Exhibit 10(b)
FULL REQUIREMENTS SERVICE AGREEMENT
BETWEEN
BALTIMORE GAS AND ELECTRIC COMPANY
AND
ALLEGHENY ENERGY SUPPLY COMPANY, L.L.C.
DATED
AUGUST 15, 2001
The asterisks on pages 12, 22, 23 and A1 denote that confidential portions of
this exhibit have been omitted in reliance on Rule 25(b)-2 of the Securities
Exchange Act of 1934. The confidential portions have been submitted separately
to the Securities and Exchange Commission.
TABLE OF CONTENTS
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Page
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ARTICLE 1. Definitions 1
ARTICLE 2. Term 7
ARTICLE 3. Supplier Responsibilities 7
ARTICLE 4. BGE Responsibilities 9
ARTICLE 5. Billing and Payment 10
ARTICLE 6. Price 12
ARTICLE 7. Events of Default; Remedies 12
ARTICLE 8. Credit Support 16
ARTICLE 9. Indemnification 17
ARTICLE 10. Limitation of Liability 18
ARTICLE 11. Force Majeure 19
ARTICLE 12. Representations and Warranties 20
ARTICLE 13. Miscellaneous 21
APPENDIX A SAMPLE PJM BILL
APPENDIX B GENERATION SHOPPING CREDITS
APPENDIX C LITIGATION DISCLOSURE
i
FULL REQUIREMENTS SERVICE AGREEMENT
THIS FULL REQUIREMENTS SERVICE AGREEMENT ("Agreement"), made and
entered into as of this 15th day of August, 2001 by and between Baltimore Gas
and Electric Company, a Maryland Corporation ("BGE") and Allegheny Energy
Supply Company, L.L.C., a Delaware corporation ("Supplier") (each individually
a "Party", or collectively, the "Parties").
W I T N E S S E T H
WHEREAS, on April 8, 1999, Maryland enacted the Electric Choice and
Competition Act authorizing customer choice and competition among electric
suppliers;
WHEREAS, on November 10, 1999 the Maryland Public Service Commission
issued an order approving the terms of a settlement providing for retail choice
within BGE's service territory;
WHEREAS, the Maryland PSC Order directs BGE to supply electric service
for a period of up to six years to those retail customers within BGE's retail
service territory that choose not to purchase their power supply from
alternative competitive suppliers;
WHEREAS, Supplier is authorized to makes sales of energy, capacity and
ancillary services at market based rates pursuant to FERC Electric Tariff,
First Revised Volume No. 1, dated December 28, 2000, Docket # ER01-811-000;
WHEREAS, Supplier and BGE are entering into this Agreement for the
purpose of establishing the terms and conditions under which Supplier will
supply such full requirements service to BGE.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the Parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. For all purposes of this Agreement, the following
terms as used in this Agreement shall have the following meanings. Except where
the context otherwise requires, definitions and terms expressed in the singular
will include the plural and vice versa.
1
"Affiliate" means, with respect to a Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such first Person. The
term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of
a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" means this Full Requirements Service Agreement, including
the Appendices, as amended, modified or supplemented from time to time.
"Alternate SOS Supplier" means a retail supplier that is responsible
for supplying former BGE SOS Customers as a result of Retail Bidding.
"Alternate SOS Supplier Customers" means former BGE SOS Customers that
are provided SOS from Alternate SOS Supplier as a result of Retail
Bidding.
"Ancillary Services" means those services, or their successors, that
are necessary to support the transmission of Energy from generation
resources to loads, as set forth in the PJM OATT, including, but not
limited to, PJM Scheduling, System Control and Dispatch Service; RTO
Scheduling, System Control and Dispatch Service; Reactive Supply and
Voltage Control from Generation Sources Service; Regulation and
Frequency Response Service; Energy Imbalance Service; Operating Reserve
- Spinning Reserve Service; and Operating Reserve - Supplemental
Reserve Service.
"BGE SOS Customers" means the customers receiving SOS from BGE.
"BGE" means Baltimore Gas and Electric Company, a Maryland corporation
and its successors and permitted assigns hereunder.
"Business Day" means a day on which Federal Reserve member banks in
Baltimore Maryland are open for business; and a Business Day shall open
at 8:00 a.m. and close at 5:00 p.m. Eastern Standard (or Daylight
Savings) time.
"Creditworthiness Criteria" with respect to a Party or its guarantor
means (i) an unsecured rating of "Baa3" or better from Moody's, "BBB-"
or better from S&P or investment grade as determined by another
nationally recognized rating service reasonably acceptable to the other
Party and (ii) a Net Worth of at least Two Hundred Million Dollars
($200,000,000).
"Contract Classes" means those customers that receive SOS from BGE
under certain contractual terms that may differ from the schedules
found in the Retail Electric Service Tariff.
2
"Customer Classes" means (i) Schedules R, RL-1, RL-2, ES, G Option 1, G
Option 2, GS Option 1, GS Option 2, GL Secondary, GL Primary, SL, PL
and DS, as defined in the Retail Electric Service Tariff and (ii)
Contract Classes.
"Delivery Point" means any point on the PJM Transmission System as
elected by Supplier.
"Delivery Term" means the period commencing July 1, 2003 and ending on
June 30, 2006, unless this Agreement is earlier terminated in
accordance with its terms.
"Effective Date" means the date upon which this Agreement is executed.
"Electricity Supplier Coordination Tariff" means the BGE Electricity
Supplier Coordination Tariff approved by the Maryland PSC, as amended,
modified or supplemented from time to time.
"Energy" means the electrical output of electric generation facilities,
usually stated in kilowatt-hours or megawatt-hours.
"FERC" means the Federal Energy Regulatory Commission and any successor
thereto.
"Fixed Transmission Rights" shall have the meaning as set forth by PJM.
"Full Requirements Service" means all-requirements electric service on
a continuous basis, including, but not limited to, the following
products: Energy, Unforced Capacity, Ancillary Services, Unaccounted
For Energy and associated losses necessary to fulfill all PJM
obligations as they may change from time to time associated with
providing all-requirements electric service to the SOS Load, as further
defined pursuant to Article 3. Such Full Requirements Service shall
include changes in customer demand for any reason, including, but not
limited to, seasonal factors, daily load fluctuations, increased or
decreased usage, transmission and distribution outages, customer
decisions regarding whether to take generation service from an
alternate supplier, demand side management activities, extremes in
weather, and other similar events.
"Generation Shopping Credits" means the prices stated in Appendix B,
unless altered as provided in Section 6.1.b.
"Governmental Authority" means the government of any federal, state,
municipal or other political subdivision, including all agencies and
instrumentalities of such governments and political subdivisions.
3
"Intermediate-Peak" shall have the meaning set forth in the Retail
Electric Service Tariff as of the Effective Date.
"Interest Rate" means, for any date, the lesser of (a) two (2) percent
over the per annum rate of interest equal to the prime lending rate as
may from time to time be published in The Wall Street Journal under
"Money Rates" and (b) the maximum rate permitted by applicable law.
"Load Serving Entity (LSE)" means an entity, including a load
aggregator or power marketer, that: (i) is serving end-users within the
PJM Control Area, and (ii) has been granted the authority, or has an
obligation pursuant to state or local law, regulation or franchise, to
sell electric energy to end-users within the PJM Control Area.
"Load Response Resources" means those resources that have the effect of
reducing the electric supply for SOS due to a customer's reduction in
consumed electricity and/or an increase in customer-owned generation,
and includes, but is not limited to (i) BGE Riders 5, 6, 14, 16, 24, as
set forth in the Retail Electric Service Tariff, as amended from time
to time; and (ii) any individually negotiated load response agreement
between BGE and its customers; and (iii) any other load response-type
service BGE may offer.
"Maryland PSC" means the Maryland Public Service Commission and any
successor thereto.
"Maryland PSC Order" means the November 10, 1999 Order issued by the
Maryland PSC allowing, among other things, retail choice for
electricity consumers, requiring that BGE provide electricity supply to
retail consumers who do not choose an alternate supplier, and further
allowing BGE to enter into a full requirements service agreement for
SOS Load.
"Moody's" means Moody's Investors Service, Inc. and any successor
thereto.
"Network Integration Transmission Service" shall have the meaning as
set forth in the PJM OATT.
"Net Worth" means total assets (exclusive of intangible assets) less
total liabilities as reflected on a balance sheet prepared in
accordance with generally accepted accounting principles consistently
applied.
"Non-Summer" shall have the meaning set forth in the Retail Electric
Service Tariff as of the Effective Date.
4
"Off-Peak" shall have the meaning set forth in the Retail Electric
Service Tariff as of the Effective Date.
"Parent" means, with respect to a Person that, directly or indirectly
through one or more intermediaries, controls such first Person, where
the term "control" means the possession, directly or indirectly, of
power to direct or cause the direction of the management or policies of
a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Peak" shall have the meaning set forth in the Retail Electric Service
Tariff as of the Effective Date.
"Person" means any individual, sole proprietorship, corporation,
partnership, joint venture, limited liability partnership, limited
liability company, trust, unincorporated association, institution,
Governmental Authority or any other entity.
"PJM" means PJM Interconnection, L.L.C., the independent system
operator for the PJM Control Area organized and operating pursuant to
the PJM Operating Agreement and any successor thereto.
"PJM Control Area" shall have the meaning as set forth in the PJM OA.
"PJM OA" means the Amended and Restated Operating Agreement of PJM
Interconnection, LLC dated June 2, 1997 and effective January 1, 1998,
as amended, modified or supplemented from time to time.
"PJM OATT" means the PJM Open Access Transmission Tariff administered
by PJM, as amended, modified or supplemented from time to time.
"PJM Transmission System" shall have the meaning as set forth in the
PJM OATT.
"Reliability Assurance Agreement (RAA)" means the Reliability
Assurance Agreement among Load Serving Entities in the PJM Control Area
dated June 2, 1997, as amended, modified or supplemented from time to
time.
"Retail Bidding" means a Maryland PSC approved process where BGE's SOS
Customers are auctioned to Alternate SOS Supplier(s).
"Retail Electric Service Tariff" means the BGE Retail Electric Service
Tariff approved by the Maryland PSC, as amended, modified or
supplemented from time to time.
5
"Retail Generation Revenue" means the revenue that BGE reports in its
financial statements, which is an approximation of the revenue
associated with the consumed electricity in any given calendar month
for BGE SOS Customers, and is equal to the actual billed revenue within
a calendar month plus an approximation of the revenue associated with
unbilled, but consumed electricity in that month, less an approximation
of the revenue associated with billed, but not consumed electricity in
that month.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc. and any successor thereto.
"Standard Offer Service (SOS)" means the electric generation service
that is provided to retail customers that have not chosen a retail
supplier other than BGE or Alternate SOS Supplier.
"SOS Load" means the kW and kWh retail load used in BGE's calculation
of its monthly Retail Generation Revenue from BGE SOS Customers, plus
the kW and kWh retail load, determined in the same manner as load is
determined for Retail Generation Revenue, associated with Alternate SOS
Supplier Customers.
"Summer" shall have the meaning set forth in the Retail Electric
Service Tariff as of the Effective Date.
"Supplier" means Allegheny Energy Supply Company, L.L.C., and its
successors and permitted assigns hereunder.
"Taxes" means any or all ad valorem, property, severance, generation,
first use, conservation, Btu or energy, transportation, utility, gross
receipts, privilege, sales, use, consumption, excise, lease,
transaction, and other taxes, governmental charges, licenses, fees,
permits and assessments, or increases therein, other than taxes based
on net income or net worth.
"Transmission Owner" shall have the meaning as set forth in the PJM OA.
"Unaccounted For Energy" means the difference between the hourly BGE
system load and the sum of (i) the estimated hourly customer loads
(interval metered and profiled) and (ii) losses.
"Unforced Capacity" shall have the meaning set forth in the RAA, and
shall include any successor product(s) defined and approved by PJM.
1.2 Additional Defined Terms. Each of the following terms has the
meaning specified in the Article, Section or Appendix set forth opposite such
term:
6
Term Section/Appendix
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AAA 13.10
Affected Party 7.4(a)
Bankruptcy Proceeding 7.1
Claims 9.1
Confidential Information 13.7
Defaulting Party 7.1
Early Termination Date 7.4(a)
Event of Default 7.1
Force Majeure 11.1(a)
Margin 7.2(c)
Non-Defaulting Party 7.2(a)
Price 6.1(a)
Settlement Amount 7.2(b)
Term 2.1
Termination Payment 7.2(c)
ARTICLE 2
TERM
2.1 Term.
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Unless earlier terminated in accordance with Article 7, this Agreement
shall remain in effect from the Effective Date through and including the end of
the Delivery Term ("Term"). At the expiration of the Term, the Parties shall no
longer be bound by the terms and conditions of this Agreement, except to the
extent necessary to enforce the rights and obligations of the Parties arising
under this Agreement prior to the expiration of the Term.
ARTICLE 3
SUPPLIER RESPONSIBILITIES
3.1 PJM Member.
--- -----------
Supplier shall, prior to the Delivery Term and throughout the entire
Delivery Term of this Agreement, be a member, in good standing, of PJM and
maintain a settlement account established in accordance with the rules and
criteria established by PJM.
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3.2 Full Requirements Service.
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During the Delivery Term, Supplier shall sell and deliver to the
Delivery Point and BGE shall receive and purchase Full Requirements Service
sufficient to serve 10 percent share of the SOS Load. As a provider of Full
Requirements Service, Supplier is solely responsible for satisfying all
requirements and paying all costs incurred or to be incurred to provide such
service including, without limitation, all costs, all scheduling or other
requirements to furnish Unforced Capacity, Energy, losses, Unaccounted For
Energy and Ancillary Services associated with the provision of Full Requirements
Service. Supplier is also solely responsible for meeting any other requirements
and paying any other costs now or hereafter imposed by PJM or imposed pursuant
to the RAA from time to time during the Delivery Term which are attributable to
any component of the provision of Full Requirements Service. If PJM allocates
any expenses or uplift costs to the Full Requirements Service provided by
Supplier (on a load or peak load basis or otherwise), the expenses or costs so
allocated will be borne by Supplier alone without recourse to BGE.
3.3 Losses; Unaccounted For Energy.
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Supplier shall be responsible for supplying sufficient Full
Requirements Service to compensate for all transmission, sub-transmission and
distribution losses and Unaccounted For Energy associated with the delivery of
electricity supplied under this Agreement from the sources of its supply to the
meters of those retail customers included in the Supplier's share of the SOS
Load.
3.4 Maryland Environmental Disclosure Requirements.
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Since Supplier is subject and bound to third-party confidentiality
provisions, Supplier will make best efforts to provide to BGE, the sources of
electricity used to supply Full Requirements Service, fuel mix and environmental
disclosure information in a timely manner and in an appropriate form to enable
BGE to comply with Maryland PSC or other governmental or regulatory agency
requirements relating to reporting of such information. Under no circumstance
will Supplier be forced to provide information that would make it breach on
confidentiality or law.
3.5 Renewable Energy Resources.
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During the Delivery Term of this Agreement, Supplier shall provide the
renewable resource requirements imposed upon BGE by Article 7-516 of the
Maryland Electric Customer Choice and Competition Act of 1999, as of the
Effective Date.
8
3.6 Transmission Congestion.
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If the PJM Control Area experiences congestion, Supplier will be
responsible for any congestion costs incurred in delivering power from the
Delivery Point to BGE's load busses. During the Delivery Term, BGE shall, at no
cost to Supplier, assign or transfer, to Supplier Fixed Transmission Rights
associated with Supplier's portion of the SOS Load.
ARTICLE 4
BGE RESPONSIBILITIES
4.1 Title; Risk of Loss.
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Title to and risk of loss related to the Full Requirements Service
delivered by Supplier in accordance with this Agreement shall transfer to BGE at
the Delivery Point. As between the Parties, Supplier shall be deemed to be in
exclusive control (and responsible for any damages or injury caused thereby) of
Full Requirements Service prior to the Delivery Point and BGE shall be deemed to
be in exclusive control (and responsible for any damages or injury caused
thereby) of Full Requirements Service at and after the Delivery Point.
4.2 Network Integration Transmission Service.
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BGE shall be responsible, at its sole cost and expense, for the
provision of Network Integration Transmission Service pursuant to the PJM OATT
and distribution service at and from the Delivery Point.
4.3 Load Response Resources.
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During the Delivery Term, BGE will operate its Load Response Resources
in accordance with the provisions of the Electricity Supplier Coordination
Tariff and the applicable Riders to the Retail Electric Service Tariff, as
amended and approved by the Maryland PSC from time to time. BGE shall be
responsible for payment of any credits to retail customers and for any penalties
assessed in accordance with the RAA for failure to implement its Load Response
Resources when so requested by PJM. BGE shall retain all of the benefits
associated with its Load Response Resources. BGE shall make the appropriate
adjustments and/or transactions in the retail load settlement process in order
for BGE to attain such benefits, which may require Supplier's confirmation,
which shall not be unreasonably withheld.
4.4 Sales for Resale.
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All Full Requirements Service delivered by Supplier to BGE hereunder
shall be sales for resale, with BGE reselling such Full Requirements Service. At
Supplier's request,
9
BGE shall obtain and provide Supplier with any resale certificates to evidence
that the deliveries hereunder are sales for resale.
ARTICLE 5
BILLING AND PAYMENT
5.1 Billing.
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On or before the sixth (6th) Business Day of each month, unless
otherwise agreed to by the Parties, BGE shall deliver to Supplier a statement
that sets forth:
(i) the allocation of the Supplier's 10 percent share of the SOS Load
for the preceding month among the Customer Classes;
(ii) the amount due and payable by BGE, based upon the Supplier's 10
percent share of the SOS Load for each Customer Class and the Prices applicable
thereto as set forth in Section 6.1; and
(iii) all other information reasonably requested by Supplier to
facilitate Supplier's verification of the foregoing values.
Such statement shall constitute an "invoice" or "bill" for purposes of
amounts due and payable for Full Requirements Service under this Agreement.
5.2 Payment.
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All invoices pursuant to Section 5.1 shall be due and payable, unless
otherwise agreed by the Parties, on the first Business Day after the 19th
calendar day of the month in which the invoice is rendered. Invoices shall be
sent electronically or by other means agreed to by the Parties. BGE will make
payments by wire transfer, or by other mutually agreeable method(s), to the
account of Supplier as designated by Supplier. Any amounts, both principal and
interest, remaining unpaid after the due date will be deemed delinquent and will
accrue interest at the Interest Rate, such interest to be calculated from the
due date to the date the unpaid amount is paid in full.
5.3 Disputed Bills.
--- ---------------
If either Party, in good faith, disputes an invoice, the disputing
Party shall immediately notify the other Party of the basis for the dispute and,
in the case of a dispute by BGE, pay the portion of such statement conceded to
be correct no later than the due date. Each Party shall have the right to
dispute any invoice prior to the lapse of 12 months from the rendition thereof.
10
If any disputed amount is ultimately determined to be due to Supplier, it shall
be paid within two (2) Business Days, unless otherwise agreed to by the Parties,
of such determination along with interest accrued at the Interest Rate from the
due date of the bill to which the dispute relates, to the date the additional
charge is paid. If any disputed amount is ultimately determined to be due to
BGE, it shall be paid within two (2) Business Days, unless otherwise agreed to
by the Parties, of such determination along with interest accrued at the
Interest Rate from the date the amount being refunded was received by Supplier,
to the date the refund is made.
5.4 Billing Adjustments.
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(a) The invoices rendered hereunder may be adjusted by the Party
rendering such invoice for any errors in arithmetic, computation, meter
readings, estimating, or otherwise no later than twelve (12) months after the
date the bill was rendered. Any billing adjustment shall be in writing and shall
state the specific basis for the adjustment. A billing adjustment shall
constitute a new bill for the purposes of this Section 5.4. An adjusted bill
shall be binding on the Parties twelve (12) months after the bill is rendered.
(b) Overpayments or underpayments resulting from a billing adjustment
shall bear interest calculated at the Interest Rate. In the case of an
underpayment, interest shall accrue from the due date of the bill to which the
adjustment relates, to the date the additional charge is paid. In the case of an
overpayment, interest shall accrue from the date the amount being refunded was
received, to the date the refund is made.
5.5 PJM Billing.
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(a) BGE shall request PJM to invoice Supplier directly for charges and
credits relating to Supplier's obligation to deliver Full Requirements Service
to BGE under this Agreement. BGE shall also request PJM to invoice BGE
separately for charges and credits relating to BGE's rights and obligations as a
Network Integration Transmission Service customer and a Transmission Owner and
otherwise as the Parties agree. Appendix A attached hereto and made a part
hereof allocates between Supplier and BGE the charges and credits currently
included on a PJM bill. In the event that either Party is billed by PJM for
charges and/or credits identified in Appendix A, but not allocated in accordance
with Appendix A, BGE shall rectify such billing in the Full Requirements Service
invoice to be in accordance with Appendix A.
(b) Any additional charges or credits imposed by PJM that are not
identified in Appendix A will be allocated to BGE and Supplier in a manner that
is consistent with Supplier's Full Requirements Service obligations and BGE's
transmission-related obligations. For avoidance of doubt, charges associated
with entities defaulting to PJM which are then allocated by PJM to BGE as an LSE
or Transmission Owner shall not be the responsibility of the Supplier.
11
ARTICLE 6
PRICE
6.1 Price.
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(a) The "Price" payable by BGE to Supplier for the delivery of Full
Requirements Service hereunder shall be equal to *** percent of the Generation
Shopping Credits stated in Appendix B.
(b) The prices stated in Appendix B associated with Schedules G Option
1, G Option 2, GS Option 1, GS Option 2, GL Secondary and GL Primary are subject
to change as a result of (i) the competitive transition charge true-up, which is
required under the Maryland PSC Order; and (ii) a change to the rate-making
treatment of the universal service charge, in accordance with the Maryland PSC
Order. Supplier agrees to accept these aforementioned price changes as they may
occur.
6.2 Taxes.
--- ------
(a) Supplier shall pay all Taxes levied in respect of the Full
Requirements Service, its sale, and the handling thereof prior to the Delivery
Point. BGE shall pay all such Taxes levied on such Full Requirements Service at,
and from, the Delivery Point.
(b) For any new Taxes levied with respect to the Full Requirements
Service after the Effective Date and to the extent permitted by the settlement
and the Maryland PSC Order, BGE will fully support and pursue in good faith the
recovery of any such new Tax levied on Supplier from BGE's Full Requirements
Service customers. To the extent such new Taxes are recoverable by BGE from its
SOS customers, BGE shall reimburse Supplier for such Taxes paid by Supplier.
6.3 Payment Netting.
--- ----------------
Payments owing by each Party on any day under this Agreement or any
other agreement between the Parties shall be offset so that only the net amount
shall be paid by the Party having the greater payment obligation on such day.
12
The asterisks on this page denote that confidential portions of this exhibit
have been omitted in reliance on Rule 25(b)-2 of the Securities Exchange Act of
1934. The confidential portions have been submitted separately to the Securities
and Exchange Commission.
ARTICLE 7
EVENTS OF DEFAULT; REMEDIES
7.1 Events of Default. An "Event of Default" shall mean, with
respect to a Party ("Defaulting Party"), the occurrence of any of the following:
(i) the failure to make, when due, any payment required pursuant to
this Agreement if such failure is not remedied within five (5) Business Days
after written notice of such failure is given by the other Party and provided
the payment is not the subject of a good faith dispute as described in Article
5;
(ii) any representation or warranty made by the Defaulting Party
herein prove to be false or misleading in any material respect;
(iii) the failure of the Defaulting Party, in a material respect, to
perform or comply with any covenant or material obligation set forth in this
Agreement and such failure is not excused by Force Majeure or cured within three
(3) Business Days after receipt of written notice thereof from the other Party;
(iv) the failure of the Defaulting Party or its guarantor to maintain
any of the security requirements set forth in Article 8, and such failure is not
cured or rectified within ten (10) days after notice from the other Party;
(v) the Defaulting Party shall be subject to a Bankruptcy Proceeding
("Bankruptcy Proceeding" means with respect to a Party, such Party (a) files a
petition or otherwise commences a proceeding under any bankruptcy, insolvency,
reorganization or similar law, or has any such petition filed or commenced
against it, (b) makes an assignment or any general arrangement for the benefit
of creditors, (c) otherwise becomes bankrupt or insolvent (however evidenced),
(d) has a liquidator, administrator, receiver, trustee, conservator or similar
official appointed with respect to it or any substantial portion of its property
or assets, or (e) is unable to pay its debts as they fall due).
7.2. Remedies upon an Event of Default.
---- ----------------------------------
(a) After the occurrence of an Event of Default with respect to a
Defaulting Party, the other Party (the "Non-Defaulting Party") shall have the
right, without prior notice, to liquidate and terminate this Agreement at any
time and from time to time, with the minimum period of notice required by FERC,
if applicable, and shall calculate, in a commercially reasonable manner, a
Settlement Amount for this Agreement as of the time of its termination or as
soon thereafter as is reasonably practicable and shall net such Settlement
Amounts in the manner provided for in Section 7.2(c).
13
(b) "Settlement Amount" shall mean, with respect to this Agreement and
the Non-Defaulting Party, the losses and costs (or gains), expressed in U.S.
Dollars, which such party incurs as a result of the liquidation, including, but
not limited to, losses and costs (or gains) based upon the then current
replacement value of this Agreement together with, at the Non-Defaulting Party's
option, but without duplication, all losses and costs which such party incurs as
a result of maintaining, terminating, obtaining or re-establishing any hedge or
related trading positions. The Settlement Amount shall be due to or from the
Non-Defaulting Party as appropriate. In calculating a Settlement Amount, the
Non-Defaulting Party shall discount to present value (in a commercially
reasonable manner based on the Prime Rate as of the date of termination) any
amount which would otherwise have been due at a later date and shall add
interest at the Prime Rate to any amount due prior to the date of the
calculation. "Prime Rate" shall mean the prime rate of interest as published
from time to time under "Money Rates" by The Wall Street Journal.
(c) If the Settlement Amount (i) is due the Non-Defaulting Party, the
Non-Defaulting Party shall set off against the Settlement Amount any Margin then
available to the Non-Defaulting Party, plus (at the Non-Defaulting Party's
election) any or all other amounts due to the Defaulting Party under this
Agreement; or (ii) is due the Defaulting Party, the Non-Defaulting Party shall
set off against the Settlement Amount any Margin then available to the
Defaulting Party, plus (at the Non-Defaulting Party's election) any or all other
amounts due to the Non-Defaulting Party under this Agreement, so that all such
amounts shall be netted to a single liquidated amount (the "Termination
Payment") payable by one Party to the other. "Margin" shall mean cash,
securities or other property held by or due from one Party to guarantee or
secure obligations of the other party under the Agreement.
(d) Notice that a liquidation pursuant to this Article 7.2 has occurred
shall be given by the Non-Defaulting Party to the Defaulting Party before the
close of business on the Business Day following such liquidation, provided that
failure to give such notice shall not affect the validity or enforceability of
the liquidation or give rise to any claim by the Defaulting Party against the
Non-Defaulting Party. The notice shall specify the amount of the Termination
Payment and whether it is owed by or to the Defaulting Party. The notice shall
include a written statement explaining in reasonable detail the calculation of
such amount. The Termination Payment shall be made by the Party that owes it on
the second Business Day after such notice is given.
(e) If the Defaulting Party disputes the Non-Defaulting Party's
calculation of the Termination Payment, in whole or in part, the Defaulting
Party shall, within two (2) Business Days of receipt of Non-Defaulting Party's
calculation of the Termination Payment, provide to the Non-Defaulting Party a
detailed written explanation of the basis for such dispute and, if the
Termination Payment is due from the Defaulting Party, shall promptly pay to the
Non-Defaulting Party such portion thereof as is conceded to be correct. If the
Parties cannot resolve such dispute within three (3) Business Days of the
Non-Defaulting Party's receipt of the Defaulting Party's written explanation,
then the Defaulting Party may submit such dispute to arbitration in accordance
with the arbitration procedures set forth in Section 13.10 hereof; provided,
however, that if the Termination Payment is due from the Defaulting Party, the
Defaulting Party shall first transfer
14
collateral (of a type and in a form acceptable to the Non-Defaulting Party) to
the Non-Defaulting Party in an amount equal to the disputed and unpaid portion
of the Termination Payment. Any payment that is due as a result of the
arbitrator's award shall be paid by the Party that owes it within two (2)
Business Days after the award is rendered.
(f) The enumeration of the foregoing remedies shall not be deemed a
waiver of any other remedies, legal or equitable, to which either Party is
entitled.
7.3 Setoffs.
--- --------
(a) Without limiting its rights under this Article 7 or otherwise,
after an Event of Default, the Non-Defaulting Party may from time to time set
off any or all amounts which the Defaulting Party owes to it (whether under the
Agreement or otherwise and whether or not then due) against any or all amounts
which it owes to the Defaulting Party (whether under the Agreement or otherwise
and whether or not then due), provided that any amount not then due which is
included in such setoff shall be discounted to present value (in the manner
specified in Section 7.2(b)) as at the time of setoff (to take account of the
period between the date of setoff and the date on which such amount would have
otherwise been due).
(b) Notwithstanding any other provision of this Agreement, after the
occurrence of an Event of Default, or an event which, with the giving of notice
or the passage of time or both, would constitute an Event of Default, with
respect to a Party, the other Party shall have the right to suspend performance
under this Agreement.
7.4 Other Terminating Events.
--- -------------------------
(a) If performance by either Party (an "Affected Party") under this
Agreement becomes subject to regulation of any kind whatsoever under any law,
rule, regulation, order or the like, including any change by the FERC regarding
a Party's authority to sell wholesale power at market-based rates, to a greater
or different extent than that existing on the Effective Date and such regulation
renders this Agreement illegal or unenforceable then such Party (or either Party
if both Parties are Affected Parties) may terminate and liquidate this Agreement
("Early Termination Date") in the manner contemplated by Section 7.2 above,
which notice shall specify the basis for declaring such Early Termination Date.
(b) If an Early Termination Date is declared under circumstances
described in Section 7.4 (a) above, both Parties shall calculate their
respective gains, losses or costs in respect of this Agreement as provided in
Section 7.2, and endeavor in good faith to agree upon the Termination Payment
payable by either Party, and notify the other Party of the Termination Payment,
as provided in Section 7.2.
15
7.5 Duty to Mitigate.
--- -----------------
Each Party agrees that it has a duty to mitigate damages and covenants
that it will use commercially reasonable efforts to minimize any damages it may
incur as a result of the other Party's failure to perform pursuant to this
Agreement.
ARTICLE 8
CREDIT SUPPORT
8.1 Supplier Credit Support.
--- ------------------------
(a) On or before the Effective Date, unless Supplier satisfies the
Creditworthiness Criteria at such time, as security for Supplier's obligations
hereunder, Supplier shall deliver to BGE a guaranty of payment from either
Parent, or another Affiliate of Supplier that satisfies the Creditworthiness
Criteria, in an amount equal to the reasonably determined credit exposure of BGE
to Supplier taking into account such factors as market risk, settlement risk,
the underlying creditworthiness of Supplier, or such other considerations as are
commercially reasonable under the circumstances. Such credit support shall be
available to be drawn upon by BGE in the event of a default by Supplier of its
obligations hereunder, and, subject to Sections 8.1(b) and (c), shall be
maintained in effect (by annual renewal or otherwise) by Supplier for the Term
of this Agreement.
(b) Supplier may, at any time during the Term of this Agreement and at
its election, deliver substitute credit support to BGE in any of the following
forms: (i) a direct pay irrevocable letter of credit directed to BGE from a
commercial bank with long-term debt ratings of "Baa2" or better from Moody's and
"BBB" or better from S&P; (ii) a performance bond issued by a surety company
with a rating of "B+" or better from A.M. Best Company; or (iii) such other
credit support that is acceptable to BGE. The substitute credit support to BGE
will be in an amount equal to the reasonably determined credit exposure of BGE
to Supplier taking into account such factors as market risk, settlement risk,
the underlying creditworthiness of Supplier, or such other considerations as are
commercially reasonable under the circumstances.
(c) If at any time during the Term of this Agreement Supplier satisfies
the Creditworthiness Criteria, its obligation to deliver any credit support
pursuant to this Section 8.1 shall be suspended for so long as Supplier
continues to satisfy the Creditworthiness Criteria. From and after the date on
which Supplier satisfies the Creditworthiness Criteria, Supplier shall certify
to BGE within thirty (30) days after the end of every calendar quarter that
Supplier satisfies the Creditworthiness Criteria (which certification shall
include evidence as BGE shall reasonably request from time to time), and shall
deliver financial statements to BGE certified by a firm of certified public
accountants of national standing at least annually within one hundred twenty
(120) days following the end of Supplier's fiscal year. If at any time
thereafter Supplier no longer satisfies the Creditworthiness Criteria, then
Supplier shall, within ten (10) Business
16
Days after receipt of a written notice with respect thereto, deliver a guaranty
that satisfies the requirements of Section 8.1(a) or other credit support in
accordance with Section 8.1(b).
8.2 BGE Credit Support.
- --- -------------------
(a) Commencing with the Effective Date and thereafter during the Term,
within thirty (30) days after the end of every calendar quarter, BGE shall
certify to Supplier that it satisfies the Creditworthiness Criteria (which
certification shall include evidence as Supplier shall reasonably request from
time to time), and shall deliver financial statements to Supplier certified by a
firm of certified public accountants of national standing at least annually
within one hundred twenty (120) days following the end of BGE's fiscal year. BGE
may satisfy its obligation under this paragraph by delivering a copy of its
parent company's Annual Report or Form 10K. If at any time during the Term BGE
no longer satisfies the Creditworthiness Criteria, then BGE shall, within ten
(10) Business Days after receipt of a written notice with respect thereto,
deliver to Supplier, in an amount equal to the reasonably determined credit
exposure of Supplier to BGE taking into account such factors as market risk,
settlement risk, the underlying creditworthiness of BGE, or such other
considerations as are commercially reasonable under the circumstances, either:
(i) a guaranty of payment from either Parent or another Affiliate of BGE that
satisfies the Creditworthiness Criteria; (ii) a letter of credit directed to
Supplier from a commercial bank with long-term debt ratings of "Baa2" or better
from Moody's and "BBB" or better from S&P; (iii) a performance bond issued by a
surety company with a rating of "B+" or better from A.M. Best Company; or (iv)
such other credit support that is acceptable to Supplier.
(b) If at any time after delivering credit support pursuant to Section
8.2(a), BGE satisfies the Creditworthiness Criteria, then its obligation to
deliver any credit support pursuant to this Section 8.2 shall be suspended for
so long as BGE continues to satisfy the Creditworthiness Criteria, as provided
in Section 8.2(a).
8.3 Modification or Waiver.
--- -----------------------
The Parties may agree in writing to modify or waive the provisions of
Article 8.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification.
--- ----------------
Each Party ("Indemnifying Party") shall indemnify, defend and hold
harmless the other Party ("Indemnified Party") and its Affiliates, trustees,
directors, board members, officers, employees and agents from any and all Claims
arising from or out of any event, circumstance, act or incident occurring during
the period when control and title to Full Requirements Service is vested, as
between the Parties as provided in Section 4.1, in the Indemnifying Party.
17
"Claims" means all claims or actions, threatened or filed and, whether
groundless, false or fraudulent, that directly or indirectly relate to the
subject matter of an indemnity, and the resulting losses, damages, expenses,
attorney's fees and court costs, whether incurred by settlement or otherwise,
and whether such claims or actions are threatened or filed prior to or after the
termination of the Agreement. In the event injury or damage results from the
joint or concurrent negligent or willful misconduct of the Parties, each Party
shall be liable under this indemnification in proportion to its relative degree
of fault. Such duty to indemnify shall not apply to any claims which arise or
are first asserted more than two (2) years after the termination of this
Agreement.
9.2 Indemnification Procedure.
--- --------------------------
Each Indemnified Party shall promptly notify the Indemnifying Party of
any Claim with respect to which the Indemnified Party is entitled to be
indemnified hereunder. Such notice shall be given as soon as is reasonably
practicable after the Indemnified Party becomes aware of each Claim; provided,
however, that failure to give prompt notice shall not adversely affect any Claim
for indemnification hereunder except to the extent the Indemnifying Party's
ability to contest any Claim by any third party is materially adversely
affected. The Indemnifying Party shall have the right, but not the obligation,
at its expense, to contest, defend and litigate, and to control the contest,
defense or litigation of, any Claim by any third party alleged or asserted
against any Indemnified Party arising out of any matter with respect to which
such Indemnified Party is entitled to be indemnified hereunder. The Indemnifying
Party shall promptly notify such Indemnified Party of its intention to exercise
such right set forth in the immediately preceding sentence and shall reimburse
the Indemnified Party for the reasonable costs and expenses paid or incurred by
it prior to the assumption of such contest, defense or litigation by the
Indemnifying Party. If the Indemnifying Party exercises such right in accordance
with the provisions of this Section 9 and any Indemnified Party notifies the
Indemnifying Party that it desires to retain separate counsel in order to
participate in or proceed independently with such contest, defense or
litigation, such Indemnified Party may do so at its own expense. If the
Indemnifying Party fails to exercise its rights set forth in the third sentence
of this paragraph, then the Indemnifying Party shall reimburse the Indemnified
Party for its reasonable costs and expenses incurred in connection with the
contest, defense or litigation of such Claim.
ARTICLE 10
LIMITATION OF LIABILITY
UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE LIABLE TO THE
OTHER PARTY FOR ANY CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT
DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN
TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT IS THE INTENT
OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE
OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING
18
THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR
CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID
HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT
OR IMPOSSIBLE TO DETERMINE, OTHERWISE OBTAINING AN ADEQUATE REMEDY IS
INCONVENIENT AND THE LIQUIDATED DAMAGES CONSTITUTE A REASONABLE APPROXIMATION OF
THE HARM OR LOSS.
ARTICLE 11
FORCE MAJEURE
11.1 Definition.
---- -----------
(a) As used in this Agreement, "Force Majeure" means any cause beyond
the reasonable control of, and without the fault or negligence of, the Party
claiming Force Majeure. A Force Majeure shall include, without limitation,
sabotage, strikes, riots or civil disturbance, acts of God, acts of a public
enemy, drought, earthquake, flood, explosion (unless resulting from the fault or
negligence of the Party asserting Force Majeure), fire, lightning, landslide, or
any similar cataclysmic occurrence, or appropriation or diversion of electricity
by sale or order of any governmental authority having jurisdiction thereof, but
only if and to the extent that the event adversely affects the availability of
the PJM Transmission System or BGE distribution facilities, and such affected
facilities are necessary to deliver Full Requirements Service electricity to the
SOS Load.
(b) An event that affects the availability or cost of operating any
transmission or distribution facilities outside the PJM Control Area, affects
the availability or cost of operating a generating facility, or any event that
merely causes an economic hardship to either Party shall not be deemed a Force
Majeure.
11.2 Performance Excused.
---- --------------------
(a) If either Party is rendered wholly or partly unable to perform its
obligations under this Agreement because of Force Majeure as defined above, that
Party shall be excused from whatever performance is affected by the Force
Majeure, to the extent so affected, provided that:
(i) the non-performing Party promptly, but in no case longer
than three (3) Business Days after the occurrence of the Force Majeure,
gives the other Party written notice describing the particulars of the
occurrence;
(ii) the suspension of performance shall be of no greater
scope and of no longer duration than is reasonably required by the
Force Majeure;
19
(iii) the non-performing Party uses due diligence to remedy
its inability to perform and expeditiously takes reasonable action to
correct or cure the event or condition; and
(iv) the non-performing Party exercises all reasonable efforts
to mitigate or limit damages to the other Party. With respect to
Supplier, this shall mean that Supplier must purchase, at its own
expense, electricity from the PJM market to meet its obligations under
this Agreement, to the extent such electricity is available and
deliverable.
(b) Neither Party to this Agreement will be required by the foregoing
to settle a strike affecting it except when, according to its judgment, such a
settlement is advisable. Nothing in this Article 11 will excuse BGE from making
payment for services provided under this Agreement.
ARTICLE 12
REPRESENTATIONS AND WARRANTIES
Each Party represents and warrants to the other Party, as of the
Effective Date, that: (i) it is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation, (ii) it has all
regulatory authorizations necessary for it to legally perform its obligations
under this Agreement and any other documentation relating to this Agreement to
which it is a party, (iii) the execution, delivery and performance of this
Agreement and any other documentation relating to this Agreement to which it is
a party are within its powers, have been duly authorized by all necessary action
and do not violate any of the terms and conditions in its governing documents,
any contracts to which it is a party or any law, rule, regulation, order or the
like applicable to it, (iv) this Agreement and each other document executed and
delivered in accordance with this Agreement constitutes its legally valid and
binding obligation enforceable against it in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency or other laws
affecting the enforcement of creditors' rights and by general principles of
equity, (v) there are no Bankruptcy Proceedings pending or being contemplated by
it or, to its knowledge, threatened against it, (vi) there is not pending or, to
its knowledge, threatened against it or any of its Affiliates any legal
proceedings that could materially adversely affect its ability to perform its
obligations under this Agreement or any other document relating to this
Agreement to which it is a party except as disclosed in BGE's or BGE's parent
company's Form 10-Q for the quarterly period ended June 30, 2001 or Annual
Report for the fiscal year ended December 2000, as well as the proceedings
listed on Appendix C hereto, and (vii) no Event of Default or event which,
absent a cure, with the giving of notice or lapse of time, or both, would
constitute an Event of Default with respect to it has occurred and is continuing
and no such event or circumstance would occur as a result of its entering into
or performing its obligations under this Agreement or any other document
relating to this Agreement.
20
ARTICLE 13
MISCELLANEOUS
13.1 Regulatory Action.
---- ------------------
If, after the Effective Date, any court or agency having jurisdiction
over this Agreement finds any term or condition to be unjust, unreasonable or
otherwise unlawful, the Parties shall enter into good faith negotiations of such
changes as are reasonably required to conform to the requirements of law.
13.2 Assignment.
---- -----------
Neither Party shall assign this Agreement or its rights hereunder
without the prior written consent of the other Party; provided, however, either
Party may, without the consent of the other Party (and without relieving itself
from liability hereunder);
(i) transfer, sell, pledge, encumber or assign this Agreement or the
accounts, revenues or proceeds hereof in connection with any financing or other
financial arrangements;
(ii) transfer or assign this Agreement to an Affiliate of such Party
which Affiliate's creditworthiness is comparable to or higher than that of such
Party, or
(iii) transfer or assign this Agreement to any Person succeeding to all
or substantially all of the assets of such Party; provided, however, that said
successor Person possess creditworthiness comparable to or higher than such
Party and any such assignee shall agree to in writing be bound by the terms and
conditions hereof.
13.3 Compliance With Laws.
---- ---------------------
At all times during the term of this Agreement, the Parties shall
comply with all laws, rules, requisitions, and codes of all governmental
authorities having jurisdiction over each of their respective businesses which
are now applicable, or may be applicable hereafter, including without
limitation, all special laws, policies, ordinances, or regulations now in force,
as amended or hereafter enacted. The Parties hereto shall maintain all licenses,
permits and other consents from all governmental authorities having jurisdiction
for the necessary use and operation of their respective business. Nothing herein
shall be deemed a waiver of the Parties' right to challenge the validity of any
such law, rule or regulation.
13.4 Choice of Law and Jurisdiction.
---- -------------------------------
THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL
BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF MARYLAND, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
Except as provided in Section 13.11, all disputes hereunder or relating hereto
shall be resolved in the Federal or State courts of Maryland and each Party
hereby irrevocably submits to the in personam jurisdiction of
21
such courts. Each Party herein waives its respective right to any jury trial
with respect to any litigation arising under or in connection with this
Agreement.
13.5 Counterparts to this Agreement.
---- -------------------------------
This Agreement may be executed in any number of counterparts each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
13.6 Notices.
---- --------
All notices, requests, statements or payments shall be made as
specified below. Notices required to be in writing shall be delivered by letter,
facsimile or other documentary form. Notice by facsimile or hand delivery shall
be deemed to have been received by the close of the Business Day on which it was
transmitted or hand delivered (unless transmitted or hand delivered after close
in which case it shall be deemed received at the close of the next Business
Day). Notice by overnight mail or courier shall be deemed to have been received
two (2) Business Days after it was sent. A Party may change its addresses by
providing notice of same in accordance herewith:
To ALLEGHENY ENERGY SUPPLY COMPANY, LLC:
--------------------------------------
NOTICES & CORRESPONDENCE: PAYMENTS:
- ------------------------ --------
Joseph P. Limone Federal Wire Transfer
909 Third Avenue, 33rd Floor ***
New York, New York 10022 ABA Routing ***
FAX No.: (212) 224-8720 Account: Allegheny Energy Supply Co., LLC
Phone No.: (212) 224-8690 Account #: ***
INVOICES: CREDIT AND COLLECTIONS:
- -------- ----------------------
Michael Schubiger Michael Schubiger
909 Third Avenue, 33rd Floor 909 Third Avenue, 33rd Floor
New York, New York 10022 New York, New York 10022
FAX No.: (212) 224-8438 FAX No.: (212) 224-8438
Phone No.: (212) 224-7028 Phone No.: (212) 224-7028
SCHEDULING:
- -----------
Scheduling Desk
909 Third Avenue, 33rd Floor
New York, New York 10022
FAX No.: (212) 224-8720
Phone No.: (212) 224-8750
22
The asterisks on this page denote that confidential portions of this exhibit
have been omitted in reliance on Rule 25(b)-2 of the Securities Exchange Act of
1934. The confidential portions have been submitted separately to the Securities
and Exchange Commission.
To BGE:
---
NOTICES & CORRESPONDENCE: PAYMENTS:
- ------------------------ --------
Baltimore Gas and Electric Company Federal Wire Transfer
General Counsel ***
39 W. Lexington Street ABA Routing ***
Baltimore, Maryland 21201 Account: Baltimore Gas & Electric Company
FAX No.: (410) 234-7043 Account # ***
Phone No.: (410) 234-5805
INVOICES: CREDIT AND COLLECTIONS:
- -------- ----------------------
Attn: Electric Supply Manager - Finance & Accounting
7225 Windsor Boulevard 39 West Lexington Street, 11th Floor
Baltimore, Maryland 21244 Baltimore, Maryland 21201
FAX No.: (410) 265-4005 FAX No.: (410) 234-5858
Phone No.: (410) 265-4229 Phone No.: (410) 234-6888
SCHEDULING:
- ----------
Attn: Electric Supply
7225 Windsor Boulevard
Baltimore, Maryland 21244
FAX No.: (410) 265-4005
Phone No.: (410) 265-4229
13.7 Confidentiality.
---- ----------------
Each Party agrees that it will treat in strictest confidence all
documents, materials, and other information marked "Confidential" or
"Proprietary" by the disclosing Party ("Confidential Information") which it
shall have obtained regarding the other Party during the course of the
negotiations leading to, and its performance of, this Agreement (whether
obtained before or after the date of this Agreement). Confidential Information
shall not be communicated to any third person (other than to the receiving
Party's counsel, accountants, financial or tax advisors, or in connection with
its financings); provided that in the event the receiving Party is required by
law, regulation or court order to disclose any Confidential Information, the
receiving Party will promptly notify the disclosing Party in writing prior to
making any such disclosure in order to facilitate the disclosing Party's seeking
a protective order or other appropriate remedy from the proper authority and
further provided that the receiving Party further agrees that if the disclosing
Party ultimately discloses such Confidential Information to the requesting legal
body, it will furnish only that portion of the Confidential Information which is
legally required and will
23
The asterisks on this page denote that confidential portions of this exhibit
have been omitted in reliance on Rule 25(b)-2 of the Securities Exchange Act of
1934. The confidential portions have been submitted separately to the Securities
and Exchange Commission.
exercise all reasonable efforts to obtain reliable assurances that confidential
treatment will be accorded the Confidential Information. The Parties shall be
entitled to all remedies available at law or in equity to enforce, or seek
relief in connection with these confidentiality obligations.
13.8 General.
---- --------
This Agreement (including the Appendices hereto) constitutes the entire
agreement between the Parties relating to the subject matter contemplated by
this Agreement. The Agreement shall be considered for all purposes as prepared
through the joint efforts of the Parties and shall not be construed against one
Party or the other as a result of the preparation, substitution, submission or
other event of negotiation, drafting or execution hereof. No amendment or
modification to this Agreement shall be enforceable unless reduced to writing
and executed by both Parties. This Agreement shall not impart any rights
enforceable by any third-party (other than a permitted successor or assignee
bound to this Agreement). No waiver by a Party of any default by the other Party
shall be construed as a waiver of any other default. Any provision declared or
rendered unlawful by any applicable court of law or regulatory agency or deemed
unlawful because of a statutory change will not otherwise affect the remaining
lawful obligations that arise under this Agreement. The term "including" when
used in this Agreement shall be by way of example only and shall not be
considered in any way to be in limitation. The headings used herein are for
convenience and reference purposes only. All indemnity and audit rights shall
survive the termination of this Agreement for two years.
13.9 Changes in Rates, Charges, Terms or Conditions.
---- -----------------------------------------------
Each Party hereby waives its rights to seek any change to the rates,
charges, terms and conditions contained in this Agreement under Sections 205 or
206 of the Federal Power Act, as either section may be amended or superseded or
to support a complaint or other judicial, regulatory or legislative action
seeking a change in this Agreement, absent mutual written agreement of the
Parties. It is the intent of this Section that, to the maximum extent permitted
by law, the rates, charges, terms and conditions of this Agreement shall not be
subject to change, regardless of whether such change is sought (a) by the FERC
acting sua sponte on behalf of a Party or a third party, (b) by a Party, (c) by
a third party, or (d) in any other manner.
13.10 Arbitration Proceedings.
----- ------------------------
(a) In the event that any dispute or need for interpretation arises
between the Parties hereto pertaining to the calculation of a Termination
Payment or a payment otherwise required pursuant to this Agreement, the Parties
shall refer the matter to their duly authorized representatives for resolution.
Should such representatives of the respective Parties fail to resolve the
dispute within ten (10) days from such referral, the Parties agree that any such
dispute will not be referred to any court, but will be referred to binding
arbitration in the city where BGE's corporate headquarters is located.
24
(b) If any dispute has not been resolved by the duly authorized
representatives with ten (10) days from referral to them, either Party may give
notice, in writing, to the other Party of its desire to submit the dispute to
arbitration and may designate an arbitrator. Within ten (10) days after the
receipt of such notice, the other Party may, in writing, serve upon the Party
invoking such arbitration, a notice designating an arbitrator on its behalf. The
two arbitrators so chosen shall within fifteen (15) days after the appointment
of the second arbitrator designate, in writing, a third arbitrator. Upon the
failure of the Party notified to appoint the second arbitrator within the
permitted time, the Parties shall proceed with arbitration using a single
arbitrator. If the first and second arbitrators are unable to agree on a third
arbitrator within (15) days of the appointment of the second arbitrator, the
first and second arbitrator shall invoke the services of the American
Arbitration Association ("AAA") to appoint a third arbitrator. The third
arbitrator shall, to the extent practicable, have special competence and
experience with respect to the subject matter under consideration. Any
arbitrator so appointed under this Section shall have full authority to act
pursuant to this Section. No arbitrator so appointed shall have the authority to
amend or add to this Agreement. The arbitrator or arbitrators shall, thereupon,
proceed promptly to hear and determine the controversy pursuant to the then
current rules of the American Arbitration Association for the conduct of
commercial arbitration proceedings. Such arbitrator or arbitrators shall fix a
time within which the matter shall be submitted to the arbitrator or the panel
by either or both of the Parties. The arbitrator or the panel shall make a
decision on the dispute within ten (10) days of final submission by the Parties.
The decision of the single arbitrator, or two of the three arbitrators, shall be
taken as the arbitration decision. Such decision shall be made in writing and in
duplicate, and one copy shall be delivered to each of the Parties. The
arbitrator(s) shall determine the manner in which the expense of the arbitration
shall be borne, except that each Party shall pay the costs of its own counsel.
Each Party shall accept and abide by the decision. The award shall be final
except as otherwise provided by applicable law. Judgment upon such award may be
entered by the prevailing Party in any Maryland state circuit court or any
federal court within Maryland or application may be made in any such court for
judicial acceptance of such award and an order of enforcement.
13.11 Audit.
----- ------
Each Party has the right, at its sole expense and during normal working
hours, to examine the records of the other Party to the extent reasonably
necessary to verify the accuracy of any statement, charge or computation made
pursuant to this Agreement. If requested, a Party shall provide to the other
Party statements evidencing the quantities of Full Requirements Service
delivered at the Delivery Point. If any such examination reveals any inaccuracy
in any statement, the necessary adjustments in such statement and the payments
thereof will be made promptly and shall bear interest at the Interest Rate from
the date the overpayment or underpayment was made until paid; provided, however,
that no adjustment for any statement or payment will be made unless objection to
the accuracy thereof was made prior to the lapse of 12 months from the rendition
thereof.
25
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date set forth at the beginning of this Agreement.
BALTIMORE GAS AND ELECTRIC COMPANY
By: _______________________________________
Name and Title: Frank O. Heintz
President and CEO
ALLEGHENY ENERGY SUPPLY COMPANY, L.L.C.
By: _______________________________________
Name and Title: Joseph P. Limone
Authorized Signatory for
Allegheny Energy Supply
Company, L.L.C.
26
APPENDIX A
TO
FULL REQUIREMENTS
SERVICE AGREEMENT
PAGE 1 of 4
PARTICIPANT: Baltimore Gas and Electric Company
FINAL BILLING STATEMENT ISSUED ON: MM/DD/YYYY
FOR PERIOD: MM/DD/YYYY TO MM/DD/YYYY
- --------------------------------------------------------------------------------
Billing Statement Summary: Total
Net Charge/Credit per Operating Agreement of PJM Interconnection, L.L.C. $
Net Charge/Credit per PJM Open Transmission Tariff $
Net Charge/Credit per Reliability Assurance Agreement Among Load Serving
Entities in the PJM Control Area $
Total Net Charge/Credit. $
- --------------------------------------------------------------------------------
TERMS: PAYABLE IN FULL BY 01:00 PM EDT ON MM/DD/YYYY
WIRE TRANSFER FUNDS TO: PJM INTERCONNECTION, L.L.C
PNC BANK N.A.
NEW JERSEY
ABA NUMBER ****
ACCOUNT NUMBER ****
A-1
The asterisks on this page denote that confidential portions of this exhibit
have been omitted in reliance on Rule 25(b)-2 of the Securities Exchange Act of
1934. The confidential portions have been submitted separately to the Securities
and Exchange Commission.
APPENDIX A
TO
FULL REQUIREMENTS
SERVICE AGREEMENT
PAGE 2 of 4
PARTICIPANT: Baltimore Gas and Electric Company
FINAL BILLING STATEMENT ISSUED ON: MM/DD/YYYY
FOR PERIOD: MM/DD/YYYY TO MM/DD/YYYY
- --------------------------------------------------------------------------------
OPERATING AGREEMENT OF PJM INTERCONNECTION, L.L.C.:
Day-ahead Balancing Total
Charges:
Spot Market Energy $ Supplier $ Supplier $ Supplier
Regulation $ Supplier
Operating Reserves $ Supplier $ Supplier $ Supplier
Transmission Congestion $ Supplier $ Supplier $ Supplier
Transmission Losses $ Supplier $ Supplier $ Supplier
Emergency Energy $ Supplier
Capacity Credit Market $ Supplier
FTR Auction $ Supplier
Meter Error Correction $ Supplier
Unscheduled Transmission Service $ Supplier
Ramapo PAR Facilities $ BGE
Reconciliation for Spot Market $ Supplier
Reconciliation for Regulation $ Supplier
Reconciliation for Operating Reserves $ Supplier
Credits:
Spot Market Energy $ Supplier $ Supplier $ Supplier
Regulation $ Supplier
Operating Reserves $ Supplier $ Supplier $ Supplier
Transmission Congestion $ BGE
Transmission Losses $ Supplier
Emergency Energy $ Supplier
Capacity Credit Market $ Supplier
FTR Auction $ Supplier
FTR Auction Revenue Allocations $ BGE
Ramapo PAR $ BGE
Reconciliation for Transmission Losses $ Supplier
Unscheduled Transmission Service $ BGE
- --------------------------------------------------------------------------------
A-2
APPENDIX A
TO
FULL REQUIREMENTS
SERVICE AGREEMENT
PAGE 3 of 4
PARTICIPANT: Baltimore Gas and Electric Company
FINAL BILLING STATEMENT ISSUED ON: MM/DD/YYYY
FOR PERIOD: MM/DD/YYYY TO MM/DD/YYYY
- -------------------------------------------------------------------------------------------
PJM OPEN ACCESS TRANSMISSION TARIFF:
Total
Charges:
PJM Scheduling, System Control and Dispatch Service $ Supplier
RTO Scheduling, System Control and Dispatch Service $ Supplier
Reactive Supply and Voltage Control from Generation Sources Service $ Supplier
Network Integration Transmission Service $ BGE
Firm Point-to-Point Transmission Service $ Supplier
Non-Firm Point-to-Point Transmission Service $ Supplier
Firm Point-to-Point - Other Supporting Facilities and Taxes $ Supplier
Non-Firm Point-to-Point - Other Supporting Facilities and Taxes $ Supplier
Mid-Atlantic Area Council $ BGE
Distribution Facilities $ Supplier
Reconciliation for PJM Scheduling, System Control and Dispatch Service $ Supplier
Reconciliation for RTO Scheduling, System Control and Dispatch Service $ Supplier
Special Studies $ Requestor
Credits:
RTO Scheduling, System Control and Dispatch Service $ BGE
Reactive Supply and Voltage Control from Generation Sources Service $ Supplier
Network Integration Transmission Service $ BGE
Firm Point-to-Point Transmission Service $ BGE
Non-Firm Point-to-Point Transmission Service $ BGE
Distribution Facilities $ BGE
- -------------------------------------------------------------------------------------------
A-3
APPENDIX A
TO
FULL REQUIREMENTS
SERVICE AGREEMENT
PAGE 4 of 4
PARTICIPANT: Baltimore Gas and Electric Company
FINAL BILLING STATEMENT ISSUED ON: MM/DD/YYYY
FOR PERIOD: MM/DD/YYYY TO MM/DD/YYYY
- --------------------------------------------------------------------------------
Reliability Assurance Agreement Among Load Serving Entities in the PJM Control
Area:
Total
Charges:
Capacity Deficiency $ Supplier
Credits:
Capacity Excess $ Supplier
- --------------------------------------------------------------------------------
A-4
APPENDIX B
TO
FULL REQUIREMENTS
SERVICE AGREEMENT
CONFIDENTIAL
Generation Shopping Credits
Residential Service - Schedule R
Jul 2003 - May 2004 Jun 2004 - May 2005 Jun 2005 - May 2006 Jun-06
------------------- ------------------- ------------------- ------
Energy Charges in (cent)/kWh
Summer 5.286 5.396 5.492 5.756
Non-Summer 3.489 3.599 3.695 n/a
Residential Large Service - Schedule RL-1
Jul 2003 - May 2004 Jun 2004 Jul 2004 - May 2005 Jun 2005 - May 2006 Jun-06
------------------- -------- ------------------- ------------------- ------
Energy Charges in (cent)/kWh
Summer
Peak 7.279 7.389 7.528 7.624 7.888
Intermediate-Peak 5.172 5.282 5.376 5.472 5.736
Off-Peak 2.895 3.005 3.050 3.146 3.410
Non-Summer
Peak 3.985 n/a 4.164 4.260 n/a
Intermediate-Peak 3.622 n/a 3.793 3.889 n/a
Off-Peak 2.689 n/a 2.841 2.937 n/a
Residential Optional Time-of-Use Service - Schedule RL-2
Jul 2003 - May 2004 Jun 2004 - May 2005 Jun 2005 - May 2006 Jun-06
------------------- ------------------- ------------------- ------
Energy Charges in (cent)/kWh
Summer
Peak 7.921 8.031 8.127 8.391
Intermediate-Peak 5.607 5.717 5.813 6.077
Off-Peak 3.104 3.214 3.310 3.574
Non-Summer
Peak 4.301 4.411 4.507 n/a
Intermediate-Peak 3.904 4.014 4.110 n/a
Off-Peak 2.879 2.989 3.085 n/a
Economy Service - Schedule ES
Jul 2003 - May 2004 Jun 2004 - May 2005 Jun 2005 - May 2006 Jun-06
------------------- ------------------- ------------------- ------
Energy Charges in(cent)/kWh 2.627 2.737 2.833 3.097
General Service - Schedule G
Jul 2003 - Jun 2004
-------------------
Option 1:
Energy Charges in(cent)/kWh
Summer 5.368
Non-Summer 3.739
Option 2:
Energy Charges in(cent)/kWh
Summer 5.270
Non-Summer 3.641
General Service Small - Schedule GS
Jul 2003 - Jun 2004
-------------------
Option 1:
Energy Charges in(cent)/kWh
Summer
Peak 7.383
Intermediate-Peak 5.563
Off-Peak 3.177
Non-Summer
Peak 4.462
Intermediate-Peak 4.088
Off-Peak 3.070
Option 2:
Energy Charges in(cent)/kWh
Summer
Peak 7.284
Intermediate-Peak 5.464
Off-Peak 3.079
Non-Summer
Peak 4.363
Intermediate-Peak 3.990
Off-Peak 2.973
B-1
APPENDIX B
TO
FULL REQUIREMENTS
SERVICE AGREEMENT
General Service Large - Schedule GL
Jul 2003 - Jun 2004
-------------------
Secondary Service:
Demand Charges in $/kW
Summer 10.44
Non-Summer 4.85
Energy Charges in (cent)/kWh
Summer
Peak 4.238
Intermediate-Peak 3.049
Off-Peak 1.601
Non-Summer
Peak 2.561
Intermediate-Peak 2.219
Off-Peak 1.627
Primary Service:
Demand Charges in $/kW
Summer 10.15
Non-Summer 4.72
Energy Charges in (cent)/kWh
Summer
Peak 4.092
Intermediate-Peak 2.944
Off-Peak 1.535
Non-Summer
Peak 2.473
Intermediate-Peak 2.141
Off-Peak 1.558
Street Lighting - Schedule SL
Jul 2003 - Jun 2004
-------------------
Energy Charges in(cent)/kWh 3.255
Private Area Lighting - Schedule PL
Jul 2003 - Jun 2006
-------------------
Energy Charges in(cent)/kWh 3.260
Default Service - Schedule DS market-based price1
Contract Classes
Class 1 market-based price1
Class 2 2.73(cent)/kWh2
1 "Market-based price" for Default Service and Contract Class 1 includes the
market price associated with energy, capacity and ancillary services, as
defined under the Default Service Schedule in BGE's Retail Electric Service
Tariff.
2 The price of Contract Class 2 varies with the Baltimore Locational Marginal
Price. The stated(cent)/kWh price represents the average price for the
12 months ending April 2001.
B-2
APPENDIX C
TO
FULL REQUIREMENTS
SERVICE AGREEMENT
LITIGATION DISCLOSURE
None.
C-1