ST-HL-AE-5555, Provides Draft Amended & Restated Participation Agreement, Draft Operating Agreement & Markup of Pages Reflecting Minor Editorial Changes

Provides Draft Amended & Restated Participation Agreement, Draft Operating Agreement & Markup of Pages Reflecting Minor Editorial Changes

ML20147B459
Person / Time
Site:	South Texas
Issue date:	01/28/1997
From:	Cottle W HOUSTON LIGHTING & POWER CO.
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
ST-HL-AE-5555, NUDOCS 9701310373
Download: ML20147B459 (119)

Text

9 The Light com any Houston Ugh

& Power South Texas Project Electric Generating Station P.O. Boz 289 Wadsworth. Texas 77483 January 28,1997 ST-HL-AE-5555 File No.: G25 U. S. Nuclear Regulatory Commission Attention: Document Control Desk Washington, DC 20555 South Texas Project Units 1 & 2 Docket Nos. STN 50-498; SAN 50-499 Supplemental Information Regarding Proposed License Amendments

References:

1.

Letter from W. T. Cottle to Document Control Desk dated August 23,1996 (ST-HL-AE-5450) 2.

Letter from W. T. Cottle to Document Control Desk dated October 1,1996 (ST-HL-AE-5480) 3.

Letter from T. H. Cloninger to Document Control Desk dated October 15,1996 (ST-HL-AE-5487)

In Reference 1, Houston Lighting & Power (HL&P) submitted proposed amendments to the South Texas Project Operating Licenses to change the licensed operator of the facility.

References 2 and 3 provided additional information regarding these proposed amendments.

This letter provides the following information to supplement the original request:

Draft Amended and Restated Participation Agreement (Attachment 2)

Draft Operating Agreement (Attachment 3)

Markup of pages reflecting minor editorial changes (Attachment 4) j a

In addition, the following individuals have been proposed for the South Texas Project Nuclear j

Operating Company Board of Directors:

William T. Cottle i

P. O. Box 289 Wadsworth, Texas 77483 I

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Charles R. Crisp P. O. Box 1700 Houston, Texas 77252 9701310373 970128

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9 Houston Lighting & Power Company South Texas Project Electric Generating Station ST-HL-AE-5555 File No.: G25 Page 2 Gerald E. Vaughn P. O. Box 2121 Corpus Christi, Texas 78403 William C. Gunst P. O. Box 1771 San Antonio, Texas 78296 i

James C. Lanier, III P. O. Box 1088 Austin, Texas 78767 In Reference 2 a listing of the Principal Officers of the South Texas Project Nuclear Operating Company was provided. The mailing address for each of these officers is:

P. O. Box 289 Wadsworth, Texas 77483 As noted in the original submittal, all directors and officers are citizens of the United States.

If you have any questions, plea;e contact me or Mr. S. M. Head at (512) 972-7136 concerning this matter.

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W. T. Cottle Executive Vice President and General Manager, Nuclear SMH/nl Attachments SMH 5UPPS$55 5T130161665 4

Houston Lighting & Power Company ST-HL-AE-5555 f

South Texas Project Electric Generating Station File No.: G25 Page 3 Leonard J. Callan Rufus S. Scott Regional Administrator, Region IV Associate General Counsel l

U. S. Nuclear Regulatory Commission Houston Lighting & Power Company 611 Ryan Plaza Drive, Suite 400 P. O. Box 61067 j

Arlington, TX 76011-8064 Houston, TX 77208 Thomas W. Alexion Institute of Nuclear Power Project Manager, Mail Code 13H3 Operations - Records Center U. S. Nuclear Regulatory Commission 700 Galleria Parkway Washington, DC 20555-0001 Atlanta, GA 30339-5957 4

David P. Loveless Dr. Bertram Wolfe i

Sr. Resident Inspector 15453 Via Vaquero c/o U. S. Nuclear Regulatory Comm.

Monte Sereno, CA 95030 P. O. Box 910 Bay City, TX 77404-0910 Richard A. Ratliff i

Bureau of Radiation Control i

J. R. Newman, Esquire Texas Department of Health Morgan, Lewis & Bockius 1100 West 49th Street 1800 M Street, N.W.

Austin, TX 78756-3189 j

Washington, DC 20036-5869 i

J. R. Egan, Esquire M. T. Hardt/W. C. Gunst Egan & Associates, P.C.

City Public Service 2300 N Street, N.W.

P. O. Box 1771 Washington, D.C. 20037 San Antonio, TX 78296 J. C. Lanier/M. B. Lee U. S. Nuclear Regulatory Commission i

City of Austin Attention: Document Control Desk Electric Utility Department Washington, D.C. 20555-0001 721 Barton Springs Road Austin, TX 78704 Central Power and Light Company J. W. Beck ATrN: G. E. Vaughn/C. A. Johnson Little Harbor Consultants, Inc.

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P. O. Box 289, Mail Code: N5012 44 Nichols Road Wadsworth, TX 77483 Cohassett, MA 02025-1166 l

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AFFIDAVIT 4

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i UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION In the Matter

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Houston Lighting & Power

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Docket Nos. 50-498 Company, et al.,

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50-499

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South Texas Project

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Units 1 and 2

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AFFIDAVIT I, W. T. Cottle, being duly sworn, hereby depose and say that I am Executive Vice President and General Manager, Nuclear, of Houston Lighting & Power Company; that I am duly authorized to sign and file with the Nuclear Regulatory Commission the attached proposed amendments to the South Texas Project Units 1 and 2 Operating Licenses; that I am familiar with the content thereof; and that the matters set forth therein are true and correct to the best of my knowledge and belief.

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W. T. Cottle Executive Vice President and General Manager, Nuclear STATE OF TEXAS

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COUNTY OF MATAGORDA

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Subscribed and sworn to before me, a Notary Public in and for the State of Texas, this.2 2 gday of L n vo r,,1997.

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Notary euhiic in aad for the" c

State of Texas SMH 5t'PPS$53 STDot61663

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1 ATTACHMENT 2 DRAFT AMENDED AND RESTATED PARTICIPATION AGREEMENT i

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Draft: December 20, 1996 AMENDED AND RESTATED SOUTH TEXAS PROJECT PARTICIPATION AGREEMENT BETWEEN CITY OF SAN ANTONIO CENTRAL POWER AND LIGHT COMPANY HOUSTON LIGHTING & POWER COMPANY CITY OF AUSTIN EFFECTIVE AS OF AS FILED WITH TAX RULING DRAFT

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Draft: December 20, 1996 i

TABLE dF CONTENTS Pacre 1.

PARTIES 1

2.

RECITALS 1

j 3.

AGREEMENT 2

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4.

DEFINITIONS 2

5.

OWNERSHIP OF SOUTH TEXAS." PROJECT 10 4

6.

ADDITION OF GENERATING UNITS 11 7.

GENERATING CAPACITY AND ENERGY ENTITLEMENT 15 8.

DELIVERY AND TRANSMISSION 16 J

9.

ADMINISTRATION.

18 10.

OPERATION AND DECOMMISSIONING 21 i

11.

REPLACEMENT OF OPCO 22 12.

PROJECT COSTS 22 23 13.

ADVANCEMENT OF FUNDS 23 14.

TAXES 15.

WAIVER OF RIGHT TO PARTITION 24 16.

MORTGAGE AND TRANSFER OF INTEREST 25 17.

RIGHT OF FIRST REFUSAL.

28 33 18.

DESTRUCTION OR ABANDONMENT 36 19.

PROJECT INSURANCE 20.

LIABILITY OF PARTICIPANTS TO EACH OTHER 37 41 21.

PAYMENT DEFAULT 22.

SOURCE OF PAYMENTS BY SAN ANTONIO 43 44 23.

SOURCE OF PAYMENTS BY AUSTIN.

46 24.

CONTINUING RESPONSIBILITY OF OPCO 4

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Draft: December 20, 1996 25.

RELATIONSHIP OF PARTICIPANTS 46 26.

FORCE MAJEURE 48 27.

GOVERNING LAW 49 28.

BINDING OBLIGATIONS 49 29.

AMENDMENT OF THIS RESTATED AGREEMENT 51 30.

TERM 51 31.

INTERESTS ACQUIRED IN ?THE NAME OF AN INDIVIDUAL PARTICIPANT 51 32.

NOTICES 51 33.

MISCELLANEOUS PROVISIONS 52 Exhibit A: Common Station Facilities 55 Exhibit B: South Texas Plant Site 56 Exhibit B-1: Railroad Strip 57 i

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Draft: December 20, 1996 AMENDED AND RESTATED SOUTH TEXAS PROJECT PARTICIPATION AGREEMENT 1.

PARTIES:

The parties to this amended and restated agreement Restated Agreement") are:

CITY OF SAN ANTONIO, acth.ng (this through the City Public Service Board of San Antonio, hereinafter referred to as " San Antonio"; CENTRAL POWER AND LIGHT COMPANY, a Texas corporation, hereinafter referred to as " Central"; HOUSTON LIGHTING & POWER COMPANY, a' Texas corporation, hereinafter referred to as " Houston"; and the CITY OF AUSTIN, hereinaf ter referred to as

" Austin".

2.

RECITALS:

The parties have heretofore jointly licensed and constructed two nuclear-fueled electric generation facilities known the South Texas Project which are currently operated for the as production of electric power and energy taken by each Participant in proportion to its ownership interest in such facilities.

Such jointly owned facilities were licensed and constructed and currently are operated under the terms of the Participation Agreement, dated as of July 1,1973, as amended by three amendments thereto (which P.articipation Agreement, as so

amended, is i

hereinaf ter referred to as the " Prior Agreement"). The parties now desire to amend and restate the Prior Agreement in order (i) to provide for the continued operation and maintenance of the said generating facilities by STP Nuclear Operating Company ("OPCO")

acting pursuant to the South Texas Project Operating Agreement, dated effective as of the Effectk.ve

Date, (the

" Operating Agreement") (ii) to relieve Houston and Central of their' respective J

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i Draft: December 20, 1996 rights and obligations as Project Managers under provisions of the Prior Agreement, (iii)- to amend and restate the terms of the Prior Agreement in other respects and (iv) to terminate the Prior Agreement as of the Effective Date.

3.

AGREEMENT:

In consideration of the mutual covenants herein, the parties agree as follows:

4.

DEFINITIONS:

The follo91ng terms, when used herein, shall have the meanings specified:

4.1 ADDITIONAL GENERATING UNIT:

The third or any subsequent nuclear electric generating unit to be located on the South Texas Plant Site.

4.2 CAPACITY

Electrical rating expressed in megawatts (mw) or megavolt-amperes (mva) and based on manufacturer's nameplate electrical ratings where available.

4.3 CAPITAL ADDITIONS:

Any Units of Property, land or interests in land which are added to the South Texas Project and which are not-in substitution for any existing Units of Property, land or interests in land constituting a part of the South Texas Project, and which in accordance with accounting practice should be capitalized.

4.4 CAPITAL BETTERMENTS:

Any improvements to the South Texas Project, including any enlargement or improvement of any Units of Property constituting a part of the South Texas Project or the substitution therefor, where such substitution constitutes an enlargement or improvement as compared with that for which it is j i

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substituted, and which in accordance with accounting practice should be capitalized.

4.5 CAPITAL IMPROVEMENTS:

All of any Capital Additions, Capital Betterments, or Capital Replacements.

4.6 CAPITAL REPLACEMENTS: The substitution of any Units of Property for other Units of Property constituting a part of the South Texas Project, where such' substitution does not constitute an enlargement or improvement of that for which it is substituted, and which in accordance with accounting practice should be capitalized.

4.7 COMMON STATION FACILITIES:

Those components of the South Texas ?roject identified in Exhibit A as being for the common I

use of all 'aits now or hereafter comprising the South Texas Project.

4.8 CONSTRUCTION POWER LINE:

A 138 KV line located within the Transmission Corridor.

4.9 CONSTRUCTION WORK:

Design, construction, repai,r, replacement and reconstruction of Capital Improvements to the South Texas Project, and the decommissioning, dismantling, removal and final disposition of all components of the South Texas Project, including, but not by way of limitation, all related engineering, design, contract preparation, purchasing, supervision, expediting, inspection, accounting, testing, management and protection.

4.10 CONSTRUCTION WORK LIABILITY:

Liability of OPCO or one or more Participants for damage suffered by anyone other than a Participant which arises out of Construction Work and is not s

t Draft: December 20, 1996 discharged by Project Insurance, and is not the result of Willful Action.

4.11 COSTS OF OPERATION:

Includes all Costs of Operation as defined in the Operating Agreement.

4.12 EFFECTIVE DATE:

[DATEl 4.13 ENERGY:

Kilowatt-hours (kwh).

4.14 GENERATION ENTITLEMENT SHARE:

.The percentage entitlement of each Participant in a particular Generating Unit of the South Texas Project. Each Participant's percentage entitlement shall be equal to such Participant's percentage ownership in the particular Unit at the applicable time as contemplated by this Restated Agreement.

4.15 GENERATING UNIT or UNIT: An electric generating unit, including the components thereof (nuclear steam supply system, turbine and generator including step-up transformers and other associated equipment), located on the South Texas Plant Site.

A Generating Unit does not include Common Station Facilities but does include that portion of the South Texas Plant Site allocated thereto in Exhibit B hereto, and in the case of an Additional Generating Unit, that portion selected by the Participant proposing the Additional Generating Unit and approved by the Owners Committee.

4.16 NET EFFECTIVE GENERATING CAPABILITY:

The maximum continuous ability of each Generating Unit to produce power s

s Draft: December 20, 1996 measured at the high voltage terminals of the generator step-up transformers.

4.17 NRC OR NUCLEAR REGULATORY COMMISSION:

The United States Nuclear Regulatory Commission or its predecessor, the Atomic Energy Commission, or any successor having responsibility for the administration of the licensing and regulation of the operation of nuclear utilization facilitie's' pnder the Atomic Energy Act of 1954 and any amendments thereto.

4.18 NUCLEAR FUEL:

Any source, special nuclear or by-product material as defined in the Atomic Energy Act of 1954 and any amendments thereto, including any ores, mined or unmined, uranium concentrates, natural or enriched uranium hexafluoride, or any other material in process containing uranium, and any fuel assemblies or parts thereof, which are required for the generation of electricity at South Texas Project.

4.19 OPCO:

STP Nuclear Operating Company, a Texas non-profit corporation formed by the Participants for the purposes described in Section 20.2 of this Restated Agreement.

4.20 OPE ltATING ' AGREEMENT:

The Operating Agreement dated effective as of the Effective Date, by and among the Participants and OPCO, as the same may be amended from time to time.

4.21 OWNERS COMMITTEE:

The committee established pursuant to Section 9.1 hereof composed of representatives of each Participant.

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s Draft: December 20, 1996 4.22 PARTICIPANT:

A party hereto or other entity acquiring an interest in the South Texas Project in accordance with this j

Restated Agreement.

i 4.23 PLANT OWNERSHIP INTEREST:

The percentage interest of l

the Participants in the South Texas Project.

Each Participant's 4

percentage interest shall be equal to such Participant's ownership a

in the Common Station JFacilities at the applicable time as contemplated by this Restated Agreement.

a 4.24 POWER:

Kilowatts (kw) or megawatts (mw).

4.25 PRECONSTRUCTION WORK:

Environmental impact studies, safety analyses, site evaluation, licensing of the South Texas Project and acquisition of the South Texas Plant Site, but excluding all Construction Work and all Station Work.

4.26 PRECONSTRUCTION WORK LIABILITY:

Liability of OPCO or one or more Participants for damage suffered by anyone other than a Participant which arises out of Preconstruction Work, and is not

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discharged by Project Insurance, and is not the result of Willful Action.

4.27 PROJECT COSTS:

The costs of possessing,.using, maintaining, repairing, improving, operating, decontaminating and decommissioning the South Texas Project which include (a) all Costs of Operation as defined in the Operating Agreement; (b) all payments made to and expenses incurred by a Participant pursuant to an agreement executed by each of the Participants which designates such payments and expenses as Project Costs; and (c), costs of ' -.

Draft: December 20, 1996 jointly acquiring and disposing of Nuclear Fuel whether by OPCO or as otherwise directed by the Owners Committee but excluding the Spent Fuel Disposal Fee.

4.2E PROJECT INSURANCE:

Policies of insurance to be procured and maintained in accordance with Section 29 of this Restated Agreement.

4.29 RAILROAD STRIP:

A strip of land approximately 80 feet wide, extending northerly from the South Texas Plant Site and being generally depicted in Exhibit B-1 hereto.

4.30 SOUTH TEXAS PLANT SITE:

A parcel of land in Matagorda County, Texas, consisting of approximately 11,000 acres and being generally depicted on Exhibit B hereto.

4.31 SOUTH TEXAS PROJECT:

The South Texas Plant Site and the two existing nuclear steam electric generating units situated thereon, each having a Capacity of approximately 1250 mw and all interests in property, facilities and structures used therewith or related thereto on or adjacent to the South Texas Plant Site.

The South Texas Project is generally described in Exhibit A hereto.

Said definition shall also include any Additional Generating Unit located on the South Texas Plant Site pursuant to this Restated Agreement and all interests in property, facilities and structures used therewith or related thereto on or adjacent to the South Texas Plant Site.

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i Draft: December 20, 1996 4.32 SPENT FUEL DISPOSAL FEE:

The fee imposed by the Department of Energy on nuclear reactor owner licensees in connection with the disposition of spent fuel. The fee is assessed on the basis of Energy produced by a nuclear reactor in accordance with rules established by the Department of Energy or its The term " Spent Fuel Disposal Fee" shall also be deemed a

successor.

to include any other fee levied now or hereafter by any i

governmental entity for any purpose related to the South Texas Project against nuclear reactor owner licensees.unless such fee is assessed on a basis that, when compared to the aggregate fee for all Participants, equates to each Participant's Generation Entitlement Share, if any, in the applicable nuclear reactor.

4.33 STATION WORK: Operation, maintenance, use or repair of the South Texas Project including, though not by, limitation, all related engineering, contract preparation, purchasing, supervision, a' d expediting, inspection, accounting,

testing, management n

protection.

4.34 STATION WORK LIABILITY:

Liability of OPCO or one or more Participants for damage suffered by anyone other than a Participant which arises out of Station Work and is not discharged anck is not the result of Willful Action.

by Project Insurance, 4.35 TRANSMISSION CORRIDOR:

A strip of land 400 feet wide and approximately 6 miles long, plus a continuing strip of land 340 feet wide and approximately 13 miles long, extending northwesterly

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Draft: December 20, 1996 from the South Texas Plant Site and being generally depicted in Exhibit B-1 hereto.

4.36 UNITS OF PROPERTY:

Units of property as described in the Federal Energy Regulatory Commission's list of " Units of Property for Use in Accounting for Additions and Retirements of Electric Plant", 18 CFR Part 116 as in effect from time to time.

4.37 WILLFUL ACTION:

4.37.1 Action taken or not taken by a Participant at the direction of its governing body or board (that is, its managing Board or governing body in the case of San Antonio and Austin, or its Board of Directors in the case of Central or Housto'n), which action is knowingly or intentionally taken or not taken with intent to cause injury or damage to another.

4.37.2 Action taken or not taken by an employee of a Participant, which action is intentionally taken or not taken injury or damage to another and which with intent to cause action or non-action is subsequently ratified by the Participant employing.such employee at the direction of its said governing body or board.

4.37.3 Willful Action does not include intentional acts or omissions of a Participant for which a Participant is f

legally responsible solely because of the master-servant relationship between such Participant and its employees.

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Draft: December 20, 1996 OWNERSHIP QF SOUTH TEXAS PROJECT:

5.

5.1 The Participants have acquired

and, subject to own the South Texas Plant Site, adjustments as provided herein, Railroad Strip and Common Station Facilities as tenants in common, as follows:

San Antonio owns an undivided 28.0 percent interest therein; Central-owns an undivided 25.2 percent interest therein;

, Houston owns an undivided 30.8 percent interest therein; and Austin owns an undivided 16.0 percent interest therein.

The Participants have acquired and own the first two 5.2 Generating Units located on the South Texas Plant Site as tenants in common, as follows:

San Antonio owns an undivided 28.0 percent interest therein; Central owns an undivided 25.2 percent interest therein; Houston owns an undivided 30.8 percent interest therein; and Austin _ ens an undivided 16.0 percent interest therein.

5.3 The Participants have acquired and own:

The400 foot wide section of the Transmission 5.3.1 Corridor as tenants in common, as follows:

San Antonio owns an undivided 36.5 percent interest therein; Central owns an undivided 21.5 percent interest therein; -

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Draft: December 20, 1996 l

Houston owns an undivided 23.2 percent interest therein; and, Austin owns an undivided 18.8 percent interest therein.

4 5.3.2 The 340 foot wide section of the Transmission l

Corridor as tenants in common, as follows:

San Antonio owns an undivided 38.0 percent interect therein; i

Central owns an undivided 20.9 percent interest therein; Houston owns an undivided 21.8 percent interest therein; Austin owns an undivided 19.3 percent interest therein.

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6.

ADDITION OF GENERATING UNITS:

6.1 Any Participant may propose the construction of an Additional Generating Unit by written notice to all other i

Participants setting forth:

6.1.1 A

general description of the proposed Additional Generating Unit and of proposed Capital Additions and Capital Betterments to the existing Common Station Facilities, all in the same form and detail as South Texas Generating Station Units Nos.1 and 2 are shown in Exhibit A to this Restated Agreement, identifying all Common Station Facilities proposed for use in connection with the proposed Additional Generating Unit or with respect to which. Capital Additions or' Capital.Betterments are proposed.

6.1.2 A plat of the South Texas Plant site depicting the location of the proposed Additional Generating Unit.

6.1.3 An estimate of the respective costs (all prospective Preconstruction Work and all Construction Work required) of the proposed Additional Generating Unit, Capital Additions and Capital Betterments, all in reasonable detail.

6.1.4 A description of-the entities which would f

plan, design, license, construct and operate the proposed l

Draft: December 20, 1996 Additional Generating Unit and the arrangements pursuant to which this work would be performed.

6.2 Within forty-five (45) days after service of the written notice given pursuant to t,ection 6.2 hereof', the proposing Participant shall furnish to each other Participant a statement, in reasonable detail, of all actual costs (without depreciation) of the South Texas Plant

Site, the Railroad

Strip, and all Preconstruction Work and Const'ruction Work attributable to the Common Station Facilities.

6.3 Each Part'icipant may elect to participate in the proposed Additional Generating Unit, Capital Additions and Capital Betterments to the extent of its Plant Ownership Interest by written election served upon each of the other Participants within three (3) months af ter service of the written notice given pursuant to section 6.1 hereof.

Failure of a Participant to exercise said election as provided in this section 6.3 within the time period specified shall be conclusively deemed to be an election not'to participate.

64 Subject to any limitations or conditions imposed by any court or other governmental authority having jurisdiction over the licensing of the South Texas Project or the proposed Additional Generating Unit, should all of the Participants served with a written notice as provided in section 6.1 hereof elect to participate in the proposed Additional Generating Unit, the proposed Additional Generating Unit, Capital Additions and Capit.al d

Draft: December 20, 1996 Betterments shall be planned, licensed, constructed, operated and maintained in accordance with the provisions of this Restated Agreement, shall be owned (subject to adjustments as provided herein) by the Participants in proportion to their Plant Ownership Interests, and shall become a part of the South Texas Project.

6.5 Subject to any limitations or conditions imposed by any court or other governmental aQthority having jurisdiction over the licensing of the South Texas Project or the proposed Additional Generating Unit, should any one or more, but less than all, of the Participants served with a

written notice as provided in Section 6.1 hereof elect to participate in th'e proposed Additional Generating Unit and should the Participants desiring to participate in the Additional Generating Unit own in excess of fifty (50) in the South Texas percent of the total Plant Ownership Interest Project, the Participants desiring to participate in the proposed I

Additional Generating

Unit, Capital Additions and Capital Betterments shall have the right to own and shall endeavor to obtain the necessary permits and licenses and shall construct, operate and maintain the Additional Generating Unit, Capital Additions and Capital Betterments proposed pursuant to Section 6.1 hereof on the following basis:

a 6.5.1 The Additional Generating Unit shall be l

risk acquired, constructed and owned by and at the sole cost, and expense of the Participants proposing the Additional Generating Unit or electing to participate therein in the proportion that the Plant Ownership Interest of each of said l

Participants bears to the Plant Ownership Interest of all of l

said Participants or as otherwise agreed between said

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Draft: December 20, 1996 i

Participants and shall be

operated, maintained and i

decommissioned by OPCO pursuant to this Restated Agreement and the Operating Agreement.

6.5.2 Within two (2) months after the proposing Participant has determined the actual costs of the Capital

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Additions and Capital Eetterments to the previously existing Common Station Facilities undertaken in conjunction with the i

Additional Generating Unit, the proposing Participant shall 1

furnish to each other Participant a statement, supplemental to d

the statement furnished pursuant to section 6.2

hereof, setting forth the costs shown in the statement furnished j

pursuant to section 6.2 hereof and the actual costs.of said Capital Additions and Capital Betterments.

Within one (1) month after receiving the statement called for in this section 6.5.2, the Participants participating in the Additional Generating Unit shall make a cash payment to all Participants equal to the amount, if any, by which:

(i) the product of the total costs shown in the statement called for e in this section 6.5.2 times a fraction, the numerator of which is the nameplate rating of the Additional Generating Unit and the denominator of which is the suu of the nameplate ratings of all completed Generating Units in the South Texas Project plus the Additional Generating Unit; exceeds (ii) the actual costs of said Capital Additions and Capital Betterments.

Thereafter the South Texas Plant Site (exclusive of the portions thereof allocate'd to all Generating Units theretofore agreed upon or permitted under this Restated Agreement or allocated to the Additional Generating Unit), the Railroad Strip and the Common Station Facilities shall be owned by the Participants, as tenants in common, in the proportion that the sum of the interests of each Participant in all Generati'ng Units (including the Additional Generating Unit) bears to the sum of the interests of all Participants in all Generating Units (including the Additional Generating Unit) and appropriate transfers of interests shall be made.

Said payment shall be borne by each Participant participating in the Additional Generating Unit in the proportion that the interest of each Participant so participating bears to the interest of all Participants so participating and shall be paid to each Participant in the proportion of its Plant Ownership Interest immediately prior to such payment.

6.5.3 The Participants proposing the Additional Generating Unit and the Capital Additions and Capital Betterments to existing Common Station Facilities and electing to participate therein shall bear the costs of Preconstruction Work and Construction Work of the Additional Generating Unit and of said Capital Additions and Capital Betterments and

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9 Draft: December 20, 1996 Project Costs of the Additional Generating Unit in proportion to their Generation Entitlement Share in the Additional Generating Unit.. The Project Costs of the Common' Station Facilities to which said Capital Additions and Capital Betterments relate shall be borne as provided in Section 22.2 hereof.

6.6 Not withstanding any other provision of this Section 6, any Participant who proposes construction of an Additional Generating Unit must, prior to the commencement of construction, (i) provide San Antonio and Aust:in with a ruling from the I'nternal Revenue Service to the effect that construction and operation of said Unit pursuant to this Restated Agreement and the Operating Agreement will not jeopardize the tax exempt status of any Debt

" Obligations as that term is defined in Sections 22 and 23 hereof and (ii) provide each other Participant with a ruling from the Internal Revenue Service to the effect that the construction and operation of said Unit pursuant to this Restated Agreement and the Operating Agreement will not create an association among the Participants which will be taxable as a corporation.

6.7 The arrangements for securing Nuclear Fuel for Additional Generating Units and the. arrangements for the disposal of spent Nuclear Fuel materials from such Additional Generating Units shall be determined by the owners of such Additional Unit or Units.

7.

GENERATING CAPACITY AND ENERGY ENTITLEMENT:

7.1 The capacity entitlement of each Participant in each Generating Unit of the South Texas Project shall be the product of Draft: December 20, 1996 its Generation Entitlement Share in that Unit and the Net Effective Generating Capability of such Unit.

7.2 Each Participant shall take for its account a

percentage share of the total Energy available at the high voltage terminal of the generator step-up terminals from each Generating Unit from time to time, corresponding to such Participant's Generation Entitlement Share.in,such Generating Unit.

7.3 operation of any Generating Unit shall be subject to scheduled outages or curtailments, operating emergencies and unscheduled outages or curtailments of such Generating Unit.

8.

DELIVERY AND TRANSMISSION:

8.1 Power and Energy shall be metered and delivered to the transmission system as shown in Exhibit B to this Restated Agreement at the South Texas Project switchyard generally described in Exhibit A to this Restated Agreement, and shall be accounted for in accordance with section 7.2.

8.2 Each Participant shall design, construct, own, operate and maintain the transmission facilities necessary to connect its system to the South Texas Project switchyard, with the objective of permitting each Participant to transmit under normal operating conditions its Generation-Entitlement Share from units of the South Texas Project to its system in a manner which will not unreasonably affect the operation of the electric systems of the other Participants or the interconnected systems of others.

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i Draft: December 20, 1996 8.3 Each Participant shall be entitled to the exclusive use of so much of the South Texas Plant Site as may be necessary to construct and connect its transmission facilities to the South Texas Project switchyard as generally chown in Exhibit B hereto, provided the actual location and construction schedule of any additional transmission facilities shall be subject to approval of the Owners Committee and the, requirements of the Operating Agreement.

Each Participant agrees to provide for the South Texas 8.4 Project off-site power to satisfy Nuclear Regulatory Commission requirements, such power to be supplied through the Construction Power Line, through the Participant's respective transmission lines connecting.into the South Texas Project switchyard and through the Participant's interconnections with other systems through the Electric Reliability Council of Texas, Inc., or'its successors.

i The Participants agree not to modify their respective facilities, procedures and practices in a manner that may result in failure to comply with Nuclear Regulatory Commission regulations or commitments or the terms.of the Operating Licenses, and each Participant agrees to inform OPCO promptly of proposed changes that reasonably would be expected to adversely affect such compliance.

Appropriate adjustments shall be made in the allocation of Energy

~

available to the respective Participants through the interconnected power grid of the Electric Reliability Council of Texas, Inc. (or any successor power grid through which the generating facilities of j

Draft: December 20, 1996 i

l the Participants are interconnected) or through the South Texas j

Project switchyard, so as to cause each Participant to bear and provide a net percentage share of off-site power corresponding to its Plant Ownership Interest.

9.

ADMINISTRATION:

9.1 As a means of implementing this Restated Agreement and the Operating Agreement ahli. fostering the interchange of information, the Participants hereby establish the Owners Committee.

9.2 The Owners Committee shall be composed of one primary representative of each Participant, who shall be an officer or f

l general manager of the Participant, and an alternate, both of whom shall be designated by the Participant represented by written notice to all other Participants.

9.3 The Owners Committee shall:

9.3.1 Provide liaison among the Participants a.nd with OPCO at the management level; 9.3.2 Perform such other functions and duties as may be assigned to it in this Restated Agreement; 9.3.3 Determine the Net Effective Generating Capability of each Unit; 9.3.4 Review and act upon OPCO's recommendations concerning or initiate, adopt, modify or take action with respect to:

9.3.4.1 Annual budget for Costs of Operation; 9.3.4.2 Annual revisions to the South Texas Project Five Year Business Plan; Draft: December 20, 1996 9.3.4.3 Annual revisions to the South Texas Project Five Year Operating / Outage and Fuel Procurement Plans; 9.3.4.4 Process and procedure for the sale, encumbrance or other disposition of equipment or personal property comprising the South Texas Project; 9.3.4.5 Process and procedure for OPCO contracting on behalf of the Participants for the purchase, lease or other acquisition of materials, inventories, cupplies, spare parts, equipment, Nuclear Fuel, and other cfo'o.ds and services; 9.3.4.6 Process and procedure for OPCO handling the defense, prosecution and/or settlement of disputes with third parties relating in any way to the South Texas Project; 9.3.4.7 The Project Insurance to be procured and maintained pursuant to Section 29 of this Restated Agreement, including the process and procedure for OPCO obtaining and complying with insurance coverages in effect and obtaining payment of claims; 9.3.4.8 Costs of Operation materially different from or in excess of annual budget or Five Year

Plans, and any

sale, encumbrance or other disposition of property other than in accordance with approved processes and procedures; 9.3.4.9 Any other matter requiring Participants' Direction or Participants' Approval pursuant to the Operating Agreement; 9.3.4.10 The annual independent audit of the books and records of OPCO and any interim or special audits directed by the Owners Committee; 9.3.5 Decide upon the abandonment of each Unit of the South Texas Project and provide written direction to OPCO of any decision by the Participants to operate at reduced capacity and/or place a Unit in safe shutdown condition and/or retire and decommission a Unit; 9.3.6 Approve and

join, where necessary, any application or amended application to the Nuclear Regulatory Commission or other regulatory authority as appropriate to provide for the reliable, safe and ef ficient operation of the l

Draft: December 20, 1996 l

South Texas Project by OPCO pursuant to the Operating Agreement; 9.3.7 Make arrangements for securing Nuclear Fuel for Units 1 and 2 and arrangements for disposal of spent Nuclear Fuel materials and approve practices and procedures for accounting for Nuclear Fuel; 9.3.8 Arrange for such additional support, services and assistance as may be required by OPCO in carrying out its responsibilities under the Operating Agreement; and 9.3.9 Plan for.'and approve payment of Project Costs to the extent not provided for in the annual budget for Costs of Operation.

9.4 All matters coming under the authority of the Owners Committee shall be decided by agreement of the representatives of two or more Participants having in excess of sixty percent (60%)

interest in the Generating Unit or Units affected by the decision, except as otherwise specifically provided in this Restated Agreement.

If, for any reason, the Owners Committee does not agree on an annual budget for Costs of Operation, OPCO shall continue to operate under the provisions of the most recently approved Five Year Business Plan and Five Year Operating / Outage and Fuel Procurement Plan until such time as at least two or more Participants'having in excess of sixty percent (60%) interest in the Generating Unit or Units affected by the decision otherwise agree.

For the purposes of this Section 9.4 decisions affecting the Common Station Facilities shall be deemed to affect all Generating Units then served by the Common Station Facilities or portion thereof affected by the decision. All decisions reached by the Owners Committee on matters concerning the South Texas Project Draft: December 20, 1996 and properly before the Owners Committee for decision pursuant to the terms of this Restated Agreement shall be binding upon all Participants.

9.5 The Owners Committee shall designate one of its members 1

i as Chairman and another as Vice Chairman, and shall appoint a Secretary and an Assistant Secretary, neither of whom need be a member of the Owners Committee?,'.and the Committee shall keep such minutes of its meetings as the Committee shall determine, provided a written record shall be made by the Committee of all of its actions and decisions.

9.6 The Owners Committee shall have no authority to modify any of the terms, covenants or conditions of this Restated Agreement or of the Operating Agreement.

9.7 Each Participant shall give prompt written notice to the other Participants of any change in the designation of its primary and alternate representatives on the Owners Committee. Any primary representative, or any alternate in the absence of the primary representative, appearing at a committee meeting shall be deemed to have ' authority to act. on behalf of the Participant represented unless the Participant represented has designated another primary representative or alternate representative as the case may be, as provided in section S.2 hereof.

10.

OPERATION AND DECOMMISSIONING:

10.1 The Participants shall cause the South Texas Project to be operated in a safe and efficient manner in order to provide to _.

j

___________m___..

d Draft: December 20, 1996 each Participant its proportionate share of Power and Energy produced from the South Texas Project.

The Participants further shall cause the decontamination and decommissioning of the Generating Units and other facilities at the South Texas Project upon final termination and abandonment of each Generating Unit.

To that end, the Participants have contemporaneously herewith engaged OPCO to do all things necessary,or desirable under 'the terms of the Operating Agreement for the operation, maintenance,

repair, replacement, reconstruction, decontamination and decommissioning of the South Texas Project.

11.

REPLACEMENT OF OPCO:

11.1 In the event OPCO's right to serve as operator on behalf of the Participants is terminated prior to final decommissioning of the Generating Units, the Participants shall by, unanimous agreement select a successor to OPCO for the operation, maintenance, repair, replacement, reconstruction, construction, decontamination and decommissioning of the -South Texas Project.

Such successor may be a

third party, one or more of the Participants or an affiliate thereof.

12.

PROJECT COSTS:

12.1 The Project Tosts of each Generating Unit shall be shared and paid for by the Participants in proportion to their Generation Entitlement Shares for the applicable Generating Unit.

The Project Costs of the Common Station Facilities shall be shared oraft necember 20, isss and paid for by thu Participants in proportion to their Plant ownership Interest.

i 1

13.

ADVANCEMENT OF FUNDS:

13.1 Each Participant shall pay its share of Costs of Operation under the Operating Agreement at the times established i

under and in accordance with the procedures specified in the Ope. rating Agreement.

Each @articipant shall pay its share of Project Costs arising under any agreement other than the Operating Agreement at the times established under and in accordance with the procedures specified in said agreement.

14.

TAXES:

14.1 Each Participant shall render for ad valorem taxation, if applicable, its undivided interest in the jointly owned property comprising the South Texas Project and shall otherwise use its best efforts to have any taxing authority imposing any taxes or assessments on the South Texas Project, or any interest or rights therein, assess and levy such taxes or assessments directly against the ownership or beneficial interest of each Participant.

14.2 All taxes or assessments including but not limited to the Spent Fuel Disposal Fee levied against or with respect to each Participant's interest in, or pro rata share of, the purchase, use, ownership or beneficial interest in the South Texas Project and Energy generated therefrom, shall be the sole responsibility of, and, if applicable, shall be paid by,-the Participant upon whose

. l

d 9

i Draft: December 20, 1996 purchase, use, ownership or beneficial interest said taxes or assessments are levied.

14.3 If any property taxes or other taxes or assessments are legally and properly levied or assessed other than against each Participant as contemplated in Sections 24.2 and 24.2 hereof (that 4

f is, are levied or assessed in such a

way as to be f

disproportionately collectedTfrom one or more Participants), scch taxes or assessments shall be apportioned between the Participants in accordance with their respective ownership interest or Power or Energy entitlement or take, whichever is appropriate to the incidence of the tax.

14.4 Each of the Participants claiming exemption from any taxes or assessments shall be responsible for and shall pay all expenses in connection with the sustaining or determination of such claims and each of the other Participants, the Owners Committee and OPCO (as directed by the Owners Committee) shall lend all reasonable cooperation in connection with the filing of tax renditions and reports and in connection with the making of protest and' payment under protest as may be requested by each Participant claiming an exemption.

15.

WAIVER OF RIGHT TO PARTITION:

15.1 Each Participant hereto agrees to waive any rights which it may have to partition any component of the South Texas Project, whether by partition in kind-or by sale and division of the proceeds, and further agrees that it will not resort to any -

Ad Draft: December 20, 1996 action in law or in equity to partition such component, and it waive.s the benefits of all laws that may now or hereafter authorize such partition for the maximum term permitted under applicable law.

16.

MORTGAGE AND TRANSFER OF INTEREST:

16.1 Each Participant shall have the right at any time and from time to time to mortgage, pledge, create or provide for a security interest in or conVe'y. in trust all or a part of that Participant's share in the South Texas Project, together with an equal interest in this Restated Agreement and the Operating Agreement, to a trustee or trustees under deeds of trust, mortgages or indentures, or to secured parties under a security agreement, as security for its present or future bcnds or other obligations or securities, and to any successors or assigns thereof, without need for the prior written consent of any other Participant, and without such mortgagee, trustee or secured party assuming or becoming in any respect obligated to perform any of the obligations <f the Participant arising prior to such time as such m6rtgagee, fm2stee, or secured party obtains possession of or assumes the right to exercise such Participant's rights in respect of such ownership share, or after such possession or assumption ceases.

16.2 Any mortgagee, trustee or secured party under present or future deeds of trust, mortgages, indentures or security agreements of any of the Participants and any successor or assign thereof, and any receiver, referee or trustee in bankruptcy or reorganization of any of the Part.icipants, and any successor by.

'o=-

eev-m,e

Draft: December 20, 1996 a

action of law or otherwise, and any purchaser, transferee or d

s assignee of any thereof may, without need for the prior written consent of the other Participants, succeed to and acquire all of the rights, titles and interests of such Participant in the South Texas Project and in this Restated Agreement, the Operating j

Agreement and its rights as an owner of the South Texas Project under any other agreement to. which all the Participants are parties, and may take over possession of or foreclose upon said property, rights, titles and interests of such Participant.

16.3 Each Participant shall have the right to transfer or assign. its ownership share in the South Texas Project, together with its rights under this Restated Agreement, the Operating Agreement and its rights as an owner of the South Texas Project j

under any other agreement to which all the Participants are parties, to any of the following without the need for prior written consent of any other Participant:

16.3.1 To any entity acquiring all or substantially all of the electric utility properties and business, or of the electric generating facilities, of such Participant; or 16.3.2 To any entity merged or consolidated with such Participan+; or 16.3.3 To any entity which is wholly-owned by such Participant.

16.4 Except as otherwise provided in Sections 26.1 and 16.2 hereof, any successor to the rights, titles and interests of a Participant in the South Texas Projec6 shall assume and agree in writing to fully perform and discharge all of the obligations

~---.--_.-__..a

_. ~ - ~

f i...

J 1

i Draft: December 20, 1996 hereunder of such Participant, and such successor shall notify each of the other Participants in writing of such transfer, assignment or merger, and shall furnish to each Participant evidence of such i

transfer, assignment or merger.

16.5 Unless and until the Participants unanimously agree otherwise, all Nuclear Fuel purchased for use in or removed from any Generating Unit or recovered after reprocessing for reuse in any Generating Unit or for sale to others shall be jointly owned by l

the Participants in accordance with their : respective Generation Entitlement Shares in the Generating Unit for which the Nuclear Fuel was purchased, provided that any Participant may at any time sell and assign all or any part of its interest in such Nuclear Fuel to any person or entity (" Fuel Lessor") for leaseback to such

(

Participant subject to the conditions that:

(i) the Fuel Lessor shall waive all right to partition of such Nuclear Fuel prior to completion of the reprocessing thereof; (ii) the Fuel Lessor shall not obtain any rights not possessed by such Participant with i

respect to the operation or scheduling of any Generating Unit or the removal of Nuclear Fuel therefrom; (iii) the Fuel Lessor shall not become a Participant in the Project unless or until it succeeds to all of such Participant's right, title and interest in the South Texas Project in accordance with the terms and provisions hereof; and (iv) such Participant shall indemnify all other Participants against any costs or expenses incurred by them because of such Draft: December 20, 1996 Participant's sale and leaseback of its interest in the Nuclear Fuel.

16.6 No Participant assigning or transferring an interest under this section 26 or section 27 shall be relieved of any of its obligations under this Restated Agreement or the Operating Agreement but shall remain liable and obligated for the performance of all of the tenns and condit' ions of this Restated Agreement and the Operating Agreement, unless otherwise agreed by all of the remaining Participants.

17.

RIGHT OF FIRST REFUSAL:

17.1 Except as provided in section 16 hereof, should any Participant, prior to the expiration of the period described in section 27.22 hereof, desire to transfer its ownership, or any part

thereof, in the South Texas Project to any person, entity or another Participant, ready, able and willing to acquire same, the Participant desiring to make such transfer shall obtain a written offer from the prospective transferee, setting forth the consideration and other terms of the offer, and each of the other Participants shall have the right. of first refusal to acquire such interest on the basis of the following consideration:

17.1.1 If the offer is in cash, whether payable in one payment or in installments, the amount of the bona fide written offer from the prospective transferee, payable as specified in the offer; or 17.1.2 If the offer is not in cash but is in securities having a readily ascertainable market value, the f air market value of the securities of fered by the prospective transferee; or l

~

4 Draft: December 20, 1996 4

17.1.3 If the offer is neither in cash nor in securities having a readily ascertainable market value, the f air market value of the consideration to be received for the ownership interest to be transferred.

17.2 At least seven (7) months prior to the date on which the intended transfer is to be consummated, the Participant desiring to transfer shall serve written notice of its intention to do so upon all of the Participants.

Such notice shall contain the

. ~.

proposed 'date of transfer and' the terms and conditions of the 4

transfer.

17.3 Each Participant shall have the option to acquire all 5

or any part of the interest to be transferred and shall' exercise said option by serving written notice of its intention upon the Participant desiring to transfer.and on the remaining Participants within three (3) months after service of the written notice of intention to transfer given pursuant to Section 27.2 hereof.

Failure of a Participant to exercise said option as provided herein within the time period specified shall be conclusively deemed to 'be an election not to exercise said option.

If two or more of the Participants desire to acquire 17.4 unless all, or parts aggregating more than all, of such interest, otherwise agreed, such interest shall be transferred in the ratio that the Plant Ownership Interest of each Participant desiring to acquire bears to the - total Plant Ownership Interests of all Participants desiring to acquire.

.~

Draft: December 20, 1996 17.5 If one or more of the Participants exercise their options to acquire a part of the interest to be transferred but fail to exercise their options so as to acquire in the aggregate the entire ownership interest to be transferred, then the Participant desiring to transfer shall' serve written notice of this fact upon the Participants exercising their options within fourteen (14') days af ter its receipt of" all of the written notices permitted by section 17.3 hereof, or after the expiration of the three (3) month period referred to in Section 17.3 hereof, whichever is earlier.

17.6 The Participants who exercise their option to acquire less than the entire ownership interest to be transferred shall have the option to acquire, for the consideration provided in section 17.1

hereof, the remaining ownership interest to be transferred, which such option shall be exercksed by serving written notice of such election upon the Participant desiring.to transfer within three (3) months after the receipt of the notita given pursuant to Section 17.5 hereof.

17.7 When the options to acquire all or any part of said ownership interest have been exercised, the Participants shall thereby incur the following obligations:

17.7.1 The Participant desiring to transfer the ownership interest.and the Participant or Participants having exercised the option to acquire all or any portion of such ownership interest shall be obligated to proceed in good f aith and with due diligence to obtain -all required authorizations and approvals of such acquisition.

?

• s en Draft: December 20, 1996 17.7.2 The Participant desiring to transfer such ownership interest shall be obligated to obtain the release of any lien encumbering the ownership interest which is the subject of the transfer at the earliest practicable date.

17.7.3 The Participant or Participants having exercised the option to acquire such ownership interest shall be obligated to perform all of the terms and conditions required of them to complete the acquisition of said ownership interest.

17.8 The acquisition of the ownership interest by the Participant or Participants having elected to acquire the same shall be fully consummated within seven (7) months following the date upon which all, notices required to be given under this 1

Section 17 have been duly served, unless said Participant or Participants are then diligently pursuing applications for required authorizations or approvals to effect such transfer or are then diligently pursuing or defending appeals from orders entered or authorizations issued in connection with such applications, in which event the transfer shall be consummated within three (3) months following the date upon which the final order is entered'or authorizations issued in connection with such applications.

17.9 If the Participants receiving notice of the proposed transfer fail to exercise their options to acquire all or some part of the ownership interest to be transferred, the Participant desiring to transfer such interest shall be free to transfer such interest, if any, as may be lef t af ter the exercise of such options to the party that made the offer referred to in Section 17.1 hereof upon the terms and conditions set forth in said bona fide written o

a Draft: December 20, 1996 offer.

If such transfer is not consummated by the proposed date of transfer referred to in section 27.2 hereof, the Participant

]

desiring to transfer said ownership interest must give another I

complete new right of first refusal to the remaining Participants pursuant to the provisions of this section 27 before such l

Participant shall be free to transfer said ownership interest to another party.

f 17.10 The Participant or Participants who acquire an

]

l cninership interest pursuant to this section 27 shall receive title l

to and shall own the interest as tenants in common, subject to the

\\

same rights, duties and obligations as are applied by this Restated to the interest being transfArred in the hands of the j

Agreement transferring Participant.

l 17.11 Any party who may succeed to an ownership interest pursuant to this section 27 shall specifically agree in writing l

with the remaining Participants at the time of such transfer that j

it will not transfer or assign all or any portion of such ownersh,ip interest without complying with the terms and conditions of this l

section 27.

17.12 It is intended that the provisions of this section 27 l

shall, to the full extent' permitted by law; continue in effect and i

be enforceable by the Participants, their successors and assigns, i

so long as two or more of them continue to own an interest in the f

i South Texas Project and/or in the South Texas Plant Site, under i

this Restated Agreement.

However, should it be finally, determined t

i !

3 7

i a

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- _. -.. _ _ - -. -.. ~.- _ _ - - - _ _ _

Draft: December 20, 1996 I

by a court of competent jurisdiction that Article I, Section 26 of l

the Constitution of the State of Texas or any other constitutional provision, statute or rule of common law of like import, is applicable to the rights created by this section 27, then the I

agreements contained in this section 27 shall terminate and be of 1

no further force and effect whenever 21 years less one day shall have elapsed after the death y of the last surviving descendant j

(living at the date of the earliest execution of this Restated i

l Agreement on behalf of any of the Participants) of any person signing this Restated Agreement in behalf of a Participant in any 4

i capacity.

17.13 It is required that any transfer of a part of an interest pursuant to this Section 27 be a transfer of the same percentage share of the selling Participant's interest in each of the Generating Units' and the Common Station Facilities.

18.

DESTRUCTION OR ABANDONMENT:

18.1 If a Generating Unit should be damaged or destroyed to the extent that the estimated cost of repairs, replacement or reconstruction of the physical damage to the-affected Unit is not more than one hundred percent (100%) of the aggregate amount of the proceeds from Project Insurance carried and covering the cost of the repairs, replacement or reconstruction of such Generating Unit, the Participants, unless otherwise unanimously agreed, shall

repair, replace or reconstruct such Generating Unic to substantially the same general character or use as the original.

Draft: December 20, 1996 The Participants shall share the costs of such repairs, replacement or reconstruction in proportion to their Generation Entitlement Shares in the Generating Unit so destroyed.

18.2 If a Generating Unit should be damaged or destroyed to the extent that the estimated ~ cost of repairs, replacement or reconstruction of the physical damage to the affected Unit is more than one hundred percent (100%) of the aggregate amount of the proceeds from Project Insurance carried and covering the cost of the repairs, replacement or reconstruction of such Generating Unit, t_he Participants

shall, upon agreement,

repair, replace or 1

reconstruct such Generating Unit to substantially the same general character or use as the original; provided, however, that should all of the Participants not agree to repair, replace or reconstruct such Generating Unit, but one or more of the Participants nevertheless desire so to do, then any Participant.who does not agree to repair, replace or reconstruct shall sell its interest in in such Generating Unit together with the corresponding interest the Common Station Facilities to the Participants desiring to i

repair, replace or reconstruct such Generating Unit for a price in the equal to the selling Participant's proportionate interest salvage value of such Generating Unit plus such Participant's proportionate cost, less depreciation at the maximum straight line rates then applicable to like properties under the Federal income in the interest in the Common Station Facilities so sold.

tax law, The Participants, if more than one, desiring to repair, replace or

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Draft: December 20, 1996 reconstruct such Generating Unit, unless otherwise agreed between them shall share the payments to, and the interest acquired from, any Participant not desiring to repair, replace or reconstruct such Generating Unit and the costs of

repair, replacement or reconstruction of such Generating Unit in the proportion that the Generation Entitlement Share in such Unit bears to the total Generation Entitl'ement Shares : in such. Unit of all Participants agreeing to repair, replace or reconstruct such Generating Unit, and appropriate transfers of interests will be made.

18.3 If any of the Common Station Facilities should be 1

destroyed, the Participants shall, unless otherwise agreed, repair l

or reconstruct same to substantially the same character or use as the original.

The Participants shall share the costs of such repair or reconstruction in proportion to their Plant Ownership Interests.

18.4 Should the Nuclear Regulatory Commission by final order not subject to judicial or administrative appeal require, or should j

1 Participants having in excess of a sixty percent (60%) Generation j

i Entitlement Share in the affected Generating Unit agree upon, the l

l abandonment of any or all of the Generating Units or of the South Texas Project, the Owners Committee shall direct OPCO to seek i

l authorization of the Nuclear Regulatory Commission to surrender the operating licenses for the affected Generating Unit or Generating i

f Units or of the South Texas Project, as the case may be, and upon i

obtaining same shall dismantle and sell or make such other final l

I

l Draft: December 20, 1996 disposition as may be required by law of the affected properties.

18.5 Costs of abandonment of the Common Station Facilities shall be shared and paid for by the Participants in proportion to their Plant Cwnership Interests while the costs of abandonment of a Generating Unit shall be shared and paid for by the Participants in proportion to their respective Generation Entitlement Shares in said Generating Unit.

19.

PROJECT INSURANCE:

19.1 The Owners Committee shall direct OPCO to recommend, and the Owners Committee shall determine, the insurance coverages, I

including the insurable values, limits, deductibles, retentions and j

other special terms, to be obtained during the periods covered by and with respect to Preconstruction Work, Construction Work and i

Station Work or any phases thereof.

19.2 All policies of Project Insurance shall:

19.2.1 Provide insurable values, limits, deductibles, retentions and other special terms as determined by the owners Committee; 19.2.2 List as loss payees or additional insureds (as their interests may appear) such mortgagees, trustees or secured parties as a Participant, by written notice to OPCO, may designate; 19.2.3 Contain endorsements providing for positive notice of cancellatfion to all parties listed as named or additional insureds; 19.2.4 Contain endorsements providing that the insurance is primary insurance for all purposes; and 19.2.5 Contain cross-liability endorsements for comprehensive bodily injury liability and property damage liability coverages. -

Draft: December 20, 1996 19.3 The Owners Committee shall direct OPCO to observe the following procedures in connection with the procurement of Project Insurance and changes in Project Insurance:

19.3.1 OPCO shall give prompt written notice to the Owners Committee of the procurement of all insurance binders.

19.3.2 OPCO shall furnish each Participant with either a certified copy: of each of the policies of the insurance procured or a certified copy of each of the policy forms therefor, together with a line sheet therefor-(and any I

subsequent amendments) naming the insurers and underwriters and the extent of their participation.

19.3.3 No policy of Project Insurance obtained pursuant to decision of the Owners Committee shall be materially changed without the prior written consent of the Owners Committee.

19.3.4 Any changes in policies of Project Insurance shall be promptly reported to the Owners Committee by OPCO.

19.4 Each Participant, at its expense, shall have the right to secure such additional or different insurance coverage as may be 4

required under any mortgage or contract provision, and, to the i

extent practicable, such Edditional or different insurance coverage may be effected through endorsements on policies of Project Insurance. Costs incurred by Participants pursuant to this Section 19.4 are not Project Costs.

1 20.

LIABILITY OF PARTICIPANTS TO EACH OTHER: 4 J

1

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- ~..

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

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

j Draft: December 20, 1996 i

20.1 No Participant'shall have any Liability to any other

]

Participant for any action taken or omitted to be taken by such i

Participant which arises out of or relates to the ownership of the South Texas Project or any portion thereof, any Preconstruction Work, Construction Work or Station Work or any actions taken or i

umitted to be taken by such Participant in connection with this 1

Restated Agreement or the Operating. Agreement,- except for any 1

l Liability of such Participant resulting from (i) its Willful j

Action, or (ii) a payment " default" under Section 22 hereof.

Each Participant agrees that it shall not make, or permit to be made on i

its behalf, any Claim against any other Participant in respect of any breach or wrongful conduct of such Participant (whether based on any federal, state or local law or regulation, securities or i

commercial law or regulation or under common law or in equity or on 3

i contract, tort, strict liability or.otherwise) ari' sing out of or j

relating to the ownership of the South Texas Project or any portion t

thereof or any Preconstruction Work, Construction Work or Station

Work, or any actions taken.or omitted to be taken by such Participant in connection with this Restated Agreement or the i

Operating Agreement other than a Claim (an " Excepted Claim")

1.

arising from (i) Willful Action of such other Participant or (ii) a payment " default" under Section 22 hereof, and hereby waives and releases and agrees not to sue upon any such claim (other than any Excepted Claim).

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j 1 i

f I

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. - ~ -. -

=..

Draft: December 20, 1996 I

20.2 Each Participant shall indemnify each other Participant I

against, and hold them harmless from and in respect of all Claims in favor of the indemnifying Participant's electric customers (or any Person claiming through the indemnifying Participant's electric customers) on account of bodily injuries, death, damage to property t

i or economic loss occurring, incident to or arising out of or in connection with the furnishing >of, or failure to furnish, electric service to such customers by such indemnifying Participant, it being the intention of this section 20.2 to impose on each Participant the sole responsibility for the defense and discharge of all such claims; provided that nothing in Section 20.2 shall impair any Excepted Claim of any Participant.

20.3 EACH PARTICIPANT SEVERALLY ACKNOWLEDGES TO EACH OTHER PARTICIPANT THAT THE PROVISIONS OF SECTIONS 20.I AND 20.2 HEREOF WHICH RELEASE THE OTHER PARTICIPANTS FROM LIABILITY OR PROVIDE FOR THE INDEMNIFICATION BY THE INDEMNIFYING PARTICIPANT OF THE OTHER PARTICIPANTS ARE INTENDED BY THE INDEMNIFYING PARTICIPANT, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW FROM TIME TO TIME, TO RELEASE AND SAVE AND HOLD THE INDEMNIFIED PARTICIPANTS HARMLESS FROM THE CONSEQUENCES OF THE INDEMNIFIED PARTICIPANT'S OWN NEGLIGENCE (WHETHER ORDINARY OR GROSS, SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE) AND STRICT LIABILITY AND (EXCEPT AS PROVIDED IN SECTION 20.I WITH RESPECT TO EXCEPTED CLAIMS) RECKLESS OR WILLFUL MISCONDUCT WHICH ARISES OUT OF OR RELATED TO THE OWNERSHIP OF THE SOUTH TEXAS PROJECT OR ANY PORTION THEREOF OR ANY PRECONSTRUCTION

.. ~ - - - - -. - -

j Draft: December 20, 1996 l'

i i

l WORK, CONSTRUCTION WORK CR STATION WORK OR ANY ACTIONS TAKEN OR OMITTED TO BE TAKEN BY THE INDEMNIFIED PARTICIPANT IN CONNECTION WITH THIS RESTATED AGR1;EMENT OR THE OPERATING AGREEMENT.

EACH PARTICIPANT ALSO SEVERALLY ACKNOWLEDGES TO EACH OTHER PARTICIPANT i

THAT IT IS THE INTENTION OF THE INDEMNIFYING PARTICIPANT IN SECTION l

1 20.2 TO BE SOLELY RESPONSIBLE FOR THE DEFENSE AND DISCHARGE OF ALL l'

CLAIMS OF ANY KIND OR NATURE REFERRED TO IN SECTION 20.2 EVEN WHEN CAUSED BY THE SOLE FAULT OF ANOTHER PARTICIPANT.

20.4 As used in this Section 20, the following terms shall have the meanings hereinafter specified, to wit:

20.4.1 Claim--shall mean any demand, claim, loss, cost (including, witho,ut limitation, fees and disbursements of accountants, actorneys, consultants and experts, whether or not any action, suit or other proceeding is brought), damage (including, without limitation, consequential, exemplary or punitive or treble damage), expense, action, suit,

fine, j

penalty, proceeding, judgment or liability of any kind or nature whatsoever.

20.4.2 Liability--shall mean, as to any Person, the liability of such Person for payment, property or services, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured.

20.4.3 Person--shall mean any individual, corporation, limited liability company, partnership, joint

venture, association, joint stock

company, trust, unincorporated organization, government (or any agency or subdivision thereof, including, without limitation, cities and towns of every class and the agencies.and instrumentalities thereof),

electric cooperative corporation, joint powers

agency, municipal power agency or other entity.

Each i

Participant is a Person.

20.5 The parties agree that the provisions of this Section 20 shall apply solely to Liability based on acts or omissions Draft: December 20, 1996 occurring on c.r af ter the Effective Date. Liability, if any, based on acts or omissions occurring before the Effective Date shall be

. governed by the provisions of the Prior Agreement.

20.6.

Each of the Participants acknowledges, agrees to.and j

accepts the provisions of the Articles of Incorporation of OPCO in the form on file with the Secretary of State of Texas including, without limitation, the provi.sions of Articles IV and X thereof.

21.

PAYMENT DEFAULT 21.1 For the purpose of this Section 22, the word "defaulta shall mean the failure of any Participant to make any payment at the time and in the manner required by this Restated Agreement or the Operating Agreement.

21.2 Because of the immediate and irreparable damage that could be caused to the South Texas Project, the other Participants and OPCO as a result of a default hereunder by any Participant, each Participant agrees that, should such Participant be in default hereunder, each other Participant, singly or in any combination of such other Participants, may enforce the payment provisions hereof against the Participant in default hereunder by mandatory injunction.

This remedy is not exclusive of any other right, remedy or recourse that Ehe Participants not in default hereunder may have in equity, at law, by virtue of statute or otherwise.

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21.3 Without limiting Section 22.2, in the event a

Participant is in default:

Draft: December 20, 1996 21.3.1 The non-defaulting Participants, if

any, agreeing to make payments and take actions necessary to cover the default (the " covering Participants") shall make such payments and take such actions, with the cost thereof allocated among and paid by each of the covering Participants having cost responsibility for the component of the South Texas Project to which the default relates in such ratio as they may then agree.

The non-defaulting Participants are not obligated to make payments under this subsection 22.3.2.

21.3.2 An election by the non-defaulting Participants not to cover the default shall not operate as a waiver of any damages incurred by the non-defaulting Participants from the resulting shut-down status of the South Texas Project. If none of the non-defaulting Participants elect to cover the default, OPCO shall, as provided in the Operating Agreement, take whatever action and make whatever expenditures, whether budgeted or not, which it determines to be reasonably necessary to protect public health and safety as required by the Operating Licenses and applicable laws and regulations and to comply with applicable licenses or permits and to place and maintain the South Texas Project in a

safe shut-down condition. All Participants remain obligated to pay for these expenditures in proportion to their Generation Entitlement Shares for each affected Generating Unit.

If one or more Participants default on this safe shut-down obligation, the other Participants are obligated to increase their contributions to OPCO to cover the safe shut-down obligation in the proportion that their respective Generation Entitlement Shares in the affected Unit bear to the aggregate Generation Entitlement Shares in such Unit of all non-defaulting Participants.

21.3.3 The defaulting Participant shall remedy defaults including a default under section 22.3.2 as soon as possible and shall pay upon demand to each covering Participant any amount paid by such covering Participant for the account of the defaulting Participant plus interest on such amounts calculated at the rate applicable to judgments rendered in the State of Texas. If the defaulting Participant shall fail to make such payment upon demand therefor by a covering Participant, then such covering Participant may, with or without the othe'.* covering Participants, exercise any or all remedies afforded by law, including without limitation, the institution of an action at law or in equity to collect such amounts or to obtain such other legal or equitable relief as may be available, or both.

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Draft: December 20, 1996 e

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22.

SOURCE OF PAYMENTS BY SAN ANTONIO 22.1 It is expressly stipulated and agreed that none of the 1

other Owners nor any of their successors or assigns shall ever have l

the right to demand or require payment of any amount becoming due l

from San Antonio under or in connection with or ' pursuant to any i

j term or provision of this Restated Agreement out of any funds raised or to be raised by taxat, ion, or from any source whatsoever other than the sources specified in section 22.2 below, and no such 4

amount shall ever constitute a claim, debt, liability or general l

obligation of the City of San Antonio required to be paid from any 1

i other revenues or assets thereof.

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22.2 San Antonio covenants and agrees that any and all

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amounts becoming due from San Antonio under or in connection with f

or pursuant to any term or provision of this Restated Agreement l

shall be payable from the Revenue of the San Antonio Electric and Gas Systems and from the proceeds of the sale of Debt Obligations 4

l issued.for that purpose.

t 22.3 As used in this Section 22, the following terms shall have the meanings hereinafter specified:

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22.3.1 Debt Obligations shall mean all bonds, notes and other evidence of indebtedness for borrowed money which f

(i) have been or are issued,-incurred or assumed by the City j

of San Antonio pursuant to express charter or statutory j

authority heretofore or hereafter adopted or enacted and (ii) are payable f rom, or secured by a lien or pledge on net I

Revenues of the San Antonio Electric and Gas Systems.

4 22.3.2 Revenue shall mean all income and revenues i

from the operation of the San Antonio Electric and Gas l

Systems.

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Draft: December 20, 1996 22.3.3 San Antonio Electric and Gas Systems shall mean the entire electric light and power plants and systems and gas distribution system and all property of every kind appurtenant t? and used or acquired in connection with said electric light and power plant and systems and gas distribution system owned by the power plant and systems and gas distribution system owned by the City of San Antonio, together with all property of every kind now or hereafter ownsd or acquired by the City of San Antonio as a part of or for use in the operation of the City's electric light and power plants and systems and gas distribution system.

23.

SOURCE OF PAYMENTS BY AUSTIN 23.1 It is expressly stipulated and agreed that none of the other owners nor any of their successors or assigns shall ever have the right to demand or require payment of any amount becoming due from Austin under or in connection with or pursuant to any term or provision of this Restated Agreement out of any funds raised or to be raised by taxation, or from any source whatsoever other than the sources specified in section 23.2 below, and no such amount shall ever constitute a claim, debt, liability or general obligation of Austin required to be paid from any other revenues or assets of Austin.

23.2 Austin covenants and agrees that any and all amounts becoming due from Austin under or in connection with or pursuant to any term or provision of this Restated Agreement shall be payable from the Revenues of the* Austin Utilities Systems (as defined in section 23.3 below) and from the proceeds of the sale of Debt Obligations issued by Austin for that purpose.

23.3 As used in this section 23, the following terms shall have the meanings hereinafter specified:

l Draft: December 20, 1996 Austin Utilities Systems shall mean 23.3.1 _

collectively tne Electric Light and Power System and the Waterworks and Sewer System.

j 23.3.2 Debt Obligations shall mean all bonds, notes and other evidence of indebtedness for borrowed money which (i) have been or are issued, incurred or assumed by the City of Austin pursuant to express charter or statutory authority heretofore or hereafter adopted or enacted and (ii) are j

payable from or secured by a lien or pledge on net Revenues of the Austin Utilities Systems or of the Electric Light and Power System or the Waterworks and Sewer System.

)

23.3.3 Electric ' Light and Power System shall mean the entire electric light and power plants and systems and all property of every kind appurtenant to and used or acquired in 1

connection with said electric light and power plants and systems owned by Austin, together with all property of every kind now or hereafter owned or acquired by Austin as a part of or for use in the operation of Austin's electric light and power plants and systems; provided that, notwithstanding the foregoing, and to the extent now or hereafter authorized or permitted by law, the term " Electric Light and Power System" shall not include facilities of any kino including any electric power generating and transmission

- :llities) which are c clared not to be a part of the Electric aight and Power System, are not a then existing material and functioning part of the Electric Light and Power System at the time of such declaration and which are acquired or constructed by Austin, alone or in participation with others, with the proceeds from the issuance of "Special Facilities Bonds," which are hereby defined as being special revenue obligations of Austin which are not entitled to be paid from or' secured by any liens on or pledges of any Revenues of the Austin Utilities Systems.

23.3.4 Revenues shall mean, with respect to the Electric Light and Power System or the Waterworks and Sewer System, all income and revenues from the - operation of the respective

system, excluding refundable meter

deposits, restricted gifts and grants, and income, receipts, revenues, proceeds or payments from facilities acquired or constructed with "Special Facilities Bonds."

23.3.5 Waterworks and Sewer System shall mean the entire waterworks and sewer system operated and maintained by Austin for the supply, treatment and transmission of treated potable water and the collectionr treatment and disposal of water-carried wastes and all property of every kind appurtenant to and used or acquired in connection with said,-

Draft: December 20, 1996 waterworks and sewer system owned by Austin, together with all property of every kind now or hereafter owned or acquired by Austin as a part of or for use in the operation of Austin's waterworks and sewer system;

provided, however, that notwithstanding the foregoing, and to the extent now or hereaf ter authorized or permitted by law, the term " Waterworks and sewer System" shall not include facilities of any kind which are declared not to be. a part of the Waterworks and Sewer Gystem, are not a then existing material' and functioning part of the Waterworks and Sewer System at the time of such declarrtion and which are acquired or constructed by or on behalf of Austin with the proceeds from the issuance of "Special Facilities Bonds;"'which are hereby defined as being special revenue obligations of Austin which are not entitled to be paid from or secured by any liens on or pledges of any Revenues of the Austin Utilities Systems.

24.

CONTINUING RESPONSIBILITY OF OPCO:

24.1 If the Participants replace OPCO pursuant to Section II, OPCO shall be required to continue to perform its duties under the operating Agreement as provided therein until its replacement has been licensed to act as operator of the South Texas Project by the Nuclear Regulatory Commission.

25.

RELTTIONSHIP OF PARTICIPANTS:

25._

The covenants, obligations and liabilities of the Participants shall be several and not joint or collective.

Each Participant shall be individually responsible for its own covenants, obligations and liabilities as herein provided.

j 25.2 It is not the intention of the Participants to create, nor shall this Restated Agreement be construed as creating, a partnership, association, joint venture or trust, as imposing a trust or partnership covenant, obligation or liability on or with regard to any one or more of the Participants or as rendering the _-.

_ _ _. _ ~ _ _ _ _. _. _. _ _. -. _.. - _ _ _ _

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Draft: December 20, 1996 Participants liable as partners or trustees.

No Participant or j

group of Participants shall be under the control,of or shall be

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deemed to control any other Participant or the Participants as a J

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group.

No Participant as such shall be the agent of or have a i

right or power to bind any other Participant.

If, for federal i

income tax purposes, this Restated Agreement and the operations hereunder are regarded as a partnership, each of the Participants i

hereto elects to be excluded from the application of all of the f

provisions of Subchapter "K,"

Chapter 1,

Subtitle "A,"

of the i

Internal Revenue Code of 1986, as amended ( " Co'de " ), as permitted l

and authorized by section 761 of the Code and the regulations promulgated thereunder. OPCO is authorized and directed to execute on behalf of each Participant such evidence of this election as may be required by the Secretary of the Treasury of the United 3tates i

l cr the Federal Internal Revenue Service, including specifically, l

but not by way of limitation, all of the returns, statements, and i

the data required by Treasury Regulations S 1.761.

Should there be 4

any requirement that each Participant give further evidence of this election, each Participant shall execute such documents and furnish such other evidence as may be required by the Federal Internal 1

Revenue Service or as ma? be necessary to evidence this election.

No such Participant shall give any notices or take any other action inconsistent with the election made hereby.

If any present or future income tax laws of the State of-Texas or any future income tax laws of the United States contain provisions similar to those

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Draft: December 20, 1996 4

in Subchapter "K,"

Chapter 1, Subtitle "A,a of the Code, under d

which an election similar to that provided by Section 761' of the Code is permitted, each Participant shall make such election as may be permitted or required by such laws.

In making the foregoing election, each Participant states that the income' derived by such 1-Participant from operations hereunder can be adequately determined without the computation of partnership taxable income.

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26.

FORCE MAJEURE:

26.1 In the event of any Participant being rendered unable, h

wholly or in part, by force majeure to perform any of its 1

obligations under this Restated Agreement (other than obligations a

to pay money), upon such Participant giving notice and full particulars of such force majeure in writing or by telephone to the other Participants as soon as reasonably possible after the 4

occurrence of the cause relied upon, the obligations of the Participant giving such notice, so far as they are affected by such force majeure, shall be suspended during the continuance of any inability of performance so caused, but for no longer period.

Telephone notices given under the provisions of titis section 26.2

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shall be confirmed in writing as soon as reasonably possible and l

shall specifically state full particulars of the force majeure, the J

time and date when the force majeure occurred and when the force majeure ceased. This Restated Agreement shall not be terminated by reason of any such cause but shall remain in full force and effect.

i The term " force majeure" shall mean any cause beyond the control of 1 '

I i

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f jo-Draft: December 20, 1996 the Participant affected which by the exercise of due diligence such Participant could not-reasonably have been expected to avoid i

j and which by exercise of due diligence it shall be unable to i

overcome.

Nothing contained herein shall be construed so as to require a Participant to settle any strike, lockout, work stoppage i

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i or other industrial disturbance or dispute in which it may be l

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involved.

Any Participant rendered unable to fulfill any of its l

obligations under this Restated Agreement, by reason of force

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majeure shall exercise due diligence to remove such inability with s

j all reasonable dispatch.

i 27.

GOVERNING LAW:

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27.1 This agreement shall be governed by the laws of the i

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State of Texas, except as to matters exclusively controlled by the l'

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Constitution and statutes of the United States of America.

l 28.

BINDING OBLIGATIONS:

l 28.1 All of the respective covenants, undertakings and i

i obligations of each of the Participants set forth in this Restated t

Agreement shall bind and shall be and become the respective i

covenants and obligations of that Participant and, to the extent j

i permitted by law and the existing contracts of the applicable Participant, shall apply ~~to and bind:

i j

All mortgagees, trustees and secured parties under all i

present and future mortgages, indentures and deeds of trust,

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security agreements and other financing arrangements which are or may become a lien upon any of the properties of such j

Participant; 1

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_49 j

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J

._.._._.___._m__.m_._

e Draft: December 20, 1996 4

All receivers, assignees for the benefit of creditors, bankruptcy trustees and referees of, or having control or

-jurisdiction over, such Participant; All other persons, firms, partnerships, corporations or entities claiming by, through or under any of the foregoing; and Any successors or assigns of any of those mentioned above in this section 28.1; and shall be covenants and obligations running with each Participant's respective rights, titles and interests in the South Texas Project and with all of the rights and i'nterests of each Participant under this Restated Agreement, and shall be for the benefit of the respective rights, titles and interests of the Participants and their respective successors and assigns, in and to the South Texas Project.

It is the i.cpecific intention of this provision that all such covenants and obligations shall be binding upon any party which acquires any of the rights, titles and interests of any Participant in the South Texas Project or in, to and under this Restated Agreement and that all of the above-described persons and groups shall be obligated to use such Participant's rights, titles and interests in the South Texas Project and/or in, to or under this Restated Agreement for the purpose of discharging the covenants and obligations under this Restated Agreement; except that in the case of a partial assignment the assignee shall only he required to share in the cost of

)

fulfilling said covenants and obligations of the assigning i

Participant to an extent proportionate to the interest so assigned.

Draft: December 20, 1996 29.

AMENDMENT OF THIS RESTATED AGREEMENT:

29.1 The Participants agree that this Restated Agreement cannot be amended except by an instrument in writing signed by the duly authorized representative of each Participant.

30.

TERM:

30.1 This Restated Agreement shall be and become effective as of the Effective Date and1shall remain in force and effect, subject to prior termination by unanimous agreement by all j

Participants, until the abandonment of, authorization by the Nuclear Regulatory Commission of the surrender of all operating licenses for, and final disposition of all components of, the South Texas Project.

31.

INTERESTS ACQUIRED IN THE NAME OF AN INDIVIDUAL PARTICIPANT:

i 31.1 Any Participant which acquires in its name an interest i

in any real or personal property or a contractual right which is d

i j

part of the South Texas Project shall acquire and hold same subject to this Restated Agreement, and shall transfer and assign an undivided interest therein to the 'other Participants so that the a

ownership and rights of the Participants in such property or contract shall be as provided in this Restated Agreement.

)

32.

NOTICES:

32.1 Any notice, demand or request provided for in this l

Restated Agreement shall be deemed properly served, given or made if delivered in person or sent by registered or certified-mail, i

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Draft: December 20, 1996 i

postage prepaid, to the Participants at the addresses specified below:

l City of Austin P. O. Box 1088 Austin, Texas 78767 Attention:

Director, Electric Utility Department City of San Antonio-City Public Service Board P. O. Box 1771 San Antonio, Texa's 78296-1771 Attention:

Office of the General Manager, City Public Service Board Central Power and Light Company P.

O. Box 2121 Corpus Christi, Texas 78403 Attention:

Office of the President Houston Lighting & Power Company P.

O. Box 1700 Houston, Texas 77001 Attention:

Office of the President.

32.2 Any Participant may, at any time, by written notice to all other Participants, designate different or additional persons or different addresses for the giving of notices hereunder.

32.3 Each Participant shall provide to each other Participant a copy of any notice, demand or request given or received by it in connection with this Restated Agreement.

33.

MISCELLANEOUS PROVISIONS:

33.1 Each Participant agrees, upon request by the other Participants, to make, execute and deliver any and all documents a.

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Draft: December 20, 1996 and writings of every kind reasonably requested or required to i

l implement this Restated Agreement.

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33.2 The captions and headings appearing in this Restated i

Agreement are inserted merely to facilitate reference and shall have no bearing upon the interpretation thereof.

33.3 Each term, covenant and condition of this Restated Agreement is deemed to be

.a n independent term, covenant and

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condition, and the obligation of any Participant to perform all of j

the terms, covenants and conditions to be kept and performed by it is not dependent on the performance by the other Participants of any or all of the terms, covenants and conditions to be kept and performed by them.

33.4 In the event that any of the terms, covenants or conditions of this Restated Agreement, or the application of any such term, covenant or condition, shall be held invalid as to any person or circumstance by any court having jurisdiction in the premises, the remainder of such agreement, and the application of its terms, covenants or conditions to such persons or circumstances shall not be affected thereby.

33.5 If any provision of this Restated Agreement is found to be in conflict with any provision of the Operating Agreement, the Participants agree that as 15etween and among the Participants the terms of this Restated Agreement are controlling.

33.6 The Participants do not intend to create rights in or to grant remedies to any third party as a beneficiary of this e

e' 1 **

I i

4 Draft: December 20, 1996 r

Restated Agreement or of any

duty, covenant, obligation or i

undertaking established therein.

33.7 Any waiver at any time by any Participant of its rights with respect to a default or any other matter arising in connection with this Restated Agreement or the Operating Agreement shall not i

be deemed a waiver with respect to any subsequent default or matter.

i

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33.8 As of the Effective Date, the Prior Agreement is i

terminated and shall be of no further force and effect.

IN WITNESS WHEREOF, the parties hereto have caused tiiis 1

Restated Agreement to be executed effective as the Effective Date.

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Draft: December 20, 1996 EXHIBIT A Common Station Facilities 1

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5 oe Draft: December 20, 1996 f

EXHIBIT B South Texas Plant Site 1

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De Draft: December 20, 1996

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EXHIBIT B-1 Railroad Strip l

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p ATTACHMENT 3 DRAFT OPERATING AGREEMENT r

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l Draft 12/20/96

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South Texas Project j

Operating Agreement i

1 l

The parties to this Operating Agreement are the owners of the South Texas Project:

f, CITY OF SAN ANTONIO, Texas, acting through the City Public Service Board of San Antonio, i

j hereinafter referred to as " San Antonio;" CENTRAL POWER AND LIGHT COMPANY, a Texas corporation, hereinafter referred to as " Central;" HOUSTON LIGHTING & POWER i

4 COMPANY, a Texas corporation, hereinafter referred to as " Houston;" CITY OF AUSTIN, i

hereinafter referred to as " Austin" (collectively, the " Participants"); and the operator of the South Texas Project, STP NUCLEAR OPERATING COMPANY, a Texas non-profit ' corporation j

. (hereinafter referred to as "Opco").

i The parties desire to enter into this Operating Agreement to set forth the rights and obligations between Participants, on the one hand, and Opco, on the other, for the licensing, operation, maintenance, modification, decontamination and decommissioning of the South Texas Project.

RECITALS A.

San Antonio, Central, Houston and Austin have heretofore jointly licensed and constructed two nuclear-fueled electric generation facilities known as the South Texas Project and

)

currently operate said facilities for the production of electric power and energy which is taken by each Participant in proportion to its ownership interest in such facilities.

B.

Such jointly owned facilities were licensed, constmcted and operated under the terms of the Participation Agreement, dated as of July 1,1973, as amended by three amendments thereto (which Participation Agreement, as so amended, is hereinafter referred to as the " Prior

[

1 F000071 LDt6 Agreement"). Houston served as Project Manager for all aspects of the South Texas Project j

under the terms of said Prior Agreement.

C.

Contemporaneous!y herewith, the Participants are amending and restating the Prior Agreement (which Prior Agreement las so amended and restated, is hereinafter referred to as the

" Restated Agreement")in order: (i) to relieve Houston ofits rights and obligations as Project Manager under the Prior Agreement; (ii) to transfer to Opco responsibilities for the licensing, operation and maintenance of the South Texas Project, including responsibilities for repair, i

modification, decontamination, decommissioning, and the constmetion of any additional i

Generating Unit (s) and support facilities that may from time to time be constructed at the South Tcus Plant Site; and (iii) to amend and restate certain other terms previously contained in the Prior Agreement.

D.

Pursuant to this Operating Agreement, Opco is authorized to act on behalf of San l

Antonio, Central, Houston and Austin to maintain and operate the South Texas Project.

i Participsnts agree and Opco acknowledges and agrees that Participants are severally and not jointly liable for payments that are chargeable to the South Texas Project hereunder in proportion i

to each of Participants' respective undivided ownership interests in the Common Station Facilities and the respective Generating Units included or to be included in the South Texas Project, as applicable, as provided in the Restated Agreement, except as to payments which are required to i

be allocated to and paid by one or more Participants other than in proportion to the ownership interests of such Participant or Participants pursuant to the provisions of Section 9.3 of this Operating Agreement.

.. ~. -. _ _

19000711.D16 ARTICLE I DEFINITIONS In addition to the previously defined terms, the following terms when used herein, shall have the meanings specified. Terms defined in the Restated Agreement, unless otherwise defined j

herein, shall have the meanings indicated in that agreement.

lil

" Costs of Operation" means all costs of Operation and all costs of Capital

)

Improvements and any related taxes that are incurred by Opco under or pursuant to or with 1

respect to this Operating Agreement and attributable to the South Texas Project, including, i

without limitation, all overhead costs and costs of maintaining the corporate existence of Opco, all costs of all officers and employees of Opco (including, without limitation, all pension, medical, 4

welfare and other employee benefits, compensation and welfare costs) and all obligations incurred by Opco under and pursuant to employment agreements a'nd indemnity agreements I

(including, without limitation, undertakings to indemnify officers and directors pursuant to the Articles 'ofIncorporation and Bylaws of Opco) in connection with the directors, officers, l

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employees, agents and contractors of Opco, all costs of contracts for goods (including, without

?

l limitation, Nuclear Fuel acquired by Opco for the Participants pursuant to this Operating 4

Agreement) or services entered into by Opco with third parties or individual Participants, all costs of claims for personal injury or death or damage to or loss or destruction of property asserted against Opco by any person or party, and all other costs of operation of Opco of whatsoever nature.

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F0000711.DI6 l

1.2

" Force Majeure" means any cause which by the exercise of due diligence such party could not reasonably have been expected to avoid and which by exercise of due diligence it shall be unable to overcome.

1.3

" Operate" and its derivatives means to possess, use, maintam, repair, improve, operate, decontaminate and decommission the South Texas Project.

1.4

" Operating Licenses" means the Facility Operating Licenses No. NPF-76 for Unit 1 of the South Texas Project and No. NPF-80 for Unit 2 of the South Texas Project and amendments thereto as issued from time to time by the NRC.

1.5

" Participants' Approval" or " Participants' Direction" and derivatives thereof means the written approval or direction of the Owners' Committee constituting the binding action of all Participants with respect to such approval or direction under the provisions of the Restated Agreement.

1.6

" Participant's Share" means, with respect to each item of Costs of Operation and with respect to each Participant, the share of such item of Costs of Operation which such Participant is required to bear and pay pursuant to the provisions of the Restated Agreement and this Operating Agreement.

1.7

" South Texas Project" as used in this Operating A greement shall have the meaning set forth in the Restated Agreement, except and excluding the Transmission Corridor, the Construction Power Line and other transmission lines owned by the respective Participants extending from the switchyard and switching facilities at the South Texas Project.

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raxxnnm ARTICLE II i

OPCO'S AUTHORITY AND RESPONSIBILITY WITH RESPECT TO OPERATION OF SOUTH TEXAS PROJECT l

2.1 Authority for Ooeration. Opco shall Operate the South Texas Project and shall i

have full control over all Operations of and making of Capital Improvements to the South Texas l

j Project as permitted and required by, and subject to the provisions and limitations set forth in, this Operating Agreement. Without limiting the generality of the foregoing, Opco shall provide, or shall provide for, all labor, supervision, supplies, equipment and services for the operation, 4

maintenance, repair, replacement, reconstmetion, decontamination and decommissioning of all aspects of the South Texas Project in order to deliver to the Participants their respective Generation Entitlement Shares, all in accordance with the Restated Agreement (including Participants' Direction pursuant to the terms and provisions thereof), this Operating Agreement, and the terms and conditions of all applicable licenses and permits, laws and regulations, including the Operating Licenses. In carrying out its responsibilities, Opco shall have authority, subject to Participants' Direction from time to time, to take any and all action, in the Panicipants' names and on the Participants' behalf, necessary or desirable to obtain and maintain in effect all licenses and permits issued by the NRC or other regulatory bodies relating to the South Texas Project and to enter into agreements and make other commitments on behalf of the Participants necessary or desirable to carry out its responsibility to provide for Operation. Opco shall act on behalf of Participants in all matters related to NRC licensing of the South Texas Project and, on behalf of the Panicipants, shall Operate, and make Capital Improvements at, the South Texas Project in accordance with the Operating Licenses and applicable laws and regulatory requirements and 1,

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POOOO71 LD16 Participants' Direction from time to time; provided that Opco shall have sole authority, as the Operator of the South Texas Project pursuant to the Operating Licenses, to make all decisions to protect public health and safety as required by the Operating Licenses and applicable laws and regulations and as are necessary to comply with applicable laws and regulations. Subject to the provisions of Sections 2.2 and 2.3 herein, in order to enable Opco fully and effectively to perform its duties hereunder, Opco shall have, and the Participants do hereby grant to Opco, subject to the terms and conditions set forth herein, the power'and authority to exercise in accordance with 1

applicable laws and Participants' Direction from time to time, the rights of the Participants under, and to execute, modify, amend, enforce or terminate, any contracts, agreements, purchase orders, licenses, permits and privileges relating to the Operation of, and making of Capital Improvements to, the South Texas Project, on behalf of the Participants.

2.2 Limitations

Notwithstanding Section 2.1 above:

A.

Opco shall, except in the case of emergency or unexpected contingencies as provided in Section 5.2 or with the Participant's Approval, endeavor to avoid incurring Costs of Operation that are either niaterially different from or in excess of the budgeted or business plan expenditures provided for or contemplated in annual Budgets or Five Year Plans adopted and approved by Participants' Approval.

B.

In conducting Operations or making Capital Improvements, Opco shall conform to annual Budgets and Five Year Plans adopted and approved by Participants' Approval, except in the case of emergency or unexpected contingencies as provided in Section 12 or unless otherwise authorized by Participants' Approval.

~

rwa 7:1 ot' C.

Opco shall not sell, encumber or otherwise dispose of any real property or 4

any equipment or personal property comprising the South Texas Project or acquired by Opco on behalf of Participants pursuant to this Operating Agreement for use in connection with Operation 2

of or making Capital Improvements to the South Texas Project, except for sales, encumbrances or dispositions made in accordance with processes and procedures for which Participants' Approval i

has been obtained.

D.

Participants, by exercise ~of Participants' Direction, shall have exclusive j

authority to and may direct Opco at any time to retire and decommission the South Texas Project or any Generating Unit or to operate the South Texas Project or any Generating Unit at reduced 1

capacity, or to place the South Texas Project or any Generating Unit in a safe shutdown

)

condition. Opco shall follow any such Participants' Direction; provided that Opco shall take any i

j such action in a manner which it determines, in the exercise of the authority vested in Opco as the Operator under the Operating Licenses and applicable laws and regulations, is consistent with public safety and health, the Operating Licenses, and applicable laws and regulations. Further, in the exercise of the authority vested in Opco as the Operator under the Operating Licenses and applicable laws and regulations, Opco shal' be authorized to Operate the South Texas Project or l

any Generating Unit at a reduced capacity or otherwise to place the South Texas Project or any l

Generating Unit in a safe shutdown condition at any time Opco determines such action is necessary to comply with the Operating Licenses and applicable laws and regulations. All costs incurred by Opco in taking any such action relating to decommissioning or shutdown of the South Texas Project or any Generating Unit shall be considered Costs of Operation.

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. _.. - -.. ~.

_... ~. -

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.- ~.

_ -.... ~....

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=

F3000711.Dl4 e

4 i

E.

Opco shall conduct r business or retivity other than to cany out its rights i

i

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and responsibilities under and pursuant to this Operating Agreement, nor shall Opco engage in any activity seeking proSt for itself. Opco shall never realize or derive a, Vt from the Operation I

of or making of Capital Improvements to the South Texas Project or otherwise under or in connection with this Operating Agreement. Opco shall not own any interest in the South Texas Project or be entitled to any electdc power therefrom. Any property, of whatsoever kind or nature, which is acquired by Opco, whether for'Operatig Capital Improvements or otherwise, shall be acquired for the account and benefit of the Participants and shall be owned by the Panicipants as tenants in common under the Restated Agreement, each Participant owning such right and interest in and bearing such share of the costs associated with such property as is provided for property of such character in the Restated Agreement.

2.3 Third-Party Contracts. All contracts entered into by Opco pursuant to this Operating Agreement with third panies (excluding contracts with officers, employees and agents of Opcd and workers' compensation insurance policies and other contracts relating to the internal affairs of Opco) in connection with the Operation of or making of Capital Improvements to the South Texas Project, including, without limitation, contracts with individual Participants, contracts for the sale, lease or acquisition of materials, inventories, supplies, spare parts, equipment, machinery, fuel, Nuclear Fuel (unless otherwise directed by Participants' Direction),

i or services, shall be executed by Opco as agent for and acting on behalfof the Participants and as the person designated to act for San Antonio and Austin pursuant to the cooperative purchasing program provided for in Section 2.7 hereof. Each such contract shall(a) expressly provide that the rights and interests of the Participants in and to and under such contract'and in and to all 'l

t F3000711.D16 goods and services to be provided to or acquired by Participants under or pursuant to such contracts are and shall be owned and held by Participants in undivided interests, in proportion to the respective Participant's Shares of the obligations and undertakings of the Participants pursuant to such contract, and (b) expressly provide that the obligations and undertakings of the Participants under and in connection with such contract are several and notjoint and that each Participant is and shall be liable and responsible only for its Participant's Share of such obligations and undertakings. The Participants agree to be' severally bound (with each Participant being liable only for its Participant's Share of the obligations and undertakings of the Participants) by the terms of all contracts executed by Opco as authorized in this Operating Agreement (including, without limitation, any provisions that limit or protect against a third party's liability, provisions granting indemnity to third parties, and limitations or exclusions of warranties) to the same extent as if the Participants were original several signatories to such contract. In addition, if the Participants' signatures are deemed by Opco to be necessary to induce a third party to enter into such a c'ontract, Participants agree not to unreasonably refuse to execute such contract.

2.4 Sales and Use Taxes. Opco recognizes that some Participants may have exemptions from sales or use taxes imposed by the State of Texas or other governmental entity or authority which are not available to other Participants, and Opco agrees to take all actions necessary to assist a Participant in' claiming and sustaining such exemptions. When Opco enters into a contract on behalf of Participants (or Participants execute a contract at Opco's request),

Opco will make such representations and provide such certificates as are required to preserve any exemption from sales and use taxes a Participant may claim and to insure that the assessment and payment of any sales and use taxes due from a Participant are assessed and paid only by that l

9

l-f rammm i

t j

Participant. Participants agree to provide Opco with sufficient exemptions or other certi6 cates i

required to claim any exemptions and to provide for separate payment of sales and use taxes owed i

by a Participant, and Participants agree that each will be severally responsible for any expenses in 1

connection with sustaining an exemption claimed by that Panicipant and the payment of any sales i

j and use taxes attributable to the purchase of that Panicipant's undivided interest in any goods or j

services. These expenses or taxes paid by a Participant shall be disregarded in determining the I

~2 relative Participant's Shares of the costs of purchasing or acquiring such goods or services under i

the provisions of this Operating Agreement.

2.5 Enforcement of Riehts.

I A.

Subject to the provisions of Section 2.2, and except as otherwise directed by Participants' Direction from time to time, Participants delegate to Opco the power, authority

]

and obligation to manage on behalf of the Panicipants the defense, prosecution and/or settlement of disputes with third parties relating in any way to the South Texas Project; provided, however, that if any Participant is named as a party to any such dispute, it shall have the right, at its own cost, to defend any claims against it in such dispute.

B.

Subject to Article VI, to the extent Opco incurs any liability to a third party in performing its duties under this Operating Agreement, amounts paid by Opco because of such liability and Opco's expenses in defending claims by third parties or prosecuting claims against third parties shall be considered Costs of Operation.

2.6 Cooperative Purchasine Procram. Pursuant to and as authorized by Sections 271.101 and 271.102 (Subchapter F of Chapter 271 of Title 8) of the Local Government Code of -

the State of Texas, as such Sections may be amended, revised or supplemented from time to time, F30007tl.Dl6 San Antonio and Austin have agreed to and shall participate in a cooperative purchasing program to purchase and acquire for San Antonio and Austin, respectively, interests correspondirig to their respective Participant's Shares of and in and to all supplies, fuel, Nuclear Fuel, equipment, machinery and other goods of any nature whatsoever purchased or acquired by Opco and all services of third parties (or of other individual Participants) engaged or acquired by Opco for or in connection with the Operation of and making of Capital Improvements to the South Texas Project pursuant to and as authorized and provided for'in this Operating Agreement. Pursuant to Subsection 271.102(b)(1) of said Local Government Code, each of San Antonio and Austin designates Opco as the person to act under the direction of, and on behalf of San Antonio and Austin, respectively, in all matters relating to such cooperative purchasing program, subject to the right ofSan Antonio and Austin to change such designation if deemed appropriate.

. ARTICLEIII PARTICIPANTS' RESPONSIBILITY AND OBLIGATIONS 3.1 Payment. Each Participant hereby severally agrees to pay Opco for its Participant's Share of Costs of Operation.

3.2 Site Access and Control. In order for Opco to Operate South Texas Project in accordance with the Operating Licenses and other applicable regulatory requirements, the Participants, as their interests may appear, grant Opco possession and use of the property constituting South Texas Project and agree to provide Opco, its agents, employees and contractors unrestricted access to the property constituting South Texas Project and, without limitation, the other real property and the switchyard, facilities, equipment and personal property located on the South Texas Plant Site. As and to the extent required by either of the Operating F300071l Di6 Licenses or applicable statutes and regulations, the Participants further agree that Opco shall have authority to exercise complete control over the Exclusion Areas as defined in the Updated Final Safety Analysis Report for each Generating Unit and to determine all activities within such Exclusion Areas. The respective commitments and responsibilities of the Participants and Opco regarding the South Texas Project switchyard, substation and transmission facilities, including the Construction Power Line, are set forth in Exhibit A hereto (as same may be modified from time to time consistent with Opco's and the Participants' regulatory obligations).

3.3 Suoport Services from Participants.

(a)

Subject to paragraph 3.3(b), each Participant agrees that it will provide assistance and cooperation with Opco in Opco's discharge ofits responsibilities under this Operating Agreement. Specifically, subject to paragraph 3.3(b), each Participant agrees to provide support to the South Texas Project Emergency Plan and emergency training and drills and to other activities undertaken by Opco as may be necessary from time to time to allow Opco to conduct safe, economic, and efficient operations at the South Texas Project and to otherwise carry out its responsibilities under this Operating Agreement, the Operating Licenses, and applicable laws and regulations. Such support services shall be provided in accordance with the principles described in Exhibit B hereto (as same may be l

modified from time to time consistent with Opco's and the Participants' regulatory obligations). The Participants agree to provide, subject to reasonable capability and availability, additional services or assistance required by Opco and hereafter agreed to by the applicable Participant in writing in connection with the Operation of South Texas Project, including, without limitation, the following: (1) communications access and IN P0000718.Dl6 1

i

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support, (2) transportation support, end (3) other services as may be required in order to allow Opco to conduct safe, economic and efficient operations at South Texas Project.

(b)

If any services are to be rendered by a Participant to Opco pursuant to i

j paragraph 3.3(a) in ordu to assist Opco in the discharge ofits responsibilities under this Operating Agreement, such services and the amounts to be charged therefor must be 3

i j

described in a separate written contract hereafter agreed upon and executed by Opco and 3

j such Participant, and all costs of Opco thereunder shall be considered Costs of Operation.

l 3.4 No Changes to Facilities. Procedures or Practices. So that Opco will be capable of

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Operating South Texas Project in accordance with the Operating Licenses and applicable regulatory requirements, the Participants agree that they will not make any changes to facilities, 4

i procedures or practices that may result in failure to comply with NRC regulations or

]

commitments or the terms of the Operating Licenses, including, but not limited to, physical i

changes to the electrical transmission or distribution facilities that directly provide an off-site power supply to South Texas Project, without prior consultation with and written consent from J

i Opco, which consent Opco shall not unreasonably withhold.

i 3.5 Off-Site Power Supply. In order for Opco to operate the South Texas Project in i

j accordance with the Operating Licenses and applicable regulatory requirements, each Participant l

agrees to provide off-site power to the South Texas Project through the Participant's transmission i'

lines connecting into the South Texas Project and the Participant's interconnections with other systems through the interconnected power grid of the Electric Reliability Council of Texas, Inc.

1

("ERCOT"), or its successors. Appropriate adjustments shat! be made in the allocation of electric i

energy available to the respective Participants through the interconnected power grid of ERCOT 4

4 f.

i P000071 f.D16 1

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1 (or any successor power grid through which the generating facilities of the Participants are interconnected) or through the South Texas Project switchyard, so as to cause each Participant to bear and provide a net percentage share of off-site power for the South Texas Prcject

]

corresponding to its Plant Ownership Interest.

ARTICLE IV OWNERSHIP 1

4.1 Ownershio of Canacity and Enerey. In accordance with the provisions of the Restated Agreement, the Participants shall be and remain the owners of, and shall be entitled to all of, the Capacity and Energy from South Texas Project, with each Participant to take and receive that Participant's entire Generation Entitlement Share of all electric Power and Energy generated from the respective Generating Units.

4.2 Plant Property. Opco shall have no ownership interest in the South Texas Project or t.ny supplies, equipment or other property acquired in connection therewith. All such property shall be ~ owned by the Participants as tenants-in-common in accordance with the terms of the Restated Agreement. As between Opco and the Participants, all risks associated with ownership i

or loss of such property and all benefits inuring from ownership shall be vested with the Participants.

ARTICLE V PAYMENT: AUDIT AND INSPECTION RIGHTS 5.1 Ooco Submittals and Participant Anorovals. On or before November 1 (or such other date at Panicipants' Direction) of each year during the term of this Operating Agreement, Opco will submit the follow'mg for Participants' Approval: (1) annual revisions to the South -

j F0000711.016 4

. Texas Project Five Year Operating / Outage and Fuel Procurement Plans; (2) annual revisions to 1

+

the South Texas Project Five Year Business Plan; (3) the annual budget for Costs of Operation; and (4) the annual budget for costs ofNuclear Fuel. Opco will keep Participants timely informed l

and obtain Participants' Approval in advance for projects which are reasonably anticipated to i

cause a material change to the then current Five Year Plans or annual Budgets as previously i

1 approved by Participants' Approval. Notwithstanding the foregoing, dudng an emergency or other unexpected contingency, Opco is auth'o'ized to make such expenditures and take such other j

r action, whether budgeted or not, as Opco shall determine to be reasonably necessary in order to 1

comply with applicable laws and regulations, the Operating Licenses and any other applicable i

heenses or permits or othenvise to maint-in the South Texas Project in a safe condition. If any j

such unbudgeted costs and expenditures are incurred, Opco shall promptly notify the Participants j

of such action, specifying the full particulars of the events giving rise to such costs and expenditures, and shall promptly submit revised annual Budgets to encomp. ass such costs and j

expenditures incurred, as well as those expected to be incurred, as a result of such emergency or i

i other unexpected event, and such costs and expenditures shall be Costs of Operation.

1 3

j 5.2 Payment Obligations. If as a result of accounting or billing errors or otherwise any i

Participant shall at any time pay more than its Participant's Share of any Costs of Operation, thus resulting in allocation to and payment by one or more other Participants ofless than its or their Participant's Share of such Costs of Operation, each Participant which has paid less than its Participant's Share of such Costs of Operation will, promptly upon demand, remit such deficiency to Opco, and, upon receipt thereof, Opco shall promptly transmit and refund same to the Participant who has thus paid more than its Participant's Share of such Costs of Operation. It is FC00071l Dl6 expressly stipulated and agreed, however, that no Participant shall have the right to require that Opco refund to such Participant, or that any other Participant pay to Opco or to such first-mentioned Participant, any overpayment of Costs of Operation made by such first-mentioned Participant unless such first-mentioned Participant shall have given written notice and demand for refund of such overpayment to Opco prior to the expiration of two years after the end of the year during which such overpayment was made.

5.3 Payment Default. Consistent th Section 21 of the Restated Agreement and without prejudice to the rights of the non-defaulting Participants against the defaulting Participant under the Restated Agreement on account of such default, in the event any Participant fails to make any payment at the time and in the manner required by this Operating Agreement, and if none of the non-defaulting Participants elect to cover the default, Opco shall take whatever action and make whatever expenditures, whether budgeted or not, that it determines to be reasonably necessary to protect public health and safety as required by the Operating Licenses and applicable laws and regulations and to comply with applicable licenses or permits and to place and maintain the South Texas Project in a safe, shut-down condition. All Participants remain obligated to pay for these expenditures in proportion to their Generation Entitlement Shares for each affected Generating Unit. If one or more Participants default on this safe, shut-down obligation, the other Participants are obligated to increase their contributions to Opco to cover the safe, shut-down obligation default (in the proportion that their respective Generation Entitlement Shares in the affected Generating Unit bear to the aggregate Generation Entitlement Shares of all non-defaulting Participants in such Unit) without prejudice to the rights of the non-defaulting 4

P000071LDl6 i*

i Participants against the defaulting Participant under the Restated Agreement on account of such default.

5.4 Payment and Billine. Subject to Sections 5.1 and 5.2 above and in accordance with procedures as may be agreed upon in writing by the parties, Opco hereby agrees to furnish Participants with requests for funds to pay Costs of Operation. Each Participant shall pay its share of Costs of Operation in accordance with requests for funds submitted by Opco. Payments for the j

Costs of Operation in accordance with Opco's requests for funds shall be made notwithstanding i

the availability or lack of availability of the South Texas Project to produce Energy.

j 5.5 Audit and Adjustment. Opco shall maintain books and records to support the Costs of Operation, which books and records shall be maintained by Opco for such periods of 1

j time as Participants shall direct by Paiticipants' Direction. As soon as practical, but no later than 2

ninety (90) days after the end of each calendar year, Opco shall prepare and deliver to each f

Participant a report prepared by an independent public accounting firm selected by Participants by l

Participants' Direction reflecting the results of an audit of the books and records of Opco. The

{

cost of preparing such audit reports shall be Costs of Operation. Further, from time to time, any of the Participants may, at the applicable Participant's cost and expense, conduct or cause to be l

conducted by others, including regulatory authorities having jurisdiction, audits of the books and records of Opco. Such audits shall be conducted at reasonable mutually agreed upon times, with agreement not being unreasonably withheld. Opco shall credit each Participant with its Participant's Share of recoveries, whenever received, from third parties and shall charge each i

Participant with its appropriate share of any underpayments of Costs of Operation and promptly 1

i transmit and refund amounts received in payment of such underpayments to the Panicipant or

mmum Participants who have made overpayments with respect to such Costs of Operation as provided for in Section 5.2 hereof.

4 ARTICLE VI LIABILITY 6.1 Release of Opco. In no event shall Opco be liable to any Participant fbr any direct, i

indirect, incidental or consequential damages, including, without limitation, damages for loss of profits or loss ofuse or cost ofreplacement' power, and each Participant hereby releases Opco for j

l any damages arising out of Opco's performance or failure to perform this Operating Agreement.

The parties recognize that Opco is a nonprofit corporation formed, controlled and financed by the Participants solely for the purpose of acting on behalf of Participants in carrying out the responsibilities which are described herein. Opco does not assume liability or responsibility to the Participants for loss, cost or expense that may be suffered by any Participant as a result of any action or inaction of Opco; provided, however, that nothing herein shall relieve any person or party other than Opco from any responsibility to Opco or to the Participants, whether assumed by contract or by operation oflaw.

4 6.2 Indemnity. The Participants shall severally, each to the extent only ofits 1

Participant's Share, protect, indemnify and hold Opco free and harmless from and against any and all damages, liabilities, claims, demands, causes of action, suits or other proceedings (including all costs in connection therewith and in connection with the defense thereof, including attorneys' fees) of every kind and character, directly or indirectly connected with Opco's Operation of the j

South Texas Project or making of Capital Improvements to the South Texas Project or for any damage thereto, whether arising in or based upon tort, fraud, contract, strict liability, negligence,

.-. -. ~.. -.

Po000711.Dl6 i

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breach of fiduciary duty or any other theory orlegal liability or as a result of fines or other penalties imposed by the NRC or other governmental authority.

i 6.3 Allocations of Liability Amona Particioanti. Alllosses, damages, expenses, l

j penalties, liabilities and claims (including those in respect of property damages, personal injury, j

and fines or penalties imposed upon Opco by the NRC or other governmental authority) asserted l

}

by third parties against Opco in connection with, or arising out of, the Operation of or making of l

Capital Improvements to the South Texas Project or any portion thereof, including, without j

limitation, the expenses of defending against or disposing of such claims and liabilities and the

{

costs and expenses covered by the indemnity under Section 6.2, attributable to any property, I

j policy, system, design or process in existence at or prior to the time that responsibility for the 4

5 l

Operation of the South Texas Project is transferred to Opco or developed after such transfer, or 1

l which is attributable to any former employee of any Participant who is employed by Opco upon or j

incident to such transfer, or to any employee hired by Opco after such transfer, and which are not l

covered in full by insurance procured in accordance with Article VII (or any successor insurance arrangement), shall be treated as Costs of Operation.

6.4 Scoce ofIndemnity and Release. EACH PARTICIPANT SEVERALLY l

ACKNOWLEDGES TO OPCO THAT THE PROVISIONS OF SECTIONS 6.1,6.2 AND 6.3 1

l l

HEREOF WHICH RELEASE OPCO OR PROVIDE FOR THE INDEMNIFICATION BY THE i

l PARTICIPANTS (SEVERALLY) OF OPCO ARE INTENDED BY THE PARTICIPANTS, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW FROM TIME TO TIME,

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TO RELEASE AND SAVE AND HOLD HARMLESS AND INDEMNIFY OPCO FROM TIE i

CONSEQUENCES OF OPCO'S OWN NEGLIGENCE (WHETHER ORDINARY OR GROSS, 1

P0000711.Dl6 SOLE, JOINT OR CONCURRENT, OIC ACTIVE OR PASSIVE) AND RECKLESS OR INTENTIONAL CONDUCT OR STRICT LIABILITY OF OPCO, ANY OF WHICH ARISES OUT OF OR RELATES TO THE OPERATION OF OR MAKING OF CAPITAL j

IMPROVEMENTS TO THE SOUTH TEXAS PROJECT OR ANY PORTION THEREOF.

I ARTICLE VII INSURANCE 4

With respect to the South Texas Proj$ct, Opco shall recommend and, subject to the

~

Participants' Direction, shall procure and maintain or cause to be procured and maintained, in the name of and on behalf of the Participants, Opco, and the Participants' respective mortgagees, if required, as their respective interests may appear, protection through insurance or otherwise covering tae Participants' and Opco's obligations to pay damages because of personal injury, death or property damage, including, without limitation, obligations under applicable workers' compensation laws, and protection through insurance or otherwise covering nuclear property and nuclear liability and other insurance and financial protection in accordance with customary industry practice and as necessary to comply with all applicable laws and regulations and the provisions of the Restated Agreement and applicable mortgages and credit arrangements of any of the Participants. Allinsurance policies obtained pursuant to this Operating Agreement shall be issued, subject to Participants' Direction, with the Participants, Opco, and the Participants' respective mortgagees, if required, as named or additional insureds or loss payees, as their interests may appear, as appropriate to the particular coverage and as directed by Participants' Direction. Opco, subject to prior Participants' Approval, shall determine the coverage limits and deductibles for any insurance policies obtained pursuant to this Operating Agreement.

P0000711.D16 i

Subject to the Participants' Direction, Opco will establish necessary procedures, cooperate with the insurers and otherwise comply with requirements of the insurers to maintain coverages in effect and to obtain payment ofclaims recoverable under such insurance applicable to the South Texas Project.

1 ARTICLE VIII l

TERM AND TERMINATION l

8.1 Term. This Operating Agre4me'nt shall become effective concurrent with the Restated Agreement, and unless sooner terminated as provided hereinafter, it shall remain in i

j effect, subject to Section 8.2 below, until all Generating Units shall have been retired and j

decommissioned in accordance with all applicable regulatory and governmental requirements and the p'arties hereto agree in writing, with agreement not to be unreasonably withheld, that all responsibilities hereunder have been fulfilled.

I

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8.2 Termination. This Operating Agreement may be terminated prior to the expiration of the term set forth in Section 8.1 above, subject to receipt of any and all necessary regulatory i

approvals, by Participants' Direction; provided that this Operating Agreement may not be terminated prior to the expiration of the term set forth in Section 8.1 unless and until a successor Operator of all Generating Units in the South Texas Project shall have been designated and selected by unanimous agreement of the Participants and shall have qualified and been designated as operator of the Generating Units pursuant to Operating Licenses issued by the NRC. Opco, as contemplated by Section i1.1 of th'e Restated Agreement, agrees that any and all licenses, permits, books, records, privileges or rights acquired by Opco relating to the South Texas Project l

P00007ll.Dl6 i,

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i shall be assigned or otherwise transferred to the Participants or as directed by Participants' i

Direction upon any termination of this Operating Agreement.

]

8.3 Survival. The indemnification, release, and limitation ofliability provisions contained in Article VI shall survive termination to the extent they pertain to events giving rise to i

]

such indemnification, release and liability that occurred during the term of this Operating Agreement. Further, it is agreed that in no event shall this Operating Agreement terminate unless all payments required to have been made by the Participants to Opco shall have been made and all J

l necessary regulatory approval for decommissioning or transfer of responsibility for the South Texas Project shall have been obtained.

I ARTICLE IX 1

INFORMATION PROVIDED TO PARTICIPANTS l

9.1 Recons to Participants Opco shall provide data and/or reports to the Participants j

to suppon Costs of Operation. Such data and reports shall be in such form., content and detail as the Participants may from time to time direct by Participants' Direction. Such data and reports i

j shall include reports relating to all receipts and disbursements of Opco.

l 9.2 Site Access. The Participants or their designees shall have access to the South Texas Project, subject to Opco's obligation to limit such access pursuant to the Operating Licenses or the applicable rules and regulations of the NRC or other regulatory authoriti s.

l 4

9.3 Assistance to Individual Particioants. At the request of any Participant from time i

to time, Opco shall provide such Panicipant with data and assistance as may be requested by such Pat ticipant to enable such Panicipant to satisfactorily discharge, as a co-owner of the South Texas Project, such Panicipant's responsibilities with regard to the South Texas Project, including i

l I

, i 1

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l Poooo7.ois 3

i such Panicipant's responsibilities to its security holders, to regulatory authorities and others.

l

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Opco shall maintain records of all direct costs and expenses incurred by Opco in providing data i

j and assistance to a Panicipant pursuant to this Section 9,3. Those costs and expenses shall be 3

included in Costs of Operation but shall be directly assigned and charged to and borne and paid

}

l solely by the particular Panicipant for whom such data and assistance was provided.

1 ARTICLE X I

i OPCb' PERSONNEL i

l It is contemplated that Opco will make offers of employment to substantially all the i

{

employees of Houston (who may be selected by Opco in its sole discretion) stationed at the South 1

j Texas Project who have been engaged in the operation and management of the South Texas Project as employees of Houston in its capacity as Project Manager, to become effective upon the transfer of responsibility E: ~ *<e Operation of the South Texas Project from Houston to Opco. All such employees of Housw > :.o accept such offers of employment by Opco shall be discharged l

i by Houston and shall become employees of Opco effective as of such transfer of responsibility and j

shall thereafter be the employees of Opco until such employment is terminated for any reason and I

l shall not be employees, representatives or agents of any Participant, or be considered for any i

i purpose to be acting as employees of Opco at the request of Houston or any other Panicipant, and shall perform services designated by Opco in accordance with Opco's rules, regulations, and i

]

safety or health procedures. Costs of any and all compensation and benefits provided by Opco to 4

any employees of Opco (whether fonnerly employed by Houston or otherwise) are Costs of Operation. This Operating Agreement is not, however, intended to, nor shall it, confer any right i

j.

or benefit upon any Houston employee or any other person to receive an offer of employment by i

23 1

l l

_ _. _. ~.. _ _ _.

emmmm l

or to be employed by Opco in any capacity or for any amount or nature of compensation or benefits or for any particular term.

ARTICLE XI SOURCE OF PAYMENTS BY AUSTIN 11.1 It is expressly stipulated and agreed that neit ar Opco nor any of the other t

Participants nor any of their successors or assigns shall ever have the right to demand or require payment of any amount becoming due from' Au'stin under or in connection with or pursuant to any i

term or provision of this Operating Agreement out of any funds raised or to be raised by taxation, j

or from any source whatsoever other than the sources specified in Section 11.2 below, and no 1

such amount shall ever constitute a claim, debt, liability or general obligation of Austin required to i

be paid from any other revenues or assets of Austin.

i 11.2 Austin covenants and agrees that any and all amounts becoming due from Austin i

under or in connection with < brsuant to any term or provision of this Operating Agreement shall be' payable from the Revenues af the Austin Utilities Systems (as defined in Section 11.3 I

below) and frora the proceeds of the sale of Debt Obligations hereafter issued by Austin for such purpose.

1i l1.3 As used in this Article XI, the following terms shall have the meanings hereinafter specified, to wit:

(a)

Austin Utilities Systems shall mean collectively the Electric Light and Power System and the Waterworks and Sewer System.

(b)

Debt Obligations shall mean all bonds, notes and other evidences of indebtedness for borrowed money which (i) have been or are issued, incurred or assumed P00007tl.D16 by Austin pursuant to express charter or statutory authority heretofore or hereaRer adopted or enacted and (ii) are payable from or secured by a lien or pledge on Revenues of the Austin Utilities Systems or of the Electric Light and Power System or the Waterworks and Sewer System.

(c)

Electric Light and Power System shall mean the entire electric light and power plants and systems and all property of every kind appurtenant to and used or 4

acquired in connection with said elec'tric' light and power plants and systems owned by Austin, together with all property of every kind now or hereaner owned or acquired by Austin as a part of or for use in the operation of Austin's electric light and power plants and systems; provided that, notwithstanding the foregoing, and to the extent now or hereaRer authorized or permitted by law, the term " Electric Light and Power System" shall not include facilities of any kind (including any electric power generating and transmission facilities) which are declared not to be a part of the Electric Light and Power System, are not a then existing material and functioning part of the Electric Light and Power System at the time of such declaration and which are acquired or constructed by Austin, alone or in participation with others, with the proceeds from the issuance of "Special Facilities Bonds," which are hereby defined as being special revenue obligations of Austin which are not entitled to be paid from or secured by any liens on or pledges of any Revenues of the Austin Utilities Systems.

(d)

Revenues shall mean, with respect to the Electric Light and Power System oc the Waterworks and Sewer System, allincome and revenues from the operation of the respective system, excluding refundable meter deposits, restricted gins and grants, and P00007tl D16 income, receipts, revenues, proceeds or payments from facilities acquired or constructed with"Special Facilities Bonds."

(e)

Waterworks and Sewer System shall mean the entire waterworks and sewer system operated and maintained by Austin for the supply, treatment and transmission of treated potable water and the collection, treatment and disposal ofwater-carried wastes and all property of every kind appurtenant to and used or acquired in connection with said waterworks and sewer system owned by Austin, together with all property of every kind now or hereafter owne'd or acquired by Austin as a part of or for 1

use in the operation of Austin's waterworks and sewer system; provided, however, that notwithstanding the foregoing, and to the extent now or hereafter authorized or permitted by law, the term " Waterworks and Sewer System" shall not include facilities of any kind which are declared not to be a part of the Waterworks and Sewer System, are not a then existing material and functioning part of the Waterworks and Sewer System at the time of such declaration and which are acquired or constructed by or on behalf of Austin with the proceeds from the issuance of"Special Facilities Bonds," which are hereby defined as being special revenue obligations of Austin which are not entitled to be paid from or secured by any liens on or pledges of any Revenues of the Austin Utilities Systems.

ARTICLE XII I

i SOURCE OF PAYMENTS BY SAN ANTONIO j

12.1 It is expressly stipulated and agreed that neither Opco nor any of the otl.er Participants nor any of their successors or assigns shall ever have the right to demand or require payment of any amount becoming due from San Antonio under or in connection with or pursuant

~

- -.. - ~.

.. - -. ~.. - _ -. - - _

,j.

E 19000781.D16 T

{

to any term or provision of this Operating Agreement out of any funds raised or to be raised by i

taxation, or from any source whatsoever other than the sources specified in Section 12.2 below, I

]

and no such amount shall ever constitute a claim, debt, liability or general obligation of San

]

Antonio required to be paid from any other revenues or assets thereof.

I j

12.2 San Antonio covenants and agrees that any and all amounts becoming due from San Antonio under or in connection with or pursuant to any term or provision of this Operating I

Agreement shall be payable from the Revenue 6f the San Antonio Electric and Gas Systems and i

j from the proceeds of the sale of Debt Obligations issued for that purpose.

i j

12.3 As used in this Article XII, the following terms shall have the meanings hereinafter i

j specified, to wit:

I (a)

Debt Obligations shall mean all bonds, notes and other evidence of i

indebtedness for borrowed money which (i) have been or are issued, incurred or assumed i,

j by San Antonio pursuant to express charter or statutory authority heretofore or hereafter i

adopted or enacted and (ii) are payable from or secured by a lien or pledge on net I

Revenues of the San Antonio Electric and Gas Systems.

i.

l (b)

Revenue shall mean all income and revenues from the operation of the San i

Antonio Electric and Gas Systems.

1 (c)

San Antonio Electric and Gas Systems shall mean the entire electric light I

j and power plants and systems and gas distribution system and all property of every kind appurtenant to and used or acquired in connection with said electric light and power plants and systems and gas distribution system owned by San Antonio, together with all property i

of every kind now or hereafter owned or acquired by San Antonio as a part.of or for use

. i i

~ _.

~

P300071LDl6 in the operation of San Antonio's electric light and power plants and systems and gas distribution system.

ARTICLE XIII MISCELLANEQUS 13.1 Confidentiality. Any party may, from time to time, come into possession of information of another party that is confidential or proprietary (including, without limitation,

)

Safeguards Information as defined in 10 C.F'.R. Part 73% Any party having any such information which another party has advised it is confidential or proprietary will not reproduce, copy, or disclose (except upon prompt and prior notification to the other party of the event precipitating such disclosure and notice to the affected parties that such disclosure is required by law) any such information in whole or in part for any purpose without the prior written consent of the other party. Safeguards Information relative to the South Texas Project shall be controlled and protected in accordance with 10 C.F.R. 73.21.

13.2 Restricted Data. The parties agree that, unless otherwise required by law, they will not permit any person to have access to Restricted Data, as defined in 42 U.S.C. Q 2014.y, until the Federal Office of Personnel Management shall have made an investigation and report to the NRC on the character, associations and loyalty of such person and the NRC shall have determined that permitting such person to have access to Restricted Data will not endanger the common defense and security.

13.3 Assignment and Successors. This Operating Agreement shall not be assignable by Opco without the prior written unanimous consent of the Participants and without first obtaining all necessary regulatory approval, and any attempted assignment without such conse,nt and i

WIl. Dig i,

• approval shall be void. Any Participant that assigns or transfers its rights or interest in the South Texas Project in accordance with the terms of the Restated Agreement shall also assign a proportionate interest in this Operating Agreement and shall cause the assignee thereof to execute an agreement to be bound by the terms of this Operating Agreement as a condition to the effectiveness thereof. Subject to the preceding provisions of this Section, this Operating Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns.

13.4 Governing Law. This Operating Agreement shall be governed by the laws of the State of Texas, except as to matters exclusively contr'olled by the Constitution and statutes of the United States of America.

13.5 No Delav in Payments. No disagreement or dispute of any kind between or among the panies concerning any matter, including, without limitation, the amount (if any) of any payment due from any Participant to Opco or from Opco to any Participant, as the case may be, or the correctness of any charge made or statement submitted by Opco to a Participant, or any reason, excuse or circumstance, including Force Majeure, shall permit or authorize any Participant to delay or withhold payment of any statement or charge submitted or made by Opco to such Participant pursuant to this Operating Agreement; provided that a Participant shall not waive any rights, including its rights to conduct audits in accordance with Section 5.6 and to receive refunds of overpayments pursuant to Section 5.2, by making payments to Opco.

13.6 Notification. Any notice, demand or request provided for or given in connection with this Operating Agreement shall be in writing and shall be delivered in person or sent by registered or certified mail,. postage prepaid and retum receipt requested, or transmitted in written.

i mxem.ois form by electronic means to the respective parties at their applicable address specified below, and shall be deemed given when received by such addressee at its address as follows:

City of Austin P. O. Box 1088 Austin, Texas 78767 Attention: Director, Electric Utility Department Telecopy:

l City of San Antonio-City Public Service Board P. O. Box 1771 San Antonio, Texas 78296-1771 l

Attention: Office of the General Manager, City Public Service Board Telecopy: 210-978-3058 Central Power and Light Company P. O. Box 2121 Corpus Christi, Texas 78403 l

Attention: Office of the President Telecopy:

Houston Lighting & Power Company P. O. Box 1700 l

Houston, Texas 77251 Attention: Office of the President Telecopy:

STP Nuclear Operating Company South Texas Project Electric Generating Station P. O. Box 289 Wadsworth, Texas 77483 Telecopy:

j Any party may, at any time, by written notice to all other parties, designate different or additional persons or different addresses for the giving of notices hereunder.

l l

}

l _

P0000711.Dl6 i

13.7 Amendments. This Operating Agreement may be amended only by a written i

instmment duly executed by and delivered to all of the parties hereto and with any and all necessary regulatory approvals previously obtained.

I 13.8 Relationship of Parties. The covenants, obligations and liabilities of the i

q Participants to each other and to Opco under this Operating Agreement shall be several and not joint or collective. Each Participant shall be individually responsible for its own covenants, i

obligations and liabilities as herein provided. It'is not the intention of the parties to create, nor i

l l

shall this Operating Agreement be construed as creating, a partnership, association, joint venture i

or trust, as imposing a trust or partnership covenant, obligation or liability on or with regard to i

any one or more of the parties or as rendering the parties liable as partners or tmstees. Neither Opco nor any Participant or group of Participants shall be under the control of or shall be deemed to control any other Participant or Opco, or Opco and the Participants as a group. No Participant I

shall be the agent of or have a right or power to bind any other Participant, and Opco shall have 4

only such powers to act on behalf of the Participants as are expressly set forth in this Operating Agreement. If, for federalincome tax purposes, this Operating Agreement and the operations 1

hereunder are regarded as a partnership, each of the parties hereto elects to be excluded from the application of all of the provisions of Subchapter "K," Chapter 1, Subtitle "A," of the Internal Revenue Code of 1986, as amended (" Code"), as permitted and authorized by Section 761 of the Code and the regulations promulgated thereunder. Opco is authorized and directed to execute on behalf of each party hereto such evidence of this election as may be required by the Secretary of the Treasury of the United States or the Federal Internal Revenue Service, including specifically, but not by way oflimitation, all of the returns, statements, and the data required by Treasury s

emmmm i

i l

Regulations 1.761. Should there be any requirement that each party hereto give further evidence of this election, each such party shall execute such documents and fumish such other

(

evidence as may be required by the Federal Internal Revenue Service or as may be necessary to evidence this election. No such party shall give any notices or take any other action inconsistent l

i l

with the election made hereby. If any present or future income tax laws of the State ofTexas or f

any future income tax laws of the United States contain provisions similar to those in 1

Subchapter "K," Chapter 1, Subtitle "A," of'the' Code, under which an election similar to that I

provided by Section 761 of the Code is permitted, each party hereto shrdi make such election as

)

may be permitted or required by such laws. In making the foregoing election, each pany hereto l

2 states that the income derived by such party from operations hereunder can be adequately determined without the computation of partnership taxable income.

l 4

i 13.9 Counteroarts. This Operating Agreement may be executed simultaneously in two I

i or more counterparts, each of which shall be deemed an original, but all of which together shall I

l constitute one and the same instrument.

j 13.10 Force Maieure. In the event of any party being rendered unable, wholly or in part, by Force Majeure to perform any ofits obligations under this Operating Agreement (other than obligations to pay amounts due and owing), upon such party giving notice and full particulars of such Force Majeure in writing or by telephone to the other parties as soon as reasonably possible after the occurrence of the cause relied upon, the obligations of the party giving such notice, so far as they are affected by such Force Majeure, shall be suspended during the continuance of any inability of performance so caused, but for no 'onger period. Telephone notices given under the provisions of this Section 13.10 shall be confirmed in writing as soon as reasonably possible and l l

.... -. ~

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

1 T@X10781.Dl6 j

l shall specifically state full particulars of the Force Majeure, the time and date when the Force Majeure occurred, and when the Force Majeure ceased. This Operating Agreement shall not be l

terminated by reason of any such cause but shall remain in full force and effect. Nothing contained herein shall be construed so as to require a perty to settle any strike, lockout, work stoppage or other industrial disturbance or dispute in which it may be involved. Any Participant rendered unable to fulfill any ofits obligations under this Operating Agreement by reason of Force Majeure shall exercise due diligence to remove'such inability with all reasonable dispatch.

13.11 Captions. The captions and headings appearing in this Operating Agreement are inserted merely to facilitate reference and shall have no bearing upon the interpretation thereof.

13.12 Severability. Each term, covenant and condition of this Operating Agreement is deemed to be an independent term, covenant and condition, and the obligation of any party to perform all of the terms, covenants and conditions to be kept and performed by it is not dependent on the performance by the other parties of any or all of the terms, covenants and conditions to be kept and performed by them. In the event that any of the terms, covenants or conditions of this Operating Agreement, or the application of any such term, covenant or condition shall be held invalid as to any person or circumstance by any court having jurisdiction in the premises, the remainder of this Operating Agreement, and the application ofits terms, covenants or conditions i

to such persons or circumstances shall not be affected thereby.

13.13 No Third-Party Beneficiaries. The parties hereto do not intend to create rights in or to grant remedies to any third party as a beneficiary of this Operating Agreement or of any duty, covenant, obligation or undertaking established therein..-

.m 4

P0000711.Dl6 l

13.14 Nonwaiver. Any waiver at any time by any party ofits rights with respect to a default or any other matter arising in connection with this Operating Agreement shall not be deemed a waiver with respect to

.y subsequent or other default or matter.

i 13.15 Entire Agreement. This Operating Agreement, including Exhibits A and B, shall constitute the entire agreement between Opco and the Participants with respect to the subject matter hereof as of the date hereof, but it shall not supersede or control the separate Restated Agreement as between or among the Participan'ts or modify the rights of the Participants thereunder as between or among the Participants. In the event of any conflict between any term or provision of this Operating Agreement and any term or provision of the Restated Agreement, then solely as between and among the Participants the terms and provisions of the Restated Agreement shall govern and control. In the event of any conflict between any term or provision of this Operating Agreement and any term or provision of Exhibit A or Exhibit B hereto, the terms and provisions of this Operating Agreement shall govern and control, I

i l

e F00007II D16 IN WITNESS WHEREOF, the parties hereto have caused this Operating Agreement to be executed to be effective as of the Effective Date.

STP NUCLEAR OPERATING COMPANY By:

ATTEST:

CITY OF AUSTIN, TEXAS By:

ATTEST:

CITY OF SAN ANTONIO, acting through the City Public Service Board of San Antonio By:

ATTEST:

)

CENTRAL POWER AND LIGHT COMPANY By:

ATTEST:

HOUSTON LIGHTING & POWER COMPANY l

By:

ATTEST:

DRAFT 12/20/96 EXRIBIT A SWITCHYARD, SECURITY AND TRANSMISSION INTERFACE SERVICES 1

This Exhibit A relates to Paragraph 3.2 of the Operating Agreement between the Participants and Opco dated as of 199__ (the " Operating Agreement") and further defines the respective commitments and responsibilities of Opco and Participants regarding the South Texas Project ("STP")

i Substation and transmission facilities, including the 138KV line

(" Switchyard"), relating to STP and the Exclusion Areas as defined in the Updated Final Safety Analysis Report ("UFSAR")

for each Generating Unit.

i I.

EXCLUSION AREA CONTROL, SWITCHYARD ACCESS AND SECURITY 1.

The authority of Opco, set forth in Section 3.2 of t'he Operating Agreement, to exercise complete control over the Switchyard and other property in the vicinity of the Switchyard, includes the authority to conduct interactions with law enforcement agencies which are deemed necessary by Opco and the authority to file associated civil or criminal complaints against third l

parties as deemed necessary by Opco The parties will cooperate it: good faith as jointly determined appropriate to support prosecution of any such complaints.

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f i

noenwn,

2.

The parties shall maintain Switchyard perimeter fence gates in a locked condition except when attended or to allow ingress or egress.

Switchyard access will be controlled in accordance with Opco Switchyard Access procedures.

3.

Opco will make a regular routine security patrol of the Switchyard.

4.

Opco will provide appropriate security measures for the Switchyard, including potential situations caused by needed maintenance, repair or replacement of security devices or equipment.

5.

Authorized personnel entering the Switchyard for the performance of duties or activities will do so in accordance with the Opco Switchyard Access procedure.

6.

The Participants will not exercise their right to use.the surface in any area within the Exclusion Area to exp' lore or recover minerals or convey or lease its mineral rights within the Exclusion Area to any third party without Opco approval.

II.

OPERATIONS 1.

Opco personnel will make regular rounds of the Switchyard equipment for which Opco is responsible, as identified in nee <m.m Section III of this Exhibit A, and carry out the following activities:

a.

make observations of equipment, b.

obtain readings of appropriate equipment parameters, c.

conduct other routine activities at the request of the Participants, and d.

provide the Participants with appropriate reports as to findings during these activities.

2.

The Participants will make regular rounds of the Site Facilities Substation equipment for which the Participants are responsible, as identified in Section III of this Exhibit A, and carry out the following activities:

a.

make observations of equipment and. facilities, b.

obta.n readings of appropriate equipment parameters, and c.

provide Opco with appropriate reports as to the findings during these activities.

3.

The parties will operate equipment located in the Switchyard as follows:

a.

Opco will be the exclusive operator of the four 345KV main generator output breakers, except for maintenance activities as designated in Section III l

N0045W.D09 e

of this Exhibit A.

Opco will coordinate the operation of these breakers with the Participants.

b.

Opco will be the exclusive operator of the Emergency Transformer (excluding the primary disconnect and ground switch) and its associated components and load side distribution equipment.

c.

The Participants will normally operate (or provide for the operation of) all 345KV and 138KV Switchyard breakers and associated equipment, including disconnects, other than the four 345KV main generator output breakers, remotely or locally, but authorized Opco personnel will operate any such breakers or other equipment locally in the Switchyard at the Participants' request.

d.

Opco will be informed in advance by the Participants of the operation of all Switchyard breakers and disconnects to remove equipment from service.

e.

Opco will provide other operating support for the Switchyard at the request of the Participants.

4.

The Participants will operate Switchyard equipment as necessary for maintenance to be performed in accordance with Section III below and may return equipment to

_4-

['.

nuow.oo 1

service upon completion of maintenance, following notification to the appropriate Opco operations Shift Supervisor.

3 III.

MAINTENANCE AND ENGINEERING i

1.

Opco will have matntenance and engineering responsibility i

(including necessary repair or replacement, configuration i

control, and related engineering functions) for the STP 1

i transformers not in the Switchyard and the Emergency 1

Transformer and its associated load side 1

equipment / components which are located in the Switchyard.

2.

Opco will have maintenance responsibility (including i

necessary repair or replacement) for the load side distribution circuits (12.47/7.2KV) of the Site Facilities Substation which provide service to STP up to, but not including, the load side supply breakers.

3.

The Participants will retain engineering responsibility (including configuration control and related engineering functions) for all of the load side distribution circuits of the Site Facilities Substation.

4.

The Participants will have maintenance and engineering responsibility (including necessary repair or replacement, configuration control, and rela,ted.

e a

M004SW.M9 engineering functions) for all other equipment locate'd in the Switchyard, including, but not limited to:

a.

345KV and 138KV breakers and transformers and related equipment; and b.

manual and motorized disconnects.

5.

Opco will be responsible for procuring, filling, analyzing and replh' ing transformer oil for STP c

transformers identified in Section III(l) above.

6.

Maintaining an appropriate inventory of spare parts for the equipment identified in thisSection III will be'the responsibility of the party that is responsible for 1

maintaining the equipment as specified in this Section.

7.

If any additional equipment is required for the Switchyard or if existing equipment is. replaced, such additional or replacement equipment shall be procured on behalf of the Participants by Opco.

If the installation of such additional or replacement equipment is the 4

responsibility of the Participants under this Exhibit A, it shall be provided by Opco to Houston for installation on behalf of the Participants, pursuant to the terms of a separate Agreement among the Participants.

l N644$W.M9 IV.

COORDINATION 1

l l

1.

Opco will coordinate planned plant outages and planned j

load reductions with the Participants.

2.

The Participants will coordi.na~te with Opco all activities j

which will directly affect power supply to STP.

At a j

minimum, the appropr,1 ate Operations Shift Supervisor will 1

}

be informed by the Participant's System Dispatching or maintenance crew during the planning of these activities.

l Activities which cannot be planned in advance and the 4

3 detailed conduct of planned activities will be coordinated with the Operations Shift Supervisor.

These i

activities include, but are not limited to:

1 j

a.

removal from service of any transmission line terminating in the Switchyard; b.

breaker switching which can affect power supply to l

STP (i.e.,

switching of lines identified in Item (a) j i

above); and 1

c.

maintenance activities which can affect power supply

}

to STP.

l 1

s I

1 b ;

4

a Mete 5W.M9 V.

REVIEW AND APPROVAL 1.

The Participants will obtain Opco review and approval of procedure changes, design changes, tests or changes in the conduct of other activities which might affect compliance with regulatory requirements, the UFSAR and/or commitments involving the Switchyard and associated i

transmission lines and equipment which could affect off-site power supply to STP prior to implementing such changes or commencing such tests.

These activi. ties will include, as a minimum, any design changes or tests that could affect the grid stability analysis performed for STP.

2.

Opco will review these proposed changes and tests in accordance with applicable commitments and regulatory requirements and will obtain prior NRC approval if required.

VI.

PROCEDURES The Participants agree to provide STP with an assured source of off-site power in accordance with procedures to be agreed upon, from time to time, by the parties.

These procedures will include, but not be limited to, voltage 1

l.

Notesw.m s

limits during normal and switching operations, minimum interconnection requirements for the Switchyard, and other stability considerations.

The Participants recognize that they must respond to the critical need to j

provide pover to STP in an emergency and will ensure that i

procedures are promulgated to make their operating and maintenance personnel aware of such need.

i 1

VII.

TRAINING i

}

1.

Opco will provide regular training (on a schedule jointly i

agreed to by the Participants and Opco) to Participant J

i dispatcher personnel to.xplain the critical need for power at STP during emergencies, the legal requirements j

associated with STP power supply and associated procedures.

2.

The Participants will make appropriate dispatcher personnel available to receive training on a schedule jointly agreed to by the Participants and Opco.

VIII. GENERAL I

l This Exhibit A is intended to supplement the Operating Agreement.

Prior to any changes being made to this

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e

..,s.,

e Exhibit A, Opco will review the proposed change to assure that it is-in compliance with its licensing commitments and regulatory requirements applicable to STP.

If regulatory approval is needed, Opco will obtain that approval prior to the changes being made.

O l

1 l

. i

DRAFT 12/20/96 EXHIBIT B SUPPORT SERVICES TO BE PROVIDED BY PARTICIPANTS i

This Exhibit B relates to Paragraph 3.3 of the Operating Agreement, dated as of 199__, between Opco and the Participants (the " Operating Agreement").

I.

EMERGENCY PIANNING EQUIPMENT AND FACILITIES 1.

ACCESS.

Paragraph 3.2 of the Operating Agreement grants Opco unrestricted access to equipment and facilities located on the South Texas Project (i'STP") site, including, without limitation, equipment and facilities relied on to execute the STP Emergency Plan.

2.

INVENTORY.

An inventory of the specific off-site equipment and facilities for which Opco will be provided shall be maintained by the Manager of the Emergency Planning Division and may be revised as necessary to reflect changes in the needs of the STP Emergency Plan or changes in the availability of the equipment and facilities.

Such revisions shall only be made with the written concurrence of designated Participant and Opco representatives.

II.

PARTICIPANT PERSONNEL SUPPORTING THE STP EMERGENCY PLAN 1.

PERSONNEL' SUPPORT.

The Participants will provide personnel to support the STP Emergency Plan, including, without limitation, appropriate personnel to staff the Media Information Center and the Alternate EOF.

These personnel shall be provided by the Participants upon request by Opco to

+

.m m.m.m

o 4

support emergency training exercises and emergency drills and 1

l on a first priority basis for an actual emergency.

I j

2.

PERSONNEL ROSTER.' A roster of the specific i

j personnel that will provide the ~ support described in-

)

Section II, Paragraph 1, above, shall be maintained by the'STP j

Emergency Planning Organization, and nay be revised as i

j necessary to reflect changes in the needs of the STP Emergency Plan or changes in the availability of personnel.

Such 4

revisions shall only be made with the written concurrence of designated Participant and Opco representatives.

III. GENERAL SUPPORT I

l In accordance with Section 3.3 of'the Operating 1

Agreement, the Participants agree to-provide personnel, i

supplies and services, subject to their reasonable i

j.

availability, as required by Opco in order td allow Opco to i

j conduct safe, economic and efficient operations at STP and to i

j otherwise carry out its responsibilities under the Operating 4

Agreement.

Such services and assistance will be provided as requested by Opco and agreed to in writing by the applicable 4

Participant and may include services relating to engineering, I

communications, transportation, accounting, payroll and personnel assistance, environmental, land management of the site and surrounding property, and other services as necessary J

i to operate STP.

1 i

h j !

resemu.oe, i

e' IV.

GENERAL This Exhibit B is intended to supplement the Operating Agreement.

Prior to any changes being made to this Exhibit B, Opco will review the proposed change to assure that it is in compliance with its licensing commitments and regulatory requirements applicable to STP.

If regulatory approval is needed, Opco will obtain that appr. oval prior to the changes being made.

E e

5 -

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d 4

ATTACHMENT 4 EDITORIAL CHANGES f

SMH SUPPS$$$

STI)016if45

ATTACHMENT 4 l

EDITORIAL CHANGES Change to make designation of the " Owners" consistent between the two licenses This mark-up page was provided in the supplement to the amendment request.

(ST-HL-AE-5487)

Changes made to add the word "to". This mark-up page was provided in the original submittal. (ST-HL-AE-5450)

SMR$UPP$$$$

IT130161M5

HOUSTON LIGHTING & POWER COMPANY CITY PUBLIC SERVICE BOARD OF SAN ANTONIO CENTRAL POWER AND LIGHT COMPANY CITY OF AUSTIN. TEXAS STP:NUCCEXWOFERXTING" COMPANY DOCKET NO. 50-499 SOUTH TEXAS PROJECT. UlilT 2 n

( g*,,CG<en

/

FACILITY OPERATING LICENSE C

License No. NPF-80 1.

The Nuclear Regulatory Commission (the Commission or the NRC) has found that:

A.

The a lication for a license filed by the Houston Lighting & Power Companyi

. liist&lik](HL&P) acting on behalf ofitself and for the City Public Service

~

Austin, Texas (COAL ('ac=)TQ (lic+nsees) complies with the st requirements of the st6isi1EEliergy Act of 1954, as amended (the Act), and the Commission's regulations set forth in 10 CFR Chapter I, and all required notifications to other agencies or bodies have been duly made; B.

Construction of the South Texas Project, Unit 2, (the facility) has been substantially completed in conformity with Construction Permit No. CPPR-129 and the application, as amended, the provisions of the Act, and the regulations of the Commission; C.

The facility will operate in conformity with the application, as amended, the provisions of the Act, and the regulations of the Commission (except as exempted from compliance in Section 2.D. below);

D.

There is reasonable assurance: (i) that the activities authorized by this operating license can be conducted without endangering the health and safety of the public, and (ii) that such activities will be conducted in compliance with the Commission's regulations set forth in 10 CFR Chapter I (except as exempted from compliance in Section 2.D. below);

2-Heusten Lighting & Pcwcr Comp =y i: auieri=d to cet for de City Pub!!e Service Board of S= An cnic, Central Power and Light Comp =y =d City of Austin, Texas =d h= exclusive responsibility =d contre! cver Se physical construction, operation and mainten=ce of Se facility.

.i.

1 1

ADMINISTRATIVE CONTROLS RESPONSIBILITIES (Continued) t 6.5.1.7 The PORC shall:

i i

a.

Recommend in writing to the Plant Manager appmval or disapproval of items I

considered under Specification 6.5.1.6a. thmugh e. pn,or to their implementation, and items considered under Specification 6.5.1.6i. thmugh 1.

t i

b.

Render determinations in writing with regard to whether or not each item considered l

under Specification 6.5.1.6a. through e. and o. constitutes an unreviewed safety question; and Provide written notification within 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> to the Crcup Vice Pics:dca:J!ac1cer and the Nuclear Safety Review Board of disagreement i

between the PORC and the Plant Manager; however, the Plant Manager shall have responsibility for resolution of such disagreements pursuant to Specification 6.1.1.

RECORDS 6.5.1.8 The PORC shall maintain written minutes of each PORC meeting that, at a minimum, document the results of all PORC activities performed under ie tesoor s bility provisio ts of hese Technical Specifications. Co pies shall be pmvided e um==x2-J arwe=rm i

em;v Croup V_ Preddca:J!;c:cer and the Nuclear ety Review 30ard.

6.5.2 NUCLEAR SAFETY REVIEW BOARD (NSRB)

FUNCTION h

4 6.5.2.1 The NSRB shall function to provide independent review an audit of designated activities in the areas of:

i Nuclear power plant o Nuclear engineenng, perations, a.

b.

c.

Chemistry and radiochemistry, d.

Metallurgy, e.

Instnamentation and contml, f.

Radiological safety, g.

Mechanical and electrical engineering, h.

Civil engineering, i.

Traimng, i

J.

Nuclear assurance,

k..

Nuclear licensing,

,)

1.

Plant security, and m.

Environmental impact.

The NSRB shall report to and advise the Creu#- Vice Preddcat-Ncdcar on those areas of responsibility spec i in Spec

• ications 6.5.2.7 and 6.5.2.8.

SOUTH TEXAS - UNITS 1 & 2 6-9 I

A 2-s