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AGREEMENT FOR
GENERATION SERVICES
BETWEEN
GULF POWER
COMPANY
AND
FLORIDA
PUBLIC UTILITIES COMPANY
Dated as of
December 28, 2006
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS & INTERPRETATION
ARTICLE 2 TERM
OF THE AGREEMENT
ARTICLE 3 SALE
OF ELECTRIC CAPACITY AND ENERGY
BILLING DISPUTES
AND FINAL ACCOUNTING
ARTICLE 7
CHARACTER OF SERVICE
ARTICLE 9
CHANGE IN LAW; ENVIRONMENTAL PROVISIONS; REGULATORY
CLEAN AIR
INTERSTATE RULE AND CLEAN AIR MERCURY RULE
FEDERAL ENERGY
REGULATORY COMMISSION
INITIAL APPROVAL OF
THE FLORIDA PUBLIC SERVICE COMMISSION
SUBSEQUENT ACTION
OF THE FLORIDA PUBLIC SERVICE COMMISSION
ARTICLE 10
INDEMNIFICATION; TITLE; COSTS AND EXPENSES
NOTICE AND REMEDY
OF FORCE MAJEURE EVENTS
ARTICLE 12
EVENTS OF DEFAULT AND TERMINATION
EVENT OF DEFAULT BY
GULF POWER
ARTICLE 13
CREDITWORTHINESS AND SECURITY
FPUC’S
PROVISION OF ELIGIBLE COLLATERAL
GULF POWER'S
PROVISION OF ELIGIBLE COLLATERAL
ARTICLE 14
REPRESENTATIONS AND WARRANTIES
DISCLOSURE OF
CONFIDENTIAL INFORMATION
INITIATION OF
ARBITRATION; SELECTION OF ARBITRATORS
ARTICLE 17
MISCELLANEOUS PROVISIONS
ARTICLES AND
SECTIONS HEADINGS
APPENDIX A CAPACITY PURCHASE
APPENDIX B MONTHLY CAPACITY PAYMENT
APPENDIX C GULF ENERGY RATE
APPENDIX D MONTHLY ENERGY PAYMENT
APPENDIX E FORM OF COMPLIANCE
CERTIFICATE
AGREEMENT FOR GENERATION
SERVICES
BETWEEN
GULF POWER COMPANY
AND
FLORIDA PUBLIC UTILITIES
COMPANY
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:
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Year |
Capacity Rate ($/kW-Mo.) |
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2008 |
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2009 |
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2010 |
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2011 |
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2012 |
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2013 |
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2014 |
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2015 |
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2016 |
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2017 |
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“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.
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