Exhibit 10(J)
TRANSITIONAL POWER PURCHASE AGREEMENT
BY AND BETWEEN
NEVADA POWER COMPANY
AND
PINNACLE WEST ENERGY CORPORATION
__________________________________
ASSET BUNDLE: HARRY ALLEN
TABLE OF CONTENTS
Section Page
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1. DEFINITIONS........................................................ 1
2. TERM............................................................... 8
3. SECURITY........................................................... 9
4. SUPPLY SERVICE..................................................... 10
5. NOTIFICATION....................................................... 14
6. PRICING OF ENERGY AND ANCILLARY SERVICES........................... 15
7. INVOICING AND PAYMENTS............................................. 16
8. REGULATORY APPROVALS............................................... 19
9. COMPLIANCE......................................................... 20
10. INDEMNIFICATION.................................................... 20
11. LIMITATION OF LIABILITY............................................ 22
12. FORCE MAJEURE...................................................... 22
13. DISPUTES........................................................... 24
14. NATURE OF OBLIGATIONS.............................................. 27
15. SUCCESSORS AND ASSIGNS............................................. 27
16. REPRESENTATIONS.................................................... 28
17. DEFAULT AND REMEDIES............................................... 29
18 FACILITY ADDITIONS AND MODIFICATIONS............................... 30
19. COORDINATION....................................................... 30
20. EMERGENCY AND NONEMERGENCY CONDITION RESPONSE...................... 30
21. OUTAGE SCHEDULING.................................................. 31
22. REPORTS............................................................ 32
23. COMMUNICATIONS..................................................... 32
24. NOTICES............................................................ 33
25. MERGER............................................................. 33
26. HEADINGS........................................................... 34
27. COUNTERPARTS AND INTERPRETATION.................................... 34
28. SEVERABILITY....................................................... 34
29. WAIVERS............................................................ 34
30. AMENDMENTS......................................................... 35
31. TIME IS OF THE ESSENCE............................................. 35
32. APPROVALS.......................................................... 35
33. PLR SERVICE........................................................ 36
34. CONFIDENTIALITY.................................................... 36
35. CHOICE OF LAW...................................................... 37
Exhibits Page
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EXHIBIT A ASSET BUNDLE CAPACITIES AND OPERATING PARAMETERS............. A-1
EXHIBIT B PRICE FLOOR OF ENERGY, PRICE CEILING OF ENERGY, AND PRICE
OF ANCILLARY SERVICES...................................... B-1
EXHIBIT C SUPPLIER'S MONTHLY INVOICE................................... C-1
EXHIBIT D BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS.................. D-1
EXHIBIT E YEAR END TRUE-UP INVOICE..................................... E-1
EXHIBIT F NOTICES, BILLING AND PAYMENT INSTRUCTIONS.................... F-1
EXHIBIT G FORM OF AVAILABILITY NOTICE.................................. G-1
EXHIBIT H FORM OF GUARANTEE............................................ H-1
EXHIBIT I COMPANY OBSERVED HOLIDAYS.................................... I-1
EXHIBIT J ADJUSTMENTS TO TPPA AMOUNT................................... J-1
EXHIBIT K ADJUSTMENTS TO MINIMUM ANNUAL TAKE........................... K-1
EXHIBIT L ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE..................... L-1
EXHIBIT M ASSET BUNDLE CONTRACTUAL AND OPERATIONAL CONSTRAINTS......... M-1
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TRANSITIONAL POWER PURCHASE AGREEMENT
This Agreement is made and entered into as of December 1, 2000 by and between
Nevada Power Company, a Nevada corporation ("Buyer"), and Pinnacle West Energy
Corporation, an Arizona corporation (the "Supplier"). Buyer and Supplier are
referred to individually as a "Party" and collectively as the "Parties."
WITNESSETH:
WHEREAS, Buyer is selling its Harry Allen generating station and other assets
associated therewith to Supplier or an affiliate thereof (the "Asset Sale");
WHEREAS, notwithstanding the Asset Sale, Buyer expects that it has been
designated as the Provider of Last Resort ("PLR") for its Nevada retail electric
customers who are unable to obtain electric service from an alternative seller
or who fail to select an alternative seller. The load required to serve such
customers, plus the customers under those wholesale sales agreements existing at
the Effective Date, is referred to herein as Buyer's Transitional Resource
Requirement; and
WHEREAS, as a result of the Asset Sale, Buyer will no longer have its interest
in the Harry Allen generating station as a source of supply for its Transitional
Resource Requirement; and
WHEREAS, Supplier has or is willing to secure the necessary resources to provide
a portion of Buyer's Transitional Resource Requirement; and
WHEREAS, Buyer desires to purchase from Supplier and Supplier desires to sell
Energy and Ancillary Services under contract to Buyer; and
NOW, THEREFORE, in consideration of the mutual covenants, representations and
agreements hereinafter set forth, and intending to be legally bound hereby, the
Parties agree as follows:
1. DEFINITIONS
1.1 Format.
1.1.1 References to Articles and Sections herein are cross-references
to Articles and Sections, respectively, in this Agreement,
unless otherwise stated.
1.1.2 Any parts of this Agreement which are incorporated by reference
shall have the same meaning as if set forth in full text
herein.
2
1.2 Definitions. As used in this Agreement, the following terms shall
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have the meanings set forth below:
1.2.1 "Agreement" means this Agreement together with the Exhibits
---------
attached hereto, as such may be amended from time to time.
1.2.2 "Adjusted Replacement Cost of Energy" means the Replacement
-----------------------------------
Cost of Energy that will be due from Supplier after true-up in
accordance with the provisions of Section 7.5. Example
determinations of the Adjusted Replacement Cost of Energy are
shown on Exhibit E.
1.2.3 "Ancillary Services" means those capacity-related services as
-------------------
listed in Exhibit B as well as the Energy component of such
services. These services are defined in Buyer's OATT.
1.2.4 "Asset Bundle" means the Harry Allen generating station and
------------
other assets associated therewith pursuant to the terms of the
Asset Sale Agreement.
1.2.5 "Asset Bundle Capacity" means, with respect to each unit listed
---------------------
in Exhibit A, the net generating capacity (in megawatts ("MW"))
of such unit, as may be adjusted therein and as modified from
time to time in accordance with Section 5.2, Section 20, and
Section 21, and not to exceed at any time the net capacity for
each unit listed in Exhibit A. Asset Bundle Capacity shall also
mean, as the context requires, the Energy (in megawatt-hours
("MWh")) and the Ancillary Services which the units would be
capable of producing if they operated at the capacity level
described in the first sentence of this Section 1.2.6.
1.2.6 "Asset Sale" has the meaning set forth in the Recitals.
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1.2.7 "Asset Sale Agreement" means the Asset Sale Agreement between
--------------------
Buyer and Supplier or Supplier's affiliate dated as of
December 1, 2000, to purchase Buyer's Asset Bundle.
1.2.8 "Asset Sale Closing" means the transfer of Buyer's ownership of
------------------
the Asset Bundle through the consummation of the Asset Sale
pursuant to the terms of the Asset Sale Agreement.
1.2.9 "Average Cost of Delivered Energy" means the total cost of
--------------------------------
Delivered Energy for the Contract Year after the application of
the annual true-up mechanism from Section
3
7.5 divided by the total Delivered Energy for the Contract
Year. Example determinations of Average Cost of Delivered
Energy are shown on Exhibit E.
1.2.10 "Availability Notice" means a notice delivered from time to
-------------------
time by Supplier to Buyer pursuant to Section 5.2 notifying
Buyer of changes in the availability of the Asset Bundle.
1.2.11 "Business Day" means any day other than Saturday, Sunday, and
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any day that is an observed holiday by Buyer as shown on
Exhibit I.
1.2.12 "CALPX" means the California Power Exchange and any successor
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entity thereto.
1.2.13 "Confidential Information" has the meaning set forth in
------------------------
Section 34.
1.2.14 "Contract Year" means, with respect to the first Contract
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Year, to each subsequent Contract Year, the period immediately
following the end of the preceding Contract Year, and in each
case ending on the earlier of the date which is twelve (12)
months thereafter or the termination date of this Agreement.
1.2.15 "Control Area" has the meaning set forth in the OATT.
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1.2.16 "Control Area Operator" means an entity and its agents which
---------------------
are responsible for the operation of the Transmission System
and for maintaining the reliability of the electrical
transmission system(s), including the Transmission System,
within the Control Area.
1.2.17 "Credit Amount" shall mean an amount equal to the TPPA Amount,
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plus an additional amount equal to $40/MWh multiplied by 76
megawatts, multiplied by the number of hours remaining in this
Agreement until March 1, 2003.
1.2.18 "Delivered Amount" means, with respect to any Dispatch Hour,
----------------
the Energy delivered by Supplier to Buyer at the designated
Point(s) of Delivery during such Dispatch Hour, whether or not
such Energy was generated by the Asset Bundle, plus any
additional amounts pursuant to Section 4.1.2, Section 4.1.3
and the Ancillary Services provided by Supplier for Buyer
during any Dispatch Hour pursuant to the terms of this
Agreement.
4
1.2.19 "Derating" means a reduction to the Asset Bundle Capacity.
--------
1.2.20 "Dispatch Hour" means the prescribed hour(s) when Energy is
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to be delivered by Supplier to Buyer at the designated
Point(s) of Delivery and the prescribed hour(s) when Ancillary
Services are to be provided to the ISA by Supplier on behalf
of Buyer.
1.2.21 "EDU" means electric distribution utility, the organization
---
with the responsibility for the distribution of energy over
Buyer's distribution system to retail end-users.
1.2.22 "Effective Date" means the date that this Agreement becomes
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effective which shall be the date on which the Closing Date,
as defined in the Asset Sale Agreement, actually occurs.
1.2.23 "Emergency Condition" shall mean a public declaration by the
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ISA or Control Area Operator that the Control Area is in
danger of imminent voltage collapse or uncontrollable
cascading outages.
1.2.24 "Energy" means electricity (measured in MWh) and associated
------
power-producing capacity to be provided by Supplier to Buyer
pursuant to this Agreement. Also known as "firm energy and
associated firm capacity".
1.2.25 "Event of Default" has the meaning set forth in Section 17
----------------
hereof.
1.2.26 "FERC" means the Federal Energy Regulatory Commission and any
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successor agency thereto.
1.2.27 "Force Majeure" has the meaning set forth in Section 12
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hereof.
1.2.28 "GAAP" means Generally Accepted Accounting Principles for the
----
United States.
1.2.29 "Good Utility Practice" means the applicable practices,
---------------------
methods, and act:
(i) required by applicable Laws, permits and reliability
criteria, whether or not the Party whose conduct at
issue is a member thereof, and
(ii) otherwise engaged in or approved by a significant
portion of the United States electric utility industry
during the relevant time period, which, in the exercise
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of reasonable judgement in light of the facts known at
the time the decision was made, could have been expected
to accomplish the desired result at a reasonable cost
consistent with good business practices, safety,
environmental protection, economy and expediency. Good
Utility Practice is not intended to be limited to the
optimum practice, method or act to the exclusion of all
others, but rather to practices, methods or acts
generally accepted in the United States electric utility
industry.
1.2.30 "Governmental Authority" means any foreign, federal, state,
----------------------
local, tribal or other governmental, regulatory or
administrative agency, court, commission, department, board,
or other governmental subdivision, legislature, rulemaking
board, tribunal, arbitrating body, or other governmental
authority.
1.2.31 "Gross Replacement Costs of Energy" means Buyer's Replacement
---------------------------------
Cost of Energy prior to adjustment for the amount that Buyer
would have paid for the Energy if Supplier had delivered the
Energy to Buyer. Example determinations of Gross Replacement
Costs of Energy are shown on Exhibit D.
1.2.32 "Guarantee" has the meaning set forth in Section 3.1.2 hereof.
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1.2.33 "Guarantor" has the meaning set forth in Section 3.1.2 hereof.
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1.2.34 "Invoiced Replacement Costs" means the Replacement Costs which
--------------------------
have been billed to Supplier or subtracted from payments to
Supplier in accordance with the provisions of Section 4.2 and
Section 7.4.
1.2.35 "ISA" means the Mountain West Independent System
---
Administrator, or the regional transmission organization
authorized with the responsibility for the scheduling and
administration of Energy and Ancillary Services over, through
and within the Transmission System in coordination with other
interconnected entities to provide transmission services. The
ISA is also referred to herein as transmission administrator.
1.2.36 "Law" means any law, treaty, code, rule, regulation, order,
---
determination, permit, certificate, authorization, or approval
of an arbitrator, court or other Governmental Authority which
is binding on a Party or any of its property.
6
1.2.37 "Limit on Excused Energy" means the amount of energy that
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can be excused under the provisions of Section 12.4 as shown
on Exhibit A.
1.2.38 "Market Price of Energy" has the meaning set forth in Section
----------------------
6.2.1.
1.2.39 "Minimum Annual Energy Take" has the meaning set forth in
--------------------------
Section 4.1.2.
1.2.40 "Minimum Investment Grade Rating" of a Person means that such
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Person has a minimum credit rating on its senior unsecured
debt securities of at least two of the following ratings: (i)
BBB as determined by Standard & Poor's Corporation, (ii) Baa2
as determined by Moody's Investors Service, Inc., or (iii) a
comparable rating by another nationally recognized rating
service reasonably acceptable to Buyer.
1.2.41 "Minimum Tangible Net Worth" means the total book value of
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shareholder's equity less the balance of goodwill, as
reported on the latest quarterly balance sheet prepared in
accordance with Generally Accepted Accounting Principles
(GAAP).
1.2.42 "NERC" means the North American Electric Reliability Council
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and any successor entity thereto.
1.2.43 "Nonemergency Condition" shall mean the determination,
----------------------
direction or order by the ISA, or Control Area Operator to
Supplier and/or Buyer to change the Supply Amount which is
not a result of or due to an Emergency Condition. A
Nonemergency Condition includes an insufficiency of Ancillary
Services to securely operate the Control Area.
1.2.44 "OATT" means Buyer's, or the Control Area Operator's as its
----
successor hereto, as applicable, then-effective Open Access
Transmission Tariff, or such entities' successor tariff,
which has been accepted for filing by the FERC.
1.2.45 "Operating Representatives" means the persons designated to
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transmit and receive routine operating and emergency
communications required under this Agreement.
1.2.46 "Party" has the meaning set forth in the preamble of this
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Agreement.
7
1.2.47 "Permitted Deratings" means those reductions to the Asset
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Bundle Capacity of which Supplier may notify Buyer from time
to time in an Availability Notice pursuant to Section 5.2.
1.2.48 "Person" means any natural person, partnership, limited
------
liability company, joint venture, corporation, trust,
unincorporated organization, or governmental entity or any
department or agency thereof.
1.2.49 "Point of Delivery" means the point (s) which has (have) been
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specified as the Interconnection Point(s) in the
Interconnection Agreement between Nevada Power Company and
Pinnacle West Energy Corporation dated as of December 1,
2000, as it may be amended from time to time, as well as any
alternative locations agreed upon pursuant to Section 4.1.6.
1.2.50 "Price Ceiling of Energy" means the ceiling price of Energy
-----------------------
as stated in Exhibit B.
1.2.51 "Price Floor of Energy" means the floor price of Energy as
---------------------
stated in Exhibit B.
1.2.52 "Provider of Last Resort (PLR)" has the meaning set forth in
-----------------------------
the Recitals.
1.2.53 "PUCN" means the Public Utilities Commission of Nevada and
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any successor entity thereto.
1.2.54 "Replacement Costs" means with respect to a period of time,
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the difference between (a) the actual costs, including
without limitation related penalties and transmission costs,
incurred by Buyer to replace any shortfall between (1) the
Supply Amount and (2) the Delivered Amounts of Energy, (or in
the case of Ancillary Services the Supplier's schedule of
Ancillary Services) during such period and (b) the payments
the Supplier would have been entitled to in respect of such
shortfall in delivery; provided that Replacement Costs shall
also be subject to the annual true-up mechanism set forth in
Section 7.5.
1.2.55 "Supply Amount" means, with respect to each Dispatch Hour,
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the amount of Energy and Ancillary Services, not to exceed
the Asset Bundle Capacity for such Dispatch Hour, requested
by Buyer to be delivered by Supplier during any Dispatch
Hour. The Supply Amount for any Dispatch Hour shall be
determined pursuant to Section 5.1.
8
1.2.56 "Total Amount of Energy Replaced" means the summation of
-------------------------------
Replacement Energy as shown on Exhibit E.
1.2.57 "TPPA Amount" means the amount paid by Buyer to Supplier in
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consideration of this Agreement.
1.2.58 "Transitional Resource Requirement" or "TRR" means the
---------------------------------
Energy and loss compensation necessary for Buyer to meet its
obligations as a Provider of Last Resort (PLR) for Nevada and
under those wholesale sales agreements existing at the
Effective Date.
1.2.59 "Transmission System" means the facilities owned, controlled,
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or operated by Buyer, or its successors and assigns, that are
used to provide transmission service under the OATT.
1.2.60 "WSCC" means the Western Systems Coordinating Council and any
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successor entity thereto.
2. TERM
2.1 Term. Unless terminated earlier pursuant to the terms of this
----
Agreement, the term of this Agreement shall commence on the Effective
Date and continue until the earlier of the effective date of an order
by a Governmental Authority terminating Buyer's PLR responsibility, or
March 1, 2003. Supplier shall provide service under this Agreement
commencing on the first hour on the day after the Effective Date.
2.2 Termination.
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2.2.1 Except pursuant to Sections 2.2.2 or 17.4, this Agreement may
not be terminated without the explicit prior written approval
of Buyer.
2.2.2 If, prior to the Asset Sale Closing, the FERC or any other
Governmental Authority places conditions on or requires
revisions of this Agreement which have a material adverse
effect on Supplier or Buyer, the Parties agree to negotiate
in good faith amendments to the Agreement to preserve the
bargain between the Parties. If the Parties fail to negotiate
mutually acceptable amendments to this Agreement within sixty
(60) days of such action by the FERC or other Governmental
Authority, either Party may terminate the Agreement after
first notifying the other Party in writing at least ten (10)
Business Days prior to the termination date; provided that
neither Party may exercise a right of termination pursuant to
this Section 2.2.2 after the Asset Sale Closing.
9
2.2.3 This Agreement may be terminated with the mutual agreement of
the Parties.
2.2.4 Any termination of this Agreement pursuant to this Section 2
shall not take effect until FERC either authorizes the
termination or accepts a written notice of termination.
2.3 Effect of Termination.
----------------------
2.3.1 Adjustment of TPPA Amount. If the Effective Date of this
-------------------------
Agreement is before June 1, 2001, the TPPA Amount shall be
adjusted to equal (1) the TPPA Amount multiplied by (2) 100%
plus the sum of the monthly adjustments from Exhibit J for
each month or portion thereof between the Effective Date and
June 1, 2001. An example calculation is shown on Exhibit J.
If the Effective Date of this Agreement is after June 1,
2001, the TPPA Amount shall be adjusted to equal (1) the TPPA
Amount multiplied by (2) 100% minus the sum of the monthly
adjustments from Exhibit J for each month or portion thereof
between June 1, 2001 and the Effective Date. An example
calculation is shown on Exhibit J.
If this Agreement is terminated before March 1, 2003,
Supplier shall pay to Buyer an amount, in accordance with the
provisions of Section 7, equal to the TPPA Amount which
existed before any adjustment in accordance with the first or
second paragraph of this Section 2.3.1, multiplied by the sum
of the monthly adjustments for each month or portion thereof
between the date on which this Agreement is terminated and
March 1, 2003. An example calculation is shown on Exhibit J.
2.3.2 Any default or termination of this Agreement shall not
release either Party from any applicable provisions of this
Agreement with respect to:
2.3.2.1 The payment of liquidated damages pursuant to
Sections 4.2, 12, 17, 18, or 21.
2.3.2.2 Indemnity obligations contained in Section 10, to
the extent of the statute of limitations period
applicable to any third party claim.
10
2.3.2.3 Limitation of liability provisions contained in
Section 11.
2.3.2.4 Payment of any unpaid amounts in respect of
obligations arising prior to or resulting from
termination.
2.3.2.5 For a period of one (1) year after the termination
date, the right to raise a payment dispute and the
resolution thereof pursuant to Section 13.
2.3.2.6 The resolution of any dispute submitted pursuant
to Section 13 prior to, or resulting from,
termination.
3. SECURITY
3.1 Supplier Certification; Guarantee. As a condition of Buyer's execution
of, and continuing compliance with, this Agreement, Supplier shall at
---------------------------------
Supplier's option comply with the provisions of either Section 3.1.1
or Section 3.1.2.
3.1.1 Supplier Certification. Supplier shall (a) provide a
----------------------
certificate from a duly authorized corporate officer of
Supplier certifying that, as of the Effective Date, Supplier
has a credit rating equal to or higher than the Minimum
Investment Grade Rating; or (b) post a letter of credit in a
form reasonably acceptable to Buyer in the amount of the
Credit Amount from a financial institution with each of: (i)
a credit rating of A2 or better from Moody's Investors
Service, Inc., (ii) a credit rating of A or better from
Standard & Poor's Corporation, and (iii) a Minimum Tangible
Net Worth ("MTNW") of one (1) billion dollars.
3.1.2 Guarantee. In the alternative to the provisions of Section
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3.1.1, the Supplier may provide a corporate guarantee, in
form and substance as set forth in Exhibit H, made by an
entity (the "Guarantor") that:
3.1.2.1 has a credit rating equal to or higher than the
Minimum Investment Grade Rating, together with a
certificate from a duly authorized corporate
officer of such Guarantor certifying that, as of
the Effective Date, such Guarantor has a credit
rating equal to or higher than the Minimum
Investment Grade Rating; or
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3.1.2.2 has a MTNW of no less than one (1) billion
dollars, together with a certificate from a duly
authorized corporate officer of such Guarantor
certifying that, as of the Effective Date, such
Guarantor has a MTNW of no less than one (1)
billion dollars; or
3.1.2.3 posts a letter of credit in a form reasonably
acceptable to Buyer in the amount of the Credit
Amount from a financial institution with each of:
(i) a credit rating of A2 or better from Moody's
Investors Service, Inc., (ii) a credit rating of A
or better from Standard & Poor's Corporation, and
(iii) a Minimum Tangible Net Worth ("MTNW") of one
(1) billion dollars.
3.2 Compliance.
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3.2.1 Reporting. If at any time during the term of this Agreement,
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Standard & Poor's Corporation, Moody's Investors Service,
Inc. or another nationally recognized firm downgrades the
credit rating of Supplier, the Guarantor, or the financial
institution that issued the letter of credit, as applicable,
then Supplier shall provide Buyer with written notice of such
change of circumstance within two (2) Business Days of any
such change. In the event such a downgrade also constitutes
an Event of Default pursuant to Section 17, the requirements
of this Section 3.2.1 are in addition to, and not in lieu of,
the requirements of Section 17.
4. SUPPLY SERVICE
4.1 Obligations of the Parties.
--------------------------
4.1.1 Supply Amount. Supplier shall be required to provide the
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Supply Amount in any Dispatch Hour. As provided in Section
5.1, Buyer shall make reasonable efforts to ensure that the
Supply Amount is no greater than necessary to satisfy Buyer's
TRR.
4.1.1.1 With the Buyer's prior consent, not to be
unreasonably withheld or delayed, Supplier shall
be entitled to generate or otherwise procure the
Supply Amount from sources other than the Asset
Bundle.
4.1.1.2 Supplier shall deliver the Supply Amount to Buyer
during the Dispatch Hour on a continuous
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basis at the Point(s) of Delivery and shall
schedule the Supply Amount in accordance with the
applicable OATT.
4.1.1.3 The Buyer at its sole discretion shall designate
the allocation of the Supply Amount between Energy
and Ancillary Services in accordance with the
notification provisions of Section 5.
4.1.1.3.1 The Parties recognize that the Asset
Bundle also is subject to the
contractual and operating constraints
set forth in Exhibit M.
4.1.2 Minimum Annual Energy Take. The Buyer shall accept a minimum
--------------------------
annual energy take during each Contract Year. The Minimum
Annual Energy Take shall be set forth on Exhibit A.
4.1.2.1 Buyer's Obligation to Take. If Buyer is unwilling
--------------------------
to accept the Minimum Annual Energy Take for any
Contract Year, as may be adjusted pursuant to
Section 4.1.2.2, the difference (in MWh) between
the Supply Amount of Energy (including
consideration for Energy that would have been
taken but was unavailable due to Permitted
Deratings or Force Majeure, as well as the Total
Amount of Energy Replaced) and the Minimum Annual
Energy Take shall be billed at the Price Ceiling
of Energy less the Price Floor of Energy. An
example of the monthly determination of the amount
of Energy to be credited against the Minimum
Annual Energy Take is shown on Exhibit L.
4.1.2.2 Adjustments to Minimum Annual Energy Take. Buyer
-----------------------------------------
shall have the right to reduce the Minimum Annual
Energy Take if the number of customers taking
electric service from Buyer falls below the number
of customers on December 31, 2000./1/1/
Adjustments will be applicable, on a pro rata
basis, on the first (1/st/) day of the month
immediately following Supplier's
__________________
/1/ If the retail markets are opened to competition prior to December 31, 2000,
the date immediately preceding the date on which the markets are opened will be
substituted for December 31, 2000.
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receipt of Buyer's notice of adjustment. Buyer
shall provide supporting data in reasonable detail
to support its calculations. An example of the
calculation of a revised Minimum Annual Energy
Take is shown on Exhibit K.
4.1.3 Supplier Rights to Output. Supplier may sell to others any
-------------------------
portion of the Asset Bundle Capacity in excess of the Supply
Amount.
4.1.4 Point(s) of Delivery. Supplier shall deliver, and Buyer
--------------------
shall take delivery of, the Supply Amount of Energy at the
Point(s) of Delivery. Subject to Section 4.1.5.2, Supplier
shall be responsible for all costs associated with delivery
of the Supply Amount of Energy to the Point(s) of Delivery.
4.1.5 Alternative Points of Delivery. For any Dispatch Hour,
------------------------------
either Party may designate one or more alternative Points of
Delivery, subject to the other Party's prior approval and
consistent with the OATT, such approval not to be
unreasonably withheld or delayed.
4.1.5.1 If Supplier has designated an alternative Point of
Delivery, Supplier shall be responsible for all
costs of delivery to such alternative Point of
Delivery.
4.1.5.2 If Buyer has designated an alternative Point of
Delivery, Buyer shall be responsible for all costs
of delivery to such alternative Point of Delivery.
4.1.6 Fuel. Buyer shall have no responsibility for any fuel
----
procurement or fuel transportation costs or activities
associated with the Asset Bundle during the term of this
Agreement.
4.1.7 Resale. Except as provided in the next sentence, the Supply
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Amount may be resold by Buyer only as necessary to satisfy
Buyer's TRR. If, after submitting the request of the Supply
Amount pursuant to Section 5.1, the Buyer determines that the
scheduled Supply Amount, together with purchases scheduled
under Buyer's other Transitional Power Purchase Agreements,
exceeds Buyer's most-current projected TRR, then the Buyer
also shall resell at wholesale that amount of Energy in
excess of Buyer's actual TRR as necessary to balance its load
and resources.
4.1.8 Right to Review. Buyer and Supplier each shall have the
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right to review during normal business hours the relevant
14
books and records of the other Party to confirm the accuracy
of such as it pertains to transactions under this Agreement.
The review shall be consistent with standard business
practices and shall follow reasonable notice to the other
Party. Reasonable notice for a review of the previous month's
records shall be at least a twenty-four (24) hour period from
a Business Day to a subsequent Business Day. If a review is
requested of other than the previous month's records, then
notice of that request shall be provided with a minimum of
seven (7) calendar days written notice by the requesting
Party. The notice shall specify the period to be covered by
the review. The Party providing records can make reasonable
requests that the receiving Party keep the records
confidential, and the receiving Party shall take reasonable
steps to accommodate such requests.
4.2 Liquidated Damages.
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4.2.1 If the Delivered Amount of Energy is less than the Supply
Amount of Energy in any Dispatch Hour during a month, and
Replacement Costs computed in respect of such month are
greater than zero, then Supplier shall reimburse Buyer for
such Replacement Costs. If Supplier's schedule of Ancillary
Services is less than the Supply Amount of Ancillary Services
in any Dispatch Hour during a month, Supplier shall reimburse
Buyer for such Replacement Costs for the difference between
Supplier's schedule and the Supply Amount of Ancillary
Services. An example of the methodology used to calculate
Replacement Costs is provided in Exhibit D.
4.2.2 Supplier also shall be responsible for any costs incurred by
Buyer associated with Supplier's violation of reliability
criteria (including but not limited to imbalance costs or
penalties), due to a deviation between the Supply Amount and
Delivered Amount.
4.2.3 The Parties recognize and agree that the payment of such
amounts by Supplier pursuant to this Section 4.2 is an
appropriate remedy in the event of such a failure and that
any such payment does not constitute a forfeiture or penalty
of any kind, but rather constitutes actual costs to Buyer
under the terms of this Agreement.
4.3 Supplier Operating Representative. Supplier shall provide and
---------------------------------
maintain a twenty-four (24) hour seven (7) day per week communication
link with Buyer's control center and with Buyer's schedulers.
Supplier's Operating Representatives shall be available to address and
15
make decisions on all operational matters under this Agreement on a
twenty-four (24) hour seven (7) day per week basis.
5. NOTIFICATION
5.1 Scheduling Notification. Buyer shall provide Supplier with a request
-----------------------
of the Supply Amount no later than twenty-four (24) hours before day-
ahead bids must be submitted to the CALPX. Buyer shall make reasonable
efforts to ensure that the day-ahead request of the Supply Amount is
no greater than that amount then projected to be necessary to satisfy
Buyer's TRR. In addition, for each supply amount request, the change
in the Supply Amount from one (1) hour to the next hour shall be no
greater than the ramping capability of the units within the Asset
Bundle as shown in Exhibit A and the minimum load and the number of
daily start-ups shall not exceed the amount shown in Exhibit M.
5.2 Availability Notification.
-------------------------
5.2.1 No later than 5:00 a.m. (Pacific Time) of each day, Supplier
shall deliver to Buyer an Availability Notice in the form set
forth in Exhibit G.
5.2.2 Availability Notices shall provide, for the ninety-six (96)
hour period starting at 6:00 a.m. (Pacific Time) that day,
Supplier's hourly projection of the unavailability or derating
("Derating") of the Asset Bundle compared to the Asset Bundle
Capacity figures stated for each unit in Exhibit A. Each
Availability Notice also shall contain, as applicable:
(a) the units which are subject to a Derating;
(b) the magnitude of the Derating;
(c) the hours during which the Derating is expected to
apply;
(d) the cause of the Derating;
(e) the extent, if any, to which the Derating is
attributable to
a Permitted Derating;
(f) the projected Asset Bundle Capacity for each unit during
the period covered by the Availability Notice, pursuant
to Section 5.2.4 below; and
(g) in the first Availability Notice to be provided for each
calendar month, the current amount of water stored in
the Asset Bundle treated water storage tank.
5.2.3 If and to the extent a Derating is the result of one or more
of the following causes, it shall be a Permitted Derating:
(a) approved planned outages pursuant to Section 21;
16
(b) response to an Emergency Condition as described in
Section 20;
(c) subject to the limitations expressed in Section 12.5, a
Force Majeure event; or
(d) unavailability of water supply to Supplier for use at
the Asset Bundle for the operation of the combustion
turbine evaporator cooler and, in the event Asset Bundle
must be operated using distillate oil for reasons only
involving the physical inability to have natural gas
delivered to the Asset Bundle, also for use in the
operation of the Asset Bundle's combustion turbine
emissions control water injectors;
(i) provided that, a Permitted Derating due to such
unavailability of water supply shall (A) only be
allowed to the extent that inoperation of such
evaporator cooler, and if applicable in the
operation of such emissions control water
injectors, would actually reduce Asset Bundle
Capacity during the affected time period and (B)
not be due to Supplier's (x) failure to maintain a
permit to treat and use 30 acre feet of water,
treated water or effluent per year, or (y) sales
to parties other than Buyer, provided that (1)
Supplier has received its necessary water
entitlements pursuant to the Water Supply
Agreement (as defined in the Asset Sale
Agreement), or deliveries pursuant to Section
5.2.3(d)(ii)(B), (2) Supplier has not terminated
such Water Supply Agreement and is not in, or
alleged to be in, breach or default of such Water
Supply Agreement, and (3) Supplier has not
otherwise arranged to procure other water
resources for this facility.
(ii) provided further that,
(A) Supplier shall maintain the amount of water
in the Asset Bundle treated water storage
tank consistent with Good Utility Practice,
(B) Buyer, in its sole discretion, shall have the
option to augment such water supply with
quality and price no less favorable to
Supplier than that provided for in the Water
Supply Agreement between Supplier and the
owner of the Clark Asset Bundle (as defined
in the Asset Sale Agreement) to allow for the
operation of such
17
evaporative cooler, and if applicable the
operation of such emmissions contol water
injectors, to increase the otherwise then-
available Asset Bundle Capacity, and
(C) notwithstanding subsection 5.2.3(d)(ii)(B)
above, Supplier shall pay for the costs of
augmenting such water supply to the extent
that the lack of water supply is caused by
Supplier's (x) sales to parties other than
Buyer or (y) failure to maintain either the
amount of water in the Asset Bundle treated
water storage tank or the failure to maintain
a permit to receive and use water, treated
water or effluent, each in accordance with
this section.
5.2.4 In respect of any Dispatch Hour, the Asset Bundle Capacity of
each unit shall be the Asset Bundle Capacity figure stated in
Exhibit A minus any Permitted Derating applicable during such
hour.
5.2.5 Neither the Asset Bundle Capacity nor the Supply Amount shall
be reduced by Deratings which are not Permitted Deratings.
Supplier shall be responsible for all Replacement Costs,
pursuant to Section 4.2.1, caused by Deratings that are not
Permitted Deratings.
6. PRICING OF ENERGY AND ANCILLARY SERVICES
6.1 Overview. The price of Energy paid by Buyer to Supplier shall be
--------
based upon a designated hourly market price, subject to monthly floor,
monthly ceiling, and annual true-up provisions. The Price Floor of
Energy will ensure that Supplier will receive an average price for
Energy for each month which is not less than the price stated in
Exhibit B. The Price Ceiling of Energy provision provides that the
average price of Energy paid to Supplier each month and for each year
shall not exceed the price stated in Exhibit B.
6.2 Price of Energy.
---------------
6.2.1 Market Price of Energy. In respect of any Dispatch Hour, the
----------------------
designated Market Price of Energy shall be the South of Path
15 ("SP 15") hourly market-clearing price in the day-ahead
market from the CALPX as published at the following Web Site
(or its successor web site)
http://www.calpx.com/prices/index_prices_dayahead_trading.html.
---------------------------------------------------------------
Should this hourly market in the day-
ahead
18
market not exist for the entire term, the Parties shall agree
upon a similar market price index.
6.2.2 Price Floor of Energy. The Price Floor of Energy is stated in
---------------------
Exhibit B and shall not change during the term of this
Agreement.
6.2.3 Price Ceiling of Energy. The Price Ceiling of Energy is
-----------------------
stated in Exhibit B and shall not change during the term of
this Agreement.
6.3 Pricing of Ancillary Services. The price of the capacity component of
------------------------------
Ancillary Services is stated in Exhibit B. The price of Ancillary
Services shall not change during the term of the Agreement. Supplier
shall make available to Buyer and Buyer shall offer to pass through
the Energy portion of Ancillary Services with respect to the Supply
Amount to the ISA, or Control Area Operator, at the Price Ceiling of
Energy (plus expected direct transaction costs). The net proceeds
shall be credited to the Supplier pursuant to Section 7.
6.4 Price Revisions. The Parties waive any and all rights to seek to
---------------
revise the provisions of this Agreement, including the prices stated,
pursuant to Sections 205 and/or 206 of the Federal Power Act.
7. INVOICING AND PAYMENTS
7.1 Invoicing and Payment. On or before the tenth (10/th/) day of each
---------------------
month, Supplier shall send to Buyer an invoice setting forth the
Supply Amount, Delivered Amount, the Market Price of Energy pursuant
to Section 6.2.1 for each Dispatch Hour in the previous month, any
amount due in accordance with Section 7.13 and the total due from
Buyer. The invoice shall be calculated based upon data available to
Supplier and shall be in accordance with this Section 7 and Exhibit C.
Buyer shall promptly notify Supplier if Buyer in good faith disputes
any portion of the invoice, stating in reasonable detail the reason
for the dispute.
7.2 Monthly Invoice Calculation. On each monthly invoice, Supplier shall
---------------------------
calculate the following amounts:
7.2.1 The Delivered Amount in respect of each Dispatch Hour
multiplied by the corresponding Market Price of Energy
pursuant to Section 6.2.1, summed over the billing period;
7.2.2 Sum of the Delivered Amounts in respect of all Dispatch Hours
of the billing period multiplied by the Price Ceiling of
Energy;
19
7.2.3 Sum of the Delivered Amounts in respect of all Dispatch Hours
of the billing period multiplied by the Price Floor of Energy;
7.2.4 For each Dispatch Hour of the billing period, the shortfall,
if any, between the Supply Amount and the Delivered Amount
(and in the case of Ancillary Services the shortfall between
the Supply Amount of Ancillary Services and Supplier's
schedule of Ancillary Services);
7.2.5 The Supply Amount of Ancillary Services for each dispatch hour
multiplied by the price of Ancillary Services as stated in
Exhibit B; and
7.2.6 The Delivered Amount of Energy related to Ancillary Services
for each dispatch hour multiplied by the Price Ceiling of
Energy as stated in Exhibit B.
7.2.7 If applicable, any amount to be calculated in accordance with
Section 7.13.
7.3 Supplier's Invoice. Supplier will invoice the lesser of the amounts
------------------
calculated in Sections 7.2.1 and 7.2.2, provided that if the amount
calculated in Section 7.2.1 is less than the amount calculated in
Section 7.2.3, Supplier shall invoice Buyer the amount calculated in
Section 7.2.3. Supplier shall also include in its invoice the amounts
calculated in Sections 7.2.5, 7.2.6 and 7.2.7. If the Delivered Amount
exceeds the Supply Amount, Buyer shall not be obligated to pay for the
excess amount. Buyer shall pay Supplier for the amounts invoiced
pursuant to Section 7.2.6 upon Buyer's receipt of payment from ISA or
Control Area Operator. Examples of this monthly invoice calculation
(and annual true-up process) are contained in Exhibit C.
7.4 Buyer's Invoice. In the event any shortfall occurs pursuant to Section
---------------
7.2.4 or payment is due to Buyer pursuant to Section 7.13, Buyer shall
within ten (10) Business Days of receipt of Supplier's invoice deliver
to Supplier a Buyer's invoice detailing any Replacement Costs or other
payment due. Buyer shall provide supporting data in reasonable detail
to support its calculations of Replacement Costs. Supplier shall
promptly notify Buyer if Supplier in good faith disputes any portion
of the invoice, stating in reasonable detail the reason for the
dispute. If the Buyer's invoice results in an amount due from Supplier
to Buyer, Buyer may offset such amount from its payment of Supplier's
corresponding invoice.
Buyer shall have the right to adjust the invoices issued in accordance
with this Section 7.4 if Buyer incurs Replacement Costs that were not
20
known when earlier invoices were issued. Adjusted invoices shall be
issued within thirty (30) days of the date on which the additional
Replacement Costs become known. Buyer shall provide supporting data
in reasonable detail to support its calculations of Replacement Costs.
Supplier shall promptly notify Buyer if Supplier in good faith
disputes any portion of the invoice, stating in reasonable detail the
reason for the dispute. If the Buyer's adjusted invoice results in an
amount due from Supplier to Buyer, Buyer may offset such amount from
its payment of Supplier's corresponding invoice.
7.5 Annual True-Up Mechanism for Energy.
-----------------------------------
7.5.1 The annual true-up mechanism will provide adjustments among
the Parties with respect to each Contract Year in the
following scenarios:
(a) If (i) the Price Ceiling of Energy multiplied by the
hourly Delivered Amount of Energy summed over the
Contract Year is less than or equal to (ii) the Market
Price of Energy for each hour pursuant to Section 6.2.1
multiplied by the Delivered Amount of Energy for each
hour during the Contract Year, Supplier shall subtract
(x) the amount invoiced by Supplier for Energy pursuant
to Section 7.3 summed of over the Contract Year from (y)
the Price Ceiling of Energy multiplied by the hourly
Delivered Amount of Energy summed over the Contract Year.
If the difference calculated in accordance with the
preceding sentence is greater than or equal to zero,
Buyer shall pay the difference to Supplier. If the
difference is less than zero, Supplier shall refund the
difference to Buyer.
(b) If (i) the Price Ceiling of Energy multiplied by the
hourly Delivered Amount of Energy summed over the
Contract Year is greater than or equal to (ii) the Market
Price of Energy for each hour pursuant to Section 6.2.1
multiplied by the Delivered Amount of Energy for each
hour during the Contract Year, Supplier shall subtract
(x) the amount invoiced by Supplier for Energy pursuant
to Section 7.3 summed of over the Contract Year from (y)
the Market Price of Energy multiplied by the hourly
Delivered Amount of Energy summed over the Contract Year.
If the difference calculated in accordance with the
preceding sentence is greater than or equal to zero,
Buyer shall pay the difference to Supplier. If the
difference is less than zero, Supplier shall refund the
difference to Buyer.
21
(c) If Buyer incurred Replacement Costs for energy during the
Contract Year, Supplier shall multiply the Total Amount
of Energy Replaced during the Contract Year by the
Average Cost of Delivered Energy after true-up as
determined in accordance with Section 7.5.1 (a) or 7.5.1
(b). If the amount so obtained is greater than the sum of
the monthly Gross Replacement Costs of Energy from
Buyer's Invoices for the Contract Year, the Adjusted
Replacement Cost of Energy for the Contract Year shall be
zero. If the amount so obtained is less than the sum of
the monthly Gross Replacement Costs of Energy from
Buyer's Invoices for the Contract Year, the Adjusted
Replacement Cost of Energy for the Contract Year shall be
the sum of the monthly Gross Replacement Costs of Energy
less the amount obtained in accordance with the first
sentence of this Section 7.5.1(c).
If the Adjusted Replacement Cost of Energy is greater
than the sum of the monthly Invoiced Replacement Costs of
Energy from Buyer's Invoices for the Contract Year,
Supplier shall pay the difference to Buyer. If the sum of
the monthly Invoiced Replacement costs of Energy is
greater than the Adjusted Replacement Cost of Energy,
Buyer shall pay the difference to Seller.
7.5.2 True-up adjustments will be calculated by Supplier within
twenty (20) days after each Contract Year. Examples of the
true-up calculations and invoice form are set forth in Exhibit
E. Interest shall be calculated pursuant to 18 CFR Section
35.19a and shall be included in the true-up invoice. Invoices
for true-up adjustments shall be submitted by Supplier within
thirty (30) days after the end of the Contract Year. Payments
for such invoices shall be due from Buyer thirty (30) days
from receipt of the true-up invoice.
7.6 Invoice Disagreements. Should there be a good faith dispute over any
---------------------
invoice, the Parties shall promptly seek resolution pursuant to
Section 13. Pending resolution of the invoice dispute, payment shall
be made or offsets or credits taken, as applicable, based upon the
undisputed portion of the invoice.
7.7 Adjustments. Upon resolution of the dispute, the prevailing Party
-----------
shall be entitled to receive the disputed amount, as finally
determined to be payable along with interest (calculated pursuant to
18 C.F.R. (S) 35.19a through the date of payment. No invoice (or
payment covered thereby) shall be subject to adjustment unless notice
or
22
request for adjustment is given within one (1) year of the date
payment thereunder was due.
7.8 Method of Payment. Subject to Sections 7.3, 7.6 and 7.7, Buyer shall
-----------------
remit all amounts due by wire or electronic fund transfer, pursuant to
Supplier's invoice instructions, no later than thirty (30) days after
receipt of the invoice.
7.9 Overdue Payments. Overdue payments shall bear interest from and
----------------
including, the due date to the date of payment on the unpaid portion
calculated pursuant to 18 C.F.R. (S) 35.19a.
7.10 Buyer Right to Offset. Buyer shall have the right to offset any
---------------------
amounts Supplier owes to Buyer, including Replacement Costs (except
for such amounts disputed in good faith by Supplier), against the
amounts owed by Buyer to Supplier.
7.11 Taxes. Each Party shall pay ad valorem and other taxes attributed to
-----
its facilities and services provided. Supplier shall not include any
taxes of any kind in its invoices to Buyer. The prices of Energy and
Ancillary Services shall not change during the term of this Agreement
as a result of any changes in local, state or federal taxes, fees or
levies.
7.12 Late Invoices. If either Party submits an invoice outside of the time
-------------
deadlines set forth herein, that Party shall not forfeit its rights to
collect the amounts due thereunder, provided that such invoice is no
more than six (6) months late, and provided that changes to invoices
remain subject to the deadline in Section 7.7
7.13 Termination Prior to March 1, 2003. Notwithstanding any other
----------------------------------
provision herein, in the event that this Agreement is terminated
before March 1, 2003 and as a result of such termination Buyer is
entitled to a payment in accordance with Section 2.3.1, Supplier shall
include an amount calculated in accordance with Section 2.3.1 and
Exhibit J, to be paid by Supplier to Buyer in the next monthly invoice
submitted to Buyer following such termination.
8. REGULATORY APPROVALS
8.1 This Agreement will be filed with the FERC and any other appropriate
regulatory agencies by the appropriate Party as may be required.
9. COMPLIANCE
23
9.1 Each Party shall comply with all relevant Laws and shall, at its sole
expense, maintain in full force and effect all relevant permits,
authorizations, licenses, and other authorizations material to the
maintenance of facilities and the performance of obligations under
this Agreement.
9.2 Each Party and its representatives shall comply with all relevant
requirements of any authorized Control Area Operator, ISA, and/or EDU
to ensure the safety of its employees and the public, and to ensure
electric system reliability and integrity, material to the performance
of this Agreement.
9.3 Buyer and Supplier shall perform or cause to be performed, their
obligations under this Agreement in all material respects in
accordance with Good Utility Practices.
10. INDEMNIFICATION
10.1 To the fullest extent permitted by law, a Party to this Agreement
("the Indemnifying Party") shall indemnify, defend and hold harmless
the other Party, its parent, affiliates, and successors and agents
(each an "Indemnified Party") from and against any and all claims,
demands, suits, obligations, payments, liabilities, costs, judgments,
damages, losses or expenses asserted by third parties against an
Indemnified Party and arising out of, relating to, or resulting from
the Indemnifying Party's breach of, or the negligent performance of
its obligations under this Agreement.
10.1.1 Such indemnity shall also extend to actual courts costs,
attorneys' fees, expenses and other liabilities incurred in
the defense of any claim, action or proceeding, including
negotiation, settlement, defense and appeals, to which this
indemnification obligation applies. In furtherance of the
foregoing indemnification and not by way of limitation
thereof, the Indemnifying Party hereby waives any defense it
otherwise might have against the Indemnified Party under
applicable workers' compensation laws.
10.1.2 In claims against any Indemnified Party by an agent of the
Indemnifying Party, or anyone directly or indirectly employed
by them or anyone for whose acts they may be liable, the
indemnification obligation under this Section 10 shall not be
limited by a limitation on amount or type of damages,
compensation or benefits payable by or for the Indemnifying
Party or a subcontractor under workers' or workmen's
compensation acts, disability benefit acts or other employee
benefit acts.
24
10.1.3 Such indemnity shall also extend to all costs and expenses
incurred by the Indemnified Party in any action or proceeding
to enforce the provisions of this Agreement, but only if and
to the extent the Indemnified Party prevails in such action or
proceeding.
10.2 No Negation of Existing Indemnities; Survival. Each Party's indemnity
---------------------------------------------
obligations hereunder shall not be construed to negate, abridge or
reduce other rights or obligations or indemnity which would otherwise
exist at law or equity. The obligations contained herein shall survive
any termination, cancellation, or suspension of this Agreement to the
extent that any third party claim is commenced during the applicable
statute of limitations period.
10.3 Indemnification Procedures.
--------------------------
10.3.1 Any Party seeking indemnification under this Agreement shall
give the other Party notice of such claim promptly but in any
event on or before thirty (30) days after the Party's actual
knowledge of such claim or action. Such notice shall describe
the claim in reasonable detail, and shall indicate the amount
(estimated if necessary) of the claim that has been, or may be
sustained by, said Party. To the extent that the other Party
will have been actually and materially prejudiced as a result
of the failure to provide such notice, such notice will be a
condition precedent to any liability of the other Party under
the provisions for indemnification contained in this
Agreement.
10.3.2 In any action or proceeding brought against an Indemnified
Party by reason of any claim indemnifiable hereunder, the
Indemnifying Party may, at its sole option, elect to assume
the defense at the Indemnifying Party's expense, and shall
have the right to control the defense thereof and to determine
the settlement or compromise of any such action or proceeding.
Notwithstanding the foregoing, an Indemnified Party shall in
all cases be entitled to control its defense in any action if
it:
(i) may result in injunctions or other equitable remedies
in respect of the Indemnified Party which would affect
its business or operations in any materially adverse
manner;
(ii) may result in material liabilities which may not be
fully indemnified hereunder; or
25
(iii) may have a significant adverse impact on the business
or the financial condition of the Indemnified Party
(including a material adverse effect on the tax
liabilities, earnings or ongoing business relationships
of the Indemnified Party) even if the Indemnifying
Party pays all indemnification amounts in full.
10.3.3 Subject to Section 10.3.2, neither Party may settle or
compromise any claim for which indemnification is sought under
this Agreement without the prior consent of the other Party;
provided, however, said consent shall not be unreasonably
withheld or delayed.
11. LIMITATION OF LIABILITY
11.1 Responsibility for Damages: Except as otherwise provided herein or to
--------------------------
the extent of the other Party's negligence or willful misconduct, each
Party shall be responsible for all physical damage to or destruction
of the property, equipment and/or facilities owned by it and its
affiliates and any physical injury or death to natural Persons
resulting therefrom, regardless of who brings the claim and regardless
of who caused the damage, and shall not seek recovery or reimbursement
from the other Party for such damage; provided, that in any such case
the Parties will exercise Due Diligence to remove the cause of any
disability at the earliest practicable time.
11.2 No Consequential Damages: To the fullest extent permitted by law and
------------------------
notwithstanding other provisions of this Agreement, in no event shall
a Party, or any of its Agents, be liable to the other Party, whether
in contract, warranty, tort, negligence, strict liability, or
otherwise, for special, indirect, incidental, multiple, consequential
(including but not limited to lost profits or revenues and lost
business opportunities), or punitive damages related to or resulting
from performance or nonperformance of this Agreement or any activity
associated with or arising out of this Agreement. For purposes of
clarification, Replacement Costs shall not be considered consequential
or incidental damages under this Section 11.2. In addition, this
limitation on liability shall not apply with respect to claims
pursuant to Section 10 hereof.
11.3 Survival: The provisions of this Section 11 shall survive any
--------
termination, cancellation, or suspension of this Agreement.
12. FORCE MAJEURE
12.1 An event of "Force Majeure" shall be defined as any interruption or
failure of service or deficiency in the quality or quantity of service
or any other failure to perform any of its obligations hereunder to
the extent such failure occurs without fault or negligence on the part
of
26
that Party and is caused by factors beyond that Party's reasonable
control, which by the exercise of reasonable diligence that Party is
unable to prevent, avoid, mitigate or overcome, including:
(i) acts of God or the public enemy, such as storms, flood,
lightning, and earthquakes,
(ii) failure, threat of failure, or unscheduled withdrawal of
facilities from operation for maintenance or repair, and
including unscheduled transmission and distribution outages,
(iii) sabotage of facilities and equipment,
(iv) civil disturbance,
(v) strike or labor dispute,
(vi) action or inaction of a court or public authority, or
(vii) any other cause of similar nature beyond the reasonable control
of that Party.
12.2 Economic hardship of either Party shall not constitute Force Majeure
under this Agreement. Notwithstanding this, if Buyer suffers an event
of Force Majeure it shall be relieved of its obligation to take
delivery of, or otherwise pay for, Energy and Ancillary Services under
this Agreement for the duration of the event of Force Majeure. In
addition, if Buyer is unable to have Energy and Ancillary Services
delivered from the Point(s) of Delivery to its service territory due
to transmission outages, that shall be considered a Force Majeure
event and shall relieve Buyer of performance for the extent of the
event.
12.3 In the event of a Force Majeure, neither Party shall be considered in
default under this Agreement or responsible to the other Party in
tort, strict liability, contract or other legal theory for damages of
any description, and affected performance obligations shall be
extended by a period equal to the term of the resultant delay, but in
no event shall exceed the term of the Agreement, provided that the
Party relying on a claim of Force Majeure:
(i) provides prompt written notice of such Force Majeure event to
the other Party, giving an estimate of its expected duration
and the probable impact on the performance of its obligations
hereunder;
(ii) exercises all reasonable efforts to continue to perform its
obligations under this Agreement;
27
(iii) expeditiously takes action to correct or cure the event or
condition excusing performance so that the suspension of
performance is no greater in scope and no longer in duration
than is dictated by the problem; provided, however, that
settlement of strikes or other labor disputes will be
completely within the sole discretion of the Party affected by
such strike or labor dispute;
(iv) exercises all reasonable efforts to mitigate or limit damages
to the other Party; and
(v) provides prompt notice to the other Party of the cessation of
the event or condition giving rise to its excuse from
performance.
12.4 Notwithstanding the above provisions, a Force Majeure event shall
excuse Supplier from its obligation to deliver the Supply Amount
pursuant to Section 4 of this Agreement only for the first twenty-four
(24) hours of the Force Majeure event, provided that the total amount
of energy excused in accordance with this Section 12.4 during any
Contract Year shall not exceed the Limit on Excused Energy set forth
in Exhibit A. After such twenty-four (24) hour period, Supplier must
either deliver the Supply Amount at the Point(s) of Delivery or pay
liquidated damages pursuant to Section 4.2 of this Agreement.
12.5 If Supplier has notified Buyer of an event of Force Majeure, and if
Supplier so requests, Buyer will attempt to replace the Supply Amount
that is not excused in accordance with Section 12.4 with Energy or
Ancillary Services from another Asset Bundle. However, Buyer's
inability to acquire such replacement Energy or Ancillary Services
shall not excuse Supplier from Supplier's obligation to deliver the
Supply Amount not otherwise excused in accordance with Section 12.4
13. DISPUTES
13.1 Any action, claim or dispute which either Party may have against the
other arising out of or relating to this Agreement or the transactions
contemplated hereunder, or the breach, termination or validity thereof
(any such claim or dispute, a "Dispute") shall be submitted in writing
to the other Party. The written submission of any Dispute shall
include a concise statement of the question or issue in dispute
together with a statement listing the relevant facts and documentation
that support the claim.
13.2 The Parties agree to cooperate in good faith to expedite the
resolution of any Dispute. Pending resolution of a Dispute, the
Parties shall
28
proceed diligently with the performance of their obligations under
this Agreement.
13.3 The Parties shall first attempt in good faith to resolve any Dispute
through informal negotiations by the Contract Representatives. In the
event that the Contract Representatives are unable to satisfactorily
resolve the Dispute within thirty (30) days from the receipt of notice
of the Dispute, either Party may by written notice to the other Party
refer the Dispute to its respective senior management for resolution
as promptly as practicable. If the Parties' senior management are
unable to resolve the Dispute within forty-five (45) days from the
date of such referral, thereafter the Parties may agree in writing to
extend the time period of such senior management negotiations. In the
event the Parties' senior management do not resolve the dispute within
the prescribed or extended time period, either Party may initiate
arbitration through the serving and filing of a demand for arbitration
and the Parties expressly agree that arbitration in accordance with
this Section 13 shall be the exclusive means to further resolve any
Dispute and hereby irrevocably waive their right to a jury trial with
respect to any Dispute, provided that at any time:
13.3.1 A request made by a Party for provisional remedies
requesting preservation of the Parties' respective rights
and obligations under the Agreement may be resolved by a
court of law located in the County of the principal place of
business of Buyer.
13.3.2 Nothing in this Agreement shall preclude, or be construed to
preclude, any Party from filing a petition or complaint with
the FERC or PUCN with respect to any arbitrable Dispute over
which said agency has jurisdiction. In such case, the other
Party may request the FERC or PUCN, as applicable, to reject
or to waive jurisdiction. If jurisdiction is rejected or
waived with respect to all or a portion of the Dispute, the
portion of the Dispute not so accepted by the FERC or PUCN,
as applicable, shall be resolved through arbitration in
accordance with this Agreement. To the extent that the FERC
or PUCN, as applicable, asserts or accepts jurisdiction over
the Dispute, the decision, finding of fact or order of FERC
shall be final and binding, subject to judicial review under
the Federal Power Act or Nevada Revised Statutes and subject
to the provisions of Section 2.2.2. Any arbitration
proceedings that may have commenced with respect to the
Dispute prior to the assertion or acceptance of jurisdiction
by the FERC or PUCN, as applicable, shall be terminated to
the extent the FERC or PUCN accepts or asserts jurisdiction
over such Dispute.
29
13.4 Unless otherwise agreed by the Parties, any arbitration initiated
under this Agreement shall be conducted in accordance with the
following:
13.4.1 Arbitrations shall be held within the County of the
principal place of business of Buyer.
13.4.2 Except as otherwise modified herein, the arbitration shall
be conducted in accordance with the "Commercial Arbitration
Rules" of the American Arbitration Association ("AAA") then
in effect.
13.4.3 Arbitration shall be conducted by one neutral arbitrator who
shall be selected pursuant to the AAA rules and the
following:
13.4.3.1 The Parties agree that the list of potential
arbitrators provided by the AAA shall, if
available, contain twenty (20) candidates, and at
least fifty percent (50%) of the candidates shall
be members of the AAA National Energy Panel.
13.4.3.2 The Parties also agree that each shall be allowed
to strike the names of five candidates before
ranking the remaining candidates and returning the
list to the AAA in accordance with the Commercial
Arbitration Rules. If the Parties are unable to
agree on an arbitrator, such arbitrator shall be
appointed by the AAA.
13.4.3.3 The arbitrator shall not have any current or past
substantial business, financial, or personal
relationships with either Party (or their
Affiliates) and shall not be a vendor, supplier,
customer, employee, consultant, or competitor to
either of the Parties or their Affiliates.
13.4.3.4 The arbitrator shall be authorized only to
interpret and apply the provisions of this
Agreement or any related agreements entered into
under this Agreement and shall have no power to
modify or change any provision of this Agreement.
The arbitrator shall have no authority to award
punitive or multiple damages or any damages
inconsistent with this Agreement. The arbitrator
shall within thirty (30) days of the conclusion of
the hearing, unless such time is extended by
agreement of the Parties, notify the Parties in
writing of his or her decision, stating his or her
30
reasons for such decision and separately listing
his or her findings of fact and conclusions of
law. Judgment on the award may be entered in any
court having jurisdiction.
13.5 The Parties shall proceed with the arbitration expeditiously, and the
arbitration shall be concluded within five (5) months of the filing of
the demand for arbitration pursuant to this Section 13 in order that
the decision may be rendered within six (6) months of such filing,
unless the arbitrator extends such time at the request of a Party upon
a showing of good cause or upon agreement of the Parties.
13.6 Any arbitration proceedings, decision or award rendered hereunder and
the validity, effect and interpretation of any arbitration agreement
shall be governed by the Federal Arbitration Act of the United States,
9 U.S.C. (S)(S) 1 et seq.
13.7 The decision of the arbitrator shall be final and binding on both
Parties and may be enforced in any court having jurisdiction over the
Party against which enforcement is sought.
13.8 The fees and expenses of the arbitrator shall be shared by the Parties
equally, unless the decision of the arbitrator shall specify some
other apportionment of such fees and expenses. All other expenses and
costs of the arbitration shall be borne by the Party incurring the
same.
14. NATURE OF OBLIGATIONS
14.1 Except where specifically stated in this Agreement to be otherwise,
the duties, obligations, and liabilities of the Parties shall be
several, not joint or collective. The provisions of this Agreement
shall not be construed to create an association, trust, partnership,
or joint venture; to impose a trust or partnership duty, obligation,
or liability or agency relationship on or with regard to either Party.
14.2 Nothing in this Agreement nor any action taken hereunder shall be
construed to create any duty, liability, or standard of care to any
person not a Party to this Agreement. Each Party shall be individually
and severally liable for its own obligations under this Agreement.
14.3 By this Agreement, neither Party dedicates any part of its facilities
or the service provided under this Agreement to the public.
15. SUCCESSORS AND ASSIGNS
15.1 This Agreement may be assigned, without express written consent of the
other Party, as follows:
31
15.1.1 Buyer may assign this Agreement or assign or delegate its
rights and obligations under this Agreement, in whole or in
part, if such assignment is made to an affiliate, parent,
subsidiary, successor or any party, provided that such
assignee operates all or a portion of the PLR or if such
assignment is required by Law or applicable regulations.
15.2 Supplier may, without the consent of Buyer, assign, transfer, pledge
or otherwise dispose of its rights and interests hereunder to a
trustee, lending institution, or any Person for the purposes of
financing or refinancing the Asset Bundle, including upon or pursuant
to the exercise of remedies under such financing or refinancing, or by
way of assignments, transfers, conveyances of dispositions in lieu
thereof; provided, however, that no such assignment or disposition
shall relieve or in any way discharge Supplier or such permitted
assignee from the performance of its duties and obligations under this
Agreement. Buyer agrees to execute and deliver such documents as may
be reasonably necessary to accomplish any such assignment, transfer,
conveyance, pledge or disposition of rights hereunder for purposes of
the financing or refinancing of the Asset Bundle, so long as Buyer's
rights under this Agreement are not thereby materially altered,
amended, diminished or otherwise impaired.
15.3 Either Party may, without the consent of the other Party, assign this
Agreement to a successor to all or substantially all of the assets of
such Party by way of merger, consolidation, sale or otherwise,
provided such successor assumes and becomes liable for all of such
Party's duties and obligations hereunder including Section 3 hereof.
15.4 Except as stated above, neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned by either Party,
including by operation of law, without the prior written consent of
the other Party, said consent not to be unreasonably withheld. Any
assignment of this Agreement in violation of the foregoing shall be,
at the option of the non-assigning Party, void.
15.5 Except as set forth above, no assignment or transfer of rights or
obligations under this Agreement by a Party shall relieve said Party
from full liability and financial responsibility for the performance
thereof after any such transfer or assignment unless and until the
transferee or assignee shall agree in writing to assume the
obligations and duties of said Party under this Agreement and the
other Party has consented in writing to such assumption; said consent
not to be unreasonably withheld.
32
15.6 This Agreement and all of the provisions hereof are binding upon, and
inure to the benefit of, the Parties and their respective successors
and permitted assigns.
16. REPRESENTATIONS
16.1 Representations of the Parties. The Parties represent and warrant each
------------------------------
to the other as follows:
16.1.1 Incorporation. Buyer is a corporation duly incorporated,
-------------
validly existing and in good standing under the laws of the
State of Nevada. Supplier is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Arizona. Both Buyer and Supplier have all requisite
corporate power and authority to own, lease and operate
their material assets and properties and to carry on their
business as now being conducted.
16.1.2 Authority. The Party has full corporate power and authority
---------
to execute and deliver this Agreement and, subject to the
procurement of applicable regulatory approvals, to carry out
the actions required of it by this Agreement. The execution
and delivery of this Agreement and the transactions
contemplated hereby have been duly and validly authorized by
all necessary corporate action required on the part of the
Party. The Agreement has been duly and validly executed and
delivered by the Party and, assuming that it is duly and
validly executed and delivered by the other Party,
constitutes a legal, valid and binding agreement of the
Party.
16.1.3 Compliance With Law. The Party represents and warrants
-------------------
that it is not in violation of any applicable Law, or
applicable regulation, which violation could reasonably be
expected to materially adversely affect the other Party's
performance of its obligations under this Agreement. The
Party represents and warrants that it will comply with all
Laws, and regulations applicable to its compliance with this
Agreement, non-compliance with which would reasonably be
expected to materially adversely affect either Party's
performance of its obligations under this Agreement.
16.1.4 Representations of Both Parties. The representations in
-------------------------------
this Section 16 shall continue in full force and effect for
the term of this Agreement.
17. DEFAULT AND REMEDIES
33
17.1 An Event of Default hereunder shall be deemed to have occurred upon a
Party's (Defaulting Party) failure to comply with any material
obligation imposed upon it by this Agreement. Examples of an Event of
Default include, but are not limited to the following:
(i) Failure to make any payments due under this Agreement;
(ii) Failure to deliver the Supply Amount for a period of five (5)
consecutive days;
(iii) Failure to follow the directions of a Control Area Operator,
ISA, EDU, WSCC, NERC, PUCN, FERC, or any successor thereto
where following such directions is required hereunder;
(iv) Supplier not being in compliance with Section 3; and
(v) Failure of the Guarantor to be in compliance with the terms of
the Guarantee delivered under Section 3.1.2.
17.2 An Event of Default shall be excused:
17.2.1 In the event such Event of Default was caused by Force
Majeure provided that the Party claiming a Force Majeure
complies with the requirements of Section 12; and
17.2.2 In the event such Event of Default was caused by
transmission and distribution outages or disruptions.
17.3 Unless excused, in an Event of Default the Non-Defaulting Party shall
be entitled to provide written notice (or verbal notice in case of
emergency followed by written notice) of the Event of Default to the
Defaulting Party and to specify a cure period, which cure period shall
be a minimum of thirty (30) days.
17.4 If an Event of Default is not cured by the Defaulting Party during the
cure period specified by the Non-Defaulting Party, the Non-Defaulting
Party shall be entitled to those remedies which are not inconsistent
with the terms of this Agreement, including termination and the
payment of liquidated damages. A Defaulting Party shall not be liable
to the Non-Defaulting Party for any punitive, consequential or
incidental damages. For purposes of clarification, Replacement Costs
shall not be considered consequential or incidental damages under this
Section 17.4.
17.5 Notwithstanding this Section 17, liquidated damages shall be paid to
Buyer pursuant to Sections 4.2, 12, 18, and 21.
34
18. FACILITY ADDITIONS AND MODIFICATIONS
18.1 Supplier shall be entitled to make additions and modifications to the
Asset Bundle subject to the following:
18.1.1 To the extent additions and modifications interfere with the
operation of the Asset Bundle in providing the Supply Amount
to Buyer beyond the limits for planned outages set forth in
Section 21, liquidated damages shall be paid to Buyer
pursuant to Section 4.2.
18.1.2 Supplier shall use reasonable efforts to minimize any
adverse impact on Buyer during the course of making such
additions and modifications.
18.1.3 Such additions and modifications shall be conducted in
accordance with Good Utility Practice, and all applicable
Laws, regulations, reliability criteria and the
Interconnection Agreement between Nevada Power Company and
Pinnacle West Energy Corporation dated as of December 1,
2000, as it may be amended from time to time.
18.2 Supplier shall seek Buyer's prior written approval, which shall not be
unreasonably withheld, for all Supplier's additions or modifications
to the Asset Bundle which might reasonably be expected to have an
adverse effect upon Buyer with respect to operations or performance
under this Agreement.
19. COORDINATION
19.1 Upon knowledge thereof, each Party shall promptly give notice to the
other Party of any labor dispute which is delaying or threatens to
delay the timely performance of this Agreement, which shall include a
description of the general nature of the dispute.
20. EMERGENCY AND NONEMERGENCY CONDITION RESPONSE
20.1 Buyer and Supplier shall comply with any applicable requirement of any
Governmental Authority, NERC, WSCC, ISA, Control Area Operator,
transmission operator, EDU or any successor of any of them, regarding
the reduced or increased generation of the Asset Bundle in the event
of an Emergency Condition or Nonemergency Condition.
20.2 Supplier shall not be obligated to deliver the Supply Amount and no
liquidated damages shall become due, if the Supply Amount is reduced
in the event of an Emergency Condition or a Nonemergency Condition.
35
20.3 Each Party shall provide prompt verbal notice to the other Party of
any Emergency Condition or Nonemergency Condition.
20.4 Either Party may take reasonable and necessary action to prevent,
avoid or mitigate injury, danger, damage or loss to its own equipment
and facilities, or to expedite restoration of service; provided,
however, that the Party taking such action shall give the other Party
prior notice if at all possible before taking any action. However,
this Section 20.4 shall not be construed to supersede Sections 20.2
and 20.3.
21. OUTAGE SCHEDULING
21.1 Supplier shall request Buyer's approval, which shall not be
unreasonably withheld, prior to any inspections, proposed planned
outages or other non-forced outages (all hereinafter referred to as
"planned outages") of the Asset Bundle so as to minimize the impact on
the availability of the Asset Bundle. Under no circumstances shall
Supplier conduct a planned outage without the express prior consent of
Buyer pursuant to this Section 21.
21.2 Planned Outages.
---------------
21.2.1 Within sixty (60) days following the Effective Date of this
Agreement and on or before October 1 of each Contract Year,
Supplier shall provide Buyer with a schedule of proposed
planned outages for the period beginning on the date of such
proposed schedule for the following twelve (12) months. The
proposed planned outage schedule will designate days for
each unit in which the Asset Bundle Capacity will be reduced
in part or total for each such unit. Each proposed schedule
shall include all applicable information, including but not
limited to the following: Month, day and time of requested
outage; facilities impacted (such as Unit and description);
duration of outage; purpose of outage; amount of capacity
(in MWs) which is derated; other conditions and remarks; and
name of contact and phone number.
21.2.2 Buyer shall promptly review Supplier's proposed schedule and
shall either require modifications or approve the proposed
schedule, which approval shall not be unreasonably withheld.
Supplier shall use its best efforts to accomplish all
planned outages in accordance with the approved schedule.
Supplier shall be responsible to Buyer for Replacement Costs
(i) if any outage period exceeds its approved schedule,
provided that changes to the approved schedule may be
requested by either Party and each Party shall make reason-
36
able efforts to accommodate such changes, provided further
the Buyer shall have no obligation to agree to Supplier's
revisions to the approved planned outage schedule; and (ii)
if Supplier conducts a planned outage without the consent of
Buyer as provided herein.
22. REPORTS
22.1 Supplier shall promptly provide Buyer with copies of any orders,
decrees, letters or other written communications to or from any
Governmental Authority asserting or indicating that Supplier and/or
its Asset Bundle is in violation of Laws which relate to Supplier, or
operations or maintenance of the Asset Bundle and which may have an
adverse effect on Buyer. Supplier shall use reasonable efforts to keep
Buyer appraised of the status of any such matters.
23. COMMUNICATIONS
23.1 Supplier's Operating Representatives shall be available twenty-four
(24) hours per day for communications with the Control Area Operator
and/or the ISA and Buyer to facilitate the operations contained in
this Agreement.
23.2 Supplier shall, at its expense, maintain and install real-time
communications equipment at the Asset Bundle to maintain
communications between personnel on site at the Asset Bundle, Buyer
and the Control Area Operator at all times. Supplier shall provide at
its expense:
(i) Ringdown voice telephone lines, and
(ii) Equipment to transmit to and receive telecopies from Buyer
and the Control Area Operator.
23.3 Supplier shall immediately report to Buyer any "Abnormal Condition"
that has or may occur, and provide all pertinent information,
including but not limited to the following:
(i) A description of the "Abnormal Condition" and the actions to
be taken to alleviate the "Abnormal Condition";
(ii) The expected duration including the beginning and ending
time of the "Abnormal Condition"; and
(iii) The amount of any adjustment to the current (real time)
level of Energy and Ancillary Services.
23.4 Cause of the Condition.
-----------------------
37
23.4.1 An "Abnormal Condition" shall include without limitation any
conditions that, to Supplier's knowledge, have or are
reasonably likely to:
(i) Adversely affect Supplier's ability to provide Energy
and Ancillary Services to Buyer;
(ii) Cause an unplanned reduction in the amount of delivery
of Energy and Ancillary Services to Buyer; or
(iii) Cause an unplanned isolation of the Asset Bundle from
the transmission system.
23.5 Supplier shall immediately notify Buyer after such "Abnormal
Condition" has been alleviated.
24. NOTICES
24.1 All notices hereunder shall, unless specified otherwise, be in writing
and shall be addressed, except as otherwise stated herein, to the
Parties as set forth in Exhibit F.
24.2 All written notices or submittals required by this Agreement shall be
sent either by hand-delivery, regular first class U.S. mail,
registered or certified U.S. mail postage paid return receipt
requested, overnight courier delivery, electronic mail or facsimile
transmission and will be effective and deemed to have been received on
the date of receipt personally, on the date and time as documented by
method of delivery if during normal business hours or on the next
succeeding Business Day, or on the third (3/rd/) Business Day
following deposit with the U.S. mail if sent regular first class U.S.
mail.
24.3 Notices of an Event of Default pursuant to Section 17 and or Force
Majeure pursuant to Section 12 may not be sent by regular first class
U.S. mail.
24.4 Any payments required to be made under this Agreement shall be made to
the Party as set forth in Exhibit F.
24.5 Each Party shall have the right to change, at any time upon written
notice to the other Party, the name, address and telephone numbers of
its representatives under this Agreement for purposes of notices and
payments.
25. MERGER
25.1 The Agreement contains the entire agreement and understanding between
the Parties with respect to all of the subject matter contained
38
herein, thereby merging and superseding all prior agreements and
representations by the Parties with respect to such subject matter.
25.2 In the event of any conflict between this Agreement and the Asset Sale
Agreement, the terms of the Asset Sale Agreement shall govern.
26. HEADINGS
26.1 The headings or section titles contained in this Agreement are
inserted solely for convenience and do not constitute a part of this
Agreement between the Parties, nor should they be used to aid in any
manner in the construction of this Agreement.
27. COUNTERPARTS AND INTERPRETATION
27.1 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
27.2 In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the
Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of authorship of any of the provisions
of this Agreement.
27.3 Any reference to any federal, state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
27.4 The word "including" in this Agreement shall mean "including without
limitation".
28. SEVERABILITY
28.1 If any term, provision or condition of this Agreement is held to be
invalid, void or unenforceable by a court or Governmental Authority of
competent jurisdiction and such holding is subject to no further
appeal or judicial review, then such invalid, void, or unenforceable
term, provision or condition shall be deemed severed from this
Agreement and all remaining terms, provisions and conditions of this
Agreement shall continue in full force and effect, unless, however,
the effect of the severance would vitiate the intent of the Parties
hereto, as determined by either Party in its reasonable discretion.
28.2 The Parties shall endeavor in good faith to replace such invalid,
void, or unenforceable provisions with a valid and enforceable
provision which achieves the purposes intended by the Parties to the
greatest extent permitted by law.
39
29. WAIVERS
29.1 No failure or delay on the part of a Party in exercising any of its
rights under this Agreement or in insisting upon strict performance of
provisions of this Agreement, no partial exercise by either Party of
any of its rights under this Agreement, and no course of dealing
between the Parties shall constitute a waiver of the rights of either
Party under this Agreement. Any waiver shall be effective only by a
written instrument signed by the Party granting such waiver, and such
shall not operate as a waiver of, or estoppel with respect to, any
subsequent failure to comply therewith.
30. AMENDMENTS
30.1 The Parties shall negotiate in good faith to determine necessary
amendments, if any, to this Agreement, provided that in negotiating
such amendments the Parties shall attempt, in good faith, to
reasonably preserve the bargain initially struck in this Agreement if
any Governmental Authority, FERC, any state or the PUCN, implements a
change in any Law or applicable regulation that materially affects or
is reasonably expected to materially affect Buyer's PLR service under
this Agreement.
30.2 The Parties shall meet to discuss the impact of any changes in Buyer's
OATT, or any rule or practice of NERC, WSCC, or any other Governmental
Authority on the terms of this Agreement upon request by either Party
during the term of this Agreement.
30.3 In the event that it is deemed necessary to amend this Agreement, the
Parties will attempt to agree upon such amendment and will submit such
mutually agreed upon amendment(s) to the FERC for filing and
acceptance.
30.4 Amendments to this Agreement shall be in writing and shall be executed
by an authorized representative of each Party.
31. TIME IS OF THE ESSENCE
31.1 Time is of the essence of this Agreement and in the performance of all
of the covenants and conditions hereof.
32. APPROVALS
32.1 Each Party's performance under this Agreement is subject to the
condition that all requisite governmental and regulatory approvals for
such performance are obtained in form and substance satisfactory to
the other Party in its reasonable discretion. Each Party shall use
best efforts to obtain all required approvals and shall exercise due
diligence and shall act in good faith to cooperate and assist each
other in
40
acquiring any regulatory approval necessary to effectuate this
Agreement. Further, the Parties agree to reasonably support the other
Party in any associated regulatory proceedings, including by being a
witness on behalf of the other Party.
32.2 This Agreement is made subject to present or future state or federal
laws, regulations, or orders properly issued by state or federal
bodies having jurisdiction.
32.3 The Parties hereto agree to execute and deliver promptly, at the
expense of the Party requesting such action, any and all other and
further instruments, documents and information which may reasonably be
necessary or appropriate to give full force and effect to the terms
and intent of this Agreement.
33. PLR SERVICE
33.1 The Agreement is premised on Buyer providing PLR service.
Notwithstanding anything to the contrary contained herein, if Nevada
retail electricity restructuring (including implementation of retail
customer choice of electricity suppliers) is delayed beyond the
Effective Date of this Agreement, the Parties shall continue to
perform this Agreement in all respects pursuant to the terms and
conditions hereof as if Buyer was the PLR and Buyer's retail and
wholesale customers shall be considered as the TRR.
34. CONFIDENTIALITY
34.1 Confidential Information. Certain information provided by a Party (the
------------------------
"Disclosing Party") to the other Party (the "Receiving Party") in
connection with the negotiation or performance of this Agreement may
be considered confidential and/or proprietary (hereinafter referred to
as "Confidential Information") by the Disclosing Party. To be
considered Confidential Information hereunder, such information must
be clearly labeled or designated by the Disclosing Party as
"confidential" or "proprietary" or with words of like meaning. If
disclosed orally, such information shall be clearly identified as
confidential and such status shall be confirmed promptly thereafter in
writing.
34.2 Treatment of Confidential Information. The Receiving Party shall treat
-------------------------------------
any Confidential Information with at least the same degree of care
regarding its secrecy and confidentiality as the Receiving Party's
similar information is treated within the Receiving Party's
organization. The Receiving Party shall not disclose the Confidential
Information of the Disclosing Party to third parties (except as stated
hereinafter) nor use it for any purpose other than the negotiation or
performance of this Agreement, without the express prior written
consent of
41
the Disclosing Party. The Receiving Party further agrees that it shall
restrict disclosure of Confidential Information as follows:
34.2.1 Disclosure shall be restricted solely to its agents as may
be necessary to enforce the terms of this Agreement after
advising those agents of their obligations under this
Section 34.2.
34.2.2 In the event that the Receiving Party is requested, pursuant
to or as required by applicable Law or by legal process, to
disclose any Confidential Information, the Receiving Party
shall provide the Disclosing Party with prompt notice of
such request or requirement in order to enable Disclosing
Party to seek an appropriate protective order or other
remedy and to consult with Disclosing Party with respect to
Disclosing Party taking steps to resist or narrow the scope
of such request or legal process. The Receiving Party agrees
not to oppose any action by the Disclosing Party to obtain a
protective order or other appropriate remedy. In the absence
of such protective order, and provided that the Receiving
Party is advised by its counsel that it is compelled to
disclose the Confidential Information, the Receiving Party
shall:
(i) furnish only that portion of the Confidential
Information which the Receiving Party is advised by
counsel is legally required; and
(ii) use its commercially reasonable best efforts, at the
expense of the Disclosing Party, to ensure that all
Confidential Information so disclosed will be accorded
confidential treatment.
34.3 Excluded Information. Confidential Information shall not be deemed to
--------------------
include the following:
34.3.1 information which is or becomes generally available to the
public other than as a result of a disclosure by the
Receiving Party;
34.3.2 information which was available to the Receiving Party on a
non-confidential basis prior to its disclosures by the
Disclosing Party; and
34.3.3 information which becomes available to the Receiving Party
on a non-confidential basis from a person other than the
Disclosing Party or its representative who is not otherwise
bound by a confidentiality agreement with Disclosing
42
Party or its agent or is otherwise not under any obligation
to Disclosing party or its agent not to disclose the
information to the Receiving Party.
34.4 Injunctive Relief Due to Breach. The Parties agree that remedies at
-------------------------------
law may be inadequate to protect each other in the event of a breach
of this Section 34, and the Receiving Party hereby in advance agrees
that the Disclosing Party shall be entitled to seek and obtain,
without proof of actual damages, temporary, preliminary and permanent
injunctive relief from any court or Governmental Authority of
competent jurisdiction restraining the Receiving Party from committing
or continuing any breach of this Section 34.
35. CHOICE OF LAW
35.1 This Agreement and the rights and obligations of the Parties shall be
construed and governed by the Laws of: (i) the State of Nevada as if
executed and performed wholly within that state; and (ii) the Federal
Power Act, to the extent the rights and obligations of the Parties are
covered by such act.
[SIGNATURES APPEAR ON NEXT PAGE]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the date and year first above written.
NEVADA POWER COMPANY, as Buyer
________________________________________
By: William E. Peterson
Title: Sr. Vice President, General
Counsel and Corporate Secretary
PINNACLE WEST ENERGY CORPORATION, as Supplier
________________________________________
By: William L. Stewart
Title: President
EXHIBIT A
ASSET BUNDLE CAPACITIES AND OPERATING PARAMETERS
================================================================================
UNIT NET SUMMER NET WINTER RAMP RATE MINIMUM HOURLY
CAPABILITY CAPABILITY (MW)/HOUR ENERGY TAKE
(MW) (MW) (MW)
- -------------------------------------------------------------------------------
HA 3 72* 76* 76* N/A
================================================================================
Minimum Annual Energy Take: 40,000 MWh
Limit on Excused Energy: 4,000 MWh
For purposes of this Exhibit A, summer months shall consist of the months of
June through September and winter months shall consist of the months of January
through May and the months of October through December.
*Subject to confirmation in accordance with Section 7.14(b) of the Asset Sale
Agreement.
A-1
EXHIBIT B
ENERGY AND ANCILLARY SERVICE PRICES
Energy Prices*
- -------------
Price Floor of Energy: $ 21.06 per MWh
Price Ceiling of Energy: $ 135.76 per MWh
Ancillary Service Prices*
- ------------------------
Regulation and Frequency Response:
Summer On-Peak: $ 40.82 per MW-reserved per hour
Summer Off-Peak: $ 23.33 per MW-reserved per hour
Winter On-Peak: $ 22.07 per MW-reserved per hour
Winter Off-Peak: $ 12.61 per MW-reserved per hour
Operating Reserve - Supplemental Reserve:
Summer On-Peak: $ 40.82 per MW-reserved per hour
Summer Off-Peak: $ 23.33 per MW-reserved per hour
Winter On-Peak: $ 22.07 per MW-reserved per hour
Winter Off-Peak: $ 12.61 per MW-reserved per hour
For purposes of this Exhibit B, summer months shall consist of the months of
June through September and winter months shall consist of the months of January
through May and October through December.
For purposes of this Exhibit B, On-Peak periods shall consist of Hour Ending
(HE) 0700 through HE 2200 PPT, Monday through Saturday. Off-Peak periods shall
consist of HE 0100 through HE 0600, HE 2300 and HE 2400 PPT, Monday through
Saturday; HE 0100 through HE 2400 PPT Sunday and additional Off-Peak days
(holidays) as designated annually by WSCC.
*SUBJECT TO FERC APPROVAL
------------------------
B-1
EXHIBIT C
SUPPLIER'S MONTHLY INVOICE
A Price Ceiling $ 135.76 /MWh of Energy
B Price Floor $ 21.06 /Mwh of Energy
MONTH 1 - ENERGY
- ----------------
C D E F G H
Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x
Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Capacity
---- -------------- ------------ --------------- ----------------- ---------------- ---------------------
(C - D) (D x F) (C x F)
1 72 72 0 60.00 $ 4,320.00 $ 4,320.00
2 72 72 0 60.00 4,320.00 4,320.00
3 72 12 60 60.00 720.00 4,320.00
4 72 12 60 60.00 720.00 4,320.00
5 42 32 10 50.00 1,600.00 2,100.00
6 42 42 0 50.00 2,100.00 2,100.00
7 62 42 20 40.00 1,680.00 2,480.00
8 72 72 0 40.00 2,880.00 2,880.00
9 72 72 0 40.00 2,880.00 2,880.00
10 72 72 0 45.00 3,240.00 3,240.00
- ----------------------------------------------------------------------------------------------------------------------------------
650 500 150 $24,460.00 $32,960.00
I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $24,460.00
IT. Sum of (Asset Bundle Capacity times corresponding hourly
Market Price) $32,960.00
J. Sum of hourly Delivered Energy multiplied by the Price Ceiling
of Energy Sec 7.2.2 $67,880.00
JT. Sum of hourly Asset Bundle Capacity multiplied by the Price
Ceiling of Energy $88,244.00
K. Sum of hourly Delivered Energy multiplied by the Price Floor
of Energy Sec 7.2.3 $10,530.00
KT. Sum of hourly Asset Bundle Capacity multiplied by the Price
Floor of Energy $13,689.00
L. Invoiced Amount - Energy Sec 7.3 (K * I * J) $24,460.00
M. Theoretical Amount for Expected Performance (KT * IT * JT) $32,960.00
* LESS THAN
MONTH 1 - ANCILLARY SERVICE CAPACITY - REGULATION AND FREQUENCY RESPONSE
- ------------------------------------------------------------------------
N O P Q R S
Dispatch Schedule of Ancillary Ancillary Capacity Supplier Capacity Price of Price x Ancillary Price x Schedule
Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Capacity Supplied of Ancillary Services
---- ------------- ------------- -------------- --------------- ----------------- ---------------------
(N - O) (O x Q) (N x Q)
1 0 0 0 23.33 $ 0.00 $ 0.00
2 0 0 0 23.33 0.00 0.00
3 0 0 0 40.82 0.00 0.00
4 0 0 0 40.82 0.00 0.00
5 10 10 0 40.82 408.20 408.20
6 20 10 10 40.82 408.20 816.40
7 0 0 0 40.82 0.00 0.00
8 0 0 0 40.82 0.00 0.00
9 0 0 0 40.82 0.00 0.00
10 0 0 0 40.82 0.00 0.00
- ----------------------------------------------------------------------------------------------------------------------------------
30 20 10 $ 816.40 $ 1,224.60
T. Invoiced Amount - Ancillary Service Capacity - Regulation
and Frequency Response Sec 7.2.5 $ 816.40
C-1
EXHIBIT C
SUPPLIER'S MONTHLY INVOICE
U. Theoretical Amount for Expected Performance $ 1,224.60
MONTH 1 - ANCILLARY SERVICE CAPACITY - SUPPLEMENTAL RESERVE
- -----------------------------------------------------------
V W X Y Z AA
Dispatch Schedule of Ancillary Ancillary Capacity Supplier Capacity Price of Price x Ancillary Price x Schedule
Hour Capacity (MW) Supplied (MW) Shortfall (MW) Services ($/MW) Capacity Supplied of Ancillary Services
---- ------------- ------------- -------------- --------------- ----------------- ---------------------
(V - W) (W x Y) (V x Y)
1 0 0 0 23.33 $ 0.00 $ 0.00
2 0 0 0 23.33 0.00 0.00
3 0 0 0 40.82 0.00 0.00
4 0 0 0 40.82 0.00 0.00
5 10 10 0 40.82 408.20 408.20
6 10 10 0 40.82 408.20 408.20
7 10 10 0 40.82 408.20 408.20
8 0 0 0 40.82 0.00 0.00
9 0 0 0 40.82 0.00 0.00
10 0 0 0 40.82 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
30 30 0 $ 1,224.60 $ 1,224.60
AB. Invoiced Amount - Ancillary Service Capacity - Supplemental Reserve Sec 7.2.5 $ 1,224.60
AC. Theoretical Amount for Expected Performance $ 1,224.60
MONTH 1 - ANCILLARY SERVICE ENERGY
- ----------------------------------
AD AE AF AG AH AI
Dispatch Schedule of Ancillary Ancillary Energy Supplier Price Ceiling of Price x Ancillary Price x Schedule
Hour Energy (MWh) Supplied (MWh) Shortfall (MWh) Energy ($/MWh) Energy Supplied of Ancillary Energy
---- ------------ -------------- --------------- -------------- --------------- -------------------
(AD - AE) (AE x AG) (AD x AG)
1 0 0 0 135.76 $ 0.00 $ 0.00
2 0 0 0 135.76 0.00 0.00
3 0 0 0 135.76 0.00 0.00
4 0 0 0 135.76 0.00 0.00
5 0 0 0 135.76 0.00 0.00
6 20 10 10 135.76 1,357.60 2,715.20
7 10 10 0 135.76 1,357.60 1,357.60
8 0 0 0 135.76 0.00 0.00
9 0 0 0 135.76 0.00 0.00
10 0 0 0 135.76 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
30 20 10 $ 1,357.60 $ 2,715.20 $ 4,072.80
AJ. Invoiced Amount - Ancillary Services Energy Sec 7.2.6 $ 2,715.20
AK. Theoretical Amount for Expected Performance $ 4,072.80
MONTH 1 - TOTAL INVOICE AMOUNT Sec 7.3 (L + T + AB + AJ) $29,216.20
====================================================================================================================================
MONTH 2 - ENERGY
- ----------------
C D E F G H
C-2
EXHIBIT C
SUPPLIER'S MONTHLY INVOICE
Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x
Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Cap.
---- -------------- ------------ --------------- ----------------- ---------------- -----------------
(C - D) (D x F) (C x F)
1 72 72 0 140.00 $ 10,080.00 $ 10,080.00
2 72 72 0 140.00 10,080.00 10,080.00
3 72 12 60 140.00 1,680.00 10,080.00
4 72 12 60 150.00 1,800.00 10,800.00
5 42 32 10 150.00 4,800.00 6,300.00
6 42 42 0 150.00 6,300.00 6,300.00
7 62 42 20 130.00 5,460.00 8,060.00
8 72 72 0 130.00 9,360.00 9,360.00
9 72 72 0 130.00 9,360.00 9,360.00
10 72 72 0 135.00 9,720.00 9,720.00
- -----------------------------------------------------------------------------------------------------------------------------------
650 500 150 $ 68,640.00 $ 90,140.00
I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $ 68,640.00
IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $ 90,140.00
J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy Sec 7.2.2 $ 67,880.00
JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $ 88,244.00
K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $ 10,530.00
KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $ 13,689.00
L. Invoiced Amount - Energy Sec 7.3 (I > J) $ 67,880.00
M. Theoretical Amount for Expected Performance (IT > JT) $ 88,244.00
MONTH 3 - ENERGY
- ----------------
C D E F G H
Dispatch Asset Bundle Delivered Supplier Market Price Market Price x Market Price x
Hour Capacity (MWh) Energy (MWh) Shortfall (MWh) of Energy ($/MWh) Delivered Energy Asset Bundle Cap.
---- -------------- ------------ --------------- ----------------- ---------------- -----------------
(C - D) (D x F) (C x F)
1 72 72 0 30.00 $ 2,160.00 $ 2,160.00
2 72 72 0 20.00 1,440.00 1,440.00
3 72 12 60 20.00 240.00 1,440.00
4 72 12 60 20.00 240.00 1,440.00
5 42 32 10 15.00 480.00 630.00
6 42 42 0 15.00 630.00 630.00
7 62 42 20 15.00 630.00 930.00
8 72 72 0 15.00 1,080.00 1,080.00
9 72 72 0 15.00 1,080.00 1,080.00
10 72 72 0 15.00 1,080.00 1,080.00
- ----------------------------------------------------------------------------------------------------------------------------------
650 500 150 $ 9,060.00 $ 11,910.00
I. Sum of (Delivered Energy times corresponding hourly Market Price) Sec 7.2.1 $ 9,060.00
IT. Sum of (Asset Bundle Capacity times corresponding hourly Market Price) $ 11,910.00
J. Sum of hourly Delivered Energy multiplied by the Price Ceiling of Energy Sec 7.2.2 $ 67,880.00
C-3
EXHIBIT C
SUPPLIER'S MONTHLY INVOICE
JT. Sum of hourly Asset Bundle Capacity multiplied by the Price Ceiling of Energy $ 88,244.00
K. Sum of hourly Delivered Energy multiplied by the Price Floor of Energy Sec 7.2.3 $ 10,530.00
KT. Sum of hourly Asset Bundle Capacity multiplied by the Price Floor of Energy $ 13,689.00
L. Invoiced Amount - Energy Sec 7.3 (I ** K) $ 10,530.00
M. Theoretical Amount for Expected Performance (IT ** KT) $ 13,689.00
** Less than
*** Greater than
For the purposes of this example, the portions of the monthly invoices
attributable to Ancillary Services for the second and third months were assumed
to be the same as the corresponding portions for the first month.
C-4
EXHIBIT D
BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS
MONTH 1 - ENERGY
- ----------------
A B * C * D
Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement
Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy
---- ------------ ----------------- --------- --------------
(A x B) + C
1 0 na $ 0.00 $ 0.00
2 0 na 0.00 0.00
3 60 35.00 100.00 2,200.00
4 60 30.00 50.00 1,850.00
5 10 30.00 50.00 350.00
6 0 na 0.00 0.00
7 20 25.00 0.00 500.00
8 0 na 0.00 0.00
9 0 na 0.00 0.00
10 0 na 0.00 0.00
- -----------------------------------------------------------------------------------------------------------
150 $ 4,900.00
E. Gross Replacement Cost of Energy $ 4,900.00
F. Theoretical Supplier's Invoice Amount for Expected Performance $32,960.00
G. Actual Supplier's Invoice Amount 24,460.00
----------
H. Avoided Payment to Supplier (F - G) $ 8,500.00
I. Invoiced Replacement Cost - Energy (E ** H) $ 0.00
MONTH 1 - ANCILLARY SERVICE CAPACITY - REGULATION AND FREQUENCY RESPONSE
- ------------------------------------------------------------------------
J K * L * M
Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement
Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity
---- ------------- ------------------ ----------- ----------------
(J x K) + L
1 0 na $ 0.00 $ 0.00
2 0 na 0.00 0.00
3 0 na 0.00 0.00
4 0 na 0.00 0.00
5 0 na 0.00 0.00
6 10 40.00 100.00 500.00
7 0 na 0.00 0.00
8 0 na 0.00 0.00
9 0 na 0.00 0.00
10 0 na 0.00 0.00
- ---------------------------------------------------------------------------------------------------------
10 $ 500.00
N. Gross Replacement Cost of Ancillary Capacity - Regulation and Frequency Response $ 500.00
O. Theoretical Supplier's Invoice Amount for Expected Performance $ 1,224.60
P. Actual Supplier's Invoice Amount 816.40
------------
Q. Avoided Payment to Supplier (O - P) $ 408.20
R. Invoiced Replacement Cost - Ancillary Capacity (N *** Q) $ 91.80
** Less than
*** Greater than
D-1
EXHIBIT D
BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS
MONTH 1 - ANCILLARY CAPACITY - SUPPLEMENTAL RESERVE
- ---------------------------------------------------
S T * U * V
Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement
Hour Capacity (MW) of Capacity ($/MW) of Capacity Cost of Capacity
---- ------------- ------------------ ----------- ----------------
(S x T) + U
1 0 na $ 0.00 $ 0.00
2 0 na 0.00 0.00
3 0 na 0.00 0.00
4 0 na 0.00 0.00
5 0 na 0.00 0.00
6 0 na 0.00 0.00
7 0 na 0.00 0.00
8 0 na 0.00 0.00
9 0 na 0.00 0.00
10 0 na 0.00 0.00
- -------------------------------------------------------------------------------------------
0 $ 0.00
W. Gross Replacement Cost of Ancillary Capacity - Supplemental Reserve $ 0.00
X. Theoretical Supplier's Invoice Amount for Expected Performance $ 1,224.60
Y. Actual Supplier's Invoice Amount 1,224.60
-----------
Z. Avoided Payment to Supplier (X - Y) $ 0.00
AA. Invoiced Replacement Cost - Ancillary Capacity (W = Z) $ 0.00
MONTH 1 - ANCILLARY SERVICE ENERGY
- ----------------------------------
AB AC * AD * AE
Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement
Hour Energy (MWh) of Energy ($/MWh) of Energy ** Cost of Energy
---- ------------ ----------------- ------------ --------------
(AB x AC) + AD
1 0 na $ 0.00 0.00
2 0 na 0.00 0.00
3 0 na 0.00 0.00
4 0 na 0.00 0.00
5 0 na 0.00 0.00
6 10 150.00 100.00 1,600.00
7 0 na 0.00 0.00
8 0 na 0.00 0.00
9 0 na 0.00 0.00
10 0 na 0.00 0.00
- ----------------------------------------------------------------------------------------------
10 $ 1,600.00
AF. Gross Replacement Cost of Ancillary Energy $ 1,600.00
AG. Theoretical Supplier's Invoice Amount for Expected Performance $ 4,072.80
AH. Actual Supplier's Invoice Amount 2,715.20
-----------------
AI. Avoided Payment to Supplier (AG - AH) $ 1,357.60
AJ. Invoiced Replacement Cost - Ancillary Energy (AF > AI) $ 242.40
==============================================================================================
D-2
EXHIBIT D
BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS
(I + R + AA + AJ) $ 334.20
MONTH 1 - TOTAL INVOICE AMOUNT
===============================================================================
MONTH 2 - ENERGY
- ----------------
A B * C * D
Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement
Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy
---- ------------ ----------------- --------- --------------
(A x B) + C
1 0 na $ 0.00 0.00
2 0 na 0.00 0.00
3 60 190.00 200.00 11,600.00
4 60 175.00 100.00 10,600.00
5 10 88.00 200.00 1,080.00
6 0 na 0.00 0.00
7 20 105.00 300.00 2,400.00
8 0 na 0.00 0.00
9 0 na 0.00 0.00
10 0 na 0.00 0.00
- ---------------------------------------------------------------------------------------------------
150 $ 25,680.00
E. Gross Replacement Cost of Energy $ 25,680.00
F. Theoretical Supplier's Invoice Amount for Expected Performance $ 88,244.00
G. Actual Supplier's Invoice Amount 67,880.00
---------------------
H. Avoided Payment to Supplier (F - G) $ 20,364.00
I. Invoiced Replacement Cost - Energy (E *** H) $ 5,316.00
MONTH 3 - ENERGY
- ----------------
A B * C * D
Dispatch Replacement Replacement Cost Replacement Cost Gross Replacement
Hour Energy (MWh) of Energy ($/MWh) of Energy Cost of Energy
---- ------------ ----------------- --------- --------------
A x B) + C
1 0 na $ 0.00 0.00
2 0 na 0.00 0.00
3 60 32.00 100.00 2,020.00
4 60 28.00 50.00 1,730.00
5 10 28.00 0.00 280.00
6 0 na 0.00 0.00
7 20 24.00 50.00 530.00
8 0 na 0.00 0.00
9 0 na 0.00 0.00
10 0 na 0.00 0.00
- ---------------------------------------------------------------------------------------------------
150 $ 4,560.00
E. Gross Replacement Cost of Energy $ 4,560.00
F. Theoretical Supplier's Invoice Amount for Expected Performance $ 13,689.00
G. Actual Supplier's Invoice Amount 10,530.00
---------------------
H. Avoided Payment to Supplier (F - G) $ 3,159.00
** Less than
*** Greater than
D-3
EXHIBIT D
BUYER'S MONTHLY INVOICE - REPLACEMENT COSTS
I. Invoiced Replacement Cost - Energy (E > H) $ 1,401.00
For the purposes of this example, the portions of the monthly invoices
attributable to Ancillary Services for the second and third months were assumed
to be the same as the corresponding portions for the first month.
EXHIBIT E
YEAR END TRUE-UP INVOICE
A Price Ceiling of Energy $ 135.76 /MWh
B Price Floor of Energy $ 21.06 /MWh
EXAMPLE 1
- ---------
C D E F G
Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced
Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy
----- ------------ ---------------- ---------------- ---------------- ---------------
(A x C) (B x C)
1 500 $ 24,460.00 $ 67,880.00 $ 10,530.00 $ 24,460.00
2 500 68,640.00 67,880.00 10,530.00 67,880.00
3 500 9,060.00 67,880.00 10,530.00 10,530.00
4 720 116,640.00 97,747.20 15,163.20 97,747.20
5 720 113,760.00 97,747.20 15,163.20 97,747.20
6 520 82,160.00 70,595.20 10,951.20 70,595.20
7 720 115,200.00 97,747.20 15,163.20 97,747.20
8 720 113,760.00 97,747.20 15,163.20 97,747.20
9 350 55,650.00 47,516.00 7,371.00 47,516.00
10 720 112,320.00 97,747.20 15,163.20 97,747.20
11 720 118,800.00 97,747.20 15,163.20 97,747.20
12 420 67,200.00 57,019.20 8,845.20 57,019.20
- -------------------------------------------------------------------------------------------------------------
Total 7,110 $ 997,650.00 $ 965,253.60 $ 149,736.60 $ 864,483.60
(Total of Column D) > (Total of Column E) therefore Annual True-up calculated under Section 7.5.1(a)
- ----------------------------------------------------------------------------------------------------
H. Annual True-up - Delivered Energy (Total E - Total G) $ 100,770.00
I. Average Cost of Delivered Energy after True-up ($/MWh) (Total E / Total C) $ 135.76
J K L M N
Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement
Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy
----- ------------ -------------- -------------- -------------- --------------
(I x J)
1 150 $ 4,900.00 $ 0.00
2 150 25,680.00 5,316.00
3 150 4,560.00 1,401.00
4 0 0.00 0.00
5 0 0.00 0.00
6 0 0.00 0.00
7 0 0.00 0.00
8 0 0.00 0.00
9 0 0.00 0.00
10 0 0.00 0.00
11 0 0.00 0.00
- ----------------------------------------------------------------------------------------------
D-4
EXHIBIT E
YEAR END TRUE-UP INVOICE
0.00
12 0 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Total 450 $ 61,092.00 $ 35,140.00 $ 0.00 $ 6,717.00
O. Annual True-up - Replacement Costs (Total N - Total M) $ 6,717.00
TOTAL ANNUAL TRUE-UP * (H + O) $107,487.00
===============================================================================================================================
EXAMPLE 2
- ---------
C D E F G
Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced
Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy
----- ------------ ---------------- ---------------- ---------------- ---------------
(A x C) (B x C)
1 500 $ 24,460.00 $ 67,880.00 $ 10,530.00 $ 24,460.00
2 500 68,640.00 67,880.00 10,530.00 67,880.00
3 500 9,060.00 67,880.00 10,530.00 10,530.00
4 720 113,760.00 97,747.20 15,163.20 97,747.20
5 720 24,480.00 97,747.20 15,163.20 24,480.00
6 520 17,680.00 70,595.20 10,951.20 17,680.00
7 720 25,920.00 97,747.20 15,163.20 25,920.00
8 720 24,480.00 97,747.20 15,163.20 24,480.00
9 350 14,000.00 47,516.00 7,371.00 14,000.00
10 720 23,040.00 97,747.20 15,163.20 23,040.00
11 720 104,400.00 97,747.20 15,163.20 97,747.20
12 420 65,520.00 57,019.20 8,845.20 57,019.20
- ------------------------------------------------------------------------------------------------------------------------------
Total 7,110 $515,440.00 $965,253.60 $149,736.60 $484,983.60
(Total of Column E) > (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b)
- ----------------------------------------------------------------------------------------------------
H. Annual True-up - Delivered Energy (Total D - Total G) $ 30,456.40
I. Average Cost of Delivered Energy after True-up ($/MWh) (Total D / Total C) $ 72.50
J K L M N
Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement
Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy
----- ------------ --------------- -------------- -------------- --------------
(I x J)
1 150 $ 4,900.00 $ 0.00
2 150 25,680.00 5,316.00
3 150 4,560.00 1,401.00
4 0 0.00 0.00
5 0 0.00 0.00
6 0 0.00 0.00
7 0 0.00 0.00
8 0 0.00 0.00
9 0 0.00 0.00
10 0 0.00 0.00
11 0 0.00 0.00
12 0 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------
Total 450 $ 32,622.78 $ 35,140.00 $ 2,517.22 $ 6,717.00
D-5
EXHIBIT E
YEAR END TRUE-UP INVOICE
O. Annual True-up - Replacement Costs (Total N - Total M) $ 4,199.78
Total Annual True-up * (H + O) $ 34,656.18
================================================================================
EXAMPLE 3
- ---------
C D E F G
Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced
Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy
----- ------------ ---------------- ---------------- ---------------- ---------------
(A x C) (B x C)
1 500 $ 24,460.00 $ 67,880.00 $ 10,530.00 $ 24,460.00
2 500 68,640.00 67,880.00 10,530.00 67,880.00
3 500 9,060.00 67,880.00 10,530.00 10,530.00
4 720 23,040.00 97,747.20 15,163.20 23,040.00
5 720 21,600.00 97,747.20 15,163.20 21,600.00
6 520 14,560.00 70,595.20 10,951.20 14,560.00
7 720 18,720.00 97,747.20 15,163.20 18,720.00
8 720 20,160.00 97,747.20 15,163.20 20,160.00
9 350 9,800.00 47,516.00 7,371.00 9,800.00
10 720 23,040.00 97,747.20 15,163.20 23,040.00
11 720 20,160.00 97,747.20 15,163.20 20,160.00
12 420 10,920.00 57,019.20 8,845.20 10,920.00
- -------------------------------------------------------------------------------------------------------------------------------
Total 7,110 $264,160.00 $965,253.60 $149,736.60 $264,870.00
(Total of Column E) > (Total of Column D) therefore Annual True-up calculated under Section 7.5.1(b)
- ----------------------------------------------------------------------------------------------------
H. Annual True-up - Delivered Energy (Total D - Total G) $ (710.00)
I. Average Cost of Delivered Energy after True-up ($/MWh) (Total D / Total C) $ 37.15
J K L M N
Replacement Replacement Gross Replacement Adjusted Replacement Invoiced
Energy Replacement
Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy
----- ------------ --------------- -------------- -------------- --------------
(I x J)
1 150 $ 4,900.00 $ 0.00
2 150 25,680.00 5,316.00
3 150 4,560.00 1,401.00
4 0 0.00 0.00
5 0 0.00 0.00
6 0 0.00 0.00
7 0 0.00 0.00
8 0 0.00 0.00
9 0 0.00 0.00
10 0 0.00 0.00
11 0 0.00 0.00
12 0 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Total 450 $ 16,718.99 $ 35,140.00 $ 18,421.01 $ 6,717.00
O. Annual True-up - Replacement Costs (Total N - Total M) $(11,704.01)
D-6
EXHIBIT E
YEAR END TRUE-UP INVOICE
Total Annual True-up * (H + O) $(12,414.01)
================================================================================
EXAMPLE 4
- ---------
C D E F G
Delivered Market Price x Price Ceiling x Price Floor x Supplier's Invoiced
Month Energy (MWh) Delivered Energy Delivered Energy Delivered Energy Amount - Energy
----- ------------- ---------------- ---------------- ---------------- ---------------
(A x C) (B x C)
1 500 $ 24,460.00 $ 67,880.00 $ 10,530.00 $ 24,460.00
2 500 68,640.00 67,880.00 10,530.00 67,880.00
3 500 9,060.00 67,880.00 10,530.00 10,530.00
4 720 5,760.00 97,747.20 15,163.20 15,163.20
5 720 5,760.00 97,747.20 15,163.20 15,163.20
6 520 4,160.00 70,595.20 10,951.20 10,951.20
7 720 5,760.00 97,747.20 15,163.20 15,163.20
8 720 5,760.00 97,747.20 15,163.20 15,163.20
9 350 2,800.00 47,516.00 7,371.00 7,371.00
10 720 5,760.00 97,747.20 15,163.20 15,163.20
11 720 5,760.00 97,747.20 15,163.20 15,163.20
12 420 3,360.00 57,019.20 8,845.20 8,845.20
- -------------------------------------------------------------------------------------------------------------------------------
Total 7,110 $147,040.00 $965,253.60 $149,736.60 $221,016.60
(Total of Column E) > (Total of Column D) therefore Annual True-up calculated
- -----------------------------------------------------------------------------
under Section 7.5.1(b)
- ----------------------
H. Annual True-up - Delivered Energy (Total F - Total G) $ (71,280.00)
I. Average Cost of Delivered Energy after True-up ($/MWh) (Total F / Total C) $ 21.06
J K L M N
Replacement Replacement Energy Gross Replacement Adjusted Replacement Invoiced Replacement
Month Energy (MWh) x Average Cost Cost of Energy Cost of Energy Cost of Energy
----- ------------ -------------- -------------- -------------- --------------
(I x J)
1 150 $ 4,900.00 $ 0.00
2 150 25,680.00 5,316.00
3 150 4,560.00 1,401.00
4 0 0.00 0.00
5 0 0.00 0.00
6 0 0.00 0.00
7 0 0.00 0.00
8 0 0.00 0.00
9 0 0.00 0.00
10 0 0.00 0.00
11 0 0.00 0.00
12 0 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Total 450 $ 9,477.00 $ 35,140.00 $ 25,663.00 $ 6,717.00
O. Annual True-up - Replacement Costs (Total N - Total M) $ (18,946.00)
Total Annual True-up * (H + O) $ (90,226.00)
===============================================================================================================================
D-7
EXHIBIT E
YEAR END TRUE-UP INVOICE
* Positive Total Annual True-up is indicative of a payment form Buyer to
Supplier; Negative Total Annual True-up is indicative of a payment form Supplier
to Buyer.
D-8
EXHIBIT F
NOTICES, BILLING AND PAYMENT INSTRUCTIONS
Supplier:
- --------
a) Agreement Notices: Name and Address
------------------
Phone:
Fax:
b) Payment Check: Name and Address
--------------
c) Payment Wire Transfer: Bank:
----------------------
ABA #:
For: Supplier's Name
Account No:
For:
d) Invoices: Name and Address
--------
Phone:
Fax:
e) Operating Notifications:
-----------------------
i) (Management, if required)
ii) Pre-Schedule: Phone:
Fax:
iii) Real Time: Phone:
Fax:
iv) Monthly Checkout Phone:
Person: Fax:
F-2
Buyer:
- -----
a) Agreement Notices:
-----------------
Address: Gary Craythorn
Manager, Resource Contracts
Nevada Power Company
6226 West Sahara Avenue, M/S 26A
Las Vegas, Nevada 89146
Phone: 702/367-5425
Fax: 702/227-2455
E-mail: gcraythorn@nevp.com
b) Invoices:
--------
US Post Office: (Via Certified Mail) Overnight Delivery
--------------- ------------------
Address: Nevada Power Company Address: Nevada Power Company
Attn: Kathy Crews Attn: Kathy Crews
P.O. Box 230, M/S 20 6226 West Sahara Ave., M/S 20
Las Vegas, Nevada 89151 Las Vegas, Nevada 89146
Telephone: 702/227-2476
Fax: 702/367-5096
E-mail: kcrews@nevp.com
c) Schedules:
---------
i) Pre-Schedule: Primary Name: Rick Engebretson Phone: 702/862-7195
E-mail: rengebretson@nevp.com
Alternate Name: Tim Schuster Phone: 702/862-7194
E-mail: tschuster@nevp.com
Fax: 702/227-2404
ii) Real Time: Phone: 702/862-7106
Fax: 702/227-2404
iii) Monthly Checkout: Kathy Crews Phone: 702/227-2476
Fax:702/367-5096
E-mail: kcrews@nevp.com
d) Control Area/Transmission:
-------------------------
i) Reliability Dispatch: Phone: (702) 451-2026
Fax: (702) 862-7113
ii) Transmission Dispatch: Phone: (702) 451-8346
Fax: (702) 862-7113
F-3
EXHIBIT G
FORM OF AVAILABILITY NOTICE
Date of Notice:
Time of Notice:
Supplier:
Name of Supplier's Representative:
Buyer:
Asset Bundle:
Availability Dates (96 hours total):
A B C D E*
Permitted Asset Bundle
Availability Hour Available from Total Derating Derating of Capacity of Alternative Point(s)
Date Ending Unit 1 (MW) of Unit 1 (MW) Unit 1 (MW) Unit 1 (MW) of Delivery
---- ------ ---------- ------------- ---------- ---------- -----------
(A ** or (___ - A) (C ** or = B) (A - C)
= ---)
600
700
800
0900
1000
1100
1200
1300
1400
1500
1600
1700
1800
1900
2000
2100
2200
2300
2400
0100
0200
0300
0400
0500
0600
0700
:
(96 hours total)
:
300
400
500
F
Availability Hour Cause and Expected Duration of Deratings
Date Ending and Identification of Permitted Deratings
---- ------ -----------------------------------------
600
700
800
0900
1000
1100
1200
1300
1400
1500
1600
1700
1800
1900
2000
2100
2200
2300
2400
0100
0200
0300
0400
0500
0600
0700
:
(96 hours total)
:
300
400
500
* The Parties' operational personnel shall develop the necessary procedure
to document requests and responses to utilize Alternative Point(s) of
Delivery.
** less than
*** Greater than
G-1
EXHIBIT H
FORM OF GUARANTY
This Guaranty is entered into as of ______________, 2000 by
_______________, a ___________ corporation ("Guarantor"), on behalf of
_________________, a ___________ corporation ("Supplier"), in favor of and for
the benefit of Nevada Power Company, a Nevada corporation ("NPC")./2/2 NPC is
sometimes referred to herein as "Beneficiary".
WHEREAS, Supplier and NPC are entering into a Transitional Power Purchase
Agreement dated as of _____________, 2000 (the "TPPA") by which Supplier has
agreed to sell and NPC has agreed to buy Energy and Ancillary Services (as
defined in the TPPA) produced by the ______________ generating station being
sold by NPC; and
WHEREAS, it is a condition to the obligation of NPC to enter into the TPPA
for Guarantor to guaranty the Supplier's obligations under the TPPA in an amount
not to exceed the Credit Amount (as defined in the TPPA) (the "Guarantied
Obligations").
1. Guaranty. Guarantor irrevocably and unconditionally guaranties, as
primary obligor and not merely as surety, the due and punctual payment in full
of all Guarantied Obligations (including amounts that would become due but for
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C.(S) 362(a)).
In the event that all or any portion of the Guarantied Obligations is paid
by Supplier, the obligations of Guarantor hereunder shall continue and remain in
full force and effect or be reinstated, as the case may be, in the event that
all or any part of such payment(s) is rescinded or recovered directly or
indirectly from the Beneficiary as a preference, fraudulent transfer or
otherwise, and any such payments that are so rescinded or recovered shall
constitute Guarantied Obligations (to the extent such payments, in the
aggregate, do not exceed the Credit Amount).
Subject to the other provisions of this Section 1, upon failure of Supplier
to pay any of the Guarantied Obligations when and as the same shall become due,
Guarantor will upon demand pay, or cause to be paid, in cash, to NPC, an amount
equal to the aggregate of the unpaid Guarantied Obligations. In the event
Guarantor fails to pay the Guarantied Obligations, each and every default in the
payment shall give rise to a separate cause of action and separate causes of
action may be brought hereunder as each such cause of action arises.
_____________________
/2/ Sierra Pacific Power Company, as the case may be.
H-2
2. Expenses. The Guarantor agrees to reimburse NPC for all reasonable costs
and expenses (including, without limitation, the reasonable fees and expenses of
legal counsel) in connection with (i) any default by Guarantor hereunder and any
enforcement or collection proceeding resulting therefrom, including, without
limitation, all manner of participation in or other involvement with bankruptcy,
insolvency, receivership, foreclosure, winding up or liquidation proceedings of
or involving the Guarantor, judicial or regulatory proceedings of or involving
the Guarantor and workout, restructuring or other negotiations or proceedings of
or involving the Guarantor (whether or not the workout, restructuring or
transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section 2.
3. Guaranty Absolute; Continuing Guaranty. The obligations of Guarantor
hereunder are irrevocable, absolute, independent and unconditional and shall not
be affected by any circumstance which constitutes a legal or equitable discharge
of a guarantor or surety other than payment in full of the Guarantied
Obligations. In furtherance of the foregoing and without limiting the generality
thereof, Guarantor agrees that: (a) this Guaranty is a guaranty of payment when
due and not of collectibility; (b) the obligations of Guarantor hereunder are
independent of the obligations of Supplier under the TPPA and a separate action
or actions may be brought and prosecuted against Guarantor whether or not any
action is brought against the Supplier and whether or not the Supplier is joined
in any such action or actions; and (c) Guarantor's payment of a portion, but not
all, of the Guarantied Obligations shall in no way limit, affect, modify or
abridge Guarantor's liability for any portion of the Guarantied Obligations that
has not been paid. This Guaranty is a continuing guaranty and shall be binding
upon Guarantor and its successors and assigns.
4. Actions by Beneficiary. The Beneficiary may from time to time, without
notice or demand and without affecting the validity or enforceability of this
Guaranty or giving rise to any limitation, impairment or discharge of
Guarantor's liability hereunder, (a) renew, extend, accelerate or otherwise
change the time, place, manner or terms of payment of the Guarantied
Obligations, (b) settle, compromise, release or discharge, or accept or refuse
any offer of performance with respect to, or substitutions for, the Guarantied
Obligations or any agreement relating thereto and/or subordinate the payment of
the same to the payment of any other obligations, (c) request and accept other
guaranties of the Guarantied Obligations and take and hold security for the
payment of this Guaranty or the Guarantied Obligations, (d) release, exchange,
compromise, subordinate or modify, with or without consideration, any security
for payment of the Guarantied Obligations, any other guaranties of the
Guarantied Obligations, or any other obligation of any Person with respect to
the Guarantied Obligations, (e) enforce and apply any security hereafter held by
or for the benefit of the Beneficiary in respect of this Guaranty or the
Guarantied Obligations and direct the order or manner of sale thereof, or
exercise any other right or remedy that the Beneficiary may have against any
such security, and (f) exercise any other rights available to NPC under the
TPPA.
H-3
5. No Discharge. This Guaranty and the obligations of Guarantor hereunder
shall be valid and enforceable and shall not be subject to any limitation,
impairment or discharge for any reason (other than payment in full of the
Guarantied Obligations), including without limitation the occurrence of any of
the following, whether or not Guarantor shall have had notice or knowledge of
any of them: (a) any failure to assert or enforce or agreement not to assert or
enforce, or the stay or enjoining, by order of court, by operation of law or
otherwise, of the exercise or enforcement of, any claim or demand or any right,
power or remedy with respect to the Guarantied Obligations or any agreement
relating thereto, or with respect to any other guaranty of or security for the
payment of the Guarantied Obligations, (b) any waiver or modification of, or any
consent to departure from, any of the terms or provisions of any other guaranty
or security for the Guarantied Obligations, (c) the Guarantied Obligations, or
any agreement relating thereto, at any time being found to be illegal, invalid
or unenforceable in any respect, (d) the application of payments received from
any source to the payment of indebtedness other than the Guarantied Obligations,
even if the Beneficiary might have elected to apply such payment to any part or
all of the Guarantied Obligations, (e) any failure to perfect or continue
perfection of a security interest in any collateral which secures any of the
Guarantied Obligations, (f) any defenses, set-offs or counterclaims which the
Supplier may assert against the Beneficiary in respect of the Guarantied
Obligations, including but not limited to failure of consideration, breach of
warranty, payment, statute of frauds, statute of limitations, accord and
satisfaction, and (g) any other act or thing or omission, or delay to do any
other act or thing, which may or might in any manner or to any extent vary the
risk of Guarantor as an obligor in respect of the Guarantied Obligations.
6. Waivers for the Benefit of Beneficiary. Guarantor waives, for the
benefit of Beneficiary: (a) any right to require the Beneficiary, as a condition
of payment or performance by Guarantor, to (i) proceed against the Supplier, any
other guarantor of the Guarantied Obligations or any other Person, (ii) proceed
against or exhaust any security held from the Supplier, any other guarantor of
the Guarantied Obligations or any other Person, or (iii) pursue any other remedy
in the power of the Beneficiary; (b) any defense arising by reason of the
incapacity, lack of authority or any disability or other defense of the Supplier
including, without limitation, any defense based on or arising out of the lack
of validity or the unenforceability of the Guarantied Obligations or any
agreement or instrument relating thereto or by reason of the cessation of the
liability of the Supplier from any cause other than payment in full of the
Guarantied Obligations; (c) any defense based upon any statute or rule of law
which provides that the obligation of a surety must be neither larger in amount
nor in other respects more burdensome than that of the principal; (d) (i) any
principles or provisions of law, statutory or otherwise, that are or might be in
conflict with the terms of this Guaranty and any legal or equitable discharge of
Guarantor's obligations hereunder, (ii) the benefit of any statute of
limitations affecting Guarantor's liability hereunder or the enforcement hereof,
(iii) any rights to set-offs, recoupments and counterclaims, and (iv)
promptness, diligence and any requirement that the
H-4
Beneficiary protect, secure, perfect or insure any lien on any property subject
thereto; (e) notices, demands, presentments, protests, notices of protest,
notices of dishonor and notices of any action or inaction, including acceptance
of this Guaranty; and (f) to the fullest extent permitted by law, any defenses
or benefits that may be derived from or afforded by law which limit the
liability of or exonerate guarantors or sureties, or which may conflict with the
terms of this Guaranty.
7. Waiver of Rights Against Supplier. Guarantor waives any claim, right or
remedy, direct or indirect, that Guarantor now has or may hereafter have against
the Supplier or any of its assets in connection with this Guaranty or the
performance by Guarantor of its obligations hereunder, in each case whether such
claim, right or remedy arises in equity, under contract, by statute, under
common law or otherwise and including without limitation (a) any right of
subrogation, reimbursement or indemnification that Guarantor now has or may
hereafter have against the Supplier, (b) any right to enforce, or to participate
in, any claim, right or remedy that the Beneficiary now has or may hereafter
have against the Supplier, and (c) any benefit of, and any right to participate
in, any collateral or security hereafter held by the Beneficiary. Guarantor
further agrees that, to the extent the waiver or agreement to withhold the
exercise of its rights of subrogation, reimbursement and indemnification as set
forth herein is found by a court of competent jurisdiction to be void or
voidable for any reason, any rights of subrogation, reimbursement or
indemnification Guarantor may have against the Supplier or against any
collateral or security shall be junior and subordinate to any rights the
Beneficiary may have against Supplier, to all right, title and interest the
Beneficiary may have in any such collateral or security, and to any right the
Beneficiary may have against such other guarantor.
8. Representations and Warranties of Guarantor. Guarantor represents and
warrants to NPC as follows:
(a) Guarantor is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation. Guarantor has the
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.
(b) Guarantor has the corporate power and authority to execute and deliver
this Guaranty and to consummate the transactions contemplated hereby. The
execution and delivery of this Guaranty and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of Guarantor, and no other corporate proceedings on the part of
Guarantor, including the approval of its shareholders, are necessary to
authorize this Guaranty or to consummate the transactions so contemplated. This
Guaranty has been duly and validly executed and delivered by Guarantor and
constitutes a valid and binding agreement of Guarantor, enforceable against
Guarantor in accordance with its terms.
(c) There are no legal or arbitral proceedings by or before any
governmental or regulatory authority or agency, now pending or (to Guarantor's
H-5
knowledge) threatened against Guarantor or its subsidiaries that could
reasonably be expected to have a material adverse effect on the consolidated
financial condition, operations or business taken as a whole of it and its
subsidiaries.
(d) The representations and warranties made herein will remain true until
Guarantor has fulfilled all obligations to pay in full the Guaranteed
Obligations.
9. Set Off. In addition to any other rights the Beneficiary may have under
law or in equity, if any amount shall at any time be due and owing by Guarantor
to the Beneficiary under this Guaranty, the Beneficiary is authorized at any
time or from time to time, without notice (any such notice being expressly
waived), to set off and to appropriate and to apply any indebtedness of the
Beneficiary owing to Guarantor and any other property of Guarantor held by the
Beneficiary to or for the credit or the account of Guarantor against and on
account of the Guarantied Obligations and liabilities of Guarantor to the
Beneficiary under this Guaranty.
10. Disputes. Any action, claim or dispute arising out of or relating to
this Guaranty (any such action, claim or dispute, a "Dispute") shall be
submitted in writing to the other Party. In the event Guarantor and NPC are
unable to resolve the Dispute satisfactorily within thirty (30) days from the
receipt of notice of the Dispute, either Guarantor or NPC may initiate
arbitration through the serving and filing of a demand for arbitration.
Guarantor and NPC expressly agree that such arbitration shall be the exclusive
means to further resolve any Dispute and hereby irrevocably waive their right to
a jury trial with respect to any Dispute, provided that at any time a request
made for provisional remedies requesting preservation of respective rights and
obligations under the Guaranty may be resolved by a court of law located in the
County of the principal place of business of NPC. Arbitration shall be conducted
in accordance with Sections 13.4, 13.5, 13.6, 13.7, and 13.8 of the TPPA.
11. Amendments and Waivers. No amendment, modification, termination or
waiver of any provision of this Guaranty, and no consent to any departure by
Guarantor therefrom, shall in any event be effective without the written
concurrence of NPC and, in the case of any such amendment or modification,
Guarantor. Any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
12. Miscellaneous. It is not necessary for Beneficiary to inquire into the
capacity or powers of Guarantor or Supplier or the officers, directors or any
agents acting or purporting to act on behalf of any of them.
The rights, powers and remedies given to Beneficiary by this Guaranty are
cumulative and shall be in addition to and independent of all rights, powers and
remedies given to Beneficiary by virtue of any statute or rule of law or in the
TPPA. Any forbearance or failure to exercise, and any delay by Beneficiary in
exercising, any right, power or remedy hereunder shall not impair any such
right, power or
H-6
remedy or be construed to be a waiver thereof, nor shall it preclude the further
exercise of any such right, power or remedy.
In case any provision in or obligation under this Guaranty shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
This Guaranty shall inure to the benefit of Beneficiary and its respective
successors and assigns.
13. Notices. All notices, requests, demands, waivers, consents and other
communications hereunder shall be in writing, shall be delivered either in
person, by telegraphic, facsimile or other electronic means, by overnight air
courier or by mail, and shall be deemed to have been duly given and to have
become effective (a) upon receipt if delivered in person or by telegraphic,
facsimile or other electronic means, (b) one (1) business day after having been
delivered to an air courier for overnight delivery or (c) three (3) business
days after having been deposited in the U.S. mails as certified or registered
mail, return receipt requested, all fees prepaid, directed to the parties at the
following addresses:
If to Guarantor, addressed to:
If to NPC, addressed to: William E. Peterson
Nevada Power Company
6100 Neil Road
Reno, Nevada 89511
Facsimile: (775) 834-5959
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed
and delivered by its officers thereunto duly authorized as of the date first
written above.
By: __________________________
Title:_________________________
Address: __________________________
___________________________
___________________________
H-7
EXHIBIT I
COMPANY OBSERVED HOLIDAYS
New Year's Day January 1/st/
Martin Luther King's Day Third Monday in January
President's Day Third Monday in February
Memorial Day (observed) Last Monday in May
Independence Day July 4/th/
Labor Day First Monday in September
Veteran's Day November 11/th/
Thanksgiving Day Fourth Thursday in November
Thanksgiving Friday Friday after Thanksgiving
Christmas Eve December 24/th/
Christmas Day December 25/th/
Holidays falling on Saturday will be observed on the preceding Friday and
those falling on Sunday will be observed on the following Monday.
I-1
EXHIBIT J
ADJUSTMENTS TO TPPA AMOUNT
Monthly Monthly
Month Adjustment Month Adjustment
- --------------------------------------------- ---------------------------------------------
Mar-01 1.1% Mar-02 1.4%
Apr-01 2.4% Apr-02 3.1%
May-01 2.7% May-02 3.2%
Jun-01 3.0% Jun-02 3.3%
Jul-01 12.4% Jul-02 9.7%
Aug-01 12.7% Aug-02 9.9%
Sep-01 12.9% Sep-02 10.0%
Oct-01 2.2% Oct-02 1.8%
Nov-01 2.3% Nov-02 1.9%
Dec-01 2.4% Dec-02 1.9%
Jan-02 1.3% Jan-03 1.6%
Feb-02 1.4% Feb-03 1.6%
Example 1 - Effective Date of Agreement is April 15, 2001
- ---------------------------------------------------------
A. TPPA Amount: $ 15,000,000
B C D
Monthly Applicable Applicable
Month Adjustment Portion * Adjustment
- ---------------------------------------------------------------------------------------------
(B x C)
Apr-01 2.4% 50.0% 1.2%
May-01 2.7% 100.0% 2.7%
- ---------------------------------------------------------------------------------------------
Total 3.9%
E. Total of Monthly Applicable Adjustments 3.9%
F Adjusted TPPA Amount (A x (1+D)) $ 15,585,000
=======================================================================================================================
Example 2 - Effective Date of Agreement is September 15, 2001
- -------------------------------------------------------------
G. TPPA Amount: $ 15,000,000
H I J
Monthly Applicable Applicable
Month Adjustment Portion * Adjustment
- ----------------------------------------------------------------------------------------------
(H x I)
Jun-01 3.0% 100.0% 3.0%
Jul-01 12.4% 100.0% 12.4%
J-1
EXHIBIT J
ADJUSTMENTS TO TPPA AMOUNT
Aug-01 12.7% 100.0% 12.7%
Sep-01 12.9% 50.0% 6.5%
- -------------------------------------------------------------------------------------------------
Total 34.6%
K. Total of Monthly Applicable Adjustments 34.6%
L Adjusted TPPA Amount (G x (1-K)) $ 9,810,000
===================================================================================================================
Example 3 - Termination Date of December 31, 2002
- -------------------------------------------------
M. TPPA Amount: $ 15,000,000
N O P
Monthly Applicable Applicable
Month Adjustment Portion ** Adjustment
- ------------------------------------------------------------------------------------------------
(N x O)
Jan-03 1.6% 100.0% 1.6%
Feb-03 1.6% 100.0% 1.6%
- ------------------------------------------------------------------------------------------------
Total 3.2%
Q. Total of Monthly Applicable Adjustments 3.2%
R Payment Amount (M x Q) $ 480,000
====================================================================================================================
* The applicable portion of the month is the number of days in the month during
which deliveries of energy from Supplier to Buyer were made divided by the
number of days in the month.
** The applicable portion of the month is the number of days in the month during
which deliveries of energy from Supplier to Buyer would have been made divided
by the number of days in the month.
EXHIBIT K
ADJUSTMENTS TO MINIMUM ANNUAL TAKE
A B C D E F
Base Number Base Energy Sales per Current Number Adjusted Energy
Class * of Customers Sales (MWh) Customer (MWh) of Customers Sales (MWh)
- --------------------------------------------------------------------------------------------------------------------------
(C / B) (D x E) **
Residential 475,000 5,800,000 12 470,000 5,738,947
Commercial 65,000 2,800,000 43 60,000 2,584,615
Industrial 1,000 4,900,000 800 3,600,000
Street Lighting 5 130,000 5 130,000
J-2
EXHIBIT K
ADJUSTMENTS TO MINIMUM ANNUAL TAKE
Other Retail 50 600,000 50 600,000
Wholesale 5 850,000 5 850,000
- -------------------------------------------------------------------------------
541,060 15,080,000 530,860 13,503,563
G. Adjustment to Minimum Annual Take (F / C) 89.55%
H. Minimum Annual Take from Exhibit A (MWh) 40,000
I. Revised Minimum Annual Take (MWh) (G x H) 35,820
J K
Month During Applicable Min.
Contract Year Annual Take (MWh)
- ----------------------------------
1 40,000
2 40,000
3 40,000
4 40,000
5 35,820
6 35,820
7 35,820
8 34,000
9 34,000
10 32,000
11 32,000
12 32,000
- ----------------------------------
Total 431,460
L. Minimum Take for Contract Year (MWh) (Total of K / 12) 35,955
* As reported on Buyer"s FERC Form 1
** Adjusted Energy Sales for the remaining Industrial, Street Lighting, Other
Retail, and Wholesale customers will be based upon actual sales during the base
period.
EXHIBIT L
ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE
A B C D E * F G **
Dispatch Supply Delivered Permitted Force Replacement Applicable
Hour Amount (MWh) Energy (MWh) Derating(MWh) Majeure(MWh) Energy(MWh) Energy(MWh)
- -------------------------------------------------------------------------------------------------------
(C+D+E+F)
1 72 72 72
2 72 72 72
3 72 72 72
K-2
EXHIBIT L
ENERGY APPLICABLE TO MINIMUM ANNUAL TAKE
4 72 72 72
5 72 72 72
6 72 52 20 72
7 72 52 20 72
8 72 52 20 72
9 72 72 72
10 72 72 72
11 72 72 72
12 72 72 72
13 72 0 72 72
14 72 0 72 72
15 72 0 72 72
16 72 0 72 72
17 72 22 30 52
18 72 72 72
19 72 72 72
20 72 72 72
21 72 72 72
22 72 72 72
23 72 72 72
24 52 52 52
25 42 42 42
26 52 52 52
27 42 12 30 42
28 52 52 52
29 72 72 72
30 72 72 72
31 72 72 72
32 72 72 72
33 72 72 72
34 72 72 72
35 72 72 72
36 72 72 72
- ---------------------------------------------------------------------------------------------------------------------------
total 2,472 2,044 70 288 50 2,452
* Includes energy excused because of Supplier's and Buyer's events of Force
Majeure
** G cannot be greater than B
L-2
EXHIBIT M
CONTRACTUAL AND OPERATIONAL CONSTRAINTS
1. For the purposes of this Exhibit M, "Constrained Capacity" shall mean that
portion of the Asset Bundle Capacity that has been designated as being
subject to contractual and operational constraints in accordance with the
provisions of this Exhibit M.
2. Section 4.1.4 of the Agreement, which addresses Supplier's right to Asset
Bundle Capacity in excess of the Supply Amount, shall not be applicable to
Constrained Capacity.
3. Asset Bundle Capacity scheduled in accordance with Section 5.1 of the
Agreement, which addresses Buyer's notifications to Supplier, shall not be
deemed to include Constrained Capacity unless Buyer's schedules
specifically designate Constrained Capacity as being applicable to the
schedules.
4. The Asset Bundle Capacity described in the following table shall be deemed
Constrained Capacity.
- -----------------------------------------------------------------------------------------------------------------------------------
Source of Capac- Monthly Daily
ity Annual Limit Limit Daily Limit Start-Up Minimum Load
- -----------------------------------------------------------------------------------------------------------------------------------
6,135 hours if operated on
Unit 3 natural gas/1/ 20 hours at
(72 MW summer) None max. capacity 1 30 MW
- ----------------------------------------------------------------------------------------------------------------------------------
_____________________
/1/ The number of operating hours shall be decreased in accordance with the
environmental permits for the Harry Allen Unit if that unit is operated on oil.
The basis for such reductions will be the overall level of NOx emissions.
M-2