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HomeMy WebLinkAboutBPMC Meeting - February 13, 1996 2BRADLEY LAKE PROJECT MANAGEMENT COMMITTEE Bradley Lake Agreements 1 Agreement for the Sale and Purchase of Electric Power ("Power Sales Agreement") 2 Agreement for the Wheeling of Electric Power and for Related Services ("Services Agreement") 3 Amendment to Agreement for Sale of Transmission Capability ("Transmission Capability Agreement") 4 Bradley Project Management Committee Bylaws 5 Master Maintenance and Operating Agreement ("MMOA") ** Additional Agreements relating to the Bradley Lake Hydroelectric Project have been executed. ** “we COUNTERPART gq of 21 BRADLEY LAKE HYDROELECTRIC PROJECT AGREEMENT FOR THE SALE AND PURCHASE OF ELECTRIC POWER ("POWER SALES AGREEMENT") by and among THE ALASKA POWER AUTHORITY, An Agency Of The State Of Alaska, ("Seller"), and The CHUGACH ELECTRIC ASSOCIATION, INC., The GOLDEN VALLEY ELECTRIC ASSOCIATION, INC., The MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER, The CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM, and The ALASKA ELECTRIC GENERATION & TRANSMISSION COOPERATIVE, ("Purchasers") and The HOMER ELECTRIC ASSOCIATION, INC., and The MATANUSKA ELECTRIC ASSOCIATION, INC., (Additional Parties) INC., Index Of Sections Section RECL CATS yea tole) le ier) tot) Voile coll) o)llfe) ee elie tefeiiiteresii edie 11. 12. 13. 14. 15. 16. i. 18. 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Covenants To Maintain Integrity Of Agreement . . Assignments) 's) |< I) >| 2) |e is) ©) 1 1s") | 6) (=) lo) m| co! Ie) |e Notices, Computation Of Time And Holidays ... Applicable! Law’ |<) Ss) 2) =) |= | «| | |s |e | si © |e '| | (6) |e | Availability Of Information ........2e-. Severability, |e |<<) i [eo | =| 19) \6) ||) s) ©! fel |e) ete) [el lie | 11 12 13 14 7 18 18 ae) 23 24 24 24 26 26 27 27 27 ~ we Section 23. Remedies Cumulative ........-. 24. Waiver Not Continuing .......-. 25. Section Headings . .......24e+e-6 26. Multiple Copies ........2-e+e-e 27. Covenant To Act In Good Faith .... 28. No Third Party Beneficiaries ..... 29. Excess Payments ....-.-.++«-e+s-s. 30. Special Arrangements Regarding AEG&T . 31. Capitalization Of Certain Costs Of Purchasers 32. Efforts To Obtain Intertie ...... Exhibit Exhibit Exhibit Exhibit Exhibit “An, *p* , *c", "pD", "EH , Bond Resolution Delivery Point Description Of The Project 27 28 28 28 28 28 28 30 31 31 Purchasers' Percentage Shares Of Project Capacity And Of Annual Project Costs Form Of Certain Supplemental Bond Resolutions POWER SALES AGREEMENT THIS AGREEMENT dated as of December 8, 1987, is entered into by and among the ALASKA POWER AUTHORITY (the "Authority") and the CHUGACH ELECTRIC ASSOCIATION, INC., the GOLDEN VALLEY ELECTRIC ASSOCIATION, INC., the MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER, the CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM, and the ALASKA ELECTRIC GENERA- TION & TRANSMISSION COOPERATIVE, INC. (individually a "Purchas- er," and collectively the "Purchasers"), and the HOMER ELECTRIC ASSOCIATION, INC., and the MATANUSKA ELECTRIC ASSOCIATION, INC. (as additional Parties with some, but not all, of the rights and responsibilities of Purchasers). WITNESS ET #H: The Authority recites, agrees, represents and cove- nants as follows: (1) The Authority is a public corporation of the State of Alaska duly created, organized and existing pursuant to AS 44.83; (2) The Authority is authorized, and has taken all steps necessary pursuant to the Constitution and laws of the State of Alaska and the regulations and by-laws of the Authori- ty, to enter into this Agreement and to comply fully with the terms hereof; (3) The Authority desires to fulfill its legisla- tively established duty of providing residents of the State of Alaska with long-term, stable, and economic sources of power and an adequate, economic, and reliable long-term supply of power; and (4) The Authority's execution and performance of this Agreement will not conflict with, violate, or constitute an event of default under any other resolution, contract, ag- reement, bond, note, mortgage, or other obligation of the Auth- ority, or with respect to any order, ruling, or decree of any court or regulatory agency to which the Authority is subject at the time the Authority executes this Agreement. Each Cooperative Purchaser (as hereinafter defined) and the Homer Electric Association, Inc. ("HEA") and the Mata- nuska Electric Assocation, Inc. ("MEA") recites, agrees, repre- sents and covenants as follows: (1) The Purchaser is a duly organized and constitut- ed electric cooperative under the laws of the State of Alaska and is currently a borrower from the Rural Electrification Ad- ministration, United States Department of Agriculture, under the Rural Electrification Act of 1936 (7 U.S.C. § 901 et seg.); BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 1 (2) The Purchaser is authorized, and has taken all steps necessary pursuant to its articles of incorporation and by-laws and applicable laws and regulations, to enter into this Agreement and to comply fully with the terms hereof; (3) The Purchaser performs the functions of a utili- ty and is a wholesale power customer eligible to purchase power produced from a project pursuant to AS 44.83; and (4) The Purchaser's execution and performance of this Agreement will not conflict with, violate, or constitute an event of default under any other resolution, contract, ag- reement, bond, note, mortgage, or other obligation of the Pur- chaser, or with respect to any order, ruling, or decree of any court or regulatory agency to which the Purchaser is subject at the time the Purchaser executes this Agreement. Each Municipal Purchaser (as hereinafter defined) re- cites, agrees, represents and covenants as follows: (1) The Purchaser is a duly organized and constitut- ed municipal corporation under the Constitution and laws of the State of Alaska; (2) The Purchaser is authorized, and has taken all steps necessary pursuant to the Constitution and laws of the State of Alaska and other applicable laws and regulations, and pursuant to its charter and ordinances, to enter into this Ag- reement and to comply fully with the terms hereof; (3) The Purchaser performs the functions of a utili- ty and is a wholesale power customer eligible to purchase power produced from a project pursuant to AS 44.83; and (4) The Purchaser's execution and performance of this Agreement will not conflict with, violate, or constitute an event of default under any other charter, ordinance, resolu- tion, contract, agreement, bond, note, mortgage, or other obli- gation of the Purchaser, or with respect to any order, ruling, or decree of any court or regulatory agency to which the Pur- chaser is subject at the time the Purchaser executes this Ag- reement. NOW, THEREFORE, the parties agree as follows: Section 1. Definitions. For the purposes of this Agreement, the following definitions apply: (a) "Act" or references to AS 44.83 mean Title 44, Chapter 83 of the Alaska Statutes (AS 44.83) as the same may be amended or supplemented from time to time. BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 2 (b) "Agreement" means this Power Sales Agree- ment. (c) “Annual Payment Obligation" means the total amount payable by a Purchaser in or for a Fiscal Year pur- suant to this Agreement. (da) "Annual Project Budget" means the budget for the Project as adopted or in effect for a particular Fiscal Year, and amended or supplemented from time to time, pursuant to Section 13. (e) "Annual Project Costs" shall have the mean- ing given it in Section 8 of this Agreement. (f) "Authority" means the Alaska Power Authori- ty as established by the Act, and any successor agency thereto. (g) "Bond Resolution" means (i) the document attached as Exhibit "A", or a resolution adopted by the Authority substantially in the form of Exhibit "A", as supplemented and amended from time to time in a manner consistent with Section 11 of this Agreement and with the provisions of the Act, or (ii) a further bond resolution, consistent with Section 11, adopted in connection with the issuance of bonds to refund the Bonds. (h) "Bonds" means bonds, notes or other evi- dences of indebtedness (including refunding bonds) issued pursuant to the Bond Resolution, the proceeds of which are used to pay or reimburse Costs of Acquisition and Con- struction and Required or Optional Project Work. (2) "Committee" means the Project Management Committee established pursuant to Section 13. (5) "Consultant" means an independent indivi- dual or firm (i) of nationwide and favorable reputation, having demonstrated expertise in the field or the matter or the item referred to it under various specific pro- visions of this Agreement, and (ii) approved by the Auth- ority and the Committee in accordance with rules of pro- cedure to be adopted by the Committee to govern such ap- proval, which approval shall not be unreasonably withheld. (k) "Cooperative Purchasers" means Chugach Electric Association, Inc., Golden Valley Electric Associ- ation, Inc., and Alaska Electric Generation & Transmission Cooperative, Inc. The term "Cooperative Purchasers" in- cludes Homer Electric Association, Inc., and Matanuska Electric Association, Inc., only to the extent specified in Section 30 of this Agreement. BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 3 (1) "Cost of Acquisition and Contruction" means the Cost of Acquisition and Construction (as defined in Section 101 of the Bond Resolution) of the Project; pro- vided, that for purposes of this Agreement the Cost of Acquisition and Construction of the Project shall not in- clude the Cost of Acquisition and Construction of Capital Improvements (as defined in Section 101 of the Bond Res- Olution). (m) "Date of Commercial Operation" means the date on which engineers retained for this purpose by the Authority have reasonably declared that the Project is fully available to be operated at not less than ninety megawatts (90 MW), and its output can be scheduled on a commercial basis. (n) "Debt Service" means amounts that the Auth- ority is required to set aside for the payment of princi- pal of, premium, if any, sinking fund payments, and inter- est on the Bonds, as the same are scheduled to become due under the Bond Resolution, and not by reason of any accel- eration. (o) “Delivery Point" means the Bradley Junction facilities, as identified and further described in Exhibit B. (p) "Electric power" or "power" means electric energy or electric capacity or both. Where the context of this Agreement requires a distinction, electric energy is specified and/or expressed in kilowatthours or megawatt- hours and electric capacity is specified and/or expressed in kilowatts or megawatts. (q) “Excess Payment Amount" means the amounts, if any, computed as provided in Section 29 and included in Annual Project Costs. (xr) "Fiscal Year" means that twelve-month peri- od starting July 1 of a calendar year through and includ- ing June 30 of the succeeding calendar year. The initial Fiscal Year for purposes of this Agreement is that portion of the twelve-month period starting on the Date of Commer- cial Operation through and including the following June 30. If the portion of the period is shorter than 90 days the parties shall determine the initial Fiscal Year, which must end on a June 30 and may not be longer than 456 days. The last Fiscal Year for purposes of this Agreement shall be that portion of the twelve-month period between the end of the last full (i.e., twelve month) Fiscal Year and the expiration of this Agreement. (s) "Municipal Purchaser" means the Municipali- ty of Anchorage d/b/a/ Municipal Light and Power, and the BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 4 City of Seward d/b/a Seward Electrical System. (t) "Optional Project Work" means Project re- pairs, renewals and replacements, improvements, better- ments, additions, or expansions that do not constitute Required Project Work. (u) "Percentage Share" means the fraction, ex- pressed as a percent and set forth for each Purchaser in Exhibit D as that Exhibit may be amended from time to time, used to compute the amount of each Purchaser's en- titlement to Project Capacity and obligation to pay Annual Project Costs. (v) "Project" means the Bradley Lake Hydroelec- tric Project as described in Exhibit C. (w) "Project Capacity" means the amount of electric capacity capable of being produced by the Project (including capacity attributable to Required or Optional Project Work) at any and all times from the Date of Com- mercial Operation until the termination of this Agreement (or any renewal thereof) under the operating conditions that exist during such times, including periods when the Project may be not operating or inoperable or the opera- tion thereof is suspended, interrupted, interfered with, reduced, or curtailed, in each case in whole or in part for any reason whatsoever, after corrections for station and Project use, and depletions required under any federal license for the Project. (x) “Prudent Utility Practice" 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 at such time, or which, in the exercise of reasonable judgment in light of facts known at such time, could have been expected to accomplish the de- sired results at the lowest reasonable cost consistent with good business practices, reliability, safety and rea- sonable expedition. Prudent Utility Practice is not re- quired to be the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition. Prudent Utility Practice includes due regard for manufacturers' warranties and the requirements of gov- ernmental agencies of competent jurisdiction and shall apply not only to functional parts of a Project, but also to appropriate structures, landscaping, painting, signs, lighting and other facilities. In evaluating whether any matter conforms to Prudent Utility Practice, the parties shall take into account (i) the nature of the parties BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 5 hereto under the laws of the State of Alaska and their statutory duties and responsibilities, and (ii) the ob- jective of integrating Project Capacity with the generat- ing resources of the Purchasers, including resources available under contract, to achieve optimum utilization of the resources and achieve efficient and economical op- eration of each Purchaser's System. For purposes of this Agreement, "national standards for the industry" means Prudent Utility Practice. (y) "Purchaser" means, as of any particular time, such of the Municipality of Anchorage d/b/a Munici- pal Light and Power, Chugach Electric Association, Inc., Golden Valley Electric Association, Inc., the City of Seward as have executed this Agreement, and the Alaska Electric Generation & Transmission Cooperative, Inc. ("AEG&T). The term "Purchaser" includes Homer Electric Association, Inc., and Matanuska Electric Association, Inc., only to the extent specified in Section 30 of this Agreement. (z) "Purchaser's System" means a Purchaser's electric utility system for the distribution, transmis- sion, and generation of electrical power and which is owned and operated by the Purchaser. If Purchaser's elec- tric utility system is combined with other utilities of the Purchaser, then "Purchaser's System" includes only those facilities, activities, and revenues properly alloc- able to Purchaser's electric utility service. "Purchas- er's System" does not include the Project, regardless of whether the Purchaser operates the Project under a separ- ate agreement with the Authority. (aa) "Purchaser's Water Allocation" means the number of acre feet of water from the Project allocated for generation purposes by the Committee to a Purchaser from time to time, based on that Purchaser's Percentage Share. (bb) "Railbelt" means the geographic area served by the Purchasers. (cc) “Railbelt Energy Fund" means a fund cre- ated by the legislature, the use of which is intended only for approved power supply and transmission projects in the Railbelt. (dd) "REA" means the Rural Electrification Ad- ministration, an agency of the United States Department of Agriculture. (ee) “Recoverable Construction Cost" means an amount equal to $175,000,000 less one half the amount, if BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 6 any, by which $350,000,000 exceeds the Cost of Acquisition and Construction, plus the principal amount of additional Bonds (if any) issued pursuant to Section 31. (££) "Renewal and Contingency Reserve Fund" means the Renewal and Contingency Reserve Fund established pursuant to Section 502 of the Bond Resolution. (gg) "Required Action" means an action that must be taken in order for the Authority to comply with federal or state law, the orders of licensing and regula- tory agencies, the Bond Resolution, or this Agreement. (hh) "Required Project Work" means repairs, maintenance, renewals, replacements, improvements or bet- terments required by federal or state law, a licensing or regulatory agency with jurisdiction over the Project, or this Agreement, or otherwise necessary to keep the Project in good and efficient operating condition, consistent with (1) sound economics for the Project and the Purchasers, and (2) national standards for the industry. (ii) "Revenue Fund" means the Revenue Fund est- ablished pursuant to Section 502 of the Bond Resolution. (jj) "Trustee" means the trustee appointed pur- suant to Article IX of the Bond Resolution, or that Trust- ee's successor or successors and any other corporation which may at any time be substituted in that Trustee's place under the Bond Resolution. Section 2. Term Of Agreement. (a) Effectiveness. This Agreement shall become effective on the first date when (i) the Agreement has been executed and delivered by all Purchasers and by the Authority, and (ii) each Purchaser has obtained all nec- essary approvals of this Agreement and of all transmission and/or services agreements for the transmission of Project power to the Purchasers. An approval shall not be con- sidered "necessary" for purposes of this Section 2(a) un- less, prior to or contemporaneously with delivery of this Agreement, the person or entity from which such approval must be obtained has been identified to the other parties in writing by the Purchaser requiring such approval. It is the intent of each Purchaser to take all steps rea- sonably within its power to obtain all necessary approvals ’ from its governing body no later than December 1, 1987. (b) Commencement of payment obligations. The payment obligations of each Purchaser under this Agreement shall commence on the Date of Commercial Operation; pro- vided, that the Purchasers shall be obligated to pay those Committee costs referenced in the last sentence of Section BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 7 13(a) regardless of whether the Date of Commercial Opera- tion occurs. (c) Termination. This Agreement shall termi- nate (i) 50 years after the Date of Commercial Operation, or (ii) when no Bonds are Outstanding under the Bond Res- olution and all payment obligations under this Agreement (other than any payment obligations under Section 29) have been satisfied or provided for, whichever occurs later; provided, that if the Date of Commercial Operation does not occur before January 1, 1996, then this Agreement shall terminate on January 1, 1996. The parties may mu- tually agree to terminate or to renew this Agreement prior to termination, subject, however, to the written approval of the Administrator of REA if such written approval is then required, and the terms and conditions of covenants and agreements between the Authority and holders of Bonds. If such approval is then required, no amendment of this Agreement shall take effect without the written approval of the Administrator of REA. (ad) Renewal. Any Purchaser may renew this Ag- reement on the same terms and conditions as provided here- in for successive additional terms (such terms to equal forty (40) years or, if shorter, the remaining useful life of the Project), upon written notice to the Authority by the Purchaser given no less than six and no more than twenty-four months prior to the end of the term of this Agreement. Purchasers electing to renew this Agreement shall be entitled to have their Percentage Shares adjusted pro rata, based on their Percentage Shares as set forth in Exhibit D as that Exhibit exists twenty-four months prior to the end of the initial term of this Agreement, so that the adjusted Percentage Shares of the Purchasers renewing this Agreement total one hundred percent (100%). No re- newing Purchaser shall be required to accept the entirety of the Percentage Share to which that Purchaser becomes entitled, but if the Percentage Shares of all renewing Purchasers do not total one hundred percent, the Authority may sell to any other utility that is a qualified purchas- er of power under the Act any remaining Percentage Share or portion thereof upon the same terms and conditions ap- plicable to the renewing Purchasers, if the Authority rea- sonably determines that such utility is able to carry out the obligations of a Purchaser under this Agreement and that such sale to such utility will not adversely affect the tax exemption of interest on any Bonds Outstanding under the Bond Resolution that originally were issued on a tax-exempt basis. The Authority shall not be obligated to renew this Agreement if, after reasonable notice to the renewing Purchasers, Percentage Shares that total one hun- dred percent have not been sold to such Purchasers or to other qualified utility purchasers. BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 8 Section 3. Exhibits. The following exhibits are incorporated by reference into this Agreement: (a) Exhibit "A", Bond Resolution, (b) Exhibit "B", Delivery Point, (c) Exhibit "C", Description of the Project, (d) Exhibit "D", Purchasers' Percentage Shares of Project Capacity and of Annual Project Costs, and (e) Exhibit "E", Form Of Certain Supplemental Bond Resolutions. Section 4. Electric Service To Be Furnished. (a) Sale _and_ purchase. The Authority hereby sells, and each Purchaser hereby purchases, that Purchas- er's Percentage Share of Project Capacity (together with associated energy) from the Project in accordance with this Agreement. The actual delivery (if any) of electric capacity and associated energy to Purchasers from the Pro- ject shall be made in accordance with scheduling proce- dures adopted by the Committee. (b) Available Power. The Authority shall at all times, except when prevented by a cause or event not within the control of the Authority, make power available to the Purchasers from the Project in an amount equal to the amount the Purchasers may schedule from the Project, within the limitations imposed by available Project capab- ility, available water, and the scheduling procedures ad- opted by the Committee. (c) Required Project Work. The Authority shall make or cause to be made all Required Project Work, pro- vided that funds are legally available to the Authority for this purpose. The costs of Required Project Work shall be included in Annual Project Costs in the manner set forth in Section 8(a) (iv). The Authority shall give reasonable notification to all Purchasers prior to making or causing to be made any Required Project Work. Alterna- tive methods (if any) of carrying out and funding Required Project Work shall be subject to approval by the Committee under rules of procedure to be adopted pursuant to Section 3 BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 9 (ad) Optional Project Work. The Authority shall not make or cause to be date Optional Project Work unless such Optional Project Work is approved by the Committee. Any Optional Project Work shall be at the expense of the benefitted Purchaser(s), as determined in advance by the Committee, in proportion to the value of the benefit con- ferred upon each such Purchaser. If such Optional Project Work has an adverse impact upon the operations or finances of a Purchaser as determined by the Committee, the bene- fitted Purchaser(s) shall compensate the adversely affect- ed Purchaser(s) for the increased costs and reduced bene- fits resulting from such impact. In the event the Pur- chasers are unable to agree as to how any increased costs or compensation will be apportioned, or as to the amount of any increased costs or appropriate compensation, the parties shall submit the question to dispute resolution in accordance with the dispute resolution procedures adopted by the Committee under Section 13. Section 5. Electric Power Reserves For The Project (a) Need for reserves. The parties recognize that (i) electric power from the Project may be unavail- able periodically because of generation and transmission outages, repairs, maintenance, inspections, testing, and similar events, and (ii) under the Alaska Intertie Agree- ment or otherwise, each Purchaser is responsible for main- taining (or contracting for the use of) generation re- serves in amounts sufficient to protect its own loads in the event that Project power is unavailable. (b) Reserve rocedures. Promptly after its establishment, the Committee shall adopt and implement procedures under which, in as cost-effective a manner as possible: (i) the Authority shall have the right to require the operation of specific amounts of generat- ing capacity owned by a Purchaser and made available to the Authority, and to use the power produced by such operation to provide reserves to requesting Pur- chasers for some or all Project power, to the extent such capacity would otherwise be idle or its output would otherwise not be needed by the owner of that capacity to enable that Purchaser to meet its own loads or to make power sales to other utilities; (ii) the additional costs incurred by any Purchaser in making such capacity available to the Authority and in operating the same for the Authority shall be computed equitably and reimbursed promptly to such Purchaser by the Authority; and BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 10 (iii) the costs of so reimbursing any Pur- chaser shall be included in Annual Project Costs. (c) Alternative reserves. Nothing in Section 5(b) shall: (i) relieve any Purchaser of the responsi- bility set forth in Section 5(a) (ii); (ii) require any Purchaser to make reserve capacity available to the Authority under Section 5(b) (i); or (iii) require any Purchaser to avail it- self of reserve power available from the Authority under Section 5(b) (i), or to bear any of the costs of such power if the Purchaser does not avail itself of such power, if the Purchaser chooses and is able to rely upon its own reserves to meet its loads when Project power is unavailable. Section 6. Obligations Under Bond Resolution; Com- pletion of Project. (a) Assignment or payment to Trustee. The par- ties recognize and agree that (i) the Authority may assign its rights to receive payments under this Agreement as security for the payment of the Bonds to the Trustee under the Bond Resolution for the benefit of the holders of the Bonds, and (ii) the Authority may direct that amounts pay- able to it under this Agreement be paid directly to the Trustee. (b) Project funding. The Authority shall issue Bonds, or otherwise obtain funds (including appropria- tions), sufficient to pay or reimburse the Cost of Acqui- sition and Construction. Annual Project Costs shall in- clude Debt Service on Bonds issued to pay the Cost of Ac- quisition and Construction in an aggregate principal amount up to but not exceeding the Recoverable Construc- tion Cost. The Authority may estimate the Recoverable Construction Cost and issue Bonds at any time in amounts up to the amount of such estimate. As soon as practicable after the Date of Commercial Operation, the Authority shall adjust (and re-adjust when necessary) Annual Project Costs to reflect actual Recoverable Construction Cost. : (c) Covenants of the Authority. The Authority covenants that it will not cause rates for Project Power to increase by reason of any bond resolution, covenant or agreement contained in any trust indenture or trust agree- ment entered into by the Authority in connection with a power project other than the Project, nor on account of any inadequacy in its actual or projected aggregate BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 11 revenues, other than revenues from the Project, nor will the Authority include in Annual Project Costs debt service payable on debt incurred for any purpose except in respect of the Project as provided herein. (da) Project completion and operation. The Authority agrees to use its best efforts to complete the Project expeditiously and in accordance with sound engin- eering practice and with the provisions of the Bond Reso- lution. The Authority shall also use its best efforts consistent with Prudent Utility Practice to construct and complete, and to operate and maintain the Project (or to arrange for such operation and maintenance) to provide power at the lowest reasonable cost to the Purchasers in a manner that is compatible with the Purchasers' Systems and consistent with the Act, the Bond Resolution, and this Ag- reement. (e) Best efforts by Committee members. To the extent that the cost of Project power is or may be affect- ed by actions of the Committee under Section 13, each Purchaser in its capacity as a member of the Committee agrees to use its best efforts consistent with Prudent Utility Practice to assist in assuring that the Project provides power at the lowest reasonable cost to the Pur- chasers in a manner that is compatible with the Purchas- ers' Systems and consistent with the Act, the Bond Resolu- tion, and this Agreement. Section 7. Payment Obligation. (a) Payment Obligation. Each Purchaser agrees to pay its Percentage Share of Annual Project Costs for each Fiscal Year. The procedures for determining the amount of and for making such payments are set forth in Section 13 of this Agreement. (b) Purchaser's Obligations. Each Purchaser shall make payments in the amounts and at the times re- quired by this Agreement notwithstanding a suspension or reduction in the amount of power supplied by the Project. Such payments shall not be subject to any reduction, by offset or otherwise. The parties intend and interpret the foregoing two sentences to mean that the obligation to make such payments shall be absolute and unconditional and unaffected by any interruption, interference, or curtail- ment in whole or in part of power supplied by the Project. In the event that (i) the Project is no longer operable, or its operation is interrupted or curtailed for any rea- son whatsoever in whole or in part, and (ii) the Authority does not restore the Project to full operation within a reasonable time, then the Purchasers may upon reasonable notice to the Authority and at their own expense take such action as they deem necessary to so restore the Project. BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 12 The taking of such action by the Purchasers shall not al- ter each Purchaser's obligation to pay its Percentage Share of Annual Project Costs. Section 8. Annual Project Costs (a) Annual Project’ Costs defined. Annual Pro- ject Costs means all of the costs resulting from the own- ership, operation, maintenance of and renewals and re- placements to the Project, properly incurred or paid dur- ing each Fiscal Year, including: (i) Amounts required to be set aside by the Authority for the payment of Debt Service on Bonds issued to pay the Cost of Acquisition and Con- struction in an aggregate principal amount up to but not exceeding the Recoverable Construction Cost; (ii) Amounts required to be set aside for the payment of Debt Service on other Bonds and debt service on other obligations approved in accordance with Sections 11 and 13; (iii) Amounts required to restore the funds established under the Bond Resolution to the levels required by the Bond Resolution to be main- tained therein; (iv) Amounts which may be required to pay for Required Project Work, to the extent that such costs are not covered by insurance or Bond proceeds or by the Renewal and Contingency Reserve Fund; (v) Other amounts determined by the Com- mittee to be necessary or appropriate to supplement and to be paid into the Funds established under the Bond Resolution; (vi) Excess Payment Amounts, if any, com- puted in accordance with Section 29; (vii) All other costs of producing and de- livering Project power (excluding depreciation) not accounted for by the payments out of funds and re- serves specified in the foregoing sections and prop- erly chargeable to the Project under the Uniform Sys- tem of Accounts, less any credits against said costs by reason of revenues from sources other than the di- rect sale of power to Purchasers, and also less any credits for interest earned during construction and available for Project purposes; provided, that income from interest earned on reserve funds shall be used at least annually to accumulate and maintain said reserve funds in the amounts required under the Bond BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 13 Resolution or in such greater amounts as may be de- termined by the Committee, or to reduce Annual Pro- ject Costs. Such other costs shall include: (A) Project operating and maintenance costs, in accordance with the Annual Budget adopted in accordance with Section 13; (B) Costs of Project-related insur- ance, and, to the extent permitted with respect to each Purchaser under Section 5, the costs of electric power reserves for the Project; (Cc) Project-specific administrative and general expenses of the Authority, such as costs of safety inspections and investigations; (D) Costs of the Committee, whether incurred by the Authority or incurred by a Pur- chaser on behalf of the Committee; and (E) Such other Project costs as the Committee may from time to time approve for in- clusion in Annual Project Costs in accordance with procedures to be adopted by the Committee. (b) Proceeds of a taking. Any payment received by the Authority as a result of a taking of the whole or any portion of the capacity, facilities, available water, or output of the Project by any state or federal govern- ment agency shall be used by the Authority, after consult- ation with the Committee, to (i) reduce Annual Project Costs, (ii) retire Bonds, or (iii) reimburse the State of Alaska for a portion of the State's capital contribution to the Project (recognizing the separate sources of Pro- ject funding under Section 6(b)), whichever of these uses or combination of such uses shall be equitable and proper under the circumstances existing at the time of the tak- ing. Section 9. Obligations In The Event Of Default. (a) Enforcement. Upon failure of a Purchaser to perform any obligation herein, the Authority may bring any suit, action or proceeding at law or in equity ("Suit"), including mandamus, injunction and action for specific performance, as may be necessary or appropriate to enforce any covenant, agreement or obligation of this Agreement against that Purchaser. The Authority may bring such Suit (i) thirty days after giving the Purchaser a written demand for performance, in the case of default by the Purchaser on any obligation other than a payment obli- gation, and (ii) immediately, in the case of default by the Purchaser on any payment obligation. Each Purchaser BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 14 shall continue to make payments in the event of any dis- pute regarding performance of any obligation by any party under this Agreement or in the event of any dispute under the Bond Resolution, and this obligation of continued pay- ment pending resolution of disputes shall be immediately enforceable by any party upon application to any court of competent jurisdiction. (b) Additional rights and remedies. In addi- tion to the Authority's STorte under Section 9(a), if a Purchaser has for any reason suspended or reduced, or has failed to make or has been prevented from making, payments required under this Agreement, the Authority may terminate or suspend the delivery of power to that non-paying Pur- chaser if, after consulting with the other Purchasers, the Authority reasonably determines that such termination or suspension is more effective than other available alterna- tives in minimizing adverse impacts on such other Purchas- ers. (i) I£ the Authority so terminates or sus- pends deliveries, the Authority shall: (A) offer to other Purchasers, on terms and conditions applicable to other power sold under this Agreement, any power not deliv- ered to the non-paying Purchaser, and if neces- sary allocate such power pro rata on the basis of Percentage Shares among Purchasers accepting such offer; (B) offer any power not sold under Section 9(b) (i) (A) to any qualified utility (in- cluding the other Purchasers) on terms and con- ditions deemed favorable by the Authority after consultation with the Committee; and (Cc) if the Authority projects that the amounts to be deposited into the Revenue Fund will nonetheless be insufficient to pay Annual Project Costs, increase every other Purchaser's Percentage Share of Annual Project Costs and Project Capacity pro rata to the extent and for the period necessary to compensate for such in- sufficiency; provided, that no Purchaser's Per- centage Share shall be increased by more than twenty-five (25) percent above the amount set forth in Exhibit D without the written consent of that Purchaser. (ii) If the Authority determines that the process of offering power to others under Sections 9(b) (i) (A) or (B) would delay exercise of the Author- ity's rights under Section 9(b) (i) (C), and that as a BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 15 result the Authority will be unable to make deposits when required under the Bond Resolution, the Authori- ty may exercise its rights under (C) immediately and take the actions required under (A) and (if neces- sary) under (B) as soon as practicable thereafter. No exercise by the Authority of any of its rights (or any failure by the Authority to exercise any of its rights) under this Section 9(b) shall relieve any non-paying Purchaser of any payment obligation under this Agreement or relieve such Purchaser of any lia- bility for damages resulting from non-payment. In particular, sales of power under Section 9(b) (i) (A) and (B) are intended to reduce the financial impact of any Purchaser's non-payment on other, paying Pur- chasers. Such sales are not intended to, nor shall they, reduce the payment obligations of the non- paying Purchaser or the damages for which such non- paying Purchaser may be liable. (iis) To the extent that the Authority uses Project reserve funds to permit it to make time- ly payments under the Bond Resolution following non- payment by a Purchaser, the amount needed to replen- ish such reserve funds shall be added to the Annual Payment Obligation of the non-paying Purchaser, and if the non-paying Purchaser fails to make payment of its Annual Payment Obligation as so increased, the Authority may exercise any of the rights available to it under this Section 9(b). (c) Litigation. If Purchasers' Percentage Shares are increased pursuant to Section 9(b) (i) (C), then the Authority shall, and any other Purchaser(s) may, im- mediately initiate and diligently pursue litigation in any court of competent jurisdiction to compel full and timely payment by the non-paying Purchaser, to recover amounts needed to compensate Purchasers whose Percentage Shares have been increased, and to obtain such other relief as shall be fair and equitable. The same or similar litiga- tion against any non-paying Purchaser may also be initi- ated and pursued by the Authority and/or by any paying Purchaser if in response to any non-payment the Authority takes action pursuant to Sections 9(b) (i) (A) or (B). (a) Default by the Authority. In the event of any default by the Authority under any covenant, agreement or obligation under this Agreement with respect to a Pur- chaser, that Purchaser may, upon thirty (30) days written notice to the Authority, bring any suit, action or pro- ceeding, at law or in equity, including mandamus, injunc- tion and action for specific performance, as may be neces- sary or appropriate to enforce any covenant, agreement or obligation of this Agreement against the Authority. No BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 16 payment obligation of a Purchaser under this Agreement is subject to offset, however. Section 10. Purchasers' Systems. (a) Character of expense. The amounts payable under this Agreement are operating expenses of each Pur- chaser's System, and are valid and binding obligations of each Purchaser, payable only from the gross revenues of said Purchaser's System as a cost of purchased electric power, and not payable from any taxes. (b) Purchasers' rate covenants. In order to afford, permit, and make timely payments as specified in this Agreement, each Purchaser agrees that it will estab- lish, charge and collect rates, fees, and charges with respect to that Purchaser's System in accordance with ap- plicable law to provide revenues sufficient to meet its obligations under this Agreement and sufficient to pay, together with any other funds or monies available there- for, any and all other amounts payable from or which con- stitute or may constitute a charge and lien upon such rev- enues including, but not limited to, amounts sufficient to meet obligations to service debt incurred by the Purchaser to finance the Purchaser's System. (c) Operation. and maintenance of Purchasers’ Systems. Each Purchaser covenants and agrees that it will operate and maintain its System in good repair, working order and condition, and in accordance with Prudent Utili- ty Practice. (ad) Limitation on certain contracts. Each Pur- chaser covenants and agrees not to enter voluntarily into any contract or agreement to take or to take or pay for power, other than this Agreement, payable from the rev- enues of the Purchaser's System on a parity with or super- ior to the payment of its obligations under this Agree- ment, except that a Purchaser may enter into such a con- tract or agreement of not to exceed two years' duration under which the Purchaser's payment obligation is on a parity with the payment of its obligations under this Ag- reement. The limitations of this Section 10(d) shall not apply to contracts or agreements creating obligations on a parity with obligations under this Agreement if a written opinion from a Consultant is rendered that (i) the con- tract or agreement is reasonably expected to contribute to the conduct of the business of the Purchaser's System in an efficient and economical manner consistent with Prudent Utility Practice, and (ii) the contract or agreement will not impair the ability of the Purchaser to raise revenues sufficient to meet its obligations under this Agreement. BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 17 Section 11. Bond Resolution. (a) Amendment or supplementation of Bond Reso- lution. Except as provided in Section 12, the Authority will not amend or supplement the Bond Resolution in any manner, or adopt a new Bond Resolution in connection with the refunding of the Bonds, which would materially ad- versely affect the ability of a Purchaser to fulfill the terms of this Agreement or impose any increased burden or obligation, financial or otherwise, on a Purchaser, with- out the consent of the Purchaser, unless: (i) the Committee has approved the Auth- ority's proposed action by a resolution adopted by the affirmative vote of members whose Percentage Shares equal or exceed eighty percent (80%) of Pro- ject Capacity and of Annual Project Costs; or (ii) the Committee by majority vote of the Purchasers requests that Required Project Work be paid for out of the proceeds of Bonds, and such Work is projected to cost in excess of the amount of money then available in the Renewal and Contingency Reserve Fund established pursuant to the Bond Resolution, plus available insurance proceeds, in which event, if such Bonds can then be legally issued and can be sold, the Authority shall issue such Bonds, payable from the Revenues of the Project (as defined in the Bond Resolution), to pay the portion of such costs which exceed insurance proceeds, if any, and to re- store said Reserve Fund to its required level. (b) Insurance. The Authority will maintain physical loss insurance to the extent required by the Bond Resolution, and the Authority will consult with the Com- mittee as provided in Sections 12 and 13 with respect to the disposition of proceeds of said insurance received as a consequence of physical destruction or impairment of the Project, including but not limited to disposition for the purpose of redemption of Bonds, replacement of the Pro- ject, or replacement of power. The Committee shall advise the Authority from time to time as to the appropriate ex- tent of insurance coverage. (c) Information. The Authority shall provide each Purchaser a copy of any report, certificate, letter, or other communication which the Authority is required to furnish to the Trustee under the Bond Resolution or that the Trustee furnishes to the Authority. Section 12. Purchasers' Consent To Supplemental Bond Resolutions To Construct The Project. The Purchasers hereby consent to the adoption by the Authority of supplemental Bond Resolutions pursuant to Section 11(a), as necessary to comply BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 18 with the Authority's obligation to finance and construct the Project pursuant to Section 6(b) and the Authority's obligation under Section 6(d) to use its best efforts to complete the Pro- ject expeditiously and in accordance with sound engineering practices and with the provisions of the Bond Resolution. The Authority shall consult with the Purchasers regarding the pro- visions to be included in such supplemental Bond Resolutions, and shall use its reasonable best efforts to comply with the requests of the Purchasers with respect thereto. Unless other- wise approved in accordance with Section 11(a) (i), such supple- mental Bond Resolutions shall: (a) provide that the total amounts required for the payment of Debt Service when due shall be, on an an- nual basis, as nearly equal as practicable; (b) provide that the final maturity of Bonds issued pursuant to such supplemental Bond Resolutions shall not be earlier than twenty-five (25) years from the date when the first of such Bonds is issued; (c) be substantially in the form attached here- to as Exhibit E, except to the extent that the Authority finds that modifications are necessary to sell the Bonds on a tax-exempt basis; and (ad) be adopted no earlier than January 1, 1989. Section 13. Establishment Of The Committee. (a) Formation and composition of the Committee. The parties agree that a Project Management Committee ("Committee") shall be established on January 15, 1988, or on such earlier date as may be agreed to by the parties. The Committee shall consist of the Authority and the Pur- chasers (including as Purchasers for this purpose both Homer Electric Association, Inc., and Matanuska Electric Association, Inc., for themselves and for AEG&T as a Pur- chaser represented by and through those utilities). No Committee member shall obtain an additional vote through merger with, acquisition of, or assignment from any other Committee member, and AEG&T shall have no direct vote, but shall be represented by and through Homer Electric Associ- ation, Inc., and Matanuska Electric Association, Inc., each of which shall be entitled to vote as a Purchaser member for purposes of Committee procedure. Each Commit- _tee member entitled to vote shall name one representative to serve on the Committee and one designated alternate for that representative. Each such member shall notify all other members in writing of the names, addresses, and tel- ephone numbers of its representative and designated al- ternate. After it is established, the Committee shall meet not less than once each quarter. Costs of the Com- mittee (other than costs incurred by the Authority) which BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 19 are incurred prior to the Date of Commercial Operation shall be borne by the Purchasers in accordance with the Percentage Shares of each. (b) Adoption of rules of procedure. The Com- mittee shall adopt, by the affirmative vote of a majority of the Purchasers and the affirmative vote of the Authori- ty, procedural rules governing the conduct of the Commit- tee's affairs. Such rules shall address, among other mat- ters, procedures for the periodic selection of Committee officers, the conduct of Committee meetings, dispute res- olution, the approval (including possible pre-approval) of Consultants, and modification of the Committee's procedur- al rules, and, to the extent not otherwise specified in this Agreement, such rules shall also specify the applic- able voting requirements for approval of matters to be decided by the Committee. Committee approval of opera- tions and maintenance arrangements for the Project, the sufficiency of the annual budget and wholesale power rates, and the undertaking of Optional Project Work shall require the affirmative vote of a majority of the Purchas- ers and the affirmative vote of the Authority. (c) Committee responsibilities; approval by the Authority. (i) As the legal owner and licensee of the Project, the issuer of Project debt, and the agency charged by statute with various duties affecting or affected by the Project, the Authority has certain non-delegable rights, duties, and responsibilities with respect to the Project. Subject to such non- delegable rights, duties, and responsibilities, the Committee shall be responsible for the management, operation, maintenance, and improvement of the Pro- ject, in recognition that as take-or-pay purchasers of Project Capacity after the Date of Commercial Op- eration, the Purchasers have substantial long-term financial interests in, and service and planning re- sponsibilities affected by, the Project. (ii) The Committee shall take the follow- ing actions, subject to the provisions of the Bond Resolution, federal and state law, the requirements of licensing and regulatory agencies, and the rights of the Authority and the Purchasers under other pro- visions of this Agreement: (A) Arrange for the operation and maintenance of the Project, and the scheduling, production, and dispatch of Project power; (B) Establish procedures for the use of each Purchaser's Water Allocation in a manner BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 20 consistent with the needs and desires of other Purchasers and the capabilities of the Project; (C) Adopt in each Fiscal Year (and revise as necessary or prudent during such Fisc- al Year) a budget of Annual Project Costs for that Fiscal Year, which budget shall be in an amount estimated by the Committee to be suffic- ient to pay all Annual Project Costs; (D) Establish for each Fiscal Year the estimated Annual Payment Obligation of each Purchaser, together with a schedule for each Purchaser of equal monthly payments that such Purchaser shall be required to make during that Fiscal Year, which payment schedule shall be (I) designed to recover such estimated Annual Pay- ment Obligation from that Purchaser during the Fiscal Year, and (II) revised during such Year to reflect any revisions to the budget of Annual Project Costs for that Fiscal Year; (E) Determine after the conclusion of each Fiscal Year the actual Annual Project Costs for that Fiscal Year, the actual Annual Payment Obligation of each Purchaser for that Fiscal Year, and the amount of any additional payment required from (or the amount of any refund to be returned to) each Purchaser to ensure that the total of all payments received from each Pur- chaser for each Fiscal Year is equal to that Purchaser's actual Annual Payment Obligation for that Fiscal Year; (F) Evaluate and select among altern- ative methods (if any) of carrying out and fund- ing (including through issuance of bonds) Re- quired Project Work; (G) Adopt provisions to evaluate and approve Optional Project Work, and to determine the compensation (if any) to be provided in ac- cordance with Section 4(d) of this Agreement if the Committee approves any such Optional Project Work; (H) Adopt procedures consistent with Section 13(f) for the resolution of disputes that may arise between or among the Purchasers and the Authority concerning the interpretation of this Agreement, the obligations created by this Agreement, or the performance of such ob- ligations; BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 21 (I) Make an initial determination of "customary" insurance within the meaning of Section 714 of the Bond Resolution and determine the appropriate amount of, and obtain, insurance for or related to the Project, in addition to such insurance as may be required by the Bond Resolution; ; (J) Adopt maintenance schedules for the Project that do not interfere unreasonably with the operations of the Purchasers; (K) Adopt and implement procedures relating to electric power reserves for the Pro- ject in accordance with Section 5; and (L) Consider the need for and approve any additional amount to be added to the Renewal and Contingency Reserve Fund over and above the Renewal and Contingency Reserve Requirement pro- vided under the Bond Resolution. (iii) If and when no Bonds are outstanding under the Bond Resolution, and the Bond Resolution is therefore no longer effective, the Committee shall provide for the establishment of such accounts and the taking of such actions as may be necessary to manage the Project. (d) Payment obligation unimpaired. Notwith- standing any Committee action or inaction under this Ag- reement, each Purchaser's obligation to make the monthly payments necessary to pay its Purchaser's Percentage Share of Debt Service, costs of operation and maintenance, and all other amounts to be paid by Purchasers under this Ag- reement shall be absolute and unimpaired. (e) The Authority's ability to take Required Action. In the event the Committee fails to take any of the actions set forth in Section 13(c) (ii) (C)-(E) in a timely fashion, or fails to take any other action which the Authority believes to be a Required Action, and as a result the Authority determines that it will be unable to meet any of its obligations imposed by statute, by the Bond Resolution, by this Agreement, or by any licensing or regulatory agency, then the Authority may (i) adopt a bud- get of Annual Project Costs, (ii) estimate the Annual Pay- ment Obligation of each Purchaser, (iii) require each Pur- chaser to make payments on the basis of such estimated Annual Payment Obligation, and (iv) take such other action as the Authority deems necessary to meet such obligations. Failure of the Committee to adopt an Annual Project Budget by the ninetieth (90th) day prior to the beginning of a Fiscal Year shall permit the Authority to adopt an Annual BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 22 Project Budget pursuant to this subsection. All actions and determinations under this Section 13(e) shall be taken and made in accordance with Prudent Utility Practice. (f) Purchasers' duties and rights of review. Each Purchaser shall make payment as required by the Auth- ority as a result of any action taken by the Authority under Section 13(e), but such payment shall not constitute a waiver of any Purchaser's rights under this Agreement. Any Purchaser may seek review of such action in accordance with the dispute resolution procedures adopted by the Com- mittee, or may seek to enforce this Agreement judicially in accordance with Section 9(d) if no applicable dispute resolution procedures have been adopted. Section 14. End Of Project (a) Authority's declaration. The Authority shall declare the Project ended, and the Authority's ob- ligations to make power available to the Purchasers and to operate and maintain (or to assure the operation and main- tenance of) the Project shall also end, if and when (i) such a declaration is required under Section 14(b), or (ii) the Project can no longer be operated in accordance with Prudent Utility Practice. (b) Consultant's report. The Authority shall make the declaration described in Section 14(a) if all of the following conditions are met: (i) the Project cannot be operated at full capacity in a manner consistent with Prudent Utility Practice absent repairs, modifications, or additions ("Repairs") to the Project; (ii) a Consultant retained by the Commit- tee concludes that such Repairs are not cost- effective in comparison with other power supply alt- ernatives then available to the Purchasers; and (iii) Committee members who are Purchasers and whose Percentage Shares total eighty percent (80%) vote that such Repairs should not be undertak- en. (c) Consequences of Authority's declaration. After the Authority has declared the Project ended, each Purchaser shall complete its payment obligation for Pro- ject Capacity and associated energy delivered to such Pur- chaser before the Project ended, and shall do so by paying its Percentage Share of Annual Project Costs until all Bonds have been paid or provision has been made for the payment of the Bonds in accordance with the Bond Resolu- tion; provided, that from the date on which the Authority BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 23 declares the Project ended, Annual Project Costs shall no longer include (except with Committee approval) costs oth- er than those set forth in Sections 8(a) (i), 8(a) (ii), 8(a) (iii), 8(a) (vii) (C), and 8(a) (vii) (D). Section 15. Records. In addition to meter records, the parties shall keep log sheets and other records as may be needed for the purposes of this Agreement. In keeping books of account, each Purchaser will, to the extent that different rules are not prescribed by this Agreement or by federal and state laws or agencies, follow the system of accounts pre- scribed for public utilities and licensees by the Federal Ener- gy Regulatory Commission, except that as long as a Purchaser is a borrower from REA then it shall follow the system of accounts prescribed by REA for its electric borrowers. Section 16. Inspection Of Facilities. For purposes of this Agreement, each party may, but shall not be obligated to, inspect any other party's facilities relating to the Pro- ject at any time upon reasonable notice, but such inspection or failure to inspect shall not render the inspecting party, its officers, agents or employees, liable or responsible for any injury, loss, damage, or accident resulting from defects in such electric installation, or for violation of this Agreement. Section 17. Covenants To Maintain Integrity Of Ag- reement. (a) Retail rate approval. Each Purchaser will affirmatively and promptly pursue all administrative and judicial remedies necessary to secure Alaska Public Utili- ty Commission approval of retail rates required to meet the terms of this Agreement where Commission approval is required. (b) Compliance with law. Each Purchaser will take all necessary steps to comply with applicable federal and state laws and regulations, licenses and permits re- lating to the use and operation of the Purchaser's System. (c) Sales, mergers, and assignments. No Pur- chaser shall abandon, sell, mortgage, lease or otherwise dispose of the Purchaser's System or any assets of that System (including by sale to or merger with any other utility), or assign this Agreement or any interest there- under to any assignee or successor in interest, unless: (1) such disposal or assignment accords with the terms of any of the Purchaser's covenants or agreements with the holders of the Purchaser's bonds, notes or other evidences of indebtedness relating to the abandonment, sale, mortgage, lease or other dis- position of property of the Purchaser's System; and BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 24 (2) such disposal or assignment is: (A) consented to in writing by a maj- ority of the Committee, including the Authori- ty's representative; or (B) made to another utility that is already a Purchaser under this Agreement and is able to meet the obligations resulting from the disposal or assignment; or (C) limited to assets that the Pur- chaser determines to be surplus to the needs of that Purchaser's System, but the depreciated value of assets so disposed of or assigned in any given year shall not exceed five percent (5%) of the depreciated value of the assets of the Purchaser's System prior to the disposal or assignment; or (D) evaluated by a Consultant and that Consultant certifies that, taking into ac- count the other obligations of the Purchaser or of the assignee or successor in interest (as the case may be), the Purchaser or the assignee or successor in interest will have (A) substantial- ly the same or greater ability to produce suf- ficient revenues to meet its payment obligations as would the Purchaser absent the transaction, and (B) the ability to perform all obligations under this Agreement. Any assignee of this Agreement must assume in writing all of the assigning Purchaser's obligations hereunder, must pay any amounts due and owing from the assigning Purchaser hereunder, and (unless the assignee is already a Purchas- er) must provide the Authority and the Purchasers with an opinion of counsel that this Agreement is enforceable against the assignee. (d) Status of Bonds. The parties will not take any action, including entry into power sales agreements, which would cause the interest on any Bond which is orig- inally issued on a tax-exempt basis to become taxable un- der the Internal Revenue Code of 1986, as the same may be amended from time to time. : (e) Licenses and permits. The parties will take all necessary steps within their control to comply with applicable federal and state laws and regulations, and to obtain and thereafter comply with all applicable licenses and permits relating to the use and operation of the Project, including without limitation, the Federal Energy Regulatory Commission license applicable to the BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 25 Project. The Authority will take all necessary steps to cause the Federal Energy Regulatory Commission license to be renewed, if necessary, so that it is in effect during the term of this Agreement or any renewal hereof. Section 18. Assignment. | (a) Assignment generally. This Agreement shall inure to the benefit of, and shall be binding upon the respective successors and assigns of the parties to this Agreement; provides, that this Agreement or any interest herein may be transferred or assigned by a Purchaser only in accordance with the provisions of Section 17(c). (b) Specific rights and transactions. Notwith- standing Sections 17(c) and 18(a): (1) A Cooperative Purchaser shall have the right to assign its assets, including its rights un- der this Agreement for security purposes to REA, or to a lender or guarantor in connection with loans to such Cooperative Purchaser where the proceeds of such loans are used to refinance obligations of such Coop- erative Purchaser to REA or the Federal Financing Bank under Section 311 of the Rural Electrification Act or otherwise; provided, however, that (A) neither REA nor any secured lender or guarantor exercising any rights, powers or privileges with respect to this Agreement under any mortgage, deed of trust or other security agreement shall be entitled to exercise the rights of the Cooperative Purchaser under this Agree- ment unless the obligations of such Cooperative Purchaser hereunder shall have been performed, (B) no such assignment shall in any way relieve such Cooper- ative Purchaser of any obligations hereunder, and (C) no assignment shall be permitted hereunder if such assignment would adversely affect the tax exemption of interest on any Bonds Outstanding under the Bond Resolution that originally were issued on a tax- exempt basis. (2) A Purchaser's agreement to resell pow- er from the Project shall not be deemed a transfer or assignment of this Agreement, but neither shall any such resale of Project power relieve the Purchaser of any payment obligation under this Agreement. Section 19. Notices, Computation Of Time And Holi- days. Any notice required by this Agreement to be given to any party shall be effective when it is received by such party, and in computing any period of time from such notice, such period shall commence at 12:01 p.m. prevailing time at the place of receipt on the date of receipt of such notice. Whenever this Agreement calls for notice to or notification by any party the BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 26 same (unless otherwise specifically provided) shall be in writ- ing directed to the Authority's executive director or a Pur- chaser's general manager. If the date for making any payment or performing any act is a day on which banking institutions are closed in the place where payment is to be made or a legal holiday, payment may be made or the act performed on the next succeeding day which is neither a legal holiday nor a day when banking institutions are closed in such place. Section 20. Applicable Law. The laws of the State of Alaska (including without limitation the equal opportunity laws set forth in AS 18.80.220, as the same may be amended from time to time) shall govern the interpretation and application of this Agreement and the actions of the parties hereunder. Section 21. Availability Of Information. The par- ties shall make available to each other, for inspection and copying during business hours, all books, records, plans and other information relating to any calculation or determination to be made pursuant to this Agreement. Section 22. Severability. (a) Severabilit enerally. If any section, paragraph, clause or provision of this Agreement or any agreement referred to in this Agreement shall be finally adjudicated by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement shall be unaffected by such adjudication and all the re- maining provisions of this Agreement shall remain in full force and effect as if such section, paragraph, clause or provision or any part thereof so adjudicated to be invalid had not been included herein. (b) Correction and substitution. If any sec- tion, paragraph, clause or provision of this Agreement or any agreement referred to in this Agreement shall be fi- nally adjudicated by a court of competent jurisdiction to be invalid or unenforceable, then and in such event the parties agree that they shall exercise their best efforts to correct such invalidation and substitute appropriate agreements and contractual arrangements to achieve the intent of this Agreement. (c) References to REA. From and after the time any Cooperative Purchaser is no longer indebted to REA under any mortgage or other security agreement with REA, all references to REA and required approvals of the Admin- istrator of REA provided for in this Agreement shall be of no further force and effect with respect to that Coopera- tive Purchaser. Section 23. Remedies Cumulative. No remedy confer- red upon or reserved to the parties hereto is intended to be BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 27 exclusive of any other remedy or remedies available hereunder or now or hereafter existing at law, in equity, by statute or otherwise, but each and every such remedy shall be cumulative and shall be in addition to every other such remedy. Section 24. Waiver Not Continuing. Any waiver at any time by either party to this Agreement of its rights with respect to any default of the other party hereto, or with re- spect to any other matter arising in connection with this Ag- reement, shall not be considered a waiver with respect to any subsequent default, right or matter. Section 25. Section Headings. The section headings in this Agreement are for convenience only, and do not purport to, and shall not be deemed to, define, limit or extend the scope or intent of the section to which they pertain. Section 26. Multiple Copies. This Agreement shall be executed in several counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. Section 27. Covenant To Act In Good Faith. In order to permit this Agreement, throughout its term, to be fully ef- fective in accordance with the original intent of the parties, each party agrees that it shall at all times act in good faith in performing its obligations and in exercising its rights under this Agreement. Section 28. No Third Party Beneficiaries. Notwith- standing that the operation of this Agreement may and is in- tended to confer benefits on third parties who are not signa- tories to this Agreement, this Agreement shall be enforceable only in accordance with its provisions expressly governing en- forcement. In promising performance to one another under this Agreement, the parties intend to create binding legal obliga- tions to and rights of enforcement in (a) one another, and (b) such assignees or successors in interest of the parties as may enjoy a right to enforce this Agreement by virture of provis- ions of this Agreement that expressly create such a right in such assignees or successors in interest. By entering into this Agreement, the parties expressly do not intend to create any obligation or promise any performance to any other third party, nor have the parties created for any other third party any right to enforce this Agreement. Section 29. Excess Payments. (a) Payments in Recognition of Efforts to Ob- tain Intertie. In recognition of the Railbelt Energy Council's commitment to continue efforts to obtain a sat- isfactory transmission intertie between Fairbanks and the Kenai Peninsula, and the Railbelt Energy Council's recog- nition of the importance of such an intertie to the well- BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 28 being of the Railbelt region and the Purchasers' ratepay- ers, and in anticipation of legislative funding of such an intertie, the Purchasers agree to make the payments de- scribed below in excess of actual debt service required for retirement of Bonds issued to pay Recoverable Con- struction Costs. The Purchasers' obligations to make pay- ment under this Section 29 are not contingent upon the success of such continued efforts to obtain a satisfactory transmission intertie between Fairbanks and the Kenai Pen- insula. (b) Calculation of Excess Payment Amount. Sub- ject to the limitations set forth in Sections 29(e) and 29(f), upon the retirement of all Bonds issued to pay Re- coverable Construction Costs (and of all Bonds issued to refund such Bonds) and the consequent reduction of Debt Service includable in Annual Project Costs, there shall be added to and included in Annual Project Costs an amount (the "Excess Payment Amount") calculated as follows: (i) The average annual Debt Service on such retired Bonds, less (ii) any debt service included in Annual Project Costs that is associated with bonds or other debt issued to fund Required Project Work. In no event shall the Excess Payment Amount be negative. (c) Payment of Excess Payment Amount. Each Purchaser shall pay its Percentage Share of the Excess Payment Amount as part of that Purchaser's Annual Payment Obligation so long as that Purchaser continues to purchase Project power under this Agreement or any renewal thereof. (d) Disposition of Payments. All Excess Pay- ment Amounts received from Purchasers, and all additional charges paid pursuant to Section 29(b), shall be paid to the Authority for deposit into the Railbelt Energy Fund. (e) Limitation. Notwithstanding any other pro- vision of this Section 29, no Purchaser's Annual Payment Obligation shall include a charge with respect to any Ex- cess Payment Amount in excess of four cents ($0.04) per kilowatthour of Project power delivered to such Purchaser. (£) Duration. The provisions of this Section 29 shall not serve to extend the term of this Agreement or any renewal thereof, and shall cease to be effective upon the expiration or termination of this Agreement (as the same may be extended through any renewal thereof). BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 29 Section 30. Special Arrangements Regarding AEGaT. (a) Contracts acknowledged. The parties recog- nize that Homer Electric Association, Inc. ("HEA") and Matanuska Electric Association, Inc. ("MEA"), have previ- ously entered into contracts with the Alaska Electric Gen- eration & Transmission Cooperative, Inc. ("AEG&T"), and that under such contracts AEG&T is to sell and HEA and MEA are to buy electric power in amounts necessary to meet the full requirements of HEA and MEA, such power to be gen- erated by AEG&T or to be purchased by AEG&T from other suppliers. Under this Agreement, therefore, AEG&T is a Purchaser on behalf of HEA and MEA, and AEG&T's payment obligations are secured by HEA's and MEA's respective ob- ligations to provide at all times the monies necessary for the performance of AEG&T's payment obligations, as more fully described in Section 30(b). (b) Treatment of HEA and MEA as Purchasers for certain purposes. HEA and MEA shall have all the rights and obligations of individual Purchasers and/or Coopera- tive Purchasers with respect to Sections 2(a), 4(d), 6(e), 8(a) (viL)-(D), 10,-.13(c), 13(@), 15, 17, 18, 31, and 32, unless the context otherwise requires. If AEG&T at any time fails to meet its payment obligations under this Ag- reement, then to the extent of such failure by AEG&T and for so long as such failure continues, HEA and MEA shall each be obligated to meet directly its respective share of AEG&T's payment obligations in the same manner as if HEA and MEA were individual Purchasers obligated to make pay- ment in accordance with Section 7 and Section 9. All rights and remedies available to the Authority and/or to the other Purchasers against AEG&T shall also be available to the Authority and the other Purchasers against HEA and MEA to the extent of the respective individual share of HEA and/or MEA, as applicable. For purposes of this Sec- tion 30(b), HEA's share shall be a Percentage Share of Project Capacity equal to 12.0 percent, and MEA's share shall be a Percentage Share of Project Capacity equal to 13.8 percent. ‘e) Arrangements among HEA, MEA, and AEG&T. In accordance with the provisions of Section 30(a) and sub- ject to the provisions of Section 30(b), AEG&T as a Pur- chaser hereunder shall act on behalf of HEA and MEA for purposes of power deliveries, billing, payment, notifica- tion, and other communications under this Agreement. AEG&T shall be, on behalf of HEA and/or MEA, the Purchaser from the Authority and the re-seller to HEA and/or MEA of power to be taken by HEA and/or by MEA under this Agree- ment. Further, AEG&T will receive, on behalf of HEA and/or MEA, all billings and other communications under BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 30 this Agreement, and AEG&T will be required to pay such bills for and on behalf of HEA and/or MEA from funds made available to AEG&T by HEA and/or MEA for this purpose. Section 31. Capitalization Of Certain Costs Of Pur- chasers. (a) Promptly after the Committee is formed, and before the Authority first issues Bonds,- the Purchaser members of the Committee shall determine by the affirma- tive vote of members whose Percentage Shares equal or ex- ceed eighty percent (80%) of Project Capacity and of An- nual Project Costs: (i) whether and to what extent the costs borne by the Purchasers pursuant to the last sentence of Section 13(a) should be capitalized through issu- ance of additional Bonds, with the costs of debt ser- vice on those additional Bonds to be added to Annual Project Costs; and (ii) whether and to what extent the costs incurred by the individual Purchasers in conjunction with this Agreement prior to the Date of Commercial Operation should be capitalized and reimbursed through issuance of additional Bonds, and whether and to what extent the costs of debt service on those additional Bonds should be added to Annual Project Costs and allocated among Purchasers either in ac- cordance with their respective Percentage Shares or in some other manner. (b) If the Purchasers provide the Authority with a written determination that additional Bonds should be issued for either or both of the foregoing purposes, then notwithstanding any other provision of this Agree- ment, the Authority shall issue additional Bonds in the requisite principal amount, allocate the proceeds of such additional Bonds among the appropriate Purchasers in ac- cordance with such written determination, and include the costs of debt service on such additional Bonds in Annual Project Costs; provided, that the Authority shall not be obligated to issue such additional Bonds unless the Auth- ority is reasonably able to do so in conjunction with the issuance of other Bonds; and provided further, that the allocation among Purchasers of the costs of debt service _on additional Bonds issued for the purpose set forth in Section 31(a) (ii) shall be made in the manner specified in such written determination. Section 32. Efforts To Obtain Intertie. The Pur- chasers recognize the importance of the completion of a satis- factory high-capacity Fairbanks to Kenai Peninsula transmission BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 31 intertie, and of full $218 million funding for the Project, and agree to continue all reasonable efforts to obtain sufficient state funding for such transmission intertie and Bradley Lake. IN WITNESS WHEREOF, the parties have caused this Ag- reement to be executed the day and year first above written. THE ALASKA POWER AUTHORITY As ALASKA ELECTRIC GENERATION & TRANSMISSION COOPERATIVE, INC. CHUGACH ELECTRIC ASSOCIATION, INC. HOMER ELECTRIC ASSOCIATION, INC. By L as Dae BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 32 GOLDEN VALLEY ELECTRIC ASSOCIATION, INC. on Dey MATANUSKA ELECTRIC ASSOCIATION, INC. THE MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER As THE CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM BRADLEY LAKE PROJECT POWER SALES AGREEMENT Page 33 EXHIBIT B Delivery Point The Delivery Point of the Project and the point at which the Purchasers accept delivery shall be at the point where the 115 kV Project transmission lines connect to a 115 kV switching - station (included within the Project) at Bradley Junction on the Fritz Creek - Soldotna transmission line to be built by the Hom- er Electric Association, Inc. POWER SALES AGREEMENT FOR BRADLEY LAKE ENERGY EXHIBIT B -- Page 1 EXHIBIT C Description Of The Project The Bradley Lake Hydroelectric Project site is located on the Kenai Peninsula, about 105 miles south of Anchorage and 27 miles northeast of Homer, Alaska. Bradley Lake, with an exist- ing elevation of 1,080, is situated in the Kenai Mountain Range. A Project Location Map is attached. The proposed development includes raising the existing Bradley Lake level 100 feet by constructing a diversion tunnel, dam, spillway and outlet facility at the lake outlet. An 18,760 foot long, 11 foot diameter concrete lined power tunnel will connect the reservoir intake works with a two 45 MW (nominal rating) unit powerhouse located just above sea level on the northeast shore of Kachemak Bay. A substation containing step-up transformers will be locat- ed at the power plant. Project transmission facilities include approximately 20 miles of two parallel, single circuit, 115 kv transmission lines to connect the power plant to a 115 kV switch- ing station at Bradley Junction (which is also included within the project). The switching station will connect to a 115 kv transmission line (not included in the project) which will transmit power between Fritz Creek and Soldotna on the Kenai Peninsula. The Project also includes the Middle Fork Diversion consisting of a small diversion structure and excavated channel which diverts the upper Middle Fork flows into Bradley Lake, and the construction of a small diversion works at the headwaters of the Nuka River which diverts flows from Nuka Glacier into Bradley Lake. The project site is remote and will be designed to be operated as an unattended plant, but will require on-site main- tenance personnel. A supervisory control and data acquisition (SCADA) system will be provided. Site access is by water or airborne transportation. To support construction, operations and maintenance of the Project, a barge basin, airstrip, con- struction camp, permanent housing facilities, and approximately ten miles of access road will be required. Provisions for adding a third 45 MW turbine-generator will be included in the Project. A Project Location Map and general plan are attached. POWER SALES AGREEMENT FOR BRADLEY LAKE ENERGY EXHIBIT C -- Page 1 ll. 12. 13. 14. Dam Spillway Power Tunnel Diversion Steel Liner/ Penstock Middle Fork Nuka Diversion Powerhouse Turbines Generators Transmission Barge Dock Access Roads Airstrip PROJECT DATA Concrete-faced, rock fill, 610 feet long, 125 feet high, 362,000 cubic yards rock fill, 10,800 cubic yards concrete. Ungated concrete ogee section, 175 feet long. 1l1-foot nominal diameter, fully con- crete lined, 18,760 feet long. 21-foot horseshoe tunnel, 440 feet long. Steel 11-foot diameter, 2,400 feet long tapering to 9 foot diameter manifold with 6 1/2 foot diameter branches. Excavated channel and river diversion structure. 9 foot high gravel fill dike. Above ground, steel superstructure, 160 feet long, 80 feet wide, 92 feet high. 2 each Pelton, vertical shaft. 2 each; 63 MVA with nominal output of 45 MW. 115 kV, steel pole, 2 parallel single circuits, 20 Line miles long, with 115 kV switching station at Bradley Junction. Sheetpile cellular structure, granular £il11. 10.8 miles gravel surfaced. Gravel surfaced, 2,400 feet long x 75 feet wide. POWER SALES AGREEMENT FOR BRADLEY LAKE ENERGY EXHIBIT C -- Page 2 x | BRAULEY JUNCTION | HOMER ELECTING ASSOCIATION FMTE CAREER - SOLOONMA HS KY | taanSunSSiOm mvt | o 1 2 3 SS ‘Scale nm Mies SY dS ance voc = waTtnrowe > Sane MESTING AREA 7K Constmuciiod x” POWER came a TUNNEL + StAGHO ca Anes : Maccenas BRADLEY LAKE : jm ( ROA0 my a Daw SHE e i Temponany omer ‘ CONS TRUC TOM ~v ‘ ' ACCESS ROAD. ‘Ouanny D soe, Exhibit D Purchasers' Percentage Shares Of And Of Annual Project PURCHASER Alaska Electric Generation & Transmission Cooperative, Inc. Chugach Electric Association, Inc. Golden Valley Electric Association, Inc. Municipality of Anchorage, d/b/a Municipal Light and Power City of Seward, d/b/a Seward Electric System Project Capacity Costs PERCENTAGE SHARE 25.8 30.4 16.9 25.9 1.0 100.00% POWER SALES AGREEMENT FOR BRADLEY LAKE ENERGY EXHIBIT D -- Page 1 COUNTERPART lL. OF 19 BRADLEY LAKE HYDROELECTRIC PROJECT AGREEMENT FOR THE WHEELING OF ELECTRIC POWER AND FOR RELATED SERVICES ("SERVICES AGREEMENT") by and among The CHUGACH ELECTRIC ASSOCIATION, INC., and The HOMER ELECTRIC ASSOCIATION, INC., The GOLDEN VALLEY ELECTRIC ASSOCIATION, INC., The MATANUSKA ELECTRIC ASSOCIATION, INC., The MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER, The CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM, AND ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE, INC. Index Of Provisions And Appendices Section Heading RECITALS 1 PARTIES ee © © © ee ee ee ele le le eo © © © © © © © we eee elle le 2 NATURE OF AGREEMENT . . . 2. «© © © © © © @ (a) Services Provided . . .....« « (b) Non-Exclusivity Of Services ... 3 TERM OF AGREEMENT; RELATED MATTERS ... . (A) eT erm eel ier «to rollne ie) el nel We | fel nisi le (b) Amendments . ....-. +. +e © « (c) Early Termination ......e. - 4 WHEELING SERVICES . . « « « « © © © «© © @ «@ (a) Wheeling Service To Be Provided . (b) Wheeling Schedules ....... (c) Line Losses . . . . « « « « « « e« (@) Wheeling Rates ..... «eo. 5 STORAGE SERVICES .... 6 «© «© © «© «© © © «@ (a) Storage Service To Be Provided . (b) Storage Schedules .......-. (c) Losses From Spill .. «-s » «-« « (d) Storage Charges . . . « « - «© « « 6 BRADLEY LAKE ENERGY PURCHASE SERVICES ... (a) Bradley Lake Energy Purchase Services To Be Provided ..... (b) Bradley Lake Energy Purchase Schedules . . 2. «© «© © «© © © «© @ © (c) Priority Of Section 6 Purchases And Other Purchases ...... « (d) Rates For Section 6(a) Purchases. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY INDEX OF PROVISIONS AND APPENDICES--Page 1 7 CHUGACH'S (a) (b) (c) DUTIES AND LIMITATIONS THEREON . DUGLES! es ie! © 6) | ol © le ie) *| ¢) 10 Limitations On Chugach's Duties . Chugach"s Priority ss.) << 8 SCHEDULING OF SERVICES ....+.+2+-s+ see (a) (b) (£) (g) (h) (i) 9 RIGHTS TO (a) (b) (c) Duties Of The Dispatcher .... Requests For Wheeling Schedules . Confirmation Of Wheeling Schedules Modified Service Schedules ... Documentation For Schedules Not Confirmed Or Not Performed ... Allocation Among Conflicting Services Requests . . . . « « « « Assured Delivery .... +... Scheduling During Certain Transmission Outages ...... Scheduling During Periods When Transmission Would Otherwise Be Pre-empted or Unavailable .... ADDITIONAL TRANSMISSION CAPACITY Specific Upgrades ....... - Shared Upgrades .......s.-e-e Opportunities to Share In New Transmission Capacity ...... 10 CONSULTATION AND DISPUTE RESOLUTION... . (a) (b) ali APPROVALS (a) (b) Consultation] 1.) we) 6 |e Dispute Resolution ....... AND RENEGOTIATION. . . - - « « « Approvals and Enforceability .. Renegotiation . . . . « 6 « « « « SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY INDEX OF PROVISIONS AND APPENDICES--Page 2 ow © Oo 10 10 LL 12 12 14 a5 LS) 16 16 17 17 17 17 18 18 18 19 a2 MISCELLANEOUS PROVISIONS ....+-+.e.e-s (al) ee Wad Vex Se iegnoreic notes Jotiromkometomkoietoletins (b) Successors And Assigns ..... (c) Performance Pending Resolution Of“Disputes =. 2c: 5 o es eee (a) Applicable Law ........-. (e) Section Headings .......-. (CE) SS Paymen teeter oer cor orttom ote) to tn] 6 (g) No Third Party Beneficiaries Or Liability To Third Parties ... (h) Force Majeure . . . . « « « « « « (i) Other Agreements ........ (j) Operation And Maintenance Of The Peoiect es ee (k) Opinions Of Counsel . ...... (1) Counterparts ......«-«e«+-e (m) Relationship To Alaska Inter- tie Agreement . . . « « « « « « « 13 DEFINITIONS . . - « « « «© © © © © © « @ @ « (a) Agreement . . . « 6 © «© «© «© «© « « (b) Alaska Intertie Agreement... . (c) Alaska Power Authority ..... (d) Alternate Transmission Facilities (e) Assured Delivery .....-+-e-. (LE Authors Cys ero) foto oe e ene (g) Bradley Lake Energy ....... (h) Bradley Lake Hydroelectric (i) (3) PEOW CCE eetotcieicline! relate tier eternent entre Decremental Cost ......2.e-e. Delivery Point ......«.« -. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY INDEX OF PROVISIONS AND APPENDICES--Page 3 19 19 19 20 20 20 20 21 21 22 23 23 23 23 23) 23 23 24 24 24 24 24 25 25 26 Appendices Appendix Appendix Appendix Appendix Appendix (k) (1) (m) (n) (o) (p) (q) (x) (s) (t) (u) (v) (w) (x) (y) (z) (aa) (bb) (cc) Direct Transmission ..... Dispatcher «4... 6 «<« « s Displaceable Energy ..... Displaceable Kenai Resources Disposal Rate . ......-. Effective Date ...... - Force Majeure . ......-. Forced Outage . ....-e+es- Incremental Cost .....-. Modified Service Schedule .. Offsetting Flows ...... Party «ss 2) se es) ses Power Sales Agreement... . Project .«.<«-c«se+eerevevase Project Management Committee Protected Storage Agreement . Soldotna Substation ..... Termination Date ...... Wheeling Utility ...... Computation Of Wheeling Rates Computation Of Disposal Rates 26 26 26 26 26 27 27 27 27 28 28 28 28 28 28 28 28 29 Computation Of Rate For Assured Delivery Wheeling Rights And Obligations With Respect To Certain Transmission Facility Upgrades Under Section 9(a) Opinions of Counsel SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY INDEX OF PROVISIONS AND APPENDICES--Page 4 THIS AGREEMENT is entered into on December 8, 1987, by and among CHUGACH ELECTRIC ASSOCIATION, INC. ("Chugach"), the HOMER ELECTRIC ASSOCIATION, INC. ("HEA"), the GOLDEN VALLEY ELECTRIC ASSOCIATION, INC. ("GVEA"), the MATANUSKA ELECTRIC ASSOCIATION, INC. ("MEA"), the MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER ("ML&P"), the CITY OF SEWARD d/b/a SEWARD ELEC- TRIC SYSTEM ("SES"), and the ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE, INC. ("AEG&T"), each an electric cooperative or a municipality duly organized and with its principal offices located in the State of Alaska. WITNESSETH: WHEREAS, each Party hereto is an electric utility or oper- ates an electric utility; and WHEREAS, each Party has determined that its purchase of electric power from the Bradley Lake Hydroelectric Project ("Project") pursuant to a Power Sales Agreement among the Alaska Power Authority ("Authority") and all other Parties is prudent under the circumstances and that over the expected useful life of the Project such power is likely to produce net economic ben- efits for the electric ratepayers served by that Party; and WHEREAS, the Parties have simultaneously herewith executed a Power Sales Agreement under which they will purchase power produced by the Project from and after the Date Of Commercial Operation (as defined in the Power Sales Agreement); and WHEREAS, the delivery of Bradley Lake Energy and power from the Project to the Parties requires use of electric transmission facilities; and WHEREAS, the Parties anticipate that the State of Alaska will take action to use monies in the Railbelt Energy Fund to fund construction of the transmission facilities required by the Parties for the purposes, among others, of obtaining delivery of the power purchased under the Power Sales Agreement, reducing the effective cost to the Parties and their electric ratepayers of power from the Project, or otherwise benefitting the electric ratepayers of the Parties for whose benefit the Railbelt Energy Fund was created; and WHEREAS, construction of the electric transmission facili- ties sought by the Parties has not yet been authorized or funded by the State of Alaska; and WHEREAS, under the circumstances, participation in the Pro- ject by all of the Parties can reasonably be achieved only if SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 1 some alternative solution to the problem of transmitting or oth- erwise utilizing Project power is devised by the Parties, such alternative arrangements to be terminated if and when adequate alternate transmission facilities are constructed; and WHEREAS, the Parties have determined that this Agreement represents an alternative solution to the problem of transmit- ting or otherwise utilizing Project power in the immediate fu- ture, and the best solution that the Parties can agree upon at the present time after good faith negotiation; and WHEREAS, the Parties recognize that this Agreement will be superseded by other arrangements upon construction of certain additional transmission facilities, which all Parties seek, and potentially by agreement among the Parties upon a system of pow- er pooling of the generation of all Parties, which Chugach and certain other Parties seek; NOW THEREFORE, IN CONSIDERATION of the mutual covenants set forth herein, the Parties agree as follows: SECTION 1. PARTIES The Parties to this Agreement are CHUGACH ELECTRIC ASSOCI- ATION, INC. ("Chugach"), the HOMER ELECTRIC ASSOCIATION, INC. ("HEA"), the GOLDEN VALLEY ELECTRIC ASSOCIATION, INC. ("GVEA"), the MATANUSKA ELECTRIC ASSOCIATION, INC. ("MEA"), the MUNICI- PALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER ("ML&P"), the CITY OF SEWARD d/b/a SEWARD ELECTRIC SYSTEM ("SES"), and ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE, INC. ("AEG&T") . SECTION 2. NATURE OF AGREEMENT (a) Services Provided. At the request of any Wheeling Utility, Chugach will provide wheeling, storage, and energy pur- chase services to such Utility for that Utility's Bradley Lake Energy in accordance with the provisions of this Agreement. (b) Non-Exclusivity Of Services. Nothing in this Agree- ment shall (i) obligate any Party to request services from Chu- gach under this Agreement, (ii) preclude any Party from obtain- ing such services from others or from Chugach outside this Ag- reement, (iii) prevent any Party from reselling or otherwise disposing of its Bradley Lake Energy to another Party or to any other entity, to the extent that such resale or disposition is otherwise legally permissible, or (iv) limit the ability of any Party, including Chugach, to enter into other agreements under SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 2 which additional services may be provided for Bradley Lake En- ergy or under which the same and/or additional services may be provided to the Parties or to third parties for electric power from any other source; provided, that no such other agreement shall have the effect of reducing the priority access to ser- vices enjoyed by Bradley Lake Energy under this Agreement. SECTION 3. TERM OF AGREEMENT; RELATED MATTERS (a) Term. (i) Except as provided in Section 3(a) (ii), this Ag- reement shall become effective upon the Effective Date and shall continue in force until the Termination Date, subject only to the limitations set forth in Sections 3(b) and 3(c). (ii) The following provisions of this Agreement shall become effective upon execution of this Agreement by all Parties, notwithstanding that such execution precedes the Effective Date: (A) The last sentence of Section 8(h) (ii); (B) Section 10; (C) The first two sentences of Section 11(a); (D) Section 12(b); (E) Section 12(c); (F) Sections 12(j) through 12(m); and (G) Section 13. (b) Amendments. This Agreement may be amended, extended, or terminated at any time by the written consent of all Parties, but no such amendment, extension, or termination shall be ef- fective unless approved by the federal and state agencies (if any) whose approval is required at the time. (c) Early Termination. Either Chugach or any Wheeling Utility shall be entitled to terminate this Agreement with re- spect to that Wheeling Utility prior to the Termination Date if at the time of such termination there are available Alternate Transmission Facilities capable of carrying the Bradley Lake Energy of such Wheeling Utility from the Project to the Delivery Point of such Wheeling Utility. A termination with respect to any Wheeling Utility under this Section 3(c) shall become ef- fective one year after Chugach or the Wheeling Utility has given written notice of termination to the other. No such notice shall affect the rights under this Agreement of any Party other SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 3 en the Party or Parties with respect to whom the notice is given. SECTION 4. WHEELING SERVICES (a) Wheeling Service To Be Provided. At the request of any Wheeling eility, and in accordance with an agreed wheeling schedule, Chugach will deliver to that Wheeling Utility at that Utility's Delivery Point or, upon request of that Wheeling Util- ity, at the Delivery Point of any other Wheeling Utility, such Bradley Lake Energy as the Wheeling Utility delivers to Chugach at the Soldotna Substation for wheeling, after adjustment for wholesale transmission line losses, if applicable. (b) Wheeling Schedules. Wheeling schedules shall be est- ablished in the manner set forth in Section 8. (c) Line Losses. Deliveries by Chugach under Section 4 (a) may be accomplished by Direct Transmission or through Offsetting Flows. (i) The Dispatcher shall maintain records adequate to determine the extent to which particular deliveries are accomplished in whole or in part by each of these means. Such records shall be made available to the Wheeling Utili- ties upon reasonable request. (ii) If and to the extent deliveries are accomplished by Direct Transmission, such deliveries shall be reduced for line losses. The reduction shall be by a percentage equal to the average percentage line losses on Chugach's wholesale system, such wholesale system line losses to be determined in Chugach's periodic rate adjustment proceed- ings or (in the absence of such a proceeding) through rea- sonable line loss studies prepared by Chugach not less fre- quently than once every two years; provided, that if, after a reasonable period of experience in actual operation under this Agreement, Chugach's system line loss studies prepared for use in Chugach's periodic wholesale and/or retail rate adjustment proceedings demonstrate that Chugach's wholesale system line losses have increased as the direct result of Bradley Lake Energy delivered by Direct Transmission, then deliveries of such Energy through Direct Transmission shall thereafter be further reduced for line losses to the extent of the increase in Chugach wholesale system line losses _attributable thereto. (iad) If and to the extent deliveries are accom- plished through Offsetting Flows, such deliveries shall not be reduced for line losses; provided, that if, after a rea- sonable period of experience in actual operation under this Agreement, Chugach's system line loss studies prepared for use in Chugach's periodic wholesale and/or retail rate SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 4 adjustment proceedings demonstrate that Chugach's wholesale system line losses have increased as the direct result of Bradley Lake Energy delivered through Offsetting Flows, then deliveries of such Energy through Offsetting Flows shall thereafter be reduced for line losses, but only to the extent of the increase in Chugach wholesale system line losses attributable thereto. (d) Wheeling Rates. For wheeling services provided under this Agreement (other than Assured Delivery service provided under Section 8 of this Agreement), each Wheeling Utility shall pay Chugach in each month an amount equal to the then-applicable wheeling rate for Bradley Lake Energy (expressed in cents per kilowatthour) multiplied by the quantity of Bradley Lake Energy (expressed in kilowatthours) delivered by that Wheeling Utility in the immediately preceding month to Chugach at the Soldotna Substation for wheeling. The applicable wheeling rates shall be established initially, and shall be changed from time to time, only in accordance with the provisions of Appendix A attached hereto and incorporated by reference herein. SECTION 5. STORAGE SERVICES (a) Storage Service To Be Provided. At the request of any Wheeling Utility, and in accordance with an agreed storage schedule, Chugach will store in its Cooper Lake Reservoir any Bradley Lake Energy of that Wheeling Utility which the Wheeling Utility cannot store in the Bradley Lake Project Reservoir and which the Wheeling Utility delivers to Chugach at the Soldotna Substation for storage. Chugach shall not be obligated to store in its Cooper Lake Reservoir any Bradley Lake Energy that can be wheeled pursuant to Section 4 of this Agreement. (b) Storage Schedules. Storage schedules shall be estab- lished in the manner set forth in Section 8. The Parties recog- nize that Chugach's ability to schedule storage of Bradley Lake Energy in the Cooper Lake Reservoir is constrained by the rate of natural inflow into that Reservoir, among other factors. Once Bradley Lake Energy is stored in accordance with this Sec- tion 5, the energy subsequently generated from storage shall be treated as Bradley Lake Energy for purposes of wheeling and/or purchase by Chugach under this Agreement and shall be scheduled in the manner set forth in Section 8. The Parties recognize that Chugach's ability to generate from storage in the Cooper Lake Reservoir is constrained by installed turbine capacity, among other factors. (c) Losses From Spill. All energy stored in the Cooper Lake Reservoir, including but not limited to Bradley Lake Ener- gy, is subject to potential loss as a result of spill. Chugach will not spill water from the Cooper Lake Reservoir unnecessari- ly. If any spill is necessary, energy of other Parties not pro- tected under a Protected Storage Agreement will be spilled SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 5 before Chugach begins to spill any energy that is so protected or that belongs to Chugach. If some but not all unprotected Bradley Lake Energy of the Wheeling Utilities is spilled, such partial spill shall be allocated proportionally among the Wheel- ing Utilities based on the amounts of such Energy so stored for each, absent some other allocation.procedure agreed to among the Wheeling Utilities in accordance with Section 8(f). Chugach may offer to enter into Protected Storage Agreements from time to time, but only when Chugach determines that it can prudently do so. (ad) Storage Charges. There shall be no charge for storage of Bradley Lake Energy pursuant to Section 5(a) of this Agree- ment. The applicable charges for storage pursuant to a Protect- ed Storage Agreement shall be as specified in that particular Protected Storage Agreement. SECTION 6. BRADLEY LAKE ENERGY PURCHASE SERVICES (a) Bradley Lake Ener Purchase Services To Be Provided. At the request of any Wheeling Utility, and in accordance with an agreed purchase schedule, Chugach will purchase from that Utility (subject to the provisions of Section 6(c)) any Bradley Lake Energy which the Wheeling Utility delivers to Chugach at the Soldotna Substation for purchase and which Chugach can use at the time in substitution for Displaceable Energy to serve Chugach system loads. Chugach shall not be obligated to pur- chase any Bradley Lake Energy that can be wheeled or stored pur- suant to Sections 4 and 5 of this Agreement. (b) Bradley Lake Energy Purchase Schedules. Schedules for Chugach's purchases of Bradley Lake Energy under Section 6(a) shall be established in the manner set forth in Section 8. (c) Priority Of Section 6 Purchases And Other Purchases. (i) In purchasing energy to substitute for Displace- able Energy, Chugach will give preference and priority to Section 6(a) purchases of Bradley Lake Energy over pur- chases of energy that may be available on the same terms from other sources. Chugach shall not be obligated to pur- chase Bradley Lake Energy under this Section 6, however, if and to the extent that doing so would require Chugach to forego the purchase of all or any portion of the energy available to Chugach from other sources that is less ex- pensive or, in Chugach's reasonable determination, more useful to Chugach in operating its system reliably and ef- ficiently. Before declining to purchase Bradley Lake Ener- gy from the Wheeling Utilities in favor of purchasing ener- gy from such other sources, Chugach will notify the Wheel- ing Utilities (if reasonably possible under the circum- stances) and provide those Utilities an opportunity to of- fer Bradley Lake Energy to Chugach under this Section 6 at SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 6 the same price and on the same terms and conditions as those on which the energy from such other sources is avail- able to Chugach; Chugach shall accept such an offer by the Wheeling Utilities if the offer is timely made. (ii) Chugach may decline to purchase Bradley Lake Energy under this Section 6 if and to the extent that such purchase would impair or conflict with a prior binding ob- ligation of Chugach to purchase energy from other sources. (iii) Notwithstanding Chugach's prior obligation (as set forth in this Agreement) to purchase Bradley Lake Ener- gy from the Wheeling Utilities in accordance with the pro- visions of this Section 6, Chugach may decline to purchase such Bradley Lake Energy if and to the extent that Chugach is obligated to purchase other energy by law or by lawful order of an agency or court. (d) Rates For Section 6(a) Purchases. For all Bradley Lake Energy that Chugach purchases under Section 6(a) from a Wheeling Utility (other than Bradley Lake Energy purchased pur- suant to the last sentence of Section 6(c)(i), the price of which shall be determined by the offer referred to in that sen- tence), Chugach shall pay that Wheeling Utility an amount equal to the then-applicable Disposal Rate for Bradley Lake Energy (expressed in cents per kilowatthour) multiplied by the quantity of Bradley Lake Energy (expressed in kilowatthours) delivered by that Wheeling Utility to Chugach at the Soldotna Substation for purchase at the time that particular Disposal Rate was in ef- fect. The applicable Disposal Rate at the time of such delivery shall be computed in accordance with the provisions of Appendix B attached hereto and incorporated by reference herein. Chugach shall pay each Wheeling Utility in each month the amounts owed by Chugach to that Utility for Bradley Lake Energy purchased by Chugach in the immediately preceding month. SECTION 7. CHUGACH'S DUTIES AND LIMITATIONS THEREON (a) Duties. The Parties shall at all times exercise their rights and perform their duties under this Agreement in a manner consistent with the principles of good faith and fair competi- tive acts and practices. Subject to the limitations set forth in Section 7(b), Chugach will in good faith and at all times: (i) confirm and perform such wheeling schedules as the Wheeling Utilities may in accordance with this Agree- ment request, and perform such Modified Service Schedules as the Wheeling Utilities may in accordance with this Ag- reement accept; (ii) use its reasonable best efforts to avoid con- flicts between Chugach's own uses of its system and the SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 7 service schedules requested or accepted by the Wheeling Utilities under this Agreement; (3:13) not discriminate in providing services under this Agreement among different Wheeling Utilities request- ing or accepting services of any particular type, in termi- nating this Agreement with respect to any Wheeling Utility under Section 3(c), or in exercising its rights or perform- ing its obligations with respect to certain transmission facility upgrades under Section 9; and (iv) operate, maintain, and repair the electrical facilities used to perform the services provided hereunder in accordance with Prudent Utility Practice (as the same is defined in the Power Sales Agreement) in a manner consist- ent with Chugach's obligations and rights under this Agree- ment. (b) Limitations On Chugach's Duties. Chugach's duties as set forth in the second sentence of Section 7(a) shall be limit- ed by: (i) the capability of Chugach's generation and trans- mission system as that system exists at the time, and as the capability of that system may be limited by action or inaction on interconnected systems over which Chugach has no control; (ii) Force Majeure and Forced Outage, but only to the extent that Chugach's performance is specifically excused by Force Majeure or Forced Outage under the provisions of Section 8; and (iii) Chugach's priority on the use of its generation and transmission system, as specified in Section 7(c). (c) Chugach's Priority. This Agreement shall not alter Chugach's ability and responsibility, at all times, to con- struct, operate, and maintain its generation and transmission system and to schedule the use of its resources in the manner Chugach reasonably determines to be necessary or prudent in or- der to meet, as a first priority, the safety, efficiency, and economic needs of Chugach's own system. The needs of Chugach's own system include Chugach's performance of agreements with oth- ers under which Chugach is the buyer or seller of electric power or the provider or recipient of related services, but not agree- ments under which Chugach provides to others the wheeling ser- vices Chugach is to provide to the Wheeling Utilities under this Agreement. In particular: (i) The Parties recognize and agree that Chugach's paramount duty to meet the safety, efficiency, and economic needs of Chugach's own system may constrain the provision of services by the Dispatcher to Wheeling Utilities under SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 8 this Agreement; provided, that Chugach will not deny such services to the Wheeling Utilities for any other reason; provided further, that in meeting the safety, efficiency, and economic needs of its system, Chugach shall not, to the detriment of any Wheeling Utility, operate its system dif- ferently from the manner in which Chugach could and would have prudently and economically operated that system if the Bradley Lake Energy of the Wheeling Utilities did not ex- ist. (ii) Nothing in this Agreement shall require Chugach to install or operate any generating unit that Chugach would not otherwise have installed or operated, or require Chugach to purchase any power (other than Bradley Lake En- ergy of the Wheeling Utilities) that Chugach would not oth- erwise have purchased, for the purpose of providing ser- vices to any Wheeling Utility; provided, that unless Chu- gach's performance of a previously confirmed service sched- ule is excused by Force Majeure or Forced Outage under Sec- tion 8, Chugach will operate its generating units to the extent necessary to perform any service schedule that the Dispatcher has previously confirmed in accordance with the provisions of Section 8. (iii) The Parties recognize that at the time this Agreement was entered into, Chugach had begun negotiating with producers of natural gas to agree upon new arrange- ments to replace Chugach's then-existing natural gas fuel supply arrangements; that the results of such negotiations are impossible to predict; and that the possible outcome(s) of such negotiations may include a change in the locations at which it is most economic for Chugach to generate elec- tric power for its own system use; and consequently that the availability of services under this Agreement may be affected by the outcome(s) of such negotiations. SECTION 8. SCHEDULING OF SERVICES (a) Duties Of The Dispatcher. Chugach will provide a Dis- patcher (or Dispatchers) on a 24-hour basis. Until such time as all the Parties or their successors have agreed upon and imple- mented a system of power pooling of all generating units within their ownership and control (under which system the output of all power generated is purchased by or otherwise equitably ac- counted for by the pool), the Dispatcher's duties shall include: (i) Dispatching power generation at the Bradley Lake Project in accordance with the requests of the Parties, the availability of services under this Agreement, and the ap- plicable operating criteria or guidelines adopted by the Project Management Committee; SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 9 (ii) Scheduling of wheeling, storage, and energy pur- chase services for the Wheeling Utilities under this Agree- ment; (iii) Notifying the Wheeling Utilities of operating limitations that may reduce Chugach's ability to perform fully any service schedule that the Dispatcher has previ- ously confirmed; and (iv) Coordinating with HEA in order that the Dis- patcher and HEA alike will minimize, to the extent reason- ably practicable, any potential conflicts between and among (A) HEA's system operations, (B) Chugach's system opera- tions, and (C) the dispatch of Project generation and the provision of services to the Wheeling Utilities in the man- ner contemplated by this Agreement. In addition, by agreement among the Dispatcher and authorized representatives of the Wheeling Utilities (which agreement the Dispatcher shall reduce to writing and copies of which the Dis- patcher shall provide to all Parties), the Dispatcher and such representatives of the Wheeling Utilities may from time to time modify the scheduling procedures set forth in Section 8(b), in the first sentence of Section 8(c), and in Section 8(d), if and to the extent that the Dispatcher and such representatives of the Wheeling Utilities determine that such modification of scheduling procedures would suit their mutual convenience. No modification of such scheduling procedures so agreed to shall require the approval of the governing boards of the Parties in order to become effective. (b) Requests For Wheeling Schedules. Not later than 12 noon on each weekday (Monday through Thursday), each Wheeling Utility shall notify the Dispatcher of the quantity of Bradley Lake Energy for which it requests wheeling services during each hour of the immediately following day (Tuesday through Friday). Not later than 12 noon on Friday, each Wheeling Utility shall notify the Dispatcher of the quantity of Bradley Lake Energy for which it requests wheeling services during each hour of each of the immediately following three days (Saturday through Monday). Chugach reserves the right to require scheduling for all days of the week on a daily basis in accordance with the first sentence of this Section 8(b) if Chugach determines, after a reasonable period of experience, that scheduling on Fridays for the three following days is not satisfactory to Chugach or to any or all of the Wheeling Utilities. “(c) Confirmation Of Wheeling Schedules. If, consistent with the duties and limitations set forth in Section 7, the Dis- patcher is able to confirm the wheeling schedules requested un- der Section 8(b), he or she shall do so through oral communica- tion with the requesting Wheeling Utilities initiated not later than 5 P.M. on each day for the immediately following day (or days, if the second sentence of Section 8(b) applies). Once the SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 10 Dispatcher has so confirmed a requested wheeling schedule, then upon delivery to Chugach at the Soldotna Substation of the Brad- ley Lake Energy for which that wheeling schedule has been con- firmed, Chugach shall be obligated to perform that schedule, subject only to Force Majeure, which shall excuse such perform- ance. (Unless the Project Management Committee adopts and imple- ments procedures to the contrary, each Party shall be respons- ible for ensuring that it does not cause to be generated at the Bradley Lake Project any power to which that Party is not en- titled by the terms of the Power Sales Agreement and the criter- ia, guidelines, and procedures adopted by the Project Management Committee. (d) Modified Service Schedules. If, consistent with the duties and limitations set forth in Section 7, the Dispatcher is unable to confirm the wheeling schedules requested under Section 8(b), he or she shall so inform the requesting Wheeling Utili- ties through oral communication initiated not later than 5 P.M. on each day for wheeling services requested for the immediately following day (or days, if the second sentence of Section 8(b) applies). In addition: (i) In the same oral communication, the Dispatcher shall inform each Wheeling Utility of, and offer to that Utility, a Modified Service Schedule under which, to the extent possible, the Bradley Lake Energy of that Utility for which wheeling had been requested can be wheeled in part and stored in whole or in part and/or purchased in whole or in part under Sections 4, 5 and 6. For purposes of calculating the type and amount of services that can be offered to individual Wheeling Utilities under Modified Service Schedules, the Dispatcher shall assume, in the first instance, that all Wheeling Utilities will accept the Modified Service Schedules offered to them. (ii) Each Wheeling Utility shall be free to accept or reject a Modified Service Schedule by oral notification to the Dispatcher within one hour of the Dispatcher's communi- cation under Section 8(d) (i). (iii) Upon delivery to Chugach at the Soldotna Sub- station of the Bradley Lake Energy for which a Modified Service Schedule has been offered and accepted, Chugach shall be obligated to perform that Modified Service Sched- ule, subject only to Force Majeure, which shall excuse such performance. (iv) I£: (A) any Wheeling Utility rejects a Modified Ser- vice Schedule offered to it (and if the Dispatcher and that Wheeling Utility do not then agree on some dif- ferent Modified Service Schedule), and SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 11 (B) as a result of such rejection of or non- agreement upon a Modified Service Schedule by one or more Wheeling Utilities, additional wheeling services can be provided to the remaining Wheeling Utility or Utilities which have accepted Modified Service Sched- ules, then (C) at the request of any Wheeling Utility that has accepted a Modified Service Schedule, the Dis- patcher shall increase if possible the wheeling of the Bradley Lake Energy which such remaining Wheeling Utility or Utilities had originally requested be wheeled, provided that such Energy is delivered to Chugach at the Soldotna Substation for wheeling. (v) At the request of any Wheeling Utility which has accepted a Modified Service Schedule, the Dispatcher shall also increase the storage and/or purchase services provided to such Utility if and to the extent that the Dispatcher can do so as the result of any other Wheeling Utility's rejection of storage and/or purchase services offered to the latter Utility in a Modified Wheeling Schedule. (e) Documentation For Schedules Not Confirmed Or Not Per- formed. Whenever the Dispatcher determines that he or she must (1) reduce or interrupt, because of Force Majeure, deliveries of power from the Project or other services to a Wheeling Utility whose wheeling or Modified Service Schedule the Dispatcher has previously confirmed, or (ii) refuse to confirm a Wheeling Util- ity's requested wheeling schedule because of any limitation set forth in Sections 7(b) or 7(c), then the Dispatcher shall pro- vide as much oral notice to the affected Wheeling Utility as is reasonably practicable under the circumstances, such notice to include an explanation of the reason for the reduction/inter- ruption/refusal and the duration of the period during which the Dispatcher anticipates the reduction/interruption/refusal will remain necessary. At all meetings convened under Section 10, Chugach shall be prepared to describe orally, to document in writing (including with contemporaneous logs and all other rele- vant documents maintained by the Dispatcher), and to justify as proper under Section 7 such actions taken by the Dispatcher dur- ing the period since the last such meeting. (£) Allocation Among Conflicting Service Requests. (i) The Wheeling Utilities may agree upon and notify Chugach in writing of the method(s) they desire the Dis- patcher to employ in allocating among the Wheeling Utili- ties, in a practicable manner, such wheeling, storage, and energy purchase services as may be available under this Agreement at times when the Dispatcher is unable within the limitations of Sections 7(b) and 7(c) to confirm or to per- form fully the wheeling schedules requested by the Wheeling Utilities. The Dispatcher shall then employ such method(s) SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 12 until further notification from the Wheeling Utilities. Until the Wheeling Utilities so notify Chugach, however, if any allocation of such services becomes necessary at any time or for any reason, then the Dispatcher shall to the extent practicable under the circumstances allocate the available’ services among the requesting Wheeling Utilities in proportion to the ratio of the respective Percentage Shares of Project Capacity (as the same are defined in the Power Sales Agreement) of the Wheeling Utilities requesting such services for any given day. (ii) If and to the extent that: (A) a Wheeling Utility buys from AEG&T/HEA either AEG&T/HEA's Bradley Lake Energy or elec- tric energy produced by the Soldotna No. 1 gener- ating unit, (B) that Wheeling Utility requests Chugach to provide wheeling services for such energy dur- ing any given month, and (C) the total amount, in that month, of all such energy purchased by all Wheeling Utilities from AEG&T/HEA, and for which wheeling services have been requested from Chugach, will not exceed the total amount of AEG&T/HEA's Bradley Lake En- ergy generated at the Project either simultane- ously with the requested wheeling schedule or earlier during the same calendar month, then (D) all terms and conditions applicable un- der this Agreement to wheeling services provided for the Bradley Lake Energy of the Wheeling Util- ities (including without limitation the terms and conditions governing priority of wheeling ser- vices, scheduling of wheeling services, and pay- ment for wheeling services) shall also apply to Chugach's wheeling of such energy purchased by such Wheeling Utility, subject to the provisions of Section 8(f) (iii). Chugach shall not be obligated to provide services other than wheeling for such energy under this Agreement. In addition, this Agreement shall not apply to any services provided by Chugach for energy sold by AEG&T/HEA in any given month in excess of the amount specified in Section 8(£) (ii) (C). (iii) If any allocation of wheeling services for Bradley Lake Energy and Soldotna No. 1 energy becomes nec- essary under this Agreement at any time, the total quantity of AEG&T/HEA's Bradley Lake Energy and/or Soldotna No. 1 energy wheeled to the Wheeling Utility or Utilities which SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 13 purchase such Bradley Lake Energy and/or Soldotna No. 1 en- ergy from AEG&T/HEA and which request wheeling services from Chugach shall be limited to a quantity of energy equal to the quantity of Bradley Lake Energy that could be wheeled to AEG&T/HEA under Section 8(f) (i) if the following hypothetical circumstances existed: (A) AEG&T/HEA's Delivery Point were the Teeland Substation; (B) AEG&T/HEA were a Wheeling Utility and re- quested Chugach to wheel AEG&T/HEA's Bradley Lake En- ergy to such Delivery Point during a period for which the Dispatcher must allocate available wheeling ser- vices under this Agreement; and (C) Under the allocation method otherwise ap- plicable under Section 8(f) (i), AEG&T/HEA's Percentage Share of Project Capacity (as defined in the Power Sales Agreement) were included in the necessary compu- tation on the same basis and for the same purposes as the respective Percentage Shares of Project Capacity of the Wheeling Utilities requesting wheeling services at the same time for their Bradley Lake Energy. (g) Assured Delivery. Any Wheeling Utility may request at any time that the Dispatcher confirm an Assured Delivery sched- ule, for any period not to exceed two weeks, of Bradley Lake Energy which that Utility desires to have Chugach wheel. In that event: (i) The Dispatcher shall confirm such requested As- sured Delivery schedules if he or she can do so consistent with the limitations set forth in Sections 7(b) and 7(c). (ii) Upon delivery to Chugach at the Soldotna Sub- station of the Bradley Lake Energy for which an Assured Delivery schedule has been so confirmed, Chugach shall be obligated to perform that Assured Delivery Schedule, sub- ject only to Forced Outage, which shall excuse such per- formance. (iii) The rates applicable to Bradley Lake Energy delivered in accordance with Assured Delivery schedules shall be computed in the manner set forth in Appendix C attached hereto and incorpated by reference herein. (iv) The Dispatcher shall give notice to other Wheel- ing Utilities as soon as reasonably possible of Assured Delivery Schedules confirmed by the Dispatcher. SERVICES AGREEMENT FOR BRADLEY LAKE ENE? CY Page 14 (h) Scheduling During Certain Transmission Outages. (i) The Parties recognize that Chugach's transmission facilities between the Soldotna Substation and the Univers- ity Substation are subject to periodic outages and, in par- ticular, outages caused by scheduled maintenance and repair or by natural events such as avalanches and slides. During any outage of such facilities, Chugach shall use its best. efforts to restore such facilities to service as promptly as is reasonably possible under the circumstances. (ii) In addition, if and to the extent that immedi- ately prior to such outage Chugach was meeting its loads south of the point of outage by operating generation north of the point of outage, then the Dispatcher shall continue to perform previously confirmed wheeling schedules and to confirm newly requested wheeling schedules under Section 8(c) to the extent that, despite such outage, the requested schedules can be performed and Chugach can continue to serve its loads south of the point of outage by the follow- ing means, rather than by means of operating Chugach's fos- sil fuel generation units located south of the point of outage: (A) Chugach continues to generate during such outage, at locations north of the point of outage, such electric power as Chugach may require to meet (I) loads for which it is responsible north of the point of outage, plus (II) loads for which it is responsible south of the point of outage, to the extent that the latter loads are not met by Chugach's own Bradley Lake Energy and any energy that is not Displaceable Energy. (B) Simultaneously, one or more Wheeling Utili- ties provides to Chugach, at the Soldotna Substation, Bradley Lake Energy equal in amount to the energy that Chugach is then generating north of the point of out- age in order to meet loads for which Chugach is re- sponsible south of the point of outage. In order to facilitate the ability of the Parties to implement this Section 8(h) (ii) at all applicable times when Bradley Lake Energy is being produced, the Parties shall each designate rep- resentatives promptly after this Agreement is executed, and shall authorize and instruct such representatives to negotiate, agree upon, and prepare the procedures reasonably necessary to carry out the intent and purpose of this Section 8(h) (ii). (i) Scheduling During Periods When Transmission Would Oth- erwise Be Pre-empted Or Unavailable. At times when Chugach's own use of its transmission system makes wheeling services un- available or insufficient under other provisions of this Agree- ment, and at times when Chugach's transmission facilities be- tween the Soldotna Substation and the University Substation are SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 15 subject to an outage but Section 8(h) (ii) does not apply, then upon the request of any Wheeling Utility, Chugach will continue to confirm and perform requested wheeling schedules for that Wheeling Utility if and to the extent the following conditions are met: (i) The Wheeling Utility delivers Bradley Lake En- ergy to Chugach at the Soldotna Substation in amounts not to exceed, at any point in time, the amounts of Displace- able Energy then being produced by Chugach's Displaceable Kenai Resources; (ii) Condition #1 in Appendix B applies, i.e., the average cost of Bradley Lake Energy (as determined in ac- cordance with the methodology set forth in Appendix B) plus applicable wheeling charges (if any) for delivery of such Energy to Chugach at the Soldotna Substation exceeds at the time the Decremental Cost of the same Displaceable Kenai Resources; (iii) Chugach has the operational ability to increase the output of its generating units north of the Kenai Pen- insula in order to deliver energy to the Wheeling Utility at that Utility's Delivery Point in the amount of the Bradley Lake Energy delivered to Chugach under Section 8(i) (i); and (iv) For such deliveries, the Wheeling Utility pays Chugach the then-applicable wheeling rate computed in ac- cordance with Appendix A, plus an additional amount equal to the difference between (A) the Incremental Costs Chugach incurs in increasing the operation of its generating units north of the Kenai Peninsula, and (B) the Decremental Costs Chugach avoids in reducing the operation of its Displace- able Kenai Resources. SECTION 9. RIGHTS TO ADDITIONAL TRANSMISSION CAPACITY (a) Specific Upgrades. Some or all of the Chugach trans- mission facilities existing as of the Effective Date and used to perform this Agreement may have the potential for being upgraded from time to time to increase carrying capacity (but not neces- sarily reliability). If and to the extent that Chugach upgrades such facilities from time to time, this Agreement shall continue to apply, and the entire capacity of such facilities as so up- graded shall be available to assist in the provision of wheeling services under this Agreement to the extent that such facilities are not used by Chugach in accordance with Section 7(c). Chu- gach also agrees that, upon request of other Parties from time to time, Chugach will upgrade such facilities at the expense of such other Parties. If Chugach so upgrades such facilities in response to such a request, the rights and obligations of Chu- gach and of other Parties with respect to the additional trans- SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 16 mission capacity thereby created shall be governed by the pro- visions of Appendix D attached hereto and incorporated by refer- ence herein. To the extent not required by Chugach for its own system operations, the non-upgraded portion of Chugach's trans- mission facilities shall remain available on a non-discrimina- tory basis for wheeling Bradley Lake Energy to the Wheeling Utilities, without regard to any individual Wheeling Utility's participation or non-participation in the financing of any up- grade under this Section 9(a). (b) Shared Upgrades. If and to the extent that (i) as a result of any long-term change in Chugach system operations or facilities that substantially reduces the availability of ser- vices under this Agreement, an upgrade is needed in order to continue to permit Bradley Lake Energy to be delivered to the Wheeling Utilities on a basis satisfactory to those Utilities, (ii) such an upgrade would produce benefits for Chugach as well as for the Wheeling Utilities, and (iii) neither Chugach on the one hand nor the Wheeling Utilities on the other is willing to bear the costs of the upgrade without some form of cost-sharing by the others, then Chugach and the Wheeling Utilities shall in good faith attempt to negotiate a cost-sharing arrangement under which the upgrade may be accomplished in a manner that both Chu- gach and the Wheeling Utilities determine to be equitable in relation to the benefits available to each of them from the up- grade. To the extent not required by Chugach for its own system operations, the non-upgraded portion of Chugach's transmission facilities and the additional capacity attributable to Chugach's participation in any upgrade shall remain available on a non- discriminatory basis for wheeling Bradley Lake Energy to the Wheeling Utilities, without regard to any individual Wheeling Utility's participation or non-participation in the financing of any upgrade under this Section 9(b). (c) Opportunities To Share In New Transmission Capacity. If any Party undertakes, alone or together with other entities, the construction of new transmission capacity linking the Kenai Peninsula with Anchorage via a transmission corridor other than Chugach's existing transmission corridor between the Soldotna Substation and the University Substation, then each other Party shall be afforded a reasonable opportunity to participate in a non-discriminatory manner in the ownership of such new transmis- sion capacity in an amount, measured in megawatts, not less than each Party's Percentage Share of Project Capacity (as the latter terms are defined in the Power Sales Agreement). SECTION 10. CONSULTATION AND DISPUTE RESOLUTION (a) Consultation. The Parties shall meet not less than once each quarter, and more frequently at the specific request of any Party, for the purposes set forth in this Section. Such meetings shall, if possible, be scheduled to coincide with other meetings among the Parties, such as Project Management Committee SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 17 meetings. At such meetings, the Parties shall apprise one an- other of any planned changes in their systems, including power purchases or sales, that might affect the demand for services and/or the availability of services under this Agreement. (b) Dispute Resolution. At the meetings referred to in Section 10(a), the Parties shall also review performance under this Agreement, including difficulties encountered under the Agreement by any of the Parties and allegations (if any) of failure of any Party to perform the Agreement in good faith in accordance with its terms or intent. The Parties agree that any further procedures for dispute resolution under this Agreement shall be entrusted (if the Authority concurs) to good faith neg- otiation and adoption by the Project Management Committee, with Chugach's affirmative vote required for adoption of such proced- ures. Chugach shall not withhold its affirmative vote unreason- ably, but Chugach's reasonableness in this regard may be chal- lenged and determined only in an action to enforce this Agree- ment and shall not be determined by vote or other action of the Project Management Committee. Such procedures shall include procedures for resolution of the following categories of po- tential disputes, among others: (i) disputes over the propriety of any refusal by Chugach to confirm or to perform schedules for services under €ection 8; (3) disputes over the propriety of any notice of termination under Section 3(c), including issues relating to whether Alternate Transmission Facilities are available in an economic and not just a legal sense; provided, that if traismission services are available to a Wheeling Utili- ty on such Facilities on any commercially reasonable terms, the fact that such services may be more expensive than wheeling services provided by Chugach under this Agreement shall not in itself constitute economic unavailability of the Alternate Transmission Facilities; and (iii) disputes over calculation of the capital costs Chugach is to assume or pay under Section 9(a) and Appendix D if pursuant to those provisions, Chugach upon notice withdraws from the Wheeling Utilities transmission capacity created by a transmission system upgrade the costs of which the Wheeling Utilities had agreed to bear. SECTION 11. APPROVALS AND RENEGOTIATION (a) Approvals And Enforceability. All Parties agree to seek and support as expeditiously as possible and in good faith all necessary approvals of this Agreement and its terms. Each Party agrees that this Agreement and each of its provisions is lawful, valid, binding, and enforceable in accordance with its terms. Each Party specifically reserves the right to seek en- SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 18 forcement of this Agreement. In any administrative or judicial action to enforce or to interpret this Agreement, any Party may dispute any interpretation of this Agreement with which that Party in good faith disagrees. This Agreement in its entirety reflects the meeting of the minds among the Parties, however, and there exists no agreement among the Parties that services will be provided to the Wheeling Utilities for Bradley Lake En- ergy (and Soldotna No. 1 energy purchased from AEG&T/HEA) on terms or conditions other than as set forth in this Agreement. Further, no Wheeling Utility is obligated by this Agreement to request that any services be provided to it. Consequently, if any other Party challenges (or supports any challenge to) the lawfulness and effectiveness of this Agreement or any provision thereof, then notwithstanding any other provision of this Agree- ment, Chugach may at its option terminate this Agreement with respect to that other Party. Thereafter, Chugach shall not be obligated to provide services to that other Party except to the extent, if any, that the provision of such services is required by other applicable agreement or by applicable statutes, regula- tory orders, or principles of common law. (b) Renegotiation. Five years after the Date of Com- mercial Operation (as defined in the Power Sales Agreement), the Parties other than Chugach may by unanimous agreement select an entity other than Chugach (and such Parties shall select such an entity if Chugach requests) to dispatch generation of the Pro- ject, and if any entity other than Chugach is so selected, then Chugach shall be entitled to change the services to be provided by Chugach under this Agreement and the terms and conditions applicable to such services; provided, that no change in the entity responsible for dispatching generation of the Project, and no change in the services to be provided by Chugach or in the terms and conditions applicable to such services, shall be- come effective unless and until the Parties, including Chugach, have negotiated, agreed upon, and obtained all necessary approv- als of amendments to this Agreement under which the quality of services provided to the Wheeling Utilities is preserved in a manner satisfactory to those Utilities, and under which Chu- gach's ability to control the use of its own system for its own system purposes is preserved in a manner satisfactory to Chu- gach. SECTION 12. MISCELLANEOUS PROVISIONS (a) Waiver. Any waiver at any time by any Party of its rights with respect to any default of the other Party, or with respect to any other matter arising in connection with this Ag- reement, shall not be considered a waiver with respect to any prior or subsequent default, right or matter. (b) Successors And Assigns. This Agreement and all of the terms and provisions hereof shall be binding upon and inure to the benefit of the respective successors and assignees of the SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 19 Parties; provided, that no assignment or other transfer of this Agreement or any interest hereunder (other than to a Party which was a Party on the Effective Date) shall be effective without the prior written consent of all of the other Parties (which consent shall not be unreasonably withheld), and any successor or assignee which was not a Party on the Effective Date must, in the commercially reasonable opinion of the other Parties, be financially capable of assuming the obligations of the Party from which the successor or assignee has accepted assignment or other transfer. This Section 12(b) shall not prevent an assign- ment of a Party's rights hereunder for security purposes only, and shall not prevent a financing entity with recorded or se- cured rights from exercising all rights and remedies available to it under law or contract, provided that performance of this Agreement is not thereby impaired. The Parties shall have the right to be reasonably notified by the financing entity prior to the time of exercise that it is exercising such rights or reme- dies. (c) Performance Pending Resolution Of Disputes. Pending resolution of any dispute, each Party shall carkinde to perform its obligations under this Agreement, including but not limited to the obligation to pay bills submitted by Chugach for Bradley Lake Energy services or, in Chugach's case, bills submitted to Chugach for Bradley Lake Energy sold to Chugach pursuant to the provisions of this Agreement. All Parties shall be entitled to seek immediate judicial enforcement of this continued perform- ance obligation notwithstanding the existence of a dispute. Application for such enforcement shall be made to the Superior Court for the State of Alaska, Anchorage District. (d) Applicable Law. The laws of the State of Alaska (including without limitation the equal opportunity laws set forth in AS 18.80.220, as the same may be amended from time to time) shall govern the interpretation and application of this Agreement and the actions of the Parties hereto. In addition, Chugach will comply with all other equal opportunity laws and regulations applicable to Chugach. (e) Section Headings. The section headings in this Agree- ment are for convenience only, and do not purport to and shall not be deemed to define, limit or extend the scope or intent of the section to which they pertain. (f) Payment. Any Party entitled to demand payment under this Agreement shall endeavor to render bills to the appropriate other Party or Parties on or before the 10th day of each calen- dar month for services furnished (or Bradley Lake Energy pur- chased) under this Agreement during the preceding month. In such bills, if any item is designated as being estimated due to unavailability of final underlying data, then adjustments to the correct amounts, when such amounts are determined, shall be in- cluded in a bill for subsequent months. Payment from every Par- ty billed shall be due in the office of the billing Party by the SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 20 25th day after mailing of the bill. If such bill is delayed in the mail and not received within ten days of the date shown on the postmark, then the Party billed shall immediately notify the billing Party and agree upon on a new due date, but in no event shall a billing Party be required to accept a delay in payment beyond 15 days from the date of actual receipt of the bill by the Party billed. Payment shall be mailed, directly deposited to the billing Party, or may be paid in person, to the billing Party's main office in Alaska. , (g) No Third Party Beneficiaries Or Liability To Third Parties. Notwithstanding that the operation of this Agreement may and is intended to confer benefits on third parties who are not signatories to this Agreement, in promising performance to one another under this Agreement the Parties intend to create binding legal obligations to and rights of enforcement in (i) one another, and (ii) one another's assignees or successors in interest. The Parties expressly do not intend to create any obligation or liability, or promise any performance to, any third party (including without limitation the Authority or any individual or entity supplied with electric power by any of the Parties). The Parties have not created for any third party any right to enforce this Agreement. (h) Force Majeure. (i) Except as modified by Sections 12(h) (ii) and (iii), "Force Majeure” means any event, without limitation, the occurrence of which (A) is beyond the control of Chu- gach, (B) the Dispatcher did not foresee when scheduling services under this Agreement, and (C) makes it impractical or imprudent in terms of the safety, efficiency, or reli- ability of Chugach's system for the Dispatcher to perform such services as scheduled. (ii) Except in the circumstance described in Section 12(h) (iii), for purposes of this Section 12(h) and this Agreement, an event beyond the control of Chugach and un- foreseen by the Dispatcher when scheduling services shall not be considered an event of Force Majeure, and shall not excuse performance of a service schedule the Dispatcher has previously confirmed, if and to the extent that (A) the Bradley Lake Energy for which the schedule has been con- firmed is delivered to Chugach at the Soldotna Substation, and (B) the Dispatcher, in response to such event, can still perform the scheduled services by operating any and all Chugach generating units that Chugach could and would operate at the time to ensure continuity of service to its own retail or wholesale loads. (iii) Notwithstanding Section 12(h) (ii), an event of Force Majeure shall be considered to have occurred and Chu- gach's further performance of the previously confirmed ser- vice schedule shall be excused if and to the extent that SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 21 the event is otherwise a Force Majeure within the meaning of Section 12(h) (i) and the following conditions are met: (A) During the period in which Chugach is to perform a previously confirmed service schedule, Chugach experiences a Forced Outage of generation or transmission that prevents Chugach from using in the service of its own system loads some or all of the electric power otherwise capable of being produced by the generating units Chugach had planned to so use during such period; (B) Chugach must operate back-up generation (or purchase power) because of the Forced Outage; (C) But for the Bradley Lake service schedule, Chugach could operate other back-up generation to meet its own system loads, and such other generation has a lower Incremental Cost than the Incremental Cost of the generation that Chugach would in fact operate (or the purchase price of the power Chugach would in fact buy) in order to meet its own system loads if Chugach must also perform the Bradley Lake service schedule; and (D) The Wheeling Utility does not agree to pay Chugach, in addition to the otherwise applicable rate for the scheduled services, the difference between the Incremental Cost of the back-up generation Chugach would operate (or the power Chugach would purchase) in order to continue serving its system loads during the Forced Outage while performing the Bradley Lake ser- vice schedule, and the Incremental Cost of the less costly back-up generation that Chugach would operate for the same purpose if Chugach did not perform the service schedule; provided, that responsibility for the payment of such difference in cost shall be divid- ed appropriately among Wheeling Utilities if two or more Wheeling Utilities choose to have Chugach perform services for them in these circumstances. (iv) To assist decision-making by the Wheeling Util- ities when Section 12(h) (iii) applies, the Dispatcher shall, as a courtesy, provide such Utilities upon request an estimate of the approximate difference in Incremental Costs (on a cents per kilowatthour basis) referred to in Section 12(h) (iii) (D), if the Dispatcher can reasonably do . so under the circumstances. For actual billing purposes, however, neither Chugach nor any Wheeling Utility shall be entitled to rely upon estimates provided by the Dispatcher. (i) Other Agreements. Except as provided in Section 12(m), this Agreement does not modify, alter, or amend any other contract or agreement that may exist between or among any of the Parties, including but not limited to existing power sales agree- SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 22 ments by and among: AEG&T and HEA; AEG&T and MEA; Chugach, AEG&T, and HEA; and Chugach, AEG&T, and MEA. (j) Operation And Maintenance Of The Project. The Parties recognize and agree that the appropriate entity to operate and maintain the Project upon its completion is AEG&T and/or HEA. The Parties agree to support and assist any reasonable efforts by AEG&T and/or HEA to obtain from the Authority the right to operate and maintain the Project in accordance with applicable standards governing such operation and maintenance. (k) Opinions Of Counsel. All parties may rely on opinions of counsel and the matters referred to in such opinions, which opinions shall accord with the provisions of Appendix E attached hereto and incorporated by reference herein. (1) Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. (m) Relationship To Alaska Intertie Agreement. All terms and conditions under which Bradley Lake Energy shall be trans- mitted over facilities owned by Chugach shall be as set forth in, or as determined in accordance with procedures established under, this Agreement. The Parties hereby acknowledge that the rights and obligations set forth in this Agreement are intended to satisfy, and are considered by the Parties to be in lieu of, the rights and obligations set forth in Article 15 (and else- where) of the Intertie Agreement relating to the transmission of Bradley Lake Energy on transmission facilities of Chugach, which rights and obligations under the Intertie Agreement the Parties hereby waive to the extent necessary to permit this Agreement to be effective in accordance with its terms. If and to the extent that the provisions of this Agreement (including without limita- tion provisions relating to the availability, scheduling and rates for wheeling services) are found to be inconsistent in any way with the provisions of the Intertie Agreement (including without limitation the provisions of Article 15 of the Intertie Agreement) as the provisions of the Intertie Agreement relate to the transmission of Bradley Lake Energy over Chugach's trans- mission facilities, the provisions of this Agreement shall gov- ern and shall supersede the provisions of the Intertie Agree- ment. SECTION 13. DEFINITIONS (a) Agreement. This Agreement governing wheeling and re- lated services for Bradley Lake Energy. (b) Alaska _Intertie Agreement (or “Intertie Agreement"). The Alaska Intertie Agreement dated December 23, 1985, among the Alaska Power Authority, ML&P, Chugach, GVEA, AEG&T, and others. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 23 (c) Alaska Power Authority. The Alaska Power Authority, an agency of the State of Alaska, and any successor thereto as owner of the Bradley Lake Hydroelectric Project. (d) Alternate Transmission Facilities. Any transmission facility or combination of such facilities (including existing facilities owned by Chugach or others), regardless of ownership or control or routing or competing uses of such facilities, to which a Wheeling Utility has or can legally obtain access in a commercially reasonable manner (even if at greater expense than under this Agreement) and which have sufficient physical cap- ability and carrying capacity to permit the Bradley Lake Energy of a Wheeling Utility to be transmitted from the Soldotna Sub- station to the Delivery Point of that Wheeling Utility without requiring such Energy to flow between the Soldotna Substation and the University Substation over Chugach-owned transmission lines in Chugach's existing transmission corridor between those two Substations; provided, that so long as transmission services are available to a Wheeling Utility on such Facilities on any commercially reasonable terms, the fact that such services may be more expensive than wheeling services provided by Chugach under this Agreement shall not in itself constitute lack of ac- cess to the Alternate Transmission Facilities in a commercially reasonable manner. (e) Assured Delivery. The service of providing firm and non-interruptible scheduled delivery of Bradley Lake Energy to a Wheeling Utility, subject only to Forced Outage, as requested by the Wheeling Utility and as agreed to by Chugach under Section 8(g) in return for payment of the applicable rate for such ser- vice as computed in accordance with Appendix C. (f) Authority. See Alaska Power Authority. (g) Bradley Lake Energy. Electric energy, expressed in kilowatthours (kwh), generated at the Bradley Lake Hydroelectric Project for a Party in a manner consistent with the Power Sales Agreement and the applicable criteria, procedures, and guide- lines adopted by the Project Management Committee. As used in this Agreement, Bradley Lake Energy does not include energy pro- duced by generators other than those located at the Bradley Lake Hydroelectric Project, regardless of whether energy or capacity from such other generators is or may be sold to a Party pursuant to provisions of the Power Sales Agreement relating to reserves for the Project, unless, with respect to any Wheeling Utility, the energy produced by such other generators and sold to that Utility as reserve energy pursuant to the provisions of the Pow- er Sales Agreement cannot reach the Delivery Point of that Util- ity without being transmitted over Chugach's transmission facil- ities located between the Soldotna Substation and the University Substation. If a Wheeling Utility delivers any of its Bradley Lake Energy to another Party without that Energy being wheeled under this Agreement, and if the other Party at a later time makes available the same or a lesser quantity of energy to that SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 24 Wheeling Utility pursuant to a "banking" agreement or similar arrangement, then, if the Wheeling Utility so chooses, the ener- gy so made available at a later time shall be treated as Bradley Lake Energy for purposes of this Agreement and shall be provided services in the same manner as any other Bradley Lake Energy (if delivered to Chugach for such services at the Soldotna Substa- tion pursuant to a service schedule), regardless of the generat- ing facilities used by such other Party to produce such energy under such agreement or arrangement. (h) Bradley Lake Hydroelectric Project. The hydroelectric generating qacliities with a planned capacity of some 100 mega- watts and a planned annual energy output of some 360,000 mega- watthours, to be constructed by the Alaska Power Authority on the Bradley River near Homer, Alaska. (i) Decremental Cost. The expense per kilowatthour which Chugach would incur if Chugach generated a specific quantity of energy instead of obtaining the same quantity of energy during the same hour from other sources, and which Chugach can avoid by so obtaining such quantity of energy rather than generating it. For purposes of this Agreement, such expense shall be equal to the sum of the following (each as reasonably determined by Chu- gach), divided by the number of kilowatthours to be so obtained rather than generated: (i) The replacement cost of fuel and lubrication the consumption of which would occur if Chugach generated such quantity of energy and the consumption of which would be avoided if Chugach does not generate such quantity of energy, (a) The maintenance cost that Chugach would incur if Chugach generated such quantity of energy and that Chu- gach can avoid by not generating such quantity of energy, (iii) The cost of direct labor and direct supervision that Chugach would incur if Chugach generated such quantity of energy and that Chugach can avoid by not generating such quantity of energy, and (iv) Any other costs that Chugach would incur if Chugach generated such quantity of energy and that Chugach can avoid by not generating such quantity of energy, which other costs shall be separately itemized by Chugach. In those instances when Chugach obtains Bradley Lake Energy from a Wheeling Utility and the Chugach energy displaced in the transaction is energy that Chugach would have purchased rather than energy Chugach would have generated, Decremental Cost (if applicable) shall equal the per kilowatthour purchased power expense that Chugach avoids as a result of the transaction. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 25 (j) Delivery Point. The substations (or successor substa- tions) listed below for the individual Parties, if such Parties become Wheeling Utilities for purposes of this Agreement: GVEA: Teeland Substation HEA: The "Delivery Point" as defined in the Power Sales Agreement MEA: Teeland Substation MLE&P: The 230 kV switchyard at ML&P's Sulli- van Generating Station SES: Dave's Creek Substation AEGET: Same locations as for MEA for energy delivered to AEG&T on behalf of MEA Same locations as for HEA for energy delivered to AEG&T on behalf of HEA (k) Direct Transmission. Any delivery of Bradley Lake Energy to a Wheeling Utility that coincides with a physical flow of energy north from the Soldotna Substation, but only to the extent of such flow. (1) Dispatcher. The individual or individuals employed by Chugach to perform the duties set forth in Section 8. (m) Displaceable Energy. Energy produced or capable of being produced by Chugach's Displaceable Kenai Resources for use in load, the production of which Chugach can avoid through the purchase and the use in load of energy from non-Chugach sources, but not including such energy as Chugach may produce and use in load as a consequence of continuing to operate such Resources at the levels prudently necessary for system stability, voltage support, and related operational purposes. (n) Displaceable Kenai Resources. Generating facilities owned or operated by Chugach (or owned and operated by others but used to supply electric power for purchase by Chugach) and located on the Kenai Peninsula, other than hydroelectric gener- ating facilities or other generators that produce electricity from wind energy, solar energy, or other renewable sources of energy the supply of which is beyond Chugach's control. (o) Disposal Rate. The rate or rates applicable to Chu- gach's purchases under Section 6 of Bradley Lake Energy and computed in accordance with Appendix C. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 26 (p) Effective Date. The first day on which both of the following conditions have been met: (i) all Parties have re- ceived satisfactory opinions of counsel and have executed and delivered this Agreement, and (ii) this Agreement has been ap- proved in its entirety by all entities whose approval is nec- essary. For purposes of this provision, the approval of any entity other than a federal or state governmental body shall not be considered necessary unless that non-governmental entity is identified in writing by one or more Parties, at the time such’ Party or Parties execute this Agreement, as an entity whose ap- proval is necessary to permit this Agreement to become effective with respect to such Party or Parties. (q) Force Majeure. The term "Force Majeure" shall have the meaning given it in Section 12(h). (r) Forced Outage. Any event, without limitation, beyond the control of and unforeseen by Chugach, the occurrence of which interferes with the transmission of energy under this Ag- reement by rendering physically impossible or unsafe the genera- tion or transmission (over any transmission facilities or por- tions thereof) of all or a portion of the electric power that under normal conditions could safely be so generated or trans- mitted. Any Forced Outage shall constitute an event of Force Majeure under this Agreement, but events of Force Majeure are not limited to Forced Outages. (s) Incremental Cost. The expense per kilowatthour which Chugach would incur if Chugach generated a specific quantity of additional energy for delivery to another Party or Parties dur- ing a particular hour, and which Chugach can avoid by not gener- ating that energy. For purposes of this Agreement, such expense shall be equal to the sum of the following (each as reasonably determined by Chugach), divided by the number of additional kilowatthours to be so generated: (i) The replacement cost of fuel and lubrication the consumption of which would occur if Chugach generated such quantity of energy and the consumption of which would be avoided if Chugach does not generate such quantity of energy, (ii) The maintenance cost that Chugach would incur if Chugach generated such quantity of energy and that Chu- gach can avoid by not generating such quantity of energy, (iii) The cost of direct labor and direct supervision that Chugach would incur if Chugach generated such quantity of energy and that Chugach can avoid by not generating such quantity of energy, and (iv) Any other costs that Chugach would incur if Chugach generated such quantity of energy and that Chugach SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 27 can avoid by not generating such quantity of energy, which other costs shall be separately itemized by Chugach. In those instances when Chugach provides a Wheeling Utility with energy obtained by purchase rather than by increasing the output of Chugach's own generation, Incremental Cost (if applicable) shall equal the per kilowatthour purchased power expense that Chugach incurs as a result of the transaction. (t) Modified Service Schedule. A schedule of services under Section 8 that provides partial wheeling, full or partial storage, and/or full or partial energy purchase services for some or all of the Bradley Lake Energy for which a Wheeling Utility initially requested wheeling services. (u) Offsetting Flows. Any delivery of Bradley Lake Energy to a Wheeling Gtility that does not coincide with a physical flow of energy north from the Soldotna Substation, but only to the extent of such non-coincidence. (v) Party. Any entity listed in Section 1 of this Agree- ment, other than the Alaska Power Authority. (w) Power Sales Agreement. The agreement for the sale and purchase of electric power from the Project entered into by and among the Authority and the Parties. (x) Project. See Bradley Lake Hydroelectric Project. (y) Project Management Committee. The committee composed of the Authority and the Parties established and invested with authority pursuant to the Power Sales Agreement. (z) Protected Storage Agreement. Any oral or written con- tractual arrangement entered into by Chugach outside this Agree- ment under which energy owned by another entity is stored in the Cooper Lake Reservoir and protected from spill to the extent specified by such contractual arrangement. (aa) Soldotna Substation. The Soldotna Substation owned and operated by Homer Electric Association, Inc., or any suc- cessor facility at which Bradley Lake Energy can be and is de- livered to Chugach at Chugach's metering point by a Wheeling Utility for services under this Agreement. (bb) Termination Date. The earliest of the following dates: (i) The date on which the Authority terminates the Project; (ii) The fiftieth (50th) anniversary of the Date Of Commercial Operation as defined in the Power Sales Agree- ment; SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 28 (iii) The date on which this Agreement has been term- inated with respect to each and all of the Wheeling Utili- ties pursuant to Section 3(c); or (iv) Such other date as the Parties may mutually ag- ree upon, subject to such approvals as may be necessary at the time of such agreement. j (cc) Wheeling Utility. Any of the Parties other than Chu- gach and HEA (or AEG&T on Bateas of HEA), but not a Party which at the time is a wholesale customer of Chugach purchasing power from Chugach pursuant to a contract (other than this Agreement) under which Chugach reimburses or otherwise assumes financial responsibility for that Party's costs of purchasing Bradley Lake Energy from the Authority. If and to the extent that HEA (or AEG&T on behalf of HEA) becomes a successor or assignee of a Wheeling Utility's Bradley Lake Energy pursuant to Section 12(b) and Chugach does not reimburse or otherwise assume financial responsibility for the costs of such Energy, then HEA (or AEG&T on behalf of HEA) shall have the option of becoming a Wheeling Utility for Bradley Lake Energy in an amount not to exceed the amount of such Energy so succeeded to by, or so assigned to, HEA (or AEG&T on behalf of HEA). IN WITNESS WHEREOF, the parties have caused this Ag- reement to be executed the day and year first above written. CHUGACH ELECTRIC ASSOCIATION, INC. ALASKA ELECTRIC GENERATION & TRANSMISSION COOPERATIVE, INC. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 29 HOMER ELECTRIC ASSOCIATION, INC. By As fa GOLDEN VALLEY ELECTRIC ASSOCIATION, INC. MATANUSKA ELECTRIC ASSOCIATION, INC. THE MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY Page 30 198711/108 APPENDIX A Computation Of Wheeling Rates Rates for wheeling services provided under Section 4 of this Agreement are intended to be computed on a fully allocated cost basis and to apply to all Wheeling Utilities in a "postage stamp" manner, in accordance with the following principles: 1. Basic Wheeling Rate. (a) Formula. The basic wheeling rate shall be computed in each Chugach rate adjustment proceeding in accordance with the following formula, using actual values for each variable as de- termined for the ratemaking test year applicable to that rate adjustment proceeding: R = A+t+B+C+D+E x K F Where: R = The basic wheeling rate to be charged during the rate period; » "i Chugach O & M expense allocated to transmis- sion (currently REA Accounts 556 through 573), less such O & M expense properly al- located to Chugach's Beluga to Point Mac- Kenzie transmission segment; B = Chugach A & G expense allocated to transmis- sion (currently REA Accounts 920 through 932), less such A & G expense properly al- located to Chugach's Beluga to Point Mac- Kenzie transmission segment; Cc = Chugach taxes allocated to transmission (currently REA Account 408), less such taxes properly allocated to Chugach's Beluga to Point MacKenzie transmission segment; Uo " Chugach depreciation allocated to transmis- sion (currently REA Account 403), less such depreciation properly allocated to Chugach's Beluga to Point MacKenzie transmission seg- ment; SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX A -- Page 1 198711/108 E = Chugach interest expense and generation-and- transmission TIER (or other applicable gen- eration and transmission margin requirement) allocated to transmission, less interest expense and generation and transmission TIER Properly allocated to Chugach's Beluga to Point MacKenzie transmission segment; F = The sum in kilowatthours of (i) Chugach's total generation (exclusive of generation for economy sales) plus purchases, and (ii) the Bradley Lake Energy of the Wheeling Utilities; and K = The applicable phase-in factor or constant as set forth below in Provision 2 of this Appendix A. (b) Notes on specific variables. (i) The Point MacKenzie Substation is not part of Chugach's Beluga to Point MacKenzie transmission segment, and the costs of that Substation shall not be excluded in determining the values for those variables from which the costs of that segment are excluded. (ii) Chugach's transmission O & M expense and A & G expense associated with Chugach's Beluga to Point MacKenzie transmission segment are not (and at this time cannot be) specifically identified and isolated from Chugach's total transmission O & M expense and A & G expense. Therefore, in computing "A" and "B" in the foregoing formula, reason- able estimates of Chugach's transmission O & M expense and A & G expense associated with Chugach's Beluga to Point MacKenzie transmission segment shall be used. Such esti- mates may be based on reasonable proxy variables, such as the percentage of total recorded annual hours of transmis- sion O & M labor represented by recorded annual hours of transmission O & M labor on Chugach's Beluga to Point Mac- Kenzie transmission segment. (iii) As provided in Section 13(cc) of this Agree- ment, neither HEA nor AEG&T on behalf of HEA is a Wheeling Utility for purposes of this Agreement (except, potential- ly, as a successor or assignee of another Wheeling Utili- ty's Bradley Lake Energy). Thus, "F" in the formula set forth above shall not include or be increased by any Brad- ley Lake Energy of HEA or AEG&T on behalf of HEA, even if such Energy is wheeled by Chugach pursuant to Section 8(f) of this Agreement at wheeling rates established under this Exhibit A. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX A -- Page 2 198711/108 2. Phase-In Factor (Years 1-15) And Constant (Later Years). Beginning with the calendar year in which the Project achieves Commercial Operation, and in each of the next fourteen calendar years (Calendar Years 1 through 15 in the table below), the applicable wheeling rate shall be determined by multiplying the then-applicable base wheeling rate (as computed above) times a phase-in factor in accordance with the following table: Calendar Year Phase-In Factor Lie ie) oie) 6) ee ars yoo35 Zev eveverneevnses ©3333 3 so 6 ws 6° © is 3333 6) 3) ete) 0 10) 0 10) 0 -3805 So) eel «ee -4278 i ooo oo tote oie oie -4750 eles) Tole etoueielomator ey Te -5222 Bois ew ow te . -5694 ee ee ee . -6167 10 ee oe oe we ew -6639 ls seb eo © 6 «742 12 e ‘ee «6 6 ® 7583 LS) ee oe ele iol ot -8056 Aw et we ee eee -8528 LS eee eo too) le is) exe -9000 Beginning on the first day of the next calendar year after Cal- endar Year 15, and in all succeeding calendar years, the base wheeling rate (as computed under heading 1 above) shall be mul- tiplied by 0.9000 as a constant. Any increase in the applicable wheeling rate resulting from an increase in the phase-in factor in accordance with the table above shall become effective with- out the need for any regulatory approval other than approval of this Agreement. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX A -- Page 3 198711/109 APPENDIX B Computation Of Disposal Rates The rates ("Disposal Rates") that Chugach will pay for Bradley Lake Energy that Chugach purchases from the Wheeling Utilities under Section 6 of this Agreement shall be computed using the following methodologies: ie Rates Under Condition #1. (a) Determining whether Condition #1 exists. (i) "Condition #1" refers to the circumstance in which, at the time Chugach purchases Bradley Lake Energy of a Wheeling Utility under Section 6, the Decremental Cost to Chugach of Displaceable Energy from Chugach's Displaceable Kenai Resources is less than or equal to the sum of (A) the average cost of Bradley Lake Energy, and (B) the wheeling charge (if any) paid or to be paid by the Wheeling Utility to have delivered to the Soldotna Substation the Bradley Lake Energy that Chugach purchases from that Wheeling Util- ity. (ii) For purposes of Paragraph 1(a)(i) above, the average cost of Bradley Lake Energy shall be equal to (A) Annual Project Costs (as defined in the Power Sales Agree- ment) as then adopted or officially estimated by the Pro- ject Management Committee for the Fiscal Year (as also so defined) in which the Section 6 purchase occurs, divided by (B) the expected kilowatthour output of the Project in that Fiscal Year as determined by the Project Management Commit- tee. (b) Rate computation under Condition #1. The applicable Disposal Rate under Condition #1 shall be equal to 95 percent of the Decremental Cost to Chugach of the Displaceable Energy from the particular Chugach Displaceable Kenai Resource(s) whose output is reduced by virtue of the pur- chase. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX B -- Page l 198711/109 2. Rates Under Condition #2. (a) Determining whether Condition #2 exists. (i) "Condition #2" refers to the circumstance in which, at the time Chugach purchases Bradley Lake Energy of a Wheeling Utility under Section 6, the Decremental Cost to Chugach of Displaceable Energy from Chugach's Displaceable Kenai Resources exceeds the sum of (A) the average cost of Bradley Lake Energy, and (B) the wheeling charge (if any) paid or to be paid by the Wheeling Utility to have deliv- ered to the Soldotna Substation the Bradley Lake Energy that Chugach purchases from that Wheeling Utility. (ads) For purposes of Paragraph 2(a)(i) above, the average cost of Bradley Lake Energy shall be determined in the manner described in Paragraph 1(a) (ii) above. (b) Rate computation under Condition #2. The applicable Disposal Rate under Condition #2 shall be equal to the lower of (A) ninety-five percent (95%) of the Dec- remental Cost to Chugach of the Displaceable Energy from the particular Chugach Displaceable Kenai Resource(s) whose output is reduced by virtue of the purchase, or (B) an amount determ- ined by the following formula: B+W+OD 2 R = Where: R = The applicable Disposal Rate under Condition #2 (unless such rate is greater than ninety- five percent (95%) of the Decrementai Cost to Chugach of the Displaceable Energy from the particular Chugach Displaceable Kenai Resource(s) whose output is reduced by vir- tue of the purchase) ; B = The average cost of Bradley Lake Energy, determined in the manner described in Para- graph 1(a) (ii) above; Ww = The wheeling charge (if any) paid or to be paid by the Wheeling Utility to have deliv- ered to the Soldotna Substation the Bradley Lake Energy that Chugach purchases from that Wheeling Utility; and: D = The Decremental Cost to Chugach of the Dis- placeable Energy from the particular Chugach SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX B -- Page 2 198711/109 Displaceable Kenai Resource(s) whose output is reduced by virtue of the purchase. 3. Price Paid When Less Expensive Energy Is Available. Notwithstanding any other provision of this Appendix, if Chugach purchases Bradley Lake Energy from a Wheeling Utility pursuant to the last sentence of Section 6(c)(i) of this Agree- ment, then the price that Chugach pays the Wheeling Utility for such Energy shall be the price at which such Energy was offered by the Wheeling Utility pursuant to the third sentence of Sec- tion 6(c)(i), rather than a rate determined in accordance with the foregoing provisions of this Appendix. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX B -- Page 3 198711/110 APPENDIX C Computation Of Rates For Assured Delivery Wheeling 1. Rate Formula. Rates for Assured Delivery wheeling services provided under Section 8(g) of this Agreement shail be computed in accordance with the following formula: R = (1.15 x B) + P R = The rate to be paid by the Wheeling Utility for each kilowatthour of Bradley Lake Energy delivered to Chugach at the Soldotna Substa- tion for wheeling on an Assured Delivery basis; B = The basic wheeling rate computed in accord- ance with Provision 1 of Appendix A-- (1) adjusted through use of the ap- plicable phase-in factor under Provision 2 of Appendix A, if the Assured Delivery wheeling services are to be performed in Years 1 through 15 as described in that Appendix; or (2) unadjusted by any phase-in factor or constant, if the Assured Deliv- ery wheeling services are to be performed in any year after Year 15 as described in Provision 2 of Appendix A; and: Lae] i] The Chugach outage premium (if applicable) computed in accordance with this Appendix Cc. 2. The Chugach Outage Premium. (a) When the premium applies. The Chugach outage premium ("P" in the foregoing formula) shall apply only if the following conditions are met: SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX C -- Page 1 198711/110 (i) During the period in which Chugach is to perform an Assured Delivery wheeling schedule, Chugach experiences a forced generation or transmission outage that prevents Chugach from using in the service of its own system loads some or all of the electric power otherwise capable of be- ing produced by the generating units Chugach had planned to so use during such period; , (ii) Chugach must operate back-up generation (or pur- chase power) because of the forced outage; (iii) But for the Assured Delivery wheeling schedule, Chugach could have operated other back-up generation to meet its own system loads, and such other generation has a lower Incremental Cost than the Incremental Cost of the generation that Chugach in fact operates (or the purchase price of the power Chugach in fact buys); and (iv) In response to notification from Chugach of the foregoing facts, the Wheeling Utility chooses not to cancel or suspend the Assured Delivery schedule. (b) Computation of the premium. The premium shall equal the difference between (i) the In- cremental Cost of the back-up generation Chugach operates (or the power Chugach purchases) in order to continue serving its system loads during the outage, and (ii) the Incremental Cost of the less costly back-up generation that Chugach could otherwise have operated for the same purpose, but for the Assured Delivery wheeling schedule. (c) Energy to which the premium applies. The premium shall apply only to that portion of the Assured Delivery period after the hour in which Chugach provides the notification described in Paragraph 2(a)(iv) above, and only to the extent, at the request of the Wheeling Utility involved, the Assured Delivery schedule continues to be performed despite that notification. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX C -- Page 2 198711/111 APPENDIX D Rights And Obligations With Respect To Certain Transmission Facility Upgrades Under Section 9(a) as Applicability Of The Provisions Of This Appendix The provisions of this Appendix D shall apply with respect to the additional transmission capacity created by an upgrade (or upgrades) of the Chugach transmission facilities used to perform this Agreement if and to the extent that, pursuant to Section 9(a) of this Agreement, Chugach upgrades such facilities at the request and expense of one or more Wheeling Utilities. All references in this Appendix to "upgrades" shall mean up- grades undertaken pursuant to Section 9(a). 2s Rights To Firm Capacity. To the extent that any Wheeling Utilities request and agree to bear the expense cf an upgrade, such Utilities shall be en- titled, upon Chugach's completion of that upgrade, to enjoy the additional transmission capacity created by the upgrade on a firm basis (subject to Forced Outage) until the effective date of a Notice of Withdrawal issued by Chugach pursuant to Para- graph 3 of this Appendix. 3s Notices Of Withdrawal. (a) Upon requisite advance notice as specified in Para- graph 3(b), Chugach may withdraw from the Wheeling Utilities for bona fide operational or system planning needs of its own all or any portion of the transmission capacity to which the Wheeling Utilities become entitled under Paragraph 2. (b) Withdrawal of transmission capacity under Paragraph 3(a) shall be effected by a written Notice of Withdrawal from Chugach to the Wheeling Utilities. Such Notice shall become effective upon the seventh (7th) anniversary of its issuance, but no such Notice shall be issued with respect to the addition- al transmission capacity created by any particular upgrade until the eighth (8th) anniversary of Chugach's completion of that upgrade. 4. Payment Obligations. (a) The Wheeling Utilities at whose request Chugach under- takes the upgrade shall either (i) reimburse Chugach for the capital and installation costs of that upgrade at agreed inter- vals while the installation of the upgrade is in progress, or (ii) repay Chugach in accordance with a reasonable amortization schedule (taking into account the terms of Chugach's financing SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX D -- Page l wgs7A 7A LT for the upgrade, if Chugach has borrowed funds for this purpose) agreed to by Chugach and the Wheeling Utilities. (b) During the period after completion of an upgrade and prior to the effective date of any Notice of Withdrawal, for all Bradley Lake Energy (and Soldotna No. 1 energy purchased from AEG&T) transmitted over the unwithdrawn transmission capacity to which the Wheeling Utilities are entitled, the Wheeling Utili- ties shall pay Chugach (in addition to any amounts payable under Paragraph 4(a)) a wheeling rate to be negotiated and agreed to by and among Chugach and such Wheeling Utilities prior to commencement of work to perform the upgrade, such rate to be subject to such approvals as may be required at the time. (Cc) For any Bradley Lake Energy (and Soldotna No. 1 energy purchased from AEG&T) delivered to the Wheeling Utilities in excess of the amount deliverable over the transmission capacity to which such Utilities are entitled under Paragraph 2, the Wheeling Utilities shall pay Chugach the otherwise applicable wheeling rate computed in accordance with Appendix A. (ad) To the extent that (i) the Wheeling Utilities use the transmission capacity to which they are entitled under Paragraph 2 for the transmission of energy other than Bradley Lake Energy (and Soldotna No. 1 energy purchased from AEG&T), and (ii) such energy is transmitted over all or any segment of Chugach's transmission system other than the segment whose capacity has been increased by the upgrade, then the Wheeling Utilities shall pay Chugach for wheeling services, although the Parties recog- nize that the wheeling rate applicable to such energy may not be the same as the wheeling rate applicable to Bradley Lake Energy (and Soldotna No. 1 energy purchased from AEG&T) under this Ag- reement. (e) If, during the useful life of any upgrade, a Notice of Withdrawal becomes effective with respect to additional trans- mission capacity created by that upgrade, then Chugach shall pay to the Wheeling Utilities an equitable amount, such amount to be calculated in a manner agreed upon by and among Chugach and «he Wheeling Utilities prior to the commencement of work to perform the upgrade. Any dispute over the amount to be paid by Chugach under this Paragraph 4(f) shall be resolved in accordance with the dispute resolution procedures adopted pursuant to Section 10(b) (iii) of this Agreement. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX D -- Page 2 198711/112 APPENDIX E Opinions Of Counsel Written opinions of counsel for each of the Parties shall address the following two questions (among other matters counsel may wish to include in such final opinion): (G2) Whether, in counsel's independent professional opinion, the Party on whose behalf the opinion is offered has the legal power to bind itself to the provisions of this Agreement and to bind itself to perform all obliga- tions set forth in this Agreement for the entire term of this Agreement; and (b) Whether, in counsel's independent professional opinion, the Party on whose behalf the opinion is offered has taken all actions legally required to permit that Party to execute this Agreement in a lawful manner and be bound thereby, with the result that such Party's execution of this Agreement will be valid, binding, and enforceable. SERVICES AGREEMENT FOR BRADLEY LAKE ENERGY APPENDIX E -- Page 1 Counterpart | of 15 BRADLEY LAKE HYDROELECTRIC PROJECT AMENDMENT TO AGREEMENT FOR SALE OF TRANSMISSION CAPABILITY by and among The HOMER ELECTRIC ASSOCIATION, INC. and The CHUGACH ELECTRIC ASSOCIATION, INC. The GOLDEN VALLEY ELECTRIC ASSOCIATION, INC. The MUNICIPALITY OF ANCHORAGE d/b/a/ MUNICIPAL LIGHT & POWER The ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE, INC. AMENDMENT TO AGREEMENT FOR SALE OF TRANSMISSION CAPABILITY THIS AGREEMENT is entered into by and among HOMER ELECTRIC ASSOCIATION, INC, ("HEA"), ALASKA ELECTRIC GENERATION AND TRANS- MISSION COOPERATIVE, INC. (AEG&T), CHUGACH ELECTRIC ASSOCIATION, INC. ("Chugach"), GOLDEN VALLEY ELECTRIC ASSOCIATION, INC. ("GVEA"), and the MUNICIPALITY OF ANCHORAGE d/b/a MUNICIPAL LIGHT AND POWER ("ML&P"), each an electric cooperative or a municipality duly organized and with its principal offices located in the State of Alaska. WITNESSETH: WHEREAS, each Party hereto is an electric utility or operates an electric utility; and WHEREAS, each Party has determined that its purchase of elec- tric power from the Bradley Lake Hydroelectric Project pursuant to a Power Sales Agreement among the Alaska Power Authority and the Parties and certain other utilities is prudent under the circum- stances, and that over the expected useful life of the Project such power is likely to produce net economic benefits for the electric ratepayers served by that Party; and WHEREAS, the Parties have heretofore executed a Power Sales Agreement under which they will purchase power produced by the Project from and after the Date of Commercial Operation (as de- fined in the Power Sales Agreement); and WHEREAS, the delivery of Bradley Lake energy and power from the Project to the Parties requires use of electric transmission facilities; and WHEREAS, HEA intends to construct, and is willing to commit to construct, between the Bradley Junction and the Soldotna Sub- station, a distance of approximately 46.8 miles, a 556 MCM ACSR, 115 kV transmission line, at an approximate cost of $14.1 million ("the Soldotna Segment"); and WHEREAS, HEA intends to construct, and is willing to acceler- ate the construction between the Bradley Junction and the Fritz Creek Substation, a distance of approximately 12.9 miles, of a 556 MCM ACSR, 115 kV transmission line, ("the Fritz Creek Segment"); and WHEREAS, construction of the Fritz Creek Segment in conjunc- tion with the Soldotna Segment will improve the reliability of power deliveries from the Project and increase the amount of capa- AMENDMENT TO TRANSMISSION AGREEMENT Page 1 city and energy which can be delivered by the Project to the Pur- chasers of Project power; WHEREAS, the Parties have agreed to support the inclusion of payment to HEA from Project funds to accelerate HEA's completion of the Fritz Creek Segment; WHEREAS, the Parties, by an agreement dated December 8, 1987, (the "1987 Agreement") agreed to the sale and purchase of a por- tion of the transmission capability of the Soldotna Segment to assist the Purchasers in the delivery of power and energy, and by this Agreement have agreed to amend the 1987 Agreement; and NOW THEREFORE, IN CONSIDERATION of the mutual covenants set forth herein, the Parties agree that the 1987 Agreement shall be amended to read in its entirety as follows: SECTION 1. PARTIES The Parties to this Agreement are HOMER ELECTRIC ASSOCIATION, INC, ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE, INC., CHUGACH ELECTRIC ASSOCIATION, INC., GOLDEN VALLEY ELECTRIC ASSOCIATION, INC., and the MUNICIPALITY OF ANCHORAGE d/b/a MUNICI- PAL LIGHT AND POWER. SECTION 2. CONSTRUCTION OF TRANSMISSION LINE (a) Construction schedule. HEA shall construct the Trans- mission Line in accordance with the schedule set forth in Attach- ment D, and place it into service on or before 90 days prior to the scheduled Date of Commercial Operation of the Project as de- fined in the Power Sales Agreement. (b) Capacity of Soldotna Segment. HEA shall take such meas- ures aS appropriate to provide voltage support and maintain steady state stability of the Soldotna Segment (including the installa- tion of capacitors or the operation of generation) to the extent economically feasible, so that the ultimate operational capacity of the Soldotna Segment is not less than 135 MW. HEA shall con- sult with the Purchasers prior to the implementation of any such measures and allow the Purchasers to review and provide comments regarding such measures. (c) Failure to provide voltage support. Notwithstanding the foregoing, HEA may elect not to provide the voltage support re- quired by Section 2(b), or it may elect to provide voltage sup- port, but to a lesser degree or at a later date, but unless and until HEA does provide such support, the right of HEA to use the Soldotna Segment shall be subordinate to the right of any Purchas-— er to use the Soldotna Segment to wheel that Purchaser's Bradley AMENDMENT TO TRANSMISSION AGREEMENT Page 2 Lake energy, to the extent of the Purchaser's share of the capa- bility of the Soldotna Segment. Any failure of HEA to provide voltage support sufficient to increase the capacity of the Soldot- na Segment to the amount required by Section 2(b) shall not reduce a Purchaser's obligation to pay for its share of the cost of pro- viding any lesser amount of voltage support. SECTION 3. SALE OF TRANSMISSION CAPABILITY (a) Obligation to sell. (i) On the Date of Commercial Operation, HEA shall sell and each ‘Purchaser agrees to purchase a share of the capability of the Soldotna Segment in an amount (stated in megawatts) equal to that Purchaser's Percentage Share (stated in megawatts) of the Project. (ii) Any payment made by a Prepaying Purchaser, along with other valuable consideration, shall be deemed a purchase of rights to a share of the capability of the Soldotna Segment, com- mencing upon the Date of Commercial Operation and continuing throughout the term of this Agreement. In the event that the Date of Commercial Operation does not occur before the Termination Date or before January 1, 1996, whichever is earlier, then, at the election of that Prepaying Purchaser HEA shall repay any and all amounts of Construction Cost so prepaid to it by the Prepaying Purchaser. Gis) For the purposes of this Agreement, Chugach's share of the capability of the Soldotna Segment shall be equal to the sum of the combined Percentage Shares of Chugach, AEG&T as the all requirements power supplier of Matanuska Electric Association, Inc., and the City of Seward (stated in megawatts). (b) Operation; line losses. HEA shall operate the Purchas- er's Soldotna Segment capability as if it were part of HEA's sys- tem and make the Purchaser's Soldotna Segment transmission capa- bility available for the use of the Purchaser to deliver energy and power in the manner directed by the Purchaser. HEA shall be compensated for line losses, if any, resulting from power of the Purchasers flowing over the Soldotna Segment. The Project Manage- ment Committee will determine the amount of line losses and the appropriate amounts and manner of compensation. (c) Use of capability. Nothing in this Agreement is in- tended to limit or restrict the use of the Soldotna Segment trans- mission capability by the Purchasers for transmitting power in addition to Bradley Lake Power. AMENDMENT TO TRANSMISSION AGREEMENT Page 3 SECTION 4. PAYMENT FOR SOLDOTNA SEGMENT CAPABILITY For Soldotna Segment transmission capability purchased pur- suant to this Agreement, each Purchaser shall pay its share of the Construction Cost and operation and maintenance expenses as fur- ther set forth herein. (a) Construction Cost. A Municipal Purchaser shall prepay its share of the Construction Cost pursuant to Section 4(a)(i). Within one year of the Effective Date, each Cooperative Purchaser shall elect_in writing whether to prepay its share of the Con- struction Cost pursuant to Section 4(a)(i) or to make quarterly payments. pursuant to Section 4(a)(ii). A Cooperative Purchaser failing to make such an election shall be deemed to have elected to prepay pursuant to Section 4(a)(i). Each Purchaser shall thereafter pay its share of the Construction Cost, in accordance with its election, pursuant to the schedule described in Section 4(d). (i) A Cooperative Purchaser electing to prepay its share of the Construction Cost and each Municipal Purchaser shall pay a fixed portion of the Construction Cost as determined by the formula set forth in Attachment A. (ii) A Cooperative Purchaser electing to pay its share of the Construction Cost on a quarterly basis shall pay in accor- dance with the formula set forth in Attachment B. (b) O & M expense. In addition to paying its share of the Construction Cost each Purchaser shall reimburse HEA in each month for a portion of HEA's actual expenses associated with operating, maintaining and repairing the Soldotna Segment (O & M expense) in accordance with the formula set forth in Attachment C. Such ex- penses shall include but shall not be limited to all expenses re- lated to providing necessary voltage support, except expenses re- lated to capital improvements, for the Soldotna Segment installed at or between Bradley Junction and Soldotna Substation, and all taxes, if any, for which HEA may become liable as a result of the sale of transmission capability. Prior to the beginning of each year HEA shall submit to the Project Management Committee an an- nual schedule and budget of its proposed operation, maintenance and repair expenses. (c) Initial carrying capacity. The carrying capacity of the Soldotna Segment for the purposes of making the computations re- quired by Attachments A, B and C, subject to the provisions of Section 9, is 135 megawatts. (d) Schedule of payments. (i) A Cooperative Purchaser electing to pay its share of the Construction Cost through prepayments shall make such pay- AMENDMENT TO TRANSMISSION AGREEMENT Page 4 ment within 30 days of demand therefor by HEA, but not before 30 days following the Date of Commercial Operation. (ii) A Cooperative Purchaser electing to pay its share of the Construction Cost through quarterly payments shall pay the first quarterly payment on or before 30 days after demand therefor by HEA, but not before 120 days following the Date of Commercial Operation. (iii) A Municipal Purchaser shall pay, on a quarterly basis, its share of the Construction Cost in accordance with the procedures set forth in Attachment E, provided that no demand for payment shall be made until after the sums demanded have actually been paid or obligated to be paid within the next calendar quarter by HEA in connection with the construction of the Soldotna Seg- ment. (e) Character of payments. The amounts payable under this Agreement are valid and binding obligations of each Purchaser, payable only from the gross revenues of said Purchaser's System and not payable from any taxes. (f£) Tax consequences. In the event the sale of transmission capability or the payment arrangements contemplated by this Agree- ment result in any Party being liable for the payment of Federal income tax, the Parties shall work together to revise the Agree- ment to reduce or eliminate such liability, provided, that any such revision shall not reduce the amount of transmission capabil- ity to which a Party is entitled hereunder, nor shall HEA be obli- gated to convey any greater interest in the Soldotna Segment than as is herein provided. (g) Purchaser's obligation. Except as provided in Section 9, each Purchaser, after the date of Commercial Operation, shall make payments in the amounts and at the times required by this Agreement notwithstanding a suspension or reduction in the amount of transmission capability of the Soldotna Segment. SECTION 5. DUTY TO OPERATE AND MAINTAIN So long as HEA owns the Transmission Line, HEA will in good faith and at all times operate, maintain and repair the electrical facilities used to perform the services provided hereunder in ac-— cordance with Prudent Utility Practice in a manner consistent with HEA's obligations under this Agreement. SECTION 6. OUTAGES (a) Forced and scheduled outages. The Transmission Line is subject to Forced Outage and to scheduled outages for maintenance. AMENDMENT TO TRANSMISSION AGREEMENT Page 5 (b) HEA's system. G> During any period when there is an outage on HEA's other transmission facilities, the capacity of the Soldotna Seg- ment shall be available to HEA on a priority basis to provide for transmission of power to HEA‘s retail system loads. Each Purchas— er's share of the capability of the Soldotna Segment shall be rat- ably reduced (based on that Purchaser's Percentage Share) during such period to the extent necessary to permit HEA to use Soldotna Segment capacity as required by this Section 6(b). HEA shall use its best efforts <a> to keep such priority use of the Soldotna Segment to a minimum and to restore the operation of its other transmission facilities as soon as practicable, and <b> to main- tain at all times adequate transmission capability on its system to meet its obligations to transmit the shares of the Purchasers under this Agreement as well as its own system needs in order to avoid the necessity of exercising its priority rights to Soldotna Segment capacity. (ii) During any period when there is an outage on the Soldotna Segment, HEA agrees to make available to the Parties at no additional cost any unused transmission capability [defined as capacity in excess of HEA's own transmission needs including Brad- ley Lake capacity delivered pursuant to Section 10(b)] on its oth- er transmission facilities to transmit their Percentage Shares or such lesser amount of power as may be accommodated, on a pro rata basis. (iii) During any period when there is an outage on the Soldotna Segment or HEA's other transmission facilities, HEA shall use its best efforts to operate its system in a manner which pro- vides to the Purchasers transmission capability adequate to trans- mit their respective Percentage Shares. During any period when, as a result of the exercise by HEA of its priority right pursuant to Section 6(b)(i), the Soldotna Segment is not available to transmit all or a portion of a Purchaser's Percentage Share of Bradley Lake Power, and HEA <a> is not able to provide such trans-— mission capacity from other HEA resources, and <b> has not elected to displace such share from other HEA resources, AEG&T shall, at the option of the Purchaser with respect to that Purchaser's Brad- ley Lake Power either <a> purchase such power or <b> agree to ex- change such power for power from AEG&T resources to be delivered at a later period. Unless otherwise agreed between AEG&T and the Purchaser, the rate applicable to any such power purchase by AEG&T will be the higher of <a> the estimated average cost per kWh for electric power for Bradley Lake computed from the costs and expen- ses budgeted for the then current year, or <b> the actual incre- mental cost per kWh to the Purchaser of replacing the portion of such Purchaser's Bradley Lake Power not available due to HEA's priority use of the Soldotna Segment. HEA shall perform the du- ties of AEG&T as set forth in this Section 6(b)(iii) to the extent AMENDMENT TO TRANSMISSION AGREEMENT Page 6 that AEG&T for any reason fails to do so. If and to the extent that AEG&T is unable to find a purchaser for the power taken by AEG&T pursuant to the terms hereof, HEA shall purchase such power from AEG&T in accordance with the provisions of the Wholesale Pow- er Contract dated April 8, 1986 between AEG&T and HEA. (iv) All rights given to Chugach as a Purchaser under this Section 6(b) are in addition to, and not in lieu of, all rights granted under Section 10(b). «c) Scheduling. HEA shall schedule outages for maintenance or upgrading of the Soldotna Segment in consultation with the Bradley Lake Project Management Committee. SECTION 7. UPGRADING OF LINE (a) Increased share. If after the initial construction of the Soldotna Segment, additional improvements constructed by HEA result in an increase of the capacity of the Soldotna Segment above the capacity stated in Section 2(b) no Purchaser will be entitled to any share of the increased capacity of the Soldotna Segment, except such Purchasers as were offered and accepted an opportunity to share in the costs of the upgrade. (b) Reimbursement of costs. A Purchaser may be equitably entitled to some financial compensation in the event the Soldotna Segment is upgraded, depending upon the nature of the upgrade and the arrangements entered into for the purpose of financing and allocating the capacity associated with the upgrade. (c) Treatment of costs of voltage support. Any capital cost incurred by HEA (determined in accordance with the REA system of accounts) of adding or enhancing voltage support for the Soldotna Segment included within the definition of Construction Cost shall not be considered to be an upgrade; rather the cost shall be treated as though it were a cost of constructing the Soldotna Seg- ment and shall be paid by the Purchasers in accordance with the provisions of Section 4(a). Purchasers that pay their share of the Construction Cost pursuant to Section 4(a)(i) shall pay their share of the capital cost of voltage support on a schedule to be mutually agreed between HEA and said Purchasers. Any other costs of adding or enhancing voltage support for the Soldotna Segment shall be treated as operating costs and shall be paid by the Pur- chasers in accordance with Section 4(b). (d) Shared costs. The cost of making any capital improve- ments provided for in this agreement which result in benefits to both the HEA system and to the Soldotna Segment will be allocated on an equitable basis. AMENDMENT TO TRANSMISSION AGREEMENT Page 7 SECTION 8. INTERVENING TAPS ON SOLDOTNA SEGMENT HEA may, at some future time, desire to place substations or taps ("facilities") along the Transmission Line in order to pro- vide for the specific needs of HEA's system. All capital and operating costs associated with such facilities, including voltage support equipment that is required as a result of the installation of such facilities, will be the responsibility of HEA. HEA agrees to allow the other Parties to review its plans for such facili- ties, and the subsequent design of such facilities, and absent compensation from HEA to the Purchasers, HEA shall propose no changes to the Transmission Line that will significantly degrade the Soldotna Segment's reliability or result in an increase in losses to the other Parties. SECTION 9. MAJOR REPAIRS AND DOWNRATING (a) Major repairs. If after the Date of Commercial Opera- tion HEA determines that the cost of repairs which are necessary to restore the line to its carrying capacity as of the Date of Commercial Operation as subsequently enhanced by the construction of any capital improvements, will exceed the equivalent sum of $1,800,000, based upon the value of the US dollar on November 1, 1987, HEA shall submit a detailed plan and estimate of such re- pairs to the Purchasers, including alternative means of financing such repairs. The Purchasers shall review and comment on such plans and develop a joint proposal, in consultation with HEA, for such repairs and financing. If the Purchasers and HEA cannot agree upon a plan to finance and accomplish the necessary work, HEA, after notice to the Purchasers, may proceed with such repairs and sball finance such work over a period representative of the remaining useful life of the Soldotna Segment (if it is prudent under the circumstances to finance the work over such period; if not, then over such longer or shorter period as may be prudent under the circumstances) and charge such cost as an operating ex- pense, provided, that if the Purchasers, within 30 days after re- ceipt of the notice from HEA, unanimously agree to terminate this Agreement, HEA shall not proceed with such repairs under this Agreement. Such termination shall take effect on the date HEA receives notice from each of the Purchasers, and the obligations of the parties under this Agreement other than the obligation to pay Construction Cost under Section 4(a)(ii) shall terminate as of such date. (b) Downrating. If, after all measures provided in Section 2(b) have been taken, HEA reasonably determines that the carrying capacity of the Soldotna Segment is less than 135 MW, Attachments A, B and C shall be amended so that the value of 135 MW is re- placed by the value of the actual carrying capacity of the Soldot- na Segment (stated in MW), as reasonably determined by HEA. Such amendment shall be effective on the date HEA issues a written dec- AMENDMENT TO TRANSMISSION AGREEMENT Page 8 laration setting forth the actual carrying capacity of the Soldotna Segment, and the Purchaser's payment obligations shall increase as of such date in accordance with such amendment, pro- vided, that any such amendment shall operate prospectively, i.e., HEA shall not be entitled to be repaid for any sums which it otherwise would not have paid, if the amendment had been effective on the Effective Date or any time prior to the effective date of the amendment. With respect to any Purchaser who has prepaid un- der the provisions of Section 4(a)(i), such Purchaser shall pay an amount to HEA under Attachment A determined by calculating the additional amount that would have been owed to HEA if the downrat- ing were in effect on the Effective Date, and then determining what amount of that additional amount would be outstanding on the date of the amendment, if such additional amounts were paid in equal quarterly installments in accordance with the terms of Sec- tion 4(a)(ii). Such portion shall be payable by the Purchaser to HEA under whatever terms may be agreed upon between the Purchaser and HEA (e.g., either yearly, monthly, or in full). In the event Attachments A, B and C are amended pursuant to the terms of this Section 9(b), any Purchaser shall have the right to decrease the amount of its share of the Soldotna Segment's capability by a per- centage not to exceed the percentage decrease in the carrying ca- pacity of the Soldotna Segment. SECTION 10. SPECIAL PROVISIONS AFFECTING CHUGACH (a) Chugach's treatment of the transmission capability for ratemaking purposes. The costs paid by Chugach for its share of the capability of the Soldotna Segment shall not be included in any revenue requirement, nor included for any other purpose, in establishing rates to be paid by AEG&T to Chugach under the Agree- ment for Sale of Electric Power and Energy between HEA, Chugach, and AEG&T, effective May 13, 1986 (the “Tripartite Agreement"). (b) Deliveries to AEG&T. Notwithstanding the provisions of Section 6, during any outage on the Soldotna Segment but only to the extent of such outage, Chugach shall be entitled to use Brad- ley Lake Power in place of other power, subject to the physical constraints of the HEA system, to satisfy all or any part of Chugach's power sales obligations to AEG&T for the benefit of HEA, and to deliver the power from Bradley Junction via the Fritz Creek substation, but such delivery shall not otherwise relieve Chugach of its obligations to provide HEA with power pursuant to the terms of the Tripartite Agreement. (c) Conveyance to AEG&T. If HEA at any time transfers to AEG&T the ownership of the Soldotna Segment, Chugach shall also transfer its Soldotna Segment capability to AEG&T under a Project Agreement among AEG&T, HEA, Chugach, and any other entities con- veying shares of the Soldotna Segment to AEG&T, if Chugach is then a Joint Action Member of AEG&T. AMENDMENT TO TRANSMISSION AGREEMENT Page 9 (d) Chugach Percentage Share. Any reference in this Agree- ment to the Percentage Share of a Purchaser or Party, shall mean, with respect to Chugach, the sum of the combined Percentage Shares of Chugach, AEG&T as the all requirements power supplier of Mata- nuska Electric Association, Inc., and the City of Seward. SECTION 11. SPECIAL PROVISION AFFECTING PURCHASERS (a) Obligations of REA and CFC with respect to the Soldotna Segment. REA and CFC, as the secured parties under the HEA Mort- gage, by their approval of this Agreement, agree that any right, title or interest they may have or acquire in the Soldotna Segment shall be subject to the ownership by any Prepaying Purchaser of a share of the capability of said Soldotna Segment purchased in ac- cordance with this Agreement. In the event that REA or CFC exer- cises any right or remedy made available to them under the terms and provisions of the HEA Mortgage with respect to the Soldotna Segment, they shall make any Prepaying Purchaser's share of the capability of the Soldotna Segment available for the use of said Prepaying Purchaser in connection with the delivery of energy and power, and shall assume, honor and perform each and every duty that HEA owes to said Prepaying Purchaser under the terms and pro- visions of this Agreement with respect to the Soldotna Segment. By their approval of this Agreement, REA and CFC further agree to cause this Section 11l(a) to be binding, and this Section 11l(a) shall be binding, upon any respective successors or assigns of REA's and CFC's right, title, or interest in the Soldotna Segment. (b) Obligations of the Parties with respect to the Soldotna Segment. If any Party becomes an Acquiring Party, it shall make each Purchaser's share of the capability of the Soldotna Segment available for the use of said Purchaser to deliver energy and pow- er in the manner directed by said Purchaser, and shall assume, honor and perform each and every duty that HEA owes to the Pur- chasers under the terms and provisions of this Agreement and re- lated or incorporated documents, but only to the extent said Pur- chaser's share of the Soldotna Segment capability is within the control of said Acquiring Party. This provision shall be applic- able to the Parties' successors or assigns, or to any entity that may be formed among or between the Parties, or the Parties and any third party, or may be controlled by or under common control with the Parties. (c) Transfer by HEA. HEA will not sell, lease, delegate, grant, mortgage, assign or otherwise alienate its right, title or interest in the Soldotna Segment or any portion thereof to any Acquiring Party without having obtained a written acknowledgment from the Acquiring Party that (i) said Acquiring Party's right, title and interest in the Soldotna Segment is subject to the ownership by any Prepaying Purchaser of a share of the capability AMENDMENT TO TRANSMISSION AGREEMENT Page 10 of said Soldotna Segment purchased in accordance with this Agree- ment; (ii) in the event the Acquiring Party exercises any right or remedy made available to it with respect to the Soldotna Segment, said Acquiring Party shall make any Prepaying Purchaser's share of the capability of the Soldotna Segment available for the use of said Prepaying Purchaser to deliver energy and power in the manner directed by said Prepaying Purchaser, and shall assume, honor and perform each and every other duty that HEA owes to said Prepaying Purchaser under the terms and provisions of this Agreement with respect to the Soldotna Segment. A Prepaying Purchaser shall be considered to be a third-party beneficiary of any agreement be- tween HEA and an Acquiring Party with respect to the sale, lease, delegation, assignment, or other alienation of the Soldotna Seg- ment or dny portion thereof. (d) Refund of Construction Costs. If, for any reason, the Transmission Line is not completed and placed in service as re- quired by Section 2(a), or if the Date of Commercial Operation does not occur before January 1, 1996, and this Agreement is ter- minated pursuant to the operation of Section 13(a), a Prepaying Purchaser may elect to give HEA written notice requesting a refund of all Construction Cost paid by said Prepaying Purchaser pursuant to Section 4(a)(i). HEA, after receipt of such notice, shall have 120 days to either complete and place the Transmission line in service or refund said Prepaying Purchaser's payments of Construc- tion Cost. HEA's obligation to refund said Construction Cost shall survive termination of this Agreement. SECTION 12. SPECIAL PROVISIONS REGARDING FRITZ CREEK SEGMENT (a) Acceleration Costs. Each of the Parties agrees, as con- sideration for HEA's agreement to accelerate completion and opera-— tion of the Fritz Creek Segment in accordance with the schedule established in Attachment D, that it will be liable for a propor- tionate share of the additional costs incurred by HEA as the re- sult of such acceleration, in an amount equal to the Percentage Share of such Party as specified in Exhibit "D" of the Power Sales Agreement. Subject to subsection (c) the Parties agree that $600,000, to be paid to HEA in approximately equal quarterly in- crements over three years, is the amount of such additional cost to be borne by the purchasers of Bradley Lake Power under the Pow- er Sales Agreement. (b) Capitalization of Costs. Each Party agrees that (1) the cost of acceleration is a cost incurred by the individual Purchas- er pursuant to Section 31(a)(ii) of the Power Sales Agreement which should be capitalized and (2) its representative to the Pro- ject Management Committee (PMC) will vote to capitalize such costs and to support the use of moneys available for Project construc- tion or the issuance of additional bonds in accordance with such Section 31. AMENDMENT TO TRANSMISSION AGREEMENT Page 11 —_ (c) Payment to HEA. The initial payment of $50,000 to HEA shall be due and payable 90 days after the later of (1) the Date of Commercial Operation of the Project or (2) the Date of Commer- cial Operation of the Fritz Creek Segment. In the event the Fritz Creek Segment is placed in commercial operation after the Date of Commercial Operation of the Project, the total amount payable to HEA shall be reduced by an amount determined by multiplying $600,000 by a fraction whose numerator is the number of days be- tween the Date of Commercial Operation of the Project and the Date of Commercial Operation of the Fritz Creek Segment and whose de- nominator is 1095. (d)° Alternate payment. In the event the cost of accelera- tion is not capitalized as provided in subsection (b) the Parties agree that their representative on the PMC will vote to include the payments due HEA under subsection (c) above as a Project oper- ation and maintenance expense, to be paid in the same manner as provided in subsection (c). (e) Payment by Purchasers. Each Purchaser shall pay a pro- portionate share of the amounts due to HEA under subsection (c) equal to that Purchaser's Percentage Share, as specified in Exhib- it D of the Power Sales Agreement to the extent that such payments are not made as provided in subsection (c) or (d). SECTION 13. TERM OF AGREEMENT; PRIOR AGREEMENTS; AMENDMENT (a) Term. This Agreement shall become effective upon the Effective Date and shall continue in force until the Termination Date, subject only to the limitations set forth in Section 13(b), provided, that if the Date of Commercial Operation does not occur before January 1, 1996, then this Agreement shall terminate on January 1, 1996. (b) Amendments. This Agreement may be amended, extended, or terminated at any time by the written consent of all Parties, but no such amendment, extension, or termination shall be effec- tive unless approved by the federal and state agencies (if any) whose approval is required at the time. SECTION 14. DISPUTE RESOLUTION. The Parties agree that any procedures for dispute resolution under this Agreement be entrusted to good faith negotiations and adoption by the Project Management Committee, with HEA's affirma- tive vote required for adoption of such procedures. HEA shall not withhold its affirmative vote unreasonably, but HEA's unreasona- bleness in this regard may be challenged and determined only in AMENDMENT TO TRANSMISSION AGREEMENT Page 12 an action to enforce this Agreement and shall not be determined by vote or other action of the Project Management Committee. SECTION 15. APPROVALS. All Parties agree to seek and support as expeditiously as possible and in good faith, all necessary approvals of this Agree- ment and its terms. Each Party agrees that this Agreement and each of its provisions is lawful, valid, binding and enforceable in accordance with its terms. This Agreement and any amendments thereto are subject to the approval:of the Administrator of REA, as long as such approval is required in the terms of any REA party's mortgage agreement with REA. SECTION 16. MISCELLANEOUS PROVISIONS. (a) Waiver. Any waiver at any time by any Party of its rights with respect to any default of the other Party, or with respect to any other matter arising in connection with this Agree- ment, shall not be considered a waiver with respect to any prior or subsequent default, right or matter. (b) Successors and assigns. (i) Nonassignability. This Agreement and all of the terms and provisions hereof shall be binding upon and inure to the benefit of the respective successors and assignees of the Parties; provided, that no assignment or other transfer of this Agreement, or any interest hereunder (other than to an entity which is a party to the Power Sales Agreement) shall be effective without the prior written consent of all of the other Parties (which consent shall not be unreasonably withheld), and any successor or assignee which is not a party to the Power Sales Agreement must, in the commercially reasonable opinion of the other Parties, be finan- cially capable of assuming the obligations of the Party from which the successor or assignee has accepted the assignment or other transfer. (ii) Assignment to REA. Notwithstanding the foregoing provisions of this subsection (b) and subject to Section 11, an Assignor may assign this Agreement, together with all of its rights and obligations thereunder, <a> to or in trust for REA for the purpose of securing obligations for borrowed money, or <b> pursuant to the exercise by REA of any rights, powers or privi- leges provided for by the mortgages or other security instruments of Assignor for borrowed money; provided, that if REA exercises any of the rights, powers or privileges of said mortgages or other security instruments of Assignor with respect to this Agreement, then and only then shall REA assume the obligations to be per- AMENDMENT TO TRANSMISSION AGREEMENT Page 13 ww formed under this Agreement by Assignor, as provided for in this Agreement; provided, further, that in the event REA exercises any of its rights, powers or privileges under said mortgages or other security agreements of Assignor with respect to this Agreement, REA may thereafter assign this Agreement, together with all the rights and obligations thereunder, to any entity authorized by law and able to perform the obligations and duties of Assignor under this Agreement, which entity shall assume all the rights and obli- gations of Assignor under this Agreement, and such assignment and assumption shall release REA from any further liability, obliga- tions or duties under this Agreement and provided, further, that no such assignment shall in any way relieve Assignor of any obli- gations hereunder. (iii) Assignments to secured lenders other than REA. A Party may assign this Agreement, together with all of its rights and obligations thereunder, <a> to or in trust for any secured lenders of such Party, for the purpose of securing obligations for borrowed money, or <b> pursuant to the exercise by any such se- cured lender of any of the rights, powers or privileges provided for by the mortgages or other security instruments of such Party for borrowed money; provided, that no such assignment shall in any way relieve such Party of any obligations hereunder. No such se- cured lender shall, as a result of such assignment or the subse- quent exercise of its rights with respect to this Agreement under any mortgage, deed of trust or other security instrument, be con- strued to have assumed, or otherwise to have become personally liable for, the assignor's obligations hereunder, but such secured lender's ability to exercise the rights of its assignor hereunder shall be subject to performance of the assignor's corresponding obligations under this Agreement. In the event any such secured lender exercises any of its rights, powers or privileges with re- spect to this Agreement under said mortgages or other security agreements, such secured lender may thereafter assign this Agree- ment, together with all the rights and obligations thereunder, to any entity authorized by law and able to perform the obligations under this Agreement, which entity shall succeed to all the rights and assume all the obligations of the borrower-assignor under this Agreement. (iv) Notice of secured lenders' exercise of rights. Prior to the exercise by any secured lender of any rights or remedies under any mortgages or security agreements with respect to this Agreement, such secured lender shall give the Parties rea- sonable notice that it intends to exercise such rights or reme- dies. (c) Performance pending resolution of disputes. Pending resolution of any dispute, each Party shall continue to perform its obligations under this Agreement, including but not limited to the obligation to make the payments required by this Agreement. All Parties shall be entitled to seek immediate judicial enforce- AMENDMENT TO TRANSMISSION AGREEMENT Page 14 (a) Acquiring Party. Any entity other than REA or CFC that acquires any right, title or interest in the Soldotna Segment, the Soldotna Segment corridor, or any portion thereof, or comes into control or possession thereof by any means whatsoever, including, but not limited to, purchase, lease, assignment, exchange, mort-— gage, foreclosure, or liquidation. (b) AEG&T. The Alaska Electric Generation and Transmission Cooperative, Inc. (c) Agreement. This Agreement governing construction of the Transmission Line and sale of Soldotna Segment capability. (d) Alaska Intertie Agreement. Alaska Intertie Agreement dated December 23, 1985 among the Alaska Power Authority, Munici- pality of Anchorage, Alaska, d.b.a. Municipal Light & Power, Chu- gach Electric Association, Inc., City of Fairbanks, Alaska, Munic-— ipal Utilities System, Golden Valley Electric Association, Inc. and Alaska Electric Generation and Transmission Cooperative, Inc. (e) Alaska Power Authority. The Alaska Power Authority, an agency of the State of Alaska, and any successor thereto as owner of the Bradley Lake Hydroelectric Project. (f) Annual Project Costs. Annual Project Costs as defined in Section 8 of the Power Sales Agreement. (g) Assignor. HEA, AEG&T, Chugach, or GVEA. (bh) Authority. See Alaska Power Authority. (i) Bradley Lake Power. Electric capacity, expressed in kilowatts (kW), generated at the Bradley Lake Hydroelectric Pro- ject for a Party in a manner consistent with the Power Sales Agreement and applicable criteria, procedures, and guidelines adopted by the Project Management Committee. As used in this Agreement, Bradley Lake Power does not include capacity produced by generators other than those located at the Bradley Lake Hydro- electric Project, regardless of whether energy or capacity from ‘such other generators is or may be sold to a Party pursuant to provisions of the Power Sales Agreement relating to reserves for the Project. (j) Bradley Lake Hydroelectric Project. The hydroelectric generating project as defined in the Power Sales Agreement. (k) CFC. National Rural Utilities Cooperative Finance Cor- poration. (1) Construction Cost. The sum of the costs, as determined in accordance with generally accepted accounting principles, as- sociated with the construction of the Soldotna Segment and any AMENDMENT TO TRANSMISSION AGREEMENT Page 17 Capital improvements installed by HEA at or between Bradley Junc- tion and Soldotna Substation and required to provide voltage sup- port as provided in Section 2(b), provided that the cost of the construction of the Soldotna Segment shall not exceed the equiva- lent sum of $18 million and the cost of the construction of any such voltage support shall not exceed the equivalent sum of $2 million, based upon the value of the US dollar on November 1, 1987. (m) Construction Loan. The loan transaction between HEA as the borrower and REA and CFC as lenders, approved on September 20, 1984, and designated as Loan "AP6." (n). Cooperative Purchaser. GVEA, Chugach, or Chugach act-— ing with respect to the capability attributable to the Percentage Share of Alaska Electric Generation and Transmission Cooperative, Inc. as the all requirements power supplier of Matanuska Electric Association, Inc. (0) Date of Commercial Operation. The date on which HEA reasonably declares (a) sufficient carrying capacity to be avail- able on the Soldotna Segment to accommodate the Purchasers' Per- centage Shares on a commercial basis and (b) the Fritz Creek Seg- ment to be available to transmit electric energy on a commercial basis. (p) Delivery Point. The Delivery Point located at Bradley Junction, as defined in the Power Sales Agreement. (q) Effective Date. The first day on which both of the fol- lowing conditions have been met: (i) all Parties have executed this Agreement, and (ii) this Agreement has been approved in its entirety by all entities whose approval is necessary. For pur- poses of this provision, the approval of any entity other than a federal or state governmental body shall be considered necessary only if that non-governmental entity is identified in writing by one or more Parties, at the time such Parties execute this Agree- ment, as an entity whose approval is necessary to permit this Agreement to become effective with respect to such Party or Par- ties. @) Force Majeure. Any event, without limitation, the oc- currence of which (i) is beyond the control of HEA, and (ii) makes it impractical or imprudent in terms of safety, efficiency, or reliability to perform as agreed. (s) Forced Outage. Any event, without limitation, beyond the control of and unforeseen by HEA, the occurrence of which in- terferes with the capability of the Soldotna Segment to transmit energy by rendering physically impossible or unsafe the transmis- sion of all or a portion of the electric power that under normal conditions could safely be so transmitted. Any Forced Outage AMENDMENT TO TRANSMISSION AGREEMENT Page 18 shall constitute an event of Force Majeure under this Agreement, but events of Force Majeure are not limited to Forced Outages. (t) Fritz Creek Segment. The transmission line, approxi- mately 13 miles in length, to be constructed by HEA between the Delivery Point at Bradley Junction and the Fritz Creek Substation, being constructed of 556 MCM ACSR conductor at a voltage of 115 kV. (u) Fritz Creek Substation. The Fritz Creek Substation owned and operated by HEA, or any successor facility. (v), HEA Mortgage. The security instruments, as they may be amended or supplemented, providing a lien on HEA's electric util- ity system securing loans made by REA and CFC to HEA. (w) Municipal Purchaser. ML&P or Chugach acting with re- spect to the capability attributable to the Percentage Share of the City of Seward. (x) Party. Any entity listed in Section 1 of this Agree- ment. Cy) Percentage Share. The amount of Project Capacity to which a Purchaser shall be entitled under the terms of the Power Sales Agreement which, prior to the Date of Commercial Operation of the. Project (as determined with reference to the Power Sales Agreement), shall equal the Purchaser's Percentage Share (as de- termined with reference to the Power Sales Agreement) multiplied by 110 MW, and after such date, the Purchaser's actual MW share of the Project, as determined at such date. (z) Power Sales Agreement. The agreement for the sale and purchase of electric power from the Project entered into by and among the Parties, and others. (aa) Prepaying Purchaser. A Purchaser electing to prepay its share of the Construction Cost pursuant to Section 4(a)(i). (bb) Project. See Bradley Lake Hydroelectric Project. (cc) Project Management Committee. The committee composed of the Parties and others and established and invested with authority pursuant to the Power Sales Agreement. (dd) Prudent Utility Practice. Prudent Utility Practice as defined in the Power Sales Agreement. (ee) Purchaser. Every Party except HEA and AEG&T. (ff) Purchaser's System. A Purchaser's electric utility system for the distribution, transmission, and generation of elec- AMENDMENT TO TRANSMISSION AGREEMENT Page 19 trical power and which is owned and operated by the Purchaser. If a Purchaser's electric utility system is combined with other utilities of the Purchaser, then "Purchaser's System" includes only those facilities, activities, and revenues properly allocable to Purchaser's electric utility service. "Purchaser's System" does not include the Project, regardless of whether the Purchaser operates the Project under a separate agreement with the Author- ity. (gg) REA. The Rural Electrification Administration. (bh) Soldotna Segment. The transmission line, approximately 46.8 miles in length, to be constructed by HEA between the Deliv- ery Point at Bradley Junction and the Soldotna Substation at a projected cost of approximately $14.1 million, being constructed of 556 MCM ACSR conductor and having a projected capacity (when enhanced by voltage support) of 135 MW and a voltage of 115 kV. (ii) Soldotna Substation. The Soldotna Substation owned by HEA, or any successor facility. (jj) Termination Date. The earliest of the following dates: (i) The date the Soldotna Segment is no longer used and useful or required for delivery of Bradley Lake Power and each Purchaser has paid the full amount of its share of the Construction Cost; (ii) The date on which the Power Sales Agreement ter- minates as provided at Section 2(c) of the Power Sales Agree- ment; (iii) Such other date as the Parties may mutually agree upon, subject to such approvals as may be necessary at the time of such agreement. (kk) Transmission Line. The transmission line, approximate- ly 59.7 miles in length, to be constructed by HEA between the Fritz Creek Substation and the Soldotna Substation, and composed of the Soldotna Segment and the Fritz Creek Segment. AMENDMENT TO TRANSMISSION AGREEMENT Page 20 the onstruction Cost, as finally determined above, shall not be subject to further adjustment. A prepaying Purchaser's share of subsequent capital costs in- curred for the purpose of providing voltage support shall be com- puted in accordance with the formula set forth in this Attachment A, where "C" is equal to the construction cost of said voltage support. Payments pursuant to this provision shall be made in accordance with a schedule to be mutually agreed between HEA and said Purchaser. ATTACHMENT A ATTACHMENT B Computation of a Purchaser's Share of Quarterly Payment for Con- struction Cost i ro) " a a —U__ Ly 135 MW ~ H " Quarterly payment which the Purchaser shall make to HEA, a * " Same as in Attachment A, and Ly = An amount which if paid quarter-annually would amortize the Construction Cost over a period of 35 years, at an inter- est rate equal to the blended interest rate paid by HEA under the terms of the Construction Loan, plus a TIER component based upon the minimum TIER required by the mortgage securing the Construction Loan. "Ly," shall be adjusted as neces- sary to reflect the capital cost of pro- viding voltage support as set forth in Section 7. *after the first three years, upon the request of either party, the amount of the Purchaser's payment obligation shall be adjust- ed as follows: HEA shall repay to the Purchaser any difference between the actual payments made and the sums the Purchaser oth- erwise would have paid if the Purchaser had been paying pursuant to the terms of Paragraph (ii) above, rather than Paragraph (i) above, and the Purchaser shall repay to HEA the difference be- tween any sums the Purchaser otherwise would have paid if the Purchaser had been paying pursuant to the terms of said Paragraph (ii) rather than Paragraph (i), and the actual payments made; provided, that such adjustment shall be made only once. ATTACHMENT B ATTACHMENT C The Purchaser's Quarterly O&M Payment To HEA Pom * —__ Ue x 0; 135 MW + Ko Where: Pom = Dollars which the Purchaser must reim- burse HEA for O & M expense in each quarter, u* = Same as in Attachment A, Ko = Any increase in the capacity of the Soldotna Segment resulting from upgrades to the original Soldotna Segment, and 0, = Dollar amount of HEA's O & M expense for the Soldotna Segment in the preceding quarter (including the Soldotna Segment's equitable share of any HEA A & G expense properly allocated to HEA transmission in that quarter, and in- cluding all expenses of providing vol- tage support to the Soldotna Segment at or between Bradley Junction and the Sol- dotna Substation during that quarter). *after the first three years, HEA shall repay to the Purchaser any difference between the actual payments made and the sums the Purchaser otherwise would have paid if the Purchaser had been paying pursuant to the terms of Paragraph (ii) above, rather than Paragraph (i) above, and the Purchaser shall repay to HEA the difference between any sums the Purchaser otherwise would have paid if the Purchaser had been paying pursuant to the terms of said Paragraph (ii) rather than Paragraph (i), and the actual payments made. ATTACHMENT C ATTACHMENT D Schedule for Construction of the Transmission Line 1. On or before the first day of the 5th month following the June lst date which next follows the date the Authority gives notice of having awarded the contract for the construction of the Project to the successful bidder, HEA shall have placed orders for the purchase of substantially all of the major construction materials to be used in the construction of the Transmission Line. : 2. On or before the first day of the 11th month following the June lst date which next follows the date the Authority gives notice of having awarded the contract for the construction of the Project to the successful bidder, HEA shall have awarded to a responsible contractor a contract for the construction of the Transmission Line and shall have given the contractor a notice to proceed under the contract. 3. On or before the first day of the 33rd month following the June lst date which next follows the date the Authority gives notice of having awarded the contract for the construction of the Project to the successful bidder, HEA shall have completed and placed into service the Transmission Line; provided that the Transmission Line shall be capable of being placed into service on or before 90 days prior to the scheduled Date of Commercial Operation of the Project as defined in the Power Sales Agreement. ATTACHMENT D ATTACHMENT E Prepayment Procedures A Prepaying Purchaser shall prepay said costs in accordance with the following procedures: 1. Billing Procedure. At the end of each calendar quarter, HEA shall submit to each Prepaying Purchaser a bill setting forth, with respect to such calendar quarter: 1 Ae The total Construction Costs incurred by HEA in said calendar quarter to be prepaid by the Prepaying Purchaser. b. The total Construction Costs incurred by HEA as of the end of said calendar quarter. Ce The amount of the costs in item 1(b) that have been billed to other Prepaying Purchasers, and submitted for payment to REA. d. A certificate of HEA's utility manager that the costs listed in items 1(a) and (b) are actual costs and are re- flected in the general accounting records of HEA and further cer- tifying that the funds requested by prepayment have been expended on Construction Costs. e. A certificate of the project engineer for the Trans- mission Line certifying that the construction of the Transmission line is proceeding on schedule as per Attachment D to this Agree- ment, and that the construction is proceeding within the estab- lished project budget, and i. accordance with Prudent Utility Practice. If any exceptions to such certification must be made, they shall be explained in writing in the certification of the project engineer. f. A copy of the most recent requests for advances sub- mitted to REA. 2. Payment. A Prepaying Purchaser shall pay the bill rend- ered pursuant to Paragraph 1, as follows: ae Except as provided in 2b, below, each bill shall be payable in full on or before 45 days of receipt. b. As to each bill rendered prior to the Date of Com- mercial Operation the Prepaying Purchaser may withhold an amount equal to 10% of the bill; (G5 All amounts withheld by a Prepaying Purchaser Page 1, ATTACHMENT E pursuant to Paragraph 2b shall be payable in full on or before 45 days after the Date of Commercial Operation. 3. Prepayment Limits. The maximum amount of Construction Costs payable by Prepaying Purchasers shall be as follows: I. ANCHORAGE MUNICIPAL LIGHT & POWER. A. Soldotna Segment Construction Costs. Maximum total Construction Costs Payable: $18,000,000 X ML&P's Percentage Share (as de- termined with reference to the Power Sales Agreement) B. Voltage Support Construction Costs. Maximum Total Construction Costs Payable. $2,000,000 X ML&P's Percentage Share (as deter- mined with reference to the Power Sales Agree- ment) In the event a Cooperative Purchaser elects, after the execu- tion of this Agreement, to prepay Construction Costs pursuant to Section 4, then HEA and the Cooperative Purchaser shall negotiate a prepayment schedule in form and substance similar to those set forth above, which schedule shall be approved in writing by all Parties prior to being finalized. 1 Page 2, ATTACHMENT E BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS ARTICLE 1 ARTICLE 2 ARTICLE 3 ARTICLE 4 ARTICLE 5 ARTICLE 6 ARTICLE 7 ARTICLE 8 TABLE OF CONTENTS Statement of Objectives ......... 2.2. 02.2.0025005. 1 Authority of Bradley Project Management Committed: ”|..).) 4 lait Bloke bt |e ak ole! las laa leas a ame 2 OPEICES | res slat ote ie ay ale top ee alot eel atte aloe lol wdetel at tel 3 Representatives 42.5 e)ie swe awe ea oe eh pe a 4 Comimnittes Meetings 22.65 soe sen cee sek saw 5 5.1 Annual Meeting. ..........2..0. 0.0. ee eee 5 5.2 Regular Meetings, .............20 02 ee eee 5 5.3' Special Meetings .. cose 002 eee nee reer sews 5 5.4. Notice: of Meetings 2-25.26 i eee ee ee eee ee 5 5.5 ‘Waiver:Of NOUGE.. 2c ess eee we ee wet 6 5.6 Place of Meetings ...............--..20.4. 6 Sa? | Teleconferencing, |,¢ 4. cc [elo belo} sill ¢ ese lol ol ele) we el 6 5.8 Minutes of Meetings «2. 62562 see ecse nave s 6 5.9 Quon oo. esc kee uae lela es fe Sl es ee wal 6 5.10 Manner of Acting... 2... ....2.22.000000000.5 6 5.11 Open Meetings ................00000002 9 (COMMMITIESS aia) =< ace) oo wt oe Be] wl ole Se Se see 11 6.1 Designation. 45). 22 eee ee Fee eee 11 6:2.) Powers) Jat eld belt aed blac tiaale wale Lads adel! 11 6.3 “TSH. aac ans nestles oole ole ees eels 11 Officers | ls loiel ee |a oi | s a ele clea fe ot ales lee ble lao els 12 Gok Number |e = s\aac\s 550 aise ze vele nels soe eae els 12 7.2 Election and Term of Office................ 12 gS: | PREMIONAN oy ce fel al to rel dy tol oe elise Jeet les, seed als ell ot ed de Le 12 Je&| Vacancies) & sd ale!s sec olteelsale nele pint b woes 12 7.5 Separation of the Office of Treasurer from that of Permanent Secretary ........... 12 7.6 Chairman. :)2 66s 464 #lee s dels oles blae alae al? 12 74 Vice Charman?s |< 56+ tla ale alos slaw sla oe |2 13 7.8 Secretary/Treasurer ...............00000. 13 Indemnification | |:|2 «\:|=. ale 2 slea ls aa) tle lt lle a tede ols 2 14 i - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) ARTICLE 9 ARTICLE 10 ARTICLE 11 ARTICLE 12 ARTICLE 13 ARTICLE 14 TABLE OF CONTENTS (cont.) Annual Budgets and Determination of Rates ......... 15 9.1 Budget Process Prior to Project Completion — sss eee tee ee ee 15 9.2 Budget Process Following Project Completion ........ 2.000000 eee 15 9.3. Auditing Standards and Procedures............ 16 9.4 Standards for Capital Asset Acquisition and AccOUMUNg 55 es i 8S See 16 Committee Funds and Assets .............200-- 18 10.1 Required Funds 5... 5 535-9505 656 355 she os 18 Project Insurance ... 2.2... 2.0... eee eee eee 19 11.1 Coverage Limits ...................0... 19 11.2 Self-Insurance sc st ee eee es ee 19 11.3 Insurance Claim Proceeds ................ 19 11.4 Annual Review ..................204.5. 19 Procedures for Dispute Resolution ............... 20 12.1 Procedural Rules 2... cc ee ee es 20 12.2 Authority ................. 2.200004. 20° 12.3 Judicial Review .................02005. 20 12:4 Arbitration 4. 3s s eee eee Mee Re UR 20 12.5. Costs of Arbitration, ....40% 3.004 560 296.056 20 Reimbursement of Travel and Per Diem Expenses 3. 263i sae gen sees wes oe 21 13.1 Committee Meetings................200. 21 13.2 Special Purpose Committee Meetings ......... 21 Other Policies — sss 5 eo ee 22 14.1 Numbering of Resolutions ................ 22, 14.2 Definition of Terms .................... 22 14.3 Amendment of Bylaws .................. 22 ii - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) BYLAWS OF BRADLEY PROJECT MANAGEMENT COMMITTEE ARTICLE 1 STATEMENT OF OBJECTIVES The Project Management Committee (the "Committee") shall be responsible for the management, operation, maintenance, and improvement of the Bradley Lake Project (the "Project"), subject to the non-delegable duties of the Alaska Energy Authority (the Authority"). All Committee members have a substantial long-term interest in the Project. The responsibilities of the Committee evolve in accordance with the Authority’s ownership of the Project, and the Purchaser’s obligations to pay the Project’s annual costs and right to use the Project’s power production. These Bylaws set forth the procedural rules of the Bradley Project Management Committee established pursuant to the Bradley Lake Power Sales Agreement and policies adopted by the Committee. 1 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) ARTICLE 2 AUTHORITY OF BRADLEY PROJECT MANAGEMENT COMMITTEE The Bradley Project Management Committee exists and operates pursuant to the terms of the Bradley Lake Hydroelectric Project Agreement for the Sale and Purchase of Electric Power ("Power Sales Agreement" or "Agreement"). 2 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) ARTICLE 3 OFFICES The Committee shall have no physical office but shall have a mailing address at the Alaska Energy Authority whose representative is the permanent Secretary of the Committee. 3 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) ARTICLE 4 REPRESENTATIVES The Committee shall consist of the Authority and the Purchasers, including as Purchasers for this purpose both Homer Electric Association, Inc. and Matanuska Electric Association, Inc., for themselves and for AEG&T as a Purchaser represented by and through these utilities. No Committee member shall obtain an additional vote through merger with, acquisition of, or assignment from any other Committee member, and AEG&T shall have no direct vote, but shall be represented by and through Homer Electric Association, Inc., and Matanuska Electric Association, Inc., each of which shall be entitled to vote as a Purchaser member for purposes of Committee procedure. Each Committee member entitled to vote shall designate one representative and one alternate representative to the Committee. Each member shall notify all other members in writing of the names, addresses and telephone numbers of its representative and designated alternate. Any member may change its designated representative or alternate representative at any time and shall promptly provide written notice of such change to the members. The alternate representative shall serve as the designated representative in the absence of the designated representative. 4 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) ARTICLE 5 COMMITTEE MEETINGS 5.1 Annual Meeting. The annual meeting of the Bradley Project Management Committee shall be the first regular meeting of the Fiscal Year (July 1 through June 30), for the purpose of electing officers and transacting such other business as may come before the meeting. 5.2 Regular Meetings. Regular meetings shall be held at least quarterly, with the specific date and time to be determined by the Committee. 5.3. Special Meetings. Special meetings of the Bradley Project Management Committee may be called by the Chairman or by three members of the Committee at any time by so advising the Secretary of the Committee. Business at a special meeting of the Committee shall be limited to the purpose stated in the notice of such special meeting. 5.4 Notice of Meetings. Public notice shall be given by the Secretary of the Committee for all meetings of the Committee. 5.4.1 Notice of regular meetings shall be given at least five (5) days before the date of the meeting by: (a) mailing notice to all Committee members, alternates, and persons or organizations who have filed with the Committee a written request to receive notice, and (b) publishing notice once in the designated newspaper of the Committee. 5.4.2 A notice of a meeting shall include the date, time and place of the meeting, and if the meeting is by teleconferencing, the location of a teleconferencing facility that is equipped with a speaker-telephone or similar listening device. 5.4.3. Written notice of special meetings shall be given, as reasonable, before the time specified for such meeting. Such notice of special meetings shall state the purpose or purposes for which the meeting is called. Business at a special meeting shall be limited to the purposes stated in the notice of such special meeting. 5.4.4 It is the intent of the Committee to give the best notice possible to the public of all its transactions, but the inadvertent failure to accomplish any one of the notice requirements shall not invalidate any action of the Committee. 5 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) 5.4.5 The designated newspaper of the Committee is the Anchorage Daily News. 5.5 Waiver of Notice. Whenever any notice is required to be given to any member a waiver of the notice in writing, signed by the person or persons entitled to such notice, whether before or after the time stated in the notice, shall be deemed equivalent to the giving of such notice. 5.6 Place of Meetings. The Chairman of the Committee may designate any place as the place of meeting for any annual, regular or special meeting of the Committee. 5.7 Teleconferencing. Attendance and participation by any or all representatives of the members at any meeting of the Committee may be by teleconference. The votes at a meeting held by teleconference shall be taken by roll call. Materials that are to be considered at a meeting that is by teleconference shall be made available at the teleconference locations. Participation by such means shall constitute presence in person at a meeting. 5.8 Minutes of Meetings. Written minutes shall be kept for all regular and special meetings of the Committee. Minutes of Committee meetings shall be mailed to each member following each meeting. The official copy of each minutes shall be signed by the Chairman and the Secretary. 5.9 Quorum. At all meetings of the Committee, the presence of the © representatives of any five members shall constitute a quorum for the transaction of business, except as otherwise provided in the Power Sales Agreement. 5.10 Manner of Acting. 5.10.1 Committee actions may be taken by any reasonable voting method, provided that any member may request a public roll call vote. All actions taken via teleconferencing shall be by roll call vote. 5.10.2 Except for those matters which expressly require alternative voting procedures, the act of a majority of votes taken during a meeting at any time when a quorum is present, shall be an act of the Committee, and binding on the members. 5.10.3 A representative who is present at a meeting of the Committee at which action on a Committee matter is taken shall be presumed to have assented to such 6 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) action unless the representative’s dissent is both indicated and recorded at the time of the action. 5.10.4 The following matters shall require the affirmative vote of at least four representatives of the Purchasers whose percentage shares of Project capacity are greater than 51%. Such matters do not require action by the Authority. 1. Adopting of procedures for scheduling, production and dispatch of Project power. 2. Selection among alternative methods that do not involve the Authority for funding Required Project Work. 3. Establishment of procedures for the use of each Purchaser’s Water Allocation, except that the Authority’s affirmative vote shall be required for any water allocation decision which affects performance of the Authority’s obligation under its FERC license. 5.10.5 The following matters shall require the affirmative vote of at least four representatives of the Purchasers, whose percentage shares of Project capacity are greater than 51% plus the affirmative vote of the representative of the Authority. 1. Arrange for the operation and maintenance of the Project. 2. Adoption of budget of Annual Project Costs. 3. Establish for each Fiscal Year the estimated Annual Payment Obligation of each Purchaser, together with a schedule for each Purchaser of equal monthly payments that such Purchaser shall be required to make during that year. 4. Determine after the conclusion of each fiscal year the actual Annual Project Costs. 5. Evaluation of necessity for and scheduling of Required Project Work. 6. Determine the appropriate amount of and obtain insurance for or related to the Project. 7 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) 5.10.9 7. Adoption of additional minimum funding amounts for the Renewal and Contingency Reserve Fund above that required by the Bond Resolution. 8. Selection among alternative methods that involve the Authority for funding Required Project Work. 9. Adoption or amendment of procedural rules of the Committee except for procedures for dispute resolution which shall be adopted or amended by unanimous agreement. 10. Adoption of maintenance schedules for the Project. 11. If and when no Bonds are outstanding, determination of rules, procedures and accounts necessary to manage the Project. 12. Evaluation and approval of Optional Project Work and the compensation for such work. 13. Application of insurance claims proceeds not governed by the bond resolution. 14. Approval of procedures and any individual utility agreements relating to electric power reserves for the Project in accordance with Section 5 of the Power Sales Agreement. 15. The approval (including possible pre-approval) of consultants. In the following matters, the unanimous concurrence of all Committee members shall be necessary for an action to be taken: (a) Adoption of procedures for dispute resolution. 5.10.10 Certain matters shall require a majority of Committee votes, with each Member receiving an equal vote (including the Authority): (a) Election of officers. ; 5.10.11 Conduct of Meetings. Robert Rules of Order shall govern the conduct of Committee meetings except where in conflict with specific procedural rules adopted by the Committee. 8 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) 5.11 Open Meetings. The Committee has determined that Alaska public policy favors openness and public access and the Committee desires to conduct its business in public in accordance with the following policies: 5.11.1 The Committee recognizes that meetings between the Authority and public utilities concerning a wholesale agreement for the sale of power or other matter exempted from review under AS 42.05.431(c) (which are contracts for wheeling, storage, regeneration or wholesale repurchase of power between the Authority and public utilities entered into between October 31, 1987 and January 1, 1988), are required to be open to the public under AS 42.05.431(d) and 44.62.310. 5.11.2 All formal meetings of the Committee and its special purpose committees shall be open to the public except as otherwise provided in these Bylaws. 5.11.3 Executive Sessions. If any subjects to be discussed at a meeting are subjects that may potentially be discussed in an executive session, the meeting shall first be convened as a regular or special meeting and the question of holding an executive session to discuss matters that come within the exceptions contained in Section 5.11.4 of this rule shall be determined by a majority vote of the Committee. No subjects may be considered at the executive session except those mentioned in the motion calling for the executive session unless auxiliary to the main question. Formal action may not be taken during the executive session. Only members of the Committee, designated alternates, and attorneys for members of the Committee may attend an executive session, unless the motion calling for the executive session specifies other persons whom the Committee wishes to attend. 5.11.4 The following excepted subjects may be discussed in an executive session: 1. Matters the immediate knowledge of which would clearly have an adverse effect upon the finances of the Authority or the Project. 2. Subjects that tend to prejudice the reputation and character of any person; provided, however, the person may request a public discussion; 3. Matters which by law, municipal charter or ordinance are required to be confidential. 4. Matters discussed with an attorney for the Committee or a member of the Committee, the immediate knowledge of which 9 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) could have an adverse effect on the legal position of the Committee or the Authority. 5.11.5 Sections 5.11.2, 5.11.3, 5.11.4 and 5.11.5 shall not apply to: 1. Meetings at which a quorum is not present; 2. Informal discussions, by telephone or otherwise, among members of the Committee, at which votes are not taken and official business is not conducted; or 3. Meetings and discussions, formal or informal, of Committee members in which all participants indicate they are acting individually as representatives of the Parties to the Agreement and not as the assembled Committee, and at which no Committee business is conducted and no votes are taken. 10 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) ARTICLE 6 COMMITTEES 6.1 Designation. The Committee may appoint special purpose committees from time to time, subject to such conditions as may be prescribed by the Committee. The designation of any such committee shall not relieve the Committee or any member of the Committee of any responsibility imposed by law or the Agreement. 6.2 Powers. Special purpose committees may only act upon Committee matters when given prior authorization by the Committee. The Committee will formalize the authorization by adopting a resolution which details the scope of the special purpose committee’s authority to act. Decisions made by a special purpose committee shall be by affirmative vote of a majority of the members of a special purpose committee, unless otherwise directed by the Committee. 6.3 Term. The members of each special purpose committee shall serve from the date of appointment until the date of the next annual meeting of the Committee. 11 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (2-1-94) ARTICLE 7 OFFICERS 7.1 Number. The officers of the Committee shall initially consist of a Chairman, a Vice Chairman, and a Secretary/Treasurer. Under subsection 7.5., below, the Committee may later decide to separate the offices of Secretary and Treasurer. The offices of Chairman and Secretary shall not be held by the same person. The Committee may elect such other officers and agents as it shall deem necessary, who shall hold office for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Committee. The Committee may, by separate resolution, provide for the indemnification of its officers, members and the members of any special purpose committees appointed by the Committee. 7.2 Election and Term of Office. Initially only the Chairman and Vice Chairman shall be elected by the Committee at its annual meeting. The Authority representative shall be the permanent Secretary/Treasurer. In the event that the office of Treasurer is separated from that of Secretary under the provisions of 7.5., below, the Treasurer will become an annually elected officer, while the Authority representative will retain the position of permanent Secretary. Only Committee members or alternates shall be eligible to serve as officers. Each officer shall hold office until a successor is elected and accepts office unless the officer resigns or is removed by the Committee. 7.3, Removal. Any officer elected by the Committee may be removed upon the vote of five members of the Committee. 7.4 Nacancies. In the event any vacancy occurs in any elected office of the Committee, the remaining members of the Committee shall elect a successor to the office at the next regular meeting of the Committee. 7.5 Separation of the Office of Treasurer from that of Permanent Secretary. Upon the vote of a majority of the Committee members (unweighted for percentage share), the offices of Secretary and Treasurer shall be separated, and an election held to fill the Treasurer’s office until the next regular election of officers. Upon separation of those offices, the Treasurer shall become an annually elected office, retaining only the "Treasurer duties" of 7.8.2. Upon separation of these officers, the representative of the Authority will remain the permanent Secretary, retaining only the "Secretary duties" of 7.8.1. 7.6 Chairman. The Chairman shall preside at all meetings of the Committee and shall perform such other duties and have such other powers as the Committee may pre- scribe, subject to the limitations set forth in the Power Sales Agreement. 12 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) 7.7 Vice Chairman. The Vice Chairman shall act under the direction of the Chairman, and in the absence or disability of the Chairman or if the office of the Chairman is vacant, shall perform the duties of the Chairman, and from time to time shall perform such other duties and have such other powers as the Chairman or Committee may prescribe, subject to the limitations set forth in the Agreement. 7.8 Secretary/Treasurer. The following duties will be assigned to the Secretary/Treasurer until such time that the Committee determines they should be separated under the provisions of 7.5., at which time the Secretary will retain only the Secretary Duties and the Treasurer shall retain only the Treasurer Duties. 7.8.1 Secretary Duties The Secretary/Treasurer shall act under the direction of the Chairman in regards to secretarial duties. Subject to the direction of the Chairman or the Committee, the Secretary/Treasurer shall attend all meetings of the Committee and keep a record of the proceedings. In the Secretary/Treasurer’s absence, the Chairman shall designate another member of the Committee to keep a record of the proceedings. The Secretary/Treasurer shall perform like duties for committees when required. The Secretary/Treasurer shall give or cause to be given notice of all meetings of the Committee and special meetings of the Committee and shall perform such other duties as may be prescribed by the Chairman or the Committee. The Secretary/Treasurer may incur reasonable expenses associated with keeping a record of the proceedings, including the compensation and travel costs incurred to retain a person to keep such records. 7.8.2 Treasurer Duties. The Secretary/Treasurer shall act under the direction of the Committee in regards to Treasurer duties. Subject to the direction of the Committee, the Secretary/Treasurer shall have control of the Committee funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Committee, and shall immediately deposit all monies and other valuable effects in the name and to the credit of the Committee in such depositories as may be designated by the Committee. The Secretary/Treasurer shall disburse the funds of the Committee as may be ordered by the Committee, taking proper vouchers for such disbursements, and shall render to the Chairman and the Committee at its regular meetings or when the Committee so requires, an account of all the Secretary/Treasurer’s transactions as Secretary/Treasurer and of the financial condition of the Committee. The Committee shall secure a bond in an adequate amount to cover the actions of the Secretary/Treasurer. 13 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) ARTICLE 8 INDEMNIFICATION To the extent legally permitted and financially able to do so from Committee- controlled assets, the Committee shall indemnify and hold its Committee members and officers harmless against all claims and liabilities which they or any of them incur as a party defendant to any proceeding (other than a proceeding filed by or in the right of the Committee), based on any authorized action of any such person as a Committee member or as an officer of the Committee within the scope of the Committee member’s office. For purposes of this provision, "Committee member" means a Committee representative, an alternate Committee representative, an authorized agent of the Committee who is otherwise employed by the Committee, the Purchasers or any authorized employee of the Committee. 14 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS : (12-1-93) ARTICLE 9 ANNUAL BUDGETS AND DETERMINATION OF RATES 9.1 Budget Process Prior to Project Completion. 9.1.1 Prior to Project completion, the Power Sales Agreement does not require any "budget process." The Purchasers determine what expenses to incur and how to fund them (the Authority is not a party to these decisions or payment obligations). The only Committee expenses during this period will be those related to Committee activity or costs incurred by individual Purchasers and agreed to be shared by other Committee members. No Authority costs will be eligible for utility payment during this period, nor will the Authority have any obligation to share in the payment of Committee expenses. 9.2 Budget Process Following Project Completion. The Agreement and Bond Resolution provides for a formal budget process following completion of the Project. Prior to Project completion and the sale of Project bonds, the Committee shall adopt a detailed budget process. 9.2.1 The annual budget shall include: 1. Amounts required for debt service on any outstanding bonds; 2. Amounts required for reserve funds created by bond resolution; 3. Costs of producing and delivering power including: (a) O&M; (b) Insurance; (c) Authority’s Project specific administrative and general costs; (d) Costs of Committee; (e) Any individual utility cost to be reimbursed by the Committee; and (f) Any other cost approved by the Committee. 4. The budget may, in the future, include amounts for non-bond funding of additional Project work, as well as Excess Payments following final payment of all bonds. 15 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) 5. The annual budget shall be based on a 12-month period starting July 1st of a calendar year through and including June 30 of the succeeding calendar year. 9.2.2 For purposes of 9.2.1(3): 1. The Authority shall provide annual budget detail listing personnel requirements by work function, their gross payroll, payroll burdens and the estimated percentage of each work function to be required for operation and maintenance. The estimated costs for materials, supplies, engineering and other costs shall be provided in sufficient detail to allow the Committee a reasonable basis to analyze the budget in the approval process and to provide a basis for the annual audit of actual costs. 2. The Authority shall provide annual budgets detailing the estimated costs relating to FERC license requirements and property insurance and the Project specific administrative and general costs and to be paid to the AEA. 9.3 Auditing Standards and Procedures. 9.3.1 An annual audit shall be performed by qualified independent auditors selected by the Committee, to be completed on or before the first day of December of each year. 9.3.2 The primary purpose of the audit is to verify expenses. The scope of the audit shall include the operating and maintenance costs relating to the Facilities, the annual Project-specific costs of the AEA, and the AEA and Committee assets, liabilities and costs including all funds administered by the AEA and the Committee, necessary to establish a true-up of the annual Project cost. 9.3.3 The annual financial statements shall disclose the comparison of actual operating results to the annual budget. 9.3.4 The members shall make available to the auditors such records and schedules required in their examination of the financial statements in a timely manner. 9.4 Standards for Capital Asset Acquisition and Accounting. To provide for a comprehensive, consistent policy of ownership and control, the Committee has designated the AEA as owner of all capital assets which benefit the Project while retaining the right to control all capital assets associated with the Project. 16 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) 9.4.1 Capital assets include an asset acquired for the benefit of the Project that has a value of $500 or more, a useful life of at least one year, and substantially comprises a Retirement Unit as listed in the Federal Energy Regulatory Commission List of Retirement Units, as amended from time to time. 9.4.2 The Committee shall transfer ownership of any assets held in trust for the Project to the AEA. 9.4.3. The Committee will have control and management of all capital assets purchased with the state or utility funds, and the Committee shall manage all proceeds derived from sales upon retirement of these capital assets and to purchase additional capital assets for the benefit of the Project. 9.4.4 To the extent that purchase costs can be minimized through the State of Alaska’s purchasing power, the AEA may make purchases on behalf of the Committee as the "Purchasing Agent". To the extent other purchasing alternatives are preferable, the Committee may use those procedures. The Committee is under no obligation to follow the State Procurement Code for acquisitions with any of the funds. 17 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) ARTICLE 10 COMMITTEE FUNDS AND ASSETS 10.1 Required Funds. The following funds are required to be established by the Bond Resolution: Construction Fund Debt Service Fund, consisting of an Interest Account and a Principal Account Capital Reserve Fund Renewal and Contingency Reserve Fund Excess Investment Earnings Fund Revenue Fund Operating Fund Revolving Construction Fund 18 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) ARTICLE 11 PROJECT INSURANCE 11.1 Coverage Limits. Insurance shall be secured and maintained in types and amounts as are "customary" for facilities of similar types and sizes as the Project. The initial determination of "customary insurance" shall be made by the Committee in concert with the insurance consultant employed by the Authority. 11.2 Self-Insurance. The amounts and types of insurance determined "customary," including the minimum amounts required in the Bond Resolution, may be maintained through self-funded insurance methods. 11.3. Insurance Claim Proceeds. Disposition of insurance claim proceeds for damage or destruction of the physical facilities is governed by Section 715 of the Bond Resolution. Application of any other insurance proceeds accruing to the Project shall be determined by the Committee. 11.4 Annual Review. The Authority and the Committee together shall review annually the insurance types and amounts carried with respect to the Project. 19 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) ARTICLE 12 PROCEDURES FOR DISPUTE RESOLUTION 12.1 Procedural Rules. The Project Management Committee shall perform its decision-making responsibilities consistent with the Power Sales Agreement and any duly adopted procedural rules. 12.2 Authority. In the event the authority of the Committee to act is at issue, the Committee shall first make a finding as to its authority. If the Committee determines that it has authority to consider the matter, it shall decide the issue on its merits. If the Committee determines that it does not have authority to consider the matter, the matter will be subject to immediate judicial resolution. If the court determines that the Committee in fact had authority to consider the matter, the matter shall be remanded for Committee action. 12.3 Judicial Review. Any action, or failure to act, of the Committee shall be subject to judicial review. The reviewing court shall (a) set aside any Committee action found to be arbitrary, capricious or otherwise not in accordance with law or with the terms of the Agreement, and (b) order the Committee to take action if such action has been unreasonably withheld or delayed. Failure of any party to appeal any Committee decision shall not constitute a waiver of the right to appeal any future decision. Judicial review shall be governed by the laws of the State of Alaska and shall be filed in the Alaska Court System. 12.4 Arbitration. Upon agreement of the Committee representatives of the Authority and any three utilities, the Committee may refer any matter within the Committee’s authority to arbitration. Unless otherwise unanimously agreed to by the members of the Committee, arbitration shall be conducted before an arbitrator selected under the guidelines of the American Arbitration Association and the arbitration shall be conducted in accordance with the commercial arbitration rules of the American Arbitration Association then in effect. In addition, the arbitrator must have education and experience in the particular matter being arbitrated. The arbitrator shall have no authority, power or jurisdiction to alter, amend, change, modify, add to or delete any of the provisions of the Agreement and the decision of the arbitrator shall be subject to judicial review as a Committee decision, in accordance with Section 12.3, above. 12.5 Costs of Arbitration. The costs incurred in connection with the arbitration shall be apportioned by the arbitrator as she or he deems appropriate. 20 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS : (12-1-93) ARTICLE 13 REIMBURSEMENT OF TRAVEL AND PER DIEM EXPENSES 13.1 Committee Meetings. The Committee has established a policy for reim- bursing the cost of travel and per diem expenses with respect to attendance at meetings of the Committee as follows: 13.1.1 Each party shall be reimbursed for the cost of travel and per diem necessary for its representative and alternate to attend meetings of the Committee, subject to the following policy: (a) Travel must be by the most direct route and will be reimbursed based on actual ground transportation, agreed upon mileage, or standard airfare. Total travel costs shall not exceed a maximum amount determined by airline coach fare. (b) Reimbursement of actual costs exclusive of transportation costs will not exceed $150.00 per day for a maximum of two days’ travel and actual meeting days for each duly convened meeting of the Committee. 13.1.2 Application must be made to the Secretary of the Committee for reimbursement. 13.2 Special Purpose Committee Meetings. The Committee has established a policy for reimbursing the cost of travel and per diem expenses with respect to attendance at meetings of the special purpose committees as follows: 13.2.1 Each Special Purpose Committee Member shall be reimbursed for the cost of travel and per diem necessary to attend special purpose committees created by the Project Management Committee, subject to the following policy: (a) Travel must be by the most direct route and will be reimbursed based on actual ground transportation, agreed upon mileage, or standard airfare. Travel costs shall not exceed a maximum amount determined by airline coach fare. (b) Reimbursement of actual costs exclusive of transportation costs will not exceed $150.00 per day for a maximum of two days’ travel and actual meeting days of the special purpose committee. 13.2.2 Application must be made to the Secretary of the Committee for reimbursement. 21 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) ARTICLE 14 OTHER POLICIES 14.1 Numbering of Resolutions. The Committee has established that all resolutions and actions adopted by the Committee shall be assigned a number. The first part of the number shall be the last two digits of the year in which the resolution or action is adopted (e.g., Resolution No. 88-___). The second part shall be a sequential number reflecting the order in which the resolution or action was adopted, beginning with the number "1," and increasing by one with the adoption of each subsequent resolution or action. The Secretary of the Committee shall establish and maintain an official journal for recording resolutions [and actions] of the Committee. 14.2 Definition of Terms. Except as otherwise provided, terms included in these Bylaws shall take the meaning specified in the Power Sales Agreement. 14.3. Amendment of Bylaws. These Bylaws may be altered, amended, or repealed and new Bylaws may be adopted by the Bradley Project Management Committee at any regular or special meeting, subject to the voting requirements set out in Article 5.10 of these Bylaws. 22 - BRADLEY PROJECT MANAGEMENT COMMITTEE BYLAWS (12-1-93) BRADLEY LAKE HYDROELECTRIC PROJECT MASTER MAINTENANCE AND OPERATING AGREEMENT THIS AGREEMENT dated as of May AY, 1994, is entered into by and among the ALASKA ENERGY AUTHORITY (the "Authority") and the BRADLEY PROJECT MANAGEMENT COMMITTEE ("BPMC"), (collectively the "Parties"). WITNESSETH: WHEREAS, the Authority is a public corporation of the State of Alaska duly created, organized and existing pursuant to AS 44.83; WHEREAS, the Authority has constructed the Bradley Lake Hydroelectric Project (the "Project"), together with Project Related Facilities needed to interconnect the Project with the Bradley Lake Purchasers, and certain related facilities and equipment; WHEREAS, the Authority is the owner of the Project, the Project Related Facilities, and the related facilities and equipment; WHEREAS, facilities and equipment owned, leased and/or operated by certain Bradley Lake Purchasers are needed to enable the Authority and the Bradley Lake Purchasers to fully utilize electric energy and capacity from the Project; WHEREAS, the Bradley Lake Purchasers are all signatories to the Bradley Lake Hydroelectric Project Agreement for the Sale and Purchase of Electric Power ("Power Sales Agreement"); WHEREAS, the BPMC was formed pursuant to the terms of the Power Sales Agreement and is made up of a representative of each of the Bradley Lake Purchasers and the Authority and is delegated certain obligations related to the administration of the Project; WHEREAS, the Power Sales Agreement provides that the BPMC shall arrange for the operation and maintenance of the Project and Project Related Facilities and adopt an annual budget of Project Costs; and 1 - MASTER MAINTENANCE AND OPERATING AGREEMENT WHEREAS, the Parties desire to establish a contract administration and budgeting procedure for contracting for the maintenance and operation of the Project, the Project Related Facilities, and the related services, facilities and equipment, and for the lease and/or use of other facilities and equipment in a manner consistent with the requirements of the Power Sales Agreement; NOW, THEREFORE, the parties agree as follows: Section 1. Definitions and Abbreviations. For the purposes of this Agreement, the following definitions and abbreviations apply: (a) Agreement means this Agreement governing the administration and budgeting for operation and maintenance of the Project. (b) Annual Project Budget means the budget for the Project and Project Related Facilities as adopted or in effect for a particular Fiscal Year, and as amended or supplemented from time to time pursuant to the applicable provisions of the Power Sales Agreement. (c) Authority or AEA means the Alaska Energy Authority, an agency of the State of Alaska. (d) Bradley Lake Hydroelectric Project or Project means the Project described in Exhibit C to the Power Sales Agreement. (e) Bradley Project Management Committee or BPMC means the committee composed of the Authority and the Parties established in Section 13 of the Power Sales Agreement. (f) Bradley Lake Purchasers means Chugach Electric Association, Inc., Golden Valley Electric Association, Inc., the Municipality of Anchorage d/b/a Municipal Light & Power, the City of Seward d/b/a Seward Electric System, Alaska Electric Generation & Transmission Cooperative, Inc., Homer Electric Association, Inc., and Matanuska Electric Association, Inc. (g) Contracts means those agreements entered into by the Authority with Contractors to perform services for, or operation or maintenance of, the Project or Project Related Facilities, including any amendments thereto. (h) Contractors means those entities retained pursuant to this Agreement to perform operation or maintenance of the Project or Project 2 - MASTER MAINTENANCE AND OPERATING AGREEMENT Related Facilities pursuant to this Agreement. Contractors may include Bradley Lake Purchasers. (i) Fiscal Year means that twelve (12) month period defined in the Power Sales Agreement. (j) Power Sales Agreement means the Agreement for the Sale and Purchase of Electric Power by and among the Authority and Chugach Electric Association, Inc., Golden Valley Electric Association, Inc., the Municipality of Anchorage d/b/a Municipal Light & Power, the City of Seward d/b/a Seward Electric System, Alaska Electric Generation & Transmission Cooperative, Inc., Homer Electric Association, Inc., and Matanuska Electric Association, Inc., dated December 8, 1987, as may be modified or amended by the parties thereto. (k) Project Related Facilities means the transmission and other facilities and equipment owned by AEA and used to interconnect Bradley Lake Purchasers with the Project, to deliver power from the Project to the Bradley Lake Purchasers, and any other facilities and equipment hereafter constructed or acquired and designed to enhance the stability or reliability of that power. (I) Prudent Utility Practices for the purposes of this Agreement, shall have the meaning provided in Section 1(x) of the Power Sales Agreement. Section 2. Term. (a) | This Agreement shall become effective when it is executed by the Parties. (b) This Agreement will remain in effect until the termination of the Power Sales Agreement or until the Authority ceases its legal existence, unless the rights, powers and duties of the Authority are transferred to a successor entity with substantially the same expertise within the intendment of Prudent Utility Practices, powers and duties as the Authority. 3 - MASTER MAINTENANCE AND OPERATING AGREEMENT Section 3. Project Operation and Maintenance. (a) | Subject to the provisions of this Agreement, the Authority shall enter into any Contracts necessary to perform services for, or operation and maintenance of, the Project or Project Related Facilities. (b) All Contracts shall be subject to the Master Contract Provisions set forth herein. Each Contract shall contain a specific clause providing that it is subject to the provisions of this Agreement. (c) Prior to executing any Contracts, the Authority shall present those Contracts to the BPMC for its review and approval. (d) When executed, all Contracts shall be included as exhibits to this Agreement. (e) All Contracts, other than those required by emergency conditions, shall be planned for, considered, and approved by the BPMC in the development of the Annual Project Budget or at regular meetings of the BPMC designated in advance by the BPMC Chairman. (f) The Authority and each Contractor shall be responsible for preparing plans and budgets for each Contract executed pursuant to this Agreement for submission to the BPMC for review and approval as part of the preparation of the Annual Project Budget. (g) Except as provided by Section 13(e) of the Power Sales Agreement, the Authority shall obtain BPMC approval of any work to be performed by a contractor either through a specific line item in the Annual Project Budget or separate BPMC approval in accordance with BPMC procedures. Section 4. Relationship to Power Sales Agreement. This Agreement implements the terms of the Power Sales Agreement, and in no way is intended to modify the terms of the Power Sales Agreement. 4 - MASTER MAINTENANCE AND OPERATING AGREEMENT Section 5. Third Party Beneficiaries. (a) The Parties intend that the BPMC is the representative of the Purchasers and is a third party beneficiary of all Contracts with the legal right to enforce any Contracts. (b) |The BPMC, pursuant to BPMC procedures, may designate one or more of the Purchasers to represent the BPMC in any action to enforce its third party rights hereunder. Section 6. Dispute Resolution. In the event that the Authority and the BPMC cannot agree on the terms and conditions of a particular Contract, either Party may request mediation of the dispute, by providing written notice to the other Party within twenty (20) days of the BPMC meeting at which the dispute occurs. If a dispute is mediated, that mediation shall be conducted under the Commercial Mediation Rules of the American Arbitration Association. The BPMC shall be responsible for arranging the mediation and both the Authority and the BPMC shall be parties to the mediation. Mediation shall be completed within ninety (90) days of the date notice of the request for mediation is given. If mediation is unsuccessful, either Party may proceed to arbitration or litigation as provided for in the Power Sales Agreement. Section 7. Master Contract Provisions. All Contracts shall include the general provisions set forth in Exhibit A, together with specific provisions applicable to that Contract, and shall follow substantially the form set forth in Exhibit A. Section 8. General Provisions. (a) Amendments. Any amendments or modifications to this Agreement must be in writing and signed by the Parties. (b) Conduct in Accord with Applicable Law. The Parties agree that at all times during the term of this Agreement, they shall conduct themselves in accord with all applicable laws and permits, and they will undertake no action contrary to such codes, laws, or permits. The laws of the State of 5 - MASTER MAINTENANCE AND OPERATING AGREEMENT Alaska shall govern this interpretation and application of this Agreement and the actions of the parties hereunder. (c) Exclusivity of Contract. All terms and provisions of this Agreement will be incorporated in writing into this Agreement setting forth the full intent of the parties. (d) Notice and Communication. Any notice or demand involving this Agreement shall be sent to the appropriate Party by registered or certified mail. Notice to the Authority shall be addressed to the Executive Director. Notice to the BPMC shall be addressed to the Chairman of the Bradley PMC. (e) Prudent Utility Practices. All actions of the Parties under this Agreement shall conform to Prudent Utility Practices. (f) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the successors, legal representatives or assigns of the Parties. However, this Agreement may not be assigned by any Party without the written consent of the other Party. If the Authority discontinues its current legal existence, this Agreement will be terminated and the obligations of the Authority hereunder will automatically be assigned to the BPMC, without the need for consent by the Contractor, unless the rights, powers and duties of the Authority are transferred to a successor entity with substantially the same expertise within the meaning of Prudent Utility Practices, powers and duties as the Authority. (g) Waiver Not Continuing. Any waiver at any time by any party to this Agreement of its rights with respect to any default of the other party hereto, or with respect to any other matter arising in connection with this Agreement, shall not be considered a waiver with respect to any subsequent default, right or matter. Any delay short of the statutory period of limitations in asserting or enforcing any right shall not be deemed a waiver of such right. (h) Section Headings. The section headings of this Agreement are for convenience only, and do not purport to, and shall not be deemed to, define, limit or extend the scope or intent of the section to which they pertain. (i) Severability. In the event that any provision of this Agreement shall be finally adjudicated by a court of competent jurisdiction to be invalid 6 - MASTER MAINTENANCE AND OPERATING AGREEMENT or unenforceable, the remainder of the Agreement shall be unaffected by such adjudication and all the remaining provisions of the Agreement shall remain in full force and effect as if such provision so adjudicated to be invalid had not been included herein. (j) Representations and Warranties. Each Party represents that it is duly authorized to execute this Agreement and to perform its obligations under this Agreement. Approval of this Agreement by the BPMC shall provide sufficient authority for the Chairman of the BPMC to execute the Agreement. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the day and year first above written. BRADLEY PROJECT MANAGEMENT COMMITTEE Date: S- / 7 _, 1994 By: Norman L. Story Chairman ALASKA ENERGY AUTHORITY “fa; / | Date: _-/ 7+/ , 1994 By: Jiu A Mp William R. Snell Executive Director 7 - MASTER MAINTENANCE AND OPERATING AGREEMENT EXHIBIT A MASTER CONTRACT PROVISIONS (a) Independent Contractor. Unless otherwise agreed to by the Parties, each Contractor entering into a Contract shall perform solely as an independent contractor. (b) Annual Planning and Budget. The Authority shall prepare, or cause the Contractor to prepare, the initial plans and budgets to be submitted to the BPMC for the operation or maintenance service in the Annual Project Budget. (c) Subcontracting. A Contractor may subcontract work on the operation or maintenance of the Project or Project Related Facilities to the extent authorized in the Annual Budget or with the written approval of the Authority and the BPMC, which shall not be unreasonably withheld. (d) Invoices. A Contractor shall submit complete written invoices to the Authority for payment with cost summaries and support documents as reasonably requested by the Authority and BPMC. (e) Payment and Dispute Resolution. The Authority shall expeditiously arrange for payment of all invoices, and shall work with the Contractor to promptly resolve any disputed biilings. (f) Accounts, Records, and Audits. In keeping records for work performed under a Contract, the Contractor shall utilize the accounting system required of public utilities and licensees by the Federal Energy Regulatory Commission for electric plants. Contractors shall make their records available as required. The Contractor shall retain copies of all invoices, payroll records, and other supporting documents sufficient for an audit of all expenditures, for three (3) years following the close of each Fiscal Year. A Contractor will furnish the Authority with operating and financial statements related to work performed under a Contract as may be reasonably requested by the Authority. If receipt of those statements is unreasonably delayed, the Authority may, with its own staff or agents, perform all work necessary to collect the data reasonably necessary, but only -1- at such times and in such a manner as will not unreasonably interfere with Contractor’s operations under a Contract. (g) Insurance. (1) During the term of the Contract, the Contractor shall purchase and maintain insurance covering injury to persons or property suffered by the Authority or a third party, as a result of errors or omissions or operations by a Contractor or by its subcontractor which arise both out of and during the course of the Contract. The Contractor shall require all subcontractors providing services directly or indirectly under a Contract to provide the same insurance as required of the Contractor. Coverage shall also provide protection against injuries to all employees of the Contractor and the employees of any subcontractor engaged in work under a Contract. Copies of all required insurance policies shall be furnished to the Authority prior to beginning work under a Contract. These policies will show evidence of coverage and provide for ninety (90) days notice of written cancellation, non-renewal for material change in the coverage. (2) |The Contractor shall purchase insurance adequate to cover its operations performed in connection with the work under the Contract. Specifically, each Contractor shall maintain Worker’s Compensation Insurance and Comprehensive General Liability Insurance, including Comprehensive General Liability Broad Form Insurance, Automobile Liability Insurance, Owned Aircraft Insurance (where applicable), and Owned Watercraft (where applicable), in amounts acceptable to the Authority and consistent with the Power Sales Agreement. (3) |The obligation to obtain and maintain insurance coverage pursuant to this Section shall be subject to the general availability of such coverage under reasonable terms and conditions. If one or more of the required insurance coverages is not available under reasonable terms and conditions, the Contractor shall, under the guidance and direction of the BPMC and Division of Risk Management, use its best efforts to obtain substantively equivalent insurance coverage acceptable to the BPMC, the Authority, and the Division of Risk Management. (4) If, after utilizing its best efforts, the Contractor is unable to obtain the required insurance coverage under reasonable terms and conditions, as reasonably determined by the Contractor, the Contractor shall request a waiver of the relevant insurance requirement. The request shall aoe outline steps taken by the Contractor to obtain such insurance and shall disclose quotations received for coverage. To the extent the waiver will not materially affect the safe and prudent operation of the Project, the Authority and BPMC, after consulting with the Division of Risk Management, will not unreasonably withhold approval of the requested waiver. Failure to furnish satisfactory evidence of insurance or failure to maintain the policy without complying with this subsection shall result in a material breach of this Agreement. (h) Indemnity. The Authority, to the extent permitted by applicable law and subject to the availability of funds, and each Contractor (as "Indemnitor") agrees to and shall indemnify and defend the other, its officers, employees, and agents (as "Indemnitee") for tort liability for all claims for damages and injuries of any character or nature whatsoever arising from the sole negligence of the Indemnitor, including its officers, employees or agents in relation to performance under this Agreement. Indemnitor agrees to assume the defense thereof and to pay all expenses (including attorney’s fees) connected therewith. For purposes of this section, "sole negligence" shall include acts or omissions of the Indemnitor, its officers, employees, or agents, or any combination thereof, and situations where such acts or omissions, in combination with the negligence of third parties combines to cause injury or damage to persons or property. It shall not include situations where the acts or omissions of the Indemnitor, its officers, employees, or agents combines with the negligence of Indemnitee to cause such injury, which situations shall be governed by the provisions of the subsection below relating to concurrent negligence. Each party agrees that liability (including costs of defense and attorney’s fees) for claims arising from the concurrent negligence of both Parties shall be apportioned according to the respective percentage of fault attributable to each Party as determined by agreement or by the trier of fact. (i) Amendments. Any amendment or modification to a Contract must be in writing and signed by the Contractor and the Authority and approved by the BPMC. (j) Conduct in Accord with Applicable Law. The Contractor and the Authority agree that at all times during the term of a Contract, they shall conduct themselves in accord with all applicable laws and permits, and they will undertake no action contrary to such laws or permits. The laws of the =34 State of Alaska shall govern this interpretation and application of the Contract and the actions of the parties thereunder. (k) Prudent Utility Practices. For the purposes of this Agreement, Prudent Utility Practices shall have the meaning provided in Section 1(x) of the Power Sales Agreement. (I) Contract Hours and Safety Standards. All Contracts are subject to all applicable provisions of state and federal law concerning work hours and safety standards. (m) Equal Employment Opportunity. All Contracts are subject to all applicable provisions of state and federal law concerning Equal Employment Opportunity. (n) Exclusivity of Contract. All terms and provisions agreed to between the Authority and any Contractor will be incorporated into a written Contract setting forth the full intent of the parties. (0) Notice and Communication. Any notice or demand involving a claim of default, breach of a Contract, or notice of a dispute shall be sent to the appropriate party by registered or certified mail. Notice to the Authority shall be addressed to: the Executive Director, Alaska Energy Authority, 480 West Tudor, Anchorage, Alaska 99503. (p) Section Headings. The section headings of a Contract are for convenience only, and do not purport to, and shall not be deemed to, define, limit or extend the scope or intent of the section to which they pertain. (q) Severability. In the event that any provision of a Contract shall be finally adjudicated by a court of competent jurisdiction to be invalid or unenforceable, the remainder of the Contract shall be unaffected by such adjudication and all the remaining provisions of the Contract shall remain in full force and effect as if such provision so adjudicated to be invalid had not been included herein. (r) Successors and Assigns. A Contract shall be binding upon and inure to the benefit of the successors, legal representatives or assigns of the Contractor and the Authority. However, a Contractor may not assign a Contract or any part thereof without the written consent of the Authority and the BPMC. If the Authority discontinues its current legal existence, its =4+ obligations under a Contract will automatically be assigned to the BPMC, without the need for consent by the Contractor, unless the rights, powers and duties of the Authority are transferred to a successor entity with substantially the same expertise within the meaning of Prudent Utility Practices, powers and duties as the Authority. (s) Waiver Not Continuing. Any waiver at any time by any party to a Contract of its rights with respect to any default of the other party hereto, or with respect to any other matter arising in connection with that Contract, shall not be considered a waiver with respect to any subsequent default, right or matter. Any delay short of the statutory period of limitations in asserting or enforcing any right shall not be deemed a waiver of such right. (t) Third Party Beneficiaries. The BPMC, as representative of the Purchasers, is a third party beneficiary of this Contract, with the legal right to enforce the provisions hereof. In any action by the BPMC for damages, the Contractor shall have the right to assert against the BPMC any defense which it could have asserted against the Authority. The raising of any such defense by the Contractor shall not affect any right of a purchaser or the BPMC under the Master Operating Agreement or Power Sales Agreement. RLS\BLM&O.k (3/14/94)