Exhibit 10(D)
UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
NEVADA POWER COMPANY ) DOCKET NOS. ER01-2754-002,
ER01-2755-002, ER01-2758-002, AND
ER01-2759-002 (NOT CONSOLIDATED)
SETTLEMENT AGREEMENT
This Settlement Agreement (the "Agreement"), dated April 16, 2002, is by and
between Nevada Power Company ("NPC"); and each of Calpine Corporation
("Calpine"); Duke Energy Trading and Marketing, L.L.C. ("Duke"); Mirant Las
Vegas, LLC ("Mirant"); Pinnacle West Energy Corporation ("Pinnacle"); and
Reliant Energy Services, Inc. ("Reliant"). Calpine, Duke, Mirant, Pinnacle and
Reliant are referred-to collectively as the "Generators."
WHEREAS, NPC filed separate transmission service agreements ("TSAs") under its
open Access Transmission Tariff ("Tariff") with each of the Generators at the
Federal Energy Regulatory Commission ("FERC") in the above-referenced
proceedings; and
WHEREAS, in order to provide the transmission service provided for under the
TSAs and to meet native load needs it is necessary for NPC to construct a 3000
MW transmission project known as the "Centennial Project;" and
WHEREAS, on December 20, 2001, FERC issued an Order (the "December 20 Order")
that, among other things; (1) set for settlement proceedings the issue of how
much security NPC could require of the Generators in connection with the
construction of the Centennial Project; (2) required NPC to negotiate with
Calpine regarding the service, if any, that can be required under Service
Agreement No. 95 that provides for service from the Crystal substation to the
NPC Control Area; and (3) required NPC to make a compliance filing with respect
to the remaining Calpine TSA and the Duke, Pinnacle and Reliant TSAs that
implemented the December 20 Order's ruling regarding rollover rights; and
WHEREAS, on February 27, 2002, NPC made its compliance filing (the
"Compliance Filing"); and
WHEREAS, the parties have negotiated regarding Centennial security, rollover
rights and Calpine's Service Agreement No. 95;
NOW THEREFORE, the parties agree as follows:
1. CENTENNIAL SECURITY.
a. The amount of each Generator's responsibility for Centennial
security is specified on Exhibit A to this Agreement. Such security
shall be in a form as specified in paragraph 1(b), and if not
already in place shall be put in place no later than 5 business days
after FERC issues an order approving this Agreement.
b. The following are acceptable forms of security:
i. The Generator has, or provides a corporate guarantee in a form
reasonably acceptable to NPC from an entity that has, a credit
rating of BBB+/Baa1 or better (an "Acceptable Credit Rating").
ii. The Generator posts a letter of credit in a form reasonably
acceptable to NPC from a bank acceptable to NPC.
iii. The Generator posts a surety bond from an entity acceptable to
NPC.
iv. Any other form of security reasonably acceptable to NPC that
provides NPC with at least the same level of security as items
(i)-(iii) above; provided, however, that a Generator may
without NPC's consent replace its existing security with any
form of security listed in (i)-(iii) above.
As of the date of this Agreement, all of the Generators except for
Pinnacle have provided acceptable security in the specified amount
and thus have satisfied Section 1 of this Agreement.
c. Once service commences under a TSA, a Generator's security required
under paragraph 1(a) shall be reduced annually on the anniversary of
the commencement of service in an amount equal to the revenues
received by NPC under the TSA in the previous year. When the initial
term of the TSA expires, the security required under this Agreement
shall be reduced to zero regardless of whether the TSA is renewed,
at which time the security provisions of NPC's Tariff shall apply.
NPC shall have the discretion to determine whether, upon the
commencement of commercial operations of a Generator's facility, it
is necessary or desirable to require the maintenance of security
required by this paragraph 1.
d. After NPC has received one year's worth of transmission revenues
from a Generator under a TSA, the Acceptable Credit Rating
requirement for that Generator will be reduced from BBB+/Baa1 to
BBB/Baa2.
2. ROLLOVER RIGHTS. The rights of the Generator under the Duke, Pinnacle and
Reliant TSAs to rollover long-term firm transmission service at the
expiration of such TSAs will be governed by the provisions of Section 2.2
of NPC's Tariff or of the applicable provisions of any successor tariff,
as such provisions may be modified in accordance with
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FERC policy. Duke, Pinnacle and Reliant agree to engage in nonbinding
communications with NPC regarding their intention to exercise rollover
rights at the expiration of the TSAs that are the subject of this
Agreement, so that NPC may plan its system accordingly. In order to
effectuate this commitment, NPC will file amended TSAs that will include a
new Section 5.0 in the form set forth in Exhibit B to this Agreement.
3. CALPINE SERVICE AGREEMENT NO. 95.
a. Calpine Service Agreement No. 95 will be terminated, and Calpine's
queue position with respect to its unfulfilled requests for
transmission service made during the year 2000 will be restored. NPC
will process Calpine's request for service into the NPC control area
simultaneously with Calpine's later-filed request for service out of
the NPC control area, with the goal of determining the additional
facilities necessary to provide service into and out of the NPC
control area under a single TSA (the "Revised Calpine TSA"). Such
processing by NPC shall be in accordance with the procedures and
priorities established by FERC under Order No. 888, including
application of Order No. 888's first-in-time principles.
b. NPC will execute a written release of the existing surety bond for
Service Agreement No. 95 within 5 business days of the earlier to
occur of: (a) the certification of this Agreement to FERC as an
uncontested settlement; or (b) FERC's approval of this Agreement.
c. NPC recognizes that Calpine has a single generation project that
will rely on both its existing 400 MW Crystal to Mead TSA (the
"Existing TSA") and the Revised Calpine TSA for transmission
capacity for its project. In order for Calpine's project to be
viable, Calpine needs assurances that the Revised Calpine TSA will
provide for transmission rates and an in-service date that are
compatible with its project. Therefore, an amendment to the Existing
TSA will be filed with a new Section 9.0 regarding termination, as
set forth in Exhibit C to this Agreement.
d. In order to ensure that service under the Existing TSA and the
Revised TSA commence at the same time, the date for commencement of
service under the Existing TSA will be amended to provide that
service will commence on January 1, 2005.
4. AMENDED 2000 RESOURCE PLAN.
a. Within 90 days of the approval of this Agreement by FERC, NPC will
file an amended 2000 Resource Plan, pursuant to NAC 704.9503 and NAC
704.9503(5),
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at the Public Utilities Commission of Nevada ("PUCN") that will
reflect the following native load uses of the Centennial Project:
i. The 500 MW of capacity made available by terminating the
Calpine Service Agreement No. 95;
ii. Transmission capacity associated with any future sale of
generation capacity from any of the Generators to NPC where
the Generator either uses its own transmission rights to
deliver the capacity to NPC or elects not to renew its TSA;
iii. Transmission capacity associated with the Existing TSA if that
agreement is terminated by Calpine as provided in paragraph
3(c); and
iv. The potential to use the remaining unsubscribed 150 MW of
Centennial capacity, provided that an appropriate transmission
project is constructed that would allow such capacity to be
delivered to the NPC control area.
b. The filing by NPC of the amended 2000 Resource Plan pursuant to
Paragraph 4(a) shall not affect the PUCN's full resource approval of
the Centennial Project.
c. Nothing in this Agreement obligates the PUCN to approve the amended
2000 Resource Plan to be filed under paragraph 4(a) or in any way
has any impact on the PUCN's ruling on that filing. If NPC proposes
in its amendment a new utility facility not previously approved by
the PUCN, PUCN acceptance will be required in order for the new
utility facility to be deemed a prudent investment pursuant to NRS
704.110(10).
5. TERM AND TERMINATION. This Agreement shall become effective as of the date
that it is approved by FERC, and shall remain in effect until all security
required by paragraph 1 has been terminated. The provisions of this Agreement
are not severable and if the Agreement is not approved in whole by FERC, the
Agreement shall be deemed null and void.
6. THIRD-PARTY BENEFICIARY RIGHTS. The PUCN is a third-party beneficiary of
Paragraph 4 of this Agreement. This Agreement shall not in any way foreclose,
limit, impair or otherwise encumber the ability, authority or jurisdiction of
the PUCN to take any action on any issue or matter consistent with the law. With
respect to the Generators, nothing in this Agreement shall be construed to
constitute a representation, warranty, covenant, surety of obligation,
guarantee, joint undertaking or joint venture, or any similar right, obligation,
or relationship. No Generator may assert a claim of any type whatsoever against
another Generator on the basis of any third-party beneficiary rights that may be
presumed or implied as a result of this Agreement. Notwithstanding any provision
in this Agreement, the obligations of the Generators are individual, not joint
and several, and no Generator shall be liable to any other Generator, NPC, the
PUCN or any third-party for any act or omission of any other party to this
Agreement.
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7. SUPPORT FOR EXPEDITIOUS APPROVAL. NPC and Generators agree to act to achieve
expeditious PUCN and FERC approval of this Agreement. NPC will file this
Agreement at FERC as a settlement within three business days of its execution by
all Generators, and will pursue expeditious PUCN consideration. NPC will
request, and Generators hereby support, comment periods at FERC as necessary so
that final comments are due no later than five business days after the date that
the PUCN considers the Agreement at a meeting.
8. CONSTRUCTION OF CENTENNIAL PROJECT. Nevada Power shall use reasonable efforts
to complete the Centennial Project in time to provide service as contemplated
under the TSAs.
9. COUNTERPARTS. This Agreement may be executed in counterparts, each one of
which shall be deemed an original.
IN WITNESS WHEREOF, the parties hereby have executed this Agreement as of the
date set forth above.
NEVADA POWER COMPANY CALPINE CORPORATION
By: By:
------------------------ ----------------------------
DUKE ENERGY TRADING AND MARKETING L.L.C. MIRANT LAS VEGAS, LLC
By: By:
------------------------ ----------------------------
PINNACLE WEST ENERGY CORPORATION RELIANT ENERGY SERVICES, INC.
By: By:
------------------------ ----------------------------
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EXHIBIT A
SECURITY REQUIREMENTS
TOTAL CENTENNIAL COSTS $254 MILLION
Calpine $33.33 million
Duke $50 million
Mirant $40.67 million
Pinnacle $29.67 million
Reliant $41.67 million
Remainder (assumed by NPC) $58.66 million
EXHIBIT B
SECTION 5.0 OF DUKE, RELIANT AND PINNACLE TSAs
5.0 The Transmission Customer's renewal rights under this agreement shall be
as specified in Section 2.2 of the Transmission Provider's Tariff as it
may be amended from time to time in accordance with FERC policy. In
addition, in order to assist the Transmission Provider in planning its
system appropriately, the Transmission Customer will communicate with the
Transmission Provider on a nonbinding basis regarding its assessment of
whether it will renew this agreement as follows:
5.1 In the event the Transmission Customer signs a power sales contract
that: (1) utilizes the transmission capacity provided for under this
agreement, and (2) extends beyond this agreement's initial term, the
Transmission Customer shall so notify the Transmission Provider (without
identifying the parties to the power sales contract) and shall provide the
Transmission Provider with the Transmission Customer's assessment of the
likely impact of such contract on its intent to renew this agreement.
5.2 The Transmission Customer will on an annual basis, starting five years
prior to the end of the initial term of this agreement, provide the
Transmission Provider with a nonbinding statement of its current
assessment of whether it will renew this agreement. The Transmission
Customer will, on Transmission Provider's request, answer any reasonable
questions the Transmission Provider has about such assessment; provided
that the Transmission Customer shall not be obligated to provide any
confidential market data to the Transmission Provider.
5.3 The Transmission Provider's transmission personnel shall treat as
confidential and proprietary all information provided by Transmission
Customer under this Section 5.0, and shall comply with FERC's affiliate
regulations and other applicable provisions of Order No. 889, or any
successor requirements, in its treatment of such information; provided
that this Section 5.3 shall not prevent the Transmission Provider from
providing information to FERC, the PUCN or any other agency of competent
jurisdiction in accordance with applicable requirements of such agency or
from compliance with any valid court order requiring the production of
such information. The Transmission Provider shall give the Transmission
Customer notice of any such agency request or court order so that the
Transmission Customer may take any action deemed necessary by the
Transmission Customer to protect the confidentiality of the requested
information.
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EXHIBIT C
CALPINE TERMINATION RIGHTS
9.0 The Transmission Customer may terminate this agreement prior to the date
specified in Section 1.0 as follows:
9.1 The Transmission Customer has submitted requests for service that
would result in a transmission service request for capacity leading
from the Crystal substation to delivery points in the El Dorado
Valley (the "Second Service Request"). The Transmission Customer
shall have the right to terminate this agreement under this Section
9.0 if the Transmission Provider's processing of the Second Service
Request does not result in a transmission service agreement filed at
FERC no later than October 15, 2002, that has the following
attributes:
9.1.1 Firm point-to-point Transmission service for a 25-year term
for 500 MW from the Crystal substation to delivery points in
the El Dorado Valley, provided at the Transmission Provider's
rolled-in transmission rates.
9.1.2 Transmission service to commence no later than January 1,
2005.
9.1.3 The amount of the Transmission Customer's regional required
upgrades resulting from the interconnection of the
Transmission Customer's generation facility to the
Transmission Provider's system has not increased solely as a
consequence of the Second Service Request.
9.1.4 Transmission Provider will accept as security any of the
acceptable forms of security listed in the Settlement
Agreement in Docket Nos. ER01-2754, et al. If any upgrades
necessary for the Second Service Request are made exclusively
for the Second Service Request, Transmission Provider will
permit a ramped-up security arrangement whereby security will
be required only as Transmission Provider makes expenditures
for the upgrades. If necessary upgrades are made for the
Second Service Request and other service requests as a group,
Transmission Provider will permit a ramped-up security
arrangement to the extent practical.
9.2 In the event that a transmission service agreement with the above
attributes is not filed at FERC by October 15, 2002, then the
Transmission Customer shall have thirty days to provide the
Transmission Provider with notice of termination of this agreement.
If notice of termination is not provided within 30 days, then the
Transmission Customer shall no longer have any right to terminate
under this Section 9.0.
9.3 In the event that the Transmission Customer does terminate this
agreement pursuant to this Section 9.0, it shall be responsible for
all nonmitigable damages incurred by the Transmission Provider,
provided that in no event shall the Transmission Customer be
obligated to pay more than $10,000,000 in damages (the "Damages
Cap"). The Transmission Provider shall use its reasonable efforts to
mitigate any damages, including but not limited to, permitting
another credit worthy customer to assume all or part of the
Transmission Customer's rights and obligations or reducing the scope
of the upgrade facilities to the extent it is possible to do so and
still satisfy all other requests for service to be satisfied with
such facilities. The Damages Cap shall not be construed to be a
liquidated damages provision and shall not relieve the Transmission
Provider of its obligation to mitigate its damages or prove the
amount of its claim.
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