Loading...
HomeMy WebLinkAbout2024.12.06 BPMC Meeting Minutes - FINALBRADLEY LAKE PROJECT MANAGEMENT COMMITTEE (BPMC) REGULAR MEETING AGENDA December 6, 2024 1. CALL TO ORDER Chair Million called the meeting of the Bradley Lake Hydroelectric Project Management Committee to order at 10:10 a.m. A quorum was established. 2. ROLL CALL (for Committee members) Travis Million (Golden Valley Electric Association [GVEA]); Tony Izzo (Matanuska Electric Association [MEA]); Brad Janorschke (Homer Electric Association [HEA]); Brian Hickey (City of Seward); Arthur Miller (Chugach Electric Association [CEA]); and Curtis Thayer (Alaska Energy Authority [AEA]). 3. PUBLIC ROLL CALL (for all others present) Karen Bell, Jennifer Bertolini, Mark Billingsley, Bryan Carey, Pam Ellis, Ryan McLaughlin, Jim Mendenhall, William Price, Mark Zeismer (AEA); Amy Fennerty, Chris Lallish (Aldrich CPAs & Advisors); Joel Paisner (Ascent Law Partners); Matt Clarkson, Sherri Highers, Mike Miller, Russell Thornton (CEA); Dan Bishop, Nathan Minnema (GVEA); Larry Jorgenson, Martin Law, Andrew Patrick (HEA); Josh Crowell, David Pease, Matt Reisterer, Jon Sinclair, Tony Zellers (MEA); and Julian Jensen (Public). 4. AGENDA APPROVAL MOTION: A motion was made by Mr. Janorschke to approve the agenda. Motion seconded by Mr. Thayer. The motion to approve the agenda passed without objection. 5. PUBLIC COMMENTS - None. 6. APPROVAL OF MEETING MINUTES — September 27, 2024 MOTION: A motion was made by Mr. Thayer to approve the Minutes of September 27, 2024 as presented. Motion seconded by Mr. Hickey. The motion to approve the Minutes of September 27, 2024, passed unanimously. 7. NEW BUSINESS A. FY24 BPMC Audited Financial Statements and Letter BPMC Minutes 12/06/24 Page 1 of 10 Amy Fennerty, Aldrich CPAs & Advisors, introduced herself and advised that she oversaw the audit for the special-purpose financial statements of the Bradley Lake Project Management Committee Operating and Revenue Funds for the fiscal year ended June 30,2024, which is included in the Committee packet. Ms. Fennerty requested Chris Lallish, Engagement Manager for Aldrich CPAs & Advisors, to discuss the required communication and the results of the 2024 audit. Mr. Lallish expressed appreciation to Pam Ellis and Mark Ziesmer, AEA, for their responsive and accurate assistance during the smooth audit process. This is the seventh year that Aldrich has performed the audit. Mr. Lallish discussed the required communication. There were no new accounting policies adopted by BPMC for this fiscal year. There were no required audit adjustments to the books received. There were no material weaknesses or noncompliance discovered during the audit procedures. BPMC received an unmodified clean opinion. This is the highest form of assurance for a financial statement audit and users can rely on the numbers. The audit was conducted in accordance with generally accepted auditing standards (GAAS). The statements are special-purpose financial statements covering only the BPMC Operating and Revenue Funds. The financial statements are the responsibility of management and includes the design, implementation, and maintenance of internal control. Mr. Lallish discussed that the auditor's objective is to obtain reasonable assurance as to whether the financial statements were free from material misstatement, whether due to fraud or error. The auditors exercised professional judgment and skepticism, identified and assessed the risks of material misstatement, and obtained an understanding of BPMC's internal controls. Mr. Lallish reviewed the Statements of Assets and Liabilities balance sheet on page 3, as of June 30, 2024. He noted that there was a receivable from the utilities in the prior year for the Sterling Substation to Quartz Creek Substations Transmission Line (SSQ Line). There is a matching payment to utilities from the Renewal and contingency Reserve Fund (R&C Fund). Mr. Lallish reviewed the Statements of Revenues and Expenses on page 4, showing the budgeted amounts, actual amounts, variance amounts, and prior year actual numbers. The revenues are primarily based on budgeted expenses, debt service, and capital activity. The actual revenues are shown net of the surplus refund calculated at year-end and were underbudget by $2.8 million, due to expenses being less than budgeted for the year. Mr. Lallish noted there is no value entered in the budget for the interest receipts. The actual interest receipts are used to offset the utility contributions for the year, but are not budgeted. The capital activity was underbudget by $700,000, and decreased significantly from the prior year, as the SSQ Line and other large projects were completed in 2023. Mr. Lallish reviewed the Statement of Cash flows and indicated that total cash used by operating activities for the year was $621,000. The interest paid for this year was $6.6. million, primarily due to the Series 11 bond payments. Mr. Lallish discussed the notes to the financial statements, including the description of business and accounting policies, details on cash and cash equivalents, major contracts and agreements, related party transactions, surplus refunds, and the shortage receivable. Mr. Lallish discussed the supplemental information and statements of expenses. MOTION: A motion was made by Mr. Izzo to accept the Fiscal Year 2024 BPMC Audited Financial Statements, as presented. Motion seconded by Mr. Miller. BPMC Minutes 12/06/24 Page 2 of 10 Mr. Izzo expressed that he is pleased with the results. The motion to accept the Fiscal Year 2024 BPMC Audited Financial Statements passed without objection. B. FY24 Refund of Surplus Mark Ziesmer, AEA Owned Assets Controller, noted that the report within the packet outlines the calculation and distribution of $3,665,935.18 in surplus refunds to the participating utilities. This total includes $2,776,802 from the Bradley Lake Project, $569,332 from the Battle Creek Project, and $319,802 from the SSQ Line. Refunds are allocated in accordance with the Power Sales Agreement and proportionately among utilities based on project share allocations. CEA will receive $1,916,465. HEA will receive $587,369. MEA will receive $505,899. GVEA will receive $619,543. The City of Seward will receive $36,659. The last page of the report is supportive documentation of the calculations. It is Note 5 — Surplus Refunds of the audited financial statements that were just accepted. MOTION: A motion was made by Mr. Thayer to approve $2,776,801.52 for the Bradley Lake utility refund, $569,331.58 for the Battle Creek utility refund, and $319,802.08 for the SSQ Line utility refund, as presented. Motion seconded by Mr. Hickey. Mr. Izzo commented that this is a reflection of prudent and conservative budgeting, as well as prudent and conservative management. He thanked AEA and HEA. Mr. Izzo noted for the record, these funds go directly back to the utility consumers through the cost of power adjustment. For MEA and others, this will reduce rates in the following quarter. Mr. Izzo expressed support for the motion. The motion to approve $2,776,801.52 for the Bradley Lake utility refund, $569,331.58 for the Battle Creek utility refund, and $319,802.08 for the SSQ Line utility refund, passed without objection. C. Bradley Lake Renewable Energy Credits (REC's) i. AEA Board's Memo and Resolution Mr. Thayer reviewed the memo to the AEA Board of Directors found in the Committee packet. He also reviewed the resolution that was considered and approved at the AEA Board meeting in October. Mr. Thayer discussed AEA's opportunity to generate additional revenue through the creation and sale of Renewable Energy Certificates (RECs). He noted that the forward projection is between $400,000 and $500,000 for Bradley Lake, and could be increased by 40% if the Dixon Diversion is included. The funds would go back into Bradley Lake to help with the costs of Dixon Diversion, other projects, and studies. Mr. Thayer noted the importance of showing the Legislature that AEA is considering all options available to support the BPMC projects. Mr. Thayer stated that AEA was waiting to move forward until today's BPMC discussion. BPMC Minutes 12/06/24 Page 3 of 10 Chair Million asked for confirmation that his understanding from the resolution is correct that since the BPMC is owned by the State and is run by AEA, that the BPMC does not have a say in the matter. Mr. Thayer agreed, and noted that this discussion is occurring out of due respect to the BPMC. Mr. Miller commented that CEA has been in the REC market for some time. He supports reviewing ways to monetize every opportunity available. However, he believes that each of the respective BPMC utilities should have the option to take the value of the RECs and keep it to claim the renewable energy attributes associated with the project, rather than receiving the financial benefit from AEA selling the RECs. Mr. Miller believes this option is critical, especially in the future. He noted the added pressure to increase renewables, and without the RECs, the utilities cannot claim the renewable energy attributes associated with the project. This will have different impacts for each utility, including the need to go to the open market and buy RECs to replace those that were sold by AEA. Mr. Miller offered his suggestion. He supports AEA selling the RECs, with the understanding that each utility is permitted the option to pay the equivalent value of the sale of the RECs to AEA or to have that amount reflected in the cost allocation, or alternatively, the utility could support the sale of the RECs and lose use of the RECs, and get their pro rata share of the financial benefit associated with the sale of the RECs. Chair Million expressed his alignment with Mr. Miller's comments regarding the option for the utilities to have the first right of refusal for their percentage share of the project. He discussed the possibility that the utilities might pick up all the RECs from AEA. Mr. Janorschke asked if the participant gets to treat it as a renewable resource if the RECs are sold. Mr. Thayer requested Mark Billingsley, AEA, to provide additional clarification. Mr. Billingsley noted that he can provide pamphlets on the nuances of best practices, public claims, double claims policies, and what can be said after the RECs are sold. AEA would work with each utility's circumstance. Acknowledgement can be made that the energy produced is from renewable resources. However, the claim cannot be made that the utility or the customers are using renewable energy. That claim is transferred to the REC buyer, who effectively owns the renewable attribute. Joel Paisner, Ascent Law Partners, believes this discussion relates to Mr. Miller's point and that if the utilities have the RECs, the utilities can retire the RECs. If another entity takes the environmental attributes, the utilities, for certain purposes, cannot claim the RECs. Mr. Paisner commented that the relevance would be considered within a renewable portfolio standard and obligations for reporting. Currently, it is mostly voluntary on what the utilities claim. Mr. Janorschke requested clarification of the wording under 7C., and asked if the plan is for the REC revenue to go directly to the Bradley Lake project, rather than for reducing the cost of energy throughout Alaska. Mr. Thayer noted that the intent is for the revenue to return to the Bradley Lake Project. He stated that specific clarifications can be made to the language that aligns with the Power Sales Agreement for any money that is earned to go back to the Project. BPMC Minutes 12/06/24 Page 4 of 10 Mr. Izzo disclosed that he is an AEA Board member and that he voted in favor of the resolution. His view is that the State has the obligation to get the highest value from its state-owned asset, the Bradley Lake Project. He expressed support for the utilities having the option to purchase the RECs at the same value that could otherwise be received. Mr. Thayer asked Mr. Billingsley if reevaluation can occur regarding how to address the RECs. Mr. Billingsley agreed, and noted that there is no federal or state requirement for a Renewable Portfolio Standard (RPS). It is likely to be introduced again. Mr. Hickey expressed support for Mr. Miller's suggestion for each utility to have the option to utilize the RECs. Mr. Thayer commented that if it is the will of the BPMC, at AEA's January meeting, AEA could clarify the language based on today's BPMC discussion, and provide that resolution language to BPMC members in advance. There was no objection. Mr. Izzo agreed with Mr. Thayer, and suggested that BPMC members' staff express support during the public comment period of the next AEA meeting. Mr. Miller reiterated that the value of the RECs would be at an equivalent value basis. Mr. Billingsley asked if an AEA resolution is necessary. He noted that the discussion is not inconsistent with what has been put forth before the AEA Board. Mr. Thayer indicated that he requests clarification on the record with the AEA Board so that they understand the direction, intent, and ability of the issue, based on the BPMC conversation today. The format can be determined at a later point. Mr. Paisner agreed with the recommendation to place on the record that the BPMC reviewed, approved, and supports the approach regarding the RECs. Mr. Thayer requested that the BPMC draft a letter outlining the suggested way the RECs are to be treated and to include the letter within the AEA Board packet at their next meeting as part of the record. Comments on the letter can be made, and any questions or concerns by AEA can be addressed. There was no objection. Chair Million agreed to that suggestion. Mr. Paisner agreed to help Chair Million prepare a draft of the letter. Spreadsheet of estimated value — No additional discussion. D. FY25 Proposed BPMC Meeting Dates Discussion occurred regarding the proposed FY25 BPMC meeting dates. Mr. Izzo noted a conflict with another meeting on January 17, 2025. Mr. Thayer stated he will be on vacation on January 17, 2025. The decision was made to change the January 17, 2025 meeting date to BPMC Minutes 12/06/24 Page 5 of 10 February 14, 2025. There were no objections. MOTION: A motion was made by Mr. Janorschke to approve the proposed Fiscal Year 2025 BPMC meeting dates with the modification of changing the January 17, 2025 meeting date to February 14, 2025. Motion seconded Mr. Miller. The motion to approve the Fiscal Year 2025 BPMC meeting dates, as modified, passed without objection. E. Bradley O&M Agreement Mr. Janorschke stated that HEA staff will provide details at the February meeting regarding the O&M Agreement. He noted that the O&M Agreement expired last summer and automatically renewed for three years. Mr. Janorschke reported that the last time HEA went out for bids, it was requested that a five-year agreement is utilized with fixed rates. HEA did their best to guess inflation over the next five years. Mr. Janorschke indicated that HEA staff will bring a proposal to the next BPMC meeting requesting to modify the table on direct labor costs shown on Exhibit C- 1, page C-3, based on inflation with a floor of 2% and a ceiling of 7%. Mr. Paisner commented that the form Mr. Janorschke is referencing would be an amendment to the O&M Agreement, since the direct labor costs are fixed. Mr. Izzo agreed, and asked which inflationary index was used and directly related to HEA's collective bargaining agreement (CBA). Mr. Janorschke agreed to confirm. He believes the measure is the Consumer Price Index for All Urban Consumers (CPI-U) — Anchorage. There were no other comments or questions. 8. OLD BUSINESS A. GRIP 3, Phase 1 Update Jim Mendenhall, AEA, reviewed the memo included in the Committee packet. Stantec has an existing agreement with BPMC, and Stantec is working on the initial project plan and schedule, conceptual design, cable preliminary design, and preliminary cost estimates. Stantec created a rough cost estimate, and it appears that the project can be completed within a $413 million budget. The assumption is for a symmetrical monopole with two wires. This could be expanded later. The issues regarding the starting point and finishing point are outstanding. Mr. Mendenhall reported that Stantec will be asked to prepare an RFP for the cable and converters. These will have significantly long lead times. The proposal has been shared with the members of the Technical Working Group, and they will continue to focus on the proposal. In mid -February, Stantec is expected to provide a better schedule and an updated cost estimate. Stantec's final report is expected to be issued in late March. Any procurement planning will occur later in the year. BPMC Minutes 12/06/24 Page 6 of 10 Mr. Mendenhall reported that weekly meetings with Department of Energy (DOE) continue to occur. Preparations are underway for the significant project of the environmental impact statement. There were no comments or questions. B. Railbelt Regional Coordination Update Mr. Hickey provided the Railbelt Regional Coordination Update. He noted that his report is included in the Committee packet. The primary work has been focused on building consensus with the various stakeholders for constructing the larger package. Mr. Hickey discussed that the current status is unknown of the Grid Resilience and Innovation Partnerships (GRIP) 3 funding that has been appropriated. Staff has reached out to the D.C. legislative delegation. Ideally, the new Administration will move forward with the funding. There were no comments or questions. 9. OPERATORS REPORT Martin Law, HEA, noted that the Operator's Report is included in the Committee packet. He asked if there were any questions. Chair Million commented that he was pleased to see that the trouble -shooting process revealed that the breaker was the problem, and that there is a path forward for the replacement. Mr. Law advised that the breaker is on order and is expected to arrive by January 15, 2025. There were no other comments or questions. 10. COMMITTEE REPORTS A. Budget vs. Actuals Mr. Ziesmer presented the Budget to Actual Expenses report for the period of July 1, 2024 to October 31, 2024. Mr. Zeismer noted that the actuals for capital purchases not funded by R&C Funds shown on Schedule A were $96,000. The major expenses included the replacement of a Polaris side -by -side vehicle and the purchase of a new pick-up truck. Schedule B shows the Operations and Maintenance (O&M) actual expenses were $1,622,482, which is underbudget by $942,625. Most of the FERC categories are close to the year-to-date budget. Mr. Zeismer discussed that FERC 539 Miscellaneous Hydraulic Power Generation Expenses exceeded its budget by $58,000 in contractual expenses. He believes this is primarily due to budget timing and when costs are expensed. Mr. Zeismer expects that the variance will be reduced going forward. Additionally, FERC 920 & 930 Administrative Expenses is underbudget primarily due to processing of payroll and internal indirect charges. He expects this variance will be mitigated going forward. Mr. Zeismer noted that Schedule D shows the actual R&C purchases at a total of $1,704,757. The expenses were primarily related to the needle rebuild project totaling $1,386,600. The Dixon Diversion project costs totaled $5,502,360, of which $1,641,759 was paid by Bradley Lake R&C Fund, $684,360 was paid by the Renewable Energy Fund (REF) Grant, and $3,176,241 was paid BPMC Minutes 12/06/24 Page 7 of 10 by State allocations. Mr. Zeismer discussed that Schedule E shows the Battle Creek Non-R&C Capital Purchases, however, there is no activity to report for FY25. Schedule F shows the Battle Creek O&M expenses were underbudget by $132,664, primarily due to the 4% allocation for Bradley Lake. There continues to be no fiscal year activity or budget for Schedule H. Mr. Zeismer discussed Schedule I shows that the SSQ Line O&M expenses were underbudget by $44,796. The majority of the expenditure was dedicated to overhead line maintenance. Mr. Zeismer reviewed Appendix A, Capital Projects Funded by Bond Proceeds for Bond Series 11. The cumulative spending was $1,635,692, of which $841,000 is for FY24 and $794,000 is for FY25. The amount that directly pertains to SSQ Line upgrades is $1,541,665. Mr. Thayer commented that there are approximately 12 vehicles at Bradley Lake, and that another vehicle was purchased. He asked for information as to when the surplus of vehicles will be removed from the premises. Mr. Zeismer explained that during the audit process at the end of the fiscal year, he will contact Bryan Carey, AEA, and folks at HEA to determine if any items need to be retired. Mr. Thayer requested Mr. Zeismer to report how many vehicles are at Bradley Lake. He noted that a legislator visiting the project inquired as to the reason there were so many cars at the Bradley Lake airport. Mr. Zeismer indicated that Mr. Law could work with Mr. Carey and respond at the next meeting. Mr. Law commented that two vehicles are slated for disposition in the spring, the Suburban and one pick-up truck. Additionally, two of the old snowmobiles and the side -by -side were excised. Work will continue to remove the vehicles. There were no other comments or questions. B. O&D Report Andrew Patrick, HEA and Chair of the O&D Committee, reviewed the O&D Report. Mr. Patrick discussed the notable issues addressed at the October and November meetings. There are continued concerns regarding the timing and duration of the scheduled islanding for the construction. Mr. Patrick hopes that future work can be more closely coordinated with the O&D Committee representing utilities. Another issue of concern is the Dixon Diversion dam raise considerations. The individual utilities are expected to provide feedback and recommendations to AEA for continued study and design. Mr. Patrick highlighted that the lake level is below normal. However, this was expected because of the heavy scheduling of the utilities, except HEA, who is conserving their share in anticipation of the islanding. The next O&D meeting is scheduled in early January. Mr. Izzo stated that there was a trip on the Southern Intertie recently. He noted that the MEA/CEA battery energy storage system (BESS) picked up the trip and the transition was seamless to the consumer. He highlighted that the success of the BESS is worth mentioning. Mr. Patrick commented that the Intertie was heavily loaded at the time. He believes a similar BPMC Minutes 12/06/24 Page 8 of 10 occurrence happened a month before and all the utilities north of HEA moved into loadshed. Since then, the BESS went into service, not necessarily seamlessly, but nevertheless, it made a difference to the event. Mr. Janorschke expressed appreciation to Mr. Patrick for the update and for including the islanding schedule in the report. Mr. Janorschke believes there will be 80 days of islanding this year. He is grateful for the BESS because without it, the cost of spin when islanded is approximately $25,000 in fuel per day. He commented that the Committee assignments listed in the report have been ongoing for at least two years. Mr. Janorschke requested that Mr. Patrick confer with the O&D Committee and establish a timeline and schedule to resolve the issues with those Committee assignments. Mr. Patrick noted that the year-to-date islanding amount is approximately 62 calendar days. He agreed that the two Committee assignments listed in the report are lingering. The assignments are discussed at each meeting. Work and discussion have occurred regarding the second assignment. However, that work has stalled and a reevaluation of the intent of the assignment needs to be discussed at the next meeting. Mr. Janorschke requested that Mr. Patrick inform the BPMC if the O&D Committee needs clarification regarding the scope or the expectations of the Committee assignments. Chair Million asked Mr. Patrick if the O&D Committee's concern regarding the coordination of the scheduling of the outages has been addressed. Mr. Patrick agreed, with the caveat that the utilities that are leading the projects have not yet presented a plan for late '25/26. He believes that one of the challenges is that scheduling on a calendar does not necessarily mean that it is good for the utilities' risk management approach. Input from each of the utilities is important. There were no other comments or questions. 11. EXECUTIVE SESSION: None (Bylaws Section 5.11.4) —To discuss confidential financial matters the immediate knowledge of which may have an adverse effect on the Authority or Project. Chair Million advised that there were no matters to discuss in executive session. There was no objection. 12. MEMBERS COMMENTS Mr. Miller expressed appreciation for the good meeting, for all the work AEA has completed, and for the updates presented today. He is interested in seeing the results from the audit of the number of vehicles at Bradley Lake. Mr. Thayer reported that Ryan McLaughlin recently applied for a $5 million funding grant to help pay for the dam raise. Each of the utilities provided a letter of support. Mr. Thayer asked Mr. McLaughlin, for the record, to explain the grant request and timeline. Mr. McLaughlin explained that the grant was through the Bureau of Reclamation WaterSMART grant program. BPMC Minutes 12/06/24 Page 9 of 10 The application was focused on the dam raise portion of the Dixon Diversion project and its effect of saving water. The dam raise was assumed to be at 14 feet. The maximum amount of the grant is $5 million, and the determination is expected to be released in the spring. Mr. Thayer expressed appreciation to members for their attention today, especially on the discussion regarding the RECs. He also looks forward to seeing the audit of the vehicles at Bradley Lake. Mr. Janorschke expressed appreciation for the information presented today. The audit looked great, and he welcomes the refund. Mr. Izzo commented that he continues to be impressed with the staff at AEA and the level of their activities. He expressed appreciation to AEA staff, and congratulated staff on the results of the audit. Mr. Izzo noted that he is a strong supporter of an amendment for HEA to continue operating Bradley Lake. He complimented HEA staff for their great job. Mr. Hickey echoed the previous comments, and thanked the staff for their efforts. Chair Million echoed the appreciation for the unmodified audit results. He looks forward to the next update from the O&D Committee regarding the schedule of other transmission -related projects that could impact the utilities. There were no other comments. 13. NEXT MEETING DATE — January 17, 2025 (tentative) Chair Million confirmed that the next meeting date is February 14, 2025, as noted previously. 14. ADJOURNMENT There being no further business for the committee, the meeting adjourned at 11:23 a.m. Travis Million, Chair Curtis Thayer, Secretary BPMC Minutes 12/06/24 Page 10 of 10