ML20085L354
| ML20085L354 | |
| Person / Time | |
|---|---|
| Site: | Midland |
| Issue date: | 10/18/1983 |
| From: | Lauer R CONSUMERS ENERGY CO. (FORMERLY CONSUMERS POWER CO.), ISHAM, LINCOLN & BEALE |
| To: | NRC OFFICE OF THE EXECUTIVE LEGAL DIRECTOR (OELD) |
| References | |
| ISSUANCES-OL, ISSUANCES-OM, NUDOCS 8310240172 | |
| Download: ML20085L354 (134) | |
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.' , RELATED CCT.SZrC::DE:!CE l
- L - l 00(.KETEC st(PC ISHAM, LINCOLN & BEALE
, COUNSELORS AT LAW
'83 OCT 21 A10:32 THettt FIRST NATIONAL PLAZA o.cAso.umosenem _
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WASHINGTON. O C 20036 October 18, 1983 2* -
UNITED STATES OF AMERICA NUCLEAR REGUIATORY COMMISSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD In the Matter of: } Docket Nos. 50-329 OM
) 50-330 OM CONSUMERS POWER COMPANY, ) Docket Nos. 50-329 OL (Midland Plant, Units 1 & 2) ) 50-330 OL To All Parties:
Documents related to the Dow Chemical / Consumers Power lawsuit were provided to the parties at hearings on July 28, 1983 and September 21, 1983. These documents were not previously served upon the remainder of the Midland j service list. This letter transmits those documents.
l The documents which were provided on July 28, 1983 include the following:
- 1) Original complaint filed in Dow lawsuit
- 2) General agreement between Dow and Consumers dated June 1978
- 3) Judge DeWitt's order striking original complaint
- 4) First amended complaint filed by Dow The documents which were provided on September 21, 1983 include the following:
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- 1) Pre-trial order number 1
- 2) Order for preservation of documents.
Sincerely,
?% .
Rebecca J. auer One of the Attorneys for Consumers Power Company RJL:at 8310240172 831018 PDR ADOCK 05000329 O PDR
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UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD In the Matter of: ) Docket Nos. 50-329 OM
) 50-330 OM CONSUMERS POWER COMPANY, ) Docket Nos. 50-329 OL (Midland Plant, Units 1 & 2) ) 50-330 OL CERTIFICATE OF SERVICE I, Rebecca J. Lauer, hereby certify that copies of the following documents were served upon persons listed in the attached service list in the manner indicated:
- 1) Original complaint filed in Dow lawsuit;
- 2) General agreement between Dow and Consumers dated June 1978;
- 3) Judge DeWitt's order striking original complaint;
- 4) First amended complaint filed by Dow;
- 5) Pre-trial order number 1; and
- 6) Order for preservation of documents.
~i k Rebecca J. Lauer One of the Attorneys for Consumer Power Company
SERVICE LIST
- Frank J. Kelley, Esq.
- Steve Gadler Attorney General of the 2120 Carter Avenue State of Michigan St. Paul, Minnesota 55108 Carole Steinberg, Esq.
Assistant Attorney General Environmental Protection Div.
- Atomic Safety & Licensing 720 Law Building Appeal Board Lansing, Michigan 48913 U.S. Nuclear Regulatory Comm.
Washington,- DC 20555
- Cherry & Flynn Suite 3700 *Mr. Scott W. Stucky Three First National Plaza Chief, Docketing & Services Chicago, Illinois 60602 U.S. Nuclear Regulatory Comm.
Office of the Secretary Washington, DC 20555
- Charles Bechoefer, Esq.
Atomic Safety & Licensing Board Panel *** William D. Paton, Esq.
U.S. Nuclear Regulatory Comm. Counsel for the NRC Staff Washington, DC 20555 U.S. Nuclear Regulatory Comm.
Washington, DC 20555
- Dr. Frederick P. Cowan 6152 N. Verde Trail
- Atomic Safety & Licensing Apt. B-125 Board Panel Boca Raton, Florida 33433 U.S. Nuclear Regulatory Comm.
Washington, DC 20555
- James E. Brunner, Esq.
Consumers Power Company *** Jerry Harbour 212 West Michigan Avenue Atomic Safety & Licensing Jackson, Michigan 49201 Board Panel U.S. Nuclear Regulatory Comm.
Washington, DC 20555
- Mr. D. F. Judd Babcock & Wilcox P.O. Box 1260 ***Ms. Lynne Bernabei Lynchburg, Virginia 24505 Mr. Thomas Devine Mr. Louis Clarh Government Accountability
- Barbara Stamiris Project of the Institute 5795 North River Road for Policy Studies Route 3 1901 Q Street, N.W.
Freeland, Michigan 48623 Washington, DC 20009
- Sent by first class mail on October 18, 1983
- First four documents on list were sent by first class mail on October 18, 1983. Last two documents on list were hand-delivered at hearings on September 21, 1983 Hand-delivered at hearings on July 28, 1983 and September 21, 1983
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You are hereby noti 6ed that a civa action has been commenced against you, and that if you desire to defend l the same, you are required to answer or take such other action as may be permitted by law with regstd to the o L
f complaint herewith served upon you, within *20 days after service of this summons and complaint upon you, esclusive of the day of service. If you fail to do so, judgment by default will be taken against you for the relief 1:
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- EXPIRATION OF SUHMONS
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STATE OF MICHIGAN IN THE CIRCUIT COURT FOR THE COUNTY OF MIDLAND THE DOW CHEMICAL COMPANY, )
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Plaintiff, )
) COMPLAINT FOR DECLARATORY
- v. ) JUDcMENT AND OTHER RELIET
)
CONSUMERS POWER COMPANY, ) File No. 83-00-@ y-CK C)
)
Defendant. )
Herbert H. Edwards (P13112) and Kirkland & Ellis Attorneys for Plaintiff e
A. Introduction
- 1. By this Complaint and based upon the facts alleged herein and based upon its information and belief, plaintiff, The Dow Chemical Company, seeks a declaratory Judg-ment declaring its legal rights and obligations with respect to the June 21, 1978 General Agreement for the sale of steam to Dow by defendant, Consumers Power Company, from its Midland Nuclear Facility currently under construction. Specif2cally.
Dow seeks a declaration that all obligations of Dow under the General Agreement are cancelled and discharged because of Consumers Power's fraudulent misrepresentations and non-disclosures, Consumers Power's material breaches of its con-tractual and fiduciary obligations to Dow, and Consumers Power's inability to complete the Midland Nuclear Facility within any reasonable time or cost. Alternatively, if Dow's obligations are not deemed to be completely cancelled and discharged, Dow seeks a declaration that any termination payment required under the 1978 General Agreement must be substantially reduced by virtue of Consumers Power's wrongful conduct. Dow A TRUE CO?Y (5' CiFUTY CU7u(
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further seeks a declaration that it is owed damages arising from Dow's expenditures of more than $60 million in reliance on
' Consumers Power's fraudulent misrepresentations and non-disclosures as well as such further and additional relief as the Court deems just and proper.
B. The Parties
- 2. The Dow Chemical Company ("Dow") is a Delaware corporation headquartered at 2030 Dow Center in Midland, Michigan.
Dow is a diversified international manufacturer of a wide range of chemicals and other products, including industrial chemicals and raw materials, specialty and agricultural chemicals, and consumer products. Since Dow's founding in 1897, one of its principal manufacturing complexes, currently referred to as the Michigan Division, has also been located in Midland. Dow currently manufactures approximately 100 major products at its Midland facilities and employs approximately 7,800 people in the Midland, Michigan area.
- 3. Consumers Power Company (" Consumers Power") is a Michigan corporation whose principal business is the sale of electricity and natural gas to a service area comprising most of the State of Michigan, including Midland. Consumers Power is the largest utility in Michigan and its revenues in 1982 i
exceeded $2.7 billion.
C. Jurisdiction and venue
- 4. Personal and subject matter jurisdiction of this Court is founded on Sections 600.601, 600.605, and 600.711 of the Machigan Compiled Laws and the Michigan General Court Rules of 1963. An actual controversy exists b'. ween Dow and Consumers Power and Consumers Power is a Michigan corporation carrying on a continuous and systematic part of its general business in Michigan.
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- 5. . Venue properly lies in the Circuit Court for the
,C,ounty of Midland under Section 600.1621(a) of the Michigan Compiled Laws because Consumers Power conducts business and maintains a place of business in Midland County.
D. The Prior contracts Between Dow And consumers Power
- 6. In the operation of its Midland, Michigan manu-facturing facilities, Dow requires a continuous, reliable and economical supply of process steam. At all relevant times, Dow's Michigan Division has owned and operated its own power-houses to supply its steam needs.
- 7. Beginning in 1966, Dow and Consumers Power engaged in discussions about the possibility of Consumers Power supplying steam to Dow from a nuclear plant it was planning to construct. As proposed, the Midland Nuclear Facility would consist of two nuclear steam supply systems, one of which (Unit
- 1) was designated to supply steam to Dow. As an inducement to Dow to discontinue its own production of steam and to rely in the future on steam from Consumers Power, Consumers Power indicated to Dow that the Midland Nuclear Facility would be capable of producing 4,050,000 pounds of steam per hour on a continuous, economical, and reliable basis as required by Dow.
- 8. At all relevant times, Consumers Power held l itself out to Dow as capable of constructing the Midland l
' Nuclear Facility in a workmanlike, safe and licensable manner, that such construction would proceed without undue delay, and that Consumers Power would undertake the project without incur-ring unreasonable or imprudent expenditures. Consumers Power also advised Dow that Bechtel Power Corperation ("Bechtel")
would be the architect-engineer and construction manager for the project. On or about December 13, 1967, Consumers Power
and Dow executed an initial General Agreement under.which Consumers Power agreed to supply steam to Dow on completion of the Midland Nuclear Facility (the "1967 Contract").
- 9. Under the 1967 Contract and at all times since, Consumers Power has retained sole responsibility for the design, construction, operation and maintenance of the Midland Nuclear Facility. Dow has no right of ownership, control or direction over the plant and Consumers Power has reserved to itself the exclusive right to make changes in the concept. design, con-struction and operation of the plant at any time and to whatever extent it deems desirable.
- 10. Because of Consumers Power's complete control over and superior knowledge of the design and construction of the plant, Dow has placed its complete faith, trust and confi-dence in Consumers Power. Because of the complete trust and confidence which Dow has placed in Consumers Power and because of the exclusive control exercised by Consumers Power over all phases of the project, Consumers Power has occupied a fiduciary relattenship to Dow, in addition to its other obligations under the parties' agreements. In recognition of Consumers' fiduciary I obligations, at all relevant times, Consumers has had an express
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' contractual obligation to keep Dow fully informed of all material facts that would significantly affect the cost of steam to Dow, including projected cost and scheduling information.
- 11. Pursuant to the 1967 Contract, Dow and Consumers Power entered into a separate contract on January 30, 1974, governing the calculation of Dow's steam cost (the "1974 Steam Contract"). Under the 1967 and 1974 agreement, relying on Consumers Power's cost estimates, the parties agreed that upon completion of the Midland Nuclear racility, the cost of steam to Dow would be based on that portion of the total plant design l
and construction costs devoted to the facilities for generating and delivering steam to Dow. This portion of costs is referred
' to in the contracts as the Allocated Steam Investment. Under the contract formula, ine'reases in the cost of the plant and delays in the plant's completion increase the cost of steam to Dow.
- 12. In 1967, Consumers Pcwer estimated that the Midland Nuclear Facility would be completed prior to 1975 at a cost of $256 million. After 1967, the Midland Nuclear Facility was subject to continuing scheduling delays and cost increases such that by September 1976, Consumers Power was predicting that it would complete both units by March 1982 at a total project cost of $1.67 billion.
E. The 1978 General Agreement
- 13. As a result of these schedule slippages and cost increases and of disputes over the continued validity of the then existing contracts. Dow and Consumers Power undertook late in 1977 the negotiation of an entirely new agreemen~. A funda-mental concern to Dow during these negotiations was to obtain from Consumers Power a firm date by which Consumers Power wculd complete the plant. Daw's need for such a date stemmed in large part from the continuing adverse effect on Dow's Michigan Division of the uncertainty as to when and at what cost the Midland Nuclear Facility would be completed. This uncertainty had had substantial adverse effects on the Michigan Division by preventing Dow from making long-range plans regarding the products to be manufactured at Dow's Midland facilities, Michigan Division employment levels, and capital projects, causing a reduction in Michigan Division operations.
- 14. Because of these concerns, Dow made it known to consumers Power from the start of the negotiations that it was of critical importance to Dow that Consumers Power make full
disclosure of accurate, reliable and up-to-date cost and schedule information. Furthermore, if Consumers Power were unable to complete the Midland Nuclear Facility by a firm date.
Dow wanted the express right to terminate any obligations to purchase steam. In the course of the negotiations which began in 1977 and concluded in June of 1978, the parties therefore agreed that all prior agreements be cancelled and that a new General Agreement be executed.
- 15. On or about June 21, 1978. Dow and consumers Power entered into the General Agreement, attached hereto as Exhibit A (the " General Agreement"). Under the General Agree-ment, Consumers Power undertook to supply up to 4,050,000 million pounds of process steam per hour to Dow upon completion of the Midland Nuclear Facility. The General Agreement further provided that the cost to Dow of the steam would be based on the Allocated Steam Investment, reflecting a portion of the costs of constructing the facility, but that Dow would have no obligation to pay Ccnsumers Power for steam until the Midland Nuclear Facility attained commercial operation for steam generation as defined in the General Agreement.
- 16. Recognizing the past history of the facility, the parties agreed to specific provisions intended to protect Dow from further cost increases and completion delays. For example, under Section 1(B) of the General Agreement. Consumers Power promised to "use its best efforts to place Unit 2 of the Generating Plant in commercial operation for electric service on or about March 1, 1981 and to place the entire Generating Plant in commercial operation for process steam service and electric service on or about March 1, 1982." Under Section 4(C)(4), Consumers Power further agreed to " avoid imprudent expenditures" and to "use its best efforts to optimize the capital investments includable in the Allocated Steam Invest-ment."
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- 17. Under Section 9(B)(1) of the General Agreement, the parties agreed that if Consumers Power became unable to declare the Midland Nuclear Facility in commercial operation for process steam by December 31, 1984, then Dow would be entitled to terminate the contract and pay Consumers a termina-tion fee no larger than one-half of the prudently incurred Allocated Steam Investment expenditures as of the date of termination.
- 18. Under Section 1(C) of the General Agreement, Consumers Power undertook to keep "Dow currently informed whenever practical concerning Consumers Power's construction schedules, the progress of engineering design and construction, and proposed changes in engineering design, construction and operating and maintenance practices and procedures that will significantly affect the aggregate cost of process steam service to Dow."
F. Consumers Power's Fraudulent Misrepresentations And Non-Disclosures in the Negotiation of the 1978 General Agreement
- 19. During the contract nagotiations in 1977 and 1978 leading up to execution of the 1978 General Agreement, Consumers represented to Dow that it knew of no construction t
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problem or other circumstances that would prevent it from placing the Midland Nuclear Facility in commercial operation by I March 1982. Immediately before the execution of the contract, Dow specifically requested disclosure of any information adversely reflecting on the status, cost or completion of the project. Consumers Power assured Dow that it knew of no "sur-prises" or any other adverse and undisclosed informatic>n about the project. These represantations were intended to and did an fact induce reliance on the part of Dow in executing the General Agreement in June 1978.
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- 20. Consumers Power's representations concerning the absence of adverse and undisclosed information were false.
Specifically, Consumers Power knew prior to the execution of the General Agreement that the Midland Nuclear Facility was being constructed on improperly placed and compacted fill and that these soils problems and other construction problems described hereafter likely would prevent Consumers Power from
- meeting its target schedule. Consumers Power thus misrepre-sented to Dow the status of the project and, in addition, concealed material information from Dow with the intent to induce Dow to enter into the General Agreement.
- 21. The soils problems concealed from Dow arose from Consumers Power's decision, because the Midland Nuclear Facility is located on the flood plain of the Tittabawassee River, to raise the level of the site by depositing and compacting more than 30 feet of fill. Rather than constructing foundations using underpinnings, pilings or other established techniques to rest the weight of the plant structures on bedrock or the undisturbed and compacted glacial deposits underlying the site, Consumers Power decided to place plant structures directly on top of the fill.
- 22. Among the structures were vital safety installa-tions such as the emergency diesel generator building, the auxiliary building, storage tanks for emergency cooling water, service water pump structure, and numerous underground pipes and cables carrying cooling water and vital control systems.
Because these structures would rest in whole or in part on fill, proper placement and compaction was essential to prevent the fill from settling under the weight of the structures.
Excessive settlement and/or differential degrees of settlement of the fill can create serious unsafe conditions in any con-struction project and are of particular concern in a nuclear power plant because they can cause blockage or rupture of pipes L
and cables carrying cooling water and electricity essential to the plant's safe operation.
- 23. On the basis of an engineering study completed in 1969 by the firm of Dames & Moere, consumers Power adopted detailed specifications and procedures governing the fall to be used on the site and how it would be deposited, compacted and tested. Among other things, the specifications and procedures called for (a) Use of specified kinds of unmixed, cohesive fill such as clay in areas containing safety-related structures; (b) Regular testing of fill for moisture content before and after placement on the plant site; (c) Control over the thickness of each layer of fill as it would be deposited on the site;
) (4) Use-of qualified rollers and other compac-
+
tien equipment to apply the necessary amouat of compaction pressure on each layer of fill to achieve proper compaction; (e) Testing of the compacted fill at specified
_ intervals to ensure that the required degree of density necessary to prevent settlement had been achieved; (f) Full-tita supervision of al1 ~ fill ope---
tions by a qualified geotechnical engineer.
- 24. Placement of the fill on the plant site took place from 1975 through 1977. Consumers Power failed to observe any of the previously identified controls or other standards of, reasonable care and prudence. Instead, Consumers Power proceeded with the placement of the fill R,owing that there was not proper supervision, that improper fill was being
I used, that the fill had been insufficiently compacted, and that false or misleading test results were being relied upon to certify the fill as meeting standards of the U.S. Nuclear Regulatory Commission ("NRC"). Dow was not informed of any of these problems by Consumers Power at any time prior to the execution of the General Agreement.
- 25. In 1977, the administration building was con-structed on the defective fill and excessive settlement occurred immediately. By August 1977, portions of the foundation of the administration building had settled up to 3-1/2 inches in one month. An informal investigation conducted by Consumers Power later in 1977 and concealed from Dow confirmed that there were serious deficiencies in the fill underlying the entire site, including the fill on which vital safety-related structores were about to be constructed. The results of this investiga-tion, as well as all other facts known to Consumers Power concerning the negligent and improper fall placement, were concealed from Dow.
- 26. The 1977 Consumers Power investigation was limited to an examination of the fill in the vicinity of the administration building and a perfunctory test of two other portions of the site. Even this inadequate review revealed that there had been systematic errors in the placement and compaction of the fill. Among other things, the investigation at the administration building site found " voids" cr pockets of air in the fill and unbroken lumps of clay up to 3 feet in i
diameter, demonstrating that the fill had not been compacted, l
l contrary to safety Analysis Reports certified by Consumers 1
Power to the NRC.
- 27. To examine the entire safety-related portion of the site, Consumers Power conducted only one test boring. As a matter of prudent engineering practice, a single boring was
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insufficient to determine the safety of fill over the complete site. Contrary to representations in the safety Analysis
" Reports submitted to the NRC that unmixed cohesive fill had been used in safety-related areas, this single test demonstrated that Consumers Power had improperly used random fill consisting of mixed clay, sand and other materials with varying properties.
Consumers Power's representations that unmixed cohesive fall had been used in the safety area were later determined by NRC officials to be material false statements.
- 28. Both before and after execution of the General Agreement, Consumtrs Power's reports documented that random fill was improperly used throughout the safety area and that the fill had not been adequately compacted to NRC safety standards. More than 600 separate tests taken during the fill work had shown that the fill was insufficiently compacted but were overruled or disregarded, while numerous instances of
" passing" tests contained results which upon further examina-tion revealed degrees of compaction physically impossible t'o achieve. At least three " audits" conoucted by Consumers Power during the period 1974 to 1977 also verified numerous instances of failure to meet proper procedures or specifications, but no disclosure was made to Dow or to the NRC.
- 29. By at least the end of December 1977, the senior management of Consumers Power knew or should have known that the fill on which the Midland Nuclear Facility was being constructed was patently inadequate for construction of a nuclear power plant and potentially unsafe. Notwithstanding this information, Consumers Power made the conscious decision not to disclose this material information to the NRC. Consumers Power also made no disclosure to Dow during the negotiation of the General Agreement. Instead, Consumers Power decided to proceed with construction of the diesel generator building and
other safety-related structures on the fill, thereby creating the false and misleading appearance during the negotiations
- that construction was proceeding normally.
- 30. At the time the General Agreement was executed.
Consumers Power was also aware, but did not disclose te bow, that non-soils construction problems would affect its ability to fulfill its obligations under the General Agreement. Con-
'struction delays caused by engineering changes, work stoppages, and continuing failures to follow proper procedures and specifi-cations were of such magnitude that Cor.sumers Power decided in June 1978 to forego its usual practice of adopting 6, .iew schedule.
Such a forecast, if properly prepared and disclosed, would have revealed Consumers Power's inability to meet the March 1981 and March 1982 completion dates represented to Dow in the General Agreement.
- 31. In reliance on Consumers Power's misrepresenta-tions and non-disclosures during the 1977-78 negotiations r+garding the status of the project, Dow executed the General Agreement. Had Dow known the true situation, it would not have signed the General Agreement.
G. Consumers Power's Misrepresentations And Failures To Disclose Since Execution of The General Agreement
- 32. Since June 1978, Consumers Power has engaged in an ongoing pattern of misrepresentation and concealment from Dow of the true impact on cost and schedule caused by Consumers Power's negligence and willful misconduct in designing and constructing the plant. Specifically, this ongoing fraud constitutes a material breach of Consumers Power's contractual and fiduciary obligations and justifies cancellation of Dow's l
j obligations to perform under the General Agreement. In addi-tion, Consumers Power's concealment from Dow of the true cost l
and schedule was intended to prevent Dow from exercising its l
t right to terminate the General Agreement, as described here-after. Moreover, as the direct and proximate result of Consumers Power's concealment of the true status and schedule of the project, Dow has incurred millions of dollars in expenses, including more than 860 million expended to construct its facilities to receive steam from Consumers Power. Dow has done so in reliance on the misrepresentations of Consumers Power regarding the status of the project. Bad Dew been informed of the continuing delays and construction problems at the project, or Consumers Power's ' inability to meet the December 31, 1984 deadline, Dow would not have incurred these costs.
- 33. Prior to execution of the General Agreement, ,
l Consumers Power began construction of the diesel generator building and other safety-related structures. By July 22, 1978, scarcely a month after the execution of the General Agreement, settlement of the diessi generator building already exceeded 1-1/2 inches as compared to a total hafety allowance of three inches over the 40-year projected lifetime of the Midland Nuclear Facility. Nevertheless, Consumers Power decided to continue construction and to conceal this information from Dow, despite the General Agreement provisions requiring Dow to be advised of such significant events.
- 34. By August 18, 1978, settlement of portions of the diesel generator building had reached four inches, exceed-ing the safety limit, even though the building was still only approximately half complete. On August 23, 1978 Consumers Power suspended construction of the diesel generator building and other safety structures and notified the NRC. At the same time, recognizing that its previous schedule estimates were no longer valid, consumers Power decided again to delay prepara-tion of a cost and schedule forecast for the project because soils problems and other uncertainties prevented ,any realistic forecast from being made. Despite its duty to disclose this r
significant development to Dow, Consumers Power failed te do so.
- 35. Following the August 23, 1978 suspension of construction Consumers Power conducted another investigation which confirmed that there had been systematic and gross neg-ligence in the placement and compaction of fill underlying the entire site. The investigation concluded that essentially all moisture and density tests conducted during the placement and compaction of the fill had been improperly performed. As later summarized in a July 1979 report prepared by Bechtel, "there is no rational means of determining which test results are valid and which are not."
- 36. Despite the overwhelming evidence that the fall underlying the site was inadequate and potentially unsafe,
, Consumers Power elected on or about December 1978 to resume construction of the Midland Nuclear Tacility. Consumers Power did so in the face of Oxpress warnings from NRC officials that Consumers Power was proceeding at its own risk. Consumers Power also decided not to remove and replace the unsafe fill but instead teeporarily piled sand on portions of the site in an attempt to compact the defective fill. Consumers Power was specifi ally warned by NRC officials that they had not approved this procedure or the resumption of construction.
- 37. In December 1979, Consumers Power requested Bechtel to assess the impact on plant completion of soils remedial work. In April 1979, Bechtel informed Consumers Power that there would be at lesst an eight-month delay in the fuel i load date for Unit 2 and a five-month delay for Unit 1. S cb-sequent schedule changes showed that the target dates Consumers Power had held out to Dow were no longer valid. These included a July 1979 Bechtel report and a November 1979 Consumers Power schedule, both of which identified further slippage in the schedule. Still further slippage became inevitable when Consumers
Power's investigation of the fill confirmed that the remedial soils measures it had taken were inadequate and that years of
' *a'dditional delay would be necessary to devise and implement further remedial measures.
- 38. On December 6, 1979, the Nuclear Regulatory Commission issued an order finding that there had been a
" breakdown in quality assurance related to soil construction
' activities under and around safety-related structures and systems." The NRC also found that Consumers Power had made material false statements in certifying its compilance with f.'.11 procedures outlined in the Final Safety Analysis Report.
The NRC determined that there remained an " unresolved safety issue concerning the adequacy of the remedial action to correct the deficiencies in the soil construction under and around safety-related structures and systems". Consumers Power was therefore ordered to terminate all further soils related work.
- 39. It was abundantly clear by at least the end of December 1979, in light of the NRC order, that Consumers Power could not meet the General Agreement's target completion dates.
Furthermore, Consumers Power also knew or should have known that it was unable to meet the December 31, 1984 deadline for commercial steam operation in view of the fact that the major structure.* t f the facility were resting on thirty feet of I
l, inadequate and unsafe fill and the NRC had rejected the remedial 1
measures which Consumers Power had taken.
- 40. Consumers Power's inability to meet the 1964 deadline was confirmed in January 1980 when Bechtel provided Consumers Power with an updated cost and schedule forecast, known as Forecast 6, which declared that Consumers Power would be unable to complete the Midland Nuclear Pacility until 1985.
The Rechtel forecast also projected that total plant costs would be 83.2 billion rather than the $1.67 billion previously estimated.
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- 41. Despite its knowledge that it could not complete the project by 1984, Consumers Power decided to conceal from
- Dow its inability in order to prevent Dcw from terminating the General Agreement under Section 9(B)(1). Thus, Consumert Pcwer publicly stated that it refused to accept Bechtel's estimates for plant completion. At the same time, however, Consumers
- Power performed internal studies disclosing that its principal alternatives were (i) either to complete the nuclear facility in May 1985 and assume the risk that Dow would terminate the General Agreement; or (ii) to terminate construction and either write-off the project or convert it to coal-fired power.
Consumers Power recognized that if Dow were to exercise its right to terminate under Section 9(B)(1), Dow's termination payment based on costs incurred as of April 1, 1980 would be a maximum of $185 million. Had Consumers Power disclosed to Dow that it could not meet the 1984 deadline, Dow would have term-
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insted the contract.
- 42. On or about March 5, 1980, Consumers Power decided to continue construction of the Midland Nuclear Facility and fabricate an artificial schedule purporting to show that 2t could complete the project before December 1984, thereby depriving Dow of its right to terminate. Pursuant to its March 1980 plan, Consumers Power thereafter took the public position that it intended to find ways of shortening the schedule. At the time it took this public position, Consumers Power concluded internally on May 5, 1980, that "we generally agree with Bechtel both on sch-dule and cost."
- 43. Dn June 25, 1980, to further the concealment of its inability to meet the 1984 deadline, Consumers Power directed Sechtel to prepare a new construction schedule under which the Midland Nuclear Facility would be in operation by July 1984.
This date, which shortened the Bechtel estimate by one year, was announced for the specific purpose of, among other things,
preventing Dow from exercising its right to terminate the General Agreement.
- In order to effect the centinuing concealment, 44.
Consumers Power and its agent, Bechtel, agreed on July 10, 1980 that in all statements and documents prepared "for public consumption," they would refer to Consumers Power's " current project schedule" dates purporting to show that the 1984 com-mercial steam operation deadline could be met. At the same time, it was agreed for internal purposes to use the true schedule which recognized that the 1984 deadline would not be met.
- 45. Dow was not informed of the true schedule.
Instead, at all times between July 10, 1980 and April 11, 1983.
Consumers Power assured Dow that the plant would be in commer-cial operation by December 31, 1984. Throughout this period of deception, Consumers Power knew or should have known with each passing day that the 1984 deadline was ever more unattainable, but refused publicly to acknowledge these facts.
- 46. For example, on November 9, 1982, Consumers Power called a press conference to discuss the plant's schedule at which a Consumers Power official specifically denied that the schedule contrived for public consumption wotid not be met.
Following the press conference, on November 15, 19b2, Consumers Power informed Dow that no new completion dates veuld be made available to Dow until early February 1983.
- 47. In early February, Consumers Power again con-cealed from Dow the existence of its right to terminate.
Instead of admitting its inability to meet the deadline, Con-sumers Power notified Dow that a new schedule would not be released until April. On February 18, 1983 Dow requested Consumers Power to provide " meaningful written assurance" that the 1984 deadline would be met. On March 7, 1983, consumers Power once again refused to admit its inability to meet the
l 1984 deadline and instead responded that " April will be the earliest time we can give you the benefit of our considered
. judgment on cost and schedule."
- 48. Not until April 11, 1983 did Consumers Power finally admit to Dow that Unit 2 would not go into commercial operation before Pebruary 1985 and that completion of Unit I would be delayed until August 1985. Consumers Power further estimated that the total cost of the project would be 54.43 billion, r.n increase of more than $1 billion over its previous estimates. By virtue of the April 11 announcement, for the first time Dow possessed the unqualified right to terminate under Article 9(B)(1) of the General Agreement.
B. Consumers Pcwer's Other Material Breaches And Negligence In The Performance of the 1978 General Agreement
- 49. The misrepresentations and non-disclosures alleged above constitute material breaches of Consumers Power's contractual and fiduciary duties. In addition, Consumers Power has since June 1978 committed other material breaches by failing to use its best efforts to complete the plant and by failing to avoid imprudent expenditures in the design and construction of the Midland Nuclear Facility. Consumers Power has also negli-gently and willfully failed to exercise due care in the con-struction of the Midland Nuclear Facility.
- 50. Since 1978, Consumers Power's mismanagement of the Nuclear Facility project has resulted in repeated schedule delays and inordinate cost increases. Among other things, as a result of the negligence of Consumers Power in the placement and compaction of the fill on the Midland Nuclear Facility site and its imprudent choice of remedial measures unacceptable to the NRC, Consumers Power placed itself in a position whereby removal and replacement of the deficient fill could not be accomplished without demolishing the nuclear facility. Consumers I
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Power then adopted a costly and untested underpinning program
. involving tunneling under existing structures and installing new foundations, further adding to the delay and expense of the project.
- 51. NRC officials have described the magnitude and complexity of the underpinning program as equivalent to building a third nuclear reactor on the site. Under present construction schedules released by Consumers Power, the earliest the under-pinning program can be completed is in 1985. As a consequence, more than eight years of delay in the Midland Nuclear Facility will have elapsed from the August 1977 detection of settlement at the administration building. During this same period.
Consumers Power's estimates of the cost of the nuclear facility have increased by nearly 53 billion.
- 52. Continuing quality assurance problems at the Midland Nuclear Facility have resulted in the NRC's concluding 9
that there is no reasonable assurance that Consumers Power vill construct a nuclear facility that meets NRC reqJirements for licensing for commercial operation. For example, since the underpinning program began, the NRC has ordered the work to be halted at least twice because of negligence and lack of super-vision by consumers Power. On January 7, 1981, the NRC fined Consumers Power $38,000 for quality assurance infractions related to the negligent installation of heating, ventilating and air-conditioning equipment. Two years later, on February 8, 1983, the NRC imposed a civil penalty of 5120,000 on Consumers Power for yet another breakdown of its quality assurance program.
- 53. On December 2, 1982, in the face of mounting pressure from the NRC, Consumers Power halted all non-soils, safety-related construction because of its continuing inability to manage construction in a competent and licensable manner.
Jurisdiction over the project has been assigned to the NRC Office of special Cases, an office specially created to review
the most troubled nuclear projects. Because of its own negli-gence and mismanagement, Consumers Power has been subject to increased scrutiny and investigation by the NRC, leading to further increases in the plant's cost and unreasonably delaying its completion.
- 54. In light of the continuing history of Consumers l Power's negligence, quality assurance breakdowns and other j failures, there is na reasonable prospect that Consumers Power will complete the Midland Nuclear Facility at a reasonable cost and within a reasonable time, if indeed the plant will ever te finished. It now appears likely that the NRC will order a reinspection of virtually all plant systems and will require an independent third-party verification of design and construction.
Such actions will require at least a year of further delay and additional substantial cost increases by themselves. Because.
of the history of serious refety and other problems discovered to date, it is reasonable to expect further delays and cost increases, if not permanent termination of construction, to result from any additional inspection of the Midland Nuclear Facility and the discovery of additional material defects concealed thus far from Dow.
- 55. Based on the present status of the Midland nuclear facility and its past history, Consumers Power's April 11, 1983 cost and schedule forecast was itself a continuation of Consumers Power's pattern of ccacealment and misrepresentatien.
Because of the continuing negligence and recklessness of Consumers Power and the numerous unresolved licensing and safety questiens that have resulted, the Midland Nuclear Facility may never be completed and in any event it certainly will not come into commercial operation before 1986 at the earliest and at a cost of less than $6.0 billion. The Midland Nuclear Facility, if completed, would produce energy at a commercially unreasonable
cost contrary to the assumptions on which the General Agreement was premised.
I. Dov's Termination Of The General Agreement
- 56. Following Consumers Power's Apri) 11, 1983 announcement, Dow undertook to determine the reasons for Con-sumers Power's failure to complete the Midland Nuclear Facility.
Dow demanded a review of a large number of Consumers Power documents never before provided to Dow, a portion of which have now been produced. The documents confirm that a continuous and systematic practice of misrepresentation and nondisclosure has been perpetuated by Consumers Power in derogation of its obliga-tion to keep Dow fully and accurately informed of all material facts concerning the project's cost and schedules.
- 57. Accordingly, for all of the reasons described in this Complaint, Dow served notice on Consumers Power that it was terminating the General Agreement pursuant to Section 9(B)(1) and reserving its rights to pursue its legal remedies under this Complaint.
COUNT I Fraudulent Misr* presentations and Non-Disclosures
- 58. The allegations of paragraphs 1-57 are hereby realleged and incorporated by referen:e.
- 59. At all relevant times Consumers Power owed Dow a duty to refrain from making material misrepr'esentations. Under the General Agreement, Consumers Power elso owed the duty affirmatively to disclose on a current basis all material information which could significantly affect Dow's rights and obligations under the General Agreement. Because of the fiduciary relationship owed by Consumers Power to Dow, Consumers Power was required to adhere to an even higher standard of full and fair disclosure than would ordinarily be applicable.
- 60. As previously alleged Consumers Power has
, engaged in an ongoing series of material misrepresentations and non-disclosures, in disregard of its common law, fiduciary and contractual duties, beginning as early as 1977 and continuing until at least the date of this action. Said misrepresentations and non-disclosures were intended by Consumers to be relied upon, and were relied upon, in inducing Dow to enter into the 1978 General Agreement. Thereafter, Consumers Power's misrepre-sentations and non-disclosures were calculated to prevent or delay Dow from exercising its legal right to terminate the i contract and were also designed to conceal Consumers Power's j negligence and incompetence in meeting its obligations to construct a nuclear generating plant in a safe, efficient, workmanlike manner while avoiding all imprudent expenditures.
Dow did in fact justifiably rely to its detriment on these misrepresentations and non-disclosures which were false and misleading by, among other things, expending over $60,000,000 as a direct and proximate result.
WHEREFORE, Dow prays that the Court adjudge the legal rights of the parties as fol' lows:
A. That during the negotiations leading up to the execution of the 1978 General Agreement, Consumers Power engaged in material misrepresentations and non-disclosures which induced Dow to enter into the 1978 General Agreement.
B. That after the execution of the 1978 General Agreement, Consumers Power engaged in ongoing misrepresentations and non-disclosures for the purpose of concealing from Dow material information concerning the cost and scheduling of the project.
C. That the foregoing material misrepresentations and non-disclosures were relied upon by Dow to its detriment.
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D. That by reason of Consumers Power's wrongful conduct, the General Agreement should be and is legally cancelled and any and all obligations of Dow under said General Agreement are discharged.
E. That Dow is entitled to such further and adda-tional relief as this court shall deem just and proper including actual damages in excess of $60,000,000 as well as punitive and exemplary damages and reasonable attorneys' fees.
COUNT II Material Breach of Contract and of Fiduciary Duties
- 61. The allegations of paragraphs 1-57 are hereby realleged and incorporated by reference.
- 62. Consumers Power owed Dow the following duties under the General Agreement and by reason of the fiduciary relationship between the parties:
- a. Consumers Power was required under Article 1(B) of the General Agreement to use its best efforts to attain commercial operation of Unit 2 for electric service by March 1, 1981 and to place the entire generating plant in commercial operation by March 1, 1982. This contract obligation, as well as its fiduciary obligation, required Consumers Power at minimum to proceed with all phases of construction and licensing with due diligence and in a non-negligent, workmanlike manner so as to achieve these dates;
- b. Consumers Power was required under Article 4(C) of the General Agreement, as well as under its fiduciary obligations, to avoid imprudent expenditures so as to rinimize the aggregate cost of the price of steam to Dow
- c. Consumers Power was further required under Article 1(C) of the General Agreement, as well as under its fiduciary obligations, to keep Dow
COUNT III Excuse by Reason of Failure of Fundamental Assumptions
- 64. The allegations of paragraphs 1-57 are hereby realleged and incorporated by reference.
- 65. All remaining contract obligations of Dow should be excused by reason of the failure of fundamental assumptions upon which contract performance was based, including Consumers Power's inability to complete the Midland Nuclear Facility. As a result, Dow's performance to purchase steam has become com-mercia11y impracticable because of the occurrence of super-vening contingencies which were not within the contemplation of the parties at the time the General Agreement was executed in June 1978, including:
- a. The assumption that the fill upon which the plant structures were to be ere-ted was adequately compacted and suitab1e for construction of the Midland Nuclear Facility;
- b. The assumption that the plant was capable of being constructed so as to meet the target dates of 1981 and 1982 for Unit 2 and the entire generating plant respectively.
- c. The assumption that the plant would be constructed within a reasonable time at a commercially reasonable cost. .
WHEREFORE, Dow prays that the Court adjudge the legal rights of the parties as follows:
A. Dow's contract obligations to purchase steam have been frustrated or rendered commercially impractical by the failure of fundamental assumptions upon which the General Agreement was based.
B. The failure of these fundamental assumptions were not caused by any actions of Dow.
C. Dow is entitled to a declaration that all of its
. -remaining obligations under the General Agreement are excused.
COUNT IV i Calculation of Termination Payment l Under Article Nine of the 1978 General Agreement l
- 66. The allegations of paragraphs 1-57 are hereby realleged and incorporated by reference.
- 67. To the extent that its obligations under the General Agreement are not legally discharged on one or more of the grounds set forth in Counts I-III, Dow notified Consumers Power that it has exercised its unqualified right to terminate in accordance with the provisions of Article 9(B)(1) of the General Agreement.
- 68. Although Consumers Power acknowledged for the first time on April 11, 1983 that commercial operation for process steam would not occur prict to December 31, 1984, it knew or had reason to know of its inability to meet this dead-line at least as early as December 1979.
- 69. Consumers Power's false representations and nondisclosures concerning its ability to meet the December 31, 1984 commercial operation date were designed to prevent, and in fact did prevent, Dow from exercising its termination rights under the General Agreement. Consumers Power thereby sought to increase by many hundreds of millions of dollars the eventual termination charge which Consumers Power would claim that Dow was required to pay.
- 70. The foregoing actions of Consumers Power are in breach of the fiduciary obligations owed Dos as well as the General Agreement and further constitute fraudulent misrepre-
! sentation and non-disclosures in violation of Dow's common law 1
l rights. As the direct and proximate result of Consumers Power's failure timely to disclose its inability to complete the plant t for commercial steam operation prior to December 31, 1984, Dow
i has incurred substantial expenses which would not have been incurred had Conaumers Power timely disclosed this inability.
WHEREFORE, Dow prays that the Court adjudge the legal l rights of the parties as follows: l A. That to the extent the General Agreement is not otherwise legally discharged, Dow has properly exercised its right to terminate under Article 9(B)(1).
B. That Consumers Power's communications to Dow concerning the commercial operation date for process steam were 1
fraudulent, misleading, and in violation of Consumers Power's contractual and fiduciary obligations to Dow.
C. That in computing the termination charge, to the extent that payment is not otherwise excused, said terminat' ion charge shall be computed on the basis of a termination date at least as early as December 1979 when Consumers Power became unable to complete the plant for commercial stes! t aration prior to December 31, 1984.
D. That in computing the termination chLrge, to the extent that payment is not otherwise excused, said terminatien charge shall be reduced by that amount of expenses incurred by Dow since at least as early as December 1979 which would not have been incurred had Consumers Power timely disclosed its inability to complete the plant for commercial steam operation prior to December 31, 1984.
COUNT V Negligence
- 71. The allegations of paragraphs 1-57 are hereby realleged and incorporated by reference.
- 72. Consumers Power further owed to Dow at all relevant times a duty to exercise due care and to proceed an a competent, workmanlike manner on its part or on the part of its agents in the planning, supervision and construction of the Midland Nuclear Facility, i
- 73. Consumers Power has breached its duty by failing to exercise due care in a competent, workmanlike manner in the planning, supervision and construction of the Midland Nuclear Facility. Consumers Power's actions have instead reflected a willful disregard for the rights of Dow and constituted reck-lessness or at minimum negligence. Dow has suffered serious financial injury as the direct and proximate result of Consumers Power's failure to exercise due care including the loss of over
$60,000,000.
WHEETOE, Dow prays that the Court adjudge the legal rights of the parties as follows:
A. That Consumers Power owed a duty to Dow to proceed in a competen. *r' manlike manner and with due care in the planning, supervision and construction of the Midland Nuclear Tacility.
B. That Consumers Power has willfully disregarded and violated the aforementioned duties and through negligent conduct has caused Dow to suffer serious financial damages in excess of $60,000,000.
C. That Dow is entitled to recover its damages as the result of Consumers Power's reckless and negligent conduct together with such further and additional relief as this Court shall deem just and proper including punitive and exemplary damages together with reasonable attorneys' fees.
Ybj?s 4br Wa $/ rPic Remigius A. Gakka Manager, Specialty Products Manufacturing.
Energy and Utilities Michigan Division The Dow Chemical Company
STATE OF MICHIGAN )
) SS.
, COUNTY OF MIDLAND )
On t.his leth day of July,1983, before se personally came the above-named Remigius A. Gaska and made oath that he has read the foregoing complaint by him subscribed, and knows the contents thereof, and that the same is true of his own knowledge or, on information and belief, ne believes it to be true.
.$ft!Notar'y
/
Yti/Public' b /Edv?
My Commission expires
- SIN.?"' ** ******
- - 907 M W OFFICES OF HERBERT H. EDWARDS, P.C.
By: 8 / EeI " EMS
/ Herbert H. Edwards (P13112 )
2612 Ashman P.O. Box 1883 Midland, Michigan 48640 (517) 631-5811 KIRKLAND & ELLIS By: 8 /#e' * #
/ Samuel A. Haubold Of Counsel:
William R. Jentes James A. Goold Lawrence E. Strickling Thomas D. Graber KIRKLAND & ELLIS 200 East Randolph Drive Chicago, Illinois 60601 (312) 861-2000 Wayne. M. Bancock Thomas J. Cresswell THE DOW CHEMICAL COMPANY 2030 Dow Center Midland, Michigan 48640 Dated: July 14, 1983
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GENERAL AGREEMENT CONSUMERS POWER COMPANY /THE D0W CHEMICAL COMPANY
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l June, 1978 l
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EXHIBIT A l
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(i, TABLE OF CONTENTS !
PREAMBLE '
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- 1. CONSTRUCTION OF GENERATIrlG PLANT 2 A. Generating Plant Description 2 -
3 B. Commercial Operation Dates 3 -
6 C. Responsibility for the Generating Plant 6 -
7 D. Warranty Performance Tests 7 -
8 E. Coordination Procedures 8 -
9
- 2. LICENSING AND OTHER ASSISTANCE 9 -
11
- 3. WATER RESOURCES MANAGEMENT 11 -
13
- 4. STEAM SERVICE 13 A. Nature of Service to be Provided 13 -
16 I
B. Delivery Points and Measurements 16 -
17 C. Monthly Rate 17 -
18 (1) Commodity Charge 18 -
22 (2) Capacity Charge 22 -
36 (3) Allocation Procedure 36 -
39 (4) Prudent Expenditures 39 -
40 (5) Books and Records 40 -
41 D. Payment 41 -
42 E. Condensate Return and Makeup Water 42 -
44 T
F. Flow Rate Changes 44
- 1. Changes in Reserved Steam Flow Rates 44
- 2. Unused NSSS 44 -
45
( 3. Stretch Steam 45 -
46
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Table of Contents
. Page 2 G. Radioactivity
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48 H. Early Steam 48 -
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- 5. REAL PROPERTY 49 A. Property Conveyed by Dow to Consumers Power 49 B. Repurchase by Dow 49 -
53
- 6. DISCHARGE OF LIABILITY 53 -
54
- 7. FORCE MAJEURE 54
- 8. INSURANCE AND INDEMNITY 54 -
55
- 9. TERM AND TERMINATION 56 A. Term 56 B. Termination Prior to the Commercial Steam Operation Date . 56 C. Termination After the Commercial Steam Operation Date 56 - 57 k D. Payments by Dow Upon Termination 57 -
59 E. Termination Notice 60 F. Termination Disputes 60
- 10. ASSIGNMENT 60
- 11. CHANGES IN AGREEMENT TERMS 61
- 12. DISPUTES 61 l 13. REGULATION 62 1
- 14. WAIVERS 63
- 15. GOVERNING LAW 63
- 16. OBLIGATIONS OF CONFID'ENTIALITY 63
- 17. OTHER AGREEMENTS 63 - 64
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A GENERAL AGREEMENT _
AGREEMENT, made this 21st day of June,1978, by and between CONSUMERS POWER COMPANY (hereinafter called " Consumers Power"), a Michigan corporation having its principal office at Jackson, Michigan, and THE DOW CHEMICAL COMPANY (hereinafter called "Dow"), a Delaware corporation authorized to do business in the State of Michigan, having its principal office therein at Midland, Michigan; W I T N E S S E T H:
WHEREAS, Dow utilizes substantial quantities of electric
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energy and steam in the operation of its chemical plant complex, in-cluding all contiguous administrative and other facilities ("Dow's -
k Midland Complex"), located in Sections 19, 20, 21, 22, 23, 24, 25, 26,
-; 27, 28, 29, 35 and 36 in the City of Midland and Midland Township, and Sections 1, 2 anu 11 in Ingersoll Township, all in Midland County, Michigan, Sections 31 and 32 in Williams Township, Bay County, Michigan, and Sections 5, 6, 7 and 8 in Tittabawassee Township, Saginaw County, Michigan; and WHEREAS, Dow desires to purchase from Consumers Power and Consumers Power desires to sell to Dow process steam and electric energy in accordance with this Agreement and an Electric Service Contract executed concurrently herewith (the " Electric Service Contract"); and k.
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. ... Gen *ral. Agreement Page 2
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, WHEREAS, Consumers Power is constructing a two-unit nuclear power plant and related facilities (the " Generating Plant") on a site (the " Generating Plant Site") on the Tittabawassee River in the City of Midland and Sections 27, 28, 33, 34 and 35, Midland Township, Midland County, Michigan, the Generating Plant Site having been purchased in part from Dow; and WHEREAS, the parties desire that this Agreement and the Elec-tric Service Contract supersede the General Agreement between them dated December 13, 1967, as amended, and the electric service, steam service and water supply contracts between them dated January 30, 1974 as,of the date hereof, and the electric service contract between them dated , _
December 30, 1969 as of the effective date of the Electric Service Contract; NOW, THEREFORE, in consideration of the mutual undertakings
, and promises herein made, Consumers Power and Dow hereby agree as follows:
- 1. CONSTRUCTION OF GENERATING PLANT A. Generating Plant Description l
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Consumers Power is constructing and pruposes to operate on the Generating Plant Site a Generating Plant consisting of two units (" Unit 1" and " Unit 2") having a total combined capability of approximately 1,300 MW of electric energy and approximately 4,050,000 lb/ hour of steam for process steam service, each unit having a pressurized water nuclear
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, Gansral Agreemsnt - '.
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steam supply system ("NSSS") and an electric turbine-generator. In -
addition, the Generating Plant will include, among other things, a cooling pond, process steam evaporators, and associated auxiliaries, piping, valves and other equipment for generating steam and electric energy and for regulating, metering, monitoring and conducting process steam to the point of its delivery to Dow. The Generating Plant is more particularly and fully described in Consumers Power's application to the U.S. Nuclear Regulatory Commission ("NRC") for reactor construction permits and operating licenses, as the same has been and may be amended l
l frore time to time (NRC Docket Nos 50-329,50-330). l I
_ All piping, valves, and other equipment for conducting, rega-lating, monitoring and utilizing the process steam beyond the delivery
{, point shall be owned, designed, constructed, operated and maintained by Dow and shall not be part of the Generating Plant, whether or not des-cribed in said application to the NRC.
B. Commercial Operation Dates Consumers Power shall use its best efforts to place Unit 2 of the Generating Plant in commercial operation for electric service on or about March 1,1981 and to place the entire Generating Plant in commer-cial operation for process steam service and electric service on or about. March 1,1982.
Provided that Consumers Power has used its best efforts as set forth in the preceding sentence, Consumers Power shall in no event be liable to Dow if Consumers Power fails for any reason to
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.- General. Agreement
. Page 4 place Unit 2 or the entire Generating Plant in commercial operation as
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aforesaid.
Units 1 and 2 of the Generating Plant will be deemed to be placed in commercial operation for electric service when Consumers Power so declares by written notice to Dow. The date on which the Generating Plant is declared to be ir, commercial operation for process steam service shall be called the " Commercial Steain Operation Date." The declaration of the Commercial Steam Operation Date shall be made by written notice from Consumers Power to Dow; provided, however, that the Generating Plant may not be declared in commercial operation for process steam service prior to March 1,1982, unless Dow, in its discretion, shall consent in writing to the declaration of an earlier Commercial f Steam Operation Date. Consumers Power may declare the Generating Plant l
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in commercial operation for process steam service v: hen:
(1) Unit 2 (a) has produced or has been able to produce steam at the secondary side of the steam generators (" Secondary Steam") at or above the flow rates which would be required in order to supply process steam at Dow's then Reserved Steam Flow Rate for 600 Psig process steam (as established pursuant to Section 4.A) and at all flow rates within the range of flow rates associated with Dcw's then Reserved Steam Flow Rate for 175 Psig process steam as shown on Exhibit A for 70% or more of the. time over a period of six months, and (b) has adequate physical facilities to
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General Agreemen't -
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({ deliver Secondary Steam to the process steam evaporators -
at or above such flow rates; and (2) Unit I has produced Secondary Steam at or above the flow rates which would be required in order to supply process steam at Dow's then Reserved Steam Flow Rate for.600 Psig process steam and at all flow rates within the range of flow rates associated with Dow's then Reserved Steam Flow Rate for 175 Psig process steam as shown on Exhibit A for at least 100 continuous hours; and (3) Process steam evaporators and associated equipment'for 175 Psig process steam (including one spare evaporator) have been installed, tested and shown to be adequate to
!w deliver process steam to Dow in accordance with the specifications for such steam set forth in Section 4.A, I
assuming delivery of process steam to Dow at all flow rates within the range of flow rates associated with Dow's then Reserved Steam Flow Rate for 175 Psig process l
steam as shown on Exhibit A, and two process steam evaporators and associated equipment for 600 Psig process steam have been installed, tested and shown to be adequate
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l to deliver process steam to Dow in accordance with the
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specifications for such steam set forth in Section 4.A, assuming delivery of process steam to Dow at Dow's then Reserved Steam Flow Rate for 600 Psig process steam; and k
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. General Agreement Page 6 (4) Consdmers Power does not, in the exercise of reasonable
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diligence, then know of any technical, operational, financial or legal circumstance (other than Dow's inability to accept delivery of or to utilin process steam) that prevents it,'or threatens to imminently prevent it, frcm deliveririg process steam to Dow at Dow's then Reserved ,
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Steam Flow Rate for 600 Psig process steam and at all flow rates within the range of flew rates associated with
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Dow's then, Reserved Steam Flow Rate for 175 Psig process steam as shown on Exhibit A in accordance with this
~ Agreement.
l Consumers Power shall be relieved of the requirement to meet the above-listed criteria (1), (2) and (3), to the extent that the
~
criteria cannot be met because of Dow's inability or failure to accept delivery of process steam. The notice of Commercial Steam Operation 1 - ~
- Date by Consumers Power shall indicate that Consumers Power has complied
!. with the above-listed criteria (1) through (4), or that the criteria
/-
/ canact.'bemetbecausc-ofDow'sinabilityorfailuretoacceptdelivery r, 3, -
j ofprocesssyeam.
C. Responsibility for the Generating Plant
,2 ;
As between the parties hereto, Consumers Power shall be
/
responsible for the design, construction, operation and maintenance of s the Generating Plant. .
/ ,
( <
I C
/
- _ . - - - - . .e - -
General Agreement Page 7 Dow shall not, by reason of this Agreement or any contract or
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other document referred to herein, acquire or assert any right of owner-ship, control or direction over the Generating Plant or over the concept, design, construction or operation thereof. Notwithstanding anything to the 'c ontrary in this Agreement or any contract or other document referred to herein, Consumers Power reserves the exclusive right to make changes in the Generating Plant and in the concept, design, construction and operation thereof, at any time or times hereafter and to whatever extent it may deem desirable, except that the Generating Plant design will provide for at least two units, each capable of producing at least 4,050,000 lb/ hour of process steam in accordance with this Agreement.
Without in any way limiting the foregoing, Consumers Power shall keep Dow currently informed whenever practical concerning Consumers Power's construction schedules, the progress of engineering design and
^
construction, and proposed changes in engineering design, construction and operating and maintenance practices and procedures that will signifi-cantly affect the aggregate cost of process steam service to Dow.
D. Warranty and Performance Tests Dow shall use its best efforts to accept delivery of the process steam from the Generating Plant as and when requested by Consumers Power in order to enable Consumers Power to perform warranty or perform-ance tests on Generating Plant equipment; provided, however, that nothing herein shall obligate Dow to make any significant capital investment,
(
General Agreement
. Page 8
-(. significantly modify any of its then existing physical facilities or significantly change any of its then current manufacturing schedules or operating practices. Dow shall not incur any liability (i) for charges under Section 4.C by virtue of its acceptance of delivery of process steam outside the range of flow rates associated with Dow's Reserved Steam Capacity in order to enable Consumers Power to perform such tests or (ii) for charges under Section 4.C or Section 4.H for process steam which Dow is unable to utilize, but delivery of which it has accepted in order to enable Consumers Power to perfonn such tests. However, Dow will be liable for charges under Section 4.C or 4.H, as the case may be, except as provided in (1) above, for such process steam to the extent that Dow is able to utilize it.
E. Coordination Procedures
{
The parties recognize their inability to foresee and contrac-tually resolve all design, construction, operation and maintenance situations and issues. They also recognize that detailed and continuing exchanges of information will be necessary in order to optimize the design, construction, operation and maintenance of their respective systems and equipment, consistent with their respective rights and responsibilities under this Agreement. To that end, each party shall designate, from time to time, an individual or individuals responsible for exchanging information with the other party and for resolving issues which may arise or be expected to arise affecting design, construction, operation and maintenance of the Generating Plant under this Agreement.
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General Agreement *
- . Page 9 Resolutions of such issues shall be in writing, executed by authorized
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representatives of both parties, and, together with sample calculations and other information, incorporated into a manual (the " Coordination Manual") for use by the parties. Such resolutions and other informa-tion, and the sample calculation methods, shall be binding, except as they may conflict with applicable laws, orders, rules, regulations, or this Agreement. The parties shall use their best efforts to resolve by agreement any factual dispute arising under this Section 1.E failing which the dispute shall be resolved as provided in Section 12.
- 2. LICENSING AND OTHER ASSISTANCE Consumers Power shall secure and maintain in effect any and all percits, licenses or other governmental authorizations required from k governmental bodies having jurisdiction for the construction and opera-tion of the Generating Plant. Consumers Power shall use its best efforts to promptly inform Dow, where practical, of the commencement of any administrative or judicial proceedings, with respect to such permits, licenses or authorizations, that may significantly affect process steam service to Dow or Dcw's facilities or operations. Dow shall secure and maintain in effect any and all permits, licenses or other authorizations required from government authorities for the construction, use, and maintenance of the piping, valves and other equipment to be furnished by Dow, and for the use of process steam delivered to Dow.
Each party shall, to the extent requested by the other party, prepare or assist in the preparation of reports, data, descriptions, k
~-
' General Agreement Page 10 drawings and calculations concerning the facilities or operations of the
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party of w the request is made, in order that the requesting party may obtain any necessary permits, licenses and approvals for (i) the construction and operation of the Generating Plant, (ii) construction and operation of facilities for the distribution, delivery and use of the process steam, and (iii) the use of the process steam. Such prepara-tion and assistance shall include, but need not be limited to, the furnishing of services of technical personnel to make adequate presenta-tiens of such reports, data, descriptions, drawings and calculations at
.oeetings and hearings. -
l .
I Dow shall also cooperate fully with Consumers Power to ensure that all , conditions of the permits, licenses, and approvals for the construction and operation of the Generating Plant are met insofar as Dow property, facilities, personnel and activities may be affected to i l
l the extent Dow is aware of such conditions or upon the request of ;
Consumers Power.
Without in any way limiting the foregoing, Dow shall prepare or assist in the preparation of an emergency plan, satisfactory to the NRC, Consumers Power and Dow, covering evacuation of the personnel in Dow's Midland Ccmplex and other necessary action in connection therewith, and shall promptly carry out any applicable provisions of the emergency plan whenever required to do so by the terms of the emergency plan or by the NRC.
r .-, . - . - ,- , -. , , - . , , . - _ . . , , , - _ _ , - - - - --
l
.. General Agreemont -
Page 11 The Final Safety Analysis Report submitted by Consumers Power
(
to the NRC for the Generating Plant utilizes certain information provided by Dow respecting Dow's facilities and operations. If. Dow proposes to make significant alterations in any of its facilities or operations so described, or in the above-mentioned emergency plan, it will fully ;
describe the proposed alterations to Consumers Power in writing as promptly as practicable and in any event before implementing such alterations, including such information as Consumers Power may require for any NRC review or approval necessary in connection with such altera-tions. Except for the foregoing obligation to inform Consumers Power, Dow may implement such alterations.
The foregoing obl.igations of both parties set forth in this Section 2 shall be performed as expeditiously as practicable, due con-sideration being given to the schedules for obtaining and maintaining the necessary permits, licenses and approvals.
Dow shall bear its own costs incurred in performing its obli-gations under this Section 2. Costs incurred by Consumers Power in performing its obligations under this Section 2 shall be allocated in accordance with Section 4.C.
- 3. WATER RESOURCES MANAGEMENT The parties recognize that it is necessary for both parties to take water from and discharge effluent into the Tittabawassee River, and that such use of the river by either party may affect the ability of the i
- General Agreement
. Page 12 other to utilize the river within applicable water quality standards and
([ -
discharge limitations. Each party therefore agrees that it will use its best efforts to limit, control or modify its int'akes from or discharges into the river to the extent that it may do so consistent with its operating requirements to the end that the other party will not be unduly restricted in its operations.
In the event that it is necessary for Consumers Power to obtain cooling water or alternate means of effluent disposal from another source or sources or to install additional facilities and equipment in t order to operate the Generating Plant in compliance with applicable water quality standards or discharge limitations, Dow will cooperate and assist Consumers Power to the extent practicable. To that end, Dow will l
make available at a reasonable cost to Consumers Power any of Dow's rights of way, water, facilities or equipment that can be utilized by
- Consumers Power without interfering with Dow's operations. Consumers Power further agrees to reimburse Dow for out-of-pocket costs incurred by Dow in providing assistance to Consumers Power.
The costs mentioned in the preceding paragraph and other costs incurred by Consumers Power in obtaining an alternate source or sources, of cooling water and/or installing additional facilities or equipment for controlling or discharging effluent from the Generating Plant will 9
be allocated by agreement between the parties in accordance with the allocation principles established in Section 4.C(3); provided, however, the fact that costs associated with the cooling pond are treated as i
.. General Agreement Page 13 i
power-related in this Agreement shall not be determinative of the
{.
treatment for billing purposes of costs subsequently incurred for obtaining cooling water from an alternate source or sources or for installing facilities or equipment to control or discharge effluent. In the event the parties cannot agree as to the allocation of any such costs, the dispute will be resolved in accordance with Section 12 of this Agreement.
- 4. STEAM SERVICE A. Nature of Service to be Provided The Generating Plant has been designed to provide process steam at the pressures (" Design Steam Pressures") and qualities (" Design Steam Qualities") at steam flow rates up to and including the following
- steam flow rates (" Design Steam Flow Rates"):
Design Steam Qualities Design Steam DesignSteamPressures(Psig) (% Dry Steam)
Flow Rates (Lb/Hr) at the delivery point at -the evaporator outlet Normal Variance Normal Minimum 400,000 600 110% 99.7 98 3,650,000 175 I 10% 99.7 95 l
The term " process steam" as used throughout this Agreement refers to the steam supplied to Dow by Consumers Power from the process steam evaporators. The use of the terms " process steam" or " process steam service" throughout this Agreement shall not be controlling for
(
.--n-- - _ - -- - _ - - - - , - . -- -
General Agre: ment Page 14 purposes of determining whether this Agreement is a contract for the sale of goods under the Uniform Commercial Code.
As is more fully set forth in Section 4.C, Dow shall pay a capacity charge for process steam based on the Design Steam Flow Rates, which are the maximum flow rates allocated to Dow's use hereunder.
Dow's entitlement to process steem at any given time, however, shall be based upon Dow's Reserved Steam Flow Rates. Dow's initial Reserved Steam Flow Rates shall be' 400,000 lb/hr of 600 Psig process steam and 1,500,000 Lb/hr of 175 Psig process steam. Dow may change its Reserved Steam Flow Rates from time to time, either before or after the Commercial Steam Operation Date, as hereinafter provided in this Section 4. Dow may take delivery of 600 Psig process steam at any flow rate up to the 600 Psig Reserved Steam Flow Rate and may take delivery of 175 Psig process steam at flow rates from and including the minimum flow rate and up to and including the maximum fled rate associated with Dow's 175 Psig Reserved Steam Flow Rate as shown on G hibit A. Should Dow at any time take delivery of 175 Psig process steam at flow rates greater than the maximum flow rate or less than the minimum flow rate associated with Dow'3175 Psig Reserved Steam Flow Rate as shown on Exhibit A, the parties understand and agree that electric energy for Consumers Power's integrated electric system will thereby be reduced and will be replaced with electric energy from other sources within or without Consumers Power's system. In such event, Dow shall not be deemed to be in breach of this Agreement, but shall reimburse Consumers Poser's costs for replacing such electric energy, to the extent provided in Section 4.C.
k
,, G2neral Agreement -
Page 15 Consumers Power shall use its best efforts to supply process
({
steam to Dow on a reasonably consistent and reliable basis at pressures not less than the Normal Design Steam Pressures nor more than the Normal Design Steam Pressures plus ten percent (10%) and at the Normal Design Steam Qualities at all steam flow rates, recognizing that it may not be possible to do so during low flow conditions, or transient conditions such as but not limited to NSSS or turbine-generator start-up or shut-down; changeover from one NSSS to the other. changeover to or from the extraction steam mode; rapid process steam load swings; or placement in or removal from service of process steam evaporators. Consumers Power shall also use its best efforts to supply process steam to Dow with only such chemicals and at such conductivities as the parties shall agree in accordance with Section 1.E, recognizing the sensitivity of Dow's processes and products to such contaminants and conductivities.
Both the '600 Psig process steam and the 175 Psig process steam will be supplied from the NSSS of Unit 1 if it is available and is capable of producing Secondary Steam sufficient to provide the required flow rates of process steam. In the event the NSSS of Unit 1 is not capable of producing Secondary Steam sufficient to provide the required flow rates of process steam, then Consumers Power shall supply process steam using the NSSS of Unit 2, if Unit 2 is available, and the use of ;
1 the Unit 2 Secondary Steam for the generation of electricity shall be ;
subordinate to such obligation.
k
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Gnneral Agreement Page 16 Consumers Power may use, sell or otherwise dispose of any
[.
steam produced by the Generating Plant in excess of that needed to supply the process steam being delivered to Dow at any time. Dow may, without restriction, use, generate power with, sell, or otherwise dis-pose of process steam delivered to Dow.
B. Delivery Points and Measurements Mutually agreed upon delivery points for (1) process steam and (2) condensate return, demineralized water and backup primary and second-ary makeup water, shall be established at or near the property line separating Dow's Midland Complex from the Generating Plant Site.
Secondary Steam from either Unit will pass through process
- steam evaporators installed in the evaporator building of the Generating Plant in order to generate process steam for delivery to Dow. For purposes of ca'1culating the monthly bill for process steam service pursuant to Section 4.C, the heat content of the steam, and the steam flow rate as measured by the Secondary Steam condensate return, shall be measured on the Secondary Steam side of the process steam evaporators, and the heat content of the condensate water shall be based on the temperature of the water measured in the condenser hotwell of the Unit receiving the Secondary Steam condensate return from the process steam evaporators, by suitable measuring equipment furnished, installed and maintained by Consumers Power. Billings will not be adjusted for water losses or heat content losses between the points of measurement and the delivery point for steam, and the parties recognize that such losses
(
- , . . . . , - . _ . , . . , , , - _ - . - .% ..._... .__ --, ,,,,,m, . . . ,, ,-,, ... , -, ,- , , . , . - . . . - - , - - . .,, _ . . , . . . . . , .
G;n ral Agreement -
Page 17 will occur. However, Consumers Power shall use its best efforts to minimize and correct any abnormal water losses and heat content losses between the points of measurement for billing purposes and the delivery point for process steam. For purposes of determining compliance with Section 4.A, the flow rate, pressure and quality of process steam shall be measured or calculated from measurements made on the process steam side of the process steam evaporators (and, with respect to the pressure measurement, corrected for the calculated pressure loss to the point of delivery of the process steam) by suitable measuring equipment furnished, installed and maintained by Consumers Power.
Consumers Power shall test such measuring equipment at mutually agreeable intervals, and keep the same within accepteo standards of ac, racy. Dow shall be. given advance notice of each such test in crder that its representatives may witness the same. In case of any failure of any of the measuring equipment utilized to calculate the billing to Dow for process steam, then billing for process steam service furnished during such period shall be calculated or estimated by other methods agreed upon by the parties pursuant to Section 1.E.
C. Monthly Rate The monthly rate for process steam service to Dow, until the expiration of the initial tenn of this Agreement or until otherwise terminated by Dow pursuant to Section 9, shall consist of a Commodity Charge and a Capacity Charge, as described in this Section 4.C and in sample calculations and other explanatory information agreed upon by the k.
6 l' General Agreement Page 18 parties pursuant to Section 1.E. The minimum monthly charge, from and
(* after the Commercial Steam Operation Date, shall be the Capacity Charge.
If Dow exercises its option to extend the term of this Agreement beyond the initial term, the rate for process steam service to Dow after the expiration of the initial term shall be reasonable and agreed upon by the parties prior to commencement of the extended tenn. Such rate shall not exceed the sum of (i) a Commodity Charge ' calculated in the manner provided in this Section 4.C, (ii) "A" below for the final year of the initial term, (iii) all components of the Capacity Charge other than "A" calculated in the manner provided in this Section 4.C, and (iv) twenty percent (20%)of(i)and(iii).
(1) Commodity Charge
~
The Commodity Charge shall be a charge calculated according
( to the following fonnula:
Commodity Charge = -
- unmodity Charge (Q) - Q2) X (Nuclear Fuel Cost) Adjustment Where:
Q) = The heat content in millions of British thermal units (MBtu) of the Secondary Steam extracted during the billing month from the Unit 1 turbine generator and/or from the main steam piping of either NSSS supplying Secondary Steam to the process steam evaporators for 175 Psig and i
600 Psig process steam, calculated by multiplying the pounds of each class of steam by its enthalpy and adding the results.
(
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..w . - , . - - . ,-v-.-,-, - -- - -
w , - , - - - - , ---r---.
G:neral Agreement Page 19
( Q2 = The heat content in MBtu returned during the billing month to the Unit 1 turbine generator cycle or Unit 2 turbine generator cycle, whichever is supplying the Secondary Steam to the process steam evaporators', cal-culated by multiplying the pounds of con #nsed steam returning from the process steam evaporators by the enthalpy of the water in the condenser hotwell of the Unit receiving the Secondary Steam condensate return from the process steam evaporators.
Nuclear Fuel Cost = the cost of nuclear fuel for supply.ing Secondary Steam to the process steam evaporators for the billing month in cents per MBtu. This cost shall include ,
monthly leasing costs for leased fuel as well as the
{ amortization expense for owned fuel, but shall not include nuclear fuel costs included in "U" in Subsection 4.C(2) below. Nuclear Fuel Cost for the first five (5) years from and after the Commercial Steam Operation Date shall be based on the estimated averaged nuclear fuel costs for leased and owned fuel for such five (5) year period.
These costs shall be calculated in a manner consistent with the method used by the MPSC in determining the cost
- of nuclear fuel charged by Consumers Power to its juris-dictional electric customers. In each of the first five (5) years from and after the Commercial Steam Operation Date, the five (5) year averaged costs shall be reviewed
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General Agreement
. Page 20
(- quarterly in light of nuclear fuel costs as actually experienced and any changes in estimated nuclear fuel costs, and Nuclear Fuel Cost for subsequent billing months shall be adjusted and, if necessary, prior bill-ings to Dow shall be corrected as provided in Section 4.D, utilizing revised five (5) year averaged costs which reflect actual nuclear fuel costs experienced to the date a
as of which any such review is made and any revision in estimated nuclear fuel costs for the balance of the five (5)yearperiod. Nuclear Fuel Cost and related billings to Dow for the sixth and each succeeding year from and P*
after the Commercial Steam Operation Date shall be based on the estimated nuclear fuel costs to be incurred in such year, and shall be reviewed quarterly in light of nuclear fuel costs as actually experienced and any changes in estimated nuclear fuel costs and Nuclear Fuel
! Cost for subsequent billing months shall be adjusted and, if necessary, prior billings to Dow shall be corrected as provided in Section 4.D; and Commodity Charge Adjustment = An adjustment calculated each month which shall reflect the savings in nuclear fuel costs realized, or additional nuclear fuel costs incurred, by the Generating Plant as a result of the generation of electricity using steam from the Unit 1 NSSS which is subsequently utilized to generate process steam supplied i
.- General Agreement
, Page 21
'( to Dow. The initial base for calculating these savings or additional costs shall be the estimated des.ign net core heat rate for Unit 2 as determined from General Electric Company's guaranteed rating heat balance 449 HB 732 and from estimates of station and pumping power requirements, or the latest revisions thereof issued prior to the Commercial Steam Operation Date, as shown in the sample calculations incorporated in the Coordination Manual. Said heat balance and net core heat rate are subject to revision after each refueling by agreement of the parties pursuant to Section 1.E to reflect the then
'~
current Generating Plant design, equipment, and operating characteristics.
c '
The Commodity Charge Adjustment will be calculated according to the following fomula:
(The net kilowatt hours generated by the Unit 1 turbine generator during the billing month, when being supplied by the Unit 1 NSSS) times (the number of Btu's per kilowatt hour that the net core heat rate for the Unit 1 turbine generator for the billing month, based on actual net kilowatt nours generated and nuclear fuel used during the portion of the billing month that the Unit 1 turbine generator is being supplied by the Unit 1 NSSS, is lower than the
(
,. G:neral Agreem:nt Page 22 then effective net core heat rate for the Unit 2 turbine generator) times (the Nuclear Fuel Cost for the Unit 1 NSSS calculated as described above in this Section 4.C plus the cost per MBtu for the Unit 1 NSSS of allocated fixed charges on owned or leased fuel calculated as described in "U" below).
Whenever the net core heat rate for the Unit I turbine generator for the month is greater than the then effective net core heat rate for the Unit 2 turbine generator, the Commodity Charge Adjustment shall be negativ.e.
The Commodity Charge Adjustment shall be reviewed cuarterly in light of ruclear fuel costs as actually experienced
( and, if necessary, prior billings to Dow shall be corrected as provided in Section 4.D.
(2) Capacity Charge The Capacity Charge shall be a charge based on an assumed delivery of process steam to Dow at the Design Steam Flow Rates, and shall be calculated according to the following formula:
Capacity Charge = A + 0 + N + U + L - G Where: A= One-twelfth of the annual fixed charges associated with the Allocated Steam Investment. Such fixed charges shall reflect the rate of return then authorized by the Michigan e
G:neral Agreement Page 23 Public Service Commission ("MPSC") for Consumers Power's electric business, the applicable depreciation provision for the Generating Plant then authorized by the MPSC and
, any provision then authorized by the MPSC for recovery of estimated costs of decommissioning the Generating Plant at the end of its useful life, the statutory Federal Income Tax and Michigan Single Business Tax net of investment tax credit taken on the Allocated Steam Investment, the property taxes applicable to the Generating Plant, and any other governmental taxes, fees, rentals, levies and charges. The return component of the fixed charge determination shall be based on the allocated steam investment levelized over a 35-year life. The
( factor used to detemine the levelized investment shall be the ratio of the average return over such 35-year life to the then authorized return. The ratio of the average return to the authorized return shall be detemined each year based on the then authorized return using a 35-year life basis and shall be applied to the then current
! Allocated Steam Investment to detemine the levelized investment for each year. Taxes which are a function of the fixed charge components shall be detemined using the tax rates and tax bases then in effect. As used herein,
" average return" equals the authorized return plus sinking fund depreciation over a 35-year life minus straight-line
(
', General Agreement .
Page 24 depreciation over a 35-year life. For any calendar month
{ in which Consumers Power is unable to deliver process steam to Dow, for reasons not attributable to Dow, from either Unit 1 or Unit 2 on more than one-half of the days in such month, there shall be subtracted from "A" one-twelfth of the annual fixed charges constituting return on common equity. .
Except for the aforesaid subtraction and except as other-wise expressly provided in this Agreement, the parties intend that Consumers Power will recover under "A".neither more nor less than the entire Allocated Steam Investment and a return thereon during the initial term of this Agreement. In the event either party believes it is necessary to alter the basis on which "A" is calculated in order to carry out such intent, it shall so notify the other party. If the parties dispute the need to alter such basis and are not able to resolve the dispute by negotiations pursuant to Section 1.E the dispute shall be submitted to arbitration as provided in Section 12.
Allocated Steam Investment = The portion of the capital cost of the Generating Plant that is allocable to process steam service to Dow on the basis of the allocation principles set forth in Subsection (3) below and the following formula:
(.
,-,_~.--,_.-....-m_.,..w,.. . _ , _ - . . _ . . - - . , . . - _ _ _ _ , , , . . _ , - , -___,-,,...,-_..,._~,,,_,r . - _ . _ - . - . - - . - - - . , , _ - - , - - - _ _ _ _ . _ . _ .
Gensral Agreement Page 25 Allocated Steam Investment = B(C) + C 2 )+M+S-F Where:
C) = Investment in facilities common to electric and steam service and not included in "M" which would have to be greater in capacity if not for the more efficient use cf heat from the Onit 1 NSSS compared to the Unit 2 NSSS due to cogeneration.
C2 = Investment in facilities common to electric and steam service and not included in "M" or "C)".
NSSS output, in Btu / hour, devoted to steam service to B
= Dow at Design Steam Flow Rates The applicable NSSS core output in Btu per hour as described below.
The values for the numerator and denominator of "B" shall
( be calculated as follows:
- a. The numerator shall equal the sum of the product of the pounds of each class of Secondary Steam per hour supplied to operate the process steam evaporators at the Design Steam Flow Rates, multiplied by its enthalpy minus the enthalpy of the water in a condenser hotwell at the design backpressure of 21/2 incnes Hga.
- b. The denominator shall equal the sum of the core ratings of Units 1 and 2 in thermal megawatts (MWt) based on whichever of the following USSS
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General Agreement
. Page 26
( outputs applies, multiplied by the conversion factor 3.412 MBtu/MWt:
(i) The NRC-licensed or NSSS vendor-warranted output where they are the same, notwith-standing that the actual output is or may be less; or (ii) If the licensed output is less than the warranted output, then (A) The licensed output if the difference is due to circumstances not peculiar to the Generati.ng Plant; provided, however, that if nuclear generating
{
plants generally are required to be licensed at less then warranted out-put during their initial power escala-tion phase, this circumstance, if applicable to the Generating Plant, shall be deemed one that is peculiar to the Generating Plant and covered by (8) below; (B) The warranted output if the dif t'erence l
is due to circumstances peculiar to l
the Generating Plant.
k '
l *
'c ' General Agre: ment Page 27 (iii) If the licensed output and the actual
{
demonstrated output are greater than the warranted output, then the actual demon-strated output less the portion of such actual demonstrated output that is not l usable to generate process steam or electric energy.
(iv) If the licensed output is greater than the warranted output but the actual output is less than the warranted output, then the warranted output.
M = All safety-related investment necessary because of
( location at Midland which would not be necessary at Consumers Power's Palisades Plant Site; all investment expressly designated as site sensitive in this Agreement as set forth in Exhibit C; Generating Plant Site cost in j
i excess of the sum of ($1.5 million plus associated overheads);
all site-related investment hereafter incurred specifically at Dow's request; and any changes in the Generating Plant required because of its location at Midland from the design thereof as described in Consumers Power's applica-tion to the NRC for licenses for the Generating Plant, as l
' amended as of March 1,1978.
k.
l
- General Agreement
. Page 28 .
( S = Turbine generator extraction, steam supply and distribu-tion facilities, and all other investment to the extent that it is devoted exclusively to process steam service to Dow.
F = A fixed savings credit for savings realized in Generating Plant investment common to electric and process steam service due to the lower net core heat rate of the Generating Plant compared to the net core heat rate for Unit 2. The amount of the credit = "C)" times (the difference in estimated net core heat rates for the
. Generating Plant and for Unit 2 at Design Steam Flow .
Rates as shown in the sample calculations incorporated in
( the Coordination Manual) times (the estimated Generating Plant net electrical output at the Design Steam Flow
- Rates as shown in the sample calculations incorporated in the Coordination Manual), divided by (the warranted or the licensed NSSS output, whichever is. greater). Said estimated net core heat rates and estimated Generating Plant net electrical output shall be determined from General Electric Company's guaranteed rating heat balances 449 HB 732 and 449 HB 701 and from estimates of station and pumping power requirements, or the latest revisions thereof prior to the Commercia' Steam Operation Date, except that if operation of the Generating Plant is licensed at an NSSS output greater than the warranted k
i
' - ' ~ ' " " ' - - ~ ._
' General Agreement Page 29 output (whether before or after the Commercial Steam
{
Operation Date), then the net core heat rates and elec-trical output shall be reestimated based on appropriate General Electric Company heat balances.
0 = The total Consumers Fower operation and maintenance expense for the Generating Plant for the month that is allocable to "M" and "S" above, plus the portion "B",
times Consumers Power's operation and maintenance expense for the Generating Plant for the month that is allocable to "(C) + C2)" above. As used herein, the term " operation and maintenance expense" shall include Consumers Power's administrative and general expense, General Office joint expense, and payroll taxes allo-cated to the Midland Plant, as shown in the sample calculations set forth in the Coordination Manual.
N = One-twelfth of Consumers Power's annual nuclear insurance f
expense for the Generating Plant times "B" above.
I l As to the definitions of "0" and "N" above, for Reserved Steam Flow Rates less than the Design Flow Rate, the "B" factor shall be reduced by an amount equal to the appropriate increase in electrical capability as sum-marized in Column 4 of Exhibit A for the then-current Reserved Steam Flow Rate, divided by the estimated l
' Generating Plant net electrical output at the Design
(. Steam Flow Rate.
.' G:neral Agreemant
. Page 30 i l
( U' = One-twelfth of the portion of Consumers Power's annual
- fixed charges on that portion of the investment in nuclear fuel that is allocable to process steam service to Dow on the basis of the ratio of Btu's of process steam it is estimated will be delivered to Dow to the 1
estimated total Generating Plant Btu cutput for the calendar year. Such fixed charges include the return and income taxes on the average net investment in nuclear fuel owned by Consumers Power, and property taxes, insurance and all other actual fixed costs on owned and leased nuclear fuel. The allocation of such fixed charges to process steam service for the first five (5) years from and after the Commercial Steam Operation Date shall be based on the average for such five (5) year period of the average investment in fuel in the Generating Plant reactors in each year as shown on Consumers Power's books, times Consumers Power's estimated annual fixed charge rate on owned nuclear fuel. The method of calcu-lating such annual fixed charge rate shall be as set forth in the sample calculations incorporated in the Coordination Manual. In each of the first five (5) years from and after the Commercial Steam Operation Date, such five (5) year average of the average investment in fuel, and such estimated annual fixed charge rate on owned nuclear fuel, shall be reviewed quarterly in light
( .
'* General Agreement Page 31 of costs as actually experienced and any changes in estimated costs, and this "U" factor for subsequent billing months shall be adjusted and if necessary prior billings to Dow shall be corrected as provided in Section 4.D utilizing a revised five (5) year average of the aver. age investment in fuel or a revised estimated annual fixed charge rate, or both, to reflect actual costs experienced to the end of such calendar quarter and any revision in estimated costs for the balance of the five (5) year period, but prior billings shall be corrected only if the aggregate difference in such billings for the calendar quarter would be $250,000 or more. The "U" factor and related billings to Dow for the sixth and each
( succeeding year from and after the Car.mercial Steam Operation Date shall be based on the estimated fixed charges to be incurred in such year on that portion of the investment in nuclear fuel that is allocable to process steam service to Dow as aforesaid, and shall be reviewed quarterly in light of fixed chargas as actually experienced and any changes in estimated fixed charges and the "U" factor for subsequent billing months shall be adjusted and if necessary, prior billings to Dow shall be corrected, but only if the aggregate difference in such billings for the calendar quarter would be $250,000 or more. ,
General Agreement Page 32 L = One-twelfth of the Annual Backup Charge. An Annual
( Backup Charge shall be made in recognition of the fact that Unit 2 can be used to produce process steam when Unit 1 is not in service. The amount of this Annual Backup Charge is based on Dow's then Reserved Steam Flow Rate for 175 Psig process steam as shown in the table attached hereto and made a part hereof as Exhibit B.
G = One-twelfth of the Annual Generating Capability Adjust-ment. The Allocated Steam Investment is based upon delivery of process steam to Dow at the Design Steam Flow l
Rate for 175 Psig process steam, which results in net electrical capability being available for Consumers Power's electric system. If Dow's 175 Psig Reserved k Steam Flow Rate is less than the Design Steam Flow Rate for 175 Psig process steam, there will be an increase or g
a decrease in net electrical capability as summarized in Column (4)ofExhibitAwhenSecondarySteambeing supplied to the process steam evaporators is extracted from the Unit 1 turbine generator. This increase or decrease in net electrical capability shall be reflected in a monthly adjustment which shall begin with the first monthly billing and shall be one-twelfth of an Annual Generating Capability Adjustment calculated as follows:
Annual Generating Capability Adjustment = kW times D times R k
General Agreement Page 33 Where: kW = the increase or decrease in generating
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capability (the values shown in Column (4) of Exhibit A as adjusted pursuant to the Notes of Exhibit A),
D = the average cost per kilowatt of net generating capability at the Design Steam Flow Rates, determined by dividing the then-current estimated total cost of the Generating Plant less the then-current Allocated Steam Investment by the esti-mated Generating Plant net electrical output at the Design Steam Flow Rates as determined for "F,"
and R = the ratio of the then-current annual fixed charges (i.e.,12 times "A" above) to the then-current Allocated Steam Investment.
In the event Dow's 175 Psig Reserved Steam Flow Rate is increased or decreased, the Generating Capability Adjust-ment shall be recalculated as of the date of first l delivery of process steam to Dow at the revised 175 Psig Reserved Steam Flow Rate.
l l
If at any time during the life cf this . Agreement investment is added to, subtracted from, or reallocated to any of the elements in the
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4 Ger.eral Agreeme'nt Page 34 le ,
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( Allocated Steam Investment, the capaetty charge will be adjusted using the changed investment stated at original cost and applying the princi-
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ples as shown in the sample calculation set forth in the Coordination Manual.
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The capacity charge shall be adjusted as of the end of each calendar year to correct any costs which were estimated to the costs as actually-incurred and to incorporate estimated costs for the succeeding calendar year; provided, however, that "A" shall be adjusted as of any billing month in t:hich investment is added to or subtracted from any of the elements in the Allocated Steam Investment; "F" shall be adjusted as of any billing month in which , investment is added to or subtracted from
. "C)" and at any time that the licensed Generating Plant NSSS output is increased above warranted output; Nuclear Fuel Cost, the Commodity
{ Cha'rge Adjustment and "U" shall be adjusted quarterly as provided above; s and the denominator of "B" shall be changed to recognize changes in applicab'l e licensed or actual NSSS core output that are effective for longer than thirty (30) days, and each such change in the denaninator of "B" shall be effective as of the first day after said thirty (30) day period.
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If D5 Ps'ig process steam is delivered at flow rates greater
'than the maximu i flow rate or less than the minimum flow rate associated with Dow's 175 Psig Reserved Steam Flow Rate as shown on Exhibit A, the parties understand and agree that electric energy to Consumers Power's
. integrated electric system will thereby be reduced and will be replaced
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G3neral Agreement Page 35 with electric energy from other sources within or without Consumers
(- Power's system. Except as set forth below, Dow shall reimburse Consumers ,
Power as an adjustment to the Capacity Charge for any billing month in which such reduction occurs for the out-of-pocket cost to Consumers Power for replacing such electric energy, plus ten percent (10%) of such cost to cover Consumers Power's related administrative and general overhead expense. Any such adjustment shall be made for the period equal to or in excess of one (1) hour that the flow rate of 175 Psig process steam delivered to Dow is less than the minimum or more than the maximum flow rates associated with Dow's then-current 175 Psig Reserved Steam Flow Rate as shown on Exhibit A, excluding all such hours when (i) process steam is being delivered at less than such minimum flow rate to Dow utilizing the Unit 2 fjsSS directly without utilizing the Unit 1
(. turbine generator; (ii) no process steam is being delivered to Dow, or process steam is being delivered to Dow at less than such minimum flew rate, for reasons other than Dow's inability or failure to take such process steam; or (iii) process steam is being delivered to Dow at more than such maximum flow rate for reasons other than Dow's demand therefor.
Fractions of an hour in excess of one (1) hour shall be rounded to the next whole hour. Such out-of-pocket cost of replacing electric energy may include, but need not be limited to, an energy charge, a demand charge, or both. Dow shall not be liable for any out-of-pocket cost of replacing energy when Consumers is unable to deliver stecn in accordance with this Agreement or when Dow in good faith believes that Consumers Power is not delivering steam in accordance with this Agreement and as a k
- General AgreemInt .
Page 36 result thereof, Dow takes delivery of 175 Psig steam at floe rates less than the minimum flow rate associated with Dow's 175 Psig Reserved Steam Flow Rate.
In the future Censumers Power may directly or indirectly 4
procure fuel from Plateau Resources, Ltd., or other affiliate of Consumers Power. The commodity and capacity charges set forth in this Section 4.C are based on the assumption that such nuclear fuel will be procured at market prices and that no investment in Plateau Resources, Ltd. or other affiliate will be recognized in the calculation of any component of the Commodity Charge or Capacity Charge referred to above. In the event that the MPSC recognizes the investment in Plateau Resources, Ltd. or other affil! ate in any element of Consumers Power's rate base for juris-dictional electric rate making purposes, then the cost of fuel directly
.k or indirectly procured by Consumers Power from Plateau Resources, Ltd.
or such other affiliate shall be calculated, for purposes of determining Nuclear Fuel Cost in the Commodity and "U" in the Capacity Charges for process steam service, as if the fuel had been procured at prevailing l
market prices for fuel of like kind, quantity and delivery terms, regard-less of the manner in which the cost of such fuel is recognized by the MPSC for jurisdictional electric rate making purposes.
(3) Allocation Procedure The capital investment in the Generating Plant at the Commercial Steam Operation Date and at any other date on which the Allocated Steam Investment is recalculated l
t .
. General Agreement Page 37 consists of capital expenditures incurred by Consumers
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Power. Such capital investment cost shall be allocated into the following four classifications:
Power "P" Investment representing costs associated with facilities for generating power for the Consumers Power electric system.
Common "C)" and "C2 " A: defined in Subsection (2) above.
Steam "S" As defined in Subsection ,(2) above. ,
Site Sensitive "M" As defined in Subsection (2) ab.ve.
If any investmer.t included in "M" because of regulatory requirements is subsequently required at nuclear power plants of comparable size, type and design vintage, regardless of location, such investment shall be transferred from "M" to whatever classification is appropriate, at its original cost.
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', General Agreement -
Page 38 Allocation of Generating Plant investment in accordance with -
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the above categories shall be adjusted on an estimated basis whenever any change in Generating Plant investment occurs, subject to adjustment i as of the end of each calendar year to correct estimated costs to actual costs.
The initial allocation of Generating Plant investment in 4 accordance with the above categories shall be effective as of the Commercial Steam Operation Date. At least six (6) months prior to the Commercial Steam Operation Date, Consumers Power shall prepare and ,
l submit to Dow a_ detailed classification of the Generating Plant systems and components, classified in accordance with the above categories. The detailed classification shall be by startup systems and/or subsystems to the extent practicable, and shall include a statement of the basis for classifying such systems and subsystems to one or more than one of the 1
above categories. The detailed classification shall also classify to the above categories structures, construction distributables, engineering 1
and supervision, overheads, and all other Generating Plant investment not included in startup systems and subsystems, and shall include a statement of the basis for classifying the sace to one or more than one of the above categories. If Dow disputes any of the descriptions or classifications in Consumers Power's detailed classification, or the accuracy of the costs assigned to items which have been so classified, then the parties shall use their best efforts to resolve the dispute by agreement, failing which the dispute shall be resolved as provided in Section 12.
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General Agreement
. Page 39 Notwithstanding the foregoing, it is agreed that certain
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principal systems and structures and related components, auxiliaries and facilities, and certa'in other Generating Plant investment, shall be classified into the above categories in accordance with the partial classification attached hereto and made a part hereof as Exhibit C, and such classification allocation shall not be subject to dispute. The remaini.ng systems, subsystems, structures and related components, aux-111 aries and facilities, and other Generating Plant investment, shall be ,
classified utilizing Exhibit C as a guide.
For purposes of this Subsection (3), the costs to be al. located i to items classified by startup systems or subsystems shall be determined
. by using contractors' cost accounts, and the costs to be allocated to classified items not included in startup systems or subsystems shall be
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- determined by using contractors' and Consumers Power's cost accounts.
Estimates shali be utilized to allocate costs to classified items, the cost of which is not determinable from contractors' and Consumers Powar's cost accounts. AFUDC on the Allocated Steam Investment will continue until the Commercial Steam Operation Date, except that AFUDC shall not continue on any portion of the Allocated Steam Investment that is common to electric and process steam service and is in commercial operation for electric service. After the Commercial Steam Operation Date, AFUDC may also be accrued on plant additions until they are placed in service.
(4) Prudent Expenditures Consumers Power shall avoid imprudent expenditures and shall use its best efforts to optimize the capital
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G:neral Agreement .
Paga 40 investments includable in the Allocated Steam Investment
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as well as the fuel, operating and maintenance expenses for the Generating Plant allocable to Dow to the end that the aggregate cost of process steam service to Dow and electric service to Consumers Power's electric customers is minimized to the extent that Consumers Power may do so consistent with its obligations under this Agreement. If Dow believes that Consumers Power has not complied with this paragraph, then Dow shall so notify Consumers Power and the parties shall use their best efforts to resolve the dispute by agreement, failing which the ' dispute shall be resolved as provided in Section 12. This paragraph shall not apply to expenditures or investments resulting h from scheduling, licensing, financing and legal decisions, actions or inactions occurring prior to the date of this Agreement, and Dow agrees that such expenditures and investments shall be deemed to be reasonable and prudent.
(5) Books and Records Dow shall have access to Consumers Power's construction, operating and accounting books and records during normal business hours for purposes of verifying or auditing any charges made by Consumers Power to Dow for process steam furnished pursuant to this Agreement. If Dow believes that any bill rendered by Consumers Power is inaccurate or has not been calculated in accordance with the terms
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General Agreement Page 41 of this Agreement as supplemented by the Coordination l Manual, Dow shall notify Consumers Power that it disagrees with the bill and shall further inform Consumers Power of the basis for its disagreement. If the parties cannot resolve any such disagreement by negotiations pursuant to Section 1.E the matter shall be submitted to arbitration as provided in Section 12.
- D. Payment Bills for steam service shall be rendered for each calendar month on the basis of Consumers Power's meter readings and calculations 4
based thereon, and shall be due and payable on or before the due date shown on each bill. The due date of each bill shall be not less than
!( twenty-one (21) days following the date of mailing or personal delivery of the bill to Dow. Each bill shall show the beginning and closing dates of the period for which the bill is rendered, the due date, the quantity of each class of process steam provided, itemized charges and l
, the amount payable. A delayed payment charge of-two percent (2%) of the i
total bill shall be added to any bill which is not paid on or before the due date shewn thereon, notwithstanding the existence of any dispute or disagreement concerning the bill.
The various adjustments to the Capacity Charge and Commodity Charge required pursuant to Section 4.C shall be reflected as additional charges to Dow or as credits to Dow, as the case may be, on the next l
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General Agreement .
Page 42 monthly bill rendered after the amounts of any such adjustments are
{ determined. Appropriate information supporting or explaining any adjustments shall accompany such bills. In no event shall interest be charged or credited to Dow as a result of any adjustments.
E. Condensate Return and Makeup Water Throughout the term of this Agreement, Dow shall use its best efforts to deliver to Consumers Power Company, at delivery points estab-lished pursuant to Section 4.B, the following supplies of water:
(1) Continuous return of steam condensate and demineralized water for use on the process steam side of the process
- steam evaporators, equivalent to that required to supply ,
onehundredpercent(100%)oftheprocesssteamdelivered to Dow, including any blowdown losses. Such steam con-densate and demineralized water shall be delivered at no cost to Consumers Power Company; and (2) A backup supply for all or such portion of Consumers Power's additional requirements of primary and secondary makeup water for the Generating Plant as Consumers Power may from time to time request for delivery on a continu-ous or non-continuous basis, but nut to exceed 750,000 gallons per day. Such backup supply may be, at Dow's option, either filtered 1.ake Huron water supplied to Dow To by the City of Midland or Dow's demineralized water.
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,' General Agreement <
Page 43 the extent that such makeup water is filtered Lake Huron water, Consumers Power shall pay Dow therefor at the rate for filtered water then being charged by the City of Midland exclusive of any penalty, minimum charge or readiness-to-serve charge. To the extent such makeup i
L water is Dow's demineralized water, consumers Power shall pay Dow therefor at Dow's booked operating costs plus ten j percent (10%). Consumers Power's costs for all such
! makeup water shall be allocated in accordance with the allocation principles established in Section 4.C.
The supplies of water described in (1) and (2) above shall meet such specifications as shall be mutually agreed upon by the parties pursuant j to Section 1.E.
Dow, at its expense, shall construct, operate and maintain all piping, treatment and other water supply facilities necessary to furnish l and deliver such supplies of water to the delivery points.
Suitable equipment for measuring the flow of primary and j secondary makeup water furnished under (2) above, shall be furnished, installed and maintained by Dow. Dow shall test such measuring equipment at mutually agreeable intervals, and shall keep the same within accepted I
standards of accuracy. Consumers Power shall be given advance notice of each such test in order that its representatives may witness the same.
In case of any failure of any of the measuring equipment utilized to ,
! calculate the billing to Consumers Power for water delivered during any t.
1
General Agreement Page 44 period, the billing for water furnished during such period shall be
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calculated or estimated by other methods agreed upon by the parties, ,
purvant to Section 1.E.
F. Flow Rate Changes (1) Changes in Reserved Steam Flow Rates Dow may change its Reserved Steam Flow Rate for 175 Psig process steam to any flow rate listed in Column (1) of Exhibit A, on two years' notice for an increase or one year's notice for a decrease, or upon such longer notice as Dow may agree, or upon such shorter notice as Consumers Peder may agree. No such notice of increase or decrease may be given less than twelve (12) calendar months from
( the last such notice unless Consumers Power agrees. Dow may change its Reserved Steam Flow Rate for 600 Psig process steam only with Consumers Power's prior written approval.
(2) Unused NSSS Under certain circumstances, when Dow takes delivery of 175 Psig process steam from Unit 1 NSSS at flow rates l
l 1ess than the 175 Psig Design Steam Flow Rate, the full output of the Unit 1 NSSS will not be utilized, resulting in unused NSSS capacity. To the extent that this unused NSSS capacity cannot be used to generate electric power, k.
' Gensral Agreem:nt Page 45 Dow may, upon thirty (30) days' notice to Consumers
(' Power, utilize this unused NSSS capacity by taking delivery of 600 Psig process steam up to the actual capacity of the 600 Psig process steam evaporators and the process steam delivery system. Dow will pay Consumers Power for this 600 Psig process steam at fuel cost (including commodity and capacity charges associated with the fuel as provided in Section 4.C). In the event Dow utilizes unused NSSS capacity as provided above, such utilization shall not be deemed a change in Dow's then Reserved Steam ,
Flow Rate for 600 Psig process steam and Exhibits A and B shall not be revised to reflect the increased flow rate i
of 600 Psig process steam being delivered to Dow.
- (3) Stretch Steam i In the event that
(a) Consumers Power has additional steam associated with an NRC-licensed NSSS output above the levels warranted l by the NSSS vendor available from the Generating l
l Plant; and (b) Consumers Power is unable to utilize such additional j steam in the turbines presently planned to be installed in the Generating Plant; and (c) the supply of additional process steam utilizing i such additional steam is permitted under applicable laws, rules, reguhtions and orders and the provisions
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,- G:neral Agreement
- Page 46
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of Consumers Power's operating license (.s) for the .
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Generating Plant; then Consumers Power will offer Dow first opportunity to purchase such additional process steam under the terms and conditions of this Agreement.
The offer shall remain open until terminated by ninety (90) day notice.
Within that period, Dow shall notify Consumers Power if it elects to purchase such additional steam or any part thereof.
G. 'RADI0 ACTIVITY Consumers Power does not guarantee, but will use its best efforts, to operate the process steam equipment so that, subject to the ,
limitations of Consumers Power's measuring equipment and procedures, process steam delivered to Dow will not contain, at statistically significant levels, radioactivity greater than that contained in the treated Lake Huron makeup water supplied to the process steam evapora-tors. Dow does not guarantee, but will use its best efforts, to supply to Consumers Power, subject to the limitation of Dow's measuring equip-ment and procedures, (1) steam condensate which will not contain, at statistically significant levels, radioactivity greater than that con-tained in process steam delivered to Dow, or (2) demineralized water which wili not contain, at statistically significant levels, radio-activity greater than that contained in untraated Lake Huron water.
If Consumers Power furnishes process steam containing levels in excess of the above specifications, the parties will cooperate to eliminate the condition and problems arising therefrom, with Consumers Power to have
- k. .
General Agreement
. Page 47 the ultimate responsibility for the steam. condensate containing those excessive levels. Both parties will use best efforts in the design and operation of their respective facilities to minimize possibilities of system contamination and to facilitate recovery from any such condition.
To the extent set forth in the FSAP., as will be incorporated in the Coordination Manual, Consumers Power shall install, operate and 1- maintain instruments and controls to monitor the process steam delivered to Dow and steam condensate and demineralized water delivered to Consumers
, Power for radioactivity. The instruments and controls to be installed shall include on-line analyzers for gross gama activity, and off-line sensitive instruments for low level beta counting and tritium analysis, or equivalent instruments and controls, and/or such other instruments e and controls as may be required by the NRC or other governmental agency having jurisdiction. In addition, Consumers Power shall institute procedures for analysis for radioactivity in blowdown streams from each of the operating process steam evaporators. Glithout relieving Consumers Power of its obligations under this Section 4.G, Dow shall install, operate and maintain, to the extent set forth in the Coordination Manual, instruments, controls and procedures to monitor or analyze for i
radioactivity in process steam delivered to Dow, and in steam condensate l
l and demineralized water delivered to Consumers Power by Dcw, and in Dow products manufactured utilizing such process steam, including such instruments, controls and procedures as may be required of Dow by any governmental agency having jurisdiction.
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,a General Agreement *
- I Page 48 l
Upon determination by either party of the presence, or possible
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presence, at statistically significant levels, (1) in process steam, of radioactivity in excess of that contained in the treated Lake Hurcr.
makeup water supplied to the process steam evaporators, or (ii) in steam condensate, of radioactivity in excess of that contained in treated Lake Huron water, or (iii) in demineralized water, of radioactivity in excess of that contained in untreated Lake Huron water, or (iv) in Dow products manufactured utilizing such process steam, of radioactivity in excess of baseline levels determined pursuant to the Coordination Manual, then such party shall immediately notify the other. Each party shall tak.e appropriate, prompt corrective action; provided, however, that neither party shall be required to take any such action with respect to plant and equipment operated by or under the control of the other party.
Each party shall make available to the other for inspection, at all reasonable times, records of tests and measurements for such radioactivity, and upon request of the other party shall furnish appro-priate samples for off-line analysis.
H. Early Steam Prior to the Commercial Steam Operation Date, process steam may be available for delivery to Dow on either an interruptible or a firm basis. If Consumers Power desires to make any such process steam available to Dow, and Dow agrees to purchase and accept delivery of such process steam, the parties shall agree upon the terms and conditions k .-
. General Agreement Page 49
, under which such process steam shall be supplied to Dow; provided, how-ever, that the rate for any such process steam delivered to Dow on an interruptible basis shall be a charge consisting of the then-current cost of fuel (including the commodity and capacity charges associated with the fuel) plus ten percent (10%) of such cost.
- 5. REAL PROPERTY A. Property Conveyed by Dow to Consumers Power _
Pursuant to the provisions of the General Agreement between the parties dated December 13, 1967, as amended, Dow conveyed to Consumers Power certain parcels of land located in the City of Midland and Township of Midland, Midland County, Michigan, all as more fully described in the warranty deed, covenant deed and quit-claim deed from Dow to Consumers
( Power, each dated January 6,1975, recorded in the Office of the Register
. -of Deeds of Midland County, Michigan, at Liber 432 of Deeds, Pages 274, 277, and 283, respectively, all of such parcels being hereinafter called the " Land."
B. Repurchase by Dow If at any time Consumers Power elects to sell or otherwise transfer to any third party the Land or any part thereof, and as a result the Land or part thereof will or may be used for purposes other than the Generating Plant and facilities related thereto and any expan-sions of or additions to the same, then Consumers Power shall first k.
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, . Gtneral Agreement ,
Page 50
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offer the Land or part to Dow for repurchase by Dow. The price to be paid therefor by Dow shall be the greater of (i) the appraised value thereof as determined by an appraiser mutually satisfactory to Consumers Power and Dow, or (ii) the price set forth in any bona fide written offer made to Consumers Power for the Land or part thereof by such third party. The following shall not be deemed to be an election by Consumers Power to sell or otherwise transfer the Land or any part thereof within the meaning of this Section 5.B- (i) the creation of a mortgage or other lien interest on the Land or any part thereof; (ii) a foreclosure on the Land or 'any part thereof, pursuant to such mortgage cr other lien interest, or (iii) a sale of the Land or any part thereof by the trustee, mortgagee, or other creditcr under such mortgage or lien interest follow-ing any such foreclosure; provided, however, that Consumers Power will
( use its best efforts to avoid any situation or correct any condition that may result in any such foreclosure or sale. The sale or transfer to other electric generating or distributing entities of an undivided interest or interests in the Generating Plant shall not be deemed to be l a sale or transfer resulting in the use of Generating Plant property for purposes other than the Generating Plant and facilities related thereto and any expansions or additions to the same; provided, that the Generating Plant will continue to be used for the production of electricity and provided further that such sale or transfer will be subject to Dow's rights under this Agreement and will not impair or preclude the fulfill-ment of Consumers Power's obligations to Dow under this Agreement and
! the Electric Service Contract.
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General Agreement Page 51 If Consumers Power shall offer any property to Dow for re-(' purchase hereunder, Dow shall be free to exercise its right of repurchase for a period of sixty (60) days following receipt of Consumers Power's written offer of such property for repurchase. Failure to notify Consumers Power in writing within such period of sixty (60) days shall terminate Dow's right of repurchase. In the event Dow repurchases land hereunder, Consumers Power will give Dow a covenant deed covering such land, subject to liens, encumbrances and restrictions then of record, and will not warrant, whether expressly or impliedly, the quality of any structure, equipment or facility thereon or that such structure, equipment or facility is fit or suitable for any particular purpose, or make any other warranty whatsoever with respect to such structure, equipment or facility. Further it is recognized that any property which Dow may have
( a right to repurchase hereunder may be subject to the lien of a trust mortgage or other instrument securing Consumers Power's indebtedness, and any repurchase of such property by Dow shall be conditioned upon l
Consumers Power's securing a release of such property from the lien of such mortgage or other instrument within one hundred twenty (120) days (or such longer period as the parties may agree upon in writing) following the date on which Dow notifies Consumers Power in writing of its election to repurchase the property. Consumers Power agrees to use its best efforts to obtain such release within the time specified. The Resale Closing Date shall be such date, following the date Consumers Pcwer secures a release of such property from the lien of such mortgage or other instrument, as the parties may agree upon in writing.
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General Agreement Page 52
- Any general tax levied on any pr.operty resold to Dow hereunder by or for the State of Michigan or any county, city, village, township, school district, community college district, or other subdivision or agency of the State of Michigan, for the calendar year in which the Resale Closing Date occurs (hereinafter called the " year of sale".) shall be prorated between the parties hereto as provided in this Section 5.B.
For purposes of such proration, any such general tax levied on a valua-tion assessed as of December 31 immediately preceding the year of sale, as finally equalized, shall be deemed to be a tax levied for the year of sale, which is also the " tax year," irrespective of the time of levy, the due date, or the fiscal year of such State, subdivision or agency.
If a valuation is not assessed on the property to be resoid, apart from other real property, the parties shall agree upon an equitable pcrtion b of the valuation assessed as of said December 31, as finally equalized, on the real property on which the property to be resold or any fraction thereof is a part which shall be allocable to the property to be resold.
The general tax allocable to the property to be resold for purposes of such proration shall be determined by applying the rate of such tax tn said equitable portion of said assessed valuation. That portion of such tax levied on or allocable to the property to be resold for the year of sale which bears the same ratio to the whole of such tax as the number of days from January 1 to the day before the Resale Closing Date, inclu-sive, in the year of sale bears to the total number of days in the year of sale shall be treated as a tax imposed on Consumers Power and shall be payable by Consumers Power. That portion of any such tax levied on
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General Aareement ' I Page 53 or allocable to the property to be resold for the year of sale which bears the same ratio to the whole of such tax as the number of days from the Resale Closing Date to December 31, inclusive, in the year of salt bears to the total r. umber of dcys in the year of sale shall be treated as a tax imposed on Dow and shall be payable by Dow.
On or before the Resale Closing Date, Consumers Power shall pay all special taxes and assessments, including unpaid installments thereo1 not then due and payable, which are assessed against the property being resold or any part of such property, and which become liens on such property or personal obligations against the owner of such property on or before the Resale Closing Date.
The provisions of this,Section 5.B shall be effective to the tull extent permitted by law, now or hereafter applicable; provided that
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if the rule against perpetuities, or any other rule of law, limits the time during which any provision of this Section 5.B can be effective, then such provision shall continue to be effective for no longer than the time limited by such other rule of law or 21 years after the death of the last survivor of all of the corporate officers of Consumers Power and Dow as-of May 1,1969, and all of their children living on May 1, 1969, whichever period is applicable. A list of such officers and their children is attached hereto and made a part hereof as Exhibit D.
- 6. DISCHARGE OF LIABILITY Each party covenants and agrees not to sue, and releases and wholly discharges the other party with respect to any liability the
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.- G;neral Agreement .
Page 54 other party may have for any breach of the General Agreement between the -
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parties dated December 13, 1967, as amended, or the electric service, steam service or water supply contracts between the parties, all dated January 30, 1974, occurring before the date of this Agreement. The parties understand that this discharge of liability is a compromise of doubtful and disputed claims, and that the consideration given in connec-tion herewith is not to be construed as an admission of liability on the part of either party. The parties further understand and agree that this Discharge of Liability shall not be construed as an agreement by the parties that Consumers Power's expenditures to date for constructing the Generating Plant have been reasonable and prudent except as specifically provided in Section 4.C.(4).
- 7. FORCE MAJEURE Notwithstanding any other provision of this Agreement, any delay or failure by either party in the performance of this Agreement, other than for the payment of money, shall be excused if and to the extent such delay or failure is due to act of God; war; action of the elements; storm or flood; fire; riot; labor dispute or disturbance; the exercise of authority or regulation by governmental or military authorities; or any other cause or causes beyond the reasonable .ontrol of the non-performing party.
- 8. INSURAf'CE AND INDEMNITY Consumers Power shall secure and maintain in force during the life of this Agreement financial protection against nuclear hazards
,- General Agre:m:nt Page 55 associated with the Generating Plant, in such form and amounts as may be required by law. Notwithstanding anything to the contrary in this Agreement, Dow shall indemnify and save Consumers Power, its officers, directors, agents and employees harmless from and against all loss, expense, liability or damages arising out of injury (including death) or damage to any person or property whatsoever, to the extent such injury or tfamage is caused by or results from process steam from and after its delivery to Dow hereunder, or from Dow's use or misuse of such steam, or from the presence of such steam in Dow's facilities or products; provided, however, that such indemnification shall apply only to the extent that Consumers Power is not otherwise insured or indemnified against such loss, expense, liability or damages and only if (1) the injury or damage was caused by radioactivity, chemicals, or other physical characteristics
( covered by the specifications set forth in this Agreement or in the Coordination Manual; and (2) the process steam delivered to Dcw complied (subject to the limitations of the parties' measuring equipment and procedures) with the applicable specifications covering radioactivity, chemicals or other physical characteristics causing such injury or
, damage. Consumers Power shall use its best efforts to mitigate any l
l loss, expense, liability or damages for which Dow indemnifies Consumers Power. As used in this Section 8, the word " expense" shall be deemed to
- include, but not be limited to, any and all reasonable and necessary expenses incurred by Consumers Power in defending any claim, action or l proceeding brought against Consumers Power for any of the above-named i
l reasons.
(.
l
{
e _ ._ _ _ _
l Gensral Agreem5nt .
Page 56 l
- 9. TERM AND TERMINATION .
A. Term Subject to the rights of termination set forth in this Section 9, this Agreement shall be effective as of the date hereof and shall I extend for an initial term expiring thirty-five (35) years from and after the Commercial Steam Operation Dste, and from year to year there-after at Dow's option, unless sooner terminated by mutual consent.
B. Termination Prior to the Commercial Stean Operation Date Dow, at its option, may terminate this Agreement prior to the
= - - - Commercial Steam Operation Date only if:
1 (1) Consumers Power is, or will be, unable to declare the
- (u Generating Plant to be in commercial operation for process steam in accordance with Section 1.B. regardless of the reason therefor, including those reasons set forth in i
Section 7, on or before December 31, 1984; or t
p (2) Dow is, or will be, prevented by governmental action from l
utilizing process steam from the Generating Plant.
l i
C. Termination after the Commercial Steam Operation Date l
Dow, at its option, may terminate this Agreement after the l
l Commercial Steam Operation Date only if:
l l
4 L
Gensral Agreement Page 57 (1) Consumers Power is prevented from, or is unable to,
- (. deliver process steam to Dow on a reasonably consistent and reliable basis in accordance with this Agreement regardless of the reason therefor, including those i
reasons set forth in Section 7; or (2) Dow gives at least two (2) years' notice to Consumers Power of its election, made in its sole discretion, to terminate, which notice may not be given prior to the Canmercial Steam Operation Date.
D. Payments by Dow Upon Termination i
(1) In the event of a termination pursuant to paragraph B(2) or C(2) above, Dow shall pay Consumers Power an amount
,(
equal to the Allocated Steam Investment (prior to deduction of the fixed savings credit, "F"), as defined in Section 4.C(2), less sinking fund depreciation or amortization and adjusted fc4 = ' e remaining portion of Investment Tax Credit attributable to the Allocated Steam Investment for which Dow has not yet received credit, for the period over which Consumers Power has taken any depreciation or amortization with respect to assets includable within the Allocated Steam Investment, as shown in the sample calcu-lations contained in the Coordination Manual; l
t-r -
,,-w --w. - - - - - - - -- ,-e--,-n_g . , -e , , -----,n-. .-,,--y-w a- -- ,, -- -- - , - - . -n-
General Agreement .
Page 58
( (2) In the event of a termination pursuant to paragraph B(1) or C(1), Dow shall pay Consumers Power an amount equal to one-half (1/2) of the amount provided in paragraph D(1) above plus one-half (1/2) of the difference between the accumulated actual booked depreciation and the accumulated sinking fund depreciation for the Allocated Steam Invest-ment (prior to deduction of the fixed savings credit, "F"), as shown in the sample calculations contained in the Coordination Manual.
(3) In the event of a termination pursuant to Section 9.C.(2) at any time after twenty (20) years from the Commercial Steam Operation Date or in the event of expiration of this Agreement, Dow shall remain obligated to pay Consumers k Power, in addition to any amount cwing under subsection D.(1), a portion of the costs, if any, thereafter incurred by Consumers Power to decommission the Generating Plant and to restore the Generating Plant Site, calculated in accordance with the following formula:
D=( times k times Y)-Z 2
Where: D = Dow's payment pursuant to this Section 9(3).
i = Time from the Commercial Steam Operation Date to the date of termination.
.' General Agreement
. Page 59 t
2 = Time from the Commercial Steam Operation Date to
(~.
the date that the Generating Plant is retired from service.
ASI = The undepreciated allocated steam investment deter-mined in accordance with Section 4.C.
TI = The undepreciated total investment in the Generating Plant.
Y = The cost of decommissioning the Generating Plant, including but not limited to any required site-restoration costs and the then present value of payments required for surveillance of the Generating Plant after it has been decommissioned.
{
Z = The then present value, at a discount rate equal to Consumers Power's rate of return on its electric i
business, of the portion of the monthly aggregate estimated decommissioning and site-restoration costs
! paid by Dow pursuant to Section 4.C.
Payment of such amount shall be made within thirty (30) j days after presentation of properly itemized invoice, supported by copies of such records substantiating said costs as Dow may reasonably require. If D as calculated i above is negative, such amount shall be refunded by l
Consumers Power to Dow.
t i
,- General Agreement .
Paga 60 E. Termination Notice .
Should Dow elect to terminate this Agreement pursuant to this Section 9, Dow shall give Consumers Power written notice of its termination, the reasons therefor and the effective date thereof, and Consumers Power shall continue to provide process steam to Dow until such effective date.
F. Termination Disputes In the event that the parties disagree with respect to the availability of any termination option or the amount of any termination payment under this Section 9, the matter shall be resolved in accordance with Section 12.
( 10. ASSIGNMENT The terms, conditions and obligations hereof are binding upon and shall inure to the benefit of the successors and assigns of the parties hereto. Each party hereby consents to any such assignment by the other party so long as the terms, conditions, and obligations hereof continue to be binding upon the assigning party as a guarantor of the performance of its assignee, and in such case no other written consent to such assignment shall be required. Any other assignment of this Agreement or any part thereof by either party, except by operation of law, without the prior written consent of the other party, shall be void and not merely voidable.
, G:neral Agreement Page 61
, 11. CHANGES IN AGREEMENT TERMS The tenns of this Agreement shall not be changed, superseded or supplemented except in writing, signed by authorized officers of the parties hereto.
- 12. DISPUTES The parties shall use their best efforts to resolve any disputes under this Agreement by negotiation and mutual agreement. In the event the parties are unable to resolve any factual dispute referred i to this Section pursuant to Sections 1.(E), 3, 4.C and 9, the parties shall submit the dispute to an arbitrator or arbitrators upon whom they shall mutually agree. Except as to factual disputes under the Sections expressly set forth above, the arbitrator or arbitrators shall have no k authority to make any adjudication or to enter any award unless specifi-
. cally agreed by the parties in writing. Arbitrators may be individuals or firms. The parties shall agree upon the assumptions, procedures and time for decision to be utilized by the arbitrator or arbitrators. The parties agree that a judgment may be rendered by an appropriate circuit court upon any award made hy the arbitrator or arbitrators pursuant to a submission hereunder, subject to the authority of such court to vacate, endify or correct such award. Consumers Power shall not be deemed to have acted unreasonably or imprudently or te have breached its obliga-tions under this Agreement in any way hy continuing to expend funds on the Generating Plant or by failing to expend funds on the Generating Plant during the pendency of any such dispute.
,g e General Agrerment .
e Page 62
~'
k3. REGULATION ,
It'is expressly understood and agreed that the parties mutually have made an analysis of the various costs of the construction and operation of the Generating Plant and have in good faith agreed upon a reasonable and proper method of allocating costs and expenses between the process steam supplied to Dow hereunder and the electric power and i
other steam to be generated by the Generating Plant; that the rates and charges set forth in this Agreement reflect the results of such analysis and method; and that such rates and charges, as well as the other terms, conditions and provisions of this Agreement are, and will continue t'o be, just, reasonable, non-discriminatory and non-preferential.
Both parties recognize that there is a question as to whether
( the MPSC now has, or may hereafter acquire, jurisdiction over the rates, charges, terms, conditions and provisions of this Agreement. Accordingly, if this Agreement or any of its terms, conditions or provisions is the subject of, or becomes an issue in, any proceeding before the MPSC, or ,
other governmental agency or court having jurisdiction, the parties will cooperate, and each party will use its best efforts, so that it may be l
demonstrated to the satisfaction of the MPSC, other agency or court, as the case may be, that to the extent the same are in issue, the rates, charges, term, conditions and provisions of this Agreement are just, reasonable, non-discriminatory and non-preferential and are fair to I
i other customers of Consumers Power and do not have an adverse effect on the public interest.
. -..--,,7 , . - . , , . . - - ..~ . _ - , _ - - _ _ _ _ . , _ . - -.. . , - --m
General Agreement Page 63
,- 14. WAIVERS
's.
The failure of either party to insist, in any one instance or more, upon the performance of any of the terms or conditions of this Agreement, or to exercise any right or privilege herein conferred, shall not be construed as thereafter waiving any such terms, conditions, rights or privileges but the same shall continue and remain in full force and effect.
- 15. GOVERNING LAW This Agreement shall be deemed to be a Michigan contract and shall be construed in accordance with and governed by the laws of the State of Michigan.
([ 16. OBLIGATIONS OF CONFIDENTIALITY 7
The parties understand that certain obligations assumed by Dow under this Agreement may require that Dow disclose to Consumers Power 1
information which Dow deems confidential, hereinafter called " Confidential i
Informa tion. " Dow is willing to disclose said Confidential Information i
to Consumers Power for Consumers Power's internal review and evaluation l
if Consumers Power executes a secrecy agreement of the form Let forth in l
l Exhibit E.
l 17. OTHER AGREEMENTS,,
l l This Agreement cancels and supersedes, as of the effective date hereof, the General Agreement between the parties dated December t (
i l
.- General Agreement Page 64 13, 1967, as amended, and the water supply contract, the electric .
('. service contract, and the steam supply contract between the parties, all dated January 30, 1974. With respect to the subject matter hereof, this Agreement supersedes all previous representations, understandings and negotiations, either written or oral, between the parties hereto or their representatives, and, together with the electric service contract dated December 30, 1969, and the Electric Service Contract constitutes the entire agreement of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate by their duly authorized representatives as of the day and year first above written. ,
CONSUMERS POWER COMPANY THE D0W CHEMICAL COMPAtlY
( By: _'_u.' 4 ,
7 By:
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ypH & ./.5 -76'
EXHIBIT A' NSSS at 2,468 iWt e Increase in Electrical Generating Capability for Various Reserved Steam Flow
. Rates of 175 Psig Process Stecm Below the Design Flow Rate (1) (2) (3) (4)
- 175 Psig Process Minimum Process Maximum Process Increase in Electrical Reserved Steam Flow Rate Steam Flow Steam Flow capability-kW from the 1,000 lb/ Hour 1,000 lb/ Hour 1,000 Lb/ Hour Unit 1 Turbine Generator 1,000 1,000 3.200 24,000 1,100 1.,100 3,100 30,000 1,200 1,200 3,000 35,000 1,300 1,300 3,000 40,000 1,400 1,400 2,900 45,000 1,500 1,500 2,800 50,000 1,600 1,600 2,700 55,000 i
1,700 1,700 2,500 61,000 1,800* 1,800 2,400 66,000 1,900* 1,900 2,200 72,000 2,000* 2,000 2,000 77,000 2,100* 1,900 2,100 74,000 2,200* 1,900 2,200 71,000 2,300 1,800 2,300 68,000 2,400 1,800 2,400 64,000 2,500 1 3700 2,500 62,000 2,600 1,700 2,600 59,000 2,700 1,600 2,700 56,000 2,800 1,500 2,800 49,000 2,900 1,400 2,900 44,000
( -
3,000 3,100 1,300 1,100 3,000 3,100 38,000 32,000 3,200 1,000 3,200 25,000 3,300 1,000 3,300 19,000 3,400 1,000 3,400 14,000 3,500 1,000 3,500 8,000 3,650 1,000 3,650 0
- Dow may elect one of these Reserved Steam Flow Rates, but understands that continuous operation within the minimum to maximum ra.nge at these Reserved Steam Flow Rates does not appear feasible.
~ NOTES:
- 1. Column 4 is based on General Electric Company heat balances as amended as of the date of execution of this Agreement, and will be revised to reflect actual demonstrated turbine generator capability after the acceptance tests have been satisfactorily completed or whenever physical changes occur in the Generating Plant which result in significant changes in the heat balances.
- 2. This table is based upon a core output of 2,468 K4t and will be revised as necessary to reflect any increases in NSSS capability.
- 3. This table is based on delivery of 400,000 lb/ hour of Psig procer.s steam.
If Dow increases its Reserved Steam Flow Rate for 600 Psig process steam above 400,000 lb/ hour, column (4) will be revised to reflect any resulting t changes in electrical capability.
- 4. All revisions referred to in notes (1) through (3) above shall be made by agreement of the parties pursuant to Section 1.E.
1 w
EXHIBIT B A_nnual Backup C h e_
(1) (2) 175 Psig Reserved Steam Flow Rate Anr.ual Backup 1,000 lb/ Hour Charge 1,000 $1,890,000 1,100 2,010,000 1,200 2,110,000 1.300 2,220,000 1,400 2,330,000 1,500 2,440,000 1,600 2,550,000 1,700 2,660,000 1,800 2,760,000 1,900 2,870,000 2,000 2,970,000 2,100 3,060,000 2,200 3,140,000 2,300 -
3,220,000 2,400 3,290,000
(} 2,500 3,370,000 2,600 3,450,000 2,700 3,530,000 2,800 3,600,000 2,900 3,690,000 3,000 3,760,000 3,100 3,840,000 3,200 3,920,000 3,300 4,000,000 3,400 4,070,000 3,500 4,150,000 3,650 4,250,000 1
NOTES:
- 1. This tabic is based on a Reserved Steam Flow Rate of 400,000 lb/hr of 600 Psig steam.
O s - -
a
(' EXHIBIT C Partial Classification of Generating Plant Investment Power "P" Power investment shall include, but not be limited to, the following principal systems, components and related auxiliaries and facili-ties, and other investment:
- Turbine generators less any extraction features to supply process steam
- Condensers and circulating water systems and cooling pond
- Generator main bus and disconnects
- Main step-up transformers
- Transmission lines and switchyard
- Base site cost of $1.5 million plus associated overheads
- Unit 2 main steam lines
- Unit 2 turbine generator extraction lines to the feedwater heaters
- Unit 2 condensate system
- Unit 2 condensate feedwater polishing system
- Unit 2 feedwater system Common Investment common to electric and steam service "C) and C2 "
shall include, but not be limited to NRC licens-ing costs, and the following principal systems,
( components and related auxiliaries and facilities:
c -- --- - -, .. - - . - - ,
C-2 .
C; - Nuclear steam supply systems
( - Reactor Buildings
- Auxiliary Building
- Component cooling water systems
- Emergency di,esel generators C
2
- Unit 1 main steam lines
- Unit 1 turbine generator extraction lines to the feedwater heaters
- Unit 1 condensate system
- Unit 1 condensate feedwater polishing system
- Unit 1 feedwater system Steam "S" Steam service investment shall include, but not be limited to, the following principal systems, components and related auxiliaries and facilities:
b - Turbine generator extraction features for supplying process steam
- Main steam lines, condensate and feedwater cross-connections between Units 1 and 2 to facilitate backup process steam supply from Unit 2
- Process steam extraction lines and process condensate return lines from the turbines to the process steam evaporator building
- Process steam evaporator building
- Process steam flow and radiation monitoring systems i
e
[, C-3 1
- Process steam lines and return piping between
( process steam evaporator building and Generat-ing Plant Site boundary
- Iron reraoval system on Secondary Steam side of process steam evaporator system l Site Sensitive "M" Site sensitive investment shall include, but not be limited to, the following systems, com-ponents and related auxilieries and facilities, and other investment:
- Relocation of drains, brine lines, utilities, etc.
- Subsidence surveillance
- Plant makeup water line and components from railroad bridge to the Generating Plant
- Reactor cavity flooding system (PLCCAP)
- Hazardous gas detection and isolation systems
- Containment penetration pressurization and leak chase systems
- Incremental cost of increasing reactor cavity design pressure to meet ACRS reqtirements
- Site cost above that included in "P"
-sw - -n ,
.. l EXHIBIT D .
The following were the corporate officers of Consumers Power Company and The Dow Chemical Company, and their children, who were living on May 1, 1969.
E-CONSUMERS POWER COMPANY Children Officer Charles H. Aymond A. H. Aymond Robert D. Aymond Chairman of the Board William G. Aymond Bruce H. Campbell James H. Campbe:1 James B. Campbell President Scott R. Campbell i Nancy Wall Reif Harry R. Wall Suzanne M. Wall Senior Vice President Stephen H. Wall John H. Wall
(- Jean Simpson John B. Simpson Senior Vice President Robin E. Allen Robert D. Allen Mark W. Allen Senior Vice President Birum G. Campbell, III Birum G. Campbell William B. Campbell Vice President Wealtha Hedgecock Rea W. Anson Hedgecock William A. Hedgecock, Jr.
Vice President George C. Bretting Ralph C. Bretting Patricia A. Bretting Vice President Debra L. Fisher Floyd C. Fisher Steven C. Fisher Vice President Pamela Fisher Allen
, - . , _ _ _ _ _ . _ _ _ _-_ z., .. _ . . . -
h.
.. D-2 Russell C. Youngdahl Karen Youngdahl Pawlick
- s. Vice President Ann K. Youngdahl Russell C. Youngdahl, Jr.
Kathryn M. Youngdahl Walter R. Boris Charry D. Boris Vice President Percilla D. Boris Emily D. Boris John U. Kluberg Lynn Kluberg Cunningham Vice President and Controller Karen L. Kluberg Paul A. Perry Patricia A. Perry Secretary Ruth A. Perry Robert P. Perry Donna J. Perry Herbert J. Palmer Mary Palmer Wallsteadt Treasurer Herbert J. Palmer, Jr.
Harold P. Graves David B. Graves General Counsel James F. Graves Samuel N. Spring Robert S. Spring Assistant Controller . James M. Spring Thomas E. Spring
(- Richard A. Spring David W. Spring Richard M. Griswold (No Children)
Assistant Secretary Roger T. Berg Thomas R. Berg Assistant Secretary Robert L. Bayn Robert L. Sayn, Jr.
Assistant Treasurer Janice M. Bayn l Dennis L. Bayn Donald W. Aldrich Claudia J. Aldrich Assistant Treasurer Tracy E. Aldrich Steven R. Aldrich
(
o
.- D-3
(, THE DOW CHEMICAL COMPANY Officer Children Carl A. Gerstacker Bette Mignon Gerstacker Chairman of the Board Lisa Jayne Gerstacker Herbert D. Doan Jeffrey William Doan President, Cnief Executive Christine Mary Doan Officer Michael Alden Doan Ruth Alden Doan Leland I. Doan Leland A. Doan Chairman of the Executive Herbert Dow Doan Committee Dorothy Doan Arbury C. B. Branch Jaquith Lee Wright Executive Vice President Pamela Jill Bendall Kristi Marie Branch Gretchen Kit Branch Audrea Denise Branch Derek Karl Branch Timotha Victoria Branch L Donald K. Baliman Donald K. Ballman, Jr.
Senior Vice President Brenda Ballman Keyser Earle B. Barnes Ronald L. Barnes Vice President, General Larry B. Barnes Manager of U. S. Area David A. Barnes Thomas H. Barnes A. P. Beutel Phillip R. Beutel Vice President, Director of Betty Ann Hanley Government Affairs Richard A. Beutel l
John M. Henske Allison Weissman Vice President, Director of Kathryn Mcdonald Corporate Product Department John D. Henske Robert C. Henske Julius E. Johnson Peggy Louise Jaster Vice President, Director of Andrea Kay Smith Research and Development Jan Elyse Johnson Reed Moery Johnson
( .
v .- , _ . .
D-4
(~ Officer Children G. James Williams Schuyler Bailard Vice President, Commercial Patricia A. Williams Director of the U. S. Area George James Williams, Jr.
Herbert H. Dow Dana E. Dow Secretary Willard H. Dow Pamela G. Dow Robert B. Bennett Stephanie L. Solar Treasurar Constance L. Howard H. H. Lyon Thomas H. Lyon Controller, Assistant Peter M. Lyon Secretary Margo A. Lyon William A. Groening, Jr. Mary Flores General Counsel, William Andrew Groening Assistant Secretary Janet Marsh Phyllis Groening Theodore Groening
(
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EXHIBIT E Dow is willing to disclose Confidential Information to Consumers Pcwer subject to the following conditions:
(A) Consumers Power shall use Confidential Information only for Consumers Power's internal review and evaluation; (B) Consumers Power shall usa their best efforts to main-tain Confidential Information in secret and in confidence from all third parties; (C) Consumers Power shall promptly notify Dow of any inquiry or demand made by any governmental agency
(
or authority or any inquiry or demand made as the result of an administrative or judicial proceeding where an answer to the same would divulge or tend to divulge Confidential Information; and (D) Consumers Power shall not, without written consent of Dow, disclose any Confidential Information in answer to said inquiry or demand except to the extent necessary to secure governmental licenses or permits ur when tequired by compulsory process of a court or administrative agency. Consumers ,
j Power shall use its best efforts to secure confiden-tial treatment of such information by the A
l 1
s
...e E-2
~
,e .
N governmental authorities involved, and shall permit Dow to assist in discussions with such authorities regarding such confidential treatment. In the event efforts to secure confidential treatment are not successful, Dow shall have the right, to the extent permissible by law, to consult and advise Consumers Power concerning such answers.
Consumers Power's obligations of confidence as set forth in this Agreement shall not apply to any information that is:
(1) known by Consumers Power before being obtained from Dow; (2) generally available to the public without the fault of r
( Consumers Power; or (3) obtained or acquired by Consumers Power in good faith from a third party who has the same in good faith and is not under any obligation to Dow in respect thereto.
Consumers Power's obligations under this Agreement shall terminate upon written release by Dow.
Further, Consumers Power shall particularly advise its officers, employees, representatives and agents who have access to Confidential Ir. formation of this Agreement and shall require each and every one of them to abide fully by the same.
\.
a
E-3 '
,< l
'5s Except for Consumers Pcwer's right to evaluate said Confi- '
dential Information of Dow, no rights or licenses under the proprietary rights of either party hereto are granted by or to be implied from this Agreement.
Upon execution of this Agreement, please return one fully executed copy of this document to M. S. Jenkins, Patent Department, The Dow Chemical Company, Midland, Michigan 48640.
Understood and Accepted by:
CONSUMERS POWER COMPANY THE DOW CHEMICAL COMPANY By By Name: Name:
Title:
Title:
Date: Date:
(
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20*.10 200 6216022 92 01 SI/20 SZapa M Woeas f2RAN y 0% h 0M t
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g t ?-76 S~- T7 2 r STATE OF MICHIGAN IN THE CIRCUIT COURT FOR THE COUNTY OF MIDLAND THE DOW CHEMICAL COMPANY, Plaintiff, File No. 83-002232-CK-D v
" ^
CONSUMERS POWER COMPANY, Defendant.
/
3 At a session of said Court held at the Court House in the City of Midland, County of Midland, State of Michigan, on the 15th day of July,A.D.,
1983. .
PRESENT: HONORABLE DAVID SCOTT DE WITT CIRCUIT JUDGE Upon reading the complaint of the Plaintiff, The Dow Chemical Company, it appears to the Court that it violates both the spirit and letter of Rule 111.1 MGCR and Rule 111.9 (1) MOCR t
and.was prepared for use as a press handout rather than a notice pleading provided for by the court rules, now therefore; IT IS ORDERED that complaint of the Plaintif f, The Dow Chemical company, is stricken on the Court!s own notion pursuant '
to Rule 115.2 MGCR. The Plaintiff is ordered t,o file a complaint complying with Rule 111 MGCR within ten (10) days or the cause will be dismissed.'
Y_
AVID SCOTT DEV WITT, CIlf001T JUDGE lLE" A TRUE COPY {I*' - - s JEFFREY P. PORTER ' '151983
- W MI AND COUNTY CLERK BY /,4, / / ,,1) ,b .d JEFFREY P. PORTEll COUNTY CLESC wotmo, p3cnicAn
/ DEPUTY MER'K
- WQ? r f f 9-4. $1 fie.e ,s? ! .srORM I Omas P e ICPC4C'AAt414 W 16e!L
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//. W M STATE OF MICHIGAN IN THE CIRCUIT COURT FOR THE COUNTY OF MIDLAND THE DOW CHEMICAL COMPANY, )
)
Plaintiff, ) FIRST AMENDED COMPLAINT
) FOR TECLARATORY JUDGMENT
- v. ) AND OTHER RELIEF
)
CONSUMERS POWER COMPANY, ) File No. 83-002232-CK-D
)
De fenda nt;. )
Herbert H. Edwards (P13112) and Kirkland & Ellis Attorneys for Plaintiff Now comes the Plaintiff by and through its attorneys, the LAW OFFICES OF HERBERT H. EDWARDS, P.C., and KIRKLAND &
ELLIS, and arnending its Complaint agair.st the Defendant says that:
GENERAL ALLEGATIONS
- 1. Plaintiff, The Dow Chemical Company ("Dow"),
is a Delaware corporation headquartered at 2030 Dow Center in the City of Midland, Midland County, Michigan, and is engaged in the manufacture of a wide ras.ge of chemicals and I other products.
- 2. Defendant, Consumers Power Company (" Consumers l
l Power"), is a Michigan corporation headquartered in the City of Jackson, Jackson County, Michigan, and is engaged in ,
the sale of electricity and natural gas to a service area '
i
! comprising most of the State of Michigan, including Midland County.
3 %2 COM i -ng(?.TONhg ,
l me :o ce",5 b ,g.[ ,I ~
t -- - -- . . , , . . _ , . . . . . , . _ _ _,
F r
- 3. The personal and sub]ect matter Jurisdiction of this Court is founded on Sections 600.601, 600.605, anc 600.711 of the Michigan Compiled Laws and the Michigan General Court Rules of 1963, because Consumers Power is a Michigan corporation carrying on a continuous and systematic part of its general business in Michigan, an actual controversy exists between Dow and Consumers Power, and declaratory relief is appropriate, among other things, to:
(a) Determine and construe the agreements and other legal relations between the parties; (b) Guide the future conduct of the parties; and (c) Avoid a multiplicity of Judicial and arbitration proceedings.
- 4. Venue properly lies in this Court under Section 600.1621(a) of the Michigan Compiled Laws, since Consumers Power conducts business and maintains a place of business in Midland County.
- 5. Dow and Consumers Power began discussions in 1966 concerning the supply of steam to Dow from a nuclear power plant (the ' Midland Nuclear Facility") that Consumers Power was planning to construct and that would consist of two nuclear steam supply systems, one of which (Unit 1), in addition to generating electricity, would be used to produce steam for Dow.
- 6. On or about December 13, 1967, Consumers Power and Dow executed a General Agreement under which Consumers Power agreed to supply steem to Dow on completion of the Midland Nuclear Facility, which agreement was amended and supplemented from time to time and is collectively referred to, with its amendments and supplements', as the 6
- 1967 Contract".
2-
- 7. Under the 1967 Contract, and at all times since, Consumers Power has retained sole responsibility for the design, construction and operation of the Midland Nuclear Facility.
- 8. Because of Consu;ners Power's complete control over and superior knowledge of the design, construction and operation of the facility, Dew has placed its complete faith, trust and confidence in Consumers Power, and Consumers Power has therefore occupied a fiduciary relationship to Dow in addition to its contractual obligations.
- 9. As a result of substantial delays in the con-struction of the Midland Nuclear Facility and disputes between Dow and Censumers Pawer over the 1967 Contract, the parties cancelled all prior agreements and entered into a completely new agreement on or about June 21, 1978 ( the "1978 General Agreement"), which was attached as Exhibit A to the original Complaint and is incorporated herein by reference.
- 10. Under the 1978 General Agreemtat, the parties agreed among other things, thats (a) Consumers Power would use its best efforts to place the Midland Nuclear racility in commercial operation for process steam service on or about March 1, 1982 (Section I. Bis (b) Consumers Power would keep Dow currently informed whenever practical concerning Consumers Power's construction schedules, the progress of engineering design and construction, and proposed changes in engineering design, construction and operating and maintenance practices and procedures that would significantly af fect the aggregate cost of process steam service to Dow (Section 1.C);
(c) Consumers Power would avoid imprudent expenditures and would use its best efforts to optimize the capital investments includable in the Allocated Steam Investment (as defined in tha' agreement) to the end that the aggregate cost of process steam service to Dow would be minimized (Section 4.C(4));
(d) If Consumers Power was or would be unable to declare the Midland Nuclear Facility in commercial operation for process steam on or before December 31, 1984, Dow would be entitled to terminate the contract, subject to a termination payment of one-half the Allocated Steam Investment expenditures Incurred as of the date of termination (Sections 9.B(1) and 9.D(2)); and (e) To the extent a termination payment would be legally required, arbitration would be available solely to resolve factual disputes over what stems of expense were properly includable in computing such payment (Sections 9.F and 12).
COUNT I Misrepresentations and Non-Disclosures
- 11. During the negotiations leading to execution of the 1978 General Agreement, Consumers Power made material misrepresentations and failed to disclose materici facts in disregard of its common law, fiduciary and contra:tual duties, which misrepresentations and non-disclosures were intended by Consumers Power to be relied upon, and were relied upon, by Dow in entering into the 1978 General Agreement.
b
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. 12. On information and belief, Consumers Power knew or should have known prior to the execution of the 1978 General Agreement that it would be unable to place the Midland Nuclear Facility in commercial operation for process steam service by March 1,1982, for several reasons, including that (a) the thirty feet of fill soil on which the Midland Nuclear Facility was being constructed was inadequate for construction of a nuclear power plant; (b) the administration building which was in the process of constructicn on the fill was settling at an excessive rater (c) an informal investigation conducted by Consumers Power in 1977 had confirmed that the serious deficiencies in the fill were not localized and instead were present throughout the siter (d) false or misleading test results were being relied upon to certify the fill as meeting standards of the U.S. Nuclear Regulatory Commission ("NRC");
(e) at least three hudits conducted by Consumers Power during the period 1974 to 1977 found numerous instances of failure to meet proper procedures or specifications in the fill; and .
(f) continued construction without first correcting these soil deficiences would result in prolonged delay and substantial additional expense.
- 13. On information and belief, Consumers Power also knew or should have known at the time the 1978 General Agreement was being negotiated that construction delays caused by engineering changes, work stoppages, and continuing failures to follow proper procedures and specifications, 5-
would prevent it from meeting the March 1, 1982 commercial operation date.
- 14. Consumers Power made no disclosure to Dow of the facts alleged in Paragraphs 12 and 13 during the negotiation of the 1973 General Agreement and instead created the false and misleading appearance during the negotiations that construction of the Midland Nuclear Facility was proceeding normally.
- 15. On information and belief, Consumers Power concealed the material facts described in Paragraphs 12 and 13 from Dow with the intent to induce Dow to enter into the 1978 General Agreement, and Dow would not have executed the 1978 General Agreement had Coniumers Power disclosed those f acts concerning the status and schedule of the Midland Nuclear Facility and Dow was injured thereby.
- 16. Immediately before the execution of the 1978 General Agreement, Dow specifically requested disclosure by Consumers Power of any information advertely reflecting on the status, cost or completion of the project, s'ad Consumers Power represented to Dow that it knew of no advsrse or un-l disclosed material information that would preve nt Consumers Power from placing the Midland Nuclear Facility in commercial i operation for process steam service by March 1,1982.
- 17. Consumers Power's representation as alleged in Paragraph 16 was material and false, was known or should l
i have been known to be false, ard was made with the intention l
l that it be acted upon by Dow, and Dow did in fact rely upon l
it in signing the 1978 General Agreement and thereby suffered i
! injury.
- 18. Since the execution of the 1978 General Agreement, Consumers Power has made material misrepresentations and failed to disclose material facts in disregard of its common law, fiduciary and contractual duties, which misrep-resentations and non-disclosures were intended by Consumers PowertoinduceDownottoterminatethe1978CheralAgree-ment.
- 19. On information and belief, Consumers Power knew or should have known by at least as early as the end of 1979 that it would be unable to place the Midland Nuclear Facility in commercial operation for process steam service by December 31, 1984, based upon the following facts among others: j (a) The NRC had rejected Consumers Power's plan for remedying Ats soils problems and had ordered a halt to the remedial soils works (b) Design and engineering changes had added significantly to the scope of the project; (c) Construction and quality assurance problems were increasing, thus requiring substantial rework and reinspection of the facility; and (d) The NRC was imposing new regulator 1' re-quirements as a result of the Three Mile Island incident in March 1979 and was imposing delays in the licensing l q
Process for the Midland Nuclear Facility. j
- 20. Notvithstanding Consumers Power's knowledge I of the facts described in Paragraph 19, Consumers Power concealed from Dow from at least the end of 1979 until April J l
11, 1983, Consumers Power's inability to declare the Midland ]
Nuclear Facility in commercial operation for process steam service by December 31, 1984, which declaration, if made by ;
Dow, would have resulted in Dow's immediately terminating ll the 1978 General Agreement.
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- 21. From at least the end of 1979 until April 11, 1983, Consumers Power continued knowingly to make false and material representations that it would complete the Midland Nuclear facility for commercial steam operation by December 31, 1984, with the intention that these representations would be relied upon by Dow, and Dow in fact did rely upon such representations to its injury.
- 22. On April 11, 1963, Consumers Power notified Dow for the first time that it would be unable to declare the Midland Nuclear Facility (including in particular Unit
- 1) in commercial operation for process steam before December 31, 1984, that the facility would not be in service until August 1985, and that the total cost of the f acility would ts approximately $4.43 billion.
- 23. The April 11, 1983 notification recognized Dow's unqualified right to terminate the 1978 General Agreement pursuant to Section 9.B(1) and, on July 18, 1983, Dow served notice on Consumers Power that it was terminating the agreement while reserving its rights to yursue any and all other legal rer edies.
- 24. As the direct and proxi. nata result of Consumers Power's failure ta disclose in a timely fashion the true status and schedule of the Midland Nuclear' Facility, Dow has incurred substantial expense, including more than 560 million to construct facilities to receive steam from consumers Power, that Dow would not have incurred had it been timely informed of Consumers Power's inability to meet the December 31, 1984 deadline.
COUNT II Breach of Contract and Fiduciary Duties
- 25. The allegations of Paragraphs 1-24 are hereby realleged and incorporated by reference.
, 26. Consumers Power owed Dow the following duties under the 1978 General Agreement and by reason of its fiduciary relationship to Dows (a) Consumers Power was required under Section 1.B of the 1978 General Agreement to use its best efforts to attain commercial steam operation of Unit 1 by March 1, 1982; (b) Consumers Power was required under Section 4.C of the 1978 General Agreement, as well as under its fiduciary obligations, to avoid imprudent expenditures so as to minimize the aggregate cost of steam to Dow; (c) Corsumers Power was required under Section 1.C of the 1976 General Agreement, as well as under its fiduciary obligations, to keep Dow currently informed of all material facts which would significantly affect the cost or timing of Dow obligations under the agreement; and (d) Consumers Power was subject to an implied obligation under the 1978 General Agreement to exertise good faith, due care and reasonable diligence in the performance of its contractual obligations.
- 27. Since the execution of the 1978 General Agreerant, Consumers Power has committed material breaches of the foregaing duties by failing to use it? bsst ef forts to complete the Midland Nuclear Facility by March 1, 1982, by f ailing to avoid imprudent expenditures in the Jesign and coratruction of the facility, by failing to keep Dow currently informed of all material facts that would af fect the cost of steam, and by failing to exercise good faith, ,
due care and reasonable diligence in the performance of its contractual obligations.
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, 28. By reason of Consumers Pcwer's material breaches of the 1978 General Agreement and Consumers Power's fiduciary obligations, all of Dow's obligations under that agreement and the prior agreements with Consumers Power are discharged and excused.
- 29. As the direct and proximate result of Consumers Power's material breaches, Dow has suffered substantial d amage s, including the loss of over $60,00C,000 expended in reliance on the 1978 General Agreement.
COUNT III Excuse by Reacan of Failure of Fundamental Assumptions
- 30. The allegations of Faragraphs 1-24 are hereby realleged and incorporated by reference.
- 31. On information and belief, Consumers Power
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knows or should knew that its April 11, 1983 cost and schedule forecasts are not realistic that Unit I will not be commercially operational for process steam service by 1985 and that, if the facility is ever completed, it will produce steam at a commercially unreasonable cost.
- 32. All obligations of Dow under the 1978 General Agreement and the prior agreements with Consumers Power are excused because of the occurrence cf supervening contingencies which were not caused by Dow, which were not within the contemplation of the parties at the time the 1978 General Agreement was executed and which have undermined the following fundamental assumptions upon which Dow's performance was based: ,
(a) The assumption that the fill upon which the Midland Nuclear Facility was to be erected was edequately compacted and suitable for construction of the facility; and
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(b) The assumpt. ion that the facility would be constructed within a reasonable time and at a commercially reasonable cost.
COUNT IV Calculation of Termination Payment Under Section 9 of the 1978 General Acreement
- 33. The allegations of Paragraphs 1-24 are hereby realleged and incorporated by reference.
- 34. To the extent that Dow's obligations under the 1978 General Agreement are not completely discharged or excused on one or more of the grounds set forth in Counts I-III, Dow has exercised its unqualified right to terminate the agreement in accordance with the provisions of Article 9.B(1).
- 35. Consumers Power's false representations and non-disclosures prior to April 11, 1983 concerning its ability to place Unit 1 of the Midland Nuclear Facility in commercial operation for process steam service by December 31, 1984 were designed to, and did in fact, prevent Dow from earlier exercising its teesination rights under the 1978 General Agreement.
- 36. Bad Consumers Power notified Dow prior to April 11, 1983 of its inability to place Unit 1 in commercial operation by December 31, 1984, Dow would have promptly ter-minated the 1978 General Agreement and any termination ch rges would have been calculated as of such earlier termination date.
- 37. While, as alleged in Paragraph 10(e), factual disputes relating to the computation of any termination payment may be the subject of arbitrstion, it is.necessary for this Court first to declare the appropriate termination date to be used.
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- 38. As a direct and proaimate result of Consumers Power's failure earlier to disclose its inability to place Dr.it 1 in commercial operation for process steam by December 31, 1984, Dow has incurred subetantial expenses which would not have been incurred had Consumers Power timely disclosed this inability.
COUNT _V Negligence
- 39. The allegations of Paragraphs 1-24 ar. hereby realleged and incorporated by reference.
- 40. Since at least 1967, Consumers Power owed to Dow a duty to exercise due care and to proceed in a competent, workmanlike manner in the planning, supervision and construction of the Midland Nuclear Facility.
- 41. Consumers Power has breached this duty by negligently and recklessly failing to act in a competent, workmanlike manner and to exercise due care in the planning, supervision and construction of the Midland Nuclear Facility.
- 42. As the direct and proximate result of Consumers Power's failure to exercise due care, Dow has suffered damages, including the loss of over $60,000,000 expended on I
facilities to receive steam from Consumers Power.
l PRAYER FOR RELIEF WHEREFORE, Dow prays that this Court adjudge and l declare the legal rights of the parties as follows:
A. Under Count I, the 1978 General Agreement is cancelled, and all obligations of Dow under that and any prior agreements with Consumers Power are discharged by reason of Consumers Power's material misrepresentations and I
f non-disclosures, and Dow is entitled to compensatory damages l
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of not less than $60,000,000 and such other relief, including punitive and exemplary damages.
B. Under Count II, the 1978 General Agreement is cancelled, ar.d all obligations of Dow under that and any prior agreements with Consumers Power are discharged, by reason of the material breaches of Consumers Power's contractual and fiduciary duties to Dow, and Dow is entitled to compensatory damages of not less than 360,000,000 and such other relief as this Court may deem just and proper.
C. Under Count III, the 1978 General Agreement is cancelled and all obligations of Dow under that and any prior agreements with consumers Power are discharged because Dow's obligation to purchase steam has been frustrated or rendered commercially impracticable by the failure of the fundamental assumptions upon which the 1978 General Agreement was based, which failure was not caused by any actions of Dow.
D. Under Count IV, to the extent Dow's obligations under the 1978 General Agreement are not otherwise legally discharged or excused:
(1) Consumers Power shall be deemed by at least as early as the end of 1979 to have been unable to declare the Midland Nuclear Facility in commercial operation for process steam service by December 31, 1984; (2) Any computation of a termination payment, including computation by an arbitrator under Section 12, shall be made on the basis of the termination date so found by this Courts and,
t (3) Such termination payment shall be reduced or of fset by the amount of expenditures made by Dow since the termination date so found by this Court.
E. Under Count V, Dow is entitled to recover the damages it has suffered as a result of Consumers Power's reckless and negligent conduct, including the more than 360,000,000 expended by Dow as the direct and proximate result of Dow's reliance on Consumers Power's faithful adherence to its legal obligations, and such further and additional relief as this court aay deem just and proper including punitive and exemplary damages.
F. Under Counts I-V, Dow is entitled to such further, necessary and proper relief as is consistent with equity and good conscience.
x R W gi . L 6. A~4 A S'aska Mpa r, Specialty Products Manufacturing, Energy and Utilities Michigan Division The Dow Chemical Company 1
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I STATE OF MICHIGAN )
) SS.
COUNTY OF MIDLAND )
On this 18th day of July,1983, before me personally came the above-named Admigius A. Gaska and made oath that he has read the foregoing Complaint by him subscribed, and knows the contents thereof, and that the same is true of his own knowledge or, on information and belief, he believes it to be true.
$l ')
- h. Tary Putnic '
My Commission expires d .? 7- / f l
LAW OFFICES OF HERBERT H. EDWARDS, P.C.
t By: 5 -
l Herbert H. Edwards (P13112) 2612 Ashman l
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P.O. Scx 1883 Midland, Michigan 48640 (517) 631-5811 KIRKLAND & ELLIS By: ?- M Samuel A. Haubold t
Of Counsel:
1 William R. Jentes Jarnes A. Goold Lawrence E. Strickling l Thomas D. Graber l KIRKLAND & ELLIS 200 East Randolph Drive i
l Chicago, Illinois 60601 i (312) 861-2000
- 1 i Wayne M. Hancock Thomas J. Cresswell THE DOW CHEMICAL COMPANY 2030 Dow Center Midland, Michigan 48640 Dated: July 18, 1983 I .
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. STATE OF MICHIGAN IN THE CIRCUIT COURT FOR THE COUNTY OF MIDLAND THE DOW CHEMICAL COMPANY, Plaintiff, Case No. 83-002232-CK-D vs.
HON. DAVID SCOTT DeWITT CONSUMERS POWER COMPANY, Defendant.
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PRE-TRIAL ORDER NUMBER 1 At a session of said Court, held in the City Of Midland, County of Midland, State of Michigan, on PRESENT: HON. DAVID SCOTT DeWITT Circuit Judge The parties hereto, having stipulated to the entry of this order; Now, therefore, it is ordered as follows:
- 1. Plaintiff and ' counter-defendant, The Dow Chemical Company ("Dow)", shall produce to defendant and counter-plaintiff, Consumers Power Company (" Consumers Power"), the documents described on Exhibit A attached hereto,which were in existence at the close of business en July 31, 1983.
- 2. Consumers Power shall produce to Dow the documents described on Exhibit B attached hereto which were in existence at the close of business on July 31, 1983.
3, The actaal reproduction costs incurred by the Producing Party in making copies of documents requested by the Discovering Party shall be borne by the Discovering Party. In the evont the parties are unable to agree on such costs, either party may present the matter to this Court for determination.
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- 4. Each perty shall commence production of its documents on or about September 15, 1983 and use its best efforts If, by December 1, to ,camplete production by December 31, 1983.
1983, either party believes that it cannot complete production by December 31, 1983, it shall notify the other party in writing, indicating a date by which it will complete production, which in no event shall be later than February 29, 1984, subject to the provisions of paragraph 7. Each party has identified to the other those categories of documents for which it requests production on a priority basis and the parties shall use their best efforts to produce in accordance with such priority requests.
- 5. Production shall concurrently take place at such times and locations and in such manner as the parties may from time to time agree upon. Should any logistical problem not be resolved by the agreement of the parties, it may ce presented by either party to tnis Court for determination.
- 6. Nothing in this order shall be deemed to preclude either party from seeking document production from the other party for periods of time before or after the periods covered herein, nor preclude either party from opposing such request.
- 7. This order shall be modified upon written stipulation of the parties and may be modified upon motion of either party, for good cause shown.
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DAVID SCOTT DeWITT Circuit Judge i We hereby stipulate to the j entry of this order:
l LAW OFFICES OF HERBERT H. EDWARDS, P.C.
BY HERBERT H. EDWARDS (P 13112)
I (Signatures continued on next page)
{
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, KIRKLAND & ELLIS l
.T Attorneys for4The Dow Chemical Company BARRIS, SOTT, DENN & DRIKER EUG (P 12959)
Attorn or Consumers Power C any i
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EXRIBIT A REVISED DOW REQUESTS TO CON::UMERS
- 1. All documents that relate to the negotiations between Consumers and Dow concerning the General Agreement
' executed in June 1978.
- 2. All documents that relate to any explanation or interpretation of the June 1978 General Agreement.
- 3. All documents that relate to any meeting, contact or comunication between f:onsumers and Dow regarding the Midland Nuclear Facility.
- 4. All documents prepared or distributed in ccanec-tion with any meeting of Consumers' Board of Directors that relate to Dow or to the design, construction, financing, cost or schedule of the Midland Nuclear Facility, including but not limited to notes of directors, minutes, handouts, and drafts and notes of presentations.
- 5. All documents, including personal notes and files, maintained by the following Consumers personnel that relata to Dow or to the design, construction, financing, cost or completion schedule of the Midland Nuclear Facility:
J.D. Selby J.B. Falahee S.H. Howell J.W. Cook G.S. Keeley D.B. Miller R.C. Bauman A.R. Mollenkopf F.W. Buckman J.A. Mooney R.A. Wells K.R. Kline T.J. Sullivan W.R. Bird P.C. Webb R.C. Youngdahl R.W. Montross
,' T.C. Cooke J.L. Bacon A.D. Sarkar J.F. Donnelly D.G. Randolph L.B. Lindemer D. Horn
.- D. Sibbald B. Marguglio
- 6. All documents that summarize, describe, evaluate h
or refer to consumers' ability or inability to declare for te Midland Nuclear Facility to be in commercial operation 31, 1984.
proce'ss steam on or before December
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All documents that summarize, describe, evaluate '
or refer to the actual or potential consequences ility. of Dow s termination or *rithdrawal from the Midland Nuclear Fac 8.
All documents that relate to the preparation, review and modification of Bechtel Forecast 4, Bechtel Bechtel Fure-cast 5, Bechtel Forecast 6, Bechtel Adjusted Forecast djus ted 6, Forecast 7, Bechtel Replanning Forecast 7. and Bechtel A Forecast 7.
9.
All documents that relate to the " project scope
- rs and schedule redefinition effort" undertaken by consume i t of the and/or Bechtel in 1980, and referred to in the m nu es June 25, 1980 Executive Management Meeting.
All documents that relate to any Consumers
- 10. key project and/or Bechtel " decision on the target dateshfor June 25, milestones", and referred to in the minutes of t e 1980 Executive Management Meeting.
All documents that relate to Project Construc-
- 11. erformed tion Summary Critical Path Method (" CPM") analyses i d to p for the Midland Nuclear Facility, including but not lim te t aints, all computer printouts listing all activities and h dres r for ling l and all network diagrams prepared for use in CPM sc e u the Midland Nuclear Facility.
12.
All documents that relate to any report, estimate, h dules for or evaluation of aggregate costs or completion sc e I
l the Midland Nuclear racility.
- 13. All documents that relate ito thethe actual cost or potential impact of Consumers' financial ility. condit on on or completion schedule of the Midland Nuclear Fac
- 14. All documents that relate to the use by Bechtel and/or Consumers of " Actual Forecast", " Current Forecast," and .
f d to
- current Schedule" information as those terms are re erre team meeting between Bechtel in the minutes of the July 10, 1980 ;
and Consumers and all documents that relate to tha July 10, l 1980 team meeting.
- 15. All documents that relate to the i'gact on the e Facility of cost and completion sche hle of the Midland Nucli regulations imposed by the U.S. Nuclaar Regulato2y Commission or other governmental agencies or commissions.
- 16. All documents that relate to any evaluation of the impact of the Three Mile Island accident on the cost and completion schedule of the Midland Nuclear Facility.
- 17. All documents that relate to the following design and construction errors, failures or deficiencies at the Midland Nuclear Facility,, including the impact of these errors,
' failures or deficiencies on cost and schedule:
- a. Deficiencies in soils placed as fill
- b. Beating, ventilating and air conditioning
- c. Pipe hangers and supports
- d. Quality assurance failures or deficiencies
- e. Seismic criteria f.
Bulk commodity installation l g. Tendon sheaths
- h. Reactor vessel bolts
- 1. Unit 1 reactor welds
- j. Electrical cables and cable trays
- k. Any overall review, summary, or evaluation of design or construc-tion errors, failures or deficiencies l 18. All documents that relate to the impact on the cost and schedule of the Midland Nuclear Facility of remedial
. , - _ . . . . , , , . ,.__,y. - _ __ _-. .--,m, -_-w, - ,, --- .- - -
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work resulting from design changes or constructicn errors, f
- 1 failures, or deficiencies, l 29.
All documents that relate to any meeting between >
l r"sumers and any employee, official or representative of the l
U.S. Nuclear Regulatory Coenaission regarding the Midland Nuc ear l e Facility.
20.
All documents that relate to any temporary halts in design or construction work at the Midland Nuclear Facility since January 1,1977, including but not limited tc documents I
relating to the reasons therefor.
- 21. All documents that relate to any Independent d
Design and Construction Verification Program for the lt Midlan Nuclear Facility, including but not limited to documents re a -
ing to the need therefor.
22.
All documents that relate to any consideration, m of evaluation or assessment of any actual or potential progra reinspection or reverification of construction or systems at i d to the Midland Nuclear Facility, including but not lim te documents relating to any consideration, evaluation or assess-ment of the need therefor.
- 23. All documents that relate to Consumers construc tion Completion Program.
24.
All documents that relate to the pessibility of I
f one or both
. consumers' suspending or ceasing construction o units of the Midland Nuclear Facility. .
25.
Consumers' contract (s), whenever executed, with f ional Bechtel Power Corporation and/or Bechtel i hAssociates respect to Pro ess Corporation (together referred to as "Bechtel")dwents, t the Midland Nuclear Facility and all revisions, amen m addenda, and appendices thereto, 26.
All documents, whenever prepared, that relate to Bechtel, l any clain Consumers has asserted or mayi assert to the against i
any of its agents, or any insurance carrier relat ng I .
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design and construction of the Midland Nuclear Fccility, includ-ing but not limited to any agreement to forego such claim, reserve such claim, or toll the statute of limitations regarding such claim.
- 27. All documents, whenever prepared, that relate to a*.ay insurance or indemnity agreement which may satisfy part or all of any judgment which may be entered in Dow's favor in this action or to indemnify or reimburse for payments made to satisfy the judgment.
- 28. All documents, whenever prepared, that relate to any study or evaluation regarding the activities of Bechtel or any of its subcontractors, consultants or suppliers with respect to the Midland Nuclear Facility.
- 29. All documents that relate to any meeting, contact j
i or communication between Consumers and Bechtel regarding the design, construction, cost or completion schedule of the Midland Nuclear Facility.
- 30. All documents prepared or transmitted since January 1, 1974 that relate to any report or evaluation regard-ing actual or potential errors, omissions or deficiencies in soils placed as fill for the Midland Nuclear Facility or exces-sive settlement of structures constructed on the fill, including but not limited to all documents relating to:
(a) any study or investigation following the dis-covery of excessive settlement in 1977 at the administration building; (b) any study or investigation following the dis-covery of excessive battlement of the diesel l generator building; f
(c) any report or measurement of settlement at the diesel generator building; (d) any study or investigation with respect to soils-related testing performed by U.S. Testing
E f
service, Abeldrilling,'Goldberg-zonino-Dunnicliff Associates or any other entity; (e) any consultant retained at any time since the
,- discovery of excessive settlement at the admin-istration building, including but not limited to Dr. R. Peck, Dr. A. Hendron, Woodward-Clyde Associates, Goldberg-Zonino-Dunnicliff Associates, Dr. 5. Wood, Dr. Y. Richart, and C. Could.
31.
All documents prepared since January 1,1974 that relate to actual or potent.ial errors, ammissions or defi-ciencies with respect to placement, control, supervision, moisture, density, strength or other characteristics of soils placed as fill on the Midland Nuclear yacility, including but not limited to all documents relating to:
(a) all daily or other regularly prepared Quality Assurance, Quality Control, or other reports on soils work prepared by Canonie constructiori Company and/or Bechtel; (b) supervision and/or inspection of soils work; (c) results of standard penetration tests, in-place density tests, dutch cone tests, strength tests, compaction tests, acisture tests, densimeter tests, or other tests of fill; (d) any approval, clearance or " release" of tests referred to in (c) which contained failing, incorrect or unsatisfactory results; (e) all documents referred to in the March 1979 NRC investigatory report relating to adequacy of Midland Nuclear Facility fill or any response thereto; (f) any meeting with any employee or representative of the NRC regarding fill at the Midland Nuclear Facility; I
t r.. , , ,+- n.. - - - -,- -- --- ---- , - - - , - ,,.m--,. wv, ,,,n.n. ,---,, _ ,- - n,, ,e._e ,n., ,,-w. -._n.-.-..,e ,, ,._ ,-------..e-v
(g) the diesel u neratof building task groups .
the July 1979 presentation to the NRC regarding (b)
Midland Nuclear Facility fill and remedial measures relating thereto.
All documents prepared or transmitted since
- 32. i speci-January 1, 1967 that relate to procedures, guidelition nes, fications, or requirements regarding placement, density or other compos
- ontrol, supervision, moisture, compaction, ility, includ-characteristics of fill at the Midland Nuclear Fac ing, but not limited to all documents relating to: &
l (a) any foundation investigation conducted by Dames Moore in 1969 or thereafter and any amendment or supplement thereto; Bechtel Specifications C-206, C-208, C-210, (b)
C-510 and QCI C-102; (c) any portion of the Preliminary and/or Final Safety Analysis Report, or any actual or pro-posed amendment thereto, regarding fill at the Midland Project.
33.
All documents that relste to any decision or r
discussion regarding the actual or proposed concerning disclosure o nondisclosure by consumers of information toincreases, Dow licensing proceedings, schedule adjustments, t thecost Midland construction delays and/or construction problems any such a Nuclear Facility, and all referring to documents disclosure or non-disclosure.
34.
All documents that relate to the stipulation and the NRC, entered into on June 5,1981 between Consumers ff/ Consumer Power entitled " Nuclear Regulatory Commission Sta Company Quality Assurance Stipulation."
35.
All indices for Consumers' files relating Facility.
to documents maintained concerning the Midisnd Nuclear 1
- . ~ . _ _ _ . ___ . - - , _ _ . , _ _ - . . . _ . - _ , , _ __-.______,,._..,.v ,,__._,-,.4 ...,_ ,,- m, , _ . , _ . . ,w. , . . _ . - , , .
idland 36.
All project organisation chahs for th3 M a Nuclear Facility.
- 37. All Occusents that relate to in the the method of 1978 calculating any termination charge as referred to any calcula- to Gereral Agreement and all documents that relate tion or estimate of any termination charge. ,
38.
All documents, including notes and tape record-to its employ-ings, thet relate to state-ments made by ss censumers concerning ees, shareholders, financ a1 analysts, or theJuly pre14, Dow'.s termination of the 1978 General Agreement on 1983 and Nw's initiation of this lawsuit.
Alldocumentstha[relatetoaudits,evaluatons i
- 39. i g the design and or reports of Consumers' performance in manag n construction of the Midland Nuclear Facility.
DrFINITIONS AND INSTRUCTIONS 1.
Unless otherwise specified, the requests cover documents dated since Jr.nuary 1, 1977.
2.
As used herein, " documents" means all " docum bjects or papers, books, accounts, letters, photographs, f the Michigano tangible things" as referred to in Rule 310 o i
General Court Rules.
As used herein, " relate" means refer, ment on,
- 3. tion with.
discuss, describe, or prepared for or used in connec d 4.
In complying with these requests Consumers nee ided to Dow in not produce to Dow any document alreadytprov tion.
response to its June 3, 1983 request for documen i a Files should be produced in the same condit on
' 5. Personal files l
and order as they are maintained by Consumers. l should be segregated according to individua . 4 Documents produced in response to Request N 6.
i s provided may be excised to exclude non-responsive port on ,h ll be that non-excised copies of such documents s a J '
6
, -ev- ,, , . ----,- .n-e -- - - - - --, - - , - ,,,--n-e _ - , , - , - - - - - - , , . , - , , - - , , -
-n--,wan,-----.mme,w---- .--e,-,-.------ - - - - . - - - - , - - - - -
Consumers Power and shall be made available for inspection on request.
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9/7/83-BSDDn33 REVISED CONSUMER 3 POWER DOCUMENT REQUESTS EXNIBIT B Definitions As used herein:
- 1. " Document" means'any medium upon which intelligence or information can be recorded or retrieved, and includes, without limitation, the original and each ccpy, regardless of or. gin and location, of any book, pamphlet, periodical, letter, memorandum (including any memorardun or report of a meeting or conversation),
financial statement, accounting invoice, bill, order form, receipt, record, entry, diary, calendar, telex, telegram, cable, report, contract, agreement, study, handwritten note, draft, working paper, chart, paper, print, laboratory record, drawing, sketch, graph, or data index, list, tape, phorograph, microfilm, data sheet recorded, transcriced, processing card. or any other written, punched, taped. filmed, or graphic matter, however produced or reproduced, which is in your possession, custody, or control or which is in the possession, custody or control of Dow.
2.
"Dow" means plaintiff, The Dow Chemical Company, any and all parent, subsidiaries, divisions, affiliates or other business entities owned, in whole or in part, o; controlled, directij or indirectly, by The Dow Chemical Company.
3
" Midland Nuclear Facility" means the nuclear power plant described in paragraph 5 of Dow's First Amended Complaint in this case.
including
- 4. The "1967 Contract" means the agreement, amendments and supplements, described in paragraph 6 of Dow's First Amended Complaint in this case.
1 l
- 5. The "1974 Service Contracts" means the agreements j 1974, between Dow and Consumers Power Company, all dated January 30, l f6r' electric service, steam service and water supply.
- 6. The "1978 General Agreement" means the contract attached as Exhibit A to Dow's original Complaint in this case.
- 7. The "1978 Electric Service Agreement" means the agreement for electric service between Dcw and Conqumers Power Company, dated June 21, 1978.
- 8. " Commercial Steam 01eration Date" meaas the date as so defined in the 1978 General Agreement.
- 9. "ASI" means the Allocated Steam Investment as defined in the 1978 General Agreement.
- 10. As used herein, " relate" means refer, mention, discuss, describe or prepared for or used in connection with.
Documents to be Produced n,
- 1. All Documents relating to the negotiatien, execut interpretation, performance or termination of the 1978 General Agreement including, without limi ation, each of the following subjects:
- a. Dow's motivation and objectives in renegotiating the 1967 Contract and the 1974 Service Contracts;
- b. Dow's strategy in the negotiations which culminated in execution of the 1978 General Agreement;
- c. Dow's analysis of the differences between the
< 1967 Contract and the 1974 Service Contracts, on the one hand, and the 1978 General Agreement and the 1978 Electric Service Agreement, on the other hand;
- d. Any consideration by Dow of whether or not and when to exercise its option to terminate the 1978 General Agreement and/or the 1978 Electric Service Agreement and the consequences thereof;
- e. Dow's financial obligations to Consumers Power Company upon exercise of its option to terminate the 1978 General Agreement and/or the 1978 Electric Service Agreement;
[
- f. Dow's motivation and objectives in ultimately electing to terminate the 1978 General Agreement and to contest any obligation to make a termination payment to Consumers Power Company; 9 Dow's analysis of: (i) the completion date and/or the Commercial Steam Operation Date of the Midland Nuclear Facility; (ii) the cost of the Midland Nuclear Facility; and (iii) the commercial reasonablen3ss of the cost of steam to Dow under the 1978 General Agreement;
- h. Selection of the December 31, 1984 deadline, cs it appears in the 1978 General Agreement;
- i. Consideration by Dow of alternative sources of process steam for Dov's Midland facilities.
.2.
All Documents which, in whole or in part, relate to, evidence or negate:
- a. Dow's alleged placing its complete faith, trust <
and confidence in Consumers Power Company for tne design, construction and operation of the Midland Nuclear AmendedFacility (] Par.
Complaint ; graph 8 of Dow's First
- b. The alleged material misrepresentations anddurino non-disclosure of Consumers Power Com any the negotiations leading to execution'of'tne 1978 General Agreement (Paragraph 11 of Dow's First Amended Complaint];
- c. The alleged f alse and misleading appearance by Consumers Power Company during the negotiations leading to execution of the 1978 General Agreement that the construction of the Midland Nuclear Facility was proceeding normally (Paragraph 14 of Dow's First Amended Complaint);
- d. The alleged specific request made by Dow to Consumers Power Company immediately prior to the execution of the 1978 General Agreement for any information adversely reflecting on the status and schedule of the project (Paragraph 15 of Dow's First Amended Complaint];
- e. The response of Consumers Power Company to Dow's specific request, as referred to in paragraph (d) above; f.
Dov's knowledge of each fact alleged in Paragraph 19 of Dow's First Amended Complaint;
- g. The alleged false and material misrepresentations made by Consumers Power Company (Paragraph 21 of Dow's First Amended Complaint];
- h. Dow's knowledge on and after June 21, 1978 of (i) the cost of the Midland Nuclear Facility; (ii) the cost to Dow of process steam from the Midland Nuclear Facility;,
(iii) the schedule (and any revisions thereof)
- for completion of the Midland Nuclear Facility for commercial operation for process steam; (iv) the compaction of the fill in the soil upon which the Midland Nuclear Facility was to be built and any related soil and construction problems and issues; (v) the settlement of any building within the Midland Nuclear Facility.
- i. Dow's knowledge of Lhe settlement cf the diesel generator building at the Midland Nucle:r Facility;
- j. The notification of Dow by consumers Power on or.
about April 11, 1983 of the anticipated Commercial Operation Date.
- 3. All Documents which, in whole or in part, relate to, evidence or negate:
- a. The portion of the expenditure of more than $60 million [ Paragraph 24 of Dow's First Amended Complaintl that was incurred by Dow on or after June 21, 1978:
- b. Additions, repairs and modifications to Dow s boilers and/or steam supply system undertasen after June 21. 1978.
- 4. All Documents which in whole or in part relate to Dow's actual and projected steam supply needs at Midland on and after the commencement date of the negotiations leading to the execution of the 1978 General Agreement.
- 5. Those portions of all agendas for, handouts, drafts and notes of presentations and visual aids used during, and minutes of, meetings of the Board of Directors, Executive or other committees of the Board of Directors, and/or other committees of senior management (including notes of directors) of Dow which relate to:
- a. the Midland Nuclear Facility;
- b. Relocation, expansion, contraction or changes in Dow's manufacturing or other processes located at Midland, in whole or in part, prepared since January 1, 1975;
- c. The 1978 General Agreement (including its renegotiation and purported termination);
r - - . , - ., - - -
- d. Payment by Dow of the amounts due under the 1978 General Agreement upon exercise of Dow's option to terminate.
- e. Expenditures on Dow's steam supply system;
- f. Consideration by Dow of alternative sources of process steam for Dow's Midland facilities.
- 6. All press clippings, news releases and similar reports given to or published in the media concerning the Midland Nuclear Facility, from January 1,1977 to July 14, 1983, both inclusive.
- 7. All Documents issued by or submitted to the United States Nuclear Regulatory Commission with respect to the Midland Nuclear Facility from January 1,1977 to July 14, 1983, both inclusive.
- 8. All Documents issued by or submitted to the Michigan Public Service Commission with respect to the Midland Nuclear Facility from January 1, 1977 to July 14, 1983, both inclusive.
- 9. All documents, including personnel nores, diaries and files, maintained by the following Dow personnel tnat relate to Consumer. Power, the Midland Nuclear Facility, Dow s purcnase, cost.
1978 supply, need for process steam for its Midland Facilities.
General Agreement (including Dow's attempted termination of same):
- a. Remigius A. Gaska;
- b. D. D. DeLine;
- c. James R. Burroughs;
- d. Robert W. Lundeen;
- e. Hunter W. Henry;
- f. Roger L. Kesseler;
- g. Paul F. Oreffice;
- h. Joseph G. Temple, Jr.;
- i. Robert M. Keil;
- j. Frank Neering;
- k. Robert Caldwell;
- 1. Donald A. Rikard;
- m. J. Leo Schick;
-, - ----e -
= .
- n. Jack M. Brown;
- o. Robert L. Johnson;
- p. Walt J. Gorney;
- g. Pat McConnell;
- r. Arthur Tucker;
- s. Richard Johnensen;
- t. Ray W. Murphy;
- u. Lou Pribila.
- v. Michael R. Clayton
- 10. All documents relating to any meeting, contract or communication between Consumers Power and Dow regarding the Midland Nuclear Facility.
- 11. All documents that relate to actual or potential consequences of:
- a. Dow paying the termination fee as required in the 1978 Ceneral Agreement; or
- b. Dow buying process steam pursuant to the terms of the 1978 General Agreement.
- 12. All reports, analyses, studies, evaluations prepared by or at the direction of Dow relating to Consumers Power, Midland Nuclear Facility, or Dow's steam supply facilities, needs, costs for its Midland Facilities.
- 13. All audits, analyses, reports, summaries, calculations of charges, costs (and other components of ASI) pertaining to the Midland Nuclear Facility performed by Dow.
- 14. All documents that relate to meetings or communications l
between Dow and any governmental agency concerning Dow's sources and generation or purchase of process steam for use in connection with its Midland Facility, including but not limited to:
- a. Agreements or mandates to conform Dov's equipment for generation and process steam with governmental requirements;
- b. Dow's forcasted steam needs and on or after December 31, 1984.
- 15. All documents that relata to the impact of the Midland Nuclear Facility on Dow's need or cost of process steam.
- 16. All documents that relate to any meeting or communications between Dow and any employee, official or representative of (a) the U.S. Nuclear Regulatory Commission, (b)
Environmental Protection Agency, or (c) Michigan Air Pollution Commission regarding the Midland Nuclear Facility, Dow's Midland Facilities or Contumers Power.
- 17. All indexes for Dow's files containing documents that relate.to:
- a. The Midland Nuclear Facility;
- b. The generation or purchase (including costs and scheduling) concerning the generation of process steam for use at Dow's Midland Facility.
- 18. All documents evidencing inspections or visits of the Midland Nuclear Plant by Dow personnel.
- 19. All registers, logs, diaries, sign-in sheets of Dow reflecting visits, meetings of Consumers Power personnel with Dow s personnel in Dow's offices.
- 20. All organization charts of Dow pertaining to:
- a. Project Pheonix;
- b. Departments or divisions involved in the generation or purchase of proc?ss steam for Dov's Midland Facilities.
- 21. All documents, including notes and tape recordings, that relate to statements by Dow to its emplcyees, shareholders, financia: analysts, or the press, concerning Dow's termination of the 1978 General Agreement on July 14, 1983 and Dow's initiation of this lawsuit.
- 22. All documents that relate to audits, evaluations or reports of Consumers Power's or Bechtel's performance in managing, scheduling or financing the design and construction of the Midland f
Nuclear Facility, the ability of Consumers Power and/or Bechtel to complete construction of the Midland Nuclear Facility.
4 I
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l L.
STATE OF MICHIGAN IN THE CIRCUIT COURT FOR THE COUNTY OF MIDLAND THE DOW CHEMICAL COMPANY, Plaintiff, Case No. 83-002232-CK-D vs. HON. DAVID SCOTT DeWITT CONSIMERS POWER COMPANY, Defendant.
/
ORDER FOR PRESERVATION OF DoctPEh"I'S At a session of said Court, held in the City of Midland, p unt. of Midland, State of Michigan, on vC4m e M9 /f /3
/ /
PRESENT: HON. DAVID SCOTT DeWITT Circuit Judge The parties hereto, having stipulated to the entry of this order, Now, therefore, it is ordered as follows:
- 1. During the pendency of this action (including any appeals), each party shall utilize its best efforts to maintain at least one copy of each Document (as hereafter defined) in the pnssession of that party on the date of entry of this Order.
- 2. As used herein, " Document" shall rean:
(a) those documents to be produced by each party pursuant to Pre-Trial Order Number I; and (b) any other document which relates or refers to the issues raised in the first amended complaint, answer and affirmative defenses, counterclaim and answer and affirmative defenses to counterclaim, previously filed in this .ction.
- 3. A party may satisfy this order by retaining a Document in its original form or in microfilm, microfiche or such .
other format as such party in the normal course of its business may retain copies of documents. ,
A 1RutCC"
-: . r. e q,j
- g. . . . -
i
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- 4. Each party shall maintain any Document created from and after the date hereof in accordance with its presently existing written document retention program, copies of which have been exchanged between the parties and are identified as follows:
Consumers Power Company:
(a) Genaral Order 25 (Revised 5/20/82);
(b) Quality Assurance Prograc. Manual for the Midland Nuclear Plant - Volume I - Document Control, Policy No. 6 (Rev 13 - Date 2/17/83);
Quality Assurance Records Policy No. 17 (Rev 13 -
Date 2/17/83);
Vol II, Document Control Proc No. 6-1 (Rev 2 -
Date 2/17/82);
Vol IIA, Document Control Proc No. 6-1 (Rev 2 4/29/82);
(c) Controller's Procedure Bulletin 10-7, Records Retention Rev 5/26/82.
The Dow Chemical Company:
Dow Records Retention Manual for 1983.
Neither party shall modify its written document retention program, as described above, with respect to any Document, without giving the other party thirty (30) days prior written notice.
- 5. Each party shall distribute a copy or summary of this order to such of its employees as are responsible for compliance with the terms of this order and, within ten (10) days from the date hereof, shall deliver to the other party a copy of the communication and a list of the names or Job titles of the persons to whom such communication was distributed.
- 6. This a der shall be modified upon written stipulation of the parties and may be modified upon motion of either party, for good cause shown.
W )., w fhtYe4 f DAVID j SCOTT DeWITT
- Circuit Judge (Signatures continued on ,
next page.)
We hereby stipulate to the entry of this order:
IAW OFFICES OF HERBERT . EDWARDS P.C.
BY , i HERBERT HVEDRARDS (P 13112)
KIRK'MD & ELLIS BY O- _
At Q :heys for The(Dow Chemical Company BARRIS, SOTT, DENN & DRIKER BY EUGENE I' (P 12959)
' Attorneys or onsumers Power Company l
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