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HomeMy WebLinkAbout2020.09.25.BPMC.ExecutedMinutesBRADLEY LAKE PROJECT MANAGEMENT COMMITTEE (BPMC) REGULAR MEETING September 25, 2020 1. CALL TO ORDER Chair Izzo called the regular meeting of the Bradley Lake Hydroelectric Project Management Committee to order at 10:05 am. A quorum was established. 2. ROLL CALL FOR COMMITTEE MEMBERS Tony Izzo (Matanuska Electric Association [MEA]); John Burns (Golden Valley Electric Association [GVEA]) (phone); Anna Henderson (Municipal Light and Power [ML&P]) (phone); Lee Thibert (Chugach Electric Association [CEA]) (phone); Bradley Janorschke (Homer Electric Association [HEA]) (phone); Curtis Thayer (AEA); and Stephen Sowell (City of Seward) (phone). 3. PUBLIC ROLL CALL Ladonna Lindley (Accu-Type Depositions); Amy Adler, Jennifer Bertolini, Bryan Carey, Robert Hopkins, Betsy McGregor, Beazit Redzepi, Aimee Sudbeck, Kirk Warren (AEA); Brian Hickey (phone), Sherri Highers (phone), Stefan Saldanha (Department of Law); Bob Day (Bradley Lake - HEA); Pete Sarauer (phone), Ron Woolf (phone) (GVEA); Larry Jorgenson (phone), Kirk Gibson (phone) (McDowell Rackner Gibson, PC); David Pease (phone), Matt Reister (phone), Tony Zellers (phone) (MEA); Unidentified Speaker (phone); Unidentified Thompson (phone); Jeff Warner (phone) (ML&P); Bernie Smith (phone) (Public); and Christina Hunter (phone) (RCA). 4. PUBLIC COMMENTS - None 5. AGENDA APPROVAL MOTION: A motion was made by Mr. Thayer to approve the agenda. Motion seconded by Mr. Thibert. Mr. Janorschke requested to add Operators Report, given by Bob Day. Chair Izzo noted Item 9C. Operators Report could be added. There was no objection to the friendly amendment. A roll call vote was taken, and the motion to approve the amended agenda, including Item 9C. Operators Report, passed unanimously. 6. APPROVAL OF PRIOR MINUTES - June 30, 2020, and July 24, 2020 MOTION: A motion was made by Mr. Thibert to approve the Minutes of June 30, 2020. Motion seconded by Mr. Thayer. A roll call vote was taken, and the motion to approve the Minutes of June 30, 2020 passed unanimously. BPMC Minutes 9/25/20 Page 1 of 7 MOTION: A motion was made by Mr. Thayer to approve the Minutes of July 24, 2020. Motion seconded by Mr. Thibert. A roll call vote was taken, and the motion to approve the Minutes of July 24, 2020 passed unanimously. 7. NEW BUSINESS A. Budget Amendment and Motion to Approve Chair Izzo introduced Beazit Redzepi, AEA, to review the budget amendment. Mr. Redzepi outlined the provided amendment and discussed the budget impacts. Chair Izzo confirmed with Ron Woolf, Chair of Budget Subcommittee that the Budget Subcommittee has reviewed and is in alignment with the recommendation and proposed amendment. Mr. Woolf agreed and explained the process of review. MOTION: A motion was made by Mr. Thibert to approve the Third Amendment of the Fiscal Year 2021 Bradley Lake Hydroelectric Project Budget. The amendment will make the following changes; $106,100 decrease in the O&M Budget, $175,000 increase in RNC Capital Purchases, and $111,000 increase in the O&M Budget. Motion seconded by Mr. Janorschke. A roll call was taken and the motion to approve the Third Amendment of the Fiscal Year 2021 Bradley Lake Hydroelectric Project Budget passed unanimously. B. Agenda Process Chair Izzo requested Mr. Thayer discuss this agenda item. Mr. Thayer explained that this is a follow-up to the last couple of meetings regarding specific confusion relating to the agenda. Mr. Thayer requested Committee members or Subcommittee Chair people send requested agenda items to Jennifer Bertolini, AEA, at least seven to 10 days prior to the scheduled meeting. Mr. Thayer explained this process will assist in providing the agenda to the Board and to the public in a timely fashion. Mr. Thayer indicated that Chair Izzo makes the ultimate decision regarding agenda items. Chair Izzo noted there are placeholder items that will occur at each meeting, including the Operators Report. He requested the recurring items are identified for Ms. Bertolini. 8. OLD BUSINESS A. S/Q Line Transaction Chair Izzo requested Kirk Gibson, McDowell Rackner Gibson, PC, lead the discussion. 1) Proposed Transaction Definitive Agreements and SSQ Line Operating Protocols Mr. Gibson informed additional issues will be covered in executive session. He reviewed that the letter of intent involved purchase of assets and capacity issues with respect to the delivery of energy. The work being completed is comprised of three areas; transmission related DRAFT BPMC Minutes 9/25/20 Page 2 of 7 agreements, the sale of the assets, and others. Mr. Gibson provided an update on each area. Additional memorandums will be distributed next week. Chair Izzo recommended that the BPMC set a target date for this obligation and commit to doing what it takes to meet the target date. Additional discussion to occur in executive session. 2) Opinion on Report of the Bradley Lake O&D Committee Mr. Gibson explained this item refers to the opinion that AEA requested from an independent engineering consultant regarding the O&D Committee's finding that the purchase of the SSQ Line was required project work. The independent engineering consultant has submitted an opinion agreeing with the O&D Committee that the purchase of the SSQ Line was required project work under all the appropriate standards. Mr. Gibson understands that AEA has deemed that the SSQ Line is required project work under the Power Sales Agreement and will move forward. Mr. Thayer noted for informational purposes, all of the requirements from AEA have been met. Mr. Thayer read from the findings of the report supporting the consideration of required project work. He informed that AEA and Department of Law agree with the findings. Chair Izzo reiterated for the record that he believes this opinion is important. It concludes the process of determination. He read from the findings; "EES believes that the proposed transaction represents prudent utility practice and is within the definition of required project work." 3) Permitting Task Force Update Chair Izzo requested Betsy McGregor, AEA, provide the update. Ms. McGregor informed that staff is working on the indemnification issue on the U.S. Forest Service land and has found standard Forest Service language on indemnification that is agreeable to the State of Alaska. Ongoing investigation continues regarding exemption or partial exemption from land use fees under the CFR or Act. A determination has not yet been made. Ms. McGregor explained that HEA has a draft permit regarding the Kenai National Wildlife Refuge, which is currently being reviewed by Refuge staff. The land use fee on the Refuge will cost approximately $35,000 per year. This is based on the existing land appraisal. After the permits are transferred, a new land appraisal will be conducted and the fee will be reassessed. Ms. McGregor informed that AEA will need to provide a schedule for the removal of the 69 kV Line to Fish and Wildlife Service during the pre -application meeting. Ms. McGregor discussed that the transfer of the assignee from HEA to AEA on DNR land has been completed. The Best Interest Document was completed and put out for a 30-day public comment period on the Mental Health Trust land. No comments were received and a draft permit for review should be forthcoming next week. The land use fee on the Mental Health Trust land will be $1,250 per year. Ms. McGregor informed that the Kenai Peninsula Borough provided a draft permit to HEA and AEA regarding the Kenai Peninsula Borough lands. However, the draft permit included an error, identifying a parcel of land that will be retained in HEA's ownership, west of the Sterling Substation. Revisions to that portion of the permit are ongoing. The remaining terms are agreeable to the State. A letter of non -objection to HEA, AEA, and DNR will be sent next week. BPMC Minutes 9/25/20 Page 3 of 7 Ms. McGregor noted that a description of the maintenance activities and the frequency of activities is required and will be provided for insurance purposes. B. Battle Creek Update Bryan Carey, AEA, discussed that most of the utility members in attendance today were present at the ribbon -cutting ceremony on August 251h. Construction is 99.9% completed. The man - camp will be removed in about a week with the tide cycle. DOWL engineers are working on the substantial close-out report. Mr. Carey advised that a few minor items are being addressed that are not related to the contractor. The air vents' capacity will be increased. The water diverted at Bradley Lake from July 23rd to August 30th was about 12,800 acre-feet. This is about a third of the estimates. Mr. Carey expressed high hopes that the future amount of water from Battle Creek will continue to exceed estimates. The September flow numbers have not yet been released. Mr. Carey informed that the contract bid was originally $36.5 million. The current contract amount is approximately $39.25 million. The true -up change orders need to be completed and will probably bring the contract amount to slightly above $40 million, which is within the original budgeting purpose. The Budget Subcommittee is aware of the status. Mr. Carey showed and discussed photos from the ribbon -cutting ceremony. Chair Izzo expressed appreciation for the efforts shown at the ribbon -cutting ceremony, especially to Mr. Carey and Bob Day, HEA - Bradley Lake. He is pleased with the additional acre-feet of water exceeding projections. C. Informational 1) Independent Determination of Bradley Lake Excess Payment Chair Izzo requested Mr. Thayer speak to this item. Mr. Thayer informed that the BPMC passed a motion that AEA would seek an independent determination for the excess payment amount after the bonds were paid off. AEA engaged PFM Financial Advisors to make the determination. PFM Financial Advisors determined the excess payment amount would be $12,454,845.88, for approximately the next 31 years. Mr. Thayer believes it is important to note PFM Financial Advisors stated this analysis of the determination of excess payment amount considers only debt issued prior to and outstanding of September 18th, 2020, and this analysis does not include the impact of any future debt which may be issued for required project work. Mr. Thayer noted that the report includes an actuarial spreadsheet including the calculations for reference. Chair Izzo commented on the 31.83 years that will drive urgency for him in future conversations. Chair Izzo will assign the Budget Subcommittee to review the PFM Financial Advisors' determination. Mr. Thibert noted that the estimate is extremely close to the long -discussed amount of $12.5 million. Chair Izzo shared the observation. 2) Engagement Letter and Audit Planning Letter Mr. Thayer reported to the BPMC that this information item is included in member packets. The engagement letter is for the current audit that is ongoing. The contract was for two years, with BPMC Minutes 9/25/20 Page 4 of 7 two one-year extensions available. BPMC is currently in its first one-year extension. Mr. Thayer noted that the Committee will be apprised of any updates in advance for approval. 9. COMMITTEE REPORTS A. O&D September 11, 2020 Meeting Chair Izzo requested a member of the O&D Committee present the report. Pete Sarauer, GVEA, informed that the O&D Committee met on September 111h, and discussed the contractor Orion had decided not to leave their camp at the Bradley Lake site. The O&D understands that there is no further action required by the Committee. Mr. Sarauer noted that the BPMC also requested the O&D Committee address Bradley Lake Unit 1 and the operation of the plant. Mr. Sarauer discussed that the current operations are per the recommendations of Mr. Day from August 13, 2020. Mr. Sarauer described the operations. The determination was made that the needle repair will cost will be in the range of $700,000 to $800,000. Mr. Sarauer stated that the O&D requests funds are included and allocated to investigate the root cause of the necessary repairs. Mr. Sarauer discussed the O&D will review the services agreement to determine consideration of the HEA wheeling activity. Chair Izzo indicated for the record that Mr. Day nodded in the affirmative that the funds to analyze and investigate the root cause of the needle repairs were indeed included in the budget. B. Budget to Actuals Report Mr. Redzepi delivered the Budget to Actual Expense Report for the year provided to members. He discussed the calculations for the O&M refunds and the R&C refunds. Mr. Redzepi reviewed the revenues, expenses, and surpluses for Battle Creek. He reported the total amounts listed in the document. Chair Izzo inquired as to the status of the arbitrary 4% O&M reduction on Bradley Lake for the two nonparticipating utilities, now that Battle Creek is online. Mr. Redzepi explained the allocation was included in the budget. Chair Izzo informed that his intent is to assign the appropriate committee to analyze and provide recommendation if the 4% reduction should be changed or remain the same. Mr. Thayer announced that Mr. Redzepi will be leaving AEA next month to pursue his Master's studies in Vienna. Mr. Thayer expressed appreciation for his service. C. Operators Report Mr. Day apologized that there is no written Operators Report. Much time has been dedicated to bringing Battle Creek online. Many administrative adjustments have been made in reports to account for the water coming in and the fish water going down Battle Creek. Manual inputs to the reports have occurred to accommodate these situations. Mr. Day expressed appreciation for the thorough O&D report. The lake level is at 1,159.0. The inflows year-to-date are 18,106, which equate to approximately $1.4 million worth of energy since July 22"d. Battle Creek does have to close down at the end of November and will remain dry until April or May. Mr. Day discussed the necessary needle repair work and highlighted the severe Unit 1 failure that occurred on August 14th, which included a substantial increase in the amount of water leaks BPMC Minutes 9/25/20 Page 5 of 7 and significant hydraulic leaks. Unit 2 has been running with a small hydraulic leak that is contained within the powerhouse structure. The leaked amount is about a barrel of oil per year. Mr. Day gave a brief history of the needle repair work that has occurred approximately every 10 to 12 years since the beginning of the project. The needles were rebuilt in 2014/20015, and work is needed again this year, which leads to concern and investigation regarding what has changed to decrease the life of the needle repairs. The soft parts for the repair are on order at approximately $150,000. It is unlikely the hard machinery parts will be worn out after five years. The labor costs of the repair are substantial because of the time consuming nature of the repairs. In 2014/2015, the repairs took a month for each unit. Mr. Day hopes to begin the work on November 1st and complete the Unit 1 repairs by Thanksgiving. The repairs on Unit 2 are expected to be completed in the three weeks prior to Christmas. Adjustments can be made to this schedule as the repairs unfold. Mr. Day discussed that now with Battle Creek work complete, the crews' quarters is available to house contractors to perform other needed work. The annual inspection to the fire system is underway. Bids are being reviewed to resurface the bridges and the work is anticipated to be completed in October. There were no questions. MOTION: A motion was made by Mr. Thayer to enter into Executive Session to discuss confidential matters related to Bradley Lake and Battle Creek. Motion seconded by Mr. Thibert. A roll call vote was taken and the motion to enter Executive Session passed unanimously. 10. EXECUTIVE SESSION: 11:17 am Discuss matters involving the Chugach / ML&P Merger, Proposed Transaction for the SSQ Line and Battle Creek Diversion Project with Counsel which may have adverse financial impact on the Project or the legal position of the BPMC. The Committee reconvened its regular meeting at 12:19 p.m. Chair Izzo advised the BPMC did not take any formal actions on matters discussed while in executive session. 11. COMMITTEE ASSIGNMENTS Chair Izzo assigned the Budget Subcommittee to review the independent determination of the Bradley Lake excess payment. Chair Izzo assigned the Budget Subcommittee to review and make any recommendations once the memorandum from Mr. Gibson regarding the financials of the SSQ Line acquisition is received. Chair Izzo assigned the O&D Committee to review the 69 kV Line removal schedule. 12. MEMBERS COMMENTS Mr. Janorschke expressed appreciation for the great information provided in the updates and the efforts of staff. BPMC Minutes 9/25/20 Page 6 of 7 Mr. Thibert expressed appreciation to Mr. Thayer and AEA for their efforts. He expressed congratulations for the completion of the Battle Creek project. He thanked Mr. Redzepi for his service and congratulated him on his new endeavors. Ms. Henderson echoed the comments of appreciation and congratulations. Mr. Thayer informed that AEA is in the process of hiring, since Mr. Redzepi is leaving. Mr. Thayer expressed appreciation to all on the AEA team and especially Mr. Gibson during these daily meetings regarding the SSQ Line and moving the effort forward. Mr. Thayer introduced Ms. Bertolini as the new Executive Assistant. He expressed appreciation for the new and improved telephonic system structure. Mr. Burns echoed the previous compliments for the reports and efforts. He especially thanked AEA for their dedication. Mr. Burns was very impressed with the Battle Creek project. He believes this is a great example of how State projects are intended to work; a capital investment that will pay long-term dividends, while providing a good way to leverage funds. Mr. Burns commended AEA. Chair Izzo echoed comments of appreciation and thanked participants for their time. 13. NEXT MEETING DATE Chair Izzo indicated that the next special meeting date is scheduled for October 13'h, 2020, and the agenda is forthcoming. 14. ADJOURNMENT There being no further busingss for the committee, the meeting adjourned at 12:26 pm. BY: _/ I#~ Tony Izzo, Chair Attest: Alaska Energy Authority, Secretary BPMC Minutes 9/25/20 Page 7 of 7