EXHIBIT (10j.(5))
Pacific Gas and Electric Company
444 Market Street, Sixth Floor
Mail Code T6B
P. O. Box 770000
San Francisco CA 94177
415/973-6262
Jack F. Jenkins-Stark
Senior Vice President and General Manager
Gas Supply Business Unit
May 11, 1994
Mr. Dwayne L. Foley
Senior Vice President
Operations and Information Services
Northwest Natural Gas Company
220 N. W. Second Avenue
Portland OR 97209
Dear Mr. Foley:
This letter reflects discussions between Northwest Natural Gas
Company (NNG) and Pacific Gas and Electric Company (PG&E)
subsequent to PG&E's May 6, 1994 counter offer for a pre-arranged
release of capacity on the PGT system by PG&E for acquisition by
NNG or its designee.
OFFER
PG&E hereby offers to release the firm transportation rights on
the PGT system described herein for acquisition by NNG, as a
prearranged release under the capacity release provisions of the
FERC Gas Tariff, Volume No. 1-A, of Pacific Gas Transmission
Company (PGT). This release shall be packaged with corresponding
upstream capacity assigned to NNG by A&S.
1. The PGT capacity to be released is held currently by
PG&E under a Firm Transportation Service Agreement
(FTSA) with PGT, and service is provided pursuant to
PGT's Rate Schedule FTS-1. Such service agreement is
incorporated herein by reference.
2. The Maximum Daily Quantity (MDQ, which is a defined
term in the applicable PGT tariff) offered for release
is 56,000 MMBtu/day.
3. PG&E will release, as a permanent release, this 56,000
MMBtu/day of capacity from Kingsgate, B. C. to Malin,
Oregon (the full distance of PG&E's current PGT
capacity). This permanent release will be effective
November 1, 1995 and remain in effect through
October 31, 2005.
4. The rate for the capacity permanently released shall be
one hundred percent of the applicable as-billed rate
for service under Rate Schedule FTS-1 Reservation
Charge. NNG shall be responsible for all volumetric
charges.
5. The points of receipt and delivery for this released
capacity shall be:
Primary Receipt Point Kingsgate, B. C.
Primary Delivery Point Malin, Oregon
Conditions: This offer and NNG's acceptance of same are subject
to the following conditions being satisfied by the relevant party
or waived by the party for whose benefit the condition is
included on or before May 23, 1994. The sole remedy available to
the parties if one or more of the following conditions is not
satisfied shall be termination of this offer.
The receipt by PG&E and NNG of all regulatory approvals
deemed necessary by each, on terms acceptable to both PG&E
and NNG.
NNG meeting the creditworthiness standards of ANG, NOVA and
PGT.
The release procedures specified in PGT's FERC Gas Tariff.
NNG's receipt of the necessary release from PGT, ANG, and
NOVA for 1995 Expansion capacity.
Confirmation from NOVA, ANG and PGT as to NNG's evergreen
rights beyond the end of the primary term on their
respective systems. For PGT, this also means continuation
for the segmented Kingsgate-to-Stanfield portion of the FTSA
with Stanfield as the primary delivery point for NNG.
NNG obtaining from A&S, as a permanent assignment,
corresponding upstream capacity on the Alberta Natural Gas
and NOVA Pipeline Systems for the remaining terms of the
service held by A&S -- through October 31, 2001 on the NOVA
system, and through October 31, 2005 on the ANG system -- at
one hundred percent of the applicable as-billed rates. The
NOVA assignment shall be for delivery capacity at the
Alberta/British Columbia border, and the ANG capacity shall
cover the entire length of its system.
The approval of NNG's management.
The approval of PG&E's management.
Indemnity: PG&E shall indemnify and hold harmless NNG from all
Gas Supply Restructuring (GSR) direct bills that may be invoiced
by PGT to NNG by virtue of NNG accepting assignment of PGT
capacity formerly held by PG&E. Such indemnification shall be
limited to the GSR direct bills recovered by PGT pursuant to the
Transition Cost Recovery Mechanism ("TCRM") approved by the FERC
in PGT's Order No. 636 restructuring proceeding in Docket No.
RS92-46. Customer shall be responsible for, and there shall be
no indemnity or any payment of or responsibility or liability on
PG&E for volumetric surcharges on such capacity arising from Gas
Supply Restructuring costs.
Recall and Reassignment Rights: Upon 12 months notice, PG&E will
have the right to recall up to the total 56,000 MMBtu/day of
assigned capacity from Stanfield, Oregon to Malin, Oregon (the
Stanfield-to-Malin segment). Any capacity so recalled by PG&E
shall remain with PG&E or its assignees) until midnight on
October 31, 2005. Such recall may be exercised by PG&E without
posting of the capacity, applicable regulations and tariff
provisions permitting. The rate PG&E will pay for this recalled
capacity shall be 100% of the as-billed rate applicable to this
capacity segment under Rate Schedule FTS-1. PG&E's rights to and
obligations relating to any recalled capacity shall terminate at
midnight on October 31, 2005, and PG&E shall have no liability or
responsibility for such capacity thereafter.
At any time prior to October 31, 2005, NNG will have the right,
at such time as PGT's rate design makes the total cost of holding
"vintage capacity" (i.e., capacity on "original" PGT facilities)
from Kingsgate to Malin more expensive than holding expansion
capacity on the Kingsgate-to-Stanfield segment, to reassign up to
the total MDQ (56,000 MMBtu/day) of capacity on the Stanfield-to-
Malin segment to PG&E for the remaining term of the permanent
release described above. PG&E's rights to and obligations
relating to any capacity so reassigned by NNG shall terminate at
midnight on October 31, 2005, and PG&E shall have no liability or
responsibility for such capacity thereafter. PG&E shall accept
this reassignment at the 100% of then-current as-billed rate.
Short-Term Release: For the period from the effective date of
this agreement until November 1, 1995, PG&E shall post a pre-
arranged capacity release with NNG with the following terms:
56,000 MMBtu/day of FTS-1 vintage capacity from Kingsgate to
Malin.
100% of the applicable as-billed rate for service under Rate
Schedule FTS-1 Reservation Charge, the variable component
thereof, and any applicable surcharges, to be paid on a
volumetric basis.
No minimum flow requirements.
A right to PG&E to an unlimited number of recalls from and
reassignments to NNG of this released capacity or any
portion thereof; provided that, PG&E's recall rights are
limited to the extent the above capacity was not nominated
by NNG on the preceding day and may be made only with notice
to NNG at least 2 hours prior to PGT's normal nomination
deadline. To the extent PGT capacity is unutilized by PG&E,
it shall be reassigned to NNG with notice at least 2 hours
prior to PGT's normal nomination deadline, up to 56,000
MMBtu/day of capacity referenced above.
ACCEPTANCE
If NNG is in agreement with the business terms of this offer,
please execute this letter where provided below and return it to
the undersigned by the close of business May 20, 1994. PG&E will
then prepare a complete formal agreement for the Release. Any
contract arising out of this offer becomes binding only upon its
execution by both PG&E and NNG.
Sincerely,
/s/ Jack Jenkins-Stark
JACK JENKINS-STARK
Senior Vice President and General Manager
Gas Supply Business Unit
JKH:pdl
cc: Randy Friedman
For Northwest Natural Gas Co. By: /s/ Dwayne L. Foley
Legal Department Name: Dwayne L. Foley
Approved As To Form
This Date /s/ SKA Date: 5/18/94
By 5/18/94
Contact designation for offeree for purposes of questions and
notices:
Name: Jann Huie King Gerry Malin
Title: Associate Area Director Vice President, Gas
Company: Pacific Gas and Electric Co. Services
2950341 Canada Ltd.
[AltaGas Services, Inc.]
(Agent for Alberta &
Southern Gas Co., Ltd.)
Address: Mail Code T4B 2700, 240 - 4th Avenue,
P. O. Box 770000 S. W.
San Francisco, CA 94177 Calgary, Alberta CANADA
T2P 4L7
Phone: (415) 973-3739 (403) 691-7518
Facsimile: (415) 973-0881 (403) 691-7576