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EXHIBIT B-1
Pro Forma Operating Agreement by and Between Michigan
Electric Transmission Company and Consumers Energy Company
(Exhibit H(1) of Exhibit D-1: the Joint FPA Section 203
Application of CECo and Michigan Transco to FERC)
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OPERATING AGREEMENT
BY AND BETWEEN
MICHIGAN ELECTRIC TRANSMISSION COMPANY
AND
CONSUMERS ENERGY COMPANY
Dated as of October __, 2000
(PRO FORMA AGREEMENT)
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OPERATING AGREEMENT
BY AND BETWEEN
MICHIGAN ELECTRIC TRANSMISSION COMPANY
AND
CONSUMERS ENERGY COMPANY
This agreement is made and entered into as of this __ day of October,
2000, by and between Michigan Electric Transmission Company ("MICHIGAN
TRANSCO"), a Michigan corporation, having its principal place of business at ▇▇▇
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and Consumers Energy Company
("CONSUMERS"), a Michigan corporation, having its principal place of business at
▇▇▇ ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. (Michigan Transco and Consumers
may be referred to individually as "PARTY" or collectively as the "PARTIES").
WHEREAS, as a consequence of the comprehensive restructuring of the
bulk power and retail electric markets in the State of Michigan, Consumers has
entered into an agreement pursuant to which it will sell a substantial amount of
Consumers transmission facilities located in the State of Michigan with voltage
ratings of 120 kilovolts ("kV") and above (collectively, the "TRANSMISSION
SYSTEM") to Michigan Transco (the "TRANSFER TRANSACTION");
WHEREAS, Michigan Transco desires to engage in the transmission of
electric energy in interstate commerce and to exercise operational authority
over the Transmission System for the purpose of providing open access,
non-discriminatory transmission service to Consumers and all other eligible
customers;
WHEREAS, Michigan Transco also desires to provide open access,
non-discriminatory transmission service over certain facilities owned and
operated by Consumers with voltage ratings below 120 kV ("DISTRIBUTION
FACILITIES") that are used to serve certain wholesale customers and credit all
charges collected therefrom to Consumers; and
WHEREAS, Michigan Transco and Consumers desire to enter into a
comprehensive agreement defining the post-Transfer Transaction responsibilities
for the Transmission System including the exercise of operational control,
planning, and expansion thereof by Michigan Transco.
NOW THEREFORE, in consideration of the mutual agreements and
commitments contained herein, Michigan Transco and Consumers agree as follows:
ARTICLE 1. DEFINITIONS
1.1 The following terms shall have the meanings set forth below. Any
term used in this Agreement that is not defined herein shall have the meaning
customarily attributed to such term within the electric utility industry.
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"AGREEMENT" means this Operating Agreement By and Between Michigan
Electric Transmission Company and Consumers Energy Company, as it may be amended
from time to time.
"CLOSING DATE" means the date and time upon which the closing of the
Transfer Transaction actually occurs.
"CONTROL AREA" means an electrical system bounded by interconnection
metering and telemetry. Generation within the Control Area is directed to
operate in a manner prescribed by guidelines established by ECAR and NERC and in
accordance with Good Utility Practice to (a) maintain scheduled interchange with
other Control Areas, (b) maintain the operating frequency and (c) provide
sufficient generating capacity to maintain operating reserves.
"CONTROL AREA OPERATOR" means the person(s) and/or entity(ies)
responsible for exercising operational control over the Transmission System.
"ECAR" means the East Central Area Reliability council, its successors
and assigns.
"FERC" means the Federal Energy Regulatory Commission or the successor
thereto.
"GENERATION RESOURCES" means the facilities used for the production of
electric energy, which are owned and operated by Consumers and located within
Michigan Transco's Control Area available to meet the capacity and energy needs
of Consumers.
"GOOD UTILITY PRACTICE" means any of the practices, methods, or acts
engaged in or approved by a significant portion of the electric utility industry
with respect to similar facilities during the relevant time period which, in
each case, in the exercise of reasonable judgment in light of the facts known or
that should have been 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, law, regulation, environmental
protection, and expedition. Good Utility Practice are not intended to be limited
to the optimum practices, methods, or acts to the exclusion of all others, but
rather to delineate the acceptable practices, methods, or acts generally
accepted in such industry.
"MICHIGAN TRANSCO TRANSMISSION TARIFFS" means either the Open Access
Transmission Tariff or the Joint Open Access Transmission Tariff in which
Michigan Transco provides or will provide open access, non-discriminatory
transmission service, as amended from time to time, or any successor tariff on
file, or to be filed, with the FERC, as such may be amended from time to time.
"OASIS STANDARDS OF CONDUCT" means the rules and regulations
promulgated by the FERC, 18 C.F.R. Part 37 (1999), as amended from time to time,
requiring the implementation of Standards of Conduct governing the transfer of
information and communications between public utilities' wholesale merchant and
transmission system operation functions, and that of their affiliates.
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"REGULATORY AUTHORITY" means any federal, state, local, or other
governmental, regulatory, or administrative agency having jurisdiction over the
subject matter of this Agreement.
"TRANSMISSION CUSTOMER" means a transmission customer taking service
under the Michigan Transco Transmission Tariffs, any entity that is a party to a
transaction under the Michigan Transco Transmission Tariffs, including
Consumers, or any entity on whose behalf Michigan Transco is providing
transmission service.
ARTICLE 2. TERM AND TERMINATION
2.1 This agreement shall become effective when signed by the Parties.
Parties' corresponding obligations as set forth herein shall begin at 12:01 a.m.
(EPT) on the day immediately following the Closing Date ("EFFECTIVE DATE"). The
initial term of this Agreement shall commence as of the Effective Date and shall
continue for three (3) years ("INITIAL TERM"), unless terminated earlier in
accordance with the provisions of this Agreement. Following the Initial Term, or
each subsequent Renewal Term (as hereinafter defined), as the case may be, this
Agreement shall automatically be renewed for a period of one (1) year ("RENEWAL
TERM"), unless either Party delivers a written notice of termination to the
other Party at least sixty (60) days prior to the end of the then current term.
2.2 Any obligations incurred by the Parties under this Agreement to
make payments due, remit costs, or complete construction of designated
facilities, as agreed to prior to the termination hereof, shall survive the
termination of this Agreement.
ARTICLE 3.
OBLIGATIONS, RIGHTS AND RESPONSIBILITIES OF
MICHIGAN ELECTRIC TRANSMISSION COMPANY
3.1 Operation of Transmission System. Pursuant to the terms of this
Agreement, upon the consummation of the Transfer Transaction, Michigan Transco
shall be responsible for operating the Transmission System in order to provide
all Transmission Customers with safe, efficient, reliable, and
non-discriminatory transmission service pursuant to terms and conditions set
forth in the Michigan Transco Transmission Tariffs. As more fully set forth in
the Operating Protocols attached hereto as Appendix 1, such operation shall be
in accordance with Good Utility Practice and shall conform to the applicable
reliability requirements of NERC, ECAR or other regional reliability councils,
or any successor organizations, and all applicable requirements of federal or
state laws or Regulatory Authorities. As further detailed in Appendix 1,
Michigan Transco shall assume the following operational responsibilities from
Consumers:
3.1.1 Administration and Maintenance of Michigan Transco
Transmission Tariffs. Michigan Transco shall be responsible for administering
the Michigan Transco Transmission Tariffs and for providing open access,
non-discriminatory transmission service to all Transmission Customers taking
service under such tariff and for maintaining the Michigan Transco Transmission
Tariffs on file with the FERC.
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3.1.2 Review and Approval of Requests for Transmission Service
Under the Michigan Transco Transmission Tariffs. Michigan Transco shall be
responsible for reviewing and approving, as appropriate, all requests for open
access, non-discriminatory transmission service under the Michigan Transco
Transmission Tariffs.
3.1.3 Determination of Available Transmission Capacity.
Michigan Transco shall be responsible for calculating available transmission
capacity ("ATC") for the Transmission System in accordance with the terms and
conditions set forth in the Michigan Transco Transmission Tariffs.
3.1.4 Provision of Ancillary Services. Michigan Transco shall
be responsible for offering ancillary services, as required by the rules and
regulations of the FERC, to all Transmission Customers taking service under the
Michigan Transco Transmission Tariffs. Michigan Transco shall procure ancillary
services on a non-preferential and competitive basis from Consumers and from any
third-party suppliers of such services at FERC-approved rates.
3.1.5 Administration of Open Access Same-Time Information
System. Michigan Transco shall assume responsibility for operating the open
access same-time information system ("OASIS") for the Transmission System.
3.1.6 Maintenance and Operation Services. Michigan Transco
shall be responsible for maintenance and operation of the Transmission System
and may employ persons and enter into agreements as necessary to perform these
services. Michigan Transco may contract with Consumers to perform these
services. Pursuant to the terms of a separate services agreement, Consumers
agrees to perform maintenance and operation services for Michigan Transco, in
accordance with Good Utility Practice.
3.1.7 Coordination of Maintenance Schedules. Michigan Transco
shall be responsible for establishing a maintenance schedule for all
Transmission Assets making up the Transmission System. Michigan Transco shall
coordinate with Consumers, as appropriate, both the scheduling of maintenance on
all Generation Resources connected to the Transmission System and the scheduling
of maintenance on Transmission Assets that could affect the operation of any
Generation Resources.
3.1.8 Maintenance of Transmission System Security. Michigan
Transco shall be responsible for maintaining the security of the Transmission
System and shall monitor and coordinate voltage levels with neighboring control
areas.
3.1.9 Construction of New Transmission Assets. Michigan
Transco shall be responsible for the construction of new Transmission Assets
where necessary or desirable to provide transmission service over the
Transmission System, or in response to requests for transmission service under
the Michigan Transco Transmission Tariffs. Upon request from Consumers, Michigan
Transco shall construct necessary connection facilities to permit the
interconnection of the Transmission System with new Distribution Facilities
constructed by Consumers. Michigan Transco shall be responsible for acquiring
all land, licenses, or rights-or-way necessary for such construction. Michigan
Transco may, in its reasonable business
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judgment, contract with Consumers for design, construction, and related real
estate services. Pursuant to the terms of separate design, construction, and
real estate services agreements, Consumers agrees to design and construct all
new Transmission Assets for Michigan Transco as well as provide real estate
services.
3.1.10 Access to Transmission System. During reasonable
business hours and under reasonable conditions, Michigan Transco shall, upon
request, allow a duly-authorized representative(s) of Consumers such access to
the Transmission System as is necessary for Consumers to perform its obligations
under this Agreement or to comply with the requirements of Regulatory
Authorities. Any such access provided pursuant to this Section 3.1.10 shall be
subject to the relevant rules and regulations set forth in the OASIS Standards
of Conduct.
3.1.11 Providing Information to Consumers. Michigan Transco
shall provide such information to Consumers as is necessary for Consumers to
perform the obligations set forth in Article IV of this Agreement or any
Grandfathered Agreement, or to comply with the requirements of any Regulatory
Authority. All such information provided by Michigan Transco shall be submitted
in accordance with the relevant rules and regulations set forth in the OASIS
Standards of Conduct. Information identified as "confidential" shall be treated
as confidential to the extent permitted by law. Any information provided
pursuant to this Section 3.1.11 shall be subject to the relevant rules and
regulations set forth in the OASIS Standards of Conduct.
3.1.12 Inspection and Auditing of Records. During reasonable
business hours and under reasonable conditions, Michigan Transco shall, upon
request, grant a duly-authorized representative(s) of Consumers and/or
Regulatory Authorities such access to Michigan Transco's books and records as is
necessary to verify compliance by Michigan Transco under this Agreement, and to
audit and verify transactions under this Agreement. Michigan Transco shall also
comply with all applicable reporting requirements of Regulatory Authorities
having jurisdiction over Michigan Transco with respect to the business aspects
of its operations, and shall maintain such accounting records and metering data
as is necessary to perform its obligations under this Agreement. The inspection
and auditing of Michigan Transco's books and records pursuant to this Section
3.1.12 shall be subject to the relevant rules and regulations of the OASIS
Standards of Conduct.
3.2 Provision of Transmission Service over Distribution Facilities
by Michigan Transco. Michigan Transco shall provide open access,
non-discriminatory transmission service to certain wholesale customers over the
Distribution Facilities, as defined herein, pursuant to the terms of the
Michigan Transco Transmission Tariffs and shall credit all charges associated
with the provision of such services over the Distribution Facilities to
Consumers.
3.3 Metering. Consumers and Michigan Transco shall provide
communications, metering, and other facilities necessary for the metering and
control of the Transmission Assets. Michigan Transco shall be responsible for
any expenses it incurs for the installation, operation, and maintenance of
Transmission Assets or the Transmission System.
3.4 Obligations as Control Area Operator. Upon consummation of the
Transfer Transaction, Michigan Transco shall administer and perform the duties,
as defined in this Section
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3.4, of Control Area Operator for the Transmission System and, at a minimum,
shall be obligated to:
3.4.1 match, at all times, the power supply located within the
Control Area and power purchased from or sold to entities located outside of the
Control Area with the load located within the Control Area;
3.4.2 maintain scheduled interchange with other Control Areas
directly connected with the Transmission System within the limits of Good
Utility Practice;
3.4.3 maintain system frequency within reasonable limits in
accordance with Good Utility Practice;
3.4.4 procure from Consumers, or from other third-party
entities, a sufficient amount of ancillary services, as necessary, to maintain
the operating reserve requirement for the Consumers portion of the Control Area
in accordance with Good Utility Practice;
3.4.5 provide operational and transaction data as necessary
through the ECAR OASIS or other OASIS facilities performing these functions on
behalf of the Control Area Operator.
3.5 Grandfathered Transmission Agreements. Where Consumers is
obligated to provide transmission under agreements or tariffs which were
executed or effective prior to July 9, 1996 ("GRANDFATHERED AGREEMENTS"),
Michigan Transco and Consumers will execute a Network Integration Transmission
Service ("NITS") agreement under the Michigan Transco Transmission Tariffs to
ensure that Consumers' obligation to provide transmission service under the
Grandfathered Agreements is satisfied. Consumers will continue to ▇▇▇▇ customers
served pursuant to the Grandfathered Agreements in accordance with the rates,
terms and conditions set forth therein.
3.6 Performance of Regulatory Obligations. Michigan Transco shall
comply with transmission operation and planning obligations of Consumers imposed
by federal or state laws or Regulatory Authorities, as of the effective date of
this Agreement, which can no longer be performed solely by Consumers following
transfer of ownership and control of their Transmission Facilities to Michigan
Transco, until such time as such obligations are changed or revised to relieve
Consumers or Michigan Transco in whole or in part of such obligations.
ARTICLE 4.
OBLIGATIONS, RIGHTS AND RESPONSIBILITIES
OF CONSUMERS ENERGY COMPANY
4.1 Duty to Cooperate with Michigan Transco. Consumers shall, to
the greatest extent practicable, cooperate with Michigan Transco as Michigan
Transco performs its duties as Control Area Operator, including providing
reactive supply and voltage control from generation
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sources or other ancillary services and reducing load, when reasonably requested
by Michigan Transco, in accordance with the terms and conditions of the Michigan
Transco Transmission Tariffs and Good Utility Practice. Consumers shall not
operate its Generation Resources or Distribution Facilities in a manner which
unduly interferes with the provision of transmission service by Michigan
Transco.
4.2 Construction of New Distribution Facilities. Consumers shall,
at the request of Michigan Transco, plan and construct such Distribution
Facilities necessary to provide adequate and reliable transmission service to
wholesale customers served over the Distribution Facilities.
4.2.1 Consumers shall obtain all required authorizations,
permits, licenses, or other regulatory approvals, including without limitation,
siting and environmental requirements as may be imposed by state, local, and
federal laws and regulations, for all facilities constructed by Consumers.
Construction of new facilities shall be performed in accordance with Good
Utility Practice, industry standards, and any requirements of Regulatory
Authorities.
4.3 Access to Distribution Facilities. During reasonable business
hours and under reasonable conditions, Consumers shall, upon request, allow a
duly-authorized representative(s) of Michigan Transco access to the Distribution
Facilities as is necessary for Michigan Transco to perform its obligations under
this Agreement, the Michigan Transco Transmission Tariffs, and any service
agreements thereunder, or to comply with the requirements of Regulatory
Authorities. Any such access provided pursuant to this Section 4.3 shall be
subject to the relevant rules and regulations set forth in the OASIS Standards
of Conduct.
4.4 Providing Information to Michigan Transco. Consumers shall
provide such information to Michigan Transco as is necessary for Michigan
Transco to perform its obligations under this Agreement, the Michigan Transco
Transmission Tariffs, and any transmission service agreements thereunder, or to
comply with the requirements of Regulatory Authorities. Any such information
provided pursuant to this Section 4.4 shall be subject to the relevant rules and
regulations established pursuant to the OASIS Standards of Conduct.
4.5 Inspection and Auditing of Records. During reasonable business
hours and under reasonable conditions, Consumers shall, upon request, allow a
duly-authorized representative(s) of Michigan Transco such access to books and
records as is necessary for Michigan Transco to perform its obligations under
this Agreement, the Michigan Transco Transmission Tariffs, and any service
agreements thereunder, or to comply with the requirements of Regulatory
Authorities, for purposes of auditing and verifying transactions under this
Agreement. Consumers shall, upon consummation of the Transfer Transaction,
comply with all applicable reporting requirements of Regulatory Authorities
having jurisdiction over Consumers with respect to the business aspects of its
operations and shall maintain such accounting records and metering data as is
necessary to perform its obligations under this Agreement. Any such inspection
and auditing of Consumers' books and records conducted by Michigan Transco
pursuant to this Section 4.5 shall be subject to the relevant rules and
regulations set forth in the OASIS Standards of Conduct.
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ARTICLE 5. ASSIGNMENT OF REVENUES
Transmission revenues from all Grandfathered Agreements will be billed
and collected by Consumers. Michigan Transco will ▇▇▇▇ and collect all revenues
for open access transmission service agreements assigned by Consumers to
Michigan Transco pursuant to the terms of the Transfer Transaction. The revenues
billed, collected, and received pursuant to open access transmission service
provided pursuant to the terms and conditions of the Michigan Transco
Transmission Tariffs shall be retained by Michigan Transco. Michigan Transco
shall credit to Consumers those charges billed and collected for the use of the
Distribution Facilities by wholesale customers taking transmission service under
Michigan Transco Transmission Tariffs.
Michigan Transco shall also use its best efforts to collect (to the extent
allowed by FERC policy) from wholesale customers taking transmission service
under Michigan Transco Transmission Tariffs for costs of Distribution Facilities
constructed by Consumers pursuant to Section 4.2 hereof, and shall credit to
Consumers any collections therefor.
ARTICLE 6.
OBLIGATIONS, RIGHTS AND RESPONSIBILITIES
OF THE ADMINISTRATIVE COMMITTEE
6.1 Creation of Administrative Committee. Upon the consummation of
the Transfer Transaction, the Parties hereto shall create an Administrative
Committee which shall consist of two members designated by each party; provided
however, that any third-party transferring ownership and/or control over its
FERC-jurisdictional transmission facilities to Michigan Transco shall be granted
the opportunity to designate two representatives to the Administrative
Committee.
6.2 Meeting Dates. The Administrative Committee shall hold such
meetings at such times designated by the Committee, but at least once per
calendar year. Meetings of the Administrative Committee may also be held at any
time upon the request of a member of the Administrative Committee. Minutes of
the Administrative Committee meeting shall be prepared and maintained.
6.3 Decisions. All decisions of the Administrative Committee shall
be made by unanimous vote of the members present or voting by proxy at the
meeting at which the vote is taken.
6.4 Duties. The Administrative Committee shall have the following
duties, unless such duties are otherwise assigned by a vote of the
Administrative Committee to Michigan Transco or Consumers, in which case the
so-assigned party shall perform such duties. The Administrative Committee shall:
6.4.1 Consider any matters in connection with the
administration of this agreement as may, from time-to-time, arise.
6.4.2 Review and recommend additional duties and
responsibilities for Michigan Transco or Consumers consistent with FERC Order
Nos. 888, 889 and 2000.
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6.4.3 Establish as necessary any other committees for the
purpose of carrying out the day-to-day administration of this Agreement
including, but not limited to, the coordination of generation and maintenance
schedules, operating reserve monitoring, transmission/distribution activity
coordination, and transmission/distribution systems planning coordination.
6.4.4 Provide coordination of other matters not specifically
provided herein which the Parties agree are necessary to operate the
Transmission System reliably and economically.
6.5 Committee Expenses. Each Party shall pay the expenses of its
representative to the Administrative Committee.
ARTICLE 7. FORCE MAJEURE
7.1 Force Majeure. A Party shall not be considered to be in
default or breach of this Agreement, and shall be excused from performance, or
liability for damages to the other Party, to the extent it shall be delayed in
or prevented from performing or carrying out any of the obligations or
responsibilities of this Agreement because of a Force Majeure Event. "FORCE
MAJEURE EVENT" means any occurrence beyond the reasonable control of a Party
which causes such Party to be delayed in or prevented from performing or
carrying out any of its obligations under this Agreement and which by the
exercise of due diligence in accordance with Good Utility Practice, that Party
is unable to prevent, avoid, mitigate, or overcome, including any of the
following: any act of God, labor disturbance, act of the public enemy, war,
insurrection, riot, fire, storm or flood, ice, explosion, breakage or accident
to machinery or equipment, order, regulation or restriction imposed by
governmental military or lawfully established civilian authorities, provided
that a Force Majeure Event shall not include lack of finances or change in
market conditions, and provided further that any failure by Michigan Transco to
obtain services for the Transmission System due to the failure of any supplier
or subcontractor of Michigan Transco to perform any obligation to Michigan
Transco (including Consumers as maintenance supplier) shall not constitute a
Force Majeure Event hereunder unless such subcontractor or supplier is unable to
perform for reasons that would constitute a "Force Majeure Event" hereunder.
7.2 Procedure. Any Party claiming that a Force Majeure Event has
occurred shall (i) provide prompt written notice of such Force Majeure Event to
the other Party giving a detailed written explanation of the event and an
estimate of its expected duration and probable effect on the performance of that
Party's obligations hereunder; and (ii) use commercially reasonable efforts in
accordance with Good Utility Practice to mitigate the effect of the Force
Majeure Event on the other Party, except that settlement of any labor dispute
shall be in the sole judgment of the affected Party.
ARTICLE 8. DEFAULT
Unless excused by a Force Majeure Event, or the other Party's Event of
Default, each of the following events shall be deemed to be an "EVENT OF
DEFAULT" hereunder: failure of either
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Party, in a material respect, to comply with, observe, or perform any covenant,
warranty, or obligation under this Agreement, without limitation, and such
failure is not cured or rectified within thirty (30) days after receipt of
written notice of such failure from the other Party or such longer period as may
be reasonably required, provided that the defaulting Party diligently attempts
to cure the Event of Default.
ARTICLE 9. DISPUTES
Any disagreement between Michigan Transco and Consumers as to their
rights and obligations under this Agreement shall first be addressed by the
Parties. If representatives of the Parties are unable in good faith to
satisfactorily resolve their disagreement, the Parties shall refer the matter to
their respective senior management. If, after using their best efforts to try to
resolve the dispute, senior management cannot resolve the dispute in thirty (30)
days, either Party may exercise any right or remedy available pursuant to this
Agreement.
ARTICLE 10. REPRESENTATIONS AND WARRANTIES
10.1 Michigan Transco. Michigan Transco represents and warrants to
Consumers as follows:
10.1.1 Organization. Michigan Transco is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Michigan and Michigan Transco has the requisite corporate power and authority to
carry on its business as now being conducted.
10.1.2 Authority Relative to this Agreement. Michigan Transco
has the requisite power and authority to execute and deliver this Agreement and,
subject to the procurement of applicable regulatory approvals, to carry out the
actions required of it by this Agreement. The execution and delivery of this
Agreement and the actions it contemplates have been duly and validly authorized
by all required corporate action. The Agreement has been duly and validly
executed and delivered by Michigan Transco and constitutes a valid and binding
Agreement of Michigan Transco.
10.1.3 Regulatory Approval. Michigan Transco has obtained or
will obtain by the Closing Date any and all approvals of, and given notice to,
any public authority that is required for it to execute and deliver this
Agreement.
10.1.4 Compliance With Law. Michigan Transco represents and
warrants that it is not in violation of any applicable law, statute, order,
rule, or regulation promulgated or judgment entered by any Federal, state, or
local governmental authority, which violation would materially affect Michigan
Transco's performance of its obligations under this Agreement. Michigan Transco
represents and warrants that it will comply in all material respects with all
applicable laws, rules, regulations, codes, and standards of all Federal, state,
and local governmental agencies having jurisdiction over this Agreement, except
to the extent that a failure to so comply would not have a material adverse
effect on Michigan Transco's obligations hereunder.
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10.2 Consumers. Consumers represents and warrants to Michigan
Transco as follows:
10.2.1 Organization. Consumers is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Michigan, and has the requisite power and authority to carry on its business as
is now being conducted.
10.2.2 Authority Relative to this Agreement. Consumers has the
requisite power and authority to execute and deliver this Agreement and, subject
to the procurement of applicable regulatory approvals, to carry out the actions
required of it by this Agreement. The execution and delivery of this Agreement
and the actions it contemplates have been duly and validly authorized by all
required corporate action. The Agreement has been duly and validly executed and
delivered by Consumers and constitutes a valid and binding Agreement of
Consumers.
10.2.3 Regulatory Approval. Consumers has obtained or will
obtain by the Closing Date any and all approvals of, and given notice to, any
public authority that is required for it to execute and deliver this Agreement.
10.2.4 Compliance With Law. Consumers represents and warrants
that it is not in violation of any applicable law, statute, order, rule, or
regulation promulgated or judgment entered by any Federal, state, or local
governmental authority, which violation would materially affect its performance
of its obligations under this Agreement. Consumers represents and warrants that
it will comply in all material respects with all applicable laws, rules,
regulations, codes, and standards of all Federal, state, and local governmental
agencies having jurisdiction over this Agreement, except to the extent that a
failure so to comply would not have a material adverse effect on its obligations
hereunder.
10.3 Effectiveness. The representations and warranties in Sections
13.1 and 13.2 shall continue in full force and effect for the term of this
Agreement.
ARTICLE 11.
ASSIGNMENT OR OTHER CHANGE IN CORPORATE IDENTITY
This Agreement and all of the provisions hereof shall be binding upon,
and inure to the benefit of the Parties and their respective successors and
permitted assigns, but assignment of any right, interest, or obligation under
this Agreement may not be made without the other Party's prior written consent,
which consent shall not be unreasonably withheld. Assignments to which there is
not consent may be voided by the non-assigning Party.
ARTICLE 12. MISCELLANEOUS
12.1 Waiver. Except as otherwise provided in this Agreement, any
failure of a Party to comply with any obligation, covenant, agreement, or
condition herein may be waived by the Party entitled to the benefit thereof only
by a written instrument signed by the Party granting such waiver, but such
waiver shall not operate as a waiver of, or estoppel with respect to any
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subsequent failure of the first Party to comply with such obligation, covenant,
agreement, or condition.
12.2 Governing Law. This Agreement, and all rights, obligations,
and performances of the Parties hereunder, are subject to all applicable Federal
and state laws, and to all duly-promulgated orders, and other duly-authorized
action of governmental authorities having jurisdiction. When not in conflict
with or preempted by Federal law, this Agreement will be governed by and
construed in accordance with the laws of the State of Michigan, without giving
effect to the conflict of law principles thereof.
12.3 Severability. If any of the provisions of this Agreement are
held to be unenforceable or invalid by any court or Regulatory Authority of
competent jurisdiction, the Parties shall, to the extent possible, negotiate an
equitable adjustment to the provisions of this Agreement with a view toward
effecting the purpose of this Agreement, and the validity and enforceability of
the remaining provisions hereof shall not be affected thereby.
12.4 Amendment. If the applicable provisions relating to the
implementation of this Agreement are changed materially from the policies,
methods, and procedures contemplated herein, the Parties shall endeavor in good
faith to make conforming changes to this Agreement with the intent to fulfill
the purposes of this Agreement. Any amendment to this Agreement shall be in
writing and signed by both Parties.
12.5 Further Assurances. The Parties hereto agree to promptly
execute and deliver, at the expense of the Party requesting such action, any and
all other and further instruments and documents which may be reasonably
requested in order to effectuate the transactions contemplated hereby, and shall
carry out their obligations under this Agreement.
12.6 Third Party Agreements. This Agreement, including the
appendices to this Agreement, the Michigan Transco Transmission Tariffs, the
Service Agreements thereunder, and other agreements referenced herein, shall not
be construed, interpreted or applied in such a manner as to cause Consumers to
be in breach, anticipatory or otherwise, of any agreement between Consumers and
one or more third parties who are not Parties to this Agreement for the joint
ownership, operation, or maintenance of any electric facilities covered by this
Agreement, or the Michigan Transco Transmission Tariffs. Consumers shall discuss
with Michigan Transco any material conflict between such third-party joint
agreement and this Agreement, or the Michigan Transco Transmission Tariffs,
raised by a third party to such joint agreement, and shall act in good faith to
resolve such conflict in accordance with Good Utility Practice.
12.7 No Third Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended to confer on any person, other than the Parties,
any rights or remedies under or by reason of this Agreement.
12.8 No Power of Representation. Michigan Transco shall have no
power to represent, bind, or otherwise obligate Consumers.
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12.9 Confidentiality. All information regarding a Party (the
"DISCLOSING PARTY") that is furnished directly or indirectly to the other Party
(the "RECIPIENT") pursuant to this Agreement and marked "Confidential" shall be
deemed "CONFIDENTIAL INFORMATION". Notwithstanding the foregoing, Confidential
Information does not include information that (i) is rightfully received by
Recipient from a third party having an obligation of confidence to the
Disclosing Party, (ii) is or becomes in the public domain through no action on
Recipient's part in violation of this Agreement, (iii) is already known by
Recipient as of the date hereof, or (iv) is developed by Recipient independent
of any Confidential Information of the Disclosing Party. Information that is
specific as to certain data shall not be deemed to be in the public domain
merely because such information is embraced by more general disclosure in the
public domain.
12.9.1 Recipient shall keep all Confidential Information
strictly confidential and not disclose any Confidential Information to any third
party for a period of two (2) years from the date the Confidential Information
was received by Recipient, except as otherwise provided herein.
12.9.2 Recipient may disclose the Confidential Information to
its affiliates and its affiliates' respective directors, officers, employees,
consultants, advisors, and agents who need to know the Confidential Information
for the purpose of assisting Recipient with respect to its obligations under
this Agreement. Recipient shall inform all such parties, in advance, of the
confidential nature of the Confidential Information. Recipient shall cause such
parties to comply with the requirements of this Agreement and shall be
responsible for the actions, uses, and disclosures of all such parties.
12.9.3 If Recipient becomes legally compelled or required to
disclose any of the Confidential Information (including, without limitation,
pursuant to the policies, methods, and procedures of the FERC, including the
OASIS Standards of Conduct, or other Regulatory Authority), Recipient will
provide the Disclosing Party with prompt written notice thereof so that the
Disclosing Party may seek a protective order or other appropriate remedy.
Recipient will furnish only that portion of the Confidential Information which
its counsel considers legally required, and Recipient will cooperate, at the
Disclosing Party's expense, with the Disclosing Party's counsel to enable the
Disclosing Party to obtain a protective order or other reliable assurance that
confidential treatment will be accorded the Confidential Information. It is
further agreed that, if, in the absence of a protective order, Recipient is
nonetheless required to disclose any Confidential Information, Recipient will
furnish only that portion of the Confidential Information which its counsel
considers legally required.
12.10 Survival. The indemnification obligations of each Party under
Article 7 shall become effective upon the occurrence of the Closing Date, and,
for acts and occurrences prior to expiration, termination, completion,
suspension, or cancellation of this Agreement shall continue in full force and
effect regardless of whether this Agreement expires, terminates, or is
suspended, completed, or canceled. The provisions of Articles 8, 9, and 10 shall
survive termination, expiration, cancellation, suspension, or completion of this
Agreement.
12.11 Notices. All notices, requests, claims, demands, and other
communications hereunder shall be in writing and shall be deemed effective upon
receipt when delivered either
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by hand delivery, cable, telecopy (confirmed in writing), or telex, or by mail
(registered or certified, postage prepaid) to the respective Parties as follows:
If to Michigan Transco to:
--------------------------
--------------------------
--------------------------
Attention:
----------------
Fax:
----------------------
If to Consumers to:
--------------------------
--------------------------
--------------------------
Attention:
----------------
Fax:
----------------------
12.12 Entire Agreement. This Agreement constitutes the entire
understanding between the Parties, and supersedes any and all previous
understandings, oral or written, which pertain to the subject matter contained
herein.
12.13 Counterparts. This Agreement may be executed in counterparts,
all of which will be considered one and the same Agreement and each of which
will be deemed an original.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the date and year first above written.
MICHIGAN ELECTRIC TRANSMISSION COMPANY
By: ________________________
Name: ________________________
Title: ________________________
CONSUMERS ENERGY COMPANY
By: _________________________
Name: _________________________
Title: _________________________
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Appendix 1
Operating Protocols
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OPERATING PROTOCOLS
Pursuant to and in accordance with the Operating Agreement between
Michigan Electric Transmission Company ("MICHIGAN TRANSCO") and Consumers Energy
Company ("CONSUMERS") entered into concurrently herewith, the Parties agree to
the following Operating Protocols. The Effective Date of this agreement is the
same as that described in the Operating Agreement ("Agreement"), and all
capitalized terms used herein shall have the same meaning ascribed thereto in
the Operating Agreement, unless otherwise indicated.
ARTICLE 1
CONTROL OF TRANSMISSION SYSTEM
1.1 Michigan Control Area Responsibilities. Agreements have been
reached with entities responsible for Control Area Operations as defined by the
NERC to calculate and operate to a single area control error for Michigan
Transco's Transmission System.
1.2 Michigan Transco Operational Responsibilities. Michigan
Transco shall have operational control over the Transmission Assets that
comprise the Transmission System. Michigan Transco shall function as Control
Area Operator. Upon consummation of the Transfer Transaction, Consumers will
transfer operational control to Michigan Transco in a manner consistent with
Good Utility Practice. Michigan Transco will cooperate with Consumers to
facilitate the transfer of operational control.
1.2.1 Michigan Transco shall periodically review whether the
Transmission Assets under its operational control constitute all of the
facilities necessary to provide reliable, non-discriminatory transmission
service as contemplated under the Operating Agreement and the Michigan Transco
Transmission Tariffs.
1.2.2 Michigan Transco shall, in consultation with Consumers,
develop, and revise from time-to-time as appropriate, operating procedures for
its exercise of operational control over the Transmission System (hereinafter
"Operating Procedures"). The Operating Procedures shall be provided to Consumers
and, except to the extent determined necessary for emergency or security
reasons, such procedures shall be made available to the public. Michigan Transco
shall comply with its Operating Procedures in exercising its operational control
over the facilities described above.
1.2.3 Michigan Transco shall operate the Transmission System
in such a way as to preserve the rights of Consumers' existing open access
Transmission Customers and transmission customers taking service under
Grandfathered Agreements.
1.2.4 Michigan Transco shall be responsible for coordinating
the operation of the Transmission System with Consumers, NERC, ECAR, and any
other applicable regional reliability councils. Michigan Transco may join such
regional reliability councils as appropriate.
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1.2.5 Michigan Transco shall comply with any transmission
operating obligations imposed by federal or state law or Regulatory Authorities
which can no longer be performed solely by Consumers following transfer of
ownership and operational control of the Transmission System to Michigan
Transco, until such obligations are revised or changed.
1.3 Operational Responsibilities of Consumers. Consumers shall own
and maintain its Distribution Facilities in accordance with Good Utility
Practice, and shall comply with the reasonable requests of Michigan Transco with
respect to such operation and maintenance issued in compliance with these
Operating Procedures.
1.4 Retained Rights by Consumers. Consumers shall retain all
rights of ownership in the Distribution Facilities. Nothing in this agreement
shall be deemed to restrict or prohibit access to the Transmission System by
Consumers, or its duly authorized representative(s), in furtherance of its
obligations under the Operating Agreement so long as such access does not affect
the provision of safe, reliable, and efficient transmission service under the
Michigan Transco Transmission Tariffs. Consumers shall be notified by Michigan
Transco immediately of any event which results or which may result in unplanned
outages of a transmission line, transformer or other transmission facilities.
Michigan Transco shall credit to Consumers those charges billed and collected
for the use of the Distribution Facilities by wholesale customers taking
transmission service under Michigan Transco Transmission Tariffs.
ARTICLE 2
DETERMINATION OF AVAILABLE TRANSMISSION CAPACITY
AND TRANSMISSION SCHEDULING
2.1 Determination of Available Transmission Capacity. Michigan
Transco shall determine the ATC consistent with the terms of the Michigan
Transco Transmission Tariffs.
2.1.1 Michigan Transco shall review all data received from
other control areas, independent transmission system operators, regional
reliability councils, or other entities that impact ATC calculations.
2.1.2 Michigan Transco shall share data with other control
areas, independent transmission system operators, regional reliability councils,
or other entities with whom data must be exchanged, as requested, in order to
determine ATC.
2.1.3 Michigan Transco shall determine the capacity, rating,
control settings, and contingency analysis parameters for all Transmission
Assets used to calculate ATC.
2.2 Transmission Service Requests. Michigan Transco shall receive
and process all transmission service requests in accordance with the Michigan
Transco Transmission Tariffs.
2.2.1 Michigan Transco shall be responsible for conducting all
System Impact Studies associated with a request for transmission service. To the
extent that a request for transmission service under the Michigan Transco
Transmission Tariffs will or may have an
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adverse affect on Consumers' ability to safely and reliably serve its
transmission customers pursuant to the terms of the Grandfathered Agreements,
Michigan Transco shall coordinate its System Impact Study analysis with
Consumers as follows:
2.2.1.1 Michigan Transco shall provide sufficient
information to representatives of Consumers to allow them to model load
consequences of the requested service on Distribution Facilities.
2.2.1.2 Michigan Transco shall coordinate with
Consumers representatives when processing requests for open access,
non-discriminatory transmission service over Distribution Facilities pursuant
the terms of the Michigan Transco Transmission Tariffs.
2.2.1.3 Michigan Transco shall consult with Consumers
with respect to the construction of new Transmission Assets, or the expansion of
existing Transmission Assets, which affects or may affect the Distribution
Facilities.
2.2.1.4 Upon completion of any required System Impact
Studies, Michigan Transco shall be responsible for making the final
determination as to the amount of firm and non-firm transmission capacity that
is available under the Michigan Transco Transmission Tariffs and for resolving
requests for transmission service in accordance with the terms of the Michigan
Transco Transmission Tariffs.
2.2.2 To the extent that there is not adequate transmission
capability to satisfy a transmission request, Michigan Transco shall relieve or
facilitate the relief of the transmission constraint consistent with Good
Utility Practice and the terms of the Michigan Transco Transmission Tariffs.
2.2.3 Michigan Transco shall document all requests for
transmission under the Michigan Transco Transmission Tariffs, the disposition of
such requests, and any supporting data required to support the decision with
respect to such requests.
2.3 Implementation of Transmission Service Transactions. Michigan
Transco shall process and implement all requests for transmission service made
under the Michigan Transco Transmission Tariffs, as follows:
2.3.1 Michigan Transco shall schedule and curtail
transmission service in accordance with the terms of Michigan Transco
Transmission Tariffs.
2.3.2 Michigan Transco shall, in consultation with
Consumers, develop, and from time-to-time amend, as necessary, scheduling
protocols ("Scheduling Procedures"). The Scheduling Procedures shall not
conflict with the terms of the Michigan Transco Transmission Tariffs or
requirements of any applicable Regulatory Authorities. All scheduling shall be
performed in accordance with the Scheduling Procedures.
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2.3.3 Michigan Transco shall operate its Control Area to
maintain load and supply balance. In so doing, Michigan Transco shall comply
with the scheduling instructions issued pursuant to the Scheduling Procedures.
2.3.4 In performing its scheduling functions, Michigan
Transco shall ensure that the Transmission System is operated in compliance with
applicable NERC, ECAR or other regional reliability council or successor
organizations' reliability requirements, and all other applicable operating
reliability criteria.
2.3.5 Michigan Transco shall perform all inadvertent flow
accounting for its control area and shall coordinate the performance of such
accounting with other control areas.
ARTICLE 3
MICHIGAN TRANSCO'S OBLIGATIONS PURSUANT TO THE MICHIGAN
TRANSCO TRANSMISSION TARIFFS
3.1 Michigan Transco shall be solely responsible for administering
the Michigan Transco Transmission Tariffs.
3.2 Michigan Transco shall negotiate as appropriate to develop
reciprocal service, equitable tariff application, compensation principles, and
any related arrangements.
3.3 Michigan Transco shall credit to Consumers those charges billed
and collected for the use of the Distribution Facilities by wholesale customers
taking transmission service under Michigan Transco Transmission Tariffs.
ARTICLE 4
SECURITY OF THE TRANSMISSION SYSTEM
4.1 Obligations of Michigan Transco to Maintain the Security of the
Transmission System. Michigan Transco shall be responsible for the security and
reliability of the Transmission System. In addition, Michigan Transco shall be
responsible for operating its control area in a secure and reliable manner. As
Control Area Operator, Michigan Transco, shall exercise security monitoring and
emergency response functions, as described in more detail below.
4.2 Security Monitoring.
4.2.1 Michigan Transco shall perform load-flow and stability
studies of the Transmission System to identify and address security problems.
4.2.2 Michigan Transco shall monitor its control area for
system security. It shall be responsible for identifying and addressing local
security problems.
4.2.3 Michigan Transco shall exchange necessary security
information with other control areas, independent transmission system operators,
ECAR, and any other
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applicable regional reliability councils consistent with NERC (or successor
organizations) and regional requirements, and the OASIS Standards of Conduct.
4.2.4 Consumers shall continuously provide Michigan Transco
with all data required to assess the security of the Transmission System
consistent with NERC (or successor organizations), ECAR, and any other
applicable regional requirements, and OASIS Standards of Conduct.
4.3 Emergency Response. Michigan Transco shall work with
Consumers, other security coordinators, NERC, ECAR, and other applicable
regional councils to develop regional security plans and emergency operating
procedures.
4.3.1 Michigan Transco shall, in coordination with Consumers,
other security coordinators, NERC, ECAR, or other applicable regional
reliability councils, develop, and from time-to-time update, procedures for
responding to emergencies (hereinafter the "Emergency Procedures"). Such
Emergency Procedures shall include procedures for responding to specified
critical contingencies.
4.3.2 Michigan Transco shall continuously analyze issues that
may require the initiation of emergency response actions. Such analysis may be
made at Michigan Transco's initiative, or at the request of Consumers and/or
other Transmission Customers, NERC, regional reliability councils, security
coordinators, or other system operators. The Emergency Procedures shall be
amended to include any changes or additions resulting from such analysis.
4.3.3 Michigan Transco shall direct the response to any
emergency in the Transmission System pursuant to the Emergency Procedures.
Consumers and other Transmission Customers shall carry out the required
emergency procedures as directed by Michigan Transco. Michigan Transco will
alert Consumers and other Transmission Customers to the possibility of load
shedding and will provide as much advance notice as possible of the need to shed
firm load.
ARTICLE 5
ANCILLARY SERVICES
Pursuant to Section 3.1.4 of the Operating Agreement, Michigan Transco
shall be obligated to offer ancillary services, as required by the applicable
rules and regulations of the FERC, to all Transmission Customers taking service
under the Michigan Transco Transmission Tariffs. Michigan Transco shall procure
such ancillary services on a non-preferential and competitive basis from
Consumers and from any third-party suppliers of such services at FERC-approved
rates. Upon request, Consumers shall provide ancillary services to Michigan
Transco. So long as Michigan Transco and Consumers are corporate affiliates, the
charges for such ancillary services provided by Consumers shall be in accordance
with FERC-approved rates.
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ARTICLE 6
TRANSMISSION AND GENERATION MAINTENANCE
6.1 Planned Transmission Maintenance. Michigan Transco is
responsible for reviewing, establishing, and updating schedules for all planned
maintenance of the Transmission System. Michigan Transco shall establish its
planned transmission maintenance schedules for a minimum of a rolling one (1)
year period, which shall be updated monthly.
6.1.1 Michigan Transco shall determine if, and to the extent
which, such planned transmission maintenance affects transmission service, ATC,
ancillary services, the security of the Transmission System, Consumers
distribution service and any other relevant effects. This determination shall
include appropriate analytical detail. As part of its review process, Michigan
Transco shall identify planned transmission maintenance schedules that limit
ATC, and opportunities and associated costs for rescheduling planned maintenance
to enhance ATC. If Michigan Transco reschedules maintenance at Consumers
request, Michigan Transco shall be compensated for additional costs associated
with rescheduling such planned maintenance pursuant to procedures jointly agreed
to by Consumers and Michigan Transco.
6.1.2 Michigan Transco will coordinate planned outages of the
Transmission System with Consumers. Consumers shall inform Michigan Transco of
all customer-owned equipment outages that could impact loading on the
Transmission System.
6.1.3 In developing its transmission maintenance schedule,
Michigan Transco will comply with all applicable reliability standards,
including, but not limited to, the current maintenance practices of Consumers,
will meet Consumers' requirements for access to the Transmission System, and
will endeavor to minimize transmission congestion.
6.2 Unplanned and Emergency Transmission Maintenance. Michigan
Transco shall coordinate unplanned transmission maintenance with Consumers to
assure that reliability of the Transmission System and Consumers distribution
system is maintained. For emergency conditions which are likely to result in
significant disruption of service or damage to Generation Resources, the
Transmission System or Distribution Facilities, or are likely to endanger life,
property, or the environment, Consumers (to the extent responsible for
performing said maintenance) shall notify Michigan Transco of such emergency
maintenance. Prior approval by Michigan Transco for such emergency transmission
maintenance is not required.
6.3 Generation Maintenance. Consumers shall coordinate the
maintenance of Generation Resources with Michigan Transco to the extent such
generation maintenance affects the capability or reliability of the Transmission
System as follows:
6.3.1 Consumers shall submit its planned generating unit
maintenance schedules to Michigan Transco annually for a two (2) year period,
updated to include changes.
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6.3.2 Michigan Transco shall analyze planned generating unit
maintenance schedules to determine the effect on Consumers (and other
Transmission Customers), ATC, ancillary services, the security of the
Transmission System, identification of must-run units, and any other relevant
effects. Michigan Transco shall inform Consumers if its generation maintenance
schedule is expected to have an impact on the security of the Transmission
System.
6.3.3 As part of its review process, Michigan Transco shall
identify Generation Resource maintenance schedules that limit ATC and shall
recommend opportunities for rescheduling planned maintenance to enhance ATC. If
Consumers reschedules maintenance at Michigan Transco's request, Consumers shall
be compensated for additional costs associated with rescheduling such planned
maintenance pursuant to procedures adopted by Michigan Transco, and applied on a
non-discriminatory basis to all similarly situated generation owners located
within Michigan Transco's Control Area.
6.3.4 With respect to all Generating Resources connected to
the Transmission System, Michigan Transco will enter into interconnection
agreements and, if necessary, must-run agreements which define coordinated
operations and such other operating requirements as are necessary to ensure the
safe and reliable operation of such Generation Resources with the Transmission
System.
6.4 Unplanned Generation Maintenance. Consumers shall notify
Michigan Transco promptly in the event of an unplanned outage of the Generation
Resources, including partial forced outages. Consumers will coordinate unplanned
generation maintenance with Michigan Transco to ensure that the reliability of
the Transmission System is maintained. For emergency conditions which are likely
to result in significant disruption of service or damage to Generation
Resources, the Transmission System, or Distribution Facilities, or are likely to
endanger life, property, or the environment, Consumers shall notify Michigan
Transco of the emergency generation maintenance. Prior approval for emergency
generation maintenance is not required.
ACCEPTED AND AGREED THIS ______ day of October, 2000.
Michigan Electric Transmission Company Consumers Energy Company
_________________________________ ____________________________________
By: By:
Its: Its:
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