D R A F T 9-8-99
FACILITIES LEASE AGREEMENT
BETWEEN
ALLEGHENY ENERGY SUPPLY COMPANY
and
WEST PENN POWER COMPANY
TABLE OF CONTENTS
Page
ARTICLE I
Definitions 2
ARTICLE II
Effective Date 3
ARTICLE III
Lease of Generating Facilities 4
ARTICLE IV
Operation and Maintenance of Leased Facilities 5
ARTICLE V
Assignment of Existing Contracts 7
ARTICLE VI
Generating Resource Responsibilities of APC 8
ARTICLE VII
Operating Committee 11
ARTICLE VIII
Term of Lease 11
ARTICLE IX
Compensation for Lease and Assignment of Generation 12
ARTICLE X
Taxes 14
ARTICLE XI
Stranded Cost Recovery 15
ARTICLE XII
Insurance 15
ARTICLE XIII
Amendment of Prior Agreements 15
ARTICLE XIV
Exchange of Information/Right of Inspection 16
TABLE OF CONTENTS (cont'd.)
Page
ARTICLE XV
Settlements 16
ARTICLE XVI
Indemnity 17
ARTICLE XVII
Force Majeure 18
ARTICLE XVIII
Conditions Precedent 20
ARTICLE XIX
Liens 21
ARTICLE XX
Successors and Assigns 21
ARTICLE XXI
Miscellaneous 21
ARTICLE XXII
Indenture Provisions 23
ARTICLE XXIII
Dispute Resolution Procedures 24
APPENDIX A
Leased Properties
APPENDIX B
List of Joint Operating Agreements
APPENDIX C
Power Sales Agreements
FACILITIES LEASE AGREEMENT
THIS LEASE made and entered into this ____ day of
_____________, 1999, between Allegheny Energy Supply Company
(a ________ corporation) ("AESC" or "Lessor"), and West Penn
Power Company (a Pennsylvania corporation) ("West Penn" or
"Lessee"), and being hereinafter individually referred to as
Party and collectively referred to as Parties.
W I T N E S S E T H:
WHEREAS, the common stock of each Party is wholly
owned by Allegheny Energy, Inc., a Maryland corporation; and
WHEREAS, the Parties desire to accommodate safe
and reliable electric generation operations for the public
in the transition from a regulated to a deregulated
environment during which time West Penn will maintain an
obligation under Pennsylvania law to serve a portion of its
customer base with generation service; and
WHEREAS, subject to the terms of this Lease, AESC
desires to lease designated generating assets to West Penn,
and to assign its rights to certain other generation
resources to West Penn, subject to certain conditions as
more fully described herein;
NOW THEREFORE, in consideration of the covenants
and premises herein set forth, and intending to be legally
bound, the Parties mutually agree as follows:
ARTICLE I
Definitions
For the purpose of this Lease, the following terms
shall have the following meanings:
1.1 Emission Allowances: The cost of sulfur dioxide and
nitrous oxide emissions allowances purchased by the
Transmission Provider ("TP"), if any, as calculated
with compensation or transfer of allowances in
accordance with the FERC's Rules and Regulations.
1.2 Federal Energy Regulatory Commission ("FERC" or
"Commission"): The current Federal Energy Regulatory
Commission or successor agency.
1.3 Good Utility Practice: Any of the practices, methods
and acts engaged in or approved by a significant
portion of the electric utility industry during the
relevant time period, including national and regional
standards set by North American Electric Reliability
Council ("NERC") or any successor organization, or any
of the practices, methods and acts which, in the
exercise of reasonable judgment in light of the facts
known at the time the decision was made, could have
been expected to accomplish the desired result at a
reasonable cost consistent with good business
practices, reliability, safety and expedition. Good
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 acceptable practices,
methods, or acts generally accepted in the region.
Good Utility Practices shall include applicable local,
regional and national reliability standards including
those established by NERC or any successor
organization.
1.4 Indenture: Shall mean the Purchase Money Mortgage
dated ______________ between AESC and
___________________.
1.5 Local Distribution Utilities ("LDU's"): West Penn and
any other subsidiary existing or hereafter created
under or as an affiliate of Allegheny Energy, Inc.,
which performs the functions of a local electric
distribution utility and leases facilities hereunder.
1.6 Regulated Loads: As defined under Pennsylvania law,
and under Pennsylvania Public Utility Commission Order
interpreting the law in West Penn's restructuring
proceeding at PaPUC Docket No. A-00973981, the electric
load of the West Penn consisting of retail customers
who do not have the legal right to choose their
generation supplier and customers.
1.7 Regulatory Contingencies: The conditions precedent set
forth in Article XVIII of this Lease.
ARTICLE II
Effective Date
2.1 This Lease shall become effective on
_____________________ or such later date as may be
required by competent regulatory authority having
jurisdiction over this Lease.
ARTICLE III
Lease Of Generating Facilities
3.1 In consideration of the mutual covenants and agreements
contained in this Lease, and other good and valuable
consideration, AESC hereby leases to West Penn, and
West Penn leases from AESC, a portion of its generating
facilities as follows:
3.1.1 AESC hereby leases to West Penn 1/3 of each
of the generating facilities more fully described
on Appendix A hereto, subject in all respects to
the requirements of the Indenture. The
description of facilities being leased contained
on Appendix A is intended to and shall exclude
facilities booked to transmission and distribution
under FERC's Uniform System of Accounts. This
Lease may be amended from time to time to remove
generating facilities, in whole or in part, in the
event that additional customers served by West
Penn obtain a legal right to choose their
generation supplier, or in the event that
additional generation is no longer required to
serve bundled retail customers or otherwise
removed from obligations under Pennsylvania law or
regulatory order.
3.2 During the term of this Lease, West Penn shall have the
exclusive right to operate and utilize the output of
the leased generating facilities, including the right
to dispatch, sell, transfer, or otherwise dedicate the
output of such generation resources, including both
capacity and energy, to or for the benefit of any
entity.
3.3 Title to the generating facilities which are subject to
this Lease shall at all times remain with AESC. West
Penn shall have no right, title, or interest in such
generating facilities, except to the extent expressly
set forth in this Lease.
3.4 Upon termination of this Lease, the leased generating
facilities, including certain capital additions made
during the term of this Lease, subject to the terms of
this Lease, shall revert to AESC.
3.5 Subject to the provisions of this Lease, West Penn
shall have the unlimited right to use the leased
generating facilities to serve its Regulated Loads.
3.6 The Parties agree that it is the understanding and
intention of the Parties that this Lease is to be
classified as an operating lease agreement. To the
extent that, by law or regulation, this Lease cannot be
classified as an operating lease agreement, the Parties
agree to negotiate in good faith to effect mutually
agreed upon changes necessary to classify this Lease as
an operating lease agreement.
ARTICLE IV
Operation and Maintenance of Leased Facilities
4.1 West Penn shall maintain the leased generating
facilities pursuant to the terms of this Lease. West
Penn shall have the right to utilize the services of
third parties, or parties hereto, in connection with its
obligations and rights under this Lease.
4.2 West Penn shall perform the operation and maintenance
obligations specified in this Lease in a good and
workmanlike manner in accordance with Good Utility
Practice and in compliance with all applicable laws,
rules and regulations.
4.3 West Penn shall perform, or cause to be performed,
operation and maintenance services, which shall
include, but not be limited to, the furnishing of all
materials, equipment, services, supplies and labor
necessary for the operation, inspection, surveillance,
monitoring and repair of the generation facilities
leased pursuant to this Lease.
4.4 West Penn shall perform, or cause to be performed,
emergency operation and maintenance services, which
shall include, but not be limited to, those services
performed in case of explosion, fire, storm, sudden
emergencies, sabotage, or any unscheduled major
interruption of the operation of the generation
facilities leased pursuant to the terms of this Lease.
Prior to the performance of such services, the
Operating Committee, set forth in Article VII below,
may upon mutual agreement, retire or place in cold
storage, in whole or in part, a generating facility
affected by an emergency as contemplated by this
Section, provided that alternate arrangements are made
to satisfy West Penn's obligations to its Regulated
Load.
4.5 Except as limited by Section 4.4 above, West Penn shall
have the sole right and discretion to determine and
perform the operation and maintenance activities set
forth in this Article IV and for those capital
additions for which it assumes financial
responsibility, and the timing of such activities and
additions. West Penn shall not exercise its discretion
under this Article IV in a fashion which impairs AESC's
ability to effectively run its generating facilities.
ARTICLE V
Assignment Of Existing Contracts
5.1 Existing Joint Ownership and Operating Agreements:
AESC hereby grants and assigns to West Penn a
proportional share of the dispatch rights, and all
rights to output, of both capacity and energy, given to
AESC under each of the Joint Ownership and Operating
Agreements listed on Appendix B hereto. AESC hereby
grants and assigns to West Penn proportionate rights,
to the extent AESC has such rights, to purchase, and
utilize the output, both capacity and energy, of the
Bath County Generating Plant ("AGC Agreement").
5.2 Purchase Power and Power Sales Agreements: AESC hereby
grants and assigns to West Penn proportionate rights,
to the extent each of them has such rights, to operate,
dispatch, and utilize the capacity and energy purchase
and exchange rights under the Purchase Power and Power
Sale Agreements listed in Appendix C.
5.3 Emission Allowances: Within ten (10) working days of
the end of each calendar month, AESC shall transfer to
West Penn 1) the amount of SO2 allowances required by
West Penn to produce energy by West Penn derived from
the leased facilities to service its Regulated Load for
the calendar month just ended and 1/3 of the NOx
allowances granted to these facilties, and 2) an
appropriate amount of allowances, to allow West Penn to
make sufficient non-affiliated sales under the Power
Supply Agreement between Monongahela Power, Potomac
Edison and West Penn, dated 1982, to support its
obligations thereunder.
5.4 Fuel Procurement Contracts and Inventories: AESC
hereby grants to West Penn the right to use fuel
inventories existing as of the effective date of this
Lease as needed to supply power for its Regulated Load;
provided that upon termination of this Lease, West Penn
shall return similar inventories. Fuel inventories
shall be measured in British Thermal Unit per unit
capability.
ARTICLE VI
Generating Resource Responsibilities of West Penn
6.1 Operating Control: Except as hereinafter set forth,
West Penn shall have operating control of the
generation resources leased from AESC under Article III
or assigned under Article V. West Penn shall operate
those resources at its own cost and expense, and shall
maintain, or cause to be maintained, each generating
resource so as to keep it in similar operating
condition as it was when it first became subject to
this Lease, ordinary wear and tear excepted. West Penn
shall replace all parts of any generating resource that
become unfit for use with appropriate replacement
parts.
West Penn shall not, without the prior written consent
of the Operating Committee defined in Section 7.1,
alter any generating resource, or affix or install any
accessories or devices on any generating resource, if
the same shall impair the originally intended function
or use of such generating resource or shall diminish
its commercial value. Any and all unseverable
additions to and improvements of any generating
resource, and any and all parts installed on and
additions and replacements made to any generating
resource, shall constitute accessions to such
generating resource and ownership thereof, free from
any lien, charge, security interest or encumbrance
shall immediately be vested in Lessor.
6.2 Operating Costs: West Penn shall be responsible for
the payment, from its own funds, of such operating and
non-capital maintenance expenses, including all fuel
contracts and the acquisition of necessary additional
emission allowances as required beyond those granted in
Section 5.4 above, as it incurs in its sole judgment
for the purpose of efficiently operating the leased
generation resources. West Penn shall be responsible
for payment, from its funds, of amounts due and payable
for the exercise of all purchase rights, both capacity
and energy, under the contracts referred to in Article
V above. It is recognized that AESC currently has in
place various fuel procurement contracts which must be
taken account of by West Penn in determining whether
and the extent to which West Penn will incur additional
fuel expenses. AESC shall remain responsible for
compliance with all terms of their currently existing
fuel contracts, including payment obligations, unless
such contracts are assigned to West Penn. Recognizing
the existence of such contracts, West Penn may incur
the cost of such additional fuel over and above the
current fuel inventory and fuel required to be
purchased under existing contracts and may incur all
other necessary operating expenses which it determines
in its sole judgment to be appropriate to efficiently
operate the generation resources leased from AESC.
6.3 Fixed Costs: AESC will remain responsible for the
fixed cost and fixed payment obligations associated
with the various contracts referred to in Article V
above. It is the intent of the parties to this Lease
that the payments for lease and transfer of rights to
generation in this Lease shall be sufficient to cover
all fixed payment obligations which AESC retains as a
result of its ownership of generating units and/or its
obligations under the various contracts referred to in
Article V. It is further the intent of the parties to
this Lease that the obligation to pay operating costs
incurred under each of these agreements shall be
transferred to and become the responsibility of West
Penn.
6.4 Capital Additions, Retirements or Re-Rates: All
capital additions made at the discretion of the
Operating Committee shall be paid for by AESC and shall
be the property of AESC upon the termination of this
Lease. Unseverable capital additions unilaterally
initiated and financed by West Penn shall also become
the property of the AESC upon termination of this
Lease. The Operating Committee may decide to
permanently re-rate any of the leased generation
resources. Following the permanent rerate of leased
generating facilities, Lease payments shall be adjusted
as necessary.
ARTICLE VII
Operating Committee
7.1 An Operating Committee shall be established to carry
out and coordinate the provisions of this Lease. Said
Operating Committee shall consist of one representative
from each Party as designated in writing. Any Party
may change its designated representative by notifying
the other Parties in writing.
ARTICLE VIII
Term of Lease
8.1 Effective Date: This Lease shall become effective on
_________________________, however, if the Conditions
Precedent set forth in Article XVIII have not been
satisfied on or before __________________________, this
Lease shall become null and void and of no effect.
8.2 Initial Term: This Lease shall continue in full force
and effect from the effective date set forth in Section
8.1 until January 2, 2000. This Initial Term may be
modified upon mutual agreement of all Parties to this
Lease.
8.3 Termination: This Lease is also subject to termination
or modification to the extent that performance
hereunder may conflict with any applicable provision of
law or with any rule, regulation or order of any
regulatory agency having jurisdiction, whether adopted
before or after the making of this Lease. This Lease
may be subject to termination or modification in the
event any state or federal regulatory or legislative
body should adopt a plan requiring retail customer
choice for electricity that results in a termination or
material modification of the Lease.
8.4 Default Events: In the event either Party shall (a)
make an assignment or any general arrangement for the
benefit of creditors; (b) default in the payment or
performance of its obligations to another Party under
this Lease (which shall not include a delay in
performance or payment that is cured within two (2)
business days (as used herein, business day shall mean
any day on which Federal Reserve member banks in New
York are open for business) of a demand for corrective
action); (c) file a petition or otherwise commence,
authorize or acquiesce in the commencement of a
proceeding or cause under any bankruptcy or similar law
for the protection of creditors or have such petition
filed or proceeding commenced against it; (d) otherwise
become bankrupt or insolvent (however evidenced); (e)
be unable to pay its debts as they fall due; or (f)
fail to give adequate security for or assurance of its
ability to perform its further obligations under this
Lease within two business days of a reasonable request
by another Party, then the performing Party shall have
the right to terminate this Lease without prior notice,
in addition to any and all other remedies available
hereunder or pursuant to law. Notice of termination
shall be given within one business day, unless
otherwise provided for herein.
ARTICLE IX
Compensation For Lease And Assignment Of Generation
9.1 As compensation for the foregoing rights to the leased
and assigned generation resources, including the
exclusive right to utilize the output of generation
resources and all purchase rights as described therein,
West Penn agrees to pay AESC $5,030,000 per month. The
Parties recognize and agree that the foregoing payments
to AESC are intended to cover depreciation, property
tax, property insurance, income tax, interest return on
all leased and assigned assets, and a regulated equity
return on those portions of the assets subject to this
Lease which remain subject to rate base regulation.
9.2 Billing and Payments: Monthly payments equivalent to
1/12 of the above annual amounts shall be made by [wire
transfer] on or before the 15th day of the following
month. The initial payments under this Lease shall be
made on or before the 15th day of the month immediately
following the month in which the effective date occurs
and shall be prorated to cover the portion of the month
in which the effective date occurs for which this Lease
is in effect.
9.3 Automatic Adjustment for Environmental Capital
Additions: Parties to this Lease shall not be prevented
from filing changes with the FERC if any federal, state
or local legislative body, judicial authority, or
administrative agency, including the FERC, orders any
new, or changes any existing, statutes, regulations,
regulatory policies, interpretations, or changes
preexisting programs or procedures directly resulting
in costs, savings, expenses or requiring of AESC a
change in compensation not otherwise provided for in
this Lease for environmental capital additions.
9.4 Automatic Adjustment for Tax Changes: An adjustment
for tax changes shall apply to the compensation for
this Lease. Rates to be adjusted, as required, by
including an automatic pass-through of changes in
federal, state, or local taxes or tax rates by
providing an automatic adjustment of all taxes included
in the Lease, upward or downward, based on actual tax
expense incurred by AESC.
9.5 Regulatory Approved Changes: Nothing contained herein
shall be construed as affecting in any way the right of
AESC individually or jointly, to unilaterally make
application to the FERC for a change in rates under
Sections 205 or 206 of the Federal Power Act and
pursuant to FERC's Rules and Regulations promulgated
thereunder.
ARTICLE X
Taxes
10.1 AESC shall remain responsible for paying all property
related taxes, including but not limited to state and
local ad valorem taxes, levied on the facilities leased
pursuant to this Lease. The Parties shall be
responsible for gross receipts taxes associated with
the sales, if any, which each of them makes to ultimate
consumers of electricity. The Parties hereby commit
that they will not impair or encumber the leased
property, by incurring any lien on such leased property
arising by failure to pay taxes or other lawful debts.
ARTICLE XI
Stranded Cost Recovery
11.1 This Lease does not in any way affect the right of any
Party to seek and recover stranded cost recovery.
ARTICLE XII
Insurance
12.1 AESC will maintain existing levels of property, boiler,
machinery and liability insurance coverage on the
leased properties described in Appendix A.
ARTICLE XIII
Amendment Of Prior Agreements
13.1 Existing Ownership and Operating Agreements: This Lease
shall constitute an amendment of each of the Joint
Ownership and Operating Agreements listed on Appendix
B. Each such Lease is hereby amended to eliminate the
sections of such agreements identified on Appendix B
and substitute for such eliminated sections the
provisions contained in this Lease. AESC is
responsible for obtaining approvals necessary to amend
all relevant agreements affected by this Lease and to
which AESC is a party or a successor or assignor
thereof. The consent of all affected parties to such
amendments shall be evidenced by a separate amendment
executed by all parties to the agreements, indicating
consent to said amendments, and executed
contemporaneously herewith. The rights and obligations
to the capacity and energy accruing to AESC under said
contract are proportionally granted and assigned to
West Penn under Article V above.
ARTICLE XIV
Exchange of Information/Right of Inspection
14.1 Records and Accounts: All records and accounts
pertaining to services hereunder shall be available to
any Party for audit and review at all reasonable times.
14.2 Right of Inspection: AESC shall have the right at any
reasonable time to enter the premises where the leased
generating facilities are located and shall be given
free access to inspect the facilities.
14.3 Standards of Conduct: Services and related exchanges
of information remain subject to any relevant standards
of conduct imposed by state and/or federal regulatory
authorities.
ARTICLE XV
Settlements
15.1 Accounting Period: The accounting period for
transactions hereunder shall be one month, which,
unless otherwise specified by the Operating Committee,
shall be a calendar month.
15.2 Disputed Bills: In case a portion of any ▇▇▇▇ is in
dispute, the undisputed amount shall be paid when due,
and the remainder, if any, shall be paid promptly after
determination of the correct amount. Interest on
unpaid amounts shall accrue daily at the then current
prime interest rate (or comparable rate) from the due
date of such unpaid amount until the date paid.
ARTICLE XVI
Indemnity
16.1 Each Party will indemnify and save harmless each other
Party from all claims, liability, and expense arising
out of any bodily injury, death, or damage to property
caused by negligence of a Party thereto (other than
those caused by the gross negligence of such other
Party or its employees, agents, or servants) occurring
in or about facilities owned by it and used for the
purposes of this Lease, except that each Party shall be
responsible for all claims of its own employees,
agents, and servants under any workmen's compensation
or similar law. This Indemnity obligation shall
survive termination of this Lease.
16.2 AESC hereby agrees to indemnify and save harmless West
Penn from all claims, liability and expense arising out
of any preexisting but not yet identified environmental
related claim or liability arising in whole or in part
from the operation of the generating facilities which
are the subject of this Lease. This indemnification
shall include but not be limited to any future
discovered environmental costs associated with removal
of any previously deposited hazardous materials
resulting from the operation of the referenced
generating units.
16.3 It is understood that during the term of this Lease,
West Penn is solely responsible for compliance with all
environmental laws and regulations, and West Penn
hereby agrees to indemnify and save harmless AESC for
any environmental claim or liability which results from
West Penn's failure to comply with such environmental
laws or regulations regarding facilities subject to
this Lease.
16.4 The indemnity contemplated by this Lease shall survive
termination of this Lease.
ARTICLE XVII
Force Majeure
17.1 If by reason of force majeure any Party hereto is
rendered unable, in whole or in part, to carry out its
obligations under this Lease, and if such Party gives
notice and reasonably full particulars of such force
majeure in writing, by telegram, facsimile, or E-mail
to the other Party or Parties, as appropriate, within a
reasonable period of time after the occurrence of the
force majeure event, the Party giving such notice, so
far as and to the extent that it is affected by such
force majeure event, shall be relieved of its
performance obligations under this Lease and shall not
be liable in damages during the continuance of
inability to perform so caused; provided, however, that
such cause shall be remedied with all reasonable
dispatch.
17.2 As used herein, the term "force majeure" shall mean:
acts of God, strikes, lockouts or other industrial
disturbances; acts of public enemies, wars, blockades,
insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, storms, floods or washouts; arrests
and restraints imposed by the government, either
federal or local, civil or military; the binding order
of any court, legislative body, or governmental
authority which has been resisted in good faith by all
reasonable legal means; vandalism, sabotage or civil
disturbances; relocation of facilities; breakage or
accident to machinery, including but not limited to
generation facilities or transmission lines; the
necessity for testing (as required by governmental
authority or as deemed necessary by the testing party
for safe operations) or for making repairs or
alterations to machinery, including but not limited to
generation facilities or transmission lines; accidents,
breakdowns or the inability of a Party to obtain
necessary material, supplies, permits, rights-of-way or
labor to perform or comply with any obligation or
condition of this Lease; and any other causes, whether
of the kind herein enumerated or otherwise, which are
not reasonably in control of the Party claiming
suspension. It is understood that the settlement of
strikes or lockouts shall be entirely within the
discretion of the Party having the difficulty and that
the above requirement that force majeure events be
remedied with reasonable dispatch shall not require the
settlement of strikes, lockouts or disagreements by
acceding to the demands of any opposing party when such
course is inadvisable in the discretion of the Party
having the difficulty.
17.3 Such force majeure affecting the performance hereunder
by any Party, however, shall not relieve such Party of
liability in the event of its concurring negligence or
willful misconduct in creating such force majeure event
or in the event of failure to use due diligence to
remedy the situation and to remove the cause or
contingencies affecting such performance in an adequate
manner and with all reasonable dispatch.
ARTICLE XVIII
Conditions Precedent
The Parties hereto expressly agree that each Party's
rights and obligations under this Lease are contingent
upon satisfaction of each of the following conditions
precedent:
18.1 The parties agree that this Lease has received approval
of the PaPUC at Docket No. R-0097398 as a component of
the transfer, lease, or assignment of West Penn's
generating assets.
18.2 All authorizations of the United States Securities and
Exchange Commission, to the extent required by the
Public Utility Holding Company Act of 1935, for the
transactions contemplated by this Lease.
18.3 All necessary Trustee consents under the bond
indentures referenced in Article II above and all
affected contracts.
18.4 Acceptance of this Lease without modification or
condition by the FERC, but solely in the event the FERC
determines that it has jurisdiction over this Lease.
ARTICLE XIX
Liens
19.1 Subject to the terms of the indentures identified in
Article I above, West Penn may incur liens or other
encumbrances on the property which is the subject of
this Lease including liens or other encumbrances made
by West Penn.
ARTICLE XX
Successors and Assigns
20.1 This Lease shall inure to and bind the successors and
assigns of the Parties. This Lease, and the leases set
forth in Article III, shall not be assigned by any
Party without the written consent of the others, which
consent shall not be unreasonably withheld; provided
that this Lease may be assigned without prior written
consent to a corporation into which such Party shall be
merged or with which it shall be consolidated or to a
corporation resulting from any merger or consolidation
to which such Party shall be a party or to a person or
corporation to which substantially all the business and
assets of such Party shall be transferred.
ARTICLE XXI
Miscellaneous
21.1 Waivers: Any waiver at any time of any rights as to
any default hereunder or any other matter arising
hereunder shall not be deemed a waiver as to any
subsequent default or matter.
21.2 Governing Law: This Lease shall be governed by and
interpreted in accordance with the laws of the
Commonwealth of Pennsylvania without recourse to the
law regarding conflict of laws.
21.3 Authority: Each Party hereto represents to the
others that this Lease, the transactions contemplated
herein, and the execution and delivery of this Lease
have been duly authorized by all necessary corporation
actions, including without limitation, required action
on the part of the officers and agents of the
representing Party, and this Lease, when executed and
delivered, shall be valid and binding on it.
21.4 Headings: The headings contained in this Lease are for
reference purposes only and shall not affect the
meaning or interpretation of this Lease.
21.5 Notices: Unless otherwise specifically provided in
this Lease, any written notice or other communication
shall be deemed to be given and received on the date
when such notice or communication is given by facsimile
or E-mail, and confirmed as received by the other
Party, or the date received if given by registered or
certified mail, postage prepaid, addressed to:
Allegheny Energy Supply Company
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
West Penn Power Company
Attn: Secretary
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
21.6 Entirety: This Lease and the appendices hereto
constitute the entire agreement between the parties
hereto. There are no prior or contemporaneous
agreements or representations affecting the same
subject matter other than those expressed herein.
21.7 Transfer of Assets: The Parties reserve the right
individually or collectively to transfer ownership of
assets which are the subject of this Lease to West Penn
or another entity of its choosing. No signatory will
oppose such transfer of assets.
21.8 Severability: Except as otherwise stated herein, any
provision, Article or Section declared or rendered
unlawful by a court of law or regulatory agency with
jurisdiction over this agreement, or deemed unlawful
because of statutory change, will not otherwise affect
the lawful obligations that arise under this Lease.
ARTICLE XXII
Indenture Provisions
22.1 This Lease is expressly made subject to the lien and
security of the Indenture, and is not intended to
impair in any way such lien or security or the rights
under the Indenture.
ARTICLE XXIII
Dispute Resolution Procedures
23.1 Internal Dispute Resolution Procedures: Any dispute
between West Penn and AESC involving service under this
Lease (excluding applications for rate changes or other
changes which shall be presented directly to the FERC
for resolution) shall be referred within six (6) months
of the written notification of a dispute by a Party to
a designated senior representative of AESC and a senior
representative of the West Penn for resolution on an
informal basis as promptly as practicable. In the
event the designated representatives are unable to
resolve the dispute within thirty (30) days [or such
other period as the Parties may agree upon] by mutual
agreement, such dispute may be submitted to arbitration
and resolved in accordance with the arbitration
procedures set forth below.
23.2 External Arbitration Procedures: Any arbitration
initiated under this Lease shall be conducted before a
single neutral arbitrator appointed by the Parties. If
the Parties fail to agree upon a single arbitrator
within ten (10) days of the referral of the dispute to
arbitration, each Party shall choose one arbitrator who
shall sit on a three-member arbitration panel. The two
arbitrators so chosen shall within twenty (20) days
select a third arbitrator to chair the arbitration
panel. In either case, the arbitrators shall be
knowledgeable in electric utility matters, including
electric transmission and bulk power issues, and shall
not have any current substantial business or financial
relationships with any party to the arbitration (except
prior arbitration). The arbitrator(s) shall provide
each of the Parties an opportunity to be heard and,
except as otherwise provided herein, shall generally
conduct the arbitration in accordance with the
Commercial Arbitration Rules of the American
Arbitration Association and any applicable Commission
regulations or regional Transmission Provider rules.
23.3 Arbitration Decisions: Unless otherwise agreed, the
arbitrator(s) shall render a decision within ninety
(90) days of appointment and shall notify the Parties
in writing of such decision and the reasons therefor.
The arbitrator(s) shall be authorized only to interpret
and apply the provisions of this Lease and shall have
no power to modify or change the Lease in any manner.
The decision of the arbitrator(s) shall be final and
binding upon the Parties, and judgment on the award may
be entered in any court having jurisdiction. The
decision of the arbitrator(s) may be appealed solely on
the grounds that the conduct of the arbitrator(s), or
the decision itself, violated the standards set forth
in the Federal Arbitration Act and/or the
Administrative Dispute Resolution Act. The final
decision of the arbitrator must also be filed with the
Commission if it affects jurisdictional rates, terms
and conditions of service or facilities.
23.4 Costs: Each Party shall be responsible for its own
costs incurred during the arbitration process and for
the following costs, if applicable:
(a) the cost of the arbitrator chosen by the
Party to sit on the three member panel and one
half of the cost of the third arbitrator chosen;
or
(b) one half the cost of the single
arbitrator jointly chosen by the Parties.
23.5 Rights Under The Federal Power Act: Nothing in this
section shall restrict the rights of any party to file
a complaint with the Commission under relevant
provisions of the Federal Power Act.
IN WITNESS WHEREOF, the parties have caused this
Lease to be executed by their respective duly authorized
officers or representatives, as of the day and year first
above written.
Attest: ALLEGHENY ENERGY SUPPLY COMPANY
__________________ By:__________________________________
[Title]
Attest: WEST PENN POWER COMPANY
__________________ By:__________________________________
[Title]
u:\jsheleh\JLM\GENCO\Facilities Lease Agreement 3_99.doc
APPENDIX A
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APPENDIX B
FOREIGN STATION OPERATING AGREEMENTS
1. Power Agreement among Monongahela, Potomac, West Penn,
and Allegheny Generating Company dated August 14, 1982 (the
"AGC Agreement")
2. Power Agreement between Ohio Valley Electric
Corporation and United States of America and related
agreements as amended, dated October 15, 1952 ("OVEC
Agreement")