Exhibit 10.103
AGREEMENT FOR THE TRANSFER AND USE
OF WASTEWATER EFFLUENT
This Agreement (the "Agreement") is made and entered into this 1st day of
June , 2001 (the "Effective Date"), by and between Arizona Public Service
Company, an Arizona corporation ("APS"), the Salt River Project Agricultural
Improvement and Power District, an agricultural improvement district organized
pursuant to the laws of the State of Arizona ("SRP"), and Pinnacle West Energy
Corporation, an Arizona Corporation ("PWE"). APS, SRP and PWE are collectively
referred to as the "Parties"; each is individually a "Party" to this Agreement.
RECITALS:
A. APS, SRP, and the City of Tolleson have executed an "Agreement for the
Sale and Purchase of Wastewater Effluent," dated November 13, 2000 (the
"Tolleson Agreement"), which is attached hereto as Attachment 1;
B. APS and SRP have entered into a related contract, the "Operating
Agreement for the Co-Ownership of Wastewater Effluent" (the "Co-Ownership
Agreement"), dated November 16, 2000, which is attached hereto as Attachment 2.
The Co-Ownership Agreement sets forth the relative rights and obligations of APS
and SRP in relation to their joint interest in the Tolleson Effluent purchased
pursuant to the Tolleson Agreement;
C. The primary use of the Tolleson Effluent is intended to be for cooling
water at Palo Verde Nuclear Generating Station ("PVNGS"); the secondary use of
the Tolleson Effluent will be its use at "Other Electric Generating Facilities"
(as defined by the Tolleson Agreement);
D. To the extent Tolleson Effluent is not used at PVNGS, the Tolleson
Effluent may be used at or for the benefit of Other Electric Generating
Facilities;
E. PWE, as an affiliate of APS, desires to make use of a portion of the
Tolleson Effluent purchased by APS and SRP at Units 1 and 2 of PWE's Other
Electric Generating Facility commonly referred to as "Redhawk";
F. APS and SRP are willing to transfer a portion of the Tolleson Effluent
to PWE for use at Redhawk Units 1 and 2 upon the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the agreements and promises set forth
below, and other good and valuable consideration, the receipt and sufficiency of
which are acknowledged, the parties agree as follows:
ARTICLE 1
DEFINITIONS AND USAGE
1.1 Definitions. As used in this Agreement, the following capitalized
terms shall have the same meaning as they are given by definition in the
Tolleson Agreement: Effluent
Pipeline, Notice of Commitment, Other Electric Generating Facility, Outages,
Surplus Effluent, and Uncontrollable Forces; and the following capitalized terms
shall have the same meaning as they are given in the Co-Ownership Agreement:
Claim, Coordinating Committee, Governmental Authority, Persons, PVNGS
Participants and Tolleson Effluent. All such definitions from the Tolleson
Agreement and the Co-Ownership Agreement are specifically incorporated in this
Agreement by this reference. In addition, the following terms shall have the
specified meanings:
"ANPP Participation Agreement" means the Arizona Nuclear Power
Project Participation Agreement, dated August 23, 1973, as amended now and in
the future.
"PVNGS Operating Agent" means the PVNGS Participant responsible for
the performance of operating work and making capital improvements at PVNGS under
the ANPP Participation Agreement.
"PVNGS Participant" means APS, SRP and the other entities having an
ownership or leasehold interest in PVNGS and related facilities as parties to
the ANPP Participation Agreement, including El Paso Electric Company, the Los
Angeles Department of Water and Power, Public Service Company of New Mexico,
Southern California Edison Company, Southern California Public Power Authority,
and each additional entity that may succeed to any such interest in PVNGS and
related facilities.
"Redhawk" means the proposed gas-fired electric generating station
to be constructed by PWE on land located west of the City of Phoenix, near
PVNGS. PWE's current plans call for construction of a (nominal) 2120 MW power
generation facility, with four (nominal) 530 MW units to be phased in over
several years.
"Redhawk Delivery Point" means the Delivery Point specified in the
Transportation and Treatment Agreement for delivery of treated effluent to PWE
for use at Redhawk.
"Redhawk Delivery System" means the pipeline, and all associated
valves, meters and other equipment, facilities, easements and rights of way
required to measure, control and transport effluent from the WRF (as hereafter
defined) to Redhawk, such system to be more precisely described and defined in
the Transportation and Treatment Agreement.
"Transportation and Treatment Agreement" means the agreement between
PWE, as owner of Redhawk, and APS, as PVNGS Operating Agent, to provide
transportation and treatment services through PVNGS facilities for effluent to
be used by PWE at Redhawk.
"WRF" means the tertiary wastewater treatment facility at PVNGS,
together with all appurtenant equipment, facilities, easements and rights of way
for treatment of effluent.
"WRF Pipeline" means the WRF's associated Water Reclamation Supply
System pipeline that conveys effluent from the SROG 91st Avenue and Tolleson
wastewater treatment plants to the WRF, together with all appurtenant equipment,
facilities, easements and rights of way.
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1.2 Certain Principles of Interpretation. In this Agreement, unless
otherwise indicated or the context otherwise requires:
(i) the singular includes the plural and plural the singular when
the context requires;
(ii) words importing any gender include the other gender;
(iii) references to "writing" include printing, typing, lithography,
and other means of reproducing words in a tangible visible form;
(iv) the words "including," "includes," and "include" shall be
deemed to be followed in each instance by the words, "without limitation";
(v) references to articles, sections, paragraphs, recitals, and
exhibits are to this Agreement unless otherwise stated;
(vi) references to contracts and related instruments shall be deemed
to include all subsequent amendments, extensions, and other modifications to
such instruments (without, however, limiting any prohibition on any such
amendments, extensions and other modifications by the terms of this Agreement);
(vii) references to Persons include their respective permitted
successors and assigns and, in the case of Governmental Authorities, persons
succeeding to their respective functions and capacities;
(viii) the words "hereof," "herein," "hereunder," and words of
similar import shall refer to this Agreement as a whole and not to any
particular provision thereof;
(ix) both Parties and their counsel participated extensively in the
preparation and drafting of this Agreement; no rule of construction shall apply
that would cause the interpretation of any claimed ambiguity in this Agreement
against a Party determined to be the drafting Party;
(x) captions and headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose;
(xi) any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction and the provision that is prohibited or
unenforceable shall be reformed or modified to reflect the parties' intent to
the maximum extent permitted by applicable law; and
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(xii) references to a "day," "week," "month," or "year" shall be
construed as a calendar day, week, month, or year.
ARTICLE 2
PURPOSE AND SCOPE OF AGREEMENT; CAPACITY OF PARTIES
2.1 Purpose. The purpose of this Agreement is to transfer to PWE, for use
at Redhawk Units 1 and 2, a portion of the Tolleson Effluent purchased by APS
and SRP, to establish the terms upon which PWE may make use of the transferred
Tolleson Effluent, and to provide for the payment by PWE of the purchase price
of transferred Tolleson Effluent, as well as a fee to APS and SRP.
2.2 Scope. This Agreement relates solely to the business, activities and
purposes set forth herein and, except as otherwise expressly provided herein,
does not apply to any other activities, transactions, relationships, contracts,
projects, or work of the Parties. Except to the extent expressly limited by the
terms of this Agreement, no Party shall be restricted in any way from engaging
in any activity or business falling outside the scope of this Agreement.
2.3 Capacity of Parties.
2.3.1 Capacity of PWE. For purposes of this Agreement, PWE is acting
solely as an owner, and if there is more than one owner, as agent on behalf of
all owners of Redhawk. PWE may in the future also assume the rights and
obligations of APS under this Agreement as provided in Section 10.3.1, and it
may assume the rights and obligations of APS as a Participant and Operating
Agent of PVNGS pursuant to the terms of the ANPP Participation Agreement. If PWE
assumes the rights and obligations of APS under this Agreement and the rights
and obligations of APS as Operating Agent under the ANPP Participation Agreement
then: (i) PWE shall act solely in its capacity as an owner, and if there is more
than one owner, as agent on behalf of the owners of Redhawk in all instances
where this Agreement establishes rights or obligations applicable to PWE as
owner of Redhawk; (ii) PWE shall act solely in its capacity as successor to the
rights and obligations of APS under this Agreement in all instances where rights
and obligations are established by this Agreement for APS in its individual
capacity; and (iii) PWE shall act solely in its capacity as Operating Agent in
all instances where rights and obligations of the Operating Agent, or APS acting
as Operating Agent, are established by this Agreement.
2.3.2 Capacity of APS. For purposes of this Agreement, APS is acting
solely in its capacity as an individual party to this Agreement, except for the
specific obligations established in Section 3.5 for APS acting as the Operating
Agent. For purposes of satisfying its obligations under Section 3.5 APS will act
solely in its capacity as Operating Agent for the limited purpose of satisfying
those specific obligations.
2.3.3 Capacity of SRP. For purposes of this Agreement, SRP is acting
solely in its capacity as an individual party to this Agreement.
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ARTICLE 3
TRANSFER AND USE OF TOLLESON EFFLUENT
3.1 Transfer of Tolleson Effluent to PWE. APS and SRP hereby transfer to
PWE, in one or more increments, up to 7,500 acre-feet per year of Tolleson
Effluent, conditioned upon the existence of the following circumstances at the
time of each transfer:
3.1.1 PVNGS has available, from all sources other than any emergency
supplies not intended for use during normal operations, sufficient supplies of
treated wastewater to satisfy all of its cooling water needs. Notwithstanding
the transfer of Tolleson Effluent to PWE pursuant to this Agreement, PVNGS may,
at any time, call for and make use of Tolleson Effluent to the extent such
Tolleson Effluent is required for cooling water purposes at PVNGS. Except in
cases of operational emergency, APS, as Operating Agent of PVNGS, shall provide
PWE reasonable notice of any need to begin using Tolleson Effluent at PVNGS that
would otherwise have been available for use at Redhawk.
3.1.2 PWE provides written notice, on or before the dates specified
in this Section, to APS and SRP of its need for a specified quantity, up to
7,500 acre-feet per year, of Tolleson Effluent to be used at Redhawk Units 1 and
2. PWE may submit one or more notices pursuant to this Section, each specifying
the quantity of Tolleson Effluent required for operation of Redhawk Units 1 and
2. PWE shall provide the notice or notices required by this Section no later
than September 1, 2002 and, in any event, prior to use of any water for cooling
purposes at Redhawk Units 1 and 2. If any of the 7,500 acre-feet of Tolleson
Effluent subject to this Agreement is not specified for use at Redhawk Units 1
and 2 in a notice or notices submitted by PWE to APS and SRP no later than
September 1, 2002, that quantity shall no longer be available to PWE pursuant to
this Agreement after that date.
3.1.3 The Transportation and Treatment Agreement is in effect and no
uncured default thereunder exists.
3.1.4 PWE employs commercially reasonable efforts to complete
construction and have Redhawk Units 1 and 2 operational by December 31, 2002,
and thereafter begins to take Tolleson Effluent for use at Redhawk Units 1 and 2
consistent with the terms and conditions of this Agreement and the
Transportation and Treatment Agreement.
3.1.5 The Tolleson Agreement is in effect, and no uncured default
thereunder exists.
3.2 Submittal of Notices of Commitment to Tolleson. Upon receipt of a
notice from PWE pursuant to Section 3.1.2, and confirmation of the existence of
the conditions stated in Sections 3.1.1, 3.1.3, 3.1.4 and 3.1.5, APS and SRP
shall promptly submit a Notice of Commitment to Tolleson pursuant to Section 8.2
of the Tolleson Agreement, confirming a commitment to transfer to PWE, for use
at Redhawk Units 1 and 2, the quantity of Tolleson Effluent specified by PWE.
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3.3 Use of Tolleson Effluent at Redhawk. Upon satisfaction of the
conditions set forth in Section 3.1, and subject to the terms and conditions of
the executed Transportation and Treatment Agreement, PWE shall begin to take
Tolleson Effluent for use at Redhawk Units 1 and 2 when those units are capable
of taking Tolleson Effluent. Use of Tolleson Effluent by PWE pursuant to this
Agreement shall be limited to all or any of the following: (i) direct use for
cooling at Redhawk Units 1 and 2; (ii) incidental, on-site, non-commercial uses
at Redhawk Units 1 and 2; (iii) use in a water exchange by which PWE obtains
other sources of water for direct use for cooling and incidental, on-site,
non-commercial uses at Redhawk Units 1 and 2; (iv) underground storage and
recovery of the Tolleson Effluent, as permitted by state law, for cooling water
use and incidental on-site, non-commercial uses at Redhawk Units 1 and 2. No
other use of Tolleson Effluent transferred pursuant to this Agreement shall be
permitted unless and until the Coordinating Committee established by Article 4
of the Co-Ownership Agreement separately approves such use. Notwithstanding
anything in this Section 3.3 to the contrary, all uses of Tolleson Effluent
shall be consistent with and not in violation of the Tolleson Agreement.
3.4 PWE Commitment to Use Tolleson Effluent at Redhawk Units 1 and 2.
During the term of this Agreement, PWE shall take Tolleson Effluent made
available to it at the Redhawk Delivery Point, and shall use such Tolleson
Effluent to satisfy all of its cooling water requirements at Redhawk Units 1 and
2 up to the full quantity of Tolleson Effluent made available at the Redhawk
Delivery Point on a daily basis. Only after taking all Tolleson Effluent made
available on a daily basis at the Redhawk Delivery Point may PWE make use of any
other source of treated wastewater or groundwater for cooling water purposes at
Redhawk Units 1 and 2. In addition, subject to the last sentence in this Section
3.4, PWE may pump groundwater at Redhawk for purposes of: (i) providing cooling
water for use at Redhawk Units 1 and 2 to the extent that and during the time
that demand for cooling water at Redhawk Units 1 and 2 exceeds the amount of
Tolleson Effluent made available to PWE at the Redhawk Delivery Point; (ii)
keeping the Redhawk Storage Reservoir full; and (iii) uses at Redhawk other than
cooling water for Redhawk Units 1 and 2. All groundwater pumping and use
pursuant to this Section 3.4 shall be conducted in a manner which does not
interfere with PWE's ability to comply with its obligation to take Tolleson
Effluent made available at the Redhawk Delivery Point on a daily basis for
cooling water purposes at Redhawk Units 1 and 2.
3.5 Requirement to Withhold Delivery. APS, as PVNGS Operating Agent, shall
stop delivery to Redhawk of Tolleson Effluent whenever PWE is in breach of its
obligations under Section 3.4 herein; provided, however, that upon curing any
breach of its obligations under Section 3.4, PWE shall be entitled to have
delivery to Redhawk restored for Tolleson Effluent to which it has contractual
rights, so long as such deliveries are consistent with the terms of this
Agreement, the Transportation and Treatment Agreement and the Tolleson
Agreement.
3.6 Enforcement by SRP. Notwithstanding the notice provisions under
Section 7.1, any breach by PWE of its obligations under Sections 3.3 or 3.4, or
any breach by APS of its obligations under Section 3.5, shall entitle SRP to
pursue any available remedies at law or in equity against the breaching Party,
upon five (5) days prior notice to that Party.
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ARTICLE 4
PAYMENT FOR TOLLESON EFFLUENT TRANSFERRED TO PWE
4.1 Operating Account. APS shall establish an operating account to track
quantities of Tolleson Effluent delivered to PWE for use at Redhawk Units 1 and
2; corresponding charges to be paid by, and payments received from PWE pursuant
to this Article; and disbursements made by APS pursuant to Section 4.4. Prior to
the initiation of deliveries of Tolleson Effluent to PWE pursuant to this
Agreement, PWE shall pay to APS the sum of $60,000 to establish an initial
balance for this operating account. Thereafter, PWE shall pay such sums to APS
as are necessary to maintain a minimum balance in the operating account equal to
the greater of $60,000 or the amount of the largest monthly invoice delivered to
PWE pursuant to this Agreement during the previous twelve month period (the
"Minimum Balance").
4.2 Submittal and Payment of Invoices. APS shall, on a monthly basis,
present invoices to PWE for payment of amounts owed by PWE as provided in this
Article. PWE shall submit payment to APS within 30 days after receipt of each
invoice. If PWE disputes the amount set forth in any billing statement, PWE will
provide notice of such dispute at the time of payment, but may not withhold
payment of the disputed amount. The Parties shall attempt to resolve the dispute
through informal consultation as provided in Section 7.2 before resorting to
litigation to resolve the dispute. So long as PWE actually pays the invoiced
amount when due: (i) the act of doing so under protest shall not constitute a
default under this Agreement; and (ii) APS and SRP shall not refuse, based
solely on the protest, to deliver Tolleson Effluent while the protest is being
resolved. If PWE fails to pay the amount stated in any invoice within 30 days
after receipt and the operating account balance is below the minimum balance
established pursuant to Section 4.1, APS shall, after providing ten (10) days
written notice to PWE, cease delivering Treated Effluent into the Redhawk
Delivery System until payment in full for any unpaid invoice(s) is received from
PWE and a positive balance of not less than the Minimum Balance is reestablished
in the operating account. If all amounts due under invoices issued by APS are
not paid in full and the operating account is not reestablished to a positive
balance of not less than the Minimum Balance within ten (10) days after written
notice to PWE pursuant to the immediately preceding sentence, PWE shall be
liable for late payment fees equal to the lesser of 1.5% per month or the
highest amount allowed by law, applied to the amounts due under the unpaid
invoice(s). If PWE's failure to pay amounts due under any invoice continues for
a period of six months after receipt of written notice of default pursuant to
this Section, this Agreement shall automatically terminate, subject to survival
of the payment obligations of this Article 4 and the indemnification provisions
of Article 9.
4.3 Content of Invoices. Invoices presented to PWE pursuant to this
Article shall itemize charges in the following categories:
4.3.1 The purchase price payable to Tolleson, as specified in
Section 2.2 of the Tolleson Agreement, for each acre-foot of Tolleson Effluent
actually delivered to PWE at the Redhawk Delivery Point.
4.3.2 The "take or pay" price payable to Tolleson, as specified in
Section 2.5 of the Tolleson Agreement, for any Surplus Effluent that:
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(i) PWE is committed to purchase by virtue of the notice(s)
issued pursuant to Section 3.1;
(ii) meets the water quality requirements of Section 3 of the
Tolleson Agreement; and
(iii) is not actually used at either Redhawk Units 1 and 2 or
at PVNGS.
During the term of this Agreement, PWE shall be obligated to pay any
applicable "take or pay" charges for Tolleson Effluent PWE is committed to
purchase by virtue of the notices issued pursuant to Section 3.1 regardless of
whether Redhawk Units 1 and 2 are capable of taking that Tolleson Effluent.
4.3.3 An annual fee of $22,600 payable to APS and SRP, such fee to
be assessed in a separate invoice submitted to PWE no later than January 31 each
year during the term of this Agreement. The first installment of this fee shall
be prorated for the year to the Effective Date of this Agreement and shall be
invoiced by APS to PWE within 30 days after the Effective Date. The final
installment shall also be prorated for the year in which this Agreement is
terminated, up to and including the date of termination. If the fee already has
been paid by PWE during the year of termination, any amount paid in excess of
the prorated amount owed by PWE through the date of termination shall be
refunded by APS and SRP. This fee shall be adjusted for inflation in the same
manner as provided for adjustments to the purchase prices paid to Tolleson for
Tolleson Effluent under Sections 2.1 and 2.2 of the Tolleson Agreement, using
the formula set forth in Exhibit A to the Tolleson Agreement.
4.4 Processing of Payments Through Operating Account. APS shall promptly
process payments through the operating account in the following manner:
4.4.1 Payments received from PWE pursuant to invoices submitted
under Section 4.2 shall be deposited into the operating account created pursuant
to Section 4.1.
4.4.2 The purchase price for Tolleson Effluent used at Redhawk Units
1 and 2 shall be paid to Tolleson as provided in Section 2.3 of the Tolleson
Agreement.
4.4.3 Any "take or pay" amount owed by PWE, as determined under
Section 4.3.2 of this Agreement, shall be paid to Tolleson as provided in
Section 2.5 of the Tolleson Agreement.
4.4.4 The fee assessed pursuant to Section 4.3.3 shall be divided
evenly between APS and SRP. APS, in its sole discretion, may choose to forego
payment of its one-half of this fee; in which case, it shall so state in the
invoices submitted to PWE, and thereafter shall disburse the entire remainder of
the fee to SRP.
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ARTICLE 5
POTENTIAL TRANSFERS OF ADDITIONAL TOLLESON
EFFLUENT TO REDHAWK OR OTHER ELECTRIC GENERATING FACILITIES
Any transfers of additional Tolleson Effluent, for use at Redhawk or any
Other Electric Generating Facility other than Redhawk, will be subject to the
negotiation of a separate agreement between APS and SRP, and confirmation by the
Coordinating Committee. The terms and conditions of any transfer of additional
Tolleson Effluent to Redhawk or Other Electric Generating Facilities shall be
substantially the same as those contained in this Agreement. If APS and SRP
enter into a separate agreement for the transfer of Tolleson Effluent for use at
an Other Electric Generating Facility other than Redhawk and that separate
agreement contains terms and conditions more favorable to the owner(s) of the
Other Electric Generating Facility than are contained in this Agreement, PWE
shall be entitled to have this Agreement modified to incorporate those more
favorable terms and conditions.
ARTICLE 6
TERM
6.1 Term. This Agreement shall commence on the Effective Date and shall
terminate upon the expiration or termination of the Tolleson Agreement, unless
earlier terminated pursuant to Section 6.2 or 6.3 below.
6.2 Permanent Cessation of Operations. This Agreement shall terminate
sixty days after permanent cessation of operations of Redhawk Units 1 and 2
unless APS and SRP, acting through the Coordinating Committee, and PWE, as owner
of Redhawk, specifically agree to continue this Agreement in effect within that
sixty day period. For purposes of this Agreement, a permanent cessation of
operations for Redhawk Units 1 and 2 shall mean: (i) initiation of physical
decommissioning activities at both units; (ii) written notice from PWE to APS
and SRP confirming PWE's intention to permanently cease operation of both units;
or (iii) failure to maintain all regulatory certifications and permits required
for operation of at least one of Redhawk Units 1 and 2 and to keep at least one
of Redhawk Units 1 and 2 in such condition that it is capable of being restored
to active power production in not more than a 270 day period. If PWE permanently
ceases operation of only one of Redhawk Units 1 and 2, this Agreement shall not
terminate, but PWE's rights to Tolleson Effluent transferred under this
Agreement shall be reduced to a quantity of 3,750 acre-feet per year, which
shall thereafter be limited to use at the Redhawk unit (of Units 1 and 2) that
has not permanently ceased operation.
6.3 Temporary Cessation of Operations. If PWE temporarily ceases operation
of Redhawk Units 1 and 2 (for reasons other than because PVNGS is using Tolleson
Effluent to the extent that there is insufficient Tolleson Effluent available
for PWE to operate Redhawk Units 1 and 2), and as a result PWE does not take any
Tolleson Effluent under this Agreement for a period in excess of three years,
APS and SRP shall provide PWE notice of their intention to terminate this
Agreement. Within sixty days after receipt of such notice, PWE may elect to
begin paying a "Holding Fee" to APS and SRP in the amount of $10 per acre-foot
per year for each acre-foot of Tolleson Effluent to which PWE desires to retain
its rights under this Agreement. As long as PWE continues paying the Holding Fee
to APS and SRP, this Agreement
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shall remain in full force and effect, provided, however, that an election to
pay the Holding Fee (i) shall not release PWE from its obligation to satisfy the
"take or pay" obligations required by Article 4 herein and by the Tolleson
Agreement, and (ii) shall obligate PWE to pay the annual fee in Section 4.3.3 in
addition to the Holding Fee. If PWE fails to make the first annual Holding Fee
payment within sixty days after receiving notice from APS and SRP as provided in
this Section, this Agreement shall terminate on the sixty-first day after that
notice is received by PWE.
6.4 Continued Use of Tolleson Effluent if Transportation and Treatment
Agreement Terminates. If the Transportation and Treatment Agreement is
terminated for any reason during the term of this Agreement, this Agreement
shall remain in effect provided that: (i) within one year of the date of
termination of the Transportation and Treatment Agreement, PWE shall submit to
the Coordinating Committee a plan for construction of an alternative means of
direct Tolleson Effluent deliveries to Redhawk, implementation of a water
exchange, or implementation of an underground storage and recovery project
pursuant to which PWE will be able to continue to use Tolleson Effluent at
Redhawk Units 1 and 2; (ii) within five years of the date of Termination of the
Transportation and Treatment Agreement, PWE shall have obtained all necessary
permits, approvals, consents and agreements required to construct and operate
the alternative means of direct Tolleson Effluent deliveries or implement the
plan for water exchange or underground storage and recovery project, and shall
resume taking Tolleson Effluent; and (iii) within 60 days after termination of
the Transportation and Treatment Agreement, PWE shall begin paying an annual
"Interim Fee" to APS and SRP in the amount of $10 per acre-foot per year for
each acre-foot of Tolleson Effluent to which PWE desires to retain its rights
under this Agreement. PWE shall continue to pay the Interim Fee until it resumes
taking Tolleson Effluent for use at Redhawk Units 1 and 2. If PWE fails to
satisfy all requirements of this section within the specified periods of time
after termination of the Transportation and Treatment Agreement, this Agreement
shall thereafter terminate.
6.5 No Termination or Material Breach of Tolleson Agreement. During the
term of this Agreement, neither APS nor SRP shall materially breach the Tolleson
Agreement, and, except as provided below in this Section 6.5, they shall
exercise commercially reasonable efforts to maintain their right to purchase
Tolleson Effluent from the City of Tolleson pursuant to that agreement.
Notwithstanding anything in this Agreement to the contrary, APS and SRP may
terminate the Tolleson Agreement to the extent permitted under Sections 2.1 and
12.3.1 of the Tolleson Agreement, as limited by Section 2.5 of the Tolleson
Agreement. Notwithstanding the notice provisions under Section 7.1, any breach
by APS or SRP of their obligations under this Section shall entitle PWE to
pursue any available remedies at law or in equity against a breaching Party,
upon five (5) days prior notice, and to take any action that PWE may be entitled
to take to cure a material breach of the Tolleson Agreement.
6.6 Survival. All obligations and liabilities of the Parties under this
Agreement shall cease upon termination except the obligations of the Parties
under Article 4 and under Article 9, and the liabilities of any Party resulting
from a default by such Party leading to such termination.
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ARTICLE 7
DEFAULT AND DISPUTE RESOLUTION
7.1 Events of Default. A Party shall be in default under this Agreement
upon the occurrence of the following ("Event of Default"): if it fails to render
performance required under any material provision of this Agreement when due and
such failure continues unremedied for thirty (30) days following written notice
to the Party in default given by any other Party. No Party shall be in default
under this Agreement due to Uncontrollable Forces or Outages as identified in
Section 9.1 of the Tolleson Agreement. It shall also be an Event of Default if a
Party shall have commenced any insolvency, receivership, bankruptcy,
liquidation, or similar proceedings and (i) one hundred twenty (120) days shall
have expired from the commencement of any one or more of such proceedings, and
(ii) a petition commencing the proceeding has not been dismissed or stayed
within that time.
7.2 Dispute Resolution. In the event of any dispute between the Parties
concerning the rights and obligations created by this Agreement, or concerning
any Event of Default, the Parties shall first confer in an attempt to informally
resolve such dispute without need to resort to arbitration or litigation. Except
in the case of: (i) a material breach by PWE of its obligations under Section
3.3 or 3.4; (ii) a material breach by APS of its obligations under Section 3.5;
or (iii) a material breach by APS or SRP of their obligations under Section 6.5;
the Parties shall not resort to arbitration or litigation to enforce their
rights under this Agreement until 15 days after they begin to confer in good
faith to informally resolve their dispute. If the Parties are unable to resolve
their dispute after conferring as required in the preceding sentence, then
during the period that any Event of Default continues, the non-defaulting Party
or Parties may, without prejudice to any other available rights or remedies
under this Agreement or at law or in equity, and without constituting an
election of an exclusive remedy for an Event of Default, initiate non-binding
arbitration by one arbitrator who has not previously been employed by any Party
(excluding employment as an arbitrator), and does not have a direct or indirect
interest in any Party or the subject matter of the arbitration. The arbitrator
shall either be as mutually agreed by the Parties within fifteen (15) calendar
days after submission of the matter to arbitration, or failing agreement shall
be selected under the expedited rules of the American Arbitration Association
("AAA"). The rules of AAA shall apply to the extent not inconsistent with the
provisions in this Section. Arbitration shall be conducted according to the
following: (a) not later than seven (7) days prior to the hearing date set by
the arbitrator, each Party shall submit a brief with a single proposal for
settlement; (b) the hearing shall be conducted on a confidential basis without
continuance or adjournment; and (c) the Parties shall divide equally the cost of
the arbitrator and the hearing, and each Party shall be responsible for its own
expenses, including its counsel and representatives.
ARTICLE 8
NOTICES
8.1 Notice Provision. All notices, demands, consents, invoices or other
communications required under this Agreement shall be in writing and may be
delivered personally to a Party, may be delivered by facsimile providing written
confirmation of successful
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transmission, or may be mailed by deposit in the United States Certified Mail,
return receipt requested, or by deposit with a reputable overnight delivery
service. Notices shall be effective:
(i) on the date delivered by personal delivery or facsimile;
(ii) three (3) business days following the date deposited in the
United States mail; or
(iii) the next business day following delivery to a reputable
overnight delivery service.
8.1.1 Notices or communications shall be delivered and mailed to the
Parties at the following addresses, or at any other address substituted by a
Party from time to time by written notice to the other Parties:
To APS: Arizona Public Service Company
Palo Verde Nuclear Generating Station
WRF Manager
Mail Station 6215
P.O. Box 52034
Phoenix, Arizona 85072-2034
Telephone: 623-393-3000
Facsimile: 623-393-1688
To SRP: Salt River Project Agricultural
Improvement and Power District
c/o Secretary
P.O. Box 52025
Phoenix, Arizona 85072-2025
Telephone: 602-236-5005
Facsimile: 602-236-2188
To PWE: Pinnacle West Energy Corp.
Mail Station 8983
P.O. Box 53999
Phoenix, Arizona 85072-3999
Attention: Redhawk Plant Manager
Telephone: 602-250-2575
Facsimile: 602-250-2153
ARTICLE 9
LIABILITY
9.1 Limitation of Liability. The liability of a Party to any other Party
under this Agreement shall be limited to the direct damages actually sustained
by the other Party or Parties. NO PARTY SHALL BE LIABLE TO THE OTHER PARTIES FOR
ANY LOSS OR
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DAMAGE IN THE NATURE OF PARTIAL OR COMPLETE LOSS OF USE OF ANY GENERATING
FACILITY, LOSS OF ELECTRIC POWER, COST OF REPLACEMENT OF ELECTRIC POWER, OR FOR
ANY LOSS OF INTEREST, REVENUE OR ANTICIPATED PROFITS FROM ACTIVITIES UNDER THIS
AGREEMENT. NO PARTY SHALL BE LIABLE TO THE OTHER PARTIES FOR ANY INDIRECT,
SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR LOST PROFITS (OTHER THAN ANY
UNPAID FEE OWED TO APS AND SRP PURSUANT TO SECTION 4.3.3), ARISING OUT OF OR
RELATED TO THIS AGREEMENT. (The limitations in this Section 9.1 shall not apply
to losses in tort to third parties or to Claims against which a Party is
entitled to indemnitee protection under Section 9.2.)
9.2 Indemnity For Claims Asserted by Third Parties.
9.2.1 APS and SRP (each an "Indemnifying Party") shall defend,
indemnify, and hold harmless PWE and its respective affiliates, directors,
officers, partners, members, employees, agents, and representatives (each a "PWE
Indemnitee") from and against any and all Claims, liability, cost, loss or
expense of any kind (including reasonable legal, accounting, consulting,
engineering and other fees) that may be imposed on, incurred by, or asserted
against the PWE Indemnitees by any other party or parties (including a
governmental entity) arising out of the fraud, or a negligent or intentional act
or omission, of the Indemnifying Party or its agents or representatives in
connection with this Agreement. In this obligation APS and SRP shall not be
jointly and severally liable, but each shall be responsible to the PWE
Indemnitees for the claims allegedly arising out if its own fraud, negligent or
intentional act or omission. In the event any such Claim, liability, cost, loss
or expense asserted by a person not a Party to this Agreement is caused by an
alleged joint or concurrent fraud, or negligent or intentional act or omission,
the Parties at fault shall bear liability in proportion to their own degrees of
culpability.
9.2.2 PWE shall defend, indemnify, and hold harmless APS and SRP and
their respective affiliates, directors, officers, partners, members, employees,
agents, and representatives (each an "APS/SRP Indemnitee") from and against any
and all Claims, liability, cost, loss or expense of any kind (including
reasonable legal, accounting, consulting, engineering and other fees) that may
be imposed on incurred by, or asserted against the APS/SRP Indemnitees by any
other party or parties (including a governmental entity) arising out of the
fraud, or a negligent or intentional act or omission, of PWE or its agents or
representatives in connection with this Agreement.
9.2.3 PWE shall defend, indemnify, and hold harmless the APS/SRP
Indemnitees from and against any and all Claims, liability, cost, loss or
expense of any kind (including reasonable legal, accounting, consulting,
engineering and other fees) that may be imposed on, incurred by, or asserted
against the APS/SRP Indemnitees by any other party or parties (including a
governmental entity) arising out of the receipt, transportation and use of
Tolleson Effluent after discharge of the same at the Redhawk Delivery Point,
including but not limited to any Release or Threat of Release of a Hazardous
Material or Substance (as defined in the Treatment and Transportation Agreement)
in connection with or resulting from its activities pertaining to this Agreement
or in connection with or resulting from the use by PWE of Tolleson Effluent
after delivery to PWE at the Redhawk Delivery Point. PWE shall promptly notify
APS
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and SRP of any such claim and of any Release or Threatened Release of a
Hazardous Material or Substance, or violation of Environmental Law or permit
condition.
9.2.4 PWE shall defend, indemnify, and hold harmless the APS/SRP
Indemnitees from and against any and all Claims, liability, cost, loss or
expense of any kind (including reasonable legal, accounting, consulting,
engineering and other fees) that may be imposed on, incurred by, or asserted
against the APS/SRP Indemnitees by any other party or parties (including a
governmental entity) arising out of PWE's withdrawal and use of groundwater at
Redhawk.
9.3 Responsibility For and Risk Associated With Transferred Tolleson
Effluent.
9.3.1 All risks associated with the transportation, treatment, use,
disposal and payment for the Tolleson Effluent transferred to PWE pursuant to
this Agreement, shall be the responsibility of PWE from and after discharge of
that Tolleson Effluent into the WRF Pipeline at the Delivery Point specified in
the Tolleson Agreement; provided, however, that: (i) ownership of the Tolleson
Effluent shall not transfer to PWE until it is discharged into the Redhawk
Delivery System as specified in the Transportation and Treatment Agreement; and
(ii) APS, as Operating Agent of PVNGS, shall remain responsible for physical
transportation and treatment of the Tolleson Effluent through the WRF Pipeline
and WRF until the point of discharge into the Redhawk Delivery System,
consistent with the terms and conditions of the Transportation and Treatment
Agreement.
9.3.2 During such times as Tolleson Effluent is being transported
through the WRF Pipeline and treated in the WRF, PWE, as owner of Redhawk, shall
share proportionally in all risks and liability, if any, associated with or
arising from the transportation, treatment, disposal and other management of the
Tolleson Effluent. Regardless of any allocation or limitation of liabilities and
indemnification under the Transportation and Treatment Agreement, PWE's
proportional share under the preceding sentence shall initially be set at 50% of
the total liability, if any, that is unrelated to the transportation, treatment,
disposal and other management of the Tolleson Effluent (and no other source of
effluent) prior to delivery to PWE at the Redhawk Delivery Point. If the amount
of Tolleson Effluent transferred to PWE for use at Redhawk either materially
increases or materially decreases during the term of this Agreement, or if PVNGS
materially reduces or ceases the delivery of Tolleson Effluent into the Redhawk
Delivery System for a period of time exceeding six months, any Party may request
that PWE's share of potential liability under this Section be adjusted to a
proportion that accurately reflects the percentage of Tolleson Effluent being
transported and treated through the WRF Pipeline and WRF on an annual basis for
PWE's use at Redhawk, in comparison to the percentage of Tolleson Effluent being
transported and treated through the WRF Pipeline and WRF on an annual basis for
other purposes. Upon being notified of a Party's request for such an adjustment,
the Parties shall meet to negotiate in good faith and establish a new
proportional share of PWE's potential liability consistent with the terms of
this Section.
9.3.3 If Tolleson Effluent transferred pursuant to this Agreement is
delivered or made available to PWE for use at Redhawk by means other than
discharge into the WRF Pipeline for transportation to and treatment at the WRF,
then PWE shall bear all risks associated
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with receipt, management, use, disposal and payment for such Tolleson Effluent
from and after its delivery by Tolleson to or for the benefit of PWE.
9.4 Claims by Tolleson for Higher Price for Effluent. As provided in
Section 4.3.1 of this Agreement, APS shall bill PWE, as owner of Redhawk, the
price specified in Section 2.2 of the Tolleson Agreement only for that quantity
of Tolleson Effluent actually delivered to PWE at the Redhawk Delivery Point. If
the City of Tolleson claims entitlement to the price specified in Section 2.2 of
the Tolleson Agreement for the full quantity of 7,500 acre-feet being
transferred to PWE pursuant to this Agreement, regardless of whether that full
quantity is actually delivered to PWE for use at Redhawk, PWE shall defend,
indemnify, and hold harmless APS, SRP and the other PVNGS Participants, as well
as their respective affiliates, directors, officers, partners, members,
employees, agents, and representatives from and against any and all Claims,
liability, cost, loss or expense of any kind arising out of Tolleson's claim to
such entitlement. PWE may, in its sole discretion and after 10 days' prior
notice to APS and SRP, choose to pay or settle any such claim without prior
approval by APS or SRP; provided, however, that PWE shall not be entitled to act
as agent for APS and SRP for purposes of amending the Tolleson Agreement or
affecting APS and SRP's rights and obligations thereunder.
9.5 Survival of Indemnification Obligations. The payment obligations of
PWE set forth in Article 4, and the indemnification obligations of the Parties
set forth in this Article 9 shall survive the termination or expiration of this
Agreement.
9.6 Liability of PVNGS Operating Agent. Any liability of the PVNGS
Operating Agent to the PVNGS Participants for the acts or omissions of the PVNGS
Operating Agent or its employees or contractors shall be determined under the
provisions of the ANPP Participation Agreement.
ARTICLE 10
GENERAL
10.1 Entire Agreement. This Agreement supersedes all prior and
contemporaneous conduct and communications, whether written or oral, pertaining
to the transfer of 7,500 acre-feet per year of Tolleson Effluent from APS and
SRP to PWE for use at Redhawk Units 1 and 2. Notwithstanding the foregoing, this
Agreement shall be read together with the November 13, 2000 Tolleson Agreement,
the November 16, 2000 Co-Ownership Agreement, and the Transportation and
Treatment Agreement to obtain necessary definitions and to otherwise determine
the intention of the Parties. This Agreement may not be modified, changed or
added to except in writing signed by all Parties hereto.
10.2 Waiver. Each Party's failure or delay in enforcing the terms and
conditions of this Agreement or insisting upon strict performance of any of the
other Parties' obligations shall not be interpreted as a waiver thereof. Waiver
of any provision of this Agreement shall only be effective if in writing and
shall not be interpreted as a waiver of any subsequent breach or failure under
the same or any other provision of this Agreement. No conduct, statement, course
of conduct, course of dealing, oral expression or other action shall be
construed as a waiver.
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10.3 Assignment.
10.3.1 Assignment by APS to PWE. APS may assign its rights and
delegate its duties under this Agreement at any time to PWE, provided that APS
assigns its entire interest in this Agreement and that PWE assumes in writing
all of the APS obligations under this Agreement, and provided further that such
assignment shall not become effective until and unless PWE has become a party to
the ANPP Participation Agreement. No assignment or delegation under this Section
10.3.1 will release APS from its obligations under this Agreement unless SRP
consents to a release (such consent not to be unreasonably withheld, conditioned
or delayed). Any subsequent assignment of the Operating Agent's obligations
under this Agreement may only be made in conjunction with a corresponding
assignment of the Operating Agent's rights and obligations under the ANPP
Participation Agreement, and such assignment also shall be subject to all terms
and conditions of this Agreement, including the restrictions of Section 10.3.2.
10.3.2 Assignment to Others. With the prior written consent of the
other Parties (such consent not to be unreasonably withheld, conditioned or
delayed), a Party may assign its rights and delegate its duties under this
Agreement at any time to any other PVNGS Participant or, in the case of PWE as
owner of Redhawk and transferee of the right to use Tolleson Effluent, to any
other owner of Redhawk, provided that such Party's assignee assumes in writing
all of such Party's obligations under this Agreement. No assignment or
delegation under this Section 10.3.2 will release the assigning Party from its
financial and indemnification obligations under this Agreement unless the other
Party or Parties consent to a release (such consent not to be unreasonably
withheld, conditioned or delayed). Any assignee to whom the rights and
obligations of this Agreement are assigned pursuant to this Section 10.3.2 shall
thereafter be subject to all terms and conditions of this Agreement, including
the restrictions of this Section 10.3.2.
10.4 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Arizona.
10.5 Attorneys' Fees. Except in case of arbitration conducted pursuant to
Section 7.2, should any Claim be brought by a Party against another Party or
Parties arising out of this Agreement, including any action for declaratory or
injunctive relief, the prevailing Party or Parties shall be entitled to
reasonable attorneys' fees and costs and expenses of litigation and
investigation, all as actually incurred, including attorneys' fees, costs and
expenses of litigation and investigation incurred in the proceedings, including
appellate proceedings, or in any action or participation in, or in connection
with, any case or proceeding under the United States or other bankruptcy laws,
and any judgment or decree rendered in any such action or proceedings shall
include an award thereof.
10.6 Counterparts. This Agreement may be executed by the Parties in any
number of separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts shall together constitute
one and the same agreement. All signatures need not be on the same counterpart.
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10.7 Relationship of the Parties. The execution of this Agreement shall
not create or constitute a partnership, joint venture, entity or any form of
business organization between the Parties.
IN WITNESS WHEREOF, the Parties have executed this Agreement to be
effective as of the Effective Date.
ARIZONA PUBLIC SERVICE COMPANY,
an Arizona corporation,
By /s/ James M. Levine
__________________________________________________
Its Executive Vice President, Generation
________________________________________
SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT,
an Arizona Agricultural Improvement District
By /s/ William P. Schrader
__________________________________________________
Its President
________________________________________
Approved as to form:
By /s/ Richard N. Morrison
__________________________________________________
PINNACLE WEST ENERGY CORPORATION,
an Arizona Corporation
By /s/ Ajoy K. Banerjee
__________________________________________________
Its Vice President
________________________________________
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ATTACHMENT 1
AGREEMENT FOR THE SALE AND PURCHASE
OF WASTEWATER EFFLUENT
THIS AGREEMENT, is made and entered into this 13th day of November 2000,
by and between the City of Tolleson, a municipal corporation organized and
existing under and by virtue of the laws of the State of Arizona ("Tolleson" or
"City"), and Arizona Public Service Company, a corporation organized and
existing under and by virtue of the laws of the State of Arizona ("APS") and
Salt River Project Agricultural Improvement and Power District, an agricultural
improvement district organized and existing under and by virtue of the laws of
the State of Arizona ("SRP"). The City, APS and SRP are collectively referred to
herein as the "Parties." APS and SRP are collectively referred to herein as "The
Companies." All references to "The Companies" in this Agreement shall include
APS or SRP, or both APS and SRP, or any affiliated or successor entity to either
SRP or APS, including but not limited to Pinnacle West Energy Corporation, an
affiliate of APS.
WITNESSETH:
WHEREAS, Tolleson owns, operates and maintains a wastewater treatment
plant (hereinafter the "Plant") situated approximately 1/4 mile south of State
Route 85 and approximately 1/4 mile west of 91st Avenue at which Tolleson treats
raw sewage collected from sources within and outside of the corporate boundaries
of Tolleson and produces treated wastewater effluent which, unless used by
Tolleson for other purposes, is discharged into the Salt River in accordance
with the laws of the United States and the State of Arizona (hereinafter
"Effluent" or "Tolleson Effluent");
WHEREAS, the rated treatment capacity of the Plant, assuming typical
influent quality, is currently approximately 17.5 million gallons per day
(hereinafter "M.G.D.") of influent;
WHEREAS, Tolleson is evaluating the possibility of having the existing
Plant re-rated to a capacity of greater than 17.5 M.G.D. of influent, and
Tolleson may in the future expand Tolleson's capacity in the Plant to create
capacity beyond 17.5 M.G.D.;
WHEREAS, Tolleson desires to reserve for its use and disposition as it may
in its own discretion elect, 10% of the amount of Effluent produced at the Plant
(hereinafter "Reserved Effluent");
WHEREAS, Reserved Effluent may be used, sold or otherwise disposed of by
Tolleson for any lawful purpose, including delivery and sale to The Companies
consistent with the terms of this Agreement;
WHEREAS, Tolleson desires to sell and The Companies desire to purchase all
available "Surplus Effluent," which for the purposes hereof shall be all of the
Effluent produced through the operation of the Plant in excess of the Reserved
Effluent, but not to exceed the maximum capacity of the current interconnection
(the "Interconnection Facilities") between the Plant and the pipeline (the
"Effluent Pipeline") that supplies effluent to the Palo Verde Nuclear Generating
Station ("Palo Verde"), and, when operational, the maximum capacity of the
modified Interconnection Facilities provided for in Section 5.2 below;
WHEREAS, additional wastewater treatment is provided at Palo Verde's
"Water Reclamation Facility" located at the northern end of the Palo Verde
property and the western terminus of the Effluent Pipeline;
WHEREAS, the Parties previously entered into an Agreement for the Sale and
Purchase of Effluent dated June 12, 1981 (the "Previous Agreement");
WHEREAS this Agreement is intended to replace the Previous Agreement,
which will be of no further effect upon execution of this Agreement; and
WHEREAS, the sale and purchase of the Surplus Effluent will result in its
beneficial use and in the reduction in the demand for the limited supplies of
unused surface waters and groundwaters;
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NOW THEREFORE, for and in consideration of the mutual covenants, terms and
conditions hereinafter stated, the Parties agree as follows:
SECTION 1. SALE AND PURCHASE OF SURPLUS EFFLUENT.
1.1 Except as provided in other Sections of this Agreement, Tolleson
shall sell and deliver to The Companies, and The Companies shall purchase and
accept, all of the Surplus Effluent produced through the operation of the Plant
during the term of this Agreement. In addition, Tolleson may sell and deliver to
The Companies, and The Companies may purchase and accept any or all of the
Reserved Effluent not used, sold or otherwise disposed of by Tolleson. Nothing
in this Agreement shall impair the right of Tolleson to use, sell or otherwise
dispose of any and all of the Reserved Effluent and any Surplus Effluent that
The Companies do not purchase and receive under this Agreement pursuant to
Sections 2.1, 3.3 or 9.2. The Companies' right to receive Surplus Effluent shall
have priority over Tolleson's use, sale or other disposition of any Surplus
Effluent except under conditions specified in Section 9.2.
1.2 This Agreement contains no requirement that Tolleson produce any
certain amount of Effluent at the Plant but merely that it deliver to The
Companies whatever amount of Surplus Effluent is produced, except as provided
elsewhere in this Agreement. However, the Parties understand and acknowledge
that since at least 1994 Tolleson has produced between 12,000 and 15,000
acre-feet of Effluent per year. Tolleson agrees that it will undertake all
reasonable, good faith efforts to maintain all existing contracts, operations
and facilities necessary to sustain discharges of Surplus Effluent meeting the
water quality standards of Section 3 at or above the level of 13,000 acre-feet
per year. Tolleson further agrees that it will not construct additional
wastewater treatment facilities at locations other than the current location of
the Plant if such facilities would adversely affect Tolleson's ability to
sustain discharges of Surplus Effluent meeting the water quality standards of
Section 3 at or above the level of 13,000 acre-feet per year. Tolleson further
agrees that it will notify The Companies, as soon as reasonably possible, of any
development or change in circumstances that may adversely affect
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Tolleson's ability to continue producing at least 13,000 acre-feet of Surplus
Effluent per year that meets the water quality standards of Section 3.
SECTION 2. PRICE AND PAYMENT.
2.1 The Companies shall pay to Tolleson, for all Effluent that is
sold and delivered hereunder for use at or for the benefit of Palo Verde, a
price of Thirty Dollars ($30.00) per acre-foot for calendar years 2000 through
2002. Beginning with calendar year 2003 and throughout the remaining term of
this Agreement, the price to be paid in all subsequent years during the term of
this Agreement for all Effluent that is sold and delivered hereunder for use at
or for the benefit of Palo Verde shall be determined by multiplying the previous
year's price by the average annual percentage increase in the Consumer Price
Index ("CPI") during the immediately preceding five years. Exhibit A to this
Agreement, which is specifically incorporated herein by this reference, states
the formula, and provides an example, for making the CPI-based price adjustments
required by this Section. If, in the sole judgement of The Companies, the price
to be paid to Tolleson for Effluent to be delivered and sold for use at or for
the benefit of Palo Verde, after application of the CPI-based price adjustment
mechanism set forth in this Section, becomes too high in comparison to the price
of treated wastewater effluent available to Palo Verde from sources other than
Tolleson, The Companies may elect to terminate their obligation to accept and
pay for Surplus Effluent for use at or for the benefit of Palo Verde. If The
Companies elect to terminate their obligation to accept and pay for Surplus
Effluent for use at or for the benefit of Palo Verde pursuant to this Section,
they shall provide Tolleson one year's advance written notice of such election
to terminate. Provided, however, that upon receipt of written notice of The
Companies' election to terminate pursuant to this Section, Tolleson may elect to
sell Surplus Effluent to The Companies for use at or for the benefit of Palo
Verde at the same price then being paid by The Companies for treated wastewater
effluent used at or for the benefit of Palo Verde and sold by sources other than
Tolleson (the "New Price"). Tolleson shall provide written notice to The
Companies of its election to begin selling Surplus Effluent at the
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New Price within 180 days after Tolleson receives notice of The Companies'
election to terminate pursuant to this Section. If Tolleson provides such
written notice within the required 180 day period, The Companies shall continue
to accept and pay for Surplus Effluent used at or for the benefit of Palo Verde
at the New Price, consistent with all other terms of this Agreement. If Tolleson
does not provide such written notice within the said 180 days, any obligation of
Tolleson to supply Surplus Effluent for use at Palo Verde shall be permanently
terminated.
2.2 If Effluent is used at or for the benefit of the proposed
electric generating facility commonly referred to as "Redhawk" or any electric
generating facilities other than Palo Verde that are owned (in whole or in part)
or operated by The Companies (collectively referred to as "Other Electric
Generating Facilities") pursuant to Section 4.1, the price to be paid for all
such Effluent shall be Seventy Five Dollars ($75.00) per acre-foot during
calendar years 2000 through 2002. Beginning with calendar year 2003 and
throughout the remaining term of this Agreement, the price to be paid by The
Companies for Effluent delivered into the Pipeline and used at or for the
benefit of Other Electric Generating Facilities shall be determined by
multiplying the previous year's price by the average annual percentage increase
in the CPI during the immediately preceding five years. The formula to be used
for making this adjustment, and an example of its application, are contained in
Exhibit A. The Companies shall measure, keep records of, and report to Tolleson
on a monthly basis the quantity, if any, of Effluent used at or for the benefit
of such Other Electric Generating Facilities.
2.3 The Companies shall pay Tolleson monthly an amount equal to the
price determined pursuant to Section 2.1 and/or 2.2 hereof, as applicable,
multiplied by the number of acre-feet of Effluent that were delivered and
accepted for use at or for the benefit of the respective facilities (Palo Verde
or Other Electric Generating Facilities) during the prior month. Such monthly
payments shall be due and payable 30 days after receipt of the invoice therefor
rendered by Tolleson.
2.4 In the event of a dispute concerning the quantity of Effluent
delivered and accepted in any month, The Companies shall pay the invoiced
amount, but may do
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so under written protest. If any protested amount shall subsequently be
determined to have been excessive, the excessive amount thereof shall be
refunded to The Companies. Any dispute or protest shall be resolved in the
manner provided by Section 12.7 hereof.
2.5 The Companies shall pay Tolleson the price determined pursuant
to Section 2.1 for each acre-foot of Surplus Effluent made available by Tolleson
for delivery under this Agreement and meeting the water quality standards of
Section 3 that is not accepted by The Companies, up to the then-operational
maximum capacity of the Interconnection Facilities, except during any
Uncontrollable Force event as defined in Section 9.1. Payments under this
Section shall be made to Tolleson monthly in an amount equal to the price
determined pursuant to Section 2.1 multiplied by the number of acre-feet of
Surplus Effluent meeting the water quality standards of Section 3 made available
by Tolleson for delivery, but not accepted by The Companies, during the prior
month. Such monthly payments shall be due and payable 30 days after receipt of
the invoice therefor rendered by Tolleson. The Companies shall have no
obligation to pay for Reserved Effluent not actually accepted into the Effluent
Pipeline for use at or for the benefit of Palo Verde or Other Electric
Generating Facilities. If The Companies elect to terminate their obligation to
accept and pay for Surplus Effluent for use at or for the benefit of Palo Verde
pursuant to Section 2.1, the obligation to pay for Surplus Effluent, whether
taken or not, under this Section shall remain in effect for any Other Electric
Generating Facility for which one or more Notices of Commitment have been
submitted to Tolleson pursuant to Section 8.2. Provided, however, that if The
Companies terminate their obligation as to Palo Verde, the number of acre-feet
thereafter subject to the payment obligation imposed by this Section shall be
the number of acre-feet specified in the Notice(s) of Commitment previously
submitted to Tolleson. Provided further that, if The Companies terminate their
obligation as to Palo Verde, the Parties shall meet to determine, based on
actual operating history and projected future needs, the number of acre-feet of
Surplus Effluent that will remain committed to such Other Electric Generating
Facilities. Such remaining committed Surplus Effluent shall be used only at or
for the benefit of such Other Electric Generating Facilities.
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2.6 The methods identified in Paragraphs 2.1 and 2.2 above for
determining the price to be paid by The Companies pursuant to this Agreement for
each acre-foot of Effluent delivered into the Effluent Pipeline by Tolleson and
accepted by The Companies for use at Palo Verde or Other Electric Generating
Facilities, and the resulting prices established by those methods, shall remain
in effect throughout the term of this Agreement. Provided, however, that: (i) if
The Companies enter into a new contract, or amend an existing contract, for
supplying treated wastewater effluent to Palo Verde or Other Electric Generating
Facilities physically capable of being economically served by Tolleson Effluent
delivered into the Effluent Pipeline; and (ii) that new contract or amendment of
that existing contract provides for a higher price, or a different method of
determining the price, of treated wastewater effluent supplied to Palo Verde or
Other Electric Generating Facilities physically capable of being economically
served by Tolleson Effluent delivered into the Effluent Pipeline; then (iii)
Sections 2.1 and/or 2.2 of this Agreement, as applicable, shall be revised to
incorporate that higher price or new method of determining the price. The
application of any different method of determining the price of effluent under
this Section 2.6 shall not result in a lower price being paid to Tolleson than
if such different method were not used. The provisions of this Section shall not
apply to any contract entered into by The Companies for a backup supply of
treated wastewater effluent that allows The Companies to purchase such effluent
when Tolleson is unable to deliver into the Pipeline at least 13,000 acre-feet
per year of Surplus Effluent meeting the water quality standards of Section 3.
The price benefits afforded to Tolleson by this Section shall apply if The
Companies purchase another source of treated wastewater effluent, other than a
backup supply pursuant to the immediately preceding sentence, for use at or for
the benefit of any Other Electric Generating Facility physically capable of
being economically served by Tolleson Effluent delivered into the Effluent
Pipeline, whether or not the other source of treated wastewater effluent is
delivered into the Effluent Pipeline. For purposes of this Agreement, the phrase
"physically capable of being economically served by Tolleson Effluent delivered
into the Effluent Pipeline" shall apply only to any Other Electric Generating
Facilities located within: (i) the area described in the legal
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description and accompanying map attached to this Agreement as Exhibit B, which
exhibit is specifically incorporated herein by this reference; or (ii) within
one mile north or two miles south of any portion of the Effluent Pipeline. The
Companies agree, as a covenant of good faith, to comply with the requirements of
this Section and Section 4.2 by refraining from constructing or acquiring Other
Electric Generating Facilities in locations immediately outside the area defined
in the preceding sentence as subject to the "physically capable of being
economically served by Tolleson Effluent delivered into the Effluent Pipeline"
standard if such construction or acquisition is intended to avoid the
requirements of this Section or Section 4.2.
2.7 In addition to any amounts The Companies are required to pay
under paragraphs 2.3 and 2.5 of this Agreement, The Companies shall also pay
Tolleson monthly, from the date of execution of this Agreement until June 30,
2002, an amount equal to the difference between: (1) the sum of the amounts paid
under paragraphs 2.3 and 2.5 of this Agreement; and (2) the amount that The
Companies would have been required to pay Tolleson for an equal quantity of
Effluent under the Previous Agreement among APS, SRP and Tolleson dated June 12,
1981.
2.8 If at any time The Companies fail to pay to Tolleson the amounts
they are obligated to pay under Sections 2.3 and 2.5 within the 30 days provided
for such payment, Tolleson may, after providing 10 days advance written notice,
cease delivering Surplus Effluent into the Effluent Pipeline until all past due
amounts are paid in full.
SECTION 3. QUALITY OF THE SURPLUS EFFLUENT.
3.1 All Effluent sold and delivered hereunder shall have received
wastewater treatment, and shall meet the standards required by law and specified
in Permit No. AZ0020338 issued to Tolleson by the Environmental Protection
Agency (hereinafter "EPA"), including any amendments or replacements thereof as
may be made from time to time and/or in any other required permit or
authorization as may hereafter be issued by the Arizona Department of
Environmental Quality (hereinafter "ADEQ"), or any other federal or state agency
having
- 8 -
jurisdiction respecting the treatment and/or discharge of wastewater effluent,
except that disinfection (by chlorination or otherwise) of such Effluent sold
and delivered hereunder shall be required and performed only upon the terms and
conditions hereinafter provided.
3.2 In addition to meeting the permit-based water quality
requirements specified in Section 3.1, Tolleson shall use its best efforts to
operate and maintain its existing Plant in a manner that will treat Effluent
such that the Effluent does not exceed: (i) 30 milligrams per liter (mg/l) of
Biological Oxygen Demand ("BOD") for any period of time; (ii) 25 mg/l BOD for
any period longer than two consecutive days; (iii) 20 mg/l BOD for any period
longer than one week; or (iv) 15 mg/l BOD for any period longer than one month.
Nothing contained in this Section 3.2 shall require Tolleson to upgrade or
improve the Plant or otherwise compel Tolleson to incur any additional expense
in the operation of the Plant.
3.3 The Companies shall not be required to purchase, accept or pay
for any Effluent that does not meet the water quality standards set forth in
Sections 3.1 and 3.2 hereof. The Companies' sole remedy for breach of Tolleson's
obligation to meet the water quality standards of Sections 3.1 and 3.2 shall be
the right to refuse to purchase, accept or pay for any Effluent that does not
meet those standards.
3.4 Tolleson, on the written request of The Companies, shall
disinfect the surplus Effluent to be delivered to The Companies, provided that
The Companies shall reimburse Tolleson for its direct costs associated with such
disinfection.
3.5 Tolleson shall promptly notify APS by telephone, and in writing
as soon as reasonable thereafter, of any changes in wastewater treatment
processes or operational anomalies at the Plant that have the potential to
significantly change the composition of the Effluent delivered to The Companies,
including, but not limited to, changes that would affect compliance with the
water quality standards addressed in this Section 3. The Companies acknowledge
that the Plant has exceeded, and will exceed the foregoing BOD levels, and
Tolleson acknowledges that The Companies will not be obligated to purchase any
Effluent produced by Tolleson that exceeds the foregoing BOD levels.
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SECTION 4. USE OF EFFLUENT.
4.1 The primary use of the Effluent purchased and accepted by The
Companies under this Agreement is for cooling required for generation of
electric power at Palo Verde. The Companies may also use, transfer or execute a
water exchange for any or all of the Effluent made available under this
Agreement for use at or for the benefit of any Other Electric Generating
Facilities that The Companies may now or in the future develop, own (in whole or
in part) or operate. All such Effluent used at or for the benefit of Other
Electric Generating Facilities shall be subject to the price established in
Section 2.2.
4.2 If at any time The Companies use any treated wastewater effluent
at or for the benefit of Other Electric Generating Facilities physically capable
of being economically served by Tolleson Effluent delivered into the Effluent
Pipeline, Tolleson shall have the first right to sell to The Companies, and The
Companies shall have the obligation to purchase from Tolleson, all such treated
wastewater effluent, up to the then-operational maximum capacity of the
Interconnection Facilities, provided that:
(a) the treated wastewater effluent requirements of Palo Verde are being
fully satisfied, whether by Tolleson Effluent or by effluent from
other sources;
(b) the Participants in Palo Verde consent to the use of the Effluent
Pipeline, Water Reclamation Facility and any other property or
facilities owned by such Participants for transportation and
treatment of Effluent for use at or for Other Electric Generating
Facilities (provided, however, that if such consent is not obtained
from the Palo Verde Participants by December 31, 2001, Tolleson may
elect to terminate its obligation under this Agreement to deliver
and sell Surplus Effluent to the Companies); by its execution of
this Agreement, APS confirms its consent, as a Palo Verde
Participant, to the use of the Effluent Pipeline, Water Reclamation
Facility and any other Palo Verde property or facilities required
for transportation and treatment of Effluent for use at or for Other
Electric Generating Facilities; and
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(c) Tolleson produces the lesser of 12,000 acre feet per year of
Effluent or sufficient Surplus Effluent meeting the water quality
standards of Section 3 to satisfy the quantity specified in any
Notices of Commitment delivered to Tolleson by The Companies
pursuant to Section 8.2.
To the extent that all of the preceding requirements are satisfied, Tolleson
shall have the first right to sell to The Companies, and The Companies shall be
obligated to purchase from Tolleson, treated wastewater effluent for use at or
for the benefit of Other Electric Generating Facilities physically capable of
being economically served by Tolleson Effluent delivered into the Effluent
Pipeline, up to the lesser of: (i) the maximum quantity of effluent used at or
for the benefit of such Other Electric Generating Facilities physically capable
of being economically served by Tolleson Effluent delivered into the Effluent
Pipeline; or (ii) the then-operational maximum capacity of the Interconnection
Facilities. For the purpose of determining the times when The Companies must
take Surplus Effluent first at Other Electric Generating Facilities physically
capable of being economically served by Tolleson Effluent delivered into the
Effluent Pipeline, The Companies shall allocate all treated wastewater effluent
that The Companies acquire, other than Surplus Effluent, first for use at Palo
Verde. Only after purchasing all available Surplus Effluent meeting the water
quality standards of Section 3 may The Companies purchase treated wastewater
effluent from another source for use at or for the benefit of such Other
Electric Generating Facilities physically capable of being economically served
by Tolleson Effluent delivered into the Effluent Pipeline, or use groundwater
for condenser cooling in lieu of such Surplus Effluent, except to the extent
that groundwater is necessary to make up any shortfall in cooling water
requirements resulting from physical constraints in the Effluent Pipeline, Water
Reclamation Facility or other Palo Verde facilities. Nothing in this Agreement
shall prohibit or limit the right of The Companies to enter into additional
contracts with other parties for the sale and purchase of wastewater effluent to
be used at Palo Verde or Other Electric Generating Facilities, provided that
such contracts do not limit Tolleson's rights under this Agreement. To the
extent that any amount of Surplus Effluent is used at or for the benefit of
Other Electric
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Generating Facilities, Tolleson shall be relieved of any obligation it may have
under this Agreement to supply that quantity of Surplus Effluent for use at or
for the benefit of Palo Verde.
SECTION 5. DELIVERY POINT AND METERING.
5.1 Effluent sold and purchased hereunder shall be delivered by
Tolleson and accepted by The Companies at the valve that controls the flow of
Effluent into the Effluent Pipeline (hereinafter the "Delivery Point") at the
interconnection between the two outfall wastewater lines from the Plant to the
Salt River (hereinafter the "Outfall Lines") and the Effluent Pipeline. Such
Effluent delivered by Tolleson and accepted by The Companies at the Delivery
Point shall be deemed "delivered into the Effluent Pipeline" as that phrase is
used in this Agreement.
5.2 Within one year after the execution of this contract, The
Companies shall design and construct a modification to the existing
Interconnection Facilities between the Outfall Lines and the Effluent Pipeline
to allow delivery by Tolleson into the Effluent Pipeline of at least 21 M.G.D.
of Surplus Effluent. All costs associated with the design, construction,
operation and maintenance of this modification shall be borne by The Companies,
and title to the modified Interconnection Facilities shall be vested consistent
with the provisions of Exhibit C, which identifies specific components of the
Interconnection Facilities and the Party or Parties in which title to each such
component is vested. The Companies shall be responsible for, and the Parties
shall cooperate as necessary, to ensure the timely design, construction,
operation and maintenance of the existing and modified Interconnection
Facilities required by this Section and to ensure that such activities do not
interfere with the operation of the Plant or the Effluent Pipeline. If The
Companies cease using the Interconnection Facilities for acceptance of Effluent
from Tolleson, The Companies shall either continue to operate and maintain the
Interconnection Facilities to ensure that operation of the Plant will not be
adversely affected, or shall offer to transfer to Tolleson title over any
portion of the Interconnection Facilities that is necessary to the operation of
the Plant, provided, however, that if Tolleson refuses to accept such
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title, The Companies shall have no obligation to continue to operate or maintain
the Interconnection Facilities.
5.3 The quantity of Effluent delivered by Tolleson and accepted by
The Companies at the Delivery Point shall be measured by metering devices
installed by The Companies as close to the Delivery Point as practicable. The
quantity of Effluent supplied by Tolleson and accepted by The Companies for use
at or for the benefit of Other Electrical Generating Facilities shall be
measured by a metering device installed by The Companies at a point which will
measure the amount of Effluent that is used at or for the benefit of Other
Electrical Generating Facilities. Such metering devices shall be of a design and
type acceptable to Tolleson and The Companies. The costs of such devices and
their installation, operation, maintenance, replacements, repair, betterments
and calibration shall be borne by The Companies, except as otherwise provided in
Section 7.2 hereof, and the title thereto shall be vested in The Companies.
Provisions shall be made to permit flow meter information to be continuously
displayed in a panel or panels at the Plant utilizing facilities and equipment
as Tolleson may, at its own expense provide, title to which shall be vested in
Tolleson.
5.4 In the event that the flow metering device measuring flows of
Tolleson Effluent into the Effluent Pipeline shall fail or be inoperative,
Tolleson shall have the right to use other in-Plant flow metering equipment to
determine the volume of Effluent delivered for billing purposes.
5.5 If Tolleson concludes that increases in capacity of the Plant
beyond 21 M.G.D. are necessary or desirable, the Parties shall meet, upon
request by Tolleson, to discuss potential additional modifications of the
Interconnection Facilities beyond those required by Section 5.2 above. Any terms
for the design and construction of, and payment for, additional modifications,
and any terms for the purchase and sale of any Effluent made available by an
increase in the capacity of the Interconnection Facilities beyond 21 M.G.D.,
shall be established by mutual agreement of the Parties at that time.
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SECTION 6. PERMITS AND AUTHORIZATIONS.
6.1 Tolleson shall be solely responsible for securing and
maintaining in force and effect any and all permits and authorizations required
by law for the delivery of Effluent to The Companies at the Delivery Point and
for the discharge into the Salt River or other disposal of Effluent which is not
delivered to and accepted by The Companies.
6.2 The Companies shall be solely responsible for securing and
maintaining in force and effect any and all permits and authorizations required
by law for the transportation of the Effluent from the Delivery Point to Palo
Verde or to any other points and for any uses of the Effluent that are allowed
by Section 4 of this Agreement. Such responsibility of The Companies may be
delegated to others, but as between the Parties the responsibility rests solely
upon The Companies.
6.3 Each of the Parties shall cooperate with the other Parties in
securing and maintaining in force and effect the permits and authorizations
required in accordance with this Agreement or by local, state or federal laws
and regulations and shall render such assistance to the other Parties as it or
they may reasonably request. Each Party shall furnish to the other Parties a
copy of each permit and authorization obtained pursuant to Sections 6.1 and 6.2
hereof.
6.4 Should Tolleson be required by law to treat the Effluent in a
manner that results in increased expenses to Tolleson because it is delivering
the Effluent to The Companies under this Agreement, which expense it would not
have incurred if the Effluent was disposed by Tolleson into the Salt River, then
The Companies shall have the right to require Tolleson to so treat the Effluent
and shall reimburse Tolleson for all reasonable expenses (including without
limitation any costs of plant additions or improvements) incurred by Tolleson in
providing such treatment. If The Companies, in their sole discretion, decide not
to exercise their right under this Section to require additional treatment, they
may take other action, including terminating this Agreement, to ensure
continuing compliance with applicable law. However, prior to terminating this
Agreement as allowed in the previous sentence, The
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Companies shall meet with Tolleson to discuss any alternatives to termination
that may be available to ensure compliance with applicable law.
SECTION 7. IMPLEMENTATION OF THE AGREEMENT.
7.1 Within 30 days after the effective date of this Agreement,
Tolleson shall designate a representative and The Companies shall jointly
designate a representative for the purposes of: (i) implementing this Agreement
in accordance with its terms, (ii) coordinating the design and construction by
The Companies of the modifications to the Interconnection Facilities required by
Section 5.2 above, (iii) ensuring the continued satisfactory operation and
maintenance of the Interconnection Facilities, and (iv) discussing any issues of
interest or concern to either or both Parties relating to this Agreement. Either
Tolleson or The Companies may from time to time designate a substitute or
successor authorized representative by giving written notice of such designation
to the other party.
7.2 The metering devices used to measure the quantity of Effluent
delivered and accepted hereunder, and the quantity of Effluent used at or for
the benefit of Other Electrical Generating Facilities, shall be calibrated in a
manner acceptable to the authorized representatives prior to the date when such
devices are placed in service and thereafter not less frequently than once every
six months. The costs of such scheduled calibrations shall be borne by The
Companies. The authorized representative for Tolleson may request in writing
such additional calibrations as he in his sole discretion deems appropriate;
provided that the cost incurred by The Companies for each such additional
calibration shall be reimbursed by Tolleson unless any such additional
calibration reveals that the inaccuracy of the metering devices is greater than
(plus/minus) 2% in which case the cost of such additional calibration shall be
borne by The Companies. Copies of all records showing calibration of meters
shall be delivered to Tolleson after each calibration, and copies of all records
of measurements of Effluent supplied to or for the benefit of Palo Verde or
Other Electrical Generating Facilities shall be delivered to Tolleson monthly,
with cover letters acknowledging the records to be true copies.
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SECTION 8. DELIVERY AND ACCEPTANCE OF EFFLUENT.
8.1 The obligation of Tolleson to sell and deliver Surplus Effluent
under this Agreement shall commence on the date this Agreement is executed and
shall continue throughout the term of this Agreement, except as otherwise
provided in this Agreement.
8.2 At any time after the effective date of this Agreement, provided
that the treated wastewater effluent requirements of Palo Verde are being fully
satisfied, The Companies may deliver to Tolleson one or more written notices of
The Companies' commitment ("Notice of Commitment") to purchase up to 13,000
acre-feet of Surplus Effluent for use at or for the benefit of Other Electric
Generating Facilities. The Companies may specify any quantity of Surplus
Effluent in any individual Notice of Commitment, up to the then-operational
maximum capacity of the Interconnection Facilities. The price to be paid for any
Effluent specified in a Notice of Commitment that is actually taken into the
Effluent Pipeline and used at or for the benefit of Other Electric Generating
Facilities shall be as specified in Section 2.2. The price to be paid for any
Effluent specified in a Notice of Commitment that is not actually taken into the
Effluent Pipeline and used at or for the benefit of Other Electric Generating
Facilities shall be as specified in Section 2.5.
8.3 If The Companies have not delivered one or more Notices of
Commitment to purchase at least the following Minimum Quantities of Surplus
Effluent for use at or for the benefit of Other Electric Generating Facilities
on or before the Commitment Dates identified in the following table, Tolleson
may elect to terminate its continuing obligation to sell and deliver any portion
of the corresponding Minimum Quantity of Surplus Effluent for use at or for the
benefit of Palo Verde or Other Electric Generating Facilities that is not yet
subject to a Notice of Commitment:
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COMMITMENT DATE MINIMUM QUANTITY
- ----------------- --------------------------------------
December 31, 2002 At least 3,000 acre-feet
December 31, 2003 At least an additional 3,000 acre-feet
December 31, 2005 At least an additional 3,000 acre-feet
December 31, 2007 At least an additional 4,000 acre-feet
For a period of one year following each specified Commitment Date, Tolleson may
terminate its obligation to sell and deliver any portion of the corresponding
Minimum Quantity not yet subject to a Notice of Commitment by delivering to The
Companies one or more written Notices of Intent to Terminate. Each Notice of
Intent to Terminate shall specify the quantity of Surplus Effluent for which
Tolleson has elected to terminate its obligation to sell and deliver to the
Companies for use at or for the benefit of Palo Verde or Other Electric
Generating Facilities. Upon receipt of a Notice of Intent to Terminate, The
Companies shall have ninety days thereafter within which to submit a Notice of
Commitment to Tolleson for the quantity of Surplus Effluent for use at or for
the benefit of Other Electric Generating Facilities specified in the Notice of
Intent to Terminate. If The Companies submit a Notice of Commitment within this
ninety-day period, Tolleson's continuing obligation to sell and deliver Surplus
Effluent to The Companies for use at or for the benefit of Palo Verde or Other
Electric Generating Facilities shall not be terminated. If The Companies do not
submit a Notice of Commitment within this ninety day period, Tolleson's
obligation to sell and deliver the specified quantity of Surplus Effluent for
use at or for the benefit of Palo Verde or Other Electric Generating Facilities
shall be terminated, the specified quantity of Surplus Effluent shall no longer
be eligible for price adjustments pursuant to Sections 2.1, 2.2 or 2.6, and The
Companies shall no longer be obligated to pay, pursuant to Section 2.5, for any
of the specified Surplus Effluent not actually taken into the Pipeline.
Notwithstanding the previous sentence, The Companies may continue to accept into
the Pipeline any or all of the Surplus Effluent specified in the Notice of
Intent to Terminate provided Tolleson desires to continue delivering such
Surplus Effluent, in which event, The Companies shall pay
- 17 -
Tolleson the price for such Surplus Effluent specified in Section 2.1 or Section
2.2, as appropriate.
8.4 Nothing in Sections 8.2 and 8.3 is intended to limit Tolleson's
first right to deliver into the Effluent Pipeline and sell to The Companies
treated wastewater effluent for use at or for the benefit of Other Electric
Generating Facilities as provided in Section 4.2 or to limit the obligation of
The Companies to purchase and accept all of the Surplus Effluent produced
through the operation of the Plant as provided in Section 1.1. To the extent
that The Companies purchase treated wastewater effluent delivered into the
Effluent Pipeline for use at or for the benefit of Other Electric Generating
Facilities, Tolleson shall have the first right to sell such treated wastewater
effluent consistent with the terms of Section 4.2, regardless of whether The
Companies have submitted one or more Notices of Commitment for that amount of
Surplus Effluent.
8.5 The Companies shall have the right to refuse delivery of
Effluent whenever, in their sole and reasonable discretion, use of Effluent
would cause significant operational problems in the Effluent Pipeline, Water
Reclamation Facility or other Palo Verde facilities. However, other than during
an Uncontrollable Force event, as defined in Section 9.1, The Companies shall
pay the price established in Section 2.5 for any Surplus Effluent refused
pursuant to this Section 8.5 that is actually available for delivery to the
Delivery Point and meets the water quality standards of Section 3 of this
Agreement.
SECTION 9. UNCONTROLLABLE FORCE AND OUTAGES.
9.1 Neither Tolleson nor The Companies shall be considered to be in
default in the performance of any of the obligations hereunder if failure of
performance shall be due to an Uncontrollable Force. The term "Uncontrollable
Force" shall mean any cause beyond the control of the Party affected, including,
but not limited to, failure of facilities, flood, earthquake, tornado, storm,
fire, lightning, epidemic, war, riot, civil disturbance or disobedience, labor
dispute, and action or nonaction by or failure to obtain or revocation of the
necessary
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authorizations or approvals from any governmental agency or authority or the
electorate, labor or material shortage, sabotage and restraint by Court order or
public authority, which by exercise of due diligence and foresight such Party
could not reasonably have been expected to avoid and which by exercise of due
diligence it shall be unable to overcome. Nothing contained herein shall be
construed so as to require any Party to settle any strike or labor dispute in
which it may be involved. Any Party rendered unable to fulfill any obligation by
reason of any Uncontrollable Force shall exercise due diligence to remove such
inability with all reasonable dispatch.
9.2 Whenever an Uncontrollable Force as defined in Section 9.1
prevents The Companies from being able to accept or use the Surplus Effluent,
then Tolleson may enter into temporary contracts with any other parties for sale
of the Surplus Effluent. If Tolleson has entered into such a temporary contract,
Tolleson shall be allowed up to 30 days to begin delivery of the Surplus
Effluent to The Companies after receiving written notice from The Companies that
the disability has been removed.
9.3 Notwithstanding the provisions of Sections 9.1 and 9.2, if,
after the exercise of due diligence, the Party rendered unable to fulfill an
obligation remains unable to remove such inability for one full year, the other
Party may elect to terminate this Agreement anytime thereafter by tendering 90
days written notice of its intention to terminate. However, if The Companies
receive a written termination notice from Tolleson pursuant to the preceding
sentence, The Companies may elect, at any time prior to the expiration of the 90
days, to begin paying the price established in Section 2.5 for any Surplus
Effluent available for delivery and meeting the water quality standards of
Section 3 of this Agreement, up to the then-operational maximum capacity of the
Interconnection Facilities. As long as The Companies continue the payments
required under this paragraph, this Agreement shall remain in full force and
effect.
9.4 If an Uncontrollable Force or malfunction of any component or
system of the Effluent Pipeline or the Water Reclamation Facility at Palo Verde,
restricts the capability of either of such facilities to transport or treat
wastewater effluent from all sources for a period of one full year or less, then
The Companies may refuse to accept delivery of the Surplus
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Effluent and shall not be required to pay therefor. It is understood, however,
that the Surplus Effluent from Tolleson's Plant shall be the last source of
effluent that The Companies cut back on during such Uncontrollable Force or
malfunction and that The Companies shall not refuse to accept and pay for
Tolleson's Surplus Effluent to the extent that they are accepting and paying for
effluent from any other source.
9.5 If The Companies initiate a Scheduled Outage of Palo Verde, the
Effluent Pipeline or the Water Reclamation Facility, The Companies shall pay the
price established in Section 2.5 for any Surplus Effluent available for delivery
and meeting the water quality standards of Section 3 of this Agreement, up to
the then-operational maximum capacity of the Interconnection Facilities. As long
as The Companies continue the payments required under this Section, this
Agreement shall remain in full force and effect. If Tolleson initiates a
Scheduled Outage of the Plant, any obligation that Tolleson may have to supply
Effluent, and the obligation of The Companies to pay the price established under
Section 2.5, shall be suspended during such Scheduled Outage. "Scheduled Outage"
shall mean any temporary cessation of operations that is planned and controlled
by the Party initiating the Scheduled Outage.
9.6 Except in emergencies, The Companies shall give 30 days written
notice in advance of any discontinuation of acceptance of Surplus Effluent under
the provisions of this Section 9. Except in emergencies, Tolleson shall give 30
days written notice in advance of any Scheduled Outage that will limit
Tolleson's ability to supply at least 13,000 acre-feet per year of Surplus
Effluent to The Companies. Tolleson shall use its best efforts to minimize the
duration of any Scheduled Outage that will limit Tolleson's ability to supply at
least 13,000 acre-feet per year of Surplus Effluent to The Companies.
SECTION 10. LIABILITY AND INSURANCE.
10.1 Except for the negligent or intentional acts of The Companies,
their officers, directors, employees and agents, Tolleson shall, to the extent
permitted by law, indemnify and hold The Companies and their officers,
directors, employees and agents harmless
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for any physical damage to property, or death of, or personal injury to, any
person, and from any cost, expense, claim or loss from such damage, injury or
death arising out of the ownership, use, occupancy, operation, maintenance,
repair, replacement and reconstruction of the Plant and the Outfall Lines and
that portion of the Interconnection Facilities owned by Tolleson as specified in
Exhibit B.
10.2 Except for the negligent or intentional acts of Tolleson, its
officers, managers, employees or agents, The Companies shall indemnify and hold
Tolleson and its officers, managers, employees and agents harmless for any
physical damage to property, or death of, or personal injury to, any person, and
from any cost, expense, claim or loss from such damage, injury or death arising
out of the construction, ownership, use, occupancy, operation, maintenance,
repair, replacement and reconstruction of the delivery facilities at the
Delivery Point, that portion of the Interconnection Facilities owned by the
Companies as specified in Exhibit C, the Effluent Pipeline, the facilities at
Palo Verde, or the transportation, use, resale or disposal of Surplus Effluent
delivered and accepted hereunder.
10.3 Tolleson shall procure and maintain insurance against physical
damage to property, or death of, or personal injury to, any persons, of the kind
and with coverages normally carried by entities operating properties similar to
the Plant and the Outfall Lines. Upon request, Tolleson shall furnish to The
Companies certificates of insurance demonstrating compliance with this Section
10.3.
10.4 The Companies shall procure and maintain insurance against
physical damage to property, or death of, or personal injury to, any persons, of
the kind and with coverages normally carried by entities operating properties
similar to the Effluent Pipeline and Palo Verde. Upon request, The Companies
shall furnish to Tolleson certificates of insurance demonstrating compliance
with this Section 10.4.
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SECTION 11. INSPECTIONS AND ACCESS TO RECORDS.
11.1 Each of the Parties shall have the right, during reasonable
hours, of access to and inspection of the facilities and operations of the other
Parties which are associated with the treatment, delivery, measurement,
transportation and use of Effluent sold and purchased hereunder.
11.2 Each of the Parties shall have the right, during reasonable
hours, of access to the records of the other Parties which are relevant for
proving compliance or noncompliance of each of the Parties with any of the terms
of this Agreement.
SECTION 12. GENERAL.
12.1 Effective Date and Term. This Agreement shall be effective from
and after the date of its execution by the parties and shall expire on December
31, 2050, unless partially or fully terminated before that date under the
provisions of Sections 2.1, 6.4, 8.3, 9.3 or 12.3.1.
12.2 Assignment of Agreement or Transfer of Facilities.
12.2.1 Neither Tolleson nor The Companies shall transfer or assign
any of their respective rights, titles and interests in and to this Agreement
without the prior written consent of the other Parties, except that: (i) The
Companies and any of their affiliates, successors or assigns shall each have the
right to transfer and assign all or any portion of its right, title and interest
in this Agreement to the other, to any related corporate entity, or to any other
entity now or hereafter participating in Palo Verde or any Other Electric
Generating Facilities which utilize the Surplus Effluent sold hereunder,
provided that such entity expressly assumes the obligations of the respective
Company, as applicable, under this Agreement; and (ii) either Company, and any
of its respective affiliates, successors or assigns shall have the right to
transfer its right, title and interest in this Agreement to any mortgagee,
trustee or secured party under present or future deeds of trust, mortgages,
indentures or security agreements. A transfer or assignment by any Party shall
not release that party from its obligations as the primary obligor under the
Agreement
- 22 -
without the written consent of the other Parties. In the event of any transfer
or assignment of this Agreement by either Tolleson or The Companies, the terms,
covenants and conditions of this Agreement shall be binding upon and inure to
the benefit of and shall apply to the respective transferees, successors and
assigns of Tolleson and The Companies.
12.2.2 The Companies shall not convey Palo Verde or any interest
therein without the grantee of such conveyance expressly agreeing to be bound by
all terms of this Agreement, unless The Company that conveys its interest in
Palo Verde expressly agrees to continue to be bound by all terms of this
Agreement. Tolleson shall not convey the Plant or any interest therein, without
the grantee of such conveyance expressly agreeing to be bound by all terms of
this Agreement.
12.3 Compliance with Laws.
12.3.1 The Companies shall use the Effluent delivered hereunder in
accordance with the applicable laws of the United States of America, the
applicable laws of the State of Arizona and the rules and regulations of
federal, state and local agencies; provided, however, that in the event any such
laws or regulations shall be amended in the future so as to make it impossible
or uneconomical to use the Effluent for the purposes specified in this
Agreement, The Companies shall, at their option, have the right to cancel and
terminate this Agreement upon giving 90 days notice in writing to Tolleson. In
the event Tolleson is prohibited by any state or federal laws or regulations
from selling Effluent for the uses contemplated herein, Tolleson shall have the
right to cancel and terminate this Agreement upon giving 90 days notice in
writing to The Companies. Until the notice period runs and the termination
becomes effective, The Companies shall continue to pay for the Surplus Effluent
pursuant to Section 2.5, except as otherwise specified in this Agreement.
12.3.2 If any proceeding in law or equity is instituted challenging
the authority and power of Tolleson and/or The Companies to make, execute and
deliver this Agreement and/or to perform its terms, covenants and conditions, or
relating to the rights, title and interest of Tolleson or The Companies in and
to the Effluent, then Tolleson and The
- 23 -
Companies shall jointly and cooperatively defend the validity of this Agreement
and the sale, delivery and uses of Effluent contemplated herein.
12.3.3 The Parties acknowledge that this Agreement is subject to the
provisions of Arizona Revised Statutes Section 38-511, and can be cancelled
within three years after its execution by Tolleson if any person significantly
involved in initiating, negotiating, securing, drafting or creating this
Agreement on behalf of Tolleson is, while this Agreement is in effect during
that three year period, an employee or agent of or consultant to any other Party
to this Agreement.
12.4 Notices. All notices, demands, consents or other writings given
or made pursuant to this Agreement shall be in writing and, unless otherwise
specified herein, shall be deemed to have been duly given when made and
deposited in the United States mail by registered or certified mail with postage
prepaid and addressed as follows:
To Tolleson: City Manager
9555 West Van Buren
Tolleson, Arizona 85353
To APS: Arizona Public Service Company
Palo Verde Nuclear Generating Station
WRF Manager
Mail Station 6215
P. O. Box 52034
Phoenix, Arizona 85072-2034
To SRP: Salt River Project Agricultural
Improvement and Power District
c/o Secretary
P. O. Box 52025
Phoenix, Arizona 85072-2025
The address to which any notice, demand, consent or other writing shall be given
to any Party may be changed from time to time by written notice of such Party to
the other Parties as above provided.
- 24 -
12.5 Relative Responsibilities and Authority of The Companies.
12.5.1 APS, or any of its affiliates, successors or assigns acting
as Operating Agent of Palo Verde, is authorized to act for and on behalf of SRP
in all matters affecting the implementation and performance of this Agreement
for the use of Effluent at Palo Verde, and all actions and representations taken
or made by APS in the implementation and performance of this Agreement shall be
binding upon SRP.
12.5.2 In the event all or part of the Effluent is used other than
at Palo Verde, The Companies shall be jointly responsible for implementation and
performance of this Agreement.
12.5.3 The Companies shall be jointly and severally liable to
perform the obligations to Tolleson that are imposed by this Agreement.
12.5.4 The Companies represent that they have the authority to enter
into and carry out all obligations to Tolleson under this Agreement.
12.6 Waivers. The waiver by either Tolleson or The Companies of any
breach of any term, covenant or condition of this Agreement shall not be deemed
a waiver of such term, covenant or condition or of any subsequent breach thereof
or a subsequent breach of any other term, covenant or condition in this
Agreement.
12.7 Resolution of Conflicts and Disputes. Any conflict or disputes
in: (i) the implementation of this Agreement provided in Section 7, or (ii) the
quantity or quality of Surplus Effluent delivered as discussed in Section 2.4,
shall be resolved by arbitration in accord with the rules of the American
Arbitration Association. No other conflicts or disputes arising out of the
Agreement shall be subject to mandatory arbitration. In all cases, the Agreement
shall be interpreted according to the laws of the State of Arizona.
12.8 Sales and Use Taxes. In the event the State of Arizona, County
of Maricopa or the federal government should require that Tolleson pay a tax
resulting from the sale of Effluent to The Companies, then the price for the
Effluent shall be increased by the amount of such tax. In the event Tolleson
shall levy a tax on the sale or use of the Effluent, then the
- 25 -
amounts of any such tax paid by The Companies shall be deducted from the amounts
payable under Sections 2.1 or 2.2 hereof.
12.9 Section Headings. Section headings in this Agreement are for
convenience only and do not purport to describe accurately or completely the
contents of any section. Such headings are not to be construed as a part of this
Agreement or as in any way defining, limiting or amplifying the provisions
hereof.
12.10 Severability. If any term or provision of this Agreement is
held to be void, invalid or unenforceable by a court of competent jurisdiction,
that term or provision shall be severable from the remainder of this Agreement
and shall not affect or render invalid, void or unenforceable any other
provision or term of this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
and attested by their respective duly authorized officers as of the date first
above written.
ATTEST: CITY OF TOLLESON
/s/ Rosemarie Martinez Booth By /s/ Adolfo F. Gamez
_______________________________ ____________________________________
City Clerk Mayor
Reviewed By
/s/ Ralph Velez
_________________________________
City Manager
Approved as to Form
/s/ Scott W. Ruby
_________________________________
City Attorney
- 26 -
ATTEST: ARIZONA PUBLIC SERVICE COMPANY
/s/ Betsy A. Pregulman By /s/ James M. Levine
_______________________________ ____________________________________
(Title) (Title)
Associate Secretary Executive Vice President,
Generation
ATTEST & COUNTERSIGN. SALT RIVER PROJECT
AGRICULTURAL IMPROVEMENT
AND POWER DISTRICT
/s/ Terri A. Lonon By William P. Schrader
_______________________________ ____________________________________
(Title) (Title)
Corporate Secretary President
- 27 -
EXHIBIT A
The following formula shall be used to adjust the prices of Effluent established
in Sections 2.1 and 2.2 of the Agreement:
Formula: Pp (1 + A) = Pc
Where: Pp Previous year's price
A= The average of the previous 5 years' annual
percent change (ending in Dec) of the Consumer
Price Index for Urban Consumers (CPI-U),
Expenditure Category "All Items" (as published
by the Bureau of Labor Statistics).
Pc = New or Current year's price
This adjustment to the prices paid to the City for Effluent will be made each
calendar year, effective in January, using the most recent CPI-U data available.
This method of price adjustment will be used throughout the term of this
Agreement.
Example of price adjustment using the above formula:
Pp (1 +A) = Pc
Where: Pp = $30/AF (previous year's price)
A = 2.5%(1995 CPI)+3.3%(1996)+1.7%(1997)+1.6%(1998)+2.7%(1999)
----------------------------------------------------------
5
A = 11.8%
-----
5
A = 2.4% (most recent 5 year CPI-U average)
$30.00 (1 +.024) = Pc = $30.72 (New or Current Year Price)
Each subsequent year, Pc will become the most recent previous year's price (Pp)
for calculating the next year's price. "A", which is a "rolling five-year
average", will be comprised of the average of the most recent five-years' annual
CPI-U percentage changes.
Example for year #2:
Pp (1+A) = Pc
Where: Pp = $30.72
A = 3.3% + 1.7% + 1.6% + 2.7% + 3.0% [assumed]
--------------------------------
5
A = 2.5%
$30.72 (1.025) = Pc = $31.49 (New or Current Year Price)
EXHIBIT B
The following legal description, as depicted on the attached map, describes the
area within which Other Electric Generating Facilities are subject to the
"physically capable of being economically served by Tolleson Effluent delivered
into the Effluent Pipeline" standard established in Sections 2.6 and 4.2 of the
"Agreement for the Sale and Purchase of Wastewater Effluent" to which this
Exhibit B is attached:
BEGINNING AT THE NORTH QUARTER CORNER OF SECTION 24, TOWNSHIP 1 NORTH, RANGE 6
WEST;
THENCE WEST ALONG THE NORTH LINE OF SAID SECTION 24 AND ALONG THE NORTH LINE OF
SECTIONS 23, 22 AND 21, TOWNSHIP 1 NORTH, RANGE 6 WEST APPROXIMATELY THREE MILES
TO THE NORTH QUARTER CORNER OF SAID SECTION 21;
THENCE SOUTH ALONG THE NORTH SOUTH MID-SECTION LINE OF SAID SECTION 21
APPROXIMATELY ONE HALF MILE TO THE APPROXIMATE CENTER OF SAID SECTION 21;
THENCE WEST ALONG THE EAST WEST MID-SECTION LINE OF SAID SECTION 21 AND SECTION
20, TOWNSHIP 1 NORTH, RANGE 6 WEST, APPROXIMATELY ONE MILE TO THE APPROXIMATE
CENTER OF SAID SECTION 20;
THENCE SOUTH ALONG THE NORTH-SOUTH MID-SECTION LINE OF SECTIONS 20, 29 AND 32,
TOWNSHIP 1 NORTH, RANGE 6 WEST APPROXIMATELY TWO AND ONE HALF MILES TO THE SOUTH
QUARTER CORNER OF SAID SECTION 32, WHICH IS COINCIDENT WITH THE NORTH QUARTER
CORNER OF SECTION 5, TOWNSHIP 1 SOUTH, RANGE 6 WEST;
THENCE WEST ALONG THE NORTH LINE OF SECTIONS 5 AND 6, TOWNSHIP 1 SOUTH, RANGE 6
WEST, AND ALONG THE NORTH LINE OF SECTION 1, TOWNSHIP 1 SOUTH, RANGE 7 WEST
APPROXIMATELY TWO AND ONE HALF MILES TO THE NORTHWEST CORNER OF SECTION 1,
TOWNSHIP 1 SOUTH, RANGE 7 WEST;
THENCE SOUTH ALONG THE WEST LINE OF SAID SECTION 1, APPROXIMATELY ONE MILE TO
THE SOUTHWEST CORNER OF SAID SECTION 1 WHICH IS COINCIDENT WITH THE NORTHEAST
CORNER OF SECTION 11, TOWNSHIP I SOUTH RANGE 7 WEST;
THENCE WEST ALONG THE NORTH LINE OF SAID SECTION 11 APPROXIMATELY ONE MILE TO
THE NORTHWEST CORNER OF SECTION 11, TOWNSHIP 1 SOUTH, RANGE 7 WEST;
THENCE SOUTH APPROXIMATELY 4 MILES ALONG THE WEST LINE OF SAID SECTION 11 AND
THE WEST LINE OF SECTIONS 14, 23, AND 26, TOWNSHIP 1 SOUTH, RANGE 7 WEST TO THE
SOUTHWEST CORNER OF SAID SECTION 26;
THENCE EAST APPROXIMATELY ONE AND ONE HALF MILES ALONG THE SOUTH LINE OF SAID
SECTION 26 AND THE SOUTH LINE OF SECTION 25, TOWNSHIP 1 SOUTH, RANGE 7 WEST TO
THE SOUTH QUARTER CORNER OF SAID SECTION 25, WHICH IS COINCIDENT WITH THE NORTH
QUARTER CORNER OF SECTION 36, TOWNSHIP 1 SOUTH, RANGE 7 WEST;
THENCE SOUTH ALONG THE NORTH SOUTH MID-SECTION LINE OF SECTION 36, TOWNSHIP 1
SOUTH, RANGE 7 WEST APPROXIMATELY ONE MILE TO THE SOUTH QUARTER CORNER OF SAID
SECTION 36;
THENCE EAST APPROXIMATELY 4 AND ONE HALF MILES ALONG THE SOUTH LINE OF SAID
SECTION 36, TOWNSHIP 1 SOUTH, RANGE 7 WEST AND THE SOUTH LINE OF SECTIONS 31,
32, 33 AND 34, TOWNSHIP 1 SOUTH, RANGE 6 WEST TO THE SOUTHEAST CORNER OF SAID
SECTION 34, WHICH IS COINCIDENT WITH THE NORTHWEST CORNER OF SECTION 2, TOWNSHIP
2 SOUTH, RANGE 6 WEST; THENCE SOUTH ALONG THE WEST LINE OF SAID SECTION 2
APPROXIMATELY ONE HALF MILE TO THE WEST QUARTER CORNER OF SAID SECTION 2;
THENCE EAST APPROXIMATELY ONE MILE ALONG THE EAST WEST MIDSECTION LINE OF SAID
SECTION 2 TO THE EAST QUARTER CORNER OF SAID SECTION 2, WHICH IS COINCIDENT WITH
THE WEST QUARTER CORNER OF SECTION 1, TOWNSHIP 2 SOUTH, RANGE 6 WEST;
THENCE SOUTH APPROXIMATELY ONE HALF MILE ALONG THE WEST LINE OF SAID SECTION 1
TO THE SOUTHWEST CORNER OF SAID SECTION 1;
THENCE EAST ALONG THE SOUTH LINE OF SAID SECTION 1 AND THE SOUTH LINE OF SECTION
6, TOWNSHIP 2 SOUTH, RANGE 5 WEST, APPROXIMATELY 2 MILES TO THE SOUTHEAST CORNER
OF SAID SECTION 6;
THENCE NORTH APPROXIMATELY THREE MILES ALONG THE EAST LINE OF SAID SECTION 6 AND
THE EAST LINE OF SECTIONS 31 AND 30, TOWNSHIP 1 SOUTH, RANGE 5 WEST TO THE
NORTHEAST CORNER OF SAID SECTION 30;
THENCE WEST APPROXIMATELY ONE HALF MILE ALONG THE NORTH LINE OF SAID SECTION 30
TO THE NORTH QUARTER CORNER OF SAID SECTION 30, WHICH IS COINCIDENT WITH THE
SOUTH QUARTER CORNER OF SECTION 19, TOWNSHIP 1 SOUTH, RANGE 5 WEST;
THENCE NORTH APPROXIMATELY ONE MILE ALONG THE NORTH SOUTH MID-SECTION LINE OF
SAID SECTION 19 TO THE NORTH QUARTER CORNER OF SAID SECTION 19;
THENCE WEST APPROXIMATELY ONE HALF MILE ALONG THE NORTH LINE OF SAID SECTION 19
TO THE NORTHWEST CORNER OF SAID SECTION 19, WHICH IS COINCIDENT WITH THE
SOUTHEAST CORNER OF SECTION 13, TOWNSHIP 1 SOUTH, RANGE 6 WEST;
THENCE NORTH APPROXIMATELY TWO MILES ALONG THE EAST LINE OF SECTIONS 13 AND 12
TOWNSHIP 1 SOUTH, RANGE 6 WEST TO THE NORTHEAST CORNER OF SAID SECTION 12;
THENCE WEST APPROXIMATELY ONE HALF MILE TO THE NORTH QUARTER CORNER OF SAID
SECTION 12, WHICH IS COINCIDENT WITH THE SOUTH QUARTER CORNER OF SECTION 1,
TOWNSHIP 1 SOUTH, RANGE 6 WEST;
THENCE NORTH APPROXIMATELY FOUR MILES ALONG THE NORTH SOUTH MID-SECTION LINE OF
SAID SECTION 1 AND THE NORTH SOUTH MIDSECTION LINE OF SECTIONS 36, 25 AND 24,
TOWNSHIP 1 NORTH, RANGE 6 WEST TO THE POINT OF BEGINNING.
ALL LYING WITHIN THE GILA AND SALT RIVER BASE AND MERIDIAN, MARICOPA COUNTY,
ARIZONA
In accordance with Item 304 of Regulation S-T of the Securities Exchange
Act of 1934, the map on this page of this Agreement shows the Other Electric
Generating Facilities that could be served by Tolleson Effluent under this
Agreement.
EXHIBIT C
The following components of the Interconnection Facilities, as depicted on
drawing Numbers AO-W-Z1C-150, Rev. 7, and AO-W-Z1C-151, Rev. 3 (both drawings
attached), are the property of the City of Tolleson:
1. The Tolleson Junction Box and the weir and three manual sluice gates
located within that Junction Box.
2. The anchor block adjacent to the Tolleson Junction Box.
3. 18 feet of 48-inch pipe connected to the inlet side of the Tolleson
Junction Box.
4. Approximately 15 feet of 42-inch pipe connected to the outlet side of the
Tolleson Junction Box.
5. The manhole and stub pipe required to connect the 42-inch pipes connected
to the inlet and outlet sides of the manhole.
6. The Tolleson Junction Structure Box.
7. All other portions of the "new" Tolleson Outfall Line.
8. The portion of the existing Tolleson Outfall Line (30-inch) within the
Tolleson Junction Box.
9. All other portions of the existing Tolleson Outfall Line.
The following components of the Interconnection Facilities, as depicted on
drawing Numbers AO-W-Z1C-150, Rev. 7, and AO-W-Z1C-151, Rev. 3 (both drawings
attached), are the property of APS, SRP and the other owners of Palo Verde
Nuclear Generating Station:
1. The ANPP Effluent Pipeline Junction Box and all facilities and equipment
located within that Junction Box.
2. The 30-inch pipe between the Palo Verde Effluent Pipeline Junction Box and
the Tolleson Junction Box.
3. The motorized sluice gate (valve) situated in the Tolleson Junction Box.
4. The flow metering equipment, including without limitations such devices as
may be necessary for transmission of flow meter data to the control panels
in the Plant.
5. The RTU Building and all facilities and equipment located within that
building.
In accordance with Item 304 of Regulation S-T of the Securities Exchange
Act of 1934, the drawings on these two pages of this Agreement show the
Interconnection Facilities owned by Palo Verde and the City of Tolleson.
Attachment 2
OPERATING AGREEMENT FOR THE
CO-OWNERSHIP OF WASTEWATER EFFLUENT
This Agreement (the "Agreement") is made and entered into this 16th day of
November, 2000 (the "Effective Date"), by and between Arizona Public Service
Company, a corporation organized and existing under and by virtue of the laws of
the State of Arizona ("APS") and Salt River Project Agricultural Improvement and
Power District, an agricultural improvement district organized and existing
under and by virtue of the laws of the State of Arizona ("SRP"). SRP and APS are
collectively referred to herein as the "Parties"; each is individually a "Party"
to this Agreement.
RECITALS:
A. APS, SRP, and the City of Tolleson have executed an "Agreement for the
Sale and Purchase of Wastewater Effluent," dated November 13, 2000 (the
"Tolleson Agreement"), and each Party to this Agreement desires to more
particularly describe its rights and responsibilities vis-a-vis the other Party
as a co-owner of Tolleson Effluent;
B. The primary use of the Tolleson Effluent is intended to be for cooling
water at Palo Verde Nuclear Generating Station ("PVNGS"); the secondary use of
the Tolleson Effluent will be its use at "Other Electric Generating Facilities"
(as defined by the Tolleson Agreement);
C. To the extent Tolleson Effluent is not used at PVNGS, the Tolleson
Effluent may be used at or for the benefit of Other Electric Generating
Facilities;
D. It is appropriate to establish terms and conditions on which APS, SRP,
and their respective affiliates, including Pinnacle West Energy Corporation
("PWE"), will make use of the Tolleson Effluent and make decisions regarding the
use of same in the future;
E. The Parties desire to enter into this Agreement to set forth their
respective rights and obligations pertaining to the co-ownership of the Tolleson
Effluent. Accordingly, this Agreement is an ancillary document or companion
agreement in relation to the Tolleson Agreement.
NOW, THEREFORE, in consideration of the agreements and promises set forth
below, and, other good and valuable considerations, the receipt and sufficiency
of which are acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS AND USAGE
1.1 Definitions. As used herein, the following capitalized terms shall
have the same meaning as they are given by definition in the Tolleson Agreement:
Delivery Point, Effluent, Effluent Pipeline, Notice of Commitment, Other
Electric Generating Facilities, Outages, Reserved Effluent, Surplus Effluent,
Tolleson, and Uncontrollable Forces. All such definitions from the Tolleson
Agreement are specifically incorporated in this
Agreement by this reference. In addition, the following terms shall have the
specified meanings:
"Claim" means any demand, claim, cause of action, lawsuit, or
proceeding of any kind or character, including investigation or audit by a
Governmental Authority.
"Coordinating Committee" has the meaning specified in Article 4.
"Effective Date" has the meaning specified in the introductory
paragraph.
"Event of Default" has the meaning specified in Section 7.1.
"Governmental Authority" means a federal, state, local or foreign
governmental authority or body politic; a state, province, commonwealth,
territory or district; a county; a city, town, township, village or other
municipality; a district or other subdivision or any of the foregoing; any
executive, legislative or other governing body of any of the foregoing; any
agency, authority, board, department, system, service, office, commission,
committee, council, or other administrative body of any of the foregoing; any
court or other judicial body; a legally recognized tribal authority; and any
officer, official or other representative of any of the foregoing when acting in
their official capacity. For purposes of this Agreement, neither SRP nor APS
shall be considered a Governmental Authority.
"Legal Requirement" means any statute, law, regulation, ordinance,
rule, judgment, order, decree, constitution, Permit, concession, grant,
franchise, agreement, directive or common law, or any requirement of, or other
governmental restriction or any similar form of decision by, or interpretation
or administration of any of the foregoing by, any Governmental Authority of
competent jurisdiction (or by an arbitrator in a forum involving binding
arbitration to which one of the parties or its business or assets is subject or
bound).
"Palo Verde Nuclear Generating Station" or "PVNGS" means the Arizona
Nuclear Power Project, as defined in the Arizona Nuclear Power Project
Participation Agreement (including amendments 1-13) among APS, SRP, Southern
California Edison, Public Service Company of New Mexico, El Paso Electric
Company, Southern California Public Power Authority, and the Department of Water
and Power of the City of Los Angeles (collectively, the "PVNGS Participants").
"Party" or "Parties" has the meaning specified in the introductory
paragraph and shall include permitted successors and assigns.
"Permit" means any permit, consent, license, rezoning, variance, use
permit, certification, notice, filing, approval, or authorization of any kind
required to be issued by a Governmental Authority and any necessary consent or
approval required to be granted by any non-Governmental Authority, other than a
Party, in order to develop, construct, own, or operate any facility that is
contemplated or required because of decisions made pursuant to this Agreement.
2
"Person" means any natural person, corporation, limited liability
company, partnership, business trust, Governmental Authority or other entity.
"PWE" means Pinnacle West Energy Corporation, an Arizona Corporation
and an affiliate of APS.
"Tolleson Effluent" means all Effluent purchased by APS and SRP from
the City of Tolleson pursuant to the Tolleson Agreement, whether such Effluent
is Surplus Effluent or Reserved Effluent, as those terms are defined in the
Tolleson Agreement.
1.2 Certain Principles of Interpretation. In this Agreement, unless
otherwise indicated or the context otherwise requires:
(i) the singular includes the plural and plural the singular when
the context requires;
(ii) words importing any gender include the other gender;
(iii) references to "writing" include printing, typing, lithography,
and other means of reproducing words in a tangible visible form;
(iv) the words "including," "includes," and "include" shall be
deemed to be followed in each instance by the words, "without limitation";
(v) references to articles, sections, paragraphs, recitals, and
exhibits are to this Agreement unless otherwise stated;
(vi) references to contracts and related instruments shall be deemed
to include all subsequent amendments, extensions, and other modifications to
such instruments (without, however, limiting any prohibition on any such
amendments, extensions and other modifications by the terms of this Agreement);
(vii) references to Persons include their respective permitted
successors and assigns and, in the case of Governmental Authorities, persons
succeeding to their respective functions and capacities;
(viii) the words "hereof," "herein," "hereunder," and words of
similar import shall refer to this Agreement as a whole and not to any
particular provision thereof;
(ix) both Parties and their counsel participated extensively in the
preparation and drafting of this Agreement; no rule of construction shall apply
that would cause the interpretation of any claimed ambiguity in this Agreement
against a Party determined to be the drafting Party;
(x) captions and headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose;
3
(xi) any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction and the provision that is prohibited or
unenforceable shall be reformed or modified to reflect the parties' intent to
the maximum extent permitted by applicable law; and
(xii) references to a "day," "week," "month," or "year" shall be
construed as a calendar day, week, month, or year.
ARTICLE 2
PURPOSE AND SCOPE
The purpose of this Agreement is to set forth certain agreements and
understandings between the Parties concerning the ownership and use of the
Tolleson Effluent, the allocation of costs incurred in connection with the
Tolleson Agreement and this Agreement, and the responsibilities and obligations
of each Party. This Agreement relates solely to the business, activities, and
purposes set forth herein and, except as otherwise expressly provided herein,
does not apply to any other activities, transactions, relationships, contracts,
projects, or work of the Parties. Subject to Article 4, no Party shall be
restricted in any way from engaging in any activity or business falling outside
the scope of this Agreement.
ARTICLE 3
OWNERSHIP AND USE OF TOLLESON EFFLUENT
3.1 Co-Ownership and Use of Effluent Purchased from Tolleson. APS and SRP
agree that they are and shall be co-owners, as tenants in common, of all
Tolleson Effluent purchased pursuant to the Tolleson Agreement, each Party
possessing a 50% undivided interest in all such Tolleson Effluent. Consistent
with the Tolleson Agreement, the Parties agree that the primary use of the
Tolleson Effluent shall be for cooling water for PVNGS and that PVNGS shall have
a priority right to the use of any or all of the Tolleson Effluent to satisfy
such requirements for cooling water at PVNGS as are not fully satisfied using
effluent from non-emergency sources other than Tolleson. To the extent that
Tolleson Effluent is available for use at Other Electric Generating Facilities,
the allocation of and the benefit from any such Effluent shall be divided
between APS and SRP (or their permitted assigns) in the manner determined by the
Coordinating Committee pursuant to Article 4. Any use of Tolleson Effluent at or
for the benefit of Other Electric Generating Facilities shall be consistent with
the terms of both this Agreement and the Tolleson Agreement.
3.2 Use of Tolleson Effluent at PVNGS. The Parties hereby agree that all
Tolleson Effluent used at PVNGS shall be transferred to the PVNGS Participants
at the Delivery Point specified in the Tolleson Agreement. All aspects of
transportation, treatment, use, disposal and payment for any Tolleson Effluent
so transferred and used at PVNGS shall be the responsibility of APS, as the
Operating Agent of PVNGS, upon discharge of that Effluent into the Effluent
Pipeline, and commencing upon such discharge, APS's rights and obligations with
respect to such Tolleson Effluent shall be those of the
4
Operating Agent under the terms of the Arizona Nuclear Power Project
Participation Agreement, including but not limited to the liability provisions
set forth in that Participation Agreement. The Parties to this Agreement shall
not receive any fee or other compensation for transfer to the PVNGS Participants
of Tolleson Effluent used at PVNGS.
3.3 Use of Tolleson Effluent at or For the Benefit of Other Electric
Generating Facilities. Tolleson Effluent, if not required for cooling water
purposes at PVNGS, may be used at or for the benefit of Other Electric
Generating Facilities upon such terms and conditions as the Parties may
separately agree, or as determined by the Coordinating Committee pursuant to
Article 4. In this regard, the Parties contemplate that up to 6,500 acre-feet
per year of available Tolleson Effluent will be transferred to PWE for use at
the proposed electric generating facility commonly referred to as "Redhawk"
pursuant to separate terms and conditions to be negotiated by the Parties,
including, without limitation, payment of a fee by PWE to SRP and APS. Depending
upon circumstances at the time, additional quantities of Tolleson Effluent may
be approved for use at Redhawk after negotiation by the Parties and appropriate
review and approval by the Coordinating Committee of any agreement that may be
negotiated, including, without limitation, payment of a fee by PWE to SRP and
APS.
ARTICLE 4
COORDINATING COMMITTEE
4.1 Coordinating Committee. Each Party shall designate one (1.)
representative ("Representative") to serve on the Coordinating Committee and one
(1) alternate ("Alternate"), each having an appropriate level of technical
expertise and familiarity with the policies of its executive management. The
Parties; hereby form the Coordinating Committee, the initial Representatives and
Alternates of which are as follows:
Party Representative Alternate
- ------------------------ ------------------------ ------------------------
SRP David Areghini Gary Harper
APS James M. Levine Richard Gouge
A Party may change its Representative or Alternate upon notice to the
other Party. (The term "Representative" shall include the designated
Representative or any Alternate that is actually performing the duties of the
Representative.)
4.2 Coordinating Committee Authority. The Coordinating Committee shall
have the following responsibilities and authority, subject to and consistent
with the other terms of this Agreement and any separate agreement between the
Parties that allocates any portion of Tolleson Effluent for a specific use:
(i) monitoring, directing, coordinating, and managing the activities
of the Parties undertaken pursuant to this Agreement and, except as provided in
Section 5.1 hereof, allocating the costs and benefits thereof between the
Parties in equal shares;
(ii) determining whether to issue a Notice of Commitment pursuant to
paragraph 8.2 of the Tolleson Agreement, and approving all proposed uses of
Tolleson Effluent, except to the extent that such issues are determined by the
terms of any separate
5
agreement between the Parties that allocates any portion of Tolleson Effluent
for a specific use;
(iii) authorizing negotiations and approving all other contracts or
commissioning such studies, investigations, or reports as the Coordinating
Committee deems desirable or necessary;
(iv) determining the agenda, scope, participants and attendees at
meetings of, and other matters relating to, the Coordinating Committee; and
(v) performing any other responsibility, duty, or authority granted
from time to time to the Coordinating Committee by amendment of this Agreement.
4.3 Actions of the Coordinating Committee. No Party shall take any action
with respect to allocation of Tolleson Effluent to any Other Electric Generating
Facility except as may be specifically authorized by this Agreement or as agreed
to and approved by the Coordinating Committee. No action of the Coordinating
Committee shall be binding unless and until: (i) such action has been set forth
in a writing submitted to the Representatives; (ii) the Representatives have had
ten days after receipt of the writing to review it; and (iii) the action has
been approved in writing by the Representative of each of the Parties. Failure
to approve an action within such ten day period shall not constitute approval;
provided, however, that each Party shall make good faith efforts to review and
approve or reject each action within the ten day period. Approval of or failure
to object to the minutes of a meeting of the Coordinating Committee shall not be
deemed to constitute written approval of any action taken thereat. All actions
approved by the Coordinating Committee shall be carried out by one or more of
the Parties, as specified in the written approval of such action; any approval
which does not specify the responsible party for the action shall be carried out
by the Party having principal responsibility, as set forth in. Article 5.
4.4 Term. The Coordinating Committee shall dissolve and have no further
authority upon (i) the due termination of this Agreement pursuant to any
provision hereof, except to the extent it is expressly agreed in writing that
the Coordinating Committee is needed to manage those matters that survive
termination; or (ii) the unanimous agreement of the Parties to dissolve the
Coordinating Committee.
4.5 Meetings.
A. Time and Conduct of Meetings: Quorum. The Coordinating Committee
shall meet during the term of this Agreement, on an "as needed" basis or at the
request of either Representative, at such times and at such places as the
Representatives may from time to time agree. Meetings of the Coordinating
Committee may be held in person or by telephone, video conference, or other
agreed means. Each Representative shall be given reasonable advance notice of
all Coordinating Committee meetings and all matters to be voted on by the
Coordinating Committee. A quorum for a meeting of the Coordinating Committee
shall consist of one representative of each Party. Any substantive decisions of
the Coordinating Committee shall be documented in writing and approved by both
Representatives.
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B. Attendance. Each Party shall use reasonable efforts to cause its
Representative to be present at each meeting of the Coordinating Committee and
no Party shall withhold the presence or participation of its Representative to
forestall decisions on any matter pertaining to this Agreement. A Party may,
without notice, cause any of its employees or its legal counsel to attend any
meeting of the Coordinating Committee. In addition, a Party may, upon reasonable
notice to the Coordinating Committee, request that individuals other than its
employees and legal counsel be allowed to attend a meeting of the Coordinating
Committee. No individuals other than the Representatives shall be permitted to
vote on behalf of a Party. The Coordinating Committee may require the execution
of a confidentiality agreement by any individual other than the Representatives,
Alternates, employees, and legal counsel of the Parties as a condition to
approving such individual's attendance at a Coordinating Committee meeting.
ARTICLE 5
PRINCIPAL RESPONSIBILITY
5.1 Implementing Decisions of Coordinating Committee. APS shall have
principal responsibility for carrying out the actions of the Coordinating
Committee, and implementing decisions of the Coordinating Committee, unless
otherwise specified pursuant to Section 4.3 or 5.2 hereof. In addition, as set
forth in paragraph 12.5.1 of the Tolleson Agreement, APS is authorized to act
for and on behalf of SRP in all matters affecting the implementation and
performance of the Tolleson Agreement when the performance in question involves
transportation and use of Tolleson Effluent at PVNGS. The intent of said
paragraph 12.5.1 is to authorize APS to act both as the Party with principal
responsibility under this Agreement and as Operating Agent for PVNGS in managing
all Tolleson Effluent to be used at PVNGS. Notwithstanding the provisions of
this Section, either Party may take any appropriate, lawful action to cure a
breach of the Tolleson Agreement caused by the other Party.
5.2 Responsibility for Transferred Tolleson Effluent.
5.2.1 Transfers for Use at PVNGS. Consistent with Section 3.2 above,
APS and SRP shall request acceptance by the PVNGS Participants of responsibility
for, and risks associated with, transportation, treatment, use, disposal and
payment for all Tolleson Effluent to be used at PVNGS. Responsibility for, and
risks associated with, transportation, treatment, use, disposal and payment for
Tolleson Effluent to be used at PVNGS, shall be transferred to the PVNGS
Participants at the Delivery Point specified in the Tolleson Agreement.
Acceptance by the PVNGS Participants of the transfer of Tolleson Effluent, and
responsibility for, and risks associated with, its transportation, treatment,
use disposal and payment, shall be documented in the minutes of the
Administrative Committee established pursuant to Section 6.1.1 of the Arizona
Nuclear Power Project Participation Agreement.
5.2.2 Transfers for Use at Other Electric Generating Facilities. As
between the Parties to this Agreement and the party or parties owning or
operating a specific Other Electric Generating Facility, responsibility for, and
risks associated with, transportation, treatment, use, disposal and payment for
Tolleson Effluent to be used at the Other Electric Generating Facility shall be
transferred to the party or parties owning an
7
interest in or operating the Other Electric Generating Facility, such transfer
to occur at the Delivery Point specified in the Tolleson Agreement. Acceptance
of this transfer of responsibility for, and risks associated with, Tolleson
Effluent to be used at Other Electric Generating Facilities shall be documented
in the agreement(s) by which the Tolleson Effluent is transferred to the party
owning or operating the Other Electric Generating Facility. Notwithstanding the
transfer of responsibility and risk to the party or parties owning or operating
the Other Electric Generating Facility, ownership of the Tolleson Effluent shall
not transfer until physical delivery of the Tolleson Effluent to that party or
parties at the delivery point specified in the agreement transferring the
Tolleson Effluent.
5.3 Permitting. APS shall have principal responsibility to ensure
compliance with any Legal Requirement applicable to the actions of the
Coordinating Committee and to ensure that any Person using Tolleson Effluent
purchased by the Parties secures any Permit and otherwise satisfies any Legal
Requirement applicable to the transportation and delivery of Tolleson Effluent
to the point of delivery agreed upon by the Parties; provided, however, that in
any case where SRP will make use of Tolleson Effluent at or for the benefit of
Other Electric Generating Facilities operated or solely owned by SRP or any
affiliated or successor entity, then from and after the delivery point agreed
upon by the Parties, SRP shall have principal responsibility to ensure
compliance with any Legal Requirement, and to secure any Permit, applicable to
its intended use of the Tolleson Effluent.
ARTICLE 6
TERM
6.1 Term. This Agreement shall commence on the Effective Date and shall
terminate upon the expiration or termination of the Tolleson Agreement.
6.2 Survival. All obligations and liabilities of the Parties under this
Agreement shall cease upon termination except the obligation of the Parties
under Article 9, obligations assigned pursuant to this Agreement to the
Coordinating Committee with the expressed, written intent that they survive this
Agreement, and the liabilities of any Party resulting from a default by such
Party leading to such termination.
ARTICLE 7
DEFAULT
7.1 Events of Default. A Party shall be in default under this Agreement
upon the occurrence of the following ("Event of Default"): if it fails to render
performance required under any material provision of this Agreement when due and
such failure continues unremedied for thirty (30) days following written notice
to the Party in default given by the other Party. Neither APS nor SRP shall be
in default under this Agreement due to Uncontrollable Forces and Outages as
identified in Section 9.1 of the Tolleson Agreement. It shall also be an Event
of Default if a Party shall have commenced any insolvency, receivership,
bankruptcy, liquidation, or similar proceedings and (i) one hundred twenty (120)
days shall have expired from the commencement of any one or more of such
proceedings, and (ii) a petition commencing the proceeding has not been
dismissed or stayed within that time.
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7.2 Actions upon Event of Default. In the event of any dispute between the
Parties concerning the rights and obligations created by this Agreement, or
concerning any Event of Default, the Parties shall first confer in an attempt to
informally resolve such dispute without need to resort to arbitration or
litigation. The Parties shall not resort to arbitration or litigation to enforce
their rights under this Agreement until they have conferred in good faith over a
period of not less than fifteen days in an attempt to informally resolve their
dispute. If the Parties are unable to resolve their dispute after conferring as
required in the preceding sentence, then during the period that any Event of
Default continues, the non-defaulting Party may, without prejudice to any other
available rights or remedies under this Agreement or at law or in equity, and
without constituting an election of an exclusive remedy for an Event of Default,
initiate either or both of the following: (i) proceedings to partition the
Tolleson Effluent and thereby terminate the co-tenancy of the Parties in the
Tolleson Effluent, or (ii) non-binding arbitration by one arbitrator who has not
previously been employed by either party (excluding employment as an
arbitrator), and does not have a direct or indirect interest in either Party or
the subject matter of the arbitration. The arbitrator shall either be as
mutually agreed by the Parties within fifteen (15) calendar days after
submission of the matter to arbitration, or failing agreement shall be selected
under the expedited rules of the American Arbitration Association ("AAA"). The
rules of AAA shall apply to the extent not inconsistent with the provisions in
this Section. Arbitration shall be conducted according to the following: (a) not
later than seven (7) days prior to the hearing date set by the arbitrator, each
party shall submit a brief with a single proposal for settlement; (b) the
hearing shall be conducted on a confidential basis without continuance or
adjournment; and (c) the Parties shall divide equally the cost of the arbitrator
and the hearing, and each Party shall be responsible for its own expenses,
including its counsel and representatives.
ARTICLE 8
NOTICES
8.1 Notice Provision. All notices, demands, consents or other
communications required under this Agreement shall be in writing and may be
delivered personally to a Party, may be delivered by facsimile providing written
confirmation of successful transmission, or may be mailed by deposit in the
United States Certified Mail, return receipt requested, or by deposit with a
reputable overnight delivery service. Notices shall be effective:
(i) on the date delivered by personal delivery or facsimile;
(ii) three (3) business days following the date deposited in the
United States mail; or
(iii) the next business day following delivery to a reputable
overnight delivery service.
Notices or communications shall be delivered and mailed to the Parties at the
addresses set forth in paragraph 12.4 of the Tolleson Agreement, or to any
address of a Party which is substituted from time to time by written notice of
such Party pursuant to paragraph 12.4 of the Tolleson Agreement.
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ARTICLE 9
LIABILITY
9.1 Limitation of Liability. The liability of a Party to the other Party
under this Agreement shall be limited to the direct damages actually sustained
by the other Party. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY
LOSS OR DAMAGE IN THE NATURE OF PARTIAL OR COMPLETE LOSS OF USE OF ANY
GENERATING FACILITY, LOSS OF ELECTRIC POWER, COST OF REPLACEMENT OF ELECTRIC
POWER, OR FOR ANY LOSS OF INTEREST, REVENUE OR ANTICIPATED PROFITS FROM
ACTIVITIES UNDER THIS AGREEMENT. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR
ANY INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR LOST PROFITS,
ARISING OUT OF OR RELATED TO THIS AGREEMENT. (The limitations in this Section
9.1 shall not apply to losses in tort to third parties or to Claims against
which a Party is entitled to indemnitee protection under Section 9.2.)
9.2 Indemnity. Except as otherwise provided in any subsequent agreement
between the Parties (or between the Parties and other entities), each Party
("Indemnifying Party") shall defend, indemnify, and hold harmless the other
Party and its respective affiliates, directors, officers, partners, members,
employees, agents, and representatives (each an "Indemnitee") from and against
any and all Claims, liability, cost, loss or expense of any kind incurred by the
Indemnitees arising out of the fraud or willful misconduct of the Indemnifying
Party or its agents or representatives in connection with this Agreement, or
arising out of a material breach of the Tolleson Agreement by the Indemnifying
Party. Except as limited by any separate agreement between the Parties, each
Party shall also indemnify and hold harmless the other Party against any and all
Claims, liability, cost, loss or expense of any kind resulting from the
Indemnifying Party's control, transportation, use or disposal of Tolleson
Effluent at or for the benefit of any of the Indemnifying Party's Other Electric
Generating Facilities In the event any such Claim, liability, cost, loss or
expense asserted by a person not a Party to this Agreement is caused by an
alleged joint or concurrent fraud, negligence or willful misconduct, the Parties
at fault shall bear liability in proportion to their own degrees of culpability.
Each Indemnitee is an intended beneficiary of this Section 9.2. The
indemnification obligation of the parties set forth in this Section shall
survive the termination or expiration of this Agreement.
ARTICLE 10
GENERAL
10.1 Entire Agreement. This Agreement supersedes all prior and
contemporaneous conduct and communications between the Parties pertaining to
co-ownership of the Tolleson Effluent, whether written or oral. Notwithstanding
the foregoing, this Agreement shall be read together with the Tolleson
Agreement, and any agreement by which APS and SRP transfer any portion of the
Tolleson Effluent for use at or for the benefit of Other Electric Generating
Facilities, to obtain necessary definitions and to otherwise determine the
intention of the Parties. This Agreement is not intended to modify or abrogate
either the Tolleson Agreement or any subsequent agreement by which APS and SRP
transfer any portion of the Tolleson Effluent for use at or for the benefit of
Other Electric Generating
10
Facilities. This Agreement may not be modified, changed or added to except in
writing signed by all Parties hereto.
10.2 Waiver. Each Party's failure or delay in enforcing the terms and
conditions of this Agreement or insisting upon strict performance of any of the
other Party's obligations shall not be interpreted as a waiver thereof. Waiver
of any provision of this Agreement shall only be effective if in writing and
shall not be interpreted as a waiver of any subsequent breach or failure under
the same or any other provision of this Agreement. No conduct, statement, course
of conduct, course of dealing, oral expression or other action shall be
construed as a waiver.
10.3. Assignment.
10.3.1 Assignment by APS to PWE. APS may assign its rights and
delegate its duties under this Agreement at any time to PWE, provided that: (i)
APS assigns' its entire interest in this Agreement; (ii) PWE assumes in writing
all of the APS obligations under this Agreement; (iii) APS also assigns all of
its rights and obligations under the Tolleson Agreement to PWE at the same time
as its assignment of this Agreement; and (iv) such assignment shall not become
effective until and unless PWE has become a party to the Arizona Nuclear Power
Project Participation Agreement. No assignment or delegation under this Section
10.3.1 will release the assigning Party from its obligations under this
Agreement unless the other Party consents to a release (such consent not to be
unreasonably withheld, conditioned or delayed). Any subsequent assignee of PWE's
rights and obligations under this Agreement shall be subject to all terms and
conditions of this Agreement, including, without limitation, the restrictions of
this Section 10.3.1.
10.3.2 Assignment to Others. With the prior written consent of the
other Party (such consent not to be unreasonably withheld, conditioned or
delayed), a Party may assign its rights or delegate its duties under this
Agreement at any time to any other PVNGS Participant, provided that such Party
assigns its entire interest in this Agreement and that its assignee assumes in
writing all of such Party's obligations under this Agreement. No assignment or
delegation under this Section 10.3.2 will release the assigning Party from its
obligations under this Agreement unless the other Party consents to a release
(such consent not to be unreasonably withheld, conditioned or delayed). Any
assignee to whom the rights and obligations of this Agreement are assigned
pursuant to this Section 10.3.2 shall thereafter be subject to all terms and
conditions of this Agreement, including, without limitation, the restrictions of
this Section 10.3.2.
10.4 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Arizona.
10.5 Attorneys' Fees. Each Party shall bear its own attorneys' fees,
costs, and expenses in case of a partition action or arbitration initiated under
the provisions of Section 7.2. Should any Claim be brought by a Party against
another Party arising out of this Agreement, including any action for
declaratory or injunctive relief, the prevailing Party shall be entitled to
reasonable. attorneys' fees and costs and expenses of litigation and
investigation, all as actually incurred, including attorneys' fees, costs and
expenses of litigation and investigation incurred in appellate proceedings or in
any action or participation
11
in, or in connection with, any case or proceeding under the United States or
other bankruptcy laws, and any judgment or decree rendered in any such action or
proceedings shall include an award thereof.
10.6 Counterparts. This Agreement may be executed by the Parties in any
number of separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts shall together constitute
one and the same agreement. All signatures need not be on the same counterpart.
10.7 Relationship of the Parties. The execution of this Agreement shall
not create or constitute a partnership, joint venture, entity or any form of
business organization between the Parties.
IN WITNESS WHEREOF, the Parties have executed this Agreement to be
effective as of the Effective Date.
ARIZONA PUBLIC SERVICE COMPANY, an
Arizona corporation,
By /s/ James M. Levine
---------------------------------------
Its Exec. VP, Generation
Approved as to form:
By /s/ Karilee S. Ramaley
---------------------------------------
SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT, an
Arizona agricultural improvement district
By /s/ William P. Schrader
---------------------------------------
Its President
Approved as to form:
By /s/ Richard N. Morrison
---------------------------------------
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