EXHIBIT 26
CONFIDENTIAL MATTER
-------------------
AMENDMENT NO. 2 TO
POWER PURCHASE AGREEMENT
BETWEEN
NEW YORK STATE ELECTRIC & GAS CORPORATION
AND
SARANAC POWER PARTNERS, L.P.
----------------------------
THIS AMENDMENT made this 24th day of February 1994, by and between New
York State Electric & Gas Corporation, a New York corporation having an office
for the transaction of business in Binghamton, N.Y. ("Buyer"), and Saranac Power
Partners, L.P., a Delaware limited partnership having an office for the
transaction of business in Houston, Texas ("Seller"), amends that power purchase
agreement between Buyer and Seller dated April 27, 1990 and amended August 29,
1991 (the "Agreement").
WITNESSETH:
WHEREAS, Buyer submitted to Seller a proposal for the amendment of the
Agreement to provide for, among other things, Buyer's ability to schedule the
operation of Seller's cogeneration facility to be located in Plattsburgh, New
York (the "Plant"); and
WHEREAS, it is the objective of Buyer to obtain, among other ratepayer
benefits, increased operating flexibility associated with the ability to
schedule the Plant; and
WHEREAS, Buyer and Seller, pursuant to a letter of intent dated March
1, 1993, as amended, have met to negotiate the terms of such an amendment to the
Agreement; and
WHEREAS, as a result of those successful negotiations, Buyer and
Seller desire to amend hereby the Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration given by one party to the other, the sufficiency of which
each party acknowledges, Buyer and Seller agree as follows:
1. A new article, designated as Article XXI, is added to the
Agreement and shall read as follows:
ARTICLE XXI - SCHEDULING OF PLANT
(1) SCHEDULING. Beginning with the latter of (a) the effective date
of Amendment No. 2 to this Agreement or (b) the Commercial Operation
Date, through the remaining term of this Agreement, and
notwithstanding anything in this Agreement to the contrary, Buyer
shall have the right to schedule the operation of the Plant in
accordance with the scheduling instructions and operating procedures
contained in Exhibit I to this Agreement; provided, however, that in
no event shall Seller be required to operate the Plant in a manner
inconsistent with (i) maintaining the Plant's status as a qualifying
facility, as required by Section 1.1(b) of Article I hereof, and (ii)
operating the Plant in conformity with all laws and governmental
rules, regulations and permits applicable to the Plant and Seller
during the term of this Agreement; provided further, however, that if
Seller's operation of the Plant consistent with constraints (i) and
(ii) above, or Sel-ler's failure to comply with the scheduling
directions given by Buyer pursuant to this Article XXI, results in
Seller failing to reduce the electric generation of the Plant in any
Gas Supply Year for less than the number of megawatt hours scheduled
by Buyer for that Gas Supply Year in accordance with the terms hereof
(the "Requested Scheduling"), then Seller shall credit Buyer with the
difference between the Requested Scheduling and the number of megawatt
hours of electric generation reduction provided by Seller for that Gas
Supply Year, which credit shall be applied toward the following
-2-
Gas Supply Year, and Buyer shall be permitted to schedule the
generation of the Plant in the following Gas Supply Year for 200,000
megawatt hours plus the number of megawatt hours credited from the
prior Gas Supply Year. In the event that the number of megawatt
hours available for scheduling by Buyer in any Gas Supply Year
exceeds 240,000 megawatt hours, Buyer shall provide written notice
of said exceedance on or before that date which is sixty (60) days
after the commencement of a Gas Supply Year. Upon Seller's receipt
of said written notice, Seller and Buyer shall engage in good faith
negotiations for a period of sixty (60) days in order to finalize an
amendment to this Agreement restoring to Buyer scheduling and other
rights commensurate with those embodied in Amendment No. 2 to this
Agreement. If Seller and Buyer fail to so finalize such an
amendment within such sixty (60) day period, then Buyer shall have
the option, in addition to other remedies and rights under this
Agreement, to rescind Amendment No. 2 to this Agreement and, upon
such rescission, Buyer's right to curtail the electric generation of
the Plant shall be reinstated to the extent said right was waived
under Amendment No. 2 to this Agreement; provided, however, that
such option shall only apply if Buyer notifies Seller within sixty
(60) days of the expiration of the sixty (60) day period for
finalizing an amendment of its intent to rescind Amendment No. 2;
provided, further, that any notice to rescind Amendment No. 2
pursuant to this Article XXI shall be in writing and any such notice
shall state that the rescission of Amendment No. 2 shall be
effective as of the last day of the first month that ends at least
ten (10) business days after Seller receives such written notice.
(2) WAIVER OF CURTAILMENT RIGHTS. Buyer shall not curtail Seller
during the term of this Agreement pursuant to Article X hereof, or
otherwise, due to the existence of conditions satisfying the
requirements of section 292.304(f) of the PURPA regulations or
pursuant to any order issued by the Commission in Cases 92-E-0814 and
88-E-081 that (i) interprets said section 292.304(f) and (ii) permits
(utility-specific) curtailment. Neither Buyer nor Seller shall
commence or join any judicial or regulatory proceeding seeking to
overturn Amendment No. 2 to this Agreement.
2. A new exhibit is added to the Agreement, and is attached hereto
as Appendix A. This exhibit shall be entitled "Exhibit I - Operating
Procedures," and shall be incorporated into and made a part of the Agreement.
-3-
3. The first full paragraph of Article III of the Agreement is
deleted in its entirety and is replaced with the following text:
Seller agrees to deliver and make available to Buyer, and Buyer agrees
to purchase from Seller, except as otherwise provided in this
Agreement, all of the electric energy and capacity produced or made
available by the Plant at the delivery point during the term of this
Agreement, including any extension or renewal thereof, at the
following rates:
(a) the purchase price for "Actual Generation" (as defined in Exhibit
J) shall be the applicable rate set forth in Exhibit B to this
Agreement.
(b) the purchase price for "Available Generation" (as defined in
Exhibit J) shall be the applicable rate set forth in Exhibit J to
this Agreement.
(c) to the extent that Seller delivers to the delivery point an
amount of energy associated with more than 240 MW of capacity, as
averaged over a five (5) minute period ("Excess Energy"), then
Buyer shall pay for said Excess Energy at a rate equal to the
lower of (i) ninety-five percent (95%) of Seller's Variable Cost
at the time said energy was delivered, or (ii) eighty percent
(80%) of Buyer's avoided energy cost as designated in Buyer's
Service Classification No. 10 tariff, as the same may be amended
or superseded ("SC-10"), which avoided energy cost shall not
include the minimum rate referenced in Section 66-c of the New
York Public Service Law. Buyer's avoided energy cost shall be
calculated at a Transmission level (115 kV) and shall be
time-differentiated (namely, separated into on-peak and off-peak
rates). Seller shall not receive, and Seller hereby waives, any
capacity payment for said Excess Energy and any energy payment
for said Excess Energy greater than that rate provided under this
subparagraph (c); provided, however, that if Buyer requests that
Seller deliver Excess Energy to the delivery point, then
Buyer shall pay a rate for such Excess Energy equal to the
greater of (i) one hundred and five percent (105%) of Seller's
Variable Cost at the time said energy is delivered, and (ii)
eighty percent (80%) of Buyer's avoided energy cost as designated
in SC-10.
-4-
4. The first paragraph of Article IV of the Agreement is revised to
read as follows:
Buyer shall pay Seller via wire transfer, or such other agreed upon
payment method, for the electric energy and capacity delivered or made
available during the preceding calendar month, applying the price
terms set forth in Article III. Buyer shall make said payment to
Seller's account at such bank as Seller may from time to time
designate in writing on or before the twenty-fifth (25th) day of each
month. Buyer shall make said payment provided that Seller shall
notify Buyer in writing, at least thirty (30) days in advance of a
required payment hereunder, of any change in the account to which such
payment is to be directed, and that, during any period that the
Lenders (as defined in Exhibit B) hold a security interest in the
Plant, such notice shall not be effective unless accompanied by a
written authorization signed by a representative of the Lenders.
Along with this payment, Buyer shall enclose a statement explaining
how the payment amount was calculated.
5. The text of the Article V entitled "Price for Electricity Sold to
Buyer" is deleted in its entirety and replaced by "Reserved."
6. The third paragraph of Article XI of the Agreement is deleted in
its entirety.
7. A new exhibit is added to the Agreement, and is attached hereto
as Appendix B. This exhibit shall be entitled "Exhibit J - Payment for
Available Generation," and shall be incorporated into and made a part of the
Agreement.
8. A new exhibit is added to the Agreement, and is attached hereto
as Appendix C. This exhibit shall be entitled "Exhibit K - Payment for Start-Up
Costs," and shall be incorporated into and made a part of the Agreement.
-5-
9. A new article, designated Article XXII, is added to the Agreement
and shall read as follows:
ARTICLE XXII - REACTIVE POWER SUPPORT
Seller shall provide to Buyer, upon Buyer's request, up to 40,000 MVAR
- hours of reactive power support during each Gas Supply Year during
the term of this Agreement. Buyer understands that, while the Plant's
VAR capability varies with ambient temperature, in no event shall
Seller be able to provide reactive power support from each of Seller's
three (3) generators in excess of a power factor of 0.85 in the lag
(namely, providing reactive power support to Buyer's system) and unity
in the lead; provided, however, that in no case shall Seller be
required to provide to Buyer MVAR in excess of the maximum level the
Plant can generate without reducing the Plant's ability to generate
240 MW net output as measured at the delivery point, as said maximum
level is designated in the D-curve provided by Seller hereunder. As
part of the monthly statement provided by Buyer to Seller pursuant to
Article IV of this Agreement, Buyer shall provide a written report of
the amount of reactive power support provided by Seller during the
prior month. Seller shall provide to Buyer, no later than thirty (30)
days prior to the Date of Commercial Operation, the D-curve for each
of the Plant's generators, which D-curves shall be updated by Seller
and provided to Buyer on or before each January 1 during the term of
this Agreement. Seller shall provide said reactive power support (a)
upon Buyer's telephonic request to the Plant control room, followed by
a confirming facsimile notice, the form of which facsimile notice
shall be finalized by Seller and Buyer within ten (10) days following
the execution by Seller and Buyer of Amendment No. 2 to this
Agreement, and (b) without compensation from Buyer. Buyer's requests
for reactive power support shall specify the magnitude of the VAR
support to be provided by Seller. Unless Seller determines that, for
Plant security reasons, the Plant must operate at some other power
factor, Seller shall operate the Plant at the power factor capability
requested by Buyer until otherwise notified by Buyer.
-6-
10. A new article, designated Article XXIII, is added to the
Agreement and shall read as follows:
ARTICLE XXIII - COORDINATION OF MAINTENANCE
Notwithstanding any other provision of this Agreement to the contrary,
Seller shall provide to Buyer, on or before September 1st of each year
during the term of this Agreement, a five-year schedule of maintenance
outages for the Plant, which schedule shall provide (a) the duration
of each outage and (b) the extent to which said maintenance outage(s)
for the first year of said schedule may be rescheduled by Buyer,
either earlier or later. Should the extent to which said maintenance
outage can be rescheduled, either earlier or later, be equal to or
less than one and one-half (1/1/2) months, Seller shall provide all
documentation and information reasonably requested by Buyer supporting
Seller's inability to reschedule the maintenance outage more than one
and one-half (1/1/2) months. Seller shall schedule and coordinate
these planned outages with Buyer and shall use reasonable efforts to
conduct all deferable maintenance during Buyer's off-peak periods,
which shall be defined as (a) those periods other than 7:00 am to
10:00 pm, Monday through Friday, and (b) the following holidays: New
Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day, and Christmas Day.
Subject to the limitations in rescheduling as specified by Seller in
accordance with the above paragraph, Buyer shall have the right to
modify the first-year of the five-year schedule of maintenance outages
submitted by Seller, without compensation to Seller, by providing
written notice to Seller no later than sixty (60) days prior to the
earlier of (a) the date the outage is being rescheduled by Buyer to
commence, and (b) the date the outage was scheduled by Seller to
commence. If Buyer provides less than sixty (60) days' written notice
to Seller of its intent to modify Seller's maintenance schedule, Buyer
shall compensate Seller for any incremental charges reasonably
incurred by Seller under its fuel supply agreements and for Seller's
other reasonably incurred incremental costs; provided, however, that
Seller shall provide to Buyer, by facsimile transmission, a statement
detailing these incremental charges within two (2) business days of
Seller's receipt of Buyer's written notice. Seller's failure to
provide this statement timely shall be deemed as an acceptance by
Seller of Buyer's direction to modify the maintenance schedule without
-7-
compensation from Buyer. Buyer shall have the right to rescind the
notice to Seller within two (2) business days of Buyer's receipt of
Seller's statement of incremental charges. In no event shall Seller
be required to take any action to implement a revision to the
maintenance schedule until Buyer's right to rescind has expired.
Seller may modify its schedule of planned outages at any time subject
to Buyer's consent, which consent shall not be unreasonably withheld.
Seller shall provide to Buyer in writing the expected duration of a
forced outage within forty-eight (48) hours after the start of the
outage.
11. A new article, designated as Article XXIV, is added to the
Agreement and shall read as follows:
ARTICLE XXIV - RIGHT OF FIRST REFUSAL
Buyer shall have a right of first refusal with respect to the sale by
Seller of any additional capacity, and associated energy, produced by
the Plant above 240 MW (the "Additional Capacity"). Seller shall
notify Buyer in writing of its receipt of any acceptable, bona fide
offer from a third party for the purchase of all or part of the
Additional Capacity. Within thirty (30) days from the date of its
receipt of said notice from Seller, Buyer may provide written notice
to Seller that it will purchase the Additional Capacity pursuant to
the terms of said third party offer. If Buyer provides said notice to
Seller, Buyer and Seller shall immediately commence negotiations for a
power purchase agreement to memorialize the terms of said third party
offer. If Buyer does not provide said notice to Seller, Seller may
accept said third party offer and Buyer shall be deemed to have
provided any written approval of such sale of power to a third party
that might otherwise be required under Articles XII and XIII of this
Agreement. Seller shall not sell any Additional Capacity to a third
party unless Buyer has failed to exercise its right of first refusal
hereunder.
-8-
12. A new article, designated Article XXV, is added to the Agreement
and shall read as follows:
ARTICLE XXV - FUEL REMARKETING OBLIGATIONS
Seller hereby acknowledges and agrees that, to the extent that
Seller's fuel supplies exceed that amount of fuel that is needed (a)
to operate the Plant consistent with maintaining its status as a
qualifying facility, as required by Section 1.1(b) of Article 1
hereof, (b) to operate the Plant in compliance with its various
governmental permits and authorizations (as in effect from time to
time) and good utility and engineering practices, and (c) to operate
the Plant so as to comply with Seller's obligations to supply steam to
Seller's steam host, either party may undertake the exploration of
various means for utilizing such excess fuel supplies for purposes
other than consumption at the Plant for the mutual benefit of Seller
and Buyer. Buyer hereby acknowledges and agrees that any means of
utilizing Seller's fuel supplies that would require Seller to become a
gas corporation under the New York State Public Service Law or would
subject Seller to regulation by the New York State Public Service
Commission or other federal or state governmental agency, or result in
a reduction of net revenue to Seller, would not be to the mutual
benefit of the Seller and Buyer and will not be undertaken under this
Article XXV. Both parties agree to cooperate in good faith in
exploring such mutually beneficial endeavors, which cooperation shall
include (a) subject to any confidentiality restrictions or provisions,
Seller providing to Buyer all information and documents pertaining to
Seller's existing fuel supply and transportation arrangements
reasonably required by Buyer and (b) the negotiation and execution of
all necessary documents and agreements as reasonably requested by
either party in connection with the exploration of such alternatives.
Seller and Buyer agree that the expenses either party incurs to
consummate the ultimate transaction(s) contemplated hereunder, along
with the benefits of the transaction(s) hereunder, shall be subject to
negotiation by the parties as to their allocation. The parties hereto
acknowledge and agree that the consummation of any transaction that
may be contemplated by this Article XXV, and the obligation of the
parties with regard thereto, is subject to and specifically
conditioned upon (aa) the negotiation and execution of acceptable
agreements in form and content acceptable to each party, in their
respective reasonable discretion, (bb) the receipt of any required
-9-
governmental approval(s), and (cc) the receipt of necessary
consents, in form and content acceptable to Seller and its counsel,
of Seller's constituent partners, Seller's Lenders, Seller's fuel
suppliers (currently Shell Canada Limited) and, if required, the
consent of Seller's gas transporter and steam host. Nothing in this
Article XXV shall be construed so as to require Seller to violate
the confidentiality provisions of its fuel supply and transportation
arrangements with third parties.
13. A new article, designated XXVI, is added to the Agreement and
shall read as follows:
ARTICLE XXVI - NO PARTNERSHIP OR AGENCY RELATIONSHIP
This Agreement shall not be interpreted or construed to create an
association, joint venture or partnership between the parties hereto
or to impose any partnership obligations or liability upon either
party. Further, neither party (nor such party's employees,
representatives, agents and subcontractors) shall have any right,
power or authority to enter into any agreement or undertaking for or
on behalf of, to act as or be an agent or representative of, or to
otherwise bind the other party. It is covenanted and agreed that
neither party shall act or make any representation to any person or
persons whomsoever to the effect that such party, its agents,
representatives, or subcontractors is the agent or agents of the other
party.
14. The second to last sentence of the second paragraph of Exhibit B
- Performance Guarantee, which appears on page B-25 of the Agreement, shall be
revised to read as follows:
The capacity factor calculation will exclude curtailments made in
accordance with Article X by subtracting the curtailed MWHRS from
the maximum possible MWHRS, and will be performed using Potential
Generation (as defined in Exhibit J) as the numerator in the
appropriate formula(s). To the extent that the unavailability of
the Plant would, absent this provision, result in (a) the Plant
failing a capacity factor test under this Exhibit B - Performance
Guarantee, with the attendant reduction in the rate paid by Buyer
for electricity and (b) the Seller not receiving payment for
Available Generation, then Buyer may be compensated for such
-10-
unavailability in an amount equal to the greater of either (a) the
payments withheld to Seller pursuant to Article XXI due to said
unavailable generation for such unavailability or (b) the reduction
in the rate payable by Buyer for electricity pursuant to Exhibit B -
Performance Guarantee, but not both. Upon performing the capacity
factor tests pursuant to Exhibit B - Performance Guarantee of the
Agreement, Buyer shall compare any resulting reduction in rates that
Buyer is permitted to initiate as a result of Seller's failure, if
any, to satisfy said capacity factor test against the amount of
payments withheld from Seller during the period over which the
capacity factor test was performed. If the capacity factor test
rate reduction is greater than the amount of withheld payments, then
Buyer may initiate a reduction in the rates payable to Seller for
electricity for that period of time necessary to recover the
positive difference between the reduction allowed under Exhibit B
and the withheld payments for unavailable generation. If the
capacity factor test reduction is less than the amount of withheld
payments, then Buyer shall not be permitted to initiate any
reduction in rates payable to Seller for electricity.
15. The third through seventh paragraphs of Exhibit B - Pricing
Description are revised to read as provided in Appendix D hereto.
16. The third paragraph of Exhibit B - security language - 8.
SECURITY FOR FRONT LOAD is revised by inserting the parenthetical "(assuming the
Plant's power was sold under a must-run contract)" after "such payments", where
it appears in the second sentence.
17. This Amendment, and each of the new articles and exhibits added
to the Agreement, shall become effective when executed by Buyer and Seller,
subject to a condition subsequent of Seller's constituent limited partners
("Limited Partners") and Lenders' consents. In the event that the Limited
Partners' and Lenders' consents are not obtained within ninety (90) days
after the effective date of this Amendment, or the Limited Partners or
Lenders insist on any material modification to
-11-
this Amendment as a condition to its consent, Buyer may terminate this
Amendment upon written notice to Seller without any liability by Buyer to
Seller. Seller shall submit this Amendment to the Limited Partners and
Lenders promptly after the Amendment is fully executed and Seller shall use
its reasonable efforts (a) to obtain the Limited Partners' and Lenders'
consents and (b) to keep Buyer apprised of Seller's discussions with such
entities regarding requests for such consents.
The Limited Partners and Lenders may consent to all or part of this
Agreement, and this Amendment shall survive to the extent to which the Limited
Partners' and Lenders grant their consents, provided, however, that the Limited
Partners and Lenders must consent, to (a) the entirety of proposed Article XXI
of the Agreement, and related provisions, as proposed in paragraphs 1, 2, 4, 5,
6, 7, 8 and 9 of this Amendment, and (b) identical terms.
18. Notwithstanding Article XIX of the Agreement, Buyer and Seller
hereby agree that the effectiveness of this Amendment is not contingent upon, or
otherwise subject to, the approval of the New York State Public Service
Commission.
19. Except as otherwise modified by this Amendment, the terms of the
Agreement remain unchanged and in full force and effect.
20. Seller and Buyer agree that this Agreement constitutes
Confidential Matter as defined in the Confidentiality Agreement between Seller
and Buyer, and Seller agrees to support any request for trade secret protection
for this Amendment made by Buyer to the New York Public Service Commission.
-12-
IN WITNESS WHEREOF, Buyer and Seller have caused this Amendment to be
executed as of the day and year first above written.
NEW YORK STATE ELECTRIC & GAS
CORPORATION
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President -
Electric Business Unit
SARANAC POWER PARTNERS, L.P.
By: Saranac Energy Company, Inc.
------------------------------
Its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Vice President
and Chief Financial
Officer
-13-
State of New York )
) ss.:
County of ▇▇▇▇▇▇ )
On this 8th day of March 1994, before me personally came ▇▇▇▇ ▇.
▇▇▇▇▇▇, to me personally known, who, being by me duly sworn, did depose and say
that he resides at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, N.Y., that he is the Senior
Vice President - Electric Business Unit of New York State Electric & Gas
Corporation, the corporation described in and which executed the foregoing
document; and that he acknowledged to me that he executed the foregoing document
by authority of the Board of Directors or By-Laws of New York State Electric &
Gas Corporation.
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Notary Public
State of Texas )
) ss.:
County of ▇▇▇▇▇▇ )
On this 24th day of February 1994, before me personally came ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ to me personally known, who, being by me duly sworn, did depose and say
that he resides at ▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇; ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇; that he is the
Senior Vice President & CFO of Saranac Energy Company, Inc., the corporation
described in and which executed the foregoing document as a general partner of
Saranac Power Partners, L.P.; and that he acknowledged to me that he executed
the foregoing document by authority of the Board of Directors or By-Laws of
Saranac Energy Company, Inc.
/s ▇▇▇▇ ▇▇▇▇▇▇
--------------------------
Notary Public
-14-
APPENDIX A
----------
EXHIBIT I - OPERATING PROCEDURES
A. INFORMATION TO BE SUPPLIED BY SELLER TO BUYER
a. At least thirty (30) days prior to the Commercial Operation Date, and
on or before each January 15 thereafter during the term of this Agreement,
Seller shall provide to Buyer in writing an estimate of the Variable Cost for
that calendar year. Following the Commercial Operation Date, on or before the
fifteenth (15th) day of each month during the term of this Agreement, Seller
shall provide to Buyer in writing an updated estimate of the Variable Cost for
the upcoming month. Seller shall furnish to Buyer, with the estimates provided
to Buyer hereunder, those documents and data used by Seller to calculate the
estimate of the yearly or monthly Variable Cost.
b. Within ninety (90) days after the effective date of this Amendment,
Seller shall provide to Buyer a heat rate curve designating the Plant's heat
rate for the following load levels based on the average monthly ambient
temperatures expected at the Plant site: operation at 100% of the maximum net
output that can safely and reliably be achieved under expected operating
conditions (but in no event greater than 240 MW), 75% of such level, 100% of the
maximum net output that can safely and reliably be achieved under expected
operating conditions with one of the Plant's gas-fired turbines shut down, and
75% of such level (such outputs correspond to the
I-1
following nominal outputs: 240, 187, 115 and 90 MW based on the average
ambient temperatures expected at the Plant site). The set of heat rate
curves shall identify a heat rate curve applicable to each month of the
calendar year taking into account the expected average ambient temperature
for each month. On or before each January 15 after the Commercial Operation
Date and before the expiration of the term of this Agreement, Seller shall
provide updated versions of said heat rate curves based on testing of the
Plant's heat rate during the prior calendar year and, as appropriate, revised
estimates of expected average monthly ambient temperatures. The Plant's heat
rate shall be tested during normal Plant operating conditions. Buyer shall be
afforded the opportunity to have a representative present at any heat rate
test of the Plant. Seller shall provide to Buyer a two (2) week written
notice of any heat rate test of the Plant. Buyer shall have the right to
review the data used by Seller to create the heat rate curves provided to
Buyer hereunder.
B. BUYER'S SCHEDULING INSTRUCTIONS
a. Commencing on the date that Seller receives the consent of its Lenders
and Limited Partners to this Amendment, by no later than the Scheduling Deadline
(as defined herein) for each Gas Day (as defined herein), Buyer shall notify
Seller of the expected schedule for the Plant for such Gas Day (the
"Schedule"). For the purposes of this Agreement: (1) a Gas Day shall be the
twenty-four (24) hour period beginning at the time specified for the
commencement of a "day" by the tariff issued
I-2
by Seller's gas transporter (for gas delivered to the United States' border
with Canada at a point near ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ and applicable to
Seller's gas supply) and ending at the same time on the following day; (2)
the Scheduling Deadline for any particular Gas Day shall be 11:00 A.M.
Eastern Time of the business day prior to the Gas Nomination Deadline for
such Gas Day, adjusted forward or back in concert with any changes in the Gas
Nomination Deadline; provided, however, that adjustments related to a change
in the Gas Nomination Deadline shall not increase the time span between the
Gas Nomination Deadline and the start of the associated Gas Day by more than
six (6) hours; and (3) the Gas Nomination Deadline for any particular Gas Day
shall be the deadline for notifying Seller's gas transporter of the amount of
gas to be transported during such Gas Day, as such deadline is established in
the tariff issued by Seller's gas transporter for gas delivered to the United
States border with Canada at a point near ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ and
applicable to Seller's gas supply. Currently, Seller's gas transporter is
TransCanada PipeLines Limited; a Gas Day commences each day at 8 A.M. Eastern
Standard Time and ends at 8 A.M. the following day; and the Gas Nomination
Deadline is 11 A.M. Mountain Time of the day prior to the day on which a Gas
Day commences. Seller agrees to promptly notify Buyer in the event that
Seller's gas transporter amends its tariff in a manner that affects the
Scheduling Deadline or the period covered by a Gas Day.
I-3
b. The Schedule shall be transmitted by Buyer to Seller by facsimile,
and receipt of which shall be confirmed by telephonic message from Seller to
Buyer. The Schedule shall be transmitted to Seller on a form to be finalized
by Seller and Buyer within ten (10) days following the execution of Amendment
No. 2 to the Agreement by Seller and Buyer. The Schedule shall include the
operating levels for the applicable period (Gas Day), which shall be either
100% of the maximum net output that can safely and reliably be achieved under
actual operating conditions (but in no event greater than 240 MW), 75% of
such level, 100% of the maximum net output that can safely and reliably be
achieved under actual operating conditions with one of the Plant's gas-fired
turbines shut down, and 75% of such level (such output levels correspond to
the following nominal outputs: 240, 187, 115 and 90 MW, based on the average
ambient temperatures expected at the Plant site). The Schedule shall be
consistent with the provisions of this Exhibit I. Should Buyer fail to
provide a Schedule to Seller, Seller shall operate the Plant at its
discretion (not to exceed 240 MW) until such period (Gas Day) as Seller
receives a timely Schedule from Buyer. On the twentieth (20th) day of each
month during the term of this Agreement, Buyer shall provide to Seller in
writing a preliminary schedule for operation of the Plant for the upcoming
month. Buyer shall have the right to modify this preliminary monthly
schedule pursuant to this section b.
c. Buyer shall have the right to request a modification of the previously
scheduled operating level of the Plant for any particular period (Gas Day), or
remaining
I-4
part thereof, by providing telephonic notice to Seller no later than five and
one-quarter (5 1/4) hours prior to the commencement of the hour for which the
change in the Schedule is being requested by Buyer, provided that said
scheduling directive is consistent with the provisions of this Exhibit I.
Buyer may make its request in the form of a direction to Seller to implement
the modification to the schedule for said Gas Day provided that the
incremental costs to be incurred by Seller are equal to or less than an
amount specified by Buyer.
d. In the event Buyer requests a modification to a scheduled operating
level of the Plant pursuant to subparagraph c above, Seller shall promptly
use reasonable efforts to obtain the approval of its non-affiliated gas
suppliers and transporters (currently, Shell Canada Limited and TransCanada
PipeLines Limited, respectively) and determine its costs of complying with
such a request. If Seller succeeds in obtaining the consent of its
non-affiliated gas suppliers and transporters and Seller reasonably
determines that its cost of complying with such request would not exceed the
upper bound on costs, if any, previously specified by Buyer, then Seller
shall modify the Plant's operation to match Buyer's request and promptly
notify Buyer of the same. Buyer shall reimburse Seller for all incremental
costs reasonably incurred by Seller as a result of such change, but in no
event shall those costs exceed the ceiling on incremental costs, if any,
specified by Buyer and furnished to Seller in writing in advance of such
modification as provided for by subparagraph c above. If Seller is unable to
obtain the consent of its non-affiliated gas suppliers and transporters or
I-5
Seller reasonably determines that its cost of complying with such request
would exceed the upper bounds on costs, if any, previously specified by
Buyer, then (i) Seller shall promptly so notify Buyer, (ii) Seller shall not
be required to modify its operation to match Buyer's request, and (iii) any
megawatt-hours included in any such request shall not be used in determining
Requested Scheduling and the number of megawatthours Buyer requested for the
purposes of Article XXI(1), except to the extent that such MWHs were
scheduled by Buyer prior to such request.
e. Upon one (1) hours' telephonic notice to Seller, Buyer may request a
modification in the scheduled operating level of the Plant from 240 MW to 187
MW, or from 187 MW to 240 MW, for a particular hour in a Gas Day provided said
scheduling change(s) do not result in a modification of the volume of gas
nominated for Seller for said Gas Day, and Seller shall comply with that request
without requiring reimbursement from Buyer for incremental costs, and provided
further that said rescheduling does not eliminate the required eight (8)
consecutive hour operating period of the Plant at 240 MW.
f. Buyer's scheduling directions to Seller shall be subject to the
following parameters:
i. Buyer may schedule the Plant to operate at any of the following
levels: 100% of the maximum net output that can safely and reliably be
achieved under actual operating conditions (but in no event greater than 240
MW), 75% of such level, 100% of the maximum net output that can safely and
reliably be achieved
I-6
under actual operating conditions with one of the Plant's gas-fired turbines
shut down, and 75% of such level (such output levels correspond to the
following nominal outputs: 240 MW, 187 MW, 115 MW, and 90 MW based on average
ambient temperatures expected at the Plant site); provided, however, that
during any Gas Day, Buyer may schedule the Plant to operate at either 240 or
187 MW for each hour of that Gas Day provided the Plant operates at 240 MW
during said Gas Day for a period of at least eight (8) consecutive hours;
ii. the start-up time for a gas turbine shall be TWO (2) hours if a
cold start (which is defined as after a shutdown of FOUR (4) hours or more) is
scheduled, and ONE (1) hour if a hot start (which is defined as after a shutdown
of less than FOUR (4) hours) is scheduled;
iii. in the event that (1) Seller's gas transporter's tariff(s)
covering the transportation of Seller's fuel is amended, revised or otherwise
changed, and (2) Seller notifies Buyer in writing of such amendment, revision
or change, Buyer thereafter shall not schedule the Plant in a manner that
would cause Seller to violate or breach any nomination requirement(s)
contained in the tariff of Seller's transporter, as in effect from time to
time; provided, however, that if said amendment, revision or change to the
tariff of Seller's fuel transporter has a material and adverse impact on
Buyer's ability to schedule the operation of the Plant, Buyer and Seller
shall commence good faith negotiations, upon Seller's receipt of written
notice from Buyer requesting same, and continue same for a period of sixty
(60) days for an amendment to this
I-7
Agreement restoring to Buyer scheduling and other rights commensurate with those
embodied in Amendment No. 2 to this Agreement. If Seller and Buyer fail to so
finalize such an amendment within said sixty (60) day period, then Buyer shall
have the option to, in addition to other remedies and rights under this
Agreement, to rescind Amendment No. 2 to this Agreement, and upon such
rescission Buyer's right to curtail the electric generation of the Plant shall
be reinstated to the extent said right was waived under Amendment No. 2 to this
Agreement; provided, however, that such option shall only apply if Buyer
notifies Seller within sixty (60) days of the expiration of the sixty (60) day
period for finalizing an amendment of its intent to rescind Amendment No. 2;
provided, further, that any notice to rescind Amendment No. 2 pursuant to this
Exhibit I shall be in writing and any such notice shall state that the
rescission of Amendment No. 2 shall be effective as of the last day of the first
month that ends at least ten (10) business days after Seller receives such
written notice;
iv. the minimum scheduled downtime for a gas turbine shall be eight
(8) hours, and the minimum run time between gas turbine start and stop shall
be eight (8) hours;
v. Seller shall endeavor to transition between operating states as
quickly as is reasonably feasible, based on equipment specifications,
operating conditions, project contracts and other relevant limiting factors.
The expected average minimum ramp rate shall be 1,000 KW per minute (up or
down) except that for transitions between generating states that do not
require a gas turbine start, the
I-8
expected ramp rate will be up to 5,000 KW per minute (up or down), as
requested by Buyer;
vi. provided that Seller's auxiliary boiler has not been unavailable
for more than ten (10) days in the Gas Supply Year in which Buyer schedules the
Plant hereunder, which unavailability shall be verified by Buyer through its
inspection of Seller's documents relating to the outages of its auxiliary
boiler, Buyer shall not schedule the Plant so as to require Seller to take a
turbine off-line during periods in which Seller's auxiliary boiler is
temporarily unavailable for operation, whether due to maintenance or otherwise
for reasons beyond Seller's reasonable control;
vii. the maximum number of gas turbine starts during any calendar
year shall be 50; provided, however, that a start of a gas turbine following a
forced outage or scheduled outage shall not constitute a start for purposes of
this section vii; and
viii. except as provided in Article XXI(1) of this Agreement, the
maximum reduction in the Plant's electric output that can be scheduled by
Buyer during any gas supply year ("Gas Supply Year") is 200,000 megawatt
hours. For the purposes of this Agreement, a Gas Supply Year shall mean (1)
in the case of the first Gas Supply Year, the period commencing at 12:00:01
a.m. on the Commercial Operation Date and concluding with the last day of the
calendar month that encompasses a period of at least twelve (12) full,
consecutive calendar months but less than thirteen (13) full, consecutive
calendar months, and (2) thereafter, the period
I-9
commencing at 12:00:01 a.m. on the first day immediately following the last
day of the prior Gas Supply Year and continuing for twelve (12) full,
consecutive calendar months.
The amount of reduction in electric output scheduled by Buyer shall
be calculated by determining the difference, in each hour that the Plant is
available for scheduling, between 240 megawatts (or such lower maximum
operating state that the Plant could have achieved during said hour if the
Plant had not been scheduled by Buyer) and the output scheduled by Buyer for
that hour; provided that Plant's scheduled output shall never be deemed to
exceed 240 megawatts and that, in any hour that the Plant was available for
scheduling but was not scheduled by Buyer, the scheduled output shall be
deemed to have been 240 megawatt hours. The sum of all such calculations for
each hour since the start of the current Gas Supply Year shall represent the
total amount of reduction to which the 200,000 megawatt hour (or such higher
number as provided in Article XXI(I) upper limit applies.
g. (i) If Buyer schedules the Plant at a level below 240 MW (the
"Initial Level"), and then schedules the Plant to achieve a higher generating
level (the "Requested Level") and the Plant (aa) cannot comply with this
subsequent direction, the Plant will be deemed to have been unavailable at an
operating level above the Initial Level for the time period from the hour the
Plant was scheduled to commence operating at the Requested Level to the hour
the Requested Level is achieved and no compensation shall be paid by Buyer
for Available Generation above the Initial Level of operation
I-10
during that deemed period of unavailability, or (bb) is able to return only
to an operating level less than the Requested Level but more than the Initial
Level (the "Interim Level"), the Plant will be deemed to have been
unavailable at an operating level above the Interim Level for the time period
from the hour the Plant was scheduled to commence operating at the Requested
Level to the hour the Requested Level is achieved and no compensation shall
be paid by Buyer for Available Generation above the Interim Level during that
deemed period of unavailability.
(ii) If Seller is unable to comply with Buyer's scheduling directions
involving a Requested Level of 240 MW and an Initial Level of 187 MW, as such
inability is described in subparagraphs (aa) and (bb) of paragraph (i), more
than twenty percent (20%) of the time such directions have been given in the
twelve (12) month period preceding a failure to follow such a direction, then
the period of unavailability for such failure shall be deemed to have
commenced at the hour that the Plant was scheduled to operate at the Initial
Level of 187 MW.
(iii) If Seller is unable to comply with Buyer's scheduling directions
involving an Initial Level less than 187 MW (namely, involving the complete
shut-down of one of the Plant's gas-fired generators), as such inability is
described in subparagraphs (aa) and (bb) of paragraph (i), more than twenty
percent (20%) of the time such directions have been given in the twelve (12)
month period preceding a failure to follow such a direction or, if less than
ten (10) such directions have been given in said twelve (12) month period,
more than twenty percent (20%) of the last ten (10) such directions
I-11
given to Seller, then the period of unavailability for such failure shall be
deemed to have commenced at the hour that the Plant was scheduled to operate
at the Initial Level.
h. Seller shall immediately notify Buyer if (i) Seller elects to
perform maintenance that would interfere with Buyer's ability to schedule the
Plant within the bounds of this Agreement, or (ii) the Plant is otherwise
unavailable, during any period that Buyer has directed the Plant to operate
at a level other than 240 MW. If the Plant is derated by Seller for any
reason, Seller shall notify Buyer immediately via facsimile transmission to
Buyer's chief system dispatcher or such person's designee of the commencement
and cessation hour for such derating period. To the extent that such
derating is not the result of force majeure, or otherwise excused under the
terms of this Agreement, and such derating conflicts with Buyer's ability to
schedule the Plant as otherwise provided for by this Agreement, the Potential
Generation (as defined in Exhibit J) of the Plant during this period shall be
adjusted by Buyer accordingly.
i. Notwithstanding any other provision of this Amendment, Seller shall
not be required to comply with any Schedule supplied by Buyer to the extent
that such Schedule would interfere with: (a) EPC performance testing for
establishing project completion during the first six (6) months following the
Commercial Operation Date; (b) DMNC testing, as required by this Agreement,
as amended; and (c) testing in accordance with industry practices following
major Plant overhauls and repairs;
I-12
provided however, that (aa) with respect to subparagraph (a) above, Seller
shall provide prompt telephonic and written notice to Buyer upon the
completion of such EPC performance testing, and (bb) with respect to
subparagraph (c) above, Seller shall (aaa) provide prompt telephonic and
written notice to Buyer upon the commencement and completion of all such
major Plant overhauls and repairs, (bbb) limit such testing to no more than
three (3) months, and (ccc) provide prompt telephonic and written notice to
Buyer upon the completion of such testing.
▇-▇▇
▇▇▇▇▇▇▇▇ ▇
----------
EXHIBIT J - PAYMENT FOR AVAILABLE GENERATION
--------------------------------------------
Provided that Buyer scheduled the operation of the Plant for said
monthly billing pursuant to Article XXI of this Agreement, Buyer shall make a
monthly payment to Seller for Available Generation equal to the monthly
summation of the following formula calculated for each hour during the said
billing period:
Payment for Available Generation = AVG x (CR - (.95 x VC)) where
AVG = Available Generation, shall be equal to PG - AG.
PG = Potential Generation, is the number of KWH the Plant could
have produced for said hour had the Plant been available and
operated at the Potential Capacity (as defined on page J-2).
AG = Actual Generation, shall be the number of KWH that are both
scheduled for delivery by Buyer (based on the output state
chosen by Buyer) and actually produced by the Plant and
delivered to the delivery point for said hour, which amount
shall not exceed 240 MW net when averaged over a five (5)
minute period.
CR = Contract Rate, shall be the rate specified in Exhibit B of
this Agreement.
J-1
VC = Variable Cost, designated in $/MWH, shall be defined for any
hour during the billing period as the lesser of 105 percent of CR
and the result of the following computation:
(DFC x (PHFC - SHFC))/AVG, where
DFC = Delivered Variable Fuel Cost ($/BTU);
PHFC = Potential Hourly Fuel
Consumption (BTU/hour) = PC x HRPC;
PC = Potential Capacity = The number of MW the Plant was
available to produce, which amount shall not exceed 240
MW;
HRPC = The heat rate of the Plant at the Potential Capacity
(BTU/MW); as indicated on the appropriate heat rate
curve provided by Seller to Buyer in accordance with
Exhibit I;
SHFC = Scheduled Hourly Fuel
Consumption (BTU/hour) = SC x HRSC;
SC = Scheduled Capacity = The number of MW the Plant was
directed by Buyer to produce based on the output state
chosen by Buyer to produce pursuant to Article XXI; and
HRSC = The heat rate of the Plant at the Scheduled Capacity
(BTU/MW) as indicated on the appropriate heat rate
curve provided by Seller to Buyer in accordance with
Exhibit I.
J-2
No payment shall be made by Buyer for electric energy delivered by Seller
to the extent such energy exceeds the amounts scheduled for delivery by
Buyer; provided that, if Buyer fails to provide a Schedule to Seller for a
particular period, Buyer shall be deemed to have scheduled the Plant to
operate at its maximum safe and reliable output under actual operating
conditions (not to exceed 240 MW net when averaged over any five (5) minute
period) until a Schedule consistent with Exhibit I is timely delivered by
Buyer to Seller. For those periods during which the Plant is ramping up or
ramping down to an operating level scheduled by Buyer, the number of KWH
metered by Buyer at the delivery point shall be considered Actual Generation
for purposes of this Agreement.
J-3
APPENDIX C
----------
EXHIBIT K
---------
PAYMENT FOR START-UP COSTS
--------------------------
In addition to payments for Actual Generation and Available Generation,
Buyer shall pay Seller an amount for each start-up of a gas turbine requested by
Buyer pursuant to Article XXI of this Agreement equal to five thousand dollars
($5,000.00) for calendar year 1994, which amount shall escalate at a compounded
rate of four (4) percent each calendar year as set forth below:
Calendar Year Start-Up Cost
------------- -------------
1994 $ 5,000.00
1995 5,200.00
1996 5,408.00
1997 5,624.32
1998 5,849.29
1999 6,083.26
2000 6,326.60
2001 6,579.66
2002 6,842.85
2003 7,116.56
2004 7,401.22
2005 7,697.27
2006 8,005.16
2007 8,325.37
2008 8,658.38
2009 9,004.72
2010 9,364.91
2011 9,739.50
APPENDIX D
----------
With regard to Period A, all electricity delivered by Seller to Buyer
during peak hours shall constitute Class I electricity. In addition, all
electricity delivered by Seller to Buyer during off-peak hours shall constitute
Class I electricity up to a maximum number of off-peak KWh such that the ratio
of peak to off-peak hours in the then current billing period shall equal the
ratio of Potential Peak Generation to Class I off-peak KWh delivered during the
same period. (Kilowatt hours of Potential Peak Generation shall be calculated by
summing the Potential Generation (as defined in Exhibit J) in each peak hour of
the relevant billing period). Except as otherwise as provided below, any
electricity delivered during off-peak in excess of that maximum number of
off-peak KWh shall be considered Class II electricity and shall be paid for at a
rate equal to Buyer's off-peak short-run avoided cost as defined in Exhibit H.
If the number of KWh delivered during the off-peak hours in any
billing period is less than the maximum off-peak permitted for Class I, the
difference between such maximum permitted amount and the amount actually
delivered shall be tracked in a notional account. In the event that in later
billing periods, there is an excess of off-peak KWh hours in comparison to the
maximum Class I off-peak KWh permitted, such additional off-peak KWh shall also
be paid for at the Class I rate up to any amount then in the notional account
and the notional account will be reduced by the additional KWh paid for at the
Class I rate.
With regard to the offset to be applied during Period A, no offset
shall be applied through the end of 1994 (the period during which LRAC is
less than 6 cents/KWh under the Commission's current estimate). Instead, the
period between commencement of commercial operation to the end of 1994 shall
be used to establish
the Plant's base output. Specifically, a second notional account shall be
used to track (1) the total number of Class I KWh purchases by Buyer through
the end of 1994 plus the total amount of Available Generation (as defined in
Exhibit J) paid for based on a Contract Rate (as defined in Exhibit J) equal
to the Class I electricity rate through the same period less Variable Cost
(as defined in Exhibit J), and (2) the total number of hours from the time of
commercial operation through the end of 1994. The first number will then be
divided by the second to compute the Plant's Base Output.
Commencing in January 1995 and for each monthly billing period
thereafter through the end of Period A, the sum of the Potential Generation of
the Plant for each hour of the current monthly billing period and the preceding
eleven monthly billing periods shall be divided by the total number of hours in
the same twelve monthly billing periods less any hours of Force Majeure outages
in the same period; the resulting number shall be referred to as the Plant's
"Current Output."
If the Plant's Current Output is less than the Plant's Base Output,
then an offset in the amount of that difference times twelve times the
difference between Buyer's short-run avoided cost as defined in Exhibit H and
six cents/KWh times the number of hours in the then current billing period
shall be applied to the amount due from Buyer during that billing period;
provided, however, that if six cents/KWh exceeds Buyer's short-run avoided
cost as defined in Exhibit H, then no offset shall be applied. In any
monthly billing period that an offset is applied, the Plant's total Potential
Generation for the corresponding period shall be deemed to equal the Plant's
Base Output times the number of hours in that period for the purpose of all
future calculations of offsets.
