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.

“ Peak Season ” shall mean the period of time comprising the Months of May through September.

“ Person ” means any individual, corporation, limited liability corporation, partnership, joint venture, trust, unincorporated organization, Governmental Authority, municipal, city or other entity.

“ Previous Season ” shall have the meaning set forth in Appendix A.

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

“ Proposed Resolutions ” shall have the meaning set forth in Section 16.3.

“ Prudent Utility Practices ” shall mean, at a particular time, any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry prior to such time, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired results at a reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Utility Practices is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts, having due regard for, among other things, manufacturers’ warranties and the requirements of Governmental Authorities of competent jurisdiction and the requirements of this Agreement.

“ Required FPUC Collateral Amount ” shall be equal to the aggregate Monthly Capacity Payments as calculated in Appendix B hereto that are reasonably expected to become due under this Agreement (as reasonably calculated by Gulf Power (assuming no Event of Default has occurred or will occur hereunder and no termination or modification of this Agreement will occur)) during the 12 Months immediately following the date the Required FPUC Collateral Amount is determined by Gulf Power from time to time; provided, however, before the commencement of the Service Term, the Required FPUC Collateral Amount shall be the aggregate Monthly Capacity Payments as calculated in Appendix B hereto that are reasonably expected to become due under this Agreement (as reasonably calculated by Gulf Power (assuming no Event of Default has occurred or will occur hereunder and no termination or

modification of this Agreement will occur)) for the first 12 Months of the Service Term; provided, further, upon the expiration of the Service Term and until all amounts under this Agreement that will be due to be paid by FPUC are indefeasibly paid (including all true-up amounts after the expiration of the Service Term under Appendix C), the Required FPUC Collateral Amount shall be equal to the Monthly Capacity Payment for the final Month of the Service Term (regardless of whether such capacity payment has been paid).

“ Required Gulf Collateral Amount ” shall be equal to the aggregate Monthly Capacity Payments as calculated in Appendix B hereto that are reasonably expected to become due under this Agreement (as reasonably calculated by Gulf Power (assuming no Event of Default has occurred or will occur hereunder and no termination or modification of this Agreement will occur)) during the 12 Months immediately following the date the Required Gulf Collateral Amount is determined by Gulf Power from time to time; provided, however, before the commencement of the Service Term, the Required Gulf Collateral Amount shall be the aggregate Monthly Capacity Payments as calculated in Appendix B hereto that are reasonably expected to become due under this Agreement (as reasonably calculated by Gulf Power (assuming no Event of Default has occurred or will occur hereunder and no termination or modification of this Agreement will occur)) for the first 12 Months of the Service Term.

“ Required Ratios ” means a Funds From Operations Interest Coverage Ratio of at least 2.0 and a Total Debt to Total Capital Ratio not to exceed .65, as tested quarterly as of the end of each quarter averaged over the 6 consecutive quarters then ending.

“ Reserve Requirement ” means fifteen percent (15%).

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

“ S&P ” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., or its successor, provided that, if S&P ceases to exist or publish ratings, S&P shall mean a nationally recognized rating agency mutually agreed upon by the Parties, which agreement will not be unreasonably withheld or delayed.

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

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

“ SEC ” shall have the meaning set forth in Section 15.2.3.

“ Service Term ” shall have the meaning set forth in Section 2.1.

“ Southern Company ” shall mean The Southern Company, a Delaware corporation.

“ Southern Control Area ” shall mean the electric service area encompassed by tie lines, including, the pseudo tie lines (as defined in NERC’s “Terms Used in the Policies”), between the Southern Operating Companies and other utilities.

“ Southern Operating Companies ” shall mean, collectively, the electric utility operating company Affiliates of Southern Company engaged in common dispatch and control of generating resources within the Southern Control Area, which, as of the Effective Date, include Alabama Power Company, Georgia Power Company, Gulf Power, Mississippi Power Company, and Southern Power Company.

“ Tariff ” shall mean Southern Operating Companies’ FERC Electric Tariff, Second Revised Volume No. 4, Market-Based Rate Tariff, as superseded or amended from time to time.

“ Term ” shall mean the period of time commencing on the Effective Date and ending December 31, 2017 as set forth in Article 2.

“ Third Arbitrator ” shall have the meaning set forth in Section 16.2.1.

“ Total Debt to Total Capital Ratio ” shall mean, with respect to a Party, such Party’s Long Term Debt plus Current Maturities plus Commercial Paper plus Other Short Term Borrowings divided by such Party’s Long Term Debt plus Current Maturities plus Commercial Paper plus Other Short Term Borrowings plus Shareholder’s Equity (Including Preferred) plus Minority Interest. All items included in the calculation of the Total Debt to Total Capital Ratio shall be prepared and calculated in accordance with GAAP.

“ Transmission Force Majeure Event ” means the occurrence of a circumstance where: (i) a Force Majeure Event causes physical damage to transmission facilities; (ii) FPUC has procured firm transmission service or network integration transmission service under the OATT with respect to the energy to be supplied by Gulf Power under this Agreement; and (iii) as a result of such physical damage to transmission facilities, FPUC is unable to utilize such procured firm and/or network integration transmission service to deliver such energy from the Delivery Point(s) to the Meter Point(s). Unless the circumstances in (i) through (iii) above exist, a curtailment or interruption of transmission service shall not constitute a Transmission Force Majeure Event.

“ Transmission Risk ” means the ramifications (performance, economic or otherwise) resulting from the unavailability of transmission service, including inadequacy, interruption or curtailment of transmission service.

“ Transmission System ” shall mean the integrated transmission systems of the electric utility operating companies of Southern Company, as such systems may be modified or expanded from time-to-time, as well as any successor transmission system(s).

“ Year ” shall mean a calendar year.

1.2

Interpretation . In this Agreement, unless the context otherwise requires, the singular shall include the plural and any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “hereof,” “herein,” “hereto” and “hereunder” and words of similar import when used in this Agreement shall, unless otherwise expressly specified, refer to this Agreement as a whole and not to any particular provision of this Agreement. Whenever the terms “include” or “including” are used herein in connection with a listing of items included within a prior reference, such listing shall be interpreted to be illustrative only, and shall not be interpreted as a limitation on or exclusive listing of the items included within the prior reference. Any reference in this Agreement to “Section,” “Article” or “Appendix” shall be references to this Agreement unless otherwise stated, and all such Appendices shall be incorporated in this Agreement by reference. Unless specified otherwise, a reference to a given agreement or instrument, and all schedules, exhibits, appendices and attachments thereto, shall be a reference to that agreement or instrument as modified, amended, supplemented and restated, and in effect from time to time (subject to Section 17.19).

1.3

Construction . Both Parties acknowledge that each was actively involved in the negotiation and drafting of this Agreement and that no Law or rule of construction shall be raised or used in which the provisions of this Agreement shall be construed in favor of or against either Party because one is deemed to be the author thereof.

ARTICLE 2

TERM OF THE AGREEMENT

2.1

Term .

This Agreement shall begin on the Effective Date and shall remain in effect for a term ending at the end of the Day on December 31, 2017 (“Term”), unless this Agreement is terminated earlier in accordance with its terms. The Service Term under this

Agreement shall commence at the beginning of the Day (Operating Time) on January 1, 2008 and shall continue until the expiration or termination of this Agreement in accordance with its terms.

2.2

Survival . All provisions of this Agreement that expressly or by implication come into or continue in force and effect following the expiration or termination of this Agreement shall remain in effect and be enforceable following such expiration or termination.

ARTICLE 3

SALE OF ELECTRIC CAPACITY AND ENERGY

3.1

Sale and Supply of Capacity . During the Service Term, subject to the terms of this Agreement, Gulf Power shall supply and sell to FPUC, and FPUC shall receive and purchase from Gulf Power, an amount of capacity equal to the Capacity Purchase as determined in accordance with the methodology provided in Appendix A.

3.2

Sale and Delivery of Energy . During the Service Term, subject to the terms of this Agreement, Gulf Power shall sell and deliver to FPUC, and FPUC shall receive and purchase from Gulf Power, a supply of energy necessary to supply the Northwest Hourly Demand. Gulf Power shall deliver such energy to, and FPUC shall receive such energy at, the Delivery Point(s).

3.3

Supply Sources for Energy . FPUC acknowledges and agrees that Gulf Power, or its agent(s), shall have the sole authority, which Gulf Power or its agent(s) may exercise in their sole discretion, to manage, control, operate and maintain the electricity resources used to supply energy to FPUC under this Agreement. Gulf Power may serve FPUC with energy from any resource(s) available to it. Gulf Power shall use the same method of dispatching resources to provide energy to FPUC under this Agreement as it uses for all of its territorial customers and shall make no adverse distinction against FPUC in designating resources to provide energy to FPUC hereunder. In addition, Gulf Power will assist FPUC in identifying resources associated

with this Agreement as may be required in connection with FPUC’s obtaining network integration transmission service under the OATT.

3.4

Exclusive Supply . FPUC shall not purchase electric energy or capacity to meet the Northwest Division’s load requirements from any party other than Gulf Power without the prior written consent of Gulf Power except to the extent that: (i) Gulf Power fails to furnish energy or capacity to FPUC in accordance with the terms of this Agreement; (ii) FPUC is required to purchase energy and/or capacity from third party generating facilities directly connected to the Northwest Division System pursuant to the Public Utility Regulatory Policies Act of 1978 (including regulations issued thereunder); and/or (iii) another Law requires FPUC to meet some portion of its load requirements by purchasing a required amount of energy (MWh) and/or capacity (MW) from third party generators. Provided, however, in the event that (ii) or (iii) of the foregoing sentence is applicable, FPUC shall provide Gulf Power with prompt notice of the applicable requirement to purchase capacity and/or energy from third party generating facilities. If such notice is provided, the Parties shall promptly commence good faith negotiations to agree upon feasible actions, if any, to be taken by either or both Parties that would facilitate the means by which FPUC can satisfy and/or comply with such requirement while simultaneously leaving this Agreement in full force and effect as originally executed. In the event that the Parties cannot agree upon such actions, FPUC and Gulf Power shall negotiate an appropriate amendment to this Agreement to reduce the amount of capacity and/or energy (as applicable) purchased under this Agreement, but only to the extent necessary for FPUC to comply with the specific requirement to purchase capacity and/or energy from the applicable third parties; provided, however, the recognition of such requirement in any such amendment and the reduction of the amount of capacity and/or energy purchased shall not adversely distinguish

against Gulf Power or this Agreement as compared to FPUC’s other power suppliers and/or other power supply arrangements, unless such adverse distinction is required by Prudent Utility Practices because of transmission considerations. Any such amendment shall, to the maximum extent practicable, allow each Party to continue to recognize the economic bargain originally contemplated by this Agreement as of the Effective Date. In addition, any such amendment shall define the use and control of any third party generating facilities, including reliability provisions, such that Gulf Power can continue to meet its obligations under Section 7.2.

ARTICLE 4

PAYMENTS

4.1

Monthly Capacity Payment . FPUC shall pay Gulf Power, or Gulf Power’s designated agent, a Monthly Capacity Payment for each Month of the Service Term, as calculated pursuant to the methodology in Appendix B.

4.2

Monthly Energy Payment . FPUC shall pay Gulf Power, or Gulf Power’s designated agent, a Monthly Energy Payment for each Month of the Service Term, as calculated pursuant to the methodology in Appendix D.

4.3

Other Payments . In addition to the payments specified in this Article 4, each of FPUC and Gulf Power shall pay all amounts for which it is responsible pursuant to the other provisions of this Agreement.

ARTICLE 5

TRANSMISSION

5.1

Transmission Arrangements .

5.1.1

FPUC shall be responsible for all costs associated with and for making all necessary transmission arrangements (including any required ancillary services) for the

delivery of all Delivered Energy from and beyond the Delivery Point(s). Such transmission arrangements (including the procurement of ancillary services) shall be made by FPUC pursuant to the provisions of the OATT. Gulf Power shall be responsible for all costs associated with and for making all necessary transmission arrangements (including any required ancillary services) for the delivery of all Delivered Energy prior to the Delivery Point(s). In the event that a Party is assessed costs that are the responsibility of the other Party pursuant to this Section 5.1.1, the responsible Party shall promptly reimburse the assessed Party for such costs actually incurred.

5.1.2

Gulf Power shall, at no additional cost to Gulf Power, provide such administrative assistance to FPUC as it may reasonably request consistent with applicable Law in connection with FPUC’s application for network integration transmission service under the OATT for Delivered Energy purchased hereunder; provided, however, that FPUC acknowledges that it is solely responsible for requesting and contracting for such service (including the negotiation of all terms and conditions of the pertinent transmission agreements).

5.2

Transmission Risk . Notwithstanding any other provision of this Agreement, any and all Transmission Risk associated with energy to be scheduled and/or delivered at and beyond the Delivery Point(s) in connection with this Agreement, whether before or after the Meter Point(s), shall be expressly borne by FPUC. In no event shall Gulf Power or any of Gulf Power’s Affiliates be responsible or have any liability to FPUC whatsoever under this Agreement in connection with, and in no event shall the Monthly Capacity Payment (subject to Section 11.1.3.2) be reduced as a result of, the unavailability, inadequacy, interruption or curtailment of transmission service (whether before or after the Meter Point(s)) for any energy to be delivered

hereunder.

5.3 Formation of RTO . In the event that a Regional Transmission Organization(s) or similar organization (“RTO”) is formed and the formation and/or implementation of such RTO results in: (i) a quantifiable monetary benefit for a Party with regard to its performance under this Agreement (“Benefited Party”) that is greater than the monetary benefit to such Party contemplated on the Effective Date (the amount by which such monetary benefit is increased being referred to as the “Incremental Benefit”); and (ii) a quantifiable monetary harm for the other Party with regard to its performance under this Agreement (“Harmed Party”) that results in a monetary burden to such Party that is greater than the monetary burden to such Party contemplated on the Effective Date (the amount by which such monetary burden is increased being referred to as the “Incremental Burden”), the Parties shall negotiate to reach mutual agreement regarding an amendment(s) to this Agreement establishing a method whereby the Benefited Party would share with the Harmed Party an amount of the Incremental Benefit equal to the lesser of: (i) the Incremental Benefit; or (ii) the Incremental Burden. In no event shall such amendment(s) require the Benefited Party to bear more of a monetary burden or receive less of a monetary benefit than as originally contemplated in this Agreement for such Party on the Effective Date.

ARTICLE 6

BILLING AND PAYMENT

6.1

Billing and Payment .

6.1.1

As promptly as practicable after the end of each Month during the Service Term, but no later than the tenth (10th) Day of the following Month, Gulf Power or its agent shall send FPUC an invoice stating the Monthly Capacity Payment, the Monthly

Energy Payment and any other amounts for which FPUC is responsible under this Agreement.

6.1.2

In addition to the payments set forth in Section 6.1.1, the Monthly invoice shall include the following adjustments: (a) billing corrections, including charges or credits, identified by either of the Parties subsequent to the last Monthly invoice, which shall not be subject to interest; (b) any billing corrections, including charges or credits, that the Parties have mutually agreed upon or otherwise resolved in accordance with Section 6.2 subsequent to the last Monthly invoice, which shall be subject to interest in accordance with Section 6.2; and (c) any overdue amounts, which shall be subject to interest in accordance with Section 6.2. Any corrections made by Gulf Power pursuant to subpart (a) of the foregoing sentence to a charge set forth on a particular Monthly invoice shall be made by Gulf Power no later than 365 Days after the issuance of such invoice. Notwithstanding the foregoing, the adjustments contemplated by this Section 6.1.2 shall not include true-ups made pursuant to the calculation of the Gulf Energy Rate under Appendix C.

6.1.3

Each Monthly payment shall be due and payable on or before the tenth (10 ^th ) Day after FPUC’s receipt of each Monthly invoice or if such Day is not a Banking Day, the next Banking Day (“Due Date”). FPUC shall make payment to Gulf Power or its designated agent in accordance with such invoices on or before the Due Date in immediately available funds through wire transfer of funds or other means acceptable to Gulf Power. If FPUC does not make a payment on or before the Due Date, then interest shall be added to the overdue payment, from the date such overdue payment was due until

such overdue payment together with interest is paid, which interest shall be compounded Monthly at the Interest Rate.

6.2

Billing Disputes and Final Accounting .

6.2.1

If, after receiving a Monthly invoice (or any other statement or bill), FPUC reasonably questions or contests the amount or propriety of any payment or amount claimed by Gulf Power to be due pursuant to this Agreement, FPUC shall provide Gulf Power with written notice of such disputed invoice amount. Notwithstanding the notice of a disputed invoice amount, FPUC shall make payments in full in accordance with such disputed invoice and adjustments with interest shall subsequently be made, if appropriate, as set forth below.

6.2.2

FPUC shall have 12 Months after the receipt of any Monthly invoice (or any other statement or bill) to question or contest the amount or propriety of any charge or credit on such invoice or statement. In the event that FPUC questions or contests any such charge or credit, Gulf Power shall promptly review the questioned charge or credit and shall notify FPUC of any error in the determination of amounts reflected on such disputed invoice and the amount of any adjusted payment that either Party is required to make as a result of such re-determination. The Party required to make such payment shall make payment to the other Party in immediately available funds by the later of: (i) 10 Days after receipt by FPUC of any such notice of re-determination from Gulf Power as to the adjusted amount; or (ii) the Due Date for the next Monthly invoice. Payments made by a Party under this Section 6.2.2 shall include interest at the Interest Rate from the date the original payment was due until the date such payment together with interest at the Interest Rate is made.

6.3

Availability of Records . Until the end of 12 Months after the receipt of any Monthly invoice, each Party will make available to the other Party and each Party may audit, such books and records of the other Party (or other relevant information to which such Party has access) as are reasonably necessary for such Party to calculate and determine the accuracy of amounts shown on such invoice and thereby to verify the appropriateness of the invoiced amounts. Upon written request and reasonable notice, each Party will make available to the other Party copies of or access to such books and records during normal business Hours, at such requesting Party’s sole expense for purposes of conducting such an audit. In the event either Party determines that an invoice was not accurate or appropriate, it shall notify the other Party in writing of the discrepancy and of the necessary correction. The Party receiving such notice shall make such payments or take such other actions as are necessary to correct the discrepancy by the later of: (i) 10 Days following receipt of such notice; or (ii) the Due Date for the next Monthly invoice.

ARTICLE 7

CHARACTER OF SERVICE

7.1

Service Rendered . This Agreement is intended as a service agreement pursuant to the Tariff. Gulf Power shall provide and FPUC shall pay for services under this Agreement pursuant to the terms and conditions of the Tariff and of this Agreement. To the extent the terms and conditions of the Tariff are inconsistent with those set forth in this Agreement, the provisions of this Agreement shall control.

7.2

Constancy of Supply .

7.2.1

Gulf Power shall supply energy to meet the load requirements of the Northwest Division in a manner that is as firm as, and otherwise comparable with, the

manner in which the Southern Operating Companies meet their firm retail native load requirements, without any adverse distinction; provided, however, notwithstanding any other provision of this Agreement, Gulf Power does not guarantee or warrant that Gulf Power will supply a constant or uninterrupted supply of energy under this Agreement; provided, further, that Gulf Power shall use commercially reasonable best efforts, consistent with Prudent Utility Practices and the provisions of this Agreement, to provide the services contemplated herein in an uninterrupted fashion.

7.2.2

Subject to Section 7.2.1, to the extent practicable and consistent with Prudent Utility Practices, Gulf Power shall raise or lower the output of the generating resources used to provide energy hereunder as necessary to follow the moment-by-moment changes in the sum of the total load requirements of the Northwest Division. Gulf Power shall also provide FPUC with on-line and quick-start generation reserves consistent with the amount of capacity purchased under this Agreement.

7.2.3

Notwithstanding any other provision of this Agreement, in the event that Gulf Power, or one of its respective agents, determines in its sole discretion that it is necessary or appropriate for Gulf Power to shed, interrupt, or curtail firm territorial requirements load (including for reason that adequate resources are not available), and Gulf Power does shed, interrupt or curtail such loads, then FPUC’s similar firm loads or interruptible/curtailable loads at the Northwest Division shall share in such interruption, curtailment or load shedding on a load-ratio basis and without adverse distinction. FPUC may restore service to such shed, interrupted or curtailed loads consistent with the restoration of service to Gulf Power’s similar firm or interruptible/curtailable loads. For actions taken pursuant to this Section 7.2.3, neither Gulf Power, nor its Affiliates shall be

in breach of this Agreement by reason of, and shall have no liability whatsoever to FPUC for, any failure to make capacity available hereunder, or for any failure to deliver or any interruption in the delivery of energy hereunder or for any deficiency in the quality of service hereunder.

7.3

Character of Transactions . The sale of capacity by Gulf Power under this Agreement shall not constitute either: (i) a sale, lease, transfer or conveyance of an ownership interest or contractual right in or to any specific generation facility or resources; or (ii) a dedication of ownership or an entitlement to the capacity or output of any specific generation facility or resource.

ARTICLE 8

METERING

8.1

Metering .

8.1.1 The amount of energy transferred under this Agreement shall be determined by meters selected by Gulf Power or other methods as Gulf Power and FPUC jointly deem necessary. FPUC shall be responsible for and shall pay, under this Agreement, all costs of purchasing, installing, owning, reading, testing, inspecting, operating and maintaining the meters used in connection with service to FPUC under this Agreement (including meters owned by Gulf Power) to the extent that such costs are not otherwise assigned to or payable by another party under FPUC’s network operating agreement under the OATT. Such costs shall be paid by FPUC in addition to the Monthly Capacity Payment and the Monthly Energy Payment. The Parties shall cause meters to be read Monthly at times mutually agreed upon. Metering records shall be available at all times to authorized agents and employees of the Parties for the purposes of this Agreement.

8.1.2

Each meter used in determining the demand for or amount of electric energy supplied hereunder will be tested, calibrated, repaired and corrected at the times and in a manner consistent with the provisions of FPUC’s network operating agreement under the OATT governing the meters that measure the delivery of energy to the Northwest Division load.

8.1.3

The results of all such tests and calibrations shall be open to examination by FPUC and a report of every test shall be furnished to FPUC as soon as reasonably practical. Any meters tested and found to be not more than 2% above or below normal shall be considered, solely for purposes of this Agreement, to be correct and accurate insofar as correction of billing is concerned. If as a result of any test, any meter is found to register in excess of 2% either above or below normal, then, solely for purposes of this Agreement, the readings of such meter previously taken for billing purposes shall be corrected according to the percentage of inaccuracy so found, but no such correction shall extend beyond 90 days previous to the day on which the inaccuracy is discovered by such test.

8.1.4

For any period that a meter is found to have failed to register, then solely for purposes of this Agreement, it shall be assumed that the demand established, or electric energy delivered, as the case may be, during said period is the same as that for a period of like operation to be agreed upon by Gulf Power and FPUC during which such meter was in service and operating.

8.1.5

The provisions of this Article 8 shall apply only with respect to metering under this Agreement and shall have no application with respect to FPUC’s network operating agreement under the OATT.

ARTICLE 9

CHANGE IN LAW; ENVIRONMENTAL PROVISIONS; REGULATORY

9.1

Change in Law .

9.1.1

Notwithstanding any other provision of this Agreement, but subject to Sections 9.1.2, 9.1.3 and 9.1.4 (including provision of the applicable Change in Law Notice): (i) FPUC shall pay Increased Costs (on an After-Tax Basis) through the Change in Law Component each Month pursuant to Section 9.1.3; and (ii) FPUC shall receive the benefit of Decreased Costs through the Change in Law Component each Month pursuant to Section 9.1.3.

9.1.2

At any time, Gulf Power may notify FPUC, or FPUC may notify Gulf Power, that a Change in Law will result or has resulted in: (i) Increased Costs that are FPUC’s responsibility under this Agreement; or (ii) Decreased Costs for which FPUC is entitled to receive a credit under this Agreement (“Change in Law Notice”). The Change in Law Notice shall include: (x) the applicable Change in Law that has caused or will cause the Increased Costs or Decreased Costs; and (y) as applicable, the resulting Increased Costs that are FPUC’s responsibility hereunder or the resulting Decreased Costs for which FPUC is entitled to receive a credit (or a projection of such costs if actual costs cannot reasonably be known). Such notice shall also include reasonable documentation of the applicable Change in Law and resulting Increased Costs or Decreased Costs. Within 90 Days after a Party receives a Change in Law Notice applicable to it, such Party shall: (a) make a good faith determination of whether the Increased Costs or Decreased Costs (as applicable) result from a Change in Law as specified in this Agreement; (b) make a good faith determination of whether the Increased

Costs or Decreased Costs (as applicable) are determined in accordance with this Agreement; and (c) send the Party providing the Change in Law Notice written notice of its determination. In the event that a Party receiving a Change in Law Notice applicable to it does not send written notice of its determination within such time period, such Party shall be deemed to have concurred that the specified Increased Costs or Decreased Costs result from a Change in Law. If such Party does not concur, the Parties shall commence discussions in an effort to address and resolve the basis for the disagreement. If the Parties are unable to resolve their disagreement within 120 Days after the Change in Law Notice was received, the Parties shall submit the issue to binding arbitration under the procedures set forth in Article 16.

9.1.3

If a Party has provided a Change in Law Notice, Gulf Power shall initiate a Change in Law Component (or modify an existing Change in Law Component) as a separate and distinctly observable component of the Monthly invoices sent to FPUC hereunder that shall reflect Increased Costs that are FPUC’s responsibility or Decreased Costs for which FPUC is entitled to a credit (whether such costs are for future or prior periods); provided, however, if there is a disagreement with respect to whether a Change in Law has occurred or the amount of Increased Costs or Decreased Costs, the Change in Law Component shall reflect the position of Gulf Power with respect to Increased Costs and the position of FPUC with respect to Decreased Costs and then be resolved under the provisions of Article 16, Dispute Resolution, of this Agreement; provided, further, that to the extent any disagreement with regard to Increased Costs or Decreased Costs is resolved in a Party’s favor, then a payment shall be made to the applicable Party(ies) if required in order to refund or pay any overcharges or undercharges with appropriate interest, where

the amount of interest is to be calculated in accordance with the Interest Rate. As applicable, FPUC shall pay or receive a credit for the amount of the Change in Law Component, as adjusted from time to time, with each Monthly invoice. In the event that the Change in Law Component is based on an estimate of Increased Costs or Decreased Costs, there shall be included a true-up amount in a subsequent Monthly invoice (either a credit or an additional charge, as appropriate) to reflect actual Increased Costs or Decreased Costs once they are known. Any portion of a Change in Law Component that is for the recovery of Increased Costs or Decreased Costs incurred in prior periods shall include interest on such amounts at the Interest Rate.

9.1.4

Notwithstanding anything to the contrary in this Section 9.1 above, to the extent that Gulf Power includes Increased Costs and/or Decreased Costs in the calculation of the Gulf Energy Rate, (i) Sections 9.1.1, 9.1.2 and 9.1.3 shall not apply with respect to such costs or the Change(s) in Law associated with such costs, and (ii) FPUC shall pay or receive the benefit of (as applicable) such increases or decreases in costs through the Gulf Energy Rate and the Monthly Energy Payment as calculated by Gulf Power.

9.2

Clean Air Interstate Rule and Clean Air Mercury Rule . The Parties acknowledge that CAIR and/or CAMR impose obligations that will increase Gulf Power’s costs of providing capacity and energy under this Agreement. Therefore, FPUC agrees to reimburse Gulf Power for an appropriate pro rata share ( i.e. , a proportionate shar

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AGREEMENT FOR GENERATION SERVICES, Parties: florida public utilities co , gulf power company

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FLORIDA PUBLIC UTILITIES CO | GULF POWER COMPANY

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