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HomeMy WebLinkAboutIntertie Managment Commitee Meetings 02-11-2014 3MEMORANDUM State of Alaska Department of Law TO:Sara Fisher Goad DATE:February 10,2014 FILE NO.:AN2014100407 FROM:Brian D.Bjorkquist TEL.NO.:(907)269-5150SeniorAssistantAttorneyGeneralSUBJECT:Bradley Lake powerLaborandStateAffairsSectiontransmissiondisputes. CONFIDENTIAL ATTORNEY CLIENT COMMUNICATION This memorandum outlines the Bradley Lake Project power transmission disputes between Homer Electric Association,Inc.(HEA)and the other Railbelt Utilities.! 1.There are two fundamental substantive disputes,and one jurisdictional dispute, related to transmission of Bradley Lake power. 2.The two substantive disputes are: a.Does Chugach Electric Association,Inc.(CEA)or HEA have superior authority to operate the HEA owned transmission line between Soldotna and Quartz Creek (S/Q Line)? b.How much compensation should HEA receive for use of the HEA owned S/Q Line,and HEA's operation and maintenance of the line if HEA prevails on dispute (a)above? i.The Railbelt Utilities have been paying approximately $240,000 annually for the S/Q Line lease. ii.HEA has requested approximately $2.7 million.But,that amount includes HEA operation and maintenance costs which CEA currently provides as part of its overall fee structure. 'Chugach Electric Association,Inc.;the Municipality of Anchorage d/b/a Municipal Light &Power;Matanuska Electric Association,Inc.;Golden Valley Electric Association,Inc.;and the City of Seward,d/b/a Seward Electric System. Bradley Lake Project: Power Transmission Disputes 3.The one jurisdictional dispute is whether the Regulatory Commission of Alaska (RCA)has jurisdiction is in dispute. a.Certain Bradley Lake related agreements are exempt from RCA jurisdiction until all Bradley Lake bonds are paid off (scheduled in 2021). b.One such agreement is at the heart of the substantive disputes on who operates the S/Q Line,and how much compensation is owed. 4,The disputes arose because HEA ceased to be an all requirements customer of CEA January 1,2014 ("all requirements”meant CEA provided almost all of HEA's power). 5.Before January 1,2014,CEA leased the S/Q Line and operated the line under a Services Agreement. a.The lease expired when the all requirements contract expired.The Services Agreement remains in effect. b.AEA is not party to either the S/Q Line lease or the Services Agreement. c.HEA and CEA alone are parties to the S/Q Line lease.Each Railbelt Utility is party to the Services Agreement. 6.HEA and CEA disagree about the impact of the expiration of the S/Q Line Lease. a.HEA claims without a lease,CEA no longer has authority to operate the S/Q Line under the Services Agreement. b.CEA claims the Services Agreement empowers CEA to continue to operate the S/Q Line,with or without a lease. c.Language in the Services Agreement is not completely clear.Each party has some interpretation difficulties. i.HEA's interpretation neglects that the Services Agreement was one of several interconnected agreements necessary to finance and construct the Bradley Lake project.No one utility should be able to alter the interconnected agreements without upsetting the negotiated bargain between the utilities.In particular,ensuring a priority for the transmission of Bradley Lake power to other Railbelt Utilities. ii.CEA's interpretation neglects that the expiration of the S/Q Line lease should have consequences.The Services Agreement speaks to CEA operating the S/Q Line,but does not grant explicit lease or access rights.Further,the pending expiration of the lease was known.Arguably,CEA and other Railbelt utilities had an obligation to establish an alternative arrangement. Bradley Lake Project:2 Power Transmission Disputes d.The significant difference in costs ($240,000 vs.$2.7 million)appears to have both CEA and HEA locking-in on their respective legal interpretations.A resolution of those disputing interpretations may be necessary before the parties will negotiate a resolution. 7.The RCA has under advisement whether it has jurisdiction.An order could be issued at any time. 8.The BPMC has established and is implementing dispute procedures as authorized in the Services Agreement. a.The BPMC has met on three occasions to date,and is scheduling additional meetings. b.The BPMC has started to identify each issue in dispute,including technical issues.Technical disputes are being sent to committees of technical experts to evaluate and report back to the BPMC. 9.The Utility GM's have also agreed to meet informally to discuss options for resolving disputes.The utilities have significant authority to craft a resolution,if they could find common ground. a.The Bradley Lake related agreements,and amendments to those agreements,are exempt from RCA jurisdiction. b.Any compromise the Utilities could negotiate respecting transmission over the S/Q Line could be incorporated into an amendment to the Services Agreement.That amendment being exempt,the compromise would be effective without RCA approval. Bradley Lake Project: Power Transmission Disputes INTERTIE MANAGEMENT COMMITTEE Resolution 2014-01 ORGANIZATIONAL STRUCTURE OF THE IMC WHEREAS,the State of Alaska funded and the Alaska Energy Authority ("AEA”)constructed the Alaska Intertie and made these electrical transmission facilities available to the Utility Participants under the Original Intertie 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;and WHEREAS,the Utility 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 WHEREAS,the Intertie interconnected the Railbelt electric utility systems so that they operate in electrical synchronism;and WHEREAS,AEA and the Utility participants desired 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,the IMC commensurately took on the responsibility for governing Railbelt reliability and operational matters.Further developed standards for conduct,operations,energy accounting load balancing area responsibilities,load balancing boundaries,custody transfer protocols and operational and planning reserves.Further the IMC has performed these duties since 1985;and WHEREAS,the IMC is the only Organization that has been reviewed and audited by NERC;and WHEREAS,the IMC is the only recognized Reliability council in the Railbelt;and WHEREAS,all rules and standards have been mutually agreed too;and WHEREAS,the IMC has lead and directed system improvements across the Railbelt system relating to spinning reserves,reliability standards under frequency load shed schedules and protective relay issues;and WHEREAS,the IMC created procedures for monitoring compliance to spinning reserves and reliability standards;and WHEREAS,the IMC has negated the Railbelt 's first open access language with the State of Alaska for a non-utility;and WHEREAS,the Railbelt needs for expansion of IMC oversight has grown;and WHEREAS,the IMC has taken on the above roles in addition to performing the duties of asset manager for the Alaskan Intertie;and NOW,THEREFORE, BE IT RESOLVED the IMC adopts the following organizational structure and guidance for each work group identified. Dated at Anchorage,Alaska,this 16"day of January,2014 BeiCa TlessaullSecretary” Resolution 2014-01 Organizational Structure of the IMC Railbelt IMC Organizational Structure Intertie Management December 18,2013 Committee (IMC) Standards Intertie Operating -¢fancards Tariffs and Regulatory'::Compliance -:.Committee Committee Cc ;Affairs Committeeommittee(IOC)-= 7 . 5 7 y Machine Ratings Operations,Dispatch and Budget Engineering,Rela Subcommittee Maintenance and System Operationg Subcomenittee and Reliability Scheduling Subcommittee °Subcommittee Subcommittee a ') System Studies SCADA and .;TelecommunicationsSubcommittee.;Subcommittee Intertie Management Committee Meeting -Alaska Online Public Notices Page 1 of 1 STATUS:Active Intertie Management Committee Meeting ALASKA ENERGY AUTHORITY Regular Meeting of the Intertie Management Committee Notice is hereby given that the Intertie Management Committee will hold a regular meeting on Tuesday,February 11,2014 at 9:00 a.m.For additional information contact Teri Webster at (907)771-3074. This meeting will be conducted by electronic media pursuant to AS 44.83.040(b)and AS 44.62.310 at the following location: Alaska Energy Authority Board Conference Room 813 West Northern Lights Boulevard Anchorage,Alaska A teleconference line has been set up for those unable to attend in person.Dial 1-800-315-6338 and enter code 3074#. The public is invited to attend.The State of Alaska (AEA)complies with Title tl of the Americans with Disabilities Act of 1990.Disabled persons requiring special modifications to participate should contact AEA staff at (907)771-3074 to make arrangements. Attachments,History,Details Attachments Details None .Commerce Community andDepartment:Economic Development Revision History Category:Public Notices Created 2/3/2014 9:46:33 AM by eo tanay.advisory Committee Meetingtawebster: Modified 2/3/2014 9:47:36 AM by ,Project/Regulation #:[Details]tawebster Modified 2/3/2014 9:49:17 AM by [Details]Publish Date:2/3/2014 tawebster Archive Date:2/12/2014 Events/Deadlines: httn://aws.state.ak.us/OnlinePublicNotices/Notices/View.aspx?id=1 71047 2/3/2014 CHECKLIST FOR ALASKA INTERTIE MANAGEMENT COMMITTEE MEETINGS Meeting Date/Time:tue CATA.ZI LL Meeting Location: Task CONFIRMED/DATE Secure Meeting Date with Gene Therriault MAKE SURE IT'S NOT A STATE HOLIDAY Secure Meeting Date with Chairman,Brad Evans (call his Exec Assistant,Connie Owens @ 762-4747) Post to the State of Alaska's Online Notice System 5 business days prior to the meeting.(30 days if budget is discussed) Secure meeting room for use (block out 30 minutes prior to meeting to allow for set-up time Secure date with Accu-type for recording services. Send email "SAVE THE DATE”to all members,in Outllook Contacts "IMC &ASSISTANTS”with meeting date/time/location (ask for documents to be emailed for packet inclusion -including action items with their motions INNSchedule a teleconference line with GCi (1-800-770-2121) provide them with a reference project (IMC)and code (your phone extension number) Draft Agenda for Gene Therriault's review (send it by email) After Gene approves, Send Draft Agenda by email to Chairman for review and approval, Brad_evans@chugachelectric.com always cc:Connie Owens connie_owens@chugachelectric.com Gather documents from members Email packet to members including all attachments (teleconference information/agenda/draft of previous meeting minutes/motions/general handouts)(SEND IN PDF FORMAT!) Make up blue packets for:Sara,Gene,Bjorkquist,and You Print extra copies of the full packet of information and bring to the meeting for those who did not bring their copy ALSO BRING TO THE MEETING:State Calendar,List of Reps, Sign in Sheet,AIA,ByLaws,and Minutes in final form from the last meeting for Chair's signature if they are approved! RECORDING the meeting. Following the meeting have Chair and Gene sign approved minutes. Send pdf of signed minutes to IMC list After minutes are transcribed and proofed by you,send to Kirk and main speaker for review.After their edits,prepare a final draft for the next meeting. NAMING WALTER J. HICKEL CHAPTE PARKWA R67SLA HB153)Y LYNN 13 7M0/2013 TRA,FIN MUSEU M OF THE THOMPS HB 154 NORTH ON (S)ED 4/9/2013 EDC EXTENDI SCHOOL JOSEPHS ON (H)EDC =3/4/2013 EDC,FIN 3/4/2013 FSH,RES FSH, (H)FSH =3/13/2013 RES,FIN CONCES COSTEL HB 158 SIONS LO UNLAWF UL USE OF UNMAN NED AERIAL STA, VEHICLE KAWAS TRA, HB159 S$AKI (H)JUD 3/20/2013 JUD,FIN RES,CBPL - (H)RES =3/5/2013 JUD,FIN BA only 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 (CEA);Cory Borgeson - Golden Valley Electric Association (GVEA);Joe Griffith -Matanuska Electric Association (MEA));Dan Kendall -Municipal Light &Power (ML&P);and Gene Therriault -Alaska Energy Authority (AEA). 3.PUBLIC ROLL CALL Public present in Anchorage:Louis Agi (ML&P);Brian Bjorkquist (Department of Law);Mark Johnson,Brian Hickey,Burke Wick (CEA);Bernie Smith (Regulatory Commission of Alaska); Bob Day -Homer Electric Association (HEA);Kirk Warren,Teri Webster (AEA);Kirk Gibson (McDowell Rackner &Gibson PC);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 TA.Asset Status IMC Draft Meeting Minutes-February 11,2014 Page 1 of 13 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 level of energy is being sent north.Mr.Wick advised it is 70 megawatts. 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 ML&P is carrying the biggest load of the spinning reserve. ittees Or Working groups is Chair Evans tasking Committee.Mr.Mr.Warner wouldChairEvans.Chair Evans requested the OW esérves becatfse the IMC will have to address the benefits others arereviewthecostofspinnin 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. IMC Draft Meeting Minutes-February 11,2014 Page 2 of 13 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 ongoin here 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) p4-Z2 Mr.Borgeson reported 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,elanging 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 assumes 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. LA ™ 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. Borgeson reported the algorithm currently proposed is the administrative costs and these costs would be shared equally among the participants and users,not 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. IMC Draft Meeting Minutes-February 11,2014 Page 3 of 13 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 evenly 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. 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 in 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 couple of efforts underway that have some initial cost estimates and other efforts that would need to 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 that not everyone operating in the interconnected system is amember.The IMC needs to address that diversity in the system.The rules have to be observed to enjoy the benefits of the system. IMC Draft Meeting Minutes-February 11,2014 |Page 4 of 13 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.Borgeson asked if the IMC or any of the utilities are 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 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 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.Ifa 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 their resources on resolving it. 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 IMC Draft Meeting Minutes-February 11,2014 Page 5 of 13 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 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.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 and the IMC have 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. IMC Draft Meeting Minutes-February 11,2014 Page 6 of 13 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 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 could 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. IMC Draft Meeting Minutes-February 11,2014 Page 7 of 13 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. 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 has 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 with 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 Evans 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 IMC Draft Meeting Minutes-February 11,2014 Page 8 of 13 bus at Bradley Junction to comply with the interconnected standards.Chair Evans 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. 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 there 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 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. 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.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. IMC Draft Meeting Minutes-February 11,2014 Page 9 of 13 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. 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.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 IMC Draft Meeting Minutes-February 11,2014 Page 10 of 13 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. 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.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 15,2014. 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 PTI and Power Engineers.A formal scope, schedule and budget should be defined by March 15,2014.Mr.Hickey noted the goal is to get the project substantially completed by the first of August. IMC Draft Meeting Minutes-February 11,2014 Page 11 of 13 Mr.Griffith asked what the timeframe of the model was?Mr.Hickey stated the 2009 loads were scaled up by a couple of percent to get to 2017 loads.The study will be 2017.The model has been updated to integrate the current studies.Several corrections were made to the 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 a request for proposal (RFP)will be provided by the SSS by March 15, 2014.Mr.Hickey explained a scope,schedule and budget will be developed by March 15,2014. 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 noted that 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. 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 meetings 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. IMC Draft Meeting Minutes-February 11,2014 Page 12 of 13 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 IMC Draft Meeting Minutes-February 11,2014 Page 13 of 13