to: board of directors from: brad janorschke, general ...€¦ · manager’s report page 2 of 3...

MANAGER’S REPORT of 3

January 17, 2017 To: Board of Directors From: Brad Janorschke, General Manager RE: Monthly Manager’s Report Happy New Year! 2017 has begun with sub-zero temperatures and as we all know in the utility business; the cooler temperatures are appreciated. Even amongst vacation time and the recent holidays, business activities continued last month and include; the conclusion of Homer Electric members’ local control election, continued transmission wheeling settlement negotiations, approved and implemented retail rate case, and initial planning of our 2017 Annual Meeting.

The following are brief updates of the above and other activities that have taken place over the last few weeks:

1. Safety – There were no Occupational Safety and Health Administration (OSHA) recordable incidents for the month of December. The last lost/restricted time incident for HEA was on December 23, 2015, which is about 374 days since the last lost/restricted time incident. 2016 has turned out to be a great year for employee safety. An updated safety scorecard is attached. In December, inside employees were required to watch videos on dealing with drug and alcohol abuse, workplace violence, workplace stress, and cyber security. Outside employees were provided a First aid/CPR/AED certification class and training on winter preparedness.

2. Financial Update – November operating margins came in strong around $717,000. The strong monthly operating margins were the result of kilowatt hour (kWh) sales of almost $9 million exceeding budget and cost of electric service coming in under budget at $8.3 million. Year-to-date our operating margin is just over $4 million! A slight margin decrease is expected by year-end as we work diligently to get expenses recorded.

By the end of January, unaudited 2016 year-end financial statements will be complete and we can begin preparing for the year-end financial audit.

3. Construction Work Plan (CWP) – Construction on distribution work in November totaled $467,000. A breakdown of this work is as follows:

• New Services for $114,000; • $97,000 spent on unplanned system improvement repairs such as cutout, wire, and

insulator work; • $125,600 spent on injection and replacement of underground cable; • $3,000 for system protection and coordination projects; • $4,500 on planned pole replacements;


• $101,000 in Substation changes of which $45,400 was at Marathon, $43,700 at Fritz Creek, $1,700 at Kasilof, and $10,200 at Hatfield;

• Hatfield TWACS (automated metering reading pilot) upgrade of $4,900; and • $17,000 on South Kachemak Bay improvements.

The total spent on Transmission CWP projects in November was $44,500. This included $38,600 spent on line repair under the transmission maintenance grant, and $5,900 for other transmission upgrades.

4. Regulatory Commission of Alaska (RCA) – Final tariff sheets with HEA’s permanent rates were

approved on December 23, 2016 with an effective date of January 5, 2017. In U-15-141(14) the RCA asked interveners and RAPA to comment if refunds of interim rates are necessary. The order implies that the Commission is considering to have HEA calculate its members’ interim bills based on the new permanent rates agreed to in our stipulation. HEA would then refund amounts where the interim bills were larger than under the new permanent rates.

Past practice on this subject has been that the Commission required refunds only when the approved new permanent revenue requirement was lower than the interim revenue requirement. HEA has been working with other Railbelt utilities to dissuade the RCA from adopting the refund standard that is implied in this order.

5. Local Control Update – The RCA released official certified election results on December 20,

2016, which revealed a membership vote against Local Control. Although it is easy to become disappointed with the results, one of the values of the cooperative model is enabling members to provide direction to their utility. Over 34% of our membership voted, which is a high turn-out compared to past annual elections and substantiates our communication efforts. A special thanks to all representatives who help provide local control information to our members. In addition, a thank you to all of our members who took the time to get informed on the issue and mail in their ballot. In addition, the Alaska Electric & Energy Cooperation, Inc. (AEEC) ballot was submitted to the RCA with a vote against local control to coincide with the HEA election outcome. The RCA has until February 19, 2017 to certify the AEEC election.

6. Transmission Wheeling Tariff Update – Settlement negotiations continue to progress very well

and all Railbelt utilities are anxious to get this issue behind us. Over the next few weeks, I expect all relevant documents will be edited to reflect the agreed upon terms. Although a short progress report will be provided in executive session at the January Board meeting, I anticipate the final version of the documents to be available for Board review and approval in February or March.

7. Battle Creek Project – The Battle Creek project to add capacity at the Bradley Lake Hydroelectric

generation facility has commenced and staff is currently working with the Bradley Project Management Committee (BPMC) on finalizing project design and outlining financing options.

8. Legislative Update – The first 90-day session of the Alaska's 30th Legislature is scheduled to begin on January 17, 2017. The session is likely to be more contentious than normal in that the Senate is led by a Republican majority and the House is led by the Democrats. Each party may


have very different priorities and approaches to solving Alaska's fiscal crisis. This years’ budget is at $4.7 billion with a deficit of approximately $3 billion. This is the last year that the deficit can be made up with money from the Constitutional Budget Reserve, so addressing this problem should be front and center during session.

Currently there are not any bills of concern for HEA, but we will continue to monitor all of the bills throughout the session. It is expected that one or more special sessions will be required to solve the fiscal problem.

9. Community Outreach Update – HEA continues the scholarships program this year and applications are available on the HEA website, at each high school, and both Cooperative offices. The deadline to submit scholarship applications is March 1, 2017. Applications will also soon be available for the Youth Rally Leadership Camp, which is an all-expense paid week at the College of Idaho in July. In addition, the Safety Poster Contest will continue for third and fourth graders.

10. National Rural Electric Cooperative Association (NRECA) CEO Close Up – I had a chance to attend the NRECA CEO Close-Up conference last week. This particular conference is always full of valuable information, networking opportunities and continues to be a valuable use of my time. I will provide the Board a summary of what I learned from my peers attending the conference.

11. 2017 Alaska Power Association (APA) Legislative Conference – As a reminder, the APA Legislative Conference is planned for January 31 through February 2, 2017 in Juneau, Alaska. APA plans to host a Manager’s Forum, Director training, and two (2) day legislative conference at the Baranof Hotel.

Please feel free to give me a call anytime with questions. Thanks, Brad The following items were approved at the January 17, 2017 Board of Directors’ Meetings: HEA Board Meeting

• Regular Meeting Minutes of December 13, 2016 • Resolution 45.2017.01, Establishing Voting Eligibility Record Date of the 2017 Annual Meeting

of the Members • Resolution 45.2017.02, Appointment of Election Teller of the 2017 Annual Meeting of the

Members • Resolution 45.2017.03, Establish Date, Time and Location of the 2018 Annual Meeting of the

Members AEEC Board Meeting - AEEC Board meetings are held on a quarterly basis (February, May, June-Annual Meeting, August, and November).

AS OF DECEMBER 31, 2016

Days Since Last OSHA

Recordable

Incident

138

Days Since Last OSHA Lost/

Restricted Time

Incident

374

DART—Represents the number of OSHA Recordable injuries resulting in lost/

restricted work days per 100 employees

TRIR—Represents the number of OSHA Recordable injuries per 100 employees

VAR—Provides the number of vehicle accidents that occurred

during the year per million miles driven by the Cooperative.

626,369 Miles Driven in 2016

VAR Accidents in 2016 = 3

2016 Recordable Incidents = 3

2016 Lost/Restricted Time Incidents = 0

MANAGER’S REPORT Page 1 of 3

February 14, 2017 To: Board of Directors From: Brad Janorschke, General Manager RE: Monthly Manager’s Report Good Afternoon. It is hard to believe we are already into February, as the month of January seemed to pass by in the blink of an eye. Homer Electric Association, Inc. (HEA) and Alaska Electric & Energy Cooperative, Inc. (AEEC) unaudited 2016 year-end financials look very good. In addition, the cold weather last month provided an excellent start to the New Year as retail energy sales (kWhs) (excluding special contracts) were up 8.3% compared to January 2016 and up 16.3% compared to January 2015! Although it has only been a few weeks since our last Board meeting, there is still quite a bit to report.


1. Safety – There were no Occupational Safety and Health Administration (OSHA) recordable incidents for the month of January. The last lost/restricted time incident for HEA was on December 23, 2015, which is about 405 days since the last lost/restricted time incident. In January, the inside employees were offered presentations on the topics of hazard recognition and stress management. Outside employees were provided an online course on cyber security, a video called It’s Not Just About Me, and an on-line video on walking and working surfaces.

2. Financial Update – HEA’s December sales far exceeded budget expectations and resulted in higher kilowatt-hour sales and revenue than we have seen all year. This allowed HEA to clean up some abandoned projects and accrued regulatory related costs. In addition, the strong sales enabled AEEC to increase its equity. HEA’s unaudited 2016 year-to-date operating margin is $2.87 million, which results in a Modified Debt Service Coverage (MDSC) of 1.37. Unaudited total margins for 2016 is $6.78 million…. $3.26 million of which is the patronage capital allocation from the margins at AEEC. As mentioned, AEEC was able to strengthen its equity level this year to 14.0%, which puts us in a strong financial position and ahead of schedule in meeting our lender (Cooperative Finance Corporation) obligations. With the unaudited 2016 financials complete for both HEA and AEEC, audit preparations are in full swing and on-site fieldwork begins the week of February 13, 2017. The draft audit report should be available to the Board in March.

3. Construction Work Plan (CWP) – Construction on distribution work in December totaled $859,000. A breakdown of this work is as follows:


• $182,000 spent on unplanned system improvement repairs such as replacement of cut-outs, wire, and insulators;

• $137,000 spent on Kasilof Substation feeders system protection and coordination; • $84,000 spent on injection and replacement of underground cable; • $23,000 on planned pole replacements; • $11,000 on transformer and meter purchases; • $6,000 on overhead primary line splice replacements; • $161,000 in Substation changes of which $26,000 was at Marathon, $124,500 at Fritz

Creek, $3,000 at Kasilof, $3,500 at Beaver Creek, and $4,000 at Hatfield; • TWACS AMR pilot project related upgrades of $46,000 at Hatfield; • $60,000 on South Kachemak Bay improvements; and • $149,000 was invested in the South Kachemak Bay (Seldovia) Generation Project.

4. Regulatory Commission of Alaska (RCA) – On January 31, 2017, the RCA issued a ruling in

HEA’s rate case finding that no refunds to members were necessary based on the facts of the case. The docket is now closed.

5. Local Control Update – A draft resolution is prepared for the AEEC Board to consider

withdrawal of the AEEC deregulation election. As we have discussed in the past, the AEEC Board’s intentions were to use the HEA member election results as an indicator as to whether or not AEEC deregulates. If the AEEC Board approves, the resolution will be filed with the RCA as soon as possible.

6. Transmission Wheeling Tariff Update – Settlement negotiations continue and I expect all relevant documents will be edited to reflect the agreed upon terms. The final version of the documents are scheduled to be available for Board review in March and approval in April.

7. Legislative Update – A special thanks to all of the directors and staff who participated at Alaska

Power Association’s Legislative Conference. In addition, the interaction with our Kenai Peninsula legislators was appreciated. It is important our Cooperative continues to be well represented and engaged with our local legislators. Although HEA representatives encouraged continued support for State funding of the Renewable Energy Fund, we also spent time updating legislators on our efforts to secure a FERC (Federal Energy Regulatory Commission) license for the Grant Lake Project. In addition, we expressed support of the South Central Power Pool and encouraged the legislators to follow the Railbelt utilities’ continued evaluation of various efforts to stabilize the cost of wholesale power. Based on our conversations, it was obvious that resolving the State’s budget crisis is by far the most pressing issue in Juneau this session.

8. Transmission Corporation (Transco) – Efforts are continuing in the evaluation of a Railbelt

Transco and how such organization would impact each of the six (6) Railbelt utilities. In addition, how the Transco interacts with the South Central Power pool is yet to be determined.

9. South Central Power Pool – As you may have read in a press release, three (3) Railbelt electric utilities recently created a new power pool. Anchorage Municipal Light & Power, Chugach


Electric Association, and Matanuska Electric Association recently announced the creation of the new power pool that is expected to create additional efficiencies for their utilities. In addition, the power pool will create benefits for the entire Railbelt. Two (2) generating Railbelt utilities not part of the pool, Golden Valley Electric Association and HEA, have been invited to join at any time or simply continue to interact with the utilities creating benefits as we do today…through bi-lateral agreements. HEA staff will continue to monitor and evaluate the potential benefits and risks of joining the pool before making a recommendation to the Board.

10. System Delivery Charge (SDC) – We have heard an increase in the number of members concerned about HEA’s increased SDC. One specific member concern is regarding our policy on back billing the SDC ($22.30 per month for services with no energy use declining to $0 at 150 kWh of monthly usage) and Customer Charge ($20 per month for all residential services subject to pro ration) on accounts when members request to be disconnected and reconnected within a 12-month period.

HEA has a significant number of seasonal and other residential members with little or no energy usage for several months of the year. The Cooperative must maintain and keep operational 24/7, 365 days a year the generation, transmission, and distribution facilities that serve and benefit all members. As you may recall from our cost-of-service study, these fixed costs average about $90 per month for each residential service. The SDC is the method used to recover a portion of these fixed costs from low usage services and it provides for fairer cost recovery from all members. It is valuable to note that the industry trend is to increase monthly customer fees to better align revenue recovery with the cost drivers. In many cases, when the customer charges increase, the energy rates decline…as we witnessed in our rate restructuring last month when HEA’s base energy rate declined about 3.3%.

11. Strategic Plan Priorities – This month the BOD will receive the fourth quarter 2016 Strategic

Plan Priorities Scorecard. The scorecard reflects progress made in 2016 on several key performance indicators.

Please feel free to give me a call anytime with questions. Thanks, Brad The following items were approved at the February 14, 2017 Board of Directors’ Meetings: HEA Board Meeting

• Regular Meeting Minutes of January 17, 2017 • May 2017 Board Meeting is rescheduled for May 16, 2017 • Resolution 45.2017.04, Retirement of Capital Credits and Capital Credits Retirement Method • Board Policy 301, Corporate Banking – Periodic Review • Board Policy 307, Records Retention – Periodic Review

AEEC Board Meeting

• Special Meeting Minutes of December 13, 2016 • May 2017 Board Meeting is rescheduled for May 16, 2017 • Resolution 01.2017.01, Withdrawal of Notice of Mailing of Notice of Deregulation Election

For more information, contact: Bradley P. Janorschke, HEA General Manager Bruce Shelley, HEA Director of Member Relations

907-283-2312 | [email protected] 907-283-2324 | [email protected]

South Kachemak Bay Generator Replacement Project

To ensure that South Kachemak Bay residents are not left without power for an extended period, Homer Electric Association, Inc. has two (2) 1,259-kilowatt standby generators located at the Gerry Willard Generation Plant in Seldovia, Alaska. The two (2) generators are available to supply power to the south Kachemak Bay area when grid power from Homer is out of service. The remote generation facility is critically important to the area, especially in the winter when an extended power outage can result in health and safety concerns. The existing back-up generation system in Seldovia is in need of replacement. The two (2) refurbished generators are beyond their expected operating life and are in constant need of attention while running. In past cases, any of the parts needed to repair these generators are no longer available and have to be fabricated overseas at a great expense. The potential for a breakdown is increasing each year and the consequences of a malfunction can be very serious if the weather is bad and the temperatures are cold. Project Description

HEA’s FY18 CAPSIS request and approximate project cost is $3.85 million, which includes the following: • Retirement of one (1) existing generator and

relocation within the site to use for spare parts. • Furnish and install a new, 1.0-megawatt generator. • Removal and disposal of existing switchgear. • Procure and install new arc-flash resistant

switchgear installed within a new, modular control building enclosure.

• New system will provide for remote start and monitoring of the equipment.

• Augmentation of the grounding grid. • Relocation of the bulk-fuel storage tank and

installation of new fencing enclosure to allow authorized independent access to refill the tank.

• Furnish and install new fuel forwarding pumps and piping system.

Project Supporters

• Kenai Peninsula Borough • City of Seldovia • Seldovia Village Tribe • Seldovia Native Association • Seldovia Chamber of Commerce • Port Graham Village Council • Nanwalek IRA Council

mailto:[email protected]

For more information, contact: Bradley P. Janorschke, HEA General Manager Bruce Shelley, HEA Director of Member Relations

907-283-2312 | [email protected] 907-283-2324 | [email protected]

Grant Lake Hydroelectric Project

On April 18, 2016, after nearly eight (8) years of consultation, collaboration, and engineering design, the Final License Application (FLA) for the Grant Lake Hydroelectric Project was filed with the Federal Energy Regulatory Commission (FERC). The FLA was over 1,800 pages long, with the accompanying consultation record, which exceeded 5,000 pages. HEA is currently working with FERC, responding to information requests and continuing our consultation efforts with interested stakeholders. The current FERC schedule shows a licensing decision in September 2018. In Fiscal Year (FY) 2016, the Alaska Energy Authority (AEA) recommended 39 projects to the legislature for funding under the Renewable Energy Fund (REF) Round IX application process. Grant Lake was one of the recommended projects at $4 Million. Although the legislature did not appropriate funding for any projects in FY 2017 capital budget, AEA plans to resubmit the recommended projects from Round IX in FY 2018. HEA encourages full funding of the REF to help move this valuable low impact renewable energy project forward.

mailto:[email protected]

Alaska Railbelt Transco Jan. 2017 Background

Each utility owns and operates separate generating facilities, high-voltage transmission lines and local distribution lines. The utilities meet the electric needs of their members or customers through local generation, power from jointly owned hydroelectric plants or through power purchases from other utilities. Many existing high-voltage transmission lines were built to move electricity locally, and some lines move electricity among utilities to facilitate power sales. Some studies suggest that limitations in the amount of power these lines can carry may limit access to the lowest-cost generation to some regions (also called economic dispatch) and may also impact reliability. One way

groups of utilities in other parts of the country have addressed this issue is by transitioning to a single transmission company – or Transco – that operates, maintains, and when necessary, improves the network for greater access and overall efficiency. Since 1998, the state of Alaska has conducted several studies of the region’s transmission system to identify a solution for grid efficiency. In June 2015, the Regulatory Commission of Alaska called for the Railbelt utilities to voluntarily develop a Railbelt Transco organization and demonstrate the potential benefits to consumers. Utility collaboration centers on local, regional benefits To determine whether a Transco is the right model for improving transmission access to generation facilities in the Railbelt, the utilities are committed to understanding the achievable economic benefits -- both locally and regionally. In 2014, the Railbelt utilities formed a senior staff Working Group supported by collaboration among subject matter experts from their utilities as well as from American Transmission Co., a Wisconsin-based Transco. Together, they set principles for Transco formation and committed to validate the potential benefits of improving economic dispatch, and weigh the benefits and costs of shared ownership of a regional Transco. In addition, the utilities began contemplating an organizational structure that could achieve possible regional benefits while continuing to meet local needs – all with consideration for cost impacts to their members and customers. Significant progress on the analysis has been made through consistent utility collaboration, which demonstrates utility commitment to positive solutions. Why ATC? Experience, potential capital ATC is the nation’s first interstate transmission-only utility, formed in 2001 by a similar desire to improve the reliability and efficiency of the grid serving portions of the Upper Midwest. ATC’s experience in the formation and 15-year operation of a Transco has served as the starting point for the current Railbelt discussions and the economic analysis. ATC routinely conducts the type of modeling necessary to inform such decisions. As a transmission company owned by cooperative, municipal and investor-owned utilities, ATC has experience incorporating inputs from multiple stakeholders and building consensus. Additionally, ATC has the capacity to provide access to capital in the form of equity investment if new and upgraded transmission facilities in Alaska require funding. Historically that funding has come from the state of Alaska or self-funded by the utilities, but both may be limited in the near-term. Over the last three years many parties, including other utilities from outside Alaska, private investors and banks, have approached Railbelt utility leaders with different proposals for addressing the region’s transmission needs. ATC’s experience in forming and operating a Transco and willingness to invest in Alaska near-term and long-term has made this Wisconsin utility a valuable facilitator and potential long-term partner. Utilities analyzing economics, reliability Following two status reports to the RCA in 2015 on voluntary and collaborative efforts, the Working Group continued the analysis and formation discussions into 2016. They are validating operations and fuel cost data on each Railbelt generating unit and developing projections on savings that could be achieved if these assets were more efficiently dispatched to meet Railbelt-wide demand for electricity. The utilities also are developing common planning and reliability standards that would apply across all assets in the Railbelt. This analysis also includes determining the cost to achieve

Alaska’s Railbelt region is served by six electric utilities: • Anchorage Municipal Light & Power (ML&P) • Chugach Electric Association, Inc. (Chugach) • Golden Valley Electric Association (GVEA) • Homer Electric Association, Inc. (HEA) • Matanuska Electric Association (MEA) • City of Seward Electric System (SES)

any benefits, including the cost of creating any new Railbelt-wide organization and associated rate of return, while maintaining clear accountability to the existing utilities and their members. This analysis will be compared to the existing system, which improved recently with a new collaborative power pool market resulting in savings for many Railbelt utilities. The utilities are committed to basing any decision to change how the Railbelt meets its energy needs on a clearly understood, transparent assessment of the benefits and a viable cost-effective business model. Separate discussions are underway among some utilities regarding a business model for a Unified System Operator – a separate organization to facilitate economic dispatch of all regional generation resources. These analyses are informing discussions and decisions within the utilities and their governing boards. Transco concept

If formed, the Alaska Railbelt Transco would integrate the existing transmission assets from each participating Railbelt utility into a new Alaska-based company. The Transco would not own generating assets and would provide non-discriminatory open access to the transmission grid. The Transco would operate, maintain, plan and construct electric transmission facilities in and around the service territories of the participating utilities. The Transco would establish operating agreements with the existing utilities, maintaining experienced operations and best practices. Under a Transco, the

Railbelt would transition to a single rate for use of the network of transmission assets. Rather than each local utility building and paying for transmission that crosses its area, or paying wheeling tariffs based on use of specific lines, the cost of the entire network would be shared. This results in a stable cost of transmission, shares the cost of new lines that benefit multiple users and creates opportunities for savings in the efficient use of generation. Another objective of the Transco is ensuring that money is available for maintaining, and when necessary, improving the grid. A Transco capital structure that includes both money borrowed from banks and direct investment by the Railbelt utilities and ATC can increase options available to meet future transmission needs. Any return on these invested dollars would be regulated by the RCA. Utility, regulatory approvals required to proceed

To proceed with a Transco, the management and governance organizations of the participating utilities will make a “go, no go” decision. Any decision to proceed with Transco formation will be based on each utility’s assessment of the financial and operational costs, economic dispatch benefits and impact of participation on their operations, customers and other stakeholders. If the utilities proceed, they would develop and file a Certificate of Public Convenience and

Necessity with the RCA, which then reviews the CPCN and issues a decision. Transco formation would begin following an RCA approval.

The goals of exploring a Transco are to: • improve electric system reliability, • facilitate the economic dispatch of the

various Railbelt generation resources and • assess future grid needs, and where

necessary, plan, finance, construct and operate new transmission.

The Working Group is addressing key questions: • How will utilities with smaller transmission

assets avoid harm by sharing transmission costs of utilities with larger systems?

• Will financial and operational costs of a Transco justify the costs?


March 14, 2017 To: Board of Directors From: Brad Janorschke, General Manager RE: Monthly Manager’s Report Good Afternoon. It has been another good month with cooler weather! We continue to stay very busy with the auditors while on-site last month; Capital Credits retirement preparation; Annual Meeting event planning; attendance at the National Rural Electric Cooperative Association (NRECA) Annual Meeting, TechAdvantage Conference, Northwest Public Power Association (NWPPA) Board meeting, and multiple other business meetings.


1. Safety – There was one (1) Occupational Safety and Health Administration (OSHA) recordable incident in the month of February. The last lost/restricted time incident for HEA was on February 14, 2017, which is about 14 days since the last lost/restricted time incident.

In February, inside employees were required to watch a video covering needle sticks and the safety prevention act. Kenai and Homer outside employees were provided the opportunity to attend a cyber-security class and watch a video called It’s Not Just About Me. The Bernice Lake and Soldotna generation employees were offered a GPI learn class on crane operation, emergency response plan review, and to watch the same It’s Not Just About Me video. Bradley Lake and Nikiski outside employees were also offered the GPI learn class on crane operation.

2. Financial Update – With a cooler winter than we have experienced the last few years, elevated

energy (kWh) sales continued into the new-year with January numbers exceeding budgeted expectations. January’s revenue was $9.3 million with the cost of electric service coming in at $8.2 million. This brings the January operating margin to almost $1.2 million.

The 2016 financial audit by BDO is now complete and is ready for Board review at our March Board of Directors’ (BOD) meeting. Although it was a lot of work, the audit went smoothly.

In addition, based on Board action last month $1.5 million in capital credits will be retired to members who had active accounts during the years of 1986 and 1987. The plan is to mail all checks the week of April 17, 2017.

3. Construction Work Plan (CWP) – Construction on HEA’s distribution system in January totaled $410,000. A breakdown of this work is as follows:

• $102,000 spent on unplanned system improvement repairs such as cutout, wire, and

insulator work; • $115,000 spent on system protection and coordination;


• $77,000 towards new services; • $6,000 on injection and replacement of underground cable; • $38,000 on transformer and meter purchases; • $53,000 in Substation changes of which more than half was spent at the Hatfield

substation; and • Hatfield TWACS upgrade of $19,000.

In addition, $18,000 was spent on the Seldovia Generation Project.

4. Bradley Wheeling Settlement – Staff continues discussions with the other Railbelt utilities to review and finalize language in the draft agreements related to the proposed Bradley Wheeling Settlement. Calculating the transmission wheeling costs will require extensive research of Alaska Electric & Energy Cooperative’s (AEEC’s) property records, to ensure the computations are accurate. This process, which needs to be completed timely, is a larger task than what our limited HEA staff can handle. To remedy the staffing problem, the other utilities have agreed to allow HEA to secure additional resources (consultants) to assist with this process and then pass along the associated costs to the other Railbelt utilities in proportion to their share of Bradley Lake. The wheeling calculation project is due by the end of 2017.

5. Kenai Beluga Pipe Line (KBPL) – The Regulatory Commission of Alaska (RCA) issued an order

on February 16, 2017, approving a settlement with KBPL. The settlement rate will save HEA $1.2 million per year, over the filed and granted interim rate of $0.6398 per million cubic feet (Mcf). HEA has recently received a refund of $537,656 for the over collected tariffs. The over collection began last summer and our members will begin to see the benefits from the refund and lower pipeline tariff as it flows through the Cost of Power Adjustment (COPA). In fact, HEA’s second quarter COPA rate, beginning April 1, 2017 will decrease to 6.873 cents per kilowatt-hour (kWh). For the average residential member using of 550 kWh per month will see a $2.75 reduction.

6. Legislative Update – The legislative session is just over the halfway mark and things are heating up. Just to restate the obvious, balancing the budget is by far the biggest issue facing the Legislature this session. Most of the discussions revolve around new revenue sources (taxes), budget cuts, and restructuring the Permanent Fund. Any legislation that is not revenue neutral, or brings money into the state, will have a difficult time moving through either body this session. There are currently no bills of concern to HEA. For timely updates, be sure to watch for E-flash updates from Alaska Power Association’s (APA) Michael Rovito and/or listen in on APA’s weekly legislative update conference calls.

7. Alaska Systems Coordinating Council (ASCC) – The ASCC is an association of Alaska's electric

power systems promoting improved reliability through systems coordination. I had the opportunity to chair an ASCC meeting last month to review Bylaws, mutual aid agreements, history of ASCC, and review a presentation by NWPPA on a free mutual aid platform that the ASCC is considering to promote.


8. Alaska Railbelt Cooperative Transmission & Electric Company, Inc. (ARCTEC) Update – Without a part-time CEO, ARCTEC is now working with Alaska Power Association (APA) for administrative support and has planned a Strategic Planning session later this month. All Railbelt utilities have been invited to the strategic planning session on March 23, 2017, that I plan to attend.

9. Cyber Security Training – Just a reminder for those that are still interested in completing an interactive cyber security training, which was sent to the Board via email. The course will take about 45 minutes to an hour, which you can start and stop as needed. HEA plans to continue using this same program for training throughout the year.

Please feel free to give me a call anytime with questions. Thanks, Brad The following items were approved at the March 14, 2017 Board of Directors’ Meetings: HEA Board Meeting

• Regular Meeting Minutes of February 14, 2017 • Resolution 45.2017.05, Acceptance of 2016 Audit Report • Resolution 45.2017.06, Authorize the Amendment of the NRECA 401(K) Pension Plan Adoption

Agreement “A” 02005-004 – IBEW Local #1547 Generation Unit • Board Policy 310, Cooperative Rate Design – Periodic review and housekeeping revisions approved • Board Policy 603, Identity Theft Red Flag Prevention – Periodic review and housekeeping revisions approved • Board Policy 703, Confidentiality of Personnel Files and Employee Privacy Rights – Periodic review and

housekeeping revisions approved AEEC Board Meeting - AEEC Board meetings are held on a quarterly basis (February, May, June-Annual Meeting, August, and November).


April 11, 2017 To: Board of Directors From: Brad Janorschke, General Manager RE: Monthly Manager’s Report Spring has sprung as the rising temperatures and increasing amount of daylight indicate we have again survived another winter. This last month has been another very busy month for our staff and me. The following are brief updates of activities that have taken place over the last few weeks:

1. Safety – There were no Occupational Safety and Health Administration (OSHA) recordable incidents in the month of March. The last lost/restricted time incident for HEA was on February 14, 2017, which is about 45 days since the last lost/restricted time incident. Attached is the 2017 Quarter 1 - Safety Scorecard, for your review. As indicated on the scorecard, the total number of OSHA recordable injuries in 2016 declined by about 50% from the previous year and continues to track well below the industry average in Alaska. In addition, HEA had no OSHA recordable injuries that resulted in lost or restricted time…..quite an achievement!

In March, inside employees were provided an overview of HEA’s radio communication system and an update on drug and alcohol awareness. Kenai outside employees reviewed a video on hearing conservation. Power Production employees were provided an on-line class on personal protective equipment. In addition, Bradley Lake and Nikiski outside employees were provided an overview of HEA’s Emergency Response Plan. All employees were offered the opportunity to participate in our annual wellness screening.

2. Financial Update – February’s revenue was $7.45 million and the cost of electric service came

in at $7.35 million, resulting in a positive monthly operating margin at just over $100,000. HEA’s year-to-date operating margin is at $1.3 million, which is below budget. However, our modified debt service coverage (MDSC) ratio continues to remain strong at 1.76. HEA’s second quarter Cost of Power Adjustment (COPA) rate, beginning April 1, 2017 has decreased again to 6.865 cents per kilowatt-hour (kWh) from the originally reported 6.873 cents per kWh. The minor correction accounts for the presumption that the Cooperative does not foresee the need to withdraw fuel from CINGSA during the second quarter. The decrease will lead to a $2.79 reduction in the COPA charge for the average member who uses 550 kWh per month. With the one-time refund from the KPBL rate case of $537,000; this is a total COPA decrease of 6.9% compared to the previous quarter.

3. Construction Work Plan (CWP) – Construction on HEA’s distribution system in February totaled $365,000. A breakdown of this work is as follows:

• $180,000 spent on system repairs such as cutout, wire, and insulator replacements; • $88,000 spent on system protection and coordination; • $7,000 towards new services;


• TWACS (automated meter reading platform) upgrade of $5,000; • $9,000 on injection, replacement and improvements of underground cable; • $12,000 on planned pole replacements; • $40,000 in Substation changes of which $27,000 was spent at the Hatfield substation,

$8,000 on Soldotna feeder metering, and $5,000 on Kasilof feeder metering; • $7,000 spent on various smaller substation maintenance projects; • $5,000 spent on other conversion and line changes; and • $12,000 was spent on the Seldovia Generation Project.

4. Legislative Update – With less than two (2) weeks before the regularly scheduled adjournment

on April 16, it appears the 2017 legislative session will be extended. As you may recall, the Legislature is statutorily bound to a 90-day session; however, the Constitution allows them to go as long as 120 days. Therefore, the Legislature can simply extend the session, up to an additional 30 days, without any formal action. The question that remains is whether leadership will allow all the bills to continue to be heard, or if business during the extended session will be limited to "bills of a fiscal nature." At this time, none of the bills directly affect HEA. The following are a couple bills worth mentioning:

• HB 111 – Oil & Gas (O&G) Tax - This bill has been in House Finance Committee most of the session and has increasingly become more complex as the session progresses. As written, neither the administration nor the O&G industry support the bill. The House Finance Committee has set the bill aside a little over a week ago and has not resumed its review.

• HB 115 – Income Tax/Permanent Fund Dividend Reform/LLC Tax - This bill has been

the focus of the House Finance Committee as of late. The bill has morphed into something that taxes pretty much everyone in Alaska. The tax would increase as income increases. In its current form, there are no deductibles. The House Finance Committee is currently taking amendments on HB 115 in an attempt to garner more support.

As a reminder, be sure to watch for E-flash updates from Alaska Power Association’s (APA) Michael Rovito and/or listen in on APA’s weekly legislative update conference calls every Friday morning at 9:00 a.m.

5. Bradley Wheeling Settlement – Efforts to wrap up the settlement continue as all Parties review

the Mediator’s proposed changes to the existing agreements. The goal is to ensure changes reflect only what was agreed upon in the mediated Memorandum of Understanding. A verbal update will be provided to the HEA Board of Directors (BOD) during Executive Session.

6. Alaska Railbelt Cooperative Transmission & Electric Company, Inc. (ARCTEC) Update – All

of the Railbelt utilities attended an ARCTEC strategic planning session on March 23, 2017. Most of the discussion was centered around the future role of ARCTEC. Follow-up discussions are expected over the next few months.


7. Community Outreach Update – HEA continues the scholarship program this year for students of all ages; both graduating seniors and adults who wish to continue their education. The scholarship committee met on March 29 and 30 to evaluate applications and ultimately selected candidates for each district. A draft resolution has been prepared for the BOD to review. If approved, twelve (12) $1,000 college scholarships will be awarded to students within our community. As a reminder, the scholarships are not paid for by HEA members, but rather by the earnings on investments with Alaska Rural Electric Cooperative Association (ARECA). HEA also continues to support the Youth Rally Leadership Camp, which is an all-expense paid week at the College of Idaho on July 10-15, 2017 for two (2) of our service area high school students. The application deadline was March 31, 2017 and the Youth Rally Committee will convene and interview applicants on April 13, 2017. In addition, HEA received over 100 colorful safety posters from local third and fourth graders. The winners for Best Safety Message, Most Creative, and Most Humorous posters will be highlighted at the Annual Meeting.

8. Annual Meeting of the Members – As a reminder, the Annual Meeting of the Members is scheduled for May 4, 2017, at Soldotna High School. Registration begins at 4:30 p.m. and the membership meeting begins at 6:00 p.m.

Please feel free to give me a call anytime with questions. Thanks, Brad The following items were approved at the April 11, 2017 Board of Directors’ Meetings: HEA Board Meeting

• Regular Meeting Minutes of March 14, 2017 • Resolution 45.2017.07, Ratification of the Generation Bargaining Unit Collective Bargaining 2017 Wages

Agreement • Resolution 45.2017.08, Annual Scholarship Awards • Board Policy 305, Receipt and Consideration of Offers to Purchase the Cooperative – Periodic review and

housekeeping revisions approved • Board Policy 306, Corporate Services Contracts – Periodic review and housekeeping revisions approved

AEEC Board Meeting - AEEC Board meetings are held on a quarterly basis (February, May, June-Annual Meeting, August, and November).

AS OF MARCH

31, 2017

Days Since

Last OSHA

Recordable

Incident

45

Days Since

Last OSHA

Lost/Restricted

Time

Incident

45

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

*US 2.0 2.1 2.0 1.9 1.8 1.7 1.5 1.5 1.6 1.2 0.9 1.0 0.9

*Alaska 2.70 4.60 3.30 4.30 3.40 4.50 3.40 3.00 3.30 4.90 3.00 3.50 1.90

HEA 5.70 6.80 4.20 6.50 4.00 6.10 5.80 5.30 1.50 0.70 2.50 2.50 2.90 0.00

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

DART (Days Away,Restricted,Transfer)Electric Power Generation,Transmission and Distribution Industry

*Source is Bureau of Labor Statistics

How do we

compare?

DART—Represents the number of OSHA Recordable injuries resulting in

lost/restricted work days per 100 employees

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

*US 4.1 4.5 4.0 3.8 3.6 3.2 3.0 2.8 3.2 2.5 1.8 2.1 1.9

*Alaska 6.50 7.20 8.40 8.60 8.40 7.10 6.10 5.60 7.00 7.40 5.40 6.40 4.80

HEA 9.0 15.3 9.2 14.6 8.8 9.2 10.8 9.1 6.0 2.0 5.6 5.0 4.3 2.3

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

TRIR (Total Recordable Incident Rate) Electric Power Generation,Transmission and Distribution Industry

*Source is Bureau of Labor Statistics

TRIR—Represents the number of OSHA Recordable injuries per 100

employees


May 16, 2017 To: Board of Directors From: Brad Janorschke, General Manager RE: Monthly Manager’s Report Congratulations on another successful Annual Meeting of the Members! It is always a pleasure to visit with our members. Now that the annual event is behind us we are gearing up for what will be another busy year that includes a hectic summer construction season and later this fall area meetings and strategic planning workshop. This last month has been another very busy month for our staff and me. The following are brief updates of activities that have taken place over the last few weeks:

1. Safety – There were no Occupational Safety and Health Administration (OSHA) recordable incidents in the month of April. The last lost/restricted time incident for HEA was on February 14, 2017, which is about 75 days since the last lost/restricted time incident.

In April, all inside employees were provided an opportunity to attend a well-developed four (4) hour “Save-A-Back,” course. In addition, Bernice Lake, Bradley Lake, Nikiski, and Soldotna outside employees were provided an opportunity to attend GPI Learn classes on Globally Harmonized Systems (GHS) Hazard Communication and Hazmat.

2. Financial Update – March kilowatt-hour sales revenue was $9.4 million, which exceeded

budgeted expectations and boosted our year-to-date revenue back to forecasted expectations. Costs of electric service, mainly fuel costs and production operation and maintenance, are trailing under budget. As a result, there is a higher than anticipated operating margins. HEA’s operating margin for the month of March was $1.3 million. Year-to-date operating margins are $824,500, which is above budget.

3. Construction Work Plan (CWP) – Construction on distribution work in March totaled $693,000. A breakdown of this work is as follows:

• $176,000 spent on unplanned system improvement repairs such as cutout, wire, and

insulator work; • $21,000 spent on transformer purchases and meter replacements; • $149,000 spent on system protection and coordination; • $19,000 towards new services; • $33,000 on injection, replacement and improvements of underground cable; • $17,000 on planned pole replacements; • $58,000 in Substation changes of which $35,500 was spent at the Hatfield substation,

$13,000 at the Tesoro substation, $8,000 on Kasilof feeder metering, and $1,500 spent on other various substation projects;

• $13,000 of overhead primary line work in the Kasilof area; • $5,500 spent on other conversion and line changes; and


• $201,500 was spent on the Seldovia Generation Project. The total spent on Transmission CWP in March was $46,000. Projects accruing costs in March were the Soldotna 115kV breakers and the Tesla dynamic fault recorder at the Nikiski substation.

4. Legislative Update – The Alaska Legislature is currently in “Extended Session,” which can

continue through May 17, 2017. During an Extended Session, all matters (bills) are still effectively in play. Anything beyond May 17, 2017 will require a Special Session to be called. Each Special Session can last up to 30 days. At this time, none of the bills directly affect our cooperative.

5. Battle Creek Hydro Project Financing – HEA continues to work with the other Railbelt utilities and the Alaska Energy Authority (AEA) to ensure the proposed water diversion project will stay on schedule (construction beginning in 2018). With HEA and Chugach Electric Association (CEA) both supporting the project, it appears this project will proceed. In addition, AEA is requesting letters of commitment from interested Bradley Participants no later than early August.

6. Alaska Power Association (APA) Award Nominations – APA is currently seeking nominations for the trade association’s three primary awards. The Mason LaZelle Achievement Award; the David P. Hutchens Public Service Award; and the Hatcher-Williams-Turkington Employee Award. Descriptions of each award are available on their website and nominations are due by June 15, 2017.

7. Northwest Public Power Association (NWPPA) Federal Policy Conference – A recent visit to our nation’s capital was short and packed full of back-to-back meetings and networking opportunities. NWPPA’s lobbyist and staff did an excellent job of preparing all attendees, including myself with well-organized meetings, pamphlets, FAQ’s, and flyers on the various energy policies. The visit was largely valued as I was able to build relationships and interject practical examples of viable energy projects and policies that our Federal Legislatures are currently evaluating. A few topics of discussion included Cybersecurity; Endangered Species Act Reform; Energy Efficiency; Environmental Regulations; Wildfire Disaster Funding; Consumer-Owned Utility Funding; Hydro Power; Reliability Standards; Vegetation Management on or near Right of Ways; Grid Modernization; and Unmanned Aircraft Systems.

8. Annual Meeting of the Members – Again, due to all of the assistance and planning from HEA staff and Board members, this year’s annual meeting went smoothly. The opportunity to visit and hear from our members should never be missed. The overall satisfactory member survey results have been compiled along with historical voting statistics and will be provided for review. Any suggestions or changes you may have or have heard to make next year’s meeting even better are welcomed.

Please feel free to give me a call anytime with questions. Thanks, Brad The following items were approved at the May 16, 2017 Board of Directors’ Meetings:


HEA Board Meeting

• Regular Meeting Minutes of April 11, 2017 and May 4, 2017 • Resolution 45.2017.09, Destruction of Annual Meeting Ballots • Resolution 45.2017.10, Appointment of Alaska Power Association (APA) Board of Director • Resolution 45.2017.11, Appointment of Alaska Power Association (APA) ACRE/CARE • Resolution 45.2017.12, Appointment of Alaska Power Association (APA) Ad Hoc Scholarship

Representative • Resolution 45.2017.13, Appointment of ARECA Educational Foundation, Inc. (AEF)

Representative • Resolution 45.2017.14, Appointment of National Rural Electric Cooperative Association

(NRECA) Voting Delegates • Resolution 45.2017.15, Appointment of National Rural Utilities Cooperative Finance

Corporation (CFC) Voting Delegates

HEA Committee Assignments Future Strategies Committee

- Dave Carey, Co-Chair - David Thomas, Co-Chair - Dan Furlong - Ed Oberts

Renewable Energy Committee

- Jim Levine, Chair - Kelly Bookey - Bill Fry - Don Stead

Scholarship Committee

- Dave Carey, Co-Chair - Bill Fry, Co-Chair - Kelly Bookey - Dan Furlong

Youth Rally Committee

- Kelly Bookey, Chair - Ed Oberts - Don Stead

AEEC Board Meeting

• Regular Meeting Minutes of February 14, 2017 • Resolution 01.2017.02, Appointment of National Rural Utilities Cooperative Finance

Corporation (CFC) Voting Delegates • Resolution 01.2017.03, Appointment of National Rural Electric Cooperative Association

(NRECA) Voting Delegates

to: board of directors from: brad janorschke, general ...€¦ · manager’s report page 2 of 3...

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