Exhibit 10.6
OPERATING AGREEMENT
between
ALABAMA POWER COMPANY
and
SOUTHERN POWER COMPANY
TABLE OF CONTENTS
ARTICLE 1 Definitions.............................................................................................2
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1.1 "Fuel Services".............................................................................2
1.2 "Generation Facility".......................................................................2
1.3 "Governmental Authority"....................................................................3
1.4 "Legal Requirements"........................................................................3
1.5 "New Investment Projects"...................................................................3
1.6 "New Investment Services"...................................................................4
1.7 "Operating Services"........................................................................4
1.8 "Operation and Maintenance Services"........................................................4
1.9 "Prudent Utility Practice"..................................................................5
ARTICLE 2 [OPCO]'s Authority and Responsibility with Respect to Operation of the
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Generation Facilities...........................................................................5
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2.1 Responsibility of [OPCO]....................................................................5
2.2 Authorization of [OPCO].....................................................................6
2.2.1. Plant Operation and Maintenance.................................................7
(a) Staff and Personnel.......................................................7
(b) Licenses and Permits for Generation Facilities............................8
(c) Reductions in Capacity and Outages at Each Plant..........................8
(d) Events About Which Owner is to be Notified................................9
(e) No Changes to Transmission or Distribution Facilities.....................9
(f) Operation in Accordance with Operating Plan...............................9
(g) Point of Interconnection.................................................10
2.2.2. New Investment Services........................................................10
2.2.3. Fuel Services..................................................................10
2.3 Retirement, Removal or Addition of Generating Facilities...................................10
2.4 Authority to Act as Agent for Owner and Right of Third Parties to Rely on
Agency................................................................................12
2.5 Assignment of Contracts; Liability and Allocation of Risks.................................12
2.5.1 Contracts with Third Parties....................................................12
2.5.2 Acceptance of Contract Provisions...............................................13
2.5.3 Enforcement of Rights Under Contracts...........................................13
2.6 Cooperation of Owner.......................................................................14
2.7 [OPCO] Interface Procedure.................................................................15
2.8 Plans and Budgets..........................................................................15
2.8.1 Strategic Plan..................................................................16
(a) Five-year Operating and Planned Outage Schedule..........................16
(b) Availability and Performance Goals.......................................16
(c) Planned Mandatory Projects...............................................16
(d) Planned Improvement Projects.............................................17
(e) Authorized Level of Staffing.............................................17
2.8.2 Fuel Plan.......................................................................18
2.8.3 Operating Budget................................................................18
2.8.4 Capital Budget..................................................................18
2.8.5 Fuel Budget.....................................................................18
2.8.6 Material Contracts..............................................................19
2.9 Information and Reports....................................................................19
2.9.1 Generation Facility Data........................................................19
2.9.2 Generation Facility Budget Reports..............................................19
2.9.3 Generation Facility Strategic Plan Reports......................................19
2.9.4 Audit Reports...................................................................19
2.9.5 Correspondence to and from Regulatory Agencies..................................20
2.9.6 Responses to Owner Inquiries....................................................20
2.10 Plant Tours...............................................................................20
2.11 Management Audit..........................................................................20
ARTICLE 3 Entitlement to Output..................................................................................21
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3.1 Entitlement to Output......................................................................21
3.2 Determination of Output-Responsibility for Station Service and Losses......................21
ARTICLE 4 Costs, Billing, Accounting and Audit...................................................................21
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4.1 Cost of Operation and Maintenance..........................................................21
4.2 New Investment Costs.......................................................................22
4.3 Fuel Costs.................................................................................22
4.4 Other Costs Required by Legal Requirements.................................................23
4.5 Revision...................................................................................23
4.6 Billing....................................................................................23
4.7 Payment....................................................................................23
4.8 General Accounting Matters.................................................................24
4.9 Right to Inspect Records...................................................................24
4.10 Disputed Invoice..........................................................................24
ARTICLE 5 Advancement of Funds...................................................................................25
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5.1 Advancement of Funds.......................................................................25
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ARTICLE 6 Taxes 25
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6.1 Taxes......................................................................................25
ARTICLE 7 Compliance with Provisions of Permits and Requirements of Governmental
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Agencies.......................................................................................25
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7.1 Compliance with Provisions of Permits and Requirements of Governmental
Agencies..............................................................................25
ARTICLE 8 Confidentiality of Information.........................................................................26
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ARTICLE 9 Damage to Persons or Property; Penalties; Fines........................................................26
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9.1 Applicability of Article...................................................................26
9.2 Absence of Warranty........................................................................27
9.3 Liabilities to Third Parties and Owner.....................................................27
9.4 Willful Misconduct.........................................................................28
9.5 Limitation of Liability....................................................................29
9.6 Severability...............................................................................30
ARTICLE 10 Insurance.............................................................................................30
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10.1 Parties Obligations Generally.............................................................30
10.2 Commercial Liability Insurance............................................................31
10.3 Workmen's Compensation Insurance..........................................................31
10.4 Additional Insurance......................................................................32
10.5 Waiver of Subrogation - Allocation and Payment of Premium.................................32
ARTICLE 11 Term 32
11.1 Term......................................................................................32
ARTICLE 12 Remedies..............................................................................................33
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12.1 Termination...............................................................................33
ARTICLE 13 Miscellaneous.........................................................................................35
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13.1 No Partnership or Joint Venture...........................................................35
13.2 Owner's Designated Representatives........................................................35
13.3 [OPCO]'s Designated Representative........................................................36
13.4 Depreciation..............................................................................36
13.5 Holidays, Business Days...................................................................36
13.6 Owner's Services to be Furnished at Cost..................................................36
13.7 Entire Agreement..........................................................................36
13.8 Amendments................................................................................37
13.9 Notices...................................................................................37
13.10 Captions.................................................................................37
13.11 Counterparts.............................................................................38
13.12 No Waiver................................................................................38
13.13 Singular and Plural......................................................................38
13.14 Third Party Beneficiaries................................................................38
13.15 Severability.............................................................................38
ARTICLE 14 Successors and Assigns................................................................................38
14.1 Successors and Assigns....................................................................39
ARTICLE 15 Governing Law.........................................................................................39
15.1 Governing Law.............................................................................39
OPERATING AGREEMENT
BETWEEN
ALABAMA POWER COMPANY
AND
SOUTHERN POWER COMPANY
THIS AGREEMENT is made and entered into this 26th day of June 2001, to
be effective as of the close of business on June 30, 2001, (the "Effective
Date") by and between Alabama Power Company ("Operator") and Southern Power
Company ("Owner").
W I T N E S S E T H:
WHEREAS, Operator and Owner are each a wholly-owned subsidiary of The
Southern Company ("Southern"), a registered holding company under the Public
Utility Holding Company Act of 1935 (the "1935 Act"); and
WHEREAS, Owner owns certain generation stations, plants and other
generation-related facilities within the service territory of Operator and may
construct or acquire additional facilities in the future; and
WHEREAS, Owner intends to sell on the wholesale market the electric
power generated by such facilities;
and
WHEREAS, Operator owns and operates generation stations, plants and
other related generation facilities and has developed the expertise and
experience to efficiently and economically operate such facilities; and
WHEREAS, Owner believes that in order to more efficiently and
economically provide for the operation, maintenance, repair, and rehabilitation
of its generating stations, plants and other generation-related facilities, such
activities should be conducted and coordinated by Operator; and
WHEREAS, Owner desires that Operator undertake the operation,
maintenance, repair and rehabilitation of its generating stations, plants and
other generation-related facilities identified on Schedule 1, subject to the
receipt of any necessary regulatory approvals, and Operator has agreed to do so
under the terms and conditions set forth below.
NOW THEREFORE, in consideration of these premises, the parties,
intending to be legally bound, do hereby agree as follows:
ARTICLE 1
Definitions
As used herein, the following terms and phrases shall have,
respectively, the following meanings:
1.1 "Fuel Services" shall mean work related to supplying and
managing all necessary fuels for the Generation Facilities,
including, without limitation, planning, procurement, contract
administration, fuel quality assurance, administration of
payables and receivables, and all activities relating to
procurement, transportation, installation, monitoring, repairing,
storage, reprocessing and disposal of fuel for the Generation
Facilities, related materials and waste products.
1.2 "Generation Facility" shall mean, and refer to,
respectively, each of the fossil fuel, hydro-electric and pumped
storage generation stations, plants and other generation-related
facilities owned by Owner, located within the service territory
of Operator and identified on Schedule 1 attached hereto and
incorporated herein; provided, however, that should activities
concerning a Generation Facility be undertaken with respect to
one unit of such station, plant or facility, the phrase
"Generation Facility" shall mean and refer to that unit and
related common facilities. Generation stations, plants and other
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generation-related facilities may be removed from or added to the
definition of "Generation Facilities" as contemplated in Section
2.3.
1.3 "Governmental Authority" shall mean any local, state,
regional or federal legislative, regulatory, administrative,
legal, judicial or executive agency, commission, department or
other entity and any person acting on behalf of any such entity.
1.4 "Legal Requirements" shall mean all laws, codes, ordinances,
orders, judgments, decrees, injunctions, licenses, rules,
permits, approvals, written agreements, regulations and
requirements of or issued by every Governmental Authority having
jurisdiction over the matter in question, whether federal,
regional, state or local, which may be applicable to Operator, or
to Owner, or to any Generation Facility or any of the real or
personal property comprising the Generation Facilities, or to
services to be provided to Owner hereunder, or the use,
occupancy, possession, operation, maintenance, construction,
retirement, acquisition, installation, alteration, replacement,
reconstruction or disposal of any one or more of the Generation
Facilities or any part thereof.
1.5 "New Investment Projects" shall mean projects for the
Generation Facilities relating to the planning, design,
licensing, acquisition, construction, completion, renewal,
improvement, addition, repair, replacement or enlargement of any
Unit of Property (as described in the Federal Energy Regulatory
Commission's "Units of Property for Use in Accounting for
Additions and Retirements of Electric Plants"), under
circumstances where expenditures on or for such projects are to
be capitalized in accordance with the Electric Plant Instructions
of the Uniform System of Accounts prescribed for Class A and B
utilities by the Federal Energy Regulatory Commission.
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1.6 "New Investment Services" shall mean work on or for any
New Investment Project, including, but not limited to, any
planning, design, engineering, labor, procurement of materials
and supplies, materials management, quality assurance, training,
security, and environmental protection, together with maintaining
or obtaining licenses and regulatory approvals related thereto,
governmental affairs or regulatory relationships, administration
of payables and receivables, and all other activity required for
the safe and reliable operation of the New Investment Project
and/or the relevant Generation Facility or that may be required
to comply with Legal Requirements.
1.7 "Operating Services" shall mean Fuel Services, New
Investment Services, and Operation and Maintenance Services.
1.8 "Operation and Maintenance Services" shall mean work for
Owner relating to the possession, management, control, start-up,
operation, availability, production of energy, maintenance,
improvement, renewal, replacement, and shutdown, including, but
not limited to, any planning, design, engineering, labor,
procurement of materials and supplies, materials management,
quality assurance, training, security, and environmental
protection, together with maintaining or obtaining licenses and
regulatory approvals related thereto, governmental affairs or
regulatory relationships, administration of payables and
receivables, and all other activity required for the safe and
reliable operation of the Generation Facilities or that may be
required to comply with Legal Requirements.
1.9 "Prudent Utility Practice" shall mean at a particular
time any of the practices, methods and acts engaged in or
approved by a significant portion of the electric utility
industry prior to such time, or any of the practices, methods and
acts which, in the exercise of reasonable judgment in light of
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the facts known at the time the decision was made, could have
been expected to accomplish the desired result at the lowest
reasonable cost consistent with good business practices,
reliability, safety and expedition. "Prudent Utility Practice" is
not intended to be limited to the optimum practice, method or act
to the exclusion of all others, but rather to be a spectrum of
possible practices, methods or acts having due regard for, among
other things, manufacturers' warranties and the requirements of
governmental agencies of competent jurisdiction.
ARTICLE 2
Operator's Authority and Responsibility with Respect to Operation
of the Generation Facilities
2.1 Responsibility of Operator. Operator, consistent with
such written guidelines as may be jointly developed with Owner,
shall provide and be responsible for (i) the operation and
maintenance of the Generation Facilities in a safe and reliable
manner in accordance with all Legal Requirements and with Prudent
Utility Practice, (ii) the generation of power and energy at the
Generation Facilities to the credit of and for the benefit of the
Owner as economically as is reasonably practicable, (iii) the
repair and rehabilitation of the Generation Facilities as may,
from time to time, be necessary, appropriate or reasonably
practicable and advisable and (iv) as and to the extent deemed by
Owner to be necessary or appropriate, the construction of new or
additional non-nuclear generation facilities for Owner. Operator
also shall make such further changes and additions to and
retirements from the Generation Facilities in its service
territory as shall be consistent with such operation,
maintenance, repair and rehabilitation. Such services and
construction may be provided by Operator through its own
personnel or, in part, by others, including without limitation
affiliate personnel, under contractual or other arrangements,
including the use of Owner's personnel under the direction and
supervision of Operator.
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2.2 Authorization of Operator. In furtherance of the
foregoing, Owner authorizes Operator, and Operator agrees to
provide, Operation and Maintenance Services and Fuel Services for
the Generation Facilities and, as authorized herein, New
Investment Services. Owner hereby authorizes Operator to take all
actions that, in the discretion and judgment of Operator
consistent with Prudent Utility Practice, are deemed necessary or
advisable in providing these Operating Services. Owner hereby
authorizes Operator, as operator, to take any and all action
necessary to comply with all Legal Requirements and to take all
action necessary to fulfill any requirements for the safe and
reliable operation of the Generation Facilities. The authority
vested in Operator shall include, but not be limited to, the
authority to incur costs, liabilities, and obligations, to
purchase equipment, materials and supplies, to perform and
arrange for performance of work, to select and retain
contractors, engineers, consultants, architect-engineers,
attorneys, accountants and other firms or persons, and to take
all actions in connection with the Generation Facilities that are
within the scope set forth above. Without limiting the foregoing,
the authority vested in Operator shall include the following:
2.2.1. Plant Operation and Maintenance. Operator shall have
the authority to possess, operate and maintain the Generation
Facilities in accordance with policies and decisions established
and made by Owner. Subject to the provisions of this Agreement,
Operator shall in accordance with Prudent Utility Practice
endeavor to achieve reliable performance of each Generation
Facility, to maximize the capacity and availability factors and
minimize forced outage rates and durations at each Generation
Facility and to produce busbar costs as low as reasonably
possible.
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(a) Staff and Personnel. Subject to the provisions of
Section 2.8.1 respecting Strategic Plans and approval of Owner or
Owner's designated representative, Operator shall have the
authority to select, hire, compensate, control and discharge
(when deemed appropriate by Operator) those persons, firms or
corporations which are required to satisfy its obligations under
this Agreement. Operator shall keep Owner informed of any plans
to change either the Operator officer responsible for any of
Owner's Generation Facilities or the Operator manager of such
Generation Facility. Any input from Owner on such plans will be
considered by Operator, but Operator's decisions on personnel
matters shall be final. Operator shall also consider any positive
or negative comments from Owner regarding the performance of any
of Operator's officers or managers, but management decisions on
whether to take personnel or salary administration actions shall
be made solely by Operator.
(b) Licenses and Permits for Generation Facilities. Operator
is authorized to obtain and maintain compliance with all
licenses, approvals and permits for each Generation Facility from
Governmental Authorities required for operation and maintenance
of the Generation Facility. Upon mutual agreement of Operator and
Owner, or as required by Legal Requirements, Operator will be
designated in such licenses, approvals and permits as having
operating responsibility for the Generation Facilities.
(c) Reductions in Capacity and Outages at Each Plant. Owner
recognizes that, in the course of operating the Generation
Facilities, it may be necessary to decide whether to operate the
Generation Facilities at less than full power or to terminate or
7
suspend such operations altogether in light of technical, legal,
regulatory, safety, economic, power system, testing, or other
considerations. Operator recognizes the need to minimize periods
of reduced capacity or outages at the Generation Facilities that
could have an adverse effect on Owner's power supply system or
its cost of providing reliable electric service. Operator will
endeavor to consult with Owner concerning any operating
conditions which are expected to result in capacity reductions of
fifty percent (50%) or more at a Generation Facility or outages
at a unit of any Generation Facility, and Operator will only take
those actions when they determine they are prudent and necessary
from an operating standpoint.
(d) Events About Which Owner is to be Notified. In the event
of an occurrence at a Generation Facility of any unplanned
outage, any significant extension of a planned outage, any
unplanned reduction in the capacity of a unit for an extended
period, or any event at a Generation Facility or any regulatory
action which is likely to attract substantial media attention or
to affect substantially the operation of the Generation Facility,
Operator shall inform Owner as soon as practical, or in
accordance with guidelines acceptable to Owner, after the
occurrence of such event.
(e) No Changes to Transmission or Distribution Facilities.
In order that the safe operation of the Generation Facilities is
assured, Owner shall not effect any operating or physical changes
to its transmission and distribution facilities which may
adversely affect the safe operation of the Generation Facilities
without prior consultation with and the concurrence of Operator.
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(f) Operation in Accordance with Operating Plan. Each Generation
Facility shall be operated in accordance with Prudent Utility
Practice and pursuant to an operating plan developed and updated
regularly by Operator and Owner and in accordance with Owner's
obligations, if any, under any interconnection agreements, power
pooling arrangements or other applicable arrangements, as such
obligations may presently exist or may hereafter be modified from
time to time, including the obligations, if any, of Owner to
maintain the design integrity of each Generation Facility under
the requirements of the Southeast Electric Reliability Council
and the National Electric Reliability Council.
(g) Point of Interconnection. The point of interconnection
between any Generation Facility and Operator's or a third party's
transmission system and the extent of Operator's operational
responsibility therefor shall be determined from time to time by
Owner and Operator.
2.2.2. New Investment Services. Operator shall have
responsibility for all New Investment Services. Operator is authorized
to enter into such arrangements as it deems appropriate for the
Generation Facilities and to make all decisions regarding the
completion of New Investment Projects that were contemplated in the
construction budgets for the Generation Facilities as of this
acquisition by Owner or that have been approved and provided for in an
Operating Budget or Capital Budget under the procedures contemplated
in Section 2.8 and as applicable Section 2.3.3. All equipment,
materials and supplies included in such New Investment Projects for
each Generation Facility shall be acquired in the name of Owner and
shall be the property of Owner.
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2.2.3. Fuel Services. Operator shall have responsibility for Fuel
Services. Operator is authorized to enter into such arrangements as it
deems appropriate and to make all decisions regarding fuel and fuel
services.
2.3 Retirement, Removal or Addition of Generating Facilities. Owner
shall retain the exclusive authority (i) to determine when the economic
life of the Generation Facility has ended and thereupon to retire the
Generation Facility from commercial operation or (ii) to remove a
particular generation station, plant or other generation-related Facility
from the provisions of this Agreement and to arrange for other means for
its operation and maintenance. Owner and Operator may agree to add new
generation stations, plants or other generation-related facilities of Owner
within Operator's service territory to this Agreement.
2.3.1 Retirement. Upon Owner informing Operator of any retirement or
removal of a Generation Facility, Operator shall take such action as may be
necessary to reduce operation of the Generation Facility or to terminate
operation and place the Generation Facility or unit in a safe shutdown
condition. Owner retains the authority to determine whether any
to-be-retired Generation Facility should be placed in standby status or
operated at reduced output for economic reasons or Owner's need for the
capacity or energy of the Generation Facility. Operator shall also take
such steps as may be necessary to decommission and dispose of and
thereafter maintain, to the extent necessary, any to-be-retired Generation
Facility or any unit thereof designated for retirement.
2.3.2 Removal. Upon Owner informing Operator of any removal of a
Generation Facility from this Agreement, Operator shall take such action as
may be necessary to transfer operational control of such Generation
Facility, and to comply with the provisions of Sections 12.1.2 and 12.1.3,
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which shall also apply. Upon the transfer of operational control of a
Generation Facility as contemplated above and in Sections 12.1.2 and
12.1.3, such generation station, plant or other generation-related facility
shall cease to be a "Generation Facility."
2.3.3 Addition. Upon Owner and Operator agreeing to the addition of a
generation station, plant or other generation-related facility to this
Agreement, such generation station, plant or other generation-related
facility shall be a "Generation Facility" and shall be subject to all of
the provisions of this Agreement.
2.4 Authority to Act as Agent for Owner and Right of Third Parties to Rely
on Agency. In the conduct of the authority vested in Operator in Sections 2.1
and 2.2 above, Owner hereby designates and authorizes Operator to act as its
attorney-in-fact and agent for such purposes, including, without limitation,
authority to enter into and administer contracts on behalf of Owner for
procurement of material, equipment or services and authority to administer
contracts entered into by Owner with respect to the Generation Facilities. As
relates to all third parties, the designation of Operator as agent shall be
binding on Owner. Operator accepts such appointment as agent of Owner. Upon
request from Operator, Owner shall provide written confirmation of this agency
relationship to third parties.
2.5 Assignment of Contracts; Liability and Allocation of Risks.
2.5.1 Contracts with Third Parties. Upon mutual agreement of Operator
and Owner, Owner shall assign and transfer to Operator those contracts with
third parties relating to the operation of each Generation Facility. Prior
to assignment and transfer of such contracts, Operator may request Owner to
appoint Operator as agent for administration of any such contracts. After
receipt of any such assignment, transfer or authorization to administer,
Operator shall have the exclusive responsibility for the administration and
enforcement thereof in accordance with the terms thereof.
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2.5.2 Acceptance of Contract Provisions. To the extent permitted
pursuant to Section 2.8, Operator in such contracts with third parties may
agree to such matters as limitations on the liability of contractors for
work performed or materials furnished, restrictions on warranties,
agreements to indemnify the contractors from liability, requirements that
Owner be bound by financial protection provisions, waivers, releases,
indemnifications, limitations of liability and further transfers or
assignments under such contracts, and other similar provisions (each
contract with a third party that contains any of the provisions, terms or
other effects described in this sentence, shall be referred to as a
"Material Contract"). Owner waives any claims against Operator for entering
into Material Contracts approved pursuant to the process provided in
Section 2.8. Owner also agrees to be bound by the requirements for
financial protection, waivers, releases, indemnification, limitation of
liability and further transfers or assignments that bind Operator as they
now exist in existing Material Contracts or as they may exist in the future
with respect to Material Contracts approved or entered into pursuant to
such process provided in Section 2.8.
2.5.3 Enforcement of Rights Under Contracts. Owner covenants that,
Owner will notify Operator in writing in advance if Owner intends to
threaten suit or bring suit against third parties or otherwise make any
claim under any contract or arrangement relating to any of the Generation
Facilities or Operating Services being provided by Operator. If Owner
desires for Operator to threaten or bring suit or otherwise to make any
claim, or desires that such action contemplated by Operator shall not be
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taken, Owner shall, by written notice to Operator, request it so to act or
refrain from acting. Upon Operator's receipt of a notice under one of the
previous two sentences, Owner and Operator shall arrange for consultation
within ten (10) working days thereafter on the questions raised, or such
lesser period of time as Operator or Owner shall specify in the light of
circumstances requiring a more expeditious determination. Neither Operator
nor Owner shall make its final determination whether it will or will not
bring any such suit or make any such claim until after such consultation;
however, the determination by Operator regarding the action that it will or
will not take, shall be final and binding (irrespective of what Owner
decides to do), and the decision of Owner regarding the action that it will
or will not take will also be final and binding (irrespective of what
Operator decides to do).
2.6 Cooperation of Owner. Subject to the requirements and procedures of
Sections 2.5.2 and 2.8, and in the case of New Investment Services Section 2.2.2
and as applicable Section 2.3.3, Owner agrees that it will take all necessary
action in a prompt manner to execute any agreements with respect to the
provision of Operation and Maintenance Services and Fuel Services for the
Generation Facilities, and New Investment Services, as and when requested by
Operator to permit Operator to carry out its authority and responsibilities
pursuant to this Article 2. Operator may request Owner to furnish services or
assistance, materials, supplies, licenses, offices and real property rights
including, without limitation, power supply services, transmission and
distribution system repair, replacement, construction and maintenance,
accounting services, maintenance personnel, security services, and other
personnel, services or assistance as Operator may require with respect to any
one or more Generation Facilities. Any such items which Owner agrees to furnish
to Operator shall be provided at cost.
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2.7 Operator Interface Procedure. Operator and Owner will jointly establish
and maintain an Operator Interface Procedure to govern the working relationships
between the two companies. The Operator Interface Procedure shall contain
procedures by which Owner can maintain an overview of Generation Facility
operations, procedures for administering this Operating Agreement through
designated executive points of contact, and procedures to define interfaces for
support services and assistance provided by Owner pursuant to Section 2.6
hereof.
2.8 Plans and Budgets. Strategic Plans, Fuel Plans, Operating Budgets,
Capital Budgets, Fuel Budgets and Material Contracts shall be submitted to Owner
by Operator as provided in Paragraphs 2.8.1 through 2.8.5 below. The contents of
these plans, budgets and Material Contracts shall conform to the requirements
and guidelines established pursuant to the Operator Interface Procedure. Owner
shall approve or disapprove each such plan, budget or Material Contract within
thirty (30) days after its submittal. In the event Owner disapproves a plan,
budget or Material Contract, Owner shall inform Operator of the basis for such
disapproval. Operator shall then modify such plan, budget or Material Contracts
as required to make it acceptable to Owner and shall resubmit it for approval;
provided, however, that in no event shall Operator be required to submit plans,
budgets or Material Contracts which would cause Operator to operate a Generation
Facility in violation of any Legal Requirements or in a manner that fails to
provide reasonable assurance of health and safety to employees. Operator shall
attempt to provide Operating Services in accordance with such approved plans and
within the aggregate annual amount of such budgets. Notwithstanding the
foregoing, Operator makes no representation, warranty or promise of any kind as
to accuracy of any such plan or budget, or that any attempt referred to in the
preceding sentence will be successful, and in no event shall Owner be relieved
of its responsibility to pay costs incurred by Operator as required in Article 4
hereof.
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2.8.1 Strategic Plan. A Strategic Plan for each Generating Facility shall
be submitted to Owner by Operator no later than July 1 of each year. Owner may
separately approve or disapprove individual projects which are classified as
planned improvement projects pursuant to Paragraph (d) below, but shall
otherwise approve or disapprove each Strategic Plan in its entirety. Strategic
Plans may cover one or more Generation Facilities. Each Strategic Plan shall
identify key assumptions to be used in the preparation of budgets and forecasts,
including:
(a) Five-year Operating and Planned Outage Schedule. This section
shall identify the scheduled operating cycles and planned outages for
maintenance and other work during the succeeding five years. The schedule
shall describe in reasonable detail the time and duration of each planned
outage and the maintenance and other work planned to be performed during
such outage.
(b) Availability and Performance Goals. This section shall contain
overall performance goals which have been established by Operator for the
Generation Facility for the current year.
(c) Planned Mandatory Projects. A mandatory project is any project
with a total estimated cost in excess of one million dollars ($1,000,000)
or such other amount as Owner may establish, including but not limited to
any upgrade, replacement, addition or program, which is needed in order to
support normal operations in accordance with Prudent Utility Practice or in
order to comply with regulatory or safety requirements. The associated
schedule and estimated annual funding requirements shall be included.
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(d) Planned Improvement Projects. An improvement project is any
project with a total estimated cost in excess of one million dollars
($1,000,000) or such other amount as Owner may establish, including but not
limited to any upgrade, replacement, addition, or program, which is not
mandatory as defined in (c) above. Examples of such projects include
efforts to improve performance of a Generation Facility or conditions, such
as improved Generation Facility capacity or efficiency, enhanced working
conditions, and appearance. The associated schedule and estimated annual
funding requirements shall be included.
(e) Authorized Level of Staffing. This section shall provide the
current authorized number of permanent staff positions which are assigned
to the Generation Facility and its offsite support. Such number of
positions shall be broken down by functional areas (e.g., operations,
maintenance, administrative, technical, corporate support), shall include
positions which are located either on-site or off-site, and shall include
all positions regardless of the actual employer. This section shall also
show any estimates of planned changes in such authorized number of
positions over the succeeding five years.
2.8.2 Fuel Plan. A five-year Fuel Plan for each Generation Facility shall
be submitted to Owner by September 15 of each year. Owner shall approve or
disapprove each Fuel Plan within thirty days after submittal. Each Fuel Plan
shall describe in reasonable detail plans for procurement and utilization of
fuel for the Generation Facility and information on disposal of waste products.
A Fuel Plan may cover one or more Generation Facilities.
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2.8.3 Operating Budget. By September 1 of each year, Operator shall submit
to Owner a written Operating Budget showing the estimated costs of operating and
maintaining Owner's Generation Facilities during the next calendar year, with a
forecast of budget requirements for the succeeding four calendar years. Each
budget shall be supported by detail reasonably adequate for the purpose of
review by Owner.
2.8.4 Capital Budget. By September 1 of each year, Operator shall submit to
Owner a written Capital Budget estimate of capital expenditures for each of
Owner's Generation Facilities for the next calendar year, with a forecast of
budget requirements for the succeeding four calendar years. Each budget shall be
supported by detail reasonably adequate for the purpose of review by Owner.
2.8.5 Fuel Budget. By September 15 of each year, Operator shall submit to
Owner a written Fuel Budget estimate of fuel expenditures for each of Owner's
Generation Facilities for the next calendar year, with a forecast of budget
requirements for the succeeding four calendar years. Each budget shall be
supported by detail reasonably adequate for the purpose of review by Owner.
2.8.6 Material Contracts. Reasonably in advance of the time it plans to
enter into a Material Contract with a third party, Operator shall submit to
Owner a draft of such Material Contract. Each draft Material Contract will be
supported with all attachments and sufficient information for Owner to evaluate
the provisions that render such draft a Material Contract.
2.9 Information and Reports. Operator shall furnish to Owner the following
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information and reports:
2.9.1 Generation Facility Data. At the time of submittal of each Strategic
Plan, Operator shall also furnish a comparison of the performance of each
Generation Facility with other generating facilities using performance
indicators in common use in the electric utility industry or as may be specified
by Owner.
2.9.2 Generation Facility Budget Reports. Operator shall furnish monthly
data showing actual costs for operation and maintenance, capital expenditures,
and direct fuel expenditures with comparisons to the respective budgets. This
report will normally be provided by the end of the succeeding month.
2.9.3 Generation Facility Strategic Plan Reports. At least quarterly,
Operator shall furnish data showing actual performance for each unit at each
Generation Facility compared to goals contained in the Strategic Plan for the
Generation Facility.
2.9.4 Audit Reports. Operator shall make available for review by Owner
copies of financial or accounting reports concerning Owner's Generation
Facilities containing the results of audits by or for Southern Company Services,
Inc., or any affiliate or subsidiary of The Southern Company, or by any
regulatory agency.
2.9.5 Correspondence to and from Regulatory Agencies. At the request of
Owner, Operator shall furnish to Owner copies of correspondence to and from
regulatory agencies concerning one or more of Owner's Generation Facilities.
2.9.6 Responses to Owner Inquiries. In addition to the obligation of
Operator to provide the information as explicitly required herein, Operator
shall respond to reasonable written or verbal requests from Owner for
information not otherwise specifically provided for herein.
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2.10 Plant Tours. Owner shall have the right to have its representatives
and guests visit its Generation Facilities, to tour the facilities, and observe
activities at the Generation Facilities; provided that such visits or tours will
not interfere with the operation of the Generation Facilities, or the security
or safety of such facilities. Owner shall assure that its representatives and
guests comply with all applicable rules and regulations in effect at a
Generation Facility whether imposed by Governmental Authority or by Operator.
2.11 Management Audit. Owner shall have the right to conduct a management
audit, at its own cost, of Operator's performance hereunder either by Owner
officers and employees or through their duly authorized agents or
representatives. Operator shall cooperate with Owner in the conducting of such
audit and, subject to applicable Legal Requirements and the requirements of
vendors, give Owner reasonable access to all contracts, records and other
documents relating to the Generating Facilities. Following any such management
audit, Operator shall respond to the findings of such audit if requested to do
so by Owner. Management audits by Owner shall be scheduled so as to minimize the
number of audits required and so as to not to exceed one management audit in any
consecutive twelve-month period.
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ARTICLE 3
Entitlement to Output
3.1 Entitlement to Output. Owner shall be entitled to all of the output
from its Generation Facilities at the time generation in such units occurs.
Subject to Operator's primary responsibility for safe operation of the
Generation Facilities, Owner shall have the right to schedule and dispatch the
capacity and energy needed from the facilities, and Operator shall use its best
efforts to honor such schedule.
3.2 Determination of Output-Responsibility for Station Service and Losses.
Output of each Generation Facility shall be the gross generation of the
facility, less station service requirements, and less adjustments for losses
experienced. Owner shall be responsible for providing all off-site electric
power required at the Generation Facility whenever the station service and
losses exceed the gross generation of the Generation Facility.
ARTICLE 4
Costs, Billing, Accounting and Audit
4.1......Cost of Operation and
Maintenance. Owner shall pay to Operator all direct costs incurred by Operator
relating to Operation and Maintenance Services for the Generation Facilities
(including all costs identified in Section 9.3 and any costs incurred by
Operator as a consequence of termination hereunder). Such costs shall include
all payments made to Operator employees (including payment of wages, salaries,
workmen's compensation and other benefits) relating to work performed by such
employees while on the premises of any of the Generation Facilities. Operator
and Owner acknowledge that all such payments made to Operator employees,
relating to work performed by such employees while on Generation Facility
premises, are effectively made by Owner, since Owner is responsible for such
payments and they are made from funds placed on deposit by Owner for those
purposes. Owner shall also pay to Operator the Generation Facility allocated
share of other of Operator's costs. Allocation of costs to Operation and
Maintenance Services shall be performed in accordance with the methodology
agreed-upon from time to time by Owner and Operator.
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4.2 New Investment Costs. Owner shall pay to Operator all costs incurred by
Operator relating to New Investment Services for the Generation Facilities,
including obligations incurred to third parties, direct costs of Operator
associated with such New Investment Services and the Generation Facilities'
allocated share of Operator's other costs associated with such activities.
Allocation of costs to New Investment Services shall be performed in accordance
with the methodology agreed-upon from time to time by Owner and Operator
pursuant to Section 4.1 hereof.
4.3 Fuel Costs. Owner shall pay to Operator all direct costs incurred by
Operator relating to Fuel Services for the Generation Facilities and the
Generation Facilities allocated share of other of Operator's costs. Allocation
of costs to Fuel Costs shall be performed in accordance with the methodology
agreed-upon from time to time by Owner and Operator pursuant to Section 4.1
hereof.
4.4 Other Costs Required by Legal Requirements. Owner shall pay to Operator
all direct costs incurred by Operator and the Generation Facilities' allocated
share of other of Operator's costs associated with any other activities of
Operator relative to the Generation Facilities that are required to meet Legal
Requirements.
4.5 Revision. Should Operator undertake to perform services for any other
affiliated company or for any non-affiliated company where the cost to Operator
of providing such services affects the cost of Operator to provide Operating
Services pursuant to this Agreement, Operator shall discuss the matter and reach
agreement with Owner respecting the need for or the terms of any amendment of
this Section 4 as may be appropriate to assure the continued fairness of the
determination of the responsibility for costs payable to Operator hereunder.
21
4.6 Billing. Operator shall render to Owner a monthly billing statement,
with detailed data in a computer readable form as reasonably requested by Owner,
no later than the fifth (5th) day of each month detailing costs incurred for
Operation and Maintenance Services during the preceding month pursuant to
Section 4.1; costs incurred for New Investment Services during the preceding
month pursuant to Section 4.2; costs incurred for Fuel Services during the
preceding month pursuant to Section 4.3; and the other costs incurred during the
preceding month pursuant to Section 4.4.
4.7 Payment. The obligation to make payments as specified herein shall
continue notwithstanding the capability (or lack of capability) of the
Generation Facilities to produce power for any reason.
4.8 General Accounting Matters. Determinations by Operator on all
accounting matters related to the transactions contemplated by this Agreement
will be in accordance with Generally Accepted Accounting Principles and the
Securities and Exchange Commission's Uniform System of Accounts for Mutual and
Subsidiary Service Companies, utilizing the accrual method of accounting, unless
otherwise specifically provided in this Agreement or mutually agreed by Operator
and Owner or as prescribed by other regulatory agencies having jurisdiction, as
in effect from time to time.
4.9 Right to Inspect Records. During normal business hours and subject to
conditions consistent with the conduct by Operator of its regular business
affairs and responsibilities, Operator will provide Owner or any auditor
utilized by Owner and reasonably acceptable to Operator, or any nationally
22
recognized accounting firm retained by Owner, access to Operator's books,
records, and other documents directly related to the performance of Operator's
obligations under this Agreement and, upon request, copies thereof, which
pertain to (a) costs applicable to Operation and Maintenance Services, New
Investment Services, Fuel Services, and Other Costs for Owner's Generation
Facilities to the extent necessary to enable Owner to verify the costs which
have been billed to Owner pursuant to the provisions of this Agreement; (b)
compliance with all environmental Legal Requirements; and (c) matters relating
to the design, construction and operation and retirement of Owner's Generation
Facilities in proceedings before any Governmental Authority.
4.10 Disputed Invoice. In the event Owner shall question any statement
rendered by Operator in accordance with the provisions of Section 4.1 hereof,
Owner shall nevertheless promptly pay amounts called for by Operator under
Section 4.1 hereof but such payment shall not be deemed to prevent Owner from
claiming an adjustment of any statement rendered.
ARTICLE 5
Advancement of Funds
5.1 Operator shall prepare forecasts, in such frequency, form and detail as
Owner shall direct, of the funds required to pay Operator's anticipated costs of
the services to be provided to Owner and the dates on which payment of such
costs shall become due. Owner shall advance funds to Operator in such amounts
and at such times determined on the basis of such forecasts, to enable Operator
to pay its costs of services on or before payment of such costs shall be due.
Such advances shall be made by deposits or bank transfers to accounts of
Operator with such financial institutions as Operator shall designate. Any
excess funds in such accounts shall be invested by Operator in accordance with
prudent cash management practices and all investment income and appreciation
received on such funds shall be credited against the cost of service provided to
Owner.
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ARTICLE 6
Taxes
6.1 Owner shall report, file returns with respect to, be
responsible for and pay all real property, franchise, business or other taxes,
except payroll and sales or use taxes, arising out of or relating to its
ownership of the Generation Facilities.
ARTICLE 7
Compliance with Provisions of Permits
and Requirements of Governmental Agencies
7.1 Owner and Operator shall cooperate in taking whatever action
may be necessary to comply with the terms and provisions of all permits and
licenses for the Generation Facilities and with all applicable lawful
requirements of any federal, state or local agency or regulatory body having
jurisdiction in or over the Generation Facilities.
ARTICLE 8
Confidentiality of Information
8.1 Each party to this Agreement may, from time to time, come into
possession of information of the other parties that is either confidential or
proprietary. Any party having any such information which is known to be
considered by any other party as either confidential or proprietary will not
reproduce, copy, use or disclose (except when required by a Governmental
Authority) any such information in whole or in part for any purpose without the
written consent of the other party. In disclosing confidential or proprietary
information to a Governmental Authority, the disclosing party shall cooperate
with the other party in minimizing the amount of such information furnished. At
the specific request of the other party, the disclosing party will endeavor to
secure the agreement of such Governmental Authority to maintain specified
portions of such information in confidence. Public dissemination of information
by the furnishing party before or after it is furnished shall constitute a
termination of the confidentiality requirement as to that specific information.
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ARTICLE 9
Damage to Persons or Property; Penalties; Fines
9.1 Applicability of Article. Since Operator is undertaking its
responsibilities hereunder (i) at cost and (ii) in order to assist Owner in
meeting its responsibilities with respect to its Generation Facilities, the
following provisions shall be applicable to loss or damage to the property of
any or all of the parties hereto (including Generation Facilities property) or
of third parties, or injuries to or loss of life by any person, including
employees of the parties hereto, and to penalties or fines assessed with respect
to the Generation Facilities:
9.2 Absence of Warranty. Operator does not warrant that its
performance of Operating Services will meet the standards set forth in Sections
2.1 and 2.2 hereof, and its sole obligation if it fails to meet such standards
is to reperform at the request of Owner the deficient work at cost payable by
Owner in a manner that complies with such standards. Owner acknowledges that
such services are not subject to any warranty of any nature, express or implied,
including, without limitation, any warranty of merchantability or fitness for a
particular purpose.
9.3 Liabilities to Third Parties and Owner. (a) To the fullest
extent provided by law, all liability to third parties other than liability for
Operator's Willful Misconduct (as defined in 9.4 below), fraud or gross
negligence whether arising in contract (including breach of warranty), tort
(including negligence, product liability, breach of fiduciary duty or any other
theory of tort liability), under the laws of real property or otherwise, or as a
result of fines or other penalties imposed by any Governmental Authority, that
25
results from or is in any way connected with the provision of Operation and
Maintenance Services, New Investment Services, or Fuel Services for the
Generation Facilities shall be borne by Owner in their entirety. Owner shall
indemnify and hold harmless Operator, its agents servants, directors, employees
and affiliates (the "Indemnified Parties") from and against any and all claims,
losses, damages, expenses and costs of any kind, including without limitation
attorneys fees, costs of investigation and court costs, other than those
attributable to Willful Misconduct, fraud or gross negligence of Operator,
whether direct or indirect, on account of or by reason of bodily injuries
(including death) to any person or persons or property damage arising out of or
occurring in connection with the provision of Operation and Maintenance
Services, New Investment Services, or Fuel Services for the Generation
Facilities, whether or not such claims, losses, damages, expenses or costs were
caused by or alleged to have been caused by or contributed to by the active,
passive, affirmative, sole or concurrent negligence or by breach of any
statutory or other duty (whether non-delegable or otherwise) of any of the
Indemnified Parties.
Except for consequences of Operator's Willful Misconduct or fraud,
Owner and its affiliates, servants, employees, agents and insurers hereby
release, acquit and forever discharge the Indemnified Parties, to the fullest
extent permitted by applicable law, from any and all damages, claims, causes of
action, damage to property of Owner or expenses of whatever kind or nature, that
are in any manner connected with the provision of any Operating Services or the
performance and prosecution of any project or work by any of the Indemnified
Parties for or on behalf of Owner for its Generation Facilities, whether arising
in tort (including negligence, strict liability, breach of fiduciary duty or any
other theory of tort liability), contract (including breach of warranty), under
the laws of real property or otherwise, or as a result of any fine or other
penalty imposed by any Governmental Authority. This release shall be effective
whether or not such claims, causes of action, damages, or expenses were caused
26
or alleged to have been caused by or contributed to by the active, passive,
affirmative, sole or concurrent negligence or by breach of any statutory or
other duty (whether non-delegable or otherwise) of any of the Indemnified
Parties.
9.4 Willful Misconduct. As used in this Agreement, the term
"Willful Misconduct" shall mean any act or omission by any of the Indemnified
Parties that is performed or omitted consciously with actual knowledge that such
conduct is likely to result in damage or injury to persons or property;
provided, however, that any such act or omission, if performed or omitted by an
Indemnified Party, shall not be deemed Willful Misconduct unless an officer or
employee of Operator at or above the officer level of Vice President or the
employee level of plant manager shall have expressly authorized such act or
omission. Operator shall exercise reasonable and customary supervision or
control over the activities of its agents, servants and employees, and its
affiliates, so as to minimize the potential for adverse willful actions by such
agents, servants or employees or affiliates; provided, however, that failure of
Operator to prevent such adverse willful actions shall not itself be considered
Willful Misconduct. Liability attributable to Operator's Willful Misconduct,
fraud or gross negligence shall be borne by Operator, subject to the limitations
of liability in Section 9.5 below and the last paragraph of Section 9.3 above in
the case of liability to Owner.
9.5 Limitation of Liability. Notwithstanding Sections 9.3 and 9.4
hereof, Owner agrees that in no event shall any of the Indemnified Parties be
liable to Owner for any indirect, special, punitive, incidental or consequential
damages including, without limitation, (1) loss of profits or revenues, (2)
damages suffered as a result of the loss of the use of Owner's power system,
Generation Facilities or equipment, (3) cost of purchase of replacement power
27
(including any differential in fuel or power costs), or (4) cost of capital with
respect to any claim based on or in any way connected with this Agreement
whether arising in contract (including breach of warranty), tort (including
negligence, strict liability, breach of fiduciary duty or any other theory of
tort liability), under the laws of real property or any other legal or equitable
theory of law, or as a result of any fine or other penalty imposed by any
Governmental Authority. Owner shall release, acquit, forever discharge,
indemnify, and hold harmless the Indemnified Parties from and against any claim
by any customer of Owner, or any other third party, for any direct, indirect,
special, punitive, incidental or consequential damages arising out of any
performance or failure to perform under this Agreement. The provisions of this
Section 9.5 shall apply to the fullest extent permitted by law.
9.6 Severability. In the event that any particular application of
any of the limitations of liability contained in this Article 9 should be
finally adjudicated to be void as a violation of the public policy of the State
of Alabama, then such limitation of liability shall not apply with respect to
such application to the extent (but only to the extent) required in order for
such limitation of liability not to be void as a violation of such public
policy, and such limitations of liability shall remain in full force and effect
with respect to all other applications to the fullest extent permitted by law.
ARTICLE 10
Insurance
10.1 Parties' Obligations Generally. During the term of this
Agreement, Owner and Operator shall make reasonable efforts to procure and
maintain in force such physical damage and loss, public liability, worker's
compensation, officers' liability and other insurance as Owner may deem
appropriate with respect to all losses, damages, liability and claims arising
28
out of Owner's ownership of its Generation Facilities and Operator's operation
thereof and the provision of Operating Services hereunder. All such insurance
policies shall identify Operator and Owner as additional insureds thereunder as
their interests may appear, and shall contain a waiver of subrogation clause in
favor of Operator and Owner to the extent of the applicable limits of such
policies. The aggregate cost of all insurance, applicable to each Generation
Facility and procured by Operator pursuant to this Agreement, and any payment by
Operator of any deductible, self-insured retention, or co-payment in connection
with any policy claim arising out of Operator's performance of this Agreement
shall be included in the costs of Operating Services. Operator will take steps
to meet the requirements of such insurance policies and cooperate with Owner to
furnish information, establish procedures, erect or change physical facilities
and otherwise meet the requirements of the insurers to maintain coverage in
effect and to collect claims that may be made under such insurance. In the event
that any of the insurance described in this Article 10 is canceled by a party,
that party shall give written notice of such cancellation to the other party at
least sixty (60) days prior to the effective date of such cancellation.
10.2 Commercial Liability Insurance. Operator will carry insurance
to cover the legal obligations to pay damages because of bodily injury or
property damage. The limits and deductibles of such coverage shall be as
mutually agreed by Operator and Owner.
10.3 Workmen's Compensation Insurance. Operator shall qualify as a
self-insurer in Alabama and with the U.S. Department of Labor for purposes of
the U.S. Longshoreman's and Harbor Worker's Act, but will provide an umbrella
policy to cover benefits in excess of its assumed liability for workmen's
compensation, the Longshoreman's and Harbor Worker's Act, and employers
liability. Owner and Operator acknowledge that, pursuant to the terms of this
29
Agreement, all premiums for Operator's workmen's compensation insurance and all
payments to Operator employees, including workmen's compensation benefits,
relating to work performed by such employees while on the premises of a
Generation Facility, are effectively made by the Owner, since such premiums and
payments constitute direct charges incurred by Operator in relation to the
performance of Operating Services for such Generation Facility. It is the intent
of Owner and Operator that for purposes of workmen's compensation Owner not be
exposed to greater liability by virtue of this Agreement than Owner would have
if Owner had utilized Owner employees to perform Operating Services. If Operator
and Owner agree, as an alternative, the parties can purchase any such insurance.
10.4 Additional Insurance. In the event Owner at any time or from
time to time shall have elected to participate in supplemental insurance
programs to cover other risks arising from the ownership and operation of a
Generation Facility, including the extra costs of replacement power, the costs
of such protection shall be borne by Owner.
10.5 Waiver of Subrogation - Allocation and Payment of Premium.
Each insurance policy obtained by a party hereto shall contain waivers of
subrogation against the other party, if obtainable from the insurer. The
aggregate cost of all insurance, applicable to the Generation Facilities and
procured by Operator pursuant to this Agreement, shall be considered an
operating cost subject to reimbursement under Section 4.1. In the event that any
of the foregoing insurance policies is canceled by a party, that party shall
give written notice of such cancellation to the other party sixty (60) days
prior to the effective date of such cancellation.
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ARTICLE 11
Term
11.1 Term. The term of this Agreement shall commence on the
Effective Date, subject nevertheless to any applicable rules, regulations or
approvals of any regulatory authority whose approval is required. This Agreement
shall expire (i) when all Generation Facilities have been retired and each site
has been returned to a condition acceptable to Owner, all in compliance with
Legal Requirements; (ii) upon termination pursuant to Section 12.1; or (c) upon
mutual agreement of the parties. Owner's obligation to make payments to Operator
under this Agreement that have not been satisfied prior to the expiration of the
term of this Agreement shall survive such expiration of the term.
.. 11.1.1 It is recognized in the case of expiration under
Sections 11.1(i) or 11.1(iii), however, that this Agreement shall not
expire, unless all necessary regulatory approvals, if any, have been
obtained to transfer the operating responsibility for all Generation
Facilities to Owner or Owner's designee. Until the date on which such
transfer of operating responsibility is accomplished, or as Owner may
otherwise notify Operator in writing, Operator agrees to continue to
provide Operating Services for the Generation Facilities.
ARTICLE 12
Remedies
12.1 Termination. In the event Owner determines that it is in its
interest to do so, or Operator determines that it is in Operator's
interest to do so, either Operator or Owner may at will terminate this
Agreement as provided below. Except as may be otherwise provided in
Section 11.1, this Section 12.1 and Article 9 hereof, this right of
termination shall be Owner's sole and exclusive remedy, legal or
equitable, for any failure by Operator at any time to perform its
duties, responsibilities, obligations, or functions under this
31
Agreement, or for any other breach by Operator of this Agreement.
The procedure for exercise of this right of termination shall be as
follows:
12.1.1 Owner shall give written notice to Operator of Owner's
determination to terminate this Agreement or Operator shall give
written notice to Owner of its determination to terminate this
Agreement.
12.1.2 Following the giving of such notice, the parties agree
to cooperate, in good faith, to accomplish the transfer of operating
responsibility in a prompt manner, including without limitation
assigning contracts, transferring employees, and modifying licenses,
approvals and permits as necessary to reflect such change (including,
if required to effectuate transfer to Owner for regulatory purposes of
the operating responsibility for the Generation Facilities).
12.1.3 It is recognized that no termination shall be
accomplished until all necessary regulatory approvals, if any, have
been obtained to transfer the operating responsibility for all
Generation Facilities to Owner or Owner's designee. During the period
between the giving of the notice of determination to terminate, and the
date on which such transfer of operating responsibility is
accomplished, Operator agrees to continue the provision of Operating
Services for the Generation Facilities.
12.1.4 Upon receipt of all necessary governmental
authorization for transfer of operating responsibility for each
Generation Facility from Operator to Owner or Owner's designee, this
Agreement shall terminate. Except as may otherwise be provided in
Section 11.1 and this Section 12.1 and except for the consequences of
Operator's Willful Misconduct, fraud or gross negligence and the other
limitations provided in Article 9 hereof, Owner hereby agrees that from
32
and after such termination Owner shall indemnify and forever hold
Operator, its servants, directors, employees, affiliates and its agents
harmless from and against any and all liability, costs, expenses
(including reasonable attorneys' fees) and judgments, which may
thereafter be experienced by Operator, which are in any way related to,
arise out of or are in connection with the activities of Operator, its
agents, servants, directors, employees and affiliates under this
Agreement (whether the cause occurred before or after termination).
Except as may otherwise be provided in Section 11.1 and this Section
12.1 and except for the consequences of Operator's Willful Misconduct
or fraud and the other limitations provided in Article 9 hereof, Owner
further waives any claim Owner may have against Operator, its officers,
directors, employees, affiliates and agents for damage to property of
Owner, that arose out of or in connection with the activities of
Operator, its officers, directors, employees, affiliates and agents
under this Agreement. The indemnification and waiver contained herein
shall survive termination and shall be specifically enforceable by
Operator against Owner.
ARTICLE 13
Miscellaneous
13.1 No Partnership or Joint Venture. Nothing in this Agreement
shall be deemed to create or constitute a partnership, joint venture or
association among the parties hereto or any of them, the sole purpose of this
Agreement being limited to providing for the orderly and efficient operation,
maintenance, repair, upgrade, rehabilitation, renewal, replacement, additions
and construction of the Generation Facilities.
13.2 Owner's Designated Representatives. Owner hereby designates
its President as Owner's Representative, who shall receive notices and
33
communications from Operator under the provisions of this Agreement and who
shall send to the designated Representative of Operator all notices and
communications under the provisions of this Agreement.
13.3 Operator's Designated Representative, Operator hereby
designates its President as the Operator Representative, who shall receive
notices and communications from Owner's Representative under the provisions of
this Agreement and who shall send to Owner's Representative all notices and
communications concerning the provisions of this Agreement.
13.4 Depreciation. Owner shall determine the basis and method it
will use for purposes of depreciation and other matters where investment in
Generation Facilities property is relevant.
13.5 Holidays, Business Days. Any obligations to perform under this
Agreement, including payment obligations, which shall become due on a
non-business day shall become due upon the next business day. The term "business
day" shall mean any day other than a day on which banking institutions in the
City of Birmingham, Alabama are authorized by law to close.
13.6 Owner's Services to be Furnished at Cost. To the extent that
Owner may, from time to time, provide goods or services to Operator, Operator
shall pay for such goods and services at Owner's cost determined as herein
provided, which payments shall thereupon be treated as Generation Facilities
costs under Article 4.
13.7 Entire Agreement. This Agreement constitutes the entire
understanding among the parties hereto, superseding any and all previous
understandings, oral or written, pertaining to the subject matter contained
herein. No party hereto has relied or will rely upon any verbal or written
representation or verbal or written information made or given to such party by
any representative of the other party or anyone on its behalf.
34
13.8 Amendments. This Agreement may not be amended, modified, or
terminated, nor may any obligation hereunder be waived verbally, and no such
amendment, modification, termination or waiver shall be effective for any
purpose unless it is in writing, and signed by both parties hereto, and all
necessary regulatory approvals have been obtained.
13.9 Notices. Any notice, request, consent or other communication
permitted or required by this Agreement shall be in writing and shall be deemed
given when deposited in the United States Mail, first class postage prepaid, and
addressed as follows:
If to Operator: Alabama Power Company
000 Xxxxx 00xx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: President
If to Owner: Southern Power Company
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: President
Unless a different officer or address shall have been designated by the
respective party by notice in writing.
13.10....Captions. The descriptive captions of the various Articles,
Sections and Paragraphs of this Agreement have been inserted for convenience of
reference only and shall in no way modify or restrict any of the terms and
provisions hereof.
13.11....Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
13.12....No Waiver. Failure of any party to enforce any rights or to
require performance of any other party of any of the provisions of this
Agreement shall not release any party of any of its obligations under this
35
Agreement and shall not be deemed a waiver of any rights of the parties to
insist on performance thereof, or of any of the parties' rights or remedies
hereunder, and in no way shall affect the validity of these terms and conditions
or any part thereof, or the right of any party thereafter to enforce every
provision hereof.
13.13 Singular and Plural. Throughout this Agreement, whenever any
word in the singular number is used, it shall include the plural unless the
context otherwise requires; and whenever the plural number is used, it shall
include the singular unless the context otherwise requires.
13.14 Third Party Beneficiaries. This Agreement is for the benefit
of Owner and Operator, and no person or entity other than Owner and Operator is
or shall be entitled to bring any action to enforce any provision of this
Agreement against anyone.
13.15 Severability. Should any provision of this Agreement be held
to be invalid or unenforceable by a court of competent jurisdiction, the
remaining provisions shall remain in full force and effect, provided that
deletion of the invalid or unenforceable provision does not materially affect
the agreement of the parties contained herein.
ARTICLE 14
Successors and Assigns
14.1 This Agreement and all of the terms and conditions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that neither this
Agreement nor any of Operator's obligations hereunder shall be assignable by
Operator, in whole or in part, without the express written consent of Owner. Any
mortgage indenture trustee which shall foreclose on substantially all of the
electric generation properties of Owner may, at such trustee's own election, be
deemed to be a successor and assign of Owner under this Agreement.
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ARTICLE 15
Governing Law
15.1 This Agreement shall be construed in accordance with, and to
be governed by, the laws of the State of Alabama.
[Signatures on following page]
37
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and by their duly authorized representatives as of the day and year
first above written.
"Operator"
ALABAMA POWER COMPANY
By: _________________________________
Xxxxxxx X. Xxxxxxxx, III
Executive Vice President and CFO
"Owner"
SOUTHERN POWER COMPANY
By: __________________________________
X.X. Xxxxxxx
Vice President, Comptroller and
Chief Financial Officer
38
SCHEDULE 1
SOUTHERN POWER COMPANY GENERATION FACILITIES
GENERATING STATION LOCATION
Autaugaville 1 and 2 Autauga County, Alabama
39
