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HomeMy WebLinkAboutIMC MINUTES MARCH 11 2014IMC Meeting Minutes-March 11, 2014 Page 1 of 10 Intertie Management Committee MEETING MINUTES Tuesday, March 11, 2014 Anchorage, Alaska 1. CALL TO ORDER Chair Brad Evans called the meeting of the Intertie Management Committee to order on March 11, 2014 at 8:59 a.m. A quorum was established. 2. ROLL CALL FOR COMMITTEE MEMBERS Members present: Bradley Evans (Chugach Electric Association (CEA)); Cory Borgeson (Golden Valley Electric Association (GVEA)); Jim Brooks (Matanuska Electric Association (MEA)); Dan Kendall (Anchorage Municipal Light & Power (ML&P)); and Gene Therriault (Alaska Energy Authority (AEA)). 3. PUBLIC ROLL CALL Public present in Anchorage: Louis Agi and Jeff Warner (ML&P); Brian Bjorkquist (Department of Law); Mark Johnson and Burke Wick (CEA); Bernie Smith (Regulatory Commission of Alaska (RCA)); Kirk Warren, Sandie Hayes and Teri Webster (AEA); Kirk Gibson (McDowell Rackner & Gibson PC); and Sunny Morrison (Accu-Type Depositions). 4. AGENDA APPROVAL MOTION: Mr. Kendall made a motion to approve the agenda. Motion seconded by Mr. Borgeson. The motion was approved unanimously. 5. PRIOR MINUTES - December 20, 2013; January 16, 2014 MOTION: Mr. Therriault made a motion to approve the prior minutes December 20, 2013 and January 16, 2014. Motion seconded by Mr. Kendall. The motion was approved unanimously. 6. PUBLIC COMMENTS There were no public comments. 7. OLD BUSINESS 7A. Amended Intertie Agreement edits reflecting cost allocation changes Mr. Gibson and Mr. Bjorkquist provided a detailed description of the changes made to the Amended and Restated Alaska Intertie Agreement. Mr. Gibson advised these changes are the result of collaboration between Mr. Bjorkquist and himself following the directive of Resolution 2014-02 to create the necessary amendments which reflect the inclusion of a new category of Intertie Administration Costs. Mr. Gibson advised the document needs to be renamed to the "Second Amended and Restated Alaska Intertie Agreement," dated and a reference needs to be added explaining why the second agreement was created. IMC Meeting Minutes-March 11, 2014 Page 2 of 10 Chair Evans does not believe the document is an accurate reflection of an additional cost category needed in Section 7.1.3, including non-asset engineering costs as it relates to reliability and other non-asset issues. Chair Evans asked if this category is already included in this document. Mr. Gibson believes Section 7.1.3.4, which describes the costs associated with developing, monitoring, and administering operating reliability standards addresses Chair Evans' requested category in a broad sense. Chair Evans requested adding the words, "engineering studies" or language that represents the engineering efforts like the one that is currently underway. Chair Evans believes AEA's administrative costs associated with the intertie should be in the intertie budget and should not be included in the non-asset costs of this document. Chair Evans asked if AEA is signatory to the reliability standards and requested clarification of the relationship between AEA and the reliability standards. Mr. Therriault believes AEA is a signatory to the reliability standards. Mr. Bjorkquist noted within the IMC, AEA's asset is subject to the reliability standards. AEA, as a member of the IMC, has agreed to the reliability standards. Chair Evans requested clarification on separating the two classifications of expenses incurred; administrative expenses for the asset and administrative expenses for activities AEA is signatory to. Mr. Bjorkquist explained all of the AEA administrative costs are put into this intertie administrative cost category and are not divided between the asset and everything else the IMC does. Chair Evans stated he wants the members to be clear asset administrative costs are included in this section. Mr. Gibson requested an example of an operating-related AEA cost. Chair Evans gave the example of someone requesting data of the intertie, this is an intertie asset administrative expense. Chair Evans gave another example if an AEA person has to do an inspection of the asset, this is an intertie asset administrative. Mr. Borgeson commented his intent was for all AEA administrative costs to be placed together and not segregated. He believes AEA's administrative expenses were about $50,000 in the last budget and this was divided equally among all the participants. Mr. Borgeson stated if Chair Evans believes AEA's administrative expenses need to be split, that can be done. Mr. Borgeson believes the current method is fair and if there is a significant project asset expense that AEA undertakes, it would be classified in a separate budgeting process. Mr. Gibson advised improvements are modifications, additions, deletions, and changes to the intertie and is a separate component in the document. Mr. Bjorkquist agreed with Mr. Gibson's statements. Mr. Kendall asked how the administration of the operating and reliability standards is addressed within the new agreement. Mr. Gibson believes that was addressed in Section 7.1.3 and 7.1.3.4. Mr. Kendall asked if the amendment only addresses cost. Mr. Gibson agreed and noted these amendments only affect the allocation responsibility for cost. Mr. Agi requested the document clarify which costs qualify and whose costs qualify for inclusion and assignment to the IMC for coverage. Chair Evans believes the Budget Committee would have flexibility and a deliberative process to recommend whether costs belong in the asset category or the administrative category. Mr. Agi asked whose regulatory costs are included in the coverage. Chair Evans believes the documents refers to regulatory costs associated with the IMC activities. The IMC has to make a decision regarding any IMC regulatory costs. IMC Meeting Minutes-March 11, 2014 Page 3 of 10 Mr. Agi commented the utilities are contributing considerable engineering costs. Chair Evans stated the historical agreement has been that the utilities' cost of participation in a study or other effort will not be billed to the intertie. Chair Evans noted the normal costs that would be budgeted is where the IMC would be contracting somebody to work for the IMC. Mr. Agi requested clarification in the document regarding expenses incurred from this day forward and entities are not able to recapture expenses. Chair Evans stated the Budget Committee will have an assignment to begin the process of determining the allocation of the remainder of the budget. Chair Evans advised he wanted to get the sponsoring language in the agreement before that process began. Mr. Borgeson advised the resolution specifically notes this is made effective at the beginning of the current fiscal year, July 2013. Mr. Therriault agreed with Chair Evans to keep the proposed language and direct the Budget Committee to address the nuances as Chair Evans recommended. Mr. Therriault noted this direction to the Budget Committee will be captured in the minutes. Mr. Therriault requested the minutes reflect his understanding is correct that AEA is not a participant and none of these costs are going to be divided where AEA is expected to pick up a share beyond what was in the existing document. Mr. Bjorkquist agreed and confirmed these amendments address the costs that are passed onto the participants and the users. Mr. Bjorkquist advised AEA is not part of that cost structure. He noted there is a provision concerning future projects where a mechanism would allow AEA to pass these responsibilities under the intertie agreement onto the purchasers of power, the users of power from a new project. Under that provision, if AEA did not pass those responsibilities on, AEA could become responsible in the future. Mr. Bjorkquist advised there is a mechanism for AEA to approach that situation in the future and these amendments do not change that paradigm. Mr. Gibson agreed. Mr. Borgeson agreed and wanted the record to reflect there may be times when AEA wants to expend their own funds to engage consultants or get advice on the intertie that the Committee does not want or need. Mr. Borgeson cautioned AEA to stay within their budget and to come back to the IMC to get a modification. He commented AEA cannot hire their own consultants whenever they want and believe the utilities are going to pay for them. Mr. Borgeson noted this has been an issue this year and is still being addressed. Mr. Borgeson agrees this agreement does not burden AEA with any of the administrative costs of the ownership of the Alaska Intertie. Chair Evans commented there is nothing stated in the amendments that is intended to mean AEA has the ability to funnel all electric efforts in the railbelt or outside of the railbelt back through the intertie and expect reimbursements for those efforts. Chair Evans noted it will be incumbent on all members to break down the purpose of their budget in more detail in order to have a scope of efforts to review. Mr. Bjorkquist advised there is a provision in these amendments addressing improvements and if AEA wanted to make an improvement that the IMC decided was not in the interest of all the users, then AEA could be responsible for that cost. Mr. Gibson advised Article 13 of the bylaws discusses reimbursement of costs and states, "unless otherwise agreed to in advance by the IMC, each IMC member shall be responsible for the cost of travel and other expenses for its representatives. Application for reimbursement of IMC approved costs and expenses must be made to the Secretary." Mr. Gibson noted that is the process stated in the bylaws. IMC Meeting Minutes-March 11, 2014 Page 4 of 10 MOTION: Mr. Borgeson made a motion to adopt the Second Amended and Restated Alaska Intertie Agreement as presented at the meeting today with the changes that include adding the term "engineering" in paragraph 7.1.3.4., adding a whereas provision that reflects this is being done pursuant to Resolution 2014-02, including necessary numbering changes, including a title change of "Second Amended and Restated Alaska Intertie Agreement," and including conforming changes in definitions. Motion seconded by Mr. Kendall. Chair Evans expressed his appreciation for the work on these amendments, GVEA's original request and the development of a fair and equitable algorithm addressing the efforts. Mr. Borgeson thanked the members for supporting this resolution and appreciates the Committee seeing these amendments as a fair allocation of costs. Mr. Borgeson also thanked Mr. Gibson and Mr. Bjorkquist for their work. The motion was approved unanimously. 8. NEW BUSINESS 8A. OPERATOR REPORTS 8A1. Asset status 8A2. System operations status Mr. Warner provided the Committee with a detailed operator's report and system operations status. Mr. Warner expressed another issue of concern are the spinning reserves. He noted as of January 1, Homer Electric Association's (HEA) stated spinning reserve obligation is equal to 10% of the largest unit online in the system, which is currently a CEA unit valued at 106 megawatts. Mr. Warner noted HEA is providing about 10 to 11 megawatts of spinning reserve. Chair Evans asked if the spinning reserves would systematically have a 50% shortfall if each of the utilities follow the rule of only providing a spinning reserve of 10% of the largest unit online in the system. Mr. Warner agreed. Chair Evans commented there would have to be 10 entities providing a 10% spinning reserve for the rule to be successful. Mr. Wick clarified that HEA's stated spinning reserve obligation is equal to 10% of the largest unit based on HEA having 10% of the system load. He gave an example that if a utility was 50% of the system load, that utility would need to carry a spinning reserve of 50% of the largest unit. Mr. Warner noted HEA's spinning reserve is recorded and their stated contribution is 10% of the largest unit. Mr. Warner reported GVEA, ML&P, and CEA are providing the additional spinning reserve necessary to keep the spinning reserve obligation whole per the existing agreement. Chair Evans noted for the record, the issue is HEA's decision was arbitrary and unilateral. Chair Evans commented this is not the kind of system that is big enough to mimic systems in the Lower 48 who use the percentage of load as criteria for spinning reserve obligations. Chair Evans explained a percentage of load in a huge system far exceeds the largest unit, but in Alaska, a percentage of a load does not exceed the largest unit. The utility who built the largest unit has some additional responsibility and the cost is spread to others because the load is being served in a more reliable manner. Chair Evans does not believe it is a fair way to implement change by deciding it is more convenient to base participation on load because the utility will carry less spin using that calculation. IMC Meeting Minutes-March 11, 2014 Page 5 of 10 Mr. Warner reported there was a teleconference last week and MEA made a motion to provide additional funding to include a new relay control building at Douglas Substation that would not exceed $800,000. Chair Evans asked if $800,000 is a valid estimate to be used as a ceiling. Mr. Warner stated the motion was made, but it was tabled because the existing building is dilapidated, limited in space, and there is damage to the control cables due to rodents. A site visit is scheduled for March 17th, 2014. Another meeting will occur to discuss the findings. Mr. Warner reported EPS found there were thousands of attempts to log into the snow load monitoring server by unknown sources. There is no indication a breach occurred. EPS recommended and it was agreed upon that the hard drive should be cleaned and the programming be reloaded. The system was back in service two days later. Chair Evans asked if Mr. Warner believes the subcommittee is making progress on standardization of compliance reporting. Mr. Warner stated it is slow progress, but believes some progress is being made. Chair Evans believes it is important to resolve the record keeping issues and expressed his appreciation to all of the members meeting once a month to address the concerns. Mr. Warner reported the under frequency load shed study has been given to the System Studies Subcommittee. A working group is in the process of being developed to help with this effort and to define the scope of work issued in September of 2013. Mr. Warner reported Mr. Hickey is heading up this effort and anticipates 20 to 30 hours per week for each utility to complete the study in a timely manner. This is quite a commitment and where the utilities cannot provide somebody to participate, it is likely to go out to a contractor to fill the gap. This will impact the budget amount. Once the budget is determined, it is anticipated the funds will be split among the utilities and hours will be billed to that budget amount. Chair Evans advised these efforts do not happen every year and it is a great opportunity to learn the system. He recommended the utilities have their engineers actively participate because it will raise the level of understanding and experience with the system. Mr. Warner agreed. Mr. Warner reported there is a study moving forward that is related to the operation of the intertie without the Healy SVC. A proposal was sent by EPS for approximately $40,000 to be completed by June 2014. An additional request by GVEA may add up to $7,000 to that amount. This is still within the $50,000 FY 2014 budget for miscellaneous studies. Chair Evans commented EPS is requesting a lot of money and the issue is already known. If the tie is opened without the SVC, the voltage rise is going to be seen at Healy and at some point could trip the plant there. Chair Evans does not believe this is a $50,000 effort to reaffirm what we already know and the situation really has not changed. He believes the second intertie may help GVEA from Fairbanks lower the voltage, but it is still limited by miles and distance. Chair Evans stated he will more than likely abide by the recommendations of the IOC, but his input has been noted. Chair Evans requested that the IOC review the recommendations from the study group. Mr. Warner noted the IOC will add that review to their next agenda. Mr. Borgeson requested an update on the site visit and issues around upgrades or building a new facility for the relay control system. Mr. Warner noted the site visit will occur on March 17, 2014. Mr. Warner commented he would expect MEA would be asked to pay a larger portion of their share based on their equipment being installed in this shared facility. The cost allocation IMC Meeting Minutes-March 11, 2014 Page 6 of 10 will have to be determined. Chair Evans asked if this issue will be brought forward in the next budget cycle. Mr. Warner agreed. Mr. Borgeson asked if there is a way to capitalize the expense for the Alaska Intertie for a capital improvement such as this. Chair Evans advised there has not been a way to achieve that in the past and the IMC does not have a financing mechanism. Chair Evans noted this issue has not previously been addressed. Mr. Borgeson believes this is a big enough issue that it probably should not go into one year's rates. Mr. Borgeson commented as improvements like this are made, a mechanism needs to be created to address this issue. Chair Evans agreed a capital repair process in an issue that needs to be addressed. Mr. Dale asked if the new building will be large enough to contain the relay for install of the Lake Lorraine line. Mr. Brooks advised that was one of the initiative that was put on the table in the form of a question and whether infrastructure should be built for a future road to anticipate Lake Lorraine. Chair Evans asked if MEA has determined the actual details of the proposal regarding cost sharing. Mr. Brooks agreed the details of cost sharing have not been determined. Mr. Warner advised the IOC is in the process of determining if this is a reasonable project for consideration. Chair Evans noted this brings up an additional issue of ownership because CEA cannot make capital repairs and say MEA is the owner. Chair Evans requested the IOC, Budget Committee and attorneys can discuss this issue and provide a fair proposal on long-term capital repairs. Mr. Borgeson suggested MEA could build the building and lease it to the Alaska Intertie. Chair Evans agreed that could be an option and is part of a bigger discussion regarding improvements to the intertie. 8B. COMMITTEE REPORTS 8B1. Tariffs and Regulatory Affairs Committee (RCA) a) RCA enforcement of reliability standards and operating protocols Mr. Johnson reported the committee has been addressing the task requested by Chair Evans to identify the next steps forward in terms of implementation and enforcement of the reliability standards. Mr. Johnson directed the members' attention to Section 3.3 of the intertie agreement, which provides the basis for how to proceed. Mr. Johnson informed there were three viable options discussed on how to proceed. The first option involves a joint filing on behalf of the IMC with the RCA to more formally establish the reliability standards as rules that need to be followed. The second option is for the individual utilities to make a tariff filing, an amendment to their tariff, which formally incorporates the reliability standards as rules for doing business with the utility. The third option is to file a petition for rule making with the RCA that would seek a recognition of the reliability standards as the rules and would apply to all of the utilities in the railbelt. Mr. Johnson suggested bringing the issue in front of the RCA, which can occur in a variety of ways. Mr. Johnson noted the committee is recommending the IMC bring the reliability standards up to a point where they will be recognized and enforced. Upon adoption of a regulation or approval of a tariff, if there was a complaint in terms of applicability of the reliability standards, a party would file a complaint with the RCA and the RCA would adjudicate it. IMC Meeting Minutes-March 11, 2014 Page 7 of 10 Chair Evans believes that major point would indicate the system is broken because any matter regarding reliability or operating protocols would first be brought to the IMC for resolution. The IMC subject matter experts would need to author an opinion on the matter. A member may dissent, but the IMC would determine if the rule is upheld or changed. The final dispute arbitrator could be the RCA. Chair Evans believes a rule making petition is the direction the IMC is heading because the system is not the same as it was. There are new players in the system, non-regulated resources, utilities who are operating and are not carrying any reserves and some who are carrying partial reserves. Chair Evans stated it is time to address these issues. Mr. Borgeson thinks the Alaska Intertie has got to file for a Certificate of Public Convenience and Necessity with the RCA, adopt tariffs including tariffs for compliance and issues. The open access has to be regulated and the rules have to be developed. Mr. Borgeson believes the IMC is heading toward the RCA for that effort. Chair Evans noted this is an entirely new area because kilowatt hours are not being sold. Mr. Borgeson commented it is more like regulating a pipeline. Chair Evans requested information from the committee how this situation is handled in existing protocols and regulatory environments in the Lower 48 with Independent System Operators (ISO) and how they are empowered by the Commission. Mr. Therriault commented the utilities, through the IMC, are acting as best they can as an ISO. He believes there needs to be an entity, short of the RCA, that keeps the standards updated as technology advances and the system evolves. Dan Kendall advised there are agreements among utilities whose path has turned to allowing the courts decide the particular issues, rather than allowing the industry experts provide solutions. He noted the ISO is one way of having the enforcement, but it is putting the utilities in the enforcement business. Chair Evans agreed it does not work for the utilities to be in the enforcement business because there is no enforcement mechanism. He believes the system is broken because entities can interconnect and do whatever they want. This issue is beyond the ability of the utilities to ensure standards are being followed. Chair Evans believes the IMC should approach the RCA to discuss this huge problem and request their help in enforcing the standards. Mr. Kendall commented the discussion will change if the Legislature acts on the ISO. Until then, the IMC needs to chose an alternative or take all of the options to the RCA and request their guidance. Chair Evans asked Mr. Johnson if he requests additional time to mature the discussion and make a recommendation on the best way to proceed. Chair Evans recommended all participants engage in the discussion of this subject so the organizations understand the process. Mr. Johnson expressed his appreciation for this discussion because it provides some questions to focus on. He requested a designated participant from GVEA, ML&P, and MEA. He believes their participation would be useful. Mr. Johnson intended to provide some answers to the IMC today and are prepared to continue working on solutions and new mechanisms. Mr. Johnson advised CEA considers this to be a very important matter and are moving ahead with the tariff approach. Mr. Therriault advised the passage of the pending legislation to initiate a report may push the IMC ahead, but if nothing passes, the steps the committee is taking will continue to move the issue forward. Chair Evans noted the draft language that went down to the Legislature was asking for more than a report and somehow through the wordsmith process, the intent of IMC Meeting Minutes-March 11, 2014 Page 8 of 10 developing a working business model and developing legislative language that would enable the authority to make a recommendation if this is implemented was not included. A working business model has to be developed to know what the study results will be. Chair Evans stated the result of the report has to be something that can be implemented. He does not like the choice of the word "report," because normally the connotation of report is not something that will be implemented, but rather the first step taken in a certain direction. Chair Evans noted the IMC was hoping the language would have been stronger in the direction to the RCA and are seeking to change the words to reflect the intent. Mr. Therriault believes there will be a hearing in the next week or two, which will provide an opportunity to work on the language. Chair Evans hopes that will occur. Chair Evans commented the scope of the problems that are in front of the IMC are beyond the enforcement and control of the IMC. The IMC's only authority was by mutual consent agreement, which is no longer being followed. Mr. Borgeson commented he would not describe this issue as a problem, but rather a growth and evolution of operations. He noted GVEA will move forward in adopting of the open access and reliability standards as a part of the tariff for GVEA's transmission lines. Mr. Borgeson believes the RCA has the authority to regulate utility transmission lines and the issue is whether or not the Alaska Intertie is viewed as a utility. Mr. Borgeson commented if all the utilities surrounding the Alaska Intertie have the same reliability standards, the Alaska Intertie will conform. Mr. Borgeson believes the reliability standards are effectively being put into place by the utilities going through the RCA and establishing the tariff process. Mr. Agi suggested discussing the tariff approach further and reviewing the downside of this option. Chair Evans agreed the issue of revision control should be discussed. Mr. Therriault asked if the suggestion from the last meeting occur whereby the utilities would use a compact mechanism for the adoption outside of the intertie. Mr. Johnson noted that approach has been discussed and no agreement has been determined. Further discussions must occur before a decision can be reached. Mr. Agi asked if AEA had a preference for that mechanism. Mr. Therriault stated AEA does not have a preference and understands a decision will take time. Mr. Johnson commented the committee is happy to review the questions the IMC has posed and will provide an updated report at the next meeting. 8B2. Intertie Operating Committee (IOC) a) Compliance Reporting for Operating Standard Protocols Mr. Warner noted he addressed some of these issues in his report earlier in the meeting and is available to answer questions. Chair Evans asked if the IOC is continuing to consolidate all of the North American Electric Reliability Corporation (NERC) information regarding the compliance reporting for operating standard protocols. Mr. Warner agreed that process is ongoing with the Dispatch Subcommittee. b) Report on non-utility generation Chair Evans commented regarding the report on non-utility generation is not only an HEA problem because there are other entities operating that are not in compliance with the IMC IMC Meeting Minutes-March 11, 2014 Page 9 of 10 standards, nor do they recognize the standards. He believes the total scope of the interconnected railbelt system needs to be reviewed to identify the individual non-utility generators and even utilities such as Doyon, who is a utility operating a generation plant and determine the level of compliance. Chair Evans requested the participants further understand and provide their opinion on this issue. He noted the way things are currently evolving regarding the spinning reserves and the reserve pool created by the standards and operating protocols is that the participants' members are paying for this benefit, but the benefit is also going to non-members who are not contributing to the cost. Chair Evans believes there is a fiduciary responsibility to examine this in detail in order to provide forward recommendations. Mr. Therriault asked if this relates to Section 3.3 where each participant should be responsible for non-residential customers or generation projects on the participant's system. Chair Evans believes that characterization is accurate, but the IMC has not come to a conclusive agreement. He does not believe the protocols and standards have guided the IMC to the appropriate answer and these concerns still need to be examined. c) HEA complaints/issues w/meeting reliability standards Chair Evans advised HEA had lodged some complaints at the Bradley Lake Project Management Committee (BPMC) meeting and the BPMC is not the appropriate body to necessarily interpret these interconnected issues. Chair Evans requested the IOC review HEA's complaints and render an opinion on the legitimacy of the complaints. Mr. Warner agreed to follow through. d) Budget Subcommittee (1) Resolution 2014-2 Intertie Cost Allocation -Budget Amendment No current report is available for presentation to the IMC. The Budget Subcommittee is meeting on Thursday to review the allocations. Chair Evans requested the Budget Subcommittee determine the bifurcation of the budget and ensure everyone agrees to the delineation of cost elements. The representative agreed to the request and noted the agenda will be revised to go back to the Fiscal Year 2014 budget and submit the changes to the expenses and costs for each utility. The same methodology will be used moving forward. e) Systems Studies Subcommittee (1) Frequency Load Shed System Studies Chair Evans noted Mr. Warner reviewed this item in his earlier report and opened the floor up to comments from the members. Mr. Therriault advised AEA will distribute by the end of the week the completed report that was contracted out, which provides recommended improvements to the intertie. Mr. Therriault noted a second report has been completed regarding the sequencing of the projects to accomplish the improvements and how that infrastructure would interact in a post-Susitna world. Mr. Therriault noted these reports will be furnished to the utilities for review, comments and questions. The reports will also be submitted to the independent power producers for review. This is not a formal public comment period. Burlingame has been hired to offer a professional opinion and AEA wants to ensure the message is clear. Mr. Borgeson advised GVEA and MEA have a meeting scheduled this week with one of their major loads who wants to develop its own power in MEA's service territory and wheel it across