Exhibit B
GENERATING STATION
OPERATING AGREEMENT
among
JERSEY CENTRAL POWER & LIGHT COMPANY
and
METROPOLITAN EDISON COMPANY
and
PENNSYLVANIA ELECTRIC COMPANY
and
GPU GENERATION CORPORATION
This AGREEMENT made and entered into this _____ day of
___________, 1996 by and among Jersey Central Power & Light
Company ("JCP&L"), Metropolitan Edison Company ("Met-Ed"),
Pennsylvania Electric Company ("Penelec") and GPU Generation
Corporation ("GPUGC").
W I T N E S S E T H:
WHEREAS, JCP&L, Met-Ed, Penelec and GPUGC are each a wholly-
owned subsidiary of General Public Utilities Corporation ("GPU"),
a registered holding company under the Public Utility Holding
Company Act of 1935 (the "1935 Act"); and
-1-
WHEREAS, JCP&L, Met-Ed and Penelec (hereinafter referred to
collectively as "Owners" and individually as an "Owner") each
owns and operates certain fossil fuel, hydro-electric (1) and
pumped storage generation stations, plants and other related
generation facilities and may, in the future, own additional such
facilities, which are set forth and generally described on
Schedule 1 hereto, as it may from time to time be hereafter
amended or supplemented without the necessity of an amendment to
this Agreement (individually a "Generation Facility" or
collectively, the "Generation Facilities"); and
WHEREAS, Penelec and JCP&L each has heretofore entered into
agreements with other utilities under which it has agreed to
operate and maintain certain fossil fuel, hydro-electric or
pumped storage (non-nuclear) generation facilities for the mutual
benefit of the co-owners, as the same may be amended or
supplemented from time to time (such agreements being
collectively called, the "Joint Operating Agreements"); and
________________________
(1) One such hydro-electric generation station, York Haven, is
owned by York Haven Power Company ("YHP"), a wholly-owned
subsidiary of Met-Ed. This Agreement is executed by Met-
Ed on its own behalf and on behalf of YHP.
-2-
WHEREAS, each Owner believes that in order to more
efficiently and economically provide for the operation,
maintenance, repair, and rehabilitation of its respective
Generation Facilities and of the facilities subject to the Joint
Operating Agreements, and for the construction of new or
additional generation facilities on its behalf if, in the future,
it deems that it is necessary or appropriate to do so, all such
activities should be conducted and coordinated on the Owners'
behalf by a single, separate organization; and
WHEREAS, each Owner now desires that GPUGC, which has been
organized for such purposes, undertake the operation,
maintenance, repair and rehabilitation of its Generation
Facilities, provide for the construction of any new or additional
non-nuclear generation facilities which an Owner may request in
the future, and assume the obligations of Penelec and JCP&L under
the Joint Operating Agreements, subject in each case to the
receipt of any necessary regulatory approvals and the consents or
agreements of the owners of the facilities subject to the Joint
Operating Agreements.
NOW THEREFORE, in consideration of these premises, the
parties, intending to be legally bound, do hereby agree as
follows:
ARTICLE 1
Services to be Provided
-3-
1.1 GPUGC, consistent with such written guidelines as may be
jointly developed with the Owners, 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 applicable licenses, permits and
requirements of federal, state and local regulatory
agencies, (ii) the generation of power and energy at the
Generation Facilities to the credit of and for the benefit
of the Owner of each such Generation Facility 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 an Owner to be necessary or
appropriate, the construction of new or additional non-
nuclear generation facilities for such Owner. GPUGC also
shall make such further modifications of and additions to
and retirements from the Generation Facilities as shall be
consistent with such operation, maintenance, repair and
rehabilitation. Such services and construction may be
provided by GPUGC through its own personnel or in part, by
others under contractual or other arrangements, including
the use of an Owner's personnel under the direction and
supervision of GPUGC.
1.2 In furtherance of the foregoing, each Owner authorizes
GPUGC, among other things, to:
-4-
(a) Select, hire, control and discharge personnel, who,
unless otherwise agreed, shall be employees solely of
GPUGC, and select and retain the services of
contractors and consultants.
(b) As and when requested by an Owner, arrange for the
procurement, on behalf of such Owner, of requisite fuel
for such Owner's Generation Facilities and for the
transportation and storage thereof.
(c) Arrange for the purchase on behalf of each Owner of
repair, modification, rehabilitation, operation,
maintenance and construction materials, services and
supplies as necessary for such Owner's Generation
Facilities.
(d) Design, construct, startup and test 1) modifications of
and additions to the Generation Facilities and 2) new
or additional non-nuclear generation facilities for
each Owner upon such Owner's request.
(e) Determine, establish and maintain inventory levels of
material, supplies, parts and equipment for each of the
Generation Facilities.
(f) Keep each Owner informed in a reasonable manner
concerning repair, modification, rehabilitation,
operation and maintenance activities and additions to
and retirements from such Owner's Generation
Facilities.
(g) Prepare, or arrange for the preparation of annual
budgets and forecasts of operation and maintenance
expenses, including budgets and forecasts for the costs
-5-
of repair, modification and rehabilitation, capital
expenditures and plant retirements relating to
Generation Facilities, in accordance with normal and
customary procedures, to be submitted to each Owner for
approval with respect to its Generation Facilities.
The approval of such budgets shall be required before
action may be taken thereunder, provided that work
required to prevent hazardous conditions or substantial
reduction in generation may be undertaken prior to such
approval with prompt notification thereof given to each
Owner. Such budgets and forecasts shall be revised
from time to time to reflect material changes in
circumstances.
(h) Perform any services and take any action on behalf of
an Owner, related to the repair, modification,
rehabilitation, operation, maintenance, renewals,
replacements, additions and retirements pertaining to
the Generation Facilities as may be necessary or
appropriate to comply with any applicable statutes,
rules, regulations, guidelines or similar criteria, and
any provisions or conditions of construction permits
and operating licenses or similar authorizations
granted or that may be hereafter granted in connection
with the Generation Facilities and as such permits,
licenses or other authorizations may hereafter or
thereafter be amended.
(i) In its capacity as operator of each of the Generation
Facilities and as agent for the Owner thereof, provide
-6-
communications to, and receive communications from, any
governmental agency having jurisdiction with respect to
any aspect of the operation, maintenance,
rehabilitation, repair and modification of such
Generation Facility and, in such capacities, represent
(or engage others to represent) each Owner with respect
thereto.
(j) Perform or, if deemed desirable by GPUGC, contract on
behalf of each Owner with others, for the repair,
modification, rehabilitation, maintenance, renewal and
replacement required to place, keep and maintain such
Owner's Generation Facilities in good and efficient
operating condition, to protect the properties on which
such Generation Facilities are located, to conduct
research and development with respect to non-nuclear
generation and to disburse or receive funds in
connection therewith. Such work and contracts relating
thereto shall be subject to normal and customary GPUGC
review and approval procedures.
(k) Perform any additional services pertaining to the
Generation Facilities to which each respective Owner
and GPUGC shall have mutually agreed.
(l) Arrange for 1) the maintenance, in accordance with
normal and customary accounting procedures, of such
necessary books of record, books of account and
memoranda of all transactions and 2) the provision of
such reports to the Owners with respect thereto as each
Owner shall desire to meet its own accounting and
-7-
statistical requirements and to conform to the
applicable lawful rules, regulations and requirements
of all regulatory bodies having jurisdiction over each
Owner. The operating costs incurred and capital
expenditures made for each of the Generation Facilities
shall be accumulated in a separate set of accounts.
(m) Provide or arrange for the provision of such other data
or information with respect to each of the Generation
Facilities as may be reasonably requested by the Owner
from time to time.
1.3 Matters and questions arising in connection with the
operation, maintenance, rehabilitation, repair, or
modification of a Generation Facility which are not within
the scope of the authority delegated to GPUGC under this
Agreement and which are not specifically provided for in
this Agreement shall be jointly determined from time to
time by the Owner of such Generation Facility and GPUGC.
1.4 The costs for services provided by GPUGC pursuant to the
terms, conditions and provisions of this Agreement shall
be paid to GPUGC as provided in Article 3 hereof.
-8-
ARTICLE 2
Operation of Generation Facilities
2.1 In order that the safe operation of the Generation
Facilities is assured, the Owners shall not effect any
operating or physical changes to their respective
transmission and distribution facilities which may affect
the safe operation of the Generation Facilities without
prior consultation with and the concurrence of GPUGC.
2.2 Each Generation Facility shall be operated in accordance
with good utility practice and pursuant to an operating
plan developed and updated regularly by GPUGC and the
Owner thereof and in accordance with each Owner's
obligations, if any, under the Pennsylvania-New Jersey-
Maryland ("PJM") Interconnection Agreement to which JCP&L,
Met-Ed and Penelec are signatories and in accordance with
the "GPU Three Party Agreement" between and among JCP&L,
Met-Ed and Penelec or other applicable power pooling
agreements or arrangements, as such obligations may
presently exist or may hereafter be modified from time to
time, including the obligations, if any, of each Owner to
maintain the design integrity of each Generation Facility
under the requirements of the MidAtlantic Area Council
("MAAC") and the National Electric Reliability Council
("NERC").
-9-
2.3 The point of interconnection between any Generation
Facility and the Owner's transmission system and the
extent of GPUGC'S operational responsibility therefor
shall be determined from time to time by each of the
respective Owners of the Generation Facilities and GPUGC.
ARTICLE 3
Working Capital Accounts
3.1 GPUGC shall arrange for a working capital account ("the
Working Capital Account") to be established for each
Owner, from which GPUGC shall make payments for all costs
incurred in providing its services and in discharging its
responsibil-ities hereunder. Each Owner shall fund its
Working Capital Account by providing or transferring funds
promptly on receipt of telephone or other notice or
direction from or on behalf of GPUGC of such Owner's
obligation therefor.
3.2 Upon termination of this Agreement, as hereinafter
provided, any residual unexpended balance in each Working
Capital Account after payment of the costs actually
incurred, and reasonable commitments therefor, as set
forth in Section 3.1 hereof shall be credited to the Owner
which contributed to such Working Capital Account.
ARTICLE 4
Charges, Financial Statements and ▇▇▇▇▇▇▇▇
-10-
4.1 GPUGC shall arrange for the prompt reporting of the
following information by written statements issued
quarterly to the Owners:
(a) The costs of operation, maintenance, repair,
rehabilitation and modification of each of the
Generation Facilities, and the cost of any plant
additions and retirements including applicable cost of
removal and salvage, all to be accounted for on an
accrual basis and classified as required to meet
GPUGC's obligations under Section 1.2(l) above.
(b) A summary statement of the operation of the Working
Capital Account during the quarter, showing beginning
balance, receipts, from whom received, disbursements,
to whom made, the purpose thereof, and closing balance.
4.2 All of the services and materials provided or rendered
hereunder to an Owner by GPUGC shall be charged to an
Owner at the actual cost thereof. Direct charges shall be
made for services and materials whenever a direct
allocation of such costs to a particular Owner or
Generation Facility is practicable. The costs incurred or
accrued from all sources during each calendar quarter in
operating, maintaining, repairing, rehabilitating,
modifying, and making additions to and retirements from
the Generation Facilities shall become liabilities when
incurred or accrued and shall be borne by the respective
Owners thereof. All such costs shall be determined in
accordance with sound accounting practices, and shall
-11-
include reasonable and appropriate indirect costs
including overheads. The determination of all other costs
and the allocation thereof are set forth in Schedule 2
hereto. Schedule 2 may, from time to time, be modified
or changed by mutual agreement of GPUGC and the Owners
without the necessity of an amendment to this Agreement,
provided that in each instance all materials and services
provided or rendered hereunder shall be at actual cost
thereof, fairly and equitably allocated, and that all such
modifications or changes shall otherwise be in accordance
with the requirements of the 1935 Act and the applicable
rules, regulations and orders thereunder.
4.3 It is the intent of each Owner that so far as possible
each Owner shall separately 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
respective ownership of the Generation Facilities, and
that such taxes shall be separately levied and assessed
against each such Owner. However, to the extent that any
such taxes may be levied on or assessed against any or all
of the Generation Facilities, or their operation, or GPUGC
or any Owner in such a manner as, in the opinion of the
Owner, to make impossible or inequitable the carrying out
of said intent, then such taxes shall be deemed a part of
the costs of operating and maintaining such Generation
Facility or Facilities and shall be apportioned among each
-12-
Owner under this Agreement in accordance with such Owner's
ownership thereof.
4.4 Each Owner shall have the right, during the term of this
Agreement and thereafter as long as the books, records and
memoranda referred to in Section 1.2(l) shall be
preserved, to inspect all such items and to make
reasonable audits thereof at its own cost as it may deem
necessary to protect its interests.
4.5 In the event any Owner shall question any statement
rendered by GPUGC in accordance with the provisions of
Section 4.1 hereof, such Owner shall nevertheless promptly
pay amounts called for by GPUGC under Section 3.1 hereof
but such payment shall not be deemed to prevent such Owner
from claiming an adjustment of any statement rendered.
-13-
ARTICLE 5
Compliance with Provisions of Permits
and Requirements of Governmental Agencies
5.1 Each Owner and GPUGC shall cooperate in taking whatever
action may be necessary to comply with the terms and
provisions of all permits and licenses for its Generation
Facilities and with all applicable lawful requirements of
any federal, state or local agency or regulatory body
having jurisdiction in or over its Generation Facilities,
including the rules, regulations and orders of the Federal
Energy Regulatory Commission ("FERC"), or its successor,
and any FERC license for any such Generation Facility.
Notwithstanding anything to the contrary contained herein,
each Owner, its successors and assigns, hereby reserves
the right, with or without the prior approval of GPUGC, to
perform any and all acts required by any rule, regulation
or order of FERC or its successor regarding any FERC
licensed Generation Facility..
ARTICLE 6
Damage to Persons or Property; Penalties; Fines
6.1 Since GPUGC is undertaking its responsibilities hereunder
(i) at cost and (ii) in order to assist each Owner in
meeting its responsibilities with respect to its
Generation Facilities, the following provisions shall be
-14-
applicable to loss or damage to the property of any or all
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:
(a) Each Owner and GPUGC shall procure and maintain such
physical damage and loss, public liability, workers'
compensation and other insurance as it may deem
appropriate with respect to all losses, damages,
liability and claims arising out of each Owner's
ownership of its Generation Facilities and GPUGC's
operation thereof and the provision of services
hereunder. In the alternative upon concurrence of each
party hereto, the Owner and GPUGC shall jointly procure
and maintain such insurance and the premium costs
thereof shall be Generation Facilities costs under
Section 4.2. All such insurance policies shall identify
GPUGC, each respective Owner and, if applicable, the
mortgage indenture trustee, as additional insureds
thereunder as their interests may appear, and shall
contain a waiver of subrogation clause in favor of the
other parties hereto to the extent of the applicable
limits of such policies.
(b) Claims cognizable under workers' compensation acts or
temporary disability benefits laws or any other
benefits under workers' compensation or analogous
statutes and the expenses of defending or disposing of
-15-
the same, attributable to the ownership or operation of
the Generation Facilities, and which are not covered in
full by insurance procured in accordance with the
preceding paragraph shall, if attributable to
particular Generation Facilities and to the extent not
covered by such insurance, be treated as Generation
Facilities costs under Section 4.2.
(c) All losses, damages, expenses, penalties, liabilities,
fines and claims (including those in respect of
property damage and personal injury) asserted by third
parties and the expenses of defending or disposing of
the same, attributable to the ownership or operation of
the Generation Facilities and which are not covered in
full by insurance procured in accordance with the
second preceding paragraph shall, if attributable to
particular Generation Facilities and to the extent not
covered by such insurance, be treated as Generation
Facilities costs under Section 4.2.
(d) Each of the parties hereto hereby expressly waives,
relinquishes and releases any claim or right it may
have to recover from any of the other parties hereto
for any losses, damages, penalties, liabilities, fines,
claims or expenses (including damage to property of the
Generation Facilities) for any cause including the
negligence of any of the other parties hereto, and its
or their employees and agents, in connection with the
operation, maintenance, repair, rehabilitation, and
-16-
modification of the Generation Facilities and the
provision of any services hereunder.
-17-
ARTICLE 7
Miscellaneous
7.1 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,
modification, rehabilitation, renewal, replacement,
additions and construction of the Generation Facilities.
7.2 Each Owner hereby designates its President as its
Representative, who shall receive notices and
communications from GPUGC under the provisions of this
Agreement and who shall send to the designated
Representative of GPUGC all notices and communications
under the provisions of this Agreement.
7.3 GPUGC hereby designates its President as the GPUGC
Representative, who shall receive notices and
communications from each Owner's Representative under the
provisions of this Agreement and who shall send to each
Owner's Representative all notices and communications
concerning the provisions of this Agreement.
7.4 Each 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.
-18-
7.5 In performing services under this Agreement on behalf of
each Owner, GPUGC shall act as an independent contractor
responsible for the result to be attained, consistent with
such guidelines as may be jointly developed with such
Owner.
7.6 To the extent that any Owner may, from time to time,
provide goods or services to GPUGC, GPUGC shall pay for
such goods and services at such providing Owner's cost
determined as herein provided, which payments shall
thereupon be treated as Generation Facilities costs under
Section 4.2. With the agreement of GPUGC, any Owner may,
from time to time, provide goods or services to another
Owner's Generation Facilities and GPUGC shall pay for such
goods and services as set forth in the preceding sentence
of this paragraph.
-19-
ARTICLE 8
Effective Date and Termination
8.1 Subject to any applicable rules and regulations and
associated approvals of any regulatory authority, this
Agreement shall become effective as of the date first
above written and shall remain in full force and effect
unless and until terminated.
8.2 This Agreement may be terminated by any Owner , with
respect to such Owner and to the Generation Facilities
owned by such Owner, upon reasonable written notice to the
other parties hereto.
ARTICLE 9
Successors and Assigns
9.1 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 GPUGC's obligations hereunder shall be
assignable by GPUGC, in whole or in part, without the
express written consent of each affected Owner. Any
mortgage indenture trustee which shall foreclose on
substantially all of the electric utility properties of
any Owner may, at such trustee's own election, be deemed
to bea successor andassign ofsaid Ownerunder thisAgreement.
-20-
ARTICLE 10
Governing Law
10.1 This Agreement shall be construed in accordance with, and
shall be governed by, the laws of Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the day and year
first above written.
JERSEY CENTRAL POWER & LIGHT COMPANY
By__________________________________
▇. ▇▇▇▇▇▇▇▇▇▇, President
PENNSYLVANIA ELECTRIC COMPANY, and
METROPOLITAN EDISON COMPANY, for itself and for and
on behalf of York Haven Power Company.
By__________________________________
▇. ▇. ▇▇▇▇▇, President
GPU GENERATION CORPORATION
By__________________________________
▇. ▇. ▇▇▇▇, President
-21-
SCHEDULE 1
GPU SYSTEM NON-NUCLEAR GENERATION FACILITIES
Jersey Central
Fossil-Fueled
Sayreville (Steam/CTs)
▇▇▇▇▇▇▇ (Steam/CC/CTs)
▇▇▇▇ ▇▇▇▇▇▇▇ (CTs)
Forked River (CTs)
▇▇▇▇▇▇ (Steam CTs)
Keystone (undivided 16.67% interest)
Pumped Storage
Yards Creek (undivided 50% interest)
Met-Ed
Fossil-Fueled
Portland
▇▇▇▇▇
▇▇▇▇▇▇▇ (CT)
Hunterstown (CTs)
▇▇▇▇▇▇▇▇ (CT)
Mountain (CTs)
Ortanna (CT)
Portland (CT)
▇▇▇▇▇ (CT)
Tolna (CTs)
Conemaugh (undivided 16.45% interest)
Hydro-electric
York Haven*
Penelec
Fossil-Fueled
▇▇▇▇▇ City (undivided 50% interest)
Shawville
▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇ (CT)
▇▇▇▇▇▇ (CT)
Hydro-electric
Piney
Deep Creek
Pumped Storage
Seneca (undivided 20% interest)
_______________________
* York Haven hydro-electric generating station is owned by York
Haven Power Company, a wholly-owned subsidiary of Met-Ed.
SCHEDULE 2
Determination of Cost of Service
and Allocation Thereof
Cost of service will be determined in accordance with the
Public Utility Holding Company Act of 1935 and the rules and
regulations and orders thereunder, and will include all costs of
doing business incurred by GPUGC.
Records will be maintained by each Department and Division of
GPUGC in order to accumulate all costs of doing business and to
determine the cost of service. These costs will include wages
and salaries of employees and related expenses such as insurance,
taxes, pensions and other employee welfare expenses, and rent or
other applicable costs of facility utilization, including but not
limited to light, heat, telephone, supplies and other
housekeeping costs. In addition, records will be maintained of
general administrative expenses, which will include the costs of
operating GPUGC as a corporate entity.
Where appropriate, charges for services of personnel rendered
to a particular Generation Facility and related expenses and non-
personnel expenses (e.g., use of automotive equipment, etc.)
relating to a particular Generation Facility will be billed
directly to the Owner of such Generation Facility ("Direct
Charges"). Direct Charges will include the charges for services
of GPUGC personnel assigned exclusively to the Generation
Facilities.
In general, expenses not directly attributable to a
particular Generation Facility ("Indirect Charges") will be
allocated among the Owners in the same proportion as the Direct
Charges are allocated among the Owners pursuant to the preceding
paragraph.
All other costs will be fairly and equitably allocated in
accordance with Rules 90 and 91 of the Public Utility Holding
Company Act of 1935. Calculations under these allocation
formulae will be reviewed periodically and revised as appropriate
to fully allocate all costs by each year-end.
Charges for services will be determined, where appropriate,
from the time records of employees (other than some secretaries,
clerical and similar employees, the cost of whose services will
be treated as a part of general administrative expenses).
Records of such related expenses and general administrative
expenses will be maintained and subjected to periodic review.
Out-of-pocket expenses which are incurred for an Owner will
be billed at cost. Charges for non-personnel expenses, such as
for use of automobiles not assigned exclusively to the Generation
Facilities, will normally be computed on the basis of costs per
hour.