The URL can be used to link to this page

Home My WebLink AboutMetlakatla-Ketchikan Intertie Project 2000ie f 7 mor 'V RAY LY 2007 AIDES, AEA METLAKATLAK ETCHIKAN INTERTIE PROJECT RECONNAISSANCE REPORT Ketchikan,Alaska MARCH2000 401 KETCHIKAN PUBLICUTILITIES METLAKATLAKETCHIKAN INTERTIE TABLEOF CONTENTS LETTEROFTRANSMITTAL TABLEOFCONTENTS THEEXISTINGFACILITIES ooo...ee eesceseeceeesseecesssneeeeessseeessseaneeecesessauseesseseaeeseaaees 3 DESCIIPUION occ ccceceseesscerscesereeessesessseessesccsessseeessseeasecesaeeseeaeesaeeesesesneeaeennee 3 DieSelPIAnt .........eecsseeseereeneeeeeseeseeeeeeeeeseesssssesesseessseaeaeeaeaueasueseseseseeeeeees 4 BatteryEnergyStorageSyStem 2...ce ceseeesesseeeesseeeeeseceeaaeeeseesenaaeseeseauesesnes 4 ChesterLakeHydr0 .....cc ccccssscesssecsteresneeceseeesssreseseeseessaeesessaseeeaneeeseaacsnees 4 PurpleLakeHydro .......:cscccescesesssssscseecseccscssecssesescssecssssssssnseceeeseeaseceneses 5 Re@VIQWOFTECHNOIOGY 00...seccesssessecsecenseeerteecsseecseececesaeeeecsseeesesseteeeaeeeeeeegs 5 HyCroelectriCPOWEl.........scccscsssesesseesecsssreseecssesssesesesecssesessetesseseeesarensens 5 SITEREVICWS 00...cscccccccceeeecessssseneeeeeensnnnnnaeneeeeeeeeseeseeeeeeeeeeeeseceeeeeeeeesesenssaaaaas 6 DamsanGREeservor ......csccsccscsssssescescesssscseccsesseseserecaesoesensesseseesesereasenes 6 StructureandGateCOnditions 0.0...eee ceeessceceeseeeseeseseseeceeeeeeseeeeeseeerens 7 POWerCONdUuits «00...eeseeseeccesscecsneeceeseeeesecsecesecseaeseeescseeaseceanetenneeeess 7 POWEPPIANS ........eesccceeseseessneecesesessaeeesssaeeeesseeeessseeeeeeeseaaaaeeeseeaeereatenenes 7 Di@SCIPOWED oo...ceccesescceeeesseecescceceeesessaaneresesecateneceessteceeeaaaaaaeeasesesneetoosags 8 SUIMIMALY ..cceeecceseseescectsecessenssssesensesesessesesessanecesseeeseeseesasseeessesanseeeesenaeeaeegs 8 Estimated UsefulLifeoftheExistingFacilities ........ce esccccesesssneeeeetceeeeeeeeaeeees 9 OperatinGHistOry .......ccsccssecsessseesssseeeeseseseecsencsresssceserereeecansecesssesseecnaseaeenees 9 POWEYFStUGIES .....csseeceeccessesteeeecsseeeesssneeeeeeessenseeseessansceeceeeeteceeseesneaeeesensesaneese 11 HYCrOlOGY .....scsecesccesesssseseesneescseeseseasenscesseseessessesesscaseeusssnseeeeseesaesneeneses 11 POWEFrPFOCUCTION........cc csesessetseetssseesesstneeeesseseaaeeceseerteseeseessaceeeereeeeesnenene 11 OperatingProgramsandProcedures .........eccccsessssscssesessssssenssensesseesserereseeees 13 GeMePal ......eececeescecesecesceteneesscceseceseeeesseessascessuesnnseecesaeecesuueeseaesseeaeseaeanes 13 DamSafetyInspections .........cscecsscesesssersscesesersessessssecesssecseeseeserseeetengs 13 OPEeratinGEXPeNse........ceececccesrecsscsessscerscersensescesssssescssersessscesseesseesseesseenses 14 FUTUREHYDROELECTRICPOTENTIAL ..0......escecsescecsssseseceeessnecesesseeeeeeseeees 15 OVEIVICW ....ccccecssesecceesersseeessaneeesssneeeesesnseeeeseseueeeeeceeeseeseesenaaeesecessaaeneecesages 15 COStEStirmates .......cece cesseseseeeeseesseseeeeseesesesssnacanaeeeeeesesseeeaeeeeeneeneasesseresssnaars 15 DirectConstructionCostEstimate 00.0...ccccssccssssccceeceseeceseseeceeesseeees 16 TotalConstructionCostEstimate .......ee eesseecesneeessneeeeeseeeeeeeeeseneeeeneens 16 FAN a)91 6[<]|O80 )keep eee 17 GenerationEstimates .........eeeseesesseeeceessscceesensensnaaaeaeceeteseesseasesteesseaees 18 ChesterLakeHydroEXxpansion........cccsccsscsessecsessesssesseesseaseeeessssaseesseeseees 19 ProjeCtDeSCriptiOn.........cccccsscccscsecssssscesscsecssscssereasssescseasasesessaseeasereseceass 19 COMStrUCtiONCOSTESTIMALE.......ceeceeseeeeesseeeteetsessesseneeeesesseeeecessenenestasenges 19 XM2813_0300 3/10/00F INAL METLAKATLAKETCHIKAN INTERTIE POWEIFGENEFATION ........cccesessceeeccccesssesceeeseescucusaseeeteasceseeseceeceeusnseeeeteseenens 19 PurpleLakeHyCroExpansion ........s:cscccscseseessesssersessseesescssesseesssesesssesserees 19 ProjeCctDeSCriptiOn..........ccecsceesesseseecssssessessesessseesccsseseseeteseneaseeasenssas 19 ConstructionCostEstimate..........cccccccssssssssssssssesscecsceuceesseveeeccessuersseneneates 20 POWEIrGENETALION .........ccccessssseccccceesenseseceecceseecceueceseneceesaueseeecenseeaeeceunerens 22 TriangleLake@HyCro .........cscscseeeseseesseessesssesseesssceaeeessssececseesneseneeeseseseeneens 23 ProjeCtDeSCriptiOn.......ccscsccsscssesecsecsesescserssscseecesssesserssenerssensensesseessas 23 ConstructionCostEstimate .............ccccccccecescccceesssecccescceeseeanseesesseceseesesenees 23 POWEIrGENEFAtION 0.0.....cccsseccsssssccsscceceesssesnenscccessusecsenscescesauaseceseeeseansessaes 26 SUMIMALY..oe eecssectsssessesesseesseresseeseeeeeseeensesesereneesesseeeesesseeteneneeeenssesaneesaeesegs 27 OtherHydroPotential 0.0...cecscesccseessesssceeeseesseneeeessesseseeeseesreeenensessetes 28 PROPOSEDMETLAKATLAKETCHIKANINTERTIE .............ccsceeseeesereseteeeeeneeees 28 PrOpOSeCINterCOMNECtiON ......cececccssscssecsseseesssrseeesseeetseesseenessseeeseeesasentens 28 CONStrUCtiONACTIVITICS.............cccccesecceceesceeeessneeceeseeeenceseneeeeecetenseeeseeesunensonees 29 TANSMUSSION ..........cccccscceseusssesenccccececeueeseesscescutsuseensescausecesssausseeeeetesseassenseeens 30 DE@SCTIPUION 0...cessecssecssessssessesseceseseeeessseseecsatesseecessusecssteceseceneesseesanesseses 30 InterticCONStrUCtiONCoOSt............ccssccecessccececceesseseceeescesserseeseeeseeseeeeseesseess 30 INCEFCOMMECHION.0.0...eecescsesccsscseesceeueesseererscecscuuceuseceeeusesssteuseseseceeseuacasseessns 32 PRINCIPALCONSIDERATIONSANDASSUMPTIONS .........cccccseeeeeeeeeseeeaeeeers 32 SUMMARY ...cssccscccccscssesscscssssssssesssssesscsssnscsscnencecersseensreceeeaesseseesesseteeeeceseerees 33 APPENDICES APPENDIXA REFERENCES APPENDIXB SITEPHOTOGRAPHSDURINGSITEVISIT (FEBRUARY9&10,2000) Thisreporthasbeenpreparedfortheuseoftheclientforthespecificpurposesidentifiedinthe report.The conclusions,observations,and recommendations contained herein attributed to R.W.Beck,Inc.,("R.W.Beck")constitute the opinions of R.W.Beck.To the extent that statements,information,and opinions provided by theclientor others have been used inthepreparationofthisreport,R.W.Beckhasrelied uponthesametobeaccurate,andfor whichnoassurancesareintendedandnorepresentationsorwarrantiesaremade.R.W.Beckmakes nocertificationandgivesnoassurancesexceptasexplicitlysetforthinthisreport. Copyright2000,R.W.Beck,Inc. Allrightsreserved. XM2813_0300 3/10/00F INAL R.WBeck ii Mr.JimVoetburg AssistantGeneralManager KetchikanPublicUtilities 2930TongassAvenue Ketchikan,Alaska99901 Subject:Metlakatla-KetchikanIntertieProject ReconnaissanceReport DearJim, Presented herein is our Reconnaissance Report of the proposal provided by Metlakatla Powerand Light's ("MP&L')tosell excess powerto Ketchikan viaanew transmission line that would beconstructed tointertieMP&Ls electric system with the Ketchikan Public Utilities'("KPU”)electric system.If KPU decides that the proposed concept has merit,then further analysis will be necessary to;(i)better define the costs and sizing of project components,(ii)assess economic feasibility, including loads and resources,projected annual costs and projected life of project basedonprojectedutilizationand(iii)assesspricingofenergytobesoldtoKPU. Ourreview and analyses included a physical review of MP&Ls current generating assets,a summary review of the proposed MetlakatlaKetchikan Transmission Intertie ("Intertie”)and proposed future generating resources to be located on AnnetteIsland.Thegeneratingresourcesreviewedincluded the Centennial Diesel Plant,the Battery Energy StorageSystem ("BESS”),the Chester Lake Plant and the PurpleLakePlant(collectively,the "Existing Facilities”).Wealsoreviewedthecostto constructtheIntertieandevaluated:(i)theproposed3MWexpansiontotheChester Lake Plant,(ii)a potential 2.4MW expansion to the Purple Lake Plant,and {iii)a potentialnew4MWhydroplantatTriangleLake,alltobelocatedonAnnettelsland (seeFigure1). During the course of our review,we visited and made general observations of the Existing Facilities sites.The general field observations were visual,above ground examinations of selected areas,which we deemed adequate to comment on the existing condition of the Existing Facilities.The site visit examinations were not to the level of detail necessary to reveal conditions with respect to geological or environmental conditions,the internal physical condition ofany equipment,orthe facilities conformance with agreements,codes,permits,rules,orregulations ofany partyhavingjurisdictionwithrespecttotheExistingFacilitiesortheirsites. XM2813_0300 3/10/00F INAL R.WBeck 1 THISPAGEINTENTIONALLYLEFTBLANK FIGUREIPLACEHOLDER XM2813_0300 3/10/00F INAL R.WBeck 2 In addition,we have reviewed available historic monthly records of the Existing Facilitieswithregardto;(1)theenergyproduction,(2)maintenanceexpenses,and (3) operating records.We did not perform anenvironmentalsite assessment nor have we independently analyzed other options available to KPU for meeting its power requirements.Based on our review,we have prepared estimates of energy that couldbetransmitted fromMP&LtoKPU.Forthe proposedhydroadditionsin the MP&L system we have prepared conceptual cost estimates for an upgrade at the PurpleLakePlantandforanewhydroprojectatTriangleLake.Inthecourseofour review,we have relied on the work of other consultants who have evaluated and analyzedtheExistingFacilities. The goal of this Reconnaissance Reportis to provide planning level information to help with the analysis of whether the existing and future planned resources of MP&Lcan reasonably be expected to produce excess energy,in sufficient amounts and at necessary times,to meet the load requirements of KPU.Our report first addresses the "Existing Facilities”followed by a review of the future "Proposed MP&L Resources”and then a review of the "Intertie Project.”The report is concluded by identifying the "Principal Considerations and Assumptions”used in ouranalysisandthekeyfindingsbasedonthereviewsandanalysisherein. THEEXISTINGFACILITIES DESCRIPTION The MP&L electrical system,located on Annette Island,was examined to assess the condition of the Existing Facilities and to estimate the potential quantity of energyavailablefromMP&Lfacilities. MP&L presently provides electric service to residential customers with a peak demand of approximately 3.8 MW.The MP&L system is comprised of the followinggeneratingassets,whichinaggregateamountto8.9MW: m Threel.2MWhydroelectricgeneratingunitsatPurpleLake ==Onel.0MWhydroelectricgeneratingunitatChesterLake m =One3.3MWdieselunitatCentennial m 1.0MWBatteryEnergyStorageSystem(the"BESS”) MP&Lcurrentlyoperatethehydrofacilitiesasbaseloadgenerationformeetingtheir energy needs.The diesel unit and BESS are used for emergency backup during outagesofthehydroplantsandformeetingrapidloadchanges. XM2813_0300 3/10/00F INAL R.WBeck DIESELPLANT The4,500hpCaterpillar Dieselhashistorically beentheleadunitforMP&L,priorto theinstallationofthe BESS.Itwascommissionedin 1986and underwentextensive overhaul in July 1996.Replacement of the heat exchanger with a higher capacity radiator was completed during May 1997.Fuelstorage for 440,000 gallons of diesel existsonsite. WiththeclosureoftheAnnette HemlockSawmillin November 1999,thediesel unit is not used as extensively as before and is primarily used as a backup emergency reserve. BATTERYENERGYSTORAGESYSTEM The Battery Energy Storage System (the "BESS”)isa 1.0 MWresource,which was installedin1997.Itactsasabufferfortheexistinghydrogenerationagainstfastload swingsandtobalancethesystemforfrequencyandvoltage fluctuations.The BESS canbeusedaseitheraloadoraresourcedependingonthedynamicsoftheelectric system.The result is a more efficient system that can more quickly accommodate changes in loads and resources.An Automatic Generator Control ("AGC”)system commandseachofthe MP&L generators,as wellas BESS,toreliably supplysystem loads,thusminimizingfrequencyandvoltagefluctuations. The BESS is capable of providing approximately 1.0 MW overa lhour period to provide blackstart and system support function,for example due to inadvertent trippingofthehydrounits.Blackstartis theabilitytorestartageneratingresource withouthavingaccesstoenergyfromanothergeneratingresource. CHESTERLAKEHYDRO Chester Lake Hydro is comprised of a dam,reservoir,penstock and powerhouse containingasingle1,042kWPelton (fixedblade)turbinegeneratingunit,which was constructedin 1986.Theturbineis rated foraccommodatingwater witha head of 781 feet ata velocity of 18 cubic feet per second ("cfs”)atamachine speed of 1200 rpm.The dam is a 40foot high concrete arch dam with normal maximum pool elevationof854feetabovemeansealevel ("msl").Thereservoirhasanactivestoragecapacityof1,544 acrefeet between E1854 and its minimum operating pool EL.835.Theintaketothepenstockisintegral with the damandiscomprisedofaslidegate locatednearthebottomofthedamwithacenterlineelevationof835.9feet,msl.The penstock is a 20inch diameter steel pipe constructed above ground and is approximately3,521feetlong. Thecommunity ofMetlakatlarelies on Chester Lake for watersupply.Thereisa4 inch water supply connection from the penstock for delivering water to the community. XM2813_0300 3/10/00F INAL R.WBeck 4 PURPLELAKEHYDRO Purple Lake Hydro is comprised of a dam,reservoir,tunnel,penstock and powerhouse containing three horizontal Francistype,(fixedblade)turbine generating units.The rated capacity of each of the Francis turbines is 1,000 kW during normal operation,defined as 0.8 power factor ("pf”),900 rpm,3phase,60 cycleand 2,400 Volts.Each unitis capable ofoperating at approximately 1,200 kW. EachFrancisturbinehasaratingof1,765 horsepower ("hp”)at300feethead (design basis).The equipment was originally installed in 1956,however a new control system wasinstalledin 1997,whichallowsthe planttoberemotelycontrolledfrom thecontrolroomatthediesel plant.The Purple Lake damiscomprised ofarockfill embankmentwithaheightofabout30feet.Anoverflowweirspillwayislocatedin asaddleadjacenttothedamwithacrestEl.of321.PurpleLakehasanactivestorage capacity of approximately 25,000 acrefeet.Areaand volumecurves were available froma 1953 study performed by Hubble &Waller Engineering,and the data was regenerated by Atlas Engineering Group ("Atlas”).Minimum pool Elevation is 294 feet,msl.ThenaturaloutletlocatedattheeastendofthelakeisatEl.316feet,msl. Purple Lake hasasurfaceareaofapproximately960 acresatnormalmaximum pool E].321. ThetunnelintakeisatEl 282 feet,msl.Theintake building hasafloorelevationat E1326 feet,msl.The intake shaftis 44 feet deep and containsa 5ft by 7ft Rodney Huntslidegate.Theintakeisalsoequippedwithastoplogslot.Thetrashracksare 8feetwideand extend downtoEI.282.6 feet,msl.Therearefourtrashrack panels,each11feetlong.Asecondoutertrashrackpanel,measuring 19'6”longby6'wide, is located in front of the intake structure througha submerged entry tunnel.The intake generally receives little trash since it is located at the opposite end of the reservoiraway fromthespillway outlet.Theapproximatetunnellengthis2,586feet and has an unlined 7.5ft high by 7ft wide horseshoeshaped cross section.The surge chamber is located at the downstream end of the tunnel and has a 14foot diameter.The penstock is a 66inch diameter,above ground steel pipeline and is approximately 1,250feet long.A 48inchdiameter guard valve is located at the tunnelportal. REVIEWOF TECHNOLOGY HYDROELECTRICPOWER Hydroelectric powerisaconventional form ofelectricity generation witha proven trackrecord forover 100 years.The hydroelectric power plants contain equipment thatconvertshydraulicenergyintoelectricenergy.Waterunderpressureisreleased inacontrolled manner throughwaterways,called penstocks,to drive waterwheels, or turbines.The turbines are connected to generators that rotate to produce electricity throughmagneticcoils.The "deenergized”wateris discharged fromthe turbines into a tailrace channel that returns the water to the river.Hydroelectric XM2813_0300 3/10/00F INAL R.WBeck 5 projectscanmakeuseofnaturalfeaturessuchaswaterfallsorcascadesormanmade dams to develop the head required creating the pressure in the water behind the turbine.Damscanalsocreatereservoirs that allow forstorageofwater during wet periodsandsubsequentreleaseofwaterduringdryperiods. Theintakestructureisequippedwithservicegatesandtrashracks.Theintakeshave an extra slot in front of the service gate for an emergency gate of stop logs.The trashrack located in front of the inlet prevents unwanted debris from entering the hydraulicpassageandpossiblydamagingtheturbinerunner(orwaterwheel). Thepenstockis comprised ofasteel pipe,atunnel,orother pressure vessels.Surge tanksareneededatthe Purple Lake Planttoreducethe effects ofpressureincrease resulting fromaquickchangeofflowthroughtheturbine.AttheChesterPlant,thePeltonTurbinetechnologyhasadeflectorthatredirectsthenozzleflowawayfrom theturbinerunner,whichhelpstolimittransientpressuresinthepipeline. The powerhouse is a structure that houses the electromechanical equipment, including the turbine runner,generator and auxiliary components,that together converthydraulicenergytoelectricalenergy. SITEREVIEWS DAMSAND RESERVOIR Becausethedamsarelocatedwhollywithin MetlakatlaIndian Community ("MIC”) lands,thereisno FederalorStateregulatory agency that overseas the safety of the dams.Consequently,these dams do nothave theannualinspections thatis typical ofmostdams.. TheChesterLakeDamwasrebuiltin 1986.Theconcretearchdamshowslittlesign ofweathering.ThePurpleLakeDamwasoriginallyconstructedin1956.Therockfill dam was overgrown with trees and several logs were piled on top of the concrete spillway crest.Treesand brushneed to becleared from the embankment damand thelogsremovedfromthespillwaycrest. MP&Loperators reportedthatwhen thereservoirices over,operation ofthe hydro unitsateitherthePurpleLakePlantorChesterLakePlantbecomesdifficultbecause anegativevacuumiscreatedwhichcausestheturbineunitstocavitate.Underthese conditions the hydro units are shut down and the diesel plant is relied upon for meeting system loads.To restore operation to the hydro plants,holes are blasted through the ice to eliminate the vacuum.However,this is a temporary solution. Generallytheiceneedstomelttothepointwherethevacuumiseliminated. XM2813_0300 3/10/00F INAL R.WBeck STRUCTUREAND GATE CONDITIONS The dams likely would be classified as "low hazard”under Federal Energy RegulatoryCommission("FERC”)definition,sinceithasbeenreportedthatthereare nohomeslocatedbelowthesedamswherepropertyandliveswouldbeendangered. TheChesterDamspillwayhasbeenmodifiedtoincludeastoplogstructurethatcan be used to allow water to be stored above its crest,thereby increasing the active storage.Stoplogs are generally designed to fail when acouple feet of flow occurs overthetopofthestructure.When thisoccursthecapacityofthereservoirreturns tonormal,howevertherecanbeaconsiderableincreaseinwaterflowasthestoplog structurefails. Thereare trashracks upstream of the intake headgates at both dams to protect the turbines.There is no trashrack removal equipmentat either site,but trash is not believed tobea problem.AtChester Lake,vegetationis sparsearound thelake;at Purple Lake,the powerintake is at the opposite end of the lake outlet,where spill occursduringhighflowsduringthespringrunoffperiod. POWER CONDUITS The Chester Lake penstock was constructed during 1986 andisin good condition. The Purple Lake penstock was reported to have been inspected recently by Acres International ("Acres”).MP &Lstaffindicated that Acres alsoreported the penstock tobeingoodcondition.ThePurpleLaketunnelwasnotinspectedanditscondition isunknown. POWER PLANTS PowerhouseStructure All powerhouse structures appear to be in satisfactory condition,and both power plantswerecleanandtidy. Generators The generator windings are usually the most expensive maintenance item in a hydroelectric power plant.Most of the generator windings in these plants are original,with the exception of the Purple Lake Plant where all of the generators werereported to have beenrewound during the 1990's.Thegeneratorshavebeen operated well within their ratings over the years,with winding temperatures significantly belowthe maximum allowed.This has contributed to the life ofthese windings. We found all other major components of the generators in satisfactory condition. Thestaticexcitersareoriginalandareperformingwell. XM2813_0300 3/10/00F INAL R.WBeck Turbines Alltheturbinesareoriginalequipment.Allarereportedtobeoperatingsatisfactorily and our site visit confirmed this.All of the Purple Lake turbine runners were refurbished in the 1990's at the same time the generators were rewound.MP&L indicated that the runner for Purple Lake Unit 3 will be replaced with anew one sometimelaterthisyear.Theoldonecanthenberefurbishedandusedasasparefor anyofthethreeunits. Nootherturbineworkisplanned,nordidwefindtheneedtodoso.Theseturbines shouldcontinuetoprovidereliableandtroublefreeserviceformanyyears. MiscellaneousMechanicalEquipment Whilethemechanicalauxiliaryequipmentisinsatisfactorycondition,theequipment appears to be original.No components are scheduled for replacement in the foreseeablefuture. AccessoryElectricalEquipment While the accessory electrical equipment was found to bein satisfactory condition, the equipment appears to be original,with the exception of new batteries at the PurpleLakePlant,whichareusedforblackstartcapability.MP&Lhaveaddednew AutomaticGeneratorcontrol("AGC”)controlsateachofthepowerplantssothatthe plants could be operated remotely froma control room located at the CentennialDieselPlant. No components have yet been scheduled for replacement over the foreseeable future;although MP&Lstaffhave been directed to investigate the cost ofreplacing theswitchgearandswitchingequipmentatthePurpleLakePlant. PowerTransformers Allofthe transformers are original and,according to MP &Lstaff,the transformers havebeenoperatingsatisfactorily.MP &Lstaffhavebeendirectedtoinvestigatethe costofreplacingthePurpleLakepowertransformers. DIESELPOWER The Centennial Diesel unit was put in service in 1985.Various upgrades andmodificationshavebeenaccomplishedsincetheoriginalconstructionoftheunitsin ordertoincreasethecapabilityandoperabilityoftheunit. SUMMARY Based on our limited review of the various components comprising the Existing Facilities,the Existing Facilities have been designed and constructed in accordance XM2813_0300 3/10/00F INAL R.WBeck with generally accepted engineering practices and the technology in use at the ExistingFacilitiesutilizesconventionalmethodswhicharesoundandproven. ESTIMATED USEFUL LIFEOFTHE EXISTING FACILITIES The useful life of hydroelectric facilities is typically much longer than for thermal generating plants.Properly maintained hydro facilitiescan operatereliably for well over 100 years,although renewals and replacements of mechanical and electrical equipment will be necessary.This is primarily because hydroelectric plants'large, slowrotating units havelonglifeexpectancies.Also,thehydroproject'scivilworks features,whichincludesdams,waterwaysandpowerhouses,ifproperlymaintained, generallyperformwellwithlittledeterioration. Theusefullifeofdieselgeneratingequipmentisnotaslongashydroelectricfacilities. Forplanningpurposesatermofabout25yearsisoftenused,howeverdependingon usage,maintenanceandrenewalandreplacementprograms,muchlongerliveshave beenachieved. We have reviewed the quality of equipment installed at the Existing Facilities,the generalplansforoperatingandmaintainingtheFacilitiesandtheperformanceofthe Facilitiestodate.Onthebasisofthisreviewandassuming thatMP &L operates the Facilities consistent with prudent utility practice and equipment vendor recommendations,including timely renewals and replacements,we are of the opinion thatthe existing hydroelectric facilities should haveauseful life of20 yearsormore.WhiletheCentennialDieselandtheBESSmayachievelongerlives,using anadditional10yearsforplanningpurposesisreasonable. OPERATING HISTORY Oneofthekeyissuestoreviewbeforeproceedingwithmoredetailedplanningwork for the Intertie is to determine the operating history of the Existing Facilities.The operating levels of the Existing Facilities,as measuredin megawatthours,willhelp to establish whether during therecent past there would has been sufficient energy thatcouldhavebeensoldtoKPUtosupportmoreextensivestudyofthelIntertie. For the Existing Facilities,we have prepared operating summaries,which include reported availability factor and capacity factor.Availability factor is traditionally definedasthenumber ofhours thatthe plantis available to operate divided bythe number of hours in the period.Capacity factor is defined as the net electrical generation measuredinmegawatthoursproducedinagivenperioddividedbythe product of the plant's rated capacity and the number ofhoursin the period.Data publishedbyNERCfor326hydroelectricunitsrangingincapacitiesfrom1to29MW operated by 25 utilities for the years 1992 through 1996 shows an average capacity factor of 50 percent and an availability factor of 91.5 percent.The forced and XM2813_0300 3/10/00F INAL R.WBeck 9 scheduled outage factors for these 326 units were 3.5 percent and 4.9 percent, respectively. Table 1 isasummary of the historical generation data for the sixyear period 1994 through 1999.Table 2 presents the average capacity factors for the same period of 1994 through 1999.The outage reports that we have received do not include scheduled outages and the forced outage reports were notentirely clear on outage duration.Consequently we assumed that all of the units have availability factorssimilartotheNERCaverageforthe326hydroelectricunitsusedinthebenchmark. TABLE 1 EXISTING FACILITIES-NET GENERATION (MWh) 19941999 Chester Lake Purple Diesel Year Plant LakePlant Plant,Total -1999 4,672 14,183 1,012 *19,867 1998 4,700 13,772 2,382 20,854 1997 5,374 14,111 1,847 21,332 1996 5,070 13,005 5,856 23,931. 1995 4,870 13,939 5,450 24,259 1994 3,698 13,356 6,013 23,067 Avg.4,731 13,728 3,760 22,219 TABLE 2 EXISTING FACILITIES-PLANT CAPACITY FACTORS 1994-1999A VERAGES 19941999 Average Total AnnualNet ! No.of Capacity Generation 19941999Plant Plant Units (MW)(MWh)CapacityFactor ChesterLake 1 1.0 4,731 54.0 PurpleLake 3 3.6 13,728 43.5 Diesel 1 3.3 3,760 12.6 Total 5 7.9 22,219 32.1 'Stationserviceuseissubtractedfromgrossgeneration. XM2813_0300 3/10/00F INAL R.WBeck 10 POWER STUDIES HYDROLOGY Anotherquestionthatisimportantishowmuchenergycouldhavebeengenerated, iftherehadbeenalargeload.Unfortunately thereislimited flow dataavailablefor the ML&P hydroelectric projects.A United State Geological Survey ("USGS”)gage was located at the Purple Lake Outlet from July 1947 through September 1956.In earlier studies,Harza estimated monthly discharges for Purple Lake using a correlationbetweentherainfalldatafromAnnetteAirfieldandthePurpleLakegage. TheCorpsofEngineersinitsevaluationoftheChesterLakeexpansionreviewedthe methodology and concurred with it.Monthly flows were estimated from October. 1942 through September 1983.Although these correlations are not ideal for determiningaverageflow,webelievethattheseestimatedflowswillbesufficientfor purposes of this Reconnaissance Report.These flows were also used in the Atlas studiesthat providedestimatesofpowergenerationfortheexistingfacilities,fortheTriangleLakeProjectandfortheChesterLakeExpansionProject Part of the rationale for this determination is that the basins for Chester Lake and TriangleLakeareapproximatelyatthesamegeneralelevationasthatofPurpleLake. Based on this information it has been assumed that the rainfall and runoff at each facilitywouldfollowthesamepattern (butnotvolume)asforPurpleLake.Monthly inflowswereestimatedbytakingaratioofthedrainageareas.ForChesterLaketheratiousedis0.25and0.882forTriangleLake. POWERPRODUCTION Performance data for the Existing Facilities was obtained from information made available to us by MP&L.The hydro plants operate to meet the energy load of theMP&Lelectricsystem.The Diesel provides electricenergy during extended outageperiodsofthehydroplant.WhentheAnnette HemlockSawmill wasstilloperating, the diesel plant was operated to meet power needs above the hydro plant capabilities.From our review of the plant data provided,the average net annual generation produced from the hydroelectric facilities was 18,460 MWh for the six year period from 1994 to 1999.However,the hydro plants are capable of higher generation based on estimated historical stream flows .The estimated higher generationissummarizedinthefollowingtable,andcanbecomparedtotheaverage generation.This comparison indicates,that with conservative assumptions, approximately3,350 MWhperyearcouldhavebeensoldtoKPUfromthese facilities during the 1994 through 1999 period.If the sawmill had been closed during the 1994-1999 period,the MP&L electric system load would have been 15,460 MWh, whichincludes 7.5%distribution losses.This would have increased the availabilityofexcesshydroenergyby3,000MWh.Thetotalavailablehydroenergy wouldhave been approximately 6,350 MWh.Without reservoir ice problems,excess available hydroenergy wouldincrease toapproximately 9,600 MWh.Because MP&L electric XM2813_0300 3/10/00F INAL R.W.Beck Jl systemloadshaveshownageneral declineoverthe 1994-1999 period,theremaybe evenmoreavailableenergythanindicatedfromaveragesoverthissixyearperiod. TABLE 3 MP&L HYDROELECTRIC PRODUCTION ASSUMPTIONS ANNUAL NET GENERATION (MWh) ChesterLakePlant PurpleLakePlant Total Description (1.0MW)(3.6MW)(4.6MW) AtlasEstimate 9,110MWh 18,433MWh 27,543MWh BeckEstimate 8,160MWh 16,885MWh 25,045MWh BeckEstimatewithIce 7,170MWh 14,639MWh 21,809MWh Average19941999Period 4,731MWh 13,728MWh 18,459MWh Based on theinformationavailable to us,itappears that the Atlas study estimateis too high for reasons discussed below.The starting pointis appropriatein that the methodologyused by Atlas does cover the expected minimum ofapproximately 30 years toaccountforannual variationsinhydrology.However,theoperationmodel appearstohaveassumptionswithwhichwedisagree. 1.Theavailability factor and capacity factor for the existing Chester Lake Plantis greater that unity.Thisimplies that the estimated energy productionis greater than could beachieved with the rated capacity of the unit.This could only be achieved if the unit rating were too low,which seems unlikely in this circumstance. 2.Although the machine efficiencies assumed in the Atlas study are commonly used for combined turbine-generator efficiencies,we believe they are too high fortheoverall projectandexcludelossesnormallyexperiencedinthetunneland penstock. 3.Another issue is that we do not believe there is additional head available from Edgecombe Lake at the Chester Plant.Similarly,we believe the Chester Lake drainage area includes Edgecombe Lake and that there is no additional flow available.Todetermineenergy generation weusedtheflowdatageneratedfrom the correlation of rainfall with the Purple Lake gage,and estimated the energy production of the Purple Lake Plant for the period October 1,1942 through September30,1983.Theflowswereadjustedtoaccountforthereduceddrainage areabetweenthegageandthedamoutlet. Based on the historical operating data reviewed,the observed condition of the hydroelectric facilities,and our review of the operations and maintenance procedures and practices currently in place,we have estimated that these units are capableofachievingthefollowingenergyproductioninanaveragehydrologicyear. Itshould be noted,however,thatin any given year generation could be higher or XM2813_0300 3/10/00F INAL R.WBeck 12 lower depending on snowpack,rainfall and the resulting streamflow in the watershedwheretheunitsarelocated. a)The Chester Plant is estimated to achieve an annual net energy production of 8,160MWh(7,170MWhwhentheeffectsofreservoiriceareconsidered). b)ThePurpleLakePlantisestimatedtoachieveanannualnetenergyproductionof 16,885MWh(14,639MWhwhenreservoiriceisconsidered). OPERATING PROGRAMSAND PROCEDURES GENERAL We have reviewed with the operators the various operating and maintenance programs and procedures,including preventive maintenance program,operating procedures,administrative procedures,emergency and safety plans,training programs and performance monitoring systems.We did not review all aspects of these plans and procedures,but verified that the operators had in place all of the usual and necessary plans,procedures,and documentation normally required to operatefacilitiesofthistype. DAMSAFETYINSPECTIONS The Federal Energy Regulatory Commission ("FERC”)requires that all licensed hydroelectric projects have their dams inspected by a qualified independent consultantevery fiveyears.Fordamsthathaveahighhazardclassification,annual inspections are required.The 5year dam safety inspections include a physical inspection of each project and the associated facilities,an analysis of the spillway adequacy forthe Probable Maximum Flood ("PMF”),andananalysis ofthestability ofthedamandothercriticalstructuresundervariouspossibleloadingconditions. As previously mentioned,MP&L's damsarenot under Federaland Stateregulation and consequently are notrequired to beinspected,norhave they been reported to havebeeninspectedasshowninthefollowingtable.WebelieveMP&Lshouldputa damsafetyinspectionprograminplaceforthesefacilities. TABLE 4 FERC DAM SAFETY INSPECTION REPORTS Hazard Visual Spillway DamSite ReportDate Classification Condition Adequacy Stability ChesterLake NonePrepared Unknown Good Unknown Unknown PurpleLake NonePrepared Unknown Poor Unknown Unknown XM2813_0300 3/10/00F INAL R.WBeck 13 OPERATING EXPENSES ThehistoricoperatingexpensesfortheMP &Lelectricsystemaresummarizedinthe Table 5.Other costs not shown in the table include depreciation and interest on longterm debt.Because the system is within the Metlakatla Indian Reservation, therearenopropertytaxes.Powerproductionexpensesincludethoseoperatingandmaintenanceexpensesassociatedwiththehydroanddieselpowerplants,including major maintenance.Onthesecondline of Table 5,the cost of purchased poweris primary additional operating expenses associated with the diesel plant.The preliminarystatementfor1999willbeavailablebyaboutmidMarch2000. TABLE 5 . HISTORICAL OPERATIONAND MAINTENANCE EXPENSES 19941998 ($000) Item 1994 1995 1996.1997 1998 Average ElectricSystem PowerProductionExpenses 645 624 642 512 470 579 CostofPurchasedPower 182 187 165 197 173 181 DistributionO&M 306 201 177 154 99 187 CustomerExpenses 163 94 129 39 70 99 AdministrationandGeneral 396_457 402 403 383 408 TotalElectricSystem 1,692 1,563 1,515 1,305 1,195 1,454 ProductionSystem TotalPowerProductionCost 827 811 807 709 643 759 PercentofA&G 253 335 291 317 303 300 Total 1,080 1,146 1,098 1,026 946 1,059 NetEnergyProduced(MWh)23,067 24,259 23,931 21,332 20,854 22,689 CostofEnergy(mills/kWh)?46.8 47.2 45.9 48.1 45.4 46.7 The "Total Power ProductionCost”forthe powerplantsindicatesageneral decrease in each succeeding year during the 19941998 period,which is due in part to the decreasing use of the diesel generator.Although the "Cost of Energy”does not followthistrend,itdoesappeartohaveremainedrelativelyconstantthroughoutthis 5yearperiodwithanaveragecostof46.7millsperkWh.Thecostofenergyincludes onlyoperationandmaintenanceexpensesanddoesnotincludedepreciationordebt serviceoncapitalexpenditures. Ourassessmentoftheongoingcostofenergyisthatthereshouldbenoappreciable changetothe46.7 millsexperienced duringthe period 19941998.Itisexpectedthat ?CostofPowerdoesnotincludedepreciationordebtserviceonlongtermdebt. XM2813_0300 3/10/00F INAL R.WBeck 14 with increased generation at the hydro facilities,little or no change in use of the diesel and with the expected closure of the Annette Hemlock Sawmill,future productioncostsshouldbereduced. FUTUREHYDROELECTRICPOTENTIAL OVERVIEW AnnetteIslandisafederallyrecognizedIndianReservationinhabitedandownedin its entirety by the Metlakatla Indian Community ("MIC”).Accordingly,any upgrades to existing hydroelectric projects or construction of new hydroelectric projects is not subject to State or Federal regulations.Therefore,development of projectscanbeexpeditedwithoutbeingsubjecttothelengthyFERCreviewprocess. Several hydroelectric projects on Annette Island have been identified as possible options for KPU to supply its future power supply requirements assuming constructionoftheproposedIntertie.Inordertocomparethecostoftheseproposed projectstothosepreviouslyidentifiedinourl996_=PowerSupplyandPlanningStudywehaveusedsimilarassumptions.Thishasincludedsimilarassumptionsregarding operating characteristics,construction costs and operating costs.Because the alternativesinvestigated havenotbeenstudiedtothesamelevelofdetailthat other hydro projects have been investigated on Revillagigedo Island,the degree of confidence in the cost estimates is less.To acknowledge this difference we have increasedthecontingencyamountstobetterreflectthisdifference. Foreach of the hydroalternatives,capital and operating costs have been estimated using2000costlevels.Asnecessary,inflationisappliedinthefuturetothesecoststo reflecttheyearinwhichthecostactuallyoccurs. SeveralhydroelectricprojectsonAnnettelslandwereevaluatedas partofthisstudy. Some of these projects have been studied in the past to varying degrees of detail. Construction costs,annual operating costs and projected energy generation have been tabulated for the 2.4MW Purple Lake Expansion Project and for the 5MW Triangle Lake Hydroelectric Project.Some other potential hydroelectric projects havebeenidentifiedherein,buthavenotbeeninvestigated. Cost ESTIMATES Cost estimates have been included in this Reconnaissance Report for various categories.Thefollowing descriptions explain thoseestimates.Theactualestimates fortheprojectsreviewedcanbefoundlaterinthissectionbythenameoftheproject studied.\ XM2813_0300 3/10/00F INAL R.WBeck 15 DIRECT CONSTRUCTION CosT ESTIMATE The Direct Construction Cost ("DCC”)includes all costs directly chargeable to a specific project,including costs for construction and equipment contracts.These costsexcludeownercosts. Theestimated costs oftheitemsincludedintheDCC fortheconstruction elements of projectcomponentsarebasedonconceptuallayoutsandpreliminarydimensions of the project features.The estimates as presented identify bid quantities for construction and the applicable unit prices to obtain estimated construction costs basedonpricelevelsforJanuary2000. Costdataavailabletousfromotherprojectswereusedtohelpestablishunitpricing forbiditemssuchasexcavation,concrete work,roadconstruction,transmissionline construction and steel penstocks.Gates,cranes,valves,turbines,generators,and otherequipmentitemsweresimilarlypricedbasedondataavailableusinginhouse cost data.For this reconnaissancelevel study,it was not possible to contact equipmentsupplierstoobtainquotes. TOTAL CONSTRUCTION Cost ESTIMATE The Total ConstructionCost ("TCC”)includes theestimate ofDCC plusengineering and contingencies.TCC is estimated to include escalation during the contractor's construction period.TCC also does not include costs for owner activities or financingrelatedcosts. The engineering allowance includes costs of preliminary engineering work,project feasibility,fieldinvestigations,engineering design,andconstructionsupervisionand inspection.Environmental studies,processing of permits and FERC license application preparation were notincludedin thecost estimate because they arenot needed forhydroelectricdevelopmenton AnnetteIsland,whichis a whollyowned reservation of the MIC.An allowance for design engineering and construction supervisionarebasedonCorpsofEngineersunpublished dataforabout70 projects constructed in the 196572 period.The data presents a cost relationship of the engineering categories as a percentage of the DCC.Construction supervision generally ranged from 6 to7 percent of the DCC for the cost range of the projects investigated.For the Purple Lake Hydroelectric Expansion Project,which is projectedtobetheleastexpensivetodevelopandconstruct,isassumedconstruction supervisionandinspectioncostswouldbe7percentoftheDCC.The Triangle LakeHydroelectricProjectisassumedtobe6percentoftheDCCbecauseofahigherbase costforconstruction. Similarly,the design engineering costs,which include geotechnical investigations andfeasibilitystudies,butnotFERClicensingactivities,range from 11 percentto12 percentoftheDCCdependingonthemagnitudeoftheDCC. XM2813_0300 3/10/00F INAL R.WBeck 16 FERC licensing costs were not considered for any hydroelectric development on AnnetteIslandbecauseoftheirlocationonIndianReservationlands. The inclusion of a contingency allowance provides for unexpected costs.This allowanceiscalculated by multiplying thesum ofthe DCC andEngineering bythe contingency percentage selected.For the Triangle Lake Hydroelectric Project,we haveassumedacontingencyof25percentfordamconstruction,20percentforother civil works and 15 percent for the turbine and generator equipment.The higher contingencyvaluesiswarrantedbecauseofthelackofgeologicdata. ANNUAL CosTs The annual cost of each project consists of the debt service necessary to repay its capital cost over aspecified number ofyears plus all the other operating expenses, whichincludethefollowingitems: m==OperationandMaintenance("O&M”) a AdministrationandGeneral m Insurance =InterimReplacements Based on experience with similar sized projects,together with historical cost data developed by FERC,the basis for the annual cost estimates shown in Table 6 were developed. TABLE 6 ASSUMPTIONSUSEDIN ESTIMATING ANNUAL CosTs OnLineDates: TriangleLakeHydro January2003(2yearconstructionperiod) PurpleLakeHydro January2002(lyearconstructionperiod) RevenueBondFinancing 30Yearsat6.5%Interest InterestDuringConstruction 6.5%DuringConstructionPeriodCashFlow AnnualEscalationRate 2.2%(BlueChipIndicators) ReserveFund 1Year'sDebtService FinancingCosts 3%ofGrossFinancingRequirements ReinvestmentRate 6.5% VariableAnnualCosts OperationandMaintenance 0.25%oftheTIC(pipelineandothercivilworks) 0.05%oftheTIC (tunnelsanddams) InterimReplacements 0.20%oftheTIC (pipelineandothercivilworks) 0.05%oftheTIC (tunnelsanddams) XM2813_0300 3/10/00F INAL R.WBeck 17 The assumptions used in estimating the operation and maintenance costs and interim replacements vary for each feature of the hydroelectric project.For dams, water conveyance structures,and roadways,the operation and maintenance costs andinterimreplacementsareassumed to beafunctionofthe TotalInvestmentCost ("TIC”).TheTICisthesumoftheTCCplusInterestDuringConstruction. The operating expenses foreach project (civil,mechanical,and electrical features)is based on industrywide historical data developed by the FERC and analyzed by Ontario Hydro *.The annual expenses for maintenance cost,operating cost,and interim replacements for the hydro plants show acostage relationship.However, wehaveonlyshownwhattheprojectwouldcostinthefirstyearofoperation. The Administrative and General costs are estimated to be 40 percent of the O&M costs.Insuranceisassumedtobe0.2percentoftheTIC. GENERATIONESTIMATES Generation estimates for the additional hydroelectric projects have generally been developed at a reconnaissance level.The three options explored in this studyincludetheexpansionsatChesterLakeandPurpleLake,andanewhydrofacilityat Triangle Lake.The generation estimates rely on USGS hydrologic data and preliminary size estimates of project components.It was assumed that all of the potential generation would beuseable withinthe KPU system.Transmission losses have not been subtracted from the available energy.For the projects that indicate economic viability,additional feasibilitylevel hydrology and power studies should be performed.Based on the information available,the preliminary values for the parameter needed to estimate the energy production were selected as shown in Table7. TABLE 7 SUMMARYOF EXISTING HYDRAULIC/HYDROLOGY DATA Average Turbine Storage Area Basin Normal Tailwater FullGate Volume Basin (sq.mi.)Flow Max.Pool Elevation (cfs)(acrefeet) ChesterLake 1.56 22.0cfs EI.850 EI.10 16.8 1,150 PurpleLake 6.23 88.5cfs E}.325 E10.0 142.0 25,000 TriangleLake 5.90 77.9cfs E1.400 E10.0 154.0 7,990 Using the assumptions and analysis techniques discussed above,the following projectswerelookedataspotentialgeneratingfacilitiesforKPU. 3Wong,CharlesT.,DeterminingO&MCostsOvertheLifeofaHydroStation,HYDROREVIEW, December1990.Pp.5262. XM2813_0300 3/10/00F INAL R.WBeck 18 CHESTER LAKE HYDRO EXPANSION PROJECTDESCRIPTION Future hydro expansion at Chester Lake is expected to occur when the US Army Corps of Engineers ("Corps”),Alaska District,relocates the Chester Power Plantas partofthenewhighwayconstructionprojectfromMetlakatlatoWaldenPoint.The powerhouse presently is located in the alignment of the new highway.The Corps haspreparedpreliminary designdrawings (datedJanuary28,1999)forreplacingthe 20inch penstock with a 36inch penstock.The existing powerhouse would be enlarged to incorporate a new 3.0MW Peltontype turbinegenerating unit and additionalswitchgearandcontrolswouldbeadded.Theexisting powertransformer would be replaced with anew 4 MVA transformer.The Metlakatla water supply would be routed to the tailrace of the powerhouse to utilize approximately3 cfs, whichwaspreviouslyunavailableforgeneration. CONSTRUCTIONCOSTESTIMATE MP&L has indicated that the Alaska District Corps has agreed to pay for the powerhouse relocation,which will include an upgrade in installed capacity,at no cost to MP&L.However,presently,it is uncertain when and if the upgrade will occur;although the powerhouse site and penstock alignment have been cleared oftimber.[We havenotyethadtheopportunitytotalk withthe Corpregarding this projectupgrade.] POWERGENERATION Withadrainagearea of 1.56squaremiles,theinflowto Chester Lake was estimated tobe22.0cfs,whichcorrespondstotherunoffof193inchesoverthewatershed.The maximum normal water levelin Chester Lake will be at E]850,with an estimated averagewaterlevelatE]841.5undertheproposedprojectoperation. Thesiteisassumed tohavenoinstreamflowdownstreamoftheembankmentdam. With an average net head of 811 feet and an allowance of 5%for outages,the estimatedannualgenerationattheChesterLakePlantwouldincreasebyabout3,211 MWhwiththeadditionofa3.0MW unit.Thelow deltaincrease over the existing 1.0MWhydroplantatChesterLakeisduetothewaterlimitationofthewatershed. PURPLE LAKE HYDRO EXPANSION PROJECTDESCRIPTION Additionalhydropotentialat Purple Lake maybeachievable withoutalargecapital investment.Previous investigations have reportedly been performed to add additionalcapacity.Arubber dam could beincorporated into the existing spillway structure that wouldincrease norma]maximum poolelevation of Purple Lakeby 4 XM2813_0300 3/10/00F INAL R.W.Beck 19 feet.This would increase active storage by about 4,000 acrefeet.The hydraulic capacityofthe PurpleLakepenstockcouldbeincreased withoutmodification.The velocitythroughthesteelpipepenstockisabout5.5fpsandthroughthetunnelonly 2.6 fps.With a 10fps maximum velocity limit on the penstock,the hydraulic capacitywouldbe235cfs. CONSTRUCTIONCOSTESTIMATE A summary of the cost estimate for the 2.4MW Purple Lake Hydro Expansion Project is presented in Table 8.Unit pricing for the rubber dam construction was adjusting upwardsby 40 percenttoaccountfortheremotesitelocationonAnnette Island.Power plant costs were derived by empirical cost formula to provide fora consistencyofcomparisonwiththeotherhydroalternatives. TABLE 8 PURPLE LAKE HYDROELECTRIC EXPANSION CONSTRUCTION CosT ESTIMATE SUMMARY FERC Account 24MWUnit RubberDam Code Description Amount Amount 60 MOBILIZATION $45,000 $20,000 330 LANDANDLANDRIGHTS $$ 331 STRUCTURESANDIMPROVEMENTS $400,000 $ 331.1 Powerhouse 350,000 331.2 SiteWork(IncludedinAcctCode336)50,000 332 RESERVOIRS,DAMSANDWATERWAYS $500,000 $400,000 332.1 Reservoir 50,000 50,000 332.2 Dam 50,000 350,000 332.3.Waterways(Penstock)100,000 333.TURBINESANDGENERATORS $1,300,000 334.ACCESSORYELECTRICALEQUIPMENT $630,000 335 MISCELLANEOUSPOWERPLANTEQUIPMENT $150,000 $ 335.1 PowerhouseMechanicalSystems 100,000 335.2 HoistingEquipment 50,000 336 ROADS,RAILROADSANDBRIDGES $$ 353.STATIONEQUIPMENT&STRUCTURES 355 TRANSMISSIONLINEPOLES&FIXTURES XM2813_0300 "3/10/00F INAL R.WBeck 20 TABLE 8(C ONTINUED) PURPLE LAKE HYDROELECTRIC EXPANSION CONSTRUCTION CosT ESTIMATE SUMMARY FERC Account 24MWUnit RubberDam Code Description Amount Amount 356 TRANSMISSIONLINECONDUCTOR&DEVICES DIRECTCONSTRUCTIONCOST(2000$'s)$3,025,000 $420,000 ENGINEERING:$540,000 $80,000 DesignEngineering 330,000 50,000 Geotechnical,Borings&SeismicSurveys FERCLicensingandOtherPermits ConstructionManagement 21 0,000 30,000 Subtotal(rounded)$3,570,000 $500,000 CONTINGENCY:$610,000 $120,000 Equipment(Accts.333,334,335,353,356)340,000 Dams&Waterways(Acct332)150,000 120,000 OtherCivil(Accts.330,331,336,352)120,000 InterestDuringConstruction $150,000 $20,000 TOTALINVESTMENTCOST(2001$'s)$4,330,000 $640,000 Escalation 100,000 10,000 TOTALINVESTMENTCOST(2002$'s)$4,430,000 $650,000 INSTALLEDPLANTCAPACITY (kW)2,400 N/A COSTPERKWINSTALLED $1,850 N/A XM2813_0300 3/10/00F INAL R.WBeck 21 TABLE 9 PURPLE LAKE HYDROELECTRIC EXPANSION ESTIMATEOF ANNUAL OPERATING COSTS 2.4MwUnit RubberDam CapitalCosts Amount Amount TotalInvestmentCost(2001$'s)$4,430,000 $650,000 ReserveAccount 380,000 60,000 Costoflssuance 150,000 20,000 GrossFinancingRequirement $4,960,000 $730,000 AnnualCosts(6.5%Financing) AmortizationofDebt: AnnualDebtService 380,000 60,000 lessInterestCreditonReserve (20,000) NetDebtService $360,000 $60,000 OperatingCosts: OperationandMaintenance 18,000 2,000 AdministrationandGeneral 7,000 J,000 Insurance 4,000 1,000 InterimReplacement 18,000 2,000 TotalOperatingCosts $47,000 $6,000 TOTALANNUALCOST(2001$'s)$407,000 $66,000 AnnualGeneration(MWh)360 179 First YearCostofEnergy(mills/kWh)1,130 370 Given the cost of the Purple Lake expansion,there are likely other alternatives availabletoKPU formeetingitsenergy loads.Additionalstudywouldbenecessary to determine whether this resource fits in some other way to meet the goals and objectivesofKPU. POWERGENERATION Withadrainageareaof6.23squaremiles,theinflowtoPurpleLakewasestimatedto be88.5cfs,whichcorrespondsto therunoffof193inchesoverthe watershed.The maximum normal water level in Purple Lake will be at El 325,with an estimated averagewaterlevelatE]322.5undertheproposedprojectoperation. Thesiteisassumedtohavenoinstreamflowdownstream oftheembankmentdam. With an average net head of 306 feet and an allowance of 5%for outages,the XM2813_0300 3/10/00F INAL R.WBeck 22 estimated annual generation would be approximately 360,000 MWh from the 2.4MWunit.Thelowdeltaincreaseovertheexisting3.6MWhydroplantatPurple Lakeisduetothewaterlimitationofthewatershed.Iftherubberdamwasinstalled without additional hydroelectric capacity,the Purple Lake Plant would increase its generationfrom16,885MWhtol7,064MWh,oranetincreaseofl79MWh. TRIANGLE LAKE HYDRO PROJECTDESCRIPTION Future hydro potential is promising at Triangle Lake,and could be developed immediately since this project is close to the Base Camp for the Dash Point Road Projectandiscloseto the proposed route ofthe MetlakatlaKetchikan Intertie.The project would be comprised of asmall embankment damat the outlet of Triangle Lake,a 1.3mile long penstock,and a powerhouse containing a single horizontal Francis turbinegenerating unit.The dam would raise the normal maximum pool elevationfrom383feetto400feet,msl,andallowingforupto7percentheadlosses,a 4.0MWunitcouldbeinstalled (380feet;150cfs). Project access to the proposed powerhouse site would be via a new 2.7mile extension from a logging road that connects the Base Camp with the Dash Point Roadstagingarea,located onthewestsideofAnnettelsland.Anadditional1.3mile access road would be needed along the penstock route to the dam site.The transmission line from the powerhouse switching station would be about 2.7 miles longandwouldoperateat34.5kV. CONSTRUCTIONCOSTESTIMATE Asummaryofthecostestimateforthe4.0MWTriangleLakeHydroelectricProjectis presented in Table 10.Unit pricing for pipeline construction was developed then adjusted upwards by 40 percent to account for the remote Annette Island site location.Power plantcosts werederivedby empiricalcostformulato providefora consistency of comparison withthe other hydro alternatives.Because the damsite topographicmapping wasnotavailablewerelied onapproximate dimensions basedonvisualobservationsobtainedduringavisittothepotentialdamsite.Forpurposes of preparingacostestimate it was assumed that the dam would be constructed to E].395andwouldbe300feetlongatitscrestand50feetwideatitsbase.Crestwidth wouldbe12feetwithrockfillembankmentslopesofapproximately34 degrees.The dam would have animpervious clay core.Excavation of foundation material was assumedtoaverage 1 0feet.A50footwidespillwaywouldbeexcavatedfromoneof theabutmentsandwouldhaveanungatedconcretecrest. Indeveloping the cost estimate,a construction engineer,familiar with construction in Alaska,provided anindependentcost estimate of the dam,penstock and access road.His estimate wasalso based on the assumptions mentionedabove.However XM2813_0300 3/10/00F INAL R.WBeck 23 his cost estimating approach differed in that he first estimated the necessary crew size for construction ofeach feature.The secondstep was to develop production rates which incorporated the design assumptions above and lastly he estimated materialcosts.Inaggregatethetwoapproachesprovidedcomparablecostestimates forthecivilfeatures. TABLE 10 TRIANGLE LAKE HYDROELECTRIC PROJECT CONSTRUCTION CosT ESTIMATE SUMMARY FERC Account 4.0MWPlant Code Description Amount 60 MOBILIZATION $100,000 61 CONSTRUCTIONCAMP $750,000 330 LANDANDLANDRIGHTS $ 331 STRUCTURESANDIMPROVEMENTS $850,000 331.1 Powerhouse 800,000 331.2 SiteWork(IncludedinAcctCode336)50,000 332.RESERVOIRS,DAMSANDWATERWAYS $2,840,000 332.1 Reservoir 40,000 332.2 Dam 900,000 332.3 Waterways(54"Penstock)1,900,000 333.TURBINESANDGENERATORS $1,740,000 334.ACCESSORYELECTRICALEQUIPMENT $800,000 335 MISCELLANEOUSPOWERPLANTEQUIPMENT $200,000 335.1 PowerhouseMechanicalSystems 120,000 335.2 HoistingEquipment 80,000 336 ROADS,RAILROADSANDBRIDGES $1,200,000 336.1 Roads 1,000,000 336.2 Bridges 200,000 353 STATIONEQUIPMENT&STRUCTURES $150,000 355 TRANSMISSIONLINEPOLES&FIXTURES $235,000 356 TRANSMISSIONLINECONDUCTOR&DEVICES Incl.In355 XM2813_0300 3/10/00F INAL R.WBeck 24 TABLE 10(C ONTINUED) TRIANGLE LAKE HYDROELECTRIC PROJECT CONSTRUCTION CosT ESTIMATE SUMMARY FERC Account 4.0MWPlant Code Description Amount ESTIMATEDDIRECTCONSTRUCTIONCOST 8,865,000 (2000$'s) ENGINEERING 1,596,000 DesignEngineering 798,000 Geotechnical,Borings&SeismicSurveys 266,000 FERCLicensingandOtherPermits ConstructionManagement 532,000 SUBTOTAL(Rounded)10,460,000 CONTINGENCY:2,150,000 Equipment(Accts.333,334,335,353,356)490,000 DamandWaterways(Acct332)1,010,000 OtherCivil(Accts.330,331,336,352)650,000 InterestDuringConstruction 900,000 TOTALINVESTMENTCOST (2002)13,510,000 Escalation 300,000 TOTALINVESTMENTCOST(2003$s)13,810,000 INSTALLEDPLANTCAPACITY(kW)4,000 COSTPERKWINSTALLED 3,450 3/10/00F INAL R.WBeck 25XM2813_0300 TABLE 11 TRIANGLE LAKE HYDROELECTRIC PROJECT ESTIMATEOF ANNUAL OPERATING COSTS 4.0MwPlant CapitalCosts Amount TotalInvestmentCost(2003$'s)$13,810,000 ReserveAccount 1,180,000 CostofIssuance 460,000 GrossFinancingRequirement $15,450,000 ANNUALCOSTS(6.5%Financing) AmortizationofDebt: AnnualDebtService 1,180,000 lessInterestCreditonReserve (80,000) NetDebtService $1,100,000 OperatingCosts: OperationandMaintenance 36,000 AdministrationandGeneral 14,000 Insurance 14,000 InterimReplacement 35,000 TotalOperatingCosts $99,000 TOTALANNUALCOST(2003$'s)$1,199,000 AnnualGeneration(MWh)17,324 FirstY earCostofEnergy(mills/kWh)69 POWERGENERATION Withadrainageareaof5.50squaremiles,theinflowtoTriangleLakewasestimated tobe77.9cfs,whichcorrespondstoanaverageannualrunoffof193inchesoverthe watershed.ThemaximumnormalwaterlevelinTriangleLakewillbeatE1395,with anestimatedaveragewaterlevelatEl390undertheproposedprojectoperation. Thesiteisassumedtohavenoinstream flowdownstreamoftheembankmentdam. With an average net head of 370 feet and an allowance of 5%for outages,the estimatedannualgenerationwouldbel7,324MWhfromthe4MWunit. XM2813_0300 3/10/00F INAL R.WBeck 26 SUMMARY Based on historical USGS data reviewed,our conceptual designs,our reconnaissancelevel cost estimates,our review of MP&Ls operations and maintenance proceduresand practices,and otherassumptionscontainedherein,we have estimated the following cost of energy at Chester Lake,Purple Lake and Triangle Lake in an average hydrologic year.However,in any given year,cost of energycouldbehigherorlowerdependingonsnowpackandrainfalllevelsandthe resulting stream flow in the watershed where the power plants are located.No determination has been made as to whether all of the energy could be used in meetingloadsofMP&LorKPU. =AtChester Lake,the 3.0MW Expansion is estimated to achieve an annual net energy productionof3,211 MWhatnocapitalcostto KPU.Theoperating costisestimatedtobel6millsperKWh. m AtPurpleLake,the 2.4MWExpansion,whichincludesa poolraise of 4 feet,is estimated toachieve an annual net energy production of 360 MWhatacost of 1,130millsperKWh. m=AtTriangleLake,anew4.0MWHydroProjectisestimatedtoachieveanannual netenergyproductionof17,324M Whatacostof69millsperKWh. The information developed,supporting our above finding,is summarized in Table12.The costs shown below are at the individual projects.For purposes of meeting the loads of KPU,transmission losses and costs of developing the Intertie shouldalsobeconsidered. TABLE 12 HYDRO POTENTIALOF CHESTER LAKEAND PURPLE LAKE EXPANSIONSAND New HYDROAT TRIANGLE LAKEIN ANNETTE ISLAND Description ChesterLake PurpleLake TriangleLake Capacity 3.0MW 2.4MW _4.0MW Energy 3,211MWh 360MWh 17,324MWh CapitalCost TobepaidbyOthers $4,960,000 $15,460,000 Cost/kW Unknown |$1,850 $3,450 AnnualCost $50,000 $407,000 $1,199,000 CostofEnergy 16mills/KWh 1,130mills/KWh 69mills/KWh Location Annettelsland AnnettelIsland Annettelsland Schedule Unknown 2years 3years Permitting SmallEffort SmallEffort SmallEffort XM2813_0300 3/10/00F INAL R.WBeck 27 If KPU is interested in pursuing the MetlakataKetchikan Intertie Project,then the followingstepsshouldbeconsidered: a.Performa feasibility study,which includes topographic land and geotechnical surveys,additional optimization studies of the 34.5kV Intertie and the Triangle LakeHydroelectricProjects. b.Update KPU's system operation model to include MP&Ls system load and estimate future useable energy from MP&L's hydro facilities,including new hydroprojectsatTriangleLakeandpossiblyatotherlocationsonAnnettelsland. OTHER HYDRO POTENTIAL Otherhydroelectric potentialis possibleatLowerTodd Lake (E1210)andMelansonLake(El.175).An estimate of the potential capacity and energy that could come from hydro developmentsat these lakes based on the ratio of drainage areas with PurpleLakeisshowninTable13. TABLE 13 OTHER HYDROELECTRIC POTENTIALON ANNETTE ISLAND Item ToddLake MelansonLake DrainageArea(sq.mi.)7.12 2.00 GrossHead (feet)220 185 PotentialCapacity(MW)2.8 0.7 PotentialEnergy(MWh)13,200 3,200 Atlas had indicated that a 1.0MW hydro plant at Tamgas Lake may be promising. However,witha lake elevation of 90 feet,msl,and witha fish hatchery that uses about 20 cfs of water forits operation,ahydro plant at Tamgas Lake would likely providemoreexpensivepowerthanattheothersitesindicatedabove. PROPOSEDMETLAKATLAKETCHIKANINTERTIE PROPOSED INTERCONNECTION The proposed 17mileIntertie project would consist ofthreecomponents.ThelinewouldoriginateatKPU'sMountainSubstation,whichisexpectedtoneedupgrading toallowforthetransmissionlineconnection.Thesecondand principalcomponent of the line would be the transmission line,including underwater cable for the approximate onemilecrossing to Annettelsland.Thethirdcomponentwouldbea newsubstationtobelocatedwithintheMP &LsystematMountainPoint. XM2813_0300 3/10/00F INAL R.WBeck 28 Othershavepreviouslyinvestigated twoalternativealignments,withone following the Corps of Engineer's proposed road alignment to Walden Point.The other alternativealignmentutilizesaroutealongthe UpperandLowerToddLakes,which decreases the aerial transmission length by approximately 3 miles.Itis this latter alignmentthatwaspreviouslyestimatedbyotherstobe$6,535,000(1996dollars)and is the alignment used for this report.The proposed alignment selected for the transmissionlineincludesal6mileaerialsectionbetweenMetlakatlaandRacePoint and a onemile,3conductor submarine cable between Race Point and Mountain Point. CONSTRUCTION ACTIVITIES Although the Walden Point Road alignmentis not used for purposes of this study, the current status is included for informational purposes and because of the implicationsforthenewfacilitiesatChesterLakeDam.Constructionofthe Walden Point Road commenced in 1998.Whencompleted,the road will be approximately 14.8mileslongandextendalongthewesternsideofAnnettelslandfromthevillage ofMetlakatlatothe proposedsiteofthenewferryterminalatAnnette Bay (seeFig. 1).The road is significant in that it opens up the Island for additional potential hydroelectric development by providing good access.More significantly,because theArmyisconstructingtheroad,they havebeenreportedtobewillingto providefundsforahydroupgradeattheChesterLakeDamandforprovidingtransmission linepolematerialfortheproposedIntertieProjectalongtheproposedalignment. The Metlakatla Indian Community ("MIC”)originally conceived the Walden Point Road Project (also referred to as the MetlakatlaKetchikan Transportation Corridor ("MKTC”),forthe purposesofimprovingtourism and encouragingnewbusinesses to locate to the Town of Metlakatla.The road will allow open access through the winter monthsandconsiderablyimproveaccess.Inconjunction with completion of theroad,ferryserviceisalsoexpectedtobeimprovedtodailyserviceyearround. The MIC requested and is receiving military support for this project under the provisionsoftheInnovativeReadiness Training ("IRT”)ProgramspecifiedinTitle 10 USC,Section 2012.The Assistant Secretary of Defense for Reserve Affairs has approvedmilitarysupportforthis project because ofopportunitiesforwarfighting training. WorkcompletedtodateontheWaldenPointRoadincludesa37buildingbasecamp at Annette Bay to houseaconstruction workforce of approximately 250300 people and construction equipment.A logging road is used to transport equipment and workers to the staging area near Hemlock Bay,where a maintenance building has also been constructed.About 2.5 miles of road is completed.The Army has indicated througha press release dated July 10,1999,that the Walden Point Road Project is aseven year IRT program,which would indicate that road construction wouldnotbecompleteduntilabout2005. XM2813_0300 3/10/00F INAL R.WBeck 29 TRANSMISSION DESCRIPTION Inourreviewofthedesign,wesized the transmission line for delivery of 8 MW of power,consistingof 4 MW from Triangle Lakeand4MWfromMetlakatla.A35kV systemisappropriateforthispowerlevelandcanaccommodatehigherpowerlevels as loads grow.The interconnection will be comprised primarily of 35 kV,3wire overhead,woodpoleconstruction,using 4/0 Penguin/AW conductor.For 8 MW of powerdelivery,voltagedropandlossesareestimatedtobeunder5%eachusingthis conductor.There would be an approximate onemile submarine crossing of RevillagigedoChannelusinga3/c,35kV,1/0AWGCu,doublearmoredcable. INTERTIECONSTRUCTIONCOST MP&Lhasindicated thatthe Corps of Engineers will help pay forthetransmission linebysupplyingmaterialsforpoleconstruction(a$150,000savings). Weassumedsignificanthelicopterassistanceintransmissionroutesectionswhereno roads exist,i.e.,out of Metlakatla to Hemlock Bay and north of the Army's Base Camp along Revillagigedo Channel.We assumed no requirement to remove any timber from cleared rightofway.We estimated a nominal amount for special foundation stabilization in muskeg soils for 12.5%of structures.Many other assumptionsarebuiltintothecostestimateitself. Our estimate of construction costs does not include any road construction, permitting,credit for timber sales on cleared land,rightofway or easement costs. The estimateis based on very limited preliminary engineering and reconnaissance. Engineeringisassumedtobe40%oftheD CCandincludesline,substationandcable design,constructionmanagementandinspection,owneradministrationcost.Italso includesafullbathymetricsurvey forthe submarinecrossing,andtopographicand geophysical surveys.The 40 percent contingency included covers uncertainties about designandsite conditions,pricing changes,and possible omissions from the estimates. TheestimatedcostofthetransmissionlinebetweenMetlakatlaandRacePointusing the Todd Lakes Routeissummarized belowin Table 14.Nocosts wereincludedfor any upgrade ofthe KPU grid to handle an additional 8 MW at theinterconnection point. XM2813_0300 3/10/00F INAL R.WBeck 30 TABLE 14 METLAKATLATO RACE POINT TRANSMISSIONLINE ESTIMATED CONSTRUCTION COSTS PreviousEstimate RevisedEstimate Item (1996Dollars)(2000Dollars) OverheadComponent RightofWayClearing $92,000 $92,000 OverheadLineMaterialsandLabor 1,918,000 406,000 Helicopter 198,000 390,000 EngineeringandAdministration 486,000 355,000 Contingencies 539,000 497,000 Subtotal-OverheadComponent $3,233,000 $1,740,000 SubmarineCable MaterialandInstallation $1,685,000 $870,000 EngineeringandAdministration 371,000 350,000. Contingencies 411,000 490,000 Subtotal-SubmarineCable $2,467,000 $1,710,000 SubmarineTerminations $835,000 Incl.Above TotalTransmissionLineCost $6,535,000 $3,450,000 Our cost estimate represents a reduction of about 50 percent over the previous estimate.There could be any number of reasons for this,including issues suchas. woodpoledesignandassumptionsregardingtheexistenceofaccessroadsalongthe transmissionlineroute.Forexample,theloggingroadbetweenHemlockBayandthe Army'sBasecampwasprobablyonlyrecentlyimprovedbytheArmyinpreparation forconstructingtheDashPointRoadProject. Based uponouronvery limited preliminary engineering and reconnaissance oftheproposedtransmissionlineroutefromMetlakatlatotheMountainPointSubstation on Revillagigedo Island,we have estimated the Total Construction Cost of the 34.5kV,17mile transmission line to be approximately $3,450,000.If KPU is interested in pursuing the construction of the Intertie,then we recommend that additionalfeasibilityanddesignworkbeaddressed. For planning purposes we estimate that construction of the Intertie could be completed within an 18month period,depending on MP&L having the necessary permitsandminimumconstructionduringwintermonths. XM2813_0300 3/10/00F INAL R.WBeck 31 Metlakatla Indian Community (MIC)Electrical Intertie The proposed Metlakatla to Ketchikan Intertie is a 34.5 kV transmission line that will connect the electric systems of Metlakatla Power &Light (MP&L)and Ketchikan Public Utilities (KPU)to the SEAPA regional electrical grid.This Intertie will include 14 miles of overhead wood pole transmission line to be constructed on Annette Island and a submarine cable crossing Revillagigedo Channel (1-3 miles depending on route),connecting to KPU's Substation.The project is intended to create jobs and provide many benefits to both Metlakatla and Ketchikan,including a reduction of dependence of fossil fuel,upgrades to the operating system and other benefits to the general public and regional environment.This completed project will become part of the Southeast Intertie System that will connect Metlakatla with Ketchikan,Wrangell,Petersburg (and possibly Kake)and will bring energy security to the region. The electric system in Metlakatla includes 4.0 MW of hydroelectric capacity and 3.3 MW of diesel generating capacity.The diesel generator,a 4,500 hp Caterpillar unit,is used primarily as a backup emergency reserve.A 1.0 MW Battery Energy Storage System (BESS)was installed in 1997 to provide emergency backup power for a limited time as well as balance out frequency and voltage fluctuations on the MP&L system.The hydroelectric energy resources available in Metlakatla at the present time are the 1.0 MW Chester Lake project and the 3.0 MW Purple Lake project.The two plants are capable of generating 25,045 MWh per year on average of which about 8,758 MWh is presently estimated to be surplus to the needs of MP&L. In 2007,the Denali Commission provided a $500,000 grant to purchase transmission line material for the 14 mile transmission line along Walden Point Road,then under construction by National Guard units under the Innovative Readiness Training (IRT)program.Material procured included poles,conductor wires,cross arms and guying anchors and ancillary material necessary for completion of the transmission line. Permitting and design were funded by RE Fund round 1 (#20).MIC submitted a round 3 application (#449)that was recommended but not funded due to insufficient funding.The project cost is now estimated at $12.73 million,up from the previous estimate of $7.65 million. In October 2009,AEA executed grant #2195429 with MIC for $820,000 for the purpose of completing upgrades to the various control systems of the MIC electrical system (including the governor and SCADA systems)and completing the design of the 34.5 kV transmission intertie interconnecting the utilities of Metlakatla and Ketchikan.Funds spent to date have completed preliminary field design,ROW identification and clearing and limited pole setting.MIC has engaged an engineering firm to assist with completion of the scope of work.Due to an unforeseen event,there has been a change of administrative staff for this project. AEA recommends funding in the amount of $1,180,000 ($2 million cumulative cap minus the $820,000 the project received in round 1).These funds would allow for a continuation of work without interruption.AEA recommends special provisions be associated with this grant as follows: (1)Before any new grant funds can be disbursed,MIC is to submit to AEA for its review and approval,a power sales agreement between MIC and KPU which clarifies the terms,conditions,rates and amount of power for this intertie; (2)MIC must demonstrate completion of all preconstruction activities including final design documents and final construction cost estimate; (3)MIC must demonstrate project site control,including required easements and Rights-of-way,NEPA requirements and all permits needed to construct have been issued;and (4)the scope of work is consistent with findings of the Southeast Alaska IRP. It is recommended that a Project Management Office approach similar to the Reynolds Creek project model be established that will consolidate funding streams and oversight for project efficiency and grant compliance.The Metlakatla Mayor has written AEA requesting assistance moving this project forward.The MP&L General Manager and Chairman of the MP&L Board will be in Anchorage next week to meet regarding the project. .Metlakatla Indian Community (MIC)Electrical Intertie'Propctk Berorplion !The proposed Metlakatla to Ketchikan Intertie is a 34.5 kV transmission line that will connect the electric systems of Metlakatla Power &Light (MP&L)and Ketchikan Public Utilities (KPU)to the SEAPA regional electrical grid.This Intertie will include 14 miles of overhead wood pole transmission line to be constructed on Annette Island and a submarine cable crossing Revillagigedo Channel (1-3 miles depending on route),connecting to KPU's clungeprojectisintendedtocreatejobsandprovidemanybenefitstobothMetlakatlaandKetchikan,including a reduction of dependence of fossil fuel,upgrades to the operating system and other benefits to the general public and regional environment.This completed project will become part of the Southeast Intertie System that will connect Metlakatla with Ketchikan,Wrangell,Petersburg (and possibly Kake)and will bring energy security to the region. The electric system in Metlakatla includes 4.0 MW of hydroelectric capacity and 3.3 MW of diesel generating capacity.The diesel generator,a 4,500 hp Caterpillar unit,is used primarily as a backup emergency reserve.A 1.0 MW Battery Energy Storage System (BESS)was installed in 1997 to provide emergency backup power for a limited time as well as balance out frequency and voltage fluctuations on the MP&L system.The hydroelectric energy resources available in Metlakatla at the present time are the 1.0 MW Chester Lake project and the 3.0 MW Purple Lake project.The two plants are capable of generating 25,045 MWh per year on average of which about 8,758 MWh is presently estimatedto be surplus to the needs of MP&L.Previenre Fundiry:In 2007,the Denali Commission provided a $500,000 grant to purchase transmission line material for the 14 mile transmission line along Walden Point Road,then under construction by National Guard units under the Innovative Readiness Training (I1RT)program.Material procured included poles,conductor wires,cross arms and guying anchors and ancillary material necessary for completion of the transmission line. Permitting and design were funded by RE Fund round 1 (#20).MIC submitted a round 3 application (#449)that was recommended but not funded due to insufficient funding.The project cost is now estimated at $12.73 million,up from the previous estimate of $7.65 million. in October 2009,AEA executed grant #2195429 with MIC for $820,000 for the purpose of completing upgrades to the various control systems of the MIC electrical system (including the governor and SCADA systems)and completing the design of the 34.5 kV transmission intertie interconnecting the utilities of Metlakatla and Ketchikan.Funds spent to date have completed preliminary field design,ROW identification and clearing and limited pole setting.MIC has engaged an engineering firm to assist with completion of the scope of work.Due to an unforeseen event,there has been a change of administrative staff for this project. AEA recommends funding in the amount of $1,180,000 ($2 million cumulative cap minus the $820,000 the projectreceivedinround1).These funds would allow for a continuation of work without interruption {AEA recommendsspecialprovisionsbeassociatedwiththisgrantasfollows: (1)Before any new grant funds can be disbursed,MIC is to submit to AEA for its review and approval,a power sales agreement between MIC and KPU which clarifies the terms,conditions,rates and amount of power for this intertie; (2)MIC must demonstrate completion of all preconstruction activities including final design documents and final construction cost estimate; (3)MIC must demonstrate project site control,including required easements and Rights-of-way,NEPA requirements and all permits needed to construct have been issued;and (4)the scope of work is consistent with findings of the Southeast Alaska IRP. It is recommended that a Project Management Office approach similar to the Reynolds Creek project model be established that will consolidate funding streams and oversight for project efficiency and grant compliance.The Metlakatla Mayor has written AEA requesting assistance moving this project forward.The MP&L General Manager and Chairman of the MP&L Board will be in Anchorage next week to meet regarding the project. METLAKATLA POWER &LIGHT Metlakatla Indian Community Metlakatla,Alaska Metlakatla Power &Light (MP&L)is a stand-alone electric utility located on the Annette Islands Reserve approximately 15 miles from'Ketchikan,Alaska.MP&L currently provides electricity to the approximate 1,400 residents of Metlakatla.MP&L's power generation consists of four (4)Hydro Generators,one (1)Diesel Generator (used only for stand-by and emergency purposes)and one (1)Battery Energy Storage System. MP&L presently has surplus hydro generation capability of approximately 9,000 MWh. Past studies have identified that through:1)expansion of existing hydroelectric facilities and 2)construction of a new hydro facility at Triangle Lake -an additional 20,700 MWh could be generated bringing the total surplus hydro generation capability to approximately 30,000 MWh annually. Current Projects: Metlakatla-Ketchikan Intertie -MP&L has initiated the design of a 34.5-kV transmission line the will interconnect the electric systems of Metlakatla and Ketchikan. The Intertie will include sixteen (16)miles of overhead line to be constructed along Walden Point Road (see attached photos)and a one (1)mile submarine cable terminating at Ketchikan's Mountain Point Substation. The estimated cost of the Project is $7.6M.MIC/MP&L received an allocation for an $820,000 grant through the Alaska Renewable Energy Fund.MIC/MP&L also received $500,000 from the Denali Commission to purchase the poles and hardware for the transmission line.The design and staking of the Intertie are scheduled to be completed by mid October;with the initial construction of the line scheduled for April 2010. MIC/MP&L is presently looking to secure funding for the remaining $6.3M to complete the Project. Triangle Lake Hydro Project -The proposed generating facility would be constructed near the route of the Metlakatla -Ketchikan Intertie.It would consist of a single turbine generating unit with a capacity of 4.0MW.The Project is estimated to produce 17,324 MWh per annually.The estimated cost of the Project is $17.7M. MIC/MP&L requested $500,000 to conduct the Feasibility Analysis and ConceptualDesignfromtheAlaskaRenewableEnergyFund-2™Round.They were not included in initial 30 Projects selected for funding. Photo attachments (3) Walden Point Road -this is where the Metlakatla-Ketchikan Intertie Transmission line will be initiated. The road is presently up to grade and ready to be paved.MIC is currently seeking $10M for paving.After the funds are secured,mobilization is estimated to be one week and paving completed within 45 days. be needyReneeRERPe Metlakatla Power &Light Load Forecast Black &Veatch developed the Metlakatla load forecast for a 50 year period from 2012- 2061 as well as a forecast for 2011. To develop the load growth forecast Black &Veatch initially reviewed the historical trends in energy and peak demand and discussed possible load growth opportunities with Metlakatla Power &Light (MPL). In developing the peak and energy demand forecast,Black &Veatch broke down the forecast period into three different time frames: >Short Term -2011 -2015 >»Intermediate Term -2016-2035 >Long Term -2036-2061 In developing this reference case forecast,Black &Veatch assumes that there are no significant changes in the cost of power and power continues to be supplied by hydro generation. 2011-2015 -Short Term During this period it is assumed that the peak and energy demand would followa similar pattern as in 2010 as usage pattern is unlikely to change in this time frame.Additional load from new developments is also considered during this period.The information for new loads was obtained in discussions with MPL.It is also assumed that no new transmission upgrades would be possible within this time frame and so,system loss patterns are unlikely to improve during this time frame as compared to 2010. No population forecasts were developed for this region by ADL,so Black &Veatch relied on MPL to estimate population growth in the region.According to MPL,the population is likely to remain constant or decrease during this period.Metlakatla's current population is between 1,100 and 1,400.However,80 percent of the population is unemployed.The community is heavily government subsidized and there are no good job opportunities in the region.So people in the work force tend to move out to bigger cities for job opportunities. According to the information received from MPL,the main demand for electricity comes from the fishing industry for refrigeration.However,this demand is seasonal and dependent upon the price of fuel,the market for fish,and the catch in the region. Competitive fuel prices compared to other nearby regions are likely to increase activity of the fishing fleet and an increased volume of fish increases the demand for electricity and vice versa.In the past the region has been able to provide fuel at competitive prices, which has resulted in higher energy demand.Black &Veatch has assumed that this trend is likely to continue during this period. Since 2007,MPL has observed an increase in energy demand due to rapid conversion to electric heating systems in residential homes and commercial buildings.The rapid change was due to the high price of oil during this period.MPL estimates that on account of the above,energy demand has been going up 6.0-7.5 percent for the last 3 years.Actual increases in NEL were 7.7,6.4,and 3.9 percent for 2008,2009 and 2010 respectively. MPL expects 7 percent in 2011.MPL estimates that 60 to 75 percent of the customers have converted to electric heat.MPL indicates that conversions to electric heating systems have slowed in 2010 due to falling oil prices.However MPL expects the conversion rate to be high in 2011,as fuel oil prices have gone up again.There is little actual data relative to penetration of electric heat and the use of portable electric heaters can cause the electric heating load to be very volatile.Black &Veatch's analysis of load and heating degree day data leads to a conclusion that existing penetration of electric heat may be less than estimated by MPL and therefore there may be greater opportunities for electric heating loads to increase. Table A presents analysis of heating degree day data for Metlakatla.The average heating degree days for 2000 through 2010 are 7,195.As shown in Table A,2007 through 2009 were above average for HDD's while 2010 was 8.3 percent below average.Thus while the growth rate in NEL in 2010 was slower than in 2008 and 2009,part of that lower growth could be attributed to fewer HDD's. Table A Heating Degree Day Data Year |HDD |HDD Above Average |Estimated Annual Heating Load (MWh) 2010 |6,598 |-597 14 2009 |7,446 |251 18 2008 |7,563 |363 19 2007 |7,391 |196 - Table B presents analysis of residential customers and residential sales. Table B Residential Customers and Sales Year |Number of Customers |Use Per Customer (MWh)|Residential Sales (MWh) 2010 |635 11.81 7,498 2009 |608 12.15 7,386 2008 |604 11.15 6,956 2007 |582 10.62 6,180 Table B indicates there has been significant growth in number of customers,use per customer except for the weather impacted 2010,and total residential sales. Table C attempts to estimate the number of electric heating customers.The baseline residential sales assume that 2007 use per customer is the baseline and that there were no incremental electric heating customers in the baseline.The incremental load due to heating is the difference between actual sales and baseline sales.The estimated number of electric heating customers is developed from the incremental load due to heating and the estimated annual heating load from Table A.The estimated increase in the number of electric heating customers slows in 2010 as stated by MLP,but the overall estimated penetration is only 9 percent compared to the 60 to 75 percent estimated by MLP. Table C Estimated Residential Electric Heating Customers Year |Baseline Residential Incremental Load Due to Number of Electric Sales (MWh)Heating (MWh)Heating Customers 2010 |6,744 754 54 2009 |6,457 929 52 2008 |6,414 542 29 2007 |6,180 0 0 The Alaska Housing Finance Corporation (AHFC)offers Weatherization and Energy Rebate programs.Even though qualifying customers can participate in the Weatherization program at no cost,very few customers are participating in either the Weatherization or Energy Rebate programs due to the lack of raters.As such,Black & Veatch does not estimate a significant reduction in NEL due to weatherization and energy efficiency without an external program to increase participation. Black &Veatch also discussed the possibility of users replacing incandescent bulbs with energy efficient bulbs,which would reduce lighting loads.Based on that discussion, Black &Veatch assumed that only a small number of people will actually do this without an external program during this time frame and the demand will not be significantly impacted on account of this. Historically net energy for load (NEL)has increased over the last decade with an annual compound annual growth rate of 1.2 percent.Within that period,NEL decreased from 2000 to 2005,increased slightly in 2006 and 2007,and then increased rapidly from 2008 onwards.Sales by sector in 2010 were as follows: e Residential 39.3 percent e Commercial 27.4 percent e Community Centers 18.9 percent e Others 4.2 percent As seen,the residential sector has the largest influence on NEL.The residential sector has seen rapid growth in demand since 2008 due to conversion to electric heating systems.This conversion is driven by MPL's declining block rates,the lowest block being 8 cents/k Wh.The sales to the commercial sector have also increased during the last 3 years.The commercial sector is heavily driven by the fishing industry,and demand from this sector varies significantly depending upon the harvest in the fishing season. The total number of customers for MPL is 917.Out of which 635 are residential customers and 115 commercial customers.The number of residential customers has increased from around 563 customers in 2000 to 635 in 2010,at annual average growth rate of 3.1 percent.The number of commercial customers has dropped from 128 customers in 2000 to 115 customers in 2010.However,the number of commercial customers has remained fairly constant since 2008.The number of commercial customers lags the economic conditions to some extent since plans for new commercial establishments are often made at least a year before opening of the establishment. Use per customer responds quicker to economic conditions and high oil prices.Use per customer for commercial and residential customers has increased an average of nearly 3.6 percent and 2.1 percent respectively per year from 2005 to 2010.At present the unemployment rate in the region is very high.High unemployment is prevalent throughout the US as a result of the recession,but not to the extent evident in Metlakatla. Based on the above analysis,Black &Veatch projects MPL's NEL to increase by 7.5 percent in 2011 from 2010 levels,with increases of 4 percent in 2012 and 2 percent in 2013 and remaining flat in 2014 and 2015 as oil prices are expected to return to more normal levels.The 2011 NEL for load reflects approximately 20 percent residential electric heating penetration.This increase assumes the continued conversion to electric heating systems by customers of MPL.However,in discussion with MPL,Black & Veatch expects that the conversion will slow and the number of residential customers will remain relatively steady due to very high unemployment rates.The commercial sector is projected to remain fairly constant keeping the recent gains.NEL could increase towards the end of the period if oil prices moderate and the economy strengthens. Based on the above assumptions and information,Black &Veatch has made the following forecasts for this period: >The number of customers will remain fairly steady through the period. >Use per customer is assumed to increase for the residential sector due to electric heating conversion.The commercial sector is projected to remain relatively stable for both number of customers and use per customer. >System losses will not improve and will be at the same level as 2010 for every year in the period,which is 9.9 percent of the annual sales forecast. >Black &Veatch did not get any load factor data or peak demand data from MPL. As such Black &Veatch assumed that the annual load factor for all years in the period would be approximately 52 percent.This number is based on the load factor seen in other utilities in the region. >Black &Veatch assumed that MPL has sufficient hydro generation capabilities to meet all near term load requirements resulting in relatively stable power costs. 2016-2035 -Intermediate Term For the intermediate term,Black &Veatch assumes that the price of oil returns to the medium ISER projections. Black &Veatch believes that the population will slowly decline for this region during this period.This is consistent with trends forecasted by ADL for other neighboring regions. Load factors are expected to remain fairly constant through this period. Based on the above assumptions,Black &Veatch has forecast the following: >The NEL will increase at 0.5 percent annually from 2016-2035. >The number of residential customers will slowly decline in relation to the ADL population projections for other neighboring regions in Alaska. >Use per residential customer will increase due to oil prices going back to medium levels and the ever increasing uses of electricity coupled with some economic sustainability from the fishing industry.Naturally occurring conservation will mitigate large increases in use per customer as residential customers are slowly able to afford more conservation. The number of commercial customers will remain relatively constant with the return of medium oil prices. Use per commercial customer will increase slowly being mitigated by fewer residential customers. System losses will remain at 2010 levels. The annual load factor for all years is forecast to remain constant at 52 percent.VVVWV2036-2060 -Long Term Long term projections are not available from the ADL.Black &Veatch forecasts moderate growth in number of customers and use per customer for residential and commercial sectors at 0.2 percent for number of customers and use per customer resulting in an approximately 0.4 percent annual increase in NEL.System losses are expected to remain same at 2010 levels. The projections are presented in Table D.1 through Table D.4. Table D.1 NEL Forecast (2011-2025) Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Data Item Unit Annual Sales MWh |18,660 19,406 19,794 19,794 19,794 19,893 19,993 20,093 20,193 20,294 20,396 20,498 20,600 20,703 20,807 System Losses MWh 1,852 1,926 1,964 1,964 1,964 1,974 1,984 1,994 2,004 2,014 2,024 2,034 2,044 2,054 2,065NetEnergyforLoad(NEL)MWh {20,511 21,331 21,758 21,758 21,758 21,867 21,976 22,086 22,197 22,307 22,419 22,531 22,644 22,757 22,871 System Losses (Percent of Annual Sales)9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92% System Peak 4.50 4.68 4.78 4.78 4,78 4.80 4.82 4.85 4.87 4.90 4,92 4.95 4.97 5.00 $.02 Load Factor 52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0% Table D.2 NEL Forecast (2026-2040) 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 Data Item Annual Sales 20,911 22,015 21,120 21,226)9=--21,332)21,439 21,546 921,654 21,762 21,871 21,958 22,046 22,134 22,223 22,312 System Losses MWh 2,075 2,085 2,096 2,106 2,117 2,127 2,138 2,149 2,160 2,170 2,179 2,188 2,197 2,205 2,214 Net Energy for Load (NEL)MWh 22,985 23,100 23,216 23,332 23,448 23,566 23,683 23,802 23,921 24,040 24,137 24,233 24,330 24,427 24,525 System Losses (Percent of Annual Sales)1%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92% System Peak MW 5.05 5.07 5.10 5.12 5.15 5.17 5.20 5.23 5.25 5.28 5.30 5.32 5.34 5.36 5.38 Load Factor %52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0% Table D.3 NEL Forecast (2041-2055) Year 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 2052 2053 2054 2055 Data Item Unit ; Annual Sales MWh 22,401 22,491 22,581 22,671 22,762 22,853 22,944 23,036 23,128 23,220 23,313 23,407 23,500 23,594 23,689 System Losses MWh 2,223 2,232 2,241 2,250 2,259 2,268 2,277 2,286 2,295 2,304 2,314 2,323 2,332 2,341 2,351 Net Energy for Load (NEL)MWh 24,623 24,722 24,821 24,920 25,020 25,120 25,220 25,321 25,422 25,524 25,626 25,729 25,831 25,935 26,038 System Losses (Percent of Annual Sales)|%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92%9.92% System Peak Mw $.41 5.43 5.45 5.47 5.49 5.51 5.54 5.56 5.58 5.60 5.63 5.65 5.67 5.69 5.72 Load Factor %52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0%52.0% Table D.4 NEL Forecast (2056-2061) Year 2056 2057 2058 2059 2060 2061 Data Item Unit Annual Sales MWh 23,783 23,878 23,974 24,070 24,166 24,263 System Losses MWh 2,360 2,370 2,379 2,389 2,398 2,408 Net Energy fortload (NEL)MWh 26,143 26,247 26,352 26,458 26,563 26,670 System Losses (PercentofAnnualSales)|%9.92%9.92%9.92%9.92%9.92%9.92% System Peak MW 5.74 5.76 5.79 5.81 5.83 5.85 Load Factor %52.0%52.0%52.0%52.0%52.0%§$2.0%