Exhibit 10
AMENDED AND RESTATED
WHOLESALE POWER SUPPLY AGREEMENT
BETWEEN
TUCSON ELECTRIC POWER COMPANY
AND
NAVAJO TRIBAL UTILITY AUTHORITY
DATED JUNE 25, 1997
TABLE OF CONTENTS
-----------------
SECTION
I. PARTIES .................................................1
II. DEFINITIONS..............................................1
III. TERM, TERMINATION AND RIGHT TO REOPEN....................6
A. Term .................................................6
B. Effective Date .......................................6
C. Termination ..........................................6
D. Right to Reopen ......................................6
E. Filing of Amended and Restated Agreement .............7
F. Representations of the Parties ...................7
IV. PHASE I: 1997 - 1999 ENERGY AND CAPACITY................8
A. Hourly Requirements ..................................8
1. Generation Billing Demand ........................8
2. Loss of Coal Mining Load .........................9
3. Generation Demand Charge .........................9
4. Energy Charges ...................................9
5. Transmission Losses ..............................9
B. Wholesale Market Purchases - New Industrial Load .....9
C. CRSP Allocation ......................................9
D. Energy Scheduling and Dispatching ....................10
V. PHASE I: 1997 - 1999 TRANSMISSION.......................10
A. Hourly Requirements ..................................10
B. CRSP Allocation ......................................10
C. Wholesale Market Purchases - New Industrial Load .....11
i
D. Billing for Transmission Service .....................11
E. Transmission Losses ..................................11
VI. PHASE II: 1999 - 2009 ENERGY AND CAPACITY...............11
A. TEP Firm Power Supply ................................11
1. Generation Billing Demand ........................11
2. Generation Demand Charges ........................11
3. Energy Charges ...................................11
4. Energy Scheduling ................................11
5. Transmission Losses .............................12
B. Resource Management of CRSP Allocation ...............12
C. Wholesale Market Purchases ...........................12
1. Initial Selection of Option ......................12
2. Options ..........................................12
a. Option 1 .....................................12
b. Option 2 .....................................12
c. Option 3 .....................................12
3. Subsequent Selection of Options ..................13
4. Coordination of NTUA Resources Under Option 3 ...13
a. Description ..................................13
b. TEP Supplemental Service .....................14
(i) Energy Price.............................14
(ii) Other Charges ...........................14
c. Market Access Service ........................14
(i) Contracts with Third-Party Suppliers.....14
(ii) Contracts with TEP ......................14
(iii)Pricing .................................14
5. Firm Backup Power Supply .........................15
a. Pricing ......................................15
b. Energy .......................................15
6. Management Fee for Market Services ...............15
a. Service Provided .............................15
ii
(i) Fee.......................................15
(ii)Billing ..................................15
D. Combustion Turbine Option ............................16
E. Local Generation .....................................16
VII. PHASE II: 1999 - 2009 TRANSMISSION......................16
A. TEP Firm Power Supply ................................16
B. CRSP Allocation ......................................16
C. Wholesale Market Purchases ...........................16
D. Billing for Transmission Service .....................17
E. Transmission Losses ..................................17
VIII.INDUSTRIAL LOAD RETENTION ...............................17
IX. BILLING AND PAYMENT......................................17
A. Billing ..............................................17
1. Bill Format ......................................17
2. Billing Inquiries ................................18
B. Payment ..............................................18
C. Disputed Bills .......................................18
D. Taxes ................................................19
E. Audit Rights .........................................19
X. AUTHORIZED REPRESENTATIVES...............................19
A. Designation ..........................................19
B. Duties ...............................................20
XI. UNCONTROLLABLE FORCES....................................20
XII. ASSIGNMENT OF AGREEMENT..................................20
XIII.NO DEDICATION OF FACILITIES..............................21
iii
XIV. NOTICES..................................................21
XV. GOVERNING LAW............................................22
XVI. NO THIRD PARTY RIGHTS....................................22
XVII.WAIVERS..................................................22
XVIII.RESOLUTION OF DISPUTES..................................23
XIX. LIABILITY AND INDEMNITY..................................23
XXX. INTERPRETATION...........................................24
A. Prior Negotiations ...................................24
B. Descriptive Headings .................................24
C. Governing Agreement ..................................24
EXHIBIT A Phase I Rate Schedule 1997 - 1999..................A-1
EXHIBIT B Phase II Rate Schedule 1999 - 2009.................B-1
EXHIBIT C Control Area Services..............................C-1
EXHIBIT D Firm Backup Power Supply Demand Charges............D-1
EXHIBIT E NTUA - TEP Network Transmission Agreement..........E-1
iv
I. PARTIES
The Parties to this Amended and Restated Wholesale Power Supply Agreement
("Agreement") are TUCSON ELECTRIC POWER COMPANY, an Arizona Corporation
("Tucson" or "TEP") and the NAVAJO TRIBAL UTILITY AUTHORITY ("NTUA"), an
enterprise and public agency of the Navajo Nation. Tucson and NTUA may
collectively be referred to herein as "Parties" or singularly as a "Party."
Tucson is engaged in the generation and distribution of electric power and
energy in the states of Arizona and New Mexico. Tucson also sells at wholesale
throughout the western United States and provides transmission service pursuant
to its Open Access Transmission Tariff.
NTUA is engaged in the distribution of power and energy on the Navajo
Reservation in northern Arizona, southern Utah and northwest New Mexico.
Electrical system interconnections exist which permit Tucson to sell and
deliver to NTUA, and NTUA to purchase and receive power and energy.
Tucson and NTUA previously entered into a Wholesale Power Supply Agreement
dated January 5, 1993, effective June 1, 1993, FERC Rate Schedule No. 93. The
Parties wish to amend and restate that Agreement to provide for the firm sale
and purchase of energy and capacity under different terms, and to separate and
unbundle transmission service from the sale of capacity and energy, as required
by FERC Orders 888 and 888-A. This amended and restated Agreement, once
accepted by FERC, shall replace in its entirety the January 5, 1993, Wholesale
Power Supply Agreement.
Tucson desires to sell and NTUA desires to purchase firm capacity and
energy from Tucson. NTUA will purchase, pursuant to a separate NTUA-TEP Network
Transmission Agreement, transmission for delivery of power and energy to stated
Delivery Points pursuant to this Agreement. The Parties therefore, agree as
follows:
II. DEFINITIONS
AGGREGATE DEMAND CHARGE: The charge per kilowatt-month for capacity TEP
delivers and NTUA receives at the Delivery Points, which includes the price of
1
generation and the price of basic transmission service and ancillary services.
AGREEMENT: This Tucson-NTUA Amended and Restated Wholesale Power Supply
Agreement, including all exhibits, attachments and any written amendments to
which the Parties may agree from time to time.
AUTHORIZED REPRESENTATIVE: The representative of a Party designated in
accordance with Section X.
CAPACITY LOSSES: The capacity required to compensate for transmission
losses on third party transmission systems pursuant to Sections IV.A.5, V.E,
VI.A.5 and VII.E.
COLLECTED FUNDS: Funds that have been deemed by the recipient bank, in
accordance with standard banking practice, to be cleared and therefore
immediately available for investment or disbursement.
COMBUSTION TURBINE: A peaking resource planned for and installed by TEP
in the Tucson vicinity.
CONTROL AREA SERVICES: The FERC defined Ancillary Services included in
Tucson's Open Access Tariff and as detailed in Exhibit C.
CONTRACT YEAR: January 1 through December 31, after the first seven
months of Phase II.
CRSP ALLOCATION: Capacity and energy available to NTUA pursuant to
Contract No.87-SLC-0013, as amended, between WAPA and NTUA; such Scheduled CRSP
Capacity and Energy is delivered directly to NTUA at the Kayenta and Longhouse
Valley substations over WAPA's transmission system.
DELIVERY POINTS: The points at which Tucson shall deliver NTUA's
capacity and energy as per Exhibit E, NTUA-TEP Network Transmission Agreement,
which shall be WAPA's Shiprock 345-kV, San Juan 345-kV, McKinley 345-kV, Four
Corners 345-kV, Springerville 345-kV and Saguaro 500-kV. Other Delivery Points
may be agreed upon by the Authorized Representatives.
ENERGY CHARGE: The charge per kilowatt-hour for energy TEP delivers and
NTUA receives at the Delivery Points.
ENERGY LOSSES: The energy required to compensate for transmission losses
on third-party transmission systems pursuant to Section IV.A.5, V.E., VI.A.5,
and VII.E.
2
Firm Backup Power Supply: The provision of capacity and energy to
NTUA to satisfy WSCC and NERC reliability requirements and to backup Market
Access Service, TEP Supplemental Service, as well as participation in a
combustion turbine project with Tucson or Local Generation resources. See
Western Systems Coordinating Council Power Supply Design Criteria, revised
March 1997.
GENERATION BILLING DEMAND ("GBD"): The kilowatt demand for which NTUA
shall pay the Generation Demand Charge.
GENERATION DEMAND CHARGE: The charge per kilowatt-month for generating
capacity TEP delivers and NTUA receives at the Delivery Points.
HOURLY LOAD: The coincident kilowatt demand in any hour as measured at
the Metering Points except Other Load.
INDEPENDANT SYSTEM OPERATOR ("ISO"): A regulated organization that may
be established in the desert southwest region to, among other things: (i)
operate or coordinate the operation of the bulk power transmission in the
region so as to assure its reliable and efficient use; and (ii) facilitate non-
discriminatory, open access to the regional transmission system.
LOCAL GENERATION: An electric generating resource, the output to which
NTUA is solely or partially entitled and which is located in NTUA's service
territory and connected to its distribution system.
MANAGEMENT FEE: An assessed charge for the coordination of all market
services provided under Section VI.C.6.
MARKET ACCESS SERVICE: Service that allows NTUA to directly access the
energy market to serve its retail and wholesale requirements customers at
prices that are determined, from time to time, by the energy marketplace.
METERED HIGH DEMAND: The highest Hourly Load during the month.
METERED POINTS: The points at which NTUA shall receive its hourly
requirements for purposes of billing and load control and may include the
following points: Nenahnezhad 69-kV, Kayenta 230-kV, Long House Valley 69-kV,
Yah-Ta-Hey 115-kV, Gray Mountain 69-kV, WAPA's Shiprock 115-kV, Indian Wells
69-kV, Jedditto 69-kV, Leupp 12.5-kV, Gap 69-kV, Copper Mine 69-kV, Lechee 69-
kV, Churchrock 13.8-kV, and other metering points as agreed to by the
3
Authorized Representatives.
NATIVE WHOLESALE LOAD CUSTOMER: A customer such as NTUA which has
existing transmission service with a term of one year or more who continues to
have the right to take transmission service from Tucson when its contract
expires, rolls over or is renewed, regardless of whether that customer
continues to purchase capacity and energy from Tucson.
NET BACKUP DEMAND: The Metered High Demand less NTUA's CRSP Allocation
less the TEP Firm Power Supply plus the coincident output of Local Generation
and less any capacity that is credited pursuant to Section VI.C.5. Net Backup
Demand is illustrated by the following equation:
NBD = MHD - CRSP - TFP + CLG - CRCT/LG
Where: NBD = Net Backup Demand
MHD = Metered High Demand
CRSP = NTUA's Colorado River Storage Project Allocation
TFP = TEP Firm Power Supply
CLG = Coincident output of Local Generation
CRCT/LG = Capacity credit for Combustion Turbine or Local Generation
pursuant to Section VI.C.5.
NETWORK TRANSMISSION CHARGE ("TN"): The charge per kilowatt-month for
basic transmission service and ancillary services that is calculated monthly
and billed to NTUA in accordance with the NTUA - TEP Network Transmission
Agreement.
NEW INDUSTRIAL LOAD: An industrial load not served by NTUA prior to the
execution of this Agreement with an expected or actual peak hourly demand of at
least 3 MW.
NTUA-TEP NETWORK TRANSMISSION AGREEMENT: An agreement for use of TEP's
transmission system pursuant to TEP's Open Access Transmission Tariff which
allows power to be delivered to NTUA under this Agreement and from other
sources, a copy of this agreement is attached hereto as Exhibit E.
OTHER LOAD: The electric load at one or more of the following locations
where NTUA serves its customers: (i) the electric railroad which is currently
used for hauling coal to the Navajo Generating Station, and (ii) remote
locations which are isolated from NTUA's main electric distribution system such
4
as Bisti, Red Mesa, and Mexican Hat.
PHASE I: July 1, 1997 through May 31, 1999.
PHASE II: June 1, 1999 through December 31, 2009.
PLAN: An operating plan developed by NTUA and TEP which outlines the
acquisition and expected usage of NTUA's resources and the wholesale
marketplace to serve NTUA's load requirements for a specified time period
pursuant to Option 3 under Phase II of this Agreement.
SCHEDULED CRSP CAPACITY: The maximum capacity available to NTUA in a
given month under the CRSP Allocation.
SCHEDULED CRSP ENERGY: The energy available to NTUA from time to time
under the CRSP Allocation, including any surplus energy that is made available
from time to time.
SUMMER MONTHS: The months of June, July, August and September.
TEP FIRM POWER SUPPLY : The firm obligation which Tucson shall have
to supply to NTUA firm capacity and energy at the Delivery Points in the
amounts specified in Section IV.A.1 for Phase I and in the amounts as specified
in Section VI.A.1 for Phase II. This supply will be neither interrupted nor
reduced, unless the integrity of the transmission system or the ability of TEP
to provide service to its retail customers or to Salt River Project under the
1990-2011 Power Sale Agreement is jeopardized, and to the extent that such
interruptions of service to NTUA are in keeping with good utility practices.
TEP SUPPLEMENTAL SERVICE: A service which allows NTUA to purchase energy
from TEP to serve its retail and wholesale requirements customers at prices
that are determined hourly by the energy marketplace.
TRANSMISSION: Either non-firm, firm or network transmission service
provided pursuant to Tucson's Open Access Transmission Tariff as filed with
FERC.
TRANSMISSION BILLING DEMAND ("TBD"): The kilowatt demand for which NTUA
shall pay the Network Transmission Charge in accordance with the NTUA-TEP
Network Transmission Agreement.
UNCONTROLLABLE FORCES: Any event beyond the control of the Party unable
to perform any of its obligations hereunder including, but not limited to,
5
failure of or threat of immediate failure of facilities; flood, earthquake,
storm, fire, lightning and other natural catastrophes; epidemic, war, riot,
civil disturbance or disobedience; labor dispute, labor or material shortage;
sabotage; restraint by court order or public authority; and action or nonaction
by, or failure to obtain the necessary authorizations or approvals from any
governmental agency or authority, which, by exercise of due diligence, such
Party could not reasonably have been expected to avoid and which, by exercise
of due diligence, it is unable to overcome.
WAPA: Western Area Power Administration.
Winter Months: All months other than Summer Months.
III. TERM, TERMINATION, RIGHT TO REOPEN, AND EFFECTIVE DATE
A. TERM
The Agreement shall terminate on December 31, 2009, subject to the
right of either party to reopen the agreement, as set forth in Section III.D.
B. EFFECTIVE DATE
The Agreement shall be effective upon: (i) acceptance for filing of
this Agreement by the Federal Energy Regulatory Commission ("FERC") and (ii)
the written approval of the Administrator of the Rural Utilities Service
("RUS") and of the Governor of the National Rural Electric Cooperative
Finance Corporation ("CFC").
C. TERMINATION
This Agreement shall not be subject to termination except as provided
herein.
D. RIGHT TO REOPEN
1. Each party shall have the right to request reopening of the
Agreement for any reason upon twelve months advance written notice, provided
however, that such notice cannot be given prior to December 31, 2002. Should
the Parties fail to successfully negotiate a new agreement within the twelve-
month period after written notice, this Agreement shall terminate. Subject to
the notice provision above, the earliest effective termination hereunder shall
6
be December 31, 2003.
2. Each Party shall also have the right to request, in writing,
reopening of the Agreement at any time after June 1, 1999, if in any twelve
month period, the twelve month average firm on-peak Palo Verde Index as
published in the Wall Street Journal, is less than 1.2 cents per kWh or greater
than 4.0 cents per kWh. Such request must be made within 180 days of the
occurrence of an average Palo Verde Index price outside the above-described
bandwith. Should the Parties fail to negotiate a new Agreement within twelve
months after written notice is given, this Agreement shall terminate at either
Party's request. If the termination occurs at NTUA's request, then on the tenth
day of each month following the termination of this Agreement, NTUA will make
payment of $60,000 to Tucson in each month from the date of termination through
December 31, 2003; such payments to Tucson are to be separate from other
payments due either Party pursuant to this Agreement.
3. This Agreement recognizes that the formation of an Independent
System Operator ("ISO") may affect certain provisions of this Agreement. The
Parties agree to negotiate in good faith to amend this Agreement as necessary
to accommodate an ISO should such ISO be approved by the FERC.
E. FILING OF AMENDED AND RESTATED AGREEMENT
Tucson shall file this Agreement with FERC. NTUA shall support
Tucson's filing by intervening in support of that filing at FERC. NTUA will
file and seek approval of this Agreement with the RUS and CFC.
If, after filing this Agreement, FERC requires any material modifications
to this Agreement which are unacceptable to either Party, TEP shall cause the
submittal of this Agreement for filing with FERC to be withdrawn. If, after
filing this Agreement, RUS or CFC requires any material modifications to this
Agreement that are unacceptable to either Party, NTUA shall cause the submittal
of this Agreement for filing with such parties to be withdrawn.
However, until all necessary regulatory approvals of this Agreement have
been obtained, the Wholesale Power Sale Agreement, shall remain in full force
and effect, and NTUA shall pay all charges thereunder. If this Agreement does
not receive all necessary approvals, the Wholesale Power Sale Agreement, dated
7
January 5, 1993, shall remain in effect throughout its term. If all regulatory
approvals are obtained, the Agreement shall be deemed to have been effective
July 1, 1997. Within 30 days of receipt of all approvals, TEP shall refund to
NTUA the difference between monies paid under the Wholesale Power Sale
Agreement dated January 5, 1993, since July 1, 1997 and monies that would have
been paid pursuant to this Agreement since July 1, 1997.
F. REPRESENTATIONS OF THE PARTIES
1. Tucson hereby represents, warrants and covenants to NTUA as
follows:
a) Tucson is an Arizona corporation duly organized, validly
existing and in good standing under the laws of the State of Arizona and has
corporate power and authority to execute and deliver this Agreement and perform
its obligations hereunder, and to carry on its business as it is now being
conducted and as it is contemplated hereunder to be conducted during the term
hereof.
b) The execution, delivery and performance of this Agreement by
Tucson has been duly and effectively authorized by all requisite corporate
action.
2. NTUA hereby represents, warrants and covenants to Tucson as
follows:
a) NTUA is an enterprise and public agency of the Navajo Nation;
is duly organized, validly existing and in good standing under the laws of the
Navajo Nation; and has the requisite power and authority to execute this
Agreement, to perform its obligations hereunder, and to carry on its business
as it is now being conducted and as it is contemplated hereunder to be
conducted during the term hereof and this Agreement has been duly executed and
delivered by NTUA and is the legal, valid and binding obligation of NTUA,
enforceable against it in accordance with its terms.
b) Subject to the provisions of Section III.E, the execution,
delivery and performance of this Agreement by NTUA have been duly and effec-
tively authorized by all requisite action.
8
IV. PHASE I: 1997 - 1999 ENERGY AND CAPACITY
During Phase I of this Agreement, the Parties intend that NTUA shall
satisfy its load requirements, except Other Load, from two sources: (i)TEP Firm
Power Supply pursuant to this Agreement, and (ii) its CRSP Allocation. NTUA may
satisfy New Industrial Load through market purchases. To satisfy the first
source, the Parties agree that:
A. HOURLY REQUIREMENTS
The Parties agree that for Phase I, Tucson shall sell and NTUA shall
purchase a TEP Firm Power Supply for NTUA's Hourly Load, excluding market
purchases for New Industrial Load and loads served with NTUA's CRSP Allocation,
upon the following terms:
1. GENERATION BILLING DEMAND: For Phase I, the Generation Billing
Demand shall be 60 MW. For this Generation Billing Demand, Tucson agrees to
deliver TEP Firm Power Supply in amounts up to 69 MW in Summer Months, and
higher amounts, as required, in Winter Months. If the TEP Firm Power Supply in
the Summer Months exceeds 69 MW, the Generation Billing Demand will ratchet on
a twelve-month basis to 60 MW plus any amounts in excess of 69 MW. Generation
Billing Demand in Winter Months shall be the same as the Summer Generation
Billing Demand. In Phase I TEP Firm Power Supply is the actual Hourly Load plus
Capacity Losses, less Scheduled CRSP Capacity, less NTUA market purchases for
New Industrial Load.
2. LOSS OF COAL MINING LOAD: If NTUA anticipates long-term (greater
than six consecutive months) loss of coal mining loads in the aggregate of 9 MW
or greater, NTUA shall give Tucson sixty days prior written notice of the
anticipated date and amounts of load loss. Tucson shall reduce the Generation
Billing Demand effective the next billing period after the reduction in load or
shutdown, by one-half of the amount of load lost. This reduction shall only
apply during Phase I.
3. GENERATION DEMAND CHARGE: The Generation Demand Charges for Phase
I are set forth in Exhibit A, Phase I Rate Schedule.
4. ENERGY CHARGES: For Phase I, the Energy Charge shall be as stated
9
in Exhibit A, for the amount of the total energy usage recorded monthly at all
Metering Points, plus Energy Losses, less Scheduled CRSP Energy, less energy
from NTUA market purchases for New Industrial Load to the extent such energy is
recorded at the Metering Points.
5. TRANSMISSION LOSSES: Tucson shall supply and be responsible for
transmission losses to the Delivery Points. Tucson shall supply Capacity Losses
and Energy Losses to compensate for transmission losses from the Delivery
Points to the Metering Points as specifically required by arrangements between
NTUA and third-party transmission owners.
B. WHOLESALE MARKET PURCHASES - NEW INDUSTRIAL LOAD
NTUA shall have the right to seek alternate suppliers for New
Industrial Load.
C. CRSP ALLOCATION
Tucson shall manage NTUA's CRSP Allocation such that: (i) it satisfies
a portion of NTUA's load, and (ii) NTUA receives full credit in the calculation
of Generation Billing Demand. It is understood that NTUA's CRSP Allocation is
delivered over WAPA's transmission system and does not involve or require the
use of Tucson's transmission system.
D. ENERGY SCHEDULING AND DISPATCHING
1. In Phase I, Tucson shall manage NTUA's CRSP Allocation, TEP Firm
Power Supply, and market purchases for New Industrial Load to serve NTUA's
total load requirements except Other Load. The Authorized Representatives
shall make procedural modifications as necessary for this management, including
all necessary billing procedure modifications.
2. Semiannually, NTUA shall provide Tucson with an estimate of the
monthly energy deliveries under its CRSP Allocation. Tucson shall schedule
NTUA's CRSP Allocation with WAPA.
10
3. In the event that either Party determines that it is adversely
impacted by the scheduling and dispatching procedures, the Authorized
Representatives will agree to modify the procedures if at all possible, or to
discontinue such procedures if it becomes necessary. In the latter case, Tucson
shall schedule and dispatch according to guidelines provided by NTUA. The
Authorized Representatives will coordinate any changes affecting hourly
scheduling requirements.
4. Tucson shall maintain records of Hourly Loads and schedules of
energy transactions for accounting and operating purposes and upon request will
furnish copies of such records to NTUA.
V. PHASE I: 1997 - 1999 TRANSMISSION
A. HOURLY REQUIREMENTS
PROVISION OF TRANSMISSION SERVICE: NTUA, as an existing Native
Wholesale Load Customer, shall continue to have the right to take transmission
service pursuant to Section 2.2 of Tucson's Open Access Tariff. To accomplish
delivery of capacity and energy for Phase I, NTUA shall be responsible for
requesting and obtaining transmission service from Tucson under TEP's Open
Access Tariff for delivery to the Delivery Points.
B. CRSP ALLOCATION
The Parties recognize that NTUA's CRSP allocation is delivered to NTUA
by WAPA from WAPA's facilities, and, therefore, no TEP transmission is required
for TEP's management of CRSP Allocation because NTUA accepts direct delivery of
and title to the Allocation.
C. WHOLESALE MARKET PURCHASES - NEW INDUSTRIAL LOAD
If necessary, NTUA shall be responsible for requesting and obtaining
transmission service from Tucson for delivery to the Delivery Points for any
wholesale market purchases.
D. BILLING FOR TRANSMISSION SERVICE
TEP shall separate the transmission charges on all bills.
E. TRANSMISSION LOSSES
11
Tucson shall supply and be responsible for transmission losses to the
Delivery Points. Tucson shall supply Capacity Losses and Energy Losses to
compensate for transmission losses from the Delivery Points to the Metering
Points as specifically required by arrangements between NTUA and third-party
transmission line owners.
VI. PHASE II: 1999 - 2009 ENERGY AND CAPACITY
During Phase II of the Agreement, the Parties intend that NTUA may satisfy
its load requirements, except Other Load, through a combination of: (i)TEP Firm
Power Supply pursuant to this Agreement, (ii) its CRSP Allocation, (iii)
purchases from the wholesale power market, (iv) participation in a Combustion
Turbine project with Tucson, and (v) through Local Generation behind the
Metering Points. To accomplish this combination, the Parties agree:
A. TEP FIRM POWER SUPPLY
During Phase II, Tucson shall have the firm obligation to supply and
NTUA shall purchase 40 MW of TEP Firm Power Supply at the Delivery Points, in
the Summer Months and 50 MW in the Winter Months:
1. GENERATION BILLING DEMAND: Shall be 40 MW in all months for Phase
II.
2. GENERATION DEMAND CHARGES: The Generation Demand Charges for Phase
II are set forth in Exhibit B, Phase II Rate Schedule.
3. ENERGY CHARGES: The Energy Charges for Phase II shall be as stated
in Exhibit B, for the amount of TEP Firm Power Supply energy delivered at the
Delivery Points.
4. ENERGY SCHEDULING: In Phase II TEP and NTUA will develop
appropriate scheduling procedures and guidelines or shall utilize such
procedures and guidelines as developed and utilized in Phase I.
5. TRANSMISSION LOSSES: Tucson shall supply and be responsible for
transmission losses to the Delivery Points. Tucson shall supply Capacity Losses
and Energy Losses to compensate for transmission losses from the Delivery
Points to the Metering Points as specifically required by arrangements between
12
NTUA and third-party transmission owners. However, TEP's obligation to deliver
TEP Firm Power Supply shall not exceed the amounts described in Section VI.A.
B. RESOURCE MANAGEMENT OF CRSP ALLOCATION
Tucson shall manage NTUA's CRSP Allocation such that it satisfies a
portion of NTUA's load. It is understood that NTUA's CRSP Allocation is
delivered over WAPA's transmission system and does not involve or require the
use of Tucson's transmission system. Semiannually, NTUA shall provide Tucson
with an estimate of the monthly energy deliveries under its CRSP Allocation.
Tucson shall schedule NTUA's CRSP Allocation with WAPA.
C. WHOLESALE MARKET PURCHASES
This Section provides the options upon which the Parties have agreed to
accommodate other resources, allowing NTUA flexibility to manage its remaining
wholesale needs on its own or on a coordinated basis with TEP:
1. INITIAL SELECTION OF OPTION: By January 1, 1999 NTUA must make a
written election of Option 1, 2 or 3. This written election shall comply with
the notice provisions of this Agreement.
2. OPTIONS:
A. OPTION 1: NTUA may operate as an independent control area or
it may acquire Control Area Services from a third party and independently
obtain resources to meet the remainder of its total load requirements.
B. OPTION 2: NTUA may purchase Control Area Services from TEP and
independently obtain resources to meet the remainder of its total load
requirements. See Control Area Services in Exhibit C.
C. OPTION 3: NTUA may purchase Control Area Services from TEP and
in coordination with TEP obtain resources to meet its remaining load
requirements. See TEP Supplemental Service and Market Access Service in Section
VI.C.4, Combustion Turbine in Section VI.D, and Local Generation in Section
VI.E.
3. SUBSEQUENT SELECTION OF OPTIONS:
A. IF AT ANY TIME NTUA ELECTS OPTION 1, it waives its right to
select Options 2 or 3.
B. IF AT ANY TIME NTUA ELECTS OPTION 2, then:
13
(i) NTUA waives its right to exercise Option 3 at any time.
(ii) NTUA may elect Option 1 by giving ninety days written
notice to TEP.
C. IF NTUA INITIALLY ELECTS OPTION 3, then; NTUA may elect Option
1 or Option 2 upon ninety days written notice to TEP and NTUA thereby waives
the right to further service under Option 3.
If NTUA elects Options 2 or 3 it is required to purchase Control Area
Services from TEP unless such services are purchased from an ISO. Additionally,
if NTUA chooses Option 3 it is required to purchase Firm Backup Power Supply
from TEP to fulfill WSCC and NERC reliability requirements.
4. COORDINATION OF NTUA'S RESOURCES UNDER OPTION 3:
A. DESCRIPTION: At NTUA's direction, TEP will coordinate the
utilization of NTUA's resources and market purchases using its best efforts to
efficiently provide NTUA's electric supply requirements. Options for providing
service to NTUA include: its CRSP Allocation, TEP Firm Power Supply, TEP
Supplemental Service and Market Access Service, participation in a Combustion
Turbine project with Tucson, and Local Generation resource(s) as discussed
below. The Firm Backup Power Supply described later in Section VI.C.5 firms the
TEP Supplemental Service and Market Access Service, as well as any capacity
from participation in a Combustion Turbine project with Tucson or Local
Generation resource(s).
To coordinate NTUA's resource options to meet NTUA's retail obligations and
wholesale requirements customers' needs,TEP and NTUA Authorized Representatives
will meet periodically to discuss relevant market information, NTUA load
expectations and to jointly develop a Plan. The Plan will be furnished to TEP
in writing and TEP will act as NTUA's agent under the guidance of the Plan. The
Authorized Representatives or their designees will manage the Plan process.
These Authorized Representatives will develop specific procedures which will
guide the process of activating the Plan (in a manner which will try to comply
with the notion that neither Party takes on any risk that is the responsibility
of the other Party in accommodating the Plan).
B. TEP SUPPLEMENTAL SERVICE: Allows NTUA to purchase energy from
14
Tucson to serve any portion of its energy needs at prices determined by the
hourly marketplace. TEP Supplemental Service is priced as follows:
(I) ENERGY PRICE: The price for TEP Supplemental Service shall
be the Palo Verde Index for firm energy as published in the Wall Street Journal
(the index may be changed upon mutual agreement of the Authorized
Representatives) for each hour during which TEP Supplemental Service is
required, plus
(II) OTHER CHARGES: NTUA is also responsible for the
Management Fee as defined in Section VI.C.6 and the Firm Backup Supply charges
as defined in Section VI.C.5.
C. MARKET ACCESS SERVICE: Allows NTUA access to the energy market
through contracts with third parties or with TEP to serve NTUA's resource
requirements in addition to its CRSP Allocation, TEP Firm Power Supply and/or
TEP Supplemental Service.
(I) CONTRACTS WITH THIRD-PARTY SUPPLIERS: TEP agrees to act as
agent for NTUA in evaluating, procuring and scheduling market purchases. TEP
may contract with third parties as directed in the Plan. Any third-party
contracts entered into by TEP on behalf of NTUA must be confirmed by NTUA
pursuant to the Plan developed between the Parties.
(II) CONTRACTS WITH TEP: As directed under the Plan, NTUA may
contract with TEP for quantities of capacity and energy at terms and prices to
be agreed upon from time to time. Any such agreements between TEP and NTUA
maybe done under TEP's Coordination Tariff or some other enabling agreement
allowing TEP and NTUA to do business.
(III) PRICING: Prices associated with Market Access Service
will be determined pursuant to the contracts with TEP or with third parties
entered into pursuant to the Plan. TEP will charge NTUA for the actual costs
billed under those agreements, including any third party transmission costs
necessary to complete the transactions. NTUA is also responsible for the
Management Fee as defined in Section VI.C.6 and the Firm Backup Supply charges
as defined in Section VI.C.5.
15
5. FIRM BACKUP POWER SUPPLY
TEP shall provide Firm Backup Power Supply to NTUA under the
following terms:
A. PRICING: The pricing for Firm Backup Power Supply will be the
demand charge as shown in Exhibit D. The monthly demand associated with Firm
Backup Power Supply will be determined by the highest of the following: (i)
NTUA's Net Backup Demand for the month, or (ii) the highest Net Backup Demand
during the preceding eleven months. In the event NTUA participates in a
Combustion Turbine project with TEP or in Local Generation resource(s), NTUA
will be credited in accordance with Section VI.E.
B. ENERGY: Energy purchased under Firm Backup Power Supply will
be priced at the Palo Verde Index for firm energy as published in the Wall
Street Journal (which index may be changed upon the mutual agreement of the
Authorized Representatives).
6. MANAGEMENT FEE FOR MARKET SERVICES:
A. SERVICE PROVIDED
All market services provided under Section VI.C.4 shall be
coordinated by TEP to efficiently serve NTUA's total load requirements.
(I) FEE: The fee for market services shall reflect 15% of the
savings achieved by NTUA by comparing the actual delivered cost of market
energy (inclusive of charges for transmission, Firm Backup Power Supply and
other ancillary services) and the hypothetical cost of that same energy as if
it were purchased under the same terms and conditions as the sale of energy and
capacity under Section VI.A of this Agreement, but in no event shall the
Management Fee be less than $100,000 per Contract Year. Prior to December 31,
1998, the Authorized Representatives will develop the methodology for
determining the savings upon which the Management Fee is based.
(II) BILLING: The estimated fee shall be billed monthly as a
line item on NTUA's monthly energy and capacity bill. The monthly estimated fee
shall be $8,333. The year end bill for each year will true up the approximated
fee with actual savings achieved.
16
D. COMBUSTION TURBINE OPTION
TEP is willing to consider jointly owning a Combustion Turbine with
NTUA should TEP decide to install a Combustion Turbine in the Tucson vicinity
during the term of this Agreement.
E. LOCAL GENERATION
In the event that NTUA acquires Local Generation, NTUA may choose to
have TEP or another party operate the resource. Should NTUA select TEP to
operate the unit, NTUA and TEP will prepare the agreements necessary for the
operations, dispatch and scheduling of the resource(s). As operating agent, TEP
agrees that if the resource(s) are designed, constructed and operated to meet
good utility practices, TEP will reflect a capacity credit to NTUA for Firm
Backup Power Supply. This capacity credit will not exceed 10 MW, unless
otherwise agreed.
VII. PHASE II 1999 - 2009 TRANSMISSION
A. TEP FIRM POWER SUPPLY
NTUA, as an existing Native Wholesale Load Customer, shall continue to
have the right to take transmission service pursuant to Section 2.2 of Tucson's
Open Access Tariff for its total requirements associated with TEP provided
services.
NTUA shall obtain transmission service pursuant to the NTUA-TEP Network
Transmission Agreement.
B. CRSP ALLOCATION
The Parties recognize that NTUA's CRSP allocation is delivered to NTUA
by WAPA from WAPA's facilities, and, therefore, no TEP transmission is required
for TEP's management of CRSP Allocation because NTUA accepts direct delivery of
and title to the Allocation.
C. WHOLESALE MARKET PURCHASES
Transmission shall be provided pursuant to TEP's Open Access
Transmission Tariff or, when required, from other parties' open access
transmission tariffs. TEP will directly charge NTUA for the costs of any
transmission acquired from TEP or others to deliver energy under Firm Backup
17
Power Supply. To the extent that transmission is utilized for which NTUA
already has acquired rights under VII.A above, no additional charges will be
incurred.
D. BILLING FOR TRANSMISSION SERVICE
TEP shall separately state all the transmission charges on bills.
E. TRANSMISSION LOSSES
Tucson shall supply and be responsible for transmission losses to the
Delivery Points. Tucson shall supply Capacity Losses and Energy Losses to
compensate for transmission losses from the Delivery Points to the Metering
Points as specifically required by arrangements between NTUA and third-party
transmission line owners. TEP's obligation to deliver TEP Firm Power Supply
shall not exceed the amounts described in Section VI.A.
VIII.INDUSTRIAL LOAD RETENTION
TEP and NTUA will work together in good faith to retain any of NTUA's large
industrial coal mining and transportation customers, as well as any federal or
state aggregated loads, which may seek alternative supplies or to move their
electric load elsewhere. In such situations, NTUA and TEP agree to endeavor to
seek solutions that are to their mutual benefit.
IX. BILLING AND PAYMENT
A. BILLING
Tucson shall bill NTUA monthly on or before the tenth day of the month
during Phase I and Phase II. Bills shall be sent electronically to:
Navajo Tribal Utility Authority
Attention: General Manager
Facsimile (602) 729-2135
and with a written copy mailed to:
Navajo Tribal Utility Authority
18
Attention: General Manager
P.O. Box 170
Ft. Defiance, Arizona 86504-0170
1. BILL FORMAT
The bills shall separately state the charges for
(i) capacity and energy supplied in Phase I and Phase II of this
Agreement,
(ii) the charge for any market services provided in Phase II,
(iii) the Management Fee under Phase II, and
(iv) the transmission provided in Phases I and II under a
separate NTUA-TEP Network Transmission Agreement.
2. BILLING INQUIRIES
Billing inquiries concerning either the capacity and energy
supplied in Phases I or II, the market services in Phase II or the Management
Fee in Phase II shall be directed to the Tucson Manager of Contracts and
Wholesale Marketing.
Billing Inquiries concerning the transmission charges provided
under a separate NTUA-TEP Network Transmission Agreement shall be directed to
the Tucson Transmission Coordinator.
B. PAYMENT
NTUA shall pay Tucson by the tenth day after electronic receipt of the
bill. If the due date falls on a weekend or bank holiday, then NTUA shall pay
Tucson on the first subsequent banking day. Payment shall be made by electronic
funds transfer to:
Bank One Arizona
Tucson, Arizona
ABA# 122-100-024
Credit Account #2002-8131
Tucson Electric Power Company
Amounts not paid by the due date shall be payable with interest accrued
19
on each calendar day from the due date to the date of payment. The interest
rate shall be at the effective prime commercial lending rate per annum as
published in the Wall Street Journal, or at the maximum rate permitted by
Arizona law, whichever rate is lower.
Either Party may at any time by written notice change the designation
of any person, address or account specified herein.
C. DISPUTED BILLS
In the event any portion of any bill is disputed, the disputed amount
shall be paid when due under protest. If the disputed portion of the bill is
found to be incorrect, Tucson shall promptly refund to NTUA any amount due,
including interest accrued on such amount due from the date of payment by NTUA
to the date the refund is made by Tucson. The refund shall be made by wire
transfer to a bank of NTUA's choice or by any other method which provides
Collected Funds on the date payment is made. The interest rate shall be at the
rate specified in this Section. No payment made pursuant to this Section shall
constitute a waiver of any right of NTUA to contest the correctness of any
charge or credit by Tucson.
D. TAXES
NTUA shall have the right to appeal to the appropriate taxing authority
any taxes chargeable to NTUA under the provisions of this Agreement.
E. AUDIT RIGHTS
Each Party shall have the right to audit, at its own expense, all books
and records regarding any costs, payments, settlement, or other supporting
information pertaining to this Agreement. Adjustments to any costs, payments or
settlements discovered pursuant to an audit conducted under this section shall
be payable by the responsible Party to the owed Party within a reasonable time,
and shall include interest accrued on such adjustment from the original due
date to the date of receipt of payment of such adjustment by the owed Party at
the rate specified in this Section. All records and supporting documentation
for billings arising under this Agreement shall be retained for three years
beyond the date of the bill.
20
X. AUTHORIZED REPRESENTATIVES:
A. DESIGNATION
Each Party shall designate a person as an Authorized Representative.
Tucson shall designate two Authorized Representatives:A Contracts and Wholesale
Marketing Representative and a Transmission Representative. The Contracts and
Wholesale Marketing Representative shall be authorized to act on the provisions
of this Agreement concerning the sale of energy and capacity and market
services. The Transmission Representative shall be authorized to act on the
provisions of the NTUA-TEP Network Transmission Agreement, Exhibit E. All
Authorized Representatives shall have the authority of the Party designating to
act on its behalf in carrying out the provisions of this Agreement and may
appoint a designee or designee(s) to assist with duties. Each Party shall
notify the other Party within fifteen calendar days after execution of this
Agreement of the designation of its Authorized Representative and shall
promptly notify the other Party of any subsequent changes in such designation.
B. DUTIES
The Authorized Representatives shall develop the Plan and approve
written procedures necessary for implementation of this Agreement including
deliveries, scheduling, metering and billing. The Authorized Representatives
shall have no authority to modify any of the provisions of this Agreement. The
Authorized Representatives shall meet as required to accomplish coordination
with respect to matters which affect the implementation of this Agreement and
to designate appropriate billing and payment addresses.
XI. UNCONTROLLABLE FORCES
Neither Party shall be considered to be in default in the performance of
any of its obligations hereunder, other than the obligations to make payments of
amounts due pursuant to this Agreement, when failure of performance shall be due
to Uncontrollable Forces. The Party claiming Uncontrollable Forces shall
promptly contact the other Party and provide written notice that an
Uncontrollable Force has occurred. Nothing contained herein shall be construed
as to require either Party to settle any strike or labor dispute in which it
21
may be involved.
XII. ASSIGNMENT OF AGREEMENT
This Agreement shall inure to the benefit of and be binding upon the
Parties hereto and their respective successors and assigns, provided, however,
that this Agreement, except as hereinafter provided, may not be assigned by
either Party except with the prior written consent of the other Party, which
consent shall not be unreasonably withheld. NTUA, without the approval of
Tucson, may assign, transfer, mortgage or pledge this Agreement to create a
security interest for the benefit of the United States of America, acting
through the Administrator of RUS. Thereafter, the Administrator of RUS, without
the approval of Tucson, may (i) cause this Agreement to be sold, assigned,
transferred or otherwise disposed of to a third party pursuant to the terms
governing such security interest, or (ii) if the Administrator of RUS first
acquires this Agreement pursuant to 7 U.S.C. Section 907,sell, assign, transfer
or otherwise dispose of this Agreement to a third party,provided, however, that
in either case (i)NTUA is in default of its obligations to the Administrator of
RUS that are secured by such security interest and the Administrator of RUS has
given Tucson notice of such default; and (ii)the Administrator of RUS has given
Tucson thirty days prior notice of its intention to sell, assign, transfer or
otherwise dispose of this Agreement indicating the identity of the intended
third-party assignee or purchaser. In addition, no consent shall be required in
the event of (i)a transfer under or pursuant to a mortgage, security agreement,
deed of trust or other type of security instrument or upon foreclosure or other
action to enforce such mortgage,security agreement, deed of trust or other type
of security instrument or (ii)a transfer pursuant to a collateral assignment or
pledge of this Agreement to a bank, insurance company, or similar financial
institution to secure indebtedness incurred or to be incurred by a Party for
the purpose of or in connection with the performance of this Agreement, or
(iii) an assignment to any financing institution or institutions of any monies
due or to become due under this Agreement, or (iv) a transfer by either Party to
any entity that shall succeed by purchase, merger, consolidation or other
22
transfer of all or substantially all of that Party's assets. In any event, any
such transferee or assignee shall be bound by the terms of this Agreement and
the transferor shall cause an appropriate instrument to be delivered indicating
the transferee's agreement to be bound hereby.
XIII.NO DEDICATION OF FACILITIES
Any undertaking by one Party to the other under any provision of this
Agreement shall not constitute the dedication of ownership or title in the sys-
tem or any portion thereof of either Party to the public or to the other Party,
and it is understood and agreed that any undertaking by either Party shall
cease upon the termination of this Agreement.
XIV. NOTICES
Any notice, demand or request provided for in this Agreement, or served,
given or made in connection with it, shall be in writing and shall be deemed
properly served, given or made if delivered in person, sent by facsimile
transmission, sent electronically or sent by United States mail, postage
prepaid, to the persons specified below:
General Manager
Navajo Tribal Utility Authority
P. O. Box 170
Fort Defiance, Arizona 86504
Telephone: 520-729-6201
Facsimile: (602) 729-2135
Tucson Electric Power Company
c/o Secretary
P. O. Box 711
Tucson, Arizona 85702
23
Facsimile: (520) 884-3991
A Party may at any time, by written notice, change the designation or the
address of the person so specified.
XV. GOVERNING LAW
This Agreement shall be interpreted, governed by and construed under the
laws of the State of Arizona and the laws of the United States, as applicable,
as if executed and to be performed wholly within the State of Arizona.
XVI. NO THIRD PARTY RIGHTS
Unless otherwise specifically provided in this Agreement, the Parties do
not intend to create any duty,covenant, obligation or undertaking to or to cre-
ate any rights in or to grant any remedies to any third party as a beneficiary
of this Agreement or of any of the rights and obligations established
hereunder.
XVII.WAIVERS
The waiver by either Party of any breach of any term, covenant or condition
contained herein shall not be deemed a waiver of any other term, covenant or
condition or of any subsequent breach of the same or any other term, covenant
or condition contained herein.
XVIII.RESOLUTION OF DISPUTES
Should any dispute arise between the Parties hereto concerning the deter-
mination of the charges for power transactions and remain unresolved for a
period of sixty days, a statement of such dispute shall be forwarded by the
Authorized Representatives to the General Manager of NTUA ("GM") and the Chief
Operating Officer of Tucson ("COO") who shall meet within thirty days (or such
24
shorter or longer time as agreed upon between the GM and COO) to discuss and
attempt to reach a resolution of the dispute. Any resolution mutually agreed
upon by the GM and COO of the Parties shall be binding, subject to FERC
approval (if required by applicable law or the terms of this Agreement).
If the GM and COO of the Parties cannot resolve the dispute within thirty
days of its submission to them (or within such longer time as shall be mutually
agreed upon by the respective Parties), either Party may submit the dispute to
arbitration. Unless otherwise agreed by the Parties, the arbitration shall be
governed by the rules and practices of the American Arbitration Association
("AAA"). The award of the arbitrators shall be final and binding, subject to
FERC approval (if required by applicable law or the terms of this Agreement),
and the costs and expenses of the arbitrators shall be shared equally by the
Parties participating in the arbitration, unless otherwise decided by the
arbitrators.
The Party submitting the dispute to arbitration shall give written notice
to the other Party, setting forth in such notice in adequate detail the nature
of the dispute, and the remedy sought by such arbitration proceedings. Within
the period specified in the rules of the AAA, the other Party shall prepare its
own statement of the matter at issue and set forth in adequate detail
additional related matters or issues to be arbitrated.
XIX. LIABILITY AND INDEMNITY
Each Party shall indemnify and hold harmless the other Party and the
directors, officers and employees of such other Party from liability,loss, dam-
age, claim, costs and expenses (including attorney fees)on account of injury to
persons (including death)or damage or destruction of property arising out of or
related to the negligence, whether active or passive, of the indemnifying Party
or its officers, directors, employees or contractors in the performance of this
Agreement, provided, however, that:
1. Each Party shall be solely responsible to its own employees for all
claims or benefits due for injuries occurring in the course of their employment
or arising out of any worker's compensation law. Neither Party shall seek
25
reimbursement or subrogation from the other Party for any benefits paid to the
employees of that Party pursuant to any worker's compensation law except as
necessary to prevent double recovery by the employee.
2. Neither Party nor its directors, officers and employees shall be
liable for any loss of earnings, revenues, indirect or consequential damages,or
injury which may be incurred by the other Party as a result of curtailments,
interruptions or outages in delivery of electric services under this Agreement
by reason of any cause whatsoever, other than gross negligence or willful
misconduct.
3. Each Party shall indemnify and hold harmless the other Party and its
directors, officers and employees from any liability, loss, claim, costs and
expenses (including attorney fees) incurred by the indemnified Party in
connection with or arising out of claims made by the indemnifying Party's elec-
tric service customers as a result of any failure of a Party to provide
electric power or energy contemplated by this Agreement for any reason or any
cause whatsoever, other than gross negligence or willful misconduct.
XXX. INTERPRETATION
A. PRIOR NEGOTIATIONS
The complete agreement of the Parties is set forth in this Agreement
and supersedes all prior and contemporaneous communications, whether written or
oral.
B. DESCRIPTIVE HEADINGS
All descriptive headings contained in this Agreement are intended only
a a guidance to the content hereof and shal not be binding with respect to the
interpretation of any provision of this Agreement.
C. GOVERNING AGREEMENT
To the extent of any inconsistency between the provisions of this
Agreement and any tariff, service agreement or exhibit incorporated in this
Agreement be reference or otherwise, the provisions of this Agreement shall
control.
26
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed this
26 day of June, 1997.
TUCSON ELECTRIC POWER COMPANY
By Steven J. Glaser
Vice President
NAVAJO TRIBAL UTILITY AUTHORITY
By Malcolm P. Dalton
General Manager
27
EXHIBIT A
Phase I Rate Schedule
1997 - 1999
BACKGROUND
For each month in the term of Phase I NTUA and TEP have agreed to an aggregate
price for generation and transmission capacity ( the Aggregate Demand Charge).
Since transmission costs may vary from time to time in the course of Phase I,it
will be necessary for the Generation Demand Charge to fluctuate so as to
accommodate the agreed-upon fixed aggregate price. In addition, the billing
demand for generation capacity may be different than the billing demand for
transmission services. Accordingly, when unbundling transmission from the
Aggregate Demand Charge it will also be necessary to adjust for this difference
in billing demands. This Exhibit will illustrate the calculations needed to
make these adjustments.
GENERATION DEMAND CHARGE
The Generation Demand Charge for the TEP Firm Power Supply in Phase I shall
be calculated each month by unbundling the charges for transmission that are
included in the Aggregate Demand Charge. The process for unbundling is
illustrated in the table below, and is to be accomplished by subtracting from
the Aggregate Demand Charge a transmission charge ("T") (in $/kW-Mo.). The
charge T itself, is a function of the charges for transmission and ancillary
services that are calculated monthly and billed to NTUA in accordance with the
NTUA - TEP Network Transmission Agreement (see Exhibit E), herein referred to
as the Network Transmission Charge ("TN").
T shall be calculated by multiplying the TN by the Transmission Billing
A-1
Demand ("TBD"), and dividing the product by the Generation Billing Demand
("GBD").
T = (TN X TBD) / GBD
This calculation unbundles the transmission included in the Aggregate
Demand Charge for the Phase I TEP Firm Power Supply, for which the Generation
Billing Demand is at 60 MW, subject to the provisions of Section IV.A.1.
TN is the monthly charge, in $/kW-Mo. that is calculated in accordance with
the NTUA - TEP Network Transmission Agreement, which includes the sum of the
charges for the following services on the TEP system: (i) Network Service Basic
Transmission Rate, (ii) Scheduling, System Control and Dispatch Service, (iii)
Reactive Supply and Voltage Control from Generation Sources Service, (iv)
Regulation and Frequency Response Service, (v) Energy Imbalance Service, (vi)
Operating Reserve - Spinning Reserve Service, and (viii) Operating Reserve -
Supplemental Reserve Service.
Generation
Demand Charge
Month/Year $/kW-Mo.
7/97 - 5/98 9.25 - T
6/98 - 5/99 9.55 - T
ENERGY CHARGE
Month/Year $/MWh
7/97 - 5/99 $18.00
No charge shall exceed Tucson's fully allocated cost of service.
A-2
EXHIBIT B
Phase II Rate Schedule
1999 - 2009
BACKGROUND
For each month in the term of Phase II NTUA and TEP have agreed to an
aggregate price for generation and transmission capacity ( the Aggregate Demand
Charge). Since transmission costs may vary from time to time in the course of
Phase II, it will be necessary for the Generation Demand Charge to fluctuate so
as to accommodate the agreed-upon fixed aggregate price.In addition the billing
demand for generation capacity is 40 MW while the Aggregate Demand Charge
includes the costs for 43.33 MW of transmission capacity. Accordingly, when
unbundling transmission from the Aggregate Demand Charge it will also be
necessary to adjust for this difference in billing demands. This Exhibit will
illustrate the calculations needed to make these adjustments.
GENERATION DEMAND CHARGE
The Generation Demand Charge for the TEP Firm Power Supply in Phase II
shall be calculated each month by unbundling the charges for 43.33 MW of
transmission that are included in the Aggregate Demand Charge. The process for
unbundling is illustrated in the table below, and is to be accomplished by
subtracting from the Aggregate Demand Charge a transmission charge(T) (in $/kW-
Mo.). The charge T itself, is a function of the charges for transmission and
ancillary services that are calculated monthly and billed to NTUA in accordance
with the NTUA - TEP Network Transmission Agreement (see Exhibit E), herein
referred to as the Network Transmission Charge (TN).
T = 1.08325 X TN, where the factor 1.08325 is the ratio of 43.33 to 40.
The factor (1.08325) adjusts TN to unbundle 43.33 MW of transmission
included in the Aggregate Demand Charge for the Phase II TEP Firm Power Supply,
B-1
for which the Generation Billing Demand is 40 MW.
TN is the monthly charge, in $/kW-Mo. that is calculated in accordance with
the NTUA - TEP Network Transmission Agreement, which includes the sum of the
charges for the following services on the TEP system: (i) Network Service Basic
Transmission Rate, (ii) Scheduling, System Control and Dispatch Service, (iii)
Reactive Supply and Voltage Control from Generation Sources Service, (iv)
Regulation and Frequency Response Service, (v) Energy Imbalance Service, (vi)
Operating Reserve - Spinning Reserve Service, and (vii) Operating Reserve -
Supplemental Reserve Service.
Generation
Demand Charge
Month/Year $/kW-Mo.
6/99 - 12/99 9.74 - T
1/00 - 12/00 9.86 - T
1/01 - 12/01 10.05 - T
1/02 - 12/02 10.25 - T
1/03 - 12/03 10.46 - T
1/04 - 12/04 10.66 - T
1/05 - 12/05 10.88 - T
1/06 - 12/06 11.10 - T
1/07 - 12/07 11.32 - T
1/08 - 12/08 11.54 - T
1/09 - 12/09 11.64 - T
ENERGY CHARGE
Month/Year $/MWh
6/99 - 12/99 $18.00
B-2
For each twelve-month period beginning in January 2000, Energy Charges will
increase or decrease as determined by the change in TEP's system average fuel
costs (FERC 501 account dollars, which include coal, environmental, handling,
waste and stabilization fuel costs for Four Corners,Irvington, Navajo, San Juan
and Springerville Power Plants; and natural gas costs for the Irvington Steam
units, per MWh of net generation) for the prior twelve months. The annual
increase or decrease in Energy Charge resulting from the above computation will
be capped at 2%.
No charge shall exceed Tucson's fully allocated cost of service.
B-3
EXHIBIT C
Control Area Services
1. General
If NTUA chooses to operate within TEP's control area, TEP shall provide
Control Area Services (including ancillary services as defined in the TEP Open
Access Tariff)as necessary pursuant to its Open Access Tariff at the charges in
effect from time to time in its most currently filed Open Access Tariff. These
charges shall be applied to the capacity required at the time of NTUA's peak
demand for the month, less the capacity from its CRSP Allocation and TEP Firm
Power Supply.
2. Scheduling, System Control and Dispatch Service
This service is required to schedule the movement of power through, out of,
within or into a Control Area. This service can be provided only by the
operator of the Control Area in which the transmission facilities used for
Transmission Service are located. Tucson shall provide Scheduling, System
Control and Dispatch Service pursuant to its Open Access Tariff at the charges
provided in its most currently filed Open Access Tariff.
3. Reactive Supply and Voltage Control from Generation Sources Service
In order to maintain transmission voltage on Tucson's transmission
facilities within acceptable limits, generation facilities (in the Control Area
where Tucson's transmission facilities are located) are operated to produce (or
absorb) reactive power. Thus, Reactive Supply and Voltage Control from
Generation Sources Service must be provided for each transaction on Tucson's
transmission facilities. Tucson shall provide Reactive Supply and Voltage
Control from Generation Sources Service pursuant to its Open Access Tariff at
the charges provided in its most currently filed Open Access Tariff.
4. Requlation and Frequency Response Service
Regulation and Frequency Response Service is necessary to provide for the
continuous balancing of resources with load and for maintaining scheduled
Interconnection frequency at 60 Hz. Regulation and Frequency Response Service
is accomplished by committing on-line generation whose output is raised or
lowered as necessary to follow the moment-by-moment changes in load. Tucson
shall provide Regulation and Frequency Response Service pursuant to its Open
Access Tariff at the charges provided in its most currently filed Open Access
Tariff.
5. Energy Imbalance Service
Energy Imbalance Service is provided when a difference occurs between the
scheduled and the actual delivery of energy to a load located within a Control
Area over a single hour. Tucson shall provide Energy Imbalance Service pursuant
to its Open Access Tariff at the charges provided in its most currently filed
Open Access Tariff.
6. Operating Reserve - Spinning Reserve Service
Spinning Reserve Service is needed to serve load immediately in the event
of a system contingency. Spinning Reserve Service must be provided by
generating units that are on-line and are loaded at less than maximum output.
Tucson shall provide Spinning Reserve Service pursuant to its Open Access
Tariff at the charges provided in its most currently filed Open Access Tariff.
7. Operating Reserve - Supplemental Reserve Service
Supplemental Reserve Service is needed to serve load in the event of a
system contingency; however, it is not available immediately to serve load but
rather within a short period of time. Supplemental Reserve Service must be
provided by generating units that are on-line but unloaded, by quick-start
generation or by interruptible load. Tucson shall provide Supplemental Reserve
Service pursuant to its Open Access Tariff at the charges provided in its most
currently filed Open Access Tariff.
Tucson Electric Power Company Open Access Transmission Tariff
Revised Original Sheet No. 3
EXHIBIT D
Firm Backup Power Supply
Demand Charges
BACKUP DEMAND CHARGES
Rate
Month/Year $/kW-Mo.
6/99 - 12/99 1.46
1/00 - 12/00 1.48
1/01 - 12/01 1.51
1/02 - 12/02 1.54
1/03 - 12/03 1.57
1/04 - 12/04 1.60
1/05 - 12/05 1.63
1/06 - 12/06 1.67
1/07 - 12/07 1.70
1/08 - 12/08 1.73
1/09 - 12/09 1.75
Tucson Electric Power Company Open Access Transmission Tariff
Revised Original Sheet No. 1
EXHIBIT E
ATTACHMENT F
{PRIVATE} SERVICE AGREEMENT FOR
NETWORK INTEGRATION TRANSMISSION SERVICE
1.0 This Service Agreement ("Agreement"),dated as of JUNE 17, 1997, is entered
into by and between Tucson Electric Power Company ("TEP"), an Arizona
corporation, and NAVAJO TRIBAL UTILITY AUTHORITY (NTUA) ("Transmission
Customer").
2.0 Based upon its submitted Completed Application, NAVAJO TRIBAL UTILITY
AUTHORITY has been determined by TEP to be a Transmission Customer under
Part III of this Tariff.
3.0 The Transmission Customer has provided to TEP an Application deposit in
the amount of $ N/A.
4.0 The Transmission Customer has executed a Network Operating Agreement with
TEP.
5.0 Service under this Agreement shall commence on the later of JULY 1, 1997
or FERC Approval. Service under this Agreement shall terminate on DECEMBER
31, 2009.
6.0 TEP agrees to provide and the Transmission Customer agrees to take and pay
E-1
for Network Integration Transmission Service in accordance with the
provisions of Part III of this Tariff, this Agreement, and the Network
Operating Agreement, as they may be amended from time to time. Initially
the Transmission Customer makes the following designations:
Tucson Electric Power Company Open Access Transmission Tariff
Revised Original Sheet No. 2
6.1 Network Resources:
FOUR CORNERS 4 & 5, NAVAJO 1, 2, & 3, SAN JUAN 1 & 2, SPRINGERVILL
1 & 2.
6.2 Network Loads:
APS Four Corners 345 kV Bus, WAPA Shiprock 345 kV Bus, Saguaro 500
kV bus, and PNM San Juan 345 kV Bus.
6.3 Points of interconnection between the Transmission Customer's facilities
and TEP's Transmission System:
APS SAGUARO 500 KV BUS, APS FOUR CORNERS 345 KV BUS, WAPA SHIPROCK
345 KV BUS, AND PNM SAN JUAN 345 KV BUS.
6.4 The Transmission Customer's initial Load Ratio Share:
4.5 %
--------
7.0 TEP agrees to provide and the Transmission Customer agrees to take and pay
for other services as indicated below:
7.1 Scheduling, System Control and Dispatch Service:
FOR PHASE 1, JULY 1, 1997 - MAY 31, 1999, NTUA WILL TAKE ALL
ANCILLARY SERVICES.
FOR PHASE 2, NTUA WILL ADVISE TEP AS TO ITS REQUIREMENTS.
7.2 Reactive Supply and Voltage Control from Generation Sources Service:
E-2
FOR PHASE 1, JULY 1, 1997 - MAY 31, 1999, NTUA WILL TAKE ALL
ANCILLARY SERVICES.
FOR PHASE 2, NTUA WILL ADVISE TEP AS TO ITS REQUIREMENTS.
7.3 Regulation and Frequency Response Service:
YES X NO
-------- --------
Tucson Electric Power Company Open Access Transmission Tariff
Revised Original Sheet No. 3
FOR PHASE 1, JULY 1, 1997 - MAY 31, 1999, NTUA WILL TAKE ALL
ANCILLARY SERVICES.
FOR PHASE 2, NTUA WILL ADVISE TEP AS TO ITS REQUIREMENTS.
7.4 Energy Imbalance Service:
YES X NO
-------- --------
FOR PHASE 1, JULY 1, 1997 - MAY 31, 1999, NTUA WILL TAKE ALL
ANCILLARY SERVICES.
FOR PHASE 2, NTUA WILL ADVISE TEP AS TO ITS REQUIREMENTS.
7.5 Operating Reserves - Spinning Reserve Service:
YES X NO
-------- --------
FOR PHASE 1, JULY 1, 1997 - MAY 31, 1999, NTUA WILL TAKE ALL
ANCILLARY SERVICES.
FOR PHASE 2, NTUA WILL ADVISE TEP AS TO ITS REQUIREMENTS.
7.6 Operating Reserve - Supplemental Reserve Service:
YES X NO
-------- --------
FOR PHASE 1, JULY 1, 1997 - MAY 31, 1999, NTUA WILL TAKE ALL
ANCILLARY SERVICES.
E-3
FOR PHASE 2, NTUA WILL ADVISE TEP AS TO ITS REQUIREMENTS.
8.0 Any notice or request, other than requests to schedule specific
transactions, made to or by either Party regarding this Agreement shall be
made to the representative of the other Party as indicated below:
TUCSON ELECTRIC POWER COMPANY: TRANSMISSION
CUSTOMER:
Tucson Electric Power Company Navajo Tribal
P.O. Box 711 UTILITY AUTHORITY
Tucson, Arizona 85702 P.O. Box 170
Attn:Transmission Coordinator Fort Defiance, AZ
Telephone:(520)745-7193 86504
Facsimile: (520) 571-4036 Attn:General Manager
(520) 729-5721 Phone
(520) 729-2135 FAX
Tucson Electric Power Company Open Access Transmission Tariff
Revised Original Sheet No. 4
9.0 This Tariff is incorporated herein and made a part hereof and all initially
capitalized terms shall have the meanings ascribed to them in the Tariff.
The terms and conditions set forth in Part I,Common Service Provisions and
Part III, Network Integration Transmission Service, of the Tariff are
incorporated into this Agreement and shall govern the services provided
under this Agreement.
10.0 Payments for Network Integration Transmission Service provided to the
Transmission Customer by TEP under this Service Agreement shall be sent to
the name and address indicated on the bill provided to the Transmission
Customer.
Tucson Electric Power Company Open Access Transmission Tariff
Revised Original Sheet No. 5
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
E-4
their respective authorized officials.
TUCSON ELECTRIC POWER COMPANY:
By:
Name: Title:
------------------------ ----------------------
Date:
-------------------
TRANSMISSION CUSTOMER:
By:
Name: Title:
------------------------ ----------------------
Date:
-------------------
E-5