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HomeMy WebLinkAboutResolutions - No. 93-15RESOLUTION NO. 93-15 APPROVE EXECUTION OF THE SOUTH OF TESLA AGREEMENT BETWEEN THE TRANSMISSION AGENCY OF NORTHERN CALIFORNIA AND ITS MEMBERS (AGREEMENT) ----------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- WHEREAS, the City Council, on May 20, 1992, approved the Midway -Sunset Third Phase Agreement between Northern California Power Agency (NCPA) and the Midway -Sunset Cogeneration Company (MSCC) enhanced oil recovery facility near Bakersfield, California, which involves purchase and sale of a large quantity of low cost energy for NCPA members, including Lodi; and WHEREAS, the savings from the NCPA-MSCC power purchase agreement attributable to Lodi's participation is estimated to be approximately $300,000 per year; and WHEREAS, to obtain the economic benefit of the NCPA-MSCC power purchase, that power must be transferred over high-voltage transmission lines from the Bakersfield site to each of the TANG member cities; and WHEREAS, since PG&E owns the only high-voltage transmission system which can transmit that power, a transmission agreement with PG&E is necessary; and WHEREAS, the Transmission Agency of Northern California (TANC) is a joint powers agency which constructed the California -Oregon Transmission Project (COTP) and which has negotiated the necessary transmission rights between Tesla and Midway Substations with PG&E; and WHEREAS, the negotiation resolved into a regulatory Order issued by the Federal Energy Regulatory Commission (FERC) requiring Tesla -Midway Transmission Service to commence on March 1, 1992 pursuant to terms and conditions contained in a statement of transmission principles between the parties; and WHEREAS, the purpose of this Agreement is to set forth the arrangements under which TANC will render Tesla -Midway Transmission Service to its Members; and WHEREAS, this Agreement has been reviewed by FERC, IANC Counsel and approved by the TAMC Commission; and WHEREAS, the Agreement must now also be executed by the participating members of TANC to ensure that the FERC commencement Order is met and the members can begin utilizing this transmission service. NOW, THEREFORE, BE IT RESOLVED that the City Council hereby authorizes approval of the South of Tesla Agreement between the Transmission Agency of Northern California and its Members. BE IT FURTHER RESOLVED that the City Manager is authorized to execute the Agreement. Dated: January 20, 1993 ----------------------------------------------------------------------- ----------------------------------------------------------------------- Resolution 93-15 January 20, 1993 Page Two I hereby certify that Resolution No. 93-15 was passed and adopted by the Lodi City Council in a regular meeting held January 20, 1993 by the following vote: Ayes: Council Members - Davenport, Mann, Sieglock, and Snider Noes: Council Members - None Absent: Council Members - Pennino (Mayor) \ Wityifer rrlerk 93-15 RES9315/TXTA.02J 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SOUTH OF TESLA AGREEMENT BETWEEN THE TRANSMISSION AGENCY OF NORTHERN CALIFORNIA AND ITS MEMBERS APPROVED BY TANC COMMISSION - DECEMBER 16,1992 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 281 SOUTH OF TESLA AGREEMENT BETWEEN THE TRANSMISSION AGENCY OF NORTHERN CALIFORNIA AND ITS MEMBERS TABLE OF CONTENTS SECTION PAGE i APPROVED BY TAMC COMMISSION - DECEMBER 16,1992 Preamble............................................ 1 Recitals...........:................................. 1 1 Definitions ........................................... 3 2 Authorization ........................................ 6 3 Participation ......................................... 6 4 Reallocations ......................................... 7 5 Voting .............................................. 10 6 Reinforcement Costs ................................... 11 7 Authority of The TANC Treasurer and TANC Controller ....... 13 8 Use of the Allocations .................................. 13 9 Withdrawal .......................................... 14 10 Default :............................................ 14 11 Effective Date and Term ................................ 15 12 Billing and Payment ................................... 16 13 Insurance ........................................... 17 14 Indemnification ....................................... 17 15 Liability of TANC Officers .............................. 18 16 Notice .............................................. 18 17 Applicable Law ....................................... 19 i APPROVED BY TAMC COMMISSION - DECEMBER 16,1992 1 2 3 4 5 6 7 8 9 10 it 12 13' 14 is 16 18 19 20 21 22 23 24 25 26 27 2E 18 Severability .......................................... 19 19 Appendices .......................................... 19 20 Waiver ............................................. 19 21 Captions ............................................ 20 22 Counterparts ......................................... 20 23 Signatures ........................................... 20 Principles for Tesla -Midway Transmission Service ......... APPENDIX A Permanent Allocations .............................. APPENDIX B-1 Long -Term Allocations .............................. APPENDIX B-2 Addresses of the Parties for Billing ..................... APPENDIX C-1 Addresses of the Parties for Notices .................... APPENDIX C-2 Pricing for SOT Transmission Service ................... APPENDIX D Initial Reinforcements Letter Agreement ................. APPENDIX E ii APPROVED BY TAMC COMMISSION - DECEMBER lb, ]992 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 PREAMBLE This Agreement is made and entered into as of , 1992, by and among the Transmission Agency of Northern California, hereinafter referred to as "TANC",- and the Cities of Alameda, Healdsburg, Lodi, Lompoc, Redding, Roseville, Santa Clara, and Ukiah; the Sacramento Municipal Utility District; the Modesto Irrigation District, the Turlock Irrigation District; and the Plumas-Sierra Rural Electric Cooperative. WHEREAS: A. 19 C. 20 21 22 23 D. 24 25 26 E. 27 28 RECITALS On December 10, 1984, TANC was duly established as a joint powers agency, pursuant to Section 65M et seq. of the California Government Code, by an agreement among the Members entitled 'Joint Powers Agreement, Transmission Agency of Northern California" (joint Powers Agreement or JPA); and TANC executed the December 19, 1984, "Memorandum of Understanding, California -Oregon Transmission Project" (MOU), among certain California entities and the Western Area Power Administration (Western), which sets forth principles for the development of the Californda-0regon Transmission Project (COTP) and provides for certain transmission rights between Tesla and Midway Substations; and TANC and the Pacific Gas and Electric Company (PG&E) entered into the Principles for Tesla -Midway Transmission Service (Principles) dated August 25,1989, (attached as Appendix A), which provide for transmission service that was described in Section 2.3 of the MOU; and TANG, in good faith, undertook negotiations with PG&E to develop a "definitive agreement" for Tesla -Midway Transmission Service in accordance with the Principles; and TANC, after negotiating with PG&E for over two years, was not successful in obtaining a reasonable, definitive successor agreement and, therefore, filed a Complaint and Motion for Summary Disposition with the Federal Energy Regulatory 1 APPROVED BY TANG COMMISSION - DECEMBER 16,1992 1 2 3 4 5 6 7 8 9 10 11 12 13I 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Commission (FERC) (FERC Docket No. EL91-8-000) seeking relief which would enable TANC to utilize the transmission service provided for in the Principles; and F. On June 12, 1991, FERC issued an Order in Docket No. EL91-8-000 which, inter Alia, required PG&E to file the Principles with the FERC and rejected an alternative transmission rate schedule previously filed by PG&E for Tesla -Midway Transmission Service. On June 27, 1991, PG&E filed the Principles with FERC and TANC requested the FERC to order the immediate commencement of Tesla -Midway Transmission Service thereunder. On August 26,1991, the FERC ordered PG&E to file, within thirty (30) days, a transmission rate schedule which is consistent with the Principles, accompanied by appropriate cost support, and G. On October 9, 1991, PG&E filed a "Replacement transmission rate schedule" which is purported by PG&E to be consistent with FERC's August 26, 1991 order; and H. On November 6, 1991, TANC filed a motion to reform on summary disposition PG&E's Replacement transmission rate schedule so that the Replacement transmission rate schedule will be consistent with the Principles and the FERC's August 26, 1991 Order; and I. On December 30,1991, TANC paid PG&E $5,000,000 as its contribution to the costs of the Initial Reinforcements. The payment was made pursuant to a letter agreement, dated December 30, 1991, between TANC and PG&E (attached as Appendix E); and J. On February 26, 1992, FERC issued an Order which, inter alis, required Tesla - Midway Transmission Service to commence on March 1, 1992 pursuant to the terms and conditions of the Principles as an interim rate schedule. K. The purpose of this Agreement is to set forth the arrangements under which TANC will render Tesla -Midway Transmission Service to its Members. NOW, THEREFORE, in consideration of the mutual covenants and conditions set forth in this Agreement, TANC and the Members agree as follows: 2 APPROVED BY TAMC COMMISSION - DECEMBER 16,1992 1 2 3 4 5, 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 281 11 DEFINITIONS Whenever used in this Agreement, the following terms, when initially capitalized, shall have the following meanings. The singular of any definition shall include the plural and the plural shall include the singular. 1.1 Agreement This South of Tesla Agreement (SOTA), as amended and supplemented from time to time in accordance with the terms hereof. 1.2 Allocation All or part of a SOT Member's portion of the 300 MW of firm bidirectional Tesla - Midway Transmission Service (measured at Midway Substation) that TANC obtains from PG&E. The permanent Allocations, as shown in Appendix B-1, and the long- term Allocations, as shown in Appendix B-2, are expressed as a percentage of TANC's Tesla -Midway Transmission Service or expressed in megawatts, depending upon the context of use. 1.3 Cash Call A request for funds from one or more of the SOT Members by the TANC Treasurer for services provided under this Agreement. 1.4 Cost Sharing Percentage A percentage which is utilized by the TANC Treasurer to compute each Member's obligation to pay for its share of the SOT Service Charge. Each SOT Member's Cost Sharing Percentage shall be equal to its Allocation expressed as a percentage and as set forth in Appendix B-2. 1.5 COTP California -Oregon Transmission Project. 1.6 Curtailment A temporary reduction in Tesla -Midway Transmission Service. 1.7 FERC The Federal Energy Regulatory Commission, or its regulatory successor. 3 APPROVED BY TANC COMMISSION - DECEMBER 16, IM 11 21 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1.8 Initial Reinforcements Those reinforcements to PG&E's transmission system that are specified in Section 4.1 of the Principles and as described in Appendix E of this Agreement. 1.9 Interest Charge That charge against unpaid amounts due and owing, assessed at an annual interest rate compounded monthly equal to the lesser of the following amounts: two percent (2%) plus the applicable first -of -the -month reference rate of the Bank of America N.T. & S.A., San Francisco, California, or its successor, corresponding to the period during which the payment is overdue; or the maximum interest rate permitted by law. 1.10 PA3 TANC Project Agreement No. 3 for the COTP. 1.11 Principles The Principles for Tesla -Midway Transmission Service executed on August 29,1989, by and between TANC and PG&E (attached as Appendix A). 1.12 Reallocation, Permanent Reallocation, Long -Term Reallocation, Short -Term Reallocation A voluntary transfer of all or a part of a SOT Member's Allocation hereunder. Such transfer can be in one of the following forms: a) Permanent Reallocation - Any permanent transfer of a SOT Member's Allocation. Appendix B-1 shall be revised from time to time to reflect any changes occasioned by such Permanent Reallocations. b) Long -Term Reallocation - Any temporary transfer which is longer than six (6) months in duration. Appendix B-2 shall be revised from time to time to reflect any changes occasioned by Long -Term Reallocations or Permanent Reallocations. c) Short -Term Reallocation - Any temporary transfer which is six (6) months or less in duration. 4 APPROVED BY TANC COMMISSION . DECEMBER 16, 1992 1 2 3 4 i 5 6 7 8' 91 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 When such a Reallocation occurs, the result shall be the new Allocation for that time period. 1.13 SOT South of Tesla. 1.14 South of Tesla Reinforcements (SOTR) Those reinforcements to PG&E's transmission system that are described in Section 4.2 of the Principles. 1.15 SOT Member A TANC Member or a former TANC Member which has withdrawn from TANC pursuant to Section 9 of this Agreement which elects to participate in this Agreement pursuant to Section 3 of this Agreement. 1.16 SOT Service Charze The charge, as determined by the TANC Commission pursuant to the voting provisions of Section 5, that shall be applied to the bills rendered by TAMC to its SOT Members. The charge shall be based upon the rate determined pursuant to Appendix D and applied in accordance with Section 12 of this Agreement. 1.17 SOT Short -Term Reallocation Rate The rate, as determined pursuant to Appendix D, which shall be used as the maximum rate for Short -Term Reallocations. 1.18 TANC Commission The governing body of TANC as described in the Joint Powers Agreement. 1.19 TANC Member Any of the Members of TANC including: Cities of Alameda, Biggs, Gridley, Healdsburg, Lodi, Lompoc, Palo Alto, Redding, Roseville, Santa Clara, and Ukiah; the Sacramento Municipal Utility District; the Modesto Irrigation District; the Turlock Irrigation District; or the Plumas-Sierra Rural Electric Cooperative, which, at any given point in time, is a party to the Joint Powers Agreement. 5 APPROVED BY TAMC COMMISSION - DECEMBER 16,1992 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 1.20 TANC Treasurer and TANC Controller The persons appointed by the Commission to serve respectively as TANC Treasurer, and TANC Controller, as provided in the Joint Powers Agreement. 1.21 Tesla -Midway Transmission Service fTMTS) Three hundred (300) megawatts of firm bidirectional transmission service provided by PG&E to TAMC, which is allocable by TANC to its SOT Members, pursuant to the Principles or a FERC accepted transmission rate schedule ('TRS). 1.22 Tesla -Midway Transmission Service Agreement (TMTS Agreement) An agreement that may be made between TANC and PG&E, including the Principles or a FERC accepted TRS, which provides for certain transmission and other services over PG&E's facilities. 1.23 Tesla -Midway Transmission Service Charge CTMTS Charge) Those charges that are made from time to time by PG&E to TANC pursuant to the TMTS Agreement, including but not limited to, monthly transmission service charges, mitigation charges, and special facilities charges related to TANC's share of the Initial Reinforcements. 2. AUTHORIZATION TANC is hereby authorized and directed to act on behalf of the SOT Members in any fl® 281 activities necessary to fulfill its obligations or enforce its rights related to the Principles, a successor TMTS Agreement, subject to procedures for SOT Member approval and authorization established by the TANC Commission pursuant to this Agreement and the terms and conditions of the Joint Powers Agreement. PARTICIPATION 3.1 Subject to Sections 3.2 and 3.3 below, each SOT Member, by executing this Agreement, hereby elects to receive an Allocation of TANC's TMTS. Such election, and payment of its share of the SOT Service Charges, permits a SOT Member to 6 APPROVED BY TAMC COMMISSION - DECEMBER 16,1992 1 21' 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 receive an Allocation in accordance with Appendices B-1 and B-2, as those Allocations may be revised pursuant to this Agreement. Further, such election shall j obligate the SOT Member to all terms and conditions provided for by this Agreement 3.2 While Section 3.1 above permits SOT Members to participate in this Agreement, the SOT Members recognize that the services and obligations under this Agreement are contingent upon the TANC Commission's acceptance of TMTS provided by PG&E. 3.3 In the event that fewer than all of the SOT Members elect to accept an Allocation from TANC once the TANC Commission accepts the TMTS Agreement, Appendix B-1 shall, within thirty (30) days of the date that the TMTS Agreement is approved by the TANC Commission, be revised to reflect the participation by those SOT Members electing to take service. Such revision shall be determined in accordance with the procedures as established in Section 4.3 of this Agreement. 4. REALLOCATIONS TMTS may be reallocated among SOT Members consistent with the Principles or the TMTS Agreement Such Reallocations shall be permitted, provided that the resulting total Allocations equal 300 MW in each direction. Procedures for Reallocation shall be as follows: 4.1 Short -Term Reallocations - A Short -Term Reallocation, to be in effect for no longer than six (6) months, may be made pursuant to an agreement reached among the SOT Members participating in the Short -Term Reallocation. Such Short -Term Reallocation shall be made provided that such a reallocation is offered to one or more SOT Members and such offer is at a price in accordance with Section 4.4.1 below. Such Short -Term Reallocations shall not relieve any SOT Member of its responsibilities for payments or any other related obligations to TANG. 4.2 Long -Term Reallocations - A Long -Term Reallocation, which shall be effective upon the first day of a future month and continue in effect for more than six (6) months, 7 APPROVED BY TAMC COMMISSION . DECEMBER 76, 7992 1D 11 12 13 14 15 16 17 1E is 2C 21 22 23 24 V 2( 2, 2f may be made by the TANC Commission. Such a Long -Term Reallocation shall be made pursuant to a resolution approving a revised Appendix B-2 by the TANC Commission, provided that such a Long -Term Reallocation is offered in the following manner. 4.2-1 A SOT Member may make a written request to the TANC Commission to offer a Long -Term Reallocation. The other SOT Members shall be notified immediately of such a written request. All SOT Members shall have a pro - rata right to the available Allocation in accordance with the Permanent Allocations as shown in Appendix B-1. The pro rata right, in percent, of each SOT Member, other than the SOT Member making the offer, shall be equal to: Pro rata right, in percent = SOT Members PA., in MW X 100% (SLcm of all PA in MW) - (Amt. of PA of the SOT Member making the offer, in MW) Where P.A. equals the Permanent Allocations, as shown in Appendix B-1, at the time the offer is made. Within forty-five (45) days of the date of that written request, all SOT Members must notify the TANC Commission of their desired amount of such available Allocation. 4.2.2 To the extent that there remains a residual amount of the available Allocation after following the procedures set forth in Section 4.2-1 above, the remainder of the available Allocation may be offered, in accordance with the TMTS Agreement, to third parties and any such Allocation shall be made available at negotiated terms and conditions. 4.2.3 Such Long -Term Reallocations shall not relieve any SOT Member of its ultimate responsibilities for payments or any other related obligations to TANC. 4.3 Permanent Reallocations - A Permanent Reallocation shall be made by the TANC Commission pursuant to the following procedures: 8 APPROVED BY TAMC COMMISSION . DECEMBER 16,1992 1'i 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4.3.1 A SOT Member may make a written request to the TANC Commission to offer a Permanent Reallocation. The other SOT Members shall be notified immediately of such a request. All SOT Members shall have a pro rata right to the available allocation in accordance with the Permanent Allocations as shown in Appendix B-1. The pro rata right, in percent, of each SOT Member, other than the SOT Member making the offer, shall be equal to: Pro rata right, in percent = SOT Members PA., in MW X 100% (Stun of all PA, in MW) - (Amt of PA of the SOT Member making the offer, in MW) Where P.A. equals the Permanent Allocations, as shown in Appendix B-1, at the time the offer is made. 4.3.2 To the extent that there remains a residual amount of the available Allocation after following the procedures set forth in Section 4.3.1 above, the remainder of the available Allocation may be offered, in accordance with the TMTS Agreement, to third parties and any such Allocation shall be made available at negotiated terms and conditions. 4.3.3 Such Permanent Reallocations to a SOT Member shall relieve the SOT Member of its obligations under this Agreement to TANC with respect to that Permanent Reallocation. Any SOT Member receiving such Permanent Reallocation shall assume all rights and obligations under this Agreement with respect to that Permanent Reallocation. Any third party to which a Permanent Reallocation is made shall have only the right to receive and use the portion of TMTS represented by that Permanent Reallocation. All obligations under this Agreement with respect to a Permanent Reallocation to a third party shall remain with the reallocating SOT Member. 4.3.4 The TANC Commission shall revise Appendices B-1 and B-2 to reflect the Permanent Reallocation, with all third parties receiving Permanent Reallocations shown as footnotes in Appendices B-1 and B-2. 4.4 Charges for Reallocations - Charges for Reallocations of SOT Members' Allocations shall be as follows: 9 APPROVED BY TANC COMMISSION - DECEMBER 16, 1992 22' 23 24 25 26 27 28 1® 4.4.1 Short -Term Reallocations shall be charged an amount that is equal to the price agreed to by the SOT Member providing the Short -Term Reallocation and the SOT Member(s) receiving the Short -Term Reallocation, provided that the price shall not exceed, but may be less than, 100 percent of the SOT Short -Term Reallocation Rate pursuant to Appendix D. Such Short -Term Reallocations shall be billed by the SOT Member(s) providing the Reallocations to the SOT Member(s) receiving those Reallocations. 4.4.2 Long -Term Reallocations and Permanent Reallocations shall be charged an amount, as described in Section 12.1, which reflects their pro -rata share of the SOT Service Charge through a modification to Appendix B-1 or B-2, as appropriate, that reflects such Reallocations. Such Long -Term Reallocations and Permanent Reallocations shall be billed by TANC to its SOT Members pursuant to Section 12 of this Agreement. 4.5 For purposes of this Agreement, the SOT Members hereby covenant and agree that any Reallocation to third parties under this Agreement will not, in any way, adversely affect the exclusion of the interest on any of the TANC indebtedness from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended, and the applicable regulations thereunder (or any successors to such statute and regulations), including without limitation, by reason of classification of such TANC indebtedness as a "private activity bond" within the meaning of said Code. VOTING Actions, approvals or authorizations required under this Agreement shall be given or withheld by the TANC Commission using the general voting procedures described in the Joint Powers Agreement, subject to the following provision: 5.1 The TANC Commission shall exercise all the powers of TANC and shall require (1) for a quorum, the presence of TANC Commissioners who together represent a 10 APPROVED BY TANC COMMISSION - DECEMBER 16,1992 1 2 3 4 5 6 7 8 9 10 it 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 majority of the Permanent Allocations, as shown in Appendix B-1, represented by the TANC Commissioners of SOT Members not in default under this Agreement at the time of the vote and (2) for any action requiring a vote of the TANC Commission, votes totalling not less than sixty-five (65) percent of the Permanent Allocations represented by the TANC Commissioners of SOT Members not in default under this Agreement at the time of the vote and no fewer than four of the SOT Members voting affirmatively. 6. REINFORCEMENT COSTS 6.1 Initial Reinforcements Cost Sharing - TANC's share of the capital cost for the Initial Reinforcements has been provided for under the provisions of a letter agreement, dated December 30,1991, between TANC and PG&E (attached as Appendix E). The SOT Members shall reimburse TANC for those costs in the form of a monthly payment as shown in Appendix D. To the extent that this Agreement terminates prior to the completion of the repayment by the SOT Members for those costs, the TANC Treasurer may be authorized by the TANC Commission to bill the SOT Members for the remaining costs in a manner to be determined by the TANC Commission, 6.2 SOTR (Los Banos -Gates) - In accordance with the voting provisions of Section 5 of this Agreement, TANC may elect in the future to participate in the SOTR. If such election is made, the following provisions shall apply: 6.2.1 TANC's participation in the SOTR shall be offered to TAMC Members as follows: (a) For the first three hundred megawatts (300 mw) of TANC's participation, each SOT Member not then in default shall be entitled to take up to at least an amount equal to its Permanent Allocation expressed in megawatts as set forth in Appendix B-1, which is in effect as of the date of TANC's election to participate 11 APPROVED BY TANG COMMISSION - DECEMBER 16, 7992 1 2 3 4 5 6 7 8 9 10 18 19. 20 21, 22 23 24 25 26 27 28 6.2.2 6.2.3 in any subsequent South of Tesla transmission service provided by TANC to its SOT Members as a result of TANC's contribution to the SOTR. (b) For amounts of TANC's participation above the first three hundred megawatts specified in part (a) above, TANC shall offer such remainder to all TANC Members, including those not currently SOT Members, on a pro -rata basis based on the participation percentages shown in column B of Appendix C of the TANC agreement entitled, 'Transmission Agency of Northern California Project Agreement No. 3 for the Califon -da -Oregon Transmission Project." (c) To the extent there remains any additional TANC's participation that has not been allocated after completion of the process described in subsection (b) above, such remainder will be offered to any other TANC Member(s) and third parties. Those SOT Members who elect to take such service as a result of the SOTR shall establish procedures for the administration and obligations of such service. Any SOT Member which elects not to take such service as a result of the SOTR shall continue to receive an equivalent amount of service from TANC for a period no longer than three (3) years from the date of the written notification of TANC's election to participate in the SOTR. Such non - electing SOT Member shall be financially obligated for its share of the costs, excluding any costs related to the SOTR, that TANC incurs as a result of continuing to provide this service during that period. In addition, at the end of such service, the non -electing SOT Member shall be billed, as a one- time lump -sum charge, for the remainder of its pro -rata share of the costs for the Initial Reinforcements. 12 APPROVED BY TAMC COMMISSION - DECEMBER 16,1992 1C 11 12 13 14 15 if 17 1E 15 2( 21 Z 2Z- 24 -25 2! 20 2: 2E 6.2.4 No such election is required at the date of the execution of this Agreement; therefore, this Agreement does not obligate either TANC, the SOT Members, or any other TANC Members to participate in the SOTR. 7. AUTHORITY OF THE TANC TREASURER AND TANC CONTROLLER At the direction of the TANC Commission, the following authorities are granted: 7.1 The TANC Treasurer and the TANC Controller are hereby authorized to render monthly bills, in accordance with Section 12 of this Agreement and Appendix D, to the SOT Members for the SOT Service Charge and for any replacement power provided by PG&E to the SOT Members. 7.2 The TANC Treasurer is hereby authorized to make payments for TMTS Charges pursuant to the TMTS Agreement provided that such invoices are approved for payment pursuant to the procedures or policies adopted by the TANC Commission including any expedited payment procedures for payment of invoices. 7.3 The TANC Controller is hereby authorized to adjust previous bills rendered to SOT Members when necessary to reflect changes in cost components of the SOT Service Charge. 7.4 The TANC Treasurer and TANC Controller may be authorized to perform additional duties, as appropriate, to carry out the responsibilities of TANC under this Agreement. 8. USE OF THE ALLOCATIONS 8.1 Member Power Scheduling Rights - During any scheduling period, each SOT Member or its designated agent shall have the right to schedule power transactions up to its Long -Term Allocation as shown in Appendix B-2, adjusted for any Short - Term Reallocation, and subject to any Curtailment. 8.2 SOT Transmission Service Use Information Coordination - Each SOT Member or its designated agent shall provide the TANC Commission with information required 13 APPROVED BY TAMC COMMISSION - DECEMBER 16,1992 1 2 3 4 5 6 7 8 9 10 11 12 13' 14 15 1611 17 18 19 20 21 22 23 24 25 26 27 28 11a* to meet TANC's obligations under the TMTS Agreement. The TANC Commission shall submit such information to PG&E in accordance with the TMTS Agreement. 8.3 Curtailment - Curtailments, if any, of TMTS in either direction will be shared on a pro -rata basis among the SOT Members, consistent with the TMTS Agreement. 8.4 Curtailment Procedures - Other specific procedures which implement the provisions of this Section 8 shall be determined by the TANC Commission. WITHDRAWAL 9.1 Withdrawal from TANC - TANC and the SOT Members hereby agree that the 300 MW of firm bidirectional TMTS is provided to TAMC. If a SOT Member should withdraw from TAMC, TANC shall cease to allocate TMTS to a withdrawing SOT Member, unless notified otherwise pursuant to Section 9.3 below. 9.2 The SOT Member withdrawing under Section 9.1 shall remain financially obligated to TANC for all costs associated with that SOT Member's Allocation until such time as another SOT Member(s) agrees to assume such financial responsibility. 9.3 A withdrawing SOT Member may, upon advance notice to the TANC Commission, request to continue to receive an Allocation of TMTS after having withdrawn from TANG. Such continued receipt of service will continue to be subject to the terms and conditions of this Agreement. 10. DEFAULT 10.1 Upon the failure of any SOT Member to meet its obligations hereunder, TANC shall give written notice of the failure to such SOT Member or former SOT Member and, if such failure has not been cured within forty-five (45) days after the date of such notice, it shall constitute a default at the expiration of that forty-five (45) day period. 10.2 If such default is not cured at that time, the SOT Member shall be considered to have permanently waived any and all rights to receive an Allocation of TANC's 14 APPROVED BY TAMC COMMISSION -DECEMBER 16,1992 21 Z 212 24 2.' 2( R 2f TMTS. All SOT Members recognize and agree that no SOT Member has any ownership rights to TMTS. To the extent that a SOT Member, which has defaulted, has any remaining financial obligations to TANC for costs, including the TMTS Charge, such obligations remain with that SOT Member unless the obligations are satisfied by other SOT Member(s). 10.3 In the event that a SOT Member's default remains uncured, each SOT Member severally agrees that the Allocation of each non- defaulting SOT Member shall be increased by the product of the ratio of the non -defaulting SOT Member's Allocation to the sum of all non -defaulting SOT Members' Allocations, expressed as a percentage, times the Allocation of the defaulting SOT Member. Such an increase, which is limited to a cumulative maximum of twenty-five percent (25%) above the Permanent Allocations shown in Appendix B-1 as of the effective date of this Agreement, shall not require the consent of the non -defaulting SOT Member(s). To the extent that the Allocation of the defaulting SOT Member is greater than the increase in the non -defaulting SOT Members' Allocations provided for in the preceding sentence, any residual Allocation shall be offered in accordance with the Reallocation provisions in Sections 4.2 and 4.3. 10.4 Upon a default, in addition to the rights and remedies available to TANC pursuant to Section 10.3, TANC may protect and enforce its rights hereunder by suit or suits in equity or at law, whether for the specific performance of any covenant herein or for damages or in aid of the execution of any power granted herein or any other remedy available under any provision of applicable law. 10.5 The term "SOT Member", when used in this Section 10, shall include a former SOT Member that has withdrawn pursuant to Section 9. 11. EFFECTIVE DATE AND TERM 11.1 This Agreement shall become effective sixty (60) days after the date on which the TANC Commission adopts a resolution authorizing execution of the Agreement on 15 APPROVED BY TAMC COMMISSION - DECEMBER ]6, 1992 10 11 12 13 14 15 U 17 1E 19 A 2] 22 23 24 2E 2E 2' 2f behalf of TANC provided that SOT Members with Permanent Allocations totaling at least 95 percent of TANC's TMTS have executed the Agreement on or before that date. 11.2 If the SOT Members that have executed the Agreement total more than 95 percent of the Permanent Allocations, but less than 100 percent, each of those SOT Members severally agrees that the Permanent Allocation of each executing SOT Member shall be automatically increased, on a pro -rata basis as shown in Appendix B-1, until all of TANC's Permanent Allocations of TMTS have been completed, provided that the SOT Members may otherwise agree to different increases so long as the total SOT Members' Permanent Allocations equal 100 percent. 11.3 This Agreement shall remain in full force and effect as long as (A) the Joint Powers Agreement, and (B) a TMTS Agreement remain effective, provided however that this Agreement will no longer be in effect upon the date it is superseded by a successor agreement. 11.4 A successor agreement, as referenced in Section 11.3 above, shall contain the principles of Section 6.2 of this Agreement. 12. BILLING AND PAYMENT 12.1 Determination of Bills - Bills rendered by the TANC Treasurer to the SOT Members shall reflect the basic cost sharing responsibility which is calculated by multiplying the SOT Long -Term Allocation (as shown in Appendix B-2, expressed as a percentage) by the SOT Service Charge. In addition, any SOT Member which receives replacement power from PG&E pursuant to the TMTS Agreement shall have the cost associated with its usage of replacement power reflected in its bill. 12.2 Monthly bills shall be rendered by the TANC Treasurer to SOT Members in -a timely manner. Such bills shall be sent by either United States mail first class, postage prepaid or its equivalent, or by facsimile to the billing address specified in 16 APPROVED BY TANC COMMISSION - DECEMBER 16, 7992 1 2 3 4 5 6 7 8 9 10 11 121 131 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Appendix C-1. The designation of any person specified in Appendix C-1 may be changed at any time by advance notice given to the TANC Treasurer. 12.3 Billings for amounts payable shall be due on the twenty-fifth (25th) day after receipt of the bill. If the due date falls on a non -business day of either party, then the payment shall be due on the next following business day without interest. 12.4 Amounts of monthly billings not paid on or before the due date shall be payable with an Interest Charge calculated from the due date to the date of payment. 12.5 In case any portion of any monthly bili is in dispute, the entire bill shall be paid when due and the dispute referred to the TANC Commission for resolution. If the TANC Commission determines that an overpayment was made, the overpayment shall be refunded. If the refund exceeds five hundred dollars ($500.00) and is more than one (1) month past due, it shall be paid with interest at a rate based on the Interest Charge less two (2) percentage points. 13. INSURANCE TANC shall maintain, or cause to be maintained in force, insurance as may be determined prudent in the judgment of the TANC Commission to effect the purposes of this Agreement. 14. INDEMNIFICATION TANC shall indemnify, defend, and hold harmless each SOT Member, and its governing board members, officers, employees, consultants, and agents, from any liability for personal injury, death, or property damage arising out of the negligent or willful misconduct of TANC pursuant to this Agreement, or the TMTS Agreement. TANC shall not be obligated to indemnify, and shall not be liable to, any SOT Member for economic loss arising out of any act or omission on the part of TANC while carrying out its obligations under this Agreement. 17 APPROVED BY TANG COMMISSION - DECEMBER 16,1992 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 15. LIABILITY OF TANC OFFICERS 15.1 Release - Each SOT Member agrees that TANC's Commissioners, officers, and employees shall not be liable to the SOT Members for direct, indirect or 110 consequential loss or damage suffered by the SOT Members as a result of: (i) the performance or nonperformance by TANC under the TMTS Agreement or (ii) the performance or nonperformance of TANC under this Agreement. Each SOT Member releases TANC's Commissioners, officers, employees, the Treasurer and the Controller from any claim or liability (whether based on negligence or otherwise) as a result of any actions or inactions of TANC under this Agreement or the performance or non-performance by TANC under the TMTS Agreement. 15.2 No Modification - The provisions of this Section 15 shall not be construed so as to relieve TANC of any obligations under the TMTS Agreement and the provisions of this Section 15 shall not be construed to modify or amend Paragraph 2 of the Joint Powers Agreement. NOTICE 16.1 Manner of Notice - Any notice or demand by a SOT Member to TANC under this Agreement shall be deemed properly given if deposited in the United States mail first class postage prepaid or its equivalent, or sent via facsimile or other electronic media and confirmed by telephone or in writing within twenty-four (24) hours, addressed to TANC at its operational office; any notice or demand by TANC to any SOT Member under this Agreement shall be deemed properly given if deposited in the United States mail first class postage prepaid or its equivalent, or sent via facsimile or other electronic media and confirmed by telephone or in writing within twenty-four (24) hours, addressed to the addressee as shown in Appendix C-2. The designations of the name and address to which any such notice or demand is directed may be changed at any time and from time to time by any party giving notice as above provided in this Section. 18 APPROVED BY TANC COMMISSION - DECEMBER 16, 1992 1 2 3 4 5 6 7 8 9 10 11 12' 18 19 20 21 22 23 24 25 26 27 28 16.2 Time Comyutation - In computing any period of time from such notice, other than for billing as specified in Section 12, such period shall commence on the date mailed or, if sent via facsimile or other electronic media, on the date sent. 17. APPLICABLE LAW This Agreement is made under and shall be governed by the laws of the State of California. 18. SEVERABIL= If any section, paragraph, clause, or provision of this Agreement, or any part thereof, shall be finally adjudicated by a court of competent jurisdiction to be invalid, the remainder of this Agreement shall remain in full force and effect as though such section, paragraph, clause, or provisions or any part thereof so adjudicated to be invalid had not been included herein and the parties shall renegotiate the terms and conditions of this Agreement so as to carry out the intent of the invalid provision. 19. APPENDICES This Agreement includes Appendices A, B-1, B-2, C-1, C-2, D, and E attached hereto and are incorporated herein by this reference. Appendices B-1, B-2, C-1, C-2, and D may be amended, modified, or otherwise changed or rescinded by the TANC Commission in accordance with the voting provisions of Section 5 without effect on the remainder of this Agreement. 20. WAIVER Any waiver at any time by any party of its rights with respect to a default under this Agreement, or with respect to any other matters arising in connection with this Agreement, shall not be deemed a waiver with respect to any subsequent default or other matter. 19 APPROVED BYTANC COMMISSION - DECEMBER 16, 1992 1 2 3 4 5 6I 7 8I 9 10 11 121 13 14' 15I 16I 17 18 19 20 21 22 23 24 25 26 27 28 21. CAPTIONS Except as used for definitions, all indexes, titles, subject headings, section titles and similar items are provided for the purpose of reference and convenience and are not intended to be inclusive, definitive, or to affect the meaning or scope of this Agreement. 22. COUNTERPARTS This Agreement may be executed in several counterparts, each of which shall be deemed to be an original and all of which, when taken together, shall constitute a single li Agreement. 23. SIGNATURES TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By: Date: CITY OF ALAMEDA By: Date: CITY OF HEALDSBURG By: Date: CITY OF LO %� By: �L Thomas A. Peterson, City Manager Date: January 20, 1993 20 APPROVED BY TAMC COMMISSION - DECEMBER 16, 1992 1 2 3 4 5 6 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CITY OF LOMPOC By: Date: MODESTO IRRIGATION DISTRICT By: Date: PLUMAS-SIERRA RURAL ELECTRIC COOPERATIVE By: Date: CITY OF REDDING By: Date: CITY OF ROSEVILLE By: Date: SACRAMENTO MUNICIPAL UTILITY DISTRICT By: Date: CITY OF SANTA CLARA By: Date: 21 APPROVED BY IANC COMMISSION - DECEMBER 16,1992 TURLOCK IRRIGATION DISTRICT By: Date: CITY OF UKIAH By: Date: 1D 11 12 13 14 15 if 17 1E 19 2[ 21 m 21 24 2? 2( 27 2f 22 APPROVED BY TAMC COMMISSION - DECEMBER 16,1992 10 11 12 13 14 15 if 17 1E 15 2C 2] 22 23 24 25 2E 25 2f APPENDDC A PRINCII'LES FOR TESLA -MIDWAY TRANSMISSION SERVICE APPROVED BY TAMC COMMISSION - DECEMBER 16,1992 1 2 3 4 5 6 7 8 9 1010 i 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PRINCIPLES FOR TESLA -MIDWAY TRANSMISSION SERVICE Whereas, certain California utilities and agencies signed the Memorandum of Understanding - California -Oregon Transmission Project dated December 19, 1984 (11MOU91) which relates to the development of a new 500 kV AC transmission facility (#1COTP11) between the California -Oregon border and the Tesla Substation; Whereas, sections 2.2 and 2.3 of the MOU contemplate that Pacific Gas and Electric Company (1tPG&Ef1) will provide firm bidirectional transmission service between Tesla and Midway Substations under reasonable rates, terms and conditions up to specified amounts to: the cities of Anaheim, Azusa, Banning, Colton, Riverside, and Vernon (#'Southern Cities"), San Diego Gas & Electric Company (fISDG&Eft) , Southern California Edison Company ("Edisonfl) and the Transmission Agency of Northern California (11TANC11) (collectively 11MOU Participants") ; Whereas, certain MOU Participants and certain other Designated Participants have executed the flRevised Principles", and IANC and PG&E have determined that the Revised Principles as modified for -TANC pursuant to the terms and conditions herein will form the basis for negotiating a definitive transmission service agreement under the terms and conditions contemplated by the MOU; Now, therefore, these principles are agreed to as of 25 , 1989 by and between PG&E and TAMC. -1- 1 2 3 4 5 6 7 8 9 10� 11' 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1.0 DEFINITIONS 1.1 CPPA Board of Control - The Board of Control established under the July 20, 1964 @'California Power Pool Agreement's among PG&E, Edison, and SDG&E. 1.2 COTP Terminus - The southernmost point of change in ownership of facilities between. PG&E and the COTP Participants, or as otherwise agreed by the parties. 1.3 CPUC - The Public Utilities Commission of the state of California or its regulatory successor. 1.4 Designated Participants - The parties receiving transmission service in accordance with the Revised Principles or like agreements, including TAMC under these principles. 1.5 Entitlements - The firm and non-firm transmission service to be provided to each Designated Participant. For TANG, three hundred (300) megawatts of firm, bidirectional transmission service provided by PG&E according to the terms and conditions of these principles unless increased in accordance with Section 5.3. 1.6 FERC - The Federal Energy Regulatory Commission or its regulatory successor. -2- 1 2 3 4 5 6 7 8 9 10 111 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i 1.7 Initial Reinforcements - Those transmission system reinforcements, other than South of Tesla Reinforcements, installed by PG&E according to the terms and conditions of Sections 4.1 and 5.2 to increase the Transmission Capability over PG&E's system between Tesla Substation/COTP Terminus and Midway Substation to meet the transmission requirements of the Designated Participants. 1.8 Mitigation Measures - Changes by PG&E in its operations) in order to avoid or eliminate transmission service curtailments even though these changes may be uneconomic to PG&E, provided that PG&E in its sole judgment determines that it can reasonably do so and is fully compensated for such actions as provided herein. Such actions shall include but not be limited to curtailment of third party loads if appropriate, uneconomic dispatch of hydro and pumped storage/generation resources, operation of higher cost generation and purchase of power from others. such actions shall not include any change in the operation of Diablo Canyon Nuclear Power Plant. 1.9 Pre -specified Mitigation - Mitigation Measures consisting of switching PG&E's AC Intertie schedules to PG&Els DC Intertie schedules when DC line capacity is available and increasing or decreasing Morro Bay C:�M 1 2 3 4 5 6 7 8 9 10 11 12I 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 generation to the extent available, for which PG&E is compensated as provided in Section 5.4. 1.10 Priority Commitments - PG&EIS obligations to meet load and load growth of its customers in northern California, and to transmit electricity, by reason of its status as a public utility and its existing contracts, including but not limited to, its interconnection contracts with utilities in northern I California and the California Power Pool Agreement,' the Pacific Intertie Agreement and the PG&E-DWR Comprehensive Agreement, and excluding transmission service provided by PG&E to Third Parties, and to Designated Participants under these principles, Revised Principles, and like agreements. 2.11 Prudent Utility Practice - Those practices, methods, and equipment, including provisions for contingencies and reserves, as modified from time to time, that are commonly used to operate electric power facilities (a) reliably and safely to serve a utility's customers dependably and economically, with due regard for the state of the art in the electric power industry, (b) by utilities which have at least 200 MW of peak load, own or operate at least 100 MW of generation and are members of the WSCC, and which are located either in the retail service areas of PG&E and TAMC Members or in the State of California, whichever represents the -4- ..._ G._:.. _ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 2i 2E better application of the considerations in subsection (a) above. The practices, methods, and equipment examined under this definition are not limited to those Of PG&E. 1.12 Revised Principles - The $#Revised Principles for Tesla -Midway Transmission Service,$$ executed by PG&E and certain MOU Participants or incorporated as part of agreements with other parties for such service, as they may be modified. 1.13 South of Tesla Reinforcements - A new Los Banos -Gates line and directly associated facilities, unless PG&E, in accordance with Prudent Utility Practice, identifies another set of reinforcements which are as cost effective, comparable in scope with, and serve the same purpose as the Los Banos -Gates line and directly associated facilities, which may be installed by PG&E in accordance with Section 4.2 to increase Transmission Capability to meet the transmission requirements of the Designated Participants and PG&E as set forth under the terms and conditions of the Revised Principles, these principles, and like agreements. 1.14 TAMC Member - Any of the Cities of Alameda, Biggs, Gridley, 8ealdsburg, Lodi, Lompoc, Palo Alto, Redding, Roseville, Santa Clara, and Ukiah; the Sacramento Municipal Utility District; the Modesto Irrigation 1 District; the Turlock Irrigation District; or the 2 Plumas-Sierra Rural Electric Cooperative, Inc.; 3 provided that such entity has not relinquished or 4 assigned its rights and interests in TANC's entitlement 5 in the COTP or, if the COTP is not constructed, has not 6 relinquished or assigned its rights and interests in 7 TANC's Entitlement under these principles or the 8 definitive successor transmission service agreement. 9 10 1.15 Third Party - An entity, to the extent that it is 11 neither receiving services as a Designated Participant 12 nor served under Priority Commitments or PG&E's 13 entitlements referred to in Section 3.2. Nothing in 14 these principles shall create any expectation or 15 obligation of PG&E to provide any service to a Third 16 Party. 17 18 1.16 Transmission Capability - The transfer ability, 19 expressed in megawatts, of PG&EIS transmission 20 facilities to transmit electric energy between Midway 21 Substation and Tesla Substation/COTP Terminus, which is 22 determined by PG&E in its sole judgment, consistent 23 with Prudent Utility Practice, to be the maximum power 24 transfer ability of the transmission facilities' under 25 operating conditions existing at the time of 26 determination. 27 28 -6- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 26 26 27 28 2.0 GENERAL TERMS 2.1 Effective Date of Principles - These principles shall become effective upon execution by PG&E and TAMC and shall remain in effect until a definitive successor transmission service agreement is executed by PG&E and TAMC. PG&E and TAMC shall use best efforts to complete a definitive successor transmission service agreement by September 1, 1989. PG&E shall use good faith efforts to file such agreement with FERC within sixty) days after execution. TAMC and PG&E agree that such definitive successor transmission service agreement shall reflect and implement Section 2.3 of the HOU fully, provided that any rights and obligations of the parties under Section 2.3 of the MOU shall not be satisfied fully until the South of Tesla Reinforcements are completed or such definitive successor transmission service agreement terminates in accordance with Section 8 of these principles. 2.2 Provision of Service - Beginning January 1, 1990, PG&E shall provide firm bidirectional transmission service in the amount of TANCIs Entitlement between Midway Substation and points of receipt and delivery set forth in section 2.4 pursuant to the definitive successor transmission service agreement embodying the terms and conditions of these principles, subject to the conditions in section 2.6. -7- 1 2 3 4 5 6 7 8 9 10 11 12 I 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2.3 Effect on Other Agreements - PG&E and TAMC agree that the present interconnection agreements and future similar agreements between PG&E and TAMC Members and between PG&E and the Northern California Power Agency will be amended or will provide for receipt and delivery of power transmitted hereunder at the backbone level at no additional cost to IANC Members consistent with Section 5.1. 2.4 Points of Receipt and Delivery - The points of receipt and delivery by PG&E shall be: 2.4.1 Midway Substation to each TAMC Member, to provide a complete transmission path from Midway substation over system interconnect and backbone subfunction transmission facilities of PG&EIs electric system; provided that for a given TAMC Member, transmission service between PG&E's backbone facilities and that TAMC Member shall be pursuant to an amendment to the existing agreement between PG&E and that TANC Member, if necessary, or a new agreement if that TAMC Member does not have an existing agreement with PG&E. For purposes of Tesla -Midway transmission service for TAMC and TAMC Members related to Sections 2.2 and 2.3 of the MOU, prior to January 1, 1999, or such earlier date as may be applicable in -8- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 191 20' 21 22 23 24 25 26 27 28 accordance with Section 5.6, if PG&E changes the definition of backbone facilities, PG&E will only charge TAMC whatever its charges would have been with the definition of backbone facilities in use as of January 1, 1989. PG&E also agrees that any changes in its current definition of backbone facilities prior to January 1, 1999, or such earlier date as may be applicable in accordance with Section 5.6, will not be used to require any TAMC Member to obtain transmission service between PG&E's backbone facilities and that, TAMC Member which it would not have had tol obtain without the change in definition of backbone facilities. 2.4.2 Each TAMC Member to Midway Substation, to provide a complete transmission path from each TAMC Member's electric system over system interconnect and backbone subfunction transmission facilities of PG&E's electric system; provided that for a given TAMC Member, transmission service between that TAMC Member and PG&Efs backbone facilities shall be pursuant to an amendment to the existing agreement between PG&E and that TAMC Member, if necessary, or a new agreement if that TAMC Member does not have an existing agreement -9- 1 2 3 4 5 6 7 8 9 10 11 12 i 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 with PG&E. For purposes of Tesla -Midway transmission service for TAMC and TAMC Members related to Sections 2.2 and 2.3 of the MOU, prior to January 1, 1999, or such earlier date as may be applicable in accordance with Section 5.6, if PG&E changes the definition of backbone facilities, PG&E will only charge TAMC whatever its charges would have been with the definition of backbone facilities in use as of January 1, 1989. PG&E also agrees that any changes in its current definition of backbone facilities prior to January 1, 1999, or such earlier date as may be applicable in, accordance with Section 5.6, will not be used to require any TAMC Member to obtain transmission service between PG&EIs backbone facilities and that TAMC Member which it would not have had to obtain without the change in definition of backbone facilities. 2.4.3 Midway Substation to the COTP Terminus/Tesla Substation, only for delivery onto the COTP. It is TANC's intent to transmit power delivered onto the COTP to various points, including, but not limited to Tracy Substation, Olinda Substation, and Malin Substation utilizing TANC's COTP capacity. Since TANC's rights . to use its COTP -10- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 entitlement, like the rights of all COTP Participants, will be defined in the COTP Participation Agreement and perhaps other project agreements, these principles do not address the issue of rights to use the COTP. 2.4.4 COTP Terminus/Tesla Substation to Midway Substation only for receipt from the COTP. It is TANC's intent to transmit power received from various points on the COTP including, but not limited to Malin Substation, Olinda Substation, and Tracy Substation to Midway Substation utilizing TANCfs COTP capacity. Since TANC's rights to use its COTP entitlement, like the rights of all COTP Participants, will be defined in the COTP Participation Agreement and perhaps other project agreements, these principles do not address the issue of rights to use the COTP. 2.5 TAMC Members, acting through TAMC, and PG&E agree to use best efforts to amend or enter into the agreements described in Sections 2.3, 2.4.1 and 2.4.2 by September 1, 1989, and not to condition such amendments or agreements on the inclusion of any other terms and conditions which are unrelated to or inconsistent with these principles. -11- 1 2 3 4 5 6 7 8 9 10 11 121 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2.6 Regulatory Approvals - Implementation of these principles and the definitive successor transmission service agreement is subject to and conditioned upon PG&E obtaining in a form and manner satisfactory to it, which determination shall be made in good faith and shall not be arbitrary or capricious, all governmental approvals, including rate filings, permits and certificates required to carry out these principles and such transmission service agreement. These principles and the definitive successor transmission service agreement will be reexamined and reconsidered by PG&E and TAMC to the extent either is found by any court or regulatory agency or body having competent jurisdiction, to be unlawful, unjust, unreasonable, imprudent or otherwise not in the public interest. Nothing in this Section 2.6 shall be construed to conflict with the time period specified in Section 6.3 during which transmission service hereunder is deemed firm following PG&E's inability to install South of Tesla Reinforcements. 2.7 These principles represent a compromise between PG&E and TAMC concerning the meaning and implementation of Section 2.3 of the MOO. The parties agree that these principles establish no precedent with regard to any other entity or agreement, or to the meaning and implementation of Section 2.3 of the MOO if the -12- 1 2 3 4 5 6 7 8 9 10 11. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 definitive successor transmission service agreement does not become effective. 3.0 CONTINUITY OF SERVICE 3.1 General - PG&E shall maintain continuity of transmission service for TAMC subject to PG&E's use of Transmission Capability between Midway substation and the points of receipt and delivery set forth in section 2.4 and transfer capability between PG&E and Edisonds system (including PG&E's share of the Midway -Vincent #3 line) for its Priority Commitments, provided that PG&E may as it determines necessary in its sole judgment curtail service to TANC pursuant to this Section 3 to maintain continuity of service to loads, system reliability and stability and to avoid or remedy conditions which may jeopardize its electric system or service thereon, or as is otherwise required for maintenance or Prudent Utility Practice. Any curtailment pursuant to this Section 3.1 shall be made in accordance with the priorities set forth in Section 3.2, except as modified below. It is recognized that under system jeopardy conditions PG&E's priority will be to maintain the integrity of its electric system and there may be instances where it is not possible to curtail strictly in accordance with the priorities set forth in Section 3.2. In such cases, PG&E's system -13- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 operators shall use good faith efforts to curtail consistent with the priorities set forth in Section 3.2. 3.1.1 In conjunction with maintaining continuity of service, PG&E shall coordinate with TAMC its schedules for planned outages which would affect service to TAMC. 3.1.2 Prior to completion of the South of Tesla Reinforcements, PG&E shall implement Pre- specified Mitigation to the extent available up to a total of 200 MW south -to -north and 700 MW north -to -south for TAMC and other Designated Participants under the terms and conditions of these principles. Subsequent to the completion of the South of Tesla Reinforcements, the charges in Section 5.4 shall cease, and service to TAMC shall not be curtailed if curtailments can be mitigated or eliminated by PG&E implementing Mitigation Measures for which PG&E shall bear the costs. 3.2 Curtailment Priorities - In the event that transmission line loading, based on daily preschedules, hourly schedules, or real time determination by PG&E dispatchers, is in excess of the amount of Transmission Capability, such excess loading may be curtailed by -14- 1 2 3 4 5 6 7 8 9 10, I I1 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PG&E under the terms and conditions of these principles for TAMC and like agreements for Designated Participants and Third Parties in the following sequence: 3.2.1 Non-firm and interruptible transmission service commitments except as otherwise specified below. 3.2.2 Any firm transmission service for or on behalf of Third Parties who have not contributed to, the Initial Reinforcements or the South of Tesla Reinforcements. 3.2.3 Any use by PG&E in excess of PG&EIS 500 MW of reserved Transmission Capability and Priority Commitments which also exceeds the amount of additional Transmission Capability PG&E has obtained through its contribution to the South of Tesla Reinforcements in accordance with Section 5.3. 3.2.4 Non-firm Entitlements of the Designated Participants and any interruptible transmission service for or on behalf of Third Parties who have contributed to the Initial Reinforcements. -15- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 2v 2E 2i 2E 3.2.5 Any use by PG&E of its 500 Mw of reserved Transmission capability, the firm Entitlements of the Designated Participants, and any firm transmission service for or on behalf of Third Parties when such entities (i) have contributed to the Initial Reinforcements, (ii) have not contributed to South of Tesla Reinforcements and (iii) do not request Mitigation Measures. 3.2.6 The firm Entitlements of Designated Participants and any firm transmission service for or on behalf of Third Parties when such entities (i) have contributed to Initial Reinforcements, (ii) have not contributed to the south of Tesla Reinforcements and (iii) do request Mitigation Measures or have agreed to Pre -specified Mitigation according to Sections 3.1.2 and 5.4; and, prior to completion of the South of Tesla Reinforcements, any use by PG&E of its 500 KW of reserved Transmission Capability for which it implements Mitigation Measures. 3.2.7 Transmission service for Designated Participants and Third Parties who have contributed to South of Tesla Reinforcements, any use by PG&E in excess of its 500 MW of -16- 1 2 3 4 5 6 7 8 9 10 11 12 13 14' 15 16 17 18 19 20 21 22 23 24 25 26 27 28 reserved Transmission Capability for which it has contributed to South of Tesla Reinforcements, and any use by PG&E of its Soo MR of reserved Transmission Capability. 3.2.8 Priority Commitments Curtailments in accordance with any of the foregoing categories shall be pro -rata among all entities in that category based on Entitlements, contract rights of', Third Parties, and the uses reserved to PG&E in this Section 3.2. 3.3 PG&E shall give TAMC reasonable advance notice prior to curtailing transmission service pursuant to section 3.1 or 3.2. Provisions for determination of transmission line loading in excess of Transmission Capability shall be included in the definitive successor transmission service agreement. 4.0 REINFORCEMENTS 4.1 Initial Reinforcements - PG&E shall promptly complete its study and propose a plan of service pursuant to the terms and conditions of these principles for Initial Reinforcements to its transmission system between Tesla and Midway Substations. PG&E will meet with TAMC and the other Designated Participants in order to discuss -17- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i= any comments they may have on the proposed plan of service and thereafter, giving due consideration to their comments, adopt a plan of service and install reinforcements necessary to implement it. TANG shall accept its share of the cost responsibility for these Initial Reinforcements in accordance with section 5.2. 4.2 South of Tesla Reinforcements - PG&E and TANC recognize that reinforcements to PG&E's system may be required) to maintain the adequacy of PG&E's transmission service' for IANC and other Designated Participants. When PG&E determines that South of Tesla Reinforcements are necessary, PG&E shall give notice to the Designated Participants at least six years in advance of the time when such reinforcements are to be completed. Once such determination is made, PG&E shall study and propose a plan of service for the South of Tesla Reinforcements. PG&E shall meet with the Designated Participants in order to discuss any comments they may have on the proposed plan of service and thereafter, giving due consideration to their comments, adopt a plan of service and install facilities and equipment necessary to implement it. TAMC shall accept its share of the cost responsibility for -South of Tesla Reinforcements in accordance with Section 5.3, unless (i) it elects not to contribute its share of the costs in accordance with Section 8.2.1 or (ii) the definitive successor transmission service agreement terminates in -18- 1 2 3 4 5 6 7 8 9 10 11 12 I 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 accordance with Section 8.2.2, 8.2.3 or 8.2.4 before TANG has made its election in accordance with Section 8.2.1 or contributed to the South of Tesla Reinforcements. TAMC shall not be required to contribute to the cost of the South of Tesla Reinforcements prior to the time that the CPPA Board of Control, as presently constituted, determines by affirmative vote of at least PG&E and Edison that such reinforcements are necessary. In the event that PG&E has already initiated the South of Tesla Reinforcements) when such determination is made by the CPPA Board of Control, the timing of TANCIs cost contribution shall be the same as if PG&E had initiated such reinforcements after such determination was made by the CPPA Board of Control. 4.3 Beneficial Use - To the extent TAMC can demonstrate that PG&E or a Third Party is making beneficial use of the additional Transmission Capability created by the Initial Reinforcements, or that a Third Party is making beneficial use of the Transmission Capability created by the South of Tesla Reinforcements, and has not contributed to the cost of such reinforcements, PG&E or, if after PG&Efs use of best efforts that Third Party agrees, that Third Party shall contribute a just and reasonable share of the costs of such reinforcements. To the extent TANC can demonstrate that PG&E is making beneficial use of the additional -19- 1 2 3' 4, 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Transmission Capability created by the South of Tesla Reinforcements beyond the 300 MW or more of additional Transmission Capability PG&E has paid for pursuant to Section 5.3, PG&E shall contribute a just and reasonable share of the cost of the South of Tesla Reinforcements in addition to the contribution already made pursuant to Section 5.3. If agreement on such cost sharing cannot be reached, then the matter shall be submitted to arbitration. Beneficial use shall not include PG&E's use for its 500 MW of reserved) Transmission Capability or for Priority Commitments. 4.4 Ownership - PG&E shall own, operate and maintain all reinforcements to its electric system in connection with these principles. 4.5 Diligence - After the South of Tesla Reinforcements are determined by the CPPA Board of Control to be necessary in accordance with Section 4.2, PG&E shall use due diligence to install such reinforcements. In the event that PG&E is unable to obtain any approvals required for PG&E to install the South of Tesla Reinforcements, PG&E shall make such proposals as are, in its judgment, reasonable alternatives to installing such reinforcements itself, including giving due consideration to permitting TANC to install such reinforcements. -20- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4.6 TAMC Alternative Project - In the event that TANC terminates the successor definitive transmission service agreement pursuant to Section 8.2.1 because TAMC elects to construct facilities in lieu of contributing to the cost of . South of Tesla 11 Reinforcements, TAMC shall offer PG&E the opportunity for joint ownership of a substantial portion of the amount of transmission capability from such facilities in excess of TANC1s needs provided that (i) regulatory or other approvals required for PG&E's participation in TANCIs facilities do not result in a delay in construction unsatisfactory to TAMC, (ii) such participation by PG&E does not impair TANCOs ability to finance such facilities or increase TANCts financing costs, and (iii) such opportunity does not preclude TAMC from giving other utilities and agencies the opp- ortunity to participate in ownership of such facilities. In the event that PG&E receives permission from the CPUC to participate once construction of such facilities has begun, TAMC shall afford PG&E the opportunity to participate to the extent that there is remaining capacity in excess of TANCfs and other Participants$ needs, provided that such participation by PG&E does not adversely impact TANC1s existing, pending, or future financing for such facilities. 4.7 Refund of Contribution to Reinforcements - In the event -21- 1 2 3 4 5 6 7 8 9 10� 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 that the successor definitive transmission service agreement terminates pursuant to Section 8 after TAMC has contributed to the cost of the South of Tesla Reinforcements, PG&E shall refund to TAMC its contribution as follows: 4.7.1 TAMC shall receive no refund until ten years after the commercial operation date of the South of Tesla Reinforcements, except to the extent that TANG demonstrates beneficial use of the South of Tesla Reinforcements by PG&E or a Third Party in accordance with section 4.3. 4.7.2 After the first ten years of commercial operation, or to the extent the demonstration is made in accordance with Sections 4.3 and 4.7.1, PG&E shall pay TANC that portion of TANC's contribution toward the cost of South of Tesla Reinforcements equal to the book value of TANC's contribution, not including any adjustment for applicable taxes, depreciated using a useful life of thirty years. 5.0 RATES AND CHARGES 5.1 Transmission Service Charge - For transmission service -22- 1 pursuant to Section 2.2, TAMC shall pay PG&E's current 2 rates on file with the FERC. The combined rates 3 (system interconnect and backbone) for each of the 4 years 1990 and 1991 shall be $0.74 per kA-month applied 5 to TANCIs Entitlement. Except as provided in Section 6 5.1.1, rates for subsequent periods shall be as 7 mutually agreed or as may be unilaterally filed by PG&E 8 with the FERC under Section 205 of the Federal Power 9 Act. TAMC shall have the right to intervene, protest, 10 or otherwise oppose any such unilateral filing. Zn 11 addition, after 1991 TAMC retains all rights it may 12 have under Section 206 of the Federal Power Act. Firm 13 transmission service will be billed on a contract 14 demand, take-or-pay basis for TANCIs Entitlement. The 15 parties acknowledge that PG&E and individual TAMC 16 Members have or may have separate agreements which 17 provide for area, backbone, and system interconnect 18 transmission charges. PG&E agrees to provide 19 bidirectional transmission service between Midway 20 Substation and the points of receipt and delivery as 21 set forth in Section 2.4 for the charges under these 22 principles and not to impose additional backbone or 23 -system interconnect charges in connection with service 24 under these principles and under such separate 25 agreements. Charges for area transmission- service, 26 where applicable, will be provided in accordance with 27 such separate agreements between PG&E and TAMC Members. 28 -23- 1 2 3 4 5 6 7 8 9 10 11 12, 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5.1.1 Except as provided in Section 5.6, the rates applicable from January 1, 1992 through December 31, 1998 shall be ME's backbone and system interconnect charges reflecting system -average cost based functionalized rates, changed based only on changes in ME's costs. 5.2 Initial Reinforcement Charge - TANC shall pay, as further defined in the definitive successor transmission service agreement, its proportionate share of the costs of the Initial Reinforcements, adjusted for applicable taxes, and associated annual ownership charges. Such costs shall include the study costs, not to exceed $2.6 million, associated with such reinforcements and the Los Banos -Gates Project. Such costs for Initial Reinforcements are estimated to be approximately $7.21 million before taxes. This estimate is based on transmission studies and subject to revision following completion of such reinforcements. Such total costs shall be shared proportionately among the Designated Participants and Third Parties based on total subscriptions for such I This estimate is subject to modification for, among other things, the installation of additional shunt capacitors at Tesla Substation to the extent these costs are not covered under separate projects. -24- 1 service. Designated Participants and Third Parties who 2 contribute to the cost of the Initial Reinforcements 3 shall receive appropriate reimbursement subsequent to 4 similar contributions made at a later date by other 5 Designated Participants or Third Parties. The annual 6 ownership charge for the Initial Reinforcements is 7 estimated to be $386,400 in 1990 allocated 8 proportionately to all contributing Designated 9 Participants and Third Parties. 10 11 5.3 South of Tesla Reinforcement Charge - The parties 12 anticipate that the South of Tesla Reinforcements will 13 increase the Transmission Capability by approximately 14 1100 to 1200 NW. Subject to Section 8, TAMC, PG&E and, 15 subject to separate agreement with PG&E, Edison, each 16 agree to pay for a share of the cost of the South of 17 Tesla Reinforcements, adjusted as to TAMC and Edison 18 for applicable taxes, and associated annual ownership 19 charges, as follows: TAMC - 300 MW, PG&E - 300 MW, 20 Edison - 281 NW. Such shares shall be divided by the 21 total shares allocated to TAMC, PG&E, Edison, other 22 Designated Participants and Third Parties (e.g., for 23 TANG, 300/total allocation), whether or not the total 24 shares allocated to TAMC, PG&E, Edison, other 25 Designated Participants and Third Parties exceed the 26 increased Transmission Capability resulting from the 27 South of Tesla Reinforcements. To the extent that any 28 portion of the cost of such reinforcements is not -25- 1 2 3 4 5 6 7 8 9 10 11 i 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 allocated to other Designated Participants or Third Parties in accordance with Section 5.3.3, TAMC, PG&E and Edison shall each pay its proportionate share of such amount and receive a corresponding increase in Entitlement or transmission use. TAMC, PG&E, and Edison also shall each pay its proportionate share of PG&Ets associated annual ownership charges for the South of Tesla Reinforcements. PG&E shall amend the October 12, 1987 Revised Principles with Edison to reflect the provisions of this Section 5.3. 5.3.1 In the event that Edison is relieved of its obligation to contribute to the cost of the South of Tesla Reinforcements pursuant to separate agreement with PG&E, PG&E and TAMC shall remain obligated to pay for 300 MW shares each; however, PG&E shall not be obligated to install the South of Tesla Reinforcements until and unless Edison's previous share of such reinforcements is assumed by PG&E, TAMC, other Designated Participants or Third Parties. 5.3.2 In the event that PG&E's participation in the COTP terminates, PG&E shall be relieved of its obligation to contribute to the cost of the South of Tesla Reinforcements. In such event, TANC and, subject to separate agreement with -26- 1 2 3 4 5 61 7, 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PG&E, Edison, shall remain obligated to pay for 300 MA and 281 MW shares, respectively; however, PG&E shall not be obligated to install the South of Tesla Reinforcements until and unless PG&E's previous share of the cost of such reinforcements is assumed by Edison, TAMC, other Designated Participants or Third Parties. 5.3.3 Unless ordered otherwise by a court or regulatory agency of competent jurisdiction, PG&E agrees to condition any agreements for new firm transmission service longer than 10 years, including contract renewals, between, Tesla Substation/COTP Terminus and Midway Substation to Designated Participants or Third Parties on agreement to pay a corresponding share of the costs of the Initial Reinforcements and the South of Tesla Reinforcements. Firm transmission service provided by PG&E to Third Parties for 10 years or less between Tesla Substation/COTP Terminus and Midway Substation may be subject to payment of an appropriate share of the costs of such reinforcements in accordance with section 4.3. Transmission service provided by PG&E which does not include a requirement to pay for Initial Reinforcements and South of -27- l 1 2 3 4 5 6 7 8 9 10 ilk 12 131 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Tesla Reinforcements shall not be considered by the CPPA Board of Control in determining the need for the South of Tesla Reinforcements. PG&E and TAMC also agree to use their best efforts to obtain agreement by Designated Participants and Third Parties to whom PG&E has already committed, after execution of the MOU, to provide firm Tesla -Midway transmission service to pay a corresponding share of the costs of the Initial Reinforcements and, for service beyond 1999, the South of Tesla Reinforcements. 5.4 Pre -Specified Mitigation Charge - In accordance with Section 3.1.2, TAMC shall pay PG&E as full compensation for Pre -specified Mitigation as follows: 5.4.1 January 1, 1990 through December 31, 1993 - $0.10/kW-month; 5.4.2 January 1, 1994 through December 31, 1998 $0.20/kW-month; 5.4.3 January 1, 1999 through December 31, 2004 - .$0.30/kW-month. -28- I Except as provided in Section 5.6, the foregoing rates 2 shall be applied to TANCIs Entitlement and shall not be 3 subject to change before January 1, 2005. 4 5 5.5 Losses - PG&E shall be compensated for transmission 6 losses by an appropriate reduction to TANCIs power 7 deliveries based on functionalized system -average loss 8 factors or as otherwise mutually.agreed. The parties 9 acknowledge that PG&E and individual TAMC Members have 10 or may have separate agreements Which provide for area, 11 backbone, and system interconnect transmission losses. 12 PG&E agrees to provide bidirectional transmission 13 service between Midway Substation and the points of 14 receipt and delivery as set forth in section 2.4 with 15 losses as set forth in these principles and not to 16 impose additional backbone or system interconnect 17 losses in connection with service under these 18 principles under such separate agreements. Losses for 19 area transmission service, where applicable, will be 20 assessed in accordance with such separate agreements 21 between PG&E and IANC Members. The loss factors for 22 the system interconnect and backbone subfunctions are 23 currently 0.999534 and 0.981547, respectively. The 24 combined loss factor is 0.9810896 (e.g., deliveries 25 over the system interconnect and backbone are reduced 26 to an amount equal to the amount of power scheduled at 27 the contract point of origin within PG&E's system 28 multiplied by 0.9810896). PG&E may revise these loss -29- I factors from time to time, as appropriate, and shall 2 submit an analysis to TANG supporting those revisions. 3 If the parties agree on those revisions, they shall 4 sign a separate letter agreement accepting those 5 revisions which shall become effective immediately 6 thereafter. If the parties cannot agree, PG&E shall 7 have the right to file a revision with the FERC and I 8 such revision shall become effective on the date it is 9 accepted for filing by FERC. 10 11 5.6 Early Termination of Rates - In the event that the 12 COTP is terminated or there is not substantial progress 13 towards its completion by January 1, 1995, or PG&E's or 14 TANCIs participation in the COTP terminates, Sections 15 5.1.1 and 5.4.3 shall no longer be in effect. 16 17 6.0- FIRMNESS OF TRANSMISSION SERVICE PRIOR TO SOUTH OF TESLA 18 REINFORCEMENTS 19 20 6.1 General - Transmission service provided hereunder shall 21 be deemed firm by PG&E and, subject to separate 22 agreement with TAMC, by Edison, for purposes of imports 23 to or exports from their respective control areas. 24 25 6.2 Replacement Power - Replacement power pursuant to these 26 principles is provided as an accommodation and in order 27 to reach agreement on the package of terms and 23 conditions for Tesla -Midway transmission service in -30- 1 2 3 4 5 6 7 8 9 10 11 12 13' 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 these principles. In accordance with Section 2.7, by agreeing to these principles the parties do not intend that anything in these principles requires, or may be used as a basis for requiring, that any replacement power or similar service be made available or supplied (1) to any TAMC Member other than under the definitive successor transmission service agreement, or (2) to any other entity. The parties acknowledge that PG&E is able to provide replacement power under the terms in these principles only because: (1) this service is expected to be needed only occasionally in off-peak periods and infrequently, if at all, in on -peak periods based on TANC's anticipated use of south -to -north transmission service; (2) this service will be provided only to TAMC Members and only in accordance with they conditions and limitations of these principles; (3) this service is to be provided in connection with curtailment of Tesla -Midway transmission service and not for unavailability of any power resource or other transmission service; and (4) PG&E will not be required to add or purchase power to its system, or reduce the integrity and reliability of service to Priority Commitments in order to supply replacement power to TAMC. South -to -north transmission service shall be deemed firm by PG&E for all purposes under the various interconnection, integration, and sales and service -31- L 1 2 3 4 5 6 7 8 9 10' 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 agreements between TAMC Members and PG&E; however, before the South of Tesla Reinforcements are installed, to the extent that Pre -specified Mitigation for south -to -north service is insufficient and TANC's Entitlement is curtailed in accordance with Section 3.1 or 3.2, PG&E shall provide replacement power, to the extent available and up to the amount of TANC1s Entitlement, if requested by a TAMC Member. Replacement power under this Section 6.2 shall not be provided by PG&E to the extent that curtailments are required and implemented by PG&E during on -peak periods as a result of: (1) emergency conditions, including Tesla -Midway transmission facility outages and partial outages; or (2) actions taken by PG&E during system jeopardy pursuant to Section 3.1. On -peak periods shall be designated by PG&E, consistent with general industry definitions and the load characteristics of PG&E's electric system, and shall include 50% of the hours in a week. Initially, on -peak periods shall be Monday -Friday 7 a.m. to 10 p.m., Saturdays 1 p.m. to 10 p.m., subject to change with adequate notice given to TAMC. The price formula used in any given month through December 31, 2004 shall be the quantity of replacement power provided in kWh in a given month times 10,500 Btu/kWh times PG&E's monthly average fuel cost (weighted average of oil and gas) for electric -32- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 generation at PG&Egs conventional steam plants. PG&E's average fuel cost for electric generation is currently defined as the sum of: (i) The annual average G-IIEG transportation rate calculated based on the currently effective G-IIEG gas transportation tariff or its successor. (The annual average G-IIEG transportation rate . is the current CPUC -adopted annual revenues for utility generation divided by the current CPUC -adopted annual utility electric generation volumes); and (ii) The core and/or non-core gas procurement rates (G -PC and/or G -PN, or their successor rates, as applicable based on the gas procurement for the month concerned), except when PG&E uses oil rather than gas for some or all of its power plants. In the latter case, PG&E may use its weighted average price of oil and gas instead of the applicable gas procurement rate. After December 31, 2004, replacement power shall be priced as agreed by PG&E and TAMC or as filed with the FERC by PG&E pursuant to Section 205 of the Federal Power Act. 6.3 Term of Firmness - For purposes of Sections 6.1 and -33- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 221 23 24 25 26 27 28 6.2, transmission service hereunder shall be deemed firm prior to the completion date of the South of Tesla Reinforcements; if, however, after the South of Tesla Reinforcements are determined by the CPPA Board of Control to be necessary in accordance with Section 4.2, PG&E is unable to install such reinforcements after exercising due diligence in accordance with section 4.5, transmission service hereunder shall be deemed firm only until the later of (i) January 1, 2004 or (ii) 8 years following the date the CPPA Board of Control makes such determination. 6.4 Limited Effect on Nature of Power Resources - Nothing in these principles shall be construed to define or determine that any power resource is firm except to the extent that firm transmission is an element of such definition or determination. 7.0 UNCONTROLLABLE FORCES The obligations of any party under these Principles and successor agreements thereto, except for payment obligations, shall be subject to uncontrollable forces. Further, such obligations shall be subject to PG&E's discretion in allocating time and materials during periods of shortage in order to avoid jeopardy to its retail customers. -34- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8.0 TERM OF SUCCESSOR DEFINITIVE TRANSMISSION SERVICE AGREEMENT 8.1 General - The successor definitive transmission service agreement shall become effective when permitted to do so by FERC and shall remain in effect for the longer of (i) the term of the COTP Participation Agreement or (ii) the date specified in Section 8.2.31 unless terminated in accordance with Section 8.2. 8.2 Early Termination - The successor definitive transmission service agreement shall terminate upon the earliest of the following events or dates: 8.2.1 The later of (i) the completion of the South of Tesla Reinforcements or (ii) three years after the CPPA Board of Control makes the determination that such reinforcements are necessary in accordance with Section 4.2; provided that South of Tesla Reinforcements are determined to be necessary by the CPPA Board of Control pursuant to Section 4.2 and TANC gives written notice to PG&E within ninety (90) days of such determination that it elects not to contribute to the cost thereof in accordance with Section 5.3. 8.2.2 The termination date specified in a written -35- 1 notice given by TAMC to PG&E at least sixty 2 (60) days in advance of termination, following 3 a change by PG&E, accepted or approved by 4 FERC, in its methodology for computing or 5 developing transmission service charges, rates 6 or prices under Section 5.1 if such change in 7 methodology is reasonably estimated toi 8 increase charges, rates or prices for g transmission service under Section 5.1 by 35 10 percent over four years or less from the date 11 such changed methodology becomes effective. 12 If TAMC has contributed to the cost of South 13 of Tesla Reinforcements in accordance with 14 Section 5.3, TAMC shall have the option to 15 continue service until the date on which TAMC 16 receives a refund in accordance with Section 17 4.7, or any shorter period when the 18 termination date specified in written notice 19 given by TAMC to PG&E is at least 180 days 20 after such notice is given, in which case PG&E 21 agrees not to increase the transmission 22 service charges, rates or prices under section 23 5.1 by more than 35 percent in any four year 24 period prior to the expiration of the ten year 25 period described in Section 4.7; provided, 26 however, for purposes of Section 4.7, TAMC 27 shall be entitled to receive its refund at the 28 -36- 1 2 3 4 5 6 7 8 9 10 111 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 same time as it would have if TAMC had notl elected to continue service. 8.2.3 The later of (i) January 1, 2010 or (ii) 10 years after completion of the South of Tesla Reinforcements if TAMC contributes to the cost of such reinforcements in accordance with Section 5.3; provided . that the COTP is terminated or is not in commercial operation by January 1, 2000, or PG&E's or TANC's participation in the COTP terminates. PG&E shall not unreasonably withhold its consent to extend for up to one year the above January 1, 2000 trigger date if substantial progress toward completion of the COTP has been made and is then underway. 8.2.4 The termination date specified in a written notice given by TAMC to PG&E at least ninety (90) days in advance of termination; provided that PG&E does not initiate installation of the South of Tesla Reinforcements within two years of the determination by the CPPA Board of Control that such reinforcements are necessary in accordance with Section 4.2, because (i) either PG&E or Edison has been relieved of its obligation to contribute to the cost of such reinforcements pursuant to -37- 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Section 5.3.1 or Section 5.3.2 and (ii) PG&Eos or Edison's previous share of the cost of such reinforcements is not assumed by PG&E, Edison,' Designated Participants or Third Parties. 9.0 SIGNATURES The signatories to these principles represent that they have been appropriately authorized to enter into this agreement on behalf of the party for whom they sign. Pacific Gas and Electric Company By: Vice Pr side t Power Planning and Contracts Transmission Agency of Northern California By: (I"t P Ch f,rman -38- 1 2 3 4 5 6 7 8 9 10 11 12 13, 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 APPENDIX B-1 PERMANENT ALLOCATIONS City of Alameda City of Healdsburg City of Lodi City of Lompoc Modesto Irrigation District Plumas-Sierra Rural Electric Cooperative City of Redding City of Roseville Sacramento Municipal Utility District City of Santa Clara Turlock Irrigation District City of Ukiah TOTAL B-1 (A) (B) Expressed Expressed in m Percentages Megawatts 2.104 6.31 0.236 0.71 2.069 6.21 0.266 0.80 34.000 102.00 0.235 0.70 10.333 31.00 1.786 5.36 15.333 46.00 27.000 81.00 6.334 19.00 0.304 0.91 100.000 300.00 APPROVED BY TAMC COMMISSION • DECEMBER 16,1992 1 2 3 4 5 6 7 8 9 10 11 12' 13 14 15 16 17 18 19 20 21 22 23 24 25 26 28 APPENDIX B-2 LONGTERM ALLOCATIONS' ' This Appendix represents a summary of the impacts of Long -Term Reallocations upon Permanent Allocations for the period beginning March 1, 1992 and ending December 31, 1993. B-2 APPROVED BY TAMC COMMISSION . DECEMBER 16,1992 (A) (B) Expressed Expressed in in Percentages Megawatts City of Alameda 5.000 15.00 City of Healdsburg 0.236 0.71 City of Lodi 5.788 17.37 City of Lompoc 0.266 0.80 Modesto Irrigation District 34.000 102.00 Plumas-Sierra Rural Electric 0.235 0.70 Cooperative City of Redding 0.000 0.00 City of Roseville 5.504 16.51 Sacramento Municipal Utility District 15.333 46.00 City of Santa Clara 27.000 81.00 Turlock Irrigation District 6.334 19.00 City of Uldah 0.304 0.91 TOTAL 100.000 300.00 ' This Appendix represents a summary of the impacts of Long -Term Reallocations upon Permanent Allocations for the period beginning March 1, 1992 and ending December 31, 1993. B-2 APPROVED BY TAMC COMMISSION . DECEMBER 16,1992 1 2 3 4 5 6 7 8 9 10 11 121 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 APPENDIX C-1 ADDRESSES OF THE PARTIES FOR BILLING City of Alameda Bureau of Electricity P. O. Box H Alameda, CA 94501 FAX #: 510/748-3975 City of Healdsburg c/o Northern California Power Agency 180 Cirby Way Roseville, CA 95678 FAX # 916/783-7693 City of Lodi P. O. Box 3006 Lodi, CA 95241-1910 FAX #: 209/333-6795 City of Lompoc 100 Civic Center Plaza Lompoc, CA 93438 FAX #: 805/736-5347 Modesto Irrigation District P. O. Box 4060 Modesto, CA 95352 FAX #: 209/526-7575 City of Redding Attention: Electric Department 760 Parkview Avenue Redding, CA 96001-3396 FAX #: 916/224-4389 City of Roseville Electric Department 2090 Hilltop Circle Roseville, CA 95678 FAX #: 916/784-3797 Sacramento Municipal Utility District Attention: Accounts Payable MS -27 P., O. Box 15830 Sacramento, CA 95852-1830 FAX #: 916/732-6587 C -la APPROVED BY TANC COMMISSION . DECEMBER 16, 1992 2 3 4 5 6 7 8 0 10 11 12 13 14 15 16 17 U 19 A 21 22 23 24 2° 2( 25 2i City of Santa Clara Electric Department Attention: Accounts Clerk 1500 Warburton Avenue Santa Clara, CA 95050 FAX #: 408/241-8291 Turlock Irrigation District Attention: Power Resources Department P. O. Box 949 Turlock, CA 95381 FAX #: 209/632-8181 City of Uldah 300 Seminary Avenue Ukiah, CA 95482 FAX,#: 707/463-6204 Plumas-Sierra Rural Electric Cooperative P. O. Box 2000 Highway 70,3 Miles West of Portola Portola, CA 96122-2000 FAX #: 916/832-5761 Transmission Agency of Northern California P. O. Box 15129 Sacramento, CA 95851-0129 FAX #: 916/852-1073 C -lb APPROVED BY TAMC COMMISSION - DECEMBER 16,1992 1 2 3 4 5 6 71 8 9 10 11 12'i 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 APPENDIX C-2 ADDRESSES OF THE PARTIES FOR NOTICES General Manager City of Alameda Bureau of Electricity P. O.Box H Alameda, CA 94501 FAX #: 510/748-3975 General Manager City of Healdsburg c/o Northern California Power Agency 180 Cirby Way Roseville, CA 95678 FAX #: 916/783-7693 Electric Utility Director City of Lodi P. O. Box 3006 Lodi, CA 95241-1910 FAX #: 209/333-6762 Public Works Director City of Lompoc 100 Civic Center Plaza Lompoc, CA 93438 FAX #: 805/736-1261 Chief Operations Officer Modesto Irrigation District P. O. Box 4060 Modesto, CA 95352 FAX #:- 209/526-7574 Director, Electric Department City of Redding 760 Parkview Avenue Redding, CA 96001-3396 FAX #: 916/224-4389 Electric Utility Director City of Roseville Electric Department 2090 Hilltop Circle Roseville, CA 95678 FAX #: 916/7843737 C -2a APPROVED BY TAMC COMMISSION - DECEMBER 16,1992 1 2 3 4 5 6 7 8 9 10' 11, 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Assistant General Manager Sacramento Municipal Utility District MS -41 P. O. Box 15830 Sacramento, CA 95852-1830 FAX #: 916/732-6562 Director of Electric Utility City of Santa Clara 1500 Warburton Avenue Santa Clara, CA 95050 FAX #: 408/241-8291 General Manager Turlock Irrigation District P. O. Box 949 Turlock, CA 95381 FAX #: 209/632-8181 City Manager City of Uldah 300 Seminary Avenue Ukiah, CA 95482 FAX #: 707/463-6204 General Manager Plumas-Sierra Rural Electric Cooperative P. O. Box 2000 Highway 70, 3 Miles West of Portola Portola, CA 96122-2000 FAX #: 916/832-5761 Executive Director Transmission Agency of Northern California P. O. Box 15129 Sacramento, CA 95851-0129 FAX #: 916/852-1073 C -2b APPROVED BY TAMC COMMISSION - DECEMBER 16,1992 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 APPENDIX D PRICING FOR SOT TRANSMISSION SERVICE 1. The TANC Commission shall determine, from time to time, the SOT Service Charge and the SOT Short -Term Reallocation Rate to be in effect for SOT transmission service to SOT Members. The SOT Service Charge shall be used for billing purposes by the TANC Treasurer when preparing the monthly bill to SOT Members. The SOT Short -Term Reallocation Rate shall be used as the maximum rate for Short -Term Reallocations pursuant to Section 4.4.1 of the Agreement. 2. SOT Service Charee - The SOT Service Charge shall be determined by including all costs that TANC incurs to provide the service, provided however, that charges for replacement power provided pursuant to the TMTS Agreement shall be billed by the TANC Treasurer directly to the SOT Member which uses that service. The SOT Service Charge shall include, but not be limited to, (i) the TMTS Charge plus, (ii) an amortized monthly amount designed to fully recover the SOT costs for SOT -related litigation and the Initial Reinforcements plus, (iii) any routine TANC administrative, legal, consulting, and other costs related to SOT transmission service that TANC has occurred during the billing period. For illustrative purposes, the SOT Service Charge shall be determined as follows: SOT Service Charge = (A+B+C) Where: A= The total dollars that TANC has been charged by PG&E during the current billing period, pursuant to the TMTS Agreement, excluding any replacement power. D-1 APPROVED BY TAMC COMMISSION - DECEMBER 16, 1991 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1® B = The monthly charge which reflects the amortization of certain SOT costs. Those costs shall include, but are not limited to, (i) all SOT litigation costs as accrued, capitalized, and placed into debt serviceI by TANC and (ii) TANC's contribution for the Initial Reinforcements. The amortization period for those accrued costs shall be over a time period beginning March 1, 1992 and ending May 1, 2024. The interest rate shall reflect TANC's true interest costs as determined by the appropriate bonds or their successor(s). C = TANC's routine administrative, legal, consulting costs related to SOT transmission service, and other SOT costs, based on TANC's annual budget. The SOT Service Charge shall be applied to any Long -Term Reallocations or Permanent Reallocations pursuant to Section 4 of the Agreement. SOT Short -Term Reallocation Rate - The SOT Short -Term Reallocation Rate shall be determined using the most recent monthly SOT Service Charge as its basis. For illustrative purposes, the rate shall be determined as follows: SOT Short -Term Reallocation Rate'" SOT Service Charge'` ($/kW -day) 300,000 kW * 30.42 Where k = is the most recent billing period The TANC Commission shall review the rate design for the SOT Short -Term Reallocation Rate in Section 3 of this Appendix D by December 1st of each year. Any revision to the rate design shall be in effect beginning January 1 of the following year, or as otherwise determined by the TANC Commission. D-2 APPROVED BY TAMC COMMISSION - DECEMBER 16, 1992 1 2 3 4 5 6 7 8 9 10 11 12 13 15 16 17 18 19 20 21 22 23 24 25 26 27 28 APPENDDC E INITIAL REINFORCEMENTS LETTER AGREEMENT APPROVED BY TAMC COMMISSION - DECEMBER 16,1992 December 30, 1991 Mr. Joseph B. Marcotte, Chairman Transmission Agency of Northern California P.O. Box 15129 Sacramento, CA 95851-0129 Dear Mr. Marcotte: This letter sets forth the agreement between Pacific Gas and Electric Company (PG&E) and the Transmission Agency of Northern California (IANC) regarding the construction by PG&E of the South -of -Tesla Initial Reinforcements and the contribution by TANC in aid of construction of such Initial Reinforcements as contemplated by Sections 4.1 and 5.2 of the Principles for Tesla -Midway Transmission Service (TANC Principles) entered into between PG&E and TANC on August 25, 1989. Nothing in this letter agreement shall represent agreement on any other issues currently the subject of settlement discussions between the parties in conjunction with FERC proceedings (Docket Nos. EL91- 8-000, ER91-344-000, and ER91-505-000)) regarding South -of -Tesla transmission service for TANC. Payment: TANC shall pay to PG&E a lump sum of $5,000,000 before the close of business on December 31, 1991. This amount consists of a $3,906,250 capital contribution to the Initial Reinforcements, and $1,093,750 (28 percent) for federal tax on Contributions In Aid of Construction (CIAC). It is intended and agreed that the payment made by TANC hereunder for its pro -rata share of the Initial Reinforcements shall constitute payment in full of TANC's obligation in connection with the construction and installation thereof. to the event that PG&E subsequently constructs the more extensive project referred to as the South -of -Tesla Reinforcements (SOTR), and TANC elects to contribute to the cost of the SOTR, none of the costs related to the Initial Reinforcements shall be included or assessed to TANC as part of its pro - rata share of the costs of the SOTR unless the Parties agree at the time to include such costs. If payment of the $5 million is received after December 31, 1991, a six percent surcharge to account for state taxes on CIAC shall be added to the lump sum amount and TANC shall pay such additional amount. In addition, payment received in 1992 shall include interest at 10 percent on an annualized basis accruing from January 1, 1992 up to and including the date payment is received by PG&E. TANC will receive no tax depreciation benefits associated with the Initial Reinforcements that may accrue to PG&E. Mr. Joseph B. Marco. , Chairman December 30, 1991 Page 2 of 4 2. Conditional Refund of Payment for Tax on CIAO: Should TANC choose to challenge the application of the federal or state tax on the CIAC made by TANG, PG&E agrees to cooperate with TANC in preparing and supporting such application. TANC shall bear the expenses of any such filing. If such a ruling is received from the appropriate federal or state authority, PG&E shall apply to the appropriate authority for a refund. If PG&E makes such an application, TANC shall reimburse PG&E for a pro -rata part of the actual administrative and clerical costs incurred. Should it be determined that PG&E is not required to pay federal or state tax on the CIAC made by TANC and such tax is not collected or is refunded, PG&E shall return TANC's pro -rata share of such refund. In the event that PG&E receives a refund of such tax which includes interest to PG&E, PG&E shall return TANC's pro -rata share of any associated interest on such payment to TANC. However, TANC shall pay PG&E an amount to make it whole (on a net present value, after tax basis) for any taxes and interest PG&E may incur at a later date, which are attributable to TANC's contribution. Because this amount will be difficult to compute, and its determination will be subject to significant controversy, the parties agree that*FANC shall pay PG&E the following sum, such amount being a reasonable approximation of the amount described in the preceding sentence: the sum of (i) the total amount includable in PG&E's gross income attributable to TANC's contribution multiplied by the "gross -up" percentage for contributions -in -aid -of - construction, as set forth in PG&E's CPUC Electric Tariffs, as applicable to contributions received on the last day of the taxable year for which such amount is so includable in PG&E's gross income, plus (ii) interest with respect to the total amount described in (i) computed at the "CPUC" Rate" from the due date (without extensions) of the federal tax return for the taxable year in which such amount is includable, until the date TANC pays to PG&E the total amount described herein. The "CPUC rate" is interest at the average three-month commercial paper rate as published in the Federal Reserve Bulletin, or such other rate as the CPUC may establish from time to time to replace the rate in paragraph 18 of its conclusions of law in Decision 87-09-026. 3. Refunds for Future Contributions: TANC shall be entitled to reimbursement from contributions made at a later date by other participants in the Initial Reinforcements Project. Such contributions may be made by existing participants who increase their participation, or new participants, who may make a capital contribution to the cost of the Initial Reinforcements to obtain service. In calculating the equivalent contribution for such a reimbursement, neither interest nor the six percent state tax on CIAC shall be included (if TANC's payment is received by PG&E on or before December 31, 1991), but federal tax on CIAC at 28 percent shall be included unless a determination is made by the IRS that the CIAC is non-taxable, in which case, the contribution will include no tax component. Reimbursement to TANC shall be pro -rata, Mr. Joseph B. Marc a, Chairman December 30, 1991 Page 3 of 4 based on the MW share of each participant, and shall be limited to contributions actually received by PG&E from new participants or existing participants who increase their Initial Reinforcements Project participation. To the extent that a new participant pays for a pro -rata share of the entire study costs (without a $2.6 million study cost cap), the portion contributed above the cap (including tax gross -up) will not be reimbursed to TANG since TANG has not paid such costs. PG&E and TANC will make good faith efforts to collect a full pro -rata contribution from any new participant or any existing participant which requests or obtains firm South -of -Tesla transmission service. 4. No Audit Rights: In return for PG&E's agreeing to accept a lump sum from TANG as payment in full for TANG's share of the costs of the Initial Reinforcements, TANG agrees to waive, for the limited purpose of this Initial Reinforcements settlement, all claims it may have to an audit, a final construction accounting, and a review of supporting documents for a final cost accounting if PG&E undertakes such an accounting for the Initial Reinforcements -- and PG&E shall have no obligation to provide such rights to TANC in connection with the Initial Reinforcements. 5. Completion of Construction: PG&E agrees to construct the Initial Reinforcements, as described in the Project Plan of Service attached hereto as Appendix A, and to complete and have the same ready for service within twenty-eight (28) months from date of the full execution of this letter agreement. PG&E shall be responsible for obtaining all necessary governmental and regulatory permits and approvals to construct and operate the Initial Reinforcements. In the event the initial Reinforcements are not completed and ready for service within twenty- eight (28) months after the full execution of this letter agreement, unless TANG otherwise agrees, PG&E shall refund to TANG its full contribution made hereunder with interest at 10 percent on an annualized basis accruing from January 1, 1992; provided that, PG&E has made a good faith effort to complete the Initial Reinforcements and has failed to do so, the refund would be pro rata based on actual benefits versus anticipated benefits. TANG shall not unreasonably withhold its consent to extend for up to four (4) months the time period for completion of construction without refund if substantial progress toward completion of the Initial Reinforcements has been made and is then underway. 6. TANC's Monthlv Pavment for Special Facilities for the Initial Reinforcement: TANG's monthly payment for Special Facilities (also sometimes referred to as Annual Ownership Charge) shall begin on the first of the month following commercial operation of the Initial Reinforcements. The amount of this monthly payment shall be as set forth in the settlement agreement currently being negotiated by the Parties or the TRS, whichever becomes effective. Mr. Joseph B. Marcc , Chairman December 30, 1991 Page 4 of 4 If you agree with the terms set forth above, please sign both duplicate originals and return one to me. Sincerely, PACIFIC AS AND ELECTRIC COMPANY Robert -J. Haywood Vice President Power Planning and Contracts Accepted: /�1--?v�/ Date TRANSMISSION AGENCY OF NORTHERN CALIFORNIA N:Y)of -•B. Marcoffe, December 30, 1991 Date Attachment a PLAN OF SERVICE SOUTH OF TESLA INITIAL REINFORCEMENTS PROTECT The project has three construction components, as follows: (1) Upgrade Existing Series Capacitors At Los Banos Substation Upgrading the existing series capacitors at Los Banos Substation, in the Los Banos -Midway #1 and #2 500 kV lines from 1,600 amp to 1,800 amp. This upgrade includes: a) Installing capacitor units at Los Banos Substation. b) Rebalancing capacitor groups and strings. c) Installing bracing for the capacitor bank platform. (2) 230 W Station and Line Work Establish two separate 230 kV circuits between Gates and Panoche Substations. This upgrade includes: a) Connecting to 230 kV the section of the Gates-Panoche 230 kV DCTL currently used for the Gates -Coalinga No. 2 70 W line. b) Installing new 230 kV circuit breakers at Gates and Panoche Substations. c) -Reconductoring the 230 kV bus at Panoche Substation. d) Relocating the Panoche-Kearney 230 kV line termination. (3) 70 kV Line Work Replace the 70 W line currently using the Gates-Panoche 230 W DCTL. This includes: a) Acquire right-of-way for construction of the line. b) Construct 11 miles of 70 kV line section to make available the section of the Gates-Panoche 230 kV DCTL being operated at 70 kV.