May 9, 1994
MODIFICATION NO. 8
TO
SAN JUAN PROJECT OPERATING AGREEMENT
BETWEEN
PUBLIC SERVICE COMPANY OF NEW MEXICO
AND
TUCSON ELECTRIC POWER COMPANY
THIS MODIFICATION No. 8 to the San Juan Project Operating
Agreement between PUBLIC SERVICE COMPANY OF NEW MEXICO ("New
Mexico") and TUCSON ELECTRIC POWER COMPANY ("Tucson"), hereinafter
referred to collectively as the "Parties", is hereby entered into
and executed as of this ____ day of _________________, 1993.
WITNESSETH:
WHEREAS, the Parties entered into an agreement described as
the San Juan Project Operating Agreement effective January 1, 1973,
as modified by Modification No. 1 on May 16, 1979, Modification
No. 2 on December 31, 1983, Modification No. 3 on July 17, 1984,
Modification No. 4 on October 25, 1984, Modification No. 5 on
July 1, 1985, Modification No. 6 on April 1, 1993, and Modification
No. 7 on April 1, 1993 (as so modified, the "Operating Agreement"),
which establishes certain terms and conditions relating to their
participation in and responsibility for the operation of the San
Juan Project; and
WHEREAS, on August 18, 1980, the Parties entered into a Coal
Sales Agreement with San Juan Coal Company ("SJCC") for the supply
of coal for the San Juan Project (as from time to time amended,
supplemented or modified, the "Coal Sales Agreement"); and
WHEREAS, in order to operate the San Juan Project more
efficiently, the Parties desire to amend the terms and conditions
under which fuel expenses are allocated among the Participants and
Unit Participants; and
WHEREAS, the Parties desire to amend the Operating Agreement
in other particulars as described herein,
NOW, THEREFORE, the Parties agree that the Operating Agreement
is hereby amended as follows:
1.0 Effective Date: This Modification No. 8 shall, subject
to the receipt of any required regulatory action, be deemed
effective as of January 1, 1993.
2.0 DEFINITIONS: Section 5 is amended by adding the
following defined terms:
5.17.1 ANNUAL MINIMUM COAL DELIVERY: The quantities of
coal set forth on Exhibit H to the Coal Sales Agreement, which
amounts are shown on Attachment A to this Modification No. 8.
5.17.2 FIXED FUEL EXPENSE: Those expenses itemized on
Attachment B, Summary of Fixed Fuel Expense, to this
Modification No. 8. To the extent further modifications to
the Coal Sales Agreement result in changes to such expenses,
the Operating Agent shall promptly modify Attachment B to
reflect those changes.
5.17.3 MINIMUM FIXED FUEL EXPENSE: Fixed Fuel Expense
associated with the Annual Minimum Coal Delivery.
5.17.4 PARTICIPANT MINIMUM FIXED FUEL EXPENSE: For each
Participant or Unit Participant, the Minimum Fixed Fuel
Expense multiplied by that Participant's or Unit Participant's
Participation Share as provided in Section 6.3.5 of the
Co-Tenancy Agreement.
5.17.5 EXCESS FIXED FUEL EXPENSE: Annual Fixed Fuel
Expenses in excess of Minimum Fixed Fuel Expense.
5.17.6 CARRY-OVER TONS: Coal deliveries made annually
to the San Juan Project by SJCC in excess of the Annual
Minimum Coal Delivery, as more fully described in Section
9.2(b)(3) of the Coal Sales Agreement.
5.17.7 VARIABLE FUEL EXPENSES: All fuel expenses not
specifically identified as Fixed Fuel Expense.
5.17.8 CARRY-OVER TONS ACCOUNT: A record system
established and maintained by the Operating Agent to allocate
to the Participant or Unit Participant Carry-over Tons earned
by the San Juan Project.
3.0 Section 5.21, Fixed Fuel, shall be deleted in its
entirety.
4.0 Sections 18.1 through 18.5 are amended in their entirety
to read as follows:
18.1 The quantity of coal delivered to the San Juan
Project shall be determined by the belt scales, in accordance
with the Coal Sales Agreement.
18.2 The Participants shall maintain a coal inventory
including an Emergency Coal Storage Pile for Units 1, 2, 3 and
4, wherein the Participants and Unit Participants shall have
Participation Shares as provided in Section 6.3.5 of the
Co-Tenancy Agreement. The Engineering and Operating Committee
shall establish an optimum coal inventory tonnage for Units 1,
2, 3 and 4 in total. Coal inventory shall be accounted for in
FERC Account 151.
18.3 Costs of the coal inventory and fuel expense shall
be apportioned among and paid for by the Participants and Unit
Participants on the following basis:
18.3.1 Costs that are classified as Fixed Fuel
Expenses shall be charged to FERC Account 151. Such
Fixed Fuel Expenses shall then be charged monthly to FERC
Account 501 and shall be apportioned among and paid for
by the Participants and Unit Participants on the basis of
the percentage that each Participant's or Unit
Participant's monthly Net Energy Generation and auxiliary
generation bears to the total monthly Net Energy
Generation and auxiliary generation. The Fixed Fuel
Expense balance in FERC Account 151 shall be reduced to
zero monthly by charging Fixed Fuel Expense to FERC
Account 501. Such Fixed Fuel Expense shall be reconciled
annually among the Participants and Unit Participants
based on the Participation Shares as provided in Section
6.3.5 of the Co-Tenancy Agreement.
18.3.2 Costs that are classified as Variable Fuel
Expenses shall be charged to the fuel inventory or
credited (as withdrawn) to FERC Account 151 and such
costs shall be apportioned among and paid for by the
Participants and Unit Participants on the basis of the
Participation Shares as provided in Section 6.3.5 of the
Co-Tenancy Agreement. Variable Fuel Expenses related to
coal requirements shall be charged to FERC Account 501 as
determined by dividing the total number of tons of coal
at the beginning of the month, plus the coal delivered
during the month, into the total recorded variable cost
and multiplying the cost per ton so derived by the number
of tons withdrawn. The Variable Fuel Expenses shall be
apportioned among and paid for by the Participants and
Unit Participants on the basis of the percentage that
each Participant's or Unit Participant's monthly Net
Energy Generation bears to the total monthly Net Energy
Generation of the Unit(s).
18.3.3 All other Variable Fuel Expenses (including,
but not limited to fuel oil, fuel handling, ash disposal)
incurred which are chargeable to FERC Account 501 shall
be apportioned among the Participants in accordance with
Section 18.3.2.
18.3.4 The Participants acknowledge and recognize
that the Unit Participants have acknowledged the terms
and conditions of the Coal Sales Agreement, wherein,
among other terms and conditions, an annual Fixed Fuel
Expense must be paid by the San Juan Project each year to
SJCC. Each Participant and Unit Participant shall pay
its Participant's Minimum Fixed Fuel Expense plus a
proportional share of Excess Fixed Fuel Expense. Such
Excess Fixed Fuel Expense shall be allocated to the
Participants and Unit Participants based on each
Participant's and Unit Participant's percentage share of
Carry-over Tons created during that calendar year.
18.3.5 The Participants acknowledge and recognize
that the Unit Participants have acknowledged the monthly
allocation of Fixed Fuel Expenses based on the monthly
Net Energy Generation, as described in Section 18.3.1,
may result in an individual Participant or Unit
Participant having been allocated Minimum Fixed Fuel
Expense and Excess Fixed Fuel Expense equal to, less
than, or greater than its proportional share of such
expenses. Any overpayment or underpayment of a
Participant's or Unit Participant's Minimum Fixed Fuel
Expenses and Excess Fixed Fuel Expense shall be included
as an adjustment to the final Participant and Unit
Participant fuel invoices in a given year. Payments
received from Participants or Unit Participants which
have underpaid during the year shall be used by the
Operating Agent to pay SJCC for any Minimum Fixed Fuel
Expense not paid and to compensate other Participants or
Unit Participants which have overpaid.
18.3.6 The Participants acknowledge and recognize
that the Unit Participants have acknowledged the
provisions of the Coal Sales Agreement that create Carry-
over Tons. To the extent that Carry-over Tons are
created and paid for by individual Participants or Unit
Participants, the Carry-over Tons will be allocated to
each Participant's or Unit Participant's Carry-over Tons
Account in proportion to each Participant's or Unit
Participant's allocation of Excess Fixed Fuel Expense for
the calendar year. At the direction of a Participant or
Unit Participant, the Operating Agent shall transfer
Carry-over Tons from an individual Participant's or Unit
Participant's Carry-over Tons Account to another
Participant's or Unit Participant's Carry-over Tons
Account. Carry-over Tons shall be accounted for on the
basis of tonnage only, with no financial value attached
thereto. Participants and Unit Participants shall apply
any existing Carry-over Tons from their account to the
payment of a minimum tonnage deficiency invoice. When
Carry-over Tons are used by the San Juan Project,
Participants and Unit Participants whose Carry-over Tons
Accounts are reduced shall be compensated by Participants
and Unit Participants whose Carry-over Tons Accounts have
no balance or an inadequate balance to meet their
obligation for the Annual Minimum Coal Delivery. The
value of this compensation shall be based on the actual
cost billed by SJCC.
18.3.7 The Participants acknowledge and recognize that
the Unit Participants have acknowledged the provisions of
Attachment C to this Modification No. 8 as representative of
the allocation and billing methodology agreed to as a result
of this Modification No. 8. Attachment C reflects the
allocation of expenses among the Participants and Unit
Participants based on Modification No. 8 and actual expenses
incurred for fuel expense for the month of January 1993.
18.4 The Operating Agent shall provide the Participants
and Unit Participants a monthly written report on the
following items related to coal deliveries at the San Juan
Project:
18.4.1 Annual Minimum Coal Delivery for the year.
18.4.2 Annual Minimum Coal Delivery allocated among
the Participants and Unit Participants.
18.4.3 Total actual coal deliveries by SJCC to the
San Juan Project for each month and for the year to date.
18.4.4 Total actual coal deliveries to the San Juan
Project for each month and for the year to date,
allocated to the Participants and Unit Participants.
18.4.5 Total cost and tonnage of inventory
allocated to the Participants and Unit Participants.
18.4.6 Fixed Fuel Expense and Variable Fuel Expense
allocated to the Participants and Unit Participants for
each month and for the year to date.
18.4.7 Status of Carry-over Tons for the San Juan
Project, allocated to the Participants and Unit
Participants.
18.5 The Operating Agent shall replace the tons of coal
withdrawn from inventory on a ton for ton basis according to
the coal withdrawn from inventory for the month, such
replacement to reflect anticipated generation usage in the
following month. The cost of this replacement shall be
apportioned among the Participants in accordance with Sections
18.2 and 18.3.
5.0 Section 15.2 shall be amended in its entirety to read as
follows:
The Engineering and Operating Committee may authorize Capital
Additions, Capital Betterments and Capital Replacements not
included in the annual capital expenditures budget; provided,
that such Capital Additions, Capital Betterments, and Capital
Replacements shall not exceed in any one year the sum of two
hundred and fifty thousand dollars ($250,000) for each such
addition, betterment or replacement, unless also authorized by
the Coordination Committee.
6.0 Section 15.4 shall be amended in its entirety to read as
follows:
The Operating Agent shall submit to the Participants a
forecast of cash requirements by months for Capital Additions,
Capital Betterments and Capital Replacements. Said forecast
will be submitted on a yearly basis after final budget
approvals have been made. A revised forecast shall be
submitted when the capital expenditures budget is revised, or
when significant changes in monthly expenditures from those
previously forecast are anticipated. The Operating Agent
shall be authorized to make expenditures related to Capital
Additions, Capital Betterments and Capital Replacements not
included in the annual capital expenditures budget; provided,
however, that such expenditures for Capital Additions, Capital
Betterments and Capital Replacements shall not exceed in any
one year the greater of the sum of fifty thousand dollars
($50,000) or a twenty percent (20%) increase in the total
amount originally authorized for each such Capital Addition,
Capital Betterment or Capital Replacement, unless also
authorized by the Engineering and Operating Committee.
IN WITNESS WHEREOF, the Parties hereto have caused this
Modification No. 8 to the Operating Agreement to be executed as of
the _____ day of _____________, 1993.
PUBLIC SERVICE COMPANY OF NEW MEXICO
By: ________________________________
Its: ________________________________
TUCSON ELECTRIC POWER COMPANY
By: ________________________________
Its: ________________________________
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
This instrument was acknowledged before me on_______________,
1993, by ______________________________, as Senior Vice President
of Public Service Company of New Mexico, a New Mexico corporation,
on behalf of the corporation.
_______________________________
Notary Public
My Commission Expires:
_________________________
STATE OF ARIZONA )
) ss.
COUNTY OF PIMA )
This instrument was acknowledged before me
on_________________, 1993, by ________________________________, as
Vice President of Tucson Electric Power Company, an Arizona
corporation, on behalf of the corporation.
________________________________
Notary Public
My Commission Expires:
________________________