Exhibit D-2.2
Original Sheet No. 1
Execution Copy
Master Power
Purchase & Sale
Agreement
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[LOGO]
Edison Electric Institute
Original Sheet No. 2
MASTER POWER PURCHASE AND SALES AGREEMENT
TABLE OF CONTENTS
COVER SHEET 4
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GENERAL TERMS AND CONDITIONS.................................................................... 17
ARTICLE ONE: GENERAL DEFINITIONS............................................................. 17
ARTICLE TWO: TRANSACTION TERMS AND CONDITIONS................................................ 22
2.1 Transactions.......................................................................... 22
2.2 Governing Terms....................................................................... 22
2.3 Confirmation.......................................................................... 22
2.4 Additional Confirmation Terms......................................................... 23
2.5 Recording............................................................................. 23
ARTICLE THREE: OBLIGATIONS AND DELIVERIES...................................................... 23
3.1 Seller's and Buyer's Obligations...................................................... 23
3.2 Transmission and Scheduling........................................................... 24
3.3 Force Majeure......................................................................... 24
ARTICLE FOUR: REMEDIES FOR FAILURE TO DELIVER/RECEIVE......................................... 24
4.1 Seller Failure........................................................................ 24
4.2 Buyer Failure......................................................................... 24
ARTICLE FIVE: EVENTS OF DEFAULT; REMEDIES..................................................... 24
5.1 Events of Default..................................................................... 25
5.2 Declaration of an Early Termination Date and Calculation of Settlement Amounts........ 26
5.3 Net Out of Settlement Amounts......................................................... 26
5.4 Notice of Payment of Termination Payment.............................................. 26
5.5 Disputes With Respect to Termination Payment.......................................... 27
5.6 Closeout Setoffs...................................................................... 27
5.7 Suspension of Performance............................................................. 27
ARTICLE SIX: PAYMENT AND NETTING............................................................. 28
6.1 Billing Period........................................................................ 28
6.2 Timeliness of Payment................................................................. 28
6.3 Disputes and Adjustments of Invoices.................................................. 28
6.4 Netting of Payments................................................................... 28
6.5 Payment Obligation Absent Netting..................................................... 29
6.6 Security.............................................................................. 29
6.7 Payment for Options................................................................... 29
6.8 Transaction Netting................................................................... 29
Original Sheet No. 3
ARTICLE SEVEN: LIMITATIONS..................................................................... 29
7.1 Limitation of Remedies, Liability and Damages......................................... 29
ARTICLE EIGHT: CREDIT AND COLLATERAL REQUIREMENTS.............................................. 30
8.1 Party A Credit Protection............................................................. 30
8.2 Party B Credit Protection............................................................. 32
8.3 Grant of Security Interest/Remedies................................................... 34
ARTICLE NINE: GOVERNMENTAL CHARGES............................................................ 34
9.1 Cooperation........................................................................... 34
9.2 Governmental Charges.................................................................. 34
ARTICLE TEN: MISCELLANEOUS................................................................... 34
10.1 Term of Master Agreement.............................................................. 35
10.2 Representations and Warranties........................................................ 35
10.3 Title and Risk of Loss................................................................ 36
10.4 Indemnity............................................................................. 36
10.5 Assignment............................................................................ 36
10.6 Governing Law......................................................................... 37
10.7 Notices............................................................................... 37
10.8 General............................................................................... 37
10.9 Audit................................................................................. 38
10.10 Forward Contract...................................................................... 38
10.11 Confidentiality....................................................................... 38
SCHEDULE M: GOVERNMENTAL ENTITY OR PUBLIC POWER SYSTEMS........................................ 39
SCHEDULE P: PRODUCTS AND RELATED DEFINITIONS................................................... 43
EXHIBIT A: CONFIRMATION LETTER................................................................. 50
Original Sheet No. 4
MASTER POWER PURCHASE AND SALE AGREEMENT
COVER SHEET
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This Master Power Purchase and Sale Agreement ("Master Agreement" ) is made as
of the following date: November 30, 2001 but shall not become effective until
the Effective Date. The Master Agreement, together with the exhibits, schedules
and any written supplements hereto, the Party A Tariff, if any, the Party B
Tariff, if any, any designated collateral, credit support or margin agreement or
similar arrangement between the Parties and all Transactions (including any
confirmations accepted in accordance with Section 2.3 hereto) shall be referred
to as the "Agreement." The Parties to this Master Agreement are the following:
Name ("Electric Generation LLC" or "Party A") Name ("Pacific Gas and Electric Company" or "Party B")
All Notices: All Notices:
Street:_________________________________________ Street:_______________________________________________
City:___________________Zip_____________________ City:___________________________Zip:__________________
Attn: Contract Administration Attn: Contract Administration
Phone:__________________________________________ Phone:________________________________________________
Facsimile:______________________________________ Facsimile:____________________________________________
Duns:___________________________________________ Duns:_________________________________________________
Federal Tax ID Number:__________________________ Federal Tax ID Number:________________________________
Invoices:_______________________________________ Invoices:_____________________________________________
Attn:________________________________________ Attn:______________________________________________
Phone:_______________________________________ Phone:_____________________________________________
Facsimile:___________________________________ Facsimile:_________________________________________
Scheduling:_____________________________________ Scheduling:___________________________________________
Attn:________________________________________ Attn:______________________________________________
Phone:_______________________________________ Phone:_____________________________________________
Facsimile:___________________________________ Facsimile:_________________________________________
Payments:_______________________________________ Payments:_____________________________________________
Attn:________________________________________ Attn:______________________________________________
Phone:_______________________________________ Phone:_____________________________________________
Facsimile:___________________________________ Facsimile:_________________________________________
Wire Transfer:__________________________________ Wire Transfer:________________________________________
BNK:_________________________________________ BNK:_______________________________________________
ABA:_________________________________________ ABA:_______________________________________________
ACCT:________________________________________ ACCT:______________________________________________
Credit and Collections:_________________________ Credit and Collections:_______________________________
Attn:________________________________________ Attn:______________________________________________
Phone:_______________________________________ Phone:_____________________________________________
Facsimile:___________________________________ Facsimile:_________________________________________
Original Sheet No. 5
With additional Notices of an Event of Default or With additional Notices of an Event of Default or
Potential Event of Default to: Potential Event of Default to:
Attn:________________________________________ Attn:________________________________________
Phone:_______________________________________ Phone:_______________________________________
Facsimile:___________________________________ Facsimile:___________________________________
[NOTE: THE FOREGOING INFORMATION WILL BE PROVIDED ON OR BEFORE THE EFFECTIVE
DATE.]
[Balance of Page Intentionally Blank]
Original Sheet No. 6
The Parties hereby agree that the General Terms and Conditions are incorporated
herein, and to the following provisions as provided for in the General Terms and
Conditions:
Party A Tariff Agreement, including the confirm and addenda, that will be filed at
FERC for acceptance or approval
Party B Tariff Tariff: Not Applicable Dated_________ Docket Number________
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Article Two
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Transaction Terms and Conditions [X] Optional provision in Section 2.4. If not checked inapplicable.
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Article Four
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Remedies for Failure to Deliver or Receive [_] Accelerated Payment of Damage. If not checked inapplicable.
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Article Five [_] Cross Default for Party A:
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Events of Default; Remedies [_] Party A:_____________ Cross Default Amount $______________
[_] Other Entity:________ Cross Default Amount $______________
[_] Cross Default for Party B:
[_] Party B:_____________ Cross Default Amount $______________
[_] Other Entity:________ Cross Default Amount $______________
5.6 Closeout Setoff
[_] Option A (Applicable if no other selection is made.)
[_] Option B - Affiliates shall have the meaning set forth in the
Agreement unless otherwise specified as follows:_____________
_____________________________________________________________
[X] Option C (No Setoff)
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Article 8 8.1 Party A Credit Protection:
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Credit and Collateral Requirements (a) Financial Information:
[_] Option A
[X] Option B Specify: Pacific Gas and Electric Company
[_] Option C Specify:_______________
(b) Credit Assurances:
[X] Not Applicable
[_] Applicable
(c) Collateral Threshold:
[X] Not Applicable
Original Sheet No. 7
[_] Applicable
If applicable, complete the following:
Party B Collateral Threshold: $ __________; provided, however, that Party
B's Collateral Threshold shall be zero if an Event of Default or Potential
Event of Default with respect to Party B has occurred and is continuing.
Party B Independent Amount: $_______________
Party B Rounding Amount: $__________________
(d) Downgrade Event:
[X] Not Applicable
[_] Applicable
If applicable, complete the following:
[_] It shall be a Downgrade Event for Party B if Party B's Credit Rating
falls below __________ from S&P or __________ from Moody's or if Party B
is not rated by either S&P or Moody's
[_] Other:
Specify:_____________________________________________________________
(e) Guarantor for Party B:_______________________________________________
Guarantee Amount:_________________________________________________
8.2 Party B Credit Protection:
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(a) Financial Information:
[_] Option A
[X] Option B Specify: Electric Generation LLC
[_] Option C Specify:________________________
(b) Credit Assurances:
[X] Not Applicable
[_] Applicable
(c) Collateral Threshold:
[X] Not Applicable
[_] Applicable
If applicable, complete the following:
Party A Collateral Threshold: $ __________; provided, however, that Party
A's Collateral Threshold shall be zero if an Event of Default or Potential
Event of Default with respect to Party A has occurred and is continuing.
Party A Independent Amount: $____________________
Original Sheet No. 8
Party A Rounding Amount: $_______________________
(d) Downgrade Event:
[X] Not Applicable
[_] Applicable
If applicable, complete the following:
[_] It shall be a Downgrade Event for Party A if Party A's Credit Rating
falls below __________ from S&P or __________ from Moody's or if Party A
is not rated by either S&P or Moody's
[_] Other:
Specify:__________________________________________________________________
(e) Guarantor for Party A:__________________________________________________________
Guarantee Amount:_________________________________________________________
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Article 10
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Confidentiality [_] Confidentiality Applicable If not checked, inapplicable.
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Schedule M
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[_] Party A is a Governmental Entity or Public Power System
[_] Party B is a Governmental Entity or Public Power System
[_] Add Section 3.6. If not checked, inapplicable
[_] Add Section 8.6. If not checked, inapplicable
Original Sheet No. 9
Other Changes 1. Section 1.23 is deleted and the
------------- following substituted in its place:
"Force Majeure" means any occurrence
beyond the reasonable control of a party
which causes the party to be unable to
perform an obligation under this
Agreement in whole or in part and which
could not have been avoided by the
exercise of due diligence. Force Majeure
includes an act of God; actual or
threatened civil disturbance, terrorism,
war, or riot; strike or other labor
dispute; emergencies declared by the
California Independent System Operator
or any other authorized successor or
regional transmission organization or
any state or federal regulator or
legislature; explosion; tsunami, fire,
ice, flood, earthquake, earth movement
(including mud slides or rock slides),
storm, effect of storm, drought,
lightning and other natural
catastrophes; regulatory requirements of
generic applicability or regulatory
requirements not related directly to
actions of the Party claiming Force
Majeure requiring a shut-down or
curtailment of Diablo Canyon; or system
transients or voltage reduction
requiring a shut-down or curtailment of
Diablo Canyon. Force Majeure shall not
be based on (i) Buyer's inability
economically to use or resell the
Product purchased hereunder, or (ii)
Seller's ability to sell the Product at
a price greater than the Contract Price.
Neither Party may raise a claim of Force
Majeure based in whole or in part on
curtailment by a Transmission Provider
unless (i) the Party claiming Force
Majeure contracts for firm transmission
service with a Transmission Provider for
the Product to be delivered to or
received at the Delivery Point and (ii)
such curtailment is due to "force
majeure" or "uncontrollable force" or a
similar term as defined under the
Transmission Provider's tariff;
provided, however, that existence of the
foregoing events shall not be sufficient
to conclusively or presumptively prove
the existence of a Force Majeure absent
a showing of other facts and
circumstances which in the aggregate
with such events establish that a Force
Majeure as defined in the first sentence
hereof has occurred. Applicability of
Force Majeure to the Transaction is
governed by the terms of the Products
and Related Definitions contained in
Schedule P and as set forth in any
Confirmations for any Transactions.
2. A new Section 1.62 is added to read:
"Good Industry Practice" means any of
the practices, methods, and acts engaged
in or approved by a significant portion
of the electric power industry for the
applicable type of electric generation
facilities (e.g., conventional hydro,
pumped storage, or nuclear,) during the
relevant time period, or any of the
practices, methods, and acts which, in
the exercise of reasonable judgment in
the light of the facts known at the time
the decision was made, could have been
expected to accomplish the desired
result at a reasonable cost consistent
with good business practices,
reliability, safety, and expedition.
Good Industry Practice does not require
use of the optimum practice, method, or
act, but only requires use of practices,
methods, or acts generally accepted in
the region covered by the Western
Systems Coordinating Council or any
other successor or similar organization.
3. Section 1.19 is deleted and the
following substituted in its place:
"Effective Date" means the Effective
Date of the Proposed Plan of
Reorganization Under Chapter 11 of the
Bankruptcy Code for Pacific
Original Sheet No. 10
Gas and Electric Company, Chapter 11
Case No. 01-30923-DM.
4. The first sentence of Section 2.3 is
deleted and the following substituted in
its place: Seller may confirm a
Transaction by forwarding to Buyer by
facsimile or otherwise no later than
three (3) Business Days after a
Transaction is entered into a
confirmation ("Confirmation")
substantially in the form of Exhibit A
and, to the extent that either party
sends the other an invoice for a payment
obligation that purports to include any
terms and conditions governing a
Transaction (other than invoice
instructions authorized by Section 6.2
of the Master Agreement), such terms and
conditions shall not apply unless they
are accepted pursuant to Article Two of
this Master Agreement.
5. Section 3.2 is deleted and the following
substituted in its place: Seller shall
arrange, be responsible for and pay for
transmission service to the Delivery
Point and shall Schedule or arrange for
Scheduling services with its
Transmission Providers, as specified by
the Parties in the Transaction, or in
the absence thereof, in accordance with
the practice of the Transmission
Providers, to deliver the Product to the
Delivery Point. Buyer shall arrange, be
responsible for and pay for transmission
service at and from the Delivery Point
and shall Schedule or arrange for
Scheduling services with its
Transmission Providers to receive the
Product at the Delivery Point.
6. Section 3.3 is deleted and the following
substituted in its place: To the extent
that either Party is prevented by Force
Majeure from carrying out in whole or
part, its obligations under the
Transaction and such Party (the
"Claiming Party") gives notice and
details of the Force Majeure to the
other Party as soon as practicable,
then, unless the terms of the Product
specify otherwise, the Claiming Party
shall be excused from the performance of
the obligations with respect to such
Transaction (other than the obligation
to make payments then due or becoming
due with respect to performance prior to
the Force Majeure). The Claiming Party
shall use due diligence to remedy the
Force Majeure. The non-Claiming Party
shall not be required to perform or
resume performance of its obligations to
the Claiming Party corresponding to the
obligations of the Claiming Party
excused by Force Majeure.
7. Section 4.1 is deleted and the following
substituted in its place: If Seller
fails to schedule and/or deliver all or
part of the Product pursuant to a
Transaction, and such failure is not
excused under the terms of the
applicable Transaction or by Buyer's
failure to perform, then (x) Seller
shall pay Buyer, on the date payment
would otherwise be due in respect of the
month in which the failure occurred or,
if "Accelerated Payment of Damages" is
specified on the Cover Sheet, within
five (5) Business Days of invoice
receipt, an amount for such deficiency
equal to the positive difference, if
any, obtained by subtracting the
Contract Price from the Replacement
Price; (y) Buyer shall reduce the price
it pays to Seller in accordance with the
terms and conditions of the Transaction
into which Buyer and Seller may enter
pursuant to this Master Agreement
providing for such adjustment; and/or
(z) any other remedy upon which the
Parties may
Original Sheet No. 11
specify for a Transaction. For each
Transaction, the Parties shall specify
which of the remedies set forth in this
Section 4.1 apply. If the parties fail
to so specify in a Transaction, then the
remedy set forth in clause (x) only
shall apply. Any invoice delivered
pursuant to this Section 4.1 shall
include a written statement explaining
in reasonable detail the calculation of
such amount.
8. Section 4.2 is deleted and the following
substituted in its place: If Buyer fails
to schedule and/or receive all or part
of the Product pursuant to a Transaction
and such failure is not excused under
the terms of the applicable transaction
or by Seller's failure to perform, then
Buyer shall pay Seller, on the date
payment would otherwise be due in
respect of the month in which the
failure occurred or, if "Accelerated
Payment of Damages" is specified on the
Cover Sheet, within five (5) Business
Days of invoice receipt, an amount for
such deficiency equal to the positive
difference, if any, obtained by
subtracting the Sales Price from the
Contract Price. When computing the
Contract Price and the Sales Price, to
the extent Buyer purchases Capacity,
fails to accept all associated Energy
and Ancillary Services as required in a
Transaction, but pays as required
pursuant to the Transaction the Contract
Price for Capacity, the Contract Price
and Sales Price for purposes of
computing payments under this Section
4.2 shall be comprised only of the
Energy Price and the Sales Price for
Energy and Ancillary Services associated
with such Capacity. Seller shall have an
obligation to remarket any Energy and
Ancillary Services Buyer fails to
schedule and/or receive only to the
extent that Seller has the requisite
regulatory authorizations for making
such sales. Buyer expressly
acknowledges, however, that Seller shall
be under no obligation to seek or
maintain such regulatory authorizations
and its failure to do so shall not alter
in any way Buyer's obligations to pay
Seller any deficiencies otherwise
required. In the event that Seller does
not have in effect at the time of
Buyer's failure to schedule Energy and
Ancillary Services the requisite
regulatory authorizations, the Sales
Price shall be deemed to be zero.
9. Section 5.1(b) is deleted and the
following substituted in its place: any
representation or warranty by such Party
herein when made or when deemed made or
repeated is false or misleading in any
substantial and material respect as to
any Transaction the parties designate as
a Major Transaction entered into under
this Master Agreement;
10. Section 5.1(c) is deleted and the
following substituted in its place: the
failure to perform any material covenant
or obligation set forth in this
Agreement (except to the extent
constituting a separate Event of
Default, and except for such Party's
obligations to deliver or receive the
Product, the exclusive remedy for which
is provided in Article Four), if such
failure is not remedied or the
defaulting party has not commenced an
appropriate action to cure, within three
(3) Business Days after written notice;
11. Section 5.2 is deleted and the following
substituted in its place: If an Event of
Default with respect to a Defaulting
Party shall have occurred and be
continuing, the other Party (the "Non-
Defaulting
Original Sheet No. 12
Party") shall have the right (i) to
designate a day, no earlier than, in the
case of a Non-Defaulting Seller, the
earlier of sixty days after a Notice of
Cancellation is filed by such Seller
with FERC or such earlier date
designated by such Seller as FERC
permits or authorizes, and, in the case
of a Non-Defaulting Buyer, the earlier
of sixty days after such Buyer files a
complaint with FERC requesting
termination as a remedy or such earlier
date designated by such Buyer as FERC
permits or authorizes (in each case
provided such filing is not withdrawn by
the filing party), an early termination
date (the "Early Termination Date") to
accelerate all amounts owing between the
Parties and to liquidate and terminate
all, but not less than all, Transactions
(each referred to as a "Terminated
Transaction") between the Parties, (ii)
withhold any payments due to the
Defaulting Party under this Agreement
and (iii) suspend performance. The Non-
Defaulting Party shall calculate, in a
commercially reasonable manner, a
Settlement Amount for each such
Terminated Transaction as of the Early
Termination Date (or, to the extent that
in the reasonable opinion of the Non-
Defaulting Party certain of such
Terminated Transactions are commercially
impracticable to liquidate or terminate
or may not be liquidated and terminated
under applicable law on the Early
Termination Date, as soon thereafter as
is reasonably practicable). The Non-
Defaulting Party may determine its Gains
or Losses by reference to information
either available to it internally or
supplied by one or more third parties
including, without limitation,
quotations (either firm or indicative)
of relevant rates, prices, yields, yield
curves, volatilities, spreads or other
relevant market data in the relevant
markets. Third parties supplying such
information may include, without
limitation, dealers in the relevant
markets, end-users of the relevant
product, information vendors and other
sources of market information.
12. Section 5.3 is deleted and the following
substituted in its place: The Non-
Defaulting Party shall aggregate all
Settlement Amounts into a single amount
by netting out (a) all Settlement
Amounts that are due to the Defaulting
Party, plus, at the option of the Non-
Defaulting Party, any cash or other form
of security then available to the Non-
Defaulting Party pursuant to Article
Eight, plus any or all other amounts due
to the Defaulting Party under this
Agreement against (b) all Settlement
Amounts that are due to the Non-
Defaulting Party, plus any or all other
amounts due to the Non-Defaulting Party
under this Agreement, so that all such
amounts shall be netted out to a single
liquidated amount. To the extent that
the single liquidated amount (the
"Termination Payment") shall be a
positive amount, such amount shall be
due and owing to the Non-Defaulting
Party from the Defaulting Party.
13. Section 5.4 is deleted and the following
substituted in its place: As soon as
practicable after a liquidation, notice
shall be given by the Non-Defaulting
Party to the Defaulting Party of the
amount of the Termination Payment due
from 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
Defaulting Party within two (2) Business
Days after such notice is effective.
Original Sheet No. 13
14. Clause (i) of Section 5.7 is deleted and
the following substituted in its place:
(i) to suspend performance under any or
all Transactions;
15. The following sentence is added at the
end of Section 6.1: The Parties shall
develop procedures for the prompt
preparation and delivery of any such
invoices and any data maintained by one
Party that is required by the other
Party in order to prepare and document
any such invoices. The procedures shall
also take into account the need to
obtain information from the ISO or
successor in connection with its
settlement process.
16. Section 10.5 is deleted and the
following substituted in its place: (a)
Neither party shall assign this
Agreement or its rights hereunder
without the prior written consent of the
other Party, which consent may be
withheld in the exercise of its sole
discretion; provided, however, that
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; provided,
however, that in the event of a
foreclosure, the creditworthiness of the
assignee of such Party shall be equal to
or higher than the creditworthiness of
such Party at the time of the transfer;
(ii) transfer or assign this Agreement
to an affiliate of such Party which
affiliate's creditworthiness is equal to
or higher than that of such Party, or
(iii) transfer or assign this Agreement
to any person or entity succeeding to
all or substantially all of the assets
of such party whose creditworthiness is
equal to or higher than that of such
Party; provided, however, that in each
such case, such assignee shall agree in
writing to be bound by the terms and
conditions hereof and so long as the
transferring Party delivers such tax and
enforceability assurance as the non-
transferring Party may reasonably
request. (b) In connection with
assignment of a security interest in
this Agreement to a financing party by
either Party pursuant to Section
10.5(a)(i), the other Party shall, at
the financing party's request, execute a
consent to assignment in form and
substance reasonably satisfactory to
such financing party which shall
include, without limitation, the
following provisions set forth in this
Section 10.5(b). For so long as the
financing Party shall have outstanding
and unpaid any financing liabilities
during the term of this Agreement, the
other Party agrees to promptly furnish
any such financing party known to the
other Party based on information
provided by the financing Party with a
copy of any notice of an Event of
Default under this Agreement.
Notwithstanding any other provision in
this Master Agreement or any
Transaction, the other Party agrees that
it will not terminate this Agreement
pursuant to Section 5.2 unless (a) a
written notice of such termination shall
have been given to and received by any
financing party then known to the other
Party thirty (30) days prior to the
effective date of such termination and
(b) prior to the effective date of any
such termination such financing party
has not either (x) cured the Event of
Default or (y) commenced in a diligent
manner to cure the Event of Default if
such Event of Default is capable of
being cured, to the extent applicable in
a Transaction.
Original Sheet No. 14
17. Section 10.6 is amended by substituting
the word "California" for the word "New
York."
18. Clause (a) of Section 6.8 is deleted and
the following substituted in its place:
(a) the Party obligated to deliver the
greater amount of the same Product will
deliver the difference between the total
amount it is obligated to deliver and
the total amount to be delivered to it
under the Offsetting Transaction.
19. Section 10.8 is amended by deleting in
their entirety the fifth, sixth and
seventh sentences.
20. The following is added at the end of
Section 10.9: Without limiting the
foregoing, audit rights under this
Section 10.9 shall include such
inspections and testing of meters as is
reasonably necessary to confirm their
accuracy consistent with ISO practices
and procedures or any successor tariff
requirements. The Party requesting any
such inspections and testing shall bear
the cost of the foregoing in the event
the meters are accurate within
applicable ISO or successor metering
requirements. The other Party shall bear
these costs if the meters are not
accurate within applicable ISO or
successor metering requirements. In
addition, such audit rights shall
include inspections and testing as is
reasonably necessary to confirm the
accuracy of any notice delivered by
Seller to Buyer respecting the
availability or operation of any
generating facility as to which Buyer
may have dispatch rights or the right to
purchase capacity. If Buyer requests
that a Unit be tested, Seller shall have
the right to a prompt retest of such
Unit. Seller shall also have the right
to request a test of a Unit at any time,
and Buyer shall have the right to a
prompt retest of such Unit. The Party
requesting that a Unit be tested shall
bear the costs of such test.
21. A new Section 10.12 is added to read:
Section 10.12. No Dedication of
Facilities. To the extent that the
Parties enter into any Transactions
respecting the output of specific
generating facilities directly or
indirectly owned or controlled by the
Seller, the Parties expressly
acknowledge and agree that the Seller is
doing so solely as an accommodation to
the Buyer; that the Seller is not and
shall not be expected to dedicate such
facilities (whether in whole or in part
and whether such facilities comprise
real, tangible or intangible property)
to public use; and that any Transaction
shall cease upon its termination;
provided, however, that to the extent
the Seller transfers or otherwise
conveys ownership or control in any
generating facilities the output of
which is subject to a Transaction, such
transfer or conveyance shall not excuse
the Seller from performing under that
Transaction, except to the extent
excused by that Transaction. Without
limiting the foregoing, and except with
respect to outstanding Transactions, the
Buyer acknowledges and agrees that it
shall have no obligation or right in the
future to purchase any or all of its
requirements from the Seller; that the
Buyer may satisfy any or all of its
requirements through transactions with
any other parties upon terms and
conditions acceptable to the Buyer and
such other counter-parties; and that the
Seller shall have no obligation to make
any sales to the Buyer except to the
extent that they elect to enter into
such sales
Original Sheet No. 15
pursuant to this Master Agreement or
otherwise.
22. A new Section 10.13 is added to read:
Section 10.13. Third Party
Beneficiaries. Nothing in this
Agreement, express or implied, shall be
construed to create any interest,
beneficial or otherwise, for any other
party.
23. A new Section 10.14 is added to read:
Section 10.14. Non-Recourse. The
obligations of each Party under this
Agreement are special obligations of
each Party and do not constitute
obligations of (and no recourse shall be
had with respect thereto) any partner of
a Party, or any shareholder, partner,
member, officers or director of any such
partner and no action shall be brought
or maintained against any such partner,
or any shareholder, partner, member,
officer or director.
24. A new Section 10.15 is added to read:
Section 10.15. Additional FERC Review.
The methodologies utilized for pricing
purposes in this Agreement, the prices
and pricing formulae specified herein,
and any terms and conditions in
connection therewith shall remain in
effect through the term of the
Agreement, unless amended in writing and
executed by both Parties. Except as the
Parties may expressly agree in a
Transaction and then only with respect
to that Transaction, neither Party shall
petition the FERC unilaterally pursuant
to the provisions of Sections 205 or 206
of the Federal Power Act to amend such
methodologies, prices or pricing
formulae or terms and conditions in
connection therewith or support such a
petition filed by any third party. Each
Party further agrees that it will not
assert, or defend itself, on the basis
that any applicable tariff is
inconsistent with this Agreement.
25. The definition of "Ancillary Services"
in Schedule P is deleted in its entirety
and the following substituted in its
place: "Ancillary Services" includes,
but is not limited to, regulation,
spinning reserve, non-spinning reserve
and replacement reserve.
26. The definition of "Unit Firm" in
Schedule P is deleted in its entirety
and the following substituted in its
place: "Unit Firm" means, with respect
to a Transaction, that the Product
subject to the Transaction is intended
to be supplied from a generation asset
or assets specified in the Transaction.
Unless otherwise limited pursuant to the
terms and conditions of a Transaction,
Seller's failure to deliver under a
"Unit Firm" Transaction shall be
excused: (i) if the specified generation
asset(s) are unavailable as a result of
a Forced Outage (as defined in the NERC
Generating Unit Availability Data System
(GADS) Forced Outage reporting
guidelines) or (ii) by an event or
circumstance that affects the specified
generating asset(s) so as to prevent
Seller from performing its obligations,
which event or circumstance was not
anticipated as of the date the
Transaction was agreed to, and which is
not within the reasonable control of, or
the result of the negligence of, the
Seller or (iii) by Buyer's failure to
perform. In any of such events, Seller
shall not be liable for any damages,
including any amounts determined
pursuant to Article Four.
Original Sheet No. 16
IN WITNESS WHEREOF, the Parties have caused this Master Agreement to be duly
executed as of the date first above written.
Electric Generation LLC Pacific Gas and Electric Company
By:___________________________ By:_________________________________________
Name: Xxxxx X. Xxxxxxxxxxx Name: Xxxxxx X. Xxxxx
Title: President Title: President and Chief Executive Officer
DISCLAIMER: This Master Power Purchase and Sale Agreement was prepared by a
committee of representatives of Edison Electric Institute ("EEI") and National
Energy Marketers Association ("NEM") member companies to facilitate orderly
trading in and development of wholesale power markets. Neither EEI nor NEM nor
any member company nor any of their agents, representatives or attorneys shall
be responsible for its use, or any damages resulting therefrom. By providing
this Agreement EEI and NEM do not offer legal advice and all users are urged to
consult their own legal counsel to ensure that their commercial objectives will
be achieved and their legal interests are adequately protected.
Original Sheet No. 17
GENERAL TERMS AND CONDITIONS
----------------------------
ARTICLE ONE: GENERAL DEFINITIONS
1.1 "Affiliate" means, with respect to any person, any other person (other
than an individual) that, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such person. For this purpose, "control" means the direct or indirect ownership
of fifty percent (50%) or more of the outstanding capital stock or other equity
interests having ordinary voting power.
1.2 "Agreement" has the meaning set forth in the Cover Sheet.
1.3 "Bankrupt" means with respect to any entity, such entity (i) files a
petition or otherwise commences, authorizes or acquiesces in the commencement of
a proceeding or cause of action under any bankruptcy, insolvency, reorganization
or similar law, or has any such petition filed or commenced against it, (ii)
makes an assignment or any general arrangement for the benefit of creditors,
(iii) otherwise becomes bankrupt or insolvent (however evidenced), (iv) 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 (v) is generally unable to pay its debts as they fall due.
1.4 "Business Day" means any day except a Saturday, Sunday, or a Federal
Reserve Bank holiday. A Business Day shall open at 8:00 a.m. and close at 5:00
p.m. local time for the relevant Party's principal place of business. The
relevant Party, in each instance unless otherwise specified, shall be the Party
from whom the notice, payment or delivery is being sent and by whom the notice
or payment or delivery is to be received.
1.5 "Buyer" means the Party to a Transaction that is obligated to purchase
and receive, or cause to be received, the Product, as specified in the
Transaction.
1.6 "Call Option" means an Option entitling, but not obligating, the
Option Buyer to purchase and receive the Product from the Option Seller at a
price equal to the Strike Price for the Delivery Period for which the Option may
be exercised, all as specified in the Transaction. Upon proper exercise of the
Option by the Option Buyer, the Option Seller will be obligated to sell and
deliver the Product for the Delivery Period for which the Option has been
exercised.
1.7 "Claiming Party" has the meaning set forth in Section 3.3.
1.8 "Claims" means all third party claims or actions, threatened or filed
and, whether groundless, false, fraudulent or otherwise, that directly or
indirectly relate to the subject matter of an indemnity, and the resulting
losses, damages, expenses, attorneys' 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 this Agreement.
1.9 "Confirmation" has the meaning set forth in Section 2.3.
Original Sheet No. 18
1.10 "Contract Price" means the price in $U.S. (unless otherwise provided
for) to be paid by Buyer to Seller for the purchase of the Product, as specified
in the Transaction.
1.11 "Costs" means, with respect to the Non-Defaulting Party, brokerage
fees, commissions and other similar third party transaction costs and expenses
reasonably incurred by such Party either in terminating any arrangement pursuant
to which it has hedged its obligations or entering into new arrangements which
replace a Terminated Transaction; and all reasonable attorneys' fees and
expenses incurred by the Non-Defaulting Party in connection with the termination
of a Transaction.
1.12 "Credit Rating" means, with respect to any entity, the rating then
assigned to such entity's unsecured, senior long-term debt obligations (not
supported by third party credit enhancements) or if such entity does not have a
rating for its senior unsecured long-term debt, then the rating then assigned to
such entity as an issues rating by S&P, Moody's or any other rating agency
agreed by the Parties as set forth in the Cover Sheet.
1.13 "Cross Default Amount" means the cross default amount, if any, set
forth in the Cover Sheet for a Party.
1.14 "Defaulting Party" has the meaning set forth in Section 5.1.
1.15 "Delivery Period" means the period of delivery for a Transaction, as
specified in the Transaction.
1.16 "Delivery Point" means the point at which the Product will be
delivered and received, as specified in the Transaction.
1.17 "Downgrade Event" has the meaning set forth on the Cover Sheet.
1.18 "Early Termination Date" has the meaning set forth in Section 5.2.
1.19 "Effective Date" has the meaning set forth on the Cover Sheet.
1.20 "Equitable Defenses" means any bankruptcy, insolvency, reorganization
and other laws affecting creditors' rights generally, and with regard to
equitable remedies, the discretion of the court before which proceedings to
obtain same may be pending.
1.21 "Event of Default" has the meaning set forth in Section 5.1.
1.22 "FERC" means the Federal Energy Regulatory Commission or any
successor government agency.
1.23 "Force Majeure" means an event or circumstance which prevents one
Party from performing its obligations under one or more Transactions, which
event or circumstance was not anticipated as of the date the Transaction was
agreed to, which is not within the reasonable control of, or the result of the
negligence of, the Claiming Party, and which, by the exercise of due diligence,
the Claiming Party is unable to overcome or avoid or cause to be avoided. Force
Original Sheet No. 19
Majeure shall not be based on (i) the loss of Buyer's markets; (ii) Buyer's
inability economically to use or resell the Product purchased hereunder; (iii)
the loss or failure of Seller's supply; or (iv) Seller's ability to sell the
Product at a price greater than the Contract Price. Neither Party may raise a
claim of Force Majeure based in whole or in part on curtailment by a
Transmission Provider unless (i) such Party has contracted for firm transmission
with a Transmission Provider for the Product to be delivered to or received at
the Delivery Point and (ii) such curtailment is due to "force majeure" or
"uncontrollable force" or a similar term as defined under the Transmission
Provider's tariff; provided, however, that existence of the foregoing factors
shall not be sufficient to conclusively or presumptively prove the existence of
a Force Majeure absent a showing of other facts and circumstances which in the
aggregate with such factors establish that a Force Majeure as defined in the
first sentence hereof has occurred. The applicability of Force Majeure to the
Transaction is governed by the terms of the Products and Related Definitions
contained in Schedule P.
1.24 "Gains" means, with respect to any Party, an amount equal to the
present value of the economic benefit to it, if any (exclusive of Costs),
resulting from the termination of a Terminated Transaction, determined in a
commercially reasonable manner.
1.25 "Guarantor" means, with respect to a Party, the guarantor, if any,
specified for such Party on the Cover Sheet.
1.26 "Interest Rate" means, for any date, the lesser of (a) 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" on such day (or if not
published on such day on the most recent preceding day on which published), plus
two percent (2%) and (b) the maximum rate permitted by applicable law.
1.27 "Letter(s) of Credit" means one or more irrevocable, transferable
standby letters of credit issued by a U.S. commercial bank or a foreign bank
with a U.S. branch with such bank having a credit rating of at least A- from S&P
or A3 from Moody's, in a form acceptable to the Party in whose favor the letter
of credit is issued. Costs of a Letter of Credit shall be borne by the applicant
for such Letter of Credit.
1.28 "Losses" means, with respect to any Party, an amount equal to the
present value of the economic loss to it, if any (exclusive of Costs), resulting
from termination of a Terminated Transaction, determined in a commercially
reasonable manner.
1.29 "Master Agreement" has the meaning set forth on the Cover Sheet.
1.30 "Moody's" means Xxxxx'x Investor Services, Inc. or its successor.
1.31 "NERC Business Day" means any day except a Saturday, Sunday or a
holiday as defined by the North American Electric Reliability Council or any
successor organization thereto. A NERC Business Day shall open at 8:00 a.m. and
close at 5:00 p.m. local time for the relevant Party's principal place of
business. The relevant Party, in each instance unless
Original Sheet No. 20
otherwise specified, shall be the Party from whom the notice, payment or
delivery is being sent and by whom the notice or payment or delivery is to be
received.
1.32 "Non-Defaulting Party" has the meaning set forth in Section 5.2.
1.33 "Offsetting Transactions" mean any two or more outstanding
Transactions, having the same or overlapping Delivery Period(s), Delivery Point
and payment date, where under one or more of such Transactions, one Party is the
Seller, and under the other such Transaction(s), the same Party is the Buyer.
1.34 "Option" means the right but not the obligation to purchase or sell a
Product as specified in a Transaction.
1.35 "Option Buyer" means the Party specified in a Transaction as the
purchaser of an option, as defined in Schedule P.
1.36 "Option Seller" means the Party specified in a Transaction as the
seller of an option, as defined in Schedule P.
1.37 "Party A Collateral Threshold" means the collateral threshold, if
any, set forth in the Cover Sheet for Party A.
1.38 "Party B Collateral Threshold" means the collateral threshold, if
any, set forth in the Cover Sheet for Party B.
1.39 "Party A Independent Amount" means the amount, if any, set forth in
the Cover Sheet for Party A.
1.40 "Party B Independent Amount" means the amount, if any, set forth in
the Cover Sheet for Party B.
1.41 "Party A Rounding Amount" means the amount, if any, set forth in the
Cover Sheet for Party A.
1.42 "Party B Rounding Amount" means the amount, if any, set forth in the
Cover Sheet for Party B.
1.43 "Party A Tariff" means the tariff, if any, specified in the Cover
Sheet for Party A.
1.44 "Party B Tariff" means the tariff, if any, specified in the Cover
Sheet for Party B.
1.45 "Performance Assurance" means collateral in the form of either cash,
Letter(s) of Credit, or other security acceptable to the Requesting Party.
1.46 "Potential Event of Default" means an event which, with notice or
passage of time or both, would constitute an Event of Default.
Original Sheet No. 21
1.47 "Product" means electric capacity, energy or other product(s) related
thereto as specified in a Transaction by reference to a Product listed in
Schedule P hereto or as otherwise specified by the Parties in the Transaction.
1.48 "Put Option" means an Option entitling, but not obligating, the
Option Buyer to sell and deliver the Product to the Option Seller at a price
equal to the Strike Price for the Delivery Period for which the option may be
exercised, all as specified in a Transaction. Upon proper exercise of the Option
by the Option Buyer, the Option Seller will be obligated to purchase and receive
the Product.
1.49 "Quantity" means that quantity of the Product that Seller agrees to
make available or sell and deliver, or cause to be delivered, to Buyer, and that
Buyer agrees to purchase and receive, or cause to be received, from Seller as
specified in the Transaction.
1.50 "Recording" has the meaning set forth in Section 2.4.
1.51 "Replacement Price" means the price at which Buyer, acting in a
commercially reasonable manner, purchases at the Delivery Point a replacement
for any Product specified in a Transaction but not delivered by Seller, plus (i)
costs reasonably incurred by Buyer in purchasing such substitute Product and
(ii) additional transmission charges, if any, reasonably incurred by Buyer to
the Delivery Point, or at Buyer's option, the market price at the Delivery Point
for such Product not delivered as determined by Buyer in a commercially
reasonable manner; provided, however, in no event shall such price include any
penalties, ratcheted demand or similar charges, nor shall Buyer be required to
utilize or change its utilization of its owned or controlled assets or market
positions to minimize Seller's liability. For the purposes of this definition,
Buyer shall be considered to have purchased replacement Product to the extent
Buyer shall have entered into one or more arrangements in a commercially
reasonable manner whereby Buyer repurchases its obligation to sell and deliver
the Product to another party at the Delivery Point.
1.52 "S&P" means the Standard & Poor's Rating Group (a division of XxXxxx-
Xxxx, Inc.) or its successor.
1.53 "Sales Price" means the price at which Seller, acting in a
commercially reasonable manner, resells at the Delivery Point any Product not
received by Buyer, deducting from such proceeds any (i) costs reasonably
incurred by Seller in reselling such Product and (ii) additional transmission
charges, if any, reasonably incurred by Seller in delivering such Product to the
third party purchasers, or at Seller's option, the market price at the Delivery
Point for such Product not received as determined by Seller in a commercially
reasonable manner; provided, however, in no event shall such price include any
penalties, ratcheted demand or similar charges, nor shall Seller be required to
utilize or change its utilization of its owned or controlled assets, including
contractual assets, or market positions to minimize Buyer's liability. For
purposes of this definition, Seller shall be considered to have resold such
Product to the extent Seller shall have entered into one or more arrangements in
a commercially reasonable manner whereby Seller repurchases its obligation to
purchase and receive the Product from another party at the Delivery Point.
Original Sheet No. 22
1.54 "Schedule" or "Scheduling" means the actions of Seller, Buyer and/or
their designated representatives, including each Party's Transmission Providers,
if applicable, of notifying, requesting and confirming to each other the
quantity and type of Product to be delivered on any given day or days during the
Delivery Period at a specified Delivery Point.
1.55 "Seller" means the Party to a Transaction that is obligated to sell
and deliver, or cause to be delivered, the Product, as specified in the
Transaction.
1.56 "Settlement Amount" means, with respect to a Transaction and the Non-
Defaulting Party, the Losses or Gains, and Costs, expressed in U.S. Dollars,
which such party incurs as a result of the liquidation of a Terminated
Transaction pursuant to Section 5.2.
1.57 "Strike Price" means the price to be paid for the purchase of the
Product pursuant to an Option.
1.58 "Terminated Transaction" has the meaning set forth in Section 5.2.
1.59 "Termination Payment" has the meaning set forth in Section 5.3.
1.60 "Transaction" means a particular transaction agreed to by the Parties
relating to the sale and purchase of a Product pursuant to this Master
Agreement.
1.61 "Transmission Provider" means any entity or entities transmitting or
transporting the Product on behalf of Seller or Buyer to or from the Delivery
Point in a particular Transaction.
ARTICLE TWO: TRANSACTION TERMS AND CONDITIONS
2.1 Transactions. A Transaction shall be entered into upon agreement of
------------
the Parties orally or, if expressly required by either Party with respect to a
particular Transaction, in writing, including an electronic means of
communication. Each Party agrees not to contest, or assert any defense to, the
validity or enforceability of the Transaction entered into in accordance with
this Master Agreement (i) based on any law requiring agreements to be in writing
or to be signed by the parties, or (ii) based on any lack of authority of the
Party or any lack of authority of any employee of the Party to enter into a
Transaction.
2.2 Governing Terms. Unless otherwise specifically agreed, each
---------------
Transaction between the Parties shall be governed by this Master Agreement. This
Master Agreement (including all exhibits, schedules and any written supplements
hereto), the Party A Tariff, if any, and the Party B Tariff, if any, any
designated collateral, credit support or margin agreement or similar arrangement
between the Parties and all Transactions (including any Confirmations accepted
in accordance with Section 2.3) shall form a single integrated agreement between
the Parties. Any inconsistency between any terms of this Master Agreement and
any terms of the Transaction shall be resolved in favor of the terms of such
Transaction.
2.3 Confirmation. Seller may confirm a Transaction by forwarding to Buyer
------------
by facsimile within three (3) Business Days after the Transaction is entered
into a confirmation
Original Sheet No. 23
("Confirmation") substantially in the form of Exhibit A. If Buyer objects to any
term(s) of such Confirmation, Buyer shall notify Seller in writing of such
objections within two (2) Business Days of Buyer's receipt thereof, failing
which Buyer shall be deemed to have accepted the terms as sent. If Seller fails
to send a Confirmation within three (3) Business Days after the Transaction is
entered into, a Confirmation substantially in the form of Exhibit A, may be
forwarded by Buyer to Seller. If Seller objects to any term(s) of such
Confirmation, Seller shall notify Buyer of such objections within two (2)
Business Days of Seller's receipt thereof, failing which Seller shall be deemed
to have accepted the terms as sent. If Seller and Buyer each send a Confirmation
and neither Party objects to the other Party's Confirmation within two (2)
Business Days of receipt, Seller's Confirmation shall be deemed to be accepted
and shall be the controlling Confirmation, unless (i) Seller's Confirmation was
sent more than three (3) Business Days after the Transaction was entered into
and (ii) Buyer's Confirmation was sent prior to Seller's Confirmation, in which
case Buyer's Confirmation shall be deemed to be accepted and shall be the
controlling Confirmation. Failure by either Party to send or either Party to
return an executed Confirmation or any objection by either Party shall not
invalidate the Transaction agreed to by the Parties.
2.4 Additional Confirmation Terms. If the Parties have elected on the
-----------------------------
Cover Sheet to make this Section 2.4 applicable to this Master Agreement, when a
Confirmation contains provisions, other than those provisions relating to the
commercial terms of the Transaction (e.g., price or special transmission
conditions), which modify or supplement the general terms and conditions of this
Master Agreement (e.g., arbitration provisions or additional representations and
warranties), such provisions shall not be deemed to be accepted pursuant to
Section 2.3 unless agreed to either orally or in writing by the Parties;
provided that the foregoing shall not invalidate any Transaction agreed to by
the Parties.
2.5 Recording. Unless a Party expressly objects to a Recording (defined
---------
below) at the beginning of a telephone conversation, each Party consents to the
creation of a tape or electronic recording ("Recording") of all telephone
conversations between the Parties to this Master Agreement, and that any such
Recordings will be retained in confidence, secured from improper access, and may
be submitted in evidence in any proceeding or action relating to this Agreement.
Each Party waives any further notice of such monitoring or recording, and agrees
to notify its officers and employees of such monitoring or recording and to
obtain any necessary consent of such officers and employees. The Recording, and
the terms and conditions described therein, if admissible, shall be the
controlling evidence for the Parties' agreement with respect to a particular
Transaction in the event a Confirmation is not fully executed (or deemed
accepted) by both Parties. Upon full execution (or deemed acceptance) of a
Confirmation, such Confirmation shall control in the event of any conflict with
the terms of a Recording, or in the event of any conflict with the terms of this
Master Agreement.
ARTICLE THREE: OBLIGATIONS AND DELIVERIES
3.1 Seller's and Buyer's Obligations. With respect to each Transaction,
--------------------------------
Seller shall sell and deliver, or cause to be delivered, and Buyer shall
purchase and receive, or cause to be received, the Quantity of the Product at
the Delivery Point, and Buyer shall pay Seller the Contract Price; provided,
however, with respect to Options, the obligations set forth in the
Original Sheet No. 24
preceding sentence shall only arise if the Option Buyer exercises its Option in
accordance with its terms. Seller shall be responsible for any costs or charges
imposed on or associated with the Product or its delivery of the Product up to
the Delivery Point. Buyer shall be responsible for any costs or charges imposed
on or associated with the Product or its receipt at and from the Delivery Point.
3.2 Transmission and Scheduling. Seller shall arrange and be responsible
---------------------------
for transmission service to the Delivery Point and shall Schedule or arrange for
Scheduling services with its Transmission Providers, as specified by the Parties
in the Transaction, or in the absence thereof, in accordance with the practice
of the Transmission Providers, to deliver the Product to the Delivery Point.
Buyer shall arrange and be responsible for transmission service at and from the
Delivery Point and shall Schedule or arrange for Scheduling services with its
Transmission Providers to receive the Product at the Delivery Point.
3.3 Force Majeure. To the extent either Party is prevented by Force
-------------
Majeure from carrying out, in whole or part, its obligations under the
Transaction and such Party (the "Claiming Party") gives notice and details of
the Force Majeure to the other Party as soon as practicable, then, unless the
terms of the Product specify otherwise, the Claiming Party shall be excused from
the performance of its obligations with respect to such Transaction (other than
the obligation to make payments then due or becoming due with respect to
performance prior to the Force Majeure). The Claiming Party shall remedy the
Force Majeure with all reasonable dispatch. The non-Claiming Party shall not be
required to perform or resume performance of its obligations to the Claiming
Party corresponding to the obligations of the Claiming Party excused by Force
Majeure.
ARTICLE FOUR: REMEDIES FOR FAILURE TO DELIVER/RECEIVE
4.1 Seller Failure. If Seller fails to schedule and/or deliver all or
--------------
part of the Product pursuant to a Transaction, and such failure is not excused
under the terms of the Product or by Buyer's failure to perform, then Seller
shall pay Buyer, on the date payment would otherwise be due in respect of the
month in which the failure occurred or, if "Accelerated Payment of Damages" is
specified on the Cover Sheet, within five (5) Business Days of invoice receipt,
an amount for such deficiency equal to the positive difference, if any, obtained
by subtracting the Contract Price from the Replacement Price. The invoice for
such amount shall include a written statement explaining in reasonable detail
the calculation of such amount.
4.2 Buyer Failure. If Buyer fails to schedule and/or receive all or part
-------------
of the Product pursuant to a Transaction and such failure is not excused under
the terms of the Product or by Seller's failure to perform, then Buyer shall pay
Seller, on the date payment would otherwise be due in respect of the month in
which the failure occurred or, if "Accelerated Payment of Damages" is specified
on the Cover Sheet, within five (5) Business Days of invoice receipt, an amount
for such deficiency equal to the positive difference, if any, obtained by
subtracting the Sales Price from the Contract Price. The invoice for such
amount shall include a written statement explaining in reasonable detail the
calculation of such amount.
ARTICLE FIVE: EVENTS OF DEFAULT; REMEDIES
Original Sheet No. 25
5.1 Events of Default. An "Event of Default" shall mean, with respect to
-----------------
a Party (a "Defaulting Party"), the occurrence of any of the following:
(a) the failure to make, when due, any payment required pursuant
to this Agreement if such failure is not remedied within
three (3) Business Days after written notice;
(b) any representation or warranty made by such Party herein is
false or misleading in any material respect when made or
when deemed made or repeated;
(c) the failure to perform any material covenant or obligation
set forth in this Agreement (except to the extent
constituting a separate Event of Default, and except for
such Party's obligations to deliver or receive the Product,
the exclusive remedy for which is provided in Article Four)
if such failure is not remedied within three (3) Business
Days after written notice;
(d) such Party becomes Bankrupt;
(e) the failure of such Party to satisfy the
creditworthiness/collateral requirements agreed to pursuant
to Article Eight hereof;
(f) such Party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all of its assets
to, another entity and, at the time of such consolidation,
amalgamation, merger or transfer, the resulting, surviving
or transferee entity fails to assume all the obligations of
such Party under this Agreement to which it or its
predecessor was a party by operation of law or pursuant to
an agreement reasonably satisfactory to the other Party;
(g) if the applicable cross default section in the Cover Sheet
is indicated for such Party, the occurrence and continuation
of (i) a default, event of default or other similar
condition or event in respect of such Party or any other
party specified in the Cover Sheet for such Party under one
or more agreements or instruments, individually or
collectively, relating to indebtedness for borrowed money in
an aggregate amount of not less than the applicable Cross
Default Amount (as specified in the Cover Sheet), which
results in such indebtedness becoming, or becoming capable
at such time of being declared, immediately due and payable
or (ii) a default by such Party or any other party specified
in the Cover Sheet for such Party in making on the due date
therefor one or more payments, individually or collectively,
in an aggregate amount of not less than the applicable Cross
Default Amount (as specified in the Cover Sheet);
(h) with respect to such Party's Guarantor, if any:
Original Sheet No. 26
(i) if any representation or warranty made by a Guarantor in
connection with this Agreement is false or misleading in
any material respect when made or when deemed made or
repeated;
(ii) the failure of a Guarantor to make any payment required or
to perform any other material covenant or obligation in
any guaranty made in connection with this Agreement and
such failure shall not be remedied within three (3)
Business Days after written notice;
(iii) a Guarantor becomes Bankrupt;
(iv) the failure of a Guarantor's guaranty to be in full force
and effect for purposes of this Agreement (other than in
accordance with its terms) prior to the satisfaction of
all obligations of such Party under each Transaction to
which such guaranty shall relate without the written
consent of the other Party; or
(v) a Guarantor shall repudiate, disaffirm, disclaim, or
reject, in whole or in part, or challenge the validity of
any guaranty.
5.2 Declaration of an Early Termination Date and Calculation of Settlement
----------------------------------------------------------------------
Amounts. If an Event of Default with respect to a Defaulting Party shall have
-------
occurred and be continuing, the other Party (the "Non-Defaulting Party") shall
have the right (i) to designate a day, no earlier than the day such notice is
effective and no later than 20 days after such notice is effective, as an early
termination date ("Early Termination Date") to accelerate all amounts owing
between the Parties and to liquidate and terminate all, but not less than all,
Transactions (each referred to as a "Terminated Transaction") between the
Parties, (ii) withhold any payments due to the Defaulting Party under this
Agreement and (iii) suspend performance. The Non-Defaulting Party shall
calculate, in a commercially reasonable manner, a Settlement Amount for each
such Terminated Transaction as of the Early Termination Date (or, to the extent
that in the reasonable opinion of the Non-Defaulting Party certain of such
Terminated Transactions are commercially impracticable to liquidate and
terminate or may not be liquidated and terminated under applicable law on the
Early Termination Date, as soon thereafter as is reasonably practicable).
5.3 Net Out of Settlement Amounts. The Non-Defaulting Party shall
-----------------------------
aggregate all Settlement Amounts into a single amount by: netting out (a) all
Settlement Amounts that are due to the Defaulting Party, plus, at the option of
the Non-Defaulting Party, any cash or other form of security then available to
the Non-Defaulting Party pursuant to Article Eight, plus any or all other
amounts due to the Defaulting Party under this Agreement against (b) all
Settlement Amounts that are due to the Non-Defaulting Party, plus any or all
other amounts due to the Non-Defaulting Party under this Agreement, so that all
such amounts shall be netted out to a single liquidated amount (the "Termination
Payment") payable by one Party to the other. The Termination Payment shall be
due to or due from the Non-Defaulting Party as appropriate.
5.4 Notice of Payment of Termination Payment. As soon as practicable
----------------------------------------
after a liquidation, notice shall be given by the Non-Defaulting Party to the
Defaulting Party of the
Original Sheet No. 27
amount of the Termination Payment and whether the Termination Payment is due to
or due from the Non-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 within two (2)
Business Days after such notice is effective.
5.5 Disputes With Respect to Termination Payment. 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; provided, however, that if the Termination Payment is due from
the Defaulting Party, the Defaulting Party shall first transfer Performance
Assurance to the Non-Defaulting Party in an amount equal to the Termination
Payment.
5.6 Closeout Setoffs.
----------------
Option A: After calculation of a Termination Payment in accordance with
Section 5.3, if the Defaulting Party would be owed the Termination Payment, the
Non-Defaulting Party shall be entitled, at its option and in its discretion, to
(i) set off against such Termination Payment any amounts due and owing by the
Defaulting Party to the Non-Defaulting Party under any other agreements,
instruments or undertakings between the Defaulting Party and the Non-Defaulting
Party and/or (ii) to the extent the Transactions are not yet liquidated in
accordance with Section 5.2, withhold payment of the Termination Payment to the
Defaulting Party. The remedy provided for in this Section shall be without
prejudice and in addition to any right of setoff, combination of accounts, lien
or other right to which any Party is at any time otherwise entitled (whether by
operation of law, contract or otherwise).
Option B: After calculation of a Termination Payment in accordance with
Section 5.3, if the Defaulting Party would be owed the Termination Payment, the
Non-Defaulting Party shall be entitled, at its option and in its discretion, to
(i) set off against such Termination Payment any amounts due and owing by the
Defaulting Party or any of its Affiliates to the Non-Defaulting Party or any of
its Affiliates under any other agreements, instruments or undertakings between
the Defaulting Party or any of its Affiliates and the Non-Defaulting Party or
any of its Affiliates and/or (ii) to the extent the Transactions are not yet
liquidated in accordance with Section 5.2, withhold payment of the Termination
Payment to the Defaulting Party. The remedy provided for in this Section shall
be without prejudice and in addition to any right of setoff, combination of
accounts, lien or other right to which any Party is at any time otherwise
entitled (whether by operation of law, contract or otherwise).
Option C: Neither Option A nor B shall apply.
5.7 Suspension of Performance. Notwithstanding any other provision of
this Master Agreement, if (a) an Event of Default or (b) a Potential Event of
Default shall have occurred and be continuing, the Non-Defaulting Party, upon
written notice to the Defaulting Party, shall have the right (i) to suspend
performance under any or all Transactions; provided, however, in no event shall
any such suspension continue for longer than ten (10) NERC Business Days with
respect to any single Transaction unless an early Termination Date shall have
been declared and
Original Sheet No. 28
notice thereof pursuant to Section 5.2 given, and (ii) to the extent an Event of
Default shall have occurred and be continuing to exercise any remedy available
at law or in equity.
ARTICLE SIX: PAYMENT AND NETTING
6.1 Billing Period. Unless otherwise specifically agreed upon by the
--------------
Parties in a Transaction, the calendar month shall be the standard period for
all payments under this Agreement (other than Termination Payments and, if
"Accelerated Payment of Damages" is specified by the Parties in the Cover Sheet,
payments pursuant to Section 4.1 or 4.2 and Option premium payments pursuant to
Section 6.7). As soon as practicable after the end of each month, each Party
will render to the other Party an invoice for the payment obligations, if any,
incurred hereunder during the preceding month.
6.2 Timeliness of Payment. Unless otherwise agreed by the Parties in a
---------------------
Transaction, all invoices under this Master Agreement shall be due and payable
in accordance with each Party's invoice instructions on or before the later of
the twentieth (20th) day of each month, or tenth (10th) day after receipt of the
invoice or, if such day is not a Business Day, then on the next Business Day.
Each Party will make payments by electronic funds transfer, or by other mutually
agreeable method(s), to the account designated by the other Party. Any amounts
not paid by the due date will be deemed delinquent and will accrue interest at
the Interest Rate, such interest to be calculated from and including the due
date to but excluding the date the delinquent amount is paid in full.
6.3 Disputes and Adjustments of Invoices. A Party may, in good faith,
------------------------------------
dispute the correctness of any invoice or any adjustment to an invoice, rendered
under this Agreement or adjust any invoice for any arithmetic or computational
error within twelve (12) months of the date the invoice, or adjustment to an
invoice, was rendered. In the event an invoice or portion thereof, or any other
claim or adjustment arising hereunder, is disputed, payment of the undisputed
portion of the invoice shall be required to be made when due, with notice of the
objection given to the other Party. Any invoice dispute or invoice adjustment
shall be in writing and shall state the basis for the dispute or adjustment.
Payment of the disputed amount shall not be required until the dispute is
resolved. Upon resolution of the dispute, any required payment shall be made
within two (2) Business Days of such resolution along with interest accrued at
the Interest Rate from and including the due date to but excluding the date
paid. Inadvertent overpayments shall be returned upon request or deducted by
the Party receiving such overpayment from subsequent payments, with interest
accrued at the Interest Rate from and including the date of such overpayment to
but excluding the date repaid or deducted by the Party receiving such
overpayment. Any dispute with respect to an invoice is waived unless the other
Party is notified in accordance with this Section 6.3 within twelve (12) months
after the invoice is rendered or any specific adjustment to the invoice is made.
If an invoice is not rendered within twelve (12) months after the close of the
month during which performance of a Transaction occurred, the right to payment
for such performance is waived.
6.4 Netting of Payments. The Parties hereby agree that they shall
-------------------
discharge mutual debts and payment obligations due and owing to each other on
the same date pursuant to all Transactions through netting, in which case all
amounts owed by each Party to the other Party
Original Sheet No. 29
for the purchase and sale of Products during the monthly billing period under
this Master Agreement, including any related damages calculated pursuant to
Article Four (unless one of the Parties elects to accelerate payment of such
amounts as permitted by Article Four), interest, and payments or credits, shall
be netted so that only the excess amount remaining due shall be paid by the
Party who owes it.
6.5 Payment Obligation Absent Netting. If no mutual debts or payment
---------------------------------
obligations exist and only one Party owes a debt or obligation to the other
during the monthly billing period, including, but not limited to, any related
damage amounts calculated pursuant to Article Four, interest, and payments or
credits, that Party shall pay such sum in full when due.
6.6 Security. Unless the Party benefiting from Performance Assurance or a
--------
guaranty notifies the other Party in writing, and except in connection with a
liquidation and termination in accordance with Article Five, all amounts netted
pursuant to this Article Six shall not take into account or include any
Performance Assurance or guaranty which may be in effect to secure a Party's
performance under this Agreement.
6.7 Payment for Options. The premium amount for the purchase of an Option
-------------------
shall be paid within two (2) Business Days of receipt of an invoice from the
Option Seller. Upon exercise of an Option, payment for the Product underlying
such Option shall be due in accordance with Section 6.1.
6.8 Transaction Netting. If the Parties enter into one or more
-------------------
Transactions, which in conjunction with one or more other outstanding
Transactions, constitute Offsetting Transactions, then all such Offsetting
Transactions may by agreement of the Parties, be netted into a single
Transaction under which:
(a) the Party obligated to deliver the greater amount of Energy
will deliver the difference between the total amount it is
obligated to deliver and the total amount to be delivered to
it under the Offsetting Transactions, and
(b) the Party owing the greater aggregate payment will pay the
net difference owed between the Parties.
Each single Transaction resulting under this Section shall be deemed part of the
single, indivisible contractual arrangement between the parties, and once such
resulting Transaction occurs, outstanding obligations under the Offsetting
Transactions which are satisfied by such offset shall terminate.
ARTICLE SEVEN: LIMITATIONS
7.1 Limitation of Remedies, Liability and Damages. EXCEPT AS SET FORTH
---------------------------------------------
HEREIN, THERE IS NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, AND ANY AND ALL IMPLIED WARRANTIES ARE DISCLAIMED. THE PARTIES CONFIRM
THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT
SATISFY THE
Original Sheet No. 30
ESSENTIAL PURPOSES HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS
REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF
DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR'S LIABILITY SHALL BE
LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW
OR IN EQUITY ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY
PROVIDED HEREIN OR IN A TRANSACTION, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO
DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND
EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE
WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE LIABLE FOR
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 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, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE
DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM
OR LOSS.
ARTICLE EIGHT: CREDIT AND COLLATERAL REQUIREMENTS
8.1 Party A Credit Protection. The applicable credit and collateral
-------------------------
requirements shall be as specified on the Cover Sheet. If no option in Section
8.1(a) is specified on the Cover Sheet, Section 8.l(a) Option C shall apply
exclusively. If none of Sections 8.1(b), 8.1(c) or 8.1(d) are specified on the
Cover Sheet, Section 8.1(b) shall apply exclusively.
(a) Financial Information. Option A: If requested by Party A,
---------------------
Party B shall deliver (i) within 120 days following the end of each fiscal year,
a copy of Party B's annual report containing audited consolidated financial
statements for such fiscal year and (ii) within 60 days after the end of each of
its first three fiscal quarters of each fiscal year, a copy of Party B's
quarterly report containing unaudited consolidated financial statements for such
fiscal quarter. In all cases the statements shall be for the most recent
accounting period and prepared in accordance with generally accepted accounting
principles; provided, however, that should any such statements not be available
on a timely basis due to a delay in preparation or certification, such delay
shall not be an Event of Default so long as Party B diligently pursues the
preparation, certification and delivery of the statements.
Option B: If requested by Party A, Party B shall deliver (i) within 120
days following the end of each fiscal year, a copy of the annual report
containing audited consolidated financial statements for such fiscal year for
the party(s) specified on the Cover Sheet and (ii) within 60
Original Sheet No. 31
days after the end of each of its first three fiscal quarters of each fiscal
year, a copy of quarterly report containing unaudited consolidated financial
statements for such fiscal quarter for the party(s) specified on the Cover
Sheet. In all cases the statements shall be for the most recent accounting
period and shall be prepared in accordance with generally accepted accounting
principles; provided, however, that should any such statements not be available
on a timely basis due to a delay in preparation or certification, such delay
shall not be an Event of Default so long as the relevant entity diligently
pursues the preparation, certification and delivery of the statements.
Option C: Party A may request from Party B the information specified in
the Cover Sheet.
(b) Credit Assurances. If Party A has reasonable grounds to believe that
-----------------
Party B's creditworthiness or performance under this Agreement has become
unsatisfactory, Party A will provide Party B with written notice requesting
Performance Assurance in an amount determined by Party A in a commercially
reasonable manner. Upon receipt of such notice Party B shall have three (3)
Business Days to remedy the situation by providing such Performance Assurance to
Party A. In the event that Party B fails to provide such Performance Assurance,
or a guaranty or other credit assurance acceptable to Party A within three (3)
Business Days of receipt of notice, then an Event of Default under Article Five
will be deemed to have occurred and Party A will be entitled to the remedies set
forth in Article Five of this Master Agreement.
(c) Collateral Threshold. If at any time and from time to time during the
--------------------
term of this Agreement (and notwithstanding whether an Event of Default has
occurred), the Termination Payment that would be owed to Party A plus Party B's
Independent Amount, if any, exceeds the Party B Collateral Threshold, then Party
A, on any Business Day, may request that Party B provide Performance Assurance
in an amount equal to the amount by which the Termination Payment plus Party B's
Independent Amount, if any, exceeds the Party B Collateral Threshold (rounding
upwards for any fractional amount to the next Party B Rounding Amount) ("Party B
Performance Assurance"), less any Party B Performance Assurance already posted
with Party A. Such Party B Performance Assurance shall be delivered to Party A
within three (3) Business Days of the date of such request. On any Business Day
(but no more frequently than weekly with respect to Letters of Credit and daily
with respect to cash), Party B, at its sole cost, may request that such Party B
Performance Assurance be reduced correspondingly to the amount of such excess
Termination Payment plus Party B's Independent Amount, if any, (rounding upwards
for any fractional amount to the next Party B Rounding Amount). In the event
that Party B fails to provide Party B Performance Assurance pursuant to the
terms of this Article Eight within three (3) Business Days, then an Event of
Default under Article Five shall be deemed to have occurred and Party A will be
entitled to the remedies set forth in Article Five of this Master Agreement.
For purposes of this Section 8.1(c), the calculation of the Termination
Payment shall be calculated pursuant to Section 5.3 by Party A as if all
outstanding Transactions had been liquidated, and in addition thereto, shall
include all amounts owed but not yet paid by Party B to Party A, whether or not
such amounts are due, for performance already provided pursuant to any and all
Transactions.
Original Sheet No. 32
(d) Downgrade Event. If at any time there shall occur a Downgrade
---------------
Event in respect of Party B, then Party A may require Party B to provide
Performance Assurance in an amount determined by Party A in a commercially
reasonable manner. In the event Party B shall fail to provide such Performance
Assurance or a guaranty or other credit assurance acceptable to Party A within
three (3) Business Days of receipt of notice, then an Event of Default shall be
deemed to have occurred and Party A will be entitled to the remedies set forth
in Article Five of this Master Agreement.
(e) If specified on the Cover Sheet, Party B shall deliver to Party
A, prior to or concurrently with the execution and delivery of this Master
Agreement a guarantee in an amount not less than the Guarantee Amount specified
on the Cover Sheet and in a form reasonably acceptable to Party A.
8.2 Party B Credit Protection. The applicable credit and collateral
-------------------------
requirements shall be as specified on the Cover Sheet. If no option in Section
8.2(a) is specified on the Cover Sheet, Section 8.2(a) Option C shall apply
exclusively. If none of Sections 8.2(b), 8.2(c) or 8.2(d) are specified on the
Cover Sheet, Section 8.2(b) shall apply exclusively.
(a) Financial Information. Option A: If requested by Party B, Party
---------------------
A shall deliver (i) within 120 days following the end of each fiscal year, a
copy of Party A's annual report containing audited consolidated financial
statements for such fiscal year and (ii) within 60 days after the end of each of
its first three fiscal quarters of each fiscal year, a copy of such Party's
quarterly report containing unaudited consolidated financial statements for such
fiscal quarter. In all cases the statements shall be for the most recent
accounting period and prepared in accordance with generally accepted accounting
principles; provided, however, that should any such statements not be available
on a timely basis due to a delay in preparation or certification, such delay
shall not be an Event of Default so long as such Party diligently pursues the
preparation, certification and delivery of the statements.
Option B: If requested by Party B, Party A shall deliver (i) within 120
days following the end of each fiscal year, a copy of the annual report
containing audited consolidated financial statements for such fiscal year for
the party(s) specified on the Cover Sheet and (ii) within 60 days after the end
of each of its first three fiscal quarters of each fiscal year, a copy of
quarterly report containing unaudited consolidated financial statements for such
fiscal quarter for the party(s) specified on the Cover Sheet. In all cases the
statements shall be for the most recent accounting period and shall be prepared
in accordance with generally accepted accounting principles; provided, however,
that should any such statements not be available on a timely basis due to a
delay in preparation or certification, such delay shall not be an Event of
Default so long as the relevant entity diligently pursues the preparation,
certification and delivery of the statements.
Option C: Party B may request from Party A the information specified in
the Cover Sheet.
(b) Credit Assurances. If Party B has reasonable grounds to believe
-----------------
that Party A's creditworthiness or performance under this Agreement has become
unsatisfactory, Party B
Original Sheet No. 33
will provide Party A with written notice requesting Performance Assurance in an
amount determined by Party B in a commercially reasonable manner. Upon receipt
of such notice Party A shall have three (3) Business Days to remedy the
situation by providing such Performance Assurance to Party B. In the event that
Party A fails to provide such Performance Assurance, or a guaranty or other
credit assurance acceptable to Party B within three (3) Business Days of receipt
of notice, then an Event of Default under Article Five will be deemed to have
occurred and Party B will be entitled to the remedies set forth in Article Five
of this Master Agreement.
(c) Collateral Threshold. If at any time and from time to time
--------------------
during the term of this Agreement (and notwithstanding whether an Event of
Default has occurred), the Termination Payment that would be owed to Party B
plus Party A's Independent Amount, if any, exceeds the Party A Collateral
Threshold, then Party B, on any Business Day, may request that Party A provide
Performance Assurance in an amount equal to the amount by which the Termination
Payment plus Party A's Independent Amount, if any, exceeds the Party A
Collateral Threshold (rounding upwards for any fractional amount to the next
Party A Rounding Amount) ("Party A Performance Assurance"), less any Party A
Performance Assurance already posted with Party B. Such Party A Performance
Assurance shall be delivered to Party B within three (3) Business Days of the
date of such request. On any Business Day (but no more frequently than weekly
with respect to Letters of Credit and daily with respect to cash), Party A, at
its sole cost, may request that such Party A Performance Assurance be reduced
correspondingly to the amount of such excess Termination Payment plus Party A's
Independent Amount, if any, (rounding upwards for any fractional amount to the
next Party A Rounding Amount). In the event that Party A fails to provide Party
A Performance Assurance pursuant to the terms of this Article Eight within three
(3) Business Days, then an Event of Default under Article Five shall be deemed
to have occurred and Party B will be entitled to the remedies set forth in
Article Five of this Master Agreement.
For purposes of this Section 8.2(c), the calculation of the Termination
Payment shall be calculated pursuant to Section 5.3 by Party B as if all
outstanding Transactions had been liquidated, and in addition thereto, shall
include all amounts owed but not yet paid by Party A to Party B, whether or not
such amounts are due, for performance already provided pursuant to any and all
Transactions.
(d) Downgrade Event. If at any time there shall occur a Downgrade
---------------
Event in respect of Party A, then Party B may require Party A to provide
Performance Assurance in an amount determined by Party B in a commercially
reasonable manner. In the event Party A shall fail to provide such Performance
Assurance or a guaranty or other credit assurance acceptable to Party B within
three (3) Business Days of receipt of notice, then an Event of Default shall be
deemed to have occurred and Party B will be entitled to the remedies set forth
in Article Five of this Master Agreement.
(e) If specified on the Cover Sheet, Party A shall deliver to Party
B, prior to or concurrently with the execution and delivery of this Master
Agreement a guarantee in an amount not less than the Guarantee Amount specified
on the Cover Sheet and in a form reasonably acceptable to Party B.
Original Sheet No. 34
8.3 Grant of Security Interest/Remedies. To secure its obligations under
-----------------------------------
this Agreement and to the extent either or both Parties deliver Performance
Assurance hereunder, each Party (a "Pledgor") hereby grants to the other Party
(the "Secured Party") a present and continuing security interest in, and lien on
(and right of setoff against), and assignment of, all cash collateral and cash
equivalent collateral and any and all proceeds resulting therefrom or the
liquidation thereof, whether now or hereafter held by, on behalf of, or for the
benefit of, such Secured Party, and each Party agrees to take such action as the
other Party reasonably requires in order to perfect the Secured Party's first-
priority security interest in, and lien on (and right of setoff against), such
collateral and any and all proceeds resulting therefrom or from the liquidation
thereof. Upon or any time after the occurrence or deemed occurrence and during
the continuation of an Event of Default or an Early Termination Date, the Non-
Defaulting Party may do any one or more of the following: (i) exercise any of
the rights and remedies of a Secured Party with respect to all Performance
Assurance, including any such rights and remedies under law then in effect; (ii)
exercise its rights of setoff against any and all property of the Defaulting
Party in the possession of the Non-Defaulting Party or its agent; (iii) draw on
any outstanding Letter of Credit issued for its benefit; and (iv) liquidate all
Performance Assurance then held by or for the benefit of the Secured Party free
from any claim or right of any nature whatsoever of the Defaulting Party,
including any equity or right of purchase or redemption by the Defaulting Party.
The Secured Party shall apply the proceeds of the collateral realized upon the
exercise of any such rights or remedies to reduce the Pledgor's obligations
under the Agreement (the Pledgor remaining liable for any amounts owing to the
Secured Party after such application), subject to the Secured Party's obligation
to return any surplus proceeds remaining after such obligations are satisfied in
full.
ARTICLE NINE: GOVERNMENTAL CHARGES
9.1 Cooperation. Each Party shall use reasonable efforts to implement the
-----------
provisions of and to administer this Master Agreement in accordance with the
intent of the parties to minimize all taxes , so long as neither Party is
materially adversely affected by such efforts.
9.2 Governmental Charges. Seller shall pay or cause to be paid all taxes
--------------------
imposed by any government authority("Governmental Charges") on or with respect
to the Product or a Transaction arising prior to the Delivery Point. Buyer
shall pay or cause to be paid all Governmental Charges on or with respect to the
Product or a Transaction at and from the Delivery Point (other than ad valorem,
franchise or income taxes which are related to the sale of the Product and are,
therefore, the responsibility of the Seller). In the event Seller is required
by law or regulation to remit or pay Governmental Charges which are Buyer's
responsibility hereunder, Buyer shall promptly reimburse Seller for such
Governmental Charges. If Buyer is required by law or regulation to remit or pay
Governmental Charges which are Seller's responsibility hereunder, Buyer may
deduct the amount of any such Governmental Charges from the sums due to Seller
under Article 6 of this Agreement. Nothing shall obligate or cause a Party to
pay or be liable to pay any Governmental Charges for which it is exempt under
the law.
ARTICLE TEN: MISCELLANEOUS
Original Sheet No. 35
10.1 Term of Master Agreement. The term of this Master Agreement shall
------------------------
commence on the Effective Date and shall remain in effect until terminated by
either Party upon (thirty) 30 days' prior written notice; provided, however,
that such termination shall not affect or excuse the performance of either Party
under any provision of this Master Agreement that by its terms survives any such
termination and, provided further, that this Master Agreement and any other
documents executed and delivered hereunder shall remain in effect with respect
to the Transaction(s) entered into prior to the effective date of such
termination until both Parties have fulfilled all of their obligations with
respect to such Transaction(s), or such Transaction(s) that have been terminated
under Section 5.2 of this Agreement.
10.2 Representations and Warranties. On the Effective Date and the date
------------------------------
of entering into each Transaction, each Party represents and warrants to the
other Party 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 Master Agreement
and each Transaction (including any Confirmation accepted in
accordance with Section 2.3);
(iii) the execution, delivery and performance of this Master
Agreement and each Transaction (including any Confirmation
accepted in accordance with Section 2.3) 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 Master Agreement, each Transaction (including any
Confirmation accepted in accordance with Section 2.3), and
each other document executed and delivered in accordance
with this Master Agreement constitutes its legally valid and
binding obligation enforceable against it in accordance with
its terms; subject to any Equitable Defenses.
(v) it is not Bankrupt and there are no proceedings pending or
being contemplated by it or, to its knowledge, threatened
against it which would result in it being or becoming
Bankrupt;
(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 Master Agreement and each
Transaction (including any Confirmation accepted in
accordance with Section 2.3);
(vii) no Event of Default or Potential 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
Original Sheet No. 36
Master Agreement and each Transaction (including any
Confirmation accepted in accordance with Section 2.3);
(viii) it is acting for its own account, has made its own
independent decision to enter into this Master Agreement and
each Transaction (including any Confirmation accepted in
accordance with Section 2.3) and as to whether this Master
Agreement and each such Transaction (including any
Confirmation accepted in accordance with Section 2.3) is
appropriate or proper for it based upon its own judgment, is
not relying upon the advice or recommendations of the other
Party in so doing, and is capable of assessing the merits of
and understanding, and understands and accepts, the terms,
conditions and risks of this Master Agreement and each
Transaction (including any Confirmation accepted in
accordance with Section 2.3);
(ix) it is a "forward contract merchant" within the meaning of
the United States Bankruptcy Code;
(x) it has entered into this Master Agreement and each
Transaction (including any Confirmation accepted in
accordance with Section 2.3) in connection with the conduct
of its business and it has the capacity or ability to make
or take delivery of all Products referred to in the
Transaction to which it is a Party;
(xi) with respect to each Transaction (including any Confirmation
accepted in accordance with Section 2.3) involving the
purchase or sale of a Product or an Option, it is a
producer, processor, commercial user or merchant handling
the Product, and it is entering into such Transaction for
purposes related to its business as such; and
(xii) the material economic terms of each Transaction are subject
to individual negotiation by the Parties.
10.3 Title and Risk of Loss. Title to and risk of loss related to the
----------------------
Product shall transfer from Seller to Buyer at the Delivery Point. Seller
warrants that it will deliver to Buyer the Quantity of the Product free and
clear of all liens, security interests, claims and encumbrances or any interest
therein or thereto by any person arising prior to the Delivery Point.
10.4 Indemnity. Each Party shall indemnify, defend and hold harmless the
---------
other Party from and against any Claims arising from or out of any event,
circumstance, act or incident first occurring or existing during the period when
control and title to Product is vested in such Party as provided in Section
10.3. Each Party shall indemnify, defend and hold harmless the other Party
against any Governmental Charges for which such Party is responsible under
Article Nine.
10.5 Assignment. Neither Party shall assign this Agreement or its rights
----------
hereunder without the prior written consent of the other Party, which consent
may be withheld in the
Original Sheet No. 37
exercise of its sole discretion; 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 equal to or higher than that
of such Party, or (iii) transfer or assign this Agreement to any person or
entity succeeding to all or substantially all of the assets whose
creditworthiness is equal to or higher than that of such Party; provided,
however, that in each such case, any such assignee shall agree in writing to be
bound by the terms and conditions hereof and so long as the transferring Party
delivers such tax and enforceability assurance as the non-transferring Party may
reasonably request.
10.6 Governing Law. 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 NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW. EACH PARTY WAIVES ITS RESPECTIVE RIGHT TO ANY JURY TRIAL
WITH RESPECT TO ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS
AGREEMENT.
10.7 Notices. All notices, requests, statements or payments shall be made
-------
as specified in the Cover Sheet. Notices (other than scheduling requests) shall,
unless otherwise specified herein, be in writing and may be delivered by hand
delivery, United States mail, overnight courier service or facsimile. Notice by
facsimile or hand delivery shall be effective at the close of business on the
day actually received, if received during business hours on a Business Day, and
otherwise shall be effective at the close of business on the next Business Day.
Notice by overnight United States mail or courier shall be effective on the next
Business Day after it was sent. A Party may change its addresses by providing
notice of same in accordance herewith.
10.8 General. This Master Agreement (including the exhibits, schedules
-------
and any written supplements hereto), the Party A Tariff, if any, the Party B
Tariff, if any, any designated collateral, credit support or margin agreement or
similar arrangement between the Parties and all Transactions (including any
Confirmation accepted in accordance with Section 2.3) constitute the entire
agreement between the Parties relating to the subject matter. Notwithstanding
the foregoing, any collateral, credit support or margin agreement or similar
arrangement between the Parties shall, upon designation by the Parties, be
deemed part of this Agreement and shall be incorporated herein by reference.
This 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. Except to the extent herein provided
for, no amendment or modification to this Master Agreement shall be enforceable
unless reduced to writing and executed by both Parties. Each Party agrees if it
seeks to amend any applicable wholesale power sales tariff during the term of
this Agreement, such amendment will not in any way affect outstanding
Transactions under this Agreement without the prior written consent of the other
Party. Each Party further agrees that it will not assert, or defend itself, on
the basis that any applicable tariff is inconsistent with this Agreement. This
Agreement shall not impart any rights enforceable by any third party (other than
a permitted successor or assignee bound to this
Original Sheet No. 38
Agreement). Waiver by a Party of any default by the other Party shall not 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 (individually or collectively, such events
referred to as "Regulatory Event") will not otherwise affect the remaining
lawful obligations that arise under this Agreement; and provided, further, that
if a Regulatory Event occurs, the Parties shall use their best efforts to reform
this Agreement in order to give effect to the original intention of the Parties.
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 twelve (12) months.
This Agreement shall be binding on each Party's successors and permitted
assigns.
10.9 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 Master Agreement. If requested, a Party shall
provide to the other Party statements evidencing the Quantity 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 calculated 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 twelve (12) months from the
rendition thereof, and thereafter any objection shall be deemed waived.
10.10 Forward Contract. The Parties acknowledge and agree that all
----------------
Transactions constitute "forward contracts" within the meaning of the United
States Bankruptcy Code.
10.11 Confidentiality. If the Parties have elected on the Cover Sheet to
---------------
make this Section 10.11 applicable to this Master Agreement, neither Party shall
disclose the terms or conditions of a Transaction under this Master Agreement to
a third party (other than the Party's employees, lenders, counsel, accountants
or advisors who have a need to know such information and have agreed to keep
such terms confidential) except in order to comply with any applicable law,
regulation, or any exchange, control area or independent system operator rule or
in connection with any court or regulatory proceeding; provided, however, each
Party shall, to the extent practicable, use reasonable efforts to prevent or
limit the disclosure. The Parties shall be entitled to all remedies available at
law or in equity to enforce, or seek relief in connection with, this
confidentiality obligation.
Original Sheet No. 39
SCHEDULE M
(THIS SCHEDULE IS INCLUDED IF THE APPROPRIATE BOX ON THE COVER SHEET IS MARKED
INDICATING A PARTY IS A GOVERNMENTAL ENTITY OR PUBLIC POWER SYSTEM)
A. The Parties agree to add the following definitions in Article One.
"Act" means ______________________________./1/
"Governmental Entity or Public Power System" means a
municipality, county, governmental board, public power authority,
public utility district, joint action agency, or other similar
political subdivision or public entity of the United States, one or
more States or territories or any combination thereof.
"Special Fund" means a fund or account of the Governmental Entity
or Public Power System set aside and or pledged to satisfy the Public
Power System's obligations hereunder out of which amounts shall be
paid to satisfy all of the Public Power System's obligations under
this Master Agreement for the entire Delivery Period.
B. The following sentence shall be added to the end of the definition of
"Force Majeure" in Article One.
If the Claiming Party is a Governmental Entity or Public Power System,
Force Majeure does not include any action taken by the Governmental
Entity or Public Power System in its governmental capacity.
C. The Parties agree to add the following representations and warranties
to Section 10.2:
Further and with respect to a Party that is a Governmental Entity
or Public Power System, such Governmental Entity or Public Power
System represents and warrants to the other Party continuing
throughout the term of this Master Agreement, with respect to this
Master Agreement and each Transaction, as follows: (i) all acts
necessary to the valid execution, delivery and performance of this
Master Agreement, including without limitation, competitive bidding,
public notice, election, referendum, prior appropriation or other
required procedures has or will be taken and performed as required
under the Act and the Public Power System's ordinances, bylaws or
other regulations, (ii) all persons making up the governing body of
Governmental Entity or Public Power System are the
___________________
/1/ Cite the state enabling and other relevant statutes applicable to
Governmental Entity or Public Power System.
Original Sheet No. 40
duly elected or appointed incumbents in their positions and hold such
positions in good standing in accordance with the Act and other
applicable law, (iii) entry into and performance of this Master
Agreement by Governmental Entity or Public Power System are for a
proper public purpose within the meaning of the Act and all other
relevant constitutional, organic or other governing documents and
applicable law, (iv) the term of this Master Agreement does not extend
beyond any applicable limitation imposed by the Act or other relevant
constitutional, organic or other governing documents and applicable
law, (v) the Public Power System's obligations to make payments
hereunder are unsubordinated obligations and such payments are (a)
operating and maintenance costs (or similar designation) which enjoy
first priority of payment at all times under any and all bond
ordinances or indentures to which it is a party, the Act and all other
relevant constitutional, organic or other governing documents and
applicable law or (b) otherwise not subject to any prior claim under
any and all bond ordinances or indentures to which it is a party, the
Act and all other relevant constitutional, organic or other governing
documents and applicable law and are available without limitation or
deduction to satisfy all Governmental Entity or Public Power System'
obligations hereunder and under each Transaction or (c) are to be made
solely from a Special Fund, (vi) entry into and performance of this
Master Agreement and each Transaction by the Governmental Entity or
Public Power System will not adversely affect the exclusion from gross
income for federal income tax purposes of interest on any obligation
of Governmental Entity or Public Power System otherwise entitled to
such exclusion, and (vii) obligations to make payments hereunder do
not constitute any kind of indebtedness of Governmental Entity or
Public Power System or create any kind of lien on, or security
interest in, any property or revenues of Governmental Entity or Public
Power System which, in either case, is proscribed by any provision of
the Act or any other relevant constitutional, organic or other
governing documents and applicable law, any order or judgment of any
court or other agency of government applicable to it or its assets, or
any contractual restriction binding on or affecting it or any of its
assets.
D. The Parties agree to add the following sections to Article Three:
Section 3.4 Public Power System's Deliveries. On the Effective
--------------------------------
Date and as a condition to the obligations of the other Party under
this Agreement, Governmental Entity or Public Power System shall
provide the other Party hereto (i) certified copies of all ordinances,
resolutions, public notices and other documents evidencing the
necessary authorizations with respect to the execution, delivery and
performance by Governmental Entity or Public Power System of this
Master Agreement and (ii) an opinion of counsel for Governmental
Entity or Public Power
Original Sheet No. 41
System, in form and substance reasonably satisfactory to the Other
Party, regarding the validity, binding effect and enforceability of
this Master Agreement against Governmental Entity or Public Power
System in respect of the Act and all other relevant constitutional
organic or other governing documents and applicable law.
Section 3.5 No Immunity Claim. Governmental Entity or Public
-----------------
Power System warrants and covenants that with respect to its
contractual obligations hereunder and performance thereof, it will not
claim immunity on the grounds of sovereignty or similar grounds with
respect to itself or its revenues or assets from (a) suit, (b)
jurisdiction of court (including a court located outside the
jurisdiction of its organization), (c) relief by way of injunction,
order for specific performance or recovery of property, (d) attachment
of assets, or (e) execution or enforcement of any judgment.
E. If the appropriate box is checked on the Cover Sheet, as an
alternative to selecting one of the options under Section 8.3, the Parties agree
to add the following section to Article Three:
Section 3.6 Governmental Entity or Public Power System Security.
---------------------------------------------------
With respect to each Transaction, Governmental Entity or Public Power
System shall either (i) have created and set aside a Special Fund or
(ii) upon execution of this Master Agreement and prior to the
commencement of each subsequent fiscal year of Governmental Entity or
Public Power System during any Delivery Period, have obtained all
necessary budgetary approvals and certifications for payment of all of
its obligations under this Master Agreement for such fiscal year; any
breach of this provision shall be deemed to have arisen during a
fiscal period of Governmental Entity or Public Power System for which
budgetary approval or certification of its obligations under this
Master Agreement is in effect and, notwithstanding anything to the
contrary in Article Four, an Early Termination Date shall
automatically and without further notice occur hereunder as of such
date wherein Governmental Entity or Public Power System shall be
treated as the Defaulting Party. Governmental Entity or Public Power
System shall have allocated to the Special Fund or its general funds a
revenue base that is adequate to cover Public Power System's payment
obligations hereunder throughout the entire Delivery Period.
F. If the appropriate box is checked on the Cover Sheet, the Parties
agree to add the following section to Article Eight:
Section 8.4 Governmental Security. As security for payment and
---------------------
performance of Public Power System's obligations hereunder, Public
Power System hereby pledges, sets over, assigns and grants to the
other
Original Sheet No. 42
Party a security interest in all of Public Power System's right, title
and interest in and to [specify collateral].
G. The Parties agree to add the following sentence at the end of Section
10.6 - Governing Law:
NOTWITHSTANDING THE FOREGOING, IN RESPECT OF THE APPLICABILITY OF THE
ACT AS HEREIN PROVIDED, THE LAWS OF THE STATE OF _____________/2/
SHALL APPLY.
________________
/2/ Insert relevant state for Governmental Entity or Public Power System.
Original Sheet No. 43
SCHEDULE P: PRODUCTS AND RELATED DEFINITIONS
"Ancillary Services" means any of the services identified by a Transmission
Provider in its transmission tariff as "ancillary services" including, but not
limited to, regulation and frequency response, energy imbalance, operating
reserve-spinning and operating reserve-supplemental, as may be specified in the
Transaction.
"Capacity" has the meaning specified in the Transaction.
"Energy" means three-phase, 60-cycle alternating current electric energy,
expressed in megawatt hours.
"Firm (LD)" means, with respect to a Transaction, that either Party shall
be relieved of its obligations to sell and deliver or purchase and receive
without liability only to the extent that, and for the period during which, such
performance is prevented by Force Majeure. In the absence of Force Majeure, the
Party to which performance is owed shall be entitled to receive from the Party
which failed to deliver/receive an amount determined pursuant to Article Four.
"Firm Transmission Contingent - Contract Path" means, with respect to a
Transaction, that the performance of either Seller or Buyer (as specified in the
Transaction) shall be excused, and no damages shall be payable including any
amounts determined pursuant to Article Four, if the transmission for such
Transaction is interrupted or curtailed and (i) such Party has provided for firm
transmission with the transmission provider(s) for the Product in the case of
the Seller from the generation source to the Delivery Point or in the case of
the Buyer from the Delivery Point to the ultimate sink, and (ii) such
interruption or curtailment is due to "force majeure" or "uncontrollable force"
or a similar term as defined under the applicable transmission provider's
tariff. This contingency shall excuse performance for the duration of the
interruption or curtailment notwithstanding the provisions of the definition of
"Force Majeure" in Section 1.23 to the contrary.
"Firm Transmission Contingent - Delivery Point" means, with respect to a
Transaction, that the performance of either Seller or Buyer (as specified in the
Transaction) shall be excused, and no damages shall be payable including any
amounts determined pursuant to Article Four, if the transmission to the Delivery
Point (in the case of Seller) or from the Delivery Point (in the case of Buyer)
for such Transaction is interrupted or curtailed and (i) such Party has provided
for firm transmission with the transmission provider(s) for the Product, in the
case of the Seller, to be delivered to the Delivery Point or, in the case of
Buyer, to be received at the Delivery Point and (ii) such interruption or
curtailment is due to "force majeure" or "uncontrollable force" or a similar
term as defined under the applicable transmission provider's tariff. This
transmission contingency excuses performance for the duration of the
interruption or curtailment, notwithstanding the provisions of the definition of
"Force Majeure" in Section 1.23 to the contrary. Interruptions or curtailments
of transmission other than the transmission either immediately to or from the
Delivery Point shall not excuse performance
"Firm (No Force Majeure)" means, with respect to a Transaction, that if
either Party fails to perform its obligation to sell and deliver or purchase and
receive the Product, the Party to
Original Sheet No. 44
which performance is owed shall be entitled to receive from the Party which
failed to perform an amount determined pursuant to Article Four. Force Majeure
shall not excuse performance of a Firm (No Force Majeure) Transaction.
"Into ______________ (the "Receiving Transmission Provider"), Seller's
Daily Choice" means that, in accordance with the provisions set forth below, (1)
the Product shall be scheduled and delivered to an interconnection or interface
("Interface") either (a) on the Receiving Transmission Provider's transmission
system border or (b) within the control area of the Receiving Transmission
Provider if the Product is from a source of generation in that control area,
which Interface, in either case, the Receiving Transmission Provider identifies
as available for delivery of the Product in or into its control area; and (2)
Seller has the right on a daily prescheduled basis to designate the Interface
where the Product shall be delivered. An "Into" Product shall be subject to the
following provisions:
1. Prescheduling and Notification. Subject to the provisions of Section
------------------------------
6, not later than the prescheduling deadline of 11:00 a.m. CPT on the Business
Day before the next delivery day or as otherwise agreed to by Buyer and Seller,
Seller shall notify Buyer ("Seller's Notification") of Seller's immediate
upstream counterparty and the Interface (the "Designated Interface") where
Seller shall deliver the Product for the next delivery day, and Buyer shall
notify Seller of Buyer's immediate downstream counterparty.
2. Availability of "Firm Transmission" to Buyer at Designated Interface;
---------------------------------------------------------------------
"Timely Request for Transmission," "ADI" and "Available Transmission." In
--------------------------------------------------------------------
determining availability to Buyer of next-day firm transmission ("Firm
Transmission") from the Designated Interface, a "Timely Request for
Transmission" shall mean a properly completed request for Firm Transmission made
by Buyer in accordance with the controlling tariff procedures, which request
shall be submitted to the Receiving Transmission Provider no later than 30
minutes after delivery of Seller's Notification, provided, however, if the
Receiving Transmission Provider is not accepting requests for Firm Transmission
at the time of Seller's Notification, then such request by Buyer shall be made
within 30 minutes of the time when the Receiving Transmission Provider first
opens thereafter for purposes of accepting requests for Firm Transmission.
Pursuant to the terms hereof, delivery of the Product may under certain
circumstances be redesignated to occur at an Interface other than the Designated
Interface (any such alternate designated interface, an "ADI") either (a) on the
Receiving Transmission Provider's transmission system border or (b) within the
control area of the Receiving Transmission Provider if the Product is from a
source of generation in that control area, which ADI, in either case, the
Receiving Transmission Provider identifies as available for delivery of the
Product in or into its control area using either firm or non-firm transmission,
as available on a day-ahead or hourly basis (individually or collectively
referred to as "Available Transmission") within the Receiving Transmission
Provider's transmission system.
3. Rights of Buyer and Seller Depending Upon Availability of/Timely
----------------------------------------------------------------
Request for Firm Transmission.
-----------------------------
Original Sheet No. 45
A. Timely Request for Firm Transmission made by Buyer, Accepted by
---------------------------------------------------------------
the Receiving Transmission Provider and Purchased by Buyer. If a Timely
----------------------------------------------------------
Request for Firm Transmission is made by Buyer and is accepted by the
Receiving Transmission Provider and Buyer purchases such Firm Transmission,
then Seller shall deliver and Buyer shall receive the Product at the
Designated Interface.
i. If the Firm Transmission purchased by Buyer within the
Receiving Transmission Provider's transmission system from the
Designated Interface ceases to be available to Buyer for any reason,
or if Seller is unable to deliver the Product at the Designated
Interface for any reason except Buyer's non-performance, then at
Seller's choice from among the following, Seller shall: (a) to the
extent Firm Transmission is available to Buyer from an ADI on a day-
ahead basis, require Buyer to purchase such Firm Transmission from
such ADI, and schedule and deliver the affected portion of the Product
to such ADI on the basis of Buyer's purchase of Firm Transmission, or
(b) require Buyer to purchase non-firm transmission, and schedule and
deliver the affected portion of the Product on the basis of Buyer's
purchase of non-firm transmission from the Designated Interface or an
ADI designated by Seller, or (c) to the extent firm transmission is
available on an hourly basis, require Buyer to purchase firm
transmission, and schedule and deliver the affected portion of the
Product on the basis of Buyer's purchase of such hourly firm
transmission from the Designated Interface or an ADI designated by
Seller.
ii. If the Available Transmission utilized by Buyer as required
by Seller pursuant to Section 3A(i) ceases to be available to Buyer
for any reason, then Seller shall again have those alternatives stated
in Section 3A(i) in order to satisfy its obligations.
iii. Seller's obligation to schedule and deliver the Product at
an ADI is subject to Buyer's obligation referenced in Section 4B to
cooperate reasonably therewith. If Buyer and Seller cannot complete
the scheduling and/or delivery at an ADI, then Buyer shall be deemed
to have satisfied its receipt obligations to Seller and Seller shall
be deemed to have failed its delivery obligations to Buyer, and Seller
shall be liable to Buyer for amounts determined pursuant to Article
Four.
iv. In each instance in which Buyer and Seller must make
alternative scheduling arrangements for delivery at the Designated
Interface or an ADI pursuant to Sections 3A(i) or (ii), and Firm
Transmission had been purchased by both Seller and Buyer into and
within the Receiving Transmission Provider's transmission system as to
the scheduled delivery which could not be completed as a result of the
interruption or curtailment of such Firm Transmission, Buyer and
Seller shall bear their respective transmission expenses and/or
associated congestion charges incurred in connection with efforts to
complete delivery by such alternative scheduling and delivery
arrangements. In any instance except as set forth in the immediately
preceding sentence, Buyer and Seller must make
Original Sheet No. 46
alternative scheduling arrangements for delivery at the Designated
Interface or an ADI under Sections 3A(i) or (ii), Seller shall be
responsible for any additional transmission purchases and/or
associated congestion charges incurred by Buyer in connection with
such alternative scheduling arrangements.
B. Timely Request for Firm Transmission Made by Buyer but Rejected by
------------------------------------------------------------------
the Receiving Transmission Provider. If Buyer's Timely Request for Firm
-----------------------------------
Transmission is rejected by the Receiving Transmission Provider because of
unavailability of Firm Transmission from the Designated Interface, then
Buyer shall notify Seller within 15 minutes after receipt of the Receiving
Transmission Provider's notice of rejection ("Buyer's Rejection Notice").
If Buyer timely notifies Seller of such unavailability of Firm Transmission
from the Designated Interface, then Seller shall be obligated either (1) to
the extent Firm Transmission is available to Buyer from an ADI on a day-
ahead basis, to require Buyer to purchase (at Buyer's own expense) such
Firm Transmission from such ADI and schedule and deliver the Product to
such ADI on the basis of Buyer's purchase of Firm Transmission, and
thereafter the provisions in Section 3A shall apply, or (2) to require
Buyer to purchase (at Buyer's own expense) non-firm transmission, and
schedule and deliver the Product on the basis of Buyer's purchase of non-
firm transmission from the Designated Interface or an ADI designated by the
Seller, in which case Seller shall bear the risk of interruption or
curtailment of the non-firm transmission; provided, however, that if the
non-firm transmission is interrupted or curtailed or if Seller is unable to
deliver the Product for any reason, Seller shall have the right to schedule
and deliver the Product to another ADI in order to satisfy its delivery
obligations, in which case Seller shall be responsible for any additional
transmission purchases and/or associated congestion charges incurred by
Buyer in connection with Seller's inability to deliver the Product as
originally prescheduled. If Buyer fails to timely notify Seller of the
unavailability of Firm Transmission, then Buyer shall bear the risk of
interruption or curtailment of transmission from the Designated Interface,
and the provisions of Section 3D shall apply.
C. Timely Request for Firm Transmission Made by Buyer, Accepted by
---------------------------------------------------------------
the Receiving Transmission Provider and not Purchased by Buyer. If Buyer's
--------------------------------------------------------------
Timely Request for Firm Transmission is accepted by the Receiving
Transmission Provider but Buyer elects to purchase non-firm transmission
rather than Firm Transmission to take delivery of the Product, then Buyer
shall bear the risk of interruption or curtailment of transmission from the
Designated Interface. In such circumstances, if Seller's delivery is
interrupted as a result of transmission relied upon by Buyer from the
Designated Interface, then Seller shall be deemed to have satisfied its
delivery obligations to Buyer, Buyer shall be deemed to have failed to
receive the Product and Buyer shall be liable to Seller for amounts
determined pursuant to Article Four.
D. No Timely Request for Firm Transmission Made by Buyer, or Buyer
---------------------------------------------------------------
Fails to Timely Send Buyer's Rejection Notice. If Buyer fails to make a
---------------------------------------------
Timely Request for Firm Transmission or Buyer fails to timely deliver
Buyer's Rejection Notice, then Buyer shall bear the risk of interruption or
curtailment of transmission from the Designated Interface. In such
circumstances, if Seller's delivery is interrupted as a result of
transmission relied upon by Buyer from the Designated
Original Sheet No. 47
Interface. In such circumstances, if Seller's delivery is interrupted as a
result of transmission relied upon by Buyer from the Designated Interface,
then Seller shall be deemed to have satisfied its delivery obligations to
Buyer, Buyer shall be deemed to have failed to receive the Product and
Buyer shall be liable to Seller for amounts determined pursuant to Article
Four.
4. Transmission.
------------
A. Seller's Responsibilities. Seller shall be responsible for
-------------------------
transmission required to deliver the Product to the Designated Interface or
ADI, as the case may be. It is expressly agreed that Seller is not
required to utilize Firm Transmission for its delivery obligations
hereunder, and Seller shall bear the risk of utilizing non-firm
transmission. If Seller's scheduled delivery to Buyer is interrupted as a
result of Buyer's attempted transmission of the Product beyond the
Receiving Transmission Provider's system border, then Seller will be deemed
to have satisfied its delivery obligations to Buyer, Buyer shall be deemed
to have failed to receive the Product and Buyer shall be liable to Seller
for damages pursuant to Article Four.
B. Buyer's Responsibilities. Buyer shall be responsible for
------------------------
transmission required to receive and transmit the Product at and from the
Designated Interface or ADI, as the case may be, and except as specifically
provided in Section 3A and 3B, shall be responsible for any costs
associated with transmission therefrom. If Seller is attempting to
complete the designation of an ADI as a result of Seller's rights and
obligations hereunder, Buyer shall co-operate reasonably with Seller in
order to effect such alternate designation.
5. Force Majeure. An "Into" Product shall be subject to the "Force
-------------
Majeure" provisions in Section 1.23.
6. Multiple Parties in Delivery Chain Involving a Designated Interface.
-------------------------------------------------------------------
Seller and Buyer recognize that there may be multiple parties involved in the
delivery and receipt of the Product at the Designated Interface or ADI to the
extent that (1) Seller may be purchasing the Product from a succession of other
sellers ("Other Sellers"), the first of which Other Sellers shall be causing the
Product to be generated from a source ("Source Seller") and/or (2) Buyer may be
selling the Product to a succession of other buyers ("Other Buyers"), the last
of which Other Buyers shall be using the Product to serve its energy needs
("Sink Buyer"). Seller and Buyer further recognize that in certain Transactions
neither Seller nor Buyer may originate the decision as to either (a) the
original identification of the Designated Interface or ADI (which designation
may be made by the Source Seller) or (b) the Timely Request for Firm
Transmission or the purchase of other Available Transmission (which request may
be made by the Sink Buyer). Accordingly, Seller and Buyer agree as follows:
A. If Seller is not the Source Seller, then Seller shall notify
Buyer of the Designated Interface promptly after Seller is notified thereof
by the Other Seller with whom Seller has a contractual relationship, but in
no event may such designation of the
Original Sheet No. 48
Designated Interface be later than the prescheduling deadline pertaining to
the Transaction between Buyer and Seller pursuant to Section 1.
B. If Buyer is not the Sink Buyer, then Buyer shall notify the Other
Buyer with whom Buyer has a contractual relationship of the Designated
Interface promptly after Seller notifies Buyer thereof, with the intent
being that the party bearing actual responsibility to secure transmission
shall have up to 30 minutes after receipt of the Designated Interface to
submit its Timely Request for Firm Transmission.
C. Seller and Buyer each agree that any other communications or
actions required to be given or made in connection with this "Into Product"
(including without limitation, information relating to an ADI) shall be
made or taken promptly after receipt of the relevant information from the
Other Sellers and Other Buyers, as the case may be.
D. Seller and Buyer each agree that in certain Transactions time is
of the essence and it may be desirable to provide necessary information to
Other Sellers and Other Buyers in order to complete the scheduling and
delivery of the Product. Accordingly, Seller and Buyer agree that each has
the right, but not the obligation, to provide information at its own risk
to Other Sellers and Other Buyers, as the case may be, in order to effect
the prescheduling, scheduling and delivery of the Product
"Native Load" means the demand imposed on an electric utility or an entity
by the requirements of retail customers located within a franchised service
territory that the electric utility or entity has statutory obligation to serve.
"Non-Firm" means, with respect to a Transaction, that delivery or receipt
of the Product may be interrupted for any reason or for no reason, without
liability on the part of either Party.
"System Firm" means that the Product will be supplied from the owned or
controlled generation or pre-existing purchased power assets of the system
specified in the Transaction (the "System") with non-firm transmission to and
from the Delivery Point, unless a different Transmission Contingency is
specified in a Transaction. Seller's failure to deliver shall be excused: (i)
by an event or circumstance which prevents Seller from performing its
obligations, which event or circumstance was not anticipated as of the date the
Transaction was agreed to, which is not within the reasonable control of, or the
result of the negligence of, the Seller; (ii) by Buyer's failure to perform;
(iii) to the extent necessary to preserve the integrity of, or prevent or limit
any instability on, the System; (iv) to the extent the System or the control
area or reliability council within which the System operates declares an
emergency condition, as determined in the system's, or the control area's, or
reliability council's reasonable judgment; or (v) by the interruption or
curtailment of transmission to the Delivery Point or by the occurrence of any
Transmission Contingency specified in a Transaction as excusing Seller's
performance. Buyer's failure to receive shall be excused (i) by Force Majeure;
(ii) by Seller's failure to perform, or (iii) by the interruption or curtailment
of transmission from the Delivery Point or by the occurrence of any Transmission
Contingency specified in a Transaction as excusing Buyer's performance. In any
of such events, neither party shall be liable to the other for any damages,
including any amounts determined pursuant to Article Four.
Original Sheet No. 49
"Transmission Contingent" means, with respect to a Transaction, that the
performance of either Seller or Buyer (as specified in the Transaction) shall be
excused, and no damages shall be payable including any amounts determined
pursuant to Article Four, if the transmission for such Transaction is
unavailable or interrupted or curtailed for any reason, at any time, anywhere
from the Seller's proposed generating source to the Buyer's proposed ultimate
sink, regardless of whether transmission, if any, that such Party is attempting
to secure and/or has purchased for the Product is firm or non-firm. If the
transmission (whether firm or non-firm) that Seller or Buyer is attempting to
secure is from source to sink is unavailable, this contingency excuses
performance for the entire Transaction. If the transmission (whether firm or
non-firm) that Seller or Buyer has secured from source to sink is interrupted or
curtailed for any reason, this contingency excuses performance for the duration
of the interruption or curtailment notwithstanding the provisions of the
definition of "Force Majeure" in Article 1.23 to the contrary.
"Unit Firm" means, with respect to a Transaction, that the Product subject
to the Transaction is intended to be supplied from a generation asset or assets
specified in the Transaction. Seller's failure to deliver under a "Unit Firm"
Transaction shall be excused: (i) if the specified generation asset(s) are
unavailable as a result of a Forced Outage (as defined in the NERC Generating
Unit Availability Data System (GADS) Forced Outage reporting guidelines) or (ii)
by an event or circumstance that affects the specified generation asset(s) so as
to prevent Seller from performing its obligations, which event or circumstance
was not anticipated as of the date the Transaction was agreed to, and which is
not within the reasonable control of, or the result of the negligence of, the
Seller or (iii) by Buyer's failure to perform. In any of such events, Seller
shall not be liable to Buyer for any damages, including any amounts determined
pursuant to Article Four.
Original Sheet No. 50
EXHIBIT A
MASTER POWER PURCHASE AND SALE AGREEMENT
CONFIRMATION LETTER
This confirmation letter shall confirm the Transaction agreed to on
November 30, 2001 between Electric Generation LLC ("Party A") and Pacific Gas
and Electric Company ("Party B") regarding the sale/purchase of the Product
under the terms and conditions as follows:
Seller: Electric Generation LLC
Buyer: Pacific Gas and Electric Company
Product:
[_] Into _________________, Seller's Daily Choice
[_] Firm (LD)
[_] Firm (No Force Majeure)
[_] System Firm
(Specify System: ______________________________________________)
[X] Unit Firm
(Specify Unit(s)): Capacity and associated Energy, Ancillary Services and
any other electrical product that Party B may utilize or sell ("Other
Products") (Energy and Ancillary Services hereafter referred to
collectively as "Associated Products" and Capacity, Associated Products and
Other Products hereafter referred to collectively as "Products") from each
of the Units specified in Schedule 1 of this Confirmation. All of the
foregoing Units collectively are referred to as the "Portfolio." Each Unit
is hereafter referred to as a Unit or Units, a Hydro Unit or Hydro Units or
a Diablo Canyon Unit or Diablo Canyon Units, as applicable. The Hydro
Units comprise: (1) each of the generating units in the nineteen
facilities owned by irrigation districts shown on Schedule 1, which are
hereafter referred to as the "I.D. Hydro Units"; (2) each of the
generating units in the Hydro Facilities owned directly or indirectly by
Gen shown on Schedule 1, which are hereafter referred to as the "Owned
Hydro Units"; and (3) the generating unit in the Grizzly Hydro Facility,
which is hereafter referred as the "Grizzly Hydro Unit". A "Hydro
Facility" is comprised of the powerhouse (including all
electrical/mechanical equipment included therein), its directly associated
water conveyance system, and its generation tie equipment up to the
Interconnection Point. The "Diablo Canyon Facility" means the Diablo
Canyon Nuclear Power Plant (including all electrical/mechanical equipment
included therein) as described in License Nos. DPR-80 and DPR-82, issued by
the Nuclear Regulatory Commission and its generation tie equipment up to
the Interconnection Point. Clauses (i) and (ii) of the definition of "Unit
Firm" in Schedule P do not apply for this Transaction. Either Party shall
be relieved of its obligations to sell and deliver or purchase and receive
the Product without liability only to the extent that,
Original Sheet No. 51
and for the period during which, such performance is prevented by Force
Majeure and in such case, only to the extent provided for in this
Transaction.
[_] Other: (___________________________________________________)
[_] Transmission Contingency (If not marked, no transmission contingency)
[_] FT-Contract Path Contingency [_] Seller [_] Buyer
[_] FT-Delivery Point Contingency [_] Seller [_] Buyer
[_] Transmission Contingent [_] Seller [-] Buyer
[X] Other transmission contingency
Specify: In accordance with the terms and conditions of this
Transaction.
Contract Quantity: The contract quantity respecting the Capacity of each Unit is
as set forth in Section 1 of the Confirmation Addendum. Party B is required to
accept all Associated Products from the Diablo Canyon Units ("Diablo Canyon
Must-Take Quantity") and from the Hydro Units to the extent that hydrological
conditions require that such Units operate ("Hydro Units Must-Take Quantity"),
subject to Section 4 of the Confirmation Addendum. Except to the extent of
accepting the Diablo Canyon Must-Take Quantity and the Hydro Units Must-Take
Quantity, Party B shall have the right to dispatch the Units in accordance with
the terms and conditions of this Transaction
Delivery Point: The Delivery Point is at the point of interconnection with the
transmission or distribution system, as appropriate, for each of the Units as
set forth more particularly in the Interconnection Agreements between Party A
and ETrans LLC dated as of the Effective Date and between Party A and Party B
dated as of the Effective Date. The Delivery of Products from the Tule River
Hydro Facility shall be at the fence line of the Tule switchyard.
Contract Price:
(1) Capacity Charge: Peak Season: July and August - $20.50/kW-Month;
Shoulder Season: June, September, and October - $15.25/kw-Month; Off-
Peak Season: November through May - $12.00/kw-Month, multiplied in
each case by the Contract Capacity and as adjusted pursuant to Section
1.3 and 2 of the Confirmation Addendum and the following paragraph (3)
of this section on Contract Price;
(2) Energy Charge: For all Units other than Xxxxx Pumped Storage Project
No. 2735 ("Xxxxx"), $8/MWh as adjusted by the following paragraph (3)
of this section on Contract Price; For Xxxxx, $0.4/MWh as adjusted by
the following paragraph (3) of this Section on Contract Price.
(3) Starting on the first day of the Second Contract Year, the Capacity
Charge and the Energy Charge shall be escalated based on the
percentage change in the then most recently published final Consumer
Price Index, All Urban Consumers, All Cities as published by the U.S.
Department of Labor, Bureau of Labor Statistics ("CPI-U"), using as a
base for determining such escalation the most recently published final
CPI-U as of the Effective Date. Thereafter the base for determining
escalation shall be the most
Original Sheet No. 52
recently published final CPI-U as of the first day of the Contract
Year immediately preceding the Contract Year for which the escalation
is computed.
(4) Notwithstanding Section 9.2 of the Master Agreement, the Capacity
Charge shall be increased or decreased to account for the effect of
any imposition of a new tax or other assessment or increase in an
existing tax or other assessment (but not local real property taxes or
other similar taxes) or a tax credit or other reduction in an existing
tax or other assessment (but not local real property taxes or other
similar taxes) enacted after the date on which this Master Agreement
and Confirmation Letter are filed with FERC that is not of general
applicability and is instead directed at the generation, sale,
purchase, ownership, operation and/or transmission of Capacity, Energy
or Ancillary Services, and/or other energy goods and services or
ownership or operation of assets related to same.
(5) If Party A deviates from a dispatch instruction of Party B that
conforms to the requirements of this Transaction and, as a result,
Party B incurs a net loss as a result of an ISO charge, penalty or
other similar assessment, Party A shall be responsible for all such
charges, penalties or other similar assessments if such deviation from
a dispatch instruction was the result of Party A's failure to apply
Good Industry Practice. To compute such net loss, Party B shall for
each event determine the total amount of gains and losses associated
with Party A's deviation from any dispatch instruction of Party B that
conforms to the requirements of this Transaction. Such gains include
but are not limited to revenues Party B may receive from the ISO as a
result of over-generation. If, on an annual basis, the losses for such
events exceed the gains, Party B shall submit to Party A an invoice
setting forth the amount of any ISO charge, penalty or other similar
assessment for which Party A is responsible. Notwithstanding the
foregoing: (1) Party B shall take all commercially reasonable steps to
mitigate such charges, penalties or other similar assessments
following notification by Seller of such deviation or upon Party B's
otherwise becoming aware of such deviation and (2) Party A may not
without Party B's consent deviate from a prior dispatch instruction of
Party B that conforms to the requirements of this Transaction in order
to maximize gains to Party B and to thereby reduce its potential
liability to Party B under this Section.
(6) To the extent required in any currently effective Reliability Must Run
("RMR") Contracts, on or before the Effective Date, Party A will
assign any such RMR contracts to Party B in accordance with their
applicable terms and Party B agrees to accept such assignment and to
be bound to such RMR contracts. To the extent Party B receives any
revenues from any assigned RMR Contract, it shall retain all such
revenue, except for Incremental Administrative Costs, Monthly
Surcharge Payments, the ISO Repair Share, and Motoring Charges for
Ancillary Services Dispatch, as each is defined in the applicable RMR
Contracts, all of which shall be remitted to Party A. If, following
the Effective Date, Party A enters into any new RMR contracts
affecting Units then subject to this Transaction, Party A will assign
such RMR contracts to Party B in accordance with their applicable
terms and Party B will agree to accept such assignment and to be bound
to such RMR contracts. Revenues from such additional RMR contracts
shall be treated in accordance with the second sentence of this
Paragraph 6. If Party B requests Party A to provide motoring services,
the charge to Party B shall be the charge for
Original Sheet No. 53
Motoring Charges for Ancillary Services Dispatch set forth in the RMR
Contract applicable to the Unit from which Party A requests such
services or, if there is no RMR Contract applicable to such Unit, from
a comparable Unit owned by Party A or any of its subsidiaries as to
which there is an RMR Contract applicable.
Delivery Period: Twelve (12) Contract Years from the Effective Date.
Special Conditions:
1. The Effective Date of this Transaction shall be the same as the
Effective Date of the Proposed Plan of Reorganization under Chapter
11 of the Bankruptcy Code for Pacific Gas and Electric Company,
Chapter 11 Case No. 01-30923-DM.
2. Sections 8.1(b), 8.1(c), 8.1(d), Section 8.2(b), 8.2(c) and 8.2(d)
and Section 8.3 of the Master Power Purchase and Sale Agreement
dated as of November 30, 2001 (the "Master Agreement") do not apply
to this Transaction.
3. Energy shall be measured in MWh at the California Independent System
Operator or its successor ("ISO") revenue meter, which amount shall
then be multiplied by the applicable generation meter multiplier (or
any successor method to account for losses established by the ISO)
for each Unit to determine the amount of Energy delivered at the
Delivery Point.
4. Contract Month shall mean a calendar month except with respect to
the first Contract Month, which shall be the period from the
Effective Date until the end of the first full calendar month
following the calendar month in which the Effective Date occurs.
Contract Year shall mean twelve calendar months, the first of which
shall be the first Contract Month.
5. Party A's performance shall be subject to the requirements imposed
on it by applicable FERC-approved tariffs, including but not limited
to RMR Contracts, issued from time to time by the ISO or its
successor. Party A's performance shall also be subject to the
requirements imposed on it by the Irrigation District Contract for
the Units on Confirmation Addendum Schedule 1 and the water delivery
obligations existing on the Effective Date.
6. Party A agrees (1) to use Good Industry Practice so that there is
not a material change in the operating characteristics of the Units
over the period of time in which the Units are subject to this
Transaction and (2) to use all commercially reasonable efforts to
obtain and maintain all regulatory approvals needed to operate and
maintain the Units.
7. In accordance with Section 4.1 of the Master Agreement, the Parties
agree that if Party A fails to satisfy its obligations to deliver
the Product pursuant to this Transaction, there shall be adjustments
in the Capacity Charge as set forth in Section 2.2 of the
Confirmation Addendum; Party A may make certain payments to Party B
pursuant to Section 2.1 and Section 5 of the Confirmation Addendum;
and that Party A shall not be required to pay Party B any amounts
specified in clause (x) of Section 4.1 of the Master Agreement.
Original Sheet No. 54
8. The failure of Party A to maintain Availability equal to or greater
than sixty percent (60%) for twelve consecutive full Contract Months
(the "Short Fall Period") constitutes an additional Event of Default
under Section 5.1 of the Master Agreement. However, if, before the
end of a Short-Fall Period, Party A elects, by sending notice to
Party B in accordance with Section 10.7 of the Master Agreement, to
pay Party B the Capacity Payment Amount (as defined in the next
sentence), then no such Event of Default shall have occurred. The
Capacity Payment Amount is (x) the difference between the Capacity
Charge determined in accordance with this Transaction at an
Availability level equal to sixty (60%) for the Short Fall Period
minus the actual Capacity Charge paid by Party B for such Short Fall
Period less (y) any downward adjustment in Party B's actual Capacity
Charge computed pursuant to Section 2.2 of the Confirmation Addendum
as a result of Availability falling below sixty percent (60%) for
the Short-Fall Period. If Party A fails to elect before the end of
the Short-Fall Period to pay the Capacity Payment Amount, it shall
have three (3) Business Days after written notice from Party B to
pay the Capacity Payment Amount in order to cure the Event of
Default arising under this Special Condition 8.
9. Subject to Special Condition 18, Party B shall be responsible for
all Scheduling Coordinator duties under the currently applicable ISO
tariffs and any successor tariffs for the Units that are subject to
this Transaction. Subject to Paragraph 5 under Price, above, Party B
shall be responsible for and pay all Scheduling Coordinator costs
and charges associated with this Transaction.
10. Party A shall have the right in its sole and absolute discretion but
on ninety (90) days' written notice to Party B to remove from this
Transaction any Units (up to 150 MW of Contract Capacity in total
over the Term) that are not listed in Schedule 1 as being certified
to provide Ancillary Services; provided, however, that it shall
thereafter no longer operate the Unit for electrical service. If
Party A sells any Unit removed from this Transaction pursuant to
this Special Condition 10 to a third party for a price greater than
its historic cost plus capital investments less depreciation at the
time of the sale, such sale shall be subject to Party B's consent
which shall not be unreasonably withheld. Notwithstanding the
foregoing, if Party A wants to remove, pursuant to this Special
Condition 10, any Units that are listed in Schedule 1 as being
certified to provide Ancillary Services, it may do so provided that
Party B agrees to their removal upon terms and conditions acceptable
to Party B. In no event may the total amount of Contract Capacity
removed pursuant to this Special Condition 10 exceed 150 MW. Except
for payments in connection with such Hydro Units that were due and
owing prior to the removal date, neither Party shall have any
further obligations to the other respecting such Hydro Unit(s) on or
after the date of removal pursuant to this paragraph.
11. Subject to Clause 2 of Special Condition 6, if, at anytime, Party A
or any of its subsidiaries (or any entity with which any of the
foregoing has contracted or otherwise arranged for the operation of
any of the Hydro Unit(s) on its behalf) is no longer authorized to
operate a Hydro Unit(s) as a result of its failure either to (x)
maintain the existing license issued by FERC under Part I of the
Federal Power Act for the operation of such Hydro Unit(s) or (y)
obtain a new license from FERC under
Original Sheet No. 55
Part I of the Federal Power Act for the continued operation of such
Hydro Unit(s), then upon the expiration of the existing license,
such Hydro Unit(s) shall be removed from this Transaction effective
as of the date its license terminates or expires (the "Removal
Date"). If as a result of new or changed regulatory requirements
there is a change in the operation of a Hydro Unit resulting in a
loss of capacity, then the Contract Capacity for such Unit shall,
effective as of the date upon which the change in operation
commences, be adjusted downward to reflect such loss of capacity.
Except for any payments in connection with such Hydro Units
referenced in the first sentence of this Special Condition 11 or in
connection with the lost capacity referenced in the second sentence
of this Special Condition 11 that were due and owing, respectively,
prior to the Removal Date or the date in which there was a change in
the operation of a Hydro Unit resulting in the loss of capacity,
neither Party shall have any further obligations to the other
respecting such Hydro Unit(s) or the Contract Capacity removed from
the Transaction pursuant to the first or second sentence,
respectively, of this Special Condition 11.
12. Subject to Clause 2 of Special Condition 6, if, at any time, Party A
or any of its subsidiaries decides to surrender its license under
Part I of the Federal Power Act for the operation of one or more
Hydro Unit(s), it shall notify Party B no later than sixty days
prior to the date on which Party A or any of its subsidiaries
intends to surrender such license (the "Surrender Date"). No later
than thirty days prior to the Surrender Date, Party B shall advise
Party A whether it intends to purchase such Hydro Unit(s) at a cost
equal to the fair value of the property. If Party B elects by such
date not to undertake such purchase or the transaction is not closed
by the Surrender Date, then, effective on the Surrender Date such
Hydro Unit(s) shall be removed from this Transaction. If, for any
reason, FERC agrees to extend the Surrender Date, then the period
for completing the purchase shall continue for the duration of such
extension. Except for payments in connection with such Hydro Units
that were due and owing prior to the Surrender Date, neither Party
shall have any further obligations to the other respecting such
Hydro Unit(s) removed from the Transaction pursuant to this Special
Condition 12.
13. Subject to Clause 2 of Special Condition 6, if, at any time, Party A
or any of its subsidiaries (or any entity with which any of the
foregoing has contracted or otherwise arranged for the operation of
Diablo Canyon on its behalf), is no longer authorized pursuant to
the Atomic Energy Act to operate Diablo Canyon, such Unit(s) shall
be removed from this Transaction effective as of the date on which
such authorization lapses (the "Diablo Removal Date"). If as a
result of new or changed regulatory requirements there is a change
in the operation of the Diablo Canyon Unit(s) resulting in a loss of
capacity, then the Contract Capacity for such Unit(s) shall,
effective as of the date upon which the change in operation
commences, be adjusted downward to reflect such loss of capacity.
Except for any payments in connection with the Diablo Canyon Unit(s)
referenced in the first sentence of this Special Condition 13 or in
connection with the lost capacity referenced in the second sentence
of this Special Condition 13 that were due and owing, respectively,
prior to the Diablo Removal Date or the date in which there was a
change in the operation of
Original Sheet No. 56
Diablo Canyon Unit(s) resulting in the loss of capacity, neither
Party shall have any further obligations to the other respecting the
Diablo Canyon Unit(s) or the Contract Capacity removed from this
Transaction pursuant to the first or second sentence, respectively,
of this Special Condition 13.
14. If Party A is required to incur material additional costs in
connection with the Diablo Canyon Facility relating to security
(including, for example but not by way of limitation, increased
staffing or physical modifications to the Diablo Canyon Facility)
after the date on which this Master Agreement and Confirmation
Letter are filed with FERC, Party A and Party B will agree on a
commercially reasonable equitable adjustment to the Capacity Charge
respecting the Diablo Canyon Facility. The adjustment shall take
into account such factors as the duration of the time and extent to
which the Diablo Canyon Facility will remain subject to this
Transaction; the remaining useful life of the Diablo Canyon
Facility; the useful life of any capital items acquired by Party A,
the cost of which is subject to this Special Condition 14; and the
then existing obligations of each of the Parties entered into in
connection with this Transaction. If, within ninety days from the
date on which Party A provides Party B with notice of its decision
to invoke this Special Condition 14, the Parties are unable to reach
agreement on a commercially reasonable equitable adjustment to the
Capacity Charge respecting the Diablo Canyon Facility, Party A may,
notwithstanding Section 10.15 of the Master Agreement and Section
6.1 of the Confirmation Addendum, petition FERC pursuant to Section
205 of the Federal Power Act to make a determination of the just and
reasonable adjustment to such Capacity Payment in light of the
factors set forth above. Notwithstanding Section 6.2 of the
Confirmation Addendum, the Parties agree that FERC shall have
exclusive jurisdiction over this matter.
15. To the extent that the State of California or any agency thereof
imposes additional requirements respecting the decommissioning of
Diablo Canyon, the costs of such requirements shall be borne
entirely by Party B, and Party B shall reimburse Party A for all
such costs and keep Party A neutral from the effects of such new
requirements. Both Parties agree to enter into or to cause any of
their subsidiaries to enter into such new or amended agreements as
are necessary to implement the foregoing arrangement.
16. The Parties acknowledge that the Contract Capacity for each Unit set
forth in Section 1 of the Confirmation Addendum is net of station
service. If a Unit cannot self-supply station service, Party A may,
if permitted by tariff, use remotely provided station service from
its other Units. When Party A does so, such amount of Energy as is
necessary for remotely provided station service shall be deducted
from the total amount of Energy delivered to Party A. If Party A is
not permitted by any other applicable tariff or elects not to use
remotely provided self-supplied station service, Party A shall
purchase such station service from Party B or any third party.
17. Party A agrees to provide Party B with copies of any material
regulatory filings made on or after the Effective Date that bear on
Party A's performance under Special Conditions 10 through 15 of this
Confirmation.
Original Sheet No. 57
18. Sales of Capacity and Associated Products shall be subject to the
Grizzly Development and Mokelumne Settlement Agreement between
Pacific Gas and Electric Company and the City of Santa Xxxxx dated
March 8, 1990, and as amended and in force as of the Effective Date
("Grizzly Contract"). The Grizzly Contract has been assigned to
Party A. Party B acknowledges the obligation of Party A under the
Grizzly Contract to provide to Silicon Valley Power ("SVP"): (1) the
output of the Grizzly Unit; (2) 27.66 MW of power under a sale that
terminates December 31, 2003; and (3) certain supplemental sales of
energy. Party B agrees that Party A will satisfy these obligations
from the Portfolio. For so long as these obligations under the
Grizzly Contract remain in effect and the Bucks Creek Hydro Facility
is subject to this Transaction, Party B agrees to arrange for the
delivery of Energy to SVP provided by Party A under the Grizzly
Contract, including arranging for transmission service and assuming
all Scheduling Coordinator duties under the currently applicable ISO
tariffs and any successor tariffs. Party B shall reduce its payments
to Party A under this Transaction to reflect all Energy and actual
capacity from the Portfolio used by Party A to satisfy its
obligations under the Grizzly Contract as well as for all Scheduling
Coordinator charges and transmission charges incurred by Party B as
set forth in this Special Condition 18, provided that Party A shall
not be responsible for, and such reduction in payments shall not
include any imbalance charges associated with the timing differences
between actual dispatch by Party B of the Grizzly Powerhouse and
SVP's schedules for delivery of such output.
19. The Parties designated this Transaction as a Major Transaction
within the meaning of Section 5(1) (b) of the Master Agreement.
Scheduling: As set forth in Section 5 of the Confirmation Addendum.
Option Buyer: Not Applicable.
Option Seller: Not Applicable.
Type of Option: Not Applicable.
Strike Price: Not Applicable.
Premium: Not Applicable.
Exercise Period: Not Applicable.
This confirmation letter, including the Confirmation Addendum and all
accompanying schedules, is being provided pursuant to and in accordance with the
Master Agreement, and constitutes part of and is subject to the terms and
provisions of such Master Agreement. Terms used but not defined herein shall
have the meanings ascribed to them in the Master Agreement.
Party A Party B
Electric Generation LLC Pacific Gas and Electric Company
Original Sheet No. 58
Name: Xxxxx X. Xxxxxxxxxxx Name: Xxxxxx X. Xxxxx
Title: President Title: President and Chief Executive Officer
Phone No: (000) 000-0000 Phone No: (000) 000-0000
Original Sheet No. 59
Confirmation Addendum
---------------------
Section 1 - Capacity
--------------------
Section 1.1 -Contract Capacity. The Contract Capacity for each Unit as of
the Effective Date is set forth in Schedule 1 to this Confirmation Addendum.
Thereafter, Contract Capacity shall be adjusted pursuant to Special Conditions
10, 11, 12 and/or 13 of the Confirmation, and/or Sections 1.2 and/or 1.4 of this
Confirmation Addendum. Schedule 1 shall from time to time be revised to reflect
each of the foregoing adjustments.
Section 1.2 - Automatic Reduction of Contract Capacity. The Contract
Capacity shall be reduced as set forth in Schedule 1. Following such reduction,
there shall be an equivalent reduction in the Capacity Charge and the reduced
Contract Capacity shall not be subject to this Transaction. Party B shall use
its reasonable efforts to dispatch Hydro Units during the Contract Year
immediately prior to their removal from this Transaction so that upon their
removal reservoir levels are consistent with historical reservoir levels during
comparable hydrologic periods (which periods may include multiple years).
Section 1.3 - Effect of Force Majeure. In the event of Force Majeure, Party
B's Capacity Charge shall be reduced in accordance with Section 2.2. Party A
shall be excused from delivering Energy and Associated Products and Party B
shall be excused from accepting any Energy or Associated Products and from
paying any Energy Charges with respect to a Unit or Unit(s) immediately upon the
occurrence of an event of Force Majeure to the extent such Unit or Unit(s) are
unable to perform as a result of the event of Force Majeure.
Section 1.4 - Increases in Contract Capacity. If Party A completes capital
additions or refurbishments to an existing Unit that increases its capacity,
such additional capacity shall be reflected in the Availability Notice delivered
pursuant to Section 2.1 of this Confirmation Addendum; provided, however, that,
(1) as specified in Section 2.2 of this Confirmation Addendum, Availability for
the Portfolio in any month may not be greater than one hundred percent (100%);
and (2) starting in Contract Year Twelve, the maximum capacity identified in an
Availability Notice that may be delivered for Diablo Canyon Xxxx 0 xxx Xxxx 0
xxxxx xx as reflected in Schedule 1. Notwithstanding the foregoing, the Parties
may agree to reflect permanently any such additional capacity in the Contract
Capacity for such Unit, in which case the additional capacity shall be added to
the Contract Capacity for such Unit shown on Schedule 1.
Section 2 - Availability
------------------------
Section 2.1 - Availability Notice. "Availability" means the actual
mechanical/electrical capability of a Unit. "Availability" applies only to the
Unit (except to the extent set forth in the third and fourth sentences of this
Section 2.1) and shall not take into account hydrological or other conditions
external to the Unit, notwithstanding the definition of Force Majeure. To the
extent that the condition of the Hydro Facility in which one or more Hydro Units
are located
Original Sheet No. 60
affects the ability of such Units to deliver Products, such condition shall be
reflected in the Availability Notice for each of the affected Hydro Units. To
the extent that the condition of the Diablo Canyon Facility affects the ability
of the Diablo Canyon Units to deliver any Products, such condition shall be
reflected in the Availability Notice for each of the affected Diablo Canyon
Units. For the purpose of calculating adjustments to the Capacity Charge as set
forth in Section 2.2 of the Confirmation Addendum, Party A shall provide Party B
with a statement as to the Availability of each Unit (the "Availability Notice")
for every hour or portion thereof. Party A may at any time change an
Availability Notice to reflect the then Availability of any Unit. Party B shall
be bound by Availability Notices when exercising its dispatch rights pursuant to
Section 5 of this Confirmation Addendum. To the extent that the Availability
Notice for any Unit reflects that the Unit is not able to perform to the full
extent of such Unit's Contract Capacity as set forth on Schedule 1, Party A will
be deemed in such Availability Notice to represent and warrant that: (x) except
with respect to generation, deliveries or sales required by FERC-approved
tariffs (including but not limited to RMR Contracts), sales otherwise permitted
under this Transaction, or to the extent such Unit is not subject to this
Transaction, no Product from such Unit is being generated, delivered or sold,
whether directly or indirectly, to any other person or for the benefit of Party
A and that (y) the issuance of such Availability Notice represents the
application of Good Industry Practice to the Unit's operation. If Party A
delivers to Party B an incorrect Availability Notice that results in a material
economic loss to Party B under this Transaction, such action shall be deemed to
constitute a failure to deliver within the meaning of Article Four of the Master
Agreement and the sole remedy of Party B shall be: (x) to the extent that the
Availability Notice overstated the Availability of a Unit, a refund in its
Capacity Charge to the extent of the overstatement; and (y) to the extent that
the Availability Notice understated the Availability of a Unit, fifty percent
(50%) of the difference between the Capacity Charge determined in accordance
with this Transaction had the Availability Notice for that Unit been accurate
and the Capacity Charge that Party B actually paid for the period of the
understatement, less any downward adjustment in Party B's actual Capacity Charge
computed pursuant to Section 2.2 of the Confirmation Addendum as a result of the
Availability understatement for that Unit; provided, however, the maximum
payment shall not exceed the equivalent of the Capacity Charge for that Unit
calculated at zero Availability. Knowing, continuing, and repeated misstatements
in Availability Notices, which misstatements are material to the overall
Transaction shall constitute an Event of Default within the meaning of Section
5.1(c) of the Master Agreement; provided, that Party B has first notified Party
A of such misstatements and Party A has failed within thirty days from its
receipt of such notice to take such actions as are reasonable to prevent such
misstatements from occurring in the future.
Section 2.2 - Availability Adjustment. Each Contract Month, the Capacity
Charge will be adjusted to reflect the actual Availability delivered from the
Portfolio. The Availability of the Portfolio shall be computed as follows:
M
Availability = [Sigma] Monthly Unit Capability
units = 1
Original Sheet No. 61
Period Hours
[Sigma] Hourly Contact
Capacity
hour = 1
Period Hours Fraction of
Monthly Unit Capability = [Sigma] Available * Hour Available
hour = 1 Capacity
Where: M means the number of Units not on Force Majeure;
Available Capacity means the lesser of the Availability of each
Unit for each hour or portion thereof as set forth in the
Availability Notice provided by Party A pursuant to Section 2.1
of this Confirmation Addendum, or the actual Availability of each
Unit for such hour or portion thereof, subject to the adjustment
provided in Section 3.1 respecting scheduled outages at the
Diablo Canyon Facility;
Fraction of Hour Available means the period of the hour,
expressed as a percentage, that the Unit was available at
Available Capacity;
Period Hours means the total number of hours in the Contract
Month; and
Hourly Contract Capacity means the sum for all Units not affected
by an Event of Force Majeure of the Contract Capacity for each
Unit, as defined in Section 1.1 of the Confirmation Addendum.
The monthly Capacity Charge will be adjusted to reflect the Availability of the
Portfolio in accordance with the following schedule, however, in no event will
Availability be more than 100%. In those months when Availability is greater
than One Hundred Percent (100%), One Hundred Percent (100%) will be substituted
for Availability in the equations below:
Original Sheet No. 62
During the Peak Season (July and August):
If Availability is equal to or greater than 95%, the Capacity Charge
shall be multiplied by [1 + 1.5 * (Availability - 95%)], or;
If Availability is less than 95%, the Capacity Charge shall be
multiplied by [1 - 1.5 * (95% - Availability)].
During the Shoulder Season (June, September, and October):
If Availability is equal to greater than 92%, the Capacity Charge
shall be multiplied by [1 + 1.0 * (Availability - 92%)], or;
If Availability is less than 92%, the Capacity Charge shall be
multiplied by [1 - 1.0 * (92% - Availability)].
During the Off-Peak Season:
December and January:
If Availability is equal to greater than 91%, the Capacity Charge
shall be multiplied by [1 + 1.0 * (Availability - 91%)], or;
If Availability is less than 91%, the Capacity Charge shall be
multiplied by [1 - 1.0 * (91% - Availability)];
November and February through May:
If Availability is equal to or greater than 90%, the Capacity
Charge shall be multiplied by one; or;
If Availability is less than 90%, the Capacity Charge shall be
multiplied by [1 - 1.0 * (90% - Availability)].
Section 3 - Scheduled Outages
-----------------------------
Section 3.1 - Diablo Canyon Units. Schedule 3 outlines the general timing
of scheduled outages for Diablo Canyon through the Delivery Period. Party A
shall provide an update to this schedule to Party B at least annually, but more
often if changes occur during a Contract Year affecting that Contract Year or
the following Contract Year. These updates shall reflect changes in the start
and completion dates of the then current scheduled outages. Party A will not
schedule any of these outages between June 15 and September 30. Subject to any
applicable regulatory requirements, Party B shall have the right to approve the
dates of such outages, which approval shall not be unreasonably withheld. The
total number of these scheduled
Original Sheet No. 63
outage days may not exceed forty-two days for each scheduled outage except as
provided for in the following two sentences. Party A may, with one year notice
to Party B and for each of the two Units at Diablo Canyon extend the length of a
scheduled outage by fifteen twenty-four consecutive hour periods for turbine
rotor replacements and fifty-five twenty-four consecutive hour periods for steam
generator replacements. However, if a turbine rotor replacement is scheduled for
the same outage as a steam generator replacement, the total extension will be
just fifty-five twenty-four consecutive hour periods. The periods for scheduled
outages identified in the sixth, seventh and eighth sentences of this Section
3.1 are allowance periods for the scheduled outages. Party A shall begin and end
the scheduled outages under this Section 3.1 by sending Party B an Availability
Notice specifying the date and hour on which such scheduled outage shall begin
and an Availability Notice specifying the date and hour on which such Scheduled
Outage shall end. Notwithstanding any such Availability Notice, for the purposes
of computing the Availability Adjustment, Diablo Canyon shall be deemed to be
100% Available during the full allowance periods permitted by (as appropriate)
the sixth, seventh and eighth sentences of this Section 3.1. With respect to all
other outages, Party A shall coordinate with Party B during the Off-Peak Season
(November through May) and for all other times, Party A shall coordinate and
agree with Party A on the schedule for such other outages. Nothing in this
Section 3.1 limits the right of Party A to schedule such other outages at any
time if required for purposes of Good Industry Practice relating to the
condition of the Diablo Canyon Units or if required by any applicable regulatory
requirement. All outages within the scope of the previous two sentences shall be
reflected in a reduction of the Available Capacity used in computing the
Availability Adjustment pursuant to Section 2.2.
Section 3.2 - Hydro Units. Party A shall coordinate with Party B
respecting outages of the Owned Hydro Units during the Off-Peak Season (November
through May). For all other times, Party A shall coordinate and agree with
Party B on the outage schedule for the Owned Hydro Units; provided, however,
that Party A may schedule an outage at any time if required for purposes of Good
Industry Practice relating to the condition of the Unit or if required by any
applicable regulatory requirement. Subject to the next sentence of this Section
3.2, if a Hydro Unit is not Available as a result of an outage, whether
scheduled or not, such outage shall be reflected in a reduction of the Available
Capacity used in computing the Availability Adjustment pursuant to Section 2.2.
If due to hydrological or other external conditions, Party B concludes that an
Hydro Unit cannot produce Associated Products for a period of time Party B
designates, and Party A elects to perform maintenance or repairs on such Hydro
Unit during this period, then such Hydro Unit may be deemed in an Availability
Notice delivered by Party A pursuant to Section 2.1 to Party B to be Available
to the extent and for the period of time as to which the Parties may agree.
Section 4 - Right of Party B to Back-Down Diablo Canyon Units and Hydro Units
-----------------------------------------------------------------------------
Section 4.1 - Diablo Canyon. From time to time Party B may back-down the
Diablo Canyon Units in accordance with back-down procedures that the parties
will develop. In the event Party B elects to back-down the Diablo Canyon Units
in accordance with this Section 4.1 and the Diablo Canyon back-down procedures,
it nevertheless shall pay an Energy Charge as if such back-down had not
occurred; provided, however, that no such payment for Energy shall be required
if the back-down occurs during implementation of the ISO or its successor over-
generation protocol or any successor protocol.
Original Sheet No. 64
Section 4.2 - Hydro Units. From time to time Party B may request that
Party A back-down a Hydro Unit even when doing so will result in spill. Party A
will, to the extent reasonably practicable, accommodate such request, after
taking into consideration public safety requirements, existing or new
regulatory, legal, WSCC or ISO requirements, sound environmental stewardship
policies, existing water supply or other contracts, applicable RMR or successor
contracts and Good Industry Practice. If Party B's spill request is
accommodated, Party B shall nevertheless pay an Energy Charge as if the water
spilled had been used to generate Energy; provided, however, that no such
payment shall be required if: (x) subject to Party B's obligation to dispatch
the Hydro Units in accordance with clause (2) of Section 5, the Hydro Unit is
operating at its Available Capacity, (y) the spills occur during implementation
of the ISO or its successor over-generation protocol or any successor protocol,
or (z) there is a curtailment initiated by the ISO or its successor in the
operation of a transmission line that is the sole means by which Energy from a
Hydro Unit is delivered, regardless of whether such curtailment constitutes
Force Majeure.
Section 5 - Dispatch
Party B shall issue and Party A shall implement dispatch instructions
governing the scheduling and operating levels of the Units in accordance with
the Transaction and subject to the limitations and rights set forth in this
Section 5. The Parties shall develop operating procedures intended to implement
the rights of Party B to dispatch the Units. The operating procedures shall
reflect: (1) the hydro staff operating practices in effect as of the Effective
Date; (2) the need for the Hydro Units to be dispatched so as to achieve a
balanced beneficial use of water resources; (3) the obligation of Party B to
accept or pay for the Diablo Canyon Must-Take Quantity and the Hydro Units Must-
Take Quantity; (4) the obligations of Party A impacting the dispatch of the
Units, including, but not limited to, public safety requirements, existing or
new regulatory, legal, WSCC or ISO requirements, sound environmental stewardship
policies, existing water supply or other contracts and applicable RMR or
successor contracts; and (5) the requirement that dispatch be consistent with
Good Industry Practice (collectively, the "Dispatch Principles").
The operating procedures shall require the accurate and timely exchange of
data and information. It is the express intention of the Parties that Party A
provide Party B with all data and information in its possession affecting the
dispatch of the Units. Party A may at any time change data and information to
account for then current conditions. If Party A delivers to Party B inaccurate
data or information that substantially bears on Party B's formulation of
dispatch instructions and that result in a material economic loss to Party B
under this Transaction, such action shall be deemed to constitute a failure to
deliver within the meaning of Article Four of the Master Agreement and the sole
remedy of Party B shall be the positive difference between the number of MWhr of
Energy that Party B could have received from the affected Unit (taking into
account the Dispatch Principles) less the MWhr of Energy that the Unit actually
produced multiplied by the weighted average MWhr price for Energy purchased by
Party B during the Contract Month in which the inaccurate data or information
was provided. Knowing, continuing and repeated misstatements by Party A that
substantially bear on Party B's formulation of dispatch instructions, which
misstatements are material to the overall Transaction, shall constitute an Event
of Default within the meaning of Section 5.1(c) of the Master Agreement;
provided, that Party B has first notified Party A of such misstatements and
Party A has failed
Original Sheet No. 65
within thirty days from its receipt of such notice to take such actions as are
reasonable to prevent such misstatements from occurring in the future.
Without limiting the foregoing, and by way of example, Party A shall
provide Party B information respecting current and future hydrological
conditions, physical constraints on operation, ramp rates, and any other factors
that could affect dispatch. Information respecting hydrological conditions to
be provided to Party B includes but is not limited to data on potential future
water availability (including snow-pack), current reservoir volumes, steam flows
(including in-low and out-flow at the Hydro Units), and maximum and minimum
water storage capacity. Information respecting physical constraints to be
provided to Party B includes but is not limited to data on the natural
conditions of the water sheds (e.g., landslides or forest fires) affecting
operations and any information provided in an Availability Notice delivered by
Party A to Party B pursuant to Section 2 of this Confirmation Addendum. Party B
shall also provide such information, including real time information, as is
necessary for Party A to dispatch the Units consistent with the terms and
conditions of this Transaction. The operating procedures shall also include
specific operating protocols for Xxxxx, which protocols shall include (but not
be limited to) run times, cycling and pumping schedules.
Section 6 - Dispute Resolution
------------------------------
Section 6.1 - Senior Officers. Each of Party A and Party B will designate
in writing to the other Party a representative who will be authorized to resolve
any dispute arising under this Agreement in an equitable manner and, unless
otherwise expressly provided herein, to exercise the authority of such Party to
make decisions by mutual agreement. If such designated representatives are
unable to resolve a dispute under this Agreement, such dispute will be referred
by each Party's representatives, respectively, to a senior officer designated by
Party A and a senior officer designated by Party B for resolution upon five
Business Days' written notice from either Party. The Parties hereto agree (i) to
attempt to resolve all disputes arising hereunder promptly, equitably and in a
good faith manner; and (ii) to provide each other with reasonable access during
normal business hours to any and all non-privileged records, information and
data pertaining to any such dispute.
Section 6.2 - Arbitration. All disputes under this Agreement that are not
resolved pursuant to Section 6.1 within 30 Days after either Party's receipt of
notice referring the dispute to the senior officers of Party A and Party B (and
in any event within the time which legal or equitable proceedings based on such
claim, dispute, or controversy would not be barred by the applicable statute of
limitations) will be submitted upon written request of either Party to binding
arbitration. Each Party will have the right to designate an arbitrator of its
choice, who need not be from the American Arbitration Association ("AAA") panel
of arbitrators but who will be an expert in the electricity industry and will
not have a direct or indirect interest in either Party or the subject matter of
the arbitration. Such designation will be made by notice to the other Party and
to the AAA within 10 Business Days or, in the case of payment disputes, five
Days after the date of the giving of notice of the demand for arbitration. The
arbitrators designated by the Parties will designate a third arbitrator, who
will have a background in legal and judicial matters (and who will act as
chairman), within 10 Business Days after the date of the designation of the last
of the arbitrators to be designated by the Parties, and the arbitration will be
decided by the three arbitrators. If the two arbitrators cannot or do not select
a third independent arbitrator
Original Sheet No. 66
within such period, either Party may apply to the AAA for the purpose of
appointing any person listed with the AAA as the third independent arbitrator
under the expedited rules of the AAA. Such arbitration will be held in
alternating locations of the home offices of the Parties, commencing with Party
A's home office, or in any other mutually agreed upon location. The rules of the
AAA will apply to the extent not inconsistent with the rules herein specified.
Each Party will bear its own expenses (including attorneys' fees) with respect
to the arbitration. To the extent that the dispute concerns the calculation of:
(1) the Contract Price (including but not limited to the determination of the
Availability Adjustment, the determination of the Energy Charge, the impact on
the Capacity Charge of new or reduced taxes or other assessments, and the
application of revenues from RMR Contracts); (2) the allocation as between Party
A and Party B of ISO charges, penalties or other assessments; (3) the amount of
any payments or refunds made by Party A to Party B pursuant to Section 2.1 or
Section 5 of the Confirmation in connection with a failure to deliver within the
meaning of Article Four of the Master Agreement; (4) the amount of any Capacity
Payment Amount Party A elects to pay Party B under Special Condition 8 of the
Confirmation Letter; or (5) the amount of a Termination Payment (but not whether
there has been an Event of Default giving rise to the right to require such
Termination Payment), each of the Parties shall submit to the arbitrators, in
accordance with a schedule set by the arbitrators, offers in the form of the
award they consider the arbitrators should make. If the arbitrators require that
the Parties submit more than one such offer, the arbitrators shall designate a
deadline by which time the Parties shall submit their last and best offer. In
such proceedings the arbitrators shall be limited to awarding only one of the
two proposed offers submitted, and may not determine an alternative or
compromise remedy. All arbitration awards will be in writing, shall be final and
binding upon the Parties, and shall be the sole and exclusive remedy between the
Parties regarding any claims, counterclaims, issues, or accountings presented to
the arbitrators. All awards granted shall be consistent with the terms and
conditions of this Transaction, including the limitation on damages set forth in
Article 7 of the Master Agreement.
Section 6.3. Binding Nature of Proceedings. Each Party understands that
this Agreement contains an agreement to arbitrate with respect to specified
disputes. After signing this Agreement, each Party understands that it will not
be able to bring a lawsuit concerning any dispute that may arise that is covered
by this arbitration provision. Any award of the arbitrator may be enforced by
the Party in whose favor such award is made in any court of competent
jurisdiction.
Original Sheet No. 67
Schedule 1
Contract Capacity of Each Facility;
Date Capacity is Removed from Contract;
and Ancillary Service Certification
Capacity Removal Date Ancillary Service Certified
Xxxx 0 Xxxx 0 Xxxx 0 Xxxx 0 (xx 00xx first day of) Reg Spin NSpin Rep
Diablo Canyon 1087 1087 see note 1
Owned Hydro Units
HAT CREEK #1 8.5 end of contract
HAT CREEK #2 8.5 end of contract
PIT #1 30.5 30.5 end of contract Y Y Y
PIT #3 23.3 23.3 23.4 end of contract Y Y Y
PIT #4 47.5 47.5 end of contract Y Y Y
PIT #5 40.0 40.0 40.0 40.0 end of contract Y Y Y Y
XXXXX X. BLACK 86.0 86.0 end of contract Y Y Y Y
PIT #6 40.0 40.0 end of contract Y Y Y Y
PIT #7 56.0 56.0 end of contract Y Y Y Y
VOLTA #1 9.0 12th contract year
VOLTA #2 0.9 12th contract year
SOUTH 7.0 12th contract year
INSKIP 8.0 12th contract year
XXXXXXX 13.0 12th contract year
KILARC 1.6 1.6 12th contract year
COW CREEK 0.9 0.9 12th contract year
TOADTOWN 1.5 12th contract year
DeSABLA 18.5 12th contract year
CENTERVILLE 5.5 0.9 12th contract year
LIME SADDLE 1.0 1.0 12th contract year
COAL CANYON 0.9 12th contract year
XXXXXXXX BRANCH 2.4 2.4 12th contract year
BUTT VALLEY 41.0 12th contract year Y Y Y
CARIBOU #1 25.0 25.0 25.0 12th contract year Y Y Y
CARIBOU #2 60.0 60.0 12th contract year Y Y Y Y
OAK FLAT 1.3 12th contract year
XXXXXX 125.0 12th contract year Y Y Y Y
ROCK CREEK 56.0 56.0 12th contract year Y Y Y Y
BUCKS CREEK 33.0 32.0 12th contract year Y Y Y Y
CRESTA 35.0 35.0 12th contract year Y Y Y Y
XXX 60.0 60.0 12th contract year Y Y Y Y
Original Sheet No. 68
Schedule 1 (cont.)
Contract Capacity of Each Facility;
Date Capacity is Removed from Contract;
and Ancillary Service Certification
Capacity Removal Date Ancillary Service Certified
Xxxx 0 Xxxx 0 Xxxx 0 Xxxx 0 (xx 00xx first day of) Reg Spin NSpin Rep
NARROWS #1 12.0 12th contract year
POTTER VALLEY 4.5 2.0 2.7 12th contract year
XXXXXXXXX #3 5.8 12th contract year
XXXXXXXXX #2 4.4 12th contract year
DEER CREEK 5.7 12th contract year
ALTA 1.0 1.0 12th contract year
XXXXXXXXX #1 7.0 12th contract year
DRUM #1 13.2 13.2 13.1 14.5 12th contract year Y Y Y
DRUM #2 49.5 12th contract year Y Y Y
DUTCH FLAT #1 22.0 12th contract year Y Y Y
XXXXXX 11.0 12th contract year
WISE 14.0 12th contract year
WISE #2 3.2 12th contract year
NEWCASTLE 11.5 12th contract year
CHILI BAR 7.0 12th contract year
XXXX XXXXXXX #0 11.0 12th contract year
SALT SPRINGS #2 33.0 12th contract year
TIGER CREEK 29.0 29.0 12th contract year Y Y Y
WEST POINT 14.5 12th contract year Y Y Y
ELECTRA 31.0 31.0 36.0 12th contract year Y Y Y Y
SPRING GAP 7.0 12th contract year
STANISLAUS 91.0 12th contract year Y Y Y Y
PHOENIX 2.0 12th contract year
MERCED FALLS 3.5 12th contract year
CRANE VALLEY 0.9 12th contract year
SAN XXXXXXX #3 4.2 12th contract year
SAN XXXXXXX #2 3.2 12th contract year
SAN XXXXXXX #1-A 0.4 12th contract year
XXXXXX 5.0 5.0 5.0 5.0 12th contract year
KERCKHOFF 12.6 12.6 12.8 12th contract year
KERCKHOFF #2 155.0 12th contract year Y Y Y Y
XXXXX 404.0 404.0 404.0 end of contract Y Y Y Y
XXXX 72.0 72.0 end of contract Y Y Y
KINGS RIVER 52.0 end of contract Y Y Y
XXXXX #1 34.0 end of contract
XXXXX #2 52.5 52.5 end of contract Y Y Y
TULE RIVER 3.2 3.2 12th contract year
XXXX CANYON 11.5 12th contract year
Original Sheet No. 69
Schedule 1 (cont.)
Contract Capacity of Each Facility (in MW);
Date Capacity is Removed from Contract;
and Ancillary Service Certification
Capacity Removal Date Ancillary Service Certified
Xxxx 0 Xxxx 0 Xxxx 0 Xxxx 0 (xx 00xx first day of) Reg Spin NSpin Rep
Contracted Hydro Units
Grizzly 20.2 12th contract year Y Y Y
Irrigation
District Contracts
OWID
SLY CREEK 13.2 7/1/2010 Y Y Y
WOODLEAF 55.0 7/1/2010 Y Y Y
FORBSTOWN 39.7 7/1/2010 X X X
XXXXX XXXXX 00.0 0/0/0000
XXXX
XXXXXXX 170.0 170.0 12th contract year Y Y Y Y
NARROWS #2 55.0 12th contract year
SID
MONTICELLO 4.0 4.0 3.9 12th contract year
NID
DUTCH XXXX #0 00.0 0/0/0000 X X X
XXXXXXX XXXX 38.0 7/1/2013 Y Y Y
XXXXXXX 13.0 7/1/2013
PCWA
FRENCH XXXXXXX 17.0 5/1/2013 Y Y Y
MIDDLE FORK 68.0 68.0 5/1/2013
XXXXXXX 86.0 5/1/2013
OXBOW 6.0 5/1/2013
Tri-Dam
DONNELLS 67.5 1/1/2005 Y Y Y
XXXXXXXXX 11.0 1/1/2005
XXXXXXX 9.0 9.0 1/1/2005
MID
EXCHEQUER 94.5 12th contract year Y Y Y Y
XxXXXXX 10.0 12th contract year
Note 1:
Diablo Canyon Contract Capacity is as follows
Xxxx 0 Xxxx 0
Prior to Contract Year 12 1087 1087
Contract Year 12 650 650
Original Sheet No. 70
Schedule 3
Diablo Canyon Scheduled Outages
Start Days
Unit 2 spring 2003 42
Unit 1 spring 2004 42
Unit 2 fall 2004 42
Unit 1 fall 2005 42
Unit 2 spring 2006 42
Unit 1 spring 2007 42
Unit 2 fall 2007 42
Unit 1 fall 2008 42
Unit 2 spring 2009 42
Unit 1 spring 2010 42
Unit 2 fall 2010 42
Unit 1 fall 2011 42
Unit 2 spring 2012 42
Unit 1 spring 2013 42
Unit 2 fall 2013 42
Unit 1 fall 2014 42
