AMENDED AND RESTATED
WHOLESALE STANDARD OFFER SERVICE AGREEMENT
WHOLESALE STANDARD OFFER
SERVICE AGREEMENT
among
MASSACHUSETTS ELECTRIC COMPANY,
NANTUCKET ELECTRIC COMPANY,
and
USGEN NEW ENGLAND, INC.
Dated as of October 29, 1997
TABLE OF CONTENTS
ARTICLE 1. BASIC UNDERSTANDINGS........................................... 1
ARTICLE 2. DEFINITIONS.................................................... 2
ARTICLE 3. TERM AND REGULATORY APPROVAL................................... 5
3.1 Term..................................................... 5
3.2 Obtaining and Maintaining Required Permits............... 5
ARTICLE 4. SALE AND PURCHASE.............................................. 5
ARTICLE 5. PRICE AND BILLING.............................................. 6
5.1 Price.................................................... 6
5.2 Payment.................................................. 6
5.3 Taxes, Fees and Levies................................... 7
ARTICLE 6. DELIVERY, LOSSES, AND DETERMINATION AND REPORTING
OF HOURLY LOADS................................................ 8
6.1 Delivery................................................. 8
6.2 Losses................................................... 8
6.3 Determination and Reporting of Hourly Loads.............. 8
ARTICLE 7. DEFAULT AND TERMINATION........................................ 9
7.1 Material Breach and Termination.......................... 9
ARTICLE 8. NOTICES, REPRESENTATIVES OF THE PARTIES........................ 11
8.1 Notices.................................................. 11
8.2 Authority of Representative.............................. 11
ARTICLE 9. LIABILITY, INDEMNIFICATION, AND RELATIONSHIP OF PARTIES........ 12
9.1 Limitation on Consequential, Incidental and Indirect
Damages.................................................. 12
9.2 Recovery of Direct Damages Permitted..................... 12
9.3 Indemnification.......................................... 13
9.4 Independent Contractor Status............................ 14
ARTICLE 10. ASSIGNMENT..................................................... 14
10.1 Assignment.............................................. 14
ARTICLE 11. SUCCESSORS AND ASSIGNS......................................... 15
ARTICLE 12. FORCE MAJEURE.................................................. 15
12.1 Force Majeure Standard.................................. 15
12.2 Force Majeure Definition................................ 15
12.3 Obligation to Diligently Cure Force Majeure............. 15
ARTICLE 13. WAIVERS........................................................ 16
ARTICLE 14. REGULATION..................................................... 16
14.1 Laws and Regulations.................................... 16
14.2 NEPOOL Requirements..................................... 16
ARTICLE 15. INTERPRETATION, DISPUTE RESOLUTION............................. 17
15.1 Interpretation.......................................... 17
15.2 Dispute Resolution...................................... 17
ARTICLE 16. SEVERABILITY................................................... 17
ARTICLE 17. MODIFICATIONS.................................................. 17
ARTICLE 18. SUPERSESSION................................................... 17
ARTICLE 19. COUNTERPARTS................................................... 18
ARTICLE 20. HEADINGS....................................................... 18
Appendix A. Incremental Revenues...........................................A-1
Appendix B. Estimation of Supplier Hourly Loads............................B-1
Appendix C. Arbitration Agreement..........................................C-1
AMENDED AND RESTATED WHOLESALE
STANDARD OFFER SERVICE AGREEMENT
This AMENDED AND RESTATED WHOLESALE STANDARD OFFER SERVICE AGREEMENT
("Agreement") is dated as of October 29, 1997 and is by and among
MASSACHUSETTS ELECTRIC COMPANY, a Massachusetts corporation, NANTUCKET
ELECTRIC COMPANY, a Massachusetts corporation (these two parties being
referred to collectively as "MECO"), and USGen New England, Inc. (formerly
named USGen Acquisition Corporation), a Delaware corporation ("Seller"), and
amends and restates and, together with the MECO Wholesale Standard Offer
Service Agreement II dated as of the date hereof between MECO and Seller,
supersedes in its entirety the Wholesale Standard Offer Service Agreement
dated as of August 5, 1997 between NECO and Seller. This Agreement provides
for the purchase by MECO and the sale by Seller of Wholesale Standard Offer
Service, as defined in this Agreement.
ARTICLE 1. BASIC UNDERSTANDINGS
MECO purchases all of its requirements of electricity for resale to its
retail electric customers from its affiliate, New England Power Company
("NEP").
NEP, MECO and other parties have entered into an agreement in settlement
of regulatory proceedings before the Federal Energy Regulatory Commission and
the Massachusetts Department of Public Utilities (the "Massachusetts
Restructuring Agreement") that, among other things, permits MECO to terminate
wholesale purchases from NEP, permits current retail customers of MECO to
purchase electricity from other suppliers on and after a date defined therein
as the "Retail Access Date," or, for a limited time, to purchase Standard
Offer Service from MECO, obligates NEP to supply MECO with power sufficient to
meet the latter's obligations to supply Standard Offer Service, and obligates
NEP to transfer its interests in the electric generating business to another
party or parties.
NEP and Seller have entered an agreement under which Seller will acquire
certain NEP generating assets.
NEP and Seller desire that Seller shall supply electric capacity and
energy to MECO to fulfill a portion of NEP's power supply obligations under
the Massachusetts Restructuring Agreement.
Under the Massachusetts Restructuring Agreement, MECO is obligated to
afford wholesale power suppliers other than NEP the opportunity to commit to
supply MECO with power sufficient to meet MECO's obligation to supply retail
Standard Offer Service after the Retail Access Date.
This Agreement sets forth the terms under which Seller will supply
Wholesale Standard Offer Service to MECO, for a period beginning on the
Closing Date, to enable MECO to meet the needs of its retail customers for
electricity, including all or a portion of the needs of customers receiving
retail Standard Offer Service after the Retail Access Date.
1. DEFINITIONS
The following words and terms shall be understood to have the following
meanings when used in this Agreement, or in any associated documents entered
into in conjunction with this Agreement. In addition, except as otherwise
expressly provided, where terms used in this Agreement are defined in the
NEPOOL Agreement and not otherwise defined herein, such definitions are
expressly incorporated into this Agreement by reference.
AFFILIATE OF MECO - Any company that is a subsidiary of New England Electric
System and its successors.
CLOSING DATE - The date upon which the Seller acquires ownership of generating
assets it purchases from NEP.
COMMISSION OR FERC - The Federal Energy Regulatory Commission or such
successor federal regulatory agency as may have jurisdiction over this
Agreement.
CONTRACT TERMINATION DATE - The date established by the Massachusetts
Restructuring Agreement when the respective obligations of NEP and MECO under
NEP's FERC Electric Tariff, Original Volume No. 1, to sell and purchase
wholesale electric requirements service shall cease. The Contract Termination
Date shall occur on the earlier of the Retail Access Date or the Wholesale
Access Date.
DEPARTMENT - The Massachusetts Department of Public Utilities.
GWh - Gigawatt hour.
ISO - The Independent System Operator to be established in accordance with the
NEPOOL Agreement and the Interim Independent System Operator Agreement as
amended, superseded or restated from time to time.
kWh - Kilowatt- hour.
MASSACHUSETTS RESTRUCTURING AGREEMENT - The Offer of Settlement dated May 28,
1997, entered into by and among the Office of the Attorney General of
Massachusetts, American National Power, American Tractebel Corporation,
Conservation Law Foundation, Division of Energy Resources, KCS Power
Marketing, Inc., Low-Income Intervenors, Massachusetts Community Action
Directors Association, Massachusetts Energy Directors Association,
Massachusetts High Technology Council, Northeast Energy and Commerce
Association, Northeast Energy Efficiency Council, Inc., The Energy Consortium,
Union of Concerned Scientists, U.S. Generating Company, Massachusetts Electric
Company and Nantucket Electric Company, and New England Power Company, as
amended and accepted or approved by the Department and the FERC.
MECO'S SERVICE TERRITORY - The geographic area in which MECO provided electric
service to retail customers on August 6, 1996.
MECO's System - The electrical system of MECO and/or the electrical system of
any Affiliate of MECO.
MMBTU - Million British thermal units.
NEP - New England Power Company, an Affiliate of MECO.
NEPEX - The New England Power Exchange.
NEPOOL - The New England Power Pool.
NEPOOL AGREEMENT - The New England Power Pool Agreement dated as of September
1, 1971, as amended and as may be amended or restated from time to time.
PRICE - The price set forth in SECTION 5.1, below.
PRIME RATE - The prime (or comparable) rate announced from time to time as its
prime rate by the Bank of Boston or its successor, which rate may differ from
the rate offered to its more substantial and creditworthy customers.
PTF - Facilities categorized as Pool Transmission Facilities under the NEPOOL
Agreement.
RETAIL ACCESS DATE - The date so defined under the Massachusetts Restructuring
Agreement, as the later of January 1, 1998, or the date when retail access is
made available to all customers of investor-owned utilities in Massachusetts;
provided, however, in the event that retail access is not yet available to all
customer of the investor-owned utilities in Massachusetts by January 1, 1998,
MECO in its sole discretion shall have the option to accelerate the Retail
Access Date and implement retail access for its customers by providing the
Commission and the Signatories to the Massachusetts Restructuring Agreement
with 90 days' advance notice in writing; and provided further, MECO agrees not
to accelerate, without Seller's consent, the Retail Access Date unless
customers representing 89% of the retail consumption in Massachusetts
currently served by investor-owned utilities or 50% of the retail consumption
in New England (both including the consumption represented by MECO's
customers) have access to retail choice.
STANDARD OFFER AUCTION - The solicitation by MECO of offers from wholesale
power suppliers, including, at their option, NEP and Seller, of electric
energy and associated capacity and ancillary services necessary to meet the
needs of ultimate customers of MECO eligible for and accepting retail Standard
Offer Service on or after the Retail Access Date, and any wholesale electric
supply contracts resulting from that solicitation. The solicitation and any
contract(s) entered into as a result thereof shall not be on terms that are
materially different from those described by MECO in the Massachusetts
Restructuring Agreement, the RFQ dated April 3, 1997, and the letter to
potential asset purchasers dated June 16, 1997, or result in a material
adverse impact on Seller. MECO shall not, without Seller's consent, conduct
the Standard Offer Auction more than once or more than six (6) months prior to
and in no event later than the Retail Access Date, which date shall be as
reasonably determined by MECO.
STANDARD OFFER SERVICE - The electric service provided by MECO pursuant to the
Massachusetts Restructuring Agreement: (i) to retail customers in MECO's
Service Territory during the period, if any, during the term of this Agreement
preceding the Retail Access Date; and (ii) to all of MECO's retail customers
on the Retail Access Date that do not elect to obtain their electric supply
from an alternative supplier on or after the Retail Access Date through
December 31, 2004.
WHOLESALE ACCESS DATE - The date so defined under the Massachusetts
Restructuring Agreement, as the date on which MECO in its sole discretion
decides to terminate its purchase from NEP of wholesale requirements service
pursuant to NEP's FERC Electric Tariff, Original Volume No. 1, by providing
the Commission and the Signatories to the Massachusetts Restructuring
Agreement with 90 days advance notice in writing, said date not to be earlier
than January 1, 1998.
WHOLESALE STANDARD OFFER SERVICE - The generation and delivery, to any
location on the NEPOOL PTF system or MECO's system, of the portion of the
electric capacity, energy and ancillary services required by MECO to meet the
needs of MECO's ultimate customers taking Standard Offer Service, excluding,
after the Retail Access Date, any portion of such requirements that MECO
obtains or has contracted to obtain through the Standard Offer Auction,
determined in accordance with ARTICLE 4. Seller, as the supplier of Wholesale
Standard Offer Service capacity and energy, will be responsible for all
present, or future requirements and associated costs for installed capability,
operable capability, energy, operating reserves, automatic generation control,
including tie benefit payments, losses and any congestion charges associated
with Seller's supply of Wholesale Standard Offer Service and any other
requirements imposed by NEPOOL or the ISO, as they may be in effect from time
to time. To the extent that any NEPOOL, ISO or any successor entity expenses
or uplift costs are allocated to wholesale suppliers, the portion of such
costs associated with Seller's supply of Standard Offer Service will also be
the responsibility of Seller. To the extent any costs contemplated by this
paragraph are applicable to MECO and recoverable by MECO from its customers,
MECO shall be responsible for such costs.
2. TERM AND REGULATORY APPROVAL
a. Term
The term of this Agreement shall begin at 12:01 am on the Closing Date
and continue until the earlier of: (a) 11:59 pm on December 31, 2004; or (b)
the first date that MECO has no requirements for electric capacity and energy
to supply Standard Offer Service that are not satisfied by contracts resulting
from the Standard Offer Auction.
b. Obtaining and Maintaining Required Permits
i. Performance under this Agreement is conditioned upon all
Parties securing and maintaining such federal, state or local approvals,
grants or permits as may be necessary for the sale and purchase of Wholesale
Standard Offer Service, which shall not include any approvals, grants, or
permits necessary for the operation of any particular generating facility.
Each Party shall use reasonable efforts to acquire and maintain such
approvals, grants or permits. If the acquisition or maintenance of a
particular approval, grant, or permit requires a modification to this
Agreement, then the Parties agree to negotiate in good-faith to reach a
mutually agreeable modification of the Agreement. The Parties are not
required to reach such a mutually acceptable modification.
ii. Seller will file this Agreement with FERC (and any other
regulatory agency as may have jurisdiction over the Agreement) in accordance
with the provisions of applicable laws, rules and regulations. Seller will be
responsible for any filing fees for filing this Agreement with FERC (and any
other regulatory agency as may have jurisdiction over the Agreement) and for
any regulatory assessments associated with sales under this Agreement. FERC
approval of this Agreement shall be a condition to the obligations of the
Parties hereunder.
3. SALE AND PURCHASE
Seller shall sell and deliver to the Delivery Points, as defined in
ARTICLE 6, SECTION 6.1, and MECO shall purchase 90.78% of MECO's requirements
for Wholesale Standard Offer Service. MECO's requirements for Wholesale
Standard Offer Service shall be determined on the basis of ARTICLE 6, SECTION
6.3, below, and the price for such sale and purchase shall be as set forth in
ARTICLE 5, SECTION 5.1, below.
4. PRICE AND BILLING
a. Price
For each kilowatt hour of Wholesale Standard Offer Service that Seller
delivers to the Delivery Points, in accordance with ARTICLE 6, SECTION 6.3,
below, MECO shall pay Seller a price equal to the following amounts for each
period during the term of this Agreement:
Period Price in Cents per kWh
1998 3.2 Cents
1999 3.5 Cents
2000 3.8 Cents
2001 3.8 Cents
2002 4.2 Cents
2003 4.7 Cents
2004 5.1 Cents
In addition, in the event of substantial increases in the market price
of No. 6 residual fuel oil (1% sulphur) and natural gas after 1999 as
described in Appendix A, MECO shall pay Seller a percentage of any incremental
revenues received by MECO as a result of MECO's Customer Rate Fuel Adjustment,
described in Appendix A, attached and incorporated herein by reference. Such
percentage, with respect to the billing month, shall equal the percentage of
MECO's total Standard Offer Service requirements during the month that Seller
delivers under this Agreement.
a. Payment
i. On or before the tenth (10th) day of each month during the
term of this Agreement, MECO shall: (i) calculate the amount
due and payable to Seller pursuant to this ARTICLE 5 with
respect to the preceding month; and (ii) advise Seller of
the schedule upon which it shall pay the amount so
calculated, which schedule shall comply with paragraph (b),
below. The amount payable shall be calculated by
multiplying the Price specified in the first paragraph of
ARTICLE 5, SECTION 5.1, above, for the applicable Contract
Period by the quantity of Wholesale Standard Offer Service
delivered by Seller to the Delivery Points for MECO's
Standard Offer Service customers in the month, as determined
in accordance with ARTICLE 6, SECTION 6.3, below. Because
quantities determined under SECTION 6.3 are estimated,
subject to a reconciliation process described in SECTION
6.3(d), quantities used in calculations under this paragraph
(a) shall be subject to adjustment, whether positive or
negative, in subsequent months' calculations, to reflect
that reconciliation process, and any adjusted quantities
shall be applied to the Price applicable during the month of
the calculation being adjusted. Seller's proportional share
of Customer Rate Fuel Adjustment incremental revenue shall
be added to such amount.
ii. MECO shall pay Seller any amounts due and payable on or
before the twenty-fifth (25th) day after the date a
calculation is made pursuant to paragraph (a), provided
that, if and to the extent MECO pays Seller any portion of
the amount due and payable before the twenty-fifth (25th)
day after a calculation is made, it shall be entitled,
without interest or penalty, to defer payment of an equal
portion of the amount due and payable for that month by the
lesser of: (i) the same number of days that the early
payment preceded the twenty-fifth day after the calculation;
and (ii) twenty-five (25) days. If all or any part of any
amount due and payable pursuant to paragraph (a) shall
remain unpaid thereafter, interest shall thereafter accrue
and be payable to Seller on such unpaid amount at a rate per
annum equal to two percent (2%) above the Prime Rate in
effect on the date of such bill; provided, however, if the
amount due and payable is disputed, interest shall accrue
and be payable to Seller on the unpaid amount finally
determined to be due and payable at a rate per annum equal
to the Prime Rate in effect on the date of the calculation
pursuant to paragraph (a); and provided, further, no
interest shall accrue in favor of Seller or MECO on amounts
that are added to or credited against a calculation due to
the adjustment of estimated quantities in accordance with
paragraph (a) and ARTICLE 6, SECTION 6.3.
iii. With respect to reconciliation adjustments pursuant to
SECTION 6.3(d) or any error in a calculation (whether the
amount is paid or not), any overpayment, underpayment, or
reconciliation adjustment will be refunded or paid up, as
appropriate. Interest shall accrue from the date of the
error or adjustment on the unpaid or overpaid amount finally
determined to be due and shall be calculated pursuant to
Section 35.19a of the Commission regulations.
b. Taxes, Fees and Levies
Seller shall be obligated to pay all present and future taxes, fees and
levies which may be assessed upon Seller by any entity upon the purchase or
sale of electricity covered by the Agreement. To the extent such taxes, fees,
and levies are allowed to be, and are actually, recoverable by MECO from its
customers, MECO shall reimburse Seller for such taxes, fees, and levies paid
by Seller.
5. DELIVERY, LOSSES, AND DETERMINATION AND REPORTING OF HOURLY LOADS
a. Delivery
All electricity shall be delivered to MECO in the form of three-phase
sixty-hertz alternating current at any location on the NEPOOL PTF system or
MECO's System ("Delivery Points"). Title shall pass to MECO at the Delivery
Point and Seller shall incur no expense or risk beyond the Delivery Point
other than those described in SECTION 6.2. If the NEPOOL control area
experiences congestion, Seller will be responsible for any congestion costs
incurred in delivering power across the PTF system to MECO to the extent such
costs are imposed by NEPOOL or the ISO on suppliers. Seller shall be
responsible for all transmission and distribution costs associated with the
use of transmission systems outside of NEPOOL and any local point to point
charges and distribution charges needed to deliver the power to the NEPOOL
PTF.
b. Losses
Seller shall be responsible for all transmission and distribution losses
associated with the delivery of electricity supplied under this Agreement to
the meters of ultimate customers of MECO receiving retail Standard Offer
Service, provided, however, that losses do not include service to unmetered
facilities for which estimates of kWh use are available and provided, further,
that Seller shall not be responsible for unmetered use or consumption of
electricity by MECO's Affiliates. Seller shall provide MECO at the Delivery
Points with additional quantities of electricity and ancillary services to
cover such losses, but Seller shall not be entitled to payment under ARTICLE 5
of this Agreement for such additional quantity. The quantities required for
this purpose in each hour of a billing period shall be determined in
accordance with NEPOOL's, NEP's and MECO's filed procedures for loss
determination.
c. Determination and Reporting of Hourly Loads
i. To meet its NEPOOL obligations, Seller, or a NEPOOL member
having an own-load dispatch or settlement account with the
NEPOOL billing system with whom Seller has a load inclusion
agreement, must report to NEPOOL or the ISO the Standard
Offer Service load for which Seller is providing Wholesale
Standard Offer Service pursuant to this Agreement, including
losses. To accomplish this, MECO will estimate its total
hourly Standard Offer Service load based upon average load
profiles developed for each MECO customer class and MECO's
actual total hourly load. Appendix B, attached and
incorporated herein by reference, provides a general
description of the estimation process that MECO will
initially employ (the "Estimation Process"). MECO reserves
the right, subject to the approval of appropriate regulatory
authorities having jurisdiction, to modify the Estimation
Process in the future, provided that any such modification
be designed to improve the accuracy of its results and
provided further that MECO shall consult with Seller and
other similarly situated sellers to the maximum extent
permitted by any applicable standards of conduct. MECO will
report to NEPOOL, on behalf of Seller or such other NEPOOL
member, Seller's hourly Standard Offer Service load, which
shall equal the portion of MECO's estimated total Standard
Offer Service hourly load for which Seller is responsible
for supplying Wholesale Standard Offer Service under this
Agreement.
ii. MECO will report to NEPOOL or the ISO Seller's hourly
adjusted Standard Offer Service loads by 12:00 noon of the
second following business day. This adjusted load should be
added by NEPOOL or the ISO to the other NEPOOL load of
Seller or such other NEPOOL member.
iii. At the end of each month, MECO shall aggregate Seller's
hourly loads for the month as determined by the Estimation
Process. For purposes of SECTION 5.1, above, the result of
the Estimation Process, less losses to the Standard Offer
Service customers' meters determined as specified in ARTICLE
6 SECTION 6.2, above, will be deemed to be the quantity of
Wholesale Standard Offer Service delivered by Seller to the
Delivery Points in a month.
iv. To refine the estimates of Seller's monthly Standard Offer
Service load developed by the Estimation Process, a monthly
calculation will be performed to reconcile the original
estimate of Seller's Standard Offer Service loads to actual
customer usage based on meter reads. MECO will apply any
resulting billing adjustment (debit or credit) to Seller's
account no later than the last day of the third month
following the billing month. Appendix B, attached and
incorporated herein by reference, also provides a general
description of this reconciliation process.
6. DEFAULT AND TERMINATION
a. Material Breach and Termination
i. (1) If MECO fails in any material respect to comply with,
observe or perform any covenant, warranty or
obligation under this Agreement (except due to causes
excused by force majeure or attributable to Seller's
wrongful act or wrongful failure to act); and
(2) After receipt of written notice from Seller such
failure continues for the Cure Period (as defined
below), or, if such failure cannot be reasonably cured
within the Cure Period, such further period as shall
reasonably be required to effect such cure (except in
the case of a payment default), provided that MECO
commences within the Cure Period to effect such cure
and at all times thereafter proceeds diligently to
complete such cure as quickly as possible; then
(3) Seller shall have the right to terminate this
Agreement, subject to paragraph (c) below. For
purposes of this Section 7.1(a), the Cure Period shall
mean five days in the case of a failure by MECO to
fulfill its payment obligations pursuant to Section
5.2 and forty-five (45) days in the case of a failure
by MECO to comply with, observe or perform any other
covenant, warranty or obligation under this Agreement.
If an unexcused failure to pay continues for fifteen
(15) days Seller shall have the right to suspend
service until payment is made in full and appropriate
security is posted for future payments or terminate
this Agreement.
ii. (1) If Seller fails in any material respect to comply
with, observe, or perform any covenant, warranty or
obligation under this Agreement (except due to causes
excused by force majeure or attributable to MECO's
wrongful act or wrongful failure to act); and
(2) After receipt of written notice from MECO such failure
continues for a period of forty-five (45) days, or, if
such failure cannot be reasonably cured within such
forty-five (45) day period, such further period as
shall reasonably be required to effect such cure,
provided that Seller commences within such forty-five
(45) day period to effect such cure and at all times
thereafter proceeds diligently to complete such cure
as quickly as possible; then
(3) MECO shall have the right to terminate this Agreement,
subject to paragraph (c) below.
iii. Any termination arising out of the exercise of the
termination rights specified in paragraphs (a) or (b) above
(with the exception of termination for a payment default)
may not take effect unless and until an arbitrator (pursuant
to ARTICLE 15, SECTION 15.2 of this Agreement) has made a
ruling that the exercise of such termination right was
valid. The fact that one party alleged to be in material
breach of this Agreement ("Alleged Breaching Party")
complies with the request of the other to cure an alleged
material breach shall not be considered by the arbitrator as
an admission against the Alleged Breaching Party or evidence
that such party was or was not in material breach.
iv. Nothing in this SECTION 7.1 shall be construed to limit the
right of any party to seek any remedies for damages, as
limited by ARTICLE 9 of this Agreement, even if a cure of an
alleged breach is made within the periods of time specified
for curing any such breach stated above. The provisions of
this SECTION 7.1 are intended only to provide the exclusive
process through which one party may exercise and effectuate
its right to terminate this Agreement as a result of a
material breach of this Agreement.
7. NOTICES, REPRESENTATIVES OF THE PARTIES
a. Notices
Any notice, demand, or request required or authorized by this Agreement
to be given by one party to another party shall be in writing. It shall
either be sent by facsimile (confirmed by telephone), overnight courier,
personally delivered and acknowledged in writing or by registered or certified
mail, (return receipt requested) postage prepaid, to the representative of the
other party designated in this ARTICLE 8. Any such notice, demand, or request
shall be deemed to be given (i) when sent by facsimile confirmed by telephone,
(ii) when actually received if delivered by courier or personal deliver or
(iii) three (3) days after deposit in the United States mail, if sent by first
class mail.
Notices and other communications by Seller to MECO shall be addressed
to:
Michael J. Hager
Massachusetts Electric Company
25 Research Drive
Westborough MA 01582
Fax (508) 389-3001
Notices and other communications by MECO to Seller shall be addressed
to:
USGen New England, Inc.
7500 Old Georgetown Road, 13th Floor
Bethesda, MD 20814
Attention: Stephen A. Herman, Esq.
Fax: (301) 718-6913
Any party may change its representative by written notice to the others.
b. Authority of Representative
The parties' representatives designated in ARTICLE 8, SECTION 8.1 shall
have full authority to act for their respective principals in all technical
matters relating to the performance of this Agreement. They shall not,
however, have the authority to amend, modify, or waive any provision of this
Agreement unless they are authorized officers of their respective entities.
8. LIABILITY, INDEMNIFICATION, AND RELATIONSHIP OF PARTIES
a. Limitation on Consequential, Incidental and Indirect Damages
To the fullest extent permissible by law, neither MECO nor Seller, nor
their respective officers, directors, agents, employees, parent or affiliates,
successor or assigns, or their respective officers, directors, agents, or
employees, successors, or assigns, shall be liable to the other party or its
parent, subsidiaries, affiliates, officers, directors, agents, employees,
successors or assigns, for claims, suits, actions or causes of action for
incidental, indirect, special, punitive, multiple or consequential damages
(including attorney's fees or litigation costs) connected with or resulting
from performance or non-performance of this Agreement, or any actions
undertaken in connection with or related to this Agreement, including without
limitation any such damages which are based upon causes of action for breach
of contract, tort (including negligence and misrepresentation), breach of
warranty, strict liability, Massachusetts Gen. Laws ch 93A, statute, operation
of law, or any other theory of recovery. The provisions of this SECTION 9.1
shall apply regardless of fault and shall survive termination, cancellation,
suspension, completion or expiration of this Agreement.
b. Recovery of Direct Damages Permitted
Notwithstanding the provisions of ARTICLE 9, SECTION 9.1, subject to the
duty to mitigate damages as provided under common law of damages recovery,
both MECO and Seller shall be entitled to recover their actual, direct damages
(i) incurred as a result of the other party's breach of this Agreement or (ii)
incurred as a result of any other claim arising out of any action undertaken
in connection with or related to this Agreement. For purposes of avoiding any
disputes about the difference between direct damages and consequential
damages, the parties agree as follows:
i. (1) To the extent that MECO is found to be in breach of
this Agreement or liable under another cause of
action; and
(b) as a result of such breach or event giving rise to
the cause of action, Seller suffers loss of profits
that Seller reasonably expected to have received from
MECO under this Agreement had MECO performed under
this Agreement; then
(c) Seller shall be entitled to recover any lost
profits that Seller can demonstrate it lost or will
lose as a result of MECO's breach, subject to the duty
to mitigate.
ii. (1) To the extent that Seller fails to provide MECO
Wholesale Standard Offer Service Power under the terms
of this Agreement; and
(b) as a result, Seller is found to be in material
breach of this Agreement or liable under another cause
of action; and
(c) subject to the duty to mitigate, MECO purchases
(as a result of Seller's failure) power from a third
party at a price that is higher than what MECO would
have paid under the terms of this Agreement, MECO may
recover the difference between the price MECO paid to
such third party and the price it would have paid had
Seller performed; provided, however, Seller shall not
be liable to MECO for lost profits associated with any
expected revenue streams from the sale of power to
third parties or lost profits from any other contracts
or sales.
iii. Except as provided in paragraphs (a) and (b) above, neither
MECO nor Seller shall be liable to the other for lost
profits arising out of performance, or non-performance of
this Agreement, whether such lost profits may be categorized
as direct, incidental, indirect, or consequential damages
and irrespective of whether such claims are based upon
warranty, tort, strict liability, contract, statute
(including Mass. G.L. ch 93A), operation of law or
otherwise.
c. Indemnification
i. Seller agrees to defend, indemnify and save MECO, its
officers, directors, employees, agents, successors, assigns,
and Affiliates and their officers, directors, employees, and
agents harmless from and against any and all claims, suits,
actions or causes of action for damage by reason of bodily
injury, death, or damage to property caused by Seller, its
officers, directors, employees, agents or affiliates or
caused by or sustained on its facilities, except to the
extent caused by an act of negligence or willful misconduct
by an officer, director, agent, employee or Affiliate of
MECO or their successors or assigns.
ii. MECO agrees to defend, indemnify and save Seller, its
officers, directors, employees, agents, successors, assigns,
and affiliates and their officers, directors, employees, and
agents harmless from and against any and all claims, suits,
actions or causes of action for damage by reason of bodily
injury, death, or damage to property caused by MECO, its
officers, directors, employees, agents or affiliates or
caused by or sustained on its facilities, except to the
extent caused by an act of negligence or willful misconduct
by an officer, director, agent, employee or Affiliate of
Seller or their successors or assigns.
iii. If any party intends to seek indemnification under this
ARTICLE from the other party with respect to any action or
claim, the party seeking indemnification shall give the
other party notice of such claim or action within fifteen
(15) days of the commencement of, or actual knowledge of,
such claim or action. Such party seeking indemnification
shall have the right, at its sole cost and expense, to
participate in the defense of any such claim or action. The
party seeking indemnification shall not compromise or settle
any such claim or action without the prior consent of the
other party, which consent shall not be unreasonably
withheld.
d. Independent Contractor Status
Nothing in this Agreement shall be construed as creating any
relationship between MECO and Seller other than that of independent
contractors for the sale and purchase of electricity provided as Wholesale
Standard Offer Service.
9. ASSIGNMENT
a. Assignment
This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party
hereto, including by operation of law without the prior written consent of the
other party, nor is this Agreement intended to confer upon any other Person
except the parties hereto any rights or remedies hereunder. Notwithstanding
the foregoing, (i) MECO may, without Seller's prior written consent, (A)
assign all or a portion of its rights and obligations under this Agreement to
any Affiliate of MECO or (B) assign its rights and obligations hereunder, or
transfer such rights and obligations by operation of law, to any corporation
or other entity with which or into which MECO shall merge or consolidate or to
which MECO shall transfer all or substantially all of its assets, provided
that such Affiliate or other entity agrees to be bound by the terms thereof;
provided, in either case, that the assignee or transferor shall have senior
securities rated investment grade or better; (ii) the Seller may assign all of
its rights and obligations hereunder to any wholly owned Subsidiary (direct or
indirect) of PG&E Corporation and upon the MECO's receipt of notice from
Seller of any such assignment, the Seller will be released from all
liabilities and obligations hereunder, accrued and unaccrued, such assignee
will be deemed to have assumed, ratified, agreed to be bound by and perform
all such liabilities and obligations, and all references herein to "Seller"
shall thereafter be deemed references to such assignee, in each case without
the necessity for further act or evidence by the parties hereto or such
assignee; provided, however, that no such assignment and assumption shall
release the Buyer from its liabilities and obligations hereunder unless the
assignee shall have acquired all or substantially all of the Buyer's assets;
provided, further, however, that no such assignment and assumption shall
relieve or in any way discharge PG&E Corporation from the performance of its
duties and obligations under the Guaranty dated as of the date of this
Agreement executed by PG&E Corporation, and (iii) the Seller or its permitted
assignee may assign, transfer, pledge or otherwise dispose of its rights and
interests hereunder to a trustee or lending institution(s) for the purposes of
financing or refinancing the Purchased Assets, including upon or pursuant to
the exercise of remedies under such financing or refinancing, or by way of
assignments, transfers, conveyances or dispositions in lieu thereof; provided,
however, that no such assignment or disposition shall relieve or in any way
discharge the Seller or such assignee from the performance of its duties and
obligations under this Agreement. MECO agrees to execute and deliver such
documents as may be reasonably necessary to accomplish any such assignment,
transfer, conveyance, pledge or disposition of rights hereunder so long as
MECO's rights under this Agreement are not thereby altered, amended,
diminished or otherwise impaired.
10. SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and shall be binding upon
the parties hereto and their respective permitted successors and assigns.
11. FORCE MAJEURE
a. Force Majeure Standard
The parties shall be excused from performing their respective
obligations hereunder and shall not be liable in damages or otherwise, if and
only to the extent that they are unable to so perform or are prevented from
performing by an event of force majeure.
b. Force Majeure Definition
An event of force majeure includes, without limitation, storm, flood,
lightning, drought, earthquake, fire, explosion, equipment failure, civil
disturbance, labor dispute, act of God or the public enemy, action of a court
or public authority, or any other cause beyond a party's control but only if
and to the extent that the event directly affects the availability of the
transmission or distribution facilities of NEPOOL, MECO or an Affiliate of
MECO necessary to deliver Wholesale Standard Offer Service to MECO's
customers. Events affecting the availability or cost of operating any
generating facility shall not be events of force majeure.
c. Obligation to Diligently Cure Force Majeure
If any party shall rely on the occurrence of an event or condition
described in ARTICLE 12, SECTION 12.2, above, as a basis for being excused
from performance of its obligations under this Agreement, then the party
relying on the event or condition shall:
a. provide written notice to the other parties promptly but in
no event later than 5 days of the occurrence of the event or
condition giving an estimation of its expected duration and
the probable impact on the performance of its obligations
hereunder;
b. exercise all reasonable efforts to continue to perform its
obligations hereunder;
c. expeditiously take reasonable action to correct or cure the
event or condition excusing performance; provided that
settlement of strikes or other labor disputes will be
completely within the sole discretion of the party affected
by such strike or labor dispute;
d. exercise all reasonable efforts to mitigate or limit damages
to the other parties to the extent such action will not
adversely affect its own interests; and
e. provide prompt notice to the other parties of the cessation
of the event or condition giving rise to its excuse from
performance.
12. WAIVERS
The failure of either party to insist in any one or more instance upon
strict performance of any of the provisions of this Agreement or to take
advantage of any of its rights under this Agreement shall not be construed as
a general waiver of any such provision or the relinquishment of any such
right, but the same shall continue and remain in full force and effect, except
with respect to the particular instance or instances.
13. REGULATION
a. Laws and Regulations
This Agreement and all rights, obligations, and performances of the
parties hereunder, are subject to all applicable Federal and state laws, and
to all duly promulgated orders and other duly authorized action of
governmental authority having jurisdiction.
b. NEPOOL Requirements
This Agreement must comply with all NEPOOL Criteria, Rules, and Standard
Operating Procedures ("Rules"). If, during the term of this Agreement, the
NEPOOL Agreement is terminated or amended in a manner that would eliminate or
materially alter a Rule affecting a right or obligation of a party hereunder,
or if such a Rule is eliminated or materially altered by NEPOOL, the parties
agree to negotiate in good faith in an attempt to amend this Agreement to
incorporate a replacement Rule ("Replacement Rule"). The intent of the
parties is that any such Replacement Rule reflect, as closely as possible, the
intent and substance of the Rule being replaced as such Rule was in effect
prior to such termination or amendment of the NEPOOL Agreement or elimination
or alteration of the Rule. If the parties are unable to reach agreement on
such an amendment, the parties agree to submit the matter to arbitration under
the terms of Appendix C, attached and incorporated herein by reference, and to
seek a resolution of the matter consistent with the above stated intent.
14. INTERPRETATION, DISPUTE RESOLUTION
a. Interpretation
The interpretation and performance of this Agreement shall be in
accordance with and controlled by the laws of The Commonwealth of
Massachusetts.
b. Dispute Resolution
All disputes between MECO and Seller arising out of or relating to this
Agreement which are defined as "Arbitrable Claims" in SECTION 2 of Appendix C,
attached and incorporated herein by reference, shall be resolved by binding
arbitration and be governed by the terms of such Arbitration Agreement. Any
arbitration of an Arbitrable Claim that is substantially related to an
arbitrable claim under a Wholesale Standard Offer Service Agreement between
Seller and The Narragansett Electric Company shall be conducted jointly with
the arbitration of the latter claim, before the same panel of arbitrators,
with MECO and The Narragansett Electric Company jointly exercising their
rights regarding the selection of arbitrators. Any decisions of the
arbitrators shall be final and binding upon the parties.
15. SEVERABILITY
If any provision or provisions of this Agreement shall be held invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.
16. MODIFICATIONS
No modification to this Agreement will be binding on any party unless it
is in writing and signed by all parties.
17. SUPERSESSION
This Agreement constitutes the entire agreement between the parties
relating to the subject matter hereof and its execution supersedes any other
agreements, written or oral, between the parties concerning such subject
matter.
18. COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each
executed counterpart shall have the same force and effect as an original
instrument.
19. HEADINGS
Article and Section headings used throughout this Agreement are for the
convenience of the parties only and are not to be construed as part of this
Agreement.
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement on their behalf as of the date first
above written.
MASSACHUSETTS ELECTRIC COMPANY
BY:
Its
NANTUCKET ELECTRIC COMPANY
BY:
Its
USGEN NEW ENGLAND, INC.
BY:
Its
APPENDIX A. INCREMENTAL REVENUES
From MECO Customer Rate Fuel Adjustment
In the event of substantial increases in the market prices of No. 6
residual fuel oil (1% sulphur) and natural gas after 1999, incremental
revenues received by MECO as a result of MECO's Customer Rate Fuel Adjustment,
described below, will be fully allocated among suppliers of Wholesale Standard
Offer Service Power in proportion to the percentage of MECO's total Standard
Offer Service requirements during the month that such supplier delivers under
its respective agreement with MECO.
MECO's Customer Rate in effect for a given billing month is multiplied
by a "Fuel Adjustment" that is set equal to 1.0 and thus has no impact on the
Customer Rate unless the "Market Gas Price" plus "Market Oil Price" for the
billing month exceeds the "Fuel Trigger Point" then in effect, where:
The MECO Customer rate for retail customers who elect Standard Offer
Service by choice or inaction is the following predetermined, flat rate
for energy consumed:
Calendar Year Price per Kilowatt hour
1998 2.8 cents
1999 3.1 cents
2000 3.4 cents
2001 3.8 cents
2002 4.2 cents
2003 4.7 cents
2004 5.1 cents
Market Gas Price is the average of the values of "Gas Index" for the
most recent available twelve months, where:
Gas Index is the average of the daily settlement prices for the
last three days that the NYMEX Contract (as defined below) for the
month of delivery trades as reported in the "Wall Street Journal",
expressed in dollars per MMBtu. NYMEX Contract shall mean the New
York Mercantile Exchange Natural Gas Futures Contract as approved
by the Commodity Futures Trading Commission for the purchase and
sale of natural gas at Henry Hub;
Market Oil Price is the average of the values of "Oil Index" for the
most recent available twelve months, where:
Oil Index is the average for the month of the daily low quotations
for cargo delivery of 1.0% sulphur No. 6 residual fuel oil into
New York harbor, as reported in "Platt's Oilgram U.S. Marketscan"
in dollars per barrel and converted to dollars per MMBtu by
dividing by 6.3; and
If the indices referred to above should become obsolete or no longer
suitable, MECO shall file alternate indices with the Massachusetts Department
of Public Utilities.
Fuel Trigger Point is the following amounts, expressed in dollars per
MMBtu, applicable for all months in the specified calendar year:
2000 $5.35/MMBtu
2001 $5.35
2002 $6.09
2003 $7.01
2004 $7.74
In the event that the Fuel Trigger Point is exceeded, the Fuel
Adjustment value for the billing month is determined based according to the
following formula:
Fuel = (Market Gas Price +$.60/MMBtu)+(Market Oil Price +$.04/MMBtu)
-------------------------------------------------------------
Adjustment Fuel Trigger Point+$.60+$.04/MMBtu
Where:
Market Gas Price, Market Oil Price and Fuel Trigger Point are as
defined above. The values of $.60 and $.04/MMBtu represent for
gas and oil respectively, estimated basis differentials or market
costs of transportation from the point where the index is
calculated to a proxy power plant in the New England market.
For example if at a point in the year 2002 the Market Gas Price and
Market Oil Price total $6.50 ($3.50/MMBtu plus $3.00/MMBtu respectively), the
Fuel Trigger Point of 6.09 would be exceeded. In this case the Fuel
Adjustment value would be:
($3.50+$.60/MMBtu)+($3.00+$.04/MMBtu) = 1.0609
-------------------------------------
$6.09+$.60+$.04/MMBtu
The Customer Rate paid to MECO is increased by this Fuel Adjustment factor for
the billing month, becoming 4.4548 cents/kWh (4.2 x 1.0609).
In subsequent months the same comparisons are made and, if applicable, a
Fuel Adjustment determined.
APPENDIX B. ESTIMATION OF SUPPLIER HOURLY LOADS
OVERVIEW
Generating units operated by suppliers are dispatched by the power pool
to meet the region's electrical requirements reliably, and at the lowest
possible cost. As a result, a supplier's electricity production may not match
the demand of its customers. In each hour some suppliers with low cost
production units are net sellers of electricity to the pool, while other
suppliers are purchasing power from the pool to meet the demand of their
customers. To determine the extent to which suppliers are net buyers or
sellers on an hourly basis, it is necessary to estimate the hourly aggregate
demand for all of the customers served by each supplier ("own-load"). MECO
will estimate Seller's Wholesale Standard Offer Service "own-load" within
MECO's service territory and report the hourly results to NEPOOL or the ISO on
a daily basis.
The estimation process is a cost effective approach to producing results
that are reliable, unbiased and reasonably accurate. The hourly load
estimates will be based on rate class load profiles which will be developed
from statistically designed samples. Each day, the class load shapes will be
scaled to the population of customers served by each supplier contracting with
MECO as a result of the Standard Offer Auction ("Standard Offer Auction
Supplier"), Seller, and any other entity providing Wholesale Standard Offer
Service. In cases where telemetered data on individual customers are
available, they will be used in place of the estimated shapes. On a monthly
basis, the estimates will be refined by incorporating actual usage data
obtained from meter readings. In both processes, the sum of all suppliers'
estimated Standard Offer Service loads will match the total load delivered
into the distribution system. A description of the estimation process
follows.
DAILY ESTIMATION OF SUPPLIERS' OWN LOAD
The daily process estimates the hourly load for each Standard Offer
Auction Supplier, Seller, and any other entity providing Wholesale Standard
Offer Service, for the previous day. There are four components in this
process:
- Select a proxy date from the previous year with characteristics
which best match the day for which the hourly demand estimates are
being produced. Extract class load shapes for the selected proxy
date from the load research data base.
- Scale the class load shapes appropriately for each individual
customer based on the usage level of the customer relative to the
class average usage level.
- Calculate a factor for each customer which reflects their relative
usage level and includes an adjustment for losses ("load
adjustment factor"). Aggregate the load adjustment factors across
the customers served by each supplier in each class.
- Produce a preliminary estimate of each supplier's hourly loads by
combining the proxy day class load shapes with the supplier's
total load adjustment factors. Aggregate the loads across the
classes for each supplier.
- Adjust the preliminary hourly supplier estimates so that their sum
is equal to MECO's actual hourly metered loads (as metered at the
point of delivery to the distribution system) by allocating any
differences to suppliers in proportion to their estimated load.
MONTHLY RECONCILIATION PROCESS
The monthly process will improve the estimates of Standard Offer Service
supplier loads by incorporating the most recent customer usage information,
which will be available after the monthly meter readings are processed. A
comparison will be made between customers' estimated and actual usage, by
billing cycle, then summed across billing cycles for each supplier. The ratio
between the actual kWh and the estimated kWh reflects the kWh amount for which
the supplier may have been overcharged or undercharged by NEPOOL or the ISO
during the month. This ratio will be used to develop a kWh adjustment amount
for each supplier for the calendar month. The sum of the adjustments will be
zero because the total kWh will still be constrained to equal MECO's actual
hourly metered Standard Offer Service loads during the month.
APPENDIX C. ARBITRATION AGREEMENT
ARBITRATION AGREEMENT
This Arbitration Agreement, dated as of _______________________ (date of
Wholesale Standard Offer Service Agreement), is entered into between
Massachusetts Electric Company and Nantucket Electric Company, both
Massachusetts corporations (referred to collectively as MECO") and
________________________, a __________ (describe entity) ("Seller").
Reference is made to that certain Wholesale Standard Offer Service Agreement
dated as of ____________________, 199_ (the "Service Agreement") between MECO
and Seller. Unless otherwise specified or apparent from the context of this
Arbitration Agreement, the term "Party" shall mean either MECO or Seller, or
both of them.
WHEREAS, MECO and Seller wish to avoid the burden, time, and expense of
court proceedings with respect to any disputes that may arise from or relate
to the Service Agreement, and to submit such disputes to mandatory binding
arbitration if they cannot first be resolved through negotiation and
mediation.
NOW, THEREFORE, MECO and SELLER AGREE AS FOLLOWS:
(i) Mediation
Before resorting to mediation or arbitration under this Arbitration
Agreement, the Parties will try to resolve promptly through negotiation any
Arbitrable claim, as defined below. If the Arbitrable Claim has not been
resolved through negotiation within ten (10) days after the existence of the
Arbitrable Claim has been brought to the attention of the other Party in a
writing, any Party may request in writing to resolve the Arbitrable Claim
through mediation conducted by a mediator selected by agreement of the
Parties. The mediation procedure shall be determined by the Parties in
consultation with the mediator. Any medication pursuant hereto shall be kept
confidential in accordance with Mass. G.L. c. 233, sec. 23C. The fees and
expenses of the mediator shall be borne equally by the Parties. If the Parties
are unable to agree upon the identity of a mediator or a mediation procedure
within ten (10) days after a Party has requested mediation in writing or if
the Arbitrable Claim has not been resolved to the satisfaction of either MECO
or Seller within forty (40) days after the Parties have selected a mediator
and agreed upon a mediation procedure, either Party may invoke arbitration
pursuant to the following sections by notifying the other Party of such
selection in writing consistent with Section 3(c), below.
(ii) Mandatory Arbitration
(1) Except as provided in paragraph (b) of this Section 2 and in
Section 8, below, any case, controversy or claim arising out of or
relating to the Service Agreement, its breach, or any other
disputes arising out of the business relationship created by the
Service Agreement, of whatever nature, including but not limited
to any claim based in contract, in law, in equity, any statute,
regulation, or theory of law now in existence or which may come
into existence in the future, whether known or unknown, including
without limitation, claims based upon deceit, fraudulent
inducement, misrepresentation, 18 U.S.C sec. 1962 and 1964 (RICO),
and Mass. G.L. c. 93A, the federal and state antitrust laws
(collectively, the "Arbitrable Claims"), which cannot be resolved
by negotiation or mediation, as provided in Section 1 above, shall
be submitted to mandatory, binding, and final arbitration in
accordance with procedures set forth in this Agreement, which
shall constitute the exclusive remedy for any and all Arbitrable
Claims.
(2) Notwithstanding paragraph (a) above, physical accidents or
events giving rise to negligence or intentional tort claims for
the recovery of property damages and/or damages for personal
injury and failure to make payments due under Section 5.2 of the
Service Agreement shall not be considered "Arbitrable Claims."
However disputes regarding the interpretation or scope of any
indemnification clauses in the Service Agreement shall be subject
to arbitration, even if the dispute relates to whether one Party
must indemnify the other for property damages and/or damages for
personal injury, the recovery of which was or will be determined
in a court of law.
(1) Each Party agrees that it will not attempt to circumvent
this Arbitration Agreement by coordinating or cooperating
with their respective parent companies of affiliates or
guarantors in the filing of a legal action in the name of
any of the parent companies or affiliates or guarantors of
the Parties to this Arbitration Agreement regarding claims
that otherwise are subject to this Arbitration Agreement.
Any Party failing to comply with this provision shall
indemnify the other Party against, and hold the other
harmless from, the costs (including reasonable litigation
costs) incurred by the other in defending any and all claims
brought by a parent company or affiliate or guarantor of the
other in a court of law regarding claims that otherwise
would be Arbitrable Claims under this Arbitration Agreement.
(i) Selection and Qualification of Arbitrators
1) Any arbitration shall be conducted by a panel
of three neutral arbitrators, consisting of (i)
a practicing lawyer admitted to practice in the
Commonwealth of Massachusetts; (ii) a person
with professional experience in and substantial
knowledge of the power generation industry in
any one or more of the New England States, who
may be, but need not be a lawyer, and (iii) a
person with professional experience in and
substantial knowledge of power markets in any
one or more of the New England States, who may,
but need not be, a lawyer (collectively, the
"Arbitration Panel"). For purposes of this
Arbitration Agreement, an arbitrator or
candidate shall be considered "neutral" only if
the arbitrator or candidate has not previously
served as an arbitrator for a Party or one of
its affiliates or guarantors and is not a
present or former lawyer, employee or consultant
of a Party or any of its affiliates or
guarantors.
2) Any Party entitled to commence arbitration
hereunder shall do so by serving a written
Notice of Arbitration briefly describing the
Arbitrable Claims and the Agreements under which
they are brought. Service of such Notice of
Arbitration shall be complete upon receipt by
the person designated for each party at the
addresses specified in Section 12 below.
3) Within twenty (20) days after service of a
Notice of Arbitration, each Party shall serve
upon the other Party a list of seven neutral
candidates for each of the three panel members
described in subparagraph (a) above.
4) Within twenty (20) days after service of the
lists referred to in subparagraph (c), MECO and
Seller shall then strike from the other's lists
any two candidates from each of the lists, for
any reason whatsoever. For the remaining
candidates each Party shall rank each candidate
on its three lists from one to five and shall do
the same for the other Party's lists.
5) The candidates in each of the three
categories with the lowest total score shall be
invited to serve as panel members. In the event
that the candidate in any of the three
categories with the lowest total score is unable
or unwilling to serve, or has a potential
conflict of interest not consented to by each
Party, then the candidate with the next lowest
score in that category shall be invited to
serve, subject to full disclosure by each
candidate of, and consent by each Party to any
potential conflicts of interests. This process
shall be repeated until a full arbitration Panel
is selected or the list of candidates for that
category is exhausted. If the list of
candidates for a category is exhausted the
Parties shall exchange a new list of candidates
for that category and the procedures set forth
above shall be repeated a second time.
6) If the parties cannot select a full
Arbitration Panel in accordance with these
procedures than any Party may request that a
court of competent jurisdiction appoint the
remaining members subject to their
qualifications, willingness and ability to serve
as provided above.
7) The American Arbitration Association shall be
appointed to facilitate and administer the
parties' compliance with the procedures set
forth above.
(iii) Time Schedule
The Arbitration shall be conducted as expeditiously as possible. The
Arbitration Panel shall schedule a pre-hearing conference and hearings as it
deems advisable and shall use its best efforts to schedule consecutive days of
hearings. Hearings shall be limited to a total of ten (10) days. The
Arbitration Panel shall issue its final decision and award within thirty (30)
days of the close of the hearings, which shall be accompanied by a written,
reasoned opinion.
(iv) Remedies
(1) The Arbitration Panel shall not award punitive or multiple
damages or any other damages not measured by the prevailing Party's actual
damages - except that the Arbitration Panel, in its sole discretion, may shift
all or a portion of the costs of the Arbitration to any Party.
(2) Any award of damages by the Arbitration Panel shall be
determined, limited and controlled by the damages limitation clauses of the
Service Agreement applicable to the dispute before the Arbitration Panel.
(3) The Arbitration Panel may, in its discretion, award pre-award
and post-award interest on any damages award; provided, however, that the rate
of pre-award or post-award interest shall not exceed a rate equal to the rate
provided for post-judgment interest by 28 U.S.C. sec. 1961 as published from
time to time by the Administrative Office of the United States Courts based on
the equivalent coupon issue yield for auctions of 52-week Treasury bills.
(iv) Confidentiality
In accordance with Mass. G.L. c. 233 sec. 23C. the existence, contents,
or results of any mediation or arbitration hereunder may not be disclosed
without the prior written consent of both Parties; provided, however, either
Party may make disclosures as may be necessary to fulfill regulatory
obligations to any regulatory bodies having jurisdiction, and may inform their
lenders, affiliates, auditors and insurers, as necessary, under pledge of
confidentiality and can consult with experts as required in connection with
the arbitration under pledge of confidentiality. If any Party seeks
preliminary injunctive relief from any court to preserve the status quo or
avoid irreparable harm pending mediation or arbitration, the Parties agree to
use best efforts to keep the court proceedings confidential, to the maximum
extent permitted by law.
(v) FERC Jurisdiction over Certain Disputes
1) Nothing in this Arbitration Agreement shall preclude, or be
construed to preclude, any Party from filing a petition or complaint with the
Federal Energy Regulatory Commission ("FERC") with respect to any Arbitrable
Claim. In such case, the other Party may request FERC to reject or to waive
jurisdiction. If the FERC rejects or waives jurisdiction, with respect to all
or a portion of the claim, the portion of the claim not so accepted by FERC
shall be resolved through arbitration, as provided in this Arbitration
Agreement. To the extent that FERC asserts or accepts jurisdiction over the
claim, the decision, finding of fact, or order of FERC shall be final and
binding, and any arbitration proceedings that may have commenced prior to the
assertion or acceptance of jurisdiction by FERC shall be stayed, pending the
outcome of the FERC proceedings.
2) The Arbitration Panel shall have no authority to modify, and
shall be conclusively bound by, any decision, finding of fact, or order of
FERC. However, to the extent that a decision finding of fact, or order of
FERC does not provide a final or complete remedy to the Party seeking relief,
such Party may proceed to arbitration under this Arbitration Agreement to
secure such remedy, subject to the FERC decision, finding or order.
(vi) Preliminary Injunctive Relief
Nothing in this Arbitration Agreement shall preclude, or be construed to
preclude, the resort by either Party to a court of competent jurisdiction
solely for the purposes of securing a temporary or preliminary injunction to
preserve the status quo or avoid irreparable harm pending mediation or
arbitration pursuant to this Arbitration Agreement.
(vii) Governing Law
This Arbitration Agreement shall be construed, enforced in accordance
with, and governed by, the laws of the Commonwealth of Massachusetts.
(viii) Location of Arbitration
Any arbitration hereunder shall be conducted in Boston, Massachusetts.
(ix) Severability
If any section, subsection, sentence, or clause of this Arbitration
Agreement is adjudged illegal, invalid, or unenforceable, such illegality,
invalidity, or enforceability shall not affect the legality, validity, or
enforceability of the Arbitration Agreement as a whole or of any section,
subsection, sentence or clause hereof not so adjudged.
(x) Notices
Any notices required to be given pursuant to this Arbitration Agreement
shall be in writing and sent to the receiving party by (i) certified mail,
return receipt requested, (ii) overnight delivery service, or (iii) facsimile
transmission (confirmed by telephone), addressed to the receiving party at the
address shown below or such other address as a party may subsequently
designate in writing. Any such notice shall be deemed to be given (i) three
days after deposit in the United States mail, if sent by mail, (ii) when
actually received if sent by overnight delivery service, or (iii) when sent,
if sent by facsimile and confirmed by telephone.
If to MECO: Massachusetts Electric Company
25 Research Drive
Westborough, Massachusetts 01582
Attention: General Counsel
Facsimile: (508) 389-2463
If to Seller
Attention:
Facsimile: ( )
In addition, the parties shall send copies of any notices required by
the terms of any of the Agreements, in accordance with the terms of each
Agreement.
IN WITNESS WHEREOF, Each Party has caused its duly authorized officers
to execute this Arbitration Agreement on the dates set forth below.
MASSACHUSETTS ELECTRIC COMPANY
BY:
Its
NANTUCKET ELECTRIC COMPANY
BY:
Its
USGEN NEW ENGLAND, INC.
BY:
Its