ML20043A246

Forwards Draft of Proposed Decommissioning Financial Assurance Plan,Per 10CFR50.33 & 50.75,for Review.Telcon Scheduled for 900515 to Discuss Comments

ML20043A246
Person / Time
Site:	Susquehanna
Issue date:	05/11/1990
From:	Dyckman D ALLEGHENY ELECTRIC COOPERATIVE, INC.
To:	Wood R Office of Nuclear Reactor Regulation
References
NUDOCS 9005210078
Download: ML20043A246 (54)

Text

So- s y7 S0- S TV y Q)[@g ELECTF,1C COOPERATIVE, INC, 212 LOCUST ST. P.O. 80X 1248 e HARRISSURG, PSNN8YLVANIA 171081288 e PHONS 717 233 8704 May 11, 1990 Mr. Robert Wood Mailstop 12E4 Office of Nuclear Reactor Regulation US Nuclear. Regulatory Commission Washington, D. C. 20555

SUBJECT:

SUSQUEHANNA STEAM ELECTRIC STATION DECOMMISSIONING FINANCIAL ASSURANCE Dear Mr. Woodt Enclosed is a draft copy of the proposed Allegheny Electric Cooperative, Inc. submittal to fulfill the requirements of Title 10 Code of Federal Regulations, Section 50.33 and 50.75.

It is requested that you review the enclosure. As previously agreed, Allegheny Electric is requesting a teleconference on May 15 at 2 00pm to discuss your comments relative to our draft submittal.

If there are any questions or comments about the enclosed information prior to our teleconference please contact me.

Sincerely,U , ,

Y.

Dennis V. Dyck an Nuclear Support Engineer

Enclosure:

As stated 228.230.E.14 l

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l ELECTRIC COOPERATIVE, INC.  ;

212 LOCUST ST P.O. BOX 1266 e HARRISSURG, PENNSYLVANIA 171081266 e PHONE 717 233 6704 July 16, 1990 ,

CERTIFIED MAIL  !'

RETURN RECEIPT REQUESTED I

Secretary i U.S. Nuclear Regulatory Commission Washington, DC 20555 [

Attention: -Chief Docketing and Service Section .

RE: Decommissioning Report and ,

certification of Financial Assurance i Docket Nos. 50-387 and 50-388 Susaushanna Steam El<actric Station s

Dear Sir:

.In accordance with the provisions of 10 C.F.R. $$50.75 and 50.33, attached for filing please find-the decommissioning report - t and certification of financial assurance of Allegheny Electric '

Cooperative, Inc. relative to our firm's ten percent interest in '

the Susquehanna Steam Electric Station.

1 l- Sincerely yours,  ;

e Anthony C. Adonizio General Counsel and j, Assistant Secretary '

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enclosure "

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Robert Wood, NRC Joseph R. Binder, REA William Barberich, PP&L '

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DRAFT ALLEGRENY ELECTRIC COOPERATIVE, INC.'

DECONNISSIONING REPORT AND CERTIFICATION OF FINANCIAL ASSURANCE-TO PER U.B. MUCLEAR REGULhTORY COMMISSION Pursuant to the requirements of 10 C.F.R. $$50.75 and 50.33 (k), and in accordance with authorizing actions by its Board'of Directors, Allegheny Electric Cooperative, - Inc. (" Allegheny")

hereby submits the following Decommissioning Report and Certifica-tion of Financial Assurance relative to Allegheny's ten percent (10%) undivided ownership interest in the Susquehanna Steam Electric Station (Docket Nos. 50-387 and 50-388) located in Luzerne County, Pennsylvania.1

1. All inquiries, notices and other communications concern-ing this report ' and certification should be directed to the licensee att Allegheny Electric Cooperative, Inc.

212 Locust Street P.O. Box 1266 Harrisburg, Pennsylvania 17108-1266 .

Attention: Dennis V. Dyckman, Nuclear Support Engineer.

2. As required by 10 C.F.R. $50.75 (e) (1) (ii) , and in accordance with formal actions by its Board of Directors dated August 3, 1989, and January 25, 1990, Allegheny has chosen to provide financial assurance of its ability to decommission its interest in the Susquehanna steam Electric Station through an external sinking fund approach. More particularly, Allegheny has-entered into a Decommissioning Trust Agreement with Mellon Bank, N.A. dated May , 1990, establishing the Allegheny Electric 1

The Pennsylvania Power & Light Company ("PP&L") is the

-owner of the 90 percent undivided ownership interest in the subject facility and is a co-licensee with Allegheny. Allegheny expects that PP&L will separately submit its own decommissioning report relative to that 90 percent undivided ownership interest.

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e Cooperative, Inc. Nuclear Decommissioning Trust and appointing Mellon Bank as trustee. A copy of this trust instrument is attached to this report as Exhibit A.

3. As part of its definitive decommissioning plan, Allegheny has also entered into an Investment Management Agreement dated May

, 1990, with National Investment Services of America, Inc.

("NISA") under which NISA has undertaken to provide investment direction to the trustee, Mellon Bank, in the acquisition and disposition of all assets of the Allegheny Electric Cooperative, Inc. Nuclear Decommissioning Trust. A copy of this Investment Management Agreement is attached to this report'as Exhibit B.

4. In accordance with 10 C.F.R. 550.75 (c) (1) (ii) , Allegheny has calculated that $26,727,400 is the minimum financial assurance amount (in January, 1986 dollars) for the decommissioning costs of its subject interest in the Susquehanna Steam Electric Station.

The details of this computation are set forth in Exhibit C which is attached to this report.

5. In accordance with 10 C.F.R. $50.75 (c) ('2) Allegheny has calculated an adjustment for escalation factor of'1.31. The details of this computation are set forth in Exhibit D which is ,

1 attached to this report.

6. As set forth in Exhibit E attached to this report, Allegheny has calculated a December 1989 adjusted cost estimate of the minimum financial assurance amount to be $35,012,894.

7. In accordance with the above regulatory provisions, Allegheny has established an operating policy providing for 2

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periodic review and adjustment of the above cal' c ulations including annual review and adjustment of the effective inflation on the estimated cost, and review and adjustment of the ' estimated costs at least every five (5) years for the effect of technological changes or changes in plant status. A copy of this Allegheny policy as promulgated by its Board of Directors is attached to this report as Exhibit F.

8. In accordance with the above, Allegheny hereby certifies that its decommissioning plan for its ten percent undivided ownership interest in the Susquehanna Steam Electric Station provides financial assurance for the decommissioning at a level which meets the minimum established by 10 C.F.R. $50.75 (c).

Respectfully submitted, Jesse C. Tilton III President Allegheny Electric Cooperative, Inc.

212 Locust Street P.O. Box 1266 Harrisburg, Pennsylvanin 4

17108-1266 DATED: July 16, 1990 at Harrisburg, Pennsylvania 3

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l ALLEGRENY ELECTRIC COOPERATIVE,-INC.

DECONNISSIONING TRUST AGREEMENT SUSQUEHANNA STEAM ELECTRIC STATION i

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1 TABLE OF CONTENTS ARTICLE I. DEFINITIONS EAgt I 1.01 Definitions . . . . . .. . .. . .. . . . . . . 2 ARTICLE II. TRUST PURPOSES, NAME AND FUNDS.

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2.01 Trust Purpowes. . . . .... . . .. . . . . . .5 2.02 Establishment of Trust . . . . . . . . . .. . . .5 2.03 Acceptance of Appointment . .. . . . . . . . . . 5 2.04 Name of Trust . . . . ..... . . . ..... 6 2.05 Delivery and Interpretation of Orders . . . . . . 6 l

2.06 Alterations and Amendments ^

.. . .. . . . . . . 6 2.07 No Authority to Conduct Business . . .. . . . . 7 2.08 l No Transferability of Interest in Trust . . . . . 7 ARTICLE III. PAYMENTS CONSTITUTING FUND.

3.01 Fund contributions . .. . .. . . . ... . . . 7 3.02 No Trustee Collection Duty . .. . ' . . . . . . . 7 ARTICLE IV. DISTRIBUTIONS. e 4.01 Payment of Decommissioning Costs . . . . . . . . 8 4.02 Payment of Expenses of Administration . . . . . . 8 ';

4.03 Fees . .

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, 4.04 Liquidation.of. Investments . . .. . . . . . . . 9 -

ARTICLE V. TERMINATION.

5.01 Termination of Trust in General . . . . . . . . .9 -

5.02 Distribution of Trust Upon Termination . . . . . 9 ARTICLE VI. TRUSTEES. '

6.01 Designation and Qualification of Trustee and 4

6.02 Successor Trustee (s) .. . . . . . . . . . . . 10 Exoneration From Bond . . . . . . . . . . . . . 11 6.03 Resignation .  ;

6.04 Responsibilities . . . . . . . .. . . . . . . . . 11  !

6.05 . . . . . . . . . . . . . . . 12  !

Transactions With Third Parties . . . . . . . . 12 6.06 Accounts and Reports . . . . . . . . . . . . . 12 -

6.07 Tax Returns and Other Reports . . . . . . . . . 13 6.08 Liability .

6.09 . . . . . . . . . . . . . . . . . . 14 Certifications . . . . . . . . . . . . . . . . 3 15 ARTICLE VII. INVESTMENT MANAGER (S). -

7.01 Apportionment of Investment Manager (s) 7.02 . . . . 16 Direction by Investment Manager (s) . . . . . . 17

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.Page ARTICLE VIII. TRUSTEE'S GENERAL POWERS.

8.01 Extension of obligations and Negotiation of Claims . . . . . .............. 19 8.02 Registration of Securities ......... . 19 8.03 Borrowing . . . . . .............. 19 8.04 Retention and Removal of Professional and  ;

Employee Services . ............... 20 8.05 Delegation of Ministerial Powers . . . . . . . 20 8.06 Powers of Trustee to Continue Until Final Distribution .............. 20 8.07 Discretion in Exercise of Powers . . . . . . . 20  ;

ARTICLE IX. TRUSTEE'S INVESTMENT POWERS.

9.01 General Investment Powers . .......... 21 (a) Investment Guidelines .......... 21 (b) Particular Fund Management . . . . . . . . 21 (c). Limitations . . .. ..... . . . . . . 22 (d) Management of Master Trust . . . . . . . . 23 9.02 Temporary Investments . . .... . . . . . . . 23 ARTICLE X. MISCELIANEOUS.

l 10.01 Headings . . . . .

i 10.02 10.03 Particular Words . . .. .. ...... . .......... .. ... .. .

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Severability of Provisions .. . . . . . . . . 24 10.04 Form and content of Communications .

10.05 . . . . . 24 Delivery of Notices Under Agreement . . . . . . 25 '

i 10.06 Successors and Assigns ........... 25 10.07 Governing Jurisdiction 10.08 Accounting Year .

. ..... . . . . . . 26 10.09 Counterparts . . . . ..... . . . . ..... . . . . . . . 26

. . . . . . - . . 26 l t l EXHIBIT A. CERTIFICATE EXHIBIT D. ELECTED AND APPOINTED OFFICERS OF ALLEGHENY ELECTRIC COOPERATIVE, INC.

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DECOMMISSIONING TRUST AGREEMEt[I i 1

AGREEMENT OF TRUST, made this day of , 1990, by

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and between Allegheny Electric Cooperative, Inc. (hereinafter referred to at ' Allegheny" or " Grantor") a Pennsylvania electric i cooperative corporation, and Mellon Bank, N.A. (hereinafter referred to as " Trustee"), a national banking association hhving

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W I T N E S S E T H: +

WHEREAS, Allegheny is the owner of a ten percent (10%)

undivided interest in the Susquehanna Steam Electric Station in Luzerne County', Pennsylvania which consists of two nuclear power reactor units identified in Nuclear Regulatory Commission License Numbers SNM-1878 and SNM-1919, respectively, issued pursuant to 10 .

CPR Part 50; and W!!SREAS, the Nuclear Regul'atory Commission as an agency of the U.S.

Government, pursuant to the Atomic Energy Act of 1954, as '

amended, and the Energy Reorganization Act of 1974, has promulgated regulations in Title 10, Chapter I of the Code of Federal Regulations, Part 50. These regulations, applicable to the Grantor, require that a holder of, or an applicant for a license issued pursaant to 10 CFR Part 50 provide assurance that funds will be available when needed for required decommissioning activities; and WHEREAS, the Grantor has elected to use a trust fund to provide all of such financial assurance, for the facilities identified herein; and WilEREAS, in fulfillment of the said financial assurance

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! I L 2 j requirements the co-licensee of Allegheny in the said Susquehanna j Steam Electric Station, Pennsylvania Power & Light Company has "

established certain trust funds relative to its ninety percent ,

(90%) undivided ownership interest; and WHEREAS, Mellon Bank, N.A. is a national banking association with trust powers; and ,

WHEREAS, Mellon Bank, N.h. is willing to serve as trustee to the Trust on the terms and conditions herein set forth. '

i NOW THEREFORE, in consideration of the mutual promises herein  !

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contained, Allegheny hereby agrees to deliver to the Trustee and  ;

the Trustee hereby agrees to receive contributions of monies to the Trust beginning on the date first written above; TO HAVE AND TO HOLD such assets as provided herein; TO INVEST AND REINVEST the assets of the Trust as provided '

herein; i

TO DISBURSE OR DISTRIBUTE from th6 trust as provided herein; l

IN TRUST NEVERTHELESS, for the uses and purposes and upon the terms and conditions hereinafter set forth.

I. DEFIN1*tIQR8 1.01 Definitions. As used in this Decommissioning Trust Agreement, the following terms shall have the following meanings: -

(1) " Agreement" shall mean and include '

this Decommissioning Trust Agreement as the same may from time to time be amended, modified or supplemented. T (2) " Certificate" shall mean a document properly completed and executed by an individinal(s) or corporation (s) duly

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authorized by Allegheny and substantially in the form of Exhibit A hereto. -

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j (3) " contribution" shall mean any contribution, cash or '

otherwise, made to the Trust by Allegheny.- i t

(4) acode" shall mean the Internal Revenue Code of 1986,  !

, as the same may be amended from time to time. h 4

(5) " Decommissioning costs" shall mean the expenses incurred in decommissioning the Plant.  !

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j (6) " Fair Value" for any security held by the Trust shall be determined as follows: ,

(a) securities listed on the New York Stock Exchange, the American Stock Exchange or any other recognized exchange shall be valued at-  ;

their last, sale price on the exchange on which securities are principally traded on the valuation date (NYSE-Composite Transactions or l

AMEX-Composite Transactions prices to prevail i i

on any security listed on either o f.. these i

I exchanges as well as on another exchange); and ,

where no sale is reported for that date, the.

bid price shall be used; j

(b) all other securities and assets shall be l

valued at.their market values as fixed by the Trustee's staff regularly engaged in such activities; provided, however, that at the request of the Trustee an Irivestment l _

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i Manager shall determine the value of any securities or other i i

property held in an Investment Aooount managed by that 7nvestment l Manager and such determination shall be regarded as a direction i i

binding upon the Trustee for purposes of tha Fair Value of such securities. -

(7) " Fund" shall mean all contributions made or transferred to the Trustee by thn Grantor together with all h earnings and profits thereon, less any paymente or distributions i made by the Trustee pursuant to this Agreement. j (8) " Investment Account" shall have the meaning set forth in Section 7.01 hereof. I (9) " Investment Manager (si)" r.e b anan the investment counselor (s), if any, designated from time to time by Allegheny.

(10) " Investment Manager Agreement (s)" shall mean the agreement (s) between Allegheny and one more or investment counselor (s) selected by Allegheny vhich agroement(s) governs the ,

investment of all or any portion of the Trust.

(11) " order" shall mean any relevant governmental order affecting any aspect of the decommissioning of'the Plant.

(12) " Plant" shall mean Allegheny's ten percent ownership interest in the Susquehanna Steam Electric Station.

i (13) " Successor Trustee" shall mean any entity appointed as successor Trustee pursuant to Section 6.01 hereof.

(14) " Trust" shall mean this Allegheny Electric Cooperative, Inc. Nuclear Decommissioning Trust and shall consist of all Contributions together with investments and reinvestments

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i thereof and any income, earnings and appreciation thereon, reduced  ;

by any losses, depreciation and disbursements made by the Trustee.

(15) " Trustee" shall mean Mellon Bank, N.A., a national i i

banking association incorporated in the commonwealth- of Pennsylvania having trust powers. I II. TRUST PURPOSES, MhME AND FmtD8. '

2.01 Trust Purnosas. The purposes of this Trust are to hold  !

and invest Contributions and any profits, income, gains or earnings from the investment and reinvestment of the contributions for the contemplated decommissioning of the Plant, and to comply with any f order applicable to the Trust. '

2.02 Establishment of Trust: By execution of this Agreement,

• Allegheny:  !

(a) establishes the Trust which shall be effective as of the day and date first above written, and which shall consist'of such contributions as may be delivered to the Trustee by Allegheny.

The Trust also shall include additional Contributions, investments and reinvestments thereof, and earnings and appreciation thereon, reduced by any losses, depreciation, and payments made by ' the .

Trustee; (b) appoints Mellon Bank, N.A. as Trustee of the Trust, 2.03 Accentance of Anocintmen.ti. By execution of this i

Agreement and upon the terms and conditions herein set forth, Mellon Bank, N. A. accepts the appointment as Trustee of this Trust.  !

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The Trustee shall receive any Contributions transferred to it by Allegheny and shall hold, manage, invest, reinvest and administer 1

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such Contributions and any profits, income, gains or earnings thereon pursuant to the terms of this Agreement without distinction between principal and income.

2.04 Name of Trust.

g The Trust shall constitute and be designated on the Trustee's books as the " Allegheny Electric Cooperative, Inc. Nuclear Decommissioning Trust."

2.05 Delivery and Internretation of Orders _. Allegheny agreen to provide the Trustee with a copy of each order, along with an explanation of the terms of each-order, and to respond promptly to questions raised by the Trustee concerning the terms of each order.

2.06 Alterations and Amendments. The Trustee and Allegheny agree to enter ir.to such amendments to this Agreement as shall be deemed by them necessary or desirable (i) to effectuate the purposes of this Trust and to comply with any Order, any changes in tax laws, regulations or rulings (whether published or private) and any state or local taxing authority, and any other changes in the laws applicable to Allegheny or the Plant; and (ii) for any other purpose not inconsistent with applicable laws, rules, orders or regulations or for the purpose of curing any ambiguity or defective or inconsistent provisions herein contained; provided, however, that no such amendment or supplement shall modify the rights, duties or immunities of the Trustee or Allegheny without their written consent. The Trustee and Allegheny may alter or amend this Agreement to the extent necessary or advisable to effectuate such purposes or to comply with such Order or changes. The Trustee shall have no duty to inquire or make an inventigation as to

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whether any proposed amendment, modification or alteration is '

consistent with this section 2.06, but the Trustee may decline to adopt such amendment, modification or alteration upon the advice of I its legal counsel that such amendment, modification or alteration is inconsistent with any order, tax laws, regulations or rulings applicable to decommissioning the Plant or is violative of the Trustee's responsibilities under this Agreement.

l 2.07 No Authority to Conduct Business. The purposes of this i

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Trust are limited to the matters set forth specifically in section 2.01 above, and there is no objective by Allegheny or.the' Trustee with respect to this Trust to carry on any business unrelated to such Trust purposes, or to divide the gains therefrom.

2.08 No Transferability of Interest in Trust. The Grantor and '

Trustee intend that no third party shall have access to the contributions, earnings thereon or any other proper , ' in the Trust except as provided herein. The interest of Allegheny in the Trust is not transferable by Allegheny. i III.

l PAYMENTS CONSTITUTING THE FUND.

3.01 Pund Contributions. Contributions made to the Trustee 4

for the Fund shall consist of cash, securities, or other liquid assets acceptable to the Trustee. Allegheny will, in its solo discretion, determine the times of such Contributions to the Fund and the amounts of such contributions to the Fund. The Fund shall-be held by the Trustee, IN TRUST, as herein provided.

3.02 No Trustee Collection Duty. Tho' Trustee shall not be '

responsible nor shall it undertake any responsibility for the n .-. , s

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I 8 I amount of, or adequacy of the Fund, nor any duty to collect from the Grantor, any payments neoessary to discharge any liabilities of ,

the Grantor' established by the Nuclear Regulatory Commission.

IV. DISTRIBUTIONE.

t l 4.01 Eavnent of Decommissionina costs. Upon receipt of a Certificate, the Trustee shall make payments of Decommissioning Costs, to the extent of monies held in the Fund, to any person or l

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entity (including Allegheny) for goods provided or labor or other '

[ services rendered in connection with the decommissioning of the Plant. .

4.02 Payment of Ernensen of Administratio,n. Upon receipt of a certificate, the Trustee shall make payments, to the extent of monies in the Fund, of administrative costs (including taxes, j reasonable out-of-pocket expenses and trustee's fees) and other '

incidental expenses of the Trust (including legal, accounting-and actuarial expenses) in connection with the operation of the Trust pursuant to this Agreement. In the event that the assets of the i

Trust are insufficient for the Trustee to pay the administrative costs and incidental expenses of the Trust as they arise, Allegheny

• agrees to pay ~ such valid costs and expenses to the appropriate payee (s) upon receipt of a written invoice for same from the ,

Trustee or payee (s).

4.03 Ep_qs. The Trustee shall receive as exclusive compensation for its services those amounts specified in the fee schedule as may from time to time be agreed upon in writing by the Trustee and Allegheny. All such compensation shall constitute a

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charge against the Trust until paid.

4.04 Liauidation of Inves%ts. Except as otherwise provided in Article IX, at the direction of Allegheny or any Investment Manager, the Trustee shall sell or liquidat.e such investments in i

the Trust as may be requested or required in order to make any ,

payment or distribution, and shall until disburuement, restore the '

{ Proceeds to the Trust.

V. TERMINATION. '

5.01 Termination of Trust in General. This Trust . shall ,

terminate upon the earlier of: (1)~ substantial completion of the nuclear. decommissioning of the Plant as provided in Allegheny's written notice of same to the Trustee; or '}ii) twenty-one (21) years after the death of the last survivor. of the elected and appointed officers of Allegheny (as set forth in Exhibit B) and such of their descendants as are in being at the effective date of

this Agreement.

5.02 Distribution of Trust Uoon Termination. Upon termination of this Trust, Allegheny shall direct the Investment Manager (s), or 4

the Trustee to the extent of its responsibility over investments pursuant to Article IX hereof, to liquidate the assets of the Trust, or the appropriate Investment Account (s) as the case may be, and upon. liquidation of the assets of the Trust the Trustee shall 4

distribute the liquidation proceeds (including accumulated and undistributed net income) less final administration e>:penses (including accrued taxes) to Allegheny provided, however, that no such distribution shall be made unicas either (a) an Order by the N

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nonappealable) and specifically authorizes sucti distribution, or  !

(b) the Trustee has received an opinion of legal counsel to Allegheny, who may be an employee of Allegheny, to the effect that' J no such final order is necessary to authorize such distribution.

VI. TRUSTEES.

6.01 Damianation and Oualification of Trustee and Successor Trusteefs). At any time during the term of this Trust, Allegheny t shall have the right to remove the Trustee (at' Allegheny's sole discretion) acting hereunder and appoint another qualified person or entity as a successor Trustee upon sixty (60) days' notice.in writing to the Trustee, or upon such shorter notice as may be acceptable to the Trustee.

In the event that the Trustee or any  :

Successor Trustee shall (1) become insolvent or admit.In writing +

its insolvency; (ii) be unable or admit in writing its inability to i

pay its debts as such debts nature; (iii) make a~ general assignment i for the benefit of. creditors; (iv)- have an involuntary petition in l

bankruptcy filed against it; (v) commence a case under or otherwise seek to take advantage any of bankruptcy, reorganization, ~T I

insolvency, readjustment of debt, dissolution or liquidation law, statute, or proceeding; or (vi) resign, Allegheny shall appoint a successor Trustee as soon as practicable. In the event of any such -

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removal or resignation, the Trustee or Successor Trustee shall settle its accounts as provided in Section 6.06 hereof. Any i

cuccessor to Allegheny shall have the same light to remove and to

. appoint any Trustee or Successor Trustee as provided herein.

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11 Any Successor Trustee shall qualify by issuing a duly acknowledged acceptance of this Trust, stelivered to Allegheny.

Upon acceptance of such appointment by the successor Trustee, the Trustee shall assign, transfer and pay over to such successor Trustee the monies and properties then constituting the Trust. The Trustee shall be entitled to receive any administrative expenses, costs, fees and other suma due and owing to it in accordance with the provisions of this Agreement. Any successor Trustee shall have all the rights, powers, duties and obligations herein granted to-the original Trustee.

If for any reason Allegheny cannot or does not act in the event of the resignation or removal of the Trustee, as provided above, the Trustee may apply to a court of competent jurisdiction for the appointment of a successor Trustee. Any expenses incurred by the Trustee in connection tiherewith shall be deemed to be an expense of administration payable in accordance with Section 4.02 hereof.

6.02 Exoneration From Bond. No bond.or other security shall be exacted or required of any Trustee appointed by this Agreement or pursuant to Section 6.01 in any jurisdiction.

6.03 Resicma tion. The Trustee or any Successor Trustee hereof .

may resign and be. relieved as Trustee at any time without prior application to or approval by or order of any court by a duly acknowledged instrument, which shall be delivered to Allegheny by the Trustee not less than sixty (60) days prior to the effective date of the Trustee's resignation or upon such shorter notice as -;

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• 6.04 Resnonsibilities.- The-Trustee shall not be responsible in any.mannor whatsoever for the correctness of the recitals or fact herein (other ~ than. recitals of : fact relating solely to the Trustee and its power and authority to enter into and perform this Agreement), all of which have been made by Allegheny-solely. The-Trustee shall not be responsible:forsthe sufficiency of the Trust to effect the decommissioning of the Plant er for the use . or application of any monies held in-the Trust when disbursed by the

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Trustee in conformity with this' Agreement.

6.05 Transactions With -Third- Parties. No person or organization dealing with the Trustee hereunder shall be' required to inquire into or to investigate its authority for entering-into any transaction or to see to the application of the proceeds of any such transaction. ~

6.06 Accounts and Reoorts. The' Trustee shall keep accurate and detailed accounts of all investments, receipts- and disbursements and other transactions hereunder, and all accounts,

. books and records relating thereto shall be open to inspection and! _

audit at all reasonable times by any person designated by Allegheny. Within 30 days following the close of each month, the Trustee shall file with Allegheny a written report of its administration of the Trust from the date of the last such report setting forth all investments, receipts and disbursements and other transactions effected during the month, containing descriptions of all securities purchased, sold or distributed.and the cost or net

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13 proceeds. of sale, and showing all - cash, securities and other:

investments held at the end of such month and the cost and Fair =

Value of each item thereof as carried on the' books of the Trustee.

Such .. accounts and reports. shall- also:' identify all, disbursements made to pay for expenses or administration of:the Trust.

h' In the event that any exception taken by Allegheny cannot--

be amicably adjusted, Allegheny-may file the written report'in a-Court having jurisdiction and upon the-audit thereof any:and all 4

such exceptions which may not have been amicably settled shall be heard and adjudicated.  !

a All records and accounts maintained,by-the Trustee with 1

respect to the Trust shall be preserved-for such period as may be i

required'under any applicable law. Upon the expiration of any such  ?

a required retention period, the Trustee shall have the right to destroy such records and accoun'ts after first notifying Allegheny  ;

in writing of its intention and transferring-to Allegheny records 3 and accounts requested. i l

6.07 1 Tax Returns and Other Renorts. The Trustee shall prepare q and timely file all Federal, state'and local income or franchise' tax returns or other reports (including estimated tax returns and information returns) as may be - required from time to -time, __and

- Allegheny agrees to provide the Trustee in a timely manner with any information within its possession, and to cause the Investment Manager (s) to provide the Trustee with any information in its possession, which is necessary to such filings. The Trustee shall prepare and submit to Allegheny in a timely manner all information 1

t ,

J14-and - documentations. requested by Allegheny regarding- the--Fund 1 i

required to be included in Allegheny's Federal, state and local.  !

-income tax returns or other reports (including estimated tax returns and information returns) . Subject to ' the -limitations -t 3

contained. in Section8.04 hereof, the Trustee may, employ ~

independent certified-public accountants or other tax counsel to 3

prepare or review such returns and reports. The Trustee agrees to sign any. tax returns or.other reports where required by law-to do '

so or arising out of the Trustee's responsibilities hereunder, and-to remit from the Trust appropriate payments; or deposits of-federal, state and local income or franchise taxes directly to the taxing agencies or authorized .' depositaries . in a timely manner.

Notwithstanding Section 6.08 hereof, any interest or penalty.. -

charges assessed'against the Trust, as a result of the Trustee's fallure to comply with this ~ Section 6.07 shall be . borne by the t Trustee and not the Trust. The Trustee agrees to notify Allegheny  ;

in writing immediately of its receipt of notice of the commencement '

of any audit of the Trust's Federal, state, or local! tax returns, and to participate with Allegheny in such audits. and 'related inquiries.

The Trustee further agrees to provide-Allegheny with any additional information in its possession regarding the Trust or Fund which may be requested by Allegheny to be furnished in an audit of Allegheny's Federal, state, or local tax or informational '

returns.

6.08 hiability.  ;

The Trustee shall not be liable for any acts, omissions or defaults of any agent (other than its officers and

. . ,  ; r a

g lP l 15 employees) or depositary appointed or selected with reasonable care or for any acts taken or not taken at. the direction of or:upon instructions from Allegheny. The Trustee.shall be liable only for such Trustee's own ' acts or omissions (and those of its officers and -

employees) occasioned by the willfulness or neglect of such Trustee (and that of its officers and employees) . The Trustee may consult with legal counsel of Allegheny, which _ may be an employee: of Allegheny, and the' advice or opinion of such counsel as to matters )

l of-law shall be full'and complete. authorization and protection-in respect of any action taken,_ omitted or' suffered by it hereunder in good faith and'in accordance with the advice or ~ opinion.of such counsel.

L Notwithstanding the foregoing, the Trustee (and.not the Trust) shall be liable for any tax imposed . upon - the Trustee pursuanttosection4951oftheCode(oranyapplicablesuccescor  !

provision) as a result of its failure to perform its -duties and

r. obligations in accordance with this Agreement. Furthermore, the Trustee (and not the Trust)- shall be liable for any tax imposed on the Trustee pursuant to section 4951 of.the Code- (or any applicable i

successor provision) as a result of any action undertaken by it which is untclated to the administration of this Trust.

6.09 Certifications. Wh9never in ~ the performance , of its duties hereunder the Trustee shall deem it necessary or desirable-that a matter be proved or established prior to taking or suffering. '

any action hereunder, such matter (unless other evidence in respect  !

thereof be herein specifically prescribed) may be deemed. to be

_ . ._, ., ,, -, , , - , _ . , , .,,i

- + ,

W 16

- conclusively proved and established-by a certification as to such matter signed 'by any person authorized to act on behalf of Allegheny pursuant to Section 10 04 hereof

' VIIA - INVESTMENT MANAGER (8).  !

7.01 Anoointment of Investment Manaaer(s). Allegheny.shall

.have'the sole right to appoint one or more Investment Managers to i

manage the investment of all or part of the Trust. Whenever such I appointment is made,' Allegheny shall notify the Trustee in writing that such appointment has been made and, if less than all of the i i

Trust, shall specify that portion of the Trust 1 with respect to I which an Investment Manager has -been> designated and, -if '

i appropriate, shall instruct the Trustee to. divide into a separate  ;

i investment subaccount . (each , constituting an Investment Account) those assets with respect to which that specific Investment Manager a has been designated. Except as otherwise expressly provided in i l

Article IX hereof, to the extent that Allegheny. authorizes an i Investment Manager to manage the investment of an Investment .

I Account or the Trust in its entirety, the Trustee shall be released i

and relieved of all investment duties, responsibilities and i

liabilities for or in respect of the investing of such Investment q

Account or the Trust, as the case may be, and as to such Investment Account, the Trustee shall act only as custodian. An Investment-Manager shall notify the Trustee in writing that it has accepted its appointment as Investment Manager, shall identify the person (s) authorized to give instructions or directionb to the Trustee on its behalf, including specimen signatures, shall indicate if it is

17 registered under the Investment Advisers Act of 1940, and shall undertake to perform its duties as Investment Manager in 'accordance '

with its Investment Manager Agreement. The Trustee may continue to  !

rely upon all such notices unless otherwise notified in writing by '

i Allegheny or an Investment Manager, as the case may be.  ;

7.02 Direction by Investment' Manaaer(si. 'An Investment Manager designated to manage the Trust or any portion thereof shall  !

have authority to manage, and to direct the acquisition .and -

disposition of the assets of the' Trust, or such portion as the case- I may be, and the Trustee shall exercise the - powers set forth~in Article IX hereof only when, if : and. in the ' manner directed- by L

Allegheny in writing. An Investment Manager shall-have the power i and authority, exercisable in its sole discretion at any time and '

i from time to time, to issue and place orders for the purchase or sale of portfolio securities directly with qualified brokers or lI dealers. The Trustee, upon proper notification from an-Investment Manager, shall settle the transaction - in. accordance with the.

appropriate-trading authorizations. Written notification of the -

issuance of each such authorization shall be given promptly to the-

\

Trustee by an Investment Manager, and such Investment Manager shall  ;

cause the execution of such order to be confirmed in writing to-the I Trustee, and to Allegheny, by the broker or dealer, Such f

Investment Manager may cause brokers and dealers to confirm trades to the Trustee through the " Institutional Delivery System" and the Trustee shall be entitled to rely upon such cbnfirmations to settle purchases or sales of securities.

Such notification shall be i

. ~ . . . - --. . - - --

L: l 3.,.. t

-]

l . l 18-proper authority for the Trustee to pay for portfolio securities i

purchased against receipt thereof 'and to deliver: portfolio-1 securities sold against payment therefor, as the case may be. All directions to the Trustee by an -Investment Manager shall be in  :

-writing'and'shall be signed by~a person who has been specified by such Investment Manager pursuant to Section -7.01 hereof as.

authorized'to give instructions or directions to the Trustee.

It shall be the sole responsibility of Allegheny to 1

i define the authority of an Investment Manager and-the terms and conditions of the appointment and retention of, such - Investment: '

Manager, and the Trustee shall not:be deemed to be a party to or to  :

i have any obligations under any' agreement with an: Investment j

Manager. Any duty of supervision or raview of the acts, omissions or overall performance of an Investment Manager shall be the '

exclusive responsibility of Allegheny, and the Trustee shall have no duty to review any securities or other assets purchased'by an Investment Manager, or to make suggestions to an Investment Manager i

or to Allegheny with respect to the exercise or nonexercise of any 4 power by an Investment Manager.

Unless the Trustee knowingly. participates in, or i knowingly undertakes to conceal an act or omission of an Investment  !

Manager, knowing such act or omission to be a breach of the ,

fiduciary responsibility of an Investment Manager, the Trustee {

shall be under no liability for any loss of any kind which may result by reason of any action taken by it in accordance with any direction of an Investment Manager pursuant to this Agreement.

I e i

19 ,

With respect to any assets invested:by an Investment Manager,.the Trustee shall-be under no liability-for any loss of any kind by reason of; investments purchased, sold, or retained by such Investment Manager, nor for the risk of - diversification or the turnover of the investments, nor for any _other. aspect of that portion of the Trust for which 'an Investment Manager has- been appointed.

VIII. TRUSTEE'S GENERAL POWERS. -

4 The Trustee shall have, with respect to_the Trust, the.  !

following powers, all of which powers are exercisable in. a fiduciary capacity and in the best interests of this Trust without-  !

court approval:

]

1 8 . 01-- '!

Extension of Oblications and Necotietion of Claim _g. To renew or extend the time of payment of any obligation,-secured or-unsecured, payable to or by this Trust, for as long:n period or  !

periods of time and on such terms as the Trustee shall determine,

• and to adjust, settle, compromise and arbitrate claims or demands in favor of or against the Trust, including claims for taxes,-upon j such terms as the Trustst RLy deem advisable, subject to the {

i limitations contai36d 3n~Section 6.08 (regarding self-dealing).

8.02 Recd str_allpon of Securji.iMs.

To hold any stocks, bonds, _.

securities or cther property in the name of a nominee, in a street j name, or by other title-holding device, with or without indication of trust.

8.03 Borrowing. To borrow money on buhalf of the Trust in such amounts and upon such terms as Allegheny may direct in writing I

C<

e.

l-20' as necessary to' carry out the purposes of this Trust, and~ to pledge on behalf of the Trust any securities or' other f property for the i repayment of any such loan.as~ Allegheny may direct.

8.04 Retention 'and Removal of Professional and Mr.nlovee Services. To employ such attorneys, accountants, custodians, engineers, contractors, clerks, and agents, as are necessary.and reasonable-to carry out-the purposes of this Trust.

8.05 Delecation of Ministerial' Powers.- To delegate to other I

persons such ministerial-powers and duties as the Trustee may deem.  !

to be advisable. I 8.06

' Powers of Trustee to continue Until Final' Distribution..

To exercise' any of such powers after the date . on' which the principal and-income'of the Trust shall haveLbecome distributable' and until such time as the entire principal of,:and income from, 1 the Trust shall have been actually-distributed bylthe Trustee. It is intended that distribution of the Trust will occur as soon as l possible upon-termination of the Trust, subject, however, tofthe '

limitations contained in Article V hereof. a' 8.07 Discretion in Exercise of Powers. To do any and all '

i other acts to effectuate the powers specifically conferred 'upon it.

by this Agreement, provided, however, that the Trustee may not do any act or participate in any transaction in connection with this Trust which the Trustee knew or should have known would:

(a) Contravene any provision of this Agreement; (b) Violate the terms and condiridns (as interpreted for the Trustee by Allegheny) of any Order; or l ll ll I I I . -

I

.V g

-c.. .

1 ,

t 21 i (c) Violate the terms and conditions- of - any law, -

regulation or ruling applicable to the Trust.

IX.- TRUSTEE'8 luvasiMENT POWERS, 9.01 General Investment Powers. To the extent that the assets -

of the Trust have not been allocated to an Investment Account under ,

the management of an Investment Manager, upon the written direction i

of Allegheny, : the Trustee = shall have . the following investment

-t powers,- all of which are exercisable in a fiduciary. capacity and in- i l

the best-interests of the Trust without court approval: [

(a) Investment Guidelines. r<1erally, to hold, manage and invest the assetu of this Trust with ,he objective.of seeking, l within the investment' restrictions specified herein and under laws, rules, regulations and orders applicable to the Trust, long' term 1

growth with liquidity and stability of principal, t In all cases, however, the total investments ' by the Truntee must be sufficiently liquid to enable the Trust.to fulfill q

the purposes of the Trust and to- satisfy obligations and i

contemplated payments from the Trust as such obligations and payments become due.

(b) Particular Fund Manacement. To invest and reinvest all or any part of the Fund, including any undistributed income therefrom, in any and all kinds of investment grade or higher '

securities, including common and preferred stocks, bonds, debentures, notes, mortgages and options on property; in money market funds, commercial paper, repurchase agreements, . United states Treasury obligations, certificates of deposit, savings s

)

i i

l 1

. 22 accounts, checking accounts, other cash ' investment medium, investment trusts, common trust funds, or in any other ' interest or -  !

investment. medium, even-though such investment would not be of~a character authorized. by applicable -law but- for this provision; ,

Drovided, however, that no such investment or reinvestment may be-t

-made4 by the ' Trustee . which would contravene - any - Order, or any

[.

instructions issued by Allegheny. :In all cases, however, the total  :

investments must be sufficiently liquid to enable the Trust to' fulfill the pr.rposes of the Trust.and to satisfy. obligations and i

contemplated payments from the Trust 'as such obligations and-payments become due.

Nothing in this l Section 9.01(b) shall be L

construed as authorizing the Trustee to carry on any business or .to divide the gains therefrom. ,

(c) Limitations. In investing, reinvesting, .and managing the Fund, the Trustee shall discharge its duties with 1

respect to the Fund solely in the-interest-of the beneficiary and with the care, skill, prudence, and diligence under the  !

circumocances then prevailing which persons of prudence,-acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of a like character and with like aims; excent thati i (1) Securities or cther obligations of the Grantor, j or any other owner or operator of the said Susquehanna Steam l l

Electric Station, or any of their affiliates as defined in the Investment Company Act of 1940, as amended -(15 U. S. C. 80A-2(a)),

shall not be acquired or held unless they are securities or other l

p V ,

{..- e.

23 obligations -of the Federal or a Statie government; and (2) The Trustee-is authorized to invest the Fund in time or demand deposits of the Trustee,-to the extent insured by-an 1

agency of the Federal government. '

(d) Manacement of Trust. To sell ~, exchange, partition-i or_otherwise dispose of all or=any part of the Trust at.public'or ~

private sale, without prior application to or approval by or order 1

of any court, upon such terms and in such manner and at such pricesi 'I as the Trustee shall determine; to modify, renew or extend-mortgages,-- bonds, notes or other_ obligations-_or any -installment of principal thereof or any interest - due thereon i

and ' to waive any - '

-defaults.in the performnr.ce of'the terms and conditions'thereof; 3 and to execute and deliver any and all bills of sale, assignments, i

bonds or other instruments in connection with these powers, alli at s

such times, in such manner and upon such terms and conditions as i the Trustee may deem expedient to accomplish the purposes of the

,1 Trust as set forth in Section 2.01 hereof. No person dealing with the Trustee shall be bound to review, analyze, or investigate the application of any consideration or proceeds of sales.- $

9.02 Temocrary Investments. The invest t

Trustee shall

l temporarily idle cash ' balances ' awaiting disburs:ement or permanent investment (by the Investment Manager pursuant to Article. VII hereof or by the Trustee pursuant to -Sec, tion 9.01 hereof) into investment vehicles which conform to the restrictions on such investments specified in Sections 9.01(b) and 9.01(c) hereof.

n

l 24 X. MISCELLANBOUS.

10.01 Headings. The section headings - set forth in this-Agreement and the Table of Content's are inserted for convenience of reference only and shall be disregarded in:the construction-or-interpretation of any of the~ provisions of-this' Agreement.

10.02 Particular Words. Any word contained in the' text of this Agreement shall be read as the singular or plural -and _. as the masculine, feminine or neuter as may be applicable or permissible; in the particular context. Unless otherwise.specifically stated, the word " person" shall be taken to mean and include an individual,  !

r partnership, association, trust, company-~or corporation. I 10.03 Severability of Provisions. ~~  :

If any provision of this. i I

Agreement or its application to any person or entity orf in any

~ '

'{

circumstances shall be invalid and unenforceable, the application  !

of such provision,to persons and in circumstances other than those as to which it is invalid or unenforceable and'the other. provisions of this Agreement, shall not be affected by such _ invalidity or '

unenforceability.

10.0.

Form and-Content of communications. The name of any i

person authorized to act on behalf of Allegheny or to execute a certificate shall be certified, with the specimen signature of such I person, to the Trustee by Allegheny. Until appropriate written i

evidence to the contrary is roccived by the Trustee, it shall be fully' protected in relying upon-and acting in accordance with any written notice, instruction, direction, certificate, resolution or other communication believed by it to be genuine and to be signed J

G 25 or certified by any proper person, and the Trustee shall be under no' ~ duty. to make any investigation ' or inquiry as ' to the truth or accuracy of any statement contained therein. Until notified in writing to the contrary, the Trustee shall have the right to assume that there has been no change in the identity or authority oflany person previously certi*ied to it. hereunder.

10.05 Delivery of Notices Under Aareement. Any notice required

.7 by this Agreement to be given to Allegheny or the Trustee shall- be j 1

deemed to have-been properly given when mailed, postage prepaid, by j registered or certified mail, to the person to be notified as set .3 j

forth below: l If to Allegheny: '

ALLEGHENY ELECTRIC COOPERATIVE, INC.

212 Locust Street  !

P.O. Box 1266  !

Harrisburg, Pennsylvania 17108 s

Attention: Mr. C. Donald Blackburn If to the Trustee:

MELLON . BANK, N. A.

Trust and Investment Department Room 151-3346' One Mellon Bank Center ,

Pittsburgh, Pennsylvania 15258 j I

s Attention: q Trust Administration Allegheny and the Trustee may' change the addresses above -

by delivering notice thereof in writing to the other party.

10.06 Successors and Assictns . Subject to the provisions of Sections 2.08 and 6.01, this Agreement shall be binding upon and inure to the benefit of Allegheny, the Trustee and their respective

__m__. __._-.._.. ___. __---_

l 4 ]

b 1

26 .,

successors, assigns, personal representatives, executors and heirs.

10.07 Governina Jurisdiction. The Trust is a Pennsylvania trust and all questions' pertaining to its validity, construction- ,

and administration shall be determined' in accordance with the? laws, of the Commonwealth of Pennsylvania- to the extent not ' superseded by

-Federal law.

10.08: 'Accountina- Year. The Trust shall operate .on an accounting year which begins on~ November 1 of each year'.

10.09 Countercarts. This Agreement may be executed in,several' '

s counterparts, and all.such~ counterparts executed ' and delivered, .

each.an original, shall constitute but one and the same instrument. '

'i IN WITNESS WHEREOF, Allegheny and the Trustee-have set.

their hands and seals to this Agreement as 'of. the day - and date -  ;

first above written. .

1 Y

ALLEGHENY ELECTRIC COOPERATIVE,-INC.

l

' By:

i l Jesse C.-Tilton III 't President

.t j Attost:

k MELLON BANK, N.A.

By:_ i

~

(Name)

(Title)

Attest:

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27 COMMONWEALTH OF PENNSYLVANIA  :

- SS:

COUNTY OF DAUPHIN  :.  !

I, Linda B.. Russell,.-a Notary Public in and'for the aforesaid jurisdiction, - do - hereby icertify - that Jesse: C. Tilton III and-Anthony l C. Adonizlo, who - are- personally known to me to be ? the -

. persons who executed the foregoing Decommisaloning Trust- Agreement, :t!

4 personally appeared President and before me in the aforesaid jurisdiction,cand as:

Assistant Secretary of' Allegheny Electric- '

cooperative,-Inc. , and by virtue ~of the pown and authority vested -

in them, acknowledged.the same to be the..act and deed of Allegheny; Electric Cooperative,.Inc., and they. executed the-same as'such~. ]

' Given under my hand and seal this day of 1990. , i

[ NOTARIAL SEAL)

Notary Public

, commonwealth of Pennsylvania My commission expires J

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. . - . . . . . . . . - , , , , , y- . _ . . , . , - ,, ,. , ,,

28 COMMONWEALTH.OF PENNSYLVANIA  :

SS:

COUNTY OF  :

I, a Notary Public Lin and'; for. the -

aforesaid jurisdiction, do hereby certify'that and ,

who are personally known to me, to-- be. the persons'who executed the foregoing Decommissioning Trust Agreement, personally appeared before me in the aforesaid jurisdiction, and as -

and- ' of Mellon Bank, N. A.

and by virtue--of the power _and authorityi-vested.'in them, acknowledged and the same they executed to be the' the'same-as such.act and deed of Mellon Bank, N. A. ,

Given under my hand and seal this day of ,_

[ NOTARIAL SEAL)

Notary Public commonwealth.of Pennsylvania i My commission expires e

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'I 11 29 i

EERIBIT A CERTIFICATE NO.

e The undersigned representative -of- Allegheny Electric- '

cooperative, Inc. (" Allegheny"), a Pennsylvania electric cooperative corporation being duly authorized andL empoweredito I execute and deliver this certificate, hereby certify _ to the-. Trustee -

~

of the Allegheny Electric . Cooperative,-Inc. ' Nuclear Decommissioning' Trust. (" Trust"), pursuant to Article IV of that - certain-Decommissioning. Trust Agreement,: dated

,- 1990L i

. (" Agreement") , between the Trustee and Allegheny 'as . follows:'

-(1)-

Exhibitincurred to,-or 1 hereto. sets forth the: amounts either invoiced by,-Alleghen each payee ' listed- (" Payees")yfor: that .are .due andiowing 'to (a) goods or services provided _in connection 'with' decommissioning lthe Plant or [

E (b) administrative costs of-thelTrust (excluding costs arising from-_ Allegheny's -!

furnishing l of - goods, services, or facilities to the Trust and excluding compensation which is excessive or unnecessary to' carry out the-purposes of_theLTrust)  ;

as evidenced by ' the '

. exhibits) attached asInvoice-Schedule Exhibit 1 hereto;

-(with supporting (2) all such amounts Costs due and owing to the Payees constitute-

)

Decommissioning or Administrative Expenses as '

described in Article IV of-the Agreement; (3) all conditions precedent to the making of this withdrawal and disbursement set forth in any agreement between such-Payees and Allegheny, if anolicable, have been fulfilled. "

Accordingly, request is hereby made that the Trustee provide-  !

for the withdrawal of $ from the Trust in order to permit 9ayment of such sum to be made to the Payees. You are further m

requested to disburse such sum, once withdrawn, directly to such i

._.- ~ ,

30 Payees in the following manner: [ DESCRIBE: CHECK, WIRE TRANSFER,.

ETC.]-on or before ,, - 19_ . ,

WITNESS ny hand'this- day of .;

19_. '

ALLEGHENY ELECTRIC COOPERATIVE, INC.- '

By:. .

Duly Authorize.d Representative L

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.1 31 '

i EERIBIT B ELECTED AND APPOINTED OFFICERS- '

OF ALLEGHENY ELECTRIC COOPERATIVE, INC.

e

-h As of the date of-the establishment of. the Allegheny ' Electric - <

Cooperative, Inc. Nuclear Decommissioning Trust, the following'were-officers of-the-corporation: ' l, David Turner, ChairmanJof the Board- '

s John B.. Drake,.Vice Chairman'of.the Board James L. Henderson, Secretary *

?

I' Donald J. Songer, Treasurer '

• Jesse C.'Tilton III,-President'

William E. Mowatt, Vice President Anthony C.

Adonizio,' Assistant Secretary and General-Counsel' t

I

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...E._______ - _ - - - " ' ' " ._ . . . . . - . . --

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'i KNVESTMENT MANAGEIGNT AGREEMENT, ,

AGREEMENT, made this ' day of- , 1990', by and 1 between Allegheny Electric Cooperative, Inc., a -Pennsylvania j electric cooperative corporation 1 (hereinafter referred to as ~

" Allegheny")\and National Investment Services of America, Inc., a Delaware corporation (hereinafter referred to as "NISA").

W I T N E S S E'T H:

WHEREAS, ' Allegheny is the - owner of a . ten ' percent (10%);

undivided . interest -in . the Susquehanna Steam Electric Station -in.

Luzerne County, Pennsylvania-:which consists-of two nuclear-power reactor' units. identified in. Nuclear Regulatory Commission License Nos. SNM-1878 and SNM-1919 respectively, issued pursuant to-10 C.F.R. Part 50;.and WHEREAS, the Nuclear Regulatory Commission as an agency of the' U.S.' government, pursuant Eto the ' Atomic .- Energy Act of 1954, . as' amended, and the Energy Reorganization Act of 1974,- has promulgated regulations in Title 10,JChapter I of the Code of Federal Regula-tions, Part 50.- These regulations, applicable to Allegheny, require that the holder of, or an applicant for a license issued A pursuant to 10 C.F.R.-Part 50 provide a assurance that 7 funds will be available when needed for required decommissioning activities; and WHEREAS, Allegheny has elected to.use a trust fund.to provide ~

all of such financial assurance for the facilities: ' identified' herein; and l~

l WHEREAS, Allegheny has thus established the Allegheny Electric Cooperative,- Inc. Nuclear- Decommissioning Trust (hereinafter referred to as the " Trust") and has appointed Mellon Bank, N. A.

(hereinafter referred to as the " Trustee") to act in'the capacity as trustee of the Trust and as custodian of all assets of the Trust; and-d t

WHEREAS, NISA is registered as an investment advisor under the'- f Investment Advisors Act of 1940; and

. WHEREAS, Allegheny desires to engage NISA to act as an L ir. vestment manager for the assets in the Trust; and l WHEREAS, NISA is willing to accept such an investment management assignment for the Trust.

NOW THEREFORE, in consideration of the mutual promises herein contained and.with intent to be legally bound hereby, the parties hereby agree as follows:

'.t 8 EXHIBIT -

3

l -

)

Section 1. APPOINTMENT AS INVESTMENT MANAGER. 1SA agrees to act on behalf of Allogheny in the performance o' ovestment management services, including investment direction t. the Trustee in the acquisition and disposition of all assets in the Trust as set forth hereinafter. In this regard, NISA acknowledges that'it'-

has received the Decommissioning Trust Agreement between Allegheny .

and the Trustee which created the Trust, a copy of which is ,

attached hereto and made a part 'of this Agreement as Exhibit A, and NISA further agrees to perform all functions required of the Investment Manager as provided for in the said Decommissioning

~

Trust Agreement'between Allegheny and the Trustee. j TERMINATION. This _ Agreement and the Section 2. (a) parties' respective responsibilities hereunder shall continue until terminated' by either Allegheny or NISA- by delivery? of M a written l notice to that effect to-the other party providing.not less than thirty (30) days notice of such termination.- NISA further agrees .

to provide a copy of any such termination notice'directly to the 1 Trustee.

' r (b) Any assignment by NISA of this Agreement, or voluntary or involuntary transfer or assignment of a controlling ,

interest in N1SA, shall also terminate this Agreement unless Allegheny expressly consents thereto in advance and in writing.

Section 3. COMPENSATION. For its services hereunder, i

Allegheny will pay NISA at the end of each quarter of the fiscal year of the Trust, fees calculated pursuant to the annual rates set 3

2 i

.u .,

forthlon the Client Fee Schedule attached and made a part of this Agreement as Exhibit B.- These fees shall be based upon the-Fair Value, as that term is defined and used'in the said Decommissioning [.

Trust-Agreement, of the total assets of the Trust as reported by the- Trustee at the close - af each such quarter. . Fees for any quarter of a-fiscal year of the Trust in which NISA has' acted as investment manager of the Trust for less than' that full time period H will be prorated 'as a fraction of the days - engaged during the '

subject time period divided by 90 and multiplied by the feel otherwise derived by the above. NISA shall not be entitled to any other-fees,-expenses or costs except as provided in this section.

Section 4. INVESTMENT POWERS, OBJECTIVES AND RESTRICTIONS.

NISA snall have the following investment. powers, tall of which'are exercisable in a fiduciary capacity and in the best interests.of 1

the Trust:

1 (a) INVESTMENT GUIDELINES. Generally, to. manage and invest the assets of the Trust with the objective of seeking, with i

the investment restrictions specified herein, long-term growth with liquidity and stability of principal. More particularly, NISA will invest the Trust assets according to specific investment guidelines and the account philosophy which Allegheny may from time to time designate on the NISA Investment Guideline form, a specimen copy of which is attached hereto and made a part of this Agreement as Exhibit C. In all cases, however, the total investments in the Trust must be sufficiently liquid to enable the Trust to fulfill 3

)

f the purposes of the Trust and to satisfy obligations and contem- l plated payments from the Trust as such obligations and payments become due.

(b) GENERAL INVESTMENT POWERS.

1 (1). To invest and reinvest in any.and all kinds of i investment grade or higher shares, stocks, bonds, notes, investment contracts, limited partnership interests and other obligations and securities of every description issued or incurred by governmental-bodies, corporations, companies,-trusts, associations or firms, in-trade acceptances and other commercial paper and in loans and deposits at interest on call or on time, whether or not secured by' '

collateral; (2) To. buy, sell or exercise rights and-warrants-with respect to securities, to subscribe . for securities and to exercise conversion and redemption privileges pertaining to and to write call options with respect to, securities of investment grade or higher; (3) To vote at stockholders' or security holders' meetings in respect of stock or other securities held in the Trust  ;

and for that purpose to execute proxies, with or without power of substitution; and (4) To assent to or participate in any reorganiza-tion, recapitalization, merger or similar transactions in' respect i of any concern whose stock 'or other securities are held in the Trust.

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i (c) LIMITATIONS.

(1)- Securities or other obligations of Allegheny or any other owner or operator of;the said Susquehanna-Steam E3ectric Station, or any of.their affiliates-as defined in=the Investment Company Act of 1940, as amended,- (15 U.S.C. 80A-2 (a)) , shall not- be 4

acquired or held-unless they are securities or other obligations of '

the Federal or a State government; ,

(2) NISA is authorized to invest'the assets of the i

Trust in time or demand deposits of the Trustee, tc the extent they i r

are insured by an agency of the federal government; and (3) NISA shall make no investment which would q contravene the general investment philosophy instructions issued to  ;

it by Allegheny.

Section 5. STANDARD-OF CARE. In investing, reinvesting and managing the assets of the Trust, NISA shall discharge its duties solely in the interest.of the ' Trust and ' with . the care, l skill, prudence, and diligence under the circumstances l then.

prevailing which persons of prudence, acting in a like capacity and falsiliar with such matters, would use in the' conduct of- an enterprise of a like character and with like aims.

Section 6. CONFIDENTIALLY. NISA agrees-to maintain the i

strictest confidence in regard to Allegheny financial affairs and L

all matters concerning the Trust, except as to information to be provided to the Trustee as set forth herein.

Section 7. REPORTS. NISA will provide to Allegheny 5

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h written reports on a quarterly basis. setting forth in reasonable  !

detail:its investment performance under this Agreement, as well as i'

a current statement of assets in the Trust and' a statement of transactions during the quarter. NISA will'.also make its princi-phle available to periodically report to Allegheny at the latter's Harrisburg, Pennsylvania offices at the request ~of Allegheny at any ,,

time, s

Section 8. OTHER PARTICULAR NISA ' DUTIES. 'NISA further

. agrees - to, undertake and discharge :the following functions and  ;

duties:

1 (a) NISA shall provide the Trustee or Allegheny any; information in its possession as the Trustee or Allegheny may-request from time to time in order to: file federal, state or local l

i income or franchise tax returns . or other reports, including estimated tax returns nnd information returns.- '

! (b) NISA shall notify the Trustee in writing that it has accepted its appointment.as investment manager'under this Agree- .

I ment.

(c) NISA shall identify all persons authorized.to give "

directions to the Trustee and.shall provide specimen signatures of [

such persons to the Trustee.

t (d). NISA shall indicate in writing to the Trustee that it is registered as an investment advisor under the Investment Advisors Act of 1940.

(e) NISA shall provide the Trustee with prompt written 6

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[

. . . . . . . . . . " ~

. notification of the issuance of each trading authorization.

(f) NISA shall cause the execution of its trading orders to be promptly confirmed in writing to the Trustee and to Allegheny- .

by any broker or dealing. -l (g) All_ directions ~by NISA to the Trustee shall~be in writing signed by a person specified by.NISA as authorized to give {

instr.ictions to the Trustee.

Section 9.- BROKERAGE COMMISSIONS. NISA shall make reasonable efforts to-minimize brokerage, commission costs in,its-  :

direction of brokerage; provided however, NISA shall not'be under an obligation to direct brokerage solely- on the basis of the lowest commission cost available, the best research or related services -i but shall exercise its best, reasonable business judgment in-assuring itself as to the fair value of,such. services and their benefit to the Trust. i Section 10. NON-ASSIGNABILITY. No assignment of this-I Agreement may be made by either party without the-written consent of the other party.

Section 11. SCC FORM ADV. By signing this Agreement, }

Allegheny acknowledges receipt of Securities and Exchange Commis-sion Form ADV Part II, and Schedule F, completed by NISA and filed with the Securities and Exchange Commission.

Section 12. HEADINGS. The section headings set forth in this Agreement are inserted for convenience of reference only and  :

shall be disregarded in the construction or interpretation of any 7 I

t b

i of the provisions in the Agreement.

t Section 13.-

y CONSTRUCTION.- Any word contained in the text of'this Agreement-shall be read as the singular or plural and as:  !

the masculine, feminine or neuter as may be applicable or permissi--

1 ble in the particular context.

Section 14. SEVERABILITY OF PROVISIONS. If any provision l

.of this Agreement or its application to-any person or entity.or in; -

any. circumstances shall be invalid or unenforceable,.the applica--

tion of-such provision to persons and in-circumstances other<than-those as to which it is invalid or . unenforceable and' the other' provisions' of this Agreement, shall notl be affected by 'such invalidity or unenforceability.

Section 15. DELIVERY OF NOTICES. Any-notice. required by this Agreement to be given to Allegheny, NISA .or the Trustee shall be deemed to-have been properly given when mailed, postage prepaid, l

by registered or. certified mail, to the person to be notified as l set forth.below:

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^

If to Allegheny:

' ALLEGHENY ELECTRIC COOPERATIVE, INC. ,

212 Locust Street P.O. Box 1266 Harrisburg, Pennsylvania 17108 ,

Attention: Mr. C. Donald Blackburn If to the Trustee:

MELLON BANK, N.A. #

Trust and Investment Department Room 151-3346 One Mellon Bank Center Fittsburgh, Pennsylvania 15258 '

Attention: Trust Administration 8

[

o .

If to NISA:

NATIONAL INVESTMENT SERVICES OF AMERICA, INC.

Suite 1501 815 East Mason Street P.O. Box 2143 Milwaukee, WI 53201 Attention: Mr. Thomas R. Tuschen, Vice President Allegheny and NISA may change their respective addresses above by delivering notice thereof in writing to the other party.

Section 16. COUNTERPARTS. This Agreement may be executed '

in several counterparts, and all:such counterparts executed and delivered, each an original, sha11' constitute but one and the same Agreement.

Section 17. ENTIRE AGREEMENT. This Agreement contains the entire agreement between the parties. It may not be amended _or modified in any respect without the written concurrence of both parties.

Section 18. PENNSYLVANIA LAW CONTROLLING. This Agreement shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania. All questions pertaining to its validitv and construction shall be determined in accordance with the laws of the Commonwealth of Pennsylvania.

9

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IN WITNESS WHEREOF, Allegheny and .NISA have set their j respective bands and seals to this Agreement as of the day and date first above written.

t ALLEGHENY ELECTRIC COOPERATIVE, INC.

l l BY: . Jade / , l __

l p sse C. Tilton III Tr dent  !

ATTEST: --/ .% .

Nd '

Ast(istant ecretary /

NATIONAL INVESTMENT SERVICES OF AMERICA, INC.

1 BY: , b/N/ _

if,$d ph 9ptiNan V

'r ide:ft ATTEST:

/

Secretary I

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ALLEGHENY ELECTRIC COOPERATIVE, INC.

COMPUTATION OF MINIMUM FINANCIAL ASSURANCE AMOUNT FOR DECOMMISSIONING SUSQUEHANNA STEAM ELECTRIC STATION UNITS ONE AND TWO As of December 31,1989 Base amount for a BWR between 1200 MWT I and 3400 MWT is (104 + .009(P)) Million Do!!ars (Where P = Powerlevelof the Reactor, The powerlevel of Unit 1 and Unit 2 =

3,293 MWT each.) $133,637,000 Number of Generating units. 2 Base amount for SSES Units $267,274,000 Allegheny Electric Cooperative,Inc percentage. 0.1 Base amount for AEC in January 1986. $26,727,400 S

EXHIBIT C

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ALLEGHENY ELECTRIC COOPERATIVE, INC.

CALCULATION OF ESCALATION FACTOR 5

USF.D IN COMPUTATION OF MINIMUM FINANCIAL ASSURANCE AMOUNT FOR DECOMMISSIONING SUSOUEHANNA STEAM ELECTRIC .

STATION UNITS ONE AND TWO <

l As of December 31,1989 i

Bolung Water Reactor (BWR) Computation of Escalation factor  :

(L) LABOR (Monthly Labor Review, Table 25, Ethployment Cost index,; Private Nonfarm Workers)

Northeast region- December 1989Index Number 100.0 -

January 1986Index Number 130.5 L= j60.0 = .1.226 ,

130.5  ;

(E) ENERGY- (Producer Price index, Table 6) I P = Industrial Power,500KW demarxl MidAtlantic (COMMODITY 05431204) '

December 1989Index Number 115 4 .

l January 1986 Index Number 111.9 P= 115.4 = 1.031  ;

l 111.9 i F = Ught Fuel Otis (COMMODITY 0573) -

December 1989Index Number 68.1 '!

January 1986 Index Number - 82 'I F= 68.1 = 0.830 82 E = (.23P + .77F)

E = (.23 x 1.031) + (.77 x .830)

E = .237 + .639 = .876 F

(B)-WASTE BURIAL NUREG 1307 REV ,1 *NRC Report on Waste Burial Charges' Table 2.1 Soult Carolina FACTOR r

' B = 1.814 i Therefore Escalation Formula = 0.65(L) + 0.13(E) + 0.22(B)  ;

Escalation = (.65 x 1.226) + (.13 x .876) + (.22 x 1.014)

Escalation = .797 + .114 + .399 = 1.31 EXH! BIT D

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ALLEGHENY ELECTRIC COOPERATIVE, INC.

CCMPUTATION OF MINIMUM FINANCIAL ASSURANCE AMOUNT FOR DECOMMISSIONING SUSOUEHANNA STEAM ELECTRIC STATION UNITS ONE AND TWO INCLUDES ADJUSTMENT FOR ESCALATION FACTOR L As of December 31,1989 I

!$aseamountfor AECinJanuary 1906 $26,727,400 Escalation (< actor from Page 2 1.31 .

Revised escalated base amount for AEC in December 1989 $35,012,894

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m EXHIBIT E

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DRAFT Policy Bulletin 1501 ALLBORENY ELBCTRIC COOPERhTIVB, INC.

SUSQUEEANNA STB &N ELBCTRIC STATION DBCCantISSIONING PLAN PERIODIC ADJUSTMENTS TO MRC COST BSTIMhTES I. OBJECTIVE To place- Allegheny Electric Cooperative, Inc. ("Alleghe-ny") in full compliance with Nuclear Regulatory Commis-sion ("NRCH) regulations relative to reporting require-ments by HRC licensees- on periodic adjustments to Allegheny's nuclo r decommissioning plan and-its finan-cial assurances ha that regard.

II. POLICY A. It is the policy of Allegheny to periodically review and adjust the funding of the Allegheny Electric Cooperative, Inc. Nuclear Decommissioning Trust, and to make appropriate reports to the NRC, during both operation and any storage period as follows:

1. Inflation 8

At . least annually, Allegheny shall determine the estimated cost of inflation on its decom-missioning plan and on the funding levels of the Nuclear Decommissioning Trust and shall adjust the"NRC certification amount using the formula in paragraph 50.75 (c)(2) of 10 C.F.R. Part 50. Alternatively, Allegheny may use standard measures of price indexing such as the annual Consumer' Price Index published ~by the U.S. Department of Labor, Bureau of Labor Statistics, or the inflation factor derived from the Implicit Price Deflator for the Gross National Product as published in the " Survey 4 of Current Business" by tha U.S. Department of '

Commerce or in " Economic Indicators"- by the Council of Economic Advisors.. Allegheny may.

also use factors indicated in Regulatory Position 1.2 of the NRC Regulatory Guide (Assuring the Availability of Funds'for Decom-missioning Nuclear Reactors) for - escalating the principal components of the cost estimate.

2. Technolooical and Status Chances At least every five years, Allegheny shall determine the estimated cost of technological EXHIBIT F

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l Policy Bulletin 1501.

changes or changes - in plant status on its .

decommissioning plan and on the funding levels j of the Nuclear Decommissioning Trust. This  ;

analysis will include developments.in decon-tar.lination, waste processing and disposal, or i cutting-equipment technology, updated informa- l tion about. the facility conditions such as  !

larger levels of contamination than anticipat-ed, updated waste disposal conditions, updated i residual radioactivity limits, and experience gained from actual decommissioning of similar ,

facilities. 1 I

B. It is the policy of Allegheny to update the decom-  ;

missioning plan and cost estimate for nuclear i decommissioning in accordance with 10 C.F.R. $50.82' (b) at such time as Allegheny may apply to termi- ]

nate its NRC license.

III. RESPONSIBILITY . ,

The President or his designes shall be responsible for j the proper administration of -this policy and to make-appropriate budgetary and rate recommendations to the Board of Directors of Allegheny consistent with this i policy. >

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I Policy Bulletin 1501 approved by the Allegheny Electric Cooperative Board of Directors on , 1990.

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