March 11, 2002
Xx. Xxxxxxx X. Xxxxxx
Chairman
Long Island Power Authority
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
Re: Agreement In Principle Regarding Extension of Generation Purchase Right
Agreement
Dear Xx. Xxxxxx:
This letter memorializes our agreement in principle to extend, for a
period of thirty (30) months, the time in which the Long Island Power Authority
("LIPA") may exercise its right (the "Right") under the Generation Purchase
Right Agreement between LIPA and KeySpan Corporation ("KeySpan") to purchase all
of KeySpan's interests in KeySpan Generation, LLC ("Genco"). Under the agreement
in principle, the Right would be exercisable during a period beginning on
November 29, 2004 and ending on May 28, 2005, provided that if the Right is
exercised during that period, any election by LIPA to operate the generating
facilities itself or by an affiliate would not be effective prior to May 28,
2005.
LIPA and XxxXxxx have also agreed in principle that:
1. The Management Services Agreement between LIPA and KeySpan will be
extended for a period of thirty (30) months, and will expire on
November 30, 2008.
2. KeySpan and XXXX will discuss in good faith such other issues as each
party deems material to its interests, with the understanding that
both parties, consistent with their respective economic interests and
public service obligations, have an interest in enhancing competition
in the electric generating industry on Long Island in an
environmentally responsible manner. In that regard, KeySpan and LIPA
will promptly undertake an evaluation of specific measures designed to
enhance competition within the electric generating industry on Long
Island and reduce retail electricity rates. The evaluation shall
include analyses of (i) repowering existing generating assets on Long
Island to improve their efficiency and to lower costs and emissions;
(ii) sale of all or part of certain generating assets to LIPA or to
third parties to enhance competition on Long Island; (iii) joint
development
of new generating capacity on Long Island, including such alternate
energy sources as renewables, efficiency technologies and distributed
generation, and (iv) such other issues as may be appropriate under the
circumstances.
The parties acknowledge that these are agreements in principle subject
to further discussions, and agree that such discussions shall proceed
expeditiously and in good faith with the objective of having amended contracts
reflecting these agreements in principle ready for submission for the approval
of the Board of Trustees of LIPA and the Board of Directors of KeySpan not later
than March 26, 2002. The parties understand that the proposed amendments may be
subject to certain governmental approvals . The parties agree that they will
address the issues related to the approval process in the definitive agreements
If I have properly set forth our agreements in principle, please
acknowledge by signing in the space provided below.
We look forward to working with you toward a definitive agreement on
the subjects addressed herein.
Very truly yours,
Xxxxxx X. Xxxxxx
Chairman and CEO
Acknowledged and Agreed
