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Gustavus Electric Company, Inc. Electric Utility Upgrade Project April 27, 2007
Business Operating Plan of the Gustavus Electric Company,Inc. Electric Utility Upgrade Project APRIL 27,2007 Gustavus Electric Company,Inc. P.O.Box 102 Gustavus,AK 99826 Phone:(907)697-2299 Fax:(907)697-2355 a,TABLE OF CONTENTS II BACKGROUND......cssssscccssscconenscsccsessceneusescceeescscenccscsseccasscseuecsesseceusescevassecccessscecssussscaccarsnacncscacscnssess Selected Statistics -Gustavus TIT.FACILITY UPGRADE ........cccscscssesssscccssscvcsceccssccsceccnnccessscuatsteccevesencusssenesecuscccnersneccscesenecasececccesesenarsenecs Electric Power Generation Facility Description .......ceccccseessscsseessesesssesssesssessessssesseasssssssasseasessneessessssssseasscesesnns 4 Project Exclusions .......csccsssssssssssecssssessesssssesseeessesssaesssesssseesaseessseasseessseegsuceesensasessusessueesssnsessseesssceasecsuuessecessecssnsestiss 4 Electric Power Generation Facility Capacity ..ccccccccccsssssseeseesseseesssssessessasesssssersesesseeaseeseesseassassensseseesecsnenseesess 4 Site Plans and Project Layout ...........cesses ees eeestessesneearesreenceasssessnesanssrenacensssassseeassessssecavesanecasssssestensesseeneaneeneceses 4 TV.FACILITY PARTICIPANTS........ccccccsscnscsccccssevascevcssccecsecesccessccescceseccsescsousesenssecesccansssousesuassconsesossesenssees 8 Contact Information .....cccccccccsssssscsssscsesescessecsesessecsassesssszecseseoesessusenesassssesecceasocsesceasseseeceesaeacssaesesssessassenseseaeeneesseaseaes 8 V.FINANCIAL AND OTHER RESPONSIBILITIES .......scscsesccccsecteccnscevccncccesscesccescascesececesescesscecenescesccessences 8 Turnover and Assumption of Responsibilities /Sustainability.........scccssscssesssecsseeesecsnnecnsseessecenecaneessneesssnensanes 8 Staffing and Training.....ccsccscsssesssesssssssseessseessesssnsesneessssssssssssnsssueessvesssscesscessusecssecsssesssavecsasecsuseeseessueessseenneesnnesens 9 Financial Responsibilities ..........sceccssessssssseeessessssssesssesseccssecsssensnsessnsessvecesscessneseneessnsesuseecaesaesusecsnesanceunecenennaseenectnes 9 Audits and Reporting ......sccccsscsssescsseeccsssessssssceescscssssecnneessnecsneesonseesnnsecnanecesnnessuarsessereeeneniecseneerastessaneassnecesneeesy 10 VI.SECONDARY OPERATOR .......cccccsssccsscssccvecnccenscnsccnssenssesecsseeeseesceesensssscsasscaessescosssecssnssosesecsssssossussounes 11 VIT.INSURANCE ........ccccccsccscsccsccccescescnccncnscsscerceeeeresecessesesessbeneseeeeeseseeenenensesenoesnesseenaneneeasnccesoesonenscessonnense 11 VIII.REGULATORY REQUIREMENTS ......sccsssssscccssssecccccssceccnssseeccscececncnscesscnessssucuesesecusscuccesesenescesessscoeeseces 11 TX.FINANCTAL INFORMATION.......cccoscscscccsccscnscecnccnscescaccescsceesssseceesessecnseaesenenecaesnesesseceeseesescncnssensoesoesens 12 Key Financial Assumptions ......cscccssecssesssssesssescesecseesesneesnnesoneeeenssenrecousessasesautessueesaerenseseseauvsssssecseseegavessaneesaserensesses 12 Key Operating Assumptions ......cccccccsssesssesssseceseeessecesneessnessaneenatessececneeenneeeinecntssanecsuessaneaseesssnesesausenseneaseerseneasenetsy 12 Explanation of Financial Terims......ccccsssssssssssssessssssesecssnneeersnneeecenneecesnrecsounmiecsssnussssnsesssusesararsonaseeesssesseesaneneesstey 12 Electric Power Generation Facility Funding ........ccccccccsssssessesssesssecneesseecssecsscanseaterseccaecsecesecnnersmesussmessiecnesnes 13 Subsequent Operating Year Revisions ........:scsccssseessneeeeseeeccenneceesensessnnesssssuesssasreensnsersessnnassesssaneseessnaeneastey 13 TABLES Table A:40 Year Estimated Utility Net Income and Cash flow.......cccccssessseecseesesesnneesneennrsentetsnsesaeesaenssnes 14 Table B:Power Generation and Consumption Summary .......sccccsssessssssseseseceseesnsensecesnssueesessnessnessneesersesenmnenies 15 Table C:Annual O&M Schedule Table D:40 Year O&M Schedule ...ccccccccccccccscsscssscsessssscsecesescsescsesceeecseaceeceeeaterseseeeevsravscseecsrsesseessesssesesssasaasenscase 17 Table E:Annual G&A and Depreciation Expenses...cescscccseesseseesireesnnreessnreesnieesatessnressanesssnessesnansensneeess 18 Table F:Annual Fuel Costs ....ccccccsccscssccccssssscsssssssscsssesescsesscesscsescsesssseseeeesensasasensanssceneesenessesessensesssesssesessesesassenenss 19 Table G:40 Year R&R Schedule wei cccccccccssscscesscseessesesescsesesesesesesereaencacecscseaeaeacaesensnssrscaesestssssenessenenseseeetete 20 Table H:Loan Schedules....ccccccccsecccsscscssecsccscsscsscsecsescssescssecseseeseseseeneceeeeseaseccnensssassesesseeassaesssesseussseaeseesenacsaseeseseee 21 APPENDIX A:PRIMARY OPERATOR STATEMENT OF QUALIFICATION APPENDIX B:O&M AND R&R COST ESTIMATE ADDITIONAL RELATED AND ATTACHED DOCUMENTS -ee eee SEE BACK 1.OPERATOR AGREEMENT COVER FOR 2.POWER PLANT FACILITY LEASE AGREEMENT CD VERSION 3.SITE CONTROL DOCUMENTS OF THIS 4.GRANT AGREEMENT PLAN. Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 1 of 22 Y I.EXECUTIVE SUMMARY This Business Operating Plan (the "Plan”)provides a guideline for the City of Gustavus (the "City”)and the Gustavus Electric Company,Inc.'s maintenance,operation and sustainability of the Gustavus Electric Utility Upgrades (the "Facility”).The City will own the Facility and lease the Facility to the Gustavus Electric Company,Inc.(the "Electric Company”). As lessee,the Electric Company will be responsible to operate and sustain the newly installed Facility and associated electric power generation equipment.This Plan has been developed to assist the Electric Company with that effort and estimates the minimum resources required to sustain the Facility;however,this Plan does not include discretionary expenses that may be incurred by the Primary Operator,which are not required for the primary function of electric power generation and distribution.For the new Facility,the Plan includes minimum estimates of operation and maintenance needs and costs,general and administrative costs,depreciation and/or renewal and replacement needs and costs,an average per kilowatt hour (kWh)charge,and total electrical costs. For the utility,Tab/e A:40 Year Estimated Utility Net Income and Cashflow includes projections of utility revenues and expenses with resulting annual net income and cashflow as well as the estimated retail price per kilowatt hour. The Rural Power System Upgrade Program will construct a new Electric Power Generation Facility in Gustavus.The Gustavus Facility will consist of three diesel engine generators,automated switchgear,fuel handling,and a step-up transformer bank. The Facility will be turned over to the City,and its lessee,after the satisfactory completion,as determined by AEA or its representative,of a 14-day test period.After this test period,AEA will provide written notice (Certificate of Substantial Completion)stating that the Facility is ready for Beneficial Occupancy. Upon receipt of this Certificate,the Electric Company will become the Primary Operator and will assume responsibility for the use,day-to-day operations,and long-term maintenance of all Facility components, except those noted elsewhere in the Plan.When the project has been completed (the Facility is complete, crews have demobilized,invoices have been paid and there are no outstanding issues),the AEA will issue,through its Grants Manager,a Notice of Project Completion. Document Interrelationships Attached to this Plan are the following documents: e Operator Agreement e Power Plant Facility Lease Agreement e Site Control Documents e Grant Agreement The Operator Agreement references the Plan,and includes language requiring the Plan be followed. The Plan takes effect after this Agreement is executed.Acceptance of the Plan by execution of these Agreements is pre-requisite to funding from the Denali Commission (the "Commission”), which will be provided through a separate Grant Agreement (See Attachments). Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 2 of 22 II.BACKGROUND The Denali Commission was established by the Federal Government to fund improvement projects within the State of Alaska,including the Rural Power System Upgrade Program.The Alaska Energy Authority is a state-owned corporation that assists in the development of safe,reliable,and environmentally sound energy systems for Alaska's communities.AEA will coordinate the planning, construction and funding of the Gustavus Electric Utility Upgrade Project,which is to be partially funded by the Commission. Gustavus is located on the north shore of Icy Passage at the mouth of the Salmon River,48 air miles northwest of Juneau.It is surrounded by Glacier Bay National Park and Preserve on three sides and the waters of Icy Passage on the south.The City of Gustavus was incorporated on April 1,2004. Glacier Bay National Monument,which includes Gustavus,was established in 1925 and became a National Park in 1980.Glacier Bay National Park attracts a large number of tourists and recreation enthusiasts during the summer months with approximately 60,000 tourists visiting or transiting the gateway community of Gustavus annually.There are approximately 459 permanent residents and about double that in the summer.More than 50%of Gustavus residents work for the National Park Service.Other employers are the lodge and other facilities at Bartlett Cove,the airport,school,and some small businesses including inns and bed and breakfasts.There is also commercial fishing in the area.The economy of Gustavus is largely seasonal. Gustavus has a State-owned airport with jet capability.The airport has two asphalt runways,one measuring 6,700'and the other 3,010'.There are many small planes,corporate jets and several air taxi services that also use the airport;float planes land at nearby Bartlett Cove.A 10-mile local road connects Bartlett Cove with the airport.Freight primarily arrives by barge;and,small boats and small ferries regularly use the Gustavus Dock,most frequently in the summer. Selected demographic and historical data for the community is provided below: Selected Statistics -Gustavus Population 2005 (State Demographer)459 2000 429 1990 258 1980 98 1970 64 1960 107 Housing (2000 Data) Occupied Housing 199 Vacant Housing Due to Seasonal Use 60 Other Vacant Housing 86 Economic Data (2000 Data) Percent Unemployed 14% Median Household Income $34,766 Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 3 of 22 --III.FACILITY UPGRADE The Rural Power System Upgrade Program will construct a new Electric Power Generation FacilityinGustavusthatwillconsistofthreedieselenginegenerators,automated switchgear,fuel handling, and a step-up transformer bank. Electric Utility Upgrade Description The AEA contracted with Alaska Energy &Engineering to develop a CDR for the Electric Power Upgrade Project,which was submitted to AEA on November 14,2005.The purpose of the CDR is to provide a concept design and construction cost estimate for upgrades to the electrical generation system for the community of Gustavus.This Plan is based upon the information contained in the CDR as well as updated Facility designs dated January 10,2007. The new Gustavus Facility will be located on land owned by the City of Gustavus.The new facility will be located south and adjacent to the existing Gustavus Electric Company power plant. A separate but related project is the ongoing construction of the Falls Creek hydro project by Gustavus Electric Company (GEC).The long term goal is for the new hydro plant to also provide power to the Glacier Bay National Park (GBNP)headquarters.In order for GBNP to receive power from GEC,a new intertie will need to be constructed between GBNP and Gustavus.The intertie is not part of this project. Project Exclusions Neither AEA nor the Commission will take responsibility for off-site fuel storage,abandonment or decommissioning of existing facilities or environmental cleanup,which are not a part of this project. The AEA and the Commission will not provide any guarantees,warrantees or ongoing support, other than that which is defined in the Plan.However,manufacturer warranties will be transferred at the time of project turnover (defined in Sectzon IV.Primary Operator). Electric Power Generation Facility Capacity The proposed capacity of the Gustavus Facility will be 921 kW,using three generators.The diesel power plant is sized to provide adequate capacity to meet the anticipated community and Glacier Bay National Park headquarters electric loads when the hydro plant is offline.Taking into account the 1%-2%annual growth in consumption over the next ten years,the initial annual estimated kW generation by diesel fuel by the community is estimated to be 1,650,000 kWh;growing to 1,750,000 kWh by year five and 1,900,000 kWh by year ten.Once the GBNP headquarters begins to receive power from the GEC utility,there will be an estimated one time step-increase of about 50%in electric load. The generators,two at 371 kW and one at 179 kW,are sized so that any two will have sufficient combined capacity to meet normal peak community loads,including the Glacier Bay National Park headquarters -once the intertie to the Park has been constructed.The Facility's power generation capacity is in excess of its present usage.The Commission guidelines dictate that extra capacity is provided to account for 10 years of growth in electric power requirements. Site Plan and Project Layout The following diagrams detail the site plan and project layout: Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 4 of 22 Project Site Plan (extent oF EXISTING COVE GLACIER BAY NATIONAL PARK AND PRESERVE{DISTRIBUTION HYDROELECTRIC TRANSMISSION a Se ee eee ee LINE AND ,wa -ACCESS ROAD BARTLETT COVE --PARK BOUNDARY EXTENTS OFexisting/{INTERTIE (FUTURA Qo pa FALLS CREEKBARTLETT_)PROJECT).HYDROELECTRIC COVE porns PROJECT POWER .\ PLANT ='eee Z|HYDROELECTRIC 8 POWERHOUSE x HYDROELECTRIC =H POWER PLANT TRANSMISSION V4 SEE SHEET SH4 LINE t Icy STRAIGHTyf GAS STATION SITE_-_SEE SHEET SH3 -_--EXTENT OF TANK FARM SITEEXISTINGGUSTAVUSSEESHEETSH2DISTRIBUTION DOCK ROAD BURIED MARINE HEADER AND DISTRIBUTION MARINE DISPENSING ON EXTENSION CITY DOCK FUEL PIPELINES AND ELECTRICAL CONDUIT ON CITY DOCK 1"=2 mi PROJECT onawn oy,JTD/CLZ|somes)"me 2 MILES.Stete of AkeGUSTAVUSENERGYINFRASTRUCTUREPROJECTS[ oe 2/10/07 te.PS et ot Com ara onornie Development mE FE wa sero]yf Pt Ewer Son)ALASKASITEPLANbust-ap-sie |SH{1 5 "*retage,means HEY Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 5 of 22 Power Plant Site Plan pT _i || || ]|| 1 ! ||w I || DOT SHO:|26 |GECTSHOPBUILDING2°|E|LA |POWER | wig PLANT ||&i 7 ;!|1 ;|| eg.75 -TI e || ---------'|1 4 }|ote °; rn 7 | 'mmaan -om ||(Cee ||rs ee i \|j i io | FUEL TANK 4 | |1 l |t |MODULE!TRANSFORMER LL”lan |a &SUBSTATION | YARD |4 7 *____7”a 7 H I 4 4 8 t 7 aws7 Z 7 7 PROPOSED yj POWER PLANT 4s SITE 2 yo Z BOUNDARY l 7 y / I 7 yoYa77/7 7ace7974Sv74weNN77¥y |47 >a ,o y 7 7 yo7 a i /7 PROIES onwn ey,BCG/CLZ sca:1"=350"Stete of AleskeGUEFAVUSENERGYINFRASTRUCTUREPROJECTSmowsmace[om 2/i0jar ow,UBT#CongoEmme OnmormeTHLE:FILE NAME SHEET OF py.0 urs Eneray Group fehtsA KAPOWERPLANTSITE2PLANcusr-e-pe ISH4 5 _room ote ug Pama hinsntas Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 6 of 22 anProject Layout -ai°*A2) cof |||Et |x| GEN #1 C CAC=1 nit371kW(|3 1 Or 3)XQ)6 & |effi|||2 |x GEN #2 |Ac-2 ff371kWOi;5) 3 'am|NY oaw 15)GEN #3 A=!r) 179kW 9} FUEL OIL COOLER FOC-J aan R=1mo a 1]xX EF-3 Lij|" =¢{fe A ela yH 3 pay]||84OmTANK _S -FIRE SUPPRESSION-7CONTROLPANEL JiUH=1 [bFIRESUPPRESSIONii-2 [pbAGENTRACKua[>2 TA SV*vio week GEN |GEN |GEN [reeoer #1 |#2 |#8 GUSTAVUS ENERGY INFRASTRUCTURE PROJECTS pawn se:BCG/CL some:3/°6'=1" *w THE obscnED ay.BOG ote.2/10/07 * ae ee | POWER PLANT MODULE PLAN GUST-BP-PP SH5 5 'we Depererert of commState of AeskeneaandEconomie Development a ALANEAGYALT ed]¥ Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 7 of 22 IV.FACILITY PARTICIPANTS The Facility participants are: Grantee/Owner:City of Gustavus Primary Contact Name:Sandy Marchbanks,Mayor Phone:(907)697-2451 Fax:(907)697-2136 Address:City of Gustavus P.O.Box 1,Gustavus,AK 99826 Usage:The City will lease the Facility to the Electric Company. Lessee/Primary Operator:Gustavus Electric Company,Inc. Primary Contact Name:Dick Levitt,President Phone:(907)697-2299 Fax:(907)697-2355 Address:Gustavus Electric Company,Inc. P.O.Box 102,Gustavus,AK 99826 Usage:The Electric Company will operate the Facility. The City owns 100%of the Facility and will lease the Facility to the Electric Company.The City also owns the property upon which the majority of the Facility will be located.The Electric Company is responsible for the Operation and Maintenance ("O&M”)and Renewal and Replacement ("R&R”)of the Facility and all associated costs. V.FINANCIAL AND OTHER RESPONSIBILITIES The Primary Operator for the Gustavus Facility will be the Gustavus Electric Company,Inc.A detailed statement of qualification for the Primary Operator is included as Appendix A:Primary Operator Statement ofQualification. Turnover and Assumption of Responsibilities /Sustainability The Facility will be turned over to the City,and its lessee,after the satisfactory completion,as determined by AEA or its representative,of a 14-day test period.After this test period,AEA will provide written notice (Certificate of Substantial Completion)stating that the Facility is ready for Beneficial Occupancy.Upon receipt of this Certificate,the Gustavus Electric Company,Inc.will become the Primary Operator and will assume responsibility for the use,day-to-day operations,and long-term maintenance of all generation facility components. When the project has been completed (the Facility is complete,crews have demobilized,invoices have been paid and there are no outstanding issues),the AEA will issue,through its Grants Manager,a Notice of Project Completion.This Notice is included in the Grant Agreement;see Additional Related and Attached Documents. The Primary Operator is responsible for the long-term sustainability of the Facility for the benefit of the local community.The complete Facility will be maintained according to guidelines outlined in Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 8 of 22 this plan,all manufacturers'recommendations for maintenance,and all state and federal laws,codes and regulations governing operation.Additionally,the Primary Operator is required to maintain a valid "Certification of Public Convenience and Necessity”issued by the Regulatory Commission of Alaska. The Primary Operator is responsible to establish and manage separate accounting funds to ensure that sufficient resources exist to sustain the Facility as specified in the Plan. Staffing and Training The Primary Operator will designate an Operations and Maintenance Manager (the "Manager”)for the Facility.The Manager will be the point of contact for communications between the Primary Operator,the Commission and all other interested parties.The Primary Operator will name the Manager prior to the start of operation and will inform the Commission in a timely fashion whenever a Manager is to be replaced.The Manager will manage the Primary Operator's enterprises and will be given complete responsibility for operating the Facility in compliance with this Plan. It is recognized that there will be,from time to time,turnover in various operational,maintenance and administrative positions.Because all functions are essential to the successful operation of the Facility,replacements will be recruited and trained as necessary.The Manager will be responsible for maintaining adequate staffing and training at all times,and when the Primary Operator lacks trained operators and administrative staff,training will be obtained to ensure sustained Facility operation. The Primary Operator's manager and bookkeeper will participate in business plan training conducted by the Alaska Energy Authority.Additionally,the Primary Operator will utilize training programs offered by AEA,the Alaska Vocational Technical Center (AVTEC)in Seward,the Commission and other training programs. Financial Responsibilities There are three cost categories that will be incurred in the ongoing operation and upkeep of the Electric Utility equipment -O&M,G&A and R&R. The Primary Operator will incur a number of expenses relating to the O&M of the equipment. O&M items are defined as expenses that are incurred on a regular basis (operator labor,supplies, etc.)and maintenance expenses that are incurred on an annual basis.O&M expenses are detailed in Table C:Annual O@M Schedule and a narrative detail is provided in Section VIL.Financial Information to address estimates and assumptions. G&A costs are routine administrative expenses incurred to manage and operate the utility and Facility,including insurance,bookkeeper labor,and depreciation expenses.G&A expenses are detailed in Table E:Annual G&A and Depreciation Expenses. R&R costs are those expenses defined as items costing greater than $5,000 and/or that are not replaced on an annual basis.Tabk G:40 Year Re>R Schedule details the anticipated items,the frequency of their replacement and their present day value. Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 9 of 22 a.The Primary Operator will maintain adequate bookkeeping and accounting records that will identifytheannualexpensesforO&M,G&A and R&R.Additionally,the Primary Operator will maintain sufficient operating and reserve cash balances to meet the O&M,G&A and R&R financial goals in this Plan.See Appendix A:Statement ofQualification for an overview of the Primary Operator's fiscal controls and accounting procedures. At least once a year,no later than November 30",the Primary Operator will develop a budget fortheupcomingfiscalyear,January 1°through December 31%,that includes the O&M,G&A and R&R costs.This will include an update of actual expenses and projections and assumptions used in this Plan,as described in Section VIII.Financial Information,Subsequent Operating Year Revisions.The Primary Operator may use Tables A-H for the annual update or provide its own schedules that provide comparable information. Audits and Reporting The Primary Operator will arrange for an annual financial audit that is conducted by qualified, independent auditors.The Primary Operator will provide an annual report of operations to the Commission that includes a summary description of O&M and R&R projections;annual O&M and R&R budgets,expenditures and account balances;a projection of future O&M and R&R cash flows; and,any other information appropriate to the Facility.The Commission will review the reports and the annual financial audits of Facility operations and will actively monitor the Primary Operator's ability to operate consistent with guidelines outlined in this Plan.The Commission has reserved the right to visit the site and to access all books and records related to the Facility at any time upon written request. Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 10 of 22 VI.SECONDARY OPERATOR The Primary Operator agrees that,if the Primary Operator is not operating the Facility in compliance with the terms and conditions of the Plan and/or does not maintain a valid "Certificate of Public Convenience and Necessity”the Denali Commission may in its discretion propose to the RCA an operator to serve as the Secondary Operator.The Electric Company shall cooperate in the transition of the Facility and its operation to a Secondary Operator,pursuant to the terms and conditions of the Operator Agreement,which is included as an attachment to the Plan. VII.INSURANCE The Primary Operator is required to be insured for General Liability and Property;estimates are included in the annual O&M costs. VIII.REGULATORY REQUIREMENTS The Primary Operator is responsible for ensuring adherence to all applicable state and federal regulations.The Facility will be provided with,and will have on-site,if applicable,the following spill response and related regulatory plan: e Environmental Protection Agency (EPA)Spill Prevention Control and Countermeasures (SPCC)Plan (40 CFR Part 112)-This plan confirms compliance of the Facility with the spill prevention and operating requirements of 40 CFR Part 112.A Registered Professional Engineer must certify the plan. This plan will include operator guidelines for spill training,drills,prevention and response and other related environmental information to ensure the environmental integrity of the Utility and the community.The plan will be developed near the end of Facility construction.The Primary Operator will participate in development and review of the plan as requested. The Primary Operator must hold a valid "Certificate of Public Convenience and Necessity”issued by the Regulatory Commission of Alaska. The Primary Operator will submit to the State of Alaska,Department of Environmental Conservation a Pre-approved Emissions Limit prior to Facility operation. Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 11 of 22 IX.FINANCIAL INFORMATION All estimates and assumptions contained in this Plan are preliminary and are anticipated to change as the project progresses.Actual expenses may vary throughout the life of the Facility and,therefore, should not be considered as final estimates. Key Financial Assumptions e Annual inflation rate of 1.5%. e Annual collections rate of 95%. ©Year 20 and Year 40 R&R will be funded 20 percent by Electric Company funding and 80 percent from debt financing. e Detailed assumptions regarding labor rates,required labor hours,and other operating costs are provided in the tables that follow. e Fuel costs for the first year are estimated to be $2.47 per gallon. e Annual kWh usage for Gustavus is estimated to grow at 1-2%annually. Key Operating Assumptions e Line loss and unbilled production are assumed to be 12%per year. e Initial first year total power generation is estimated to be 1,650,000 kWh for Gustavus - 15%of which is estimated to be generated with diesel fuel. e Initial annual billed kWh is estimated to be 1,450,000 kWh for Gustavus. e Energy is produced at 14 kWh/gallon on average. Explanation of Financial Terms e Total Annual Billed kWh -The annual estimated kWh of demand from all users groups (residential,community,commercial,etc)that is billed for payment. e Assumed Annual Collectable kWh -The annual estimated kWh that is deemed to be collectable upon billing for payment. Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 12 of 22 Electric Power Generation Facility Funding This Plan is not a commitment;however,it is anticipated that project funding will be provided by the Denali Commission.For funding details see the Grant Agreement included as an attachment to this Plan. Subsequent Operating Year Revisions Starting with the second year,as operating experience specific to this Facility is obtained,the projections and assumptions upon which the Plan is based will be reviewed and modified.The following guidelines are for use in subsequent operating years in updating and modifying Plan projections and assumptions: Step 1:Review previous years'O&M,G&A and R&R costs and compare to current projections Step 2:Adjust O&M,G&A and R&R projections and assumptions based upon actual experience Step 3:Update Table A:40 Year Estimated Utihty Net Income and Cashflow or similar annual budget Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 13 of 22 Inflation Rate :nor 1.50% 40 YEAR ESTIMATED UTILITY NET INCOME AND CASHFLOW TABLE A Table A is a summary of the following revenue and expenses tables,all of which are presented to illustrate Gustavus Electric Company's ability to generate a postive cashflow sufficient to support operations and maintenance and repair and renewal over 40 years.As a RCA-regulated utility,GEC's actual utility rates will be set following RCA procedures and policies. Annul Average Rate Increase :0.50°%) Annual Revenue Estimate Annual Expense Estimate Estimated Annual Cashflow Before Taxes Average Assumed Estimated O&M General &|per Loan _.Estimated Estimated _Plus:Tess:R&R EstimatedYearEstimatedCollectableFuelCosts|Administrative Depreciation |.:Net Income Estimated Loan De Annual Expenses Interest Total Expenses|Year |Net Income a oo.AnnualRetailPricekWh/Year Revenue (Fables C&D)(Table E)Expenses Payments (Table F)Before Taxes|Before Taxes Depreciation Principal Cashflo$/kWh (Table B)(Table F)(Table F)Payment w 1 $0.3600 1,379,400 ||$541,584]|$19,773 |$43,666 ]$416,300 $50,000 |$529,739 ||$11,845 1 4$11,845]|$50,000 $-$61,845 2 $0.3618 1,400,091 $551,553 ||$20,070 |$44,986 |$422,545 $50,750 |$538,350}|$13,203 218 13,203 |1 $50,750 $:$63,953 3 $0.3636 1,421,092]|$561,722}1 $20,371 |$46,346 |$428,883 $51,511]$547,111 $14,611 3/3 14,611 $51,511 $-$66,123 4 $0.3654 1,442,409 ||$572,095]|$20,677 |$47,746 |$435,316 $52,284 |$556,023 ||$16,072 4 [$16,072]|$52,284 ||$-$68,356 5 $0.3673 1,464,045 ||$582,677)|$20,987 |$49,190 |$441,846 $55,364|$567,386}|$15,291 5 |$15,291 $55,364 ||$-$70,655 6 $0.3691 1,486,006 ||$593,470]|$21,302 |$50,676 |$448,473 $56,160|$576,611 $16,859 6 /$16,859]|$56,160 $-$73,019 7 $0.3709 1,508,296 ||$604,481 $21,621 |$52,208 |$455,200 $56,968 |$585,997}|$18,484 7 |$18,484]{|$56,968 $-$75,452 8 $0.3728 1,530,920]|$615,713 ||$21,945 |$53,786 |$462,028 $§5,492|$593,252}1S 22,461 8 |$22,461 $55,492 $-$77,953 9 $0.3747 1,553,884!|$627,170]|$22,275 |$55,412{$468,959 $56,325|$602,970}|$24,200 9 {3 24,200 |1 $56,325 $-$80,525 10 $0.3765 1,577,192 ||S 638,857 ||$22,609 |$57,0861 $475,993 |$7,113 |$62,183 |$624,985 |1 $13,872 10 |$13,872]1$62,183 $5,772 ||$70,283 11 $0.3784 1,600,850 ||$650,778}|$22,948 |$58,812}$483,133]$6,796 |$63,044 |$634,730}|$16,049 11 |$16,049]1 §63,041 $6,089 $73,001 12 $0.3803 1,624,863 ||$662,939 ||$23,292 |$60,589 |$490,380 |$6,461 |$63,911 |$644,634 |1 $18,305 12 1$18,305]|§$63,911 $6,424 ||%75,793 13 $0.3822 1,649,236 ||$675,345]|$23,641 |$62,421|$497,736]$6,108 |$61,681}$651,587}|§23,758 13 |$23,758}|$61,681 $6,777 $78,661 14 $0.3841 1,673,974}|$687,999}|$23,996 |$64,307 |$505,202 |$5,735 |$62,578 |$661,818 ||$26,181 14 |$26,181 $62,578 $7,150 $81,608 15 $0.3860 1,699,084 ||$700,907 ||$24,356 |$66,251 |$512,780]$5,342 |$64,183 1$672,912]|$27,995 15 |$27,995}|$64,183 $7,543 $84,635 16 $0.3880 1,724,570 |1 $714,074]|$24,721 |$68,254|$520,472 |$4,927 |$65,107 |$683,481 $30,594 16 |$30,594]|$65,107 $7,958 ||$87,743 17 $0.3899 1,750,439 |{$727,506 ||$25,092 |$70,317 |$528,279 |$4,489 |$66,045 |$694,221 $33,284 17 _|$33,284}|$66,045 $8,396 ||$90,933 18 $0.3919 1,776,695 ||$741,207 ||$25,469 |$72,442 |$536,203 |$4,027 |$64,701 |$702,842}|$38,366 18 |$38,3669 |$64,701 $8,858 ||$94,209 19 $0.3938 1,803,346 ||$755,184}|$25,851 |$74,631 [3 544,246 |$3,540 |$65,667 |$713,935 ||$41,248 19 |$41,2481 |$65,667 ||$9,345 $97,571 20 $0.3958 1,830,396 ||$769,440}|$26,238 |$76,887 |$552,410 |$3,026 |$78,724 |$737,286}|$32,155 20 |$32,155]|$78,724 ||$9,859 $101,020 21 $0.3978 1,857,852}|$783,984]|$26,632 |$79,211,$560,696 |$2,484 |$79,720 |$748,742}|$35,241 21 |$35,241 $79,720 ||$10,401 $104,560 22 $0.3998 1,885,720 ||$798,819}|$27,031 |$81,605]$569,106 |$1,912 |$80,730 |$760,384}|$38,434 22 |$38,434]|$80,730 ||$10,973 |[|$108,191 23 $0.4017 1,914,005 |7 $813,952 ||$27,437 |$84,072 |$577,643 |$1,308 |$79,097 |$769,556 ||$44,395 23 |$44,3951 |$79,097 $14,577 [S$111,915 24 $(0.4038 1,942,715]|$829,388}|$27,848 |$86,613 |$586,307 |$672 |$80,137 |$781,578]|§47,811 24 |$47,811 $80,137 $12,213 ||$145,735 25 $0.4058 1,971,856 ||$845,135 |4 $28,266 |$89,231 |$595,102 $83,489 |$796,088)|$49,047 25 |$49,047]|$83,489 $:$132,536 26 $0.4078 2,001,434 ||$861,198 ||$28,690 |$91,928 |$604,029 $84,561]$809,208]|$51,990 26 |$51,990]|$84,561 $-$136,551 27 $0.4098 2,031,456}|$877,583 ||$29,120 |$94,706 |$613,089 $85,649 |$822,565)|$55,018 27 |$55,018]|$85,649 $-$140,667 28 $0.4119 2,061,927 ||$894,297 |1 §29,557 |$97,569 |$622,285 $84,458 [$833,870]|$60,427 28 |$60,427 ||$84,458 $-$144,88629||$0.4140 2,092,856 |1$911,347]|$30,001 |$100,518]$631,620 $85,579 |$847,717]|$63,629 29 |$63,629 |1 $85,579 $-$149,209 30 $0.4160 2,124,249 ||$928,738]|$30,451]$103,556]$641,094 $84,888 |$859,988]|$68,750 30 |$68,750]1$84,888 $-$153,638 31 $0.4181 2,156,113 ||$946,479 ||$30,907 |$106,686]$650,710 $86,043 |$874,3467 |$72,133]|31|$72,133 |1 $86,043 $-$158,176 32 $0.4202 2,188,455 ||$964,577 ||$31,371 |$109,910]$660,471 $87,215|$888,967]|$75,609 32 |$75,609 ||$87,215}|$-$162,824 33 $0.4223 2,221,281 $983,037 ||$31,8421 $113,232]$670,378 $85,7511 $901,203]|$81,834 33 1$81,834]|$85,751 $:$167,585 34 $0.4244 2,254,601 $1,001,868 ||$32,319]$116,655]$680,434 $86,959]$916,367]|$85,502 34 |$85,502 ||$86,959]|$-$172,461 35 $0.4265 2,288,420 ||$1,021,077}|$32,804]$120,181]$690,640 $85,815|$929,440]|$91,637 35 |$91,637 ||$85,815 $-$177,452 36 $0.4287 2,322,746 ||$1,040,672 ||$33,296 |$123,813}$701,000 $87,060]$945,169 ||$95,503 36 |$95,503 ||$87,060 ||$-$182,56337|13 0.4308 2,357,587 |1$1,060,660]|$33,795 |$127,555 |$711,515 $88,323 1$961,188}|$99,472 37 |$99,472]|$88,323 $-$187,795 38 $0.4330 2,392,951 $1,081,050]|$34,302 |$131,411]$722,188 $87,039 |$974,940]|$106,110 38 |$106,110]|$87,039 $-$193,149 39 $0.4351 2,428,845 ||$1,101,848 ||$34,817]$135,383 |$733,020 $88,340{$991,560]|$110,288 39 |$110,288}|$88,340 $-$198,628 40 $0.4373 2,465,278 ||$1,123,065 ||3 35,339 |$139,475]$744,016]$46,396 |$121,999 |$1,087,224]|$35,840 40 13 35,840 f |$121,999}1 $37,644 ||$120,195 Gustavus Electric Company Inc. Electric Utility Upgrade Business Operating Plan Page 14 of 22 TABLE B Power Generation and Consumption Summary Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 15 of 22 Total Annual Line . Year Generated Loss and Total Billed CollecablekWh/Year Unbilled kWh/'Year kWh/Year 1 1,650,000 198,000 1,452,000 1,379,400 2 1,674,750 200,970 1,473,780 1,400,091 Assumed Collection 3 1,699,871 203,985 1,495,887 1,421,092 Rate 4 1,725,369 207,044 1,518,325 1,442,409 eho lassal)QR geome: 5 1,751,250 210,150 1,541,100 1,464,045 6 1,777,519 213,302 1,564,216 1,486,006 7 1,804,181 216,502 1,587,680 1,508,296 Annual kWh 8 1,831,244 219,749 1,611,495 1,530,920 Increase 9 1,858,713 223,046 1,635,667 1,553,884 10 1,886,593 226,391 1,660,202 1,577,192 porate DL50%2. 11 1,914,892 229,787 1,685,105 1,600,850 12 1,943,616 233,234 1,710,382 1,624,863 13 1,972,770 236,732 1,736,038 1,649,236 14 2,002,362 240,283 1,762,078 1,673,974 15 2,032,397 243,888 1,788,509 1,699,084 Annual Line Loss/ 16 2,062,883 247,546 1,815,337 1,724,570 Unbilled 17 2,093,826 251,259 1,842,567 1,750,439 12%: 18 2,125,234 255,028 1,870,206 1,776,695 19 2,157,112 258,853 1,898,259 1,803,346 20 2,189,469 262,736 1,926,732 1,830,396 21 2,222,311 266,677 1,955,633 1,857,852 22 2,255,645 270,677 1,984,968 1,885,720 23 2,289,480 274,738 2,014,742 1,914,005 24 2,323,822 278,859 2,044,964 1,942,715 25 2,358,680 283,042 2,075,638 1,971,856 26 2,394,060 287,287 2,106,773 2,001,434 27 2,429,971 291,596 2,138,374 2,031,456 28 2,466,420 295,970 2,170,450 2,061,927 29 2,503,417 300,410 2,203,007 2,092,856 30 2,540,968 304,916 2,236,052 2,124,249 31 2,579,082 309,490 2,269,592 2,156,113 32 2,617,769 314,132 2,303,636 2,188,455 33 2,657,035 318,844 2,338,191 2,221,281 34 2,696,891 323,627 2,373,264 2,254,601 35 2,737,344 328,481 2,408,863 2,288,420 36 2,778,404 333,409 2,444,996 2,322,746 37 2,820,080 338,410 2,481,671 2,357,987 38 2,862,381 343,486 2,518,896 2,392,951 39 2,905,317 348,638 2,556,679 2,428,845 40 2,948,897 353,868 2,595,029 2,465,278 TABLE C ANNUAL "O and M"SCHEDULE Rate Per Fringe Total Hourly Position Hour Rate Cost Duties Operator 1 -Primary $23.00 13.0%$25.99 Maintenance &Primary Operations Operator 2 -Secondary $17.00 13.0%$19.21 Maintenance &Operations Bookkeeper $15.00 13.0%$16.95 Payroll,Accounts Payable Utility Manager $50.00 13.0%$56.50 Manager,Denali Commission Reporting Annual O&M Costs: Labor Costs Hours/Hourly Monthly Labor:Month Cost Cost Annual Costs Operating Labor Operator 1 12.10 $25.99 $314.43 Operator 2 12.10 $19.21 $232.40 Subtotal Operating Labor 24.20 $546.83 $6,562 Administrative Labor Bookkeeper 0 $616.95 $- Utility Manager 0 $56.50 $- Subtotal Administrative Labor 0 $-$- Materials: Materials &Equipment $2,961 Outside Labor $1,250 Other Costs: Training (Lump Sum)$2,000 Annual Audit (Lump Sum)$2,000 Insurance $5,000 Total Annual O&M Costs $19,773 Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 16 of 22 TABLE D 40 YEAR "O and M"SCHEDULE Annual O&M Total Billed Assumed O&M SurchargeYearExpenseskWh/Year Collectable $/kWhkWh/Year 1 $19,773 1,452,000 1,379,400 $0.014 2 $20,070 1,473,780 1,400,091 ||$0.014 3 $20,371 1,495,887 1,421,092 ||$0.014 4 $20,677 1,518,325 1,442,409 ||$0.014 5 $20,987 1,541,100 1,464,045 ||$0.014 6 $21,302 1,564,216 1,486,006 ||$0.014 7 $21,621 1,587,680 1,508,296 ||$0.014 8 $21,945 1,611,495 1,530,920 ||$0.014 9 $22,275 1,635,667 1,553,884 ||$0.014 10 $22,609 1,660,202 1,577,192 ||$0.014 11 $22,948 1,685,105 1,600,850 ||$0.014 12 $23,292 1,710,382 1,624,863 ||$0.014 13 $23,641 1,736,038 1,649,236 ||$0.014 14 $23,996 1,762,078 1,673,974 ||$0.014 15 $24,356 1,788,509 1,699,084 ||$0.014 16 $24,721 1,815,337 1,724,570 ||$0.014 17 $25,092 1,842,567 1,750,439 ||$0.014 18 $25,469 1,870,206 1,776,695 ||$0.014 19 $25,851 1,898,259 1,803,346 ||$0.014 20 $26,238 1,926,732 1,830,396 ||$0.014 21 $26,632 1,955,633 1,857,852 ||$0.014 22 $27,031 1,984,968 1,885,720 ||$0.014 23 $27,437 2,014,742 1,914,005 ||$0.014 24 $27,848 2,044,964 1,942,715 ||$0.014 25 $28,266 2,075,638 1,971,856 ||$0.014 26 $28,690 2,106,773 2,001,434 ||$0.014 27 $29,120 2,138,374 2,031,456 ||$0.014 28 $29,557 2,170,450 2,061,927 ||$0.014 29 $30,001 2,203,007 2,092,856 ||$0.014 30 $30,451 2,236,052 2,124,249 ||$0.014 31 $30,907 2,269,592 2,156,113 ||$0.014 32 $31,371 2,303,636 2,188,455 ||$0.014 33 $31,842 2,338,191 2,221,281 ||$0.014 34 $32,319 2,373,264 2,254,601 ||$0.014 35 $32,804 2,408,863 2,288,420 ||$0.014 36 $33,296 2,444,996 2,322,746 ||$0.014 37 $33,795 2,481,671 2,357,587 ||$0.014 38 $34,302 2,518,896 2,392,951 ||$0.014 39 $34,817 2,556,679 2,428,845 ||$0.014 40 $35,339 2,595,029 2,465,278 ||$0.014 Gustatvus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 17 of 22 Inflation Rate Collection:Rate Ln eS TABLE E ANNUAL "G and A"AND DEPRECIATION EXPENSES Annual General &Administrative Costs: Salaries S 160,000 Employee Fringe $45,000 Interest/Bank Fees $27,000 Aircraft/Auto Expenses $38,000 Office Expenses $18,000 Freight/Postage $10,000 Insurance-Auto $8,100 Operating Expenses -Additional to O&M $40,000 Professional Fees $1,000 Rent Expense $26,500 Phone/Utilities $13,500 Training $3,000 Franklin Growth Fund $1,700 HRBFA $24,500 'Total Annual O&M Costs $416,300 Annual Depreciation Expense: Depreciation-Other Year Depreciation R&R Assets Total Annual Depreciation 1 18 -{$50,000 $50,000 2 $-$50,750 $50,750 3 $=$51,511 $51,511 4 $=$52,284 $52,284 5 $2,296 |$53,068 $55,364 6 $2,296 |$53,864 $56,160 7 Is 2,296 |$54,672]|$56,968 8 $=$55,492 $55,492 9 $-$56,325 $56,325 10 {§5,014 |$57,169 5 62,183 11 $5,014 |§58,027 §63,041 12 $5,014]$58,897 $63,911 13 $1,900 |$59,781 $61,681 14 $1,900 |$60,678 $62,578 15 1$2,596 |§61,588 $64,183 16 I$2,596 |§62,512 $65,107 17,{$2,596 |$63,449 $66,045 18 $300 |$64,401 $64,701 19 $300 |$65,367 $65,667 20 $12,377 |$66,348 $78,724 21 $12,377 |$67,343 $79,720 22 $12,377 |$68,353 $80,730 23 =1$9,718 |$69,378 $79,097 24 $9,718 |$70,419 $80,137 25 $12,014 |$71,475 $83,489 26 [$12,014 |$72,547 $84,561 27 $12,014 |$73,635 $85,649 28 $9,718 |$74,740 $84,458 29 $9,718 |$75,861 $85,579 30 $7,889 |$76,999 $84,888 31 $7,889 |$78,154 $86,043 32 $7,889 |$79,326 $87,215 33 1 $5,235 |$80,516 $85,751 34 $5,235 |$81,724 $86,959 35 $2,866 |$82,950 $85,815 36 $2,866 |$84,194 $87,060 37 $2,866 |$85,457 $88,323 38 $300 |$86,739 $87,039 39 $300 |$88,040 $88,340 40 $32,638 |$89,361 $421,999 Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 18 of 22 TABLE F ANNUAL FUEL COSTS Inflation Rate ©gh Produced per Gallon Estimated Total Diesel Total Fuel Usage Assumed Year Fuel Cost per Generated @ Total Annual Collectable Fuel Cost Gallon kWh/Yeat 14kWh/Gallon ||Fe!SoS |1 ewnsvear |"WE(15%of Total) 1 $2.47 247,500 17,679 $43,666 1,379,400 |$0.032 2 $2.51 251,213 17,944 $44,986 1,400,091 |$0.032 3 $2.54 254,981 18,213 $©46,346 1,421,092 |$0.033 4 $2.58 258,805 18,486 $©47,746 1,442,409 |$0.033 5 $2.62 262,687 18,763 $©49,190 1,464,045 |$0.034 6 $2.66 266,628 19,045 $50,676 1,486,006 |$0.034 7 $2.70 270,627 19,331 $52,208 1,508,296 |$0.035 8 $2.74 274,687 19,620 $53,786 1,530,920 |$0.035 9 $2.78 278,807 19,915 $55,412 1,553,884 |$0.036 10 $2.82 282,989 20,214 $57,086 1,577,192 |$0.036 11 $2.87 287,234 20,517 $©58,812 1,600,850 |$0.037 12 $2.91 291,542 20,824 ||$60,589 1,624,863 |$0.037 13 $2.95 295,915 21,137 $62,421 1,649,236 |$0.038 14 $3.00 300,354 21,454]|$64,307 1,673,974 |$0.038 15 $3.04 304,860 21,776 $66,251 1,699,084 |$0.039 16 $3.09 309,432 22,102 $68,254 1,724,570 |$0.040 17 $3.13 314,074 22,434]|$70,317 1,750,439 |$0.040 18 $3.18 318,785 22,770 $72,442 1,776,695 |$0.041 19 $3.23 323,567 23,112 $74,631 1,803,346 |$0.041 20 $3.28 328,420 23,459 $76,887 1,830,396 |$0.042 21 $3.33 333,347 23,810 $=79,211 1,857,852 |$0.043 22 $3.38 338,347 24,168 $=81,605 1,885,720 |$0.043 23 $3.43 343,422 24,530 $84,072 1,914,005 |$0.044 24 $3.48 348,573 24,898 $86,613 1,942,715 |$0.045 25 $3.53 353,802 25,272 $=89,231 1,971,856 |$0.045 26 $3.58 359,109 25,651 $=91,928 2,001,434 |$0.046 27 $3.64 364,496 26,035 $94,706 2,031,456 |$0.047 28 $3.69 369,963 26,426 $97,569 2,061,927 }$0.047 29 $3.75 375,512 26,822 $100,518 2,092,856 |$0.048 30 $3.80 381,145 27,225 $103,556 2,124,249 |$0.049 31 $3.86 386,862 27,633 $106,686 2,156,113 |$0.049 32 $3.92 392,665 28,048]}$109,910 2,188,455 |$0.050 33 $3.98 398,555 28,468 ||$113,232 2,221,281 |$0.051 34 $4.04 404,534 28,895 $116,655 2,254,601 |$0.052 35 $4.10 410,602 29,329 $©6120,181 2,288,420 |$0.053 36 $4.16 416,761 29,769 $123,813 2,322,746 |$0.053 37 $4.22 423,012 30,215 $127,555 2,357,587 |$0.054 38 $4.28 429,357 30,668 $131,411 2,392,951 |$0.055 39 $4.35 435,798 31,128 $135,383 2,428,845 |$0.056 40 $4.41 442,335 31,595 $139,475 2,465,278 |$0.057 Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 19 of 22 TABLE G 40 YEAR "R and R"SCHEDULE Year of Present Day {|Annual Inflated DepreciatiActivityR&R Activity Value Total Value R&R Activities:Cost Activity Year Term 3 Repair Ramp/Grate $426 Replace Values/Gauges 437 Repair Ramp/Grate $426 §/10/15/25/30/35 3 Repair Siding/Door 1,288 Resurface Drive Access $-20/40 20 Upgrade Floors/W'alls /Ceilings 1,620 |,Replace Ramps/Stairs $9,250 40 20 Replace Batteries/Alternators /Etc 2,697 Pump Replacement $654 10/20/30/40 3 Repair Ballasts/Lenses 420 11$6,887 1)$7,310 Replace Fuel Tank $21,780 40 20 10 Repair Ramp/Grate $426 Replace Values/Gauges $437 5/15/25/35 3 Pump Replacement 654 Refurbish Electric Systems $686 10/20/30/40 3 Refurbish Electric Systems 686 Replace Electrical Systems $41,250 40 20 Floor/Roof Repair 845 Floor/Roof Repair $845 10/20/30/40 3 Repair Siding/Door 1,288 Upgrade Floor/Roofs $12,250 20/40 10 Repair Roof 810 Repair Siding/Door $1,288 5/10/15/25/30/35 3 Change Door Hardware 1,167 Replace Wails/Windows $12,531 40 20 Upgrade Floors/W'alls /Ceilings 1,620 Repair Roof $810 10/20/35 3 Repair Ducts/Grilles 1,428 Replace Roofing/Insulation $-15/35 10 Repair Fire Supression System 3,000 Change Door Hardware $1,167 10/30 3 Repair Bailasts/Lenses 420 Window Upgrade $597 20 3 Top End Overhaul Genset/Controls 8,000 f]$20,341 |]$23,258 Upgrade Floors/Walls /Ceilings $1,620 5/10/15/25/30/35 3 15 Repair Ramp/Grate $426 Replace Doors $2,645 20/40 3 Replace Values /Gauges 437 Mechanical Upgrade $:5/10/15/25/30/35 3 Repair Siding/Door 1,288 Replacement Mechanical S:$126,575 40 20 Upgrade Floors/W'alls /Ceilings 1,620 Repair Ducts /Grilles $1,428 10/30 3 Replace Batteries/Alternators/Etc 2,097 Refurbish Ducts /Grilles $5,040 20/40 10 Repair Ballasts/Lenses 420]}}$6,887 }}$8,483 Repair Fire Supression System $3,000 10/30 10 20 Pump Replacement $634 Replace Fire Supression System $34,000 40 20 Refurbish Electric Systems 686 Replace Fi:/Fire Alarm /Cond $33,043 20/40 10 Floor/Roof Repair 845 Replace Breakers /Fuses $1,740 20 3 Repair Roof 810 Repair Ballasts/Lenses $420 §/10/15/25/30/35 3 Window Upgrade 597 Replace Switchgear /Controls $13,500 20 10 Upgrade Floor/Roofs 12,250 [Top End Overhaul Genset/Controls $8,000 10/30 5 Replace Doors 2,645 Major Genset Overhaul $50,025 20 15 Replace Fixtures/Fire Alarm/Conductors 33,043 Repower Generators $78,950 40 15 Refurbish Ducts/Grilles 5,040 Replace Batteries /Alternators /Etc $2,697 §/15/25/35 3 Replace Breakers/Fuses 1,740 [Replace Conductors /Transformers/Controls $210,500 40 20 Replace Switchgear/Controls 13,500 Major Genset Overhaul 50,025 |}$121,834 11 $161,668 25 Repair Ramp/Grate $426 Replace Values/Gauges 437 Repair Siding/Door 1,288 Inflation Rate 15% Upgrade Floors/Walls /Ceilings 1,620 Reinvestment Rate 3% Replace Batteries/Alternators/Etc 2,697 Repair Ballasts/Lenses 420 |$6,887 ||$9,845 30 Repair Ramp/Grate $426 Pump Replacement 654 Refurbish Electric Systems 686 Floor/Roof Repair 845 Repair Siding/Door 1,288 Change Door Hardware 1,167 Upgrade Floors/Walls/Ceihings 1,620 Repair Ducts/Grilles 1,428 Repair Fire Supression System 3,000 Repair Ballasts/Lenses 420 Top End Overhaul Genset/Controls 8,000 |]$19,532 |]$30,078 35 Repair Ramp/Grate $426 Replace Values/Gauges 437 Repair Siding/Door 1,288 Repair Roof 810 Upgrade Floors/Walls/Ceilings 1,620 Mechanical Upgrade : Replace Batteries/Alternators /Etc 2,697 Repair Ballasts/Lenses 420}/$7,697 ||$12,769 40 Pump Replacement $654 Refurbish Electric Systems 686 Floor/Roof Repair 845 Replace Ramps/Stairs 9,250 Replace Fuel Tank 21,780 Replace Electrical Systems 41,250 Upgrade Floor/Roofs 12,250 Replace Walls/Windows 12,531 Replace Doors 2,645 Replacement Mechanical Systems 126,575 Replace Fixtures/I'ire Alarm /Conductors 33,043 Refurbish Ducts/Grilles 5,040 Replace Fire Supression System 34,000 Repower Generators 78,950 Replace Conductors/Transformers /Controls 210,500 |]$589,999 11 $1,054,452 g 780,064 $=780,64 §1,307,863 Chignik Electric Electric Utility Upgrade Business Operating Plan Page 20 of 22 Year 20 R&R Loan TABLE H Loan Schedules Principal.|$=°°.129,334 Tem ff 15 Years © Rate ee BB Payment ©($12,884.99) Beginning Principal Ending Year Balance Interest Payment Payment Balance 1 $129,334.18 |$7,113.38 |$(12,884.99)|$5,771.61 |$123,562.56 2 $123,562.56 |$6,795.94]$ (12,884.99)]$6,089.05]$117,473.51 3 $117,473.51 |$6,461.04 |$(12,884.99)|$6,423.95 |$111,049.56 4 $111,049.56 |$6,107.73 |$(12,884.99)|$6,777.27 |$104,272.29 5 $104,272.29 |$5,734.98 |$(12,884.99)|$7,150.02 |$97,122.27 6 $97,122.27]$5,341.72 |$(12,884.99)|$7,543.27 |$89,579.00 7 $89,579.00 |$4,926.84]$-(12,884.99)|$7,958.15 |$81,620.85 8 $81,620.85 |$4,489.15 |$(12,884.99)|$8,395.85 |$73,225.00 9 $73,225.00 |$4,027.38 |$_(12,884.99)|$8,857.62]$64,367.38 10 $64,367.38 1 $3,540.21 1 $(12,884.99)|$9,344.79 |$55,022.59 11 $55,022.59 1 $3,026.24 |$(12,884.99)|$9,858.75 |$45,163.84 12 $45,163.84 |$2,484.01 |$(12,884.99)$10,400.98 |$34,762.86 13 $34,762.86 |$1,911.96 |$ (12,884.99)}$10,973.04]$23,789.82 14 $23,789.82 |$1,308.44 |$(12,884.99)$11,576.55]$12,213.27 15 $12,213.27 1 $671.73 |$(12,884.99){$12,213.27 |$(0.00) $63,940.74 $(193,274.92)$129,334.18 Year 40 R&R Loan Principal $ere 843,BOD oe ee cea ae: Term =oes 15 Years - Rate...ee BBM Payment ($84,040.29) Beginning Principal Ending Year Balance Interest Payment Payment Balance 1 $843,561.26 |$46,395.87 |$(84,040.29)|$37,644.43 |$805,916.84 2 $805,916.84 |$44,325.43 1$_(84,040.29)|$39,714.87 |$766,201.97 3 $766,201.97 |$42,141.11 |$(84,040.29)|$41,899.19 |$724,302.78 4 $724,302.78 |$39,836.65 |$(84,040.29)|$44,203.64 |$680,099.14 5 $680,099.14 |$37,405.45 |$_(84,040.29)|$46,634.84 |$633,464.30 6 $633,464.30 |$34,840.54 |$-(84,040.29)|$49,199.76 |$584,264.54 7 $584,264.54 |$32,134.55 |$(84,040.29)|$51,905.75 |$532,358.79 8 $532,358.79 |$29,279.73 1 $(84,040.29)|$54,760.56 |$_477,598.23 9 $477,598.23 |$26,267.90 |$(84,040.29)|$57,772.39 |$419,825.84 10 $419,825.84 |$23,090.42 |$(84,040.29)}$60,949.87 |$358,875.97 it $358,875.97 |$19,738.18 |$(84,040.29)]$64,302.12 |$294,573.85 12 $294,573.85 |$16,201.56 |$_(84,040.29)|$67,838.73 |$_226,735.12 13 $226,735.12 |$12,470.43 |$_(84,040.29)|$71,569.86 |$155,165.25 14 $155,165.25 |$8,534.09 |$_(84,040.29)|$75,506.21 1 $79,659.05 15 $79,659.05 |$4,381.25 |$-(84,040.29)|$79,659.05 |$(0.00) 16 |$(0.00)|$(0.00)]$__(84,040.29)|$84,040.29 |$(84,040.2917|$_(84,040.29)|$(4,622.22),$_(84,040.29)|$88,662.51 |$(172,702.81)18 |$(172,702.81)|$(9,498.65)|$_(84,040.29)|$93,538.95 |$(266,241.75)19 |$(266,241.75)|$(14,643.30)|$_(84,040.29){$98,683.59 |$(364,925.35)20 |$(364,925.35)]$(20,070.89)]$_(84,040.29)]$104,111.19 |$(469,036.53) $368,208.10 $(1,680,805.89)$1,312,597.80 Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 21 of 22 APPENDIX A:PRIMARY OPERATOR STATEMENT OF QUALIFICATION The Primary Operator Statement of Qualification includes: 1.A description of the Primary Operator,its personnel and experience,and its responsibilities and functions.This discussion includes a description of the ability and history of the Primary Operator to operate an electric power generation facility and utility as a business and/or its history of operating other business enterprises,as well as a description of the Primary Operator's fiscal controls and accounting procedures.This discussion details organization history,management and structure;identification of key personnel,their experience and responsibilities;and,proposed organization of the electric utility management and operations,including an organizational chart. 2.A description of the Primary Operator's,if any,staffing or training needs. 3.A description of the training plan proposed by the Primary Operator to address current and future needs. Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Page 22 of 22 GUSTAVUS ELECTRIC COMPANY,INC. Community History Gustavus is located on the north shore of Icy Passage at the mouth of the Salmon River,48 air miles northwest of fineau.It is surrounded by Glacier Bay National Park and Preserve on three sides and the waters of Icy Passage on the south.Its maritime climate is characterized by cool summers and mild winters with summer temperatures ranging from 52 to 63,winter temperatures from 26 to 39. Gustavus began as an agricultural homestead in 1914.Once called Strawberry Point due to the abundant wild strawberries in the area,the community was later named after Point Gustavus,which lies 7 miles to the southwest.The City of Gustavus was incorporated on April 1,2004. Glacier Bay National Monument,which includes Gustavus,was established in 1925 and became a National Park in 1980.Glacier Bay National Park attracts a large number of tourists and recreation enthusiasts during the summer months with approximately 60,000 tourists visiting or transiting the gateway community of Gustavus annually.There are approximately 459 permanent residents and about double that in the summer.More than 50°%f Gustavus residents work for the National Park Service.Other employers are the lodge and other facilities at Bartlett Cove,the airport,school,and some small businesses including inns and bed and breakfasts.There is also commercial fishing in the area.The economy of Gustavus is largely seasonal. Half of all year-round homes have individual water wells,septic tank systems and full plumbing.A community well with water treatment is available.Due to shallow wells and individual septic systems,concerns have been raised about water safety.The school currently purchases water from the U.S.Park Service. Gustavus has a State-owned airport with jet capability.The airport has two asphalt runways,one measuring 6,700'and the other 3,010”.Air traffic is relatively high during peak summer months including Alaska Airlines'daily flights.There are many small planes,corporate jets and several air taxi services that also use the airport;float planes land at nearby Bartlett Cove.A 10-mile local road connects Bartlett Cove with the airport.Freight primarily arrives by barge;and,small boats and small ferries regularly use the Gustavus Dock,most frequently in the summer. Description of Business History Since about 1983,Gustavus Electric Company,Inc.has been an electric utility serving the City of Gustavus by generating and distributing electricity.Mr.Richard (Dick)Levitt is the owner and president. Gustavus Electric Company,Inc.has 507 year-round customers,including 394 resident,85 commercial,six community and 22 statefederal ac counts,which are billed monthly for electric services and pay with cash or check.Customers double in the summer tourist season.The rate per kilowatt is currently 52.326 cents.For residential and community customers,PCE contributes 25.37 cents per kWh for the first 500 kWh.After 500 kWh the charge is 52.326 cents per kWh. Commercial,federal and state accounts pay 52.326 cents per kWh.About 1,670,400 kWh were Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Appendix A-1 generated in FY 2005 (fn.05 Dec '05)and 1,437,920 were sold.Total revenue of $07,389 was generated (includes miscellaneous income). Gustavus Electric Company,Inc.purchases the electric power plant's fuel from Gustavus Dray,Inc. in Gustavus,Alaska.Gustavus Electric Company,Inc.most recently paid 3.47 per gallon for diesel #to run the electric utility. Description of Fiscal Controls and Accounting Procedures Gustavus Electric Company is operated on a Anuary through December fiscal year.Richard Levitt is the OwnerPresident and is the main contact for the Electrical Utility.His is the only signature required on a check.Bookkeeping and accounting is done with @ckBooks 2004,an accounting software program.In the past three years,the collection rate for electrical service has varied from 95%o 85°%o 99%dCustomers are billed monthl y and pay with cash or credit card.Logan General Tax Practice in fineau does the company's tax preparation and year-end accounting. Management and Structure Gustavus Electric Company,Inc.has an OwnerPres ident and six employees.The organizational chart below shows the various components of the Gustavus Electric Company,Inc.overall structure. Gustavus Electric Company,Inc. Organizational Chart Richard Levitt President/Owner ||Nancy Heubschen Joe Vanderzanden Don Duke || Bookkeeper Operations Manager Electrical Assistant |Martha Romero Sam Rice a Office Manager Bethany Vanderzanden Mechanic Assistant Labor Gustavus Electric Company,Inc. Electric Utility Upgrade Business Operating Plan Appendix A-2