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HomeMy WebLinkAbout2026-03-20_BPMC-Minutes-FINAL___________________________________________________________________________ BPMC Minutes 3/20/26 Page 1 of 16 BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE (BPMC) REGULAR MEETING MINUTES March 20, 2026 1. CALL TO ORDER Vice Chair Arthur Miller called the meeting of the Bradley Lake Hydroelectric Project Management Committee to order at 10:02 a.m. A quorum was established. 2. ROLL CALL (for Committee members) Tony Zellers (Matanuska Electric Association [MEA]); Arthur Miller (Chugach Electric Association [CEA]); Travis Million (Golden Valley Electric Association [GVEA]); Brad Janorschke (Homer Electric Association [HEA]); Brian Hickey (City of Seward); and Curtis Thayer (Alaska Energy Authority [AEA]). 3. PUBLIC ROLL CALL (for all others present) Jennifer Bertolini, Mark Billingsley, Pamela Ellis, Josi Hartley, Ryan McLaughlin, Jim Mendenhall, William Price, Robert Varga, Mark Ziesmer (AEA); Matt Clarkson, Josh Crowell, Sherri Highers, Andrew Laughlin, Mike Miller, Paul Millwood (CEA); Dan Bishop (GVEA); Larry Jorgensen, Sarah Lambe, Andrew Patrick (HEA); Josh Crowell, Kim Henkel, David Pease, Matt Reisterer, Jon Sinclair (MEA); and Julian Jensen (Public). 4. AGENDA APPROVAL MOTION: A motion was made by Mr. Million to approve the agenda, as presented. Motion seconded by Mr. Janorschke. A roll call was taken, and the motion to approve the agenda passed unanimously. 5. PUBLIC COMMENTS - None. 6. APPROVAL OF MEETING MINUTES – January 16, 2026 MOTION: A motion was made by Mr. Thayer to approve the Minutes of January 16, 2026. Motion seconded by Mr. Million. A roll call was taken, and the motion to approve the Minutes of January 16, 2026, passed unanimously. 7. NEW BUSINESS A. FY27 BPMC Budget ___________________________________________________________________________ BPMC Minutes 3/20/26 Page 2 of 16 Vice Chair Miller requested Mark Ziesmer, AEA, to provide an overview of the FY27 BPMC Budget. Matt Reisterer, MEA, commented that he is Acting Vice Chair of the Budget Subcommittee. He requested to provide a brief report and highlights of the budget before Mr. Ziesmer provides greater detail. Vice Chair Miller agreed. Mr. Reisterer discussed the Budget Subcommittee meeting last Friday. Also in attendance was Mr. Ziesmer and Larry Jorgensen, HEA, representing O&D. The review was productive and there were no controversies. One project was moved from the operations side to the capital side. There was no impact on the cost sharing bottom line. The budget has increased $1 million from last year, primarily due to administrative costs. Most of the review questions were focused on the increase of the budget in that area. After the meeting, Mr. Ziesmer provided a five-year summary of the budget escalation that was distributed to each of the utilities Chief Executive Officers (CEO). The escalation begins after AEA switched to actual administrative costs rather than the $200,000 flat fee schedule. Mr. Reisterer requested that the administrative costs for the expansion are removed from the Bradley Lake Project costs. He commented that it might be time to set up a different schedule, like the one created for Battle Creek and SSQ. Mr. Reisterer noted that Mr. Ziesmer has included the unassigned interest income at the bottom of the Budget versus Actual schedule. Through December, that amount is $16.2 million. Mr. Reisterer indicated that there were some costs added on Friday. He requested that Mr. Ziesmer provide a summary explanation of those costs. Mr. Reisterer announced that Sarah Lambe, HEA, will be taking over as Budget Subcommittee Vice Chair. Mr. Reisterer requested that the Budget Subcommittee is involved in AEA’s review of the financing options and terms for the expansion costs. In the past, the Budget Subcommittee collaborated well with AEA staff and the financial advisor. Vice Chair Miller commented that the overhead increased substantially. He asked if the Finance Subcommittee feels confident in the justification for the increases. Mr. Reisterer noted that Mr. Ziesmer provided information on the FTE’s that are part of the increases and the indirect allocations that are coming with those. Mr. Reisterer indicated that he does not have a working knowledge about the allocations. He believes additional explanation would be helpful, including an understanding of why the cost billing has increased dramatically from the original $200,000 fee. Mr. Thayer discussed that the original $200,000 that AEA was charging for administrative costs resulted in AEA absorbing a lot of costs related to Bradley Lake. AEA is not receiving any reimbursement for catch-up from prior years. He believes it was in 2024 that the BPMC chose to pay the actual costs, and the BPMC expected to see an increase by using the actual costs. He discussed the primary drivers of the increase. Last year, the BPMC agreed that AEA could go to the Legislature and get funding for another accountant. The cost for the second accountant is included in the budget. Mr. Thayer discussed the ongoing work on the FERC/Bradley comprehensive assessment and activity related to relicensing and not related to the amendment for Dixon Diversion. The costs also include two legislative trips to the Bradley Lake facility. Mr. ___________________________________________________________________________ BPMC Minutes 3/20/26 Page 3 of 16 Thayer reiterated that the administrative costs are truly actual costs. The Dixon Diversion costs are separate. Mr. Ziesmer focused his review on page 3, Summary, of the 2024 Proposed Budget. The Summary consists of three parts: Bradley Lake, Battle Creek, and SSQ Line. He began with Bradley Lake and noted that this is a zero-sum budget. The revenues are driven by the expenses. The Operations and Maintenance expenses, Schedule B, for Bradley Lake were $8.5 million. This is an increase of approximately $780,000 from the prior year. Mr. Ziesmer directed the members’ attention to page 5, Schedule B. He reviewed the Summary by Expense Type items and variances. The increases are related to staff and professional services with the addition of one full-time senior accounting position, expected increase in engineering activity related to the position, and half-time for project manager assistance. Also factored in are the COLA increases, step increases, and general pay increases. The Labor and Benefits item has been reduced by approximately $150,000. This is primarily related to the ending of the contract with the BPMC consultant. Most of the benefits of the FERC line items are flat with no increases. Mr. Ziesmer noted that the travel line-item expenses will increase by approximately $75,000. Much of this travel is related to trips to Bradley Lake for the FERC assessment and with legislators. The training line-item expenses will increase by approximately $74,000. This is primarily related to the increased requirements for field safety training. The contractual line-item expenses will increase by approximately $200,000 related to a variety of maintenance activities, including a fire inspection, painting the residences, generator work, powerhouse repairs, and risk assessment. However, there is also a decrease of approximately $30,000 in the contractual line item related to planned travel related to maintenance activities. Mr. Ziesmer continued the review and noted the consulting and administrative line-item expenses have decreased by $151,000. This is related to the contract with the BPMC consultant. The supplies and materials line-item expenses have generally decreased across all of the FERC sections. One of the reasons for the reduction is that a couple of projects have been moved to Schedule A since they are capital in nature. Mr. Ziesmer reviewed the increases in the administrative costs line item. He noted that approximately $200,000 of the increase is related to insurance. Approximately $255,000 of the increase is related to FERC activity. A portion of the FERC activity was originally planned for 2026 and has been moved to 2027. Approximately $77,000 of the increase is related to indirects based off payroll. Approximately $70,000 of the increase is related to legal fees pertaining to FERC, RCA, and potential financing activity. Mr. Ziesmer noted that the combined increase for Schedule B of the proposed budget is approximately $778,000. Mr. Million commented on the increase in training costs. He asked Mr. Ziesmer what is driving the increase. He asked if there are new training requirements that have not been implemented before or if the training was missing an aspect in the past and it has now been recognized. Mr. Ziesmer asked Larry Jorgensen, HEA, to answer the question. Mr. Jorgensen explained that they found that there were certifications that the operators needed that were not being addressed, including crane ___________________________________________________________________________ BPMC Minutes 3/20/26 Page 4 of 16 certified, forklift certified, and other heavy and large equipment at the facility. Training at a remote site is challenging. The budget increase is to bring the certifications up to date for all the operators. Mr. Million asked if those certifications are on a three-year cycle or if the certifications were not completed in the past and this issue was recognized and is now being corrected. Mr. Jorgensen answered that the cycles are different for each certification, ranging from annual to three years. The intent is to match the actual requirements. A hazard assessment identified that specific certifications were not up to date. This line item begins to correct the certifications and will carry forward. Mr. Janorschke asked Mr. Ziesmer for the name of the Bradley Lake Project Manager from AEA. Mr. Ziesmer answered that the Project Manager is Ryan McLaughlin, AEA. Mr. Thayer agreed. Mr. Ziesmer continued his presentation reviewing Schedule D, R&C Fund Repayments, on the Summary page on page 3. This line item has a reduction of approximately $562,000 from the prior year. The reduction is explained primarily by two activities being removed from the schedule. The change out of the turbine nozzle units project has been pulled and is no longer required. The $400,000 critical spare nozzle assembly project was transferred to Schedule A. Mr. Ziesmer realized that per a previous BPMC resolution, projects under $500,000 are not to be included in Schedule D. Mr. Ziesmer directed members’ attention to page 4, Schedule A, capital purchases not funded by R&C Fund, which increased by approximately $600,000. He discussed that a couple of the projects were originally in the FY2026 Budget and have been moved to the FY2027 Budget. Mr. Ziesmer highlighted again that the critical spare nozzle assembly project is included in Schedule A. Additionally, a couple of projects were shifted from maintenance work to Schedule A because they are capital activity, rather than O&M activity. Mr. Ziesmer focused members’ attention back on the Summary page. He discussed the transfer to operating reserve line item in the amount of $155,715 reflects the increase in the operating reserve balance that is needed. The requirement is to keep 20% of the balance of the O&M cost from Schedule B. Mr. Ziesmer reviewed that the debt service line-item totals approximately $12 million. This amount is based off the debt amortization schedule for Bond Series 11 required project work funding. The total amount of the expenses is approximately $23 million. The total revenue amount is also approximately $23 million. Mr. Ziesmer noted that the interest income of about $235,000 is estimated using the interest rate as of January of 2.51%. This is similar to the prior year’s interest amount. Mr. Ziesmer indicated that the utility contributions shown in Schedule C total $23,466,754. He noted that the utility contribution is identified by percent share. It shows previous years, both as an annual amount and as a monthly amount. Mr. Ziesmer discussed Battle Creek project costs shown on the Summary page. He noted there will be a reduction in the Battle Creek budget. This is due primarily to the termination of a coho ___________________________________________________________________________ BPMC Minutes 3/20/26 Page 5 of 16 spawn study in the amount of $150,000 that was determined not to be required. There is also a reduction of approximately $30,000 to the operating reserves since the O&M costs are decreasing. Additionally, there is a reduction in capital reserves that is based off the debt service schedule of $2.7 million. Mr. Ziesmer noted that the IRS subsidy related to Bond Series 7 and Bond Series 8 is based off the debt series schedule. Mr. Ziesmer indicated that the total expenses for Battle Creek are $2,368,729. Using the zero-sum balance formula, the revenue will equal the expenses. Mr. Ziesmer estimated the interest income total at approximately $150,000. The utility contributions total $2.2 million. This is a reduction of approximately $230,000 from the prior year. Mr. Ziesmer directed members’ attention to the SSQ Line revenues and expenses. He noted that Schedule I is the SSQ Line O&M expenses. There was a small increase for the year due to administrative labor costs and overhead line maintenance labor costs. Another addition to the budget this year is the capital projects for the SSQ Line in the amount of $250,000 related to upgrades at Daves Creek and the Soldotna SVC. Mr. Ziesmer explained that the increase in the operating reserve balance reflects the increase in the O&M costs to match the 20% reserve requirement. He discussed that the debt service cost is for Bond Series 10. The amount is based on the Bond Series 10 Debt Service Schedule. The total SSQ Line expenses are approximately $985,000. He estimated the interest income and noted that the utility contributions are $968,197. Mr. Ziesmer highlighted that the overall increase in expenses in the budget is approximately 3.9% compared to the prior year’s budget. Vice Chair Miller expressed appreciation to Mr. Ziesmer for his detailed review of the proposed FY2027 Budget. He indicated that the members would vote on accepting the budget this morning. Mr. Janorschke asked Mr. Ziesmer if it would be prudent to have someone from the BPMC, perhaps the Vice Chair, participate in the Bradley Lake tours. Mr. Thayer responded that he participates in the tours as a representative of the BPMC. He noted that the planes are limited in size and the number of people on the planes is maximized. Mr. Thayer discussed that visitors to the site included Senator Lisa Murkowski, two FERC Commissioners, a Lieutenant Governor, the Speaker of the House, and approximately thirty legislators. He noted that everyone who has visited Bradley Lake has come back as an advocate. Mr. Janorschke clarified that he views Mr. Thayer as representing the State as the owner of the project, rather than the BPMC, who is paying for the project. He agrees that he has spoken to many big supporters. He believes that having another BPMC member participate in the tours serves two purposes; to ensure that the BPMC who is paying the costs is represented on the tours, and to ensure that members of the BPMC visit the project occasionally. Mr. Janorschke thinks this adds credibility overall and is a suggestion for the group to explore. He complemented Mr. Thayer on his great job facilitating the tours. Mr. Thayer noted that the tours have resulted in the Legislature helping to fund this project, including almost $20 million for the Bradley Expansion, and other projects. Mr. Thayer discussed that additional trips are not an issue. Usually only one person, Mr. Thayer or staff, goes on the tour in order to maximize the plane and to specifically ___________________________________________________________________________ BPMC Minutes 3/20/26 Page 6 of 16 advocate for key funding points. Vice Chair Miller reiterated to Mr. Thayer to please let the members know if there is an opportunity for someone to attend a tour. Mr. Thayer agreed. Vice Chair Miller noted that CEA went on a tour of Bradley Lake and the Beluga Power Plant with AEA last summer and had outstanding support from Mr. Thayer and his team. Mr. Reisterer expressed appreciation from the Budget Subcommittee for Mr. Ziesmer’s efforts on the budget process and for the Budget Versus Actual Report. Vice Chair Miller agreed to the praise and appreciation of Mr. Ziesmer. Vice Chair Miller inquired about the costs regarding the adjudication with the Renewable Energy Certificates. He asked if the costs are in the budget or out of the budget, and how those are treated from a cost recovery perspective. Mr. Thayer noted those costs are not included in the budget, but he thinks it would be great if those costs were included in the budget because it is a BPMC issue. MOTION: A motion was made by Mr. Hickey to approve the FY27 BPMC Budget. Motion seconded by Mr. Million. Mr. Janorschke asked Mr. Reisterer if he has any other comments to add. Mr. Reisterer believes he covered everything. He noted that Sarah Lambe, HEA, and Sherri Highers, CEA, are also in attendance and are available for additional comments. Vice Chair Miller asked if Ms. Lambe or Ms. Highers would like to comment. Sherri Highers responded to the legal costs that are not included in the budget and noted that those expenses will not be charged against Bradley Lake. Vice Chair Miller agreed that it was his understanding as well. Sarah Lambe noted that she believes Mr. Reisterer did a good job of summarizing follow-up questions and explanations. Vice Chair Miller thanked Ms. Lambe and Ms. Highers. Mr. Janorschke expressed appreciation to Mr. Ziesmer, Mr. Reisterer, and the Committee for scrutinizing the budget. Vice Chair Miller echoed the expression of appreciation. There were no other comments or questions. A roll call was taken, and the motion passed unanimously. 8. OLD BUSINESS A. AEA Capital Project Financing Mark Billingsley, AEA General Counsel, provided an update on the Capital Project Financing. Mr. Billingsley noted that he will review the slideshow which highlights the Bradley Lake Expansion Project (Bradley Project) and the Cook Inlet PowerLink (CIPLink) Project. Subsequent agenda items ___________________________________________________________________________ BPMC Minutes 3/20/26 Page 7 of 16 will cover the Bradley Project and CIPLink, and the engineers will provide details regarding the project updates. Mr. Billingsley stated that the total project cost for Bradley Project is $400 million. There has been $20.7 million raised to-date. However, those funds were preconstruction costs and are not included in the $400 million total still needed. The total project cost for CIPLink is $413 million. There has been $270 million raised to-date. Of that amount, $206 million is from the Grid Resilience and Innovation Partnerships (GRIP) grants, $50 million is from the Series 11 bonds, and $14 million is from State appropriations. The construction cost timeline for CIPLink will pick up quickly as procurement begins, and construction will begin in a couple of years. Mr. Billingsley noted that Mr. McLaughlin will provide an update on the Bradley Project later in the meeting. Mr. Billingsley commented that the construction cost timeline for the Bradley Project has remained the same since the last review. He noted that the expert partners include DOWL and Stantec, who are providing the engineering work, Hunton, who is helping with the tax credit, Orrick, who is the bond counsel, and PFM, who is providing financial advice and analysis. Mr. Billingsley discussed that staff has submitted one loan application to the U.S. Department of Energy’s (DOE) Energy Dominance Financing, previously called the Loan Programs Office. That loan application took a significant amount of work to complete. He showed a picture of the three binders’ worth of information submitted. Mr. Billingsley highlighted the list of the top five finance options staff are pursuing. The bottom two options listed are the most expensive options, with private placement. Out of the top three options, staff are evaluating which of those is the least expensive, has the best timing, and the best eligibility. Mr. Billingsley reviewed the top option, which is the application that was submitted for the Bradley Project to DOE’s Energy Dominance Financing Title 17 loans. They have a preference for billion-dollar projects, but they are open to financing the Bradley Project. The CIPLink Project is not eligible because of federal support restrictions. The second option is the U.S. Department of Agriculture (USDA) Rural Utilities Service (RUS) Program, which has both a project borrower program and a system borrower program. Both the Bradley Lake Project and the CIPLink Project are eligible under the system borrower program. The third option is tax-exempt bonds. Only the Bradley Project is eligible for tax-exempt bonds. Mr. Billingsley noted that staff went through the process to receive an allocation of the State’s volume cap for local furnishing bonds equivalent to the amount needed for tax exempt bonds. The allocation must be issued within a three-year period, and every year it will be rolled over. It is possible that two series of tax-exempt bonds will be necessary due to timing issues. Mr. Billingsley commented that the final two options are more expensive and do not take as much time to complete their application processes. He noted that the National Rural Utilities Cooperative Finance Corporation (NRUCFC) is a lender in Alaska. Mr. Billingsley advised that staff are reviewing the IRS Code 48E regarding investment tax credits (ITC) for the Bradley Project. CIPLink is not eligible to inquire. There is a possibility of up to $100 million in tax credits for the Bradley Project if eligibility can be established. Before the tax credits can be maximized, the project must reach tax credit eligibility, which could be in 2032, the year after commissioning. After which, the IRS must complete their due diligence. ___________________________________________________________________________ BPMC Minutes 3/20/26 Page 8 of 16 Vice Chair Miller asked what the concerns are regarding ITC eligibility. Mr. Billingsley explained that the tax credits are for a new unit or addition of capacity. The Bradley Project is not really adding capacity but is channeling more water for megawatt hours. Staff is encouraging the U.S. Treasury to view the project in a different way. Mr. Thayer commented that Senator Dan Sullivan set up a meeting between AEA and the Assistant Secretary of Treasury and tax attorneys. Vice Chair Miller believes there is a much greater benefit with a greater capacity factor from the facility, rather than a smaller bit of additional capacity. Mr. Janorschke noted that since there is no change in capacity, the project does not qualify for an ITC. He asked if the Dixon Diversion has contemplated installing a 20-megawatt turbine next to the two that are currently there, so that the project could then qualify. Mr. Janorschke expressed his understanding that any improvement to capacity would apply to the entire project. Mr. Thayer commented that legal counsel believes that the Bradley Project does possibly qualify. Work is ongoing with the Secretary of Energy to make that determination. Mr. Thayer explained that beginning construction in 2027 would not be possible if the decision were made today to install a 20-megawatt turbine, and the work with the Federal Energy Regulatory Commission (FERC) would be compromised. The initial application has been filed with FERC and staff met with all five FERC Commissioners, who hope to begin in June and have an answer within a year. Mr. Thayer reiterated that there are a few paths that could be taken to potentially be eligible for an amount of the ITC up to $100 million. Vice Chair Miller acknowledged that the project is not an insignificant amount of energy. The output of Bradley Lake is being increased by 50%. Mr. Thayer agreed and noted that argument is being made and discussed. Mr. Zellers mentioned previous discussion regarding an energy recovery turbine at the end of the tunnel at Bradley. Mr. Thayer agreed there was talk of that. Mr. Billingsley commented on the discussion regarding a 1-megawatt turbine. However, even that would probably push the schedule back quite a bit. Staff are also reviewing the raised dam, which may help the situation. Mr. Billingsley noted that he does not want to get hopes up yet, as the process and effort continues to receive any amount, even $24 million, which would benefit everybody directly or indirectly. Mr. Billingsley discussed that strategies to maximize the tax credit dollar amount have begun because of the requirements that come with issuing a Request for Proposal (RFP). Mr. Billingsley reviewed that another project that needs potential funding is the SSQ Transmission Substation Upgrades Project that began in 2024 and is expected to be completed in 2029. The current cost estimate is $178.5 million. The $90 million that has been raised to date was allocated ___________________________________________________________________________ BPMC Minutes 3/20/26 Page 9 of 16 from Series 11. The funding options mentioned earlier could apply to the gap in funding for the SSQ Upgrades Project. This project is included in the total pursuit of funding for all the projects. Mr. Janorschke requested clarification regarding the CIPLink slide noting that capacity is 200 megawatts. He previously understood that the project would start with 100 megawatts. Mr. Billingsley believes that is accurate. Mr. Janorschke requested clarification of what is meant by Target Completion 2032 Shovel-ready status. Mr. Billingsley believes that is a typographical error. Mr. Thayer explained that wording is supposed to mean that the project is in process and should be completed by 2032. Mr. Janorschke asked how confident staff is on the estimated cost of $413 million. Mr. Billingsley indicated that number is from the most recent cost estimate. Mr. Thayer commented that the slideshow gives an overview, and if members want to enter into executive session, then additional information regarding the options can be discussed. AEA’s goal is to present the options and to determine the eligibility for the options. The hope is to refine the options and present them to the AEA Board in early summer. After which, the options will be brought before the BPMC’s Finance Committee for a thorough review and determine the best option. It is likely that multiple scenarios will be presented simultaneously for the two different projects. The goal is to have the Bradley Project financing piece finalized this year, and the CIPLink financing piece finalized this time next year. Mr. Thayer discussed the possibility of adding the transmission cost to the application. He explained that if there is funding at 4%, that might free up the bond for other use. These types of decisions will have to be made by the BPMC and the AEA Board. Even though this information is preliminary, AEA has made two separate trips to Washington, D.C. to get to the current position of due diligence. Follow-up is underway with the Assistant Secretary of Treasury on his requests. Vice Chair Miller asked if the BPMC Finance Subcommittee has been involved. Mr. Thayer noted they have not been involved. He explained that the current focus is on determining which funding the projects qualify for, and which funding the projects do not qualify for, and the terms and conditions of that qualifying funding. Mr. Thayer does not think the BPMC Finance Subcommittee would want to be involved in completing a total of four 1,000-page applications just to determine eligibility. Based on those applications, the determination will be made what financing structures the projects qualify for. Once determinations are made, the qualifying information will be brought back to the BPMC. Mr. Billingsley commented that consideration is being taken to calculate the breakeven amount to justify using tax credits rather than tax exempt bonds. Additionally, calculations are considered for dollars per kilowatt hour, the total cost of the loan, and life of the loan. If the SSQ Line project is included, this might help meet the equity requirement for a DOE loan. There has been no final decision. Preliminary work continues. Mr. Thayer noted that Sterling to Quartz Creek is a designated line, but the Soldotna to Sterling Line is HEA’s line, and he is not aware that the BPMC has formalized an agreement of how those ___________________________________________________________________________ BPMC Minutes 3/20/26 Page 10 of 16 upgrades would be completed and treated. Mr. Thayer commented that conversation needs to occur sooner rather than later. Mr. Billingsley stated that both the SSQ Line and CIPLink depend on those upgrades. There were no other comments or questions. A brief at-ease was taken. B. Dispute Resolution Process – Wheeling Services Agreement Vice Chair Miller commented that his understanding is that arbitration will not be used. He asked if anyone else has additional information on this item. Mr. Million does not believe there is much more to add at this point. The last time the item was discussed, the process was reviewed. The RTO hearings took precedence. There were no other comments or questions. C. CIPLink Update Jim Mendenhall, AEA, reported on CIPLink. Mr. Mendenhall showed members a sample piece of cable that is similar to the cable that could be used for the project. He discussed that work is ongoing on planning, permitting, purchasing, and payments. He noted that Mr. Billingsley reviewed the financing side of the project. Work with HDR continues for the planning and environmental permitting for the upcoming marine season. Additionally, the Stantec engineers are coordinating to finalize the scope and the procurement of a marine survey vessel contractor to conduct geophysical testing. This data will be collected this summer in order to refine the route for the cable. After the initial route is determined and the subsurface composition is identified, then the cable design can be planned. Mr. Mendenhall noted that AEA is pursuing a U.S. Army Corps of Engineers Nationwide Permit for the survey activities. Additionally, work will occur under the Endangered Species Act. Stantec continues to work on procurement activities for both the HVDC converter stations and for the cable. They are preparing requests for information from vendors and will move to staged purchases with commitments for planning and procurement. Mr. Mendenhall noted that the sample cable is made in the U.S. by Nexans. He believes they are the only subsea cable manufacturer in the U.S. It is unknown at this point if the Nexans cable can be used or if the project will have to apply for a Build America, Buy America Act (BABA) waiver. Mr. Mendenhall expects that all the converters will be sourced from foreign manufacturers in Europe or Asia. Mr. Mendenhall discussed that negotiations are ongoing with DOE regarding Budget Period 2. The DOE required removal of costs for the community and benefits program (CBP), which was eliminated. Some of those funds were retained. However, the DOE will issue a change order to take back about $400,000 in costs. Staff have the scope and budget confirmed and hope to get that approved and finalized from DOE soon. ___________________________________________________________________________ BPMC Minutes 3/20/26 Page 11 of 16 Mr. Mendenhall reiterated that Mr. Billingsley reviewed the capital stack development. To date, AEA has secured $64.2 million in combined State appropriations and the Bradley bonds. An additional $142.3 million in funding is being pursued. He discussed that the project expenditures through June 2025, which have been billed and paid for, were about $1.1 million. The total expenditures through December 31, 2026, are $1.6 million. The additional amount will be billed after the contract is finalized for Budget Period 2. Mr. Mendenhall commented that Owned Assets recently hired an individual to support the development and permitting activities associated with the project and will also work on Bradley and other AEA infrastructure projects. The position will support coordination of environmental reviews, agency consultations, and permitting activities across the projects. Vice Chair Miller asked Mr. Mendenhall for his opinion on the $413 million budget number. Mr. Mendenhall expects the match to be decreased by approximately $400,000 for community benefits. The most recent estimate achieved the $413 million budget number. This is a high-level estimate and could be plus $30 million or less $15 million. Staff’s goal is to achieve the project within that price range. Mr. Mendenhall reminded the members that the scope was previously reduced from $200 million to $100 million, and evaluations are ongoing regarding whether there should be two cables or three cables. Mr. Janorschke commented that he was thinking there would be two cables. He asked if fiber will be included. Mr. Mendenhall noted they can put fiber with it. With an AC cable, a conduit can be placed for fiber, but it is not done for others. He explained that the cable being considered has a much greater life than fiber and so they will not include the fiber. Also, the fiber cannot be included in the insulation block. Mr. Mendenhall noted that the fiber would probably be attached to the outside. The expectation is there will be fiber, but it will not be embedded in the cable. Mr. Janorschke asked if there are two or three cables, are they going to be bundled all together. Mr. Mendenhall responded that possibility is being discussed. Two cables will probably be bundled. Additionally, the consideration is being reviewed to move north of the OSK dock because that is where most of the marine activity is where there might be a cable drag. Vice Chair Miller noted there are eight years to complete the project. He asked Mr. Mendenhall when is the target completion date. Mr. Mendenhall stated that the contract requires completion by August 31, 2032. That was eight years from the date of the notice to proceed. The plan is to finish in the spring of 2032. Based on Stantec’s last evaluation, that date was achievable. Mr. Zellers asked Mr. Mendenhall what is considered the highest risk on the project. Mr. Mendenhall believes there is risk in how the cable is buried, if it is trenched, jetted in, or laid on the ground. A typical cable ship cannot be used because of the high tides and location. Focus needs to continue to ensure that the procurement and progression is ongoing to get under contract. Additionally, the terminus of the HVDC needs to be finalized. Originally, it was going to terminate in Nikiski. However, based on work from EPS, there could be a benefit to making the ___________________________________________________________________________ BPMC Minutes 3/20/26 Page 12 of 16 Soldotna substation the terminus. Those issues still need to be resolved. Mr. Mendenhall commented that it is also unknown what the actual costs will be. This is a concern. The goal is the $413 million budget amount, but cost increases are of concern. Vice Chair Miller noted that all construction projects are unfortunately experiencing cost increases and considerations. Mr. Mendenhall gave the example of the cost increases for the SS Line from $24 million to $36 million. D. Bradley Lake Expansion Project Update Vice Chair Miller requested Mr. McLaughlin to provide the Bradley Lake Expansion Update. Mr. McLaughlin discussed that staff was successful in submitting the draft amendment application to FERC on February 13, 2026. The application is complete and includes a preliminary draft environmental analysis. Significant work occurred to complete the application and submit it on time. Coordination has begun with the resource agencies to review the results of the two years of studies and the contents of the environmental assessment. Mr. McLaughlin discussed that AEA hosted a Terrestrial Resources meeting with agencies on March 4th, and an Aquatics Resources meeting on March 5th to discuss impacts to aquatic life on the Lower Martin River. Development talks are ongoing with the resource agencies to create a mutual agreement on Protection, Mitigation, and Enhancement (PME) measures. This includes discussions regarding the Minimum Instream Flow so that salmon can still travel upstream and get to their spawning habitat. The request is for the resource agencies to submit their comments by mid-April. Staff encourage utility representatives to review the application and submit any comments to Mr. McLaughlin by the end of April to incorporate all the information into the final amendment application. The target date to submit the final amendment application to FERC is mid-June. FERC indicated they would target for a year turnaround to approve the application. Mr. McLaughlin noted that a new cost estimate for Dixon Diversion was developed. The total cost is approximately $400 million. The reasons for the increases are included in the update. The current efforts include planning and work for the busy subsurface investigation season. Additional geotechnical work will be conducted this summer. Mobilization will occur during May high tide window and work includes drilling a couple of holes in front of the spillway while lake levels are low, PS logging through the dam crest, and drilling two deep boreholes along the proposed tunnel alignment. The time budgeted for these efforts is 35 days. Also scheduled at the end of June is the third Board of Consultants site visit and meeting. This meeting overlaps with the timing of the drilling activities. Mr. Million asked for the original cost estimate. Mr. McLaughlin indicated that the cost estimate in November 2023 was $342 million. Mr. Thayer explained some of the cost overrun includes the expected FERC required modifications of the dam due to relicensing. This work will occur at the same time mobilization occurs for the project. Mr. McLaughlin noted that this includes updating the probable maximum flood studies. It was discovered that current spillway as constructed would not pass the probable maximum flood. A certain number of modifications to the dam and spillway ___________________________________________________________________________ BPMC Minutes 3/20/26 Page 13 of 16 are anticipated that will be required by FERC. This is built into the cost estimate. Vice Chair Miller asked Mr. McLaughlin to follow up and provide the levelized price per megawatt hour of the upgrades from the original project costs. Mr. McLaughlin agreed to provide the information. He noted that a financial model was recently produced that showed that the expansion project would be approximately 7.8 cents per kilowatt on all Bradley power. Mr. Janorschke expressed appreciation to Mr. McLaughlin for the update. He asked if the existing dock will be used for the Dixon Diversion. Mr. McLaughlin agreed. Mr. Janorschke noted that the dock is 35 years old and is flaking paint. He stated that they tried to get a permit to sandblast it and paint it, but it got pushed back because the requirements include capturing all the paint chips and sandblasting sand. Mr. Janorschke noted that any help that AEA can get from the State on that front would be greatly appreciated. Mr. Janorschke asked Mr. Jorgenson if his summary was accurate. Mr. Jorgenson agreed. He added that the problem is that the saltwater is now eating into the base metal because the coating had been scarred by the ice. When the permit was initially requested, there were no issues, but then the permitters later came back and said that all the sandblasting sand had to be captured. This is rather difficult because of the ocean tides. Once the contractor saw the new requirements, they declined the contract. New RFPs have been issued twice trying to obtain another contractor, but no one is willing to take on the work with the new conditions attached. Mr. Thayer indicated that AEA was unaware of the situation. He requested Mr. Jorgenson draft a summary of the details and he will follow up and work on advocating for the work to proceed. Mr. Thayer asked how big the painting project is and the estimated budget. Mr. Jorgenson noted that the original quote for the sandblasting and recoating was $600,000. When the requirement was added to recapture everything, the estimates came in at $1.2 million, but no one was willing to move forward even at that budget. Vice Chair Miller expressed appreciation to Mr. McLaughlin for his report. He noted this is another outstanding project for the Railbelt. There were no other comments or questions. E. SQ Upgrade Update Mike Miller, CEA, provided the update on the SQ Upgrade. Mr. Mike Miller discussed activities of note since the prior BPMC meeting in January. Vendor drawings have been received for review of approval for the steel structures. All the materials have been purchased. The original budget was $9.9 million. The actual costs are $11.6 million. This is due mostly to the steel structure cost increases. The design package is close to 90% and is schedule for the beginning of April. The intent is to solicit bids for construction in mid-May and issue a Notice to Proceed (NTP) construction in August on Project 2. There will be approximately eighty outage days, most likely in the first quarter of 2027. Discussions are ongoing to potentially shift some of the work to the fourth quarter of 2026. ___________________________________________________________________________ BPMC Minutes 3/20/26 Page 14 of 16 Mr. Mike Miller discussed that Project 3 has received a draft geotechnical report and preliminary foundation design work has begun. Work is ongoing for the steel drawings for procurement. The intent is to release an RFP at the beginning of May. There were no comments. 9. OPERATORS REPORT Larry Jorgenson, HEA, provided the Operator’s Report. Mr. Jorgenson indicated that he was standing in for Martin Law, HEA, today. Mr. Jorgenson indicated that the Operator Report is fairly normal. One forced outage occurred on Unit 2. Dispatch gave a command to shut down but then connected back to the grid. The emergency stop was then used to keep the unit offline. Mr. Jorgenson explained that the coil had burned up on a shutdown relay. The device was identified, replaced, and tested. All is back to normal. Additionally, there was a leaking cylinder from the newly installed Kidde Fire Protection System. The replacement cylinder was received and will be installed in the upcoming outage next month. The work on the damage to the residence from the fire protection leak has been completed. There were no comments or questions. 10. COMMITTEE REPORTS A. Budget vs. Actuals Mr. Ziesmer discussed the Bradley Lake Budget to Actual Expenses Report as of December 31, 2025. He explained that there was no FY26 activity recorded for Schedule A, Non-R&C Capital Projects for Bradley Lake. Of the $521,000 budgeted amount, approximately $271,000 is scheduled for completion within the fiscal year. These projects are highlighted in the report. The two projects that are not highlighted, are expected to be deferred and were included in the FY27 Budget that was approved earlier in the meeting. The total O&M expenses were approximately $3 million, which is approximately $620,000 below budget. Most of the FERC categories are within or close to budget. Mr. Ziesmer noted that FERC 544 Maintenance of Electric Plan contractual expenses was over budget by approximately $25,000, mostly due to costs related to the braker and relay testing work. FERC 545 Maintenance of Miscellaneous Hydraulic Plant was over budget by approximately $21,000 in contractual expenses. This is largely due to crane inspection work and the nozzle rebuild activities. FERC 920 & 930 Administrative Expense was over by approximately $116,000, related to payroll and fringe costs, and higher professional consultants’ costs. FERC 928 Regulatory Commission Expenses was under budget by $288,000, primarily due to the timing of invoices. This variance is expected to decrease. Mr. Ziesmer reviewed Schedule D Renewal and Contingency (R&C) Fund Disbursements and Repayments. The R&C purchases totaled $262,582, mostly related to the fire alarm system replacement and the Bradley Lake Expansion Project. The cumulative costs for the Bradley Lake Expansion Project since inception total $10.28 million. Mr. Ziesmer noted there have been no FY2026 activity as of December 31, 2025, for Schedule E Battle Creek Non-R&C Capita Purchases. Mr. Ziesmer reviewed Schedule F Battle Creek O&M expenses. The total amount was $305,448, which is approximately $61,000 below budget. Most of the costs in this section are attributable to ___________________________________________________________________________ BPMC Minutes 3/20/26 Page 15 of 16 the standard 4% allocation for Bradley Lake. Mr. Ziesmer reviewed Schedule I SSQ Line O&M expenses. The total expenses were approximately $10,000, which is $126,000 below budget. The majority of the costs are associated with overhead line maintenance. Mr. Ziesmer reviewed Appendix A, which is related to Bond Series 11 funding. The cumulative spending was $17,603,200. The total costs for the Oscillation Dampening Service contracts were $1,865,245. Mr. Zellers noted that he believes there was one project on page two, the Limitorque Actuators, which was not highlighted in green that was also deferred to the FY27 budget. Mr. Ziesmer explained that his overall understanding is that the effort will take six or seven years, and the amount of $35,000 will be included in the budgets for the next few years. There were no other comments or questions. B. O&D Report Josh Crowell, MEA, presented the O&D Committee Report. Mr. Crowell indicated that the focus during the last couple of meetings regarded the O&D’s budget submittal to the Budget Subcommittee. There were no comments or questions. 11. EXECUTIVE SESSION: - (Bylaws Section 5.11.4) –To discuss confidential matters the immediate knowledge of which would clearly have an adverse effect upon the finances of the Authority or the Project. No Executive Session was necessary. 12. MEMBERS COMMENTS Mr. Million expressed appreciation for the efforts in today’s meeting, and particularly for the work of the Finance Subcommittee in creating the budget. Mr. Thayer highlighted AEA’s team members for the financing efforts. He expressed appreciation to Mr. Ziesmer, Mr. Mendenhall, Mr. McLaughlin, and Josi Hartley, AEA for leading those efforts. Mr. Thayer noted that the Department of Government Efficiency (DOGE) efforts that had to be fulfilled last summer helped with the applications because AEA had some of the information. He reiterated that Ms. Hartley has been spearheading the applications. Mr. Thayer restated that he and Mr. McLaughlin met with all of the FERC Commissioners in D.C. to get the time schedule improved for Bradley. Mr. Thayer thanked Jennifer Bertolini, AEA, for supporting all the activities and for coordinating two trips to Washington, D.C. and organizing up to fourteen appointments each time. Mr. Zellers echoed the previous comments of appreciation for the budget work and for the explanations. He thanked AEA’s team for their work and great effort. ___________________________________________________________________________ BPMC Minutes 3/20/26 Page 16 of 16 Mr. Janorschke echoed the previous comments of appreciation, and for the updates on the projects. Mr. Thayer also expressed appreciation to the other AEA staff who are present today for their continued efforts. Mr. Hickey echoed the previous comments of appreciation for the diligent work and informative meeting. Vice Chair Miller echoed the previous comments of appreciation. He acknowledged the amount of work completed for the thorough updates and professional reports. Vice Chair Miller specifically thanked AEA’s staff for their work. There were no other comments. 13.NEXT MEETING DATE – May 1, 2026 14.ADJOURNMENT There being no further business for the committee, the meeting adjourned at 11:57 a.m. ____________________________ Arthur Miller, Vice Chair _____________________________ Curtis Thayer, Secretary