ML20010F067

Operating & Fuel Agreement Between CP&L & Nc Municipal Power Agency Number 3 & Exhibits.

ML20010F067
Person / Time
Site:	Harris, Brunswick
Issue date:	07/30/1981
From:	Sitterson S, Shawn Smith CAROLINA POWER & LIGHT CO., NORTH CAROLINA MUNICIPAL POWER AGENCIES
To:
Shared Package
ML18017B453	List: ML18017B452 ML20010F060 ML20010F067 ML20010F071 ML20010F075
References
NUDOCS 8109090328
Download: ML20010F067 (1)

Text

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OPERATING AND FUEL AGREEMENT BETWEEN CAROLINA POWER & LIGHT COMPANY AND NORTH CAROLINA MUNICIPAL POWER AGENCY NUMBER 3 AND EXHIBITS i

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JULY 30,1981 I

AOKO 324 PDR

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! OPERATING AND FUEL AGREEMENT

! BETWEEN l 4

CAROLINA POWER & LIGHT COMPANY l AND 1

! NORTH CAROLINA MUNICIPAL POWER 1

! AGENCY NUMBER 3 l ,

AND EXHIBITS k

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JULY 30,1981 I

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m OPERATING AND FUEL AGREEMENT TABLE OF. CONTENTS Page RECITALS ................................................ 1 ARTICLE 1 DEFINITIONS ................................ 1-1 ARTICLE 2 OPERATION AND MAINTENANCE.AND CAPITAL ADDITIONS .......................... 2-1 1

2.1 General Obligations ........................ 2-1 2.2 Scope of Obligations ....................... 2-3 2.3 Capital Additions .......................... 2-11 2.4 Contract Submittal and Review .............. 2-21 ARTICLE 3 FUEL MATERIAL AND FUEL SERVICES ............ 3-1 3.1 General .................................... 3-1 3.2 Designation, Title, Risk of Loss, Exchange and Repurchase .................... 3-6 3.3 Responsibility for Spent Fuel .............. 3-8 3.4 Recycle Uranium ............................ 3-9 ARTICLE 4 SPENT FUEL STORAGE CAPABILITY .............. 4-1

. 4.1 Use by CP&L ................................ 4-1 4.2 Indemnification by CP&L .................... 4-2

4. Assumption of Defense by CP&L .........,..... 4-3 4.4 Continuation of Use After Termination of Agreement ................... 4-4 ARTICLE 5 FOSSIL FUEL WASTE DISPOSAL ................. 5-1 ARTICLE 6 RIGHT OF USE OF THE ROXBORO COMMON SUPPORT FACILITIES .................. 6-1 6.1 Right of Use by Power Agency ............... 6-1 t

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1 Page 6.2 Payment of Costs of Operation and Maintenance ................................ 6-1 6.3 Advances for Capital Additions ............. 6-1 6.4 Salvage, Sale, Transfer or Disposition of Capital Additions to the Roxboro Common Support Facilities .................. 6-4 1

ARTICLE 7 COSTS ...................................... 7-1

, 7.1 Costs and Accounting ....................... 7-1 7.2 Cost of Operation and Maintenance and Capital Additions .......................... 7-2 7.3 Cost of Nuclear Fuel Material, Nuclear Fuel Services and Reload Fuel .............. 7-4 7.4 Cost of Fossil Fuel Material and Fossil Fuel Services ....................... 7-7 7.5 Determination of Cost of Nuclear Fuel Material .............................. 7-12 7.6 Advances for Procurement of Nuclear Fuel Material .............................. 7-17 7.7 Advances for Procurement of Fossil Fuel Material .............................. 7-20 7.8 Costs to Each Owner ........................ 7-21 4

7.9 Apportionment of Costs of Nuclear Fuel Back-End Services .......................... 7-23 4

7.10 Allocation of Certain Costs ................ 7-24 7.11 Fees ....................................... 7-25 ARTICLE 8 WORKING CAPITAL FUND AND CAPITAL ADDITIONS A DVAN C E F U N D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-1

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8.1 Initial Establishment of Working Capital Fund and Capital Additions Advance Fund .... 8-1 8.2 Working Capital Fund Use ................... 8-1 i

Page 8.3 Capital Additions Advance Fund Use and i

Annual Reestablishment ..................... 8-2 i

8.4 Change in Working Capital Fund Due to i

Revision of Annual Cost-Estimates .......... 8-2 8.5 Interest ................................... 8-3 ARTICLE 9 PAYMENT .................................... 9-1 l 9.1 Method of Payment for Costs of Operation and Maintenance .................. 9-1 l 9.2 Method of Payment for Costs of Fuel l

Material and Fuel Services ................. 9-5 l 9.3 Method of Payment for Cost of Capital l Additions .................................. 9-9 9.4 Monthly Adjustment to Working Capital Fund and Capital Additions Advance Fund .... 9-14 l 9.5 Offsets .................................... 9-15 9.6 Challenges ................................. 9-15

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Audits ..................................... 9-17 ARTICLE 10 SPARE PARTS, TOOLS AND EQUlPMENT . . . . . . . . . . . 10-1 10.1 Obligation to Maintain Stock ............... 10-1 10.2 Transfer and Exchange ...................... 10-1 ARTICLE 11 INSURANCE .................................. 11-1 11.1 Harris Plant ............................... 11-1 l

11.2 Brunswick Plant ............................ 11-7 11.3 Mayo Plant ................................. 11-11 11.4 Roxboro Unit No. 4 ......................... 11-16 11.5 General Provisions ......................... 11-19 ARTICLE 12 OPERATIONS REVIEW ANr OTHER MATTEP3 ........ 12-1

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Page 12.1 Operations Review Committee and Capital Additions Review ................... 12-1 12.2 Liaison Representative for Joint Facilities ........................... 12-3 l ARTICLE 13 FORCE MAJEURE .............................. 13-1 13.1 Excuse of Performance ...................... 13-1 l 13.2 De finition ................................. 13-1 t

l 13.3 Continuation After Force l Majeure Event .............................. 13-2 I

ARTICLE 14 GOVERNMENTAL AND REGULATORY APPROVALS .................................. 14-1 14.1 CP&L's Responsibilities .................... 14-l'

( 14.2 Procedure in Event of Failure to Obtain or i

Retain Necessary Approvals ................. 14-1 ARTICLE 15 LIABILITY AND ALLOCATION OF RISK ........... 15-1 15.1 Recognition of Allocation of Risk of Loss to Owners ..................... 15-1 l 15.2 Liability of CP&L for Certain i

Loss or Damage ............................. 15-2 15.3 Indirect or Consequential Damages .......... 15-3 15.4 Indemnification ............................ 15-3 l ARTICLE 16 RESOLUTION OF DISPUTES ..................... 16-1 16.1 Arbitration ................................ 16-1 16.2 Arbitration Procedure ...................... 16-1 16.3 Court Proceedings .......................... 16-10 16.4 Payment of Fees and Costs .................. 16-10 ARTICLE 17 ASSIGNMENT ................................. 17-1 ARTICLE 18 EFFECTIVE DATE ............................. 18-1

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! Page i ARTICLE 19 REPRESENTATIONS, WARRANTIES AND COVENANTS .................................. 19-1 t

I 19.1 Power Agency's Representations, j Wa r ra n t i e s a nd Co vena n ts . . . . . . . . . . . . . . . . . . . 19-1 i

i 19.2 General Covenan t by the Parties . . . . . . . . . . . . 19-7 ARTICLE 20 DEPAULT .................................... 20-1 20.1 Events of Default .......................... 20-1 20.2 CP&L's Rights on Default o f Po w e r Ag e n c y . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20-3 20.3 Power Agency's Rights on Default of CP&L ..................................... 20-5

~20.4 Disputes Concerning De faul t ................ 20-7 20.5 Add i t ional r ol iga tions . . . . . . . . . . . . . . . . . . . . . 20-7 20.6 In j u n c t i ve Re l ie f . . . . . . . . . . . . . . . . . . . . . . . . . . 20-8 20.7 No Remedy Exclusive ........................ 29-8 i

20.8 Waivers .................................... 20-9 20.9 Agreement to Pay All Costs to Cure De f aul t ............................ 20-9 20.10 Regulatory Approvals ........................ 20-10 20.11 Notice and Opportunity to Cure as Conditions Precedent to Invoking Remedies . . 20-11 l

ARTICLE 21 TERM OF AGREEMENT .......................... 21-1 21.1 General .................................... 21-1 l 21.2 Returr. of Working Capital Fund i and Capital Additions Advance Fund ......... 21-2 21.3 Costs of Tennination ....................... 21-3 ARTICLE 22 DECOMMISSIONING OR RETIREMENT .............. 22-1 22.1 Ge n e r a l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22-1

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4 Page i 22.2 Costs of Decommissioning or Retirement ..... 22-1 22.3 Decommissioning Agreement .................. 22-2 22.4 Repurchase ................................. 22-2 ARTICLE 23 ACCESS TO BOOKS AND RECORDS ................ 23-1 23.1 Access to CP&L's Books and Records . . . . . . . . . 23-1 23.2 Additional" Materials to bc ovided to Powe r Ag e n c y . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23-2 23.3 Add itional Rights o f Power Agency . . . . . . . . . . 23-3 23.4 Access to Power Agency's Books and Records. . 23-3 ARTICLE 24 ASSISTANCE BY CP&L IN AGENCY FINANCINGS .... 24-1 24.1 Assistance ................................. 24-1 24.2 Reports .................................... 24-1 24.3 Senior Personnel ........................... 24-2 24.4 Certification of Information by CP&L ....... 24-3 24.5 Liability and Costs ........................ 24-4 ARTICLE 25 MISCELLANEOUS ............................. 25-1 25.1 CP& T,'s Discharc e of Obliga tions . . . . . . . . . . . 1 25.2 No De l a y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25-1

' 3. 3 Further Documen ta tion . . . . . . . . . . . . . . . . . . . . 25-1 25.4 Notice .................................... 25-2 25.5 Headings Not to Af fec t Meaning . . . . . . . . . . . . 25-2 Amendments ................................ 25-2 25.6 No Pa rtnersh ip, Tax Matters . . . . . . . . . . . . . . . 25-3 25.7 25.8 Successors and Assigns .................... 25-3 Counterparts .............................. 25-4 25.9

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a Page 25.10 Incorporation of Exhibits ..................

• 25-4 25.11 Severability of Provisions ................. 25-4 25.12 Entire Agreement ........................... 25-6 25.13 Applicable Law ............................. 25-6 25.14 No Waiver .................................. 25-7 25.15 Singular to Include Plural and Plural to Includ e S ingula r . . . . . . . . . . . . . . . . . 25-7 25.16 Secur i ty o f In forma t ion . . . . . . . . . . . . . . . . . . . . 25-7 25.17 Comp u ta t io n o f Tim e . . . . . . . . . . . . . . . . . . . . . . . . 25-7 25.18 Effect of )e fault Upon Terms o f this Agreeuent ............................. 25-8 25.19 Changes to Reflect ownership Interests in Joint Facilities by Other Entities ......... 25-8 25.20 References to Articles, Sections and Exhibits ............................... 25-9 25.21 Proration .................................. 25-9 ARTICLE 26 S U RV I VO RS H I P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26-1 26.1 Survivorship of Obligations . . . . . . . . . . . . . . . . 26-1 26.2 Survivorship of Provisions ................. 26-1

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e OPERATING AND ~ FUEL AGREEMENT This Agreement, dated as of July 30, 1981, is be-tween' CAROLINA POWER & LIGHT COMPANY'("CP&L"),.a cort ration

. organized and existing under Chapter 55 of the General Statutes of North Carolina, known as the Business Corporation Act, with offices in Raleigh, North Carolina, and NORTH CAROLINA MUNICIPAL POWER AGENCY' NUMBER 3 (" Power Agency"), a public body and body-corporate and politic organized and existing under Chapter 159B of.t;te General. Statutes of North Carolina, known as the Joint Municipal Electric Power and Energy Act, with offices 'n Raleigh, North Carolina.

RECITALS (A) CP&L is engaged in the business of generating, l transmitting and distributing electtic power in portions of the l

states of North Carolina and South Carolina, and operates its i

own electric generating facilities.

(B) Power Agency is a joint agency organized by its member municipalities pursuant to Chapter 159B of the General Statutes-of North Carolina, known as the-Joint Municipal Electric I

Power and Energy Act, to undertake to plan, finance, develop, own and operate facilities for the generation, transmission, sale and supply of electric power and energy.

(C) CP&L and Power Agency have entered into a Purchase, ,

Construction and Ownership Agreement (Sales Agreement) of even I

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date herewith for the sale by CP&L to Power Agency of certain undivided ownership interests in the following generating facilities and in Associated Fuel as defined in Section 1.4 of the Sales Agreement (Joint Facilities):

Brunswick Unit No. 1 Harris Unit No. 1 Brunswick Unit No. 2 Harris Unit No. 2 Roxboro Unit No. 4 Harris Unit No. 3 Mayo Unit No. 1 Harris Unit No. 4 Mayo Unit No. 2

( D) CP&L and Power Agency have entered into a Power Coordination Agreement of even date herewith to establish terms and conditions for provision by CP&L to Power Agency of certain power services and for other matters.

(E) CP&L and Power Agency desire to establish the terms and conditions for the operation and fueling of the Joint Facili-i l

ties by CP&L on behalf of itself and Power Agency.

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l-OPERATING AND FUEL AGREEMENT ARTICLE 1 DEFINITIONS 1.1 Adjustment Interest Rate For any month, the prime rate being charged by the Chase Manhattan Bank of New York on the first day of such month, less one percentage point, divided by twelve, express'e d in per-contage points, to the nearest hundredth.

l 1.2 Allowance for Funds Used During Construction ( AFU DC)

Capital carrying costs incurred by CP&L during con-l struction which are capitalized as a cost of plant on the books of CP&L in accordance with the PERC Uniform System of Accounts.

For the purposes of this Agreement and the Related Agreements, such capital costs shall not reflect any credits associated with inclusion of construction work in progress in the rate base for retail jurisdictions, but shall reflect credits associated with l inclusion of pollution control construction work in progress in the rate base for sale for resale jurisdictions.

l 1.3 Approved Arbitrators List The list of Arbitrators to-be used in resolution of disputes in accordance with Section 16.2(B)(3).

l l.4 Arbitrator The person selected to conduct arbitration in accordance with Section 16.2- .

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l(. 1..5 Brunswick Plant

! The Brunswicx Plant, formally designated the Brunswick .

Steam Electric Plant, ic an electric generating facility located

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near Southport, North Carolina, consisting of two (2) operating nuclear-fueled generating units designated Brunswick Unit No. 1 and Brunswick Unit No. 2, support facilities, spare parts, tools and equipment and any capitalized construction materials and sup-i plics on hand, all au more completely described in the Bill of Sale, the form of which is prescribed in Exhibit SA-IV to the

. Sales Agreement. The boundaries of.the Brunswick Plant, each unit thereof and certain of the support facilities are illus-l trated in Exhibit SA-XV to the Sales Agreement. Transmis-sion facilities located at the site, including step-up trans-formers having a high side transmission voltage, are not included as part of the Brunswick Plant.

1.6 Brunswick Unit l

Brunswick Unit No. 1 or Brunswick Unit No. 2, which are the individual nuclear-fueled electric generating units, associated supIort facilitics, spare parts, tools and equipment and any capitalized construction materials and supplies on hand, located at the Brunswick Plant. Brunswick Unit No. 1 and Bruns-wick Unit No. 2 are collectively referred to herein as the

" Brunswick Units."

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1.7 Capital Additions Advance Fund A fund to be established on the First Closing Date in accordance with Article 8.

1.8 CP& L- Customer Ratio The CP&L Customer Ratio is the ratio of the projected 1982 Annual Peak Resource Demand (as defined in Section 1.4 of the Power Coordination Agreement) of those Participants which were full requirements customers of CP&L prior to the First Closing Date to the projected 1982 Annual Peak Resource Demand of Power Agency 's members listed in Fxhibit SA-I to the Sales Agreement which were full requirements customers of CP&L prior to the First Closing Date. Such projections shall be furnished to CP&L by Power Agency at least sixty (60) days prior to the First Closing Date.

1.9 CP& L Operating Prac,tice (A) CP&L Operating Practice means any practice, method or act which, in the exercise of reasonable judgment in light of the facts known at the time a decision is made, would be expected to accomplish the desired result at a reasonable cost consistent with r-liability and safcuy.

(B) The parties acknowledge and agree that in applying this Section 1.9 the following principles shall govern:

(1) CP&L's o'inership interests in the f acilities subject to this Agreement provide CP&L with the incentive to 1-3

choose practices, methods and acts which meet the standard described in'this Section 1.9; (2) CP&L Operating Practice includes, but is not

-limited to, any practice, method or act engaged in or approved by a significant portion of the electric industry; and (3) CP&L Operating Practice includes, but is not limited to, practices, methods or acts which are not used by other participants in the electric industry.

(C) CP&L Operating Practice is not limited to the optimum practice, method or act, to the exclusion of all others, but rather includes a number of possible practices, methods or acts.

1.10 CP& L System .

All facilities constructed, operated or owned (in whole or in part) by CP&L (except those owned by CP&L but leased to lower Agel cy or a Participant pursuant to Section 13.3 ot' the Power Coordination Agreement ) or any subsidiary for the purpose of generation, transmission or distribution of electric energy, or related thereto. l 1.11 Closing Da te Each date on which a closing takes place pursuant to Article 2 of the Sales Agreement.

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1.12 Combined System The Combined System, for purposes of this Agreement and the Related Agreements, shall consist of the generating facili-ties at the Joint Facilities, New Resources which may be used to meet ilourly Resource Demand pursuant to Article 6 of the Pow 7r Coordination ;greement and oll other generating and trans-mission facilities owned and/or operated by CP&L at present or in the future.

1.13 Commercial Operation (A) For purposes of this Agreement and the Related Agreements, Comlaercial Operation commenced for the Brunswick Units and Roxboro Unit No. 4 on the following dates:

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Brunswick Unit No. 1 - March 18, 1977 Brunswick Unit No. 2 - November 3, 1975 l Roxboro Unit No. 4 - September 16, 1980

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(B) For purposes of this Agreement and the Related Agreements, Commercial Operation commences for each flayo Unit i

and 11arris Unit at 12:01 A.M. the day after one of the following

{ conditions is met:

(1) Continuous operation of the Unit for fifty (50) hours at ninety-nine percent (99%) or greater of its unit i

l design capability (in the case of a flayo Unit) or one hundred (100) hours at ninety-nine percent ( 99 '4 ) or greater of its licensed reactor power level (in the case of a Harris Unit);

(2) Continuous operation for fif ty (50) hours-(in the case of a tiayo Unit) or one hur. dred (100) hours (in the 1-5

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-case of a Harris Unit) within one percent (1%)-of any lower capability level established by regulatory or other operating restriction the. time period for which is expected to extend

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beyond thirty (30) days; or.

(3) Continuous operation for fifty (50) hours at a. point below its unit design capability - (in the case of a Mayo Unit) or one hundred (100) hours at a point below its li-Ecensed reactor power level (in the case of a Harris Unit) as mutually agreed upon by CP&L and Power Agency, provided that l neither party shall unreasonably withhold its agreement.

t 1.14 Commitment. Ratio l Power Agency's Commitment Ratio is the ratio of the projected 1982 Annual Peak Resource Demand (as defined in Sec-

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tion 1.4 of the Power Coordination Agr eement) of Power Agency's Participants to the projected 1982 Anr.ual Peak Resource Demand of Power Agency's members listed in Exhibit SA-I to the Sales i

Agreement. Such projection shall be furnished to CP&L by Power Agency at least sixty (60) days prior to the First Closing Date.

1.15 Compensatory Interest Rate For any month, the capital related. costs of the party to whom interest is owed as described in Exhibit PCA-X of the Power Coordination Agreement, divided by twelve, expressed in percentage ;c'nts to the nearest hundredth.

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l.16 Construction As relates to the Mayo Units and the Harris Units, Construction shall mean the acquisition and construction of any portion of the Mayo Plant and the Harris Plant, and shall include, without limitation, the planning, design, engineering, licensing, completion and start-up of, and purchasing, accounting, training, cuality assurance and administration for, such Units including any additions or modifications thereto commenced or authorir.cd prior to the date of Commercial operation of the Mayo Unit or liarris Unit as to which such addition or modification relates.

As relates to the Brunswick Units and Roxboro Unit No. 4, Construction shall mean the acquisition and construction of any addition to or modification of the Brunswick Unit.u or Roxboro Unit No. 4 which was us amenced or authorized prior to the First Closing Date and shall include, without limitation, the planning, design, engineering and completion of, and pur-chasing, accounting, training, quality assurance and administra-tion for, such addition or modification. ' '

l.17 Cost of Consttuction Cost of Construction is all costs incurred in connec-tion with Construction of the Joint Pacilities, and shall include, but not be limited to, the following expenses, obligations and liabilities:

(A) All expenses in respect to the Construction of the Joint Pacilities, and each portion thereof, which are properly 1-7

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recordable. in appropriate accounts as set forth' in FERC's Uni--

form' System of Accounts. Prescribed for Class A and Class B Public Utilities-and Licenses, 18 C.F.R. Part 101, as it may be amended f rom time to time; provided, however, .that if the con-struction accounting under=the Uniform System is eliminated,

'then the Cost of ' Construction of the Joint Facilities shall be determined thereafter by applying the same methods and proce--

dures used by CP&L, at the time such determination is made, in regard to the construction of its other generation f acilities.

Any allowance for funds used during construction recorded by' CP&L as of a Closing Date shall not be incli ad as a Cost of Construction.

(B) The costs of all insurance obtained by CP&L in connection with the Construction of the Joint Facilities pur-suant to Section 12.6 of the Sales Agreement, adjusted as appropriate when Power Agency provides substitute insurance either through insurance coverage or through self-insurance-r 1. -

7 pursuant to Section 12.6(E)(?) of the Sales Agreement.

(C) All amounts payable by the owners pursuant

{ to Article '12 of the Sales Agreement, other than costs of insurance..

(D) All property, sales, use and other similar taxes

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{ payable in connection with the Construction of-the Joint raci-lities.

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(E) All indirect costs and all other costs and expenses which are incurred in the Construction of the Joint Facilities. The amount of such indirect and other costs shall

.be chargeable to each Joint Facility by applying the same allo-cation methods and procedures described in Section 4.6 of the Sales Agreement.

(F) The cost of employing CP&L managers and techni-cians and utilizing CP&L methods and technical expertise in the Construction of the Joint Facilities, measured by multiplying the costs identified in Sections 1.17(A), (B), (D), (E) and (G), less land, APUDC, property taxes and retrospective insur-ance premium adjustments included thei in, by one and one-half percent (1.5%).

(G) Every other cost which is designated in the Sales l Agreement as a Cost of Construction.

1.18 Cumulative Closing Ratio The sum of the First Closing Ratio plus all Subsequent Closing Ratios through the closing to which a subsequent Closing Ratio is applicable, without regard to the application or the ~

j Service Ratio.

1.19 Events of Default l The evento described it Section 20.1.

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1.20 Federal Energy Regulatory Commission-(FERC)

The Federal Energy Regulatory Commission (FERC) is f

th'e commission that has jurisdiction over CP&L rates and charges contained in the Power Coordination Agreement and over the system l

! of accounts used by CP&L. FERC shall also mean any successor regulatory commission, agency or department having jurisdiction i

over thosa rates, charges and accounting systems.

1.21 F_inal Closing Date l

Thc date of the Subsequent Closing on which Power Agency l

completes the purchase, and CP&L completes the conveyance, of the Ultimate Ownership Interest in the Joint Facilities to which Power Agency is committed to purchase under the Sales Agreement.

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1.22 First Closing Date l

The Closing Date on which Power Agency first purchases, and CP&L first conveys, any part of the undivided ownership in-terests in Joint Facilities to which Power Agency is committed to purchase under the Sales Agreement.

1.23 First Closing Ratio Power Agency's First Closing Ratio is the ratio of the portion of Power Agency's Ultimate Ownership Interest in the Joint Facilities which Power Agency shall purchase and CP&L shall convey on the First Closing Date (without regard to the application of the Service Ratia), to Power Agency's Ultimate Ownership Interest in each Joint Faciljty which Power Agency is committed to purchase under the. Sales Agreement.

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1.24 Force Majeure The events or circumstances described in Section 13.2.

1.25 Fossil Fuel Material Fossil Fuel Material includes coal, oil, natural or synthetic gas and any other combustible fuel material, whether produced by fossilization or not.

1.26 Fossil Fpel Services Fossil Fuel Services for Roxboro Unit No. 4 and ffayo Units shall be deemed to include, but not be limited t all services related to the loading and transportation of fossil fuel from origin of purchase to plant site which are not in-cluded in the cost of Fossil Fuel Material.

1.27 Fuel Management Services Fuel Management Services, as used in this Agreement, shall be deemed to mean those resources maintained and actions taken by CP&L to provide, manage, and use, on behalf of CP&L and Power Agency, Nuclear Fuel Materiale Nuclear Fuel Services, Fossil Fuel Material and Fossil Fuel Services.

1.28 Harris Plant The Harris Plant, formally designated the Shearon Harris Nuclear Power Plant, is an electric generating facility presently being constructed near New Hill, North Carolina, which will consist of four nuclear-fueled generating units designated 1-11

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!!arris Unit No. 1, Harris Unit No. 2, Harris Unit No. 3 and Harris Unit No. 4, support facilities, spare parts, tools and equipment and any capitalized construction materials and supplies on hand, all as inore completely described in the 11111 of Sale,

the form of which is prescribed in Exhibit SA-IV-1 to the Sales Agreement. The boundaries of the Harris Plant, each unit thereof l

and certain of the support facilities are illustrated in Exhibit

! SA-XVI-l to the Sales Agreement. Transmission facilities located at the site, including step-up transformers having a high side transmission voltage, are ,t included as part of the IIarris f

Plant.

1.29 Ilarris Unit i

! liarris Unit No. 1, Harris Unit No. 2, Harris Unit l

l tio. 3 or llarria Unit No. 4, which are the individual nuclear-fueled electric generating units, associated support facilities, spare parts, tools ar.J equipment and any capitalized construction materials and supplies on hand, being constructed at the 1:arris Plant. liarris Unit No. 1, Harris Unit No. 2, Harris Unit No. 3 and Harris Unit No. 4 are collectively referred to herein as the "llarris Units."

I 1.30 Incentive Interest Rate l For any month, one twelfth (1/12) of the sum of:

l (i) the capital related costs of the party to whom interest is owed, as described in Exhibit PCA-X of the Power Coordination 1-12

V 5greement; and (ii) the difference, on the first day of such month, between the most recently published Moody's electric utility bond yield for the rating category in which CP&L's first i-mortgage. bonds are rated and the corresponding electric utility bond yield for the next lowest rating category. The Incentive Interest Rate shall be expressed in percentage points to the nearest hundredth.

1.31 Initial Fuel Core Nuclear Fuel Material and Nuclear Fuel Services asso-d ciated with those fuel batches in the reactors at the Brunswick Plant as of any closing and Nuclear Fuel Material and Nuclear Fuel Services associated with those fuel batches required for the initial start-up and initial operation of the Harris Units.

1.32 Initial Fueling Initial Fueling is the process of acquiring and utiliz-ing the Initial Fuel Cores in the case of nuclear fuel, or the Initial Stockpile in the case of fossil (coal and start-up fuel e

oil) fuel, necessary and sufficient for the start-up and placing into Commercial Operation of the Harris Units and the Mayo Units, respectively, and for the operation for an initial period consis-tent with the fuel plan for such Units (including the fuel cycle for nuclear fuel and the stockpile for fossil fuel). Initial Fueling shall include (but shall not be limited co), with respect to such fuel, the solicitation and acceptance of bids for the 1-13

i supply thereof, the securing of necessary fuel-processing ser-vices, the transportation to a liarris Unit or a !!ayo Unit and L

the handling and consumption at any liarris Unit or Mayo Unit.

I In the case of nuclear fuel, Initial Fueling does not include 1

Reload Fuel, as defined in Section 1.57. In the case of

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fossil fuel, Initial Fueling does not include fossil fuel in I

excess of Initial Stockpiles. The owners' rights and obliga-l tions with respect to fossil fuel other than Initial Stockpilea l

l are covered by this Agreement.

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1.33 Initial Stockpile The Initial Stockpile shall be that coal and start-up fuel oil inventory (i) required for the initial start-up, testing

{ and commencement of sustained operation of each coal-fired unit i

at the Mayo Plant, and (ii) stored at the Roxboro Plant as of f each Closing Date which is to be used in the operation of (or propetly allocable to) Roxboro Unit No. 4.

1.34 Joint Facilities The Joint Facilities are the Brunswick Units, the j liarris Units, the Mayo Units, Roxboro Unit No. 4, and Asso-ciated Fuel (as defined in Section 1.4 of the Sales Agreement) for such Units, or any of them or any portion thereof, owner-ship interests in which are to be conveyed to Power Agency l

pursuant to this Agreement.

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f 1.35 Joint Units The Joint-Units are Brunswick Unit No. 1 and Brunswick Unit No. 2, Mayo Unit No. I and Mayo Unit No. 2,liarris Unit No. 1, Harris Unit No. 2, Harris Unit No. 3 and Harris Unit l

No. 4 and Roxboro Unit No. 4, ownerahip interests in which are I

i to be conveyed to Power Agency pursuant to the Sales Agreement.

l.J6 Late Payment Interest Rate For any month, the capital related costs of CP&L as describcd in Exhibit PCA-X of the Power coordination Agreement, I

divided by twelve, expressed in percentage points to the nearest hundredth.

1.37 Liaison Representative The CP&L employee whose duties and responsibilities t

with respect to Power Agency are as described in Section 12.2. ,

1.38 MNDC Maximum Net Dependable Capability (MNDC) in kilowatts (KU) shall be the dependably attainable value for main unit cap-ability less auxiliaries of the Brunswick Units, the Mayo Units, the Harris Units, and Roxboro Unit No. 4 as such level is estab-lished from time to time after Commercial Operation in accordance l with Article 12 of the Power Coordination Agreement.

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1.39 Mayo Plant The Mayo Plant, formally designated the Mayo Electric Generating Plant, is an electric generating facility presently being constructed in Person County, North Carolina, which will consist of two coal-fired generating units designated Mayo Unit No. 1 and Mayo Unit No. 2, support facilities, spare parts, tools and equipment and any capitalized construction materials and supplies on hand, all as more completely described in the Bill of Sale, the form of which is prescribed in Exhibit SA-IV to the Sales Agreement. The boundaries of the Mayo Plant, each unit thereof and certain of the support facilities are illustrated in Exhibit SA-XVII to the Sales Agreement. Trans-mission facilities located at the site, including step-up trans-formers having a high side transmission voltage, are not included as part of the Mayo Plant.

1.40 Mayo Unit Mayo Unit No. 1 or Mayo Unit No. 2, which are the indi-vidual coal-fired electric generating units, associated support facilities, spare parts, tools and equipment and any capitalized construction materials and supplies on hand, being constructed at the Mayo Plant. Mayo Unit No. 1 and Mayo Unit No. 2 are col-1ectively referred to herein as the " Mayo Units."

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1.41 Municipal System A municipality in North Carolina which has become, or which may hereaf ter become a member of Power Agency. A list of the Municipal Systems is attached as Exhibit SA-II to the Sales Agreement.

1.42 North Carolina Utilities Commission (NCUC)

The North Carolina Utilities Commission (NCUC) or any successor regulatory commission, agency or department having jurisdiction over the retail sale of electricity by CP&L in North l Carolina.

1.43 Nuclear Fuel Material Nuclear Fuel Material is material which is the source of fissionable nuclei required to prodace power in nuclear units.

I 1.44 Nuclear Fuel Services f

Nuclear Fuel Services for the Brunswick and Harris Units shall be deemed to include, but not be limited to, such services as the following:

(1) Conversion of U308 to UF6 (uranium hexafluoride);

(2) Enrichment of UF6 in the isotope U-235 (whether 1

provided by the Department of Energy, by any successor agency or department, or by another enrichment facility);

(3) Fabrication of fuel assemblies, including spares, which shall include, but not be limited to, the following:

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(i) all materials, labor and services (with the exception of Nuclear Fusi Material) necessary to produce finished fuel assemblies suitable for insertion into a Brunswick or Harris Unit; (ii) such fuel design, fuel management, and fuel-related licensing services as may be obtained under an applicable CP&L contract for the fabrication of fuel assemblies; (4) Supply of nuclear fuel-related material and hard-ware, such as burnable poisons, replacement or additional control rods, channels, orifice rods, neutron sources, and other such components; (5) All transportation, storage, weighing, sampling, and other services used to carry out the above activities; s (6) Any special handling, processing, insurance and safeguards which are used; and (7) In addition, Nuclear Fuel Services shall include back-end services. The parties recognize that certain back-end services must be performed on the Initial Fuel Cores and Reload Fuel and other related fuel hardware after discharge from the Brunswick Units and the Harris Units. These services are pre-sently envisioned to include, but are not limited to:

(1) spent fuel storage; >

(ii) spent fuel shipping; (iii) spent fuel processing;

< (iv) waste disposal and/or management; 4

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(v) uranium hexafluoride conversion;

) (vi) plutonium oxide conversion;

plutonium storage; (vii) i (viii) safeguards and insurance; and l

(ix) weighing, sampling and assaying i

associated with the above.

l 1.45 Nuclear Regulatory Commission (NRC)

The Nuclear Regulatory Commission (NRC) is the com-l mission that has jurisdiction over the construction and opera-tion of nuclear power plants. NRC shall also mean any successor

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federal regulatory commission, agency or department having jur-

! isdiction over the conetruction and operation of nuclear power plants.

l l 1.46 Operations Review Committee l

The Committee whose duties and responsibilities are described in Section 12.1.

1.47 Output l

The net amount of electric power, measured in kilowatt hours, supplied in Ty hour by a generating unit to the transmis-sion system. Output is determined by subtracting all auxiliary l

l power used by the unit during each hour from the metered _ gross kilowatt hours generated by the unit during each such hour, but, as used in this Agreement shall not be less than zero.

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1.48 Owner

- Either CP&L (in CP&I.'s capacity as an owner of interests in Joint Facilities) or Power Agency.

1.49 Ownership Interest Power Agency's Ownership Interest in any Joint Faci-lity at any time is the aggregate of the undivided ownership interests (expressed as percentages) which Power Agency has purchased, and CP&L has conveyed to Power Agency, at and through the closings provided for in Article 2 of the Sales Agreement.

Ownership Interest in the Mayo Units and the ifarris Units at any time shall be a percentage equal to the product l

I of the Ultimate Ownership Interest times the Cumulative Closing i

Ratio; provided, however, that at all times, Power Agency's

(

Ownership Interest in the Mayo Units and the liarris Units shall l be subject to adjustment as set forth in Sections 14.3, 14.4 I and 25.1 of the Sales Agreement. Ownership Intercat in the Brunswick Plant and Roxboro Unit No. 4 shall be a percentage equal to the product of the Ultimate Ownership Interest times the Cumulative Closing Ratio times the Service Ratio; provided, however, that at all times, Power Agency's Ownership Interest in the Brunswick Units and Roxboro Unit No. 4 shall be subject to adjustment in accordance with sections 14.3 and 14.4 of the Sales Agreement. Following the Final Closing Date, Ownership t Interest in any Joint Facility shall be equal to the Ultimate Ownership Interest except as Ownership Interest may be modified pursuant to Sections 14.3, 14.4 or 25.1 of the Sales Agreement.

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i 1.50 Ownership Offering

! As relates to any Joint Facility, the Ownership Offering in a unit or other facility is the undivided ownership interest l

i (expressed as a percentage) which CP&L has made available for purchase by Power Agency pursuant to the Sales Agreement. The Ownership Offering in each of the Joint Facilities is set forth in Section 2.l(A) of the Sales Agreement.

1.51 Participant

! A Municipal System which prior to the First Closing Date has entered into a Project Power Sales Agreement and a Supplemental Power Sales Agreement with Power' Agency, in the forms prescribed in Exhibits SA-VII and SA-VIII to the Sales Agreement, for the supply by Power Agency of capacity and energy to such Participant.

1.52 Power Coordination Agreement The agreement, dated concurrently herewith, between CP&L and Power Agency establishing the terms and conditions for provision by CP&L to Power Agency of certain power services and other matters, which is entitled the Power Coordination Agreement.

1.53 Project Power Sales Agreement An agreement which is in the form of Exhibit SA-VII to

'the Sales Agreement between Power Agency and a Participant.

1.54 Purchased Capacity Capacity purchased by CP&L la accordance with Section 9.1 of the Power Coordination Agreement. '

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i 1.55 'urchased Energy /

I i Energy associated with Purchased Capacity as described i

in Section 9.2 of the Power Coordination Agreement.

i 1.56 Relat1d Agreements Those agreements described in Sections 1.52 and 1.60.

i 1.57 Reload Fuel Nuclear Fuel Material and Nuclear FL al Services asso-l l

ciated with those fuel batches which are not pa + 2 the Initial Fuel Cores for the Brunswick and Harris Uni' which have been specifically designated to a particular b runswick or Harris Unit in accordance with Section 3.2.

0 1.58 Roxboro Common Support Facilities The Roxboro Common Support Facilities are the support facilities located at the Roxboro Steam Electric Plant needed in the operation of Roxboro Unit No. 4 and not directly associ-ated solely with Roxboro Unit No. 4.

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l 1.59 Roxboro Unit No. 4 I

l Roxboro Unit 7: , is the individual coal-fired elec-tric generating unit placed in Commercial Operation in 1980 ac the Roxboro Steam Electric Plant near Roxboro, North Carolina, ,

the support facilities directly associated solely with such

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l unit, spare parts, tools and equipment and any capitalized con-struction materials and supplies on hand, all as more completely described-in the Bill of Sale, the form of which is prescribed in Exhibit SA-IV to the Sales Agreement. The boundaries of Roxboro Unit No. 4 are illustrated in Exhibit SA-XVIII to the Sales Agreement. Transmission facilities located at the site, including step-up transformers having a high side transmission voltage, are not included as part of Roxboro Unit No. 4.

1.60 Sales Agreement The agreement, entitled the Purchase, Construction and Ownership Agreement, dated concurrently herewith, between CP&L '

and Power Agency establishing the terms and conditions for the sale to Power; Agency of certain undivided ownership interests in the Joint Facilities, and for the Construction, Initial Fueling and placing into Commercial Operation by CP&L of the Joint Facilities.

1.61' Service Ratio For the period beginning with the First Closing Date through November 30, 1982, the Service Ratio used in E ' closing shall be a decimal fraction equal to .69 divided by the Cumula-tive Closing Ratio, but not greater than 1.0. For the period beginning with December 1, 1982, the Service Ratio used in any closing shall be 1.0. I l

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1.62 Site Representative i

the Power Agency representative whose duties and resportsibilities are described in Section 2.2(11) (1) .

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! 1.63 Subsequent' Closing-Ratio As is applicable to each Subsequent Closing, Power Agency's Subsequent Closing Ratio is the ratio of the portion of Power Agency's Ultimate Ownership Interest in the Joint Facilities which Power Agency shall purchase and CP&L shall convey at such Subsequent Closing (without regard to the application of the Service Ratio), to Power Agency's Ultimate ownership Interest in each Joint Facility.

i l 1.64 Subsequent Closings ,

l The closings provided for in Sect 2on 2.l(B)(1)(b) of the Sales Agrouaent af ter the First Closing Date at and through l which Power Agency shall purchase and CP&L shall convey the re-maining portion of Power Agency's Ultimate Ownership Interest in each Joint Facility, 1.05 Supplemental Power Sales Agreement An agreement in the form of Exhibit SA-VIII to the Sales Agreement between Power-Agency and a Participant.

1.66 Ultimate Ownership Interest Po"er Agency's Ultimate Ownership Interest in any Joint Facility is the Ownership Of fering in such Joint Facility times the C>mmitment Ratio.

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1.67 Unit Brunswick Unit No. 1; Bruncwick Unit No. 2; Mayo Unit No. 1;-Mayo Unit No. 2; Harris Unit No. 1; Harris Unit No. 2; Harris Unit No. 3; Harris Unit No. 4; or Roxboro Unit No. 4.

1.68 Uranium Account The account established pursuant to Section 7.5 for Nuclear Fuel Material and Nuclear Fuel Services associated with all unenriched uranium material to which CP&L holds title (or has interest in or has the right to use by lease or~otherwise) regardless of chemical form and which has not yet been desig-nated to a specific unit in accordance with Section 3.2.

1.69 Uranium Venture Account The account to which advances made by Power Agency for exploration, mining or other ventures undertaken by CP&L, alone or with others, for the purpose of attempting to obtain uranium material or for evaluation of potential projects are credited in accordance with Section 7.6(C).

1.70 Working Capital Fund A fund to be established on the First Closing Date in accordance with Article 8.

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ARTICLE 2 i

OPERATION AND MAINTENANCE AND CAPITAL ADDITIONS 2.1 General Obligations (A) Power Agency hereby engages and employs CP&L, as operator, to operate and maintain Dower Agency's Ownership Interests in the Joint Pacilities, and Cn&L hereby agrees so to act. Power Agency also hereby engages and employs CP&L as l

project manager for all capital additions to the Joint Facili-l ties, and CP&L hereby agrees se t>> act. In performing the work, CP&L shall act as an independent contractor as to Power Agency.

(B) Subject to the provisions and conditions set l forth below, limitations and requirements of personnel and equipment, or technical specifications, applicable licenses, environmental and other regulations and any other applicable limitations, CP&L shall operate and maintain the Joint Fa-cilities in accordance with CP&L Operating Practice, and shall j

treat all expenditures made for operation and maintenance in i

a manner consistent with CP&L's usual accounting, control and I approval procedures as modified by this Agreement.

(C) The Joint Facilities shall be operated by CP&L as part of the Combined System.

(D) CP&L shall schedule the output from and dispatch the Joint Facilities as provided in Article 3 of the Power Coordination Agreement.

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(E) Each party recognizes that the operation of nuclear-fueled and fossil-fired electric generating plants is-a complex undertaking, cad is exposed to a variety of problems, unforeseen or otherwise. Each party also recognizes the im-portance of advising the other party of major problems or other matters which may affect the other party's costs or the ability of either party to perform its duties and responsibilities under this Agreement. Each party, therefore, shall cooperate with and assist the other party in fulfilling and discharging all respon-sibilities assumed under this Agreement. This general under-taking of mutual cooperation and assistance shall not be deemed to replace or modify in any respect the specific responsibili-ties and obligations of each party as described in this Agree-1 ment.

(F) It is recognized that Output from the Joint Facilities will be integrated with CP&L's other generating facilities. Additionally, Power Agency will receive backup and "upplemental power pursuant to the Power Coordination Agreement from other generating units on, or other resources available to, the Combined-System. The parties recognize that it is in their mutual interests that, under special circumstances, resources devoted to the Joint Facilities, or any portion thereof, be di-verted temporarily to meet the needs of other generating units on tne Combined System and that resources devoted to other ger. rating units be so diverted to the Joint Facilities.

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l l 2.2 Scope of Obligations Pursuant to the provisions of Section 2.1, CP&L shall endeavor to furnish adequate qualified personnel and l all supervision, labor, equipment, tools, materials, supplies j and incidentals necessary to operate and maintain the Joint Fa-cilities. In performing its obligations under this Article 2, l

CP&L shall act .in a timely manner in accordance with CP&L Op-

erating Practice as defined in Section 1.9. Each of the par-l

! ties also recognizes that the operation of, fueling and main-tenance of, and capital additions to nuclear-fueled electric generating plants are subject to applicable law and licensing l

by the United States Nuclear Regulatory Commission ("NRC")

l and that CP&L has neen or will be authorized by the NRC to l

direct and control such activities on a day-to-day basis. In addition, each of the parties recognizes that the operation of, fueling and maintenance of, and capital additions to fossil-fired electric generating plants are subject to applicable law.

[ Accordingly, the parties agree that in no event shall CP&L be 1

required to act or refrain from acting or to suffer any act or l

omission inconsistent with NRC licensing requirements or with any other applicable law. Except as may otherwise be provided in Article 12, CP&L's control, authority, and responsibility, 1

L without limitation but subject to the provisions as indicated, L

( shall include the following:

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(A) Plant Staf fing and Labor Relations -- CP&L, as operator, shall determine the organizational structure, manpower requirements, and contractual arrangements with third parties for the operation and maintenance of the Joint Facilities. CP&L shall set wages, benefits, and compensation for all CP&L personnel, and shall employ, bargain with, transfer, discipline, terminate, and otherwise manage all such personnel. Except where a con-tractual arrangement with third parties is applicable, settlement of strikes, lockouts and other industrial disturbances shall be solely in the discretion of CP&L. CP&L shall not he required to make settlement of strikes, lockouts and other industrial dis-turbances by acceding to the demands of the opposing party or parties when such course is, in the sole judgment of CP&L, unfa-vorabfe to CP&L, either with respect to the Joint Pacilities or any cther interest of CP&L, including the ef fect on the CP&L Systum as a whole or on the Combined System. Where a contractual arrangement with third parties is applicable, nothing contained in this Agreement shall require the settlement of strikes, lock-outs and other industrial disturbances, and the contractor shall not be required by this Agreement to make settlement of strikes, lockouts and other industrial dist'urbances by acceding to the demands of the opposing party or parties. In carrying out the functions described in this Section 2.2(A), CP&L shall act in accordance with its standard practice and procedures.

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(B) Materials and Services -- CP&L, as operator, shall arrange for and procure such materials, special engineer-l ing studies, rescarch, analysis, inspections and other services l

as are necessary or desirable for the operation, maintenance i and fueling of, and capital additions to the Joint Facilities in accordance with CP&L Operating Practice, including the direct sale of any such material or service by CP&L, as opera-l tor, to 'he owners.

i (C) Fuel Supply Management

! (1) CP&L shall determine core performance and l

l the design length of each fuel cycle for the Brunswick and Harris Units and shall have the right to regulate the load on each of the Brunswick and Harris Units or commence refueling of such Units prior to or later than the optimum burnup of the fuel in accordance with CP&L Operating Practice.

(2) When disruptions in the supply or trans-portation of fossil fuels arising from an event of Force Majeure cause stockpiles on the Combined System to reach levels which require energy conservation measures, or when such disruptions cause stockpiles at particular plants on i

j the Combined System to reach levels which threaten continued l

operations at such plants, CP&L shall have the right to regu-late the load on Roxboro Unit No. 4 and the Mayo Units to take account of such disruptions, including taking such action as is necessary to levelize the supply of the fossil fuel in-volved in tcrms of number of days a# supply, at each plant on l the Combined System.

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l (D) Energg Management -- CP&L, as operator, shall de-termine outage senedulcz, shutdown times and start-up times for the Joint rm:111 ties.

($) Notification of H6aagement Decisions -- CP&L shall advise Power Agency of determinations made pursuant to Sections 12.2(C) and 2.2(D) and such notification shall include a brief explanation of the reaeons for such determinations. The Site Representative at the plant affected by CP&L's determinations or another representative designated by Power Agency may, upon request, meet with appropriate personnel of CP&L to discuss such determinations and the reasons therefor.

(P) Payment of Disputed Costa -- If Power Agency in-l stitutes arbitration, in accordance with the provisions of Article 16, regarding the determinations made by CP&L pursuant to Sections 2.2(C) and 2.2(D), CP&L may take any action it

! reasonably deems necessary, in accordance with CP&L Operating Practice, taking account of economic, reliability, safety or regulatory considerations, pending the resolution of the dis-pute, and any costs incurred as a result of-such actions shall be' apportioned between the Owners and shall be payable pursuant to Section 9.1. The final apportionment of such costs shall be made in accordance with the determination of the Arbitrator.

(C) Operating Reports and Information

! (1) CP&L, on behalf of the Owners, shall prepare, execute and file all applications, reports, amendments and other documents and filings relating to the operation of the Joint 2-6 l

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Facilities to be Submitted to the NRC or any other federal, statu or local governmental agency or body. CP&L sha3? inform Power Agency as to the identity of monthly and annual finan-cial and operating raports and schedules on the Joint Facili-tien normally prepared by CP&L including, but not limited to, reports concerning the cost of operation, maintenance and fueling, generating and operating statistics, quality assurance and regulatory inspections. Upon specific request- Power Agency shall be entitled regularly to receive copies of any such report identified by CP&L. CP&L shall have the right to submit, in any form, any report or information relating to the operation of the Joint Facilities to any other entity; (2) Power Agency shall provide CP&L promptly with any infermation or assistance requested by CP&L (a) for the purpose of preparing or submitting any report or informa-tion described in Section 2.2(G)(1), or (b) in order to facili-tate the operation of the Joint Facilities. Such assistance to CP&L shall include, without limitation, joining with CP&L in the filing of any documents to be filed, executing all such documents, and doing all such other acts and things as are necessary, appropriate or helpful; (3) CP&L need not make available to Power Agency any reports or information relating to personnel rela-tions, utaffing relations (except staffing levels) or labor relations at or connected with the operation of the Joint Facilities; 2-7

(4) On the written request of Power Agency, CP&L shall provide to it such information or make such reports relating to the operation, maintenance, or fueling of or capital additions to the Joint Facilities, or assistance in making reports on such matters, in addition to thoae provided for in Section 2.2(G)(1),

as Pow.ar Agency may require. The cost thereof shall be borne by Power Agency.

l (H) Site Representative and Plant Visits 1 (1) Power Agency may have a Site Representative for observing, in the interest of Power Agency, the operation, maintenance and fueling and the costs thereof at the Brunswick Plant, t

Roxboro Unit No. 4 and, following the first date of Commercial Operation of a Unit thereat, the Harris Plant and the Mayo Plant, i The Site Representative at eacn plant or at Roxboro Unit No. 4 shall have complete access to the Joint Facilities at such plant or at Roxboro Unit No. 4. The Site Representative may have additional support personnel located on the plant sites, but such support personnel shall not be authorized to represent Power Agency, nor have access to the Joint Facilities except as authorized by CP&L's plant manager or other specified personnel, who shall not unreason-ably deny such access. The Site Representative and support per-sonnel shall: '(a) cooperate with CP&L and any contractors en-gaged by CP&L in order to minimize interference with the operation, f maintenance and fueling of the Joint Facilities, or any part thereof; and (b) comply with all regulations of any governmental-2-8

agency and those which CP&L and any contractors engaged by CP&L reasonably impose in the operation of CP&L's generating plants.

CP&L shall provide such reasonable facilities and assistance at the Joint Facilities for the Site Representative and his support personnel as may be required for them to carry l out their work, and the cost thereof shall be borne by Power l

Agency.

The Site Representative and support personnel shall be employed and paid by Power Agency. Neither the Site Representa-tive nor any support personnel shall have the right to supervise i or issue orders to CP&L personnel or personnel of any contractor i

engaged by CP&L.

(2) Upon reasonable prior notice, other authorized representatives of Power Agency chall have the right to visit the Joint Facilities. Visitors shall be required to comply with all requirements which any governmental agency imposes, or CP&L or its contractors impose, for safety or security reasons, including, but not limited to, personal search.

(3) The Owners mutually recognize that it may be beneficial to have members of the public visit the Joint Facili-ties. CP&L shall cooperate with Power Agency in arranging such visits requested by Power Agcucy, but CP&L shall have the right to excludo such visitors or reschedule such visits, in order to i

minimize any interference with the operation of the Joint Facili-( tico.

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l (I) Load Reduction and Plant Shutdown -- CP&L shall have the right to reduce load or shut down the Joint Facilities, or any Unit thereof, with such frequency and for such periods of time as CP&L deems necessary (1) upon order of any branch of gov-ernment having jurisdiction, (2) in accordance with applicable regulatory requirements, (3) in accordance with CP&L Operating Practice, or (4) as otherwise recommended by Power Agency and approved by CP&L.

(J) Miscellaneous -- CP&L may take all steps and actions which it deems necessary or appropriate to carry out its obligations pursuant to this Article 2 in accordance with CP&L Operatina Practice.

(K) Retired Equipment -- CP&L shall have the right of first refusal to purchase any equipment, goods, or materials Proceeds from any retired from use at the Joint Facilities.

such sale shall be credited directly toward the replacement cost of such item, or if no replacement is necessary, net pro-ceeds shall be credited to the Owners in accordance with their respective ownership interests in such Joint Facility.

In the event any such equipment, goods, or materials arc sold to other than a party to this Agreement, then the net proceeds shall be credited to the Owners in accordance with their respective ownership interests in such Joint Facility.

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! 2.3 Capita l _ Additions.

(A) In order to comply with governmental- regulations 1

or to. promote safe, environmentally sound, economical, efficient

[ or reliable operations, capital additions to the Joint Facili-l

. ties will be made over the life of the Units and the support

facilities. Either owner may propose such a capital addition which it believes is needed for regulatory, safety,. environ- '

mental', ' economic, ef ficier.cy or reliability reasons.

, (P) The Sales Agreement shall govern (1) capital additions to the Mayo or Harris Units authorized price to Conmercial Operation of the Unit to which the capital addition relates and (2) capital additions to the Brunswick Units or Roxboro Unit ho. 4 commenced or authorized prior to the First Closing Da te. This Agreement shall govern all other capital l additions to the Joint Facilities. Sections 2.3(C) through 2.3(P) apply only to capital additions governed by this

( Agreement.

(C) CP&L's fee for serving as project manager for capital additions shall be determined in the same manner as set forth in Section 1.18 and Exhibit SA-VI of the Sales Agreenent.

(D) CP&L shall classify each capital addition to a Joint Facility which is part of a project having at estimated ,

cost exceeding $20,000 and with which it determines to proceed ,

t into one of the'following categories:

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E (1) Capital additions undertaken pursuant to a-l ' directive of a governmental regulatory agency which directs

-that the' specific capital addition, or its equivalent, be ,

l made; l

l (2) Capital.a6ditions-required to comply with a

j. directive of a governmental regulatory agency, or to comply

( with a policy adopted or expressed by such an agency without

! embodiment in a directive, where such directive or policy in-posos or creates a requirement or objective without directing that a specific capital addition be undertaken;

(3) Capital additions ntt required by a directive e

or policy of a governmental regulatory agency which are under-taken to improve or maintain safe, reliable, or environmentally. 1 sound operations or to maintain economic or ef ficient operations; (4) Capital additions not required by a directive l

or policy of a governmental regulatory agency which are under-taken to improve the economy or efficiency of operations; (5) All other capital additions.  !

(E) CP54L shall give writ *"r. notice to Power Agency that a capital addition is needed. Such notice shall include:

(1)_ CP&L's estinate of the cost of such capital addition (including fees payable to CP&L) ar.d the portion of such costs i CP&L has determined to be properly allocable to Power Agency;

-(2) the intended purpose of such- capital addition; and (3)'for

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projects which CP&L is required to classify .under the terms of ,

Section 2.3(D), a designation of the category enumerated in Section 2.3(D) into which the addition falls.

(F) Determinations and decisions by CP&L concerning capital additions which CP&L is not required to classify under l

the terms of Section 2.3(D) shall be subject to challenge by-l Power Agenay and i o arbitration under the provisions of _ Article 16 solely on the issues enumerated in Sections 2.3(I)(4) and 2.3(I)(5).

(G) CP&L's services as project manager shall at all I

times be subject to all the provisions applicable to such ser-vices contained in this Agreement (including, without limitation, Articles 15 and 16 and Section 25.11(C)) and the provisions of the Sales Agreement with respect to CP&L acting as project manager.

(H) A capital addition shall be deemed approved by Power Agency unless, within sixty (60) days after the date of notice given under Section 2.3(E), Power Agency advises CP&L in writing of its objections to such capital addition, stating in detail the basis for its objections and the issues it may wish to arbitrate under Sections 2.3(I) and 2.3(J).

(I) In any arbitretion concerning a capt'al addition proposed by CP&L which is subject to arbitration under this .

Section i 3(I), the issues to be determined by the.Arbi-trator shall be-limited to:

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t (1) For any capital addition classified under the-terms of Section 2.3(D), a determination whether the capital addition was properly designated by CP&L as falling into said category.

(2) For a capital addition classified by CP&L in category (2) of Section 2.3(D), a determination whether, in light of conditions existing at the time CP&L proposed the capital addition and known to CP&L, the addition could not reasonably be expected to comply with the directive or policy of a governmental agency, such compliance having been identified by CP&L as the intended purpose of the capital addition in 'its notice given under Section 2.3(E).

(3) For a capital addition classified by CP&L in category (3), (4) or (5) of Section 2.3(D), (a) whether, in accordance with CP&L Operating Practice and in light of con-ditions existing at the time CP&L proposed the addition, i t.

could not reasonably be expected to accomplish the intend.1 pur-pose which CP&L identified in its notice under Section 2.3(E);

and (b) whether CP&L's purpose in undertaking the capital ad-dition was in accordance with CP&L Operating Practice.

(4) For any capital addition, whether the proposed

- allocation of the costs thereof to a Joint Facility is proper in accordance with.CP&L Operating Practice and the applicable terms of this Agreement.

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(5) For any capital addition, whether the costs thereof actually chsrged to Power Agency have been properly allocated in accordance with CP&L Operating Practice and the applicable terms of this Agreement.

l (J) Notwithstanding Power Agency's rioht and obli-gation to respond to a notice given by CP&L pursuant to Sec-tion 2.3(E), CP&L at any time may proceed with the planning, design and/or construction of a proposed capital addition to any Unit of the Joint Facilities. If CP&L determines so to proceed, it shall give Power Agency a written notice thereof

(" Notice of Intent to Proceed"), and Power Agency shall pay l its proportionate share thereof in accordance with Section 9.3.

(1) If Power ogency has responded to the notice .

provided to it pursuant to Section 2.3(E) with written objections i

pursuant to Section 2.3(H) and CP&L sends Power Agency a Notice of Intent to Proceed , Power Agency may, within ninety (90) days af ter it received such Notice of Intent to Proceed, notify CP&L in writing of its intention to arbitrate a capital addition under Section 2.3(I)(1) through (4). At any time, but in any event j

l no later than twelve months after April 1 of the year following the year in which Power Agency has received its final Additiens Monthly Statement relating to a capital addition, Power Agency may challenge in accordance with Section 9.6 and, pursuant to such Section 9.6, give CP&L notice of its intention to arbitrate 2-15

I under Section 2.3(I)(5) with respect to such capital addition, L and provision by Power Agency of written objections pursuant to Section 2.3(H) shall not be a prerequisite to the giving of W

such notice by Power Agency.-

(a) If Power Agency so advises CP&L of its in-tention to arbitrate a capital addition classified by CP&L in category (1), (2), (3) or (4) of Section 2.3(D), CP&L may j continue with the planning, designing, and/or construction of l

L the proposed capital addition and Power Agency shall be cbli-gated to pay CP&L, in accordance with Section 9.3, its proportionate monthly share of the costs of such capital addi-tion lacurred from the date of Power Agency's notice of inten-tion to arbitrate to the date of the Arbitrator's decision.

, 1 l (b) If Power Agency advises CP&L of its inten-l tion to arbitrate a capital addition classified by CP&L in cate-gory (5) of Section 2.3( D), CP&L may continue with the plan-ning, designing and/or construction of the proposed capital ad-l dition but Power Agency snall not be obligated to continue to i

pay CP&L, in accordance with Section 9.3, its proportionate share of the costs of such capital addition incurred from the -

date of Power Agency's notice of intention to arbitrate to the date of the Arbitrator's decision.

l (2)(a) If CP&L has proceeded with a capital.

addition classified by CP&L in category (1), (2), (3) or (4) ,

of section 2.3(D) pursuant to this Section 2.3(J) and the mat-ter is arbitrated and the Arbitrator determines - the issues 2-16 l

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enumerated in Section 2.3(I) adversely to CP&L, CP&L shall reimburse Power Agency only for such part of Power. Agency's pro-portionate share of the costs of the capital addition (including fees) incurred on and af ter the date of the notice of intention to arbitrate as the Arbitrator shall award to Power Agency plus

simple interest calculated at the -Incentive Interest Rate. CP&L shall have the right, to the extent it chooses to do so, to cure any defects found by the Arbitrator in the application of the standards enumerated in Section 2.3(I) within a time limit set by the Arbitrator, in which case, if approved by the Arbitrator, Power Agency shall be responsible for its full proportionate share of the costs of this capital addition.

l (b) If CP&L has proceeded with a capital addition classified by CP&L in category (5) of Section 2.3 (D) pursuant l

to this Section 2.3(J) and the matter is arbitrated and the Arbitrator determines the arbitrable issues enumerated in Sec-tion 2.3(I) adversely to Power Agency, Power Agency shall re-i imburse CP&L only for such PGct of Power Agency's proportionate share of the costs of the capital addition (including fees) in-l curred on and after the date of its notice of intention to arbi-trate as the Arbitrator shall award to CP&L plus simple interest calcul6ted at the Incentive Interest Rate.

(3) If CP&L has proceeded pursuant to this Sec-tion 2.3(J) and the matter is arbitrated, after the Arbitrator decides the applicable issues enumerated in Section 2.3(I),

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Power Agtncy shall make payments (including fees) to CP&L re-Equired to complete the capital addition, in accordance with the t-i decision of the Arbitrator.

l (K) When Power Agency proposes a capital addition, it shall designate the' category enumerated in Section 2.3(D) into which such addition falls and provide an estimate of the cost thereof. Within ninety (90) days af ter receipt of -such notice, CP&L shall . inform Power Agency in writing whether it will pro-coed with such capital addition. If CP&L determines to proceed with such capital addition, the parties shall proceed in the same manner as though CP&L had proposed the capital addition pursuant to this Section 2.3. The costs thereof shall be borne by the Owners in accordance with Section 9.3 and CP&L shall act as project manager. If CP&L determines not to proceed l

with such capital addition, such determination shall be subject to arbitration in accordance with procedures set out in Article

16. The question to be determined by the Arbitrator shall be limited tc whethe or not CP&L's determination not to proceed with such capital addition is in accordance with CP&L Operating Practice. If the Arbitrator determines this issue adversely to CP&L, CP&L shall proceed as project manager with the desiga ,

and construction of such capital addition, but CP&L or Power Agency may seek arbitration in accordance with the provisiot.s of Article 16 concerning any further disputes which may arise 2-18

concerning the design and construction of such capital addition.

If the Arbitrator decides that CP&L's determination not to pro-ceed was in accordance with CP&L Operating Practice, CP&L shall not be required to proceed with such capital addition.

(L) If either Owner proves to the reasonable satis-faction of the other owner that funds are unavailable to it for a capital addition, the owner proving its shortage of funds shall enter into an agreement, the principles of which are outlined in Exhibit OPA-II, covering an arrangement for the payment of the costs of the capital addition and repayment th'ereof. Failure of such Gwner either to furnish its share of the costs of a capital addition or to enter into such agreement in accordance with this Section 2.3(L) shall be an Event of Default under Article 20.

(M) With respect to capital additions, the $20,000 figure set f orth in Sections 2.3(n) and 2.3(P) is a base amount, and shall be adjosted annually (as of January 1 of each year) as follows: (1) fifty-five percent (55%) of said base

]

amount shall be adjusted to reflect the increase or decrease, if any, in the index of " Average llourly Earnings, Electrical 1

Equipment and Supplica Industry" (S I C-3 6 ) , as published in "Em-

. ployment and Earnings", above or below such index fcr the month l

of December 1980, and (2) forty-five percent (45%) of said base amount shall be adjusted to reflect the increase or decrease, if any, in the price index for " Steel Mill Products" (S IC-1013 ) ,

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as published in'" Wholesale Prices and Price Indices", above or below such index for the, month of December 1980.

The' indices referred to above are presently published Rby the Bureau of Labor Statistics of the United States Depart-l ment of Labor. If said indices, as the same are now computed and published,'should be di' continued, or enlarged upon, or changed, the adjustment shall be ca Aculated on the equivalent of the pre-sent indicen, and for the purpose of determining and- calculating .

the equivalent of the present indices, use shall be made of the successor index or indices and the formulas announced or published l

by the Bureau of Labor Statistics of the United States Department of Labor, and its successors, as being proper for conversion of any such successor index to the equivalent of the present index. ,

(N) The costs of any capital addition designed and/or constructed under the supervision of CP&L as project manager shall include all properly allocable direct and indirect costs thereof.

(O) CP&L 'aikes no warranty whatsoever that any capital addition or change to any part of the Jcint Pacilities will meet any regulatory requirement or will cure any deficiency with respect to safety, economy, efficiency, environmental soundness, or reliability for which it is deemed to be required or acbomplish any other intended purpose.

(P) When CP&L begins to consider construction of a capital addition at any Joint Facility having an estimated cost 2-20

exci iing S20,000, it shall advise Power Agency of such consider-ation and the estimated cost of such prciposed capital addition at the earliest stage which is reasonably feasible and, in any ,

event, CP&L shall advise Power Agency as soon as a recommendation is made by an of ficer or management employee of CP&L, as set forth in Section 12.l(B)(3) of the Sales Agreement, to tra Senior Management Committee of CP&L for the expenditure of funds for study or ;onstruction of a epecific capital addition.

2.4 Contraut Submitt31 and Review (A) Pursuant to Section 7.4(B)(1) of the Sales Agree-ment, CP&L shall furnish to Power Agency at least sixty (60) days prior to the First Closing Date, for Power Agency's ap-

, proval, copies of all contracts with third parties relating to the construction, Initial Fueling and placing into Commercial Operation of the Joint Facilities listed on Exhibit S A-IX-1 of the Sales Agreement, including all changes or amendments thereto as of the First Closing Da te .

I' (B) Following the First Closing Da te, CP&L shall sub-mit to Power Agency for Power Agen.:y's review all contracts with third parties executed af ter the First Closing Date relating to the operation and maintenance of, capital additions to, and pro-vition of Fuel Management Services for, the Joint Facilities, in-cluding all changes or amendments to existing third-party contracts.

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CP&L shall submit each such contract, change or amendment for Power Agency's review as soon as practical following execution l of such coatract, change or amendment, but in no event later than thirty (30) days af ter CP&L- receives the original or a, copy.of j such' executed contract, change or amendment.

( (C) CP&L shall take any and all reasortable steps to l

l enforce compliance with each such contract and shall actively pursueanyaddallcontractualorotherremedieswhichmightbe available in the event of noncompliance with any such contract.

CP&L's actions in enforcing compliance with such contracts and CP&L's pursuit of remedies in tha event of noncompliance with

any such contract shall be in accordance with CP&L Operating Practice.

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ARTICLE 3 FUEL MATERIAL AND FUEL SERVICES 31

. General L (A) Under this Agreement, the Owners shall pay the costs of all Nuclear Fuel Material, Nuclear Fuel Services, Fos-l sil Fuel Material, Fossil Fuel Srrvices and otner costs allocable to the fueling of the Joint Unics which have net been paid for under the Sales A.greement.

(B) The price oi Nuclear Fuel Material required for Reload Fuel for the Brunswick Units and the Harris Units shall be CP&L's average cost for such material as further set forth in Section 7.5.

(C) CP&L shall provide all Fuel Management Services, j including but not limited to, arranging fer the acquisition, by l purchase, lease, or otherwise, of all (1) Nuclear Fuel Material for the Brunswick and Harris Plants, (2) Possil Fuel Material, (3) Nuclear Fuel Services and Fossil Fuel Services required for i

the sustained operation of the Joint Facilities, and (4) re-l placement Nuclear Fuel Material, Nuclear Fuel Services and/or i

l Reload Fuel required pursuant to Section 3.2(C).

CP&L shall use reasonable efforts to obtain such Nuclear i

Fuel Material and Fossil Fuel Material and provide such Nuclear Fuel Services and Fossil Fuel Services, but CP&L does not warrant or assure (1) the availability of such Fuel Materials or Fuel 3-1 -

I Services, or (2) the availability of such Fuel Materials or Fuel

. Services at reasonable prices or on an established schedule.

(D) -CP&L shall act as the administrator of the con-tracts and~other technical services provided throughout the nuclear fuel cycle and in connection with the procurement and use of fossil fuels.

! (E) Except as is otherwise provided in Section 7.5, CP&L shall use its usual accounting, control and approval pro-cedures with respect' to all' expenditures made for Nuclear Fuel Material, Fossil Fuel Material, Nuclear Fuel Services, Fossil Fuel Services and Fuel Management Servicas hereunder.

(F) Notwithstanding the other provisions of this

! Article 3 or of Article 17, CP&L shall have the right to l

subcontract for any or all of the fuel procurement functions l

described herein; but, as between Power Agency and CP&L, such subcontracts shall not operate to relieve CP&L of any rerpon-sibility it has under this Article 3.

(G) In consideration of Section 3.1(B) and Section 7.5, CP&L shall have the right to undertake and pursue explo-ration, mining and other ventures, either alone or with others, l

for the purpose of a ttempting to obtain Nuclear Fdel Material in accordance with Section 3.1(C) and, in connection therewith, Power Agency shall have the obligation to advance funds in accor-dance with Section 7.6 for all such ventures, including those in existence on the First Closing Date. If it so chooses, Power 3-2

1 Agency may participate in exploration, mining or other venteres undertaken by cP&L, either alone or with others, for the purpose of attempting to obtain Fossil Fuel . Material, af ter the First

-Closing Date. In the event Power Agency participates in ven-tures to procure Fossil Fuel Material. it shall have the obli-i gation to advance funds in accordance with Section 7.7.

CP&L shall have the right to include any funds ex-pended by Cr&L on behalf of CP&L and Power Agency for ventures to procure Nuclear Fuel Material and those ventures to procure Fossil Fuel Material in which Power Agency has chosen to par-ticipate in the costs of Nuclear Fuel Material and Fossil Fuel Material, respectively, pursuant to Article 7; and Power Agency sliall have the obligation to pay the cost of Nuclear Fuel Material for the Brunswick and Ilarris Plants acquired for the Uranium Account as described in and determined in accordance with Sections 7.3 and 7.5, and to pay the cost of Fossil Fuel Material as described in Section 7.4 including, without limitation, its share of the costs of such venture (s) pursuant to Article 9. Power Agency agrees that its right to dispute any of the foregoing by arbitration under Article 16, by legal action or otherwise, shall be limited (1) to events of fraud, willful misconduct cr gross negligence by CP&L in conntction .

therewith and (2) to the determination of the costs (but not 5,hether such costs should have been incurred) and the proper allocation of Power Agency's share of such costs.

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(II) In. the event any supplier of NuclearEFuel Mater-cial or Nuc1e' ar ' Fuel Services in connection with Reload Fuel

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for the Brunswick ~ Plant or the liarris Plant, or Fossil Fuel Material or ' Fossil Fuel Services in connection with Foxboro Unit No. 4 or the Mayo Units breaches or otherwise inadequately performs a contract with CP&L or Power Agency, Power Agency agrees.that its right to seek redress in any form from CP&L with

^

respect to such-breach or inadequate performance by arbitration under Article 16, by legal action or otherwise, shall be limited to events of fraud, willful misconduct or gross negli-gence by CP&L in connection with such contract.

(I) CP&L may take all steps and actions which it deems .

necessary or appropriate to carry.out itu rights and obligations h pursuant to this Article 3.

(J) CP&L shall prepare a nuclear fuel plan which shall i initially be provided to Power Agency not later than thirty (30) l 4 days prior to the First Closing Date and which shall he updated :

i

$ on December 1 of each year following the First closing Tu te .

j This plan shall include, for a period of no less than five (5) i

[

calendar years and for a longer period up to ten (10) years, if I

i 'such a plan is available, following the year in which the plan is submitted to Power Agency, the following information:

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(1) the anticipated fueling schedule for each nuclear generating facility on the Combined System; (2) The anticipated schedule and source, including existing and proposed contractual arrangements, for the supply-of Nuclear Fuel Material .and major Nuclear Fuel Services (conver-

, - sion, enrici. ment and fabrication) for the Combined System, except Nuclear Fuel Services relating to nuclear fuel designated for use 1

in units other than the Brunswick and liarris Units; and (3) An estimate of the cost associated with the supply of the Nuclear Fuel Material and major Nuclear Fuel Ser-vices described in Section 3.l(J)(2).

In supplying such information, CP&L shall not be

] required to disclose information in violation of any of its

contracts.

The nuclear fuel plan shall be provided for planning i

purposes only, and shall not govern for the purpose of deter-I mination of the cost or payment schedule required under this Agreement except for use in computation of Powar Agency's con-4 tribution to the Uranium Account in accordance with Exhibit-i OFA-III.

The nuclear fuel plan and all information contained

, therein, including, without limitation, ex.isting and proi ,ced con-tractual arrangements, the terms and conditions thereof (including prices) set forth in the nuclear fuel plan, and any information 3-5

+ - - -.-, - - , .

A derived solely therefrom, are cor.fidential and proprietary infor-

-mation of CP&L, and Power Agency shall not disclose any such information without obtaining the advance written consent of CP&L, except where such disclosure is required by law or regulation or:

in connection with assertion of a claim or, defense in arbitration, judicial or administrative proceedings involving '.'wer Agency, in which event Power Agency shall advise CP&L in advance and t ooperate to the maximum extent practicable to minimize the disclosure of such information.

3.2 De s igna t ion , Title, Risk cy[ Lass, Exchange and Repurchase (A) Designation and Title -- All Nuclear Fuel Material (whether or not to be enriched) shall be designated for use at a specific nucicar generating unit on the Combined System at the time the portion of such Nuclear Fuel Material to be enriched arrives at an enrichment facility. Legal title, as between CP&L and the Ownern, to Nuclear Fuel Material for the Brunswick Plant and the llarris Plant shall pass to the Owners at the time such Nuclear Fue.7 Material is designated for use at a specific Brunswick or Harris Unit. In the case of leased fuel, obligations under the lease as between CP&L and the Owners concerning such leased fuel used as Nuclear Fuel Material for the Brunswick and liarris Plants shall pass to the owners at the time when leased fuel used as Nuclear Fuel Material is designated for a specific Brunswick ,

or llarris Unit. As between CP&L and the Owners, title to nuclear fuel wsste material, other nuclear waste material, or recovered 3-6

product shall be vested in the Owners of the Nuclear Fuel Material producing such nuclear fuel waste material in proportion to their respective ownership interests in such Nuclear Puel Material.

Legal title, as between CP&L and the Owners, to Fossil Fuel Material for the Mayo Plant and Roxboro Unit No. 4 shall pass to the-Owners at such time as CF&L acquires title to such Fos-sil Fuel Material.

( '3 ) Risk of Loss -- Any loss or damage to Nuclear Fuel Material occurring prior to its designation for use at a specific

! Brunswick or darris Unit shall be ref.'.ected in the cost of Nuclear Fuel Material pursuant to Section 7.5. After the Nuclear Fuel I

Material is designated for use at a specific Brunswick or Harris Unit, any loss or damage to the Nuclear Fuel Material, Reload Fuel or Nuclear Fuel Services associated with such fuel shall be charged to the Brunswick or Harris Unit for which the fuel is i

designated.

(C) Exchange and Repurchase -- In the event that any Nuclear Fuel Mater 2al, Nuclear Fuel Services and/or Reload Fuel designated for the account of a specific Brunswick or Harris Unit and paid for by the Owners is tempot,arily not required, CP&L may use such Nuclear Fuel Matcrial, Nuclear Fuel Services and/or Reload Fuel at other nuclear generating units on the Combined System, provided CP&L replaces the same. In the event any Nuclear Fuel Material, Nuclear Fuel Services and/or Reload Fuel designated to the account of a specific Brunswick or Harris Unit and paid for by the Owners will never be used for the Unit to 3-7 w T*'W

~

which it has been designated, CP&L shall have the right to repurchase any such Nuclear Fuel fiaterial, Nuclear Fuel Service or Reload Fuel at the cost to ' Power Agency, plus -simple interest calculated at the Compensatory- Interest Rate to the date of such repurchase.

(D) Sale to Other Parties -- In the event any Nuclear Fuel f*aterial from the Uranium Account is sold, leased (except when CP&L retains title under a trust or other financing arrange-ment) or otherwise disposed of, CP&L and Power Agency shall share in any and all_ profits and losses associated with such transaction as provided in Section 7.5(A)(4)(d).

3.3 Responsibility (or Spent Fuel (A) For spent fuel batches for which all fuel asser-blies have been finally discharged from a reactor and which are located in the fuel pools of units on the Combined System as of the First Closing Da te , Power Agency shall assume responsibility for a portion of any back-end costs or liabilities and shall he entitled to a portion of any salvage value credits associated thercwith. Such portion shall be equal to the product of eight and one-quarter percent (8.25%) times the CP&L Customer RLtio.

Within ninety (90) days af ter the First Closing Date, CP&L shall furnish Power Agency with a statement specifically identi-fying each fuel assembly in such spent fuel batch and also show- i ing, as of the First Closing Date, paymento associated with back-end costs or liabilities for such fuel made by the Participanta, 3-8

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as full requirements customers, to CP&I. prior to the First Clos-ing Date. At such time as back-end costs, liabilities or salvage

! vnlue credits are realized for such fuel, such payments, less.

r any amounts of such payments which are refunded to the Partici-pants pursuant to an -order of FERC, shall ne credited to Power

' Agency as an offset Against Power Agency's share of actual back-end costs or liabilities or ad6ed to Power Agency's salvage value iredits, as appropriate.

(B) For all fuel batches finally discharged from the l

reactors at the Brunswick Plant and the Harris Plant subsequent

, to the First Closi Power Agency shall assume responsibility for a portion of any back-end costs or liabilities and shall be-

! entitled to a portion of any salvage value credits in proportion l

to its ownership interest in such batches at the time such batches are-finally discharged from the reactor.

3.4 Recycle Uranium l If spent fuel from a Brunswick Unit or a Harris Unit is reproceseed and recycled, recycle uranium and the costs asso-l ciated therewith shall be credited to the Uranium Account in a l

manner which appropriately reflects the respective investments,

! rights and responsibilities of the Owners in such recycle uran-ium pursuant to this Agreement and the Related Agreements.

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I ARTICLE 4 SPEtJT FUEL STORAGE CAPABILITY 4.1 - Use bj( CP&L In consideration in part of the Power Coordination Agreement, CP&L shall have the exclusive right to use the spent f uel storage capability at the Brunswick Plant and the spent fuel storage capability at the Harris Plant for other than Hrunswick or Harris fuel, respectively, but only for nuclear fuel from the Combined System.- The monthly charge therefor shall be calculated in accordance with Exhibit OPA-VIII. Such charge shall be payable when CP&L first uses such storage for nuclear fuel from the Com-t bined System (or, if fuel from the Combined System is then being stored at the Brunswick Plant, effective as of the First Closing Da te ) , other than Brunswick fuel at the Brunswick Plant or Harris fuel at the Harris Plant, and shall be payable only so long as, and to the extent that, CP&L uses such storage for that purpose.

In the event CP&L's use of such spent fuel storage l capabilities creates a situation where Brunswick or Harris fuel j could not use the fuel storage capabilities at the Brunswick Plant i

or the Harris Plant, respectively, CP&L shall, subject to appro-l priate regulatory approvals, either (1) remove its fuel assemblies l

stored at the Brunswick Plant or the Harris Plant, in order to provide storage at the Brunswick Plant locations for Brunswick fuel assemblies and at the Harris Plant locations for Harris fuel assemblies;-or (2) provide comparable storage and safeguarding 4-1 i

e for Brunswick and Itarris spent fuel at another. facility provided by.CP&L, at the above monthly charge payable to CP&L, up to the capacity CP&L uses at the Brunswick Plant f or other than Bruna-wick fuel assemblies and up to the capacity CP&L uses at the

!!arris Plant for other than !!arris fuel assemblies. In this

! latter event, CP&L shall pay the cost of transporting the Bruns-l wick or liarris fuel assemblies to any interim location, and the Owners shall pay for such transport from the interim location to .

i any location then understood to be tl.e final destination of assemblies so displaced.

j 4.2 Indemnification by CP&L Except as provided in Section 3.3, CP&L hereby agrees to indemnify and hold harmless Power Agency, and the individual Participants, t!,eir agents, servants and employees, in using the spent fuel storage capabilities at the Brunswick.and ITarris l Plants for other than jointly-owned Brunswick fuel or other than liarris fuel, respectively, and, where caused by such use 'in transporting Brunswick or liarris spent fuel to another location, and storage at such location, against any and all respc sibility I

or liability for any and all damage or injury of any nature what-soever (including death resulting therefrom) to all persons, whether employees of CP&L, Power Agency, Participants, or other-wise, and to all property, caused by, resulting from, arising out .

-of, or occurring in ' connection with, such use of the spent . fuel storage capability at the Brunswick and liarris Plants by CP&L, 4-2

whether such claim may be based upon contract, tort or upon any alleged breach of any duty or obligation. Except as otherwise 1

specifically provided in Section 4.3, such indennification shall hold harmless Power Agency, and the Participants, their agents, servants and employees against any and all liability and any and all losses, damages, injuries, coste and expenses, including expenses incurred by Power Agency, and the individual Participants, their agents, servants and employees, in connection with investigating any claim or defending any action and includ-ing reasonable attorneys' fees incurred or suffered by Power Agency, and the individual Participants, their agents, servants and employees, by reason of the assertion of any such claim against Power Agency, and the individual Participants, their agents, servants or employees.

I 4.3 Assumption of Defense by CP&L l CP&L may assume on behalf of Power Agency, the individual l

l Pa rticipan ts , their agents, servants and employees, at its option l

l and afta* written notification to Power Agency, the defense of any action at law or in equity which may be brought against Powe r i

P;cncy, and the individual Participants, their agents, servants or employees, upon any claim described in Section 4.2. CP&L, l regardless of whether it assumes the defense of any action of Power Agency or defends such action, shall pay on behalf of Power Agency, and the individual Participants, their agents, servants 4-3

I or employees, all costs associated with the defense of the claim and the amount of any judgment that may be entered against Power Agency, en.1 the individual Participants, their agents, servants or employees, in any such action, with the exception of the fol-lowing costs:

(1) The expense of investigating any claim prior to

.the time that notice is given to CP&L that said claim is cov-ered by this indemnification; (2) Cenpensation for time spent by employees of Power Agency in defending any action; and (3) Attorneys' fees incurred by Power Agency af ter CP&L has assumed the , defense of an action as provided in this Section 4.3.

4.4 Continuation of Use Af ter Termination of Agreement In the event this Agreement is terminated for any rea-son, CP&L shall retain the rights and liabilities for use of the

spent fuel storage capabilities at the Brunswick Plant and the Harris Plant in accordance with this Article 4.

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ARTICLE 5 FOSSIL FUF3 WASTE DISPOSAL f The operation and main'tenance and capital costs of fossil fuel waste disposal shall be treated in accordarice with the provisions of Article 7 with respect to Roxboro Unit No. 4 and the Mayo plant and, where applicable, to the Roxboro Common Support Facilities in accordance with the provisions of Sections 6.2, 6.3, 7.1 and 7.2. Revenues generated from the disposal'of fossil fuel waste shall be credited to the fuel account or to the appropriate operation and maintenance expense account in accet-dance with Section 7.1. The allocation of such revenues to particular Units shall be performed in accor-dance with Section 7.10.

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ARTICLE 6  !

RIGliT OF USE OF TliE ROXBORO COMMON SUPPORT FACILITIES 6.1 Right of Use;by Power Agency In consideration of Power Agency's payment of the pur-chase prJce of Roxboro rinit No. 4 and in order to facilitate Power Agency's use of its ownership interest in Roxboro Unit No. 4, CP&L grants to Power Agency the right to'use all support facilities located at the Roxboro Plant needed in the operation of Roxboro Unit No. 4 and not directly associated solely with Roxboro Unit No. 4 (the "Roxboro Common Support Facilitie0"). Power Agency's right to use the Roxboro Common Support Facilities shall commencc un the First Clusing Date, as set forth in Section 2.1 of the Sales Agreement, and Thall continue until the date of retirement of Roxboro Unit No. 4.

6.2 Payment of Costs Of Operation and Maintenance (A) During the term of Power Agency's right to use the Roxboro Common Support Facilities, Powcr Agency shall advance to CP&L on a monthly basis its proportionate share of the costs of operation and maintenance of such facilities. Such advances shall be paid on the same basis as, and included as a part of, the payments provided for in Section 9.1. The costs of oper-ation and maintenance of the Roxboro Common Support Facilities shall be allocated to Roxboro Unit No. 4 on the basis of the al-location methods set forth in Exhibit OFA-IX. At any time, 6-1

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Power Agency's share of the operation and maintenance costs

_ properly allocable to Roxboro Unit No. 4-shall be based upon ,

Power Agency's ownership Interest (as defined in Section 1.48 of the Sales Agreement) in Roxboro Unit No. 4. The method by which' Power Agency's share of the costs of operation and main -

tenance of the Roxboro Common Support Facilities shall be deter-mined is set forth in Exhibit OPA-IX. 4 (B) CP&L shall furnish te Power Agency estimates of the monthly payments due from Power Agency for Power Agency's share of the costs of operation and maintenance of the Roxboro l Common Support Facilities. Such estimates shall be included as a part of, and prepared on the same basis as, the estimates to be provided by CP&L pursuant to Section 9.1.

l 6.3 Advances for Capital Additions l

l (a) CP&L and Power Agency acknowledge that capital i

additions to the Roxboro Common Support Facilities will be neces-sary from time to time. Power Agency shall pay its proportionate

(

share of expenditures for capital additions to the Roxboro Common '

Support Facilities which occur after December 31, 1979. Each l

! Closing Payment provided for in Section 6.1(B) of the Sales Agreement shall include Power Agency's share of such expenditures made between December 31, 1979 and each Closing Date, based on the ownership. interest being acquired by Power Agency on such

' Closing Date. After the First Closing Date, Power Agency shall advance to CP&L on a monthly basis its proportionate' share of 6-2

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L such expenditures not -included in a Closing Payment, and such advances shall be paid on the same basis as, and. included as a part of, the payments provided for in Section 9.3. The costs of such capitcl additions to the Roxboro Common Suppect Facili-ties ~ sha.'l be allocated to Roxboro Unit No. 4 on the basis of L'

the alloca ion methods set forth in Exhibit OPA-VII. Power.

Agency's share of the costs properly allocable to Foxboro Unit l

No. 4 shall be based upon Pouer Agency's Ownership Interest in Roxboro Unit No. 4. The method by which Power Agency's share of the costs of such capital additions to the Roxboro common Support Facilities shall be determined is set forth in Exhibit OPA-VII.

( B) CP&L shall furnish to Power Agency estimates of the monthly payments due from Power Agency for Power Agency's j share of the costs of capital additions to the Roxboro Common Support Facilities. Such estimates shall be included as a part of, and prepared on the same basis as, the estimates to be pro-t vided by CP&L pursuant to Section 9.3.

(C) Power Agency agrees that its right to dispute its obligations under this Section 6.3 shall be limited

(1) events of fraud, willful misconduct or gross negligence by CP&L in connection with such capital additions and (2) the determination of the costs (but not whether auch costs should l

have been incurred) and the proper allocation of Power Agency's l share of such costs.

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6.4' Salvage, Salo,-.- Transfer or Disposition of Capi ta1 -

Additions y th'c Roxborolommon Support 7acilities

g. CP&L shall have the right to salvage, sell, transfer or.

( disppse of any capital addition to the Roxboro Common Support c '

Pacilities; provided, however,-that Power Agency.shall b'e credited with'its proportionate chare of the'value of.or proceeds received

(- f rom the salvage, sale, transfer or disposition of any capital l ..

addition as to. which Power Agency has made a payment pursuant- to I

Section 6.3.-

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-ARTICLE 7

{0STS 7.1 Costs and Accounting Except for those costs to be borne specifically by Power ~ Agency pursuant to any provision ~of this Agreement, each owner shall pay its proportionate share pursuant to this Article 7 of (a) all direct and indirect costs incurred in con-nection with fuel and with the operation, fueling, maintenance or shutdown of the Joint Facilitics, and (b) all costs of capital additions thereto. Separate accounts for the Joint Facilities shall be maintained for operation and maintenance expenses, on the one hand, and capital additions, on the other. Such accounts shall be maintained in accordance with the ERC Uniform System of Accounts prescribed for Class A and Class R Public Utilities and Licensees, 18 C.F.R. Part 101, as it may be amended from time

! to time; provided, however, that if such accounting under the Uniform System is eliminated, then costs shall be determined thereafter by applying the same methods and procedures then l

used by CP&L. Allocatien of costs snall be made in accordance with Exhibits OPA-IX-1, OPA-IX-2, OFA-IX-3, and OPA-IX-4 and OPA-IX-5 or, where no allocation is specified in this Agreement, in accordance with Section 7.10. There shall be no duplication of charges.

7-1

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(- -7. 2 - Cost of Operation and Maintenance and Capital Additions

' Direct and indirect costs incurred in connection with v.

operation, fueling (other than costs paid by the Owners pursuant dece; ns 7.3, 7.4, 7.5 and 7.9), maintenance'or shutdown of

.the Joint Facilities, and costs of capital- additions shall in--

clude, but not be limited to, the following expenses, obliga-tions and liabilities:

(A) All direct expenses of labor and direct payroll 1

}

overhead of personnel assigned to and/or working at, and properly chargeable to, the Joint Facilities (excluding costs described in Sections 7.2(B) through (G), 7.3, 7.4, 7.5, 7.6 and 7.7).

1.

j (B) Costs of all utilicies, services, equipment, I chemicals, spcre parts, tools, goods, materials and supplies i of every nature used at the Joint Facilities charged directly i

to the expense of operation and maintenance of, or capital additions to, the Joint Lacilities.

'( C) All indirect labor costs and indirect payroll overheads which-are properly allocable to the operation and main-tenance of, and any capital addition to, the Joint ' Facilities.

, ( D) Every other cost which is designated in this Agreement as a cost of operation and maintenance or as a cost of capital additions; the costs associated with procuring, de-i signing, managing, ana'lyzing and operating Reload Fuel and 1

7-2

, , . - - - - - . , y -- -,- .mm. .-----r~ . - - - - ,-

Fossil Fuel Material not otherwise allocated to the Joint Fa-cilities pursuant to Sections 7.3, 7si, 7.5 and 7.9; other costs related to operation, fueling or maintenance or to capital additions, including the cost of insurance, regulatory fees and taxes other than roll related taxes, and other payments to third parties except for irect labor and indirect costs of CP&L's subsidiaries allocable to the Joint Facilities (which costs are included pursuant to Section 7.2(A) or 7.2(C)).

(E) The properly allocable portion of CP&L's admini-strative and general expenses allocated to the Joint Facilities l

which shall be allocated in accordance with Exhibit OFA-IX-2.

(F) The properly allocable portion of the fixed cost l

i associated with CP&L's investment in General Plant allocated l

to the Joint Facilities which shall be allocated in accordance l with Exhibit OPA-IX-5.

(G) All costs of accounting and billing under this

! Agreement (which shall be costs of operation and maintenance);

j except that Power Agency shall pay all costs of developing new accounting systems or modifying existing accounting systems re-quired for accounting and billing under this Agreement. If tie, sells ownership interests in any of its generating facilities to an entity other than Power Agency, and if such development of new accounting systems or r.uch modifications to existing ac-counting systems are used la accounting and billing for such other entity, CP&L shall pay Power Agency a portion of the 7-3

development or modification costs previously paid by Power Agency for such development or modification. Such portion shall be equal to the proportion of such other owner's ownership interest in generating f acilities jointly owned with CP&L (in megawatts) to the total ownership interests in generating facilities jointly owned with CP&L (in megawatts) of all such other owners (including Power Agency). Such payments shall be made upon the Closing Date for the acquisition of such ownership interest by such other owner.

Power Agency shall also pay all costs incurred by CP&L arising out of special requests by Power Agency associated with billing and accountino under this Agreement.

7.3 Cost of N'.; clear Fuel Material, Nuclear Fuel Services and Retold _ Fuel The Owners shall pay all costs of all Nuclear Fuel Material for the Brunswick and Harris Plants and Nuclear Fuel Services, including all costs arising from contracts relating to these materials and services, for Reload Fuel for the Brunswick and Harris Units.

(A) At Closings -- In connection with the provision of any Reload Fuel for the Brunswick and Harris Unitb, Power Agency shall pay, upon each Closing Date, its portion of the costs asso-ciated with Reload Fuel for the Brunswick Plant and the Harris Plant calculated in accoze'nce with the procedures set forth in Section 4.3 of the Sales Agreement. Such costs shall include, 7-4 l

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I but not be limited to, the cost of Nuclear Fuel Material (in-cluding costs of advances incurred or determined pursuant to .

1 Sections 7.5 and 7.6), Nuclear Fuel Services in connection with Reload Fuel and al.1 costs incurred by CP&L cf the type described in Sectioti 7.3(B)(3) through ( 6 ) . In connection with each closing, the Cloning Payments for Reload Fuel shall include Power Agency's portion not previously paid under the Sales Agreement of all such actual costs for Reload Fuel incurred during the period ending sixty (60) days prior to each closing l Da te and an estimate of costs incurred in the period beginning sixty (60) days prior to each Closing Date and ending on the last day of the month following the month in which each Closing l Da te occurs. The Closing Payments shall also include an amount l to be paid by Power Agency, calculated in accordance with Exhi-bits S A-V-4 and SA-V-6 of the Sales Agreement.

(B) Af ter Closings -- Other than to the extent cov-cred by Sections 7.3(A) and 9.2(A), the Owners shall pay, in accordance with Section 9.2(B) through (H), their properly l

l allocable share of all Brunswick-related and Harria-related l

Reload Fuel costs and all other fuel costs properly allocable

to these Units which have not been paid for under the Sales l Agceement. These costs shall include the following

(1) Nuclear Fuel Material; (2) Nuclear Fuel Services; 7-5

(3) Legal Fees and Expenses: Ali Icgal fees and ex-penses (including consultants' fees) incurred by CP&L related to the purchase of Nuclear Fuel Material or Nuclear Fuel Services in connection with Reload Fuel for the Brunswick Units and the liarris Units, as well as any legal fees and expenses (including consultants' fees) arising from disputes with third parties per-taining thereto. The fees and expenses included in this sub-section relate solely to services provided by persons other than employees of CPAL, which employee costs are covered in Section 7.3(B)(8);

(4) Taxes and Insurance: All taxes (other than CP&L's income taxes), including all property taxes or other taxes asses-sed against Nuclear Fuel Material or Nuclear Fuel Services in connection with Reload Fuel for the Brunswick Units and'the liarris Units and a pro rata share of any such taxes levied upon CFsL's supply of Nuclear Fuel Material or Nuclear Fuel Services in connection with Reload Fuel of which fuel or services for the Brunswick or liarris Units are a part; anu all insurance costs incurred by CP&L in the course of procuring Nuclear Fuel Material and Nuclear Fuel Services in connection with Reload Fuel for the Brunswick and !!arris Units and for a pro rata share of any such insurance costs incurred by CP&L on its supply of Nuclear Fuel Material or Nuclear Fuel Services in connection with Reload Fuel of which fuel or services for the Brunswick or liarris Units are a part;

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l (5) Research and Development, Design: All research, I development and/or design expenses incurred by CP&L which are ,

l appropriately allocable to the supply of Nuclear Fuel Material or Nuclear Fuel Services in connection with Reload Fuel for the i

Brunswick Units and the liarris Units; l

(6) Consultants: All consultant fees and expenses incurred by CP&L which are appropriately allocable to the supply ,

of Nuclear Fuel Material or Nuclear Fuel Services in connection with Reload Fuel for the Brunswick Units and the !!arris Units; (7) Penalties and Termination Costs: All penalty costs or termination costs incurred by CP&L which are appro-priately allocable to the supply of Nuclear Fuel Material or l

Nuclear Fuel Services in connection with Reload Fuel for the Brunswick Units and the liarris Units; (8) Other Costs: All other costs incurred by CP&L which are appropriately allocable to Nuclear Fuel Material or Nuclear Fuel Services, in connection with Reload Fuel for the Brunswick and Ilarris Units, including, but not limited to, all uninsured losses or liabilities incurred with respect to such

' t Material or Services.

7.4 Cost of Fossil Puel Material and Fossil Fuel Services The Owners shall pay all costs of all Fossil Puel l

Material and Fossil Puel Services, including all costs arising from contracts relating to these materials and services, for L Roxboro Unit No. 4 and the Mayo Units.-

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-o I (A) At Closings -- Power Agency shall pay, upon each Closing Date, its portion of the costs of Fossil Fuel-Material and Fossil Fuel Services for Roxboro Unit No. 4 and the Mayo Units, as specified in Exhibit SA-V of the Sales Agreement.

(B) Af ter Closings -- Other than to the extent covered by Sections 7.4(A) and 9.2(A), the Owners shall pay, in accor-dance with Section 9.2(B) through (H), their properly allocable share of all costs of fuel for Roxboro Unit No. 4 and the tiayo Units and all other fuel costs properly allocable to these Units which have not been paid for under the Sales Agreement. These costs shall include the following:

(1)- Fossil Fuel Material:

(a) The cost of coal and all associated transportation costs including, but not limited to, demurrage and other fees incurred in the delivery of

! such coal; provided, however, if such coal is pro-duced from a venture in existence at the First Closing Date in which CP&L has an interest or is otherwise participating but in which Power Agency does not have an interest or is not otherwise participating, such costs shall be aetermined in a manner consistent with the manner that such costs are treated for rate making purposes by the North Carolina Utilities Commission and if coal is produced from such a venture which is 7-8

begun af ter the First Closing Date, such costs shall l include all direct and indirect costs of CP&L associ-ated with such venture, including a fair return on CP&L's capital invested in such venture.

If Power Agency proposes to enter into a venture to produce coal in which CP&L does not participate, CP&L agrees to negotiate with Power Agency regarding a coal purchase contract by CP&L for Power Agency's coal produced frca such venture, but CP&L shall not be required hereby to enter in-to such contract if satisfactory terms cannot be agreed upon or if CP&L concludes that an alternate source of coal is preferable; (b) The cost of oil for start-up, flame stabilization and other miscellaneous purposes for Roxboro Unit No. 4 shall be determined by applying the average unit price for all such oil delivered to the Roxboro Plant in the subject month to the quantity of oil burned at Roxboro Unit No. 4 during that month; (c) The coal pile inventory at Roxboro Unit No. 4 and the Mayo Plant shall be adjusted peri-odically to reconcile coal tonnage determined by aerial 7-9

survey methods with tonnage carried in the accounts of CP&L to take account of dif fercnces which arise due to scale tolerances. The adjustments will be made in accordance with standard procedures used by CP&L at all of its coal burning plants; (2) Fossil ruel Services; (3) Legal Fees and Expenses: All legal fees and expenses (including consultants' fees) in-curred by CP&L related to the purchase of Fossil Fuel Material or Fossil Fuel Services in connection with fossil fuel for Roxboro Unit No. 4 and the Mayo Units, as well as any legal fees and expenses (includ-ing consultants' fees) arising from disputes with third parties pertaining thereto. The fees and ex-penses included in this subsection relate solely to services provided by persons other than employees of CP&L, which employee costs are covered in Section 7.4(B)(8);

(4) Taxes and Insurance: All taxes (other than CP&L's income taxes), including all property taxes or other taxes assessed against Fossil Fuel Material or Fossil Fuel Services in connection with fossil f uel for Roxboro Unit No. 4 and the Mayo Units and a pro rata share of any such taxes levied upon CP&L's supply of Fossil Fuel Material or Fossil Fuel 7-10

D

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l L l Services in connection with fossil fuel of which fuel l

! or services for Roxboro Unit No. 4 or the Mayo Units are a part; and all insurance costs incurred by CP&L l

l in the course of procuring Fossil Fuel Material or Fossil Fuel Services in connection with fossil fuel j for Roxboro Unit No. 4 and the Mayo Units or for a pro rata share of any such insurance costs incurred by CP&L on its supply of Fossil Fuel Material or l

Fossil Fuel Services in connection with fossil fuel l

of which fuel or services for Roxboro Unit *b. 4 or the Mayo Units are a part; i

i (5) Research and Development, De sign: All j research, development and/or design expenses incurred

[

by CP&L which are appropriately allocable to the sup-ply of Fossil Fuel Material or Fossil Fuel Services in connection with fossil fuel for Roxboro Unit No. 4 and the Mayo Units; (6) Consultants: All consultant fees and expenses incurred by CPr.L which are appropriately allocable to the supply of Fossil Fuel Faterial or l

Poss51 Fuel Services in connection with fossil fuel for Roxboro Unit No. 4 and the Mayo Units;

^ (7) Penalties and Termination Costs: All penalty costs or termination costs incurred by CP&L which are appropriately. allocable to the supply of 7-11

f Fossil Fuel Material or Fossil Fuel Services in l

l connection with fossil fuel for Roxboro Unit No. 4 and the Mayo Units; (8) Other. Costs: All other costs incurred by CP&L which are appropriately allocable to Fossil Fuel Material or Fossil Fuel Services in connection with fossil fuel for Roxboro Unit No. 4 and the Mayo Unito, including, but not limited to, all uninsured losses or liabilities incurred with respect to such Material or Services.

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! 7.5 Determination of Cost of Nuclear Fuel Material (A)(1) An account to be known as the Uranium Account shall be established commencing on the First Closing Date for all unenriched uranium material to which CP&L holds title (or has an interest in or has the right to use by lease or otherwise), re-gardless of chemical form and which has not yet been designated to a specific unit in accordance with Section 3.2( A). The Uranium Account shall contain a record of (a) quantities of uranium material, maintained separately for U 038 and UF 6 , and (b) all costs associated with such quantities, including but not limited to the cost of U 038, conversion, transportation, weighing

.and sampling, allowance for funds used during construction (APUDC) to the extent provided for in Section 7.5(A)(2) and all un-insured losses or liabilities, but excluding fees payable under this Agreement pursuant to Section 7.11.

7-12

l (2) The Uranium Account average unit uranium cos*

for'U O3 g and-for UF6 shall be calculated in accordance with Exhibit OFA-IV. AFUDC included on CP&L's books as of the First l

Closing Date for. uranium material to be included in the Uranium l

Account as of such date shall be included in the Uranium Account pursuant to Section 7.5(A)(1). In addition, a proportionate part, reflecting Power Agency advc~.ces pursuant to Section 7.5(A)(3), of any APUDC accrued on the books of CP&L for ura-nium material in tha Uranium Account between the First Closing Date and any Subsequent Closing shall be included in the cal-celation of Power Agency's addition to its contribution to the Uranium Account to be paid on such Subsequent Closing. Such APUDC accrued on the books of CP&L shall be adjusted, for the purposes of the foregoing calculation, to eliminate any reduc-tion thereto associated with previous Power Agency contributions to the Uranium tccount.

(3) Power Agency shall make an initial payment for costs reflected in the Uranium Account, and the amount thus paid shall be periodically adjusted, as described in Exhibit OPA-III. In addition, Power Agency shall advance funds toward the costs reflected in the Uranium /ccount for each purchase of uranium material or associated services assigned to the Uranium Account, as described in Exhibit OFA-III. Such pay-monts shall be subject to the provisions of Section 7.6.

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(4) The following provisions shall govern with-drawals from the Uraniun Account l

(a). When uranium' material from the Uranium Account, UF6 sub-account, is designated for a specific unit, the f dollar amount by which the Uranium Account, UF6 sub-account, is l reduced (" Withdrawal value") shall be an amount equal to the l

product of the quantity of uranium material, in pounds, as UF6 '

designated, multiplied by the Average Unit Uranium Cost for UF6 in effect at the time of such designation.

(b) When' uranium material fran the Uranium Account, UF6 sub-account, is designated for a specific Harris or Brunswick Unit, Power Agency shall pay CP&L an. amount in dollars

! equal to:

[(X - P) x (Withdrawal value)] +Z Where X is Power Agency's undivided ownership interest (frac-tion), at the tbne of designation, in the Unit for which the i designation is made, P is Power Agency's portion of the Uranium i

Account, UF 6 sub-account, expressed as a decimal fraction, as cal-culated in Exhibit OPA-III in effect at the tbne of designation, i

and Z is the actual net effect on CP&L's federal and state income taxes (including tax on capital gains) attributable to APUDC in-cluded in the Uranium Account to the extent provided for in Sec-tion 7.5( A)(2) associated with the sale to Power Agency of such uranium material, as detennined in accordance with the principles set forth in Exhibit SA-V-6 of the Sales Agreement, and Withdrawal Value is as defined in Section 7.5(A)(4)(a) above. (If such calculated anount is a negative number of dollars, CP&L shall pay Power Agency the abaniute value in dollars of such amount.)

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(c) When uranium material from the Uranium Account, UF g sub-account, is designated for a specific CP&L unit other than a Harris or Brunswick Unit, CP&L shall pay Power Agency an amount in dollars equal to:

(P) x (Withdrawal value)

Where P and Withdrawal value are as defined in Section 7.5( A)

(4)(a) and (b).

(d) When Nuclear Fuel Material fran the Uranium Account is sold, leased (except when CP&L retains title under a trust or other financing arrangement) or otherwise disposed of, the Withdrawal value as defined in Section 7.5(A)

(4)(a) shall be deducted from the Uranium Account and the owners shall share in the revenues from the sale, or other value received, in proportion to the ratios deteomined pur-suant to Section 7.8(B) as of the date of such transaction.

Any papnents due Power Agency under this Section 7.5(A)(4)(d) shall be paid as soon as prac . cable but not later than thirty (30) days after receipt by CP&L of the proceeds of such sale.

(e) Paynents specified in Section 7.5( A)

(4)(b) and (c) shall be due within thirty (30) days of notifica-tion of a designation for a specific Unit. Notification shall be made within fif teen (15) days of the date on which such de-signation is made.

(f) If unenriched uranium material is pro-

cured by CP&L in a chenical form other than U 038 r UF6, an equi-valent U 03 8 amount in pounds and cost in dollars to be recorded 7-15

in the Uranium Account shall be calculated, with the ccnversion factors in the calculation adjust'ed to reflect accurately the dif ferent chemical form.

(B) If Nuclear Fuel Material other than uranium is procured for a Brunswick or !!arris Unit pursuant to this Agree-ment, the principles of Section 7.5(A) shall apply. An ac-count separate from tne Uranium Account shall be maintained for any such other Nuclear Fuel Material so procured, and adjustments to any. conversion factors shall be made so as to accurately reflect the chemical and fissionable composition of the material. For purposes of determining the average unit cost of such material ,

pursuant to Section 7.5(A), the applicable time of determina-tion shall be the first month in which the material is specifi-cally identified or scheduled by CP&L for use at ' Brunswick or liarris Unit or for use at another generating facility of CP&L.

(C) Uranium obtained by CP&L as a result of explora-tion, mining and other ventures undertaken by CP&L, alone or with o thers, shall be included in the Uranium Account. All costs of such uranium appropriate for inclusion in the Utanium Account shall be determined by CP&L and shall include such items as mine and/or mill depreciation, operating costs, taxes and land rec-lamation costs, whether actual or anticipated, and shall take into account at -any point in time CP&L's best estimate of remain-ing ore reserve. If any uranium developed by a venture is sold 7-16

by or for CP&L to a party other than the parties to this Agree-ment, the' net revenue from such sale shall be distributed between the parties in the same proportion as they contributed mds to the venture producing the uranium sold.

(D) To the extent that the price of uraniam obtained from exploration, mining and other ventures, as determined in Section 7.5(C) above and recorded in the Uranium Account over the productive life of a given venture and charged to a Brunswick or Harris Unit, is insufficient to meet CP&L's obliga-tions in closing down the venture, Power Agency shall promptly pay CP&L, upon receipt of the final accounting for the venture, the amount of such deficiency in the proportion that the amount of uranium from the venture utilized in Power Agency's owner-ship interest in such Unit hears to the total amount of uranium produced by the venture over its productive life. To the extent such price of uranium exceeds Power Agency's portion of CP&L's obligations in closing down the venture, CP&L shall promptly re-imburse such excess to Power Agency in the proportion that the amount of uranium from the venture utilized in Power Agency's ownership interest in such Unit bears to the total amount of uranium produced by the venture over its productive life.

7.6 Advances for Procurement of Nuclear Fuel Material (A) In accordance with Sections 7.3 and 7.5, Power Agency shall . advance funds toward the costs of uranium material described in Section 7.5(A)(1)(b) acquired for the Uranium l

7-17 J

.aF-l Account. The amounts'so advanced shall not be segregated but shall be credited by CP&L as- Power Agency's contribution to the Uranium Account. The amounts advanced shall be used to of fset the cost of uranium material determined pursuant to Section 7.5. Amounts advanced by Power Agency for the Uranium Account n.ay not be used for any other purpose under-this Agreement or the Pelated Agreements. The amounts so advanced shall be calculated in accordance with the provisions of Exhibit OPA-III. For purposes of comparing advances to costs pursuant to Section 9.2(G), CP&L shall be deemed to have in-curred a fuel cost in the month in which CP&L pays for uranium material acquired for the Uranium Account. For a given acqui-sition of material, the cost attributable to Power Agency shall be determined in the same proportion used to calculate the ad vance . Any excess advance or deficiency in the advance

-shall be treated in accordance with Section 9.2(G).

(B) If Nuclear Fuel Material other than uranium is expected to be used at a Brunswick or Harris Unit pursuant to this Agreement, Power Agency shall provide advances pursuant to-the procedures set forth in Section 7.6(A). A separate nu-clear fuel account shall be maintained for each such other i Nuclear Fuel Material, and Power Agency's contribution shall be determined as set forth in Section 7.5(A) and Exhibit OPA-III.

(C) Power Agency shall make an advance to CP&L in accordance with Section 9.2 each time CP&L anticipates an 7-18

expenditure for exploration, mining or other ventures undertaken by CP&L, alone or with others, for the purpose of attempting to obtain uranium material or for evaluation of potential projects.

Of the total expenditure to be made by CP&L, the dollar amount to be advanced by Power Agency shall be calculated in the same proportion as the current fraction "P" as calculated in accordance with Exhibit OPA-III. Such funds advanced for mining, exploration, or other ventures shall be credited by CP&L to a Uranium Venture Account, established for Power Agency, which shall record the advances by venture. Amounts in Power Agency's Uranium Venture Account may not be used for any other purposes under this Agree-ment or the Related Agreemes.ts. If a given venture produces uranium, such advances shall be treated as Power Agency's con-tribution to the Uranium Account at such time and in such manner as to be consistent with the way in which CP&L treats its own outlays for such venture. If a given venture does not produce uranium, Power Agency's portion of such expendituree shall be debited to Power Agency's Uranium Venture Account. Further, Power Agency's portion of the expenditures for such venture shall be accounted for in such manner as to be consistent with the way in which CP&L treats its own outlay for such venture.

Payments required pursuant to this Section 7.6(C) shall be made pursuant to Sections 9.2(E) and 9.2(F).

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i 7.7 Advances for Procurement of Fossil Fuel Material (A) In consideration of the provisions of Section 3.1(C), when Power Agency exercises its participation rights pursuant to Section 3.l(G), Power Agency shall make an advance to CP&L for its proportionate share, as set out in Section 9.2, of all costs each time CP&L anticipates an expenditure for explo-ration, mining, or other ventures undertaken by CP&L, alone or with others, for the purpose of attempting to obtain Fossil Fuel Material or for evaluation of potential projects. In the event the expenditure is to be made in connection with a venture relating to the Mayo Plant, or either Unit thereof, or Roxboro Unit No. 4, the dollar amount to be advanced by Power Agency.

shall be calculated in the proportion which its owncrship in-terest in such plant or Unit bears to the total expenditure.

In the event the expenditure is to be made in connection with a venture related not to the Mayo Plant, or either Unit thereof, or Re:, boro Unit No. 4 but to all of CP&L's fossil fuel units, the dollar amount to be advanced by Power Agency shall be calculated by applying to the total expenditure the ratio of Power Agency's undivided ownership share in fossil-fueled generating facilities on the Combined System expressed in MW to the total capacity of fossil-fueled generating facilities on the Combined System having comparable -fossil fuel quality and annual quantities requirements expressed in MW. In the event an expenditure is to be nade for a venture which is 7-20

not related to the Mayo Plant, or either Unit thereof, or Roxboro Unit !!n. 4, nor to all of CP&L's fossil fuel units, the dollar Gmount to be advanced by Power Agency shall be the subject of negotiations between the parties based on the facts as they exist at the time of such negotiations. Such payments shall be made pursuant to Sections 9.2(E) and 9.2(F).

(u) Such funds advanced for mining, exploration or other ventures may not be used for any other purposes under this Agreement or the Related Agreements. If a given venture produces Fossil Fuel Material, the amount of such advances shall be credited to the amounts due from Power Agency pursuant to Section 7.4 at such time and in such manner as to be consis-I tent with the way in which CP&L treats its own outlays for such i venture. Further, Power Agency's portion of the expenditures for l

l such venture shall be accounted for in such manner as to be con-i sistent with the way in which CP&L treats its own outlay for such venture. If a given venture is liquidated, Power Agency's portion of the profit or loss realized from the liquidation shall

, be credited or debited to the appropriate account of Power Agency by CP&L at such time and in such manner as to be consis-tent with the way in which CP&L treats its own outlJys for such venture.

7.8 Costs to Each Owner (A) Except as otherwise specifically provided in Sec-l tion 7.2(G), costs payable by the owners pursuant to Sections 7-21

I 7.1, 7.2, 7.3 and 7.4 shall be borne in the following propor-tions:

(1) After the Final Closing Date (a) As to Power Agency's Costs -- (i) for the Brunswick Units = Commitment Ratio (as %) x 18.70%;

(ii) for Roxboro Unit No. 4 = Commitment Ratio (as %) x l

l 13.20%; (iii) for th' Harris Units = Commitment Ratio (as

%) x 16.50%; and (iv) for the Mayo Units = Commitment Ratio 1

l (as %) x 16.50%.

l (b) As to CP&L's Costs -- (i) for the i

L Brunswick Units = 100% - (Commitment Ratio (as %) x 18.70%);

(ii) for Roxboro Unit No. 4 = 100% - (Commitment Ratio (as

!  %) x 13.20%); (iii) for the Harris Units = 100% - (Commitment Ratio (as %) x 16.50%); and (iv) for the Mayo Units = 100%

- (Commitment Ratio (as %) x 16.50%).

(2) During the peried between the First Closir;g Date and the Final Closing Date (a) As to Power Agency's Costs -- (i) for the Brunswick Units = Cumulative Closing Ratio (at last pre-ceding closing) (as %) x Service Ratio (at -last preceding closing) (as %) x Commitment Ratio (as %) x 18.70%; (ii) for Roxboro Unit No. 4 = Cumulative Closing Ratio (at last preceding closing) (as %) x Service Ratio (at last preced-ing closing) (as %) x Commitment Ratio (as %) x 13.20%;

and (iii) for Mayo Unit No. 1 = Cumulative Closing Ratio 7-22

-(at last preceding closing) (as %) x Commitment Ratio (as

%) x 16.50%. -

(b) As to CP&L's Costs -- (i) for the Brunswick Units = 100% - (Cumulative Closing Ratio (at last preceding closing) (as %) x Service Ratio (at last proceding closing) (as %) x Commitment Ratio (as %)

x 18.70%); (ii) for Roxboro Unit No. 4 = 100% - (Cumula-tive Closing Ratio (at last preceding closing) (as %)

x Service Ratio (at last preceding closing) (as %) x Commitment Ratio (as %) x 13.20%); and (iii) for Mayo Unit No. 1 = 100% - (Cumulative Closing Ratio (at last preceding closing) (as %) x Commitment Ratio (as %) x 16.50%).

(B) Costs payable by the Owners for Nuclear Fuel Material and Nuclear Fuel Scrvices designated for the Uranium Account or Uranium Venture Account pursuant to Sections 7.5 and 7.6 shall be borne in the following proportions:

(1) As to Power Agency's Costs -- that propor-tionate share represented by the fraction "P" as calculated in accordance with Exhibit OPA-III.

(2) As to CP&L's Costs -- that proportionate share represented by the fraction (1 "P"), where "P" is cal'cu-lated in accordance with Exhibit OFA-III.

7.9 Apportionment of Costs of Nuclear Fuel Back-End Services Responsibility for costs or credits arising from those elements of Nuclear Fuel Services described in Section 7-23

l.44(7) shall be apportioned between the owners as provided for in Section 3.3.

7.10 Allocation 5d[ Certain Costs Any costs or revenues properly allocable to the Joint Facilities shall be allocated by applying the same allocation methods and procedures, if any, being used by CP&L at the time in regard to the operation of its other generating facilities.

If no such allocation methods and procedures are being used, or if such methods and procedures are inappropriate for use, then CP&L shall apply appropriate allocation methods and procedures.

CP&L shall submit such allocation methods as are available, and an explanation of the bases for such allocation methods, to Power Agency at least ninety (90) days prior to the First Closing Date. At the First Closing Date and thereafter, CP&L shall submit the allocation methods, and an explanation of the bases therefor, on an annual basis and at other times as neces-sary prior to making a charge to the Joint Facilities based on such methods.

Nothing in this Agreement shall require CP&L to change, or otherwise affect, the corporate accounting practices and pro-cedures used by it. All accounting practices, procedures and records necessary to obtain a proper allocation of all costs to the Joint Facilities under this Agreement may be maintained in-dependently of CP&L's corporate records and nay include alloca-tions not otherwise used by CP&L.

7-24

i i

r 7.11 Fees L (A) Power Agency shall pay the following fees to CP&L, l

in addition to all other costs described in this Agreement, in l determining the payments made under Article 9. Such fees l

L shall be included in Power Agency's costs in determining the payments made by CP&L under the Power Coordination Agreement l

for Purchased capacity.

l (1) Fo; services rendered in operating and maintaining the Joi..t Facilities, Power Agency shall pay CFaL a fee of twelve and one-half percent (12.5%) of Power Agency's proportionate share of the cv ts described in Sections 7.2'A) and 7.2(C) as set out in Exhibit OFA-IX-6, and eight and one-half percent (8.5%) of Power Agency's proportionate share of third party labor and direct payroll overheads of personnel working at the Joint Facilities, which are properly allowable l as set out in Exhibit OFA-IX-7.

(2) For services rendered by CP&L in connection with the provision of Fuel Material for the Joint Facilities and Fuel Services, in connection with Feload Fuel for the Bruns-wick and liarris Plants and with fossil fuel for Roxboro Unit No.

4 and the Mayo Units pursuant to Article 3, Power Agency shall pay CP&L an annual fee of $102,750 plus escalation as herein-a f ter c.et forth. Said $102,750, the base fee, shall be adjusted prospectively following the base month set forth below to reflect the increase, if any, in the consumers Price Index for Urban 7-25

Wage Earners and Clerical Workers (CPI-W), all items (1967=100),

as published by the Department of Labor, Bureau of Labor Statis-tics. The base month shall be November 16, 1978. If said CPI-W, as the same is now computed and published, should be discontin-ued, or enlarged upon, or changed, the adjustment shall be cal-culated on the equivalent of the CPI-W, and for the purpose of determining and calculating the equivalent of the present CPI-W, use shall be made of the successor index or indices and the formulas announced or published by the Department of Labor and its successors, as being proper for conversion of any successor index to the equivalent to the present CPI-W.

(3) For services rendered in dispatching Power Agency's output from the Joint Facilities, Power Agency shall pay CP&L a fee of twelve and o..e-half percent (12.5%) of Power Agency's proportionate share of the costs of the production and transmission dispatching labor and direct payroll overheads related to such labor, indirect labor costs and indirect payroll overheads which are properly related to dispatching Output of the Combined System and which shall be allocated as set out in Exhibit OPA-IX-6.

(4) For services rendered in connection with the construction of capital additions, including the cost of employing CP&L managers and technicians and using CP&L methods and technical expertise, Power Agency shall pay CP&L a fee meas-ured by multiplying the costs of capital additions identified 7-26

l L

l in Section 7.2, less lar.d, AFUDC, property taxes, retrospective j insurance premium adjustments and all amounte payable by the owners pursuant to Article 15 (other than costs of insurance),

l by one and one-half percent (1.5%).

(D) In no event shall any fee determined pursuant to Section 7.11(A)(1) be applied to any cost described in Sections 7.2(D) through (G), 7.3, 7.4, 7.5, 7.6 or 7.7.

! (C) Payment of all fees specified in this Section 7.11 shall be made morthly pursuant to Article 9.

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ARTICLE 8 s WORKING CAPITAL FUND AND CAPITAL ADDITIONS ADVANCE FUND 8.1 Initial Establishment of Working Capital Fund and Capital .

Additions Advance _ Fund ~~

On the First Closing Date, Power Agency shall deposit with CP&L an amount equal to one-sixth (1/6) of that portion of the annual estimates of the anticipated payments for which Power Agency will be liable as described in Section 9.1(B), which amount shall be deposited by CP&L into a fund known as Power Agency's Working Capital Fund. Power Agency shall also deposit with CP&L on such date an amount equal to one-sixth (1/6) of that portion of the annual estimates of the anticipated pay-ments for which Power Agency will be liable as described in Section 9.3(B), which amount shall be deposited by CP&L into a fund known as Power Agency's Capital Additions Advance Fund; provided, however, that the amount to be deposited into the Capital Additions Advance Fund shall not exceed the sum of the monthly estimates described in Section 9.3(B) for the remainder of the year in which the First Closing Date occurs. CP&L may commingle these funds with other monies under its control, but shall account separately for the amounts provided by Power Agency in accordance with the purposes of such funds described in See-tions 8.2 and 8.3 and Article 9.

8.2 Working Capital Fund Use The Working Capital Fund shall be used in accordance with the provisions of this Agreement, including Sections 9.1(F),

9.2(G) and 9.4(A).

1 8-1

. m -

8.3 Capital Additions Advance Fund Use and Annual Reestablishment The Capital Additions Advance Fund shall be used in accor-dance with the p?ovisions of this Agreement, including Sections 9.3(F) and 9.4(B). In accordance with Sections 9.3(D)(3) and 9.4(B), the amounts in the Capital Additions Advance Fund shall be drawn down to zero by December 31 of each year beginning with the year in which the First Closing Date occurs. On Janu-ary 1 of each year following the year in which the First Closing Date occurs, Power Agency shall pay to CP&L an amount equal to one-sixth (1/6) of that portion of the annual estimate for sLch year of the anticipated payments for which Power Agency will be liable, as described in Section 9.3(B).

8.4 Change in Working Capital Fund Due to Revision of Annual Cost Estimates When the annual estimates called for in Sections 9.1(B) and 9.2(C) are revised, Power Agency shall, in addition to any other payments called for by Article 9, deposit with CP&L such amount as is necessary to bring the balance of the Working Capi-tal Fund to an amount equal to one-sixth (1/6) of the revised annual estimate for which Power Agency would be liable for that j year. Such amount shall be reflected on the next monthly state-ment to be rendered by CP&L. If such revised estimate reduces the total annual estimate, then the excess amount in the Working Capital Fund shall be a credit against the next monthly state-l l

ment rendered by CP&L to Power Agency.

l 8-2

8.5 Interest CP&L shall pay simple interest to Power Agency on its balances in the Working Capital Fund and the Capital Additions Advance Fund calculated at the Adjustment Interest Rate less l forty-two thousandths of one percent (0.042%). If the Funds have negative balances, CP&L shall charge simple interest at the same rate. After appropriate adjustments have been made pursuant to Section 9.4, simple interest shall be computed for each month based upon the adjusted balance of such Funds on I

l the first business day of the month at said Adjustment Interest Rate in effect on said day, less forty-two thousandths of one i

percent (0.042%).

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8-3

r ARTICLE 9 PAYMENT 9.1- Method of Payment for Costs of Operation and Maintenance (A). Power Agency shall pay a monthly cash advance to CP&L, in accords: ce with the schedule and procedures set forth below, as an operating advance for CP&L to apply in payment of the costs of operation and maintenance of the Joint Facilities.

(B) Commencing at least sixty ( 60) days prior to the First Closing Date, and thereaf ter by December 1 each year,- CP&L shall submit an estimate to Power Agency of the cost of operat-ing and maintaining the Joint Facilities for the next calendar year, on a month-to-month basis, and Power Agency's anticipated payments with respect thereto. Such estimate shall include all applicable fees. CP&L shall inform Power Agency of the basis on which such estimate was made. The initial estimate shall also cover the remainder of the year in which the First Closing Da te occurs. Either Owner shall have the right at any time to initiate a review of the annual estimate of nonth-to-month cents for the .Toint Facilities as a whole or any part the Jo f . CP& L i

shall have the right to change such annual estimate on the basis of any such review and shall inform Power Agency of the basis on which any changes in such estimate were made. In addition, in order to assist Power Agency in the preparation of its annual budget, by November 15 of each year, CP&L shall furnish a pr. lim-inary estimate of such costs to the extent that estimates of any such ' costs are available.

9-1

6 . .; y~,

l. (C) On the.first business day of each month after the i.

First Closing Date, CP&L shall submit. a statement (O&M Monthly Statement) to Power Agancy which sets forth the amount pajable;

~

by Power Agency in the month next following pursuant to Section 9.l(E). CP&L shall inform Power agency of the basis on which L ~such statement was'made.

(D) Each O&M Monthly Statement subt itted for payment by Power Agency (O&M Monthly Advance) shall '.ncl ud e :

L (1) Power Agency's proportionate share of 'the anticipated cost of operating and maintaining each of the Joint l

Facilities in the month next following, to be determined as i

I follows: ,

l (a) Af ter the Final Closing Date -- Bruns-wick Units = Commitment Ratio (as %) x 18.70%; Roxboro Unit -

No. 4 = Commitment Ra tio (as %) x 13.20%; Harris Units = .

Commitment Ratio (as %) x 16.50%; and Mayo Units = Commit-ment Ratio (as %) x 16.50%;

l (b) During the period ~between the First l

Closing Date and the Final Closing Date -- Brunswick Units =

Cumulative Closing Ratio-(at last preceding closing)-(as %) x Service Ratio (at last preceding closing) (as %) x Commi t-ment Ratio (as %) x 18.70%; Roxboro Unit No. 4 = Cum. ative Closing Ratio (at last preceding closing) (as %) x Service Ratio (et last preceding closing) (as %) x Commitment Ratio 1 9-2

.~;_ . . --

(as %) x 13.20%;_and Mayo Unit No. 1.= Cumulative Closing Ratio (at last preceding closing) -(as %) x Commitment Ratio (as %) x 16.50%.

(2) The amount of any fees payable by Power Agency and any other amount due from Power Agency in accordance with any other provision of this Agreement.

(3) The amount of costs payable by Power Agency for systems development and special requests associated with accounting and billing under this Agreement pursuant to Section 7.2(G).

(4) The amount of costs payable by Power Agency pursuant to Article 12.-

(E) The O&M Monthly Advance shall be due and payable on the first business day of the month following the date of the statement submitted pursuant to Section 9.l(C). Payment by Power Agency shall be delivered on the date due to CP&L, or

) to CP&L's account at a bank designated by CP&L. The O&M Monthly i

Statements submitted pursuant to Section 9.l(C) may not cot respond on a monthly basis w; the annual estimates provided pursuant to Section 9..'.(B). The amounts set forth in each 1

O&M Monthly Statement shall govern for the purpose of deter-mining the O&M Monthly Advance due from Power Agency.

(F) Commencing with the third month following the First Closing Date, and each month thereaf ter, CP&L shall sub-mit a statement to Power Agency on the first day of each such 9-3 7

l month which shall show the known expenses and fees ' incurred in l l

the second previous month supported tur a monthly financial and operating report prepared in accordance with the FERC Uniform

-System of Accounts and in a form prescribed by Power Agency, and the balance, if any, of the O&M Monthly 5dvance remaining, or the deficit of Power Agency if the month's expenses payable by i t exceeded Power Agency's O&fi Monthly. Advance. for the nonth in question. Such statement shall also correct errors, addi-tions or omissions discovered by either party involving expenses and fees incurred in any prior month, including simple interest on such corrections calculated at the Adjustment Interest Rate, ..

to accrue on a monthly basis from the date of payment of the statement to which such correction is applicable.

When a statement is rendered showing a deficit for any month, CP&L shall of fset such deficit by reducing the Working Capital Fund, ef fective on the first business day of such month.

When a statement is rendered showing an excess, CP&L shall credit the Working Capital Fund in the amount of the excess, effective on the first business day of such month.

(G) Simple interest charges shall accrue at the Late

, Paymen t Interest Rate on any O&M Monthly Advance due, but not i

received - by CP&L on time, beginning on the first day such payment should have been made pursuant to Section 9.1(E).

i 9-4 r '

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9.2 Method of Payment for' Costs of Fuel Material and Fuel Services

-(A) In accordance with the terms of Section 4.3 of

- .the Sales Agreement and Article 6 of the Sales Agreement, Power Agency shall pay to CP&L upon each . Closing Date a portion of the costs of the Initial Fuel Cores and Reload Fuel for the Bruns-wick Units and the Harris Units. In accordance with the terms of Sections 4.4 and 4.5 of the Sales Agreenent and Article

.6 of the Sales Agreement, Power Agency shall pay to CP&L, upo- asch closing Date, a portion of the costs of the Initial Stockpiles for Roxboro Unit No. 4 and the Mayo Units. In addi-tion, u;on each closing Date, Power Agency shall pay to CP&L the costs described in Sections 7.3(A) and 7.4(A).

(B) Power Agency shall pay periodic cash advances to CP&L, in accordance with the schedule and procedures set forth below, as a fuel advance for CP&L to apply in payment of the

! costs of Nuclear Fuel Material and Nuclear Fuel Services in con-l nection with Reload Fuel, Fossil Fuel Material and Fossil Fuel

-Services for Roxboro Unit No. 4 and the Mayo Plant.

(C) Commencing at least sixty (60) days prior to the First Closing Date, and thereaf ter by December 1 each year, CP&L shall submit an estimate to Power Agency of the cost of Nuclear Fuel Material and Nuclear Fuel Services in connection with Reload Fuel, Fossil Fuel Material and Fossil Fuel Services

, for 'Roxboro Unit No. 4 and the Mayo Units for the next calendar I i '

l year, on a month-to-month basis, and Power Agency's anticipated l 9-5 F

payments with respect t!.oreto.- Such estimate shall include all applicable' fees. CP&L shall inform Power Agency of the basis on which such estimate was made. The initirl estimate shall also cover. the remainder of the year'in which the First Closing Date occurs. . Either Owner shall have the right at any time to ini-tiate a review of its. annual estimate of month-to-month costs.

CP&L shall have the right to change such annual estimate on the basis of any such review and shall inform Power Agency of the basis on which any changes in such estimate were made. In add i-tion, in order to assist Power Agency in the preparation of its annual budget, by November 15 of each year CP&L shall furnish a ,

preliminary estimate of such costs to the extent that estimates of any such costs are available.

(D) ' On the first business day of each month af ter. the First Closing Date, CP&L shall submit a statement (Fuel Monthly.

Statement) to Power Agency which sets forth the amount payable by Power Agency in the month next following pursuant to 'Section 9.2(F). CP&L shall inform Power Agency of the basis on which l such statement was made.

(R) Each Fuel Monthly Statement submitted for payment by Power Agency (Fuel Monthly Advance) shall include Power Agency's proportionate share as defined below of the anticipated cost of Nuclear Fuel Material and Nuclear Fuel-Services in connection ,

with Reload Puel, Fossil Fuel Material and Fossil Fuel Services for Roxboro Unit No. 4 and the Mayo Units in the month next

~9-6

following, plus any amounts payable by Power Agency pursuant to S ections 7.6 and 7.7 of this Agreement in'the month next

.following, plus any applicable fees.

(1) The amount of Power Agency's proportionate share of the anticipated cost, except for costs designated for t'he Uranium Account, shall be determined as follows:

(a) After the Final Closing Date -- Bruns-wick Units = Connitment Ratio (as %) x 18.70%; Roxboro Unit No. 4 = Commitment Ratio (as %) x 13.20%; Harris Units =

Commitment Ratio (as % ) x 16.50%; and Mayo Units = Connit-ment Ratio (as %) x 16.50%;

(b) During the period between the First Closing Date and the Final Closing Date -- Brunswick Units =

Cumulative Closing Ratio (at last preceding closing) (as %) x Service Ratio (at last preceding closing) (as %) x Commitment Ra tio ( as % ) x 18.70%; Roxboro Un it No . 4 = Cu;::lative Clos-ing Ratio (at last preceding closing) (as %) x Service Ratio (at last preceding closing) (as 4) x Commitment Ratio (as %)

x 13.20%; and Mayo Unit No. 1 = Cumulatihe Closing Ratio (at

) last preceding closing) (t o %) x Commitment Ratio (as %) x 16.50%.

(2) The amount of Power Agency's proportionate share of the anticipated cost designated to the Uranium Account l.( - ~

shall be called Power Ar, ency's contribution and shall be deter- '

.h, mined in accordance with the provisions of Exhibit OFA-III. Power 9-7 i

i

l 1

I Agency's proportionate share of funds to be advanced for nuclear fbel' ventures shall be determined pursuant to section 7.6(C).

-( P) The. Puol Monthly Advance shall be due and payable on the first business day of the moilh following the 6 ate of

'the statement submitted pursuant to Section 9.2(D). Payments

+

by Power Agency shall be delivered to CP&L, or to CP&L's account at a bank designated by CP&L on the date due. The Puol Monthly F

Statement submitted pursuant to~Section 9.2(n) may not corre-spond on a monthly basis with the annual estimates providedi pursuant to Section 9.2(C). The amounts set forth in-each Puel tionthly St atement shall govern for the purpose of deter-mining the Fuel Monthly Advance due fro'm Power Agency. ,

(G) Commencing with the third month following.the

~

First Closing Da te, and each monith thereaf ter, CP&L shall submit a statement to Power Agency on the first day of each such month .

which shall show the known costs and fees incurred in the second previous month, supported by a monthly financial and operating report prepared in accordance with the PERC Uniform System of Accounts and in a form prescr' sed by Power Agency, and the ,

balanco, _ if any, of the Puel Monthly Advance remaining, or c the deficit of Power Agency if the month's costs payable by Power Agency exceeded its Puel Monthly Advance for the month in question. Such statement shall also correct errors, additions or omissions discoyered by either party involving costs and. fees incurred in. any prior month, including simple interest on such 9-8 l

e corrections calculated at the - Adjustment Interest Rate, to accrue on a monthly basis from the date of payment of the state-ment to which such correction is applicable.

When a statement is rendered showing a deficit for i

any month, CP&L shall of fset such deficit by reducing the Work-ing ~ Capital Fund effective on the first business day of such month. When a statement is rendered showing an excess, CP&L

. shall credit the Working Capital Fund in the amount of the ex-cess effective on the first business day of such month.

(II) Simple interest charges shall accrue at the La te

' Payment Interest Rate on any Fuel Monthly Advance due,' but not received by CP&L on time, beginning on the first day such pay-ment should have been made pursuant to Section 9.2(F).

9.3 Method of Payment for Cost of Capital Additions (A) Power Agency shall pay periodic cash advances to CP&L, in accordance with the schedule and procedures set forth below, as a Capital Additions Advance ( Additions Monthly Ad va nce ) , for CP&L to apply in payment for capital additions to the Joint Facilities.

(B) Commencing at least sixty (60) days prior to the First Closing Date, and thereaf ter by December 1 each year, CP&L shall submit an estimate to Power Agency of the cost of capital additions to the Joint Facilities, other than those included as a Cost of Construction under the Sales Agreement, for the next calendar year, on a month-to-month basis, and Power Agency's 9-9 l

~

c anticipated payments with respect thereto. Such estimate shall include all applicable fees.. CP&L shall inform Power Agency of the basis on which such estimate was made. The initial estimate

~

shall also- cover the remainder. of' the year in which the First -

- Closing Date occurs. . Either Owner shall have the right at any

~

time to initiate a- review of the annual estimate of- month-to-month ~ costs -for the Joint Facilities as a whole or any part thereof. CP&L shall have the right to change such annual esti- <

mate on the basis of any such review and shall inform Power Agency of the basis on which any changes in such estimate were made.

In addition, in order to assist Power Agency in the preparation of its annual budget, by November 15 of each year, CP&L shall furnish a preliminary estimate of such costs to the extent -that estimates of any such costs are available.

(C) On the first business day of each month af ter the -

the First Closing Date, CP&L shall submit a statement (Additions Monthly Statement) to Power Agency which sets forth the amount payable by Power Agency in the month next following pursuant to Section 9.3(E). CP&L shall inform Power Agency of the basis on which such statement was made.

(D) Each Additions Monthly Statement submitted for.

payment by Power Agency shall include:  :

(1) Power Agency's proportionate share of the -

anticipated cost of capital additions to the Joint Facilities 9-10 1.

,g. . - . - . ~ , ~ , _

l

(

in the month'next following, to be determined according to the following proportions: ,

(a) Af ter the Final Closing Date -- Bruns-wick' Units = Commitment Ratio (as %) x 18.70%; Roxboro Unit No . 4 = Commitmen t Ra tio ( as % ) x 13.20%; Harris Units =

Commitment Ratio (as %) x 16.50%; and Mayo Units = Commi t-ment Ratio (as %) x 16.50%;

(b) During the period between the First Closing Da te and the Final Closing Da te -- Brunswick Units =

Cunulative Closing Ratio (at last preceding closing) (as %) x Service Ratio (at last preceding closing) (as %) x Commitment Ratio (as %) x 18.70%; Roxboro Unit No. 4 = Cumulative Clo-sing Ratio (at last preceding closing) (as %) x Service Ratic

-(at last preceding closing) (as %) x Commitment Ratio (as %)

x 13.20%; and Mayo Unit No. 1 = Cumulative Closing _ Ratio (at.

last preceding closing) (as %) x Commitment Ratio (as %) x 16.50%. ,

(2) The amount of any fees or any other amount payable by Power Agency in regard to a capital addition.

I (3) For any month in which the sum of (a) the 4

amount to lu) included on the Additions Monthly Statement for such month and (b) the currently estimated amounts to be in-cluded in the Additions Monthly Statements for subsequent months in the same year. exceeds the balance then on-deposit i

- in the Capital Additions Advance Fund, the Additions Monthly 9 -

Statement shall be credited in the amount necessary to equal-ize (i) the currently estimated amounts to be includc.J on future Additions Monthly Statements for such year and (ii) the balance then on deposit in the Capital Additions Advance Fund after giving effect to such credit. Credits made to Addi-tions Monthly Statements pursuant to this Section 9.3(D)(3) shall be used to reduce the Capital Additions Advance Fund to zero by each December 31.

(E) The Additions Monthly Advance shall be due and payable on the first business day of the nonth following the date of the statement submitted pursuant to Section 9.3(C) .

Payment by Power Agency shall be delivered to CP&L, or to CP&L's account at a bank designated by CP&L on the date due. The Add i-tions Monthly Statemene snbinitted pursuant to Section 9.3(C) may not correspond on a monthly basis with the annual estimates provided pursuant to Section 9.3(B). The amounts set forth in each Additions Monthly Statement shall govern for the purposes of determining the Additions Monthly Advance due from Power Agency.

(F) Commencing with the third month following the First Closing Date, and each month thereaf ter, CP&L shall submit a statement to Power Agency on the first day of each such month which shall show the known costs and fees incurred and payments made in the second previous month, supported by a nonthly finan-cial and operating report prepared in accordance with the FERC Uniform System of Accounts and in a form prescribed by Power 9-12

-c l-I

, ' Agency, , and the balance, if any, ,of .the Additions Monthly Advance-l' remaining, or the deficit of Power Agency if the balance in the Capital 1 Additions Advance Fund falls below the amounts required pursuant to pections 8.1, 8.3 and.9.3(D)(3). For purposes of calculating such balances or deficits, CP&L shall subtract from l

j_ actual' charges incurred (1) contract retentions reflected there-l in and (2) construction related payables reflected therein which are-recorded on the canstruction accounting subsidiary ledger'of CP&L to facilitate CP&L's computation of AFUDC. Such statement.

l shall also correct errors, additions or omissions discovered by either aarty involving costs and fees incurred in any prior month (s), including simple interest on such corrections calcu-lated at the Adjustment Interest Rate.

When a statement is rendered showing an excess advance, CP&L shall credit the Capital Additions Advance Fund in the ~ amount of the excess effective on the first business day of such month. When a statement is rendered showing a deficit for any-month, CP&L shall of fset such deficit by reducing the Capital Additions Advance Fund effective on the first business day of such month.

(G) Simple interest charges shall accrue at the Late Paymen t Interest Rate on any Additions Monthly Advance due, . hdt l

l not received by CP&L on time, beginning on the first day such

! payment should have been made pursuant to Section 9.3(F).

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9.4 Monthly Adjustment to Working Capital Fund and Capital

- Additions Advance Fund (A) Commencing with the third month following the i First Closing Date, and cach month thereaf ter, CP&L shall submit a statement to Power Agency on the first day of each such month which shall show the balance on the last day in the second pre-vious month in the Working Capital Fund and all adjustments thereto pursuant to Sections 8.4, 8.5, 9.l(F), 9.2(G) and this Section 9.4(A). If such statement shows an adjusted balance in excess of that required by the then-applicable Section of Article 8, such excess shall be credited to the payment due on such statement and shall be renoved from the Working Capital Fund upon the paynent of such statement. If such statement shows a current deficit below that required by tne applicable Section of Article 8, such deficit shall be reflected on such monthly statement rendered by CP&L, and shall be credited to the Working Capital Fund upon payment.

(B) Commencing with the third month following the First Closing Date, and each month thereaf ter, CP&L shall submit a statement to Power Agency on the first day of each such month which shall show the balance on the last day in the second pre-vious month in the Capital Additions Advance Fund and all ad-justments thereto pursuant to Sections 8.3, 8.5, 9. 3 ( D) ( 3 ) ,

9.3(F), and this Section 9.4(B). If such statement shows an adjusted balance in excess of that required by the applicable 9-14 l

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1

-Section of Article 8, such excess shall be credited to the payment due on such statement and shall be . removed from the Capital Additions Advance Fun'd upon the payment of such state-ment. If such statement shows a current deficit below the amount required by the applicable Section of Article 8, such deficit shall be reflected on such monthly statement rendered by CP&L and shall be credited to the Capital Additions Advance Fund upon payment.

9.5 Offsets Payments due and payable by one Owner to the other Owner under- this Agreement may be offset first against payments then due and payable to the first owner by the second Owner under this Agreement and only then may any remaining amounts be offset against payments due under the Power Coordination Agreement.

Payments due and payable hereunder shall not be subject to any offset of any nature arising outside this Agreement or outside the Power Coo.rdination Agreement.

9.6 Challenges Power Agency may challenge the correctness of any statement, estimate, payment or adjustment (including any pay-ments previously made for the item so adjusted) made pursuant to this Agreement only if its objections, in writing, are received by CP&L no later than April 1 of the second year af ter the year in which the challenged statement or adjustment was rendered or the challenged payment was made. Notwithstanding the existence 9-15

r I

of any challenge or the lack thereof, CP&L shall have- the right

~

to initiate correction of errors in any statement or adjustment by giving Power Agency notice thereof no later than April 1 of the seconde year after the year in which the statement or ad-justment was rendered. The parties shall undertake to resolve challenges or corrections within a reasonabl. time and if the matter is unresolved for sixty-(60) days after the challenge by Power Agency or correction by CP&L is initiated, either party, at any time following such sixty (60) day period, may inform the other party in writing that a formal dispute exists. Within sixty (60) days following such notice, the party giving notice l

shall submit the dispute for arbitration pursuant to Article 16

( and, if not submitted to arbitration within such sixty (60) days, the challenge or correction shall be conclusively terminated and without ef fect. In the event of such a challenge or correction, the review of the challenged or corrected statement or adjustment shall not be limited to the items challenged by Power Agency t

or corrected by CP&L, but shall include any other items which

CP&L chooses to raise in a challenge or Power Agency. chooses to raise in a correction and any such item shall also be subject to adjustment. Except as specifically provided in Section 2.3(J), no challenge, disagreement or dirpute relating to the reasonableness or correctness of any such charge or fee shall permit Power Agency to delay or withhold any payment due here-under.

9-16

u 9.7 Audits By April 1 of each year following the First Closing Da te , CP&L shall have an audit made of the accounts relating to the payments due under this Agreement. The costs of such cudits shall be. borne by Power Agency. Such audits shall be made by the independent certified public accountant performing CP&L's annual audit, who shall be nationally recognized and licensed, registered or entitled to practice under the laws of North Carolina. A copy of each such audit showing the costs involved, in reasonable detai1, and the amount each owner has heretofore paid shall be furnished promptly to each Owner.

The costs of the audits performed pursuant to this Section shall be included in Power Agency's costs in determining the payments made by CP&L under the Power Coordination Agreement for Purchased Capacity.

i 9-17

ARTICLE 10-SPARE PARTS, TOOLS AND EQUIPMENT

, 10.1 Obligation to Maintain Stock Spare parts, tools and equipment shall be maintained at the Joint Facilities, at a level in accordance with CP&L Operating Practice, taking into account the program of transfer and excha,.ge provided for in Section 10.2. The cost of the original stock of such items shall be reflected in the Cost of Construction, as defined in the Sales Agreement, of the j Harris and Mayo Plants and is included in the purchase prices of Roxboro Unit No. 4 and the Brunswick Plant. The cost of l replacecent of such original stock shall be included in the operation and maintenance expense of the Joint Facilities in i

accordance with CP&L's accounting methods applied to all of l its generating facilities.

10.2 Transfer and Exchange (A) From time to time, CP&L may, but shall not be recaired to, transfer or exchange spare parts, tools, or equip-ment between Units at the Joint Facilities, between the Joint l

Facilities and other facilities operated by either of the Owners or other utilities in accordance with CP&L Operating Practice; provided, however, a transfer or exchange from a Joint Facility may not take place if to do so would require a shutdown or reduc-tion in the output of a Unit or Units at the Joint Facility, or the reasonably known likelihood thereof, without Power Agency's prior written consent.

10-1

(B) . Any item transferred or exchanged shall be re-placed at the earliest practicable date. The replacement cost of the item so transferred shall be' borne by the owner of the Unit, Joint Facility orLother facility tn which such item is transferred or exchanged, and the price thereof shall be the

' replacement cost of the item transferred P.O.B. the original'

location of the- item. In the event that it is determined that -

5 the item transferred noed not be replaced, the applicable accounts'shall be credited at original cost.

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10- 2 4

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ARTICLE 11 INSURANCE 11.1 Ilarris Plant (A) All Risk Property Insurance -- CP&L shall obtain and maintain ir force (i.e., carry), in the name of CP&L with the loss payable t the Owners as their interests may appear, all risk property insurance covering owners' properties at the Harris Plant in the form available from, or equivalent to that available from, Nuclear Mutual Limited. The limit of such insurance cover-age shall be the maximum amount available from Nuclear Mutual l

Limited for a nuclear generating plant not to exceed the values at risk at the Itarris Plant; provided, however, the limit of such insurance coverage prior to first delivery of nuclear fuel to the Ilarris Plant shall be S100,000,000. Excapt as otherwise provided in this Article 11, any loss not reimbursed by insurance pro-coeds shall be borne by the Owners of the affected property in proportion to their respective interests in such property. The cost of the builder's risk portion of the all risk insurance coverage shall be considered a Cost of Construction and shall be allocated between and borne by the Owners in the same manner

! a3 other Costs of Construction associated with the Harris Plant.

The cost of the operating plant portion of the all risk property insurance coverage shall be considered an operating expense of the 11arris Plant and shall be allocated between and borne by the 11-1

Owners in tho' sane manner as other operating expenses associated

.with_ the lIlarris Plant. As long as Nuclear. Mutual Limited 's in-suring. agreements perr.it the insurance company.to make retro-spective premium adjustments for a given policy year, CP&L shall bear.the additional premium cost resulting.from any retrospective.

premium adjustment made by Nuclear Mutual Limited and shall be en-titled to any good experience credit 'and/or any increment to its share. account resulting from premiums paid for all risk property insurance coverage at the liarris Plant.

(B) Nuclear Liability Insurance and Governmental Indemnity (1) CP&L shall obtain c.nd maintain in force (i.e.,

carry), in the name of the owners as their interests nay appear, nuclear liability insurance in nuch form, in such anount and for such term as will meet the financial responsibility requirenents established from time to time by the NRC, or any successor govern-mental ageracy, pursuant to Section 170 of the Atomic Energy Act of 1954, as amended. The allocation of premiums at any. time among each of~the-Ilarris Units shall be in proportion to the ratable exposure of each such Unit to the total ratable exposure of the lla rris Pla.. . As- to each !!arris Unit which is not yet in Commer-cial Operation, such allocated portion of premiums for nuclear liability insurance shall be considered a Cost of Construction of the llarris Plant and shall be allocated between and borne by the Owners in the same manner as other Costs of Construction associated with the llarris Plant. As to each Ilarris Unit which 11-2.

l

is in Commercial Operation, such allocated portion of premiuns for nuclear liability insurance sball be considered an operating expense of the liarris Plant and shall be allocated between and borne by the Owners in the same manner as other operating ex-penses associated with the Ilarris Plant.

(2) The Owners shall enter into the governmental indemnity agreements required by Section 170 of the Atomic Energy Act of 1954, as amended. The cost of'such indemnity, including any retrospective premium liability (deferred premiums), shall be borne by the Owners in proportion to their interest in the Joint Facilities covered by the governmental indemnity. Each Owner shall be responsible. for g"aranteeing its portion of any retro- ,

spective pronium liability wiich may be required by the NRC, or any successor governmental agency. Any reimbursement recuired to be made to an insurance carrier, surety or governmental agency because of the default of either Owner in paynent of a retrospec-tive premium shall be for the account of the defaulting Owner.

(3) In the event that the nuclear liability protection system contemplated by Section 170 of the Atomic Energy Act of 1954, as amended, is epealed, the owners shall maintain in effect during the period of operation and until the completion of decommissioning of each Joint Unit at the IIarris Plant and with respect thereto, to the extent available and consistent with generally accepted electric utility industry 11-3

p l'  ;

L -

l practice in.the United States, a l'iability protection system

. consisting of governmental indemnity, limitation of liability.-

and/or ' nuclear liability. insurance.

j (C). Extra Expense Insurance -- CP&L shall obtain and maintain in force (i.e.,-carry), in.the name of the-owners as-l l

their interests -may appear, insurance coverage against the i

extra expense incurred in obtaining replacement power during prolonged accidental outages of the Joint Units at the Harris Plant in the form available from, or equivalent to that avail-able from, Nuclear Electric Insurance Limited. The limit of i insurance coverage shall be the maximum amount available from l- Nuclear Electric Insurance Limited for the Harris Plant. The l cost of.the extra expense insurance shall be considered an l operating expense of the Harris Plant and shall be allocated' i

i between and borne by the owners in the same manner as other operating expenses associated with the Harris Plant. As long as the Nuclear Electric Insurance Limited insuring agreements pe rmi t the insurance company to make retrospective premium

! adjustments for a given policy year, CP&L shall bear the addi-tional premium cost resulting from any retrospective premium adjustment made by Nuclear Electric Insurance Limited and shall l

be entitled to any good experience credit and/or increment to its share account resulting from premiums paid for extra expense insurance coverage of the Joint Units at the Harris Plant.

1 11-4

(D) Non-Nuclear Liability Insurance --

(1) During construction of the Harris Plant, and with respect- to claims arising out.of construction activities at-the Harris Plant, Daniel Construction Company is insuring the interests of the Owners and constructor against exposures cov-ered by the following types of inaurance to a maximum limit of

$ 2 5,0 0 0,0 00 : Worker's Compensation / Employer Liability' Insurance; Comprehensive General Liability Insurance; and Motor Vehicle Liability Insurance.

(2) Prior to the-date of Commercial Operation of _the first Joint Unit to achieve Commercial Operation at the Harris Plant, CP&L shall obtain and thereaf ter maintain in force (i.e., carry), at its sole cost and expense, public liability insurance coverage insuring CP&L against liability to third per-sons and their property in limits of not less than S25,000,000 in excess of a deductible (i.,e. , retention) of $1,000,000. CP& L shall make reasonable ef forts to have Power Agency included as an additional insured on its public liability insurance policy.

Any additional cost actually incurred by CP&L solely as a result of the inclusion of Lawer Agency on CP&L's public liability insurance coverage shall be borne by Power Agency.

(E) Worker's Compensation -- All uninsured costs incurred by the Owners, or either one of them, associated with claims arising prior to the date of Commercial operation of any l l

Harris Unit for payments to or for the benefit of covered CP&L 11-5

A i

employees'at the Harris' Plant shall be considered a Cost of Con-struction of the Harris Unit.as to which such claims relate and shall be allocated between and borne by the Owners in the same manner as other Costs of Construction associated with the Harris Plant. All uninsured costs incurred by the Owners, or either one of them, associated with claims arising after the date of Commercial Operation of any Harris Unit for payments to or for the benefit of covered CP&L employees.at the Harris Plant shall be considered an operating expense of the Harris Unit as to which such claims relate and shall be allocated between and borne by the Owners in the same manner as other operating ex-penses associated with the Harris Plant.

(F) Other Insurance -- CP&L may obtain and maintain in force (i.e., carry) transit, contractor's equipment and such l- other insurance coverages as utilities of similar size may from time to time purchase to protect against risks of loss at nuclear-fueled generating plants. The cost of such insurance coverages for the Harris Plant, and any other insurance related expenses chargeable to the Harris Plant in accordance with, generally ac-cepted utility accounting practices, which are incurred by CP&L prior to the date of Commercial Operation of a Harris Unit shall be considered a Cost of Construction of the Harris Unit as to-which such costs relate and shall be allocated between and borne

by the Owners in the same manner as other Costs of Construction associated with the Harris Plant. The costs of such insurance 11-6

= .- - ~ . .

coverages for the Harris Plant, and any other insurance-related expenses chargeable to the Harris Plant in accordance with generally accepted utility accounting practices, which are incurred by CP&L after the date of Commercial Operation of a Harris Unit shall be considered an operating expense of the Harris Unit as to which such costs relate and shall be allocated between and borne by the Owners in the same manner as other operating expenses associated with the Harris plant.

11.2 Brunswick Plant

(A) All Risk Property Insurance -- CP&L shall main-tain in force (i.e., carry), in the name of CP&L with the loss payable to the Owners as their interests may appear, all risk property insurance covering owners' properties at the Brunswick Plant in the form available from, or equivalent to that avail-able from, nuclear flutual Limited. The limit of such insurance coverage shall be the maximum amount available from Nuclear Mutual Limited for a nuclear generating plant not to exceed the values at risk at the Brunswick Plant. Except as otherwise

, provided in this Article 11, any loss not reimbursed by insurance proceeds shall he borne by the Owners of the affected property

in proportion to their respective interests in such property.

The cost of the all risk property insurance coverage shall be

! considered an operating expense of the Brunswick Plant and

shall be allocated between and borne by tue Owners in the same 4

manner as other operating expenses associated with the Brunswick a

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t 3di l long as Nuclear' Mutual Limited's insuring agreements Plant.

- permit the insurance company to make retrospective premium ad-

~

justments.for a given-policy year,.CP&L shall bear the additional

- premium cost resulting from any. retrospective premium adjustment

- made by Nuclear Mutual Limited and shall be entitled to any.

good experience credit and/or any increment to its share account resulting from-premiums paid for all risk property insurance coverage at the Brunswick Plant.

(B) Nuclear Liability Insurance and Governmental Indemnity 1 (1) CP&L shall maintain in force (i.e., carry),

in tne name of the Owners as their interests may appear, nuclear liability insurance in such form, in such amount and for such teru as will meet the financial responsibility requirements established from time to time by the NRC, or any successor .

governmental agency, pursuant to Section 170 of the Atomic Energy Act of 1954, as amended. The costs of such insurance shall be considered an operating expense of the Brunswick' Plant and shall be allocated between and borne by the Owners in the same manner as other operating expenses associated with the Brunswick Plant.

(2) The owners shall enter into the governmental indemnity agreements-required by Section 170 of the Atomic Energy Act of'1954, as amended. The cost of such indemnity, including any retrospective premium liability (deferred premiums), shall be 11-0 g a T- +T-- -- ? mm e ~ en r- =,aw J. m

borne by the Owners in proportion to their interests l' 'he Joint Facilities covered by the governmental indemnity. Each Owner shall be responsible for guaranteeing its portion of any retrospective premium liability which may be required by the NRC, or any successor governmental agency. Any reimbursement required to be made to any insurance carrier, surety or govern-mental agency because of the default of an owner in payment of-l a retrospective premium shall be for the account of the default-l ing Owner.

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(3) In the event that the nuclear liability pro-tection system contemplated by Section 170 of the Atomic Energy l Act of 1954, as amended, is repealed, the Owners shall maintain

! in effect during the period of operation and until the completion l of decommissioning of each Joint Unit at the Brunswick Plant and i

j with respect thereto, to the extent available and consistent with

[ generally accepted electric utility industry practice in the l

United States, a liability protection system consisting of gov-i ornmental indemnity, limitation of liability and/or nucicar lia-( bility insurance. .

(C) Extra Expense Insurance -- CPLL shall obtain and l~

( maintain in force (i.e., carry), in the name of the Owners as their interests may appear, insurance coverage against th'e extra expense incurred in obtaining replacement power during prolonged accidental outages of the Joint Uraits at the Brunswick Plant in the form available from, or equivalent to that available l

11-9

l l from, Nuclear Electric Insurance Limited. The limit of insur-ance coverage shall be the maximum amount available from Nuclear Electric Insurance Limited for the Brunswick Plant. The cost of the extra expense insurance shall be considered an operating i

expense of the Brunswick Plant and shall be allocated between and borne by the owners in the same manner as other operating expenses associated with the Brunswick Plant. As long as the Nuclear Electric Insurance Limited insuring agreement permits the insurance company to nake retrospective premium adjustments for a given policy year, CP&L' shall bear the additional premium cost resulting from any retrospective premiun adjustment made by Nuclear Riectric Insurance Limited and shall be entitled to l

'any good experience credit and/or increment to its share account resulting from premiums paid for extra expense insurance cover-age of the Joint Units at the Brunswick Plant.

(D) Non-Nuclear Liability Insuiince -- CP&L shall obtain and maintain in force (i.e., carry) at its sole cost and expense, public liability insurance coverage insuring CP&L against liability to thirJ persons and their property in limits of not less than S25,000,000 in excess of a deductible (i.e., retention) --

o f S1,000,000. CP&L shall make reasonable efforts to have Power Agency included as an additional insured on its public liability insurance policy. Any additional cost actually incurred by CP&L solely as a result of the inclusion of Power Agency on CP&L's pub-lic liability insurance coverage shall be borne by Power Agency.

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(E) Worker's Compensation -- All uninsured costs incurred by the owners, or either one of them, for payments to or for the ber cit of covered CP&L employees at the Brunswick Plant shall be considered an operating expense of the Brunswick Plant and shall be allocated between and borne by the owners in the same manner as other operating expenses associated with the Brunswick Plant.

( P) Other Insurance -- CP&L may obtain and maintain in force (i.e., carry) transit, contractor's equipment and such siher innurance coverages an utilities of similar ulze may from time to time perchase to protect against risks of Icss at nuclea r-fueled generating plants. The cost of such insurance coverages for the Brunswick Plant and any other insurance-related expenses chargeable to the Brunswick Plant in accordance with generally accepted electric utility accounting practices shall be coi.sidered an operating expense of the Drunswick Plant and shall be allocated between and borne by the Owners in the same manner as other operat-ing expenses associated with the Brunswick Plant.

11.3 Mayo Plant (A) Property Insurance --

(1? 'P&L shall obtain and maintain in force (i.e.,

carry), in the name of CP&L with the loss payable to the Owners as their interests nay appear, during the construction of the Mayo 11-11

Plant, all risk builders' risk property insurance in the form l

available to CP&L as an Ebasco, Incorporated client company under-written (i.e., insured by) by Insurance Company of North America and other participat.ing insurance companies. The limit of such 1

Insurance coverage shall be S50,000,000 in excess of a deductible

( i .e . , retention) not to exceed $50,000 per occurrence. The cost

! of such insurance coverage shall be considered a cost of coristruc-l tion of the !!ayo Plant and shall be allocated between and borne by the owners in the same manner as other costs of construction associated with the flayc ?lant.

(2) CP&L shall obtain and maintain in force (i.e., ,

carry), in the name of CP&L with the loss payable to the Owners as j their interests way appear, during the operation of each Mayo Unit f which is in Commercial Operation, property insurance coverage under

! a broad form named perils policy covering all generating properties . o

( of CP&L (except the nuclear-fueled generating plants and 11. B.

Robinson Unit No. 1). The pecils covered shall include: fire and lightning; windstorm; hail; riot; riot attending a strike; civil commotion; explosion; implosion; aircraft; vehicles; smoke damage; vandalism and malicious mischief; electrical injury; collapse; I falling objects; weight of snow; ice or slect; and water damage.

Tne minimum limit of such blanket insurance coverage shall be i S100,000,000 in excess of a deductible (i.e., retention) not to exceed S250,000 per occurrence. The cost of such insurance l

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i coverage for the Mayo Plant shall be considered an operating ex-1 per,se of the Mayo Plant and shall be allocatea between and borne by the Owners in the same manner as other operating expenses associated with the Mayo Plant.

(3) CP&L shall obtain and maintain in force (i.e.,

carry), in the name of CP&L with the loss payable to the owners as their interests may appear, during the operation of each Mayo Unit which is in Commercial Operation, Primary Boiler Insurance Coverage and Excess Boiler & Turbine Insurance Coverage. The Primary Boiler Insurance Coverage shall be in the form available from, or equivalent to that available from, American Motorist Insurance Company, with a limit of $500,000 per occurrence and

, subject to a deductible (i.e., retention) of $100,000. The Excess Boiler & Turbine Insurance shall be in the form avail-able from, or equivalent to that available from, Utility

Services Insurance Company, Ltd., with a minimum limit of

$25,000,000 for boiler coverage and $22,000,000 for turbine j coverage subject to such reasonable deductibles (i.e., reten-tions) as CP&L shall select. The cost of such insurance coverages for the Mayo Plant shall be considered an operating expense of the Mayo Plant and shall be allocated between

, and borne by the Owners in the same manner as other operating

expenses associated with the Mayo Plant.

(4) Except as otherwise provided in this Article 11, any loss not reimbursed by insurance proceeds shall be 11-13

l borne by the owners of the af fected property in proportion to their respective interests in such property.

(n) Liability Insurance --

(1) During the construction of the Mayo Plant, and with respect to claims arising out of construction activities at the Mayo Plant, CP&L is insuring, under an owner-controlled in-surance program, the interests of the owners and participating contractors against exposures covered by the following types of insurance to a maximum limit of $11,000,000: Worker's Compen-sation/ Employer Liability Insurance and Comprehensive General Liability Insurance.

(2) CP&L shall obtain and maintain in force (i.e.,

carry), at its sole cost and expense, public liability insurance coverage insurinq CP&L against liability to third pornons and their property in limits of not less than $2 5,000,000 in excess of a deductible (i.e., retention) of $1,000,000. CP&L shall make reasonabic efforts to have Power Agency included as an additional insured on its public liability insurance policy.

Any additional cost actually incurred by CP&L solely as a result of the inclusion of Power Agency on CP&L's public liability in-surance coverage shall be borne by Power Agency.

(C) Worker's Compensation -- All uninsured costs incurred by the owners, or either one of them, associated with claims arising prior to the date of Commercial Operation of 11-14

any Mayo Unit for payments to or for the benefit of covered Cp&L employees at the Mayo Plant shall be considered a Cost of Construc-tion of the Mayo Unit as to which such claims relate and shall be allocated between and borne by the owners in the same manner as other Costs of Construction associated with the Mayo Plant. All uninsured costs incurred by the Owners, or either one of them, associated with claims arising after the date of Commercial Opera-tion of any Mayo Unit for payments to or for the benefit of cov-4 ered CP&L employees at the Mayo Plant shall be considered an oper-

{ ating expense of the Mayo Unit as to which such claims relate and 1

j 1

shall be allocated between and borne by the Owners in the same 4

manner as other operating expenses associated with the Mayo Plant.

l ( D) Other Insurance -- CP&L nay obtain and naintain

! in force (i.e., carry) transit, contractor's equipment and such other insurance coverages as utilities af similar size may

, from time to time purchase to protect against risks of loss at j fossil-fueled generating plants. The costs of such itisurance coverages for the Mayo Plant, and any other insurance-related expenses chargeable to the Mayo Plant in accordance with gener-j- ally accepted electric utility accounting practices, which are l incurred by CP&L prior to the date of Commercial Operation of a Mayo Unit shall be considered a Cost of Construction associated with the Mayo Unit as to which such costs relate and shall be allocated between and borne by the owners in the same manner as l other Costs of Construction associated with the Mayo Plant. I l

11-15 4

a.. , - . - ,., . - - , , , -. ,n -. -, ,.,- , , . - .

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l The costs of such insurance coverages for the Mayo Plant, and any other insurance related expenses chargeable to the Mayo Plant in accordance with generally accepted electric utility accounting practices, which are incurred by CP&L df ter the date of Commercial Operation of a Mayo Unit shall be considered an operating expense of the Mayo Unit as to which such costs relate and shall be allocated between and borne by the owners in the same manner as other operating expenses associated with the Mayo Plant.

11 4 Roxboro _ Unit No. 4 (A) Property Insurance --

(1) CP&L shall obtain and maintain in force (i.e.,

carry), in the name of CP& L with the loss payable to the Owners as their interests may appear, during the operation of Roxboro Unit No. 4, property insurance coverage under a broad form elmed perils policy covering all generating properties of CP&L (except the nuclear-fueled generating plants and 3. B. Robinson Unit No. 1).

Tne perils covered shall include: fire and lightning; windstorm; hail; riot; riot attending a strike; civil commetian; explosion; implosion; aircraft; vehicles; smoke damage; vandalism and mali-cious mischief; electrical injury; collapse; falling objects; weight of snow; ice or sleet; and water damage. The minimum limit of such blanket insurance coverage shall be S100,000,000 in excess of a deductible (i.e., retention) not to exceed $250,000 per occurrence. The cost of such insurance coverage for Roxboro Unit No. 4 shall be considered an operating expense of Roxboro 11-16

c Unit No. 4 and shall be allocated between and borne by the owners in the same ner.ner as other operating expenses associated with Ro x boro Un i t No . 4.

4 (2) CP&L shall obtain and maintain in force (i.e. ,

carry), in the name of CP&L with the loss payabic to the owners as their interests may appcar, during the operation of Roxboro Unit No. 4, Primary Boiler Insurance Coverage and Excess Boiler &

Turbine Insurance Coverage. The Primary Boiler Insurance Cover-age shall be in the form available from, or equivalent to that available f rom, American Motorist Insurance Company , with a limit of SS00,000 per occurrence and subject to a deductible (f.e., re-tention) of S100,000. The Excess Boiler & Turbine Insurance shall be in the form available from, or equivalent to that avail-able from, Utility Services Insurance Company, Ltd., with a minimum limit of $25,000,000 for boiler coverage and S22,000,000 for turbine coverage subject to such reasonable deductibles (i.e.,

e retentions) as CP&L shall select. The cost of such insurance coverd7e for Roxboro Unit Mo. 4 shall be considered an operating expense associated with Roxboro Unit No. 4 and shall be allocated between and borne by the Owners in the same manner as other oper-ating expenses of Roxboro Unit No. 4.

(3) Except as otherwise provided for in this Article 11, any loss not reimbursed by insurance proceeds shall

, be borne by the owners of the affected property in proportion to the2r respective interests in such property.

11-17

( 11) Liability Insurance -- CP&L nhall obtain and main-tain in force ( i . e, . , carry), at its nole cost and expenne public 1inLility innurance coverage innuring CP&L aqainnt liability to third personn and their property in linita of not lenn than S25,000,000 in excenn of a deductible (i.e. , retention) of

$1,000,000. CP&L nhall nake reanonable effortn to have power Agency included an an additional innured on itn public liability innurance policy. Any additioul cont actually incurred by CP&L nolely an a renuit of the inclunion of Power Agency on CP&L'n public liability insurance coverage nhall be borne by Ibwer Agency.

(C) Worker's Compensation -- All uninsured conta incurred by the ownern, or either one of them, for payments to or for the benefit of covered CP&L employeen at Roxboro Unit tio . 4 nhall be consider:d an operating expenne of Roxboro Unit tio . 4 and nhall be allocated between and borne by the Ownern in the name manner an other operating expennen annociated with l Roxboro Unit Flo. .1 (D) Other Innurance -- Ci%L may obtain and naintain in force (i.e., carry) trannit, contr ::'.or'n equipment and nuch other innurance coveragen an utilitien of nimilar nize may f rom time to time purchane to protect againnt rinkn of lonn at fonnil-fueled generating plantn. The conts of such innurance coveragen for Itoxboro Unit tio. 4, and any other innurance-related expennen chargeable to Roxboro Unit tJo. 4 in accordance with generally i

11-18

cccepted electic utility accounting practices, shall be con-cidered an operating expense of Roxboro Unit No. 4 and shall ,

be allocated between and borne by the Owners in the same manner cs other operating expenses associated with Roxboro Unit No. 4.

11.5 General Provisions (A) Copies of Insurance Policies -- Not less than j thirty (30) days prior to the First Closing Date, CP&L shall l provide Power Agency with certified copies of all insurance policies required to be obtained by CP&L pursuant to this Arti-l cle 11, or other evidence of coverage satisfactory to Power Agency pending availability of the certified copies of the in-l surance policies.

(B) Additional or Substitute Insurance of Power Agency -- As a substitute for or in addition to the insur-ance coverage on the Owners' exposures to be obtained by CP&L (including any self-insurance by CP&L) which is provided for in this Article 11, Power Agency may self-insure or may obtain and maintain, at its sole cost and expense, such insurance cover-age as it deems necessary or advisable in substitution' for or in

_ addition to the insurance coverage obtained by CP&L pursuant to

- this Article 11; provided, however, that self-insurance by Power Agency, or such additional or substitute insurance on Power Agency's exposures, shall not reduce or diminish in any way the insurance coverage maintained by CP&L on its own expo-sures as contemplated by this Article 11, and shall'not increase 11-19

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the costs to CP&L for such insurance coverage. In the event that Power Agency self-insures or obtains any insurance coverage on its exposures as a substitute for insurance coverage obtained by CP&L, then Power Agency shall not be assigned any portion of the premiun or other costs incurred by CP&L in obtaining or maintaining in force the substituted insurance coverage, nor shall Power Agency be entitled to share in the proceeds of auch substituted insurance coverage.

11-20

2 ARTICLE 12 OPERATIO!!S REVIEW AtJD OTIJER ?!ATTERS 12.1 Operations Review Committee and Capital Additions Review

!!ot later than thirty (30) days prior to the First Closir.g Date, the parties shall form an Operations Review Committee with no more than two (2) members appointed by each Owner. The first Owner representatives shall be appointed

at the First Closing Date, and the representatives so appointed shall remain representatives of such Owner until changed by that ownet by written notice to the other Owner. Either Owner may, by written notice to the other Owner, designat' an alternate or cubatitute to act as such representative in the ausence of any of its regular members, or to participate in lieu of the regular regresentative on specified occasions or with respect to specif-ic matters. The Committee shall adopt such rules of procedure as it deems appropriate. Each Owner shall be responsible for the personal expenses of its Committee members. All other ex-penscs of the Committee shall be a cost of operation and main-tenance.

The Committee shall periodically meet and review the operation of, maintenance and fueling of, and capital additions to the Joint Facilities on such schedule as it deems necessary, taking into consideration the operating requirements of the Joint Facilities, but not less of ten than quarterly. Any members or 12-1

L representatives 'of the governing' bodies of the Participants may attend such meetings.- CP&L shall keep the Committee informed

, concerning the Joint Pacilities' operation, maintenance, fueling and capital additions, and the Committee shall make recommenda-tions to CP&L with . respect thereto. CP&L shall diligently con-I nider all such recommendations and shall make available to ' the I Committee information reasonably requested by it and such of CP&L's operating personnel as are reasonably necessary (ta' .ng into consideration the operating requirements of the Combined Systen) to evaluate such recommendations. However, CP&L shall retain control and responsibility for operation of, maintenance and fueling of, and capital additions to the Joint Facilities pursuant to this Agreement.

l At Power Agency's request, CP&L shall provide a formal presentation to Power Agency representatives on capital additions to the Joint Facilities, including an opportunity for discussion of those capital additions to the Joint Facilities covered by the formal presentation. These presentations shall be held at a time and place convenient to Power Agency and CP&L but not more of ten - 1 than quarterly. In addition to representatives of CP&L and Power Agency, representatives of architect-engineers, contractors, or consultants may, at the request of either Owner, attend such meetings.

l The Owners shall attempt to resolve any dispute as between themselves, and as between power Agency and CP&L as

[

12-2 i

b l

operator,-arising during or subsequent to any Committee meeting with respect to operation of, maintenance and fueling of, and capital additions to the Joint Facilities during the prior quarter, and such proposed activities for the current quarter or for any activity requiring agreement between the Owners. Except as arbitration of disputes regarding operation of, maintenance and fueling of, and capital additions to the Joint Facilities is limited by Sections 2.3(I), 2.3(J), 2.3(K), 3.1(G) and 3.1(H),

l any such matter not so resolved may be submitted to arbitration in accordance with Article 16, but only if such matter is so submitted within thirty (30) days after the Committee meeting next following the regular quarterly Cominittee meeting at which the dicpute was first noted and referred to as an item in dis-I pute specifically raised by either party under an agenda item entitled " Challenges and Disputes" in the minutes of such Com-mittee meeting; provided, however, the representatives of CP&L l

l and Power Agency at such next following Committee meeting may agree in writing that the disputed matter is to be carried I

over to the next subsequent meeting in which event'the time for submitting the matter to arbitration shall be tolled for the period between such Committee meetings.

l 12.2 Liaison Representative for Joint Facilities l

CP&L shall provide a Liaison Representative whose defined duties shall include (a) the responsibility to co-operate with Power Agency in meeting its needs for all in-formation reasonably requested with respect to operation and 12-3

- - . , . - --n - . . . , .

maintenance of, construction and completion of capital ad-ditions - to, and - the provision of Fuel Planagement Services for.the Joint Facilities and the costs thereof and (b) the responsibility for obtaining and coordinating adequate re-sponse by CP&L to such needs. The Liaison Representative's duties shall also include responsibility for obtaining and coordinating monthly progress payment estimates, information concerning costs of operation and maintenance of, costs of constraction of capital additions to, and costa of providing Fuel 11anagement Services for Lhe Joint Facilities, and in fo r-mation or other assistance relating to Power Agency financings.

l The Liaison Representative shall be an employee of CP&L with

(

-the responsibilities and obligations attendant thereto. Power l Agency shall pay all direct and indirect costs of the Liaison I

i Representative in neeting his responsibilities to Power Agency, including, but not limited tc, the direct costs associated with employment- of the Liaison Representative. In addition, Power l

Agency shall pay all direct and indirect costs not specified in this Agreement and the Related Agreements as a cost of oper-ation and maintenance of, cost of construction of capital addi-tions to, and cost of provision of Fuel Management Services 1

for the Joint Facilities that CP&L incurs, including hourly f

costs of other CP&L personnel, in providing Power Agency with information, reports and assistance when the Liaison Represen-tative.is responsible for obtaining and coordinating such in-formation,' reports or assistance. Any costs of the Liaison 12-4 I

r:

i E

- Representative for work performed other than for Power Agency, including a properly allocated portion of the overhead costs, chall be excluded from the costs of Power Agency determined pursuant to this Section 12.2.

The cost, fees and payments described in this Section 12.2 shall be included in Power Agency's costs in determining the payments made by CP&L under the Power Coordination Agreement for Purchased Capacity.

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ARTICLE 13 i FORCE MAJRURE 13.1 Excuse of Performance Notwithstanding anything in this Agreement to the con-trary, neither party shall be liable or responsible for failure l to carry out any of its obligations under this Agreement caused by Force Majeure; provided, however, that this Article shall not apply to the parties' obligations to make payments or give i credits as specified in Article 9.

13.2 Definition The term " Force fiajeure" as used herein shall mean any cause beyond the control of the party affected, and which by reasonable ef forts the party af fected is unable to overcome, including without limitation the following: acts of God; fire, flood, landslide, lightning, earthquake, volcanic eruption, hurricane, tornado, storm, freeze, or drought; blight, fanine, epidemic or quarantine; strike, lockout or other labor difficulty; act or failure to act of the other party (and such party so act-ing or failing to act shall not use its act or failure to act to excuse any other obligation which it has under this Agreement);

act or failure to act of any regulatory agency or other govern-mental authority; changes in the work or delays caused by public bidding requirements; theft; casualty; accident; equipment break-down; failure or shortage of, or inability to obtain from usual 13-1

i i

L sources, goods, labor, equipment, information or drawings, ma-l chinery, supplies, energy, fuel or materials; embargo; injunction; l

L litigation' or arbitration with suppliers or vendors; shortage r

of rolling stock; arrest; wars civil disturbance; explosion; act of public enemies; sabotage; invasion; or breach of contract by any supplier, contractor, sub-contractor, laborer or material-nan. . Either party rendered unable to fulfill any obligation under l this Agreement by reason of Force Majeure shall make reasonable l ef forts to remove such inability within a reasonable time.

13.3 Continuation after Force Majeure Event (n) If, due to an event of Force Majeure which causes the operation (including, without limitation, the fueling) of any Joint Facility to be interrupted or suspended for a pericd l

l of at least six (6) months, CP&L as operator recommends in writing l

to the other owner that operation of any of the Joint Facilities

! or any Unit thereof be discontinued on the ground tha t continua-I l tion of such operation would be impracticable under CP&L Operat-inq practice, the Owners shall attempt to aqrce as to whether operation of any Unit or all Units shall continue. If agreement is not reached within six (6) months af ter receipt of such recom-mendation by the other owner (or such later time as the Owners

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sha11' agree), Cr&L may terminate its responsibility for opera-

tion and mahitenance of that Unit. with respect to which it has recommended discontinuation of operations.

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-i (B)(1) If Power Agency desires to continue operation of Joint Facilities for which CP&L has terminated its responsi-bility for-operation and maintenance pursuant to Section 13.3(A),

Power Agency shall have the right to purchase CP&L's ownership interest in such Joint Facilities and shall succeed t'o the rights p and obligations of CP&L under this. Agreement with respect to such ,

i Joint Facilitis?.

(2) If the parties cannot agree upon a price within j sixty -(60) days af ter CP&L's termination of operation and main-l tenance responsibility pursuant to Section 13.3(A), the deter-j mination of the f air market value of CP&L's ownership interest i

may be submitted to arbitration. In such event, Power Agency l

]

3 may obtain title at any time af ter giving notice of Intent to Proceed with Arbitration pursuant to Article 16 by paying to l CP& L, in such manner as CP&L may reasonably require, an amount i

equal to (a) the net plant investment in such Joint Facilities, 4 '

plus (b) the actual net effect on CP&L's federal and state j income taxes (including tax on capital gains) associated with

! the sale to Power Agency of such investment as is attributable-l

! 'to AFUDC not' previously amortized, calculated in a manner simi- ,

lar to that set forth in Exhibit SA-V-6 of the Sales Agreement.

I (3) Should the final determination of fair market value as determined through arbitration be higher than the amount paid pursuant to Section 13.3(B)(2), Power Agency shall 1

make such additional payment, in such manner as CP&L may reason- ,

13-3 i

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ably require, as shall make the total purchase price equal to the f air market value. In addition, Power Agency shall pay CP&L simple interest, calculated at the Compensatory Interest Rate, on the amount of such additional payment for the period begin-ning with the date of acquisition of title by Power Agency in sac.9 Joint Facilities and ending with the date of such additional pay-ment. Such additional payment, including simple interest thereon, shall be paid as soon after the date of the Arbitrator's decision as Power Agency can effect the necessary financing using reason-able best efforts.

(C) During any period in which there is an interrup-tion, suspension or discontinuation of operations pursuant to this Section 13.3, any cost of maintaining that part of the Plant at which such interruption, suspension or discontinua-4 tion occurs shall be a cost of operation and maintenance, and st.all be borne by the Owners in accordance with their respective ownership interests in the Plant or Unit affected.

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, ARTICLE 14-GOVERNMENTAL AND REGULATORY APPROVALS 14.1 CP&L's Responsibilities CP&L shall use all reasonable efforts to obtain and I maintain, or amend, as necessary, all required governmental and regulatory approvals for operation, cessation of operations, or decommissioning of the Joint Facilities. Power Agency shall co-l operate fully with CP&L in taking all actions required in order to obtain, retain or amend all such approvals. CP&L shall have the right' to negotiate with any governmental or regulatory agency l and may agree on behalf of the owners with respect to such ap-provals provided that such agreement is not inconsistent with this Agreement or the Related Agreements. All costs incurred l

pursuant.to this Article chall be treated as costs of capital additions, costs of operation and maintenance, or costs of con-struction, as appropriate, and shall be paid in the same manner as provided for in this Agreement or, as appropriate, in accor-dance with. the Sales Agreement.

14.2 Procedure in Event of Failure to Obtain l or Retain Necessary Approvals

! (A) In the event either party fails for any reason to obtain retain any governmental or regulatory approval,- or takes or fails to take any action which prevents the other party from obtaining, retaining, or amending any governmental 14-1

or regulatory approval without which approval the operation, cessation of operations, or decommissioning of the Joint Facili-ties or a Unit thereof cannot proceed, the Owners shall first use all reasonable efforts to take such actions as are required in order to effect the necessary approval without affecting CP&L's status as operator of the Joint Facilities.

(D) If the Owners are unable af ter a reasonable period of time to effect the necessary approval in accordance with Section 14.2(A), then the provisions of Section 10.3(B)(2),

and thereafter Section 10.3(B)(5), of the Salen Agreement shall govern, i

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ARTICLE 15 LIABILITY AND ALLOCATION OP. RISK 15.1 Recognition of Allocation of Risk of Loss

_t_o owners The parties acknowledge and-agree that the-amounts payable to CP&L for its performance as operator under +.his Agreement have been determined on the basis of the-assumption by the Owners of all risk of claims by, or uninsured loss or damage to, the other Owner, or to third parties arising out of, connected with, occasioned by, or resulting from this Agreement or any activities hereunder, except as otherwise specifically provided in Sections 3.3, 4.2, 4.3, 4.4, this Section 15.1 and Section 15.2. Such clains, loss or damage may be substantial. In this connection CP&L aqrees to hear its share of the risk of claims, uninsured loss or damage arising out of, connected with, occasioned by, or resulting s

f rom this Agreement, in its role as Owner. It is tho' inten-tion of the parties that, except with respect to the limited liability of CP&L as specifically provided for in this Sec-tion 15.1 and Section 15.2, and the liability provided for in Sections 3.3, 4.2, 4.3 and 4.4, the expense of such claims, including the cost of defense, the cost of insurance against such claims and any and.all such uninsured loss or da. age be borne by the Owners as a cost of operation and maintenance.

15-1

Sut?  : pense shall be allocated between and borne by the owners of the Uriit or plant giving rise to the axpense in the same manner as the cost of operation and maintenance of such Unit or plant is shared by the Owners.

15.2 Liability of CP&L for Certain Loss or Damage Except as otherwise provided in Sections 3.3, 4.2, 4.3 and 4.4, CP&L's sole liability as operator to the Owners with respect to all claims of any kind, whether based upon con-tract, tort (including negligence), or otherwise, for any loss or damage connected with, arising out of, occasioned by or result-i ing from this Agreement or the performance or the breach there-of shall be to pay the uninsured costs of restoring, repairing or replacing any property of the owners damaged or made inoper-able as the result of the failure of CP&L to use reasonable efforts, in accordance with CP&L Operating Practice, to carry out its express undertakings under this Agreement, but only to the extent that such uninsured cost in any single occurrence exceeds $50,000; provided, however, that in no event shall CP&L l required to expend for the restoration, repair or replacement of 11 property so damaged or made inoperable within one (1) calen-dar , ar an aggregate amount in excess of thirty percent (30%) of the fe prescribed in Section 7.11(A)(1) paid for that calendar 4

year by Power Agency; and provided further, however, that in no t event shall CP&L be liable for the payment of the cost of any such restoration, repair or replacement unless demand for such L 15-2 i

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' payment is made by Power Agency in writing and is received by l

CP&L within one (1) year from the date that occurrence of such i

! damage becomes known to Power Agency. .

Notwithstanding the foregoing paragraph, the Owners l

specifically agree that they shall bear as Owners and in propor-tion to their ownership interests any and all losses, damages or costs arising out of errors, omissions and failures by CP&L l non-supervisory personnel.

l 15.3 Indirect or Consequential Damages l

In no event shall either Owner be liable to the other l Owner for any indirect, special, incidental or consequential damages with respect to any claim, whether based upon contract, tort (including negligence), patent, trademark or servicemark, i or otherwise, including, but not limited to, any claims for loss-of profits or revenues, loss of use of all or any portion of the Brunswick, Harris, or Mayo Plants, Roxboro Unit No. 4 or.the Roxboro Common Support Facilities, cost of capital, cost of purchased or replacement power or claims of customers of the Owners for service interruptions, or claims of customers of the Participants for service interruptions.

15.4 Indemnification Except for the liability of the Owners as provided in Section 15.1, and except with respect to the limited liability

~

of CP&L as operator as provided in Section 15.2, and except ;s otherwise expressly provided in this Agreement, (a) the Owners 15-3

hereby assume all liability with respect to the ownership of, operation and maintenance of, construction of capital adci-tions to and provision of Fuel Management Services for the Joint Facilities in proportion to their ownership interests in the Joint Facilities, and (b) the owners agree to indemnify and save harmless each other and their respective agents, servants and employees from and against all liability, losses, claims, damages, expenses (including attorneys' fees) in excess of their proportionate shares, as defined in this paragraph.

Such indemnification shall apply whether the claims involved

( be based upon contract, tort (including the owner's alleged j active or passive negligence or participation in the wrong),

l or upon any alleged breach of any duty or obligation under this Agreement on the part of the owners, their respective l agents, servants or employees or otherwise. The provisions of this Section 15.4 shall include any claims based on alleged damage to the business of any claimant.

Such indemnification shall hold harmless the Owners and their respective agents, servants and employees, in the l manner indicated above, in performing their obligations under this Agreement from and against any and all liability and any and all losses, damages, injuries, costs and expenses, in-cluding expenses incurred by an owner who is sued, its agents, servants and employees, in cor.nection with investigating any i

15-4

claim or defending any action, and including reasonable a ttorneys' fees incurred or suffered by the owner sued, its egents, servants or employees, by reason of the assertion of .

any such claim against the Owner sued, its agents, servants or employees. The Owners may assume on behalf of the Owner sued, its agents, servants and employees, at their option af ter written notification to the owner sued, the defense of any action at law or in equity which may be brought against the Owner sued, its agents, servants or employees, upon any such claim. The Owners, regardless of whether they assume the defense of any action or the Owner sued defends such action, shall pay on behalf of the owner sued, its aqents, servants and employees, the amount of any judgment that may be entered against the Owner sued, its agents, servants or employees, in any such action. The indemnification provided for in this Section 15.4, however, does not extend to conduct of either party or its respective agents, servants or employees adjudged to have caused the damage or injury by reason of willful or wanton misconduct or reckless action. The Owners agree that the obligations assumed by them in this Section 15.4 shall i be paid by them as a cost of operation and maintenance of, cost of construction of capital additions to, or cost of provision of Fuel Management Services for the Joint Facilities. Such expense shall be allocated between and borne by the Owners of 15-5

l the Joint Pacility giving rise to the expense in the same manner as the cost of operation and maintenance of, cost of construction of capital additions to, or cost of provision of Fuel Management Services for such facility is shared by the owners.

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ARTICLE 16 L RESOLUTION OF DISPUTES 16.1 Arbitration  !

l (A) Except as otherwise set forth in this Agreenent, l

l all matters under this Agreement are subject to challenge by either party. Except as provided in Section 16.l(B), any unresolved dispute arising out of or relating to matters set l forth in this Agreement shall be settled oy arbitration ir.

accordance with the procedures set forth in this Article 16, l

and judgment upon the award rendered by the Arbitrator may be entered in the Superior Court for Wake County of the State of l North Carolina or in any other state or federal court having jurisdiction thereof. In addition, . disputes relating to the l arbitration provisions of this Agreement including, without limitation, disputes as to the applicability of such provisions to a particular dispute, she * ' ba submitted for arbitration.

(B) Any disp 'Di a t sit.g out of or relating to Sec-tion 4.2 or Article 15 c << :cle 17 shall not be submitted to or determined by arbitration unlena the parties agree to do so in writing.

16.2 Arbitration Procedure l

(A)

Applicability of Provisions -- Arbitration of disputes subject to arbitration hereunder shall be conducted in i eccordance with the procedures set forth in this Section 16.2.

l-16-1 8-u

m (B) Initiation of Arbitration and Selection of 7

Arbitrator -- Arbitration hereunder shall be ini- ,

tiated and the Arbitrator selected in the' following manner:

T (1). The initiating party ( the " Initiating party")

shall.give written notice (the " Notice") to the other. party (the I '"Other Pa rty" ) of its intention to arbitrate, which Notice shall set forth the na"ure of the dispute, the . Initiating Pa rty's esti-

't I mate of the amount involved, if any, and the remedy sought. With I the_ Notice, the Initiating Party shall submit to the Other Party I in writing the names of three persons acceptable to the Initiat-

-ing Party as arbitrators, the fee arrangements required by each

, such person, and a statement that such persons have agreed to.

serve if requested.

}

(2) Within ten (10) days of its receipt of the Notice and related information, the Other Party may, if it so desires, serve on the Initiating Party an answr ring statement (the " Answering Statoment") with respect to the matters set j forth in tne Notice and shall notify the Initiating Party in 4

writing either o f its acceptance of one of tl.e, proposed arbi-trators or of its rejection of all such arbitrators'. In the event the Other Party notif  ; the Initiating Party of its ac-ceptance of one of the proposed arbitrators, such proposed arbi-trator shall thereupon become the Arbitrator.

i 16-2

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1 (3) In the event the Other Party does not accept one of the proposed arbitrators submitted by the Initiating Party as provided above and the parties are otherwise unable to agree on an Arbitrator within twenty (20) days of the receipt of the Motice by the Other Party, the Arbitrator shall be selected from among the persons on the relevant Approved Arbitrators List as hereinafter defined, in the following manner:

(a) The Initiating Party shall give five (5) days written notice of its demand that an Arbi-trator be selected from the relevant Approved Arbi-trators List, which notice shall set a day, within fourteen (14) days of the date of such notice, time and place for a meeting of representatives of the parties to nake such selection. At such meeting, which shall be held at a location in Raleigh, North Carolina (or at such other place as the parties uay designate), the parties shall strike names from the relevant Approved Arbitrators List alternately, with the Other Party striking first, until a single per-son's name remains on such list, which person shall thereupon becon.e the Arbitrator. In the event such person is unable to serve as Arbitrator, the process shall be repeated one additional time with the re-maining names on the relevant Approved Arbitrators List.

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(b) There shall be separate Approved Arbi-trators Lists for the following fields, each consist-ing of the names of not less than three (3) nor more than eleven (11) persons qualified in the field listed:

(1) Nuclear fueled electric generating plant operations and capital additions; (2) ' fossil-fired electric generat-ing plant operations and capital additions; (3) nuclear fuel procurement and management; and (4) fossil fuel procurement and management. On the First Closing Da te, the parties shall mutually agree as to the names on all' four Approved Arbitrators Lists. Each'name on each list shall require mutual confirmation of approval by the parties during the month of January each year thereafter.. No person approved or confirmed for inclu-

- sion on any such list shall be removed except (i)~upon 3

such person's demise or incaos. citation, (ii) upon such

person's request, (iii) upon such person's failure to 4

. receive such annual mutual confirmation of approval, ,

(iv) upon such person's being employed or compensated by a party other than for services as an arbitrator, I or (v) upon the mutual consent of ' the parties, tipon -

i

any such renoval, a person nutually acceptable to 3

the parties shall be named as a replacement. It is the intention of the parties that each Approved f Arbitrators List shall consist of as many persons, i-16-4

~.. , . , _ .2 _ _ . . ~ _ .,. . _ . . -,

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up to eleven, as are qualified. Accordingly, at any time any list contains-less than eleven persons, each party shall continue to seek additional quali-fled persons acceptable to the other party for in-clusion in the list.

(c) Only the Approved Arbitrators List con-sisting of ' persons qualified in the field of nuclear-fueled electric ganerating plant operations and capital additions shall be used for selection of an Arbitrator with respect to any dispute relating to operations, maintenance, modifications or additions, or 6econmis-sioning of a Brunswick Unit or a Harris Unit; only the Approved Arbitrators Lict consisting of persons quali-fled in the field cf fossil-fired electric generating plant operations and capital additions shall be used for selection of an Arbitrator with respect to'any dispute relating to operations, maintenance, modifica-tions or additions, or retirement from service of a Mayo Unit or Roxboro Unit No. 4; only the Approved Arbitrators List consisting of persons qualified in the field of nuclear fuel procurement and management shall be used for selection of an Arbitrator with respect to any dispute relating to the procurement of Nuclear Fuel Material, Nuclear Fuel Services, or Nuclear Fuel Management Servicas in connection with Reload Fuel; and only the Approved Arbitrators List 16-5

consisting of persons qualified in the field of fossil fuel procurement and management shall be used for selection of an Arbitrator with respect to any dispute relating to the procurement of Fossil Fuel Material, Fossil Fuel Services or Fossil Fuel Management Services in connection with Roxboro Unit No. 4 or the Mayo plant. In any case where either party indicates that the dispute relates both to operationn, maintenance, or additions and to the procurement of Nuclear or Fossil Puel Material, Nuclear or Fessil Fucl Services, or Fuel Manaqenent Services, with respect to either a nuclear-f ueled or a fossil-fired Unit, each party shall select an Arbitrator from either of the two relevant Approved Arbitratcro Lists and the two so selected shall select a third Arbitrator from either of the two relevant Approved Arbitrators Lists.

(4) In the event the selection procedure pro-vided for herein does not result in the selection of an Arbi-l trator within the time periods allotted, or in the event a i

designated Arbitrator fails to serve or fails to complete j his service, then either party may petition the Senior Resi-dont Judge of the Superiot Court of Wake County of the State of North Carolina for the appointment of an Arbitrator, or a 16-6

. substitute Arbitrator, and such Arbitrator.may be, but need not be, . selected from the current App' roved Arbitrators List.

(5) Upon the selection of an Arbitrator, the

' Initiating Party shall immediately notify the proposed Arbitrator of his selection by the parties to become Arbitrator of the dispute and immediately provide such Arbitrator with a copy of the Notice, the Answering Statement, if any, and a copy of this i

Agreement and the Related Agreements. . Copies of this selection notice and all correspondence and other documents relating to the arbitration between either party and the Arbitrator shall be sent to the other party to this Agreement.

(C) In' .ation and Completion of Hearings -- The Arbitrator shall initiate the hearings as promptly and expedi-tiously as possible af ter his selection (and both parties shall cooperate to this end), and shall conclude the hearings within thirty (30) days of their commencement unless the Arbitrator expressly finds that additional time is necessary for completion of the hearings for reasons in the best interest of the parties and directed toward the development of an adequate record. The-Arbitrator shall expressly designate the number of days by which the hearings shall be extended. Such extension shall be limited to the minimum amount of time which, in the Arbitrator's. judgment, is n7cessary to conclude the hearings.

(D) Time and Finality of Award -- The award of the

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Arbitrator shall be made no later than thirty (30) days from 16-7 a

the date of the- closing of hearings, and such award and any judgment thereon, entered pursuant to Section 16.1, shall be conclusive, final and binding except as 3pecifically provided in Sections 16.2(G) and 16.2(H).

(E) Location -- Unless the Initiating Party and Other Party otherwise agree in writing, arbitration under this Agree-ment shall be conducted in Raleigh, North Carolina.

(F) Applicable Rules -- Arbitration under this Agree-ment shall be governed by the provisions of the General Statutes of North Carolina relating to arbitration, as the same are in ef fect at the time the Notice is given by the Initiating Party, provided that any specific provision hereof that conflicts therewith shall govern.

(G) Vacation of Arbitration Award -- Upon application of either party to the Arbitration, an Arbitrato; *s award shall be vacated by a court where:

(1) The award was procured by corruption, fraud or other undue means; (2) there was evident partiality by an Arbitrator or corruption of an Arbitrater or misconduct prejudicing the rights of either party; (3) the Arbitrator exceeded his powers; or (4) the Arbitrator refused to postpone the hearing upon sufficient cause being shown therefor or refused to hear.

16-8

evidence material to the controversy or otherwise so conducted

-the hearing, contrary to the provisions of Chapter 1, Article 45A' of the General Statutes of North Carolina, as to pre-judice substantially the rights of either ' party.

(!! ) - Trial De Novo -- When the prevailing party to an arbitration applies to the _ court for enforcement of the arbi-tration award and the court determines that one or mc re of the following elements is present in such award, the non-prevailing party shall have the right to a trial de novo in a court of competent jurisdiction: (1) Where such award for any one pro-ceeding exceeds five million dollars (S5,000,000) against such non-prevailing party, or (2) where such award requires the per-formance by the non-prevailing party of ar.y act which (a) is not lawful, ( b) is contrary to the provisions of the non-prevailing party's security instruments, (c) violates the conditions of any governmental or regulatory approval required herein or

-jeopardizes the obtaining, retaining, transferring or amending of such governmental or reguletory approvals, (d) has the effect of interrupting, suspending or terminating operation of the Joint Pacilities or any major portions thereof for a period of at least ninety (90) days contrary to ti.a provisions of this Agreement or (e) has the ef fect of creating an Event of Default for the non-prevailing party under the terms of this Agreement.

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16.3 Court Proceedings Any dispute arising under Section 4.2 or Articles 15 or 17 shall- (unless the party af fected agrees otherwise) be resolved by a court- of 1 competent jurisdiction in- accordance with -the ' law of North Carolina.

16.4. Payment of ' Pees and Costs (A) Where no money damages are claimed 1by the party initiating the arbitration or court proceedings, the payment of the Arbitrator's fee and the cost of the arbitration or court proceedings, not including attorneys' fees, shall be borne by the' party the Arbitrator or the court rules against-unless the Arbitrator or the court. directs otherwise, in which-event the Arbitrator's or the court's allocation of said fee and costs >

shall be binding.

(R) Where money damages are claimed by the party initiating the arbitration or court proceedings or where a party seeks to vacate an arbitration award, such party shall' pay to the defending party a portion of the defense. costs, including investigations, engineering fees, attorneys' fees, expert witnesses' fees, and any other expenses of defense actu-ally incurred in regard to the particular arbitration or court-proceeding in question. Such portion of the defense costs pay- .

able shall bear the same relation to the total defense costs as.

the dollar amount of the claims of the party- initiating the pro-l ceeding which were not sustained by the Arbitrator or the court

! 16-10 1

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, ,_,-.y.. , .- ,m-.

t' bears' to ' the total dollar amount of such party's claims. Such determination shall' be made only af ter _ the entry of a decision or order no longer subject to appeal. Payment of any defense l costs to lthe defending party shall be made by the party initiat-ing 'the arb'itration or court proceeding within thirty (30) days after the defending party to be paid fuenishes such initiating party with an itemized and verified listing of-the defense costs

[- actually incurred.-

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s ARTICLE 17

. ASSIGNMENT Except as otherwise provided 'in this Article, in l Article 16 of the Sales Agreement or in Section 25.19 of this Agreement, no sale,-lease, conveyance, transfer, alienation or assignment of this Agreement, or the rights _ or obligations of -

either party hereunder, shall be made without the prior written approval of tuo other party; provided, however, that- such approval L shall not be unreasonably withheld. Notwithstanding the fore-going,- (a) CP&L.may transfer'its rights and obligations pursuann to this Agreement to any affiliate or subsidiary company W.tnout i

L such approval, and (b) either party voluntarily or involuntarily transferring its ownership interest, or a portion thereof, in'the l-Joint Facilities in accordance with the Sales Agreement or other-l wise, nay, pursuant to and in accordance with the Sales Agreement, transfer its rights and obligations hereunder to its transferee.

Any successor or assignee shall be subject to all the terms and conditions of this Agreement and, as specifically referred to i

herein, the Related'Agreementn, to the sane extent, as though such successor or assignee were an original party hereto.

No sale, lease, conveyance, transfer, alienation or assignment'of rights or obligations under this Agreement, whether to.the other owner or a third party, shall relieve the 17-1 i

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tr :eror or assignor from iull liability and financial re-sponsibility for performance af ter any such transfer, Icese or assignment of:

(1) any obligation or duty incurred by the transferor, lessor or assignor prior to such trar.afer under the terms and conditions of this Agreement or any Re2ated Agreement; or (2) any obligation or duty provided and imposed after such transfer upon such transferor, lessor or assignor under th. terms and conditions of this Agreement or any Related Agreementy unless and until the transferee, lessee or assignee shall agree in writing to assume such obligations and duties and the other Owner han consented in writing to such assumption, which consent sha!.1 not be unreas , ably withheld.

17-2

ARTICLE 18 EFFECTIVE DATE This Agreement shall become ef fective on the First Closing Date.

18-1 1

ARTICLE 19 REPRESENTATIONS,- yARRANTIES AND COVENANTS 19.1 Power Agency's Representations, Warranties and Covenants Power Agency hereby represents, warrants and covenante to 'CP&L. as follows:

4 (A) Power Agency is a body corporate and politic and an instrumentality of the State of North Carolina, duly organized, validly existing and in good standing under the 'ei of the State i of North rarolina having corporate power and authority to perform all its obligations under this Agreement and the Re3ated Agree-1-

p ments and the requisite power and authority to conduct its opera-4-

tions as they are now conducted, including, without limitation, 1

the implementation of this Agreement and the Related Agreements.

1 Power Agency shall take no action, including, without limitation, amendment to its charter or By-Laws, the effect of which would change its status as a body corporate and politic and an instru-mentality of the State of North Carolina, or which would adversely

[ affect its corporate power and authority to perform all its obli-4 gations under this Agreement and the Related Agreements, or its corporate power and authority to conduct its operations, includ-ing, without limitation, the implementation of this Agreement and.the Related Agreements. Power Agency has furnished true and attested copies of its Certificate of Incorporation and By-Laws 5

to CP&L with all amendments to date.

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(B) Exhibit SA-VII of~the Sales. Agreement pre-scribes the form of Project Power Sales Agreement which Power-Agency'will enter into with.each of its' Participants for the supply by Power Agency of capacity and energy to each such Par-ticipant, which' agreements, in the aggregate, shall be designed to' provide' Power Agency w*th funds sufficient to meet its obli-gations.under this Agreement, under the applicabic provisions of the-Power Coordination Agreement, and under the bonds or other securities or evidence of indebtedness referred to in Section l

9.3 of the Sales Agreement. In: the event Power Agency shall

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enter into a similar Project Power Sales Agreement with any other Municipal System (as defined in Section 1.40 of the Sales Agree-ment), whether before or after the First Closing Date, as provided in the Sales Agreement, Power Agency shall forthwith, upon execu-tion of said agreement by both parties, notify CP&L thereof and f urnish CP&L with a copy of such agreement together with a cove-nant not to sue, indemnification and release, as prescribed in Exhibit SA-XI to the Sales Agreement, executed by such Municipal System. Power Agency covenants and agrees that it shall fix, charge and tube all steps necessary to collect rents, rates, fees and charges for the sale of electric power and energy and other facilities and commodities sold, furnished or supplied to its-Participants at a IcVel sufficient to provide Power Agency with ,

revenues' adequate to meet its obligations under.this Agreement and

. the Rela ted Agreements, and under the bonds or other securities s

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or evidences of indebtedness referred to in Section 9.3 of the Sales Agreement, and to pay any and all other amounts payable from or constituting a charge or lien upon such revenues. To the ex-tent that revenues received by Power Agency under such Project Power Sales Agreements are insuf ficient to cover all of its obli-gations, Power Agency shall first apply such revenues to its op-i eration and maintenance expense for the Project (as defined in the Project Power Sales Agreement), including the payments for operation and maintenance and fuel owed to CP&L under this Agree-ment pursuant to Sections 9.1, 9.2 and the amounts due under Section 9.4(A). Before the remaining revenues are applied to obligations of Power Agency, other than obligations to holders of bonds, notes or other evidences of indebtedness of Power Agency and other than obligations under Power Agency's resolutions, in-dentures or other instruments securing such bonds, notes or other evidences of indebtedness to make payments into funds created thereunder, any remaining revenues shall be applied to payments due pursuant to Section 9.3 and next to amounts due under Sec-tion 9.4(B).

Each Project Power Sales Agreement shall provide t3at (1) the signatory Participant shall fix, charge and collect rents, rates, fees and charges for the sale of electric power and energy and other services, facilitier and commodities sold, furnished or supplied through its electric system at a level sufficient to provide revenues adequate to meet its obligations under such 19-3

Project Power Sales Agreement and to pay any and all other amounts payable from or constituting a charge or lien upon such revenues; (2) the signatory Participant shall take no action the effect of which would be to prevent, hinder or delay Power Agency from the timely f ulfillment of its obligations under such agreement, this Agreenent, the Related Agreements, and the bonds, other securities or evidences of indebtedness referred to in Section 9.3 of the Sales Agreement; (3) Power Agency shall have the right to terminate such agreement as to the de-faulting Participant in accordance with Section 20.2(B); and (4) upon failure of the Participant to make any payraent in full when due under the Project Power Sales Agreement or to perform any other obligation in such agreements, Power Agency shall make demand u[.on the Pa rt icipan t for payment or performance and if sa id failure is not cured within fifteen (15) days from the date of such demande it shall constitute a default at the expiration of such period and notice of such event of def ault shall be given to the Participant. Each such agreeraent shall f urther provide that it shall not be amended or rescinded with respect to the provisions specified in clauses (1) through (4) of this Section 19.l(B) without the prior written consent of CP&L.

(C) Except as provided in the Project Power Salen Agreements or Section 20.2(B), Power Agency shall continue each of such agreements in full force and effect and shall enforce 19-4

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all such agreements in accordance with their terms, as amended from time to time. The parties agree and acknowledge that the.

violation of the obligations of_ Power Agency under this Section 19.1(C) would cause irreparable injury to CP&L and that.the remedy at law for any violations or threatened violations thereof would be inadequate, and agree that if an " Event of Default" by Power Agency as defined in this Agreement or the Related Agree-

.nents shall have occurred and shall not have been fully cured, CP&L need not prove the inadequacy of legal remedies in order to

.become entitled to a temporary or permanent injunction or other equitabl relief specifically to enforce such obligation.

(D) Each Project Power Sales Agreement and each Sup-d plemental Power Sales Agreement (as described in Section 26.l( A) of the Power Coordination Agreement) shall provide that the charges which Power Agency makes to each Participant thereunder shall be separately identified on the monthly billings to the

' Participant and that the revenues received in any month from a ,

Participant making less than full payment of such billings shall be applied pro rata to the separate charges under each agreement in the ratio that each separate chargu bears to the total monthly bill rendered.

(E) The charges which' Power Agency makes to each Participant pursuant to its Project Power Sales Agreement as ,

l described in the Sales Agreement and its Supplemental Power 19-5

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t- a Sales - Agreement as described in Section 26.'l( A) of the Power

- Coordination : Agreement shal1~ be separately identified on the f - monthly billings ~ to eachi Participant and the revenues actually p received in any month from a Participant making less than full payment of suchL billings shall be applied pro rata to the i

separate charges in the rotio that each separate ch.:ge bears to the total monthly bill rendered; the resulting amounts shall be. credited to the appropriate accounts on the books of

-Power > Agency and shall be applied solely ' to the separate obli-gations of Power Agency which were the basis for the separate charges on the billings.

(F) Power Agency shall not create any lien in favor of any third party in any of- the revenues it receives from Partic i-pants under the Project Power Sales Agreaments which is superior in right of payment tc the right of CP&L to receive payments for costs of operation and maintenance and fuel pursuant to Sec-

, -tions 9.1 and 9.? and the amounts payable under Section 9.4(A).

With respect to CP&L's right to receive payment pursuant to Sections 9.3 and 9.4(B), Power Agency shall not create liens i

i or obligations superior in right of payment to that of CP&L L - . .

[ other than liens in favor of any holder of any bond, note or e

other evidence of indebtedness of Power Agency or other than obligations to nake payments into funds created by Power Agency's resolutions, indentures or other instruments secur-inq such bonds, notes or other evidences of indebtedness.

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(G) Power Agency shall immediately notify CP&L'of any-i default under or breach of any Project Power Sales Agreement

! itate which it has entered with ary Participant, specifying the nature of such' breach, the parcy so breaching and any action taken or proposed to be taken with respect thereto.

(H) The execution.and delivery of this Agreement and

the Related Agreements by Power Agency have been duly and effec-tively authorized by all requisite action by Power Agency.and the provisions thereof comply with the General Statutes of North Carolina and do not violate any provision thereof.

(I) The execution and delivery of the covenant not to sue, indemnification and release, substantially in the form

(

prescribed in Exhibit SA-XI of the Sales Agreement, by Power Agency and each Participant have been duly and effectively autho-rized by all requisite action.

19.2 General Covenant by the Parties l

! (A) Each party covenants and agrees that if any event

! shall occur or condition exist which constitutes, or which after I

notice, lapse of time, or both, would constitute an Event of Default on its part pursuant to Section 20.1, it shall immedi-ately notify the other party thereof, specifying the nature thereof and any action taken or proposed to be taken with

respect thereto.

19 't

-l (B) Power' Agency covenants and agrees that it shall promptly furnish CP&L a copy of any notification to a Participant of an '" event of default" .by such Participant under the provisions

of a . Project Power -Sales Agreement.

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ARTICLE 20 DEFAULT 20.1 Events of Default The following shall be " Events of Default" under this Agreement:

(A) Failure'by either'Ouner to nake any payment to the other Owner. (including without limitation payments to CP&L' acting as operator) required under this Agreement within sixty (60) days af ter the date on which such payment becomes due, or failure by CF&L to give any credit to Power Agency required under this Agreement for a period of sixty (60) days after the date on which such credit becomes due; provided, however, that neither party shall be in default if the amount it owes hereunder to the other party can be offset in whole, within sixty (60) days after the date on which such amount became due and payable, by sums owed to it by such other party under the Power Coord.ination Agreement.

(B) Willful failure by CP&L to perform its obliga-tions with respect to operation and maintenance of the Joint Facilities or any portion thereof, for a period of ninety (90) days.

(C)(1) The insolvency, bankruptcy, or equivalent

t. ereof, of Power Agency or CP&L or either party's inability or a,. nission in writing of its inability to pay its debts as they mature, or the making of a general assignment for the benefit of, l

20-1 I

l or entry into any composition or arrangement with, its creditors; ,

t or (2) Either party's application for, or consent (by. admission of material allegations of a petition or e-therwise) to, the appointment of a receiver, trustee, or liquidator for such party, or for all or substantially all of such party's as-

! sets, or either party's authorization of or consent to such ap-L plication or' the co;omencement of any proceedings seeking such appointment against it without such authorization, consent or application, which proceedings continue undismissed or unstayed for a period of one hundred eighty (180) days; or (3) The authorization or filing by Power Agency or

! CP&L of a voluntary petition in bankruptcy or application for, or consent (by admission of material allegations of a petition or otherwise) to, the application of any bankruptcy, reorgan aa-tion, readjustment of debt, insolvency, dissolution, liquidation, or other simit.r _aw of any jurisdiction, or the institution of such proceedings against Power Agency o,r against CP&L without such authorization, application, or consent, which proceedings remain undismissed or unstayed for ninety (90) days, or which result in an adjudication of bankruptcy or insolvency within such time.

(D) Failure by an Owner, under Section 2.3(L) to enter into an agreement relating to the costs of a capital addi-tion or its failure to make payments under the terms thereof.

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20.2 CP&L's Rights on Default of ' Power Agency Whenever any Event of Default by Power Agency referred to in Section 20.1 shall have occurred and shall not have been fully cured, CP&L shall have the following rights:

(A) CP&L shall have the right to reduce the amounts in the Working Capital Fund and the Capital Additions Advance Fund attributable to Power Agency by the amounts required to cure the default.

(B) If a Participant defaults under a Project Power Sales Agreement, (1) Power Agency may terminate service under

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its Project Power Sa) es Agreement with the defaulting Partici-pant or (2) 4' .ch default by a Participant causes Power Agency to be in Jefault a 'ar this Agreement for a period of one (1) year, CP&L shall have the right to demand that Power Agency.

terminate service under its Project Power Sales Agreement with the defaulting Participant. In such event, Power Agency shall forthwith notify the Part cipant of srch termination. In the event a Project Power Sales Agreement is terminated pursuant to this Section 20.2(B), CP&L agrees to serve the defaulting Pa r-ticipant if requested to do so by such Participant; but if such Participant is not directly served from the CP&L Transmission System, it shall .be the responsibility of such Participant to make arrangements for the delivery of elec

• ric service supplied by CP&L. Such service shall be at CP&L's wholesale rate in 20-3

ef fect at the time of the termination if there is such a rate then on file with the appropriate regulatory agency which is applicable by its terms to the defaulting Participant or, if there is no such rate on file, at the all-requirements rate being charged the Participant by Power Agency immediately prior to the termination of the Project Power Sales Agreement. CP&L may at any time and from time to time thereafter, if it so elects, file and place into effect pursuant to Section 205 of the Federal Power Act any superseding rate, charge, fee or any other term or condition for service to such Participant.

(C) If an Event of Def ault of Power Agency shall have continued for a period of at least one (1) year, CP&L may exer-cise any or all of the following rights:

(1) With regard to the Joint Facility af fected by the Event of Default, (a) to terminate this Agreement; (b) to terminate its responsibility for the Fuel Procurement Function for the Joint Facility af fected; and/or (c) to terminate its responsibility for the operation and maintenance function for the Joint Facility affected.

In the event CPt.L elects not to continue operating such Joint Facility, CP&L shall have the right, subject to any regulatory or governmental restrictions, to abandon that portion of the Joint Facility affected which it is no longer operating.

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(2) With regard to all of the Joint Facilities, to terminate thisLAgreement upon one (1) year's written notice.

During the -one (1) year period between such notice and the termi-nation date, CP&L and Power Agency shall undertake Jgood faith negotiations for a new operating and. fuel agreement to replace this Agreement following its termination.

20.3 Power Agency's Rights on Lefault of CP&L (A) Whenever any Event of Def ault of CP&L referred to in Section 20.l(A) or 20.l(C) shall have occurred and shall not have been fully cured, Power Agency shall have the right to sell the Purchased Capacity and Purchased Energy which CP&L otherwise would purchase pursuant to Article 9 of the Power Co-ordination Agreement to another entity. If Power Agency elects to make such a sale, it shall give CP&L at least thirty (30) days notice thereof and shall make diligent efforts to obtain the best price available. Such sale shall be for the account of CP&L and shall terminate when CP&L shall have fully cured the default.

If the amount paid by the other entity for such capacity and energy is less than the amount which CP&L woul'd have paid to Power Agency therefor, CP&L shall pay the dif ference to Power Agency upon being notified thereof by Power Agency. Said payment shall be.made in accordance with Article 16 of the Power Coor-dination Agreement.

(B) Whenever the Event of Default or CP&L referred to ,

in Section 20.l(B) shall have continued for a period of at 20-5 w e -

y -- _ ___ -- __ - - . _ - - _ _ - _ - . - _ - - - _ - - _ - - . - - _ - - - - - - - - - . - - - -_. --

least.one (1) ' year, Power Agency may exercise any. or all of the following rights:

(1) With regard to the Joint Facility affected by the Event of Default, (a) to terminate this Agreement; (b) to terminate any portion of CP&L's respon-sibilities under thiaf Agreement with respect to operation and-maintenance, or procurement of Nuclear or Fossil Fuel Material, Nuclear or Fossil Fuel Services or Fuel Management Services for the Joint Facilities; (c) to continue to operate the Joint Facilities af fected by the Event of Default with its own forces or with a substitute entity of its choosing to act as operator. In such case, CP&L shall not object to Power Agency's succeeding to the rights of CP&L under such portions of all contracts with suppliers, contractors, and subcontractors; provided, however, that if Power Agency so elects to operate the Joint Facility affected, as set forth in this Section'20.3(B), CP&L shall have the right to continue to dispatch the Output of such Joint Facility in accor-dance with Article 3 of the Power Coordination Agreement.

(2) With regard to all of the Joint Facilities, to terminate this Agreement upon one (1) year's written notice.

During the one (1) year period between such notice and the termi- t nation date, Power Agency and CP&L shall undertake good faith negotiations for a new operating and fuel agreement to replace 20-6

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i-l this Agreement followiig'its termination.  ;

! 20.4 Disputes Concerning Default _

i In the event that' e'.ther Owner or CP&L as operator ch'all dispute an asserted default by it, then such party shall pay the disputed payment or perform the . disputed obligation, but may do so under protest. The protest shall be in writing, shall precede or accompany the disputed payment or performance of the disputed obligation, and shall specify the reasons upon which the protest is based. In the event it is determined that the protesting party is entitled to a refund of all or any portion of a disputed payment or payments, or is entitled to reimburse-ment of th'o cost of performing a disputed obligation theretofore made or performed, then the protesting party shall be reimbursed such-amount with simple interest calculated at the Compensatory In terest Ra te.

20.5 Additional obligations

, (A) With respect to either party as to which an Event of Default has occurred, such party shall make all reason-able ef forts to take any and all such further actions and shall execute, and file where appropriate, any and all such further

, legal documents and papers as may be reasonable under the cir-

[ cumstancen in order to facilitate the carrying out of this Agreement or otherwise ef fectuate its . purposes including, .bu t

'not limited to, action to seek any required governmental or i

(

20-7

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regulatory approval and to obtain any other required consent, release, amendment, or other similar 1cgal documents.

(B) The parties agree not to taka any action, or otherw.ao connent to any agreement or amendments to any agree-ment, which would prohibit, or the purpose of which in to make illegal or to prevent, hinder or delay, the taking of any action contemnlated by thin Agreement in the event of a default.

20.6 Injunctive Relief The partien agree and acknowledge that the failure to perform any of their obligations under thin Agreement, in-cluding the execution of legal documents which may be reason-ably requested an set forth in this Article 20, would cause irreparable injury to the other party and that the remedy at law for any violations or threatened violations thereof would be inadequate, and agree that the other party shall be entitled to a temporary or permanent injunction or other equitable relief specifically to enforce such obligation without the necessity of proving the inadequacy of its legal remedies.

20.7 tio Remedy Exclusive No remedy conferred upon or reserved to the partics in thin Article 20 in intended to be exclusive of any other

, remedy or remedien available hereunder or now or hereaf ter existing at law, in equity, by statute or otherwise, but each

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i

! and every. such_ remedy shall be cumulative and shall be in addition to every other such' remedy. The pursuit by either party of any

.pecific remedy'shall not be deemed to be an election of that '

remedy to the exclusion of any other or others, whether provided f hereunder or by law, equity, statute or otherwise.

20.8 Waivers No waiver of any default or Event of Default hereunder shall extend to or af fect any subsequent default or Event of u Delault or shall impair any rights or remedies consequent thereon.

No delay or omission to exercise any remedy available upon any Event of Default shall impair either party's right to exercise such remedy or shall be construed to be a waiver thereof, but any such remedy may be exercised from time to tine ar.d as of ten as l may be deemed expedient. In order to entitle each party to exer -

l l clue any remedy conferred upon or reserved to it in this Article 20,-it shall not be necessary to give any notice, other than

[ such notice as may be expressly required by this Agreement.

20.9 Agreement to Pay All Coste to Cure Default I

(A) Simple interest shall accrue on any amount in de-fault at the Incentive Interest Rate.

(B) . If any Event of Default should occur and a party l

l not in default should employ attorneys or incur other expenses for the collection of any payment or the enforcement of perfer-  ;

mance or observance of any condition or obligation on the part l of a defaulting party, or for the exercise of any other remedy l

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hereunder, the defaulting party agrees that it shall on demand therefor reimburse the other party for its reasonable expenses for such attorneys and such other expenses so incurred. No default shall be deemed cured until all costs payable under this Article 20, including any attorneys' fees incurred by the party not in default, and payments , Wsuant to this Agreement shall have been paid or reimbursed.

(C) If CP&L exercises its option not to operate any of the Joint Facilities pursuant to Section 20.2(C), Powe r Agency agrees that it shall be liable for payment of any costs incurred by CP&L as a result of cancellation of contracts or ordern for equipment, materials and services relating to that Joint Facility.

20.10 Regulatory Approvals Power Agency agrees to obtain all regulatory approvals required and take all other necessary steps in order to relieve CP&L of all responsibility for the operation of the Joint Facility af fected by the Event of Default in the elent CP&L's operation and maintenance function is terminated pursuant to Section 20.2(C).

All such steps shall have been taken and such approvals shall be obtained and be in ef fect as of the ef fective date of termination.

In the event any necessary step, for any reason, has not been or cannot be taken, or in the event any required approval, for any reanon, has not been or cannot be obtained by the effective date 20-10 I

1 l

l of termination, CP&L shall have the right to cease operating the Joint Facility af fected, and Power Agency shall hold CP&L free and harmless from any cost, expense, damage or loss resulting f rom CP&L's decision to cease operations.  !

l 20.11 Notice and Opportunity to Cure as Conditions Precedent j

g InvoRTng nemedies In the event either party wishes to invoke the remedies provide'd for in Sections 20.2 and 20.3, i t must give written l notice to the other party that an Event of Default has occurred, l

specifying the Event of Default involved, and the other party shall then have thirty (30) days to cure such Event of Default l before any remedy may be invoked.

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20-11

ARTICLE 21 TERM OF AGREEMENT 21.1 General (A) Unless sooner terminated pursuant to Article 13 or 20, this Agreement shall continue and remain in full force and ef fect until all costs associated with decommis-sioning or' retiring the Joint Facilities and with back-end services (referred to in Section 1.44(7)) are paid or provi-sion made therefor which is agreed to by the Owners and CP&L as operator. Notwithstanding termination of CP&L's respon-sibilities hereunder, CP&L shc11 continue to dispatch each of the Joint Facilities purnuant to the terms of the Power Co-ordination Agreement in which event the fee provided by Sec-tion 7.11(A)(3) shall be paid by Power Agency.

(D) Upon termination of CP&L's responsibilities under i

this Agreement, CP&L shall retain all books and records relating '

to the operation, maintenance and fueling of, and capital addi-

! tions to, the Joint Facilities for such period of time as is i

i then required by any regulatory o governmental authority. Upon the expiration of that time, CP&L shall offer such books and

, records to the then operator (if any) of the Joint Facilities.

In the event the then operator of the Joint Facilities declines to accept any or all of such books and records, CP&L may dispose of any books and records remaining in its custody.

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l' 21.2 Return of Working Capital Fund and Capital Additions

Advance Fund r

-(A) Prior to the ef fective date of any termination

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of this Agreement, Power Agency shall satisfy all financial ob-ligations due and owing.to CP&L. In the event any balance remafas outstanding and payabic to CP&L under this Agreement or the Power Coordination Agreement (af ter giving effect to any amounts due and payable to Power Agency from CP&L) upon the ef fective date of termination, CP&L shall be entitled to reimbursement therefor from the Working Capital Fund or from the Capital . Additions _ Advance Fund. If such funds are inadequate to meet Aower Agency's finan-cial obligation to CP&L, any balance remaining payable to CP&L nhall be paid to CP&L forthwith. Any excess remaining in such I

funds shall be returned to Power Agency, including accrued inter-L est as set forth in Section 8.5.

(B) Any balance remaining in the Working Capital Fund or the Capital Additions Advance Fund shall be paid no later than j six (6) months from the effective date of termination.

(C) Notwithstanding any of the foregoing, CP&L shall not be obligated to return any portion of the Working Capital p Fund or the Capital Additions- Advance Fund to Power Agency as long as any regulatory or governmental authority imposes any duty on CP&L with regard to this Agreement, the Joint Facilities or any part thereof, except in CP&L's capacity as an Owner, t ,

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21.3 Costs of Termination CP&L shall submit a monthly statement to Power Agency covering the costs of termination, and payment therefor shall be due and payable an of the date of such statement. Any such costs payabic by Power Agency shall be considered operation and main-tenance coste in accordance with Section 9.1. Simple interest shall accrue at the Late Payment Interest Rate on any payment due but not received within fif tcon (15) days from the date of the statement. Unless full payment of any amount due hereunder is received within sixty (60) days of the date payable, the party l failing to make the payment due shall be in default and the pro-visionn of Article 20 shall apply.

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ARTICLE 22 R RETIREMENT DECOMMISSIONING O_R 22.1 General The Owners may, at any time, agree to decommission or retire one or more of the Joint Facilities, or any Unit thereof. Either Owner may require that the question of whether or not to decommission or retire be submitted to arbitration pur-cuant to Article 16. If such issue is submitted to arbitration, the Arbitrator shall consider economic and any other relevant factors in making his decision.

22.2 Costs of Decommissioning or Retirement The Owners shall bear all costs incurred for decom-missioning or retirement in proportion to their respective owner-ship interests in the Joint Facilities for whatever period of time is necessary, whether pursuant to regulatory requirements or otherwise, to complete the de commissioning or retirement pro-cess so that no furthoc expenditure of funds is required. Decom-missioning or retirement costs shall include, but not be limited to, any costs which must be provided for in advance of decommis-sioning or retirement, and any costs which are incurred during or af ter decommissioning or retirement, whether such costs result from regulatory requirements or otherwise. If decommissioning or retirement costs must be provided in advance of decommissioning or retirement, it shall be the responsibility of each owner to 22-1

take appropriate measures to collect such costs and each owner shall hold the funds so collected by it until there is a reques t for payment of decommissioning or retirement costs.

22.3 Decommissioning Agreement After the decision to deconmission the Brunswick Plant or the IIarris Plant or a Unit thereof has been nade, the owners stall arranqe, pursuant to an agreement (the " Decommissioning Agreement") separate from this Agreement, to carry out the decommissioning of one or both of these Plants, or Units, by CP&L or by other qualified engineers and/or contractors.

Such agreement shall contain the provisions set forth in Sec-tion 22.2. If CP&L is to carry out the decommissioning, the Decommissioning Agreement shall contain the provisions of Article 15 and Section 25.11(c) and the provisions of the Sales Agreement with respect to CP&L acting as project manager and shall contain no provision which is inconsistent with any term of this Agreement or the Sales Agreement with respect to CP&L acting as project manager.

22.4 Repurchase In the event one or more of the Joint Facilities or Joint Units is decommissioned or retired, CP&L shall have the right of first refusal to purchase any materials, parts, supplies or other facilities therefrom. The proceeds of such sale to CP&L, or of any sale to any other entity, shall be credited to the.

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I owners in accordance with their respective ownership interests j

in the af fected Joint Pacility or Joint Unit.

i 22-3

APTICLE 23 ACCESS TO BOOKS AND RECORDS 23.1 Access to CP&L's Books and Records During normal business hours and subject to conditions consistent with the conduct by CP&L of its regular business cf f airs and responsibilities, CP&L shall provide Power Agency, or its authorized representatives, with access in a timely man-ner to those of CP&L'a books, records and other documents which are in the possess'on of CP&L or which can be made available by CP&L, and, upon request, copies thereof, which set forth (a ) ma t-ters including costs and methods of cost allocation applicable to the transactione deceribed in this Agreement to the extent necessary to enable Power Agency to verify the costs for which it is billed pursuant to the provisions of this Agreenent; (b) matters relating to the transactions and duties of CP&L de-scribed in this Agreement; and (c) matters relating to dealings in regard to this Agreement between CP&L and any regulatory body or governmental agency. Such right of access shall not include any internal audit reports or documents prepared by CP&L's inter-nal audit staf f or any books, records or other documents subject to a valid claim of privilege by CP&L. Power Agency shall main-tain the confidentiality of any non-public information obtained through such access and shall not disclose any such information except as required by law.

1 23-1 l 1

Power Agency shall bear the costs incurred by CP&L as a result of providing the access to information, documentary ma-teria'Is or presentations to which Power Agency is entitled under this ' Article 23; provided, however, that where the inforns*. ion or documentary materials involved are already available in the form provided to Power Agency, the costs associated with the accumulation and preparation of such information or materials, including the cost of one copy of such documentary materials, shall be deemed a cost of operation and maintenance.

CP&L need not make available to Power Agency any reports or information relating to personnel matters, staffing or labor relations connected with the operation, maintenance and fueling of and capital additions to the Joint Facilities, or any books, records or other documents that are subject to a valid clain of privilege by CP&L. Any payroll information made available to Power Agency shall be provided in a form which protects the identity of individuals.

23.2 Additional Materials to to Provided to Power Agency (A) CP&L shall:

(1) Make Power Agency aware of any actual litiga-tion relating to the operation, maintenance or fueling of and capital additions to any Joint Facility known to CP&L if in CP&L's opinion such litigation is likely to result in liability.

of, or cost to, Power Agency; and i

23-2

(2) Make Power Agency aware of any claim reported to any insurer of the Joint Pacilities and known to CP&L's Man-ager of Insurance (or any successor entity with equivalent responsibilitieu) or any uninsured claims exceeding S100,000 known to CP&L's Geacral Counsel (or any successor office with equivalent responsibilities) when auch insured or uninsured claims relate to the operation, maintenance or fueling of or capital additions to any Joint Facility.

23.3 Additional Rights of Power Agency In addition to the rights of access and review described in this Article 23 and in other provisions of this Agreement and the Related Agreenents, Power Agency shall have the follow-ing rights:

(A) The right to review and audit primary books of account maintained by CP&L; and (B) The right, upon Power Agency's request, to meet at a mutually agreeable time and place with appropriate personnel of CP&L to review, discuss, clarify or supplement in fo rma tion supplied to Power Agency by CP&L concerning the operation, main-tenance or fueling of, or capital additions to the Joint Facili-ties. The timing and frequency of such meetings shall be subject to reasonable conditions consistent with the conduct of the regu-j lar business affairs and responsibilities of CP&L.

23.4 Access to Power Agency's Books and Records During normal business hours and subject to conditions consistent with the conduct of its regular business af f airs and 23-3

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, 1 responsibilities, Power Agency shall provide CP&L, or its other .

authorized rt resentatives, with access in a timely manner to <

such books, records and other documents, pertaining to the obli-gdtions of Power Agency under this Agreement, which are in the possession of Power Agency or which can be made available by Power Agency. CPAL shall maintain .the confidentiality of any non-public information obtained through such access and shall not dicciose any such information except as required by law.

CP&L shall bear the costs incurred by Power Agency as a result of providing the access to information, documentary materials or presentations to which CP&L is entitled under this Article 23; provided, however, that where the information or documea-t tary materials involved are alreaay available in the form pro-vided to CP&L, the costs associated with the accumulation and preparation of such information or materials, including the cost of one copy of such documentary materials, shall be a cost of operation and maintenance.

Power Agency need not make available to CP&L any reports or information relating to personnel matters, staf fing or labor relations relating to Power Agency, its own staff or any other organization performing a staff function for Power Agency on a continuous basis or make available any books, rec-or'ds or other documents that are subject to a valid claim of privilege.

23-4

<< s CP&L shall rot have a right of access to any internal cudit reports or documents prepared by the staf f of Power Agency or by any other organization performing a staff function for Power Agency on a continrous basis.

23-5

ARTICLE 24 ASSISTANCE BY CP&L IN AGENCY FINANCINGS 24.1 Assistance CP&L shall provide such assistance as hereaf ter set forth in this Article 24 as Power Agency may reasonably re-quire in connection with the issuance or sale by Power Agency of any bonds, notes or other evidences of indebtedness, whether public or private (including, without limitation, revolving or other credit facilities) for the purpose of financinq capital additions to the Joint Facilities.

24.2 Reports CP&L agrees that in connection with such issuance or sale, it shall make available to Power Agency, to the managing underwriters of any such issuance or sale and to any other financing entity involved in such issuance or sale (a) approprl-ate information relating to the Joint Facilities and (b) i n fo r-mation relating to such capital additions including, but not limited to, a current architectural and construction engineering report with respect to such capital additions to the Joint Facilities, prepared by CP&L, setting forth the design of such capital additions, a description of such capital additions, the status of engineering, desion and construction of such capital additions, the status of any required licenses and

! permits, an estimate of construction costs and the construction )

i schedule related to such capital additions and an updated I

24-1

summary of actual or potential litigation, defects in construc-tion, major licensing or other problems and controversies then known to CP&L's management, as defined in Section 12.l(B)(3) of the Sales Agreement, which in their judgment could af fect the fueling or operation of the Brunswick Plant or Roxboro Unit No. 4 or the Construction, Initial Fueling or placing into Commercial Operation of the liarris Plant or the Mayo Pla n t , or any portion thereof, or the cor.struction of capital additions to the Joint Facilities or the rights or obligations of Power Agency arising under this Agreement. When appropriate, the report shall also include a description of CP&L's utility business and a factual outline of its experience in the opera-tion of nuclear-f ueled and coal-fired generating facilities.

Such report may be used as an exhibit to, or otherwise in sup-port o f, any of ficial statement prepared by Power Agency in con-nection with the issuance or sale by Power Agency of the obliga-tions described in Section 24.1. Such report shall be in-such detail as is customary in similar financings by municipal power agencies or comparable entities.

24.3 Senior Personnel CP&L, at the request of the managing underwriters oc any other financing entity involved in the issuance or sale by Power Agency of the obligations described in Section 24.1, .

shall make available in connection with any such issuance or sale at least one of its senior personnel who is knowledgeable 24-2

about the operation of and capital additions to the Joint Facilities to assist Power Agency and its underwriters or any other financing entity involved in such issuance or sale (a) in the preparation of any of ficial statement or report; provided, however, that such casistance and preparation shall be limited to matters relating to the information in the report furniched pursuant to Section 24.2; (b) at the due diligence meetings with the underwriters or their representatives; and (c) at information meetings with potential investors or lenders. such assistance shall be provided at such times and from time to time, and at such places, as shall be reasonably requested by Power Agency, the managing underwriters or any other financing entity involved in such issuance or sale.

24.4 Certification of Information by CP&L (A) CP&L shall certify and represent as true, sub-ject to any qualification containc6 in suen certification, any information contained in the report referrod to in Section 24.2 supplied by CP&L to Power Agency, to the managing underwriters or to any other financing entity involved in the 2ssuance or sale by Power Agency of any of the obligations dc scribed in Section 24.1 in connection with such issuance or sale by Ibwer Agency, and CP&L shall state that the statements in such report which purport to be statements of f act are true and correct in all material respects and such report does not omit to state any material fact necessary to nake such report not 24-3

misleading in the light of the circumstances under which it was furnished. Such certification and representation shall, upon request of the managing underwriters or any other financ-ing entity involved in such issuance or sale, be embodied in a letter of representation addressed to such managers on behalf of the underwriting syndicate or to such other financing entity.

(B) CP&L shall also, upon request, furnish an opinion of counsel for CP&L, addrensed to the managing underwriters or to any other financing entity involved in the issuance or sale by Power Agency of any of the obligations described in Section 24.1, to the same effect as the opinions required by Sections 3.2(C)(1), 3.2(C)(2) and 3.2(C)(3) of the Sales Agreement, and to the further ef fect that the execution and delivery of the letter of aepresentation referred to in Section 24.4(A) have been duly and effectively authorized by all requisite corporate action.

24.5 Liabil;[y and Costs Any liability which CP&L may have to Power Agency, to members of the underwriting syndicate of any securities or to any other financing entity involved in the issuance or sale by Power Agency of any of the obligations described in Section 24.1, by reason of any minstatement of material facts or omis-sion of material facts by CP&L in the information furnished pur-suant to Section 24.2, shall be borne by CP&L, subject to any l

24-4

rights of contribution to which it may be entitled by law, and chall not be a cost reimbursable by Power Agency under this Agreement. For purposes of the preceding sentence, CP&L's lia-bility shall include the costs of its- defense of any lawsuit in-volving the subject matter of such sentence, whether or not CP&L prevails in such defense, but CP&L shall be held harmless against cny and all claims against CP&L including reasonable attorneys' fees resulting from any misleading, improper or erroneous use of such information by Power Agency, the underwriters or any other financing entity. Power Agency shall also hear all other costs of CP&L's performance under this Article 24, excepting, however, any liability resulting from any intentional misstate-ment by CP&L of a material fact or the intentional omission by CP&L of a material fact necessary in order to make such infor-mation provided under this Article 24, in the light of the circumstances under which it was furnished, not misleading.

24-5

ARTICLE 25 MISCELLANEOUS 25.1 CP&L's Discharge of Obligations (A) In performing its functions and obligations under this Agreement, CP&L shall act in accordance with CP&L Operating Practice in a timely manner.

(B) In the performance of its obligations under this Agreement, CP&L shall not engage in a pattern of adverse distinc-tion against, or a pattern of undue discrimination against, the Joint Facilities.

25.2 No Delay No disagreement or dispute of any kind between the parties to this Agreenent or between either party and any other entity, concerning any matter including, without limitation, t

the amount of any payment due from said party or the correctness l of any billing made to the party, shall permit the said party, or either of them, to delay or withhold any payment or the l

performance by either party of any other obligation pursuant to this Agreement. Each party shall promptly and diligently under-l take to resolve such disagreement or dispute without undue delay.

25.3 Further Documentation l From time to time af ter the execution of this Agree-ment, the parties shall within their legal authority execute any 1

i other documents as may be necessary, helpful or appropriate to l

carry out the terms of this Ayreement.

25-1 i

F 25.4 Notice Any notice, consent or other communication permitted or required by this Agreement shall be in writing and shall be deemed given when delivetcd by hand or (unless otherwise re-quired by the terms of this Agreement) when deposited in the United States mail, first class postage prepaid, and if to CP&L, addressed to:

Vice President - Power Supply Carolina Power & Light Company P.O. Box 1551 Raleigh, North Carolina 27602 and if to Power Agency, addressed to:

General Manager North Carolina riunicipal Power Agency Number 3 c P.O. Box 95162 Raleigh, North Carolina 27625 unless a different officer or address shall have been designated by the respective party by notice in writing.

25.5 lieadings Not to Affect Meaning The descriptive headings of the various Articles and Sections of this Agreement have been inserted for convenience of reference only and shell in no way modify or restrict any of the terms and provisions hereof.

25.6 Amendments This Agreement or any Exhibit hereof may be amended or supplemented by and only by a written inctrument duly execu-ted by each of the parties.

25-2 L

25.7 No Partnership; Tax Matters Notwithstanding any provision of this Agreement, the parties do not intend to craate hereby any joint venture, part-nership, association taxable as a corporation, or other entity t

for the conduct of any business for profit, and, if it should appear thct one or more changes to this Agreement would be re-quired in order not to create such an entity or relationship, the parties agree to negotiate promptly in good faith with respect to such changes. Upon the request of a party, the other party agrees to take, in a timely manner, all voluntary action as inay be necessary to be excluded from treatment as a partner-ship under the Internal Revenue Code of 1954, as amended. Upon the request of a party, the other party agrees to take, in a timely manner, all voluntary action as may be necessary to obtain a ruling from the Internal Revenue Service (a) that no association taxable as a corporation has been created by this Agreement or the Related Agreements; (b) that neither thiu Agreement nor the Related Agreements would cause the loss of .

r the tax exempt status of the bonds of Power Agency; and (c) that is satisfactory to CP&h relating to the income tax treatment of Power Agency's advances for Puel Material, Fuel Services and Reload Fuel.

25.8 Successors and Assigns This Agreement shall inure to the benefit of and be binding ul.on the parties and their respective successors and 25-3

, . - _ _ _ _ _ - _ _ = _ _ _ _ -

assigns. No thing in this Agreement, express or implied, is in-tended to confer upon any other person any rights or remer* *.es hereunder.

25.9 . Counterparts This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same inetrument.

25.10 Incorporation of Exhibits Exhibits UFA-I through OPA-XI attached to this Agreement are incorporated in and are part of this Agreement.

25.11 Sevarability of provisions (A) Generally -- In the event a court or other tri-hunal of competent jurisdiction at any time holds that any pro-vision of this Agreement is invalid, the remainder of this Agreement shall not be affected therchy and shall continue in full force and effect.

(B) Specifically as to Article 15 -- In the event n court or other tribunal of competent jurisdiction at any time holds that any provision of Article 15 is invalid, (1) the re-nainder of Article 15 shall not be af fected thereby and shall continue in full force and offect; and (2) to the extent that the. subject matter of such invalidated provision is not governed by the remainder of Article 15, said subject matter is to be conntrued in' light of the agreement of the parties that .the 4 25-4

.i t

amounts payable to CP&L for its performance under this Agree-ment have been determined on the basis of the intention of the parties that, except with respect to (a) the limited liability ,

of CP&L to restore, repair or replace as specifically provided

! for in Section 15.2, (b) CP&L's liability under Sections 4.2, 4.3 and 4.4 in using the spent fuel capability at the Brunswick Plant and the Harris Plant for other than Brunswick and Harris i fuel, (c) CP&L's liability under Section 24.5, ano (d) the lia-bility of the owners for certain spent fuel specified in Sec-tion 3.3, the expense of any and all claims against, or unin--

'sured loss or damage to, CP&L or Power Agency 'as Owners arising out of, connected with, occasioned by or resulting from this Agreement or any activities hereunder, including, but not limited l to, activities by CP&L in its role as operator, shall be borne by the Owners as a cost of operation and maintenance as set forth in Section 15.1.

(C) Renegotiation -- In the event any provision of this Agreement is so held invalid, the parties shall promptly renegotiate in good faith new provisions to restore this Agree-l ment as nearly as possible to its original intent and effect.

In this connection, the parties recognize that they have bar-  !

l gained at arm's length in good faith and on equal terms for i t economic benefits to each party, which are closely interrelated and which produce an overall result which is considered by the  !

parties to be-just-and reasonable. In recognition thereof, if l -.

25-5 l

. _ . - _ . __ _ ,_ . - . _ , . . . , .J

any provision of this Agreement is held invalid, and such hold-ing alters the economic benefits flowing to either party, the parties' renegotiation shall attempt to restore the overall economic benefits to each party to the levels provided for in the Agreement as originally executed. If either party concludes i

j that such renegotiations have failed, or will fail, to produce l the objective of restoring economic benefits to the levels ori-ginally provided for, such party may institute arbitration pro-coedings-in accordance with Article 16, the issues at such l

l arbitration being limited to the means by which such restoration ,

l l

of original economic benefits should be accomplished and shall not involve any issues as to whether such restoration should I

take place.

! 25.12 Entire Agreement l

This Agres. ment and, as applicabic, the Related Agree-

! ments, shall constitute the entire understanding between the i

parties, superseding any and all previous understandings, oral or written, pertaining to the subject matter contained herein.

l The parties have entered into this Agreement in reliance upon the retrecentations and mutual undertakings contained herein and not in reliance upon any oral or written representation or information provided to one party by any representative of the other party.

25.13 Ag licable Law l

This Agreement is made under and shall be governed by the law of the State of North Carolina.

25-6 l

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25.14 No Waiver l-

[ The. failure of either party to enforce at any tine any I r l of the provisions of this Agreement, or to require at any time performance by the other party of any of the provisions hereof, l shall in no way be construed to be a waiver of such provisions, l

nor in any way to affect the validity of this Agreement or any part hereof, or the right of such party thereaf ter to enforce 3

i cach and every such provision.

25.15 Singular to Include Plural and Plural to Include Singular Throughout this Agreement, whenever any word in the singular number is used, it shall include the plural unless the context otherwise requires; and whenever the plural number is used, it shall include th'e singular unless the context other-wise requires.

25.16 Security of Information

• The Owners agree that any information provided under this Agreement shall not be used in a nanner which (a) would compromise any part of the security system of any Joint Pacility, '

(b) would be in contravention of any applicable governmental regulation, or (c) would cause an Owner to violate any arrange-ment regarding confidentiality or proprietary rights which such owner has with any third party.

1 .

l l

25.17 -Computation _of Time

In computing any period of time prescribed or c11 owed l

under this Agreement, the day of the act, event or default from 1 I

_.-7

_.c -

l J

. which the designated period of time begins to run shall be in-c l .;d ed .

If the last day of the period so ~conputed is a Saturcay, .

a Sunday or a local holiday in North Carolina, then the period shall run until he end of the next day which is not a Saturday, a . Sunday or a legal holiday in North Carolina.

25.18 Ef fect of Default upon Terns of this Agreement In the event that the remedies set for th in Sections 14.3 or 14.4 of the Sales Agreement are invoked and applied in connection with an Event of Default (as defined in Section 14.1 of the Sales Agreement), the terms of this Agreement shall be applied in a manner which takes account of the changes in ownership interests or entitlements resulting from such ap-plication of Sections 14.3 or 14.4 of the Sales Agreement.

25.19 Changes to Reflect Ownership Interests in Joint Facilities by Other Entities --

Power Agency recognizes that CP&L may sell an interest in the. Joint Facilities to another entity or entities and, in con-I nection with such sale, Power Agency agrees that CP&L may trans-fer or assign certain of CP&L's rights and obligations under this Agreement to one or more of such entities. Notwithstanding the preceding sen* ence, CP&L shall not assign its obligation to oper-ate the Joint Facilities without Power Agency's prior written consent, not to be unreasonably withheld; provided , however, that l such consent shall not be required with respect to (a) an assign-ment or transfer of CP&L's obligation to operate the Joint Facilities when such assignment or transfer applies tc all of l 25-8

[-

E l l

CP&L's generating facilities, (b) an. assignment or transfer of ,

l

'CP&L's obligation to operate all fossil-fired Joint Pacilities l when such assignment or transfer applicc to all of CP&L's fos-sil-fired oenerating facilities or (c) an assignment or transfer of, CP&L's obligation to operate all nuclear-fueled Joint Pacili-ties.when such. assignment or tranLfer applies to all of CP&L's

~

nuclear-fueled generating facilities. In the event any other entity purchases such an' ownership interest in the Joint Pacili-ties, the provisions of this Agreement shall be amended, if necessary, to reficct such other entity's ownership laterest.

In no event shall such purchase and sale diminish Power Agen-cy's rights under this Agreement.

25.20 References to Articles, Sections and Exhibits Unless otherwise expressly indicated, all references to Articles, Sections and Exhibits are references to Articles and Sections of, and Exhibits to, this Agreement.

25.21 Proration For billing under this Agreement, the First Closing and each Subsequent Clos:.ng shall be effective as of midnight of the day of closing. Bil..ngs for a month in which there is a closing shall be prorated based on the ratio of the number of days remaining in such month after the day of such closing

<livided by the number of days in such month.

25-9

ARTICLE 26 S URVIVORSiiIP 26.1 Survivorship of Obligations The termination of this Agreement shall not discharge oither party from any obligation it owes to the other party under this Agreement by rsason of any transaction, loss, cost, dcmage, expense or liability (a) which shall occur or arise (or the circumstances, events or bases of which shall occur or crice) prior to such termination or (b) which shall occur or arise (or the circumstancec events or bases of which sball occur or arise) as a result of this Agreement af ter such term i-nation. It is the intent of the parties hereby that any such obligation owed pursuant to the preceding sentence (whether the same shall be known or unknown at the terminrtion of this Agreement or whether the circumstances, events or bases of the came shall be known or unknown at the tcrmination of this Agree-ment) shall survive the termi tation of this Agreement.

26.2 Survivorship of Provisions The provisions of Article 15, including specifically, but without limitation, the indemnification provisions thereof, chall remain operative and in full force and effect, regardless of any termination or cancellation of this Agreement, except with respect to actions of the Owners occurring af ter such ter-mination or cancellation.

26-1

l IN WITNESS THEREOF, the parties have caused this Operating and Fuel Agreement to be signed and sealed as of the day and year first above written, by their duly authorized rep-resentatives.

CAROLINA POWER & LIGHT COMPANY ATTEST: . < ,

j // Chairman / President V'

&W SLscr#tarf (/

NORTH CAPOLINA MUNICIPAL POWER AGENCY NUMBER 3 ATTES2: By.Cd d ,

y Thairman, Bodrd'of CommissWeYs Secretary e

i i

i, i OPERATING AND FUEL AGREEMENT i

EXHIBITS ii t

l I

t

OPERATING AND EdEL~ AGREEMENT INDEX'OF EXHIBITS Exhibit Title Exhibit Reference Msmbers of Power Agency Number 3 OFA-I-l Principles of- Agreements Relating to Financing of a-Capital. Addition OFA-II-l Calculation of Power Agency's Contribution to the Uranium Account OPA-III-l Determination of Uranium Account Average Unit Uranium Cost OPA-IV-1 O&M Monthly Statement OFA-V-1 Fuel Monthly Statement OFA-VI-l Additions Monthly Statement OFA-VII-l Spent Fuel Storage Monthly Charge Calculation OPA-VIII-l O&M Expense Allocated to Pc.<er Agency OFA-IX-l*

A&G Expenses, Taxes Other Than Income j- Taxes, and Income Accounts Allocated

to Power Agency OFA-IX-2*

Determination of Labor Allocation Factors OFA-IX-3*

Determination of Property Tax Allocation Factors OFA-IX-4*

- - - , - . _ , , - , ,, . . , . ~ - ~~..,.--,,,,~e , . , .

l EXIIIBIT TITLE EXHIBIT REFERENCE Determination of Power Agency's Monthly Allocated Expense-for General Plant Return on Invest-

~

ment, Depreciation, Income Tax and Property Tax OFA-IX-5*

Determination of Dispatch Fee and the 12 1/2% Fee For CP&L Labor OFA-IX-6*

Determination of the Monthly 8 1/2% Fee For Third Party Labor OFA-IX-7*

Fuel Cost OFA-IX-8*

Auxiliary Power Expense OFA-X-1 Determination of Monthly Adjustment to the Working Capital Fund OPA-XI-l These exhibits have been submitted by CP&L to Power Agency.

The parties shall promptly undertake negotiations on the final form and substance of these exhibits. If such negotiations do not produce an agreement by the parties on any given exhibit not later than August 21, 1981, the allocation covered by the subject matter of such exhibit shall be governed by Section 7.10. <

4

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OFA-I-1

~

MEMBERS OF - POWER AGENCY - NUMBER 3 Town of Apex -

Town:of Ayden Town of Belhaven Town of'Benson Town of Clayton Town of Edenton

. City: of Elizabeth City "Down of Enfield Town-of i..rmville Town of Fremont City of~Greenville Town of Hamilton

. Town of Hertford

' Town of Hobgood Town of Ilookerton City of Kinston ,

Town of LaGrange City of ' Laurinburg Town of Louisburg City of Lumberton City of New Bern

Town of-Pikeville Town of Red Springs Tbwn of Robersonville City'of Rocky Mount Town of Scotland Neck Town of Selma Town of Smithfield City of Southport Town of Tarboro.

. Town of Wake Forest City of Washingtor.

. Town.of-Waynesville City of Wiison Town'of Windsor Town of'Winterville 3

-OFA-I'l-1  !

l PRINCIPLES OF AGREEMENTS RELATING TO FINANCING

,, OF A CAPITAL ADDITION

'( A) Advance by CP&L on' Behalf of Power Agency WhenLPower Agency proves to the reasonable satisfaction

~

1.

of CP&L that funds are not available.to Power Agency for its-proportionate share of the cost (including ~ fees) of a capital addition, CP&L shaU advance the necessary funds therefore on behr.lf of Power Agency.

2. Power Agency shell reimburse to CP&L the principal cmount of the advance no-later than two (2) years from the date l

on which monics are first advanced. Power Agency shall have the right to reimburse the. principal, in whole or in part, at-any i

time'and from' time to time, prior to the two-year maturation l

t date.

3. Simple interest on the monies aavanced shall be calculated at the Compensatory Interest Rate.

4. CP&L shall bill Power Agency monthly for such interest l

l and such billing shall commence thirty (30) days after the date

[ on which the advance is made.

Such monthly bill for interest i

chall .be due and payable to CP&L as of the date shown on the

. bill. If any portion of the amount due and. payable remainc unapid fif teen -(15) days after the date shown on the monthly bill, a penalty charge shall accrue at the rate 7f one percent (1%) per month or _ portion thereof, compounded monthly, on the l Ldelinquent. amount, including any previously unpaid penalty charge; provided, however, that if funds are on-deposit in Power E Agency's Working Capital l Fund or Capital Additions Advance Fund j:

s' P' OFA-II-2 established pursuant to Article 8'of the operating Agreement, CP&L shall offset such part of the delinquent-amount as funds are available in either fund by reducing such fund effective on the 16th day following the date on which the payment was due. If a'

CP&L'makes such a -reduction to either fund, Power Agency shall adjust such fund in accordance with Section 9.4 of the Operating Agreement.

5. The f ailure of Power Aaency to pty interest, penalty charge or principal associated with the advance within sixty (60)-

days af ter the date on which such payment becomes due shall constitute an Event of Default under the Operating Agreement.

(B) Lease from Power Agency to CP&L

1. When CP&L proves to the reasonable satisfaction of Power Agency that CP&L is unable to pay for its proportionate share of the costs of a capital addition, Power Agency shall pay the-costs thereof.

2. Power Agency and CP&L shall enter into a lease agreement for the use by CP&L of the capital addition involved and the payment of a leased facilities fee by CP&L therefore based on CP&L's capital related cost, which cost shall be calculated in accordance with the methodology set forth in Exhibit PCA-X-1 of the Power Coordination Agreement except that the capitalization ratio shall be calculated using the beginning of the calendar e

year in which a cost for the capital addition first was incurred.

3. The lease shall have a maximum term of two years and shall contain a required mandatory purchase of facilities leased 5

F-OPA-II-3 ct a purchase price equal to the cost to Power Agency of the fccilities leased.

4. CP&L shall pay Power Agency monthly the amoun?. of the lease payment commencing thirty (30) days after the date on which

- the lease is made. Such monthly lease payment shall be due and payable to Power Agenc} as of the date shown on the bill. If any portion of the amount due and payable remains unpaid fifteen (15) days after the date shown on the monthly bill, a penalty charge chall accrue at the rate of one percent (1%) per mont h or portion thereof, compounded monthly, on the delinquent amount including any previously unpaid penalty charge.

5. The f ailure of CP&L to pay any lease payment, penalty charge, or the mandatory purchase price of the facilities within sixty (60) days af ter the date on which such payment becomes due shall constitute an Event of Def ault under the Operating Agreement.

6. Notwithstanding any other provision of the Operating Agreement or the Related Agreements, title to such portion of the capital addition so leased shall vest in Power Agency until purchased by CP&L pursuant to paragraph (B) (3) hereof.

1 I

OPA-III-l CALCULATION OF POWER AGENCY'S CONTRIBUTION i

TO THE URANIUM ACCOUNT l

A. Each closing At each closing Date, CP&L shall perform the following calculations:

(1) As of such Closing Date, all natural uranium, regardless of chemical form, to which CP&L holds -title or has the right to utilize by 2 case or otherwise, and which has not been designated to the account of a specific reactor pursuant l

to Section 3.2, and all costs associated with such material shall be assigned to the Uranium Account.

(2) Expected deliveries of uranium material over the l

twelve (12) month period folicwing such Clcsing Date shall be added to the actual quantities to be included in the Uranium Account as determined in paragraph A(1) above to form the

! " Adjusted Stockpile." The Adjusted Stockpile shall be used

solely in performing the calculations called for in this l

Exhibit OFA-III.

(3) Using the nuclear fuel plan described in Section 3.l(J), and assuming no deliveries beyond those identified in paragraph A(2) above, the uranium needs for each reactor in the Combined System and the times of such needs shall be determined.

s .

OPA-III-2 J

'(4)'. Power Agency's portionLof.the Uranium Account,

'O

~ expressed'as a decimal' fraction, shall be determined, at af such Closing Date as follows:

m n

[ E0 ,y 1 x-(01-) i i=1

p. .

Y" Adjusted Stockpije

- where: P = Power Agency's portion of the Uranium Account, expressed as decimal fraction i = designation number of' Joint Unit Reactor m = number of years required to deplete the Adjusted  ;

Stockpile n = number of reactors in the Jcint Units E0iy = natural uranium requirements for Joint Unit i in year y-(in equivalent pounds U 30 )

011 = Ownership Interest of~ Power Agency. n Joint Unit i just subsequent to the Closing Date for which such calculation is being performed. 5 i

(5) Power Agency's contribucion to the Uranium Account-l and each of the subaccounts therein shall be determined by multiplying "P", as determined in paragraph A(4) above, times-the cost of uranium material assigned to tho Uranium Account-l pursuant to paragraph A(1) above.

i l

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, ~ , . - , - . , , , , - - - . , . . . - , - - , . - .,,.,,,~-~.--n.---, .-. - -n, , . - , . - ,

OFA-III-3 B. Annuol Calculation On January 1 of each year, beginning with the year following the Final Closing Date, Power Agency's contribution to the Uranium Account shall be recalculated using the general methodology _ described in paragraphs A(1) through A(5) above, with the January 1 date replacing the closing date.

C. Payments (1) Any variance between Power Agency's contribution to the Uranium Account, as determined in accordance with sections A or B above, and Power Agency's then-current balance of contributions oreviously paid by Power Agency shall be eliminated by a transfer of-funds between Power A'ency and CP&L, calculated in the followino manner:

(a) The new fr. action quantity "P" shall be subtracted from the old f raction quantity "P" .

(b) This difference shall be multiplied by the then-current balance of the costs of uranium material assigned to the Uraniu$ Account as described in paragraph A(1) above, For a variance determined to exist as of any Closing Date, ,

such variance shall be reflected on the Closing Statement associated with such Closing, and shall be paid in accordance with Article 6 of the Sales Agreement. For a variance.

. arising out of an annual calculation described in paragraph B j above, such variance shall be reflected on the next Fuel Monthly Sta'tement submitted-by CP&L to Power Agency, and ,

1 l

1

_ - . . - - - . l

j.;

OFA-III-4 shall be paid in accordance with Article 9 of the Operating Agrecment.

(2) Power Agency shall contribute its share of any new Lusts assigned to the Uranium Account based upon the fraction quantity "P" in effect as of the date of the Fuel Monthly Statement upon which such new cost is reflected. Such payments shall be made in accordance with Article 9 of the Operating Agreement.

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OFA-IV-1 DETERMINATION OF URANIUM ACCOUNT AVERAGE UNIT URANIUM COST

1. Definition of Uranium Account Subaccounts The Uranium Account shall consist of three subaccounts, as l follows:

a.. U 2 0n Subaccount -This subaccount shall contain the quantities and associated costs of -nuclear material in the form of U 038 to which CP&L holds title or has the ri.ght to utilize by lease or otherwise.

b. Inventory and Conversion (I&C) Subaccount -This subaccount shall contain the quantities and associated l

costs of nuclear material during the U 038 to UF6 conversion process when CP&L holds title to or has the ,s l right to utilize such nuclear material by lease or otherwise.

l c. UFs Subaccount --This subaccount shall contain the quantities and associated costs of nuclear material in the form of unenriched UF6 to which CP&L holds title or l

OFA-IV-2 has the right to utilize L'y lehae or otherwise and

~

which has not been de'eignated to the account of a

- specific reactor pursuant to Section 3.2.

2. Overview of Subaccount Process

a. Nuclear material delivered to CP&L in the form of U03 8 shall be credited to the Uranium Account, U038 Subaccount, upon payment of the delivery invoices. A record of all cost of the material (including escalation thereon) and the cost associated with the acquisition, transportation, storage, weighing and sampling, etc., and the quantity of such material in pounds of U380 , shall be maintained for the U 038 Subaccount. The Average it Uranium Cost (in dollars per pound U 38 0 ) for U3 0g shall be computed in accordance with paragraph 3. below. Dollars associated with nuclear mater!al transferred from the U 038 Subaccount shall be computed as the product of the pounds of U 3Og transferred and the Average Unit Uranium Cost for U 038 in effect on the transfer date.

_ _ , ~ _

II' L

OFA-IV-3

b. When nuclear material in the U 038 Subaccount enters the conversion prncess, which shall. be the date required by conversion contracts for delivery of material required for conversion, such material shall be transferred to the I&C Subaccount. Transfer would include (i) the quantity of nuclear material which is entering the conversion process in pounds of U 03 8 and (ii) dollars associated with such nuclear material, computed as the product of the pounds of U 038 transferred and the Average Unit Uranium Cost for U 038 in-effect on the transfer date.

c. Upon completion of the conversion process (which shall be at the conversion delivery date) the nuclear material.in question shall be transferred from the I&C Sabaccount to the UF6 Subaccount. Quantity recorded in the UF6 Subaccount shall be in units of pounds U as UF6*

Dollars transferred from the I&C Subaccount shall be '

those dollars previously transferred from the U 38 0 Subaccount to the I&C Subaccount for the quantity of I

L nuclear material in question. Quantity of nuclear l material transferred to the UF 6 Subacount shall be the pounds U as UF6 actually produced by,the conversion I

r

OFA-IV-4 process. Conversion and associated charges and expenses incurred by the nuclear material in question since entering the conversion process shall be charged to the UF6 Subaccount with such transfer. The Average Unit Uranium Cost (in dollars per pound U as UF 6) for UF6 shall be computed in accordance with paragraph 3. below.

Dollars associated with nuclear material transferred from the UP6 Subaccount shall be computed as the product of the pounds of U as UF6 transferred and the Average Unit Uranium Cost for UF6 in effect on the transfer date.

3. Computation of Subaccotint Balances and Average Unit Uranium Cost for UqOg and for UFg As of the First Closing Date and on the first day of each -

subsec.uent month, balances shall be determined for the U03 8 and UF6 Subaccounts. The dollar balance for each subaccount shall include the balance on the first day of the previous month plus the cost of any additions and less the cost of any withdrawals niado during the previous month. The quantity balance for each subaccount shall include the balance on the first day of the previous month plus the quantity of any material transferred into the subaccount and less the quantity of any material transferred out of the

[

t l

OFA-IV-5 subaccount during the previous month. Using these new balances, the Average Unit Uranium Cost for U 03 8 and for UF6 shall be determined by dividing the total dollar amount in each subaccount by the aggregate quantity of uranium material in the respective subaccount. If, as of the date of a withdrawal of nuclear material from a subaccount, transactions have occurred with respect to such subaccount which would affect the then most recently computed Average Unit Uraniur Cost for such subaccount, then the Average Unit Uranium Cost for such subaccount shall be recomputed and applied in the determination of the cost of nuclear material so withdrawn.

4. Computation Precision The Average Unit Uranium Cost computations described in Section 3 above shall be rounded to two (2) decimal places.

I

OFA-V PRELIMINARY PORM OF Tile O&M MONTHLY STATEMENT

('IO BE AGREED UPON)

<4 ,m.,

w OPA-VI i

PRELIMINARY FORM OF THE FUEL MONTHLY STATEMENT W

i

('IO BE AGREED UPON)

3 OFA-VII PRELIMINARY FORM OF THE ADDITIONS MONTHLY STATEMENT

('IO BE AGREED UI'ON) h

i i

OFA-VIII-l SPENT FUEL STORAGE MONTHLY CHARGE CALCULATION Pursuant to Article 4 of the operating Agreement and Article 17 of the Sales Agreement, CP&L may utilize the spent fual storage facilities at the Brunswick and Harris Plants for opent. fuel-that is other than Brunswick or Harris fuel. Although a very detailed methodology for calculating monthly storage charges for such spent fuel could be developed, the parties agree that the effort and expense necessary are not justified when the cmount of money'and the inherent uncertainties involved are L considered. Thus, in order to simplify the procedures, the perties agree that the monthly charges as determined by this Exhibit shall apply to other than Brunswick spent fuel stored at the Brunswick Plant subsequent to the First Closing Date and to other than Harris spent fuel stored at the Harris Plant cubsequent to the date of Commercial Operation of the first-Harris Unit.

Within five years after the First Closing Date, and at

- intervals of each five years thereafter, and at any time that a c'gnificant i change in the operating costs for spent fuel storage r

F hos occured or a major capital addition or repair has been made to the spent fuel storage facilities at the Brunswick Plant or at

OFA-VIII-2 l- the 11arris Plant, the parties shall review the actual costs where identifiable and apprapriate allocations where costs cannot be specifically identified, and the parties agree . to negotiate reasonable modifications to.the spent fuel-storage charge, if necessary, to restore equity based upon the principles outlined in-this Exhibit OPA-VIII.

i

OFA-VIII-3 TOTAL MONTHLY SPENT FUEL STORAGE CHARGE MONTH OF. ,

PLANT

1. O&M Spent Fuel Storage Charge - BWR Fuel (OFA-VIII-4, line 2d, column 1) S

2. O&M Spent Fuel Storage Charge - PWR Fuel (OFA-VIII-4, line 2d, column 2) $

3. Total O&M Spent Fuel Storage Charge (line 1 + line 2) S

4. Power Agency's Ownership Interest (fraction)

5. Amount to be credited to Power Agency's O&M Monthly Statement (line 3 X line 4) S

6. Capital Spent Fuel Storage Charge - BWR Fuel (OFA-VIII-4, line 3c, column 1) S

7. Capital Spent Fuel Storage Charge - PWR Fuel (OPA-VIII-4, line 3c, column 2) S

8. Total Capital Spent Fuel Storage Charges (line 6 + line 7) S __

9. Power Agency's Ownership Interest (fraction)

10. Amount to Be Credited to Power Agency's Capital Additions Advance Fund (line 8 x line 9) $

I i

l _

s'

.0FA-VIII-4A TOTAL MONTHLY SPENT FUEL STORAGE CHARGE

. MONTH OF ,

PLANT (1)- (2)

BWR Fuel PWR Fuel

1. Cost of loading or unloading.

i spent fuel (ora-VIII-6, line 7) S- S l

2. OEM storage chargcs for spent fuel assemblies

a. .-Operating and maintenance cost per assembly (OFA-VIII-10, line 16) S S L b. Average number of spent fuel assemblies in storage during the month for which the O&M '

storage charge is applicable NOTE A

c. Total O&M cost (line 2a x line 2c) S S

( d. Total O&M monthly charge l (line 1 + line 2c) S $___,

3. Capital Cost Storage Charges

a. Capital cost per assembly *

(OPA-VIII-8, line 15) S S l

i

OFA-VIII-4B (1) (2) l BWR Fuel PWR Fuel l

b. Average number of spent fuel assemblies in storage during the month forLwhich the spent fuel'atorage capital charge is .

applicable NOTE B $ $

c. Total Capital Cost (line 3a x line 3b) S S NOTE A The averagt of the monthly beginning and ending balances of other than . _.iswick spent fuel stored at the Brunswick Plant or other than Harris spent fuel stored at the Harris Plant, as applicable.

NOTE B: The average number of spent fuel assemblies stored at the Brunswick Plant or the Harris Plant, as applicable, in excess of the storage space capability authorized by CP&L management as the First Closing Date for such Flant, but not more than the number of other than Brunswick spent fuel assemblies stored at the Brunswick Plant or other than Harris spent fuel asst.nblies stored at the Harris Plant, as applicable. The average number for each month shall be the average of the beginning and ending balances for such month.

1 4

d 1

9 N

'~

OFA-VIII-5A ^

COST OF CASK LOAD OR UNLOAD (NOTE A) *

.,j ."

MONTH OF ,

3. .

PLANT '"+.

(1) (2) Es~ 7.

BWR Fuel PWR Fuel

' .' - s Line .

9 '

No. .+

• - 'd

1. Nonescalatable charges - demineralized water 1 '

a. Initial cask fill (gallons) 685 685 .-~

b. Cask rinse (gallons) 450 450 c -; 5

s r,s ;

c. Flush, after cask removal, and decay 2,100 2,100

,.. .y 4 heat removal (gallons) ,

k

d. Decontamination (gallons) 6,500 6,500 ^1 c .,

4 y

e. Total (add a through d) 9,735 3,735 ,,

^

f. Cost per gallon S0.025 S0.025 .

g. Total nonescalatable charges '3 .

(multiply lines e & f) S245.00 S245.00 o

~- .:-

2. Escalatable charges s

t. t.

a. Clothing (50 changes @ S8.50) S425.00 S425.00  ;' ' J J

b. Miscellaneous paper products S 20.00 S 20.00 -

.: 48

c. Solid waste processing (1 drum at $65 ,' *f J ^-,

disposal cost) S 65.00 $ 65.00 .'y 4

f 4.- ]

.y N

2. 0

1. .4 i .4

., .- p h+

~ "

v

~

g

--3., k2.>

m C

OFA-VIII-5B

d. Labor $475.00 S4'5.00

e. Total escalatable charges (add a through d) $985.00 S985.00

3. Number of, casks loaded or unloaded NOTE B

4. Total number of assemblies loaded or unloaded for casks referred to in 3 above

5. Total number of spent fuel assemblies loaded or unloaded to which the spent fuel storage charge is applicable

6. Escalation factor (OFA-VIII-8, line 3)

7. Cost of loading or unloading spent fuel (line'3 X line 5 divided by line 4)

X (line 6 X line 2e + line 19) S S NOTE A: Assumes use of the IF-300 type spent fuel cask. Entries in this table may be altered for other casks. Labor rate based on tests at Barnwell Reprocessing Facility requiring 94 manhoura/MTHM for 1 legal weight truck cask and $12.50/ur. ~

cost of labor including overheads.

NOTE B: The number of casks loaded or unloaded shall be ce 7 ned as the number of casks loaded or unloaded at the Brut. ' Plant or at the Harris Plant during the month which contal . other than Brunswick spent fue] or other than Harris spent fuel, respectively.

4

OFA-VIII-6A CAPITAL COST OF STORING SPENT FUEL (NOTE A)

MONTH OF ,

PLANT (1) (2)

BWR Fuel PWR Fuel Line No.

Actual Cost of expansions:

1. Earthwork and concrete structures S S

2. Pool liner and fuel racks

3. Mechanical equipment

4. Electrical equipmerit

5. Const.uction labor

6. Construction material overhead- 9

7. Construction labor overhead

8. Design engineering labor and overhead

9. Allowance for funds used during constructi n (based on CP&L's rate for all fun. expended,

10. Total estimat<.d cost (add lines 1 through 9) S S

11. Stor. ige spaces added due to expansion

12. Total cost per added space (line 10 divided by 11) S S

OFA-VIII-6B

13. Rate for computing annual capital charga .150 .150 NOTE B 3

14. Annual capital cost, per added space (line 12 X line 13) S S

15. Mont'hly capital cost, per assembly of storing spent fuel (one-twelfth of line 14) S S NOTE A: This is the capital cost of all expansions to the storage facilities authorized by CP&L management subsequert to the First Closing Date. If no such expansions have taken place, then the monthly capital cost of storing spent fuel shall be Zero.

NOTE D: This rate is based on a reasonable " split the savings" between the estimated capital cost differences of the parties.

OFA-VIII-7A OPERATING AND MAINTENANCE COST OF STORING SPENT FUEL MONTH OF ,

PLANT (1) (2)

Line # Brunswick Harris

1. Periodic replacement of HVAC System charcoal filters; 1 change /5 years at S44,000 per change (S44,00n/5 = 8,800) NOTE A S 8,800 S 8,800

2. Periodic replacement of HVAC System HEPA filters; 1 change /5 years at S41,250 per change S 41,250/5 = $ 8,250) NOTE A S 8,250 $ 8,250

3. Periodic replacement of HVAC System prefilters; I change /8 months at S750 per change (S750 x 1.5) NOTE A S 1,125 S 1,125

4. HVAC System annual energy consumption (KWH) 980,000 980,000

5. Cooling and cleanup system annual energy consumption (Kwn) 1,530,000 1,530,000

6. Total energy consumption related to spent fuel storage capacity (KWH)

(line 4 + line 5) 2,510,000 2,510,000

7. Estimated energy cost per KWH $ .00700 S .00700 1

8. Annual cost of energy consumed (line o X line 7) S 17,570 $ 17,570

9. Total anrual operating and maintenance cost of spent fuel storage capacity (line 1 + line 2 + line 3 + line 8) S 35,745 S 35,745

10. Monthly operating and maintenance cost of spent fuel. storage capacity (one-twelfth of line 9) NOTE B S 2,978 $ 2,978

OFA-VIII-7B

11. Weighted allocation of storage area

a. Fraction to BWR fuel _

b. Fraction to PWR fuel

12. Allocation of monthly operating & maintenance cost

a. BWR fuel (line 10 x line lla)

b. PWR fuel (line 10 x line lib) l 13. Number of storage spaces l a. BWR fuel l

l b. PWR fuel

14. Monthly cost per space in 1980 dollars of operation and l

maintenance of spent fuel storage capacity

a. BWR fuel (line 12a t line 13a) S .S

b. PWR fuel (line 12b t line 13b) S S

15. Escalation factor (OPA-VIII-8, line 3)

16. Operating and maintenance cost of storing spent fuel.

a. BWR fuel (line 14a x line 15) S ,S

b. PWR fuel (line 14b x line 15) S S NOTE A: The HVAC system at Brunswick serves the entire secondary containment structure, not just the spent fuel pool. The filter replacement costs, however, are thought to be representative of a system designed to serve the spent fuel pool only.

NOTE B: Bas: J on average heavy metal content of 1 BWR assembly equal to 2/5 of a PWR assembly.

Total BWR storage spaces Fraction to BWR fuel = Total BWR + S/2 x PWR storage spaces Fraction to PWR fuel = 1.00 - Fraction to BWR.

OFA-VIII-8 ESCALATION FACTOR MONTH OF ,

PLANT Line #

v

1. Producer Price Index, Industrial Commodities (1967 = 100), as published by the Bureau of Labor Statistics for the second preceding month

2. Producer Price Index, Industrial Commodities (1967 = 100), as published by the Bureau of Labor Statistics for July 1980 275.60

3. Escalatiar. Factor (line 1 divided by line 2)

J A - - - - - - - - - - -

OFA-IX-1 O&M Expense Allocated to Power Agency .

4 (TO BE PROVIDED.

SEE FOOTNOTE TO l

INDEX OF EXHIBITS.)

i I

.I I

4

OPA-IX-2 A&G Expenses, Taxes Other '"han Income Taxes, And Income Accounts Allocated to Power Agency (TO BE PROVIDED.

SEE FOOTNOTE TO INDEX OF EXilIBITS.)

l

i i OFA-IX-3 l

( Determination: of Labor Allocation Factors i

(TO BE PROVIDED.

SEE FOOTNOTE TO INDEX OF EXPIBITS.)

4

OFA-IX-4 Determination of Property Tax Allocation Factors (TO DE PROVIDED.

SEE FOOTNOTE TO s INDEX OF EXilIBITS.)

l  ?

e

/

w-.

OFA-IX-3 Determination of Power Agency's Monthly Allocated Expense For General Plant Return on Investment, Depreciation, Income Tax and Property Tax (TO BE PROVIDED.

SEE FOOTNOTE TO IhDEX OF EXHIBITS.)

I l

t _ _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

me OFA-IX-6 Determination of Dispatch Fee and the 12 1/2% Fee For CP&L Labor l

t (TO BE PROVIDED, SEE FOOTNOTE TO INDEX OF EXHIBITS.)

t t .

i--._ _

OFA-IX-7 Determinatioss of the Monthly 8 1/2% Fee For Third Party Labor (TO BE PROVIDED.

SEE FOOTNOTE TO INDEX OF EXHIBITS.)

l l

l l

l l .

o OFA-IX-8 Fuel Cost O

P l

l

$.+,.

(TO BE PROVIDED. U SEE FOOTNOTE TO INDEX OF EXIIIBITS. )

I 9

e 6

O L _. . . _ .

OFA-X Auxiliary Power Expense Month of ,

Col. 1 Col. 2 Col. 3 Col. 4 Col. 5 Col. 6 Col. 7 Col. 8 Col. 9 Line Brunswick Brunswick Roxboro Mayo Mayo llarris flarris lla rris lla rris

%. 1 2 4 1 2 1 2 3 4

1. Power Agency's Monthly Total Aux 111at y Ibwer (Note A) __ ._

2. Reserve Energy Monthly Rate (S/ WH)(Note B) _ , , , _ _ _ _

3. Power Agency's Auxiliary Power l Expense (Line 1 x Line 2) __ .

I Note As Power Agency's share of monthly total auxiliary power for each Joint Unit shall be ttt monthly total of Power Agency's Ownership Interest in each hour times the amounts calculated by subtracting (1) the l

metered gross kilowatt hours generated by such Unit during each hour for which the applicable Joint Unit's Output is zero from (2) the auxiliary power used by such Unl* during,r.uch hour.

Note B The Reserve Energy Monthly Rate is determined peersuant to Exhibit PCA-t-31 of the Power Coordination l Agreement.

PRELIMINARY FORMAT OF TIIIS EXilIDIT (FINAL FORMAT W BE AGREED UPON LATER) l

OPA-XI l

Determination of Monthly Adjustment To the Working Capital Fund (TO BE ACdEED UPON)