1993 ALASKA INTERTIE PROJECT
PARTICIPANTS AGREEMENT
by and among
ALASKA ELECTRIC GENERATION & TRANSMISSION COOPERATIVE, INC.,
The Municipality OF ANCHORAGE d/b/a MUNICIPAL LIGHT & POWER,
CHUGACH ELECTRIC ASSOCIATION, INC.,
The MUNICIPALITY OF FAIRBANKS
d/b/a FAIRBANKS MUNICIPAL UTILITIES SYSTEM,
GOLDEN VALLEY ELECTRIC ASSOCIATION, INC.,
The CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM,
("Participants")
and
HOMER ELECTRIC ASSOCIATION, INC.,
MATANUSKA ELECTRIC ASSOCIATION, INC.,
("Additional Parties")
January 24, 1994
Index of Sections
Section Page
Recitals..........................................................................................................1
Section 1. Parties.........................................................................................1
Section 2. Term of Agreement...............................................................................2
Section 3. Definition and Scope of the Project.............................................................2
Section 4. The Participants................................................................................3
Section 5. Rights & Obligations of Participants............................................................7
Section 6. Decision Making by the Participants.............................................................8
Section 7. Construction Matters...........................................................................13
Section 8. Construction Financing.........................................................................15
Section 9. Operation & Maintenance; Related Matters is....................................................18
Section 10. Project Costs & Cost Recovery..................................................................18
Section 11. Use of Project Capacity........................................................................22
Section 12. Miscellaneous Provisions.......................................................................24
Section 13. Definitions....................................................................................28
Section 14. Defaults and Remedies..........................................................................32
PARTICIPANTS AGREEMENT
THIS AGREEMENT ("Agreement") dated as of December ____ 1993, is entered
into by and among the Parties hereto, namely the ALASKA ELECTRIC GENERATION &
TRANSMISSION COOPERATIVE, INC., The MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL
LIGHT & POWER, the CHUGACH ELECTRIC ASSOCIATION, INC., The MUNICIPALITY OF
FAIRBANKS d/b/a FAIRBANKS MUNICIPAL UTILITIES SYSTEM, the GOLDEN VALLEY ELECTRIC
ASSOCIATION, INC., The CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM, each of
which shall be a "Participant," and the HOMER ELECTRIC ASSOCIATION, INC., and
the MATANUSKA ELECTRIC ASSOCIATION, INC., each of which shall be an "Additional
Party."
WITNESSETH:
WHEREAS, the State of Alaska ("State") has by statute authorized, and
has partially funded, the design and construction of two segments of high
voltage electric power transmission line, namely (1) a Healy-Fairbanks Segment,
and (2) an Anchorage-Kenai Peninsula Segment (said two Segments referred to
collectively as "the Project"); and
WHEREAS, the State's action is intended to benefit the general public
through greater electric power reliability and improved efficiency of electric
power supply for consumers served by electric utilities that agree,
collectively, to provide the remaining funds needed to design, construct,
operate and maintain the Project; and
WHEREAS, each Party hereto is an electric utility or operates as an
electric utility, and is entitled under the relevant State statutes to be a
party to this and other contractual agreements that are necessary to the
Project; and
WHEREAS, each Party hereto has already executed the Intertie Grant
Agreement ("Grant Agreement") and Grant Transfer And Delegation Agreement for
the Project, which are attached to this Agreement as Exhibits A(1) and A(2); and
WHEREAS, each Party has independently determined that its participation
in the Project under the terms and conditions set forth in this and related
Agreements is prudent under the circumstances, and that over its expected useful
life the Project is likely to produce net economic benefits (directly and
through improved reliability) for the electric ratepayers served by that Party;
NOW THEREFORE, IN CONSIDERATION of the mutual covenants set forth herein, the
Parties agree as follows:
Section 1. PARTIES
(a) Participants And Additional Parties As Parties To This Agreement.
The Parties to this Agreement are the Participants, as defined in Section 1(b),
and the Additional Parties, as defined in Section 1(c). As further set forth in
Section 5(a) and in other provisions of this Agreement, the Participants will
own (as tenants in common) certain transmission facilities that are the subject
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of this Agreement, and will exercise the rights and bear the responsibilities of
such ownership. The Additional Parties are electric utilities who collectively
constitute Alaska Electric Generation and Transmission Cooperative, Inc., one of
the Participants, and whose systems will be electrically interconnected with,
and will affect and be affected by, the transmission facilities that are the
subject of this Agreement. The Additional Parties will participate in the
governance and control of the Project, but will not be among the owners of such
facilities.
(b) Participants. The Participants are the ALASKA ELECTRIC GENERATION &
TRANSMISSION COOPERATIVE, INC. ("AEG&T"), The MUNICIPALITY OF ANCHORAGE d/b/a
MUNICIPAL LIGHT & POWER ("ML&P"), the CHUGACH ELECTRIC ASSOCIATION, INC.
("Chugach"), The MUNICIPALITY OF FAIRBANKS d/b/a FAIRBANKS MUNICIPAL UTILITIES
SYSTEM ("FMUS"), the GOLDEN VALLEY ELECTRIC ASSOCIATION, INC. ("GVEA"), and The
CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM ("SES").
(c) Additional Parties. The Additional Parties are the HOMER ELECTRIC
ASSOCIATION, INC. ("HEA") and the MATANUSKA ELECTRIC ASSOCIATION, INC., ("MEA").
Section 2. TERM OF AGREEMENT
(a) Effective Date. This Agreement shall become effective at 24:00 hours on
the first date that it has been executed by all of the Parties ("Effective
Date").
(b) Expiration Date. Unless earlier terminated pursuant to other
provisions of this Agreement, this Agreement shall expire at 24:00 hours on the
first date that the Project has reached the end of its actual useful life
("Expiration Date"), as reasonably determined by the Intertie Participants Group
("IPG").
Section 3. DEFINITION AND SCOPE OF THE PROJECT
(a) The Healy-Fairbanks Segment. The Healy-Fairbanks Segment of the
Project shall consist of a 138-kV (minimum) electric power transmission line
between Healy, Alaska, and the proposed Wilson Substation in south Fairbanks,
Alaska, the routing and design of which will be approved by the IPG, and a
description of which will thereafter be attached hereto as Exhibit B and
incorporated by reference herein. The proposed Wilson Substation shall be
designed to accommodate appropriate direct interconnection for FMUS, and FMUS
shall interconnect to the Project at that location within 18 months of the Date
of Commercial Operation of the Healy-Fairbanks Segment.
(b) The Anchorage-Kenai Peninsula Segment. The Anchorage-Kenai
Peninsula Segment of the Project shall consist of a 138-kV (minimum) electric
power transmission line between Anchorage, Alaska, and the Kenai Peninsula of
Alaska, the routing and design of which will be approved by the IPG, and a
description of which will thereafter be attached hereto as Exhibit C and
incorporated by reference herein.
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Section 4. THE PARTICIPANTS
(a) Participants' Shares. Each Participant's rights to Project
capacity, and each Participant's responsibility for Project costs, shall be
determined as set forth in this Agreement on the basis of that Participant's
Share of each Project Segment. The Parties have computed and agreed upon the
respective individual Participants' Shares in a manner consistent with
applicable statutory provisions. Unless otherwise changed in accordance with
this Agreement, each Participant's Share with respect to both Segments shall
initially be as follows:
AEG&T.......................................25.79%
of which:
HEA.........................11.60%
MEA.........................14.19%
ML&P........................................22.43%
Chugach.....................................30.23%
FMUS........................................4.70%
GVEA........................................15.41%
SES.........................................1.44%
(b) Changes In Participants' Shares. Except as otherwise specifically
provided herein, changes in Participants' Shares shall be subject to the terms
and conditions set forth in this Section 4(b). If either or both Additional
Parties change their Shares independently of one another, then the Share of
AEG&T shall be divided into separate Shares of HEA and MEA in accordance with
their interests in each Segment of the Project as applicable at the time of such
division. In the event of such division and for the purposes of this Section
4(b), the Additional Parties shall be deemed Participants.
(1) General Conditions.
(A) Except as provided in Sections 4(b)(3), 4(b)(4),
and 4(b)(6), no Participant's Share or any portion thereof
shall be assigned or transferred, voluntarily or
involuntarily, to any entity, unless said entity:
(i) is capable of being a "participating
electric utility" for purposes of Sections 1 and 2 of
Chapter 19 SLA 1993, which authorize and partially
fund the Project; and
(ii) is capable of carrying out all the
electric utility services, duties, obligations, and
functions of a Participant, as reasonably determined
by the IPG;
(iii) has validly assumed, in writing; all
of the transferring Participant's obligations
hereunder, provided that such assignment or transfer
shall not relieve the transferring Participant of its
obligations under this Agreement (although said
transferring Participant may become secondarily
liable and the transferee may become primarily
liable) without the express written approval of the
IPG; and
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(iv) has provided the Parties with an
opinion of counsel that this Agreement is enforceable
against the transferee or assignee.
(2) Consent. Except as provided in sections 4(b)(3)
and 4(b)(4), no Participant's Share shall be changed (i.e.,
increased or decreased, including eliminated or reduced to
zero), either voluntarily or involuntarily, by assignment or
otherwise, except with the prior written consent of:
(A) each and every Participant, which consent shall
not be unreasonably withheld;
(B) any Project lender, bondholder, bond fund
trustee, or other party whose consent is a precondition to any
such a change by that Participant as a result of agreements or
arrangements entered into by that Participant for the purpose
of financing the Project; and
(C) if applicable, any lender or regulatory agency
whose consent the Participant(s) may require in order to
increase, decrease, or eliminate its (their) respective
Participant's Share(s).
(3) Limited automatic rights of withdrawal.
(A) Generally. Each Participant other than GVEA and
FMUS shall have a limited automatic right of withdrawal from
participation in the Healy-Fairbanks Segment, and each
Participant (including GVEA and FMUS) shall be entitled to
withdraw from participation in the Anchorage-Kenai Peninsula
Segment, but, in each case, only in accordance with the
provisions of this Section 4(b)(3).
(B) Timing. A Participant that withdraws from
participation in either Segment may do so only by delivering
written notice to the other Participants on or before a
particular date (hereinafter the "decision date") reasonably
established by the IPG. The decision date shall be a date
certain, after completion of the requisite Anchorage-Kenai
Peninsula Segment route studies and cost estimates, on which a
final decision will be made to proceed or not to proceed with
construction of that Segment along a particular route and with
particular end points. The Participants will cooperate with
one another in good faith to help devise and implement such
additional procedures, including reasonable meeting and
notification schedules, as the IPG may adopt to facilitate
decisionmaking on the potential transfers and assumptions of
rights and obligations among Participants that may occur
pursuant to this Section 4(b)(3).
(C) Effect of withdrawal on Participant Shares and
related obligations. The Participant's Share of any
withdrawing Participant shall be reallocated among other
Participants in accordance with paragraph (D) below. The
withdrawal of any Participant from the Healy-Fairbanks
Segment, however, shall become effective only one year after
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the Date of Commercial Operation of that Segment, or, if
later, one year after the date of that Participant's
withdrawal notice. Until its withdrawal becomes effective,
such Participant shall remain liable for all costs and
obligations associated with its Participant's Share of the
Healy-Fairbanks Segment. The withdrawal of any Participant
from the Anchorage-Kenai Peninsula Segment shall become
effective sixty (60) days after the decision date, subject to
the last sentence of Section 4(b)(3)(D)(ii).
(D) Reallocation of the Participant's Share of a
withdrawing Participant.
(i) Healy-Fairbanks Segment. The
Participant's Share of a Participant that withdraws
from the Healy-Fairbanks Segment shall first be
offered to other Participants in that Segment in
proportion to the respective Participant's Shares of
such other Participants in that Segment. Any portion
of the withdrawing Participant's Share that remains
available after this first-round offer shall next be
accepted by FMUS and GVEA in proportion to their
respective Participant's Shares, provided, that FMUS
shall not be required to accept said portion to the
extent FMUS's total Participant's Share of the
Healy-Fairbanks Segment would thereby exceed 15%. If
any portion of the withdrawing Participant's Share
remains available after this second-round offer, then
that portion shall be accepted by GVEA.
(ii) Anchorage-Kenai Peninsula Segment. The
Participant's Share of a Participant that withdraws
from the Anchorage-Kenai Peninsula Segment shall
first be offered to all remaining Participants in
that Segment, in proportion to their respective
Shares in that Segment. Any portion of the
withdrawing Participant's Share that remains
available after this first-round offer shall next be
offered to all Participants in that Segment that have
committed to withdraw from the Healy-Fairbanks
Segment ("South-only Participants"). If and to the
extent that the South-only Participants decline to
accept this second-round offer, then the withdrawing
Participant's Share (or any remaining portion
thereof) shall again be offered to all remaining
Participants in that Segment (including the
South-only Participants) in proportion to the
respective Participant's Shares of such Participants
in that Segment. Each such Participant shall either
accept such third-round offer, obtain agreement from
another Participant to accept such third-round offer,
or shall itself withdraw from participation in that
Segment. In the event this process leads one or more
additional Participants to withdraw from
participation in that Segment, then their
Participant's Shares shall be offered to the
remaining Participants in a like first-round,
second-round, and third-round manner. If, at the
conclusion of this process, one or more Participants
have accepted Participant's Shares in the
Anchorage-Kenai Peninsula Segment that total one
hundred percent (100%), then construction of the
Segment shall commence and there shall be no farther
automatic rights of withdrawal available to any
Participant; otherwise this Project Segment shall be
considered Abandoned and all Participants in it
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(notwithstanding the attempted withdrawal of any of
them under this paragraph) shall proceed, in
accordance with procedures the IPG shall adopt, to
wind up this Project Segment. No Participant shall in
that event be excused from its Participant's Share of
any obligations associated with this Project Segment
until all such obligations have been satisfied.
(E) Financial arrangements with a Participant that
withdraws from participation in the Healy-Fairbanks Segment.
Upon acceptance of a transfer and assumption by one or more
other Participants of the rights and obligations associated
with the Participant's Share of a Participant that withdraws
from participation in the Healy-Fairbanks Segment, and after
such withdrawal becomes effective pursuant to Section
4(b)(3)(C), the Participant(s) assuming such rights and
obligations shall proceed to pay the withdrawing Participant's
Annual Payment Obligations and Assessments for that Project
Segment. Such payment shall include any then-unamortized
amounts of the transferring Participant's Share of such Design
and Construction Costs as may exceed the sum total of the
Grant Funds plus available interest thereon for that Segment.
In the event that the withdrawing Participant's Share of
Design and Construction Costs for that Segment has not been
financed through a collective financing arrangement, then the
Participant(s) assuming such Share shall pay the withdrawing
Participant directly, over a period of twenty-five (25) years
(unless otherwise agreed) and on a mutually-agreed
amortization schedule, for amounts that would at that time be
unamortized, assuming said withdrawing Participant's Share had
been financed by means of a collective financing arrangement
or other loan.
(F) In the event a Participant exercises the limited
right of withdrawal pursuant to Section 4(b)(3), then each
remaining Participant shall continue to be a Member with a
single vote, notwithstanding its assumption of the
transferring Participant's Share, but the Share of said
remaining Participant shall be increased by the amount
transferred for all other purposes, including for purposes of
determining the affirmative vote of Members whose percentage
Shares exceed 50% under Section 6(e)(3)(a).
(4) Default and Step-up. If, by reason of a Participant's
default or otherwise by operation of law (including by order of any
regulatory body with jurisdiction), a Participant's Share is reduced or
eliminated, or a Participant ceases to be a Participant and ceases to
pay the costs associated with its Participant's Share, then the Shares
of the remaining Participants shall be proportionately increased so
that the total of all Shares continues to equal 100%. No Party shall
initiate or otherwise seek such an order reducing or eliminating its
Share or terminating its role as a Participant.
(5) Voluntary Transfers. In the event that a Participant
transfers or assigns its Share or portion thereof to another Party, the
Share of the transferee shall be increased accordingly, but it shall
continue to be a Member with a single vote on the IPG. In the event
that a Participant transfers or assigns its Share or portion thereof to
an entity that is not a Party, the transferee may become a Member with
a single vote on the IPG.
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(6) Assignment for Security Purposes. Nothing in this
Agreement shall prevent an assignment of a Party's rights hereunder for
security purposes only, or shall prevent a financing entity with
recorded or secured rights from exercising all rights and remedies
available to it under law or contract, provided that performance of
this Agreement is not thereby impaired. The Parties shall have the
right to be reasonably notified by the financing entity prior to the
time of exercise that it is exercising such rights or remedies.
Section 5. RIGHTS & OBLIGATIONS OF PARTICIPANTS
(a) Ownership As Tenants In Common. The Participants shall be owners of
each Segment of the Project (including all personal and real property interests
thereof) as tenants in common, with undivided interests and obligations with
respect to all Project Segment assets and liabilities in the proportionate
amounts of their respective Participants' Shares. Except as otherwise provided
hereunder, the Participants shall share in the Project Segment's benefits,
burdens, and risks only in proportion to their respective Participants' Shares,
notwithstanding that the IPG may select one or more individual Participants to
manage, design, build, finance, operate, and/or maintain the Project Segment or
portions thereof on behalf of the Participants collectively.
(b) Waivers.
(1) Right of partition. Each Participant hereby
waives (on behalf of itself and of any assignee or transferee
of all or any portion of its respective Participant's Share)
any right or power that a tenant in common might otherwise
possess to compel a partition of the Project or any element
thereof as commonly held property, provided, that this
provision shall not prevent the Additional Parties or any
other Parties from seeking to divide AEG&T's Participant's
Share into two Participant's Shares in proportion to the
actual interests of said Additional Parties applicable at that
time.
(2) Claims against other Parties. Each Party shall be
entitled to enforce this Agreement; provided, that no Party
shall be entitled, without the prior approval of the IPG, to
assert claims against a Participant based on or arising out of
that Participant's acts or omissions as a Construction Manager
or an O&M Manager.
(c) Payment Obligations. Each Participant shall (1) meet in
timely fashion each and all of its obligations under this Agreement,
including without limitation its obligations to make payments of money
for or with respect to the Project, and (2) make such payments of money
in such amount, in such manner, and at such time as may be required by
this Agreement, or by operation of law.
(d) Rights And Duties Regarding Use Of Party's Facilities.
(1) Duty of Parties to allow use of their own
transmission capacity. Each Party shall make available to the
other Parties, on a just and reasonable and nondiscriminatory
basis, and in the manner and subject to the conditions set
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forth in this Section 5(d), capacity in that Party's own
non-Project electric power transmission facilities for the
purpose of affording the Participants access to/from the
Project in order that each may make use of the Project.
(2) Initial terms and conditions governing Chugach
facilities. Subject to approval by the Alaska Public Utilities
Commission ("Commission"), the use of Chugach's facilities for
access to/from the Anchorage-Kenai Peninsula Segment by other
Parties shall be governed initially by the terms and
conditions, including rates, described in Exhibit D(1),
attached hereto and incorporated by this reference herein.
Chugach shall submit said terms and conditions to the
Commission for review and shall seek approval thereof.
(3) Terms and conditions governing GVEA facilities.
The terms and conditions governing use of GVEA facilities are
set forth in Exhibit D(2), attached hereto and incorporated by
this reference herein.
(4) Other terms and conditions. When appropriate to
effect the duty set forth in Section 5(d)(l) under
circumstances other than those described in Sections 5(d)(2)
and 5(d)(3), the Parties shall promptly negotiate in good
faith in an effort to reach agreement on reasonable terms and
conditions, including rates, that will apply when a particular
Party provides to Participants access to/from either Project
Segment over its non-Project transmission facilities. Any such
terms and conditions that become effective shall be set forth
in Exhibit D, and shall be attached hereto and incorporated by
reference herein during such time as they remain effective.
(5) Submission of terms and conditions to the
Commission. If, despite the good faith negotiation efforts of
the Parties, agreement is not reached on the terms and
conditions governing the Participants' use of any particular
Party's non-Project transmission facilities, then that Party
shall submit to the Commission for review and approval the
terms and conditions, including rates, which that Party
proposes with respect to its facilities.
(6) Additions to Exhibit D. Any terms and conditions,
including rates, that ultimately become effective through
order of the Commission or of a reviewing court shall be set
forth in Exhibit D, and shall be attached hereto and
incorporated by reference herein during such time as they
remain effective.
Section 6. DECISION MAKING BY THE PARTICIPANTS
(a) Nature of the IPG.
(1) Each Participant or Additional Party, as the case may be,
shall exercise certain of its rights and carry out certain of its
responsibilities with respect to the design, planning, construction,
operation, management and, as appropriate, partial funding of the
Project by acting through the LPG in accordance with this Agreement or
with rules adopted by the IPG pursuant to this Agreement. When used in
this Agreement, the term "IPG" refers to the Participants and
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Additional Parties acting collectively as set forth herein. Nothing in
this Agreement is intended to establish the IPG as a separate entity,
nor do the Parties intend to delegate any authority or confer any
powers or impose any obligations on the IPG, apart from the authority,
powers and obligations of each Participant and Additional Party
expressly conferred pursuant to this Agreement. The IPG shall have no
power or authority to take actions which modify, directly or
indirectly, the terms and conditions of this Agreement.
(2) The IPG, in making certain decisions and carrying out
certain Project activities with respect to the ownership and management
of the Project, shall at all times act in accordance with voting
procedures and rules set forth in or adopted pursuant to this
Agreement.
(b) Membership. The IPG shall consist of the following initial members
("Members'), each of which shall be entitled to one vote as further set forth
herein: ML&P, Chugach, FMUS, GVEA, SES, HEA, and MEA. No Member shall obtain an
additional vote through merger with, acquisition of, or assignment from any
other Member. In the event a Party ceases to have a Share, either directly or,
in the case of an Additional Party, indirectly, then said Party shall cease to
be a Member.
(c) Designation of representatives. Each Member shall designate one
representative and one alternative representative to the IPG. Each Member shall
notify all other Members in writing of the names, addresses, and telephone
numbers of its representative and designated alternate. Any Member may change
its designated representative or alternate representative at any time and shall
promptly provide written notice of such change to the Members. The alternative
representative shall serve as the designated representative in the absence of
the designated representative.
(d) Meetings.
(1) Annual Meeting. The annual meeting of the IPG shall be the
first regular meeting of each Project Year, and shall be convened for
the purpose of electing officers and transacting such other business as
may come before the meeting.
(2) Regular Meetings. Regular meetings shall be held at least
quarterly, with the specific date and time to be determined by the IPG.
(3) Special Meetings. Special meetings of the IPG may be
called by the Chairman or by three Members at any time by so advising
the Secretary of the IPG. Business at a special meeting of the IPG
shall be limited to the purpose stated in the notice of such special
meeting.
(4) Quorum. At all meetings of the IPG, the presence of the
representatives of any five Members shall constitute a quorum for the
transaction of business.
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(e) Manner of Acting.
(1) IPG actions may be taken by any reasonable voting method,
provided that any Member may request an open roll call vote. A Member
may not vote on a matter solely or primarily affecting a Segment of
which said Member does not hold a Share, either directly or, in the
case of an Additional Party, indirectly. Telephonic participation shall
constitute presence at a meeting of the IPG. All actions taken via
teleconferencing shall be taken by roll call vote.
(2) Except as otherwise provided herein, all actions of the
IPG that are decided by vote shall require a majority vote of the
Members, such vote to be taken during a meeting at a time when a quorum
is present.
(3) The actions listed in this Section 6(e)(3) shall require
(a) the affirmative vote of a majority of the Members, and (b) the
affirmative vote of those Members whose Participant's Shares of Project
capacity total greater than 50% ("double majority"), but only if at
least three Members are eligible to vote on such actions. Otherwise the
actions listed in this Section 6(e)(3) shall require the affirmative
vote of those Members whose Participant's Shares total greater than
50%, and shall be made in good faith and consistent with Prudent
Utility Practice for the benefit of both Segment Participants.
(A) Approval and modification of Construction Budget.
(B) For each Project Segment, selection, removal, or
replacement of the Construction Manager and the O&M Manager,
subject to the requirements of Sections 7 and 9, and approval
of terms and conditions of the Construction and O&M
Agreements.
(C) Adoption and modification of the budget of Annual
Project Costs.
(D) Establishing for each Project Year the estimated
Annual Payment Obligation of each Participant, together with a
schedule for each Participant of payments that such
Participant shall be required to make during the year.
(E) Determination after the conclusion of each
Project Year of the actual Annual Project Costs for that Year.
(F) Evaluation of necessity for and scheduling for
major change orders, Required Project Work and Optional
Project Work; provided, that Optional Project Work may be
undertaken only if all Parties agree that said Work is
consistent with the terms of this Agreement, including Section
6(a) hereof.
(G) Determination of the appropriate amount of and
method for obtaining insurance for or related to the Project.
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(H) Creation of specific Project accounts or funds,
if any, and determination of minimum funding amounts for the
same.
(I) Adoption or amendments of procedural rules of the
IPG (except for procedures for dispute resolution, which shall
be adopted or amended by unanimous agreement).
(J) Final approval of maintenance schedules, breaker
settings, and similar protocols for each Segment (to be
proposed to the IPG in the first instance by the O&M
Managers).
(K) Determination of when the Project has reached the
end of its actual useful life.
(L) Determination of whether claims may be asserted
against any Party providing Project services under a related
agreement.
(M) Adoption of procedures for Assessments pursuant
to Section 10(e)(2).
(N) Approval of material routing and design decisions
for each Project Segment. The IPG shall select among potential
alternative routings and end points for the Project Segments
reasonably and in good faith in order to (1) satisfy such
reasonable objectives for electric reliability, transfer
capability, safety, feasibility, environmental quality, and
similar objectives as the IPG may adopt for the Project
consistent with Prudent Utility Practice, at (2) the lowest
reasonably expected Project cost; provided, that the northern
terminus of the Healy-Fairbanks Segment shall be located at
the proposed Wilson substation and designed to accommodate
direct interconnection by FMUS unless FMUS expressly and in
writing approves a different location or design.
(O) Relief of a Participant of its obligations
pursuant to this Agreement as a consequence of assignment or
transfer.
(P) Adoption of standards and procedures pursuant to
which a Party may be compensated by the others for any
reasonable cost, expense, or loss (or portion thereof) that
(i) such Party would not have incurred but for the Project,
and (ii) should properly be considered a cost of the Project.
(Q) All other matters that this Agreement would
otherwise allow to be decided by a simple majority of the
Members, but that the IPG decides, by double majority vote,
should require the affirmative vote of a double majority.
(4) All significant actions or determinations of the IPG shall
be reduced to writing and promptly disseminated among the Participants
in the form of meeting minutes or IPG Resolutions, provided that
failure to comply strictly with this provision shall not by itself
render said action or determination invalid.
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(5) Decisions on which only two Members are eligible to vote
shall be subject to notice and opportunity to comment by the minority
Participant, and to appeal to the Commission for consistency with good
faith and Prudent Utility Practice for the benefit of both Segment
Participants.
(f) Committees.
(1) Designation. The IPG may appoint committees from time to
time, subject to such conditions as may be prescribed by the IPG. The
designation of any such committee shall not relieve the IPG or any
Member of any responsibility by law or the Agreement.
(2) Powers. Any delegation of decisionmaking authority by the
IPG to any committee, officer, or other individual shall be evidenced
in writing.
(g) Officers.
(1) Number. The officers of the IPG shall initially consist of
a Chairman, a Vice Chairman, a Secretary, and a Treasurer, who shall
serve at the pleasure of the IPG. The IPG may reduce the number of its
officers and may elect such other officers and agents as it shall deem
necessary, who shall hold office for such terms and shall exercise such
powers and perform such duties consistent with this Agreement as shall
be determined from time to time by the IPG. The IPG may, by separate
resolution, provide for the indemnification of its officers, Members,
and the members of any special purpose committees appointed by the IPG.
(2) Election and Term of Office. Officers shall be elected by
the IPG at its annual meeting. Only designated representatives of
Members shall be eligible to serve as officers. Each officer shall hold
office until a successor is elected and accepts office unless the
officer resigns or is removed by the IPG.
(3) Vacancies. In the event any vacancy occurs in any elected
office of the IPG, the remaining members of the IPG shall elect a
successor to the office at the next regular or special meeting of the
IPG.
(h) Auditing Standards and Procedures.
(1) Unless otherwise waived by the IPG, an annual audit of
each Project Segment shall be performed by qualified independent
auditors selected by the IPG. The primary purpose of the audits shall
include verification of Project expenses and determination of amounts
to be carried forward or collected pursuant to an annual true-up of
Project costs.
(2) In accordance with rules established by the IPG, the IPG
shall (a) keep or cause to be kept complete and accurate records and
accounts for each Segment of the Project, which records and accounts
shall be subject at reasonable times to inspection by any Participant,
and (b) require Construction Managers and O&M Managers to provide
progress reports, transaction records, Project certifications, or other
12
information that the IPG reasonably deems relevant to Project ownership
or operation.
Section 7. CONSTRUCTION MATTERS
(a) Construction Manager. GVEA shall serve as the Construction Manager
of the Healy-Fairbanks Segment, and Chugach shall serve as the Construction
Manager of the Anchorage-Kenai Peninsula Segment, unless said Managers elect to
withdraw or are removed pursuant to Section 7(j). Each Construction Manager
shall be responsible for the preparation of its Project Segment's design for
approval by the IPG and shall be responsible for the construction of its
respective Segment of the Project utilizing Prudent Utility Practices and
subject to construction budgets approved by the IPG. Each Construction Manager
shall be responsible for selecting and supervising any design engineering firms
or subcontractors necessary for the successful completion of construction of its
Segment of the Project.
(b) Project Schedules/Commercial Operation. Each Construction Manager
shall, upon execution of the apposite Construction Agreement, proceed with the
design, right-of-way acquisition, permits, and construction with due diligence
and in accordance with Prudent Utility Practice; provided, that detailed design
and construction of the Anchorage-Kenai Peninsula Segment shall not commence
until after completion of the process described in Section 4(b)(3). Each
Construction Manager shall submit a Project schedule to the IPG, and shall use
its reasonable best efforts to achieve the scheduled dates of commercial
operation, but shall not be responsible for delays which are beyond its
reasonable control.
(c) Protect Budgets/Construction Costs. Each Construction Manager
shall, immediately upon execution of the apposite Construction Agreement,
prepare a budget of the total estimated Design and Construction Costs of the
Healy-Fairbanks or Anchorage-Kenai Peninsula Segments, as the case may be, and
submit that Construction Budget to the IPG, together with Construction Budgets
for the 1994 calendar year, for approval by the IPG; provided, that in the case
of the Anchorage-Kenai Peninsula Segment, the first such budget shall be
prepared for submission to the IPG only after the Segment's routing and end
points have first been selected. Thereafter, no less than one hundred and twenty
(120) days before the beginning of each succeeding Construction Year, each
Construction Manager shall submit to the IPG for its approval a budget (or, as
the case may be, a revised budget) for each succeeding Construction Year. The
IPG shall approve a budget or revised budget no less than 60 days before the
beginning of each succeeding Construction Year.
The Construction Managers shall not without the express approval of the
IPG incur costs or obligate finds beyond those amounts contained in an approved
budget.
The Construction Managers shall not make material intra-budget
transfers without the IPG's approval.
The Construction Managers shall not be compensated for their services
as Construction Managers, except that each Construction Manager may include
within the Project budget a reasonable amount for labor (i.e., compensation,
including associated payroll benefits) to the extent directly assigned to the
Project by that Construction Manager. Any such costs contained in Project
13
budgets shall be set out in sufficient detail so as to allow the IPG to assess
the reasonableness of those costs. The Construction Managers may also include
within the Project Budget an amount for its general and administrative overhead,
including construction overhead, of 0.5% of Design and Construction Costs.
(d) Advancement of Funds. The IPG shall instruct the administrator
under the Grant Administration Agreement ("Grant Administrator") to advance
finds to each Construction Manager (1) either upon the submission of progress
payment invoices from subcontractors certified as to accuracy by said
Construction Manager or direct labor invoices submitted by said Construction
Manager showing personnel and hours involved in connection with the Project, or
(2) otherwise in accordance with the Grant Administrative Agreement.
(e) Change Orders. The Construction Managers may not enter into or
agree to major change orders without the prior approval of the IPG. Each
Construction Manager may, however, agree to minor change orders without the
approval of the IPG; the Construction Manager shall report all such minor change
orders in that Construction Manager's next applicable construction report to the
IPG. Minor change orders are defined as those changes to the design or
construction of the Project which are not expected to affect the Project
capacity, general routing, points of interconnection, or basic design of the
structures, and which are not expected to exceed $50,000 individually or, in the
aggregate, exceed the approved budget for that phase of the design or
construction.
(f) Separate Books and Records. Each Construction Manager shall
maintain separate books and records for the design and construction of its
Segment of the Project. Such books and records shall be available to the
Participants for their inspection. Copies of such books and records shall be
made available to any Participant upon request provided that such Participant
reimburses the Construction Manager for the reasonable cost of reproducing or
otherwise making available such books and records.
(g) Monthly Reports. During construction, each Construction Manager
shall submit monthly reports to the IPG setting out in sufficient detail the
status of the design and construction of its Segment of the Project so as to
allow the IPG to compare the percentage of completion of the Project with total
expenditures as a percentage of budgeted amounts. Each Construction Manager
shall immediately inform the members of the IPG by fax of any design or
construction problems encountered which, in that Construction Manager's opinion,
might result in significant future litigation, the request for a major change
order, or a significant deviation from the Project schedule. The IPG may from
time to time establish standards and criteria for determining what constitutes
"significant" litigation and "major" change orders for purposes of this
provision.
(h) Audit. The IPG. or any Participant, shall have the right to audit
the books and records of each Construction Manager at any time. The costs of
such an audit shall be borne by the party requesting the audit unless such audit
discloses that the Construction Manager has (1) failed in some significant
manner or (2) acted in bad faith, in performing its obligations under the
Construction Agreement, in which case the Construction Manager shall pay the
reasonable costs of the audit.
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(i) Liability of Construction Manager. The Participants are entitled to
compel each Construction Manager to disgorge any unjust enrichment gained in
connection with its performance under the Construction Agreement. Each
Construction Manager shall also be responsible for the consequences of its own
intentional or willful misconduct, or of its grossly negligent action in
performance of its obligations under the Construction Agreement (including such
actions by its officers, employees, or agents); provided, that the Construction
Manager shall not be liable (except with other Participants, and to the extent
of its Participant's Share of Project liabilities) for:
(1) Damages resulting from design or construction decisions
presented to and approved by the IPG; and/or
(2) The intentional or negligent acts of engineering design
firms or subcontractors retained by the Construction Manager, provided
that the Construction Manager has made a good-faith effort to supervise
and inspect the activities of such engineering design firms or
subcontractors, and/or
(3) Damages or other costs and expenses resulting from the
Construction Manager's ordinary negligence in the performance of its
duties as Construction Manager.
The Participants shall treat such damages, costs, and expenses as costs of the
Project, to be recovered from all Participants in proportion to their
Participants Shares; provided., that the Construction Manager shall remain
obligated as a Participant to pay its Participant's Share of any Project costs,
including the costs of any indemnification.
(j) Removal or Withdrawal of Construction Manager. The IPG may remove
the Construction Manager for reasonable cause, and may replace that Construction
Manager with another Party; provided that the IPG gives the Construction Manager
at least thirty (30) days' prior notice in writing and reasonable opportunity to
cure. All Members of the IPG may participate in the vote for such removal and
replacement. The Construction Manager may, for any reason, voluntarily withdraw
from its duties as Construction Manager if written notice thereof is tendered no
less than 60 days prior to the anticipated date of commencement of construction.
After commencement of construction, the Construction Manager may withdraw from
said duties only upon reasonable notice (but not less than 90 days) and only for
good cause shown. In either event, the Construction Manager shall use its
reasonable best efforts to cooperate with the new Construction Manager, and to
mitigate any costs arising from the withdrawal and replacement of the
Construction Manager.
(k) Duty to Negotiate Construction Agreement. The Parties shall
negotiate in good faith in an effort to reach agreement on reasonable terms and
conditions for, and to enter into, a Construction Agreement containing terms and
conditions substantially as set forth in this Section 7.
Section 8. CONSTRUCTION FINANCING
(a) Disbursement of Grant Funds. Grant Funds deposited to each Intertie
Grant Account established pursuant to the Grant Administration Agreement shall
be disbursed and expended for the design and construction of the appropriate
Segment of the Project in accordance with the provisions of this Section 8, the
Construction Agreement, and the Grant Administration Agreement.
15
(1) The Participants shall exercise overall control over the
disbursement of Grant Funds through the IPG, which shall act in
accordance with its rules, the Construction Agreement, and the Grant
Administration Agreement. Upon approval by the IPG, Grant Funds shall
be disbursed for the purpose of undertaking preliminary investigation
and design work, including but not limited to environmental and route
studies. No Grant Funds shall be disbursed for the actual construction
of the Project unless and until the IPG has considered and approved the
construction budget and schedule, as provided for in Sections 6 and 7,
whereupon the Participants shall cause the appropriate Construction
Manager to commence design and construction of its Segment of the
Project as set forth in the Construction Agreement.
(2) Thereafter, and from time to time until the Date of
Commercial Operation, the IPG shall consider and either approve or
disapprove (i) any design or construction activities required by the
IPG to be approved prior to commencing said activities, (ii) any
payments or reimbursements to the Construction Manager for costs
incurred and expenditures made that are not in accordance with the
approved construction budget and schedule, and (iii) any changes to the
construction budget and schedule. The procedure for such consideration
and approval shall be as set forth in rules and procedures duly adopted
by the IPG as provided for in Section 6.
(3) Payments and reimbursements from the Intertie Grant
Accounts shall be made only for costs incurred and expenditures made
pursuant to the approved construction budget and schedule or otherwise
as approved by the IPG. Documentation required to make draws against
the appropriate Intertie Grant Account shall be provided in the manner
determined by the IPG in accordance with the Grant Administration
Agreement, and shall be evidenced by a certification executed by the
Chairman or Treasurer of the IPG. or otherwise as the IPG may by rule
determine.
(4) The Participants, through the IPG, shall consider and act
upon such modifications and amendments to the construction budget and
schedule as are proposed by the appropriate Construction Manager or on
the initiative of any Participant.
(5) Each Participant hereby pledges all Grant Funds received
to payment of Design and Construction Costs, except as provided in
paragraph (c) of this section. "Design and Construction Costs" means
all capital costs of the Project, including but not limited to
planning, permitting, design, acquisition of real property interests,
construction, equipment, testing, and insurance costs, but not
administrative and general costs of any Participant, State agency,
political subdivision, or Construction Manager, except pursuant to
Section 7(c), unless such costs are expressly approved by the IPG prior
to being incurred.
(b) Additional Financing. Notwithstanding any other provision of this
Agreement, and in order to complete the Project, each Participant shall pay its
Participant's Share of any Design and Construction Costs that exceed the sum
total of the Grant Funds plus available interest thereon ("Additional Costs").
16
(1) The Parties recognize the possibility of completing the
Project through collective financing arrangements, including bonds
issued by AIDEA or other State agency, as may be provided by separate
agreement.
(2) If the Parties agree unanimously, each in its own
discretion, to participate in a collective financing arrangement and to
approve the Bond Resolution adopted to implement said collective
financing arrangement, then amounts required to be paid during each
Project Year by the Participants pursuant to said Bond Resolution shall
be included in Annual Project Costs. Each Participant shall discharge
its obligation, in whole or in part, to pay its Participant's Share of
Additional Costs through payment of its Participant's Share of Annual
Debt Service and certain other Annual Project Costs in accordance with
Section 10 and any applicable Bond Resolution.
(3) Each Participant reserves the right to finance separately
its Participant's Share of Additional Costs, or any other payments
required by this Agreement. Such separate financing shall not impair
any Party's legal rights or obligations under this Agreement. In the
event the Parties do not agree to a collective financing arrangement,
then each Party shall pay, by any lawful means, its own Participant's
Share of Additional Costs and other payments required by this
Agreement.
(4) The time and manner of payment of such Additional Costs
shall be determined by the IPG in accordance with its rules. Each
Participant shall pay its Participant's Share of Additional Costs upon
receipt of certification in the same manner as is provided in paragraph
8(a)(3) for the disbursement of Grant Funds by the Trustee.
(5) The IPG may take appropriate actions to facilitate
collective financing among some or all of the Parties, but the costs of
collective financing arrangements undertaken by less than all of the
Participants shall not be considered Project Costs or be borne by other
Participants.
(c) Disposition of Unexpended Grant Funds. To the extent permitted by
applicable law, any Grant Funds that remain unexpended after the Date of
Commercial Operation each Segment of the Project shall be held and applied for
use in connection with the Project for the benefit of the Participants, as
provided for in rules to be adopted by the IPG. Any Grant Funds that remain
unexpended after Abandonment of the Project and discharge of outstanding
obligations in connection therewith shall be deposited to the account of AIDEA
for return to the State.
(d) Insurance. The Participants shall obtain and maintain insurance on
the Project during design and construction if and as determined by the IPG in
accordance with Section 6.
Section 9. OPERATION & MAINTENANCE; RELATED MATTERS
(a) Selection Of O&M Managers. GVEA shall serve as the O&M Manager for
the Healy-Fairbanks Segment, and shall be removable only for reasonable cause,
after reasonable notice and opportunity to cure. Chugach shall be the initial
O&M Manager for the Anchorage-Kenai Peninsula Segment for a period of three (3)
years from and after the Date of Commercial Operation of that Segment; during
17
such period, the IPG may remove Chugach for reasonable cause after reasonable
notice and opportunity to cure, and thereafter the IPG may remove Chugach after
reasonable notice by the affirmative vote of Members whose Participant's Shares
in total exceed fifty percent (50%). Chugach shall subcontract with AEG&T and/or
HEA to provide some or all of the Project maintenance services for Project
facilities located on the Kenai Peninsula, if and to the extent that doing so
will reduce Project expenses. The Parties shall negotiate in good faith in an
effort to reach agreement on reasonable terms and conditions for, and to enter
into, an O&M Agreement containing terms and conditions consistent with this
Agreement. The rights and obligations of the O&M Manager(s) and of the IPG and
its Members with respect to the Project shall also be governed by the O&M
Agreement(s) for the Project.
(b) Duties Of Parties Re: Electrical Connection & Coordination. Because
each Party's own facilities will be electrically interconnected, directly or
indirectly, with the Project, each Party shall operate and maintain its own
facilities in a prudent and reasonable manner. The Parties agree that:
(1) they will negotiate in good faith to reach agreement on
such protocols as may be necessary to ensure that the efficient
operation of the Project is consistent with and adequately supported by
(A) the Parties' interconnected systems, and (B) reasonable
coordination of the Parties' respective system operations; and
(2) each Party shall in good faith operate its own system in a
manner that will reasonably accommodate operation of the Project, but
nothing in this Agreement shall obligate any Party to (A) operate its
system in a manner inconsistent with its own needs and requirements, or
(B) incur solely for the benefit of the Project or its operation, or
for the benefit of the other Parties, any uncompensated cost, expense,
or loss in the design, construction, maintenance, or operation of that
Party's own system.
(c) Intervening Taps & Other Connections. No Party or other entity
shall be allowed to establish an intervening tap or other electrical connection
to the Project except in accordance with standards and rules promulgated by the
IPG to protect the Project's operation, financing, capability, and electric
integrity.
Section 10. PROJECT COSTS & COST RECOVERY
(a) Funds & Accounts. The following finds and accounts shall be owned
by the Participants in proportion to their Participants' Shares, or, if
established through Participants' contributions, then in proportion to said
contributions. Said funds and accounts shall be held and administered in
accordance with the provisions of this Agreement, with rules adopted by the IPG,
or with applicable requirements set forth in any controlling Bond Resolution:
(1) Grant Account. All Grant Funds, including available
interest thereon, as described in Section 8(a) above.
(2) Funds and Accounts established pursuant to any applicable
Bond Resolution.
18
(3) Operating Fund, including a Working Capital Account
therein.
(b) Operating Budget.
(1) The IPG shall adopt in each Operating Year (and revise as
necessary or prudent during such Operating Year), in accordance with
its rules, an Operating Budget of Annual Project Costs for that
Operating Year, which budget shall be in an amount estimated by the IPG
to be sufficient to pay all Annual Project Costs. Such budget of Annual
Project Costs shall be composed of separate budgets for each Segment of
the Project, and shall be broken down into categories approved by the
IPG. No less than 120 days prior to the beginning of each Operating
Year the O&M Managers for each Segment shall prepare and submit to the
IPG an annual budget of costs, which budget (or a revised budget) the
IPG shall approve or disapprove no later than sixty (60) days prior to
the beginning of said Operating Year, provided, that the annual budget
shall include costs attributable to overhead or administrative and
general costs of the O&M Manager, any Participant, or any agency or
political subdivision of the State only to the extent that said costs
are approved by the IPG before they are incurred, are reasonably
incurred for labor directly employed by that O&M Manager in performance
of its duties under the O&M Agreement, and would not have been incurred
but for the activities undertaken as O&M Manager.
(2) In accordance with rules established by the IPG, the
Participants shall establish for each Operating Year the estimated
Annual Payment Obligation of each Participant, together with a schedule
for each Participant of payments that such Participant shall be
required to make during the Operating Year pursuant to Section 10(d) of
this Agreement, which payment schedule shall be (i) designed to recover
such estimated Annual Payment Obligation from that Participant during
the Operating Year, and (ii) revised during such Operating Year to
reflect any revisions to the Operating Budget. After the conclusion of
each Operating Year, the IPG shall determine the actual Annual Project
Costs for that Project Year, the actual Annual Payment Obligation of
each Participant for that Operating Year, and the amount of any
additional payment required from (or the amount of any refund to be
returned to) each Participant to ensure that the total of all payments
received from each Participant for each Operating Year is equal to that
Participant's Annual Payment Obligation for that Operating Year. Said
payment or refund shall be made in periodic installments as an
adjustment to the Participants' billing statement over the next
succeeding Operating Year, unless otherwise determined by the IPG.
(c) Expenditure of Project Funds.
(1) The Participants shall exercise overall control over the
disbursement of funds to pay Annual Project Costs through the IPG,
which shall act in accordance with its rules, the Operation and
Maintenance Agreement, and any applicable Bond Resolution. The
Participants shall exercise their powers as members of the IPG to
consider and-either approve or disapprove (i) any activities related to
managing the Project that are required by the IPG to be approved prior
to commencing said activities, (ii) any payments or reimbursements to
the O&M Manager for costs incurred and expenditures made that are not
19
in accordance with the approved operating budget, and (iii) any changes
to the operating budget, as provided for in Section 6.
(2) Payments and reimbursements for Annual Project Costs shall
be made only for costs incurred and expenditures made pursuant to the
approved annual budget or otherwise as approved by the IPG.
Documentation required to make draws against the Operating Fund shall
be provided in the manner determined by the IPG in accordance with the
O&M Agreement, and shall be evidenced by a certification executed by
the Chairman or Treasurer of the IPG, or otherwise as the IPG may by
rule determine.
(3) The Participants, through the IPG, shall also consider and
act upon such modifications and amendments to the budget as are
proposed by the O&M Manager or on the initiative of any Participant.
Any revisions to the operating budget shall be made in accordance with
Section 9(b)(2) of this Agreement.
(d) Recovery of Annual Project Costs.
(1) Each Participant agrees and is hereby obligated to pay all
Annual Payment Obligations, Energy Charges and Assessments for the
appropriate Project Segment, as set forth in this Section 10(d). To the
extent provided in the Bond Resolution, if any, each Participant shall
make said payment whether or not the Project is completed or its
operation is terminated, interrupted or suspended in whole or in part.
A Participant's Annual Payment Obligation for each Project Segment
equals the actual Annual Project Costs for that Segment, less the total
amount of actual Energy Charges incurred by all Participants during
each Project Year for that Segment, and less any revenues received
during said Project Year that are allocable to said Segment, multiplied
by the Participant's Percentage Share in that Segment. Such Annual
Payment Obligation is exclusive of any Assessments for that Segment
duly adopted by the Participants acting through the IPG.
(2) "Annual Project Costs" for each Project Segment means
costs and expenses of every type, except as provided in subsection (3)
of this Section 10(d), resulting from the ownership, operation and
maintenance of that Segment, that are incurred or paid by the
Participants, acting through the IPG, during each Project Year in
connection with that segment, including but not limited to the
following:
(A) Operation and maintenance costs relating to the
Project ("O&M");
(B) Other costs, reimbursements or compensation as
may be allowed under any O&M Agreement;
(C) Insurance, as determined by the IPG in accordance
with Section 6 of this Agreement;
(D) Amounts required to be set aside by the
Participants for the payment of debt service, or for any
reserve or contingency fluid, by any Bond Resolution;
20
(E) Professional services, including accountants and
auditors, insurance consultants, attorneys, engineers,
arbitration or alternative dispute resolution professionals;
(F) Costs of the IPG, but only to the extent approved
by the IPG prior to being incurred; and
(G) Other necessary and appropriate costs, but only
to the extent approved by the IPG.
(3) "Annual Project Costs" shall exclude:
(A) Design and Construction costs financed under
Section 8 of this Agreement (but not the costs of debt service
and related expenses associated with such financing);
(B) Renewals and replacements funded by insurance
proceeds or by Assessment or any specially-dedicated funds or
accounts.
(4) From and after the Date of Commercial Operation of each
Segment, each Participant shall make payment, in a manner to be
provided by IPG resolution, for that individual Participant's Energy
Charge amounts.
(A) "Energy Charge" means
(i) for the Anchorage-Kenai segment of the
Project, a 1.5 mill/kwh charge for all energy
generated by the Bradley Lake Hydroelectric Project,
to be paid by each Participant for its Bradley Lake
energy (including, in the case of AEG&T, for the
Bradley Lake energy of HEA and MEA); and
(ii) for the Healy-Fairbanks segment of the
Project, a 1.5 mill/kwh charge for energy generated
by the Bradley Lake Hydroelectric Project for receipt
by utilities in Fairbanks, and an additional 1.5
mill/kwh charge to be paid by the receiving utility
for 60 percent of the non-Bradley Lake energy
transmitted on the existing GVEA transmission line
and the Healy-Fairbanks segment of the Project, in
each case net of losses.
(B) The IPG may provide by resolution for
the Participants to pay Energy Charges in advance, in
which case the IPG Treasurer shall estimate each
Participant's Energy Charges for the upcoming
Operating Year. The Treasurer may rely on historical
data, energy transfer forecasts, or other relevant
information in preparing such estimates.
(C) The IPG shall establish procedures for
collecting information regarding each Participant's
Energy Charges due, and the manner of their payment.
21
(5) Prior to the beginning of each Project Year, the
Treasurer of the IPG shall prepare and mail to each
Participant a pro forma statement showing a detailed estimate
of the Annual Project Costs, a detailed estimate of the
Participant's Annual Payment Obligation, and the amount of
equal payments to be made by the Participant in the upcoming
Project Year. Said statement may be in lieu of the issuance of
periodic bills to each Participant.
(6) The IPG shall adopt all other procedures for
billing and collection, including accounting for extraordinary
receipts.
(e) Assessments.
(1) The Participants agree to fund by Assessment amounts that
the Participants determine are needed to pay for the prevention or
correction of any major loss or damage, and for major replacements or
renewals, to keep each Project Segment in good operating condition to
the extent that such costs are not covered by insurance or by borrowed
money, the debt service of which is included in Annual Project Costs.
"Assessment" means the Participants' duly-approved obligation to pay
the total amount, according to each Participant's Share and any agreed
schedule, of any such contingency.
(2) When a Construction Manager, O&M Manager, or Participant
requests an Assessment for any contingency or renewal and replacement,
the IPG shall consider such request at its next regular or special
meeting. The IPG may, in its discretion, continue consideration of such
request to future meetings. The IPG shall approve an Assessment
pursuant to the procedures established in Section 6 of this Agreement.
Section 11. USE OF PROJECT CAPACITY
(a) Use Of Protect Capacity When No Transmission Capacity Constraint
Exists. At all times after the Date of Commercial Operation of each Project
Segment when (1) that Segment's facilities and any parallel utility-owned
transmission facilities are both in normal operation, and (2) the total combined
transfer capabilities of those facilities are sufficient to allow all desired
transmission by all Participants to take place simultaneously between,
respectively, Healy and Fairbanks, and Anchorage and the Kenai Peninsula (i.e.,
at all times when parallel facilities are in operation and no transmission
capacity constraint exists), then no distinction will be made between power
transmitted over the facilities of that Project Segment and power transmitted
over the parallel utility-owned transmission facilities, and, instead, all such
power shall be deemed to move over the facilities of the Project Segment.
Transmission access to/from the facilities of the Project Segment over the
facilities of any Participant shall be in accordance with the applicable terms
and conditions set forth in Section 5(d).
(b) Operation For Stability. If, on either Segment, the Project
facilities and the parallel utility-owned transmission facilities are both in
operation, then the combined total transfer capability or operating limit of the
parallel transmission facilities will be the stability-limited amount, not the
thermal limit of those facilities, as reasonably established through agreement
22
between the IPG and the owner of the parallel utility-owned facilities. If, on
either Segment, either the Project facilities or the parallel utility-owned
transmission facilities are not in operation, then the operating limit of the
remaining facilities shall be that which is reasonably established, as the case
may be, by the IPG for the relevant Project Segment, or by the owner of the
parallel utility-owned transmission facilities, under the circumstances as they
exist at that time.
(c) Fixed Capacity Shares When Capacity Is Or May Be Constrained.
(1) If either Project Segment is in operation but the parallel
utility-owned transmission facilities are not, then each Participant
shall be entitled to its Participant's Share of the transfer capability
of the facilities of that Project Segment, as established by the IPG.
(2) If the parallel utility-owned transmission facilities are
in operation but the facilities of the Project Segment are not, then
the owner of the parallel utility-owned transmission facilities will
provide wheeling and related services to the other Participants under
the applicable terms and conditions set forth in Section 5(d).
(3) If the Project facilities and the parallel utility-owned
transmission facilities are both in operation, but for either Segment
their total combined transfer capabilities are not sufficient to allow
all desired transmission by all Participants to take place
simultaneously (i.e., if Project and parallel facilities are both in
operation but a transmission capacity constraint exists), then so long
as such constraint exists the available transmission capacity shall be
allocated between the applicable Project facilities and the parallel
utility-owned facilities by one of the following methods:
(A) The IPG and the owner of the parallel
utility-owned facilities may by agreement establish any
reasonable allocation of such capacity, or
(B) The parallel utility-owned facilities shall be
deemed to have the transfer capability that they would have if
operated alone, less some amount reasonably adopted by the IPG
to reflect the reliability/stability benefits such facilities
receive from the existence of the parallel Project facilities.
The remainder of the total combined transfer capability shall
be deemed to be that of the Project facilities, and shall be
available to each Participant in accordance with its
Participant's Share.
(d) No Duty To Transmit Power For Ultimate Consumers. The Project
represents a bulk power transmission facility whose benefits are made possible
by the agreement of the Participants to assume responsibility for various costs
on behalf of their respective customers collectively. The Project is not a
common carrier. No Party has assumed any duty to use its Participant's Share of
Project capacity to transmit power for individual users/consumers or for
non-utility generators.
Section 12. MISCELLANEOUS PROVISIONS
(a) Waiver Not Continuing. Any waiver at any time by any Party to this
Agreement of its rights with respect to any default of another Party, or with
23
respect to any other matter arising in connection with this Agreement, shall not
be considered a waiver with respect to any prior or subsequent default, right or
matter.
(b) Applicable Law. The laws of the State of Alaska (including without
limitation the equal opportunity laws set forth in AS 18.80.220, as the same may
be amended from time to time) shall govern the interpretation and application of
this Agreement and the actions of the parties hereunder.
(c) Section Headings. The Section headings in this Agreement are for
convenience only, and do not purport to and shall not be deemed to define, limit
or extend the scope or intent of the section to which they pertain.
(d) No Third Party Beneficiaries. In promising performance to one
another under this Agreement, the Parties intend to create binding legal
obligations to and rights of enforcement in (a) one another, and (b) such
assignees or successors in interest of the Parties as may enjoy a right to
enforce this Agreement by virtue of provisions of this Agreement that expressly
create such a right in such assignees or successors in interest. By entering
into this Agreement, the Parties expressly do not intend to create any
obligation or liability, or promise any performance to, any third party, nor
have the Parties created for any third party any right to enforce this
Agreement.
(e) Execution In Counterparts. This agreement may be executed in any
number of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute one
agreement.
(f) Severability; Effect Of Partial Invalidity. If after this Agreement
has become effective any article, paragraph, clause or provision of this
Agreement shall be finally adjudicated by a court of competent jurisdiction or a
regulatory agency with jurisdiction over the parties to be invalid or
unenforceable, or if any administrative agency with authority over the parties
shall require changes to this Agreement, then the parties shall in good faith
meet promptly to negotiate lawful amendments or modifications to this Agreement
that will effectuate the original intent of this Agreement and return the
parties as nearly as possible to the position that each would have enjoyed in
the absence of such judicial, regulatory, or administrative action.
(g) Notices & Computation Of Time. Any notice required by this
Agreement to be given to any Party shall be effective when it is received by
such Party, and in computing any period of time from such notice, such period
shall commence at 12:01 p.m. prevailing time at the place of receipt on the date
of receipt of such notice. Whenever this Agreement calls for notice to or
notification by any Party the same (unless otherwise specifically provided)
shall be in writing and directed to the General Manager of the Party notified.
If the date for making any payment or performing any act is a day on which
banking institutions are closed in the place where payment is to be made or a
legal holiday, payment may be made or the act performed on the next succeeding
day which is neither a legal holiday nor a day when banking institutions are
closed in such place.
(h) Inspection Of Facilities. For purposes of this Agreement, each
Party may, but shall not be obligated to, inspect any other Party's facilities
relating to the Project at any time upon reasonable notice, but such inspection
24
or failure to inspect shall not render the inspecting party, its officers,
agents or employees, liable or responsible for any injury, loss, damage, or
accident resulting from defects in such electric installation, or for violation
of this Agreement.
(i) Remedies Cumulative. No remedy conferred upon or reserved to the
Parties hereto is intended to be exclusive of any other remedy or remedies
available hereunder or now or hereafter existing at law, in equity, by statute
or otherwise, but each and every such remedy shall be cumulative and shall be in
addition to every other such remedy.
(j) Covenant of good faith and fair dealing. In order to permit this
Agreement, throughout its term, to be fully effective in accordance with the
original intent of the Parties, each Party agrees that it shall at all times act
in good faith and with fair dealing in performing its obligations and in
exercising its rights under this Agreement.
(k) Exhibits Incorporated By Reference. The exhibits attached to this
Agreement shall be incorporated by reference into this Agreement if the
provisions of this Agreement identifying such exhibits so specify, but otherwise
shall be attached for convenience only.
(l) Successors & Assigns. Subject to Section 4(b)(6) governing
assignment for security purposes, this Agreement and all of the terms and
provisions hereof shall be binding upon and inure to the benefit of the
respective successors and assignees of the Parties.
(m) Performance Pending Resolution Of Disputes. Pending resolution of
any dispute, each Party shall continue to perform its obligations under this
Agreement, including but not limited to the obligation to make the payments
required by this Agreement. All Parties shall be entitled to seek immediate
judicial enforcement of this continued performance obligation notwithstanding
the existence of a dispute. Application for such enforcement shall be made to
the Superior Court for the State of Alaska, at Anchorage.
(n) Force Maieure. In the event any Party, by reason of an
Uncontrollable Force, is rendered unable, wholly or in part, to perform its
obligations under the Agreement (other than its obligations to pay money), then
upon said Party giving notice and particulars of such Uncontrollable Force, its
obligation to perform shall be suspended or correspondingly reduced during the
continuance of any inability so caused, but in no greater amount than required
by the Uncontrollable Force and for no longer period, and the effects of such
cause shall, so far as possible, be remedied with all reasonable and prompt
dispatch. The affected Party shall not be responsible for its delay in
performance under this Agreement during delays caused by the Uncontrollable
Force.
(o) Other Agreements. Except as otherwise expressly provided herein,
this Agreement does not modify, alter, or amend any other contract or agreement
that may exist between or among any of the Parties.
(p) Amendment Of Agreement. This Agreement may be amended, extended, or
terminated at any time by the written consent of all Parties, but no such
amendment, extension, or termination shall be effective unless approved by the
federal and state agencies (if any) whose approval is required at the time.
25
(q) Records. The Parties shall make available to each other, for
inspection and copying during business hours, all books, records, plans and
other information relating to the Project; including but not limited to
information relating to its cost, construction and operation, and any
calculation or determination made pursuant to this agreement. In addition to
meter records, the Parties shall keep log sheets and other records as may be
needed for the purposes of this Agreement. In keeping books of account, each
Party will, to the extent that different rules are not prescribed by this
Agreement or by federal and state laws or agencies, follow the system of
accounts prescribed for public utilities and licensees by the Federal Energy
Regulatory Commission, except that as long as a Party is a borrower from REA
then it shall follow the system of accounts prescribed by REA for its electric
borrowers.
(r) Obligations Several. Notwithstanding any Party's failure to perform
its obligations under this Agreement, or any IPG action or inaction under this
Agreement, each Party's obligation to perform as called for by this Agreement,
including the obligation to make payments under the terms of this Agreement,
shall be absolute and unimpaired. Except where specifically stated in the
Agreement to be otherwise, the duties, obligations and liabilities of the
parties are intended to be several and not joint or collective. Nothing
contained in this Agreement shall ever by construed to create an association,
trust, partnership or joint venture or to impose a trust or partnership duty,
obligation or liability on or with regard to any party. Each party shall be
individually and severally liable for its own obligations under this Agreement.
(s) Mutual Covenants & Warranties.
(1) Retail rate approval. Each Party will affirmatively and
promptly pursue all administrative and judicial remedies necessary to
secure Commission approval of retail rates required to meet the terms
of this Agreement where Commission approval is required.
(2) Compliance with law. Each Party will take all necessary
steps to comply with applicable federal and state laws and regulations,
licenses and permits relating to the use and operation of the Party's
System.
(3) Licenses and permits. The Parties will take all necessary
steps within their control to comply with applicable federal and state
laws and regulations, and to obtain and thereafter comply with all
applicable licenses and permits relating to the construction, use and
operation of the Project.
(4) Sales and mergers. No Party shall abandon, sell, mortgage,
lease or otherwise dispose of a substantial portion of the Party's
system (including by sale to or merger with any other utility), unless
such disposal is evaluated by a consultant approved by the IPG and that
consultant certifies that taking into account the other obligations of
the Party that Party will have (a) substantially the same or greater
ability to produce sufficient revenues to meet its payment obligations
as would the Party absent the transaction, and (b) the ability to
perform all obligations under this Agreement.
(t) Indemnification. To the extent permitted by applicable law, each
Party shall protect, indemnify, defend and hold harmless every other Party, its
26
officers, directors, employees, agents, attorneys, contractors, subcontractors,
and successors and. assigns from and against any and all liabilities, damages,
claims, demands, judgments, losses, harm, costs, expenses, suits or actions,
including but not limited to appeals and reasonable attorneys' fees, to the
extent caused by the negligent or wrongful acts or omissions of the indemnifying
Party, its officers, directors, employees, agents, attorneys, contractors,
subcontractors, and successors and assigns arising out of or as a result of this
Agreement or the performance of any obligations hereunder, provided. that the
indemnification set forth in this Section is subject to Section 7(i) and shall
not require the Construction Manager to indemnify other Parties in any manner
inconsistent with Section 7(i).
(u) Guarantees by Additional Parties. If AEG&T at any time fails to
meet any of its obligations under this Agreement, then to the extent of such
failure by AEG&T and for so long as such failure continues, HEA and MEA shall
each be obligated to meet directly its respective Share of AEG&Ts payment
obligation and every other obligation in the same manner as if HEA and MEA were
individual Participants obligated to make payments and perform other obligations
in accordance with this Agreement. All rights and remedies available to the
other Parties against AEG&T shall also be available to the other Parties against
HEA and/or MBA, as applicable. For purposes of this Section 12(u), HEA's Share
and MEA's Share of Project capacity shall be as set forth in Section 4(a), as
modified by Section 4(b).
(v) Relationship To The Transmission Services Agreement. The
Transmission Services Agreement (attached as Exhibit E to this Agreement for
reference only) shall not be terminated by this Agreement, but from and after:
(1) January 1, 1997, any Party may elect to pay Chugach for
wheeling services the applicable Chugach wheeling rate as approved by
the Commission pursuant to Section 5(d) and Exhibit D(1) of this
Agreement, in lieu of paying the applicable Chugach wheeling rate
computed in accordance with the Transmission Services Agreement; and
(2) the Effective Date, the provisions of the Transmission
Services Agreement requiring Chugach to provide free Bradley Lake
energy storage services in Chugach's Cooper Lake reservoir will no
longer apply.
(w) Consideration Of Other Benefits Facilitated By The Project. In
order to ensure that all potentially beneficial uses of the Project are
appropriately investigated, the Parties agree that, promptly after this
Agreement becomes effective, they will begin to meet periodically in order to
discuss and explore in good faith potential mutually agreeable opportunities to
reduce the costs of providing electric power service to their respective
consumers through power pooling, transmission pooling, reserve sharing,
exchanges, economic dispatch, hydrothermal coordination, maintenance of
competitive economy energy markets, and other arrangements.
Section 13. DEFINITIONS.
The following terms shall, for purposes of this Agreement, have the
meaning specified.
(a) "Additional Costs" shall have the same meaning given to it in
Section 8(b) of this Agreement.
27
(b) "Additional Parties" shall have the same meaning given to it in
Section 1 of this Agreement.
(c) "Agreement" means this 1993 Alaska Intertie Project Participants
Agreement, also referred to herein as Participants Agreement.
(d) "Annual Debt Service" means the amount payable by a Participant in
or for a Project Year pursuant to the Bond Resolution.
(e) "Annual Payment Obligation" shall have the same meaning given to it
in Section 10(d)(1) of this Agreement.
(f) "Annual Project Cost" shall have the same meaning given to it in
Section 10(d)(2) of this Agreement.
(g) "Assessment" shall have the same meaning given to it in Section
10(e)(1) of this Agreement.
(h) "Bond Resolution" means a resolution, ordinance, indenture, or
similar instrument, approved by all of the Parties, pursuant to which bonds,
notes or other evidences of indebtedness (including refunding bonds), are
issued, the proceeds of which are used to pay or reimburse Additional Costs,
pursuant to a collective financing arrangement entered into by all Parties under
Section 8(b).
(i) "Construction Agreement" means an agreement entered into pursuant
to Section 7(k) between the Construction Manager of a Project Segment and the
Participants acting through the IPG setting forth the rights and obligations of
the Construction Manager and of the IPG and its Members and such details
regarding the design and construction of that Project Segment as the
Construction Manager and the IPG determine to be necessary.
(j) "Construction Budget" means the annual budget for Design and
Construction Costs for a Project Segment as adopted or in effect for a
particular Construction Year, and amended or supplemented from time to time as
provided for in this Agreement.
(k) "Construction Manager" means the Participant that, for the benefit
of all of the Participants, manages or carries out the design and construction
of either Segment of the Project. As provided in Section 7(a) of this Agreement,
Golden Valley Electric Association, Inc. shall be the Construction Manager of
the Healy-Fairbanks Segment and Chugach Electric Association, Inc. shall be the
Construction Manager of the Anchorage-Kenai Peninsula Segment (unless and until
either is replaced by another Participant by action of the IPG pursuant to
Section 7(j)), and may be referred to collectively herein as Construction
Managers.
(i) "Construction Schedule" means a projection of significant design
and construction milestones marking progress from the Effective Date of this
28
Agreement to the projected Date of Commercial Operation of a Project Segment, to
be prepared by the Construction Manager for that Segment.
(m) "Construction Year" means a Project Year during which a Project
Segment is being designed or is under construction. The first Construction Year
starts on the Effective Date of this Agreement and corresponds to the first
Project Year. The last Construction Year for a Project Segment shall be that
portion of the twelve-month period between the last full (i.e. twelve month)
Project Year and the Date of Commercial Operation. The Construction Year for
both Project Segments shall run concurrently, except that the conclusion of the
last Construction Year for one of the Project Segments (when it reaches its Date
of Commercial Operation) shall not affect the calculation of Construction Years
for the other Project Segment, which shall continue until that segment reaches
its Date of Commercial Operation.
(n) "Date of Commercial Operation" means the date on which a
Construction Manager reasonably declares that a Segment of the Project is fully
available to be operated on a commercial basis and in accordance with this
Agreement.
(o) "Design and Construction Costs" means all capital costs of the
Project, including but not limited to planning, permitting, design, acquisition
of real property interests, construction, equipment, testing, and insurance
costs, but not administrative and general costs of any Participant, State
agency, political subdivision, or Construction Manager, except pursuant to
Section 7(c), unless such costs are expressly approved by the IPG prior to being
incurred.
(p) "Effective Date" shall have the same meaning given to it in Section
2(a) of this Agreement.
(q) "Energy Charge" shall have the same meaning given to it in Section
10(d)(4).
(r) "Expiration Date" shall have the same meaning given to it in
Section 2(b) of this Agreement.
(s) "Grant Account" means the Healy-Fairbanks Intertie Account or the
Anchorage-Kenai Intertie Account, or both, as established by Section 2.02 of the
Grant Administration Agreement.
(t) "Grant Administration Agreement" means the agreement dated _______
among the Alaska Industrial Development and Export Authority and the Parties to
this Agreement setting forth the terms and conditions governing the
administration of Grant Accounts.
(u) "Grant Funds" means the $43,200,000 appropriated by Section 1 of
ch. 19, SLA 1993, for payment as a grant under AS 37.05.316 for construction of
the Healy-Fairbanks Segment and the $46,800,000 appropriated by Section 2 of ch.
19, SLA 1993, for payment as a grant under AS 37.05.316 for construction of the
Anchorage-Kenai Peninsula Segment.
(v) "Intertie Grant Agreement" means the agreement dated October 26,
1993 among the Parties to this Agreement, the Alaska Industrial Development and
29
Export Authority and the State of Alaska, Department of Administration (DOA)
satisfying the statutory conditions precedent to DOA's transfer of the Grant
Funds and providing for DOA's transfer of such Grant Funds.
(w) "IPG" is an abbreviation for "lntertie Participants Group" and
means the Participants and Additional Parties acting collectively as set forth
hi this Agreement. As provided elsewhere in this agreement, AEG&T, while a
Participant, is not a Member of the IPG. The Additional Parties to this
Agreement, HEA and MEA, collectively constitute AEG&T and are individually
Members of the IPG.
(x) "Member" means a member of the IPG. The members of the IPG are
identified in Section 6(b).
(y) "Operating Budget" means the budget for Annual Project Costs as
adopted or in effect for a particular Operating Year, and amended or
supplemented from time to time as provided for in this Agreement.
(z) "Operating Fund" means a fund established pursuant to Section 10(a)
of this Agreement, consisting of Annual Payment Obligations, Energy Charges,
Assessments, insurance proceeds and other revenues available to pay Annual
Project Costs.
(aa) "Operating Year" means that Project Year, and is a period used for
computation of Annual Project Costs for a Project Segment or both Segments and
preparation of annual budgets for recovery of the same pursuant to Section 10 of
this Agreement. The initial Operating Year for each Segment shall start on the
Date of Commercial Operation of that Segment and continue through and include
the last day of that Project Year. Subsequently, the Operating Year for that
Segment shall be the Project Year.
(bb) "Operation & Maintenance Agreement" may also be referred to herein
as O&M Agreement and means an agreement pursuant to Section 9(a) between the O&M
Manager of the Project or a Project Segment and the Participants acting through
the IPG detailing the rights and obligations of the O&M Manager and of the IPG
and its members with regard to the operation and maintenance of the Project or
relevant Project Segment.
(cc) "Operation & Maintenance Manager" may also be referred to herein
as O&M Manager and means the Participant selected by the IPG pursuant to Section
9(a) of this Agreement to be responsible for the operation and maintenance of
the Project or a Project Segment, for the benefit of all of the Participants.
The O&M Manager may exercise this responsibility by conducting operation and
maintenance activities with its own personnel, or by supervising a contractor
selected by the O&M Manager expressly for the purpose of conducting such
activities.
(dd) "Optional Project Work" means project repairs, renewals and
replacements, improvements, betterments, additions, or expansions that do not
constitute Required Project Work.
(ee) "Participants" shall have the same meaning given to it in Section
1 of this Agreement.
30
(ff) "Participant's Share" means the percentage interest a Participant
holds in the Project or a Project Segment under the terms of this Agreement. A
Participant's Share is used to calculate its Annual Payment Obligation,
including its share of Annual Project Costs, and to determine its share of
Assessments, Additional Costs, or Annual Debt Service, and includes a
Participant's Energy Charges.
(gg) "Project" means the Intertie Project to be designed, constructed,
operated and maintained pursuant to this Agreement, which shall consist of two
Segments; the Healy-Fairbanks Segment defined by Section 3(a) of this Agreement
and the Anchorage-Kenai Peninsula Segment defined by Section 3(b) of this
Agreement, which may also be referred to individually herein as a Project
Segment.
(hh) "Project Year" means that calendar year unless and until the IPG
converts the calculation of the Project Year to a fiscal year consisting of a
twelve-month period starting on such date as the IPG shall select. The initial
Project Year for purposes of this Agreement shall start on the Effective Date of
this Agreement and continue through and include December 31, 1994. When and if
calculation of the Project Year is converted to a fiscal year, the IPG shall
provide for a transition from calendar year to fiscal year by shortening or
lengthening the first Project Year calculated on a fiscal basis. The last
Project Year for purposes of this Agreement shall be that portion of the
twelve-month period between the end of the last full (i.e. twelve month) Project
Year and the expiration of this Agreement. For each Project Segment, those
Project Years, or portions thereof: prior to the Date of Commercial Operation
are designated Construction Years (see the definition of Construction Years,
above) and those Project Years, or portions thereof: following the Date of
Commercial Operation axe designated Operating Years (see the definition of
Operating Years, above).
(ii) "Prudent Utility Practice" means at a particular time any of the
practices, methods and acts engaged in or approved by a significant portion of
the electric utility industry at such time, or which, in the exercise of
reasonable judgment in light of facts known at such time, could have been
expected to accomplish the desired results at the lowest reasonable cost
consistent with good business practices, reliability, safety and reasonable
expedition. Prudent Utility Practice is not required to be the optimum practice,
method or act to the exclusion of all others, but rather to be a spectrum of
possible practices, methods or acts which could have been expected to accomplish
the desired result at the lowest reasonable cost consistent with reliability,
safety and expedition. Prudent Utility Practice includes due regard for
manufacturer's warranties and the requirements of governmental agencies of
competent jurisdiction and shall apply not only to functional parts of the
Project, but also to appropriate structures, landscaping, painting, signs,
lighting and other facilities.
(jj) "Required Project Work" means repairs, maintenance, renewals,
replacements, improvements, or betterments required by federal or state law, a
licensing or regulatory agency with jurisdiction over the Project, or this
Agreement, or otherwise necessary to keep the Project in good and efficient
operating condition, consistent with (1) sound economics for the Project and (2)
Prudent Utility Practice.
31
(kk) "Segment" means either of the two electric power transmission
lines and associated facilities constituting the Project to be designed,
constructed, operated and maintained under the terms of this Agreement
(ll) "Uncontrollable Force" means any cause beyond the control of a
Party hereto and which by the exercise of due diligence that Party is unable to
prevent or overcome, including but not limited to an act of God, fire, flood,
volcano, earthquake, explosion, sabotage, and act of the public enemy, civil or
military authority, including court orders, injunctions and orders of
governmental agencies of competent jurisdiction,, insurrection or riot, an act
of the elements, failure of equipment, or the inability to obtain or ship
equipment or materials because of the effect of similar causes on carriers or
shippers. Strikes, lockouts, and other labor disturbances shall be considered
Uncontrollable Forces, and nothing in this Agreement shall require any Party to
settle a labor dispute against its best judgment; provided, that during any
labor dispute all Parties shall make all reasonable efforts under the
circumstances, including, to the extent permitted by law, the use of replacement
personnel and or management personnel and/or other personnel under the
provisions of a mutual aid agreement, to ensure, if possible the continued
ability of the Parties to carry out their obligations under this Agreement.
(mm) "Working Capital Account" means an account within the Operating
Fund which is to be managed so that finds from that account are available to
meet reasonable current expenses and contingencies as they arise in the course
of the design, construction, operation and maintenance of the Project.
Section 14. DEFAULTS AND REMEDIES.
(a) Each of the following shall constitute an Event of Default:
(1) A material breach in performance of this Agreement by a
Party, which breach has continued for a period in excess of sixty (60)
days after the defaulting Participant has been notified in writing that
such breach will, unless corrected within such 60-day period,
constitute an Event of Default; such material breaches shall include,
but not be limited to, the failure to make any payments required by
this Agreement, including but not limited to Annual Payment Obligation,
Energy Charges, Assessments, and Additional Costs;
(2) A continual or repeated failure or refusal by a Party to
perform, substantially in accordance with this Agreement, all or any of
its obligations under this Agreement, thereby materially impairing the
value of this Agreement to the other Parties, which failure or refusal
recurs after the breaching Party has been notified in writing that such
breach will, if repeated, constitute an Event of Default;
(3) A filing by a Party to seek protection under any
applicable bankruptcy, reorganization, insolvency, dissolution or
liquidation law, which filing has not been dismissed within 90 days;
(4) Default under the Bond Resolution or separate financing
instrument used by a Participant to finance all or part of its
obligation under this Agreement.
32
(b) Upon the occurrence of any Event of Default by a Party, any other
Party may exercise any remedy or combination of available remedies, including
but not limited to the following:
(1) Termination of this Agreement with respect to that
defaulting Party, provided however that said termination shall not be
effective to increase the Annual Payment Obligations or Assessments of
non-defaulting Parties unless termination is first approved in writing
by all Members whose Annual Payment Obligations or Assessments would be
increased as a consequence of said termination;
(2) Suspension or expulsion of the defaulting Party from the
IPG and loss of the defaulting Party's right to use the Project;
(3) An action to recover compensatory or other damages
provided by law, or to seek specific performance of any and all
obligations required under this Agreement.
(c) The remedies provided herein for Events of Default are not
exclusive and the Parties retain all rights of action that exist at law and in
equity, or pursuant to this Agreement, to remedy any breach, irrespective of
whether said breach constitutes an Event of Default or results in termination of
the Agreement.
33
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed the day and year first above written.
ALASKA ELECTRIC GENERATION & TRANSMISSION COOPERATIVE, INC.
By /s/
------------------------------
As Executive Manager
------------------------------
The MUNICIPALITY OF ANCHORAGE d/b/a/ MUNICIPAL LIGHT & POWER
By /s/
------------------------------
As Mayor
------------------------------
CHUGACH ELECTRIC ASSOCIATION, INC.
By /s/
------------------------------
As General Manager
------------------------------
The MUNICIPALITY OF FAIRBANKS d/b/a SYSTEM FAIRBANKS MUNICIPAL UTILITIES
By /s/
------------------------------
As Deputy City Manager-Utilities
------------------------------
GOLDEN VALLEY ELECTRIC ASSOCIATION, INC.
By /s/
------------------------------
As General Manager
------------------------------
34
The CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM
By /s/
------------------------------
As Manager, Engineering & Utilities
------------------------------
HOMER ELECTRIC ASSOCIATION, INC.
By /s/
------------------------------
As General Manager
------------------------------
MATANUSKA ELECTRIC ASSOCIATION, INC.
By /s/
-----------------------------
As General Manager
------------------------------
35
EXHIBIT D(1)
INITIAL CHUGACH WHEELING RATES & RELATED MATTERS
The following rates, terms, and conditions shall apply pursuant to
Section 5(d)(2) for use of Chugach's facilities under Section 5(d)(1):
1. Effective date and term. The wheeling rates and related, terms and
conditions described herein shall become effective on January 1, 1997 and shall
remain in effect for fifteen (15) years, i.e., through December 31, 2011.
2. Applicability.
(a) The rates and related terms and conditions described herein will
apply to electric power transmitted to or from the Anchorage-Kenai Peninsula
Segment (i) by Participants in, or Additional Parties who are participating
through a Participant in, that Segment, and (ii) from generators already
existing as of December 1, 1993.
(b) If for any reason the Segment is not completed but is instead
terminated/ abandoned by the Participants, then the rates and related terms and
conditions described herein will apply under the Transmission Services
Agreement, during the term described in Paragraph 1 of this Exhibit D(1), to
electric power that is:
(i) the power of a Wheeling Utility (as defined in the
Transmission Services Agreement) that is also a Participant in the
Healy-Fairbanks Segment of the Project at the time;
(ii) generated either:
(A) by the Bradley Lake Hydroelectric Project, or,
(B) by the Soldotna No. 1 generating unit, if and to
the extent that power generated by such unit is eligible to
receive wheeling services under the terms and conditions set
forth in Section 8(f) of the Transmission Services Agreement;
and
(iii) transmitted from the Soldotna Substation to that
Wheeling Utility's Delivery Point, as the latter is defined in the
Transmission Services Agreement.
(c) For wheeling services not within the scope of Paragraphs 2(a) or
2(b) of this Exhibit D(1) and not within the scope of the Transmission Services
Agreement, Chugach will prepare (on request and/or periodically) and will submit
to the Commission for review and approval, nondiscriminatory and just and
reasonable (i) wheeling rates, and (ii) terms and conditions governing such
wheeling services. Such rates, terms, and conditions may be revised from time to
time.
36
3. Basic wheeling rate. In each year, the basic wheeling rate, "R,"
will be computed in accordance with the formula set forth in Appendix A of the
Transmission Services Agreement, with the exception that the value of "K" in
such formula shall be established at "0.50" in each year.
4. Cost review and control.
(a) Standard. After the effective date, the costs of any new
transmission investment by Chugach shall be added to the costs used to compute
the wheeling rate only if and to the extent that such transmission investment
supports Chugach's bulk power network transmission system, and not Chugach's
retail distribution system. If any investment supports both such systems, then
the costs of that investment shall be allocated equitably and reasonably between
such systems for purposes of applying the foregoing standard.
(b) Procedure. Chugach will provide reasonable notice to the
Participants of the costs of any new transmission investment that Chugach
proposes to add to the costs used to compute the wheeling rate. With such
notice, Chugach will also explain in writing why the inclusion of such costs in
the wheeling rate meets the standard set forth above. On request, Chugach will
meet with the Participants to discuss these matters. If, after such meeting, any
Participant believes that including any such costs (hereinafter "disputed
costs") in the wheeling rate would violate the standard set forth above, that
Participant shall so notify Chugach and provide a written explanation for that
Participant's position. In response to any such notice and explanation, and
before Chugach makes any final decision to include any such disputed costs in
the wheeling rate, Chugach may, but shall not be obligated to, offer to engage
in further discussions with that Participant, and/or afford that Participant
additional opportunities to present its position to the Chugach staff and/or
Board, or to a joint Board or other inter-utility panel that Chugach may elect
to convene.
(c) Review. Chugach's final decision to include or not include any such
costs in the wheeling rate, if disputed, shall be submitted to the Commission
for resolution. Each Participant shall be entitled to challenge Chugach's
decision before the Commission, but only if and to the extent that such
Participant took part in the pre-filing discussions and presentations described
in Paragraph 4(b) above.
5. Rate applies during Intertie outages. "R" would apply to
transmission even at times when the Segment, having been completed, is out of
service and Chugach's parallel transmission facilities alone are available for
wheeling services.
6. Other services. Under the Transmission Services Agreement, Chugach
will continue to provide (a) assured wheeling services, for periods of up to two
weeks at a time, at a rate computed in the same manner as the basic wheeling
rate but using a value of "1.15" for the constant "K," and (b) displacement
energy purchase services for the Bradley Lake energy of Wheeling Utilities that
cannot be transmitted from the Kenai Peninsula. From and after the Effective
Date of this Agreement, Chugach will no longer continue to provide free
reservoir storage for such energy in Cooper Lake.
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7. Other terms and conditions. Such matters as the scheduling of
transmission or displacement purchase services, accounting for line losses, the
effect of offsetting flows, and other matters -dealt with in the Transmission-
Services Agreement (including Chugach's duties, limitations on such duties, and
priority use of its own facilities), as reasonably applicable to the
circumstances-of this Agreement, will continue to be governed by the
Transmission-Service Agreement.
8. Reciprocal services. Each Participant and Additional Party agrees
that, at Chugach's request, it will make wheeling services available to Chugach
over its system, subject to like conditions and limitations as those set forth
in this Exhibit D(1), at a rate no higher than the rate computed in accordance
with the following formula:
Rate = C/E x 0.5
Where "C" represents the applicable utility's annual costs of bulk power network
transmission investments, and "E" represents the firm energy and Bradley Lake
energy transmitted annually over that utility's system.
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EXHIBIT D(2)
GVEA WHEELING RATES AND RELATED MATTERS
The following rates, terms and conditions shall apply pursuant to
Section 5(d)(3):
(a) Wheeling Rate. The wheeling rate for any use of the GVEA system
shall initially be 1.5 mills/kwh for the period commencing with the Date of
Commercial Operation of the Healy-Fairbanks Segment, and shall remain in effect
at least until the third anniversary thereof. Thereafter, the rate may be
revised either by mutual agreement of GVEA and FMUS or by the Commission in a
proceeding initiated by either GVEA or FMUS.
(b) Use of Lines and Calculation of Charges. For purposes of computing
wheeling charges, GVEA and FMUS are deemed to transmit 60% of energy transmitted
from Healy to Fairbanks on the Healy-Fairbanks Segment, and 40% on the existing
GVEA transmission line. At. any time the GVEA line is inoperable, FMUS shall pay
to the IPG 1.5 mills/kwh for 100% of power transmitted. At any time the new
Healy-Fairbanks Segment is inoperable, FMUS shall pay to GVEA the then-current
rate for 100% of power transmitted. During any period in which FMUS is not
directly connected to the Wilson substation, FMUS shall be responsible for
payment of wheeling charges to GVEA for 100% of energy transmitted and to the
IPG for 60% of energy transmitted.
(c) Losses.
(1) Existing GVEA Line. FMUS losses shall be incremental on the
existing GVEA line.
(2) Healy-Fairbanks Segment. FMUS and GVEA Losses on the
Healy-Fairbanks Segment shall be computed on an average basis.
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