EXHIBIT 10.2c
1987 SUPPLEMENTARY POWER CONTRACT
This 1987 Supplementary Power Contract, dated as of the 1st day of April,
1987, is entered into by and between Connecticut Yankee Atomic Power Company
("Connecticut Yankee") and The United Illuminating Company ("Purchaser").
Basic Understandings
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Connecticut Yankee and the Purchaser are parties to a Power Contract
dated as of July 1, 1964 ("Power Contract"). Pursuant to the Power Contract and
other similar contracts (collectively, the "Power Contracts") between
Connecticut Yankee and its other purchasers (collectively, with the Purchaser,
the "Purchasers"), Connecticut Yankee supplies to the Purchasers all of the
capacity and electric energy available from the nuclear generating unit owned by
Connecticut Yankee at a site adjacent to the Connecticut River in the Town of
Haddam, Connecticut (the "Unit"). The Power Contracts have a term of thirty (30)
years following January 1, 1968, the date on which the Unit commenced commercial
operation.
Connecticut Yankee and the Purchaser are also parties to an Additional
Power Contract, dated as of April 30, 1984
("Additional Power Contract"). The Additional Power Contract and other similar
contracts (collectively, the "Additional Power Contracts") between Connecticut
Yankee and its other purchasers provide for extension of their respective rights
and obligations following the December 31, 1997 termination date of the Power
Contract and continuing during the Unit's service life following January 1, 1998
and termination of all decommissioning obligations related to the Unit.
Pursuant to the Power Contract and the Additional Power Contract, the
Purchaser is entitled and obligated to take its entitlement percentage of the
capacity and net electrical output of the Unit and the Purchaser is obligated to
make payment of a similar portion of the costs and expenses related to the Unit
during the Unit's service life and decommissioning.
The Power Contract serves as security for obligations of Connecticut
Yankee and cannot be changed without the concurrence of other parties.
Therefore, Connecticut Yankee and the Purchaser have been precluded from
amending the Power Contract, and Connecticut Yankee and the Purchaser have
entered into the following additional contract arrangements relating to the Unit
(collectively, with other
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similar contract arrangements between Connecticut Yankee and the other
Purchasers, the "Supplementary Power Contracts"):
Supplementary Power Contract, dated as of March 1, 1978
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Agreement Amending Supplementary Power Contract, dated August 22, 1980
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Second Amendment Of The Supplementary Power Contract, dated October 15, 1982
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Second Supplementary Power Contract, dated as of April 30, 1984
-----------------------------------
Pursuant to the Supplementary Power Contracts, the Purchaser makes
monthly supplemental payments to Connecticut Yankee, such payments being in
addition to the payments made pursuant to the Power Contract. These
supplementary payments cover elements of Connecticut Yankee's costs of owning,
operating and maintaining the Unit which are not appropriately provided for in
the Power Contracts. The Supplementary Power Contracts also contain additional
commitments and obligations relating to ownership, operation and maintenance of
the Unit.
NOW THEREFORE, in order to supersede the Supplementary Power Contracts
and to restate herein the terms and conditions contained in such superseded
Supplementary Power Contracts which Connecticut Yankee and the Purchaser wish to
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continue and to make the applicable provisions of this 1987 Supplementary Power
Contract effective during the terms of the Power Contract and the Additional
Power Contract, and in consideration of the understandings recited herein and
previously recited in the Supplementary Power Contracts, and in consideration of
the respective undertakings of the parties to this 1987 Supplementary Power
Contract, Connecticut Yankee and the Purchaser hereby agree as follows:
1. Undertakings By Connecticut Yankee
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Connecticut Yankee agrees to continue to operate and maintain the Unit
in accordance with the requirements of the Power Contract and Additional Power
Contract and to use its best efforts to meet its future financing needs at the
lowest practicable cost.
2. Supplementary Payment To Payments Under The Power Contract
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With respect to each month, the Purchaser will pay to Connecticut
Yankee the amount, if any, by which (i) the Purchaser's entitlement percentage
of the sum of (a) Connecticut Yankee's total operating expenses for the month
with respect to the Unit and (b) an amount equal to one-twelfth (1/12) of the
composite percentage for such
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month of the net Unit investment, exceeds (ii) the amount payable by the
Purchaser for the month pursuant to the second paragraph of Section 7 of the
Power Contract.
For the purposes of determining the amount, if any, to be paid pursuant
to this Section 2, the following shall apply:
Connecticut Yankee's "operating expenses" shall include all amounts
properly chargeable to operating expense accounts, less any applicable
credits thereto, in accordance with the Uniform System of Accounts (the
"Uniform System") prescribed by the Federal Energy Regulatory
Commission for Class A or Class B Public Utilities and Licensees;
provided, that for purposes of this Supplementary Power Contract, the
accrual of depreciation shall be computed on the basis of a term ending
May 26, 2004.
Included in the Unit's monthly operating expenses until fully recovered
shall be an amount equal to one-thirty sixth (1/36) of the interest
expense accrued from April, 1983 to October, 1986, inclusive, on the
amount due from Connecticut Yankee to the U.S. Department of Energy for
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disposal of prior spent nuclear fuel and associated high level
radioactive material.
Also included in the Unit's operating expenses shall be an expense
accrual for materials and supplies which are anticipated to remain at
the end of the Unit's operating life, with payment of such accruals
being determined in accordance with the following formula:
1/M times (Im-Rm) = Em
where: "M" equals the total number of months beginning with
the billing month and ending on May 26, 2004, inclusive;
"Im" equals the gross book value of inventory as shown on
Connecticut Yankee's books of account at the end of the
month prior to the billing month;
"Rm" equals the total accumulated amortization reserve for
materials and supplies at the end of the Unit's useful life,
as shown on Connecticut
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Yankee's books of account for the month prior to the billing
month; and
"Em" equals the monthly operating expense accrual to be
credited to the accumulated reserve for the billing month.
Also included in the Unit's operating expenses shall be an expense
accrual for nuclear fuel which is anticipated to operating life, with
payment of such accruals being determined in accordance with the
following formula:
1/M times (If-Rf) = Ef
where: "M" equals the total number of months beginning with
the billing month and ending on May 26, 2004, inclusive;
"If" equals the gross book value of the unburned fuel
remaining in the reactor core at the end of the month during
which the Unit most recently shut down for refueling. The
value of the unburned fuel in the core shall be
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before any new fuel is added to the core pursuant to
refueling;
"Rf" equals the accumulated amortization reserve for the
unburned final core value, as shown on Connecticut Yankee's
books of account for the month prior to the billing month;
and
"Ef" equals the monthly fuel amortization expense accrual
for the billing month.
If in any month the earnings, after deducting associated costs, from
investment of the segregated fund created pursuant to Section 8 of this
1987 Supplementary Power Contract for disposal of prior spent nuclear
fuel and associated high level radioactive material exceed or are
insufficient to meet Connecticut Yankee's interest obligations to the
U.S. Department of Energy in regard to such disposal costs, then an
appropriate adjustment will be made to the Unit's operating expenses
for the month to reflect the net amount of such excess or deficiency.
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"Net Unit investment" shall be determined in accordance with the
provisions of Section 7 of the Power Contract, except that for purposes
of this 1987 Supplementary Power Contract, (i) net Unit investment
shall include construction work in progress only to the extent allowed
by the Federal Energy Regulatory Commission, (ii) in determining net
Unit investment, the accumulated provision for depreciation shall not
include any amounts specifically allowed by the Federal Energy
Regulatory Commission to be excluded, (iii) net Unit investment shall
include the amount of Connecticut Yankee's obligation for the principal
balance and accrued interest due to the U.S. Department of Energy in
regard to disposal of prior spent nuclear fuel and associated high
level radioactive material, as shown on Connecticut Yankee's books of
account, to the extent that such amount has not been funded pursuant to
Section 8 of this 1987 Supplementary Power Contract, (iv) net Unit
investment shall include, in addition to all other amounts which may be
includable therein under said Section 7, but without duplication, the
aggregate amount
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properly chargeable at the time in accordance with the Uniform System
to Connecticut Yankee's nuclear fuel accounts (other than nuclear fuel
in process), less the balance at the time of the accumulated provision
for amortization of the cost of nuclear fuel (excluding any amounts
specifically permitted by the Federal Energy Regulatory Commission),
and (v) net Unit investment shall be reduced by the reserve for
materials and supplies and unburned nuclear fuel remaining at the end
of the Unit's useful life, all as determined in accordance with the
Uniform System.
"Composite percentage" shall be computed as of the last day of each
month ("the computation date"), and for any month the composite
percentage shall be that computed as of the last day of the previous
month. "Composite percentage" as of a computation date shall be the sum
of (i) fifteen percent (15%) multiplied by the ratio which the equity
investment with respect to the Unit, as of such date, is to the total
capital as of such date; plus (ii) the "effective interest rate" per
annum of each
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principal amount of long-term debt outstanding on such date for money
borrowed with respect to the Unit (including the amount of Connecticut
Yankee's obligation to the U.S. Department of Energy in regard to
disposal of prior spent nuclear fuel and associated high level
radioactive material which is included in net Unit investment),
multiplied by the ratio which such principal amount is to total
capital as of such date; plus (iii) the "effective dividend rate" per
annum of each series of preferred stock outstanding as of such date
with respect to the Unit multiplied by the ratio which the amount at
which such preferred stock would be reflected on a balance sheet of
Connecticut Yankee is to total capital as of such date. The "effective
interest rate" of each principal amount of long-term debt referred to
in clause (ii) will reflect the annual interest requirements and to
the extent applicable, amortization of issuance expenses and discounts
and premiums and sinking fund call premiums, and expenses and
discounts, refunding and retirement expenses and discounts and
premiums, and all other expenses applicable to
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the issue of such indebtedness. The "effective dividend rate" of each
series of preferred stock referred to in clause (iii) will reflect the
annual dividend requirements, and to the extent applicable,
amortization of issuance expenses and discounts and premiums, sinking
fund call premiums and expenses and discounts, refunding and
retirement expenses and discounts and premiums, and all other expenses
applicable to each such issue of preferred stock.
"Equity investment" as of any date shall consist of the sum of (i) all
amounts theretofore paid to Connecticut Yankee for all common capital
stock theretofore issued, plus all amounts paid to Connecticut Yankee
by any of its common stockholders as capital contributions or advances,
less the sum of any amounts paid by Connecticut Yankee to its common
stockholders in the form of stock retirements, repurchases or
redemptions, return of capital or repayments of such contributions or
advances; plus (ii) any credit balance in the capital surplus account
not included under (i) and in the retained earnings
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account on the books of Connecticut Yankee as of such date.
"Total capital" as of any date shall be the equity investment with
respect to the Unit, plus the total of the amount which would be
reflected on a balance sheet of Connecticut Yankee for all long-term
debt and preferred stock then outstanding with respect to the Unit.
"Uniform System" shall mean the Uniform System of Accounts prescribed
by the Federal Energy Regulatory Commission (or any successor
governmental authority) for Class A and Class B Public Utilities and
Licensees, as said system may be amended from time to time.
3. Decommissioning Payment
-----------------------
For each month the Purchaser will pay Connecticut Yankee an amount
equal to the Purchaser's entitlement percentage of the Total Decommissioning
Costs for the month with respect to the Unit.
(a) "Total Decommissioning Costs" for any month shall mean the sum of (x)
an amount equal to all accruals in such month to any
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reserve as from time to time established by Connecticut Yankee and
approved by its board of directors, to provide for the ultimate
payment of the Decommissioning Expenses of the Unit plus (y)
Decommissioning Tax Liability for such month. It is understood (i)
that such funds may be held by Connecticut Yankee or by an independent
trust or other separate fund, as determined by said board of
directors, (ii) that, upon compliance with Section 7 hereof, the
amount, custody and/or timing of such accruals may from time to time
during the term hereof be modified by said board of directors in its
discretion or to comply with applicable statutory or regulatory
requirements or to reflect changes in the amount, custody or timing of
anticipated Decommissioning Expenses, and (iii) that the use of the
term "to decommission" herein encompasses compliance with all
requirements (other than those relating to spent nuclear fuel) of the
Nuclear Regulatory Commission or its
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successors (the "NRC") for permanent cessation of operation of a
nuclear facility and any other activities reasonably related thereto.
(b) "Decommissioning Expenses" shall include:
(1) All costs and expenses of any NRC-approved method of removing the
Unit from service, including without limitation, dismantling,
mothballing, entombment, removing radioactive material (excluding
spent nuclear fuel) to temporary and/or permanent storage sites,
decontaminating, restoring and supervising the site, and any
costs and expenses incurred in connection with proceedings before
governmental authorities relating to any authorization to
decommission the Unit or remove the Unit from service;
(2) All costs of labor and services, whether directly or indirectly
incurred, including without limitation, services of foremen,
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inspectors, supervisors, surveyors, engineers, security
personnel, counsel and accountants, performed or rendered in
connection with the decommissioning of the Unit and the removal
of the Unit from service, and all costs of materials, supplies,
machinery, construction equipment and apparatus acquired or used
(including rental charges for machinery, equipment or apparatus
hired) for or in connection with the decommissioning of the Unit
and the removal of the Unit from service, and all administrative
costs, including services of counsel and financial advisers, of
any applicable independent trust or other separate fund; it being
understood that any amount, exclusive of proceeds of insurance,
realized by Connecticut Yankee as salvage on any machinery,
construction equipment and apparatus, the cost of which was
charged to Decommissioning Expense, shall be
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treated as a reduction of the amounts otherwise chargeable on
account of the costs of decommissioning of the Unit: and
(3) All overhead costs applicable to the Unit during its
decommissioning period, including, without limiting the
generality of the foregoing, taxes (other than taxes on or in
respect of income), charges, licenses, excises and assessments,
casualties, surety bond premiums and insurance premiums.
(c) "Decommissioning Tax Liability" for any month shall be an amount
established by Connecticut Yankee and approved by its board of
directors to meet possible income tax obligations, which amount shall
not exceed the amount to be included in the clause (x) portion of
Total Decommissioning Costs for such month multiplied by a fraction
whose numerator is equal to the combined highest applicable statutory
Federal and state marginal income tax rate
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and whose denominator is equal to one minus the combined highest
statutory Federal and state marginal income tax rate.
Without limiting the generality of the foregoing, any other amounts
expended or to be paid with respect to decommissioning o(pound) the
Unit or removal of the Unit from service shall constitute part of the
Decommissioning Expenses if they are, or when paid will be, either (i)
properly chargeable to any account related to decommissioning of a
nuclear generating unit in accordance with the Uniform System of
Accounts applicable to Connecticut Yankee or generally accepted
accounting principles as then in effect, or (ii) properly chargeable
to decommissioning of a nuclear generating unit in accordance with
then applicable regulations of the NRC or the FERC or any other
regulatory agency having jurisdiction.
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4. Decommissioning Payment Billing
-------------------------------
Connecticut Yankee will xxxx the Purchaser, as soon as practicable
after the end of each month, for all amounts payable by the Purchaser with
respect to the particular month pursuant to Section 3 hereof. Such bills will be
rendered in such detail as the Purchaser may reasonably request and may be
rendered on an estimated basis subject to corrective adjustments in subsequent
billing periods. All bills shall be due and payable when rendered and any amount
remaining unpaid 15 days following the date of receipt of bills shall bear
interest at an annual rate equal to 2% in excess of the current prime rate then
in effect at the principal office in Hartford, Connecticut of The Connecticut
Bank and Trust Company, National Association, from the due date to the date
payment is received by Connecticut Yankee.
5. Decommissioning Fund
--------------------
Connecticut Yankee agrees to pay to, or cause to be paid to, the
Connecticut Yankee Trust or any successor trust approved by the board of
directors of Connecticut Yankee all funds collected hereunder for the purpose of
decommissioning the Unit or removing the Unit from service.
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6. Duration of Decommissioning Payments
------------------------------------
The Purchaser's obligation to make payment of its entitlement
percentage of Total Decommissioning Costs shall, whether or not the Unit is
operated or operable and notwithstanding any earlier termination of the service
life of the Unit and cancellation of the Power Contract or Additional Power
Contract, remain in full force and effect until the completion of
decommissioning of the Unit, it being recognized that such costs represent
deferred payments in connection with power theretofore delivered by Connecticut
Yankee; provided, however, that the payment of Total Decommissioning Costs shall
cease upon the taking of the Unit by exercise of the right of eminent domain or
similar right or power.
7. Amendment of Decommissioning Payment Provisions
-----------------------------------------------
Upon authorization by Connecticut Yankee's board of directors of
uniform amendments to all the 1987 Supplementary Power Contracts identical to
this 1987 Supplementary Power Contract, Connecticut Yankee shall have the right
to amend the provisions hereof relating to decommissioning payments by serving
an appropriate statement of such amendment upon the Purchaser and filing the
same with the Federal Energy Regulatory Commission (or such other
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regulatory agency as may have jurisdiction in the premises) in accordance with
the provisions of applicable laws and any rules and regulations thereunder, and
such amendment shall thereupon become effective on the date specified therein,
subject to any suspension order duly issued by such agency. All other amendments
to this 1987 Supplementary Power Contract shall be by mutual agreement,
evidenced by a written amendment signed by the parties hereto.
8. Segregated Fund for Disposal of Prior Spent Nuclear Fuel and
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Associated High Level Radioactive Material
----------------------------------------------------------------------
Connecticut Yankee agrees to pay to, or cause to be paid into any
segregated fund approved by the board of directors of Connecticut Yankee funds
collected under this 1987 Supplementary Power Contract for the purpose of
disposing of prior spent nuclear fuel and associated high level radioactive
material. Funds previously collected by Connecticut Yankee from the Purchaser
for the purpose of disposing of prior spent nuclear fuel and associated high
level radioactive material shall also be paid into any such segregated fund.
Connecticut Yankee further agrees that any funds collected from the Purchaser to
meet such disposal costs which are not used for that purpose will be refunded to
the Purchaser at the time final payment of such disposal costs is made to the
U.S. Department of Energy.
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9. Supplementary Payment to Payments Under The Additional Power Contract
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With respect to each month commencing on or after the effective date of
service under the Additional Power Contract, the Purchaser will pay to
Connecticut Yankee the amount by which (i) the Purchaser's entitlement
percentage of the sum of (a) Connecticut Yankee's total operating expenses for
the month with respect to the Unit and (b) an amount equal to one-twelfth (1/12)
of the composite percentage for such month of the net Unit investment, exceeds
(ii) the amount payable by the Purchaser for the month pursuant to Section 7 of
the Additional Power Contract.
For the purposes of determining the amount, if any, to be paid pursuant
to this Section 9, the definitions set forth in Section 2 of this 1987
Supplementary Power Contract shall apply.
10. Supplementary Payments Upon Termination of the Unit's Service Life
------------------------------------------------------------------
In addition to all amounts otherwise payable by the Purchaser pursuant
to the Power Contract and Additional Power Contract, the Purchaser will be
obligated to pay to Connecticut Yankee, whether or not the Unit is operated or
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operable and notwithstanding any earlier termination of the service life of the
Unit and cancellation of the Power Contract or Additional Power Contract, the
Purchasers entitlement percentage of expenses associated with disposal of prior
spent nuclear fuel. Such spent nuclear fuel expenses will be billed and paid in
the same manner as decommissioning payments pursuant to Sections 4 and 6 hereof.
11. Arbitration
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In case any dispute shall arise as to the interpretation or performance
of this 1987 Supplementary Power Contract which cannot be settled by mutual
agreement, such dispute shall be submitted to arbitration. The parties shall if
possible agree upon a single arbitrator. In case of failure to agree upon an
arbitrator within 15 days after the delivery by either party to the other of a
written notice requesting arbitration, either party may request the American
Arbitration Association to appoint the arbitrator. The arbitrator, after
opportunity for each of the parties to be heard, shall consider and decide the
dispute and notify the parties in writing of his decision. Such decision shall
be binding upon the parties, and the expenses of the arbitration shall be borne
equally by them.
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12. Regulation
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This 1987 Supplementary Power Contract, and all rights, obligations and
performance of the parties hereunder, are subject to all applicable state and
Federal law and to all duly promulgated orders and other duly authorized action
of any governmental authority having jurisdiction.
13. Assignment
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This 1987 Supplementary Power Contract shall be binding upon and shall
inure to the benefit of, and may be performed by, the successors and assigns of
the parties, except that no assignment, pledge or other transfer of this 1987
Supplementary Power Contract by either party shall operate to release the
assignor, pledgor or transferor of any of its obligations under this 1987
Supplementary Power Contract unless consent to the release is given in writing
by the other party, or, if the other party has theretofore assigned, pledged or
otherwise transferred its interest in this 1987 Supplementary Power Contract, by
the other party's assignee, pledgee or transferee, or unless such transfer is
incident to a merger or consolidation with, or transfer of all or substantially
all of the assets of the transferor to, another Purchaser which shall, as part
of such succession,
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assume all the obligations of the transferor under this contract.
14. Right of Setoff
---------------
The Purchaser shall not be entitled to set off against the payments
required to be made by it under this 1987 Supplementary Power Contract (i) any
amounts owed to it by Connecticut Yankee or (ii) the amount of any claim by it
against Connecticut Yankee. However, the foregoing shall not affect in any other
way the Purchaser's rights and remedies with respect to any such amounts owed to
it by Connecticut Yankee or any claim by it against Connecticut Yankee.
15. Interpretation
--------------
The interpretation and performance of this 1987 Supplementary Power
Contract shall be in accordance with and controlled by the law of the State of
Connecticut.
16. Addresses
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Except as the parties may otherwise agree, any notice, request, xxxx or
other communication from one party to the other, relating to this 1987
Supplementary Power Contract, or the rights, obligations or performance of the
parties
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hereunder, shall be in writing and shall be effective upon delivery to the other
party. Any such communication shall be considered as duly delivered when mailed
to the respective post office address of the other party shown following the
signatures of such other party hereto, or such other post office address as may
be designated by written notice given as provided in this Section.
17. Corporate Obligations
---------------------
This 1987 Supplementary Power Contract is the corporate act and
obligation of the parties hereto, and any claim hereunder against any
stockholder, director or officer of any party, as such, is expressly waived.
18. Usage of Defined Terms
----------------------
Except where otherwise specifically provided herein, the usage in this
1987 Supplementary Power Contract of terms which are defined in the Power
Contract and Additional Power Contract shall be deemed to be in accordance with
the definitions thereof in the Power Contract.
19. Counterparts
------------
This 1987 Supplementary Power Contract may be executed in any number of
counterparts and each executed counterpart shall have the same force and effect
as an original
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instrument and as if all the parties to all of the counterparts had signed the
same instrument. Any signature page of this 1987 Supplementary Power Contract
may be detached from any counterpart without impairing the legal effect of any
signatures thereon, and may be attached to another counterpart of this 1987
Supplementary Power Contract identical in form hereto but having attached to it
one or more signature pages.
20. Effectiveness
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This 1987 Supplementary Power Contract shall become effective sixty
days after the date upon which this 1987 Supplementary Power Contract shall have
been filed with the Federal Energy Regulatory Commission, subject to any
suspension order duly issued by the Federal Energy Regulatory Commission. At
such time as this 1987 Supplementary Power Contract becomes effective it shall
supersede and cancel the previous Supplemental Power Contracts between
Connecticut Yankee and the Purchaser, except that this 1987 Supplementary Power
Contract shall not affect the obligation to pay any sums of money due with
respect to any prior period under the terms of any such previous Supplementary
Power Contracts.
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IN WITNESS WHEREOF, the parties have executed this 1987 Supplementary
Power Contract by their respective officers duly authorized as of the 1st day of
April, 1987.
CONNECTICUT YANKEE ATOMIC POWER COMPANY
By_____________________________________
Its:
Address: X.X. Xxx 000
Xxxxxxxx, XX 00000
THE UNITED ILLUMINATING COMPANY
By_____________________________________
Its:
Address: 00 Xxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
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