ML12318A259
| ML12318A259 | |
| Person / Time | |
|---|---|
| Site: | Millstone, Kewaunee, Surry, North Anna, 07200002, 07200055, 07000047  |
| Issue date: | 11/06/2012 |
| From: | Hartz L Dominion Energy Kewaunee, Dominion Nuclear Connecticut, Virginia Electric & Power Co (VEPCO) |
| To: | Document Control Desk, Office of Nuclear Reactor Regulation |
| References | |
| 12-676 | |
| Download: ML12318A259 (164) | |
Text
Dominion Resources Services, Inc.
Innsbrook Technical Center 5000 Dominion Boulevard, 2SE, Glen Allen, VA 23060
'Dominiow V
November 6, 2012 United States Nuclear Regulatory Commission Serial No.12-676 Attention: Document Control Desk NLOS/TJS Rev. 0 Washington, D. C. 20555-0001 Docket Nos. 50-280, 281 50-338, 339 50-245, 336, 423 50-305 72-16,56,2,55,47,64 License Nos. DPR-32, 37 NPF-4, 7 DPR-21, 65 NPF-49 DPR-43 SNM-2507,2501 VIRGINIA ELECTRIC AND POWER COMPANY DOMINION NUCLEAR CONNECTICUT, INC.
DOMINION ENERGY KEWAUNEE, INC.
SURRY POWER STATION UNITS I AND 2 and ISFSIs NORTH ANNA POWER STATION UNITS I AND 2 and ISFSIs MILLSTONE POWER STATION UNITS 1. 2 AND 3 and ISFSl KEWAUNEE POWER STATION and ISFS1 CHANGES TO DECOMMISSIONING TRUST AGREEMENTS AND TRUSTEE This letter provides notification that Virginia Electric and Power Company (Dominion),
Dominion Nuclear Connecticut, Inc. (DNC) and Dominion Energy Kewaunee, Inc. (DEK) are changing the trustee of their nuclear decommissioning trusts for Surry Units 1 and 2, North Anna Units 1 and 2, Millstone Units 1, 2 and 3, and the Kewaunee Power Station, and are entering into amended and restated trust agreements with the new trustee.
With respect to Millstone, DNC is providing this notification pursuant to Section 5.01 of the nuclear decommissioning trust agreements for Millstone Units 1, 2, and 3 implementing conditions 2.C.6(d), 2.C.8.(d), and 2.C.5(d) of the respective licenses for which the license conditions remain operative under 10 C.F.R. § 50.75(h)(5). With respect to Kewaunee, DEK is providing this notification pursuant to Section 5.01 of the nuclear decommissioning trust agreement for the Kewaunee Power Station implementing 10 C.F.R. § 50.75(h)(1)(iii).
With respect to the changes to the Surry and North Anna units, no such notification is required by 10 C.F.R. § 50.75(h)(2) as licensees that are electric utilities and thus governed by the agreements for Dominion's rate-regulated units. Nevertheless, Dominion is informing the NRC of these same changes as a courtesy.
Each of these trusts is currently held by Bank of New York Mellon (BNY Mellon).
Dominion, DNC and DEK will be terminating BNY Mellon's services as Trustee effective December 31, 2012, and will be appointing The Northern Trust Company, an Illinois corporation of Chicago, Illinois, as the successor Trustee effective January 1, 2013.
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Serial No.12-676 Trustee Change Page 2 of 4 In connection with this change in Trustee, each of the existing trust agreements are being amended and restated to reflect the new Trustee and to conform to commercial terms acceptable to the new Trustee. Such changes, however, have been kept to a minimum. Other than a change to Section 5.01 of the trust agreements for Kewaunee and Millstone clarifying that material amendments requiring NRC notification include a change in trustee (consistent with the guidance in Regulatory Guide 1.159), the amended and restated agreements do not include any material changes to provisions required by 10 CFR 50.75(h) or license conditions. Copies of each of the amended and restated trust agreements are attached. These amended and restated trust agreements may be executed soon, but are to be made as of January 1, 2013 and will not become effective until the new trustee's appointment takes effect on that date.
Please contact Mr. David A. Sommers at (804) 273-2823 if you have any questions or require additional information.
Sincerely, Leslie N. Hartz Vice President - Nuclear upport Services Virginia Electric and Power Company Dominion Nuclear Connecticut, Inc.
Dominion Energy Kewaunee, Inc.
Attachments: - Amended and Restated Dominion Nuclear Connecticut, Inc. Qualified Nuclear Decommissioning Trust Agreement - Amended and Restated Dominion Nuclear Connecticut, Inc. Non-Qualified Nuclear Decommissioning Trust Agreement - Amended and Restated Dominion Energy Kewaunee, Inc. Qualified Nuclear Decommissioning Trust Agreement - Amended and Restated Dominion Energy Kewaunee, Inc. Non-Qualified Nuclear Decommissioning Trust Agreement - Amended and Restated Virginia Electric and Power Company Qualified Nuclear Decommissioning Trust Agreement - Amended and Restated Virginia Electric and Power Company Non-Qualified Nuclear Decommissioning Trust Agreement Commitments made in this letter: None
Serial No.12-676 Trustee change Page 3 of 4 cc: Director, Office of Nuclear Reactor Regulation (w/attachments)
U. S. Nuclear Regulatory Commission One White Flint North 11555 Rockville Pike Rockville, MD 20852-2738 U.S. Nuclear Regulatory Commission, Region I (w/o attachments) 2100 Renaissance Blvd Suite 100 King of Prussia, PA 19406-2713 U.S. Nuclear Regulatory Commission, Region II(w/o attachments)
Marquis One Tower 245 Peachtree Center Avenue, NE Suite 1200 Atlanta, GA 30303-1257 U.S. Nuclear Regulatory Commission, Region III (w/o attachments) 2443 Warrenville Road Suite 210 Lisle, IL60532-4352 ATTN: Document Control Desk (w/o attachments)
Director, Division of Spent Fuel Storage and Transportation Office of Nuclear Material Safety and Safeguards U.S. Nuclear Regulatory Commission Washington, D.C. 20555-0001 Dr. V. Sreenivas (w/o attachments)
NRC Project Manager North Anna / Surry U.S. Nuclear Regulatory Commission, Mail Stop 08 G-9A One White Flint North 11555 Rockville Pike Rockville, MD 20852-2738 Ms. K. R. Cotton (w/o attachments)
NRC Project Manager North Anna / Surry U.S. Nuclear Regulatory Commission, Mail Stop 08 G-9A One White Flint North 11555 Rockville Pike Rockville, MD 20852-2738
Serial No.12-676 Trustee change Page 4 of 4 Mr. J. S. Kim (w/o attachments)
NRC Project Manager (MPS Units 2 and 3)
U.S. Nuclear Regulatory Commission, Mail Stop 08 C-2A One White Flint North 11555 Rockville Pike Rockville, MD 20852-2738 Mr. S. J. Giebel (MPS Unit 1) (w/o attachments)
Two White Flint North Mail Stop T-8 F5 11555 Rockville Pike Rockville, MD 20852-2738 Mr. K. D. Feintuch (w/o attachments)
NRC Project Manager U.S. Nuclear Regulatory Commission, Mail Stop 08 H-4A One White Flint North 11555 Rockville Pike Rockville, MD 20852-2738 Ms. J. Davis (w/o attachments)
NRC Senior Project Manager U. S. Nuclear Regulatory Commission, Mail Stop EBB-E3-D2M One White Flint North 11555 Rockville Pike Rockville, MD 20852-2738 NRC Senior Resident Inspector (w/o attachments)
North Anna Power Station NRC Senior Resident Inspector (w/o attachments)
Surry Power Station NRC Senior Resident Inspector (w/o attachments)
Millstone Power Station NRC Senior Resident Inspector (w/o attachments)
Kewaunee Power Station
Attachment 1 Amended and Restated Dominion Nuclear Connecticut, Inc. Qualified Nuclear Decommissioning Trust Agreement Millstone Power Station - Units 1,2 and 3 Dominion Nuclear Connecticut, Inc.
AMENDED AND RESTATED DOMINION NUCLEAR CONNECTICUT, INC.,
QUALIFIED NUCLEAR DECOMMISSIONING TRUST AGREEMENT
AMENDED AND RESTATED DOMINION NUCLEAR CONNECTICUT, INC.,
QUALIFIED NUCLEAR DECOMMISSIONING TRUST AGREEMENT This AMENDED AND RESTATED TRUST AGREEMENT is made the 1st day of January, 2013, between DOMINION NUCLEAR CONNECTICUT, INC., a Delaware corporation, the Grantor, and THE NORTHERN TRUST COMPANY, an Illinois corporation of Chicago, Illinois, the Trustee.
WHEREAS, the Grantor owns a 100 percent interest in Unit 1, 100 percent interest in Unit 2, and 93.47 percent interest in Unit 3 of the Millstone Power Station, a nuclear generating station located in the Town of Waterford, New London County, Connecticut.
WHEREAS, the Grantor wishes to establish pursuant to this Agreement and under the laws of the State of Illinois, separate trust funds under a single agreement each of which qualifies as a Nuclear Decommissioning Reserve Fund under section 468A of the Internal Revenue Code of 1986, as amended, or any corresponding section or sections of any future United States internal revenue statute and the regulations thereunder.
WHEREAS, the execution and delivery of this Agreement have been duly authorized by each of the Grantor and the Trustee and all things necessary to make this Agreement a valid and binding agreement by each of the Grantor and the Trustee have been done.
NOW, THEREFORE, the Grantor and the Trustee agree as follows:
ARTICLE 1 GENERAL PROVISIONS 1.01 Name, Trust Funds.
The separate trusts may be referred to collectively under the name DOMINION NUCLEAR CONNECTICUT, INC., QUALIFIED NUCLEAR DECOMMISSIONING TRUST. The separate trusts shall be identified by adding the suffix "Unit 1," "Unit 2," and "Unit 3." In addition, the Grantor, as Lead Participant may amend the Minority Interest Trust to continue as a separate trust subject to the terms of this Master Trust Agreement, and such Qualified Fund shall be identified by adding the suffix Green Mountain Power Corporation Minority Interest Unit 3 to the Fund. The Trust Fund is the entire undistributed amount of all contributions placed with the Trustee, as adjusted for all income, expense, gain, or loss on such amount as may exist from time to time. As used herein, "Trust Fund" shall be used merely to refer to the Reserve Funds in the aggregate and is not intended nor should it be construed to constitute a separate entity.
1.02 Grantor, Trustee.
The Grantor of this Trust is Dominion Nuclear Connecticut, Inc., and its successors and assigns as provided in Section 5.03 of this Agreement. The Trustee under this Agreement is Northern Trust Company, its successors and assigns, or any other person, company, bank, or trust company appointed as provided in Section 2.01 of this Agreement.
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1.03 Trust Committee.
The Grantor may establish a Nuclear Decommissioning Trust Committee (the "Committee")
composed of any three or more persons appointed by the Grantor's Board of Directors on whatever terms the Board desires. The Committee has the authority to exercise all of the Grantor's powers under this Agreement, and for purposes of Sections 2.03(c) and (d) and Section 3.04(g), the Trustee will be protected in treating the directions and other actions of the Committee as the directions or actions of the Grantor. The Grantor must certify to the Trustee all appointments to or removals from the Committee, and the Trustee must recognize written instructions signed by any Committee member, or its designee, as a directive from the Committee.
1.04. Separate Reserve Funds.
The Trust Fund is divided into separate Reserve Funds as designated by the Grantor, and each Reserve Fund provides for the decommissioning of a specified unit of a nuclear power plant.
Each Reserve Fund is established as a trust under state law. Each Reserve Fund will be segregated and maintained apart from the assets of other Reserve Funds and any other assets of the Trust Fund. Separate accounting and separate funding will be observed, and each Reserve Fund shall be treated as a separate trust. Reserve Funds may be commingled for investment purposes in accordance with section 3.02 of this Agreement.
ARTICLE 2 TRUSTEE APPOINTMENT, REMOVAL, LIABILITY 2.01 Appointment, Removal, Successors.
(a) The Grantor may appoint a successor Trustee by written notice to the person appointed and to the Trustee then serving. A Trustee may resign on thirty days' notice in writing to the Grantor. The Grantor may remove any Trustee by thirty days' written notice to the Trustee. Notwithstanding the foregoing, no removal or resignation shall take effect until (1) a successor Trustee has been appointed and accepted appointment as Trustee and (2) notice of the change in Trustee has been provided to the Nuclear Regulatory Commission in accordance with section 5.01(c) of this Agreement. If a successor Trustee has not been appointed and accepted appointment within sixty (60) days of the Grantor's receipt of notice of resignation of the Trustee or the Trustee's receipt of notice of removal, such Trustee may petition a court of competent jurisdiction to appoint a successor Trustee to serve until such time, if ever, as a successor Trustee shall have been appointed by the Grantor and accepted such appointment. Each successor Trustee shall have the same powers and duties as the Trustee named herein.
(b) A successor Trustee may accept appointment and qualify as Trustee by executing, acknowledging, and delivering to the Grantor its acceptance in a form satisfactory to the Grantor.
The successor Trustee, without further act, deed, or conveyance, is vested with all the estate, rights, powers, and discretion of the predecessor Trustee just as if originally named as a Trustee in this Agreement.
(c) When a successor Trustee accepts appointment, the predecessor Trustee (or representative, if the predecessor Trustee is unable or unavailable) will assign, transfer title, and 2
pay over to the successor Trustee the funds and properties then constituting the Trust Fund. The predecessor Trustee (or representative) is authorized, however, to reserve a sum of money deemed advisable for payment of fees and expenses accrued to date or expected to be incurred in connection with the transfer and settlement of the Trust Fund (all subject to the limitation in Section 5.04 of this Agreement), and any balance of that reserve remaining after the payment of fees and expenses will be paid over to the successor Trustee.
(d) The Trustee may adopt or amend bylaws and regulations that the Trustee deems desirable for the conduct of Trustee affairs.
(e) The Trustee will keep a record of all Trustee proceedings and acts and all other data necessary for the proper administration of the Trust. To the extent required in the provisions of this Agreement set forth below, the Trustee will notify the Grantor and any specified interested party of any Trustee action taken.
2.02 Establishment and Acceptance of Trust.
(a) All contributions to the Trust Fund (other than deemed contributions under Treasury Regulations section 1.468A-8(b)(2)(iv)(A)) must be made in cash.
(b) At the time it makes any contribution to the Trust Fund, the Grantor will specify in writing then delivered to the Trustee the exact amount or portion of the contribution that is to be placed in each Reserve Fund then existing. The Trustee shall not accept contributions from anyone other than the Grantor without the Grantor's written approval for each such contribution, and an exact written allocation of such a contribution among the Reserve Funds then existing must accompany the contribution. The Trustee has no right or duty to inquire into the amount of or the method used in determining any contribution or the allocation of any contribution among the Reserve Funds. The Trustee is accountable only for funds actually received. The Trustee has no duty to compute or collect the amount to be paid to it by the Grantor.
(c) All contributions and/or transferred assets and income therefrom will be held in trust and administered according to the terms of this Agreement.
(d) No part of the Trust Fund may be used for or diverted to purposes other than the exclusive purposes allowed by this Agreement, as described in Sections 5.04 and 6.01 of this Agreement.
2.03 Limitation of Liability.
(a) To the extent permitted by law, the Trustee will serve without bond; the Trustee will secure and pay for required bonds. At its own expense, the Grantor is entitled to employ its own counsel to defend or maintain, either in its own name or in the name of any Trustee, with said Trustee's approval, any suit or litigation arising under this Agreement involving the Trustee.
(b) In the event that THE NORTHERN TRUST COMPANY incurs any liability, loss, claim, suit or expense (including attorneys fees) in connection with or arising out of its provision of services under this agreement, or its status as trustee hereunder, under circumstances where THE NORTHERN TRUST COMPANY cannot obtain or would be precluded by law 3
from obtaining payment or reimbursement of such liability, loss, claim, suit or expense (including attorneys fees) from the Trust Fund, then the Grantor (which has the authority to do so under the laws of the state of its incorporation) shall indemnify and hold THE NORTHERN TRUST COMPANY harmless from and against such liability, loss, claim, suit or expense, except to the extent such liability, loss, claim, suit or expense arises from (i) a breach by the Trustee of the terms of this agreement (provided, however, that this exception shall not apply to the extent that such breach arises under section 3.06 of the Agreement as a result of the Trustee acting in good faith and in accordance with the direction, instruction or notice of the Grantor or an investment adviser) or (ii) the Trustee's negligence or willful misconduct in the performance of its specifically allocated duties under this agreement. Notwithstanding the foregoing, THE NORTHERN TRUST COMPANY shall not be indemnified for any loss, liability, claim, suit or expense to the extent the Trustee participated knowingly in, or knowingly undertook to conceal, an act or omission of any person or entity constituting a breach of such person or entity's fiduciary responsibility hereunder, knowing such act or omission was a breach; provided however, that the Trustee shall not be deemed to have done so by merely complying with directions of an Investment Adviser or by its failure to act in the absence of such direction or by reason of maintaining accounting records or solely as a result of the normal information received by the Trustee or its officers, employees, or agents in the normal course of performing any custodial, reporting, recording and bookkeeping functions with respect to any assets of the Trust Fund managed by an Investment Manager or the Grantor. This paragraph shall survive the termination of this agreement.
(c) THE NORTHERN TRUST COMPANY (which has the authority to do so under the laws of the state of its incorporation) agrees to defend, indemnify and hold harmless the Grantor, the Trust and its fiduciaries, and the then present and former officers, employees, and directors of the Grantor from and against any and all liability, loss, claim, suit or expense (including attorneys' fees), which arises from (i) a breach by the NORTHERN TRUST COMPANY of the terms of this agreement or (ii) the Trustee's own negligence or willful misconduct in the performance of its duties and responsibilities specifically allocated to it herein.
This paragraph shall survive the termination of this Agreement.
(d) Notwithstanding the foregoing subparagraphs (b) and (c), neither the Company nor the Trustee shall be responsible for consequential or special damages under such subparagraphs.
2.04 Discharge after Distributions or Termination.
After all distributions (including distributions to a successor Trustee) or any termination under this Agreement or applicable law, the Trustee is discharged from all obligations under this Agreement, and no person or entity has any further right or claim against the Trustee not otherwise provided by statute.
2.05 Legal Action.
In all legal actions regarding the Trust and this Agreement, the Trustee and the Grantor are the only necessary parties. A final judgment not appealed or appealable entered in an action or 4
proceeding against the Grantor, the Trust, or the Trustee is binding and conclusive on the parties to this Agreement and all persons having or claiming to have any interest in the Trust Fund.
ARTICLE 3 INVESTMENT DUTIES, POWERS 3.01 Investment Policy and Limitations.
Certain limitations are placed on investing in and disposing of some securities by the Nuclear Regulatory Commission and in order to avoid disqualification of the Trust for tax purposes and to minimize potential problems with securities regulations. As provided by law and Section 5.04 of this Agreement, an investment must not result in a diversion or use of Trust assets that is not permitted under Internal Revenue Code Section 468A. The Grantor, and to the extent that they have been allocated investment responsibility, the Trustee and any investment advisor appointed by the Grantor shall adhere to the standard of care that a "prudent investor" would use in the same circumstances, such term having the same meaning as the standard set forth in 18 CFR 35.32(a)(3) of the FERC regulations, or any successor regulation.
The Grantor shall be responsible for formulation of the investment policy for the Trust. To the extent that investment responsibility is allocated to the Trustee or investment advisors, the Grantor shall provide written investment guidelines to each entity to which investment responsibility has been allocated, consistent with such investment policy.
3.02 Investment of Trust Fund.
The assets of two or more Reserve Funds may be commingled for investment purposes as the Grantor directs. The Trustee shall apportion any earnings or losses from an investment made with commingled assets to each participating Reserve Fund in the same proportion that the amount invested from each Reserve Fund bears to the total amount invested. Subject to the provisions of section 3.04 of this Agreement, the Trustee will invest and reinvest the principal and income of each Reserve Fund and keep those trust assets invested, without distinction between principal and income. If assets of two or more Reserve Funds are commingled for investment purposes, the Grantor shall have the absolute authority to direct the Trustee at any time to liquidate the interests of the Reserve Funds in a commingled investment, and the trustee shall promptly comply with any such directive. The commingling arrangement undertaken as permitted in this Section 3. 02 can be terminated at any time by any Reserve Fund. No Reserve Fund in the commingling arrangement may substitute for itself in the arrangement any person that is not a member to the commingling arrangement.
Trust investments may include, but shall not be limited to the following:
(a) Publicly traded domestic or foreign common and preferred stocks and options thereon, as well as warrants, rights and preferred stocks convertible into common stock, regardless of where or how traded.
(b) Investment grade domestic corporate bonds and debentures and any such securities which are convertible into common stock, domestic or foreign.
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(c) Bonds or other obligations of the United States of America or non-U.S. sovereign debt with an equivalent rating of A or higher.
(d) Investment grade obligations of the states and of municipalities or of any agencies thereof.
(e) Investment grade notes of any nature, of foreign or domestic issuers.
(f) Savings accounts, certificates of deposit and other types of time deposits, bearing a reasonable rate of interest based upon the duration, amount, type and geographical area, with any financial institution or quasi-financial institution or any department of the same, either domestic or foreign, under the supervision of the United States or any State, including any such financial institution owned, operated or maintained by the Trustee in its corporate or association capacity (including any department or division of the same) or a corporation or association affiliated with the same but only to the extent consistent with Treasury regulation §1.468A-5(b)(2).
(g) Any collective, common or pooled trust fund operated or maintained exclusively for the commingling and collective investment of monies or other assets including any such fund operated or maintained by the Trustee or its affiliate. Notwithstanding the provisions of this Agreement which place restrictions upon the actions of the Trustee, to the extent monies or other assets are utilized to acquire units of any collective trust, the terms of the collective trust indenture shall solely govern the investment duties, responsibilities and powers of the trustee of such collective trust and, to the extent required by law, such terms, responsibilities and powers shall be incorporated herein by reference and shall be part of this Agreement. For purposes of valuation, the value of the interest maintained by a Reserve Fund in such collective trust shall be the fair market value of the collective fund units held, determined in accordance with generally recognized valuation procedures. The Grantor expressly understands and agrees that any such collective fund may provide for the lending of its securities by the collective fund trustee and that such collective fund's trustee will receive compensation from such collective fund for the lending of securities that is separate from any compensation of the Trustee hereunder, or any compensation of the collective fund trustee for the management of such collective fund.
(h) Open-end and closed-end investment companies, regardless of the purposes for which such fund or funds were created, (including those for which the Trustee or an affiliate provides services for a fee), and any partnership, limited or unlimited, joint venture and other forms of joint enterprise created for any lawful purposes otherwise consistent with the investment guidelines set forth herein. Settlements of transactions may be effected in trading and processing practices customary in the jurisdiction or market where the transaction occurs. The Grantor acknowledges that this may, in certain circumstances, require the delivery of cash or securities (or other property) without the concurrent receipt of securities (or other property) or cash. In such circumstances, the Trustee shall have no responsibility for nonreceipt of payment (or late payment) or nondelivery of securities or property (or late delivery) by the counterparty.
(i) Subject to the limitations of Sections 3.01, 3.03 and 3.06, any other investments not described above as directed by the Grantor.
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3.03 Additional Powers of Trustee.
The Trustee has the following powers and authority in the administration and investment of the Trust Fund, to be exercised subject to the other provisions of this Agreement and especially this Article 3:
(a) To purchase, subscribe for, and hold securities or other property authorized by Sections 3.01 and 3.02 as a proper investment for the Trust Fund, and to retain the same in trust.
(b) To sell for cash or credit, exchange, convey, transfer, or otherwise dispose of any securities or other property held in each Reserve Fund, by private contract or at public auction.
No person dealing with the Trustee is bound to see to the application of the purchase money or to inquire into the validity, expediency, or propriety of any sale or other disposition.
(c) To vote any stocks, bonds, or other securities; to give general or special proxies or powers of attorney with or without power of substitution; to exercise any conversion privileges, subscription rights, or other options, and to make any incidental payments; to oppose, consent to, or otherwise participate in corporate reorganizations or other changes affecting corporate securities, and (unless prohibited by statute) to delegate discretionary powers, and to pay any related assessments or charges; and generally to exercise any ownership powers over stocks, bonds, securities, or other property held as part of a Reserve Fund.
(d) To keep part of a Reserve Fund in cash or cash balances invested in interest-bearing accounts if the Trustee deems that to be prudent under the circumstances.
(e) To accept and retain for as long as the Trustee deems advisable any securities or other property received or acquired by the Trustee, regardless of any lack of diversification.
(f) To make, execute, acknowledge, and deliver documents of transfer and conveyance and other instruments that may be necessary or appropriate to carry out the Trustee's powers.
(g) To settle, compromise, or submit to arbitration any claims, debts, or damages due or owing to or from a Reserve Fund, to commence or defend legal or administrative proceedings, and to represent the Trust in all legal or administrative proceedings.
(h) To employ suitable subcustodians, agents and counsel (who may be counsel of the Grantor) and to pay their reasonable expenses and compensation. The Trustee may consult with legal counsel approved by the Grantor, which approval shall not be unreasonably withheld, who may also be counsel for the Grantor, with respect to its responsibilities under this agreement and shall be entitled to rely upon the written advice of such legal counsel.
(i) On direction by the Grantor as to the agent and insurance company, to invest in insurance contracts if and as allowed under Internal Revenue Code Section 468A, payable to the Trustee or its assignees as beneficiary.
(j) To purchase, enter, sell, hold, and generally deal in any manner in and with contracts for the immediate or future delivery of financial instruments of any issuer or of any 7
other property, foreign exchange and foreign exchange contracts, to grant, purchase, sell, exercise, permit to expire, permit to be held in escrow, and otherwise to acquire, dispose of, hold and generally deal in any manner with and in all forms of options in any combination.
(k) To enter into contracts with one or more persons, firms, associations, or corporations to obtain advice and counsel about investments.
(1) To enter into arrangements for the deposit of funds with banks or trust companies and in connection with the arrangements:
(1) To authorize the depositary to act as custodian of the cash, securities, or other property comprising the funds; (2) To authorize the depositary to convert the funds in whole or in part into, or to invest and reinvest the same in, securities of any kind and nature pen-nitted in this Agreement; and (3) To provide for the payment to the depositary of reasonable compensation for its services.
(m) To cause any securities or other property held as part of a Reserve Fund to be registered in its own name or in the name of one or more of its nominees, and to hold any investments in bearer form, but the books and records of the Trustee must at all times show that the investments are part of a Reserve Fund and subject to the jurisdiction of the United States, and to hold the property in safekeeping facilities of the Trustee or of other Trustee banks or clearing corporations, in the United States or elsewhere.
(n) To participate in any mergers or consolidations, or any registrations of securities with state or federal authorities regarding any securities held.
(o) Take all action necessary to pay for authorized transactions, including exercising the power to borrow or raise monies from the Trustee in its corporate capacity or an affiliate of the Trustee, and hold any property in the Trust Fund as security for advances made to the Trust Fund for any such authorized transactions, including disbursements or expenses, or the purchase or sale of foreign exchange, or of contracts for foreign exchange. The Trustee shall be entitled to collect from the Trust Fund sufficient cash for reimbursement and, if such cash is insufficient, dispose of the assets of the Trust Fund to the extent necessary to obtain reimbursement.
(p) To exercise any and all discretionary powers not explicitly or implicitly conferred by this Agreement which the Trustee may deem reasonably necessary and proper to carry out instructions given to the Trustee hereunder and which powers are not in contravention of the terms of this Agreement and applicable law.
(q) To perform any actions in furtherance of its safekeeping duties and obligations under this Agreement in accordance with the standard of care applicable to a prudent, professional custodian for hire acting with the care, skill, prudence, and diligence under the circumstances then prevailing which financial institutions, acting in a like capacity and familiar with such matter, would use, including performing actions to avoid any loss of securities of the 8
Trust in the Trustee's custody under this agreement, including but not limited to loss due to burglary, robbery, hold-up, theft or mysterious disappearance, damage or destruction.
(r) To do all acts, take all proceedings, and exercise all rights and privileges although not specifically mentioned here, as the Trustee deems necessary to administer the Trust Fund and to carry out the purposes of this Agreement.
3.04 Allocation of Investment Responsibility.
(a) Except to the extent that it has allocated investment responsibility to the Trustee or one or more investment advisors, the Grantor shall have investment responsibility for all assets of the Trust and in carryout out such responsibility the Grantor may direct the investments of the Trust in investments of any kind, including but not limited to, private equity, indirect interests in real estate, and non-investment grade bonds subject to the limitations contained in this Agreement. Directed investments under this Section 3.04 may not exceed the total of a Reserve Fund.
(b) The Grantor shall have the right, by written notice to the Trustee, to appoint and remove one or more investment advisors and to direct the Trustee to segregate any part or all of the Trust assets into one or more accounts, each of which shall be designated as an "Investment Advisor Account" The Trustee may assume that any Investment Advisor Account previously established and the prior appointment of an investment advisor for that account continues in full force and effect until receipt of written notice to the contrary from the Grantor. The Grantor may also, subject to the written consent of the Trustee, allocate investment responsibility for a designated portion of the Trust assets, which assets shall be segregated into an account known as the Trustee Managed Account. The Grantor shall furnish the Trustee with written investment guidelines, consistent with the terms of this Agreement, for the management of the assets contained in the Trustee Managed Account.
(c) The Grantor, with respect to any Trust assets not held in an Investment Advisor Account or Trustee Managed Account, and each investment advisor, with respect to its designated Investment Advisor Account, shall have all of the investment powers contained in this Agreement, subject to the applicable limitations set forth in the Agreement and, in the case of each investment advisor, such investment guidelines as the Grantor may provide to such investment advisor. The Trustee is not responsible for the selection, terms of appointment, compensation or conduct of any investment manager, broker, salesman, or agent selected by the Grantor, shall follow the directions of the Grantor with respect to Trust assets for which the Grantor has investment responsibility and shall follow the directions of any designated investment advisor, and shall have no responsibility for reviewing or determining whether any investment directed or carried out by the Grantor or a designated investment advisor is consistent with the investment limitations set forth in this Agreement or contained in the investment guidelines for such investment advisor.
(d) Subject to such investment guidelines as may be furnished to it from time to time by the Grantor, the Trustee is free to proceed without the concurrence or affirmative expression of the Grantor to handle, manage, control, invest, and reinvest the Trust Fund assets that are 9
allocated to the Trustee Managed Account under the powers granted in this Agreement with the same force and effect as if this section were not a part of this Agreement.
(e) No person dealing with the Trustee is required to determine whether any sale or purchase by the Trustee has been authorized or directed by the Grantor, and each is fully protected in dealing with the Trustee in the same manner as if this section were not a part of this Agreement.
(f) Whenever the Trustee is directed to purchase or sell assets in a Reserve Fund, the Trustee in its sole discretion is permitted at the expense of the Trust to obtain an appraisal of the value of the assets to be purchased or sold.
(g) To the extent that the Trustee has been allocated investment responsibility hereunder, then with respect to the assets held in the Trustee Managed Account, the powers granted the Trustee under Sections 3.02 and 3.03 of this Agreement will be exercised in the discretion of the Trustee. Neither the Trustee nor any other person is under a duty to question the Grantor's direction, and the Trustee will comply as promptly as practicable with such direction if it is consistent with the terms of this Agreement. The Trustee shall not be liable for the acts or omissions of any subcustodian appointed under Section 3.03(h) at the direction of the Grantor or an investment advisor including, but not limited to, any broker-dealer or other entity designated by the Grantor or an investment advisor to hold any property of the Trust Fund as collateral or otherwise pursuant to investment strategy.
3.05 Prohibition Against Self-Dealing.
Anything herein to the contrary notwithstanding, the Grantor and the Trustee will perform no act of self-dealing within the meaning of Internal Revenue Code Section 495 1(d), except for those acts expressly permitted by Treasury Regulations Section 1.468A-5(b)(2).
3.06. Prohibited Investments.
Anything herein to the contrary notwithstanding, the following investments are prohibited:
(a) Investment in the securities of Dominion Resources, Inc. or its affiliates, successors or assigns; and (b) Except for investments tied to market indices or other non-nuclear sector mutual funds, investment in any entity owning one or more nuclear power plants.
ARTICLE 4 OTHER DUTIES OF TRUSTEE 4.01 Payments from a Reserve Fund.
Payments or disbursements may be made from the trust only on the written direction of the Grantor after first giving 30 days prior written notice to the Nuclear Regulatory Commission and no payments or disbursements may be made from the trust if the Trustee receives prior written notice of objection from the Director, Office of Nuclear Reactor Regulation. For purposes of this 10
section 4.0 I, payments and disbursements do not include tax payments, ordinary and recurring administrative expenses including, but not limited to, those described in Section 4.02 or the return of excess contributions (as defined in Treasury Regulations section 1.468A-5( c )(2)(ii).
Promptly upon receipt by the Trustee of a written direction to make payments or disbursements from the trust, the Trustee shall provide written notice to the Nuclear Regulatory Commission.
Subject to the foregoing, on the written direction of the Grantor, the Trustee will make payments and transfers from a Reserve Fund to the persons or entities, in the manner, in the amounts, and for the purposes specified in the written directions. After payment, the amount paid is no longer a part of the Reserve Fund. Each Grantor direction will include a representation by the Grantor that the payment is in accordance with the purposes of this Agreement. The Trustee is not responsible for the application of the payments or for the adequacy of a Reserve Fund after payment to meet and discharge Trust liabilities.
4.02 Payment of Compensation, Expenses, and Taxes.
(a) The Trustee will be paid reasonable compensation as agreed upon from time to time in writing by the Grantor and the Trustee. In addition, the Trustee will be reimbursed from the Reserve Funds or, at the option of the Grantor, by the Grantor for all ordinary and necessary expenses incurred in connection with the operation of the Trust, including federal income tax imposed on the modified gross income of the Trust, any state or local tax imposed on the income or assets of the Trust, legal expenses, accounting expenses, actuarial expenses, investment manager fees and trustee compensation and expenses. To the extent the Trustee advances funds to the Trust Fund for disbursements or to effect the settlement of purchase transactions, the Trustee shall be entitled to collect from the Trust Fund either (i) with respect to domestic assets, an amount equal to what would have been earned on the sums advanced (an amount approximating the "federal funds" interest rate) or (ii) with respect to non-domestic assets, the rate applicable to the appropriate foreign market. All taxes levied or assessed on or in respect of a Reserve Fund, whether assessed to the Reserve Fund or the Grantor, will be paid, at the option of the Grantor, by the Grantor, or from the Trust Fund and pro-rated among the Reserve Funds in proportion to their respective fair-market values at the preceding calendar year end in the case of property taxes and in proportion to their respective taxable incomes for the relevant taxable year in the case of income taxes. To the extent that any taxes are provoked by the investment in or receipt of an identifiable asset or transaction involving a particular Reserve Fund, the taxes will be charged against the appropriate Reserve Fund, giving appropriate effect to computations of income and deductions related to the asset or transaction, and allocating any exemption available among the Reserve Funds in proportion to the tax liability provoked. Identifiable direct expenses will be treated in the same way as taxes.
(b) The Trustee will prepare and file tax returns for the Trust Fund as directed by the Grantor, provided that the Grantor shall indemnify the Trustee for any penalties, additions to tax, or other amounts for which it may be charged or may incur in connection with such preparation and filing, including but not limited to that due to a position taken on such returns. The Trustee may assume that any taxes assessed on or with respect to the Trust Fund are, lawfully assessed unless the Grantor advises the Trustee in writing that in the opinion of counsel for the Grantor the taxes are or may be unlawfully assessed. When so advised and requested in writing by the Grantor, the Trustee will contest the validity or the taxes in any manner deemed appropriate by the Grantor or its counsel (in which event the Trustee will execute all documents, instruments 11
claims, and petitions necessary or advisable in the opinion of the Grantor or its counsel for the refund, abatement) reduction or elimination of taxes. Reasonable expenses incurred by the Trustee in connection with such a contest will be reimbursed as provided in paragraph (a) of this section.
(c) The Trust Fund is a "grantor trust" under Subpart E of Part I of subchapter J of the Internal Revenue Code of 1986, as amended. The Trustee will prepare and timely deliver to the Grantor such information as shall be necessary for the Grantor to file timely tax returns reporting all items of income, deduction, gains or loss in respect of the Reserve Funds.
(d) No provision of this section will be effective to the extent that it would violate Internal Revenue Code Section 468A, especially insofar as it relates to Code Section 4951.
4.03 Accounting.
(a) The Trustee will keep accurate and detailed accounts of all investments, receipts, disbursements, and other transactions for each Reserve Fund and for the Trust Fund. All accounts, books, tax returns, and records relating to the Trust are open to inspection and audit at all reasonable times by any person designated by the Grantor and at the expense of the Grantor.
(b) An account of the Trustee may be approved by the Grantor by written notice delivered to the Trustee or by failure to object to the account by written notice delivered to the Trustee within one hundred twenty (120) days of the completion of the Plan's annual audit by the Grantor or its appointed auditor. The approval of an account shall constitute a full and complete discharge to the Trustee as to all matters that are set forth in that account as if the account had been settled by a court of competent jurisdiction in an action or proceeding to which the Trustee, and the Grantor were parties. In no event shall the Trustee be precluded from having its accounts settled by a judicial proceeding.
(c) Except as specifically provided by statute, no person other than the Grantor may require an accounting or bring an action against the Trustee about the Trust or the actions of the Trustee. The Trustee is not required to make reports to any courts or administrative agencies, except as specifically directed by Grantor or as otherwise required by applicable law.
4.04 Valuation.
(a) As of each calendar year end, the Trustee will determine the fair-market value of the Trust Fund and each Reserve Fund and report that value to the Grantor in writing.
(b) Non-cash contributions are valued at fair-market value determined by the Trustee as of the actual date on which the Trustee accepts the property.
(c) In determining the net worth of the Trust Fund and the Reserve Funds, the Trustee will deduct all allocable expenses.
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ARTICLE 5 AMENDMENT AND TERMINATION OF THE TRUST 5.01 Amendment of the Trust.
The Grantor has the right at any time to amend this Agreement in whole or in part, but (a) No amendment may authorize or permit any assets of the Trust Fund (other than those required to pay taxes and other administration expenses) to be used for or diverted to purposes other than the costs of decommissioning Grantor's nuclear power plants, except as may be required by any court or regulatory authority or those allowed by Internal Revenue Code Section 468A; (b) No amendment may be made that changes the Trustee's duties or liabilities without the Trustee's written consent; and (c) No amendment of any material respect, including change in Trustee, may be made without 30 days' prior written notification to the Director, Office of Nuclear Reactor Regulation.
An amendment may be made retroactively if such application is necessary to bring the Trust or the Grantor into conformity with any other applicable statute or regulation.
5.02 Irrevocability of Trust Fund.
Each Reserve Fund is irrevocable. Except as otherwise provided by law, each Reserve Fund ternminates upon completion of its nuclear power plant decommissioning that it has been created to fund as certified to the Trustee by the Grantor, upon disqualification of the Reserve Fund under Internal Revenue Code Section 468A, or upon the frustration or failure of the Reserve Fund's purposes.
5.03 Merger, Consolidation, or Succession.
(a) A corporation with which the Grantor is merged or a corporation or other legal entity which acquires substantially all the assets of the Grantor, shall become the Grantor for purposes of this Agreement, and every reference in this Agreement to the Grantor will be treated as a reference to that surviving or purchasing corporation or other legal entity.
(b) If the Grantor is liquidated, merged, or consolidated with another company or other legal entity and the Grantor's successor chooses not to discharge the Grantor's duties under this Agreement, the Trust nevertheless will survive and the Trust Fund will continue in trust under the terms of this Agreement. In such a case, the Trustee may, but shall not be required to, petition a court of competent jurisdiction seeking the appointment of a party to succeed to the responsibilities of the Grantor. In seeking such an order, the Trustee shall be held harmless and indemnified by the Grantor or its successor. Any expenses incurred by the Trustee in seeking said court order shall be the responsibility of the Grantor or its successor until paid.
(c) The merger or consolidation of the Trust with, or a transfer of assets or liabilities from this Trust to another trust or fund is not permitted unless the Trustee has received an opinion of counsel satisfactory to the Trustee to the effect that the merger, consolidation, or 13
transfer results in no diversion or use of assets that is not permitted by Internal Revenue Code Section 468A.
5.04 Impossibility of Diversion.
Assets of the Trust Fund or Reserve Funds may not be used for or diverted to purposes other than the purposes permitted by Internal Revenue Code Section 468A, whether by operation or natural termination of the Trust, by power of revocation or amendment, by happening of a contingency, by collateral arrangement, or by any other means. If permissible under the preceding sentence, contributions by the Grantor to the Trust found not to be deductible for federal income tax purposes shall be returned to the Grantor or, failing that, set aside in a fund or trust separate from this trust under such terms as the law permits and the Grantor directs.
ARTICLE 6 MISCELLANEOUS PROVISIONS 6.01 Construction.
The Grantor's intent and purpose in creating the trusts hereunder and executing this Agreement is to maintain Nuclear Decommissioning Reserve Funds pursuant to Internal Revenue Code Section 468A. All questions arising in the administration of the Trust and in the construction of this Agreement will be resolved accordingly. This Agreement will be construed, enforced, and administered in accordance with the laws of the State of Illinois, except to the extent that the laws of the United States of America take precedence, in which event, this Agreement will be construed in accordance with the laws of the United States of America. The headings and subheadings in this Agreement have been inserted for convenience only and are to be ignored in construction of the provisions.
6.02 Rights under the Trust.
No person other than the Grantor has any vested rights under the Trust except to the extent that rights may accrue under other agreements made by the Trustee. Except as permitted by law, no assignment of any rights or benefits under the Trust is permitted or recognized, nor will any rights or benefits be subject to attachment or other legal or equitable process or subject to the jurisdiction of any bankruptcy court.
6.03 Frustrated Actions.
If it becomes impossible for the Grantor or the Trustee to perform an act, then that act will be performed which, in the discretion of the Trustee, most nearly carries out the intent and purpose of this Agreement.
6.04 Construction of Direction.
Whenever the Grantor or Trustee is directed to take an action upon the occurrence of an event, neither is under obligation to take that action until it has received proper and satisfactory written notice of the occurrence.
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6.05 Authorizations and Communication.
A written authorization or communication from an officer of the Grantor or the Trustee that an event has occurred constitutes conclusive evidence of the occurrence, and the Grantor or Trustee is fully protected and discharged from all liability in accepting and relying upon that authorization or communication.
6.06 Genuine Notice; Direction.
The Grantor or the Trustee will not incur liability to any persons or party when acting on a notice, request, consent, direction, instruction, letter, telegram, or other paper or document that it believes to be genuine, and to have been signed or sent by the proper person.
6.07 Binding Nature.
This Agreement is binding upon the heirs, executors, administrators, successors, and assigns of all parties, present and future.
6.08. Force Maieure.
Neither party shall be responsible for any delay in performance, or non-performance, of any obligation hereunder to the extent that the same is due to forces beyond its reasonable control, including but not limited to delays, errors or interruptions caused by the Grantor or third parties, any industrial, juridical, governmental, civil or military action, acts of terrorism, insurrection or revolution; nuclear fusion, fission or radiation, failure or fluctuation in electrical power, heat, light, air conditioning or telecommunications equipment, or acts of God.
6.09 Representation and Warranty as to Authority.
The Grantor and the Trustee hereby each represent and warrant to the other that it has full authority to enter into this Agreement upon the terms and conditions hereof and that the individual executing this Agreement on its behalf has the requisite authority to bind the Grantor or the Trustee to this Agreement.
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IN WITNESS of this Amended and Restated Agreement, the grantor and the Trustee have signed below on this __ day of ,2012.
DOMINION NUCLEAR CONNECTICUT, INC.
By:_
Title:
THE NORTHERN TRUST COMPANY, TRUSTEE By:
Title:
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Attachment 2 Amended and Restated Dominion Nuclear Connecticut, Inc. Non-Qualified Nuclear Decommissioning Trust Agreement Millstone Power Station - Units 1,2 and 3 Dominion Nuclear Connecticut, Inc.
AMENDED AND RESTATED DOMINION NUCLEAR CONNECTICUT, INC.,
NON-QUALIFIED NUCLEAR DECOMMISSIONING TRUST AGREEMENT
AMENDED AND RESTATED DOMINION NUCLEAR CONNECTICUT, INC.,
NON-QUALIFIED NUCLEAR DECOMMISSIONING TRUST AGREEMENT This AMENDED AND RESTATED TRUST AGREEMENT ("Agreement") is made the 1st day of January 2013, between DOMINION NUCLEAR CONNECTICUT, INC., a Delaware corporation, the Grantor, and THE NORTHERN TRUST COMPANY, an Illinois corporation of Chicago, Illinois, the Trustee.
WHEREAS, the Grantor owns a 100 percent interest in Unit 1, 100 percent interest in Unit 2, and 93.47 percent interest in Unit 3 of the Millstone Power Station, a nuclear generating station located in the Town of Waterford, New London County, Connecticut.
WHEREAS, the Grantor wishes to establish pursuant to this Agreement and under the laws of the State of Illinois, separate trust funds under a single agreement none of which qualifies as a Nuclear Decommissioning Reserve Fund under section 468A of the Internal Revenue Code of 1986, as amended.
WHEREAS, the execution and delivery of this Agreement have been duly authorized by each of the Grantor and the Trustee and all things necessary to make this Agreement a valid and binding agreement by each of the Grantor and the Trustee have been done.
NOW, THEREFORE, the Grantor and the Trustee agree as follows:
ARTICLE 1 GENERAL PROVISIONS 1.01 Name, Trust Funds.
The separate trusts may be referred to collectively under the name DOMINION NUCLEAR CONNECTICUT, INC., NON-QUALIFIED NUCLEAR DECOMMISSIONING TRUST (referred to herein as the "Trust" or "Trust Fund"). The separate trusts shall be identified by adding the suffix "Unit 1," "Unit 2," and "Unit 3." In addition, the Grantor, as Lead Participant, may amend the Minority Interest Trust to authorize each of its non-qualified Funds to continue as a separate trust subject to the terms of this Master Trust Agreement, and such Funds shall be identified by adding the suffix Green Mountain Power Corporation Minority Interest Unit 3 and Massachusetts Municipal Wholesale Electric Company Minority Interest Unit 3 to the respective Fund. The Trust Fund is the entire undistributed amount of all contributions and transferred assets placed with the Trustee, as adjusted for all income, expense, gain, or loss on such amount as may exist from time to time. As used herein, "Trust Fund" shall be used merely to refer to the Reserve Funds in the aggregate and is not intended nor should it be construed to constitute a separate entity.
1.02 Grantor, Trustee.
The Grantor of this Trust is Dominion Nuclear Connecticut, Inc., and its successors and assigns as provided in Section 5.03 of this Agreement. The Trustee under this Agreement is Northern Trust Company, its successors and assigns, or any other person, company, bank, or trust company appointed as provided in Section 2.01 of this Agreement.
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1.03 Trust Committee.
The Grantor may establish a Nuclear Decommissioning Trust Committee (the "Committee")
composed of any three or more persons appointed by the Grantor's Board of Directors on whatever terms the Board desires. The Committee has the authority to exercise all of the Grantor's powers under this Agreement, and for purposes of Sections 2.03(c) and (d) and Section 3.04(g), the Trustee will be protected in treating the directions and other actions of the Committee as the directions or actions of the Grantor. The Grantor must certify to the Trustee all appointments to or removals from the Committee, and the Trustee must recognize written instructions signed by any Committee member, or its designee, as a directive from the Committee.
1.04. Separate Reserve Funds.
The Trust Fund is divided into separate Reserve Funds as designated by the Grantor, and each Reserve Fund provides for the decommissioning of a specified unit of a nuclear power plant.
Each Reserve Fund is established as a trust under state law. Each Reserve Fund will be segregated and maintained apart from the assets of other Reserve Funds and any other assets of the Trust Fund. Separate accounting and separate funding will be observed, and each Reserve Fund shall be treated as a separate trust. Reserve Funds may be commingled for investment purposes in accordance with section 3.02 of this Agreement.
ARTICLE 2 TRUSTEE APPOINTMENT, REMOVAL, LIABILITY 2.01 Appointment, Removal. Successors.
(a) The Grantor may appoint a successor Trustee by written notice to the person appointed and to the Trustee then serving. A Trustee may resign on thirty days' notice in writing to the Grantor. The Grantor may remove any Trustee by thirty days' written notice to the Trustee. Notwithstanding the foregoing, no removal or resignation shall take effect until (1) a successor Trustee has been appointed and accepted appointment as Trustee and (2) notice of the change in Trustee has been provided to the Nuclear Regulatory Commission in accordance with section 5.01(c) of this Agreement. If a successor Trustee has not been appointed and accepted appointment within sixty (60) days of the Grantor's receipt of notice of resignation of the Trustee or the Trustee's receipt of notice of removal, such Trustee may petition a court of competent jurisdiction to appoint a successor Trustee to serve until such time, if ever, as a successor Trustee shall have been appointed by the Grantor and accepted such appointment. Each successor Trustee shall have the same powers and duties as the Trustee named herein.
(b) A successor Trustee may accept appointment and qualify as Trustee by executing, acknowledging, and delivering to the Grantor its acceptance in a form satisfactory to the Grantor.
The successor Trustee, without further act, deed, or conveyance, is vested with all the estate, rights, powers, and discretion of the predecessor Trustee just as if originally named as a Trustee in this Agreement.
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(c) When a successor Trustee accepts appointment, the predecessor Trustee (or representative, if the predecessor Trustee is unable or unavailable) will assign, transfer title, and pay over to the successor Trustee the funds and properties then constituting the Trust Fund. The predecessor Trustee (or representative) is authorized, however, to reserve a sum of money deemed advisable for payment of fees and expenses accrued to date or expected to be incurred in connection with the transfer and settlement of the Trust Fund (all subject to the limitation in Section 5.04 of this Agreement), and any balance of that reserve remaining after the payment of fees and expenses will be paid over to the successor Trustee.
(d) The Trustee may adopt or amend bylaws and regulations that the Trustee deems desirable for the conduct of Trustee affairs.
(e) The Trustee will keep a record of all Trustee proceedings and acts and all other data necessary for the proper administration of the Trust. To the extent required in the provisions of this Agreement set forth below, the Trustee will notify the Grantor and any specified interested party of any Trustee action taken.
2.02 Establishment and Acceptance of Trust.
(a) Unless the Grantor otherwise advises the Trustee, the Grantor will make all contributions in cash or other intangible personal property.
(b) At the time it makes any contribution to the Trust Fund, the Grantor will specify in a writing then delivered to the Trustee the exact amount or portion of the contribution that is to be placed in each Reserve Fund then existing. The Trustee shall not accept contributions from anyone other than the Grantor without the Grantor's written approval for each such contribution, and an exact written allocation of such a contribution among the Reserve Funds then existing must accompany the contribution. The Trustee has no right or duty to inquire into the amount of or the method used in determining any contribution or the allocation of any contribution among the Reserve Funds. The Trustee is accountable only for funds actually received. The Trustee has no duty to compute or collect the amount to be paid to it by the Grantor.
(c) All contributions and/or transferred assets and income therefrom will be held in trust and administered according to the terms of this Agreement.
(d) No part of the Trust Fund may be used for or diverted to purposes other than the exclusive purposes allowed by this Agreement, as described in Sections 5.04 and 6.01 of this Agreement.
2.03 Limitation of Liability.
(a) To the extent permitted by law, the Trustee will serve without bond; the Trustee will secure and pay for required bonds. At its own expense, the Grantor is entitled to employ its own counsel to defend or maintain, either in its own name or in the name of any Trustee, with said Trustee's approval, any suit or litigation arising under this Agreement involving the Trustee.
(b) In the event that THE NORTHERN TRUST COMPANY incurs any liability, loss, claim, suit or expense (including attorneys fees) in connection with or arising out of its 3
provision of services under this agreement, or its status as trustee hereunder, under circumstances where THE NORTHERN TRUST COMPANY cannot obtain or would be precluded by law from obtaining payment or reimbursement of such liability, loss, claim, suit or expense (including attorneys fees) from the Trust Fund, then the Grantor (which has the authority to do so under the laws of the state of its incorporation) shall indemnify and hold THE NORTHERN TRUST COMPANY harmless from and against such liability, loss, claim, suit or expense, except to the extent such liability, loss, claim, suit or expense arises from (i) a breach by the Trustee of the terms of this agreement (provided, however, that this exception shall not apply to the extent that such breach arises under section 3.06 of the Agreement as a result of the Trustee acting in good faith and in accordance with the direction, instruction or notice of the Grantor or an investment adviser) or (ii) the Trustee's negligence or willful misconduct in the performance of its specifically allocated duties under this agreement. Notwithstanding the foregoing, THE NORTHERN TRUST COMPANY shall not be indemnified for any loss, liability, claim, suit or expense to the extent the Trustee participated knowingly in, or knowingly undertook to conceal, an act or omission of any person or entity constituting a breach of such person or entity's fiduciary responsibility hereunder, knowing such act or omission was a breach; provided however, that the Trustee shall not be deemed to have done so by merely complying with directions of an Investment Adviser or by its failure to act in the absence of such direction or by reason of maintaining accounting records or solely as a result of the normal information received by the Trustee or its officers, employees, or agents in the normal course of performing any custodial, reporting, recording and bookkeeping functions with respect to any assets of the Trust Fund managed by an Investment Manager or the Grantor. This paragraph shall survive the termination of this agreement.
(c) THE NORTHERN TRUST COMPANY (which has the authority to do so under the laws of the state of its incorporation) agrees to defend, indemnify and hold harmless the Grantor, the Trust and its fiduciaries, and the then present and former officers, employees, and directors of the Grantor from and against any and all liability, loss, claim, suit or expense (including attorneys' fees), which arises from (i) a breach by the NORTHERN TRUST COMPANY of the terms of this agreement or (ii) the Trustee's own negligence or willful misconduct in the performance of its duties and responsibilities specifically allocated to it herein.
This paragraph shall survive the termination of this Agreement.
(d) Notwithstanding the foregoing subparagraphs (b) and (c), neither the Company nor the Trustee shall be responsible for consequential or special damages under such subparagraphs.
(e) The Trustee shall not be responsible for any losses resulting from the deposit or maintenance of securities or other property (in accordance with market practice, custom, or regulation) with any recognized foreign clearing facility, book-entry system, centralized custodial depository, or similar organization. The Trustee shall not be responsible or liable for any losses or damages suffered by the Trust Fund arising as a result of the insolvency of any custodian, subtrustee or subcustodian, except to the extent the loss or damage was due to the Trustee's failure to prudently select or periodically monitor a custodian, subtrustee or subcustodian. Settlements of transactions may be effected in trading and processing practices customary in the jurisdiction or market where the transaction occurs. The Grantor acknowledges that this may, in certain circumstances, require the delivery of cash or securities (or other 4
property) without the concurrent receipt of securities (or other property) or cash and, in such circumstances, the Grantor shall have sole responsibility for nonreceipt of payment (or late payment) by the counterparty.
2.04 Discharge after Distributions or Termination.
After all distributions (including distributions to a successor Trustee) or any termination under this Agreement or applicable law, the Trustee is discharged from all obligations under this Agreement, and no person or entity has any further right or claim against the Trustee not otherwise provided by statute.
2.05 Legal Action.
In all legal actions regarding the Trust and this Agreement, the Trustee and the Grantor are the only necessary parties. A final judgment not appealed or appealable entered in an action or proceeding against the Grantor, the Trust, or the Trustee is binding and conclusive on the parties to this Agreement and all persons having or claiming to have any interest in the Trust Fund.
ARTICLE 3 INVESTMENT DUTIES, POWERS 3.01 Investment Policy and Limitations.
The Trustee, the Grantor, any investment advisor and anyone else directing investments, when directing investments, shall adhere to the "prudent investor" standard as specified in 18 C.F.R.
35.32(a)(3) of the FERC regulations.
The Grantor shall be responsible for formulation of the investment policy for the Trust. To the extent that investment responsibility is allocated to the Trustee or investment advisors, the Grantor shall provide written investment guidelines to each entity to which investment responsibility has been allocated, consistent with such investment policy.
3.02 Investment of Trust Fund.
The assets of two or more Reserve Funds may be commingled for investment purposes as the Grantor directs. The Trustee shall apportion any earnings or losses from an investment made with commingled assets to each participating Reserve Fund in the same proportion that the amount invested from each Reserve Fund bears to the total amount invested. Subject to the provisions of section 3.04 of this Agreement, the Trustee will invest and reinvest the principal and income of each Reserve Fund and keep those trust assets invested, without distinction between principal and income. If assets of two or more Reserve Funds are commingled for investment purposes, the Grantor shall have the absolute authority to direct the Trustee at any time to liquidate the interests of the Reserve Funds in a commingled investment, and the trustee shall promptly comply with any such directive. The commingling arrangement undertaken as permitted in this Section 3.02 can be terminated at any time by any Reserve Fund. No Reserve Fund in the commingling arrangement may substitute for itself in the arrangement any person that is not a member to the commingling arrangement.
Trust investments may include, but shall not be limited to the following:
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(a) Publicly traded domestic or foreign common and preferred stocks and options thereon, as well as warrants, rights and preferred stocks convertible into common stock, regardless of where or how traded.
(b) Investment grade domestic corporate bonds and debentures and any such securities which are convertible into common stock, domestic or foreign.
(c) Bonds or other obligations of the United States of America or non-U.S. sovereign debt with an equivalent rating of A or higher.
(d) Investment grade obligations of the states and of municipalities or of any agencies thereof.
(e) Investment grade notes of any nature, of foreign or domestic issuers.
(f) Savings accounts, certificates of deposit and other types of time deposits, bearing a reasonable rate of interest based upon the duration, amount, type and geographical area, with any financial institution or quasi-financial institution or any department of the same, either domestic or foreign, under the supervision of the United States or any State, including any such financial institution owned, operated or maintained by the Trustee in its corporate or association capacity (including any department or division of the same) or a corporation or association affiliated with the same.
(g) Any collective, common or pooled trust fund operated or maintained exclusively for the commingling and collective investment of monies or other assets including any such fund operated or maintained by the Trustee or its affiliate. Notwithstanding the provisions of this Agreement which place restrictions upon the actions of the Trustee, to the extent monies or other assets are utilized to acquire units of any collective trust, the terms of the collective trust indenture shall solely govern the investment duties, responsibilities and powers of the trustee of such collective trust and, to the extent required by law, such terms, responsibilities and powers shall be incorporated herein by reference and shall be part of this Agreement. For purposes of valuation, the value of the interest maintained by a Reserve Fund in such collective trust shall be the fair market value of the collective fund units held, determined in accordance with generally recognized valuation procedures. The Grantor expressly understands and agrees that any such collective fund may provide for the lending of its securities by the collective fund trustee and that such collective fund's trustee will receive compensation from such collective fund for the lending of securities that is separate from any compensation of the Trustee hereunder, or any compensation of the collective fund trustee for the management of such collective fund.
(h) Open-end and closed-end investment companies, regardless of the purposes for which such fund or funds were created, (including those for which the Trustee or an affiliate provides services for a fee), and any partnership, limited or unlimited, joint venture and other forms of joint enterprise created for any lawful purposes otherwise consistent with the investment guidelines set forth herein. Settlements of transactions may be effected in trading and processing practices customary in the jurisdiction or market where the transaction occurs. The Grantor acknowledges that this may, in certain circumstances, require the delivery of cash or securities (or other property) without the concurrent receipt of securities (or other property) or 6
cash. In such circumstances, the Trustee shall have no responsibility for nonreceipt of payment (or late payment) or nondelivery of securities or property (or late delivery) by the counterparty.
(i) Subject to the limitations of Sections 3.01 and 3.05, any other investments not described above as directed by the Grantor.
3.03 Additional Powers of Trustee.
The Trustee has the following powers and authority in the administration and investment of the Trust Fund, to be exercised subject to the other provisions of this Agreement and especially this Article 3:
(a) To purchase, subscribe for, and hold securities or other property authorized by Sections 3.01 and 3.02 as a proper investment for the Trust Fund, and to retain the same in trust.
(b) To sell for cash or credit, exchange, convey, transfer, or otherwise dispose of any securities or other property held in each Reserve Fund, by private contract or at public auction.
No person dealing with the Trustee is bound to see to the application of the purchase money or to inquire into the validity, expediency, or propriety of any sale or other disposition.
(c) To vote any stocks, bonds, or other securities; to give general or special proxies or powers of attorney with or without power of substitution; to exercise any conversion privileges, subscription rights, or other options, and to make any incidental payments; to oppose, consent to, or otherwise participate in corporate reorganizations or other changes affecting corporate securities, and (unless prohibited by statute) to delegate discretionary powers, and to pay any related assessments or charges; and generally to exercise any ownership powers over stocks, bonds, securities, or other property held as part of a Reserve Fund.
(d) To keep part of a Reserve Fund in cash or cash balances invested in interest-bearing accounts if the Trustee deems that to be prudent under the circumstances.
(e) To accept and retain for as long as the Trustee deems advisable any securities or other property received or acquired by the Trustee, regardless of any lack of diversification.
(0 To make, execute, acknowledge, and deliver documents of transfer and conveyance and other instruments that may be necessary or appropriate to carry out the Trustee's powers.
(g) To settle, compromise, or submit to arbitration any claims, debts, or damages due or owing to or from a Reserve Fund, to commence or defend legal or administrative proceedings, and to represent the Trust in all legal or administrative proceedings.
(h) To employ suitable subcustodians, agents and counsel (who may be counsel of the Grantor) and to pay their reasonable expenses and compensation. The Trustee may consult with legal counsel approved by the Grantor, which approval shall not be unreasonably withheld, who may also be counsel for the Grantor, with respect to its responsibilities under this agreement and shall be entitled to rely upon the written advice of such legal counsel.
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(i) On direction by the Grantor as to the agent and insurance company, to invest in insurance contracts, payable to the Trustee or its assignees as beneficiary.
(j) To purchase, enter, sell, hold, and generally deal in any manner in and with contracts for the immediate or future delivery of financial instruments of any issuer or of any other property, foreign exchange and foreign exchange contracts, to grant, purchase, sell, exercise, permit to expire, permit to be held in escrow, and otherwise to acquire, dispose of, hold and generally deal in any manner with and in all forms of options in any combination.
(k) To enter into contracts with one or more persons, firms, associations, or corporations to obtain advice and counsel about investments.
(1) To enter into arrangements for the deposit of funds with banks or trust companies and in connection with the arrangements:
(1) To authorize the depositary to act as custodian of the cash, securities, or other property comprising the funds; (2) To authorize the depositary to convert the funds in whole or in part into, or to invest and reinvest the same in, securities of any kind and nature permitted in this Agreement; and (3) To provide for the payment to the depositary of reasonable compensation for its services.
(m) To cause any securities or other property held as part of a Reserve Fund to be registered in its own name or in the name of one or more of its nominees, and to hold any investments in bearer form, but the books and records of the Trustee must at all times show that the investments are part of a Reserve Fund and subject to the jurisdiction of the United States, and to hold the property in safekeeping facilities of the Trustee or of other Trustee banks or clearing corporations, in the United States or elsewhere.
(n) To participate in any mergers or consolidations, or any registrations of securities with state or federal authorities regarding any securities held.
(o) To exercise any and all discretionary powers not explicitly or implicitly conferred by this Agreement which the Trustee may deem reasonably necessary and proper to carry out instructions given to the Trustee hereunder and which powers are not in contravention of the terms of this Agreement and applicable law.
(p) To perform any actions in furtherance of its safekeeping duties and obligations under this Agreement in accordance with the standard of care applicable to a prudent, professional custodian for hire acting with the care, skill, prudence, and diligence under the circumstances then prevailing which financial institutions, acting in a like capacity and familiar with such matter, would use, including performing actions to avoid any loss of securities of the Trust in the Trustee's custody under this agreement, including but not limited to loss due to burglary, robbery, hold-up, theft or mysterious disappearance, damage or destruction.
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(q) Take all action necessary to pay for authorized transactions, including exercising the power to borrow or raise monies from the Trustee in its corporate capacity or an affiliate of the Trustee, and hold any property in the Trust Fund as security for advances made to the Trust Fund for any such authorized transactions, including disbursements or expenses, or the purchase or sale of foreign exchange, or of contracts for foreign exchange. The Trustee shall be entitled to collect from the Trust Fund sufficient cash for reimbursement and, if such cash is insufficient, dispose of the assets of the Trust Fund to the extent necessary to obtain reimbursement.
(r) To do all acts, take all proceedings, and exercise all rights and privileges although not specifically mentioned here, as the Trustee deems necessary to administer the Trust Fund and to carry out the purposes of this Agreement.
3.04 Allocation of Investment Responsibility.
(a) Except to the extent that it has allocated investment responsibility to the Trustee or one or more investment advisors, the Grantor shall have the investment responsibility for all assets of the Trust and in carrying out such responsibility the Grantor may direct the investments of the Trust in investments of any kind, including but not limited to, private equity, indirect interests in real estate, and non-investment grade bonds, subject to the limitations contained in this Agreement. Directed investments under this Section 3.04 may not exceed the total of a Reserve Fund.
(b) The Grantor shall have the right, by written notice to the Trustee, to appoint and remove one or more investment advisors and to direct the Trustee to segregate any part or all of the Trust assets into one or more accounts, each of which shall be designated as an "Investment Advisor Account" The Trustee may assume that any Investment Advisor Account previously established and the prior appointment of an investment advisor for that account continues in full force and effect until receipt of written notice to the contrary from the Grantor. The Grantor may also, subject to the written consent of the Trustee, allocate investment responsibility for a designated portion of the Trust assets, which assets shall be segregated into an account known as the Trustee Managed Account. The Grantor shall furnish the Trustee with written investment guidelines, consistent with the terms of this Agreement, for the management of the assets contained in the Trustee Managed Account.
(c) The Grantor, with respect to any Trust assets not held in an Investment Advisor Account or Trustee Managed Account, and each investment advisor, with respect to its designated Investment Advisor Account, shall have all of the investment powers contained in this Agreement, subject to the applicable limitations set forth in the Agreement and, in the case of each investment advisor, such investment guidelines as the Grantor may provide to such investment advisor. The Trustee is not responsible for the selection, terms of appointment, compensation or conduct of any investment manager, broker, salesman, or agent selected by the Grantor, shall follow the directions of the Grantor with respect to Trust assets for which the Grantor has investment responsibility and shall follow the directions of any designated investment advisor, and shall have no responsibility for reviewing or determining whether any investment directed or carried out by the Grantor or a designated investment advisor is consistent with the investment limitations set forth in this Agreement or contained in the investment guidelines for such investment advisor.
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(d) Subject to such investment guidelines as may be furnished to it from time to time by the Grantor, the Trustee is free to proceed without the concurrence or affirmative expression of the Grantor to handle, manage, control, invest, and reinvest the Trust Fund assets that are allocated to the Trustee Managed Account under the powers granted in this Agreement with the same force and effect as if this section were not a part of this Agreement.
(e) No person dealing with the Trustee is required to determine whether any sale or purchase by the Trustee has been authorized or directed by the Grantor, and each is fully protected in dealing with the Trustee in the same manner as if this section were not a part of this Agreement.
(f) Whenever the Trustee is directed to purchase or sell assets in a Reserve Fund, the Trustee in its sole discretion is permitted at the expense of the Trust to obtain an appraisal of the value of the assets to be purchased or sold.
(g) To the extent that the Trustee has been allocated investment responsibility hereunder, then with respect to the assets held in the Trustee Managed Account, the powers granted the Trustee under Sections 3.02 and 3.03 of this Agreement will be exercised in the discretion of the Trustee. Neither the Trustee nor any other person is under a duty to question the Grantor's direction, and the Trustee will comply as promptly as practicable with such direction if it is consistent with the terms of this Agreement. The Trustee shall not be liable for the acts or omissions of any subcustodian appointed under Section 3.03(h) at the direction of the Grantor or an investment advisor including, but not limited to, any broker-dealer or other entity designated by the Grantor or an investment advisor to hold any property of the Trust Fund as collateral or otherwise pursuant to investment strategy.
3.05. Prohibited Investments.
Anything herein to the contrary notwithstanding, the following investments are prohibited:
(a) Investment in the securities of Dominion Resources, Inc. or its affiliates, successors or assigns; and (b) Except for investments tied to market indices or other non-nuclear sector mutual funds, investment in any entity owning one or more nuclear power plants.
ARTICLE 4 OTHER DUTIES OF TRUSTEE 4.01 Payments from a Reserve Fund.
Payments or disbursements may be made from the trust only on the written direction of the Grantor after first giving 30 days prior written notice to the Nuclear Regulatory Commission and no payments or disbursements may be made from the trust if the Trustee receives prior written notice of objection from the Director, Office of Nuclear Reactor Regulation. For purposes of this section 4.0 1,payments and disbursements do not include tax payments, ordinary and recurring administrative expenses including, but not limited to, those described in Section 4.02.
Promptly upon receipt by the Trustee of a written direction to make payments or disbursements from the trust, the Trustee shall provide written notice to the Nuclear Regulatory Commission.
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Subject to the foregoing, on the written direction of the Grantor, the Trustee will make payments and transfers from a Reserve Fund to the persons or entities, in the manner, in the amounts, and for the purposes specified in the written directions. After payment, the amount paid is no longer a part of the Reserve Fund. Each Grantor direction will include a representation by the Grantor that the payment is in accordance with the purposes of this Agreement, including but not limited to the provisions of this Article 4. The Trustee is not responsible for the application of the payments or for the adequacy of a Reserve Fund after payment to meet and discharge Trust liabilities.
4.02 Payment of Compensation, Expenses, and Taxes.
(a) The Trustee will be paid reasonable compensation as agreed upon from time to time in writing by the Grantor and the Trustee. In addition, the Trustee will be reimbursed from the Reserve Funds or, at the option of the Grantor, by the Grantor for all ordinary and necessary expenses incurred in connection with the operation of the Trust, including federal income tax imposed on the modified gross income of the Trust, any state or local tax imposed on the income or assets of the Trust, legal expenses, accounting expenses, actuarial expenses, investment manager fees and trustee compensation and expenses. To the extent the Trustee advances funds to the Trust Fund for disbursements or to effect the settlement of purchase transactions, the Trustee shall be entitled to collect from the Trust Fund either (i) with respect to domestic assets, an amount equal to what would have been earned on the sums advanced (an amount approximating the "federal funds" interest rate) or (ii) with respect to non-domestic assets, the rate applicable to the appropriate foreign market. All taxes levied or assessed on or in respect of a Reserve Fund, whether assessed to the Reserve Fund or the Grantor, will be paid, at the option of the Grantor, by the Grantor, or from the Trust Fund and pro-rated among the Reserve Funds in proportion to their respective fair -market values at the preceding calendar year end in the case of property taxes and in proportion to their respective taxable incomes for the relevant taxable year in the case of income taxes. To the extent that any taxes are provoked by the investment in or receipt of an identifiable asset or transaction involving a particular Reserve Fund, the taxes will be charged against the appropriate Reserve Fund, giving appropriate effect to computations of income and deductions related to the asset or transaction, and allocating any exemption available among the Reserve Funds in proportion to the tax liability provoked. Identifiable direct expenses will be treated in the same way as taxes.
(b) The Trustee will prepare and file tax returns for the Reserve Funds as directed by the Grantor, provided that the Grantor shall indemnify the Trustee for any penalties, additions to tax, or other amounts for which it may be charged or may incur in connection with such preparation and filing, including but not limited to that due to a position taken on such returns.
The Trustee may assume that any taxes assessed on or with respect to the Reserve Funds are lawfully assessed unless the Grantor advises the Trustee in writing that in the opinion of counsel for the Grantor the taxes are or may be unlawfully assessed. When so advised and requested in writing by the Grantor, the Trustee will contest the validity or the taxes in any manner deemed appropriate by the Grantor or its counsel) in which event the Trustee will execute all documents, instruments claims, and petitions necessary or advisable in the opinion of the Grantor or its counsel for the refund, abatement) reduction or elimination of taxes. Reasonable expenses incurred by the Trustee in connection with such a contest will be reimbursed as provided in paragraph (a) of this section.
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4.03 Accounting.
(a) The Trustee will keep accurate and detailed accounts of all investments, receipts, disbursements, and other transactions for each Reserve Fund and for the Trust Fund. All accounts, books, tax returns, and records relating to the Trust are open to inspection and audit at all reasonable times by any person designated by the Grantor and at the expense of the Grantor.
(b) An account of the Trustee may be approved by the Grantor by written notice delivered to the Trustee or by failure to object to the account by written notice delivered to the Trustee within one hundred twenty (120) days of the completion of the Plan's annual audit by the Grantor or its appointed auditor. The approval of an account shall constitute a full and complete discharge to the Trustee as to all matters that are set forth in that account as if the account had been settled by a court of competent jurisdiction in an action or proceeding to which the Trustee, and the Grantor were parties. In no event shall the Trustee be precluded from having its accounts settled by a judicial proceeding.
(c) Except as specifically provided by statute, no person other than the Grantor may require an accounting or bring an action against the Trustee about the Trust or the actions of the Trustee. The Trustee is not required to make reports to any courts or administrative agencies, except as specifically directed by Grantor or as otherwise required by applicable law.
4.04 Valuation.
(a) As of each calendar year end, the Trustee will determine the fair-market value of the Trust Fund and each Reserve Fund and report that value to the Grantor in writing. The valuation determined according to this section is binding on the Grantor, and all other persons interested in the Trust.
(b) Non-cash contributions are valued at fair-market value determined by the Trustee as of the actual date on which the Trustee accepts the property.
(c) In determining the net worth of the Trust Fund and each Reserve Fund, the Trustee will deduct all allocable expenses.
ARTICLE 5 AMENDMENT AND TERMINATION OF THE TRUST 5.01 Amendment of the Trust.
The Grantor has the right at any time to amend this Agreement in whole or in part, but (a) No amendment may authorize or permit any assets of the Trust Fund (other than those required to pay taxes and other administration expenses) to be used for or diverted to purposes other than the costs of decommissioning the Grantor's nuclear power plants, except as may be required by any court or regulatory authority; (b) No amendment may be made that changes the Trustee's duties or liabilities without the Trustee's written consent, such consent being evidenced by Trustee's written agreement to such amendment; and 12
(c) No amendment of any material respect, including change in Trustee, may be made without 30 days' prior written notification to the Director, Office of Nuclear Reactor Regulation.
An amendment may be made retroactively if such application is necessary to bring the Trust or the Grantor into conformity with any applicable statute or regulation.
5.02 Termination Of Reserve Funds.
Except as otherwise provided by law, each Reserve Fund terminates upon completion of all nuclear power plant decommissioning that it has been created to fund, as certified to the Trustee by the Grantor, or upon the frustration or failure of the trust's purposes. Upon termination of a Reserve Fund, any of the Reserve Fund that remains shall revert to the Grantor free of trust.
5.03 Merger, Consolidation, or Succession.
(a) A corporation with which the Grantor is merged or a corporation or other legal entity which acquires substantially all the assets of the Grantor, shall become the Grantor for purposes of this Agreement, and every reference in this Agreement to the Grantor will be treated as a reference to that surviving or purchasing corporation or other legal entity.
(b) If the Grantor is liquidated, merged, or consolidated with another company or other legal entity and the Grantor's successor chooses not to discharge the Grantor's duties under this Agreement, the Trust nevertheless will survive and the Trust Fund will continue in trust under the terms of this Agreement. In such a case, the Trustee may, but shall not be required to, petition a court of competent jurisdiction seeking the appointment of a party to succeed to the responsibilities of the Grantor. In seeking such an order, the Trustee shall be held harmless and indemnified by the Grantor or its successor. Any expenses incurred by the Trustee in seeking said court order shall be the responsibility of the Grantor or its successor until paid.
(c) The merger or consolidation of the Trust with, or a transfer of assets or liabilities from this Trust to another trust or fund is not permitted unless the Trustee has received an opinion of counsel satisfactory to the Trustee to the effect that the merger, consolidation, or transfer results in no diversion or use of assets that is not permitted by the Agreement.
5.04 Impossibility of Diversion.
Until a Reserve Fund terminates, assets of a Reserve Fund may not be used for or diverted to purposes other than the purposes permitted by this Agreement.
ARTICLE 6 MISCELLANEOUS PROVISIONS 6.01 Construction.
The Grantor's intent and purpose in creating the trusts hereunder and executing this Agreement is to maintain Nuclear Decommissioning Reserve Funds to provide for the costs of decommissioning the Grantor's nuclear power plants. All questions arising in the administration 13
of the Trust and in the construction of this Agreement will be resolved accordingly. This Agreement will be construed, enforced, and administered in accordance with the laws of the State of Illinois, except to the extent that the laws of the United States of America take precedence, in which event, this Agreement will be construed in accordance with the laws of the United States of America. The headings and subheadings in this Agreement have been inserted for convenience only and are to be ignored in construction of the provisions.
6.02 Rights under the Trust.
No person other than the Grantor has any vested rights under the Trust except to the extent that rights may accrue under other agreements made by the Trustee. Except as permitted by law, no assignment of any rights or benefits under the Trust is permitted or recognized, nor will any rights or benefits be subject to attachment or other legal or equitable process or subject to the jurisdiction of any bankruptcy court.
6.03 Frustrated Actions.
If it becomes impossible for the Grantor or the Trustee to perform an act, then that act will be performed which, in the discretion of the Trustee, most nearly carries out the intent and purpose of this Agreement.
6.04 Construction of Direction.
Whenever the Grantor or Trustee is directed to take an action upon the occurrence of an event, neither is under obligation to take that action until it has received proper and satisfactory written notice of the occurrence.
6.05 Authorizations and Communication.
A written authorization or communication from an officer of the Grantor or the Trustee that an event has occurred constitutes conclusive evidence of the occurrence, and the Grantor or Trustee is fully protected and discharged from all liability in accepting and relying upon that authorization or communication.
6.06 Genuine Notice; Direction.
The Grantor or the Trustee will not incur liability to any persons or party when acting on a notice, request, consent, direction, instruction, letter, telegram, or other paper or document that it believes to be genuine, and to have been signed or sent by the proper person.
6.07 Binding Nature.
This Agreement is binding upon the heirs, executors, administrators, successors, and assigns of all parties, present and future.
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6.08 Force Maieure.
Neither party shall be responsible for any delay in performance, or non-performance, of any obligation hereunder to the extent that the same is due to forces beyond its reasonable control, including but not limited to, delays, errors or interruptions caused by the Grantor or third parties, any industrial juridical, governmental, civil or military action, acts of, terrorism, insurrection or revolution; nuclear fission or radiation, failure or fluctuation in electrical power, heat, light, air conditioning or telecommunications equipment, or acts of God.
6.10 Representation and Warranty as to Authority.
The Grantor and the Trustee hereby each represent and warrant to the other that it has full authority to enter into this Agreement upon the terms and conditions hereof and that the individual executing this Agreement on its behalf has the requisite authority to bind the Grantor or the Trustee to this Agreement.
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IN WITNESS of this Amended and Restated Agreement, the grantor and the Tnistee have signed below on this __ day of ,2012.
DOMINION NUCLEAR CONNECTICUT, INC.
By:
Title:
THE NORTHERN TRUST COMPANY, TRUSTEE By:
Title:
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Attachment 3 Amended and Restated Dominion Energy Kewaunee, Inc. Qualified Nuclear Decommissioning Trust Agreement Kewaunee Power Station Dominion Energy Kewaunee, Inc.
AMENDED AND RESTATED DOMINION ENERGY KEWAUNEE, INC.,
QUALIFIED NUCLEAR DECOMMISSIONING TRUST AGREEMENT
AMENDED AND RESTATED DOMINION ENERGY KEWAUNEE, INC.,
QUALIFIED NUCLEAR DECOMMISSIONING TRUST AGREEMENT This AMENDED AND RESTATED TRUST AGREEMENT ("Agreement") is made the 1st day of January 2013, between DOMINION ENERGY KEWAUNEE, INC., a Wisconsin corporation, the Grantor, and THE NORTHERN TRUST COMPANY, an Illinois corporation of Chicago, Illinois, the Trustee.
WHEREAS, the Grantor owns a 100 percent interest in the Kewaunee Power Station, a nuclear generating station located in the Town of Carlton, Kewaunee County, Wisconsin.
WHEREAS, the Grantor wishes to establish pursuant to this Agreement and under the laws of the State of Illinois, a separate trust fund under this Agreement which qualifies as a Nuclear Decommissioning Reserve Fund under Section 468A of the Internal Revenue Code of 1986, as amended, or any corresponding section or sections of any future United States internal revenue statute and the regulations thereunder.
WHEREAS, the execution and delivery of this Agreement have been duly authorized by each of the Grantor and the Trustee and all things necessary to make this Agreement a valid and binding agreement by each of the Grantor and the Trustee have been done.
NOW, THEREFORE, the Grantor and the Trustee agree as follows:
ARTICLE 1 GENERAL PROVISIONS 1.01 Name of Trust.
The separate trust may be referred to under the name DOMINION ENERGY KEWAUNEE, INC., QUALIFIED NUCLEAR DECOMMISSIONING TRUST (referred to herein as the "Trust" or the "Trust Fund"). The Trust Fund is the entire undistributed amount of all contributions and/or transferred assets placed with the Trustee, as adjusted for all income, expense, gain, or loss on such amount as may exist from time to time.
1.02 Grantor, Trustee.
The Grantor of this Trust is Dominion Energy Kewaunee, Inc., and its successors and assigns as provided in Section 5.03 of this Agreement. The Trustee under this Agreement is Northern Trust Company, its successors and assigns, or any other person, company, bank, or trust company appointed as provided in Section 2.01 of this Agreement.
1.03 Trust Committee.
The Grantor may establish a Nuclear Decommissioning Trust Committee (the "Committee")
composed of any three or more persons appointed by the Grantor's Board of Directors on whatever terms the Board desires. The Committee has the authority to exercise all of the Grantor's powers under this Agreement, and for purposes of Sections 2.03(c) and (d) and Section 3.05(g), the Trustee will be protected in treating the directions and other actions of the Committee as the directions or actions of the Grantor. The Grantor must certify to the Trustee all I
appointments to or removals from the Committee, and the Trustee must recognize written instructions signed by any Committee member, or its designee, as a directive from the Committee.
ARTICLE 2 TRUSTEE APPOINTMENT, REMOVAL, LIABILITY 2.01 Appointment, Removal, Successors.
(a) The Grantor may appoint a successor Trustee by written notice to the person appointed and to the Trustee then serving. A Trustee may resign on thirty days' notice in writing to the Grantor. The Grantor may remove any Trustee by thirty days' written notice to the Trustee. Notwithstanding the foregoing, no removal or resignation shall take effect until (1) a successor Trustee has been appointed and accepted appointment as Trustee, and (2) notice of the change in Trustee has been provided to the Nuclear Regulatory Commission in accordance with section 5.01(c) of this Agreement. If a successor Trustee has not been appointed and accepted appointment within sixty (60) days of the Grantor's receipt of notice of resignation of the Trustee or the Trustee's receipt of notice of removal, such Trustee may petition a court of competent jurisdiction to appoint a successor Trustee to serve until such time, if ever, as a successor Trustee shall have been appointed by the Grantor and accepted such appointment. Each successor Trustee shall have the same powers and duties as the Trustee named herein.
(b) A successor Trustee may accept appointment and qualify as Trustee by executing, acknowledging, and delivering to the Grantor its acceptance in a form satisfactory to the Grantor.
The successor Trustee, without further act, deed, or conveyance, is vested with all the estate, rights, powers, and discretion of the predecessor Trustee just as if originally named as a Trustee in this Agreement.
(c) When a successor Trustee accepts appointment, the predecessor Trustee (or representative, if the predecessor Trustee is unable or unavailable) will assign, transfer title, and pay over to the successor Trustee the funds and properties then constituting the Trust Fund. The predecessor Trustee (or representative) is authorized, however, to reserve a sum of money deemed advisable for payment of fees and expenses accrued to date or expected to be incurred in connection with the transfer and settlement of the Trust Fund (all subject to the limitation in Section 5.04 of this Agreement), and any balance of that reserve remaining after the payment of fees and expenses will be paid over to the successor Trustee.
(d) The Trustee may adopt or amend bylaws and regulations that the Trustee deems desirable for the conduct of Trustee affairs.
(e) The Trustee will keep a record of all Trustee proceedings and acts and all other data necessary for the proper administration of the Trust. To the extent required in the provisions of this Agreement set forth below, the Trustee will notify the Grantor and any specified interested party of any Trustee action taken.
2.02 Establishment and Acceptance of Trust.
(a) All contributions to the Trust Fund must be made in cash.
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(b) At the time it makes any contribution to the Trust Fund, the Grantor will specify in writing then delivered to the Trustee the exact amount that is to be placed in the Trust Fund then existing. The Trustee shall not accept contributions from anyone other than the Grantor without the Grantor's written approval for each such contribution, which written approval must accompany the contribution. The Trustee has no right or duty to inquire into the amount of or the method used in determining any contribution to the Trust Fund. The Trustee is accountable only for funds actually received. The Trustee has no duty to compute or collect the amount to be paid to it by the Grantor.
(c) Assets other than cash may be transferred to the Trust Fund in connection with an acquisition or disposition of an interest in a nuclear power plant that meets (or is treated as meeting) the requirements of Treasury Regulations Section 1.468A-6(b).
(d) All contributions and/or transferred assets and income therefrom will be held in trust and administered according to the terms of this Agreement.
(e) No part of the Trust Fund may be used for or diverted to purposes other than the exclusive purposes allowed by this Agreement, as described in Sections 4.02, 5.04, 5.05 and 6.01 of this Agreement.
2.03 Limitation of Liability.
(a) To the extent permitted by law, the Trustee will serve without bond; the Trustee will secure and pay for required bonds. At its own expense, the Grantor is entitled to employ its own counsel to defend or maintain, either in its own name or in the name of any Trustee, with said Trustee's approval, any suit or litigation arising under this Agreement involving the Trustee.
(b) In the event that THE NORTHERN TRUST COMPANY incurs any liability, loss, claim, suit or expense (including attorneys fees) in connection with or arising out of its provision of services under this agreement, or its status as trustee hereunder, under circumstances where THE NORTHERN TRUST COMPANY cannot obtain or would be precluded by law from obtaining payment or reimbursement of such liability, loss, claim, suit or expense (including attorneys fees) from the Trust Fund, then the Grantor (which has the authority to do so under the laws of the state of its incorporation) shall indemnify and hold THE NORTHERN TRUST COMPANY harmless from and against such liability, loss, claim, suit or expense, except to the extent such liability, loss, claim, suit or expense arises from (i) a breach by the Trustee of the terms of this agreement (provided, however, that this exception shall not apply to the extent that such breach arises under section 3.06 of the Agreement as a result of the Trustee acting in good faith and in accordance with the direction, instruction or notice of the Grantor or an investment adviser) or (ii) the Trustee's negligence or willful misconduct in the performance of its specifically allocated duties under this agreement. Notwithstanding the foregoing, THE NORTHERN TRUST COMPANY shall not be indemnified for any loss, liability, claim, suit or expense to the extent the Trustee participated knowingly in, or knowingly undertook to conceal, an act or omission of any person or entity constituting a breach of such person or entity's fiduciary responsibility hereunder, knowing such act or omission was a breach; provided however, that the Trustee shall not be deemed to have done so by merely complying with directions of an Investment Adviser or by its failure to act in the absence of such direction or by 3
reason of maintaining accounting records or solely as a result of the normal information received by the Trustee or its officers, employees, or agents in the normal course of performing any custodial, reporting, recording and bookkeeping functions with respect to any assets of the Trust Fund managed by an Investment Manager or the Grantor. This paragraph shall survive the termination of this agreement.
(c) THE NORTHERN TRUST COMPANY (which has the authority to do so under the laws of the state of its incorporation) agrees to defend, indemnify and hold harmless the Grantor, the Trust and its fiduciaries, and the then present and former officers, employees, and directors of the Grantor from and against any and all liability, loss, claim, suit or expense (including attorneys' fees), which arises from (i) a breach by the NORTHERN TRUST COMPANY of the terms of this agreement or (ii) the Trustee's own negligence or willful misconduct in the performance of its duties and responsibilities specifically allocated to it herein.
This paragraph shall survive the termination of this Agreement.
(d) Notwithstanding the foregoing subparagraphs (b) and (c), neither the Company nor the Trustee shall be responsible for consequential or special damages under such subparagraphs.
(e) The Trustee shall not be responsible for any losses resulting from the deposit or maintenance of securities or other property (in accordance with market practice, custom, or regulation) with any recognized foreign clearing facility, book-entry system, centralized custodial depository, or similar organization. The Trustee shall not be responsible or liable for any losses or damages suffered by the Trust Fund arising as a result of the insolvency of any custodian, subtrustee or subcustodian, except to the extent the loss or damage was due to the Trustee's failure to prudently select or periodically monitor a custodian, subtrustee or subcustodian. Settlements of transactions may be effected in trading and processing practices customary in the jurisdiction or market where the transaction occurs. The Grantor acknowledges that this may, in certain circumstances, require the delivery of cash or securities (or other property) without the concurrent receipt of securities (or other property) or cash and, in such circumstances, the Grantor shall have sole responsibility for nonreceipt of payment (or late payment) by the counterparty.
2.04 Discharge after Distributions or Termination.
After all distributions (including distributions to a successor Trustee) or any termination under this Agreement or applicable law, the Trustee is discharged from all obligations under this Agreement, and no person or entity has any further right or claim against the Trustee not otherwise provided by statute.
2.05 Legal Action.
In all legal actions regarding the Trust and this Agreement, the Trustee and the Grantor are the only necessary parties. A final judgment not appealed or appealable entered in an action or proceeding against the Grantor, the Trust, or the Trustee is binding and conclusive on the parties to this Agreement and all persons having or claiming to have any interest in the Trust Fund.
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ARTICLE 3 INVESTMENT DUTIES, POWERS 3.01 Investment Policy and Limitations.
Certain limitations are placed on investing in and disposing of some securities by the Nuclear Regulatory Commission and in order to avoid disqualification of the Trust for tax purposes and to minimize potential problems with securities regulations. As provided by law and Section 5.04 of this Agreement, an investment must not result in a diversion or use of Trust assets that is not permitted under Internal Revenue Code Section 468A. The Grantor, and to the extent that they have been allocated investment responsibility, the Trustee and any investment advisor appointed by the Grantor shall adhere to the standard of care that a "prudent investor" would use in the same circumstances, such term having the same meaning as the standard set forth in 18 CFR 35.32(a)(3) of the FERC regulations, or any successor regulation.
The Grantor shall be responsible for formulation of the investment policy for the Trust. To the extent that investment responsibility is allocated to the Trustee or investment advisors, the Grantor shall provide written investment guidelines to each entity to which investment responsibility has been allocated, consistent with such investment policy.
3.02 Investment of Trust Fund.
The assets of the Trust Fund may be commingled for investment purposes as the Grantor directs.
The Trustee shall apportion any earnings or losses from an investment made with commingled assets to the Trust Fund and the other commingled fund or funds in the same proportion that the amount invested from the Trust Fund, or any other commingled fund, bears to the total commingled amount invested. Subject to the provisions of Section 3.05 of this Agreement, the Trustee will invest and reinvest the principal and income of the Trust Fund and keep those trust assets invested, without distinction between principal and income. If assets of two or more funds are commingled for investment purposes, the Grantor shall have the absolute authority to direct the Trustee at any time to liquidate the interests of the Trust Fund in a commingled investment, and the Trustee shall promptly comply with any such directive. The commingling arrangement undertaken as permitted in this Section 3.02 can be terminated at any time by the Trust Fund or any commingled fund. No fund in the commingling arrangement may substitute for itself in the arrangement any person that is not a member to the commingling arrangement.
Trust investments may include, but shall not be limited to the following:
(a) Publicly traded domestic or foreign common and preferred stocks and options thereon, as well as warrants, rights and preferred stocks convertible into common stock, regardless of where or how traded.
(b) Investment grade domestic corporate bonds and debentures and any such securities which are convertible into common stock, domestic or foreign.
(c) Bonds or other obligations of the United States of America or non-U.S. sovereign debt with an equivalent rating of A or higher.
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(d) Investment grade obligations of the states and of municipalities or of any agencies thereof.
(e) Investment grade notes of any nature, of foreign or domestic issuers.
(f) Savings accounts, certificates of deposit and other types of time deposits, bearing a reasonable rate of interest based upon the duration, amount, type and geographical area, with any financial institution or quasi-financial institution or any department of the same, either domestic or foreign, under the supervision of the United States or any State, including any such financial institution owned, operated or maintained by the Trustee in its corporate or association capacity (including any department or division of the same) or a corporation or association affiliated with the same but only to the extent consistent with Treasury regulation § 1.468A-5(b)(2).
(g) Any collective, common or pooled trust fund operated or maintained exclusively for the commingling and collective investment of monies or other assets including any such fund operated or maintained by the Trustee or its affiliate. Notwithstanding the provisions of this Agreement which place restrictions upon the actions of the Trustee, to the extent monies or other assets are utilized to acquire units of any collective trust, the terms of the collective trust indenture shall solely govern the investment duties, responsibilities and powers of the trustee of such collective trust and, to the extent required by law, such terms, responsibilities and powers shall be incorporated herein by reference and shall be part of this Agreement. For purposes of valuation, the value of the interest maintained by the Trust Fund in such collective trust shall be the fair market value of the collective fund units held, determined in accordance with generally recognized valuation procedures. The Grantor expressly understands and agrees that any such collective fund may provide for the lending of its securities by the collective fund trustee and that such collective fund's trustee will receive compensation from such collective fund for the lending of securities that is separate from any compensation of the Trustee hereunder, or any compensation of the collective fund trustee for the management of such collective fund.
(h) Open-end and closed-end investment companies (including those for which the Trustee or an affiliate provides services for a fee) regardless of the purposes for which such fund or funds were created, and any partnership, limited or unlimited, joint venture and other forms of joint enterprise created for any lawful purposes otherwise consistent with the investment guidelines set forth herein.
(i) Subject to the limitations of Sections 3.01, 3.03 and 3.06, any other investments not described above as directed by the Grantor.
(j) The Trustee may lend the assets of the Trust Fund in accordance with the terms and conditions of a separate securities lending agreement, may settle transactions in futures and/or options contracts, short-selling programs, foreign exchange or foreign exchange contracts, swaps and other derivative investments with third parties.
3.03 Prohibited Investments.
The assets of the Trust Fund are prohibited from being invested in:
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(a) securities or other obligations of Dominion Energy Kewaunee, Inc. or its affiliates, subsidiaries, successors or assigns; (b) securities or other obligations of any other owner or operator of any nuclear power reactor, or the affiliates, subsidiaries, successors or assigns of such owner or operator; (c) a mutual fund in which at least 50 percent of the fund is invested in the securities of one or more companies that own or operate a foreign or domestic nuclear power plant, or are parents, subsidiaries or affiliates of such a company (herein, "nuclear sector mutual fund"); or (d) direct interests in real estate.
Provided, however, that the foregoing (i) shall not prohibit the Trust Fund from being invested in securities tied to market indices or other non-nuclear sector collective, commingled, or mutual funds; (ii) shall not require the sale or transfer either in whole or in part, or other disposition of any such prohibited investment that was made before December 24, 2002; and (iii) shall not prohibit less than 10 percent of the Trust Fund assets being indirectly invested in securities of any entity owning or operating one or more nuclear power plants.
3.04 Additional Powers of Trustee.
The Trustee has the following powers and authority in the administration and investment of the Trust Fund, to be exercised subject to the other provisions of this Agreement and especially this Article 3:
(a) To purchase, subscribe for, and hold securities or other property authorized by Sections 3.01 and 3.02 as a proper investment for the Trust Fund, and to retain the same in trust.
(b) To sell for cash or credit, exchange, convey, transfer, or otherwise dispose of any securities or other property held in the Trust Fund, by private contract or at public auction. No person dealing with the Trustee is bound to see to the application of the purchase money or to inquire into the validity, expediency, or propriety of any sale or other disposition.
(c) To vote any stocks, bonds, or other securities; to give general or special proxies or powers of attorney with or without power of substitution; to exercise any conversion privileges, subscription rights, or other options, and to make any incidental payments; to oppose, consent to, or otherwise participate in corporate reorganizations or other changes affecting corporate securities, and (unless prohibited by statute) to delegate discretionary powers, and to pay any related assessments or charges; and generally to exercise any ownership powers over stocks, bonds, securities, or other property held as part of the Trust Fund.
(d) To keep part of the Trust Fund in cash or cash balances invested in interest-bearing accounts if the Trustee deems that to be prudent under the circumstances.
(e) To accept and retain for as long as the Trustee deems advisable any securities or other property received or acquired by the Trustee, regardless of any lack of diversification.
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(f) To make, execute, acknowledge, and deliver documents of transfer and conveyance and other instruments that may be necessary or appropriate to carry out the Trustee's powers.
(g) To settle, compromise, or submit to arbitration any claims, debts, or damages due or owing to or from the Trust Fund, to commence or defend legal or administrative proceedings, and to represent the Trust in all legal or administrative proceedings.
(h) To employ suitable subcustodians, agents and counsel (who may be counsel of the Grantor) and to pay their reasonable expenses and compensation. The Trustee may consult with legal counsel approved by the Grantor, which approval shall not be unreasonably withheld, who may also be counsel for the Grantor, with respect to its responsibilities under this agreement and shall be entitled to rely upon the written advice of such legal counsel.
(i) On direction by the Grantor as to the agent and insurance company, to invest in insurance contracts if and as allowed under Internal Revenue Code Section 468A, payable to the Trustee or its assignees as beneficiary.
(j) To purchase, enter, sell, hold, and generally deal in any manner in and with contracts for the immediate or future delivery of financial instruments of any issuer or of any other property, foreign exchange and foreign exchange contracts, to grant, purchase, sell, exercise, permit to expire, permit to be held in escrow, and otherwise to acquire, dispose of, hold and generally deal in any manner with and in all forms of options in any combination.
(k) To enter into contracts with one or more persons, firms, associations, or corporations to obtain advice and counsel about investments.
(1) To enter into arrangements for the deposit of funds with banks or trust companies and in connection with the arrangements:
(1) To authorize the depositary to act as custodian of the cash, securities, or other property comprising the funds; (2) To authorize the depositary to convert the funds in whole or in part into, or to invest and reinvest the same in, securities of any kind and nature permitted in this Agreement; and (3) To provide for the payment to the depositary of reasonable compensation for its services.
(m) To cause any securities or other property held as part of the Trust Fund to be registered in its own name or in the name of one or more of its nominees, and to hold any investments in bearer form, but the books and records of the Trustee must at all times show that the investments are part of the Trust Fund and subject to the jurisdiction of the United States, and to hold the property in safekeeping facilities of the Trustee or of other Trustee banks or clearing corporations, in the United States or elsewhere.
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(n) To participate in any mergers or consolidations, or any registrations of securities with state or federal authorities regarding any securities held.
(o) To exercise any and all discretionary powers not explicitly or implicitly conferred by this Agreement which the Trustee may deem reasonably necessary and proper to carry out instructions given to the Trustee hereunder and which powers are not in contravention of the terms of this Agreement and applicable law.
(p) To perform any actions in furtherance of its safekeeping duties and obligations under this Agreement in accordance with the standard of care applicable to a prudent, professional custodian for hire acting with the care, skill, prudence, and diligence under the circumstances then prevailing which financial institutions, acting in a like capacity and familiar with such matter, would use, including performing actions to avoid any loss of securities of the Trust in the Trustee's custody under this agreement, including but not limited to loss due to burglary, robbery, hold-up, theft or mysterious disappearance, damage or destruction.
(q) To do all acts, take all proceedings, and exercise all rights and privileges although not specifically mentioned here, as the Trustee deems necessary to administer the Trust Fund and to carry out the purposes of this Agreement.
3.05 Allocation of Investment Responsibility.
(a) Except to the extent that it has allocated investment responsibility to the Trustee or one or more investment advisors, the Grantor shall have investment responsibility for all assets of the Trust and in carrying out such responsibility may direct the investments of the Trust in investments of any kind, including but not limited to, private equity, indirect interests in real estate, and non-investment grade bonds, subject to the limitations contained in this Agreement.
Directed investments under this Section 3.05 may not exceed the total of the Trust Fund.
(b) The Grantor shall have the right, by written notice to the Trustee, to appoint and remove one or more investment advisors and to direct the Trustee to segregate any part or all of the Trust assets into one or more accounts, each of which shall be designated as an "Investment Advisor Account." The Trustee may assume that any Investment Advisor Account previously established and the prior appointment of an investment advisor for that account continues in full force and effect until receipt of written notice to the contrary from the Grantor. The Grantor may also, subject to the written consent of the Trustee, allocate investment responsibility for a designated portion of the Trust assets, which assets shall be segregated into an account known as the Trustee Managed Account. The Grantor shall furnish the Trustee with written investment guidelines, consistent with the terms of this Agreement, for the management of the assets contained in the Trustee Managed Account.
(c) The Grantor, with respect to any Trust assets not held in an Investment Advisor Account or Trustee Managed Account, and each investment advisor, with respect to its designated Investment Advisor Account, shall have all of the investment powers contained in this Agreement, subject to the applicable limitations set forth in the Agreement and, in the case of each investment advisor, such investment guidelines as the Grantor may provide to such investment advisor. The Trustee is not responsible for the selection, terms of appointment, 9
compensation or conduct of any investment manager, broker, salesman, or agent selected by the Grantor, shall follow the directions of the Grantor with respect to Trust assets for which the Grantor has investment responsibility and shall follow the directions of any designated investment advisor, and shall have no responsibility for reviewing or determining whether any investment directed or carried out by the Grantor or a designated investment advisor is consistent with the investment limitations set forth in this Agreement or contained in the investment guidelines for such investment advisor.
(d) Subject to such investment guidelines as may be furnished to it from time to time by the Grantor, the Trustee is free to proceed without the concurrence or affirmative expression of the Grantor to handle, manage, control, invest, and reinvest the Trust Fund assets that are allocated to the Trustee Managed Account under the powers granted in this Agreement with the same force and effect as if this section were not a part of this Agreement.
(e) No person dealing with the Trustee is required to determine whether any sale or purchase by the Trustee has been authorized or directed by the Grantor, and each is fully protected in dealing with the Trustee in the same manner as if this section were not a part of this Agreement.
(f) Whenever the Trustee is directed to purchase or sell assets in the Trust Fund, the Trustee in its sole discretion is permitted at the expense of the Trust to obtain an appraisal of the value of the assets to be purchased or sold.
(g) To the extent that the Trustee has been allocated investment responsibility hereunder, then with respect to the assets held in the Trustee Managed Account, the powers granted the Trustee under Sections 3.02 and 3.04 of this Agreement will be exercised in the discretion of the Trustee. Neither the Trustee nor any other person is under a duty to question the Grantor's direction, and the Trustee will comply as promptly as practicable with such direction if it is consistent with the terms of this Agreement. The Trustee shall not be liable for the acts or omissions of any subcustodian appointed under Section 3.04(h) at the direction of the Grantor or an investment advisor including, but not limited to, any broker-dealer or other entity designated by the Grantor or an investment advisor to hold any property of the Trust Fund as collateral or otherwise pursuant to investment strategy.
3.06 Prohibition Against Self-Dealing.
Anything herein to the contrary notwithstanding, the Grantor and the Trustee, will perform no act of self-dealing within the meaning of Internal Revenue Code Section 495 1(d), except for those acts expressly permitted by Treasury Regulations Section 1.468A-5(b)(2).
ARTICLE 4 OTHER DUTIES OF TRUSTEE 4.01 Notice Regarding Disbursements or Payments.
Except for (i) payments of ordinary administrative costs (including taxes) and other incidental expenses of the Trust Fund (including legal, accounting, actuarial, and trustee expenses) in connection with the operation of the Trust Fund, which includes investment management fees; (ii) withdrawals being made under 10 CFR 50.82(a)(8); and (iii) amounts transferred to a non-10
qualified trust established for Kewaunee Power Station pursuant to an agreement with terms substantially similar to this Agreement, no disbursement or payment may be made from the trust until written notice of the intention to make a disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, at least 30 working days before the date of the intended disbursement or payment. The disbursement or payment from the trust may be made following the 30-working day notice period if no written notice of objection from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, is received by the Trustee or the Grantor within the notice period. The required notice may be made by the Trustee or may be made on the Trustee's behalf, in which case evidence of such notice being made shall be provided to Trustee. No such notice is required for withdrawals being made pursuant to 10 CFR 50.82(a)(8)(ii), including withdrawals made during the operating life of the plant to be used for decommissioning planning. In addition, no such notice is required to be made to the NRC after decommissioning has begun and withdrawals are being made under 10 CFR 50.82(a)(8).
4.02 Use of Trust Funds.
Until decommissioning has been completed, the Trust Fund, including any disbursements or payments from the Trust Fund, must be used only as authorized by Section 468A of the Internal Revenue Code and the regulations thereunder, and by the regulations of the NRC including 10 CFR 50.75(h) & 50.80(a), such as:
(a) to satisfy, in whole or part, the liability of Grantor for decommissioning costs of the nuclear power plant to which the Trust Fund relates; (b) to pay ordinary administrative costs (including taxes) and other incidental expenses of the Trust Fund (including legal, accounting, actuarial, and trustee expenses) in connection with the operation of the Trust Fund, which includes investment management fees; (c) to be transferred to a non-qualified trust established for Kewaunee Power Station pursuant to an agreement with terms substantially similar to this Agreement, or to another financial assurance method acceptable under 10 CFR 50.75(e) of the NRC's regulations, to the extent permitted by the Internal Revenue Code;, or (d) to make investments, to the extent that the assets are not currently required for another purpose permitted under this section.
4.03 Payments from the Trust Fund.
Subject to the foregoing provisions of this Article 4, on the written direction of the Grantor, the Trustee will make payments and transfers from the Trust Fund to the persons or entities, in the manner, in the amounts, and for the purposes specified in the written directions. After payment, the amount paid is no longer a part of the Trust Fund. Each Grantor direction will include a representation by the Grantor that the payment is in accordance with the purposes of this Agreement, including but not limited to the provisions of this Article 4. The Trustee is not responsible for the application of the payments or for the adequacy of the Trust Fund after payment to meet and discharge Trust liabilities.
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4.04 Payment of Compensation, Expenses, and Taxes.
(a) The Trustee will be paid reasonable compensation as agreed upon from time to time in writing by the Grantor and the Trustee. In addition, the Trustee will be reimbursed from the Trust Fund or, at the option of the Grantor, by the Grantor for all ordinary and necessary expenses incurred in connection with the operation of the Trust, including federal income tax imposed on the modified gross income of the Trust, any state or local tax imposed on the income or assets of the Trust, legal expenses, accounting expenses, actuarial expenses, investment manager fees and trustee compensation and expenses. All taxes levied or assessed on or in respect of the Trust Fund, whether assessed to the Trust Fund or the Grantor, will be paid, at the option of the Grantor, by the Grantor, or from the Trust Fund and prorated among the Trust Fund and other funds in proportion to their respective fair-market values at the preceding calendar year end in the case of property taxes and in proportion to their respective taxable incomes for the relevant taxable year in the case of income taxes. To the extent that any taxes are provoked by the investment in or receipt of an identifiable asset or transaction involving the Trust Fund or other particular fund, the taxes will be charged against the Trust Fund or other appropriate fund, giving appropriate effect to computations of income and deductions related to the asset or transaction, and allocating any exemption available to the Trust Fund in proportion to the tax liability provoked. Identifiable direct expenses will be treated in the same way as taxes.
(b) The Trustee will prepare and file tax returns for the Trust Fund as directed by the Grantor, provided that the Grantor shall indemnify the Trustee for any penalties, additions to tax, or other amounts for which it may be charged or may incur in connection with such preparation and filing, including but not limited to that due to a position taken on such returns. The Trustee may assume that any taxes assessed on or with respect to the Trust Fund are lawfully assessed unless the Grantor advises the Trustee in writing that in the opinion of counsel for the Grantor the taxes are or may be unlawfully assessed. When so advised and requested in writing by the Grantor, the Trustee will contest the validity or the taxes in any manner deemed appropriate by the Grantor or its counsel) in which event the Trustee will execute all documents, instruments claims, and petitions necessary or advisable in the opinion of the Grantor or its counsel for the refund, abatement) reduction or elimination of taxes. Reasonable expenses incurred by the Trustee in connection with such a contest will be reimbursed as provided in paragraph (a) of this section.
(c) No provision of this section will be effective to the extent that it would violate Internal Revenue Code Section 468A, especially in so far as it relates to Internal Revenue Code Section 4951.
4.05 Accounting.
(a) The Trustee will keep accurate and detailed accounts of all investments, receipts, disbursements, and other transactions for the Trust Fund. All accounts, books, tax returns, and records relating to the Trust are open to inspection and audit at all reasonable times by any person designated by the Grantor and at the expense of the Grantor.
(b) An account of the Trustee may be approved by the Grantor by written notice delivered to the Trustee or by failure to object to the account by written notice delivered to the 12
Trustee within one hundred twenty (120) days of the completion of the Plan's annual audit by the Grantor or its appointed auditor. The approval of an account shall constitute a full and complete discharge to the Trustee as to all matters that are set forth in that account as if the account had been settled by a court of competent jurisdiction in an action or proceeding to which the Trustee, and the Grantor were parties. In no event shall the Trustee be precluded from having its accounts settled by a judicial proceeding.
(c) Except as specifically provided by statute, no person other than the Grantor may require an accounting or bring an action against the Trustee about the Trust or the actions of the Trustee. The Trustee is not required to make reports to any courts or administrative agencies, except as specifically directed by Grantor or as otherwise required by applicable law.
4.06 Segregation of Ratepayer Funds and Additional Contributions.
(a) On July 5, 2005, the Trust Fund consisted solely of funds and assets contributed to the Trust Fund from funds collected from ratepayers by Wisconsin Public Service Company and Wisconsin Power and Light Company, who were the Sellers of Kewaunee Power Station (formerly known as Kewaunee Nuclear Power Plant). These funds and assets shall constitute and be classified as the "Ratepayer Funds" and shall be accounted for as a sub-account "A."
Trustee shall hold and account for all Ratepayer Funds in sub-account A, together with (i) additions for any earnings thereon or apportioned thereto; (ii) subtractions for any and all disbursements and payments (e.g., for payment of taxes and fees) made pursuant to Section 4.02(b) of this Agreement or otherwise, to the extent such disbursements and payments are attributable to this sub-account A; and (iii) subtractions for all disbursements made pursuant to Section 4.02(a) of this Agreement to satisfy, in whole or part, the liability of Grantor for the decommissioning costs of Kewaunee Power Station. All payments made pursuant to Section 4.02(a) shall be made from sub-account A, unless the Trustee is otherwise directed in writing by the Grantor, or unless the balances in sub-account A shall have been exhausted.
(b) The Grantor, in its sole discretion, may make one or more additional contributions to the Trust Fund ("Additional Contributions"), provided that each such contribution is permitted by applicable law, regulation, court order, rule, private letter ruling or other governmental approval, and that such contribution would not cause the disqualification of the Trust Fund for tax purposes. In the event any such contribution is made by Grantor, all such funds and assets shall constitute and be classified as the "Additional Contributions" and shall be accounted for as a sub-account "B." Trustee shall hold and account for all Additional Contributions in sub-account B, together with (i) additions for any earnings thereon or apportioned thereto; (ii) subtractions for any and all disbursements and payments (e.g., for payment of taxes and fees) made pursuant to Section 4.02(b) of this Agreement or otherwise, to the extent such disbursements and payments are attributable to this sub-account B; and (iii) subtractions for all disbursements made pursuant to Section 4.02(a) of this Agreement to satisfy, in whole or part, the liability of Grantor for the decommissioning costs of Kewaunee Power Station. Upon exhaustion of the funds available from sub-account A, all payments made pursuant to Section 4.02(a) shall be made from sub-account B.
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4.07 Valuation.
(a) As of each calendar year end, the Trustee will determine the fair-market value of the Trust Fund, including separate line items for sub-accounts A and B, and report that value to the Grantor in writing. The valuation determined according to this section is binding on the Grantor, and all other persons interested in the Trust.
(b) Non-cash contributions are valued at fair-market value determined by the Trustee as of the actual date on which the Trustee accepts the property.
(c) In determining the net worth of the Trust Fund, the Trustee will deduct all allocable expenses.
ARTICLE 5 AMENDMENT AND TERMINATION OF THE TRUST 5.01 Amendment of the Trust.
The Grantor has the right at any time to amend this Agreement in whole or in part, but (a) No amendment may be made that changes the Trustee's duties or liabilities without the Trustee's written consent, such consent being evidenced by Trustee's written agreement to such amendment; (b) This Agreement may not be amended so as to violate Section 468A or the regulations thereunder; and (c) This Agreement may not be amended in any material respect, including change in Trustee, without written notification to the Director, Office of Nuclear Reactor Regulation (Director, NRR) having been given at least 30 working days before the proposed effective date of the amendment, such notice having provided the text of the proposed amendment and a statement of the reason for the proposed amendment, and without the notice period having expired with no notice of objection having been received from the Director, NRR.
An amendment may be made retroactively if such application is necessary to qualify the Trust Fund as a Nuclear Decommissioning Trust Fund under Section 468A of the Internal Revenue Code of 1986, as amended, or to bring the Trust or the Grantor into conformity with any other applicable statute or regulation.
5.02 Irrevocability of Trust Fund.
The Trust Fund is irrevocable. Except as otherwise provided by law, the Trust Fund terminates upon completion of its nuclear power plant decommissioning that it has been created to fund as certified to the Trustee by the Grantor, upon disqualification of the Trust Fund under Internal Revenue Code Section 468A, or upon the frustration or failure of the Trust Fund's purposes.
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5.03 Merger, Consolidation, or Succession.
(a) A corporation with which the Grantor is merged or a corporation or other legal entity which acquires substantially all the assets of the Grantor, shall become the Grantor for purposes of this Agreement, and every reference in this Agreement to the Grantor will be treated as a reference to that surviving or purchasing corporation or other legal entity.
(b) If the Grantor is liquidated, merged, or consolidated with another company or other legal entity and the Grantor's successor chooses not to discharge the Grantor's duties under this Agreement, the Trust nevertheless will survive and the Trust Fund will continue in trust under the terms of this Agreement. In such a case, the Trustee may, but shall not be required to, petition a court of competent jurisdiction seeking the appointment of a party to succeed to the responsibilities of the Grantor. In seeking such an order, the Trustee shall be held harmless and indemnified by the Grantor or its successor. Any expenses incurred by the Trustee in seeking said court order shall be the responsibility of the Grantor or its successor until paid.
(c) The merger or consolidation of the Trust with, or a transfer of assets or liabilities from this Trust to another trust or fund is not permitted unless the Trustee has received an opinion of counsel satisfactory to the Trustee to the effect that the merger, consolidation, or transfer results in no diversion or use of assets that is not permitted by Internal Revenue Code Section 468A.
5.04 Impossibility of Diversion.
Assets of the Trust Fund may not be used for or diverted to purposes other than the purposes permitted by Internal Revenue Code Section 468A, whether by operation or natural termination of the Trust, by power of revocation or amendment, by happening of a contingency, by collateral arrangement, or by any other means. If permissible under the preceding sentence, contributions by the Grantor to the Trust found not to be deductible for federal income tax purposes shall be returned to the Grantor and transferred to a non-qualified trust established for Kewaunee Power Station pursuant to an agreement with terms substantially similar to this Agreement.
5.05 Return of Excess Funds after Final Decommissioning.
(a) Pursuant to the Final Decision of the Public Service Commission of Wisconsin, dated April 21, 2005 (Docket No. 05-EI-136) approving the sale of Kewaunee Power Station to Grantor (the "PSCW Order"), Grantor is obligated to return any and all excess funds from the Ratepayer Funds, if any, after final completion of all decommissioning activities at Kewaunee Power Station pursuant to all applicable governmental requirements, including the commitments in the PSCW Order, ("Final Decommissioning"), and Grantor shall discharge this obligation pursuant to this Section 5.05 of the Agreement. A copy of the PSCW Order is appended hereto as Exhibit A.
(b) Upon completion of Final Decommissioning, the Grantor shall'request, and the Trustee shall provide an accounting of the final balance remaining, if any, in sub-account A
("Final Balance"). If the sub-account A Final Balance is greater than zero, Grantor shall deduct 15
and reserve from such Final Balance, the estimated amount of(1) any tax liability that is projected to be incurred and paid by Grantor or the Trust Fund in connection with the distribution of the excess Ratepayer Funds, and (2) any administrative costs and fees owed or accrued but not yet paid. After allowing for such deduction and reservation, the remaining balance shall be the net amount of "Excess Ratepayer Funds." If the net amount of Excess Ratepayer Funds is greater than zero, Grantor shall direct the Trustee to disburse 59% of the net Excess Ratepayer Funds to Wisconsin Public Service Corporation, or its successors or assigns, with notice to the Public Service Commission of Wisconsin, and 41% of the net Excess Ratepayer Funds to Wisconsin Power and Light Company, or its successors or assigns, with notice to the Public Service Commission of Wisconsin.
(c) After the completion of Final Decommissioning and satisfaction of the actions contemplated by Section 5.05(b) above, and payment of all administrative costs (including taxes) and fees associated with sub-account B, any amounts remaining in sub-account B shall revert to Grantor free of trust and free and clear of the provisions of this Agreement.
(d) If any law, regulation, court order, rule, private letter ruling or other governmental action results in the termination of this Agreement or the Trust Fund prior to completion of Final Decommissioning, Grantor shall maintain any balances remaining in sub-account A in an external trust and make appropriate arrangements for fulfilling the obligation to return Excess Ratepayers Funds, if any, to Wisconsin Public Service Corporation and Wisconsin Power and Light Company, or their successors or assigns, for distribution to their customers, consistent with the terms of Sections 4.06 and 5.05 of this Agreement.
ARTICLE 6 MISCELLANEOUS PROVISIONS 6.01 Construction.
The Grantor's intent and purpose in creating the trusts hereunder and executing this Agreement is to maintain Nuclear Decommissioning Reserve Funds pursuant to Internal Revenue Code Section 468A. All questions arising in the administration of the Trust and in the construction of this Agreement will be resolved accordingly. This Agreement will be construed, enforced, and administered in accordance with the laws of the State of Illinois, except to the extent that the laws of the United States of America take precedence, in which event, this Agreement will be construed in accordance with the laws of the United States of America. The headings and subheadings in this Agreement have been inserted for convenience only and are to be ignored in construction of the provisions.
6.02 Rights under the Trust.
No person other than the Grantor has any vested rights under the Trust except to the extent that rights may accrue under other agreements made by the Trustee. Except as permitted by law, no assignment of any rights or benefits under the Trust is permitted or recognized, nor will any rights or benefits be subject to attachment or other legal or equitable process or subject to the jurisdiction of any bankruptcy court.
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6.03 Frustrated Actions.
If it becomes impossible for the Grantor or the Trustee to perform an act, then that act will be performed which, in the discretion of the Trustee, most nearly carries out the intent and purpose of this Agreement.
6.04 Construction of Direction.
Whenever the Grantor or Trustee is directed to take an action upon the occurrence of an event, neither is under obligation to take that action until it has received proper and satisfactory written notice of the occurrence.
6.05 Authorizations and Communication.
A written authorization or communication from an officer of the Grantor or the Trustee that an event has occurred constitutes conclusive evidence of the occurrence, and the Grantor or Trustee is fully protected and discharged from all liability in accepting and relying upon that authorization or communication.
6.06 Genuine Notice; Direction.
The Grantor or the Trustee will not incur liability to any persons or party when acting on a notice, request, consent, direction, instruction, letter, telegram, or other paper or document that it believes to be genuine, and to have been signed or sent by the proper person.
6.07 Binding Nature.
This Agreement is binding upon the heirs,executors, administrators, successors, and assigns of all parties, present and future.
6.08 Settlement of Transactions and Collateral.
The Trustee may take all action necessary to pay for, and settle, authorized transactions, including disbursements or expenses, or the purchase or sale of foreign exchange, or of contracts for foreign exchange, and including exercising the power to borrow or raise monies from the Trustee in its corporate capacity or an affiliate. To secure expenses and advances made to settle or pay for authorized transactions, including payment for securities and disbursements, the Grantor grants to the Trustee a first priority security interest in the Trust Fund, all property therein, all income, substitutions and proceeds, whether now owned or hereafter acquired (the "Collateral"); provided that the Grantor does not grant the Trustee a security interest in any securities issued by an affiliate of the Trustee (as defined in Section 23A of the Federal Reserve Act). The parties intend that as the securities intermediary with respect to the Collateral, the Trustee's security interest shall automatically be perfected when it attaches. To the extent the Trustee advances funds to the Trust Fund for disbursements or to effect the settlement of purchase transactions, the Trustee shall be entitled to collect from the Trust Fund reasonable charges established under the Trustee's standard overdraft terms, conditions and procedures.
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6.09 Force Maieure.
Neither party shall be responsible for any delay in performance, or non-performance, of any obligation hereunder to the extent that the same is due to forces beyond its reasonable control, including but not limited to delays, errors or interruptions caused by the Grantor or third parties, any industrial, juridical, governmental, civil or military action, acts of terrorism, insurrection or revolution, nuclear fusion, fission or radiation, failure or fluctuation in electrical power, heat, light, air conditioning or telecommunications equipment, or acts of God.
6.10 Representation and Warranty as to Authority.
The Grantor and the Trustee hereby each represent and warrant to the other that it has full authority to enter into this Agreement upon the terms and conditions hereof and that the individual executing this Agreement on its behalf has the requisite authority to bind the Grantor or the Trustee to this Agreement.
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IN WITNESS of this Amended and Restated Agreement, the Grantor and the Trustee have signed below on this __ day of ,2012.
DOMINION ENERGY KEWAUNEE, INC.
By:
Title:
THE NORTHERN TRUST COMPANY, TRUSTEE By:
Title:
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PSC RHT F#: 32803 I DATE MAILED "
e..
I APR 2 12005 BEFORE THE PUBLIC SERVICE COMMISSION OF WISCONSIN In the.Matter of the Application for All Approvals Necessary for the Transfer of Ownership and Operational Control of the Kewaunee Nuclear Power 05-EI-136 Plant From Wisconsin Public Service Corporation and Wisconsin Power and Light Company to Dominion Energy Kewaunee, Inc.
FINAL DECISION This is the final decision following the request by Wisconsin Public Service Corporation (WPSC) and Wisconsin Power and Light Company (WP&L) to reopen this docket. The applicants' request to transfer ownership and operational control of the Kewaunee Nuclear Power Plant (KNPP) to Dominion Energy Kewaunee, Inc. (DEK), is APPROVED, subject to conditions.
Introduction KNPP is a 543-megawatt, nuclear-powered, electric generating facility that WPSC and WP&L jointly own. The plant is located in the town of Carlton in Kewaunee County, Wisconsin. It commenced operation in 1,974 and is licensed by the United States Nuclear Regulatory Commission (NRC) to operate through December 21, 2013. KNPP is operated by Nuclear Management Company, LLC (NMC), a non-utility affiliate of WPSC and WP&L.
On December 19, 2003, WPSC and WP&L filed an application for approval of a series of transactions by which they would transfer ownership and operational control of KNPP to DEK.
They also proposed to enter into power purchase agreements (PPAs), to purchase the output of
Docket 05-El- 136 KNPP from DEK over the remaining term of KNPP's current federal nuclear license. DEK is a special purpose entity, incorporated in Wisconsin for the specific purpose of acquiring, owning, and operating KNPP. It is a wholly-owned subsidiary of Dominion Resources, Inc. (DRI), a registered public utility holding company that is incorporated under the laws of Virginia.'
Hearings in this proceeding occurred on June 17, 18, and 21, 2004, in Madison, and on June 24,2004, in Manitowoc. Following thes hearings the Commission received.extensive briefing from the parties., including a separate round of briefs regarding the Commission's authority to issue and enforce conditional orders. The Commission issued its initial decision, denying the applicants' original request to sell KNPP, on December 16, 2004. In that decision, the Commission gave three reasons for its denial. The first reason concerned the potential lack of state jurisdiction if KNPP or DEK were sold at some point to a third party. The Commission stated, "As proposed, the sale would appear to deprive the Commission of a meaningful role regarding the subsequent sale of KNPP to future owners." FinalDecision, page 4 (December 16, 2004). The Commission's second reason for finding the proposal inconsistent with the public interest was that "it would deprive Wisconsin's ratepayers of decommissioning funds that are likely not to be needed for actual decommissioning." Id. at 16. Although the terms of the sale would have returned the applicants' nonqualified decommissioning funds to their ratepayers, they would have transferred all qualified funds to DEK and allowed DEK to keep any qualified funds that remained after decommissioning was complete. The Commission's third reason addressed the adequacy of the financial protections built into the PPAs and Asset Sale Agreement (ASA). The Commission held, "While the PPAs and ASA provide significant monetary protections, in view of the potential enormous cost that might result from extended,
.' 15 U.S.C. § 79e(a) 2
Docket 05 136 unanticipated outages, some added assurance appears warranted. The Commission concludes that it would be prudent to demand greater support from DEK's parent, DR. (Dominion Resources, Inc.]." Id. at 18.
The applicants and DEK responded with a "Motion for Reopening and Rehearing" on December 21, 2004, five days after issuance of the Commission's initial decision. In the briefs that DEK filed in the fall of2004, the company had proposed seven conditions of sale. DEK intended these seven 'Proffered Conditions" to respond to key concerns that hadbeen raised at the Commission's hearings and in briefs. As part of the Motion for Reopening and.Rehearing, DEK offered three additional Proffered Conditions, designed to address the reasons for denial of sale that the Commission had articulated in its December 16 decision. In its brief filed February 11, 2005, DEK supplemented this proposal with two more Proffered Conditions. In total, DEK is now offering and stating its willingness to accede to twelve Proffered Conditions.
The Commission formally reopened this docket on January.21, 2005, in order to receive further briefs on five specific topics. These issues all dealt with the potential transfer of KNPP or.DEK to a subsequent, third-party owner.2 The Commission accepted initial briefs and reply 2The Order go Reopen instructed parties to addres the following issues:
I. How would the Commission enforce a Proffered Condition, ifDEK or KNPP Is sold to a third party and the new owner fals to implement one of the proffered conditions?
- 2. At hearing and in its briefs, DEK interpreted the Asset Sale Agreement as obligating it to decommuission
.KNPP to greenfield status. Section 11.6 of the Asset Sale Agreement declares that the Agreement.is binding upon future successors and assignees. How would the Commission enforce dth.or other obligations under the Asset Sale Agreement ifa successor or.as.sgnee of DEK fails to perform?
- 3. Ifa new owner acquires a majority interest in KNPP or DEK but does not acquire "substantially all" ofthe assets, are the Proffered Conditions enforceable against the new owner?
- 4. Ifa new owner acquires KNPP or DEK through a transfer other than a "purchase," are the Proffered Conditions enforceable against the new owner?
- 5. Is it necessary for and consistent with the public interest for the Commission to have the status ofa third-party beneficiary to the transactionas agre*ennti?
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Docket 05-EI-136 briefs from the applicants, DEK, and intervenors. The briefs were sufficiently complete and well-reasoned that no oral arguments or additional hearings were needed.
The Commission is satisfied that the twelve Proffered Conditions now meet the concerns expressed in its initial decision. In addition, as requested by other intervenors,. the Commission has also considered whether these Proffered Conditions are sufficient to determine that a sale of KNPP is consistent with the public interest. The Commission finds that this sale now meets the standard.of Wis..StaL § 196.80(3), which declares, "Ifthe commission finds that the proposed action is consistent with the public interest, it shall give its consent and approval in writing," and therefore VACATES its prior decision of December 16, 2004.
This order describes how the Commission reached its decision. It also addresses the remaining requests of the applicants, that the Commission:
- a. Issue a'declaratory ruling that authorizes the utilities to recover their costs through rates and that approves the utilities' proposals: regarding the disposition of decommissioning funds and the repayment of costs that WPSC's nuclear affiliate will incur by withdrawing from the NMC.
- b. Authorize the utilities' deferral of gains and losses associated with the sale.ofKNPP.
- c. Determine that the sale will benefit consumers, is in the public interest, and does not violate state law, so KNPP can be considered an. "eligible facility" and DEK can be designated an "exempt wholesale generator" under federal law.
- d. Determine that DEK properly offers employment to the current employees of KNPP as required by state law.
The applicants seek these determinations pursuant to Wis. Stat. §§ 196.03, 196.52, 196.807, 196.81, and 227.41, and 15 U.S.C. § 79z-;5a.
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Docket 05-EI- 136 Findings of-Fact
- 1. The consideration received by the applicants under the ASA for the sale of the KNPP is reasonable as compared to the value of the assets to be transferred.
- 2. It is reasonable and prudent for WPSC and WP&L to divest ownership of the KNPP pursuant to the ASA, and to enter into the PPAs.
- 3. Allowing the KNPP to become an "eligible facility" under 15 U.S.C. § 79z-5a(c) will benefit consumers, is in the public interest, and does not violate Wisconsin law.
- 4. It is reasonable and prudent for the applicants to transfer their qualified decommissioning funds to DEK and for DEK toassume all risks, obligations and duties with respect to the decommissioning of the KNPP in a manner that complies with all the Proffered Conditions and applicable standards.
- 5. It is reasonable to grant the applicants rate recovery for changes in their revenue requirements due to all expenses incurred in connection with the negotiation and execution of the ASA and PPM., expenses incurred in obtaining approvals and closing the transaction, all costs incurred under the PPAs during their entire term, and all other costs incurred in relation to the transaction, to the extent that such expenses are determined upon appropriate audit and scrutiny to be reasonable and consistent with this order.
- 6. It is reasonable, prudent and in the public interest for applicants to:
- a. Defer all gains, losses, and transaction costs as described herein.
- b. Undertake their respective obligations under the PPAs.
- c. Continue to depreciate all assets that will be transferred (o DEK until the date of closing, notwithstanding Statement of Financial Accounting Standard (SFAS) 144.
- d. Otheriwise account for the transaction as proposed.
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Docket 05-EI-136
- 7. It is reasonable and prudent for the applicants to retain their respective nonqualified decommissioning funds, for such funds to be released from dedication to the future decommissioning of the KNPP upon closing of the transaction, and for the applicants to return these funds to their ratepayers on an amortized basis. it is reasonable for the Commission to determine the specific amortization and jurisdictional allocations in separate rate proceedings. It is also reasonable for the Commission to determine, in separate rate proceedings, the specific amortization and jurisdictional allocations of any amounts from DEK's qualified fund that DEK ultimately refunds.
- 8. It is reasonable and consistent with'the public interest for WPSC to reimburse its affiliate WPS Nuclear, Inc. (WPSN), which is a member of NMC, for the diminution in NMC equity interest caused by selling KNPP and to hold WPSN harmless for the NMC exit fees.
- 9. The proposed transaction is a Type III action under Wis. Admin. Code
§ PSC 4.10(3). No unusual circumstances suggesting the likelihood of significant environmental consequences have come to the Commission's attention. Neither an environmental assessment nor an environmental impact statementunder Wis. Stat. § 1.11 is required for the Commission to grant the requested relief.
- 10. The sale is reasonable and consistent with the public interest when made subject to the Proffered Conditions.
Conclusions of.Law
- 1. Both WPSC and WP&L are electric public utilities, as defined in Wis. Stat.
§ 196.01.
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Docket 05-EI-136
- 2. The Commission has authority under Wis., Stat. §§ 196.39(1), 196.395, 196.40, 196.52, 196.80, 196.807, and 227.41 to issue this order.
- 3. Wis. Stat. § 196.81, regarding abandonment of service, does not apply to the proposed sale.
- 4. The Energy Priorities Law (Wis. Stat. §§ 1.12 and 196.025) does not apply to the proposed sale.
- 5. This sale, subject to the Proffered Conditions expressed in this order, wilibenefit consumers, is in the public interest, and does not violate state law.
- 6. DEK's voluntary agreement to comply with every Proffered Condition, as demonstrated in its testimony, briefs and the affidavit of its Vice President, constitutes a legal waiver of its right to challenge enforcement of the Proffered Conditions on both statutory and equitable grounds. The Proffered Conditions are essential to the Commission's determination that the proposed sale is consistent with the public interest.
Opinion KNPP is a well-zm, dependable component of Wisconsin's electric generating fleet.
WPSC and WP&L, however, are~now raising reasonable concerns about maintaining their interest in. a nuclear plant, just as their former joint owner Madison Gas and Electric Company (MGE) didin 2000. The U.S. nuclear industry is consolidating, in part because the risks of ownership are especially difficult to manage for smaller utilities that own single units. NMC operates KNPP and seven other nuclear units in Wisconsin and neighboring states, but the fact that.it does not own any of these plants to some extent limits NMC's economies of scale. Unless each of the five utility owners agrees about program initiatives, NMC cannot optimally manage 7
Docket 05-Hi- 136 and operate these units. The Nuclear Energy Institute reports that twelve nuclear power plants have been sold since July 1999, with another five sales (including the sale of KNPP) pending.
Although KNPP has a very good operating history, its operation and maintenance (O&M) expenses are frequently driven by significant unexpected events occurring at other nuclear plants throughout the industry. When problems arise at other nuclear plants in the country, such as the corrosion recently found in.the Davis-Bessey reactor vessel head in Indiana, they can trigger industry-wide inspections by the NRC. In response, the NRC may alter its regulatory requirements and apply these new requirements to every plant. Part of the work performed during this year's fall outage at KNPP was the replacement of its reactor vessel head, because of NRC's findings of corrosion at plants elsewhere, at a cost of approximately $24.million. The industry itself is also engaged in ongoing performance reviews that result in operational changes and improvements, and nuclear plant owners must react to developing concerns, such as WPSC's estimated $9 million expenditure in 2004 for increased anti-terrorism security protection.
Complying with these continually evolving industry standards and demands, even though they arise because of circumstances that do not relate directly to KNPP, may entail costly capital improvements and lengthy shutdown.periods.
Overall, many of the costs of a nuclear plant are substantially. more volatile than those of other types of generating units. The applicants now propose to sell KNPP in order to shift these O&M, capital, and purchased power risks away from their ratepayers.
Because KNPP's operating license expires in 2013, WPSC and WP&L will soon be facing the costs associated with relicensing. Their first responsibility would be to conduct relicensing studies, and the record indicates that these studies alone will take two years to 8
Docket 05-EI-136 complete and cost approximately $20 million. As long as the two utilities retain ownership of; KNPP their ratepayers would shoulder thiscost, even if the studies demonstrate that relicensing is not practical. The applicants' witnesses testified that moving forward with relicensing could require as much as $250 million in capital improvements to allow the plant to run for a complete 20-year license renewal period. While successful relicensing would be a real benefit to ratepayers because it would make a fully depreciated, baseload asset available for another 20 years, the large capital investment necessary to relicense KNPP would become a sunk cost and provide no value to ratepayers if the plant had to be shut down prematurely. Selling KNPP will transfer the duty of relicensing and the risks of early shutdown to DEL Another significant cost, unique to nuclear facilities, is decommissioning. This Commission has adopted a very conservative approach to decommissioning nuclear plants. As a result, KNPP's decommissioning trusts are now amply funded to meet the estimated cost of decommissioning, but these estimates could be incorrect if unforeseen problems shut the plant down prematurely or increase the actual cost of decommissioning.
Nuclear plants entail a unique aggregation of risks, unlikethose of any other conventional generating units. The value to ratepayers of selling KNPP under the terms of this sale and the Proffered Conditions, in order to shed nuclear risks and substitute the more certain-costs of PPAs, exceeds the value of a relicensed nuclear plant that the utilities would continue to own.
Ratepayers must still shoulder some economic risk, regardless of whether the applicants sell or retain KNPP, but the Commission finds that selling the plant under these termsis the more effective means of controlling that risk. Approving this sale of KNPP, however, is in no way a precursor to retail deregulation of Wisconsin's electric utility industry. This decision should not 9
Docket 05-El- 136 be construed as precedent for any future request by a utility to sell its fossil-fueledplants or otherwise to reduce Commission authority over Wisconsin's electric utility system. The applicants themselves recognize this fact. They are not proposing that this transaction be considered any kind of step toward the sale of other generating plants to non-utility entities, DEK and DRI are assuming a number of obligations under the terms of the proposed ASA, the PPAs, and the Proffered Conditions. Performance of these obligations is essential to the Commission's determination that a sale of KNPP will be consistent with the public interest.
Original terms of the proposed transaction The applicants decided to pursue this alternative after WPSC was approached with a proposal to purchase KNPP. Ultimately, the applicants received four complete and detailed offers over a period of almost two years, scrutinizing the terms of each offer: as well as the parties that made them. During the applicants' review process, interested parties were required to respond to draft asset sale and power purchase:term sheets that evolved as the process progressed. The applicants engaged in extended negotiations with two potential purchasers, including DRI, and ultimately reached an agreement with DRI's subsidiary, DEK. The key financial terms of the ASA that the applicants and DEK originally proposed to the Commission were:
- 1. $220 Million Asset Sale Price. Subject to certain adjustments and prorations, DEK would pay $220 million to the applicants for 100 percent ownership and control of KNPP. This price would approximate KNPP's current book value.
InitialBrtefof Wirconsln Public Service Corporationand Wisconsin Power & Light, page 24 (July 26* 2004).
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Docket 05-El- 136
- 2. Transfer of Oualified Decommissioning Funds to DEK. Each utility has an external decommissioning fund, held in trust for the purpose of decommissioning.KNPP, that meets the requirements of § 468A of the Internal Revenue Code. These external sinking funds are known as qualified decommissioning funds.4 Under the ASA, the applicants' qualified funds would transfer to DEK upon closing. The total projected pre-tax market value ofthe two qualified funds is approximately $405 million. DEK would assume full decommissioning responsibilities, regardless of the sufficiency of the transferred qualified funds, but DEK Would retain any excess remaining in the qualified funds after decommissioning. (DEK altered this element of the sale, pledging to return any excess ratepayer funds in the qualified trust, when it moved to reopen this 5
docket. )
- 3. Return'ofNonqualified Decommissioning Funds to Rateyavers. Each utility also has an external decommissioning fund that does not meet the requirements of § 468A of the Internal Revenue Code, known as the nonqualified fund.6 Under the ASA, the current balance in each utility's nonqualified fund would be retained by WPSC and WP&L, not transferred to DEK. The utilities propose to return all of the nonqualified funds, approximately $193 million, to their ratepayers.
4 Funds deposited in a qualified fund are tax deductible by the nuclear plant owner imendiately. in the year of the contribution.
See Proffered Condition 9.
IRS regulations only allow-a prorated amount to bedepositedin.a qualified decommissioning fund.. If i nuclear plant is 35 percent depreciated at the time that a qualified fund is created, the deposits into a qualified fund may not exceed 65 percent of the total amount to be set aside for decommissioning. The Comn-ission directedWisconsin utilities to Set up their external funds in 1955, 10 to 15 years.after theirnuclear plants began service, so they could only use qualified funds to cover a prorated portion of their total decomaissioning expenses. As a result, the Commission also required that the owners of KNPP and Point Beach create nonqualified funds, where the remainder would be invested. Deposits intoua nonqualified fuind cannot be taken as tax deductions in the year of contribution, only in the year they are withdrawn and used.
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Docket 05-EI-136
- 4. Offers to KNPP Employees. The ASA requires DEK to offer employment to all WPSC employees who are working at KNPP at the time of sale, in accordance with WPSC's collective bargaining agreement covering its non-supervisory KNPP employees and all applicable federal, state and local laws. DEK has made these offers to WPSC employees, as well as to all NMC employees who are currently stationed at KNPP.
- 5. Capacity and Enemv Prices under the PPAs. The PPAs would entitle the utilities to their respective percentage share of KNPP's projected capacity, energy, ancillary services and "attributes," such as excess emission allowances. Both utilities would pay a formulaic fixed monthly payment, designed to mimic the fixed capacity and O&M expenses each would bear under rate-based treatment. The utilities would also make variable monthly payments for delivered energy.
- 6. Performance Bonus and Damages. Under the PPAs, DEK would guarantee the plant's performance at levels similar to or slightly higher than KNPP'shistorical performance.
Depending on KNPP availability and outage rates, as well as the costs of replacement energy and capacity, the applicants would either pay a monthly "performance bonus" to DEK or receive "performance damages" from DEK. WPSC and WP&L allege that these financial incentives would hold ratepayers harmless financially against the costs associated with KNPP's projected level ofperformance. As security to ensure that DEK complies with its obligations under the PPAs, DRI issued a $31 million corporate Guaranty that the utilities can invoke on their own behalf. (DEK altered this element of the sale, increasing DRI's Guaranty, when it moved to reopen this docket.)?
See Proffered Condition 10.
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Docket 05-EI-136 The PPAs would also limit ratepayer risk exposure in the event of an extended shutdown.
If any outage were to exceed 360 days, regardless of whether DEK provided replacement power during such an outage, the applicants could terminate-their PPAs and stop making the fixed payments.
Proffered Conditions DEK's original seven Proffered Conditions are as follows:
- 1. Require that DRI notify the Commission of any request made by the U.S. Securities and Exchange Commission ("SEC")-to pay dividends from funds other than Dominion Energy Kewaunee's retained earnings;
- 2. Prohibit Dominion Energy Kewaunee from providing loans to any of its holding company affiliates, except through the DRI money pool that has been approved by the SEC;
- 3. Prohibit Dominion Energy Kewaunee from guaranteeing any debt of DRI or of its holding company.affiliates;
- 4. Allow the Commission to approve any subsequent.sale of the Kewaunee Nuclear Power Plant ("KNPP"), or of Dominion Energy Kewaunee, for the purpose of determining whether the new owner:has sufficient financial resources to operate the plant. A decision by the NRC approving the license transfer would constitute a rebuttable presumption that the new owner is creditworthy;
- 5. Require that Dominion Energy Kewaunee use only an external trust fund as its form.of decommissioning financial assurance; 6.. Require:that Dominion Energy Kewauneo contimie to. use the DECON assumption of immediate decommissioning when estimating the future cost of decommissioning KNPP, as well as the assumption that the site would be restored to greenfield status; and 7* Prohibit Dominion Energy Kewaunee from storing any nuclear waste at KNPP that was produced elsewhere.
DEK added three additional Proffered Conditions as Exhibit B of the "Motion for Reopening and Rehearing" that it submitted on December 21, 2004. These conditions are:
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Docket 05-EI-136
- 8. Dominion Energy Kewaunee will grant to Grantees and their successors and assigns a right of first refusal to purchase KNPP in the form to which this Exhibit B is appended (the "ROFR").
- 9. Upon final completion of all decommissioning activities at KNPP, Dominion Energy Kewaunee shall return to Grantees, their successors or assigns, for distribution to their customers, any and all excess ratepayer funds contained in Dominion Energy Kewaunee's Qualified Decommissioning Trust Fund for KNPP. Any excess funds shall be returned to Grantees in proportion to their ownership share on the day ofthe sale of KNPP to Dominion Energy Kewaunee.
- 10. Dominion Energy Kewaunee.s parent company, Dominion Resources, Inc., will increase the total level of its guaranties attached to the Power Purchase Agreements from $31 million to [amount filed confidentially].
(A copy of the ROFR is appended to this order as Attachment A.)
In its InitialBriefin the Reopened Proceeding,dated February 11, 2005, DEK completed its list of Proffered Conditions. It proposed the following:
- 11. Require any subsequent purchaser of KNPP or Dominion Energy Kewaunee (other than the transfer pursuant to a Permitted Transfer) to. intervene as a party in any Public Service Commission of Wisconsin proceeding initiated pursuant to Proffered Condition No. 4 or paragraph 6 of the ROFR and affirmatively commit on the record of such proceeding to be bound by the same conditions set forth in this Exhibit B. The transferee of a Permitted Transfer under § 2(ii) of the ROFR will file with the PSCW a document affirmatively committing to be bound by the same conditions set forth in this Exhibit B.
- 12. Dominion Energy Kewaunee and all subsequent purchasers will decommission the KNPP site in accordance with § 7.17 of the Asset Sale Agreement (and associated definitions) dated NoVember 7, 2003 by and between Dominion Energy Kewaunee and Grantees ("ASA") and subsequent purchasers shall contractually bind themselves to the Grantees to decommission the KNPP site in a manner consistent with § 7.17 (and associated definitions) of the ASA.
Public Interest Determination Under Wis. Stat. § 196.80(lm)(e) and (3), KNPP cannot be sold unless the Commission determines that the.proposed sale is "consistent with the public interest." [n addition, DEK is seeking to own and operate KNPP as an exempt wholesale generator. Under federal law, the Federal Energy Regulatory Commission (FERC) must first find that KNPP is an "eligible 14
Docket 05-EI-136 facility." Such a finding, pursuant to the federal :Public Utility Holding Company Act, depends upon the Commission first determining "that allowing such facility to be an eligible facility (1) will benefit consumers, (2) is in the public.interest, and (3)does not violate State-law." 8 These are the broad public interest issues now before the Commission. Determining DEK's financial viability is the first step in the Commission's public interest analysis. Because KNPP is a nuclear facility that will remain sited in Wisconsin on the shores of Lake Michigan for its entire useful life, the Commission must also consider the matters of nuclear waste storage and successful decommissioning of this plant. The Commission must look forward 30 years or more to evaluate these concerns. To:reach its decision, the Commission has analyzed specific and general costs and benefits of the proposed transaction. These matters are discussed below.
Third party ownership In its original decision on December 16,2004, the Commission stated that it "is examining the ability of DRI and its subsidiary to operate, maintain, and decommission KNPP safely and reliably. If DEK were to sell KNPP at some point in the future, or if DRI were to sell DEK outright, the ownership of this plant will transfer to a third party. Unless it can reserve some right to review a subsequent sale-of KNPP, the Commission would have no ability to judge whether this successor is a suitable owner of KNPP." FinalDecision, page 11. The five issues presented for briefing in these reopened proceedings all deal with the potential transfer of KNPP DEK only qualifies as an exempt wholesale generator if the FERC finds it to be "engaged directly, or indirectly through one or more affiliates . .. and e.'clusively in the business of owning or operating, or both owning and operating, all or part of one or more eligible facilities and selling. electric energy at wholesale." An "eligible facility" most be "used for the generation of electric energy exclusively for sale at wholesale." "Sale of electric energy at wholesale," in turn, refers to the definition of that termin the.Federal Power Act, or '"a sale of electric energy to any person for resale." See 15 U.S.C. § 79z-Sa and 16 U.S.C.:§ 824(d).
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Docket 05-EI-136 or DEK to a subsequent, third-party owner. The parties' briefs explored whether the commitments being made by DEK would flow to any successor.
Proffered Conditions 4, 8, and II properly bind a third-party successor to all the terms of the proposed sale. Proffered Condition 8 incorporates the Right of First Refusal (ROFR), an instrument that will be recorded with the Kewaunee County Register of Deeds and run with the land. Under the terms of the ROFR, KNPP can only be sold via a "Bona Fide Offer," which is defined as the purchase of substantially all of the plant and its related assets or substantially all of DEK's common stock. Part of a Bona Fide Offer is a requirement that the purchaser render an undertaking to be bound by each Proffered-Condition. If a Bona Fide Offer to purchase is made, WPSC and WP&L then have a 60-day option to invoke their right of first refusal. They must then file a request. with the Commission for a declaratory ruling on the reasonableness and prudence of their decision to exercise or~waive the right of first refusal.9 An essential element of the Bona Fide Offer is the requirement that the third-party purchaser agree to be bound by every Proffered Condition, including Condition 8. Under these terms, if a third party acquires KNPP and then decides to sell the plant, the ROFR applies again and the next successor in interest becomes obliged to enter into an undertaking that binds it.to each Proffered Condition. Although the ROFR exempts mergers and purchases of DRL the holding company, as well as transfers of KNPP to an affiliate of DEK, even under these "Permitted Transfers" the transferee must furnish the same undertaking. The ROFR remains in 0
effect for the life of the plant's NRC licenses.'
.9ROM R, 4 to 6.
'uROMff 2 =W3.
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Docket 05-EI-136 Proffered Conditions 4 and lI impose a further requirement upon subsequent purchasers.
When the Commission initiates a docket for the.review of a proposed sale, Proffered Condition 4 specifies its ability to examine the financial resources of the prospective owner. Proffered Condition I I requires that the purchaser must intervene as a party to this docket, or as a party to the declaratory ruling proceeding that the two utilities would commence, and must "affirmatively commit on the record of such proceeding to be bound by the same conditions set forth in this Exhibit B [the Proffered Conditions)." A transferee of a Permitted Transfer must file a document with the Commission making the same affirmative commitment.
Entering Commission proceedings and making the binding declaration that it will abide by the Proffered Conditions will equitably estop the prospective purchaser from challenging any action by the Commission to enforce performance. Furthermore, the Commission can issue a conditional order when it authorizes a sale or transfer of KNPP or DEK, demanding compliance with the Proffered Conditions. Wis. Stat. § 196.395 provides that, when the new owner acts upon the Commission's order and acquires the plant, it will waive all objections to such conditions."
Thes e doctrines of estoppel and waiver also apply to DEK, if the.Commission commences an action to enforce performance of any Proffered Condition. DEK agrees-with this legal conclusion. In its Reply to the Supplemental Briefs, dated November 12, 2004, the company stated, "Thc Commission can be confident in its ability to adopt: and enforce these Proffered Conditions because Dominion Energy Kewaunee has proffered, on the record, to abide "Wis. Stat..§ 196.395 provides, "'Thecommission may issue conditional, temporary, emergency and supplemental order. If an order is issued upon certain stated conditions,.any partyacting upon any part of the order shall be deareed to have accepted and waived all objections to any condition contained in the order."
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Docket 05-El- 136 by the terms of these Proffered Conditions. Through this agreement, Dominion Energy Kewaunee is waiving its right to challenge the Proffered Conditions." The company further declared, "Dominion Energy Kewaunee would also be precluded from challenging the Proffered Conditions on equitable grounds." It cited the doctrines of judicial admission, estoppel by record, and judicial estoppel as each preventing such challenges and stated, "This is the type of situation where these equitable theories will act to preclude a challenge to the Proffered Conditions." Id. at page 5 and page 6, fin. 9. DEK also stated that imposing its Proffered Conditions would be within the Commission's statutory authority, citing Wis. Stat. §§ 196.02(1),
196.491(2) and (5), and 196.80(3).2 In briefs filed during the initial proceedings, DEK further declared that none of the Proffered Conditions would besubject to federal preemption. Although DEK reserved judgment regarding whether prohibiting the storage of off-site nuclear waste at KNPP could be federally preempted (Proffered Condition 7), it stated categorically that preventing the storage of off-site waste at KNPP is "a reasonable, lawful, and targeted condition that addresses a lcgitimAte State concern," whose adoption "should not present new preemption issues.": Reply BriefofDominion Energy Kewaunee. Inc., pages 19-20 (August 9., 2004); SupplementalBriefof Dominion Energy Kewaunee, Inc., page 9 .(November 5, 2004);. Reply to the Supplemental Briefs, page 18. The Commission also notes that this prohibition is already imposed upon KNPP through its NRC license.
12Reply to the Supplemental Friefs, page 11. DEK also maintains that none of the Proffered Conditions would be subject to federal preemption. "with the possible exception of [Proffered Condition 7, prolhibiting storage of off-site nuclear waste at KNPP] that is already imposed upon KNPP through.its NRC license." Id. at 18. Even on Proffered Condition 7, DEK has stated categorically that preventing the storage of off-site waste at KNPP is "a reasonable, lawful, and targeted condition that addresses a legitimate State concern," whose adoption "should not present new preemption issues." Reply BriefofDominion Energy Kewaunee, Inc., pages 19-20 (August 9. 2004);Supplemental Briefof Dominion Energy Kewaunee, Inc., page 9 (November 5, 2004).
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Docket 05-El- 136 In briefs filed during these reopened proceedings, DEK affirms all of these legal conclusions regarding the new Proffered Conditions. It again declares that the Commission has statutory authority to adopt and enforce every condition, that DEK is voluntarily waiving its right to contest Commission enforcement actions, and that none.ofthe.new Proffered Conditions would be federally preempted. Reply.Briefof Dominion Energy.Kewaunee in the Reopened Proceeding,.pages 4-6 (February 21, 2005).
The Commission agrees with these legal conclusions. The twelve Proffered Conditions will subject any subsequent purchaser of KNPP or DEK to the same requirements as are imposed upon DEK, and will convey the same enforcement authority to the Commission. Furthermore, as an exempt wholesale generator, DEK or any subsequent owner will be subject to the Federal Power Act. Under 16 U.S.C. § 824(g), the Commission will then have the right to audit the books and records of the owner and its holding company parent. In addition, the applications, annual reports and other information that.DEK.or any subsequent owner files with the FERC, NRC, and SEC are publicly available to monitor the financial status and regulatory activities of the owner. The Commission finds this authority sufficient to ensureperformance.
Nuclear waste storage DEK has consistently stipulated that. the KNPP site would store only nuclear waste generated by KNPP, not any off-site waste. One of the reasons the Commission initially rejected this sale, though, Was because if KNPP were sold by DEK to a new owner, the terms of sale did 19
Docket 05-EI- 136 not commit the subsequent owner to abide by this stipulation. The new Proffered Conditions now under review will impose that commitment upon any third party that acquires KNPP.' 3 Several intervenors object that the Commission can never cloak itself with sufficient enforcement authority after KNPP is sold. They cite the issue of nuclear waste storage as an example, maintaining. that the risk of federal preemption will remain regardless of what conditions may be proffered. The Commission agrees, but notes that the same would be true even if WPSC and WP&L continued to own the plant. The prohibition on storing off-site nuclear waste in Proffered Condition 7, as extended to all owners of KNPP by the new Proffered Conditions, is actually a broader, more explicit bar than is currently in place for the utility owners of Wisconsin's nuclear plants. This prohibition properly substitutes for the Commission's rate and construction authority over utility owners.
Decommissioning In its initial decision the Commission expressed its satisfaction with DEK's decommissioning commitments. The company stated that it will use an external trust fund as the only form of decommissioning financial assurance for KNPP (Proffered Condition 5). DEK affirmed that, when estimating the future cost of decommissioning KNPP, it will base these estimates upon the conservative assumptions that decommissioning will commence immediately and that the site will be restored to.greenfield status (Proffered Condition.6). DEK also stated that when it actually performs decommissioning, the ASA requires that it must restore the site to 13Cormmissioner Garvin concurs in the couclusion that the approval of the salelis in the public interest notwithstanding the remote possibility that a subsequent owner, with appropriate federal approvals, may preempt state retrictions regarding storage of out-of-state waste. While it may be that the Commission could limit recovery of costs in rates, its authority to deal directly with this issue is limited.
20
Docket 05-EI-I 36 greenfield status. 14 As the Commission stated in its initial decision, these stipulations do add value to the transaction.
At the time of its original order, though, the Commission remained concerned about whether it could enforce decommissioning conditions against a subsequent purchaser. The enforcement procedures described above respond to this problem, because they will impose the external trust find and forecasting assumptions of Proffered Conditions 5 and 6 upon all future owners. In addition, Proffered Condition 12 resolves the Commission's concern about whether the ASA's provisions about greenfield decommissioning would bind a third party, because this condition requires that both DEK and all subsequent purchasers must complete greenfield decommissioning.' 5 The Commission does exercise additional control over decommissioning when the nuclear plant owner is a public utility. It requires site-specific studies of a plant's future decommissioning costs every four years, and the forms of investment for decommissioning trust funds are subject to the Commission's approval.' 6 DEKis willing to continue conducting site-specific studies of KNPP's future decommissioning costs, rather than using a generic cost estimate, but it prefers that these studies occur at five-year intervals, which the NRC allows.,7 4
1 .DomonlonEnergy Kewaunee, Inc. 's Reply to the SupplementalBriefs, page 16 (November 12, 2004); Reply Brief ofDominion Energy Kewaunee in the Reopened Proceedingw,pages 8-9 (February 21, 2005).
" UnderASA § 1.1(39), DEK is obligated to decommission KNPP "in a manner consistent with the Decommissioning Study, or as otherwise requuird by Laws." Thi obligation transfers to successive, owners via Proffered Condition 12. Some int*evnors, however, questioned whether this provision of the ASA really requires restoration to greenfield status. In their Reply BrIefon Reopening,pages 647 (February 21, 2005), the applicants affirm that decommissioning can only be consistent with the Decommissioning Study of TLG Services, Inc. if the KNPP site is restored to greenfield status, because that Study presumes decommissioning to unrestricted use. They also state that the phrase "as otherwise required by Laws" will not permit the owner of KNPP to pursue some lesser degree ofdecommissioning unless "decommissioning to the greenfield standard, for whatever reason, has become unlawful." Id.
"'Docket 05-EJ-14 Order, page 22 (July 5, 1994); Fe*is, Tr. 1624-25 and Mougin, 'Tr. 1293-1308.
" NRC Regulatory Guide 1. 59, Rev. I (October 2003), § 1.4-3.
21
Docket 05-El- 136 The Commission agrees that this interval is reasonable. The NRC has also recently added special restrictions concerning how non-utility licensees can invest.their external trust funds. Under 10 C.F.R. § 50.75(hX 1)(i), the trustee may not invest these funds in "securities or other obligations of the licensee or any otheruowner oroperator of any nuclear power reactor or their affiliates,":or in mutual funds that consist primarily of the securities of nuclear plant owners. The Commission agrees that, these federal requirements will provide sufficient control over the investment of DEK's external.sinking fund.
Currently, the owners of KNPP must receive the Commission's approval before they use decommissioning trust funds for any reason.'a DEK argues that the Commission should not impose this restriction upon draws from DEK's trust fund, because the NRC already restricts its use by prohibiting withdrawals except to cover ordinary administrative expenses of the fund and "legitimate decommissioning activities." Under the NRC's regulations, expenditures from these funds must not reduce the trust below the amount needed to place a reactor in safe storage, and maintain it in that status, in case unforeseen conditions arise. In addition, the NRC prohibits withdrawals from inhibiting the availability of the funds that will ultimately be needed to restore the site and requires 30 days of advance notice before a disbursement can occur. 10 C.F.R.
§§ 50.75(h)(1)(iv) and 50.82(a)(8). The Commission is willing to relinquish its approval authority over the use of KNPP's decommissioning funds and rely upon federal controls, because of the overall benefits of the sale and the other safeguards built into the Proffered Conditions.
"Docket 05-EI-14 Order,.page 15 (December 5, 1985).
22
Docket 05-EI- 136 Return of unused qualified decommissioning funds As described in the Commission's initial decision, the ASA provides that the applicants' nonqualified decommissioning funds will be retained by the applicants and returned to their ratepayers. The total projected pre-tax market value of these funds%is approximately
$193 million and this guaranteed return to ratepayers is a real benefit of the sale. Not only does it recognize that ratepayers own these trust funds, but it also avoids the risk that the actual cost of decommissioning will be so high that it consumes some or all of the nonqualified funds.
However, the ASA would have transferred to DEK the applicants' qualified decommissioning funds for DEK's use when it assumes.full decommissioning responsibilities. The total projected pre-tax market value of the applicants' two qualified funds is approximately $405 million.
Under the original terms of sale, if DEK were'to complete decommissioning without using all of these qualified funds, it would have retained the excess. The Commission's finding that ratepayers should also have the right to any unused amounts in the qualified funds was one reason why it decided that the proposed sale was not consistent with the publicinterest.
DEK now agrees to make such a commitment. Proffered Condition 9 states that DEK will return to the applicants all excess ratepayer funds contained in its qualified trust fund, after decommissioning. has been finally completed. These funds will then be distributed to ratepayers.
The Commission finds that Proffered Condition 9 properly responds to its prior decision, resolving its concern about Wisconsin ratepayers' right to unused decommissioning funds. The intervenors contend that tracking DEK's decommissioning trust fund for 30 years to determine what portion of it constitutes "ratepayer funds" and how much should bexreturned after decommissioning will be very difficult.. Even if this proves to be the case, Proffered Condition 9 23
Docket 05-EI-136 still removes any perverse incentive to cut comers when decommissioning, just so the owner can keep unused fiuids. This alone is a valuable benefit to the state.
Parental guaranties and support In its initial decision the Commission examined the financial viability of DEK as an important element of its public interest determination. DEK's parent, DRI, had offered a
$31 million Guaranty under the terms of the PPAs as support for its subsidiary, but the Commission determined that this financial support was not sufficient. DEK responded with Proffered Condition 10, which increases this parental Guaranty to an amount sufficient to cover DEK's maximum potential liability to the applicants in any given year. (The company requested confidential treatment of this dollar amount.) The record describes other funding sources available to DEK, to supplement its PPA revenuesr access to the DRI money pool; the retention of planned dividends to the parent; additional investments by DRI; and DRI's $60 million Support Agreement. These financial options are voluntary arrangernents with DRI, but the Guaranty is a binding obligation that either WPSC or WP&L can invoke. The Commission finds that the larger Guaranty now being offered is satisfactory to protect the applicants under the PPAs, so Wisconsin's electric reliability will not be harmed by the sale.
General public Interest concerns In the course of these reopened proceedings, the intervenors have asked the Commission to examine this sale from a broader perspective. They question whether the Proffered Conditions will be sufficient to safeguard the public interest, regardless of whether they are enforceable or extend to third parties. In particular, the intervenors point to the fact that the PPAs last only 24
Docket.05-EI-136 through 2013 and from then on the energy and capacity of KNPP are not pledged to Wisconsin ratepayers.
The intervenors correctly state that, if KNPP is relicensed after 2013 and remains a reliable, low cost unit, its financial benefits will no longer be guaranteed to Wisconsin ratepayers. DEK may then choose to sell KNPP's power on the open market to the highest bidder, which may be a purchaser in another state. KNPP would still be a nuclear plant located in Wisconsin, but would not be a source of electric power for Wisconsin. The applicants and DEK have negotiated an Exclusivity Agreement, however, granting the applicants sole rights through 2011 to negotiate future PPAs for the purchase of KNPP's energy, capacity and attributes. This agreement gives DEK an incentive to sign further PPAs with the applicants for the period 2014 and beyond, not with other purchasers outside Wisconsin, becauseDEK will have an interest in securing firm power contracts for the output of KNPP before committing its resources to relicensing. Furthermore, even if the Commission rejected this sale, ratepayers would still not be guaranteed that KNPP is an economical source of future generation, because the future may hold that this plant is no longer reliable or cost-effective. If the applicants continue as owners, but KNPP must be shut down prematurely, the plant would become a sunk cost to ratepayers.
It is impossible to predict with certainty whether or how long KNPP will be a cost-effective unit. Included in the record, though, are extensive analyses of the financial effects of selling KNPP through 2033. The base case analyses used by the applicants, intervenors and Commission staff all produced positive benefits for ratepayers ranging from approximately $25 million to $130 million, even without considering the return of decommissioning funds.
25
Docket 05-EI-136 Determining whether selling KNPP would benefit ratepayers and the state of Wisconsin.
requires the Commission to weigh all the risks and rewards associated with the sale. Offsetting the intervenors' concerns about possible limitations on enforcing conditions and KNPP's availability after 2013 are the benefits of sale, which are described below.
The transaction results in cost and rate certainty.
The PPAs will benefit ratepayers through 2013 by reducing their exposure to volatile nuclear generation costs. The applicants will be able to provide a high level of price predictability, while shielding ratepayers from the potentially significant economic consequences of both the open-ended, supply-side risks they would face if the KNPP sale were not coupled with the PPAs and.the open-ended, nuclear-specific capital expenditure and O&M risks of continued utility ownership.
The t.ransation results in significant financial benefits for ratepaVers.
.Since the net proceeds from the sale will approximate KNPP's current book value, the transaction properly considers the reasonable value of the plant's property and assets as required under Wis. Stat. § 196.80(3). Ratepayers will also recapture $193 million of the applicants' nonqualified funds. This return of decommissioning money is an immediate financial benefit to consumers. Returning the nonqualified funds to the,ratepayers who are purchasing KNPP generation will also promote intergenerational equity by avoiding the possibility of a long delay before any refunds are made. Furthermore, under Proffered Condition 9 ratepayers are also entitled to all excess, unused ratepayer funds remaining in DEK's qualified fund after deconmmissioning is completed.
26.
Docket 05-EI-136 Significant risks shift from Wisconsin rateayvrs to DELK.
The "all-in" PPA price shields ratepayers from the significant cost volatility risk associated with continued ownership of a nuclear plant, particularly the potential for large capital expenditures late in the current license term. Failing to make such expenditures could lead to an early shutdown; on the other hand, if the applicants were to incur such expenses but for some reason the plant were not relicensed, accelerated depreciation could be needed for full rate recovery. Locking in the price formula .for the remaining license term also reduces the risk to applicants of unpredictable cost. increases resulting from equipment failure, changed industry standards or new regulatory requirements. The PPAs will allocate these risks, currently borne by the applicants' ratepayers, to DEK.
DEK takes the risks of decommissioning.
DEK will be assuming all decommissioning liabilities, although only the applicants' qualified funds will be transferred to DEK under the ASA, and DEK will return all excess ratepayer funds contained in its qualified fund, following decommissioning. The risk that the cost of decommissioning may exceed amounts in the external trust fund will fall upon DEK.
The PPAs will result in increased assurance of KNPP performance and availability through 2013.
The reliability of KNPP should remain high under DEK's ownership, since, its parent is an experienced operator with a large fleet of nuclear plants and a good operational and safety record. Under the PPAs, DEK not only guarantees performance at levels equal to KNPP's projected performance but.has financial incentives to achieve even better performance. These 27
Docket.05-EI-136 financial incentives will not increase the overall cost of KNPP output because they approximate the.value to the applicants of the increased output.
DEK bears the: risk of performance below the standards: set in the PPAs, in the form of penalties tied to the market cost of replacement.power and lost revenues&. If DEK fails to provide the energy guaranteed by the PPAs, the utilities can use net billing tovoffset their replacement power costs against the monthly payments they would otherwise make to DEK. In addition, the utilities could call upon DRI's enhanced Guaranty or begin the process of terminating the PPAs entirely. These levels of protection, which are not available if the applicants retain ownership, help ensure that WPSC and WP&L will not face an energy supply shortage due to early loss of KNPP's capacity. Given DRI's longer-term investment horizon and its desire to remain in the nuclear-fueled wholesale generation market as a key long-term strategic initiative, DEK is more likely than the applicants to invest in the plant This, in addition to the significant penalties for DEK's. nonperformance, make it much less likely that KNPP will be subject to early retirement.
The-transaction protects rateyaers if KNPP is forced to shut down.
The ability of the applicants to offset their capacity payments or terminate the PPAs entirely, in the event of an outage that lasts for more than a year, is a very significant ratepayer benefit. If KNPP remained in rate base and experienced such an extended outage, ratepayers would continue to pay a return of and on KNPP capital investment through the end of the license term, in addition to replacement energy costs. Under the PPAs, the applicants are liable for only one year of fixed costs. DEK is then at risk for the remaining investment, because the applicants can choose to continue the PPAs or terminate them.
28
Docket 05-El- 136 Granting ownership Lo DEK tds another competitor to isconsin's wholesale electri At this time, DRI is not a participant in Wisconsin's wholesale electric market. By expanding the level of competition in the state, DRI's entry will benefit -thismarket.
Return of Nonqualifled Decommilssloning Funds to MGE Ratepayers MGE entered this docket to challenge two provisions of the sale. Under the ASA, WPSC and WP&L would return the nonqualified decommissioning trust funds to their own ratepayers; MGE requests that its ratepayers receive:a proportional share of these fuinds. Proffered Condition 9 also grants WPSC and WP&L a right to excess ratepayer funds in DEK's qualified fund. MGE also argues that it has a proportional right to any amounts refunded after DEK completes its decommissioning.
Over 20 years ago, the Commission initiated docket 05-EI-14, Accounting Treatment to be Afforded Costs Associated with DecommissioningNuclear Facilitiesand the Costs of Future Spent FuelDisposal. In 1985, the Commission established that decommissioning funds must be deposited in external trust funds, separate from utility accounts. The Commission required that these funds be controlled by an independent fiduciary trustee who can only use the fund balance to accomplish the actual decommissioning of the plant and who must first receive the Commission's approval to begin using the funds. The applicants' fiduciary trustees manage both the qualified and nonqualified decommissioning funds.
The combined value of WPSC's and WP&L's qualified funds is approximately $405 million, while their nonqualified funds currently total $193 million.' 9 The money in these trust Pie-tax, amounts forecasted as of June.30, 2004.
29
Docket 05-EI-136 funds is now forecast to exceed future decommissioning costs. The latest study of TLG Services, Inc., estimates that decommissioning KNPP will cost $530.1 million, and theNRC's formula minimum is only $317 million.2° The $405 million in qualified funds alone is already larger than the NRC minimum, and the Commission stals economist testified that the growth in the qualified funds will likely be sufficient even to cover TLG Services' estimated cost of decommissioning by the year 2013. For this reason, WPSC and WP&L were able to negotiate an ASA that allows them to keep the nonqualified funds and return them to ratepayers.
WPSC's decommissioning funds include the amounts it acquired from MGE. MGE sold its share (17.8 percent) of KNPP to WPSC in 2000. The terms of sale were embodied in a Settlement and Ownership Transfer Agreement (SOTA), which the Commission approved in dockets 3270-EA-100 and 6690-EB- 103 (May 18, 2000). As part of the sale, MGE transferred both its qualified and nonqualified decommissioning funds to WPSC. The parties do not dispute that, had MGE retained its share of KNPP, overall its ratepayers would have contributed $33.1 million to MGE's nonqualified fund.21 They also agree that MGE contributed 34.6 percent of the amount in WPSC's qualified fund; MGE's share is currently valued at $83.7 million. MGE argues that this money should be returned to its own ratepayers, not to WPSC ratepayers.
Nuclear decommissioning fends are not utility assets, but are moneys held in trust on behalf of utility ratepayers for the purpose of paying decommissioning funds. Because MGE did not own its decommissioning funds, the utility needed the Commission's approval to transfer these funds to WPSC when it sold both its share of KNPP and all the accompanying z TLG Services, Inc., assumes that decommissioning will restore the KNPP site to greenfield status when it calculates decommissioning costs. NRC's formula minimum.assumes only the removal of radioactive structures, not including nuclear fuel. 10 C.F.R. § 50.75(c).
21Pre-tax, as of February 29, 2004.
30
Docket 05-EI-136 decommissioning liabilities. As part of the consideration for assuming decommissioning liabilities, WPSC received MGE's rights to decommissioning funds. The SOTA gives WPSC full rights to all of MGE's decommissioning funds, both qualified and nonqualified. The agreement also granted WPSC the right to assign or transfer the interests it acquired in MGE's nonqualified fund. The SOTA reserves no rights to MGE regarding ownership of any excess decommissioning funds.42 MGE has not presented a basis in contractlaw to override the express terms in the SOTA.
The Commission's subsequent approval of the SOTA, which thereby approved MGE's full transfer of its decommissioning funds to WPSC, extinguished MGE's interest in recovering any unused funds. Likewise, the Commission's approval of this transfer without reservation, with regard to the future use of these funds, supports WPSC's right to these funds for its ratepayers.
The Commission has also consistently relied upon principles of equity when making decisions about decommissioning funds. WPSC contends that requiring it:to return some of the decommissioning funds to MGE after the sale would be inequitable, because when MGE transferred its interest in KNPP to WPSC, it also transferred all its decommissioning risk to WPSC. WPSC maintains that its decision to sell KNPP is just one method of controlling this risk, no different than choosing to retain ownership and investing in external sinking funds or purchasing insurance. Both utilities agree that WPSC's ratepayers would be entitled to any unused decommissioning funds if WPSC were to retain ownership; WPSC's decision to choose another risk management method should not alter this outcome.
Since WPSC assumed all the risk of decommissioning on MGE's behalfM granting WPSC's ratepayers the benefit of its nonqualified funds and of any returned nonqualified funds 22 SOTA, sections i7 and 25.
31
Docket 05-EI-136 is the most equitable outcome. Absent a compelling equitable concern and in order to avoid regulatory uncertainty, the Commission will not reopen its prior decision to examine an issue only now being raised by MGE. Therefore, the Commission rejects MGE's attempt to rewrite the SOTA and resurrect aright to decommissioning funds that were transferred with KNPP to WPSC in 2000. The Commission declines MGE's invitation to reopen-its prior decision approving the transfer.
(Chairperson Bridge, who rendered a decision in the Commission's oral deliberations, decided this matter in favor of MGE.)
Employment Offer to KNPP Employees State law prohibits the sale of an electric generatingiplant unless the Commission has verified that the buyer will offer employment to the nonsupervisory personnel "who are employed with the energy unit immediately prior to the transfer and who are necessary for the operation and maintenance of the energy unit." Wis. Stat. § 196.807(2)(a) and (4). The ASA requires compliance with this statute as a condition of sale. The International Union of Operating Engineers Local 310, which represents approximately 150 employees at KNPP, also affirmed DEK's willingness to recognize Local 310 as the sole representative of unionized plant employees and to abide by the current labor agreement between the union and WPSC.
A representative of the International Brotherhood of Electrical Workers Local 2150 raised concerns about whether the statutory protections would be applied to employees at the plant who are not covered by a collective bargaining agreement, but DEK introduced testimony that over 99 percent of KNPP employees have accepted job offers from DEK. The Commission finds that DEK has complied with.Wis. Stat. § 196.807.
32
Docket 05-E1-136 Rate Recovery of All Transaction-Related Costs The applicants seek to recover their costs related to the sale of KNPP in future retail rate cases. These transaction-related costs are the changes in the applicants' revenue requirements due to all expenses incurred in connection with the negotiation and execution of the ASA and PPMAs,.all expenses incurred in obtaining approvals and closing the transaction, all costs incurred under the PPAs during their entire term, and all other costs incurred in relation to the transaction.
Their recovery would be subject to a Commission finding that such expenses, upon appropriate audit and scrutiny, are reasonable and consistent with the Commission's approval of the transaction.? In addition, they are asking the Commission to find that deferring all gains and losses'resulting from the transaction would be reasonable, prudent, and in the public interest, including regulatory tax effects and the costs incurred by the applicants in order to arrive at the transaction.
It is reasonable to allow rate recovery of all expenses incurred in connection with the negotiation and execution of the ASA and PPAs, expenses incurred in obtaining approvals and closing the transaction, and all other costs incurred in relation tothe transaction, provided that such costs are reasonable and not of the type normally excluded for ratemaking purposes. This includes. the costs of WPSC reimbursing WPSN for the diminution in its NMC equity interest and to hold WPSN harmless for the NMC exit fees. These are legitimate costs of consummating the sale of KNPP. Since the gain from the sale ofKNPP and other related assets will be returned to the ratepayers, it is reasonable to offset this gain by the cost of completing the transaction.
- The Commission also finds it reasonable and consistent with the public interest, pursuant to Wis. Stat.
§ 19 6 .52(3)(a) and Wis. Admin. Code § PSC.100.02, to include .ith the above expenses the costs to reimburse WPSN, for the diminution in value of its equity interest in NMC, and for exit fees.incurred due to early termination ofthe Nuclear Power Plant Operating Services Agreement between WPSC and NMC.
33
Docket 05-BI-136 The Commission will review all costs incurred under the PPAs during their entire term in each future rate proceeding of WPSC and WP&L, just the same as any other PPA.
Regarding the request to defer all gains and losses resulting from the transaction, including regulatory tax effects and the costs incurred-by the applicants in order to arrive at the transaction, the applicants' transactional costs include, but are not limited to, employee pension and post-retirement transition costs, legal and actuarial costs incurred to complete the transaction, legal, actuarial, accounting, contractual, and system costs necessary to transition operations to DEK, equity AFUDC gross-up, tax expenses, and transition and termination costs relatedto the relationship with NMC.
The sale of a nuclear power plant or any other power plant is an infrequently recurring event. In addition, the only way to return the net gain to ratepayers is to defer it and amortize it in future rate proceedings. For these reasons, such a deferral of gains and losses is consistent with the Commission's deferred account policy as set fbrth in the Commission's Staff Accounting Policy Team Statement ofPosition 94-1 (February 23, 1995), and it is, therefore, reasonable and in the public interest to approve the requested deferral.
In order to ease the accounting and administrative burdens of the applicants with respect to the: transaction, they requested permission to continue depreciating all assets that will be transferred to DEK until the date of closing, notwithstanding the accounting requirements established by SFAS. 144.14 Such depreciation is justified because KNPP will remain used and 2
SFAS 144 requires a'"hange in accounting classification.of assets being "held for sale" when certain:criteria are satisfied. Under SFAS 144, the applicants would no longer be entitled to take depreciation on KNPP. The applicants argue that the lat ofthese criteria, where the sale of an asset is probable and enpected to qualify for recognition as a completed sale within one year, could be considered satisfied as early as when the Commission issues an order in this docket approving the transaction.
.34
Docket 05-BI-136 useful in the applicants' utility businesses until closing and because the recovery of such depreciation is authorized in the applicants' current rates.
Finally, the applicants seek approval to account for the transaction as proposed. Based on current accounting rules,. nothing has come to the Commission~s attention that would indicate that the proposed accounting is unreasonable and not in accordance with generally accepted accounting principles (GAAP). The Commission will review the accounting for the PPAs, for consistency with the then-applicable GAAP and proper raternaking treatment, in each utility's future rate cases.
The applicants are granted a declaratory ruling approving full rate recovery in future rate proceedings of all transaction-related costs and the deferral of all gains and losses resulting from the, transaction, including regulatory tax effects and the costs incurred by the applicants in order to arrive at the transaction. This authorization of recovery, however, depends upon future Commission audits showing that the costs, are reasonable and not of the type normally excluded for ratemaking purposes.
Summary Owning a nuclear plant involves unique risks, in addition to those associated with conventional generating facilities, and managing these risks.becomes even more difficult when a utility owns only a single unit. The costs of operation, maintenance, capital improvements and decommissioning are all. significantly more volatile than for fossil-fueled or renewable facilities.
Given these facts, WPSC and WP&L prudently decided to consider offers to purchase KNPP.
They affirm, however, that this sale does not presage any further attempt to sell conventional facilities or otherwise deregulate the electric industry in Wisconsin.
35.
Docket 05-EI- 36 After examining the provisions of the ASA, PPAs, and Proffered Conditions, the Commission finds this sale to be in the public interest. The net proceeds of sale approximate.the book value of KNPP, thereby eliminating any risk of stranded investment if KNPP were required to shut down early. The transfer of ownership shifts:all obligations and financial risk of design, operating, relicensing and. decommissioning to.DEK, and the Commission finds DEK capable of both assuming these financial risks and reliably operating the plant. It is part of a family of companies that safely and reliably operate a fleet of nuclear plants in the United States. The terms of the.PPAs, as well as their performance protections, offer a direct benefit to ratepayers over the remaining life of KNPP's license. Taken together, the ASA and the PPAs will materially reduce the cost volatility and operating risks associated with continued KNPP ownership.
DEK maintains that, undermost circumstances, it will seek to relicense KNPP. The sale of KNPP means that WPSC and WP&L ratepayers may lose thevalueofa relicensed plant, if DEK refuses to sign new PPAs with the two utilities or if it demands a substantially higher price for KNPP's capacity and energy.: However, the Exclusivity Agreement that grants the utilities a sole right to negotiate for future PPAs through 2011 is a means of mitigating that lost value.
DEK has proposed and declared its willingness to abide by twelve Proffered Conditions.
Both utilities have also stipulated to these conditions. The Commission stated in its initial decision that Wisconsin deserves a "local voice" in the key areas of nuclear waste storage, decommissioning, and the reliability of WVisconsin's electric system, and the Proffered Conditions restore that voice. They recognize ongoing Commission authority over the plant owner's financial viability, decommissioning funds, ratepayers' entitlement to these funds, and 36
Docket 05-EI-136 actual decommissioning to greenfield status. They protect Wisconsin against the possibility that KNPP could be used as a storage site for nuclear wastes produced elsewhere. They apply these requirements not just to DEK but to all future owners, and they guarantee additional financial support from DRI. These Proffered Conditions, combined with the other benefits to ratepayers associated with the sale of KNPP, are essential to the.Commission's conclusion that this sale is consistent with the public interest. The Commission therefore reserves the right to reopen this order if any of the Proffered Conditions ismodified or declared void, by further regulatory activity in other state or federal jurisdictions or by judicial review.
Order I. The proposed sale of KNPP to DEK, according to the terms of the ASA, the PPAs, and the Proffered Conditions, is consistent with the public interest and is approved.
- 3. The applicants may defer to their next rate proceeding the changes in their revenue requirements that are due to all expenses incurred in connection with the negotiation and execution of the sale of KNPP, all expenses incurred in obtaining approvals and closing the transaction, and all other costs incurred in relation to the transaction.
4- MGE is not entitled to a share of the decommissioning funds that WPSC would otherwise return to its ratepayers as described above.
- 5. Within 30 days of the consummation of the sale of KNPP to DEK, WPSC and WP&IL shall file the following information with the Commission:
37
Docket05-EI- 136
- a. Copies of all accounting journal entries recording the sale of KNPP on the books of account of each utility.
- b. Thecalculation of the gain on thesaleof KNPP including the final sales price and net book value of the assets sold at the time of consummation of the sale.
- c. A breakdown ofall transaction costs related to the sale of KNPP.
- d. The final balances in the non-qualified decommissioning funds to be retained by the utilities and returned to the utility ratepayers.
- 6. The Final Decision of December 16,2004, is VACATED, and this order shall take effect one day after the dale of mailing.
- 7. The Commission retains jurisdiction.
Dated at Madison, Wisconsin By the Commission:
cis-tyl. .....
Secretary to the Commission CLZ:DAL:rem:g:\orderzpending\05-EI-136.doc Attachment (Right of First Refusal and Proffered Conditions)
See attached Notice of Appeal Rights 38
Docket 05-EI-136 Notice of Apoeal Rights Notice is hereby given that a person aggrieved by the foregoing decision has the right to file a petition for judicial.review as provided in Wis. Star. § 227.53. The petition must be filed within 30 days after thedate of mailing of this decision. That date is shown.on-the first page. If there is no date on the first page, the date of mailing is shown immediately above the signature line.
The Public Service Commission of Wisconsin must be named as respondent in the petition for judicial review.
Notice is further given that, if the foregoing decision is an order following a proceeding which is a contested case as defined in Wis. Stat. § 227.01(3), a person aggrieved by the order has the further right to file one petition for rehearing as provided in Wis.
Stat. § 227.49. The petition must be filed within 20 days of the date of mailing of this.decision.
If this decision is an order after rehearing, a per*on aggrieved who wishes to appeal must seek judicial review rather than rehearing.
A second petition for rehearing is not an option.
This general notice is for the purpose. of ensuring compliance with Wis. Stat. § 227.48(2), and does not constitute a conclusion or admission that any particular party or person is necessarily aggrieved or that any particular decision or order is final or judicially reviewable.
Revised 9/28/98 39
ATTACHMENT A Docummt No.
RIGHT OF FIRST REFUSAL THIS DOCUMENT IS A RIGHT OF FIRST REFUSAL AND IS NOT A CONVEYANCE suBJEcrTo RETURN AND FEE UNL)ER wIs. STATS.
77.2)(1).
Remm ta John D. Wilson, Esq.
Michael, Best & FridddCh P.O. Box 1806 Madison, WI 53701-1806 Pa-,u Nunmbe RIGHT OF FIRST REFUSAL THIS RIGHT OF FIRST REFUSAL, is granted this - day of . 200_., by DOMINION ENERGY KEWAUNEE, INC. ("Grantor) to WISCONSIN PUBLIC SERVICE CORPORATION ("WPS") and WISCONSIN POWER AND LIGHT COMPANY ("WPL")
(collectively "Grantees").
RECITALS:
WHEREAS Grantor has purchased the Kewaunee Nuclear-Power Plant (the "Fac ') from Grantees pursuant to an order dated from the Public Service: Commission of Wisconsin (PSCW") in Docket 05-EI-136 (the "Order"); and WHEREAS Grantor agreed to a condition in the Order to grant a Right of First Refusal to the Grantees in the event Grantor receives a bona fide offer to purchase the.Facility or Grantor from a thrd party purchaser, and WHEREAS the Facility is tocated on real property in the Town of Carlton, County of
Kewaunee, State of Wisconsin, more particularly described on Exhibit A attached hereto and made a part hereof;.and WHEREAS Grantor desires to grant to Grantees a right .of first refusal (the "Right of First Refusal") on any transfer of ownership of the Facility or Grantor, pursuant to the terms hereof NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
I. Grant of Right of First Refusal. Except as provided in Section 2, Grantor grants to Grantees a Right of First Refusal on any transfer of ownership of the Facility or Grantor to any person or entity during the Option Period (as defined in Section 3) ("Transfer"). Except for Permitted Transfers, if DRIeor any of its respective subsidiaries include the Facility or Grantor in a proposed sale of other assets and/or entities, the sale shall be structured in a manner that will allow a carve out of the Facility or Grantor from the sale so as to allow Grantees the option of exercising their Right of First Refusal,
- 2. Permitte.d T.ransfers:. The Right of First Refusal shall not apply (i) to any transaction involving a substantial portion of the stock or assets of, or a merger involving, Dominion Resources, Inc. ("DRI") or (ii) to a Transfer to an affiliate of Grantor that is directly or indirectly owned and controlled by DRI, provided that notwithstanding anything contained herein to the contrary, any transferee of a Permitted Transfer must petition the PSCW to reopen any final order in PSCW Docket 05-EI-136 for the purpose of obtaining an amended order finding that the transferree has agreed to be bound by all of the conditions preferred by Grantor in PSCW Docket 05-EI-136 as set forth on Exhibit B attached hereto. (collectively, "Permitted Transfers").
- 3. Oiigon Period. The Option Period shall commence as of Closing and continue up to the termination date of the NRC licenses for the Facility, as they may be extended.
- 4. Bona Fide Offer. No Transfer other than a Permitted Transfer may occur during the Option Period except pursuant to a Bona Fide Offer (as described herein), and no such Transfer may occur unless and until Grantor gives Grantees the right to exercise the Right of First Refusal based on such Bona Fide Offer from a third party. Grantor must notify Grantees in writing ifDRI, Grantor or another subsidiary of DRI intends to make a Transfer (other than a Permitted Transfer) pursuant to a Bona Fide Offer. The written notice must include all of the material definitive agreements pursuant to which the Transfer would occur. A Bona Fide Offer must contain in addition to such terms and conditions of the sale to a third party the elements below:
(a) A Bona Fide Offer must be for the purchage of substantially all of the Facility and the related assets or substantially all of the common stock of Grantor.
(b) A Bona Fide Offer is void unless the purchaser intervenes as a party in the PSCW declaratory ruling proceeding required by Section 6 and as a party in that proceeding (i) affirmatively commits to be bound by all of the conditions preferred by Grantor in PSCW Docket
Docket 05-EI-136 as set forth on Exhibit B attached hereto, and; (ii) afflmatively states that it has no objection to PSCW enforcement of the conditions proferred by Grantor in PSCW Docket-05-EI-136 as set forth on Exhibit B attached hereto.
-5. Exercise by-Selr. The Right of First Refusal shall be offered to WPS and WPL in respective proportions of 59% and 41%.current ownership and the Grantees shall have the option to purchase the Facility pursuant to the Bona Fide Offer. If one Grantee determines not to exercise the option, then the other has the right to buy that interest in addition to its own interest.
However, the Right of First Refusal will not be effective unless there is an exercise for substantially all of the Facility and related assets or substantially all of the common stock of Grantor prior to the expiration of the Option Exercise Period set forth in Section 6.
- 6. Option Exercise Period. Each Grantee shall have a sixty-day period after receipt of the written notification and documents pursuant to Section 4 in order to determine whether to exercise its Right of First Refusal. On or before the end of this period, each Grantee shall file with the Public Service Commission of Wisconsin ("PSCW") a request for a declaratory ruling on the reasonableness and prudence of exercising or waiving Grantees' rights under the Right of First Refusal, and shall give written notice thereof to Grantor. If Grantees have filed a request for authority to acquire the Facility and the PSCW has issued an order that has become final granting.
the authority on conditions acceptable to each Grantee in its reasonable discretion, the Grantees shall exercise the option within 5 days of receiving the authority. In idll events, the Option Exercise Period shall expire on the 180th day following the Grantees! receipt of written notice from Grantor of a Bona Fide Offer.
- 7. Closing of Option. Once the Right of First Refusal is exercised, the closing for the Transfer shall occur within sixty (60) days, subject to extension for regulatory approvals.
- 8. Recording. This agreement will be recorded in the title to the Facility in the Kewaunee County Register of Deeds office and run with the land.
- 9. Regulatory Appovals. Any Transfer, including to WPS and WPL, shall be subject to all applicable governmental approvals.
- 10. Successors and Assigns. This Right of First Refusal shall be binding upon, and inure to the benefit o& the parties hereto and their successors and assigns.
[signature page follows]
ý3-
IN WITNESS WHEREOF, Grantees and Grantor have executed this Right of First Refusal as of the date first above written.
DOMINION ENERGY KEWAUNEE, INC.
("Grantor")
Its:
WISCONSIN PUBLIC SERVICE CORPORATION
("Grantee')
By:.
Its:
WISCONSIN POWER AND LIGHT COMPANY
("CGrantee")
By:
ACKNOWLEDGMENT STATE OF_ _
COUNTY OF )
Personally came before me this - day of _ -, , known to me to be the of Dominion Energy Kewaunee, Inc., who executed the above instrument and acknowledged the same.
Name:
Notary Public, State of My Commission:
ACKNOVLEDGMENT STATE OF )
)ss.
COUNTY OF )
Personally came before me this day of________,_.___,_, known to me to be the of Wisconsin Public Service Corporation, whoexecuted the above instrument and acknowledged the same.
Name:
Notary Public, State.of My Commission:
ACKNOWLEDGMENT STATE OF )
)ss.
COUNTY OF )
Personally came before me this __ day of. , ____.,_ , known to me to. be the _ of Wisconsin Power and Light Company, who executed the above instrument and acknowledged the same.
Name:
Notary Public, State of MyCommission:
THIS DOCUMENT WAS DRAFTED BY, AND SHOULD BE RETURNED TO, John D. Wilson, Esq.
Michael Best & Friedrich LLP P.O. Box 1806 Madison, WI 53701-1806
U C
be rz~ U 0
EXHIBIT B PROFFERED CONDITIONS
- 1. Require that DRI notify the Commission of any request made of the U.S. Securities and Exchange Commission ("SEC") to pay dividends from funds other than Dominion Energy Kewaunee's retained earnings;
- 2. Prohibit Dominion Energy Kewaunee from providing loans to any of its holding company affiliates, except through the DRI'money pool that has been approved by the SEC;
- 3. Prohibit Dominion Energy Kewaunee from guaranteeing any debt of DRI or of its holding company affiliates;
- 4. Allow the Commission to approve any subsequent sale of the Kewaunee Nuclear Power Plant ('KNPP'), or of Dominion Energy Kewaunee, for the purpose of determining whether the new owner has sufficient financial resources to operate the plant. A decision by the NRC approving the license transfer would constitute a rebuttable presumption that the new owner is creditworthy;
- 5. Require that Dominion Energy Kewaunee use only an external trust fund as its form of decommissioning financial assurance;
- 6. Require that Dominion Energy Kewaunee continue to use the DECON assumption of immediate decommissioning when estimating the future cost of decommissioning KNPP, as well as the assumption that the site would be restored to greenfield status; and
- 7. Prohibit Dominion Energy Kewaunee from storing any nuclear waste at KNPP that was produced elsewhere.
- 8. Dominion Energy Kewaunee will grant to Grantees and their successors and assigns a right of first refusal to purchase KNPP in the form to which this Exhibit B is appended (the
'"ROFRM).
- 9. Upon final completion of all decommissioning activities at KNPP, Dominion Energy Kewaunee shall return to Grantees, their successors or assigns, for distribution to their customers, any and all excess ratepayer fuids contained in Dominion Energy Kewaunee's Qualified Decommissioning Trust Fund for KNPP. Any excess fRmds shall be returned to Grantees in proportion to their ownership share on the day of the sale of KNPP to Dominion Energy Kewaunee.
- 10. Dominion Energy Kewaunee's parent company, Dominion Resources, Inc., will increase the total level of its guaranties attached to the Power Purchase Agreements from $31 million to *
- 11. Require any subsequent purchaser of KNPP or Dominion Energy Kewaunee (other than the transfer pursuant to a Permitted Transfer) to intervene as a party in any Public Service Commission of Wisconsin proceeding initiated pursuant to Proffered Condition No. 4 or paragraph
paragraph 6 of the ROFR and affirmatively commit on the record of such proceeding to be bound by the same conditions set forth in this Exhibit B. The transferce of a Permitted Transfer under § 2(ii)of the ROFR will file with the PSCW a document affirmatively committing-to be bound by the same conditions set forth in this Exhibit B.
- 12. Dominion Energy Kewaunee and all subsequent purchasers will decommission the KNFP site in accordance with § 7.17 of the: Asset Sale Agreement (and associated definitions) dated November 7,2003 by and between Dominion Energy Kewaunee and Grantees ("ASA") and subsequent purchasers shall contractually bind themselves to the Grantees to decommission the KNPP site in a manner consistent with § 7.17 (and associated definitions) of the ASA.
Attachment 4 Amended and Restated Dominion Energy Kewaunee, Inc. Non-Qualified Nuclear Decommissioning Trust Agreement Kewaunee Power Station Dominion Energy Kewaunee, Inc.
AMENDED AND RESTATED DOMINION ENERGY KEWAUNEE, INC.,
NON-QUALIFIED NUCLEAR DECOMMISSIONING TRUST AGREEMENT
AMENDED AND RESTATED DOMINION ENERGY KEWAUNEE, INC.,
NON-QUALIFIED NUCLEAR DECOMMISSIONING TRUST AGREEMENT This AMENDED AND RESTATED TRUST AGREEMENT ("Agreement") is made the 1st day of January 2013, between DOMINION ENERGY KEWAUNEE, INC., a Wisconsin corporation, the Grantor, and THE NORTHERN TRUST COMPANY, an Illinois corporation of Chicago, Illinois, the Trustee.
WHEREAS, the Grantor owns a 100 percent interest in the Kewaunee Power Station, a nuclear generating station located in the Town of Carlton, Kewaunee County, Wisconsin.
WHEREAS, the Grantor wishes to establish pursuant to this Agreement and under the laws of the State of Illinois, a separate trust fund under this Agreement which does not qualify as a Nuclear Decommissioning Reserve Fund under Section 468A of the Internal Revenue Code of 1986, as amended.
WHEREAS, the execution and delivery of this Agreement have been duly authorized by each of the Grantor and the Trustee and all things necessary to make this Agreement a valid and binding agreement by each of the Grantor and the Trustee have been done.
NOW, THEREFORE, the Grantor and the Trustee agree as follows:
ARTICLE 1 GENERAL PROVISIONS 1.01 Name of Trust.
The separate trust may be referred to under the name DOMINION ENERGY KEWAUNEE, INC., NON-QUALIFIED NUCLEAR DECOMMISSIONING TRUST (referred to herein as the "Trust" or the "Trust Fund"). The Trust Fund is the entire undistributed amount of all contributions and/or transferred assets placed with the Trustee, as adjusted for all income, expense, gain, or loss on such amount as may exist from time to time.
1.02 Grantor, Trustee.
The Grantor of this Trust is Dominion Energy Kewaunee, Inc., and its successors and assigns as provided in Section 5.03 of this Agreement. The Trustee under this Agreement is Northern Trust Company, its successors and assigns, or any other person, company, bank, or trust company appointed as provided in Section 2.01 of this Agreement.
1.03 Trust Committee.
The Grantor may establish a Nuclear Decommissioning Trust Committee (the "Committee")
composed of any three or more persons appointed by the Grantor's Board of Directors on whatever terms the Board desires. The Committee has the authority to exercise all of the Grantor's powers under this Agreement, and for purposes of Sections 2.03(c) and (d) and Section 3.05(g), the Trustee will be protected in treating the directions and other actions of the Committee as the directions or actions of the Grantor. The Grantor must certify to the Trustee all appointments to or removals from the Committee, and the Trustee must recognize written I
instructions signed by any Committee member, or its designee, as a directive from the Committee.
ARTICLE 2 TRUSTEE APPOINTMENT, REMOVAL, LIABILITY 2.01 Appointment, Removal, Successors.
(a) The Grantor may appoint a successor Trustee by written notice to the person appointed and to the Trustee then serving. A Trustee may resign on thirty days' notice in writing to the Grantor. The Grantor may remove any Trustee by thirty days' written notice to the Trustee. Notwithstanding the foregoing, no removal or resignation shall take effect until (1) a successor Trustee has been appointed and accepted appointment as Trustee, and (2) notice of the change in Trustee has been provided to the Nuclear Regulatory Commission in accordance with section 5.01(c) of this Agreement. If a successor Trustee has not been appointed and accepted appointment within sixty (60) days of the Grantor's receipt of notice of resignation of the Trustee or the Trustee's receipt of notice of removal, such Trustee may petition a court of competent jurisdiction to appoint a successor Trustee to serve until such time, if ever, as a successor Trustee shall have been appointed by the Grantor and accepted such appointment. Each successor Trustee shall have the same powers and duties as the Trustee named herein.
(b) A successor Trustee may accept appointment and qualify as Trustee by executing, acknowledging, and delivering to the Grantor its acceptance in a form satisfactory to the Grantor.
The successor Trustee, without further act, deed, or conveyance, is vested with all the estate, rights, powers, and discretion of the predecessor Trustee just as if originally named as a Trustee in this Agreement.
(c) When a successor Trustee accepts appointment, the predecessor Trustee (or representative, if the predecessor Trustee is unable or unavailable) will assign, transfer title, and pay over to the successor Trustee the funds and properties then constituting the Trust Fund. The predecessor Trustee (or representative) is authorized, however, to reserve a sum of money deemed advisable for payment of fees and expenses accrued to date or expected to be incurred in connection with the transfer and settlement of the Trust Fund (all subject to the limitation in Section 5.04 of this Agreement), and any balance of that reserve remaining after the payment of fees and expenses will be paid over to the successor Trustee.
(d) The Trustee may adopt or amend bylaws and regulations that the Trustee deems desirable for the conduct of Trustee affairs.
(e) The Trustee will keep a record of all Trustee proceedings and acts and all other data necessary for the proper administration of the Trust. To the extent required in the provisions of this Agreement set forth below, the Trustee will notify the Grantor and any specified interested party of any Trustee action taken.
2.02 Establishment and Acceptance of Trust.
(a) All contributions to the Trust Fund must be made in cash.
2
(b) At the time it makes any contribution to the Trust Fund, the Grantor will specify in writing then delivered to the Trustee the exact amount that is to be placed in the Trust Fund then existing. The Trustee shall not accept contributions from anyone other than the Grantor without the Grantor's written approval for each such contribution, which written approval must accompany the contribution. The Trustee has no right or duty to inquire into the amount of or the method used in determining any contribution to the Trust Fund. The Trustee is accountable only for funds actually received. The Trustee has no duty to compute or collect the amount to be paid to it by the Grantor.
(c) All contributions and/or transferred assets and income therefrom will be held in trust and administered according to the terms of this Agreement.
(d) No part of the Trust Fund may be used for or diverted to purposes other than the exclusive purposes allowed by this Agreement, as described in Sections 4.02, 5.04, 5.05 and 6.01 of this Agreement.
2.03 Limitation of Liability.
(a) To the extent permitted by law, the Trustee will serve without bond; the Trustee will secure and pay for required bonds. At its own expense, the Grantor is entitled to employ its own counsel to defend or maintain, either in its own name or in the name of any Trustee, with said Trustee's approval, any suit or litigation arising under this Agreement involving the Trustee.
(b) In the event that THE NORTHERN TRUST COMPANY incurs any liability, loss, claim, suit or expense (including attorneys fees) in connection with or arising out of its provision of services under this agreement, or its status as trustee hereunder, under circumstances where THE NORTHERN TRUST COMPANY cannot obtain or would be precluded by law from obtaining payment or reimbursement of such liability, loss, claim, suit or expense (including attorneys fees) from the Trust Fund, then the Grantor (which has the authority to do so under the laws of the state of its incorporation) shall indemnify and hold THE NORTHERN TRUST COMPANY harmless from and against such liability, loss, claim, suit or expense, except to the extent such liability, loss, claim, suit or expense arises from (i) a breach by the Trustee of the terms of this agreement (provided, however, that this exception shall not apply to the extent that such breach arises under section 3.06 of the Agreement as a result of the Trustee acting in good faith and in accordance with the direction, instruction or notice of the Grantor or an investment adviser) or (ii) the Trustee's negligence or willful misconduct in the performance of its specifically allocated duties under this agreement. Notwithstanding the foregoing, THE NORTHERN TRUST COMPANY shall not be indemnified for any loss, liability, claim, suit or expense to the extent the Trustee participated knowingly in, or knowingly undertook to conceal, an act or omission of any person or entity constituting a breach of such person or entity's fiduciary responsibility hereunder, knowing such act or omission was a breach; provided however, that the Trustee shall not be deemed to have done so by merely complying with directions of an Investment Adviser or by its failure to act in the absence of such direction or by reason of maintaining accounting records or solely as a result of the normal information received by the Trustee or its officers, employees, or agents in the normal course of performing any custodial, reporting, recording and bookkeeping functions with respect to any assets of the Trust 3
Fund managed by an Investment Manager or the Grantor. This paragraph shall survive the termination of this agreement.
(c) THE NORTHERN TRUST COMPANY (which has the authority to do so under the laws of the state of its incorporation) agrees to defend, indemnify and hold harmless the Grantor, the Trust and its fiduciaries, and the then present and former officers, employees, and directors of the Grantor from and against any and all liability, loss, claim, suit or expense (including attorneys' fees), which arises from (i) a breach by the NORTHERN TRUST COMPANY of the terms of this agreement or (ii) the Trustee's own negligence or willful misconduct in the performance of its duties and responsibilities specifically allocated to it herein.
This paragraph shall survive the termination of this Agreement.
(d) Notwithstanding the foregoing subparagraphs (b) and (c), neither the Company nor the Trustee shall be responsible for consequential or special damages under such subparagraphs.
(e) The Trustee shall not be responsible for any losses resulting from the deposit or maintenance of securities or other property (in accordance with market practice, custom, or regulation) with any recognized foreign clearing facility, book-entry system, centralized custodial depository, or similar organization. The Trustee shall not be responsible or liable for any losses or damages suffered by the Trust Fund arising as a result of the insolvency of any custodian, subtrustee or subcustodian, except to the extent the loss or damage was due to the Trustee's failure to prudently select or periodically monitor a custodian, subtrustee or subcustodian. Settlements of transactions may be effected in trading and processing practices customary in the jurisdiction or market where the transaction occurs. The Grantor acknowledges that this may, in certain circumstances, require the delivery of cash or securities (or other property) without the concurrent receipt of securities (or other property) or cash and, in such circumstances, the Grantor shall have sole responsibility for nonreceipt of payment (or late payment) by the counterparty.
2.04 Discharge after Distributions or Termination.
After all distributions (including distributions to a successor Trustee) or any termination under this Agreement or applicable law, the Trustee is discharged from all obligations under this Agreement, and no person or entity has any further right or claim against the Trustee not otherwise provided by statute.
2.05 Legal Action.
In all legal actions regarding the Trust and this Agreement, the Trustee and the Grantor are the only necessary parties. A final judgment not appealed or appealable entered in an action or proceeding against the Grantor, the Trust, or the Trustee is binding and conclusive on the parties to this Agreement and all persons having or claiming to have any interest in the Trust Fund.
4
ARTICLE 3 INVESTMENT DUTIES, POWERS 3.01 Investment Policy and Limitations.
Certain limitations are placed on investing in and disposing of some securities by the Nuclear Regulatory Commission and to minimize potential problems with securities regulations. The Grantor, and to the extent that they have been allocated investment responsibility, the Trustee and any investment advisor appointed by the Grantor shall adhere to the standard of care that a "prudent investor" would use in the same circumstances, such term having the same meaning as the standard set forth in 18 CFR 35.32(a)(3) of the FERC regulations, or any successor regulation.
The Grantor shall be responsible for formulation of the investment policy for the Trust. To the extent that investment responsibility is allocated to the Trustee or investment advisors, the Grantor shall provide written investment guidelines to each entity to which investment responsibility has been allocated, consistent with such investment policy.
3.02 Investment of Trust Fund.
The assets of the Trust Fund may be commingled for investment purposes as the Grantor directs.
The Trustee shall apportion any earnings or losses from an investment made with commingled assets to the Trust Fund and the other commingled fund or funds in the same proportion that the amount invested from the Trust Fund, or any other commingled fund, bears to the total commingled amount invested. Subject to the provisions of Section 3.05 of this Agreement, the Trustee will invest and reinvest the principal and income of the Trust Fund and keep those trust assets invested, without distinction between principal and income. If assets of two or more funds are commingled for investment purposes, the Grantor shall have the absolute authority to direct the Trustee at any time to liquidate the interests of the Trust Fund in a commingled investment, and the Trustee shall promptly comply with any such directive. The commingling arrangement undertaken as permitted in this Section 3.02 can be terminated at any time by the Trust Fund or any commingled fund. No fund in the commingling arrangement may substitute for itself in the arrangement any person that is not a member to the commingling arrangement.
Trust investments may include, but shall not be limited to the following:
(a) Publicly traded domestic or foreign common and preferred stocks and options thereon, as well as warrants, rights and preferred stocks convertible into common stock, regardless of where or how traded.
(b) Investment grade domestic corporate bonds and debentures and any such securities which are convertible into common stock, domestic or foreign.
(c) Bonds or other obligations of the United States of America or non-U.S. sovereign debt with an equivalent rating of A or higher.
(d) Investment grade obligations of the states and of municipalities or of any agencies thereof.
5
(e) Investment grade notes of any nature, of foreign or domestic issuers.
(f) Savings accounts, certificates of deposit and other types of time deposits, bearing a reasonable rate of interest based upon the duration, amount, type and geographical area, with any financial institution or quasi-financial institution or any department of the same, either domestic or foreign, under the supervision of the United States or any State, including any such financial institution owned, operated or maintained by the Trustee in its corporate or association capacity (including any department or division of the same) or a corporation or association affiliated with the same.
(g) Any collective, common or pooled trust fund operated or maintained exclusively for the commingling and collective investment of monies or other assets including any such fund operated or maintained by the Trustee or its affiliate. Notwithstanding the provisions of this Agreement which place restrictions upon the actions of the Trustee, to the extent monies or other assets are utilized to acquire units of any collective trust, the terms of the collective trust indenture shall solely govern the investment duties, responsibilities and powers of the trustee of such collective trust and, to the extent required by law, such terms, responsibilities and powers shall be incorporated herein by reference and shall be part of this Agreement. For purposes of valuation, the value of the interest maintained by the Trust Fund in such collective trust shall be the fair market value of the collective fund units held, determined in accordance with generally recognized valuation procedures. The Grantor expressly understands and agrees that any such collective fund may provide for the lending of its securities by the collective fund trustee and that such collective fund's trustee will receive compensation from such collective fund for the lending of securities that is separate from any compensation of the Trustee hereunder, or any compensation of the collective fund trustee for the management of such collective fund.
(h) Open-end and closed-end investment companies (including those for which the Trustee or an affiliate provides services for a fee) regardless of the purposes for which such fund or funds were created, and any partnership, limited or unlimited, joint venture and other forms of joint enterprise created for any lawful purposes otherwise consistent with the investment guidelines set forth herein.
(i) Subject to the limitations of Sections 3.01 and 3.03, any other investments not described above as directed by the Grantor.
(j) The Trustee may lend the assets of the Trust Fund in accordance with the terms and conditions of a separate securities lending agreement, may settle transactions in futures and/or options contracts, short-selling programs, foreign exchange or foreign exchange contracts, swaps and other derivative investments with third parties.
3.03 Prohibited Investments.
The assets of the Trust Fund are prohibited from being invested in:
(a) securities or other obligations of Dominion Energy Kewaunee, Inc. or its affiliates, subsidiaries, successors or assigns; 6
(b) securities or other obligations of any other owner or operator of any nuclear power reactor, or the affiliates, subsidiaries, successors or assigns of such owner or operator; (c) a mutual fund in which at least 50 percent of the fund is invested in the securities of one or more companies that own or operate a foreign or domestic nuclear power plant, or are parents, subsidiaries or affiliates of such a company (herein, "nuclear sector mutual fund"); or (d) direct interests in real estate.
Provided, however, that the foregoing (i) shall not prohibit the Trust Fund from being invested in securities tied to market indices or other non-nuclear sector collective, commingled, or mutual funds; (ii) shall not require the sale or transfer either in whole or in part, or other disposition of any such prohibited investment that was made before December 24, 2002; and (iii) shall not prohibit less than 10 percent of the Trust Fund assets being indirectly invested in securities of any entity owning or operating one or more nuclear power plants.
3.04 Additional Powers of Trustee.
The Trustee has the following powers and authority in the administration and investment of the Trust Fund, to be exercised subject to the other provisions of this Agreement and especially this Article 3:
(a) To purchase, subscribe for, and hold securities or other property authorized by Sections 3.01 and 3.02 as a proper investment for the Trust Fund, and to retain the same in trust.
(b) To sell for cash or credit, exchange, convey, transfer, or otherwise dispose of any securities or other property held in the Trust Fund, by private contract or at public auction. No person dealing with the Trustee is bound to see to the application of the purchase money or to inquire into the validity, expediency, or propriety of any sale or other disposition.
(c) To vote any stocks, bonds, or other securities; to give general or special proxies or powers of attorney with or without power of substitution; to exercise any conversion privileges, subscription rights, or other options, and to make any incidental payments; to oppose, consent to, or otherwise participate in corporate reorganizations or other changes affecting corporate securities, and (unless prohibited by statute) to delegate discretionary powers, and to pay any related assessments or charges; and generally to exercise any ownership powers over stocks, bonds, securities, or other property held as part of the Trust Fund.
(d) To keep part of the Trust Fund in cash or cash balances invested in interest-bearing accounts if the Trustee deems that to be prudent under the circumstances.
(e) To accept and retain for as long as the Trustee deems advisable any securities or other property received or acquired by the Trustee, regardless of any lack of diversification.
(f) To make, execute, acknowledge, and deliver documents of transfer and conveyance and other instruments that may be necessary or appropriate to carry out the Trustee's powers.
7
(g) To settle, compromise, or submit to arbitration any claims, debts, or damages due or owing to or from the Trust Fund, to commence or defend legal or administrative proceedings, and to represent the Trust in all legal or administrative proceedings.
(h) To employ suitable subcustodians, agents and counsel (who may be counsel of the Grantor) and to pay their reasonable expenses and compensation. The Trustee may consult with legal counsel approved by the Grantor, which approval shall not be unreasonably withheld, who may also be counsel for the Grantor, with respect to its responsibilities under this agreement and shall be entitled to rely upon the written advice of such legal counsel.
(i) On direction by the Grantor as to the agent and insurance company, to invest in insurance contracts payable to the Trustee or its assignees as beneficiary.
(j) To purchase, enter, sell, hold, and generally deal in any manner in and with contracts for the immediate or future delivery of financial instruments of any issuer or of any other property, foreign exchange and foreign exchange contracts, to grant, purchase, sell, exercise, permit to expire, permit to be held in escrow, and otherwise to acquire, dispose of, hold and generally deal in any manner with and in all forms of options in any combination.
(k) To enter into contracts with one or more persons, firms, associations, or corporations to obtain advice and counsel about investments.
(1) To enter into arrangements for the deposit of funds with banks or trust companies and in connection with the arrangements:
(1) To authorize the depositary to act as custodian of the cash, securities, or other property comprising the funds; (2) To authorize the depositary to convert the funds in whole or in part into, or to invest and reinvest the same in, securities of any kind and nature permitted in this Agreement; and (3) To provide for the payment to the depositary of reasonable compensation for its services.
(m) To cause any securities or other property held as part of the Trust Fund to be registered in its own name or in the name of one or more of its nominees, and to hold any investments in bearer form, but the books and records of the Trustee must at all times show that the investments are part of the Trust Fund and subject to the jurisdiction of the United States, and to hold the property in safekeeping facilities of the Trustee or of other Trustee banks or clearing corporations, in the United States or elsewhere.
(n) To participate in any mergers or consolidations, or any registrations of securities with state or federal authorities regarding any securities held.
(o) To exercise any and all discretionary powers not explicitly or implicitly conferred by this Agreement which the Trustee may deem reasonably necessary and proper to carry out 8
instructions given to the Trustee hereunder and which powers are not in contravention of the terms of this Agreement and applicable law.
(p) To perform any actions in furtherance of its safekeeping duties and obligations under this Agreement in accordance with the standard of care applicable to a prudent, professional custodian for hire acting with the care, skill, prudence, and diligence under the circumstances then prevailing which financial institutions, acting in a like capacity and familiar with such matter, would use, including performing actions to avoid any loss of securities of the Trust in the Trustee's custody under this agreement, including but not limited to loss due to burglary, robbery, hold-up, theft or mysterious disappearance, damage or destruction.
(q) To do all acts, take all proceedings, and exercise all rights and privileges although not specifically mentioned here, as the Trustee deems necessary to administer the Trust Fund and to carry out the purposes of this Agreement.
3.05 Allocation of Investment Responsibility.
(a) Except to the extent that it has allocated investment responsibility to the Trustee or one or more investment advisors, the Grantor shall have investment responsibility for all assets of the Trust and in carrying out such responsibility may direct the investments of the Trust in investments of any kind, including but not limited to, private equity, indirect interests in real estate, and non-investment grade bonds, subject to the limitations contained in this Agreement.
Directed investments under this Section 3.05 may not exceed the total of the Trust Fund.
(b) The Grantor shall have the right, by written notice to the Trustee, to appoint and remove one or more investment advisors and to direct the Trustee to segregate any part or all of the Trust assets into one or more accounts, each of which shall be designated as an "Investment Advisor Account." The Trustee may assume that any Investment Advisor Account previously established and the prior appointment of an investment advisor for that account continues in full force and effect until receipt of written notice to the contrary from the Grantor. The Grantor may also, subject to the written consent of the Trustee, allocate investment responsibility for a designated portion of the Trust assets, which assets shall be segregated into an account known as the Trustee Managed Account. The Grantor shall furnish the Trustee with written investment guidelines, consistent with the terms of this Agreement, for the management of the assets contained in the Trustee Managed Account.
(c) The Grantor, with respect to any Trust assets not held in an Investment Advisor Account or Trustee Managed Account, and each investment advisor, with respect to its designated Investment Advisor Account, shall have all of the investment powers contained in this Agreement, subject to the applicable limitations set forth in the Agreement and, in the case of each investment advisor, such investment guidelines as the Grantor may provide to such investment advisor. The Trustee is not responsible for the selection, ternms of appointment, compensation or conduct of any investment manager, broker, salesman, or agent selected by the Grantor, shall follow the directions of the Grantor with respect to Trust assets for which the Grantor has investment responsibility and shall follow the directions of any designated investment advisor, and shall have no responsibility for reviewing or determining whether any investment directed or carried out by the Grantor or a designated investment advisor is consistent 9
with the investment limitations set forth in this Agreement or contained in the investment guidelines for such investment advisor.
(d) Subject to such investment guidelines as may be furnished to it from time to time by the Grantor, the Trustee is free to proceed without the concurrence or affirmative expression of the Grantor to handle, manage, control, invest, and reinvest the Trust Fund assets that are allocated to the Trustee Managed Account under the powers granted in this Agreement with the same force and effect as if this section were not a part of this Agreement.
(e) No person dealing with the Trustee is required to determine whether any sale or purchase by the Trustee has been authorized or directed by the Grantor, and each is fully protected in dealing with the Trustee in the same manner as if this section were not a part of this Agreement.
(f) Whenever the Trustee is directed to purchase or sell assets in the Trust Fund, the Trustee in its sole discretion is permitted at the expense of the Trust to obtain an appraisal of the value of the assets to be purchased or sold.
(g) To the extent that the Trustee has been allocated investment responsibility hereunder, then with respect to the assets held in the Trustee Managed Account, the powers granted the Trustee under Sections 3.02 and 3.04 of this Agreement will be exercised in the discretion of the Trustee. Neither the Trustee nor any other person is under a duty to question the Grantor's direction, and the Trustee will comply as promptly as practicable with such direction if it is consistent with the terms of this Agreement. The Trustee shall not be liable for the acts or omissions of any subcustodian appointed under Section 3.04(h) at the direction of the Grantor or an investment advisor including, but not limited to, any broker-dealer or other entity designated by the Grantor or an investment advisor to hold any property of the Trust Fund as collateral or otherwise pursuant to investment strategy.
ARTICLE 4 OTHER DUTIES OF TRUSTEE 4.01 Notice Regarding Disbursements or Payments.
Except for (i) payments of ordinary administrative costs (including taxes) and other incidental expenses of the Trust Fund (including legal, accounting, actuarial, and trustee expenses) in connection with the operation of the Trust Fund, which includes investment management fees; (ii) withdrawals being made under 10 CFR 50.82(a)(8); and (iii) amounts transferred to a qualified trust established for Kewaunee Power Station pursuant to an agreement with terms substantially similar to this Agreement, no disbursement or payment may be made from the trust until written notice of the intention to make a disbursement or payment has been given to the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, at least 30 working days before the date of the intended disbursement or payment. The disbursement or payment from the trust may be made following the 30-working day notice period if no written notice of objection from the Director, Office of Nuclear Reactor Regulation, or the Director, Office of Nuclear Material Safety and Safeguards, as applicable, is received by the Trustee or the Grantor within the notice period. The required notice may be made by the Trustee, or may be made on the Trustee's behalf, in which case 10
evidence of such notice being made shall be provided to Trustee. No such notice is required for withdrawals being made pursuant to 10 CFR 50.82(a)(8)(ii), including withdrawals made during the operating life of the plant to be used for decommissioning planning. In addition, no such notice is required to be made to the NRC after decommissioning has begun and withdrawals are being made under 10 CFR 50.82(a)(8).
4.02 Use of Trust Funds.
Until decommissioning has been completed, the Trust Fund, including any disbursements or payments from the Trust Fund, must be used only as authorized by the regulations of the NRC including 10 CFR 50.75(h) & 50.80(a), such as:
(a) to satisfy, in whole or part, the liability of Grantor for decommissioning costs of the nuclear power plant to which the Trust Fund relates; (b) to pay ordinary administrative costs (including taxes) and other incidental expenses of the Trust Fund (including legal, accounting, actuarial, and trustee expenses) in connection with the operation of the Trust Fund, which includes investment management fees; (c) to be transferred to a non-Non-Qualified trust established for Kewaunee Power Station pursuant to an agreement with terms substantially similar to this Agreement, or to another financial assurance method acceptable under 10 CFR 50.75(e) of the NRC's regulations; or (d) to make investments, to the extent that the assets are not currently required for another purpose permitted under this section.
4.03 Payments from the Trust Fund.
Subject to the foregoing provisions of this Article 4, on the written direction of the Grantor, the Trustee will make payments and transfers from the Trust Fund to the persons or entities, in the manner, in the amounts, and for the purposes specified in the written directions. After payment, the amount paid is no longer a part of the Trust Fund. Each Grantor direction will include a representation by the Grantor that the payment is in accordance with the purposes of this Agreement including but not limited to the provisions of this Article 4. The Trustee is not responsible for the application of the payments or for the adequacy of the Trust Fund after payment to meet and discharge Trust liabilities.
4.04 Payment of Compensation, Expenses, and Taxes.
(a) The Trustee will be paid reasonable compensation as agreed upon from time to time in writing by the Grantor and the Trustee. In addition, the Trustee will be reimbursed from the Trust Fund or, at the option of the Grantor, by the Grantor for all ordinary and necessary expenses incurred in connection with the operation of the Trust, including federal income tax imposed on the modified gross income of the Trust, any state or local tax imposed on the income or assets of the Trust, legal expenses, accounting expenses, actuarial expenses, investment manager fees and trustee compensation and expenses. All taxes levied or assessed on or in respect of the Trust Fund, whether assessed to the Trust Fund or the Grantor, will be paid, at the II
option of the Grantor, by the Grantor, or from the Trust Fund and prorated among the Trust Fund and other funds in proportion to their respective fair-market values at the preceding calendar year end in the case of property taxes and in proportion to their respective taxable incomes for the relevant taxable year in the case of income taxes. To the extent that any taxes are provoked by the investment in or receipt of an identifiable asset or transaction involving the Trust Fund or other particular fund, the taxes will be charged against the Trust Fund or other appropriate fund, giving appropriate effect to computations of income and deductions related to the asset or transaction, and allocating any exemption available to the Trust Fund in proportion to the tax liability provoked. Identifiable direct expenses will be treated in the same way as taxes.
(b) The Trustee will prepare and file tax returns for the Trust Fund as directed by the Grantor, provided that the Grantor shall indemnify the Trustee for any penalties, additions to tax, or other amounts for which it may be charged or may incur in connection with such preparation and filing, including but not limited to that due to a position taken on such returns. The Trustee may assume that any taxes assessed on or with respect to the Trust Fund are lawfully assessed unless the Grantor advises the Trustee in writing that in the opinion of counsel for the Grantor the taxes are or may be unlawfully assessed. When so advised and requested in writing by the Grantor, the Trustee will contest the validity or the taxes in any manner deemed appropriate by the Grantor or its counsel) in which event the Trustee will execute all documents, instruments claims, and petitions necessary or advisable in the opinion of the Grantor or its counsel for the refund, abatement) reduction or elimination of taxes. Reasonable expenses incurred by the Trustee in connection with such a contest will be reimbursed as provided in paragraph (a) of this section.
(c) The Trust Fund is a "grantor trust" under Subpart E of Part I of subchapter J of the Internal Revenue Code of 1986, as amended. The Trustee will prepare and timely deliver to the Grantor such information as shall be necessary for the Grantor to file timely tax returns reporting all items of income, deduction, gains or loss in respect of the Trust Fund.
4.05 Accounting.
(a) The Trustee will keep accurate and detailed accounts of all investments, receipts, disbursements, and other transactions for the Trust Fund. All accounts, books, tax returns, and records relating to the Trust are open to inspection and audit at all reasonable times by any person designated by the Grantor and at the expense of the Grantor.
(b) An account of the Trustee may be approved by the Grantor by written notice delivered to the Trustee or by failure to object to the account by written notice delivered to the Trustee within one hundred twenty (120) days of the completion of the Plan's annual audit by the Grantor or its appointed auditor. The approval of an account shall constitute a full and complete discharge to the Trustee as to all matters that are set forth in that account as if the account had been settled by a court of competent jurisdiction in an action or proceeding to which the Trustee, and the Grantor were parties. In no event shall the Trustee be precluded from having its accounts settled by a judicial proceeding.
(c) Except as specifically provided by statute, no person other than the Grantor may require an accounting or bring an action against the Trustee about the Trust or the actions of the 12
Trustee. The Trustee is not required to make reports to any courts or administrative agencies, except as specifically directed by Grantor or as otherwise required by applicable law.
4.06 Valuation.
(a) As of each calendar year end, the Trustee will determine the fair-market value of the Trust Fund, and report that value to the Grantor in writing. The valuation determined according to this section is binding on the Grantor, and all other persons interested in the Trust.
(b) Non-cash contributions are valued at fair-market value determined by the Trustee as of the actual date on which the Trustee accepts the property.
(c) In determining the net worth of the Trust Fund, the Trustee will deduct all allocable expenses.
ARTICLE 5 AMENDMENT AND TERMINATION OF THE TRUST 5.01 Amendment of the Trust.
The Grantor has the right at any time to amend this Agreement in whole or in part, but (a) No amendment may be made that changes the Trustee's duties or liabilities without the Trustee's written consent, such consent being evidenced by Trustee's written agreement to such amendment; (b) This Agreement may not be amended in any material respect, including change in Trustee, without written notification to the Director, Office of Nuclear Reactor Regulation (Director, NRR) having been given at least 30 working days before the proposed effective date of the amendment, such notice having provided the text of the proposed amendment and a statement of the reason for the proposed amendment, and without the notice period having expired with no notice of objection having been received from the Director, NRR.
An amendment may be made retroactively if such application is necessary to bring the Trust or the Grantor into conformity with any other applicable statute or regulation.
5.02 Irrevocability of Trust Fund.
Except as otherwise provided by law, the Trust Fund terminates upon completion of its nuclear power plant decommissioning that it has been created to fund as certified to the Trustee by the Grantor, or upon the frustration or failure of the Trust Fund's purposes. Upon termination of the Trust Fund, any of the Trust Fund that remains shall revert to the Grantor free of trust.
5.03 Merger, Consolidation, or Succession.
(a) A corporation with which the Grantor is merged or a corporation or other legal entity which acquires substantially all the assets of the Grantor, shall become the Grantor for purposes of this Agreement, and every reference in this Agreement to the Grantor will be treated as a reference to that surviving or purchasing corporation or other legal entity.
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(b) If the Grantor is liquidated, merged, or consolidated with another company or other legal entity and the Grantor's successor chooses not to discharge the Grantor's duties under this Agreement, the Trust nevertheless will survive and the Trust Fund will continue in trust under the terms of this Agreement. In such a case, the Trustee may, but shall not be required to, petition a court of competent jurisdiction seeking the appointment of a party to succeed to the responsibilities of the Grantor. In seeking such an order, the Trustee shall be held harmless and indemnified by the Grantor or its successor. Any expenses incurred by the Trustee in seeking said court order shall be the responsibility of the Grantor or its successor until paid.
(c) The merger or consolidation of the Trust with, or a transfer of assets or liabilities from this Trust to another trust or fund is not permitted unless the Trustee has received an opinion of counsel satisfactory to the Trustee to the effect that the merger, consolidation, or transfer results in no diversion or use of assets that is not permitted by this Agreement.
5.04 Impossibility of Diversion.
Until the Trust Fund terminates, assets of the Trust Fund may not be used for or diverted to purposes other than the purposes permitted by this Agreement.
ARTICLE 6 MISCELLANEOUS PROVISIONS 6.01 Construction.
The Grantor's intent and purpose in creating the trusts hereunder and executing this Agreement is to maintain a Nuclear Decommissioning Trust Fund to provide for the costs of decommissioning the Grantor's nuclear power plants. All questions arising in the administration of the Trust and in the construction of this Agreement will be resolved accordingly. This Agreement will be construed, enforced, and administered in accordance with the laws of the State of Illinois, except to the extent that the laws of the United States of America take precedence, in which event, this Agreement will be construed in accordance with the laws of the United States of America. The headings and subheadings in this Agreement have been inserted for convenience only and are to be ignored in construction of the provisions.
6.02 Rights under the Trust.
No person other than the Grantor has any vested rights under the Trust except to the extent that rights may accrue under other agreements made by the Trustee. Except as permitted by law, no assignment of any rights or benefits under the Trust is permitted or recognized, nor will any rights or benefits be subject to attachment or other legal or equitable process or subject to the jurisdiction of any bankruptcy court.
6.03 Frustrated Actions.
If it becomes impossible for the Grantor or the Trustee to perform an act, then that act will be performed which, in the discretion of the Trustee, most nearly carries out the intent and purpose of this Agreement.
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6.04 Construction of Direction.
Whenever the Grantor or Trustee is directed to take an action upon the occurrence of an event, neither is under obligation to take that action until it has received proper and satisfactory written notice of the occurrence.
6.05 Authorizations and Communication.
A written authorization or communication from an officer of the Grantor or the Trustee that an event has occurred constitutes conclusive evidence of the occurrence, and the Grantor or Trustee is fully protected and discharged from all liability in accepting and relying upon that authorization or communication.
6.06 Genuine Notice; Direction.
The Grantor or the Trustee will not incur liability to any persons or party when acting on a notice, request, consent, direction, instruction, letter, telegram, or other paper or document that it believes to be genuine, and to have been signed or sent by the proper person.
6.07 Binding Nature.
This Agreement is binding upon the heirs, executors, administrators, successors, and assigns of all parties, present and future.
6.08 Settlement of Transactions and Collateral.
The Trustee may take all action necessary to pay for, and settle, authorized transactions, including disbursements or expenses, or the purchase or sale of foreign exchange, or of contracts for foreign exchange, and including exercising the power to borrow or raise monies from the Trustee in its corporate capacity or an affiliate. To secure expenses and advances made to settle or pay for authorized transactions, including payment for securities and disbursements, the Grantor grants to the Trustee a first priority security interest in the Trust Fund, all property therein, all income, substitutions and proceeds, whether now owned or hereafter acquired (the "Collateral"); provided that the Grantor does not grant the Trustee a security interest in any securities issued by an affiliate of the Trustee (as defined in Section 23A of the Federal Reserve Act). The parties intend that as the securities intermediary with respect to the Collateral, the Trustee's security interest shall automatically be perfected when it attaches. To the extent the Trustee advances funds to the Trust Fund for disbursements or to effect the settlement of purchase transactions, the Trustee shall be entitled to collect from the Trust Fund reasonable charges established under the Trustee's standard overdraft terms, conditions and procedures.
6.09 Force Maieure.
Neither party shall be responsible for any delay in performance, or non-performance, of any obligation hereunder to the extent that the same is due to forces beyond its reasonable control, including but not limited to delays, errors or interruptions caused by the Grantor or third parties, any industrial, juridical, governmental, civil or military action, acts of terrorism, insurrection or 15
revolution, nuclear fusion, fission or radiation, failure or fluctuation in electrical power, heat, light, air conditioning or telecommunications equipment, or acts of God.
6.10 Representation and Warranty as to Authority.
The Grantor and the Trustee hereby each represent and warrant to the other that it has full authority to enter into this Agreement upon the terms and conditions hereof and that the individual executing this Agreement on its behalf has the requisite authority to bind the Grantor or the Trustee to this Agreement.
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IN WITNESS of this Amended and Restated Agreement, the Grantor and the Trustee have signed below on this day of ,2012.
DOMINION ENERGY KEWAUNEE, INC.
By:
Title:
THE NORTHERN TRUST COMPANY, TRUSTEE By:_
Title:
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Attachment 5 Amended and Restated Virginia Electric and Power Company Qualified Nuclear Decomnissioning Trust Agreement North Anna and Surry Power Stations - Units 1 and 2 Virginia Electric and Power Company
AMENDED AND RESTATED VIRGINIA ELECTRIC AND POWER COMPANY QUALIFIED NUCLEAR DECOMMISSIONING TRUST AGREEMENT
AMENDED AND RESTATED VIRGINIA ELECTRIC AND POWER COMPANY, QUALIFIED NUCLEAR DECOMMISSIONING TRUST AGREEMENT This AMENDED AND RESTATED TRUST AGREEMENT ("Agreement") is made the 1st day of January 2013, between VIRGINIA ELECTRIC AND POWER COMPANY, a Virginia corporation, the Grantor, and THE NORTHERN TRUST COMPANY, an Illinois corporation of Chicago, Illinois, the Trustee.
WHEREAS, the Grantor wishes to establish pursuant to this Agreement and under the laws of the State of Illinois, a separate trust fund under this Agreement which qualifies as a Nuclear Decommissioning Reserve Fund under Section 468A of the Internal Revenue Code of 1986, as amended, or any corresponding section or sections of any future United States internal revenue statute and the regulations thereunder.
WHEREAS, the execution and delivery of this Agreement have been duly authorized by each of the Grantor and the Trustee and all things necessary to make this Agreement a valid and binding agreement by each of the Grantor and the Trustee have been done.
NOW, THEREFORE, the Grantor and the Trustee agree as follows:
ARTICLE 1 GENERAL PROVISIONS 1.01 Name of Trust.
The name of the Trust is the VIRGINIA ELECTRIC AND POWER COMPANY QUALIFIED NUCLEAR DECOMMISSIONING TRUST (referred to herein as the "Trust" or the "Trust Fund"). The Trust Fund is the entire undistributed amount of all contributions and/or transferred assets placed with the Trustee, as adjusted for all income, expense, gain, or loss on such amount as may exist from time to time. As used herein, "Trust Fund" shall be used merely to refer to the Reserve Funds in the aggregate and is not intended nor should it be construed to constitute a separate entity.
1.02 Grantor, Trustee.
The Grantor of this Trust is Virginia Electric and Power Company and its successors and assigns as provided in Section 5.03 of this Agreement. The Trustee under this Agreement is Northern Trust Company, its successors and assigns, or any other person, company, bank, or trust company appointed as provided in Section 2.01 of this Agreement.
1.03 Trust Committee.
The Grantor may establish a Nuclear Decommissioning Trust Committee (the "Committee")
composed of any three or more persons appointed by the Grantor's Board of Directors on whatever terms the Board desires. The Committee has the authority to exercise all of the Grantor's powers under this Agreement, and for purposes of Sections 2.03(c) and (d) and Section 3.04(g), the Trustee will be protected in treating the directions and other actions of the Committee as the directions or actions of the Grantor. The Grantor must certify to the Trustee all appointments to or removals from the Committee, and the Trustee must recognize written I
instructions signed by any Committee member, or its designee, as a directive from the Committee.
1.04 Separate Reserve Funds The Trust Fund may be divided into separate Reserve Funds as designated by the Grantor, and each Reserve Fund provides for the decommissioning of a specified unit of a nuclear power plant. Each Reserve Fund is established as a trust under state law. Each Reserve Fund will be segregated and maintained apart from the assets of other Reserve Funds and any other assets of the Trust Fund. Separate accounting and separate funding will be observed, and each Reserve Fund shall be treated as a separate trust. Reserve Funds may be commingled for investment purposes in accordance with section 3.02 of this Agreement.
ARTICLE 2 TRUSTEE APPOINTMENT, REMOVAL, LIABILITY 2.01 Appointment, Removal, Successors.
(a) The Trustee is named above. The Grantor may appoint a successor Trustee by written notice to the person appointed and to the Trustee then serving. A Trustee may resign on thirty days' notice in writing to the Grantor. The Grantor may remove any Trustee by thirty days' written notice to each Trustee. Upon the resignation or removal of a Trustee, the Grantor will appoint a successor Trustee, who will have the same powers and duties as the predecessor Trustee. Additional Trustees may be appointed in the same manner as a successor Trustee.
Notwithstanding the foregoing, no removal or resignation shall take effect until a successor Trustee has been appointed and accepted appointment as Trustee. If a successor Trustee has not been appointed and accepted appointment within sixty (60) days of the Grantor's receipt of notice of resignation of the Trustee or the Trustee's receipt of notice of removal, such Trustee may petition a court of competent jurisdiction to appoint a successor Trustee to serve until such time, if ever, as a successor Trustee shall have been appointed by the Grantor and accepted such appointment.
(b) A successor Trustee may qualify by executing, acknowledging, and delivering acceptance to the Grantor in a form satisfactory to the Grantor. The successor without further act, deed, or conveyance is vested with all the estate, rights, powers, and discretion of the predecessor Trustee just as if originally named as a Trustee in this Agreement.
(c) When a successor Trustee accepts, the predecessor Trustee (or representative, if the predecessor Trustee is unable or unavailable) will assign, transfer title, and pay over to the successor Trustee the funds and properties then constituting the Trust Fund. The predecessor Trustee (or representative) is authorized, however, to reserve a sum of money deemed advisable for payment of fees and expenses in connection with the transfer and settlement of the Trust Fund or otherwise (all subject to the limitation in section 5.04 of this Agreement), and any balance of that reserve remaining after the payment of fees and expenses will be paid over to the successor Trustee.
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(d) The Trustee may adopt or amend bylaws and regulations that the Trustee deems desirable for the conduct of Trustee affairs.
(e) The Trustee will keep a record of all Trustee proceedings and acts and all other data necessary for the proper administration of the Trust. To the extent required in the provisions of this Agreement set forth below, the Trustee will notify the Grantor and any specified interested party of any Trustee action taken.
2.02 Establishment and Acceptance of Trust.
(a) All contributions to the Trust Fund (other than deemed contributions under Treasury Regulations Section 1.468A-8-(b)(2)(iv)(A)) must be made in cash.
(b) At the time it makes any contribution to the Trust Fund, the Grantor will specify in writing then delivered to the Trustee the exact amount that is to be placed each Reserve Fund then existing. The Trustee shall not accept contributions from anyone other than the Grantor without the Grantor's written approval for each such contribution, and an exact written allocation of such a contribution among the Reserve Funds then existing must accompany the contribution.
The Trustee has no right or duty to inquire into the amount of or the method used in determining any contribution among the Reserve Funds. The Trustee is accountable only for funds actually received. The Trustee has no duty to compute or collect the amount to be paid to it by the Grantor.
(c) All contributions and income from contributions will be held, managed and administered in trust according to the terms of this Agreement.
(d) No part of the Trust Fund may be used for or diverted to purposes other than the exclusive purposes allowed by this Agreement, as described in Sections 5.04, and 6.01 of this Agreement.
(e) The Trustee now accepts the Trust created by this Agreement and will perform the Trustee's duties under this Agreement.
2.03 Limitation of Liability.
(a) To the extent permitted by law, the Trustee will serve without bond; the Trustee will secure and pay for required bonds. At its own expense, the Grantor is entitled to employ its own counsel to defend or maintain, either in its own name or in the name of any Trustee, with said Trustee's approval, any suit or litigation arising under this Agreement involving the Trustee.
(b) In the event that THE NORTHERN TRUST COMPANY incurs any liability, loss, claim, suit or expense (including attorneys fees) in connection with or arising out of its provision of services under this agreement, or its status as trustee hereunder, under circumstances where THE NORTHERN TRUST COMPANY cannot obtain or would be precluded by law from obtaining payment or reimbursement of such liability, loss, claim, suit or expense (including attorneys fees) from the Trust Fund, then the Grantor (which has the authority to do so under the laws of the state of its incorporation) shall indemnify and hold THE NORTHERN TRUST COMPANY harmless from and against such liability, loss, claim, suit or expense, 3
except to the extent such liability, loss, claim, suit or expense arises from (i) a breach by the Trustee of the terms of this agreement (provided, however, that this exception shall not apply to the extent that such breach arises under section 3.06 of the Agreement as a result of the Trustee acting in good faith and in accordance with the direction, instruction or notice of the Grantor or an investment adviser) or (ii) the Trustee's negligence or willful misconduct in the performance of its specifically allocated duties under this agreement. Notwithstanding the foregoing, THE NORTHERN TRUST COMPANY shall not be indemnified for any loss, liability, claim, suit or expense to the extent the Trustee participated knowingly in, or knowingly undertook to conceal, an act or omission of any person or entity constituting a breach of such person or entity's fiduciary responsibility hereunder, knowing such act or omission was a breach; provided however, that the Trustee shall not be deemed to have done so by merely complying with directions of an Investment Adviser or by its failure to act in the absence of such direction or by reason of maintaining accounting records or solely as a result of the normal information received by the Trustee or its officers, employees, or agents in the normal course of performing any custodial, reporting, recording and bookkeeping functions with respect to any assets of the Trust Fund managed by an Investment Manager or the Grantor. This paragraph shall survive the termination of this agreement.
(c) THE NORTHERN TRUST COMPANY (which has the authority to do so under the laws of the state of its incorporation) agrees to defend, indemnify and hold harmless the Grantor, the Trust and its fiduciaries, and the then present and former officers, employees, and directors of the Grantor from and against any and all liability, loss, claim, suit or expense (including attomeys' fees), which arises from (i) a breach by the NORTHERN TRUST COMPANY of the terms of this agreement or (ii) the Trustee's own negligence or willful misconduct in the performance of its duties and responsibilities specifically allocated to it herein.
This paragraph shall survive the termination of this Agreement.
(d) Notwithstanding the foregoing subparagraphs (b) and (c), neither the Company nor the Trustee shall be responsible for consequential or special damages under such subparagraphs.
(e) The Trustee shall not be responsible for any losses resulting from the deposit or maintenance of securities or other property (in accordance with market practice, custom, or regulation) with any recognized foreign clearing facility, book-entry system, centralized custodial depository, or similar organization. The Trustee shall not be responsible or liable for any losses or damages suffered by the Trust Fund arising as a result of the insolvency of any custodian, subtrustee or subcustodian, except to the extent the loss or damage was due to the Trustee's failure to prudently select or periodically monitor a custodian, subtrustee or subcustodian. Settlements of transactions may be effected in trading and processing practices customary in the jurisdiction or market where the transaction occurs. The Grantor acknowledges that this may, in certain circumstances, require the delivery of cash or securities (or other property) without the concurrent receipt of securities (or other property) or cash and, in such circumstances, the Grantor shall have sole responsibility for nonreceipt of payment (or late payment) by the counterparty.
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2.04 Discharge after Distributions or Termination.
After all distributions (including distributions to a successor Trustee) or any termination under this Agreement or applicable law, the Trustee is discharged from all obligations under this Agreement, and no person or entity has any further right or claim against the Trustee not otherwise provided by statute.
2.05 Legal Action.
In all legal actions regarding the Trust and this Agreement, the Trustee and the Grantor are the only necessary parties. A final judgment not appealed or appealable entered in an action or proceeding against the Grantor, the Trust, or the Trustee is binding and conclusive on the parties to this Agreement and all persons having or claiming to have any interest in the Trust Fund.
ARTICLE 3 INVESTMENT DUTIES, POWERS 3.01 Investment Policy and Limitations.
Certain limitations are placed on investing in and disposing of some securities to avoid disqualification of the Trust for tax purposes and to minimize potential problems with securities regulations. As provided by law and Section 5.04 of this Agreement, an investment must not result in a diversion or use of Trust assets that is not permitted under Internal Revenue Code Section 468A. The Grantor, and to the extent that they have been allocated investment responsibility, the Trustee and any investment advisor appointed by the Grantor shall adhere to the standard of care that a "prudent investor" would use in the same circumstances, such term having the same meaning as the standard set forth in 18 CFR 35.32(a)(3) of the FERC regulations, or any successor regulation.
The Grantor shall be responsible for formulation of the investment policy for the Trust. To the extent that investment responsibility is allocated to the Trustee or investment advisors, tile Grantor shall provide written investment guidelines to each entity to which investment responsibility has been allocated, consistent with such investment policy.
3.02 Investment of Trust Fund.
The assets of two or more Reserve Funds may be commingled for investment purposes as the Grantor directs. The Trustee shall apportion any earnings or losses from an investment made with commingled assets to each participating Reserve Fund in the same proportion that the amount invested from each Reserve Fund bears to the total commingled amount invested.
Subject to the provisions of Section 3.04 of this Agreement, the Trustee will invest and reinvest the principal and income of each Reserve Fund and keep those trust assets invested, without distinction between principal and income. If assets of two or more Reserve Funds are commingled for investment purposes, the Grantor shall have the absolute authority to direct the Trustee at any time to liquidate the interests of the Reserve Funds in a commingled investment, and the Trustee shall promptly comply with any such directive. The commingling arrangement undertaken as permitted in this Section 3.02 can be terminated at any time by any Reserve Fund.
No Reserve Fund in the commingling arrangement may substitute for itself in the arrangement any person that is not a member to the commingling arrangement.
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Trust investments may include, but shall not be limited to the following:
(a) Publicly traded domestic or foreign common and preferred stocks and options thereon, as well as warrants, rights and preferred stocks convertible into common stock, regardless of where or how traded.
(b) Investment grade domestic corporate bonds and debentures and any such securities which are convertible into common stock, domestic or foreign.
(c) Bonds or other obligations of the United States of America or non-U.S. sovereign debt with an equivalent rating of A or higher.
(d) Investment grade obligations of the states and of municipalities or of any agencies thereof.
(e) Investment grade notes of any nature, of foreign or domestic issuers.
(f) Savings accounts, certificates of deposit and other types of time deposits, bearing a reasonable rate of interest based upon the duration, amount, type and geographical area, with any financial institution or quasi-financial institution or any department of the same, either domestic or foreign, under the supervision of the United States or any State, including any such financial institution owned, operated or maintained by the Trustee in its corporate or association capacity (including any department or division of the same) or a corporation or association affiliated with the same.
(g) Any collective, common or pooled trust fund operated or maintained exclusively for the commingling and collective investment of monies or other assets including any such fund operated or maintained by the Trustee or its affiliate. Notwithstanding the provisions of this Agreement which place restrictions upon the actions of the Trustee, to the extent monies or other assets are utilized to acquire units of any collective trust, the terms of the collective trust indenture shall solely govern the investment duties, responsibilities and powers of the trustee of such collective trust and, to the extent required by law, such terms, responsibilities and powers shall be incorporated herein by reference and shall be part of this Agreement. For purposes of valuation, the value of the interest maintained by the Trust Fund in such collective trust shall be the fair market value of the collective fund units held, determined in accordance with generally recognized valuation procedures. The Grantor expressly understands and agrees that any such collective fund may provide for the lending of its securities by the collective fund trustee and that such collective fund's trustee will receive compensation from such collective fund for the lending of securities that is separate from any compensation of the Trustee hereunder, or any compensation of the collective fund trustee for the management of such collective fund.
(h) Open-end and closed-end investment companies (including those for which the Trustee or an affiliate provides services for a fee) regardless of the purposes for which such fund or funds were created, and any partnership, limited or unlimited, joint venture and other forms of joint enterprise created for any lawful purposes otherwise consistent with the investment guidelines set forth herein.
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(i) Notwithstanding anything else in this Agreement to the contrary, including, without limitation, any specific or general power granted to the Trustee, including the power to invest in real property, no portion of a Reserve Fund shall be invested in real estate. For this purpose, "real estate" includes, but is not limited to, real property, leaseholds or mineral interests.
(j) The Trustee may lend the assets of the Trust Fund in accordance with the terms and conditions of a separate securities lending agreement, may settle transactions in futures and/or options contracts, short-selling programs, foreign exchange or foreign exchange contracts, swaps and other derivative investments with third parties.
3.03 Additional Powers of Trustee.
The Trustee has the following powers and authority in the administration and investment of the Trust Fund, to be exercised subject to the other provisions of this Agreement and especially this Article 3:
(a) To purchase, subscribe for, and hold securities or other property authorized by Sections 3.01 and 3.02 as a proper investment for the Trust Fund, and to retain the same in trust.
(b) To sell for cash or credit, exchange, convey, transfer, or otherwise dispose of any securities or other property held in the Trust Fund, by private contract or at public auction. No person dealing with the Trustee is bound to see to the application of the purchase money or to inquire into the validity, expediency, or propriety of any sale or other disposition.
(c) To vote any stocks, bonds, or other securities; to give general or special proxies or powers of attorney with or without power of substitution; to exercise any conversion privileges, subscription rights, or other options, and to make any incidental payments; to oppose, consent to, or otherwise participate in corporate reorganizations or other changes affecting corporate securities, and (unless prohibited by statute) to delegate discretionary powers, and to pay any related assessments or charges; and generally to exercise any ownership powers over stocks, bonds, securities, or other property held as part of the a Reserve Fund.
(d) To keep part of a Reserve Fund in cash or cash balances invested in interest-bearing accounts if the Trustee deems that to be prudent under the circumstances.
(e) To accept and retain for as long as the Trustee deems advisable any securities or other property received or acquired by the Trustee, regardless of any lack of diversification.
(f) To make, execute, acknowledge, and deliver documents of transfer and conveyance and other instruments that may be necessary or appropriate to carry out the Trustee's powers.
(g) To settle, compromise, or submit to arbitration any claims, debts, or damages due or owing to or from a Reserve Fund, to commence or defend legal or administrative proceedings, and to represent the Trust in all legal or administrative proceedings.
(h) To employ suitable agents and counsel (who may be counsel of the Grantor) and to pay their reasonable expenses and compensation. The Trustee may consult with legal counsel 7
approved by the Grantor, which approval shall not be unreasonably withheld, who may also be counsel for the Grantor, with respect to its responsibilities under this agreement and shall be entitled to rely upon the written advice of such legal counsel.
(i) On direction by the Grantor as to the agent and insurance company, to invest in insurance contracts if and as allowed under Internal Revenue Code Section 468A, payable to the Trustee or its assignees as beneficiary.
(j) To purchase, enter, sell, hold, and generally deal in any manner in and with contracts for the immediate or future delivery of financial instruments of any issuer or of any other property, foreign exchange and foreign exchange contracts, to grant, purchase, sell, exercise, permit to expire, permit to be held in escrow, and otherwise to acquire, dispose of, hold and generally deal in any manner with and in all forms of options in any combination.
(k) To enter into contracts with one or more persons, firms, associations, or corporations to obtain advice and counsel about investments.
(1) To enter into arrangements for the deposit of funds with banks or trust companies and in connection with the arrangements:
(1) To authorize the depositary to act as custodian of the cash, securities, or other property comprising the funds; (2) To authorize the depositary to convert the funds in whole or in part into, or to invest and reinvest the same in, securities of any kind and nature permitted in this Agreement; and (3) To provide for the payment to the depositary of reasonable compensation for its services.
(m) To cause any securities or other property held as part of the Trust Fund to be registered in its own name or in the name of one or more of its nominees, and to hold any investments in bearer form, but the books and records of the Trustee must at all times show that the investments are part of the Trust Fund and subject to the jurisdiction of the United States, and to hold the property in safekeeping facilities of the Trustee or of other Trustee banks or clearing corporations, in the United States or elsewhere.
(n) To participate in any mergers or consolidations, or any registrations of securities with state or federal authorities regarding any securities held.
(o) To exercise any and all discretionary powers not explicitly or implicitly conferred by this Agreement which the Trustee may deem reasonably necessary and proper to carry out instructions given to the Trustee hereunder and which powers are not in contravention of the terms of this Agreement and applicable law.
(p) To perform any actions in furtherance of its safekeeping duties and obligations under this Agreement in accordance with the standard of care applicable to a prudent, professional custodian for hire acting with the care, skill, prudence, and diligence under the 8
circumstances then prevailing which financial institutions, acting in a like capacity and familiar with such matter, would use, including performing actions to avoid any loss of securities of the Trust in the Trustee's custody under this agreement, including but not limited to loss due to burglary, robbery, hold-up, theft or mysterious disappearance, damage or destruction.
(q) To do all acts, take all proceedings, and exercise all rights and privileges although not specifically mentioned here, as the Trustee deems necessary to administer the Trust Fund and to carry out the purposes of this Agreement.
3.04 Allocation of Investment Responsibility.
(a) Except to the extent that it has allocated investment responsibility to the Trustee or one or more investment advisors, the Grantor shall have investment responsibility for all assets of the Trust and in carrying out such responsibility may direct the investments of the Trust in investments of any kind, including but not limited to, private equity, indirect interests in real estate, and non-investment grade bonds, subject to the limitations contained in this Agreement.
Directed investments under this Section 3.04 may not exceed the total of the Trust Fund.
(b) The Grantor shall have the right, by written notice to the Trustee, to appoint and remove one or more investment advisors and to direct the Trustee to segregate any part or all of the Trust assets into one or more accounts, each of which shall be designated as an "Investment Advisor Account." The Trustee may assume that any Investment Advisor Account previously established and the prior appointment of an investment advisor for that account continues in full force and effect until receipt of written notice to the contrary from the Grantor. The Grantor may also, subject to the written consent of the Trustee, allocate investment responsibility for a designated portion of the Trust assets, which assets shall be segregated into an account known as the Trustee Managed Account. The Grantor shall furnish the Trustee with written investment guidelines, consistent with the terms of this Agreement, for the management of the assets contained in the Trustee Managed Account.
(c) The Grantor, with respect to any Trust assets not held in an Investment Advisor Account or Trustee Managed Account, and each investment advisor, with respect to its designated Investment Advisor Account, shall have all of the investment powers contained in this Agreement, subject to the applicable limitations set forth in the Agreement and, in the case of each investment advisor, such investment guidelines as the Grantor may provide to such investment advisor. The Trustee is not responsible for the selection, terms of appointment, compensation or conduct of any investment manager, broker, salesman, or agent selected by the Grantor, shall follow the directions of the Grantor with respect to Trust assets for which the Grantor has investment responsibility and shall follow the directions of any designated investment advisor, and shall have no responsibility for reviewing or determining whether any investment directed or carried out by the Grantor or a designated investment advisor is consistent with the investment limitations set forth in this Agreement or contained in the investment guidelines for such investment advisor.
(d) Subject to such investment guidelines as may be furnished to it from time to time by the Grantor, the Trustee is free to proceed without the concurrence or affirmative expression of the Grantor to handle, manage, control, invest, and reinvest the Trust Fund assets that are 9
allocated to the Trustee Managed Account under the powers granted in this Agreement with the same force and effect as if this section were not a part of this Agreement.
(e) No person dealing with the Trustee is required to determine whether any sale or purchase by the Trustee has been authorized or directed by the Grantor, and each is fully protected in dealing with the Trustee in the same manner as if this section were not a part of this Agreement.
(f) Whenever the Trustee is directed to purchase or sell assets in the Trust Fund, the Trustee in its sole discretion is permitted at the expense of the Trust to obtain an appraisal of the value of the assets to be purchased or sold.
(g) To the extent that the Trustee has been allocated investment responsibility hereunder, then with respect to the assets held in the Trustee Managed Account, the powers granted the Trustee under Sections 3.02 and 3.03 of this Agreement will be exercised in the discretion of the Trustee. Neither the Trustee nor any other person is under a duty to question the Grantor's direction, and the Trustee will comply as promptly as practicable with such direction if it is consistent with the terms of this Agreement.
3.05 Prohibition Against Self-Dealing.
Anything herein to the contrary notwithstanding, the Grantor and the Trustee will perform no act of self-dealing within the meaning of Internal Revenue Code Section 4951 (d), except for those acts expressly permitted by Treasury Regulations Section 1.468A-5(b)(2).
ARTICLE 4 OTHER DUTIES OF TRUSTEE 4.01 Notice Regarding Disbursements or Payments.
Payments or disbursements may be made from each Reserve Fund only upon written direction of the Grantor and in accordance with this section. Except for (i) withdrawals being made under 10 C.F.R. § 50.82(a)(8), which include all withdrawals commencing 90 days after the NRC receives a Post-Shutdown Decommissioning Activities Report (PSDAR) from Grantor, (ii) withdrawals credited against sub-accounts established by Grantor for non-radiological decommissioning or spent fuel storage, and (iii) transfers between the Qualified and NonQualified Reserve Funds for the same unit of a nuclear power plant, no payment or disbursement may be made from a Reserve Fund unless the Director, Office of Nuclear Reactor Regulation, U.S. NRC ("NRC Director") has been given written notice of the intent to make the payment or disbursement at least 30 working days before the date of the intended payment or disbursement, and no notice of objection has been received from the NRC Director within the notice period. For purposes of this section 4.01, payments and disbursements do not include ordinary administrative costs and other incidental expenses of the fund, including but not limited to those administrative expenses described in section 4.02. Promptly upon receipt by the Trustee of a written direction to make payments or disbursements from a Reserve Fund, the Trustee shall provide written notice to the NRC Director unless Grantor's direction (a) is accompanied by written notice by Grantor to the NRC Director, or (b) represents that the withdrawal is (i) being made pursuant to 10 C.F.R.
§50.82(a)(8), (ii) credited against a sub-account established for non-radiological decommissioning or spent fuel storage, or (iii) a transfer between the Qualified and 10
NonQualified Reserve Funds for the same unit of a nuclear power plant. Subject to the foregoing, the Trustee will make payments and transfer from a Reserve Fund to the persons or entities, in the manner, in the amounts, and for the purposes specified in the written direction.
After payment, the amount paid is no longer part of the Reserve Fund. Until final decommissioning has been completed, payments or disbursements, other than payment of ordinary administrative costs (including taxes) and other incidental expenses (including legal, accounting, actuarial, investment and trustee expenses), shall be made only for the purposes of paying decommissioning costs (which shall include all decommissioning costs as defined under the Treasury Regulations) or for making transfers to another financial assurance method acceptable under NRC regulations. Each Grantor direction will include a representation by Grantor that the payment or disbursement is in accordance with these purposes, including but not limited to the provisions of this Article 4. The Trustee is not responsible for the application of the payments or for the adequacy of a Reserve Fund after payment to meet and discharge trust liabilities.
4.02 Payment of Compensation, Expenses, and Taxes.
(a) The Trustee will be paid reasonable compensation as agreed upon from time to time in writing by the Grantor and the Trustee. In addition, the Trustee will be reimbursed from the Reserve Funds or, at the option of the Grantor, by the Grantor for all ordinary and necessary expenses incurred in connection with the operation of the Trust, including federal income tax imposed on the modified gross income of the Trust, any state or local tax imposed on the income or assets of the Trust, legal expenses, accounting expenses, actuarial expenses, investment manager fees and trustee compensation and expenses. All taxes levied or assessed on or in respect of a Reserve Fund, whether assessed to the Reserve Fund or the Grantor, will be paid, at the option of the Grantor, by the Grantor, or from the Trust Fund and prorated among the Reserve Funds in proportion to their respective fair-market values at the preceding calendar year end in the case of property taxes and in proportion to their respective taxable incomes for the relevant taxable year in the case of income taxes. To the extent that any taxes are provoked by the investment in or receipt of an identifiable asset or transaction involving a particular Reserve Fund or other particular fund, the taxes will be charged against the appropriate Reserve Fund, giving appropriate effect to computations of income and deductions related to the asset or transaction, and allocating any exemption available among the Reserve Funds in proportion to the tax liability provoked. Identifiable direct expenses will be treated in the same way as taxes.
(b) The Trustee will prepare and file tax returns for the Reserve Funds as directed by the Grantor, provided that the Grantor shall indemnify the Trustee for any penalties, additions to tax, or other amounts for which it may be charged or may incur in connection with such preparation and filing, including but not limited to that due to a position taken on such returns.
The Trustee may assume that any taxes assessed on or with respect to the Trust Fund are lawfully assessed unless the Grantor advises the Trustee in writing that in the opinion of counsel for the Grantor the taxes are or may be unlawfully assessed. When so advised and requested in writing by the Grantor, the Trustee will contest the validity or the taxes in any manner deemed appropriate by the Grantor or its counsel) in which event the Trustee will execute all documents, instruments claims, and petitions necessary or advisable in the opinion of the Grantor or its counsel for the refund, abatement) reduction or elimination of taxes. Reasonable expenses 11
incurred by the Trustee in connection with such a contest will be reimbursed as provided in paragraph (a) of this section.
(c) No provision of this section will be effective to the extent that it would violate Internal Revenue Code Section 468A, especially in so far as it relates to Internal Revenue Code Section 4951.
4.03 Accounting.
(a) The Trustee will keep accurate and detailed accounts of all investments, receipts, disbursements, and other transactions for the Reserve Funds and the Trust Fund. All accounts, books, tax returns, and records relating to the Trust are open to inspection and audit at all reasonable times by any person designated by the Grantor and at the expense of the Grantor.
(b) An account of the Trustee may be approved by the Grantor by written notice delivered to the Trustee or by failure to object to the account by written notice delivered to the Trustee within one hundred twenty (120) days of the completion of the Plan's annual audit by the Grantor or its appointed auditor. The approval of an account shall constitute a full and complete discharge to the Trustee as to all matters that are set forth in that account as if the account had been settled by a court of competent jurisdiction in an action or proceeding to which the Trustee, and the Grantor were parties. In no event shall the Trustee be precluded from having its accounts settled by a judicial proceeding.
(c) Except as specifically provided by statute, no person other than the Grantor may require an accounting or bring an action against the Trustee about the Trust or.the actions of the Trustee. The Trustee is not required to make reports to any courts or administrative agencies, except as specifically directed by Grantor or as otherwise required by applicable law.
4.04 Valuation.
(a) As of each calendar year end, the Trustee will determine the fair-market value of the Trust Fund and each Reserve Fund and report that value to the Grantor in writing. The valuation determined according to this section is binding on the Grantor, and all other persons interested in the Trust.
(b) Non-cash contributions are valued at fair-market value determined by the Trustee as of the actual date on which the Trustee accepts the property.
(c) In determining the net worth of the Trust Fund and the Reserve Funds, the Trustee will deduct all allocable expenses.
ARTICLE 5 AMENDMENT AND TERMINATION OF THE TRUST 5.01 Amendment of the Trust.
The Grantor has the right at any time to amend this Agreement in whole or in part, but:
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(a) Except to permit the return of contributions found not to be deductible for federal income tax purposes to whatever extent such return may be accomplished without disqualifying the Trust under Internal Revenue Code section 468A, no amendment may authorize or permit any assets of the Trust Fund (other than those required to pay taxes and other administration expenses) to be used for or diverted to purposes other than those allowed by Internal Revenue Code section 468A.
(b) No amendment may be made that changes the Trustee's duties or liabilities without the Trustee's written consent, such consent being evidenced by Trustee's written agreement to such amendment.
An amendment may be made retroactively if such application is necessary to qualify the Trust Fund as a Nuclear Decommissioning Trust Fund under Section 468A of the Internal Revenue Code of 1986, as amended, or to bring the Trust or the Grantor into conformity with any other applicable statute or regulation.
An amendment may be made retroactively if such application is necessary to bring the Trust, the Grantor, or the Virginia Electric and Power Company Non-Qualified Nuclear Decommissioning Trust (another trust between the Grantor and the Trustee) into conformity with the Internal Revenue Code, Treasury regulations, or any other applicable statute or regulation.
5.02 Irrevocability of Reserve Fund.
Each Reserve Fund is irrevocable. Except as otherwise provided by law, each Reserve Fund terminates upon completion of its nuclear power plant decommissioning that it has been created to fund as certified to the Trustee by the Grantor, upon disqualification of the Reserve Fund under Internal Revenue Code Section 468A, or upon the frustration or failure of the Reserve Fund's purposes.
5.03 Merger, Consolidation, or Succession.
(a) A corporation with which the Grantor is merged or a corporation or other legal entity which acquires substantially all the assets of the Grantor, shall become the Grantor for purposes of this Agreement, and every reference in this Agreement to the Grantor will be treated as a reference to that surviving or purchasing corporation or other legal entity.
(b) If the Grantor is liquidated, merged, or consolidated with another company or other legal entity and the Grantor's successor chooses not to discharge the Grantor's duties under this Agreement, the Trust nevertheless will survive and the Trust Fund will continue in trust under the terms of this Agreement. In such a case, the Trustee may, but shall not be required to, petition a court of competent jurisdiction seeking the appointment of a party to succeed to the responsibilities of the Grantor. In seeking such an order, the Trustee shall be held harmless and indemnified by the Grantor or its successor. Any expenses incurred by the Trustee in seeking said court order shall be the responsibility of the Grantor or its successor until paid.
(c) The merger or consolidation of the Trust with, or a transfer of assets or liabilities from this Trust to another trust or fund is not permitted unless the Trustee has received an opinion of counsel satisfactory to the Trustee to the effect that the merger, consolidation, or 13
transfer results in no diversion or use of assets that is not permitted by Internal Revenue Code Section 468A.
5.04 Impossibility of Diversion.
Assets of the Reserve Funds may not be used for or diverted to purposes other than the purposes permitted by Internal Revenue Code Section 468A, whether by operation or natural termination of the Trust, by power of revocation or amendment, by happening of a contingency, by collateral arrangement, or by any other means. If permissible under the preceding sentence, contributions by the Grantor to the Trust found not to be deductible for federal income tax purposes shall be returned to the Grantor, or failing that, set aside in a fund or trust separate from this trust under such terms as the law permits and the Grantor directs.
ARTICLE 6 MISCELLANEOUS PROVISIONS 6.01 Construction.
The Grantor's intent and purpose in creating the trusts hereunder and executing this Agreement is to maintain Nuclear Decommissioning Reserve Funds pursuant to Internal Revenue Code Section 468A. All questions arising in the administration of the Trust and in the construction of this Agreement will be resolved accordingly. This Agreement will be construed, enforced, and administered in accordance with the laws of the State of Illinois, except to the extent that the laws of the United States of America take precedence, in which event, this Agreement will be construed in accordance with the laws of the United States of America. The headings and subheadings in this Agreement have been inserted for convenience only and are to be ignored in construction of the provisions.
6.02 Rights under the Trust.
No person other than the Grantor has any vested rights under the Trust except to the extent that rights may accrue under other agreements made by the Trustee. Except as permitted by law, no assignment of any rights or benefits under the Trust is permitted or recognized, nor will any rights or benefits be subject to attachment or other legal or equitable process or subject to the jurisdiction of any bankruptcy court.
6.03 Frustrated Actions.
If it becomes impossible for the Grantor or the Trustee to perform an act, then that act will be performed which, in the discretion of the Trustee, most nearly carries out the intent and purpose of this Agreement.
6.04 Construction of Direction.
Whenever the Grantor or Trustee is directed to take an action upon the occurrence of an event, neither is under obligation to take that action until it has received proper and satisfactory written notice of the occurrence.
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6.05 Authorizations and Communication.
A written authorization or communication from an officer of the Grantor or the Trustee that an event has occurred constitutes conclusive evidence of the occurrence, and the Grantor or Trustee is fully protected and discharged from all liability in accepting and relying upon that authorization or communication.
6.06 Genuine Notice; Direction.
The Grantor or the Trustee will not incur liability to any persons or party when acting on a notice, request, consent, direction, instruction, letter, telegram, or other paper or document that it believes to be genuine, and to have been signed or sent by the proper person.
6.07 Binding Nature.
This Agreement is binding upon the heirs, executors, administrators, successors, and assigns of all parties, present and future.
6.08 Settlement of Transactions and Collateral.
The Trustee may take all action necessary to pay for, and settle, authorized transactions, including disbursements or expenses, or the purchase or sale of foreign exchange, or of contracts for foreign exchange, and including exercising the power to borrow or raise monies from the Trustee in its corporate capacity or an affiliate. To secure expenses and advances made to settle or pay for authorized transactions, including payment for securities and disbursements, the Grantor grants to the Trustee a first priority security interest in the Trust Fund, all property therein, all income, substitutions and proceeds, whether now owned or hereafter acquired (the "Collateral"); provided that the Grantor does not grant the Trustee a security interest in any securities issued by an affiliate of the Trustee (as defined in Section 23A of the Federal Reserve Act). The parties intend that as the securities intermediary with respect to the Collateral, the Trustee's security interest shall automatically be perfected when it attaches. To the extent the Trustee advances funds to the Trust Fund for disbursements or to effect the settlement of purchase transactions, the Trustee shall be entitled to collect from the Trust Fund reasonable charges established under the Trustee's standard overdraft terms, conditions and procedures.
6.09 Force Maieure.
Neither party shall be responsible for any delay in performance, or non-performance, of any obligation hereunder to the extent that the same is due to forces beyond its reasonable control, including but not limited to delays, errors or interruptions caused by the Grantor or third parties, any industrial, juridical, governmental, civil or military action, acts of terrorism, insurrection or revolution, nuclear fusion, fission or radiation, failure or fluctuation in electrical power, heat, light, air conditioning or telecommunications equipment, or acts of God.
6.10 Representation and Warranty as to Authority.
The Grantor and the Trustee hereby each represent and warrant to the other that it has full authority to enter into this Agreement upon the terms and conditions hereof and that the 15
individual executing this Agreement on its behalf has the requisite authority to bind the Grantor or the Trustee to this Agreement.
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IN WITNESS of this Amended and Restated Agreement, the Grantor and the Trustee have signed below on this __ day of , 2012.
VIRGINIA ELECTRIC AND POWER COMPANY By:
Title:
THE NORTHERN TRUST COMPANY, TRUSTEE By:
Title:
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Attachment 6 Amended and Restated Virginia Electric and Power Company Non-Qualified Nuclear Decommissioning Trust Agreement North Anna and Surry Power Stations - Units I and 2 Virginia Electric and Power Company
AMENDED AND RESTATED VIRGINIA ELECTRIC AND POWER COMPANY NON-QUALIFIED NUCLEAR DECOMMISSIONING TRUST AGREEMENT
AMENDED AND RESTATED VIRGINIA ELECTRIC AND POWER COMPANY, NON-QUALIFIED NUCLEAR DECOMMISSIONING TRUST AGREEMENT This AMENDED AND RESTATED TRUST AGREEMENT ("Agreement") is made the 1st day of January 2013, between VIRGINIA ELECTRIC AND POWER COMPANY, a Virginia corporation, the Grantor, and THE NORTHERN TRUST COMPANY, an Illinois corporation of Chicago, Illinois, the Trustee.
WHEREAS, the Grantor wishes to establish pursuant to this Agreement and under the laws of the State of Illinois, a separate trust fund under this Agreement, none of which qualifies as a Nuclear Decommissioning Reserve Fund under Section 468A of the Internal Revenue Code of 1986, as amended.
WHEREAS, the execution and delivery of this Agreement have been duly authorized by each of the Grantor and the Trustee and all things necessary to make this Agreement a valid and binding agreement by each of the Grantor and the Trustee have been done.
NOW, THEREFORE, the Grantor and the Trustee agree as follows:
ARTICLE 1 GENERAL PROVISIONS 1.01 Name of Trust.
The name of the Trust is the VIRGINIA ELECTRIC AND POWER COMPANY NON-QUALIFIED NUCLEAR DECOMMISSIONING TRUST (referred to herein as the "Trust" or the "Trust Fund"). The Trust Fund is the entire undistributed amount of all contributions and/or transferred assets placed with the Trustee, as adjusted for all income, expense, gain, or loss on such amount as may exist from time to time. As used herein, "Trust Fund" shall be used merely to refer to the Reserve Funds in the aggregate and is not intended nor should it be construed to constitute a separate entity.
1.02 Grantor, Trustee.
The Grantor of this Trust is Virginia Electric and Power Company and its successors and assigns as provided in Section 5.03 of this Agreement. The Trustee under this Agreement is Northern Trust Company, its successors and assigns, or any other person, company, bank, or trust company appointed as provided in Section 2.01 of this Agreement.
1.03 Trust Committee.
The Grantor may establish a Nuclear Decommissioning Trust Committee (the "Committee")
composed of any three or more persons appointed by the Grantor's Board of Directors on whatever terms the Board desires. The Committee has the authority to exercise all of the Grantor's powers under this Agreement, and for purposes of Sections 2.03(c) and (d) and Section 3.04(g), the Trustee will be protected in treating the directions and other actions of the Committee as the directions or actions of the Grantor. The Grantor must certify to the Trustee all appointments to or removals from the Committee, and the Trustee must recognize written I
instructions signed by any Committee member, or its designee, as a directive from the Committee.
1.04 Separate Reserve Funds The Trust Fund may be divided into separate Reserve Funds as designated by the Grantor, and each Reserve Fund provides for the decommissioning of a specified unit of a nuclear power plant. Each Reserve Fund is established as a trust under state law. Each Reserve Fund will be segregated and maintained apart from the assets of other Reserve Funds and any other assets of the Trust Fund. Separate accounting and separate funding will be observed, and each Reserve Fund shall be treated as a separate trust. Reserve Funds may be commingled for investment purposes in accordance with section 3.02 of this Agreement.
ARTICLE 2 TRUSTEE APPOINTMENT, REMOVAL, LIABILITY 2.01 Appointment, Removal, Successors.
(a) The Trustee is named above. The Grantor may appoint a successor Trustee by written notice to the person appointed and to the Trustee then serving. A Trustee may resign on thirty days' notice in writing to the Grantor. The Grantor may remove any Trustee by thirty days' written notice to the Trustee. Upon the resignation or removal of a Trustee, the Grantor will appoint a successor Trustee, who will have the same powers and duties as the predecessor Trustee. Additional Trustees may be appointed in the same manner as a successor Trustee.
Notwithstanding the foregoing, no removal or resignation shall take effect until a successor Trustee has been appointed and accepted appointment as Trustee. If a successor Trustee has not been appointed and accepted appointment within sixty (60) days of the Grantor's receipt of notice of resignation of the Trustee or the Trustee's receipt of notice of removal, such Trustee may petition a court of competent jurisdiction to appoint a successor Trustee to serve until such time, if ever, as a successor Trustee shall have been appointed by the Grantor and accepted such appointment.
(b) A successor Trustee may qualify by executing, acknowledging, and delivering acceptance to the Grantor in a form satisfactory to the Grantor. The successor without further act, deed, or conveyance is vested with all the estate, rights, powers, and discretion of the predecessor Trustee just as if originally named as a Trustee in this Agreement.
(c) When a successor Trustee accepts, the predecessor Trustee (or representative, if the predecessor Trustee is unable or unavailable) will assign, transfer title, and pay over to the successor Trustee the funds and properties then constituting the Trust Fund. The predecessor Trustee (or representative) is authorized, however, to reserve a sum of money deemed advisable for payment of fees and expenses in connection with the transfer and settlement of the Trust Fund or otherwise (all subject to the limitation in section 5.04 of this Agreement), and any balance of that reserve remaining after the payment of fees and expenses will be paid over to the successor Trustee.
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(d) The Trustee may adopt or amend bylaws and regulations that the Trustee deems desirable for the conduct of Trustee affairs.
(e) The Trustee will keep a record of all Trustee proceedings and acts and all other data necessary for the proper administration of the Trust. To the extent required in the provisions of this Agreement set forth below, the Trustee will notify the Grantor and any specified interested party of any Trustee action taken.
2.02 Establishment and Acceptance of Trust.
(a) Unless the Grantor otherwise advises the Trustee, the Grantor will make all contributions in cash or other intangible personal property.
(b) At the time it makes any contribution to the Trust Fund, the Grantor will specify in writing then delivered to the Trustee the exact amount that is to be placed each Reserve Fund then existing. The Trustee shall not accept contributions from anyone other than the Grantor without the Grantor's written approval for each such contribution, and an exact written allocation of such a contribution among the Reserve Funds then existing must accompany the contribution.
The Trustee has no right or duty to inquire into the amount of or the method used in determining any contribution among the Reserve Funds. The Trustee is accountable only for funds actually received. The Trustee has no duty to compute or collect the amount to be paid to it by the Grantor.
(c) All contributions and income from contributions will be held, managed and administered in trust according to the terms of this Agreement.
(d) No part of the Trust Fund may be used for or diverted to purposes other than the exclusive purposes allowed by this Agreement, as described in Sections 5.04, and 6.01 of this Agreement.
(e) The Trustee now accepts the Trust created by this Agreement and will perform the Trustee's duties under this Agreement.
2.03 Limitation of Liability.
(a) To the extent permitted by law, the Trustee will serve without bond; the Trustee will secure and pay for required bonds. At its own expense, the Grantor is entitled to employ its own counsel to defend or maintain, either in its own name or in the name of any Trustee, with said Trustee's approval, any suit or litigation arising under this Agreement involving the Trustee.
(b) In the event that THE NORTHERN TRUST COMPANY incurs any liability, loss, claim, suit or expense (including attorneys fees) in connection with or arising out of its provision of services under this agreement, or its status as trustee hereunder, under circumstances where THE NORTHERN TRUST COMPANY cannot obtain or would be precluded by law from obtaining payment or reimbursement of such liability, loss, claim, suit or expense (including attorneys fees) from the Trust Fund, then the Grantor (which has the authority to do so under the laws of the state of its incorporation) shall indemnify and hold THE NORTHERN TRUST COMPANY harmless from and against such liability, loss, claim, suit or expense, 3
except to the extent such liability, loss, claim, suit or expense arises from (i) a breach by the Trustee of the terms of this agreement (provided, however, that this exception shall not apply to the extent that such breach arises under section 3.06 of the Agreement as a result of the Trustee acting in good faith and in accordance with the direction, instruction or notice of the Grantor or an investment adviser) or (ii) the Trustee's negligence or willful misconduct in the performance of its specifically allocated duties under this agreement. Notwithstanding the foregoing, THE NORTHERN TRUST COMPANY shall not be indemnified for any loss, liability, claim, suit or expense to the extent the Trustee participated knowingly in, or knowingly undertook to conceal, an act or omission of any person or entity constituting a breach of such person or entity's fiduciary responsibility hereunder, knowing such act or omission was a breach; provided however, that the Trustee shall not be deemed to have done so by merely complying with directions of an Investment Adviser or by its failure to act in the absence of such direction or by reason of maintaining accounting records or solely as a result of the normal information received by the Trustee or its officers, employees, or agents in the normal course of performing any custodial, reporting, recording and bookkeeping functions with respect to any assets of the Trust Fund managed by an Investment Manager or the Grantor. This paragraph shall survive the termination of this agreement.
(c) THE NORTHERN TRUST COMPANY (which has the authority to do so under the laws of the state of its incorporation) agrees to defend, indemnify and hold harmless the Grantor, the Trust and its fiduciaries, and the then present and former officers, employees, and directors of the Grantor from and against any and all liability, loss, claim, suit or expense (including attorneys' fees), which arises from (i) a breach by the NORTHERN TRUST COMPANY of the terms of this agreement or (ii) the Trustee's own negligence or willful misconduct in the performance of its duties and responsibilities specifically allocated to it herein.
This paragraph shall survive the termination of this Agreement.
(d) Notwithstanding the foregoing subparagraphs (b) and (c), neither the Company nor the Trustee shall be responsible for consequential or special damages under such subparagraphs.
(e) The Trustee shall not be responsible for any losses resulting from the deposit or maintenance of securities or other property (in accordance with market practice, custom, or regulation) with any recognized foreign clearing facility, book-entry system, centralized custodial depository, or similar organization. The Trustee shall not be responsible or liable for any losses or damages suffered by the Trust Fund arising as a result of the insolvency of any custodian, subtrustee or subcustodian, except to the extent the loss or damage was due to the Trustee's failure to prudently select or periodically monitor a custodian, subtrustee or subcustodian. Settlements of transactions may be effected in trading and processing practices customary in the jurisdiction or market where the transaction occurs. The Grantor acknowledges that this may, in certain circumstances, require the delivery of cash or securities (or other property) without the concurrent receipt of securities (or other property) or cash and, in such circumstances, the Grantor shall have sole responsibility for nonreceipt of payment (or late payment) by the counterparty.
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2.04 Discharge after Distributions or Termination.
After all distributions (including distributions to a successor Trustee) or any termination under this Agreement or applicable law, the Trustee is discharged from all obligations under this Agreement, and no person or entity has any further right or claim against the Trustee not otherwise provided by statute.
2.05 Legal Action.
In all legal actions regarding the Trust and this Agreement, the Trustee and the Grantor are the only necessary parties. A final judgment not appealed or appealable entered in an action or proceeding against the Grantor, the Trust, or the Trustee is binding and conclusive on the parties to this Agreement and all persons having or claiming to have any interest in the Trust Fund.
ARTICLE 3 INVESTMENT DUTIES, POWERS 3.01 Investment Policy and Limitations.
Certain limitations are placed on investing in and disposing of some securities by the Nuclear Regulatory Commission and in order to avoid disqualification of the Trust for tax purposes and to minimize potential problems with securities regulations. As provided by law and Section 5.04 of this Agreement, an investment must not result in a diversion or use of Trust assets that is not permitted under Internal Revenue Code Section 468A. The Grantor, and to the extent that they have been allocated investment responsibility, the Trustee and any investment advisor appointed by the Grantor shall adhere to the standard of care that a "prudent investor" would use in the same circumstances, such term having the same meaning as the standard set forth in 18 CFR 35.32(a)(3) of the FERC regulations, or any successor regulation.
The Grantor shall be responsible for formulation of the investment policy for the Trust. To the extent that investment responsibility is allocated to the Trustee or investment advisors, the Grantor shall provide written investment guidelines to each entity to which investment responsibility has been allocated, consistent with such investment policy.
3.02 Investment of Trust Fund.
The assets of two or more Reserve Funds may be commingled for investment purposes as the Grantor directs. The Trustee shall apportion any earnings or losses from an investment made with commingled assets to each participating Reserve Fund in the same proportion that the amount invested from each Reserve Fund bears to the total commingled amount invested.
Subject to the provisions of Section 3.04 of this Agreement, the Trustee will invest and reinvest the principal and income of each Reserve Fund and keep those trust assets invested, without distinction between principal and income. If assets of two or more Reserve Funds are commingled for investment purposes, the Grantor shall have the absolute authority to direct the Trustee at any time to liquidate the interests of the Reserve Funds in a commingled investment, and the Trustee shall promptly comply with any such directive. The commingling arrangement undertaken as permitted in this Section 3.02 can be terminated at any time by any Reserve Fund. No Reserve Fund in the commingling arrangement may substitute for itself in the arrangement any person that is not a member to the commingling arrangement.
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Such investments may include, but shall not be limited to the following:
(a) Publicly traded domestic or foreign common and preferred stocks and options thereon, as well as warrants, rights and preferred stocks convertible into common stock, regardless of where or how traded.
(b) Investment grade domestic corporate bonds and debentures and any such securities which are convertible into common stock, domestic or foreign.
(c) Bonds or other obligations of the United States of America or non-U.S. sovereign debt with an equivalent rating of A or higher.
(d) Investment grade obligations of the states and of municipalities or of any agencies thereof.
(e) Investment grade notes of any nature, of foreign or domestic issuers.
(f) Savings accounts, certificates of deposit and other types of time deposits, bearing a reasonable rate of interest based upon the duration, amount, type and geographical area, with any financial institution or quasi-financial institution or any department of the same, either domestic or foreign, under the supervision of the United States or any State, including any such financial institution owned, operated or maintained by the Trustee in its corporate or association capacity (including any department or division of the same) or a corporation or association affiliated with the same.
(g) Any collective, common or pooled trust fund operated or maintained exclusively for the commingling and collective investment of monies or other assets including any such fund operated or maintained by the Trustee or its affiliate. Notwithstanding the provisions of this Agreement which place restrictions upon the actions of the Trustee, to the extent monies or other assets are utilized to acquire units of any collective trust, the terms of the collective trust indenture shall solely govern the investment duties, responsibilities and powers of the trustee of such collective trust and, to the extent required by law, such terms, responsibilities and powers shall be incorporated herein by reference and shall be part of this Agreement. For purposes of valuation, the value of the interest maintained by the Trust Fund in such collective trust shall be the fair market value of the collective fund units held, determined in accordance with generally recognized valuation procedures. The Grantor expressly understands and agrees that any such collective fund may provide for the lending of its securities by the collective fund trustee and that such collective fund's trustee will receive compensation from such collective fund for the lending of securities that is separate from any compensation of the Trustee hereunder, or any compensation of the collective fund trustee for the management of such collective fund.
(h) Open-end and closed-end investment companies (including those for which the Trustee or an affiliate provides services for a fee) regardless of the purposes for which such fund or funds were created, and any partnership, limited or unlimited, joint venture and other forms of joint enterprise created for any lawful purposes otherwise consistent with the investment guidelines set forth herein.
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(i) Notwithstanding anything else in this Agreement to the contrary, including, without limitation, any specific or general power granted to the Trustee, including the power to invest in real property, no portion of a Reserve Fund shall be invested in real estate. For this purpose, "real estate" includes, but is not limited to, real property, leaseholds or mineral interests.
(j) The Trustee may lend the assets of the Trust Fund in accordance with the terms and conditions of a separate securities lending agreement, may settle transactions in futures and/or options contracts, short-selling programs, foreign exchange or foreign exchange contracts, swaps and other derivative investments with third parties.
3.03 Additional Powers of Trustee.
The Trustee has the following powers and authority in the administration and investment of the Trust Fund, to be exercised subject to the other provisions of this Agreement and especially this Article 3:
(a) To purchase, subscribe for, and hold securities or other property authorized by Sections 3.01 and 3.02 as a proper investment for the Trust Fund, and to retain the same in trust.
(b) To sell for cash or credit, exchange, convey, transfer, or otherwise dispose of any securities or other property held in the Trust Fund, by private contract or at public auction. No person dealing with the Trustee is bound to see to the application of the purchase money or to inquire into the validity, expediency, or propriety of any sale or other disposition.
(c) To vote any stocks, bonds, or other securities; to give general or special proxies or powers of attorney with or without power of substitution; to exercise any conversion privileges, subscription rights, or other options, and to make any incidental payments; to oppose, consent to, or otherwise participate in corporate reorganizations or other changes affecting corporate securities, and (unless prohibited by statute) to delegate discretionary powers, and to pay any related assessments or charges; and generally to exercise any ownership powers over stocks, bonds, securities, or other property held as part of the a Reserve Fund.
(d) To keep part of a Reserve Fund in cash or cash balances invested in interest-bearing accounts if the Trustee deems that to be prudent under the circumstances.
(e) To accept and retain for as long as the Trustee deems advisable any securities or other property received or acquired by the Trustee, regardless of any lack of diversification.
(f) To make, execute, acknowledge, and deliver documents of transfer and conveyance and other instruments that may be necessary or appropriate to carry out the Trustee's powers.
(g) To settle, compromise, or submit to arbitration any claims, debts, or damages due or owing to or from a Reserve Fund, to commence or defend legal or administrative proceedings, and to represent the Trust in all legal or administrative proceedings.
(h) To employ suitable agents and counsel (who may be counsel of the Grantor) and to pay their reasonable expenses and compensation. The Trustee may consult with legal counsel 7
approved by the Grantor, which approval shall not be unreasonably withheld, who may also be counsel for the Grantor, with respect to its responsibilities under this agreement and shall be entitled to rely upon the written advice of such legal counsel.
(i) On direction by the Grantor as to the agent and insurance company, to invest in insurance contracts payable to the Trustee or its assignees as beneficiary.
(j) To purchase, enter, sell, hold, and generally deal in any manner in and with contracts for the immediate or future delivery of financial instruments of any issuer or of any other property, foreign exchange and foreign exchange contracts, to grant, purchase, sell, exercise, permit to expire, permit to be held in escrow, and otherwise to acquire, dispose of, hold and generally deal in any manner with and in all forms of options in any combination.
(k) To enter into contracts with one or more persons, firms, associations, or corporations to obtain advice and counsel about investments.
(1) To enter into arrangements for the deposit of funds with banks or trust companies and in connection with the arrangements:
(1) To authorize the depositary to act as custodian of the cash, securities, or other property comprising the funds; (2) To authorize the depositary to convert the funds in whole or in part into, or to invest and reinvest the same in, securities of any kind and nature permitted in this Agreement; and (3) To provide for the payment to the depositary of reasonable compensation for its services.
(m) To cause any securities or other property held as part of the Trust Fund to be registered in its own name or in the name of one or more of its nominees, and to hold any investments in bearer form, but the books and records of the Trustee must at all times show that the investments are part of the Trust Fund and subject to the jurisdiction of the United States, and to hold the property in safekeeping facilities of the Trustee or of other Trustee banks or clearing corporations, in the United States or elsewhere.
(n) To participate in any mergers or consolidations, or any registrations of securities with state or federal authorities regarding any securities held.
(o) To exercise any and all discretionary powers not explicitly or implicitly conferred by this Agreement which the Trustee may deem reasonably necessary and proper to carry out instructions given to the Trustee hereunder and which powers are not in contravention of the terms of this Agreement and applicable law.
(p) To perform any actions in furtherance of its safekeeping duties and obligations under this Agreement in accordance with the standard of care applicable to a prudent, professional custodian for hire acting with the care, skill, prudence, and diligence under the circumstances then prevailing which financial institutions, acting in a like capacity and familiar 8
with such matter, would use, including performing actions to avoid any loss of securities of the Trust in the Trustee's custody under this agreement, including but not limited to loss due to burglary, robbery, hold-up, theft or mysterious disappearance, damage or destruction.
(q) To do all acts, take all proceedings, and exercise all rights and privileges although not specifically mentioned here, as the Trustee deems necessary to administer the Trust Fund and to carry out the purposes of this Agreement.
3.04 Allocation of Investment Responsibility.
(a) Except to the extent that it has allocated investment responsibility to the Trustee or one or more investment advisors, the Grantor shall have investment responsibility for all assets of the Trust and in carrying out such responsibility may direct the investments of the Trust in investments of any kind, including but not limited to, private equity, indirect interests in real estate, and non-investment grade bonds, subject to the limitations contained in this Agreement.
Directed investments under this Section 3.04 may not exceed the total of the Trust Fund.
(b) The Grantor shall have the right, by written notice to the Trustee, to appoint and remove one or more investment advisors and to direct the Trustee to segregate any part or all of the Trust assets into one or more accounts, each of which shall be designated as an "Investment Advisor Account." The Trustee may assume that any Investment Advisor Account previously established and the prior appointment of an investment advisor for that account continues in full force and effect until receipt of written notice to the contrary from the Grantor. The Grantor may also, subject to the written consent of the Trustee, allocate investment responsibility for a designated portion of the Trust assets, which assets shall be segregated into an account known as the Trustee Managed Account. The Grantor shall furnish the Trustee with written investment guidelines, consistent with the terms of this Agreement, for the management of the assets contained in the Trustee Managed Account.
(c) The Grantor, with respect to any Trust assets not held in an Investment Advisor Account or Trustee Managed Account, and each investment advisor, with respect to its designated Investment Advisor Account, shall have all of the investment powers contained in this Agreement, subject to the applicable limitations set forth in the Agreement and, in the case of each investment advisor, such investment guidelines as the Grantor may provide to such investment advisor. The Trustee is not responsible for the selection, terms of appointment, compensation or conduct of any investment manager, broker, salesman, or agent selected by the Grantor, shall follow the directions of the Grantor with respect to Trust assets for which the Grantor has investment responsibility and shall follow the directions of any designated investment advisor, and shall have no responsibility for reviewing or determining whether any investment directed or carried out by the Grantor or a designated investment advisor is consistent with the investment limitations set forth in this Agreement or contained in the investment guidelines for such investment advisor.
(d) Subject to such investment guidelines as may be furnished to it from time to time by the Grantor, the Trustee is free to proceed without the concurrence or affirmative expression of the Grantor to handle, manage, control, invest, and reinvest the Trust Fund assets that are 9
allocated to the Trustee Managed Account under the powers granted in this Agreement with the same force and effect as if this section were not a part of this Agreement.
(e) No person dealing with the Trustee is required to determine whether any sale or purchase by the Trustee has been authorized or directed by the Grantor, and each is fully protected in dealing with the Trustee in the same manner as if this section were not a part of this Agreement.
(f) Whenever the Trustee is directed to purchase or sell assets in the Trust Fund, the Trustee in its sole discretion is permitted at the expense of the Trust to obtain an appraisal of the value of the assets to be purchased or sold.
(g) To the extent that the Trustee has been allocated investment responsibility hereunder, then with respect to the assets held in the Trustee Managed Account, the powers granted the Trustee under Sections 3.02 and 3.03 of this Agreement will be exercised in the discretion of the Trustee. Neither the Trustee nor any other person is under a duty to question the Grantor's direction, and the Trustee will comply as promptly as practicable with such direction if it is consistent with the terms of this Agreement.
ARTICLE 4 OTHER DUTIES OF TRUSTEE 4.01 Notice Regarding Disbursements or Payments.
Payments or disbursements may be made from each Reserve Fund only upon written direction of the Grantor and in accordance with this section. Except for (i) withdrawals being made under 10 C.F.R. § 50.82(a)(8), which include all withdrawals commencing 90 days after the NRC receives a Post-Shutdown Decommissioning Activities Report (PSDAR) from Grantor, (ii) withdrawals credited against sub-accounts established by Grantor for non-radiological decommissioning or spent fuel storage, and (iii) transfers between the Qualified and NonQualified Reserve Funds for the same unit of a nuclear power plant, no payment or disbursement may be made from a Reserve Fund unless the Director, Office of Nuclear Reactor Regulation, U.S. NRC ("NRC Director") has been given written notice of the intent to make the payment or disbursement at least 30 working days before the date of the intended payment or disbursement, and no notice of objection has been received from the NRC Director within the notice period. For purposes of this section 4.01, payments and disbursements do not include ordinary administrative costs and other incidental expenses of the fund, including but not limited to those administrative expenses described in section 4.02. Promptly upon receipt by the Trustee of a written direction to make payments or disbursements from a Reserve Fund, the Trustee shall provide written notice to the NRC Director unless Grantor's direction (a) is accompanied by written notice by Grantor to the NRC Director, or (b) represents that the withdrawal is (i) being made pursuant to 10 C.F.R.
§50.82(a)(8), (ii) credited against a sub-account established for non-radiological decommissioning or spent fuel storage, or (iii) a transfer between the Qualified and NonQualified Reserve Funds for the same unit of a nuclear power plant. Subject to the foregoing, the Trustee will make payments and transfer from a Reserve Fund to the persons or entities, in the manner, in the amounts, and for the purposes specified in the written direction.
After payment, the amount paid is no longer part of the Reserve Fund. Until final decommissioning has been completed, payments or disbursements, other than payment of 10
ordinary administrative costs (including taxes) and other incidental expenses (including legal, accounting, actuarial, investment and trustee expenses), shall be made only for the purposes of paying decommissioning costs (which shall include all decommissioning costs as defined under the Treasury Regulations) or for making transfers to another financial assurance method acceptable under NRC regulations. Each Grantor direction will include a representation by Grantor that the payment or disbursement is in accordance with these purposes, including but not limited to the provisions of this Article 4. The Trustee is not responsible for the application of the payments or for the adequacy of a Reserve Fund after payment to meet and discharge trust liabilities.
4.02 Payment of Compensation, Expenses, and Taxes.
(a) The Trustee will be paid reasonable compensation as agreed upon from time to time in writing by the Grantor and the Trustee. In addition, the Trustee will be reimbursed from the Reserve Funds or, at the option of the Grantor, by the Grantor for all ordinary and necessary expenses incurred in connection with the operation of the Trust, including federal income tax imposed on the modified gross income of the Trust, any state or local tax imposed on the income or assets of the Trust, legal expenses, accounting expenses, actuarial expenses, investment manager fees and trustee compensation and expenses. All taxes levied or assessed on or in respect of a Reserve Fund, whether assessed to the Reserve Fund or the Grantor, will be paid, at the option of the Grantor, by the Grantor, or from the Trust Fund and prorated among the Reserve Funds in proportion to their respective fair-market values at the preceding calendar year end in the case of property taxes and in proportion to their respective taxable incomes for the relevant taxable year in the case of income taxes. To the extent that any taxes are provoked by the investment in or receipt of an identifiable asset or transaction involving a particular Reserve Fund or other particular fund, the taxes will be charged against the appropriate Reserve Fund, giving appropriate effect to computations of income and deductions related to the asset or transaction, and allocating any exemption available among the Reserve Funds in proportion to the tax liability provoked. Identifiable direct expenses will be treated in the same way as taxes.
(b) The Trustee will prepare and file tax returns for the Reserve Funds as directed by the Grantor, provided that the Grantor shall indemnify the Trustee for any penalties, additions to tax, or other amounts for which it may be charged or may incur in connection with such preparation and filing, including but not limited to that due to a position taken on such returns.
The Trustee may assume that any taxes assessed on or with respect to the Trust Fund are lawfully assessed unless the Grantor advises the Trustee in writing that in the opinion of counsel for the Grantor the taxes are or may be unlawfully assessed. When so advised and requested in writing by the Grantor, the Trustee will contest the validity or the taxes in any manner deemed appropriate by the Grantor or its counsel) in which event the Trustee will execute all documents, instruments claims, and petitions necessary or advisable in the opinion of the Grantor or its counsel for the refund, abatement) reduction or elimination of taxes. Reasonable expenses incurred by the Trustee in connection with such a contest will be reimbursed as provided in paragraph (a) of this section.
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4.03 Accounting.
(a) The Trustee will keep accurate and detailed accounts of all investments, receipts, disbursements, and other transactions for the Reserve Funds and the Trust Fund. All accounts, books, tax returns, and records relating to the Trust are open to inspection and audit at all reasonable times by any person designated by the Grantor and at the expense of the Grantor.
(b) An account of the Trustee may be approved by the Grantor by written notice delivered to the Trustee or by failure to object to the account by written notice delivered to the Trustee within one hundred twenty (120) days of the completion of the Plan's annual audit by the Grantor or its appointed auditor. The approval of an account shall constitute a full and complete discharge to the Trustee as to all matters that are set forth in that account as if the account had been settled by a court of competent jurisdiction in an action or proceeding to which the Trustee, and the Grantor were parties. In no event shall the Trustee be precluded from having its accounts settled by a judicial proceeding.
(c) Except as specifically provided by statute, no person other than the Grantor may require an accounting or bring an action against the Trustee about the Trust or the actions of the Trustee. The Trustee is not required to make reports to any courts or administrative agencies, except as specifically directed by Grantor or as otherwise required by applicable law.
4.04 Valuation.
(a) As of each calendar year end, the Trustee will determine the fair-market value of the Trust Fund and each Reserve Fund and report that value to the Grantor in writing.
(b) Non-cash contributions are valued at fair-market value determined by the Trustee as of the actual date on which the Trustee accepts the property.
(c) In determining the net worth of the Trust Fund and the Reserve Funds, the Trustee will deduct all allocable expenses.
ARTICLE 5 AMENDMENT AND TERMINATION OF THE TRUST 5.01 Amendment of the Trust.
The Grantor has the right at any time to amend this Agreement in whole or in part, but:
(a) No amendment may authorize or permit any assets of the Trust Fund (other than those required to pay taxes and other administration expenses) to be used for or diverted to purposes other than the costs of decommissioning the Grantor's nuclear power plants, except as may be required by any court or regulatory authority, and (b) No amendment may be made that changes the Trustee's duties or liabilities without the Trustee's written consent, such consent being evidenced by Trustee's written agreement to such amendment.
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An amendment may be made retroactively if such application is necessary to bring the Trust, the Grantor, or the Virginia Electric and Power Company Qualified Nuclear Decommissioning Trust (another trust between the Grantor and the Trustee) into conformity with the Internal Revenue Code, Treasury regulations, or any other applicable statute or regulation.
5.02 Termination Of Reserve Funds.
Except as otherwise provided by law, each Reserve Fund terminates upon completion of all nuclear power plant decommissioning that it has been created to fund, as certified to the Trustee by the Grantor, or upon the frustration or failure of the trust's purposes. Upon termination of a Reserve Fund, any of the Reserve Fund that remains shall revert to the Grantor free of trust.
5.03 Merger, Consolidation, or Succession.
(a) A corporation with which the Grantor is merged or a corporation or other legal entity which acquires substantially all the assets of the Grantor, shall become the Grantor for purposes of this Agreement, and every reference in this Agreement to the Grantor will be treated as a reference to that surviving or purchasing corporation or other legal entity.
(b) If the Grantor is liquidated, merged, or consolidated with another company or other legal entity and the Grantor's successor chooses not to discharge the Grantor's duties under this Agreement, the Trust nevertheless will survive and the Trust Fund will continue in trust under the terms of this Agreement. In such a case, the Trustee may, but shall not be required to, petition a court of competent jurisdiction seeking the appointment of a party to succeed to the responsibilities of the Grantor. In seeking such an order, the Trustee shall be held harmless and indemnified by the Grantor or its successor. Any expenses incurred by the Trustee in seeking said court order shall be the responsibility of the Grantor or its successor until paid.
(c) The merger or consolidation of the Trust with, or a transfer of assets or liabilities from this Trust to another trust or fund is not permitted unless the Trustee has received an opinion of counsel satisfactory to the Trustee to the effect that the merger, consolidation, or transfer results in no diversion or use of assets that is not permitted by the Agreement.
5.04 Impossibility of Diversion.
Until a Reserve Fund terminates, assets of a Reserve Fund may not be used for or diverted to purposes other than the purposes permitted by this Agreement.
ARTICLE 6 MISCELLANEOUS PROVISIONS 6.01 Construction.
The Grantor's intent and purpose in creating the trusts hereunder and executing this Agreement is to maintain Nuclear Decommissioning Reserve Funds to provide for the costs of decommissioning the Grantor's nuclear power plants. All questions arising in the administration of the Trust and in the construction of this Agreement will be resolved accordingly. This Agreement will be construed, enforced, and administered in accordance with the laws of the 13
State of Illinois, except to the extent that the laws of the United States of America take precedence, in which event, this Agreement will be construed in accordance with the laws of the United States of America. The headings and subheadings in this Agreement have been inserted for convenience only and are to be ignored in construction of the provisions.
6.02 Rights under the Trust.
No person other than the Grantor has any vested rights under the Trust except to the extent that rights may accrue under other agreements made by the Trustee. Except as permitted by law, no assignment of any rights or benefits under the Trust is permitted or recognized, nor will any rights or benefits be subject to attachment or other legal or equitable process or subject to the jurisdiction of any bankruptcy court.
6.03 Frustrated Actions.
If it becomes impossible for the Grantor or the Trustee to perform an act, then that act will be performed which, in the discretion of the Trustee, most nearly carries out the intent and purpose of this Agreement.
6.04 Construction of Direction.
Whenever the Grantor or Trustee is directed to take an action upon the occurrence of an event, neither is under obligation to take that action until it has received proper and satisfactory written notice of the occurrence.
6.05 Authorizations and Communication.
A written authorization or communication from an officer of the Grantor or the Trustee that an event has occurred constitutes conclusive evidence of the occurrence, and the Grantor or Trustee is fully protected and discharged from all liability in accepting and relying upon that authorization or communication.
6.06 Genuine Notice; Direction.
The Grantor or the Trustee will not incur liability to any persons or party when acting on a notice, request, consent, direction, instruction, letter, telegram, or other paper or document that it believes to be genuine, and to have been signed or sent by the proper person.
6.07 Binding Nature.
This Agreement is binding upon the heirs, executors, administrators, successors, and assigns of all parties, present and future.
6.08 Settlement of Transactions and Collateral.
The Trustee may take all action necessary to pay for, and settle, authorized transactions, including disbursements or expenses, or the purchase or sale of foreign exchange, or of contracts for foreign exchange, and including exercising the power to borrow or raise monies from the 14
Trustee in its corporate capacity or an affiliate. To secure expenses and advances made to settle or pay for authorized transactions, including payment for securities and disbursements, the Grantor grants to the Trustee a first priority security interest in the Trust Fund, all property therein, all income, substitutions and proceeds, whether now owned or hereafter acquired (the "Collateral"); provided that the Grantor does not grant the Trustee a security interest in any securities issued by an affiliate of the Trustee (as defined in Section 23A of the Federal Reserve Act). The parties intend that as the securities intermediary with respect to the Collateral, the Trustee's security interest shall automatically be perfected when it attaches. To the extent the Trustee advances funds to the Trust Fund for disbursements or to effect the settlement of purchase transactions, the Trustee shall be entitled to collect from the Trust Fund reasonable charges established under the Trustee's standard overdraft terms, conditions and procedures.
6.09 Force Maieure.
Neither party shall be responsible for any delay in performance, or non-performance, of any obligation hereunder to the extent that the same is due to forces beyond its reasonable control, including but not limited to delays, errors or interruptions caused by the Grantor or third parties, any industrial, juridical, governmental, civil or military action, acts of terrorism, insurrection or revolution, nuclear fusion, fission or radiation, failure or fluctuation in electrical power, heat, light, air conditioning or telecommunications equipment, or acts of God.
6.10 Representation and Warranty as to Authority.
The Grantor and the Trustee hereby each represent and warrant to the other that it has full authority to enter into this Agreement upon the terms and conditions hereof and that the individual executing this Agreement on its behalf has the requisite authority to bind the Grantor or the Trustee to this Agreement.
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IN WITNESS of this Amended and Restated Agreement, the Grantor and the Trustee have signed below on this __ day of , 2012.
VIRGINIA ELECTRIC AND POWER COMPANY By:
Title:
THE NORTHERN TRUST COMPANY, TRUSTEE By:
Title:
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