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HomeMy WebLinkAbout2023.12.08 BPMC.ExecutedMinutes BPMC Meeting Minutes 12/8/23 Page 1 of 10 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE (BPMC) REGULAR MEETING MINUTES December 8, 2023 Alaska Energy Authority 813 Northern Lights Boulevard Anchorage, AK 99503 1. CALL TO ORDER Chair Brad Janorschke called the meeting of the Bradley Lake Hydroelectric Project Management Committee to order at 10:02 a.m. 2. ROLL CALL (for Committee members) Brad Janorschke (Homer Electric Association (HEA)); John Burns (Golden Valley Electric Association (GVEA); Tony Izzo (Matanuska Electric Association (MEA); Arthur Miller (Chugach Electric Association (CEA); Curtis Thayer (Alaska Energy Authority (AEA); and Rob Montgomery (City of Seward). 3. PUBLIC ROLL CALL (for all others present) Dan Bishop (GVEA); David Pease, Matt Reisterer, Tony Zeller, Ed Jenkin (MEA); Sherri Highers, Andrew Laughlin, Mike Miller, Russell Thornton (CEA); Larry Jorgenson, Andy Patrick, Martin Law, Sarah Lamb (HEA); David Grossklaus, Counsel to AEA; Brian Hickey (BPMC); Bryan Carey, Ryan McLaughlin, Bill Price, Mark Ziesmer, Jennifer Bertolini (AEA); Amy Fenerty (Aldrich CPAs); Bonnie Paksvan; Kent Sullivan, General Counsel to AEA; Joel Paisner, Counsel to BPMC; and Betty Caudle, AccuType Depositions. 4. AGENDA APPROVAL MOTION: John Burns moved to approve the Agenda as presented. Curtis Thayer seconded the motion. The motion to approve the agenda passed without objection. 5. PUBLIC COMMENTS - None. 6. APPROVAL OF MEETING MINUTES - Oct. 13, 2023 and Nov. 17, 2023 MOTION: Curtis Thayer moved to approve the meeting minutes from the October 13, 2023, and November 17, 2023, meetings. John Burns seconded the motion. The motion to approve the minutes passed without objection. BPMC Meeting Minutes 12/8/23 Page 2 of 10 7. NEW BUSINESS A. FY23 BPMC Audited Financial Statements Amy Fenerty, CPA with Aldrich CPAs and Advisors presented the audited financial statements for Bradley Lake Hydroelectric Project as of June 30, 2023, to committee members. She started with the independent auditors report. As in the past, the Bradley Lake Project Management Committee (BPMC) received an unmodified or clean opinion, which is the highest form of assurance you can receive. This means that based on the audit procedures performed, you can rely on the information in the financial statements. The auditors report also outlines that we conducted our audit in accordance with auditing standards generally accepted in the United States of America, that management is responsible for the preparation and fair presentation of these special purpose financial statements, and also for the design and implementation and maintenance of internal control. Our objective was to obtain reasonable assurance about whether the special purpose financial statements are free from material misstatements. As part of our audit process, we also exercise professional judgment, maintain professional skepticism, and identify and assess the risk of material misstatements and obtain an understanding of internal control relevant to the audit process in order to design our audit procedures. We are required to communicate with you as those charged with governance as part of the planning process. We provided written documentation during our audit planning prior to field work, and now at the conclusion, reviewing any significant audit findings or internal control related matters of which there were no significant findings or material weaknesses to report. Ms. Fenerty then went over the financial statements with committee members. At the end of her presentation, she thanked Mark and Pamela from AEA for their assistance in going through the audit. She appreciates all their efforts in providing the auditors with information they needed and answering their many, many questions. MOTION: Curtis Thayer moved that the Bradley Lake Project Management Committee accept the FY23 BPMC Audited Financial Statements as presented. Arthur Miller seconded the motion. Roll call vote was taken. The motion passed unanimously. (6-Yes; 0-No) B. FY23 Refund of Surplus Mark Ziesmer with AEA presented this item to committee members. He referred committee members to the report showing the FY23 surplus and how it is organized into two pieces, the O&M portion and the RNC portion. He then walked committee members through the report and the various surplus refund portions. He pointed out that the percent shares is different for Battle Creek than it is for Bradley and for SSQ. Overall, the net surplus amount is $1,754,609. BPMC Meeting Minutes 12/8/23 Page 3 of 10 MOTION: Curtis Thayer moved that the Bradley Lake Project Management Committee approve the $1,818,012.01 Bradley Lake Utilities Refund, the $178,694.99 Battle Creek utilities refund and a $242,098.34 SSQ line shortage as presented. Tony Izzo seconded the motion. Chair Janorschke asked if there were any questions or discussion. There were none. Roll call vote was taken. The motion passed unanimously. (6-Yes; 0-No) C. Staffing Discussion Curtis Thayer advised committee members that AEA has put in a request within the Governor’s budget for an additional person to assist with BPMC matters. Currently, we have Mark working with three projects. Soon we are going to start spending the bonding funds. This means our workload is growing and Mark needs some assistance. A request has been made for one additional staff. D. 2024 Proposed BPMC Meeting Dates Committee members reviewed the proposed meeting dates. MOTION: Curtis Thayer moved that the Bradley Lake Project Management Committee approve the 2024 proposed BPMC meeting dates. Arthur Miller seconded the motion. Chair Janorschke asked if there were any comments or discussion. There were none. Roll call vote was taken. The motion passed unanimously. (6-Yes; 0-No) 8. OLD BUSINESS A. Dixon Diversion Update Bryan Carey reported that during the 2023 summer, both Dowl and USGS were taking discharge measurements on the Martin River, which is hard to gauge for various reasons. Energy wise, he walked committee members through the process used to determine discharge numbers for 10, 20, 30, and 40 year averages. He discussed other elements and changes of the project, per below. Salmon - While salmon do not necessarily spawn in the Martin River, they use the Martin River to reach side sloughs and lakes where they can spawn. It is important that there is enough water in the river for them to go upstream to reach these areas. The changes to the project will allow for enough water for the salmon. Tunnel Diameter - Additional geologic work was performed so we could revise the cost estimates with our tunneling specialists. We looked at various tunnel sizes and ended up BPMC Meeting Minutes 12/8/23 Page 4 of 10 focusing on a 14-foot diameter tunnel. For the 30-year record, it is about 159,000 acre-feet. And for a ten year record, it is actually 183,000 acre feet of water. The other part about that is there is also going to be a lot of spillage over the top of the diversion dam, because even at that point of 14-foot tunnel, you are going to have, on average, each year, about 14,000 acre feet of water, that will go over the top of the diversion dam. When there is a storm up there, the flows are going to be much higher than what the tunnel can handle anyway. And you are going to be increasing the efficiency when you do the reservoir raise for example, the 400,000-megawatt hours that we are currently doing. Therefore, you are going to gain around 8,000 megawatt hours at that point. Based on that, with Dixon and the higher reservoir, a 30 year record gives you an annual average of about 179,000 megawatt hours. And a ten year record at around 191,000 megawatt hours. The reason why that ten-year one is so much different is just there has been higher temperatures and there has been much more glacial melt that has occurred over the last ten years. Revised Cost Estimate - We decided to drop building a road to the Dixon Glacier. We believe that we can build the diversion dam up below the Dixon by getting the equipment and the people in by helicopter. Brian walked committee members through some of the costs with these changes. They also allowed for the prices of goods and materials to increase over the construction period. Environmental footprint - By eliminating a new road to the Dixon Glacier, there will be very little environmental footprint for this project. There will be a half a mile new road to the outlet, three phase power within the Bradley Lake Road, and diversion up there with a couple hundred acres of water. That is the environmental impact or footprint. Visibility - The only way you can see the diversion dam is if you fly over it in a plane. There is very little that will actually be seen from Kachemak Bay or anywhere else. New Studies - A certain amount of studies for the project have been completed already. However, we still need to conduct two years of studies for the fisheries that are scheduled to start that in 2024 or 2025. Schedule - Mr. Carey discussed the schedule and the reason for and strategy of when and where to install three phase power up to the dam to support the tunnel boring machine. Once the project is complete, it can be used for other projects at the dam. He also discussed the stages of the work. Install phase three power in 2027; construct the road in 2028; tunnel boring would occur in 2029-2030 and simultaneously you could also do the dam raise at the same time and build the diversion dam because you do not need the tunnel completed to construct those. Then the entire project could be completed by the end of 2030. Mr. Carey concluded by stating that he distributed a memorandum with a summary of these cost changes and a constructability review to committee members along with the hydrology update. If committee members did not receive it, contact him and he will provide that memo to them. BPMC Meeting Minutes 12/8/23 Page 5 of 10 Mr. Izzo commented that this looks like really positive news, and he appreciate the analysis that went into this. Do you have a general sense, based on this updated information, what the percentage increase as it relates to Bradley Lake this could represent? Mr. Carey responded that Bradley Lake is averaging around 400,000 megawatt hours a year or so. In the shorter term, when the glacier has the higher melt, it is adding about 190,000 to it, so it is close to 50%. It brings bring Bradley from 400,000 megawatt hours up to about 600,000 megawatt hours a year. With the reservoir raise, it will gain storage of 55,000 acre feet of water. It increases the ponding amount that goes into the winter. But, it also means that with 190,000 megawatt hours there will have to be more burn off a lot more during the summertime. It will have to be used; otherwise, it is at risk of spilling it. It will depends on water levels and what levels of risk to take. It will mean a change of operation. For example, a big solar facility on the Kenai Peninsula, the solar may provide a lot of energy during the daytime, and use Bradley more at nighttime to balance it against solar or otherwise. Mr. Carey added in late January, there is a planning a meeting with agencies regarding our 2024 plans. Because there is funding from the state during 2024, AEA will proceed with the different environmental studies, such as the salmon studies. We will also plan to drill for core samples at both the inlet and outlet of the tunnel to help us fine tune and adjust cost numbers in the future. Mr. Miller commented that the revised cost estimate factors in a 25% contingency amount and an assumption of 6% escalation, which does seem very conservative. Have you considered raising the dam earlier than beginning construction in 2028? Would that help the economics with an earlier start date? Mr. Carey responded the FERC amendment has both. It could be separated. With the lack of fish issues and wildlife, it may end up inundating a couple hundred acres of land at the head of Nuka and Upper Bradley. When Bradley was built, that impact was mitigated by purchasing land for moose habitat in the Kenai area with funds from Bradley, the state and utilities. For this project, that would be the only type of impact on the environment. We should be able to start earlier, if we want to. Mr. Burns asked if accelerating the raising of the dam does cut time off the end. Mr. Carey responded that it would not necessarily cut time because the dam raising can be done at the same time as when the tunnel bore machine is working. With an earlier raise, the main benefits, would be about a 2% efficiency increase, gaining in the short-term about 8,000 megawatt hours a year and to store more water and use it in the wintertime. With this revised cost estimate, we envisioned the tunnel bore machine company would be the prime and have subs. However, AEA could split the contract into three parts, the dam raise, the Dixon diversion, and the housing and tunnel. It would require more coordination between them, but could easily be separate contracts, which means avoiding markup. While the dam BPMC Meeting Minutes 12/8/23 Page 6 of 10 raise could be done earlier, it would not reduce the amount of time for construction because the main driver for the schedule will be the road and the tunnel construction. Mr. Burns commented on raising Bradley 50% really underscores the concern of transmission. If there is another Swan Lake fire with another 50% capacity, it creates havoc. This increase goes hand in glove with transmission upgrades. Mr. Carey commented that right now Bradley is under utilized in the middle of the night. However, Bradley was built to be used for peaking. So, if the desire is to be able to peak more during the daytime, then transmission upgrades are important. Chair Janorschke asked if this proposal changes the available capacity of Bradley. Mr. Carey responded that it changes it a nominal amount. The maximum output will increase by 2% just because of a greater head. But using the same generators and turbines, it is an increase in energy, but not capacity. Chair Janorschke asked if there has been a chance to determine what the cost per megawatt hour would be with this addition. Mr. Carey responded we have not. B. BESS Update / Resolution and Related Agreements MOTION: Curtis Thayer moved that the Bradley Lake Project Management Committee table the BESS Resolution and Related Agreements and the O&M Agreement Update until the March 22 meeting or sooner by call of the Chair. John Burns seconded the motion. Roll call vote was taken. The motion passed unanimously. (yes-6; no-0) C. O&M Agreement Update This item was tabled until March 2024, meeting. D. Soldotna to Sterling Upgrade Update Chair Janorschke stated that earlier this year the committee passed a resolution giving HEA the green light to do the design work for the 230kv upgrade between Soldotna and Sterling and then to procure the materials necessary for the upgrade. However, when reviewing the project charter, he noticed that this resolution was passed before the notification from DOE on the $206.5 million. He is seeking guidance from the committee if HEA should only do the design work and procure the materials later, or should HEA proceed with both the design work and procure materials, as originally planned. After discussion among committee members, it was agreed this is an important line and these upgrades are needed. HEA is to continue with the project work as originally planned. BPMC Meeting Minutes 12/8/23 Page 7 of 10 E. Railbelt Reliability Coordination Update Brian Hickey stated that since his report was just sent this morning and committee members have not had a chance to read it, he will be a bit more detailed than normal. Contractors - Currently there are no contractors working with him other than the downstream contract, which is ongoing. Alaska Energy Security Task Force - The Governor's Energy Security Task Force Report has been issued. The BPMC both assisted in developing the railbelt recommendations as well as submitted public comments on them. Those public comments came from our August 28, 2023 meeting. Transmission System White Papers – There has been quite a bit of activity to circulate multiple white papers related to a transmission system organization, on how that organization would be structured, why it would be appropriate, and how to actually implement the ERCOT single state weaving solution on the backbone of the railbelt. I have been working on those with the tactical team. Utility Coordination Alignment Meeting - Did a fair amount of work preparing documents for this meeting. He created a model that allowed him to analyze a number of scenarios on how we might propose the revised schedule for the $206.5 million from the federal government. There is more work to do on that. GRIP 2 – He has been reviewing the Grid Resilience and Innovation Partnerships (GRIP) Funding Opportunity Announcement (FOA) 3195, which is funding Cycle 2. At this point, he believes the utilities have agreed that they will pursue Topic Number 1, and will be asking AEA, if they are willing, to move forward with Topic Number 3. We continue to work with the strike team on their work. I did a review of the Alaska Center for Energy and Power (ACEP) decarbonization pathways model and spent a fair amount of time with them. There is another meeting scheduled with those folks, trying to bring that into alignment with some of the things that we have been working on regionally. Obviously, there has been work on the lease agreement and the operation and maintenance (O&M) agreement for the BESS. Cybersecurity Plan - We worked with Jim Mendenhall and Brian Carey on the Cybersecurity Plan. As we discussed at the last BPMC meeting, we received the first draft of the plan, and it looks in good shape and is being reviewed by Jeff Meyer with the Cybersecurity Working Group and AEA staff. Topics 1 and 3 Concept Papers - There is preliminary work on the concept papers for Topic 1 and Topic 3, assuming that AEA is going to move forward with Topic 3. He has a draft budget amendment in the packet that still has to go through the finance subcommittee. We are looking for funding to complete the concept papers and the application, assuming that is the direction the body wants to go. Because the concept papers for Topics 1 and 3 are due on January 12, there may be a need for a teleconference or something to approve that budget amendment. As we finish preparing the final documents, I am using LSI and Agnew::Beck to do that work. BPMC Meeting Minutes 12/8/23 Page 8 of 10 Utility/AEA Coordination Meeting - He wanted to schedule an all-day Utility/AEA coordinating meeting on January 8. But, he just learned this morning that is the date for a National Rural Electric Cooperative Association (NRECA) general managers meeting, which is out of state. We will either move it back to Friday, January 5, or out to Monday, January 15. Committee members asked Brian about the due dates of the concept papers and the budget amendment. He responded that the concept papers are due January 12, and, if selected, the applications are due April 17. He is asking for $40,000 in support of writing the concept papers out of a not to exceed $250,000 amount. He added that most of the technical work has been completed. This is the final push for the January 12, 2024 submission date. After discussion, committee members decided to go forward with additional funding of $50,000 with the finance subcommittee to provide guidance and approval for the balance later. MOTION: John Burns moved that the Bradley Lake Project Management Committee approve a budget amendment to provide a not to exceed amount of $50,000 to complete the GRIP Topic 1 Concept Paper and GRIP Topic 3 Concept Paper that are due January 12, 2024, with the balance of $200,000 to go before the finance subcommittee for additional direction from them. Arthur Miller seconded the motion. Chair Janorschke asked if there were any comments or discussion. There were none. Roll call vote was taken. The motion passed unanimously. (6-Yes; 0-No) 9. OPERATOR’S REPORT Martin Law directed committee members to the operator’s report in the meeting packet. No surprises in the report. The project is running well. He included a few pictures of the dam, the spillway power tunnel, spillway gallery, and the progress on the new residents. There were no questions for Martin. 10. COMMITTEE REPORTS A. Budget to Actuals Report Mark Ziesmer with AEA stated he is here to discuss the Bradley Lake Budget to Actual Expenses for October 31, 2023. He directed committee members to their packets and walked them through the schedules and tables in his report. Activities are on track and as expected. There was nothing remarkable to discuss. Chair Janorschke asked if there were any questions or comments for Mark. Hearing none, he moved on to the O&D Report. B. O&D Report BPMC Meeting Minutes 12/8/23 Page 9 of 10 Andy Patrick directed committee members to the O&D report in their meeting packets. He reported on two assignments from the BPMC. He said the Bradley Ring BUS relay settings scope is completed and EPS is working on a proposal. We will work with CEA before it actually goes out to bid. Second assignment concerns the O&M agreement. There have been numerous meetings and discussions to finalize the agreement and the Committee worked with Joel Paisner, general counsel, to help finalize the agreement as well. A draft is in the meeting packet and this topic is an agenda item for today. Chair Janorschke asked if there were any questions or comments for Andy. He asked if the O&D Committee needs anything from the BPMC. Andy responded the Committee does not at the moment, unless the committee has another assignment for them. MOTION: Curtis Thayer moved that the Bradley Lake Project Management Committee go into Executive Session to discuss confidential financial matters regarding Required Project Work and financing, the immediate knowledge of which may have an adverse effect on the Authority or Project. John Burns seconded the motion. Roll call vote was taken. The motion passed unanimously. (6-Yes; 0-No) 11. EXECUTIVE SESSION - 11:24 a.m. (Bylaws Sections 5.11.4) - To discuss confidential financial matters regarding Required Project Work and financing, the immediate knowledge of which may have an adverse effect on the Authority or Project. The Committee reconvened its regular meeting at 12:23 p.m. Chair Janorschke stated that no action was taken during the Executive Session. 12. MEMBER COMMENTS Arthur Miller - Good meeting. I want to express appreciation for the clean audit to Curtis and his crew. Again, outstanding work. I also really appreciated the Dixon Diversion Project Update. Great information and numbers are going in the right direction. Thank you. Curtis Thayer - I want to thank everybody and I do appreciate them. There is a lot of positive things going on. We are in a very unique position. Like I said earlier, think about where we were a year ago. We had no money for transmission upgrades, and now we are looking at tax credits and how to spend $600 million. It is a great improvement. And I thank everybody. We have a better path forward and then we get to defend it down in Juneau. Tony Izzo - I would just echo the comments made by the prior members. Thank you. BPMC Meeting Minutes 12/8/23 Page 10 of 10 John Burns - I certainly echo the comments on the audit. It is great to get a clean audit. Dixon Diversion report was very positive and I am excited about the possibility of expansion by 50% plus. I really do appreciate the GRIP 2nd round funding. I know it puts a heck of a burden on AEA as well as Brian Hickey in terms of the very energetic date of January 12. But, it is always good to at least shoot for the moon and put the best foot forward. Curtis, I want to thank you personally for all the efforts that you are doing and putting forward with you and your team to maximize our funding. It is very much appreciated. Ultimately, I am confident we will get there with the batteries. The whole objective of all of it is to do it in a way that minimizes the impact on our ratepayers. So, I really appreciate your efforts. Thank you. Rob Montgomery - (not able to comment because of technical difficulties) Chair Janorschke - Ditto to everything that was said. I appreciate all the efforts. It is great having a clean audit. It makes life easier. It is greatly appreciated. Have a happy holiday. 13.NEXT MEETING DATE - January 19, 2024 14.ADJOURNMENT Chair Janorschke adjourned the meeting at 12:29 p.m. ___________________________ Brad Janorschke, Chair ___________________________ Curtis Thayer, Secretary