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HomeMy WebLinkAbout2025.02.14 BPMC Meeting MinutesBRADLEY LAKE PROJECT MANAGEMENT COMMITTEE (BPMC) REGULAR MEETING AGENDA February 14, 2025 1. CALL TO ORDER Chair Million called the meeting of the Bradley Lake Hydroelectric Project Management Committee to order at 10:02 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]); Kat Sorenson (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, Patrick Domitrovich, Ryan McLaughlin, Jim Mendenhall, William Price, Mark Ziesmer (AEA); Joel Paisner (Ascent Law Partners); Sherri Highers, Andrew Laughlin, Mike Miller, Russell Thornton (CEA); Dan Bishop, Sarah Villalon (GVEA); Larry Jorgenson, Sarah Lambe, Martin Law, Andrew Patrick (HEA); Josh Crowell, David Pease, Matt Reisterer, Jon Sinclair, Tony Zellers (MEA); Julian Jensen, and Bernie Smith (Public). 4. AGENDA APPROVAL MOTION: A motion was made to approve the agenda. Motion seconded. The motion to approve the agenda passed without objection. S. PUBLIC COMMENTS - None. 6. APPROVAL OF MEETING MINUTES — December 6, 2024 MOTION: A motion was made by Mr. Thayer to approve the Minutes of December 6, 2024 as presented. Motion seconded by Mr. Izzo. The motion to approve the Minutes of December 6, 2024, passed without objection. 7. NEW BUSINESS A. Resolution 25-01 Amendment to Tenth Supplemental Resolution and certain agreement related to Series 2022 Bonds to allow for interest to be used for Required Project Work BPMC Minutes 2/14/25 Page 1 of 10 Mr. Thayer explained that Resolution 25-01 is an Amendment to the Tenth Supplemental Resolution and certain agreement related to the Series 2022 Bonds to allow for interest to be used for Required Project Work. During previous discussions concerning the allocation of the $166 million, questions arose regarding how the interest funds will be spent. This resolution specifies that the interest will be allocated to Bradley Lake, Dixon Diversion, and required project work as defined by the Department of Law. Mr. Thayer noted that the resolution was reviewed by AEA's bond counsel, and the AEA Board approved the resolution. Mr. Thayer commented on the importance of concurrence from the BPMC on this issue. He read from the resolution: "Be it resolved that the BPMC approves the amendment of the Tenth Supplemental Resolution and certain other agreements related to the Series 2022 Bonds that are necessary or desirable to permit the Authority to apply interest earnings on the proceeds of the Series 2022 Bonds deposited in the Eleventh Series Construction Account to additional Cost of Acquisition and Construction of the Bradley Lake Hydroelectric Project, including Costs of Acquisition and Construction of the Dixon Diversion Project and other projects determined to be Required Project Work pursuant to the Power Sales Agreement and the Power Revenue Bond Resolution." Mr. Thayer requested members to support the resolution. He discussed that $12.5 million is necessary to get to Federal Energy Regulatory Commission (FERC) licensing. Mr. Thayer noted that the Governor included $6.5 million in the budget for this. Mr. Thayer hopes that $6 million of the interest can be used to match the Governor's budgeted amount to reach the $12.5 million. Mr. Miller expressed his support for the resolution. He believes that the interest income should be used for advancing the project. MOTION: A motion was made by Mr. Miller to approve Resolution 25-01 Amendment to Tenth Supplemental Resolution and certain agreement related to Series 2022 Bonds to allow for interest to be used for Required Project Work, as presented. Motion seconded by Mr. Izzo. Mr. Janorschke commented that he likes that the resolution says Dixon Diversion and other projects determined are required project. He understands that the high -voltage direct current (HVDC) lines are mentioned, but the status of the federal funding payment is still unknown. Mr. Janorschke asked if there is a document that states that the Dixon Diversion is required project work. Mr. Thayer agreed. He explained that the Dixon Diversion is defined as a different project, but it is associated with Bradley Lake and is benefiting Bradley Lake. Mr. Thayer noted that bond counsel agreed the Dixon Diversion was a permissible use. Mr. Thayer requested to comment on the question regarding the $206 million of federal funding. He was in Washington, D.C. last week and met with a delegation from the National Association of Energy Offices. Mr. Thayer explained that every President pauses the predecessor's projects across the board. President Biden paused President Trump's projects, and President Trump paused President Obama's projects. Mr. Thayer discussed that there is heightened awareness on the issue because Alaska qualified for so much money from the BPMC Minutes 2/14/25 Page 2 of 10 Department of Energy. Mr. Thayer explained that the President cannot use the Impoundment Act to undo what a previous Congress and President did. If a new Congress wants to claw back the funding, they can, with the incumbent President. Additionally, there is a legal contract in place. Grant negotiations have occurred, and things are moving forward. Mr. Thayer noted that from the indications staff has received, the suspension is just a pause. The paused funding affects infrastructure and transmission, which are areas President Trump campaigned on. Mr. Thayer stated that his colleagues in the delegation offices do not see this pause as an issue, rather they see it as waiting until the pause ends. Mr. Thayer discussed that Alaska's National Electric Vehicle Infrastructure (NEVI) Program of $52 million was suspended, which means that they are waiting for further instructions this summer. He explained that the federal NEVI Program is a $5 billion program and has approved 52 charging stations in the whole country. Mr. Thayer does not believe the program was earning up to what they were supposed to be doing. Certain programs are being paused or suspended that need to be reviewed. The infrastructure and Grid Resilience and Innovation Partnerships (GRIP) grants are expected to move forward. Mr. Thayer noted that AEA has been in contact with Department of Energy (DOE), and they are paying the bills that AEA has submitted for the work that has been done. Mr. Thayer discussed that even though there is a federal pause, there is state match money and money from the utilities of $50 million and $12.5 million to move the GRIP projects forward so that the schedule is not lost when the pause is lifted. The bill for the next 90 days is approximately $700,000. Mr. Thayer indicated that projects that do not have a state match do not have this flexibility. There were no other comments or questions. A roll call was taken, and the motion to approve Resolution 25-01 passed unanimously. 8. OLD BUSINESS A. Resolution 25-02 Authorizing the First Amendment to the Bradley Lake O&M Agreement MOTION: A motion was made by Mr. Izzo to approve Resolution 25-02 Authorizing the First Amendment to the Bradley Lake Operation & Maintenance Agreement, as presented. Motion seconded by Mr. Miller. Mr. Janorschke noted that he had not anticipated presenting today, and requested that Sarah Lambe, HEA, correct him if he misspeaks. Mr. Janorschke indicated that when this originally went out to bid, the old way was for HEA to charge actual costs to the BPMC for the operation and maintenance (O&M) of Bradley Lake. In approximately 2018, the BPMC participants voted to go out for bids, and wanted a fixed price for five years. Mr. Janorschke noted that HEA submitted a proposal with a fixed price for five years considering inflation, and HEA won the bid. There is a clause included in the contract that allows HEA to adjust the base rates. He explained that the overhead cost is called Indirect Cost Rate (IDCR). This proposed budget amendment increases the base rate. Mr. Janorschke stated that HEA reviewed the calculations and assumes 2.5% inflation for this year, and 4% inflation for each of the next two years. The proposed budget BPMC Minutes 2/14/25 Page 3 of 10 amendment does not change the IDCR, it only changes the direct base rate. The expected budget impact for 2025 will be negligible because the hours have been reduced. The expected budget impact over the next two years will be just over $100,000. Mr. Janorschke stated that if this Resolution gets approved, he suggested the possibility that after the current agreement expires in the middle of 2027, the BPMC could implement a contract with HEA that returns to the previous way of operations for direct costs and overhead costs. He understands that this would be cheaper for the BPMC. Mr. Miller indicated his preference is to make the contract more streamlined and straight forward and go back to actual costs. He does not support going out for bid since competent resources are in place operating the plant, and it is important to have the specialization maintained on this critical facility. Mr. Miller recommended the termination of this agreement as soon as possible and the return to using actual costs. Chair Million noted that Sherri Highers, CEA, is requesting to comment. Ms. Highers asked a process question. She noted that in 2019, the contract was reviewed by the Budget Subcommittee. She asked if the calculations presented were submitted to and examined by the Budget Subcommittee. Mr. Janorschke does not believe that the calculations were provided to the Budget Subcommittee since HEA is following the flexibility within the existing agreement. Mr. Thayer noted that if the Resolution does not need to be approved today, then he suggests that the numbers can be reviewed by the Budget Subcommittee, with the possibility of prorating the numbers back to a certain date. He noted that the Budget Subcommittee could also assist with proposing a new contract. Mr. Thayer suggested that this Resolution be tabled today, and be sent to the Budget Subcommittee for review. The Resolution can be brought back at the next BPMC meeting. Chair Million asked if the review would need to be assigned to the Budget Subcommittee. Mr. Thayer agreed. Mr. Janorschke commented that he is fine with moving forward in any way the Committee wants. He remembers arguing vehemently in 2018 not to bid out the O&M. However, the bids were submitted, and HEA won the bid. He noted that the BPMC and Budget Subcommittee reviewed and accepted the bid, and gave up their rights. Mr. Janorschke noted that he is fine if the Budget Subcommittee wants to review the information. Mr. Thayer commented that the contract includes a timeframe in which to address the requested amendments, and that timeframe has passed. Any changes to the contract were supposed to be addressed in the previous year. Mr. Thayer stated that he understands Mr. Janorschke's point of view, and Mr. Miller's point of view. Mr. Thayer believes that the Budget Subcommittee may be able to reach those goals, and determine what kind of contract should go forward. He noted that the BPMC and Budget Subcommittee gave up rights within the contract. However, there are deadlines in the contract that were missed regarding addressing this issue. BPMC Minutes 2/14/25 Page 4 of 10 Mr. Janorschke expressed appreciation for Mr. Thayer's comments. Mr. Janorschke asked Joel Paisner, Ascent Law Partners LLP, to confirm what he read and understood that no deadlines were missed. Mr. Paisner indicated that he is not sure as to Mr. Thayer's references and he would have to review the exhibit. Mr. Paisner discussed that there seems to be a conflict in the contract where the initial contract term is 5.5 years, which is until the end of this fiscal year, and then there is an automatic renewal of three years. In the initial term plus the first renewal, there must be two years' notice to terminate the contract. The Resolution regards the exhibit and the change to the rates, which he believes are adjustable on their own within the terms of the contract. Mr. Paisner explained that he views the two issues as separate. He believes that the first issues pertains to the Resolution that proposes to prorate the changes to January 1, 2025, and would remain as proposed if the Resolution is reviewed by the Budget Subcommittee. The second issue regards termination of the contract and the creation of a new contract. Mr. Izzo noted that he is not opposed to any of the comments made, and supports tabling the motion. From a fiduciary perspective, he feels it is prudent for the Budget Subcommittee to review the Resolution and to share their perspective with the BPMC. MOTION: Mr. Thayer made a motion to table the Resolution 25-02 Authorizing the First Amendment to the Bradley Lake O&M Agreement to the next meeting. Motion seconded by Mr. Izzo. Chair Million made the assignment to the Budget Subcommittee to review Resolution 25-02. A roll call was taken, and the motion to table Resolution 25-02 Authorizing the First Amendment to the Bradley Lake O&M Agreement to the next meeting passed unanimously. B. Renewable Energy Credits (REC's) Update Mr. Thayer indicated that the BPMC members requested a legal analysis of the REC's, which is currently underway. There were no comments or questions. C. Grip 3, Phase 1 Update Chair Million requested Jim Mendenhall, AEA, to provide the GRIP 3 update. Mr. Mendenhall discussed the memorandum that was distributed on February 10, 2025. AEA is contracting with Stantec, and they have submitted preliminary reports. On January 23, 2025, a meeting was held with the Technical Working Group, at which most of the utilities were present. The consensus was that 200MW of transfer capacity was sufficient, and that a bipole configuration was preferred. Mr. Mendenhall noted that the cost differential between a monopole and a bipole is approximately 25%. Further studies are needed on the link between Soldotna and Bernice Lake. Additionally, alternate route studies for the Southern Intertie are expected to be required as part of the Environmental Impact Statement (EIS). However, this route was approved. Mr. Mendenhall BPMC Minutes 2/14/25 Page 5 of 10 discussed that Stantec is currently preparing Request For Information (RFI) on cable and converter stations focused on verifying the cost and timing. Within the next week, Stantec anticipates the submittal of an intermediate budget and schedules report. The final report is expected to be submitted in March. Mr. Mendenhall reiterated Mr. Thayer's comments that the DOE has paused their efforts. The official kick-off meeting for AEA's Project Management Plan was scheduled for January 31, 2025, but DOE has cancelled all activity, including weekly check -in meetings, pending further guidance. The DOE has given notice that the Justice40 Initiative and Community Benefits Plan are suspended and are no longer required under the contract. Mr. Mendenhall informed that invoices were submitted to DOE, and a notice was returned that DOE is reviewing the invoices. AEA believes that is a good sign. Mr. Mendenhall advised that AEA is still preparing to advertise positions within AEA for the GRIP Project. He does not believe there is any change in matching grants. Mr. Izzo requested Mr. Mendenhall to comment on what was in the application regarding the Community Benefits Plan and what funding was allocated. Mr. Mendenhall explained that Justice40 required that 40% of the benefits of all the programs had to go to disadvantaged communities. AEA complied, and the projects outlined the information on how to address the benefits to disadvantaged communities along the Railbelt. Mr. Mendenhall noted that funds were spent creating the Community Benefits Plan. This was a required deliverable prior to the contract acceptance. Other than that, minimal funds have been spent on Justice40 and Community Benefits Plans. Chair Million asked Mr. Mendenhall if the preliminary construction component cost estimate in his report of $358 million to $390 million is only for contract labor or if that cost estimate is for both contract labor and materials. Mr. Mendenhall indicated that cost estimate is for everything, except AEA's time and the Railbelt coordination time, and it is unknown as to how much is included for permitting. Mr. Mendenhall explained that Stantec acquired a firm in Manitoba, who has extensive high -voltage direct current (HVDC) experience. He commented, though, that like many items now, the prices are changing rapidly with increased demand. Mr. Mendenhall hopes that when the RFI's are received, then the deliverable times and cost estimates will be more accurate. There were no other comments or questions. D. Railbelt Regional Coordination Update Chair Million indicated that Brian Hickey, City of Seward, submitted the Railbelt Regional Coordination Update report that is included in the Committee packet. He noted that Mr. Hickey is not in attendance today. There were no comments or questions. 9. OPERATORS REPORT Chair Million requested the representative from HEA provide the Operators Report. Martin Law, HEA, noted that included in the provided Operators Report, and per the BPMC's request, he BPMC Minutes 2/14/25 Page 6 of 10 developed a list of the vehicles at Bradley Lake denoting their uses and assignments. Two vehicles in excess were shipped to Homer and are currently for sale. Mr. Janorschke asked if the vehicles for sale could be used as extra vehicles during the upcoming Dixon Diversion work. Mr. Law advised there are two extra vehicles that are designated for contractor visitor use. One of the vehicles is an extended cab and seats six people, and the other vehicle is a crew cab and can seat five people. Additionally, the ambulance could be used, if needed. Mr. Law believes the number of vehicles onsite are adequate for contractor needs. Mr. Janorschke reiterated the suggestion that the extra vehicles could be used during the Dixon Diversion work. Mr. Law indicated that he is open for suggestions and specific direction. There were no other comments or questions. 10. COMMITTEE REPORTS A. Budget vs. Actuals Chair Million requested Mark Ziesmer, AEA, to discuss the included Budget to Actual Expenses report for the period of July 1, 2024 to December 31, 2024. Mr. Ziesmer noted that the actual costs for capital purchases not funded by R&C Funds shown on Schedule A were $172,628, and exceeds the FY25 approved budget by $22,628. This is due to the FY24 planned purchase of a vehicle that was completed in the current fiscal year, and expenses related to a new circuit breaker for Generator 2. Schedule B shows the Operations and Maintenance (O&M) actual expenses are under budget by $744,596. Most of the FERC categories are close to the year-to- date budget. Mr. Ziesmer discussed that FERC 539 Miscellaneous Hydraulic Power Generation Expenses exceeded its budget by $71,411 in contractual expenses, primarily due to increased expenses related to fuel purchases and fixed wing air travel. FERC 543 Maintenance of Reservoirs, Dams & Waterways expenses were underbudget by $114,056, due to lower than anticipated expenses to -date. Mr. Ziesmer noted that FERC 920 & 930 Administrative Expenses are under budget by $105,731 primarily due to a net effect of increased internal payroll and indirect costs versus lower than planned costs for professional consultants. The FERC 924 insurance premiums are under budget by $160,359 partly due to receipt of an annual cash distribution from the ARECA Insurance Exchange, and slightly lower than expected expenses. FERC 923 Outside Services is under budget by $113, 220 due to lower than anticipated expenses. FERC 928 Regulatory Commission Expenses are under budget by approximately $150,000 due to the timing of the budget versus invoices. Mr. Ziesmer anticipates the budget to be consumed by year-end. Mr. Ziesmer noted that Schedule D shows the actual R&C purchases at a total of $1,993,463. The expenses were primarily related to the needle rebuild project totaling $1,504,127. The Dixon Diversion project costs totaled $5,804,108, of which $1,798,748 was paid by Bradley Lake R&C Fund, $684,360 was paid by the Renewable Energy Fund (REF) Grant, and $3,321,000 was paid by State allocations. BPMC Minutes 2/14/25 Page 7 of 10 Mr. Ziesmer discussed that Schedule E shows the Battle Creek Non-R&C Capital Purchases totaling $2,621, primarily related to the survey and monument Department of Natural Resources (DNR) lease effort. Schedule F shows the Battle Creek O&M expenses were under budget by $161,518, primarily due to the 4% allocation cost from Bradley Lake. There continues to be no planned fiscal year activity or budget for Schedule H. Mr. Ziesmer discussed Schedule I shows that the SSQ Line O&M expenses were under budget by $96,561 due to less than anticipated expenses to -date. Mr. Ziesmer reviewed Appendix A, Capital Projects Funded by Bond Proceeds for Bond Series 11. The cumulative spending was $1,775,883, of which $1,636,312 directly pertains to SSQ Line upgrade projects. Mr. Thayer noted that the Dixon Diversion Project was under budget as of December 31, 2024 for the REF grants and the state grant. He asked if there is still room in those categories to -date to fund work that will occur this spring. Mr. Ziesmer indicated there is still room in the budget. There were no other comments or questions. B. O&D Report Chair Million requested Josh Crowell, CEA, review the Operation and Dispatch (O&D) Committee Report. Mr. Crowell noted that the O&D Committee approved HEA's budget and forwarded it to AEA. The budget included the labor rates discussed today. Mr. Crowell highlighted that the lake level is above average, probably due to the rain and lower usage. There is very little snow onsite. There were no comments or questions for Mr. Crowell. Mr. Thayer advised that he has a question unrelated to the O&D Report. There was no objection. Mr. Thayer asked for update on the Sterling Quartz (SQ) Line from Bryan Carey or Patrick Domitrovich, AEA, including the challenges from the warmer weather. Mr. Thayer noted that he has received professional photographs of the progress and has shared the pictures with representatives in Juneau. Mr. Carey discussed that the SQ Line work was slowed during the first couple of weeks during January because the ground that was supposed to be frozen was not frozen. A change order occurred with the contractor for about $2 million for the placement of mats. The final costs will also include moving the mats during the process. The amount remains to be determined. Mr. Carey reported that the crew completing the wiring went on break last week to let other work catch up. The crew is mostly out of the wetlands and should be returning the mats. The ground is well -drained and ready for crews to proceed forward. The project is on schedule to be completed by February 28, 2025. There were no 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 BPMC Minutes 2/14/25 Page 8 of 10 Mr. Miller expressed appreciation for the good meeting and updates. He looks forward to modifying the arrangement for the operations of the Bradley Lake Project cost assignment. Mr. Thayer indicated that he recently returned from Juneau, and that when he was in Washington, D.C., members were in Juneau. He expressed the importance of comparing notes with legislators, especially freshmen legislators, who voiced surprising comments to Mr. Thayer, which indicates the need for additional information. Mr. Thayer noted that one legislator did not understand why funds were being spent on redundancy of the power line, and that those funds could be spent elsewhere. Mr. Thayer recommended that additional discussion occur with that legislator. Mr. Thayer indicated that AEA is applying for a congressional direct spending for $6 million with Senator Lisa Murkowski's Office. Senator Murkowski visited with AEA, and staff requested AEA apply for this spending. Mr. Thayer apologized for circulating a letter of support late last night for the $6 million toward Dixon Diversion. Mr. Thayer asked Karen Bell, AEA, if the deadline is today or February 28, 2025. Ms. Bell indicated that she requested clarification and has not yet been notified. Ms. Bertolini indicated that a hard copy of the letter was included in the Committee packets. Mr. Thayer continued his comments that AEA staff is hoping to share the Dixon Diversion video as part of the application. He noted that Senator Murkowski and her Chief of Staff have seen the video. Mr. Thayer expressed appreciation to members for today's meeting, and especially for providing a clear path forward for Resolution 25-01. Mr. Janorschke noted that he likes the letter of support, and he believes that the Dixon Diversion project is a no-brainer. He highlighted two components; one, to limit the utility liability for vegetation outside the right-of-way, which also affects the state transmission lines, and second, to finish the FERC process on Susitna-Watana. He believes that the financing can be addressed later. Until there is a license, the project cannot move forward. Mr. Janorschke noted that surprisingly, every legislator indicated to him that they were onboard with the project. Mr. Thayer noted that he was surprised as well that both Democrats and Republicans inquired as to next steps to move the Susitna-Watana project forward. Mr. Janorschke commented on his conversation with Wayne Dyok, previous Susitna-Watana Project Manager. Mr. Janorschke highlighted the projected cost of $50 million to finish the FERC process. He does not know if the amount is correct, but he wanted to communicate the amount so that it was not a surprise. Mr. Janorschke expressed support to finish the FERC process. He noted that HEA's small Grant Lake project took 11 years to get licensed. Mr. Janorschke believes that the Dixon Diversion project is the most readily available renewable project. Mr. Izzo commented on the good meeting, and agreed with previous comments. Ms. Sorenson expressed appreciation for the efficient and informative meeting. BPMC Minutes 2/14/25 Page 9 of 10 Chair Million echoed the appreciation for the reports and the update on the SQ Line activities. 13. NEXT MEETING DATE — March 2.1, 2025 Chair Million confirmed that the next meeting date is March 21, 2025. 14. ADJOURNMENT There being no further business for the committee, the meeting adjourned at 10:51 a.m. Travis Million, Chair Curtis Thayer, Secretary BPMC Minutes 2/14/25 Page 10 of 10