EXHIBIT 10.2(a)
INTERCONNECTION AGREEMENT
(Dickerson)
By and Between
POTOMAC ELECTRIC POWER COMPANY
and
SOUTHERN ENERGY MID-ATLANTIC, LLC
Dated December 19, 2000
INTERCONNECTION AGREEMENT
-------------------------
TABLE OF CONTENTS
-----------------
ARTICLE 1 - DEFINITIONS.......................................................1
ARTICLE 2- TERM AND TERMINATION...............................................2
2.1 Term...................................................................2
2.2 Change in Law..........................................................2
2.3 Effect after Termination...............................................2
ARTICLE 3- CONTINUING OBLIGATIONS AND RESPONSIBILITIES........................2
3.1 Interconnection Service................................................2
3.2 New Construction or Modifications......................................3
3.2.1 Pepco Construction or Modifications................................3
3.2.2 Generator Construction or Modifications............................4
3.2.3 Modifications Affecting the Transmission System or the Station.....5
3.3 Access, Easements, Conveyances, Licenses, and Restrictions.............6
3.4 Facility and Equipment Maintenance.....................................7
3.5 Pepco Facilities and Generator Facilities..............................7
3.6 Equipment Testing Obligations..........................................7
3.7 Inspections............................................................8
3.8 Information Reporting Obligations......................................9
3.9 Local Services........................................................10
3.9.1 General...........................................................10
3.9.2 Temporary Suspension of Local Services............................10
3.10 Pepco Provided Services...............................................11
3.11 Generator Provided Services...........................................11
3.12 Optional Services.....................................................12
3.13 Metering and Telemetering.............................................12
3.14 Emergency Procedure...................................................12
3.15 Interconnection Service Interruptions.................................13
3.16 Unit Status Notification..............................................14
3.17 Scheduled Maintenance Notification and Coordination...................14
3.17.1 Local Routine Inspection and Maintenance..........................14
3.17.2 Transmission System Maintenance...................................15
3.18 Safety..................................................................15
3.18.1 General...........................................................15
3.18.2 Switching Tagging and Grounding...................................15
3.19 Environmental Compliance and Procedures.................................15
3.20 Operating Committee.....................................................16
ARTICLE 4- OPERATIONS........................................................16
4.1 General...............................................................16
4.2 Generator's Operating Obligations.....................................17
4.2.1 General...........................................................17
4.2.2 Voltage or Reactive Control Requirements..........................18
4.3 Auditing of Accounts and Records......................................19
ARTICLE 5- COST RESPONSIBILITIES AND BILLING PROCEDURES ...................19
5.1 Cost Responsibilities for Interconnection Service.....................19
5.2 Cost Responsibilities for Local Services..............................19
5.3 Billing Procedures....................................................19
5.4 Billing Disputes......................................................20
ARTICLE 6- CONFIDENTIALITY...................................................20
6.1 Confidentiality Obligations of Pepco..................................20
6.2 Confidentiality Obligations of Generator..............................21
6.3 Confidentiality of Audits.............................................22
6.4 Remedies..............................................................22
ARTICLE 7- EVENTS OF DEFAULT.................................................22
7.1 Events of Default.....................................................22
7.2 Remedies..............................................................23
ARTICLE 8- LIMITATION OF LIABILITY...........................................24
8.1 Limitation of Pepco's Liability.......................................24
8.2 Limitation on Generator's Liability...................................24
8.3 Consequential Damages .......................................24
ARTICLE 9- INDEMNIFICATION FOR THIRD PARTY CLAIMS............................25
9.1 Generator's Indemnification...........................................25
9.2 Pepco's Indemnification...............................................25
9.3 Indemnification Procedures............................................25
9.4 Survival..............................................................26
ARTICLE 10- INSURANCE........................................................26
10.1 Insurance Coverage....................................................26
10.2 Certificates of Insurance.............................................26
10.3 Additional Insureds and Waiver........................................26
ARTICLE 11- FORCE MAJEURE....................................................27
11.1 Effect of Force Majeure...............................................27
11.2 Force Majeure Defined.................................................27
11.3 Notification..........................................................27
ARTICLE 12- DISPUTES.........................................................27
12.1 Disputes..............................................................27
12.2 Arbitration...........................................................28
12.3 FERC Dispute Resolution...............................................29
ARTICLE 13- REPRESENTATIONS..................................................29
13.1 Representations of Pepco..............................................29
13.2 Representations of Generator..........................................30
ARTICLE 14- ASSIGNMENT/CHANGE IN CORPORATE IDENTITY..........................31
14.1 Assignment............................................................31
14.2 Release of Rights and Obligations.....................................32
14.3 Change in Corporate Identity..........................................32
14.4 Successors and Assigns................................................33
2
ARTICLE 15- SUBCONTRACTORS...................................................33
ARTICLE 16- NOTICES..........................................................33
16.1 Emergency Notices.....................................................33
16.2 Notices...............................................................33
ARTICLE 17- AMENDMENTS.......................................................34
17.1 Amendments............................................................34
17.2 FERC Proceedings......................................................35
ARTICLE 18- MISCELLANEOUS PROVISIONS.........................................35
18.1 Waiver................................................................35
18.2 Labor Relations.......................................................35
18.3 No Third Party Beneficiaries..........................................35
18.4 Governing Law.........................................................35
18.5 Counterparts..........................................................36
18.6 Interpretation........................................................36
18.7 Jurisdiction and Enforcement..........................................36
18.8 Entire Agreement......................................................37
18.9 Severability..........................................................37
18.10 Independent Contractor Status.........................................37
18.11 Conflicts.............................................................37
SCHEDULE A - DEFINITIONS......................................................2
SCHEDULE B - Pepco Facilities and Generator Facilities........................7
SCHEDULE C - Points of Interconnection........................................9
SCHEDULE D - Switching, Tagging and Grounding Rules..........................11
SCHEDULE E - Pepco's Interconnection Standards...............................14
SCHEDULE F - Local Services..................................................15
SCHEDULE G - Pepco Current Projects..........................................18
SCHEDULE H - Real Time Telemetry List........................................19
3
INTERCONNECTION AGREEMENT (Dickerson)
=====================================
This Interconnection Agreement ("Agreement") dated as of December 19,
2000 by and between Potomac Electric Power Company ("Pepco") a District of
Columbia and Virginia corporation, and Southern Energy Mid-Atlantic, LLC
("Generator") a Delaware limited liability company. Pepco and Generator are each
referred to herein as a "Party," and collectively referred to herein as the
"Parties."
WITNESSETH:
-----------
WHEREAS, Pepco, and Southern Energy, Inc., a Delaware corporation
("SEI"), have entered into an Asset Purchase and Sale Agreement for Generating
and Related Assets ("Asset Sale Agreement") dated June 7, 2000, as amended, for
the sale by Pepco to SEI of certain assets comprising the Dickerson electric
generation station;
WHEREAS, SEI has assigned its rights and obligations relating to the
this Agreement and Dickerson electric generation station to Generator in
accordance with Section 12.5 of the Asset Sale Agreement;
WHEREAS, Pepco intends to continue to operate its transmission and
distribution businesses from their present locations;
WHEREAS, Generator needs Interconnection Service from Pepco for the
Dickerson electric generating station;
WHEREAS, Pepco needs access to parts of the Generator's assets, and
Generator needs access to parts of the Pepco's assets; and
WHEREAS, the Parties have agreed in the Asset Sale Agreement to
execute this Agreement in order to provide Interconnection Service to Generator
and to define continuing responsibilities and obligations of the Parties with
respect to the use of the other Party's property, assets and facilities as set
forth herein.
NOW THEREFORE, in consideration of the mutual representations,
covenants and agreements hereinafter set forth, and intending to be legally
bound hereby, the Parties hereto agree as follows:
ARTICLE 1
---------
DEFINITIONS
Capitalized terms used in this Agreement shall have the meanings
specified or referred to in Schedule A.
ARTICLE 2
---------
TERM AND TERMINATION
--------------------
2.1 Term. This Agreement shall become effective upon consummation of
----
the Closing ("Effective Date"), and unless terminated sooner in accordance with
the terms of this Agreement, shall continue in full force and effect until the
earlier to occur of (i) the permanent cessation by the Generator of the power
generation functions of the Station or (ii) the permanent cessation of the
interconnection functions of the Transmission System.
2.2 Change in Law. If (a) the FERC, any state or state regulatory
-------------
commission or the PJM Interconnection LLC implements a change in any law,
regulation, rule or practice, or (b) Pepco's compliance with a change in any law
or regulation, which compliance, in either case, affects, or may reasonably be
expected to affect, Pepco's performance under this Agreement, the Parties shall
negotiate in good faith any amendments to this Agreement that are necessary to
adapt the terms of this Agreement to such change, and Pepco shall file such
amendments with the FERC. If the Parties are unable to reach agreement on such
amendments, either Party shall have the right to make a unilateral filing with
the FERC to modify this Agreement pursuant to Sections 205 or 206 or any other
applicable provision of the Federal Power Act and the FERC rules and regulations
thereunder; provided that the other Party shall have the right to oppose such
filing and to participate fully in any proceeding established by the FERC to
address such amendments.
2.3 Effect after Termination. The applicable provisions of this
------------------------
Agreement shall continue in effect after cancellation or termination hereof to
the extent necessary to provide for final billings, billing adjustments and
payments pertaining to liability and indemnification obligations arising from
acts or events that occurred while this Agreement was in effect.
ARTICLE 3
---------
CONTINUING OBLIGATIONS AND RESPONSIBILITIES
-------------------------------------------
3.1 Interconnection Service
-----------------------
3.1.1 Subject to the terms and conditions of the Agreement, Pepco
shall (a) permit the Station to continue to be interconnected to the
Transmission System at the Point of Interconnection, and (b) provide
Interconnection Service at the Point of Interconnection. Pepco agrees to permit
Generator to interconnect
2
Station as long as Generator continues to operate such facilities pursuant to
PJM Requirements and Good Utility Practice.
3.1.2 Interconnection Service shall not include, and Pepco shall
not be responsible under this Agreement for (a) transmission service, losses or
ancillary services associated with the use of the Transmission System for the
delivery of capacity, energy and/or ancillary services produced by the
Generating Facilities, or (b) providing or procuring capacity, energy and/or
ancillary services to the Generator or the Generating Facilities.
3.1.3 The Generator's interconnection to the Transmission System of
any new or expanded generating capacity of the Station shall (a) be subject to
PJM Requirements and/or FERC requirements governing interconnections and (b)
require a separate interconnection agreement mutually agreed to by the Parties
in writing.
3.1.4 Notwithstanding anything to the contrary in this Agreement,
Pepco's performance of its obligations under this Agreement shall be subject to
Generator entering into, and complying with, any PJM Generator Connection
Agreement which may be required pursuant to PJM Requirements with respect to
Interconnection Service or the Station.
3.2 New Construction or Modifications
---------------------------------
32.1 Pepco Construction or Modifications
-----------------------------------
(a) Pepco shall make such additions, modifications,
replacements and improvements to the Interconnection Facilities as are required
by PJM Requirements or Good Utility Practice to enable Pepco to provide
Interconnection Service in compliance with this Agreement. Generator shall pay
all reasonable Costs incurred by Pepco for such additions, modifications,
replacements or improvements.
(b) Except with respect to operation and maintenance or
ordinary maintenance done in the ordinary course of business or to respond to
abnormal or emergency conditions, if any additions, modifications, replacements
or improvements to the Interconnection Facilities undertaken by Pepco might
reasonably be expected to affect Generator's operation of the Station, Pepco
shall provide one hundred twenty (120) days written notice to Generator prior to
undertaking such additions, modifications, replacements or improvements. Any
such additions, modifications, replacements or improvements shall comply with
PJM Requirements and Good Utility Practice. The Parties shall mutually agree to
the
3
scheduling of such addition, modification, replacement or improvement to
minimize any adverse impact on the Station. Generator shall be deemed to have
accepted Pepco's proposed additions, modifications, replacements or improvements
unless Generator gives Pepco written notice of its objections within thirty (30)
days after receipt of Pepco's notice. Generator's acceptance or deemed
acceptance of Pepco's proposed additions, modifications, replacements or
improvements shall not be construed, with respect thereto, as: (i) confirmation
or endorsement of the design; (ii) a warranty of safety, durability or
reliability; or (iii) responsibility for strength, details of design, adequacy
or capability.
3.2.2 Generator Construction or Modifications
---------------------------------------
(a) In the event Generator plans to increase the capacity of
the Generating Facilities, Generator shall submit to Pepco any and all plans and
specifications that Pepco may reasonably request related to such increase. Such
specifications and plans shall be submitted by Generator to Pepco at the time
that Generator submits its plans under the PJM Tariff related to such expansion
but no later than one hundred twenty (120) days prior to commencing such
proposed increase. Any such additions, modifications, or replacements shall
comply with PJM Requirements and Good Utility Practice and shall be subject to
Section 3.1.3 of this Agreement.
(b) If Generator plans any additions, modifications, or
replacements to the Station that will not increase its capacity, but could
reasonably be expected to affect the Transmission System or the Interconnection
Facilities, Generator shall give Pepco reasonable notice, but not less than one
hundred twenty (120) days prior written notice and Generator shall comply with
all applicable PJM Requirements with respect to such proposed additions,
modifications, or replacements. All such additions, modifications, or
replacements shall (i) comply with PJM Requirements and Good Utility Practice,
(ii) be accompanied by appropriate information and operating instructions, and
(iii) be subject to the review and acceptance of Pepco, which review shall be
based on PJM Requirements and Good Utility Practice and which acceptance shall
not unreasonably be withheld or delayed. Pepco shall be deemed to have accepted
Generator's proposed additions, modifications or replacements unless Pepco gives
Generator written notice of its objections within thirty (30) days after receipt
of the Generator's notice.
(c) Pepco's acceptance of Generator's plans and specifications
for any proposed additions, modifications, or replacements to the Generating
Facilities and Pepco's participation in any interconnected operations with
Generator are not and shall not be construed as: (i) confirmation or endorsement
of the design of the Generating Facilities; (ii) a warranty of safety,
durability or reliability of the
4
Generating Facilities; or (iii) responsibility for strength, details of design,
adequacy, or capability of the Generating Facilities.
(d) Pepco, pursuant to PJM Requirements, shall inform
Generator of any additions, modifications, or replacements to the Transmission
System or Interconnection Facilities, that will be necessary as a result of the
addition, modification, or replacement to Station made pursuant to Section
3.2.2. Generator shall compensate Pepco for all reasonable Costs it incurs
associated with any modifications, additions, or replacements made to the
Interconnection Facilities or Transmission System related to any additions,
modifications, or replacements to the Generating Facilities. Pepco shall provide
an estimate as early as practicable, but in any event not less than sixty (60)
days prior to the initiation of such addition, modification or replacement.
(e) Generator shall modify, at its sole cost and expense, the
Generating Facilities as may be reasonably required to conform with PJM
Requirements and Good Utility Practice or to conform with additions,
modifications, or replacements of the Transmission System or the Interconnection
Facilities, required by PJM Requirements and Good Utility Practice or
implemented in accordance with this Agreement, (including, without limitation,
changes to the voltages at which the Transmission System is operated) PROVIDED,
HOWEVER, that Generator shall not be obligated under this Agreement to
modernize, expand or upgrade the Generating Facilities unless the failure to
modernize, expand or upgrade is reasonably likely to have a material adverse
effect on the operation of Pepco's Facilities.
(f) Upon completion of any addition, modification, or
replacement to the Generating Facilities that may reasonably be expected to
affect the Transmission System or the Interconnection Facilities, but no later
than ninety (90) days thereafter, Generator shall issue "as built" drawings to
Pepco. Upon completion of any addition, modification, or replacement to the
Interconnection Facilities, that may reasonably be expected to affect the
operation of the Station, but no later than ninety (90) days thereafter, Pepco
shall issue "as built" drawings to the Generator.
3.2.3 Modifications Affecting the Transmission System or the
------------------------------------------------------
Station
- -------
(a) Notwithstanding anything herein to the contrary, except
with respect to the projects or construction set forth in Schedule G, no
modifications to or new construction of facilities, or access thereto, including
but not limited to rights of way, fences, gates, shall be made by either Party
which might reasonably be expected to adversely affect the other Party with
respect to such Party's obligations
5
and responsibilities under this Agreement, without prior written notification as
set forth in Section 3.2.3 (b) below, and without providing the other Party with
sufficient information regarding the work prior to commencement to enable such
Party to evaluate the impact of the proposed work on its operations. For all
modifications reasonably expected to adversely affect the operations of the
other Party's facilities, the Party shall provide at least one hundred twenty
(120) days written notice to the other Party prior to undertaking such
additions, modifications or replacements. Any such additions, modifications, or
replacements shall comply with PJM Requirements and Good Utility Practice.
(b) The Parties shall mutually agree to the scheduling of such
addition, modification, replacement or improvement proposed pursuant to Section
3.2.3(a) to minimize any adverse impact on the Station or the Transmission
System. For all construction work, major modifications, or circuit changes
involving new or existing facilities, equipment, systems or circuits that could
reasonably be expected to affect the operation of either Party, the Party
desiring to perform said work shall provide the other Party with drawings,
plans, specifications, and other necessary documentation for review at least
sixty (60) days prior to the beginning of construction provided that for routine
telecommunication work, the Party doing the work shall only be required to
provide 48 hours prior notice. The Party shall be deemed to have accepted the
proposed additions, modifications, replacements or improvements unless the Party
gives written notice of their objections within sixty (60) days after receipt of
such notice. The Party's acceptance or deemed acceptance of the proposed
additions, modifications, replacements or improvements shall not be construed,
with respect thereto, as: (i) confirmation or endorsement of the design; (ii) a
warranty of safety, durability or reliability; or (iii) responsibility for
strength, details of design, adequacy or capability.
3.3 Access, Easements, Conveyances, Licenses and Restrictions
---------------------------------------------------------
3.3.1 The Parties hereby grant to each other such licenses, access
and other rights to the Station and the Interconnection Facilities as may be
necessary for either Party's performance of their respective obligations under
this Agreement. Such access shall be provided in a manner so as not to
unreasonably interfere with the ongoing business operations, rights, and
obligations of the other Party and shall be subject to the safety and security
practices of the Party granting such access. Access shall only be granted to
Qualified Personnel.
3.3.2 A Party shall not restrict a Party's rights hereunder to
access the other Party's property, facilities, or equipment without prior
written notification except in an Emergency, in which case the restricted access
shall last no longer than three (3) days, unless an alternate means of access is
provided.
6
3.3.3 The Parties' rights with respect to access to their
respective facilities properties shall also be governed by the Easement.
3.4 Facility and Equipment Maintenance
----------------------------------
3.4.1 Pepco shall provide Interconnection Service at the Point of
Interconnection in a safe and efficient manner and pursuant to PJM Requirements
and Good Utility Practice. Generator shall be responsible for all reasonable
Costs incurred by Pepco to provide Interconnection Service and to Maintain the
Interconnection Facilities pursuant to the Agreement.
3.4.2 Generator shall Maintain the Generating Facilities (including
coordination of its relay protection equipment) in a safe and efficient manner
and as required by and in accordance with PJM Requirements and Good Utility
Practice, provided, however, that Generator shall not be obligated to modernize,
expand or upgrade the Generating Facilities unless the failure to modernize,
expand or upgrade is reasonably likely to have a material adverse affect on the
operation of the Interconnection Facilities or the Transmission System.
3.4.3 Unless otherwise specified herein, or unless the Parties
mutually agree to a different arrangement, neither Party shall be responsible
for the maintenance of the other Party's equipment or property regardless of its
location.
3.4.4 In addition to the requirements set forth elsewhere in this
Agreement, each Party shall Maintain its equipment and facilities and perform
its maintenance obligations that could reasonably be expected to affect the
operations of the other Party in a safe and efficient manner and pursuant to PJM
Requirements and Good Utility Practice.
3.5 Pepco Facilities and Generator Facilities. Unless otherwise agreed
-----------------------------------------
to by the Parties, the Party owning Pepco Facilities or Generator Facilities
shall Maintain those facilities and shall do so pursuant to PJM Requirements and
Good Utility Practice and shall make such additions, modifications, replacements
and improvements as are required by PJM requirements and Good Utility Practice
or which are necessary to maintain Interconnection Service, provided, however,
-----------------
that the Generator shall not be obligated under this Agreement to modernize,
expand or upgrade the Generator Facilities unless the failure to modernize,
expand or upgrade is reasonably likely to have a material adverse effect on the
operation of the Transmission System or Interconnection Facilities.
3.6 Equipment Testing and Obligations
---------------------------------
7
3.6.1 For reliability purposes with respect to the Interconnection
Facilities and the Transmission System, Pepco may reasonably request, pursuant
to PJM Requirements, or Good Utility Practice, that Generator test, calibrate,
verify, or validate the Generating Facilities or its equipment, and Generator
shall promptly comply with such a request. Generator shall be responsible for
all costs of testing, calibrating, verifying or validating its facilities.
3.6.2 At Pepco's request, Generator shall supply to Pepco at no
cost, copies of inspection reports, installation and maintenance documents, test
and calibration records, verifications, and validations pursuant to the
foregoing Section 3.6.1. Pepco shall supply to Generator, at Generator's request
and at no cost to Generator, copies of inspection reports, installation and
maintenance documents, test and calibration records, verifications, and
validations that Pepco has which are related to the Interconnection Facilities.
3.7 Inspections
-----------
3.7.1 Pepco shall, at its expense, have the right to inspect or
observe all maintenance activities, equipment tests, installation work,
construction work, and modification work to the Generating Facilities. Such
access by Pepco shall be exercised in a manner which does not unreasonably
interfere with Generator's ongoing business operations, rights and obligations
and shall be subject to Generator's safety and security practices. If Pepco
observes any deficiencies or defects with respect thereto that might reasonably
be expected to adversely affect the Transmission System or the Interconnection
Facilities, Pepco shall notify the Generator, and Generator shall immediately
make any corrections necessitated by PJM Requirements and Good Utility Practice.
Notwithstanding the foregoing in this Section 3.7.1, Pepco shall have no
liability whatsoever for any failure to fully or adequately observe any
deficiency, it being agreed that Generator shall be fully responsible and liable
for all such deficiencies, activities, equipment tests, installation,
construction or modification.
3.7.2 Generator shall, at its expense, have the right to inspect or
observe all maintenance activities, equipment tests, installation work,
construction work, and modification work conducted by Pepco to the
Interconnection Facilities. Such access by Generator shall be exercised in a
manner which does not unreasonably interfere with Pepco's ongoing business
operations, rights and obligations and shall be subject to Pepco's safety and
security practices. If Generator observes any deficiencies or defects with
respect thereto that might reasonably be expected to adversely affect the
Station, Generator shall notify Pepco, and Pepco shall immediately make any
corrections necessitated by applicable PJM Requirements and Good Utility
Practice. Notwithstanding the foregoing in this
8
Section 3.7.2, Generator shall have no liability whatsoever for any failure to
fully or adequately observe any deficiency, it being agreed that Pepco shall be
fully responsible and liable for all such deficiencies, activities, equipment
tests, installation, construction or modification.
3.8 Information Reporting Obligations
---------------------------------
3.8.1 In order to provide Interconnection Service hereunder, Pepco
may request, and Generator shall promptly provide, all relevant information,
documents, or data regarding the Generating Facilities that would be expected to
materially affect the Transmission System, and which is reasonably requested by
NERC, MAAC, the PJM Interconnection LLC, the MDPSC, the District of Columbia
Public Service Commission and any other state or District of Columbia agency
having jurisdiction over Pepco or Generator, the PJM System Operator, or the
Transmission Operator, which disclosure shall be subject to Article 6 of this
Agreement regarding the disclosure of commercially sensitive information.
3.8.2 Generator shall promptly supply accurate, complete, and
reliable information in response to reasonable information requests for real
time data and other data from Pepco necessary for operations, maintenance,
compliance with PJM Requirements or regulatory requirements, or analysis of the
Interconnection Facilities or the Transmission System. Such information may
include metered values for MW and MVAR, voltage, current, automatic voltage
regulator status, automatic frequency control, dispatch, frequency, breaker
status indication, or any other information reasonably required for reliable
operation of the Transmission System pursuant to PJM Requirements and Good
Utility Practice. At minimum, Generator shall satisfy the telemetry requirements
set forth in Schedule H.
3.8.3 Information pertaining to generation operating parameters
shall be gathered and electronically transmitted directly to Pepco's energy
management system using a mutually acceptable communications protocol.
3.8.4 Generator shall be responsible for the maintenance, and any
required replacements or upgrades of the field devices and equipment used to
gather information regarding generation operating parameters.
3.8.5 Generator shall Maintain, at its expense, operating telephone
links to the PJM Interconnection LLC, PJM System Operator, Pepco and the
Transmission Operator, to provide information deemed necessary by them, or as
reasonably deemed necessary by Pepco in accordance with PJM Requirements or Good
Utility Practice to integrate operation of the Station with the Transmission
9
System, provided, however, that Generator shall not be obligated under this
-----------------
Agreement to modernize, expand or upgrade the Generator's facilities unless the
failure to modernize, expand or upgrade is reasonably likely to have a material
adverse effect on the operation of the Transmission System. Generator shall use
communication links at the Station consisting of the mobile radio low band C
frequency and "all call" and "red phone" systems currently located at the
Station (or successor systems as may reasonably be required by Pepco) and shall
maintain the availability of such systems to operate during abnormal conditions
including blackouts.
3.9 Local Services
--------------
3.9.1 General
-------
(a) The Parties agree that, due to the integration of certain
control schemes of the Station and the Transmission System, it is cost effective
to provide each other with the services set forth in Sections 3.10 and 3.11 in
accordance with the terms and conditions set forth therein.
(b) The Parties shall ensure, in accordance with Good Utility
Practice, that services provided by one Party to the other Party pursuant to
Sections 3.10 and 3.11 shall be available at all times and in the manner and at
the prices specified herein. Notwithstanding the foregoing, either Party may
change the services, provided that (1) there is no cost to the receiving Party
as a result of such change, (2) the quality, reliability and integrity of the
replacement services is equivalent to the existing service, and (3) there is
otherwise no materially adverse effect on the receiving Party.
(c) Neither Party shall terminate any services set forth in
Sections 3.10 and 3.11 below that it agrees to provide to the other Party,
without the other Party's prior written consent, which consent shall not be
unreasonably withheld or delayed, provided, however, if a Party receiving a
service under Sections 3.10 or 3.11 no longer needs or desires a particular
service, said Party shall notify the other Party and the providing Party shall
terminate said services as soon thereafter as practicable.
3.9.2 Temporary Suspension of Local Services
--------------------------------------
(a) The Party providing a service set forth in Sections 3.10
or 3.11 below shall notify and obtain approval, which approval shall not be
unreasonably withheld or delayed, from the receiving Party of any scheduled
temporary
10
suspension of services at least five (5) business days in advance of such
suspension. Such notification shall include an estimated time duration for a
return to normal conditions.
(b) In the event of any unplanned or forced suspension of the
services set forth in Sections 3.10 or 3.11, below, the providing Party shall
immediately notify the other Party first verbally and then in writing. The
providing Party shall use all reasonable efforts to minimize the duration of
said suspension.
(c) The Parties agree to complete any repairs, modifications
or corrections, in accordance with Good Utility Practice, that are necessary to
restore to the other Party as soon as reasonably practicable any services set
forth in Sections 3.10 or 3.11 below that have been suspended.
3.10 Pepco Provided Services: Schedule F sets forth the local services
-----------------------
Pepco shall provide to the Generator pursuant to the terms of this Agreement.
Unless otherwise specified in Schedule F, for a period of three (3) years after
the Effective Date (the "Initial Period") and subject to Section 3.9 above,
Pepco shall provide Generator with the local services set forth in Schedule F at
no cost and in consideration of the local services Generator shall provide Pepco
in accordance with Section 3.11 below. If Generator desires the continuation of
any of the services set forth in Schedule F which are subject to the Initial
Period to continue after the Initial Period, upon Generator's written request to
Pepco made at least 60 days prior to the expiration of the Initial Period, the
Parties shall engage in good faith negotiations to reach mutually agreeable
terms and conditions upon which such services will continue, provided, however,
-----------------
that if such agreement is not reached prior to the expiration of the Initial
Period, Pepco shall cease to provide services under Section 3.10 at the end of
the Initial Period.
3.11 Generator Provided Services. Schedule F sets forth the local
---------------------------
services Generator shall provide to Pepco pursuant to the terms of this
Agreement. Unless otherwise specified in Schedule F, for the Initial Period and
subject to Section 3.9 above, Generator shall provide Pepco with the local
services set forth in Schedule F at no cost and in consideration of the local
services Pepco shall provide Generator in accordance with Section 3.10 above. If
Pepco desires the continuation of any of the services set forth in Schedule F
which are subject to the Initial Period to continue after the Initial Period,
upon Pepco's written request to Generator made at least 60 days prior to the
expiration of the Initial Period, the Parties shall engage in good faith
negotiations to reach mutually agreeable terms and conditions upon which such
services will continue, provided, however, that if such agreement is not reached
-----------------
prior to the expiration of the Initial Period, Generator shall cease to provide
services under Section 3.11 at the end of the Initial Period.
11
3.12 Optional Services: Generator may request that Pepco provide the
-----------------
following services to the Generator, provided, however, that Pepco shall not
-----------------
have any obligation to provide such services unless the Parties have mutually
agreed in writing to the price and other terms and conditions of such service:
(a) PJM interface and dispatch services through the Pepco control
center;
(b) use of Pepco's communication services;
(c) maintenance of certain auxiliary and communications equipment
at the Station;
(d) maintenance of high-voltage and medium-voltage equipment such
as power transformers and power circuit breakers;
(e) maintenance of protective relaying, certain control equipment,
such as AGC and MSVC, plant batteries and revenue meters owned by Generator.
3.13 Metering and Telemetering
-------------------------
3.13.1 Generator shall, at Generator's expense: (a) own, Maintain
and repair, all Revenue Meters, instrument transformers and appurtenances
associated with Revenue Meters, and real time telemetry, (b) conduct meter
accuracy and tolerance tests, and (c) prepare all calibration reports required
for equipment that measures energy transfers at the Point of Interconnection.
All meter accuracy and tolerance testing hereunder shall be in accordance with
PJM Requirements and Good Utility Practice and shall be conducted, at Pepco's
request, in the presence of Pepco's representative.
3.13.2 Generator shall own and Maintain, at the Generator's
expense, equipment for redundant real-time communications and transmission of
telemetry, hourly MWh information, and such other information as required by the
PJM System Operator or Transmission Operator, or as reasonably required by Pepco
in accordance with PJM Requirements and Good Utility Practice.
3.14 Emergency Procedure
-------------------
3.14.1 Pepco, through the Transmission Operator, shall provide
Generator with prompt verbal notification of Emergencies with regard to the
Transmission System which may reasonably be expected to affect Generator's
12
immediate operation of the Station or Generator Facilities, and Generator shall
provide Pepco with prompt verbal notification of Emergencies with regard to the
Station which may reasonably be expected to affect Interconnection Service or
the Transmission System. Such notification shall describe the Emergency, the
extent of damage or deficiency, the anticipated length of an outage and the
corrective action taken and/or to be taken. Said verbal notification shall be
followed as soon as practicable (but no later than 24 hours after the verbal
notification) with written notification.
3.14.2 If an Emergency in the good faith judgment of a Party
endangers or could endanger life or property, the Party recognizing the problem
shall take such action as may be reasonable and necessary to prevent, avoid, or
mitigate injury, danger, or loss. If however the Emergency involves transmission
or electrical equipment, Generator shall notify the Transmission Operator, and
obtain the consent of such personnel, prior to performing any switching
operations.
3.14.3 Pepco may, consistent with PJM Requirements and Good
Utility Practice, have the Transmission System Operator take whatever actions
(including tripping Generator's synchronizing breakers) or inactions it deems
necessary during an Emergency to: (a) preserve public safety; (b) preserve the
integrity of the Transmission System, (c) limit or prevent damage; or (d)
expedite restoration of service. If any action or inaction by Pepco or the
Transmission Operator under this Section 3.14 results in the discontinuation,
curtailment, interruption or reduction of Interconnection Service, Pepco shall
use reasonable efforts consistent with PJM Requirements and Good Utility
Practice to restore Interconnection Service as promptly as practicable and to
minimize the effect of such restoration of service on the Station.
3.15 Interconnection Service Interruptions
-------------------------------------
3.15.1 If at any time, in the reasonable exercise of the PJM
System Operator's judgment, or the Transmission Operator's judgment exercised in
accordance with PJM Requirements or Good Utility Practice and on a
non-discriminatory basis, a condition exists, including the operation of
Generator's equipment, which might reasonably be expected to have a materially
adverse affect on the quality of service rendered by Pepco (including services
rendered to transmission or distribution customers) or interferes with the safe
and reliable operation of the Transmission System, Pepco may discontinue,
curtail, reduce and/or interrupt Interconnection Service until the condition has
been corrected.
3.15.2 Unless the PJM System Operator, the Transmission Operator
or Pepco perceives that an Emergency exists or the risk of one is imminent,
Pepco
13
shall give Generator reasonable notice of its intention to discontinue, curtail,
interrupt or reduce Interconnection Service in response to the interfering
condition and, where practical, allow suitable time for Generator to remove the
interfering condition if it is the result of Generator's operations, before the
discontinuation, curtailment, interruption or reduction commences. Pepco's
judgment with regard to the interruption of service under this paragraph shall
be made pursuant to PJM Requirements and Good Utility Practice. In the case of
such interruption, Pepco shall immediately confer with Generator regarding the
conditions causing such interruption and its recommendation concerning timely
correction thereof. In the event Interconnection Service is interrupted under
this section due to Generator's failure to operate and Maintain the Generating
Facilities pursuant to PJM Requirements or Good Utility Practice, Generator
shall compensate Pepco for all costs reasonably incurred by Pepco attributable
to the interruption and restoration of Interconnection Service. Pepco shall use
reasonable efforts consistent with PJM Requirements and Good Utility Practice to
restore Interconnection Service interrupted, curtailed or reduced pursuant to
this Section 3.15 as promptly as practicable and to minimize the effect of such
restoration of service on the Station.
3.16 Unit Status Notification
------------------------
3.16.1 Generator acknowledges that Pepco requires information
regarding the status of the Station for Transmission System reliability
purposes. Accordingly, by 10:00 a.m. of each day, the Generator shall provide
Pepco the following information regarding the status of the Station for the
following day: Station availability to provide energy and capacity, the
Station's scheduled on and off times, Station synchronization, planned outages
or deratings, and generation restrictions and limitations. Generator shall
immediately notify Pepco of any changes to the information provided pursuant to
the foregoing sentence.
3.16.2 In circumstances, such as forced outages, Generator shall
notify Pepco of its generating unit's temporary interruption of generation as
soon as practicable; and it shall provide Pepco, as soon as practicable, with a
schedule of when generation will be resumed.
3.17 Scheduled Maintenance Notification and Coordination
---------------------------------------------------
3.17.1 Local Routing Inspection and Maintenance. The Parties agree
----------------------------------------
that, due to the integration of certain control and protective relaying schemes
between the Station and the Interconnection Facilities, it will be necessary for
them to cooperate in the inspection, maintenance and testing of these areas of
integration. Each Party will provide advance notice to the other Party before
undertaking any work in these areas, especially in electrical circuits involving
circuit breaker trip and
14
close contacts, current transformers or potential transformers and such work
will be performed in accordance with PJM Requirements and Good Utility Practice.
3.17.2 Transmission System Maintenance. Pepco shall consult with
-------------------------------
Generator regarding timing of scheduled maintenance of the Interconnection
Facilities or the transmission facilities of the Transmission System which Pepco
or the Transmission Operator performs and which might reasonably be expected to
affect the Station. Pepco shall, to the extent practicable, schedule any
testing, shutdown, or withdrawal of said facilities to coincide with Generator's
scheduled outages for the Station. To facilitate such consultation and to the
extent the information is not available from the PJM System Operator in a timely
manner, in June of each year, or on another date mutually acceptable to the
Parties, Generator shall furnish Pepco with non-binding preliminary generator
maintenance schedules covering the upcoming two years and any material changes
thereto. In the event Pepco is unable to schedule the outage of its facilities
to coincide with Generator's schedule, Pepco shall notify Generator as soon as
practicable of the reasons for the facilities' outage, of the time scheduled for
the outage to take place, and of its expected duration.
3.18 Safety
------
3.18.1 General. Pepco agrees with respect to the Interconnection
-------
Facilities and the Transmission System, and Generator agrees with respect to the
Station, that all work performed by either Party on such facilities which could
reasonably be expected to affect the operations of the other Parry shall be
performed in accordance with all applicable PJM Requirements and Good Utility
Practice.
3.18.2 Switching Tagging and Grounding. Each Party shall comply
-------------------------------
with the Switching, Tagging and Grounding Rules. Pepco will notify Generator of
any changes in its Switching, Tagging and Grounding Rules. Generator shall be
responsible for all switching, tagging and grounding on Generator's side of the
Point of Interconnection and, except for Generator Facilities, Pepco shall be
responsible for all switching, tagging and grounding on its side of the Point of
Interconnection.
3.19 Environmental Compliance and Procedures
---------------------------------------
3.19.1 Each Party shall be responsible for complying with all
Environmental Laws applicable to it with respect to its facilities or property.
15
3.19.2 A Party shall notify the other Party first verbally and
then in writing, of any Releases of a Hazardous Substance or any type of
remediation activities related thereto as soon as possible but no later than
twenty-four (24) hours after the occurrence if within the reasonable judgment of
the Party said activities could reasonably be expected to have a material
adverse effect upon the operations of the other Party and shall promptly furnish
to the other Party copies of any reports filed with any governmental agencies
covering such events. This Section 3.19.2 does not effect any allocation of
liability with respect to the Station pursuant to the Asset Sale Agreement.
3.19.3 Neither Party shall knowingly take any actions which might
reasonably be expected to have a material adverse environmental impact upon the
operations of the other Party without prior written notification and agreement
between then Parties.
3.20 Operating Committee. The Parties shall establish an operating
-------------------
committee consisting of one representative for each Party ("Operating
Committee"). The Operating Committee shall act only by unanimous agreement or
consent. The Parties shall designate their respective representatives to the
Operating Committee, plus an alternate by written notice. Each Party's
representative on the Operating Committee is authorized to act on behalf of such
Party with respect to any matter arising under this Agreement which is to be
decided by the Operating Committee, however, the Operating Committee shall not
have any authority to modify or otherwise alter the rights and obligations of
the Parties hereunder. The Operating Committee shall develop and implement
suitable policies and procedures with which to coordinate the interaction of the
Parties with respect to the performance of their duties and obligations under
this Agreement.
ARTICLE 4
---------
OPERATIONS
----------
4.1 General
-------
4.1.1 The Parties agree to operate their respective equipment that
could reasonably be expected to have a material effect on the operations of the
other Party in a safe and efficient manner and in accordance with PJM
Requirements and Good Utility Practice, and otherwise in accordance with the
terms of this Agreement.
4.1.2 Generator shall comply with the requests, orders, and
directives of Pepco with respect to Interconnection Service to the extent such
requests, orders
16
or directives are (a) issued pursuant to PJM Requirements or Good Utility
Practice, (b) not discriminatory; and (c) otherwise in accordance with this
Agreement or applicable tariff.
4.1.3 In the event Generator believes that a request, order, or
directive of Pepco exceeds the limitations in this Section 4.1.2, it shall
nevertheless comply with the request, order, or directive pending resolution of
the dispute under Article 12. The Parties agree to cooperate in good faith to
expedite the resolution of any disputes arising under this Section 4.1.
4.2 Generator's Operating Obligations
---------------------------------
4.2.1 General. Generator shall request permission from the
-------
Transmission Operator, the PJM System Operator or the PJM Interconnection LLC,
as applicable, prior to opening and/or closing circuit breakers in accordance
with applicable switching and operations procedures and Good Utility Practice.
(a) Generator shall carry out all switching orders from the
Transmission Operator, the PJM System Operator, or the PJM Interconnection LLC,
in a timely manner and in accordance with PJM Requirements and Good Utility
Practice.
(b) Generator shall (i) comply with Pepco's system restoration
plan and black start criteria applicable to the Station as configured as of the
Effective Date or (ii) if the Station's configuration is modified, provide
alternative service restoration and black start capability in accordance with
PJM Requirements. Generator shall ensure that operating personnel at the Station
are trained to implement such system restoration or black start plans. The
Generator shall test the Station's black-start combustion-turbines annually to
confirm that the black-start combustion-turbines will start without an external
power supply. The Generator shall test the Station's steam turbine-generators
and those combustion-turbine generators that would be required to be
black-started in accordance with Pepco's Emergency Conditions and System
Restoration Manual, as revised from time to time, and plant restoration
procedures, at least once every three years. Testing shall confirm the ability
of a generating unit or Station to go from a shut down condition to an operating
condition and start delivering power without assistance from the Transmission
System. These testing requirements shall remain in place until PJM promulgates
specific rules governing black-start testing.
17
(c) The electricity supplied by Generator to the Point of
Interconnection shall be in the form of three-phase 60 Hertz alternating current
at the nominal system voltage.
(d) Generator's equipment shall conform with Good Utility
Practice for harmonic distortion and voltage fluctuation.
4.2.2 Voltage or Reactive Control Requirements. Unless otherwise
----------------------------------------
agreed to by the Parties or authorized or directed by the PJM Interconnection
LLC, Generator shall operate the Station with automatic voltage regulators in
service at all times. The voltage regulators will control voltage at the Points
of Interconnection consistent with the range of voltage prescribed by Pepco or
the Transmission System Operator in accordance with PJM Requirements and Good
Utility Practice.
(a) Generator will operate the Station in accordance with
prescribed voltage schedules pursuant to Section 4.2.2 to the extent the Station
is operating within its reactive generating capability and not violating any
electrical constraints. Should Generator fail to comply with such voltage
schedules, Pepco or the Transmission Operator, as applicable, shall provide
written notice to the Generator of its intent to remedy that failure. If
Generator does not promptly commence appropriate action after receiving such
notice, Pepco or the Transmission Operator may then take any necessary action at
Generator's expense to remedy such failure, including the installation of
capacitor banks or other reactive compensation equipment necessary to ensure the
proper voltage or reactive supply at the Station including, at a minimum, by
installing such equipment outside any building housing the Generation
Facilities. Pepco shall make, to the extent feasible, reasonable efforts to
minimize the impact of such action on the operation of the Station.
(b) Generator shall notify the Transmission Operator if (a)
any or all generating units at the Station reaches a VAR limit, (b) there is any
deviation from the voltage schedules prescribed pursuant to Section 4.2.2 which
is outside the limits permitted by PJM Requirements or Good Utility Practice, or
(c) any automatic voltage regulator is removed from or restored to service.
(c) The Transmission Operator may from time to time, pursuant
to PJM Requirements or Good Utility Practice, request or direct Generator to
adjust generator controls that impact the Transmission System, such as
excitation, droop, and automatic generation control settings and Generator shall
comply with such request or directions.
18
(d) Generator acknowledges that the Transmission Operator may
have the right, to the extent authorized or directed by the PJM Interconnection
LLC, to require reduced or increased generation of the Station in accordance
with PJM Requirements, or in accordance with applicable rules of the
Transmission Operator.
4.3 Auditing of Accounts and Records. The Parties shall have the right,
--------------------------------
during normal business hours, to audit each other's accounts and records
pertaining to transactions under this Agreement, upon twenty (20) days prior
written notice, at the offices where such accounts and records are maintained,
provided, however, that the audit shall be limited to those portions of the
accounts and records that are related to services provided to the other Party
under this Agreement. Any such audit of a Party's accounts and records will be
at the expense of the auditing Party, shall not be made more frequently than
once in any twelve (12) month period, and no such audit may be made with respect
to accounts and records relating to periods more than twenty-four (24) months
prior to the date of the audit notice. The Party being audited will be entitled
to review the audit report and any supporting materials. The Party conducting
the audit shall maintain the confidentiality of all information obtained during
the audit in compliance with Article 6 of this Agreement. To the extent that
audited information includes confidential information, the auditing Party shall
designate an independent auditor at its expense to perform such audit.
ARTICLE 5
---------
COST RESPONSIBILITIES AND BILLING PROCEDURES
--------------------------------------------
5.1 Cost Responsibilities for Interconnection Service. Except as
-------------------------------------------------
otherwise expressly stated herein, Generator shall not be responsible for any
costs arising from Pepco's provision of Interconnection Service or local
services to Generator, except for those costs specified in Sections 3.2.1,
3.2.2, 3.4.1, and 3.15 or arising from the liability or indemnification
provisions of this Agreement.
5.2 Cost Responsibilities for Local Services. Except as otherwise
----------------------------------------
expressly provided herein or agreed to by the Parties, each Party shall be
responsible for the costs for local services provided to the other Party in
Sections 3.10 and 3.11 as set forth in said sections.
5.3 Billing Procedures
------------------
19
(a) Within ten (10) days after the first day of each calendar
month, each Party shall provide the other Party with a written invoice for any
payments due from the other Party for services provided in the previous month.
(b) Each invoice shall (i) delineate the month in which the
services were provided, (ii) fully describe the services rendered, (iii) be
itemized to reflect the services performed or provided, and (iv) provide
reasonable detail as to the calculation of the amount involved.
(c) All invoices shall be paid within fifteen (15) days after
receipt, but not earlier than the 25th day of the month in which the invoice is
rendered. All payments shall be made in immediately available funds payable to
the other Party, or by wire transfer to a bank designated in writing by such
Party. Payment of invoices shall not relieve the paying Party from any
responsibilities or obligations it has under this Agreement, nor shall such
payment constitute a waiver of any claims arising hereunder.
(d) To the extent that, for any billing period, Generator is
obligated to pay to Pepco amounts due and calculated pursuant to Section 5.3,
Pepco may use such amounts as a set-off against any amounts owed by Pepco to
Generator under this Section 5.3.
(e) Interest on any unpaid amounts shall be calculated in
accordance with the methodology specified for interest on refunds in FERC
regulations at 18 C.F.R. ss.35.19a(a)(2)(iii). Interest on delinquent amounts
shall be calculated from the due date of the bill to the date of payment. When
payments are made by mail, bills shall be considered as having been paid on the
date of receipt by the other Party.
5.4 Billing Disputes. In the event of a billing dispute between the
----------------
Parties, each Party shall continue to provide services as long as the other
Party continues to make all payments not in dispute. Payment of invoices by
either Party shall not relieve the paying Party from any responsibilities or
obligations it has under this Agreement; nor shall it constitute a waiver of any
claims arising hereunder.
ARTICLE 6
---------
CONFIDENTIALITY
---------------
6.1 Confidentiality Obligations of Pepco. Pepco shall hold in
------------------------------------
confidence, unless compelled to disclose by judicial or administrative process
or other provisions of law, all documents and information furnished by Generator
in
20
connection with this Agreement marked "Confidential" or "Proprietary." Except to
the extent that such information or documents are (i) generally available to the
public other than as a result of a disclosure by Pepco in breach of this
Agreement, (ii) available to Pepco on a non-confidential basis prior to
disclosure to Pepco by Generator, or (iii) available to Pepco on a
non-confidential basis from a source other than Generator, provided that such
source is not known, and by reasonable effort could not be known, by Pepco to be
bound by a confidentiality agreement with Generator or otherwise prohibited from
transmitting the information to Pepco by a contractual, legal or fiduciary
obligation, Pepco shall not release or disclose such information to any other
person, except to its employees, representatives or agents on a need-to-know
basis, in connection with this Agreement who has not first been advised of the
confidentiality provisions of this Section 6.1 and has agreed in writing to
comply with such provisions. In no event shall such information be disclosed in
violation of the requirements of FERC Orders 889 and 889-A, and any successor
thereto. Pepco shall promptly notify Generator if it receives notice or
otherwise concludes that the production of any information subject to this
Section 6.1 is being sought under any provision of law and Pepco shall use
reasonable efforts in cooperation with Generator to seek confidential treatment
for such confidential information provided thereto.
6.2 Confidentiality Obligations of Generator. Generator shall hold in
----------------------------------------
confidence, unless compelled to disclose by judicial or administrative process
or other provisions of law, all documents and information furnished by Pepco in
connection with this Agreement marked "Confidential" or "Proprietary." Except to
the extent that such information or documents are (i) generally available to the
public other than as a result of a disclosure by Generator in breach of this
Agreement, (ii) available to Generator on a non-confidential basis prior to
disclosure to Generator by Pepco, or (iii) available to Generator on a
non-confidential basis from a source other than Pepco, provided that such source
is not known, and by reasonable effort could not be known, by Generator to be
bound by a confidentiality agreement with Pepco or otherwise prohibited from
transmitting the information to Generator by a contractual, legal or fiduciary
obligation, Generator shall not release or disclose such information to any
other person, except to its employees, representatives or agents on a
need-to-know basis, in connection with this Agreement who has not first been
advised of the confidentiality provisions of this Section 6.2 and has agreed in
writing to comply with such provisions. In no event shall such information be
disclosed in violation of the requirements of FERC Orders 889 and 889-A, and any
successor thereto. Generator shall promptly notify Pepco if it receives notice
or otherwise concludes that the production of any information subject to this
Section 6.2 is being sought under any provision of law and Generator shall use
reasonable efforts in cooperation with Pepco to seek confidential treatment for
such confidential information provided thereto.
21
6.3 Confidentiality of Audits. The independent auditor performing any
-------------------------
audit, as referred to in Section 4.3, shall be subject to a confidentiality
agreement between the auditor and the Party being audited. Such audit
information shall be treated as confidential except to the extent that its
disclosure is required by regulatory or judicial order, for reliability purposes
pursuant to PJM Requirements or Good Utility Practice, and pursuant to the
FERC's rules and regulations. Except as provided herein, neither Party will
disclose the audit information to any third party, without the other Party's
prior written consent. Audit information in the hands of the Party not being
audited shall be subject to all provisions of Section 6.1 or 6.2, above, as
applicable.
6.4 Remedies. The Parties agree that monetary damages would be
--------
inadequate to compensate a Party for the other Party's breach of its obligations
under Section 6.1 or 6.2, above, as applicable. Each Party accordingly agrees,
subject to Article 8, that the other Party shall be entitled to equitable
relief, by way of injunction or otherwise, if the first Party breaches or
threatens to breach its obligations under Section 6.1 or 6.2 of this Agreement,
as applicable, which equitable relief shall be granted without bond or proof of
damages, and the receiving Party shall not plead in defense that there would be
an adequate remedy at law.
ARTICLE 7
---------
EVENTS OF DEFAULT
-----------------
7.1 Events of Default. Each of the following shall constitute an Event
-----------------
of Default by the a defaulting Party under this Agreement:
(a) The failure by a Party to pay any amount due within twenty
(20) calendar days after receipt of written notice of nonpayment by the other
Party, unless the payment of such amount is disputed in good faith, in which
event Section 5.5 shall apply;
(b) A Party's breach of any material term or condition of this
Agreement, including but not limited to any material breach of a representation,
warranty or covenant made in this Agreement which, after receiving written
notice of the breach from the non-breaching Party (such notice to set forth in
reasonable detail the nature of the default and, where known and if applicable,
the steps necessary to cure such default), (i) the breaching Party fails to
cure, if curable, within thirty (30) days following receipt of the notice or
(ii) if such default is of such a nature that it cannot be cured within thirty
(30) days following receipt of such notice, the breaching Party fails within
such thirty (30) days to commence the necessary cure and fails at any time
thereafter diligently and continuously to
22
prosecute such cure to completion provided that the cure is completed no later
than 180 days after the receipt of the default notice;
(c) The appointment of a receiver, liquidator or trustee for
either Party, and such receiver, liquidator or trustee is not discharged within
sixty (60) days;
(d) The entry of a decree or decrees adjudicating a Party as
bankrupt or insolvent, and such decree or decrees are not stayed or discharged
within sixty (60) days; or
(e) The filing of voluntary petitions for bankruptcy under any
federal or state bankruptcy law by a Party.
7.2 Remedies
--------
7.2.1 If the breaching Party disputes that an Event of Default
under Section 7.1.(b) has occurred, the breaching Party shall nonetheless comply
with this Section 7.2 pending the resolution of the dispute. If it is determined
that no breach or Event of Default under Section 7.1(b) existed, the Party
alleging the default shall pay and reimburse the other Party for all reasonable
costs and expenses incurred by it to cure the alleged default.
7.2.2 Upon the occurrence of an Event of Default, the
non-defaulting Party may (i) exercise all such rights and remedies as may be
available to it at law or equity including seeking to recover damages caused by
such Event of Default, subject to Article 8 of this Agreement; and/or (ii)
terminate this Agreement. The Parties shall not discontinue the performance of
any one or more of their obligations hereunder due to the occurrence of an Event
of Default during the pendency of any dispute regarding such Event of Default
and until such dispute is finally resolved except that Pepco may suspend or
interrupt service if necessary for the safe and reliable operation of the
Interconnection Facilities or the Transmission System.
7.2.3 Notwithstanding the foregoing, upon the occurrence of any
Event of Default, the non-defaulting Party shall be entitled to commence an
action to require the defaulting Party to remedy such default by specifically
performance of its duties and obligations hereunder in accordance with the terms
and conditions hereof.
23
7.2.4 Notwithstanding anything in this Agreement to the contrary,
in the event the Generator's failure to comply with the provisions of Sections
4.1 and 4.2 of this Agreement is reasonably likely to have an immediate and
material adverse impact on Pepco or the Transmission System, Pepco shall have
the right to take immediately reasonable steps and/or to exercise immediately
all remedies available under this Agreement, or at law or equity, including the
right, after providing as much notice as is practicable under the circumstances
and complying with the applicable FERC notice requirements regarding termination
of service, to disconnect the Station from the Transmission System.
ARTICLE 8
---------
LIMITATION OF LIABILITY
-----------------------
8.1 Limitation of Pepco's Liability. Pepco does not guarantee the
-------------------------------
non-occurrence of, or warrant against, and will have no liability hereunder for,
and the Generator will release Pepco from all claims or damages associated with,
any interruption in the availability of the Interconnection Facilities,
Interconnection Service or local services pursuant to Section 3.10 or damages to
the Generator's facilities, except to the extent such interruption or damage is
caused by Pepco's gross negligence or willful misconduct in the performance of
its obligations under this Agreement.
8.2 Limitation on Generator's Liability. Generator does not guarantee
-----------------------------------
the non-occurrence of, or warrant against, and will have no liability under this
Agreement for, and Pepco will release Generator from all claims or damages
arising under this Agreement which are associated with any interruption in the
availability of the Station or local services pursuant to Section 3.11, any
reduction, curtailment, interruption or reduction of energy from the Station, or
damage to Pepco's facilities, except to the extent such interruption or damage
is caused by Generator's gross negligence or willful misconduct in the
performance of its obligations under the Agreement.
8.3 Consequential Damages. Except for indemnity obligations set forth
---------------------
in Article 9, neither Party, nor their respective officers, directors, agents,
employees, Affiliates, or successors or assigns of any of them, shall be liable
to the other Party or its Affiliates, officers, directors, agents, employees,
successors or assigns for claims, suits, actions or causes of action for
incidental, punitive, special, indirect, multiple or consequential damages
(including, without limitation, replacement power costs, lost revenues, claims
of customers, attorneys' fees and litigation costs) connected with, or resulting
from, performance or non-performance of this Agreement, or any actions
undertaken in connection with or related to this Agreement, including, without
limitation, any such damages which are based upon causes of action for
24
breach of contract, tort (including negligence and misrepresentation), breach of
warranty or strict liability. The provisions of this Section 8.3 shall apply
regardless of fault and shall survive termination, cancellation, suspension,
completion, or expiration of this Agreement.
ARTICLE 9
---------
INDEMNIFICATION FOR THIRD PARTY CLAIMS
--------------------------------------
9.1 Generator's Indemnification. Generator shall indemnify, hold
---------------------------
harmless, and defend Pepco and its Affiliates, as the case may be, and their
respective officers, directors, employees, agents, contractors, subcontractors,
invitees, successors and permitted assigns from and against any and all claims,
liabilities, costs, damages, and expenses (including, without limitation,
reasonable attorney and expert fees, and disbursements incurred by any of them
in any action or proceeding between Pepco and a third party or Generator) for
damage to property of unaffiliated third parties, injury to or death of any
person, including Pepco's employees or any third parties, to the extent caused,
by the negligence or willful misconduct of Generator's and/or its officers,
directors, employees, agents, contractors, subcontractors or invitees arising
out of or connected with Generator's performance or breach of this Agreement, or
the exercise by Generator of its rights hereunder. In furtherance of the
foregoing indemnification and not by way of limitation thereof, Generator hereby
waives any defense it might otherwise have under applicable workers'
compensation laws.
9.2 Pepco's Indemnification. Pepco shall indemnify, hold harmless, and
-----------------------
defend Generator and its Affiliates, as the case may be, and their respective
officers, directors, employees, agents, contractors, subcontractors, invitees,
successors and permitted assigns from and against any and all claims,
liabilities, costs, damages, and expenses (including, without limitation,
reasonable attorney and expert fees, and disbursements incurred by any of them
in any action or proceeding between the Generator and a third party or Pepco)
for damage to property of unaffiliated third parties, injury to or death of any
person, including Generator's employees or any third parties, to the extent
caused by the negligence or willful misconduct of Pepco and/or its officers,
directors, employees, agents, contractors, subcontractors or invitees arising
out of or connected with Pepco's performance or breach of this Agreement, or the
exercise by Pepco of its rights hereunder. In furtherance of the foregoing
indemnification and not by way of limitation thereof, Pepco hereby waives any
defense it might otherwise have under applicable workers' compensation laws.
9.3 Indemnification Procedures. If either Party intends to seek
--------------------------
indemnification under this Article 9 from the other Party, the Party seeking
indemnification shall give the other Party notice of such claim within ninety
(90)
25
days of the later of the commencement of, or 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. Neither Party may settle or compromise any claim without the prior
consent of the other Party; provided, however, said consent shall not be
unreasonably withheld or delayed.
9.4 Survival. The indemnification obligations of each Party under this
--------
Article 9 shall continue in full force and effect regardless of whether this
Agreement has either expired or been terminated or canceled.
ARTICLE 10
----------
INSURANCE
---------
10.1 Insurance Coverage. The Parties shall maintain at their own cost
------------------
and expense, fire, liability, worker's compensation, and other forms of
insurance relating to their respective property and facilities subject to this
Agreement in the manner, and amounts, and for the durations as is customary in
the electric utility industry.
10.2 Certificates of Insurance. The Parties agree to furnish each other
-------------------------
with certificates of insurance evidencing the insurance coverage obtained in
accordance with this Article 10, and the Parties agree to notify and send copies
to the other of any policies maintained hereunder upon written request by a
Party. Each Party must notify the other Party within ten (10) business days of
receiving notice of cancellation, change, amendment or renewal of any insurance
policy required pursuant to Section 10.1 above.
10.3 Additional Insureds and Waiver. Each Party and its affiliates
------------------------------
shall be named as additional insureds on the general liability insurance
policies obtained in accordance with Section 10.1, above, as regards liability
under this Agreement; and each Party shall waive its rights of recovery against
the other for any loss or damage covered by such policy.
26
ARTICLE 11
----------
FORCE MAJEURE
-------------
11.1 Effect of Force Majeure. Notwithstanding anything in this
-----------------------
Agreement to the contrary, Generator and Pepco shall not be liable in damages or
otherwise or responsible to the other for its failure to carry out any of its
obligations under this Agreement (except for the obligation to pay sums of money
due and owing hereunder) to the extent that they are unable to so perform or are
prevented from performing by an event of Force Majeure and has complied with
Section 11.3.
11.2 Force Majeure Defined. Force Majeure means those causes beyond the
---------------------
reasonable control of the Party affected, which by the exercise of reasonable
diligence, including Good Utility Practice, that Party is unable to prevent,
avoid, mitigate, or overcome, including the following: any act of God, labor
disturbance (including a strike), act of the public enemy, war, insurrection,
riot, fire, storm or flood, explosion, breakage or accident to machinery or
equipment, electric system disturbance), order, regulation or restriction
imposed by governmental, military or lawfully established civilian authorities,
or any other cause of a similar nature beyond a Party's reasonable control.
11.3 Notification. A Party shall not be entitled to rely on the
------------
occurrence of an event of Force Majeure as a basis for being excused from
performance of its obligations under this Agreement, unless the Party relying on
the event or condition shall: (a) provide prompt written notice of such Force
Majeure event to the other Party, including an estimation of its expected
duration and the probable impact on the performance of its obligations
hereunder; (b) exercise all reasonable efforts in accordance with Good Utility
Practice to continue to perform its obligations under this Agreement; (c)
expeditiously take action to correct or cure the event or condition excusing
performance; (d) exercise all reasonable efforts to mitigate or limit damages to
the other Party; and (e) provide prompt notice to the other Party of the
cessation of the event or condition giving rise to its excuse from performance.
Subject to this Section 11.3, any obligation under this Agreement shall be
suspended only to the extent caused by such Force Majeure and only during the
continuance of any inability of performance caused by such Force Majeure but for
no longer period.
ARTICLE 12
----------
DISPUTE
-------
12.1 Disputes.
--------
27
12.1.1 A Party with a claim or dispute under this Agreement shall
submit to the Operating Committee a notification of such claim or dispute within
sixty (60) days after the circumstances that gave rise to the claim or the
question or issue in dispute. The notification shall be in writing and shall
include a concise statement of the claim or the issue or question in dispute, a
statement of the relevant facts and documentation to support the claim. In the
event the Operating Committee is unable, in good faith, to resolve their
disagreement in a manner satisfactory to both Parties within thirty (30) days
after receipt by the Operating Committee of a notification specifying the claim,
issue or question in dispute, the Parties shall refer the dispute to their
respective senior management. If, after using their good faith best efforts to
resolve the dispute, senior management cannot resolve the dispute within thirty
(30) days, the Parties shall utilize the arbitration procedures set forth below
in Section 12.2 to resolve a dispute, provided that nothing herein or therein
shall prohibit either Party from at any time requesting from a court of
competent jurisdiction a temporary restraining order, preliminary injunction, or
other similar form of equitable relief to enforce performance of the provisions
of this Agreement.
12.2 Arbitration.
-----------
(a) Unless the Parties other wise mutually agree in writing to
another form of dispute resolution such as dispute resolution under the PJM
Agreement or the MAAC agreement, any arbitration initiated under this Agreement
shall be conducted before a single neutral arbitrator appointed by the Parties
within thirty (30) days of receipt by respondent of the demand for arbitration.
If the Parties are unable to agree on an arbitrator, such arbitration shall be
appointed by the American Arbitration Association. Unless the Parties agree
otherwise, the arbitrator shall be an attorney or retired judge with at least
fifteen (15) years of experience, and shall not have any current or past
substantial business or financial relationships with any Party to the
arbitration. If possible, the arbitrator shall have experience in the electric
utility industry. Unless otherwise agreed, the arbitration shall be conducted in
accordance with the American Arbitration Association's Commercial Arbitration
Rules, then in effect. Any arbitration proceedings, decision or award rendered
hereunder and the validity, effect and interpretation of this arbitration
agreement shall be governed by the Federal Arbitration Act of the United States,
9 U.S.C. ss.ss. 1 et seq. The location of any arbitration hereunder shall be in
the District of Columbia.
(b) The arbitration shall, if possible, be concluded not later
than six (6) months after the date that it is initiated. 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
28
or change any of the above in any manner. 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 reasons for
such decision and separately listing his or her findings of fact and conclusions
of law. The decision of the arbitrator rendered in such a proceeding shall be
final and binding on the Parties. Judgment on the award may be entered upon it
in any court having jurisdiction.
12.3 FERC Dispute Resolution. Nothing in this Agreement shall preclude,
-----------------------
or be construed to preclude, any Party from filing a petition or complaint with
FERC with respect to any arbitrable claim over which FERC has jurisdiction. In
such case, the other Party may request FERC to reject or to waive jurisdiction.
If FERC rejects or waives jurisdiction with respect to all or a portion of the
claim, the portion of the claim not so accepted by FERC shall be resolved
through arbitration, as provided in this Agreement. To the extent that FERC
asserts or accepts jurisdiction over the claim, the decision, finding of fact or
order of FERC shall be final and binding, subject to judicial review under the
Federal Power Act, and any arbitration proceedings that may have commenced with
respect to the claim prior to the assertion or acceptance of jurisdiction by
FERC shall be terminated.
ARTICLE 13
---------------
REPRESENTATIONS
---------------
13.1 Representations of Pepco. Pepco hereby represents and warrants to
------------------------
Generator as follows:
(a) Incorporation. Pepco is a corporation duly organized, validly
-------------
existing and in good standing under the laws of the District of Columbia and the
Commonwealth of Virginia, and has all requisite corporate power and authority to
own, lease and operate its material assets and properties and to carry on its
business as now being conducted.
(b) Authority. Pepco has all necessary corporate power and
---------
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Pepco of this
Agreement and the consummation by Pepco of the transactions contemplated
hereunder have been duly and validly authorized by the Board of Directors of
Pepco or by a committee thereof to whom such authority has been delegated and no
other corporate proceedings on the part of Pepco are necessary to authorize this
Agreement or the transactions contemplated hereby. This Agreement has been duly
and validly
29
executed and delivered by Pepco and, assuming that this Agreement constitutes a
valid and binding agreement of Generator, constitutes a valid and binding
agreement of Pepco, enforceable by Pepco in accordance with its terms.
(c) Consents and Approvals; No Violation.
------------------------------------
(i) Neither the execution and delivery of this Agreement by
Pepco nor performance by Pepco of its obligations hereunder will (A) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or Bylaws of Pepco, (B) result in a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which Pepco or any of its
subsidiaries is a party or by which any of their respective assets may be bound
or (C) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Pepco, or any of its assets, except in the case of clauses (B) and
(C) for such failures to obtain a necessary consent, defaults and violations
which would not, individually or in the aggregate, have a material adverse
effect on the ability of Pepco to discharge its obligations under this Agreement
(a "Pepco Material Adverse Effect").
(ii) No declaration, filing or registration with, or notice
to, or authorization, consent or approval of any governmental authority is
necessary for performance by Pepco of its obligations hereunder, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not obtained or made would not, individually or in the
aggregate, have a Pepco Material Adverse Effect.
13.2 Representations of Generator. Generator hereby represents and
----------------------------
warrants to Pepco as follows:
(a) Incorporation. Generator is a limited liability company duly
-------------
formed, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite limited liability company power and authority to
own, lease and operate its material assets and properties and to carry on its
business as now being conducted.
(b) Authority. Generator has all necessary limited liability
---------
company power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery by
the Generator of this Agreement and the consummation by Generator of the
transactions contemplated hereby have been duly and validly authorized by the
30
manager of Generator or by a committee thereof to whom such authority has been
delegated and no other limited liability company proceedings on the part of
Generator are necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Generator and, assuming that this Agreement constitutes a valid and
binding agreement of Pepco, constitutes a valid and binding agreement of
Generator, enforceable against Generator in accordance with its terms.
(c) Consents and Approvals.
----------------------
(i) Neither the execution and delivery of this Agreement by
Generator nor performance by Generator of its obligations hereunder will (A)
conflict with or result in any breach of any provision of the Certificate of
Formation or Operating Agreement or other charter document of Generator, (B)
result in a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement, lease or other instrument or
obligation to which Generator or any of its subsidiaries is a party or by which
any of their respective assets may be bound or (C) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Generator, or any
of its assets, except in the case of clauses (B) and (C) for such failures to
obtain a necessary consent, defaults and violations which would not,
individually or in the aggregate, have a material adverse effect on the ability
of Generator to discharge its obligations under this Agreement (a "Generator
Material Adverse Effect").
(ii) No declaration, filing or registration with, or notice to,
or authorization, consent or approval of any Governmental Authority is necessary
for performance by Generator of its obligations hereunder, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not obtained or made would not, individually or in the
aggregate, have a Generator Material Adverse Effect.
ARTICLE 14
----------
ASSIGNMENT/CHANGE IN CORPORATE IDENTITY
---------------------------------------
14.1 Assignment.
----------
(a) Except as set forth in this Article 14, neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned by
either Party hereto, without the prior written consent of the other Party, which
consent shall not be unreasonably withheld or delayed.
31
(b) Subject to Section 14.2, upon ten (10) days prior written
notice to Generator, Pepco may assign this Agreement, and Pepco's rights,
interests and obligations hereunder, to (i) an Affiliate of Pepco that owns all
or part of Pepco's Transmission System or (ii) an independent system operator or
independent transmission company whose control over all or part of Pepco's
Transmission System has been approved by the FERC.
(c) Subject to Section 14.2, Generator may (a) assign any of its
rights and obligations hereunder to an Affiliate to the extent necessary for the
Generator to qualify as an exempt wholesale generator under Section 32 of the
Public Utility Holding Company Act of 1935, as amended, and (b) assign,
transfer, pledge or otherwise dispose of its rights and interests hereunder to a
trustee, lending institution, or other Person for the purposes of financing or
refinancing the Station, 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 shall relieve or in any way discharge Generator from the performance
of its duties and obligations under this Agreement. Pepco agrees to execute and
deliver, at Generator's expense, 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
Facility, so long as Pepco's rights under this Agreement are not thereby
altered, amended, diminished or otherwise impaired.
(d) Subject to Section 14.2, either Party may 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 in writing and becomes liable for all of such Party's duties and
obligations hereunder.
14.2 Release of Rights and Obligations. No assignment, transfer,
---------------------------------
conveyance, pledge or disposition of rights, interests, duties or obligations
under this Agreement by a Party shall relieve that Party from liability and
financial responsibility for the performance thereof after any such transfer,
assignment, conveyance, pledge or disposition unless and until (i) the
transferee or assignee shall agree in writing to assume the obligations and
duties of that Party under this Agreement and to impose such obligations on
subsequent permitted transferees and assignees and (ii) the non-assigning Party
has consented in writing to such assumption and to a release of the assigning
Party from such liability, such consent not to be unreasonably withheld or
delayed.
14.3 Change in Corporate Identity. If Generator terminates its
----------------------------
existence as a limited liability company entity by merger, acquisition, sale,
consolidation or otherwise, or if all or substantially all of Generator's assets
are transferred to another
32
person or business entity without complying with this Article 14, Pepco shall
have the right, enforceable in a court of competent jurisdiction, to enjoin
Generator's successor from using the Station in any manner that does not comply
with the requirements of this Agreement or that impedes Pepco's ability to carry
on its ongoing business operations.
14.4 Successors and Assigns. 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.
ARTICLE 15
----------
SUBCONTRACTORS
--------------
Nothing in this Agreement shall prevent the Parties from utilizing the
services of subcontractors as they deem appropriate, provided, however, the
Parties agree that, where applicable, all said subcontractors shall comply with
the terms and conditions of this Agreement. The creation of any subcontract
relationship shall not relieve the hiring Party of any of its obligations under
this Agreement. Each Party shall be fully responsible to the other Party for the
acts and/or omission of any subcontractor it hires as if no subcontract had been
made. Any obligation imposed by this Agreement upon the Parties, where
applicable, shall be equally binding upon and shall be construed as having
application to any subcontractor. The Parties shall each be liable for,
indemnify, and hold harmless the other Party, their Affiliates and their
officers, directors, employees, agents, servants, and assigns from and against
any and all claims, demands, or actions, from the other Party's subcontractors;
and shall pay all costs, expenses and legal fees associated therewith and all
judgments, decrees and awards rendered therein. No subcontractor is intended to
be or shall be deemed a third-party beneficiary of this Agreement.
ARTICLE 16
----------
NOTICES
-------
16.1 Emergency Notices. At or prior to the Effective Date, each Party
-----------------
shall indicate to the other Party, by notice, the appropriate person during each
eight-hour work shift to contact in the event of an emergency, a scheduled or
forced interruption or reduction in services. The notice last received by a
Party shall be effective until modified in writing by the other Party.
16.2 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given (as of the time of delivery or, in the case
of a telecopied communication, of confirmation) if delivered personally,
telecopied (which is confirmed) or sent by overnight courier (providing proof of
delivery) to
33
the Parties at the following addresses (or at such other address for a Party as
shall be specified by like notice):
if to Pepco, to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) 872-3174
Attention: Andrew W. Williams
with a copy to:
Potomac Electric Power Company
1900 Pennsylvania Avenue, N.W.
Washington, D.C. 20068
Telecopier: (202) 261-7889
Attention: William T. Torgerson, General Counsel
if to Generator, to:
c/o Production Service Center
8711 Westphalia Road
Upper Marlboro, MD 20774
Telecopier: (301) 669-8030
Attention:Richard Koch, Chief Operations Officer
with a copy to:
Troutman Sanders LLP 401
9th Street, N.W.
Suite 1000
Washington, D.C. 20004
Telecopier: (202) 274-2994
Attention:Benjamin L. Israel, Esq.
ARTICLE 17
----------
AMENDMENTS
----------
17.1 Amendments. Except as set forth in Sections 2.2 and 17.2 of this
----------
Agreement, this Agreement may be amended, modified, or supplemented only by
written agreement of both Pepco and Generator.
34
17.2 FERC Proceedings.
----------------
(a) Pepco may unilaterally make application to FERC under Section
205 of the Federal Power Act and pursuant to the FERC's rules and regulations
promulgated thereunder for, or exercise any rights it may have under Section 206
of the Federal Power Act and the regulations thereunder with respect to, a
change in any rates, terms and conditions, charges, classification of service,
rule or regulation for any services Pepco provides under this Agreement over
which FERC has jurisdiction.
(b) Generator may exercise its rights under Section 205 or 206 of
the Federal Power Act and pursuant to FERC's rules and regulations promulgated
thereunder with respect to any rate, term, condition, charge, classification of
service, rule or regulation for any services provided under this Agreement over
which FERC has jurisdiction.
ARTICLE 18
----------
MISCELLANEOUS PROVISIONS
------------------------
18.1 Waiver. Except as otherwise provided in this Agreement, any
------
failure of a Party to comply with any obligation, covenant, agreement, or
condition herein may be waived by the Party entitled to the benefits thereof
only by a written instrument signed by the Party granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement, or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
18.2 Labor Relations. The Parties agree to immediately notify the other
---------------
Party, verbally and then in writing, of any labor dispute or anticipated labor
dispute which may reasonably be expected to affect the operations of the other
Party.
18.3 No Third Party Beneficiaries. Nothing in this Agreement is
----------------------------
intended to confer upon any other person except the Parties any rights or
remedies hereunder or shall create any third party beneficiary rights in any
person. No provision of this Agreement shall create any rights in any such
persons in respect of any benefits that may be provided, directly or indirectly,
under any employee benefit plan or arrangement except as expressly provided for
thereunder.
18.4 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Maryland (regardless of the laws
that might otherwise govern under applicable principles of conflicts of law).
35
18.5 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
18.6 Interpretation. When a reference is made in this Agreement to an
--------------
Article, Section, Schedule or exhibit, such reference shall be to an Article or
Section of, or Schedule or exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation" or equivalent words. The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such term. Unless otherwise expressly
stated otherwise herein, the word "day" shall mean any calendar day including
weekends and holidays. Any agreement, instrument, statute, regulation, rule or
order defined or referred to herein or in any agreement or instrument that is
referred to herein means such agreement, instrument, statute, regulation, rule
or order as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes, regulations, rules or orders) by succession of comparable successor
statutes, regulations, rules or orders and references to all attachments thereto
and instruments incorporated therein. References to a person are also to its
permitted successors and assigns. Each Party acknowledges that it has been
represented by counsel in connection with the review and execution of this
Agreement, and, accordingly, there shall be no presumption that this Agreement
or any provision hereof be construed against the Party that drafted this
Agreement.
18.7 Jurisdiction and Enforcement. Each of the Parties irrevocably
----------------------------
submits to the exclusive jurisdiction of the federal and state courts of the
State of Maryland for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby. Each of
the Parties agrees to commence any action, suit or proceeding relating hereto
either in the federal courts of the State of Maryland or, if such suit, action
or proceeding may not be brought in such court for jurisdictional reasons, in
the state courts of the State of Maryland. Each of the Parties further agrees
that service of process, summons, notice or document by hand delivery or U.S.
registered mail at the address specified for such Party in Section 16.2 (or such
other address specified by such Party from time to time pursuant to Section
16.2) shall be effective service of process for any action,
36
suit or proceeding brought against such Party in any such court. Each of the
Parties irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in the federal and state courts of the State of
Maryland and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
18.8 Entire Agreement. This Agreement, Asset Sale Agreement, the
----------------
Confidentiality Agreement and the Ancillary Agreements including the Exhibits,
Schedules, documents, certificates and instruments referred to herein or therein
and other contracts, agreements and instruments contemplated hereby or thereby,
embody the entire agreement and understanding of the Parties in respect of the
transactions contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings other than
those expressly set forth or referred to herein or therein. This Agreement, the
Asset Sale Agreement and the Ancillary Agreements supersede all prior agreements
and understandings between the Parties with respect to the transactions
contemplated by this Agreement other than the Confidentiality Agreement.
18.9 Severability. If any term or other provision of this Agreement is
------------
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
18.10 Independent Contractor Status. Nothing in this Agreement shall be
-----------------------------
construed as creating any relationship between Pepco and Generator other than
that of independent contractors.
18.11 Conflicts. Except with respect to the amendments,
---------
indemnification, liability, default and remedies provisions contained herein or
as otherwise expressly provided herein, in the event of any conflict or
inconsistency between the terms of this Agreement and the terms of the Asset
Sale Agreement, the terms of the Asset Sale Agreement shall prevail.
37
IN WITNESS WHEREOF, Pepco and Generator have caused this
Interconnection Agreement (Dickerson) to be signed by their respective duly
authorized officers as of the date first above written.
POTOMAC ELECTRIC POWER COMPANY
By: /s/ Mary Sharpe-Hayes
----------------------------------
Name: Mary Sharpe-Hayes
Title: Vice President
SOUTHERN ENERGY MID-ATLANTIC, LLC
By: /s/ David L. Davis
----------------------------------
Name: David L. Davis
Title: Vice President
1
SCHEDULE A
DEFINITIONS
-----------
Part A. Capitalized terms not defined in the body of the Agreement shall have
the meaning set forth in Part A of this Schedule A. (Part B of this
Schedule A sets forth capitalized terms defined within the Agreement.)
(1) "Affiliate" has the meaning set forth in Rule 12b-2 of the General
---------
Rules and Regulations under the Securities Exchange Act of 1934.
(2) "Ancillary Agreements" has the meaning set forth in the Asset Sale
--------------------
Agreement.
(3) "Closing" has the meaning set forth in the Asset Sale Agreement.
-------
(4) "Confidentiality Agreement" has the meaning set forth in the Asset
-------------------------
Sale Agreement.
(5) "Costs" means all costs, including without limitation, any Taxes,
-----
costs of acquiring real property, costs and fees for permits, franchises,
licenses and regulatory approvals except to the extent that such costs are
allocated to a party or parties other than the Generator by the PJM
Interconnection LLC or otherwise under the PJM Tariff or PJM Agreement.
(6) "Easement" means the Easement Agreement dated December 19, 2000,
--------
between the Parties with respect to the Station.
(7) "Environmental Laws" means all former, current and future federal,
------------------
state, local and foreign laws (including common law), treaties, regulations,
rules, ordinances, codes, decrees, judgments, directives or orders (including
consent orders) and environmental permits, in each case, relating to pollution
or protection of the environment or natural resources, including laws relating
to Releases or threatened Releases, or otherwise relating to the generation,
manufacture, processing, distribution, use, treatment, storage, arrangement for
disposal, transport, recycling or handling, of Hazardous Substances.
(8) "Emergency" means (a) with respect to Pepco, a condition or
---------
situation which Pepco, the PJM Interconnection LLC, the PJM System Operator or
the Transmission Operator deem imminently likely to (i) endanger life or
property, or (ii) adversely affect or impair the Transmission System, Pepco's
electrical system or the electrical or transmission systems of others to which
the Transmission System or Pepco's electrical system are directly or indirectly
connected and (b) with respect to the Generator, a condition or situation which
the Generator deems imminently likely to (i) endanger life or property, or (ii)
adversely affect or impair the Station.
(9) "FERC" means the Federal Energy Regulatory Commission or its
----
successors.
2
(10) "Generating Facilities" means the Station and any additional
---------------------
generating plants, turbines or other generating facilities constructed by
Generator after the Effective Date at the site of the Station.
(11) "Generator" has the meaning set forth in the introductory
---------
paragraph of this Agreement and shall include its permitted successors and
assigns.
(12) "Generator Facilities" mean the equipment and facilities owned or
--------------------
operated by the Generator but located on Pepco's property which are identified
in Schedule B of this Agreement.
(13) "Good Utility Practice" means any of the applicable practices,
---------------------
methods and acts.
(a) required by FERC, NERC, MAAC, the PJM Interconnection LLC, the
PJM System Operator, or the successor of any of them, whether or not the Party
whose conduct is at issue is a member thereof,
(b) required by applicable law or regulations,
(c) required by the Pepco Interconnection Standards or the
policies and standards of Pepco relating to emergency operations;
(d) otherwise engaged in or approved by a significant portion of
the electric utility industry during the relevant time period;
which, in the exercise of reasonable judgment 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 law, regulation, good business
practices, reliability, safety, and expedition. 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 be acceptable practices, methods, or acts generally
accepted in the region.
(14) "Hazardous Substances" means (i) any petrochemical or petroleum
--------------------
products, crude oil or any fraction thereof, ash, radioactive materials, radon
gas, asbestos in any form, urea formaldehyde foam insulation or polychlorinated
biphenyls, (ii) any chemicals, materials, substances or wastes defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "restricted hazardous materials," "extremely hazardous
substances," "toxic substances," "contaminants" or "pollutants" or words of
similar meaning and regulatory effect contained in any Environmental Law or
(iii) any other chemical, material, substance or waste which is prohibited,
limited or regulated by any Environmental Law.
(15) "Interconnection Facilities" means those facilities or portions of
--------------------------
facilities owned or operated by Pepco to provide Interconnection Service which
shall include, but not be limited to (1) facilities the cost of which is
reasonably allocated to the Interconnection Service provided to the Station, or
(2) Attachment Facilities or Local Upgrade Facilities, as defined in the PJM
3
Tariff, which are associated with the Interconnection Service and operated and
maintained by Pepco.
(16) "Interconnection Service" means the services provided by Pepco
-----------------------
which are necessary to connect the Station to the Transmission System for
parallel operation of the Station and to enable Generator to transmit the energy
and ancillary services produced by the Station to the Transmission System and
receive Station energy service and ancillary services, including blackstart
power, from the Generator's supplier.
(17) "MAAC" means the Mid-Atlantic Area Council, a reliability council
----
under Section 202 of the Federal Power Act established pursuant to the MAAC
Agreement dated August 1, 1994, or any successor thereto.
(18) "Maintain" means construct, reconstruct, install, inspect, repair,
--------
replace, operate, patrol, maintain, use, modernize, expand, upgrade, or other
similar activities.
(19) "MDPSC" means the Maryland Public Service Commission or any
-----
successor agency thereto.
(20) "NERC" means North American Electric Reliability Council or any
----
successor thereto.
(21) "Pepco" has the meaning set forth in the introductory paragraph of
-----
this Agreement and shall include its permitted successors or assigns.
(22) "Pepco Facilities" means the equipment and facilities owned by
----------------
Pepco but located on Generator's property which are identified in Schedule B of
this Agreement.
(23) "Pepco Interconnection Standards" means Pepco's Interconnection
-------------------------------
and Parallel Operating Guidelines as amended, modified or replaced from time to
time. A copy of the existing Pepco Interconnection Standards is attached hereto
as Schedule E.
(24) "Point of Interconnection" means each ownership point of
------------------------
demarcation set forth in Schedule C where capacity, energy and ancillary
services are transferred between the Station and the Transmission System.
(25) "Pepco Transmission Facilities" means those transmission,
-----------------------------
substation, and communication facilities and related equipment, including the
Interconnection Facilities, and any additions, modifications or replacements
thereto, that are utilized to provide Interconnection Service to the Station.
(26) "PJM" means the Pennsylvania New Jersey-Maryland interconnected
---
power pool operated under the PJM Agreement and any successor thereto including
any regional transmission operator, independent system operator, transco, or any
other independent system administrator that possesses operational or planning
control over the Transmission System.
4
(27) "PJM Agreement" means the Amended and Restated Operating Agreement
-------------
of the PJM Interconnection LLC dated as of June 2, 1997.
(28) "PJM Control Area" shall mean the control area recognized by NERC
----------------
as the PJM Control Area.
(29) "PJM Interconnection LLC" means the independent system operator of
-----------------------
the PJM Control Area pursuant to the PJM Operating Agreement and the PJM Tariff.
(30) "PJM Generator Connection Agreement" means the interconnection
----------------------------------
agreement entered into between the Generator and the PJM Interconnection LLC
pursuant to the PJM Tariff with respect to the interconnection of the Station
and the Transmission System.
(31) "PJM Reliability Agreement" means the Reliability Assurance
-------------------------
Agreement dated June 2, 1997 among the load serving entities of PJM.
(32) "PJM Requirements" means the rules, regulations or other
----------------
requirements of PJM or MAAC contained in or adopted pursuant to the PJM
Agreement, the PJM Tariff or the PJM Reliability Agreement which are applicable
to Pepco, with respect to the Transmission System or the Interconnection
Service, and the Generator with respect to the Generating Facilities.
(33) "PJM System Operator" shall mean the PJM Interconnection LLC,
-------------------
energy control center staff responsible for central dispatch as provided in the
PJM Agreement.
(34) "PJM Tariff" means the PJM Open Access Transmission Tariff
----------
providing transmission service within the PJM Control Area.
(35) "Qualified Personnel" means individuals who possess any required
-------------------
licenses and are trained for their positions and duties by Generator and/or
Pepco pursuant to Good Utility Practice.
(36) "Release" means any release, spill, emission, leaking, dumping,
-------
injection, pouring, deposit, disposal, discharge, dispersal, leaching or
migration into the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata) or within any building,
structure, facility or fixture.
(37) "Revenue Meters" means all MWh and MVArh meters, pulse isolation
--------------
relays, pulse conversion relays, transducers required by Pepco or the PJM
Interconnection or PJM System Operator for billing or other purposes, and
associated totalizing equipment and appurtenances and compensation required to
measure the transfer of energy across the Point of Interconnection.
(38) "Station" means the Dickerson Station as defined in the Asset Sale
-------
Agreement.
5
(39) "Switching, Tagging and Grounding Rules" means Pepco's switching,
--------------------------------------
tagging and grounding rules as amended, modified or replaced from time to time.
A copy of the existing Switching, Tagging and Grounding Rules is attached hereto
as Schedule D.
(40) "Taxes" means all taxes, surtaxes, charges, fees, levies,
-----
penalties or other assessments imposed by any United States federal, state,
local or foreign taxing authority, including income taxes, excise, property,
sales, transfer, franchise, special franchise, payroll, recording, withholding,
social security or other taxes, in each case including any interest, penalties
or additions attributable thereto.
(41) "Transmission System" means the facilities owned, controlled, or
-------------------
operated by Pepco, for purposes of providing transmission service, including
services under the PJM Tariff, and Interconnection Service.
(42) "Transmission Operator" means the person, or persons designated by
---------------------
Pepco to coordinate the day to day interconnection of the Station with the
Transmission System.
Part B. The following terms have the meaning specified in the section of this
- ------ Agreement set forth opposite to such term:
- ----------------------------------------------------------
Term Agreement Reference
- ----------------------------------------------------------
Agreement Preamble
- ----------------------------------------------------------
Asset Sale Agreement Preamble
- ----------------------------------------------------------
Effective Date Section 2.1
- ----------------------------------------------------------
Event of Default Section 8.1
- ----------------------------------------------------------
Force Majeure Section 11.1
- ----------------------------------------------------------
Initial Period Section 3.10
- ----------------------------------------------------------
Operating Committee Section 3.20
- ----------------------------------------------------------
Party or Parties Preamble
- ----------------------------------------------------------
Term Article 2
- ----------------------------------------------------------
6