HECO Exhibit 10
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SECOND AMENDED AND RESTATED POWER PURCHASE AGREEMENT
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This Second Amended and Restated Power Purchase Agreement ("the Contract")
is made and entered into on October 4, 1999 by and between HILO COAST POWER
COMPANY, a Division of Brewer Environmental Industries, LLC (hereinafter
referred to as "HCPC") and HAWAII ELECTRIC LIGHT COMPANY, INC. (hereinafter
referred to as "HELCO").
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
WHEREAS, HELCO is and has been an operating electric public utility on the
Island of Hawaii in the State of Hawaii and is subject to the Hawaii Public
Utilities Laws (Chapter 269 of the Hawaii Revised Statutes) and the rules and
regulations of the Hawaii Public Utilities Commission (hereinafter referred to
as the "PUC"); and
WHEREAS, HELCO and Pepeekeo Sugar Company ("Pepeekeo") entered into that
certain Purchase Power Agreement dated July 1, 1971 (hereinafter referred to as
"the Initial Agreement"); and
WHEREAS, Pepeekeo assigned all of its right, title and interest in and to
the Initial Agreement to HCPC, subject to the terms, conditions and provisions
thereof, pursuant to that certain Assignment of Power Purchase Agreement
Contract made September 1, 1971 (hereinafter referred to as the "Assignment");
and
WHEREAS, HELCO and HCPC agreed to amend and restate the Initial Agreement
as heretofore amended and/or modified in its entirety as of May 31, 1988, for a
term through December 31, 2002; and
WHEREAS, HCPC currently provides electric power and energy to HELCO
pursuant to an Amended and Restated Power Purchase Agreement entered into on
March 24, 1995 and approved by the PUC in Decision and Order No. 14207, filed on
September 6, 1995, in Docket No. 95-0075 (the "Prior Contract"); and
WHEREAS, prior to July 9, 1997, the Prior Contract was between HELCO and
Hilo Coast Processing Company, a Hawaii agricultural cooperative association.
As of that date, the rights and obligations under the Prior Contract were
assumed by HCPC and Hilo Coast Processing Company was dissolved. HCPC has the
same management as the dissolved Hilo Coast Processing Company, but is now part
of a larger organization, Brewer Environmental Industries, LLC, a subsidiary of
C. Brewer and Company, Limited; and
WHEREAS, the term of the Prior Contract is due to expire on December 31,
1999; and
WHEREAS, for a period beyond December 31, 1999 HELCO needs the 22 megawatts
of capacity during its peak hours of operation in order to adequately meet its
system load and reserve criteria; and
WHEREAS, HCPC and HELCO have been negotiating over the terms of the
continued supply of power and energy from HCPC beyond the term of the Prior
Contract; and
WHEREAS, in Order No. 17050, filed on June 24, 1999, in Docket No. 97-0102,
the PUC ordered that HELCO and HCPC continue to negotiate, consistent with the
conclusions in the Order; and
WHEREAS, HELCO needs power and capacity from HCPC almost exclusively during
its system peak hours but under the Prior Contract
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was obligated to purchase a minimum of four (4) megawatts of power at all times
during 48 weeks of each year; and
WHEREAS, HCPC is willing to extend the term of the agreement under which it
will provide power and energy to HELCO at the price for capacity and energy
currently in force under the Prior Contract and to remove the 4 mW minimum
purchase obligation in consideration of other modifications to its obligations
and rights; and
WHEREAS, upon approval of this Contract by the PUC, all outstanding matters
in Docket No. 97-0102 will be settled;
NOW, THEREFORE, in consideration of the mutual promises and obligations set
forth herein, the sufficiency of which is hereby mutually acknowledged, the
parties hereto agree as follows:
I. Definitions.
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A. HELCO Dispatch. The term "HELCO dispatch" as used herein means
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HELCO's absolute and sole right, through supervisory equipment and otherwise, to
control electrical energy generated by HCPC pursuant to this Contract up to such
capacity as may be agreed from time to time. HELCO may purchase, install, and
own Automatic Generator Control equipment at HCPC in order to allow HELCO to
dispatch the megawatt level of electrical energy from HCPC as required to
optimize economic and reliable operation of HELCO's electrical system. Var
control will continue to be through HCPC's control operator. HCPC shall
cooperate with HELCO in the installation of such equipment. Upon termination of
the Contract, HELCO shall remove such equipment within thirty (30) days of the
termination.
B. Contract Year. The term "contract year" means a year
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during the term hereof beginning at 0001 hours on January 1 and ending at 0001
hours on January 1 of the following year.
C. [deleted]
D. [deleted]
E. PUC. PUC means the Hawaii Public Utilities Commission.
---
F. PUC Approval. PUC Approval means the PUC order or orders described in
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Section XVIII.
G. Good Engineering and Operating Practices. The practices, methods and
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acts engaged in or approved by a significant portion of the electric utility
industry for similarly situated U.S. facilities that at a particular time, in
the exercise of reasonable judgment in light of the facts known or that
reasonably should be known at the time a decision is made, would be expected to
accomplish the desired result in a manner consistent with law, regulation,
reliability, safety, environmental protection, economy and expedition. With
respect to the power plant, Good Engineering and Operating Practices include but
are not limited to taking reasonable steps to ensure that:
1. Adequate materials, resources and supplies, including fuel, are
available to meet the power plant's needs under normal conditions and reasonably
anticipated abnormal conditions.
2. Sufficient operating personnel are available and are adequately
experienced and trained to operate the power plant properly, efficiently and
within manufacturer's guidelines and specifications and are capable of
responding to emergency conditions.
3. Preventive, routine and non-routine maintenance
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and repairs are performed on a basis that ensures reliable long-term and safe
operation, and are performed by knowledgeable, trained and experienced personnel
utilizing proper equipment, tools, and procedures.
4. Appropriate monitoring and testing is done to ensure equipment is
functioning as designed and to provide assurance that equipment will function
properly under both normal and emergency conditions.
5. Equipment is operated in a safe manner and in a manner safe to
workers, the general public and the environment and with regard to defined
limitations such as steam pressure, temperature, and moisture content, chemical
content and quality of make-up water, operating voltage, current, frequency,
rotational speed, polarity, synchronization, control system limits, etc.
H. Ramp-up Period. The Ramp-up Period is a reasonable period
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beginning at the time the HCPC unit is initially synchronized to the HELCO
system and ending at the time it reaches its minimum dispatch capability of 18
MW (but not earlier than the beginning of the related On-peak Period).
II. HCPC's Obligation to Supply Capacity.
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A. Capacity Guarantee. HCPC shall furnish HELCO 22,000 kw of capacity
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and 13,600 kvar of reactive under HELCO dispatch during the entire term hereof
except for the "annual overhaul period" set forth in Section II.B. below. The
reactive shall be in proportion to power in the range of 0.85 lagging to 1.0
unity power factor and shall be dispatched by HELCO so that HCPC keeps its
turbine generator
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output, at HELCO's direction, within the limits of plus or minus 5% of 13.8 kv.
B. Plant Shutdown Period. HCPC shall have the right to shut its
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turbine generator down and shall have no obligation to furnish HELCO the
capacity described in II.A hereof during four consecutive weeks each contract
year (the "annual overhaul period"). HCPC's annual overhaul period for the year
2000 shall be taken in the first quarter of 2000 as mutually agreeable to HCPC
and HELCO. HCPC's annual overhaul period for subsequent years shall be scheduled
for September each year, provided, however, that HELCO may request such annual
overhaul period to be moved up earlier in the year, in which case HCPC shall
make all reasonable efforts to comply with such request. In the event HELCO
gives HCPC notice of termination under Section XIV hereof prior to HCPC taking
its annual overhaul period for the year of termination, HCPC shall be permitted
to either take its annual overhaul period in December of the year of termination
or request that its annual overhaul period for the year of termination be
rescheduled, which request shall not be unreasonably denied by HELCO.
C. Capacity Charge. As compensation for maintaining the 22,000 kw of
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capacity under HELCO dispatch during the time periods as described herein, HELCO
will pay HCPC a capacity charge, payable in twelve equal monthly installments
within ten (10) days after the last day of each calendar month, equal to
$5,082,000 ($231/kw-yr) per contract year. HELCO shall not be obligated to pay
any additional capacity charge for any additional capacity supplied by HCPC,
either at HELCO's request or at HCPC's request. A failure by HCPC to provide
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the required capacity to HELCO shall result in the reduction in the capacity
charge due to HCPC from HELCO in accordance with Section IX.B.1. of this
Contract. HELCO shall not have any obligation to pay capacity charges to HCPC
(i) for periods in excess of 24 consecutive hours in which HCPC is unable to
fulfill its obligations under Section II.A. of this Contract without fault as
set forth in Section VIII, or (ii) for periods in which HCPC does not fulfill
its obligations under Section II.A. of this Contract due to HCPC's "total
default", as such term is defined in Section XV.B. of this Contract.
D. Conditions Related to Capacity Guarantee.
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1. The capacity obligation amounts in Section II.A. are based on the
assumption that such amounts are permissible under HCPC's applicable permits and
any conditions thereunder. Upon HELCO's request, HCPC shall provide verification
of such assumption. Should the assumption be incorrect, HELCO reserves the right
to require that HCPC use its best effort to cure any discrepancies in a timely
manner and/or to adjust such capacity obligation, and the corresponding capacity
charge, in order to comply with such permits and conditions.
2. [deleted]
3. [deleted]
III. Sale and Purchase of Energy.
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A. Purchase of Energy
1. Priority Periods
(a) "On-peak Period" is defined as the 14 consecutive hours
falling within a 16-hour window (0600-2200 hours) during which HCPC is scheduled
to be dispatched under this Contract.
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(b) "Priority Period" is defined as a 70 hour period within
a calendar week, consisting of 5 On-peak Periods during 5 consecutive days
(usually Monday through Friday, subject to change and adjusted for partial
calendar weeks at the beginning or end of this Contract), as determined by HELCO
pursuant to subsection (d) herein.
(c) During a Priority Period, HELCO may dispatch HCPC up to
22,000 kW, provided however, that HELCO shall use its reasonable best efforts,
taking into account Good Engineering and Operating Practices with respect to
operation and maintenance of HELCO's utility system, to dispatch HCPC at a
minimum average load level of 18,000 kW. During each contract year, HELCO's
"Minimum Purchase Obligation" shall be 60,480,000 kWh (18,000 kW x 5 days x 14
hours x 48 weeks) during the Priority Periods. The Minimum Purchase Obligation
shall be reduced by the kilowatthours not made available by HCPC during the
Priority Periods, and as otherwise limited by transmission system constraints.
Consideration of HELCO's utility system operation and maintenance shall include,
but not be limited to, transmission system issues such as planned and unplanned
line outages, ampacity limitations, and voltage constraints.
(d) As to any calendar week, HELCO shall provide HCPC with
advance notice of the days and hours that will constitute the Priority Period
for that week. Advance notice will be provided before the first working day of
the prior calendar week. In the event such advance notice is not received by
HCPC at least eight (8) days prior to the start of the Priority Period, HELCO
shall
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reimburse HCPC for any actual, documented incremental costs incurred by HCPC to
the extent directly attributable to the timing of the notice.
(e) If, due to HELCO's scheduling of the Priority Periods,
HCPC incurs incremental labor costs (including incremental labor benefit costs)
for its necessary operations personnel which are mandated by its applicable
collective bargaining agreement or applicable laws, HELCO shall reimburse HCPC
for such actual, documented incremental labor costs.
(f) HCPC shall have available for dispatch at least 18,000
kW at the start of each fourteen (14) hour On-peak Period. HELCO's purchases of
energy during the Ramp-up Period prior to the start of the fourteen (14) hour
On-peak Period shall not be counted as part of HELCO's Minimum Purchase
Obligation.
2. Emergency Periods
(a) All periods of delivery of energy outside of the Priority
Periods, except for any Ramp-up Periods, shall be considered "Emergency
Periods." HELCO shall use its reasonable best efforts to notify HCPC of the need
for emergency energy, and HCPC shall use its reasonable best efforts to provide
HELCO with emergency energy at the time it is required.
(b) During any Emergency Period, HELCO may dispatch HCPC up to
22,000 kW, provided however, that HELCO shall use its reasonable best efforts,
taking into account Good Engineering and Operating Practices with respect to
operation and maintenance of HELCO's utility system, to dispatch HCPC at a
minimum average load
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level of 18,000 kW. Consideration of HELCO's utility system operation and
maintenance shall include but not be limited to transmission system issues such
as planned and unplanned line outages, ampacity limitations, and voltage
constraints.
(c) If the Emergency Period has a gap in time prior to or following
an On-peak Period, HELCO shall reimburse HCPC for additional diesel fuel costs,
if any, to restart its generating unit.
(d) If an Emergency Period occurs during the two (2) days of the
calendar week which are not included in a Priority Period, HELCO shall use its
reasonable best efforts to dispatch HCPC for at least eight (8) consecutive
hours.
(e) HELCO shall reimburse HCPC for its actual, documented labor
costs (including incremental labor benefit costs) for its necessary operations
personnel during any Emergency Period, in the amounts mandated by its applicable
collective bargaining agreement. HELCO will not be required to pay HCPC's labor
and incremental labor benefits costs for the first two (2) hours in each of the
first two (2) instances of provision of emergency power per contract year.
3. Incremental Costs.
In the event HELCO is obligated to reimburse HCPC for certain incremental
costs pursuant to Section III.A.1(d) or (e) or Section III.A.2(e), HELCO shall
have the right to verify such incremental costs by obtaining from HCPC, subject
to appropriate confidentiality arrangements, the relevant provisions of HCPC's
applicable collective bargaining agreement.
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B. Determination of Energy Rates.
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1. The rate for energy shall consist of on-peak and off-peak
rates equal to:
(a) the base on-peak and off-peak rates specified in Section
III.B.4 of this Contract (the "base rates") plus two-thirds of the difference
between the base on-peak or off-peak rates and 100% of HELCO's on-peak and off-
peak avoided cost, respectively, if HELCO's on-peak or off-peak avoided cost is
greater than the respective base on-peak or off-peak rate, or
(b) the base on-peak or off-peak rates, if such base rates are
greater than HELCO's respective on-peak or off-peak avoided cost at the time the
energy is delivered.
The calculation of the on-peak energy payment rate is
illustrated in Exhibit B to this Contract.
2. For the purpose of determining the on-peak and off-peak energy
payment rates, HELCO's on-peak hours shall be those between the hours of 0700
hours and 2100 hours each day and the off-peak hours shall be those between the
hours of 2100 hours on one day and 0700 hours on the following day.
3. "HELCO's avoided cost" means HELCO's respective on-peak and off-
peak avoided costs for energy in cents per kilowatt hour as shown by HELCO's
most recent avoided cost filing with the PUC.
4. The base on-peak and off-peak rates shall be HELCO's avoided cost
for the first quarter of 1995, specifically, $0.0541/kwh on-peak and $0.0451/kwh
off-peak.
5. (deleted]
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6. [deleted]
C. Application of Rates.
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1. The on-peak rate shall apply to all energy provided by HCPC
during the Priority Periods.
2. The on-peak rate shall apply to all energy provided by HCPC
during Emergency Periods.
3. The off-peak rate shall apply to all energy provided by HCPC
during other than the Priority Periods and Emergency Periods.
D. Payments. Charges for all energy delivered hereunder shall be
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payable monthly within ten (10) days after the last day of each calendar month.
IV. [deleted]
V. 69 kv Substation and Transmission Line.
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A. Existing Facilities.
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Pursuant to the Initial Agreement, HELCO constructed and equipped a
69/13.8 kv substation, transmission line and other necessary apparatus for the
purpose of making HCPC capacity available to the HELCO system. With regard
thereto, HELCO charged HCPC $77,238 annually for a 20-year period, paid in equal
monthly installments from September 15, 1974 to September 14, 1994.
The interconnection facilities include the
following:
1. 69 kv and 13.8 kv equipment at the HELCO Pepeekeo Switching
Station;
2. Two 13.8 kv overhead polelines;
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3. Two 13.8 kv underground circuits;
4. 13.8 kv breakers and switchgear equipment at the HCPC power
plant;
5. 13.8 kv revenue meters and metering support facilities at the
HCPC power plant; and
6. Communication and current transformer circuit between the
Pepeekeo Switching Station and the HCPC power plant.
The point of interconnection is the jumper cables between the HELCO
13.8 kv overhead lines and HCPC's 13.8 kv underground conductors. HELCO will
continue to own, operate and maintain at its expense items #1, #2, and the
revenue meters in item #5. HCPC will continue to own, operate and maintain at
its expense items #3, #4, the metering support facilities in item #5, and #6.
B. [deleted]
VI. Metering.
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All electric energy to be delivered hereunder shall be what is
commonly called 3-phase 60 hertz alternating current and shall be delivered and
metered at an electromotive force of 13.8 kv, a plus or minus 5% variation being
allowable, at HCPC's 13.8 kv bus. All revenue-metering equipment shall be owned
and operated by HELCO in a metering compartment provided by HCPC and meeting all
PUC standards at the 13.8 kv bus. Metering shall be accomplished by an
individual system measuring energy from HCPC. HELCO shall, at least once each
contract year during the term hereof, test and adjust, in the presence of HCPC's
representative, all revenue-metering equipment in conformity with the current
standards followed by HELCO pursuant to the latest
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PUC order or rule relating to the testing and adjustment of revenue-metering
equipment. If said equipment is found inaccurate by more than 2%, then
adjustment in the billings for such inaccuracy shall be made within 30 days by
one party to the other as the case may be. Any inaccuracy so discovered shall be
conclusively presumed to have existed for half the period between the last
inspection and the inspection in which the inaccuracy was discovered.
VII. Purchase of Power by HCPC.
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Sales of electrical energy to HCPC by HELCO shall be governed by
applicable rate schedules and rules and regulations at the time of such sales as
specified in HELCO's tariff filed with the PUC, and not by this Contract.
VIII. Interruption of Service.
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If HCPC shall be wholly or partially prevented from delivering the
electrical energy contracted for herein, or if the service thereof shall be
interrupted, or if HELCO shall be prevented from receiving, using and applying
the same, by reason of or through strikes, riot, fire, flood, invasion,
insurrection, lava flow or volcanic activity, tidal wave, civil commotion,
accident, the order of any court or civil authority, any act of God or the
public enemy, or any other similar or dissimilar cause reasonably beyond its
exclusive control and not attributable to its neglect, then and in any such
event, HCPC shall not be obligated to deliver said electrical energy hereunder
during such period and shall not be liable for any damage or loss resulting from
such interruption or suspension, and HELCO shall not be obligated or liable to
take or pay for any such energy during
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such period. In the event of a strike of its own employees which would interfere
with the delivery of energy hereunder, HCPC will utilize its best efforts to
operate the HCPC power plant facilities, including the use of supervisory labor.
In any case, however, so long as HCPC is able to fulfill its obligations under
this Contract, HELCO will continue to pay the capacity charge set forth in
Section II.C. hereinabove. In the event HELCO is able to fulfill its obligations
under this Contract but HCPC is unable to do so, HCPC shall continue to pay the
charge set forth in Section V hereinabove. In the event of either party being
unable to fulfill its obligations under this Contract without fault as
aforesaid, for periods not in excess of 24 consecutive hours, then, and in such
case, there will be no adjustment of the charge set forth in Section V or the
capacity charge. In any of such event or events, the party or parties suffering
such interruption or suspension shall be prompt and diligent in removing the
cause thereof. In order to minimize the possibility of interruption, HCPC agrees
to keep reasonable fuel reserves and a reasonable inventory of spare parts on
hand at all times.
IX. Performance Standards and Sanctions.
-----------------------------------
A. Minimum Performance Standards.
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1. HCPC acknowledges and agrees that the HCPC unit is expected to
meet the following minimum standards for satisfactory day-to-day performance
during each contract year:(i) a "Priority Period Availability" (as defined in
subsection IX.A.2, and excluding the four-week annual maintenance period and
other downtime due to a catastrophic equipment failure) of 95 percent or better;
(ii) not more
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than 6 unit trips per year; and (iii) a forced outage rate of 5 percent or less.
2. The "Priority Period Availability" of the HCPC unit (in
percent) is to be computed by adding the average megawatts available from the
HCPC unit during each Priority Period hour during the contract year, multiplying
the total by 100, and dividing by 73,920 (22 MW x 14 hr/day x 5 days/wk x 48
weeks).
3. "Catastrophic equipment failure" means a sudden, unexpected
failure of a major piece of equipment which (i) substantially reduces or
eliminates the capability of the HCPC Unit to produce power, (ii) is beyond the
reasonable control of HCPC and could not have been prevented by the exercise of
due diligence by HCPC and, (iii) despite the exercise of all reasonable efforts,
requires more than 60 days to repair.
4. "Unit trip" means the sudden and immediate removal of the HCPC
unit from service as a result of an immediate mechanical/electrical/hydraulic
control system trip or operator initiated trip/shutdown which requires HELCO to
take immediate steps to place an unscheduled generator on line to make up for
the loss of output of the HCPC unit; provided, however, that a unit trip shall
not include: (i) any such removal which occurs within 48 hours of the time at
which the HCPC unit is restarted following an outage; (ii) trips caused or
initiated by HELCO; or (iii) trips occurring during periods when HCPC has
continued to furnish capacity to HELCO at the request of HELCO's Production
Manager or his designated representative after HCPC has notified HELCO that the
HCPC unit is likely to trip.
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5. The forced outage rate of the HCPC unit during a contract year
is to be computed by totaling the average megawatts unavailable for service due
to forced outages or deratings on an hourly basis, multiplying the total by 100,
and dividing by 192,720.
B. Sanctions.
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1. The capacity charge is to be made on the basis of the full
Priority Period Availability of 22,000 kw. For any full Priority Period hour in
which the full 22,000 kw is not available, the capacity charge will be reduced
by $0.0609/kW.
2. For each contract year in which the Priority Period Availability
of the HCPC unit is less than 95 percent, HCPC will pay to HELCO $5000 for each
full percentage point of the shortfall unless the shortfall is due to a
catastrophic equipment failure.
3. For each unit trip in excess of 6 per contract year, HCPC
shall pay $5000 to HELCO.
4. HELCO shall have the right to set off any payment due from
HCPC under this Section against any payments due to HCPC.
C. Deletion of Capacity Charge.
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1. If the performance of the HCPC unit fails to meet any of the
following minimum criteria for any reason other than a catastrophic equipment
failure, the capacity charge shall be deleted until, with respect to criterion
(v) or (vi), HCPC demonstrates to HELCO's reasonable satisfaction that it has
cured the defect or deficiencies causing the unit trips, and until, with respect
to criterion (i), (ii) or (iii), HCPC operates the unit at or above the
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minimum criterion or criteria for one full year:
(i) Priority Period Availability of no less than 75 percent for
any one contract year;
(ii) Priority Period Availability of no less than 80 percent for
two out of any three consecutive contract years;
(iii) Forced outage rate no greater than 15 percent for any one
contract year;
(iv) Forced outage rate no greater than 10 percent for two out of
any three consecutive contract years;
(v) Unit trips no greater than 18 for any one contract year; or
(vi) Unit trips no greater than 12 for any two out of three
consecutive contract years.
2. Any period during which the HCPC unit does not meet or exceed the
minimum criteria set forth in Section IX.C.l. shall be termed a "deficiency
period."
3. Notwithstanding the provisions of Section IX.C.l.(v) and (vi), the
capacity charge shall not be deleted solely on the basis of excessive unit trips
during such period following a deficiency period (not to exceed five (5) days)
as HCPC is taking appropriate and timely corrective action acceptable to HELCO
to cure any defects or deficiencies causing the unit trips. HCPC shall not be
deemed to be taking appropriate and timely corrective action unless (i) it
provides written notice to HELCO of the defects or deficiencies causing the unit
trips, the corrective action it proposes to take, and an appropriate schedule
for completing such corrective action within
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two (2) days after the end of a deficiency period, and (ii) it complies with
such schedule. Such written notice shall not be valid unless it is provided
within seven (7) days after the end of a deficiency period.
X. Privity.
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Any other term, covenant or provision herein contained to the contrary
notwithstanding, this Contract is not intended and shall not be construed in any
manner so as to benefit any third party; nor is it intended nor shall it be
construed in a manner such as to place HCPC in privity with any parties who
might have a contract to purchase electric energy from HELCO; nor is it intended
nor shall it be construed in any manner so as to impose a duty upon HCPC to
supply electric energy to the public or any portion of the public or to any
private person or parties not a party to this Contract, or to supply electric
energy to any particular locality or district in the County of Hawaii.
XI. Assignment.
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This Contract shall not be assigned by either party without the prior
written consent of the other party; provided that HELCO may assign its interest
in this Contract, upon written notice to HCPC, to the Trustee under HELCO's
First Mortgage and Deed of Trust dated May 1, 1941, as it has been and may be
amended from time to time; which consent shall not be unreasonably withheld.
XII. Arbitration.
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A. Enforcement of Contract. In the event any controversy or dispute
-----------------------
arises with respect to this Contract or any of the terms or
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conditions hereof other than any dispute arising under Section XV, or with
respect to any alleged breach hereof, such controversy or dispute, and all
issues with respect to any obligation or duty to continue performance under this
Contract pending resolution of such controversy or dispute, shall be submitted
to and settled by arbitration in accordance with the laws of the State of Hawaii
(which are currently codified in Chapter 658 of the Hawaii Revised Statutes) and
the Commercial Rules of the American Arbitration Association and the parties
shall be bound by the award of such arbitration.
B. Attorneys' Fees. In the event of any breach of any covenant or
---------------
condition of this Contract, or any dispute or controversy with respect hereto,
the prevailing party shall be entitled to recover from the other party all
expenses and costs, including reasonable attorneys' fees, incurred in the
enforcement of this Contract.
XIII. Training Standards.
------------------
All HCPC employees operating and maintaining the steam generator and
all HCPC employees maintaining the turbine generator shall have received
training in accordance with good engineering and operating standards and
practices. HCPC's operation and maintenance schedules shall be established to
provide adequate staffing by qualified personnel at all times.
XIV. Term.
----
A. The term of this Contract shall be from January 1, 2000 to and
including December 31, 2004, and thereafter shall continue for one-year periods
unless either party gives written notice of termination by May 30 of the year of
termination.
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B. HELCO Right to Early Termination: HELCO may choose to terminate
--------------------------------
this Contract as of January 1, 2002, 2003 or 2004 by giving HCPC written notice
of such termination no later than May 30 of the previous year. In the event of
such termination, HELCO shall pay to HCPC an early termination payment in
accordance with the following schedule:
Termination as of January 1 Early Termination Payment
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2002 $1,500,000
2003 $1,000,000
2004 $ 500,000
2005 and later $ 0
HELCO shall pay HCPC the Early Termination Payment amount no later
than thirty (30) days after the date HCPC ceases deliveries of capacity and
energy to HELCO.
C. If HCPC has not already taken its four-week overhaul period that
year, HCPC's obligation to provide capacity and energy to HELCO shall cease as
of midnight, November 30 of the year of termination without any decrease in the
capacity charge payable under Section II.C herein.
XV. Termination; Default.
--------------------
A. Termination upon HCPC's Total Default.
-------------------------------------
1. Upon the occurrence of a total default by HCPC, HELCO may, at
its option, (i) terminate this Contract by delivering written notice of such
termination to HCPC, and institute proceedings or resort to such other remedies
not in conflict with this Contract as
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it deems appropriate, or (ii) continue this Contract, in which event HCPC shall
pay HELCO's power replacement cost, and institute proceedings or resort to such
other remedies not in conflict with this Contract as it deems appropriate.
Termination under this Section shall be effective 30 days from the date of
HCPC's receipt of written notice of termination and shall not prejudice any
other rights or remedies HELCO may have.
2. "Total default" means abandonment of the production of power
by failure to maintain continuous service to the extent required by this
Contract, when HCPC has the technical capability to maintain such service
(including the ability to operate HCPC's unit in a safe manner in accordance
with good engineering and operating practices), for three (3) or more
consecutive days, the last 24 hours of which shall be after notice to HCPC that
it is in total default.
3. "HELCO's power replacement cost" means the cost to HELCO of
replacing the capacity and energy that HCPC is obligated to furnish to HELCO
pursuant to Sections II.A. and III.A.l. and 2. less the net payments HELCO would
have made to HCPC for such capacity and energy.
B. HCPC's Failure to Restore Unit. If HCPC shall fail to make all
------------------------------
reasonable efforts to restore the HCPC unit to full or substantially full
operating condition following any casualty loss and such failure continues for
ten (10) days after written demand therefor by HELCO, HELCO shall have the
option to terminate this Contract by giving written notice of such termination
to HCPC. Such termination
22
shall be effective 30 days from the date of HCPC's receipt of written notice of
termination and shall not prejudice any other rights or remedies HELCO may have.
C. HELCO's Right to Possession. In the event there is a total default
---------------------------
by HCPC as defined under Section XV, HELCO shall have the right but not any
obligation immediately to take possession of the HCPC Power Plant for the
remaining term of the Contract and to generate power regardless of whether or
not it exercises its default purchase option under Section XVI.A. If at the time
of such total default HCPC is under the jurisdiction of the Bankruptcy Court, to
the extent any automatic stay may apply, the parties agree that HELCO has cause,
within the meaning given that term in Section 362(d) (1) of the Bankruptcy Code,
11 U.S.C. (S) 362(d) (1), to obtain relief from any automatic stay to permit it
to exercise its rights under this Section. If HELCO takes possession of the HCPC
Power Plant, it must preserve the value and operational integrity of the plant
so that the fair market value (less depreciation) of the plant is not negatively
impacted. During and as a result of any such possession by HELCO, the risk of
damage to or loss of the HCPC Power Plant shall be borne by HELCO to the extent
such damage or loss is attributable to HELCO's failure to operate the power
plant in accordance with (i) Good Engineering and Operating Practices and (ii)
electric public utility standards. In the event HELCO takes possession of the
HCPC Power Plant, HCPC shall make available to HELCO all operating manuals and
equivalent information relating to the operation of the power plant.
XVI. HELCO's Purchase Options.
------------------------
23
A. Default Purchase Option.
-----------------------
1. In addition to any other rights or remedies HELCO may have, if a
total default by HCPC occurs and HELCO gives notice of termination of this
Contract to HCPC pursuant to Section XV.A., HELCO, at its option, shall have the
right but not any obligation, to purchase the HCPC Power Plant, as defined and
identified on Exhibit "A" to this Contract, free and clear of any liens, debts,
mortgages or other encumbrances (which right shall be termed HELCO's "default
purchase option").
2. In order to preserve its default purchase option, HELCO shall
provide written notice of its preliminary intent to exercise such option to
purchase to HCPC within 30 days after HELCO gives notice of termination of this
Contract to HCPC as a result of HCPC's total default.
3. Notice of intent to purchase hereunder by HELCO shall be in
writing, and shall be given to HCPC within 15 days after agreement between the
parties as to the fair market value of the HCPC Power Plant, or after a
determination of such fair market value, with the closing of any such purchase
contingent upon PUC approval unless waived by HELCO.
4. The purchase price pursuant to HELCO's default purchase option
shall be the fair market value of the HCPC Power Plant.
5. If HELCO gives written notice of its preliminary intent to
exercise its default purchase option after a total default by HCPC occurs, HELCO
shall have the right but not any obligation to
24
immediately take possession of the HCPC Power Plant during any remaining term of
this Contract and to generate electrical energy for its electric public utility
system. If HELCO takes possession of the HCPC Power Plant, it must preserve the
value and operational integrity of the plant so that the fair market value (less
depreciation) of the plant is not negatively impacted. During and as a result of
any such possession by HELCO, the risk of damage to or loss of the HCPC Power
Plant shall be borne by HELCO to the extent such damage or loss is attributable
to HELCO's failure to operate the power plant in accordance with (i) Good
Engineering and Operating Practices and (ii) electric public utility standards.
In the event HELCO takes possession of the HCPC Power Plant, HCPC shall make
available to HELCO all operating manuals and equivalent information relating to
the operation of the power plant.
B. [deleted]
C. [deleted]
D. Protection of Option to Purchase. HCPC will not directly or
--------------------------------
indirectly create, or permit to be created by any action or inaction of HCPC or
those claiming through or under HCPC (and will not permit to remain, and will
promptly discharge, any of the same so created or permitted) any mortgage, lien
or encumbrance with respect to the HCPC Power Plant (other than those existing
and disclosed in writing to HELCO by HCPC as of the date of this Contract) that
would impair the exercise by HELCO of its option to purchase pursuant to Section
XVI.A. of this Contract, without HELCO's prior written consent, which consent
shall not be unreasonably withheld.
25
XVII. [deleted]
XVIII. PUC Approval.
------------
HELCO shall use its good faith efforts to obtain, as soon as
practicable, an order from the PUC ordering that: (i) the Contract is approved;
(ii) the energy and capacity charges to be paid by HELCO pursuant to the
Contract are reasonable; (iii) HELCO may pass on to its ratepayers, through its
energy cost adjustment clause ("ECAC"), the energy payments it will be required
to make to HCPC under the Contract, to the extent that such payments are not
recovered in HELCO's base rates; (iv) the terms and conditions of the Contract
are reasonable; and (v) HELCO may include the energy and capacity payments in
its calculation of revenue requirements in future HELCO rate cases.
If the PUC order, or an acceptable PUC interim order, is not issued
by November 30, 1999 (unless extended by written, signed agreement of the
parties), this Contract shall be null and void. If an order is issued on or
before November 30, 1999 (unless extended by written, signed agreement of the
parties) but is unacceptable, then the party to whom the order is unacceptable
shall provide written notice (faxed or hand-delivered to the other party) of the
unacceptable terms or conditions by December 15, 1999, in which event the
Contract shall be null and void.
An acceptable PUC interim order is an order issued by November 30,
1999 that (i) approves (a) the Contract, on an interim basis pending issuance of
the PUC's final order, and (b) inclusion in
26
HELCO's ECAC of the energy payments it is required to make to HCPC under
the Contract, to the extent that such payments are not recovered in HELCO's base
rates, for an interim period extending up to 90 days after the issuance date of
the PUC's final order, and (ii) does not contain terms and conditions that are
unacceptable to either party.
If the final PUC order (i) does not approve the contract, or (ii)
contains terms and conditions that are unacceptable to either party, or (iii)
conditions approval of the Contract on modifications to the Contract that would
have a material adverse impact on a party, or (iv) fails to make any of the
findings requested above, or (v) is not issued by March 31, 2000 (unless
extended by written, signed agreement of the parties), then either party
[provided such party is adversely affected in the case of condition (ii) or
(iii)] may terminate the Contract, by written notice faxed or hand-delivered to
the other party within 30 days of the filing date of the final PUC order, in
which event the Contract shall terminate as of 90 days after the issuance date
of the final PUC order.
XIX. General Provisions.
------------------
A. Severability. Any portion or provision of this Contract which is
------------
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining portions or
provisions hereof in such jurisdiction or, to the extent permitted by law,
rendering that or any other portion or provision thereof invalid, illegal or
27
unenforceable in any other jurisdiction.
B. Section Headings. The Section headings included in this Contract
----------------
are for the convenience of the parties only and shall not affect the
construction or interpretation of this Contract. Schedules and Exhibits referred
to in this Contract are an integral part of this Contract.
C. Notices. All notices given pursuant to this Contract shall be in
-------
writing and be personally delivered or mailed with postage prepaid, by
registered or certified mail, return receipt requested to the address set forth
below or such other address as a party may from time to time specify in writing
to the other party. If so mailed and also sent by telegram or facsimile machine,
the notice will conclusively be deemed to have been received on the business day
next occurring 24 hours after the latest to occur of such mailing and
telegraphic communication; otherwise, no notice shall be deemed given until it
actually arrives at the address in question. The addresses to which notice are
initially to be sent are as follows:
28
If to HELCO to:
President
Hawaii Electric Light Company, Inc.
P.O. Box 1027
Hilo, Hawaii 96721
Telecopier No.: (808) 969-0100
With a copy to:
Director, Power Purchase Division
Hawaiian Electric Company, Inc.
P.O. Box 2750
Honolulu, Hawaii 96840
Telecopier No.: (808) 543-4377
If to HCPC to:
President
Hilo Coast Power Company,
a Division of Brewer Environmental Industries,LLC
P.O. Box 4190
Hilo, Hawaii 96720
Telecopier No.: (808) 933-7772
With a copy to:
President
C. Brewer and Company, Limited
P.O. Box 1826
Papaikou, Hawaii 96781
Telecopier No.: (808) 969-8151
D. Entire Agreement. This Contract (including Exhibits "A" and "B"
----------------
hereto) constitutes the entire agreement of the parties with respect to the
subject matter hereof and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations between the
parties with respect to the subject matter hereof.
E. Governing Law. This Contract is governed by and is to be construed
-------------
and interpreted in accordance with the laws of the State of Hawaii, without
giving effect to the conflict of law principles thereof.
29
F. Modifications, Amendments or Waivers. Except as otherwise provided
------------------------------------
herein, provisions of this Contract may be modified, amended or waived only by a
written document specifically identifying this Contract and signed by a duly
authorized executive officer of a party.
G. Interpretation. Because the terms of this Contract have been
--------------
negotiated at arm's length among sophisticated parties represented by
experienced counsel and with all parties having had the opportunity to request
and bargain for provisions in their respective interests, the parties agree that
any dispute as to the construction of this Contract shall be resolved by
interpreting its terms according to their ordinary and every day meaning, and
not for or against any party by virtue of its role in negotiating or drafting
this Contract and that the rule of "interpretation against the draftsman" shall
not apply.
H. Good Faith Efforts. For purposes of any provision in this Contract
------------------
which requires any party to obtain certain approvals or comply with certain
conditions, including, but not limited to, any approvals and conditions under
Section XVIII hereof, such party shall use its good faith efforts to obtain such
approvals or comply with such conditions in a timely manner, and the other party
shall not act so as to prevent or hinder such efforts. Furthermore, with regard
to Section XVIII hereof, HCPC shall cooperate with HELCO's efforts in obtaining
a satisfactory PUC order.
I. Cooperation between the Parties. Both HCPC and HELCO shall
-------------------------------
cooperate with the other party in connection with this Contract
30
and except for pursuing or enforcing its legal rights shall refrain from taking
any action or making any statements or representations which may undermine the
business activities or reputation of the other party.
31
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
HAWAII ELECTRIC LIGHT COMPANY, INC.
By: /s/ Edward Y. Hirata
--------------------------------
Its Vice President
---------------------------
By: /s/ Molly M. Egged
-------------------------------
Its Secretary
----------------------------
32
HILO COAST POWER COMPANY,
a Division of Brewer Environmental Industries, LLC,
a Hawaii Limited Liability Company By Brewer Environmental Industries Holdings,
Inc.
By: /s/ Kent T. Lucien
--------------------------------
Its: Vice President
---------------------------
33
EXHIBIT A
HCPC POWER PLANT OWNERSHIP TRANSFER
-----------------------------------
1. Transfer ownership of the power generating plant, associated equipment, and
structures to include, but not be limited to the following:
A. Powerhouse (boiler and turbine generator)
B. Bagasse storage and handling buildings
C. Coal storage area
D. Fuel storage area
E. Circulating water wells and pipeline
F. Circulating water outfalls
G. Fresh water well located off-site
H. Land that Items A-G above are situated on as shown on the attached map.
(Location of Item G is not shown.)
2. Obtain easements and rights-of-way to include but not be limited to the
following:
A. 13.8 KV generator feeder from the power plant to the HELCO substation
B. Service roads
C. Service water line from the fresh water well
D. Power supply line for the fresh water well pump
3. Sever interconnections with plantation facilities, for the following items:
A. 2.4 KV distribution system
B. Domestic utilities (water, sanitary sewer, power, etc.)
C. Service utilities (air, steam, etc.)
4. HCPC should obtain all government approvals and proper subdivision of the
affected property prior to transfer of ownership. (Note: Coal storage area
is situated on a parcel zoned for residential use.)
5. Equipment included in paragraph 1 above is described in greater detail on
the attached page A3.
A-1
EXHIBIT A
HCPC POWER PLANT OWNERSHIP TRANSFER
-----------------------------------
A map of the land that items 1A-G are situated on.
A-2
HCPC POWER PLANT OWNERSHIP TRANSFER
LIST OF EQUIPMENT
Number
of Units Description
- ------- -----------
5 Air Compressors, Instrument Air Dryer, Air Tank and Miscellaneous
Tanks
4 Demineralize Chemical Treatment Pumps, Fuel Oil Heating, Pumping and
Storage and Condensate Tanks
Misc Piping, Superstructure, Support Steel and Bridge Crane
8 Minor Component Group Consisting of Rotary Seal Valves, Pressure
Control Valves, Fiberglass Tank, Kittrell Silencer Check Valves and
L.D. Fan Coupling
4 Conveying and Storage Equipment for Bagasse and Boiler Ash
4 Control Instrumentation System and Accessories
4 Motors for Fans and Boiler Feed Pumps and Auxiliaries
3 480 V and 2,400 V Load Centers and 13.8 KV Switchgear
1 Concrete Substructure and Foundations for Boiler and Turbogenerator
9 20 Mega-Watt DeLaval Turbo-Generator/Condenser, Vacuum Pump, Spare
Parts and Cooling Water Heat Exchanger
1 330,000 lb./hr. 1,250 psig. 825 degree F.T.T. Babcock and Wilcox
Boiler and Spare Parts
5 Boiler Feed Pumps and Drive Turbine, Generator and Feedwater Heater
1 Fuel Storage Structure
1 Foundations
1 Fuel Reclaimers
9 Fuel Conveyors, Bagasse Plows and Trash Conveyor and Drives
1 Electrical System
3 Salt Water Wells Nos. 1, 2 and 3
1 Fresh Water Well System (off-site) with 6-inch Water Line to Power
Plant
A-3
EXHIBIT B
Calculation of Energy Payment Rate
Assumptions:
- -----------
HELCO on-peak base ("floor") rate (Prior Contract): $0.0437
HCPC on-peak energy payment rate (Prior Contract): HELCO avoided cost
HCPC on-peak base ("floor") rate (this Contract): $0.0541 (rounded to $0.054 for
illustration purposes)
HCPC on-peak energy payment rate (this Contract): formula reflecting two-thirds
of the increase/decrease between quarterly avoided cost figures
HELCO on-peak filed avoided energy cost payment rates:
First year 1st quarter $0.054
2d quarter $0.057
3d quarter $0.060
PUC approval
4th quarter $0.063
Second year 1st quarter $0.057
2d quarter $0.051
3d quarter $0.053
4th quarter $0.057
HCPC on-peak energy payment rates:
- ---------------------------------
First year 1st quarter $0.054
2d quarter $0.057
3d quarter $0.060
PUC approval $0.058 (1)
4th quarter $0.060
Second year 1st quarter $0.056
2d quarter $0.054 (2)
3d quarter $0.054 (3)
4th quarter $0.056 (4)
(l) Immediate adjustment upon PUC approval, to reflect sharing formula
(2) Due to floor
(3) Effect of III.B: energy payment rate will not be increased even though
HELCO's avoided cost increases, where HELCO's avoided cost for both the current
and prior quarter are less than or equal to the floor
(4) Effect of III.B: where HELCO's avoided cost increases and the current
quarter's avoided cost is above the floor but the prior quarter's avoided cost
is below the floor. HCPC's energy payment is increased but only to the extent of
two-thirds the difference between the floor and the current quarter's avoided
cost.
B-1