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Attorney responds to questions on SEAPA and TBPA

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The Assembly is holding a special meeting to discuss the Southeast Alaska Power Agency and the Thomas Bay Power Authority.

First of all, these issues are complex and have a long history.

But, there are a few tidbits and definitions that can help sift through the immense pile of information.

Here’s a little history to start with:

  1. In the mid-1970s, Wrangell and Petersburg created the Thomas Bay Power Authority for exploration and development of hydro power.
  2. The Four Dam Pool Power Agency was the precursor to SEAPA. Many SEAPA policies are roll-overs from that time.
  3. SEAPA formed in the early 2000s as the agency to cover power from the three panhandle communities of Ketchikan, Wrangell, and Petersburg.
  4. SEAPA contracts TBPA to operate and maintain the Tyee hydroelectric facility, which is located in Wrangell borough boundaries. KPU, in Ketchikan, does the same for Swan Lake.
  5. SEAPA sells the power from Tyee to Wrangell and Petersburg. TBPA does not sell power—it operates and maintains the facility.

So, now, if we just look at this year alone, there have been a lot of changes to how the SEAPA communities handle the agreements among them—especially Wrangell and Petersburg.

These two communities historically shared the administrative costs of TBPA half and half.

A budget was forwarded to SEAPA for the Tyee Lake operation and maintenance, or O&M, costs. SEAPA approved the budget, but rejected what’s called the non-net-billable costs. Those include-among other things-basic clerical and office costs.

In May of this year, the Petersburg assembly voted NOT to pay its portion of the O&M costs because it thought SEAPA should be responsible for them. That left Wrangell footing the entire bill.

So, fast forward several months. Wrangell and Petersburg met and did not come to any agreement.

The Borough assembly has discussed this over and over again at its meetings, but has not yet come up with a viable solution—and not for lack of trying.

It’s created the Special Energy Committee to hash out these details and make recommendations.

And those meetings have been chock full of open and straightforward discussion.

The Assembly decided to send three questions to an attorney to help understand its position in this whole situation.

The attorney’s response is part of the nearly 30 pages of documentation in this week’s special assembly meeting packet.

Svend Brandt-Erichsen is the attorney the Assembly consulted. This is a quick rundown of Wrangell’s questions and Brandt-Erichsen’s answers.

Question 1:

Are TBPA clerical and administrative costs normally allowed under Federal Regulatory Energy Commission- FERC- accounting code 539 and the Long Term Power Sales Agreement?

So, FERC accounting codes help separate out the mess of costs incurred by energy agencies.

The short answer is – because TBPA does not SELL power the FERC accounting codes don’t actually regulate who pays which costs.

You’ve got to look at the Power Sales Agreement and the Tyee O&M Agreement. In a nutshell, they say that SEAPA has to approve any costs that it will take over. So- neither Wrangell nor Petersburg can independently tell SEAPA “you have to pay x, y, or z.” They can recommend it or request it, and SEAPA has to approve or deny it.

Question number 2:

Does SEAPA have the legal right to deny reimbursement of TBPA clerical and administrative costs based on SEAPA’s Policies and Procedures Handbook?

The short answer—well, there isn’t one. Neither the Tyee O&M Agreement nor the Power Sales Agreement are specific about what costs fall in the O&M category.

There’s a term used quite a lot, which is “Facility Operating Costs.” But, there’s no specific definition for it.

So, it’s up to interpretation.

There is a section in the handbook that basically says SEAPA does not have to pay general administrative costs. Then, there’s a little clause that says—okay, SEAPA can pay them if they are necessary to the operation of the project.

Since, at this point in time, TBPA’s only job is to run Tyee, then in theory, every cost would fall under that category of necessary for the project.

But, that sort of defeats the point of the first section excluding admin costs. If Wrangell made that argument, the attorney says SEAPA could re-write the section to make it more specific OR… Ketchikan might want to jump on the bandwagon, so to speak, and put its utility costs on SEAPA’s tab. And that would make the whole thing more expensive for Wrangell anyway.

Which brings us to Question 3:

If SEAPA does not have the right to deny these charges, can Wrangell deduct these costs when it pays the monthly power bill to SEAPA?

First of all, while TBPA is not prohibited from adding admin costs to the budget, SEAPA is not obligated to approve them, either.

The Power Sales Agreement does not give a single community the power to quote “independently determine on its own whether a TBPA operating cost is recoverable.”

So, Wrangell cannot just decide to stop paying. SEAPA has to be part of the conversation and ultimately, approve the costs.

That basically leaves a few options for Wrangell.

  1. Wrangell absorbs TBPA and takes over operation of Tyee. It takes over the facility—and all the costs.
  2. SEAPA takes over operation, costs, and employees of Tyee. SEAPA verbally offered this—though there’s no official written offer on the table.

 

This is the option that Petersburg officially endorsed in an August resolution by the assembly–and is encouraging Wrangell to accept, too.
As part of this option, TBPA could be put on ice for a while until it’s needed again for its original purpose—to explore hydro potential in Southeast.

There are a few other options on the table, too.

The special assembly meeting is Tuesday, December 3rd, at 7pm in the Borough Assembly Chambers at City Hall.

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