HomeMy WebLinkAbout2024-11-18 AEA Agenda and docs
813 West Northern Lights Boulevard, Anchorage, Alaska 99503 T 907.771.3000 Toll Free 888.300.8534 F 907.771.3044
REDUCING THE COST OF ENERGY IN ALASKA AKENERGYAUTHORITY.ORG
Alaska Energy Authority Special Board Meeting
November 18, 2024, 9:00 am
AGENDA
Dial 1 (888) 585-9008 and enter code 212-753-619# Public comment guidelines are below.
1. CALL TO ORDER
2. ROLL CALL BOARD MEMBERS
3. AGENDA APPROVAL
4. PRIOR MINUTES – October 22, 2024
5. PUBLIC COMMENTS (2 minutes per person) see call in number above
6. COMMITTEE REPORTS - NONE
7. OLD BUSINESS –
A. Battery Energy Storage Systems (BESS) Service Agreements:
i. Resolution 2024-13 – Authorizing Purchase from Alaska Electric & Energy Cooperative of Battery Energy Storage System (BESS) or Related Services
ii. Resolution 2024-14 – Authorizing the Purchase from Chugach Electric Association of Battery Energy Storage System (BESS) or Related Services
iii. Resolution 2024-15 – Authorizing the Purchase from Golden Valley Electric Association of Battery Energy Storage System (BESS) or Related Services – (Pending)
iv. Resolution 2024-16 – Authorizing the Purchase from Matanuska Electric Association of Battery Energy Storage System (BESS) or Related Services
8. NEW BUSINESS
A. Power Project Fund (PPF) Loan Regulation Change
9. BOARD COMMENTS
10. ADJOURNMENT
Public Comment Guidelines Members of the public who wish to provide written comments, please email your comments to publiccomment@akenergyauthority.org by no later than 4 p.m. on the day before the meeting, so they can be shared with board members prior to the meeting. On the meeting day, callers will enter the teleconference muted. After board roll call and agenda
approval, we will ask callers to press *9 on their phones if they wish to make a public comment.
This will initiate the hand-raising function.
We will unmute callers individually in the order the calls were received. When an individual is
unmuted, you will hear, “It is now your turn to speak.” Please identify yourself and make your
public comments.
813 W Northern Lights Blvd, Anchorage, AK 99503 Phone: (907) 771-3000 Fax: (907) 771-3044 Email: info@akenergyauthority.org
REDUCING THE COST OF ENERGY IN ALASKA AKENERGYAUTHORITY.ORG
Alaska Energy Authority BOARD MEETING MINUTES
Tuesday, October 22, 2024
Anchorage, Alaska
1. CALL TO ORDER Clay Koplin, Chair, called the meeting of the Alaska Energy Authority to order on September 10, 2024, at 9:01 am. 2. ROLL CALL BOARD MEMBERS Members present: Clay Koplin (Public Member); Duff Mitchell (Public Member); Adam Crum (Commissioner DOR); Julie Sande (Commissioner DCCED (Arrived Late)); Ingemar Mathiasson (Public Member); Jenn Miller (Public Member); Robert Siedman (Public Member); and Tony Izzo (Public Member). A quorum was established. 3. AGENDA APPROVAL
Curtis Thayer, Executive Director, noted that the auditors are in attendance today. He requested
to move Item 8A. Alaska Energy Authority 2024 Draft Financial Statements and the auditors’
presentation before Item 7. Old Business.
There was no objection to approving the agenda with the modification.
4. PRIOR MINUTES – September 10, 2024
MOTION: A motion was made by Mr. Izzo to approve the prior minutes of September 10,
2024. Motion seconded by Vice Chair Mitchell.
Vice-Chair Mitchell corrected a typographical error on page 4 of the minutes: IGA should be IRA. Vice Chair Mitchell requested to clarify and add to his comments in that same paragraph. The last sentence should read: “Mr. Mitchell expressed his willingness to serve as Vice Chair for AEA officer balance of utility and non-utility interests.” There were no objections. A roll call was taken, and the motion to accept the minutes of September 10, 2024, as amended, passed unanimously. 5. PUBLIC COMMENTS (2 minutes per person) There were no members of the public online or in-person who requested to comment.
Alaska Energy Authority Page 2 of 12
6. COMMITTEE REPORTS – None
8. NEW BUSINESS
A. Alaska Energy Authority 2024 DRAFT Financial Statements
Mr. Thayer requested Bikky Shretha, BDO, present the AEA 2024 Draft Financial Statements included in the packet. Mr. Shretha expressed appreciation to the staff for their assistance beyond their normal duties in providing the required information for the audit. All requested records and information was freely available for inspection, and management cooperation was excellent. He explained that BDO is substantially completed with AEA’s audit for the year ended June 30, 2024, and only minor changes to the Draft Financial Statements are anticipated. Mr. Shretha defined that the objective of the audit is to provide reasonable assurance that the financial statements are free from material misstatements. BDO expects to issue an unmodified, clean opinion on both the audit of the financial statements and the compliance audit of the federal programs. Mr. Shretha reviewed there were no major changes to the accounting rules that were applied in the financial statements. However, AEA’s movement of the funds from the Treasury’s management
to Alaska Permanent Fund Corporation’s (APFC) management shifted the status of investments
from a pooled asset to multiple different categories of investments, each with individual
disclosures. Mr. Shretha highlighted another difference from last year is that the portion of the
investments that are managed by Alaska Permanent Fund Corporation are audited by other
auditors. Reference and input from those audits, such as investment balance and investment
revenue, are included in the financial statements. Mr. Shretha reported no corrected or
uncorrected misstatements, and no findings regarding internal control over financial reporting.
Chair Koplin opened the floor for members to ask questions.
Mr. Izzo noted that he could not find the words “clean” or “unqualified” within the draft opinion.
He requested clarification. Mr. Shretha explained that the nomenclature changed about 12 years ago. The term “qualified” remains, but rather than “unqualified,” the description is now “unmodified,” which would be an unmodified or clean opinion. Vice Chair Mitchell asked if Mr. Shretha’s PowerPoint can be incorporated into the information provided for the public. Mr. Shretha indicated that the information presented is not finalized. Once the information is finalized, Mr. Shretha will provide it. Vice Chair Mitchell commented that the information would be helpful to the public. He asked Mr.
Alaska Energy Authority Page 3 of 12
Shretha if it is accurate to summarize the audit findings as such: AEA’s funds are safe, secure, and well-managed.
Mr. Shretha noted that there were no findings to report within the audit. All information within
the financial statements were presented in accordance with the accounting rules and government
auditing accounting standards.
Vice Chair Mitchell asked Mr. Shretha if he feels that AEA is well-situated for the anticipated continued growth of receipt of federal funding. Mr. Shretha noted that three federal programs were subjected to the current fiscal year audit. No findings were reported, and compliance requirements were met. BDO has no concerns regarding the current fiscal year. He explained that future programs may have different compliance requirements and rules that will need to be addressed at that time. Mr. Siedman asked if the external audits discussed by Mr. Shretha will be available to the public. Mr. Shretha responded that question should be directed to management. Mr. Thayer highlighted that the completed audit will be posted to the AEA website. He noted that APFC also posts their completed audit to their website. Mr. Thayer clarified that the Department
of Revenue no longer manages AEA’s funds. Approximately two years ago, the Legislature
changed AEA’s management of funds to APFC. This is the first year that change has taken effect.
Mr. Thayer commented that AEA’s net position for government activities and non-government
activities make AEA one of the largest State corporations, exceeding the Alaska Railroad.
Mr. Shretha directed members’ attention to page 18 of the Draft Financial Statement to highlight
the approximately $1 billion of governmental activities, and approximately $600 million of
business-type activities, totaling approximately $1.7 billion in assets. The two major asset
categories are Investments, and Cash and Cash Equivalents. The majority of those assets are
restricted.
Commissioner Crum reiterated that the Legislature moved the management of the Power Cost Equalization (PCE) Program’s investments to APFC. The annual meeting of APFC was approximately four weeks ago. Commissioner Crum sits on the Board of Trustees. The external auditor’s report was formally adopted and is available to the public. Commissioner Crum explained that assets managed by APFC are subject to the asset allocation as determined by APFC Trustees. He explained that AEA can view the allocation of the funds, the returns on the funds, but AEA will have no input as to how the funds are invested. Commissioner Crum highlighted that AEA created a functional Audit Committee at the previous meeting, who will maintain regular engagement during the year with the auditors. He commended BDO for their work on this audit and their transparent process with staff prior to the formation of a functional Audit Committee. Chair Koplin asked Mr. Shretha to provide a high-level summary of the audit.
Alaska Energy Authority Page 4 of 12
Mr. Shretha reviewed the fiscal year-end total net position was approximately $1.4 billion, of which approximately $1 billion was in governmental activities and approximately $399 million was in the
business-type activities. Mr. Shretha discussed the results of the operations of the governmental
funds as shown on page 22, the business-type assets and liabilities on page 23, and the results of
the operations of the business-type activities on page 24. The disclosures related to the
investments begin on page 38. There were no additional questions. MOTION: A motion was made by Ms. Miller to accept AEA FY2024 Draft Financial Statements, as presented. Motion seconded by Vice Chair Mitchell. A roll call was taken, and the motion to accept AEA FY2024 Draft Financial Statements passed unanimously. 7. OLD BUSINESS Mr. Thayer recommended discussing the legal matters related to the BESS Service Agreements in executive session. MOTION: A motion was made by Vice Chair Mitchell to enter into executive session to discuss the legal matters related to the BESS Service Agreements. Motion seconded by Ms.
Miller.
A roll call was taken, and the motion to go into executive session passed unanimously.
EXECUTIVE SESSION: 9:33 am – Discuss legal matters related to the BESS Service
Agreements
The Board reconvened its regular meeting at 10:13 am.
Chair Koplin advised that no action was taken while in Executive Session. He indicated that a
conflict of interest was declared for Mr. Izzo, who is a Railbelt utility manager involved in the direct
negotiations with AEA. Chair Koplin requested that an overview of the action item be presented to the public. A. Battery Energy Storage Systems (BESS) Service Agreements Mr. Thayer explained that the following resolutions authorize the purchase of the BESS and related services from the Railbelt utilities for required project work at Bradley Lake. In 2022, $166 million of bonds were approved for required project work at Bradley Lake. The Bradley Lake Management Committee (BPMC) and the AEA Board selected transmission work and battery storage as the two key components of required project work. Mr. Thayer informed that there is approximately $90 million of required project work already in process. He noted that through consultations with the BPMC, bondholders, and Department of Law, it was determined that the remaining undesignated
Alaska Energy Authority Page 5 of 12
amount of approximately $20 million would be included in the Grid Resilience and Innovation Partnerships (GRIP) match for the High-Voltage Direct Current (HVDC) line across Cook Inlet. The
approximate amount remaining, and intended for the purchase of BESS and related services in
the three Alaska regions was $58 million. Meanwhile, the BESS costs increased dramatically, and
the available funds were not able to cover the purchase of even one BESS for one region in the
state. Staff has been working diligently with Department of Law and the utilities over the last six months to find language within the bond covenants that would allow $30 million for the GRIP match, and $28 million to be divided among the utilities for the BESS that will help offset the cost for the ratepayers. There were no questions from members. Chair Koplin opened the floor to public comments regarding this agenda item. Mr. Izzo requested to comment. Chair Koplin noted that due to the conflict of interest in his position as a Railbelt utility, Mr. Izzo is commenting as a Railbelt utility manager and not as an AEA Board member. Mr. Izzo reiterated that he is speaking as the CEO of the Railbelt utility Matanuska Electric Association (MEA) and not as an AEA Director. He advised that he was recused from the discussion during executive session and will recuse himself from any action AEA will take regarding this issue.
Mr. Izzo stated that he completely agrees with Mr. Thayer’s comments outlining the mutual goals
of AEA and the Railbelt utilities, particularly to ensure that the agreements maintain the availability
of investment tax credits and increased savings. Discussions are ongoing and the outcomes are
forthcoming. Mr. Izzo recommended that the Board wait to act on the resolutions until the
outcomes are considered. There were no other comments.
MOTION: A motion was made by Vice Chair Mitchell to table all BESS agreements, and to
call for a special meeting once the modifications and conclusions are presented. Public
comments can be made at the special meeting, if necessary. Motion seconded by Ms.
Siedman.
A roll call was taken, and the motion to table all BESS agreements passed, with Mr. Izzo abstaining. i. Resolution 2024-13 – Authorizing Purchase from Alaska Electric & Energy Cooperative of Battery Energy Storage System (BESS) or Related Services ii. Resolution 2024-14 – Authorizing Purchase from Chugach Electric Association of Battery Energy Storage System (BESS) or Related Services iii. Resolution 2024-15 – Authorizing Purchase from Golden Valley Electric Association of Battery Energy Storage System (BESS) or Related Services iv. Resolution 2024-16 – Authorizing Purchase from Matanuska Electric Association of Battery Energy Storage System (BESS) or Related Services
Alaska Energy Authority Page 6 of 12
B. Board Meeting Schedule
Chair Koplin indicated that determination was made at the first Board meeting to hold regular
quarterly meetings, while recognizing the need for occasional interim meetings as needed to
address time-sensitive and impactful items. The meetings will follow the same structure and
agenda format. There were no questions. 8. NEW BUSINESS B. Resolution 2024-17 – Renewable Energy Certificates Mr. Thayer explained that Resolution 2024-17 authorizes the Executive Director to create and sell Renewable Energy Certificates (RECs) for the Bradley Lake Hydro Project. The RECs represent the environmental and renewable attributes of energy generated from renewable sources, such as wind, solar, hydro, or biomass. While the electricity itself cannot be physically differentiated once it enters the grid, RECs serve as a certification of the renewable origin of the energy produced. The market for RECs began in the late 1990s, and the current REC market is well-established and growing. RECs is a key tool for achieving carbon reduction and renewable energy goals. RECs can be sold directly or through a broker to either the end-user or wholesale. Using a broker reduces the administrative burden and eliminates the need to develop knowledge of the market. However,
this option incurs brokerage fees and hands over control of the REC to the broker.
Mr. Thayer explained that AEA’s Bradley Lake produces 400,000 MW of power per year, and RECs
have never been sold. AEA has statutory authority to create and sell RECs under AS 44.83.080. The
statute grants AEA broad authority to manage alternative energy projects, enter into contracts for
the sale of power, and promote energy efficiency. The resolution authorizes the Executive Director
to enter into all contracts necessary to achieve the creation and sale of the RECs, including a
contract with a broker, if that option is selected through the request for proposal (RFP) process.
Mr. Thayer disclosed that conversations have occurred with two vendors in Alaska, which clearly
indicates initial interest.
Mr. Thayer discussed that it is possible to utilize RECs from as far back as 2019, even though older RECs are not as valuable as newer and future credits. He discussed that the older RECs that may be available could potentially sell for up to $700,000. Future RECs are worth more, with 2025 RECs anticipated to sell for $400,000, 2026 RECs anticipated to sell for $600,000, and 2027 RECs anticipated to sell for over $800,000. Further information is necessary to determine if the anticipated numbers are reflective of today’s market. Mr. Thayer highlighted that the Dixon Diversion would increase the RECs by approximately 50%. Mr. Thayer commented that deliberations with the Board and the Governor’s Office would occur to determine how to best utilize this unique opportunity and the earnings to benefit AEA programs. Staff recommends approval of Resolution 2024-17.
Alaska Energy Authority Page 7 of 12
MOTION: A motion was made by Vice Chair Mitchell to approve Resolution 2024-17 for discussion purposes, to authorize the creation and sale of Renewable Energy Certificates for
Bradley Lake Hydroelectric Project, as presented. Motion seconded by Ms. Miller.
Ms. Miller applauded the Executive Director and the team for finding this new revenue source that
can benefit Alaskans. She expressed support for the RFP process and bidding for the RECs. Vice Chair Mitchell echoed Ms. Miller’s comments. He recommended that the timing and the sale of the RECs is optimized. Similarly, he noted that smaller utilities, smaller municipalities, and individual owners could be eligible for RECs, and are not participating for a variety of reasons. Vice Chair Mitchell suggested that AEA’s Executive Director and staff provide leadership to bundle the RECs for those entities to optimize their economies of scale and to work toward lowering the cost of energy for Alaskans. Mr. Siedman agreed with the previous comments and expressed support for the resolution. He requested that the RFP process is not solely structured as commission-based or lowest bidder, and that the process include the important quality of the bidders to sell the RECs. Mr. Siedman asked that his comments are taken into consideration. There were no further comments. A roll call was taken, and the motion to approve Resolution 2024-17 passed unanimously.
9. DIRECTORS COMMENTS
A. Response to Board Question
Mr. Thayer noted that the memorandum and report regarding the Renewable Energy Fund (REF)
question is included in the packet. There were no questions.
B. Bradley Lake Update and Video
Mr. Thayer showed the Bradley Lake video, which will be available to the public after the meeting.
Staff’s intent is to create similar videos highlighting Dixon Diversion and GRIP. The Bradley Lake video is part of the presentations for the Legislature. Mr. Thayer expressed appreciation to staff for their fantastic job. Mr. Izzo echoed the accolades to staff. Mr. Thayer discussed that Bryan Carey, AEA, authored the included Bradley Lake Hydroelectric Update. Mr. Thayer outlined the key components of the report. Much work was conducted during the summer that was focused on the Dixon Diversion. The Board of Consultants visited Bradley Lake. This was required by the Federal Energy Regulatory Commission (FERC). The rock appears to be good quality for tunnel boring. Mr. Thayer reviewed the request in the Governor’s budget to fully fund the Dixon Diversion and to move the project forward for completion in 2030. Federal tax credits are anticipated to help offset the $340 million cost of the Dixon Diversion.
Alaska Energy Authority Page 8 of 12
Mr. Thayer noted the record high lake levels since this summer. He listed the contributing factors,
and informed that the levels are currently below spill level. There were no questions.
C. GRIP 3 Update
Mr. Thayer discussed that Jim Mendenhall, AEA, authored the included GRIP Update. AEA has formally accepted the project award from Department of Energy (DOE). The initial budget is $14.7 million. The pre-award costs were approved. Additionally, AEA submitted a notice to proceed with contractor Stantec to provide the initial project plan and schedule, HVDC conceptual design, HVDC cable preliminary design, critical environmental issues analysis, and preliminary cost estimate. The hope is to have substantial information available in February. There were no questions. D. SSQ Line Update Mr. Thayer discussed the Sterling to Quartz Substation (SSQ) transmission line upgrade update included in the packet. The project is scheduled for the next five years due to the management of the outages during the upgrade work. Mr. Thayer reported that Chugach Electric Association (CEA) is conducting upgrades and scheduling outages concurrent to the SSQ work. Because of the
overlap of projects, AEA has contracted with CEA for the design, procurement, and oversight of
the construction. The initial bids have come in lower than expected. The draft schedule through
2028 is included in the report. Mr. Thayer expressed sensitivity to the permitted and scheduled
outage of the southern intertie between January 7, 2025 and March 21, 2025. The contractor has
indicated that there are contingencies that, if necessary, the line could be brought back into
service within 24 hours. There were no questions.
E. Railbelt Transmission Organization (RTO) Update
Mr. Thayer reviewed the included RTO update. House Bill 307 created the RTO, and the first
hearing with the Regulatory Commission of Alaska (RCA) was conducted. The RTO Working Group
is focused on the RCA filings, and the Governance Committee has drafted an initial set of bylaws. The attorneys are reviewing the information. The bylaws need to be approved and submitted to the RCA by December 31, 2024. The RTO has scheduled meetings in November and in December. Officer elections have not yet occurred. Mr. Thayer expressed appreciation to Mark Ziesmer, AEA, for his efforts. There were no questions. F. Power Project Fund (PPF) Loan Update Mr. Thayer reviewed the included Loan Dashboard Report. There are 15 outstanding loans. As of the October report, there was one delinquency of $27,000, which has since been paid. The total loan program is approximately $40 million, and is comprised of an outstanding loan balance of approximately $31 million, an uncommitted cash balance of approximately $4.3 million, and loan commitments of approximate $5.4 million. There were no questions.
Alaska Energy Authority Page 9 of 12
G. Power Cost Equalization (PCE) Update
Mr. Thayer reviewed the included PCE Update. He noted that by statute, the PCE is managed by APFC. AEA tracks the investments and balances monthly. There were no questions.
H. Rural Update
Mr. Thayer reviewed the included Rural Update. There are 23 active Bulk Fuel Upgrade (BFU) projects. Each project costs an average of $11 million, resulting in over $1 billion in unmet funding needs for BFU projects. There are 40 active Rural Power System Upgrades (RPSU) projects. Each project costs an average of $6 million, which is almost double than what it cost five years ago. The unmet funding need for RPSU projects is over $300 million. The Circuit Rider representatives have travelled to Napaskiak, Port Heiden, and Teller to conduct training. No electrical emergencies occurred in September. There were no questions.
I. Renewables Update
Mr. Thayer reviewed the included Renewables Update. AEA, within its Renewable Energy and Energy Efficiency (REEE) Program, manages four biomass projects, four energy storage projects,
two geothermal projects, seven hydroelectric projects, seven solar projects, and 24 wind projects
in the state. Additionally, the REEE team manages 19 projects funded by other agencies. The update includes a description of each of the projects, the technology, title, grantee, and associated budget. Staff is awaiting the pending funding for the two Solar for All projects. There were no questions.
J. Navision Update
Mr. Thayer discussed the Navision upgrade to the computer system. Currently, AEA shares the platform with AIDEA, and is treated as one company. Funding for the upgrade has been requested within the Governor’s budget. The intent is to maintain the shared server while treating AEA and AIDEA as two separate companies, and creating individual modules based on specific programs.
There were no questions.
K. Governor Eklutna Decision
Mr. Thayer informed that AEA was named in the 1991 Eklutna agreement. The Governor’s Eklutna Decision to move forward with the proposal is included in the packet for informational purposes.
The process was open and transparent. Mr. Thayer discussed that AEA was also named in the
Snettisham Project, even though AEA has no role in the project. AEA will be working with Alaska Power and Light and the other parties to define AEA’s role. Mr. Thayer highlighted that AIDEA now owns the project. There were no questions. L. FY25 Statutorily Required Reports Schedule Mr. Thayer discussed that the FY25 Statutorily Required Reports Schedule is included for
Alaska Energy Authority Page 10 of 12
informational purposes. There were no questions.
M. Community Outreach
Mr. Thayer highlighted the Community Outreach document included in the packet. This time of the year is very busy. There were no questions.
N. Articles of Interest
The Articles of Interest are included in the packet.
Mr. Izzo thanked Mr. Thayer for his updates. He emphasized the critical nature and appreciation for the recognition by AEA for being able to get Bradley Lake back on a 24-hour schedule. Mr.
Izzo commented that his understanding of the gas situation is that not everything that is needed
is under contract going into next year. Identification of the Railbelt shortfall is being determined.
The goal is to achieve the vision of eliminating constraints and being able to move the lowest cost
power across the Railbelt.
Mr. Mathiasson commented that he is happy to hear the forward momentum on RECs in the state, and would like to see bundling of the smaller projects for the rural communities. There were no other questions or comments.
O. Next Regularly Scheduled AEA Board – January 23, 2025 at 9:00 am
Chair Koplin reiterated that the next regularly scheduled AEA Board meeting is on Thursday, January 23, 2025.
MOTION: A motion was made by Vice Chair Mitchell to enter into executive session to discuss confidential matters related to the FY26 budget, that the immediate of which may
have an adverse impact on the Authority. This is supported by the Open Meetings Act (AS
44.62.310), which allows a board to consider confidential matters in executive session. In
this case, the Board believes that these are subjects, which would have an adverse effect
upon the finances of AEA and are protected by law due to the rules protecting personal
privacy and certain business information. Motion seconded by Ms. Miller.
A roll call was taken, and the motion to go into executive session passed.
10. EXECUTIVE SESSION: 10:58 am – Discuss confidential information related to the FY26 budget.
The Board reconvened its regular meeting at 11:33 am. Chair Koplin advised that the Board did not take any formal action on matters discussed while in Executive Session.
11. BOARD COMMENTS
Vice Chair Mitchell believes this meeting has been very productive. He expressed appreciation to
Alaska Energy Authority Page 11 of 12
all who participated. He is confident there is a pathway to resolve the BESS systems. Vice Chair Mitchell requested AEA staff to notify the Board regarding any upcoming energy legislation so
that AEA can help facilitate forward movement. Vice Chair Mitchell sees the bulk fuel issues as an
existential threat for the rural communities and requested staff to advise the Board of proactive
ways to put forward and obtain congressional designated spending. He believes that a
maintenance component and standard of performance needs to be included to prevent a recurrence of this situation. Vice Chair Mitchell commented on the advent of artificial intelligence (AI) and its effect on energy. Three Mile Island is being funded by Microsoft. Amazon is funding another nuclear program. He noted that Microsoft and Amazon will get 100% of the energy output for data centers. The Electric Power Research Institute (EPRI) released a study finding that 4% of the nation’s energy is used in data centers in 2024. By 2030, that number is expected to grow to 9.8%. Vice Chair Mitchell requested Board members to read Governor Dunleavy’s comments on KTOO from October 21, 2024 regarding these issues. Vice Chair Mitchell applauded Chair Koplin for pioneering data centers within powerhouses. Mr. Izzo expressed appreciation to Mr. Thayer, to Jennifer Bertolini, AEA, and to staff for their diligent efforts. Ms. Miller echoed and reiterated Mr. Izzo’s sentiments of appreciation.
Mr. Mathiasson commented on the competency of staff and the information provided during this
good meeting. He looks forward to the resolution of the BESS system and bringing it online. Mr.
Mathiasson supports continued forward motion on the RECs.
Mr. Siedman commented on today’s great meeting. He believes the Board is well-suited with
experience to move AEA in a positive forward direction. Mr. Siedman agrees it is important to
focus on the BESS resolutions. He commended the Board for tabling the resolutions to establish
a clear understanding of leveraging federal money while protecting possible incentives. Mr.
Siedman looks forward to a special Board meeting to reconvene on that issue. He emphasized the
importance of fully funding the Renewable Energy Fund for the next fiscal year. He understands
the labor market challenges, including inflation and competition, affecting the Solar for All
program. Mr. Siedman reiterated Vice Chair Mitchell’s comments regarding the methodical increase of data centers. He envisions a potential opportunity for AEA to reach out to the big players in the industry and to dedicate a certain portion of the renewable energy investments to data centers that may offset costs. Lastly, Mr. Siedman commended Mr. Thayer and staff for their efforts regarding the RECs. He believes the future of that market will be lucrative, although somewhat volatile. Chair Koplin expressed appreciation for his time in Iceland and the opportunity for seeing their datacenters. He believes that the industry leaders, such as Amazon, Microsoft, and Google, will actively pursue Alaska’s resources. Chair Koplin commended the excellent Renewable Energy Fund history report. He complimented staff on the Bradley Lake video, and highlighted the project’s steady increase in value over its lifespan, including the current REC opportunities. Chair Koplin expressed excitement for the Dixon Diversion project and for the utilization of the Power Project
Alaska Energy Authority Page 12 of 12
Loan Fund. Chair Koplin commented that he attended the Rural Energy Conference and appreciated the AEA presentation on the Circuit Rider Program. Chair Koplin agreed with the
comments of Vice Chair Mitchell regarding the idea of a pathway to aggregate RECs. He reflected
on the funding of Mr. Mathiasson’s data program, and the importance of those programs.
Chair Koplin thanked the public for their input, and thanked Board members and staff for their efforts. 12. ADJOURNMENT There being no further business of the Board, the AEA meeting adjourned at 11:49 am. _________________________________ Curtis W. Thayer, Secretary
813 W Northern Lights Blvd, Anchorage, AK 99503 Phone: (907) 771-3000 Fax: (907) 771-3044 Email: info@akenergyauthority.org
REDUCING THE COST OF ENERGY IN ALASKA AKENERGYAUTHORITY.ORG
MEMORANDUM
DATE: November 18, 2024
TO: AEA Board of Directors
FROM: Curtis W. Thayer, Executive Director
RE: Purchase of Bradley Lake Hydroelectric Project Required Project Work: Priority
Rights to BESS Services
As part of work required to support the Bradley Lake Hydroelectric Project (so-called “Required
Project Work”), AEA seeks to purchase priority rights to BESSs services from Railbelt utilities. The
funds for these transactions were raised as part of AEA’s Bond Series 11. The Board has before it
draft resolutions, supported by this memo, to authorize purchase agreements with Railbelt
utilities.
BACKGROUND
In December 2022, Alaska Energy Authority issued its “Bond Series 11,” totaling $166M, to
support the Bradley Lake Hydroelectric Project. The Bradley Project Management Committee
voted to allocate 35% of bond proceeds to BESSs. Of the $58M available for BESSs, the AEA
Board designated $30M via Resolution 2024-12 as cost share for the US Department of Energy
GRIP 3 Round 1 grant that has been awarded to AEA. This left $28M for direct investment into
BESSs.
Use of bond proceeds is expressly limited to Required Project Work (“RPW”). The State of
Alaska Department of Law issued a memo in April 2022 describing RPW as including BESSs that
improve power oscillations. Additionally, an analysis by external engineering firm GDS
Engineering found that these investments are consistent with sound economics and national
standards.
BESSs help manage grid oscillations, which have increased in recent years, by absorbing or
supplying power. Oscillations could cause damage to the power grid and the Bradley Lake
powerhouse in a severe case. For example, if a 100MW load drops off in Fairbanks, the
Fairbanks BESS combined with the BESSs in Anchorage and on the Kenai Peninsula can provide
stability to the Railbelt. Without the BESS systems, an over-frequency event can occur and the
Bradley Lake plant can lose synchronism.
Alaska Energy Authority Page 2 of 2
AEA-UTILITY PURCHASE AGREEMENTS
The proposed terms for AEA’s purchases from the Railbelt utilities generally would be under the
same terms and conditions, including:
• AEA will issue payments to the utility owner on a monthly basis.
• AEA will receive priority rights to utility BESS services that dampen transmission
oscillation.
• The utility will retain the right to use BESS spinning reserve at all times to the extent
unused by AEA under the agreement.
• The utilities and AEA will work together to develop a protocol for providing oscillation
dampening services that best serves the entire Railbelt.
• The utility will be responsible, at its cost, for charging, energy loss associated with
conversion, arranging transmission and wheeling, and O&M.
• The utility will own any federal or state tax credits and any other renewable energy
attributes associated with the BESS.
• Payment proportional to Seward’s participant share will go to Seward’s wholesale
provider, which is currently CEA though that could change during the life of the
agreements.
Services provided by CEA and MEA will come from the same BESS, which is co-owned by the
two utilities and which share the capacity (25% MEA / 75% CEA).
Utility Anticipated Contract
Execution Date
Value of Service
/ Contract Value
Total BESS Capacity BESS Date of
Service
CEA ASAP $16,072,397.54 75% of 40MW (2hrs) October 2024
MEA ASAP $3,870,839.20 25% of 40MW (2hrs) October 2024
GVEA TBD $4,740,376.54 TBD Estimated 2028
HEA ASAP $3,365,947.13 46MW (2hrs) January 2022
= $28,049,559.40
In conclusion, we encourage the AEA Board of Directors to adopt the resolutions authorizing the
use of Bond Series 11 proceeds to purchases priority rights to BESS services.
AEA Resolution No. 2024-13 Page 1 of 2
ALASKA ENERGY AUTHORITY
RESOLUTION NO. 2024-13
RESOLUTION OF THE ALASKA ENERGY AUTHORITY AUTHORIZING THE PURCHASE FROM ALASKA ELECTRIC
& ENERGY COOPERATIVE OF PRIORITY RIGHTS TO BESS
SERVICES
WHEREAS, the Alaska Energy Authority (AEA) is a public corporation of the State
of Alaska, the State's energy office and lead agency for statewide energy policy and
program development, and has the mission to “reduce the cost of energy in Alaska”; and
WHEREAS, Alaska Statute 44.83.080 authorizes the Alaska Energy Authority to
accept grants and enter into contracts “for the construction, financing, operation, and
maintenance of all or any part of a power project,” “for the sale or transmission of power
from a project,” and “acquire battery and other energy storage systems”; and
WHEREAS, AEA desires to purchase priority rights to Battery Energy Storage
Systems (BESS) services for the benefit of the Bradley Lake Hydroelectric Project; and
WHEREAS, AEA desires to use $28 million of the proceeds from its $166 million
Bond Series 11 issued in December 2022 to perform Required Project Work for the Bradley
Lake Hydroelectric Project; and
WHEREAS, Bond Series 11 proceeds are required to be spent on Required Project
Work, and investment in priority rights to BESS services along the Railbelt was found by
the Alaska Department of Law to be Required Project Work; and
WHEREAS, GDS Engineering found the purchase of oscillation dampening
services using BESSs to be consistent with sound economics and national standards; and
WHEREAS, Alaska Electric & Energy Cooperative desires to provide AEA with
priority rights to BESS services; and
WHEREAS, the Board of Directors has reviewed the Term Sheet for a proposed
service agreement with Alaska Electric & Energy Cooperative.
AEA Resolution No. 2024-13 Page 2 of 2
NOW, THEREFORE, BE IT RESOLVED, by the ALASKA ENERGY AUTHORITY as
follows:
Section 1. The Board of Directors hereby endorses the terms and conditions included in the Term Sheet for the proposed service agreement with Alaska Electric &
Energy Cooperative.
Section 2. The AEA Executive Director is authorized to enter into a contract with Alaska Electric & Energy Cooperative so long as the contract includes no additional
material terms and is consistent with all material terms of the Term Sheet.
Section 3. The AEA Executive Director is authorized and directed to administer
the contract referenced in Section 2 above.
Section 2. The Executive Director is authorized to take all actions necessary to give effect to the intent stated herein.
DATED at Anchorage, Alaska, this ___ day of November 2024.
ALASKA ENERGY AUTHORITY
__________________________
Clay Koplin, Chair
__________________________ Curtis W. Thayer, Secretary
Corporate seal
AEA-HEA BESS term sheet
1759298
TERM SHEET FOR ALASKA ELECTRIC & ENERGY COOPERATIVE, INC. TO PROVIDE
TO ALASKA ENERGY AUTHORITY
OSCILLATION DAMPENING SERVICES
FOR THE BRADLEY LAKE HYDROELECTRIC PROJECT
This term sheet (the “Term Sheet”) is intended to set forth certain terms and conditions being discussed to provide oscillation dampening services related to the 46.5 MW by 2-hour (46.5MW/93 MWh) battery energy storage system (“BESS”) owned by Alaska Electric & Energy Cooperative, Inc. (“AEEC” or “Seller”) between the Alaska Energy Authority (“AEA”), as Buyer, and the Seller (the “Proposed Transaction”). AEEC and AEA are referred to individually as a “Party” and, collectively as the “Parties”.
This Term Sheet is for discussion purposes only and does not contain all matters upon which agreement must be reached in order for the Proposed Transaction to be completed. Other than with respect to the provisions contained in Section 2 of this Term Sheet, which shall be binding on the Parties hereto to the extent set forth herein, this Term Sheet is not a binding agreement and does not represent an offer or commitment of any nature from either Party hereto or their respective affiliated entities to engage in negotiations regarding, or to enter into any contract or agreement effecting, the Proposed Transaction contemplated herein. Other than as specified above with respect to the provision in Section 2 of this Term Sheet, this Term Sheet does not impose any obligation or liability on any Party hereto if the transaction contemplated herein is
not consummated.
Except with respect to Section 2 of this Term Sheet, the terms and conditions of this Term Sheet
are subject in all respects to the Parties’ satisfactory completion of commercial and legal due
diligence; receipt of any necessary board, regulatory, and/or other third-party approvals;
confirmation that the Proposed Transaction is consistent with the funding source (Bond Series 11)
T&C; and execution by the Parties of one or more binding definitive agreements and other
documentation or agreements necessary to effect the Proposed Transaction (the “Definitive
Agreements”).
1. Terms and Conditions of Proposed Transaction
General Terms
Buyer: Alaska Energy Authority ("AEA")
Seller: Alaska Electric & Energy Cooperative, Inc. ("AEEC")
Project Site: The 2-hr BESS referenced herein.
Governing Law; Jurisdiction and Venue: Alaska
2
1759298
Terms for the purchase of ODS from AEEC
Oscillation Dampening Services: AEA shall purchase oscillation dampening services (“ODS”) to address certain expected but unpredictable intermittent
instability events causing oscillation problems with the turbines (each an "Instability Event") at the Bradley Lake Hydroelectric Project ("Bradley Lake") so that the BESS can be used (in proportion to the consideration provided by AEA and subject to the limitations set forth herein) to mitigate or eliminate such Instability Event through spinning reserves.
The Parties understand that Instability Events cannot be scheduled, so the value the BESS delivers is by being available to respond, to the extent defined in the Definitive Agreements, to these unscheduled events.
Seller shall operate the BESS to provide ODS to AEA on a first priority basis to support the system stability needs of Bradley Lake.
Seller’s resource for providing ODS 46.5 MW by 2-hour (46.5MW/93 MWh) battery energy storage system
Payments to Seller For the ODS, AEA will make monthly payments to Seller totaling $3,365,947, taking into consideration those terms and conditions relating to performance guarantees set forth
in the Definitive Agreements.
Term: The ODS will be provided for 15 years from the date the Definitive Agreements are executed, unless terminated earlier due to an AEA event of default or any other reason as may be
specified in the Definitive Agreements.
Limitations on Availability of ODS to AEA: AEEC shall be entitled to use a) all BESS capacity remaining when AEA is benefitting from the ODS committed to AEA at any given time, and b) all of the BESS capacity, any time AEA
is not benefiting from the ODS.
If the tie line to Anchorage is out of service and the Kenai is islanded, the BESS will be fully dedicated to serving the AEEC
Load Balancing Area, which would provide sole mitigation of
Bradley oscillations during islanded periods.
BESS Energy Charge Management: AEEC shall be responsible, at its own cost, for providing or procuring charging energy for any energy loss associated
3
1759298
with converting charging energy to discharged energy associated with the ODS.
O&M Charges: AEEC shall be responsible, at its cost, for all O&M Charges associated with the BESS.
Operation of the BESS: AEEC will operate the BESS based on a protocol ("Protocol") to which the Parties mutually agree, that will be attached as an exhibit to the Definitive Agreements. The Protocol shall
address operation of the BESS and dispatch of the ODS. .
Battery Energy Storage Tax Credit: As the owner of the BESS, Seller shall own any Federal or State tax credit(s) or related cash amounts for which the BESS
qualifies and, to the extent applicable, any other renewable
energy, environmental or green attributes associated with the
BESS.
Additional Provisions: The Definitive Agreements shall contain other provisions for agreements of this nature, including, but not limited to, conditions precedent, billing and payment, measurement and
metering, termination, force majeure/excused performance,
limitations on liability, indemnification and confidentiality.
2. Other Terms and Conditions
a. Not Binding. This Term Sheet does not constitute, nor is it intended to be, a final agreement between the Parties or a commitment to enter into any binding
agreement(s). Except for the commitments stated in this Section 2 of this Term
Sheet, this Term Sheet does not give rise to any binding obligations, express or
implied, and neither Party will be liable to the other for the failure to agree upon
Definitive Agreements. In addition, neither Party should act or fail to act in detrimental reliance on this Term Sheet. No Party will be legally bound until mutually acceptable final Definitive Agreements containing such terms and conditions as agreed to by the Parties are fully executed by duly authorized representatives.
b. Confidentiality. This Term Sheet and any information exchanged between the Parties regarding the Proposed Transaction described in this Term Sheet will be
kept confidential to the fullest extent allowed by the laws of the State of Alaska.
No Party will make a public announcement regarding the contents of this Term
Sheet without prior written consent of the other Parties.
c. Costs and Fees. Each Party shall bear and be solely responsible for its own costs, expenses, and legal fees in connection with the preparation and negotiation of this Term Sheet and the preparation and negotiation of any Definitive
4
1759298
Agreements.
d. Relationship. This Term Sheet will not be construed to determine that a Party is a partner, joint venturer, or fiduciary of the other Party, to create any other form of legal association that would impose liability on one Party for the act or failure to act of the other Party, or to provide either Party with the right, power, or authority (express or implied) to create any duty or obligation of the other Party.
e. Choice of Law. Interpretation of this Term Sheet will be governed by the laws of the State of Alaska, without giving effect to any choice-of-law rules that may require the application of the laws of another jurisdiction. All disputes arising out of this Term Sheet will be subject to the exclusive jurisdiction of the state and federal courts located in Anchorage, Alaska, as applicable, and each Party consents to the personal jurisdiction of these bodies.
f. Term. The terms set forth in this Term Sheet are valid for 120 days from the date hereof and thereafter shall be null and void.
[Signature blocks to be added once the Parties agree to this Term Sheet.]
AEA Resolution No. 2024-13 Page 1 of 2
ALASKA ENERGY AUTHORITY
RESOLUTION NO. 2024-13
RESOLUTION OF THE ALASKA ENERGY AUTHORITY AUTHORIZING THE PURCHASE FROM ALASKA ELECTRIC
& ENERGY COOPERATIVE OF PRIORITY RIGHTS TO BESS
SERVICES
WHEREAS, the Alaska Energy Authority (AEA) is a public corporation of the State
of Alaska, the State's energy office and lead agency for statewide energy policy and
program development, and has the mission to “reduce the cost of energy in Alaska”; and
WHEREAS, Alaska Statute 44.83.080 authorizes the Alaska Energy Authority to
accept grants and enter into contracts “for the construction, financing, operation, and
maintenance of all or any part of a power project,” “for the sale or transmission of power
from a project,” and “acquire battery and other energy storage systems”; and
WHEREAS, AEA desires to purchase priority rights to Battery Energy Storage
Systems (BESS) services for the benefit of the Bradley Lake Hydroelectric Project; and
WHEREAS, AEA desires to use $28 million of the proceeds from its $166 million
Bond Series 11 issued in December 2022 to perform Required Project Work for the Bradley
Lake Hydroelectric Project; and
WHEREAS, Bond Series 11 proceeds are required to be spent on Required Project
Work, and investment in priority rights to BESS services along the Railbelt was found by
the Alaska Department of Law to be Required Project Work; and
WHEREAS, GDS Engineering found the purchase of oscillation dampening
services using BESSs to be consistent with sound economics and national standards; and
WHEREAS, Alaska Electric & Energy Cooperative desires to provide AEA with
priority rights to BESS services; and
WHEREAS, the Board of Directors has reviewed the Term Sheet for a proposed
service agreement with Alaska Electric & Energy Cooperative.
AEA Resolution No. 2024-13 Page 2 of 2
NOW, THEREFORE, BE IT RESOLVED, by the ALASKA ENERGY AUTHORITY as
follows:
Section 1. The Board of Directors hereby endorses the terms and conditions included in the Term Sheet for the proposed service agreement with Alaska Electric &
Energy Cooperative.
Section 2. The AEA Executive Director is authorized to enter into a contract with Alaska Electric & Energy Cooperative so long as the contract includes no additional
material terms and is consistent with all material terms of the Term Sheet.
Section 3. The AEA Executive Director is authorized and directed to administer
the contract referenced in Section 2 above.
Section 2. The Executive Director is authorized to take all actions necessary to give effect to the intent stated herein.
DATED at Anchorage, Alaska, this ___ day of November 2024.
ALASKA ENERGY AUTHORITY
__________________________
Clay Koplin, Chair
__________________________ Curtis W. Thayer, Secretary
Corporate seal
AEA-HEA BESS term sheet
1759298
TERM SHEET FOR ALASKA ELECTRIC & ENERGY COOPERATIVE, INC. TO PROVIDE
TO ALASKA ENERGY AUTHORITY
OSCILLATION DAMPENING SERVICES
FOR THE BRADLEY LAKE HYDROELECTRIC PROJECT
This term sheet (the “Term Sheet”) is intended to set forth certain terms and conditions being discussed to provide oscillation dampening services related to the 46.5 MW by 2-hour (46.5MW/93 MWh) battery energy storage system (“BESS”) owned by Alaska Electric & Energy Cooperative, Inc. (“AEEC” or “Seller”) between the Alaska Energy Authority (“AEA”), as Buyer, and the Seller (the “Proposed Transaction”). AEEC and AEA are referred to individually as a “Party” and, collectively as the “Parties”.
This Term Sheet is for discussion purposes only and does not contain all matters upon which agreement must be reached in order for the Proposed Transaction to be completed. Other than with respect to the provisions contained in Section 2 of this Term Sheet, which shall be binding on the Parties hereto to the extent set forth herein, this Term Sheet is not a binding agreement and does not represent an offer or commitment of any nature from either Party hereto or their respective affiliated entities to engage in negotiations regarding, or to enter into any contract or agreement effecting, the Proposed Transaction contemplated herein. Other than as specified above with respect to the provision in Section 2 of this Term Sheet, this Term Sheet does not impose any obligation or liability on any Party hereto if the transaction contemplated herein is
not consummated.
Except with respect to Section 2 of this Term Sheet, the terms and conditions of this Term Sheet
are subject in all respects to the Parties’ satisfactory completion of commercial and legal due
diligence; receipt of any necessary board, regulatory, and/or other third-party approvals;
confirmation that the Proposed Transaction is consistent with the funding source (Bond Series 11)
T&C; and execution by the Parties of one or more binding definitive agreements and other
documentation or agreements necessary to effect the Proposed Transaction (the “Definitive
Agreements”).
1. Terms and Conditions of Proposed Transaction
General Terms
Buyer: Alaska Energy Authority ("AEA")
Seller: Alaska Electric & Energy Cooperative, Inc. ("AEEC")
Project Site: The 2-hr BESS referenced herein.
Governing Law; Jurisdiction and Venue: Alaska
2
1759298
Terms for the purchase of ODS from AEEC
Oscillation Dampening Services: AEA shall purchase oscillation dampening services (“ODS”) to address certain expected but unpredictable intermittent
instability events causing oscillation problems with the turbines (each an "Instability Event") at the Bradley Lake Hydroelectric Project ("Bradley Lake") so that the BESS can be used (in proportion to the consideration provided by AEA and subject to the limitations set forth herein) to mitigate or eliminate such Instability Event through spinning reserves.
The Parties understand that Instability Events cannot be scheduled, so the value the BESS delivers is by being available to respond, to the extent defined in the Definitive Agreements, to these unscheduled events.
Seller shall operate the BESS to provide ODS to AEA on a first priority basis to support the system stability needs of Bradley Lake.
Seller’s resource for providing ODS 46.5 MW by 2-hour (46.5MW/93 MWh) battery energy storage system
Payments to Seller For the ODS, AEA will make monthly payments to Seller totaling $3,365,947, taking into consideration those terms and conditions relating to performance guarantees set forth
in the Definitive Agreements.
Term: The ODS will be provided for 15 years from the date the Definitive Agreements are executed, unless terminated earlier due to an AEA event of default or any other reason as may be
specified in the Definitive Agreements.
Limitations on Availability of ODS to AEA: AEEC shall be entitled to use a) all BESS capacity remaining when AEA is benefitting from the ODS committed to AEA at any given time, and b) all of the BESS capacity, any time AEA
is not benefiting from the ODS.
If the tie line to Anchorage is out of service and the Kenai is islanded, the BESS will be fully dedicated to serving the AEEC
Load Balancing Area, which would provide sole mitigation of
Bradley oscillations during islanded periods.
BESS Energy Charge Management: AEEC shall be responsible, at its own cost, for providing or procuring charging energy for any energy loss associated
3
1759298
with converting charging energy to discharged energy associated with the ODS.
O&M Charges: AEEC shall be responsible, at its cost, for all O&M Charges associated with the BESS.
Operation of the BESS: AEEC will operate the BESS based on a protocol ("Protocol") to which the Parties mutually agree, that will be attached as an exhibit to the Definitive Agreements. The Protocol shall
address operation of the BESS and dispatch of the ODS. .
Battery Energy Storage Tax Credit: As the owner of the BESS, Seller shall own any Federal or State tax credit(s) or related cash amounts for which the BESS
qualifies and, to the extent applicable, any other renewable
energy, environmental or green attributes associated with the
BESS.
Additional Provisions: The Definitive Agreements shall contain other provisions for agreements of this nature, including, but not limited to, conditions precedent, billing and payment, measurement and
metering, termination, force majeure/excused performance,
limitations on liability, indemnification and confidentiality.
2. Other Terms and Conditions
a. Not Binding. This Term Sheet does not constitute, nor is it intended to be, a final agreement between the Parties or a commitment to enter into any binding
agreement(s). Except for the commitments stated in this Section 2 of this Term
Sheet, this Term Sheet does not give rise to any binding obligations, express or
implied, and neither Party will be liable to the other for the failure to agree upon
Definitive Agreements. In addition, neither Party should act or fail to act in detrimental reliance on this Term Sheet. No Party will be legally bound until mutually acceptable final Definitive Agreements containing such terms and conditions as agreed to by the Parties are fully executed by duly authorized representatives.
b. Confidentiality. This Term Sheet and any information exchanged between the Parties regarding the Proposed Transaction described in this Term Sheet will be
kept confidential to the fullest extent allowed by the laws of the State of Alaska.
No Party will make a public announcement regarding the contents of this Term
Sheet without prior written consent of the other Parties.
c. Costs and Fees. Each Party shall bear and be solely responsible for its own costs, expenses, and legal fees in connection with the preparation and negotiation of this Term Sheet and the preparation and negotiation of any Definitive
4
1759298
Agreements.
d. Relationship. This Term Sheet will not be construed to determine that a Party is a partner, joint venturer, or fiduciary of the other Party, to create any other form of legal association that would impose liability on one Party for the act or failure to act of the other Party, or to provide either Party with the right, power, or authority (express or implied) to create any duty or obligation of the other Party.
e. Choice of Law. Interpretation of this Term Sheet will be governed by the laws of the State of Alaska, without giving effect to any choice-of-law rules that may require the application of the laws of another jurisdiction. All disputes arising out of this Term Sheet will be subject to the exclusive jurisdiction of the state and federal courts located in Anchorage, Alaska, as applicable, and each Party consents to the personal jurisdiction of these bodies.
f. Term. The terms set forth in this Term Sheet are valid for 120 days from the date hereof and thereafter shall be null and void.
[Signature blocks to be added once the Parties agree to this Term Sheet.]
AEA Resolution No. 2024-14
Page 1 of 2
ALASKA ENERGY AUTHORITY
RESOLUTION NO. 2024-14
RESOLUTION OF THE ALASKA ENERGY AUTHORITY
AUTHORIZING THE PURCHASE FROM CHUGACH
ELECTRIC ASSOCIATION OF PRIORITY RIGHTS TO BESS
SERVICES
WHEREAS, the Alaska Energy Authority (AEA) is a public corporation of the State
of Alaska, the State's energy office and lead agency for statewide energy policy and
program development, and has the mission to “reduce the cost of energy in Alaska”; and
WHEREAS, Alaska Statute 44.83.080 authorizes the Alaska Energy Authority to
accept grants and enter into contracts “for the construction, financing, operation, and
maintenance of all or any part of a power project,” “for the sale or transmission of power
from a project,” and “acquire battery and other energy storage systems”; and
WHEREAS, AEA desires to purchase priority rights to Battery Energy Storage
Systems (BESS) services for the benefit of the Bradley Lake Hydroelectric Project; and
WHEREAS, AEA desires to use $28 million of the proceeds from its $166 million
Bond Series 11 issued in December 2022 to perform Required Project Work for the Bradley
Lake Hydroelectric Project; and
WHEREAS, Bond Series 11 proceeds are required to be spent on Required Project
Work, and investment in priority rights to BESS services along the Railbelt was found by
the Alaska Department of Law to be Required Project Work; and
WHEREAS, GDS Engineering found the purchase of oscillation dampening
services using BESSs to be consistent with sound economics and national standards; and
WHEREAS, Chugach Electric Association desires to provide AEA with priority rights
to BESS services; and
WHEREAS, the Board of Directors has reviewed the Term Sheet for a proposed
service agreement with Chugach Electric Association.
AEA Resolution No. 2024-14
Page 2 of 2
NOW, THEREFORE, BE IT RESOLVED, by the ALASKA ENERGY AUTHORITY as
follows:
Section 1. The Board of Directors hereby endorses the terms and conditions
included in the Term Sheet for the proposed service agreement with Chugach Electric
Association.
Section 2. The AEA Executive Director is authorized to enter into a contract
with Chugach Electric Association so long as the contract includes no additional material
terms and is consistent with all material terms of the Term Sheet.
Section 3. The AEA Executive Director is authorized and directed to administer
the contract referenced in Section 2 above.
Section 2. The Executive Director is authorized to take all actions necessary to
give effect to the intent stated herein.
DATED at Anchorage, Alaska, this ___ day of November 2024.
ALASKA ENERGY AUTHORITY
__________________________
Chair
__________________________
Curtis W. Thayer, Secretary
Corporate seal
Draft term sheet, Chugach 2024/10/23
CORE/2065927.0031/191264229.8
TERM SHEET FOR CHUGACH
TO PROVIDE TO ALASKA ENERGY AUTHORITY
OSCILLATION DAMPENING SERVICE FOR BRADLEY LAKE This term sheet (the “Term Sheet”) is intended to set forth certain terms and conditions being
discussed for the “Proposed Transaction” in which Chugach Electric Association, Inc. (“Chugach”
and “Seller”) would provide Alaska Energy Authority (“AEA” and “Buyer”) oscillation dampening
services from the 40 MW by 2-hour (40MW/80MWh) battery energy storage system (“BESS”)
owned by Chugach and Matanuska Electric Association, Inc. ("MEA"). Chugach and AEA are
referred to individually as a “Party ” and collectively as the “Parties.” This Term Sheet and the
Proposed Transaction do not cover any sale of oscillation dampening services from MEA to AEA
that has occurred or may occur.
This Term Sheet is for discussion purposes only and does not contain all matters upon which
agreement must be reached in order for the Proposed Transaction to be completed. This Term
Sheet is not a binding agreement and does not represent an offer or commitment of any nature
from either Party hereto or their respective affiliated entities to engage in negotiations regarding,
or to enter into any contract or agreement effecting, the Proposed Transaction contemplated
herein. This Term Sheet does not impose any obligation or liability on any Party hereto if the
transactions contemplated herein are not consummated.
The terms and conditions of this Term Sheet are subject in all respects to the Parties’ satisfactory
completion of commercial and legal due diligence; receipt of any necessary board, regulatory,
and/or other third-party approvals; confirmation that the Proposed Transaction is consistent with
the funding source (Bond Series 11) T&C; and execution by the Parties of one or more binding
definitive agreements and other documentation or agreements necessary to effect the
transactions contemplated hereby (the “Definitive Agreements”).
1. Terms and Conditions of Proposed Transaction
General Terms
Buyer : Alaska Energy Authority ("AEA")
Seller : Chugach Electric Association, Inc.
(“Chugach”)
Project providing the service: The BESS located at Chugach's headquarters.
Governing Law; Jurisdiction and Venue: Alaska
Terms for the purchase of oscillation dampening service from the BESS
DRAFT: Chugach-AEA BESS Service term sheet, Chugach 2024/10/23
2
CORE/2065927.0031/191264229.8
Oscillation Dampening Service: AEA shall purchase oscillation dampening
service ("ODS") from Sellers using the BESS to
address certain expected but unpredictable
intermittent instability events causing
oscillation problems with the turbines at the Bradley Lake Hydroelectric Project ("Bradley Lake") so that the BESS can be used (subject to the operational limitations of the BESS) to mitigate or eliminate such oscillation problems through contingency reserve response.
Seller shall operate the BESS to provide ODS to AEA on a first priority basis to support the system stability needs of Bradley Lake.
Seller’s resource for providing ODS 75% of the 40 MW by 2-hour (40MW/80MWh) battery energy storage system co-owned by Chugach and MEA
Required Project Work Seller shall provide, and the Definitive Agreements shall include language that ensures, services that are in alignment with the definition of Required Project Work provided
in Bond Series 11, as interpreted by the SOA
Dept of Law in its memo dated 4/27/22, and as
applied by GDS Associates in its letter dated
9/27/22; including that the service must
achieve sound economics and meet national
standards in the industry
Payments to Sellers for the ODS: For the ODS, AEA will make equal monthly
payments to Seller of $89,291 per month
during the Term, subject to mutually
acceptable performance guarantees included
in the Definitive Agreements. The monthly
payment amount may be revised to reflect a
different term depending upon the
performance guarantee mechanism that is
ultimately agreed upon by the parties in the
Definitive Agreement. The AEA monthly
payment amount will be modified as necessary to reflect changes associated with Seward Electric System’s wholesale power agreement.
DRAFT: Chugach-AEA BESS Service term sheet, Chugach 2024/10/23
3
CORE/2065927.0031/191264229.8
Term: The Term of the ODS agreement will be for 15
years from the date of execution of the
Definitive Agreements, unless terminated
earlier due to an AEA event of default or any
other reason as may be specified in the
Definitive Agreements.
Operations to Provide for ODS to AEA: Chugach will operate the BESS in a manner that will provide ODS to mitigate oscillations caused by the Bradley Lake Project on a first priority basis. The services provided will comply with the Electric Power Systems study: Bradley Lake Oscillation Mitigation Study, dated June 14, 2024.
Charging Energy: Chugach shall be responsible, at their cost, for providing or procuring charging energy for any energy loss associated with converting charging energy to discharged energy associated with the ODS.
Transmission Charges: Chugach shall be responsible, at their cost, for arranging transmission and wheeling required to deliver Charging Energy and take
discharged energy associated with the ODS as
may be applicable under tariffs and agreements.
O&M Charges: Chugach shall be responsible, at their cost, for all O&M Charges associated with the ODS.
Operation of the BESS: Chugach will operate the BESS based on a protocol ("Protocol") to which the Parties mutually agree and that will be attached as an exhibit to the Definitive Agreements. The Protocol shall address operation of the BESS for the ODS. On a quarterly basis, Seller shall
provide the BPMC a report on ODS
performance and compliance with the
protocol.
Battery Energy Storage Tax Credit: Buyer shall have no ownership interest in any
Federal or State tax credit(s) or related cash
amounts for which the BESS qualifies and, to
DRAFT: Chugach-AEA BESS Service term sheet, Chugach 2024/10/23
4
CORE/2065927.0031/191264229.8
the extent applicable, any other renewable
energy, environmental or green attributes
associated with the BESS.
The Parties intend that the ODS Definitive
Agreements will qualify as a “service contract” as such term is used in Section 7701(e) of the United States Internal Revenue Code of 1986 (“IRC”) and that none of the conditions set forth in IRC Section 7701(e)(4) shall apply. Those conditions that would inhibit the Definitive Agreements from qualifying as a “service contract” under the IRC are as follows:
(i) the service recipient (or a related entity) operates such facility.
(ii) the service recipient (or a related entity) bears any significant financial burden if there is nonperformance under the contract or arrangement (other than for reasons beyond the
control of the service provider),
(iii) the service recipient (or a related
entity) receives any significant financial
benefit if the operating costs of such
facility are less than the standards of
performance or operation under the
contract or arrangement, or
(iv) the service recipient (or a related
entity) has an option to purchase, or
may be required to purchase, all or a
part of such facility at a fixed and
determinable price (other than for fair
market value).
For the avoidance of doubt, the Parties do not intend for AEA to (1) operate the BESS facility; (2) pay for BESS service when applicable performance guarantees are not met; (3) receive a significant financial benefit from reduced operating costs; or (3) have an option to purchase all or a part of the BESS facility. Parties intend to make best efforts to collaborate in drafting final agreement(s) that
DRAFT: Chugach-AEA BESS Service term sheet, Chugach 2024/10/23
5
CORE/2065927.0031/191264229.8
support maximizing eligibility for IRS
refundable/direct pay energy property and
bonus tax credits or other tax credits or
applicable financial incentives.
Additional Provisions The Definitive Agreements shall contain other
customary provisions for agreements of this nature, including, but not limited to, provisions related to conditions precedent, billing and payment, measurement and metering, forecasting, curtailment/interruption, events of default, termination, force majeure/excused performance, performance guarantees, limitations on liability, indemnification and confidentiality.
2. Other Term s and Conditions
a. Not Binding. This Term Sheet does not constitute, nor is it intended to be, a final agreement between the Parties or a commitment to enter into any binding agreement(s). This Term Sheet, this Term Sheet does not give rise to any binding obligations, express or implied, and neither Party will be liable to the other for the failure to agree upon Definitive Agreements. In addition, neither Party should act or fail to act in detrimental reliance on this Term Sheet. No Party will be legally bound until mutually acceptable final Definitive Agreements containing such terms and conditions as agreed to by the Parties are fully executed by duly authorized
representatives.
b. Confidentiality. This Term Sheet and any information exchanged between the
Parties regarding the Proposed Transaction described in this Term Sheet will be
kept confidential to the fullest extent allowed by the laws of the State of Alaska.
No Party will make a public announcement regarding the contents of this Term
Sheet without prior written consent of the other Parties.
c. Costs and Fees. Each Party shall bear and be solely responsible for its own costs,
expenses, and legal fees in connection with the preparation and negotiation of this
Term Sheet and the preparation and negotiation of any Definitive Agreements.
d. Relationship. This Term Sheet will not be construed to determine that a Party is a partner, joint venturer, or fiduciary of the other Party, to create any other form of legal association that would impose liability on one Party for the act or failure to
DRAFT: Chugach-AEA BESS Service term sheet, Chugach 2024/10/23
6
CORE/2065927.0031/191264229.8
act of the other Party, or to provide either Party with the right, power, or authority
(express or implied) to create any duty or obligation of the other Party.
e. Choice of Law. Interpretation of this Term Sheet will be governed by the laws of the State of Alaska, without giving effect to any choice-of-law rules that may require the application of the laws of another jurisdiction. All disputes arising out of this Term Sheet will be subject to the exclusive jurisdiction of the state and federal courts located in Anchorage, Alaska, as applicable, and each Party consents to the personal jurisdiction of these bodies.
f. Te rm. The terms set forth in this Term Sheet are valid for 120 days from the date
hereof and thereafter shall be null and void.
[Signature blocks to be added once the Parties agree to this Term Sheet.]
AEA Resolution No. 2024-14
Page 1 of 2
ALASKA ENERGY AUTHORITY
RESOLUTION NO. 2024-14
RESOLUTION OF THE ALASKA ENERGY AUTHORITY
AUTHORIZING THE PURCHASE FROM CHUGACH
ELECTRIC ASSOCIATION OF PRIORITY RIGHTS TO BESS
SERVICES
WHEREAS, the Alaska Energy Authority (AEA) is a public corporation of the State
of Alaska, the State's energy office and lead agency for statewide energy policy and
program development, and has the mission to “reduce the cost of energy in Alaska”; and
WHEREAS, Alaska Statute 44.83.080 authorizes the Alaska Energy Authority to
accept grants and enter into contracts “for the construction, financing, operation, and
maintenance of all or any part of a power project,” “for the sale or transmission of power
from a project,” and “acquire battery and other energy storage systems”; and
WHEREAS, AEA desires to purchase priority rights to Battery Energy Storage
Systems (BESS) services for the benefit of the Bradley Lake Hydroelectric Project; and
WHEREAS, AEA desires to use $28 million of the proceeds from its $166 million
Bond Series 11 issued in December 2022 to perform Required Project Work for the Bradley
Lake Hydroelectric Project; and
WHEREAS, Bond Series 11 proceeds are required to be spent on Required Project
Work, and investment in priority rights to BESS services along the Railbelt was found by
the Alaska Department of Law to be Required Project Work; and
WHEREAS, GDS Engineering found the purchase of oscillation dampening
services using BESSs to be consistent with sound economics and national standards; and
WHEREAS, Chugach Electric Association desires to provide AEA with priority rights
to BESS services; and
WHEREAS, the Board of Directors has reviewed the Term Sheet for a proposed
service agreement with Chugach Electric Association.
AEA Resolution No. 2024-14
Page 2 of 2
NOW, THEREFORE, BE IT RESOLVED, by the ALASKA ENERGY AUTHORITY as
follows:
Section 1. The Board of Directors hereby endorses the terms and conditions
included in the Term Sheet for the proposed service agreement with Chugach Electric
Association.
Section 2. The AEA Executive Director is authorized to enter into a contract
with Chugach Electric Association so long as the contract includes no additional material
terms and is consistent with all material terms of the Term Sheet.
Section 3. The AEA Executive Director is authorized and directed to administer
the contract referenced in Section 2 above.
Section 2. The Executive Director is authorized to take all actions necessary to
give effect to the intent stated herein.
DATED at Anchorage, Alaska, this ___ day of November 2024.
ALASKA ENERGY AUTHORITY
__________________________
Chair
__________________________
Curtis W. Thayer, Secretary
Corporate seal
Draft term sheet, Chugach 2024/10/23
CORE/2065927.0031/191264229.8
TERM SHEET FOR CHUGACH
TO PROVIDE TO ALASKA ENERGY AUTHORITY
OSCILLATION DAMPENING SERVICE FOR BRADLEY LAKE This term sheet (the “Term Sheet”) is intended to set forth certain terms and conditions being
discussed for the “Proposed Transaction” in which Chugach Electric Association, Inc. (“Chugach”
and “Seller”) would provide Alaska Energy Authority (“AEA” and “Buyer”) oscillation dampening
services from the 40 MW by 2-hour (40MW/80MWh) battery energy storage system (“BESS”)
owned by Chugach and Matanuska Electric Association, Inc. ("MEA"). Chugach and AEA are
referred to individually as a “Party ” and collectively as the “Parties.” This Term Sheet and the
Proposed Transaction do not cover any sale of oscillation dampening services from MEA to AEA
that has occurred or may occur.
This Term Sheet is for discussion purposes only and does not contain all matters upon which
agreement must be reached in order for the Proposed Transaction to be completed. This Term
Sheet is not a binding agreement and does not represent an offer or commitment of any nature
from either Party hereto or their respective affiliated entities to engage in negotiations regarding,
or to enter into any contract or agreement effecting, the Proposed Transaction contemplated
herein. This Term Sheet does not impose any obligation or liability on any Party hereto if the
transactions contemplated herein are not consummated.
The terms and conditions of this Term Sheet are subject in all respects to the Parties’ satisfactory
completion of commercial and legal due diligence; receipt of any necessary board, regulatory,
and/or other third-party approvals; confirmation that the Proposed Transaction is consistent with
the funding source (Bond Series 11) T&C; and execution by the Parties of one or more binding
definitive agreements and other documentation or agreements necessary to effect the
transactions contemplated hereby (the “Definitive Agreements”).
1. Terms and Conditions of Proposed Transaction
General Terms
Buyer : Alaska Energy Authority ("AEA")
Seller : Chugach Electric Association, Inc.
(“Chugach”)
Project providing the service: The BESS located at Chugach's headquarters.
Governing Law; Jurisdiction and Venue: Alaska
Terms for the purchase of oscillation dampening service from the BESS
DRAFT: Chugach-AEA BESS Service term sheet, Chugach 2024/10/23
2
CORE/2065927.0031/191264229.8
Oscillation Dampening Service: AEA shall purchase oscillation dampening
service ("ODS") from Sellers using the BESS to
address certain expected but unpredictable
intermittent instability events causing
oscillation problems with the turbines at the Bradley Lake Hydroelectric Project ("Bradley Lake") so that the BESS can be used (subject to the operational limitations of the BESS) to mitigate or eliminate such oscillation problems through contingency reserve response.
Seller shall operate the BESS to provide ODS to AEA on a first priority basis to support the system stability needs of Bradley Lake.
Seller’s resource for providing ODS 75% of the 40 MW by 2-hour (40MW/80MWh) battery energy storage system co-owned by Chugach and MEA
Required Project Work Seller shall provide, and the Definitive Agreements shall include language that ensures, services that are in alignment with the definition of Required Project Work provided
in Bond Series 11, as interpreted by the SOA
Dept of Law in its memo dated 4/27/22, and as
applied by GDS Associates in its letter dated
9/27/22; including that the service must
achieve sound economics and meet national
standards in the industry
Payments to Sellers for the ODS: For the ODS, AEA will make equal monthly
payments to Seller of $89,291 per month
during the Term, subject to mutually
acceptable performance guarantees included
in the Definitive Agreements. The monthly
payment amount may be revised to reflect a
different term depending upon the
performance guarantee mechanism that is
ultimately agreed upon by the parties in the
Definitive Agreement. The AEA monthly
payment amount will be modified as necessary to reflect changes associated with Seward Electric System’s wholesale power agreement.
DRAFT: Chugach-AEA BESS Service term sheet, Chugach 2024/10/23
3
CORE/2065927.0031/191264229.8
Term: The Term of the ODS agreement will be for 15
years from the date of execution of the
Definitive Agreements, unless terminated
earlier due to an AEA event of default or any
other reason as may be specified in the
Definitive Agreements.
Operations to Provide for ODS to AEA: Chugach will operate the BESS in a manner that will provide ODS to mitigate oscillations caused by the Bradley Lake Project on a first priority basis. The services provided will comply with the Electric Power Systems study: Bradley Lake Oscillation Mitigation Study, dated June 14, 2024.
Charging Energy: Chugach shall be responsible, at their cost, for providing or procuring charging energy for any energy loss associated with converting charging energy to discharged energy associated with the ODS.
Transmission Charges: Chugach shall be responsible, at their cost, for arranging transmission and wheeling required to deliver Charging Energy and take
discharged energy associated with the ODS as
may be applicable under tariffs and agreements.
O&M Charges: Chugach shall be responsible, at their cost, for all O&M Charges associated with the ODS.
Operation of the BESS: Chugach will operate the BESS based on a protocol ("Protocol") to which the Parties mutually agree and that will be attached as an exhibit to the Definitive Agreements. The Protocol shall address operation of the BESS for the ODS. On a quarterly basis, Seller shall
provide the BPMC a report on ODS
performance and compliance with the
protocol.
Battery Energy Storage Tax Credit: Buyer shall have no ownership interest in any
Federal or State tax credit(s) or related cash
amounts for which the BESS qualifies and, to
DRAFT: Chugach-AEA BESS Service term sheet, Chugach 2024/10/23
4
CORE/2065927.0031/191264229.8
the extent applicable, any other renewable
energy, environmental or green attributes
associated with the BESS.
The Parties intend that the ODS Definitive
Agreements will qualify as a “service contract” as such term is used in Section 7701(e) of the United States Internal Revenue Code of 1986 (“IRC”) and that none of the conditions set forth in IRC Section 7701(e)(4) shall apply. Those conditions that would inhibit the Definitive Agreements from qualifying as a “service contract” under the IRC are as follows:
(i) the service recipient (or a related entity) operates such facility.
(ii) the service recipient (or a related entity) bears any significant financial burden if there is nonperformance under the contract or arrangement (other than for reasons beyond the
control of the service provider),
(iii) the service recipient (or a related
entity) receives any significant financial
benefit if the operating costs of such
facility are less than the standards of
performance or operation under the
contract or arrangement, or
(iv) the service recipient (or a related
entity) has an option to purchase, or
may be required to purchase, all or a
part of such facility at a fixed and
determinable price (other than for fair
market value).
For the avoidance of doubt, the Parties do not intend for AEA to (1) operate the BESS facility; (2) pay for BESS service when applicable performance guarantees are not met; (3) receive a significant financial benefit from reduced operating costs; or (3) have an option to purchase all or a part of the BESS facility. Parties intend to make best efforts to collaborate in drafting final agreement(s) that
DRAFT: Chugach-AEA BESS Service term sheet, Chugach 2024/10/23
5
CORE/2065927.0031/191264229.8
support maximizing eligibility for IRS
refundable/direct pay energy property and
bonus tax credits or other tax credits or
applicable financial incentives.
Additional Provisions The Definitive Agreements shall contain other
customary provisions for agreements of this nature, including, but not limited to, provisions related to conditions precedent, billing and payment, measurement and metering, forecasting, curtailment/interruption, events of default, termination, force majeure/excused performance, performance guarantees, limitations on liability, indemnification and confidentiality.
2. Other Term s and Conditions
a. Not Binding. This Term Sheet does not constitute, nor is it intended to be, a final agreement between the Parties or a commitment to enter into any binding agreement(s). This Term Sheet, this Term Sheet does not give rise to any binding obligations, express or implied, and neither Party will be liable to the other for the failure to agree upon Definitive Agreements. In addition, neither Party should act or fail to act in detrimental reliance on this Term Sheet. No Party will be legally bound until mutually acceptable final Definitive Agreements containing such terms and conditions as agreed to by the Parties are fully executed by duly authorized
representatives.
b. Confidentiality. This Term Sheet and any information exchanged between the
Parties regarding the Proposed Transaction described in this Term Sheet will be
kept confidential to the fullest extent allowed by the laws of the State of Alaska.
No Party will make a public announcement regarding the contents of this Term
Sheet without prior written consent of the other Parties.
c. Costs and Fees. Each Party shall bear and be solely responsible for its own costs,
expenses, and legal fees in connection with the preparation and negotiation of this
Term Sheet and the preparation and negotiation of any Definitive Agreements.
d. Relationship. This Term Sheet will not be construed to determine that a Party is a partner, joint venturer, or fiduciary of the other Party, to create any other form of legal association that would impose liability on one Party for the act or failure to
DRAFT: Chugach-AEA BESS Service term sheet, Chugach 2024/10/23
6
CORE/2065927.0031/191264229.8
act of the other Party, or to provide either Party with the right, power, or authority
(express or implied) to create any duty or obligation of the other Party.
e. Choice of Law. Interpretation of this Term Sheet will be governed by the laws of the State of Alaska, without giving effect to any choice-of-law rules that may require the application of the laws of another jurisdiction. All disputes arising out of this Term Sheet will be subject to the exclusive jurisdiction of the state and federal courts located in Anchorage, Alaska, as applicable, and each Party consents to the personal jurisdiction of these bodies.
f. Te rm. The terms set forth in this Term Sheet are valid for 120 days from the date
hereof and thereafter shall be null and void.
[Signature blocks to be added once the Parties agree to this Term Sheet.]
AEA Resolution No. 2024-16
Page 1 of 2
ALASKA ENERGY AUTHORITY
RESOLUTION NO. 2024-16
RESOLUTION OF THE ALASKA ENERGY AUTHORITY
AUTHORIZING THE PURCHASE FROM MATANUSKA
ELECTRIC ASSOCIATION OF PRIORITY RIGHTS TO BESS
SERVICES
WHEREAS, the Alaska Energy Authority (AEA) is a public corporation of the State
of Alaska, the State's energy office and lead agency for statewide energy policy and
program development, and has the mission to “reduce the cost of energy in Alaska”; and
WHEREAS, Alaska Statute 44.83.080 authorizes the Alaska Energy Authority to
accept grants and enter into contracts “for the construction, financing, operation, and
maintenance of all or any part of a power project,” “for the sale or transmission of power
from a project,” and “acquire battery and other energy storage systems”; and
WHEREAS, AEA desires to purchase priority rights to Battery Energy Storage
Systems (BESS) services for the benefit of the Bradley Lake Hydroelectric Project; and
WHEREAS, AEA desires to use $28 million of the proceeds from its $166 million
Bond Series 11 issued in December 2022 to perform Required Project Work for the Bradley
Lake Hydroelectric Project; and
WHEREAS, Bond Series 11 proceeds are required to be spent on Required Project
Work, and investment in priority rights to BESS services along the Railbelt was found by
the Alaska Department of Law to be Required Project Work; and
WHEREAS, GDS Engineering found the purchase of oscillation dampening
services using BESSs to be consistent with sound economics and national standards; and
WHEREAS, Matanuska Electric Association desires to provide AEA with priority
rights to BESS services; and
WHEREAS, the Board of Directors has reviewed the Term Sheet for a proposed
service agreement with Matanuska Electric Association.
AEA Resolution No. 2024-16
Page 2 of 2
NOW, THEREFORE, BE IT RESOLVED, by the ALASKA ENERGY AUTHORITY as
follows:
Section 1. The Board of Directors hereby endorses the terms and conditions
included in the Term Sheet for the proposed service agreement with Matanuska Electric
Association.
Section 2. The AEA Executive Director is authorized to enter into a contract
with Matanuska Electric Association so long as the contract includes no additional
material terms and is consistent with all material terms of the Term Sheet.
Section 3. The AEA Executive Director is authorized and directed to administer
the contract referenced in Section 2 above.
Section 2. The Executive Director is authorized to take all actions necessary to
give effect to the intent stated herein.
DATED at Anchorage, Alaska, this ___ day of November 2024.
ALASKA ENERGY AUTHORITY
__________________________
Chair
__________________________
Curtis W. Thayer, Secretary
Corporate seal
MEA BESS term sheet, 2024-11 -07
CORE/2065927.0031/191264229.8
TERM SHEET FOR MEA
TO PROVIDE TO ALASKA ENERGY AUTHORITY
OSCILLATION DAMPENING SERVICE FOR BRADLEY LAKE This term sheet (the “Term Sheet”) is intended to set forth certain terms and conditions being
discussed for the “Proposed Transaction” in which Matanuska Electric Association, Inc. (“MEA” and
“Seller”) would provide Alaska Energy Authority (“AEA” and “Buyer”) oscillation dampening
services from the 40 MW by 2-hour (40MW/80MWh) battery energy storage system (“BESS”)
owned by MEA and Chugach Electric Association, Inc. ("Chugach"). MEA and AEA are referred to
individually as a “Party” and collectively as the “Parties.” This Term Sheet and the Proposed
Transaction do not cover any sale of oscillation dampening services from Chugach to AEA that
has occurred or may occur.
This Term Sheet is for discussion purposes only and does not contain all matters upon which
agreement must be reached in order for the Proposed Transaction to be completed. This Term
Sheet is not a binding agreement and does not represent an offer or commitment of any nature
from either Party hereto or their respective affiliated entities to engage in negotiations regarding,
or to enter into any contract or agreement effecting, the Proposed Transaction contemplated
herein. This Term Sheet does not impose any obligation or liability on any Party hereto if the
transactions contemplated herein are not consummated.
The terms and conditions of this Term Sheet are subject in all respects to the Parties’ satisfactory
completion of commercial and legal due diligence; receipt of any necessary board, regulatory,
and/or other third-party approvals; confirmation that the Proposed Transaction is consistent with
the funding source (Bond Series 11) T&C; and execution by the Parties of one or more binding
definitive agreements and other documentation or agreements necessary to effect the
transactions contemplated hereby (the “Definitive Agreements”).
1. Terms and Conditions of Proposed Transaction
General Terms
Buyer : Alaska Energy Authority ("AEA")
Seller : Matanuska Electric Association, Inc.
(“MEA”)
Project providing the service: The BESS located at Chugach's headquarters.
Governing Law; Jurisdiction and Venue: Alaska
Terms for the purchase of oscillation dampening service from the BESS
MEA BESS term sheet, 2024-11 -07
2
CORE/2065927.0031/191264229.8
Oscillation Dampening Service: AEA shall purchase oscillation dampening
service ("ODS") from Sellers using the BESS to
address certain expected but unpredictable
intermittent instability events causing
oscillation problems with the turbines at the Bradley Lake Hydroelectric Project ("Bradley Lake") so that the BESS can be used (subject to the operational limitations of the BESS) to mitigate or eliminate such oscillation problems through contingency reserve response.
Seller shall operate the BESS to provide ODS to AEA on a first priority basis to support the system stability needs of Bradley Lake.
Seller’s resource for providing ODS 25% of the 40 MW by 2-hour (40MW/80MWh) battery energy storage system co-owned by Chugach and MEA
Required Project Work Seller shall provide, and the Definitive Agreements shall include language that ensures, services that are in alignment with the definition of Required Project Work provided
in Bond Series 11, as interpreted by the SOA
Dept of Law in its memo dated 4/27/22, and as
applied by GDS Associates in its letter dated
9/27/22; including that the service must
achieve sound economics and meet national
standards in the industry
Payments to Sellers for the ODS: For the ODS, AEA will make equal monthly
payments to Seller of $21,505 per month
during the Term, subject to mutually
acceptable performance guarantees included
in the Definitive Agreements. The monthly
payment amount may be revised to reflect a
different term depending upon the
performance guarantee mechanism that is
ultimately agreed upon by the parties in the
Definitive Agreement. The AEA monthly
payment amount will be modified as necessary to reflect changes associated with Seward Electric System’s wholesale power agreement.
MEA BESS term sheet, 2024-11 -07
3
CORE/2065927.0031/191264229.8
Term: The Term of the ODS agreement will be for 15
years from the date of execution of the
Definitive Agreements, unless terminated
earlier due to an AEA event of default or any
other reason as may be specified in the
Definitive Agreements.
Operations to Provide for ODS to AEA: MEA will operate the BESS in a manner that will provide ODS to mitigate oscillations caused by the Bradley Lake Project on a first priority basis. The services provided will comply with the Electric Power Systems study: Bradley Lake Oscillation Mitigation Study, dated June 14, 2024.
Charging Energy: MEA shall be responsible, at their cost, for providing or procuring charging energy for any energy loss associated with converting charging energy to discharged energy associated with the ODS.
Transmission Charges: MEA shall be responsible, at their cost, for arranging transmission and wheeling required to deliver Charging Energy and take discharged energy associated with the ODS as
may be applicable under tariffs and agreements.
O&M Charges: MEA shall be responsible, at their cost, for all O&M Charges associated with the ODS.
Operation of the BESS: MEA will operate the BESS based on a protocol ("Protocol") to which the Parties mutually
agree and that will be attached as an exhibit to
the Definitive Agreements. The Protocol shall
address operation of the BESS for the ODS. On
a quarterly basis, Seller shall provide the BPMC
a report on ODS performance and compliance
with the protocol.
Battery Energy Storage Tax Credit: Buyer shall have no ownership interest in any
Federal or State tax credit(s) or related cash
amounts for which the BESS qualifies and, to
the extent applicable, any other renewable
MEA BESS term sheet, 2024-11 -07
4
CORE/2065927.0031/191264229.8
energy, environmental or green attributes
associated with the BESS.
The Parties intend that the ODS Definitive
Agreements will qualify as a “service contract”
as such term is used in Section 7701(e) of the United States Internal Revenue Code of 1986 (“IRC”) and that none of the conditions set forth in IRC Section 7701(e)(4) shall apply. Those conditions that would inhibit the Definitive Agreements from qualifying as a “service contract” under the IRC are as follows:
(i) the service recipient (or a related entity) operates such facility.
(ii) the service recipient (or a related entity) bears any significant financial burden if there is nonperformance under the contract or arrangement (other than for reasons beyond the control of the service provider),
(iii) the service recipient (or a related
entity) receives any significant financial
benefit if the operating costs of such
facility are less than the standards of
performance or operation under the
contract or arrangement, or
(iv) the service recipient (or a related
entity) has an option to purchase, or
may be required to purchase, all or a
part of such facility at a fixed and
determinable price (other than for fair
market value).
For the avoidance of doubt, the Parties do not intend for AEA to (1) operate the BESS facility; (2) pay for BESS service when applicable performance guarantees are not met; (3) receive a significant financial benefit from reduced operating costs; or (3) have an option to purchase all or a part of the BESS facility. Parties intend to make best efforts to collaborate in drafting final agreement(s) that support maximizing eligibility for IRS
MEA BESS term sheet, 2024-11 -07
5
CORE/2065927.0031/191264229.8
refundable/direct pay energy property and
bonus tax credits or other tax credits or
applicable financial incentives.
Additional Provisions The Definitive Agreements shall contain other
customary provisions for agreements of this
nature, including, but not limited to, provisions related to conditions precedent, billing and payment, measurement and metering, forecasting, curtailment/interruption, events of default, termination, force majeure/excused performance, performance guarantees, limitations on liability, indemnification and confidentiality.
2. Other Term s and Conditions
a. Not Binding. This Term Sheet does not constitute, nor is it intended to be, a final
agreement between the Parties or a commitment to enter into any binding agreement(s). This Term Sheet, this Term Sheet does not give rise to any binding obligations, express or implied, and neither Party will be liable to the other for the failure to agree upon Definitive Agreements. In addition, neither Party should act or fail to act in detrimental reliance on this Term Sheet. No Party will be legally bound until mutually acceptable final Definitive Agreements containing such terms and conditions as agreed to by the Parties are fully executed by duly authorized representatives.
b. Confidentiality. This Term Sheet and any information exchanged between the
Parties regarding the Proposed Transaction described in this Term Sheet will be
kept confidential to the fullest extent allowed by the laws of the State of Alaska.
No Party will make a public announcement regarding the contents of this Term
Sheet without prior written consent of the other Parties.
c. Costs and Fees. Each Party shall bear and be solely responsible for its own costs,
expenses, and legal fees in connection with the preparation and negotiation of this
Term Sheet and the preparation and negotiation of any Definitive Agreements.
d. Relationship. This Term Sheet will not be construed to determine that a Party is a partner, joint venturer, or fiduciary of the other Party, to create any other form of legal association that would impose liability on one Party for the act or failure to act of the other Party, or to provide either Party with the right, power, or authority (express or implied) to create any duty or obligation of the other Party.
MEA BESS term sheet, 2024-11 -07
6
CORE/2065927.0031/191264229.8
e. Choice of Law. Interpretation of this Term Sheet will be governed by the laws of
the State of Alaska, without giving effect to any choice-of-law rules that may require the application of the laws of another jurisdiction. All disputes arising out of this Term Sheet will be subject to the exclusive jurisdiction of the state and federal courts located in Anchorage, Alaska, as applicable, and each Party consents to the personal jurisdiction of these bodies. f. Te rm. The terms set forth in this Term Sheet are valid for 120 days from the date hereof and thereafter shall be null and void.
[Signature blocks to be added once the Parties agree to this Term Sheet.]
AEA Resolution No. 2024-16
Page 1 of 2
ALASKA ENERGY AUTHORITY
RESOLUTION NO. 2024-16
RESOLUTION OF THE ALASKA ENERGY AUTHORITY
AUTHORIZING THE PURCHASE FROM MATANUSKA
ELECTRIC ASSOCIATION OF PRIORITY RIGHTS TO BESS
SERVICES
WHEREAS, the Alaska Energy Authority (AEA) is a public corporation of the State
of Alaska, the State's energy office and lead agency for statewide energy policy and
program development, and has the mission to “reduce the cost of energy in Alaska”; and
WHEREAS, Alaska Statute 44.83.080 authorizes the Alaska Energy Authority to
accept grants and enter into contracts “for the construction, financing, operation, and
maintenance of all or any part of a power project,” “for the sale or transmission of power
from a project,” and “acquire battery and other energy storage systems”; and
WHEREAS, AEA desires to purchase priority rights to Battery Energy Storage
Systems (BESS) services for the benefit of the Bradley Lake Hydroelectric Project; and
WHEREAS, AEA desires to use $28 million of the proceeds from its $166 million
Bond Series 11 issued in December 2022 to perform Required Project Work for the Bradley
Lake Hydroelectric Project; and
WHEREAS, Bond Series 11 proceeds are required to be spent on Required Project
Work, and investment in priority rights to BESS services along the Railbelt was found by
the Alaska Department of Law to be Required Project Work; and
WHEREAS, GDS Engineering found the purchase of oscillation dampening
services using BESSs to be consistent with sound economics and national standards; and
WHEREAS, Matanuska Electric Association desires to provide AEA with priority
rights to BESS services; and
WHEREAS, the Board of Directors has reviewed the Term Sheet for a proposed
service agreement with Matanuska Electric Association.
AEA Resolution No. 2024-16
Page 2 of 2
NOW, THEREFORE, BE IT RESOLVED, by the ALASKA ENERGY AUTHORITY as
follows:
Section 1. The Board of Directors hereby endorses the terms and conditions
included in the Term Sheet for the proposed service agreement with Matanuska Electric
Association.
Section 2. The AEA Executive Director is authorized to enter into a contract
with Matanuska Electric Association so long as the contract includes no additional
material terms and is consistent with all material terms of the Term Sheet.
Section 3. The AEA Executive Director is authorized and directed to administer
the contract referenced in Section 2 above.
Section 2. The Executive Director is authorized to take all actions necessary to
give effect to the intent stated herein.
DATED at Anchorage, Alaska, this ___ day of November 2024.
ALASKA ENERGY AUTHORITY
__________________________
Chair
__________________________
Curtis W. Thayer, Secretary
Corporate seal
MEA BESS term sheet, 2024-11 -07
CORE/2065927.0031/191264229.8
TERM SHEET FOR MEA
TO PROVIDE TO ALASKA ENERGY AUTHORITY
OSCILLATION DAMPENING SERVICE FOR BRADLEY LAKE This term sheet (the “Term Sheet”) is intended to set forth certain terms and conditions being
discussed for the “Proposed Transaction” in which Matanuska Electric Association, Inc. (“MEA” and
“Seller”) would provide Alaska Energy Authority (“AEA” and “Buyer”) oscillation dampening
services from the 40 MW by 2-hour (40MW/80MWh) battery energy storage system (“BESS”)
owned by MEA and Chugach Electric Association, Inc. ("Chugach"). MEA and AEA are referred to
individually as a “Party” and collectively as the “Parties.” This Term Sheet and the Proposed
Transaction do not cover any sale of oscillation dampening services from Chugach to AEA that
has occurred or may occur.
This Term Sheet is for discussion purposes only and does not contain all matters upon which
agreement must be reached in order for the Proposed Transaction to be completed. This Term
Sheet is not a binding agreement and does not represent an offer or commitment of any nature
from either Party hereto or their respective affiliated entities to engage in negotiations regarding,
or to enter into any contract or agreement effecting, the Proposed Transaction contemplated
herein. This Term Sheet does not impose any obligation or liability on any Party hereto if the
transactions contemplated herein are not consummated.
The terms and conditions of this Term Sheet are subject in all respects to the Parties’ satisfactory
completion of commercial and legal due diligence; receipt of any necessary board, regulatory,
and/or other third-party approvals; confirmation that the Proposed Transaction is consistent with
the funding source (Bond Series 11) T&C; and execution by the Parties of one or more binding
definitive agreements and other documentation or agreements necessary to effect the
transactions contemplated hereby (the “Definitive Agreements”).
1. Terms and Conditions of Proposed Transaction
General Terms
Buyer : Alaska Energy Authority ("AEA")
Seller : Matanuska Electric Association, Inc.
(“MEA”)
Project providing the service: The BESS located at Chugach's headquarters.
Governing Law; Jurisdiction and Venue: Alaska
Terms for the purchase of oscillation dampening service from the BESS
MEA BESS term sheet, 2024-11 -07
2
CORE/2065927.0031/191264229.8
Oscillation Dampening Service: AEA shall purchase oscillation dampening
service ("ODS") from Sellers using the BESS to
address certain expected but unpredictable
intermittent instability events causing
oscillation problems with the turbines at the Bradley Lake Hydroelectric Project ("Bradley Lake") so that the BESS can be used (subject to the operational limitations of the BESS) to mitigate or eliminate such oscillation problems through contingency reserve response.
Seller shall operate the BESS to provide ODS to AEA on a first priority basis to support the system stability needs of Bradley Lake.
Seller’s resource for providing ODS 25% of the 40 MW by 2-hour (40MW/80MWh) battery energy storage system co-owned by Chugach and MEA
Required Project Work Seller shall provide, and the Definitive Agreements shall include language that ensures, services that are in alignment with the definition of Required Project Work provided
in Bond Series 11, as interpreted by the SOA
Dept of Law in its memo dated 4/27/22, and as
applied by GDS Associates in its letter dated
9/27/22; including that the service must
achieve sound economics and meet national
standards in the industry
Payments to Sellers for the ODS: For the ODS, AEA will make equal monthly
payments to Seller of $21,505 per month
during the Term, subject to mutually
acceptable performance guarantees included
in the Definitive Agreements. The monthly
payment amount may be revised to reflect a
different term depending upon the
performance guarantee mechanism that is
ultimately agreed upon by the parties in the
Definitive Agreement. The AEA monthly
payment amount will be modified as necessary to reflect changes associated with Seward Electric System’s wholesale power agreement.
MEA BESS term sheet, 2024-11 -07
3
CORE/2065927.0031/191264229.8
Term: The Term of the ODS agreement will be for 15
years from the date of execution of the
Definitive Agreements, unless terminated
earlier due to an AEA event of default or any
other reason as may be specified in the
Definitive Agreements.
Operations to Provide for ODS to AEA: MEA will operate the BESS in a manner that will provide ODS to mitigate oscillations caused by the Bradley Lake Project on a first priority basis. The services provided will comply with the Electric Power Systems study: Bradley Lake Oscillation Mitigation Study, dated June 14, 2024.
Charging Energy: MEA shall be responsible, at their cost, for providing or procuring charging energy for any energy loss associated with converting charging energy to discharged energy associated with the ODS.
Transmission Charges: MEA shall be responsible, at their cost, for arranging transmission and wheeling required to deliver Charging Energy and take discharged energy associated with the ODS as
may be applicable under tariffs and agreements.
O&M Charges: MEA shall be responsible, at their cost, for all O&M Charges associated with the ODS.
Operation of the BESS: MEA will operate the BESS based on a protocol ("Protocol") to which the Parties mutually
agree and that will be attached as an exhibit to
the Definitive Agreements. The Protocol shall
address operation of the BESS for the ODS. On
a quarterly basis, Seller shall provide the BPMC
a report on ODS performance and compliance
with the protocol.
Battery Energy Storage Tax Credit: Buyer shall have no ownership interest in any
Federal or State tax credit(s) or related cash
amounts for which the BESS qualifies and, to
the extent applicable, any other renewable
MEA BESS term sheet, 2024-11 -07
4
CORE/2065927.0031/191264229.8
energy, environmental or green attributes
associated with the BESS.
The Parties intend that the ODS Definitive
Agreements will qualify as a “service contract”
as such term is used in Section 7701(e) of the United States Internal Revenue Code of 1986 (“IRC”) and that none of the conditions set forth in IRC Section 7701(e)(4) shall apply. Those conditions that would inhibit the Definitive Agreements from qualifying as a “service contract” under the IRC are as follows:
(i) the service recipient (or a related entity) operates such facility.
(ii) the service recipient (or a related entity) bears any significant financial burden if there is nonperformance under the contract or arrangement (other than for reasons beyond the control of the service provider),
(iii) the service recipient (or a related
entity) receives any significant financial
benefit if the operating costs of such
facility are less than the standards of
performance or operation under the
contract or arrangement, or
(iv) the service recipient (or a related
entity) has an option to purchase, or
may be required to purchase, all or a
part of such facility at a fixed and
determinable price (other than for fair
market value).
For the avoidance of doubt, the Parties do not intend for AEA to (1) operate the BESS facility; (2) pay for BESS service when applicable performance guarantees are not met; (3) receive a significant financial benefit from reduced operating costs; or (3) have an option to purchase all or a part of the BESS facility. Parties intend to make best efforts to collaborate in drafting final agreement(s) that support maximizing eligibility for IRS
MEA BESS term sheet, 2024-11 -07
5
CORE/2065927.0031/191264229.8
refundable/direct pay energy property and
bonus tax credits or other tax credits or
applicable financial incentives.
Additional Provisions The Definitive Agreements shall contain other
customary provisions for agreements of this
nature, including, but not limited to, provisions related to conditions precedent, billing and payment, measurement and metering, forecasting, curtailment/interruption, events of default, termination, force majeure/excused performance, performance guarantees, limitations on liability, indemnification and confidentiality.
2. Other Term s and Conditions
a. Not Binding. This Term Sheet does not constitute, nor is it intended to be, a final
agreement between the Parties or a commitment to enter into any binding agreement(s). This Term Sheet, this Term Sheet does not give rise to any binding obligations, express or implied, and neither Party will be liable to the other for the failure to agree upon Definitive Agreements. In addition, neither Party should act or fail to act in detrimental reliance on this Term Sheet. No Party will be legally bound until mutually acceptable final Definitive Agreements containing such terms and conditions as agreed to by the Parties are fully executed by duly authorized representatives.
b. Confidentiality. This Term Sheet and any information exchanged between the
Parties regarding the Proposed Transaction described in this Term Sheet will be
kept confidential to the fullest extent allowed by the laws of the State of Alaska.
No Party will make a public announcement regarding the contents of this Term
Sheet without prior written consent of the other Parties.
c. Costs and Fees. Each Party shall bear and be solely responsible for its own costs,
expenses, and legal fees in connection with the preparation and negotiation of this
Term Sheet and the preparation and negotiation of any Definitive Agreements.
d. Relationship. This Term Sheet will not be construed to determine that a Party is a partner, joint venturer, or fiduciary of the other Party, to create any other form of legal association that would impose liability on one Party for the act or failure to act of the other Party, or to provide either Party with the right, power, or authority (express or implied) to create any duty or obligation of the other Party.
MEA BESS term sheet, 2024-11 -07
6
CORE/2065927.0031/191264229.8
e. Choice of Law. Interpretation of this Term Sheet will be governed by the laws of
the State of Alaska, without giving effect to any choice-of-law rules that may require the application of the laws of another jurisdiction. All disputes arising out of this Term Sheet will be subject to the exclusive jurisdiction of the state and federal courts located in Anchorage, Alaska, as applicable, and each Party consents to the personal jurisdiction of these bodies. f. Te rm. The terms set forth in this Term Sheet are valid for 120 days from the date hereof and thereafter shall be null and void.
[Signature blocks to be added once the Parties agree to this Term Sheet.]
813 W Northern Lights Blvd, Anchorage, AK 99503 Phone:(907) 771-3000 Fax: (907) 771-3044 Email: info@akenergyauthority.org
REDUCING THE COST OF ENERGY IN ALASKA AKENERGYAUTHORITY.ORG
RGYAUTHORITY.ORG
MEMORANDUM
TO: Alaska Energy Authority - Board of Directors
THRU: Curtis. W. Thayer, Executive Director
FROM: Conner Erickson, AEA Planning Director
DATE: November 8th, 2024
RE: Proposed changes to Power Project Fund (PPF) regulations
Overview
House Bill (HB) 307, signed into law in July 2024, being the same legislation which established
the Railbelt Transmission Organization (RTO), also included an amendment to the Alaska Energy
Authority’s (AEA) Power Project Fund (PPF) statutes AS 42.45.010. In order to align AEA’s PPF
regulations with the amendment enacted under HB307, AEA now proposes changes to the
existing PPF regulations (reference 3 AAC 106.100 – 3 AAC 106.159; 3 AAC 106.900) as provided
in Attachment B to this memo. AEA through this memo requests approval from AEA’s Board of
Directors to proceed with these changes to existing PPF regulations.
HB307 amendment to PPF statutes
Section 15 of HB307, and as provided in Attachment A of this memo, amends PPF statutes AS
42.45.010 by adding new subsections to read:
(m) A loan for a renewable energy resources projects in which the cumulative monetary state
involvement, through loans, grants, and bonds, is at least $5,000,000 may not be granted for a
term that exceeds years and may, notwithstanding (f)(2) of this section, be granted at an interest
rate that is the lesser of
(1) three percent lower than the rate determined under (f)(2)(A) of this section, but not less
than one percent; or
(2) a rate equivalent to the rate determined under (f)(2)(B) of this section.
(n) In (m) of this section, “renewable energy resources” as the meaning given in AS 42.05.045(l).
Alignment with Governor’s Alaska Energy Security Task Force (AESTF) Recommendations
This amendment to PPF statutes as incorporated in HB307, and provided in Attachment A to this
memo, seeks to support priority recommendation A-2: Diversify Generation as provided by the
Railbelt subcommittee of the AESTF. Actions proposed under priority recommendation A-2
include Action A-2.1: Adopt Clean Energy Standard and Incentives to Diversify Generation under
which the “Augmentation of the Power Project Fund (PPF)” is stated as a recommended
Page 1 of 26
Alaska Energy Authority
incentive. This amendment augments the PPF’s ability to provide low-cost financing through
significantly reduced interest rates and extended loan terms for major power projects
generating power via renewable energy resources. Such lower interest rates costs for such
major power projects will provide for improved project economics via reduced financing costs,
enabling such project cost savings to be passed on to ratepayers in the form of lower-cost
energy.
Changes to existing PPF regulations
The proposed changes to existing PPF regulations are provided in attachment B. The changes
are minor changes and are applicable only to those regulations which concern the
determination of the interest rates and loan terms applied to certain types of loans under the
program.
Under the current PPF statutes and regulations, AEA may set interest rates for PPF loans at a rate
below that of the statutory rate under AS 42.45.010(f)(2)(B), however, such a reduced rate
request must be substantiated, in that it must allow for the project to achieve financial feasibility
under 3 AAC 106.125(b) in order for the lower rate to be allowable under statute. This HB307
amendment allows for an applicant to apply at a pre-determined reduced interest rate, or three
percent less than the statutory rate, but not less than one percent, without the need to provide
justification as to its aid in achieving financial feasibility, with the primary intent of this
amendment being the pass-thru of project cost savings, realized from such low-cost financing,
to ratepayers for major renewable energy projects.
For loan terms, existing PPF regulations under 3 AAC 106.120 place a ceiling on loan terms at 50
years, however, under 3 AAC 106.120(a)(2)(A), PPF loans which concern certain technologies are
not to exceed 20 years. As such, edits are proposed, as stated in Attachment B, which allow for
extended loan terms beyond 20 years for loans which meet the criteria stated in AS
42.45.010(m).
To clarify, the reduced interest rate and loan term allowed per this statutory amendment is only
applicable to “renewable energy resources projects in which the cumulative monetary state
involvement, through loans, grants, and bonds, is at least $5,000,000”.
For reference, the statutory PPF interest rate is calculated on a weekly basis and was reported at
5.36% as of Nov. 4, 2024.
Regulation Change Package
Subject to AEA’s Board of Director’s approval of these regulation changes, AEA will submit the
necessary forms and documentation to the State of Alaska Department of Law to officially
effectuate such changes to existing PPF regulations. While changes to regulations require a
certain public-comment period, AEA does not anticipate any comments which would alter those
changes as provided in Attachment B.
Page 2 of 26
Alaska Energy Authority
Attachment A: Enrolled Copy of HB307
Page 3 of 26
Enrolled HB 307
LAWS OF ALASKA
2024
Source Chapter No.
SCS CSHB 307(FIN) _______
AN ACT
Relating to the Regulatory Commission of Alaska; relating to regulation of public utilities and
pipeline carriers; relating to approval of wholesale power agreements; relating to electric
reliability organizations; relating to loans for renewable energy resources projects from the
power project fund; relating to the taxation of new electricity generation and storage facilities;
relating to the Alaska Energy Authority; relating to the Railbelt Transmission Organization;
and providing for an effective date.
_______________
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA:
THE ACT FOLLOWS ON PAGE 1
Page 4 of 26
-1- Enrolled HB 307
AN ACT
Relating to the Regulatory Commission of Alaska; relating to regulation of public utilities and 1
pipeline carriers; relating to approval of wholesale power agreements; relating to electric 2
reliability organizations; relating to loans for renewable energy resources projects from the 3
power project fund; relating to the taxation of new electricity generation and storage facilities; 4
relating to the Alaska Energy Authority; relating to the Railbelt Transmission Organization; 5
and providing for an effective date. 6
_______________ 7
* Section 1. The uncodified law of the State of Alaska is amended by adding a new section 8
to read: 9
LEGISLATIVE INTENT. It is the intent of the legislature that ownership of state-10
funded new or upgraded backbone transmission assets in the Railbelt be decided when the 11
financing for the new or upgraded transmission assets is approved by the state. 12
* Sec. 2. AS 39.25.110(11) is amended to read: 13
(11) the officers and employees of the following boards, commissions, 14
and authorities: 15
Page 5 of 26
Enrolled HB 307 -2-
(A) [REPEALED] 1
(B) Alaska Permanent Fund Corporation; 2
(C) Alaska Industrial Development and Export Authority; 3
(D) Alaska Commercial Fisheries Entry Commission; 4
(E) Alaska Commission on Postsecondary Education; 5
(F) Alaska Aerospace Corporation; 6
(G) [REPEALED] 7
(H) Alaska Gasline Development Corporation and subsidiaries 8
of the Alaska Gasline Development Corporation; 9
(I) Alaska Energy Authority; 10
* Sec. 3. AS 42.04.020(a) is amended to read: 11
(a) The commission consists of five commissioners appointed by the governor 12
and confirmed by the legislature in joint session. To qualify for appointment as a 13
commissioner, a person must 14
(1) be a member in good standing of the Alaska Bar Association with 15
at least five years of actual experience in the practice of law; 16
(2) be a professional engineer registered under AS 08.48; or 17
(3) have a degree from an accredited college or university with a major 18
in [ENGINEERING,] finance, economics, accounting, business administration, or 19
public administration and at least five years of actual experience in the field 20
associated with the degree [ACTUAL EXPERIENCE FOR A PERIOD OF FIVE 21
YEARS IN THE PRACTICE OF LAW OR IN THE FIELD OF ENGINEERING, 22
FINANCE, ECONOMICS, ACCOUNTING, BUSINESS ADMINISTRATION, OR 23
PUBLIC ADMINISTRATION IS EQUIVALENT TO A DEGREE]. 24
* Sec. 4. AS 42.04.020(f) is amended to read: 25
(f) Members of the commission are in the exempt service and are entitled to a 26
monthly salary equal to a step in Range 29 [RANGE 27] of the salary schedule in 27
AS 39.27.011(a) for Juneau, Alaska. The chair of the commission is entitled to a 28
monthly salary equal to a step in Range 29 [RANGE 27] of the salary schedule in 29
AS 39.27.011(a) for Juneau, Alaska. 30
* Sec. 5. AS 42.05.141(b) is amended to read: 31
Page 6 of 26
-3- Enrolled HB 307
(b) The commission shall perform the duties assigned to it under 1
AS 42.45.100 - 42.45.190 and AS 44.83.700 - 44.83.720. 2
* Sec. 6. AS 42.05.141 is amended by adding a new subsection to read: 3
(g) Nothing in this chapter limits the authority of the commission under this 4
section or AS 42.05.151 necessary to implement provisions that remain applicable 5
under AS 42.05.321(b) or 42.05.711. 6
* Sec. 7. AS 42.05.254(a) is amended to read: 7
(a) A regulated public utility or a certificated utility that provides 8
telecommunications services operating in the state shall pay to the commission an 9
annual regulatory cost charge in an amount not to exceed the maximum percentage of 10
adjusted gross revenue that applies to the utility sector of which the utility is a part. 11
The regulatory cost charges that the commission expects to collect from all regulated 12
utilities and certificated utilities providing telecommunications services may not 13
exceed the sum of the following percentages of the total adjusted gross revenue of all 14
regulated public utilities and certificated utilities providing telecommunications 15
services derived from operations in the state: (1) not more than .98 [.7] percent to fund 16
the operations of the commission, and (2) not more than .22 [.17] percent to fund 17
operations of the public advocacy function under AS 42.04.070(c) and 18
AS 44.23.020(e) within the Department of Law. An exempt utility that does not 19
provide telecommunications services shall pay the actual cost of services provided to 20
it by the commission. 21
* Sec. 8. AS 42.05.381 is amended by adding a new subsection to read: 22
(p) A determination of whether an electric utility's rate is just and reasonable 23
may consider whether the purpose of the rate is to increase diversity of supply, 24
promote load growth, or enhance energy reliability or energy security. 25
* Sec. 9. AS 42.05.431(b) is amended to read: 26
(b) A wholesale power agreement between public utilities, or between a 27
public utility and an independent power producer, is subject to advance approval 28
of the commission. A rate set in accordance with a wholesale power agreement 29
must disclose a state or local tax exemption provided to a utility or independent 30
power producer. After a wholesale power agreement is in effect, the commission 31
Page 7 of 26
Enrolled HB 307 -4-
may not invalidate any purchase or sale obligation under the agreement. However, if 1
the commission finds that rates set in accordance with the agreement violate this 2
subsection or are not just and reasonable, the commission may order the parties to 3
negotiate an amendment to the agreement and if the parties fail to agree, to use the 4
dispute resolution procedures contained in the contract. In this subsection, 5
"independent power producer" means a legal entity, other than a public utility 6
or a joint action agency established under AS 42.45.310, that owns or operates a 7
facility for the generation of electricity. 8
* Sec. 10. AS 42.05.711(b) is amended to read: 9
(b) Except as otherwise provided in this subsection, [AND IN] (o) of this 10
section, and AS 44.83.700(d), public utilities owned and operated by a political 11
subdivision of the state, or electric operating entities established as the instrumentality 12
of two or more public utilities owned and operated by political subdivisions of the 13
state, are exempt from this chapter, other than AS 42.05.221 - 42.05.281 and 14
42.05.385. However, 15
(1) the governing body of a political subdivision may elect to be 16
subject to this chapter; and 17
(2) a utility or electric operating entity that is owned and operated by a 18
political subdivision and that directly competes with another utility or electric 19
operating entity is subject to this chapter and any other utility or electric operating 20
entity owned and operated by the political subdivision is also subject to this chapter; 21
this paragraph does not apply to a utility or electric operating entity owned and 22
operated by a political subdivision that competes with a telecommunications utility. 23
* Sec. 11. AS 42.05.760(a) is amended to read: 24
(a) An electric utility must participate in an electric reliability organization if 25
the utility operates in an interconnected electric energy transmission network served 26
by an electric reliability organization certificated by the commission. The commission 27
may not require an electric reliability organization for an interconnected bulk-electric 28
system if 29
(1) all of the load-serving entities operating in the interconnected bulk-30
electric system are exempt under AS 42.05.711(b); or 31
Page 8 of 26
-5- Enrolled HB 307
(2) the sum of annual electric energy sales made by load-serving 1
entities operating in the interconnected bulk-electric system is less than 3,000,000 2
megawatt-hours. 3
* Sec. 12. AS 42.05.762 is amended to read: 4
Sec. 42.05.762. Duties of an electric reliability organization. An electric 5
reliability organization shall 6
(1) develop reliability standards that provide for an adequate level of 7
reliability of an interconnected electric energy transmission network; 8
(2) develop integrated resource plans under AS 42.05.780(a); 9
(3) establish rules to 10
(A) ensure that the directors of the electric reliability 11
organization and the electric reliability organization act independently from 12
users, owners, and operators of the interconnected electric energy transmission 13
network; 14
(B) equitably allocate reasonable dues, fees, and other charges 15
among all load-serving entities connected to the interconnected electric energy 16
transmission network for all activities under AS 42.05.760 - 42.05.790; 17
(C) provide fair and impartial procedures for the enforcement 18
of reliability standards; 19
(D) provide for reasonable notice and opportunity for public 20
comment, due process, openness, and balancing of interests in exercising its 21
duties; [AND] 22
(4) be governed by a board that 23
(A) includes as nonvoting members the chair of the 24
commission or the chair's designee and the attorney general or the attorney 25
general's designee; and 26
(B) is formed as 27
(i) an independent board; 28
(ii) a balanced stakeholder board; or 29
(iii) a combination independent and balanced 30
stakeholder board; and 31
Page 9 of 26
Enrolled HB 307 -6-
(5) prioritize the reliability, stability, and cost to consumers of the 1
interconnected bulk-electric system served by the electric reliability organization. 2
* Sec. 13. AS 42.05.770 is amended to read: 3
Sec. 42.05.770. Regulations. The commission shall adopt regulations 4
governing electric reliability organizations, reliability standards, and modifications to 5
reliability standards consistent with this section. Regulations under AS 42.05.760 - 6
42.05.790 must 7
(1) require that an electric reliability organization's tariff include 8
[(A) STANDARDS FOR] nondiscriminatory standards for 9
[OPEN ACCESS TRANSMISSION AND] interconnection; 10
[(B) STANDARDS FOR TRANSMISSION SYSTEM COST 11
RECOVERY;] 12
(2) provide a process to identify and resolve conflicts between a 13
reliability standard and a function, rule, tariff, rate schedule, or agreement that has 14
been accepted, approved, adopted, or ordered by the commission; 15
(3) allow an electric reliability organization to recover its costs through 16
surcharges added to the rate for each participating load-serving entity. 17
* Sec. 14. AS 42.06.286(a) is amended to read: 18
(a) A pipeline carrier operating in the state shall pay to the commission an 19
annual regulatory cost charge in an amount not to exceed the sum of the following 20
percentages of gross revenue derived from operations in the state: (1) not more than 21
.98 [.7] percent to fund the operations of the commission, and (2) not more than .22 22
[.17] percent to fund operations of the public advocacy function under 23
AS 42.04.070(c) and AS 44.23.020(e) within the Department of Law. A regulatory 24
cost charge may not be assessed on pipeline carrier operations unless the operations 25
are within the jurisdiction of the commission. 26
* Sec. 15. AS 42.45.010 is amended by adding new subsections to read: 27
(m) A loan for a renewable energy resources project in which the cumulative 28
state monetary involvement, through loans, grants, and bonds, is at least $5,000,000 29
may not be granted for a term that exceeds 50 years and may, notwithstanding (f)(2) of 30
this section, be granted at an interest rate that is the lesser of 31
Page 10 of 26
-7- Enrolled HB 307
(1) three percent lower than the rate determined under (f)(2)(A) of this 1
section, but not less than one percent; or 2
(2) a rate equivalent to the rate determined under (f)(2)(B) of this 3
section. 4
(n) In (m) of this section, "renewable energy resources" has the meaning given 5
in AS 42.45.045(l). 6
* Sec. 16. AS 43.98 is amended by adding a new section to read: 7
Article 2A. Taxation of New Electricity Generation and Storage Facilities. 8
Sec. 43.98.100. Taxation of new electricity generation and storage 9
facilities. (a) An electricity generation facility or electricity storage facility that is 10
constructed and placed into service on or after July 1, 2024, is not subject to state and 11
local ad valorem, income, and excise taxes if the electricity generation facility is 12
(1) operated by a public utility or joint action agency established under 13
AS 42.45.310; or 14
(2) operated by an entity other than a public utility and provides power 15
only to a public utility. 16
(b) In this section, "public utility" has the meaning given in AS 42.05.990. 17
* Sec. 17. AS 44.83.030 is amended to read: 18
Sec. 44.83.030. Membership of the authority. The members of the board of 19
directors of the authority [ALASKA ENERGY AUTHORITY] are 20
(1) the commissioner of revenue; 21
(2) the commissioner of commerce, community, and economic 22
development; and 23
(3) six public members appointed by the governor as follows: 24
(A) one member with expertise or experience in managing 25
or operating an electric utility that is not connected to an interconnected 26
electric energy transmission network as defined in AS 42.05.790; 27
(B) one member with expertise or experience in developing 28
energy projects in rural communities; 29
(C) one member with expertise or experience in managing 30
or operating an electric utility connected to an interconnected electric 31
Page 11 of 26
Enrolled HB 307 -8-
energy transmission network as defined in AS 42.05.790; 1
(D) one member with expertise or experience in managing a 2
municipally owned utility located off the interconnected road system or 3
joint action agency established under AS 42.45.310 located off the 4
interconnected road system; 5
(E) one member with financial expertise in large power 6
generation project development; and 7
(F) one member with expertise or experience in finance, 8
energy policy, energy technology, engineering, law, or economics [THE 9
MEMBERS OF THE ALASKA INDUSTRIAL DEVELOPMENT AND 10
EXPORT AUTHORITY]. 11
* Sec. 18. AS 44.83.030 is amended by adding new subsections to read: 12
(b) If the commissioner described in (a)(1) or (a)(2) of this section is unable to 13
attend a meeting of the authority, the commissioner may, by an instrument in writing 14
filed with the authority, designate a deputy or director to act in the commissioner's 15
place as a member of the board at the meeting. For all purposes of this chapter, the 16
designee is a member of the board at the meeting. 17
(c) Public board members described in (a)(3) of this section serve for three-18
year terms. 19
(d) If a vacancy occurs in the membership of the board, the governor shall 20
immediately appoint a member for the unexpired portion of the term. 21
* Sec. 19. AS 44.83.040(a) is amended to read: 22
(a) The board of directors of the authority shall elect a chair and vice-chair 23
every two years from among its members [OF THE ALASKA INDUSTRIAL 24
DEVELOPMENT AND EXPORT AUTHORITY SHALL SERVE AS OFFICERS 25
OF THE ALASKA ENERGY AUTHORITY]. The powers of the authority 26
[ALASKA ENERGY AUTHORITY] are vested in the board of directors, and five 27
board members [FOUR DIRECTORS OF THE AUTHORITY] constitute a quorum. 28
Action may be taken and motions and resolutions adopted by the authority 29
[ALASKA ENERGY AUTHORITY] at a meeting by the affirmative vote of at least 30
five board members [A MAJORITY OF THE DIRECTORS]. The members of the 31
Page 12 of 26
-9- Enrolled HB 307
board of directors of the authority [ALASKA ENERGY AUTHORITY] serve 1
without compensation, but they shall receive the same travel pay and per diem as 2
provided by law for board members under AS 39.20.180. 3
* Sec. 20. AS 44.83.040 is amended by adding a new subsection to read: 4
(e) The authority may, as the authority considers advisable, appoint persons as 5
officers, including an executive director, and employ professional advisors, counsel, 6
technical experts, agents, and other employees. The executive director and employees 7
of the authority are in the exempt service under AS 39.25. 8
* Sec. 21. AS 44.83.080 is amended to read: 9
Sec. 44.83.080. Powers of the authority. In furtherance of its corporate 10
purposes, the authority has the following powers in addition to its other powers: 11
(1) to sue and be sued; 12
(2) to have a seal and alter it at pleasure; 13
(3) to make and alter bylaws for its organization and internal 14
management; 15
(4) to adopt regulations governing the exercise of its corporate powers; 16
(5) to improve, equip, operate, and maintain power projects and bulk 17
fuel, waste energy, energy conservation, energy efficiency, and alternative energy 18
facilities and equipment; 19
(6) to issue bonds to carry out any of its corporate purposes and 20
powers, including the establishment or increase of reserves to secure or to pay the 21
bonds or interest on them, and the payment of all other costs or expenses of the 22
authority incident to and necessary or convenient to carry out its corporate purposes 23
and powers; 24
(7) to sell, lease as lessor or lessee, exchange, donate, convey, or 25
encumber in any manner by mortgage or by creation of any other security interest, real 26
or personal property owned by it, or in which it has an interest, when, in the judgment 27
of the authority, the action is in furtherance of its corporate purposes; 28
(8) to accept gifts, grants, or loans from, and enter into contracts or 29
other transactions regarding them, with any person; 30
(9) to deposit or invest its funds, subject to agreements with 31
Page 13 of 26
Enrolled HB 307 -10-
bondholders; 1
(10) to enter into contracts with the United States or any person and, 2
subject to the laws of the United States and subject to concurrence of the legislature, 3
with a foreign country or its agencies, for the construction, financing, operation, and 4
maintenance of all or any part of a power project or bulk fuel, waste energy, energy 5
conservation, energy efficiency, or alternative energy facilities or equipment, either 6
inside or outside the state, and for the sale or transmission of power from a project or 7
any right to the capacity of it or for the security of any bonds of the authority issued or 8
to be issued for the project; 9
(11) to enter into contracts with any person and with the United States 10
and, subject to the laws of the United States and subject to the concurrence of the 11
legislature, with a foreign country or its agencies for the purchase, sale, exchange, 12
transmission, or use of power from a project, or any right to the capacity of it; 13
(12) to apply to the appropriate agencies of the state, the United States, 14
and a foreign country and any other proper agency for the permits, licenses, or 15
approvals as may be necessary, to acquire, construct, maintain, and operate power 16
projects in accordance with the licenses or permits, and to obtain, hold, and use the 17
licenses and permits in the same manner as any other person or operating unit; 18
(13) to enter into contracts or agreements with respect to the exercise 19
of any of its powers, and do all things necessary or convenient to carry out its 20
corporate purposes and exercise the powers granted in this chapter; 21
(14) to recommend to the legislature 22
(A) the pledge of the credit of the state to guarantee repayment 23
of all or any portion of revenue bonds issued to assist in construction of power 24
projects; 25
(B) an appropriation from the general fund 26
(i) for debt service on bonds or other project purposes; 27
or 28
(ii) to reduce the amount of debt financing for the 29
project; 30
(15) to carry out the powers and duties assigned to it under AS 42.45 31
Page 14 of 26
-11- Enrolled HB 307
and AS 44.83.700 - 44.83.720; 1
(16) to make grants or loans to any person and enter into contracts or 2
other transactions regarding the grants or loans; 3
(17) to promote energy conservation, energy efficiency, and alternative 4
energy through training and public education; 5
(18) to acquire a Susitna River power project, whether by construction, 6
purchase, gift, or lease, including the acquisition of property rights and interests by 7
eminent domain under AS 09; 8
(19) to perform feasibility studies and engineering and design with 9
respect to power projects; 10
(20) to acquire battery and other energy storage systems, whether 11
by direct ownership, purchase, grant, gift, or lease. 12
* Sec. 22. AS 44.83.090(b) is amended to read: 13
(b) The authority is not subject to the jurisdiction of the Regulatory 14
Commission of Alaska, except as provided in AS 44.83.700(d). Nothing in this 15
chapter, except as provided in AS 44.83.700 - 44.83.720, grants the authority 16
jurisdiction over the services or rates of a public utility or diminishes or otherwise 17
alters the jurisdiction of the Regulatory Commission of Alaska with respect to a public 18
utility, including any right the commission may have to review and approve or 19
disapprove contracts for the purchase of electricity by a public utility other than 20
wholesale agreements and contracts described in AS 42.05.431(c)(1). 21
* Sec. 23. AS 44.83 is amended by adding new sections to read: 22
Article 5A. Railbelt Transmission Organization. 23
Sec. 44.83.700. Railbelt Transmission Organization. (a) The Railbelt 24
Transmission Organization is created for the purpose of establishing an open access 25
transmission tariff that 26
(1) provides for recovery of transmission costs and related ancillary 27
services; and 28
(2) replaces wholesale charges assessed by unit by each utility in the 29
Railbelt with a new mechanism that fairly recovers and equitably allocates the costs of 30
operating the backbone transmission system. 31
Page 15 of 26
Enrolled HB 307 -12-
(b) For administrative purposes, the transmission organization is a division of 1
the Alaska Energy Authority. 2
(c) To assist in administering the open access transmission tariff, the 3
governance structure for the transmission organization must be made up of a 4
representative from the authority, a representative from each Railbelt utility, and, as an 5
ex officio nonvoting representative, the chief executive officer of the applicable 6
electric reliability organization or the chief executive officer's designee. 7
(d) Notwithstanding AS 42.05.711(b) and AS 44.83.090(b), the transmission 8
organization is subject to the jurisdiction of the commission for the purposes of 9
AS 44.83.700 - 44.83.720. The commission shall require the transmission organization 10
to apply for a certificate under AS 42.05.221 and file tariffs to achieve the purposes of 11
AS 44.83.700 - 44.83.720. 12
Sec. 44.83.710. Revenue mechanism. (a) The transmission organization shall 13
hold and administer a commission-approved nondiscriminatory open access 14
transmission tariff for the backbone transmission system. 15
(b) The transmission organization shall file with the commission a 16
nondiscriminatory open access transmission tariff consistent with Federal Energy 17
Regulatory Commission standards to remove impediments to competition in the 18
wholesale bulk power marketplace in the state. If the transmission organization does 19
not file a nondiscriminatory open access transmission tariff with the commission on or 20
before July 1, 2025, the commission shall, after notice and opportunity for public 21
comment, establish a nondiscriminatory open access transmission tariff consistent 22
with this section. 23
(c) The nondiscriminatory open access transmission tariff must, as approved 24
by the commission, 25
(1) pool backbone transmission system costs and allocate those costs 26
through certificated load-serving entities on a coincident peak or load ratio share basis, 27
or a combination of both; and 28
(2) account for 29
(A) required backbone transmission system ancillary services; 30
(B) backbone transmission system congestion; 31
Page 16 of 26
-13- Enrolled HB 307
(C) disruptions to the backbone transmission system that result 1
in the isolation of one geographical area of the backbone transmission system 2
from another for more than 24 hours; and 3
(D) costs to own and operate the backbone transmission 4
system, as established by the commission or by contract, including 5
transmission costs associated with the Bradley Lake hydroelectric project. 6
(d) A Railbelt utility shall pass the commission-approved transmission costs 7
directly and transparently to the utility's customers. 8
Sec. 44.83.720. Definitions. In AS 44.83.700 - 44.83.720, 9
(1) "backbone transmission system" means the transmission assets in 10
the Railbelt that facilitate the transmission of electrical power under the standards 11
established by the Federal Energy Regulatory Commission; 12
(2) "commission" means the Regulatory Commission of Alaska; 13
(3) "Railbelt" means the geographic region from the Kenai Peninsula 14
to Interior Alaska that is connected to a common electric transmission backbone; 15
(4) "Railbelt utility" means a public electric utility certificated to 16
operate in the Railbelt that operates backbone transmission system assets; 17
(5) "transmission organization" means the Railbelt Transmission 18
Organization established by AS 44.83.700. 19
* Sec. 24. The uncodified law of the State of Alaska is amended by adding a new section to 20
read: 21
TRANSITION: REGULATORY COMMISSION OF ALASKA MEMBERS. An 22
individual who is a member of the Regulatory Commission of Alaska on the day before the 23
effective date of sec. 3 of this Act continues to serve on the Regulatory Commission of Alaska 24
until the member's term expires and a successor is appointed and qualified. The governor shall 25
make appointments for vacancies that occur on or after the effective date of sec. 3 of this Act 26
in accordance with AS 42.04.020(a), as amended by sec. 3 of this Act. 27
* Sec. 25. The uncodified law of the State of Alaska is amended by adding a new section to 28
read: 29
TRANSITION: ALASKA ENERGY AUTHORITY BOARD MEMBERS. 30
Notwithstanding AS 44.83.030(c), added by sec. 18 of this Act, the governor shall appoint 31
Page 17 of 26
Enrolled HB 307 -14-
two public members of the initial Alaska Energy Authority board of directors to one-year 1
terms, two public members to two-year terms, and two public members to three-year terms. 2
* Sec. 26. The uncodified law of the State of Alaska is amended by adding a new section to 3
read: 4
TRANSITION: RAILBELT TRANSMISSION ORGANIZATION. To facilitate the 5
development and management of the Railbelt backbone transmission system open access 6
transmission tariff, the Alaska Energy Authority and the Railbelt utilities, as defined in 7
AS 44.83.720, added by sec. 23 of this Act, shall form the Railbelt Transmission Organization 8
under AS 44.83.700, added by sec. 23 of this Act, on or before January 1, 2025, modeled after 9
the governance structure of the Bradley Lake Hydroelectric Project, as outlined in the Bradley 10
Lake Power Sales Agreement, including the creation, duties, and methods of the Bradley Lake 11
Project Management Committee, with any adjustments the parties to the agreement determine 12
are necessary. On or before January 1, 2025, the Railbelt Transmission Organization shall 13
apply to the Regulatory Commission of Alaska for a certificate under AS 42.05.221 to 14
achieve the purposes of AS 44.83.700 - 44.83.720, added by sec. 23 of this Act. 15
* Sec. 27. Section 8 of this Act takes effect immediately under AS 01.10.070(c). 16
* Sec. 28. Except as provided in sec. 27 of this Act, this Act takes effect July 1, 2024. 17
Page 18 of 26
Alaska Energy Authority
Attachment B: Proposed changes to existing PPF regulations for alignment with HB307
Page 19 of 26
3 AAC 106.100. Power project fund loan application.
(a) An applicant for a loan from the power project fund must submit an application to the authority. The
application must contain at the time of submission the following information:
(1) the legal name of the applicant and the legal authority under which it was created and other
information that will demonstrate that the applicant is an eligible borrower under AS 42.45.010;
(2) a certified copy of the resolution or other official action taken by the applicant's governing body
authorizing the application for a loan;
(3) the name, title, and address of the applicant's official correspondent or representative for
purposes of the application;
(4) the names and titles of the applicant's principal officers, including the chief executive officer or
general manager;
(5) the names and addresses of the engineer, legal counsel, financial advisor or consultant, and any
management, engineering, design, economic, or other advisors or consultants t hat the applicant
has for the project;
(6) the terms requested for the loan, including the total dollar amount of the loan, the maximum
time allowed for repayment, and whether the applicant requests a reduced interest rate under (c)
of this section;
(7) a general description of the use to which the loan money will be applied, including
(A) the geographic location of the project;
(B) a comprehensive statement clearly demonstrating public need for the project and the
project's eligibility under AS 42.45.010;
(C) the proposed allocation of loan money to each pur pose or to each phase of a project;
and
(D) a narrative section providing a detailed description of the project, including each
purpose of the project, a timeline and description of project phases, and the estimated
annual operating costs and revenues of the project once project operations begin;
(8) information from which the authority can determine (A) in the case of a loan to construct, equip,
modify, or expand a project, whether the project is technically and economically viable, and is
financially feasible under the criteria for financial feasibility in 3 AAC 106.125(a); and (B) whether
the applicant has the financial ability including, if necessary, the authority to charge and collect
rates, fees, or rentals or in the case of a municipality, to levy taxes to generate sufficient revenue to
repay the loan;
(9) the status of any proceedings undertaken by the applicant to obtain permits, certificates or other
authorizations from any federal, state, or local agency necessary to begin, complete, and operate
the project;
(10) financial statements for the previous two complete fiscal or calendar years of the applicant and
any other party or parties acting as guarantor of the loan, unless other wise required by the
authority; these financial statements must include balance sheets and profit -and-loss statements
and when possible, must be certified by an independent certified public accountant;
(11) for an investor-owned electric utility, a business history of any person or entity owning or
controlling 10 percent or more of the applicant's stock or business;
(12) for a leveraged lease financing arrangement, information sufficient for the authority to
determine that the provisions of AS 42.45.010(b)(2) have been met; and
(13) if the applicant is a Native village council, a resolution waiving sovereign immunity on a form
provided by the authority.
(b) An applicant shall, in addition to the application, timely provide other information requested by the
authority.
Page 20 of 26
(c) Repealed 4/8/2015.
(d) An applicant requesting an interest rate less than the rate set out in AS 42.45.010(f)(2)(A) or AS
42.45.010(m), as applicable, must provide information sufficient for the authority to determine that the
reduced rate is necessary to allow the project to meet the criteria for financial feasibility under 3 AAC
106.125(b).
3 AAC 106.110. Review by authority.
(a) Upon receipt of a completed application and other information requested or required, the authority will
review the application.
(b) The authority after reviewing an application, other than an application for a loan for reconnaissance
studies, feasibility studies, license and permit applications, or engineering and design, will make a
determination that includes the following:
(1) written comments analyzing whether
(A) the money will be used to pay the costs of activities that are eligible under AS 42.45.010
and the applicant is an eligible borrower under AS 42.45.010;
(B) the project will meet the needs of the area to be served by the project and will benefit
the area;
(C) for a loan to construct, equip, modify, or expand a project, the project is
(i) technically and economically viable; and
(ii) financially feasible under the criteria in 3 AAC 106.125(a), or will become
financially feasible with the assistance of a power project loan;
(D) for a construction project, any alternatives to the project exist that
(i) would result in development of power at a different site, by a different method,
or by an entity other than the applicant
(ii) could reasonably be expected to provide, within a time schedule comparable to
the project, comparable volumes of power at a lower cost to the consumer; and
(iii) meet the criteria set out in (B) and (C) of this paragraph;
(E) the applicant has applied for, or has been awarded, necessary permits or certificates;
(F) for a loan to construct, equip, modify, or expand a project, if enough money is not
available in the power project fund to make a loan for the project, or if a loan cannot be
made at a rate of interest low enough to allow the project to be financially feasible under
the criteria in 3 AAC 106.125(b), the loan should be approved if assistance is made to the
applicant from some other source identified by the authority;
(G) if there is power project fund money that the authority can loan for more than one
project, the needs of, and benefits to, the area to be served by the project are greater than
the needs of, and benefits offered to, other areas of the state by a project for which
sponsors may also seek loan money from the authority, if this determination can be made
based on information existing at the time of the authority's review;
(H) the applicant has, or will have, sufficient revenue from all sources to repay the loan; and
(2) a list of subjects to be analyzed in any studies to be made by the applicant.
(c) The authority will consider each application for a loan for reconnaissance studies, feasibility studies,
license and permit applications, engineering and design that has been transmitted to it for action and will
determine whether the applicant is an eligible borrower under AS 42.45.010, whether the loan will be used
to pay the costs of activities that are eligible under AS 42.45.010, and whether the applicant can reasonably
be expected to have sufficient revenue from all sources to timely repay the loan.
(d) A loan committee comprised of authority staff designated by the executive director of the authority shall
make the final decision of the authority on applications for loans up to and including $2,000,000. For loans
in excess of $2,000,000, the board of directors of the authority, upon recommendation by the loan
Page 21 of 26
committee, will make the final decision of the authority on applications for loans, except for loans that
require legislative approval under AS 42.45.010(j). The final decision of the authority to approve or deny an
application for a loan will be in the form of a written determination that contains the findings required by
this section, and any other comments the authority considers appropriate. The authority will transmit a copy
of the written determination to the applicant not later than 30 days after making its final decision.
(e) If the authority approves an application, the written determination will also include (1) any conditions
that the applicant must satisfy before the authority will make the loan to the applicant; and (2) proposed
loan terms.
(f) If the authority approves an application, and after approval of the loan by the legislature to the extent
required under AS 42.45.010(j), the authority will enter into a loan agreement with the applicant under
conditions complying with 3 AAC 106.120, but only after receiving a certified copy of the resolution or other
official action taken by the applicant's governing body agreeing to the terms of the loan.
(g) It is the responsibility of the applicant and not of the authority to obtain the approval by the legislature
if approval of the applicant's loan is required under AS 42.45.010(j).
(h) If the authority denies an application, the written determination will also include a statement explaining
the reasons for the denial.
3 AAC 106.120. Terms of loans.
(a) The terms of a loan made by the authority from the power project fund will be determined by the
authority and will comply with the following conditions:
(1) the loan must bear interest at the rate determined under AS 42.45.010(f)(2)(A) or AS
42.45.010(m), as applicable,, unless the authority determines, based on information the applicant
provides under 3 AAC 106.100(d), that a lower interest rate will allow a project to meet the criteria
for financial feasibility under 3 AAC 106.125(b);
(2) the loan must mature on the date and pay interest on the dates and in the amounts determined
by the authority, but the final maturity date may not extend beyond 50 years for a renewable energy
resources project, where “renewable energy resources” has the meaning given in AS 42.45.045(l),
and in which the cumulative state monetary involvement, through loans, grants, and bonds, is at
least $5,000,000;
(3) for all projects not covered by paragraph (a)(2) of this regulation, the loan must mature on the
date and pay interest on the dates and in the amounts determined by the authority, but the final
maturity date may not extend beyond 50 years or the expected and specified productive life of the
project being financed, whichever is less; the authority will use the following standards to determine
the length of the loan, taking into consideration the expected productive life of a project unless the
authority determines that a different expected productive life is indicated:
(A) the term of loans will be up to 20 years for reconnaissance studies and for feasibility
studies, preconstruction engineering and project design, or constructing, equipping,
modifying, improving, and expanding of
(i) diesel generation facilities;
(ii) wind, geothermal, and waste heat recovery facilities;
(iii) wood gasification;
(iv) wood-fired steam-generation facilities;
(v) bulk fuel storage facilities;
(vi) energy efficiency and conservation projects;
(vii) solar thermal, solar photovoltaic hydrokinetic, energy storage, and
transmission facilities; and
(viii) alternative energy facilities;
Page 22 of 26
(B) the term of loans will be up to 50 years for feasibility studies, preconstruction
engineering and project design, or constructing, equipping, modifying, improving, and
expanding of
(i) coal-fired steam-generation facilities; and
(ii) hydroelectric generation facilities; and
(34) the loan must be supported by appropriate documentation that may include a loan agreement,
bonds, notes, or other documentation, evidencing to the authority's satisfaction that the loan is
secured by one or more of the following:
(A) a pledge of the revenues of the borrower or the project that may be subordinate to
operating and maintenance expenses and certain other expenses of the borrower or the
project as specified by the authority;
(B) a lien, mortgage, security interest, collateral agreements, or other encumbrance on the
project or other assets, rights, or interests of the borrower; or
(C) a pledge of the taxing power of the borrower.
(b) The requirements of (a)(34) of this section do not apply to a loan to an applicant regulated by the
Regulatory Commission of Alaska under AS 42.05 if the applicant has a history of repaying long-term loans
and demonstrates to the authority that it has the capacity to repay the loan obtained from the authority.
3 AAC 106.125. Criteria to establish financial feasibility.
(a) When making a written determination under 3 AAC 106.110 regarding the financial feasibility of a
project, the authority will consider
(1) the revenue-generating capability of the project, including the local need for power from the
project within any interconnected transmission grid;
(2) whether the applicant has, or will have, sufficient revenue from all sources to
(A) repay the loan;
(B) complete the project; and
(C) operate and maintain the project;
(3) whether the collateral provided is sufficient to secure repayment of the loan, including whether
the loan is secured by a means other than by a pledge or revenues of the project;
(4) whether the applicant has obtained regulatory approval for any proposed power sales
agreement; (5) the relationship between the estimated user fees or charges upon completion of the
project and the estimated user fees or charges if consumers of services provided by the project
would have continued to receive services from existing sources; and;
(6) the relationship between the estimated user fees or charges upon completion of the project and
the present or estimated user fees or charges for similar services in the state;
(b) When making a determination under 3 AAC 106.120(a)(1) regarding whether to reduce the interest rate
for a loan below the interest rate set out in AS 42.45.010(f)(2)(A) or AS 42.45.010(m), as applicable, the
authority will consider
(1) the criteria identified in (a) of this section;
(2) for electric power projects, whether and the amount by which the local cost of energy exceeds
the weighted average retail residential rate in Anchorage, Fairbanks, and Juneau under AS
42.45.110(c)(2);
(3) the financial impact on nonindustrial ratepayers expected to use energy or heat produced by
the project;
(4) whether the project will provide immediate benefits to support the stability and sustainability of
local energy or heat systems, including replacement of failing generation systems; and
Page 23 of 26
(5) whether the project will help meet new load demands or diversify the local energy system's
energy resource portfolio.
3 AAC 106.130. Inspection of records and facilities.
(a) An applicant for a loan and a borrower who has an outstanding loan with the authority shall make its
books and records, facilities, and its real and personal property of any kind, available for ins pection at any
reasonable time by the authority, or its agents, after receipt by the applicant or borrower of the authority's
written request to inspect.
(b) The authority or its agents will, in the discretion of the authority, inspect, after giving reaso nable notice,
the construction of any project that is financed, in whole or in part, with a loan under this chapter. The
inspection does not relieve the borrower from its obligation to comply with applicable codes and
ordinances.
(c) A borrower that has obtained a loan from the authority shall permit the authority or its agents to inspect
its books, records, facilities, and real and personal property for as long as any portion of the loan, including
interest, remains outstanding.
(d) The authority will, in its discretion, by written request require a borrower who has obtained a loan from
the authority to submit
(1) at reasonable times to audits or examinations of its books and records by an independent firm
of certified public accountants selected by the authority to determine whether the provisions of the
loan agreement have been complied with and to pay the cost of those audits or examinations;
(2) a sworn statement by a responsible officer of the borrower describing the purposes to which
the proceeds of the loan have been applied.
3 AAC 106.140. Loans from other appropriations.
The provisions of 3 AAC 106.100 - 3 AAC 106.130 relating to loans from the power project fund apply also
to all other loans made by the authority affected by ch. 58, SLA 1999 and made from money appropriated
for that purpose by the legislature, except loans from the rural electrification revolving loan fund, which are
subject to the provisions of 3 AAC 106.200 - 3 AAC 106.260 and loans from the bulk fuel revolving loan
fund, which are subject to the provisions of 3 AAC 106.300 - 3 AAC 106.365.
3 AAC 106.150. Loan fees and reimbursement of costs.
(a) An applicant for a loan from the power project fund must pay an application fee of
(1) $200 for applications requesting loan amounts up to and including $100,000;
(2) $1,000 for applications requesting loan amounts of more than $100,000 and not more than
$500,000;
(3) $2,000 for applications requesting loan amounts of more than $500,000 and not more than
$1,000,000; or
(4) $5,000 for applications requesting loan amounts of more than $1,000,000.
(b) The application fees in (a) of this section are nonrefundable and due at the time an application is filed
with the authority.
(c) The authority may require the applicant to enter into an agreement obligating the applicant to reimburse
the authority for the authority's costs to conduct a feasibility analysis of the loan application or proposed
project.
(d) If the authority approves an application, the borrower shall pay a closing fee of one percent of the total
loan amount at the time of closing. The application fee will be credited toward the closing fee. The authority
may add the closing fee to the balance of the loan at loan closing. If the authority entered into an agreement
Page 24 of 26
with the applicant for reimbursement of the authority's costs for conducting a feasibility analysis under (c)
of this section, the authority may add the cost of the authority's feasibility analysis to the balance of the
loan at closing.
3 AAC 106.159. Definition.
In 3 AAC 106.100 - 3 AAC 106.159, "financially feasible" means that the authority has determined that
enough money is available from all sources to complete the project, and that enough money is estimated
to be available in the future to repay any debt incurred in connection with the project, taking into
consideration the criteria in 3 AAC 106.125.
3 AAC 106.900. Definitions.
(a) In this chapter, unless the context requires otherwise,
(1) deleted;
(2) Repealed 4/8/2015;
(3) deleted;
(4) "regional corporation" means an Alaska Native regional corporation established under the
laws of this state in accordance with the provisions of 43 U.S.C. 1601 - 1629(e) (Alaska Native
Claims Settlement Act).
(b) In AS 42.45, unless the context requires otherwise, "nonprofit marketing cooperative" means a
cooperative organized under AS 10.15 (Alaska Cooperative Corporation Act), which is operated on a
nonprofit basis for the mutual benefit of its members and which has bylaws containing provisions relating
to the disposition of revenues and receipts as may be necessary and appropriate to establish and maintain
its nonprofit and cooperative character, or a cooperative organized under AS 10.25 (Electric and
Telephone Cooperative Act) that exercises the powers granted to an electric cooperative by AS 10.25.020.
(c) In AS 42.45 and this chapter, unless the context requires otherwise,
(1) "economically viable" means
(A) a project for which the long term benefits exceed the long term costs; or
(B) the project is financially feasible in the absence of a government grant fo r the project;
(2) "extension of electric service" means the point when at least three new customers begin
receiving electric service through an extension made in connection with a loan from the rural
electrification revolving loan fund;
(3) "immediate service" means electric service provided within 30 days after completion of the
extension of electric service made in connection with a loan from the rural electrification revolving
loan fund;
(4) "village corporation" means an Alaska Native Village Corporation organized under the laws of
the State of Alaska as a business for profit or nonprofit corporation to hold, invest, manage, and
distribute land, property, money, and other rights and assets for and on behalf of a native village
in accordance with the terms of the Alaska Native Claims Settlement Act (PL 920-203);
(5) "village council" means the duly elected governing body of an unincorporated community
which has between 25 and 600 people residing within a two-mile radius;
(6) "authority" means the Alaska Energy Authority created in AS 44.83.020.
(d) In AS 42.45.010, "independent power producer" means a corporation, person, agency, authority, or
other legal entity or instrumentality, that is not a utility and that owns or operates a facility for the
generation or production of electric or thermal energy for use by the residents, local government, or
Page 25 of 26
businesses of one or more municipalities or unincorporated communities recognized by the Department
of Commerce, Community, and Economic Development for community revenue sharing under AS
29.60.850 - 29.60.879 and 3 AAC 180.
(e) In AS 42.45.010 and this chapter,
(1) "alternative energy"
(A) means energy or fuel that is used for production of electricity, heat, or mechanical
power, and that is derived from renewable or local sources other than liquid petroleum;
(B) includes, (i) wind, solar, geothermal, hydroelectric, and biomass power sources; and (ii)
local sources of coal and natural gas;
(2) "alternative energy facility" means a facility that generates or produces alternative energy;
(3) "electric utility" has the meaning given the term "public utility" in AS 42.05.990(6)(A).
Page 26 of 26