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HomeMy WebLinkAboutAEA Annual Report 1993/=ALASKAENERGYAUTHORITY mw 1993 Annual Report [TABLE OF CONTENTS Statement from Gov.Walter J.Hickel Executive Director's Statement 1993-The Year in Transition Summary of Major Programs A Look at AIDEA/AEA Projects Financial Statements AEA Board of Directors AEA Contact Numbers 41 41 STATEMENT From Gov.WALTER J.HICKEL y fellow Alaskans: v The restructuring of the Alaska Energy Authority will enable Alaskans to build the projects necessary to meet our future energy needs. This reorganization was a top priority of our administration.Working closely with the leadership in the Legislature,we achieved our goal last spring when |signed into law Senate Bill 106.The legislation provided for a restructuring of the Energy Authority.It also authorized use of a portion of our energy savings to make energy available where it is needed to support economic development.These investments will allow future generations of Alaskans to benefit from the oil wealth of the past 15 years through energy reliability and economic diversification. As 1993 drew to a close,the restructuring was virtually complete.The Energy Authority's rural programs went to a newly created division within the Department of Community and Regional Affairs,and the Authority's current and proposed new projects were given to the Alaska Industrial Development and Export Authority,or AIDEA. Over the coming year,as additional ground work is performed for the new energy projects,we will look forward to helping these projects move forward. With warmest regards,Laalln HistWalterJ.Hickel Governor ALASKA ENERGY AUTHORITY ANNUAL REPORT 1 EXECUTIVE DIRECTOR'S STATEMENT n May of 1993 the Alaska Legislature passed a bill which set in motion a fundamental change in the state's role in energy programs and oversight of state-owned power projects. For a number of years the state's efforts in the critical area of energy policy had been located within the Alaska Energy Authority (AEA).Pursuant to Senate Bill 106, AEA's rural programs have been transferred into a newly created Division of Energy within the Department of Community and Regional Affairs.The transfer is designed to ensure greater efficiency in the delivery of rural energy programs.It is also aimed at reducing state payroll costs by combining agency functions and eliminating redundancy. AEA's operating power projects are now under the authority of the Alaska Industrial Development and Export Authority (AIDEA).To ensure the integrity of AEA bonds,the Energy Authority will continue to exist as a public corporation,but its ability to construct and acquire projects has been eliminated.Through AIDEA,the state will move away from involvement in daily operations of the energy projects.By transferring operational responsibilities to the appropriate utilities,the state will be able to privatize much of the workforce involved in energy projects. Through the transition,AIDEA has worked closely with the Energy Authority and the Department of Community and Regional Affairs.The complicated and time consuming tasks of reorganization were undertaken mindful of a key objective:to continue delivery of services and oversight of projects with the minimum of disruption. We are proud to say we have achieved that goal. During the coming months there will be a number of challenges facing the Energy Authority.Among them will be the pending acquisition of the Snettisham Hydroelectric Project.Also moving forward is preliminary work on new electrical Interties in the Railbelt and a hydroelectric project near Lake Clark.We will look forward to keeping you informed about these projects as they develop. Von Soll William R.(Riley)Snell Executive Director Alaska Industrial Development and Export Authority and Alaska Energy Authority ALASKA ENERGY AUTHORITY ANNUAL REPORT 1993 -THE YEAR IN TRANSITION reated by the Alaska Legislature in 1976,the Alaska Energy Authority was charged with the following mission:to promote,develop and advance the general prosperity and economic welfare of the people of Alaska by providing a means of constructing,acquiring,financing and operating power projects and facilities that tap Alaska's natural resources to produce electricity and heat.The Authority has accomplished its mission through construction and operation of power projects and through technical assistance programs,grants,loans and bond financing. Since 1976,the Alaska Energy Authority has helped provide reliable,on line electricity to more than 200 communities representing more than three-quarters of the state's population.The Authority has added more than 165 megawatts of generating capacity in some of the most rugged and remote areas of Alaska. The Authority owns and operates six hydroelectric dams and more than 420 miles of transmission lines which tie hydroelectric projects to local power grids,and four low-voltage lines that link communities.In its 17th year the Alaska Energy Authority's assets surpassed $1 billion. Several years ago,once the large projects were completed,the Alaska Energy Authority increased its attention to rural communities,with programs such as the Power Cost Equalization,the Electrical Service Extension Fund,Circuit Rider Maintenance,Power Systems Upgrades,Life Health and Safety,Waste Heat Recovery, Rural Technical Assistance,Metering and Rural Data Acquisition,Power Statistics Reports,Rural Construction Assistance and Emergency Response Coordination. The coordination of these programs,along with the development of Alternative and Applied Technologies,represented a fundamental shift in direction for the Energy Authority.With the winding down of multi-million dollar projects and no major construction projects on the horizon,many felt it was time to reorganize,redefine and redirect the state's energy policy. In May of 1993,legislation was signed by Governor Hickel that created a new Division of Energy within the Department of Community and Regional Affairs.This new division has taken on the Authority's rural programs and planning responsibilities effective August 18,1993.Oversight responsibilities for the Energy Authority's owned projects have been transferred to the Alaska Industrial Development and Export Authority (AIDEA),whose board and executive director also serve in the same capacity for the Energy Authority. ALASKA ENERGY AUTHORITY ANNUAL REPORT 3 DIVISION OF ENERGY PROGRAMS be LOANS HELP COMMUNITIES BUY FUEL AT COMPETITIVE :,WHOLESALE PRICES OAN PROGRAMS During 1993 the Alaska Energy Authority administered more than $29 million in new and outstanding loans under three loan funds:the Bulk Fuel Revolving Loan Fund,Power Project Loan Fund,and the Rural Electrification Revolving Loan Fund.Responsibility for the loan programs was transferred to the Department of Community and Regional Affairs (DCRA),Division of Energy. The most active loan program is the Bulk Fuel Revolving Loan Fund,which assists rural communities with a population of 2,000 or less in making bulk purchases of fuel oil.By consolidating its fuel needs into one large order,communities can take advantage of once-a-year barge service and buy fuel at competitive wholesale prices. As of June 30,1993,there were 55 loans outstanding,with a balance of more than $756,000. The Power Project Loan Fund provides financing for development of new,small- scale power projects,conservation facilities,bulk fuel storage,transmission and distribution lines or potable water supply projects.As ofJune 30,1993 some 29 loans were outstanding with a total balance of more than $24 million. The Rural Electrification Revolving Loan Fund is designed to assist local utilities in extending electrical service to previously unserved areas.As of June 30,1993,a total of 13 loans were outstanding with a balance of more than $4.4 million. =Power CosT EQUALIZATION (PCE)PROGRAM The Power Cost Equalization (PCE)Program was established by the Alaska Legislature in 1984 as a statewide program aimed at reducing consumer cost of electricity in rural Alaska communities where diesel-fired generation produces more than 75 percent of a community's electrical requirement.During 1993,96 utilities serving 164 communities with a combined total population of nearly 68,000 were eligible to participate in the PCE program. The purpose of PCE is to equalize the cost of power statewide at close to the combined average cost per kilowatt hour in Anchorage,Fairbanks and Juneau.About 40 percent of the electricity used by consumers of participating utilities is eligible for PCE credit. The PCE program added more than $17 million to the disposable income of rural Alaskans in fiscal year 1993 in the form of reduced electricity rates,and another $17 million is expected to be disbursed during fiscal year 1994.This adds cash to local economies and may help offset costs of other state and federal public assistance programs.During the past 13 years,the PCE and similar programs that preceded it have returned more than $175 million to rural energy consumers in rate reductions. The Energy Authority's technical assistance and rural construction programs have helped make rural power systems more efficient.The average fuel efficiency of diesel electric generators for all participating villages,for example,has increased by more than 10 percent. 4 ALASKA ENERGY AUTHORITY ANNUAL REPORT PARTICIPATING STATISTICS =PCE PROGRAM FISCAL YEAR 1993 STATISTICS Population served 67,922 Communities served 164 Participating utilities 96 Total customers 26,372 Residential 20,059 Commercial 5,037 Community facilities 1,276 FINANCIAL STATISTICS Total PCE payments $15,173,165 Average PCE payment per eligible kwh $.122 Average annual required PCE payment per customer $575.00 PRODUCTION STATISTICS Total mwh sold 309,552 PCE eligible mwhResidential 82,434 Commercial 19,574 Community facilities 22,185 Total PCE eligible mwh as a %of total mwh sold 40 Average monthly PCE eligible kwhResidential 345 Commercial 325 Community facilities 27 EFFICIENCY STATISTICS kwh sold per gallon of fuel oil 12.8 Operating expenses per total kwh sold $0.136 m GRANTS Another program transferred to the Division of Energy provides grant funds to rural communities for work on projects that meet funding objectives for a number of different energy programs.Construction activities are managed by community representatives with training,assistance and oversight provided by staff. Grant projects optimize the use of local labor and training in construction trades, as well as operation and maintenance of utility equipment.The goal of local community participation is to instill a sense of ownership in the projects through involvement in all phases of construction and management. POWER COST EQUALIZATION PROGRAM IS DESIGNED TO EQUALIZETHE COST OF POWER STATEWIDE 0 ion nntaiaael ALASKA ENERGY AUTHORITY ANNUAL REPORT 5 DIVISION OF ENERGY PROGRAMS (CONTINUED) 6 HELPING FINANCE NEW ELECTRICAL SERVICE TO HOMES AND BUSINESSES mw ELECTRICAL SERVICE LINE EXTENSION FUND The Electrical Service Line Extension Fund was established by the Alaska Legislature in 1991 to provide matching funds to electric utilities to help defray the high costs of extending new electrical service to residences and small businesses.The fund provides grants for up to 60 percent of the cost of site preparation and construction for qualifying projects.Matching funding for at least 40 percent of total eligible project costs must be contributed by the applicant.Projects to improve existing facilities also are eligible under this program,but are given lower priority in the project selection process.The Energy Authority awarded twelve contracts for Electric Service Line Extension projects in fiscal year 1993 with a total value of $1,830,649.This fund was transferred to the Division of Energy. =CIRCUIT RIDER MAINTENANCE PROGRAM The Circuit Rider Maintenance Program was established in 1988 with several objectives:to provide training to local operators;to improve maintenance and operations of small community electric utility systems;to reduce operating costs;to prevent safety hazards and emergency situations;and to reduce the need for future capital demands on the state.This program was also transferred to the Division of Energy. The Division of Energy has also moved toward regionalizing utilities,which groups them to create better economies of scale in administration,purchasing and other functions.This regionalization reduces costs to individual utilities.In the future the cost burden of operating the circuit rider program will be assumed by participating utilities.Circuit rider contracts are currently in place with a number of regional organizations. m RURAL POWER SYSTEMS UPGRADES The Rural Power Systems Upgrades program provides for the design and construction of new power systems and upgrades of existing electric generation and distribution systems in rural communities.In 1993,this included constructing a new distribution system for St.Paul.Work also took place in Port Alsworth,Port Heiden and Perryville,among others. A rural utility receiving improvements to its electrical system under this program is required to employ a qualified operator and to participate in the Circuit Rider Maintenance program to ensure reliable power to the community and that the system is properly operated and maintained.This program was transferred to the Division of Energy. ALASKA ENERGY AUTHORITY ANNUAL REPORT m LiFe HEALTH AND SAFETY PROGRAM The Life Health and Safety Program assists utilities and communities in correcting problems that pose an immediate threat to people,such as exposed or uninsulated wiring,unfenced substations,inadequate grounding,sagging distribution conductors, leaking fuel storage tanks and code compliance inadequacies.Once the problem is corrected,the rural utility is required to hire a qualified operator and to participate in the Circuit Rider Maintenance Program to ensure that the system is properly operated and maintained,thereby protecting the state's investment in the system.During 1993, a commitment was made to fund Life,Health and Safety projects in 14 rural communities.This program was transferred to the Division of Energy. m WASTE HEAT RECOVERY PROGRAM The Waste Heat Recovery Program assists communities with the design and installation of equipment used to capture waste heat from operating diesel generators for use in heating community buildings such as schools,water treatment plants or recreational facilities.Waste heat may be used for space heating or to heat domestic water.During 1993,the Energy Authority worked with more than 22 communities under the waste heat program.A $250,000 legislative appropriation is being used to identify additional waste heat sites,after which engineering work and financing will be completed.Potential waste heat projects include the communities of Kotzebue,Cold Bay,Tok and Unalaska.The new waste heat projects would be financed by revenue from heat sales. m RURAL TECHNICAL ASSISTANCE PROGRAM The Rural Technical Assistance Program,which was transferred to the Division of Energy,provides communities access to staff and consultant expertise in mechanical, electrical and civil engineering as well as economic and administrative matters relating to rural energy systems.Rural utilities,communities and school districts can use the program to address electrical system safety and health hazards,utility operating costs, system efficiencies,and waste heat alternatives.Energy Division staff and consultants can also evaluate and recommend electrical system upgrades,power plant and bulk fuel storage relocation and assist with equipment procurement. 7 SONI ENERGY EFFICIENCY FOR HEATING PUBLIC BUILDINGS IS GOAL OF WASTE HEAT RECOVERY PROGRAM ALASKA ENERGY AUTHORITY ANNUAL REPORT 7 Division OF ENERGY PROGRAMS (CONTINUED) a |METERS SENDOPERATING ©DATA VIA MODEM FROM REMOTE PLANTS m@ METERING AND RURAL DATA ACQUISITION PROGRAM Regulations for the Division of Energy Power Cost Equalization Program require participating utilities to install and maintain totalizing demand meters,fuel meters and station service meters in order to monitor system power use and fuel consumption,and to evaluate system efficiency.Utilities having technical or financial problems in implementing the requirements may petition the Division of Energy for assistance under this program.In addition,accurate metering is used by utilities and the agency to trouble-shoot deficiencies and operating problems,and to plan for system upgrades and efficiency improvements. Three years ago,the program implemented a simple,inexpensive monitoring device to record and transmit utility system operating data via telephone modem to Anchorage from small power plants at remote locations.The information can then be used to trouble-shoot systems without requiring an expensive trip to the site.This remote monitoring application could be of specific use by regional utilities that operate a number of remote systems from a central location.The program installed metering equipment in six communities during fiscal year 1993. =POWER STATISTICS REPORT The annual "Alaska Electric Power Statistics”report provides information to the public on the installed capacity of electric generators,fuel use and the number of kilowatt hours produced by electric generating plants in Alaska each year.The report was jointly funded by the Authority and the Alaska Systems Coordinating Council,an association of a number of Alaska's electric power systems.The report is widely used by utilities,communities,government agencies,military installations and private businesses in Alaska and other states. In recent years,the document has expanded to include statistics on typical monthly residential electric bills and on frequency of interruptions in electrical service.The report also contains summary information and trends on electric utilities since 1960. Data on growth in electrical load are often used as indicators of economic activity in particular areas of the state.Responsibility for this report has been transferred to the Division of Energy. m RURAL CONSTRUCTION ASSISTANCE PROGRAM The Rural Construction Assistance Program,transferred to the Division of Energy,is unique in that it requires no state funding.The program results from requests from communities,utilities,and particularly from housing authorities for technical assistance on energy-related projects.In these instances,the requesting entity provides funding for a project but does not have the expertise to administer it.Under this program,the former Energy Authority has participated in technical and financial feasibility studies, constructed electrical distribution expansions,constructed waste heat recovery systems,and arranged for tax exempt financing. 8 ALASKA ENERGY AUTHORITY ANNUAL REPORT m EMERGENCY RESPONSE COORDINATION The Division of Energy is organized to respond to energy emergencies in a number of different ways.It is a member of the Mutual Assistance Program,sponsored by the Alaska Systems Coordinating Council (ASCC),an association of 17 utilities,the Authority and the federal Alaska Power Administration.The ASCC coordinates utility resources and provides guidelines for member utilities to request and provide emergency assistance.Each of the utilities that participates in the Mutual Assistance Program can contact participating utilities and request personnel,equipment and spare parts.Under a written agreement,the responding utility has pledged to provide assistance when possible. The Division of Energy also has electric power responsibilities in the event of natural disasters or civil defense emergencies.In addition,the Division of Energy will coordinate with U.S.Department of Energy offices in other states and with other state agencies in planning for energy supply emergencies.This cooperative program addresses both short-and long-term fuel shortages and the impact of these shortages on different sectors of the population. m REGIONAL CONSOLIDATION The consolidation of utilities has been a long-term goal of the Energy Authority, which has now been assumed by the Division of Energy.The intent of this program is to encourage small rural utilities to take advantage of the economies of scale in the operation,management and maintenance of their utilities.It is anticipated that this endeavor will reduce costs to an affordable level and provide for more reliable electrical services.Becoming part of an existing regional utility,developing a working relationship with a nearby larger utility or forming a cooperative will often result in cost savings. This past year the following communities have opted for the regional utility approach:Eagle,Eagle Village,Mentasta,and Tetlin with Alaska Power &Telephone (AP&T);Brevig Mission with Alaska Village Electric Cooperative (AVEC).To promote additional regional consolidation,the Division of Energy is working with communities in the following regions:Yukon-Kuskokwim Delta,Kodiak Island,Yukon Flats and Bristol Bay. m=BULK FUEL STORAGE Another major concern of the Division of Energy is the safe storage and handling of fuel to provide for not only electrical generation but also heating and transportation. Responding to new code requirements and regulations is,and will continue to be,a driving force behind the cost of projects,whether they are rehabilitative efforts on existing systems or construction of new power or bulk fuel storage facilities.Most existing rural fuel facilities are not in compliance with current codes and pose a significant threat to public safety and the environment. REGIONAL _ UTILITIES ENJOY ECONOMIES OF © SCALE IN OPERATION, MANAGEMENT, ALASKA ENERGY AUTHORITY ANNUAL REPORT 9 Division OF ENERGY PROGRAMS (CONTINUED) MOVING QUICKLY TO ENSURE CODE COMPLIANCE FOR BULK FUEL FACILITIES In March of 1993,the U.S.Coast Guard issued orders to suspend operations to numerous rural fuel facility operators.The Governor negotiated a one-year moratorium allowing operations to continue,conditional upon an immediate and aggressive effort by the state to bring facilities into compliance with Coast Guard regulations.The Energy Authority participated in public meetings to gather information and develop policy and performed repairs to bring facilities into compliance.During the summer and fall of 1993,repairs were performed at 47 rural fuel facilities through grants and contracts.Because of limited funding,the majority of the repairs were minor in nature,primarily replacement of piping and valves.Larger scale upgrades will be required at most of the facilities in the future.Preventive operations and maintenance programs must also be instituted to reduce future replacement and environmental mitigation costs. =REA BORROWER As a U.S.Rural Electrification Administration-certified (REA)borrower,the Authority has all the financing tools available to REA electric cooperatives,including a preferred bond rating.This bond rating is higher for the Authority than other state agencies and municipal governments because Authority bonding is limited only to power projects. The Authority has used its excellent bond rating and its ability to issue bonds to aid small utilities that do not have the resources to win REA certification or to complete the necessary paperwork to maintain that certification.This financing ability remains available to the Authority. m ALTERNATIVE ENERGIES The vast majority of communities north and west of Alaska's Railbelt rely on diesel fuel to power their electrical generation facilities.The fuel is expensive,and the engines require substantial maintenance.In most areas,fuel must be stockpiled for a full year,causing strains on rural economies and creating environmental concerns because of inadequate storage facilities.In addition,with the decline of state oil revenues,reductions are foreseen in the Power Cost Equalization program. Accordingly,the Energy Authority has been studying alternative,renewable energy resources for rural Alaska. =COAL Alaska has more than 5 trillion tons of coal reserves,more than half of the total reserves of the United States.Much of this coal is located north of the Brooks Range and in the Cook Inlet region.However,pockets of coal exist across the state in areas that could potentially serve many of our rural communities.In addition,coal plants 10 ALASKA ENERGY AUTHORITY ANNUAL REPORT can be modified to accept municipal solid waste and sewage as fuel stock,helping to solve some of the other critical problems facing our state. The Alaska Energy Authority worked on a number of projects to enhance our in- state coal capability.For example,the Authority has contracted with the Energy and Environmental Research Corporation in Orville,Ohio to locate and investigate small (250 kWh to 2 megawatt hour)coal fired power plants capable of utilizing local coal resources. The Authority also entered into discussions with Doyon,Ltd.that will see the State of Alaska participate in the conceptual design of an advanced technology coal fired generation plant that would utilize Little Tonzona coal in a McGrath power plant.This project could eventually lead to coal being utilized throughout rural Alaska. The Energy Authority worked extensively with the Alaska Low Rank Coal Water Fuel consortium in applying for a grant from the Alaska Science and Technology Foundation (ASTF)to build a scaled up,pre-commercialization project in Cook Inlet. This process converts low value,low rank coal into a high value,utility grade boiler fuel that would compete with heavy oil in the international markets.If successful,this project would initially concentrate on the export of millions of tons of Low Rank Coal Water Fuel.The same technology could be used to reduce the transportation costs of interior Alaska coals to rural communities. =BIOMASS The Bioenergy Program,funded jointly with the U.S.Department of Energy,has been administered by the Energy Authority since 1985 and now is run by the Division of Energy.The program seeks to stimulate economic development by replacing high- cost fossil fuels with lower cost biomass fuels,such as wood residue,municipal solid waste,and agricultural waste.An added benefit of many bioenergy projects is that they result in lower waste disposal costs and lessen the environmental impacts of land filling. During 1993 the Authority conducted an analysis of available waste wood generated by sawmill,pulp mill,and logging operations in the South Tongass area. During the next year this information will be used by the Division of Energy to assess the feasibility of using this material to produce energy. The Authority also assisted the Fairbanks North Star Borough in considering waste- to-energy alternatives for extending the life of the borough landfill.The City and Borough of Sitka already incinerates much of its waste and pipes heat to Sheldon Jackson College.With the help of the Division of Energy,Sitka is adding a back pressure steam turbine which will supply the solid waste facility's power. Also during 1993,the Authority assisted the Seward Forest Products mill in assessing options for converting mill waste to heat for dry kilns and the nearby Spring Creek Correctional Facility.In Juneau,energy from Channel Corporation's solid waste incinerators may also heat a nearby correctional facility. RAILBELT INTERTIE HELPS PREVENT POWER OUTAGES ALASKA ENERGY AUTHORITY ANNUAL REPORT 11 DIVISION OF ENERGY PROGRAMS (CONTINUED) |.WASTE TO ENERGY _PROGRAM |MAY EXTEND LIFE OF LANDFILLS w WIND Western Alaska has exceptional wind resources.The winds are consistent and also appear to vary with local load requirements;load requirements increase when temperatures drop and winds pick up.The Energy Authority worked actively with several western Alaska communities to implement a program of assessing local wind resources to determine the feasibility of installing wind turbines to reduce the dependence on diesel fired electricity generation.This function has been assumed by the Division of Energy. =SOLAR Recent improvements in solar photo-voltaic systems have substantially reduced the costs and increased the efficiencies of this technology.Although peak energy demand occurs during Alaska's dark winter months,photo-voltaic panels could prove to be economically viable way to produce electricity in Alaska during the long summer days. The Energy Authority has collected a substantial amount of information on photo- voltaic systems.Further studies are planned by the Division of Energy to determine what impact these systems could have on rural communities. =BATTERIES While not an alternative source of energy,batteries represent a excellent opportunity to increase local fuel efficiencies by allowing generators to run in their most efficient power curves and storing the energy for peak consumption periods. They can also be utilized to store the energy produced from wind or solar generators. Further economic analysis of installation of batteries including initial cost,replacement costs and disposal costs needs to be performed to determine the applicability in rural Alaska. m ABSORPTION FREEZER The lack of refrigeration,freezing and ice making capacity in remote fishing communities has long held down the prices that Alaska seafood can command in the world market.The cost of producing ice using conventional electrically-driven freezers can be quite high in locations where electric rates exceed 40 cents per kilowatt hour. To address this problem,a demonstration project in Kotzebue has showcased a new absorption refrigeration system.The system uses waste heat from existing electrical generating plants rather than requiring additional generating capacity.The prototype was installed this fall and operated a total of 80 hours.The test successfully demonstrated the ability of this system to produce ice from heat that would normally be wasted,thereby reducing energy costs.Other sites throughout Alaska could benefit from this technology.The Authority contributed $55,000 to the project in fiscal year 1992 and $144,000 in fiscal year 1993. 12 ALASKA ENERGY AUTHORITY ANNUAL REPORT A Look AT AIDEA/AEA PROJECTS hroughout the 1980s the Alaska Energy Authority worked to develop the state's energy resources as a key element in diversifying Alaska's economy. A number of large-scale projects were constructed,and alternative energy resources explored.Today,six hydroelectric projects,420 miles of transmission line and 10 waste heat projects are in operation.Ongoing studies of energy alternatives are yielding promising results.Responsibility for oversight has been transferred to AIDEA. mw BRADLEY LAKE HYDROELECTRIC PROJECT The pride of the Authority,the Bradley Lake Hydroelectric Project produced 355,000 megawatt hours of electricity for the year ended June 30,1993.The project, which raises the lake's water level 100 feet,continues to generate above expectation and transmits its power to the state's main power grid via two parallel,20-mile-long, 115 kV transmission lines connected to Homer Electric Association's transmission system. The 90 megawatt project was completed substantially under budget at a cost of $328.25 million.Power sales in 1993 were as follows: Customer Power Sold (mWh) Chugach Electric Association 107,920 Anchorage Municipal Light and Power 91,945 Golden Valley Electric 59,995 Matanuska Electric Association 48,990 Homer Electric Association 42,600 Seward Electric System 3,550 mw LARSEN BAY HYDROELECTRIC PROJECT The 475 kilowatt Larsen Bay Hydroelectric Project was completed in 1991 at a cost of $2.1 million.In addition to producing over 400,000 kilowatt hours of electricity, the project replaces the City of Larsen Bay's old water supply and provides a better source of water with reduced maintenance and improved water quality. =Four DAM POOL PROJECTS The Solomon Gulch,Swan Lake,Terror Lake and Tyee Lake hydroelectric projects collectively make up the project known as the Four Dam Pool,which services the communities of Valdez,Glennallen,Ketchikan,Kodiak,Petersburg and Wrangell through the terms of a 45-year power sales agreement signed in 1985.The project gains its name from the fact that operations,maintenance and debt costs are pooled with the same rate charged for electricity drawn from any one of the four dam projects. BRADLEY LAKE HYDRO PROJECT WAS COMPLETED SUBSTANTIALLY UNDER BUDGET aiUuiialaiiialll ALASKA ENERGY AUTHORITY ANNUAL REPORT 13 AIDEA/AEA PROJECTS (CONTINUED) INTERTIE SAVES CONSUMERS MONEY AND BOOSTS RELIABILITY A Project Management Commitment comprised of the Authority and representatives from the purchasing utilities establishes annual operating budgets,sets power purchase rates,makes decisions on insurance and technical standards and performs other management duties. mw ANCHORAGE-FAIRBANKS INTERTIE The Authority owns and operates the 170 mile,345 kV transmission line Intertie which runs between Wasilla and Healy.This link allows Golden Valley Electric Association in Fairbanks to purchase electricity produced with lower cost energy,such as natural gas and hydroelectric,from Anchorage and Kenai Peninsula utilities.The Energy Authority estimates that the Intertie saves Fairbanks consumers approximately $7 million per year in addition to reducing the number of black/brownouts throughout the system. 14 ALASKA ENERGY AUTHORITY ANNUAL REPORT Board of Directors Alaska Energy Authority Anchorage,Alaska }(e have audited the accompanying combined balance sheets of the Alaska Energy Authority as of June 30,1993 and 1992,and the related combined statements of revenues and expenses,statements of changes in equity,and cash flows for the years then ended. These financial statements are the responsibility of the Authority's management.Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing stan- dards.Those standards require that we plan and perform the audit to obtain reason- able assurance about whether the financial statements are free of material misstate- ment.An audit includes examining,on a test basis,evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation.We believe that our audits pro- vide a reasonable basis for our opinion. In our opinion,such financial statements present fairly,in all material respects,the financial position of the Alaska Energy Authority as of June 30,1993 and 1992,and the results of its operations,changes in equity,and its cash flows for the years then ended in conformity with generally accepted accounting principles. Lbalé/Taucle Deloitte &Touche October 9,1993 Anchorage,Alaska INIPaDaNIDIANNEAUGIDIERO)SOE Caelemw = ez = ALASKA ENERGY AUTHORITY ANNUAL REPORT 15 ;e_ComeineD)BALANCE!SHEET i 7b June 30 1993 1992 ASSETS AND OTHER DEBITS PROPERTY,PLANT AND EQUIPMENT Property,plant and equipment in service $938,639,101 $921,771,912 Less:accumulated depreciation 154,046,122 130,873,586 NET PROPERTY,PLANT AND EQUIPMENT 784,592,979 790,898,326 OTHER ASSETS Restricted cash and investments 60,046,318 73,766,180 Power Project Fund loans 22,655,507 23,550,524 Rural Electrification Revolving Loan Fund loans 4,358,577 4,462,306 Deferred projects cost 104,072 2,798,834 Unamortized bond issuance cost 39,764 43,323 OTHER ASSETS 87,204,238 104,621,167 CURRENT ASSETS Due from State of Alaska 3,243,702 2,788,478 Operating revenue receivable 10,591,757 9,780,138 Accrued interest receivable 2,499,439 2,974,938 Current portion of notes receivable 857,430 752,022 Bulk Fuel Revolving Loan Fund loans 728,641 770,276 Allowance for loss on discontinued segment (4,493,926) Other 26,397 27,413 TOTAL CURRENT ASSETS 13,453,440 17,093,265 TOTAL ASSETS $885,250,657 $912,612,758 LIABILITIES AND FUND EQUITY FUND EQUITY Contributed capital $619,800,808 $631,706,219 Deficit (144,222,268 }(120,450,152) TOTAL FUND EQUITY 475,578,540 511,256,067 LONG-TERM DEBT,NET OF CURRENT PORTION Bonds payable 158,986,981 161,220,054 Power Development Revolving Loan Fund loan payable 184,571,726 184,571,726 Power Project Fund loans payable 22,655,507 23,550,524 Rural Electrification Revolving Loan Fund loans payable 4,358,577 4,462,306 Arbitrage interest payable 1,674,443 1,503,172 TOTAL LONG-TERM DEBT 372,247,234 375,307,782 CURRENT LIABILITIES Accounts payable 3,634,389 3,797,581 Retainage payable 1,037,125 224,026 Current portion of long-term debt and loans payable 4,081,071 3,502,298 Due to State of Alaska Refund of Bradley Lake Hydroelectric Project construction cost savings 12,082,500 Power Development Revolving Loan Fund accrued interest 10,249,567 9,372,513 Other loan funds accrued interest 749,156 721,527 Other accrued interest 5,487,003 5,535,011 Deferred revenue 104,072 2,895,953 TOTAL CURRENT LIABILITIES 37,424,883 26,048,909 TOTAL LIABILITIES 409,672,117 401,356,691 TOTAL LIABILITIES AND FUND EQUITY $885,250,657 $912,612,758 See accompanying notes to combined financial statements. 16 ALASKA ENERGY AUTHORITY ANNUAL REPORT : .COMBINED STATEMENT,OF REVENUES'AND EXPENSES ED /= Year Ended June 30 1993 1992 REVENUES State of Alaska appropriations $560,892 $448,449 Revenue from operating plants 27,681,912 25,509,991 Interest and investment income 3,985,166 4,208,905 TOTAL REVENUES 32,227,970 30,167,345 EXPENSES General and administrative expense 560,892 448,449 Plan to operating expense 5,158,798 3,960,723 Contribution to Four Dam Pool Initial Project Renewal and Replacement Fund 3,000,000 Depreciation expense 22,713,565 21,271,069 Interest expense 21,505,408 19,231,040 TOTAL EXPENSES 49,938,663 47,911,281 DEFICIENCY OF REVENUES OVER EXPENSES FROM CONTINUING OPERATION (17,710,693)(17,743,936) DEFICIENCY OF REVENUES OVER EXPENSES FROM OPERATION OF DISCONTINUED SEGMENT (See Note F)(1,567,497 )(1,194,760) LOSS ON TRANSFER OFA SEGMENT (4,493,926) DEFICIENCY OF REVENUES OVER EXPENSES FROM DISCONTINUED SEGMENT (6,061,423)(1,194,760) DEFICIENCY OF REVENUES OVER EXPENSES $(23,772,116)$(18,938,696) See accompanying notes to combined financial statements. ALASKA ENERGY AUTHORITY ANNUAL REPORT 17 'COMBINED STATEMENT,1 a ae eeOF,CHANGES IN EQUITY as (7[== Accumulated Contributed Total Deficit Capital Equity BALANCE AT JULY 17,1991 $(101,511,456)$629,629,738 $528,118,282 Deficiency of revenues over expenses (18,938,696 )(18,938,696) Contributions/appropriations 2,076,481 2,076,481 BALANCEATJUNE 30,1992 (120,450,152)631,706,219 511,256,067 Deficiency of revenues over expenses (23,772,116)(23,772,116) Refund due to State for Bradley Lake Hydroelectric Project construction cost savings (12,082,500)(12,082,500) Contributions/appropriations 177,089 177,089 BALANCE AT JUNE 30,1993 $(144,222,268)$619,800,808 $475,578,540 See accompanying notes to combined financial statements. 18 ALASKA ENERGY AUTHORITY ANNUAL REPORT 1993 COMBINED STATEMENT,OF CASH)FLOWS EEE f= Year Ended June 30 1992 CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from State of Alaska $23,596,360 $24,836,999 Receipts from operations 26 ,958,040 25 ,416 ,904 Other receipts 262,082 527,481 General and administrative expenses (897,677)(747,576) Operating expense (5,140,988}(3,914,816) Contribution to Initial Project Renewal and Replacement Fund (3,000,000) Power Cost Equalization program (16,702,029)(16,150,813) Grants (6,701,430)(7,202,792) Disbursement on projects (225,020)(401,501) Program loans: Interest and principal collected from borrower 2,191,213 3,229,951 New loans draws 1,894,346 597,926 Loan service fees collected 8,854 10,644 Interest and principal remitted to State of Alaska (2,191,213)(3,229,951) New loan disbursements (1,894,346)(597,926) Loan service fees paid to State of Alaska (8,854)(10,644) NET CASH PROVIDED BY OPERATING ACTIVITIES 21,149,338 19,363,886 CASH FLOWS FROM NON CAPITAL FINANCING ACTIVITIES: Repayment of bonds (1,980,000) NET CASH USED IN NON CAPITAL FINANCING ACTIVITIES (1,980,000) CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES: Contributed capital from State of Alaska 176,223 1,278,131 Interest paid on borrowings (11,041,924)(11,102,037) Power Development Revolving Loan Fund debt service (9,265,826)(9,601,200) Power Development Revolving Loan Fund interest from trust (106,687)(353,339) Construction of capital projects (17,281,552)(21,803,572) Deferred project costs (32,535)(383,338) NET CASH USED IN CAPITAL FINANCING ACTIVITIES (37,552,301)(41,965,355) CASH FLOWS FROM INVESTMENT ACTIVITIES: interest received from Bradley trust 4,231,472 5,631,393 Interest received from other trust 431,629 625,556 NET CASH PROVIDED BY INVESTMENT ACTIVITIES 4,663,101 6,256,949 Net decrease in cash and cash equivalents (13,719,862)(16,344,520 ) Cash and cash equivalents at beginning of year 73,766,180 90,110,700 CASH AND CASH EQUIVALENTS AT END OF YEAR $60,046,318 $73,766,180 (continued) ALASKA ENERGY AUTHORITY ANNUAL REPORT 19 COMBINED!STATEMENT,OF.CASH |TEC)sd f= RECONCILIATION OF DEFICIENCY OF REVENUES OVER EXPENSES TO NET CASH PROVIDED BY OPERATING ACTIVITIES:Year Ended June 30 1993 1992 DEFICIENCY OF REVENUES OVER EXPENSES $(23,772,116)$(18,938,696) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 23,888,547 22,413,571 Estimated loss on disposal of segment 4,493,926 Amortization of deferred interest and bonds discount 261,927 596,059 Amortization of bond issuance costs 3,558 3,581 Deferred projects expensed 3,227,055 12,017,600 Loss on disposal of assets 418,307 151,843 Bonds interest payments 10,993,915 9,262,469 Power Development Revolving Loan Fund interest payment 10,249,567 9,372,513 Investment income (3,988,703)(4,211,549) Change in assets and liabilities that provided (used)cash: Due from State of Alaska (455,224)1,708,935 Accounts and other receivable (810,601)(102,728) Loans receivable 995,788 929,210 Accrued interest receivable (27,628)51,577 Accounts payable (48,012)(1,351,907) Loans payable (995,788)(929,210) Accrued interest payable 27,628 (51,577) Contributed capital 100,426 Deferred revenue (3,312,808)(11,658,231) NET CASH PROVIDED BY OPERATING ACTIVITIES $21,149,338 $19,363,886 NON-CASH INVESTMENT AND CAPITAL FINANCING ACTIVITIES Bond discounts related to the Bradley Lake Power Revenue Bond First and Second Series and Larsen Bay Fixed Rate Revenue Bonds of $35,292 were capitalized in 1992.Amortization of deferred interest related to the Bradley Lake Power Revenue Bond First and Second Series of $83,919 were capitalized in 1992.Deferred project costs of $3,227,055 and $12,017,600 were charged to expense and revenue in fiscal years 1993 and 1992,respectively.In 1993,savings from the Bradley Lake Hydroelectric Project construction (see Note N)of $12,082,500 was accrued as payable to the State and reduced contributed capital.A power project loan receivable from Nenana Port Authority of $150,000 in fiscal year 1993 and Cordova Electric Cooperative of $1,000,000 in fiscal year 1992 were redesignated as a grant by an act of the State Legislature. See accompanying notes to combined financial statements. soaps ss Sai eo 20 ALASKA ENERGY AUTHORITY ANNUAL REPORT NoOTES.TO COMBINED FINANCIAL'STATEMENTS+ Years Ended June 30,1993 and 1992 NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity:The accompanying financial statements include all the activities of the Alaska Energy Authority (Energy Authority).The Energy Authority was created in 1976 by an act of the State of Alaska Legislature (legislature),Alaska Statute 44.83.020.The Energy Authority is a public corporation of the State of Alaska established to promote the general welfare of the people in the state by reducing consumer power costs and encouraging the long-term economic growth of the state by promoting,financing,developing and operat- ing power production facilities in Alaska.Such facilities may operate on fossil fuels,waste energy and renew- able energy resources,including hydroelectric power,wind,biomass,geothermal,tidal and solar. The Energy Authority is authorized to issue its own bonds and other obligations in such principal amounts as will be necessary to provide for sufficient funds for carrying out its purpose.Obligations issued are not deemed to constitute a debt of the State of Alaska. Two major bills affecting the Energy Authority became effective August 11,1993 (Chapters 18 and 19,SLA 1993).Major elements of the legislation are: e State energy loan programs,the Power Cost Equalization program,the technical assistance programs and technology development functions are transferred from the Energy Authority to the Department of Community and Regional Affairs (DCRA); °On August 12,1993,the Board of Directors of the Alaska Industrial Development and Export Authority (AIDEA),a public corporation and a political subdivision of the State,assumed responsibility as the Board of Directors of the Energy Authority.Concurrently,the Executive Director of AIDEA was also appointed as Executive Director of the Energy Authority. °The corporate structure of the Energy Authority was retained but the ability to construct and acquire energy projects was eliminated.The Energy Authority retained its operating assets including, among others,the Four Dam Pool (Solomon Gulch,Swan Lake,Terror Lake and Tyee Lake Hydroelectric projects),the Bradley Lake Hydroelectric project,Larsen Bay Hydroelectric project,and the Anchorage-Fairbanks Intertie.It is the intent of the legislation that ongoing operation of the operat- ing assets be assumed by the electric utility companies that use or purchase power from them,with oversight responsibility retained by the Energy Authority. Transfer of programs to DCRA must be completed by December 31,1993.The responsibility for the Energy Authority's rural programs was accepted by the newly created Division of Energy within DCRA,effective August 18,1993,although the transition process has not been completed. The financial effects of this restructuring have been reflected on the financial statements of the Energy Authority. Basis of Accounting-Fnterprise Fund Accounting:The accounts of the Energy Authority are organized as an Enterprise Fund.Accordingly,the financial activities of the Energy Authority are recorded using the full accru- al basis of accounting whereby revenues are recorded when earned and expenses are recorded when goods or services are received or the related liability is incurred. mm| ALASKA ENERGY AUTHORITY ANNUAL REPORT -21 NOTES:TO.COMBINED?FINANCIAL' Years Ended June 30,1993 and 1992 :[<a]STATEMENTS Sa 17[== NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued State Appropriations:Appropriations are made by the legislature to the Energy Authority in the State general fund and/or the following State statutory funds: (a)Power Development Fund (AS 44.83.382)-The Power Development Fund accounts for appropriations for the Energy Program for Alaska to be expended by the Energy Authority for reconnaissance and fea- sibility studies,power project finance plans,power project construction,debt service and power pro- ject operating costs. (b)Power Project Fund (AS 44.83.170)-The Power Project Fund accounts for appropriations which are to be expended by the Energy Authority in the form of loans for power or potable water supply projects consistent with the Energy Authority's mandate.In the financial statements,the loans made under the fund are accounted for as notes receivable from borrowers,and corresponding amounts are recorded as notes payable to the State.* (c)Power Cost Equalization Fund (AS 44.83.162)-The Power Cost Equalization Fund accounts for appro- priations to be expended by the Energy Authority for providing power cost assistance to eligible elec- tric utilities to reduce the cost of electric energy to the consumers.* (d)Rural Electrification Revolving Loan Fund (AS 44.83.361)-The Rural Electrification Revolving Loan Fund accounts for appropriations to be expended by the Energy Authority to make loans to electric util- ities for extending new electric services into an area of the State that an electric utility may serve under a certificate of public convenience and necessity issued by the Alaska Public Utilities Commission.In the financial statements,the loans made under the fund are accounted for as notes receivable from borrowers,and corresponding amounts are recorded as notes payable to the State.* (e)Power Development Revolving Loan Fund (AS 44.83.500)-The Power Development Revolving Loan Fund accounts for appropriations to be used by the Energy Authority for carrying out the Energy Program for Alaska.The fund consists of,in addition to appropriations to the fund by the legislature, repayments of principal to the fund and income from investment of money in the fund and from loans made from the fund.* (f)Bulk Fuel Revolving Loan Fund (AS 44.83.600)-The Bulk Fuel Revolving Loan Fund accounts for appropriations to be used by the Energy Authority to make loans to communities,with a population under 2,000 or to a private individual with a written endorsement of the governing body of such com- munity,for purchasing bulk fuel.In the financial statements,the loans made under the fund are accounted for as notes receivable from borrowers,and corresponding amounts are recorded as notes payable to the State.* (g)Electrical Service Extension Fund (AS 44,83.370)-The Electrical Service Extension Fund accounts for appropriations to be used by the Energy Authority to make grants to electrical utilities for cost ofsite preparation and construction for extending new electrical service,and for improvements of existing facilities.The amount of grant may not exceed 60 %of the total project cost.* *Funds transferred to Division of Energy/Department of Community and Regional Affairs,per Chapter 18 SLA 1993 and Chapter 19,SLA 1993. hints Peace 22 ALASKA ENERGY AUTHORITY ANNUAL REPORT NotTES.TO COMBINED FINANCIAL:STATEMENTS #4927052=]A my tfAeIPAAch Years Ended June 30,1993 and 1992 NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued Other Accounting Basis:In accordance with AS 44.83.950,the Energy Authority is subject to the provisions of the Executive Budget Act (AS 37.07).A proposed operating budget for the operations of the Authority as well as a Capital improvements budget for the next fiscal year are prepared annually and subject to the State of Alaska's approval process.Appropriations for the operating budget lapse at the end of each fiscal year. Appropriations for capital projects,various grants and programs may carry over at year end. The Energy Authority is also subject to accounting requirements of the Federal Energy Regulatory Commission (FERC)for the construction costs of certain hydroelectric projects licensed by FERC.Such requirements do not differ materially from generally accepted accounting principles,the standards upon which the accompanying combined financial statements are presented. Property,Plant and Equipment:Property,plant and equipment are stated at cost and depreciated on the straight-line method over their estimated useful lives. For hydroelectric plants financed through restricted tax-exempt borrowings,interest costs on the borrowings, less any interest earned on the related interest-bearing investments acquired with proceeds of the borrowings are Capitalized from the date of the borrowing until the assets are placed in service.Amortization of bond dis- counts during the construction is also capitalized.Ordinary repairs and maintenance are expensed as incurred. Depreciation on property,plant and equipment is reflected as an expense in the combined statement of rev- enues and expenses.Depreciation expense on property,plant and equipment acquired through capital contri- butions is also presented as an operating expense.The estimated economic life of the assets are as follows: Non-utility plant:Utility plant: Camp buildings 5 years Intangible 30-50 years Machinery and equipment 5 years Production 30-50 years Furniture and equipment 7-10 years Transmission 20-40 years General 5-30 years Contributed Capital:Property,plant and equipment acquired with funds from federal,state or other sources are accounted for as contributed capital. Investments:Investments are recorded at cost or amortized cost. Income Taxes:The Internal Revenue Code provides that gross income for tax purposes does not include income accruing to a state or territory or any political subdivision thereof which is derived from the exercise of any governmental function or from any public utility.The Energy Authority is a political subdivision of the State of Alaska and is therefore exempt from state and federal taxes. Cash and Cash Equivalents:Cash equivalents for the purpose of presenting the statement of cash flows are defined as short-term,highly liquid investments.All of the Energy Authority's cash and cash equivalents are restricted. een - ALASKA ENERGY AUTHORITY ANNUAL REPORT -23 .':-.EeTOCOMBINEDFINANCIAL"STATEMENTS i {= Years Ended June 30,1993 and 1992 NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued Deferred Project Costs and Deferred Revenues:Costs of feasibility studies performed in connection with potential construction projects which are expected to benefit future operations or result in construction of plant are recorded as deferred project costs and deferred revenue.Deferred costs related to feasible projects are reclassified to construction work in progress and to contributed capital at the onset of construction. Deferred costs related to terminated projects which are projects that will not become assets of the Energy Authority are recorded as project expenses and the funding of such projects is recorded as project revenue. Discontinued Operation:New legislation,Chapters 18,SLA 1993,mandated the transfer of rural energy pro- grams administered by the Energy Authority to DCRA.The bill was signed by the Governor on June 11,1993. The transfer was considered disposal ofa segment ofa business in accordance with Accounting Principle Board Opinion No.30.Accordingly,assets to be transferred to DCRA are recorded at net realizable value. The results of operation from discontinued operations and the estimated loss from the transfer are segregated from the results of continuing operations for financial statement presentation. NOTE B-CASH AND INVESTMENTS Pursuant to various agreements relating to its operation,the Energy Authority has established funds to account for assets restricted to construction,operation and financing activities.In the financial statements,these funds are Classified as restricted cash and investments.The components of this classification are as follows: June 30 1993 1992 Investments $59,957,230 $73,681,851 Demand and time deposits 89,088 84,329 Total cash and investment held 60,046,318 73,766,180 Less:Amount to be transferred as a part of discontinued segment (110,178) Net cash and investment for continuing operation $59,936,140 $73,766,180 The restricted cash and investments are held in trust accounts for the following activities: June 30 1993 1992 Bradley Lake Hydroelectric Project $46,556,978 $61,041,339 Four Dam Pool self insurance 10,504,104 9,457,714 Four Dam Pool construction 1,584,109 1,958,771 Four Dam Pool renewal and replacement revolving loan fund 1,073,699 1,033,312 Larsen Bay Hydroelectric Project 217,250 171,886 Small Projects operation 110,178 103,158 Total cash and investment held 60,046,318 73,766,180 Less:Amount to be transferred as a part of discontinued segment (110,178) Net cash and investment for continuing operation $59,936,140 $73,766,180 24 ALASKA ENERGY AUTHORITY ANNUAL REPORT NOTES .TO COMBINED,FINANCIAL:STATEMENTS eos Years Ended June 30,1993 and 1992 NOTE B-CASH AND INVESTMENTS-Continued The investments for Bradley Lake Hydroelectric projects are restricted for a specific purpose and deposited in the following accounts: June 30 1993 1992 Construction Fund-Bond Proceeds $9,869,070 $25,395,015 Capital Reserve Fund 13,392,890 13,392,890 Dept Service Fund 7,928,935 7,601,000 Unallocated Construction Fund 6,824,240 6,408,652 Renewal and Contingency Fund 5,003,497 5,003,398 Excess Earnings Fund 1,601,949 1,266,531 Revenue Fund 689,663 865,573 Operating Reserve Fund 625,000 625,000 Operating Fund 621,734 483,280 $46,556,978 $61,041,339 Demand and Time Deposits:As of June 30,1993,the Energy Authority has $89,088 in time deposits held in accounts of the City of Ketchikan as agent for the Swan Lake Hydroelectric Project.The bank balances are covered by FDIC insurance or collateral held by the City of Ketchikan's agent in the name of the City. The Energy Authority's investments are categorized below to give an indication of risk assumed by the Authority at year end.Category 1 includes investments that are insured,registered or collateralized with secu- rities held by the Authority or its agents in the Authority's name.Category 2 includes uninsured and unregis- tered investments or collateralized investments,with securities held by the pledging financial institution's trust department in the Energy Authority's name.Category 3 includes uninsured and unregistered investments for which the securities are held by the counterparty,or by its trust department or agent but not in the Authority's name. Carrying Amount Category 1 Category 2 Category 3 as of June 30,1993 Repurchase agreements $46,774,228 $46,774,228 U.S.Government securities $1,605,199 , 1,605,199 Other investments 11,666,891 11,666,891 $1,605,199 $46,774,228 $11,666,891 $60,046,318 Interest earned on investment of the proceeds of the note payable to the State of Alaska,Power Development Revolving Loan Fund (PDRLF)held by the Energy Authority for the Four Dam Pool Project,is paid to the PDRLF. Investments:Alaska Statutes authorize the Authority to establish trust funds for the investment and deposit of bond proceeds.Statutes and applicable trust agreements authorize the Authority to invest in federal obliga- tions,obligations of States or political subdivisions,interest bearing accounts or certificates of deposit,agency obligations,repurchase agreements,public housing bonds,commercial paper and bankers acceptances. ALASKA ENERGY AUTHORITY ANNUAL REPORT -25 ',=NOTES ,TO|COMBINED)FINANCIAL"STATEMENTS io /= Years Ended June 30,1993 and 1992 NOTE C-PROPERTY,PLANT AND EQUIPMENT A summary ofproperty,plant and equipment and related accumulated depreciation are as follows: June 30 1993 1992 Non-utility plant: Camp buildings $155,194 $296,448 Machinery and equipment 2,025,280 2,767,415 Furniture and equipment 1,213,274 1,287,981 3,393,748 4,351,844 Utility plant: Intangible 2,974,654 2,975,070 Production 583,941,084 580,639,808 Transmission 341,131,493 326,655,823 General 7,198,122 7,149,367 935,245,353 917,420,068 Total plant asset Accumulated depreciation 938,639,101 (154,046,122) 921,771,912 (130,873,586) Net Property,Plant and Equipment Less:Estimated loss on transfer of equipment related to discontinued operations 784,592,979 4,360,363 790,898,326 Net Property,Plant and Equipment $780,232,616 $790,898,326 NOTE D-DEFERRED PROJECT COSTS AND PROJECTS EXPENSE The Energy Authority periodically reviews the status of various deferred projects and writes off those projects deemed to have no benefit to the Energy Authority's future operation or that would not result in construction of plant.Due to the legislative restructuring,the Energy Authority will pursue only the Snettisham Project Transfer. Deferred project costs are as follows: June 30 1993 1992 Allison Lake $$84,967 Railbelt Energy Alternative Study 2,096,760 Snettisham Project Transfer 104,072 92,706 Southeast Intertie 797,297 Swan-Tyee Intertie Project 248,030 104,072 3,319,760 Less: Machinery,furniture and equipment included as non-utility plant in service 520,926 Net Deferred Project Costs $104,072 $2,798,834 26 ALASKA ENERGY AUTHORITY ANNUAL REPORT NoTEs.TO COMBINED FINANCIAL;STATEMENTS sib ti! Years Ended June 30,1993 and 1992 NOTE E-LONG-TERM DEBT AND PROGRAM LOANS PAYABLE The following is a summary of long-term debt and program loans payable: june 30 1993 1992 Bradley Lake Power Revenue Bond First Series (a)$101,324,785 $102,542,698 Bradley Lake Power Revenue Bond Second Series (a)59,336,930 59,812,961 Larsen Bay Fixed Rate Revenue Bond (b)820,266 844,395 Arbitrage interest payable (c)1,674,443 1,503,172 Notes payable to State of Alaska: Power Development Revolving Loan Fund loan (d)184,571,726 184,571,726 Power Project Fund loans (e)23,449,068 24,240,414 Rural Electrification Revolving Loan Fund loans (e}4,422,446 4,524,438 Bulk Fuel Revolving Loan Fund loans (e)728,641 770,276 376,328,305 378,810,080 Less:Current Portion (4,081,071)(3,502,298) Total Long-Term Debt $372,247,234 $375,307,782 (a)The Energy Authority issued the Power Revenue Bonds,First and Second Series in September 1989 and August 1990,respectively,for the long term financing of the construction costs of the Bradley Lake Hydroelectric Project and refunded the Energy Authority's Variable Rate Demand Bonds which were issued in November 1985 to provide interim financing of the project.All of the revenues derived by the Energy Authority from the operation of the project and all moneys,securities and funds held or set aside are pledged and assigned to secure the payment of,redemption premium,if any,and interest on the Bonds. No other revenues of the Energy Authority are pledged as security for the payment of the Bonds.The Energy Authority has further committed that at all times after the date of commercial operation of the Project,it shall charge and collect from each power purchaser a percentage share of annual project costs. The Power Revenue Bonds,First and Second Series,annual maturity began on July 1,1992,and final maturity will be on July 1,2021 with interest rates ranging from 6.2%to 7.25%a year. The Bond Resolutions contain covenants conventional to such financing.The Energy Authority is not in compliance with a covenant requiring submission of an annual report to the Bond Trustee within 120 days of the fiscal year end,for that fiscal year (Section 717.3).The lack of compliance stems from the ambiguity of the requirement language and its interpretation. (b)Larsen Bay Fixed Rate Revenue Bonds were issued in May 1991 for the long-term financing of a portion of the construction costs of the Larsen Bay Hydroelectric Project.All of the revenues derived by the Energy Authority from the operation of the Project are pledged and assigned to secure the payment of the Bonds. The Bonds'annual maturity began on April 1,1993,and final maturity will be on April 1,2011 with interest rates ranging from 6.25%to 7.75%. ALASKA ENERGY AUTHORITY ANNUAL REPORT 27 Notes TO COMBINED FINANCIAL" Years Ended June 30,1993 and 1992 °=Bae SS NOTE E-LONG-TERM DEBT AND PROGRAM LOANS PAYABLE-Continued (c)The arbitrage interest payable is due to the Internal Revenue Service for the excess of investment income on the proceeds of the Energy Authority's tax exempt bonds over the related interest expense in accordance with Section 148 of the Internal Revenue Code of 1986.The accumulated arbitrage interest payable amount is computed each year,and the first amount is due after the end of the fifth bond year.The Energy Authority maintains with the trustee a separate account and each year sets aside a sufficient amount to satisfy the liability. (d)The note payable to the State of Alaska for the Power Development Revolving Loan Fund (the note)at June 30,1993 is subject to the terms and conditions ofa loan agreement effective October 28,1985, as amended. The loan proceeds are restricted to financing initial hydroelectric projects under the Energy Program for Alaska.Any interest earned on the unexpended proceeds of the note must be paid to the State. The note is due October 28,2030 and provides for accrual of interest and repayments thereof for the first 15 years in an amount not less than the debt service component of the proceeds from the sale of power generated from the Solomon Gulch,Terror Lake,Swan Lake and Lake Tyee hydroelectric facili- ties (Four Dam Pool Project).However,principal repayment may occur under specific circumstances. The principal balance as of October 28,2000 will be amortized in equal annual installments at an interest rate of 8 percent,but subject to the reopener of the debt service component of the wholesale power rate in the fifteenth and thirtieth anniversaries of the Power Sales Agreement between theEnergyAuthorityandtheFourDamPoolprojectpowerpurchasers. All of the assets of the Four Dam Pool Project and the rights under agreements and revenues derived from use of capacity and sale of output of the Four Dam Pool project have been pledged as security under the loan agreement. (e)The Energy Authority manages three loan programs through loan funds established by Alaska statutes: Power Project Fund,Rural Electrification Revolving Loan Fund and Bulk Fuel Revolving Loan Fund. As ofJune 30,1993,these loan funds have the following receivable from borrowers: Long-term Short-term Total Accrued Receivable Receivable Receivable Interest Power Project Fund loans $22,655,507 $793,561 $23,449,068 $672,244 Rural Electrification Revolving Loan Fund loans 4,358,577 63,869 4,422,446 48,778 Bulk Fuel Revolving Loan Fund loans 728,641 728,641 28,134 Total $27,014,084 $1,586,071 $28,600,155 $749,156 The Energy Authority records liabilities for notes payable and accrued interest payable to the state for corre- sponding notes receivable and accrued interest from borrowers.Any uncollectible loans from borrower, when written-off,also correspondingly reduces notes payable to the State,and in the case of revolving loan funds,reduces the amounts available for future borrowers. E pie28ALASKAENERGYAUTHORITY ANNUAL REPORT NOTES .TO COMBINED FINANCIAL"STATEMENTS Years Ended June 30,1993 and 1992 NOTE E-LONG-TERM DEBT AND PROGRAM LOANS PAYABLE-Continued =1== Pursuant to AS 44.83.170,AS 44.83.361 and AS 44.83.610,the Authority is required to reimburse the State of Alaska general fund for interest and principal received for Power Project Fund loans and interest and fees received for Rural Electrification Revolving Loan Fund loans and Bulk Fuel Revolving Loan Fund loans. Components of repayments to the State of Alaska are as follows: June 30 1993 1992 Power Project Fund loans Principal 891,345 $832,534 Interest 1,443,683 1,586,579 Rural Electrification Revolving Loan Fund loans interest 99,430 80,694 Bulk Fuel Revolving Loan Fund loans Interest 45,295 47,162 Fees 8,854 10,644 $2,488,607 $2,557,613 Scheduled maturities of long-term debt as of June 30,1993 are as follows (program loans are excluded since the payables are offset by receivables): Bradley Lake Larsen Power Power Revenue Bonds Total Bay Development Maturity Date First Second Bradley Revenue Revolving Loan (Fiscal year)Series Series Lake Bond Fund Loans Total 1994 $1,485,000 $985,000 $2,470,000 $25,000 $$2,495,000 1995 1,580,000 1,045,000 2,625,000 25,000 2,650,000 1996 1,680,000 1,115,000 2,795,000 25,000 2,820,000 1997 1,790,000 1,185,000 2,975,000 30,000 3,005,000 1998 1,905,000 1,265,000 3,170,000 30,000 3,200,000 1999-2003 11,690,000 7,700,000 19,390,000 195,000 5,289,342 24,874,342 2004-2008 15,715,000 10,640,000 26,355,000 275,000 12,040,858 38,670,858 2009-2013 18,900,000 11,685,000 30,585,000 225,000 17,691,971 48,501,971 2014-2018 26,825,000 15,300,000 42,125,000 25,995,309 68,120,309 2019-2023 29,010,000 16,745,000 45,755,000 38,195,638 83,950,638 2024-2028 56,121,924 56,121,924 2029-2030 29,236,684 29,236,684 110,580,000 67,665,000 178,245,000 830,000 184,571,726 363,646,726 Bond discount & deferred interest (9,255,215)(8,328,070)(17,583,285)(9,734)(17,593,019) Total $101,324,785 $59,336,930 $160,661,715 $820,266 $184,571,726 $346,053,707 ve| ALASKA ENERGY AUTHORITY ANNUAL REPORT -29 ,1 =NorEs ,TO_COMBINED,FINANCIAL"STATEMENTS {= Years Ended June 30,1993 and 1992 NOTE E-LONG-TERM DEBT AND PROGRAM LOANS PAYABLE-Continued Interest expenses on borrowings totaled $21,505,408 and $21,189,822 in 1993 and 1992,respectively.On the Bradley Lake Hydroelectric Project,interest expense of $1,958,782 and interest income of $804,208 relat- ed to tax exempt borrowings have been capitalized for fiscal year 1992. Other Debt:In 1982,the Energy Authority assumed $44,858,858 of 5%mortgage notes payable which pro- vide for quarterly principal and interest payments to the Rural Electrification Administration (REA)in connec- tion with the Solomon Gulch Hydroelectric Project.At June 30,1993,the unpaid principal balance is $37,572,724.Concurrent with the assumption,the Energy Authority deposited with a trustee an investment in treasury notes with a 14%rate of return sufficient to satisfy and provide for timely repayment of all principal and interest due on the assumed REA loans.Accordingly,the loans and related trust assets are not included in the combined financial statements of the Energy Authority.As of June 30,1993,the assets in this trust have a carrying value of $21,645,748. NOTE F-SEGMENT INFORMATION AND DISCONTINUED OPERATION The Energy Authority maintains enterprise funds which account for the Four Dam Pool Hydroelectric Project, Anchorage Fairbanks Intertie,Larsen Bay Hydroelectric Project,Other Facilities,Loan Programs,Bradley Lake Hydroelectric Project,and Alaska Energy Authority Administration which includes Power Cost Equalization, Grants,Electrical Service Extension grant program and Deferred Projects. New legislation,Chapter 18,SLA 1993,mandated transfer of rural energy programs administered by the Energy Authority to DCRA (see Note A).The legislation,signed by the Governor on June 11,1993,also man- dated that the transfer be completed no later than December 31,1993.The Energy Authority recorded the transfer as discontinued operation according to Accounting Principle Board Opinion No.30. Programs to be transferred include the state energy loan programs,the Power Cost Equalization program,the technical assistance programs and technology development functions.Since those programs are accounted for in separate funds of the Energy Authority,all assets and liabilities of those funds will be transferred.The funds to be transferred include:Administration Fund,Rural Facilities Operation Fund,Power Project Loan Fund, Rural Electrification Revolving Loan Fund and Power Development Revolving Loan Fund. The responsibility for the Energy Authority's rural energy programs was accepted by the newly created Division of Energy within DCRA,effective August 18,1993,although the transition process has not been completed. ja 30 ALASKA ENERGY AUTHORITY ANNUAL REPORT NOTES TO,COMBINED FINANCIAL"STATEMENTS Eo Years Ended June 30,1993 and 1992 af= NOTE F-SEGMENT INFORMATION AND DISCONTINUED OPERATION-Continued The following funds have net positive book value as of the measurement date,June 11,1993.Transfer of these funds results in a loss to the Energy Authority,calculated as follows: Net Net Book Value Realizable Estimated as of Value on Loss on 6/11/93 Disposal Disposal Administration Fund $264,625 $0 $264,625 Rural Facilities Fund 4,229,301 0 4,229,301 Total $4,493,926 $0 $4,493,926 The deficiency of revenues over expenses from discontinued segment is $6,061,423 and $1,194,760 for fiscal years ended June 30,1993 and 1992,respectively.The Balance Sheets of the Continuing Operation as ofJune 30,1993 and the Statement of Revenues and Expenses for the year ended June 30,1993 by funds are as follows: (This space left intentionally blank) men| ALASKA ENERGY AUTHORITY ANNUAL REPORT -31 NOTES ,TO_COMBIN Years Ended June 30,1993 and 1992 NOTE F-SEGMENT INFORMATION AND DISCONTINUED OPERATION-Continued .e-_NANCIAL"STATEMENTS 3 /=< Total Total Continued Discontinued Before After Operation Operation Elimination Elimination Elimination ASSETS AND OTHER DEBITS PROPERTY,PLANT AND EQUIPMENT . Property,plant and equipment in service $929,174,583 $9,464,518 $938,639,101 $$938,639,101 Less accumulated depreciation 148,941,967 5,104,155 154,046,122 154,046,122 NET PROPERTY,PLANT AND EQUIPMENT 780,232,616 4,360,363 784,592,979 784,592,979 OTHER ASSETS Restricted cash and investments 59,936,140 110,178 60,046,318 60,046,318 Power Development Revolving Loan Fund loan 184,571,726 184,571,726 (184,571,726) Power Project Fund loans 22,655,507 22,655,507 22,655,507 Rural Electrification Revolving Loan Fund loans 4,358,577 4,358,577 4,358,577 Deferred project cost 104,072 104,072 104,072 Unamortized bond issuance cost 39,764 39,764 39,764 OTHER ASSETS 60,079,976 211,695,988 271,775,964 (184,571,726)87,204,238CURRENTASSETSDuefromStateofAlaska643,339 2,600,363 3,243,702 3,243,702 Operating revenue receivable 10,565,373 26,384 10,591,757 10,591,757 Accrued interest receivable 1,750,283 10,998,723 12,749,006 (10,249.567)2,499,439 Current portion of notes receivable 857,430 857,430 857,430 Bulk Fuel Revolving Loan Fund loans 7 28,641 7 28,641 728,641 Allowance for loss on discontinued segment (4,493,926)(4,493,926)(4,493,926)Other 26,397 26,397 26,397 TOTAL CURRENT ASSETS 12,958,995 10,744,012 23,703,007 (10,249,567)13,453,440 TOTAL ASSFTS $853,271,587 $226,800,363 $1,080,071,950 $(194,821.293)$885,250,657 LIABILITIES AND FUND EQUITY FUND EQUITY Contributed capital $606,91 3,482 $12,887,326 $619,800,808 $$619,800,808 Deficit (131,334,942)(12,887,326)(144,222,268)(144,222,268) TOTAL FUND EQUITY 475,578,540 475,578,540 475,578,540 LONG-TERM DEBT,NET OF CURRENT PORTION Bonds payable 158,986,981 158,986,981 158,986,981 Power Development Revolving Loan Fund loan payable 184,571,726 184,571,726 369,143,452 184,571,726 184,571,726 Power Project Fund loans payable 22,655,507 22,655,507 22,655,507 Rural Electrification Revolving Loan Fund loans payable 4,358,577 4,358,577 4,358,577 Arbitrage interest payable 1,674,443 1,674,443 1,674,443 TOTAL LONG-TERM DEBT 345,233,150 211,585,810 556,818,960 184,571,726 372,247,234 CURRENT LIABILITIES Accounts payable 1,004,630 2,629,759 3,634,389 3,634,389 Retainage payable 1,037,125 1,037,125 1,037,125 Currert portion of long-term debt and loans payable 2,495,000 1,586,071 4,081,071 4,081,071 Due to State of Alaska . Refund of Bradley Lake Hydroelectric Project construction cost savings 12,082,500 12,082,500 12,082,500 Power Development Revolving Loan Fund accrued interest 10,249,567 10,249,567 20,499,134 10,249.567 10,249,567 Other loan funds accrued interest 749,156 749,156 749,156 Other accrued interest 5,487,003 5,487,003 5,487,003 Deferred revenue 104,072 104,072 104,072 TOTAL CURRENT UUABILITIES 32,459,897 15,214,553 47,674,450 10,249,567.37,424,883 TOTAL LIABILITIES 377,693,047 226,800,363 604,493,410 194,821,293 409,672,117 TOTAL LIABHATIFS AND FUND FOUITY $853,271.587 $226,800,363 $1,080,071,950 $194,821,293 $885,250,657 REVENUES: State of Alaska appropriations $560,892 $26,658.992 $27,219,884 $$27,219,884 Revenue from other state agencies 47,388 47,388 47,388 Revenue from other federal government agencies 63,971 63,971 63,971 Revenue from operating plants 27,681,912 87,747 27,769,659 27,769,659 interest and investment income 3,985,166 11,862,570 15,847,736 10,249,567 5,598,169 Other revenue 303,068 303,068 303,068 TOTAL REVENUES 32,227,970 39,023,736 71,251,706 10,249 567 61,002,139 EXPENSES: General and administrative expense 560,892 395,089 955,981 955,981 Plant operating expenses 5,158,798 65,490 5,224,288 5,224,288 Depreciation expense 22,713,565 1,174,982 23,888,547 23,888,547 Project expense 3,465,435 3,465,435 3,465,435Grants6,522,077 6,522,077 6,522,077 interest expense 21,505,408 11,859,034 33,364,442 (10,249,567)23,114,875 Power Cost Equalization Program 16,681,965 16,681,965 16,681,965Other427,161 427,161 427,161 TOTAL EXPENSES 49,938,663 40,591,233 90,529,896 (10,249,567)80,280,329 DEFICIENCY OF REVENUES OVER EXPENSES FROM CONTINUING OPERATION (17,710,693)17,710,693)(17,710,693) DEFICIENCY OF REVENUES OVER EXPENSES FROM OPERATION OF DISCONTINED SEGMFNT (1,567,497)(1,567,497)(1,567,497) LOSS ON TRANSFER OF A SEGMENT (4,493,926)(4,493,926)(4,493,926) DEFICIENCY OF REVENUES OVER EXPENSES FROM DISCONTINUED SEGMENT.(6,061,423)(6,061,423)(6,061,423) DEFICIENCY OF REVENUES OVER EXPENSES $17,710,693)$(6,061,423)$123 772,116)$$(23,772,116) E 32 ALASKA ENERGY AUTHORITY ANNUAL REPORT I Loy eae Kom G0),1:1]\140M gin Nel." Years Ended June 30,1993 and 1992 NOTE F-SEGMENT INFORMATION AND DISCONTINUED OPERATION-Continued (xem)f=a, CONTINUING OPERATION Anchorage/ Bradley Lake Four Dam Fairbanks Larsen Bay Total Hydroeleciric Pool intertie Hydroeleciric Continued Administration Project Project Project Project Operation ASSETS AND OTHER DEBITS PROPERTY,PLANT AND EQUIPMENT Property,plant and equipment in service $$305,011,152 $498,312,261 $124,249,576 $1,601,594 $929,174,583 Less:accumulated depreciation 11,838,326 111,457,118 25,579,210 73,313 148,941,967 NET PROPERTY,PLANT AND EQUIPMENT 293,172,826 386,861,143 98,670,366 1,528 281 780,232,616 OTHER ASSETS Restricted cash and investments 46,556,978 13,161,912 217,250 59,936,140 Deterred projects cost 104,072 104,072 Unamortized bond issuance cost 39,764 39,764 OTHER ASSETS 104,072 46,556,978 13,161,912 257,014 60,079,976 CURRENT ASSETS Due from State of Alaska 681,698 (44,055)91,385 (85,689 )643,339 Operating revenue receivable 10,551,777 13,602 10,565,373 Accrued interest receivable 1,718,803 34,480 1,750,283 TOTAL CURRENT ASSETS 2,400,501 10,539,196 104,987.(85,689)12,958,995 TOTAL ASSETS $104,072 $342,130,305 $470,562,251 $98,775,353 $1,699,606 $853,271,587 LIABILITIES AND FUND EQUITY FUND EQUITY Contributed capital $$162,975,0465 $318,766,187 $124,249,576 $922,680 $606,91 3,482Deficit(2,606,243)(103,073,846)(25,579,210)(75,643)(131,334,942) TOTAL FUND FQUITY 160,368,602 215,692,335 98,670,366 847,037 475,578,540 LONG-TERM DEBT,NET OF CURRENT PORTION Bonds payable 158,191,715 795,266 158,986,981 Power Development Revolving Loan Fund loan payable 184,571,726 184,571,726 Arbitrage interest payable 1,674,443 1,674,443 TOTAL LONG-TERM DEBT 159,866,158 184,571,726 795,266 345,233,150 CURRENT LIABILITIES Accounts payable 846,787 48,623 104,987 4,233 1,004,630 Retainage payable 1,037,125 1,037,125 Current portion of long-term debt and loans payable 2,470,000 25,000 2,495,000 Refund of Bradley Lake Hydroelectric Project construction cost savings 72,082,500 12,082,500 Power Development Revolving Loan Fund accrued interest 10,249,567 10,249,567 Other accrued interest 5,458,933 28,070 5,487,003 Deterred revenue 104,072 104,072 TOTAL CURRENT LIABILITIES 104,072 21,895,345 10,298,190 104,987 57,303 32,459,897 TOTAL LIABILITIES 104,072 181,761,503 194,869,916 104,987 852,569 377,693,047 TOTAL LIABILITIFS AND FUND FQUITY $104,072 $342,130,305 $410.562.251 $98,775,353 $1.699.606 $853,271,587 REVENUES: State of Alaska appropriations $560,892 $$$$$560,892 Revenue frorn operating plants 13,891,238 12,412,930 1,189,923 187,821 27,681,912 interest and investment income 3,557,484 422,148 5,534 3,985,166 TOTAL REVENUES 560,892 17,448,722 12,835,078 1,189,923 193,355 32,227,970 EXPENSES: General and administrative expense 560,892 560,892 Plant operating expenses 2,347,969 1,527,736 1,189,923 93,170 5,158,798 Depreciation expense 6,633,703 12,640,229 3,401,600 38,033 22,743,565 interest expense 11,178,921 10,249,567 76,920 21,505,408 TOTAL EXPENSES 560,892 20,160,593 24,417,532 4,591,523 208,123 49,938,663 DEFICIENCY OF REVENUFS OVER EXPENSES $$(2,711,871)$(11,582,454)$(3,407,600 }$114,768)$(17,710.693) ALASKA ENERGY AUTHORITY ANNUAL REPORT 33 'a)NOTES ,TO COMBINED |FINANCIA =< =_ Years Ended June 30,1993 and 1992 NOTE F-SEGMENT INFORMATION AND DISCONTINUED OPERATION--Continued DISCONTINUED OPERATION: Administration Rural Bullk and Power Electrification Fuel Power Power Cost Rural Project Revolving Revolving Development Equalization Facilities Fund Loan Fund Loan Fund Revolving Program Operation Loans Loans loans Loans Total ASSETS AND OTHER DEBITS PROPERTY,PLANT AND EQUIPMENT Property,plant and equipment in service $3,393,748 $6,070,770 5 5 $5 $9,464,518 Less:acc lated depreciation 3,129,124 1,975,031 5,104,155 NET PROPERTY,PLANT AND EQUIPMENT 264,624 4,095,739 4,360,363 OTHER ASSETS Restricted cash and investments 116,178 116,178 Power Development Revolving loan 184,571,726 184,571,726 Power Project Fund loans 22,655,507 22,655,507 Rural Electrification Revolving Loan Fund loans 4,358,577 4,358 577 OTHER ASSETS 110,178 22,655,507 4,358,577 184,571,726 211,695,988 CURRENT ASSETS Due from State of Alaska 2,591,940 8,423 2,600,363 Operating revenue receivable 26,384 26,384 Accrued interest receivable 672,244 48,778 28,134 10,249,567 10,998,723 Current portion of notes receivable 793,561 63,869 857,430 Bulk Fuel Revolving Loan Fund loans 728,641 728,641 Allowance for loss on disposal (264,624 )(4,229,302 )(4,493,926) Other 26,397 26,397 TOTAL CURRENT ASSETS 2,353,713 (4,194,495 )1,465,805 112,647 756,775 10,249,567 10,744,012 TOTAL ASSETS $2,618,337 $11,422 $24,121,312 $4,471,224 $756,775 $194,821,293 $226,800,363 LIABILITIES AND FUND EQUITY FUND EQUITY Contributed capital $6,816,556 $6,070,770 s 5 $$$12,887,326 Deficit (6,816,556 )(6,070,770 }(12,887,326) TOTAL FUND EQUITY LONG-TERM DEBT,NET OF CURRENT PORTION Power Development Revolving Loan Fund loan payable 184,571,726 184,571,726 Power Project Fund loans payable 22,655,507 22,655,507 Rural Electrification Revolving Loan Fund loans payable 4,358,577 4,358,577 TOTAL LONG-TERM DEBT 22,655,507 4,358,577 184,571,726 211,585,810 CURRENT LIABILITIES Accounts payable 2,618,337 11,422 2,629,759 Current portion of long-term debt and loans payable 793,561 63,869 728,641 1,586,071 Due to State of Alaska Power Development Revolving Loan Fund accrued interest 10,249,567 10,249,567 Loan fund accrued interest 672,244 48,778 28,134 749,156 TOTAL CURRENT LIABILITIES 2,618,337 11,422 1,465,805 112,647 756,775 10,249,567 15,214,553 TOTAL LIABILITIES 2,618,337 1,422 24,121,312 4,471,224 756,775 194,821,293 226,800,363 TOTAL LIABILITIES AND FUND FOUTTY $2,618,337 $11,422 $24,121,312 $4,471,224 $756,775 $794,821,293 $226,800,363 REVENUES: State of Alaska appropriations $26,556,471 $$12,363 $12,608 $77,550 5 $26,658,992 Revenue from other state agencies 47,388 47,388 Revenue from federal government agencies 63,971 63,971 Revenue from operating plants 87,747 87,747 interest and investment income 3,536 1,465,795 93,250 50,422 10,249,567 11,862,570 Other revenue 294,214 8,854 303,068 TOTAL REVENUES 26,962,044 91,283 1,478,158 105,858 136,826 10,249,567 39,023,736 EXPENSES: General and administrative expense 292,568 12,363 12,608 77,550 395,089 Plant operating expense 65,490 65,490 Depreciation expense 694,692 480,290 1,174,982 Projects expense 3,465,435 3,465,435 Grants 6,522,077 6 522,077 Interest expense $465,795 93,250 50,422 10,249,567 11,859,034 Power Cost Equalization Program 16,681,965 16,681,965 Other 418,307 8,854 427,161 TOTAL EXPENSES 28,075,044 545,780 1,478,158 105,858 136,826 10,.249.567 40,591,233 DEFICIENCY OF REVENUES OVER EXPENSES (1,113,000 )(454,497 )(1,567,497) LOSS ON TRANSFER OF A SEGMENT (264,624)(4,229,302)(4,493,926) DEFICIENCY OF REVENUES OVER EXPENSES $1,377,624)$(4,683,799 )$$$$$(6,061,423} -.. 34 ALASKA ENERGY AUTHORITY ANNUAL REPORT NOTES ,.TO COMBINED FINANCIAL'STATEMENTS Gee Years Ended june 30,1993 and 1992 ea{==__! NOTE G-INTERFUND ACTIVITIES AND BALANCES Interfund activities and balances as of June 30,1993 for the various funds are summarized as follows: Power Development Four Dam Pool Revolving Loan Fund Fund Note receivable (Payable) Power Development Revolving Loan Fund ($184,571,726)$184,571,726 Interest receivable (payable)(10,249,567)10,249,567 interest expense (income)10,249,567 (10,249,567) NOTE H-UNEXPENDED APPROPRIATIONS The Energy Authority's unexpended appropriations are held by the State of Alaska as follows: June 30 1993 1992 Grants $11,972,188 $4,373,498 Bulk Fuel Revolving Loan Fund 1,555,273 1,589,652 Power Cost Equalization :307,746 1,362,060 Power Project Fund 727,579 839,847 Rural Electrictication Revolving Loan Fund 478,363 388,862 Projects 386,967 162,398 $15,428,116 $8,716,317 NOTE I-PENSION PLAN All full-time employees of the Energy Authority participate in the State of Alaska Public Employees Retirement System (PERS),a multiple employer public retirement system.The Energy Authority is a part of the State of Alaska and detailed pension information is not generated for the Energy Authority.Total salaries for Authority employees covered by PERS for the years ended June 30,1993 and 1992 amounted to $3,826,448 and $3,945,246,respectively. The Energy Authority employees are required to contribute 6.75%of their annual salaries to PERS.The Authority contributes the remaining amounts necessary to fund the actuarially determined contribution for the year.For the fiscal year ended June 30,1993,the Authority's contribution was 15.63%of covered payroll. a ALASKA ENERGY AUTHORITY ANNUAL REPORT 35 .eae”NOTES ,TO_COMBINED]FINANCIAL"STATEMENTS Se /= Years Ended June 30,1993 and 1992 NOTE I--PENSION PLAN-Continued Benefits vest after five years of credited service.Employees hired prior to July 1,1986 with five or more years of credited service are entitled to annual pension benefits beginning at normal retirement age 55 or early retirement age 50.For employees hired after June 30,1986,the normal and early retirement ages are 60 and 55,respectively.The normal monthly pension benefit is equal to 2 -2-1/2 percent of the member's highest three-year average monthly compensation times the number of years the employee has participated in PERS. The pension benefit obligation was computed as part of an actuarial valuation as of June 30,1992.Significant actuarial assumptions used in the valuation include;a)a rate of return on the investment of present and future assets of 8.75 percent per year compounded annually,b)projected salary increases of 6.5 percent per year for the first five years of employment and 5.5 percent per year thereafter.Detailed information with respect to the PERS system is contained in the Alaska Public Employees'Retirement System Component Unit Annual Financial Report. Total unfunded pension benefit obligation,based on the pension assets at cost,applicable to the State of Alaska's employees was $285,926,000 and $334,498,000 at June 30,1992 and 1991,respectively,and is as follows (in thousands): 1992 1991 Pension benefit obligation $2,144,472 $1,924,251 Net assets available 1,858,546 1,589,753 UNFUNDED PENSION BENEFIT OBLIGATION $285,926 $334,498 ASSETS AS A PERCENTAGE OF PENSION BENEFIT OBLIGATION 87%83% The net assets available for benefits,at market value,were $1,882,661,000 and $1,630,505,000 as ofJune 30,1992 and 1991,respectively. NOTE J-CONDUIT FINANCING Slana Energy Bonds:In March,1990,the Energy Authority issued approximately $34,000,000 Retainable Adjustable Duration/Adjustable Rate Revenue Bonds (Alaskan Air Command/Slana Energy Project)of which proceeds are maintained by bank trustees.These obligations are not included in these financial statements. These bonds are payable solely from payments made on and secured by a pledge of all revenues deriving to the Energy Authority under the Loan Agreement with Slana Energy,Inc.and Castle Mountain Mining Co.,Ltd. All moneys,securities,and funds held or set aside under the indenture are pledged and assigned to secure the payment of principal,redemption premium,if any,and interest on the bonds.The bonds are not payable fromanyotherrevenuesorassetsoftheEnergyAuthority.Neither the faith and credit,nor the taxing powers of the State of Alaska,or any political corporation,subdivision or agency thereof is pledged to the principal and interest on the bonds. Galena Project -Fixed Rate Revenue Bonds,Series 1991A:In May 1991,the Energy Authority issued $2,900,000 in revenue bonds to allow the City of Galena to refinance the construction ofa new electric gener- ation plant to serve the local community and United States Air Force Base.These obligations are not included in these financial statements. | 36 ALASKA ENERGY AUTHORITY ANNUAL REPORT tongs Kom Ge)[:11\[40m gINy-aly:\ Years Ended June 30,1993 and 1992 ,,aTATEMENTSSD{=a= NOTE J-CONDUIT FINANCING-Continued These bonds are secured solely by a loan agreement between the Energy Authority and the City of Galena,and a Letter of Credit issued by Seattle-First National Bank (formerly Security Pacific Bank Washington,N.A.).The Bonds are special limited non-recourse obligations of the Authority and do not constitute direct or general obligations of the Authority,and the full faith and credit of the Authority is not pledged to the payment of the principal of and interest on the Bonds.The Bonds do not constitute an indebtedness or liability of the State of Alaska,and the Bonds do not directly,indirectly or contingently obligate the State of Alaska or any political subdivision thereof to apply moneys from or levy or pledge any form of taxation whatsoever to the payment of the Bonds. City and Borough of Sitka -Utility Revenue Bonds Series 1992:In May 1992,the Energy Authority issued about $56,900,000 tax-exempt bonds (Bonds)that allowed the City and Borough of Sitka to refinance its 1979 municipal bonds,resulting in significant debt service savings to Sitka.These obligations are not included in these financial statements. The Bonds are special obligations of the Alaska Energy Authority secured under a Trust Indenture by and between the Authority and Seattle-First National Bank (formerly Security Pacific Bank Washington,N.A.),as Trustee.The Bonds are payable solely from the sources provided under the Trust Indenture.They are equally and ratably secured by a pledge and assignment of the Municipal Revenue Bonds of the City held by the Authority under the Trust Indenture,the obligation of the City to make payments under its Loan Agreement with the Authority and the moneys and securities held under the Trust Indenture,including the Capital Reserve Fund. The Bonds do not constitute an indebtedness or other liability of the State of Alaska,and do not directly,indi- rectly or contingently obligate the State or any political subdivision thereof to levy any form of taxation for the payment of the bonds.Neither the full faith and credit nor the taxing power of the State of Alaska or the City is pledged for the payment of the 1992 Bonds. NOTE L-RISK MANAGEMENT The Energy Authority is exposed to various risks of loss related to torts;theft of,damage to,and destruction of assets;errors and omissions;injuries to employees;and natural disasters.The Energy Authority obtains cover- age for its risks through purchase of commercial insurance,participation in the State Risk Management Pool and the establishment of self-insurance plans. General Liability;Watercraft and Aviation:All risks are covered by the State insurance plan through an annual charge assessed by the State Division of Risk Management,and payroll mark up. Property;Boiler and Machinery:,The Authority covers these risks arising from its ownership of hydroelectric and transmission facilities through a combination of acquisition of commercial coverage and risk retention. a ALASKA ENERGY AUTHORITY ANNUAL REPORT 37 NOTES ,TO COMBINED,FINANCIAL"STATEMENTS Years Ended June 30,1993 and 1992 NOTE L-RISK MANAGEMENT-Continued (a)Property Four Dam Pool Facilities: The Four Dam Pool (FDP)property risks are covered by commercial insurance purchased through the State Division of Risk Management for losses in excess of $10,000,000 up to $60,000,000.The risk of losses for the first $10,000,000 is retained.However,the Authority maintains a line of credit for $10,000,000,secured by a capital reserve fund to cover the self-retained risks and other non-insurable risks. The Energy Authority's self insurance for the FDP is funded through:1)annual insurance premium payment from the Four Dam Pool Project Management Committee;2)initial borrowings from the Power Development Revolving Loan Fund totaling $6,500,000;3)investment revenue from invest- ment in the self-insurance capital reserve;and 4)revenues received under the Interruptible Power Sales Agreements. Anchorage-Fairbanks Intertie: The utilities participating in the Anchorage-Fairbanks Intertie operating agreement retain the property risks associated with the Anchorage-Fairbanks Intertie.The Authority maintains a line of credit for $1,000,000 for costs of repairs that would ultimately be reimbursed by the utilities utilizing the facility. Bradley Lake and Larsen Bay Hydroelectric Projects: The risks are covered by commercial insurance purchased through the State Division of Risk Management,and the self-insured retentions are a responsibility of the respective projects from operat- ing funds. (b)Boiler and Machinery These risks are covered by commercial insurance purchased through the State Division of Risk Management. Additionally,utilities benefiting from the use of the facilities owned by the Energy Authority participate in the responsibility for deductibles and self-insured retentions under the terms of the respective agreement. Workers Compensation Insurance:The Energy Authority participates in the State of Alaska Risk Management Pool.The risks are transferred to the Pool,and the premium is charged to the Energy Authority based on pay- roll expenditures. NOTE M-RELATED PARTIES State of Alaska:Financing for portions of the Energy Authority's operations and programs is dependent upon annual appropriation of the Legislature.The State of Alaska appropriations are recorded as revenues when expenses are incurred.In the normal course of business,the Energy Authority receives administrative,trea- sury,personnel,legal,risk management,data processing,communications,and other services from the State ofAlaska. E seine an 38 ALASKA ENERGY AUTHORITY ANNUAL REPORT NOTES ,TO COMBINED FINANCIAL"STATEMENTS aaa Years Ended June 30,1993 and 1992 =>f==__ NOTE M---RELATED PARTIES-Continued Four Dam Pool Project Management Committee:Effective October 28,1985,the Energy Authority entered into a long-term power sales agreement with utilities purchasing electric power from the Four Dam Pool Project.Pursuant to the agreement,a Project Management Committee (PMC)was formed.The PMC is com- prised ofa representative from the Energy Authority and each of the utilities.The participating utilities make monthly payments to the PMC,net of each utility's operating costs associated with the respective Four Dam Pool facility,for the utilities'share of total estimated annual costs,including debt service,at a set price for kilowatt hours purchased each month,with an annual settlement to adjust the payments to actual costs.The PMC makes monthly payments to the Energy Authority for the Energy Authority's share of the estimated costs and annual payments for the debt service component of the wholesale power rate and for insurance. Anchorage-Fairbanks Intertie Operating Committee:Effective May 1,1986,the Energy Authority entered into an agreement with utilities using the Anchorage-Fairbanks Intertie for wheeling of electrical power.Pursuant to the agreement,the Intertie Operating Committee (IOC)was established to manage the system.The IOC is comprised ofa representative from the Energy Authority and each of the utilities.The Energy Authority is to be reimbursed for operation and maintenance costs on a monthly basis with an annual settlement to adjust the payments to actual costs.The agreement may be terminated by the Energy Authority if the Energy Authority determines that such action is required to improve power systems serving the Alaska railbelt utilities or may be terminated by mutual agreement of the participants. Bradley Lake Project Management Committee:Effective December 7,1987,the Energy Authority entered into a power sales agreement with utilities purchasing electric power produced by the Bradley Lake Hydroelectric Project.Pursuant to the agreement,a Project Management Committee (PMC)was formed.The PMC is com- prised ofa representative from the Energy Authority and each of the utilities.The participating utilities make monthly payments directly to the bond trustee based on the respective percentage share of the estimated annu- al project costs for each fiscal year,including debt service,with an annual settlement to adjust the payments to actual costs. NOTE N-BRADLEY LAKE CONSTRUCTION FUNDS REIMBURSABLE TO STATE Pursuant to the Bradley Lake Variable Rate Demand Bonds Indenture,the State of Alaska deposited with the bond trustee $166,000,000 restricted to construction activities of the Bradley Lake Hydroelectric Project.The state funds were fully expended as of June 30,1991.However,due to savings on construction costs, $12,082,500 will be refunded to the State. NOTE O-LITIGATION SETTLEMENTS During fiscal year 1991,the Energy Authority settled litigation with the Initial Project Management Committee (PMC)regarding Four Dam Pool Hydroelectric Project.According to the settlement,the Energy Authority established the Initial Project Revolving Loan Fund;the Fund is to make loans in an amount no less than $25,000 to the PMC for purposes related to the initial project.The Energy Authority received from the PMC $120,000 of disputed prior year debt service payment.During fiscal year 1992,upon finalization of the settle- ment documents,the Energy Authority disbursed $3,000,000 from the Tyee Lake Hydroelectric Project Construction fund to the PMC for deposit in the PMC Renewal and Replacement Fund for the uses identified in the Settlement Agreement. ne eo :7 ALASKA ENERGY AUTHORITY ANNUAL REPORT 39 |ons a cem Gel (:11\140) Years Ended June 30,19923 and 1992 =INCAS UNGE SONGS {= NOTE P-COMMITMENTS AND CONTINGENCIES Litigation:The Authority,in the normal course of business,is involved in various claims and pending litiga- tion.The State of Alaska Department of Law manages all pending litigation of the Authority,and any liability arising from the settlement of pending claims is a State of Alaska liability for which the Department of Law or the Authority requests an appropriation from the State of Alaska Legislature to satisfy judgment.In the opin- ion of management,the disposition of current claims and pending litigation is not presently expected to have a materially adverse effect on the Authority's combined financial statements. Loan Programs:The Energy Authority,in the normal course of providing loans through the Rural Electrification Revolving Loan Fund and the Power Project Fund,incurs commitments for future loans which are not reflected in the accompanying combined financial statements.The Energy Authority,as discussed in Note A,will transfer these funds and related commitment to Department of Community and Regional Affairs. As of June 30,1993 and 1992,the Energy Authority has commitments as follows: June 30 1993 1992 Rural Electrification Revolving Loan Fund loans $337,790 $337,790 Power Project Fund Loans 463,238 610,095 $801,028 $947,885 | 40 ALASKA ENERGY AUTHORITY ANNUAL REPORT m ALASKA ENERGY AUTHORITY BOARD OF DIRECTORS Chairman: Herbert C.Lang,President Alaska Basic Industries Vice-Chairman: Darrel Rexwinkel,Commissioner Alaska Department of Revenue Other Board Members: Paul Fuhs,Commissioner Alaska Department of Commerce and Economic Development Edgar Blatchford,Commissioner Alaska Department of Community and Regional Affairs Harry J."Red”Porter Civic leader,retired CEO ™FOR ADDITIONAL INFORMATION If you have questions about the Authority's operating power projects or new energy projects,contact one of the following officials at AIDEA,480 West Tudor Road, Anchorage,Alaska 99503.Phone:(907)561-8050;fax 561-8998:William R. (Riley)Snell,Executive Director;Dennis McCrohan,Deputy Director;Dan Beardsley, Contract Manager. For information about AEA's rural programs,contact the new Division of Energy within the Department of Community and Regional Affairs,333 West 4th Avenue, Suite 220,Anchorage,Alaska 99501-2341.Phone:(907)269-4500 =ABOUT THIS ANNUAL REPORT This report on the activities and financial condition of the Alaska Energy Authority is submitted in accordance with AS 44.83.940.It was produced and printed in Anchorage at a cost of $4.70 per copy. Design and production by Northwest Strategies Printing by Professional Colorgraphics