1
Exhibit 10.36
AGREEMENT FOR THE SALE OF THERMAL ENERGY
AND WOOD BYPRODUCT
BETWEEN
NORTHERN STATES POWER COMPANY
AND
NORENCO CORPORATION
This Agreement, effective as of the first day of December, 0000, xxxxxxx
Xxxxxxxx Xxxxxx Power Company, a Minnesota corporation (hereinafter referred to
as "NSP") and NORENCO Corporation, a Minnesota corporation (hereinafter referred
to as "NORENCO"), a wholly owned subsidiary of NSP.
WITNESSETH
WHEREAS, NSP owns and operates the Xxxxx X. Xxxx Electric Generating Plant
comprised of a high pressure boiler, which supplies steam to an extraction
condensing turbine-generator, and a low pressure heating boiler; and
WHEREAS, NSP desires to sell steam to NORENCO, and NORENCO desires to
purchase such steam from, NSP to resell to Xxxxxxxx Corporation (hereinafter
"Andersen") and the State of Minnesota Correctional Facility, Stillwater
(hereinafter "State"); and
-1-
2
WHEREAS, NORENCO desires to sell wood byproduct purchased from Andersen to
NSP to be used as fuel and NSP desires to purchase such wood byproduct from
NORENCO; and
WHEREAS, it is the intention of both NSP and NORENCO that NORENCO
reimburse NSP for all of NSP's incremental costs associated with the sale of
steam to NORENCO.
NOW THEREFORE, the parties hereby agree as follows:
1. Term-Effective Date
1.1 This Agreement shall become effective on December 1, 1986, and shall
continue through December 31, 2006.
2. Conditions of Service
2.1 NSP shall use its best efforts to produce and deliver to NORENCO and
NORENCO shall use its best efforts to purchase and accept from NSP all of
NORENCO's current Steam requirements at Andersen and the State.
2.2 Steam sales from NSP's King Plant to NORENCO may at NSP's option be
interrupted during electric system emergencies and times of peak electric loads.
2.3 NORENCO will reimburse NSP for the incremental cost associated with
replacement electric energy at all times steam is being purchased for resale.
2.4 NORENCO shall make in a manner acceptable to NSP, all modifications,
adjustments, and additions to NSP's existing boilers, pipes, valves, meters,
controls, buildings, yards,
-2-
3
tracks and all other equipment and machinery (collectively called Generating
Equipment) at the King Plant necessary to produce steam of the quality specified
and in the quantity required by this Agreement (herein sometimes referred to as
Steam).
2.5 NORENCO shall obtain all necessary franchises, licenses, permits,
rights of way or easements and purchase, construct and install a transport
system which will connect King Plant to Andersen and the State. The transport
system (herein called the Supply System) shall include all pipes, pumps, valves,
meters, controls, wires, insulation and other equipment necessary to:
(a) transport Steam from the King Plant to Andersen and the State;
(b) transport condensate from Andersen and the State to the King
Plant;
(c) provide for control of Steam and communications between the King
Plant and Andersen and the State; and
(d) transport wood byproduct from Andersen to the King Plant.
2.6 Throughout the Term of this Agreement NORENCO shall obtain, renew, and
maintain all licenses, permits and other governmental authorizations necessary
to furnish Steam, condensate and wood byproduct through the Supply System. NSP
shall use its best efforts to change or challenge rules, regulations, laws
-3-
4
or ordinances which would prevent NSP from furnishing Steam hereunder or using
wood byproduct as a fuel.
2.7 Throughout the Term of this Agreement NSP shall own, operate,
maintain, repair, and adjust the Generating Equipment. NSP will not purchase any
equipment not required for electric generation.
2.8 At NORENCO's expense, which shall be NSP's incremental cost, NSP
shall, throughout the Term of this Agreement, operate, maintain, repair and
adjust NORENCO-purchased equipment installed on NSP property.
2.9 NORENCO shall not, by reason of this Agreement, the termination of
this Agreement or the payments made pursuant to this Agreement, acquire title or
ownership in or to the Generating Equipment of the King Plant.
2. 10 All Steam produced and delivered from the King Plant shall meet the
following specifications when measured at the delivery point:
(a) Temperature: 0 to 10 degrees F above saturated steam conditions
with variations required for load control.
(b) Pressure: 150 to 250 pounds per square inch gauge (PSIG) with
variations required for load control.
(c) Steam flow rate: 0 to 160,000 pounds per hour.
2.11 Delivery point as used in Article 2 of this Agreement shall be the
point where the Steam exits the Steam conditioning valve and enters the Supply
Line at the King Plant.
-4-
5
2.12 During each fiscal year of the Term of this Agreement, NORENCO shall
provide 100% of the water necessary to produce Steam for NORENCO at the King
Plant by delivering to NSP the condensate return water or pay NSP for the cost
of any makeup required. NORENCO shall return the condensate in a condition
acceptable for the King boilers.
3. Cost of Service
For any Steam delivered to NORENCO by NSP, the costs shall be recovered by
NSP from NORENCO as specified in this Section 3. The calculation of these costs
includes the use of coefficients which are to be updated at least annually by
NSP. The costs recovered by NSP are to be reviewed annually by NSP to ensure
that the provisions of this Agreement recover all appropriate costs. Corrections
to xxxxxxxx will be made if it can be demonstrated by either party to the other
party's satisfaction that the monthly payments made by NORENCO to NSP are in
error by at least plus or minus 1%. Any corrections to xxxxxxxx will be
consistent with the incremental cost approach.
3.1 Cost to Provide Steam From the King Turbine Cold Reheat Extraction
Line
The King Plant turbine-generator will be operated as required by NSP
for electric generation. When the turbine-generator is in operation, Steam will
be provided to NORENCO from the turbine cold reheat extraction line. NORENCO
will be charged for the cost of replacement energy generation (or loss of the
oppor-
-5-
6
tunity to sell electricity for resale) due to NORENC0's Steam requirements as
follows:
(a) The cost of replacement energy is calculated as the difference
in the cost of NSP generation and purchases to supply NSP native requirements
with and without the supply of Steam to NORENCO. The change in NSP generation
cost will include such items as the changes in fuel and maintenance for startup
and hours of operation, and the incremental ash disposal cost. The change in
billing cost for purchases with and without the supply of Steam to NORENCO will
also be used in the calculation.
(b) NORENCO will be charged monthly for incremental costs associated
with the loss of the opportunity to sell electricity for resale due to NORENCO's
Steam requirements. This incremental cost is calculated as the estimated lost
revenues from sales for resale from the King Plant minus the estimated avoided
electrical production costs, had this energy been generated at the King Plant.
(c) The cost of replacement energy shall be calculated using the NSP
System Operations computer program and the following coefficients or
information:
(1) Total Steam Flow in MMBTU's to NORENCO
(2) Electric power MW hours lost per MMBTU delivered to
NORENCO
(3) Cost of replacement energy per MW Hour
-6-
7
3.2 Cost to Provide Steam from the King Heating Boiler
The King Plant heating boiler may be used to provide Steam to
Andersen and the State when the King Plant turbine generator is not in
operation. NORENCO will be charged for operation of the heating boiler
(including standby operation) as provided in 3.2.1 - 3.2.3.
3.2.1 Fuel Cost
(a) NORENCO will be charged for any incremental fuel used due to
heating boiler operations for NORENCO. For oil usage the cost will be calculated
as follows:
Cost = Gallons of oil used for x Oil cost per
NORENCO gallon
(b) For gas usage, the cost will be calculated as follows:
Cost = Millions of BTU of gas x Gas cost per
used for NORENCO million BTU
(c) The King Plant will report monthly the gallons of oil and the
millions of BTU's of gas used for the heating boiler. If the heating boiler
is used to supply steam to both NSP and NORENCO, the costs will be prorated
based on NORENCO Steam Flow and NSP steam flow.
3.2.2 Incremental Maintenance Cost
Each month, NORENCO shall pay NSP for the cost of
-7-
8
incremental maintenance of the King Plant heating boiler as calculated using NSP
Power Production's incremental maintenance coefficient.
3.2.3 Incremental Auxiliary Cost
Each month, NORENCO shall pay NSP for the cost of incremental
auxiliary electrical power usage for the King Plant heating boiler as calculated
using the average incremental system generation cost for that month.
3.3 Incremental Operating Cost
Any other incremental operating costs including overtime or
operating personnel required by NSP to provide Steam to NORENCO shall be
reported and charged to NORENCO.
3.4 Thermal Equipment Operation and Maintenance
Any operation or maintenance of thermal only equipment (equipment
installed for thermal use only) will be charged on separate work orders to
NORENCO.
3.5 Supply of Gas or Oil
If NSP supplies any oil or natural gas to NORENCO, NORENCO shall
reimburse NSP for the replacement cost of that oil or natural gas including
appropriate carrying and handling charges.
3.6 Administrative and General Costs
Administrative and general costs are covered by the Administrative
Services Agreement dated January 1, 1983, and any amendments thereto, between
NSP and NORENCO.
3.7 NSP Surcharge
-8-
9
A 5% surcharge will be added to items 3.2.2 through 3.4.
4. Sale of wood Byproduct to NSP
4.1 NORENCO is responsible for transporting and for all costs related to
transporting the wood byproduct from Andersen to the King Plant site or to other
mutually agreed to NSP sites if King Plant is out of service.
4.2 NSP agrees to use reasonable efforts to burn wood byproduct from
NORENCO up to thirteen (13) tons per hour and up to 80,000 tons per year of wood
byproduct when the King Plant is operating or to utilize it at other NSP
generating plants capable of handling and burning such wood byproduct when the
King Plant is out of service. NORENCO will annually provide NSP with a
forecasted wood byproduct delivery schedule. NORENCO agrees to supply all such
wood byproduct received from Andersen to NSP at the locations specified in 4.1
above unless NSP in its sole discretion is unable to utilize such wood
byproduct.
4.3 Whenever NSP receives wood byproduct from NORENCO, NSP shall pay for
all such wood byproduct at the following rate:
(a) For wood byproduct burned at the King Plant NSP shall pay
NORENCO at the average cost per MMBTU for solid fuel delivered to the King Plant
during the calendar year on a BTU equivalent basis.
(b) For wood byproduct delivered to other NSP generating plants, NSP
shall pay NORENCO the average cost per
-9-
10
MMBTU of solid fuel (on an equivalent BTU basis) during the calendar year at
such other NSP plants. The cost per MMBTU in (a) and (b) above shall be
estimated at the beginning of each calendar year for billing purposes and the
xxxxxxxx adjusted after the close of the year to reflect the year's actual
average cost.
5. Billing
5.1 NSP will xxxx NORENCO, and NORENCO will xxxx NSP, by the 20th of the
month following the month in which the costs were incurred. The amount of each
month's xxxx shall be increased by 1% to cover working capital and miscellaneous
costs.
5.2 NORENCO will pay NSP, and NSP will pay NORENCO, no later than ten
(10) days following the date of NSP's xxxx and the date of NORENCO's xxxx,
respectively. Interest shall accrue on payments which are overdue at the daily
commercial prime rate in effect at the Norwest Bank Minneapolis.
5.3 NSP will provide NORENCO with a cost component schedule along with its
xxxx similar to that shown in Table 1. NORENCO will provide NSP with a cost
component schedule along with its xxxx similar to that shown in Table II.
5.4 The total monthly cost billed shall be calculated pursuant to Articles
3 and 4 of this Agreement.
6. Liability
6.1 NORENCO shall hold harmless and indemnify NSP from
-10-
11
any and all claims, loss, damage or liability, including injury to and death of
persons, caused directly or indirectly by the Steam or the use of NORENCO's
facilities after the delivery of Steam to NORENCO, other than those resulting
solely from the negligence of NSP or its agents or employees (excluding persons
assigned to NORENCO on a full-time basis). NSP likewise shall hold harmless and
indemnify NORENCO from any and claims, loss, damage or liability, including
injury to and death of persons, caused directly or indirectly by steam or the
use of NSP's facilities before the delivery of steam to NORENCO, other than
those resulting solely from the negligence of NORENCO or its agents or employees
(including those persons assigned to NORENCO on a full-time basis).
6.2 Notwithstanding any other provision of this Agreement, neither NSP nor
NORENCO in any event shall be liable to the other, whether arising under
contract, tort (including negligence), or otherwise, for claims of customers or
any other third parties, or for loss of use of capital or revenue, or for loss
of anticipated profits, or for any other special, indirect, incidental or
consequential loss or damage of any nature arising at any time or from any cause
whatsoever.
6.3 No provision of this Agreement shall in any way inure to the benefit
of any third person (including the public at large) so as to constitute any such
person a third party beneficiary of this Agreement or of any one or more of the
terms
-11-
12
hereof, or otherwise give rise to any cause of action in any person not a party
hereto.
6.4 The provisions of this section and of any other sections of this
Agreement providing for limitation, of or protection against liability shall
apply to the full extent permitted by law and regardless of fault and shall
survive the expiration or termination of this Agreement.
7. Continuity of Service
7.1 NSP shall not be liable to NORENCO for its failure to deliver Steam,
and NORENCO shall not be liable to NSP for its failure to receive Steam, when
such failure on the part of either party shall be due to accident to or breakage
of pipelines or equipment, fires, floods, storms, weather conditions, strikes,
lockouts or other industrial disturbances, riots, legal interference, acts of
God or public enemy, shutdowns for necessary repairs and maintenance, or,
without limitation by enumeration, any other cause beyond the reasonable control
of the party failing to deliver or receive Steam provided such party shall
promptly and diligently take such action as may be necessary and practicable
under the then existing circumstances to remove the cause of failure and resume
the delivery or receipt of Steam.
Furthermore, NSP shall not be liable for its failure to deliver
Steam provided that such failure is (i) due to any scheduled or unscheduled
maintenance shutdown of King Plant
-12-
13
boilers or (ii) due to operating conditions on King Plant boilers and turbine
that warrant curtailment of the delivery of Steam to NORENCO. NSP shall have the
sole right to determine when those conditions exist. NSP and NORENCO shall
cooperate with each other regarding maintenance and Steam service curtailment,
and shall use their best efforts to coordinate inspections, maintenance and
repairs to their respective facilities. NSP shall provide NORENCO with
reasonable advance notice as possible of scheduled interruption or curtailment
of Steam service.
8. Miscellaneous
8.1 This Agreement shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto, and any reference to any of the
parties hereto shall be deemed to include all successors and assigns.
Notwithstanding the foregoing, no assignment shall relieve a party of its duties
and obligations to the other party under this Agreement if the assignee defaults
in such duty or obligation, unless such other party consents to the novation in
writing.
8.2 Unless designated otherwise in writing, all notices from NORENCO to
NSP shall be delivered to:
D. E. Gilberts
Senior Vice President-Power Supply
Northern States Power Company
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
-13-
14
Unless designated otherwise in writing, all notices from NSP to NORENCO
shall be delivered to:
X. X. Xxxx
Vice President
NORENCO Corporation
000 Xxxxxxxx Xxxx
X.X. Xxx 0000
Xxxxxxxxxxx, XX 00000
8.3 All payments and reimbursements required to be made by NORENCO to NSP
pursuant to this Agreement shall be directed to:
Manager, General Accounting
Northern States Power Company
000 Xxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
8.4 All payments and reimbursements required to be made by NSP to NORENCO
pursuant to this Agreement shall be directed to:
Manager, Business Operations
NORENCO Corporation
X.X. Xxx 0000
Xxxxxxxxxxx, XX 00000
8.5 The costs and charges provided for herein are exclusive of any
present or future federal, state, municipal or other sales or use tax with
respect to the personnel or products covered hereby, or any other present or
future excise tax upon or measured by the gross receipts from this transaction
or any allocated portion thereof or by the gross value of the personnel or
products covered hereby. If NSP is required by applicable law or regulations to
pay or collect any such tax or taxes on account of this transaction or the
personnel or products covered hereby, then such amount shall be paid by NORENCO
in addition to the costs or charges provided for herein.
-14-
15
8.6 This Agreement shall be construed in accordance with and be governed
by the laws of the State of Minnesota.
IN WITNESSETH WHEREOF, the parties hereto have caused this instrument to
be executed by their respective officers thereunto duly authorized as of the day
and year below written.
NORENCO CORPORATION NORTHERN STATES POWER COMPANY
By______________________________ By__________________________________
Its_____________________________ Its_________________________________
Date____________________________ Date________________________________
00476
-15-
16
TABLE I
NSP CHARGES TO NORENCO
3.1(a) Cost for Replacement Generation $
-------------
(b) Lost Opportunity Cost $
-------------
3.2.1 Heating Boiler Fuel Cost Gas $
-------------
Oil $
-------------
3.2.2 Incremental Maintenance Cost $
-------------
3.2.3 Incremental Auxiliary Cost $
-------------
3.3 Incremental Operating Cost $
-------------
3.4 Thermal Equipment Operation and
Maintenance $
-------------
3.5 Supply of Gas and Oil $
-------------
3.6 Administrative and General Costs $
-------------
3.7 NSP Surcharge $
-------------
00476.4
-16-
17
TABLE II
NORENCO WOOD BYPRODUCT SALE TO NSP
Tons of wood byproduct delivered to NSP _______________ Tons
BTU's per pound _______________ BTU/lb.
* NSP Equivalent cost for coal
delivered to King Plant during
the year $ _______________ /MMBTU
* An estimated cost will be used during the year and retroactively adjusted as
necessary at the end of the year.
00476.5
-17-
