FORT XXXXXX CONSTRUCTION AND OPERATING AGREEMENT, dated April
30, 1965, among DUQUESNE LIGHT COMPANY, a Pennsylvania corporation
("Duquesne"), MONONGAHELA POWER COMPANY, a West Virginia corporation
("Monongahela"), and THE POTOMAC EDISON COMPANY, a Maryland corporation
("Potomac").
1. Station.
Duquesne, Monongahela and Potomac (the "Companies") hereby
provide for the construction and operation of the first unit of
approximately 500,000 kw name plate capacity (the "First Unit") of a
steam electric generating station in Monongalia County, West Virginia, to
be owned by the Companies as tenants in common with undivided ownership
interests of Duquesne one-half, Monongahela one-quarter and Potomac one-
quarter (their respective "Ownership Shares"), all as contemplated in the
Deed dated April 30, 1965 (the "Deed") from Monongahela to Duquesne and
Potomac. The provisions of this Agreement are intended, as contemplated
in the Deed, to establish as among the Companies more detailed provisions
and procedures for carrying out provisions of the Deed.
2. Construction.
Construction of the First Unit shall be carried out by the
Companies under the general supervision and direction of a Construction
Committee, which shall be the Allegheny Power System Fort Xxxxxx
Construction Committee. Duquesne will have a representative on such
committee.
The Companies intend to use their best efforts toward the end
that the construction of the First Unit will be completed, and full-scale
operation commenced, on or before May 1, 1967.
The Companies shall, with reasonable expedition, enter into
contracts (which may be purchase order contracts) providing for (a) the
purchase of materials, equipment and services for, and construction of,
the First Unit and (b) insurance to insure all work under construction
against risks usually insured against for such work. Each such contract
shall provide, among other things, that the performance of the contract
shall be for the account of, and the charges therefor shall be billed to,
and paid by the Companies in proportion to their respective Ownership
Shares and that the invoices for such billing (Contractor's Invoice or
Invoices) shall be submitted in the names of the Companies. Each of the
Companies shall execute and deliver on its own behalf the contracts
providing for the purchase of the following: Steam generator, turbine-
generator, main transformers, equipment erection, piping installation,
electrical installation, structural steel, substructure, superstructure,
piping and equipment insulation, condenser, fly ash collectors, large
pumps, and consulting engineering work. For their convenience the
Companies may authorize an individual or individuals to execute and
deliver on behalf of the Companies all other contracts to be entered into
pursuant to this Section.
Books of account and records containing details of the items of
cost applicable to the construction of the First Unit shall be kept under
the supervision of the Construction Committee and shall be open to
examination at any time by any Company or its representatives.
The Construction Committee shall cause the Companies to be
furnished with counterparts of such books of account and records as they
may request. The basic books of account and records shall be turned over
to and maintained by the Operating Company referred to in Section 3.
3. Operation and Maintenance.
The First Unit shall be operated and maintained in accordance
with good utility operating practice.
The Companies shall establish an Operating Committee for the
purpose of establishing policies for the operation and maintenance of the
First Unit. The Companies shall be represented on the Operating
Committee in proportion to their Ownership Shares. The Operating
Committee shall meet at the call of any member.
The First Unit will be operated and maintained by one of the
Companies (the "Operating Company") in accordance with policies to be
established by the Operating Committee. Until otherwise agreed by all
the Companies, Monongahela shall be the Operating Company. The Operating
Company shall not be liable in respect of operation or maintenance except
for its gross negligence or willful misconduct. The Operating Company
shall keep books of account and records containing details of the items
of cost applicable to the operation and maintenance of the First Unit.
Such books of account and records shall be open to examination at any
time by any Company or its representatives. The Operating Company shall
furnish the Companies with counterparts of such books of account and
records as they may request.
4. Renewals, Replacements, Additions and Retirements.
Renewals and replacements necessary for the operation of the
First Unit shall be made as required by good utility operating practice.
Other renewals and replacements and any additions to the First Unit may
be made only by agreement of all the Companies. Retirements, sales and
other dispositions of First Unit property shall be effected only in a
manner consistent with the Companies' respective mortgage indentures, if
any. Renewals, replacements, additions, and retirements (and related
dispositions and sales) shall be effected by the Operating Company
subject to the policies established by the Operating Committee.
5. Title to Property.
Title to all property (including Common Facilities as defined in
the Deed) acquired or constructed in connection with the First Unit
(including without limitation property acquired for use or consumption in
connection with its construction, operation or maintenance) shall be in
the Companies as tenants in common in proportion to their Ownership
Shares, subject in the case of Common Facilities to any sales pursuant to
subparagraph 5 of the Deed. Construction, acquisitions and purchases
shall be made in such manner that title shall vest in accordance with the
foregoing.
6. Power and Energy.
Subject to Section 9, each Company shall at all times have full
ownership of and available to it at the First Unit the portion of the
generating capability of the First Unit and the energy associated there-
with, corresponding to its Ownership Share.
Each Company shall keep the Operating Company informed as to the
amount of power it requires to be generated for it.
Subject to its capability and to necessary or unavoidable
outages, the First Unit shall be operated so as to produce an output
equal to the sum of the power requirements of the Companies therefrom.
7. Expenditures.
All expenditures in respect of the First Unit shall be accounted
for in accordance with the Uniform System of Accounts prescribed by the
Federal Power Commission for Public Utilities and Licensees (Class A and
B Electric Utilities) as in effect on the date of this Agreement.
All expenditures (including without limitation all expenditures
or administration, labor, payroll taxes, employee benefits, maintenance,
materials, research and development, supplies nd services), except those
in respect of Common Facilities as defined in the Deed for the con-
struction, operation and maintenance (excluding fuel) of the First Unit
and for renewals, replacements, additions and retirements in respect
thereof shall be shared by the Companies in proportion to their Ownership
Shares. All such expenditures in respect of Common Facilities shall be
shared by the Companies in proportion to each Company's Ownership Share
(after reduction by a fraction equal to any fraction of such Company's
ownership interest in Common Facilities sold pursuant to the provisions
of the Deed). All expenditures in respect of the First Unit properly
chargeable to Account 501 (Fuel) of such Uniform System of Accounts for
any period shall be shared by the Companies pro rata according to the
total kilowatt hours of energy respectively taken by them from the First
Unit during such period.
Interest charges on borrowed funds, income taxes, and
property, business and occupation and like taxes, of each Company shall
be borne entirely by such Company; and such items, as well as
depreciation, amortization, and interest charged to construction, shall
not be deemed expenditures for purposes of this Section.
8. Joint Account.
The Companies shall maintain one or more joint accounts
(collectively, the "Joint Account") in a bank or banks agreed upon by
them, the title of each such account to include Duquesne (50%),
Monongahela (25%) and Potomac (25%). All expenditures referred to in the
second paragraph of Section 7 shall be paid out of the Joint Account.
From time to time the Construction Committee or the Operating
Company may request the Companies to advance to the Joint Account such
amount as is then needed for cash working capital. Within ten days
thereafter the Companies, pro rata according to their respective
Ownership Shares, shall deposit in the Joint Account the amount specified
in such request.
As promptly as practicable after the end of each month, the
Construction Committee or the Operating Company shall send to each of the
Companies a statement in reasonable detail of all expenditures for such
month and the amount of each Company's share thereof. Within ten days
after its receipt of such statement, each Company shall deposit its share
in the Joint Account.
The Construction Committee or Operating Company shall cause to
be drawn against the Joint Account, and to be delivered, checks or drafts
in the names of the Companies in payment of expenditures. Funds shall be
disbursed from the Joint Account in accordance with sound accounting and
disbursement procedures. All persons authorized to handle or disburse
funds from the Joint Account shall be bonded in favor of Duquesne,
Monongahela and Potomac, as their respective interests may appear, for
not less than $500,000.
9. Default.
During any period that a Company is in default in whole or in
part in making the most recent deposit in the Joint Account then required
under this Agreement, (a) such Company shall be entitled to no energy
from the First Unit during such period (but shall be obligated to pay any
damages to the non-defaulting Companies resulting from the default) and
(b) the non-defaulting Companies shall be entitled to all of the energy
from the First Unit in proportion to their Ownership Shares. No such
default shall affect any Company's ownership interest or any Company's
obligations under Sections 7 and 8.
10. Arbitration.
The Companies hereby declare their intention and agree that any
controversy arising out of or resulting to this Agreement or the Deed, or
the breach of either thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association and
that judgment upon the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof.
11. Term of Agreement.
This Agreement shall continue in full force and effect for a
period of forty-two years from the date hereof and for such longer period
as the Companies shall by mutual agreement continue to operate the First
Unit. Termination of this Agreement shall not terminate the provisions
of Section 10.
12. Amendment.
This Agreement may be amended from time to time or canceled at
any time, by an instrument or instruments in writing signed by all of the
Companies (or their successors or assigns).
13. Successors and Assigns.
This Agreement shall inure to the benefit of and bind the
successors and assigns of the parties hereto, but it may be assigned in
whole or in part only in connection with transfer to the assign of a
corresponding ownership interest in the First Unit.
IN WITNESS WHEREOF each of the parties has caused this Agreement
to be duly executed.
DUQUESNE LIGHT COMPANY
XXXXXX X. XXXXXX
Chairman of the Board
and President
MONONGAHELA POWER COMPANY
XXXX X. XXXXXXX
Vice President
THE POTOMAC EDISON COMPANY
XXXXXXX X. XXXX
President
