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Exhibit 10.5(a)
OWNERSHIP AND OPERATION AGREEMENT
COLSTRIP UNITS #3 & #4
TABLE OF CONTENTS
Page
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1. Definitions ...................................................... 1
2. Ownership of Project ............................................. 3
3. Operator ......................................................... 5
4. Design, Engineering and Construction Management .................. 6
5. Construction ..................................................... 6
6. Costs of Construction ............................................ 7
7. Construction Budget .............................................. 8
8. Construction Payments ............................................ 9
9. Cost of Operation ................................................ 9
10. Operating Budget ................................................. 10
11. Operation and Maintenance Payments ............................... 11
12 Coal Fuel ........................................................ 12
13. Scheduling of Power and Energy ................................... 13
14. Scheduling of Outages ............................................ 15
15. Accounting and Reports ........................................... 15
16. Insurance ........................................................ 16
17. Project Committee ................................................ 17
18. Arbitration ...................................................... 21
19. Damage to the Project ............................................ 21
20. Liabilities ...................................................... 23
21. Default .......................................................... 23
22. Uncontrollable Forces ............................................ 25
23. Waiver of Right to Partition ..................................... 25
24. Transfers and Assignments ........................................ 26
25. Obligations Are Several .......................................... 28
26. Notices .......................................................... 29
27. Implementation ................................................... 29
28. Provisions for Additional Facilities ............................. 29
29. Regulatory Approval .............................................. 29
30. Rule Against Perpetuities or Similar or Related Rules ............ 30
31. End of Project ................................................... 30
32. Term ............................................................. 30
33. Effective Date and Basin Electric's Participation ................ 31
34. Miscel1aneous .................................................... 31
Exhibit A - Real Estate
Exhibit B - Administrative and General Costs
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OWNERSHIP AND OPERATION AGREEMENT
COLSTRIP UNITS #3 & #4
THIS AGREEMENT is made as of the 6th day of May, 1981, by and between the
following parties: THE MONTANA POWER COMPANY, a Montana corporation, and FIRST
TRUST COMPANY OF MONTANA, a Montana corporation, as trustee under The Montana
Power Company Construction Trust (collectively "Montana"); PUGET SOUND POWER &
LIGHT COMPANY, a Washington corporation, and PUGET COLSTRIP CONSTRUCTION
COMPANY, a Washington corporation (collectively, "Puget"); THE WASHINGTON WATER
POWER COMPANY, a Washington corporation ("Water Power"); PORTLAND GENERAL
ELECTRIC COMPANY, an Oregon corporation ("Portland"); PACIFIC POWER & LIGHT
COMPANY, a Maine corporation ("Pacific"); and BASIN ELECTRIC POWER COOPERATIVE,
a North Dakota cooperative corporation ("Basin Electric"):
WITNESSETH:
WHEREAS, the parties desire to establish the terms and conditions relating
to their ownership, as tenants in common, and the planning, financing,
acquisition, construction, operation and maintenance of the Colstrip Units #3
and #4 Steam Electric Generating Project and related facilities; and
WHEREAS, The Montana Power Company has conveyed an 11.16% interest in the
Project to First Trust Company of Montana, as Trustee under a grantor trust, and
Puget has conveyed a 23.25% interest in the Project to its wholly-owned
subsidiary, Puget Colstrip Construction Company.
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements herein stated and the performance thereof, all as hereinafter set
forth, the parties hereto mutually agree as follows:
1. Definitions
(a) "Capital Additions" means additions, betterments and replacements to
the Project that are necessary to assure design capability and reliability or
that are required by governmental agencies.
(b) "Capital Retirements" means those physical elements of the Project
removed from service or use with the intent that the items so removed will not
be placed back into service.
(c) "Coal Supplier" shall mean WESTERN ENERGY COMPANY, a Montana
corporation, or its successor under the Coal Agreement.
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(d) "Committee" means the committee provided for in Section 17 hereof.
(e) "Common Facilities" means that portion of the property described in
the Common Facilities Agreement which is allocated to the Project.
(f) "Construction" means all activities necessary for planning,
engineering, acquisition and erection of the Project and of Capital Additions
and Elective Capital Additions.
(g) "Costs of Construction" shall have the meaning set forth in Section 6
hereof.
(h) "Costs of Operation" shall have the meaning set forth in Section 9
hereof.
(i) "Elective Capital Additions" means additions, betterments, and
replacements to the Project that are not Capita1 Additions.
(j) "Net Generating Capability" means the total amount of electrical
energy which the Project is capable of generating, due allowance being made for
legal, regulatory or physical constraints then obtaining, less the amount used
in the production thereof, all as determined at any time by the Operator under
guidelines developed by the Committee.
(k) "Operator" means the Operator appointed under Section 3 hereof.
(l) "Owners" means Montana, Puget, Water Power, Portland, Pacific, and
Basin Electric and shall include their successors and assigns of an ownership
interest in the Project or any part thereof.
(m) "Person" means any individual, partnership, corporation, trust, joint
venture, or unincorporated organization.
(n) "Project" means the coal-fired steam electric generating project known
as Colstrip Units #3 and #4 Steam Electric Generating Project, consisting of two
units, each of 700 megawatt nominal rating, the Common Facilities and related
facilities, real property and property rights (including, but not limited to,
the real property described in Exhibit "A" hereto) located near Colstrip,
Montana. The Project shall not include the Transmission System defined in
Section 2(p) of the Transmission Agreement.
(o) "Project Agreements" means this Agreement together with the following
agreements to be entered into relating to Colstrip Units #3 and *4:
(i) Coal Agreement, Colstrip Units #3 and #4 Steam Electric
Generating Project, between Owners and
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Western Energy Company, herein called the "Coal Agreement";
(ii) Colstrip Project Transmission Agreement (the "Transmission
Agreement");
(iii) Common Facilities Agreement.
(p) "Project Share" shall have the meaning set forth in Section 2(b)
hereof.
(q) "Project User" means any Owner (except to the extent that such Owner
is leasing as lessor its undivided interest in the Project, or any part thereof,
to another Person) and any Person engaged in the electric utility business
during the time, and to the extent, it is leasing, as lessee, an undivided
interest in the Project or any part thereof.
(r) "Prudent Utility Practice" at any particular time means either any of
the practices, methods and acts engaged in or approved by a significant portion
of the electrical utility industry prior thereto or any of the practices,
methods or acts, which, in the exercise of reasonable judgment in the light of
the facts known at the time the decision was made, could have been expected to
accomplish the desired result at the lowest reasonable cost consistent with
reliability, safety and expedition. Prudent Utility Practice shall apply not
only to functional parts of the Project, but also to appropriate structures,
landscaping, painting, signs, lighting, other facilities and public relations
programs, inc1uding recreational facilities, and any other programs or
facilities, reasonably designed to promote public enjoyment, understanding and
acceptance of the Project. Prudent 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 a spectrum of possible practices, methods or acts. Prudent
Utility Practice shall also include those practices, methods and acts that are
required by applicable laws and final orders or regulations of regulatory
agencies having jurisdiction.
2. Ownership of Project
Subject to the terms and conditions hereinafter set forth, ownership of
the Project and each part thereof shall be as follows:
(a) The Project and each part thereof shall be owned by the Owners as
tenants in common, with each Owner's respective undivided interest initially
being in the following percentage:
Montana 27.9 % Water Power 13.95%
Puget 23.25% Pacific 9.3 %
Portland 18.6 % Basin Electric 7.0 %
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(b) Each Project User shall have a project share ("Project Share") equal
to the sum of the percentages of undivided interest in the Project:
(i) owned by (and not eased to another Person) such Project User;
and
(ii) leased by an Owner to such Project User.
if a Project Share is reduced or added to pursuant to this Agreement, the
Owner's percentage undivided interest corresponding to such Project Share shall
also be reduced or added to, as the case may be, to the same extent.
(c) Each Project User shall be entitled to schedule and take an amount of
generation up to but not to exceed its Project Share of the Net Generating
Capability; provided that an Owner which becomes a Project User shall not be
entitled to schedule and take generation with respect to its ownership interest
in the Project until it has assumed in writing all the duties and obligations of
a Project User with respect to such interest under the Project Agreements.
(d) All of the respective covenants and agreements of each Owner and each
Project User set forth and contained in the Project Agreements are incorporated
herein by reference and shall bind and shall be and become the respective
obligations of each Owner and each Project User and their respective successors
and assigns.
(e) Each Owner and each Project User shall promptly take all action
(including, but not limited to, obtaining all requisite authorizations)
necessary for participation by such Owner or Project User in the ownership,
construction, operation and maintenance of the Project. Each Owner and Project
User shall promptly take such action (including, but not limited to, the
execution, acknowledgment, delivery and recordation of instruments of conveyance
and for release of security interests) as may reasonably be requested by any
other Owner or Project User to effect, evidence or vest each Owner's or Project
User's respective interests in the Project.
(f) Each Project User may at any time assign one or more representatives
to the Project. Such representatives shall remain the employees of their
respective employers and may keep their employers advised concerning matters
involving the Project. The salary and related costs of the representatives shall
be an expense of each respective employer. Operator shall not direct the work of
or in any fashion utilize such representatives to supervise or to perform
services. Operator shall have no authority to discharge such representatives but
may for good cause require the Project User to transfer its representatives from
the Project.
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(g) Each of the Owners and Project Users shall have the right at all
reasonable times to inspect the Project and all Project records. The Operator
shall provide access and safe and sufficient equipment and facilities required
for such inspection.
3. Operator
(a) The Owners and Project Users hereby appoint The Montana Power Company,
and The Montana Power Company hereby accepts appointment, as the Operator of the
Project ("Operator"). The Operator may be substituted or replaced by the
Committee in accordance with Section 17(k), provided, that no substitution or
replacement of an Operator shall become effective earlier than two (2) years
from the date of such approval unless:
(i) the existing Operator consents thereto; or
(ii) an arbitrator shall find that the Operator is in
material breach of its obligations as Operator.
The Operator removed shall be entitled to recover from the Project an equitable
amount to cover the cost impacts of such removal.
(b) The Operator, as agent for and on behalf of the Owners and the Project
Users, shall construct, operate and maintain the Project, hire all Project
personnel, and pay all Costs of Construction and Costs of Operation, all in
accordance with Prudent Utility Practice, the Project Agreements, guidelines
established from time to time by the Committee, and any applicable laws,
regulations, orders, permits and licenses, now or hereafter in effect, of any
governmental authority having authority.
(c) The Operator shall not assign, transfer or delegate, voluntarily or by
operation of law, its responsibilities to any Person without the written
approval of Committee members representing at least 50% of the total Project
Shares (excluding the Project Share of the Operator). The Operator may resign as
Operator upon the giving of two (2) years' notice to the Project Users. The
Committee shall thereupon appoint a new Operator in accordance with Section
17(k).
(d) In every instance where Operator is required by any of the Project
Agreements to act as agent for and on behalf of the Owners and/or Project Users,
or any of the Owners and/or Project Users, Operator is hereby granted and shall
have the power to exercise authority to do everything necessary, proper and
usual, in the ordinary course of business, for effecting the purpose of its
agency, including, but not limited to, the power to enter into contracts with
third parties for and on behalf of the Owners and/or Project Users, the power to
make and receive payments, the power to initiate, compromise or settle claims
with third parties, the power to act as agent in its own name, and the power to
appoint subagents. The Operator shall exercise such agency power in
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accordance with any guidelines established by the Committee. The grant of such
agency powers to Operator shall remain in effect until the Project ends as
described in Section 31.
(e) The Operator shall maintain a force of able and efficient manpower
and, as employer of the work force, Operator shall hire and fire personnel as
necessary. The work force will be employed in the classifications necessary to
construct, operate and maintain the Project. The Operator shall negotiate any
contracts entered into with unions and set wage scales for nonunion personnel.
(f) The Operator shall maintain a training program as necessary to assure
the availability of qualified personnel for the Construction, operation and
maintenance of the Project. If such training program utilizes facilities of
Operator other than Project facilities, the costs of such use of facilities
shall be allocated on an equitable basis to Project costs hereunder. Operator
shall make such training program and reasonable use of Project facilities
available to employees of the other Project Users for the purpose of training
and the costs of such training shall be apportioned equitably between the
Project and such other Project Users.
(g) The Operator shall pay promptly all sums due employees or due any
governmental or other agency on their behalf or on account of their employment
and shall not permit any labor claims to become a lien against the property of
the Owners or Project Users, other than claims that are being contested in good
faith.
(h) The Operator shall develop and maintain a safety program for
protection of personnel and equipment. The Operator shall practice good
housekeeping. Subject to the rights of the other Owners and Project Users to
inspect the Project, the Operator shall control access to the Project.
(i) The Operator shall develop and maintain a preventative maintenance
program in accordance with guidelines established by the Committee.
4. Design, Engineering and Construction Management
The Project Users shall retain a firm or firms, including a Project
Architect-Engineer, recognized for knowledge, skill and experience on the design
and construction of electrical generating facilities and related facilities,
until the Committee determines that the services of any such firm or firms are
no longer required or desirable.
5. Construction
(a) Operator shall take whatever action is necessary or appropriate to
seek and obtain all licenses, permits and other
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rights and regulatory approvals necessary for the Construction, operation and
maintenance of the Project, on behalf of itself and the other Owners and Project
Users. However, the Owners and Project Users acknowledge that there is no
assurance that such permits, licenses and approvals will be obtained.
(b) Operator shall prosecute Construction in accordance with appropriate
plans and specifications for the Project so as to complete Construction by a
date to be established by the Committee. The Owners and Project Users
acknowledge that there is no assurance that such Construction will be completed
as scheduled.
(c) All agreements, purchase contracts and orders heretofore entered into
by Montana in its own name relating to Construction are hereby dedicated to the
Project and ratified by the Owners and Project Users. Operator, with reasonable
expedition for itself and as agent for the other Owners and Project Users, shall
enter into additional contracts for such purpose as well as for operation and
maintenance of the Project. The award of any contracts in connection with
Construction, operation and maintenance of the Project shall be made by Operator
in a manner designed to result in the least overall cost consistent with
standards of high quality.
(d) The Operator shall dispose of surplus Project property in accordance
with the directions of the Committee. Proceeds from such disposal shall be
distributed or allocated to the Owners in accordance with their respective
percentage undivided ownership interests in such property.
(e) The Project Users authorize and direct Operator to schedule
deliveries in proportion to their Project Shares of appropriate quantities of
coal to permit initial testing of Units #3 and #4 as each said unit becomes
ready therefor. Operator shall appropriately record coal used for such purposes
and furnish copies of such records to the other Project Users. Operator will
schedule generation from testing to the Project Users according to their
respective Project Shares.
6. Costs of Construction
"Costs of Construction" are all costs allocable to Construction (excluding
costs of coal and allowance for funds used during construction), after giving
appropriate consideration to credits relating to such costs, including proceeds
from dispositions of surplus property and interest received on sums of money
deposited in the Construction Trust Account referred to in Section 8(a) hereof.
Without limiting the generality of the foregoing, such costs shall include:
(a) All costs of preliminary site investigation and development, land
acquisition, architectural and engineering services,
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labor, materials, equipment, supplies, personnel training, testing, permits and
licenses, legal services, Capital Additions and Elective Capital Additions;
(b) Payroll, including related fringe benefits and payroll taxes, of
direct full time Project employees;
(c) Payroll of Operator's employees, other than those charged to its
administrative and general expenses, and other than direct full time Project
employees, on an actual time basis including related fringe benefits and payroll
taxes;
(d) Reasonable traveling expense including use of Operator's
transportation equipment;
(e) All costs of insurance obtained pursuant hereto applicable to
Construction;
(f) All costs relating to injury or damage (whether incurred by an Owner,
Project User or any other person or entity) arising out of Construction (other
than any claims released pursuant to Section 20) less proceeds of insurance
maintained pursuant hereto or of insurance under any contract for Construction;
(g) All federal, state and local taxes and payments in lieu of taxes
legally required to be paid in connection with Construction, except any tax or
payment in lieu of taxes assessed or charged directly against any individual
Owner or Project User unless such tax or payment was assessed or charged to the
individual Owner or Project User on behalf of the Project;
(h) Administrative and general costs of Operator applicable to
Construction determined in accordance with Exhibit "B" hereto; and
(i) All costs of acquiring Common Facilities.
7. Construction Budget
As soon as practical after the execution of this Agreement, Operator shall
submit to the Project Users a budget setting forth an estimate of amounts
expected to be expended for Costs of Construction and an estimate of Capital
Retirements and related costs in each quarter hereafter to the completion of
Construction, together with an estimated cash flow schedule for each of said
quarters. By September 1 of each year, Operator shall submit to the Committee
for approval an updated budget and cash flow schedule, supported by detail
adequate for the purpose of comprehensive review, describing the items of Costs
of Construction and Capital Retirements and the amounts expected to be expended
therefor in each month during the next 12 months commencing the following
January and in each quarter thereafter. Construction budget and cash flow
schedules shall be changed by Operator from time to time
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as necessary to reflect substantial changes in construction schedules, plans,
specifications or costs and, when so changed, shall be submitted to the
Committee for approval.
8. Construction Payments
(a) Operator shall establish a separate trust account ("Construction Trust
Account") in a bank located in the State of Montana and having qualifications
meeting all requirements imposed upon depositories for any of the Owners or
Project Users. Sums of money for Costs of Construction shall be deposited
therein and Operator shall withdraw and apply funds therefrom only as necessary
to pay Costs of Construction.
(b) Upon execution of this Agreement, each Project User shall deposit (or
cause deposit of) into the Construction Trust Account its Project Share of a
working fund of $50,000. Operator shall periodically notify each Project User a
reasonable period of time in advance, as determined from time to time by the
Committee, or in the event of an emergency as soon as practicable, of
expenditures for Costs of Construction. Whether or not such expenditures are
provided for in the budget, each Project User shall deposit (or cause deposit
of) its Project Share of such expenditures in the Construction Trust Account in
funds immediately available on the dates specified in the notification.
(c) At the time of execution of this Agreement or promptly thereafter,
each Project User shall have paid (or caused payment of) its Project Share of
the accumulated Costs of Construction paid prior to the date of such execution,
plus the cost of interest thereon.
(d) The Construction Trust Account may from time to time be closed or
later reopened upon unanimous action of the Committee.
(e) Any cost or expense required to be incurred solely as a result of a
Project User's lease or financing of its Project Share shall be borne by such
Project User.
9. Costs of Operation
Costs of Operation means all expenses incurred in or relating to the
operation and maintenance of the Project, except coal fuel, including but not
limited to:
(a) Payroll, including related fringe benefits and payroll taxes, of
direct full time Project employees;
(b) Payroll of Operator's employees, other than those charged to its
administrative and general expenses, and other than direct full time Project
employees, on an actual time basis including related fringe benefits and payroll
taxes;
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(c) Materials and supplies including related purchasing and handling
costs;
(d) Reasonable traveling expense including use of Operator's
transportation equipment;
(e) Start-up and flame stabilization fuel costs;
(f) Purchased power costs;
(g) All costs of insurance obtained pursuant hereto applicable to
operation or maintenance;
(h) All costs relating to injury or damage (whether incurred by an Owner,
Project User, or any other person or entity) arising out of operation or
maintenance of the Project (other than any claims released pursuant to Section
20) less proceeds of insurance maintained pursuant hereto or of insurance under
any contract relating to operation or maintenance of the Project;
(i) All federal, state and local taxes and payments in lieu of taxes
legally required to be paid in connection with ownership, operation, or
maintenance of the Project, except any tax or payment in lieu of taxes assessed
or charged directly against any individual Owner or Project User unless such tax
or payment was assessed or charged to the individual Owner or Project User on
behalf of the Project; and
(j) Administrative and general costs of Operator applicable to Project
operation and maintenance as determined in accordance with Exhibit "B" hereto.
However, any cost or expense required to be incurred solely as a result of
a Project User's lease or financing of its Project Share shall be borne by such
Project User.
10. Operating Budget
(a) On or before September 1 of each year, the Operator shall submit to
the Committee a budget of its estimate of Costs of Operation by calendar months
for the operating year beginning January 1 next following. Such budget shall be
subject to approval by the Committee which approval shall not unreasonably be
withheld. The Committee shall approve such budget or a revised budget on or
before November 1 in any such year. The budget will list the work force and
expense therefor, materials, supplies, and other expenses associated with the
normal maintenance program. Extraordinary items of maintenance will be detailed
to set forth the cost of labor required beyond that available from the regular
force and other expense which will be incurred. The operator will submit budget
revisions as may become necessary from time to time during any operating year
which the Committee shall promptly consider and which shall similarly be
subject to approval by the Committee. The budget will guide expenditures for
operating and
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maintenance purposes through the ensuing year, except as may be required in an
emergency.
(b) In the event of emergency, forced outages, reductions in Net
Generating Capability, or instances of unforeseen maintenance restricting
production below that required by the Project Users when repairs could be
effected more rapidly by expenditure of overtime and other expediting costs, the
Project Users will be individually notified. Unless authorized by the Committee
as Costs of Construction or Costs of Operation, Project Users desiring
accelerated repairs will share pro rata, according to their respective Project
Shares, the expediting costs expended to return the Project to the required
operating level at an earlier date.
(c) The Owners and Project Users recognize that it will be necessary for
continued operation of the Project, or to maintain the Project in operable
condition, that the Operator be in a position to meet commitments for payroll,
repairs and replacements, materials and supplies, services and other expenses of
a continuing nature in order that it may fulfill its obligations to the Owners
and Project Users as Operator under this Agreement. Accordingly, notwithstanding
any of the provisions of this Section 10, the Operator, on behalf of the Owners
and Project Users, may make all expenditures in the normal course of business or
in an emergency, all as the same are necessary for the proper and safe operation
and maintenance of the Project. As soon as practicable after the making of any
such expenditures, the Operator shall make a full report thereof to the
Committee. The Operator shall take any action required by a final and binding
order of any public authority having jurisdiction or in any emergency for the
safety of the Project.
11. Operation and Maintenance Payments
(a) At such time as the Committee shall determine, Operator shall
establish a separate trust account ("Operation Trust Account") in a bank located
in the State of Montana and having qualifications meeting all requirements
imposed upon depositories for any of the Owners and Project Users. Sums of money
for Costs of Operation shall be deposited therein and the Operator shall
withdraw and apply funds therefrom only as necessary to pay Costs of Operation.
(b) Upon establishment of the Operation Trust Account, each Project User
shall deposit (or cause deposit of) into the Operation Trust Account its Project
Share of a working fund in an amount established by the Committee as sufficient
for the continuing operation of the Project. The Operator shall periodically
notify each Project User a reasonable period of time in advance, as determined
from time to time by the Committee, or in the event of an emergency as soon as
practicable, of expenditures for Costs of Operation. Whether or not such
expenditures are provided for in the budget, each Project User shall deposit (or
cause deposit
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of) its Project Share of such expenditures in the Operation Trust Account in
funds immediately available on the dates specified in the notification.
(c) The Operation Trust Account may from time to time be combined with the
Construction Trust Account established pursuant to Section 8(a) of this
Agreement as determined by unanimous action of the Committee.
12. Coal Fuel
(a) Each Project User agrees to order an amount of coal sufficient to
generate the minimum energy required by Section 13(d) of this Agreement and to
timely provide the Operator with its coal delivery schedules to be furnished to
the Coal Supplier under Section 3 of the Coal Agreement. The Project Users
authorize the Operator to execute and deliver appropriate purchase orders to the
Coal Supplier for said amounts to be delivered. Subject to the foregoing and as
more specifically set forth hereinafter, the Operator shall timely schedule coal
supplies necessary to meet the generating requirements of the Project Users
pursuant to Section 13 of this Agreement and to meet the Project Users'
respective coal storage requirements.
(b) Each Project User shall have the right to use the coal storage area in
the same proportion as its Project Share. During any time any portion of such
coal storage area is not being used by a Project User entitled to such use, it
may be temporarily used without charge by another Project User; provided, that
such temporary use shall not interfere with any Project User's right to schedule
coal into its portion of the coal storage area; and that if sufficient storage
is not available to accommodate the coal scheduled into storage, the Project
User temporarily using the area shall make such arrangements as are necessary in
order to avoid any such interference. If any Project User suffers an economic
loss in the form of increased coal costs or penalties assessed by the Coal
Supplier because of the other Project User's temporary use of storage in excess
of its share, the Project User suffering such loss shall be made whole by the
Project User causing such loss.
(c) The Project Users shall cooperate in the scheduling of coal from the
Coal Supplier and scheduling of coal in and out of storage in order to minimize
rehandling.
(d) At least annually, the Operator shall survey the coal in storage and
determine its tonnage. If the coal in storage, as determined by such survey, is
greater or less than the tonnage shown in the records maintained by the
Operator, the tonnage in such records for each Project User will be increased or
decreased, as the case may be, pro rata to the average of the daily balances of
coal in storage determined from received and consumed tonnages for each Project
User during the period since the last survey, or
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by such other method as may be determined upon by the Committee. If such
adjustment results in any Project User having a negative coal balance, such
Project User shall make arrangements to eliminate its negative position as soon
as reasonably possible.
(e) If casualty or other forces cause a sudden or rapid loss of coal in
coal storage, such loss shall be estimated or surveyed, as may be appropriate in
the circumstances, and shared by the Project Users pro rata, based upon the
tonnage of coal of each in storage immediately preceding the loss, as shown in
the records.
(f) Operator shall, pursuant to the procedures established by the
Committee, prepare a "Distribution Notice" to be provided to the Coal Supplier
pursuant to subsection 7.2 of the Coal Agreement. The Committee shall prescribe
a procedure for equitably allocating to each Project User the tonnage of coal
consumed in each twenty-four (24) hour period.
(g) Complete records shall be kept by Operator as prescribed by the
Committee, including tons of coal consumed, the Btu content thereof, the amounts
allocated to the respective Project Users, the tonnage in and out of storage,
the tonnage each Project User has in storage and the remaining storage capacity
available.
(h) Annually the Operator shall compute price adjustments for Btu content
of coal pursuant to Section 8 of the Coal Agreement and furnish notification
thereof to each Project User and to Coal Supplier.
(i) Each Project User shall pay before delinquency its Project Share of
the Fixed Charge payable under Section 7 of the Coal Agreement. Each Project
User shall pay before delinquency the Commodity Charge payable under Section 7
of the Coal Agreement for coal ordered by such Project User. Any additional
payments to or credits from the Coal Supplier (e.g. under subsection 7.5, 7.8 or
8.3 of the Coal Agreement) shall be equitably allocated among the Project Users
taking into account all pertinent factors. Such factors may include, but are not
necessarily limited to, the amounts of coal ordered by each Project User, the
amounts of coal delivered under subsection 4.1 of the Coal Agreement for use in
a generating plant other than the Project, the amount by which each Project
User's orders for coal exceed or are less than such Project User's Project Share
of the minimum annual tonnage under subsection 7.8 of the Coal Agreement, any
release under subsection 7.8(d) of the Coal Agreement of all or any portion of a
Project User's contracted minimum tonnage of coal, sales of coal to third
parties and force majeure under Section 10 of the Coal Agreement.
13. Scheduling of Power and Energy
(a) Each Project User shall furnish its generation schedule to the
Operator in accordance with the procedures hereinafter set forth and except as
provided in Section 2(c) shall be entitled to
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schedule and take an amount of generation up to but not to exceed its Project
Share of the Project's Net Generating Capability. Subject to the terms,
covenants, and conditions contained in the Project Agreements, the Operator will
operate the Project in accordance with such generation schedules.
(b) Before 4:00 p.m. Mountain Time of each day, the Project Users shall
make available to Operator the hourly schedules of desired generation for the
following day or days. Changes in such scheduled generation may thereafter be
made at any time by a Project User.
(c) No Project User shall schedule a rate of change of its share of output
greater than such Project User's Project Share of a rate of change which is
within the ability of the Project to perform; provided, however, that if any
Project User schedules a rate of change of output less than its Project Share of
such Project ability, the other Project Users may schedule a rate of change of
output greater than their Project Share of such Project ability, subject to
meeting a total rate of change of output which is within the ability of the
Project to perform.
(d) Each Project User's schedule of generation shall not be less at any
time than such Project User's Project Share of the minimum operating capability
of the Project unless all Project Users agree on a shutdown of the Project;
provided, however, that if at times one or more Project User schedules more than
their Project Share of the minimum operating capability, the Project Users that
have scheduled their Project Share of the minimum operating capability may
reduce their schedules during such times subject to meeting the minimum
operating capability requirements of the Project. Such reduction shall be pro
rata to the Project Shares of the Project Users desiring such adjustment or as
otherwise agreed by such Project Users.
(e) The Committee shall, as soon as necessary information is available,
establish guidelines for determination of minimum operating capability for each
unit of the Project, normal rate of change of generation, and Net Generating
Capability.
(f) The Operator shall hold deviations from schedule to a minimum. Unless
otherwise agreed among the Project Users, actual generation in any hour shall be
apportioned among the respective Project Users in proportion to the generation
schedules of the respective Project Users; provided, however, that no Project
User shall be entitled to receive deliveries of energy in excess of its Project
Share of the Net Generating Capability.
(g) When the actual Net Generating Capability of the Project during any
particular hour is for any reason reduced from its anticipated capability, the
amount of energy available to each Project User, except as may otherwise
mutually be agreed, shall be equal to such Project User's Project Share of
reduced Net Generating Capability and the schedule for each Project User, which
had
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more energy scheduled than is available for such Project User, shall be
appropriately reduced for such hour. The Operator shall promptly notify each
Project User of the new Net Generating Capability or of any change in operating
limits, and the respective Project Users shall thereupon make any necessary
changes in their respective generation schedules to conform such schedules to
any limitation thereof.
(h) At any time that neither Unit is operating, each Project User shall
supply to Operator such Project User's Project Share of power to provide station
service.
14. Scheduling of Outages
(a) The Operator shall schedule outages for major maintenance as required
by the manufacturers' applicable conditions of sale and delivery of the affected
facilities and equipment or as the manufacturer may advise from time to time,
unless otherwise directed by the Committee.
(b) The Operator shall schedule all unit outages for inspection and
routine maintenance at such time as shall be directed by the Committee,
provided, however, that any outages required by governmental agencies having
jurisdiction or outages to avoid hazard to the Project or to any person or
property shall be scheduled by the Operator as required.
15. Accounting and Reports
(a) Operator shall keep up-to-date Project books and records of Project
financial transactions and other arrangements in carrying out the terms of this
Agreement. Such books and records shall contain information supporting the
allocation of Operator's administrative and general costs associated with the
Project. Such books and records shall be retained by Operator for such period as
is required by the rules and regulations of the Federal Energy Regulatory
Commission or such longer period determined by the Committee and shall be made
available for inspection and audit by each of the Owners and Project Users at
any reasonable time.
(b) Any contract with any consultant or contractor of Operator providing
for reimbursement of costs or expenses of any kind shall require the keeping and
maintenance of books, records, documents and other evidence pertaining to the
costs and expenses incurred or claimed under such contract to the extent, and in
such detail, as will properly reflect all costs related to this Agreement and
shall require such books, records, documents and evidence to be made available
to each of the Owners and Project Users at all reasonable times for review and
audit. Each of the Owners and Project Users shall have the right to examine and
copy all plans, specifications, bids and contracts relating to the Project
provided that proprietary information subject to confidentiality
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agreements shall only be disclosed in accordance with the terms of such
agreements.
(c) All accounts shall be kept so as to permit conversion to the system of
accounts prescribed for electric utilities by the Federal Energy Regulatory
Commission, but the manner in which accounts are kept pursuant to this Agreement
is not intended to be determinative of the manner in which they are treated in
the books of account of the Owners or Project Users.
(d) Operator shall cause all books and records to be audited annually by
independent Certified Public Accountants of national reputation acceptable to
all the Project Users. Copies of such audits shall be supplied to each Owner and
Project User. The cost of such periodic audits shall be a Project cost. Any
Owner or Project User may request a more frequent audit, but in that case the
requesting Owner or Project User shall pay the costs of such audit.
(e) Operator shall furnish to each Project User monthly statements of
Costs of Construction and Costs of Operation and monthly construction progress,
operation and maintenance reports in accordance with guidelines established by
the Committee. The Operator shall also furnish to each Owner and Project User
such other reports as may from time to time reasonably be requested by such
Owner or Project User. At the request of an Owner or Project User, Operator
shall provide certificates signed by a responsible officer of Operator or an
individual designated by him for such signature setting forth the status of
Costs of Construction and application of funds. The certificate shall be in such
form and contain such information as is reasonably requested by such Owner or
Project User.
(f) At the request of any Owner or Project User, the Owners and Project
Users shall elect to exclude from the provisions of Subchapter K of the Internal
Revenue Code any organization which they may be deemed to comprise by virtue of
the Project, the Transmission System, the Common Facilities, any of the Project
Agreements, or any combination thereof.
16. Insurance
(a) The Operator shall procure at the earliest practicable time and
thereafter maintain in effect at all times hereinafter provided, to the extent
available at reasonable cost and in accordance with standards prevailing in the
utility industry for projects of similar size and nature, adequate insurance
coverage of the Project with responsible insurers, with each Owner and Project
User as a named assured and with losses payable to the respective Owners and
Project Users for their benefit as their respective interests may appear, to
protect and insure against: worker's compensation and employer's liability,
public liability for bodily injury and property damage, all risks of physical
damage to property or equipment, including transportation and
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installation perils, and such other insurance as the Committee deems necessary,
with reasonable limits and subject to appropriate exclusions, and deductibles.
Self-insurance under the State of Montana's workers' compensation laws may be
substituted for the referenced workers' compensation and employer's liability
insurance and the Project Users agree to cooperate to establish a procedure
whereby the cost of such self-insurance shall be levelized over a three (3) to
five (5) year period.
(b) Each Owner and Project User shall ensure that each of its policies of
insurance that may be applicable to any calms arising in connection with the
Project shall provide a waiver of the insurer's rights of subrogation against,
or name as additional assureds, all the other Owners and Project Users and their
respective agents and employees. To the extent permitted by its insurance
policies, each Owner and Project User waives any rights of subrogation against
all the other Owners and Project Users, their agents and employees, for losses,
costs, damages, or expenses arising out of the Construction, operation,
maintenance, reconstruction or repair of the Project.
(c) Copies of all policies of insurance procured pursuant to Section 16(a)
shall be provided to each Owner and each Project User. Upon request of an Owner
or Project User, any Owner or Project User will provide copies of policies of
insurance described in Section 16(b). Operator shall notify the Owners and
Project Users of the assertion of any claim in excess of $500,000 against the
Project immediately upon assertion of the same, or of the occurrence of an event
likely to result in the assertion of such a claim. All claims for lesser amounts
shall be reported annually by Operator to the Owners and Project Users. The
insurance program, policies and coverages shall be reviewed annually by the
Committee.
17. Project Committee
(a) There is hereby established a Committee to facilitate effective
cooperation, interchange of information and efficient management of the Project,
on a prompt and orderly basis. The Committee shall be composed of not more than
six (6) members. Each party (or its successors and assigns acting collectively)
shall appoint one (1) Committee member. For purposes of this Section 17(a),
Puget shall be one party and Montana shall be one party. Each Committee member
shall have the right to vote the Project Share of the party (or its successors
and assigns) that appointed such member. A member shall vote the entire Project
Share represented by such member as a unit.
(b) Upon execution of this Agreement, each party shall notify all of the
other parties of the Committee member initially appointed by it. Any party (or
its successors and assigns acting collectively) may change its appointment by
giving written notice of the change to all of the Project Users. Any party (or
its
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successors and assigns acting collectively) may appoint an alternate or
alternates to serve on the Committee in the absence of the regular Committee
member or to act on specified occasions or with respect to specified occasions
or with respect to specified matters. Any reference herein to "Committee member"
includes the member's alternate in the absence of the member.
(c) The Committee shall meet regularly, but not less often than once in
each calendar quarter, as may be agreed upon, and at such other times as
requested by any Committee member upon three days' written notice. Meetings of
the Committee may be held or members thereof may participate in a meeting of
such Committee by means of conference telephones or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation in a meeting by means of conference telephones or
similar communications equipment shall constitute presence in person at the
meeting. The Committee may appoint such subcommittees as it deems necessary or
appropriate and by unanimous action, may delegate approval authority to such
subcommittees. Operator shall prepare written minutes of all meetings and
distribute them to each Committee member within a reasonable time after each
meeting. Unless otherwise mutually agreed, Operator's member shall act as
Chairman of the Committee.
(d) Any action which may be taken at a meeting of the Committee may be
taken without a meeting if all Committee members consent in writing. The
Committee may, by unanimous action, adopt written procedures for review and
approval of matters requiring Committee approval, which procedures may include,
but are not limited to, modifying of maximum allowable times for approval,
waiver of portions of information required, and advance approvals.
(e) Operator shall use its best efforts to keep all members of the
Committee informed of all significant matters with respect to Construction,
operation and maintenance of the Project (including, without limitation, plans,
specifications, engineering studies, environmental reports, budgets, estimates
and schedules) and, when practicable, in time for members to comment thereon
before decisions are made, and shall confer with the Committee, or separately
with members thereof, during the development of any of Operator's proposals
regarding such matters when practicable to do so. Upon request of any Committee
member, Operator shall furnish or make available, with reasonable promptness and
at reasonable times, any and all other information relating to Construction,
operation and maintenance of the Project.
(f) Operator shall submit each of the matters listed below to the
Committee for approval, which approval must be by a vote of Operator's Committee
member, plus at least two other Committee members so that the Committee members
voting for approval represent at least 55% of the total Project Shares:
(i) Any proposal made by two Committee members appointed by
Project Users other than Operator except as provided in
Sections 17(j) and 17(k);
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(ii) Construction and operating budgets and changes therein except
as provided in Section 17(j);
(iii) Any changes in the working fund in the Construction Trust
Account or Operation Trust Account, except as provided in
Sections 8(d) and 11(c);
(iv) Award of any contract, approval of any change order, or
payment of any controverted claim, in excess of $500,000;
(v) Insurance coverage, including limits and choice of insurers;
(vi) Estimate of cost of repair or damage to the Project if in
excess of $2,000,000, recommendation whether to repair in
whole or in part or to remove from service, and construction
budget for repair of Project.
(vii) Disposition of surplus property having a value of such
minimum amount as is established by the Committee;
(viii) Settlement of third party claims against the Project in
excess of $500,000;
(ix) Any proposal by Operator to issue a purchase order to or
contract with any other Project User for facilities, goods,
services, or other items to be provided to the Project;
(x) The establishment of the estimated date of the commencement
of operation of each unit for purposes of Sections 3.2 and
3.5 of the Coal Agreement; and
(xi) Any other action required to be taken by the Committee
pursuant to this Agreement for which a procedure or voting
percentage for reaching approval is not otherwise
specifically provided.
(g) All proposals of Operator relating to any matters regarding the
Construction, operation and maintenance of the Project submitted to the
Committee under any provisions of the Project Agreements shall include itemized
cost estimates and other detail sufficient to support a comprehensive review.
Upon request, Operator shall furnish or make available all supporting reports,
analyses, recommendations or other documents pertaining thereto. Operator shall
prepare and furnish such documents to each Project User as may be required by
any regulatory authority to be maintained by such Project User.
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(h) If any matter submitted to the Committee under section 17(f) above is
not approved by a vote within 10 days after the original submission to the
Committee, or within such longer time as the Committee may decide upon
unanimously, then each member or the Committee who declines to vote approval
shall, upon demand of Operator or any Committee member voting for approval of
the matter, specify in a written statement his reasons for declining approval,
and shall also state therein what alternative, if any, is acceptable to him.
Such statement shall be submitted to the other Committee members within 10 days
after expiration of the later of (i) the member's receipt of a demand for a
written statement of his reasons for declining approval or (ii) such longer
period as the Committee may decide upon unanimously. Each member who has not
submitted such written statement within the time provided in the preceding
sentence shall be deemed to have approved the matter as submitted by Operator.
Immediately after receipt of such statements from Committee members representing
at least 45% of the total Project Shares, Operator may refer the disputed matter
to arbitration pursuant to Section 18 of this Agreement. If Operator elects not
to do so and does not submit an alternative proposal, Committee members
representing at least 45% of the total Project Shares may refer such matter to
arbitration pursuant to Section 18.
(i) Two Committee members appointed by Project Users other than Operator
may submit to the Committee any proposal which conforms with the requirements
imposed on Operator under Section 17(g) by serving a copy of such proposal on
all other Committee members. Within 15 days after receipt of such proposal,
Operator shall submit one or more written alternative proposals. Such an
alternative proposal may be that the Project continue to be constructed,
operated or maintained in the manner previously planned. The Committee shall
meet with reasonable promptness and vote on such proposals. If the Committee
approves in accordance with this section any of Operator's proposals, the
proposal of the other Committee members shall be dismissed and Operator shall
implement its approved proposal. If the Committee does not approve any of
Operator's proposals, as they may be amended, the Committee shall vote on the
proposal or proposals of the other Committee members and if the Committee
approves in accordance with this section any such proposal, Operator shall
proceed with the approved proposal. If the Committee does not approve any of the
proposals submitted, it shall require submission of further proposals or it
shall dismiss all proposals. If the Committee does not require further proposals
or dismisses all proposals, the Committee member appointed by Operator or the
Committee members submitting any such proposal, as the case may be, may submit
its proposal to arbitration within 15 days after the Committee vote. The
arbitrator shall then consider Operator's proposal and determine if its proposal
is in accordance with Prudent Utility Practice. If the arbitrator so determines,
Operator shall proceed accordingly and the proposal of the other Committee
members shall be dismissed. If the arbitrator determines Operator's proposal is
not in accordance with Prudent Utility Practice, he shall then consider the
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proposal of such other Committee members and determine if such proposal of such
other Committee members is in accordance with Prudent Utility Practice. If the
arbitrator determines such proposal is in accordance with Prudent Utility
Practice, Operator shall proceed with the proposal. If the arbitrator determines
that none of the proposals conform with Prudent Utility Practice, he shall
dismiss all proposals and terminate the arbitration.
(j) Proposals for Elective Capital Additions in excess of $25,000 shall
require approval of Committee members representing at least 85% of the total
Project Shares.
(k) Proposals for the substitution or replacement of the Operator shall
require approval of Committee members representing at least 65% of the total
Project Shares.
(l) The Committee is the successor to the group known as the Steering
Committee, and by execution of this Agreement, each Owner and Project User
ratifies, confirms and adopts all prior actions of said Steering Committee.
(m) Any of the specific dollar limitations contained in subsections (iv),
(vi) and (viii) of Section 17(f) and in Section 17(j) may be changed from time
to time with approval of Committee members representing at least 85% of the
total Project Shares.
18. Arbitration
Any controversies arising out of or relating to this Agreement which
cannot be resolved through negotiations among the Project Users within thirty
(30) days after inception of the matter in dispute shall, upon demand of any
Project User involved in the controversy, be submitted to an Arbitrator having
demonstrated expertise in the matter submitted. If the Project Users cannot
mutually agree upon such Arbitrator, then upon petition of any Project User,
such Arbitrator shall be appointed by the Superior Court of the State of
Washington, in and for the County of Spokane. The arbitration shall be conducted
in Spokane, Washington, pursuant to the Washington Arbitration Act, RCW Chapter
7.04 as the same may be amended from time to time. The Arbitrator shall render
his decision in writing not later than thirty (30) days after the matter has
been submitted to him, and such decision shall be conclusive and binding upon
the Project Users. The costs incurred by any arbitration proceedings shall be
charged to Costs of Construction or Costs of Operation, whichever may be
appropriate, provided that each party shall bear its own attorney's fees and
costs of witnesses.
19. Damage to the Project
(a) If the Project suffers damage to the extent that the estimate of the
cost of repair is less than 20% of the then-
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depreciated value of the Project, and if the Project Users do not unanimously
agree that the Project shall be ended pursuant to Section 31, operator shall
promptly submit a budget for the cost of repair of the Project and upon the
Committee's approval of a budget, the Operator shall proceed to repair the
Project.
(b) If the Project suffers damage to the extent that the estimate of the
cost of repair exceeds 20% of the then-depreciated value of the Project, and if
the Project Users do not unanimously agree that the Project shall be ended
pursuant to Section 31, Operator shall determine the estimated fair market value
of the Project if it were then terminated without repair and the estimated total
cost of repair and shall promptly submit to the Committee its recommendation as
to whether the Project should be repaired in whole or in part, and if not
repaired in whole, what portions of the Project should be withdrawn from further
service, removed from the Project and sold as salvage pursuant to Section 31. If
Operator's recommendation to repair the Project is approved by the Committee,
then Operator shall prepare a budget for the cost of repair and shall submit its
recommendations together with its budget to the Committee.
(i) Upon unanimous approval by the Committee of the recommendation
and a budget, Operator shall proceed to repair the Project and
each Project User shall pay (or cause to be paid) its Project
Share of the cost of repair. If Operator's recommendation is
to remove part or all of the Project from further service,
then upon unanimous approval of the recommendation, the
portion of the Project being removed from service shall be
sold as salvage.
(ii) In the event that one or more Project Users, but not all
Project Users, desire that the Project be repaired, then each
such Project User shall promptly give notice in writing to the
other Project Users. If any Project User has given such
notice, the Project Share of each Project User which has not
given notice within 60 days after the giving of the initial
notice shall be reduced at the time repairs commence to the
extent determined by the following formula:
S(r) = S(o) [V]/[V + C]
where
V = Fair Market Value of the Project if it were to be
terminated without repair as unanimously agreed by the
Committee or determined by arbitration
C = Estimated expenditures for repair
S(o) = Project Share prior to loss
S(r) = Reduced Project Share
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At the same time, the amount of such reduction shall be added to the Project
Shares of the Project Users giving such notice in the proportion that their
respective Project Share bears to the total of the Project Shares of all Project
Users giving such notice. Each of the Project Users shall pay or cause to be
paid that part of the total cost of repair in the proportion that its Project
Share bears to the total of the Project Shares of all Project Users giving such
notice. Upon completion of repair, a second adjustment of the Project Share of
each Project User will be made by substituting the actual expenditures for
repair for the estimated expenditures in the above formula and adjusting the
Project Share of each Project User to compensate for any increase or reduction
of Project Share.
(c) Solely for the purposes of this Section 19, the depreciated value of
the Project at any time shall be based on the original Costs of Construction of
the Project (excluding allowance for funds used during construction), including
additions and less retirements, depreciated on a straight-line basis using a
composite life of 35 years.
20. Liabilities
Each of the Owners and Project Users releases all other Owners and Project
Users and their respective directors, officers, employees and agents, from any
consequential damages (including, but not limited to, any loss of use, revenue
or profit and any replacement power costs except as otherwise provided by
Section 6(d) of the Transmission Agreement) arising out of the Construction or
the operation, maintenance, or repair of the Project.
21. Default
(a) Upon failure of a Project User to make or cause to be made any payment
when due, or to perform or cause to be performed any other obligation to be
performed by it pursuant to the terms, covenants and conditions contained in the
Project Agreements, any other Project User may make written demand upon said
Project User for such payment or performance. Any Project User making such a
demand shall concurrently deliver copies of the demand to all other Project
Users and Owners.
(b) If the failure of a Project User is to make a payment when due and
such failure is not cured within five (5) days from the date of a demand made
pursuant to Section 21(a), it shall constitute a default at the expiration of
such period.
(c) If the failure of a Project User is to perform any obligation
contained in the Project Agreements other than to make payments when due and
such failure is not cured within 30 days from the date of a demand made pursuant
to Section 21(a) or, if it could not be cured within said 30 days, within a
reasonable period
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after the date of such demand, it shall constitute a default at the expiration
of such period.
(d) If a Project User shall dispute a default asserted against it, then
such Project User shall timely make or cause to be made payment of any sums in
dispute or perform the obligation in dispute but may do so under protest. Such
protest shall be in writing, shall specify the reasons upon which the protest is
based and copies thereof shall be mailed to the other Project Users and Owners.
Upon resolution of such dispute, the payments advanced or made between Project
Users, as in this paragraph provided, shall be adjusted appropriately.
(e) All disputes referred to in subsection (d) above shall be submitted to
arbitration pursuant to Section 18 to determine the extent, if any, of the
obligation of the Project User disputing such default. If payment or performance
is timely made under protest, an act of default shall not be deemed to have
occurred.
(f) In the event that a Project User is in default because of failure to
make payments when due, then the following shall occur during the period such
Project User is in default unless the nondefaulting Project Users elect
otherwise in writing:
(i) The defaulting Project User shall have no right to schedule or
receive its Project Share of the output of the Project;
(ii) The defaulting Project User's Project Share of the output of
the Project shall be deemed to be assigned to the Operator on
behalf of the nondefaulting Project Users during the period of
default. The Operator shall be authorized to order coal,
schedule generation and otherwise operate the Project for the
account of the defaulting Project User and to sell and
transmit the Project User's Project Share of the output and
apply the proceeds thereof to the amounts owed by the
defaulting Project User pursuant to the Project Agreements.
In the event of a default, the nondefaulting Project Users are authorized to
execute, deliver and file on behalf of all Project Users, such notices, demands,
agreements, consents, financing statements, applications and other documents as
are necessary or appropriate to implement the provisions of this subsection to
the full extent legally possible; provided that, if the default is cured, the
nondefaulting Project Users shall take such reasonable action as may be
requested by the Person curing such default to reflect the fact that such
default has been cured. In the event that any of the provisions of this
subsection are waived by nondefaulting Project Users or are held to be
unenforceable by competent authority, then the remaining provisions shall be
severable and in full force and effect.
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(g) Payments not made when due may be advanced by other Project Users and,
if so advanced, shall bear interest until paid at the rate of 2% per month or
the highest lawful rate, whichever is lower.
(h) In addition to the rights granted in this Section 21, any
nondefaulting Project User may take any action, at law or in equity, including
an action for specific performance, to enforce this Agreement and to recover for
any loss, damage or payment advances, including attorneys' fees in all trial and
appellate courts and collection costs incurred by reason of such default.
(i) Subsection (f) shall not create an encumbrance prior to the lien of
any existing mortgage, loan or credit agreement of each Project User except to
the extent permitted thereunder.
(j) Each act or omission to act which becomes an act of default hereunder
shall be treated as a separate act of default under this Section 21.
22. Uncontrollable Forces
No Project User shall be considered to be in default in the performance of
any of its obligations hereunder, other than obligations of such Project User to
pay costs and expenses, if failure of performance shall be due to uncontrollable
forces. The term "uncontrollable forces" shall mean any cause beyond the control
of the Project User failing to perform, and which, by the exercise of reasonable
diligence, such Project User is unable to overcome, and shall include but not be
limited to an act of God, fire, flood, explosion, strikes, labor disputes, labor
or materials shortages, sabotage, an act of the public enemy, civil or military
authority, including court orders, injunctions, and orders of government
agencies with proper jurisdiction prohibiting acts necessary to performance
hereunder or permitting any such act only subject to unreasonable conditions,
insurrection or riot, an act of the elements, failure of equipment, inability to
obtain or ship materials or equipment because of the effect of similar causes on
suppliers or carriers or failure of any governmental agency to timely act.
Nothing contained herein shall be construed so as to require a Project User to
settle any strike or labor dispute in which it may be involved. Any party
rendered unable to fulfill any obligation by reason of uncontrollable forces
shall exercise due diligence to remove such inability with all reasonable
dispatch.
23. Wavier of Right to Partition
So long as the Project or any part thereof as originally constructed,
reconstructed or added to is used or useful for the generation of electric power
and energy, or to the end of the period permitted by applicable law, whichever
first occurs, the
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Owners waive their right to partition whether by partition in kind or sale and
division of the proceeds thereof, and agree that they will not resort to any
action at law or in equity to partition and further waive the benefit of all
laws that may now or hereafter authorize such partition of the properties
comprising the Project. It is agreed this covenant shall be deemed to run with
the land. All instruments of conveyance which effect, evidence or vest each
Owner's or Project User's respective ownership interest in the Project shall
contain this waiver of right to partition.
24. Transfers and Assignments
All or any part of the interest of each Owner and Project User in the
Project or any part thereof, and all or any part of the rights set forth in the
Project Agreements which relate to such interest, may be transferred and
assigned as follows, but not otherwise:
(a) To any mortgagee, trustee or other secured party, as security for
bonds or other indebtedness of such Owner or Project User, present or future,
and such secured party may transfer or assign the interest given as security
pursuant to, or in lieu of, a foreclosure of the lien (or the exercise of power
of sale) held by such secured party, provided that the transferee or assignee
assumes all of the duties and obligations of the Owner or Project User making
the transfer or assignment under the Project Agreements which relate to the
interest being transferred or assigned;
(b) To any financial institution acting as lessor with respect to such
interest under a lease with the Owner or Project User making the transfer or
assignment, provided that the lessor/Owner shall not transfer or assign the
interest transferred or assigned to it (other than to its lessee):
(i) unless and until it has first offered to sell the portions of
such interest specified below to the Project Users other than
the Project User to which such interest was leased at a price
equal to the fair market value of such portions; and
(ii) unless (A) simultaneously the lessor/Owner's interest or part
thereof in all other Project Agreements in which it has rights
is similarly transferred or assigned to the same Person or
Persons, and (B) such Person or Persons or a Person or Persons
to which such interest is leased shall have assumed in writing
all the duties and obligations of the Project User in
possession under such lease immediately prior to the
expiration or termination thereof under this Agreement and all
other Project Agreements.
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The portion of such interest to be offered to each Project User pursuant to this
subsection (b) shall be equal to the proportionate interest of such Project User
in the Project after excluding the interest being offered. The initial offer
shall be kept open for a period of 90 days. If, at the end of such 90-day
period, any Project User shall have failed to accept such offer, the
proportionate interest offered to such Project User shall be offered on a
proportionate basis to the other Project Users, who shall have a further period
of 7 days to accept the same. The process referred to in the immediately
preceding sentence shall be repeated until all Project Users then being offered
an interest shall have failed to accept such offer. To the extent that a
lessor/Owner has complied with the foregoing provisions of this subsection (b),
it shall be permitted to transfer and assign its interest in the Project, or any
part thereof, and the Project Agreements in which it has rights to any Person
notwithstanding any other provision of this Section 24 and, to the extent such
transfer and assignment is to a financial institution acting as lessor under a
lease with a Person in the electric utility business, subsequent transfers and
assignments by such financial institution shall be governed by the provisions of
this subsection (b) and not by any other subsection of this Section 24.
(c) To any financial institution acting as trustee with respect to such
interest under a construction trust agreement with the Owner or Project User
making the transfer or assignment, provided that such trustee shall not transfer
or assign the interest transferred or assigned to it (other than to the original
Owner or Project User), except as permitted by this Section 24.
(d) To any Person in the electric utility business into which or with
which the Owner or Project User making the transfer may be merged or
consolidated or to which the Owner or Project User transfers substantially all
of its assets;
(e) To any Person wholly owning, wholly owned by, or wholly owned in
common with, the Owner or Project User making the transfer;
(f) To any other Person, provided that the Owner or Project User shall
first offer to transfer its interest or any part thereof to the other Project
Users, at the amount of, and on terms not less advantageous than, those of a
bona fide offer from a buyer able and willing to purchase such Owner's or
Project User's interest. The portion of such interest to be offered to each
Project User pursuant to this subsection (f) shall be equal to the proportionate
interest of such Project User in the Project after excluding the interest being
offered. The initial offer shall be kept open for a period of 90 days. If, at
the end of the 90-day period, any Project User shall have failed to accept such
offer, the proportionate interest offered to such Project User shall be offered
on a pro rata basis to the other Project Users, who shall have a further period
of 7 days to accept the the same. The
-27-
29
process referred to in the immediately preceding sentence shall be repeated
until all Project Users then being offered an interest shall have failed to
accept such offer.
(g) To any other Person with the written consent of all Project Users.
No transfer or assignment of any interest in the Project or any part
thereof pursuant to subsections (d), (e), (f) or (g) above may be made unless
simultaneously the Owner's or Project User's rights under the Project Agreements
which relate to such interest are similarly transferred or assigned to the same
Person or Persons, and such Person or Persons have assumed in writing all the
duties and obligations of the Owner or Project User making such transfer or
assignment under the Project Agreements which relate to the interest being
transferred or assigned. Transfers or assignments shall not relieve any Owner or
Project User of any obligation hereunder, except to the extent agreed in writing
by all other Project Users. Any attempted or purported transfer made other than
in accordance with this Section 24 either voluntarily or by operation of law
shall be void and of no effect.
25. Obligations Are Several
(a) The duties, obligations and liabilities of the Owners and Project
Users hereunder are intended to be several and not joint or collective and no
Owner or Project User shall be jointly or severally liable for the acts,
omissions, or obligations of any other Owner or Project User. Nothing herein
contained shall be construed to create an association, joint venture,
partnership, or impose a partnership duty, obligation or liability, among the
Owners and/or Project Users. No Owner or Project User shall have a right or
power to bind any other Owner or Project User without its express written
consent, except as expressly provided in this Agreement.
(b) Without limiting the obligations of Puget Colstrip Construction
Company, Puget Sound Power & Light Company guarantees the performance of all of
Puget Colstrip Construction Company's obligations under the Project Agreements.
(c) Without limiting the obligations of First Trust Company of Montana
("Trustee"), The Montana Power Company guarantees the performance of all of
Trustee's obligations under the Project Agreements.
(d) The Trustee is executing this Agreement solely in a fiduciary, trust
capacity under a Trust Agreement dated December 23, 1980 ("Trust Agreement") by
and between The Montana Power Company and the Trustee and not in any individual,
personal or other capacity. The Owners (except Montana) agree that they will
look solely to the Trust Estate, which term shall have the meaning specified in
the Trust Agreement, for the payment of any amounts
-28-
30
payable by the Trustee under this Agreement and confirm that the Trustee is not
in any way personally liable for any such amounts except for its own gross
negligence or willful misconduct.
26. Notices
Any notice, demand or request provided for in this Agreement served, given
or made in connection therewith shall be deemed properly served, given or made
if given by telephone or in person and confirmed in writing, or if in writing by
acknowledged delivery or sent by registered or certified mail, postage prepaid,
addressed to the Project User or Project Users at its or their principal place
or places of business to the attention of the president or chief executive
officer of such Project Users. Any Project User may at any time, and from time
to time, change its designation of the person to whom notice shall be given by
giving notice to the other Project Users as hereinabove provided.
27. Implementation
Each Owner and Project User shall take such reasonable action (including,
but not limited to, the execution, acknowledgment and delivery of documents) as
may be requested by any other Owner or Project User for the implementation of
this Agreement.
28. Provisions for Additional Facilities
(a) Each Project User shall have the right at its expense to install and
operate on the Project land, facilities for its own system; provided, however,
that the facilities of any Project User shall be so installed and operated as
not to burden or unreasonably interfere with those of the other Project Users or
the Project, the construction on the Project lands of additional generating
units, or the ultimate full utilization of the land for the Project. In the
event that a Project User proposes to install or operate facilities which would
require the relocation of previously installed facilities of another Project
User, or of the Project, but would otherwise meet the requirements of the
preceding sentence, the Project User desiring to install or operate such
facilities shall have the right to require such relocation if it bears all
direct and indirect costs of such relocation.
(b) Each Owner and Project User releases all other Owners and Project
Users from claims to profits, charges, rents or benefits that may arise from use
by any Owner or Project User of Project land pursuant to Section 28(a).
29. Regulatory Approval
It is understood that transfers of property under this Agreement may be
subject to the jurisdiction of state or federal
-29-
31
regulatory agencies. Such transfers shall not be effective until all required
approvals and all other required action by such agencies having jurisdiction
shall have been obtained.
30. Rule Against Perpetuities or Similar or Related Rules
If the duration of any term or condition of the Project Agreements shall
be subject to the rule against perpetuities or a similar or related rule, then
the effectiveness of such term or condition shall not extend beyond (i) the
maximum period of time permitted under such rule, or (ii) the specific
applicable period of time expressed in this Agreement, whichever is shorter. For
purposes of applying the rule against perpetuities or a similar or related rule,
the measuring lives in being shall be those of the officers and directors of
Montana shown in its 1980 Annual Report, together with all such listed persons'
children all of whom are living on the date of execution of the Project
Agreements. As used in this paragraph, the word "children" shall have its
primary and generally accepted meaning of descendants of the first degree.
31. End of Project
When the Project can no longer be made capable of producing electricity
consistent with Prudent Utility Practice or the requirements of governmental
agencies having jurisdiction, or when part or all of the Project is removed from
service, Operator shall sell all salable parts of the portion of the Project
being removed from service to the highest bidders; provided, however, if the
entire Project is being removed from service and if Operator should determine
that the Project will bring a greater amount at salvage if sold as a unit,
including land and structures, than it would if it were dismantled and the
salable parts removed and sold, then Operator may sell the Project as a unit to
the highest bidder. After deducting all costs of ending the Project, including,
without limiting the generality of the foregoing, the cost of decommissioning,
razing all structures and disposing of the debris and meeting all applicable
requirements of law, Operator shall close any remaining Project accounts and, if
there are net proceeds, distribute to each Owner its percentage share of such
proceeds. In the event such costs of ending the Project exceed available funds,
each Owner shall pay its percentage share of such excess as incurred.
32. Term
This Agreement shall continue for so long as the Project or any part
thereof as originally constructed, reconstructed or added to is, or can be made,
capable of producing electricity consistent with Prudent Utility Practice or the
requirements of governmental agencies having jurisdiction plus any time required
for ending the Project as provided in Section 31.
-30-
32
33. Effective Date and Basin Electric's Participation
(a) This Agreement shall be effective and binding when executed by
Montana, Puget, Water Power, Portland, and Pacific and shall be effective and
binding as to Basin Electric only when executed by Basin Electric.
6 (b) Basin Electric's participation in the Project, Transmission System and
Bonneville Power Administration Contract No. DE-MS79-81BP90210 ("BPA Contract")
executed by BPA and all parties hereto, is conditional upon Rural
Electrification Administration ("REA") approval thereof. Basin Electric will
exercise due diligence in seeking such approval. In the event by May 1, 1982,
that Basin Electric is unable to secure unconditional REA approval, the parties
hereto will return to Basin Electric thereafter all amounts paid by Basin
Electric pursuant to the Project Agreements. In such event, Basin Electric shall
take such action (including, but not limited to, the execution, acknowledgment,
delivery and recordation of instruments of conveyance and for release of
security instruments) as may be reasonably requested by any party hereto that
effects or evidences Basin Electric's withdrawal of participation.
(c) Upon payment pursuant to Section 33(b), or if Basin Electric does not
concurrently execute the Project Agreements, the remaining parties' interests in
the Project and the Transmission System, as defined in the Transmission
Agreement, shall be appropriately increased and Basin Electric shall cease to be
a party to the Project Agreements and all its rights and obligations thereunder
shall terminate. The remaining parties to the Project Agreements shall then
assume all Basin Electric's rights, duties, and obligations under said
agreements.
(d) Each other party to the Project Agreements, other than Basin Electric,
affirms that it is bound as a party to the Project Agreements and the BPA
Contract from the date of execution thereof even though Basin Electric's
participation in the Project, Transmission System, and the BPA Contract is
conditional upon REA approval thereof.
34. Miscellaneous
(a) The headings of the clauses of this Agreement are inserted for
convenience of reference only and shall not affect the meaning or construction
thereof.
(b) The singular of any term in this Agreement shall encompass the plural
and the plural the singular, unless the context otherwise indicates.
(c) This Agreement shall be construed in accordance with the laws of the
State of Montana, except that Section 18 shall be construed in accordance with
the laws of the State of Washington.
-31-
33
(d) This Agreement shall not be amended except by written instrument
executed, acknowledged and delivered by all of the Project Users.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
several counterparts.
THE MONTANA POWER COMPANY
By /s/ Melvyn M. Ryan
------------------------------------------
Its Executive Vice President
------------------------------------------
for Administration
------------------------------------------
Attest:
/s/ T. O. McElwain
- ----------------------------------
Asst. Secretary
FIRST TRUST COMPANY OF MONTANA, as
Trustee
By /s/ David L. Servies
------------------------------------------
Its Vice President
------------------------------------------
Attest:
/s/ P. T. Westbrook
- ----------------------------------
Secretary
PUGET SOUND POWER & LIGHT COMPANY
By /s/ D. H. Knight
------------------------------------------
Its Sr. Vice President
------------------------------------------
Attest:
/s/ W. E. Watson
- ----------------------------------
Secretary
PUGET COLSTRIP CONSTRUCTION COMPANY
By /s/ D. H. Knight
------------------------------------------
Its Sr. Vice President
------------------------------------------
Attest:
/s/ W. E. Watson
- ----------------------------------
Secretary
-32-
34
THE WASHINGTON WATER POWER COMPANY
By /s/ H. W. Harding
------------------------------------------
Its Vice President
------------------------------------------
Attest:
/s/ L. O. Falk
- ----------------------------------
Asst. Secretary
PORTLAND GENERAL ELECTRIC COMPANY
By /s/ Glen S. Bredemeier
------------------------------------------
Its Vice President
------------------------------------------
Attest:
/s/ Warren Hastings
- ----------------------------------
Asst. Secretary
PACIFIC POWER & LIGHT COMPANY
By /s/ R. B. Lisbakken
------------------------------------------
Its Vice President
------------------------------------------
Attest:
/s/ Sally A. Nofziger
- ----------------------------------
Asst. Secretary
BASIN ELECTRIC POWER COOPERATIVE
By
------------------------------------------
Its
------------------------------------------
Attest:
- ----------------------------------
Secretary
-33-
35
STATE OF MONTANA )
) ss.
COUNTY OF SILVER BOW )
On this 6th day of May, 1981, before me, the undersigned, a Notary Public
in and for the State of Montana, personally appeared Melvyn M. Ryan, known to me
to be the Executive Vice President of THE MONTANA POWER COMPANY and acknowledged
to me that he executed the within instrument on behalf of that corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
Seal the day and year in this certificate first above written.
/s/ James Walsh
------------------------------------------
Notary Public in and for the State of
Montana
Residing at Butte
My Commission expires 6-26-82
STATE OF MONTANA )
) ss.
COUNTY OF YELLOWSTONE )
On this 6th day of May, 1981, before me, the undersigned, a Notary Public
in and for the State of Montana, personally appeared David L. Servies, known to
me to be the Vice President of FIRST TRUST COMPANY OF MONTANA and acknowledged
to me that he executed the within instrument on behalf of that corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
Seal the day and year in this certificate first above written.
/s/ Helen G. Frank
------------------------------------------
Notary Public in and for the State of
Montana
Residing at Billings, Montana
My Commission expires 1-8-83
36
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 6th day of May, 1981, before me, the undersigned, a Notary Public
in and for the State of Washington, personally appeared D. H. Knight, known to
me to be the Sr. Vice President of PUGET SOUND POWER & LIGHT COMPANY and
acknowledged to me that he executed the within instrument on behalf of that
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
Seal the day and year in this certificate first above written.
/s/ Jeanette Ragsdale
------------------------------------------
Notary Public in and for the State of
Washington
Residing at Seattle
My Commission expires August 1, 1981
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 6th day of May, 1981, before me, the undersigned, a Notary Public
in and for the State of Washington, personally appeared D. H. Knight, known to
me to be the Sr. Vice President of PUGET COLSTRIP CONSTRUCTION COMPANY and
acknowledged to me that he executed the within instrument on behalf of that
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
Seal the day and year in this certificate first above written.
/s/ Jeanette Ragsdale
------------------------------------------
Notary Public in and for the State of
Washington
Residing at Seattle
My Commission expires August 1, 1981
37
STATE OF WASHINGTON )
) ss.
COUNTY OF SPOKANE )
On this 6th day of May, 1981, before me, the undersigned, a Notary Public
in and for the State of Washington, personally appeared H. W. Harding, known to
me to be the Vice President of THE WASHINGTON WATER POWER COMPANY and
acknowledged to me that he executed the within instrument on behalf of that
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
Seal the day and year in this certificate first above written.
/s/ Lois L. Loveridge
--------------------------------------
Notary Public in and for the State of
Washington
Residing at Spokane, Washington
My Commission expires October 17, 1982
STATE OF OREGON )
) ss.
COUNTY OF MULTNOMAH )
On this 6th day of May, 1981, before me, the undersigned, a Notary Public
in and for the State of Oregon, personally appeared Glen E. Bredemeier, known to
me to be the Vice President of PORTLAND GENERAL ELECTRIC COMPANY and
acknowledged to me that he executed the within instrument on behalf of that
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
Seal the day and year in this certificate first above written.
/s/ Shirley A. Kushner
--------------------------------------
Notary Public in and for the State of
Oregon
Residing at Portland, OR
My Commission expires 9/27/84
38
STATE OF OREGON )
) ss.
COUNTY OF MULTNOMAH )
On this 6th day of May, 1981, before me, the undersigned, a Notary Public
in and for the State of Oregon, personally appeared R. B. Lisbakken, known to
me to be the Vice President of PACIFIC POWER & LIGHT COMPANY and acknowledged to
me that he executed the within instrument on behalf of that corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
Seal the day and year in this certificate first above written.
/s/ Hilda V. Hambach
----------------------------------------
Notary Public in and for the State of
Oregon
Residing at Portland, Oregon
My Commission expires September 28, 1982
STATE OF NORTH DAKOTA )
) ss.
COUNTY OF )
On this _____ day of _____________, 198_, before me, the undersigned, a
Notary Public in and for the State of North Dakota, personally appeared
__________________________, known to me to be the
__________________________________ of BASIN ELECTRIC POWER COOPERATIVE and
acknowledged to me that he executed the within instrument on behalf of that
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial
Seal the day and year in this certificate first above written.
-------------------------------------
Notary Public in and for the State of
North Dakota
Residing at Butte
My Commission expires ________________
39
Page 1 of 2
Exhibit A
Colstrip Units #3 & #4
Ownership and Operation
Agreement
REAL ESTATE
(All as Described on the Attached Maps)
1. Parcel No. 1 (Portion of the Colstrip Switchyard)
T2N,R4lE, P.M.M.: Portion of the SE 1/4, Sec. 27
Being approximately the easterly 890 feet of the Colstrip Switchyard
property as depicted on Certificate of Survey No. 1660.
Containing 30.65 acres more or less.
2. Parcel No. 2 (Cooling Towers for Units 3 & 4)
T2N,R4lE, P.M.M.: Portion of the E 1/2 NE 1/4, Sec. 34
W 1/2 NW 1/4, Sec. 35
Lying northerly of the Burlington Northern, Inc. Railroad
right-of-way
Containing 45.9 acres more or less
3. Parcel No. 3 (Portion of the Coal Storage & Ash Holding Area)
T2N,R4lE, P.M.M.: Portion of the E 1/2 SE 1/2, Sec. 34
SW 1/2, Sec. 35
Lying southerly of the Unit 3 & 4 generation site survey and the
Western Energy tipple site.
Containing 91 acres more or less.
4. Parcel No. 4 (Project 3 & 4 Generation Units)
T2N,R4lE, P.M.M.: Portion of the NE 1/4 and the SE 1/4, Sec. 34
as depicted on Certificate of Survey No. 29931.
Containing 20.068 acres more or less.
40
[MAP OMITTED]
41
Page 1 of 1
Exhibit B
Colstrip Units #3 & #4
Ownership and Operation
Agreement
ADMINISTRATIVE & GENERAL
As a reimbursement for general office electric system administrative and general
expenses and related employee benefit costs indirectly applicable to the
Project, but not charged thereto, Operator will charge monthly to Costs of
Construction or Costs of Operation, as appropriate, a percentage ("Percentage
Rate") of labor costs provided for in Sections 6(b) and (c) and in Sections 9(a)
and (b) hereof, incurred by the Operator during the current month, which labor
costs include a loading rate to cover pay for the time not worked, such as
vacation, holiday and sick leave. The applicable Percentage Rate shall be
determined annually by the Committee and shall be based upon Operator's actual
costs incurred during the previous year. The applicable Percentage Rate shall be
a fraction the numerator of which is the sum of the Operator's (i) annual
administrative and general salaries recorded in FERC Account 920, (ii) annual
office supplies and expenses recorded in FERC Account 921, and (iii) an
appropriate provision for employee pensions and benefits recorded in FERC
Account 926 which relate to administrative and general salaries recorded in FERC
Account 920, and the denominator of which is the sum of Operator's (i) annual
electric system labor costs, such as Operator's payroll charged to construction,
retirements and clearing accounts, and (ii) Operator's annual labor costs billed
to persons under other agreements to manage and operate joint projects.