Golden Valley Electric Association

1998 Annual Report

"Preparing for the Future" is a theme that highlights the 1998 accomplishments of your co-op. In April Rick Schikora, Chairman of GVEA's Board of Directors, announced a strategic restructuring of the organization into business units. Schikora and President and Chief Executive Officer Mike Kelly explained that the new structure will better position the utility to be highly competitive in the coming deregulated market as well as maintaining GVEA's long-standing service goals. "The GVEA Board and management are very excited about the opportunities to grow stronger, more efficient and more responsive to our members-opportunities that are greatly enhanced by the focus and accountability of the business unit structure," stated Schikora. To achieve these goals, GVEA continued work on a major upgrade of our information technology system. The desktop project, designed to provide a common system throughout the company, put the tools necessary for growth and efficiency at the fingertips of all employees. And when GVEA's Web site went live in August, we put technology within reach of our members.

During 1998 we continued to focus on providing economical and reliable electric service as work continued on several vital power supply projects. As we reflect on our 52nd year of operation, it is a pleasure to report on the progress made toward our long-term goals. "Preparing for the future" presents challenges-challenges your co-op is ready to meet.

Healy Clean Coal Project

During 1998 Healy employees completed the Healy Clean Coal Project (HCCP) Personal Qualifications Checklist (PQC) Program. The program covered 39 major HCCP systems and required a significant time commitment from each participating employee. When testing is complete, GVEA employees will be fully trained and ready to operate the power plant.

Though HCCP generated power during 1998, the 54-megawatt plant was not commercially reliable or dispatchable and it is still not ready to provide competitively-priced electric power. GVEA has a number of significant unresolved issues relating to design, operating efficiency and safety with the owners of the project, Alaska Industrial Development and Export Authority (AIDEA). Both GVEA and AIDEA are committed to working toward a resolution. It is GVEA's intention to make HCCP the best it can be for Interior Alaskans before accepting HCCP for commercial operation.

The HCCP is a joint venture between the U.S. Department of Energy (DOE) and the State of Alaska.

Haystack/Hilltop areas connected to system

In August 1998 construction of a $2.3 million, 23-mile distribution line began, and by the time the line is completed in May 1999, over 25 residents in the Haystack and Hilltop areas will have retired their generators. The three-phase power line runs along the Elliot Highway to the Hilltop Truckstop. From there, the single-phase line continues to the 11-Mile Store then along Haystack Drive to the top of Haystack Mountain and along the entire length of Leuthold Drive. Area residents had campaigned for years to receive power. Then in 1996, GVEA's Board of Directors pledged $631,000 on the condition that the State cover the balance on the project costs. Many thanks are due to Senator Bert Sharp and local State representatives for their efforts to move this project through to Governor Knowles' desk. We welcome all our new members to our Cooperative.

Y2K and GVEA

By now nearly everyone is familiar with the Year 2000 issue. Early in 1998, GVEA Year 2000 Project Leaders compiled a comprehensive checklist of steps toward "Y2K readiness." These steps involve:

Our plans involve not only equipment necessary to keep the lights on, but also constant communication with other businesses that are part of the power supply chain. GVEA has filed an in-depth Y2K readiness plan with the Alaska Public Utilities Commission. For more information on this plan, visit GVEA's web site at www.gvea.com/about/projectarchive/y2k/ or stop by our Member Services Office in Fairbanks.

Northern Intertie

Progress was made on this critical project during 1998. Plans started in the mid-1980s, and studies have verified the need and the positive benefit-to-cost ratio for the Northern Intertie. January 1998 saw overwhelming community support for this project at the Bureau of Land Management's (BLM) public meetings. The Rex South Route, minus the Chicken Creek Bypass, is the route BLM selected in its final record of decision in September; an appeal of the BLM's decision is pending. In March 1999, the State issued an Early Entry Permit allowing GVEA to start immediate construction on the portions which cross state lands.

The Northern Intertie will serve a critical need for increased reliable energy to the Interior. When complete, the project will include a second transmission line from Healy to South Fairbanks as well as a 40-megawatt Battery Energy Storage System (BESS). Surveying and geotechnical work for the 230-kilovolt transmission line is scheduled to begin in March 1999, with an optimistic operational date sometime during 2000.

1998 Highlights
Your co-op met all our bankers' requirements and is financially sound. Since the co-op had no margins in 1980, no capital credits were assigned for that year.
No rate increase since 1982 and none expected for 1999; 17 years of stable rates! 36.3 percent equity ratio, up from 20 percent a decade ago.
$23,004,531 savings to members through cost-of-power adjustments (fuel credit) on 1998 bills 99.99 percent reliability - an average of 1.3 hours of outage per consumer
$1,043,193 made available to refund capital credits to 1979 and 1981 members. Record system peak of 175.5 megawatts set on December 17 at 5 p.m. at minus 29° F.