AGREEMENT
AMONG DELMARVA POWER & LIGHT COMPANY,
PECO ENERGY COMPANY AND PUBLIC SERVICE
ELECTRIC AND GAS COMPANY REGARDING LIABILITY
AND PERFORMANCE OBLIGATIONS OF THE PLANT OPERATOR
This Agreement dated May 27, 1997 is by and among Delmarva Power &
Light Company (hereinafter referred to as "DP&L"), PECO Energy Company (formerly
the Philadelphia Electric Company) hereinafter referred to as "PECO") and Public
Service electric and Gas Company (and Public Services Enterprise Group
Incorporated) (hereinafter referred to as "PSE&G"). DP&L, PECO Energy Company
and PSE&G are hereinafter collectively referred to as the "Parties."
RECITALS:
WHEREAS, DP&L and PECO Energy Company filed a lawsuit against PSE&G and
Public Services Enterprise Group Incorporated in the United States District
Court for the Eastern District of Pennsylvania styled Delmarva Power & Light
Company, et al. V. Public Service Enterprise Group, Inc., et al., C.A. No.
96-CV-1705 (E.D. Pa.) (hereinafter referred to as the "Litigation");
WHEREAS, DP&L, PECO and PSE&G are parties to the Salem Owners
Agreement, as amended, and are co-owners of the Salem Nuclear Generating Station
Xxxxx 0, 0 xxx 0 ("Xxxxx Xxxxxxx");
WHEREAS, DP&L, PECO and PSE&G are parties to the Peach Bottom Owners
Agreement, as amended, and are co-owners of the Peach Bottom Atomic Power
Station Units 2 and 3 ("Peach Bottom Station");
WHEREAS, in an order dated March 28, 1997, Judge Xxxxxxxx X. Xxxxxxxx
encouraged the Parties to enter into settlement negotiations, and supported the
use of an alternative dispute resolution process;
WHEREAS, the Parties engaged in an alternative dispute resolution
process with the assistance of the Xxxxxxxxx Xxxxxx X. Xxxxx, Xx., of New York,
New York, former United States District Judge for the Southern District of New
York; and
WHEREAS, in consideration for the settlement of the litigation and for
the additional consideration provided in this Agreement, the Parties desire to
minimize the possibility of future litigation among the Owners of the Salem and
Peach Bottom Stations and to establish for the remainder of the operating lives
of the Salem and Peach Bottom Stations the extent of responsibility of the
Owner-operator to the Non-operating Owner Parties of each Station for all
management or operating errors and omissions or the failure to generate power
and energy at either Station as economically and reliably as is practicable.
NOW, THEREFORE, as part of the settlement of the Litigation, in
consideration of the mutual covenants made by and between the Parties in
settling the Litigation and for other valuable consideration, the Parties,
intending to be legally bound, hereby agree as follows:
DEFINITIONS
Unless otherwise defined herein, the following terms used in this
Agreement shall have the meanings ascribed to them as set forth below:
(a) "Agreement" shall mean this Agreement Among DP&L, PECO and PSE&G
Regarding Liability and Performance Obligations of the Plant Operator.
(b) "Court" shall mean the United States District Court for the Eastern
District of Pennsylvania.
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(c) "Litigation" shall mean the lawsuit described in the recitals to
this Agreement and all contentions and claims made therein.
(d) "Salem Station" shall mean the Salem Nuclear Generating Station.
(e) "Peach Bottom Station" shall mean the Peach Bottom Atomic Power
Station.
(f) "Salem Owners Agreement" shall mean the owners Agreement for Salem
Nuclear Generating Station Units No. 1, 2 and 3, dated November 24, 1971, as
amended.
(g) "Peach Bottom owners Agreement" shall mean the Owners Agreement for
the Peach Bottom Atomic Power Station Units No. 2 and 3, dated November 24,
1971, as amended.
(h) "Owners Agreements" shall mean the Salem Owners Agreement and the
Peach Bottom Owners Agreement referred to collectively.
(i) "Owner-operator" refers to the owner which operates the Station(s)
under each Owners Agreement. PSE&G is the Owner-operator of the Salem Station.
PECO is the Owner-operator of the Peach Bottom Station.
(j) "Non-operating owner Parties" refers to the owners which do not
operate the Station(s) under each owners Agreement. For Salem, PECO and DP&L are
Non-operating owner Parties; for Peach Bottom, PSE&G and DP&L are Non-operating
Owner Parties.
(k) "Current Outage": Salem Station Unit 1 has been off line (i.e., not
producing electricity) since may 17, 1995, and Xxxx 0 since June '/, 1995. The
Current Outage for each unit shall mean from June 1, 1995 to the first day of
the month that is closest to the date of Synchronization of that unit with the
grid as described herein. In the event the date of Synchronization of a unit
with the grid falls on or between days 1 through 16 of a month, the Current
Outage for that unit shall mean from June 1, 1995 to the first day of the month
that the Synchronization with the grid takes place. In the event the date of
Synchronization of a unit with the grid falls on or between days 17 through 31
of a month, the Current Outage for that unit shall mean from June 1, 1995 to
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the first day of the next month following the date on which Synchronization with
the grid takes place.
(l) "Synchronization" shall have the special meaning accorded to it in
the electric power industry. In general (and without intending to modify or
alter its special meaning), the term refers to the point during restart at which
the turbine generator of the nuclear plant is synchronously interconnected with
the transmission grid and the first megawatt of sustained, continuous flow of
electricity begins to flow from the plant to the grid.
(m) "Replacement Power Costs" mean the costs incurred to obtain
electricity, whether it is generated or purchased, to replace the output of a
particular generation unit that is wholly or partially out of service. For
purposes of this Agreement, Replacement Power Costs also shall include any
alternative measure of the cost burden of maintaining a unit that is
nonproductive.
(n) "MDC" shall mean the maximum dependable capacity net. This shall be
defined, for each Station, as the gross electrical output measured at the output
terminals of the turbine generators during the most restrictive seasonal
conditions, less the station service load.
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TERMS AND CONDITIONS
1. This Agreement shall govern the relationship among the Parties with
respect to liability and performance obligations of the undersigned
Owner-operators of the Salem and Peach Bottom Stations.
2. The arrangements provided herein shall be effective for the Peach
Bottom Station beginning on January 1, 1998 and for the Salem Station beginning
on the later of the end of the Current Outage of Salem Unit 1 or Salem Unit 2.
As to Salem, if the above occurs prior to January 1, 1998, then the beginning
date for the Salem Station shall be January 1, 1998. The arrangements provided
herein shall continue for each Station until the date of retirement of both
units at that Station.
3. For the Salem Station, the following performance standards shall
apply:
a. The Owner-operator shall compensate the Non-operatinq Owner
Parties a total of $10 million (PECO: $8,518,000; DP&L: $1,482,000) for
each year that the three year historical average MDC capacity factor
(excluding therefrom any period of time to which the Force Maleure
Clause of this Agreement applies) for the Salem Station as calculated
as of December 31 of that year is less than 40% but equal to or above
20%.(1) In the event that the three year historical average MDC
capacity factor (excluding therefrom any period of time to which the
Force Majeure Clause of this Agreement applies) for the Salem Station
calculated as of December 31 of that year falls below 20%, the total
-----------------
(1) In the event that the beginning date for the Salem Station occurs after
January 1, 1998, the calculation for the Salem Station shall be made
initially as of December 31 of the first calendar year that is at least 24
months after the end of the Current Outage of the later of Unit 1 or Unit 2
of the Salem Station. In such event, the capacity factor calculation shall
be made for the period beginning on the later of the end of the Current
Outage of Salem Unit 1 or Salem Unit 2.
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payment to the Non-operating Owner Parties shall be $25 million per
year (PECO: $21,295,000; DP&L: $3,705,000).(2)
b. The performance standards provided in paragraph 3(a) shall
be applied beginning with the month these arrangements take effect for
the Salem Station as set forth in paragraph 2 above. Any payments to
Non-operating Owner Parties shall be in proportion to their ownership
interests under the respective Owners Agreement. In no event will a
payment be owing prior to two years from the effective date of the
performance standard as it applies to the Salem Station.
c. The calculation of amounts owed under paragraph 3(a) shall
be done annually with any amounts owed for the preceding year becoming
due and payable by the end of the first month following that year.
Where one unit of the Salem Station has been retired, 1/2 of the
payments provided in paragraph 3(a) will apply.
4. For the Peach Bottom Station, the following performance standards
shall apply:
a. The Owner-operator shall compensate the Non-operating Owner
Parties a total of $10 million (PSE&G: $8,498,000; DP&L: $1,502,000)
for each year that the three year historical average MDC capacity
factor (excluding therefrom any period of time to which the Force
Majeure Clause of this Agreement applies) for the Peach Bottom Station
as calculated as of December 31 of that year is less than 40% but equal
to or above 20%.(3) In the event that the three year historical average
MDC capacity factor (excluding therefrom any period of time to which
the Force
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(2) See Footnote 1.
(3) The first "calculation" date shall be December 31, 2000.
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Majeure Clause of this agreement applies) for the Peach Bottom Station
calculated as of December 31 of that year falls below 20%, the total
payment to the Non-operating Owner Parties shall be S25 million per
year (PSE&G: $21,245,000; DP&L: $3,755,000).
b. The performance standards provided in paragraph 4(a) shall
be applied beginning with the month these arrangements take effect for
the Peach Bottom Station as set forth in paragraph 2 above. Any
payments to Non-operatinq Owner Parties shall be in proportion to their
ownership interests under the respective Owners Agreement. In no event
will a payment be owing prior to three years from the effective date of
the performance standard as it applies to the Peach Bottom Station.
c. The calculation of amounts owed under paragraph 4(a) shall
be done annually with any amounts owed for the preceding year becoming
due and payable by the end of the first month following that year.
Where one unit of the Peach Bottom Station has been retired, 1/2 of the
payments provided in paragraph 4(a) will apply-
5. The performance standards set forth in paragraph 3 shall be
effective until December 31, 2011 at the dollar amounts set forth in paragraph
3(a). After that date, the performance standards and other provisions of this
Agreement will remain effective, but the dollar amounts in paragraph 3(a) will
be $1. The performance standards in paragraph 4 shall be effective until
December 31, 2007 at the dollar amounts set forth in paragraph 4(a). After that
date, the performance standards and other provisions of this Agreement shall
remain effective, but the dollar amounts in paragraph 4(a) shall be $1.
6. The Parties agree that paragraphs 2-5 of this Agreement shall be the
Non-operating Owner Parties, sole and exclusive remedy for all management or
operating errors or omissions or the failure to generate power and energy at
either
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Station as economically and reliably as is practicable. The Owner-operator of
the Salem Station or the Peach Bottom Station shall not be liable to the
Non-operating Owner Parties in contract, or in tort (including, but not limited
to negligence or gross negligence), or otherwise based upon facts, matters, or
occurrences relating to or arising out of the construction, management,
operation or maintenance of the Salem or Peach Bottom Stations or for any
failures of the Owner-operator to perform any of its responsibilities except for
Willful Action and then only up to a combined total of $5 million to the
Non-operating Owner Parties for all such facts, matters or occurrences or
failures to perform based upon Willful Action(s) during any one annual period,
which amount shall be reduced to $2.5 million where one unit of a Station has
been retired. Each Party shall bear the entire amount of its own Replacement
Power Costs. "Willful Action" is defined as: action knowingly or intentionally
taken or not taken by the chief nuclear officer and approved by his superior,
which action or non-action and approval is taken with intent that injury or
damage would result or would probably result therefrom or with intent to defraud
another Party.
7. Each Party waives and covenants not to assert against any other
Party all rights under the Owners Agreements to the extent that they are
inconsistent with this Agreement. This Agreement does not alter or change the
duties of all Parties to share the costs of the Salem and Peach Bottom Stations
as specified in Article 3 of the Owners Agreements (and related budget and
accounting articles of the Owners Agreements).
The Parties to this Agreement do not intend, and this Agreement shall
not be construed to affect the currently existing rights and interests of
Atlantic Energy, Inc. or Atlantic City Electric Company (hereinafter referred to
collectively as "Atlantic") that arise from Atlantic's ownership interests in
the Salem and Peach Bottom Stations.
8. Times during which the operation of a Station is adversely affected
by Force Majeure Conditions shall not form any part of the basis for a payment
for low
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capacity factors as set forth in paragraphs 3 and 4 of this Agreement. "Force
Majeure Conditions" as used herein means the following: acts of God, floods,
earthquakes, tornadoes, hurricanes; terrorism, or acts of public enemies; war,
insurrections, riots or other civil disturbances; failure of or the necessity to
replace equipment for reasons of obsolescence or defect in design or manufacture
where the condition is generic to the equipment involved and for such time as is
reasonably required therefor; plant shutdown, modification, derating, or
decommissioning requirement which is necessary to comply with any Nuclear
Regulatory Commission or other governmental action that is applicable to any
generic category of plants or is based on considerations external to the Station
itself (including, but not limited to, seismological, meteorological,
hydrological, demographic or soil conditions). Any outage required to repair or
replace steam generators shall conclusively be deemed to constitute a Force
Majeure condition.
9. Any dispute over the application of the performance standards or any
other disputes under the Owners Agreements for Salem and Peach Bottom shall be
the subject of non-binding mediation prior to resort to any legal process. All
Parties waive the right to trial by jury in any court proceeding involving any
such dispute.
MISCELLANEOUS PROVISIONS
10. Intent to Be Legally Bound
The Parties intend that this Agreement create legally binding and
enforceable obligations, and that each of the covenants and obligations
contained herein may be legally enforced.
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11. Warranty of Enforceabilitv
Each Party represents, agrees, and warrants, that this Agreement, and
each instrument required hereby to be executed and delivered by it, constitute
legally valid, binding obligations, and shall be enforceable against each Party.
12. Assignment
This Agreement may not be assigned by any Party hereto without the
express written consent of each other Party hereto. The representations,
warranties, covenants, and agreements contained in this Agreement are for the
sole benefit of the Parties hereto and their successors and permitted assigns,
and shall not be construed to confer any right or to avail any remedy to any
other person.
13. Governing Law
This Agreement shall be governed by, construed, and interpreted, and
the rights of the Parties determined in accordance with, the laws of New Jersey
as it applies to the Salem Station and the laws of Pennsylvania as it applies to
the Peach Bottom Station.
14 Entire Agreement
This Agreement contains the entire understanding of the Parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, representations, warranties, covenants and undertakings governing the
subject matter of this Agreement other than those expressly set forth or
referred to herein. To the extent the terms and conditions of this Agreement can
be construed to be inconsistent with the terms and conditions of either of the
Owners Agreements, this Agreement supersedes the Owners Agreements and any other
prior agreements and understandings among the Parties hereto with respect to the
rights and obligations of the Parties under the Owners Agreements and the
obligations of the Owner-operators of the Salem and Peach Bottom Stations.
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15. Waiver of Compliance
Any failure of any Party hereto to comply with any obligation,
covenant, agreement or condition herein may be expressly waived in writing, to
the extent permitted under applicable law, by the Party or Parties hereto
entitled to the benefit of such obligation, covenant, agreement or condition. A
waiver or failure to insist upon strict compliance with any representation,
warranty, covenant, agreement or condition shall not operate a waiver of, or
estoppel with respect to, any subsequent or other failure.
16. Counterparts
This Agreement may be executed in any number of counterparts and any
Party hereto may execute any such counterpart, each of which when executed and
delivered shall be deemed to be an original and all of which counterparts taken
together shall constitute but one and the same instrument. it shall not be
necessary in making proof of this Agreement or any counterpart hereof to produce
or account for any of the other counterparts.
17. Severance
The Parties agree that if any provision of this Agreement is declared
invalid in whole or in part, it will have no effect on the validity of the other
provisions of the Agreement.
18. Joint Drafting
This Agreement is the product of the joint drafting of the parties. The
parties agree that no provision of this Agreement xxxxx be construed against any
party as the drafter.
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19. Recitals
The Recitals to this Agreement are incorporated into and are part of this
Agreement.
PUBLIC SERVICE ELECTRIC
AND GAS COMPANY
Attest: By: /s/ R. Xxxxx Xxxxxxx
--------------------------------------
Its: Senior Vice President
and General Counsel
/s/ X.X. XXXXXXX, Xx.
Corporate Secretary
PUBLIC SERVICE ELECTRIC
AND GAS COMPANY
Attest: By: /s/ R. Xxxxx Xxxxxxx
--------------------------------------
Its: Vice President
and General Counsel
/s/ X.X. XXXXXXX, Xx.
Corporate Secretary
PECO ENERGY COMPANY
Attest: By: /s/ Dikinson X. Xxxxx
--------------------------------------
Its: President, PECO Nuclear,
PECO Energy Company
/s/ Xxxxxxxxx X. Xxxxx
Corporate Secretary
DELMARVA POWER & LIGHT COMPANY
Attest: By: /s/ H. E. Cosgrove
--------------------------------------
Its: Chairman, President and C.E.O.
/s/ X. X. Xxxxxxxx
SECRETARY
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