This Agreement for Generation Services (“Agreement”) is entered into and effective as of the 28th day of December 2006 (“Effective Date”), by and between GULF POWER COMPANY (acting through its agent, Southern Company Services, Inc., a corporation organized and existing under the laws of the State of Alabama (“SCS”)), a corporation organized and existing under the laws of the State of Florida (“Gulf Power”) and FLORIDA PUBLIC UTILITIES COMPANY, a corporation organized and existing under the laws of the State of Florida (“FPUC”). Gulf Power and FPUC are individually referred to as a “Party” and collectively referred to as the “Parties.”

W I T N E S S E T H:

WHEREAS, Gulf Power is engaged in, among other things, the sale of electric power at wholesale for resale and has received authorization from FERC to provide such service at market-based rates in accordance with the Southern Operating Companies’ FERC Electric Tariff, Second Revised Volume No. 4, Market-Based Rate Tariff;

WHEREAS, FPUC supplies the native load electric requirements of its electric system headquartered in Marianna, Florida (“Northwest Division”); and

WHEREAS, subject to the terms and conditions of this Agreement, the Parties desire for Gulf Power to supply the native load electric requirements of the Northwest Division through FPUC’s purchase of capacity and associated energy pursuant to this Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein set forth, and other good and valuable consideration, the receipt, sufficiency and adequacy

of which are hereby acknowledged, each Party intending to be legally bound, hereby agrees as follows:

ARTICLE 1

DEFINITIONS & INTERPRETATION

1.1

Definitions. In addition to the initially capitalized terms and phrases defined in the preamble of this Agreement, the following capitalized terms used herein and not otherwise defined, whether singular or plural, shall have the following respective meanings:

“AAA” shall have the meaning set forth in Section 16.2.2.

“Acceptable Rating” shall mean, with respect to a Person, such Person has: (A) (i) an issuer rating (and senior unsecured rating if also available) of at or above Baa3 (or future equivalent) by Moody’s, or (ii) an issuer credit rating (and senior unsecured rating if also available) of at or above BBB- (or future equivalent) by S&P; or (B) the Required Ratios but does not have an issuer credit rating or senior unsecured rating by S&P and does not have an issuer rating or senior unsecured rating by Moody’s.

“Adjusted Hourly Demand” shall mean, for a given Hour, the sum of: (a) the Northwest Hourly Demand; plus (b) the amount of any demand satisfied by generation connected to the Northwest Division System (including distributed generation); plus (c) contract interruptible or curtailable load on such electric system curtailed at Gulf Power’s request and any firm load reductions occurring as a result of system emergencies; plus (d) transmission and other losses from the Delivery Point(s) that would be associated with the foregoing (b) and (c) as if such demand and loads (whether or not curtailed, interrupted or reduced) were served by Gulf Power under this Agreement (such transmission losses on the Transmission System to be determined pursuant to the then-current transmission tariff (or other applicable arrangement governing

transmission on the Transmission System) applicable to transmission service on the Transmission System, as amended from time to time), all expressed in megawatt-hours per hour (MWH/H). In determining the total Northwest Hourly Demand for any Hour, the demand measurements at all applicable Meter Point(s) shall be cumulated simultaneously.

“Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. The terms “controlling” and “controlled” have meanings correlative to the foregoing.

“After-Tax Basis” means, with respect to a specified amount owing or to be paid to any Person, such amount (“Base Amount”) supplemented by a further payment (“Additional Payment”) to that Person so that the sum of the Base Amount plus the Additional Payment shall, after deduction of the amount of all Federal, state and local income taxes required to be paid by such Person in respect of the receipt or accrual of the Base Amount and the Additional Payment (taking into account the net present value of any reduction in such income taxes resulting from tax benefits realized by the recipient as a result of the payment or the event giving rise to the payment), be equal to the amount required to be received. Such calculations shall be made on the basis of the highest generally applicable Federal, state and local income tax rates applicable to the Person for whom the calculation is being made for all relevant periods, and shall take into account the deductibility of state and local income taxes for Federal income tax purposes.

“Agreement” shall mean this Agreement for Generation Services as set forth in the preamble above.

“Applicable Year” shall have the meaning set forth in Appendix C.

“Approval Deadline” shall have the meaning set forth in Section 9.4.

“Arbitration Expenses” shall have the meaning set forth in Section 16.5.

“Assignment Conditions” shall have the meaning set forth in Section 17.1.2.

“Banking Day” shall mean any Day other than a Saturday, Sunday or any Day on which the Federal Reserve Bank of New York is closed.

“Benefited Party” shall have the meaning set forth in Section 5.3.

“CAIR” shall mean the final rule issued by the Environmental Protection Agency on March 10, 2005 entitled “Rule to Reduce Interstate Transport of Fine Particulate Matter and Ozone,” often referred to as the Clean Air Interstate Rule, including any rules, regulations or other actions of any Governmental Authority(ies) to comply with or implement such rule.

“Calculation Year” shall have the meaning set forth in Appendix A.

“CAMR” shall mean the final rule issued by the Environmental Protection Agency on March 15, 2005 entitled “Standards of Performance for New and Existing Stationary Sources: Electric Utility Steam Generating Units,” often referred to as the Clean Air Mercury Rule, including any rules, regulations or other actions of any Governmental Authority(ies) to comply with or implement such rule.

“Capacity Purchase” shall have the meaning set forth in Appendix A.

“Cash Security” shall mean cash security, free and clear of any adverse lien or interest, pursuant to a pledge agreement in form and substance reasonably acceptable to the Party(ies) to which such security is being provided.

“Change in Law” means the adoption, enactment, promulgation or issuance of, a change in, or a new or changed interpretation by a Governmental Authority of, any Law or any standards

or criteria contained in a permit, license or other approval of a Governmental Authority after June 21, 2005.

“Change in Law Notice” shall have the meaning set forth in Section 9.1.2.

“Confidential Information” shall have the meaning set forth in Section 15.1.

“Continuation Period” shall have the meaning set forth in Section 9.5.2.

“Current Year” shall have the meaning set forth in Appendix C.

“Day” shall mean a calendar day; provided, however, for purposes of this Agreement, a Day shall begin and end at the applicable Operating Time.

“Decreased Costs” means the amount of any reduction in Gulf Power’s costs and/or expenses (fixed and variable) that result from complying with or recognizing a Change(s) in Law and which: (i) is associated with any of Gulf Power’s generating and power supply resources; (ii) is associated with capacity and energy provided under this Agreement; or (iii) is realized by Gulf Power in performing its obligations under this Agreement; provided, however, with respect to any Decreased Costs under the foregoing (i), any benefit or credit that FPUC is entitled to receive as a result of such Decreased Costs shall be limited to a proportionate share based on the amount of capacity provided under this Agreement and FPUC’s actual load served under this Agreement. In no event shall Decreased Costs be reflected in a separate Change in Law Component pursuant to Section 9.1.3 if such Decreased Costs are also reflected in the Gulf Energy Rate pursuant to the formula in Appendix C.

“Defaulting Party” shall have the meaning set forth in Section 12.1.

“Delivered Energy” shall mean, for a given Hour, all energy (expressed in megawatt-Hours (MWH)) delivered by Gulf Power to FPUC under this Agreement at the Delivery Point(s), which energy shall be measured at the Meter Point(s) and shall be increased for transmission and

other losses from the Delivery Point(s) to the Meter Point(s), where such transmission losses on the Transmission System are to be determined pursuant to the then-current OATT (or other arrangement governing transmission on the Transmission System) applicable to transmission service on the Transmission System, as amended from time to time.

“Delivery Point(s)” shall mean (as applicable): (i) the high voltage side of the generator step-up transformer(s) at each of the generating units and plants from which capacity and energy are provided under this Agreement, if such units and/or plants are connected to the Transmission System; and/or or (ii) the interface(s) between the Transmission System and the system(s) to which the generating units and plants from which capacity and energy are provided under this Agreement are connected, if such units and/or plants are not connected to the Transmission System.

“Disallowance Order” shall have the meaning set forth in Section 9.5.1.

“Dispute Response” shall have the meaning set forth in Section 16.1.1.

“Disputing Party” shall have the meaning set forth in Section 16.1.1.

“Due Date” shall have the meaning set forth in Section 6.1.3.

“Effective Date” shall have the meaning set forth in the preamble of this Agreement.

“Eligible Collateral” shall mean an Eligible Letter of Credit, an Eligible Guaranty, or Cash Security.

“Eligible Guaranty” shall mean a continuing parent guaranty in form and substance reasonably acceptable to the receiving Party issued by an entity who has and maintains an Acceptable Rating.

“Eligible Letter of Credit” shall mean a letter of credit in form and substance reasonably acceptable to the receiving Party issued by a major U.S. commercial bank with assets of at least

$25 billion and a senior unsecured rating of at least A2 (or future equivalent) by Moody’s or at least A (or future equivalent) by S&P.

“Event of Default” shall have the meaning set forth in Section 12.1.

“Federal Power Act” means the Federal Power Act, 16 U.S.C.A. §§ 791a-828c, as the same may hereafter be amended from time to time.

“FERC” shall mean the Federal Energy Regulatory Commission or any Governmental Authority succeeding to the powers and functions thereof under the Federal Power Act.

“Force Majeure Event” shall have the meaning set forth in Section 11.1.1.

“Forecasted Northwest Annual Peak Demand” shall mean the quantity determined pursuant to Appendix A of this Agreement.

“FPSC” shall mean the Florida Public Service Commission, or any Governmental Authority succeeding to the powers and functions thereof.

“FPSC Approval” shall have the meaning set forth in Section 9.4.1.

“FPUC Information” shall have the meaning set forth in Section 17.16.

“FPUC Liquidated Damages” shall have the meaning set forth in Section 12.3.3.

“FPUC Termination Date” shall have the meaning set forth in Section 12.3.2.

“FPUC” shall have the meaning set forth in the first paragraph of this Agreement.

“Funds From Operations Interest Coverage Ratio” shall mean, with respect to a Party, the sum of such Party’s Net Income from Continuing Operations plus Depreciation and Amortization plus Deferred Income Taxes plus gross interest expense incurred before subtracting capitalized interest and interest income divided by such Party’s gross interest expense incurred before subtracting capitalized interest and interest income. All items included in the calculation

of the Funds From Operations Interest Coverage Ratio shall be prepared and calculated in accordance with GAAP.

“GAAP” means generally accepted accounting principles in the United States applied on a consistent basis.

“Governmental Authority” means any federal, state, local, territorial or municipal government and any department, commission, board, court, bureau, agency, instrumentality, judicial or administrative body thereof.

“Growth Rate” shall have the meaning set forth in Appendix A.

“Guarantor” shall mean, with respect to a Party, an entity that guarantees such Party’s obligations under this Agreement, including through an Eligible Guaranty.

“Gulf Energy Rate” shall have the meaning set forth in Appendix C.

“Gulf Liquidated Damages” shall have the meaning set forth in Section 12.4.3.

“Gulf Power” shall have the meaning set forth in the preamble of this Agreement.

“Gulf Termination Date” shall have the meaning set forth in Section 12.4.2.

“Harmed Party” shall have the meaning set forth in Section 5.3.

“Hour” shall mean one (1) of the clock-hours of a Day.

“Hourly” shall have a meaning correlative to that of Hour.

“Impacted Party” shall have the meaning set forth in Section 9.3.1.

“Impasse Notice” shall have the meaning set forth in Section 16.1.2.

“Increased Costs” means the additional costs and expenses (fixed and variable) incurred by Gulf Power that result from complying with or recognizing a Change(s) in Law and which: (i) are associated with any of Gulf Power’s generating and power supply resources; (ii) are associated with capacity and energy provided under this Agreement; or (iii) are incurred by Gulf

Power in performing its obligations under this Agreement; provided, however, with respect to any Increased Costs under the foregoing (i), FPUC’s responsibility for such costs shall be limited to a proportionate share based on the amount of capacity provided under this Agreement and FPUC’s actual load served under this Agreement. Examples of Increased Costs shall include costs and expenses resulting from: (i) compliance with environmental Laws changing existing emissions limits (e.g., NOx) or establishing limits for currently uncontrolled substances (e.g., CO2 and mercury); (ii) the imposition of or increases in taxes (such as taxes on power and gas sales) except for income taxes; and (iii) compliance with health and safety Laws. For purposes of calculating the Increased Costs associated with capitalized additions or modifications or other capital expenditures (determined in accordance with GAAP), the Parties will at that time jointly establish an appropriate annual fixed charge rate for application to the original capital cost (less depreciation) of such additions, modifications, or other capital expenditures. Such fixed charge rate shall be consistent with the methodology and approach used by the FPSC to determine the weighted average cost of capital (otherwise known as the overall rate of return) for the purpose of establishing prices for retail electricity service provided by Gulf Power. This calculation will represent the total cost associated with the identified addition, modifications, or other capital expenditures including and recognizing the key factors such as depreciation, useful life, carrying costs, and any other cost or expense item directly related to capital investments. Any costs and/or expenses not otherwise reflected in a fixed charge rate calculation shall be treated as Increased Costs as incurred; provided, however, that in no event shall Increased Costs be reflected in a separate Change in Law Component pursuant to Section 9.1.3 if such Increased Costs are also reflected in the Gulf Energy Rate pursuant to the formula in Appendix C.

“Incremental Benefit” shall have the meaning set forth in Section 5.3.

“Incremental Burden” shall have the meaning set forth in Section 5.3.

“Indemnified Party” shall have the meaning set forth in Section 10.1.4.

“Indemnifying Party” shall have the meaning set forth in Section 10.1.4.

“Interest Rate” shall mean the rate per annum equal to the lesser of: (i) the highest interest rate allowed by Law; or (ii) (a) for the first 14 Days of a given consecutive period of time during which interest shall accrue under this Agreement at the Interest Rate, the prime rate as stated in the Wall Street Journal on the date payment is due; and (b) for the remainder of such consecutive period of time after such 14 Day period has expired, two percent (2%) plus the prime rate as stated in the Wall Street Journal on the date payment is due.

“Law” means any act; statute; law; requirement; ordinance; order; ruling or rule; regulation; standards and/or criteria contained in any permit, license or other approval; legislative or administrative action; or a decree, judgment or order of any Governmental Authority imposed, whether in effect now or at any time in the future.

“Meter Point(s)” shall mean the points of interconnection between the Northwest Division System and the Transmission System.

“Month” shall mean a calendar month.

“Monthly” shall have a meaning correlative to that of Month.

“Monthly Capacity Payment” shall have the meaning set forth in Section 4.1.

“Monthly Capacity Rate” shall mean, for each Month during the Service Term, the applicable rate per kilowatt Month ($/kW-Mo.) for the Year in which such Month occurs, determined pursuant to the following table:


Year	Capacity Rate ($/kW-Mo.)
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

“Monthly Energy Payment” shall have the meaning set forth in Section 4.2.

“Moody’s” shall mean Moody’s Investors Service or its successor, provided that, if Moody’s ceases to exist or publish ratings, Moody’s shall mean a nationally recognized rating agency mutually agreed upon by the Parties, which agreement will not be unreasonably withheld or delayed.

“Negotiation Period” shall have the meaning set forth in Section 16.1.2.

“NERC” shall mean the North American Electric Reliability Council, including the regional reliability organization(s) to which the Southern Operating Companies belong, and any successor organization(s).

“Non-Defaulting Party” shall have the meaning set forth in Section 12.1.

“Northwest Annual Peak Demand” shall mean the amount of the Adjusted Hourly Demand for the Northwest Division for the one Hour period during the Peak Season in which the Northwest Division experiences the highest Adjusted Hourly Demand.

“Northwest Division” shall have the meaning set forth in the preamble of this Agreement.

“Northwest Division System” shall mean the integrated transmission and/or distribution system of the Northwest Division, as such system may be modified or expanded from time-to-time, as well as any successor transmission and/or distribution system(s).

“Northwest Hourly Demand” shall mean, for a given Hour, the sum of: (i) the integrated Hourly energy requirements for the Northwest Division expressed in kilowatt-Hours per Hour (kWH/H), as measured conjunctively at the Meter Point(s), plus: (ii) transmission and other losses from the Delivery Point(s) to the Meter Point(s) that would be associated with such demand (such transmission losses on the Transmission System to be determined pursuant to the then-current OATT (or other arrangement governing transmission on the Transmission System) applicable to transmission service for the Transmission System, as amended from time to time).

“Notice of Dispute” shall have the meaning set forth in Section 16.1.1.

“OATT” shall mean the Open Access Transmission Tariff governing transmission service on the Transmission System, as such tariff is filed at FERC and as such tariff may be revised or amended from time to time.

“Operating Time” shall mean the time standard used to dispatch, schedule and control generation in the Southern Control Area (currently, central prevailing time).

“Original Amount” shall have the meaning set forth in Section 9.3.1.

“Party-Appointed Arbitrators” shall have the meaning set forth in Section 16.2.1.