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EXHIBIT 1
ADDITIONAL POWER CONTRACT, dated as of February 1, 1984, between VERMONT
YANKEE NUCLEAR POWER CORPORATION ("Vermont Yankee"), a Vermont corporation,
and CAMBRIDGE ELECTRIC LIGHT COMPANY (the "Purchaser").
It is agreed as follows:
1. Basic Understandings.
Vermont Yankee was organized in 1966 to provide for the supply of power
to its sponsoring utility companies (including the Purchaser), which utilities
are hereinafter called the "sponsors". It constructed a nuclear electric gen-
erating unit of the boiling water type, having a maximum net capability of
approximately 540 megawatts electric, at a site adjacent to the Connecticut
River at Vernon, Vermont (said unit being herein, together with the site and
all related facilities owned or to be owned by Vermont Yankee, referred to as
the "Unit"). On February 28, 1973 Vermont Yankee was issued a full-term,
operating license for the Unit from the Atomic Energy Commission (now the
Nuclear Regulatory Commission which, together with any successor agency or
agencies, is hereafter called the "NRC"), which license expires on December
11, 2007, and the Unit commenced commercial operation on November 30, 1972.
The Unit is operated to supply power to Vermont Yankee's sponsors, each
of which by a Power Contract dated as of February 1, 1968, as amended (collec-
tively the "Initial Power Contracts"), has undertaken to purchase a fixed
percentage of the capacity and output of the Unit for a term extending through
November 30, 2002. The names of the sponsors and their respective percentages
("entitlement percentages") of the capacity and output of the Unit are as
follows:
Entitlement
Percentage
Central Vermont Public Service Corporation . . . . 35.0%
Green Mountain Power Corporation . . . . . . . . . 20.0%
New England Power Company. . . . . . . . . . . . . 20.0%
The Connecticut Light and Power Company. . . . . . 9.5%
Central Maine Power Company. . . . . . . . . . . . 4.0%
Public Service Company of New Hampshire. . . . . . 4.0%
Western Massachusetts Electric Company . . . . . . 2.5%
Montaup Electric Company . . . . . . . . . . . . . 2.5%
Cambridge Electric Light Company . . . . . . . . . 2.5%
The sponsors have resold portions of their entitlement percentages of
capacity and output of the Unit under the Initial Power Contracts to other
utilities (the "secondary purchasers") on terms and conditions substantially
equivalent to those in the Initial Power Contracts: in 1969, the two Vermont
sponsors resold an aggregate of 7.426% of the Unit's capacity and output to
other utilities in Vermont; and in 1970 the non-Vermont sponsors resold an
aggregate of 4.5451% of the Unit's capacity and output to other New England
utilities outside of Vermont (collectively the "Resale Contracts"). In 1983
the Initial Power Contracts were amended to incorporate provisions for collec-
tion of funds to defray the ultimate cost of decommissioning the Unit, which
costs are being borne pro rata by said secondary purchasers under the Resale
Contracts.
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Vermont Yankee and its sponsors desire to provide for the orderly
continuation of the sale and purchase of the capacity and output of the Unit
during the useful life of the Unit to the extent it continues beyond the
termination date of the Initial Power Contracts and to provide appropriate
provisions for the collection of funds for and the payment of decommissioning
and any other costs with respect thereto both during and after the useful life
of the Unit. Vermont Yankee and its other sponsors are entering into Addi-
tional Power Contracts which are identical to this contract except for neces-
sary changes in the names of the parties.
2. Effective Date, Term and Waiver.
This contract shall become effective upon receipt by the Purchaser of
notice that Vermont Yankee has entered into additional power contracts, as
contemplated by Section 1 above, with each of its other sponsors. The opera-
tive term of this contract shall commence on December 1, 2002 notwithstanding
the fact that the useful service life of the Unit may have been terminated
prior to that date, and shall terminate upon the later to occur of (i) 30 days
after the date on which the last of the financial obligations of Vermont
Yankee which constitute elements of the purchase price calculated pursuant to
Section 7 of this contract has been extinguished by Vermont Yankee or (ii) 30
days after the date on which Vermont Yankee is finally relieved of any
obligations under the last of any licenses (operating and/or possessory) which
it now holds from, or which may hereafter be issued to it by, the NRC with
respect to the Unit under applicable provisions of the Atomic Energy Act of
1954, as amended from time to time (the "Act").
Vermont Yankee and the Purchaser acknowledge that, if the useful life of
the Unit is terminated prior to December 1, 2002, then only the provisions of
this contract applicable to decommissioning of the Unit will apply during the
operative term of this contract.
The Purchaser hereby irrevocably waives its right to extend the contract
term of its Initial Power Contract pursuant to subsections (a) or (b) of
Section 8 thereof.
3. Operation and Maintenance of the Unit.
Vermont Yankee will operate and maintain the Unit in accordance with
good utility practice under the circumstances and all applicable law, includ-
ing the applicable provisions of the Act and of any licenses issued thereunder
to Vermont Yankee. Within the limits imposed by good utility practice under
the circumstances and applicable law, the Unit will be operated at its maximum
capability and on a long hour use basis.
Outages for inspection, maintenance refueling and repairs and replace-
ments will be scheduled in accordance with good utility practice and insofar
as practicable shall be mutually agreed upon by Vermont Yankee and the
Purchaser. In the event of an outage, Vermont Yankee will use its best
efforts to restore the Unit to service as promptly as practicable.
4. Decommissioning.
After commercial operation of the Unit permanently ceases, Vermont
Yankee will decommission the Unit in a manner authorized by Vermont Yankee's
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board of directors and approved by the NRC in accordance with the Act and the
rules and regulations thereunder then in effect and by any agency having
jurisdiction over decommissioning of the Unit.
It is understood that, pursuant to the Initial Power Contracts and the
Resale Contracts, the sponsors and secondary purchasers are currently being
billed for Total Decommissioning Costs which as of the date of this contract,
are being accumulated in a separate fund which was established for the purpose
of reimbursing Vermont Yankee for Decommissioning Expenses incurred in the
process of decommissioning the Unit and that such billings are subject to
change in accordance with the provisions of the Initial Power Contracts
subject to the jurisdiction of FERC. It is contemplated that sufficient funds
will be accumulated pursuant to those contracts and paragraph 7 hereof to
reimburse Vermont Yankee for the full cost of decommissioning the Unit.
5. Purchaser's Entitlement.
The Purchaser will, throughout the term of this contract, be entitled
and obligated to take its entitlement percentage of the capacity and net
electrical output of the Unit, at whatever level the Unit is operated or
operable, whether more or less than 540 megawatts electric.
6. Deliveries and Metering.
The Purchaser's entitlement percentage of the output of the Unit will be
delivered to and accepted by it at the step-up substation at the site. All
deliveries will be made in the form of 3-phase, 60 cycle, alternating current
at a nominal voltage of 345,000 volts. The Purchaser will make its own
arrangements for the transmission of its entitlement percentage of the output
of the Unit.
Vermont Yankee will supply and maintain all necessary metering equipment
for determining the quantity and conditions of supply of deliveries under this
contract, will make appropriate tests of such equipment in accordance with
good utility practice and as reasonably requested by the Purchaser, and will
maintain the accuracy of such equipment within reasonable limits. Vermont
Yankee will furnish the Purchaser with such summaries of meter readings as the
Purchaser may reasonably request.
7. Payment.
With respect to each month commencing on or after December 1, 2002, the
Purchaser will pay Vermont Yankee an amount equal to the Purchaser's entitle-
ment percentage of the sum of (a) Vermont Yankee's total fuel costs for the
month with respect to the Unit, plus (b) the Total Decommissioning Costs for
the month with respect to the Unit, plus (c) Vermont Yankee's total operating
expenses for the month with respect to the Unit, plus (d) an amount equal to
one-twelfth of the composite percentage for such month of the net Unit invest-
ment as most recently determined in accordance with this Section 7.
"Composite percentage" shall be computed as of the last day of each
month during the term hereof (the "computation date") and for any month the
composite percentage shall be that computed as of the most recent computation
date. "Composite percentage" as of a computation date shall be the sum of (i)
the equity percentage as of such date multiplied by the percentage which
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equity investment as of such date is of the total capital as of such date;
plus (ii) the stated interest rate per annum of each principal amount of
indebtedness bearing a particular rate of interest outstanding on such date
for money borrowed from other than sponsors multiplied by the percentage which
such principal amount is of total capital as of such date.
"Equity percentage" as of any date after the commencement of the opera-
tive term hereof shall be that percentage which was the "equity percentage" in
effect on the last day of the term of the Initial Power Contracts or such
other percentage as may from time to time thereafter be approved by the
Federal Energy Regulatory Commission or any successor agency thereto ("FERC").
"Common stock equity investment" as of any date shall consist of equity
investment as of such date less the aggregate par value of all issues of
preferred stock outstanding on such date.
"Equity investment" as of any date shall consist of not less than the
sum of (i) all amounts theretofore paid to Vermont Yankee for all capital
stock theretofore issued (taken at the total par value thereof plus the total
of all amounts in excess of such par value paid thereon); plus all capital
contributions, loans and advances theretofore made to Vermont Yankee by its
sponsors, less the sum of any amounts distributed by Vermont Yankee to its
sponsors or stockholders in the form of stock repurchases or redemptions,
return of capital or repayments of loans and advances; plus (ii) any credit
balance in the capital surplus account (not included under (i)) and in the
earned surplus account on the books of Vermont Yankee as of such date.
"Total capital" as of any date shall be the equity investment plus the
total of all indebtedness then outstanding for money borrowed from other than
Vermont Yankee's sponsors.
"Uniform System" shall mean the Uniform System of Accounts prescribed by
the FERC for Class A and Class B Public Utilities and Licensees as from time
to time in effect.
Vermont Yankee's "fuel costs" for any month shall include (i) amounts
chargeable in accordance with the Uniform System in such month as amortization
of costs of fuel assemblies and components and burn-up of nuclear materials
for the Unit; plus (ii) all other amounts properly chargeable in accordance
with the Uniform System to fuel costs for the Unit less any applicable credits
thereto; plus(ii) to the extent not so chargeable all payments (or accruals
therefor) with respect to lease or other financing obligations incurred in
connection with such fuel assemblies and components, including nuclear materi-
als, for the Unit (provided such fuel assemblies and components are not
included in net Unit investment), and with the temporary or permanent storage
or disposal thereof.
Vermont Yankee's "operating expenses" shall include all amounts properly
chargeable to operating expense accounts (other than such amounts which are
included in Vermont Yankee's fuel costs) less any applicable credits thereto,
in accordance with the Uniform System; it being understood that for purposes
of this contract "operating expenses" shall include (i) depreciation accrual
at a rate at least sufficient to fully amortize the non-salvageable plant
investment over the estimated remaining useful life of the plant; and (ii)
obligations incurred in connection with the leasing of plant facilities.
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The "net Unit investment" shall consist, in each case with respect to
the Unit, of (i) the aggregate amount properly chargeable at the time in
accordance with the Uniform System to Vermont Yankee's electric plant accounts
(including construction work in progress) less the amount of any accumulated
provisions for depreciation thereof; plus (ii) the aggregate amount properly
chargeable at the time in accordance with the Uniform System to accounts
representing fuel assemblies and components (including nuclear materials) and
other materials and supplies, less the balance, if any, at the time of the
accumulated amortization thereof; plus (iii) such reasonable allowances for
prepaid items and cash working capital as may from time to time be determined
by Vermont Yankee. The net Unit investment shall be determined as of the
commencement of each calendar year, or, if Vermont Yankee elects, at more
frequent intervals.
"Total Decommissioning Costs" for any month shall mean the sum of (x) an
amount equal to all accruals in such month, as from time to time established
by Vermont Yankee and approved by its board of directors, to provide for the
ultimate payment of the Decommissioning Expenses of the Unit plus (y) Decom-
missioning Tax Liability for such month. It is understood (i) that such funds
may be held by Vermont Yankee or by an independent trust or other separate
fund as determined by said board of directors, (ii) that, upon compliance with
Section 17 hereof, the amount, custody and/or timing of such accruals may from
time to time during the term hereof be modified by said board of directors in
its discretion or to comply with applicable statutory or regulatory
requirements or to reflect changes in the amount,custody or timing of antici-
pated Decommissioning Expenses, and (iii) that the use of the term "to decom-
mission" herein encompasses compliance with all requirements (other than those
relating to spent nuclear fuel) of the NRC for permanent cessation of opera-
tion of a nuclear facility and any other activities reasonably related
thereto. "Decommissioning Expenses" shall include:
(1)All costs and expenses of removing the Unit from service, including
without limitation, dismantling, mothballing, removing radioactive
material (excluding spent nuclear fuel) to temporary and/or perma-
nent storage sites, decontaminating, restoring and supervising the
site, and any costs and expenses incurred in connection with pro-
ceedings before governmental regulatory authorities relating to any
authorization to decommission the Unit or remove the Unit from
service;
(2)All costs of labor and services whether directly or indirectly
incurred, including without limitation services of foremen, inspec-
tors, supervisors, surveyors, engineers, security personnel, coun-
sel and accountants, performed or rendered in connection with the
decommissioning of the Unit and the removal of the Unit from ser-
vice, and all costs of materials, supplies, machinery, construction
equipment and apparatus acquired or used (including rental charges
for machinery, equipment or apparatus hired) for or in connection
with the decommissioning of the Unit and the removal of the Unit
from service, and all administrative costs, including services of
counsel and financial advisers, of any applicable independent trust
or other separate fund; it being understood that any amount, exclu-
sive of proceeds of insurance, realized by Vermont Yankee as sal-
vage on any machinery, construction equipment and apparatus, the
cost of which was charged to Decommissioning Expense shall be
treated as a reduction of the amounts otherwise chargeable on
account of the costs of decommissioning of the Unit; and
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(3)All overhead costs applicable to the Unit during its decommission-
ing period including, without limiting the generality of the fore-
going, taxes (other than taxes on or in respect of income), charges
licenses, excises and assessments, casualties, surety bond premiums
and insurance premiums.
"Decommissioning Tax Liability" for any month shall be an amount estab-
lished by Vermont Yankee and approved by its board of directors to meet
possible income tax obligations, which amount shall not exceed: the amount to
be included in the clause (x) portion of Total Decommissioning Costs for such
month multiplied by a fraction whose numerator is equal to the combined
highest statutory Federal and state marginal income tax rate and whose denomi-
nator is equal to one minus the combined highest statutory Federal and state
marginal income tax rate.
Without limiting the generality of the foregoing, amounts expended or to
be paid with respect to decommissioning of the Unit or removal of the Unit
from service shall constitute part of the Decommissioning Expenses if they
are, or when paid will be, either (i) properly chargeable to any account
related to decommissioning of a nuclear generating unit in accordance with the
Uniform System or generally accepted accounting principles as then in effect,
or (ii) properly chargeable to decommissioning of a nuclear generating unit in
accordance with then applicable regulations of the NRC or the FERC or any
other regulatory agency having jurisdiction.
8. Billing.
Vermont Yankee will bill the Purchaser, as soon as practicable after the
end of each month, for all amounts payable by the Purchaser with respect to
the particular month pursuant to Section 7 hereof. Such bills will be
rendered in such detail as the Purchaser may reasonably request and may be
rendered on an estimated basis subject to corrective adjustments in subsequent
billing periods. All bills shall be due and payable when rendered and any
amount remaining unpaid 10 days following the date of issuance of bills should
bear interest at an annual rate equal to 2% in excess of the current prime
rate then in effect at The First National Bank of Boston, from the due date to
the date payment is received by Vermont Yankee.
9. Decommissioning Fund.
Vermont Yankee agrees to cause an appropriate decommissioning reserve to
be maintained in accordance with applicable regulatory requirements. As of
the date hereof, FERC has required an independent trust or other separate fund
to be created which has the necessary powers to hold and invest all funds
collected for the decommissioning of the Unit and to disburse the same to pay
or to reimburse Vermont Yankee for such costs when actually incurred for
decommissioning of the Unit or removal of the Unit from service. If during
the term of such trust or fund federal or state legislation or regulations are
promulgated which so permit or require or an alternative entity is created for
funding decommissioning of the Unit, such trust has the authority, with the
concurrence of Vermont Yankee, to transfer its trust estate to such newly
authorized entity for the purpose of providing for the decommissioning of the
Unit or removal of the Unit from service.
Vermont Yankee agrees to credit to, or cause to be credited to, the
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appropriate decommissioning reserve all funds collected hereunder for the
express purpose of decommissioning the Unit or removing the Unit from service
and further agrees that, after the tax consequences of decommissioning collec-
tions have been resolved, any funds collected hereunder to meet Decommission-
ing Tax Liability which are not used for that purpose, will be refunded to
Purchaser.
10. Cancellation of Contract.
If deliveries cannot be made to the Purchaser because either
(i) the Unit is damaged to the extent of being completely or sub-
stantially completely destroyed, or
(ii) the Unit is taken by exercise of the right of eminent domain
or a similar right or power, or
(iii) (a) the Unit cannot be used because of contamination, or
because a necessary license or other necessary public authorization
cannot be obtained or is revoked or because the utilization of such
a license or authorization is made subject to specified conditions
which are not met, and (b) the situation cannot be rectified to an
extent which will permit Vermont Yankee to make deliveries to the
Purchaser from the Unit;
then and in any such case, the Purchaser may cancel the provisions of this
contract except that in all cases other than those described in clause (ii)
above, the provisions relating to the payment of Total Decommissioning Costs
and of costs of permanent storage or disposal of spent nuclear fuel shall,
whether or not the Unit is operated or operable and notwithstanding any
earlier termination of the service life of the Unit, remain in full force and
effect until the expiration of the term hereof, it being recognized that such
costs represent deferred payments in connection with power theretofore deliv-
ered by Vermont Yankee hereunder. Such cancellation shall be effected by
written notice given by the Purchaser to Vermont Yankee. In the event of such
cancellation, all continuing obligations of the parties hereunder as to subse-
quently incurred costs of Vermont Yankee other than the obligations relating
to the payment and application of Total Decommissioning Costs and of costs of
permanent storage or disposal of spent nuclear fuel to the extent excluded
from such cancellation by the second preceding sentence, but including the
Purchaser's obligations to continue payments pursuant to clause (a)(other than
those related to the costs of permanent storage or disposal of spent nuclear
fuel, and clauses (c) and (d) of the first paragraph of Section 7 hereof,
shall cease forthwith. Notwithstanding the foregoing, the applicable provi-
sions of this contract shall continue in effect after the cancellation hereof
to the extent necessary to permit final billings and adjustments hereunder
with respect to obligations incurred through the date of cancellation and the
collection thereof. Any dispute as to the Purchaser's right to cancel this
contract pursuant to the foregoing provisions shall be referred to arbitration
in accordance with the provisions of Section 13.
Notwithstanding anything in this contract elsewhere contained, the
Purchaser may cancel this contract or be relieved of its obligations to make
payments hereunder only as provided in the next preceding paragraph of this
Section 10. Further, if for reasons beyond Vermont Yankee's reasonable
control, deliveries are not made as contemplated by this contract, Vermont
Yankee shall have no liability to the Purchaser on account of such non-
delivery.
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11. Insurance.
Vermont Yankee presently has in effect, and hereafter will at all times
maintain until the expiration of the term hereof, insurance to cover its
"public liability" for personal injury and property damage resulting from a
"nuclear incident" (as those terms are defined in the Act), with limits not
less than Vermont Yankee may be required to maintain to qualify for governmen-
tal indemnity under the Act and shall execute and maintain an indemnification
agreement with the NRC as provided by the Act. Vermont Yankee will also at
all times maintain such other types of liability insurance, including work-
men's compensation insurance in such amounts, as is customary in the case of
other similar electric utility companies, or as may be required by law.
Vermont Yankee will at all times keep insured such portions of the Unit
(other than the fuel assemblies and components, including nuclear materials)
as are of a character usually insured by electric utility companies similarly
situated and operating like properties, against the risk of a "nuclear inci-
dent" and such other risks as electric utility companies, similarly situated
and operating like properties, usually insure against; and such insurance
shall to the extent available be carried in amounts sufficient to prevent
Vermont Yankee from becoming a co-insurer. Vermont Yankee will at all times
keep its fuel assemblies and components (including nuclear materials) insured
against such risks and in such amounts as shall, in the opinion of Vermont
Yankee, provide adequate protection.
12. Audit.
Vermont Yankee's books and records (including metering records) shall be
open to reasonable inspection and audit by the Purchaser.
13. Arbitration.
In case any dispute shall arise as to the interpretation or performance
of this contract which cannot be settled by mutual agreement, such dispute
shall be submitted to arbitration. The parties shall if possible agree upon a
single arbitrator. In case of failure to agree upon an arbitrator within 15
days after the delivery by either party to the other of a written notice
requesting arbitration, either party may request the American Arbitration
Association to appoint the arbitrator. The arbitrator, after opportunity for
each of the parties to be heard, shall consider and decide the dispute and
notify the parties in writing of his decision. Such decision shall be binding
upon the parties, and the expenses of the arbitration shall be borne equally
by them.
14. Regulation.
This contract, and all rights, obligations and performance of the
parties hereunder, are subject to all applicable state and federal law and to
all duly promulgated orders and other duly authorized action of governmental
authority having jurisdiction in the premises.
15. Assignment.
This contract shall be binding upon and shall inure to the benefit of,
and may be performed by, the successors and assigns of the parties, except
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that no assignment, pledge or other transfer of this contract by either party
shall operate to release the assignor, pledgor or transferor from any of its
obligations under this contract unless consent to the release is given in
writing by the other party, or, if the other party has theretofore assigned,
pledged or otherwise transferred its interest in this contract, by the other
party's assignee, pledgee or transferee, or unless such transfer is incident
to a merger or consolidation with, or transfer of all or substantially all of
the assets of the transferor to, another sponsor which shall, as a part of
such succession, assume all the obligations of the transferor under this
contract.
16. Right of Setoff.
The Purchaser shall not be entitled to set off against the payments
required to be made by it under this contract (i) any amounts owed to it by
Vermont Yankee or (ii) the amount of any claim by it against Vermont Yankee.
However, the foregoing shall not affect in any other way the Purchaser's right
and remedies with respect to any such amounts owed to it by Vermont Yankee or
any such claim by it against Vermont Yankee.
17. Amendments.
Upon authorization by Vermont Yankee's board of directors of uniform
amendments to all the Additional Power Contracts with sponsors, Vermont Yankee
shall have the right to amend the provisions of Section 7 hereof by serving an
appropriate statement of such amendment upon the Purchaser and filing the same
with FERC (or such other regulatory agency as may have jurisdiction in the
premises) in accordance with the provisions of applicable laws and any rules
and regulations thereunder, and the amendment shall thereupon become effective
on the date specified therein, subject to any suspension order issued by such
agency. All other amendments to this contract shall be by mutual agreement
evidenced by a written amendment signed by the parties thereto.
18. Interpretation.
The interpretation and performance of this contract shall be in accor-
dance with and controlled by the law of the State of Vermont.
19. Addresses.
Except as the parties may otherwise agree, any notice, request, bill or
other communication from one party to the other, relating to this contract, or
the rights, obligations or performance of the parties hereunder, shall be in
writing and shall be effective upon delivery to the other party. Any such
communication shall be considered as duly delivered when delivered in person
or mailed by registered or certified mail, postage prepaid, to the respective
post office address of the other party shown following the signatures of such
other party hereto, or such other address as may be designated by written
notice given as provided in this Section 19.
20. Corporate Obligations.
This contract is the corporate act and obligation of the parties hereto,
and any claim hereunder against any stockholder, director or officer of either
party, as such, is expressly waived.
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21. All Prior Agreements Superseded.
This contract represents the entire agreement between the parties
relating to the subject matter hereof during the operative term hereof (i.e.,
post-December 1, 2002), and all previous agreements, discussions, communica-
tions and correspondence with respect to the subject matter are hereby
superseded and are of no further force and effect.
IN WITNESS WHEREOF the parties have executed this contract by their
respective officers thereunto duly authorized as of the date first above
written.
VERMONT YANKEE NUCLEAR POWER CORPORATION
By William F. Conway
President
R.D. 5, Ferry Road, Box 169
Brattleboro, Vermont 05301
CAMBRIDGE ELECTRIC LIGHT COMPANY
By E. G. Cheney
Financial Vice President
(Address)
675 Massachusetts Avenue
Cambridge, Massachusetts 02139