Overview of a Business Plan

1. Overview of City of Ruby Electric Utility Upgrade ProjectBusiness Operating PlanApril 2, 2010 Draft

2. Overview of a Business Plan An outline and explanation of your roles and responsibilities for the operation and maintenance, and replacement and renewal of the electric utility for the next 40 years.

3. Business Operating Plan Purpose • Calculate average kWh based on: • Current kWh generation & usage • Current operating/management expenses • Current fuel costs • Projected efficiencies • Future renewal & replacement

4. Business Operating Plan Requirements • O&M • R&R • Annual Budgets • Regulatory • Insurance, Audit & Reporting • Secondary Operator

5. Operations and Maintenance • Maintain facilities • Manufacturers’ recommendations • State and federal laws, codes and regulations • Comply with procedures outlines in spill prevention and response plans • Operation & Maintenance • Expenses incurred on a routine, regular basis • Maintenance expenses incurred on an annual basis

6. Renewal & Replacement • R&R • Renewal and replacement expenses not incurred annually and more than $5,000 • Required to have an R&R fund • Financial tables will • calculate the R & R needs and costs over the next 40 years

7. What Special Bank Accounts are Needed? • O&M: An active non-interest bearing account which can be in any bank or credit institution. Does not need to be a separate account. • R&R: An interest-bearing savings or invested escrow account acceptable to the Denali Commission, ensuring capitalization of an amount sufficient to maintain the R & R Schedule.

8. Annual Budgets • Must develop an O&M budget • Must develop a R&R budget • Payment schedules for O&M and R&R

9. Regulatory Compliance • US Environmental Protection Agency (EPA) “Spill Prevention Control and Countermeasures Plan” – spill prevention and operating requirements • Must remain in good standing with Regulatory Commission of Alaska (RCA) and the Power Cost Equalization (PCE) program

10. Other Requirements • General Liability Insurance • Annual Audit/Review • Annual Report to Denali Commission and AEA

11. SECONDARY OPERATOR • City must agree that if there are compliance issues with terms of business operating plan – operating, bank accounts, collections, PCE – the Denali Commission may designate a Secondary Operator • City must sign the Secondary Operator Agreement prior to funding of upgrade project

12. Costs in Financial Tables • Operation & Maintenance (O&M)Based on cost estimate • General & Administrative (G&A)General administration & other O&M • Renewal & Replacement (R&R) • Fuel Costs

13. Business Operating PlanFinancial Tables • Table A – 40 Year Utility Net Income & Cash Flow • Table B – Power Generation and Consumption Summary • Table C – Annual “O&M” Schedule • Table D – 40 Year “O&M” Schedule • Table E – Annual Fuel Costs • Table F – Annual “G&A” and Depreciation Expenses • Table G – 40 Year “R&R” Schedule • Table H – 40 Year “R&R” Cash Flow

14. April 2, 2010 City of Ruby Draft • Year One: Average estimate is $.63 per kWh • Annual O&M of $39,000 • Annual fuel costs of $113,000 • Annual G&A of $102,000 • And, R&R deposit into bank of $18,500

15. Bottom Line: Ensure that the utility operates effectively and efficiently and meets its financial obligations.