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HomeMy WebLinkAbout2024.03.22 BPMC Meeting Minutes - FINALBPMC Minutes 3/22/24 Page 1 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE (BPMC) REGULAR MEETING MINUTES Alaska Energy Authority Board Room Anchorage, AK 99503 March 22, 2024, 1. CALL TO ORDER Chair Brad Janorschke called the meeting of the Bradley Lake Hydroelectric Project Management Committee to order at 10:01 a.m. 2. ROLL CALL (for Committee members) Brad Janorschke (Homer Electric Association [HEA]); John Burns, (Golden Valley Electric Association [GVEA]); Curtis Thayer, (Alaska Energy Authority [AEA]); Tony Zellers (Matanuska Electric Association [MEA]); Arthur Miller (Chugach Electric Association [CEA]). A quorum was established. 3. PUBLIC ROLL CALL (for all others present) Joel Paisner, counsel for BPMC; Kent Sullivan, general counsel for AEA; Andrew Laughlin (CEA); Jon Sinclair (MEA); Matt Clarkson (CEA); Russell Thornton (CEA); Mike Miller (CEA); Dan Bishop (GVEA); Travis Million (GVEA); Larry Jorgensen (HEA); Sarah Lambe (HEA); Martin Law (HEA); Andy Patrick (HEA); Tony Izzo (MEA); Ed Jenkin (MEA); David Pease (MEA); Matt Reisterer (MEA); Bryan Carey (AEA); Pam Ellis (AEA); Ryan McLaughlin (AEA); Jim Mendenhall (AEA); Bill Price (AEA); Jennifer Bertolini (AEA). 4. AGENDA APPROVAL MOTION: Mr. Curtis Thayer moved to approve the Agenda as presented. Mr. Arthur Miller seconded the motion. The motion to approve the agenda passed without objection. 5. PUBLIC COMMENTS - None. 6. APPROVAL OF MEETING MINUTES - January 26, 2024 Chair Janorschke stated that he had a few non-substantial edits that he submitted to Jennifer. He opened the floor for discussion. Mr. Burns stated that the motion that begins on page 2 and continues to page 3 to approve the Bradley Lake Project Management Committee resolution for the $20 million, the end of that motion should read, this resolution or the power sales agreement beyond the $20 million authorized herein, not authorized year end. Chair Janorschke thanked Mr. Burns for his comment and asked if there were any objections to this change. BPMC Minutes 3/22/24 Page 2 MOTION: Mr. Thayer moved to approve the minutes as amended from January 26, 2024. Mr. Tony Zellers seconded the motion. The motion to approve the minutes, as amended, passed without objection. City of Seward was absent. 7. NEW BUSINESS 7a. FY25 BPMC Budget Ms. Pam Ellis, AEA Controller, presented to the committee the Fiscal Year 2025 (FY25) budget. Bradley Lake: Ms. Ellis said the utility contributions are expected to be $550,126 less than Fiscal Year 2024 as seen on Schedule C detail. She explained the contributions are directly impacted by the overall budgeted expenses. She said FY25 budget expenses decreased slightly over FY24 by $13,626. The primary reason for the reduced contribution is that there is an inclusion this year of a revenue budget line item for interest income for FY25, which is $536,500. That concludes the report for revenues budgeted. Ms. Ellis said Operation and Maintenance (O&M) is detailed on schedule B and an increase of $404,866 is expected in FY25 over FY24. The largest increases to O&M are in administrative costs including: • FERC line 924 and 925 - insurance, property and general liability increased $200,000; • Fixed Admin Fees – net increase $95k o inclusion of a single senior accountant o indirect increase for AEA o slight decrease for anticipated TMs working on project work and not in the admin area. She said Schedule B will provide more specific line item details for the overall increases and decreases that are not as significant that resulted in that overall increase. She moved onto Renewals and Replacements, on Schedule D. She said the RNC fund payment overall increases $346,162. The majority of the increases were for the needle valve rebuild and a new project of bar stock rehabilitation. She called attention Schedule A, non-RNC capital purchases, which decrease from FY24 by $700,098. This decrease is because most of the capital activity for FY25 is anticipated to be focused on RNC and construction fund activity of the required project work bond series eleven. She said the summary page has transfers to and from operating reserve line items, which increases from FY24 by $32,789. This increase is a result of the increase to the O&M for FY25. She said the summary page also has the debt service line, which is an overall small increase of $538, a direct result of the amortization scheduled for bond series eleven for the coming year. BPMC Minutes 3/22/24 Page 3 Battle Creek: Ms. Ellis called attention to the Revenue Section for FY 25 on Schedule D. She said the utility contributions are expected to be $1,442,778 less than FY24, which are a direct impact for the overall budgeted expenses. She said Bradley's FY25 budget expenses are anticipated to decrease by $1,442,778; and another overall decrease that results is the included interest income for FY25 of $218,000. She said Battle Creek expenses on Schedule F, Operation and Maintenance (O&M), increase overall from FY24 by $110,670. The main reason for this overall increase is the hydraulic expenses primarily in the contractual line item of $70k (at FERC 537) and the increase to the Bradley Lake O&M 4% distribution to Battle Creek. She said Renewals and Replacements, the RNC fund replacement is detailed on Schedule D. The budget decreased by $1,000,104 because of the final year of the four-year budget where Battle Creek was reimbursing Bradley for the RNC. This is complete in FY24. She said Schedule E details capital purchase and shows an overall decrease by $160,000. She said the decrease is because most construction activity in FY25 will be around Bradley RNC Construction Fund activity, required project work bond series eleven. She said the summary page has the line item of transferred to/from operating reserve. There will be an increase from FY24 by $7,555, which is a result from an increase in the O&M of Bradley with a 4% distribution for FY25. She said the next line item is the transfer to/from Capital Reserve. This decreases from FY25 by $58,284, which is a result of the scheduled reduced cap reserve to operations per schedule of annual withdrawals by US Bank. The result of the debt service payment for Bond Series 7 & 8 required to have on reserve is dropping each year. She said the next line item is the debt service, which is decreasing by $58,284 as reported in the capital reserve retirement on budget line item. Lastly, from the summary page for Battle Creek, the IRS subsidy per amortization schedule is expected through the IRS subsidy payment to be $37,566 less than FY24. That concludes Battle Creek. SSQ Line: Ms. Ellis said for the SSQ Line Revenues for FY25, the utility contributions are expected to be $16,482 less than FY24, which is detailed on Schedule A. She explained the utility contributions are directly impacted by the overall budgeted expenses. Bradley's FY25 budget expenses increased over FY24 by $49,718. The reason though for the overall decrease is the inclusion to the revenue budget for interest income for FY25 of $66,200. She said Expenses for the SSQ Line for FY25 Operating and Maintenance (O&M) on Schedule I, have an overall anticipated increase from FY24 of $36,878. The main overall increase is the increased admin cost to have a fire management plan created for the Intertie, which is noted as BPMC Minutes 3/22/24 Page 4 the requirement of the insurer at $45,000. She said decreases of $8.1 thousand were in supplies and materials, and permitting which is $8.1 thousand. She called attention to the summary page for SSQ Line and the transfers to and from operating reserve line. She explained there is an increase in budget amount to transfer to operating reserve of $13,375, which is due to the O&M budgeted increase for FY25. She said the last line item is to debt service for SSQ line, which decreases by $536 per the amortization schedule payment. She concluded her report. Chair Janorschke thanked Ms. Ellis Pam and the budget subcommittee for their efforts in putting this budget together. He asked if this budget must be approved today or is it possible to approve it at the next meeting on May 3, 2024. He said he would like time to further review the budget. Mr. Paisner responded that the committee does not have approve the budget today. After brief discussion, committee members decided to defer approval of the budget until the May meeting. Ms. Ellis said she would check if the budget must be approved sooner for the Trustees. Mr. Miller asked about the interest income. Ms. Ellis explained the interest is from the various accounts and was not included in prior year budgets and is interest from the various bank accounts. Mr. Janorschke summarized approval of the Budget will be carried over to the May 3, 2024 meeting. 8b. Lease Authorization for Equipment and Materials Storage Chair Janorschke turned the meeting over to Vice Chair Burns since the Lease Authorization for Equipment and Materials Storage involves Homer Electric He said he would abstain from voting on any actions taken on the item. Vice-Chair Burns asked Mr. Joel Paisner to provide background information on this agenda item. Mr. Paisner stated that this item involves the SSQ Line. He explained there have been prior resolutions by the BPMC that authorize both Homer and Chugach to conduct procurement activity on the SSQ Line, which has led to large purchases of equipment that need to be stored for the project. He said there should be a motion from the BPMC authorizing the development of a lease agreement between HEA and AEA to store this equipment on HEA’s site on behalf of the project. BPMC Minutes 3/22/24 Page 5 Mr. Janorschke clarified the request is to approve expenditures only to develop the lease agreement. Mr. Paisner said it would be an agreement primarily between the Authority and HEA to allow for storage and provide insurance, etc. Through discussion, committee members determined that the site in question is the Sterling Substation, which is owned by Homer Electric. Mr. Miller asked Andrew Laughlin to confirm whether Chugach is also receiving materials. Mr. Laughlin said CEA would be receiving material. Mr. Paisner said the lease would be developed and would come back to the BPMC for consideration of the terms and conditions. He suggested it might be appropriate to develop a form or template lease that could also be used in the future for projects along the Railbelt. MOTION: Mr. Thayer moved that the Bradley Lake Project Management Committee authorize counsel to work with Homer Electric Association and Alaska Energy Authority and any other appropriate parties to develop a boilerplate lease agreement associated with the storage of equipment and materials for the SSQ Line project and other projects along the rail belt and present a draft lease agreement to the BPMC at the next meeting of the committee in May, 2024, for their review and approval. Mr. Miller seconded the motion. A roll call vote was taken, and the motion passed unanimously. City of Seward was absent, and HEA abstained. 7c. BPMC Letter of Support to EPA - Dixon Diversion Chair Janorschke referred committee members to their packets, as this is an informational item and asked Mr. Thayer if he has anything to add. Mr. Thayer stated that AEA has been working through the Alaska Department of Environmental Conservation (ADEC) on a climate pollution reduction grant implementation, which has a series of buckets of money. He said the letter is in support of AEA's application for the CPA grant to build the Dixon Diversion and requests $342 million with no match required. He thanked the BPMC for the letter of support and said AEA is requesting letters of support from the governor's office as well as the congressional delegation. He said the grant application is due April 1, and if successful, the grant will be awarded sometime late summer. Committee members expressed their appreciation to AEA being proactive in seeking grants on behalf of the Railbelt, and the state. BPMC Minutes 3/22/24 Page 6 8. OLD BUSINESS 8a. Railbelt Reliability Coordination Update i. Grid Resilience and Innovation Partnerships (GRIP) 3, Phase 1 Update Jim Mendenhall provided a brief overview of AEA’s work on the Grid Resilience and Innovation Partnership (GRIP), Topic 3, Round 1. He said AEA is in prior to grant award status and has submitted or needs to submit to Department of Energy (DOE) the following information and plans: • Project Management Plan - Template ready and will finalize within 30 days of the award. • Statement of Project Outcomes - A summary of preliminary tasks in the order that we will work. DOE is reviewing now. • Community Benefits Plan -Several subparts to it including the Benefits and Outcomes portion; Community Engagement Plan - identifying stakeholders which include regional communities, communities and disadvantaged villages along the railbelt, and other interested parties in the region, • National Environmental Policy Compliance Statement – Complete. AEA believes there will be an environmental impact statement (EIS), and will comply with the terms of the EIS, and work with the lead agency, as appointed by DOE. • Cybersecurity Plan - Submitted in December. • Draft Project Budget – Estimated spend over the course of the project. Mr. Mendenhall said AEA and the utilities have been working with the governor and the legislature on how to secure the matching funds. He said there is the $20 million from Bradley Lake fund, which was approved and the state is expecting to contribute another $12.7 million directly to the project. He explained AEA has discussed with DOE the funding situation and the timing of Alaska’s budget approval process; the project may not have a full match defined anytime soon because GO Bonds would require an election. He said AEA has an agreement in principle with DOE that the project will move forward with the initial budget and will approve a grant award for that amount. He said the balance of the project cost would be subject to further negotiations. He summarized that between AEA and DOE funds, there is $60 million to start the project, which should be plenty. As more money comes in from the state, DOE will approve and increase our award to match. He explained if the project secures another $30 million in match funding, DOE would award $30 million. Mr. Mendenhall said the initial phase of the project would be design, permitting and siting issues with high voltage direct current (HVDC). He said while the HVDC line is primary, there is money in the budget for some battery energy storage system (BESS) work, too. BPMC Minutes 3/22/24 Page 7 He said, internally, instead of the traditional design-bid-build, AEA has been looking at alternative delivery methods. He said the technical team would talk about that soon because some of these tables and converter stations are extremely long lead items. He said regarding the award date, DOE has to complete their internal review and approval process, which includes OMB and congressional notifications. AEA expects the award to come out in June. Mr. Mendenhall stated AEA has scheduled Hatch to conduct an HVDC 101 class online and invited utilities’ staff to participate. Mr. Burns stated great report and he is glad to hear that DOE is working with us on phasing the funding. He asked about the vulnerability of the $206.5 million and wondered if the money is vulnerable if the administration changes. Mr. Mendenhall responded that this money has been appropriated for this project and said it is as safe as it can be for federal money. Mr. Thayer concurred with that assessment. Mr. Burns asked that the HVDC 101 session schedule be shared with all the utilities, as it would be very beneficial for participants just listening and getting an understanding what is involved in the project. Mr. Thayer said an invite has gone out to all BPMC members. The class is scheduled for April 9, 2024, at 9:00 a.m. to 12:00 p.m. AST. Tony Zellers asked when the clock starts on the eight years of the project. Mr. Mendenhall responded the clock starts when the contract is signed. He explained that AEA has the ability to notify DOE in advance of the contract signing of potential preliminary work, those could be allowable costs for the project. Chair Janorschke asked if there is funding for the first two years, and no funds identified in the third year, is the eight-year schedule affected. Mr. Mendenhall understood the eight years starts at contract signing, but would need to get clarification from DOE on that point. Mr. Thayer responded that the Governor has put $206.5 million in federal receipt authority and therefore the State has the ability to take the full award when it is available. He said the state has $32.7 million available in this first round and then the governor's office has laid out, based on cash analysis provided by AEA, what amounts would need to be done at a minimum by the legislature. He said the legislature could very well speed up an appropriation, put more money, put less money, but there is a clear schedule for the next eight years. He said some BPMC Minutes 3/22/24 Page 8 legislators have stated on the record that they want to get as much of the match done as soon as possible, but recognized there are budget constraints in Juneau. . Mr. Miller understood there are funds the state has committed and wondered if the project does not go forward, do funds contributed by DOE have to be returned to DOE. Mr. Mendenhall said AEA has asked DOE that question—twice and their response is that the project only has to match the amount of money that DOE has provided at that point and funds do not have to be returned. He said DOE will not “claw back money.” He said as negotiations progress that will be very clear and very specific through the contract with DOE. David Grossklaus, AEA outside Counsel, said regarding repatriation back to the extent the full amount is not used, or not able to finish the whole project, DOE has stated only have to match the amount that DOE provided to the project. He said going forward, that is something that will be very clear and very specific in working through the contract. Mr. Burns emphasized the importance of getting that in writing in the contract. He said the project does not want to have to repatriate money back. Mr. Grossklaus agreed that normally repatriation is the situation with the Federal Government, if the project is not completed, the money has to be paid back. He said AEA has asked for clarification twice and the response has been the same. He said AEA expects to be crystal clear in the contract. Mr. Paisner asked about the timing of the contract. Mr. Mendenhall said AEA has sample terms and conditions, but expects to see the contract in May for review, congressional delegation and for review by OMB. ii. Grid Resilience and Innovation Partnership (GRIP) 3, Phase 2, Application Cost Chair Janorschke stated that Brian Hickey’s report is in the packet and he is looking for a motion and approval of a budget item from committee members. Mr. Hickey stated that for the application, we were able to get letters of support from the Infrastructure Working Group (IWG) that the IBEW pulled together. This working group is a large group of people from ConocoPhillips all the way to MTA regarding the fiber optics. The letters of support went to the legislature and Senate Finance Committee co-chairs. He said regarding GRIP 3, Phase 2 Concept Paper was asked by DOE to move forward with the full application. The team has been working on that application for the last six or seven days. He reminded the committee that in January, BPMC declined to fund the actual application dependent on the concept being approved to move forward. He said the BPMC does not BPMC Minutes 3/22/24 Page 9 require formal budget amendments for amounts in less than $250,000. He said this request is for $175,000 and does not require a formal budget amendment. Mr. Hickey said much of the content needed for the application is in the existing application for Topic 1. He said he could rework and extract from that application, but there might be a need for someone in this short time frame to help with the engineering and he would want to be able to bring support on board quickly. He said the community benefit plan requirements under this funding opportunity announcement (FOA) are different than the ones under the previous FOA and will have Agnew Beck working on that and the grant writer, LSI. HE said he is looking for a motion to recognize spending the money for three consultants to assist in preparing this grant application and that money will be allocated by project share, as the other application cost was allocated. Mr. Hickey said regarding the earlier discussion about claw back, he understood the FOA was structured such that that is not an option. He said go / no go points were required throughout the project. He said there are a minimum of four of them a year where DOE can say go/no go. He said DOE is taking responsibility and there is a clause in the FOA that discussed how DOE operates and is involved in the project. He said he believes that is consistent with the funding opportunity announcement. Chair Janorschke asked if anyone has any questions for Mr. Hickey. Hearing none, Chair Janorschke asked about page 2 of the report, 3rd bullet from the top where it talks about a Texas single-state solution (TSSS). He asked whether the TSSS adjust and how. He also asked about TSSS handling islanding projects. Mr. Hickey responded that he does not have a quick answer, but he can get Chair Janorschke more information after the meeting. Chair Janorschke confirmed that the first bullet under “Looking Forward,” has been postponed. Mr. Hickey answered yes. He said, after discussion with Commissioner Pickett of the Regulatory Commission, it would be updated later in the spring or early summer. With no further questions or comments, Chair Janorschke asked for a motion from the committee to fund the $175,000. MOTION: Mr. Burns moved that Brian Hickey, on behalf of the BPMC, move forward with GRIP 3, Phase 2, Application and to engage the necessary consultants as promptly as feasible in an amount not to exceed (NTE) budgeted expenditures of $175,000 to be allocated by project share among the participants. Curtis Thayer, AEA, seconded the motion. Chair Janorschke opened the floor for discussion. There was none. BPMC Minutes 3/22/24 Page 10 A roll call vote was taken, and the motion passed unanimously. City of Seward was absent. 9. OPERATOR’S REPORT Mr. Martin Law with Homer Electric Association presented the Operator Report, a copy of which is in the meeting packet. He said it has been had a busy couple of months as the outage was completed. He said he is available to answer questions. Mr. Zellers asked about how the annual inspections. Mr. Martin responded that everything looked good and there were no surprises. He said both machines were inspected. He recalled that during the last outage, a little bit of damage was on the needle barrels and cones, but they have held up and there does not appear to be any additional cavitation on the machine. He said there is a picture in the back of the report of one of the runners. He said the audits went really well and completed approximately 125 work orders with approximately 900 man hours. 10. COMMITTEE REPORTS 10a. Budget to Actuals Report Ms. Pam Ellis, AEA Controller, presented the budget versus actuals for the reporting period of July 1, 2023 through January 1, 2024, which is seven months into the fiscal year. She referred committee members to Schedule A for Bradley Lake Hydraulic Project. She said the remaining budget as of 1/31/24 is $606,813 with year to-date spent is $341,187. She said most of the spend is equipment purchases and upgrade to crew quarters. She directed the committee to Schedule B, Bradley Lake Operations and Maintenance (O&M) and said expenses were less than budgeted at $773,367, primarily made up of FERC 544, maintenance of electric plant, FERC 545, maintenance of miscellaneous hydraulic plant, FERC 556, system control and load dispatching. She said each were under budget more than $100,000; all three combined was over $347,204 total. She said FERC 928, Regulatory Commission expense, made up another good part of that budget variance, which is also under budget more than $100,000. This variance is anticipated to be reduced by the end of the year. Ms. Ellis said Schedule D, RNC purchases is currently at $919,592. She also called attention to the box that at the bottom as a special reporting, “Spillway Raise and Expansion Project,” also known as the Dixon Diversion project. She said current spent to date is paid with Bradley Lake RNC funding of $1,390,328 and paid with Renewable Energy Fund grant $469,180, for a total project cost at $123,123 of $1,859,508. She said Schedule E, Non-RNC capital purchases for Battle Creek are $64,936, with a budget remaining then is $95,064. She said these costs are related to survey and monument DNR lease BPMC Minutes 3/22/24 Page 11 projects. She said Schedule F for Battle Creek, Operation and Maintenance (O&M) expenses, were less than budgeted by $17,512. Most of this is because of the 4% allocation for Bradley Lake being under. She said Schedule H is the SSQ Line Capital Purchases and has no FY24 activity. She said this budget is for design and permitting and it is across two fiscal years with no activity in FY24 yet. She said Schedule I, SSQ Line Operations and Maintenance (O&M) expenses, were less than budget by $131,189. She explained $250,000 of the budget at FERC 571, maintenance of overhead lines, had zero expenses to date and at 1/24, $145,000 variance makes up most of the under budget variance. She said Appendix A gives you a year-to-date snapshot of the expending for Bond Series 10, construction fund, and Bond Series 11. She said the spending year to date for the transmission required project work related to Bond Series 11 is $274,411. She concluded her report. Mr. Burns asked about the progress on the SSQ Line according to the expenditures. Andrew Laughlin from Chugach Electric Association stated that the SSQ Line is progressing. He said it is broken into phases with most substantial efforts in the first phase from Sterling Substation to the Wildlife Refuge. He said the design is 95% complete and are in the material procurement phase with the conductor ordered and the steel structures ready to be purchased. He said the next stage is the Wildlife Refuge and AEA recently started working with the federal agency on the environmental assessment (EA) for that section of line, which is about a year long process before wrapping up design and start ordering materials for the construction package for that section. He said that leaves the balance of line between the Wildlife Refuge and the Quartz Creek Substation, which should be wrapped into the first phase if design and materials are completed for section. He said first construction is anticipated to begin in 2025 for Sterling to the Wildlife Refuge and there are no planned construction work activities in the field in 2024. He said the Chugach Electric tie line is being removed between Girdwood and Indian to do that phase of rebuild in 2024 and a little bit into 2025. Chair Janorschke asked if there was any other discussion or questions on Agenda Items 10a. 7a. FY25 BPMC Budget (follow-up) Mr. Thayer asked committee members to revisit Agenda Item 7a. Fiscal Year 2025 BPMC Budget. He said according to our bond covenants, the BPMC is required to pass a budget by April 1. He said it would be prudent to pass the budget during today’s meeting. He said Committee members can still do a more thorough review of the budget over the next few weeks and could amend the budget at the next meeting, if there are changes. MOTION: Mr. Thayer moved that the Bradley Lake Project Management Committee approve the Fiscal Year 2025 Bradley Lake Hydro Project budget as presented. BPMC Minutes 3/22/24 Page 12 Mr. Zellers seconded the motion. Chair Janorschke opened the floor for questions or discussion. There was none. A roll call vote was taken, and the motion passed unanimously. City of Seward was absent. 10b. Operation and Dispatch (O&D) Report Mr. Andy Patrick stated that the O&D Committee met a couple of times since January. He said aside from normal project updates, the meetings focused on the budget. He said the meetings focused on operational side of the project and the dock repairs that are needed. HE said water levels are looking at normal right now. He said there is not yet a forecast for the water yea, but the River Forecast Center should have that preliminary forecast by our next meeting. 11. EXECUTIVE SESSION - 11:25 a.m. to 12:18 p.m. MOTION: Mr. Miller moved that the Bradley Lake Project Management Committee enter into executive session to discuss confidential matters regarding required project work and financing, the immediate knowledge of which may have an adverse effect on the Authority or the project. Mr. Zellers seconded the motion. A roll call vote was taken, and the motion passed unanimously with City of Seward absent. The committee went into executive session. After committee members returned to their regular meeting, Chair Janorschke stated that no action was taken by committee members during the executive session. 12. MEMBERS COMMENTS Mr. Burns expressed his appreciation of the thoroughness with the budget. He appreciated AEA’s efforts in pursuing as much grant funding as is possible to help facilitate the railbelt expansion and development. Mr. Miller concurs with Mr. Burn’s comments on AEA looking out for and identifying additional grant opportunities. He said the Dixon Diversion is a critical project, especially with the gas supply situation. HE said it is outstanding that the committee is continuing to move the ball in the right direction, all the way through.