Sitka rates remain some of the lowest in the State of Alaska (10/2018). In our community the electric utility is “not for profit” meaning that we only charge enough from rates to cover our community costs of operating the utility. The Assembly and city staff work together to establish rates that are fair to all of our community. In 2017 a new rate increase was approved by the Assembly. During that discussion the rate structure was reviewed. For Residential and Regular Commercial business, the Assembly voted to have low rates in the winter (approx. 12 cents) and higher rates in the summer (approx. 19 cents) which averages based on usage to approximately 15 cents. This rate design was incorporated to help Sitkans who live in the community year round when usage is at the highest in winter and to further balance the costs of the utility with the summer tourism.
EXECUTIVE SUMMARY
The Blue Lake penstock and tunnel system is a critically important part of our community infrastructure. This system supplies water from Blue Lake under existing permits for numerous critical water uses: firewater, domestic water, hydroelectric power, a 1959 vintage bulk water connection, and the NSRAA fish hatchery. This penstock system includes over a mile of tunnel/penstock pipe (7ft-10ft in diameter), over twenty root valves, an intake gate, a bulkhead gate, and a surge chamber. Responsibly, the community needs the capability to respond to equipment failures and to provide inspections of this critical infrastructure by developing an alternate means of supplying domestic water. Responding to a failure or providing regular inspections will necessitate the need for an alternate system or plan which can operate from five days to two hundred days. The risk of failures includes many possible scenarios: a failure of any of the twenty penstock root valves, landslides, earthquake impacts on the tunnel, erosion, flooding, and more. Nearly all of these risk issues can be mitigated by an alternate water supply system. [Example: the Green Lake gate failure in 2017 required 84 days to repair the dam intake gate]
PRESENT SITUATION: DOMESTIC WATER PRESENT SITUATION -
The Public Works department is responsible to ensure safe and reliable domestic water for our community which includes: fish processing, residential use, hospitals, restaurants and other uses. When the penstock is shut-down due to a typical failure the city will be without drinking water. In previous years when the penstock was down, Indian River was used to supply water to the community. Indian River was the primary drinking water source prior to switching to Blue Lake in the 1980s. The Surface Water Treatment Rule has evolved in the last 20 years and the Indian River Treatment Plant is now unable to achieve compliance with the drinking water regulations. Surface waters must be filtered for giardia and cryptosporidium removal and achieve chlorine contact time prior to the first customer being served.
Even if the regulations hadn’t changed, the Indian River Water Treatment Plant no longer functions as it did 20 years ago. The sand filter is plugged, pumps have burned up, the laterals that supply water to the infiltration gallery are no longer functioning, and the list goes on. We can supply water to the community (in a limited fashion and under a boil water notice) from Indian River but the water will be straight from the river.
The CBS has a filtration avoidance waiver for Blue Lake. This means that we are not required to filter our surface water. There are only a handful of systems in the US that have a filtration avoidance waiver. There are strict requirements that must be met in order to maintain our waiver. One of those requirements is our raw water turbidity cannot be above 5 NTU more than two times in 12 months or five times in 10 years. We have experienced a few events over the past few years which is cause for concern that we may be trending towards losing our waiver which would then mean we would be required to install filtration plant and filter our water 24/7.
Two issues exist with regard to domestic water: Sitka will be without water when the penstock is down and the threat of losing our filtration avoidance waiver.
HYDRO GENERATION PRESENT SITUATION –
The Electric department is responsible to provide safe and reliable operation of the Blue Lake dam and penstock system for the Sitka Community. This system, as stated earlier, includes over twenty root valves, over a mile of pipe and tunnel and the associated gates and bulkheads which serve as safety equipment to protect the community. FERC regulates the operations and maintenance of these systems with a key interest in protecting communities.
The Blue Lake project is effectively regulated under our FERC license #P-2230-AK. A large amount of correspondence exists between the Electric Department and FERC regarding this project and the electric department is in overall compliance with the associated permit. The project is inspected annually by FERC and a major inspection occurs every five years. FERC has requested that we “test” the gate annually and then every five years that we inspect the penstock tunnel. This inspection cycle is normal and typical of these types of dams with the associated public safety impacts (we are classified as a Level 2 due to the public nature of the GPIP). FERC, in writing (January 8, 2018 Attached), has accepted our request to delay testing and inspection of the gate as we informed FERC that the CBS was considering a back-up water system to allow for future testing of the gate.
The annual test requires us to lift the gate a few inches and then lower the gate back into position. The “5-year” penstock inspection requires closing the gate, draining of the penstock, and a physical inspection performed by a registered engineer. None of these tests have been performed since Oct 2014. Testing of the gate was reviewed with CBS management in 2015 and a team decision was made to delay any testing. The decision to delay testing was based on the risk of a gate failure during the test that would result in an uncontrolled shut-down of the domestic water supply for CBS. Although the risk of failure could be characterized as “medium to low”, the consequences of a failure are high for the CBS community.
The intake gate on the Blue Lake project serves as the single most important safety feature of the dam, penstock, and power plant system. A failure of the gate hoist system would shut off domestic water to CBS for an extended period and could additionally result in excessive diesel generation due to lack of Blue Lake power plant generation. No crane is normally available in Sitka which can be used to raise the gate in an emergency (or to install the bulk-head gate to initiate a repair). A detailed, written, electric department emergency action plan exists to respond to a failure of the gate. It is estimated that responding to a failure of the gate hoist system would require a minimum of 2-3 weeks due to crane availability. Failure of any of the components associated with the penstock system could result in very long term outages of this system. Currently, we are not able to provide the needed inspections as the city will not have domestic water during those inspections. This is resulting in a high level of risk for the community. Again, a failure of the Green Lake gate in 2017 resulted in a 84 day outage of the Green Lake penstock system.
HYDRO DETAILS:
The gate on the Blue Lake project is a gravity type gate which weighs approximately 26,000 lbs and is controlled by a drum type system with wire cables on each side of the gate. The drum is located in the gatehouse and the wires extend over one hundred and fifty feet down into the gate structure in the lake. A failure of the drum system, a cable failure, drum braking, or a guide failure would result in an uncontrolled gate failure.
NSRAA PRESENT SITUATION –
NSRAA provides significant benefit to our community but requires a reliable flow of 10CFS. Additionally, NSRAA is requesting an additional flow of 10CFS for a total of 20CFS. As the need for electric power grows in the community, it will be more beneficial to serve NSRAA from the discharge of the power plant after-bay. At that time, this system should become the backup to the after-bay water supply. Regardless, NSRAA needs a stable and reliable source of water.
SUMMARY AND RECOMMENDED SOLUTIONS
Proposed Solutions and Alternatives:
Proposed Solution:
After a number of professional studies, reviews and consideration, the CBS Public Works department has recommended the installation of an intake location in the Sawmill Creek area above the existing powerhouse and the constructing of a filtration plant. The filtration plant will be used when the penstock is out of service for inspection or repair as well as when there are water quality issues in Blue Lake. The filtration plant is much more costly to operate than our current treatment. The filtration plant will allow the CBS to maintain our filtration avoidance waiver thus saving the citizens of Sitka a significant amount of annual operating costs. The early estimate for a project of this size is $18M.
Alternative 1:
A Water Supply from Indian River without filtration could be developed. As regulatory requirements have changed any water supply created from a proposed Indian River system without filtration would not be in compliance with regulatory requirements. This water supply would require a “Boiled Water” Notice. This supply of water would preclude many parties from operating in our community and lead to significant financial impacts to the Sitka community. The list of parties who could not operate during that condition would include but not be limited to: fish processing, restaurants, hospitals, any food serving or processing entity. As this would create a significant financial impact to the community, it was not recommended.
Alternative 2:
The Assembly could direct the CBS to not inspect, operate, test or shut down the penstock and tunnel system. This order would be in violation of the Federal Energy Regulatory Commission (FERC) permit for the Blue Lake Dam. A lack of inspection, testing or maintenance would eventually result in an unplanned failure and subsequent unplanned outage of the penstock and tunnel system. As this is the single most important safety feature of the dam, a decision to not comply with reasonable inspections and testing could impact safety of the public, safety of CBS employees, CBS insurance risk and CBS liability risk.
FACT-What-are-the-Costs-of-Running-the-Electric-Dept-10-1-2018.pdf
Although Blue Lake dam was rebuilt, our existing infrastructure was in need of evaluation and planned replacement or repairs. The Electric Department spent a good portion of 2016 evaluating our major equipment and the result was the creation of a detailed 10 year plan which was approved by the Assembly in October, 2016. This plan utilizes the remaining working capital from the Blue Lake expansion combined with the annual collection of $1.25M in working capital and will be used to fix our aged infrastructure. The Electric Department staff is working hard to implement the plan and is updated annually.
Below is from the Assembly Approval:
The Electric Department respectfully requests Assembly approval of a revised and consolidated ten year capital plan. This ten year plan includes expending a total of $22M in capital over the ten year period while maintaining an emergency reserve of $2.5M and a liquidity reserve of $1.0M. These reserve requirements are based on industry best practice as recommended by the CBS CFAO. The currently available Electric Department total working capital of $15,881,204 will be increased by a $1.5M/year due to the bond covenants. This request includes a revision to all Electric Department existing capital projects (“reappropriation”) as well as newly identified projects to provide a complete consolidation. This recommendation comes after an eight month long process within the Electric Department which included detailed reviews coupled with 3rd party engineering studies. These projects are lengthy and interrelated, thus approval of the complete revision is requested.
Background:
The electrical infrastructure of the Electric Department required a thorough review to ensure that efficient and reliable operation will be sustained at the lowest reasonable cost. After review, it was identified that the available working capital was not sufficient to support the total number of capital projects identified. However, after an intensive and long process, staff has been able to recommend a series of projects which can be completed within the existing capital constraints. These recommended Capital Projects have the highest probability of ensuring reliability at low cost to our citizens and customers.
Highlights:
N-1 Project ($3.9M): This term is used in our industry to describe redundancy and emergency backup. As we have often described, 80% of our citizens and customers are served from the Marine Street Substation. A back-up for this substation is imperative and necessary, as the existing equipment is now over 40 years old. A new substation north of town would be ideal (Kramer Ave area), however the cost was identified as being too high (>$13M of the available capital would be consumed). Alternatively, we are proposing to install a 2nd bay at the existing Marine Street Substation at a cost of approximately $3.9M. This 2nd bay would still utilize a portion of the older equipment, but the overall cost is substantially lower. This modification would also increase the amount of power that can be delivered from the Jarvis Substation to Marine Street customers in the event of an emergency. While not ideal, this provides the greatest increase in emergency backup at the lowest cost.
Green Lake Power Plant Overhaul ($4.8M): The Green Lake Power Plant is a very valuable asset for the community and has not been overhauled since the early 1990’s. A major pre-inspection is scheduled for 2018 which will help to further define and identify the costs of a major overhaul. Numerous small inspections during the last twelve months have clearly demonstrated specific needs to return this overhaul to the list of required capital items. The existing plan of $4.8 M only includes enough funding for an overhaul of the common water-way systems, not the individual power generation units or the switchyard. An overhaul of those systems is being developed as Phase 2 and Phase 3. It is expected to cost in the range of $15 M to overhaul the Green Lake power plant as it reaches 50 years old in 2030.
Jarvis Fuel System Repairs/Storage ($1.5M) & Thimbleberry Bypass ($3.8M): These two items are directly related. In August 2015, the fuel release demonstrated a need for extensive repairs and redesign to the Jarvis Street fuel storage system. Presently, the system was designed for over seven days of fuel storage. This period was defined by the time needed to repair the worst case scenario on the electrical transmission line….the Thimbleberry portion of the transmission line. The existing Thimbleberry portion of our 69kv backbone transmission line is installed in difficult and dangerous terrain and is subject to outages from fallen trees and extensive degradation of transmission poles. Presently, a repair during winter months has demonstrated to be dangerous and time-consuming (on the order of seven days), thus setting the amount of fuel storage required. This plan proposes to permit and install a bypass to the existing transmission line from the Whale Park area to the Blue Lake Switchyard. This line would be planned on the inside of the roadway to minimize the impacts to the view-shed. This line will reduce the cost of annual diesel fuel burned, reduce the redesign costs of the Jarvis fuel system ($2M saved), likely eliminate the need to replace the very old diesel generation units at the Jarvis facility ($10M saved), and eliminate the costly and dangerous maintenance required on the existing transmission line.
Feeder Improvements ($1.6M): A host of miscellaneous feeder improvements are planned and required. Extensive aging and environment requires sufficient engineering, planning, inventory and lead time.
Blue Lake 3rd Turbine ($2.48M): A significant listing of items are needed to close out this project and are required for compliance with the FERC permit. Including but not limited to: the dam overlook project, the campground, modifications to the safety ladders on the dam, rock removal, etc.
SCADA System ($230,000): A significant amount of work has already been performed to remove the Electric Department control system from the interface with commercial carriers thus making the system significantly more secure and far less costly. Additionally, the Green Lake power house and many of the system field breakers have very limited control capability making outages more frequent and longer with extensive personnel overtime. These changes will improve safety and reliability and will bring old systems up to date significantly extending the life of the equipment (which lowers overall costs).
Capital for Fuel Conversions ($1.2M): With the original assistance of Siemens Engineering, a number of facilities have been identified for conversion to dual fuel (Electric Interruptible boilers). This work was engineered and procured by Electric Department staff, reducing the cost to less than half. Further boilers are planned for the Water Treatment facility and for USCG. These projects have a payback of less than 2-3 years and provide significant revenue to the electric utility which lowers rates for the entire community.
Harbor Meters ($75,000): Revised electric rates included an increase to the monthly rate for harbor meters which was reviewed and supported by theHarbor Department. These funds will allow us to repair and replace the failed meters in the harbor system thus generating additional revenue to lower costs for all customers.
All of the community benefits from seafood production. In electric sales alone, seafood production accounts for over $2M/year. All Sitkans should be proud of the clean and reliable energy that we provide for this critical business in our community. Without these valuable seafood production customers, rates would increase by over 10% in our community.
We value ALL of our customers, including those challenged to pay the monthly bill.
Notices of disconnection have not been eliminated, but replaced with electronic notification (phone call or email). So as a customer, make sure the City Utility Office (747-1818) has your up-to-date method of contact.
If you are unable to pay, contact the City Utility Office to arrange a payment plan. *** (907) 747-1818 ***
In the past, door hangers were used to notice customers of non-payment. This was an old and costly process and required our electric department employees to travel to each location and hang a door hanger prior to an actual disconnect. Rather than having these employees available to perform their primary job function (like fixing broken electric meters) they were hanging door hangers. This old process was costly to the community ($35,000 per year) and those people hours are now re-directed toward the back-log of high value metering work (like harbor meters). Customers who do not pay timely still receive notice by means of a phone call or email prior to the disconnection of services. The City has a system to allow for payments when customers are challenged financially.
Additionally, a source of funding for citizens has been set up with the SalvationArmy.
Interruptible users help lower electric rates for all customers. These users get disconnected during times of limited electricity availability. This service is confined to large customers and customers must have an approved alternative system. Interruptions are unusual but when interrupted, these customers are required to switch to their alternate system with only short notice. Recently we installed electric boilers at the Keet and Baranoff schools at a cost of approximately $120,000 with annual revenue generated of $100,000/yr. This 1.2 year payback of our electric department capital provides annual revenue to the electric department keeping rates low for the electric department customers while cutting replacement fuel oil costs to the schools of over $10,000/yr. A win-win for our community.
The newly revised electric ordinance (2017) includes a revised pricing structure based on publicly posted fuel oil benchmark prices (a common business practice and in this case the ordinance language came right out of the Regulatory Commission of Alaska approved AELP rate structure). The calculated interruptible price reflects a “no more than 90%” of that benchmark fuel oil price “paid by the state of Alaska” and is adjusted on a monthly basis. This is meant to ensure that, with fluctuations in oil price, that the current interruptible customers remain in a financially beneficial position when using interruptible heat (especially discounted considering that they are defined as “interruptible” and may have to switch to back-up oil at any time). This discount also encourages customers to convert to interruptible electric heat by providing a means to amortize the capital cost of the conversion.
With regard to new potential customers our Assembly approved Electric Department capital plan allowed us to procure and install conversions to interruptible electric heat for both Keet and Baranoff schools, both of which are public entities (approved budget approximately 1.2M with an estimated three year payback). As a reminder, any new interruptible customer must be approved and must be larger than 100kw. Other customers (which we are not providing ANY funding for at this time) who are considering a change to electric based interruptible heat are: SEARHC, the new Swimming pool, USCG, and others. Again, the 10% discount above is an effort to help those customers amortize the cost of the electric heat systems.
In all of these cases the switch to electricity reduces the total amount of revenue in the community which is LEAVING the island. This interruptible revenue directly reduces electric rates for all customers and further significantly reduces fossil emissions for the community providing a cleaner and safer environment for all of our citizens.
Note : AELP Rates, https://www.aelp.com/tariff/Schedule%20of%20Fees%20and%20Charges.pdf
