ML20195J130

Requests NRC to Institute Investigation of Southern Co & Operating & Svc Subsidiaries to Determine Whether Any License Conditions Being Violated.Supporting Documentation Encl

ML20195J130
Person / Time
Site:	Farley
Issue date:	06/15/1988
From:	Fogel J CAJUN ELECTRIC POWER COOPERATIVE, INC., DUNCAN, WEINBERG, MILLER & PEMBROKE, P.C. (FORMERLY
To:	Vogler B NRC
References
NUDOCS 8806290059
Download: ML20195J130 (70)

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• • ADMITYtD IN Wi&CONSih ONLY BY HAND Benjamin Vogler Senior Supervisory Trial Attorney U.S. Nuclear Regulatory Commission 7735 Old Georgetown Road -

Room 10700 Bethesda, MD 20814 Re: Cajun Electr ic Fower Cooperative, Inc. ,

and Southern Company

Dear Mr. Vogler :

Cajun Electr ic Power Cooperative, Inc. ("Ca jun") ,

requests the Nuclear Regulatory Commission ("NRC") to institute an investigation of the Southern Company ( " Sou the rn ") and its operating and service subsidiaries to determine whether Southern and/or one or more of its operating or service subsidiaries are in violation of the license conditions currently existing regarding nuclear generating stations on the Southern system and whether Southern and/or one or more of its operating or service subsidiaries have taken actions that would createThe or maintain actions a situation inconsistent with the antitrust laws.

giving rise to this request, as discussed in detail below, involve unreasonable or irrelevant constraints imposed by Southern and/or its operating subsidiaries as conditions on the transmission of Cajun generated power for ultimate delivery to potential Cajun customers located in Tennessee, Alabama and Florida and on their purchase of economy energy from Cajun.

Cajun is a rural electric cooperative which generates, transmits and sells electric power and energy at wholesale.

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c Cajun is composed of the following thirteea rural electric cooperatives, which are its members: Beautegard Electr ic Cooperative, DeRidder , Louisiana; Bossier Rural Electr ic Membership Corporation, Bossier City, Louisiana; Claiborne Electr ic Cooperative, Inc., Homer , Louisiana ; Concordia Electr ic Cooperative, Inc. , Ferr iday , Lou isiana; Dixie Electric Membership Corporation, Baton Rouge, Louisiana; Jefferson Davis Electric Cooperative, Inc., Jennings, Louisiana; Not theast Louisiana Power Coopera tive, Inc . , Winnsboro, Louisiana ; Pointe Coupee Electr ic Memberehip Corporation, New Roads, Louisiana; South Louisiana Electr ic Cooperative Associa tion, Houma, Louisiana; Southwest Louisiana Electric Membership Corporation, Laf ayette, Louisiana; Teche Electr ic Cooperative, Inc., Jeanerette , L)uisiana ; Valley Electr ic Membership Corporation, Natchitoches, Louisiana ;

Wa sh ing ton-S t . Tammany Electr ic Cooperative, Franklinton, Louisiana. Cajun's primary responsibility is to supply the power and energy requirements of these member cooperatives, which, in turn, resell power and energy to approximately 310,000 rural customers at retail, in 54 of the 64 parishes in the State of Louisiana.

Regarding generating capability, Cajun owns the following generating stations: ,

Big Cajun 1 (gas; two units; 210 MW)

Big Cajun 2, Unit 1 (coal; 540 MW)

Big Cajun 2, Unit 2 (coal; 540 MW)

Big Cajun 2, Unit 3 (coal; 313 MW)1/

River Bend (nuclear; 28 2 MW) 2/

Cajun has generating capability which is in excess of its current native load and actively markets that excess power and energy in the southern and southeastern United States.

Recently, Cajun has successfully renegotiated fuel transportation contracts and is actively renegotiating its contract with its fuel supplier to further enable Cajun to be competitive in the energy market. To this end, Cajun has entered into and consum-1/ The rema in ing output of th is Unit, approx ima te ly 227 MW, is owned by Gulf States Utilities Company

( "G SU " ) .

2/ The rema in ing output of this plant, approximately 658 MW, is owned by GSU.

_3-mated several economy energy and wheeling transactions with entities other than Southern and its subsidiaries.

Southern is a holding company organized under the Public Utility Holding Company Act. Southern's operating subsidiaries are Alabama Power Company ("Alabama Power") , Georgia Power Company ("Georg ia Power ") , Gulf Power Company ("Gulf Power") , Mississippi Power Company ("Mississippi Dower") and Savannah Electric & Power Company. Southern Company Services, Inc. ( " SC S" ) , is a subsidiary service company of the Southern system. Southern subsidiaries form a highly integrated and interconnected power pool, which coordinates both the installa-tion and operation of facilities. See Power Pooling in the United States, Federal Energy Regulatory Commission (December 1981). In allowing the continued existence of Southern as a holding company, the Securities and Exchange Commission ("SEC")

found that the Southern subsidiaries "were under common control as an integrated public utility system." See The Commonwealth &

Southern Corp., 26 SBC 464, 494 (1947). Add it ionally , the SEC found that the Southern subsidiaries "have had a history of common planning, development and operation commencing in the middle nineteen-twenties and that since 1930, the central load dispatching of fice in Birmingham, Alabama, hac closely coor- ,

dinatej the use of the generating capacity and the power inter-change among the companies pursuant to contractual arrangements which exist among them". Id. at 477. Such coord ina tion con-tinues today. See Sou thern Company Intercompany Interchange O)n tr ac t , Oct. 29, 1985.

The authority and jurisdiction of the NRC are invoked as a result of Georgia Power 's ownership and operation of the '

Edwin I. Hatch Nuclear Plant ("Plant Hatch") , and Vog tle Elec tr ic Generating Plant ("Plant Vogtle ") , and of Alabama Power's owner-ship and operation of the Joseph M. Farley Nuclear Plant ("Plant Far ley") . These plants are operated on behalf of Southern and its subsidiaries. Pursuant to the Southern Company Intercompany Exchange Contract, energy f rom the plants is economically dis-patche6 (Section 3.4) and subject to being shared among sister Southern Company subsidiaries as surplus energy (Section 7.1) or interchange energy (Section 8.1) . It is Cajun's understanding that Southern plans to operate these pisnts under the auspices of a subsidiary operating company. Thus, both Southern and each of l

its subsidiaries has a direct in tere st in the three nuclear power j plants.

i Cajun currently has no direct physical connection with the Southern system. However, Cajun does have access to the l

Southern system through a physical interconnection between l Mississippi Power and Gulf States Utiliti.s Company ("GSU") ; that l

connection being a 500 KV transmission l!ne between GSU's l

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McKnight substation and Mississippi Power 's generating station, Plant Daniel ("McKnight/ Plant Daniel Line") . Cajun has the right to transmit power over the McKnight/ Plant Daniel Line, inter alia, under the terms of the Power Interconnection Agreement

( " PI A" ) between GSU and Cajun and certain services schedules which are part of the PI A.

Although it has sought contractual privity with Southern and its operating subsidiaries, Cajun currently has no ccatractual rights to transmit power and energy over the Southern system or to sell power and energy to Southern or any members of the Southern system.

Cajun has attempted since early 1987 to sell economy and replacement energy to Southern and to other entities, utilizing the transmission systems of Southern's operating subs id iar ie s . Southern has denied Cajun access to the Southern transmission system based on purported justifications which do not rise to the level of good business reasons and based on purported justifications which, while used to deny Cajun access to the Southern transmission system, are not used to deny trans-mission access to utilities other than Cajun for the same type of transactions. These actions are not consistent with the princi ,

ples underlying the license conditions on Southern's nuclear plants, and the actions create and maintain a situation inconsistent with the antitrust laws.

Cajun has sought wheeling services from Southern and its operating subsidiaries in a generic sense and with regard to three specific substantial power transactions between Cajun and third parties. In each case, the requested transmission services were denied.

Pr ior to October ,1987, Cajun requested generic trans-mission rights over the Southern transmission system. Southern, while not directly denying the requested service, erected barriers to such services by requiring Cajun to make transaction specific requests, thus, effectively denying Cajun's generic transmission request. A letter of October 15, 1987, to Phillip G. Harris, Ccjun's Vice President of Operations, from Robert O.

Usry, SCS's Vice President, sta ted :

Regarding your request that Southern Companies confirm that our transmission f acilities are available for arrangements Cajun is seeking th a t require transmission over Southern Companies '

facilities, then we must regretfully decline to do th is . Any delivery service over Southern Companies' electric system must be the subject of agreed-upon delivery charges and other terms and 0

conditions so as not to inter fere with the prudent operation of our transmission system. Before we could agree to such delivery service, we would have to have a great deal more information about your proposed transactions, including information such as the proposed buyer, the proposed load, and other scheduling in for ma tion . Without such detailed information and the opportunity to study it, Southern can make no commitment for delivery service.

Exhibit A hereto at 2.

Re spond ing to Sou thern 's request for specificity , in the fall of 1987, Caj in requested Southern to wheel Cajun power over the Southern tra tsmission system for ultimate delivery to the Tennessee Valley ..u thor ity ("TVA") . The transmission was to have commenced on Januaty 1, 1988. On November 30, 1987, Southern, through SCS, responded stating that it was willing to discuss the transaction; however, Southern demanded that it receive certain "necessary assurances" prior to the consummation of a wheeling contract, Southern required the following :

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(a) A representation and warranty by Cajun Electric Power Coopera tive that it has contractual or ownership rights to use GSU's transmission system including the right to use GSU's portion of the McKnight/ Plant Daniel Line.

( b) Assurance from GSU in the form of representa-tions , warranties , or appropr iate indemnity agreements that Cajun Electric Power Cooperative has the right to use GSU's transmission system and GSU's portion of the McKnight/ Plant Daniel Line. Included within these assurances and representations would be a representation that GSU does not object to the proposed energy transactions and will take steps to facilitate such transaction.

(c) Assurances and representations from Cajun including an appropriate indemnity agreement that it will protect and hold Southern Companies harmless in any litigation which arises out of or in any way concerns the electric transactions proposed by Cajun Electric Power Cooperative.

Exhibit B, hereto. These "assurances" extend far beyond the reque st for specificity in Southern's October 15, 1987 letter, constitute an unreasonable insertion into the Cajun transaction

l of Southern's concerns regarding a third party, and are unneces-sary to protect Southern's interest, under any industry standard for wheeling. Indeed, the first assurance requested had pre-viously been met on at least two occasions. Southern had not, prior to Novenber 30, 1987, notified Cajun that such assurances were insaf ficient or what corrections would be required to make them sufficient. See 9, n.5, in f ra .

As the January 1, 1988 commencement date approached for the TVA power sale, Southern had not agreed to provide the requested wheeling services. In order to make the power sale to TVA, Cajun was able to secure a transmission ag reement to trans-mit the power through the Middle South Utilities system to TVA.

A third refusal to allow Cajun access to Southern transmission involved a potential sale by Cajun to Alabama Elec tr ic Co-op, Inc. ( " AEC ") , for the time period from June 1, 1988, to May 31, 1998, in the ra ng e o f 16 0 MW. Cajun reached this agreement to sell power to AEC, significantly, af ter AEC had given notice of termination of power purchases from Alabama Power--a Sou thern operating subsidiary. To e f f ec tua te the Ca jun sale, AEC requested wheeling from Mississippi Power , also a Southern subsidiary. Mississippi Power stated that it would ,

transmit the Cajun power to AEC only if Mississippi Power received assurances f rom GSU that GSU would continue to make GSU 's facilities charge payments to Mississippi Power related to the McKnight/ Plant Daniel Line under an ag reement entitled "Transmission Facilities Agreement between Gulf States Utilities Company and Mississippi Power Company" ("Facilities Charge Ag reement") . See Exhibit C. This curious request by Mississippi Power to AEC to seek assurances f rom a third party (GSU) regarding the unrelated Facilities Charge Agreement presumably stems circuitously f rom Southern's stated concern that GSU may breach the Facilities Charge Agreement.

Significantly, Alabama Power , another Southern subsidiary, has license conditions before this Commission which require Alabama Power to wheel for AEC. That license condition p rov id es :

Licensee will provide, under contractual arrangements between Licensee and AEC, transmission services via its e'.ectric system

( a) f rom AEC 's elec tr ic sy stem to AEC 's of f-system members; and (b) to ADC 's electr ic system f rom elec tr ic systems other than Licensee's, and from AEC 's electr ic system to electric systems other than Licensees.

Alabama Power Co. 13 NRC 1027 at 1112 (1981) . Apparently ,

Southern does not believe that these license conditions impose any obligations on other Southern subsidiaries.

An agreement by Southern to wheel the Cajun power to AEC was not forthcoming , and Mississippi Power recently for maliz ed its request to AEC for the GSU assurances. See Exhibit D, hereto. Cajun did not conclude an agreement with AEC by the June 1, 1988, deadline because of the further assurances required on the wheeling conditions imposed by Mississippi Power. Cajun was, however, successful in consummating a smaller sale to another cooperative for the same periods. Cajun remains ready, willing and able to deliver the additional power needs and enter into other power transactions with AEC as soon as AEC can consummate a wheeling agreement with Mississippi Power. Cajun has in this instance, and in all similar instances, actively sought alternative transactions in order to minimize the losses incurred by the failure of Southern and its subsidiaries to provide transmission services.

The fourth instance of Southern operating subsidiaries' failure to transmit Cajun power involved a potential sale of Cajun power to Seminole Electr ic Power Co-operative ("Seminole") . A ,

recent fire at one of Seminole 's generating stations requires Seminole to purchase 150 MW of power at least over the summer peak electric months of June, July and August. Cajun stood ready, willing , and able to sell that power to Seminole and concluded an agreement in pr inciple with Seminole. The key to the transaction was the wheeling of Cajun power o"(. the Southern transmission system. On May 19, 1988, representacives of Cajun and Southern met to discuss the wheeling of Cajun power for ultimate delivery to Seminole. In response to Cajun's request for transmission service, Southern provided its now-familiar litany of reasons for its re fusal to wheel Cajun power .

First, Southern purportedly had not received adequate assurances that Cajun had the right to use the McKnight/ Plant l Daniel Line . This was the first time that Southern informed Cajun that the letter of February 18, 1988, previously supplied by Cajun and GSU to Southern, Exhibit E hereto, was insufficient to provide such assurances. S ig n i f icantly , Southern waited thtge months to inform Cajun that the assurances were insufficient. S Pr ior the February 18, 1988 le t te r , Cajun had 3/ to secu r ed from GSU two sepa ra te letters from GSU to Southern, both of which Southern belatedly rejected as l

itau f ficient to assure Southern that Cajun had access to the McKnight/ Plant Daniel Line. See 9, n.5 infra.

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Immediately following the submission of the February 18, 1988 letter, Cajun contacted Southern to determine whether the assurances in the February 18, 1988, letter were sufficient.

Sou thern 's representative responded at that time that the assurances appeared suf ficient but that legal consultation was necessary. At the- May 19 meeting Southern's counsel stated that the assurances were incufficient.

Second, Southern required assurances that GSU would not rely on the Cajun use of the McKnight/ Plant Daniel Line to avoid its performance under the Facilities Charge Agreement regarding that transmission line.

Th i rd , Southern Companies required assurance from GSU that GSU would not use the wheeling transaction in litigation involving Southern. GSU and Southern are before the Federal Energy Regulatopy Commission ("FERC") and the United States Distr ict Cou rt M in cases involving GSU 's responsibility to continue to purchase substantial amounts of capacity and energy f rom Sou thern. GSU has relied upon economy power sales by GSU to Southern as evidence that Southern did not have adequate capacity to make the capacity sale to GSU. Southern seeks GSU 's assurance that this wheeling transaction will not be used by GSU in any .

manner in this li t ig a t ion . Southern 's concerns regarding litiga-tion exposure fail for two reasons. First, in the FERC litiga-tion, the FERC has rejected GSU 's arguments that GSU 's economy sale to Southern indicates a lack of Southern generating- capa-bility. See Southern Company Services, Inc., et al., FERC Docket Nos. EL8 6-53-000 and EL8 6-57-000, Op. No. 300, 43 FERC 161,003 (April 1, 1988), reh'g denied, Op. No. 300-A, 43 FERC T (May 1988) . Second, the transaction by Cajun is a wheeling This transaction, transaction, not a sale of power or energy.

therefore, is irrelevant to an analysis of Southern's generating capacity. Regardless, Southern still requires these assurances pr ior to initiating a wheeling transaction for Cajun. Th is is l

particularly offensive since Southern currently transmits power for other utilities , even GSU, without any such assurances.

' Fourth, Southern requires assurances that Seminole has the ability to import the power over the Florida border. There exists a physical interconnection between Southern and certain l

i l 4/ Sou thern Company Services, Inc., FERC Docket No. EL86-

!53-000; Gulf States Utilities Company v. Southern Compan) Se r v ic e s , Inc., et al., FERC Dock e t No. EL86-l i 57-000; Gulf Sta te s Ut ilities Company v. Alabama Powei Company, el a l . , Civil Ac tion No. B-86-634-CA (E. D.

l Tex.).

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Florida utilities with a rated capability of approximately 3200 MW.

Southern claims to have secured the right to utilize 2550 MW of this capability. Southern refuses to make any of this transfer capability available for the Cajun / Seminole transaction and stated that it would not consider a wheeling arrangement unless Cajun or Seminole had access to a suf ficient portion of the remaining 650 MW of the transfer capability to effect the transaction.

At this date, the Seminole transaction has not been consummated and the expectation is low that Southern will voluntarily wheel Cajun's power for ultimate delivery to Seminole. The adverse financial impact on Cajen is substantial.

Fu r ther reflection of Southern's policy with Cajun is its re fusal to purchase Cajun power , even where it is economi-cally bene ficial to Southern to purchase Cajun power. In July 1987, Cajun sought to sell power on an econony interchange basis with Sou thern. Southern informed Cajun that Southern had desired to purchase this economy energy from Cajun. See Exhibit A.

Cajun met with its fuel suppliers to attempt to obtain a su f fi-ciently low fuel price to make the transaction extremely attrac-tive to Sou thern. When Cajun believed a transaction was on the verge of consummation, Southern refused to enter into the trans ,

action because of an alleged fear that GSU would raise any Cajun-Southern transaction in the litigation discussed above. See Exhibit A. Assurances were deemed by Southern to be needed. 5/

5/ One Such assurance, a sta tement by GSU that Ca jun wa s auth ized to use the McKn ight/ Plant Dan iel Line, was sent ay GSU to Sou thern on April 16, 1987 wh en Ca ju n was a tte mpt ing to ob ta in an in terconnec t ion agreement with Sou the rn . See Exhibit F. Sou thern refused to ents. into an interconnection ag reement with Cajun, on the stated ground that Southern would not be physically interconnected with Cajun f acilities. See Exhibit G.

On Sep temb er 2, 1987, Cajun met with Sou thern to a tte mp t to salvage the ec onomy energy sale trans-action. At th a t time, Sou thern requested a further assurance, in light of in terv ening events involving Cajun and GSU, that Cajun had the r ig h t to use the McKnight/ Plant Dan iel Line. On September 3, 1987, GSU sent a second assutance letter almost identical to the first. See Exh ibit H. The ftrat time that Southern even suggested that the proffered assurances were insuf ficient was in a November 30, 1987 le t te r (Exh ibit B hereto) , more than seven months af ter the April 16 ,

1987 letter.

However, Southern is selective in imposing this assurance oblig a t ion. Southern subsidiaries have purchased energy from other suppliers, including the City of Dalton, Georgia (Georg ia Powe r) and Mississippi Power & Light Co. (Gulf Power , Alabama Power) during the relevant time frane with no assurances from GSU that it would not use such purchases against Southern in li t ig ation .

On January 21, 1968, Cajun met again with Southern and GSU in an attempt to salvage this econony energy transaction with Sou ther n . At that time, Southern again raised the specter of GSU use of the economy energy transaction in pending or fu tu re liti-gation with Southern . Additionally , Southern raised two other 3

barr iers to the transaction which mirror Southern's responses to Cajun wheeling requests.

First, Southern required assurances from GSU that Cajun was author ized to use the McKnight/ Plant Daniel Line to ef f ect the transaction.

Second, Southern required assurances from GSU that GSU would not use the Cajun-Southern transaction to avoid payments to Mississippi Power under the Facilities Charge Agreement. .

Southern also requested indennification f rom Cajun if GSU did f ail to make such payments. It is Ca jun's understanding ,

however, that Southern will not currently require such indemni-fication if GSU will assure Southern that it will not use the Cajun / Southern econony energy transaction to avoid payments under l the Facilities Charge Agreement.

l The economy energy transaction remains stalled.

l Having established that Southern will wheel or purchase economy energy only upon performance by Cajun or third parties of l

j unreasonable or irrelevant conditions, the matter of the intent

' and the import of these actions arises.

i Southern plans and constructs f acilities substantially based upon the system as a whole. See Power Pooling , at 85; Southern Company Intercompany Interchange Contract; see also suora, at 3. Southern and its subsidiaries, through their system power, including the nuclear power f rom these plants , are direct conpetitors with Cajun for sales to ADC, Seminole , and TVA.

Thus, Southern's unreasonable and irrelevant conditions prevent Cajun from enter ing into transactions in the Southeast and have a direct relationship to the nuclear power plants owned by Southern sub sid ia r ie s .

For the foregoing reasons, Cajun urges the Nuclear Regulatory Commission to investigate Southern and its subsi-l l

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diaries and to expand any conditions on the nuclear plant licenses of Southern subsidiaries to apply to the entire Southern ef et ?m and all subsidiaries. Otherwise, as is evident from che abcia discussions, an entity which is protected by licence conditions applicable to one Southern subsidiary (such as ADC which has guaranteed wheeling f rom Alabama Power pu rsuant to the Farley license conditions) will not be protected from refusal to wheel by another Southern subsidiary (such as Mississippi Power) .

Cajun's representatives and Staff look forward to meeting with you and your Staf f to discuss these matters.

Sinc er ely ,

k s N =s James D.

s Pe mb ro e J. Cathy Fogel Attorneys for Cajun Electr ic Power Cooperative, Inc.

Enclosures .

cc: Dr . Thoma s Mu rley , Dir ec tor Of fice of Nuclear Reactor Regulation Joseph Rutberg Janet Urban William Lambe H. Allen Franklin Robert O. Usry Rodney O. Mundy J. A. Vann, Jr.

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October 15, 1987 RECElVED OCT 191c87 Mr. Phillip G. Harris Vice President of Operations Y.P oP.EMT g Cajun Electric Power Cooperative, Inc.

10719 Airline Highway Post Office Box 15540 -

Baton Rouge, Louisiana 70895

Dear Mr. Harris:

This will acknowledge receipt of your letter of September 22, 1987 regarding

.the proposed energy transactior between Cajun and Southern Companies. Like you, we regret that we are unable to purchase.this energy from you. I get the impression from your letter, however, that you feel it was the hesitance or unwillingness of Southern Companies that kept this transaction from ~

occurring. We wish to assure you that such is not the case; it was the actions of Gulf States Utilities Company that prevented us from reaching an agreement with you.

As you know, there is presently litigation between Gulf States and Soutnern Companies in both the Federal Energy Regulatory Comission and in the United States District Court in Texas. As a part Jf that litigation, Gulf States alleged that Southern Companies do not have adequate capacity to serve their territorial load. At FERC, Southern Companies successfully disproved this allegation and received a favorable ruling from the Presiding Administrative Law Judge.

When your energy became available, Southern Companies desired to purchase it, but cou'.i do so only if Gulf States would agree not to use the purchase as evidence in any litigation. Energy transactions such as you proposed are comonplace in the electric utility industry and certainly not evidence of inadequate capacity to serve territorial load. Gulf States took the posi-tion that if Southern Companies purchased energy from Cajun, then this transaction might be considered by Gulf States as evidence supporting their allegations.

Southern Companies have sufficient capacity to serve their territorial load without this purchase and look at this energy transaction as an opportunity to reduce their overall energy costs. Regretfully, Gulf States did not view the transaction this way. Since this action of Gulf States has potentially far more detrimental impact on our ratepayers than the energy purchase has beneficial aspects, we could not in good faith go forth with the transac-tion.

Mr. frill 1:: 3. -ar"*S Cetocer 15, 1937

, ,Page Two Regarding your request that Southern Companies confirm that our transmission facilities are available for arrangements Cajun is seeking that require transmission over Southern Ccmoantes' facilities, then we must regretfully decline to do this. Any delivery service over Southern C0mpanies' electric system must be the subject of agreed upon delivery charges and other terms and conditions so as not to interfere with the prudent operaticn of cur transmissien system. 3efore we could agree to suen delivery service, we would have to have a great deal more infonnation about your proposed trans-actions, in'cluding infonration such as the proposec buyer, the ; c:osee load, and other scheduling information. Without such deuiled infer a-fon and the opportunity to study it. Southern can make no cermiitment for de-livery service.

We trust this letter is responsive to your requests, and we will be glad to meet with you for further review.

Sincerely, h

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EXHIBIT B 9

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. . e Post Cff.ce Box 2625 o e 505 8 2 R. o. usry the southem elec1rc system November 30, 1987 RECElVED Mr. Phillip'G. Harris Vice President of Operations utC 031987 Cajun Electric Power Cooperative, Inc. V. R. CPERATICNS 10719 Airline Highway Post Office Box 15540 Baton Rouge, Louisiana 70895

Dear Mr. Harris:

We appreciate your recent visit to our offices in Birmingham. At that meeting, you explained your relationship with GSU concerning Cajun's rights to use transmission facilities owned and operated by GSU. At the meeting and by subsequent correspondence, you provided us with documents, rate schedules, and orders of the Federal Energy Regulatory Commission addressing Cajun's legal rights to utilize GSU's transmission facilities. .

Although we have reviewed the documents and information supplied by Cajun, we are simply unable to make a definitive judgment regarding the extent of Cajun's rights ta utilize GSU's transmission system. This inability is .

particularly troublesome with respect to the Daniel-McKnight line, a portion of which is owned by Mississippi Power Company but which is made available by Mississippi Pover Company for use by GSU under a transmission use agree-ment between GSU and Mississippi Power Company. Under that transmission use agreement, GSU pays designated use fees related to the Daniel-McKnight 500 KV transmission line.

It has not been the practice of the operating subsidiaries of The Southern Company (Southern Companies) to enter into interconnected operations with utilities with which they do not have a direct interconnection. A direct interconnection and an interconnection agreement have been considered necessary to provide the operational and legal framework for interconnected operations and attendant services. We realize, however, that transmission agreements you have with GSU may provide the framework for some intercon-nected transactions.

At the meeting, you requested that we provide transmission services to accomodate proposed energy transactions that might be arranged between Cajun and TVA. We would be willing to discuss the requested transmission services given necessary assurances:

(a) A representation and warranty by Cajun Electric Power Cooperative that it has contractual or ownert. hip rights to use GSU's transmission system including the right to use GSU's portion of the Daniel-McKnight 500 KV line.

Mr. pnillio G. Harr..

' tiovember 30, 1987 Page Two (b) Assurance from GSU in the form of representations, warranties, or appropriate indemnity agreements that Cajun Electric Power Cooperative has the right to use GSU's transmission system and GSU's portion of the Daniel-Mc.< night 500 KV transmission line. Included within these assurances and representations would be a representation that GSU does not object to the proposed energy transactions and will take steps to facilitate such transactions.

(c) Assurances and representations frem Cajun including an appropriate indemnity agreement that it will protect and hold Southern Companies harmless in any litigation which arises out of or in any way concerns the electric transactions proposed by Cajun Electric Power Cooperative.

Af ter we have received the above-outlined assurances, we will undertake to We would be receptive explore ways to accomodate the proposed transaction.

to a meeting between representatives of Cajun Electric Power Cooperative and Please contact me if you C30 to discuss the above-described assurances.

believe that such a meeting would be appropriate and productive.

Sincerely, .

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TRANSMISSION FACILITIES AGREEMENT c,

BETWEEN GULF STATES UTILITIES COMPANY ,

m Is~ e AND MISSISSIPPI POWER COMPANY m g, m K' ~ i s ' ' ,,,

THIS AGREEMENT , made and entered into as of the 5$h .',

day of February, 1982, by and between GULF STATES UTI TIES COMPANY, a Texas corporation ("GSU"), and MISSISSIPPI OWER COMPANY, a Mississippi corporation ("MPC") . @^ u.

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E I I E E E E E I E' WHEREAS, Alabama Power Company, Georgia Power Company, Gulf Power Company, Southern Company Services, Inc., and MPC (collectively the "Southern Companies"), and GSU, are par-ties to an Interchange Contr.act which is of even date and contemporaneous term horewith, which provides for the establishment of. a certain point of interconnection between the electric systems of the parties, and, pursuant to the terms of which the parties provide for the construction and -

maintenance of a point of interconnection which will provide and improve system reliability of each of the systems; and WHEREAS, the Southern Companies and GSU are parties to a Unit Power Sales Agreement which is of even date herewith, which provides for the sale from the Southern Companies to GSU of capacity and energy from specified coal-fired steam l

generating units of the Southern Companies in the years and I amounts specified therein; and WHEREAS, the transmission facilities provided for in (this "Agreement")

this Transmission Facilities Agreement are necessary in order to implement capacity and interchange transactions under the Interchange Contract and the Unit Pcwer Sales Agreement as aforesaid, and to improve the sys-tem reliability of each of the parties' systems; and .

WHEREAS, substantial benefits may be secured for GSU and MPC and for the customers served by them by mairtaining an interconnection, by coordinating the operations of their respective power systems, and by the purchase, sale and l

l interchange of capacity and energy; and i

WHSREAS, MPC has agreed to construct, )perate and main-tain the transmission facilities described in this Agreement on the terms and conditions set forth herein; and t

WHEREAS, GSU has agreed to pay MPC for the use of such transmission facilities as provided herein;

NCW, THEREFORE, in consideration of the premises and the covenants and agreements hereinafter set forth, the parties hereto agree as follows:

ARTICLE I DEFINITIONS 1.1 TRANSMISSION FACILITIES: The term "Transmission Facilities" as used herein shall refer to a 500 kv trans-mission line to be constructed by MPC (as provided for in Article III hereof) from its V. J. Daniel Steam Plant lo-cated in Jackson County, Mississippi, to the interconnection point at the Mississippi-Louisiana State Line in Pearl River County, Mississippi. The term "Transmission Facilities" shall also include 230/500 kilovolt transmission substation facilities at said Plant Daniel, towers,. poles, and other facilities necessary to provide the interconnection .from MPC's system to GSU in accordance with this Agreement. The ,

l 500 kv line is being designed and constructed to provide l

i 3,000 mva line capacity, with the initial 230/500 kv trans-l formation facility at Plant Daniel to be of 1,500 mva ca-pacity. The location of the interconnection is shown on l Exhibit A to this Agreement which is attached hereto and incorporated herein by reference.

l 1.2 Prudent Utility Practices: The term "Prudent Utility Practices," as used herein, shall mean at any particular time any of the practices, methods and acts

• engaged in or approved by a significant portion of the electric utility industry prior to such time, or any of the practices, methods and acts which, in the exercise of rea-sonable judgment in light of the facts known at the time the decision was made, could have been expected to have accom-plished the desired result at a reasonable cost consistent

• with good business practices, reliability, safety and ex-pedition. "Prudent Utility Practices" are not intended to be limited to the optimum practice method, or act to the exclusion of all others, but rather to be a spectrum of possible practices, methods or acts expected to accomplish the desired results.

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ARTICLE II -

TERM OF AGREEMENT l

This Agreement shall become effective as of 1

2.1 Term:

the date of the latest signature on the signature page 1

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hereof and shall continue for a term expiring forty (40) years after the Transmission Facilities described in Sections 1.1 and 3.1 hereof are declared by MPC as available for commercial operation. The phrase "available for commercial operation", aa used herein, means that the Transmission Facilities to be constructed by MPC have been for completed and are capable Itofisperforming the functions anticipated by the parties which they were designed.

that the Transmission Facilities will be declared available for commercial operation by June 1, 1984, and that this Agreement accordingly shall terminate by May 31, 2024.

Since GSU desires that MPC complete construction of the Transmission Facilities at the earliest possible time, it is agreed that the 40-year period shall begin prior to June 1, 1984 in the declared event for available thatcommercial the Transmission Facilities operation before suchare date.

MPC 2.2 Federa1 Energy Regulatory Commission Filing:

agrees to file this Agreement, togetherEnergy with. the Federal with appropriate Regulatory .

supporting documents, Commission ("FERC") within sixty (60) days after execution of this Agreement by both parties and to use its best ef-forts to have this Agreement accepted for filing and ordered ef f ective by FERC, or its successor agency, as soon as .

reasonably possible. GSU agrees to cooperate with and as-sist MPC in securing the conclusion of the initial review by FERC of this Agreement withoutMPC significant and GSUchange each hereto, hereby re-and in an expeditious manner. and appeal any change i

serve the right to object to, contest, or in the Use Fees (as provided for in Article IV hereof) terms and conditions of the agreements contemplatedsuch hereby Use l

in any appropriate FERC or court proceedings, but l Fees, terms and conditions as are approved in the applicable j

final order shall control for purposes of this Agreement subject to change by mutual agreement or by subsequent final .

orders of FERC.

ARTICLE III CONSTRUCTION OF TRANSMISSION FACILITIES MPC 3.1 MPC to Construct Transmission Facilities:

agrees to construct or cause to be constructed the 500 kv from its V. J. Daniel , Steam Plant Transmission located in JacksonFacilities County, Mississippi to a dead-end struc-ture in Pearl River County, Mississippi, located ontthe MPC shall use its best Mississippi efforts side of the Pearl River.to have the Transmission Facilities compl declared available for commercial operation no later than June 1, 1984. ,

3.2 GSU to Connect to Transmission Line: It shall be the respons1Dility of GSU to connect its own transmission line to the Transmission Facilities brought by MPC to the dead-end structure on the Mississippi side of the Pearl River. GSU shall be responsible for constructing its trans-mission line across the Pearl River, and for obtaining all necessary app'rovals and permits in that regard. It is the intent hereof and the parties agree that MPC shall own and maintain the 500 kv transmission line to the Mississippi-Louisiana State Line above the Pearl River, or to such other 7.oint as such State Line may be relocated.

ARTICLE IV USE FEES 4.1 GSU to Pay Use Fee for Transmission Tacilities:

So long as MPC is not in default hereunder, GSU shall pay MPC, on a monthly basis, a Use Fee for the Transmission -

Facilities in accordance with the Transmission Facilities Use Fee Manual which is attached hereto as Exhibit B to this Agreement and incorporated herein by reference, commencing when the Transmission Facilities are declared available for commercial operation.

GSU and MPC recognize that the cost of MPC's continuing obligations under this Agreement may change during the term of this Agreement. Thus, in order fo'r MPC to be compensated fairly and adequately, it will be necessary to revise or update on a periodic basis (at least annually), the cost, expense and investment figures utilized in determining the Use Fee. The Transmission Facilities Use Fee Manual was adopted by the parties in order to f acilitate revisions or updates of the Use Fees over the term of this Agreement.

The Transmission Facilities Use Fee Manual describes in -

detail the methodology and procedure to be utilized in the periodic calculation of Use Fees provided for in this Agreement.

MPC shall have the right to make unilateral application at any to FERC for changes in the Use Fees to the extent, time, that any additional legitimate costs not now in exis-tence, are incurred with respect to providing MPC's continu-ing obligations under this Agreement, which such costs are not recouped under the Use Fees calculated in the Transmis-MPC and GSU agree tha't MPC sion Facilities Use Fee Manual.

shall be entitled to recover from GSU such costs immediately as incurred subject to refund with interest in the event it is finally determined that all or any part of such costs are disallowed by FERC after resort to any appeal to the courts.

MFC further shall have the right to unilaterally make

,' application to FERC to amend the Use Fees established in

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this Agreement and the Transmission Facilities Use Fee Manual, including the right to make changes in provision for percentage return on equity capital and cost components included in the formula for Use Fees. MPC shall have the right to unilaterally make application to the FERC for a change in rates under Section 205 of the Federal Power Act and pursuant to the Commission's Rules and Regulations pro-mulgated thereunder. After any such application, the amend-ments or changes shall become effective, subject to refund, at the earliest possible date under the governing rules and regulations of the FERC. In all events, GSU shall be free to support or contest any amendment or change applied for by MPC or raise any objection it may have to any amendment before FERC and to contest and appeal any FERC order.

In addition to all other rights reserved to GSU in this Agreement to contest any amendments or changes sought by MPC and any orders of FERC, GSU reserves and shall have 'all rights and remedies available to it to seek relief from any -

discriminatory or unreasonable charges by MPC, including but not limited to any rights and remedies available to it under Section 206 of the Federal Power Act.

4.2 Early Completion of Transmission Facilities:

Since GSU desires that MPC complete construction of the Transmission Facilities at the earliest time, GSU agrees, in the event that such Transmission Facilities are completed prior to June 1, 1984, to commence payment of the Use Fees provided in Section 4.1 hereof at such earlier time as the Transmission Facilities are declared available for commer-cial operation. It is agreed that GSU's obligation to pay the Use Fees hereunder shall not be contingent on the com-pletion by GSU of its own transmission line or facilities to the interconnection point, irrespective of the cause for -

such failure of completion by GSU.

4.3 Connection to Transmission Facilities by MPC: It is the intent of both GSU and MPC that MPC is entitled to connect other transmission facilities to the Transmission Facilities based upon terms and conditions, including charges (providing for reasonable payments to GSU to reflect the effect of such connection and the use made of such fa-cilities), then mutually agreed upon by the respective par-ties. '

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ARTICLE V I BILLING AND PAYMENTS 5.1 Presentation and Payment of Bills for Use Fees:

Use Fees in the amounts determined in accordance with Article IV for each month shall be stated in an invoice presented by MPC to GSU on or before December 1 of each year, beginning in the first calendar year in which the Transmission Facilities are declared available for com-mercial operation, stating the amount due each month during the ensuing year; provided, however, that MPC shall present GSU an invoice for the remainder of the calendar year in which the Transmission Facilities are declared available for commercial operation within sixty (60) days following the ,

date of such declaration by MPC. To the extent the monthly Use Fees specified in any such invoice change as a result of causes specified in this Agreement or in the Transmission Facilities Use Fee Manual, an amended invoice shall be pre-sented to GSU by MPC as soon as pract Jable after such change occurs. On or before the fifteenth day of each month -

of the ensuing year, GSU shall make payment to MPC, in ac-cordance with the .'nvoice or amended invoice, in immediately available funds, through wiring of funds or other mutually agreeable methods of payment. Any adjustment due to be made as a result of the procedures set forth in the Transmission Facilities Use Fee Manual shall be added to or subtracted from the invoice due to be paid in the month next following the date on which GSU is notified by MPC (by mail and tele-copy on the same day) of such adjustment. Such payment shall also include any amounts theretofore invoiced by MPC -

and not paid by GSU associated with the administration of the true up provision as specified in the Transmission Fa-cilities Use Fee Manual. Payments of Use Fees not made when due shall accrue interest, at one hundred five percent (1054) of the prime rate quoted on the date due by Manu-

• facturers Hanover Trust Company in New York, New York, from the due date to the date of payment (a day shall equal 1/30 of a month) . Payments of Use Fees which are in excess of amounts w'aich would have been due based upon actual trued up costs shall be credited or refunded to GSU together with interest thereon from the date of payment to the date of-credit or refund accrued on the same basis as provided in the preceding sentence. The rate of interest calculated hereunder shall in no event exceed the maximum rgte allcwed by law. The intention of the parties being to conform strictly to the Usury Laws now .in force, any of said bon-tracts for interest shall be held to be subject to reduction to the highest amount 311 owed under said Usury Laws as now or hereafter construed oy the courts having jurisdiction.

4 Disputed Invoice: In the event that any portion 5.2 of an inv61ce submitted pursuant to Section 5.1 is in bona fide dispute, the undisputed amount shall be payable when due; and thethe remainder correct shall be paid amount, in promptly, upon accordance with determination of Section 5.1. Upon request by GSU, MPC shall provide copies of supporting documentation and records necessary to verify invoices whether disputed or undisputed.

5.3 Audit Richts:

MPC shall, upon written request any from GSU, promptly make arrangements for GSU to audit and all books and records of MPC which relate to and are necessary for verification of Use Fees paid by GSU under this Agreement.

Such audit, at the option of GSU, and at GSU's sole expense, shall be performed by GSU or by a nationally recognized accounting GSU's right firm to experienced audit such in utility records accounting practices.

shall extend for,a period of three (3) years following any year to which such audit relates.

ARTICLE VI CONTINUING OBLIGATIONS OF MPC 6.1 MPC Construction and Operation of Transmission Facil-ities:

shall construct and operate the Transmission Facilities in accordance with Section 3.1 hereof.

6.2 Maintenance and Repair of Transmission Facilities: ,

MPC's continuing obligations with respect to the maintenance i

and repair of the Transmission Facilities shall include, but l

shall not be limited tot 6.2.1 Periodic patrols and inspection of the Transmission Facilities and right-of-way areas; .

6.2.2 Periodic clearing of right-of-way areast 6.2.3 Replacement of worn or broken insulatorst 6.2.4 Repair of towers, foundations, and guy wires; 6.2.5 Routine substation inspection, including I

routine maintenance, and repair of worn or broken parts; t 6.2.6 Any and all other maintenance and repair which is required by Prudent Utility Practices.

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l 6.3 Standard of Perform 3nce of Obligations: In con-nection witn the construction, operation and maintenance of the Transmission Facilities r3ferenced in this Agreement,

/ MPC's standard of maintenance and performance during the terr of_this Agreement shall be at least equal to the scandard which.it would use ifand such MPCTransmission Facilities shall not discriminate were solely for its own use, against such Transmission Facilities in relation to its other facilities.

ARTICLE VII FORCE MAJEURE 7.1 Delays in Construction or Service Notwithstanding the schedule of construction of the Transmission Facilities set forth in Article III hereof, the obligation of MPC to make the Transmission and to keepFacilities available for the Transmission commercial Facilities in

• operation, service, shall be subject to delays in construction and interruptions in service. Construction on and interruptions in service to the Transmission Facilities shall be governed by the following principles:

7.1.1 MPC agrees to use best efforts consis-cent with Prudent Utility Practices (as defined in Section 1.2 hereof) , to design and construct, or to have designed and constructed, the Transmission Facilities so that such Transmission for ccmmercialFacilities shall operation as have of thebeen date declared available set forth in Section 3.1. MFC shall not be liable to GSU for any loss, damage, injury or expense (including consequential damages and cost of replacement power) for delays or f ailure to have the Transmission Facilities declared available for commercial operation as of such date, or for delays or failures to keep -

the Transmission Facilities in service, due to causes not reasonably within its control including, e.

but courts not limited or to, acts of civil oragencies) administrative military authority (d", g.war,

, acts of Go , riot or insur-rection, inability to obtain any required permits, licenses, er right-of-way easements, blockades, embargoes, sabotage, epidemics, fires, floods, strikes, lockouts or other labor disputes or dif ficulties, unusually severe weather condi-tions, breakdowns of machinery or equipment, inability to obtain necessary materials or equipment, and economic con-straints such as inability to secure adequateIn capital'on the event reasonable terms for continued construction.

of any delay in having the Transmission Facilities declared available for commercial operation resulting from such causes, the date set forth in Section 2.1 hereof as the

.' beginning of the 40-year period of this Agreement shall be

,' extended for a period of time necessary to overcome the effect of such causes. MPC shall keep GSU informed of the construction schedules for the Transmission Facilities and any changes which alter the anticipated dates for commercial cperation of the Transmission Facilities, together with the MPC shall not be required by the reasons for such changes.

foregoing provisions to settle a strike er other laborsuch dis-a pute except when, according to its own best judgment, settlement seems advisable, 7.1.2 In the event that the date for commercial operation for the Transmission Facilities is delayed, MPC shall have no obligation during the period of delay to fur-nish any other lines in substitute therefor.

7.2 No Obligation to Pay Until Transmission Facilities Declared Available For Commercial Operation: Nothing in this Agreement is intended to obligate GSU to pay the'Use Fees provided in Article IV hereof prior to the time that '

the Transmission Facilities are declared available for com-mercial operation.

ARTICLE VIII INTERRELATIONSHIP WITH INTERCHANGE CONTRACT 8.1 It is recognized by MPC and GSU that the Inter-change Contract executed on even date herewith governs the interconnected operations of the parties thereto, and that the Transmission Facilities provided for herein are neces- <

sary for such interconnected operations. It is further agreed that this Agreement will not be subject to termina-tion or cancellation by either party and will continue in -

effect contemporaneously with the Interchange Contract until this Agreement expires as provided in Section 2.1 hereof.

To the extent not inconsistent herewith, such Interchange contract, including any amendments thereto, shall govern the operations of MPC and GSU hereunder; provided, however, that the Use Fees set forth herein shall be paid by GSU notwith-standing any inconsistent provision in the Interchange Con-tract.

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ARTICLE IX MISCELLANEOUS t

i 9.1 Responsibility and Indemnificationt GSU and MPC expressly agree to indemnify, save harmless and defend the other against' all claims, demands, costs or expense for

-loss, damage,-or injury to persons or property, in any man-ner directly or indirectly connected with or growing out of the generation, transmission, or use of electric capacity and energy on its on side of the interconnection point here-under, irrespective of negligence actual or claimed of the .

other.

9.2 Notices

Any notice, demand or request required or authorized by this Agreement shall be deemed properly given if mailed, postage prepaid:

To GSU Gulf States Utilities Company P. O. Box 2951 Beaumont, Texas 77704 Attn: Executive Vice President-Operations To MPC:

Mississippi Power Company .

P. O. Box 4079 Gulfport, Mississippi 39501 Attn: Vice President-Engineering and Operations The designation of the person to be notified or the address of such person may be changed by GSU or MPC at any time, or from time to time by similar notice.

9.3 Waivers

Any waiver at any time by GSU or MPC of its rights witn respect to the other or with respect to any other matter arising in connection with this Agreement shal1 not be considered a waiver with respect to any subsequent default or matter. .

9.4 Subcessors and Assigns: This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the respective parties hereto, but it shall not be assignable by either GSU'or by MPC (except to others of the Southern Companies) without the written consent of

the other party, except in accordance to a with the successor in provisions the of operation

- a mortgage or deed of trust Nothing in this of the properties of a signatory hereto.

Agreement shall be construed as a stipulation for the benefit of others (except for others of the Southern Com-

/ panies), and no third party (not a party to this Agreement, i

for ot'hers of the Southern Companies) shall be except entitled to enforce this Agreement.

(The next page is the signature page, page 12.T 9

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IN WITNESS WHEREOF, the parties to behereto have by executed caused theirthis duly Transmission Facilities Agreement authorized officers effective as of the date set forth in Section 2.1.

GULF STATES UTILITIES COMPANY ATTEST:

W $ $h By spyyr J.#ET Bdndurant W

ffyg, 'Ed W ~~ Executive Vice President, Operations Date: 2/25/82 MISSISSIPPI POWER COMPANY ATTEST: ,

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HW. Bell, Jz'. ~ ~

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Vice President Date: 2/25/82 e

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EXHIBIT B ADDENDUM TO TRANSMISSICN FACILITIES AGREEMENT BEWEEN GSU AND MPC ,

TRANSMISSICN FACILITIES USE FEE MANUAL Section 0.0 . Description and Purpose of this Manual: This addendum to the Transmis'sion Facilities Agreement Between GSU and HPC (Agreement) entered into the 25th day of February,1982, contains a formulary description of the methodology and procedure used to calculate the Use Fees for each Contract Year It is related the intent to the of Transmission the parties that Facilities this '

described in the Agreement.

Manual will provide for allocation methods and costing procedures to derive Use Fees for the Transmissien Facilities which will be fair to the custcmers of both parties so that the customers of one party will not be unduly burdened or benefited by the customers of the other.

The term "Contract Year" as used herein shall mean calendar year. The Manual is divided into four (4) basic articles as follows:

Article I - Derivation of the Use Fees for Transmission Facilities .

Article II - Derivation of Return on Common Equity Article III - Support Schedules and Informational Schedules Article IV - Adjustments for Actual Cost section 0.1 Allocation Methods and Procedures The allocation methods and procedures set forth in this Manual have been developed with reference to the Mississippi Power Company's (KPC) present acccunting practices; if such accounting practices change in the future so as to make the allocation methods and procedures specified in this Manual inappropriate, the allocation methods and procedures shall be deleted or changed to meet the new accounting practices of MPC, provided such changed allocation methods and procedures are fair and equitable. Such allocation methods and procedures shal1 he in ac- .

cordance with income tax normalization requirements prescribed by the Internal Revenue Service Regulations.

Section 0.2 "Uniform System of Accounts,"_: The accounts set forth in this Manual are currently prescribed in the Federal Energy Regulatory Cc= mission's (FERC) "Uniform System of Accounts Prescribed for Public Utilities and Licensees (Class If taessA accounts and Class are B)" in effect then amended, as ofthis the date of this Agreement.

Manual shall be construed to reflect the amended accounts prescribed by FERC or its successor agency.

In' Section 0.3 Changes in Taxes and Other Governmental Charges i

addition to the Use Fees computed by the formulary methodology con-tained in this Manual, GSU shall pay HPC any new tax, or increase in existing taxes due to changes impos,ed by tax collector, governmental

ittposition, or charge (excepting state, county, city, and special district ad valorem taxes and any taxes on net incente) levied with respect to the Transmission Facilities owned by MPC as described in the Agreement after the effective date of the Agreement, or Use Fees paid pursuant to the Agreement.

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ARTICLE I_

CERIVATICN OF USE FEES FCR TRANSMISSICN FACILITIES This article of the Manual establishes the formulary methodology for deriving .the Use Fees for Transmission Facilities used for will This methodology the be service to be' supplied under the Agreement.

used for the development of estimated monthly Use Fees for initial billing as well as actual monthly Use Fees as specified in Article IV.

The Section 1.1 Derivation of Transmission Facilities Costs:

d2rivation of the Transmission Facilities Use fees is based on the investments, expenses, and the cost of capital and income taxes and associated substation facilities related to transmission line(s)The derivation of the monthly Transmission during the Contract Year.

Facilities Use Fees is expressed in the following formula R = I x (CM.+ IT)/100 +E 12 Where:

R = Monthly Transmission Facilities Use Tees ($/ month),

associated CM = The weighted average cost of capital (Percent) with the Transmission Facilities.

IT = The income tax requirement associated with the preferred stock and common equity weighted cost of capital (Percent) associated with the Transmission Facilities.

• I = The end of month total net investment in Transmission Facilities (D,ollars).

t E = The monthly expenses for Transmission Facilities (Dollars). '

l The source of the investment and expense data incorporated in the above formula (including FERC Account numbers and description of is as allecation procedures and calculation of the cost of capital) folicws:

included in FERC Account 104, Electric Section 1.1.1 Gross Investment 350, 354, Plant Leased to Others, is the summation of FERC Accounts 355, 356, 357, 358 and 359 associated with the transmission line f acility plus the associated transformation and switching equipment in Gross. ATUDC will be computed ini, Accounts 330, 352, and 353. The balances and accordance cost rates for with long the termformula debt, prescribed by the FERC. preferred stock and c be based on the capitalization and cost of capital described in section 1.1.15. ,

Section 1.1.2 Accumulated Depreciation is that depreciation associated with the gross transmissicn investment defined above.

Section 1.1.3 . Net Plant is the difference between Section 1.1.1 (Gross Investment) and Section 1.1.2 (Accumulated Depreciation).

Section 1.1.4 General Plant (Net) includes the investment in FERC Accounts 389 through 399, but excludes equipment carried in TERC Accounts 389, 398 and 399 which is related to production plant. The allocation of net general plant to Transmission racilities is done on the basis of payroll taxes which is ccmputed in Section 1.1.12.

Section 1.1.5 Working Capital is the summation of cash working capital, prepayments and materials and supplies, and is computed for each month of the Contract Year. The cash working capital for the Transmission racilities is calculated by taking one-eighth (45/360) of The OEM and A&G expenses the sum of the annual O&M and A&G expenses.

are developed in Sections 1.1.8 and 1.1.9., respectively.

Prepayments. are computed on the basis of a 13-month average and are directly assigned to the Transmission racilities and general plant function. Prepayments associated with general plant are allocated to -

the transmission function on the basis of payroll taxes as described in Section 1.1.12. The general plant amount allocated and assigned to the transmission function is allocated to the Transmission racilities en the basis of operation and maintenance expenses as described in Section 1.1.8.

The materials and supplies carried in FERC Account 154 which are associated with the Transmission racilities will be directly assigned to these facilities. The materials and supplies related to the transmission function in Account 154 that are not directly assigned to

• the Transmission racilities will be allocated to the Transmission Facilities on the basis of the ratio of the gross investment, excluding land, of the facilities to the gross investment, excluding land, in the transmission function. The direct and allocated material and supplies are computed on the basis of a thirteen-month average.

Total working capital is computed by adding prepayments, and material and supplies to cash working capital.

Section 1.1.6 Accumulated Deferred Income Taxes are developed for the Transmission racilities for each month of the Contract Year and are the net total of TERC Accounts 190, 281, 282, and 283. The accumulated deferred income taxes related to general plant are allocated to the transmission function as described in Section 1.1.4.

The allocation to Transmission racilities is on the basis of net plant less land. , ,

Section 1.1.7 Total Net Investment represents the direct and al-iccated investments that are associated with the Transmission ra-through cilities and is the summation of Section 1.1.3 (Net Plant)

"I" in 1.1.6 (Accumulated Deferred Inccme Taxes) and is the value for ,

the f ormula in Section 1.1.

Section 1.1.8 Operation and Maintenance Expenses, included in FERC _

Account 413, Expenses of Electric Plant Leased to Others, are the summatien of FERC Accounts 560 through 573, and are allocated in relation to the not plant associated with the Transmission Facilities censidered he. rein unless more detail assignments can be made frca existing MPC records.

Section 1.1.9 Administrative and General Expenses, included in FERO Acccunt 413, Expenses of Electric Plant Leased to Others, are the sure.ation of FERC Accounts 920 through 932, excluding 924, and are allocated to the transmission function based on payroll taxes and to Transmission Facilities on the basis of not investment. Account 924 (Property Insurance) is directly assigned to the Transmission Facilities by MPC.

Section 1.1.10 Depreciation Expense for Transmission Facilities is taken directly from the records of MPC which shall be based on the group straight line depreciation method over the remaining life of the Agreement. The depreciation expense associated with general plant is

• allocated to the Transmission Facilities in accordance with the general plant allocations as described in Section 1.1.4. ,

Section 1.1.11 Amortization of Investment Tax credits (AITC) for Transmission Facilities is taken directly from the records of MPC.

The AITC associated with general plant is allocated to the Transmission Facilities in the same manner as the general plant allocation described in Section 1.1.10.

Section 1.1.12 Payroll Taxes are calculated in the following manner.

The company budgets the salaries and wages by functional group for the Centract Year and accounts for expected changes in number of employees. The expected payroll tax rates for the Contract Year are then applied to the budgeted salaries and wages, making allowance for ceiling level upon which payroll taxes are to be collected, by -

functional group to obtain each function's payroll tax. ,

I A portion of payroll taxes associated with the administrative and general classification is allocated to the transmission function. The- l transmission plant payroll taxes plus the allocated AEG are allocated to the Transmission Facilities based on the ratio of the net investment in the Transmission Facilities to the total net transmission plant investment.

Section 1.1.13 Other Taxes are assigned directly to the Transmission '

Facilities gnd associated general plant and include real and personal property taxes, pole line mileage tax, st&te franchise tax, and sales

tax if any.

Section 1.1.14 Total Expenses represent the direct and allocated expenses associated with the Transmission Facilities considered herein '

and are the summation of Section 1.1.8 (Operation and Maintenance

'l 4

s e e Expenses) through Section 1.1.13 (Other Taxes) and are the value for "E" tr. the formula in Section 1.1.

Section 1.1.15 The Cost of Capital and associated income taxes are cceputed in the following manner:

Cit = (LDT. x i) + (PR x p) + (ER x c)]

where: CR + PR + ER = 1.0 IT = T x ((PR x p) + (ER x c)]

1-T where: T = F + 5 - TS (federal income taxes not deductible for state income tax purposes)

CM = The weighted average cost of capital associated with Mississippi Power Company's cost of construction of the Transmission Facilities (Percent).

IT = The income tax requirement associated with the preferred stock and common equity weighted cost of capital associated -

with Mississippi Power Company's cost of construction of the.

Transmission Facilities (Percent) .

OR = Ratio of debt capital )*

i PR = Ratio of preferred stock )*

ER = Ratio of common equity )*

• The components of the capital structure of MPC will be

• determined by calculating the simple arithmetical averages of each of the components as determined by the capitaliza-tion as recorded on the Annual Report to the Stockholders for end of year capitalization for each year of construction of the Transmission Facilities Leginning in 1982. In the case of a facility which will go into commercial operation -

during the ensuing Contract Year, the components of the capital structure may change between the information avail-able at the time the estimated charges are developed and the time the applicable Annual Report to the Stockholders is available. This one time change in capital structure will be recognized as soon as practicable. If the common equity ratio determined above is less than the common equity ratio j

fcund on the Annual Repcrt to the Stockholders for year-end I

i 1991, then the capitalization ratios as found on the Annual Repo,rt to the Stockholders* for year-end 1981 will be uti- '

11:ed.

~ _ _ _ _ . _ _ _ _ , _ _ _ __ _ _ _ _ _ _ _ _ _ _ _ _ _ , _ - - _ . . . _ _ _ _ _ . _ _ _ _ --

i = The cost of debt capital, which shall be determined as of the date the facility gees into ecmmercial operation, shall be the weighted average percent rate, based en net proceeds, of First Mortgage Bonds issued during the construction of the Transmission Facilities, which shall be calculated by applying the annual percent interest rate of the most recent issue of First Mortgage Bonds prior to the incurrence of each monthly capital expenditure on the Transmission Facili-ties. The cost of debt capital shall be modified after the date of commercial operation to account for additional monthly capital expenditures to the Transmission Facilities by applying the annual percent interest rate of the most recent issue of First Mortgage Bonds prior to the incurrence of such monthly capital expenditure. The cost of First Mortgage Bonds will be adjusted to account for periods exceeding twelve months when no issues of First Mortgage Bonds were made. The cost used after this twelve-month period and prior to the next issue will be determined as the simple arithmetical average cost of First Mortgage Bond issues of comparably rated utilities. As First Mortgage Bonds identified with the Transmission Facilsties are '

retired, the cost of debt will be adjusted to reflect the current rates of First Mortgage Bonds based upon the procedures described above.

p = The cost of preferred stock, which shall be determined as of the date the Transmission Facilities goes into ccamercial operation, shall be the weighted average dividend percent rate, based on net proceeds, of such stock, which such percent rate shall be calculated by applying the annual dividend percent rate of the most recent issue of the

• Preferred Stock prior to the incurrence of each monthly capital expenditure on the Transmission Facilities. The cost of preferred stock shall be modified after the date of ec=mercial operation to account for additional monthly capital expenditures to the Transmission Facilities by applying the annual percent interest rate of the most recent

' issue of the Preferred Stock prior to the incurrence of such '

monthly capital expenditure. The cost of preferred stock l

j will be adjusted to account for periods exceeding twelve l

months when no issues of preferred stock were made. The l

cost used after this twelve-month period and prior to the l next issue of stock will be determined as the simple

' arithmetical average cost of preferred stock issues of ecmparably rated utilities. As Preferred Stocks identified with the Transmission Facilities are retired, the cost of preferred stock will be adjusted to reflect the current rates of Preferred Stocks' based upon the procedures' de-scribed above, c = Return on common equity for MPC as determined in Article II.

7-

e . 4 T = Combined state and federal income tax rate.

F = Federal income tax rate.

S = State income tax rate, section 1.1.16 Data to be Provided: The data contained in this article will be supplied on informational and support schedules described in' Article III and shall be made available for both estimated and actual cost data specified in Article IV.

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A3,TICLE II ,

DERIVATION OF FIT'JFJJ CN OCMMCN EOUITY_

For the purposes of determining Section 2.0 Return on Common Equity:

Use Tees for Transmission Facilities, the return on common equity (c) for MFC shall ce seventeen percent (17.0%). This return on common equity will be reviewed periodically to determine if revisions are required. Any such revisions shall-be made in accordance with the provisions of Section 4.1 of the Agreement.

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ARTICLE III_

The development of the Use d rees to byand the support Schedules _:

Section 3.0_

ecst coeponents will be provided on formats f the Manual mutually agreeSu parties. i h Use Tees.

with reference to the applicable articles and sect ons oan The results of the forlaulary Section 3.1_ Informational Schedules:

methodology set forth in this Manual shall be displaye parties. The support Schedules for Estimated and Actual Charges: 3.0 and

~

Section 3.2_ l cost schedules and informational schedules de data as specified in Article IV.

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I

ARTICLE IV ADJUSTPENTS FOR ACTUAL COST This article of the Manual establishes the formulary components of the Transmission Facilities Use Fees which is subject to adjustment for actual cost. Such adjustments for actual cost pursuant to Section 5.1 of the Agreement will be made using the applicable procedures described in Article I of this Manual.

Section 4.0 Cost for Transmission Facilities: The monthly Transmission Facilities Use Fees computed under Article I for each menth of the Contract Year will be recalculated using the formula specified in Section 1.1 of Article I, and the actual cost data for the Transmission Facilities. All cost items contained in Article I will be adjusted to reflect their actual costs. 'The adjustment will be made as soon as practicable following the end of the month. The capital structure and cost of debt capital and preferred stock will be modified as described in Section 1.1.15.

Section 4.1 Administrative Cost for Adjustment Procedures GSU shall reteturse MPC for all costs incurred by MPC directly in administering .

this article of the Manual. Such costs shall be accumulated by MPC at standard rates of MPC and Southern Company Services, Inc. for the services performed and shall include, but not be limited to, charges for ecmputer time associated with the calculation of charges based on actual data, personnel engaged in administsring this article of the Manual based on time actually spent, and materials and supplies censumed in connection with administration of this article of the Manual. Such administrative charges will not be included in the development of Use Fees in Section 1.1.9 of Article I. .

9 4

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O AMENDMENT NO. 1 TO THE TRANSMISSION FACILITIES AGREEMENT BETWEEN GULF STATES UTILITIES COMPANY AND MISSISSIPPI POWER COMPANY THIS AMENDMENT made and entered into effective ilay 12 ,

1982 by and between GULF STATES UTILITIES COMPANY ("GSU") AND MISSISSIPPI POWER COMPANY ("MPC") , being

'cendment No. 1 to the Transmission Facilities Agreement Ithe "Agreement") between GSU and MPC dated February 25, 1982. .

EIIggSSgig:

WHEREAS, GSU and MPC entered into the Agreement on February 25, 1982 pursuant to which MPC agreed to construct, cperate and maintain certain transmission facilities and GSU agreed to pay MPC for the use thereof; and WHEREAS, the parties desire to amend the Agreement to provide for interest to be paid en certain charges under the Agreement.

NCW, THEREFORE, in consideration of the premises and the covenants and agreements hereinaf ter set forth the parties hereto agree as follows:

1

1. Section 5.1 of the Agreement is hereby' amended by t striking the seventh sentence of such section and substi-tuting for such sentence the following two sentences:

_,s. . - - -_ _--

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~

l "Psyments of Use Fees which are in excess (er deficient) of amounts which would have been due based upon actual trued up costs shall be credited (or debited) to GSU cogether with interest thereon from the date payment was due on the budgeted amount to the date payment is made for the credit (or debit) resulting from the true up. . Interest on the excess or deficient amount shall be accrued at one hundred percent (1004) of the prime rate quoted by Manuf acturers Hanover Trust Company on the

,date payment of the budgeted amount was due."

2. All other terms and conditions of the Agreement shall remain in full force and effect.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. I to the. Transmission Facilities Agreement to be e:<ecuted by their duly authorized officers ef fective as of the date first set forth above. .

GUT 2F STATES UTILIT1u., MOMPANY ATTEST: .

f y?/b j// d $

W $ Y' Assistant Sec:jgtary By J. 'E. Scfndurant Executive Vice President, Operations ,

Dater m y 12. 1o82 MISSISSIPPI POWER COMPANY ATTEST:

By - A 3 /

/d 8. /- ~

t /2 --

H.M. Bell, J r. ~ /" t Vice President .. ,

May 12,1982 Date

- ~ ~ ~ - - - - - _ -

AS .7, m UTILITIES COMPANY GULF STATES rexAsfrie4 ao s t o a nie s s o = assi . s e auvout.

A 8t E A Co0E713 838 4431 May 13, 1932 JOSEPH C. BONDL'AANT r u us., % P m W ms 0p m ti m Mr. Kenneth Plumb, Secretary Federal Energy Regulatory Commission Washington, D.C. 20426

Dear Mr. Plumb:

CERTIFICATE OF CONCURRENCE This ts to certify that Gulf States Utilities 1 toCompany the elov, which assents Transmission to and concurs Facilities in the Amendment Agreement descri'cs' d I ths.eby 2

• Southern Company Services, Inc. has filed, files th of the agreement specified.

12, 1982, to the Amendment No. 1, dated May Transmission Facilities Agreement between Gulf States Utilities Company 25, and1982.

Mississippi Power Co=pany, dated February Very truly yours, .

1, G

• LERTIFICATE OF CO!!CURRENCE This is to certify that Mississippi Power Company assents to and concurs in the Transmission Facilities Inc. has filed, and hereby file this certificate of concurrence.in lieu of the filing of the agreement specified.

• Amendment No. 1 to the Transmission Facilities Agreemeat between Gulf States Utilities Company and Mississippi Power Company, dated February 25, 1982.

1 f

PJSSISSIPPI POWER CONPANY V v By .

H. H. Bell, Jr. _~ /

Vice Prcsident Bulk Power Racources Dated: May 6, 1982 t

- s .c

INFORMATIONAL SCitEDULE

- FOR TRANSMISSION FACILITIES-AGREEMENT BETk'EEN GULF STATES UTILITIES COMPANY AND MISSISSIPPI POWER COMPANY The attached data is for illustration only and serves to provide a nutorical exampic of the determination of the Use Fee for Trsnsmission-Facilities. All values are estimated.

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TRANS}!ISSION USE FEES INFORFATIONAL SCHEDl'LE TO TPaNS!!ISSION FACILITIES AGREES!ENT P,ETliEE:1 CULF STATES UTILITIES CO::PANY AND !!ISSISSIPPI PO'.iER C01:PANY

• • • FOR ILLUSTRATIVE PURPOSES ONLY ***

Section L.l Derivation of Tran=nission Facilities Costs:

• +

R= 12 Were: I = $65,521,000 Ctt = 16.360%

IT = 7.362%

E = $381,000 R = 65,521,000 x (16.360 7.362) + $381,000 100 '

L2 R = 15,543,000/12 + $381,000 R = $1,295,000 + $381,000 = $1,676,000 l

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Page 2 ot7 TRANSMISSION USE FEES INF0P."ATIONAL SCHEDULE TO TRANSMISSION FACILITIES AGREEMENT DET.1EEN GULF STATES ETILITIES CO:!PANY AND MISSISSIPPI PCUER COMPANY

• • • FOR ILLUSTRATIVE PURPOSES ONLY ***

Sec tion 1.1.7 Total Net Investment: ("I")

$68,250,000 Section 1.1.3 Net Plant General Plant (Net) 378,000 Section 1.1.4 693,000 Section 1.1.5 t!orking Capital (3,800,000)

Section 1.1.6 . Accumulated Deferred Income Taxes

$65,521,000 Total Net Investnent "I" ,

Section 1.1.14 Total Expenses: ("E")

Operation & Maintenance S 200,000 .

Section 1.1.8 Administrative & General 658.000 Section 1.1.9 Section 1.1.10 Depreciation $ 1,750,000

$ (175,000)

Section 1.1.11 Amortication of AITC Section 1.1.12 Payroll Taxes S 77,000

$ 2,062,000 Section 1.1.13 Other Taxes S 4,572,000 Total "E" Per Year

$ 381,000

enthly "E" f

1.

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• - Page 3 of 7 TRANSMISSION USE FEES INFORMATIONAL' SCHEDULE TO TRANSMISSION FACILITIES AGREEMEST BEU'EEN' CULF STATES l'TILITIES COMPANY AND MISSISSIPPI POWER CCMPAh"/

• • • 'FOR ILLUSTRATIVE PURPOSES ONLY ***

Section 1.1.1 Cross Investment:

~

Summation of FERC Accounts 350, 354, 355, 356, 357, 358, 359, 352, 353 $70,000,000 Section 1.1.2 Accumulated Depreciation: $ 1,750,000 Section 1.1.3 Net Plant: $70,000,000

- 1,750,000

$68,250,000 Section 1.1.4 General Plant (Net):

Sutration of Accounts 389-399

,- Not General Plant $13,000,0.00 Not General Plant Allocated to Transmission Function:

125,000/2,172,000 x 13,000,000 = $ 748,000 Transmission Function Net General Plant Altocated to the Transmission Facility:

68,250/135,117 x $748,000 = $ 378,000 Section 1.1.5 Working Capital:

(a) Cash Working Capital:

45/360 x (0&M + ASG Expenses) 45/360 x (200,000 + 58,000) = $ 107,000 *

(b) Frepayments (Taxes, etc.) - Account 165 $ 200,000 -

! (c) Materials and Supplies - Account 154 _$ 250,000 Total Working Capital $ 557,000 Section 1.1.6 Accumulated Deferred Income Taxes:

Summation of Accounts 190, 281, 282, 283 $ (3,800,000) 1.

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• ' - ::e . et TRANS>lISSION USE FEES INF092'.ATIONAL SCHEDULE TO TRANS>lISSION FACILITIES AGREE >lEST BET'4EEN GULF STATES UTILITIES CO:!PANY AND l11SSISSIPPI P0"ER CO>lPANY

• • • -FOR ILLUSTRATIVE PURPOSES ONLY ***

Section 1.1.8 Operation and 5faintenance Expenses: $ 200',000 Section 1.1.9 Administrative and General Expenses:

Summation of FERC Accounts 920-932 Excluding 924 $19,200,000 Total Payroll Taxes $'2,172,000 Transmission Payroll Taxes $ 125,000 A&G Allocated to Transmission Function 125,000/2,172,000 x $19,200,000 = $ 1,1.05,000 Transmission Function'A&G Allocceed to Transmission Facility ,

68,250/135,117 x 1,105,000 = $ 558,000 Prcperty Insurance (Account 924) $ 100,000 1aral Transmission Facility A&G Expenses $ 658,000 Section 1.1.10 Depreciation Expense:

Depreciable Property $70,000,000 Life (assuming ss'.vage and remos- are equal) 40 years 70,000,000 -= S 1,750,000/ year .

40 years Section 1.1.11 Amor:ization of Investment Tax Credits (AITC):

Amount Subject to Credit $70,000,000 10%

Credit Race S 7,000,000 Credit l

l Anortization 7,000,000 -

$ 175,000/ year 40 years ,

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' GUL'.' J7 ATE' l' TIT.IT:EF ccMPldy ;su '.ississ'r?[ rc..;ca r3M: "

• " FOR ; LLL 5!'! '.. [VP '. r?Pn :r.S . ::L-l i**

p

'e *n 1.1.!2  :%v e , l ' T.u:.w :

D:p.c:.:d P;y roll T: x r re S ; ,9 '. ,00 ;

Ti nr.niosion '.I.tcies General C ' tri .: $5,0n",006 H.inistrative P1yral: Laxes $1,563,000 T ra r. sci s s t . a.

x .08 5 i?i,000

$5,000,000

/ dninist rat. c a CcN r a l P:". ro ll Tax :s x .08 l S wc0,000 Allocation of ASC Payroll Taxes to f ransmission Function I

Transmission Salaries / Total Salaries l

1,561,000/23,000,000 = 6.50%

1

! 27,000 S400,000 - t.80% $

fransmission riant Ratio x Tr.tasmissien Pavroll Taxes 77,000 68,250/135,'il? . (S27,000 + $125,000) = S S 77,000 Total Payroll Tixes 1

IS

= = = .

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TP. A::S" I .9i' :' ' . "S'.i F E E S ;::FP MAT:0!;.1!. 3Cl!EDU*.C

/

e TO iru:G'llS'i:0N ?.\CiLITIES AGII::i.:'t.NT ben!EEN

/ Gl'LF STAT ES UTil.Ui FS CC:'PA ;Y ':;D :!!3SidSIPPI Pot;ER COMPA:;Y

• *

• F.):t it.LUS C't.',TIVE PUP POSES OSLY * * *

/

.N

: 1.1. !'i Other Tm<o :

(a) F r a te Franchi:..' Tax Capital, Surr'n.i. unit undii Xed prefits ' 2 '; .

"'O Invested in Esc.ilitics Tax Rate Equals 32.50/$1,000 3 65,000 Fran:hisa Tax Puc (5) Pole Litie Sfiteage Ta:(

! 1,755 73 miles tirxs 522.50/ mile =

(c) Real and Personal Preperty Tax Assessment ir m Mississippi State Tax Corr.i> wien 92!.000.000 .

-i

.p TRANS:1I!;S'.V; t'SC FE2S INFO!c:ATIONAL SCHEDULE

./ .

to fSAS*'!E3[0N FACILITIES AGREE!!ZNT BEL *EEN

~ Gulf STAT!.S UTit.I s t:;3 i:0MPA::Y At:D ltiSSIS$'PPI POWER C0!!PANY

[ "* FOR - l LLU3T!U.TI VE FURPOSES ONLY ***

Seetter. 1.1.15 The Piet of Caf.ta t and Associ.stod incor-e Taxos_:

-WEICliTED AVERAGF. COS T OF CAP. ;AL (f.) -- ("C:l")

AVERACE +

WEIGliTFD CAPITALIZATION CC:1?0 NEST CC:iFONE' T.

• ATIO DURING RETURN COST CONSCRUCTION PERIOD

-52.80 16% 8.448l:

Debt 11.20 16% 1.792 Preferred Stock

~

36.00 17% 6.120 Cocunon Equity 100.00 16.360%

Total INCOME TAX REQUIRI.!ENT 2 - ("IT") .

Conposite Tax Rate (Federal and State) - 48.20%

(PR x p) = 1.792 (EP,x c) = 6.120 .

N IT=1[.f x {(PR x p) + (ER x c)]

^

IT = 482 x (1.792 + 6.120) 1 .482

! IT = .9305 x 7.912 = 7.362%

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.w COMPANY GULF STATES UTILITXES 233i e e a . . .e c . - csas i , c .,

a:s orsiesac .

ARE4 DO2 '

J 4J4 653.

JOSEPH E 110NDUR.4NT t?,x- ur u Ennssts t'ar l'enn. set

larch 15,1982 Mr. Kenneth Plumb, Secretary Fede al Energy Regulatory Comission Washington, D.C. 20426

Dear Mr. Plumb:

CERTIFICATE OF CONCURREN E This is to certify that Gulf States Utilities Company assents to and concurs in the Transmission Facilities Agreement described -

below, which Southern Company Services, Inc. has filed, and thereby files this Certificate of Concurrence in lieu of the filing of the agreement specified.

Transmission Facilities Agreement between Gulf States Utilities Company and Mississippi Power Company, dated February 25, 1982.

l Very truly yours, l

1. 7?

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/

CERTIFICATE OF CONCURRENCE

,/

/

This is to certify that Mississippi Power Company assents to and concurs in the Transmission Facilities Agreement. described below, which Southern Company Services, Inc.

has filed, and hereby file this certift: ate of concurrence in lieu of the filing of the agraement specified.

Transmission Facilities Agraement between Gulf States Utilities Company and Mississippi Power Company , dated February 25, 1982.

MISSISSIPPI POWER COMPATY i

By H. H. Bell, Jr/

Vice President Bulk Power Resources Dated: April '.5, 1982 R~

. g - -

• e EXHIBIT D 1

1

, + _ _ . _ _ , _ . - ,

RCV PY:Cajkn Electric Power 1 5-23-68 111111AW i 024 150428130761s 2 Maaseen het Comcas sees was sessa seJoes mes Cwee ses a0ps Ow8ogri. W. sasses see01 lesencru 401 te*4s11 A

MississipplPower me soumem eewetream May 19, 1988 Mr. J. A. Vann, Jr.

Alabama Blottrie Cooperative, Inc.

F. C. Box 330 Andalusts. Alabama 36420 Dear Mr. Vanni Mississippi Power Cosepany (MPC) is party to a contrast with Culf states Utilities company (G3U) pursuant to which G3U is obligated to pay to MPC .

usa fees with respeet to the 500 kV transatseson 1Las of MFC estanding from MFC's Flant Daniel to the Mississippi Louisiana state line at the Fearl River, where it eenneets with a 300 kV transmission line of C4U.

Were is no interconneetion agreement between MPC and Cajun Ilestrio Power Cooperative (Cajun): nor is there a physical interconnection of the transaiesten f acilities of Cajun with these of MPC. MPC has been informed that there are disagreements between G3U and Cajun, sees of which are in litigation.

MFC desires that neither the proposed trenomission service agreement between MFC and Alabana Electric Cooperative (AIC) nor transactions thereunder can create a situation or event which would efford to 08U any basta for asserting that its obligations pursuant to the NPC G8U 500 kV transmission line agreement are thereby in any wise affected or mitigated 3 and therefore satisf aatory assurance from CSU is necessary hafora i

I transmission service over said line for the account of AEC can be initiated.

l HPC eensquently rMuests AEC to soeure assuranes from CSU in the fans of l

the latter from G5U to MFC which is hereto attached.

Very truly yourss l . 0 % + /-

L. H. Surris. Jr.

Manaser Systes Planning Attachment

RCV SY:Cajkn Elec ric Power i 5-23-88 111:12AM i 06* 15042613076i8 3 May 18, 1988 Hississippi Power Company 2992 West Beach Blvd.

Gulfport, MS 39501 ,

Gentlemen This letter confirms for

("CSU'you the understanding of Gulf States Utilities Company ] that Alabass Elaetric l

Cooperative ("AEC") contemplates the execution of a contract with Mississippi Power Company ("WPC') pursuant to which MFC will l

furnish transmission services with respect to power and energy to i be supplied by Cajun Electric Power Cooperative ( "Caj un")

l delivered by 05U to HPC at the point of interconnection on the Danial-HeXnight 500 KV transmission line of the facilities of CSU with those of MFC, and delivered by NPC to the transmission l facilities of Alabama Power company for the account of Atc.

CSU acknowledges shat its duties and obligations under the Transmission Facilities Agressent dated February 25, 1982. as

smended, between CSU and HPC are unaffested by any transaations pursuant to the contemplated Transmission Services Agreement between AEC and MPC. As an example of the foregoing and without linitation of it. 05U represents and agrees that the use by Cajun /AEC or HPC of the Daniel-HeKnight $00 KV transmission line (and all associated facilities and equipment) under the contemplated Transmission Services Agreement between NPC and AEC will not be cited or used as a reason, excusa or justification for any reduction or mitigation, in whole or in part, of its obligation to pay to NPC Use Tees as provided for in the Transmission Facilities Agreement.

Very truly yours, GULP STATES UTILITIES COMPANY l

BY Locricer or asuJ l

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EXIIIBIT E O

.r. . ..

a 2 21988 I[1 GULF STATES UTILITIES COMPANY' P O S T O F F I C E 8 0 x 2 9 51 a SEAUMONT. TEXAS 77704 AREACODE409 838 663i February 18, 1988 Mr. R. O. Usry Vice President - Operations Services Southern Ccrnpany Services, Inc.

P. O. Box 2625 Birmingham, AL 35202

Dear Mr. Usry:

Gulf States Utilities Ccupany (GSU) has a 500kv Transmission Line interconnection between GSU's htKnight switching station and Southern Ccrnpanies Plant Daniel. 'Ihis interconnection is governed by an Interchange Contract (dated February 25, 1982, and as amended) between .

GSU and Alabama Power Ccnpany, Georgia Power Ccopany, Gulf Powr Ccmpany, Mississippi Power Ccmpany and Southern Ccupany Services, Inc.

(Southern Ccupanies) .

GSU also has an active Interconnection Agreenent with Cajun Electric Power Cooperative, Inc. , (Cajun) dated June 26, 1978, and as amended.

This Agreenent provides for deliveries of power and energy frcn Cajun generating plants to an entity.

The purpose of this letter is to state clearly that the 500kv McKnight-Daniel Transmission Line is presently available to supply transmission service for delivery of powr and/or energy between Cajun and Southern Ccupanies. This transmission service is available under either of the above agreenents and their appurtenant service schedules.

It is recognized that Cajun and Southern Ccnpanies contemplate certain power and energy transactions and it is agreed that the proposed transactions will be subject to the terms and conditions of the GSU-Cajun Interconnection Agreenent and Service Schedule CIS (for transactions to the Southern Ccmpanies and CSTS (for transactions to Cajun) , thereof. Use of the 500kv btKnight-Daniel Line for purposes of transactions under Service Schedule CrS or CSTS are to be requested by Cajun and will be made available and agreed to by GSU in accord with and subject to the scheduling requirenents of the Service Schedules.

Cajun has its own control area and will be responsible for scheduling power with Southern Ccnpanies and keeping GSU informed of the transactions.

e -

-f Mr. R. O. Usry l February 18, 1988 Page 2 GSU and/or Cajun will notify Southern Ccrpanies if any of the t arrangements surmised in this letter are modified.

Subnitted jointly and separately, Gulf s Utilitie y Qo mo A.

Cajun Eleptric Power Cooperative, Inc.

1

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• , 8O EXHIBIT F

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COMPANY GULF STATES UTILITIES

• SEAUVONT. TEXAS 77704 POST O F R I C E 8 0 x 2 9 51 A# FaC001 409 938 4631 r R E C: E I V E E)

April 16, 1987 APR 211987 Joint Oo-.tations &

Intercnnections Orpartment PH Mr. R. O. Usry 't7*

Vice President-Operations Services INC. ---

es. ,a SOUTHERN COMPANY SERVICES,

l*E -

P.O. Box 2625 35202 dCR Birmingham, Alabama s t. .,,

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Dear Mr. Usry:

has a 500 KV Trans-Gulf States Utilities Company (GSU) mission Line interconnection between GSU's This Plant Daniel. McKnight Switch (dated ing Station and Southern Companies' interconnection is c February 25, 1982, and as amended) (SCS).

Companies and Southern Company Services, Inc.

GSU also has an active Interconnection Agreement (Cajun), dated with Cajun Electric Power Cooperative, Inc.

June 26, 1978, and as amended.

The above interconnection is presently available andto / or supply transmission service for delivery of powe thern energy Companies.

between Cajun Electric Power Cooperative and of the above agreements and their appurtenant Service Schedules.

It is our understanding from Cajun that Cajun's bject to transactions with the Southern Companies will be su the following conditions:

1. All transactions terms and conditions will be GSU-Cajun of the in accordance Interconnec-with the tion Agreement and Service Schedule CTS.

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2. Use of the McKnight-Plant Daniel Interconne l an subject"astoavailable"the te basis in accordance with an Schedule CTS.

3. Cajun has their own control area and will be responsible for scheduling power with Southern Company Services, Inc. and keeping GSU informed on the transaction.

Please let me know if you require additional informa-tion.

Sincerely, .

ly, Mana r-Delbert R. Zi Power Interconnections cc:

Mr. Edward M. Loggins, GSU Mr. George T. McCollough, GSU Mr. Mel Cole, GSU Mr. Bill Hollins, GSU I Mr. Jim Champagne, GSU Mr. Phil Harris, Cajun .

Mr. Doug Calvert, Cajun l

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. W t/.3 R. o. ussy VW 7 es: cent :ne so;;:nem s'oc .: sys e r June 22, 1987 /7-- [c Lco AE Mr. Douglas H. Calvert to Manager, Power Supply ,g Cajun Electric Power Cooperative. Inc. 4 Oj / Spy 112 Telly Street Ntg New Roads, Louisiana 70760 Dog

Dear Doug:

As noted in our telephone conversation earlier today, I am writing in response to your letter of May 28, 1987, wherein you requested that the operating companies of the Southern electric system enter into an intercon-nection agreement with Cajun Electric Power Cooperative, Inc. We have reviewed this request and discussed it with the operating representatives of the four operating subsidiaries of The Southern Coriipany and have concluded, that such an agreement is not needed'at this time.

It is my understanding that. coordination transactions between the operating comoanies of the Southern electric system and Cajun can be arranged by Cajun through either Gulf States Utilities Company or appropriate sub:idiaries of Middle South Utilities. We believe that any benefits can be ot:afned under these existing interconnection arrangements. The additional investx:ent of time and money in negotiating and developing an interconnection agreement with Cajun along with the added expenses of associated programing would -

provide little, if any, additional benefits to our respective systems.

If I can be of further assistance in regard to this matter, please do not hesitate to contact me.

Sincerely,

[ N'h L M .' D 199g l

cc: Mr. R. E. Huffman - Alabama Power Company l

Mr. F. D. Williams - Georgia Power Company

) Mr. E. B. Parsons, Jr. - Gulf Power Company Mr. R. C. Pierce - Mississippi Power Company 6 MLiu. (sh) 9/9y,

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UTILITIES COMPANY f ,) '

W GULF STATES P O S T O F F I C E 8 0 x 2 9 51 BEAUMONT. TEXAS 77704 AREACODE409 838 6631 RECEIVED

SEP 081987 September 3, 19'87 Ya E E EfRT10fis Mr. R. O. Usry Vice President-Operations Services SOUTHERN COMPANY SERVICES, INC.

P.O. Box 2625 35202 Birmingham, Alabama

Dear Mr. Usry:

Gulf States Utilities Company (GSU) has a 500 KVSwitch- Trans-mission Line interconnection between GSU'sPlant McKnight Daniel. This

/ and Southern Companies' ing Station (dated interconnection is covered by an Interchange Contractbetween GSU and Southe February 25, 1982, and as amended)

Inc. (SCS).

Companies and Southern Company Services, Interconnection Agreement with GSU also has an activeCooperative, Inc. (Cajun), dated Cajun Electric Power ,

June 26, 1978, and as amended.

interconnection is presently available to The above for delivery of power and/or supply transmission service energy between Cajun Electric Power Cooperative and Southern Companies. Transmission Service is available under either of the above agreements and their appurtenant Service Sched-ules.

It is our understanding from Cajuncover that Cajun's the nexttrans-four__

actions with the Southern Companies wijlto the following condi-to five months, and will be subject

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with the terms

1. All transactions will be in accordanceof the GSU-Cajun Interconne and conditions l

' ment and Service Schedule CTS.

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2. Use of the McKnight-Plant Daniel Interconnection will be requested by Cajun and agreed to by GSU on an "as avail-termo able" basis in accordance with and subject to the and conditions of Service Schedule CTS.

3. Cajun has their own control area and wi,11 be responsible Company Services, for scheduling power with Southern Inc. and keeping GSU informed on the transaction.

Please let me know if you require additional informa-tion.

Sincerely, d ?g M .2 ger.i x - % ...

Delbert R. Zi ly - M ger Power Interconnections DRZ:cvo wgh6 cc: Mr. Edward M. Loggins, GSU

, Mr. Mel Cole, GSU

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Mr. Bill Hollins, GSU Mr. Jim Champagne, GSU I

Mr. Phil Harris, Cajun i

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