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HomeMy WebLinkAbout2021.03.26 BPMC.ExecutedMinutesBRADLEY LAKE PROJECT MANAGEMENT COMMITTEE (BPMC) REGULAR MEETING AGENDA March 26, 2021 1. CALL TO ORDER Chair Izzo called the meeting of the Bradley Lake Hydroelectric Project Management Committee to order at 10:08 a.m. A quorum was established. 2. ROLL CALL (for Committee members) Tony Izzo (Matanuska Electric Association [MEA]); John Burns (Golden Valley Electric Association [GVEA]); Lee Thibert (Chugach Electric Association [CEA]); Larry Jorgensen (phone) (Homer Electric Association [HEA]); Curtis Thayer (Alaska Energy Authority [AEA]); Cory Borgeson (phone) (City of Seward (Seward)). 3. PUBLIC ROLL CALL (for all others present) Sunny Morrison (phone) (Accu-Type Depositions); Jennifer Bertolini, Debra Caldwell, Melissa Yang, Kirk Warren (AEA); Russell Thornton (CEA); Stefan Saldanha (Department of Law); Pete Sarauer (phone), Ron Woolf (arrived late - phone) (GVEA); Bob Day, Emily Hutchinson, Andy Patrick (phone) (HEA); Kirk Gibson (phone) (McDowell Rackner Gibson, PC); David Pease (phone), Tony Zellers (phone) (MEA); and Bernie Smith (phone) (Public). 4. AGENDA APPROVAL MOTION: A motion was made by Mr. Thayer to approve the agenda. Motion seconded by Mr. Burns. A roll call vote was taken, and the motion to approve the agenda passed unanimously. 5. PUBLIC COMMENTS - None. 6. APPROVAL OF PRIOR MINUTES - January 29, 2021 MOTION: A motion was made by Mr. Thayer to approve the Minutes of January 29, 2021. Motion seconded by Mr. Burns. A roll call vote was taken, and the motion to approve the Minutes of January 29, 2021 passed unanimously. 7. NEW BUSINESS A. FY 22 Budget Approval Debra Caldwell, AEA, reviewed the proposed FY22 Budget. She highlighted that the budget summary consists of three main sections; Bradley Lake, Battle Creek, and SSQ Line. Ms. Caldwell noted the primary occurrence for Bradley Lake is the maturation of the bonds on July 1, 2021. The impacts related to the maturity of the bonds include a decrease of utility contributions BPMC Minutes 3/26/21 Page 1 of 5 and an increase in other available funds for Bradley Lake and SSQ Line. The interest income will cease upon the maturity of the bonds. Both the debt service and .arbitrage transfer expenses will decrease entirely upon maturity of the bonds and the new expense of the excess payment agreement under the Power Sales Agreement will begin. The total FY22 budget for Bradley Lake is approximately $19.9 million, which is a $274,000 increase from FY21. Ms. Caldwell discussed Schedules A through D, relating to Bradley Lake. Ms. Caldwell reviewed the Battle Creek section of the proposed FY22 budget. The construction is completed, resulting in a decrease of the utility contribution and a decrease in O&M expenses. Ms. Caldwell explained that the new expense line item of IRS Subsidy was included at the request of the Budget Subcommittee. The credit offsets the interest expense on the debt service. She reviewed Schedules E through G, relating to Battle Creek. Ms. Caldwell reviewed the SSQ Line section of the proposed FY22 budget. This section reflects a full 12 months, compared to FY21, which only reflected a six-month budget. The debt service payments are offset by the other funds available, due to the return of the capital reserve funds. Ms. Caldwell discussed Schedules H through J, relating to the SSQ Line. Mr. Thibert expressed appreciation to Ms. Caldwell for the thorough review of the budget. Bob Day, HEA, reiterated that the operator spent much time with the O&D and Budget Committees to review the proposed budget. He complimented Ms. Caldwell for her diligence. Chair Izzo informed that MEA's representatives on the O&D and Budget Committees communicated primarily positive feedback regarding the budget. MEA continues to believe the 4% charge to Battle Creek participants for O&M does not make sense. He commented that the turbine efficiency would offset any increase in maintenance. Mr. Borgeson commented that the budget looks reasonable. He inquired as to the cost of the power. Ms. Caldwell explained that the projected energy in the draft budget for the year for Bradley Lake is at 425,000 megawatts, resulting in the cost of energy at $47 per megawatt. If the R&C contributions are excluded, the cost of energy would be at $45 per megawatt. The cost of energy for Bradley Lake, including SSQ Line, is at $49 per megawatt. Ms. Caldwell explained that the projected energy for the year for Battle Creek is 37,000 megawatts, resulting in the cost of energy of $96 per megawatt. If the R&C contributions are excluded, the cost of energy would be at $66 per megawatt. Ms. Caldwell stated she will provide the cost of power calculations to the Committee. Mr. Borgeson asked if there is going to be a reduction in the budget from the excess payment to the Railbelt energy funds. Ms. Caldwell agreed, and explained there will be a true -up and revision at the end of the year, once the total energy usage is known. The excess payment is not reduced by non -required project work, including Battle Creek project work. The calculation takes into consideration the required project work, including the SSQ Line. Ms. Caldwell informed that she will research the understanding of the final calculation and follow-up with the Committee. She believes that the adjustment will be made on the prior year's actual information, which will then be used for the budget moving forward. MOTION: A motion was made by Mr. Thayer to approve the fiscal year 2022 Bradley Lake Hydroelectric Project Budget as presented. Motion seconded by Mr. Thibert. BPMC Minutes 3/26/21 Page 2 of 5 A roll call vote was taken, and the motion to approve the fiscal year 2022 Bradley Lake Hydroelectric Project Budget as presented passed unanimously. 8. OLD BUSINESS A. Operators Report Chair Izzo welcomed Mr. Day to present the Operator's Report. Mr. Day explained the report reflects the month of February and up to March 15, 2021. Lake levels were average at that time. Currently, the lake levels are slightly below average. The needle repair on Unit 1 was completed at the beginning of February. It ran for one week and then failed due to oil contamination. It took one week to clean Unit 1 and then it was returned back to service. Unit 2 repairs began a week later than originally scheduled and are expected to be completed by April 15th. The divider plates are being replaced during the Unit 2 repairs. The shafts have been machined and will be delivered to Bradley Lake on Monday. A pole inspection will be conducted on both Unit 1 and Unit 2. Mr. Day discussed that the original estimate of $700,000 for the Unit 1 needle replacement of soft goods was exceeded because of the unanticipated amount of corrosion and extensive repairs required for the shaft. The Unit 2 repair budget was estimated at $900,000. Unit 2 is showing the same extent of corrosion and problems to the shaft. Mr. Day believes the extensive repairs necessary will exceed the current budgeted amount. The final amount will be revealed after the unit is returned to service in April. Mr. Day explained that the cybersecurity has been upgraded and is aligned with Regulatory Commission of Alaska (RCA) and Railbelt requirements. He discussed that the abundant snow coverage is expected to provide a strong spring runoff. Mr. Day described the pictures of the unit repair process included in his report. There were no questions. B. O&D Report Chair Izzo invited Russ Thornton, CEA, to present the O&D Report. Mr. Thornton discussed that the O&D met on March 12th and reviewed the FY22 budget, including input on plant capital, O&M, SSQ line issues, 69 kV line removal, and Battle Creek. The O&D approved the budget unanimously. Mr. Thornton noted that the proposed scope of work to retune the SVCs (Static VAR Compensator) to meet the requirements of the Oscillation Study was approved unanimously. Mr. Thornton reported on discussion regarding the implementation of the Oscillation Study settings at Bradley Lake. HEA is currently establishing a budget and scope for implementation of those settings. This will result in a possible FY22 budget amendment. The progress of the repairs to Unit 1 and Unit 2 were reviewed at the Committee meeting. There were no questions. C. Bylaw Work - Status Report Chair Izzo requested Kirk Gibson, McDowell Rackner Gibson, provide the status on the Bylaws work. Mr. Gibson reminded the Committee that the impetus to the Bylaws work was due to the ML&P/CEA transaction and the resolution addressing the voting requirements. He reported that the initial review is complete. The next step is the review and changes by Stefan Saldanha at the AG's Office. The expectation is that the Bylaws will be distributed to members and their Counsel for review in April. There were no questions. 9. COMMITTEE REPORTS - Budget BPMC Minutes 3/26/21 Page 3 of 5 Chair Izzo asked Ron Woolf if he was the appropriate representative from the Budget Subcommittee to present a report. Mr. Woolf commented that the proposed budget was reviewed earlier in the meeting and that he was not prepared to provide an additional report. Chair Izzo agreed that Ms. Caldwell provided a comprehensive review of the proposed budget. Chair Izzo suggested that in future years, the BPMC may want to structure the agenda so that the Budget Committee and O&D Committee provide feedback regarding the budget prior to taking any action. Chair Izzo noted that Mr. Day previously indicated that both the Budget and O&D Committees were supportive of the unanimously approved budget. Ms. Caldwell reiterated that a primary change in the budget was the addition of the IRS Subsidy expense line item requested by the Budget Subcommittee. 10. COMMITTEE ASSIGNMENTS Chair Izzo assigned the O&D Committee to audit Bradley Lake scheduling of capacity versus the actual usage by the utilities. Chair Izzo will provide additional information to Mr. Thornton, if necessary. MOTION: A motion was made by Mr. Thayer to enter into Executive Session to discuss confidential matters related to Bradley Lake. Discussions will involve 1) matters the immediate knowledge of which would clearly have an adverse effect on the finances of the Authority or the Project; and 2) matters involving an attorney for the Committee or a member of the Committee, the immediate knowledge of which could have an adverse effect on the legal position of the Committee or the Authority. Motion seconded by Mr. Thibert. A roll call vote was taken, and the motion to enter Executive Session passed unanimously. 11. EXECUTIVE SESSION: 10:57 a.m. Discuss confidential matters related to Bradley Lake. Discussions will involve: 1) matters the immediate knowledge of which would clearly have an adverse effect on the.finances of the Authority or the Project; and 2) matters involving an attorney for the Committee or a member of the Committee, the immediate knowledge of which could have an adverse effect on the legal position of the Committee or the Authority. The Committee reconvened its regular meeting at 11:25 a.m. Chair Izzo advised that no formal action was taken on the matters discussed during Executive Session. 12. MEMBERS COMMENTS Mr. Borgeson expressed appreciation for the work performed and for the opportunity to represent Seward at this meeting. He noted that his tenure provides a bridge while Seward is hiring new resources. Mr. Burns commended Ms. Caldwell and staff for the excellent and informative reports. Mr. Thibert echoed appreciation of the work of the committees. Mr. Jorgensen echoed the appreciation and believes the budget process was exceptionally smooth this year. Mr. Thayer reiterated the comments appreciation. BPMC Minutes 3/26/21 Page 4 of 5 Chair Izzo echoed the comments of appreciation, specifically to Ms. Caldwell and the AEA team. He believes the subcommittees are doing well and thanked them for their diligent efforts. Chair Izzo requested Jennifer Bertolini, AEA, revert the scheduling of the BPMC meeting start time back to the default of beginning immediately following the IMC meeting, rather than a time -certain. He noted that today's IMC meeting ran over schedule and he believes the IMC could have benefitted from additional time flexibility. 13. NEXT MEETING DATE - May 21, 2021 - Regular Meeting 14. ADJOURNMENT There being no further business for the committee, the meeting adjourned at 11:30 a.m. Curtis W. Thayer, Secretary BPMC Minutes 3/26/21 Page 5 of 5