ML20239A135
| ML20239A135 | |
| Person / Time | |
|---|---|
| Site: | Beaver Valley |
| Issue date: | 09/14/1987 |
| From: | Doris Lewis DUQUESNE LIGHT CO., SHAW, PITTMAN, POTTS & TROWBRIDGE |
| To: | |
| Shared Package | |
| ML20239A003 | List: |
| References | |
| NUDOCS 8709170101 | |
| Download: ML20239A135 (60) | |
Text
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ - _ - _ _ - _ _ _ _ - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ - - _ _ _ _ _ _ _ _
i September 14, 1987 I
I UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION In the Matter of )
< )
DUQUESNE LIGHT COMPANY, et al. ) Docket No. 50-412
)
(Beaver Valley Power Stat. ion, )
Unit 2) )
4 MEMORANDUM REGARDING ANTITRUST REVIEWS I. Introduction on July 16, 1987, Duquesne Light Company (DL) filed, on its own behalf, an Application for License Amendment and Approval in I Connection with Sale and Leaseback Transactions by DL (the "Ap-plication"). The Application relates to certain sale and lease- l J
back transactions proposed to be entered into by DL with respect to all or a portion of DL's 13.74% ownership interest in the Bea-ver Valley Power Station (BVPS) Unit 2 and common facilities. In the Application, DL requests authority to enter into sale and leaseback transactions with equity investors who may include sub-sidiaries or affiliates of electric utilities. In this case, two i
of the potential equity investors are non-utility affiliates of electric utilities.
4 8709170101 870914 PDR ADOCK 05000412 I
l i
The sale and leaseback transactions proposed by DL are sub-stantially the same as those previously approved for the Palo Verde Nuclear Generating Station and for the Perry Nuclear Power Plant. As a matter of first impression, the initial Palo Verde l transaction was the subject of NRC Policy Paper SECY-85-367 (Nov. 20, 1985) and Commission order dated December 12, 1985 1/
Thereafter, applications for approval of a number of similar i transactions were reviewed and approved by the NRC Staff. See Application at 3-5 (describing these precedents).
In the Palo Verde sale and leaseback transactions, affili-ates or subsidiaries of electric utilities were also potential ;
equity investors. See, e.a., Arizona Public Service Co., Docket No. STN-50-529, Application in Respect of Sale and Leaseback Transactions by Public Service Company of New Mexico (Feb. 14, 1986) at 6, 17-18. There, the issue arose whether the potential participation of a utility, directly or indirectly, in the pro-
)
posed sale and leaseback transactions, presented the need for submittal of the matter to the Attorney General for antitrust re-view and advice pursuant to section 105(c) of the Atomic Energy ;
Act of 1954, as amended (the "Act").2/ After receiving from the i
1/ Arizona Public Service Co. (Palo Verde Unit 1), Docket No.
STN-50-528, Commission Order (Dec. 12, 1985). j 1
2/ 42 U.S.C. 5 2135(c) (1982). l l
j h
a 1
i
applicants a Memorandum in Respect of Antitrust Reviews (Feb. 26, 1986), the NRC Staff approved the transactions without further antitrust review.
Similarly, in the Perry sale and leaseback transactions, an electric utility was identified as a potential equity investor.3/
The NRC Staff again approved the transactions without further an-titrust review.
II. Issue Presented This memorandum again considers whether the potential par-ticipation of a utility affiliate, directly or indirectly, in the proposed sale and leaseback transactions requires the submittal of the matter to the Attorney General for antitrust review. This memorandum concludes that submittal to the Attorney General is not required.
Section 105(c) of the Act establishes "a particularized re-gime for the consideration and accommodation of possible anti-i trust concerns arising in connection with the licensing of nuclear power plants."1/ At the construction permit stage of the 1/ Cleveland Electric Illuminating Co. (Perry Nuclear Power Plant, Unit 1), Docket No. 50-440, Letter dated March 3, 1987.
1/ Houston Lichtino & Power Co. (South Texas Project, Units 1 and 2), CLI-77-13, 5 N.R.C. 1303 (1977). ,
l facility licensing process, a thorough antitrust review takes place. A "second narrower review"5/ occurs during the operating license application phase if, and only if, there have been "sig-nificant changes in the licensee's activitiesuor proposed activi-ties"g/ subsequent to the first detailed review. No such changes occurred at BVPS Unit 2.7/ !
Subsequent to the issuance of an operating license for a nuclear power plant, such as BVPS Unit 2, no further antitrust evaluations ordinarily take place unless a license amendment is sought which is determined would result in "significant [ anti-trust] changes" to the licensed activities.g/ Three criteria de-fine the circumstances in which a change in licensed activities is considered to be significant for antitrust purposes. Those criteria are whether the change (1) occurred since the previous, detailed antitrust review of the licensee (s); (2) is reasonably attributable to the licensee (s); and (3) has antitrust 5/ Id. at 1312.
s/ Section 105(c)(2) of the Act, 42 U.S.C. S 2135(c)(2); see South Carolina Electric & Gas Co. (Virgil C. Summer Nuclear Sta-
~
tion, Unit No. 1), CLI-80-28, 11 N.R.C. 817, 823 (1980).
7/ 52 Fed. Reg. 15,402 (1987).
8/ See 10 C.F.R. 5 50.80(b); Detroit _ Edison Co. (Enrico Fermi j Atomic Power Plant, Unit No. 2), ALAB-475, 7 N.R.C. 752, 755 n.7 >
(1978); South Carolina Electric & Gas Co. (Virgil C. Summer l Nuclear Station, Unit No. 1), CLI-81-14, 13 N.R.C. 862, 874 n.47 I (1981).
l 1
t implications that would likely warrant some antitrust. remedy.9/
This third criteria has been further explained as establishing i i
that " changes would be considered 'significant' only when the competitive structure, as changed, would likely warrant and be susceptible to a greater than de minimus license modifica- l tion."10/ For antitrust review to be appropriate, the change must have more than a de minimus anticompetitive effect, its sig-i nificance must be reasonably apparent, and the change must be one i likely to warrant Commission review.11/
Here, the proposed sale and leaseback transaction will not have " antitrust implications that would likely warrant NRC [ anti-trust] remedy." For the duration of the lease and unless and until the equity investors apply for and are made licensees in conformity with the NRC's creditor regulations, the equity inves-tors, even if they include utility affiliates, will have no right of possession or control of BVPS Unit 2. The entitlement to electricity generated by BVPS Unit 2 will be vested in DL.
In this respect, the transaction is no different from those previously approved for the Palo Verde plant without antitrust !
9/ Summer, supra, CLI-80-28, 11 N.R.C. at 824; Summer, supra, CLI-81-14, 13 N.R.C. at 864 n.3, 872. ;
10/ Summer, supra, CLI-81-14, 13 N.R.C. at 864 n.3.
11/ Id. at 872-73.
I I
j l
i
s ..;
I
. review. In1 reviewing that transaction, the NRC staff determined q thatLwhere the. investor owners do not acquire the right to elec-tric power generation at the facility, and such electricity will ]
J continue to be distributed in the same manner as is now' set forth i in-the operating agreement, "the transaction does not present any antitrust considerations _not previously considered at the time of the' license." SECY-85-367 at 9. The presence of_ utility affili-atesLamong the equity investors makes no difference to the deter- {
mination, since those affiliates have no greater rights or enti-tlement than any other equity investor. They are functionally indistinguishable. Indeed, from the regulatory perspective of the NRC, DL's' sale and leaseback transactions can be considered simply as the-refinancing of capital, with equity investors akin to mortgagees. .SECY-85-367 at 8, 9 n.6.
Prudential considerations further militate against antitrust review. In the absence of a change of the law as reflected in R the Commission's December 12, 1985 Order and in the absence of further amendment to the BVPS Unit 2 license, neither the equity investors'nor their trustee may become a licensee without compli-ance with the creditor regulations at 10 C.F.R. S 50.81. If this occurs at all, it is likely to be thirty years hence. To conduct at this time an antitrust review would be premature and unavailing in the performance of the Commission's responsibil-ities. The prospective licensees are unknown, the terms and L
1 L
1.
u__ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
i conditions under which such entities might apply to become l
licenseees are unknown, and the economic and regulatory circum-stances that might exist at that future date are unknown. On the other hand, if an equity investor seeks at some future date to become a licensee, an antitrust review could be conducted at that I
juncture,12/ if necessary, to evaluate the actual terms and cir-cumstances of such action.
III. Conclusion Neither the Atomic Energy Act nor the public interest re-quire an antitrust review of DL's proposed sale and leaseback transactions. To the contrary, the Act and NRC precedent indi-cate that the time for such a review is when an entity seeks for i the first time to become a licensee. The public interest dic-tates that the Commission not divert its resources to review the 12/ NRC precedent in fact suggests that the appropriate time for antitrust review is when entities are made licensees. In Detroit j Edison Co. (Enrico Fermi Atomic Power Plant, Unit No. 2), l LBP-78-13, 7 K.R.C. 583 (1978), a Licensing Board considered an I application to amend a construction permit to add two new owners, which in that case entailed the owners becoming regular licensees with commensurate rights, including entitlement to a generation share, and obligations for plant expenses and costs. Upon these tacts, the Board concluded that with respect to these new owners, the application to amend the construction permit to include them as licensees constituted the new owners' " initial application for a construction permit" within the meaning of section 105(c) and therefore triggered the antitrust review process. It bears re-peating that with respect to DL's sale and leaseback transac-tions, the equity investors are not now seeking to become licens- )
ees, and their initial application for licenses will not occur, l if ever, until termination of the lease. 1
i l
l possibility that some entity, as yet undetermined, may in the fu-ture seek to become a licensee under terms and conditions not now known; nor should the Commission impose unreasonable impediments to financial transactions that are important to the continued de-velopment of energy resources and involve no change in competi-tive structure. The current transactions involve no change in plant operation or in the distribution of electricity generated.
DL will remain a licensee subject to the conditions of the license. For these reasons, DL respectfully submits that the Ap- ,
plication should be promptly granted.
Respectfully submitted, SHAW, PITTMAN, POTTS & TROWBRIDGE David R. Lewis Counsel for Applicants Dated: September 14, 1987 1
'4 g e g~
~
I DRAFT - 9/8/87
[LA l! s';
OPERATING AGREEMENT l l
l Beaver Valley Power Station Units Nos. 1 and 2 l As Amended and Restated .1987 l 1
1 This Agreement, dated , 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 ("OE") ; l 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. The Participants are parties to an Operating Agreement dated May 24, 1976 which provides for the operation and maintenance of Beaver Valley Power Station Units Nos. 1 and 2, and are hereby amending and restating in its entirety such Agreement as hereinafter provided.
- 2. The Participants have provided for the construction on j a tract of land, known as the "Shippingport Site" and consisting of
- e. approximately 475 acres located on the Ohio River in the Borough of Shippingport, Beaver County, Pennsylvania, of two light-water nuclear
. \
_________ ___-- __-__ - J
electric generating units, each having a net rated capacity in the 800,000-kilowatt class, known as " Beaver Valley Power Station Unit No. 1" or " Unit No. 1", and " Leaver Valley Power Station Unit No. 2",
or " Unit No. 2", respectively.
i Unit.No. I which began commercial operation in 1976 was constructed pursuant to a Construction Agreement among DL, OE and PP dated February 5, 1970, as amended. As of the date of execution and delivery hereof Unit No. 1 is owned by DL, OE and PP as tenants in common with undivided interests of 47.5%, 35.0% and 17.5%,
respectively (the owners of Unit No. 1 are hereinafter sometimes referred to individually as a " Unit No. 1 Participant" and collectively as " Unit No. 1 Participants").
l Unit No. 2 has been constructed pursuant to a Construction !
Agreement among CEI, DL, OE and TE dated December 5, 1975, as I
amended. As of the date of execution and delivery hereof Unit No. 2 f is owned by CEI, DL, OE and TE as tenants in common with undivided interests of 24.47%, 13.74%, 41.88% and 19.91%, respectively (the owners of Unit No. 2 are hereinafter sometimes referred to individually as a " Unit No. 2 Participant" and collectively as " Unit No. 2 Participants").
l l
l The terms " Unit No. 1" and " Unit No. 2" and the word
" Unit", as used in this Agreement, shall mean and include, with 2
i
'A l
., s-respect to each Unit, the portion of common facilities allocable thereto. The interests in land associated with each Unit referenced above are referred to individually as the " Unit No. 1 Site" or the
" Unit No. 2 Site", as appropriate, and collectively as the " Sites".
This Agreement provides for the operation and maintenance of all or any portion of Unit No. 1 and Unit No. 2 from the date of commercial operation of each and thereafter.
- 3. Subject to matters requiring joint action as
.specifically provided herein or as required by law, DL, on its own behalf and on behalf of the Unit No. 1 Participants with respect to i Unit No. 1, and on its own behalf and on behalf of the Unit No. 2 Participants with respect to Unit No. 2, shall operate and maintain Unit No. 1 and the Unit No. 1 Site and Unit No. 2 and the Unit No. 2 Site, provide necessary materials and supplies including fuel, as provided in Section 12, and make any additions, replacements and retirements with respect to each 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 then currently applicable laws, codes and regulations; provided, that, with respect to each 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
)
3 l
Unit approved in accordance with Section 13 hereof and not of an emergency nature, shall be made only upon mutual agreement of the Participants having an ownership interest or a leasehold interest in the Unit. Retirements with respect to each Unit shall be effected only in a manner consistent with any applicable provisions of the respective mortgage indentures of the Participants having an ownership interest or a leasehold interest in the Unit (oranyplease relating to the Unit and the interests therein to which a Participant is a party).4 Upon the request of any Participant, copies of all operative documents affecting the scope of such Participant's interest in a Unit shall be provided to such Particpant.
l J
- 4. Each Unit No. 1 Participant shall be entitled to its j l
generation entitlement share of the hour-to-hour net operating capacity of Unit No. 1, as determined by DL, and the energy associated therewith. The initial generation entitlement share,s,of the original Unit No. 1 Participants shall be as follows: DL 47. 5%,
OE 35.0% and PP 17.5%. Generation entitlement shares may be assigned and modified in accordance with Section 26 hereof.
Each Unit No. 2 Participant shall be entitled to its generation entitlement share of the hour-to-hour net operating capacity of Unit No. 2, as determined by DL, and the energy I
4 .
W.,
associated' therewith. The initial generation entitlement shares _of I the original Unit No. 2. Participants shell be as follows: CEI 24.47%, DL 13.74%, OE 41.88%'and TE 19.91%. Generation entitlement sharas may be' assigned and modified in accordance with Section 26 h
hereof.
- 5. DL will keep the Participants in each of Unit No. 1 and Unit No. 2 informed as to the expected maximum hour-to-hour net' operating capacity of each Unit permissible for proper operation of the Unit, as determined by DL, as it may vary in accordance with conditions existing from time.to time. Each Participant shall reserve its desired share of capacity in each 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 Participants.
Subject to necessary outages or reductions in capability, each Unit shall be operated by DL so as to produce capacity and energy equal to the sums of the capacity reserved and energy scheduled by the Participants in each Unit.
'I
.6. DL will keep the Participants in each of Unit No. 1 and {
Unit No. 2 informed as to the expected minimum net generation for proper. operation of each Unit, as determined by DL, as it may vary in accordance with conditions existing from time to time. At any time when a Unit is operated at the level of such minimum net generation, 5
l 1
e j
each Participant in such Unit shall schedule an amount of energy from
.the Unit equal to its generation entitlement share specified in Section 4 (as it may be modified in accordance with Section 26), of
'such minimum net generation, provided that if any Participant in such ;
Unit shall schedule more than its generation entitlement share of such minimum net generation, the other Participants in such Unit shall schedule not less than the balance of such minimum net generation in proportion to their generation entitlement shares.
- 7. The Participants authorize DL to provide and DL shall provide a staff of competent engineering, supervisory, operating and maintenance and other appropriate personnel to operate and maintain the Units and Sites. Such staff and all other employees of DL performing work in connection with the operation and maintenance of the Units and Sites shall be, and for all purposes shall be considered to be, employees only of DL. Such staff and employees shall receive their instructions and orders only from appropriate officials of DL.
- 8. Subject to any applicable restrictions contained in l 1'
Sections 3 and 12, the Unit No. 1 Participants, with respect to Unit No. 1, and the Unit No. 2 Participants, with respect to Unit No. 2, <
hereby appoint DL as their agent, and DL agrees as the agent of such j l
Participants and as principal on its own behalf, to negotiate, I execute and enforce contracts (including purchase order contracts),
l 6 .
4 either in DL's name only or in the name of DL on its own behalf and as agent for the other Participants, providing for the purchase of materials, equipment and services for the operation and maintenance of each of the Units and Sites, including the provision of nuclear material and nuclear fuel assemblies in connection with the operation of each Unit and the obtaining of necessary governmental authorizations therefor. The Unit No. 1 Participants, with respect to Unit No. 1, and the Unit No. 2 Participants, with respect to Unit No. 2, hereby ratify and confirm all contracts entered into by DL prior to the execution of this Agreement relating to the operation or maintenance of either of the Units or Sites.
- 9. Scheduled maintenance of each of Unit No. 1 and Unit No. 2 shall be performed by DL in accordance with the CAPCO Basic operating Agreement as amended September 1, 1980 among CEI, DL, OE, PP and TE, and as subsequently amended, or any extension thereof or successor agreement thereto.
- 10. DL shall keep the Participants informed concerning the operation and maintenance of each Unit, the Unit No. 1 Site and the Unit No. 2 Site and DL's plans with respect thereto, but no failure of DL to provide information pursuant to the provisions of this Section shall relieve any Participant of any of its obligations under this Agreement.
7
DL shall accord the Unit No. 1 Participants and their representatives access to Unit No. 1 and the Unit No. 1 Site, and the Unit No. 2 Participants and their representatives access to Unit No. 2 and the Unit No. 2 Site, at all reasonable times and in accordance with established safety and security procedures in order that such Participants and their representatives may examine the Unita, the Unit No. 1 Site and the Unit No. 2 Site, and observe the operation of the Units. On request therefor, DL shall supply the Unit No, 1 Partici. pants, with respect to Unit No. 1, and the Unit No 2 Participants, with respect to Unit No. 2, with copies of such regular and any special reports on the operation, maintenance and condition of each of the Units and Sites, whether made by employees of DL or by other engineers, consultants or advisers. The Participants in each Unit shall consult from time to time as to the operation and maintenance of the Unit, the Unit No. 1 Site and the Unit No. 2 Site and DL shall consider any proposal or suggestion of the other Participants in each Unit with respect thereto.
Each Unit No. 1 Participant with respect to Unit No. 1, and each Unit No. 2 Participant, with respect to Unit No. 2, may at its own expense provide and mainthin communication, telemetering and control equipaent connected to DL's System Dispatch Office necessary (1) to monitor the Unit, (2) to integrate its generation entitlement j share from the Unit with its control of its other sources of generation, or (3) if and when the Units are automatically regulated ,
i l
~
8
l by DL, to participate in the regulation of the Unit. Such equipment and its operation shall be subject to and shall not interfere with DL's control of the Units and shall not unduly affect the operation of the Units or the system of any Participant.
- 11. The Unit No. 1 Participants, with respect to Unit No.
1, and the Unit No. 2 Participants, with respect to Unit No. 2, will cooperate with DL in all activities in connection with each of the Units and Sites, 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 confirm DL'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 DL's written request or as expressly permitted by this Agreement, no such other Participant shall incur any obligation in connection with the Units or Sites which would or might obligate DL or any other Participant to any third party.
- 12. The Participants understand and recognize that nuclear material and nuclear fuel assemblies for Unit No. 1 and Unit No. 2 may be the subject of agreemento among the Participants relating to or resulting from joint or individual planning, scheduling and purchasing by the Participants as a part of nuclear fuel arrangements for said Units and other Units owned by some or all of the 9
l 1
- t.
- Participants. Subject to and in accordance with such agreements
'(such as the Memorandum of Understanding, dated March 31, 1985, relating to Company by company Management of uranium inventory and deliveries) as may. exist from time to time and be applicable, each Participant shall be responsible for a percentage of the nuclear fuel l requirements for the Units in which it has an ownership interest-
! equal to its generation entitlement share in such Unit,'and.DL shall manage, schedule deliveries of and handle fuel supplies to each of the Units, including handling of spent fuel from shipment off-site through final reprocessing and disposal of radioactive wastes, whether under contracts entered into by DL with third parties or under contracts entered into prior to the execution of this Agreement by the Participants of either Unit 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.
- 13. DL will prepare, revise from time to time as appropriate and furnish to the Participants in each Unit an annual budget showing by months to the extent possible, the expected operating and maintenance expenses, capital expenditures and retirements _for each Unit, the Unit No. 1 Site and the Unit No. 2 Site. Any Participant having a generation entitlement share in a
, Unit may raise objections to items contained in the budget for such Unit and if all Participants agree such items shall be deleted from 10
the bt?dget. DL will also prepare, revise from time to time as
[
L appropriate and furnish to the Participants in each Unit projections of such budgets for such reasonably longer periods of time as may be requested by the Participants.
I DL 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 the transactions provided for herein in conformity with the Uniform System of Accounts prescribed for Public Utilities and Licensees by the Federal Energy Regulatory Commission ("FERC") and any state commission having jurisdiction, as such systems of accounts are now in effect or are hereafter modified or amended. The Unit No. 1 Participants with respect to Unit No. 1, and the Unit No. 2 Participants with respect to Unit No. 2, and the independent auditors of each, shall have access at all reasonable
' times to such records and accounts and DL will furnish copies of all or any part thereof as requested. DL 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.
DL shall prepare, and furnish to the Unit No. 1 Participants with respect to Unit No. 1, and to the Unit No. 2 11
Participants with: respect to Unit No. 2, copies of continuing property records with respect to the Units in such form as is agreed to be reasonably necessary to conform to the accounting requirements of.each' Participant.
The cost of preparing, preserving and making copies of such budgets, records and accounts with respect.to each Unit shall be borne by the Participants in each Unit 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. l DL shall have special audits conducted, as to either or both of the Units, with respect to the matters provided for in this' Agreement, either internally or by independent auditors, according to such programs and 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 in the Unit to which such audits relate. 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 the Unit to which such audits relate in proportion to their respective generation entitlement shares in such Unit. Any Participant may at its own expense, make such further audits, using its internal or independent auditors or both, as it may deem desirable.
12
I l 14. All costs and expenses contemplated by this Agreement, including overheads, directly or indirectly associated with the operation.and maintenance of Unit No. 1 and the Unit No. 1 Site and Unit No. 2 and the Unit No. 2 Site, whether incurred by any or all of the Participants in said Units, shall be shared by the Unit No. 1 Participants if applicable to Unit No. 1 and the Unit No. 1 Site, and by the Unit No. 2 Participants, if applicable to Unit No. 2 and the Unit No. 2 Site, in accordance with Exhibit A attached hereto.
The types of administrative and general costs set forth in the CAPCO Accounting and Procedure Manual in use at the time incurred by DL shall be allocated by it among the total of all of the generating stations operated by it, including Unit No. 1 and Unit No.
2, utilizing the bases of allocation set forth in the CAPCO Accounting and Procedura Manual. If requested by the Unit No. 1 Participants with respect to Unit No. 1, or by the Unit No. 2 Participants, with respect to Unit No. 2, DL will make such examinations, analyses or studies as would support the reasonableness of the specific costs so allocated to Unit No. 1 and Unit No. 2, 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. Sharable costs which are incurred by the Unit No. 1 Participants with respect to Unit No. 1 and by the Unit No. 2 Participants with respect to Unit No. 2 shall be accumulated and billed by DL on a direct charge basis drawn from specific records 13
E
-4.
or reasonable estimates with applicable additives as agreed upon by the ParticipantsLin the Unit.
Except as otherwise agreed or as 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 provided such methods and practices are consistent with sound accounting practices.
i
- 15. 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 Unit No. 1 and the Unit No.
1 Site or Unit No. 2 and the Unit No. 2 Site. To the extent that such taxes may be levied on or assessed against either or both of the Units, or Sites or.its or their operation, or the owners of either or both Units or their related Participants, in such manner as, in the opinion of the Participants in the Unit or Units involved, makes impracticable or inequitable the carrying out of said intent, then such taxes shall be deemed a part of the cost or expense of the Unit involved, the Unit No. 1 Site or the Unit No. 2 Site or the operation thereof.
- 16. As soon as possible after the close of each calendar conth, DL shall advise the Unit No. 1 Participants with respect to 14 -
_m______.__ - _ _ . _ _ . _ _ _ _ _
Unit No. 1, and the Unit No. 2 Participants with respect to Unit No. f 1
2, as to their respective shares of estimated operation and maintenance expenses with respect to the Unit, the Unit No. 1 Site or the Unit No. 2 Site, and costs of adjustments in shares of fuel inventories and/or materials and supplies inventories for such preceding month by FERC account numbers. Fuel expense data shall preferably be supplied on or before the fourth working day of the I 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 day of the following month, DL shall prepare and deliver invoices to the Unit No. 1 Participants with respect to Unit No. 1, and the Unit No. 2 Participants with respect to Unic No. 2, for their respective shares of actual fixed and variable operation and maintenance expenses and costs of adjustments in shares of fuel inventories and/or materials and supplies inventories for each Unit for such preceding month, by FERC account numbers, in accordance with Exhibit A. The amount billed will be payable on receipt. If such bill is not paid within fifteen
. days after the mailing of any such invoice, interest on any unpaid amount shall accrue from the due date of such unpaid amount and shall 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 l Rate, as published quarterly in the CAPCO Accounting and Procedure e
15
________________m. _ _ _ _ _ _ _
Manual in effect during the period in which such amount remains unpaid.
The Participants in each Unit 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 each Unit, and the shares thereof to be provided by each. If the Participants in either Unit so agree, any Participant or Participants may provide all or part of the working capital share of another Participant or Participants in such Unit and shall be compensated therefor by the payment of appropriate fixed charges (as prescribed in the CAPCO Accounting and Procedura Manual in use at the time).
i
- 17. 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 or the Unit No. 1 Site or Unit No. 2 or the Unit No. 2 Site, except for any action not taken in good faith and prejudicing any Participant for the benefit of another Participant.
- 18. 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 16
t j-liability under the Workmen's Compensation Laws of Pennsylvania), any. I l Participant shall be called upon to make any payment or incur any l
L
- obligation in. greater percentage of the total liability than its proportionate generation entitlement share in such property, the
~ other Participants shall indemnify and reimbursa such Participant in-l-
such amount as will cause each Participant to share such liability in proportion to its generation entitlement share i.n such property, J
! ' irrespective of the negligence of any Participant. )
- 19. DL shall use its best efforts to arrange for and maintain appropriate insurance to cover (a) risk of damage to or loss of the Units or Sites 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 i maintenance of the Units or Sites, and (c) such other risks as the Participants may agree shall be'so covered. DL shall give good faith consideration to requests by a Participant for an increase in or addition to insurance maintained with respect to Unit No. 1 or the Unit No. 1 Site or Unit No. 2 or the Unit No. 2 Site, provided that such increase or additional insurance is consistent with prudent utility practica. The cost of such insurance as well as any losses j not covered by insurance shall be shared by the Participants in proportion to their respective generation entitlement shares in the I
l 17
L j property involved, and the' Participants shall be. named insureds in alll policies purchased hereunder. In the event that any loss resulting from damage to both Unit No. 1 and Unit No. 2 exceeds the amount of property insurance covering both Unit No. 1 and Unit No. 2, the proceeds of such' insurance actually recovered shall be allocated to each Unit'in the proportion that the amount of loss to each Unit bears to the total amount of loss to both Units.
Each Participant shall have the right.to have any lessor and any assignee.thereof under a sale and leaseback transaction named on all or any of the insurance policies as a loss payee 'cn additional insured as its interest may appear,'by notice in writing to DL given 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 or assignee and such additional information as may be necessary or required to permit it to be included on the policy (ies) of insurance.
l DL 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 i maintenance of the Units or Sites and not covered by insurance carried by any of the Participants, subject to approval of the Participants in the property involved f any such non-insured claim, i
18 +
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 deem appropriate. Each Participant shall'make arrangements for appropriate worker's compensation coverage for its own employees.
- 7. 0 . 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 but not limited to failure of facilities, flood, earthquake, storm, fire, lightning, epidemic, war, riot, civil disturbance, labor 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 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. ,
- 21. The duties, obligations, and liabilities of the j i
Participants are intended to be several and not joint or collective, and nothing in this Agreement shall ever be construed to create an i
~ t 19 i
_____-___________--_--------D
4 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 on the other, 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 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.
- 22. The Participants will elect to be excluded from the application of Subchapter "K" of Chapter 1 of Subtitle "A" of the Internal Revenue Code of 1986, as amended, or such portion or portions thereof as may be permitted or authorized by the Secretary i of the Treasury or its delegate insofar as any such subchapter or any
- portion or portions thereof may be applicable to the Participants under this Agreement.
- 23. No Participant shall permit any unsatisfied liens to remain in effect against a Unit, the Unit No. 1 Site or the Unit No.
I 2 Site, or fuel or materials and supplies acquired in connection with I
l t 1 20 l
operationLand maintenance thereof (other than the' lien of its.
mortgage,: 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 26); provided that a Participant.shall not be required to pay or discharge any such lien
- ro 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.
- 24. 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.
- 25. This Agreement is made under and shall be governed by the laws of the Commonwealth of Pennsylvania.
- 26. (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 prior' written consent of the others, assign this Agreement, except as the same may be assigned (i) voluntarily or otherwise under its first mortgage, (ii) 21 l
r- _ _ _ _ _ _ . . _ _ _ _ _ _ _ . _ _ _ _ . _ . _
.e to a successor-t'o all or substantially all of the assets of such-Participant by way..of merger, consolidation, sale or otherwise, where-the successor assumes and becomes liable for all the t obligations of such Participant hereunder, or (iii) to a lessor in a sale and leaseback transaction involving an interest in a 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 trustees'under a dead of trust, mortgage or indenture or to a secured 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, stockholder, director or any affiliate of any thereof shall ,
be a Participant hereunder by reason of the assignm6nt 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.
l 1
Notwithstanding any such assignment in connection with a sale and leaseback transaction, during the term of the lease which is a part of such transaction and continuing until such time as the conditions of paragraph (b) of this section have been met, the l
assigning Participant shall be and remain the sole " Participant" for l l
l 22 -
l
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 mortgages, trustee, and secured party of such lessor) in'all dealings with the other Participants in relation to 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 to in clause (iii) of paragraph (a) of this Section (the
" Lease Termination Date"), to the extent the lessor which is a party thereto leases or sells, or has theretofore leased or sold, its !
ownership interest in a 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 (a " Transferee") and such lessor has complied with the provisions of paragraph (c) of this Section 26 in connection with such lease or sale, such Transferee shall be and become a Participant for all purposes of this Agreement, to the extent of its interest in the Unit (whether owned or leased),
1
' 1 23 l
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; provided that such Transferec (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 oblighwions in respect of decommissioning and the permanent removal of such 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 furnished with evidence of such sale or lease and such assumption and agreement. At such time, the generation entitlement shares determined as provided in Section 4 hereof shall be modified by the Participants to reflect their respective interests in_such Unit (whether owned or leased).
(c) Prior to any sale or lease by a lessor of its interest in a Unit to a Transferee, the lessor first shall have offered to the Participants in such Unit (other than the Participant which is or was a 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 lease such interest on terms specified by such lessor (the " Offered Lease Terms"). Each Eligible Participant shall be entitled to receive and accept such offer in respect of the 24 '
I
~ - - - - - _ . - _ - _ - _ . . - _ _ _ _ _ _ _ _ _ _ . .
l l
i i l
percentage of the total interest offered, obtained by multiplying 100 )
by the quotient obtained by dividing such Participant's generation l
l entitlement share in such Unit by the total generation entitlement 1
shares of all Eligible Participants (the " Allotted Share") in such Unit. Each Eligible Participant shall be given at least 20 days within which to evaluate the offered Sale 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 such 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 is" basis free and clear of all liens created by such lessor or persons claiming by or through such lessor, but otherwise without recourse, representation or warranty. If an Eligible Participant shall elect to lease its Allotted Share of a lessor's interest in such Unit, such Participant and lessor shall enter into a lease in conformity with the Offered Lease Terms.
If any Eligible Participant shall fail to accept any offer to purchase or lease its Allotted Share of a lessor's interest in such 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 25
l Eligible Participants shall be given an additional period of at least 20 days to accept such offer in the manner provided above.
If all Eligible Participants have failed to accept the offers made in accordance with the above provisions, the lessor ;
which has made such offers shall be free (i) to sell all, but not less than'all, of.its interest in such 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 such 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 and of the month preceding the determination date for the U.S. Treasury Bond closest to maturity to that of the rental stream).
(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 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 l
26
j matters hereunder pursuant to the next succeeding sentence), unless such rights were acquired in connection with the exercise of remedies l
l under a sale and leaseback transaction or such assigning Participant does not'then have an interest in a 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 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 matters 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 (i) by the Representative and one or more Represented Participants that the Representative does not have an ownership or leasehold interest in a 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.
27
(e) Notwithstanding anything herein contained to the contrary, from and after, but in no event prior to, the date of a rejecticn or deemed rejection of a lease or other executory' contract ,
1 constituting part of a sale and leaseback transaction relating to a -
1 i
Unit by any receiver, referee or trustee in bankruptcy or reorganization-of any Participant which is a party to such lease or i
- other executory contract, the lesror in such sale and leaseback transaction (or any mortgagee, 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, (i) 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. I 28
_.~~.a
- 27. Prior to the termination of this Agreement, the Unit No. 1 Participants with respect to Unit No. 1, and the Unit No. 2 Participants with respect to Unit No. 2, shall agree upon the time l when such Unit is no longer used and useful for their respective purposes and shall be retired and such Participants shall enter into i a written agreement providing for (1) the disposal of such Unit, (2) the method to be adopted for such disposal, and (3) the date of commencement of such disposal. The disposal ples. adopted for one ,--
Unit shall be such as not to interfere unreasonably with the operation of the Unit not being retired and the Participants of the Unit not being retired shall have the option to purchase in proportion to the generation entitlement share of such Participants in the Unit not being retired any part or all of the common facilities which are part of the Unit being retired at the then depreciated book cost of such common facilities. The costs and expenses relating to disposal of a Unit and any then remaining salvage value shall be shared by the Participants in such Unit in proportion to their generation entitiament share therein, unless otherwise agreed by the Participants in such Unit.
- 28. Any controversy or claim arising out of this Agreement, including the refusal by any Participant to perform the whole or any part hereof, shall, upon demand of the Participant aggrieved, be settled by an Arbitration Board, which shall consist of three non-representative members and such additional representative ..
29
- 9 :
members as hereinafter provided, in accordance with the provisions of this Section. No person _shall be eligible for appointment as a non-representative member of the Arbitration Board who is an officer, employee, shareholder of, or otherwise interested in, any Participant or any affiliate thereof or in the matter sought to be arbitrated.
Unless otherwise agreed, no demand for arbitration shall be made more than one year after the Participants parties to the controversy have reached an impasse as to the controversy or-claim involved. The Participant or 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 member to serve as a member of the Arbitration Board, and within a period of thirty days from such receipt of such written notice, such representative members shall unanimously agree upon the
]
persons who shall serve as the three non-representative members of the Arbitration Board. In the selection of non-representative members'of the Arbitration Board representatives of OE and PP shall have only one vote.
If the representative members shall fail to unanimously j agree upon the appointment of any or all of the three l
l
- 30 w---__--.___________._
non-representative members of the Arbitration Board within the specified thirty-day period, any Participant to the controversy may, upon written notice to the other Participants to the controversy, request the Anerican 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
{
non-representative member or members who have not been so appointed l
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 member within the specific ten-day period, such Participant shall be deemed to have waived its right to appoint such representative member and the Arbitration Board shall consist of the three non-representative members and such representative members, 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 shall afford adequate opportunity to each Participant to the controversy to present information with respect to the controversy or claim submitted to arbitration and may request further information from any such Particit at. Except as provided in 31
'N the preceding sentence, the Participants to the controversy may, by mutual 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 American Arbitration Association for the conduct of commercial arbitration shall govern the proceedings.
The arbitration shall be limited to the matter or matters specified in the initial notice demanding arbitration and the award of the Board shall not affect or change any other provision of this Agreement or any other transaction between the Participants.
Procedural matters pertaining to the conduct of the arbitration and the award of the Arbitration Board shall be made upon a determination of a majority of the non-representative 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 non-representative members thereof, shall be final and conclusive with respect to the controversy or claim submitted for arbitration and shall be binding 32 .
.0 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.
- 29. 'This Agreement shall be fully effective as of the date of commercial operation of each Unit and shall be effective as of such earlier date or dates as relate to operating matters in connection with each of the Units not covered by the Construction Agreement for such Unit. This Agreement shall remain in full force and effect with respect to each Unit until the date of retirement of such Unit determined pursuant to Section 27 hereof.
33
- B
.IN-WITNESS WHEREOF, the Participants have caused this Agreement to be' duly executed as of the date above written.
THE CLEVELAND bLECTRIC PENNSYLVANIA POWER COMPANY ILLUMINATING COMPANY By By Title Title THE TOLEDO EDISON COMPANY DUQUESNE LIGHT COMPANY-By By Title Title OHIO EDISON COMPANY By Title 34 ,
EXRIBIT A TO THE OPERATING AGREEMENT p,, Beaver Valley Power Station Units Nos. I and 2
. Accounting Provisions for Beaver Valley Power Station Section I. - Accounting Concept
'Duquesne Light Company (DL) shall record all operating and maintenance costs in -accordance with the Federal Energy Regulatory Commission's Uniform System of Accounts as shown in Section II of this Exhibit.
DL will-be responsible'for the determination of the assignability by Unit of:all' costs that relate to the Beaver Valley Power Station. Those costs that are determined to be solely associated with Unit No. 1 or 2 will be charged to-specific Unit-accounts. Those costs which cannot be assigned directly to a specific Unit.will be charged to common facilities accounts.
Such common. costs shall then be allocated to particular Units on the b' asis of the allocation codes listed below under " Common Charges." These code definitions appear at the end of Section II.
The sum of.the costs charged directly to Unit 1 or 2 plus the portion of the costs charged to Common Charges and allocated to the particular Unit shall then be allocated to the Participants on the basis of the allocation codes listed below under " Direct Charges." These code definitions appear at the end of Section 11.
. _ _ _ _ _ . _ _ _ _ _ _ _ . _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ _ _ _ _ _m
e sCN r u
_ il f V DP oB 2
s o t t &
s od1 C e C t .
R nas C - - C E oc o F mon ml d ol V n CAB a
L D
e h
t n l i a r r a m s ee d a i nl n e e ec i rt r s s gu t n d u n e e c r u hf n n o o t o i if c f c nn e sd s a i o d e e t i s s s g d t s n u o n g ea a e C i n r r p r w i r e e x e e o r u p s . et c l e co nt a n l n e n ei d w a o o n i e pb n n f i i h xi ad e t g st eh n t e p n e x d a n h i E sf l E e i t r no e s s a c d e . us ul M f s n pn s fi a o e a x ou h si l r d D eic rt n n . n t i a ae a os o d ct ef i t .
e r e was i t i n ea l o e
n t n s a rt s c o pu i i s n ul r t s i i o v rd e ne e a ro t rc r o g p u s t mep a c c e bd n x d F t a f r r sA p ani E e s W ,s u e e u l at s s o r n p p df S a l a . t C d oa O o f nr e eI s n b r g d ,
ooe u l I oe a at n f em n in F I Cl l i o l e o t s e r b s t l i t i si g r on d a t f ao n a s t ov a o ei n oeo o t y a cr r e di x r a h c i eS r epw e e l et i a l t t d e c nc FV o s rd a m p h u o u w e o oon c er O T s p N OS C Cf a o r o l of l mi A n AU
. - t A Vb c B uc
. SA I
I n
o i .
t C t c R c 7 8 9 e E c 1 1 1 S FA 5 5 5
, I
es cN r u -
il f V DP oE 2
s o t t &
s od1 C e C .t .
R nas C - - C C E oco F mon ml d ol V n CAB a
L D
e h ,
t s s n l r i a o .er i t h ro s race i e rt h n t eiwo -
s . an w i yn t s meg s st ss l o n s e eii u e i ,o ,ni ,rd t o s t rb si m r aaa c nh ri or uos o er c e gol b ut pn b h re s a p ufi at a a a c p t x o c l r er l it o s g ers a gah t h o o n h ef f n pt f wnn C i d t s oip r o o w n nt t aoo s d ei e o a ape mea t a s r y t f e s
t ert s raa c l n l n d exh oert n n or r a o o et er c p ano e c ure n f i s s e oiei p con e t u r p e l ms x e n e t e p f au h nipr E hi r g n h i s ol s ti xie t o i t r l i uuv r sf r a c a nmy ed a qn e e e a M f s i oir d e eo w d sd e o e ri sa ur r c o u nel d D et i l ri c P l ed c n n . t cdl t c ueir c pi u a os a uni r nch ro r n xv n i t md ax o i nt tf a i eo n t n o u p i c e .r r o pu ,r ,a p l d es l l d pe i i o r ps u s l s nl e c l n h t r c o ey S e a eaev u a ayt a cc b es n g s h s a N h l o r sA s ah sa en n s ns re sdl e e' e l t e si e eeel . s ea o p df s cf ul p t pnh n u t s ct O o n f noo od x nxit yo o n ui d e oir h n E u eb oti e u f e f
o em l e p
x t d pn o
ga nH c o
cd ud cu r it n a
osil .
cl cb s i t E s eri i i c nt nib l c aeat n as or at t l r aa ari l aipnn rs gu o t y m cr ea s e t m t r e s e i eS a ul r eu c sd arct c io t d e e cce WF e i e eaes s i t t s c a - m t h n up l h s t el i i h aos c c er S Tino E T us ged M T mnaa o r o l of l mi A n AU 00
. 34
. - t .
A Vb c 00 B uc 22
. SA 55 1
1 n
o i .
t Ct c R c 0 3 4 e E c 2 2 2 S FA 5 5 5 t
,ll , l' l
c oo es cN ru il f V DP oB
_ 2 s o~
t t &
s od1 _
C e C t .
R nas C C C CC E oco mon F
ml d ol V n CAB "
a L
D ,
e h
t -
s n l n i a i ,
m i s r e
_ i - e e l
- r t b s dd na af a t nn i d mod n aan ah n u u o ,mca ,el o rni r i rc c c oot oeh s onn c bi a bh we b ai t s a as r at r an n t .
l ie l f u l es t a s g g vn not ti nl c o n n f r e fi c t f n aP C i i oeg o s u n oih . l w r p d t r e gictn P r A e o e t u r t est m t o c e s s a s r oS p s - h e rt n
a l
l o
'n o i n o cl l e or c cu ,
i u
oewmsoc ch p t a n f i g ac ck1 q t fi ce e t n eru en o2 E e ou aR t e p E h en hi o3 h n _q e n z" t ti t E R e(
h i t n t b -
i t r d ef s t n s a c n ego eeen a ed ot -
M f s a d s d sh u l d ecn c ur a en c a +
o e uee e unt o P d D n l h c r l e ,cc l rkl n n . o u cp r c u oP nn a os i ct n n - a t nx sA o nc o i nb r a
nt -
e -.
it s i nn c i ee t n t n i ie u '
rt c i o en o pu v l t r 1d un a l et ti i i o r l d n s t 1 nt a e l sh c na t rc e a ei S aacl R a iM a
r e.
s a c p u
h ra s rm, f h
sd r uP f ae h s s n'A,ku e
Ma e e e S u o et n . o et v p df t cf t s si s t p n , ei O o e nno . e nu t e nx a2 vt d c ui ' s c u f en c u el 2 ia f em n a
o , ne n a
os ol e b m n
a o p3 dn t t o l e cs oi cl cd i t n c eit n caeae n cn rt ee n as e as ti e aicd v e aaon t v o t y t ncl t r nuo t t u r e i eS n s eei n seal r n sd c o or t d i i pr c i it ncp i i eap CP a m a h xia a h aen m a h s e~c %
c er M T eff M T mti I M T u rA m o r o .
l of l mi _
A n , 0i AU s 1 1
- t . .
A Vb c g 00 B uc _
s 33
. SA 55 I
I .
n o
i .
t Ct -
c R e 8 9 0 e E c 2 2 -. 3 5
S FA 5 5
[^
l
c oo esCN r u il f V DP oB 2
s o t t &
s od1 C e C t .
R nas C C E oc o F mon ml d ol V n CAB a
d L h e D gt i a e s ehid h u h cn t o t eoa s e h s L n l n nt s s
- i . aa i ar t i l t d o s n rl s n d nd t i re eeia e a nc om t c l r au s a shP rr d
_._ t n
f ai t p orequ mic ues n c mro u , ,mir h e n r ec o r t nE rf ww i ow c o es e oo o f oe c b h ogc t b f P s sth s a at c oi n a eo en t
_ t l b r a l c s s a ,
_ s g nk rt l nt u nr s n o n f iouc P f as o et r e
. C i o oT e onoe p oe
,k w db l r ecn x pt w e o t e ,E a t t a euct c l s re3 e s nkl - ue n l n orh2 y l oiol d pdb a o o c ut 3 r c c aoe n en n f i c o u mb c at on e t en ,t s N e s s co t e p t hi t ns h nei d i n h i n t n ue s t ihM et gt i t r a s aoc u t si nc a c l eel c c o ed , u nie M f s P d s pcA e d e ,5 ud n .
o e u n A n urt 2 s une d D c l ec ,
a l r n3 l nl or d n . i c pi n4 l cua aiccu a os r nx ri2 l ncl t i an t i t t i et 3 e i npn r miec n t n c c e c i u e h u o p u e l d el t s l go t ent r i i o l l nl b n i l s nc ah o t t r c E a aea u M a eic s mti os a c c h d o h st A e t t r sA f sdf uc f s n a s ,f c d e e o e ol c o er n n r oepr p df t s cA t pei e o nua O o e n uen e n x n p b en y d c u cid c u eee . x a c osh f em n os n n n o gl t E l n cec o l e a cl as a a cd b n a it it n c a r,i n c nr a e n f n et i
_ n as e ai e , e a a ad m o o e gi w
_ o t y t rt h s t eup i t al s
_ i eS n s enct n sdl l i t t nti
_ t d s i itiii i iecc u a sil c e
_ - a m a h aah n a h s un q n t oa oah
_ c er M T mmwU M T uniE o S C mvf t
- o r o i l of t
_ l mi a A n r AU e
_ . p
. - t O A Vb c I
I B u c S A i n
o s
s
_ n i o m i
t c
C t R c 1 2 s
n a 2 e E c 3 3 r 6 5
S FA 5 5 T i
c - oo eeCN
_ ru il f V
_ DP oB L
~
2 s o t t &
s '
_ odl C
R C
nas e'.
t C C oc o E
mon
_ F ml ol V
_ d
_ n CAB a
L s D ns n r e s o , e o s oi ,
h r ti sl hh t r ti l t o ent i a t g c oent d a t c ea u i u t c ear u n ci mcd n nh d ci mcan u vpoya
_ i u vpor a i n
_ d ril aM d o d ril hM
_ s n eul y d nd c neul c
_ i o s qah e ean os qat e c e- cr r ae c e i r ewu r r n n
s et u h t ,
ol hid uest ,ol h sd c mr e n sil T we sil T u rt a s c nref rt a ec o e a o iowo ea o c wt n . er f o wt n .ht r
_ c os od hP s st n os od P
_ s a t - i rt en o t i rn t
L et a d s a ,i et aid
_ vh aynn nrst vh a yh n
_ s g o n k t chi a et rc k t cht a C i och p x pt n oe oci 8 el t wg w 8 el t t g eucn n e o 3 vl i i n 3 vl i c l 1 rawwi - u o 1 rawti n l n e s t d pd c - e s nl a o o e s s t n t nen es s ec n f i h i nnu n at oe h i nmu t hh oeo e s ch . t hh opo e t d t e ctii c t e p cti mc s pc p m
et g r oi s uc n
_ h i oi sh ms qA i t r ) sh msiA i si n ou a c d l woiu u unit t l woie rm O a
M f s e a r mqO q ud c e u E s upu t f s rC o t f s eC l nl u r t n noP d D n t n n P n n . i n eearA n aic t n eeaf A a os t u md roc o i a ns s u md r C i t n oput f i r mie oput s -
n t n o cil e t e - id cil t e o pu c c ucesh a t ent r c uc esh
( a qxh t t t ah oia a qxh ot i i o mt il y eEt c t rc . eEt s S a cc e s on ti h s n r sA s id nci . f ,f ccc id nei .
e e n h e .i 4 o r oeat h e .ic 4 p df e t t sh gr0 o nfi t t sh nr0 O o p art no- e b en w art ao -
d x nieiif5 c a cod s nieinf5 f em E i c mwt 0 n l nce i c mwe 0 o l e or ad a a t e or td it n es od ren n f neah es od nen d sf eid o n as o d sf eed o e o e gi t o t y i u ast pii t t ac uast aii
_ i eS t l naovt e n t nt oh l na mvt
_ t d .
a cd ac oc c i sil st cd ac oc a m t nnrof r e n a oaosi nn r of r e
_ a M C mvaw I at l ops
_ c er S I atl ops n
_ o r o a
_ l of
_ l mi t
_ A n n AU i a
. - t M
_ A Vb e n
B uc o
. SA i I
_ I s s
_ n i
_ o m
_ i . s
_ t Ct n
_ c R c 2 a 0
_ e E c 6 r 7
_ S FA 5 T 5
c's e
r u CooN
. il f V DP oB 2
s o t t &
s od1 C e C t .
R nas E oco F mon ml d ol V n CAB a
L D
e h h -
t c ah id rt n d eh eei i er wt pw .
ra uo l r s r db el o i uh nincif cc aron w s s ni ti a t ih nstd L e n woiarD g u s id t o a o est S c t c s eae c .n c nitb raL e s a et S e D c t pi l wn' r s g xvrl oiye o n eieiP .b p C i t ww s w d co yt d n e o n aP s eneo c l a t l u ni n l n rynl oit a o o d eeuac ma n f i ehl oV c rc e t st l c aeo t e p uoac r t l n h i V aeeel i t r sd vsd a a c l n rgan M f s aaenee s e o e i viB pas d D r gar x e n n . eneaeesh a os t iB et l aeg et i t at n t n ms ocic a w o pu et rnt e i i o d t L pani
~ t r c n dD onev a c c aee r ec e .
r sA ct opt r r s e e r nat pne s p df oal aipye O o bl ed a l n d al r eomnl e f em li eyr gt oal o l e di cb it f vl aynti a n as ort hl aad n o t y u c ch c oo i eS t s e t n ois t d s r enol r a a m onir oil ee c er Cid a mt apr o r o l of l mi .
A n s AU t
. n
. - t u A Vb c o B uc c
. SA c I A I
g n n o i i . r t Ct a c R c e 4 e E c l 8 S FA .
C 1
l --
- EXHIBIT A_IO THE i OPERATING AGREEMENT
. Beaver Valley Power Station Units Nos. I and 2 -
Accounting-Provisions for Beaver Valley Power Station l
Section II. B. Allocation Codes and Explanations n
Allocation of Common Costs Between Beaver Valley Unit No. I and Beaver Valley Unit No. 2 1 The basis for allocating common costs among the Participants shall be in l proportion to their then current respective generation entitlement shares in the l Units.
I CODE BASIS C The portion of the cost to be allocated to a Unit shall be (a) the pre-vailing Net Demonstrated Capability of a Unit, divided by (b) the pre-vailing Net Demonstrated Capability of all Units to which the common cost is applicable.
Allocation of Costs Among the Participants The bases for allocating among the Participants the sum of those costs which are charged to Beaver Valley Unit No. 1, Beaver Valley Unit No. 2, and the portion of the common costs which are allocated to Beaver Valley Unit No. 1 or Unit No. 2.are as follows:
0 The costs shall be allocated among the Participants in proportion to their present respective generation entitlement shares in the Units, namely:
Participant Unit No. 1 Unit No. 2 CEI -
24.47%
DL 47.5% 13.14%
OE 35.0% 41.88% !
PP 17.5% -
l TE -
19.91%
HV The costs during the current month shall be allocated to a Participant in proportion to a fraction, the numerator of which is the variable portion of the Btu input to the main unit turbine used to produce the kilowatt hours of energy taken by that Participant during the current month, and the denominator of which is the variable portion of the Btu input used in 4 producing all of the kilowatt hours of energy taken by all of the Participants during that same month, these Btu inputs being calculated hourly and accumulated monthly in accordance with the principles of allocation of heat consumption set forth in Section III.
HY The costs during the current month shall be allocated to a Participant in proportion to a fraction, the numerator of which is the total Btu of !
energy consumed by that Participant during the preceding twelve month period and the denominator of which is the total Btu of energy consumed by all Participants during that same preceding twelve month period.
H0 The costs during the current month shall be computed by using Partici-pant's costs. These costs will be accumulated by the operating company to nwak ne sa reemM mia reana-
i-l .
EXHIBIT A TO THE' OPERATING AGREEMENT Beaver. Valley. Power Station Units Nos. 1 and 2 Accounting Provisions for Beaver Valley Power Station l I
l Section III. Fuel l
!. .The quantities of nuclear fuel materials required for efficient' operation of the Units shall be owned or leased by the Participants in Beaver Valley Units Nos. 1 and 2 in percentage shares equaling the respective generation entitlement share in the Units in which the fuel materials are intended to be used. As the
- quantity of fuel.is consumed, any imbalance in nuclear fuel materials shall be l adjusted monthly to the generation entitlement share in the Units. Monthly calculation of the cost of the fuel consumed may be done by the operating
' Participant or by each Participant. Since the cost of fuel may be different for each Participant, total fuel cost shall be determined by adding each Participant's cost. At the beginning of each month, each Participant's unamortized value in nuclear fuel materials must be in proportion to that Participant's share of the original cost of fuel. Each Participant's share of the original cost need not be equal to that Participant's generatioc entitlement share in the Units. Adjustments to maintain such proportional unamortized value ,
will be made monthly in accordance with Section VI of this Exhibit.
The accounting for owned or leased nuclear fuel will be in accordan s with the FERC Uniform System'of Accounts.
The' following basic principles shall govern the calculation of depletion (amortization)=of fuel assemblies installed in the reactors for heat production.
- 1. Nuclear fuel assemblies shall be considered to be producing heat only
.-during periods of zero or positive net generation.
- 2. During periods of negative net generation, it will be considered that in-stalled nuclear fuel assemblies are not producing heat and are not thus consumed. During periods of negative net generation, records of station service electric energy supplied by the system shall be maintained and the Participants in the Units shall be invoiced for such electric energy in proportion to their generation entitlement share in the Units at the 3 operating Participant's system average production cost (
purchased power costs) during the current calendar month {ncluding adjusted to net exclude the output and cost during the current calendar month of the Units to which such station service energy was supplied.
- 3. During periods of zero or positive net generation, the components of consumption of heat from nuclear fuel assemblies shall be considered to consist of a fixed heat consumption component and a variable heat con-sumption component. The components of heat consumption are illustrated by the current turbine-generator heat consumption curve for the Unit as agreed to by the Participants. The fixed portion of heat consumption i consists of the heat produced by the reactor required to supply station service electric energy plus heat losses in the plant.
I Note: Estimated costs will be used for the current month's calculation and ;
an adjustment, based upon the deviation of estimated vs. actual costs, l will be made in the next rocceeding month's hilling, i
I
L EXHIBIT A TO THE OPERATING AGREEMENT Beaver Valley Power Station Units Nos. I and 2 h Accounting' Provisions for Beaver Valley Power Station
.Section III. Fuel (continued)
- 4. - During periods of zero or positive net generation, the fixed and variable portions of the total unit heat consumption 'shall be calculated on an hour-by-hour basis.' The fixed portion of the Unit heat consumption shall be the product of service hours accumulated during periods of zero or positive net generation times the fixed unit heat consumption as indicaced on the current turbine-generator heat consumption cerve for the Unit as agreed to by the Participants. The variable portion of the. unit heat consumption shall be the total net main unit generation in Mw,hr/hr converted to Btu /hr, excluding the fixed unit heat consumption, utilizing the' relationship between Mw,hr/hr versus Btu /hr as represented on the current turbine-generator heat consumption curve for the Units as agreed to by'the Participants. The total unit heat consumption: shall be the sum of fixed and. variable portions of the unit heat consumption. The portion of the cost of nuclear fuel consumed to be considered to be attributable to fixed unit heat' consumption for each Participant shall be the total cost for each Participant of nuclear fuel consumed times a fraction, the numerator of .which is the monthly fixed unit heat consumption and the denominator of vnich is the total monthly unit heat consumption. The portion of the cost of nuclest fuel consumed to be attributable to variable heat consumption for each Participant shall be the total cost of nuclear fuel consumed for each Participant minus the portion of the cost of nuclear fuel consumed attributable to fixed unit heat consumption for each Participant.
- 5. In determining the cost of nuclear fuel consumed, costs shall be calcu-lated using amortization in proportion to main unit heat consumption, such cost taking into account the original acquisition cost for each Participant of the materials and services required to provide the fuel as originally installed, the predicted total heat output of the assemblies and the estimated net value of salvage materials. Each Participant may calculate its share of the ' cost of nuclear fuel consumed or, if requested, DL shall calculate such cost of nuclear fuel consumed using methods and/or computer codes considered acceptable by the Participants for this purpoce.
- 6. For owned nuclear fuel, the monthly nuclear fuel expense shall be deter-mined by the formula:
FC c =Ec (A c -S)f Eg
l I
EXHIBIT A TO THEJ OPERATING AGREEMENT . ,
L
- Beaver Valley Power Station Units Nos. 1 and 2 1:
. Accounting Provisions for Beaver Valley Power Station i.
L Section III.- Fuel (continued) where:
FCc .= Nuclear fuel expense during the current accounting month.
E c
= The energy, in Btu, produced during the current accounting month.
Eg = The energy, in Btu, expected to be produced from the beginning of the current accounting-month until the estimated end of life of the fuel. '
'A c = The unamortized value of the fuel as reflected by the difference between the balances in Accounts 120.3 (Nuclear fuel assemblies in reactor) and 120.5 (Accumulated provision for amortization of nu-clear fuel-assemblies) at the beginning of the current accounting month.
Sg = Anticipated salvage value of the fuel with related deductions in-cluding, but not limited to, shipping, reprocessing and waste dis-posal costs.
- 7. The monthly charge to expense for leased nuclear fuel consumed is com-posed of (a) a burnup expense related to energy resource consumption, (b) a finance charge expense on either a current or levelized basis, and, if. appropriate, (c) amortization of accumulated deferred expenses,
- a. Monthly Burnup Expense The monthly burnup expense shall be calculated as follows:
\
B c =Ec (C c -S) f Eg where:
-B = Burnup expense for the current accounting month.
c E
c = The energy, in Btu, produced during the current accounting month.
Eg = The energy, in Btu, expected to be produced from the beginning of the current accounting month to the end of life of the fuel.
-~~----:---_-___- - )
. EXHIBIT A TO THE OPERATING AGREEMENT l
Beaver Valley l Power Station Units Nos. I and 2
. Accounting Provisions for Beaver Valley Power Station Section III. Fuel (continued)
C = The lessor's net investment (acquisition cost ao defined in the c
lease agreement less burnup expenses prior to the current ac-counting month) at the beginning of the current accounting
' month.
Sg = Anticipated lessors net' investment at the end of the lease term, representing the salvage value of the fuel with related deduc-tions including, but not limited to, shipping, reprocessing and waste disposal costs.
B. Monthly Finance Charge Expense At the election of.each Participant, which election may be made separately for each batch of nuclear fuel, the monthly finance charge expense may be calculated in either of the following two ways:
- i. Current finance' charge expense. The amount paid or payable to the lessor in the current month for finance charges.
F=R c c Cc i i '. Levelized finance charge expense. The current month's share, apportioned on energy resource consumption, of all finance charges to be paid or payable to the lessor for finance charges i over the remaining life of the fuel including such charges for the current month. !
F e
=E e [(Ree C ) + (Re ,1Ce,1) +...+ (R Cg)}
f
{
Eg a where:
F e
= The finance charge expense in the current accounting month.
E e
= The energy in Btu produced in the current accounting month.
Eg = The energy in Btu expected to be produced from the beginning of the current accounting month to the end of the lease term.
I
(
I 1
O j EXHIBIT A TO THE
~ T OPERATING. AGREEMENT
'* - Beaver Valley Power Stati" Nits Nos. I and 2 Accounting Provisions for Beaver Valley Power Station Sec' tion'III. Fuel (continued)-
'Rt ' The actual or' estimated lease rate in month i, expressed as the decima1' equivalent _of percent per month, as defined in the -lease agreement or. as calculated to produce total monthly costs of fi-nancing including any financing related fees. Rc is the rate for
'the current month and Rg is the rate for the final month of the j lease term.-
~
Ci = The lessor's actual.or estimated net investment at the beginning of month i (acquisition cost as defined in the lease agreement less burnup payments made to the lessor prior to month i). C is the value at the beginning of the current month and Cf is the value at' the beginning of the final month of the lease term.
C. Monthly' Amortization of' Deferred Expense
' The monthly amortization of deferred expense shall be calculated as follows:
DA c *Ic (0p+ D,)
Eg where:
DAc = The amortization of deferred expense during the current account-ing month.
Ee = The energy, in Btu, produced during the current accounting month.
Eg = The-energy, in Btu, expected to be produced from the beginning of-i the current accounting month to the end of the life of the fuel.
D = The unamortized portion at the beginning of the current account-ing month of the deferred expente related to the period prior to the beginning of commercial operation of the leased nuclear fuel.
D, = The unamortized portion at the beginning of the current account-ing month of the deferred expense related to the period af ter the beginning of commercial operation of the leased nuclear fuel.
Section IV. Materials and Supplies Materials and supplies required for the operation and maintenance of the Units shall be procured by DL. Materials and supplies which are purchased prior to the beginning of commercial operation of Beaver Valley Unit No. 1 are charged to the project work order. When commercial operation of Unit No. 1
EXHIBlT A TO THE OPERATING AGREEMENT Beaver Valley Power Station Units Nos. I and 2 Accounting Provisions for Beaver Valley Power Station Section IV. Materials and Supplies (continued) begins, a physical inventory of materials and supplies at the site will be conducted by DI, and such materials and supplies will be transferred from the project work order to Account 154 (Plant materials and operating supplies).
Materials and supplies which are purchased after the commercial operation date of Unit No. I will be charged directly to Account 154.
Prior to the commercial operation date of Beaver Valley Unit No. 2, the materials and supplies (M&S) inventory at the site will be separated into specific Beaver Valley No. I and Beaver Valley No. 2 inventories with each inventory owned by the Participants in Beaver Valley in proportion to each Participant's respective present generation entitlement share in each Unit.
Materials and supplies determined to be " common"1 at the time of purchase will be charged to the Participants of Beaver Valley Unit No. 1. Materials and supplies purchased specifically for Beaver Valley Unit No. 2 and subsequently
termined to be " common" will be transferred to Beaver Valley Unit No. 1
.or :erials and supplies and charged to the Participants of Beaver Valley Unit No. I and credit issued to the Participants of Besver Valley Unit No. 2. The Beaver Valley Unit No. 2 joint bank account will be billed for any materials and supplies used from either one of these inventories in the construction or preliminary operation of Beaver Valley Unit No. 2. Credit for materials and supplies used will be reflected on the operation and maintenance (0&M) bill to the Participants of the Unit No. 1 inventory, or on the materials and supplies invoice to the Participants of the Unit No. 2 inventory, in proportion to each Participant's respective present generation entitlement share. Materials and supplies used in the operation and maintenance of Unit No. 1 from the Unit No. 2 inventory will be billed to the Unit No. 1 Participants; the Unit No. 2 Partici-pants will receive credit on their monthly materials and supplies invoice in proportion to each Participant's respective present generation entitlement share. ,
M&S used from either inventory for the common facilities will be billed to the !
Participants of Beaver Valley Unit No. I at their respective present generation entitlement shares. If the items were from the Unit No. 2 inventory, the Unit No. 2 M&S invoice will be credited in proportion to each Participant's respective present generation entitlement share.
In the event a single item from Beaver Valley Unit No. 2 materials and supplies inventory with a value of $5,000 or more should be removed from stock during the current accounting month to be used in the operation and maintenance of Beaver Valley Unit No. 1, or to common facilities, then the Beaver Valley Unit No. 2 Participants will be reimbursed the value of said item (s) plus a carrying charge to be assessed from the date of purchase up to the date of removal.
Working capital will be assessed using the CAPCO Cost of Capital rate (s) for the period (s) this transaction covers, i Prior to the commercial operation date of Beaver Valley Unit No. 2, each Participant's share of each component of the materials and supplies inven-l tory at the beginning of each month must be equal to that Participant's respec-( tive present generation entitlement share in each Beaver Valley Unit. Informa-tion in support of the payments required to effect such adjustment will be supplied by Duquesne Light, i
! Note: M&S for common facilities includes items for specific common facilities and items which may be used at Unit No. 1 or Unit No. 2.
I I
I
o
- EXHIBIT A TO THE OPERATING' AGREEMENT
- ' Beaver Valley Power Station Units Nos. 1 and 2 Accounting Provisions for Beaver Valley Power Station Section IV. Materials and Supplies (continued)
Monthly materials and supplies usage shall be credited to Account 154 and charged to the appropriate operation and maintenance expense accounts as described in Section II.B.
Ef fective with the commercial operation date of Beaver Valley Unit No.
2, each Participant's share of the materials and supplies inventory at the beginning of each month must be equal to that Participant's present respective generation entitlement share in the total plant. Adjustments to maintain this basis will be made monthly in accordance with Section VI. of this Exhibit.
Section V. Other Expenses For intercompany billing purposes, labor and material additive costs at current rates prevailing at DL as adjusted from time to time shall be added to the labor and material components of direct operation and maintenance costs of a Unit to which such rates are applicable and shall be shared by the Participants on the same bases on which the primary labor and material costs are shared.
In addition, an allocation will be made of Account 556, System Control and Load Dispatching costs related to production, and Account 557, Other Produc tion Expenses. These costs would be allocated to each Unit on a direct basis where a direct relationship e:ists, or on a "C" Code basis when a direct relationship does not exist. Account 556 will include only those load dispatching costs incurred by DL that are attributable to the Beaver Valley Plant.
Included in Account 557, Other Production Expenses, are other production expenses not directly assignable to the other production accounts. These costs included in Account 557 may be charged directly where a direct relationship exists or, if not, they may be allocated on a "C" Code basis. The invoice will identify amounts billed that were included in Account 557.
For intercompany billing purposes, administrative and general ( A&G) expenses shall be allocated to a Unit on the basis of a composite three year i moving average ratio for DL calculated at the end of each calendar year in accordance with the following formuir, to become effective on July 1 of the following year. g L,1 (1 + p/P) + 0,1 (L,-La2) (1 + P/P) + (0,-Oa2) i In which: l L,1 and 0,1 = the three year sums of direct labor expense and direct other-than-labor e xpense, respectively charged to the following accounts, excluding (1) any reduction for A&G costs billed to other Participants, and (2) any increases l for A&G costs paid to other Participants.
I l
u______ l
o 1e ,
[ g; EXHIBIT A'TO THE.
_0PERATING AGREEMEKr Beaver Valley Power Station Units Nos. I and 2 A,ccounting Provisions for-Beaver Valley Power Station Section J. Other Expenses (continued)
- 1. Account 920,: Administrative and General Salaries.
- 2. Account .921, Of fice Supplies and Expenses.
l' 3. Account 922, Administrative Expenses Transferred - Credit.
~(1.+ p/P) = lA cost ratio.by means of which those expenses directly associated with payroll (labor additives) may be added to direct' labor charges.
1 P = The three-year sum of the following labor additives; i
- 1. Payroll- Ta xe s Federal Insurance: Contribution Act iknefits Federal Unemployment Insurance.
S:ste Unemployment Insurance
- 2. Workers Compensation and/or Injuries and Damages (Payroll Related Costs Only)
- 3. ' Employee Pensions and Benefits '( Account 926) -
~4. ' Pay for Tine Not Worked
' Exclude' any. labor additives.which are included with the basic direct labor charges, examples of which might be " Pay for Time Not Worked" or " Payroll' Taxes."
P =1The three-year. sum of the total payroll with which the above labor additives are associated.
L, and 0, = The three-year sums of direct labor expense and direct other-than-labor expense, respectively, charg'ed to all operation and maintenance expense accounts except accounts for fuel and i purchased / interchange power for the entire Company, excluding (1) any reduction for direct labor expense and other-than-labor expense billed to other Participants, and (2) any increases for direct labor expenses and other-than-labor expenses paid to other Participants. .
La2 and Oa2 = The three-year sums of direct labor expense and direct other-than-labor expense, respectively, charged to all Administrative and General Expense Accounts 920 through 935, inclusive.
The amount of administrative and general expenses to be allocated to each Partic-ipant during a given' period shall be the product of the above ratio multiplied by the total operation and maintenance expenses and labor additives, excluding Account 518, allocated to the Participant for that period.
I i
\s .. . . . __
b EXHIBIT A TO THE
, g OPERATING AGREEMENT
" Beaver Valley Power Station Units Nos. I and 2 Accounting Provisions for Beaver Valley Power Station Payroll Additives on Direct Labor Costs Payroll additives on direct labor costs will be computed using the same components as used in the 1 + p/P basis, except it will be a monthly rate.
Section VI. Billing The monthly bill for operation and maintenance expenses will include costs for materials and supplies, oil and nuclear fuel and other operation and maintenance e xpenses .
- 1. Materials and Supplies (M&S) and Oil Sun iies DL shall procure M&S and oil and pay vendors all payments as they become due and shall promptly bill the Participants in the Units for their respective ;
shares of such procurement. j DL treats oil as an M&S item. The billing of M&S has been discussed previously in Section IV. Materials and Supplies.
- 2. Nuclear Fuel Nuclear fuel may be owned or leased. With respect to the procurement of owned nuclear fuel for the Units, DL will pay vendors' payments as they become due having received from the Participants on the business day on or before the payment date the Participants' respective shares of such payments; or each Participant may pay and accumulate the costs of fuel they purchase for the Units. With respect to the procurement of leased nuclear fuel, DL as agent for the Participants, may instruct the lessor (s) for the Units to make payments to vendors as they become due; or each Participant may instruct its individual lessor (s) to make payments as they become due.
If the fuel is leased and DL is the agent of the lease, DL will pay to the lessors all payments as they become due, having received from the Partici-pants their respective shares of such payments on or before the payment date. If the Participants utilize their own lease agreements they will pay their respective shares of the lease costs directly to the lessors.
DL shall make payments for the disposal of spent nuclear fuel from the Units i in accordance with the U.S. Department of Energy Contract No. DE-CR01-83 NE44380 (Unit 1) and DE-CR01-84 RW00004 (Unit 2), having received from the Participants in the Units their respective shares of such payments on the business day prior to the payment date.
I l
=
0 EXHIBIT A TO THE hr OPERATING AGREEMENT Beaver Valley Power Station Units Nos. I and 2 Accounting Provisions for Beaver Valley Power Station Section VI. Billing (continued)
Included in the monthly bill will be adjustments between Participants of nuclear fuel expenses necessary to maintain, at the beginning of each month, the Participants' remaining owned shares or lease shares in the in-core value of nuclear fuel in proportion to their original cost of owned shares or lease shares of the in-core value of nuclear fuel.
If any Participant chooses to compute its share of amortization and expense, DL will furnish such Participant with heat consumption and megawatthour data as appropriate and the Participant will perform such computation and furnish DL with the results to accumulate the total cost of fuel consumed. If a Participant elects to have DL compute its share of amortization and expense and the Participant is supplying its own individual lease financing, such Participant will furnish DL with financing charge data and DL will furnish such Participant with the results of the computation.
- 3. Monthly Operation and Maintenance Expense DL will bill the Participants in the Units monthly for their respective shares of operation and maintenance expenses for the Units.
Note: Costs of subsequent construction will be billed separately in accordance with the Subsequent Construction Agreement and will not be part of the Operation and Maintenance bill. l l
1 4
i
_ - _ _ _ _ - _ _ _ _ .