ML20212N130

Forwards Final Draft Plant Operating Agreement Mentioned in Application for License Amend & Approval Re Sale & Leaseback Transactions.Agreement Currently Being Executed

ML20212N130
Person / Time
Site:	Perry
Issue date:	03/11/1987
From:	Doris Lewis CLEVELAND ELECTRIC ILLUMINATING CO., SHAW, PITTMAN, POTTS & TROWBRIDGE
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
NUDOCS 8703120368
Download: ML20212N130 (31)

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SHAW, PITTMAN, PoTTs & TROWBRIDGE A PARTNERSMi# 'NCLUO4NG PROF.SSsONAL CORPORATIONS 2300 N STREET. N. W.

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(202) 663-8474 U.S. Nuclear Regulatory Commission ATTENTION: Document Control Desk 7920 Norfolk Avenue Bethesda, MD 20814 r In the Matter of The Cleveland Electric Illuminating Company, et al.

(Perry Nuclear Power Plant, Unit 1)

Docket No. 50-440 Reft Application for License Amendment and Approval In Connection with Sale and Leaseback Transactions by Ohio Edison Company (Jan. 23, 1987).

Dear Sir Enclosed for your information is the final draft of the Perry Unit 1 Operating Agreement, which is mentioned in the rei-crenced Application. This agreement is currently being executed.

Sincerel ,

a h D ~h David R. Lewis Counsel for Applicants Enclosure O

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0703120360 070311 SDH ADOCK 05000440 R PDR

SHAw, PITTMAN, PoTTs & TROWBRIDGE A PARTNERSHtP INCLUDtNG PROFESSIONAL CORPORAttoNS Letter to the U.S. Nuclear Regulatory Commission March 11, 1987 Page 2 Service List U.S. Nuclear Regulatory Commission Region III Att'n: Licensing 799 Roosevelt Road Glen Ellyn, Illinois 60137 Mr. Richard Knop Division of Reactor Projects U.S. Nuclear Regulatory Commission, Region III 799 Roosevelt Road Glen Ellyn, Illinois 60137 Mr. Walter R. Butler Director, BWR Project Directorate No. 4 Division of BWR Licensing U.S. Nuclear Regulatory Commission 7920 Norfolk Avenue, Room P-924C Bethesda, Maryland 20814 George E. Johnson, Esq.

Office of the General Counsel U.S. Nuclear Regulatory Commission Maryland National Bank Building 7735 Old Georgetown Road Bethesda, Maryland 20814

r-4 OPERATING AGREEMENT Perry Unit No. 1 This Agreement, dated March 10, 1987, entered into by and between The Cleveland Electric Illuminating Company, an Ohio corporation ("CEI"); Duquesne Light Company, a Pennsylvania corporation ("DL"); Ohio Edison Company, an Ohio corporation ("0E");

Pennsylvania Power Company, a Pennsylvania corporation ("PP"); and The Toledo Edison Company, an Ohio corporation ("TE") (sometimes collectively referred to herein as the " Participants" and individually as a " Participant").

WITNESSETH:

1. CEI, DL, OE, PP and TE have provided for the construction on a tract of land, known as the Perry site and consisting of approximately 1,100 acres located near Lake Erie in North Perry Village and Perry Township, Lake County, Ohio, of a nuclear electric generating unit, having a net rated capacity in the 1,200,000 kilowatt class, known as " Unit No. 1" or the " Unit".

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o The Unit was constructed pursuant to a Construction

, Agreement among the Participants dated July 22, 1974 (hereinafter sometimes referred to as the " Construction Agreement"), as amended by the Memorandus Agreement dated January 29, 1975 relating to capacity deferrals, the Memorandum Agreement dated November 15, 1978 relating to schedule changes in construction, the Memorandum Agreement dated July f,1981 relating to schedule changes in construction and ownership changes, and the Memorandum of Agreement dated September 20, 1982 relating to amendments to construction and operating agreements. As of the date of execution and delivery hereof, the Unit is owned by CEI, DL, OE, PP and TE as tenants in common with undivided interests of 31.11%, 13 74%, 30.00%, 5.24% and 19.915, respectively.

The term " Unit No. 1" and the word " Unit" as used in this

. Agreement, shall mean and include such Unit and the common facilities 4

l_ allocable thereto. The interests in land associated with the Unit referenced above are referred to as the " Unit No.1 Site".

This Agreement provides for the operation and maintenance of all or any portion of Unit No. I from its date of commercial operation and thereafter. '

2. Subject to matters requiring joint action as r

j specifically provided herein or as required by law, CEI, on its own behalf and on behalf of DL, OE, PP and TE, shall operate and maintain the Unit and Unit No. 1 Site, provide necessary materials and l

supplies including fuel as provided in Section 11, and make any additions, replacements and retirements with respect to the Unit, taking all steps which it deems necessary or appropriate to carry out the provisions of this Agreement, all in accordance with sound engineering and operating principles and practices and applicable laws, codes and regulations; provided that, with respect to the Unit, additions, replacements and retirements involving material changes in capability, useful life, basic methods of operation of the Unit and similar matters, and not included in the budget with respect to the Unit approved in accordance with Section 12 hereof and not of any energency nature, shall be made only upon autual agreement of the Participants. Retirements with respect to the Unit shall be effected only in a manner consistent with any applicable provisions of the respective mortgage indentures of the Participants (or any financing lease relating to the Unit and the interests therein to which a Participant is s par ty, copies of which will be provided to all Participants).

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3 Each Participant shall be entitled to its generation entitlement share of the hour-to-hour net operating capacity of the Unit as determined by CEI, and the energy associated therewith. The initial generation entitlement share of the original Participants shall be as follows: CEI 31.11%, DL 13 74%, OE 30.00%, PP 5.24% and TE 19 91%. Generation entitlement shares may be assigned and modified in accordance with Section 25 hereof.

4. CEI will keep the Participants informed as to the expected maximum hour-to-hour net operating capacity of the Unit

, ~4-permissible for proper operation of the Unit, as determined by CEI, as it any vary in accordance with conditions existing from time to time. Each Participant shall reserve its desired share of capacity in the Unit and schedule its desired share of energy associated therewith, on an hour-to-hour basis, up to the limits of its generation entitlement share, all in accordance with procedures to be agreed upon by the Farticipants. Subject to necessary outages or reductions in capability, the Unit shall be operated by CEI so as to produce capacity and energy equal to the suas of the capacity reserved and energy scheduled by the Participants. CEI shall exercise its best efforts to achieve a balance between the scheduled output of the Unit and its actual output, and any imbalances shall be recorded and appropriate adjustments made periodically to reduce such imbalances.

5. CEI will keep the Participants informed as to the expected minimum net generation for proper operation of the Unit, as determined by CEI, as it may vary in accordance with conditions existing from time to time. At any time when the Unit is operated at the level of such minimum net generation, each Participant shall schedule an amount of energy from the Unit equal to its percentage generation entitlement share specified in Section 3 of such minimum net generation, provided that if any Participant shall schedule more than its generation entitlement share of such minimum net generation, 3

the other Participants shall schedule not less than the balance of such minimum net generation in proportion to their generation entitlement shares.

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6. The Participants authorize CEI to provide and CEI shall provide a staff of competent engineering, supervisory, operating and maintenance, and other appropriate personnel to operate and maintain the Unit and the Unit No. 1 Site. Such staff and all other employees of CEI performing work in connection with the operation and maintenance of the Unit and Unit No. 1 Site shall be, and for all purposes shall be considered to be, employees only of CEI. Such staff and employees shall receive their instructions and orders only from appropriate officials of CEI.

7 Subject to any applicable restrictions contained in Sections 2 and 11, the Participants hereby appoint CEI as their agent in respect of the Unit and Unit No.1 Site, and CEI agrees as the agent of such Participants and as principal on its own behalf, to negotiate, execute and enforce contracts (including purchase order '

contracts), either in CEI's name only or in the name of CEI on its own behalf and as agent for the Participants, providing for the purchase of materials, equipment and services for the operation and t

maintenance of the Unit and the Unit No. 1 Site, including the provision of nuclear material and nuclear fuel assemblies in connection with the operation of the Unit and the obtaining of necessary governmental authorizations therefor. The Participants hereby ratify and confirm all contracts entered into by CEI prior to the execution of this Agreement relating to the operation or maintenance of the Unit or Unit No. 1 Site.

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8. Scheduled maintenance of the Unit shall be performed by CEI in accordance with the CAPCO Basic Operating Agreement as asended September 1, 1980 among CEI, DL, OE, PP and TE, and as subsequently amended, or any extension thereof or successor agreement thereto.

9 CEI shall keep the Participants informed concerning the operation and maintenance of the Unit and Unit No. 1 Site and CEI's plans with respect thereto, Lat no failure of CEI to provide information pursuant to the provisions of this Section shall relieve any Participant of any of their obligations under this Agreement.

CEI shall accord each of the Participants access to the Unit and Unit No. 1 Site at all reasonable times and in accordance with established safety and security procedures in order that their representatives may examine the Unit and Unit No. 1 Site and observe the operation of the Unit. On request therefor, CEI shall supply each Participant with copies of any regular and special reports on the operation, maintenance and condition of the Unit and Unit No. 1 j Site, whether made by employees of CEI or by other engineers, 1

consultants or advisers. The Participants shall consult from time to time as to the operation and maintenance of the Unit and Unit No. 1 Site and CEI shall consider any proposal or suggestion of the other Participants with respect thereto.

l Each Participant may at its own expense provide and maintain communication, telemetering and control equipment connected to CEI's System Dispatch Office necessary (1) to monitor the Unit,

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- (2) to integrate its generation entitlement share from the Unit with its control of its other sources of generation, or (3) if and when the Unit is automatically regulated by CEI, to participate in the regulation of the Unit. Such equipment and its operation shall be subject to, and shall not interfere with, CEI's control of the Unit and shall not unduly affect the operation of the Unit or the system of any Participant.

10. The Participants will cooperate with CEI in all activities in connection with the Unit and Unit No. 1 Site, including, without limitation, the filing of applications for authorizations, permits and licenses, and the execution of such other documents as may be reasonably necessary to confira CEI's authority to act.for them and the assumption by them of their proportionate shares of the obligations to be incurred pursuant to this Agreement, but, except at CEI's written request or as expressly permitted by this Agreement, no such other Participant shall incur any obligation in connection with the Unit or Unit No. 1 Site which would or might obligate CEI or any other Participant to any third party.

11. The Participants understand and recognize that nuclear material and nuclear fuel assemblies for Unit No. 1 may be the subject of agreements between the parties hereto relating to or resulting from joint or individual planning, scheduling and purchasing by the Participants hereto as a part of nuclear fuel arrangements for the Unit and other units owned by some or all of the Participants hereto. Subject to and in accordance with such

. O agreements (such as the Memorandum of Understanding, dated March 31, 1985, relating to Company by Company Management of Uranium inventory and deliveries) as any exist from time to time and be applicable, each Participant shall be responsible for a percentage of the nuclear fuel requirements for the Unit equal to its generation entitlement share, and CEI shall manage, schedule deliveries of and handle fuel supplies to the Unit, including handling of spent fuel from shipment off-site through final reprocessing and disposal of radioactive wastes, whether under contracts entered into by CEI with third parties or under contracts entered into prior to the execution of this Agreement by the Participants with third parties. Accounting for nuclear materials, nuclear fuel assemblies and fuel handling expenses shall be handled in accordance with Exhibit A attached hereto and made a part hereof.

12. CEI will prepare, revise from time to time as appropriate and furnish to each of the other Participants an annual budget showing by nonths to the extent possible, the expected operating and naintenance exoenses, capital expenditures and retirements with respect to the Unit and Unit No. 1 Site. Any participant may raise objections to items contained in such budget, and if all participants agree, such items shall be deleted frcxn the budget. CEI will also prepare, revise from

time to time as appropriate and furnish to the Participants projections of such budgets for such reasonably longer periods of time as may be requested by the Participants.

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o CEI will make such records and keep such accounts, consistent with sound accounting practices, as will permit each of the Participants to record on its books any transactions provided for herein, in conformity with the Uniform System of Accounts prescribed for Public Utilities Commission and Licensees by the Federal Energy Regulatory Commission ("FERC") and any state consission having jurisdiction, as such systems of accounts are now in effect or are hereafter modified or amended. The Participants and their respective independent auditors shall have access at all reasonable times to such records and accounts and CEI will furnish copies of all or any part thereof as requested. CEI shall preserve and maintain the originals of each of such records and accounts for at least such periods of time as any Participant may request, having in mind the requirements of regulatory authorities having jurisdiction and the policies and practices of the Participants with respect to retention of records.

CEI shall prepare and furnish each Participant copies of continuing property records with respect to the Unit and Unit No. 1 <

Site in such form as is agreed to be reasonably necessary to conform to the accounting requirements of each Participant.

The cost of making, preserving and making copies of such budgets, records and accounts with respect to the Unit shall be borne by the Participants in proportion to their respective generation entitlement shares, except that any costs incurred for the special purpose of a Participant shall be borne by such Participant.

. - 10-CEI shall have special audits conducted, as to the Unit, with respect to the matters provided for in this Agreement, either internally or by independent auditors, according to such programs and 4

procedures as agreed to be necessary to conform to the auditing requirements of each Participant, and shall furnish copies of the reports of such audits to the Participants. The cost of making such audits, including any participation by any Participant's auditors agreed to be desirable and necessary, shall be shared by the Participants in proportion to their respective generation entitlement shares. Any Participant may, at its own expense, make such further audits, using its internal or independent auditors or both, as it may 1

deen desirable.

13 All costs and expenses contemplated by this Agreement, including overheads, directly or indirectly associated with the '

operation and maintenance of the Unit or Unit No. 1 Site, whether incurred by any or all of the Participants shall be shared by the i'

Participants in accordance with Exhibit A.

The type of administrative and general costs set forth in

the CAPCO Accounting and Procedure Manual in use at the time such costs are incurred by CEI shall be allocated by it among the total of all of generating stations operated by it, including the Unit, utilizing the bases of allocation set forth in the CAPCO Accounting i

, and Procedure Manual. If requested, any Participant will make such

! examinations, analyses or studies as would go to support the w e- my y---,.---- p 99p, ._ --,---,--.----r _.wg _-------,---+m.--,m-m

reasonableness of the specific costs so allocated to the Unit or provide a basis for modification to achieve such reasonableness with respect to either the specific costs or the total administrative and general expense allocation. Shareable costs which are incurred by the Participants with respect to the Unit shall be accumulated and billed by CEI on a direct charge basis drawn from specific records or reasonable catinates with applicable additives as agreed upon by the Participants.

Except as otherwise provided above, the accounting methods and practices normally in use at the time by each of the Participants in determining and assigning operating and maintenance costs and expenses, generally, are to be used by such Participant for the purposes of this Agreement, unless otherwise agreed, provided such methods and practices are consistent with sound accounting practices.

14. It is the intent of the Participants that so far as possible each shall separately report, file, be responsible for and pay all property, franchise, business or other taxes applicable to its interest (whether owned or leased) in the Unit or Unit No. 1 Site. To the extent that such taxes may be levied on or assessed 1

against the Unit or Unit No. 1 Site or its operation, or the owners or their related Participants in such manner as, in the opinion of the Participants, makes impracticable or inequitable the carrying out l of said intent, then such taxes shall be deemed a part of the cost or expense.of the Unit or Unit No. 1 Site or the operation of the Unit.

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4 15 As soon as possible after the close of each calendar

, month, CEI shall advise the Participants as to their respective shares of estimated operation and maintenance expenses with respect to the Unit or Unit No.1 Site, and costs of adjustments in shares of fuel inventories and/or materials and supplies inventories for the Unit for such preceding month by FERC account numbers. Fuel expense data shall preferably be supplied on or before the fourth working day of the following month, and the other data preferably on or before the eighth working day of such month.

. As soon as possible after the close of each calendar month, preferably on or before the 25th of the following month, CEI shall prepare and deliver invoices to the Participants for their respective shares of actual fixed and variable operation and maintenance expenses and costs of adjustments in shares of fuel inventories 4

and/or materials and supplies inventories for the Unit for such preceding month, by FERC account numbers, in accordance with Exhibit A. The amount billed shall be payable upon receipt. If such bill is not paid within fifteen days after the sailing of any such invoice, interest on any unpaid amount shall accrue from the due date of such unpaid amount and chall be paid for each month or part thereof at the higher of (a) 1%, or (b) the monthly equivalent of the current Chase Manhattan Bank Prime Rate, as published quarterly in the CAPCO Accounting and Procedure Manual in effect during the period in which such amount remains unpaid.

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-13 The Participants shall from time to time jointly determine and furnish on an equitable basis the amount of working capital needed for the operation and maintenance of the Unit, and the shares thereof to be provided by each. If the Participants so agree, any Participant or Participants may provide all or part of the working capital share of another Participant or Participants and shall be compensated therefor by the payment of appropriate fixed charges (as prescribed in the CAPCO Accounting and Procedures Manual.)

16. No Participant shall be liable to any other Participant for any loss, cost, damage or expense incurred by any Participant as a result of any action or failure to act by any other Participant in connection with the ownership, operation, use or maintenance of Unit No. 1, except for any action not taken in good faith and prejudicing any Participant for the benefit of another Participant.

17 If by reason of any liability to third persons arising out of the ownership, operation, use or maintenance of any property which is the subject of this Agreement (including personal injury to and death of third persons and damage to property, but other than liability under the Workers' Compensation Laws of Ohio), any Participant shall be called upon to make any payment or incur any obligation in greater percentage of the total liability than its proportionate generation entitlement share in the Unit, the other Participants shall indemnify and reimburse such Participant in such amount as will cause each Participant to share such liability in

proportion to its generation entitlement share, irrespective of the negligence of any Participant.

18. CEI shall use its best efforts to arrange for and maintain appropriate insurance to cover (a) risk of damage to or loss of the Unit or the Unit No.1 Site and materials and supplies held for use in connection therewith, including risk of damage or loss due to a nuclear incident, (b) liability for bodily injury to, or death of, or damage to property of third persons, including liability due to a nuclear incident, arising out of the ownership, operation, use or maintenance of the Unit, and (c) such other risks as the Participants may agree shall be so covered. CEI shall give good faith consideration to requests by a Participant for an increase in or addition to insurance maintained with respect to the Unit or the Unit No. 1 Site, provided that such increase or additional insurance is consistent with prudent utility practice. The cost of such insurance as well as any losses not covered by insurance shall be shared by the Participants in proportion to their respective generation entitlement shares in the Unit, and the Participants shall be named insureds in all policies purchased hereunder.

Each Participant shall have the right to have any lessor l and any assignee thereof under a sale and leaseback transaction named on all or any of the insurance policies as loss payee or additional insured as its interest may appear, by notice in writing to CEI given l in writing not less than fifteen (15) days prior to the date proposed for such naming, which notice shall specify the name or names of such

lessor and such additional information as may be necessary or required to permit it to be included on the policy (les) of insurance.

CEI shall assist the insurers in the investigation, adjustment and settlement or defense of all claims covered by such insurance, and shall investigate, adjust and settle or defend all claims or losses arising out of the ownership, operation, use or maintenance of the Unit or Unit No. 1 Site and not covered by insurance carried by any of the Participants, subject to approval of all Participants involved or their related Participants of any such non-insured clain, or combination of such claims arising out of the same occurrence, in excess of $200,000.

Any Participant may separately procure at its own cost such other insurance as it may deen appropriate. Each Participant shall make arrangements for appropriate workers' compensation coverage for its own employees.

19 No Participant shall be considered to be in default in the performance of any of its obligations hereunder (other than obligations to pay money) if failure of performance shall be due to uncontrollable forces. The term " uncontrollable forces" shall mean any cause beyond the control of the Participant affected, including j but not limited to failure of facilities, flood, earthquake, storm, fire, lightning, epidemic, war, riot, civil disturbance, labor i

dispute, sabotage, restraint by Court order or public authority, or inability to obtain necessary licenses, permits or other governmental authorizations. Nothing contained herein shall be construed so as to require a Participant to settle any strike or labor dispute in which l

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it may be involved. Any Participant which is unable to fulfill any obligation by reason of uncontrollable forces shall exercise due diligence to remove such inability with all reasonable dispatch.

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20. The duties, obligations and liabilities of the Participants are intended to be several and not joint or collective, and nothing in this Agreement shall ever be construed to create an '

association, joint venture, trust or partnership, or to impose a trust or partnership duty, obligation or liability on or with regard to any of the Participants. Each Participant shall be individually responsible for its own obligations as herein provided; provided however, that as between PP and OE on the one hand, and each of the other Participants, the liability and responsibility for the performance of any obligation of PP hereunder shall be the joint and several responsibility of PP and OE. No Participant shall be under i the control of or shall be deemed to control any other Participant, nor shall the Participants be deemed an entity by virtue of this Agreement. No Participant shall have a right or power to bind any other Participant without its express written consent, except as expressly provided in this Agreement.

21. The Participants will elect to be excluded from the application of Subchapter "K" of Chapter 1 of Subtitle "A" of the Internal Resanue Code of 1986, as amended, or such portion or portions thereof as may be permitted or authorized by the Secretary of the Treasury or his delegate insofar as such subchapter or any  !

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17 portion or portions thereof may be applicable to the Participants under this Agreement.

22. No Participant shall permit any unsatisfied liens to remain in effect against the Unit or Unit No. I Site, or fuel or materials and supplies acquired in connection with operation and maintenance thereof (other than the lien of its nortgage, liens permitted by its mortgage, liens for taxes and assessments not yet delinquent, liens associated with the financings of fuel and liens created by or in connection with any sale or leaseback transaction permitted by Section 25); provided that a Participant shall not be required to pay or discharge any such lien so long as it in good faith shall be contesting the same in a proceeding during which the collection or enforcement of such contested lien is stayed or otherwise not permitted.

23. Failure of any Participant to insist upon strict performance of any of the provisions of this Agreement, or to take advantage of any of its rights hereunder shall not be construed as a waiver of any such provisions, or a relinquishment of any such rights, but the same shall continue to remain in full force and effect.

24. This Agreement is made under and shall be governed by the laws of the State of Ohio.

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25. (a) This Agreement shall inure to the benefit of and be binding upon the Participants and their respective successors and assigns; provided no Participant will, without the prior written

consent of the others, assign this Agreement, except as the same may be assigned (1) voluntarily or otherwise under its first mortgage, (ii) to a successor to all or substantially all of the assets of such Participant by way of merger, consolidation, sale or otherwise, where the successor assume; and becomes liable for all the obligations of such Participant hereunder, or (iii) to a lessor in a sale and leaseback transaction involving an interest in the Unit, and to any direct or indirect successor or assign of such lessor, as permitted hereby. Each lessor under a sale and leaseback transaction shall have the right at any time and from time to time to mortgage, create or provide for a security interest in or convey in trust all or any part of its ownership interest in this Agreement to a trustee or i trustees under a deed of trust, mortgage or indenture or to a secured 4

party or parties under a security agreement, as security for its present or future bonds or other obligations or securities, and to any successor or assign thereof. No such lessor, mortgagee, trustee or secured party or any direct or indirect beneficiary, partner, i

stockholder, director or any affiliate of any thereof shall be a Participant hereunder by reason of the assignment referred to above, or shall assume or be in any respect obligated with respect to any of the obligations or liabilities of any Participant hereunder.

I Notwithstanding any such assignment in connection with a sale and leaseback transaction, during the ters of the lease which is I

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a part of such transaction and continuing until such time as the conditions of paragraph (b) of this Section have been set, the assigning Participant shall be and remain the sole " Participant" for all purposes of this Agreement and the sole representative (with power to bind each lessor which is a party to such transaction and such successor or assign thereof, including each mortgagee, trustee, and secured party of such lessor) in all dealings with the other Participants in relation to the property, rights, title, and interests of such Participant transferred pursuant to such transaction; provided that the authority of such Participant shall not extend to the approval of any amendment hereto the effect of which would be to reduce the generation entitlement share related to the ownership interest acquired by any such lessor. A Participant shall not be released from any liability or obligation under this Agreement as the result of entering into a sale and leaseback transaction hereunder.

(b) At the expiration or termination of any lease referred j to in clause (iii) of paragraph (a) of this Section, to the extent the lessor which is a party thereto leases or sells, or has theretofore leased or sold, its ownership interest in the Unit to a person, partnership, corporation or governmental authority or agency engaged in the generation, transmission or distribution of energy and

which meets the Nuclear Regulatory Commission's Creditor Regulations l

(a " Transferee") and such lessor has complied with the provisions of -

paragraph (c) of this Section 25 in connection with such lease or sale, such Transferee shall be and become a Participant for all l

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i purposes of this Agreement, to the extent of its interest in the Unit (whether owned or leased), and, except as provided in paragraph (d) below, shall be the sole Participant (with power to bind) in all dealings with the other Participants in relation to such interest; l i

provided that such Transferee (other than the Participant which assigned such interest) has assumed and agreed to fully perform and discharge all obligations of a Participant hereunder to the extent of such interest to the extent arising subsequent to such sale or lease, (except obligations in respect of decommissioning and the permanent removal of the Unit from service which, unless otherwise assumed by'

, such Transferee, shall remain the obligation of the Participant which assigned such interest), and each other Participant shall have been l

furnished with evidence of such sale or lease and such assumption and l agreement. At such time, the generation entitlement shares determined as provided in Section 3 hereof shall be modified by the i

Participants to reflect their respective interests in the Unit '

(whether owned or leased).

(c) Prior to any sale or lease by a lessor of its interest i in the Unit to a Transferee, the lessor first shall have offered to J

the Participants (other than the Participant which is or was the i

lessee under the related lease) (the " Eligible. Participants") an

! opportunity either to purchase such lessor's ownership interest for an amount specified by such lessor (the " Offered Sale Price") or to i lease such interest on terms specified by such lessor (the " Offered

Lease Terms"). Each Eligible Participant shall be entitled to ,

i receive and accapt such offer in respect of the percentage of the t

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total interest offered, obtained by multiplying 100 by the quotient obtained by dividing such Participant's generation entitlement share by the total generation entitlement shares of all Eligible 4

Participants (the " Allotted Share"). Each Eligible Participant shall be given at least 20 days within which to evaluate the Offered Sale 4

Price or the Offered Lease Terms, as the case may be. If an Eligible ,

Participant shall elect to purchase its Allotted Share of a lessor's ownership interest in the Unit, payment by the Participant of the Offered Sale Price shall be made in immediately available funds on the date designated by such lessor, but in no event earlier than the Lease Termination Date with respect to such lease, whereupon such lessor shall transfer such interest to such Eligible Participant on

an "as is, where 1s" basis free and clear of all liens created by such lessor or persons claiming by or through such lessor, but i'

otherwise without recourse, representation or warranty. If an Eligible Participant shall elect to lease its Allotted Share of a lessor's interest in the Unit, such Participant and lessor shall l

enter into a lease in conformity with the Offered Lease Terms.

If any Eligible harticipant shall fail to accept any offer i

to purchase or lease its A*. lotted Share of a lessor's interest in the l Unit, such Allotted Share shall be offered to the other Eligible Participants which have accepted such offer in respect of their  ;

Allotted Shares proportionately as determined above, and such Eligible Participants shall be given an additional period of at least

20 days to accept such offer in the manner provided above.

2 If all Eligible Participants have failed to accept the

offers made in accordance with the above provisions, the lessor which 2

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4 has made such offers shall be free (1) to sell all, but not less than all, of its interest in the Unit so offered to a Transferee or Transferees at an aggregate price no less than the Offered Sale Price or (ii) to lease all, but not less than all, of its interest in the i

Unit so offered to a Transferee or Transferees on terms no more favorable than the Offered Lease Terms. (The determination as to what constitutes more favorable terms shall be based upon a comparison of the present values of the respective rental streams discounted at a rate equal to that published by the Federal Reserve Bank as of the end of the monta preceding the determination date for the U.S. Treasury Bond closest in maturity to that of the rental

, stream).

i

} (d) To the extent paragraph (b) of this Section is applicable, all Participants which have derived their rights under this Agreement from an assignment hereof in connection with a sale and leaseback transaction (the " Represented Participant") shall be l represented in all actions hereunder by the Participant from which such rights hereunder were derived (except to the extent such Represented Participant shall be entitled to express its own views on i

matters hereunder pursuant to the next succeeding sentence), unless such rights were acquired in connection with the exercise of remedies under a sale and leaseback transaction or such assigning Participant does not then have an interest in the Unit (whether owned or leased),

in which case each such Represented Participant shall be entitled to represent itself to the extent of its interest. To the extent an assigning Participant (a " Representative") is representing one or more other

i 1

23-

. l Participants as contemplated by this paragraph (d), such Representative shall be entitled to speak on behalf of all interests which it represents, including its own interest, in connection with all matters hereunder, and to express the views of each of such Represented Participants, provided however, that if a Represented Participant states that it desires to express its own views on satters hereunder, and all of the other Participants consent (which consent shall not be unreasonably withheld), such Represented Participant shall be entitled to do so. The other Participants shall be entitled to rely on the Representative in all dealings under this

~

Agreement with respect to matters relating to the interests of a Represented Participant until such time as such other Participants have been notified in writing either (1) by the Representative and one or more Represented Participants that the Representative does not have an ownership or leasehold interest in the Unit or (ii) by a Represented Participant that such Represented Participant has acquired rights under this Agreement in conjunction with the exercise ,

of remedies under the sale and leaseback documentation with the Representative.

l (e) Notwithstanding anything herein contained to the l contrary, from and after, but in no event prior to, the date of a rejection or deemed rejection of a lease or other executory contract constituting part of a sale and leaseback transaction relating to the Unit by any receiver, referee or trustee in bankruptcy or

[ reorganization of any Participant which is a party to such lease or other executory contract, the lessor in such sale and leaseback 1

t

transaction (or any nortgag,ee, trustee or secured party under present and future deeds of trust, mortgages, indentures or security agreements of such lessor and any successor or assignee thereof, and any receiver, referee or trustee in bankruptcy or reorganization of such lessor and any successor by action of law or otherwise, and any purchaser, transferee or assignee of any thereof) may (subject, however, to the rights of the other Participants under this Agreement) without need for the prior written consent of any other Participant but subject to compliance with the Nuclear Regulatory Commission's Creditor Regulations, (1) succeed to and acquire all the rights, titles and interests of such Participant in the Unit and this Agreement, to the extent, but only to the extent of its interest in the Unit acquired by such lessor in such transaction, and (ii) take over possession of or foreclose upon said property, rights, titles and interests of such Participant, and in such event such lessor or other party shall assume and be obligated fully to perform and discharge all obligations arising thereafter hereunder of such Participant to the extent of its interest in the Unit.

26. Prior to the termination of this Agreement, the Participants shall agree upon the time when the Unit is no longer used and useful for their respective purposes and shall be retired and shall enter into a written agreement providing for (a) the disposal of the Unit, (b) the method to be adopted for such disposal, and (c) the date of commencement of such disposal. The disposal plan adopted for the Unit shall be such as not to interfere unreasonably l

with the operation of any other generating unit located at the Unit 1

i

No. 1 Site and not being retired. Each owner having rights in respect to the capacity of such other unit not being retired and the energy generated therefree and which is a Participant shall have the option to purchase that portion of the Common Facilities which are part of the unit being retired and which are usable by such other unit equal to such owner's proportional interest in the capacity and energy of such other unit, such option price to be at the then depreciated book cost of such Common Facilities. The costs and expenses relating to the disposal of the Unit and any then remaining salvage value shall be shared by the Participants of the Unit in proportion to their generation entitlement share, unless otherwise agreed by the Participants of such Unit.

27. Any controversy or claim arising out of this Agreement, including the refusal by any Participant to perform the l

l whole or any part hereof, shall, upon demand of any Participant aggrieved, be settled by an Arbitration Board, which shall consist of three nonrepresentative sesbers and such additional representative aesbers as hereinafter provided in this Section. No person shall be eligible for appointment as a nonrepresentative member of the i Arbitration Board who is an officer, employee, shareholder of, or otherwise interested in, any Participant or any affiliate thereof or 1

in the matter sought to be arbitrated.

i Unless otherwise agreed, no demand for arbitration shall be made more than one year after the Participants have reached an l impasse as to the controversy or clain involved. The Participant or 1

-. . . - - - - = - . - - - . - . - . . - - - . _ - _ _ . _ . -

Participants demanding arbitration shall serve written notice upon the other Participant or Participants to the controversy, setting forth in detail the matter or matters with respect to which arbitration is demanded, and shall serve copies of such notice upon the other Participants. Within a period of ten days from the date of receipt of the aforesaid written notice, each Participant to the controversy shall appoint one representative seaber to serve as a member of the Arbitration Board; and, within a period of thirty days from such date of receipt of such written notice, such representative seabers shall unanimously agree upon the persons who shall serve as the three nonrepresentative seabers of the Arbitration Board. In the selection of nonrepresentative members of the Arbitration Board, j representatives of OE and PP shall have only one vote.

If the representative seabers shall fail to unanimously agree upon the appointment of any or all the three nonrepresentative seabers of the Arbitration Board within the specified thirty-day period, any Participant to the controversy may, upon written notice of the other Participants to the controversy, request the American Arbitration Association to submit to the Participants to the controversy a list from its panels of arbitrators of the names of at least seven persons from which the nonrepresentative member or i acabers who have not been so appointed shall be selected in accordance with the Commercial Arbitration Rules of such Association.

If any Participant to the controversy shall fail to appoint

its representative seaber within the specified ten-day period, such i

i

,, .--.-__,.,__,--.----,-m.__ . , - . - - - , .

L Participant shall be deemed to have waived its right to appoint such representative member and the Arbitration Board shall consist of the i three nonrepresentative members and such representative seabers, if any, as shall have been appointed in accordance with the provisions of this Section.

The arbitration proceedings shall be conducted at a place, to be designated by the Arbitration Board, within the operating area of one of the Participants to the controversy. The Arbitration Board i

shall afford adequate opportunity to each Participant to the i

controversy to present information with respect to the controversy or clais submitted to arbitration and may request further information l

from any such Participant. Except as provided in the preceding sentence, the Participants to the controversy may, by mutual l agreement, specify the rules which are to govern any proceeding before the Arbitration Board and limit the matters to be considered by the Arbitration Board, in which event the Arbitration-Board shall be governed by the terms and conditions of such agreement. To the extent of the absence of any such agreement specifying the rules which are to govern any proceeding, the then current rules of the i

American Arbitration Association for the conduct of commercial l

l arbitration shall govern the proceedings.

l

/

Thearbitrationshallbelimitedtothe.matterormak.ters specified in the initial notice demanding arbitration and the award of the Board shall not affect or change any other provlsion of this Agreement or any other transaction between the Participants.

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Procedural matters pertaining to the conduct of the arbitration and the award of the Arbitration Board shall be determined by a majority of the nonrepresentative members thereof, provided, however, that the representative members shall have the full right and authority to participate in all meetings and deliberations of the Arbitration Board leading to the award. The findings and award of the Arbitration Board, so made upon a determination of a majority of the noncepresentative members thereof, shall be final and conclusive with respect to the controversy or clain subai.tted for arbitration and shall be binding upon the Participants to the controversy except as otherwise provided by law.

Such award of the Arbitration Board shall specify the manner and extent of the division of the costs of the arbitration proceedings among the Participants to the controversy. Judgment upon the award may be entered in any court, State or Federal, having jurisdiction.

28. This Agreement shall be fully effective as of the date of commercial operation of all or a portion of Unit No.1 and shall be effective as of such earlier date or dates as relate to operating matters in connection with the Unit not covered by the Construction Agreement for the Unit. This Agreement shall remain in full force and effect with respect to the Unit until the date of retirement of a

the Unit determined pursuant to Section 26 hereof.

4 IN WITNESS WHEREOF, the Participants have caused this Agreement to be duly executed as of the date above written.

c- 7 i.

6

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