Golden Valley Electric Association

1999 Annual Report

"The Future is Now"

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Having now passed quietly from one century to the next, GVEA is prepared to embark on a new era. This will be an era of major changes, both internal and external. GVEA is now under the direction of new leadership. Competition will surely arrive in Alaska. Continually evolving technology also presents new opportunities and challenges to the electric industry playing field.

Be assured your co-op is prepared. During 1999 we continued working hard on several vital power supply projects. These projects represent years of diligent effort to ensure that your long-term power needs will be met at the least overall cost. The future is now, and GVEA welcomes it.

New President & Chief Executive Officer

During 1999, GVEA's Board of Directors conducted a nationwide search for a new President & CEO, unanimously selecting George Kitchens, who came on board in November as Executive Vice President. He assumed the position of President & CEO of our Co-op on April 3, 2000. Kitchens succeeds retiring President & CEO Mike Kelly who has been with GVEA for over 33 years and at the helm since 1983.

Enron Corp. and its affiliates of Houston, Texas previously employed George. Enron is one of the world's leading providers of energy and related services. Prior to joining Enron, he served as President of West Virginia Power, a division of UtiliCorp., for over seven years.

GVEA's Board and employees are looking forward to facing the challenges and opportunities of the new millennium with the Cooperative under his administration.

George will preside over the April 2000 Annual Meeting.

Healy Clean Coal Project

The Healy Clean Coal Project (HCCP) is a U.S. Department of Energy (DOE) Clean Coal Technology project partially funded by the DOE as a research and development project to find ways of burning coal cleanly. The Alaska Industrial Development and Export Authority (AIDEA) is the owner of the plant. Usibelli Coal Mine partnered in the project as the coal supplier and GVEA partnered as the future operator and power purchaser. HCCP began burning coal in 1998 and generated power intermittently through 1999, but the nominal 50-megawatt plant was not commercially reliable and it produced very expensive power. Late in 1999, the plant failed to pass a 90-day operating test designed to test reliability and economics resulting in the automatic termination of the contract between AIDEA and GVEA. The plant was shut down on December 31, 1999 until new agreements can be made for the operation of the plant and for power sales. GVEA has remained committed to working with AIDEA toward eventual commercial operation of the plant. GVEA is exploring ways to replacing the experimental, research and development technology, which was tested on the plant, and replacing it with a proven technology which would be as environmentally friendly as the experimental technology for the control of emissions. GVEA and AIDEA are working under a signed agreement to accomplish this, cooperatively. GVEA's goal is to have a first-class power plant that has very low emissions and produces inexpensive power for our members. We are now positioned to be able to realistically accomplish that goal.

Northern Intertie

There is a serious need for a second transmission line from Fairbanks to Healy in order to reliably meet existing needs and future growth. Currently, GVEA members are connected by a single line that is 33 years old and undersized. When this line trips during peak winter loads, regardless of the reason, GVEA must shed load. That means power outages. This continuing problem to GVEA, and as emphasized by the North American Electric Reliability Council, poses a security and liability risk which necessitates a second transmission line.

The Northern Intertie is critical to the delivery of increased energy from GVEA's Healy Plants, our Bradley Lake Hydroelectric Plant near Homer and the natural gas-fired generators in the Anchorage area. During February 2000, the State Department of Natural Resources (DNR) prepared a proposed Best Interest Finding (BIF), which proposed that the Northern Intertie be constructed along the Rex/South Route.

DNR held public hearings and solicited public comments. GVEA mailed a letter to all members soliciting support for this vital project. GVEA members on both sides of this issue responded actively to DNR. During March and April 2000 it's anticipated that DNR will evaluate these comments to identify issues that haven't been addressed earlier in their preliminary BIF. DNR will issue a final BIF in May.

AlasConnect

During 1999 GVEA formally announced the formation of a new company–AlasConnect. It provides high technology fiber optic telecommunications services to local commercial members who transfer large amounts of data. AlasConnect is a corporation formed jointly by GVEA and United Native American Telecommunications (UNAT). AlasConnect currently provides service to the areas of Fairbanks, Ft. Greely/Delta, Anchorage and the Lower-48. It is carrying traffic for AT&T, Williams Alaska Petroleum, Fairbanks Memorial Hospital, Natchiq/Houston, Kanas and the military. Because of AlasConnect's 100-percent fiber loop system, AlasConnect was able to step in immediately and reroute traffic affected by the December 1999 avalanches in the Thompson Pass area.

In forming AlasConnect, GVEA wanted to remain close to its core business and needed a fiber optic system built for GVEA's electric system operation and communications. AlasConnect contracts with GVEA to provide facilities and services. This new venture provides the benefits of expanding services to our members and of leveraging our existing capital and personnel. The GVEA Board had one goal in mind when forming AlasConnect–to provide new revenue to help keep electric rates low for all GVEA members. AlasConnect is well on its way to achieving this goal.

1999 Highlights