ML20196K788
| ML20196K788 | |
| Person / Time | |
|---|---|
| Site: | Big Rock Point File:Consumers Energy icon.png |
| Issue date: | 03/29/1999 |
| From: | Powers K CONSUMERS ENERGY CO. (FORMERLY CONSUMERS POWER CO.) |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| NUDOCS 9904060165 | |
| Download: ML20196K788 (29) | |
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1 A CMS Energ> Company Big Rock Point Nuclear Plant Kaeneek P. hneers i
10269 L&31 Norm Site General Mant]er Char &oix, MI 49720 March 29,1999 Nuclear Regulatory Commission i
Document Control Desk Washington, DC 20555 - 0001 DOCKET 50-155 - LICENSE DPR-6, BIG ROCK POINT PLANT - CERTIFICATION OF FINANCIAL ASSURANCE FOR DECOMMISSIONING PURSUANT TO 10 CFR 50.75 (f)(1).
Each power reactor licensee shall report, on a calendar-year basis, to the NRC by March 31, 1999, and at least once every 2 years thereafter on the status of its decommissioning funding j
for each reactor or part of a reactor that it owns. The purpose of this report is a response to the potential rate deregulation in the power generating industry and NRC concerns regarding whether current NRC decommissioning funding assurance requirements will need to be
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modified.
Please find as attachment (s) to this letter, the Certification of Financial Assurance for Decommissioning of the Big Rock Point Plant, and a copy of the Trust Agreement between Consumers Energy and State Street Bank and Trust Company pursuant to 10 CFR 50.75(b)(4).
i This report addres s financial status as of December 31,1998.
A Kenneth P Powers Site General Manager cc:
Administrator, Region III NRC Reactor Decommissioning Inspector - BRP NRR Project Manager - OWFN, USNRC Attachment (s) 9904060165 990329 PDR ADOCK 05000155 PDR 1
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i ATTACHMENT 1 CERTIFICATION OF FINANCIAL ASSURANCE FOR DECOMMISSIONING PURSUANT TO 10 CFR 50.75 (f)(1).
March 29,1999
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I CONSUMERS ENERGY COMPANY Big Rock Point Plant Docket 50-155 License DPR-6
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CERTIFICATION OF FINANCIAL ASSURANCE FOR DECOMMISSIONING March 1999 Consumers Energy Company submits this certification of financial assurance for decommissioning in compliance with 10 CFR 50.75(f)(l).
1.
Consumers Energy owns a 100% undivided interest in the Big Rock Point Plant (Big Rock) and provides financial assurance for decommissioning through the use of an external sinking fund, funded by rates that are established by cost of service ratemaking regulation. On August 29,1997, Consumers Energy voluntarily shut Big Rock down and began to decommission it pursuant to the Post Shutdown Decommissioning Activities Report that was submitted to the NRC.
2.
The amount of decommissioning funds estimated to be required, based on a site-specific 1
decommissioning study,is $306,014,953 in January 1,1999 dollars. The site-specific study was i
prepared by TLG Services in 1997 and includes all costs necessary to restore the Big Rock site to
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a greenfield condition. The amount of decommissioning funds estimated to be required based upon the formula set forth in 10 CFR 50.75(c)(1) and (2), with the use of GTS-Duratek as a waste vendor, is $304,220,000 in January 1,1999 dollars. However, Mr. Seymour H. Weiss, in his June 12,1995 letter (attachment 1) concludei that Consumers Energy may fund decommissioning based on its site-specific cost estimate rather than on the formula provided in 10 CFR 50.75(c).
Therefore, Consumers Energy is providing decommissioning funding in the amount of its site-specific decommissioning cost estimate.
3.
The amount of decommissioning funds accumulated at the end of the calendar year preceding the date of this report was $177,008,381, based on the Company's trustee, State Street Bank and Trust, December 31,1998 Annual Reports for the Big Rock Decommissioning Trust Funds. The year-end balance reflects the withdraw of $68,481,660 to cover decommissioning expenditures incurred to date.
4.
The amount of decommissioning funds scheduled to be collected and deposited in the external sinking fund for 1999 and 2000 are $25,822,831 per year. Ilowever, on March 31,1998, Consumers Energy filed an application with the Michigan Public Service Commission (MPSC) to increase this amount to $32,466,243 for 1999 and 2000. Consumers Energy estimates that the MPSC will issue an order on the Company's application sometime during the first half of 1999.
5.
The following assumptions were used in the MPSC Application to project future expenditures and fund balances.
The separate weighted inflation rates were developed for each of the decommissioning periods in TLG Service's site-specific study based on the ratio oflabor costs, other costs, and burial costs to total costs for the period. The separate weighted inflation rates for each decommissioning period are listed below:
Period A, Mobilization & Hazard Reduction 4.11 %
Period B, Systems and RPV Internals Removal 4.55 %
l Period C, RPV Removal and Final Site Survey 5.27 %
Period D, License Termination & Site Restoration 3.89 %
Period E, ISFSI Operations 3.51 %
Period F, Fuel Transfer, ISFSI Decom. & Site Restoration 6.26 %
The following inflation rates were used to develop the weighted rates for each period:
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Compensation per11our 4.0%
U.S. - CPI, Urban 3.0%
Burial Cost 9.0%
Three separate extemal trust funds are maintained to collect decommissioning funds. The following projected after-tax rates of return were used to project future fund balances for each trust:
Section 468A Trust (Equity investments) 8.0%
Section 468A Trust (Fixed Income Investments) 4.5%
Non-Section 468 A Trust (Fixed income Investments) 4.5%
6.
Consumers Energy has not relied on any contract obligations pursuant to 10 CFR 50.75(e)(v) to meet its NRC decommissioning funding assurance.
7.
Since the last Certification of Financial Assurance for Decommissioning was filed with the NRC on July 26,1990, Consumers Energy has not modified its method of providing financial assurance.
However, Consumers Energy has changed its trustee from National Bank of Detroit to State Street Bank and Trust, invested a portion ofits decommissioning trust funds in equity investments and is relying on projected earnings of the external sinking funds to meet a portion ofits non-NRC costs to greenfield the site.
To the best of my knowledge, information and belief, the foregoing statements are true and correct.
hC m e Dennis DaPra Vice President and Controller Sworn and subscribed to this the inday of March,1999.
i AA. Katkit4h fbamerv M. Kathleen Bamm, Notary Public, Jackson County, Michigan My Commission Expires: 05/05/2001 I
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8 ]} '9 wAssisoros. o.c. aoses4oos June 12, 1995 O
Mr. Patrick M. Donnelly Plant Manager Big Rock Point Plant Consumers Power Company 10269 U.S. 31 North Charlevoix, Michigan 49720
Dear Mr. Donnelly:
By letter dated February 27, 1995, CPCo requested an exemption from the miniram certification amount required under 10 CFR 50.75(c) for decommissioning funding assurance for the Big Rock Point Nuclear Plant (BRP or the plant). CPCo stated in the above letter, that the amount of dccommissioning funding assurance that would be needed for BRP, as calculated using the formulae in f 50.75(c)(1) and (2), would be $361,160,800.
- However, in the CPCo site-specific decommissioning cost estimate for BRP, Consumers Power concludes that costs for decommissioning the radiological portion of the plant, excluding costs associated with interim management of spent reactor fuel, are about $200 million.
CPCo stated it needs an exemption from having to collect the additional decommissioning funds of about $161 million, which represents the difference between the site-specific estimate and the i
decommissioning formulae amounts in 5 50.75(c).
For the reasons stated below, we have concluded that CPCo does not need an exemption from the decommissioning formula amounts provided in f 50.75(c).
i The 1988 decommissioning rule was structured to provide a step-wise procedure to provide decommissioning funding assurance, where each reactor licensee establishes "a general level of adequate financial responsibility for decommissioning early in life, followed by periodic adjustment, and then i
evaluation of specific provisions close to the time of decommissioning" (53 FR 2401B, at page 24030). The preamble to the decommissioning rule also
- steted, Use of the certification approach is a first step in providing reasonable assurance of funds for decommissioning from the Commission's perspective. The second step is that the amendments [to the decommissioning rule] require the licensee, five years prior to the expected end of operations, to submit a cost estimate for decommissioning based on an up-to-date assessment of the actions necessary for decommissioning and plans for adjusting levels of funds l
assured for decommissioning....
This estimate would be based on a then current assessment of major factors that could affect decommissioning costs and would include relevant, up-to-date information. These factors could include site-specific factors as well as then current information on such issues as disposal of waste, residual radioactivity criteria, etc., and would present a realistic appraisal of the decommissioning of the specific reactor, taking into account actual factors and details specific to the reactor and the time period.
(Ibid, page 24030) q.gt=kRSCMt 9., h n '
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}. This and related discussions in the preamble indicate that the NRC implem the formulae so that licensees could provide assurance that the bulk of funds needed for decommissioning would be available without their having to pre site-specific cost estimates early in facility life.
the preliminary site-specific decommissioning The NRC envisioned that 50.75(f) would supplant the generic formulae. plans required in 10 CFR assessment of decommissioning five years before expec eliminate any shortfalls or. overages by the time it perm This would operation.
for the NRC to favor generic formulae over site-specific stu regulations require near the end of reactor life.
Thus, Consumers Power does not need an exemption from 10 CFR 50.75(c establish its decommissioning funding assurance amount based on its site-specific cost estimate for Big Rock Point adjustments to the licensee's proposed dicommissioning funding plan amc based on the review of the BRP decommissioning plan that the NRC is conducting.
You should direct any questions on this letter to Robert Wood on (301) 415-1255 or Richard Dudley on (301) 415-1116.
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Sincerely,
, j= M Seymour H. Weiss, Director Non-Power Reactors and Decommissioning Project Directorate Division of Project Support Office of Nuclear Reactor Regulation D:cket No. 50-155 cc:
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l ATTACHMENT 2 TRUST AGREEMENT BETWEEN CONSUMERS ENERGY AND STATE STREET BANK AND TRUST COMPANY PURSUANT TO 10 CFR 50.75(b)(4).
March 29,1999 l
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CONSUMERS ENERGY COMPANY NUCLEAR POWER PLANT DECOMMISSIONING TRUSTS TRUST AGREEMENT Between CONSUMERS ENERGY COMPANY and STATE STREET BANK AND TRUST COMPANY Dated as of March 1,1997 l
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CONSUMERS ENERGY COMPANY
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NUCLEAR POWER PLANT DECOMMISSIONING TRUSTS CONTENTS
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aan Recitals 1
Anicle 1
Establishment of Tmsts 3
Anicle 2
Purpose of Tmsts 4
Anicle 3
Administration of Tmsts and Investment Managers 7
Article 4
Indemnification of Trustee 10 Anicle 5
Trustee's Duties and Powers 11 Anicle 6
Securities or Other Propeny 17 Anicle 7
Taxes and Expenses 18 Anicle 8
Accountings by Tmstee 19' Anicle 9
Removal or Resignation of Tmstee 20 Anicle 10 Reliance on Communications 21 Anicle 11 Amendment of Agreement 22 Anicle 12 Termination of Trusts 22 Anicle 13 Miscellaneous Provisions and Effective Date 23 i
Signatums 24
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This is a TRUST AGREEMENT (the " Agreement") dated as of March 1,1997 by ano oetween Consumers Power Comp:ny d/b/a Consumers Energy Company, a Michigan corporation having its principal place of business at 212 West Michigan Avenue, Jackson, Michigan, 49201 (the " Company"), and STATE STREET BANK AND TRUST COMPANY, a banking corporation having its principal office in Boston, Massachusetts (the " Trustee").
RECITALS For the purpose of generating electricity for sale to its customers, the Company 4
owns and opemtes the Palisades Nuclear Power Plant (" Palisades") and the Big Rock Nuclear Power Plant (" Big Rock").
The Company is subject to the jurisdiction of the Michigan Public Service '
Commission ("MPSC") which has ordered the Company to include in rates certain amounts of monies ("MPSC Nuclear Decommissioning Provision") for collection by the Company from its customers to be placed into trusts in order to provide adequate funds to decommission Palisades and Big Rock.
The Company is also subject to regulation by the Federal Energy Regulatory Commission ("FERC"), an agency of the United States Government created and existing pursuant to 42 U.S.C. sections 7134 and 7171. The FERC has also ordered the Company to include in rates certain amounts of monies ("FERC Nuclear 1
Decommissioning Pmvision") for collection by the Company from its customers to be placed into trusts in order to provide adequate funds to decommission Palisades and Big Rock.
Section 468A of the Internal Revenue Code of 1986 permits a utility to make an election to currently deduct certain payments made to a Nuclear Decommissioning Reserve Fund during a taxable year. As used herein, the term " Code" refers to the Internal Revenue Code of 1986, as amended from time to time.
The Company, pursuant to Code Section 468A, has established qualified tmsts with respect to Palisades and Big Rock to receive amounts which will be eligible for federal income tax deductions. In addition, the Company has established tmsts which are not qualified pursuant to Section 468A with respect to Palisades and Big Rock to receive amounts collected under the MPSC orders, if any, in excess of the amounts for which federal income tax deductions are allowed under Code Section 468A. Finally, the Company has established nonqualified trusts with respect to Palisades and Big Rock
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to receive amounts collected under FERC orders, if any, in excess of the amounts for which federal income tax deductions are allowed under Code Section 468A.
The Company heretofore entered into a Trust Agmement with the predecessor Trustee effective January 1,1987.
Trusted is willing to perform the duties of trustee hereunder with respect to the tmsts.
NOW, THEREFORE, the Company and the Tmstee hereby agree as follows:
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ARTICLE 1. ESTABLISHMENT OF TRUSTS Section 1.1 The Company hereby establishes with the Tmstee trusts ("Tmsts")
consisting of (i) all sums of money and other property transferred to it from the
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predecessor trustee, (ii) such sums of money as shall, fmm time to time, be paid or delivered to the Trustee by the Company, and (iii) the earnings and profits thereon.
All money and property, all investments and reinvestments made pursuant to the provisions of this Agreement, all proceeds thereof, and all eamings and profits thereon, i
less the payments which at the time of reference shall have been made by the Trustee, are referred to herein as the " Assets." The Assets shall be held by the Tmstee, in Trust, and shall not be commingled with any other pmperty of the Tmstee (except to the extent expressly provided under this Agreement), and shall be dealt with in accordance with the provisions of this Agreement, j
Section 1.2 The name of the Tmsts shall be designated as follows: (i) Consumers Energy Big Rock Section 468A Tmst, (ii) Consumers Energy Palisades Section 468A Tmst, (iii) Consumers Energy Big Rock Non-Section 468A State Trust, (iv) Consumers Energy Palisades Non-Section 468A State Tmst, (v) Consumers Energy Big Rock Non-Section 468A Federal Tmst, (vi) Cor.,umers Energy Palisades Non-Section 468A Federal Tmst. The term "Section 468A Tmst" refers to the Consumers Energy Big Rock Section 468A Tmst and the Consumers Energy Palisades Section 468A Tmst and i
the term "Non-Secuon 468A Tmst" refers to the Consumers Energy Big Rock Non-l 3
Section 468A State Tmst, Consumers Energy Palisades Non-Section 468A State Trust, 3
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Consumers Energy Company Big Rock Non-Section 468A Federal Tmst, Consumers Energy Palisades Non-Section 468A Federal " rust. Each and all of such Trusts are referred to as a " Trust" or " Trusts."
i Section 1.3 All contributions to a Trust by the Company shall be accompanied by written instructions of the Company, designating the contributions as contributions to the Trust, the Tmst or Trusts into which such contributions shall be placed, and the amount to be placed in ea:h such Trust.
Section 1.4 The Trustee shall have no.esponsibility or authority in connection with the determination of tle amounts tr., be transferred to it from time to time as contributions of the Company nor the Funds into which such amounts shall be placed, nor shall it have any authority or responsibility on behalf of any party to bring any action or proceeding to enforce the collection of any such amount.
Section 1.5 No duties or obligations shall be imposed upon the Trustee with respect to the Assets unless they have been specifically undertaken by the Trustee by 1
the express terms of this Agreement or other written agreement to which the Trustee is a party, or are otherwise imposed upon the Trustee by applicable law.
. lTICY R 2. PURPOSE OF TRUSTS Section 2.1 Each Trust is reated and shall be operated exclusively for the i
following purposes:
(a) To satisfy, in whole on., art, an: Nability of the Company for the 4
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. decommissioning of the nuclear power plant to which the Trust relates. In the case of the Section 468A Tmst, the Assets must be used as authorized by section 468A of the Code and the regulations themunder; (b) To pay administrative costs and other incidental expenses of the Tmst. The term " administrative costs and other incidental expenses" means ordinary and necessary expenditures that are incurred in connection with the operation of the Trust, including but not limited to taxes (other than tax imposed by Section 4951 of the Code), legal, accounting, actuarial, brokerage investment, and trustee fees and expenses; and, (c) To the extent that a ponion of the Assets is not currently needed for purposes described in Subsection 2.l(a) or (b), to make investments permitted herein.
Section 2.2 No pan of the Assets may be used for, or divened to, any purpose other than the following:
(a) The purposes described in Section 2.1; (b)
Transfer to another trust, established by the Company or by any governmental instrumentality having jurisdiction over the decommissioning of -
nuclear power plants if the purpose of such tmst is to fund the Company's costs of nuclear power plant decommissioning; and (c)
Distribution to the Company, if it is determined that the Assets are in excess of what is reasonably required 'o satisfy the purposes described in Section 2.1, or if there has been an excess contribution, in the manner described in Section 2.4.
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.Section 2.3 Each disbursement of each Trust, other than for administrative and other incidental expenses, shall be made only upon written instructions of the Company, signed by an officer, designating the payee (which may be the Company, as provided in Section 2.4, or if the amount is for reimbursement of decommissioning costs paid by the Company), the Trust or Tmsts from which such disbursement is to be made, the amount which is to be disbursed from each such Trust, and the nuclear power plant subject to decommissioning for which the disbursement is to be made.
t Upon receipt of such written instmetions from the Company, the Trustee shall make payments from the designated Trust or Trusts. The Trustee may rely absolutely upon such instructions and shall be under no duty to question or verify the accuracy of such instructions.
Section 2.4 If any part of any contribution to any Trust is subsequently determined by the Company to be in excess of the amount which should have been so contributed, the amount of such excess contribution shall be repaid to the Company from that Trust. If, after the decommissioning of Big Rock and Palisades has been completed, the Assets of the Section 468A Trusts and the Non-Section 468A State Trusts am determined by the MPSC or its successor to be in excess of the amount actually expended for decommissioning, the excess shall be returned to the Company to be refunded to the Company's customers in the manner determined by the MP3C and in the case of the Non-Section 468A Federal Trusts, the excess shall be returned to the Company to be retunded to the Company's customers in the manner determined by the I
FERC. Returns of any such amount shall be made by the Trustee upon written 6
r-instruction of the Company, specifying the amount to be returned from each Tmst, certifying that such amounts represent excess contributions, or amounts in excess of decommissioning costs, and signed by an officer of the Company. Tir Company shall provide any additional information reasonably requested by the Tmstee, including a schedule of ruling amounts. 'Ihe Tmstee may rely absolutely upon such instmetions and shall be under no duty to question or verify the accuracy of such instructions.
ARTICLE 3. ADMINISTRATION OF TRUSTS AND INVESTMENT MANAGERS.
Section 3.1 Except with respect to any Investment account of which it is acting as Investment Manager pursuant to Section 3.2 hereof, the Tmstee shall be released and relieved af all investment duties, responsibilities and liabilities customarily or statutorily incident to a tmstee with respect to the Tmsts hereunder, and as to cuch Tmsts, the Tmstee shall act only as Custodian.
Notwithstanding the foregoing paragraph, the Tmstee in its custodial capacity shall, to the extent any assets of the Trusts have not been invested by an Investment Manager or the Company as of the end of any business day, invest such uninvested assets of the Tmsts ovemight as the Company or such Investment Manager may direct in writing, subject to the limitations in Section 5.4 hereof.
Section 3.2 The Company, from time to time, may appoint one or more independent Investment Managers, which may include the Trustee, pursuant to a ivritten investment management agreement describing the powers and duties of the I
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l Investment Manager, to direct the investment and reinvestment of any Tmst or any ponica herec,.ler (an " Investment Fund").
The Company shall be responsible for ascenaining that any Investment Manager is duly qualified to serve in that capacity.
The Company shall furnish the Tmstee with written notice of the appointment of each Investment Manager hereunder, and of the termination of any such appointment.
Such notice shall specify the assets which shall constitute the Investment Fund for such Investment Manager. The Trustee shall be fully protected in relying upon the effectiveness of such appointment and the Investment Manager's continuing l
qualification to serve until it receives written notice from the Company to the contrary.
l The Trustee shall conclusively presume that each Investment Manager, under its investment management agreement, is entitled to act, in directing the investment and reinvestment of the Investment Fund for which it is responsible, in its sole and independent discretion and without limitation, except for any limitations which from l_
time to time the Company and the Tmstee agree (in writing) shall Godify the scope of j
such authority.
An Investment Manager shall cenify, at the request of the Trustee, the value of l
any securities or other propeny held in any Investment Fund managed by such Investment. Manager. The Trustee shall be entitled to rely conclusively upon such valuation for all purposes under this Tmst Agreement.
Section 3.3 The Company may from time to time direct the Trustee in writing l
to segregate all or a ponion of any Trust hereunder into one or more separate 8
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Investment Funds with respect to which the Company shall have the powers and duties granted to an Investment Manager under this Agreement, such accounts to be known as The Company Directed Accounts. In addition, during any time when there is no Investment Manager with respect to any portion of a Trust hereunder (such as before an investment mansgement agreement takes effect or after it terminates), such poition shall be deemed to be the Company Directed Account. Whenever the Company is l
directing the investment and reinvestment of any' property held hereunder, the Company shall have the powers and duties which the Investment Manager would have under this tmst instrument if an Investment Manager were then serving and the Trustee shall be protected under this instmment as if it had relied on the directions of an Investment Manager.
Section 3.4 The Company intends by this article to allocate to Investment Managers all fiduciary responsibility with respect to investments in the separate account under the management of such Manager except to the extent the Trustee invests cash as hereinbefore pmvided. Unless the Trustee knowingly participates in or undertakes to i
conceal a breach of such other party's fiduciary duty, knowing it to be a beach, the Trustee shall incur no lisbility for any loss of any kind which may result (i) from following directions of an Investment Manager or the Company which are given in accordance.with this Trust Agreement, or (ii) by reason of any act or omission of an Investment Manager or the Company or (iii) for any loss of any kind which may result with respect to any Investment Funds. On receipt of directions from an Investment l
Manager or the Company, the Trustee shall promptly make, execute, acknowledge and 9
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deliver any /.xi all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out such directions.
Sagig LLS An Investment Manager shall, except as otherwise limited by agreement or by investment objectives provided by the Company, have powers and duties herein granted to or imposed upon the Trustee in Section 5. The Investment Manager shall make orily such investments and reinvestments as are permitted by the l
laws of the Commonwealth of Massachusetts for the investment of trust funds, except i
1 that the MPSC and the relevant laws of the State of Michigan shall control the MPSC Nuclear Decommissioning Provision and the Investment Manager shall make no investments in securities issued by the Company, its successors or assigns or any of its affiliates. Further, the Trustee shall not make any loans from the Trusts to the l
Company or to persons with whom the Company, to a significant extent, is associated or affiliated, or to persons who have the power, directly or indirectly, significantly to influence or direct the actions or policies of the Company.
l ARTICIR 4. INDEMNIFICATION OF TRUSTEE Section 4.1 The Trustee shall not be answerable or accountable under any circumstances, except for its own bad faith, negligence or willful misconduct, and shall be responsible for the performance of only such duties as are specifically set forth in this Agreement and no implied covenants or obligations shall be read into this i
Agreement against the Trustee. The Company, its successors, and assigns hereby L
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l agree to indemnify the Trustee and hold it harmless from and against any and all costs, l
expenses or liability (including reasonable attomey's fees) which may be incurred by the Tmstee or asserted against the Trustee by reason of its acting as Tmstee under this Agreement, except for such costs, expenses and liability arising from the Trustee's bad faith, negligence or willful misconduct.
ARTICLE 5. TRUSTEE'S DUTIES AND POWERS I
Section 5.1 It shall be the duty of the Trustee (i) to hold the Assets as provided in this Agmement, (ii) to record all charges, credits and other transactions executed in f
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accordance with written instmetions furnished by the Company or an Investment Manager and (iii) to make paymen:s and distributions from the funds for the purposes described in Section 2.2 in accordance with instmetions furnished by the Ccmpany.
The making of any such payments or distributions shaP not be interpreted to impose any responsibility on the Trustee with respect to the purpose for which such payment or distribution is made.
Section 5.2 The Tmstee may from time to time consult with counsel, who may be counsel to the Company, and may rely, to the extent permitted by law, upon such advice of cbunsel.
Section 5.3 Without in any way limiting the powers and discretions conferred upon it by the other provisions of this Agreement or by applicable law, the Tmstee shall have and exercise the following powers and authority (i) over Investment Funds 11
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where it has express Investment Management discretion as provided in Section 3.2, or (ii) upon dimetion of the Investment Manager of an Investment Fund, or (iii) upon dimetion of the Company for a Company Directed Account:
(a) To purchase, receive, or subscribe for any securities or other property and to retain in trust such securities or other propeny.
(b) To sell for cash or on cmdit, to grant options, conven, redeem, exchange for other securities or other propeny (including selling short securities or entering in o contracts for exchange of interest rates or other returns based on a nmional principal value), to enter into standby agreements for future investment, either with or without a standby fee, or otherwise to dispose of any securities or other propeny
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at any time held by it.
(c) To settle, compromise or submit to arbitration any claims, debts, or damages, due or owing to or from the trust, to commence or defend suits or legal proceedings and to represent the tmst in all suits or legal proceedings in any court of law or before any other body or tribunal.
- 1) To trade in financial options and futures, including index options and options a futures and to execute in c6anection therewith such account agreements and other agreements in such form and upon such terms as the Investment Manager or the Company shall direct.
(e) To exercise all voting rights, tender or exchange rights, any conversion privileges, subscription rights and other rights and powers available in connection with any securities or other propeny at anytime held by it; to oppose or to consent to the reorganization, consolidation, mager, or readjustment of the fimances of any corporation, company or association, or to the sale, mortgage, pledge or lease of the propeny of any corporation, company or association any of the securities which may at any time be held by it and to do any act with reference thereto, including the exercise of options, the making of agreements or subscriptions and the payment of expenses,- assessments or subscriptions, which may be deemed necessuy or
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advisable by the Investment Manager or The Company in connection therewith, and to hold'and retain any securities or other propeny which it may so acquire; and to deposit any propeny with any protective, reorganization or similar committee, and to pay and agree to pay part of the expenses and compensation of any such committee and any assessments levied with respect to property so deposited.
(f) To borrow money in such amounts and upon such terms and conditions as shall be deemed advisable or proper by the Company or Investment Manager to carry out 12 1
I the purposes of the trust and to pledge any securities or other property for the repayment of any such loan.
l (g) To invest all or a portion of the Assets in contracts issued by insumnce companies, including contracts under which the insurance company holds Assets in a separate account or commingled separate account managed by the insurance company. The Trustee shall be entitled to rely upon any written directions of the Company or the Investment Manager under this Section 5.3, and the Trustee shall l
not be responsible for the tenns of any insurance contract that it is directed to purchase and hold or for the selection of the issuer thereof or for performing any functions under such contract (other than the execution of any documents incidental thereto on the instructions of the Company or the Investment Manager).
(h) To manage, administer, operate, lease for any number of years, develop, improve, repair, alter, demolish, mortgage, pledge, grant options with respect to, or otherwise deal with any real property or interest therein at any time held by it, and to hold any such real property in its own name or in the name of a nominee, L
with or without the addition of words indicating that such property is held in a fiduciary capacity, all upon such terms and conditions as may be deemed advisable l
by the Investment Manager or the Company.
(i) To renew, extend or participate in the renewal or extension of any mongage, l
upon such terms as may be deemed advisable by the Investment Manager or The Company, and to agree to a reduction in the rate of interest on any mortgage or of l
any guarantee pertaining thereto in any manner and to any extent that may be deemed advisable by the Investment Manager or The Company for the protection of the Assets or the preservation of the value of the investment; to waive any default, whether in the performance of any covenant or condition of any mortgage or in the performance of any guarantee, or to enforce any such default in such manner and to such extent as may be deemed advisable by the Investment Manager or The Company; to exercise and enforce any and all rights of foreclosure, to bid on
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property on foreclosure, to take a deed in lieu of foreclosure with or without paying consideration therefor, and in connection therewith to release the obligation on the bond secured by such mortgage, and to exercise and enforce in any action, suit or proceeding at law or in equity any rights or remedies with respect to any such mortgage or guarantee.
(j) To hold part or all of the Assets uninvested.
(k) To employ suitable agents and counsel arid to pay their reasonable and proper i
expenses and compensation.
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l (1) To purchase and sell foreign exchange and contracts for foreign exchange, including transactions entered into with State Street Bank and Trust Company, its agents or subcustodians.
(m) To form corporations and to create trusts to hold title to any securities or other property, all upon such terms and conditions as may be deemed advisable by the Investment Manager or The Company.
(n) To register any securities held by it hereunder in its own name or in the name of a nominee with or without the addition of words indicating that such securities are held in a fiduciary capacity and to hold any securities in bearer fonn and to deposit any securities or other property in a depository or clearing corporation.
(o) To make, execute and deliver, as Trustee, any and all deeds, leases, mortgages, conveyances, waivers, releases, or other instruments in writing necessary or desirable for the accomplishment of any of the foregoing powers.
(p) To invest at State Street Bank and Trust Company (i) in any type of interest bearing investments (including, 'et not limited to savings accounts, money market accounts, certificates of deposit and repurchase agreements) and (ii) in noninterest beanng accounts (including but not limited to checking accounts).
(q) To invest in open-end and closed-end investment companies, regardless of the purposes for which such fund or funds were created, including those managed, servie.xi or advised by the Trustee, an affiliate of the Trustee, and any partnership, i
limited or unlimited, joint venture and other forms of joint enterprise created for l
any lawful purpose.
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l (r) To lend securities of the Trusts only pursuant to a separate written authorization agreement with the Company.
t Except as otherwise provided in this Trust Agreement, the Investment Manager of an Investment Fund or the Company in the case of a Company Directed Account shall i
have the power and authority, to be exercised in its sole discretion at any time and from time to time, to issue orders for the purchase or sale of securities directly to a broker. Written notification of the issuance of each such order shall be given promptly to the Trustee by the Investment Manager or the Company and the confumation ot' 14 I
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L each such order shall be confirmed to the Tmstee by the broker. Unless otherwise directed by the Company or Investment Manager, such notification shall be authority for the Trustee to pay for securities purchased or to deliver securities sold as the case may be. Upon the direction of the Investment Manager or the Company, the Trustee will execute and deliver appropriate trading authorizations, but no such authorization shall be deemed to increase the liability or responsibility of the Trustee under this Tmst Agreement.
The Tmstee shall transmit promptly to the Company or the Investment Manager, as the case may be, all notices of conversion, redemption, tender, exchange, subscription, class action, claim in insolvency proceedings or other rights or powers relating to any of the securities in the Trusts, which notices are received by the Truste: from its agents or custodians, from issuers of the securities in question and from the pany (or its l
agents) extending such rights. The Tmstee shall have no obligation to determine the existence of any conversion, redemption, tender, exchange, subscription, class action, claim in insolvency proceedings or other right or power relating to any of the securities l
l in the Trusts of which notice was given prior to the purchase of such securities by the Trusts, and shall have no obligation to exercise any such right or power unless the l
Trustee is informed of the existence of the right or power.
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'Ihe Trdstee shall not be liable for any untimely exercise or assenion of such rights or powers described in the paragraph immediately above in connection with securities or other propeny of the Trusts at any time held by it unless (i) it or its agents or custodians are in actual possession of such securities or propeny and (ii) it receives i
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directions to exercise any such rights or powers from the Company or the Investment Manager, as the case may be, and both (i) and (ii) occur at least thme business days prior to the date on which such rights or powers are to be exercised.
If the Trustee is dimeted by the Company or an Investment Manager to purchase securities issued by any foreign government or agency thereof, or by any corporation or other entity domiciled outside of the United States, it shall be the responsibility of the Company or Investment Manager, as the case may be, to advise the Trustee in writing with respect to any laws or regulations of any foreign countries or any United i
States territory or possession which shall apply in any manner whatsoever to such securities, including, without limitation, receipt by the Trustee of dividends, interest or j
otier distributions on such securities.
Section 5.4 Notwithstanding the appointment of an Investment Manager, the Trustee shall have the following powers and authority, to be exercised in its sole discretion, with respect to the Trusts:
4 (a) To employ suitable agents, custodians and counsel and to pay their reasonable expenses and compensation.
(b) To register any securities held by it hereunder in its own name or in the name of a nominee with or without the addition of words indicating that such securities are held in a fiduciary capacity and to hold any securities in bearer form and to deposit any securities or other property in a depository or clearing corporation, (c) To.make, execute acd deliver, as Trustee, any and all deeds, leases, mortgages, conveyances, waivers, releases or other instruments in writing necessary or desirable for the accomplishment of any of the foregoing powers.
(d) Genemlly to do all ministerial acts, whether or not expressly authorized, which the Trustee may deem necessary or desirable in carrying out its duties under this Trust Agreement.
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1 Notwithstanding anything in this Trust Agreement to the contrary, the Trustee shall not be required by the Company or any Investment Manager to engage in any action, nor make any investment which constitutes a prohibited transaction or which is otherwise contrary to law or to the terms of this Tmst Agreement.
Section 5.5 The Tmstee shall not manage any Section 468A Trust in a manner which would constitute self-dealing, as defined in Section 4951 of the Code.
ARTICLE 6. SECURITIES OR OTHER PROPERTY Section 6.1 The words " securities or other propeny", used in this Trust i
l Agreement, shall be deemed to refer to any propeny, real or personal, or part interest therein, wherever situated, including, without limitation, governmental, corporate or personal obligations, trust and panicipation cenificates, pannership interests, annuity or investment contracts issued by an insurance company, leaseholds, fee titles, mortgages and other interests in realty, preferred and common stocks, certificates of deposit, financial options and futures or any other form of option, evidences of indebtedness or ownership in foreign corporations or other enterprises or indebtedness of foreign governments, and any other evidences of indebtedness or ownership.
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i ARTICLE 7. TAXFR AND EXPENSEE SEliQIL7.,1 All taxes of any kind that may be assessed or levied against or in respect of each Trust, including income taxes borne by the Company, if any, associated with income and transactions of each Trust, and all brokerage commissions incurred by each Trust shall be paid from the Assets of such Trust. The Trustee shall cause appropriate federal and state tax returns with respect to each Section 468A Trust to be prepared and filed and shall pay any taxes shown to be due out of each Section 468A Trust. The Company shall cause to be prepared and filed such other federal and state tax returns as may be required with respect to income earned by or the assets of the Trusts hereunder. On direction of the Company, Trustee may pay such taxes out of the Non-Section 468A Trusts or reimburse the Company for payment thereof. All other reasonable expenses of administration, such as (but not limited to) the expenses incurred by the Trustee in connection with the administration of the Tmsts, including fees and expenses of agents or attorneys employed by the Trustee (whether or not arising out of a judicial or administrative proceediig and whether or not ' eurred while m
it is r. ting as Tmstee), such compensation to th: Tmstee as may be agreed upon from time to time between the Tm" and the Company, and all other proper charges and disbursemehts of the Trustee, snali be witixhawn and paid from the Assets.
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ARTICIR 8. 'ACCOUNTINGS BY TRUSTEE Section 8.1 The Trustee shall keep accurate and detailed accounts of all investments, receipts, disbursements and other transactions hereunder, with respect to each Trust, and all accounts, books and reconis relating thereto shall be open to inspection and audit at all reasonable times by any person designated by the Company.
Section 8.2 Within 90 days following the close of each calendar quarter, and within 90 days after the removal or resignation of the Trustee as provided in Section 8.1, the Trustee shall file with the Company a written account setting forth all investments, receipts, disbursements and other transactions, with respect to the Trust, effected by it during such quarter or during the period from the close of the last
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calendar quarter to the date of such removal or resignation. Upon the expiration of three years from the date of filing such quarterly or other account, the Trustee shall be forever released and discharged from all liability and accountability to the Company with respect to the propriety of its acts and transactions shown in such account, except with respect to any such acts or transactions as to which the Company shall within such three-year period file with the Trustee written objections.
Section 8.3 In order to protect the Trusts against waste, no one other than the Company may require the Trustee to account or may institute an action or proceeding against the Trustee or any Trust. However, nothing herein shall in any way limit the Trustee's right to bring any action or proceeding to settle its account or for such other relief as it may deem appropriate.
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ARTICLE 9. REMOVAL OR RRRIGNATION OF TRUSTEE Section 9.1 The Tmstee may be removed by the Company at any time upon 60 days' notice in writing to the Trustee. The Tmstee may resign at any time upon 60 days' notice in writing to the Company. Upon such removal or resignation of the Trustee, the Company shall appoint and designate a successor trustee who shall be a qualified financial institution and who shall have the same powers and duties as those conferred upon the Trustee hereunder, and upon acceptance of such appointment by the successor tmstee, the Trustee shall assign, transfer and pay over to such successor trustee all the Assets of the Trusts. The Trustee is authorized to reserve from such payment to a successor trustee such amounts as it may reasonably deem necessary to provide for any and all expenses and payments properly chargeable against the Trusts, or for which the Trusts may be liable, or to which the retiring Trustee may be entitled by way of fees and expenses in the settlement of its account. If the assets so withheld are insufficient for such purposes, the retiring Tmstee shall be entitled to reimbursement from the Successor Trustee, or any balance of such reserve remaining after the payment of such fees and expenses shall be paid over to the successor trustee.
Section 9.2 If, for any reason, the Company cannot or does not act in the event of the resignadon or removal of the Trustee, as provided in Section 9.1, the Trustee may apply to a court of competent jurisdiction for the appointment of a successor trustee or for instructions. Any expenses so incurred shall be treated as an expense of
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administration.
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ARTICTR 10. DKT TANCE ON COMMUNICATIONS Section 10.1 Any action of the Company pursuant to any of the provisions of this Agmement shall be evidenced by a written notice or direction to such effect over the signatum of any officer or other representative of the Company who shall have been certified to the Trustee by the Secretary or an Assistant Secretary of the Company as having such authority, and the Tmstee shall be fully protected in acting in accordance with such notices or directions.
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Section 10.2 The Trustee shall not be bound by any notice, directions, i
mquisitions, or request unless and until it shall have been received in writing at its main office in Nonh Quincy, Massachusetts. The Trustee shall be funtwr protected in relying upon a cenification from any Investment Manager appointed by the Company as to the person or persons authorized to give instructions or directions on behalf of such Investment Manager and may continue to rely upon such certification until a subsequent cenification is filed with Tmstee. All cenifications, orders, requests and instructions of the Company or an Investment Manager to the Tmstee shall be in i
writing and the Trustee shall act and may rely upon cenifications, orders, requests and i
instructioni. The Trustee shall have the right to assume, in the absence of written notice to the contrary, that no event terminating the authority of any person auttanzed to act on its behalf hereunder has occurmd.
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r MCI N 11. AMENDMENT OF AGRRNMENT l
Section 11.1 'Ihe Company reserves the right at any time and from time to time to amend, in whole or in pan, any or all of the provisions of this Agreement by notice thereof in writing delivered to the Trustee. No amendment which affects the rights, duties or responsibilities of the Tmstee may be made without its consent, and no amendment shall authorize or permit any part of the corpus or income of any Trust to l
be used for or diverted to purposes other than those described in Section 2.2, and in the case of the Section 468A Tmst no amendment shall be made so as to violate Section 468A of the Code and the regulations thereunder.
ARTICLE 12. TERMINATION OF TRUSTS Section 12.1 The Company may terminate any Trust at any time by a written notice to the Tmstee. Upon such termination, the Trustee, pursuant to instmetions 1
I fumished by the Company, shall dispose of the remaining Assets of such Tmst by the transfers and payments described in Section 2.2.
Section 12.2 In no event shall any Tmst extend for a term longer than the earlier of (i) the date r<hich shall be the 21st anniversary of the death of the last survivor of all l
i the children and grandchildren of the officers of the Company as of the original
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l establishment of these tmsts on Janua'q 1,1987, a list of such children and grandchildren is attached as Exhibit A hereto, or (ii) the f' mal payment of all costs of 22
J the Company mlating to the decommissioning of Big Rock and Palisades. If any Trust is still in existence on such anniversary date referred to in clause (i) above, the Trustee shall dispose of the Assets in the manner directed by the Company.,
ARTICLE 13. MISCFr i ANEOUS PROVISIONS AND EFFECTIVE DATE l
Section 13.1 Upon the tennination of any Trusts, or upon the removal or resignation of the Trustee as provided in Section 9.1, the Trustee shall continue to have and may exercise all the title, powers, discretions, rights and duties conferred or imposed upon it by law or by this Agreement until the final distribution of the Assets of such Trust.
Section 13.2 This Agreement shall be administered, construed and enforted according to the laws of the Commonwealth of Massachusetts, except that the MPSC and the relevant laws of the State of Michigan shall control the MPSC Nuclear Decommissioning Provision. The Company shall provide the Trustee.with copies of any statutes, mgulations or rulings of the State of Michigan or the MPSC which affect administration of the Trust. The Trustee shall provide the Company with copies of any i
statutes, regulations or rulings of the Commonwealth of Massachusetts which affect the
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Company's duties and obligations under this Trust Agreement.
Section 13.3 The fiscal year of each Trust shall be the calendar year.
Section 13.4 The provisions of this Agreement shall take effect as of the date hereof.
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.IN WITNESS WHEREOF the panies hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized and their re,spective seals to be hereunto affixed and attested as of the day and year first above written.
CONSUMERS POWER COMPANY d/b/a CONSUMERS ENERGY COMPANY 7
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By 7
Vice President Attest-
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Assistant Secretary S
TE S:fREET BANK AND TRUST COMPANY, Trustee By
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Attest:
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