 5.1 Withdrawal of AEG&T Notwithstanding the provisions of Section 2.2,Termination,AEG&T shall effect the termination of its Participant status under this Agreement immediately upon its execution of this Agreement. Page 15 of 53 -Amended and Restated Alaska Intertie Agreement Section 5.2 Substitution of HEA and MEA,and Admission of City of Seward and the United States Army Notwithstanding the provisions of Section 4.2,New Participant,HEA and MEA individually shall have the right to obtain Participant status immediately upon their execution of a New Participant Addendum in the form attached as Exhibit C,provided,however,that this right shall terminate twenty-four (24)hours after the termination by AEG&T pursuant to Section 5.1, Withdrawal of AEG&T.The City of Seward and the United States Army shall also have the right to obtain Participant status immediately upon execution of a New Participant Addendum in the form attached as Exhibit C if such execution occurs within twenty-four (24)hours of the execution of this Agreement by AEA and the Participants.In the event that United States Army has not obtained Participant status,then after July 2013,the United States Army shall have the right to become a User by executing a User Agreement and providing three (3)months written notice to the IMC,so long as the available Intertie Capacity is not fully subscribed. Article 6. MINIMUM RIGHTS OF THE PARTICIPANTS AND USERS TO USE INTERTIE FACILITIES Section 6.1 Minimum Intertie Transfer Capability Rights ("MITCR”) The established MITCR rights as well as the MITCR methodology for allocation of Capacity on the Intertie from the Original Agreement are temporarily retained in this Agreement and shall be administered by the IMC during the period from the Effective Date until July 1,2013.The MITCR methodology is set forth in this Article 6.The IMC shall implement a new methodology for allocation of Capacity before July 1,2013,which shall comply with the provisions of Article 16,OPEN ACCESS PRINCIPLES. 6.1.1 Right of First Refusal.For so long as the IMC has not amended or replaced the MITCR methodology,Participants shall have the right of first refusal to an allocated portion of the maximum Intertie transfer capability,as determined pursuant to Section 6.2,Determination of MITCR.Intertie Capacity not scheduled or used by the Participants for the purpose of transmitting or receiving Energy over the Intertie shall be allotted to the Participants in the manner provided in Section 6.2.2,Unused MITCR. 6.1.2 Allocation of Transfer_Capability.The Intertie transfer capability shall be shared by the Participants in the Northern and Southern Groups in the manner described in Section 6.2,Determination of MITCR.If a Participant is not using part of its MITCR in either direction,other Participants shall have the right to use that unused part to make transfers across the Intertie,either as a purchase or a sale of Capacity and/or Energy,pursuant to a procedure adopted by the IMC. 6.1.3.Emergency Operations.During emergencies when it is necessary to use the Intertie to transfer Energy to maintain system integrity,a Participant's MITCR Page 16 of 53 -Amended and Restated Alaska Intertie Agreement will be adjusted by the IMC as required pursuant to Intertie operating policies and procedures and Prudent Utility Practices.To the extent practical,such adjustments shall be shared proportionally among all Participants in the affected Group(s). Section 6.2 Determination of MITCR 6.2.1 Methodology.For so long as the IMC has not amended or replaced the MITCR methodology,the IMC shall determine the MITCR of each Participant each year prior to the final approval of the fiscal year budget,or when a new Participant becomes a Party to this Agreement.The MITCR of each Participant shall be calculated as follows: MITCR shall be determined each year based on the average of the three most recent Annual System Demands submitted by each of the Participants under Section 7.2.1,Participant and User Estimates, Participant Historical Data.Temporary reductions of the maximum Intertie transfer capability may be required for periods due to maintenance,safety,or equipment failure.MITCR shall be determined separately for the Participants of the Northern Group and of the Southern Group.A Participant's MITCR shall be the ratio of its average Annual System Demand to the sum of the average Annual System Demands of its respective group (Northern or Southern) multiplied by the maximum Intertie transfer capability set forth in Section 6.3,Maximum Intertie Transfer Capability. 6.2.2.Unused MITCR.MITCR not used by a Participant shall be available to the other Participants in the same group (i.e.,Northern Group or Southern Group) in the same proportion as remaining Participants'MITCR is to the total MITCR of the remaining Participants in the group that are allocating the unused MITCR.If no Participant chooses to use the unused MITCR,the IMC may make it available to any User subject to the requirements set forth in Section 8.6.7,Maximum Capability and Capacity Allocation.Unless otherwise agreed upon,a Participant whose unused MITCR is being used by other Participant(s)or User(s)shall have the right to its full entitlement immediately upon notification to the Participant(s)or User(s)using its MITCR. 6.2.3 Right to Contractually Transfer MITCR.A Participant has the right to transfer on a contractual basis all or part of its MITCR to other Participants or Users with reasonable written notice to all Participants.A Participant whose unused MITCR is being used by another Participant or User under this Section 6.2.3 shall be paid by the using Participant or User a prorated amount of the Intertie Capacity Rate determined by the following formula: P =ICR/12 x CP x HR/THR where: Page 17 of 53 --Amended and Restated Alaska Intertie Agreement P -is the monthly payment due to the Participant whose MITCR,or portion thereof,is being used by another Participant or User; ICR/12 -is the relevant monthly Intertie Capacity Rate as defined in Section 7.2.6,Capacity Rate,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 or User;and THR-is the total number of hours in the relevant month. 6.2.4 IMC Authority to Change Capacity Allocation Methodology.The IMC shall have the authority to amend or replace the Intertie Capacity allocation methodology with a different methodology.Any amendment or replacement of the Intertie Capacity allocation methodology shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA.In amending or replacing the Intertie allocation methodology,the IMC shall employ Open Access principles to the extent practicable. 6.2.5 New State Power Projects.The IMC shall amend or replace the Intertie Capacity allocation methodology if requested by AEA to facilitate the transfer of power from a new state-owned generation project,provided,that the then- existing rights of Participants and Users for firm service shall be preserved. Section 6.3.Maximum Intertie Transfer Capability The maximum transfer capability of the Intertie is 78 MW,net of losses,unless and until it is changed pursuant to this section.No provision of this Agreement shall prohibit the IMC from temporarily reducing the maximum Intertie transfer capability for maintenance,equipment failure,safety considerations,or other reasonable causes in compliance with Prudent Utility Practices.Such temporary reductions of maximum Intertie transfer capability shall proportionally reduce the rights of each Participant and User,for that temporary period.The IMC,upon the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA,shall have the authority to change the maximum Intertie transfer capability. Page 18 of 53 -Amended and Restated Alaska Intertie Agreement Section 6.4 Improvements to the Intertie 6.4.1 Development_of Improvements.Modifications,additions,deletions and changes to the Intertie ("Improvements”)shall be designed and constructed so as not to reduce the Intertie's reliability.All Improvements shall be implemented in accordance with Prudent Utility Practice and,with commercially reasonable consideration of the costs and benefits of such improvements. 6.4.1.1 Except as provided in Section 6.4.1.2,the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA,shall be required to approve any Improvements. The design and specifications,including engineering studies for proposed Improvements to the Intertie shall be submitted to the IMC for review and approval.The IMC may require additional studies.Approval of the design and specifications of Improvements shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA. 6.4.1.2 AEA shall have the nght to make Improvements to the Intertie,including taps to provide electrical services at locations that AEA deems beneficial and reasonable. Costs related to Improvements covered by this Section 6.4.1.2 will not be deemed to be Intertie Costs unless such Improvements are of direct benefit to the Participants and/or Users as determined in advance by the IMC under Section 6.4.3,Responsibility for Cost of Improvements.The design for such Improvements shall be submitted to the IMC for review and comment. The comments of the IMC shall be incorporated into the design of the Improvements as they relate to maintaining the Intertie's reliability. 6.4.1.3 The IMC shall not unreasonably delay the implementation of any Improvements provided for under Section 6.4,Improvements to the Intertie. 6.4.2 Requests for Improvements.Participants and Users,individually or otherwise,shall have the right to request the IMC to make Improvements. Page 19 of 53 -Amended and Restated Alaska Intertie Agreement 6.4.3 6.4.4 6.4.5 Section 6.5 Each request shall include a detailed written explanation of the requested Improvement and demonstrate its compliance with the requirements of Section 6.4.1,Development of Improvements. Responsibility for Cost of Improvements.The cost of Improvements may be apportioned among the requesting Participants and Users pursuant to a written agreement and may be adjusted to include other sources of funding.If there is no such written agreement,an Improvement shall be made at the expense of the requesting Participant(s),User(s),and/or AEA (AEA only if the Improvement is undertaken pursuant to Section 6.4.1.2)unless the IMC determines prior to performing the Improvement that the Improvement directly benefits other Participants or Users,or may provide direct benefit to other Participants or Users in the future,in which case the cost of the requested Improvements shall be deemed Intertie Costs.The IMC may also, but shall not be required to,determine that the cost of an Improvement shall be born only by the group of directly benefitted Participant(s)or User(s)if some will not be directly benefitted.The IMC shall have the right to consider the cause or need for any Improvements when making its determination of cost responsibility.The IMC shall also determine prior to performing the Improvement whether the cost of such Improvements shall be recovered in the Intertie Energy Rate or in the Intertie Capacity Rate.AEA shall be the owner of all Improvements without regard to the sources of funding.The determination and setting of the responsibility for payment of costs associated with an Improvement and any allocation of recovery between the Intertie Energy Rate and the Intertie Capacity Rate shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA. Right to Make Improvements -Required Work.AEA shall have the right to require Improvements to the Intertie as provided in Section 8.8,AEA's Ability to Perform Required Work. Notice.The IMC shall give reasonable advanced notice to all Participants before approving any Improvements as provided in this Article 6. Additional Project Taps Terms and conditions applicable to new taps and interconnections for new projects shall be subject to,and shall be handled in accordance with,the rules,Reliability Standards,and procedures in effect at the time the tap or interconnection is constructed and as they may be amended from time to time.This Section shall also apply to proposed temporary taps or interconnections. Page 20 of 53 -Amended and Restated Alaska Intertie Agreement Section 7.1 7.1.1 Article 7. COSTS FOR INTERTIE TRANSFER RIGHTS Intertie Costs Costs to Be Shared by Participants and Users.Costs incurred in operating and maintaining the Intertie and the annual debt service on any bonds or other debt issued by AEA or contractual obligations incurred by AEA or the IMC for the Intertie facilities,including those incurred for renewals,replacements,repairs, Required Work,and Improvements,("Intertie Operating Costs”)and_costs incurred_in administering the legal and regulatory affairs of the IMC, including the costs associated with the development,monitoring,and administration of the operating and_reliability standards ("Intertie Administration Costs”)shall be shared by the Participants and Users._Intertie Operating Costs and Intertie Administration Costs shall be referred to jointly in this Agreement_as Intertie Costs.Intertie Costs shall be identified in accordance with the provisions of former Alaska Statute 44.83.398(f) (attached as Exhibit D)and this Agreement.Participants and Users shall also contribute to the recovery of Intertie Costs through rates and charges approved by the IMC. 7.1.2__Intertie Operating Costs.At a minimum,the following costs shall be included in Intertie Operating Costs budget: 7.1.1.1 "Operation and Maintenance Costs”are all operation costs as provided for in Article 10,OPERATION OF THE INTERTIE,and all maintenance costs as provided for in Article 12,MAINTENANCE OF THE INTERTIE FACILITIES,and including any replacements in the ordinary course of operations, plus any applicable taxes,but excluding uninsured losses or liability resulting from deductible or self-insured retention provisions of property or liability insurance policies,respectively. 7.1.1.2 "Extraordinary Maintenance and Replacement Costs” are uninsured losses or liabilities resulting from deductible or self- insured retention provisions of property or liability insurance policies,costs of facility maintenance,renewals,and replacements. 7.1.1.3 "Annual Debt Service Cost”is interest on,and amortization sufficient to retire over their term,any bonds or other debt issued by AEA for construction,renewals,replacement, repairs or Improvements of the Intertie facilities,plus the debt service coverage or other financial performance factors determined by AEA to be necessary for the marketability of bonds issued by it and as provided in any bond covenants,resolutions or similar obligations. Page 21 of 53 -Amended and Restated Alaska Intertie Agreement 7.1.1.4 |"Reserve Fund”is the amount necessary,as determined by the IMC,to provide a prudent level of reserves to fund the operation and maintenance of the Intertie and the Intertie Costs specified in this Section 7.1,Intertie Costs.The Reserve Fund shall be maintained as a separate and distinct fund to be held, managed,invested,disbursed and administered by AEA in accordance with criteria approved by the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA.All money deposited in the Fund shall be used solely for the purposes set forth in this Agreement.AEA shall keep and maintain records pertaining to the Reserve Fund,and all disbursements therefrom,in accordance with its general practices and procedures in effect from time to time and in compliance with GAAP. 7.1.1.5 Station service costs. 7.1.1.6 "Cost of Improvements”those costs determined in accordance with Section 6.4.3,Responsibilityfor Cost_of Improvements. 7.1.3 Intertie Administration Costs.At a minimum,the following costs shall be included in Intertie Administration Costs budget: 7.1.3.1 AEA's administrative expense associated with the Intertie. 7.1.3.2 Legal expense associated with IMC activities. 7.1.3.3 Regulatory costs associated with IMC activities. FAG 8 7.1.3.4 Costs associated with developing,monitoring,and administering operating and reliability standards for the Intertie and the IMC. FA2 7.1.4 Annual Budget and Fiscal Year.The IMC will estimate and budget Intertie Costs annually for the ensuing fiscal year,July 1 to June 30,subject to AEA's review and approval.The IMC shall develop annually a preliminary operating budget from:the Intertie maintenance budget;the Intertie operating budget;the Annual Debt Service costs;and,AEBAs administrative-expense-associated-withthe budget for Intertie_Administration Costs budget.Unless otherwise agreed in writing by the Participants,the preliminary Intertie budget shall be provided to the Participants and made available to the public for their review at least thirty (30)days before the IMC meeting where the budget will be approved.Written comments shall be submitted to AEA and the IMC by the date established by the IMC.The Participants shall be provided no less than thirty (30)days to comment.Based Page 22 of 53 -Amended and Restated Alaska Intertie Agreement Section 7.2 7.2.1 7.2.2 7.2.3 7.2.4 7.2.5 7.2.6 on the preliminary Intertie budget and the comments from the Participants,the IMC shall annually establish the Intertie operating budget and submit it to the AEA for review and approval. Calculation of Intertie Operating Costs and Rates Participant and User Estimates,Participant Historical Data.The IMC shall establish a schedule and format that the Participants and Users with valid contracts for service on the Intertie shall use to submit their projected usage of the Intertie for the upcoming fiscal year.Unless directed to do otherwise by the IMC,Participants and Users shall also submit,at the same time,their three most recent Annual System Demands for the calculation of MITCR under Section 6.2,Determination of MITCR,or as required by the IMC for the allocation of Intertie Capacity. IMC Estimates.The IMC shall prepare a preliminary Intertie annual usage estimate in kilowatt hours ("kWh”)and provide the same to the Participants and Users no later than the date the preliminary Intertie budget is submitted to the Participants for comment.The preliminary Intertie annual usage estimate provided under this Section with the use of projected or other relevant information shall in no event be less than the amount equal to 30 percent of the kWhs that could be transferred by continuous operation of the Intertie at the maximum rated fiscal-year transfer Capacity (as currently established under Section 6.3,Maximum Intertie Transfer_Capability).The projected usage shall not exceed the total projected usage of the Participants and Users so long as their combined usage is in excess of the 30 percent as provided in this Section 7.2.2. Comments.Participants and Users may provide comments to the IMC on the preliminary Intertie annual usage estimate,which shall be considered by the IMC in making its final estimate for the following fiscal year. IMC Determination of Estimated Intertie Usage.Based upon the Participants' and Users'preliminary Intertie annual usage estimates and comments received,the IMC shall establish the estimated annual Intertie usage in kWhs for the following fiscal year. Energy Rate.The "Intertie Energy Rate”for the following fiscal year, expressed in dollars per kWh,shall be calculated by dividing 83.5 percent of the total budgeted Intertie Operating Costs as determined in the Intertie budget under Section 7.1,Intertie Costs,by the annual Intertie usage as established under Section 7.2.4,IMC Determination of Estimated Intertie Usage. Capacity Rate.The "Intertie Capacity Rate”for the following fiscal year. expressed in dollars per kW,shall be calculated by dividing 16.5 percent of the total budgeted Intertie Operating Costs as determined in the Intertie budget Page 23 of 53 -Amended and Restated Alaska Intertie Agreement established under Section 7.1,Intertie Costs,by the sum of the Participant's or User's Intertie Capacity rights allocations. Section 7.3 Allocation of Intertie Administration Costs 7.3.1 Allocation of Intertie Administrative Costs and Rates.The IMC shall allocate the Intertie Administrative Costs in equal annual shares for all of the Participants and Users. Seetion7;3Section 7.4 Allocation of Intertie Costs 7347.4.1 Participant and User Payments.Each Participant and User shall be obligated to pay to AEA,for the account of the IMC,monthly the sum of the following: 4+3+47.4.1.1 The Participant's or User's scheduled use of the Intertie for the month multiplied by the Intertie Energy Rate in effect for the fiscal year;plus, 73-4.27.4.1.2 The Participant's Intertie Capacity rights allocation, determined in accordance with this Agreement,multiplied by one- twelfth of the Intertie Capacity Rate in effect for the fiscal year or the Participant's obligation as calculated pursuant to Section 6.2.3, Right to Contractually Transfer MITCR,if applicable;plus, 7.4.1.3,Each User's Intertie Capacity rights allocation, determined in accordance with this Agreement,multiplied by the monthly Intertie Capacity Rate in effect for that period multiplied by the number of months of the fiscal year that the User has a contract for the use of Intertie Capacity or as determined pursuant to Section 7.3.1.2;plus.; 7.4.1.4 The allocated monthly share of the _Intertie Administrative Costs for all Participants and Users in effect for the fiscal year. 7327.4.2___Annual Payment of Intertie Costs.The IMC shall have the authority to convert the Participants'and Users'payment obligation,or any portion thereof,to one annual payment,which shall be due and payable at the beginning of the fiscal year.Any such annual payment shall be based on each Participant's or User's projected use of the Intertie to the extent usage has not been scheduled. Page 24 of 53 -Amended and Restated Alaska Intertie Agreement 4337.4.3 Monthly Use.For billing purposes only,the scheduled use of the Intertie in any month shall be the greater of the actual energy transferred or the product of the scheduled Intertie transfer at the Intertie Point of Interconnection and the number of hours each schedule was in effect during that calendar month. 43-47.4.4 Excess Revenues.Should the annual revenues received from all sources under Section 7.3.1,Participant_and User Payments,exceed actual annual Intertie Costs,the revenues in excess of the Intertie Costs shall be allocated to the contributing Participants and Users in proportion to the total dollar amount paid by all parties for use of the Intertie in the fiscal year,or portion thereof, in which the revenues were accrued.The IMC shall authorize AEA to refund the Participants and Users their proportionate share of this excess. 73-57.4.5 Revenue Deficiencies.Should the revenues received under Section 7.3.1, Participant and User Payments,be less than the actual Intertie Costs,the revenue deficiency shall be allocated between the Participants and Users in the same proportional manner as revenues are re-allocated between the Participants and Users under Section 7.3.4,Excess Revenues,of this Section. The IMC shall authorize AEA to bill the Participants and Users their proportionate share of this deficiency. Article 8. INTERTIE MANAGEMENT COMMITTEE Section 8.1 Establishment of the Intertie Management Committee,Right to Vote AEA and the Participants hereby establish an Intertie Management Committee.The IMC shall be the governing body with the authority to control,operate,maintain,repair,and perform Improvements of the Intertie in accordance with the terms of this Agreement.The IMC shall consist of the representative appointed by AEA and the representatives appointed by each of the Participants,which shall be either their Chief Executive Officer,General Manager,or Executive Director.Each Participant shall be entitled to only one representative,appointed pursuant to Section 4.3,Membership in IMC,and one vote on the IMC.AEA shall also be entitled to only one representative and one vote on the IMC.Under no circumstances shall AEA or a Participant have,or have the right to control,more than one vote on the IMC or have more than one voting representative,directly or indirectly,through another organization with which it is an affiliate or has an agency relationship.Each IMC member entitled to vote may name one representative to serve on the IMC and one designated alternate for that representative.A representative or designated alternate may be an employee of a Designated Contractor of the IMC Member.Each IMC member shall notify all other IMC members in writing of the names,addresses,and telephone numbers of its representative and designated alternate.After it is established,the IMC shall meet at least twice each year.Meetings of the IMC and any committees of the IMC shall, to the extent practicable,be open to the public. 8.1.1 Eligibility to Vote.Participants that are not current on their financial obligations for Intertie Costs or any other costs or assessments approved by Page 25 of 53 -Amended and Restated Alaska Intertie Agreement the IMC shall not be eligible to vote on matters before the IMC and shall not be considered a member of the IMC for purposes of voting,or for calculating the Annual System Demand of Participants or Users for purposes of allocating Intertie Capacity. 8.1.2 Minutes.Written minutes shall be kept for all meetings of the IMC,and all decisions or agreements made by the IMC shall be reduced to writing, including all matters voted upon and each member's vote on those matters. Section 8.2.Adoption of Procedural Rules or Bylaws The IMC shall adopt and maintain rules and procedures governing the operation of the IMC ("IMC Bylaws”).The IMC Bylaws shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA,to be effective.The IMC Bylaws shall address,among other matters,procedures for the selection of IMC officers,the conduct of IMC meetings,the approval or possible pre-approval of consultants, the modification of the IMC's procedural rules,and to the extent not otherwise specified in this Agreement,the specific voting requirements for approval of matters to be decided by the IMC. Section 8.3.Effect of Abstention.For purposes of voting on any matter before the IMC, each abstaining Participant or AEA Representative shall not be counted towards any voting requirement.The minimum percentage required to transact business shall be determined from the total number of IMC Members not abstaining. Section 8.4 Meetings by Electronic Communication.The IMC may elect to meet by electronic communication so long as all members can be heard and hear all of the proceedings. Section 8.5 IMC Responsibilities 8.5.1 IMC Responsibilities and AEA Duties.AEA,as the legal owner of the Intertie,a potential issuer of debt related to the Intertie,and the agency charged by statute with various duties affecting or affected by the Intertie,has or may have assigned to it,certain rights,duties,and responsibilities with respect to the Intertie.For example,AS 44.83.396(e)imposes on AEA the duty to (a)review and approve the annual budget for the operation and maintenance of the project,and (b)assure that the project is being operated efficiently and in a manner that is consistent with national standards for the industry and agreements with any bondholders.(See also,Section 8.8,AEA's Ability to Perform Required Work.)Subject only to such AEA rights,duties, and responsibilities,the IMC shall be responsible for the management, operation,maintenance,and improvement of the Intertie.The IMC members, Participants,and Users are the beneficiaries of the prudent management of the Intertie and shall bear their respective share of Intertie Costs in accordance with the terms of this Agreement.All Users have a shared and substantial long-term financial interest in the Intertie facilities.The IMC shall undertake Page 26 of 53 -Amended and Restated Alaska Intertie Agreement 8.5.2 Section 8.6 responsibility for the prudent management and reliable operation of the Intertie on behalf of AEA,for the benefit of the Participants and Users. IMC Approvals.IMC approval of the sufficiency of the annual budget,rates, and the allocation of Intertie Capacity,shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC, including the affirmative vote of AEA. IMC Actions The IMC shall have the authority to take the actions set forth in this section,subject only to the provisions of any applicable bond resolutions,federal and state law,the requirements of licensing and regulatory agencies,and the rights of AEA,the Participants,and Users under other provisions of this Agreement. 8.6.1 8.6.2 8.6.3 8.6.4 8.6.5 8.6.6 Intertie Operation.Develop,adopt,and enforce operating policies and procedures and Reliability Standards applicable to the Intertie.See Section 3.1,Adoption of Operating Policies and Procedures,and Reliability Standards. Intertie User Agreements.Adopt standard terms and conditions for User Agreements for Intertie Transactions in accordance with this Agreement and incorporating Open Access principles.Adopt a three (3)month termination provision in certain User Agreements in accordance with Section 5.2, Substitution of HEA and MEA,and Admission of City of Seward and the United States Army,and Section 16.3.5,Federal Acquisition Regulations. Non-Compliance Appeals.Provide procedures for Users to appeal:(i) Operating policies and procedures;ii)Reliability Standards non-compliance determinations;or iii)sanctions imposed for non-compliance with Reliability Standards. O&M_and Scheduling.Arrange for the operation and maintenance of the Intertie and the scheduling of power transfers on the Intertie. Budget.Adopt,and revise if prudent to do so,each fiscal year a budget of Intertie Costs for that fiscal year.The adopted or revised budget shall be reasonably estimated by the IMC to be sufficient to pay all Intertie Costs and shall be made available to the public at the time it is distributed to Participants.The IMC shall establish the fiscal year budget in accordance with Article 7,COSTS FOR INTERTIE TRANSFER RIGHTS,and a schedule established by the IMC. Cost Allocation and Payment Schedule.Establish for each fiscal year the estimated annual allocation of Intertie Costs for each Participant and User Page 27 of 53 -Amended and Restated Alaska Intertie Agreement together with a schedule for each Participant's and Users'required monthly payments during that fiscal year,pursuant to Sections 7.2,Calculation of Intertie Operating Costs and Rates,7.3 Allocation of Intertie Administration Costs and 7.34,Allocation of Intertie Costs.The payment schedule shall be designed to recover the Participant's or User's share of the estimated annual Intertie Costs during the fiscal year and as revised during such Year to reflect any approved changes to the budget of annual Intertie Costs for that fiscal year.The IMC also shall determine the costs to be collected from Users for Intertie Transactions.Such costs shall be determined and applied based upon just,fair,reasonable,and not unduly discriminatory principles and in compliance with Article 16,OPEN ACCESS PRINCIPLES.The approval of the allocation of Intertie Costs,payment schedule,and the costs to be collected for Intertie Transactions shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC, including the affirmative vote of AEA. 8.6.7 Maximum Capability and Capacity Allocation.Establish the maximum Intertie transfer capability in accordance with Section 6.3,Maximum Intertie Transfer Capability.Determine each Participant's and User's rights to Intertie Capacity pursuant to any methodology adopted under Article 6,MINIMUM RIGHTS OF THE PARTICIPANTS AND USERS TO USE INTERTIE FACILITIES.The IMC shall consider the Participant's or User's reserve obligations and equitably preserve any Participant's and User's Intertie operational rights existing as of the Effective Date that are valid and effective at the time of the IMC's determination.The IMC shall have the right to consider the cause or need for such operational rights when making its determination. 8.6.8 Determination of Actual Payment Obligation.Determine after the conclusion of each fiscal year the actual annual Intertie Costs for that fiscal year,the actual annual Payment Obligation of each Participant or User for that fiscal year,and the amount of any additional payment required from or the amount of any refund to each Participant or User to ensure that the total of all payments received from each Participant or User for each fiscal year is equal to that Participant's or User's actual annual Payment Obligation for the fiscal year,pursuant to Sections 7.3.3,Excess Revenues,and 7.3.4,Revenue Deficiencies. 8.6.9 Funding Methods.Evaluate and select methods of carrying out and funding Improvements,whether by recommending AEA's issuance of bonds or otherwise. 8.6.10 Improvements.Evaluate and approve Improvements and determine the required level of funding for approved Improvements under Sections 6.4.2, Page 28 of 53 -Amended and Restated Alaska Intertie Agreement Requests for Improvements,6.4.3,Responsibility for Cost of Improvements, 6.4.4,Right to Make Improvements -Required Work,or as otherwise provided in this Agreement. 8.6.11 Maintenance.Adopt maintenance schedules for the Intertie that do not unreasonably interfere with the operations of the Participants. 8.6.12 Creation of Reserve Fund.Establish and maintain a Reserve Fund,which meets the requirements set forth in Section 7.1.1.4. 8.6.13 Procurement of Services.Procure services the IMC requires so long as sufficient budgeted funds are available for those services and the procedures for such procurements are in compliance with the IMC's Bylaws and any applicable Alaska law or regulation. 8.6.14 Miscellaneous.Provide for all things necessary to carry out the responsibilities and obligations set forth in this Agreement and in the IMC Bylaws. Section 8.7 Payment Obligation Unimpaired Notwithstanding any action or inaction by AEA or the IMC under this Agreement,each Participant's or User's obligation to make payments necessary to pay their allocated percentage share of Intertie Costs under Section 7.3,Allocation of Intertie Costs,of this Agreement and all other amounts to be paid under this Agreement ("Payment Obligation”)shall be absolute and unimpaired.Each Participant and User shall make all payments as required as a result of action taken by the IMC under this Agreement or an action taken by AEA pursuant to Section 6.4.4, Right to Make Improvements -Required Work,or Section 8.8,AEA's Ability to Perform Required Work. Section 8.8 AEA's Ability to Perform Required Work In the event the IMC fails to take any of the actions set forth in this Agreement in a timely fashion or fails to take any other action which the AEA believes to be a required action with respect to the management,operation,maintenance or improvement of the Intertie,and as a result the AEA determines that it will be unable to meet any of its obligations imposed by bond resolutions,by this Agreement,by any licensing or regulatory agency,or by statute,or as otherwise is necessary to keep the Intertie in good and efficient operating condition,consistent with (1)prudent economics for the Intertie and the Participants and Users,and (2)national standards for the industry ("Required Work”)then the AEA may:(a)adopt a budget of Annual Intertie Costs;(b)estimate the Payment Obligation of each Participant in accordance with the methodology set forth in this Agreement;(c)require each Participant to make payments on the basis of such estimated Payment Obligation;or (d)cause the Required Work to be performed; and (e)take such other action as the AEA deems reasonably necessary to meet such obligations. All actions and determinations under this Section 8.8 shall be taken in accordance with Prudent Utility Practice.The comments of the IMC regarding Required Work related to Improvements Page 29 of 53 -Amended and Restated Alaska Intertie Agreement shall be given great weight and incorporated into the design of the Improvements as they relate to the operation and reliability of the Intertie. Section 8.9 Payment Obligation and Rights of Review Making a payment as required under this Agreement shall not constitute a waiver of any of the Participant's or User's rights under this Agreement.Any Participant or User may seek review of actions by the IMC by means of the procedures in Article 19,REVIEW OF DECISION. Section 8.10 AEA Authority to Collect Payments and Disburse Funds The IMC hereby delegates to AEA the authority to invoice and collect from Participants or Users any Payment Obligations due and owing under this Agreement and to make payments on behalf of the IMC for Intertie operations,maintenance or other Intertie related expenses arising under this Agreement.AEA shall hold funds collected in one or more separate accounts designated for Alaska Intertie purposes until such funds are obligated for Intertie operations or maintenance and used to pay Intertie Costs.Interest and/or investment income earned on invested funds shall be credited to the IMC.The IMC shall have the right to audit all funds held by AEA on behalf of the IMC as well as the transactions associated therewith. Article 9. OPERATING COMMITTEE Section 9.1 Establishment of the Operating Committee 9.1.1 Establishment.The IMC shall establish a committee for the purpose of recommending operating policies and procedures under the direction of the IMC and assisting in the implementation of any policies and procedures approved by the IMC (the "Operating Committee”). 9.1.2 Representatives.Each Participant may,but is not required to,designate a representative to act on its behalf,which shall be done in writing ("Representative”).Such Representatives shall meet the requirements of Section 3.5,Operating Committee.Each Participant may also designate an alternate who may act in the stead of its Representative at the option of that Participant.A Participant may at any time change,remove or designate its representative or alternate,and shall promptly notify in writing the other Participants of any change in such designation.The members of The Operating Committee shall designate a member to be Chairman. Recommendations and decisions of the Operating Committee shall be adopted if approved by at least a majority of the Representatives appointed under this Section,unless otherwise provided in the bylaws of the committee.The AEA may designate a Representative to the committee who may vote on any matters. Page 30 of 53 -Amended and Restated Alaska Intertie Agreement Section 9.2 9.2.1 9.2.2 9.2.3 9.2.4 9.2.5 Section 9.3 Meetings of the Operating Committee Meetings.The Operating Committee shall meet at least once each year and at such other times as deemed necessary by its Chairman or the IMC and shall to the extent practicable,be open to the public. Voting.The Operating Committee may determine the manner of voting on matters that come before it.All decisions of the Operating Committee affecting the Participants,the Intertie,or its Users shall be subject to the review and approval of the IMC. Minutes.Written minutes shall be kept for ali meetings of the Operating Committee,and all decisions or agreements made by the Operating Committee shall be reduced to writing including all matters voted upon and each member's vote on those matters. Expenses.The Operating Committee shall prepare and submit an expense budget to the IMC under Section 10.3,Budget for Operation of the Intertie, annually to provide for Operating Committee expenses other than the expenses of each Operating Committee Representative,which shall be borne by the Operating Committee Representative. Meetings by Electronic Communication.The Operating Committee may elect to meet by electronic communication so long as all members can be heard and hear all of the proceedings. Operating Procedures The Operating Committee shall recommend operating policies and procedures and standard practices to the IMC for the guidance of dispatchers and other employees and shall recommend arrangements for metering,communications,and other services and facilities.All such operating policies and procedures and standard practices shall be subject to the approval of the IMC pursuant to Section 3.1,Adoption of Operating Policies_and Procedures,and_Reliability Standards,and shall conform with any Reliability Standards adopted by the IMC.The Operating Committee has no authority to modify any of the provisions of this Agreement or to modify or set rates for Intertie services. Section 10.1 10.1.1 Article 10. OPERATION OF THE INTERTIE Responsibility for Operation of the Intertie Responsible Participants.AML&P and GVEA are hereby delegated the responsibility for the operation of the Intertie on behalf of the IMC.The operation of the Intertie shall be in compliance with the guidelines of this Agreement,the operating policies and procedures established by the IMC,and Page 31 of 53 -Amended and Restated Alaska Intertie Agreement in compliance with any applicable Reliability Standards.The IMC may at any time designate another Participant to assume such responsibility from GVEA or AML&P with the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA.Upon such designation by the IMC,the name of the new operator(s) shall be deemed substituted for the name of the old operator(s)in this Article 10,OPERATION OF THE INTERTIE,as appropriate. 10.1.2 AML&P and MEA Responsibilities.AML&P shall be responsible for the operation of the southern assets of the Intertie including,but not limited to, coordination with other utilities,the terminal facilities,communication facilities,the Intertie transmission line,and other facilities south of the Douglas Substation (more specifically illustrated and defined in the Intertie Facilities Diagram in Exhibit E of this Agreement).The Douglas Substation Intertie facilities shall be managed by AML&P and shall be deemed to be the point of demarcation between the Intertie Operators. 10.1.2.1 AEA has contracted with MEA under the 1984 Joint Use Agreement for use of approximately five and one-half (5.5) miles of MEA's right-of-way and constructed transmission facilities that are a part of the Intertie to the Teeland Substation. This being presently a part of the Intertie,the IMC delegates to AML&P,and AML&P assumes the responsibility for operation of this portion of the transmission facilities.AEA delegates to MEA and MEA assumes responsibility for maintenance of this portion of the transmission facilities.Nothing contained in this Agreement shall be deemed to modify any portion of the 1984 Joint Use Agreement. 10.1.3 GVEA Responsibilities.GVEA shall be responsible for the operation of the northern assets of the Intertie,including but not limited to,coordination with other utilities,the terminal facilities,communication facilities,the Intertie transmission line,and other facilities north of the Douglas Substation (as more specifically illustrated and defined in the Intertie Facilities Diagram in Exhibit E of this Agreement).The Douglas Substation Intertie facilities shall be managed by AML&P and deemed to be the point of demarcation between Operators. 10.1.4 Joint Responsibilities.AML&P and GVEA acting in concert shall: 10.1.4.1 Coordinate all the activities and transactions involving the Intertie operation; 10.1.4.2 Coordinate Intertie Transactions to ensure that at all times,to the extent possible,the Intertie System is operated to: Page 32 of 53 -Amended and Restated Alaska Intertie Agreement provide reliable and economical service;optimize the availability of the Intertie within practical operational and cost constraints; and;ensure the Intertie is fully subscribed; 10.1.4.3 Comply with,monitor compliance with,and enforce the operating policies and procedures and Reliability Standards; 10.1.4.4 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; 10.1.4.5 Develop procedures for restoration of service on the Intertie for interruptions due to either Scheduled or Forced Outages,and have personnel trained to carry out such operational procedures to ensure Intertie reliability; 10.1.4.6 Maintain communications with each other and the other Participants using prudent methods of data acquisition sufficient for reliable system control of the operation of the Intertie; 10.1.4.7 Maintain complete and accurate hourly records of all operations,Intertie Transactions,and activities involving the Intertie,and promptly publish and distribute such records to all Participants at regular intervals as 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); 10.1.4.8 Coordinate the responsibilities delegated to them in this Agreement to minimize duplication and ensure efficient operation of the Intertie; 10.1.4.9 Abide by the terms and conditions of other contracts or agreements involving the operation of the Intertie,so long as they do not conflict with this Agreement; 10.1.4.10 Operate the Intertie in a safe,reliable,and responsible manner consistent with Prudent Utility Practices,the directives and instructions of the Operating Committee,and any applicable Reliability Standards. Page 33 of 53 -Amended and Restated Alaska Intertie Agreement 10.1.5 10.1.6 Contracting.The IMC may,to the extent permitted by law,contract with other Participants and qualified contractors to maintain transmission facilities under IMC control. Load_Balancing.The Operating Committee shall recommend operating policies and procedures and standard practices to the IMC to guide load balancing responsibilities performed by the Intertie Operators and any Control Area operators interconnected with the Intertie. Section 10.2.Suspension of Work in Performance of Operational Duties The AEA or IMC may order AML&P and/or GVEA,or any other entity responsible for operation of the Intertie,in writing to suspend,delay,or interrupt all or any part of the work involved in operation of the Intertie for such period of time as AEA or the IMC determines to be appropriate for the convenience of,and in the best interest of,the operation of the Intertie. Section 10.3 10.3.1 10.3.2 10.3.3 10.3.4 Budget for Operation of the Intertie Budget Process.For purposes of calculation of unit Intertie Operating Costs pursuant to Section 7.2,Calculation of Intertie Costs and Rates,of this Agreement,AML&P and GVEA may develop and submit to the IMC a suggested scope of operations and a budget for operation of the Intertie upon thirty (30)days written notice to the IMC.The budget developed by the Intertie Operators may include all direct expenses and an 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 AML&P's and GVEA's respective utility system operations and generally accepted utility accounting principles.Unless otherwise agreed upon,the IMC shall provide AML&P and GVEA submittals to the Participants for their review and comments prior to the inclusion of such costs in Intertie Operating Costs.The Participants shall be provided no less than thirty (30)days to comment. Participant Comments.Participants may provide written comments on the preliminary scope of operations and related budget requirements to the IMC pursuant to a schedule adopted by the IMC.The Participants shall be provided no less than thirty (30)days to comment. IMC Establishes Budget.Based on the preliminary scope of operations and budget and the comments received,the IMC shall establish the final Intertie operating budget under the schedule established in Section 8.6.5,Budget. IMC Determinations and Payment of AML&P and GVEA.If AML&P and GVEA submit a budget under Section 10.3.1,Budget Process,the IMC shall determine the final scope of operations and related budget requirements that will be deemed to be the fixed cost fee for operation of the Intertie for the Page 34 of 53 --Amended and Restated Alaska Intertie Agreement 10.3.5 ensuing fiscal year.Unless otherwise agreed,the IMC shall pay each of AML&P and GVEA pursuant to Section 10.6,Payment of Operators. Payment if IMC Unable to Determine Fixed Cost Fee.If the IMC is unable to determine the fixed cost fee for operation of the Intertie,then AML&P and GVEA may each determine,using records and accounts maintained under Section 10.4,Accounting and Records,the cost to their respective systems to provide operation of the Intertie in accordance with this Agreement and shall bill the IMC monthly for these services.The IMC will then reimburse AML&P and GVEA under Section 10.6,Payment of Operators. Section 10.4 Accounting and Records In maintaining accounts for operation of the Intertie,AML&P and GVEA will follow the system of accounts prescribed for public utilities and licensees by the Federal Energy Regulatory Commission,conform to Section 12.2.2,Cost Records,and GAAP.AML&P and GVEA will furnish the IMC such operating and financial statements relating to operation of the Intertie as may be reasonably requested by AEA or the IMC.If receipt of such operating and financial statements is unduly delayed,the IMC may,with its own staff,perform all work necessary to collect such data as reasonably necessary.Such work shall be performed at a time and in a manner to prevent unreasonable interference with AML&P and GVEA operations. Section 10.5 Audits 10.5.1 10.5.2 Request for Audit.At the discretion of AEA or the IMC or by request of a majority of the Participants,an audit shall be conducted with respect to the matters provided for 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 performing such audits shall be shared by the Participants in the same proportion as their MITCR or share of Intertie Capacity share during the period covered by the audit or as determined by the IMC.The Participants,their agents,and any other party involved with the operation of the Intertie,shall provide and/or make available the information and records required for the audit.The cost of any audit required by a Participant that is beyond the above scope deemed necessary by the IMC shall be borne by such Participant. State Audit.AML&P and GVEA shall allow their books of accounts to be audited with respect to matters provided for in this Agreement by such state officials or agencies as may be authorized and directed by law to make those audits.To the extent permitted by law,Participants shall have the same authority to audit the books of accounts of the IMC and AEA with respect to the operation of the Intertie. Page 35 of 53 -Amended and Restated Alaska Intertie Agreement Section 10.6 Payment of Operators If a fixed cost fee for operation of the Intertie is established under Section 10.3.4 of this Article, then within thirty (30)days of the end of each month the IMC shall pay to AML&P and GVEA one-twelfth of their respective yearly fixed cost fees for operation of the Intertie.If the Participants have not agreed upon a fixed cost fee for operation of the Intertie under Section 10.3.4 of this Article,then the IMC shall reimburse AML&P and GVEA within thirty (30)days of the receipt of their invoices.At all times,however,such reimbursement is subject to adjustment in the event of errors,the resolution of disputes,or as the result of audit findings. Section 10.7 Change in Ownership or Control If there is any change in the ownership,ownership structure,control of,or right to control an entity delegated responsibility for the operation of the Intertie on behalf of the IMC,or any such change regarding an entity delegated any other responsibility related to the operation or maintenance of any portion of the Intertie facilities,then the IMC may designate another Participant,or such other entity as it deems appropriate,to assume those responsibilities.The IMC's designation shall be accomplished in the same manner as set forth in Section 10.1.1, Responsible Participants. Section 10.8 Critical Repairs and Maintenance In the event that immediate action is required to preserve the reliability or safe operation of the Intertie,the operators shall have the right to engage qualified contractors or qualified members of their own staff to effect such repairs as are reasonably necessary pursuant to Prudent Utility Practices.The costs for such repairs shall be Intertie Costs_and the Payment Obligation of each Participant shall be determined in accordance with the methodology set forth in this Agreement. In the event an Operator has not performed,or cannot perform,repairs or maintenance on Intertie facilities for which it is responsible,and such delay or failure jeopardizes the immediate safety, reliability,or operation of the Intertie pursuant to Prudent Utility Practices,the affected Participants shall have the same right to effect such repairs or maintenance.The costs for such repairs or maintenance shall be Intertie Costs. Article 11. SCHEDULING OF CAPACITY AND ENERGY ON THE INTERTIE Section 11.1 Scheduling Responsibility 11.1.1 Southern Group.AML&P shall have the responsibility for scheduling transfers on the Intertie for the Participants and Users of the Southern Group and coordinating them with GVEA under:(i)the provisions of this Agreement;(ii)any operating policies and procedures or Reliability Standards;and (iii)the procedures adopted by the IMC. 11.1.2 Northern Group.GVEA shall have the responsibility for scheduling transfers on the Intertie for the Participants and Users of the Northern Group and Page 36 of 53 -Amended and Restated Alaska Intertie Agreement 11.1.3 coordinating them with AML&P under:(i)the provisions of this Agreement; (ii)any operating policies and procedures or Reliability Standards;and (iii) the procedures adopted by the IMC. Coordination.AML&P and GVEA shall each have the responsibility for coordinating schedules within their respective Groups. Section 11.2.Capacity and Energy Schedules 11.2.1 11.2.2 11.2.3 11.2.4 11.2.5 Section 11.3 Participant Hourly Schedules.The amount of electric Capacity used and Energy to be transferred on the Intertie under this Agreement will be based upon hourly schedules provided by the Participants and Users. Advanced Scheduling.Capacity and Energy shall be scheduled on an hourly basis and the schedules may be made for the next hour(s),day(s),week(s),or month(s)in advance if allowed by the operating policies and procedures. Procedure.Schedules for all transfers on the Intertie shall be furnished to the respective Intertie Operators before 3:00 P.M.prevailing local time each day for Capacity used and Energy to be delivered across the Intertie for each clock hour of the following 24-hour period.If the IMC determines that it is prudent to do so,this schedule shall be updated each day and an additional six-day schedule will be furnished to provide a continuing seven-day schedule. Short-term Scheduling.Short-term schedules of transfers on the Intertie may not be made or changed on an hour-by-hour basis unless coordinated in advance with the Intertie Operators.Operators will use their best efforts to accommodate changes. Modification of Scheduling Procedures.Modifications to scheduling procedures shall be required to be adopted by the IMC before implementation to be effective. Intertie Schedule Limitations The maximum schedule of Capacity and Energy of any Participant or User on the Intertie shall be limited to their individual Intertie Capacity rights as allocated under this Agreement,either by the MITCR methodology or the methodology adopted by the IMC under Section 6.2.4,IMC Authority to Change Capacity Allocation Methodology. Section 11.4 Transmission Service to Access the Intertie Each Participant and User shall have the sole responsibility for scheduling any service(s) required,on the intervening transmission systems for transfers of Energy or Capacity to and from the Alaska Intertie,in compliance with the applicable tariff schedules of the Participants or utilities involved. Page 37 of 53 -Amended and Restated Alaska Intertie Agreement Article 12. MAINTENANCE OF THE INTERTIE FACILITIES Section 12.1.Maintenance Responsibility 12.1.1 Responsibility for Maintenance Practices.The IMC shall maintain the Intertie facilities that AEA owns or for which AEA has contracted use arrangements. The IMC shall provide for the maintenance of the Intertie facilities by contracting with qualified parties to perform maintenance on its behalf. Maintenance shall be scheduled,coordinated,and accomplished in accordance with Prudent Utility Practices so as to minimize disturbances on the Intertie that would impair service on the Participants'systems. 12.1.2 Availability.The Intertie shall be maintained in good working condition, optimizing the availability of the Intertie within practical operational and cost constraints.After a failure on the Intertie,the Intertie shall be returned to service in the shortest possible time within the constraints of practical maintenance procedures and Prudent Utility Practices. Section 12.2.Maintenance Budget and Costs 12.2.1 Development_of Budget.The IMC shall develop an annual maintenance budget and a schedule for the maintenance on the Intertie each year based on the budgets developed by the contractors providing Intertie maintenance.This budget will be reviewed with the Participants and Users sufficiently in advance of the commencement of the fiscal year covered so that each Participant or User will be able to submit its comments for consideration prior to finalization of the budget.Budgets for more than one year will be required for the Participants'and Users'long range fiscal planning requirements.The IMC will prepare and furnish the Participants and Users a copy of the long range fiscal requirements for the Intertie,or a forecast of such requirements. 12.2.2 Cost Records.AEA,in cooperation with the IMC,shall maintain complete and accurate records of costs associated with maintenance of the Intertie. Costs associated with maintenance of the Intertie will be recorded using 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 Required Metering Facilities The electric power delivered through interconnection facilities of the Intertie shall be measured by nonreversible watt-hour meters and 15-minute interval demand meters. Page 38 of 53 --Amended and Restated Alaska Intertie Agreement Section 13.2 Access to Metering Facilities and Data The IMC is responsible for the operation and maintenance of the facilities necessary to interface with points of interconnection.The equipment at these points of interconnection is necessary to provide for Intertie operation only.The IMC shall provide for the use of available metered Intertie data output for Participants or Users for the purpose of providing data necessary for their operations. Section 13.3 Installation and Maintenance The IMC shall agree upon the specifications for Intertie-related metering equipment before its installation.Each Participant hereby grants to all other Participants the right to install and maintain at the installing Participants'cost,Intertie-related equipment in other Participants' substations.Each Participant has the right to install and maintain,at its cost,equipment in another Participant's substation only if the equipment is necessary to perform Intertie functions under this Agreement.The installation and maintenance shall be coordinated with staff of the Participant owning and operating the facilities on which the meters are to be installed.Ingress and egress shall be granted to the other Participants to install,remove,or maintain such equipment.Participants shall coordinate such activities. Section 13.4.Testing of Metering Equipment. Participants,Users,and AEA,shall each,at its cost,have the right to require testing of metering equipment for accurate registration by a qualified third party.Such testing shall be coordinated with the Participant owning and operating the facilities on which the meters are installed.The IMC shall be responsible for taking appropriate action to resolve any inaccurate registration,plus or minus,that is not within tolerances approved by the IMC pursuant to Section 9.3,Operating Procedures. Article 14. TRANSMISSION LOSSES Section 14.1 Intertie Transmission and Transmission Service Losses 14.1.1 Method of Determination of Losses.Losses in the Intertie System created by Intertie transfers shall be determined by the Intertie Operators through engineering studies,calculation,and power flow programs,and procedures as established by the Operating Committee. 14.1.2 |Compensation for Losses.The Participant or User supplying Capacity and Energy shall also provide power to compensate for losses which occur from the transfer.Such compensating power shall be provided at the time of the transfer unless otherwise agreed by the affected Participants or Users. 14.1.3.Schedules.Transfer schedules shall include losses associated with such transfers.When transfers reduce losses in a Participant's system which is not Page 39 of 53 -Amended and Restated Alaska Intertie Agreement a part of the Intertie,the losses in that system caused by the transfer shall be considered zero. Section 14.2 Intertie Transmission Loss Compensation Losses occurring due to Energy transfers shall be made up by in-kind deliveries of Energy and scheduled accordingly.All Energy usage that occurs in Intertie facilities within a Control Area will be allocated and charged to the operation of the Intertie in that Control Area.In each month, entities utilizing the Intertie will be allocated losses based on their percentage share of the Energy transferred in their respective Control Area.If no Energy is transferred,losses will be allocated according to MITCR shares. Article 15. RIGHTS OF USERS The rights and responsibilities of a User shall be set out in a User Agreement adopted by the IMC pursuant to Section 8.6.2,Intertie User Agreements.Non-Participant Users shall not be directly responsible for the management,operation,maintenance or improvement of the Intertie, but shall have the same rights,obligations,and responsibilities as a Participant with respect to compliance with operating policies and procedures,any applicable Reliability Standards and the provisions of Section 8.7,Payment Obligation Unimpaired and Article 20,INDEMNITY. Article 16. OPEN ACCESS PRINCIPLES Section 16.1 Definition "Open Access”means that all potential Users of the Alaska Intertie shall be provided access to transmission service on the Alaska Intertie under common terms and conditions that are just and reasonable and not unjustly discriminatory,subject to a priority reservation of Capacity for power supply contracts with AEA projects,and equal access to Intertie system information the IMC has deemed critical for all potential Users. Section 16.2 Purpose The policies and procedures for the operation of the Intertie shall make use of Open Access principles where practicable. Section 16.3.Implementation of Capacity Allocation Methodology The IMC shall use the process and principles in this Section 16.3 as guidance when developing a proposed allocation methodology for Intertie Capacity. 16.3.1 |New Methodology.The IMC shall develop and implement a methodology for the allocation of Intertie Capacity,approved by AEA pursuant to Sections 6.2.4 IMC Authority to Change Capacity Allocation Methodology,and 8.6.7 Maximum Capability and Capacity Allocation,before July 1,2013.The Page 40 of 53 -Amended and Restated Alaska Intertie Agreement methodology shall use and incorporate Open Access and other principles set forth in this Article. 16.3.2 Statutory Conditions.The allocation of Intertie Capacity shall comply with statutory conditions,including that the allocation provide a method by which municipal electric,rural electric,cooperative electric,or private electric and regional electric authorities,or other persons authorized by law to engage in the distribution of electricity may secure a reasonable share of available Intertie Capacity (i.e.,United States Army). 16.3.3.Priority for AEA Contracts.Participants or Users with contracts for power from a facility owned by AEA shall have a priority capacity reservation on the Intertie sufficient to accommodate the transfer of that contracted power throughout the term of the power supply contract with AEA.This priority shall be subject to rights of Participants and Users with firm contracts so long as the Participant or User materially satisfies its related obligations. Continued service under firm contracts will be guaranteed irrespective of whether another AEA-owned project is developed or additional transmission capacity is made available by AEA or another entity.In the event that additional transmission capacity is made available,however,the IMC shall have the right to supply transmission service to those Participants or Users by means of transmission paths other than the currently-existing Intertie so long as there is no degradation in the quality or amount of transmission capacity provided. 16.3.4 Alternative Allocation of Intertie Capacity.If the IMC has not developed and implemented a new methodology for the allocation of Intertie Capacity, approved by AEA,on or before July 1,2013,then the MITCR allocation processes under Article 6 shall continue but in an expanded format.Absent an approved new methodology,after July 1,2013,and notwithstanding the requirements of Section 4.2,New Participant,any User or potential User shall be entitled to become a "Participant”under and for purposes of Article 6 by (a)giving twenty-four (24)months written notice to AEA and the Participants of its intention to become a Participant under Article 6,and (b)executing a User Agreement,if one has not already been executed.Upon becoming a Participant under this section (referred to as a "Section 16.3.4 Participant)the entity shall obtain full rights to MITCR allocations under Article 6, MINIMUM RIGHTS OF THE PARTICIPANTS AND USERS TO USE INTERTIE FACILITIES. 16.3.4.1 For purposes of calculating MITCR allocations under Section 16.3.4 and Article 6 for a User eligible to become a Participant only under Section 16.3.4 and that sells wholesale power to an electric utility,the number of "kilowatts-hours in any clock hour,attributable Page 41 of 53 -Amended and Restated Alaska Intertie Agreement to Energy required during such hour for supply of Energy to a system's consumers,”as that phrase is used in the definition of "System Demand,”shall include wholesale power sold to an electric utility,unless otherwise agreed in writing by the "Section 16.3.4 Participant.”Wholesale power sold to a Participant and included in the calculation of a "Section 16.3.4 Participant's”MITCR may not be included in the calculation of the receiving Participant's MITCR. 16.3.5 Federal Acquisition Regulations.A User Agreement with an organization that is required to follow the Federal Acquisition Regulations (FAR),may differ from the standard User Agreement in order to accommodate obligations to follow the FAR so long as the entity required to follow the FAR has provided the IMC with reasonable assurance that its financial obligations have been or will be satisfied. Section 16.4 Public Process The IMC shall publish its initial proposed allocation methodology for Intertie Capacity and request public comment no later than eighteen (18)months after the Effective Date of this Agreement.The IMC shall consider the public comments before finalizing an Intertie Capacity allocation methodology. Section 16.5 Availability of Information The IMC shall use a transparent approach to:(i)making Intertie system information available to all Users;(ii)allocating Capacity on the Intertie;(iii)planning for Improvements,planned outages,or increases in Intertie Capacity;(iv)developing the types of transmission service and the setting of the appropriate rate for each type (including ancillary services should it deem the provision of ancillary services appropriate);and (v)budgeting. Section 16.6 Review of Methodology The IMC shall request comments on the Capacity allocation methodology in effect once every three years following implementation of the new allocation methodology developed pursuant to Section 16.3,Implementation of Capacity Allocation Methodology. Article 17. BILLING AND PAYMENTS Section 17.1 _Billing Participants and User shall be invoiced monthly for their respective share of Intertie Costs, normally not later than fifteen (15)days after the end of the calendar month to which the bills apply.Bills shall be due and payable within fifteen (15)days from the date the bills are Page 42 of 53 -Amended and Restated Alaska Intertie Agreement postmarked 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.Interest collected pursuant to this section shall be credited to the IMC. Section 17.2 _Billing Disputes If a Participant or User disputes the charges on an invoice,the Participant or User shall nevertheless pay the full amount when due and payable and give notification in writing,within ninety (90)days of the date the bill is rendered,to the AEA and IMC stating the grounds on which charges are disputed and the amount in dispute.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,from the date of overpayment to the date of refund. Section 17.3.Payment of Sanctions Any payments related to sanctions shall be administered as provided in any Reliability Standards adopted by the IMC. Article 18. INSURANCE AND LIABILITY Section 18.1 Insurance During the term of this Agreement,each Participant shall purchase and maintain liability insurance with a carrier or carriers satisfactory to AEA and the IMC 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 Agreement by the Participant or by any of its subcontractors,including injuries to all employees of the Participant and the employees of any of its subcontractors engaged in work under this Agreement.If approved by the IMC and AEA,a Participant that is legally eligible to do so may self-insure for the Workers' Compensation Insurance and other types of insurance required by this Article.An insurance certificate in a reasonably satisfactory form or a copy of the insurance policies along with any undertaking to self-insure,shall be furnished to the Operating Committee,AEA and the IMC before beginning operations under this Agreement. Section 18.2 Types of Insurance The Intertie insurance coverage and limits shall be reviewed by the IMC yearly and may be adjusted with the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA.The agreed coverage must be provided by each Participant to cover those operations of the Participant performed under this Agreement.The Alaska State Risk Management department may also review the coverage and limits,and any required changes to established coverage and limits shall be adopted. Page 43 of 53 -Amended and Restated Alaska Intertie Agreement 18.2.1 18.2.2 Workers'Compensation Insurance.Each Participant shall provide and maintain,for all employees of the Participant engaged in work under this Agreement,workers'compensation insurance as required by AS 23.30.045,as it may be amended or replaced,or other Alaska or federal statue or regulation. The Participant is responsible for ensuring that any of its subcontractors who directly or indirectly provide services under this Agreement maintain workers' compensation insurance to the extent required by law.The workers' compensation insurance policy shall contain a waiver of subrogation in favor of the other Participants.Any Participant who is self-insured hereby waives subrogation in favor of the other Participants. Comprehensive General Liability Insurance.Each Participant shall purchase and maintain comprehensive general liability insurance in an amount not less than the limits approved by the IMC.The other Participants shall be included as additional insureds on insurance required in this Agreement and shall not by their inclusion be responsible to the insurance carrier for payment of premiums therefor.These insurance policies must also contain a cross liability or severability of interest endorsement. Section 18.3.Other Insurance Coverage Requirements 18.3.1 18.3.2 18.3.3 Section 19.1 Participants'Cost Responsibility.Each Participant will bear the cost of the required insurance.Insurance required to be maintained under this Agreement 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. Users'Insurance Requirements.The IMC may set minimum requirements for Users to be included in any User Agreement for Intertie service. Coverage and Certificates.These policies must provide that any cancellation, non-renewal,or material change be upon not less than thirty (30)days notice to all named insureds.Each Participant must provide the AEA and IMC 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. Article 19. REVIEW OF DECISION Review of IMC Decision Participants and Users may seek review of an IMC decision in the manner provided in this Article if they are directly affected by such decision.For review of IMC determinations of compliance or non-compliance with any operating policies and procedures or other IMC adopted Page 44 of 53 -Amended and Restated Alaska Intertie Agreement standards,a Participant or User first must complete any review process specifically provided for in such policies,procedures,or standards.This Article shall not apply to AEA without AEA's written consent. Section 19.2 Initiation of Review Any review process under this Article 19 must be initiated within fifteen (15)days after receipt of written notification of the disputed decision. Section 19.3.Review Process 19.3.1 19.3.2 Section 20.1 20.1.1 Settlement _Conference.Within twenty (20)calendar days after the written request of any disputing party,or such longer time as mutually agreed upon, representatives of the IMC and the disputing parties'senior management with direct authority to enter into a settlement agreement shall meet and make a good faith effort to resolve any dispute.In the event the representatives are unable to achieve a resolution,then the dispute shall be subject to mediation pursuant to this Section 19.3.Completion of the settlement conference procedure set out in this paragraph shall be a condition precedent to mediation under this Section unless one or more of the disputing parties refuses to attend the settlement conference as requested. Disposition of Dispute.Any dispute(s)not resolved by the settlement conference convened pursuant to Section 19.3.1 above,shall be subject to mediation unless otherwise mutually agreed upon in writing.Within twenty (20)calendar days after receipt of a written notice of demand for mediation,or such longer time as mutually agreed upon,the IMC and disputing parties shall jointly select a single,neutral mediator and thereafter shall participate in the mediation in a good faith effort to resolve the dispute(s).If the parties are unable to mutually agree upon a mediator within 20 calendar days after receipt of the written demand for mediation,the mediator shall be selected by the presiding judge of the Superior Court for the Third Judicial District at Anchorage,Alaska,unless mutually agreed otherwise.Any mediator selected must have experience in the subject matter of the dispute.If the IMC and the disputing parties have not reached a settlement of the dispute(s)within an additional thirty (30)days after appointment of the mediator,or such longer period as they may agree,then they may file an action in a court of competent jurisdiction or pursue such other remedies as they may have. Article 20. INDEMNITY Responsibility;Cost of Indemnity Costs of Indemnity.Each Participant shall be responsible for the costs and liability arising out of,or in any way connected with,the acts or omissions of Page 45 of 53 --Amended and Restated Alaska Intertie Agreement the Participant,its agents (excluding other Participants),employees,or officers taken pursuant to or under color of this Agreement. 20.1.2 Participant Indemnity.Each Participant shall defend and indemnify the other Participants from and against any claim or liability,including any related loss or cost,caused by or resulting from the design,construction,installation, operation,or maintenance of any of the electric facilities owned,operated,or maintained by the indemnifying Participant or by reason of the acts or omissions of its agents,contractors,servants,or employees in connection therewith. 20.1.3.IMC Indemnity.To the fullest extent permitted by law,the IMC shall indemnify and hold its members,authorized agents,and officers harmless against all claims and liabilities which they or any of them incur as a party defendant to any proceeding,except one filed by or in the right of the IMC, based on any authorized action of any such person as a member of the IMC, an authorized agent of the IMC,or as an officer of the IMC within the scope of the member's office. 20.1.4 User Agreements.The IMC shall include provisions in any agreements with Users that provide equivalent indemnity rights and responsibilities for such Users as those provided for and required of Participants in this Article provided,however,that this Section may not apply to AEA or other state entities. Section 20.2 Comparative Negligence Any liability,including costs of defense and attorney fees,for claims arising from the concurrent negligence of two or more Participants and/or Users will be apportioned according to the respective percentage of fault attributable to each Participant and/or User as determined by agreement or by the trier of fact. Article 21. WARRANTY DENIAL AND EXCLUSIVITY OF CONTRACT Section 21.1 AEA Denial of Warranty AEA does not warrant the Intertie facilities it owns as fit for their intended use or the reliability or availability of the Intertie for intended operations covered by this Agreement. Section 21.2 Exclusivity of Contract The terms of this Agreement and any provisions adopted by reference or otherwise incorporated into this Agreement set forth the full intent and agreement of AEA and the Participants regarding the matters covered by this Agreement.However,this Agreement does not supersede related Page 46 of 53 -Amended and Restated Alaska Intertie Agreement written agreements,such as the Intertie maintenance agreements between AEA and GVEA or AMLA&P,but is to be interpreted consistently with them. Article 22, UNCONTROLLABLE FORCES Section 22.1 Limited Excuse of Performance. A Participant will not be in default in performance 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. Section 22.2 Suspension of Performance. If a Participant,by reason of an uncontrollable force,is rendered unable,wholly or in part,to perform its obligations under this Agreement (other than its obligations to pay money),then upon that Participant giving notice and the particulars of the uncontrollable force,its obligation to perform will be suspended during the continuance of,but only to the extent of,any inability so caused,but for no longer period thereof,and the effects of such cause shall,so far as possible,be remedied with all reasonable dispatch;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 to the extent caused by an uncontrollable force,nor will such uncontrollable force give rise to claim for damages or constitute default. Article 23. WAIVERS Any waiver at any time by a Participant or the IMC of its rights with respect to a default under this Agreement,or with respect to any other matter arising in connection with this Agreement, shall not be deemed a waiver with respect to any subsequent 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. Article 24. SUCCESSORS AND ASSIGNS;NO THIRD PARTY BENEFICIARIES Section 24.1.Successors and Assigns This Agreement shall be binding upon and inure to the benefit of the successors,legal representatives,or assigns of the respective Participants.However,no Participant shall assign this Agreement nor any part hereof without the express written consent of the IMC,which consent shall not be unreasonably withheld or delayed.Nor shall a Participant be relieved of its obligations hereunder by an assignment of less than all of the benefits and burdens hereunder or Page 47 of 53 -Amended and Restated Alaska Intertie Agreement impose additional obligations or burdens on the other Participants by an assignment of this Agreement or any part hereof.The consent of the IMC under this section shall require at least the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA Section 24.2 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,except as provided herein for Users,and the obligations herein assumed are solely for the use and benefit of the Participants to this Agreement. Article 25. GOVERNING LAW This Agreement is made subject to,and shall be governed by and construed in accordance with, the laws of the State of Alaska and the authority granted to the individual Participants thereunder. Article 26. CAPTIONS,MERGER OF ADDENDA AND EXHIBITS Section 26.1 Captions Captions of the various articles herein are intended for convenience of reference only and shall not define or limit any terms or provisions. Section 26.2.Merger The following addendum and exhibits as attached hereto are hereby merged into this Agreement: Exhibit A -Former AS 44.83.380 Exhibit B -Definitions Exhibit C -Form of New Participant Addendum Exhibit D -Former AS 44.83.398(f)Exhibit E -Intertie Facilities Diagram Exhibit E -Intertie Facilities Diagram Exhibit F --Form of User Agreement Exhibit G -Sample MITCR Calculation Exhibit H -Reserve Capacity and Operating Reserve Responsibility Agreement Subsequent Entering Participant addenda also shall be merged into this Agreement upon their execution by AEA and the Participants. Page 48 of 53 -Amended and Restated Alaska Intertie Agreement Article 27. NOTICES Section 27.1 Notices 27.1.1 Address.Any notice or demand under this Agreement is properly given if sent by registered or certified mail and addressed to the following: General Manager Municipality of Anchorage,Alaska Municipal Light and Power 1200 East First Avenue Anchorage,Alaska 99501 Executive Director Alaska Energy Authority 813 West Northern Lights Blvd. Anchorage,Alaska 99503 President Alaska Electric Generation and Transmission Cooperative,Inc. 3977 Lake Street Homer,Alaska 99603 Chief Executive Officer Chugach Electric Association,Inc. Pouch 6300 Anchorage,Alaska 99503 or 5601 Electron Drive Anchorage,Alaska 99502 President and CEO Golden Valley Electric Association,Inc. P.O.Box 71249 Fairbanks,Alaska 99707 or 758 Illinois Street Fairbanks,Alaska 99701 with a copy to: Kirk H.Gibson McDowell Rackner &Gibson PC 419 SW 11"Ave.,Suite 400 Page 49 of 53 --Amended and Restated Alaska Intertie Agreement Portland,Oregon 97205 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 any Participant to all others. 27.1.2 Means of Notice.Any notice or request of a routine character in connection with the use of Capacity or delivery of Energy,or in connection with the operation of facilities,shall be given in the manner so designated by the Operating Committee,or the IMC. Article 28. AMENDMENTS Except as expressly provided for in this Agreement,neither this Agreement nor any part hereof may be terminated,amended,supplemented,waived,or modified except by a written instrument signed by a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA. Article 29. MUTUAL RIGHT OF ENTRY Each Participant and AEA hereby grants a license and permit to the operators of the Intertie, including the operators'employees or contractors,to enter upon its rights-of-way and to make use of its easements (or similar right to use or enter upon property)to perform work related to the repair,operation or maintenance of Intertie facilities located thereon.Any such entry shall comply with the requirements and restrictions of the right-of-way or easement.Notice of entry and the purpose(s)for it shall be provided to the owner or holder in as timely a manner as is practicable under the then-existing circumstances. Article 30. AGENTS Each Participant shall provide notice to the IMC and the operators of the Intertie of that Participant's appointment of an agent,or Designated Contractor.The Participant shall remain fully responsible under this Agreement for all acts or failures to act of its agents or Designated Contractors.Appointment of an agent or Designated Contractor shall not relieve a Participant of any of its responsibilities or obligations under this Agreement.The appointment of an agent or Designated Contractor shall not be used to have,or have the right to control more than one vote or have more than one voting representative on the IMC.See Section 8.1,Establishment of the Intertie Management Committee,Right to Vote.An agent or Designated Contractor must meet the requirements of this Agreement to become a Participant. Page 50 of 53 -Amended and Restated Alaska Intertie Agreement Article 31. AGREEMENT APPROVAL AND TRANSMITTAL By signing this Agreement,a Participant does not subject itself to rate regulation by the Regulatory Commission of Alaska (RCA).AEA will transmit this Agreement to the RCA for informational purposes only. [The remainder of this page intentionally left blank] Page 51 of 53 -Amended and Restated Alaska Intertie Agreement Article 32. CONSTRUCTION OF AGREEMENT Each Participant agrees that it has participated as fully as it deemed prudent in the drafting and negotiation of this Agreement.Accordingly,the Agreement will not be construed against any particular Participant,or Participants,as the drafter. IN WITNESS WHEREOF,the Participants have caused this Agreement to be executed by their duly authorized officers or representatives as of the day and year first above written. This Agreement may be executed in counterparts each of which shall be an original,and all of which shal]be merged into this Agreement. ALASKA ENERGY AUTHORITY By: Title: SUBSCRIBED AND SWORN TO before me on the day of ,2011. Notary Public,State of Alaska My Commission Expires: MUNICIPALITY OF ANCHORAGE,ALASKA d.b.a.MUNICIPAL LIGHT AND POWER By: Title: SUBSCRIBED AND SWORN TO before me on the day of ,2011. Notary Public,State of Alaska My Commission Expires: Page 52 of 53 -Amended and Restated Alaska Intertie Agreement CHUGACH ELECTRIC ASSOCIATION,INC. By: Title: SUBSCRIBED AND SWORN TO before me on the day of ,2011. Notary Public,State of Alaska My Commission Expires: GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. By: Title: SUBSCRIBED AND SWORN TO before me on the day of ,2011. Notary Public,State of Alaska My Commission Expires: Page 53 of 53 -Amended and Restated Alaska Intertie Agreement ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE,INC. By: Title: SUBSCRIBED AND SWORN TO before me on the day of ,2011. Notary Public,State of Alaska My Commission Expires: Page 54 of 53 -Amended and Restated Alaska Intertie Agreement PRELIMINARY DRAFT OF IMC RESOLUTION 2014-02 CHANGES FOR PURPOSES OF REVIEW AND DISCUSSION ONLY RED-LINED 2/10/14 AMENDED AND RESTATED ALASKA INTERTIE AGREEMENT Among ALASKA ENERGY AUTHORITY; MUNICIPALITY OF ANCHORAGE,ALASKA d.b.a.MUNICIPAL LIGHT AND POWER; CHUGACH ELECTRIC ASSOCIATION,INC.; GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.; ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE,INC. November 18,2011 TABLE OF CONTENTS Table of Contents......0.0...eccccecee cece eect een e nent eset ene ee eee een eeeteseeeeeeeeteseeevasenseeeeecs 1-8 Incorporated Exhibits List.........0.0...ccc cece ence ence ee ence eee ene eeeeeeeeeeetensseeteeaeusasenseeeeeeeeees 9 Recitals...ccc cece cece e cece eee ee enero eee ee een e eee eee ee eens nee eee ee eee eee eeeeeeeetteeseeeeeaeeeeeeeeeaeers 10 Afticle 1.Definitions..........ce.ccesccessccesscceeseeeesceeesceecsesaeeesseeseeesseessasecsssecesseseeseesenscersnseseneees 124242 Article 2.Term and Effective Date .......eee eeeseecseeseceeseeeseneesneeceatecseneceseeesseeeesaceesseeseseees 12RR Section 2.1 Effective Date...cece eecseccssescsecesssecesccescesssesseessseessecsaseenecesscssteesneseeeenees 1222 Section 2.2 Termination 0.0.0...ee eseessceesseeeeceeecssesceescceesecesseseceeesseeeesssesseeeesneeeeeseeeeeeeees 12 2.2.1 Mutual Consent..0..........ccccccccsssssscesccsseecssessuseesessseceeesescvssssesacessesssssesacesesesees 1RR 2.2.2 Participant and AEA.00.0...eeecccssccssssseeesecescssesseccssteeeseesesssessnaeesnseeeesseeseees 124242 2.2.3 AEA Financial Ob1igations,..0......eeesecssccsstseessesessecsescessseecsseesenseeeeeeeereess 1D2RR 2.2.4 Limitation for Financing.0.0.0...cessecsseseerscsseesessecscssesseecesseeesseeeesanseeaeeees 122 Article 3.Operating and Reliability Standards and Enforcement.............eceeseeseseseeeeeeeeeees BBB Section 3.1 Adoption of Operating Policies and Procedures,and Reliability Standards 134343 3.1.1 AEA Responsibilities.........cccscccssssesecssseessescseessseceeaeeceeceeceaseessecesaasesseeeeseees 13BB 3.1.2 Notice Required .........ccsccssccsscssssccsssersccsseceseeseseeesseseceeesenseeceaceeceneessaeeeeeses BBB Section 3.2.Compliance with Standards...tesesessssssesscssseceessceseseeesenesssnesesseeseeeeees BBB Section 3.3.Implementation -Participants and Users .0.......cceeessccssessceeesseeeeesceseeeseneeees 144444 Section 3.4 Replacement of Reliability Standards 00.0.0...ceeessteesseeeeeecsnceeeeneseeceees 14444 Section 3.5 Operating Committe 0.0...eeeecccsssseeesssesseesensesseeeseeecsseeessseecseesseaeeseaeeees 144444 Section 3.6 Required Data SubMiSSIONS.............ccssccsescsesseessesessccentesscesscceseseesteeeeeeeeses 144444 Section 3.7 AEA Power Project Compliance ........ccccssssscsssscessecesecssececeseeceneecenseeenseves 144444 Article 4,Participant 2.0.0...esecccsssecesseceseceesnecssscecssesssessacesseeeatseenscessesessaeeesaceseaeeseseeseaeenes 15454 Section 4.1 Participant Defined .............cccccsceccssessssessessceeseesstecsseeesseeeeseeeesaeecseaeesaeeeses 154545 Section 4.2 New Participant ...........ccccssssssscsesseccssscccseesssssessesesaeceneeessaeessaeesseeeceaeeeneeenes 154545 Section 4.3.Membership in IMC ...0........ccscccsssccescessecssesssceseseesscessaueesseeeseeeeesseceesseseneeses 154545 Article 5.Withdrawal of AEG&T and Other Participant and User Status .............cccseeeeee 154545 Section 5.1 Withdrawal of AEG&T uo...ccceccccssscssscccsseccssnscecesecccesseesesseeacsesaeeseesseesese 1545455 Section 5.2.Substitution of HEA and MEA,and Admission of City of Seward and the United States ALM .......ccccsecccccsssecesssnecessceesseccescseesssseessensecenseseeeseseeeseceueesesseeeessnees 1646146 Article 6.Minimum Rights of the Participants and Users to Use Intertie Facilities............1614616 Section 6.1 Minimum Intertie Transfer Capability Rights (MITCR”).......ee eeeeeeees 164616 Page 1 of 53 -Amended and Restated Alaska Intertie Agreement 6.1.1 Right of First Refusal.........ccccccccccssssssscsssccesssssssessessecessescsseessseesesssesessneres 164616 6.1.2 Allocation of Transfer Capability............:ccccsscsscssssssecessseescesecssceeecsaeseeeeres 1646146 6.1.3 Emergency Operations,.........csccccssscssssecsssecessecesssecceseecesseeeucessneeseessceesaeeees 164616 Section 6.2 Determination of MITCR.............cccssccssccssceseseesecesseeesseessecenseeseessteesseesseessnees 17447 6.2.1 Methodology...........ccccsccscessscesssecssssccsecceseccsessscessuceesssseessceeseesessaseesaeeceseteeses 17444 6.2.2 Unused MIT CR..0...ee eeceseesecssessesnceseeseceeenscessceseeeseeseessesenseaceseteseeeeeeeeeenss 174447 6.2.3 Right to Contractually Transfer MITCR............ccsccssssceseesssesenseeeseneceseeeeees 17444 6.2.4 IMC Authority to Change Capacity Allocation Methodology................06+184848 6.2.5 New State Power Projects..........ccsssccccsscsccssssseccesssseesseesssccescsseccesssnseessnseeses 184848 Section 6.3 Maximum Intertie Transfer Capability...ee ccsesssesnecseneeeeseceseacceeeenes 184848 Section 6.4 Improvements to the Intertic ...........ee esesceesseeceseecesseeeestecessecesesecesseessneeees 194949 6.4.1 Development of Improvements............ccsesseeeccsseecesssccesesceesnseesecessteesseteeeeees 194919 6.4.2 Requests for Improvement,..........:ccsscccsseecessseceeseceesscescnsesenscesseseeesessesseeeees 194919 6.4.3 Responsibility for Cost of Improvement..............:ssssesceseeeeeenseseceeeeeeeeseees 202929 6.4.4 Right to Make Improvements -Required Work..............:ssscscseceseeeeeeeeeeeees 2029020 6.4.5 NOtice,.....cccccccssssesssssscececsesssseseccessssseesseeseessesssaeeeeseeseseseaeesseeessesueaeesesssessnees 202620 Section 6.5 Additional Project Taps..........cccccssccecsssscccseesscccessseseecseseeecesaeceeseneeeseseeeeeeess 202020 Article 7.Costs for Intertie Transfer Rights...ceseseesscessecesscessnseesceseseeresesseeseseseseeses 212421 Section 7.1 Intertic Costs.............sccssssssssncensnnececcsceecseccesecesecesccssessseseseessesessansnnnansenaceaeeses 212-4 7.1.1 Costs to Be Shared by Participants and USerS............eeeesscceseceeeeeeeeseereneees 212424 7.1.2 Annual Budget and Fiscal Year...eseessscessceeeseeressecessneeseeeeeseceenseesens 222222 Section 7.2 Calculation of Intertie Costs and Rates .............cccssessscssssesersenscessccessecceseeees 232322 7.2.1 Participant and User Estimates,Participant Historical Data........0........232322 7.2.2 IMC Estimates............cccccccccssssssccccessssssccceccesessssnscsceccesecseesaeceeeessusaceeseesesenes 232322 7.2.3 COMMEMMS............ccccesceecessessncnnnscecceceecececececeecesecesaesaeesseesessessucnscansuansensensenss 232323 7.2.4 IMC Determination of Estimated Intertie Usage.0.0...ee ecesccssceeeneeeenees 232323 7.2.5 Energy Rate........ccceessccecsssscesesscceessecceeesseesesccsseeseessseessesseesceeseeserseeseseeneeeses 232323 7.2.6 Capacity Rate.0.cceccscsssscsecescssscsrscsssesesessessessessesscssccssscnsssersssesesesoners 232323 Section 7.3 Allocation of Intertie Costs .0..........ccccccccccessssessneseccessssssnseececsessceeeceseesesseaeecs 242423 7.3.1 Participant and User Payments...............:ssesccesseeeeseceseeceeseeeeseenseceeereeseseeees 242423 7.3.2 Annual Payment of Intertic Costs...........eeeseeeseesecessceeeeseeeeeeeeceeseeeeeeeneees 242424 Page 2 of 53 -Amended and Restated Alaska Intertie Agreement 7.3.3 Monthly USe.........cessesscssssessesssescsscssesseessscseesssssessessonseoesssosseessasesssesscenseeeues 252524 7.3.4 Excess ReVenues........scccccccessssscsccceceseccesssseececssnseeseceeeesacsetccsesvesseneeaseccvsesenes 2523524 7.3.5 Revenue Deficiencies............:ccccsesscessecssenccessesccnseseccesneesesseseceessaeeesensreceens 252524 Article 8.Intertie Management Committee...ccc secessesssesssssscseesssnessesesesceeesssaseneseneeees 252524 Section 8.1 Establishment of the Intertie Management Committee,Right to Vote.......252524 8.1.1 Eligibility to Vote.0...ei esesssssscssccssseseccesecsessscsessscsssssessseseeecesesssesonsseceeees 252525 8.1.2 MiNuteS......ccccccccccccscssecsseeserssssssnsseessssescesensssessesesecseetseseseesesseessenseensansesanenes 262625 Section 8.2 Adoption of Procedural Rules or Bylaws........c.ccecssessssesssssesseesscnseeeenees 262625 Section 8.3 Effect of ADStention,...........cc.cccccccssssesesscceceesseesceceesssensseceseesccsaceseceeesesseeseees 262625 Section 8.4 Meetings by Electronic Communication...........cc ceessseseeeeesesssersceneeeseneeeee 262625 Section 8.5 IMC Responsibilities...eeecesseessesssesssssssescsseeseeccsssscssseeessescseeeseenecs 262625 8.5.1 IMC Responsibilities and AEA Duties.......ccc eeeeseeseeesesessereesseeeseeneeees 262625 8.5.2 IMC Approvals........:cccsccsecessccseecessceressessscesscesnesscecaesesescsesesssssssssssessseseesaneees 272726 Section 8.6 IMC Actions ........ccccccccccccccsecccecsenenssssecceeecnencseecseueneessscsesesesscesececanenagerenseeeers 272726 8.6.1 Intertic Operation,0.0...ee ee eesceeseeecserseseeseessenssscsssscsesraccsesceseseesseseseeeeseeeess 272726 8.6.2 Intertie User Agreement...ees sesessseessscsssesssesessccessccsrscensesessseecseeeeeneeess 272726 8.6.3 Non-Compliance Appeals..0.......:cscscecsceceseceseeeseeeeessecsseeessesesseesvsnsecesesesseas 272726 8.6.4 O&M and Scheduling...ee eceeeseceseeecseeesesessecesssesessesessessssassesseesseeeoees 272727 8.6.5 Budget.....ceeccesccsscccseceseseseecsssesecseseesscsasesscsssosscsesceesoseusssassesssssesseeeseeesssosess 27277 8.6.6 Cost Allocation and Payment Schedule...0.....ect eeeseeseseseseseteseesseesesesoeeeoes 2727 8.6.7 Maximum Capability and Capacity Allocation..........ccccsccsesesseeeeneeeeees 282827 8.6.8 Determination of Actual Payment Obligation.00.0.0...ee ee eeeeeeseeeeetseseesenee 282827 8.6.9 Funding Methods..0...........cssscceseccessessceeseecsseesssessesecssessessesessescsseeseeesesseeeens 282828 8.6.10 IMProvemMents.........cccsccscseseeseeeceeseescsecseeescesecsseseseessssassssessssecssesenseesceasenes 282828 8.6.11 Maintenance.............ccsssseccceesssseneccccssccesesscscccsssnsseceessssnneeeesesnscceeseeseeeeasaeas 292928 8.6.12 Creation of Reserve FUund............cccsscccssssssecsssesscccesssssnsecesssssenceeeeseseseseeeeens 292928 8.6.13 Procurement Of S€rviCes...........cccccccssssccccsseecccssssssessenscsasenscsscececceesesceeeeereees 292928 8.6.14 Miscellaneous............csssesessesecsscsnsccccessseneceseccecesesssessnssnsnsessesecceceseeseeceseeereree 292928 Section 8.7 Payment Obligation Unimpaired 0.0...ceeesssssecsscossscesesneessessseeeseseeeeees 292928 Section 8.8 AEA's Ability to Perform Required Work...ce ceescessesssceseeereeeseeeees 292928 Section 8.9 Payment Obligation and Rights of Review .........cccecscssesesssscsscereeseteneeneeees 303929 Page 3 of 53 -Amended and Restated Alaska Intertie Agreement Section 8.10 AEA Authority to Collect Payments and Disburse Funds .............:..cceceee 303029 Article 9.Operating Committee ...........cc cesscssscssssesssececesscessesecseseecensasecesscessseeecessecenaeesnees 303029 Section 9.1 Establishment of the Operating Committee ............ccccsssscsssscsseteeeeeenceereeeaes 303929 9.1.1 Establishment,..........ccccccccsssesssssccsssesesecesssceseaeecessceceeseecssseecseseeceneseesereessnsens 303029 9.1.2 Representatives.........cssccscssccsssscesseessncecesscessseeeseaseeseaecessasssessecensseeaneeeaseeeons 303029 Section 9.2.Meetings of the Operating Committee ..........ec ceeeesssececeeeteteeteeeeenseeeneeeees 313430 9.2.1 MEECHINGS.........eessececcccssseccecsseceesssncecessueecessscnscesessaseseeressaneeseeseneeessaneeserensees 313439 9.2.2 VOtINE.oo.cceeeecssssssccccecessceeccessscceessseesecsceesenssssseceerscseseecsesseeesessneeeesneceserseaers 313439 9.2.3 MUN UIES..........cccccescececcsessessseccecesessesesceceesssssusnsacecceesessssenaneescesessessseseeeeesseesaes 313430 9.2.4 EXPOMS€S.........ssceessceeeseeeseesecescsssseressesceessnssescessseeeesessesssesoseessecesesesesseeaseeues 3134389 9.2.5 Meetings by Electronic COMMUNICATION.............eeeeseceseeceeseeceeteceeneeeeeneeeses 313439 Section 9.3 Operating Procedures ............cscsssssccssecessnecessccesessccersecesesseessneeseerenseeeesreese 313+ Article 10.Operation of the Intertie 0.0...ee eeesecsenecssenseescceteneneesnseeesensecesnsenseeeeseeeseseesees 313434 Section 10.1 Responsibility for Operation of the Intertie 0...ee ee eeeeeeeeeeeeeeeeeeeees 313434 10.1.1 Responsible Participants...es eesecscessccessseeseeeessssencscescsssensseeesoneessceeeses 313434 10.1.2 AML&P and MEA Responsibilities..............:ccccsscecssscesssceceseeceeeeeseeeeseeeeees 323234 10.1.3 GVEA Responsibilities..............::cccssssseecccecesessssncceceeeeeserssseceeesessenseeeeeeseeres 323234 10.1.4 Joint Responsibilities..........ee eesescesececesceceeccceseeeecssaceesneeessseesnsesseneesseseesseees 323232 10.1.5 Oo)018 ¢:018 |0:343433 10.1.6 Load Balancing...........ccessccsescecescccssetecsceessceeessceeesscesessecessceeesseeessceeeeeeensnees 343433 Section 10.2 Suspension of Work in Performance of Operational Duties........0....ee 343433 Section 10.3 Budget for Operation of the Intertic.........eeeeseseseensseetsseeeneeeseereneasees 343433 10.3.1 Budget Process.2.0...sscesesccssscessecesseescecessseesesseessneseeseeasosseeesseesssssossaeoeseees 343433 10.3.2 Participant COMMENMS...........cessessensesessseeseessensesesssseceessseceesssececsseneesensneeees 343433 10.3.3 IMC Establishes Bud get............c:cccssccessecseseecseceesseeeseseeeeecseeeseessnseseeseesaneasee 343434 10.3.4 IMC Determinations and Payment of AML&P and GVEA...........:ccceeseeeees 343434 10.3.5 Payment if IMC Unable to Determine Fixed Cost Fee.occ eeeeeeeeeeeees 353534 Section 10.4 Accounting and Records .00......eeeceeesceeeccesseecesceeecsecesseeeeseeeeseeeeneeeteesenseeeons 353534 Section 10.5 Audits ...........ccssssssscccsssscecesseccesscecesssecessseeeeesseesesessessesssseeseesseeessseteesssaeeeens 353534 10.5.1 Request for Audit.0...ce ceesccsscssessesssesssesssesseesssssccsesessessssesssensessesereesusones 353534 10.5.2 State Audit.0...esscccsccssesssesscsessecscesceseeesesesseessesecesecasecseeeseseeseeseesaeeesseenaes 353535 Page 4 of 53 -Amended and Restated Alaska Intertie Agreement Section 10.6 Payment of Operators .........ccc ceecsseessrecsescnecesseseesssccssesseesessceseeeesceessseneeses 363635 Section 10.7 Change in Ownership or Control...ese seescseeseeeesesteenccetessesseeseesssesseenees 363635 Section 10.8 Critical Repairs and Maintenance .0........ccceesssessecssceseeeesecesssessresseeessesseeees 363635 Article 11.Scheduling of Capacity and Energy on the Intertie 0...ee eeseeseeeeeeeeeeeees 363635 Section 11.1 Scheduling Responsibility 0.0...eee cesscscesccseesssceseectecesecesseesseeeeasoesaoes 363635 11.1.1 Southern Group,.........ccccceseceeseccesseeessecsecesseesseseseessseesessecsstacseseneessneeeseesesseees 363635 11.1.2 Northern Group,........:escecssecsssseescsessesessecesecessessseeseseeseessecseseeeeseeeeeseeesenseces 363636 11.1.3 COOrdinatiOn..........cccccsesccccccessssscsceascesnsecesesnasecssseessecsesessaaescesceesesseeaeacessesnees 37336 Section 11.2 Capacity and Energy Schedules 0.0...eeesscsecsessesessescseesssesssasenesesenes 3736 11.2.1 Participant Hourly Schedules.000.0...eescsssesscreseseessesesesessessscessesenesseseees 373-6 11.2.2 Advanced Scheduling..........cccsccsesescseecseceseceeseesseeecsecesceeeceseeeensaeeecsseesssenseess 37336 11.2.3 PLOCECUIE..........sseccecceesssncecccsesssreacesccssescesensnesecssnssecenecseanesecseesessscneeseseseusaues 373-36 11.2.4 Short-term Scheduling..............ccsscssesscesecccensesseesseeeeseeesseeceseeeeseceeesseesenseees 37336 11.2.5 Modification of Scheduling Procedures...........cee sseeecceeseececoeeeeeeeeeeneeeeseeees 37336 Section 11.3 Intertie Schedule Limitations ............ccccsccccssseccesssssesecceessscnceseceeeeesssseneeeeees 3736 Section 11.4 Transmission Service to Access the Intertie.................ccccsscsesceceeesessnsceenens 373737 Article 12.Maintenance of the Intertie Facilities...ecscecscsssccecceceecsenscessecsssesesecesceeeees 383837 Section 12.1 Maintenance Responsibility ..0...cece ceseseceseeeeeseessseeceseseseeeseneesseeaeees 383837 12.1.1 Responsibility for Maintenance Practices.0.0...ceescesscessesessscessteceesesenseees 383837 12.1.2 Availability.........cscesccsscescecsscesecesscessesccesecsseesescsscessessescssscssesssasosseessasensessess 383837 Section 12.2 Maintenance Budget and Costs .0........ces csssssessseccsseeseessesesecessesesseesesenesees 383837 12.2.1 Development of Budget...ce esescseececsssesesencenscsseseseeessesesesssssesessnesees 383837 12.2.2 Cost Records.........cccccssecscesscsssssscccccesssssneesecsensssnnsaneeacecececeecesesseesseesserseesceees 383837 Article 13.Measurement of Electric Power and Energy......cscesesccsssesescsrecssecesesesoeseeeeees 383838 Section 13.1 Required Metering Facilities .......0.ee eeececeseeeeseeeesseeeesssersseseesseesseeseeees 383838 Section 13.2 Access to Metering Facilities and Data...ee eeeeseceeseeeeceeeeeeceeeseeeoeees 393938 Section 13.3 Installation and Maintenance.............ccccsssscccsssssceccsssscecceceecesessseceeeeesseseeeeess 393938 Article 14.Transmission Losses ...........:::cccccssssssscccccsscceesssscccsesseseccessscececesseessseeceeeseeseseaseees 393938 Section 14.1 Intertie Transmission and Transmission Service LOSSES...........ccccccceceeeerees 393938 14.1.1 Method of Determination Of LOSSES............csscccsseseseesseeesssceceeesscceeseseeeseeees 393938 14.1.2 Compensation for LOSSES..........cscscssscescssssssssscessesscsrsessesesssorseessesessseeeneess 393939 Page 5 of 53 --Amended and Restated Alaska Intertie Agreement 14.1.3 Schedules.......cceescccescescecessssceseeesaseeessessesssssessesssescesecssceessesseesseseseesseeetes 393939 Section 14.2 Intertie Transmission Loss Compensation ............cssccsseseeceeeeeseseeneeeeesoeeeoes 404039 Article 15.Rights Of Users...cccscccsssccesssssesscessscessssessscceseeeesneceesseesseeeesasesenscessueeeaueesenes 404039 Article 16.Open Access Principles...........ccccccssccsstccsecesscessecceseneesesceessaesecsecesseeeeceaeessaeesees 404039 Section 16.1 Definition...cecccccccssssccsessseccessssccssseecssseecesescacecesssuseseeeeseecensnseeessneeenes 404939 Section 16.2 Purpose ......eee eesssssnecceccssssenseceeceessseececeesenssetecsseessesssesseeseesecessseseesesoseenes 404039 Section 16.3 Implementation of Capacity Allocation Methodology..........eescessesesesseeees 404040 16.3.1 New Methodology..0........cscccssseesseecessceesceessceessneeessceecessaeseseeesssssassesoseesonees 4040-40 16.3.2 Statutory Conditions..........cc ccescceeesecesseeececeessneeesseesessasesssssessseesssesssseseneesees 414446 16.3.3 Priority for AEA Contracts...eesesececeeeceeseeeecscneessseaseseeessssessseseesscseseess 414446 16.3.4 Alternative Allocation of Intertie Capacity...0....eee ce tesceseceeeeeessteeessesoeeees 414446 16.3.5 Federal Acquisition Regulations..............:csssssssscstsecssccesessessseeceseeseseeeseeees 424244 Section 16.4 Public Process.......cccc ces csscssscsecceccccecuccccucnesesscensececceaecnscusesesecsseseesesenseacoss 424244 Section 16.5 Availability of Information .............cee seessssesseceenceseseeeesneeseneeeetseteesceeesseeenes 424244 Section 16.6 Review of Methodology...eeeseseccessceessceeeseeeeseceeessseesseseosseaseecesseeasenes 424244 Article 17.Billing and Payments ....0.....cc cccessscssseseceescneeeseeesseseesessesscssesssesesesscssosesesssoseees 424242 Section 17.1 Billing...eeescccssscerceessseecccsscnecesseceeseseesscesasseeessenseessesseeesssseeseonseeaees 424242 Section 17.2 Billing Disputes .0.........cee eeeetcsssesesseeeeecsseeesesesseescsssessasessesesesceasenseeseesees 434342 Section 17.3 Payment of Sanctions .0......eee eessessceeseessesseeesseseeseensesesessesesssesasensseeeseees 434342 Article 18.Insurance and Liability...ceesseceeseceesseseeeeessceceseseceesecssceeeeessssesecsseesoeses 434342 Section 18.1 Insurance ...........ccceeesssccccecssssssscccceessnseececcesesseneeesecesenesssneeeseeeceesessessesessesnees 434342 Section 18.2 Types of Insurance .0......eee ee eseceescceseeesseceeseeeesssseesseesonsacesseescsssessresoeees 434343 18.2.1 Workers'Compensation Insurance..........ccscesccssceeseeeeseseesseesseeeseeseeseaaoseens 444443 18.2.2 Comprehensive General Liability Insurance...0......cee eeseesseeeseresseseeeeaeeeeene 444443 Section 18.3 Other Insurance Coverage Requirements ............:cessssseceesecceeeesesesenseeeerees 444443 18.3.1 Participants'Cost Responsibility.0...ce esscssseseeseseesesesseeesssaseensseseseoosaee 444443 18.3.2 Users'Insurance Requirement..............eeeceeseeccesseceeeeceeseeeessaeeessersrereneees 444443 18.3.3 Coverage and Certificates...........cesscsssessseeessenceesecereseneeeseeeececeeeeeeeesereeseners 444443 Article 19.Review of Decision .............cccccssssccccceesssnsecccsesssssssececeessssssnseaceceeseseessnaceesesesaeanens 444444 Section 19.1 Review of IMC Decision...............ccsssscccsesessssccceessssessnsaceeeceessensceneeeessssneeeees 444444 Section 19.2 Initiation Of REVICW............::ccccccssssssececesssssscccceeessssseescaceceesssessnceeseeseeeaeeees 454544 Page 6 of 53 -Amended and Restated Alaska Intertie Agreement 19.3.1 Settlement Conference............::cccccccsseccssssseeccsssseeeesssssssceecessceenssssesecsscesesees 454544 19.3.2 Disposition Of Dispute...cecccescessesseseseseseeesescssessssscseseseseseeeeseneeeseessnees 454544 Article 20.Indemnity 00.0.0...ce eesceesceersssesessscesseeesssenescsessneeesseassescesssesesaacssseeessseescssasesness 454345 Section 20.1 Responsibility;Cost of Indemnity...ceessscsccsecsseessesesesceecesseeesoneenes 454545 20.1.1 Costs of Indemnity...........ce eeeececeeceeessceseceesssssseseseeeesscescseeessseeesnseeeseeseneeens 454545 20.1.2 Participant Indemnity........ee cee ccseeeessceseeesneessesesssesessasseseesesseesesersoeeness 464645 20.1.3 IMC Indemnity,...........:.cesscesececsscccecessceesscescesessceseeecseeecsseeessceeessceesesssessnees 464645 20.1.4 User Agreement,oc.ccseescscsssecssssesssssscessrsessssessssseseensescsesscessesonseeesensessaeers 464645 Section 20.2 Comparative Negligence ..........ccecesscescceccrscsssseecsssssrsscssscssssessssssesseenees 464645 Article 21.Warranty Denial and Exclusivity of Contract ........ccccscssssescsscsssessssssseseseseeeees 464646 Section 21.1 AEA Denial of Warranty...ceesscessseeseescseceseeeesceessseeenssesesssesesseneeerees 464646 Section 21.2 Exclusivity of Contract...cescesssessscsessccssesssssecesseecsesseesssesseesssesseaeeeses 464646 Article 22.Uncontrollable Forces .........ccccccccssssscssscsssseccesceessssecesecsesseseseceseseessesseeseeesessreneenes 474746 Section 22.1 Limited Excuse of Performance..............ccccccsscccsssscecccceessssennnceeceesenseeeeeeeees 474746 Section 22.2 Suspension of Performance.2.0....cccssessessecssccsscsesessesseesesseesseesssssseesesseesees 474746 Article 23,Waivers ...........ccccccccccccccceseeseeesscsscescessesssceseesseneceaeesesenstensasssenceaasaeseasaaaaeaaauaseaeoes 474746 Article 24.Successors and Assigns;No Third Party Beneficiaries ...........cc eessessesseseseeeees 474747 Section 24.1 Successors and ASSIQMS ..........::cccssessssccssseseesseeeceascessseeeesesseeeesessseseoeseesosseaees 474747 Section 24.2 No Third-Party Beneficiaries .0......cc eeesccsscesscessscessecesseseesseeestesessnesseetees 484847 Article 25.Governing Law.............secccesssescssseceesssencncsenseesesnssssssssssassaessensssecsssssseseesseesoensaee®484847 Article 26.Captions,Merger of Addenda and Exhibits...cic ecssecsceessscsssseneessersneseees 484847 Section 26.1 Captions........cecesccscssscesscessecssesesccescsssesasssesseesssssaceseesesesensccnsesessasesaeersennees 484847 Section 26.2 Merger ........ccscccseceesscecssceescececsreeeseceecsssessssssnssessssssesssssesesssecnseesonsesceeeeseseeees 484847 Article 27.NOtices.........cccsscssccsccscccsceceeccsecsssessssscssncsrsscssnecnncesetssessnssncaacocacceccscceasaseaseesessevenes 494948 Section 27.1 Notices .....cccccccccscscssssssssssssssssssnacecseescosnscsscecessaseneeseesscececeeeceseeeseeseseeesseseranes 494948 27.1.1 AATESS.....ccceccccccccccccssesescessscssvsscsesssssevsesserseesacsavsenssssscoeccnsceeauensaecerseceeseseeees 494948 27.1.2 Means Of Notice...........:cscsssssssesssncscteesssnnnessccesessssnsnenacenscsesacsaceaeeeeeeeeecseerenes 505049 Article 28.Amendment .............ccccssssesscccessessnsceccecssccssscaceesessaceessssnaaeecessesesscsaceeesonssaeeeonens 505049 Article 29,Mutual Right of Entry 0...eeccsecseseeseeesscsscsscesesessessessssscesssenasneesessensesenees 5303049 Article 30.Agents .0.....cece eeeesscesesecesesecsssecscscsneccsscssscesesesessssscseseesssscessesesseeceaeessesensnsesnase 505049 Page 7 of 53 -Amended and Restated Alaska Intertie Agreement Article 31.Agreement Approval and Transmittal...eceeceseseecseeseeeseeteeceesseseeseesseeens 515450 Article 32.Construction of Agreement ...........cccccscccsssssscsseesseesseessesseecseseesseeseeeseeestenenseeseeese 52 Exhibit A -Former AS 44.83.380 Exhibit B -Definitions Exhibit C -Form of New Participant Addendum Exhibit D -Former AS 44.83.398(f) Exhibit E -Intertie Facilities Diagram Exhibit F Form of User Agreement Exhibit G -Sample MITCR Calculation Exhibit H -Reserve Capacity and Operating Reserve Responsibility Agreement Page 8 of 53 -Amended and Restated Alaska Intertie Agreement Incorporated Exhibits Exhibit A -Former AS 44.83.380 Exhibit B -Definitions Exhibit C -Form of New Participant Addendum Exhibit D -Former AS 44.83.398(f) Exhibit E -Intertie Facilities Diagram Exhibit F -Form of User Agreement Exhibit G -Sample MITCR Calculation Exhibit H -Reserve Capacity and Operating Reserve Responsibility Agreement Page 9 of 53 -Amended and Restated Alaska Intertie Agreement AMENDED AND RESTATED ALASKA INTERTIE AGREEMENT Among ALASKA ENERGY AUTHORITY; MUNICIPALITY OF ANCHORAGE,ALASKA d.b.a.MUNICIPAL LIGHT AND POWER; CHUGACH ELECTRIC ASSOCIATION,INC.; GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.; ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE,INC. This agreement ("Agreement”),is made and entered into this 18"day of November,2011 ("Effective Date'),between ALASKA ENERGY AUTHORITY,a public corporation of the State of Alaska ("AEA”);MUNICIPAL LIGHT AND POWER,a department of THE MUNICIPALITY OF ANCHORAGE,ALASKA,("AML&P”);CHUGACH ELECTRIC ASSOCIATION,INC.,a not-for-profit electric cooperative membership corporation of the State of Alaska ("CEA”);GOLDEN VALLEY ELECTRIC ASSOCIATION,INC.,a not-for-profit electric cooperative membership corporation of the State of Alaska ("GVEA”);ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE,INC.,a not-for-profit electric cooperative membership corporation of the State of Alaska (""AEG&T”).These entities, other than AEA,and subsequent qualifying signatories to this Agreement shall be referred to individually as "Participant”or collectively as "Participants.” WITNESSETH WHEREAS,AML&P,CEA,GVEA,and AEG&T each own and operate electric utility facilities and/or are engaged in the business of providing Capacity and Energy to customers;and WHEREAS,it is expected that entities other than the Participants will also use the Intertie;and WHEREAS,the State of Alaska funded and AEA constructed the Intertie and made these electrical transmission facilities available to the Utility Participants under the Original Agreement for Capacity and Energy transactions to benefit Railbelt customers,ensure delivery of energy from State-owned projects,and improve reliability and economical Capacity and Energy deliveries to the Utility Participants'customers under the former Alaska Energy Program established by former AS 44.83.380 (attached as Exhibit A);and WHEREAS,the Participants entered into the Original Agreement to improve the reliability of their interconnected electrical systems and engage in transactions for electrical Capacity and Energy with each other under individual contractual arrangements between the Participants using the Intertie;and Page 10 of 53 -Amended and Restated Alaska Intertie Agreement WHEREAS,the Intertie interconnected the Railbelt electric utility systems so that they operate in electrical synchronism;and WHEREAS,AEA and the Participants desire to establish the Intertie Management Committee ("IMC”)and provide it with primary responsibility for the governance,control,operation, maintenance,repair,and improvement of the Intertie;and WHEREAS,AEA and the Participants desire to set forth the responsibilities and rights of all users of the Intertie ("Users”);and WHEREAS,it is desirable to maintain the reliable operation of the Alaska Intertie for all Users; and WHEREAS,it is desirable to have uniformly applicable standards for maintaining and enforcing reliability on the Intertie;and WHEREAS,the Utility Participant Parties to the Original Agreement are also Parties to the Reserve Capacity and Operating Reserve Responsibility Agreement,a separate and independent contract that was made Addendum No.|to the Original Agreement in order to provide for the reliable operation of the Intertie and the interconnected Railbelt electrical system;and WHEREAS,it is desirable for all Users to execute an Intertie User Agreement ("User Agreement”)under the same terms and conditions and to be subject to the same operating policies and procedures,Reliability Standards,and compliance measures in keeping with Open Access principles;and WHEREAS,the IMC is the appropriate organization to transition Intertie operations and policies to Open Access principles;and WHEREAS,the management of the Intertie will be most effective if the IMC membership is made up of representatives of AEA and electric utilities who are qualifying Participants;and WHEREAS,AEG&T shall be allowed to terminate its Participant status immediately upon its execution of this Agreement;and WHEREAS,the members of AEG&T,Homer Electric Association,Inc.a not-for-profit electric cooperative membership corporation of the State of Alaska ("HEA”)and,Matanuska Electric Association,Inc.a not-for-profit electric cooperative membership corporation of the State of Alaska ("MEA”)individually shall have the one-time opportunity to become Participants immediately upon their timely execution of a New Participant Addendum;and WHEREAS,the United States Army and the City of Seward individually shall be allowed to become a Participant immediately upon their timely execution of a New Participant Addendum; THEREFORE,in consideration of the mutual covenants in this Agreement,AEA and the Participants agree as follows: Page 11 of 53 -Amended and Restated Alaska Intertie Agreement Article 1. DEFINITIONS Definitions are as specified in Exhibit B,attached hereto and incorporated herein by this reference.Exhibit B shall remain in effect during the term of this Agreement,but may be amended from time to time in the manner provided in Article 27,AMENDMENTS. Article 2. TERM AND EFFECTIVE DATE Section 2.1 Effective Date This Agreement supersedes the Original Agreement,and shall become effective immediately upon its execution by AEA and the Participants.This Agreement shall remain in full force and effect unless otherwise terminated as provided herein. Section 2.2 Termination 2.2.1.Mutual Consent.This Agreement may be terminated at any time by the mutual consent of all Participants. 2.2.2 Participant and AEA.Any Participant may terminate its participation in this Agreement by giving at least thirty-six (36)months advanced written notice and paying or settling all of its outstanding obligations for Intertie Costs existing before the effective date of its termination,and including any other obligations related to Intertie financing or other funding or sanctions for non- compliance with Reliability Standards.AEA may terminate this Agreement by giving at least thirty-six (36)months advance written notice,and,if applicable,paying any amounts it is obligated to pay that were due and owing before the effective date of its termination.Termination of this Agreement is conditional upon AEA making a determination that such action is required to improve power systems serving utilities in the Railbelt.Unless it is otherwise agreed in writing,any Participant that terminates its participation shall be liable only for those Intertie Costs and other obligations that existed before the effective date of its termination,as set out above. 2.2.3.AEA Financial Obligations.In the event AEA incurs,or intends to incur, financial obligations that are recoverable from the Participants pursuant to Article 7,COSTS FOR INTERTIE TRANSFER RIGHTS,the Participants' requirement to provide advanced written notice of termination shall be thirty (30)calendar days.Termination under this Section shall not be effective until the terminating Participant has satisfied the requirements of Section 2.2.2, Participant and AEA. 2.2.4 Limitation for Financing.The Participants and AEA may agree to limit their respective rights under Sections 2.2.1,2.2.2,and 2.2.3 to terminate this Page 12 of 53 --Amended and Restated Alaska Intertie Agreement Agreement in conjunction with bond or debt financing for repairs or improvements to the Intertie.To be effective,any such limitation agreed to pursuant to this Section 2.2.4 shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA. Article 3. OPERATING AND RELIABILITY STANDARDS AND ENFORCEMENT Section 3.1 Adoption of Operating Policies and Procedures,and Reliability Standards The IMC shall determine the operating policies and procedures for handling the obligations and responsibilities for providing Reserve Capacity and Operating Reserves for the Intertie.The IMC shall have the authority to adopt and implement operating policies and procedures, Reliability Standards for the Intertie,and enforcement processes,including sanctions and other remedies.All Participants and Users shall be obligated to comply with all operating policies and procedures and Reliability Standards adopted by the IMC.All operating policies and procedures and Reliability Standards shall be adopted,applied and enforced by the IMC in a uniform,non- preferential,just and reasonable manner that is not unjustly discriminatory.The adoption, amendment,or modification of operating policies and procedures shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC.The adoption,amendment,or modification of Reliability Standards and enforcement processes,including sanctions and other remedies shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA. 3.1.1 AEA Responsibilities.AEA shall have the authority to void any operating policies and procedures or Reliability Standards that AEA reasonably believes would adversely affect the safe operation of the Intertie,breach AEA's statutory mandates,or directly jeopardize AEA-owned Intertie assets in a manner that would be inconsistent with Prudent Utility Practices. 3.1.2 Notice Required.Except in the case of an emergency,AEA shall provide the IMC at least ten (10)business days prior written notice of its decision to void any operating policy and procedure or Reliability Standard. Section 3.2 Compliance with Standards In the event a User fails to comply with the Intertie operating policies and procedures or Reliability Standards,the User may be subject to any sanctions or other enforcement policies adopted by the IMC applicable to such non-compliance.Compliance with Intertie operating policies and procedures and Reliability Standards is a material obligation of this Agreement and the User Agreement. Page 13 of 53 -Amended and Restated Alaska Intertie Agreement Section 3.3 Implementation -Participants and Users All Users shall execute any necessary agreements and take such reasonable actions as may be requested by the IMC in order to implement operating policies and procedures or Reliability Standards and any sanctions for non-compliance approved by the IMC.Each Participant or User shall require or be responsible for all non-residential customers or generation projects on the Participant's or User's system to comply with all applicable operating policies and procedures or Reliability Standards approved by the IMC as a condition of connection to the Participant's or User's system.The IMC,excluding AEA,shall assist in the enforcement of this provision. Section 3.4 Replacement of Reliability Standards In the event Reliability Standards adopted by the IMC are replaced or superseded in whole or in part by the order of a state or federal regulatory agency or by the terms of a state or federal regulation or statute,the IMC shall make amendments to or terminate the Reliability Standards to the extent the IMC deems prudent or necessary upon such change in accordance with Section 3.1,Adoption of Operating Policies and Procedures,and Reliability Standards. Section 3.5 Operating Committee The Operating Committee,established under Article 9,OPERATING COMMITTEE,shall advise the IMC on setting operating policies and procedures for the Intertie.The members of the Operating Committee shall have experience and expertise in the operation of electric utility transmission and distribution systems and the Railbelt's transmission system.The IMC shall give consideration to the group's proposals and take action to adopt,modify or reject any such proposal within one-hundred-twenty (120)calendar days. Section 3.6 Required Data Submissions. Each Participant and User (or their designated agent or Designated Contractor)shall submit to the IMC all data as reasonably requested by the IMC,whether related to any operating policies and procedures,Reliability Standards,or otherwise.A Participant or User shall notify the IMC of its designation of an agent or Designated Contractor prior to having that agent submit any data on behalf of the Participant or User. Section 3.7 AEA Power Project Compliance AEA anticipates that Users engaging in Intertie Transactions for transporting power from state projects (such as AEA's Bradley Lake Hydroelectric Project or future state-owned projects)will contractually assume responsibility for compliance with all applicable Intertie operating policies and procedures or Reliability Standards,and accept responsibility for any sanctions or other duties required of such Users by any operating policies and procedures or Reliability Standards.If Users transporting power from state projects assume those responsibilities,AEA or the state agency owning a power project shall not be directly or indirectly responsible for such compliance or sanctions absent their written agreement to assume such responsibility. Page 14 of 53 -Amended and Restated Alaska Intertie Agreement Article 4. PARTICIPANT Section 4.1 Participant Defined Participants will be responsible for the governance of the Intertie through participation in the IMC in accordance with Section 4.3 Membership In IMC.For purposes of this Agreement,a Participant is:an electric public utility with at least an Annual System Demand of SMW of retail load,holding a Certificate of Public Convenience and Necessity from the Regulatory Commission of Alaska,or having other equivalent authority;and,having a certificated service territory,or other equivalent authority,with physical or contractual access to the Alaska Intertie for the transport of electric power.A Participant must also meet all of the requirements of and agree to comply with the terms of this Agreement.Participants shall execute a User Agreement to have the right to transport power on the Intertie. Section 4.2 New Participant An entity seeking Participant status shall execute a New Participant Addendum to this Agreement in the form attached as Exhibit C,and such other agreements as may be required by the IMC from time to time.The entity shall also be required to execute a User Agreement to have the right to transport power on the Intertie.The entity shall then give twenty-four (24) months written notice to AEA and the Participants of its intention to become a Participant.The entity shall become a Participant upon expiration of the twenty-four (24)month notice period required in this section and the IMC's determination that all of the requirements of this Agreement have been completely satisfied.The IMC's determination under this section shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC, including the affirmative vote of AEA. Section 4.3 Membership in IMC An entity with Participant status shall be allowed,but not required,to appoint one member to the IMC.IMC members'voting rights shall be as provided in Article 8,INTERTIE MANAGEMENT COMMITTEE. Article 5, WITHDRAWAL OF AEG&T AND OTHER PARTICIPANT AND USER STATUS Section 5.1 Withdrawal of AEG&T Notwithstanding the provisions of Section 2.2,Termination,AEG&T shall effect the termination of its Participant status under this Agreement immediately upon its execution of this Agreement. Page 15 of 53 -Amended and Restated Alaska Intertie Agreement Section 5.2 Substitution of HEA and MEA,and Admission of City of Seward and the United States Army Notwithstanding the provisions of Section 4.2,New Participant,HEA and MEA individually shall have the right to obtain Participant status immediately upon their execution of a New Participant Addendum in the form attached as Exhibit C,provided,however,that this right shall terminate twenty-four (24)hours after the termination by AEG&T pursuant to Section 5.1, Withdrawal of AEG&T.The City of Seward and the United States Army shall also have the right to obtain Participant status immediately upon execution of a New Participant Addendum in the form attached as Exhibit C if such execution occurs within twenty-four (24)hours of the execution of this Agreement by AEA and the Participants.In the event that United States Army has not obtained Participant status,then after July 2013,the United States Army shall have the right to become a User by executing a User Agreement and providing three (3)months written notice to the IMC,so long as the available Intertie Capacity is not fully subscribed. Article 6. MINIMUM RIGHTS OF THE PARTICIPANTS AND USERS TO USE INTERTIE FACILITIES Section 6.1 Minimum Intertie Transfer Capability Rights (""MITCR”) The established MITCR rights as well as the MITCR methodology for allocation of Capacity on the Intertie from the Original Agreement are temporarily retained in this Agreement and shall be administered by the IMC during the period from the Effective Date until July 1,2013.The MITCR methodology is set forth in this Article 6.The IMC shall implement a new methodology for allocation of Capacity before July 1,2013,which shall comply with the provisions of Article 16,OPEN ACCESS PRINCIPLES. 6.1.1 Right of First Refusal.For so long as the IMC has not amended or replaced the MITCR methodology,Participants shall have the right of first refusal to an allocated portion of the maximum Intertie transfer capability,as determined pursuant to Section 6.2,Determination of MITCR.Intertie Capacity not scheduled or used by the Participants for the purpose of transmitting or receiving Energy over the Intertie shall be allotted to the Participants in the manner provided in Section 6.2.2,Unused MITCR. 6.1.2 Allocation of Transfer Capability.The Intertie transfer capability shall be shared by the Participants in the Northern and Southern Groups in the manner described in Section 6.2,Determination of MITCR.If a Participant is not using part of its MITCR in either direction,other Participants shall have the right to use that unused part to make transfers across the Intertie,either as a purchase or a sale of Capacity and/or Energy,pursuant to a procedure adopted by the IMC. 6.1.3 Emergency Operations.During emergencies when it is necessary to use the Intertie to transfer Energy to maintain system integrity,a Participant's MITCR Page 16 of 53 -Amended and Restated Alaska Intertie Agreement Section 6.2 6.2.1 6.2.2 6.2.3 will be adjusted by the IMC as required pursuant to Intertie operating policies and procedures and Prudent Utility Practices.To the extent practical,such adjustments shall be shared proportionally among all Participants in the affected Group(s). Determination of MITCR Methodology.For so long as the IMC has not amended or replaced the MITCR methodology,the IMC shall determine the MITCR of each Participant each year prior to the final approval of the fiscal year budget,or when a new Participant becomes a Party to this Agreement.The MITCR of each Participant shall be calculated as follows: MITCR shall be determined each year based on the average of the three most recent Annual System Demands submitted by each of the Participants under Section 7.2.1,Participant_and_User_Estimates, Participant Historical Data.Temporary reductions of the maximum Intertie transfer capability may be required for periods due to maintenance,safety,or equipment failure.©MITCR shall be determined separately for the Participants of the Northern Group and of the Southern Group.A Participant's MITCR shall be the ratio of its average Annual System Demand to the sum of the average Annual System Demands of its respective group (Northern or Southern) multiplied by the maximum Intertie transfer capability set forth in Section 6.3,Maximum Intertie Transfer Capability. Unused MITCR.MITCR not used by a Participant shall be available to the other Participants in the same group (i.e.,Northern Group or Southern Group) in the same proportion as remaining Participants'MITCR is to the total MITCR of the remaining Participants in the group that are allocating the unused MITCR.If no Participant chooses to use the unused MITCR,the IMC may make it available to any User subject to the requirements set forth in Section 8.6.7,Maximum Capability and Capacity Allocation.Unless otherwise agreed upon,a Participant whose unused MITCR is being used by other Participant(s)or User(s)shall have the right to its full entitlement immediately upon notification to the Participant(s)or User(s)using its MITCR. Right to Contractually Transfer MITCR.A Participant has the right to transfer on a contractual basis all or part of its MITCR to other Participants or Users with reasonable written notice to all Participants.A Participant whose unused MITCR is being used by another Participant or User under this Section 6.2.3 shall be paid by the using Participant or User a prorated amount of the Intertie Capacity Rate determined by the following formula: P =ICR/12 x CP x HR/THR where: Page 17 of 53 -Amended and Restated Alaska Intertie Agreement P -is the monthly payment due to the Participant whose MITCR,or portion thereof,is being used by another Participant or User; ICR/12 -is the relevant monthly Intertie Capacity Rate as defined in Section 7.2.6,Capacity Rate,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 or User;and THR-is the total number of hours in the relevant month. 6.2.4 IMC Authority to Change Capacity Allocation Methodology.The IMC shall have the authority to amend or replace the Intertie Capacity allocation methodology with a different methodology.Any amendment or replacement of the Intertie Capacity allocation methodology shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA.In amending or replacing the Intertie allocation methodology,the IMC shall employ Open Access principles to the extent practicable. 6.2.5 New State Power Projects.The IMC shall amend or replace the Intertie Capacity allocation methodology if requested by AEA to facilitate the transfer of power from a new state-owned generation project,provided,that the then- existing rights of Participants and Users for firm service shall be preserved. Section 6.3 Maximum Intertie Transfer Capability The maximum transfer capability of the Intertie is 78 MW,net of losses,unless and until it is changed pursuant to this section.No provision of this Agreement shall prohibit the IMC from temporarily reducing the maximum Intertie transfer capability for maintenance,equipment failure,safety considerations,or other reasonable causes in compliance with Prudent Utility Practices.Such temporary reductions of maximum Intertie transfer capability shall proportionally reduce the rights of each Participant and User,for that temporary period.The IMC,upon the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA,shall have the authority to change the maximum Intertie transfer capability. Page 18 of 53 -Amended and Restated Alaska Intertie Agreement Section 6.4 Improvements to the Intertie 6.4.1 Development_of Improvements.Modifications,additions,deletions and changes to the Intertie ("Improvements”)shall be designed and constructed so as not to reduce the Intertie's reliability.All Improvements shall be implemented in accordance with Prudent Utility Practice and,with commercially reasonable consideration of the costs and benefits of such improvements. 6.4.1.1 Except as provided in Section 6.4.1.2,the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA,shall be required to approve any Improvements. The design and specifications,including engineering studies for proposed Improvements to the Intertie shall be submitted to the IMC for review and approval.The IMC may require additional studies.Approval of the design and specifications of Improvements shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA. 6.4.1.2 AEA shall have the right to make Improvements to the Intertie,including taps to provide electrical services at locations that AEA deems beneficial and reasonable. Costs related to Improvements covered by this Section 6.4.1.2 will not be deemed to be Intertie Costs unless such Improvements are of direct benefit to the Participants and/or Users as determined in advance by the IMC under Section 6.4.3,Responsibility for Cost of Improvements.The design for such Improvements shall be submitted to the IMC for review and comment. The comments of the IMC shall be incorporated into the design of the Improvements as they relate to maintaining the Intertie's reliability. 6.4.1.3 The IMC shall not unreasonably delay the implementation of any Improvements provided for under Section 6.4,Improvements to the Intertie. 6.4.2 Requests for Improvements.Participants and Users,individually or otherwise,shall have the right to request the IMC to make Improvements. Page 19 of 53 -Amended and Restated Alaska Intertie Agreement 6.4.3 6.4.4 6.4.5 Section 6.5 Each request shall include a detailed written explanation of the requested Improvement and demonstrate its compliance with the requirements of Section 6.4.1,Development of Improvements. Responsibility for Cost of Improvements.The cost of Improvements may be apportioned among the requesting Participants and Users pursuant to a written agreement and may be adjusted to include other sources of funding.If there is no such written agreement,an Improvement shall be made at the expense of the requesting Participant(s),User(s),and/or AEA (AEA only if the Improvement is undertaken pursuant to Section 6.4.1.2)unless the IMC determines prior to performing the Improvement that the Improvement directly benefits other Participants or Users,or may provide direct benefit to other Participants or Users in the future,in which case the cost of the requested Improvements shall be deemed Intertie Costs.The IMC may also, but shall not be required to,determine that the cost of an Improvement shall be born only by the group of directly benefitted Participant(s)or User(s)if some will not be directly benefitted.The IMC shall have the right to consider the cause or need for any Improvements when making its determination of cost responsibility.The IMC shall also determine prior to performing the Improvement whether the cost of such Improvements shall be recovered in the Intertie Energy Rate or in the Intertie Capacity Rate.AEA shall be the owner of all Improvements without regard to the sources of funding.The determination and setting of the responsibility for payment of costs associated with an Improvement and any allocation of recovery between the Intertie Energy Rate and the Intertie Capacity Rate shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA. Right to Make Improvements -Required Work.AEA shall have the right to require Improvements to the Intertie as provided in Section 8.8,AEA's Ability to Perform Required Work. Notice.The IMC shall give reasonable advanced notice to all Participants before approving any Improvements as provided in this Article 6. Additional Project Taps Terms and conditions applicable to new taps and interconnections for new projects shall be subject to,and shall be handled in accordance with,the rules,Reliability Standards,and procedures in effect at the time the tap or interconnection is constructed and as they may be amended from time to time.This Section shall also apply to proposed temporary taps or interconnections. Page 20 of 53 -Amended and Restated Alaska Intertie Agreement Section 7.1 7.1.1 Article 7. COSTS FOR INTERTIE TRANSFER RIGHTS Intertie Costs Costs to Be Shared by Participants and Users.Costs incurred in operating and maintaining the Intertie and the annual debt service on any bonds or other debt issued by AEA or contractual obligations incurred by AEA or the IMC for the Intertie facilities,including those incurred for renewals,replacements,repairs, Required Work,and Improvements,("Intertie Operating Costs”)and_costs incurred _in administering the legal and regulatory affairs of the IMC, including the costs associated with the development,monitoring,and administration of the operating and_reliability standards (''Intertie Administration Costs”)shall be shared by the Participants and Users._Intertie Operating Costs and Intertie Administration Costs shall be referred tojointly in this Agreement_as Intertie Costs.Intertie Costs shall be identified in accordance with the provisions of former Alaska Statute 44.83.398(f) (attached as Exhibit D)and this Agreement.Participants and Users shall also contribute to the recovery of Intertie Costs through rates and charges approved by the IMC. 7.1.2 _Intertie Operating Costs.At a minimum,the following costs shall be included in Intertie Operating Costs budget: 7.1.1.1 "Operation and Maintenance Costs”are all operation costs as provided for in Article 10,OPERATION OF THE INTERTIE,and all maintenance costs as provided for in Article 12,MAINTENANCE OF THE INTERTIE FACILITIES,and including any replacements in the ordinary course of operations, plus any applicable taxes,but excluding uninsured losses or liability resulting from deductible or self-insured retention provisions of property or liability insurance policies,respectively. 7.1.1.2 "Extraordinary Maintenance and Replacement Costs” are uninsured losses or liabilities resulting from deductible or self- insured retention provisions of property or liability insurance policies,costs of facility maintenance,renewals,and replacements. 7.1.1.3 "Annual Debt Service Cost”is interest on,and amortization sufficient to retire over their term,any bonds or other debt issued by AEA for construction,renewals,replacement, repairs or Improvements of the Intertie facilities,plus the debt service coverage or other financial performance factors determined by AEA to be necessary for the marketability of bonds issued by it and as provided in any bond covenants,resolutions or similar obligations. Page 21 of 53 -Amended and Restated Alaska Intertie Agreement 7.1.1.4 "Reserve Fund”is the amount necessary,as determined by the IMC,to provide a prudent level of reserves to fund the operation and maintenance of the Intertie and the Intertie Costs specified in this Section 7.1,Intertie Costs.The Reserve Fund shall be maintained as a separate and distinct fund to be held, managed,invested,disbursed and administered by AEA in accordance with criteria approved by the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA.All money deposited in the Fund shall be used solely for the purposes set forth in this Agreement.AEA shall keep and maintain records pertaining to the Reserve Fund,and all disbursements therefrom,in accordance with its general practices and procedures in effect from time to time and in compliance with GAAP. 7.1.1.5 Station service costs. 7.1.1.6 "Cost of Improvements”those costs determined in accordance with Section 6.4.3,Responsibility for Cost of Improvements. 7.1.3 Intertie Administration Costs.At a minimum,the following costs shall be included in Intertie Administration Costs budget: 7.1.3.1 AEA's administrative expense associated with the Intertie. 7.1.3.2 Legal expense associated with IMC activities. 7.1.3.3 Regulatory costs associated with IMC activities. F446 7.13.4 Costs associated with developing,monitoring,and administering operating and reliability standards for the Intertie and the IMC. FA2 7.1.4 Annual Budget and Fiscal Year.The IMC will estimate and budget Intertie Costs annually for the ensuing fiscal year,July 1 to June 30,subject to AEA's review and approval.The IMC shall develop annually a preliminary operating budget from:the Intertie maintenance budget;the Intertie operating budget;the Annual Debt Service costs;and,AEA-s administrative expense associated with the budget for Intertie_AdministrationCostsbudget.Unless otherwise agreed in writing by the Participants,the preliminary Intertie budget shall be provided to the Participants and made available to the public for their review at least thirty (30)days before the IMC meeting where the budget will be approved.Written comments shall be submitted to AEA and the IMC by the date established by the IMC.The Participants shall be provided no less than thirty (30)days to comment.Based Page 22 of 53 -Amended and Restated Alaska Intertie Agreement Section 7.2 7.2.1 7.2.2 7.2.3 7.2.4 7.2.5 7.2.6 on the preliminary Intertie budget and the comments from the Participants,the IMC shall annually establish the Intertie operating budget and submit it to the AEA for review and approval. Calculation of Intertie Operating Costs and Rates Participant and User Estimates,Participant Historical Data.The IMC shall establish a schedule and format that the Participants and Users with valid contracts for service on the Intertie shall use to submit their projected usage of the Intertie for the upcoming fiscal year.Unless directed to do otherwise by the IMC,Participants and Users shall also submit,at the same time,their three most recent Annual System Demands for the calculation of MITCR under Section 6.2,Determination of MITCR,or as required by the IMC for the allocation of Intertie Capacity. IMC Estimates.The IMC shall prepare a preliminary Intertie annual usage estimate in kilowatt hours ("kWh”)and provide the same to the Participants and Users no later than the date the preliminary Intertie budget is submitted to the Participants for comment.The preliminary Intertie annual usage estimate provided under this Section with the use of projected or other relevant information shall in no event be less than the amount equal to 30 percent of the kWhs that could be transferred by continuous operation of the Intertie at the maximum rated fiscal-year transfer Capacity (as currently established under Section 6.3,Maximum Intertie Transfer Capability).The projected usage shall not exceed the total projected usage of the Participants and Users so long as their combined usage is in excess of the 30 percent as provided in this Section 7.2.2. Comments.Participants and Users may provide comments to the IMC on the preliminary Intertie annual usage estimate,which shall be considered by the IMC in making its final estimate for the following fiscal year. IMC Determination of Estimated Intertie Usage.Based upon the Participants' and Users'preliminary Intertie annual usage estimates and comments received,the IMC shall establish the estimated annual Intertie usage in kWhs for the following fiscal year. Energy Rate.The "Intertie Energy Rate”for the following fiscal year, expressed in dollars per kWh,shall be calculated by dividing 83.5 percent of the total budgeted Intertie Operating Costs as determined in the Intertie budget under Section 7.1,Intertie Costs,by the annual Intertie usage as established under Section 7.2.4,IMC Determination of Estimated Intertie Usage. Capacity Rate.The "Intertie Capacity Rate”for the following fiscal year. expressed in dollars per kW,shall be calculated by dividing 16.5 percent of the total budgeted Intertie Operating Costs as determined in the Intertie budget Page 23 of 53 -Amended and Restated Alaska Intertie Agreement established under Section 7.1,Intertie Costs,by the sum of the Participant's or User's Intertie Capacity rights allocations. Section 7.3 Allocation of Intertie Administration Costs 7.3.1 AHocation of Intertie Administrative Costs and Rates.The IMC shall allocate the Intertie Administrative Costs in equal annual shares for all of the Participants and Users. Seetion 73Section 7.4 Allocation of Intertie Costs 4347.4.1_Participant and User Payments.Each Participant and User shall be obligated to pay to AEA,for the account of the IMC,monthly the sum of the following: 4#3447.4.1.1 The Participant's or User's scheduled use of the Intertie for the month multiplied by the Intertie Energy Rate in effect for the fiscal year;plus, 4#3+27.4.1.2 The Participant's Intertie Capacity rights allocation, determined in accordance with this Agreement,multiplied by one- twelfth of the Intertie Capacity Rate in effect for the fiscal year or the Participant's obligation as calculated pursuant to Section 6.2.3, Right to Contractually Transfer MITCR,if applicable;plus, 7.4.1.3.Each User's Intertie Capacity rights allocation, determined in accordance with this Agreement,multiplied by the monthly Intertie Capacity Rate in effect for that period multiplied by the number of months of the fiscal year that the User has a contract for the use of Intertie Capacity or as determined pursuant to Section 7.3.1.2;plus,; 7.4.1.4 The allocated monthly share of the Intertie Administrative Costs for all Participants and Users in effect for the fiscal year. 4327.4.2 Annual Payment of Intertie Costs.The IMC shall have the authority to convert the Participants'and Users'payment obligation,or any portion thereof,to one annual payment,which shall be due and payable at the beginning of the fiscal year.Any such annual payment shall be based on each Participant's or User's projected use of the Intertie to the extent usage has not been scheduled. Page 24 of 53 -Amended and Restated Alaska Intertie Agreement 7337.43 Monthly Use.For billing purposes only,the scheduled use of the Intertie in any month shall be the greater of the actual energy transferred or the product of the scheduled Intertie transfer at the Intertie Point of Interconnection and the number of hours each schedule was in effect during that calendar month. 7:3.47.4.4 Excess Revenues.Should the annual revenues received from all sources under Section 7.3.1,Participant_and User Payments,exceed actual annual Intertie Costs,the revenues in excess of the Intertie Costs shall be allocated to the contributing Participants and Users in proportion to the total dollar amount paid by all parties for use of the Intertie in the fiscal year,or portion thereof, in which the revenues were accrued.The IMC shall authorize AEA to refund the Participants and Users their proportionate share of this excess. 43-57.4.5 Revenue Deficiencies.Should the revenues received under Section 7.3.1, Participant_and User Payments,be less than the actual Intertie Costs,the revenue deficiency shall be allocated between the Participants and Users in the same proportional manner as revenues are re-allocated between the Participants and Users under Section 7.3.4,Excess Revenues,of this Section. The IMC shall authorize AEA to bill the Participants and Users their proportionate share of this deficiency. Article 8. INTERTIE MANAGEMENT COMMITTEE Section 8.1 Establishment of the Intertie Management Committee,Right to Vote AEA and the Participants hereby establish an Intertie Management Committee.The IMC shall be the governing body with the authority to control,operate,maintain,repair,and perform Improvements of the Intertie in accordance with the terms of this Agreement.The IMC shall consist of the representative appointed by AEA and the representatives appointed by each of the Participants,which shall be either their Chief Executive Officer,General Manager,or Executive Director.Each Participant shall be entitled to only one representative,appointed pursuant to Section 4.3,Membership in IMC,and one vote on the IMC.AEA shall also be entitled to only one representative and one vote on the IMC.Under no circumstances shall AEA or a Participant have,or have the right to control,more than one vote on the IMC or have more than one voting representative,directly or indirectly,through another organization with which it is an affiliate or has an agency relationship.Each IMC member entitled to vote may name one representative to serve on the IMC and one designated alternate for that representative.A representative or designated alternate may be an employee of a Designated Contractor of the IMC Member.Each IMC member shall notify all other IMC members in writing of the names,addresses,and telephone numbers of its representative and designated alternate.After it is established,the IMC shall meet at least twice each year.Meetings of the IMC and any committees of the IMC shall, to the extent practicable,be open to the public. 8.1.1 Eligibility to Vote.Participants that are not current on their financial obligations for Intertie Costs or any other costs or assessments approved by Page 25 of 53 -Amended and Restated Alaska Intertie Agreement the IMC shall not be eligible to vote on matters before the IMC and shall not be considered a member of the IMC for purposes of voting,or for calculating the Annual System Demand of Participants or Users for purposes of allocating Intertie Capacity. 8.1.2 Minutes.Written minutes shall be kept for all meetings of the IMC,and all decisions or agreements made by the IMC shall be reduced to writing, including all matters voted upon and each member's vote on those matters. Section 8.2 Adoption of Procedural Rules or Bylaws The IMC shall adopt and maintain rules and procedures governing the operation of the IMC ("IMC Bylaws”).The IMC Bylaws shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA,to be effective.The IMC Bylaws shall address,among other matters,procedures for the selection of IMC officers,the conduct of IMC meetings,the approval or possible pre-approval of consultants, the modification of the IMC's procedural rules,and to the extent not otherwise specified in this Agreement,the specific voting requirements for approval of matters to be decided by the IMC. Section 8.3 Effect of Abstention.For purposes of voting on any matter before the IMC, each abstaining Participant or AEA Representative shall not be counted towards any voting requirement.The minimum percentage required to transact business shall be determined from the total number of IMC Members not abstaining. Section 8.4 Meetings by Electronic Communication.The IMC may elect to meet by electronic communication so long as all members can be heard and hear all of the proceedings. Section 8.5 IMC Responsibilities 8.5.1 IMC Responsibilities and AEA Duties.AEA,as the legal owner of the Intertie,a potential issuer of debt related to the Intertie,and the agency charged by statute with various duties affecting or affected by the Intertie,has or may have assigned to it,certain rights,duties,and responsibilities with respect to the Intertie.For example,AS 44.83.396(e)imposes on AEA the duty to (a)review and approve the annual budget for the operation and maintenance of the project,and (b)assure that the project is being operated efficiently and in a manner that is consistent with national standards for the industry and agreements with any bondholders.(See also,Section 8.8,AEA's Ability to Perform Required Work.)Subject only to such AEA rights,duties, and responsibilities,the IMC shall be responsible for the management, operation,maintenance,and improvement of the Intertie.The IMC members, Participants,and Users are the beneficiaries of the prudent management of the Intertie and shall bear their respective share of Intertie Costs in accordance with the terms of this Agreement.All Users have a shared and substantial long-term financial interest in the Intertie facilities.The IMC shall undertake Page 26 of 53 -Amended and Restated Alaska Intertie Agreement 8.5.2 Section 8.6 responsibility for the prudent management and reliable operation of the Intertie on behalf of AEA,for the benefit of the Participants and Users. IMC Approvals.IMC approval of the sufficiency of the annual budget,rates, and the allocation of Intertie Capacity,shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC, including the affirmative vote of AEA. IMC Actions The IMC shall have the authority to take the actions set forth in this section,subject only to the provisions of any applicable bond resolutions,federal and state law,the requirements of licensing and regulatory agencies,and the rights of AEA,the Participants,and Users under other provisions of this Agreement. 8.6.1 8.6.2 8.6.3 8.6.4 8.6.5 8.6.6 Intertie Operation.Develop,adopt,and enforce operating policies and procedures and Reliability Standards applicable to the Intertie.See Section 3.1,Adoption of Operating Policies and Procedures,and_Reliability Standards. Intertie User Agreements.Adopt standard terms and conditions for User Agreements for Intertie Transactions in accordance with this Agreement and incorporating Open Access principles.Adopt a three (3)month termination provision in certain User Agreements in accordance with Section 5.2, Substitution of HEA and MEA,and Admission of City of Seward and the United States Army,and Section 16.3.5,Federal Acquisition Regulations. Non-Compliance Appeals.Provide procedures for Users to appeal:(i) Operating policies and procedures;ii)Reliability Standards non-compliance determinations;or iii)sanctions imposed for non-compliance with Reliability Standards. O&M_and Scheduling.Arrange for the operation and maintenance of the Intertie and the scheduling of power transfers on the Intertie. Budget.Adopt,and revise if prudent to do so,each fiscal year a budget of Intertie Costs for that fiscal year.The adopted or revised budget shall be reasonably estimated by the IMC to be sufficient to pay all Intertie Costs and shall be made available to the public at the time it is distributed to Participants.The IMC shall establish the fiscal year budget in accordance with Article 7,COSTS FOR INTERTIE TRANSFER RIGHTS,and a schedule established by the IMC. Cost Allocation and Payment Schedule.Establish for each fiscal year the estimated annual allocation of Intertie Costs for each Participant and User Page 27 of 53 -Amended and Restated Alaska Intertie Agreement together with a schedule for each Participant's and Users'required monthly payments during that fiscal year,pursuant to Sections 7.2,Calculation of Intertie Operating Costs and Rates,7.3 Allocation of Intertie Administration Costs and 7.34,Allocation of Intertie Costs.The payment schedule shall be designed to recover the Participant's or User's share of the estimated annual Intertie Costs during the fiscal year and as revised during such Year to reflect any approved changes to the budget of annual Intertie Costs for that fiscal year.The IMC also shall determine the costs to be collected from Users for Intertie Transactions.Such costs shall be determined and applied based upon just,fair,reasonable,and not unduly discriminatory principles and in compliance with Article 16,OPEN ACCESS PRINCIPLES.The approval of the allocation of Intertie Costs,payment schedule,and the costs to be collected for Intertie Transactions shall require the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC, including the affirmative vote of AEA. 8.6.7 Maximum Capability and Capacity Allocation.Establish the maximum Intertie transfer capability in accordance with Section 6.3,Maximum Intertie Transfer Capability.Determine each Participant's and User's rights to Intertie Capacity pursuant to any methodology adopted under Article 6,MINIMUM RIGHTS OF THE PARTICIPANTS AND USERS TO USE INTERTIE FACILITIES.The IMC shall consider the Participant's or User's reserve obligations and equitably preserve any Participant's and User's Intertie operational rights existing as of the Effective Date that are valid and effective at the time of the IMC's determination.The IMC shall have the right to consider the cause or need for such operational rights when making its determination. 8.6.8 Determination of Actual Payment Obligation.Determine after the conclusion of each fiscal year the actual annual Intertie Costs for that fiscal year,the actual annual Payment Obligation of each Participant or User for that fiscal year,and the amount of any additional payment required from or the amount of any refund to each Participant or User to ensure that the total of all payments received from each Participant or User for each fiscal year is equal to that Participant's or User's actual annual Payment Obligation for the fiscal year,pursuant to Sections 7.3.3,Excess Revenues,and 7.3.4,Revenue Deficiencies. 8.6.9 Funding Methods.Evaluate and select methods of carrying out and funding Improvements,whether by recommending AEA's issuance of bonds or otherwise. 8.6.10 Improvements.Evaluate and approve Improvements and determine the required level of funding for approved Improvements under Sections 6.4.2, Page 28 of 53 -Amended and Restated Alaska Intertie Agreement Requests for Improvements,6.4.3,Responsibility for Cost of Improvements, 6.4.4,Right to Make Improvements -Required Work,or as otherwise provided in this Agreement. 8.6.11 Maintenance.Adopt maintenance schedules for the Intertie that do not unreasonably interfere with the operations of the Participants. 8.6.12 Creation of Reserve Fund.Establish and maintain a Reserve Fund,which meets the requirements set forth in Section 7.1.1.4. 8.6.13 Procurement of Services.Procure services the IMC requires so long as sufficient budgeted funds are available for those services and the procedures for such procurements are in compliance with the IMC's Bylaws and any applicable Alaska law or regulation. 8.6.14 Miscellaneous.Provide for all things necessary to carry out the responsibilities and obligations set forth in this Agreement and in the IMC Bylaws. Section 8.7.Payment Obligation Unimpaired Notwithstanding any action or inaction by AEA or the IMC under this Agreement,each Participant's or User's obligation to make payments necessary to pay their allocated percentage share of Intertie Costs under Section 7.3,Allocation of Intertie Costs,of this Agreement and all other amounts to be paid under this Agreement ("Payment Obligation”)shall be absolute and unimpaired.Each Participant and User shall make all payments as required as a result of action taken by the IMC under this Agreement or an action taken by AEA pursuant to Section 6.4.4, Right to Make Improvements -Required Work,or Section 8.8,AEA's Ability to Perform Required Work. Section 8.8 AEA's Ability to Perform Required Work In the event the IMC fails to take any of the actions set forth in this Agreement in a timely fashion or fails to take any other action which the AEA believes to be a required action with respect to the management,operation,maintenance or improvement of the Intertie,and as a result the AEA determines that it will be unable to meet any of its obligations imposed by bond resolutions,by this Agreement,by any licensing or regulatory agency,or by statute,or as otherwise is necessary to keep the Intertie in good and efficient operating condition,consistent with (1)prudent economics for the Intertie and the Participants and Users,and (2)national standards for the industry ("Required Work”)then the AEA may:(a)adopt a budget of Annual Intertie Costs;(b)estimate the Payment Obligation of each Participant in accordance with the methodology set forth in this Agreement;(c)require each Participant to make payments on the basis of such estimated Payment Obligation;or (d)cause the Required Work to be performed; and (e)take such other action as the AEA deems reasonably necessary to meet such obligations. All actions and determinations under this Section 8.8 shall be taken in accordance with Prudent Utility Practice.The comments of the IMC regarding Required Work related to Improvements Page 29 of 53 -Amended and Restated Alaska Intertie Agreement shall be given great weight and incorporated into the design of the Improvements as they relate to the operation and reliability of the Intertie. Section 8.9 Payment Obligation and Rights of Review Making a payment as required under this Agreement shall not constitute a waiver of any of the Participant's or User's rights under this Agreement.Any Participant or User may seek review of actions by the IMC by means of the procedures in Article 19,REVIEW OF DECISION. Section 8.10 AEA Authority to Collect Payments and Disburse Funds The IMC hereby delegates to AEA the authority to invoice and collect from Participants or Users any Payment Obligations due and owing under this Agreement and to make payments on behalf of the IMC for Intertie operations,maintenance or other Intertie related expenses arising under this Agreement.AEA shall hold funds collected in one or more separate accounts designated for Alaska Intertie purposes until such funds are obligated for Intertie operations or maintenance and used to pay Intertie Costs.Interest and/or investment income earned on invested funds shall be credited to the IMC.The IMC shall have the right to audit all funds held by AEA on behalf of the IMC as well as the transactions associated therewith. Article 9. OPERATING COMMITTEE Section 9.1 Establishment of the Operating Committee 9.1.1 Establishment.The IMC shall establish a committee for the purpose of recommending operating policies and procedures under the direction of the IMC and assisting in the implementation of any policies and procedures approved by the IMC (the "Operating Committee”). 9.1.2 Representatives.Each Participant may,but is not required to,designate a representative to act on its behalf,which shall be done in writing ("Representative”).Such Representatives shall meet the requirements of Section 3.5,Operating Committee.Each Participant may also designate an alternate who may act in the stead of its Representative at the option of that Participant.A Participant may at any time change,remove or designate its representative or alternate,and shall promptly notify in writing the other Participants of any change in such designation.The members of The Operating Committee shall designate a member to be Chairman. Recommendations and decisions of the Operating Committee shall be adopted if approved by at least a majority of the Representatives appointed under this Section,unless otherwise provided in the bylaws of the committee.The AEA may designate a Representative to the committee who may vote on any matters. Page 30 of 53 -Amended and Restated Alaska Intertie Agreement Section 9.2 9.2.1 9.2.2 9.2.3 9.2.4 9.2.5 Section 9.3 Meetings of the Operating Committee Meetings.The Operating Committee shall meet at least once each year and at such other times as deemed necessary by its Chairman or the IMC and shall to the extent practicable,be open to the public. Voting.The Operating Committee may determine the manner of voting on matters that come before it.All decisions of the Operating Committee affecting the Participants,the Intertie,or its Users shall be subject to the review and approval of the IMC. Minutes.Written minutes shall be kept for all meetings of the Operating Committee,and all decisions or agreements made by the Operating Committee shall be reduced to writing including all matters voted upon and each member's vote on those matters. Expenses.The Operating Committee shall prepare and submit an expense budget to the IMC under Section 10.3,Budget for Operation of the Intertie, annually to provide for Operating Committee expenses other than the expenses of each Operating Committee Representative,which shall be borne by the Operating Committee Representative. Meetings by Electronic Communication.The Operating Committee may elect to meet by electronic communication so long as all members can be heard and hear all of the proceedings. Operating Procedures The Operating Committee shall recommend operating policies and procedures and standard practices to the IMC for the guidance of dispatchers and other employees and shall recommend arrangements for metering,communications,and other services and facilities.All such operating policies and procedures and standard practices shall be subject to the approval of the IMC pursuant to Section 3.1,Adoption of Operating Policies and Procedures,and Reliability Standards,and shall conform with any Reliability Standards adopted by the IMC.The Operating Committee has no authority to modify any of the provisions of this Agreement or to modify or set rates for Intertie services. Section 10.1 10.1.1 Article 10. OPERATION OF THE INTERTIE Responsibility for Operation of the Intertie Responsible Participants.AML&P and GVEA are hereby delegated the responsibility for the operation of the Intertie on behalf of the IMC.The operation of the Intertie shall be in compliance with the guidelines of this Agreement,the operating policies and procedures established by the IMC,and Page 31 of 53 -Amended and Restated Alaska Intertie Agreement in compliance with any applicable Reliability Standards.The IMC may at any time designate another Participant to assume such responsibility from GVEA or AML&P with the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA.Upon such designation by the IMC,the name of the new operator(s) shall be deemed substituted for the name of the old operator(s)in this Article 10,OPERATION OF THE INTERTIE,as appropriate. 10.1.2 AML&P and MEA Responsibilities.AML&P shall be responsible for the operation of the southern assets of the Intertie including,but not limited to, coordination with other utilities,the terminal facilities,communication facilities,the Intertie transmission line,and other facilities south of the Douglas Substation (more specifically illustrated and defined in the Intertie Facilities Diagram in Exhibit E of this Agreement).The Douglas Substation Intertie facilities shall be managed by AML&P and shall be deemed to be the point of demarcation between the Intertie Operators. 10.1.2.1 AEA has contracted with MEA under the 1984 Joint Use Agreement for use of approximately five and one-half (5.5) miles of MEA's right-of-way and constructed transmission facilities that are a part of the Intertie to the Teeland Substation. This being presently a part of the Intertie,the IMC delegates to AML&P,and AML&P assumes the responsibility for operation of this portion of the transmission facilities.AEA delegates to MEA and MEA assumes responsibility for maintenance of this portion of the transmission facilities.Nothing contained in this Agreement shall be deemed to modify any portion of the 1984 Joint Use Agreement. 10.1.3 GVEA Responsibilities.GVEA shall be responsible for the operation of the northern assets of the Intertie,including but not limited to,coordination with other utilities,the terminal facilities,communication facilities,the Intertie transmission line,and other facilities north of the Douglas Substation (as more specifically illustrated and defined in the Intertie Facilities Diagram in Exhibit E of this Agreement).The Douglas Substation Intertie facilities shall be managed by AML&P and deemed to be the point of demarcation between Operators. 10.1.4 Joint Responsibilities.AML&P and GVEA acting in concert shall: 10.1.4.1 Coordinate all the activities and transactions involving the Intertie operation; 10.1.4.2 Coordinate Intertie Transactions to ensure that at all times,to the extent possible,the Intertie System is operated to: Page 32 of 53 --Amended and Restated Alaska Intertie Agreement provide reliable and economical service;optimize the availability of the Intertie within practical operational and cost constraints; and;ensure the Intertie is fully subscribed; 10.1.4.3.Comply with,monitor compliance with,and enforce the operating policies and procedures and Reliability Standards; 10.1.4.4 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; 10.1.4.5 Develop procedures for restoration of service on the Intertie for interruptions due to either Scheduled or Forced Outages,and have personnel trained to carry out such operational procedures to ensure Intertie reliability; 10.1.4.6 Maintain communications with each other and the other Participants using prudent methods of data acquisition sufficient for reliable system control of the operation of the Intertie; 10.1.4.7 Maintain complete and accurate hourly records of all operations,Intertie Transactions,and activities involving the Intertie,and promptly publish and distribute such records to all Participants at regular intervals as 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); 10.1.4.8 |Coordinate the responsibilities delegated to them in this Agreement to minimize duplication and ensure efficient operation of the Intertie; 10.1.4.9 Abide by the terms and conditions of other contracts or agreements involving the operation of the Intertie,so long as they do not conflict with this Agreement; 10.1.4.10 Operate the Intertie in a safe,reliable,and responsible manner consistent with Prudent Utility Practices,the directives and instructions of the Operating Committee,and any applicable Reliability Standards. Page 33 of 53 -Amended and Restated Alaska Intertie Agreement 10.1.5 10.1.6 Contracting.The IMC may,to the extent permitted by law,contract with other Participants and qualified contractors to maintain transmission facilities under IMC control. Load_Balancing.The Operating Committee shall recommend operating policies and procedures and standard practices to the IMC to guide load balancing responsibilities performed by the Intertie Operators and any Control Area operators interconnected with the Intertie. Section 10.2 Suspension of Work in Performance of Operational Duties The AEA or IMC may order AML&P and/or GVEA,or any other entity responsible for operation of the Intertie,in writing to suspend,delay,or interrupt all or any part of the work involved in operation of the Intertie for such period of time as AEA or the IMC determines to be appropriate for the convenience of,and in the best interest of,the operation of the Intertie. Section 10.3 10.3.1 10.3.2 10.3.3 10.3.4 Budget for Operation of the Intertie Budget Process.For purposes of calculation of unit Intertie Operating Costs pursuant to Section 7.2,Calculation of Intertie Costs _and Rates,of this Agreement,AML&P and GVEA may develop and submit to the IMC a suggested scope of operations and a budget for operation of the Intertie upon thirty (30)days written notice to the IMC.The budget developed by the Intertie Operators may include all direct expenses and an 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 AML&P's and GVEA's respective utility system operations and generally accepted utility accounting principles.Unless otherwise agreed upon,the IMC shall provide AML&P and GVEA submittals to the Participants for their review and comments prior to the inclusion of such costs in Intertie Operating Costs.The Participants shall be provided no less than thirty (30)days to comment. Participant Comments.Participants may provide written comments on the preliminary scope of operations and related budget requirements to the IMC pursuant to a schedule adopted by the IMC.The Participants shall be provided no less than thirty (30)days to comment. IMC Establishes Budget.Based on the preliminary scope of operations and budget and the comments received,the IMC shall establish the final Intertie operating budget under the schedule established in Section 8.6.5,Budget. IMC Determinations and Payment of AML&P and GVEA.If AML&P and GVEA submit a budget under Section 10.3.1,Budget Process,the IMC shall determine the final scope of operations and related budget requirements that will be deemed to be the fixed cost fee for operation of the Intertie for the Page 34 of 53 -Amended and Restated Alaska Intertie Agreement 10.3.5 ensuing fiscal year.Unless otherwise agreed,the IMC shall pay each of AML&P and GVEA pursuant to Section 10.6,Payment of Operators. Payment if IMC Unable to Determine Fixed Cost Fee.If the IMC is unable to determine the fixed cost fee for operation of the Intertie,then AML&P and GVEA may each determine,using records and accounts maintained under Section 10.4,Accounting and Records,the cost to their respective systems to provide operation of the Intertie in accordance with this Agreement and shall bill the IMC monthly for these services.The IMC will then reimburse AML&P and GVEA under Section 10.6,Payment of Operators. Section 10.4 Accounting and Records In maintaining accounts for operation of the Intertie,AML&P and GVEA will follow the system of accounts prescribed for public utilities and licensees by the Federal Energy Regulatory Commission,conform to Section 12.2.2,Cost Records,and GAAP.AML&P and GVEA will furnish the IMC such operating and financial statements relating to operation of the Intertie as may be reasonably requested by AEA or the IMC.If receipt of such operating and financial statements is unduly delayed,the IMC may,with its own staff,perform all work necessary to collect such data as reasonably necessary.Such work shall be performed at a time and in a manner to prevent unreasonable interference with AML&P and GVEA operations. Section 10.5 Audits 10.5.1 10.5.2 Request for Audit.At the discretion of AEA or the IMC or by request of a majority of the Participants,an audit shall be conducted with respect to the matters provided for 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 performing such audits shall be shared by the Participants in the same proportion as their MITCR or share of Intertie Capacity share during the period covered by the audit or as determined by the IMC.The Participants,their agents,and any other party involved with the operation of the Intertie,shall provide and/or make available the information and records required for the audit.The cost of any audit required by a Participant that is beyond the above scope deemed necessary by the IMC shall be bome by such Participant. State Audit.AML&P and GVEA shall allow their books of accounts to be audited with respect to matters provided for in this Agreement by such state officials or agencies as may be authorized and directed by law to make those audits.To the extent permitted by law,Participants shall have the same authority to audit the books of accounts of the IMC and AEA with respect to the operation of the Intertie. Page 35 of 53 -Amended and Restated Alaska Intertie Agreement Section 10.6 Payment of Operators If a fixed cost fee for operation of the Intertie is established under Section 10.3.4 of this Article, then within thirty (30)days of the end of each month the IMC shall pay to AML&P and GVEA one-twelfth of their respective yearly fixed cost fees for operation of the Intertie.If the Participants have not agreed upon a fixed cost fee for operation of the Intertie under Section 10.3.4 of this Article,then the IMC shall reimburse AML&P and GVEA within thirty (30)days of the receipt of their invoices.At all times,however,such reimbursement is subject to adjustment in the event of errors,the resolution of disputes,or as the result of audit findings. Section 10.7.Change in Ownership or Control If there is any change in the ownership,ownership structure,control of,or right to control an entity delegated responsibility for the operation of the Intertie on behalf of the IMC,or any such change regarding an entity delegated any other responsibility related to the operation or maintenance of any portion of the Intertie facilities,then the IMC may designate another Participant,or such other entity as it deems appropriate,to assume those responsibilities.The IMC's designation shall be accomplished in the same manner as set forth in Section 10.1.1, Responsible Participants. Section 10.8 Critical Repairs and Maintenance In the event that immediate action is required to preserve the reliability or safe operation of the Intertie,the operators shall have the right to engage qualified contractors or qualified members of their own staff to effect such repairs as are reasonably necessary pursuant to Prudent Utility Practices.The costs for such repairs shall be Intertie Costs_and the Payment Obligation of each Participant shall be determined in accordance with the methodology set forth in this Agreement. In the event an Operator has not performed,or cannot perform,repairs or maintenance on Intertie facilities for which it is responsible,and such delay or failure jeopardizes the immediate safety, reliability,or operation of the Intertie pursuant to Prudent Utility Practices,the affected Participants shall have the same right to effect such repairs or maintenance.The costs for such repairs or maintenance shall be Intertie Costs. Article 11. SCHEDULING OF CAPACITY AND ENERGY ON THE INTERTIE Section 11.1 Scheduling Responsibility 11.1.1 Southern Group.AML&P shall have the responsibility for scheduling transfers on the Intertie for the Participants and Users of the Southern Group and coordinating them with GVEA under:(i)the provisions of this Agreement;(ii)any operating policies and procedures or Reliability Standards;and (iii)the procedures adopted by the IMC. 11.1.2 Northern Group.GVEA shall have the responsibility for scheduling transfers on the Intertie for the Participants and Users of the Northern Group and Page 36 of 53 -Amended and Restated Alaska Intertie Agreement 11.1.3 Section 11.2 11.2.1 11.2.2 11.2.3 11.2.4 11.2.5 Section 11.3 coordinating them with AML&P under:(i)the provisions of this Agreement; (ii)any operating policies and procedures or Reliability Standards;and (iii) the procedures adopted by the IMC. Coordination.AML&P and GVEA shall each have the responsibility for coordinating schedules within their respective Groups. Capacity and Energy Schedules Participant Hourly Schedules.The amount of electric Capacity used and Energy to be transferred on the Intertie under this Agreement will be based upon hourly schedules provided by the Participants and Users. Advanced Scheduling.Capacity and Energy shall be scheduled on an hourly basis and the schedules may be made for the next hour(s),day(s),week(s),or month(s)in advance if allowed by the operating policies and procedures. Procedure.Schedules for all transfers on the Intertie shall be furnished to the respective Intertie Operators before 3:00 P.M.prevailing local time each day for Capacity used and Energy to be delivered across the Intertie for each clock hour of the following 24-hour period.If the IMC determines that it is prudent to do so,this schedule shall be updated each day and an additional six-day schedule will be furnished to provide a continuing seven-day schedule. Short-term Scheduling.Short-term schedules of transfers on the Intertie may not be made or changed on an hour-by-hour basis unless coordinated in advance with the Intertie Operators.Operators will use their best efforts to accommodate changes. Modification of Scheduling Procedures.Modifications to scheduling procedures shall be required to be adopted by the IMC before implementation to be effective. Intertie Schedule Limitations The maximum schedule of Capacity and Energy of any Participant or User on the Intertie shall be limited to their individual Intertie Capacity rights as allocated under this Agreement,either by the MITCR methodology or the methodology adopted by the IMC under Section 6.2.4,IMC Authority to Change Capacity Allocation Methodology. Section 11.4 Transmission Service to Access the Intertie Each Participant and User shall have the sole responsibility for scheduling any service(s) required,on the intervening transmission systems for transfers of Energy or Capacity to and from the Alaska Intertie,in compliance with the applicable tariff schedules of the Participants or utilities involved. Page 37 of 53 -Amended and Restated Alaska Intertie Agreement Section 12.1 12.1.1 12.1.2 Article 12. MAINTENANCE OF THE INTERTIE FACILITIES Maintenance Responsibility Responsibility for Maintenance Practices.The IMC shall maintain the Intertie facilities that AEA owns or for which AEA has contracted use arrangements. The IMC shall provide for the maintenance of the Intertie facilities by contracting with qualified parties to perform maintenance on its behalf. Maintenance shall be scheduled,coordinated,and accomplished in accordance with Prudent Utility Practices so as to minimize disturbances on the Intertie that would impair service on the Participants'systems. Availability.The Intertie shall be maintained in good working condition, optimizing the availability of the Intertie within practical operational and cost constraints.After a failure on the Intertie,the Intertie shall be returned to service in the shortest possible time within the constraints of practical maintenance procedures and Prudent Utility Practices. Section 12.2.Maintenance Budget and Costs 12.2.1 12.2.2 Section 13.1 Development of Budget.The IMC shall develop an annual maintenance budget and a schedule for the maintenance on the Intertie each year based on the budgets developed by the contractors providing Intertie maintenance.This budget will be reviewed with the Participants and Users sufficiently in advance of the commencement of the fiscal year covered so that each Participant or User will be able to submit its comments for consideration prior to finalization of the budget.Budgets for more than one year will be required for the Participants'and Users'long range fiscal planning requirements.The IMC will prepare and furnish the Participants and Users a copy of the long range fiscal requirements for the Intertie,or a forecast of such requirements. Cost Records.AEA,in cooperation with the IMC,shall maintain complete and accurate records of costs associated with maintenance of the Intertie. Costs associated with maintenance of the Intertie will be recorded using the system of accounts prescribed for public utilities and licensees by the Federal Energy Regulatory Commission. Article 13. MEASUREMENT OF ELECTRIC POWER AND ENERGY Required Metering Facilities The electric power delivered through interconnection facilities of the Intertie shall be measured by nonreversible watt-hour meters and 15-minute interval demand meters. Page 38 of 53 -Amended and Restated Alaska Intertie Agreement Section 13.2 Access to Metering Facilities and Data The IMC is responsible for the operation and maintenance of the facilities necessary to interface with points of interconnection.The equipment at these points of interconnection is necessary to provide for Intertie operation only.The IMC shall provide for the use of available metered Intertie data output for Participants or Users for the purpose of providing data necessary for their operations. Section 13.3 Installation and Maintenance The IMC shall agree upon the specifications for Intertie-related metering equipment before its installation.Each Participant hereby grants to all other Participants the right to install and maintain at the installing Participants'cost,Intertie-related equipment in other Participants' substations.Each Participant has the right to install and maintain,at its cost,equipment in another Participant's substation only if the equipment is necessary to perform Intertie functions under this Agreement.The installation and maintenance shall be coordinated with staff of the Participant owning and operating the facilities on which the meters are to be installed.Ingress and egress shall be granted to the other Participants to install,remove,or maintain such equipment.Participants shall coordinate such activities. Section 13.4.Testing of Metering Equipment. Participants,Users,and AEA,shall each,at its cost,have the right to require testing of metering equipment for accurate registration by a qualified third party.Such testing shall be coordinated with the Participant owning and operating the facilities on which the meters are installed.The IMC shall be responsible for taking appropriate action to resolve any inaccurate registration,plus or minus,that is not within tolerances approved by the IMC pursuant to Section 9.3,Operating Procedures. Article 14. TRANSMISSION LOSSES Section 14.1 Intertie Transmission and Transmission Service Losses 14.1.1.Method of Determination of Losses.Losses in the Intertie System created by Intertie transfers shall be determined by the Intertie Operators through engineering studies,calculation,and power flow programs,and procedures as established by the Operating Committee. 14.1.2 Compensation for Losses.The Participant or User supplying Capacity and Energy shall also provide power to compensate for losses which occur from the transfer.Such compensating power shall be provided at the time of the transfer unless otherwise agreed by the affected Participants or Users. 14.1.3 Schedules.Transfer schedules shall include losses associated with such transfers.When transfers reduce losses in a Participant's system which is not Page 39 of 53 -Amended and Restated Alaska Intertie Agreement a part of the Intertie,the losses in that system caused by the transfer shall be considered zero. Section 14.2 Intertie Transmission Loss Compensation Losses occurring due to Energy transfers shall be made up by in-kind deliveries of Energy and scheduled accordingly.All Energy usage that occurs in Intertie facilities within a Control Area will be allocated and charged to the operation of the Intertie in that Control Area.In each month, entities utilizing the Intertie will be allocated losses based on their percentage share of the Energy transferred in their respective Control Area.If no Energy is transferred,losses will be allocated according to MITCR shares. Article 15. RIGHTS OF USERS The rights and responsibilities of a User shall be set out in a User Agreement adopted by the IMC pursuant to Section 8.6.2,Intertie User Agreements.Non-Participant Users shall not be directly responsible for the management,operation,maintenance or improvement of the Intertie, but shall have the same rights,obligations,and responsibilities as a Participant with respect to compliance with operating policies and procedures,any applicable Reliability Standards and the provisions of Section 8.7,Payment Obligation Unimpaired and Article 20,INDEMNITY. Article 16. OPEN ACCESS PRINCIPLES Section 16.1 Definition "Open Access”means that all potential Users of the Alaska Intertie shall be provided access to transmission service on the Alaska Intertie under common terms and conditions that are just and reasonable and not unjustly discriminatory,subject to a priority reservation of Capacity for power supply contracts with AEA projects,and equal access to Intertie system information the IMC has deemed critical for all potential Users. Section 16.2.Purpose The policies and procedures for the operation of the Intertie shall make use of Open Access principles where practicable. Section 16.3 Implementation of Capacity Allocation Methodology The IMC shall use the process and principles in this Section 16.3 as guidance when developing a proposed allocation methodology for Intertie Capacity. 16.3.1 New Methodology.The IMC shall develop and implement a methodology for the allocation of Intertie Capacity,approved by AEA pursuant to Sections 6.2.4 IMC Authority to Change Capacity Allocation Methodology,and 8.6.7 Maximum Capability and Capacity Allocation,before July 1,2013.The Page 40 of 53 -Amended and Restated Alaska Intertie Agreement methodology shall use and incorporate Open Access and other principles set forth in this Article. 16.3.2 Statutory Conditions.The allocation of Intertie Capacity shall comply with statutory conditions,including that the allocation provide a method by which municipal electric,rural electric,cooperative electric,or private electric and regional electric authorities,or other persons authorized by law to engage in the distribution of electricity may secure a reasonable share of available Intertie Capacity (i.e.,United States Army). 16.3.3 Priority for AEA Contracts.Participants or Users with contracts for power from a facility owned by AEA shall have a priority capacity reservation on the Intertie sufficient to accommodate the transfer of that contracted power throughout the term of the power supply contract with AEA.This priority shall be subject to rights of Participants and Users with firm contracts so long as the Participant or User materially satisfies its related obligations. Continued service under firm contracts will be guaranteed irrespective of whether another AEA-owned project is developed or additional transmission capacity is made available by AEA or another entity.In the event that additional transmission capacity is made available,however,the IMC shall have the right to supply transmission service to those Participants or Users by means of transmission paths other than the currently-existing Intertie so long as there is no degradation in the quality or amount of transmission capacity provided. 16.3.4 Alternative Allocation of Intertie Capacity.If the IMC has not developed and implemented a new methodology for the allocation of Intertie Capacity, approved by AEA,on or before July 1,2013,then the MITCR allocation processes under Article 6 shall continue but in an expanded format.Absent an approved new methodology,after July 1,2013,and notwithstanding the requirements of Section 4.2,New Participant,any User or potential User shall be entitled to become a "Participant”under and for purposes of Article 6 by (a)giving twenty-four (24)months written notice to AEA and the Participants of its intention to become a Participant under Article 6,and (b)executing a User Agreement,if one has not already been executed.Upon becoming a Participant under this section (referred to as a "Section 16.3.4 Participant)the entity shall obtain full rights to MITCR allocations under Article 6, MINIMUM RIGHTS OF THE PARTICIPANTS AND USERS TO USE INTERTIE FACILITIES. 16.3.4.1 For purposes of calculating MITCR allocations under Section 16.3.4 and Article 6 for a User eligible to become a Participant only under Section 16.3.4 and that sells wholesale power to an electric utility,the number of "kilowatts-hours in any clock hour,attributable Page 41 of 53 -Amended and Restated Alaska Intertie Agreement to Energy required during such hour for supply of Energy to a system's consumers,”as that phrase is used in the definition of "System Demand,”shall include wholesale power sold to an electric utility,unless otherwise agreed in writing by the "Section 16.3.4 Participant.”Wholesale power sold to a Participant and included in the calculation of a "Section 16.3.4 Participant's”MITCR may not be included in the calculation of the receiving Participant's MITCR. 16.3.5 Federal Acquisition Regulations.A User Agreement with an organization that is required to follow the Federal Acquisition Regulations (FAR),may differ from the standard User Agreement in order to accommodate obligations to follow the FAR so long as the entity required to follow the FAR has provided the IMC with reasonable assurance that its financial obligations have been or will be satisfied. Section 16.4 Public Process The IMC shall publish its initial proposed allocation methodology for Intertie Capacity and request public comment no later than eighteen (18)months after the Effective Date of this Agreement.The IMC shall consider the public comments before finalizing an Intertie Capacity allocation methodology. Section 16.5 Availability of Information The IMC shall use a transparent approach to:(i)making Intertie system information available to all Users;(ii)allocating Capacity on the Intertie;(iii)planning for Improvements,planned outages,or increases in Intertie Capacity;(iv)developing the types of transmission service and the setting of the appropriate rate for each type (including ancillary services should it deem the provision of ancillary services appropriate);and (v)budgeting. Section 16.6 Review of Methodology The IMC shall request comments on the Capacity allocation methodology in effect once every three years following implementation of the new allocation methodology developed pursuant to Section 16.3,Implementation of Capacity Allocation Methodology. Article 17. BILLING AND PAYMENTS Section 17.1 _Billing Participants and User shall be invoiced monthly for their respective share of Intertie Costs, normally not later than fifteen (15)days after the end of the calendar month to which the bills apply.Bills shall be due and payable within fifteen (15)days from the date the bills are Page 42 of 53 -Amended and Restated Alaska Intertie Agreement postmarked 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.Interest collected pursuant to this section shall be credited to the IMC. Section 17.2 _Billing Disputes If a Participant or User disputes the charges on an invoice,the Participant or User shall nevertheless pay the full amount when due and payable and give notification in writing,within ninety (90)days of the date the bill is rendered,to the AEA and IMC stating the grounds on which charges are disputed and the amount in dispute.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,from the date of overpayment to the date of refund. Section 17.3.Payment of Sanctions Any payments related to sanctions shall be administered as provided in any Reliability Standards adopted by the IMC. Article 18. INSURANCE AND LIABILITY Section 18.1 Insurance During the term of this Agreement,each Participant shall purchase and maintain liability insurance with a carrier or carriers satisfactory to AEA and the IMC 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 Agreement by the Participant or by any of its subcontractors,including injuries to all employees of the Participant and the employees of any of its subcontractors engaged in work under this Agreement.If approved by the IMC and AEA,a Participant that is legally eligible to do so may self-insure for the Workers' Compensation Insurance and other types of insurance required by this Article.An insurance certificate in a reasonably satisfactory form or a copy of the insurance policies along with any undertaking to self-insure,shall be furnished to the Operating Committee,AEA and the IMC before beginning operations under this Agreement. Section 18.2.Types of Insurance The Intertie insurance coverage and limits shall be reviewed by the IMC yearly and may be adjusted with the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA.The agreed coverage must be provided by each Participant to cover those operations of the Participant performed under this Agreement.The Alaska State Risk Management department may also review the coverage and limits,and any required changes to established coverage and limits shall be adopted. Page 43 of 53 -Amended and Restated Alaska Intertie Agreement 18.2.1 18.2.2 Workers'Compensation Insurance.Each Participant shall provide and maintain,for all employees of the Participant engaged in work under this Agreement,workers'compensation insurance as required by AS 23.30.045,as it may be amended or replaced,or other Alaska or federal statue or regulation. The Participant is responsible for ensuring that any of its subcontractors who directly or indirectly provide services under this Agreement maintain workers' compensation insurance to the extent required by law.The workers' compensation insurance policy shall contain a waiver of subrogation in favor of the other Participants.Any Participant who is self-insured hereby waives subrogation in favor of the other Participants. Comprehensive General Liability Insurance.Each Participant shall purchase and maintain comprehensive general liability insurance in an amount not less than the limits approved by the IMC.The other Participants shall be included as additional insureds on insurance required in this Agreement and shall not by their inclusion be responsible to the insurance carrier for payment of premiums therefor.These insurance policies must also contain a cross liability or severability of interest endorsement. Section 18.3.Other Insurance Coverage Requirements 18.3.1 18.3.2 18.3.3 Section 19.1 Participants'Cost Responsibility.Each Participant will bear the cost of the required insurance.Insurance required to be maintained under this Agreement 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. Users'Insurance Requirements.The IMC may set minimum requirements for Users to be included in any User Agreement for Intertie service. Coverage and Certificates.These policies must provide that any cancellation, non-renewal,or material change be upon not less than thirty (30)days notice to all named insureds.Each Participant must provide the AEA and IMC 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. Article 19. REVIEW OF DECISION Review of IMC Decision Participants and Users may seek review of an IMC decision in the manner provided in this Article if they are directly affected by such decision.For review of IMC determinations of compliance or non-compliance with any operating policies and procedures or other IMC adopted Page 44 of 53 -Amended and Restated Alaska Intertie Agreement standards,a Participant or User first must complete any review process specifically provided for in such policies,procedures,or standards.This Article shall not apply to AEA without AEA's written consent. Section 19.2 Initiation of Review Any review process under this Article 19 must be initiated within fifteen (15)days after receipt of written notification of the disputed decision. Section 19.3.Review Process 19.3.1 19.3.2 Section 20.1 20.1.1 Settlement_Conference.Within twenty (20)calendar days after the written request of any disputing party,or such longer time as mutually agreed upon, representatives of the IMC and the disputing parties'senior management with direct authority to enter into a settlement agreement shall meet and make a good faith effort to resolve any dispute.In the event the representatives are unable to achieve a resolution,then the dispute shall be subject to mediation pursuant to this Section 19.3.Completion of the settlement conference procedure set out in this paragraph shall be a condition precedent to mediation under this Section unless one or more of the disputing parties refuses to attend the settlement conference as requested. Disposition of Dispute.Any dispute(s)not resolved by the settlement conference convened pursuant to Section 19.3.1 above,shall be subject to mediation unless otherwise mutually agreed upon in writing.Within twenty (20)calendar days after receipt of a written notice of demand for mediation,or such longer time as mutually agreed upon,the IMC and disputing parties shall jointly select a single,neutral mediator and thereafter shall participate in the mediation in a good faith effort to resolve the dispute(s).If the parties are unable to mutually agree upon a mediator within 20 calendar days after receipt of the written demand for mediation,the mediator shall be selected by the presiding judge of the Superior Court for the Third Judicial District at Anchorage,Alaska,unless mutually agreed otherwise.Any mediator selected must have experience in the subject matter of the dispute.If the IMC and the disputing parties have not reached a settlement of the dispute(s)within an additional thirty (30)days after appointment of the mediator,or such longer period as they may agree,then they may file an action in a court of competent jurisdiction or pursue such other remedies as they may have. Article 20. INDEMNITY Responsibility;Cost of Indemnity Costs of Indemnity.Each Participant shall be responsible for the costs and liability arising out of,or in any way connected with,the acts or omissions of Page 45 of 53 -Amended and Restated Alaska Intertie Agreement the Participant,its agents (excluding other Participants),employees,or officers taken pursuant to or under color of this Agreement. 20.1.2 Participant Indemnity.Each Participant shall defend and indemnify the other Participants from and against any claim or liability,including any related loss or cost,caused by or resulting from the design,construction,installation, operation,or maintenance of any of the electric facilities owned,operated,or maintained by the indemnifying Participant or by reason of the acts or omissions of its agents,contractors,servants,or employees in connection therewith. 20.1.3 IMC Indemnity.To the fullest extent permitted by law,the IMC shall indemnify and hold its members,authorized agents,and officers harmless against all claims and liabilities which they or any of them incur as a party defendant to any proceeding,except one filed by or in the right of the IMC, based on any authorized action of any such person as a member of the IMC, an authorized agent of the IMC,or as an officer of the IMC within the scope of the member's office. 20.1.4 User Agreements.The IMC shall include provisions in any agreements with Users that provide equivalent indemnity rights and responsibilities for such Users as those provided for and required of Participants in this Article provided,however,that this Section may not apply to AEA or other state entities. Section 20.2.Comparative Negligence Any liability,including costs of defense and attorney fees,for claims arising from the concurrent negligence of two or more Participants and/or Users will be apportioned according to the respective percentage of fault attributable to each Participant and/or User as determined by agreement or by the trier of fact. Article 21. WARRANTY DENIAL AND EXCLUSIVITY OF CONTRACT Section 21.1.AEA Denial of Warranty AEA does not warrant the Intertie facilities it owns as fit for their intended use or the reliability or availability of the Intertie for intended operations covered by this Agreement. Section 21.2.Exclusivity of Contract The terms of this Agreement and any provisions adopted by reference or otherwise incorporated into this Agreement set forth the full intent and agreement of AEA and the Participants regarding the matters covered by this Agreement.However,this Agreement does not supersede related Page 46 of 53 -Amended and Restated Alaska Intertie Agreement written agreements,such as the Intertie maintenance agreements between AEA and GVEA or AML&P,but is to be interpreted consistently with them. Article 22. UNCONTROLLABLE FORCES Section 22.1 Limited Excuse of Performance. A Participant will not be in default in performance 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. Section 22.2 Suspension of Performance. If a Participant,by reason of an uncontrollable force,is rendered unable,wholly or in part,to perform its obligations under this Agreement (other than its obligations to pay money),then upon that Participant giving notice and the particulars of the uncontrollable force,its obligation to perform will be suspended during the continuance of,but only to the extent of,any inability so caused,but for no longer period thereof,and the effects of such cause shall,so far as possible,be remedied with all reasonable dispatch;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 to the extent caused by an uncontrollable force,nor will such uncontrollable force give rise to claim for damages or constitute default. Article 23. WAIVERS Any waiver at any time by a Participant or the IMC of its rights with respect to a default under this Agreement,or with respect to any other matter arising in connection with this Agreement, shall not be deemed a waiver with respect to any subsequent 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. Article 24. SUCCESSORS AND ASSIGNS;NO THIRD PARTY BENEFICIARIES Section 24.1 Successors and Assigns This Agreement shall be binding upon and inure to the benefit of the successors,legal representatives,or assigns of the respective Participants.However,no Participant shall assign this Agreement nor any part hereof without the express written consent of the IMC,which consent shall not be unreasonably withheld or delayed.Nor shall a Participant be relieved of its obligations hereunder by an assignment of less than all of the benefits and burdens hereunder or Page 47 of 53 -Amended and Restated Alaska Intertie Agreement impose additional obligations or burdens on the other Participants by an assignment of this Agreement or any part hereof.The consent of the IMC under this section shall require at least the affirmative vote of a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA Section 24.2.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,except as provided herein for Users,and the obligations herein assumed are solely for the use and benefit of the Participants to this Agreement. Article 25. GOVERNING LAW This Agreement is made subject to,and shall be governed by and construed in accordance with, the laws of the State of Alaska and the authority granted to the individual Participants thereunder. Article 26. CAPTIONS,MERGER OF ADDENDA AND EXHIBITS Section 26.1 Captions Captions of the various articles herein are intended for convenience of reference only and shall not define or limit any terms or provisions. Section 26.2.Merger The following addendum and exhibits as attached hereto are hereby merged into this Agreement: Exhibit A -Former AS 44.83.380 Exhibit B -Definitions Exhibit C -Form of New Participant Addendum Exhibit D -Former AS 44.83.398(f)Exhibit E -Intertie Facilities Diagram Exhibit E -Intertie Facilities Diagram Exhibit F -Form of User Agreement Exhibit G -Sample MITCR Calculation Exhibit H -Reserve Capacity and Operating Reserve Responsibility Agreement Subsequent Entering Participant addenda also shall be merged into this Agreement upon their execution by AEA and the Participants. Page 48 of 53 -Amended and Restated Alaska Intertie Agreement Article 27. NOTICES Section 27.1.Notices 27.1.1 Address.Any notice or demand under this Agreement is properly given if sent by registered or certified mail and addressed to the following: General Manager Municipality of Anchorage,Alaska Municipal Light and Power 1200 East First Avenue Anchorage,Alaska 99501 Executive Director Alaska Energy Authority 813 West Northern Lights Blvd. Anchorage,Alaska 99503 President Alaska Electric Generation and Transmission Cooperative,Inc. 3977 Lake Street Homer,Alaska 99603 Chief Executive Officer Chugach Electric Association,Inc. Pouch 6300 Anchorage,Alaska 99503 or 5601 Electron Drive Anchorage,Alaska 99502 President and CEO Golden Valley Electric Association,Inc. P.O.Box 71249 Fairbanks,Alaska 99707 or 758 Illinois Street Fairbanks,Alaska 99701 with a copy to: Kirk H.Gibson McDowell Rackner &Gibson PC 419 SW 11"Ave.,Suite 400 Page 49 of 53 -Amended and Restated Alaska Intertie Agreement Portland,Oregon 97205 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 any Participant to all others. 27.1.2 Means of Notice.Any notice or request of a routine character in connection with the use of Capacity or delivery of Energy,or in connection with the operation of facilities,shall be given in the manner so designated by the Operating Committee,or the IMC. Article 28. AMENDMENTS Except as expressly provided for in this Agreement,neither this Agreement nor any part hereof may be terminated,amended,supplemented,waived,or modified except by a written instrument signed by a minimum of 75 percent of the members of the IMC constituting greater than 66 percent of the total Annual System Demand of all members of the IMC,including the affirmative vote of AEA. Article 29. MUTUAL RIGHT OF ENTRY Each Participant and AEA hereby grants a license and permit to the operators of the Intertie, including the operators'employees or contractors,to enter upon its rights-of-way and to make use of its easements (or similar right to use or enter upon property)to perform work related to the repair,operation or maintenance of Intertie facilities located thereon.Any such entry shall comply with the requirements and restrictions of the right-of-way or easement.Notice of entry and the purpose(s)for it shall be provided to the owner or holder in as timely a manner as is practicable under the then-existing circumstances. Article 30. AGENTS Each Participant shall provide notice to the IMC and the operators of the Intertie of that Participant's appointment of an agent,or Designated Contractor.The Participant shall remain fully responsible under this Agreement for all acts or failures to act of its agents or Designated Contractors.Appointment of an agent or Designated Contractor shall not relieve a Participant of any of its responsibilities or obligations under this Agreement.The appointment of an agent or Designated Contractor shall not be used to have,or have the right to control more than one vote or have more than one voting representative on the IMC.See Section 8.1,Establishment of the Intertie Management Committee,Right to Vote.An agent or Designated Contractor must meet the requirements of this Agreement to become a Participant. Page 50 of 53 -Amended and Restated Alaska Intertie Agreement Article 31. AGREEMENT APPROVAL AND TRANSMITTAL By signing this Agreement,a Participant does not subject itself to rate regulation by the Regulatory Commission of Alaska (RCA).AEA will transmit this Agreement to the RCA for informational purposes only. [The remainder of this page intentionally left blank] Page 51 of 53 -Amended and Restated Alaska Intertie Agreement Article 32. CONSTRUCTION OF AGREEMENT Each Participant agrees that it has participated as fully as it deemed prudent in the drafting and negotiation of this Agreement.Accordingly,the Agreement will not be construed against any particular Participant,or Participants,as the drafter. IN WITNESS WHEREOF,the Participants have caused this Agreement to be executed by their duly authorized officers or representatives as of the day and year first above written. This Agreement may be executed in counterparts each of which shall be an original,and all of which shall be merged into this Agreement. ALASKA ENERGY AUTHORITY By: Title: SUBSCRIBED AND SWORN TO before me on the day of ,2011. Notary Public,State of Alaska My Commission Expires: MUNICIPALITY OF ANCHORAGE,ALASKA d.b.a.MUNICIPAL LIGHT AND POWER By: Title: SUBSCRIBED AND SWORN TO before me on the day of ,2011. Notary Public,State of Alaska My Commission Expires: Page 52 of 53 -Amended and Restated Alaska Intertie Agreement CHUGACH ELECTRIC ASSOCIATION,INC. By: Title: SUBSCRIBED AND SWORN TO before me on the day of ,2011. Notary Public,State of Alaska My Commission Expires: GOLDEN VALLEY ELECTRIC ASSOCIATION,INC. By: Title: SUBSCRIBED AND SWORN TO before me on the day of ,2011. Notary Public,State of Alaska My Commission Expires: Page 53 of 53 -Amended and Restated Alaska Intertie Agreement ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE,INC. By: Title: SUBSCRIBED AND SWORN TO before me on the day of ,2011. Notary Public,State of Alaska My Commission Expires: Page 54 of 53 -Amended and Restated Alaska Intertie Agreement State of Alaska Regulatory Commission of Alaska TAM Pah Commissioner January 31,2014 Bradley Evans,Chairman RECEIVED Intertie Management Committee c/o Chugach Electric Association FEB 06 2014 §601 Electron Drive EXECUTIVE OFFICEAnchorage,Alaska 99519 Re:Alaska Intertie -Railbelt Operating and Reliability Standards Dear Mr.Evans, Thank you for your recent transmittal of the above identified informational filing.The filing will be reviewed in due course.| understand the IMC is not at this time requesting any RCA action with respect to the filing.Be informed that the filing has been made of public record,as Alaska Statute requires.Members of the public can obtain a copy of the filing through the RCA web site. Please convey to the members of the IMC,and through them to their staff,that the RCA appreciates how complex the document is and how it took significant effort to agree on and memorialize these standards.For the effort towards making the safe,reliable, reasonably priced,delivery of electric service available to the railbeltcitizenry|express my personal gratitude. W.Ba Chairman INTERTIE MANAGEMENT COMMITTEE January 27,2014 T.W.Patch,Chairman Regulatory Commission of Alaska 701 West Eighth Avenue,Suite 300 Anchorage,Alaska 99501-3469 RE:The Alaska Intertie -Railbelt Operating and Reliability Standards Dear Chairman Patch: This information filing to the Regulatory Commission of Alaska (Commission)is beingsubmittedbytheIntertieManagementCommittee(IMC)'in order to provide notice to the Commission that the IMC has adopted the attached operating and reliabilitystandardsforallusersoftheAlaskaIntertie.?The IMC is the governing body with the authority to control,operate,maintain,repair,and perform improvements on the Alaska Intertie in accordance with the terms of the Alaska Intertie Agreement.The IMCreceivesitsauthorityfromtheprovisionsoftheAlaskaIntertieAgreement.® Adoption of the Railbelt Operating and Reliability Standards The Railbelt Operating and Reliability Standards are to be used to govern the activities of all users of the Alaska Intertie.The Railbelt Operating and Reliability Standards were adopted by the IMC after the completion of a public review and comment process that was administered by AEA.The IMC formally adopted the Railbelt Operating andReliabilityStandardsatitsmeetingheldNovember1,2013.4 The Alaska Energy Authority (AEA)and the Participating Utilities (Chugach Electric Association,Inc.(CEA), Golden Valley Electric Association,Inc.(GVEA),Matanuska Electric Association,Inc. (MEA),and the Municipality of Anchorage d/b/a/Municipal Light and Power (ML&P) supported the filing of the Railbelt Operating and Reliability Standards with the Commission as part of the IMC Resolution approving the use of the Railbelt Operating and Reliability Standards for the Alaska Intertie. 'The IMC is comprised of the Alaska Energy Authority,Chugach Electric Association,Inc.,Golden Valley Electric Association,Inc.,Matanuska Electric Association,Inc.,and the Municipality of Anchorage d/b/af Municipal Light and Power .2 See Exhibit 1 for a copy of the "Railbelt Operating and Reliability Standards”adopted by the IMC.3 See Exhibit 2 for a copy of the Amended and Restated Alaska Intertie Agreement dated November 18, 2011. "See Exhibit 3 for a copy of IMC Resolution 13-3,dated November 1,2013. 1 -Alaska Intertie:Railbelt Utility Operating and Reliability Standards Background In 1985,the utilities operating systems along the Railbelt and the Alaska Power Authority (APA;now known as the Alaska Energy Authority)entered into the AlaskaIntertieAgreement'to set forth the understanding of the parties concerning the construction and operation of the electric transmission facilities connecting the Railbelt Utilities from North central,Alaska to South central,Alaska.This transmission facility is known as the Alaska Intertie. The Original Utility Participants incorporated a separate agreement providing for individual utility reserve capacity and operating reserve responsibilities as an appendixtotheAlaskaIntertieAgreement.©This Reserve Capacity and Operating Reserve Responsibility agreement was developed by the Original Utility Participants to memorialize the agreed reserve requirement responsibilities for those entities with these operational obligations on the interconnected system (i.e.,not APA/AEA).With one limited exception,the entire interconnected electric utility system along the Railbelt has been continually operated in accordance with the requirements and responsibilities set forth in the Reserve Capacity and Operating Reserve Responsibility agreement. The Alaska Intertie Agreement established an operating committee,consisting of representatives of APA and the Original Utility Participants,to develop operating procedures and standard practices with respect to all matters affecting the operations of the Alaska Intertie and the Railbelt interconnection.Shortly after the interconnection of the Northern and Southern systems of the Railbelt in 1985,the newly formed Intertie Operating Committee (IOC)reviewed,modified,and adopted the North American Electric Reliability Corporation (NERC)'s "Operating Guides for Interconnected Power Systems”.In 1992,the Alaska Systems Coordinating Council (ASCC)established Railbelt wide planning criteria and subsumed The "Alaska Intertie Operating Guides” into the Alaska Systems Coordinating Council "Operating and Planning Guides.” The efforts of both the IOC and later the ASCC began with a review of the current editions of interconnected operating and planning guides.NERC adopted guidelines for the Lower-48 States and controlling entities implemented them on a voluntary basis. However,given the significant technical differences and capability between the large, more robust interconnected utility systems of the Lower-48 States,Canada,and Mexico and the limited interconnected Alaska Railbelt grid,the standards required considerable revision and adaptation in order to have the standards fit the needs of the Alaska Railbelt grid. 5 The utilities initially involved with the Alaska Intertie were:The Municipality of Anchorage,d.b.a. Municipal Light and Power (ML&P);Chugach Electric Association,Inc.(CEA);The City of Fairbanks, Alaska,Municipal Utilities System (FMUS),Golden Valtey Electric Association,Inc.(GVEA);and the Alaska Electric Generation and Transmission Cooperative,Inc.(AEG&T)of which Homer Electric Association,Inc.(HEA)and Matanuska Electric Association,Inc.(MEA)were members.The Alaska Power Authority was also a signatory.For convenience,these utilities will be collectively referenced as the "Original Utility Participants”in this filing.®See Exhibit 4 for a copy of Addendum No.1 to the Alaska Intertie Agreement,Reserve Capacity and Operating Reserve Responsibility. 2 -Alaska Intertie:Railbelt Utility Operating and Reliability Standards NERC's standards as well as the Railbelt Standards have been under continuous review and development since their inception.Indeed,the entire electric industry has changed significantly in the last thirty (30)years.As an example,the implementation of uniform non-discriminatory open access to the transmission grid required a mandatory approach to reliability because of the multiplication of competing interests over time and the market power of the legacy utilities in the Lower 48 States.In 2006,the Federal Energy Regulatory Commission (FERC)selected NERC as the Electric Reliability Organization for the United States (as well as parts of Canada and Mexico).This particular development spurred significant development and refinement of the various standards governing electric utility operations. AEA gave notice on October 16,2006,that it was terminating the Alaska !Intertie Agreement because,among other things,the Alaska Intertie Agreement had no mechanism to fund capital inprovements,a number of repairs were needed,and AEA believed that termination was required to improve the power systems serving the interconnected Alaska Railbelt grid.With the imminent termination of the Alaska IntertieAgreement,the upcoming termination of the Tri-partite Agreement',and significant technical efforts about to undertaken to re-integrate the modified Bradley Project into the grid,the utilities operating along the interconnected Alaska Railbelt grid believed areviewandupdatetothestandardswasnecessary.The Railbelt Utility Group®(RUG) directed their respective operations personnel to form an Ad-hoc Railbelt Reliability Committee (RRC)and tasked it with reviewing the most recent version of the NERC's "Reliability Standards for the Bulk Electric Systems of North America”and modifying and/or updating the planning and operating standards used by the utilities operating along the interconnected Alaska Railbelt grid.Formal meetings of the RRC began inthespringof2007withtheadoptionofcommitteegroundrules'. The representatives of the original RRC were”®: Brian Hickey,CEA -Chair Frank Bettine -MEA Bob Day -HEA Henri Dale -GVEA Jim Strandberg AEA Doug Hall -ML&P 7 The Tri-partite Agreement references the agreement between CEA and MEA concerning the terms and conditions under which CEA was the full requirements supplier of electric power to MEA.8 The Railbelt Utility Groupis an ad hoc group comprised of the CEOs and General Managers from the six Railbelt Utilities (CEA,GVEA,HEA,MEA,ML&P,and City of Seward).®See attached Ground rules at AEA - website:http://Awww.akenergyauthority.org/RailbeltReliabilityHomePage.html 0 At the direction of MEA management,MEA's representative on the ad-hoc Railbelt reliability committee was an observing and commenting participant only and was precluded from voting on any specific topics. 3 -Alaska Intertie:Railbelt Utility Operating and Reliability Standards The RRC,working with representatives of AEA formed committee working rules and open public process for the NERC standards review.Over the following several years the RRC reviewed many pages of NERC standards.The RRC modified the NERC standards for use by the interconnected Alaska Railbelt grid by drawing upon this body of knowledge,the existing Railbelt operating and planning standards,as well as recognizing the current practices of the utilities operating along the interconnected Alaska Railbelt grid.As time passed,the committee has taken on additional reliability- related tasks and consequently increased the importance of the work of the committee. Review and adoption of standards continued to proceed,albeit at slower than anticipated pace. In 2011,the Alaska Intertie Agreement was amended and restated.The Amended and Restated Alaska Intertie Agreement was in many ways similar to the original Alaska Intertie Agreement;however,there were three significant areas of change:1)the inclusion of open access principles that would be used to establish a process for access to the Alaska Intertie for other users than the current legacy utilities;2)the IMC assumed primary management responsibilities,with AEA given "step-in”managementrights'',and 3)the signatories to the agreement changed.”In addition,the IMC became the successor to many of the responsibilities of the IOC under the Amended and Restated Alaska Intertie Agreement. After the RRC had come as far as it felt possible on development of the basic operating and planning standards in 2012,committee members issued a draft of the standards completed "to-date”to the Participating Utilities and AEA for comment.It should be noted that the RRC membership had changed considerably;only Bob Day of HEA and Henri Dale of GVEA remained from the original committee.In addition,MEA had become a direct voting member,rather than through AEG&T.And,HEA declined to sign the Amended and Restated Alaska Intertie Agreement.HEA's withdrawal from participating is the only substantive difference in the make-up of the Original Utility Participants and the utility signatories to the Amended and Restated Alaska Intertie Agreement,which have been referred to herein as the Participating Utilities. With the upcoming termination of the Tri-partite agreement,the formation of two new load-balancing authorities (HEA and MEA),open access provisions added in the Amended and Restated Alaska Intertie Agreement ,and HEA's departure from participation in IOC (now IMC)activities,the IMC took on the issue of completing thereliabilitystandardsreview.'?Brian Hickey (original chair of the RRC)was directed by the IMC to review the work completed by the RRC,propose changes as required,and "These management processes are substantially similar to those used with the Bradley Lake Hydroelectric Project.'2 The Amended and Restated Alaska Intertie Agreement was executed by ML&P,CEA,GVEA,AEG&T, and AEA.The provisions of the Restated Alaska Intertie Agreement accommodated the replacement of AEG&T with its individual members (AEG&T and MEA)as separate signatories.MEA executed the necessary documents to become part of the Utility Participants involved with the Amended and Restated Alaska Intertie Agreement.HEA did not.While HEA representatives were actively involved in the discussions during the development of the Amended and Restated Alaska Intertie Agreement,HEA chose to not be part or signatory to the Restated Alaska Intertie Agreement.3 The IMC is effectively the current monitor of reliability issues in and along the Alaska Railbelt grid. 4 -Alaska Intertie:Railbelt Utility Operating and Reliability Standards add any necessary operating standards required for completeness.Mr.Hickey was then to submit the document to both AEA and the IMC for review,comment,and subsequent adoption by the IMC. Mr.Hickey performed the following tasks under the direction of the IMC: e Updated the glossary to the most recent NERC standard with modification to reflect regional Railbelt terminology; e Made editorial corrections to approved standards;clarified the contingency analysis and operations interface portions of the planning standards; e {ntegrated the committee's working papers on reserves and the existing Exhibit H of the Alaska Intertie Agreement into a single reserve standard, preserving the thirty year old reserve allocation methodology; Appended the interconnection standards for transmission and generation Updated the under-frequency load shed table with the best information available;and, e And,produced a final draft copy for review by AEA and submission to the IOC. On July 9"2013,the following actions were taken by the IMC: 1.The operating portions of the standards governing all Railbelt facilities of the IMC members were adopted; 2.The reliability standards governing all facilities of the individual IMC's member utilities were adopted; 3.The reliability standards governing the State-owned Alaska Intertie were adopted (with a one-year sunset clause and excepting the "sanctions”portions of the enforcement mechanisms until separately approved by the IMC);and, 4.AEA agreed to submit the document for an additional 60-days of public comment Following the 60-day comment period additional edits were incorporated into the standards.The final version was approved by the IMC,including AEA,on November 1,2013,with no sunset clause but with the "sanctions”exception remaining. The Operating and Reliability Standards The operating and reliability standards issued by NERC have been reviewed, considered,and modified for use in Alaska so that,to the extent practicable,the best electric utility practices are followed by the users of the Alaska Intertie.The operating and reliability standards represent the establishment of the first set of comprehensive policies and procedures governing operating and reliability standards in Alaska. '4 See IMC Resolution 13-3,dated November 1,2013 attached as Exhibit 3. 5 -Alaska Intertie:Railbelt Utility Operating and Reliability Standards The standards have been developed with the objective of achieving the five (5)following goals: e To set the minimum requirements for interconnection to the interconnected Aiaska Railbelt grid (understanding that the utility at the point of interconnection may have the need for additional or stricter requirements); e To establish performance based standards for interconnection to the extent practicable; e To avoid the degradation of the performance or reliability of the interconnected Alaska Railbeilt grid by interconnecting entities and standardize the methodology for analyzing whether any degradation would occur by modeling the Railbelt electrical system using boundary dispatch cases against all category B and probable category C contingencies; ¢To limit the requirement for interconnecting utilities to make system improvements beyond what is necessary to meet the above goal of avoiding system degradation;and, e To establish the requirement that an entity desiring interconnection shall agree to abide by these operating and reliability standards (and all other applicable standards)as a condition for interconnecting onto the interconnected Alaska Railbelt grid. The operating and reliability standards that have been adopted by the IMC are comprised of fourteen (14)standards including: Alaska Standard AKBAL-001-0 -Real Power Balancing Control Performance Alaska Standard AKBAL-002-0 -Disturbance Control Performance Alaska Standard AKBAL-003-0 -Frequency Response and Bias Alaska Standard AKBAL-004-0 -Time Error Correction Alaska Standard AKBAL-005-0 -Automatic Generation Control Alaska Standard AKBAL-006-0 -Inadvertent Interchange Alaska Standard AKFAC-001-0 -Facility Connection Requirements 6 -Alaska Intertie:Railbelt Utility Operating and Reliability Standards Alaska Standard AKFAC-002-0 Coordination of Plans for New Facilities Alaska Standard AKRES-001-0 -Reserve Obligation and Allocation Alaska Standard AKTPL-001-0 -System Performance Under Normal Conditions Alaska Standard AKTPL-002-0 -System Performance Following Loss of a Single BES Element and Likely Subsequent Contingencies Alaska Standard AKTPL-003-0 -System Performance Following Loss of Two or More BES Elements Alaska Standard AKVAR-001-0 -Voltage and Reactive Control Alaska Standard AKVAR-002-0 -Generator Operation for Maintaining Network Voltage Schedules The AKBAL and AKVAR standards govern how balancing authorities'®work with each other.These standards establish the balancing authority's obligation for maintaining reserve requirements. The AKFAC standards govern new construction,maintenance and ratings on a utility's system.These standards contain the interconnection requirements.As noted earlier, these interconnection standards establish minimum requirements for the utilities operating along the interconnected Alaska Railbelt grid and acknowledge that the utility at the point of interconnection may have the need for additional or stricter requirements. The AKRES standard delineates the reserves policy of the utilities operating along the interconnected Alaska Railbelt grid.This standard draws heavily upon Exhibit H to the Amended and Restated Alaska Intertie Agreement.The AKRES standard sets the requirements for the resource adequacy,operating reserves,spinning reserves,andregulatingreserves.'®These standards have some amount of behavior modification built into them in that they have formulas that should incentivize an entity's compliance with the standards in the event of nonperformance.It should be noted that these formulas are for minor infractions,and that for willful infractions further additional and more substantial sanctions may be warranted.As discussed earlier,the IMC has not adopted the "sanctions”portions of the enforcement mechanisms.Therefore,the "sanctions”portion of the standards will not be effective without further consideration 'S Most of the Alaskan utilities are vertically integrated and are each their own balancing authority.*®At this time,HEA has not accepted the well-established method for determining a utility's reserveobligationsinandalongtheRailbeltgrid. 7 -Alaska Intertie:Railbelt Utility Operating and Reliability Standards and vote by the IMC.Balancing authorities with small units (less than 10 MW)but with non-dispatchable fuel sources may find that they have little to no spin obligation,but will likely have a comparatively larger regulating obligation. The AKTPL standards address contingency categorization and utility reporting under normal and emergency conditions. An important component of the Reliability Standards is that they represent a "living”set of standards that will be continually reviewed and modified when appropriate.For example,a significant attack or interruption to critical cyber-asset infrastructure could cause significant electric utility system disruptions,and implementation of open access will require standardizing and memorializing the Available Transfer Capability.The IMC is currently working on "Critical Infrastructure Protection Standards”and Transfer Path Capacity modeling standards to address these issues.The resulting standards will be incorporated into the standards as soon as practicable. Another aspect of the Reliability Standards is that the document does not address every eventuality.A prolonged interruption of the fuel supply to a generating unit is an unlikely, but highly disruptive contingency.For the Anchorage Bowl area,such an event would likely be coincident to a loss of heating fuel as well;an extremely disruptive event with major life safety consequences if such an event would occur in the winter.While not specifically addressed in the Railbelt Operating and Reliability Standards,there is a requirement that each generating entity have contingency plans for loss of the primary fuel supply. Conclusion This filing is being made in order that the Commission may be informed regarding the activities of the Alaska Intertie.Please do not hesitate to contact me should you have any questions of the IMC or desire further information from the IMC. Sincerely, Brabl nord Bradley W.Evans,Chairman Intertie Management Committee C:Commissioner Lisankie Commissioner Pickett Commissioner Rokeberg Commissioner Wilson Bernie Smith,Utility Engineering Analyst 8 -Alaska Intertie:Railbelt Utility Operating and Reliability Standards