ML19329E651

Deposition of Sh Howell (CPC) Re Contract Changes Since CP Hearings & Util Objectives in Current Negotiations.Contracts W/Dow Chemical Co Encl

ML19329E651
Person / Time
Site:	Midland
Issue date:	11/05/1976
From:	Howell S CONSUMERS ENERGY CO. (FORMERLY CONSUMERS POWER CO.)
To:
Shared Package
ML19329E643	List: ML19329E642 ML19329E646 ML19329E648 ML19329E651 ML19329E652
References
NUDOCS 8006160431
Download: ML19329E651 (80)

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TESTIMotrl 0F STEPHEN H. HOWELL ltr name is Stephen H. Howell and I reside at 3923 Harvich Lane, Jackson, Michigan.

I am currently Vice President, Projects, Engineering and Constmetion for Con-sumers Power Company, Jackson, Michigan (" Consumers Power") with responsibility for engineering and construction activities for all production, generation and transmission facilities of the Company.

I graduated from Princeton University in 1954 with Honors in Engineering and received a Bachelor of Science in Engineering Degree. After graduation, I served two years on active duty as an officer in the US Navy.

I obtained a Masters of Science Degree in Industrial Management in 1966 from the Massa-chusetts Institute cf Technology, which I attended on a Sloan Fellowship.

After my naval service and prior to joining Consumers Power in 1961, I worked for five years as an exploration geologist for The Chio 011 Company.

I joined Consumers Power in Jackson as a geologist in the Gas Deparc.ent. I held successive Jobs in the Gas Department in underground gas storage, gas and oil exploration, gas production and transmission, and gas distribution, before being named Executive Manager of Gas Engineering and Constmetion in 1968. In 1970 I was appointed Executive Manager of Electric and Generating Plant Con-struction and in 1971 was named Executive Manager of Electric Plant Projects.

I was elected a vice president in June 1972 with responsibilities for design and construction of electric generating plants. I assumed ::gr current responsibilities

' n dpril 1976. 'I am a RegisterM i ofessional Engineer in the State of Michigan [ ~

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I have been involved in the consultations and negotiations between The Dow Chemical Company ("Dov") and Consumers Power with regard to the Midland Nuclear Plant for the last five years and am familiar with the contracts currently in effect between the parties and the positions of the parties in negotiations now in progress to modify the contracts in several respects. The purpose of this testimony is to outline changes in the contracts since the construction pemit hearings in this proceeding, and to indicate Consumers Powers principal objectives in the current negotiations between the parties.

I have attached as proposed Consumers Power Exhibit 7(a) - 7(c) the contracts between Dov and Consumers Power which were executed in January 1974 and which are presently in effect. These contracts are identical to those submitted to the US Nuclear Regulatory Commission and as to which it stated in its order of April 11, 1974:

"We have care.W reviewed the relevant portions of these contracts and reaffim our prior detemination that there are no ' changed circumstances',

as alleged by Saginaw, varzunting a reopening of these proceedings.

We think it sufficient to note that Dov has a contractual commitment to pur-chase large quantities of process steam from the completed facility, that substantial purchases of electricity are also contemplated, and that Dov's existing fossil-fueled facilities are to be maintained primarily on a standby basis. "

Principal Changes in the Steam Contract At the construction permit hearing, the fom of steam service contract appended to the 1967 Dov-Consumers Power General Agreement, as amended through Supple-mental Agreement No.13 (the ' initial steam proposal") was entered into evidence

3 as Mapleton Exhibit 27. The principal changes between this initial steam pro-posal and the steam supply contract executed in 1974 (the "present steam contract")

are as follows:

1.

There was no minimum requirement for steam in the initial steam proposal.

Dow agreed in the present steam contract to a minimum take of at least 2,000,000 lbs/hr of 175 psig steam. There is no mini =um requirement for 600 psig steam.

2.

The estimated date for commercial operation of the nuclear unit which would supply steam to Dow was changed from February 1,1974 in the initial steam proposal to March 1,1980 in the present steam contract.

3 The initial steam proposal contemplated that, if requested by Dov, Consumers would install fossil-fired package boilers to supply 1,000,000 lbs/hrof emergency back-up steam to Dow, to be utilized in the event the total steam supply to Dow from the nuclear plant fell below 1,000,000lbs/hr.

The present steam contract provides that such units would be installed by Consumers Power only if Dov had given Consumers Power such notice by October 1,1974, and that the notice could require boilers having a total flow rate not less than 300,000 lbs/hr and not more than 1,000,000lbs/hr of 175 psig steam. If no such notice had been given by that date, Dow would have been obligsted to maintain, throughout the life of the agreement, a standby and auxiliary source of steam of 300,000 lbs/hr at 150 psig or greater for Consumers Power's Midland Nuclear Plant. As a result of notice given by Dov in September 1974 and subsequent discussions, Censumers Power and Dov vill each provide for its own standby steam requirements. Consumers Power plans to install oil-fired package boilers with 300,000 lbs/hrof steam generating capacity, to supply its standby steam require =ents.

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The present steam contract provides that Dov may Benerate any amount of steam, as standby or auxiliar/ to the steam provided by Censumers Power, f' rom Dov's existing facilities which vere operable as of Januar/ 15, 1974, provided that Dov may repair but not replace or add to its then existing fossil-fueled South and West Power Houses. The initial steam proposal required that these fossil-fired units be retired after the second nuclear unit was declared in commercial operation.

Under the initial steam proposal, Dov expected to maintain its existing fossil-fired units as back-up for the nuclear-generated steam until the second nuclear unit was placed in service to provide back-up steam capacity.

At that time it was anticipated that the first unit on line vould be the steam generating unit (Unit 1) and that Unit 2, the back-up unit, would come on line about one year later. The order in which the units vill be placed in cerrice has now been reversed. The present steam contract further provides that, upon retirement of Dov's antiquated fossf.1-fired units, Dev may generate and utilize up to 1,000,000 lbs/hr of 175 psis steam from any facility owned and operated by Dov as standby or auxiliar/ to the steam provided by Consumers Power. This Dov steam capacity would enable Dov to provide back-up steam in the event both nuclear units are down or auxiliar/

steam to Dow in excess of the take from Consumers Power, in instances where Dov desires to do so.

This change was made when it was anticipated that nuclear steam vculd ccme on line in 1980. Dow had expressed concern that serious power shorta6es might develop in the early 1980's which could cause the Michigan Public

5 Service Commission to order Consumers Power to cut back steam and power supplies to Dov. Of cource, current pmjections are for nuclear steam to come on line in 1982 and the spectre of severe power shortages in the early 1980's has been somewhat diminished. Another reason for the change was Dov's lack of ability to forecast scales that far in advance. Dow desired the flexibility to make correct economic decisions on how to provide for those increases in steam demand that could not be forecast sufficiently in advance to give Consumers Power the required notice.

Dow has infomed us that it intends to shut down its antiquated units as soon as possible after a reliable and economic source of process steam is avail-able. Consequently, the provision of the present steam contract pemitting Dow to continue to generate steam from its existing fossil-fueled powerhouses is not expected to actually be utilized.

5 The present steam contract provides that if, for any reason, the Consumers Power's Midland nuclear Plant is prevented from being completed or operated, Dow shall pay Consumers Prwer for all costs for facilities to produce and serve process steam as well as costs for the turbine-generator cycle of the steam unit which cannot be used in a full electric-on3J unit.

There was no such provision for cost sharing in the initiel steam proposal.

However, the 1967 General Agreement; as amended through Supplemental Agree-

- ment No.13, prior to tae construction permit hearing, (the " initial proposal")

a provision that Dow would share 50/50 in all expenditures up to a limit of

$18,000,000 in the case of termination before the execution of the steam i

contract. The steam contract at that time was not executed but the proposed l

fom of such a contract was attached to the General Agreement.

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Principal Change in the Electric Contruct The principal change between the fem of electric service centract appended to the 1967 General Agreement, as last amended through Supplemental Agreement No.13, prior to the construction pemit hearing (the " initial electric pro-posal") and the electric service contract executed ;.n 1974 (the "present electric contract"), is that the initial electric proposal provided for 1

Consumers Power to supply all of Dov's electrical needs, up to 400,000 kW, while the present electric contract provides for Consumers Power to supply electric energy as auxiliary or standby to Dov's existing generating facilities 4

with a contract demand established at 300,000 kW. The reasons for these changes are analogous to those described for steam in item 4 above.

Since Dov has said it expects to cease operating these units as socn as a reliable source of process steam is in place, this provision also may be of 4'

no practical significance.

1 Other Changes i

The foregoing discussions summarize the major differences between the proposed j

electric and steam service contracts as considered at the construction per=it hearing,on the one hand, and the contracts executed in 1974 on the other, l

insofar as the differences relate directly to operation of Dov's existing fossil-fueled generating facilities, and to the installation and operation of any new fossil-fueled genezeting facilities. The only other difference of any new fossil-fueled generating facilities. The only other difference of any note is a minor one relating to the description of nuclear insurance and indemnity to be maintained.

T Current Negotiations There are current negotiations between Consumers Power and Dow regarding possible further contreet changes. Mr. Joseph G. Te=ple of Dow vill testify concerning changes sou6ht by Dov. Consumers Power is principally seeking the following modifications in the contract:

1.

The right to sell undivided interests in the Midland Nuclear Generating Plant to third parties, or to obtain financing for the generating plant by transferring it, or any portion of it, to a financial institution or other entity, with Consumers Power continuing to be responsible for corresponding limitaticn on Dov's right to increase its reserved steam capacity. Consumers Power seeks this revision principally in order to allow it to sell a portion of the plant to cernin raal electric cooperatives and municipal utilities that have ezoressed an interest in making such a purchase and with whom negotiations are in progress.

2.

Refinements in the fonm21as for calculating the rate to be charged for steam.

- s Exhibit Ta CONTRACT FOR SUPPLY OF WATER BEIWEDI CONSLNERS POWER COMPANY AND THE DOW CHEMICAL COMPANY s-

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s C,0!frRACT FOR SUPPLY OF WATER j

j MT!:EME ff, made this.3C day of euc,4, 1974, between

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CONSQERS POWER COMPANY (hereinafter called " Consumers Power"), a Michigan corporation having its principal office at Jackson, Michigan, and THE DOW CHEMICAL COMPANY (hereinafter called "Dow"), a Delaware corporation authorized to do business in the State of Michigan, having its principal office therein at Midland, Michigan, WITNESSETH:

WHEREAS, Censumers Power proposes to construct a two-unit nu-clear power plant and other facilities (which nuclear power plant and other facilities in the aggregate are hereinafter called the "Generatin6 Plant") on a site (hereinafter called the " Site") conveyed to Consumers Fover pursuant to the General Agreement dated December 13, 1967, as amended (hereinafter called the " General Agreement") between the par-ties hereto; and WHEREAS, operation of the Generating Plant vill require an adequate supply of water for various uses; and WHEREAS, Consumers Power is unwilling to construct the Gener-ating Plant at the Site unless Dov vill construct certain facilities and guarantee certain supplies of water for operation of the Generating Plant; NOW, THEREFORE, in consideratien of the mutual undertakings and promises herein made, Consumers Power and Dov hereby agree as fol-lows:

2 1.

Dow shall construct, cause to be constructed, or other-vise provide, and shall own, operate and maintain throughout the life of this agre ement, all transmission, treatment and other water supply faciliktet necessary to furnish and deliver, at :nutually agreeable points of delivery on t.he property line of the Site, the supplies of water which Dov is obligated to furnish to Consumers Power under Sec-tion 2 hereof.

Al'. facilities required to transmit, treat and utilize such vater beyAl such points of delivery and all facilities required to supply coolin6 vater to said nuclear power plant shall be furnished, operated and maintained by Consumers Power.

2.

Dow guarantees that it will fumish to Consumers Power the following supplies of water:

a.

at such time or times as Consumers Power may designate prior to th*9 initial operation, the initial supply of water for each nuclear steam supply system (including, but not limited to, primary and seconiary loop vater, fuel storage pool water and flushing vnter) and fossil-fired package boiler included in the Generating Plant, at no cost to Consumers Power.

b.

throughout the tem of this a6reement, continuous condensate return and makeup water equivalent to 100% of the steca supplied to Dow from the Gener-ating Plant, at no cost to Consumera Power.

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3 Section 2 (Contd) throughout the tem of this agreement, an or c.

such part of Consumers Power's additional re-quirements of makeup water for the Generating Plant as Consumers Power =ay frca time to time request for delivery on a continuous or non-continuous basis, but not to exceed h00,000 gallons per day (or such larger amount as the parties may agree on the basis of Generating Plant design or operation is desirable for Generating Plant operation), at the rate of

$0.85 per 1,000 ganons, subject to adjust-ment from $0.85 per 1,000 ganons as of

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January 1 of each year, for water thereafter fumished in such year, by $0.01 per 1,0C0 gallons for each full $0.01 per 1,000 gallons i

which Dov's average cost for unfiltered water supplied by the City of Midland varied from

$0.105 per 1,000 ganons for the year hme-distely preceding.

throu6 out the tem of this agreement, all or h

d.

such part of the potable water requirements for the Generating Plant as Consumers Power may from time to time request for delivery cn a continuous or noncontinuous basis, at the rate of $0.40 per 1,000 gallons for the first 25,000 gallons used

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4 Section2d(Contd) per quarter, $0 32 per 1,000 gallons for the next 50,000 gallons used per quarter, and $0.26 per 1,000 gallons for all over 75,000 gallons used per quarter, or such other rate for filtered water as may be charged by the City of Midland, exclusive of any penalty, min 4==_ charge or readiness-to-serve charge; provided, however, that if, in the opinion of le6al counsel for Dov, Dow is legally unable to resell to Consumers Power water obtained by Dow from the City of Midland, Dov shall provide an alternate means,

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satisfactory to Censu=cra Power, of delivering or ensuring the supply at the Site of Consumers Power's requirements of potable water for the Generating Plant, and the parties shall agree upon the ccupensation, if any, to be paid to Dow therefor.

Pota' ble water shall meet specifications at least equal to the City of Midland's standards for filtered water. The parties understand and a6ree that the supplies of vnter described in Paragraphs a, b and c of this Section 2 must meet the following specifications at the points of Consumers Power's intended use, as to the supplies of water described in said paragraph a, and at the point or points of introductica into the condensate system or systems of said nuclear power plant and any fossil-b fired package boilers included in the Generating Plant, as to the supplies i

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5 Section 2 (Contd) of water described in said paragraphs b and c:

2 Conductivity,micrcahos/cm 05 Total solids, ppa Dissolved 0.10 Suspended 0.01 Silica, ppa 0.03 Chlorides, ppa 0.1 Hardness, ppa 0

Oil, ppa 0

Organics, ppa O

Iron, ppa 0.01 Copper, ppa 0.005 Lead, ppa 0.005 Dov shall bear the capital, operating ani maintenance, and all other costs necessary to ensure that the specifications described herein shall be met. Dov shall reimburse Consumers Power for any such costs which are incurred initially by Consumers Power, either upon receipt of in-voice therefor or in the monthly rate for steam supplied to Dov from the Generating Plant, at Consumers Power's option. Suitable metering equipnent for measuring all vater furnished hereunder for which Dow is to be paid by Consumers Power shall be furnished, installed and main-tained by Dov. Dov shall test its meters at mutually agreeable intervals, and shall keep the same within accepted standards of accuracy. Consumers Power shall be given advance notice of each such test in order that its i

representatives may vitness the same. In case of failure of a meter to register the amount of water supplied during any period, billin6 for j

service furnished during such period shall be for an estimated amount based upon test results, use durin6 a similar period, both o'f the fore-going methods, or other known factors.

3 Dov does not undertake to furnish the supply of couJ.ng water for said nuclear power plant, and Consumers Power expects to use j

6 Section 3 (Contd) the waters of the Tittabawassee River at Midland to supply the cooling water requirements for said nuclear power plant.

If, however, at any time the supply of cooling water from the Tittabawassee River, or Consumers Power's right as a riparian owner to divert water from the Tittabawassee River for cooling purposes or for storage in a reservoir or reservoirs, is impaired or restricted to the extent of requiring Consumers Power to reduce its steam production, its electric energy pro-duction, or both, from said nuclear power plant, Consumers Power shall have the right to do the following (in the following order, if practi-cable):

(1) purchase replacement electric energy and recover from Dow, in addition to and not in lieu of the charges to Dow under the electric service contract for Dow's Midland Plant, the additional cost to Consumers Power of such replacement energy over the cost of equivalent electric energy had it been produced by said nuclear power plant or, to the extent that such purchase is impracticable, to re-duce or limit or cease supplying Dow with electric energy at Dow's Midland Plant, (2) reduce or limit or cease supplying Dow with steem, or (3) both of the abeve, without thereby breaching or teminating the contracts for electric and steam service executed by the parties concurrently herewith ar.d l

7 Section 3 (Contd) without affecting Dow's continuing liability throughout the period of such reduction, limitation or cessation for all minimum or capacity charges provided for in such contracts. If Consumers Power is legally precluded, by injunction or otherwise, from diverting watet from the Tittabawassee River for cooling purposes or for storage in a reservoir or reservoirs, or if at any time, in Consumers Power's sole judgment, tre supply of cooling water from the Tittabawassee River or Consumers Power's right as a riparian owner to divert water from the Tittabavassee River for cooling purposes or for storage in a reservoir or reservoirs is likely to be impaired or restricted to the extent of requiring Consumers Power to reduce its electric production from said nuclear power plant by h00 MWe or more, Consumers Power, in addition to its

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rights under the sentence i= mediately preceding, shall have the right to give Dow written notice to such effect and thereby require Dow to procure and furnish an alternate supply or supplies of water or other means of cooling acceptable to Consumers Power, adequate to meet Consumers Power's cooling requirements for said nuclear power plant; and Dow shall proceed, immediately upon receipt of such notice, to procure and furnish the same.

Notwithstanding anything herein to the contrary, Dow has the right, even though not requested by Consumers Power, at any time to procure such al-ternate supply or supplies of water or other means of cooling acceptable to Consumers Power and adequate to meet Consumers Power's cooling require-j ments for said nuclear power plant. All additional capital, operating, maintenance and other direct and indirect costs incurred by Dow and Consumers Power as a result of the procurement, furnishing and use of

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Section 3 (Contd) any alternate supply or supplies of water or other means of cooling pur-suant to this Section 3 shall be borne by Dow.

4 If Dow shall in any respect default in the performance of its obligations and undertakings set forth in Sections 1 through 3 hereof, Consumers Power shall have available to it all remedies provided by law for such default, including but not limited to the right to compel specific performance of this agreement and the right to recover damages for any and all liabilities to others and for any and all lossc4 or expenses incurred by Consumers Power by reason of such de-fault. Without in any way limiting the foregoing, Dow agrees that Consumers Power, in order to minimize or prevent damage, less or ex-pense to itself and others and to minimize or prevent impairment of

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service to its other customers, shall have the right to remedy such default by doing the following (in the following order, if practicable):

(1) purchasing replacement electric energy and recover-ing from Dow, in addition to and not in lieu of the charges to Dow under the electric service contract for Dow's Midland Plant, the additional cost to Consumers Power of such replacement energy over the cost of equivalent electric energy had it been pro-duced by said nuclear power plant or, to the extent that such purchase is impracticable, to reduce or limit or cease supplying Dow with electric energy at Dow's Midland Plant, i

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9 Section 4 (Contd)

(2) reducing or limiting or ceasing to supply Dow with steam, or (3) both of the above, without thereby reaching or terminating the contracts for electric and steam service executed by the parties concurrently herewith and without affecting Dow's continuing liability throughout the period of such reduction, limitation or cessation for all minimum or capacity charges provided for in such contracts. Without in any way limiting the foregoing, Dow also agrees that consumers Power shall have the right to remedy any such default by furnishing or contracting with others for the furnishing of necessary facilities, water supplies or water treatment, or by contracting with others for the furnishing of replacement steam or electric energy, and to recover from Dow all addi-tional capital, operating, maintenance and other direct and indirect costs to Consumers Power associated therewith.

5.

In order to provide storage for a supply of cooling water of sufficient magnitude to meet any emergency cooling requirements at said nuclear power plant and to furnish normal plant cooling water re-quirements, Consumers Power shall construct or cause to be constructed at the Site a reservoir or reservoirs and associated equipment of sufficient design and capacity to supply the design cooling water re-quirements of said nuclear plant continuously for such number of days as may be required by the United States Atomic Energy Commission or other governmental authorities, plus not more than 100 additional days.

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e 10 6.

Neither party shall be liable to the other hereunder for damsges for any act, omission or circumstance occasioned by or in con-sequence of any labor disturbance, act of the public enemy, war, in-surrection, riot, fire, storm, flood, explosion, or any cause beyond such party's reasonable control; provided, however, that nothing in this Section 6 ehall in any way affect Dow's obligations or Consumers Power's rights under Sections 3 and 4 hereof in the event the supply of cooling water from the Tittabawassee River, or Consumers Power's right to divert water from the Tittabawassee River, is impaired or restricted.

7.

This agreement shall become effective as of the date hereof and shall continue in effect for a period of fifty (50) years, and from year to year thereafter until terminated by either party as of the anniversary date hereof upon one (1) year's written notice to the other party.

6.

Any assignment, subcontracting or other transfer of this agreement or any part hereof without the prior written consent of Con-sumers Power shall be void and not merely voidable, except that Dow may contract with others for the construction of facilities and for its purchase of a water supply or supplies. Subject to the foregoing, the terms, conditions and obligations of this agreement shall bind and inure to the benefit of the successors and assigns of the parties hereto, and if any subcontracting by Dow is approved, the subcontract shall specify that the provisions of the subcontract shall be subject to, and the subcontractor shall comply in every respect with, the relevant pro-visions of this agreement.

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The failure of either party to enforce at any time any of the provisions of this agreement or to require at any time performance by the other party of any of the provisions hereof shall in no way be construed to be a waiver of such provision or to affect in any way the validity of this agreement or any part thereof, or the right of either party thereafter to enforce each and every such provision.

10. The terms of this agreement shall not be changed, super-seded or supplemented except in writing, signed by authorized officers of the parties hereto.

IN WITNESS WlEREOF, the parties hereto have executed this agree:nent in duplicate by their du.ly authorized representatives on the day and year first above written.

CONSUMERS POWER COMPANY N'.

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4 AGREEMENT FOR ELECTRIC SERVICE BETWEEN CONSUMERS POWER COMPANY i

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TIIE DOW CIEMICAL COMPANY i

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o AGREEMCC FOR ELECTRIC !ERVICE AGIOMENT, made this d day of

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, 1974, between j

CONSUMERS POWER COMPANY (hereinafter called " Consumers Pover"), a Michigan corporation having its principal office at Jackson, Michigan, and THE DOW CIEMICAL COMPANY (hereinafter called "Dow"), a Delaware corporation authorized to do business in the St' ate of Michigan, having its principal office therein at Midland, Michigan, as follows:

l 1.

Consumers Power agrees to supply, and Dov agrees to pur-chase hereunder, electric energy as auxiliary or standby to Dov's pres-ently existing electric generating facilities located at Dov's chemical plant ccuplex, including all contiguous administrative and other facili-ties, (hereinnfter called "Dov's Midland Plant") located in Sections 20, 21, 22, 23, 26, 27, 28, and 35 in the City of Midland and Midland Township, Midland County, Michigan, for the operation of Dov's Midland Plant and for the operation of all of Dov's wells heretofore served by Dov's Midland Plcnt primary electric distribution system and shown on the at-tached Dov's Sketches No. 64-SK-1438 (Rev.12/1/67) and 64-SK-1439 (Rev.

12/1/67). It is expressly understood and agreed that Dow may modernize and replace said wells, but Consumers Power vill not serve hereunder any i

additional total number of such wells, any W load for wells in excess of the present total kW load of such wells or any extension of Dov's Midland Plant primary electric distribution system presently serving said wells.

Dow presently pinns to construct additional chemical plant facili-ties on land adjacent to Consumers Power's Midland Plant in. Midland County, l

Michigan. Consumers Power agrees to serve such additional facilities W.,

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as part of Dov'o Midinnd Plant under the terms of thia Agreement, modi-ficd by written agreement of t'he parties as necesenry to provide for auch nervice.

2.

The electric energy to be supplied hereunder shall be al-ternating current, three phase, 60 hertz, at approximately 13,800 volts.

Delivery shall be.made at a mutually agreeable point at each of two Consumers Power-osned 138,000-13,800 volt substations at Dov's Midland Plant. Said energy shall be metered at each of said substatiens and totalized for billing purpoacs by meters and metering equipment furnished, installed'nnd maintained by Consumers Power. Censumers Power shall make periodic tests of its meters and keep them within acceptable standarbs of accuracy. Dov shall furnich, without cost to Consumers Power, a suitable site or sites on its premises for Consumers Power's 138,000-13,800 volt substation equip ent and transmission lines. If, during the tem hereof,

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Dov'n une of its premises makes necessary the relocation of said facili-ties, from the site or sites so furnished, to another site or sites on its premises, Consumers Power shall relocate the sa=e at Dov's request, and Dow shall reimburne Consumers Power for the cost thereby incurred.

Conoumers Power, its agento and employees, shall have full right and au-thority of ingrcos and cgress at all times en and across Dov's premises, for the purpose of constructing, operating, maintaining, replacing, re-pairing, moving and removing its said facilities. Dov's use of its pmmises shall not unreasonably interfere with Consumers Power's said right of ingress and egress. Dow shall afford adequate protection to avoid damage to or tampering or interference with Consumers Pover's said substation equiptent and transmionion lines, meters and meterin6 equip-ment.

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3 Dov shall pay for such energy in accordance with Consumers Power's Rate "F."

By reason of the character of the proposed use of acrvlec, 11. La nico nubject to the provisions of Rule 12(1) - Auxilinry or Standby Service, of Conoumers Power's Standard Electric Rules and Heguintions. A copy of said Rate and Sheet No. 5 06 and Sheet No. 5.O'(

containing snid Rule are attached hereto and made a part hereof. Said service shall also be subject to such future revisions and s=end=ents to said Rate or Rule, or both, supplements thereto, or substitutes there '

for as are hereafter filed with and approved by the Michigan Public Service Comission.

4.

It is further agreed that:

(a)

Dov's contract de=snd fur such service shall be established nt 300,000 kilovntts. Such service is for the cole use of Dov, for the purposes aforesaid, and shall not be transmitted elsewhere or chared or resold. Said energy may be used by Dov as auxiliary to electric energy generated by Dov by its own generating facilities existing and opernting cr operable as of January 15, 1174. It is a canaition of Consumers Power's agreement to serve Dow hereunder that Dow may repair, but shall not replace or add to, Dov's said gener-ating facilitics. Dow may generate and utili o in its Midisnd Plant such portion of Dov'o Midland Plant electrical power re-quirements as mny be supplied incidentally frtu chemical processes nt Dov's Midland P1nnt. Consumers Power agrees to po mit Dov, when Dow so desires, to operate Dov's electric generating fa-cilities in parallel with Consumers Power's electric system; provided, however, that such parallel operation shall at no

k time crente a hazard, disturb, impair or interfere with cosuitznern Pover'n nervice to other custo ors. Dow furtter esgreen 1.hnt the electric energy furnished by Consumero l'ower shall not be utili:.cd in such manner as to cause any objec-tionable inductive interference in em:munication circuits.

(b) Such service shall be governed by Consumers Power's Standard Rules and Regulations as filed with the Michigan Public Service Cdssion, and such future re-visions and amendments thereof, supplements thereto, or substitutes therefor as hereafter filed with and approved by the Mic!ti6nn Public Service Comission.

(c) }bccept as to the demand and minimum charges payable by Dov, prescribed in said Rate and Rule 12(1),,

neither party shall be liable to the other for anmages for any act, omission or circumstance occasioned by or in con-sequence of any act of God, labor disturbance, act of the public enemy, var, insurrection, riot, fire, storm or flood, explosion, breakaSe or accident to machinery or equipnent, or by any other cause or causes beyond such par-ty's control, incluling any curtailment, order, regula-tion or restriction imposed by goverrmental, military or lawfully established civilian authorities, or by the making of necessary repairs upon the property or equip::ent of either party hereto; provided, however, that Consumers Power's responsibility for interruptions in the service, phase failure or reversal, or variations in the service

5 chnrnetcrintica ohnll be as provided in anid Standard Miectric Huleo and Hegulations.

(d) This Agreement will extend for an initial tem of five (5) years i' rom the date Unit No. 2 of the nuclear power plant which Consumers Power proposes to con-struct at Midland, Michi sn,is declared by Consu=ers Power 6

to be' available for co:=ercial operation, which date is estimated to be March 1,1979 This Agreement vill con-tinue in effect Crom month to month after said initial tem until ter=innted by mutual consent, or tcminated at the expiration of any monthly period by either party giving the other at least sixty (60) days' notice of its desire to teminate the sa=e, which notice may be given at any time.

(e) This Agrce=ent shall not be transferred by Dow or othervice aliennted without Consu=crs P'over's writ-ten consent. Subjcet to the preceding sentence / this A5ree-ment inurcs to and binds the auccessora and assigns of the respective partien hereto. Thia Agreement concels and nup rneden, no of the date of comencement of the initial tem hercor, the contrnet betvcen the partico hereto dated December 30, 1969 for the purchase of ele m 6e energy at the above location, including any rca M c

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IN WITNESS h1EREOF, the parties hereto have executed this Agree-ment in duplicate by their duly authori::ed representatives as of the day and year first above written.

A CONSUMERS PO' u COMP JU Md POWtA CC.dANi IWf 11 GAL DEPARTMENT By

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o M.P.S.C. No. 7 - Electric ThirteenthRevised Sheet No.16.00 Consumers Power Company Cancelling Twelfth Revi. sed Sheet No.16.00

'To revite Afonthlv Ratel COMMERCIAL AND INDUSTRIAL PRIMARY HIGH LOAD FACTOR SERVICE (OPTIONAL CONTRACT RATE "F")

Availability:

Open to any customer desiring primary voltage service for commercial or industrial use where the billing demand is 100 kW or more. This rate is not available for streetlighting service or for resale purposes.

Naters of Service:

~

Alternating current,60 hertz, single phase, or three phase, the particular nature of the voltage in each case to be determined by the Company.

Monthly Rate:

Capacity Charge:(Including 600 kWh per kW of billing demand)

$9.30 per kW for the first 2,000 kW of billing demand,

$8.20 per kW for the next 8,000 kW of billing demand,

$7.50 per kN for the next 15,000 kW of hilling demand, S6.90 per kW for all over 25,000 kW of billing demand.

Energy Charge:

.48/ per kWh for all kWh over 600 kWh per kW of billing demand.

/

Fuel Cost Adjustment:

The fuel clause adjustment shall consict of an increase or decrease of

.0109 mill par hWh for each ftill

.01 min inercase or decrettce in the averace delivered coct of fossil fuel burt.cd inonthly above or belw 5.15 mi13s per kWh adjusted by the ratio of the monthly foncil fuel generJ. tion to the conthly net generatio:1.

The adjustdei.I'nin11 apply to the second bindng month following the

calendar month in which the fuel is burned.

Tax Adjustment:

(a) Bills shall be increased within the limits of political subdivisions which levy special taxes. license fees or rentals against the Company's property, or its operation, or the production and/or sale of electric -

energy, to offset such special charges and thereby prevent other customers from being compelled to share such local increases.

(b) Bills shall be increased to offset any new or increased specific tax or excise imposed by any governmental authority upon the Company's generation or sale of electrical energy.

Minimum Charge:

The capacity charge included in the rate.

Delayed Payment Charge:

A delayed payment charge of 2% of the total net bill shall be added to any bill which is not paid on or before the due date shown thereon.

(Continued on Sheet No.16.01)

Effective: For electric ser*.ce rendered an and after s

tasued under authority of order of the ggggg7y 1g' lg7h MMTid;"'MW"TWah332 lasued by: A. H. Aymond. Chairman of the Board of Directors and President, Jackson, Michigan

o M. P. S. C. No. 7 - E! ctrie Consumers Power Compan:-

Eighth Revised Sheet No.16.01 (To recine Adiustment for Off Feak Hour Operation Cancelling Seventh Revised Sheet No.16.01 RATE "F" (Continued from Sheet No.10.00)

Billing Demand:

1. %e hil!!ng demand shall be the kilowatts (kW) supplied during the 15-minute period of maximum use in the billing month adjusted for nff. peak hour operation as specified elow, but not less than 60% of the highest billing demand of the preceding 11 months, nor less than 100 kW.

2. When a customer guarantees in writing a billing demand of 2.500 kW or more for a minimum term cf 'welve consecutive months the billing demand each month during the period of such guarantee shall be the average of the four maximum weekly demands for such month (the period after the first 21 days of each month being considered to be the fourth week); provided that no billing demand. hall be less than 60% of the highest bill-ing demand of the preceding 11 months, and in no case less than 2,500 kW.

Adjustment for Off. Peak Hour Operation:

Demands created during off-peak hours designated by the Company in the Company's current " Schedule of Off-Peak !!ours" (Sheet No. 7.00) shall be disregarded provided the billing demand shall not he less than 63 % % of the greatest demand created in such cff peak hours nor less than 100 kW.

Adlustment foe Power Factor:

This rate requires a determination of the average power factor maintained by the customer during the billing period. Such everage power factor will be determined through metering of lagging kilovarhours and kilowatthours i

during the billing period. ne calculated ratio of lagging kilovarhours to kilowatthours will then be converted to the average power factor for the hilling period by using the appropriate conversion factor. Whenever the average power factor during the billing period is above.699 or below.600, the capacity charge will be adjustnl as follows:

(a) If the average power factor during the billing period is.900 or higher the capacity charge will be reduced by 2%. This cred;t shall not in any case be used to reduce the prescribed minimum charge or the capacity charge when based upon 60% of the highest billing demand of the preceding 11 months.

(h) If the average power factor during the billing period is less than.800, the capacity charge will be increased by the. ratio that.800 bears to the customer's average power factor during the billing period.

Terms and Form of Contract:

Minimum term of one year on written contract.

1 (Continued on Sheet No.16.02)

I" uni: December 29, 1972 Effective: For electric service rendered on and after November 25, 1972 Issued under authority of order of the hilchigan Public Service Commission dated November 24, 1972 in Case U-4174.

Issued by: A. II. Aymond, Chairman of the Board of Directors and President, Jackson, Michigan

e gf. l'. S. C. No. 7 - Electric Commnen l'nwer Company Third Revhed Sheet No. Ill.02 Tu resise llules amt fieculations)

Cancellins Senmd llesised sheet No. 111.0 2

' d RATE "F" t onticad from Sheet No.18.01) llules and Regulations:

Service governed by Company's Standard Rules and Regulations.

Whcre service is supplied at a nominal voltage of 25,000 volts or less, the customer shall furnish, install and maintain all netrssary t. nsforming, controlling and protective equipment.

Where the Company elects to measure the service at a nominsi voltage above 25,000 volt 3,2% will be deducted, for billing purposes, from the demand and energy measurements thus made.

Where the Company elects to measure the service at a nominal voltage of less than 2,400 volts,3% will be auded for hilling purposes, to the demand and energy measurements thus made.

Where service is supplied at a nominal voltage of more than 25,000 volts and the customer provides all of the nee-enary transforming, controlling and protective equipment for all the service, there shall he deducted from the capa-city charre herein provided for, the sum of 10e per kW if the nominal supply voltage is 46,000 volts or Icw and 20e per KW if the nominal supply voltage is above 40,000 volts (after the 2% deduction or the 3% addition referred in ahnve) for the marimum integrated demand created during the month or for the hilling demand, whichever is greater.

Where service is supplied at a nominal voltage of more than 25,000 volts and the customer provides all of the ner.

cuary transforming, controlling and protective equipment for a part of the servier, there shall be deducted from the capacity charge herein provided for, the sum of 10e per kW ff the nominal supply voltage is 46.000 volts or less and 20e per kW if the nominal supply voltageis above 46,000 volts (after the 2% deduction or the 3% addition referred to above) for that part of the maximum integrated demand created during the month through such customer-owned equipment.

i lum il: }l ctnnher 29, 1972 Effcetive: For electric service rendered en s

and after November 25, 1972 lwunt under authority of order of the hiichigan l'uhlie Service Commission dated November 24, 1972 in Case U-4174.

Issued by: A. H. Aymond, Chairman of the Board of Directors and President, Jackson, hiichigan

M. P. S. C. Nr. 7 - Elecerie Sixth Revistd Sheet No. 5.06 Consumess Power Company Caa, mns Fifth Revised Sheet No. 5.00 go ahmo MPSC approval)

STANDARD RULES AND REGULATIONS (f%*l-d froaa Sheet No,5.05)

12. Appucation of Rates (Continued)

(1) Auxiliary or Stand Sy Service:

" Auxiliary" service is defined as trat electric seMee which supplements another source of power supply, there being throw over arrangements, either electrical or mechanical, which enable either or both sources of supply to be utilized for all or any part of the customer's total requirements.

" Stand-by' seMee is defined as that service which is capable of being used in place of the gener Ily used source of power supply, there being no actual use of the " stand-by" seMce except in emergency.

Customers who purchase all or practically all of their energy requirements from the Company, but who install generating equfpment for use only in case of failure of the Company's service, or who use a relatively small amount of energy generated as a by-product of manufacturing or testing processes, will not be considered to be using the Company's seMee for either auxiliary or stand-by purposes.

Whero a customer desires to use the Company's facilities as an auzihary or stand-by to primary or secondary serv-Ice supplied, or capable of being supplied from another source, the Company only offers its General Secondary Service Rate "C," or its Primary Service Rates "D," and "F" for such sesvice.

'Ihe application of the above rates to auxihary or stand-by service shall be subject to the following special condi-tions:

l (1) Contracts for such service shall be executed on a special contract form for minimum term of one year.

(2) A " contract AmanA" shall be initially established by mutual agreement between the Company and the cus-tomer and stated in the service contract. The Company shall not be required to supply power to the customer in excess of the contract demand; however, the Company will, at the written request of the customer made at least thirty days in advance, permit an increase in the mntract demand provided the Company has power available.

(3) No customer shall be permitted to effect a reduction in his contract demand by recontracting for the same service, unless a bona fide reduction in Icad has occurred.

(4) The bilhng demand provisions in Rates "C," "D* and "F" shall be modified to provide that the billing de-mand shall not be less than 60% of the highest billing demand of the preceding 11 months, or 60% of the contract den'qd.' whichever is greater, and in no case less than 25 kW on Rate "C," 200 kW on Rate "D,"

or 100 kW on Rate "F." The bilHng demand provisions of Rates "D" and "F'* shall be further modified to provide that the billing demand shall in no case be less than 80% of the actual maximum kilovoltampere (kVA) demand.

When the billing demands under Rates "D" and "F" are determined by any of the modifications stated above, the capacity charge credit based on average powcr factor shall not apply.

(Continued on Sheet No. 5.(YT)

[

Issued: May 8,1970 Effective: For electric service rendered on tsumt under authority of order of the and after October 20,1969 Michman Public Service Commission dated April 20,'1970 in Case U-3179.

Issued by: J. H. Campbell, President, Jackson, Michigan l

E M.P.S.C. No. 7 - Electric Eighth Revised Sheet No. 5.07 runsumers Power Company Cancelling Seventh Revi.ed Sheet No. 5.07 (no revise Rule No.12(H)

STANDARD RULES AND REGULATIONS (Continued from Sheet No. 5.06)

12. Application of Rates: (Contd).

(i) Auxiliary or Standby Service: (Contd)

(5) The provisions in Rate "D" and Rate "F" covering the determination of the billing demand from the average of the four weekly maximum demands shall not apply.

(6) The provisions in Rates "C","D" and "F" for adjusting off. peak demands shall not apply.

(7) For the protection of the Company's facilities, the customer may be required to furnish, install and miintain a load limiting device approved by and under the sole controi of the Company.

(j) Temporary Service:

Customers desiring general secondary service for a short time only, such as for construction jobs, traveling shows, outdoor or indoor entertainments or exhibitions, etc, shall pay the charge per customer per month provided in the General Secondary Service Rate "B". provided, however, that if such service extends for a period in excess of six months the customer may qualify for other of the Company's available rates.

In addition, such customer shall pay installation and removal charges as follows:

(1) Where 120/240 voit single phase service is desired and such service is available at the site at the time temporary service is desired, the charge for installation end removal of temporary. single phase, three wire, 120/240 volt service shall be:

(a) For temporary overhead service

$40.00 (b) For temporary underground service, during the period from April I to December 14 355.00 (c) For temporary underground service, during the period from December 15 to March 31 275.00 (2) Where 120/240 volt single phase service is not available at the site, or if other than 120/240 voit single phase service is desired, the charge for installation and removal shall be based on the cost thereof.

The customer may be required to deposit with the Company an amount to cover the cost of installing and removing these temporary facilities plus the estimated cost of service under the terms of the rate set forth above. Meters may be read daily and the deposit modified as the energy used may justify such modifications.

(Continued on Sheet No. 5.071)

IssueJ: November 3o.1973

' /

Effective: For electric service rendered on towed unJer authority of order of the and after November to.1973 Muhigan Public Service Commission dated November 9.1973 in Case U-4332 tsaued br: A. H. Aymond, Chairman or the Board of Directors and President.

Jackson, Michtsan

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Exhibit 7e CONTRACT FOR STEAM SERVICE BETWEET CONSUMERS POWER COMPATE AND THE DOW CHEMICAL COMPATE I

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CONTRACT FOR STEAM SERVICE AGREEMENT, made this 3d day of OWoM

, 197h, between CONSUMERS POWER COMPANY (hereinafter called "Co umers Power"), a Michigan corporation having its principal office at Jackson, Michigan, and THE DOW CHEMICAL COMPANY (hereinafter called "Dow"), a Delaware corporation authorized to do business in the State of Michigan, having its principal office therein at Midland, Michigan, as follows:

1.

Except as hereinafter otherwise provided, Consumers Power agrees to supply and Dow agrees to purchase hereunder all of the steam re-quirements for the operation of Dow's che=ical plant complex, including all contiguous administrative and other facilities, (hereinafter called "Dow's Midland Plant") located in Sections 20, 21, 22, 23, 26, 27, 28 and 35 in the City of Midland and Midland Tovaship, Midland County, Michigan, at the following pressures, plus or minus ten percent (10%), up to and including but not in excess of the following flow rates, as the same may be adjusted from time to time pursuant to Section 12 hereof, said flow rates being the capacities reserved by Consu=ers Power for Dow's use:

Pressure, Psig Flow Rate, Lbs/Hr 600 400, to 175 3,650,000 Dow agrees to receive and purchase hereunder, throughout the life of the agreement, at least 2,000,000 lbs/hrofnominal175psigsteam. The steam will be approximately saturated under nor=al conditions, but the mini =um degrees of saturation shall be ninety-eight percent (98%) at 600 psis and ninety-five percent (95%) at 175 psig. Dow presently plans to construct

Section 1 (Contd) 2 additional chemical plant racilities on land adjacent to the site or f.he two-unit nuclear power plant which Consumers Power plans to construct and operate, together with other facilities, in Midland County, Michigan.

(Said nuclear power plant and other facilities, in the a6gregate, are here-inafter referred to as the " Generating Plant," and the site thereof, con-veyed to Consumers Power pursuant to the General Agreement between the parties dated December 13,1%7, as amended, is hereinafter referred to as the " Site.") Consumers Power agrees to serve such additional chemical plant facilities as part of Dow's Midland Plant under the terms of this agreement, modified by written agreement of the parties as necessary to provide for such service.

2.

Delivery of said steam shall be at one mutually agreeable point of delivery for each class of steam on or near the property line j

separating Dov's Midland Plant site from the Site. The amount of steam and the heat content of the steam shall be metered at the poims of deliv-ery or, at Consumers Power's option, at locations selected by Consu=ers Power on the Site, by suitable metering equipment furnished, installed and maintained by Consumers' Power. The a=ount of the condensate return and makeup water to be supplied by Dow 5 Consumers Power at the Site pursuant to Section 2a of the Contract for Supply of Water executed by the parties concurrently herewith, and the heat content of such condensate return and makeup water, shall be metered at the point or points of deliv-ery provided for in Section 1 of said Contract or, at Consumers Power's option, at locations selected by Consumers Power on the Site, by suitable metering equipment furnished, installed and maintained by Consumers Power.

u

APPENDIX C Year Amount 7

$11,051,000 8

10,935,000 9

10,809,000 10 10,674,000 11 10,528,000 12 10,371,000 13 10,200,000 14 10,016,000 15 9,818,000 16 9,603,000 17 9,371,000 18 9,121,000 19 8,851,000 20 8,559,000 21 8,244,000 22 7,903,000 23 7,536,000 24 7,138,000

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25 6,710,000 26 6,246,000 4

27 5,746,000 r.it 5,206,000 29 4,622,000 30 3,992,000 31 3,312,000 32 2,577,000 33 1,783,000 34 925,000 35

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S etion 2 (Contd) 3 Consumers Power shall test its meters at.=utually agreeable intervals and n

keep them within accepted standards of accuracy. Dow shall be given ad-vance notice of each such test in order that its representatives may wit-ness the same. In case of failure of a meter to register the amount or heat content of steam supplied by Consu=ers Power during av period, or the amount or heat content of such condensate return or makeup water sup-plied by Dow during any period, billing for steam service furnished dur-ing such period shall be for an estimated amount based upon test results, use during a similar period, both of the foregoing methods, or other known factors.

3.

All piping, valves and other equipment for generating, regu-lating, metering, conitoring, and conducting the steam to said points of delivery shall be furnished, installed, owned, operated and maintained by Consumers Power at its expense. All piping, valves and other equipment for conducting, regulating, monitoring and utili~ zing the steem beyond said points of delivery shall be furnished, installed, owned, operated and main-tained by Dow at its expense. Each party shall at its own expense secure and maintain in effect any and all per..dts, licenses or other authorizations required from government authorities for the construction, use and mainte-nance of the piping, valves and other equipment to be furnished by it here-under.

4.

Except as otherwise provided in Section 12 hereof, Dow shall pay for steam delivered to it hereunder at the following monthly rate, con-sisting of a capacity charge and a co==odity charge:

Srction 4 (Contd) h Monthly Rate:

Capacity Charge

$0.1823 per pound per hour of total design reserved capacity for both classes of steem.

" Total design reserved capacity" for purposes of ec=puting the =onthly rate and applying the rate adjust =ents provided for in this Section 4 and in Sec-tion 12 hereof equals h,050,000 pounds of steem per hour.

Ccmmodity Charge 600 psig............... $0.2086 per 1,000 lbs 175 psig............... $0.1497 per 1,000 lbs Said monthlv rate will be adjusted in accordance with the following para-graphs:

a.

The capacity charge in said =onthly rate assumes a total " allocated stea= investment" of $69,476,000 in and required for the Generating Plant. Said amount does not include any allowance for fossil-fired prtekage boilers. On or about the date that Unit No.1 of the nuclear power plant is declared by Consu=ers Power to be available for coc=ercial operation (hereinafter called the "cc==ercial opera-tion date"), which date is estimated to be March 1, 1980, and at any time during the life of this agree-

=ent that invectment is added to or subtracted from any of the elements in the following for=ula, Consu=ers Power shall recalculate its " allocated

SecQicn 4 (Contd)

I, Monthly Rate:

Capacity Charge

$0.1823 per pound per hour of total design reserved capacity for both classes of steam.

" Total design reserved capacity" for purposes of computing the =cnthly rate and applyir4 the rate adjustments provided for in this Section 4 and in Sec-tion 12 hereof equals 4,050,000 pounds of steem per hour.

Commodity Charge 600 psig............... $0.2086 per 1,000 lbs 175 psig............... $0.1497 per 1,000 lbs Said monthly rate will be adjusted in accordance with the following para-graphs:

The capacity charge in said conthly rate assumes a.

a total " allocated steem investment" of $69,476,000 in and required for the Generating Plant. Said amount does not include any allowance for fossil-fired package boilers. On or about the date that Unit No.1 of the nuclear power plant is declared by Consumers Power to be available for co m ercial operation (hereinafter called the "ce=ercial opera-tion cahe"), which date is estimated to be March 1, 1980, and at any time during the life of this agree-ment that investment is added to or subtracted frcm any of the elements in the following formula, Consu=ers Power shall recalculate its " allocated

Snction 4 (Contd) 5 steam investment" in and required for the Gener-ating Plant by neans of the following formula, using actual costs and then-current estimates of costs not yet incurred:

Allocated Steam Invest =ent = (CB) + M + S where C = investment co= mon to electric and steam service, other than investment included in "M";

nuclearsteemsupplysystemoutput,inStu/hr, devoted to steam service to Dow at total design B=

reserved capacity Total maximum warranted nuclear steam supplysystemoutput,inStu/hr M = cooling facilities (less estimated average cost of equivalent cooling facilities for Palisades Units 1 and 2) and all other investment neces-sary because of location at Midland which is not necessary at a low-population site on the Great Lakes; and S = turbine generator extraction, steam distribution facilities, fossil-fired packa5e boilers, and all other investment wholly devoted to steam service to Dow.

The values for the numerator and denc=inator of "B" in the above for=ula shall be calculated as follows:

(1) the numerator shall equal the sum of the products of the following for each class of steam:

the pounds of steam per hour at total design reserved capacity, multiplied by the enthalpy of such steam at the point at which it is metered for billir4 purposes minus the enthalpy of the condensate drain return and makeup water from Dow equivalent to 100%

of the stees supplied to Dow from the Generating Plant at the point at which it is metered by Consu=ers Power.

~

S:ctien 4 (Contd) 6 (2).the denominator shall equal the product of the total pounds of steam per hour leaving the steem Senerators at the maximum nuclear steen supply system output warranted by the nuclear steam supply systems randor in its contract for the sale of such systems to Consu=ers Power, =ulti-plied by the enthalpy of such steam minus the enthalpy of the feedwater as it enters the steam generators.

The parties a6ree that "M" in the above formula shall include, but not be limited to, the cost to Consumers Power of the Site; provided, however, that for purposes of the above for=cla there shall be excluded frem the Site cost that portion thereof which is equivalent to the cost of a site for a nuclear electric generating plant on the Great Lakes, which the parties a6ree would be $1,500,000.

For each $1,000,000 increase or decrease from

$69,h76,000 in the allocated steam invest =ent, as so reca'.culated by Consu=ers Power, there shall be a cor-responding $0.0030 increase or decrease in said capacity charge, plus such increase or decrease in said capacity charge as is provided for by the next sentence hereof; provided, however, that for any such increase in the al-located steem investment occurring after ten (10) years of co=mercial operation of the Generating Plant, the u

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S~ction 4 (Contd) 7 amount of the corresponding increase in the capacity charge shall be adjusted to provide for depreciation of the amount of such increase in the allocated steam in-vestment over a period of thirty-five (35) years minus the number of years during which the Generating Plant has been in commercial operation. For such portion of an increase or decrease from $69,476,000 as is not a multiple of $1,000,000, including an increase or de-crease from $69,476,000 in an amount less than

$1,000,000, the increase or decrease in the capacity charge shall be calculated by linear interpolation, to the nearest one hundredth of one cent. If at av time during the life of this agreement there are established by law, or by regulation, rule or order of any govern-mental body having jurisdiction, criteria which would require all future Consu=ers Power condensing power gen-erating plants located on the Great Lakes to utilize cooling towers, cooling ponds or other similar heat dis-sipation facilities other than the Great Lakes for all or any portion of the cooling require =ents of such plants, an equivalent portion, at prices contemporary with the investment in cooling facilities for the Gen-erating Plant, of the investment in cooling facilities included as part of "M" in the above for=ula shall thenceforth be regarded as investment wholly devoted to electric service and the capacity charge in said

SocGion h (Contd) 8 monthly rate shall be recalculated accordingly using the above formula. In any case, that portion of the invest-ment in cooling towers, cooling ponds and other similar heat dissipation facilities for the Generating Plant equal to the investment, at prices conte =porary with the investment in cooling facilities at the Generating Plant, required to build closed cycle cooling facilities to dis-sipate the same quantity of waste heat at a Great Lakes site, to the extent included in Consu=ers Power's electric rate base by order of applicable regulaton bodies, shall be regarded as invest =ent wholly devoted to electric ser-vice and the capacity charge in said =onthly rate shall be recalculated accordingly using the above formula. If at any time durin6 the life of this a6ree=ent there are estab-lished by rule, regulation or order of the U. S. Atomic Energy Cc= mission, criteria which would require all exist-ing and future pressurized-water nuclear power plants on Consumers Power's system to include any capital-investment item which is included in as part of "M" in the above for-

=ula, such item shall thenceforth be included as part of "C," rather than "M," in the above for=ula and the capacity charge in said monthly rate shall be recalculated accord-ingly, using the above for=ula.

b.

The capacity charge in said =onthly rate assumes a credit of $0.0379/lb/hr of reserved steam capacity for savings in Generating Plant investment con =on to electric and

Section k (Contd) 9 steam service, other than investment included in "M" in the above fomula, resulting from the generation of elec-tric energy utilizing steam which is subsequently supplied to Dow hereunder. The amount of said credit is based upon (1) an estimated Generatin6 Plant investment comon to electric and steam service, other than investment included in "M" in the above for=ula, (2) delivery of steam to Dow at the total design reserved capacity, (3) the difference in estimated net plant heat rates for the Generatin6 Plant and for a hypotetical two-unit electric generation-only nuclear power plant located on the Great Lakes and having nuclear steam supply systems of a like design to those of the Generating Plant, and (4) an estimated net electrical output of the Generating Plant which assumes operation at maximum warranted nuclear steam supply system output at one hundred percent (100%) capacity factor, at design conditions.

On or about the comercial operation date, Consumers Power shall recalculate the amount of such'eredit, assuming operation at maximum warranted nuclear steam supply system output and delivery of steam to Dow at the total design reserved capacity, and using its then-current best esti-mates of the remainder of the foregoing bases. For each full $0.0001 increase or decrease in the recalculated credit from said assumed $0.0379 credit, there shall be a corresponding $0.0001 decrease or increase in said capacity charge. Amounts less than $0.0001 shall be i

S ction 4 (Contd) 10 disregarded in making the capacity charge ad,justment pro-vided for in this pdragraph.

c.

The capacity charge in said monthly rate assumes the fol-loving tax rates:

Federal income tax...........

48.0%

Michigan income tax 5.6%

Michigan franchise tax.......... 5 mills Other taxes:

(a) All real and personal property taxes actually assessed against the property of Consumers Power at the Site (135%),

and (b) Michigan intangibles tax, Federal un-e:::ployment tax, Federal old a6e benefit tax, miscellaneous excise taxes (0.15%)...........

1. 5% of allo-cated steam investment (effective)

In the event that there is a change in c.ny of the above tax rates, or in the event that new taxes, license fees or rentals of any kind are levied by any governmental unit against Consumers Power's steam property maintained to serve Dow, or against Consumers Power's steam opera-tica or the production or sale of steam hereunder, or l

against the revenues, inccme or profits frem the sale I

l' 1

Section 4 (Contd) 11 of steam hereunder, prior to the comercial operation date or at any time during the life of this agreement, the monthly capacity charge and the bills rendered and the pay =ents made hereunder shall be adjusted as necessary to reflect said change as of the cc=mercial operation date as to charges occurrir4 prior to said comercial cperation date, and as of the effective date of such charge as to changes occu -

rir4 after said commercial operation date; provided, however, that charges in the tax rates tabulated above shall have the followir4 effects:

(1) The cc=posite effective rate of the above Federal and Michigan inecme tax rates is 50 9%. For each full O.5 of a percentage point net increase or decrease from 50 9% in said cc=posite effective rate, there shall be a corresponding increase or decrease in said capacity charge of $0.000018 times the number of millions of dollars (to the nearest one-tenth of one million) of allocated steam in-vestment as recalculated under paragraph a. of tnis Section 4 less the number of millions of dol-lars (to the nearest one-tenth of one million) of savings in initial investment upon which the credit provided for in paragrtph b. of this Section 4 is based.

Srction 4 (Contd) 12 (2) For each full 1 mill net increase or decrease from 5 mills in the Michigan franchise tax rate, there shall be a corresponding increase or decrease in said capacity charge of $0.00001 times the number of millions of dollars (to the nearest one-tenth of one million) of allocated steam investment as recalculated under paragraph a. of this Section h less the number of millions of dollars (to the nearest one-tenth of one million) of savin 6s in initial investment upon which the credit provided for in paragraph b. of this Section 4 is based.

(3) For each full 0.1 of a percentage point net increase or decrease from 1.5% in the effective rate for the remaining taxes, there shall be a corresponding in-crease or decrease in said capacity charge of

$0.00002 times the number of millions of dollars (to the nearest one-tenth of one million) of allo-cated steem investment as recalculated under para-graph a. of this Section 4 less the number of millions.of dolle.rs (to the nearest one-tenth of one million) of savings in initial investment upon which the credit provided for in paragraph b. of this Section 4 is based. Said effective rate shall be recalculated annually by Consu=ers Power, using for component (a) of the effective rate the ratio of

'N.

Section 4 (Contd) 13

/

all real and personal property taxes assessed against the property of Consumers Power at the Site to Consumers Power's total investment at the Site, and using for component (b) of the effective rate the ratio of the total amount of all such taxes to Consu=ers Power's total year-end gross investment in utility plant as shown in Consuners Power's lat-est annual report to the Michigan Public Service Commission. The capacity charge, if adjusted here-under, shall be adjusted to the nearest one-hundredth of one cent.

d.

The capacity charge in said monthly rate shall be adjusted to the extent necessary to reflect the 1mpact of changes in the Federal income tax payment of Consumers Power related to the investment in that portion of the Generating Plant al-located to steem service to Dow pursuant to tax law changes, e.g., the investment tax credit and Asset Depreciation Range rules of the Revenue Act of 1971 and any future amendments to the internal revenue code, in a manner consistent with the manner in which any change in said tax payment result-ing from such legislation for investment in the electric portion of said Generating Plant is reflected in the retail electric rates offered by Consumers Power. This adjustment, if any, shall be made on or about the com=ercial operation data and subsequent adjustments shall be made in the same manner as necessary to reflect e.ny similar changes in i

i Section h (Contd) 11 Consumers Pcwer's tax payment frem future tax legislation.

The capacity charge, if adjusted hereunder, shall be ad-hustedtothenearestone-hundredthofonecent.

e.

The capacity charge in said monthly rate assumes an annual expense of $912,000 allocable to steam service for nuclear insurance and operation and maintenance, on the basis that 26 9% of nuclear insurance and operation and =aintenance expense for said nuclear power plant is allocable to steam service. Consumers Power shall reestimate its annual ex-pense for nuclear insurance and operation and maintenance

)

(including operation and maintenance for fossil-fired boilers, if any, installed by Consumers Power) on or about the co=mercial operation date and shall annually calculate its actual expense for nuclear insurance, fossil-fired boiler operation and operation and =r.intenance as of every November 30 thereafter. For every full $50,000 increase or decrease from $912,000 in such annual expense allocable to eteam service, as so reestimated and calculated, allo-cated by substituting for 26 9% the value for "B" used in recalculating the allocated steam investment under para-graph a. of this Section 4, there shall be a corresponding

$0.0010 increase or decrease in said capacity charge as of the commercial operation date in the case of said reestimate and as of the December 1 i~ediately following each such an-nual calculation.

f.

The capacity charge in said monthly rate assumes an interest cost to Consumers Power of 5% on all long-term debt incurred

i Section k (Contd) 15 between January 1, 1968 and the commercial operation date.

For each full O.2 of a percentage point increase or de-crease from 5% in the weighted average interest cost to Consumers Power on all long-term debt incurred by Consumers Power between said dates, there shall be a corresponding increase or decrease in said capacity charge of $0.000013 times the number of millions of dollars (to the nearest one-tenth of one million) of allocated steam investment as recalculated under paragraph a. of this Section 4 less the number of millions of dollars (to the nearest one-tenth of

)

one million) of savings in initial investment upon which the credit provided for in paragraph b. of this Section 4 is based, effective as of the cc==ercial operation date.

The ccpacity charge, if adjusted hereunder, shall be ad-justed to the nearest one-hundredth of one cent.

g.

The co==odity charges in said monthly rate assume a nuclear fuel cost of $0.1801 per million Btu levelized over the 20-year period beginning on the co=mercial operation date. On or about the ecmmercial operation date and annually there-after during the life of this agreement, Consumers Power shall recalculate the nuclear fuel cost as of the commer-cial operation date and the anniversary of such date in each year thereafter, by means of the CONFUCY Computer P-o-gram (Consumers Power Company Computer Program No. 5201),

using the most accurate nuclear fuel cost and other data then available to Consumers Power. On the basis of such

Section 4 (Contd) 16 recalculation, Consumers Power shall ad.just the commodity charge rates and previous billings to Dow as followc :

(1) For each full $0.001 per million Stu which any such recalculation shows the levelized nuclear fuel cost for the 20-year period beginning on the commercial operation date to be above or below $0.1801 per mil-lion Stu, the cc:m::odity charge for each class of steam shall be increased or decreased, whichever is appropriate, from the commodity charge set forth above in this Section 4 for such class of steam as

)

follows :

600 psig - - by $0.001158 per 1,000 pounds of steam 175 psig - - by $0.001125 per 1,000 pounds of steam as of the effective date of such recalculation.

(2) For purposes of adjusting previous billings to Dow,

$0.1801 per million Btu shall be deemed to be the original base levelized nuclear fuel cost for the 20-year period beginning on the co=mercial operation date. Said original base cost and every revised base levelized nuclear fuel cost established for said 20-year period pursuant to this subparagraph (2) shall be deemed to be the " effective base cost" for purposes of this subparagraph (2) until superseded by such a revised base cost. Whenever any recalculation provided for in this paragraph g. shows that the level-ized nuclear fuel cost for said 20-year period is

Section 4 (Contd) 17

$0.001 per million Btu or more above or below the effective base cost, a revised base cost for said 20-year period shall be established by increasir4 or decreasing the effective base cost, whichever is appropriate, by each full $0.001 which said re-calculation shows the 20-year levelized nuclear fuel cost to be above or below said effective base cost. One-twelfth (1/12)ofthedifferencebetween the revised base cost and said effective base cost, multiplied by the number of millions of Btu utilized

)

at the nucl'ar pcwer plant for the production of e

steam delivered to Dow hereunder (includir4 addi-tional steam delivered to Dow under Section 12 hereof at cost of fuel plus ten percent [10%3) during all of the years precedir4 such recalculation less the number of millions of Btu for which an efficiency credit for fuel savirgs is =ade under paragraph h.

of this Section 4 during all of the years preceding such recalculation, shall be added to or deducted from each of Dov's monthly bills in the succeeding year, whichever is appropriate. Any increase or decrease in the levelized cost of nuclear fuel during the year or part thereof i==ediately pre-ceding termination of this agree =ent shall be paid in one lump sum upon ter=ination on the basis of a recalculation as aforesaid, made at the time of i

Section 4 (Contd) 18 termination. On or before the expiration of the initial tem of this agreement, the parties shall agree upon a levelized nuclear fuel cost to be used as the original base fuel cost for rate and billing adjustments as aforesaid following the initial term.

Amounts less than $0.001 in the recalculated levelizec' nuclear fuel cost shall be disregarded in making the commodity charge adjustments provided for in this pars-graph g.

The commodity charges, if adjusted hereunder, shall be adjusted to the nearest one-hundredth of one cent.

h.

The cer=cdity charge for 175 psig stea= in said monthly rate assumes a credit of $0.0509 per 1000 lbs for annual fuel cav-ings resulting from the generation of electric energy utilizing steam which is subsequently supplied to Dow.

The a=ount of said credit is based upon (1) a 20-year levelized nuclear fuel cost of $0.1801 per million Stu, (2) delivery of 600 psig and 175 psig steam to Dow at the total design reserved capacity, (3) the difference in estimated net plant heat rates for the Generating Plant and for a hypothetical two-unit elec-tric generation-only nuclear pcwer plant located on the Great Lakes and having nuclear steam supply systems of like design to those of the Generating Plant, and (4) an estimated net electrical output of the Generating Plant which assumes cper-ation at maximum warranted nuclear steam supply system out-put at eighty-five percent (85%) capacity factor at design

S*ction h (Contd) 19 conditions. On or about the commercial opernbion date anel annually as of every November 30 thereafter, Consumers Power shall recalculate the amount of such credit, based upon the then-current 20-year levelized nuclear fuel cost, as calcu-lated pursuant to paragraph g. of this Section !+, and other Generating Plant design conditions. Such recalculations shall also be based upon the following electrical output and heat-rate differential assumptions:

(1) the recalculation to be made on or about the commercial operation date shall be based upon Consumers Power's estimate of the net electrical output of Unit No. 1 at eighty-five percent (85%) capacity factor for the period beginning with the cc==ercial operation date and ended the first November 30 thereafter, and also upon the difference between Consumers Power's then-current estimate of the net plant heat rate for a hypothetical two-unit, electric-generation-only nu-clear power plant located on the Great Lakes and hav-ing nuclear steam supply systems of like design to those of the Generating Plant and Consumers Power's then-current esti= ate of the net heat rate for Unit No. 1 during the same period; (2) each annual recalculation hereunder shall be based upon Consumers Power's estimate of the net electrical output of Unit No. 1 for the succeeding twelve-month period, i

and also upon the difference between Consumers Power's l

l S etion h l'Sntd) 20 estimate, as of the ccamercial operation date, of the net plant heat rate for a hypothetical two-unit, electric-generation-only nuclear power plant located on the Great Lakes and having nuclear steam supply systems of like design to those of the Generating Plant and Consumers Power's estimate of the net plant heat rate for Unit No. 1 for the succeeding twelve-month period.

There shall be excluded from the amount of savings upon which the credit is based the expenses associated with the additional fuel use by Unit No. 2 of the nuclear power plant at an eighty-five percent (65%) capacity factor due to the increased backpressure of Unit No. 2 resulting frem the cooling water temperature at Midland over the 1.8 inch backpressure which would occur at the site of the hypothetical power plant located on the Great Lakes. There shall also be excluded from the amount of savings upon which the credit is based the expenses associated with the increased net heat rate for Unit No. 2 of the Midland Pcwer Plant due to the supplying of steam to Dow from Unit No. 2 through pressure-reducing stations, for the periods during which steam must be sup-plied to Dow in such manner. For each full $0.0001 in-crease or decrease from $0.0509 in said credit, as so recalculated, there shall be a corresponding $0.0001 decrease or increase in said ccmmedity charge, as of the commercial operation date in the case of the initial

Section k (Contd) 21 recalculation and as of the December 1 ircediately following each such annual calculation. Amounts less than $0.0001 shall be disregarded in making the commodity charge adjustments provided for in this paragraph. At the time of each annual recalculation hereunder Consumers Power shall correct the recalculation next preceding to reflect the actual net heat rate and net electrical output of Unit No.1, and the actual periods and amounts

~

of increased nr, heat rate of Unit No. 2 when steam had to be supplied to Dow from Unit No. 2 through pressure-reducing stations, during the period between said re-calculations. There shall be included in the first bill to Dow for steam service following each such annual re-calculation a charge or credit, whichever is appropriate, for the difference, if any, between the amount of the credit for the period elapsed since the previous recal-culation as so corrected and the amount of the credit actually applied to Dow's bills for steam service during such period.

i. The commodity charges in said monthly rate assume an average heat content per pound of steam of 1158 stu per pound of 600 psig steam and 111i+ Btu per pound of 175 psig steam, deter-mined by deductic6 the estimated total Stu ccatent of con-densate return and makeup water equivalent to 100% of the steam supplied to Dow frcm the estimated total Stu content of the steam supplied to Dow. Each monthly bill to Dow shall include a charge or credit, whichever is app'ropriate,

Section 4 (Contd) 22 l

for all Btu in excess of or less than 1158 times the number of pounds of 600 psig steam, plus 1114 times the number of pounds of 175 psig steam, supplied to Dow during the month for which such bill is rendered. Said charge or credit shall be computed on the basis of the then-current levelized nu-clear fuel cost as calculated pursuant to paragraph g. of i

this Section 4 J.

The capacity charge in said monthly rate is based upon de-livery of steam to Dow at levels not exceeding the reserved capacity for each class of steam set forth in Section 1 hereof, as the same may be adjusted pursuant to Section 12 hereof.

If in any month the flow rate of steam delivered to Dow from j

the Generating Plant for any one (1) hour is greater than such reserved capacity, and the net electrical output available to Consumers Power's electric system is thereby decreased, the capacity charge for such month and for the succeeding eleven (11) months shall be increased by 1.67 times the Adjustment Factor calculated in accordance with the provisions of sub-laragraph (1) of paragraph a. of Section 12 for each full i

1,000 kW by which the net electrical output anilable to j

Consumers Power's electric system is thereby decreased below the net electrical output upon which the capacity charge is based. However, the reserved capacity for such class of i

steam shall not thereby be changed. Amounts less than 1,000 kW shall be disregarded in making the capacity charge in-creases provided for herein. It is agreed that the capacity

' charge increases provided for herein and the capacity charge

Section 14 (Contd) 23 increases provided for in paragraph a(1) and a(2) of Section 12 hereof for reduction of steam flow below n minimum cteam flow shan not be added together. If more than one of said increases would otherwise be in effect at any given time only the increase resulting from the greatest decrease in net electrical output shan be effective at such time.

5 Bills for steam service shan be rendered approximately monthly on the basis of Consumers Power's meter readings, and shan be due and payable on or before the due date shown on each bin. Bills shall be de-livered to Dow not less than se'v'en (7) days prior to the due date. Each bill shall show the beginning and closing dates of the period for which the bill is rendered, the due date, the meter readings, the number of units, and the amount payable. A delayed payment charge of two percent (2%) of the total bin shan be added to any bill which is not paid on or before the due date shown thereon. 'Ihe minimum monthly charge shan be the capacity charge pro-vided for in Section l+ hereof.

6.

Consumers Power does not guarantee, but will endeavor to fur-nish continuous supplies of steam and to maintain pressure within plus or minus ten percent (10%) hereunder. Consumers Power shall not be liable for interruptions in the service or variations in pressure or other service char-acteristics, or for any loss or damage of any kind or character occasioned thereby, due to causes or conditions beyond Consumers Power's reasonable control, and such causes or conditions shan be deemed to specifically in-clude, but not be limited to, the following:

acts or omissions of customers or third parties; operation of safety devices except when such operation is A

Gection 6 (Contd) 24 caused by the negligence of Consumers Power; absence of an alternate supply of service; failure, malfunction, breakage, necessary repairs or inspection of machinery, facilities or equipment when Consumers Power has carried on a l

program of maintenance consistent with the general standards prevailing in the industry; act of God; var; action of the elements; storm or flood; fire; riot; labor dispute or disturbance; or the exercise of authorf ty or regu-lation by governmental or military authorities. Dow shall not be relieved of its obligation to pay the minimum monthly charge provided for in Section 5 hereof by reasen of any interruption in the service or variation in pressure or other service characteristics, however caused. Whenever there shall be any interruption in service or variation in pressure or other service characteristics due to causes or conditions covered by the second sentence of this Section 6, Consumers Power shall use reasonable efforts, consistent with the standards of performance prevailing in the public utility industry, to remove such causes or conditions.

7.

Consumers Power shall secure and maintain in force during the life of this agreement financial protection against nuclear hazards associated with the Generating Plant in such form and amounts as may be required by law. Notwithstanding anything to the contrary in this agree-ment, Dow shall indemnify and save Consumers Power hr.rmless from and against all loss, expense, liability or damages arising out of injury (including death) or damage to any person or property whatsoever, caused, contributed to or resulting from steam delivered to Dow hereunder, or from Dow's use or misuse of such steam, or from the presence of such steam in Dow's fa-cilities, except to the extent Consumers Power is insured or indemnified l

l

Section 7 (Contd) 25 against such loss, expense, liability or damages as part of the financial protection it is required by law to maintain with respect to the Generating Plant, it being understood and agreed that Consumers Power does not hereby assume any liability by contract. As used in the preceding sentence, the word " expense" shall be deemed to include, but not be limited to, any and all reasonable and.necessary expenses incurred by Consumers Power in defend-ing any claim, action or proceeding brought against Consumers Power for any of the above-named reasons.

8.

Consumers Power does not guarantee, but will endeavor to ensure that steam supplied to Dow from said nuclear power plant does not contain radioactivity in excess of the applicable limits set forth in Part 20 of the U. S. Atomic Energy Commission's regulations. Each party shall install monitoring and shutoff equipment on its own premises to per-mit detection and shutoff of steam supplied frem said nuclear power plant in the event that such steam contains radioactivity at levels in excess of such limits at any time. Upon notification from Dow that Dow detects radioactivity in excess of such limits in the steam supplied to Dow here-under at any time, Consumers Power sha'.1 take such corrective action as it deems appropriate to eliminate such excess.

9.

In the event that the total steam supply to Dow from said nuclear power plant falls below 1,000,000 lbs/hrorbelowDov'stotalsteam requirements, whichever is less, Consumers Power will, if requested, supply emergency steam to Dov's Midland Plant within a mutuahy agreeable time, from fossil-fired package boilers installed as a part of the Generating Plant, at a nominal pressure of 173 psig, and at such flow rate as is

Section 9 (Contd) 26 necessary to restore the total steam supply to Dow to 1,000,000 lbs/hror to Dow's total steam requirements, whichever is less, to the extent such flow rate is within the capability of said packa6e boilers, at the monthly rate for 175 psig steam provided for in Section 4 hereof; provided, that Dow has given Consumers Power, on or before october 1,197h, written notice to procure and install said package boilers. Such notice may require Consumers Power to. procure and install package boilers having an a6gregate flow rate of not less than 300,000 lbs/hrandnotmorethan 1,000,000lbs/hr of nominal 175 psig steam.

If Dow has not given Consumers Power, on or before october 1, 1974, notice to procure and install said package boilers, then Dow shall be obligated to maintain at its Midland Plant throughout the life of this agreement a standby and auxiliary source or sources of steam for the Gen-erating Plant, having a nominal pressure of 150 psig or higher and a flow rate of 300,000lbs/hr. Dow agrees to supply up to 300,000 lbs/hrofsuch steam to Consumers Power at a mutually agreeable point or points of delivery on or near the property line separating Dow's Midland Plant site from the Site, upon at least twenty-four (24) hours' notice given at any time after two years prior to the scheduled commercial operation date of Unit No. 2 of the Generating Plant, at a price equal to the monthly rate for 175 psig steam then in effect pursuant to Section h hereof for steam service to Dow.

All piping, valves and other equipment for generating, regulating, metering, monitoring, and conducting the steam to said point or points of delivery shall be furnished, installed, owned, operated and maintained by Dow at its expense. All piping, valves and other equipment for conducting,

Section 9 (Contd) 27 l

.egulating, monitoring and utilizin6 the steam beyond said point or points l

of delivery shall be furnished, installed, owned, operated and maintained i'

by Consumers Power at its expense, and shall be deemed to be " investment common to electric and steam service" for purposes of calculating the al-located steam investment in and required for the Generating Plant, to the extent such equipment is not also utilized by Consumers Power for steam sez rice to Dow hereunder. Each party shall at its own expense secure and maintain in effect any and all permits, licenses or other authorizations required from government authorities for the construction, use and mainte-nance of the piping, valves and other equipment to be furnished by it here-under.

Dow does not guarantee, but will endeavor to furnish such steam and to maintain pressure as provided in the paragraph i= mediately preceding.

Dow shall ~not be liable for interruptions in the service or variations in pressure or other service characteristics, or for any loss or da= age of any kind or character occasioned thereby, due to causes or conditions b'eyond Dov's reasonable control, and such causes or conditions shall be deemed to specifically include, but not be limited to, the following: acts or omis-sions of third parties; operation of safety devices except when such opera-tion is caused by the neEligence of Dow; failure, malfunction, breakage, necessary repairs or inspection of machinery, facilities or equipment, when Dow has carried on a program of maintenance of said packa6e boilers, pipin6, valves and other equipment consistent with the recommendations of the manu-facturers and vendors thereof; act of God; war; action of the elements; stom or flood; fire; riot; labor dispute or disturbance; or the exercise t

Section 9 (Contd) 28 of authority or regulation by governmental or military authorities. When-ever there shall be any interruption in service or variation in pressure or other service characteristics due to the aforementioned causes or conditions, Dow shall use all reasonable efforts to remove such causes or conditions.

10.

Steam supplied to Dow hereunder shall be for the sole use of Dow, for the purpose aforesaid, and shall not be transmitted elsewhere, or shared or resold.

11.

Dow :nay generate and utilize in its Midland Plant the follow-ing supplies of steam, and the same shall be excluded frem Dow's obligation to purchase all of its Midland Plant steam requirements from Consumers Power as provided in Section 1:

a.

from all of its facilities at Dow's. Midland Plant which are operating or operable as of January 15, 197h, any amount of steam, as standby or auxiliary to the steam to be provided by Consumers Power; provided, however, that Dow may repair, but shall not replace or add to, its steam-producing facilities at the South and West Power Houses at its Mid h a. Plant; and provided, further, that upon retirement of said Power House facilities Dow

nay generate and utilize in its Midland Plant an amount of steam not exceeding 1,000,000 lbs/hrofsteamata pressure not exceeding nominal 175 psig from any facili-ties owned and operated by Dow, as standby or auxiliary to the steam to be provided by Consumers Power. The foreEoin6 amounts of steam shall be deemed to include,

Section 11 (Contd) 29 and not be in addition to, the capacity of 300,000lbs/hr if maintained by Dow pursuant to Section 9 hereof.

b.

from any source, such portion of Dow's Midland Plant steam requirements as is not within the design capa-bilities of the Generating Plant; provided, however, that Dow shall permit Consumers Power to supply such steam re-quirements from another source if Consumers Power is able to do so at an esti=ated cost to Dow which is not more than ten percent (10%) higher than Dow's estimated cost of supplying said requirements from its own facilities or those of a third party or parties; c.

such portion of Dow's Midland Plant steam requirements as may be supplied incidentally from chemical processes at Dow's Midland Plant.

The provisions of this Section 11 shall not operate to relieve Dew frem its obligation to pay Consumers Power the minimum monthly charge providad for in Section 5 hereof.

12. Dow may vary the reserved capacities set forth in Section 1 hereof, or purchase additional steam produced by said nuclear power plant, as follows:

a.

The capacity charge in ',he monthly rate set forth in l

j Section 4 hereof is based upon the availability to Consumers Power's electric system of the =aximum net electrical output attainable at the maximum varranted nuclear steam supply system output when steam is delivered i

to Dow at the total design reserved capacity. The minimum

Section 12 (Contd) 30 flow rate of 175 psig steam necessary to obtain the maximum net electrical output of the Generating Plant (hereinafter called the " Minimum Flow Rate") is presently estimated to be 2,000,000lbs/hr. Consumers power agrees that the reserved capacities set forth in Section 1 hereof may be changed at the request of Dow during the' term of this agreement with corresponding adjustments in the ca-pacity charge in said monthly rate, as follows:

(1) Upon at least six (6) years' written notice to Consumers Power of a desired reduction in reserved 175 psig steam capacity, which notice shall state Dov's estimated mini =um 175 psig steam de=and at the desired reserved capacity, the reserved ca-pacity for 175 psig steam shan be reduced. For each full 1,000 kW by which the net electrical out-put available to Consumers Power's electric system is increased as a result of such reduction in Dow's reserved steam capacity, the capacity charge in the monthly rate shall thereupon be decreased by

$0.0006 per lb times the ratio of the as-incurred cost per kW of.the Generating Plant to $205.

(The product of this multiplication is called the " Adjust-ment Factor" in this subparagraph (1) and subpara-graphs (2) and (3) of this paragraph a. of section 12.) The as-incurred cost per kW shall be calculated O

Section 12 (Contd) 31 by dividing the total Generating Plant investment less the quantity calculated by subtracting the investment savings credited to steam from the al-located steam investment by the rated net electric output of the Generating Plant at the maximum var-ranted nuclear steam supply system output. The investment savings credited to steam shall be cal-culated as follows:

X*Y. C Z

X = the difference in estimated net plant heat rates for the Generating Plant and for a hypothetical two-unit electric generation-only nuclear power plant located on the Great Iakes and having nuclear steam supply systems of a like design to those of the Generating Plant,expressedinMBTU/kWh.

Y = the estimated net electrical output.of the Generating Plant which assumes operation at maximum warranted nuclear steam supply system output at one hundred percent (100%) capacity factor, at design conditions, expressed in kW.

Z = the maxi =um warranted nuclear steam supply systemoutput,expressedinMBTU/hr.

C = common investment as provided in femala for calculating allocated steam investment (para-graph a. of Section l+).

Section 12 (Contd) 32 The Adjustment Factor shall be rounded to the nearest one-hundredth of a cent. The amount of the increase in such net electrical output shall be determined on the basis of the net electrical output at the new reserved capacity or the net electrical output at said estimated minimum 175 psig steam demand, whichever is lower.

If in any month following such reduction in Dow's reserved steam capacity the flow rate of 175 psis steam delivered to Dow from the Generating Plant for any one (1) hour is less than the mini =um steam flow necessary to maintain the net electrical out-put upon which such decreased capacity charge is based, the capacity charge for such month and for the succeeding 11 months shall be increased by the Adjustment Factor times 1.67 for each full 1,000 kW by which the net electrical output available to Consumers Power electric system is hereby decreased below the net electrical output upon which such de-creased capacity charge is based, except as provided in the next sentence and except as provided in paragraph j. of Section 4 hereof. The capacity charge shall not be increased as provided in the sentence next preceding for the first instance in any calendar year where such flow rate is from

._Section 12 (Con 2d) 33 300,000 to 400,000 lbs/hrlessthansaidminimum steam flow for a period not greater than forty-eight (k8) hours due to an unscheduled, emergency shutdown of Dow chemical processes, or for any instance where such flow rate is less than said minimum steam flow as a result of act of God, war, storm, flood, or inability of Censumers Power to deliver said minimum steam flow. A=ounts less than 1,000 kW shall be disregarded in making the capacity charge adjustments provided for herein.

(2) Upon at least six (6) years' written notice to Consumers Power of a desired increase i reserved 175 psig steam capacity, which notice shall state Dow's estimated minimum 175 psig steam demand at i

the desired reserved capacity, the reserved capacity for 175 psig steam shall be increased to any flow rate level of which the Generating Plant is capable, except to the extent Dow has relinquished its right to increased steam flow pursuant to paragraph c. of this Section 12.

For each full 1, Coo kW by which the net electrical output available to Consumers Power's electric system is decreased as a result of such increase in Dov's reserved sceam capacity, t.he capacity charge in the monthly rate shall thereupon be increased by the Adjustment Factor. The amount i

I

Section 12 (Contd) 3h of the decrease in such net electrical output shall be detemined on the basis of the net electrical output at the new reserved capacity or the net elec-trical output at said estinated mini =um 175 psig steam demand, whichever is lover.

If in any month followin6 such increase in Dow's reserved steam capacity the flow rate of 175 psig steam delivered to Dow from the Generating Plant for any one (1) hour is less than the =inimum steam flow necessary to maintain the net electrical cutput upon which such increased capacity charge is based, the ca-pacity charge for such month and for the succeeding 11 months shall be increased by the Adjustment Fac-tor times 1.67 for each full 1,000 kW by which the net electrical output available to Consumers Power electric system is hereby decreased below the net electrical output upon which such increased ca-pacity charge is based, except as provided in the next sentence and except as provided in paragraph j.

of Section h hereof. The capacity charge shall not be _ncreased as provided in the sentence next pre-ceding for the first instance in any calendar year where such flow rate is from 300,000to400,000lbs/hr less than said minimum steam flow for a period not greater than forty-eight (h8) hours due to an un-schedul.ed, emergency shutdown of Dow chemical

Section 12 (Contd) 35 processes, or for any instance where such flow rate is less than said minimum steem flow as a re-sult of act of God, war, storm, flood, or inability of Consumers Power to deliver said minimum steam flow. Amounts less than 1,000 kW shall be dis-regarded in making the capacity charge adjustments provided for herein.

(3) Upon at least six (6) years' written notice to Consumers Power of a desired increase in reserved

~

600 psig steam capacity, the reserved capacity for 600 psig steam shall be increased to any flow rate level of which the Generating Plant is capable, except to the extent Dow has relinquished its right to increased steam flow pursuant to paragraph c.

of this Section 12.

For each full 1,000 kW by which the net electrical output available to Consumers Power's electric system is decreased as a result of such increase in Dov's reserved steam capacity, the capacity charge in the monthly rate shall thereupon be increased by the Adjustment Factor. Amounts less than 1,000 kW shall be dis-regarded in making the capacity charge adjustments provided for herein.

(4) Upon at least thirty (30) days' written notice to Consumers Power of a desired reduction or increase

Section 12 (Contd) 36 in reserved steam capacity which would decrease or increase the net electric output available to Consumers Power's electric system, the total re-served capacity for 175 psig steam may be reduced or increased, and the reserved capacity for 600 psig steam may be increased, upon such tems as the parties may agree.

b.

At the written request of Dow made at least two (2) years in advance, or upon shorter notice if Consumers Power so agrees, Consumers Power will supply steam to Dow in ad-dition to the total or the Apacities reserved by Consumers Power for Dow's use, if the following con-ditions are satisfied:

(1) Consumers Power has such additional steam available from said nuclear power plant; (2) Consumers Power is unable to utilize such additional steam in the turbines of said nuclear power plant; (3) the supply of such additional steam is permitted under applicable laws, rules, regulations and orders I

and the provisions of Consumers Power's operating li-cense (s) for said nuclear power plant, and (4) Dow as-aumes whatever additional costs, of any kind, are l

1 necessary to enable Consumers Power to furnish such additional steam to Dow. The rate for such additional steam shall be a commodity charge consisting of the levelized cost of nuclear fuel as determined and ad, justed

Fection 12 (Contd) 3'/

pursuant to paragraph g. of Section h hereof, plus ten percent (10%) of such cost.

c.

At any time during the life of this agreement Dow nay notify Consumers Power in writing that Dow desires to permanently relinquish its right to have Consu=ers Power supply steam to Dow hereunder at reserved capacities in excess of a reduced reserved capacity or capacities stated in such notice. Consumers Power will agree to Dow's pro-posed relinquishment if a third party or parties satis-factory to Consumers Power agree to contract with Consumers Power, on terms (including rates) satisfactory to Consumers Power and said third party or parties, for the amount of reserved steam capacity or capacities by which Dov's reduced reserved capacity or capacities is less than the total design reserved capacity. Consumers Power agrees not to denand unreasonable ter=s from such third party or parties. In the event any such relinquish-ment is agreed to, the capacity charge in Dow's nonthly rate will thereafter be based upon Dov's reserved ca-pacity or capacities as reduced thereby, and the total of such reduced reserved capacity or capacities shall thereafter be used in lieu of the total design reserved capacity for purposes of the rate adjustments provided for in Section h and in this Section 12.

~.

-r r

Section 13 38 13 Dubject t.o the rights of termination set fort.h In thia llccl.lon 13, this agreement shall extend for an initial term of twent.y (90) yearc from the commercial operation date, and following said initial tem of twenty (20) years until teminated by mutual consent or as hereinafter pro-

vided, s.

Dow shall have the right to terminate this agree::ient at the expiration of the seventh (7th) or any succeed-ing year during the life of this agreement by giving Consumers Power at least two (2) years' written notice of Dov's desire te terminate the same, which notice may be given at any time; provided, however, that in such event Dow shall pay Consumers Power on or before the termination date a termination charge consisting of (1) the present worth in the year of termination, com-

,puted at an interest rate of seven and one-half percent (7-1/2%) per annum, of the additional ex-pense for nuclear fuel which Consumers Power esti-mates it will incur during the period between the date of termination and a date thirty-five (35) years after the commercial operation date as a result of such termination, such additional expense being associated with the following:

(a) the additional nuclear fuel consumed by Unit No. 2 of the nuclear power plant at-l tributable to greater backpressure due to location of Unit No. 2 at Midland rather than at a Great Lakes site; and I

k

ficct. inn 13 (contd) 39 (b) the additional cost of nuclent fuel con-sumed by Unit No. 1 of the nuclear power plant due to its operation as an electric generation-only plant as compared to the cost of nuclear fuel consumed by a hypo-thetical electric generation-only nuclear unit located at a Great Lakes site and havir4 the same rated net electrical output and op-ersting at the same capacity factor as does Unit No. 1 following such termination.

(2) the applicable percentage, set forth in Appendix A hereto, of Consumers Power's allocated steam in-vestment in the Generating Plant, calculated as of said termination date by Consumers Power by means of the formula set forth in paragraph a. of Section 4 hereof, using undepreciated original costs and using the same value for "B" in said formula as was used in recalculating the allocated steam in-vestmer.t pursuant to para 6raph a. of Section 4 hereof. As used herein, " applicable percentage" shall mean the percentage set forth in Appendix A hereto for the number of years elapsed between the commercial operation date and the date of termina-tion, except that with respect to Consumers Power's investment allocated to steam service to Dow and L_

^

8 Section 13 (Contd) 40 made after the co=mercial operation date "appli-cable percentage" shall mean the percentage set forth in Appendix A hereto for the number of years elapsed between the date of such installation and the date of temination.

b.

Consumers Power may teminate this agreement at any time after the expiration of the initial tem hereof by giving Dow at least four (h) years' written notice of its desire to terminate the same, which notice may be given at any time.

c.

If the total of Dov's bills for electric service under the Contract for Electric Service entered into by the parties concurrently herewith increases in any year during the tem of said contract by reason of any change in the monthly electric rate provided for in said Contract, then the amount of Consumers Power's allocated steem invest-ment which Dow would be required by paragraph a(2) of

.this Section 13 to pay Consumers Power upon termination of this agreement shall be reduced, if such temination occurs during the period that such rate change is ef-fective, by the applicable amount set forth in Appen-dix B hereto Iraltiplied by the number of millions of dollars, to the nearest one-tenth of one million, by which the total of Dow's bills for electric service under said Contract in such year exceeded the a=ount which said total of Dow's bills would have been but

bl Section 13 (Contd) for such rate change, but only to the extent that our:h excess is $1,000,000 or more and is attributable to an increase in the ratio of Consumers Power's rate of return on electric service under said Contract to Consumers Power's rate of return under all of its resi-dential electric rates. The amount of any such excess and its attributability to an increase in said ratio shall be verified by a third party selected by Consumers Power and satisfactory to Dow. The amount of any such adjustment shall not exceed the amount of the termina-tion charge. As used herein, " applicable amount" shall mean the amount set forth in Appendix B hereto for the year corresponding to the " applicable percentage" (as defined in paragraph a. of this Section 13) of allocated steam investment that Dow is to pay to Consumers Power on termination of this agreement.

d.

If Dow teminates this agreement and can de=enstrate to the satisfaction of Consumers Power that Dow has made a fim commitment to purchase or produce at its Midland Plant steam of a quantity and quality equal to er greater than that supplied by Consumers Power under this agree-ment, that said steam will be generated by a technological means not known or feasible at the date of this agreement, and that the cost of said steam to Dow is at least ten percent (10%) less than Dow's cost for steam under this e

Sectic Q (Contd) ha agreement, then the termination charge to be paid by Dow to Consumers Power under paragraph a(2) of this Section 13 shall be reduced by fifty percent (50%).

In the event that said steam is to be produced by Dow or an entity controlled by Dow, the cost of said steam to Dow shall be calculated on the basis of the same fixed charge rate as is used by Consumers Power in the steam rate provided for in Section !+ hereof, as verified by a third party selected by Consumers Power and satis-factory to Dow.

If, due to any cause or condition whatsoever, including e.

but not limited to the exercise or nonexercise of eu-thority or regulation by the U. S. Atomic Energy Co= mis-sion or any successor egency or any court or any other govern = ental authority, Consu=ers Power at any time prior to the commercial operation date for Unit No. 1 of the Generating Plant is prevented from or is unable to complete or operate the Generating Plant or is pre-vented from or is unable to serve process steam to Dow from the Generating Plant, then either party may at its

'optien, and upon written notice to the other, terminate this agreement without further liability to the other, except that in such event Dow shall be liable for and shall pay Consumers Power, upon receipt of properly-itemized invoice therefor, the following costs, less salvage value of the equipment, structures and facili-ties to which such costs relate:

w

Section 13 (Contd) 43 (1) tti l ciutl.n Incurroil by or ore bedtall' o" Connumven l'ower l'or *,hc design, procurement., [*nb r l e rti,l on,

installatien, dismantling, removal and disposal of equipment, structures and facilities intended to be utilized solely for the production and de-livery of process steam to Dow; and (2) all costs incurred by or on behalf of Consumers Power for the design, procurement, fabrication, installation, dismantling, removal and disposal of equipment, structuz,; and facilities for the t.urbine-generator cycle of tinit No.1 of the Cen-erating Plant except for the costs, as calculated or estimated by Consumers Power, which would have been expended for the design, procurement, fabri-cation and installation of items in the turbine-generator cycle for Unit No.1 of the Generating Plant which could have been utilized without modi-fication in an 800 MWe electric-enly turbine-generator cycle for Unit No.1 of the Generating Plant.

The costs referred to in (1) and (2) above shall include, but not be limited to, Consumers Power overheads for General and Administrative Expense, Allowance for Funds During Construction, Miscellaneous Work Orders, Taxes, and Insurance. Consumers Power's books of account shall be open, if Dow so requests, to an independent auditcr e

44 Section 13 (Contd) snt.lsfnet.ory to Consumers Power for the purpose of vert l'ying 1.hnt. l.he cost.s l'or whlt:b Dow in : hnry.nel hereunder have in fact been incurred.

1 14 This agreement shall not be transferred by Dow or otherwise alienated without Consumers Power's written consent. Subject to the pre-ceding sentence, this agreement inures to and binds the successors and assigns of the respective parties hereto. This agreement cancels and supersedes, as of the commercial operation date, the Contract for Interim Steam Service between the parties dated December 13, 1967, unless said Contract has been previously terminated.

IN WITNESS WIEREOF, the parties hereto have executed this agree-ment in dupilcate by t. heir duly nuthorized representatives on the day nnr1 year first above written.

CONSUMERS FOWER COMPMW om h

C 2nt m d

&gm<ocw-or j

s DOW CHEMIC OMPMU v

1

(

s l

k Al'I'MNill X A Year Percentage 1

99.4 2

98.7 3

97 9 4

97.1 5

96.2 6

95.3 7

94.3 8

93 2 4

9 92.1 10 90.8 11 89 5 12 88.1 11

86. ')

14 84.9 15 83 1 16 81.2 17 79 1 18 76.9 19 74.5 20 71.9 21 69 2 22 66.2 23 63.0 24' 59.6 25 55 9 26 52.0 27 47.7 28 43.2 29 38.3 30 33.0 31 27 3 32 21.2 33 14.7 34 7.6 35 i

l.

l

Al'I'idllLX 11 Year Amount 7

411,051,000 8

10,935,000 9

10,809,000 lo 10,674,000 11 10,528,000 12 10,371,000 13 10,200,000 14 10,o16,000 15 9,818,000 16 9,603,000 17 9,371,000

~8 9,121,000 1

.19 8,851,000 20 8,559,000 21 8,244,000 22 7,903,000 23 g,536,000 24 7,138,000 25 6,710,000 26 6,2 M,000 27 5,7 %,000 28 5,206,000 29 4,622,000 30 3,992,000 31 3,312,000 32 2,577,000 33 1,783,000 34 925,000 35

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