ADDITIONAL POWER CONTRACT
ADDITIONAL POWER CONTRACT, dated as of April 30, 1984, between CONNECTICUT
YANKEE ATOMIC POWER COMPANY ("Connecticut Yankee"), a Connecticut corporation,
and The Connecticut Light and Power Company, (the "Purchaser").
In consideration of the following understandings and the respective
undertakings of the parties, it is agreed as follows:
1. Basic Understandings.
Connecticut Yankee was organized in 1962 to provide for the supply of
power to its sponsoring utility companies (including the Purchaser). Connecticut
Yankee constructed a nuclear electric generating unit of the pressurized water
type, having a maximum net capability of approximately 582 megawatts electric,
at a site adjacent to the Connecticut River at Haddam, Connecticut (said unit,
together with the site and all related facilities owned or to be owned by
Connecticut Yankee, being referred to herein as the "Unit"). On June 30, 1967,
Connecticut 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 May 26, 2004, and the Unit commenced commercial
operation on January 1, 1968.
The Unit is operated to supply power to the purchasers from Connecticut
Yankee (collectively the "Purchasers"), each of which by a Power Contract dated
as of July 1, 1964, as supplemented by Supplementary Power Contracts dated as of
March 1, 1978, such Supplementary Power Contracts amended on August 22, 1980 and
October 15, 1982 (collectively the "Power Contracts"), has undertaken to
purchase a fixed percentage of the capacity and output of the Unit for a term
extending through December 31, 1997. The names of the Purchasers and their
respective percentages ("entitlement percentages") of the capacity and output of
the Unit are as follows:
Entitlement
Percentage
The Connecticut Light and Power Company 34.5%
New England Power Company 15.0
Western Massachusetts Electric Company 9.5
The United Illuminating Company 9.5
Boston Edison Company 9.5
Central Maine Power Company 6.0
Public Service Company of New Hampshire 5.0
Montaup Electric Company 4.5
Cambridge Electric Light Company 4.5
Central Vermont Public Service Corporation 2.0
The Power Contracts have been supplemented most recently by Second
Supplementary Power Contracts, dated as of 1984, between Connecticut Yankee and
each of the Purchasers (the "Second Supplementary Power Contracts"). The Second
Supplementary Power Contracts provide for the collection of funds to defray the
ultimate cost of decommissioning the Unit and to provide an allowance for
potential taxes payable by Connecticut Yankee with respect to the
decommissioning fund.
Connecticut Yankee and the Purchasers 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 that such useful life continues
beyond the termination date of the Power Contracts and the Second Supplementary
Power Contracts and to provide appropriate provisions for the collection of
funds for, and the payment of, decommissioning costs and any other costs,
including potential taxes, with respect to the Unit during and after the useful
life of the Unit. Connecticut Yankee and the other Purchasers are entering into
Additional Power Contracts which are identical to this contract except for
necessary 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 Connecticut Yankee has entered into Additional Power Contracts, as
contemplated by Section 1 above, with each of the other Purchasers. The
operative term of this contract shall commence on January 1, 1998
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
Connecticut Yankee which constitute elements of the payment calculated pursuant
to Section 7 of this contract has been extinguished by Connecticut Yankee, or
(ii) 30 days after the date on which Connecticut 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").
Connecticut Yankee and the Purchaser acknowledge that, if the useful
service life of the Unit is terminated prior to January 1, 1998, 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 Power Contract pursuant to subsections (a) or (b) of Section 8
thereof.
3. Operation and Maintenance of the Unit.
Connecticut Yankee will operate and maintain the Unit in accordance with
good utility practice under the circumstances and all applicable law, including
the applicable provisions of the Act and of any licenses issued thereunder to
Connecticut 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
replacements will be scheduled in accordance with good utility practice and
insofar as practicable shall be mutually agreed upon by Connecticut Yankee and
the Purchaser. In the event of an outage, Connecticut 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, Connecticut
Yankee will decommission the Unit in a manner authorized by Connecticut Yankee's
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 Second Supplementary Power
Contracts, the 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 Connecticut
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 Second Supplementary Power Contracts subject to the
jurisdiction of the Federal Energy Regulatory Commission or any successor agency
thereto (the "FERC"). It is contemplated that sufficient funds will be
accumulated pursuant to those contracts and paragraph 7 hereof to make payment
to reimburse Connecticut Yankee for the full cost of decommissioning the Unit.
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 582 megawatts electric.
6. Deliveries and Metering.
The Purchaser's entitlement percentage of the output of the Unit will be
delivered to and accepted by the Purchaser 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.
Connecticut 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.
Connecticut 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 January 1, 1998, the
Purchaser will pay Connecticut Yankee an amount equal to the Purchaser's
entitlement percentage of the sum of (a) the Total Decommissioning Costs for the
month with respect to the Unit, plus (b) Connecticut Yankee's total operating
expenses for the month with respect to the Unit, plus (c) an amount equal to
one-twelfth of the composite percentage for such month of the net Unit
investment 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 last day of the previous month.
"Composite percentage" as of a computation date shall be the sum of (i) the
equity percentage as of such date multiplied by the ratio which the equity
investment with respect to the Unit, as of such date, is to the total capital as
of such date; plus (ii) the "effective interest rate" per annum of each
principal amount of long-term debt outstanding on such date for money borrowed
with respect to the Unit, multiplied by the ratio which such principal amount is
to total capital as of such date; plus (iii) the "effective dividend rate" per
annum of each series of preferred stock outstanding as of such date with respect
to the Unit multiplied by the ratio which the amount at which such preferred
stock would be reflected on a balance sheet of Connecticut Yankee is to total
capital as of such date. The "effective interest rate" of each principal amount
of long-term debt referred to in clause (ii) will reflect the annual interest
requirements and to the extent applicable, amortization of issue expenses,
discounts and premiums, sinking fund call premiums, expenses and discounts,
refunding and retirement expenses, discounts and premiums, and all other
expenses applicable to the issue of such indebtedness.
The "effective dividend rate" of each series of preferred stock referred
to in clause (iii) will reflect the annual dividend requirements applicable to
each such series of preferred stock.
"Equity percentage" as of any date after commencement of the operative
term hereof shall be that percentage which was the "equity percentage"
applicable under the Power Contracts on the last day of the term of the Power
Contracts or such other percentage as may from time to time thereafter be
approved by the FERC or any successor regulatory authority.
"Equity investment" as of any date shall consist of the sum of (i) all
amounts theretofore paid to Connecticut Yankee for all common capital stock
theretofore issued, plus all amounts paid to Connecticut Yankee by any of its
common stockholders as capital contributions or advances less the sum of any
amounts paid by Connecticut Yankee to its common stockholders in the form of
stock retirements, repurchases or redemptions, return of capital or repayments
of such contributions or advances; plus (ii) any credit balance in the capital
surplus account not included under (i) and in the retained earnings account on
the books of Connecticut Yankee as of such date.
"Total capital" as of any date shall be the equity investment with respect
to the Unit, plus the total of the amount which would be reflected on a balance
sheet of Connecticut Yankee for all other securities (excluding short-term
debt), including long-term debt and preferred stock then outstanding with
respect to the Unit.
"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.
Connecticut Yankee's "operating expenses" shall include all amounts
properly chargeable to operating expense accounts, less any applicable credits
thereto, in accordance with the Uniform System; however, excluding for purposes
of this contract Total Decommissioning Costs.
"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 Connecticut Yankee's plant accounts (including -
construction work in progress to the extent allowed by the FERC) less the
balance, if any, at the time of the accumulated provision for depreciation, as
determined in accordance with the Uniform System (excluding any amounts
specifically allowed by the FERC to be so excluded); plus (ii) the aggregate
amount properly chargeable at the time in accordance with the Uniform System to
accounts representing materials and supplies; plus (iii) such reasonable
allowances for prepaid items and cash working capital as may from time to time
be determined by Connecticut Yankee and, for purposes hereof, net Unit
investment shall include, in addition to all other amounts which may be
includable therein under this section, but without duplication, the aggregate
amount properly chargeable at the time in accordance with the Uniform System to
Connecticut Yankee's nuclear fuel accounts (other than nuclear fuel in process
of fabrication), less the balance at the time of the accumulated provision for
amortization of the cost of nuclear fuel (excluding any amounts specifically
permitted by the FERC), all as determined in accordance with the Uniform System.
The net Unit investment shall be determined as of the commencement of each
calendar year, or, if Connecticut 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 to any reserve, as from time to time
established by Connecticut Yankee and approved by its board of directors to
provide for the ultimate payment of the Decommissioning Expenses of the Unit
plus (y) Decommissioning Tax Liability for such month. It is understood (i)
that such funds may be held by Connecticut 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 d rectors in its discretion or to comply with applicable statutory or
regulatory requirements or to reflect changes in the amount, custody or timing
of anticipated Decommissioning Expenses, and (iii) that the use of the term "to
decommission" herein encompasses compliance with all requirements (other than
those relating to spent nuclear fuel) of the NRC for permanent cessation of
operation 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 permanent storage sites,
decontaminating, restoring and supervising the site, and any costs and expenses
incurred in connection with proceedings before governmental 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, inspectors,
supervisors surveyors, engineers, security personnel, counsel and accountants,
performed or rendered in connection with the decommissioning of the Unit and the
removal of the Unit from service, 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, exclusive of proceeds of insurance, realized by
Connecticut Yankee as salvage 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
(3) All overhead costs applicable to the Unit during its decommissioning
period, including, without limiting the generality of the foregoing, 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
established by Connecticut 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
applicable statutory Federal and state marginal income tax rate and whose
denominator is equal to one minus the combined highest statutory Federal and
state marginal income tax rate.
Without limiting the generality of the foregoing, any other 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.
Connecticut 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 15 days following the date of receipt of bills shall
bear interest at an annual rate equal to 2% in excess of the current prime rate
then in effect at The Connecticut Bank and Trust Company, National Association,
from the due date to the date payment is received by Connecticut Yankee.
9. Decommissioning Fund.
Connecticut Yankee agrees to cause an appropriate decommissioning reserve
to be maintained in accordance with applicable regulatory requirements.
Connecticut Yankee has established an independent trust or other separate fund
(the "Connecticut Yankee Trust") which has the necessary powers to hold and
invest all funds collected for the decommissioning of the Unit and to disburse
the same to reimburse Connecticut Yankee for such costs when actually incurred
for decommissioning of the Unit or removal of the Unit from service. If during
the term of the Connecticut Yankee Trust applicable legislation or regulations
are promulgated which so permit or require, or an alternative entity is created
for funding decommissioning of the Unit, the Connecticut Yankee Trust has the
authority, with the concurrence of Connecticut 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.
Connecticut Yankee agrees to pay to, or cause to be paid to, the
Connecticut Yankee Trust or any successor trust approved by the board of
directors of Connecticut Yankee 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 collections
have been resolved, any funds collected hereunder to meet Decommissioning Tax
Liability which are not used for that purpose will be refunded to the 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
substantially 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 Connecticut 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
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 delivered
by Connecticut Yankee hereunder. Such cancellation shall be effected by written
notice given by the Purchaser to Connecticut Yankee. In the event of such
cancellation, all continuing obligations of the parties hereunder as to
subsequently incurred costs of Connecticut Yankee other than the obligations
relating to the payment and application of Total Decommissioning Costs excluded
from such cancellation by the second preceding sentence, but including the
Purchaser's obligations to continue payments pursuant to clauses (b) and (c) of
the first paragraph of Section 7 hereof, shall cease forthwith. Notwithstanding
the foregoing, the applicable provisions 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 Connecticut Yankee's reasonable
control, deliveries are not made as contemplated by this contract, Connecticut
Yankee shall have no liability to the Purchaser on account of such non-delivery.
11. Insurance.
Connecticut 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 Connecticut Yankee may be required to maintain to qualify for governmental
indemnity under the Act and shall maintain an indemnification agreement with the
NRC as provided by the Act. Connecticut Yankee will also at all time maintain
such other types of liability insurance, including workmen'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.
Connecticut Yankee will at all times keep insured such portions of the
Unit as are of a character usually insured by electric utility companies
similarly situated and operating like properties, against the risk of a
"nuclear incident" 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 Connecticut Yankee from becoming a co-insurer. Such insurance shall to
the extent available be carried in an amount at least equal to the original cost
of the insured facilities, less accrued depreciation thereon.
12. Audit.
Connecticut 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 authorities
having jurisdiction.
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 that no
assignment, pledge or other transfer of this contract by either party shall
operate to
the assignor, pledgor or transferor from any of its obligations under this
contract unless consent to the 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
Purchaser 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
Connecticut Yankee or (ii) the amount of any claim by it against Connecticut
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
Connecticut Yankee or any such claim by it against Connecticut Yankee.
17. Amendments.
Upon authorization by Connecticut Yankee's board of directors of uniform
amendments to all the Additional Power Contracts, Connecticut 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 the 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 hereto.
18. Interpretation.
The interpretation and performance of this contract shall be in accordance
with and controlled by the law of the State of Connecticut.
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.
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 31, 1997), and all previous agreements, discussions, communications and
correspondence with respect to the subject matter are hereby superseded and are
of no further force and effect.
22. Counterparts.
This contract may be executed in any number of counterparts and each
executed counterpart shall have the same force and effect as an original
instrument and as if all the parties to all of the counterparts had signed the
same instrument. Any signature page of this contract may be detached from any
counterpart without impairing the legal effect of any signatures thereon, and
may be attached to another counterpart of this contract identical in form hereto
but having attached to it one or more signature pages.
IN WITNESS WHEREOF, the parties have executed this contract by their
respective officers thereunto duly authorized as of the date first above
written.
CONNECTICUT YANKEE ATOMIC POWER COMPANY
By /s/ Bernard M. Fox
Its Senior Vice President
P.O. Box 270
Hartford, Connecticut 06141
THE CONNECTICUT LIGHT AND POWER COMPANY
By /s/ E. James Ferland
(Officer and Title)
E. JAMES FERLAND, PRESIDENT & CHIEF
OPERATING OFFICER
(Address)