2015 Interim POWER SALES AGREEMENT BETWEEN MATANUSKA
ELECTRIC ASSOCIATION, INC. AND CHUGACH ELECTRIC ASSOCIATION, INC.

This INTERIM POWER SALES AGREEMENT (the “Agreement”) by and among MATANUSKA
ELECTRIC ASSOCIATION, INC. (“MEA”) and CHUGACH ELECTRIC ASSOCIATION, INC.
(“Chugach”) is made and entered into effective as of September 30, 2014.

RECITALS

A. After receiving notice from MEA in 2004, the Modified Agreement for the Sale
and Purchase of Electric Power by and among Chugach, MEA and Alaska Electric
Generation and Transmission Cooperative, Inc., dated April 5, 1989 (the “1989
Agreement”), is set to expire as of midnight December 31, 2014.

B. MEA notified Chugach on August 12, 2014, that it anticipated that the Eklutna
Generation Station power plant (“EGS”) would not be completely online by January
1, 2015 and that MEA needs another power source, probably through March 1, 2015.

C. MEA anticipates that it may have some EGS units available to pool with
Chugach units to meet the combined system load of Chugach and MEA on January 1,
2015 through the term of this Agreement and desires to place these units into
economic dispatch once they reach commercial operation.  Chugach will purchase
the pooled energy and recover the costs from all members, including MEA, through
Chugach’s fuel and purchased power rates. Chugach is willing to provide MEA with
all demand and energy requirements on a firm basis based on existing tariff
rates, taking into account Chugach’s various obligations to other parties, for a
minimum one-quarter period beginning on January 1, 2015 and ending as of
midnight March 31, 2015.

D. MEA entered into that certain Gas Sale and Purchase Agreement between Hilcorp
Alaska, LLC (“Hilcorp”) and MEA, dated July 1, 2013 (the “Hilcorp Agreement”).

E. MEA desires to supply and deliver any and all additional gas and attendant
gas transportation necessary for Chugach to produce electric service to MEA
arising as a result of the electric services to be provided by Chugach pursuant
to this Agreement and Chugach desires to receive and use such gas and attendant
transportation.

NOW, THEREFORE, in consideration of the mutual promises and agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:

SECTION 1. AGREEMENT

1.1 Sale and Purchase.  In consideration of mutual covenants herein, Chugach
agrees to sell and deliver, and MEA agrees to purchase and receive, Electric
Power, subject to the following terms and conditions.  In consideration of
mutual covenants herein, MEA agrees to supply and deliver, and Chugach agrees to
receive and use natural gas, subject to the following terms and conditions.

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1.2 System Sale.  The power which Chugach is obligated to sell under this
Agreement is power generated by and/or purchased and transmitted over Chugach’s
Generation and Transmission System, except as provided in Section 4.1(d).  Thus,
this sale is a “system sale” supported by the resources of Chugach’s entire
Generation and Transmission System, and not a “resource sale” supported by
specific, distinct and identifiable generating units and transmission facilities
included within that System.   However, Chugach must fulfill its obligations
under its various existing agreements. For instance, Chugach has an existing
economy energy agreement with Golden Valley Electric Association (“GVEA”) to
provide GVEA with the system average heat rate 1st quarter 2015, which was
determined on the expectation that the 1989 Agreement would expire on December
31, 2014.  As a result, if the system average heat rate is more than what was
otherwise dispatched due to serving MEA, Chugach reserves the right to adjust
the system average heat for Chugach’s system, including its provision of
wholesale service to the City of Seward, (Chugach/SES) and MEA to meet the terms
of the GVEA agreement. MEA would receive the same average heat rate as
Chugach/SES.

SECTION 2. 1989 AGREEMENT EXPIRED

The parties hereby acknowledge that the 1989 Agreement and all rights and
obligations thereunder shall expire December 31, 2014.

SECTION 3. TERM

This Agreement shall become effective upon the obtaining of all necessary
regulatory and administrative approvals, including that of the Commission as
mentioned in Section 17 or otherwise required by law (the date of which shall
herein after be referred to as the “Effective Date”) and shall continue in force
until March 31, 2015 unless extended as provided herein.

SECTION 4. POWER AND ENERGY DELIVERIES

4.1 Firm Service.  Provided that this Agreement receives the necessary
Commission approval by then, from 12:01 a.m. prevailing time in Anchorage,
Alaska, on January 1, 2015 until 11:59 p.m. prevailing time in Anchorage,
Alaska, on March 31, 2015, Chugach shall supply and be paid for electric
capacity and energy under this Agreement on a full (i.e., total) requirements
basis, and MEA’s full system demand for capacity and full system requirements
for energy shall be met and obtained by MEA from Chugach.  The rates, terms and
conditions of service are subject to change by Chugach in accordance with
applicable law.  The following rate-making and billing provisions shall apply to
such full requirements service:

(a) Customer Charge.  MEA shall pay Chugach each month during the term of
Chugach’s services herein Chugach’s then-applicable customer charge (identified
on Tariff Sheet No. 99, 47th Revision canceling 46th Revision, effective June 1,
2014, and as may be modified by the Commission pursuant to the final
adjudication of Docket U-14-01 (“Tariff Sheet No. 99”)).

(b) Billing Demand and Payment for Capacity.  Chugach will charge and be paid
MEA’s full system demand for capacity each month multiplied by the
then-applicable

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demand charge (identified on Tariff Sheet No. 99) to produce the required
payment for electric capacity in that month.  Chugach’s billing demand and
energy to MEA shall include as additional load MEA’s non-firm purchases from the
Southfork Hydroelectric Facility.

(c) Payment for Energy.  Chugach will charge and be paid for energy for each
monthly billing period in an amount equal to Chugach’s then-applicable energy
charge (identified on Tariff Sheet No. 99) multiplied by MEA’s total system
energy requirements for that month, which energy requirements shall be metered
at the Points of Delivery.

(d) Purchased Power Costs.  Chugach will charge and be paid for purchased power
costs on an average cost basis, except that additional costs associated with
purchases of power from the wind energy conversion facility on Fire Island shall
not be included for purposes of calculation of such averages costs.

(e) Fuel Costs.  In accordance with the attached Exhibit A, (i) Chugach shall
credit MEA for natural gas on an average cost basis for all units used to
generate pooled power, whether owned by Chugach or MEA and (ii) MEA shall supply
any and all additional gas and attendant gas transportation necessary for
Chugach to supply the electric service contemplated by this Agreement, and
Chugach shall be responsible for dispatch and coordination in connection with
such natural gas purchases.

 

(f) Fuel and Purchased Power Balancing Account.  Any remaining balance (over or
under recovery) in MEA’s fuel and purchased power balancing account at the
termination of this Agreement shall be paid in full.  A balance with an
over-recovery shall be paid by Chugach to MEA, and a balance with an
under-recovery shall be paid by MEA to Chugach.  Balances shall be paid within
30 days following the Commission’s approval of the final month’s allocation of
fuel and purchased power costs.

 

(g) Net Billing of MEA’s Eklutna and Bradley Lake Hydroelectric Projects.  For
the duration of this Agreement, Chugach will be entitled to schedule the
generation of and to receive from MEA any power which is produced by the Eklutna
Hydroelectric Project and the Bradley Lake Project and which MEA is entitled to
receive under the power sales agreements or other arrangements governing the
disposition of power from those Projects.  For purposes of supplying and making
rates for power sold to MEA, Chugach will be entitled to co-mingle and to
include with all other electric power available to Chugach for such purposes any
such power Chugach receives from MEA under this Section.  Notwithstanding any
other provision of this Agreement, MEA shall remain obligated to pay (pursuant
to the power sales agreements or other arrangements governing the disposition of
power from the Projects) its share of the cost of power from the Eklutna
Hydroelectric Project and from the Bradley Lake Project.  This Agreement shall
not be considered to constitute, nor shall it be relied upon as, an assignment
of MEA’s shares of the Eklutna Hydroelectric Project and/or the Bradley Lake
Project to Chugach.  Through the mechanism of billing credits, however, Chugach
will reimburse MEA for any such costs actually incurred pursuant to such
agreements or other arrangements.  The effect of such billing credits shall be
to reduce the net amounts that MEA is otherwise obligated to pay Chugach for
power purchased from Chugach.  The specific method of implementing this net
billing credit arrangement shall be that previously followed under the Net
Billing Agreement

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(Eklutna And Bradley lake Hydroelectric Projects) between the Parties dated
December 16, 1987.

 

(h) Operating Contingencies for First Quarter of 2015.  MEA acknowledges that
continuing cost-effective power production to serve MEA after December 31, 2014
requires Chugach to continue operation of its combined-cycle Beluga Units 6, 7
and 8. Chugach plans to continue operation of Beluga Units 7 and 8 for the first
quarter of 2015 to meet its obligations to serve the Chugach retail and
wholesale customers. Continuing cost-effective power production to serve MEA
requires continued operation of Beluga Unit 6 in combination with Beluga Units 7
and 8. Operation of Beluga Unit 6 after December 31, 2014 and through March 31,
2015 could require additional Beluga Unit 6 maintenance and/or critical
component repairs based on the existing and projected fired hours of the unit.
Since Chugach did not expect this level of operation for Beluga Unit 6 after
December 31, 2014, and the normal maintenance intervals may be exceeded, Chugach
cannot guarantee the Beluga Unit 6 will be available in accordance with standard
system availability criteria.  To the extent that Chugach determines that Beluga
Unit 6 will not be available for dispatch for the remaining term of this
agreement then Chugach will provide MEA with a two-week notice regarding Beluga
Unit 6’s unavailability starting date. If Beluga Unit 6 is unavailable for any
reason then Chugach may have to operate, according to economically based merit
dispatch, one or more simple-cycle units to replace the combined-cycle operation
to provide MEA firm service.  In the event Beluga Unit 6 operations are
restricted or unavailable at any time during the term of this agreement and MEA
EGS units are not available per Section 5.0, Power Pooling, MEA shall provide
and pay for the additional fuel to offset the incremental increase in fuel. The
provision of this fuel shall be in accordance with Section 4.1(e) and Exhibit A.

4.2 Extension of Term.  By providing written notice to Chugach on or before
January 5, 2015 that includes the period of days for extension, MEA may extend
the period for the services described in Section 4.1, until 11:59 p.m.
prevailing time in Anchorage, Alaska, for a continuous period that ends on or
before June 30, 2015.  Such a service extension shall extend the term of this
Agreement through the end of the period mutually agreed to by Chugach and
MEA.  Such an extension of services and the term of this Agreement shall not
require a separate and secondary approval of the Commission apart from the
required approval of this Agreement in its entirety referenced in Section
3.  During any extended term, as noted above, Chugach may have to operate one or
more simple-cycle units to replace the combined-cycle operation to provide MEA
firm service.  In the event Chugach must operate one or more simple-cycle units
to provide MEA firm service, MEA shall provide and pay for the additional fuel
to offset the incremental increase in fuel.  The provision of this fuel shall be
in accordance with Section 4.1(e) and Exhibit A. And per Section 25 of this
Agreement, Chugach shall maintain and provide to MEA all documents reasonably
necessary to support the need for this incremental increase in fuel.

4.3 Resale of Chugach Power Prohibited; Limit on Amount of Power Actually
Taken.  MEA agrees that (1) all electric power delivered under this Agreement
shall be used to serve MEA’s retail electric loads as ultimate consumers and
end-users of the power, and (2) no power taken under this Agreement may or will
be resold to any other entity or otherwise used or disposed of, by contractual
agreement or otherwise, in any other manner or for any other purpose.  To assist
in enforcing this provision, the parties agree that at no time will MEA take,

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and at no time will Chugach be obligated to supply, capacity or energy under
this Agreement in amounts in excess of the then-existing MEA system demand or
requirement for capacity and energy.

SECTION 5. POWER POOLING

5.1 Pooling of MEA Eklutna Generation Station (EGS) power plant.  MEA may pool
EGS generation to the extent Chugach, in its sole judgment and according to good
utility practice, can economically incorporate MEA’s generation into the
Chugach/MEA dispatch.  Chugach will use commercially reasonable efforts to
utilize the EGS generation as part of an economic-based merit dispatch of the
Chugach pool to serve the combined load of Chugach’s retail/wholesale customers
and MEA’s load.  Due to Chugach’s combined-cycle (SPP and Beluga 6/7/8) unit
sizes and minimum operating limits, the Parties recognize that Chugach may be
limited in its ability to operate more than four (4) EGS units at one
time.  Based upon preliminary production runs the maximum efficiency is based on
incorporation of four (4) EGS units operated in either peaking or secondarily in
load blocking mode (base loaded for periods of day).  The Parties will
communicate daily as to the best operating scenario given the status of
operating parameters during plant start-up. 

5.2 Notice of Generation Available for Pooled Operation. MEA shall notify the
Chugach dispatch center when the EGS units are available for pooled
operation.  Once the notice is provided, Chugach will place such units in
economic dispatch with its other generation resources for the term of this
Agreement, unless such units are returned for further testing and commissioning
as hereinafter described. The Parties acknowledge that Chugach will
simultaneously be dispatching other EGS units for testing and commissioning
pursuant to that certain Eklutna Generation Station Commissioning Dispatch
Service and Test Power Agreement, dated August 1, 2014, by and between the
Parties and attached as Exhibit B (the “Test Power Agreement”). The terms of the
Test Power Agreement and not this Agreement shall govern with respect to units
which are undergoing testing and Commissioning. Power produced from units
undergoing testing and commissioning will not be incorporated into the power
pool.  If a unit is placed into pooled operation and its performance is not
within acceptable standards of availability, Chugach will remove such unit from
economic dispatch and return it for further commissioning and all energy
received will be considered test power with no remuneration.

5.3 Payment for MEA Pooled Generation. Chugach will pay MEA a negotiated monthly
capacity charge of $13.31 per kW per month x 16,500 kW per unit for 4 generating
units unless Chugach, in Chugach’s sole judgment, deems that additional EGS
generating capacity will improve economic efficiency, in which case Chugach also
can request and pay a capacity charge for additional EGS units.  The capacity
charge will only apply to EGS units available for commercial operation at the
start of the month. For billing purposes, units not available at the first of
any month, but which later become available for commercial operation on or
before the fifteenth of the month, will be billed a prorated capacity charge for
that month equal to 50% of the monthly capacity charge. In addition, Chugach
will pay MEA a negotiated monthly Operations and Maintenance charge of $0.01390
per kWh for each kWh of commercial operation by an EGS generating unit(s) during
the month.  Chugach will purchase the pooled energy and recover the costs from
its members, including MEA, through Chugach’s fuel and purchased power rates.

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5.4 The methodology for computing the capacity charge of $13.31 per kW is
included in Exhibit C.  The parties acknowledge that due to the absence of final
capitalized costs at the time MEA’s EGS units are placed in commercial operation
for pooled generation, the per kW capacity charge of $13.31 shall be designated
as interim and subject to adjustment pending final approval of the EGS
capitalized costs and related expenses as set forth by the Regulatory Commission
of Alaska in its final order regarding MEA’s next retail rate filing
proceeding.  MEA shall submit such a retail rate filing to the Commission based
on a 12-month test year ending December 31, 2016 that includes revenue
requirements pertaining to the EGS power plant and EGS switchyard. Once those
revenue requirements are approved by final order of the Commission, the interim
capacity charge shall be adjusted for charges assessed during the term of this
Agreement to reflect the final, Commission approved cost levels to be recovered
in MEA’s rates.  In no event, however, shall the adjustment to the interim
capacity charge result in a per kW charge that is greater than (110 percent of
$13.31) $14.64 per kW. 

5.5 The methodology for computing the interim O&M charge of $0.01390 per kWh is
included in Exhibit C.  The interim O&M charge shall be adjusted for charges
assessed during the term of this Agreement to reflect the final, Commission
approved cost levels pertaining to the EGS power plant and EGS switchyard to be
recovered in MEA’s rates, as set forth in the Commission’s final order
referenced in Section 5.4 above.

SECTION 6. CAPITAL CREDITS

MEA will remain a member of Chugach during the term of this Agreement and will
be entitled to all the rights and privileges of members, including the
allocation and payment of any capital credits resulting from the purchase of
electric power hereunder.  All capital credits earned by MEA under this
Agreement will NOT be subject to the terms of the settlement agreement between
the Association and Matanuska Electric Association in the matter entitled
Matanuska Electric Association, Inc., vs. Chugach Electric Association, Inc.,
No. 3 PA-13-01006 CI, and will be separately accrued, allocated and distributed
under rules generally applicable to other wholesale customers.  Any such
retirements shall be determined at the discretion of the Chugach Board of
Directors. This Agreement does not alter the terms of the settlement between the
parties in case number 3 PA-13-01006 CI.

SECTION 7. BILLING AND PAYMENT

7.1 Monthly Billing.  Chugach shall endeavor to render bills to MEA on or before
the 10th day of each calendar month for services furnished during the preceding
billing month.  In such bills, Chugach may designate certain items as being
estimated due to unavailability of final underlying data, in which event
adjustments to the correct amounts, when amounts are determined, shall be
included in a bill for subsequent months.  Chugach may, in its sole discretion,
postpone issuance of bills or portions of bills pending receipt from MEA of
actual invoices (from the party selling the gas or providing the transportation)
for gas purchases and transportation in the prior month and invoices for power
purchased by Chugach from MEA.

7.2 Payment.  Payment by MEA shall be due in Chugach’s office by the 15th day
after mailing of the bill.  If Chugach’s bill is delayed in the mail and not
received by MEA within

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ten days of the date shown on the postmark, MEA shall immediately notify Chugach
and agree with Chugach on a new due date, but in no event shall Chugach be
required to accept a delay in payment beyond 15 days from the date of MEA’s
actual receipt of the bill.  Payment may be mailed, directly deposited to
Chugach, or paid in person, to Chugach’s main office in Anchorage.

7.3 Billing Disputes.  In the event any portion of any bill is disputed (i.e.,
in any circumstance when a bill from Chugach is not paid fully and in timely
fashion and with protest):

(a) MEA shall request, by written notice delivered to Chugach not later than the
date payment is due (or earlier, if in good faith it is reasonably possible for
MEA to afford Chugach earlier notice), a meeting with Chugach to resolve the
billing dispute.  Such notice shall provide Chugach a detailed written
explanation of why the amount is in dispute, and shall specify at least three
specific days within a two week period, beginning on the day after the notice is
delivered, on which MEA can attend the meeting.  Chugach will select a meeting
day from among those specified and so notify MEA, orally or in writing, or, if
none of the days is convenient for Chugach, the parties will in good faith
endeavor to agree on another meeting date within the same two week period.  At
such meeting the parties will in good faith endeavor to resolve the billing
dispute, either immediately or through subsequent meetings or discussions within
the one-month period immediately following the date on which payment was due.

(b) At any time after one month has elapsed from the date payment was due,
either Chugach or MEA may seek immediate judicial enforcement of this Agreement
in the Superior Court for the State of Alaska, Anchorage District, with respect
to such payment.

(c) Pending resolution of the billing dispute in accordance with the procedures
of this Section, the undisputed portion of each bill shall be paid to Chugach in
timely fashion and the disputed amount must be paid in full in timely fashion
either to Chugach under protest or to a licensed and bonded escrow agent.  If an
escrow agent is used, MEA shall obtain Chugach’s prior approval of the escrow
agent to be used and the instructions to the escrow agent governing the
conditions of release of the escrowed funds.  If the disputed amount has been
paid to Chugach under protest, and if any or all of the disputed portion is
later found to be not owed, Chugach shall refund to MEA the amount not owed plus
interest, on a monthly basis at the weighted average interest expense of
Chugach’s contemporaneous short-term borrowings, to the date the refund check is
mailed by Chugach.  If the disputed amount has been paid into escrow, no such
interest shall be paid to MEA by Chugach, but if any or all of the disputed
portion is later found to be owed to Chugach, then MEA or the escrow agent shall
pay Chugach that amount, and in addition MEA shall pay or cause Chugach to be
paid interest, computed in the same manner, to the date the payment is made to
Chugach.

SECTION 8. CONTINUITY OF SERVICE

8.1 Capacity to be Made Available.  Chugach shall at all times, except when
prevented by an Uncontrollable Force, make electric capacity continuously
available to MEA at the Points of Delivery in the amount of MEA’s total demand
for electric capacity.

8.2 Restoration of Service.  In the case of a partial or total loss of service
to MEA as a result of problems encountered on the Chugach system, Chugach will
extend its reasonable best

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efforts to restore service in a prompt and non-discriminatory manner and to
notify MEA promptly of the estimated time required for restoration, and further
inform MEA as to the cause of the loss of service as soon as possible following
determination thereof.  MEA in turn will promptly notify Chugach of major
disruptions of service caused by problems on the MEA system, including an
estimated time for repairs and a proposed schedule of major circuit restoration.

8.3 No Duty to Third Parties.  This Agreement shall not create on the part of
MEA or Chugach any legal duty owed to the retail customers of either party or to
other wholesale or wheeling customers of Chugach, including without limitation,
any legal duty to maintain continuity of Electric Power service.  Nothing in the
foregoing sentence shall limit the rights afforded Chugach and MEA under this
Agreement.

SECTION 9. FACILITIES AND EQUIPMENT

Both parties shall at all times design, construct, maintain, operate, and repair
their respective facilities and equipment in accordance with Prudent Utility
Practice.

SECTION 10. METERING

Chugach and MEA shall (1) make or provide for tests and inspections of all
meters and recorders used for billing purposes in this Agreement in order to
maintain a commercial standard of accuracy, (2) restore to a condition of
accuracy any meters or recorders found to be inadequate, and (3) advise the
other party promptly of the results of any such test which shows any inaccuracy
more than 1 percent slow or fast.  Each party shall be permitted to have
representatives present at such tests and inspections.  The entity conducting
the tests and inspections shall notify the other party at least one (1) week in
advance.  Each party shall make or provide for additional tests of its meters or
recorders at the request of the other party and in the presence of
representatives of the requesting party or parties.  In the event that the
result of such tests shows a meter or recorder registering in excess of 1
percent either above or below the current registration, then the readings of
such meter previously taken for billing purposes shall be corrected according to
the percentage of inaccuracy so found for the known or estimated period of such
error, but no such correction shall extend beyond ninety (90) days previous to
the day on which the inaccuracy is discovered by such test.  For any period that
a meter or recorder should fail to register, or its registration should be so
erratic as to be meaningless for billing purposes, the bill for power and energy
shall be based upon records from check meters, if available and tested for
accuracy, or otherwise upon the best available data.

SECTION 11. GOOD FAITH PERFORMANCE OF RIGHTS AND OBLIGATIONS

Each party to this Agreement covenants and agrees to act in good faith under
this Agreement and the terms cited herein, and to act and perform in a manner
consistent with Prudent Utility Practice.

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SECTION 12. FORCE MAJEURE

In the event Chugach, by reason of an Uncontrollable Force, is rendered unable,
wholly or in part, to perform its obligations under this Agreement (other than
its obligations to pay money), then upon Chugach giving notice and particulars
of such Uncontrollable Force, its obligation to perform shall be suspended or
correspondingly reduced during the continuance of any inability so caused, but
in no greater amount than required by the Uncontrollable Force and for no longer
period, and the effects of such cause shall, so far as possible, be remedied
with all reasonable and prompt dispatch.  Chugach shall not be responsible for
its delay in performance under this Agreement during delays caused by an
Uncontrollable Force.

SECTION 13. RESPONSIBILITY FOR POWER SUPPLY AND DELIVERY

13.1 Responsibility of Parties.  Except as provided in Sections 13.2 and 13.3,
each party shall assume responsibility on its respective side of the Points of
Delivery for the electric service or natural gas supplied or taken, as well as
for maintenance of any apparatus used in connection therewith.  Regardless of
the foregoing and of the location of any Point of Delivery or metering point,
however, each party shall be responsible for maintaining and operating its own
facilities unless (1) a different division of responsibilities is agreed upon in
writing by the parties, or (2) a different division of responsibilities in
specific emergency circumstances is agreed upon orally or in writing by the
parties.  Delivery (which shall be made free and clear of all liens, claims and
encumbrances) and risk of loss of the electric service or natural gas supplied,
and, in the case of electric service supplied, transfer of title, shall take
place at the Points of Delivery.

13.2 Indemnification.  Each party shall, as to all actions taken relevant to
this Agreement, indemnify and hold harmless each other party, its directors,
officers, and employees, against all loss, damage, legal expense and liability
to third persons arising from any injury to, or death of, persons or injury to
property to the extent caused by any intentional or negligent act or omission of
the indemnifying party, or its directors, officers, or employees.

13.3 Notice, Defense and Settlement of Legal Proceeding.

(a) If any legal proceeding shall be instituted, or any claim or demand made,
against either party hereto (hereinafter called the “Indemnified party”) with
respect to which the other party (hereinafter called the “Indemnifying party”)
may be liable hereunder, the Indemnified party shall give prompt written notice
thereof, within thirty days thereof by certified mail, return receipt requested,
and promptly deliver a true copy of any summons or other process, pleading or
notice to the Indemnifying party.

(b) In any action in which there is no reasonable possibility of joint liability
of both parties to this Agreement, the Indemnifying party shall have the
absolute right, at its sole expense and without the consent of the Indemnified
party, to defend and settle any such legal proceeding, claim or
demand.  However, the Indemnifying party shall give notice, if possible, to the
Indemnified party of any proposed settlement.  In no event shall the
participation of the Indemnified party in the defense and settlement of any
legal proceeding, claim or demand, interfere with or alter the Indemnifying
party’s absolute right to control the defense and/or

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settlement of the legal proceeding, claim or demand.  The Indemnified party may,
if it sees fit, participate in defense of any such legal proceeding, at its own
expense.

(c) Where joint liability of both parties to this Agreement is a reasonable
possibility, neither party shall be limited in their participation in the
action.

(d) If the Indemnified party, without the prior consent of the Indemnifying
party (which consent, if requested, shall not be unreasonably withheld), makes
any settlement with respect to any such legal proceeding, claim or demand, the
Indemnifying party shall be discharged of any liability hereunder with respect
thereto.

(e) The Indemnifying party shall pay all reasonable costs incurred by the
Indemnified party in any successful enforcement of this indemnity.

SECTION 14. INSURANCE

14.1 Risks to be Insured Against.  Each party agrees to use its best efforts to
obtain and maintain in full force and effect during the term of this Agreement,
adequate insurance with responsible insurers, qualified under the guidelines
established by the State of Alaska, Division of Risk Management or Division of
Insurance, against:

(a) public liability for bodily injury and property damage, in amounts not less
than $5 million;

(b) each party’s obligations under the applicable Worker’s Compensation laws of
the State of Alaska, and employer’s liability in an amount not less than $1
million; and

(c) any other insurance agreed upon by the parties.

14.2 Availability of Insurance.  The obligation to maintain insurance coverage,
pursuant to this Section, shall be subject to the general availability of such
coverage under reasonable terms and conditions.  If one or more of the required
insurances is not available under reasonable terms and conditions, each party
agrees to use its reasonable best efforts to obtain substantially equivalent
insurance coverage.  In the event either party is unable to meet the insurance
requirements set forth in this Section, that party shall notify the other party
in writing.  Either party, before the expiration of any required insurance
policies, may reopen this Section upon sixty (60) days written notice to the
other party.

SECTION 15. WAIVER

Any waiver at any time by either party to this Agreement of its rights with
respect to any default of the other party hereto, or with respect to any other
matter arising in connection with this Agreement, shall not be considered a
waiver with respect to any prior or subsequent default, right or matter.

10

 

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SECTION 16. RELATIONSHIP OF THE PARTIES

Nothing contained in this Agreement shall ever be construed to create an
association, trust, partnership or joint venture or to impose a trust or
partnership duty, obligation or liability on or with regard to either
party.  Each party shall be individually and severally liable for its own
obligations under this Agreement.

SECTION 17. APPROVALS

This Agreement is a special contract under AS 42.05.361 and does not take effect
without the prior approval of the Regulatory Commission of Alaska and is, at all
times, subject to the revisions by the Commission.

SECTION 18. SEVERABILITY

If any provision of this Agreement is held illegal or unenforceable in a
judicial proceeding, such provision shall be severed and shall be inoperative,
and the remainder of this Agreement shall remain operative and binding on the
parties.

SECTION 19. NOTICES

Any notice or demand required by this Agreement to be given to either party
shall be effective when it is received by such party, and in computing any
period of time from such notice or demand, such period shall commence at 12:01
p.m. prevailing time at the place of receipt on the date of receipt of such
notice or demand.  Whenever this Agreement calls for notice or demand (unless
otherwise specifically provided), or notification by either party is necessary,
the same shall be in writing directed to Bradley W. Evans, its Chief Executive
Officer, in the case of Chugach, and Joe Griffith, its General Manager, in the
case of MEA.  Should telephone notice be necessary, it shall be directed to the
General Managers or to a designated or otherwise appropriate subordinate.  The
designation of the name to which any such notice or demand shall be directed may
be changed at any time and from time to time by either party by giving notice as
provided above.

SECTION 20. DEFAULT AND DISPUTE RESOLUTION

20.1 Notice of Default.  Upon failure of either party to perform any obligation
hereunder, the party or parties to whom such performance is due shall make
demand in writing upon the defaulting party.  If such failure, other than a
failure to pay Chugach when such payment is due, is not cured within thirty (30)
days from the date of such demand it shall constitute a default at the
expiration of such period.  Chugach’s bills to MEA shall constitute written
demands for payment for purposes of this Section, and MEA shall be considered to
be in immediate default of its payment obligations if such bills are not fully
paid in timely fashion (or the special provisions for billing disputes are not
timely followed) in accordance with Section 7.2 of this Agreement.

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20.2 Performance Pending Resolution of Dispute.  Pending resolution of any
dispute, each party shall continue to perform its obligations under this
Agreement, including the obligations to deliver and receive electric power and
the obligation to pay bills submitted by Chugach for such power (subject to the
provisions of this Agreement dealing with billing disputes specifically).  Each
party shall be entitled to seek immediate judicial enforcement of this continued
performance obligation notwithstanding the existence of a dispute.  Application
for such enforcement shall be made to the Superior Court for the State of
Alaska, Anchorage District.

20.3 Consultation to Resolve Disputes.  After notice is delivered and before
default occurs under Section 20.1, the parties shall in good faith endeavor to
meet promptly and to resolve any dispute through good faith negotiation.  If a
party has met its obligation of good faith under this Section 20.3, and if the
dispute has not been resolved before default occurs, then that party shall be
entitled at any time thereafter to seek immediate judicial enforcement of this
Agreement in the Superior Court for the State of Alaska, Anchorage District, by
bringing any suit, action or proceeding, at law or in equity, including without
limitation mandamus, injunction, damages and action for specific performance, as
may be necessary or appropriate to enforce any covenant, agreement or obligation
of this Agreement.

20.4 Remedies Cumulative.  No remedy conferred upon or reserved to the parties
hereto is intended to be exclusive of any other remedy available hereunder or
now or hereafter existing at law, in equity, by statute or otherwise, but each
and every such remedy shall be cumulative and shall be in addition to every
other such remedy.  The pursuit by either party of any specific remedy shall not
be deemed to be an election of that remedy to the exclusion of any other,
whether provided hereunder or by law, equity or statute, but where this
Agreement requires a party to take a particular action (e.g., consultation with
another party) or to pursue a particular remedy (e.g., arbitration) prior to
pursuing any other remedy (e.g., judicial enforcement), such requirement shall
be binding and enforceable.

SECTION 21. RIGHT OF ACCESS AND REMOVAL

Each party will have access to the premises, records, facilities, or property of
the other party at all reasonable times for any purpose necessary or appropriate
to the performance of this Agreement.  Upon termination of this Agreement in
accordance with the provisions hereof, each party will remove any property or
equipment which it may have installed on the premises of the other party for any
purposes hereunder.

SECTION 22. APPLICABLE LAW

The parties agree that the interpretation and application of this Agreement
shall be governed by the laws of the State of Alaska.

SECTION 23. MODIFICATION

No modification of this Agreement shall be valid unless it is in writing and
signed by all parties hereto, and approved by all appropriate and regulatory and
administrative agencies or

12

 

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bodies.  For the avoidance of doubt, extension of services and this Agreement
until June 30, 2015, pursuant to Section 4.2 shall not require separate and
secondary approval of the Commission.

SECTION 24. HEADINGS

The section headings in this Agreement are for convenience only, and do not
purport to and shall not be deemed to define, limit or extend the scope or
intent of the section to which they pertain.

SECTION 25. ACCESS TO RECORDS/RECORDS OF THE PARTIES

Upon written request from the other party, but only at reasonable times and
during normal business hours, each party hereto shall afford such other party
with access to data and information which are maintained and compiled in the
ordinary course of business (or which have in fact been compiled or prepared)
and which are reasonably necessary to permit the requesting party to determine
whether this Agreement is being performed in the manner intended by the
parties.  To the extent that either party asserts that any data or information
requested hereunder are confidential or proprietary or otherwise not required to
be made available to the public generally, access to such data and information
shall nonetheless be provided, but only if the party to whom such data or
information are provided agree in writing not to disclose such data or
information unless specifically authorized to do so by order of the Commission
or, as the case may be, by a court of competent jurisdiction.

SECTION 26. MUTUAL COVENANTS AND WARRANTIES

Each party covenants and warrants to the other party that it (1) has the legal
authority and ability to enter into and perform, and (2) will at all times
maintain the practical and financial ability to perform, this Agreement and each
obligation assumed by such party under this Agreement.  Each party also
covenants and warrants that prior to executing this Agreement it has taken all
actions necessary to permit its execution of this Agreement to be fully
effective and legally binding in accordance with the terms and conditions of the
Agreement for the entire term thereof.

SECTION 27. LIMITATION OF LIABILITY

In no circumstances shall Chugach be liable to MEA for special, consequential,
or incidental damages whatsoever, including but not limited to, for loss of
profits or revenue or the loss of use of either, costs of replacement of
capital, or claims of customers of MEA relating to loss of power.

SECTION 28. PUBLIC ANNOUNCEMENTS AND PRESS RELEASES

The parties agree that any and all public announcement and press release
regarding any matter relating to this Agreement, whether orally in writing,
shall be mutually agree to in writing by the parties.

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SECTION 29. NO PRESUMPTION

This Agreement is the result of negotiations between, and has been reviewed by,
the parties and their respective legal counsel.  Accordingly, this Agreement
shall be deemed the product of each party hereto, and there shall be no
presumption that an ambiguity should be construed in favor of or against a party
solely as a result of such party's actual alleged role in the drafting of this
Agreement.

SECTION 30. DEFINITIONS

The following terms, when used in the Agreement and Exhibits hereto, shall have
the meanings specified.

 

30.1 1989 Agreement.  1989 Agreement shall have the meaning set forth in the
recitals.

30.2 Agreement.  This 2015 Interim Power Sales Agreement.

30.3 CINGSA.  CINGSA shall mean Cook Inlet Natural Gas Storage, Alaska.

30.4 Commission.  The Regulatory Commission of Alaska.

30.5 Effective Date.  Effective Date shall have the meaning set forth in Section
3.

30.6 EGS.  EGS shall have the meaning set forth in the recitals.

30.7 Electric Power or Power.  Electric energy or electric capacity, or
both.  Where the context of this Agreement requires a distinction, electric
energy is expressed in kilowatt hours (kwh) or megawatt hours (MWh), and
electric capacity is expressed in kilowatts (kw) or megawatts (MW).

30.8 Generation and Transmission System.  All existing and future facilities
(whether or not operable, and whether or not operating) used by Chugach for
generation and transmission of electric power, including, in addition to
physical generation and transmission facilities and facilities associated with
the provision of fuel for electric power generation, Chugach’s rights and
obligations to obtain (by purchase, wheeling, or otherwise) electric power
generated by other entities or fuel for the generation of electric power by
Chugach, to the extent that the costs of such facilities and rights are
allowably included in the rates charged to Chugach’s retail consumers.

30.9 GVEA.  GVEA shall have the meaning set forth in Section 1.2.

30.10 Hilcorp.  Hilcorp shall have the meaning set forth in the recitals.

30.11 Hilcorp Agreement.  Hilcorp Agreement shall have the meaning set forth in
the recitals.

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30.12 Points of Delivery.  With respect to the capacity and energy provided by
Chugach under this Agreement, the points where Chugach delivers to MEA such
capacity and energy as set forth in Exhibit D hereof.  With respect to the
delivery of natural gas to Chugach by MEA, the points of delivery shall be the
points set forth on Exhibit E. And with respect to the electricity provided by
MEA under this Agreement, the point where MEA delivers such energy is EGS.

30.13 Prudent Utility Practice.  At a particular time any of the practices,
methods and acts engaged in or approved by a significant portion of the electric
utility industry at such time, or which in the exercise of reasonable judgment
in light of facts known at such time, could have been expected to accomplish the
desired results at the lowest reasonable cost consistent with good business
practices, reliability, safety and reasonable expedition.  Prudent Utility
Practice is not required to be the optimum practice, method or act to the
exclusion of all others, but rather to be a spectrum of possible practices,
methods or acts which could have been expected to accomplish the desired result
at the lowest reasonable cost consistent with reliability, safety and
expedition.  Prudent Utility Practice includes due regard for manufacturer’s
warranties and the requirements of governmental agencies of competent
jurisdiction and shall apply not only to functional parts of the parties’
generation, transmission, and distribution facilities, but also to appropriate
structures, landscaping, painting, signs, lighting and other facilities.

30.14 SES.SES shall mean the Seward Electric System.

30.15 Tariff Sheet No. 99.  Tariff Sheet No. 99 shall have the meaning set forth
in Section 4.1(a).

30.16 Uncontrollable Force.  Any cause beyond the control of Chugach and which
by the exercise of due diligence Chugach is unable to prevent or overcome,
including but not limited to an act of God, fire, flood, volcano, earthquake,
explosion, sabotage, and act of the public enemy, civil or military authority,
including court orders, injunctions and orders of governmental agencies of
competent jurisdiction, insurrection or riot, an act of the elements, failure of
equipment, or the inability to obtain or ship equipment or materials because of
the effect of similar causes on carriers or shippers.  Strikes, lockouts, and
other labor disturbances shall be considered Uncontrollable Forces, and nothing
in this Agreement shall require Chugach to settle a labor dispute against its
best judgment; provided, that during any labor dispute Chugach shall make all
reasonable efforts under the circumstances, including, to the extent permitted
by law, the use of replacement personnel and/or management personnel and/or
other personnel under the provisions of a mutual aid agreement, to ensure, if
possible, the continued ability of Chugach to produce, deliver, receive, and
distribute the Electric Power that is the subject matter of this Agreement.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their authorized representatives.

 

CHUGACH ELECTRIC ASSOCIATION, INC.

 

 

By /s/Bradley W. Evans

Bradley W. Evans, Chief Executive Officer

15

 

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Date 9/30/14

 

 

 

MATANUSKA ELECTRIC ASSOCIATION, INC.

 

 

By /s/ Joe Griffith

Joe Griffith, General Manager

 

 

Date 9/30/2014

 

16

 

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EXHIBIT A

 

2015 Interim Power Sales Agreement between

Matanuska Electric Association, Inc. and Chugach Electric Association, Inc.

 

During the term of this Agreement, Chugach will receive and use natural gas from
MEA at a credit amount calculated on the basis of Chugach’s weighted average
cost of gas, including gas from storage and transportation costs to Chugach's
generation facilities, needed to meet Chugach’s native load requirements
(Chugach Retail and the City of Seward).  Ownership of the natural gas to be
supplied and delivered to Chugach under this Agreement shall be acquired by MEA
under the Hilcorp Agreement.  MEA is responsible for all of its obligations to
Hilcorp under the Hilcorp Agreement, including payment obligations for all gas
purchases, and Chugach is in no way responsible for MEA’s obligations under the
Hilcorp Agreement.  To the extent MEA is unable to satisfy its obligations
hereunder, and without limiting any other remedies Chugach may have, Chugach may
purchase such gas not supplied and charge MEA for such gas. In addition, MEA
shall indemnify Chugach for the costs thereof.

 

The Hilcorp Agreement provides for firm gas delivery through March 31, 2018 with
gas volumes not to exceed 28 million cubic feet (Mcf) per day for use at its
Eklutna Generation Station.  In calendar-year 2015, MEA’s contract gas prices
are $7.13 per Mcf for Base Load gas; $8.91 per Mcf for Swing Load gas; and
$10.70 per Mcf for Emergency gas.  These prices compare with Chugach’s projected
first quarter 2015 average weighted price of gas of $5.3410 per Mcf.

 

In coordination with MEA and Hilcorp, Chugach’s Fuel Supply Department will be
responsible for the dispatch and coordination to Chugach's generation facilities
of the natural gas purchased by MEA under the Hilcorp Agreement and supplied and
delivered to Chugach.  MEA shall cooperate with Chugach to facilitate Chugach's
provision of such coordination and dispatch services, including authorizing
Chugach to act on MEA's behalf with respect to Hilcorp.  Chugach shall use its
reasonable best efforts to conduct such dispatch and coordination services in
conformity with the Hilcorp Agreement.  Contacts for gas scheduling and
coordination matters are listed below:

 

 

 

Andrew White

Tony Izzo

Manager, Fuel Supply & Operations

Manager, Fuel Supply and Contracts

Chugach Electric Association, Inc.

Matanuska Electric Association, Inc.

5601 Electron Drive

PO Box 2929

Anchorage, AK  99518

Palmer, AK  99645

(907) 762-4577 (phone)

(907) 982-5504 (phone)

(907) 306-0123 (cell)

(907) 351-1212 (cell)

Andrew_white@chugachelectric.com 

tony.izzo@mea.coop 

 

17

 

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Monthly Gas Cost True-Up Example

Chugach’s cost of gas and attendant transportation to generation facilities for
a given month is summarized below. 

 

Table 1:  Calculation of Chugach’s Monthly
Weighted Cost of Gas and Transportation

Description

Price per Mcf

Percent of Total

Weighted Price per Mcf

ConocoPhillips

$4.10

65.0%

$2.665

Hilcorp

$7.13

20.0%

$1.426

Gas from Storage (CINGSA)

$6.40

15.0%

$0.960

Gas Storage

$0.29

--

$0.290

 Total

 

100.0%

$5.341

 

 

 

 

 

In this example, Chugach will receive and use the gas and transportation from
MEA and credit MEA at Chugach’s actual weighted average price of $5.341 per Mcf
for all gas delivered to Chugach at the appropriate Point of Delivery under this
Agreement, notwithstanding the higher price paid for such natural gas by MEA
under the Hilcorp Agreement.

 

Chugach’s payment for gas shall be provided as a credit on the wholesale power
invoice to MEA for the value of the additional gas needed to meet the load
requirements of Chugach retail, MEA and SES.  Exhibit A.1 is a sample wholesale
power invoice from Chugach to MEA that includes the credit adjustment for the
additional gas used by Chugach.  Chugach will include this amount in its fuel
and purchased power rate adjustment process for recovery from Chugach retail,
MEA and SES.

 

 

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EXHIBIT A-1

 

 

CHUGACH ELECTRIC ASSOCIATION, INC.

cealogo [c004-20141216xex10g001.jpg]

P.O. Box 196300

ANCHORAGE, AK  99519-6300

(907) 563-7494; FAX (907) 562-0027

 

 

 

 

Alaska Electric Generation & Transmission Cooperative Inc.

Invoice Date:

SAMPLE 2015

Matanuska Electric Association, Inc.

Invoice No:

MEA

3977 Lake Street

Account No:

1422006100-2101

Homer, Alaska  99603

 

 

 

 

Page 1 of 3

 

Matanuska Electric Association, Inc.

 

Billing demand and energy from January 1 at 00:01 to January 31 at 24:00 per
Chugach Electric Association, Inc. electronic readings.

 

Description

Units

Rate per Unit

Amount

Customer Charge

9 

Meters

$
150.00 
$
1,350.00 

Demand Charge

128,380 

kW

$
19.54 
$
2,508,545.20 

Energy Charge

73,490,938 

kWh

$
0.01170 
$
859,843.97 

Fuel and Purchased Power Adjustment Factor

73,490,938 

kWh

$
0.04927 
$
3,620,898.52 

Subtotal

 

 

 

$
6,990,637.69 

Alaska Energy Authority Bradley Lake Credit – January 2015

 

 

($202,105.00)

South Fork Hydro Purchases Credit – January 2015

331,955 

kWh

$
0.05493 
$
(18,234.27)

Total Amount Due for Electric Service

 

 

 

$
6,770,298.42 

Natural Gas Use Credit – MEA Hilcorp Gas

624,461 

Mcf

$
5,341 

($3,319,223.20)

Net Amount Due

 

 

 

$
3,432,840.96 

 

Peak billing demand occurred on Thursday, January 22 at 20:15.

 

Please note: Payment due no later than February 25, 2015.

(25 days from original Chugach fax / mailing date or first business day after
due date)

 

cc: Matanuska Electric Association, Inc., accountspayable@mea.coop

19

 

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Billing

 

 

 

Invoice Date:

SAMPLE 2015

 

Invoice No:

MEA

Summary of Detail:

 

Page 2 of 3

 

 

 

Billing Peak: Thursday, January 22 at 20:15

System Load Factor: 76.9%

Average Power Factor: 98.5%

 

 

 

 

 

 

 

Delivery Points

Direction

Meter/

Recorder No.

Channel

kW

kWh

 

 

 

 

 

 

Briggs Substation1

Out

2010105313

1

41,180.65 

27,410,455.00 

(115 kV)

In

2010105313

2

0.00 

0.00 

 

Net

 

 

41,180.65 

27,410,455.00 

 

 

 

 

 

 

Douglas Substation2

Out

515469

1

3,950.00 

2,259,450.00 

 

 

 

 

 

 

Stevens Substation

Out

515824

3

2,297.90 

1,412,304.60 

Douglas to Stevens Losses

----

----

----

13.46 

6,296.76 

Adjusted Stevens Load

 

 

 

2,311.36 

1,418,601.36 

 

Eklutna:

 

Anchorage Line1,3

Out

515807

6

0.00 

5,685.60 

 

In

515807

5

(9,575.00)

(9,732,580.00)

 

Net

 

 

(9,575.00)

(9,726,894.40)

 

 

 

 

 

 

Palmer Line3

Out

515701

2

45,500.00 

21,803,300.00 

 

In

515701

1

0.00 

0.00 

 

Net

 

 

45,500.00 

21,803,300.00 

 

 

 

 

 

 

Camp Line

Out

515820

1

33.30 

28,819.70 

MTA Cellular Repeater

Out

----

----

2.50 

1,673.00 

Adjusted Stevens Load

 

 

 

35.80 

30,492.70 

 

 

 

 

 

 

Water Pump

Out

515818

1

145.10 

7,854.00 

 

 

 

 

 

 

Subtotal - Eklutna

 

 

 

36,105.90 

12,114,752.30 

 

 

1 Net deliveries (out and in measurements) at Briggs Substation and Anchorage
Line reflect the reduction of Eklutna line losses, established per agreement at
0.25%.

20

 

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Invoice Date:

SAMPLE 2015

 

Invoice No:

MEA

Summary of Detail (Continued):

 

Page 3 of 3

 

Delivery Points

Direction

Meter/

Recorder No.

Channel

kW

kWh

 

 

 

 

 

 

Teeland:

 

 

 

 

 

 

 

 

 

 

 

Teeland 115kV

Out

98294012

1

94,625.40 

58,340,528.50 

(Transformer T-1)

In

98294012

2

0.00 

0.00 

 

Net

 

 

94,625.40 

58,340,528.50 

 

 

 

 

 

 

Teeland 115kV

Out

91031311

2

0.00 

220,494.70 

(Breaker 1452)

In

91031311

1

(55,255.70)

(31,395,014.40)

 

Net

 

 

(55,255.70)

(31,174,519.70)

 

 

 

 

 

 

Teeland 115kV

Out

90021372

1

5,001.60 

2,789,715.60 

(Breaker 332)

In

90021372

2

0.00 

0.00 

 

Net

 

 

5,001.60 

2,789,715.60 

 

 

 

 

 

 

Subtotal - Teeland

 

 

 

44,371.30 

29,955,724.40 

 

 

 

 

 

 

 

 

 

 

 

 

South Fork Hydro Project

Out

1132750155

2

461.00 

331,954.60 

 

Net

 

 

461.00 

331,954.60 

 

 

 

 

 

 

Adjusted Billing Load4

 

 

 

128,380.21 

73,490,937.66 

 

4Actual billing units rounded.

21

 

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22

 

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EXHIBIT B

 

 

Eklutna Generation Station Commissioning

Dispatch Service and Test Power Agreement

 

This EKLUTNA GENERATION STATION COMMISSIONING, DISPATCH SERVICE AND TEST POWER
AGREEMENT (the “Agreement”) by and among MATANUSKA ELECTRIC ASSOCIATION, INC.
(“MEA”) and CHUGACH ELECTRIC ASSOCIATION, INC. (“Chugach”) is made and entered
into effective as of August 1, 2014 (“Effective Date”).  MEA and Chugach are
referred to herein individually as a “Party” and collectively as the “Parties.”

 

RECITALS

 

1.

MEA plans to commission the Eklutna Generation Station (“EGS”) prior to April 1,
2015.

 

2.

MEA requests Chugach to dispatch EGS gas and electricity during commissioning.

 

3.

Chugach is willing to provide dispatch services to commission EGS.

 

4.

Upon commercial operation, the EGS will generate or have the capability to
generate approximately 170 mW of power.

 

5.

Chugach expects to incur costs prior to when EGS commissioning begins (such as
SCADA modifications) and costs to diligently perform the dispatch service during
commissioning.

 

6.

Chugach has purchased gas to generate electricity for MEA under the
all-requirements Tripartite Agreement through December 31, 2014. MEA has gas
reserved for generation scheduled with Hilcorp sufficient to meet all
commissioning needs and the flexibility to take this gas or not.

 

7.

MEA is willing to provide to Chugach and Chugach is willing to take from MEA
such quantities of EGS Test Power as the EGS may produce from time-to-time.

 

NOW,  THEREFORE, in consideration of the mutual promises and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:

This Agreement is the result of negotiations between, and has been reviewed by,
the Parties and their respective legal counsel.  Accordingly, this Agreement
shall be deemed to be the product of each Party hereto, and there shall be no
presumption that an ambiguity should be construed in favor of or against a Party
solely as a result of such Party’s actual or alleged role in the drafting of
this Agreement.

23

 

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1.

TERM

 

1.1

Term of Agreement.

 

This Agreement shall be effective as of the Effective Date and shall remain in
effect until the earlier of March 31, 2014 or until MEA brings EGS into
commercial operation.

 

The EGS commissioning may begin as early as October 15, 2014 and ends the
earlier of March 31, 2015 or the date MEA declares EGS commissioned as
plant-in-service and ready for commercial operation, with such period
hereinafter referred to as the “Commissioning Period”.  The first day EGS
produces Test Power is the starting date for the Commissioning Period, herein
referred to the “Commissioning Start Date”.

 

2.

SCHEDULING AND DISPATCH

 

2.1

Generation and Natural Gas Dispatch.

 

Chugach shall provide generation and natural gas dispatch services during the
Commissioning Period.

 

2.2

EGS Dispatch.

 

During the commissioning process, MEA and Chugach, taking into account the good
faith operation of its electric system, agree that Chugach shall coordinate
commissioning activities with EGS subject to operational limitations and
scheduled and unscheduled maintenance in in accordance with Prudent Utility
Practices.  “Prudent Utility Practices” means thos practices, methods, standards
and acts (including those engaged in or approved by a significant portion of the
U.S. electric utility industry for similar facilities) that at a particular time
in the exercise of good judgement would have been expected to accomplish the
desired result in a manner consistent with applicable laws, industry standards,
safety, economy and expedition.

 

2.3

EGS SCADA.

 

MEA shall provide a SCADA interconnection for EGS that shall enable Chugach to
dispatch the EGS during the term of this Agreement.

 

2.4

EGS Commissioning Schedule.

 

MEA shall provide Chugach an hourly schedule of planned commissioning activities
and all necessary updates to the schedule.  The expected schedule is shown on
Schedule 1, “EGS Commissioning Schedule”.  If the Commissioning schedule
changes, MEA shall provide a revised schedule to Chugach with as much advanced
notice as possible.

 

2.5

Dispatch Coordination.

 

MEA shall provide Chugach as much advance notice as possible of EGS
commissioning activities, but no later than 9:00 AM for commissioning activities
for the next day.  All modifications to the day-ahead schedule shall be provided
to Chugach between 8 AM and 3 PM on business days.  MEA may make two intraday
changes to the dispatch schedule each day of the commissioning activities when a
single unit is scheduled for testing and one intraday change when multiple units
are scheduled to be run simultaneously provided that the change is provided to
Chugach between 8 AM and 3 PM on business days.

 

24

 

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Due to the unique functional design of the engines, these units will sometimes
deviate from the power dispatch schedule while conducting operational testing of
the fuel switching  process.   This may result in the unit’s temporary shut down
and then restarting to continue testing of that scheduled test dispatch.  MEA
will inform Chugach when test dispatch conditions change and the generating
units require a short restart.  This is not considered to be an intraday change,
as the resumption of the test will continue at the scheduled output and
duration.

 

MEA and Chugach will provide each other in advance with a direct phone contact
person and phone number(s) for both day ahead and intraday coordination of
activities and will update those numbers immediately if they change.

 

2.6

EGS Test Power.

 

For purposes of this Agreement, EGS Test Power shall mean all energy produced
during the Term by EGS in excess of its station service power load.  Chugach
will receive all the EGS Test Power and MEA will provide all the EGS Test Power
to Chugach during the Commissioning Period.  If Chugach is unable to receive all
the EGS Test Power, Chugach will make commercially reasonable efforts to provide
the power to other utilities or reschedule the test to a time when the power can
be received.  Test Power is measured at EGS at the delivery point on the Chugach
system or delivery point of any other receiving utility.

 

2.7

Natural Gas Supply and Transportation.

 

Chugach will provide all Chugach contracted gas for EGS commissioning from its
own supplies.  If any additional gas is needed for commissioning or for
Chugach’s operations as a result of the EGS commissioning activities, that gas
will be provided by MEA under the MEA Hilcorp gas contract.  Chugach will
provide all gas dispatch services, including nominations on required pipelines,
for gas delivery to EGS during the Commissioning Period.  MEA shall authorize
Chugach to act on MEA’s behalf for APC/ENSTAR and Hilcorp to schedule EGS
commissioning gas.

 

3.

COSTS

 

3.1

Administrative Costs.

 

MEA shall pay a one-time administrative fee of $50,000 for Chugach to manage and
administer commissioning dispatch.

 

3.2

Gas Supply and Transportation.

 

Chugach gas will be provided to produce EGS Test Power and MEA shall pay for
this gas under the Tripartite Agreement through Chugach’s fuel and purchased
power rate adjustment process up to December 31, 2014.  Chugach may request MEA
provide additional gas through its Hilcorp gas contract and MEA will make
available the Hilcorp gas if requested for commissioning efforts or for
Chugach’s operations as a result of the EGS commissioning.  MEA shall provide
all gas for commissioning efforts after December 31, 2014.  MEA shall provide
its Hilcorp gas at no commodity cost to Chugach, and MEA will pay Hilcorp
directly for MEA’s Hilcorp gas used as part of commissioning EGS.

25

 

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MEA shall pay ENSTAR/APC directly for gas transport and any other tariffed
charges associated with delivery of Chugach’s gas and MEA’s Hilcorp gas to EGS
as part of commissioning.

 

MEA’s Hilcorp gas will be used when the incremental Chugach system gas demand is
higher than it would have otherwise been if EGS was not being commissioned,
including but not limited to for providing additional spin and incremental
increases in gas usage due to heat rate differential.

 

MEA wil provide all diesel and other liquids to be used duirng Commissioning
Period.

 

3.3

Dispatch Operations Fee.

 

MEA shall pay Chugach a one-time dispatch fee for dispatch services of
$165,000.  MEA shall pay an additional fee of $1,500 per day for each day EGS
commissioning exceeds 90 consecutive calendar days from the Commissioning Start
Date.

 

3.4

Chugach Production Cost.

 

If Chguach has to start a generating unit that it would not have otherwise had
to start due to EGS commissioning, MEA shall pay Chugach the following unit
starts:  Frame 5 is $1,000 per start; Frame 7 is $3,500 per start; Alstom units
(Beluga 6 and 7) are $4,500 per start; and SPP turbines are $1,000 per start.

 

3.5

SCADA.

 

MEA will not charge Chugach for MEA SCADA.

 

3.6

Test Power.

 

MEA shall provide all Test Power generated during the Commissioning Period to
Chugach at no charge and Chugach shall provide Chugach generation capacity for
spin at no charge to MEA.  If generation is required from another utility for
spin, MEA shall pay these amounts to those utilities.

 

3.7

Accounting for Decreases in Chugach System Cost due to EGS Commissioning

 

Chugach’s receipt of EGS Test Power may change the Chugach system production
costs.  If the net monthly amount is a decrease in the Chugach system production
costs, there will be no payment from Chguach to MEA and the net cost reduction
shall be accounted for in Chugach’s fuel and purchased power rate adjustment
process.

 

4.

BILLING

 

4.1

Billing

 

Payment is due within 30 days of delivery of invoices.  The one-time
Administrative Cost and retainer for Dispatch Operations Fee are due within 15
days of the execution of this Agreement.  MEA shall pay a retainer of $105,000
within 15 days of the execution of this Agreement.  The balance is due 15 days
after the Commissioning Period.

26

 

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5.

INDEMNIFICATION

 

5.1

Indemnification

 

MEA shall indemnify, defend and hold harmless Chugach and its respective agents,
officers, directors, employees, members and affiliates from and against any
loss, cost, liability, claim, damage, expense (including reasonable attorneys’
fees and disbursements), penalty or fine incurred in connection with any third
party claim or cause of action arising from or in connection with this Agreement
or the activities contemplated hereunder to the extent attributable to the
breach of this Agreement by MEA or the negligence, misrepresentation, fraud,
fault or willful misconduct of MEA.

 

6.

INDEMNIFICATION

 

6.1

Liability

 

Chugach shall have no liability for any reason for: (1) failure to meet MEA’s
commissioning schedule, (2) outages caused by MEA commissioning, (3) failures or
issues with the SCADA fo the EGS provided by MEA, or (4) circumstances outside
of the control of Chugach.  In no circumstances shall Chugach be liable to MEA
for special, consequential, or incidental damages whatsoever, including but not
limited to, for loss of profits or revenue or the loss of use of either, costs
of replacement power or capital, or claims of customers of MEA relating to loss
of power supply.

 

The Parties recognize that unforeseen system events such as the availability of
wind or hydro power or equipment failures may necessitate  alteration or
modification of the commissioning schedule and process.  Neither Party shall be
responsible for any costs or delays or claims arising out of any such system
events.  The Parties agree to work closely together to resolve system related
problems and to adjust the commissioning process accordingly.

 

7.

NOTICES

 

7.1

Notices.

 

Any notice, or other communication which may or shall be given or served by
either Party upon the other Party, shall be deemed to have been given or served
if provided in accordance with the attached Schedule 2.  “Notices”.  Addresses,
email addresses, facsimile numbers, and authorized recipients on behalf of the
Parties may be changed at any time by the receiving Party by providing notice to
the other Party in accordance with this Section 7.1.

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8.

REGULATORY STATUS

 

8.1

Regulatory Status

 

The Parties agree that this Agreement is a contract for a non-regulated service
which is not covered by Chugach’s tariff for electric service and not offered to
the public.  The Parties agree that the compensation paid to Chugach for these
services is the result of arms-length negotiations between commercial entities
and is not subject to regulatory review.  The Parties agree the Agreement wil
not affect Chugach’s rates.

 

9.

PUBLIC ANNOUNCEMENTS AND PRESS RELEASES

 

8.1

Public Announcements and Press Releases

 

The Parties agree that any and all public announcements or press releases
regarding any matter relating to this Agreement and EGS commissioning, whether
orally or in writing, shall be mutually agreed to in writing by the Parties.

 

 

IN WITNESS WHEREOF, MEA and Chugach have caused this Agreement to be executed on
its behalf by its duly authorized representative to be effective as of the date
first above written.

 

 

CHUGACH ELECTRIC ASSOCIATION, INC.

 

 

By:

/s/Bradley W. Evans

Name:

Bradley W. Evans

Title:

Chief Executive Officer

Date:

Aug 21, 2014

 

 

MATANUSKA ELECTRIC ASSOCIATION, INC.

 

 

By:

/s/Evan J. Griffith

Name:

Evan J. Griffith

Title:

General Manager

Date:

8/29/14

 

 

 

 

 

 

 

 

 

28

 

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EXHIBIT C

 

Annual Fixed and O&M Costs for Eklutna Generation Station (EGS)

For Purposes of

Calculating Payments to MEA from Chugach Under the 2015 Interim Power Sales
Agreement

 

Line

Number

 

Annual Fixed Costs per kW Capacity Component:

 

Calendar Year 2015

Estimated

*

 

Test Year 2016

Approved

**

(a)

 

 

(b)

 

(c)

 

 

(d)

 

 

 

 

 

 

 

 

 

 

 

1

 

 

Annual Interest on EGS Generation Loans

 

$
13,825,000 

 

 

$
0 

 

2

 

 

Annual EGS Depreciation

 

$
11,032,469 

 

 

$
0 

 

3

 

 

Annual Margins @ Chugach’s 1.10 TIER

 

$
1,392,500 

 

 

$
0 

 

4

 

 

Annual Fixed Costs

 

$
26,349,969 

 

 

$
0 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

Generator Test kW Capacity

 

165,000 

 

 

0 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

Annual Fixed Costs per kW

 

$
159.70 

 

 

$
0.00 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

Monthly Fixed Costs per kW/Month

 

$
13.31 

 

 

$
0.00 

 

 

 

 

 

 

 

 

 

 

 

8

 

 

Capacity Charge per kW/Month

 

$
13.31 

 

 

$
0.00 

***

 

 

 

 

 

 

 

 

 

 

 

 

Annual O&M Costs per kWh Component:

 

Calendar Year 2015

Estimated

*

 

Test Year 2016

Approved

**

 

 

 

 

 

 

 

 

 

 

9

 

 

Annual All-in O&M (non-fuel) Costs

 

$
9,963,408 

 

 

$
0 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

Annual kWh Energy from EGS Plant

 

716,791,919 

 

 

0 

 

 

 

 

 

 

 

 

 

 

 

11

 

 

Annual O&M Costs per kWh

 

$
0.01390 

 

 

$
0.00000 

 

 

 

 

 

 

 

 

 

 

 

12

 

 

O&M Charge per kWh

 

$
0.01390 

 

 

$
0.00000 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes:

 

 

 

 

 

 

 

 

*

Estimated values are per MEA’s August, 2014 update to its Financial Forecast

 

 

 

**

Approved values to be taken from RCA Final Order in MEA’s 2016 Test Year Rate
Filing

 

 

 

***

Amount not to exceed 1.10 times the estimated value in column (c)

 

 

 

29

 

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EXHIBIT D

 

Points of Delivery – Capacity (Demand) and Energy

 

For the purposes of this agreement, the delivery of capacity (demand) and energy
shall occur at the following locations:

 

Delivery Points / Metering Locations

Briggs Tap 115 kV

Douglas

Eklutna Camp Line

Eklutna Generating Station

Eklutna Water Pump

Eklutna 115 kV (in and out)

MTA Repeater Site

Stevens Substation

Southfork Hydroelectric Project

Teeland Site Bay

Teeland Substation 115 kV (in and out)

 

30

 

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EXHIBIT E

 

Points of Delivery for Chugach Owned Units– Natural Gas

 

1.

Beluga River Unit (Connections), as follows:

o

The inlet to Buyer’s facilities connected to the Beluga Unit Area Connection (to
CEA) off the Beluga River Unit’s gas filter building located within located
within the West 1/2 of the Southeast ¼ of Section 26, Township 13 North, Range
10 West, Kenai Peninsula Borough, Seward Meridian, State of Alaska.

 

 

 

2.   Delivery Meter off KBPL to the Beluga Power Plant 8100. 

Description per KBPL Tariff

 

 

 

Meter No.

Meter Name

Interconnecting Person

8100

CEA Electric Power Plant at (Beluga Point)

Chugach Electric Association, Inc.

 

31

 

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