Exhibit 10.9
 
POWER SALES CONTRACT
 
Executed by
 
PUBLIC UTILITY DISTRICT NO. 1 OF
 
DOUGLAS COUNTY, WASHINGTON
 
and
 
PUGET SOUND POWER & LIGHT COMPANY
 
 
THIS AGREEMENT made and entered into as of the 18th day of September, 1963,
between Public Utility District No. 1 of Douglas County, Washington (hereinafter
called “Douglas”) a municipal corporation of the State of Washington, and Puget
Sound Power & Light Company (hereinafter called the “Purchaser”) a corporation
organized and existing under the laws of the State of Washington:
 
W i t n e s s e t h :
 
Whereas, Douglas is a municipal corporation organized under the laws of the
State of Washington and authorized to construct and operate electric generating
plants and transmission lines and to supply electric energy to other electric
utilities and to develop the Wells Hydroelectric Project on the Columbia River;
and
 
Whereas, Douglas has heretofore obtained a license, issued July 12, 1962, from
the Federal Power Commission (FPC) for Project No. 2149 (Wells Project), a
hydroelectric generating station to be constructed on the Columbia River between
Douglas and Chelan Counties, with the structures, fixtures, equipment and
facilities used or useful in the maintenance and operation of said Project; and
 
Whereas, Douglas has heretofore granted an option to the Purchaser to purchase
31.3% of the power and energy produced by the Wells Project and the Purchaser
desires to exercise said option on the terms and conditions hereinafter
provided; and
 
Whereas, in order to provide funds for the completion of the construction of the
Wells Project, Douglas desires to enter into contracts for the sale of the power
and energy to be produced by the Wells Project in excess of the amounts required
to provide for the actual and prospective needs of Douglas and the Purchaser
desires to purchase such power and energy; and
 
Whereas, Douglas has the responsibility and authority for the financing,
construction and operation of the Wells Project;
 
Now, Therefore, for and in Consideration of the Mutual Covenants and Agreements
Herein Contained, it is Agreed by and Between the Parties Hereto as Follows:
 
Section 1.   Term of Contract.  This contract shall be in full force and effect
until midnight of August 31, 2018, or until the 1963 Bonds and Completion Bonds
as defined in the First Bond Resolution are paid or provision is made for the
retirement thereof, whichever is later.
 
Section 2.   Definitions and Explanations of Terms (as Used Herein).
 
(a)           “Contract Year” is a term used herein to define fiscal periods
under this contract and shall mean a twelve-month period commencing at
12:01 A.M., on September 1 of each year, except, however, that the first
Contract Year hereunder shall commence on January 1, 1969 or the Commencement of
Normal Routine Operation, whichever is later, and shall end at 12:01 A.M. on the
following September 1.
 
(b)           “License” shall mean the Federal Power Commission License for
Project No. 2149 (Wells Project), issued July 12, 1962, as from time to time
amended.
 
(c)           “Wells Project” shall mean the “Project” as such term is defined
in Section 1.1.E of the First Bond Resolution and shall include, among other
things, an electric generating plant and associated facilities on the Columbia
River at approximately river mile 516 from the mouth of said river at the Wells
site in Douglas and Chelan Counties, Washington, as authorized by the License;
said generating plant to have an installed nameplate rating of approximately
494,200 kilowatts, and said generating plant and associated facilities to
include, but not be limited to, an earth embankment damming the present Columbia
River channel; a single concrete structure constituting a power house, spillway,
switchyard and fish facilities, including the initial installation of
7 generating units with provision for a total of 10 generating units, and 11
spillway openings; another earth embankment extending from the central concrete
structure to an abutment on the west side of the Columbia River; a reservoir,
waterways, fish ladders and other fish protective devices; associated
transmission, transformation and switching facilities including two 230 kv
transmission lines to or in the vicinity of the Rocky Reach switchyard in
Douglas County; railroad siding, shops, warehouses, construction camp, offices,
and dwellings; and all other structures, fixtures, equipment or facilities used
or useful in the construction, maintenance and operation of the Wells
Hydroelectric Project; and all necessary water rights, development rights,
permits and licenses, easements, rights-of-way, flowage rights and rights
permitting the storage of water, riparian rights and shore rights.
 
(d)           “Wells Project Output” shall mean the amount of power and energy
produced by, or received for the account of the Wells Project during the term of
this contract under the operating conditions which exist during said term,
including periods when the Wells Project may not be operable or operating, after
corrections for station and project use, depletions for encroachments, and any
adjustments resulting from the requirements of the License or from orders of
governmental agencies having power to make and enforce such orders.
 
(e)           “Month” shall mean a calendar month.
 
(f)           “Purchaser’s Power Allocation” shall mean the percentage of Wells
Project Output purchased and sold under this contract as set forth in Section 3
hereof and as adjusted in accordance with Section 21 hereof.
 
(g)           “Debt Service” shall mean, with respect to any period, the
aggregate of the amounts required by the Bond Resolution to be paid or accrued
during said period into the special fund or funds created by the Bond Resolution
for the sole purpose of paying the principal of and premium, if any, and
interest on all the Revenue Bonds from time to time outstanding as the same
shall become due and of retiring said Bonds prior to maturity in the manner
provided in the Bond Resolution.
 
(h)           “Uncontrollable Forces” shall mean any cause beyond the control of
Douglas, and which by the exercise of due diligence Douglas is unable to prevent
or overcome, including but not limited to an act of God, fire, flood, explosion,
strike, sabotage, an act of the public enemy, civil or military authority,
including court orders, injunctions, and orders of governmental agencies with
proper jurisdiction, insurrection or riot, an act of the elements, failure of
equipment, or inability to obtain or ship materials or equipment because of the
effect of similar causes on suppliers or carriers.
 
(i)           “Purchasers” shall mean the Purchaser and other companies which
enter into contracts with Douglas to buy a percentage share of Wells Project
Output, all as listed under the heading “Purchasers” in Exhibit “A”, entitled
“Distribution of Wells Project Output”, attached hereto and made a part hereof.
 
(j)           “Revenue Bonds” shall mean the bonds issued by Douglas under the
First Bond Resolution for the purpose of paying the Cost of Acquisition and
Construction and any bonds (including bonds referred to in Section 5(c) hereof)
which, by the terms of the First Bond Resolution, are permitted to be issued
payable from the revenues of the Wells Project on a parity with the bonds issued
and sold pursuant to the First Bond Resolution and secured by an equal charge
and lien on such revenues; except that, unless otherwise agreed to in  writing
by the Purchasers, Revenue Bonds shall not include bonds issued pursuant to
Section 9.1.F2(d) of the First Bond Resolution or bonds issued to refund bonds
so issued.
 
(k)           “Cost of Acquisition and Construction” shall mean all costs of
acquisition, construction, installation and financing of the Wells Project,
heretofore or hereafter paid or accrued, including but not limited to:
 
(1)           Working capital in the amount of One Million Five Hundred Thousand
Dollars ($1,500,000); provided, that if it shall at any time appear that the
amount of working capital on hand is in excess of that which is necessary or in
excess of anticipated requirements in the future, such amount may be reduced as
referred to in subsection 6(g) hereof;
 
(2)           Establishing a Reserve Account in the Bond Fund pursuant to the
First Bond Resolution to the extent of one (1) year’s interest on the Revenue
Bonds;
 
(3)           Establishing a Reserve and Contingency Fund in the amount of
$5,000,000 pursuant to the First Bond Resolution;
 
(4)           Interest accruing on Revenue Bonds until Commencement of Normal
Routine Operation or until January 1, 1969, whichever is later, except for such
interest as is payable by the Purchasers as part of Annual Power Costs for the
Interim Delivery Period; and
 
(5)           All other items relating to payment of costs in connection with
the acquisition, construction, installation and financing of the Wells Project
to the extent such items constitute “Cost of Construction” as defined in
Section 6.9 of the First Bond Resolution.
 
(1)           “Uniform System of Accounts” shall mean the Uniform System of
Accounts prescribed by the Federal Power Commission for Electric Utilities and
Licensees in effect at the time this contract is executed.
 
(m)           “Bond Resolution” shall mean collectively the First Bond
Resolution and all other resolutions adopted by Douglas authorizing the issue of
Revenue Bonds.  The term “First Bond Resolution” shall mean Resolution No. 688
adopted by the District on October 4, 1963, a certified copy of which has been
delivered to the Purchaser.
 
(n)           “Initial Date of Delivery” shall mean 12:01 A.M. of the day the
Wells Project is capable of delivering power and energy hereunder from one or
more generating units which shall have been installed, successfully tested as
required by the specifications, except for the index tests, and, in the opinion
of Douglas, the one or more generating units are ready and available for normal
continuous operation.
 
(o)           “Commencement of Normal Routine Operation” shall mean 12:01 A.M.
of the day the Wells Project is capable of delivering power and energy hereunder
from all of the initial seven generating units which shall have been installed,
successfully tested as required by the specifications, except for the index
tests, and, in the opinion of Douglas, the Wells Project with such seven
generating units is ready and available for normal continuous operation.
 
(p)           “Initial Delivery Period” shall mean the period of time commencing
on the Initial Date of Delivery and ending at 12:01 A.M. on January 1, 1969.
 
(q)           “Interim Delivery Period” shall mean the period of time commencing
at 12:01 A.M. on January 1, 1969 or the Initial Date of Delivery, whichever is
later, and ending with the Commencement of Normal Routine Operation.
 
(r)           “Okanogan” shall mean Public Utility District No. 1 of Okanogan
County, Washington, and its successors in interest.
 
Section 3.   Amount of Wells Project Output Sold.
 
(a)           Douglas agrees to sell to the Purchaser and the Purchaser agrees
to purchase 31.3 per cent (31.3%) of Wells Project Output during the term of
this contract subject to adjustment as provided in Section 21 hereof.
 
(b)           After the expiration of the term of this contract, the Purchaser
shall have the right of first refusal to purchase that proportion of the part of
the output of the Wells Project which is then, as determined by Douglas, in
excess of the actual and prospective needs of Douglas for service to customers
for use within the service area of Douglas, and for delivery to Okanogan for use
within the service area of Okanogan under the terms of its agreement with
Okanogan, which the Purchaser’s Power Allocation immediately prior to such
expiration shall bear to the then total power allocations of all the
Purchasers.  In the event this subsection 3(b), or any sentence, clause or
phrase thereof shall be adjudicated by a court of last resort and of competent
jurisdiction to be invalid or illegal, the remainder of this contract shall be
unaffected by such adjudication, and all other provisions of this contract shall
remain in full force and effect as though this subsection or such part thereof
so adjudicated to be invalid had not been included herein.
 
Section 4.   Amount of Energy and Power Reserved.  Douglas hereby reserves
thirty-eight per cent (38%) of Wells Project Output, and shall be entitled to
the power and energy thus reserved and to the rights and privileges associated
therewith and subject to the same obligations, including those provided in
Section 21 hereof but excepting those recited in Section 14 hereof, as it would
have if Douglas were one of the Purchasers and had the same rights, privileges
and obligations as the Purchasers.  Douglas covenants and agrees that it will
establish, maintain and collect rates or charges for power and energy and other
services, facilities and commodities sold, furnished or supplied by it through
any of its electric properties, which shall be fair and non-discriminatory and
adequate to provide revenues sufficient to enable Douglas to pay its pro rata
share of the Annual Power Costs and all other charges and obligations payable
from such revenues.  All moneys received by Douglas from the sale of Wells
Project Output to the Purchasers, together with payments by Douglas for power
and energy reserved by it from the Wells Project, and all other moneys received
by Douglas from the sale of Wells Project Output, and from sources connected
with the Wells Project other than from the sale of power, shall be segregated,
deposited and held separate and apart from all other revenues of Douglas and
shall be held in trust by Douglas for the uses and purposes specified in the
Bond Resolution.
 
Section 5.   Annual Power Costs.
 
(a)           “Annual Power Costs”, as used in this contract, shall be deemed to
mean all costs and expenses of Douglas in connection with the Wells Project
(excluding depreciation and items properly chargeable to Cost of Acquisition and
Construction), whether or not the Wells Project is inoperable or the operation
thereof is interrupted, suspended, or interfered with, in whole or in part,
during the term of this contract or any portion of said term, including, but not
limited to, the items of cost and expense of Douglas during each Contract Year
in connection with the Wells Project hereinafter mentioned in this Section 5, to
wit:
 
(1)           amounts which must be set aside by Douglas for the payment of Debt
Service as required by the Bond Resolution;
 
(2)           an amount equal to ten percent (10%) of the total Debt Service
during the applicable Contract Year (being equivalent to the amount which
Douglas will agree in the First Bond Resolution to pay out of the Revenue Fund
therein provided for into the Reserve and Contingency Fund as provided for in
the First Bond Resolution, and to be used only for the purposes therein
provided);
 
(3)           amounts which Douglas is required to pay for extraordinary
operation and maintenance costs of the Wells Project, including the prevention
or correction of any unusual loss or damage (including major repairs) thereto,
in order to keep the Wells Project in good operating condition, and for
renewals, replacements, additions, betterments and improvements to the Wells
Project and extensions thereof, to the extent that such amounts exceed the
amount in said Reserve and Contingency Fund available to make or provide for
such payments, including any insurance proceeds payable in respect of such
unusual loss or damage or of loss or damage to the property being repaired,
renewed or replaced and available to make or provide for such payments; and
 
(4)           all costs of producing and delivering power and energy from the
Wells Project (including but not limited to ordinary operation and maintenance
costs but excluding depreciation) not accounted for by the payments out of funds
and reserves specified in the foregoing clauses of this Section 5(a) and
properly chargeable to the Wells Project in accordance with the Uniform System
of Accounts.
 
(b)           Notwithstanding the provisions of the foregoing subsection 5(a),
the term “Annual Power Costs”, as used in this contract, shall mean:
 
(1)           for the Initial Delivery Period, all costs and expenses (not
including depreciation, Debt Service and items properly chargeable to Cost of
Acquisition and Construction) of Douglas in connection with the ownership,
operation and maintenance of the Wells Project during the Initial Delivery
Period; and
 
(2)           for the Interim Delivery Period, (i) all costs and expenses (not
including depreciation, Debt Service and items properly chargeable to Cost of
Acquisition and Construction) of Douglas in connection with the ownership,
operation and maintenance of the Wells Project during the Interim Delivery
Period; (ii) that proportion (not exceeding 100%) of the interest and principal
payments accruing during the Interim Delivery Period on all outstanding Revenue
Bonds which the number of generating units installed, successfully tested as
required by the specifications, except for the index tests, and made ready and
available for normal continuous operation bears to the number seven (7),
provided that the seventh unit shall not be deemed to be so ready until the
Commencement of Normal Routine Operation.  For the purpose of this clause (ii),
during the Interim Delivery Period interest payments shall be deemed to have
accrued on a daily basis, and principal payments shall be deemed to have accrued
on a daily basis during the 12-month period prior to their due date; and the
applicable proportion shall be determined from time to time as additional
generating units are so installed, tested, except for the index tests, and made
ready and available; and (iii) 10% of the aggregate amount payable pursuant to
the foregoing clause (ii).
 
(c)           If the amounts described in Section 5(a)(3) hereof exceed the
amount in said Reserve and Contingency Fund, including the insurance proceeds
referred to in Section 5(a)(3), plus One Million Dollars ($1,000,000), Douglas
agrees that it will, at the request of the Purchasers, fund the full sum by
which such amounts exceed such insurance proceeds, if any, by the issuance and
sale of equal lien (pari passu) bonds payable from the revenues of the Wells
Project; provided that such bonds can then be legally issued and can be sold;
and provided further that unless all the Purchasers otherwise agree in writing,
such bonds shall mature no earlier than the expiration of the service life of
the facilities financed from the proceeds of such bonds, as determined by the
Consulting Engineer (acting under the First Bond Resolution) at the time of
issuance.
 
(d)           Any payment or compensation received by Douglas as a result of the
taking or depletion of any portion of Wells Project Output by any state or
federal government agency shall be allocated to the payment of Annual Power
Costs over the term of such taking, or the remaining term of this contract if
the period of taking is for the remaining term of this contract.  In the event
such taking or depletion is of the whole of Wells Project Output for the
remaining term of this contract, any payment or compensation to Douglas received
by Douglas shall be applied in the manner and to the extent required in the
First Bond Resolution as though such payment was received for the sale or other
disposition of the Wells Project.
 
(e)           Should any amount remain in any of the funds established in
connection with the Wells Project, including working capital and all reserves in
excess of outstanding obligations against such funds at the expiration of the
term of this contract, there shall be refunded to the Purchaser, as excess
payment for its share of Wells Project Output theretofore purchased, a share of
such remainders determined by multiplying the total thereof by the percentage of
Wells Project Output to which the Purchaser is entitled immediately prior to
such expiration.
 
Section 6.   Payment for Well Project Output Sold.
 
(a)           Not less than thirty (30) nor more than sixty (60) days prior to
the estimated date of commencement of the Interim Delivery Period, and on or
before one hundred twenty (120) days prior to January 1, 1969, or the estimated
date of Commencement of Normal Routine Operation, whichever is later, and on or
before one hundred twenty (120) days prior to the beginning of each Contract
Year thereafter, Douglas shall prepare and mail to the Purchaser a pro forma
statement showing:
 
(1)           The estimated date of Commencement of Normal Routine
Operation.  This need not be shown after the first statement; provided, that
Douglas shall keep the Purchaser advised at all times of changes in such
estimated date, as well as of the actual date of Commencement of Normal Routine
Operation when this occurs;
 
(2)           A detailed estimate of the Annual Power Costs of the Wells Project
for the Interim Delivery Period or for the following Contract Year, as the case
may be, accompanied by a copy of the operating and capital budgets upon which
such estimate is based;
 
(3)           An amount obtained by multiplying the estimated Annual Power Costs
by the Purchaser’s Power Allocation.  This amount (expressed in dollars) is
hereinafter referred to as the “Purchaser’s Estimated Cost”; and
 
(4)           The amount of the equal monthly payments to be made by the
Purchaser to pay the Purchaser’s Estimated Cost during the estimated length of
the Interim Delivery Period or during the following Contract Year, as the case
may be.  Said statement shall be in lieu of the issuance of monthly bills to the
Purchaser by Douglas.
 
(b)           In the event of extraordinary receipts or payments of unusual
costs or other circumstances (including in the case of the Interim Delivery
Period changes in the estimated date of Commencement of Normal Routine Operation
or the dates or estimated dates when generating units are or are to be made
ready for normal continuous operation) which substantially affect the Annual
Power Costs during the Interim Delivery Period or any Contract Year, Douglas
shall prepare and mail to the Purchaser a revised estimate of Annual Power Costs
for the estimated balance of the Interim Delivery Period or the balance of such
Contract Year which shall supersede the previous estimate of Annual Power Costs
as a basis for the Purchaser’s subsequent monthly payments.
 
(c)           The Purchaser shall make said monthly payments as advances on
account towards the payment of its share of the Annual Power Costs at the
offices of Douglas at East Wenatchee, Washington,
 
(1)           in the case of the Interim Delivery Period, not later than the
last day of the month in which the Interim Delivery Period commences, and not
later than the twentieth day of each month thereafter, to the month in which
occurs the Commencement of Normal Routine Operation, and
 
(2)           in the case of the first Contract Year and thereafter, not later
than the last day of the month in which the Commencement of Normal Routine
Operation occurs, or January 31, 1969, whichever is later, and not later than
the twentieth day of each month thereafter,
 
whether or not the Wells Project is then operable or operating; provided that if
the period which is the Interim Delivery Period or the first Contract Year
commences other than on the first day of a month, the payment for the first
month of such period shall be reduced to an amount equal to the Purchaser’s
Estimated Cost divided by the number of days in such period and multiplied by
the number of days in the first month included within such period.
 
(d)           If payment in full is not made on or before the close of business
on the due date, a delayed-payment charge of two per cent (2%) of the unpaid
amount due will be made.  Remittances received by mail will be accepted without
assessment of the two per cent (2%) delayed-payment charge if the postmark
indicates the payment was mailed on or before the due date.  If the due date is
a Sunday or a holiday, the next following business day shall be the last day on
which payment may be made or mailed without the addition of the delayed-payment
charge.  Except as to any portion of a monthly payment which may in good faith
be disputed by the Purchaser, Douglas may, whenever any amount due remains
unpaid subsequent to the thirtieth day after the due date and after giving
thirty (30) days’ advance notice in writing, discontinue deliveries to the
Purchaser until such bill and any subsequent payments which have become due are
paid.  No such discontinuance shall relieve the Purchaser from any of its
obligations under this contract; provided, that until the Purchaser’s Power
Allocation has been reallocated under the provisions of Section 21 hereof,
Douglas shall use its best efforts to sell the power and energy made available
by such discontinuance for the account of the Purchaser.
 
(e)           Douglas shall pay into the Revenue Fund established by the Bond
Resolution that share of the Annual Power Costs determined by multiplying the
Annual Power Costs by the percentage of Wells Project Output reserved by Douglas
in accordance with Section 4 hereof as it may be modified by Section 21 hereof.
 

(f)           On or before one hundred twenty (120) days after the end of the
Interim Delivery Period, Douglas will submit to the Purchaser a detailed
statement of the actual Annual Power Costs for the Interim Delivery Period,
based on the audit of the accounts of the Wells Project provided for in
Section 12 hereof, and will compare such actual Annual Power Costs with the
estimated Annual Power Costs for the Interim Delivery Period.  If such actual
costs exceed such estimated costs, Douglas shall bill the Purchaser for an
amount equal to such excess multiplied by the Purchaser’s Power Allocation for
the Interim Delivery Period, and the Purchaser agrees to pay such bill
promptly.  If such estimated costs exceed such actual costs, Douglas shall give
credit to the Purchaser for an amount equal to such excess multiplied by such
Power Allocation, such credit to be given (in full until exhausted) against
monthly payments commencing with the first monthly payment after the submission
of such statement.
 
(g)           On or before one hundred twenty (120) days after the end of each
Contract Year, Douglas will submit to the Purchaser, based on the audit of the
accounts of the Wells Project provided for in Section 12 hereof, a detailed
statement of the actual Annual Power Costs for such Contract Year and a
statement of the amount existing in the Revenue Fund created by the First Bond
Resolution as of the close of such Contract Year.  If the amount so existing in
the Revenue Fund exceeds the required amount of working capital, Douglas shall
give credit to the Purchaser for an amount equal to such excess multiplied by
the Purchaser’s Power Allocation for such Contract Year, such credit to be given
(in full until exhausted) against monthly payments in the then current Contract
Year; provided that, if Douglas and all the Purchasers shall agree thereto in
writing, all or any part of such excess may be applied (and such credit shall be
correspondingly reduced by such application) to the making of repairs, renewals,
replacements, additions, betterments, improvements or extensions in connection
with the Wells Project; and provided, further, that if such statement is
submitted following the expiration of the term of this contract, Douglas shall
thereupon make a cash refund of such amount to the Purchaser.  If the required
amount of working capital exceeds the amount so existing in the Revenue Fund,
Douglas shall bill the Purchaser for an amount equal to such excess multiplied
by such Power Allocation, and the Purchaser agrees to pay such bill
promptly.  As used in this subsection (g), the “required amount of working
capital” shall be $1,500,000, or such lesser amount (but not less than $750,000)
or such greater amount as may be agreed upon by Douglas and the Purchasers, and
the amount existing in the Revenue Fund as of the close of any Contract Year
shall be deemed to be the amount of the then excess of the current assets in the
Revenue Fund over the current liabilities thereof determined in accordance with
the Uniform System of Accounts; provided that such current liabilities shall not
include Debt Service for the next following Contract Year.
 
(h)           The Purchaser shall pay to Douglas for the Initial Delivery Period
an amount determined by multiplying the Annual Power Costs for the Initial
Delivery Period by the Purchaser’s Power Allocation.  For this purpose, Douglas
shall prepare and mail monthly to the Purchaser a statement showing the portion
of the Annual Power Costs allocable to the preceding month and the Purchaser
shall pay Douglas its percentage thereof promptly.  If payment of the amount so
due is not made by the twentieth day after receipt of the statement by the
Purchaser, a late-payment charge of two per cent (2%) of the unpaid amount due
will be made.  Remittances received by mail will be accepted without assessment
of the two per cent (2%) delayed-payment charge if the postmark indicates the
payment was mailed on or before the twentieth day after such receipt.  On or
before one hundred twenty (120) days after the end of the Initial Delivery
Period, Douglas will submit to the Purchaser a detailed statement of the Annual
Power Costs for the Initial Delivery Period, based on the audit of the accounts
of the Wells Project provided for in Section 12 hereof, and will compare such
Annual Power Costs with the aggregate of the monthly payments previously made by
the Purchasers.  If such actual costs exceed such aggregate payments, Douglas
shall bill the Purchaser for an amount equal to such excess multiplied by the
Purchaser’s Power Allocation for the Initial Delivery Period, and the Purchaser
agrees to pay such bill promptly.  If such aggregate payments exceed such actual
costs; Douglas shall promptly pay to the Purchaser an amount equal to such
excess multiplied by such Power Allocation.
 
Section 7.   Scheduling of Deliveries.
 
(a)           Deliveries will be made insofar as possible as requested by the
Purchaser, all as provided in this Section 7; provided, that such deliveries,
together with deliveries requested by all other Purchasers (including deliveries
to Douglas pursuant to its reservation under Section 4 hereof) will be possible
of fulfillment under the terms of the License and will not exceed the capability
of the Wells Project or subject it or its operation to undue hazard.
 
(b)           It is the intent of the parties hereto that the power and energy
purchased hereunder by the Purchaser shall be fully coordinated with other
resources available to the Purchaser and with the resources of other Purchasers
and that the operation of the Wells Project shall be coordinated with the
operation of the Northwest Power Pool.  Scheduling of generation from the Wells
Project shall be as requested by the Purchaser, acting singly or as a member of
a group of Purchasers, subject to the limitations set forth in this Section and
in other Sections of this contract.
 
(c)           The Purchaser, acting singly or as a member of a group of
Purchasers, shall make available to Douglas at least eight (8) hours before
12:01 A.M. of each day an hourly schedule of desired total energy deliveries for
that day.  Such schedule shall be based upon the probable water supply to the
Wells Project and the resulting probable output.  Changes in the desired energy
deliveries may be made at any time upon the request of the Purchaser if required
by changes in estimated river flows or system requirements, and the Purchaser
may request that such changes be made continuously through the use of automatic
load control equipment.  Deviations from schedule for Wells Project Output shall
be held to a minimum by Douglas and corrected as promptly as possible on an
hourly basis under conditions as nearly equivalent as possible to those
obtaining when the deviations occurred.
 
(d)           The schedules and deliveries requested by the Purchaser shall be
in accordance with the following:
 
(1)           The Purchaser shall not request the delivery of energy, or
equivalent spill, at a rate in excess of an amount determined by multiplying the
peaking capability of the Wells Project at the time of such request by the
Purchaser’s Power Allocation.  The Purchaser shall request such deliveries at a
rate not less than an amount determined by multiplying the total deliveries of
energy, or equivalent spill, required to comply with the minimum discharge
provisions of the License, by the Purchaser’s Power Allocation; provided that,
if the aggregate requests of all the Purchasers shall provide sufficient
discharge from the Wells Project to comply with such provisions of the License,
Douglas may not require the scheduling of additional delivery or spill by the
Purchaser;
 
(2)           The Purchaser shall be entitled to schedule a share of that part
of Wells Project Output resulting from the inflow of the stream each hour
determined by multiplying said part of Wells Project Output by the Purchaser’s
Power Allocation;
 
(3)           The Purchaser shall be entitled to schedule a share of the pondage
available at the Wells Project (hereinafter called the “Purchaser’s Allocation
of Pondage”), determined by multiplying the total pondage available by the
Purchaser’s Power Allocation; and
 
(4)           The Purchaser may schedule more or less than its share of Wells
Project Output determined in accordance with subsection 7(d)2 hereof by
scheduling from or to a pondage account established for each Purchaser.  The
aggregate amount of the energy scheduled from the pondage account shall not
exceed the Purchaser’s Allocation of Pondage determined in accordance with
subsection 7(d)3 hereof and shall subsequently require, except as all of the
Purchasers shall otherwise agree, the scheduling of an equivalent amount of
energy to the account for refill by 7:00 A.M. on the following
Monday.  Scheduling by the Purchaser to its pondage account shall be only
against its prior accumulated pondage draft.  Refill obligations shall be
reduced proportionately when inflow of the stream exceeds the hydraulic capacity
of the Wells Project and will be cancelled when spill occurs.
 
Section 8.   Points of Delivery.  The power and energy to be made available to
the Purchaser by Douglas hereunder shall be delivered at approximately 230 kv
and at the Purchaser’s request delivered at (a) the Wells Project’s 230 kv bus
at the point or points of connection with any non-Project transmission lines,
and/or (b) any point where the 230 kv transmission facilities of the Wells
Project connect with non-Project facilities in the vicinity of the Rocky Reach
switchyard, and/or (c) other points of delivery as may be agreed upon from time
to time by all of the Purchasers and Douglas; provided, however, that except as
provided in the next succeeding paragraph of this Section, and until Douglas has
had a reasonable opportunity to construct additional facilities if necessary to
comply with Section 20 (f) hereof, the power and energy to be delivered to the
Purchaser at all points of delivery specified in (b) above shall not exceed the
capacity of the Wells Project transmission facilities between the Wells
Project’s 230 kv bus and all said points of delivery multiplied by the
Purchaser’s Power Allocation; the amount so determined to be hereafter referred
to as “Purchaser’s Share of Transmission Capacity”.
 
Each Purchaser of a portion of Wells Project Output shall have the right,
without additional charge by Douglas, to use or assign to another such Purchaser
its Purchaser’s Share of Transmission Capacity to transmit Wells Project and/or
non-Project power and energy.  During any time transmission capacity is not used
or assigned by a Purchaser entitled to the same or any transmission capacity is
made available by opposed power flow such capacity shall be divided among
Purchasers desiring the same in proportion to their respective power
allocations.
 
Section 9.   Voltage Control and Reactive Deliveries.
 
(a)           Douglas shall maintain voltage levels at the Wells Project to best
coordinate with the systems of the Purchasers and the systems operated by
members of the Northwest Power Pool.
 
(b)           Reactive kilovolt-amperes shall be made available up to the
capability of the equipment of the Wells Project, consistent with the power
generation and voltage level schedule for the Wells Project at the time.
 
(c)           The Purchaser is entitled at any time to a share of the reactive
output equal to that available at the time of maximum power output from the
Wells Project determined by multiplying the total reactive output by the
Purchaser’s Power Allocation.  The Purchaser may take additional reactive
deliveries when available, or otherwise, by reducing deliveries of power from
the Wells Project to the Purchaser so as to provide the additional reactive
capability.
 
Section 10.   Character and Continuity of Service.
 
(a)           Power and energy delivered hereunder shall be approximately
230 kv, three-phase alternating current, at approximately sixty cycles per
second.  Douglas may temporarily interrupt or reduce deliveries of electric
energy to the Purchaser if Douglas determines that such interruption or
reduction is necessary in case of emergencies, or in order to install equipment
in, make repairs to, replacements, investigations and inspections of, or perform
other maintenance work on the Wells Project.  In order that operations of the
Purchasers will not be unreasonably interrupted or interfered with, Douglas,
after consulting with the Purchaser regarding any such planned interruption or
reduction, giving the reason therefor and stating the probable duration thereof,
will to the best of its ability schedule such interruption at a time which will
cause the least interference to the operations of the Purchaser and the
operations of the other Purchasers.
 
(b)           Except as interrupted by Uncontrollable Forces or as provided
otherwise by this Section, the Purchaser’s share of Wells Project Output shall
be made available in accordance with this contract at all times during the term
of this contract commencing with the Initial Date of Delivery.
 
Section 11.   Metering and Transmission Losses.
 
(a)           Douglas shall provide and maintain suitable meters in the
generator leads of the power plant of the Wells Project to indicate and record
the output of the Wells Project.  Wells Project Output shall be determined from
totalized readings from said meters and in accordance with the provisions of
subsection 2(d) hereof.  Douglas shall also arrange for suitable metering at the
point of delivery specified in Section 8 hereof or at other points as agreed
upon.  Meters shall be read by Douglas or an agent of Douglas and records
thereof shall be made available to the Purchaser as may be reasonably required.
 
(b)           The amounts of Wells Project Output delivered hereunder shall be
determined as though they were made at the low voltage side of the power
transformers of the Wells Project.  All losses of power and energy from the
Purchaser’s Power Allocation purchased hereunder resulting from transformation
and transmission shall be borne by the Purchaser.
 
Section 12.   Accounts.
 
(a)           Douglas agrees to keep accurate records and accounts of the Wells
Project in accordance with the Uniform System of Accounts and in accordance with
the rules and regulations prescribed by the Division of Municipal Corporations
of the State Auditor’s office of the State of Washington, separate and apart
from its other accounting records.  Said accounts shall be the subject of an
annual audit by a firm of certified public accountants, experienced in electric
utility accounting and of national reputation, to be employed by Douglas.  The
transactions with respect to each Contract Year shall be subject to such an
audit.  In addition, such an audit shall be prepared to cover all transactions
relating to the Interim Delivery Period, as well as a separate audit covering
transactions relating to the Initial Delivery Period.
 
(b)           A copy of each such audit, including all recommendations of the
accountants, shall be furnished by Douglas to the Purchaser promptly after the
same shall have been prepared.
 
Section 13.   Information to be Made Available to the Purchaser.
 
(a)           All drawings, designs, plans, specifications and terms of
contracts relating to the construction and operation of the Wells Project are or
will be placed on file in the office of Douglas at East Wenatchee, Washington,
and will be open to inspection by the Purchaser.
 
(b)           All agreements and data relating to the financing of the Wells
Project may be examined by the Purchaser at the office of Douglas.
 
(c)           All operating and financial records and reports relating to the
Wells Project may be examined by the Purchaser at the office of Douglas.
 
(d)           Policies of insurance carried by Douglas pursuant to Section 15
hereof shall be available at the office of Douglas for inspection by the
Purchaser.
 
(e)           The Purchaser’s representatives shall at all times be given
reasonable access to the Wells Project.
 
Section 14.   Advisory Committee—Arbitration.
 
(a)           In order that the Purchasers may, in an orderly way, participate
in problems relating to the Wells Project, there is hereby established the Wells
Advisory Committee (herein called the “Committee”).  The Purchaser and each of
the other Purchasers are entitled to representation on the Committee and may
each appoint a representative to attend Committee meetings.  A Chairman shall be
elected by the members of the Committee.  The Committee will meet regularly each
month, or as otherwise determined by the Committee, for the purpose of
discussing the problems with respect to the Wells Project and may make
recommendations to Douglas with reference thereto.  Special meetings shall be
called by the Chairman at the request of Douglas or upon the request of any
member of the Committee.  All meetings will be held at the office of Douglas at
East Wenatchee, Washington, or at such other place or places as may be
determined by the Committee.
 
(b)           Copies of the operating and capital budgets referred to in
subsection 6(a)(2) hereof shall be submitted to the Committee.
 
(c)           Except in the event of an emergency requiring immediate action,
Douglas shall give to the Committee reasonable notice, in no case less than
thirty (30) days, whenever it proposes to replace items of major equipment in or
to construct additions, improvements or betterments to or extensions of the
Wells Project, or to enter into additional new or special contractual
arrangements relating to or substantially modifying the operation or Annual
Power Costs of the Wells Project.
 
(d)           Douglas will give due consideration to the recommendations of the
Committee.  In considering said recommendations, Douglas shall give due regard
to the objective of achieving from the Wells Project the optimum electric power
production consistent with economy, reliability and facility of operation and
Douglas’ statutory duties.  Written recommendations may be made to Douglas
whenever such recommendations are approved in writing by members of the
Committee representing Purchasers who are purchasing forty-nine per cent (49%)
or more of that part of the Wells Project Output purchased under this contract
and the other contracts referred to in subsection 2(i) hereof by all
Purchasers.  Such written recommendations shall be forwarded to Douglas with
appropriate supporting data.  Douglas shall take action on such recommendations
within a reasonable time by adopting, modifying or rejecting such
recommendations.  If Douglas modifies or rejects said recommendations it shall
notify the Committee of its action in writing, giving the reasons therefor.
 
(e)           If Douglas modifies or rejects a written recommendation of the
Committee dealing with matters which may be arbitrated as set forth in
subsection 14(f) hereof, and made in accordance with the procedures set forth in
subsection 14(d) hereof, the Committee may, by affirmative vote of members of
the Committee representing Purchasers who purchase forty-nine per cent (49%) or
more of that part of Wells Project Output purchased under this contract and the
other contracts referred to in subsection 2(i) hereof by all Purchasers, submit
the recommendation to a board of arbitrators.  The board of arbitrators shall be
composed of three (3) persons, one of whom shall be appointed by Douglas, one of
whom shall be appointed by majority vote of the members of the Committee, and
the third person shall be appointed by the two persons so appointed.  In the
event said two persons cannot agree upon the appointment of a third person, then
such third person shall be appointed by the Chief Justice of the Supreme Court
of the State of Washington.  The procedure for arbitration shall be governed by
the laws of the State of Washington.  Insofar as the parties hereto may legally
do so, they agree to abide by the decision of said board; provided, that Douglas
shall not be bound by any decision of a board of arbitrators to the extent that
such decision is retroactive beyond the date when the matter arbitrated was made
the subject of written recommendation of the Committee.
 
(f)           Subject to the provisions of Section 22 hereof, the matters which
may be arbitrated in accordance with subsection 14(e) hereof shall consist of
all matters pertaining to the maintenance, operation, additions, betterments,
extensions, improvements, replacements and renewals of the Wells Project,
insurance to be carried on the Wells Project and its operation, financing and
refinancing, voluntary payments in lieu of taxes or other voluntary donations
made by Douglas, and any matter substantially adversely affecting Annual Power
Costs, except, however, that this Section 14 shall not require Douglas to submit
to arbitration any matter which Douglas cannot lawfully submit to arbitration.
 
(g)           In the event this Section 14 or any paragraph, sentence, clause or
phrase thereof shall be adjudicated by a court of last resort and of competent
jurisdiction to be invalid or illegal, the remainder of this contract shall be
unaffected by such adjudication, and all other provisions of this contract shall
remain in full force and effect as though this Section or such part thereof so
adjudicated to be invalid had not been included herein.
 
Section 15.   Insurance.  Douglas agrees to obtain and maintain in full force
and effect during the term of this contract, to the extent available at
reasonable cost, adequate insurance with responsible insurers with policies
payable to Douglas for the benefit of Douglas and the Purchasers as their
respective interests may appear, against:
 
(1)           Obligations of Douglas under the Workmen’s Compensation Law of the
State of Washington, and Employer’s liability;
 
(2)           Public liability for bodily injury and property damage;
 
(3)           Physical loss or damage to the Wells Project;
 
(4)           Business interruption loss to Douglas and/or the Purchasers
resulting from delay in completion of the Wells Project, and from interruption
or reduction of generation or transmission of power and energy caused by
physical loss, damage or destruction; and
 
(5)           Any other insurance determined to be necessary by Douglas and
concurred in by the Purchasers who are purchasing sixty percent (60%) or more of
that part of the Wells Project Output purchased under this contract and the
other contracts referred to in subsection 2(i) hereof by all the Purchasers.
 
Section 16.   Operation and Maintenance.  Douglas covenants and agrees that it
will operate and maintain the Wells Project in an efficient and economical
manner, consistent with good business and operating practices of comparable
non-federally owned hydroelectric projects on the Columbia River in the United
States.
 
Section 17.   Board of Consulting Engineers on Construction Problems.  Douglas
shall establish a Board of five, (5) Consulting Engineers during the
construction of the Wells Project, which shall include two (2) engineers of
outstanding ability and national reputation, selected by Douglas from a list of
not less than four (4) such engineers submitted by the Committee to Douglas.
 
Section 18.   Construction and Financing Contracts.  Douglas agrees that prior
to commencing construction of the Wells Project it will have completed the
financing of the estimated Cost of Acquisition and Construction, shall have let
the major contract for the construction thereof, and shall have obtained
adequate surety bonds for the completion of said contract.  Bechtel Corporation
shall have prepared the plans and specifications for the Wells Project, and
Messrs. Fraley and Leighton shall have prepared the plans and specifications for
the office building included in the Wells Project, all of which plans and
specifications shall have been subject to review by the Purchaser, and Douglas
agrees that it will not (without the consent of the Purchasers who are
purchasing sixty per cent (60%) or more of that part of the Wells Project Output
purchased under this contract and the other contracts referred to in
subsection 2(i) hereof by all the Purchasers) modify, amend or waive full
compliance with, nor make any elections provided for in, the said plans and
specifications, in any material respect.
 
Section 19.   Completion of Construction.  Douglas agrees to proceed diligently
with the financing and construction of the Wells Project and, subject to
Uncontrollable Forces, plans to complete the Wells Project by September 1, 1968.
 
Section 20.   Additional Facilities.
 
(a)           From time to time during the term hereof Douglas may propose to
expand the Wells Project by installing additional generating
facilities.  Whenever Douglas proposes to so expand the Wells Project it shall
give notice in writing of such intent to the Purchaser stating:
 
(1)           The estimated cost of such additional generating facilities;
 
(2)           The proposed method of financing the cost of said facilities;
 
(3)           The estimated additional power and energy which would be available
as a result of the installation of said facilities;
 
(4)           The estimated incremental cost (i.e., the costs which will be
incurred as a result of installing the proposed additional facilities, which
costs would not be incurred were such proposed additional facilities not
installed) of said additional power and energy on an annual basis; and
 
(5)           The estimated construction period for the installation of said
facilities.
 
The notice shall also contain other available pertinent information.
 
(b)           The Purchaser shall have the option of purchasing a share of said
additional power and energy determined by multiplying the total additional
output by the Purchaser’s Power Allocation, and may exercise such option by
giving written notice to Douglas on or before the expiration of ninety (90) days
from the receipt of said written notice from Douglas.  Douglas shall give a
second notice to the Purchaser if any of the other Purchasers shall fail to
exercise its option for its full share of said power and energy, and the
Purchaser may, by giving written notice to Douglas within sixty (60) days after
the receipt of the second notice from Douglas, have its respective share of said
power and energy increased either in proportion or, as shall be mutually agreed
upon, so as to make available to the Purchaser and to the other Purchasers power
and energy available as a result of any of the other Purchasers failing to elect
to take its full share of said additional power and energy.  Douglas, in
addition to its share of said additional output determined by multiplying the
total amount of said additional power and energy by the percent reservation for
Douglas specified in Section 4 hereof, shall be entitled to the additional power
and energy which the Purchaser and other Purchasers shall not elect to take in
accordance with the foregoing provision.  Failure to exercise its option to
purchase additional power and energy which would be available from the
installation of additional generating facilities proposed by Douglas at any time
shall not be construed to waive the rights of the Purchaser to a share of the
additional power and energy which would be available from additional facilities
proposed for installation by Douglas at a later date.
 
(c)           If the Purchaser exercises its option to take its share of said
additional power and energy, it shall pay for said additional power and energy a
percentage of the incremental annual cost of said additional facilities
corresponding to the percent the share of additional power and energy which it
purchases is of the total additional power and energy available as the result of
the installation of the additional facilities.  If the Purchaser does not elect
to take additional power and energy which would be available from the
installation of additional generating facilities it shall continue to receive
the same percentage of Wells Project Output and pay the same Annual Power Costs
therefor as if such additional generating facilities had not been installed.
 
(d)           If, after the Purchaser shall have exercised its option as
aforesaid, Douglas shall determine that it is not economically feasible for it
to install additional generating facilities as proposed, Douglas shall be under
no obligation to so do and shall so notify the Purchaser of such determination.
 
(e)           Notwithstanding any other provisions of Section 20 hereof,
whenever Douglas is compelled to install additional facilities at or in the
Wells Project by any order or decision of the Federal Power Commission or any
state or federal government agency with authority to issue or make and enforce
such an order or decision, the Purchaser shall share the benefits and costs
resulting from the installation of said additional facilities in the same manner
and to the same extent as if the Purchaser had voluntarily exercised its option
to purchase the power and energy resulting from the installation of additional
generating facilities as provided above in Section 20 hereof.
 
(f)           Douglas agrees that it will construct as a part of the Wells
Project such transmission lines and such terminal facilities as are necessary to
deliver power and energy from the Wells Project to the points of delivery
specified in Section 8 of this contract and the similar contracts with the other
Purchasers.  The Purchaser hereby agrees that Douglas may at any time or from
time to time construct as a part of the Wells Project (1) one 230/115-kv
stepdown substation at the Wells Project and one 230/115-kv stepdown substation
near the Rocky Reach switchyard with a combined capacity of not more than
250,000 kva, (2) one 115-kv transmission line approximately 10 miles long from
the Wells Project to the vicinity of Brewster and Bridgeport, and (3) one 115-kv
transmission line approximately 8 miles long from the vicinity of the Rocky
Reach switchyard to the Eastmont area of Douglas County, including, in each
case, necessary terminal facilities.
 
Section 21.   Adjustment of Power Allocation.  The Purchaser’s Power Allocation
shall be automatically increased pro rata with that of the other Purchasers, not
in excess of a cumulative maximum of Twenty-Five Per Cent (25%) of its original
percentage allocation specified in Exhibit “A” hereto, in the event of a Default
(as hereinafter defined) by any one or more of the other Purchasers.  If any of
the other Purchasers defaults, and the Purchaser’s Power Allocation is
automatically increased in accordance with this Section, the Purchaser either
individually or as a member of a group shall have a right of recovery from that
one of the Purchasers in default for such amount as the Purchaser may sustain as
a loss or damage by reason of such Default and may commence such suit, action or
proceeding as may be necessary or appropriate to recover the amount of said loss
or damage.  The term “Default” as used herein shall mean the failure by any one
of the Purchasers to make the payments specified in Section 6 hereof and
contemporaneously with said failure to make payments there shall exist, with
respect to that one of the Purchasers, any one or more of the following
conditions:
 
(a)           An order, judgment or decree shall be entered by any court of
competent jurisdiction:
 
(1)           Appointing a receiver, trustee or liquidator for said Purchaser or
the whole or any substantial part of the properties of said Purchaser;
 
(2)           Approving a petition filed against said Purchaser under the
provision of an Act to Establish a Uniform System of Bankruptcy Throughout the
United States, Approved July 1, 1898, as amended;
 
(3)           Granting relief to said Purchaser under an amendment to said
Bankruptcy Act which shall give relief similar to that afforded by said Act; or
 
(4)           Assuming custody or control of the whole or any substantial part
of the properties of said Purchaser under the provisions of any other law for
the relief or aid of debtors;
 
and such order, judgment or decree shall not be vacated or set aside or stayed
(or, in case custody or control is assumed by said order, such custody or
control shall not otherwise be terminated) within sixty (60) days from the date
of the entry of such order, judgment or decree;
 
(b)           Said Purchaser shall:
 
(1)           Admit in writing its inability to pay its debts generally as they
become due;
 
(2)           File a petition in bankruptcy;
 
(3)           Make an assignment for the benefit of its creditors;
 
(4)           Consent to the appointment of a receiver of the whole or any
substantial part of its properties;
 
(5)           Be adjudicated a bankrupt on the basis of a petition in bankruptcy
filed against it;
 
(6)           File a petition or an answer seeking relief under any amendment to
said Bankruptcy Act which shall afford relief substantially similar to that
afforded by said Act; or
 
(7)           Consent to the assumption by any court of competent jurisdiction
under the provisions of any other law for the relief or aid of debtors of
custody or control of such Purchaser or of the whole or any substantial part of
its properties;
 
provided that if prior to an imminent Default by any Purchaser (hereinafter
called the “Defaulting Purchaser”), the Defaulting Purchaser shall demonstrate,
to the satisfaction of other Purchasers receiving in the aggregate at least
two-thirds (⅔) of the Wells Project Output being purchased by Purchasers other
than the Defaulting Purchaser under this contract and the other contracts
referred to in subsection 2(i) hereof and to the satisfaction of Douglas, the
inability of the Defaulting Purchaser to pay for its power allocation under its
contract and its ability to pay for a smaller power allocation thereunder, then
the Defaulting Purchaser shall be allowed thereafter to take such smaller power
allocation thereunder and shall thereafter be liable thereunder for the smaller
power allocation in the same manner as for its previous power allocation
thereunder; and, in such event, the automatic increase in the Purchaser’s Power
Allocation as above provided shall apply only to the amount of such decrease in
power allocation of the Defaulting Purchaser.
 
Section 22.   Additions, Betterments, Improvements and Extensions.  Douglas may
at its option make in any Contract Year additions, betterments or improvements
to or extensions of the Wells Project costing in the aggregate not more than
$25,000, but may not make in such Contract Year such additions, betterments,
improvements or extensions costing in the aggregate more than $25,000 unless
such excess amount shall have been approved in writing by Purchasers who are
purchasing sixty per cent (60%) or more of the part of the Wells Project Output
purchased under this contract and the other contracts referred to in
subsection 2(i) hereof by all Purchasers.  Notwithstanding the provisions of
this Section 22, such approval of the Purchasers shall not be required in
connection with the construction of the facilities referred to in Section 20
hereof.
 
Section 23.   Liability of Parties.  Douglas and the Purchaser each assumes full
responsibility and liability for the maintenance and operation of its respective
properties and shall indemnify and save harmless the other party from all
liability and expense on account of any and all damages, claims or actions,
including injury to or death of persons, arising from any act or accident in
connection with the installation, presence, maintenance and operation of the
property and equipment of the indemnifying party; provided, that any liability
which is incurred by Douglas through the operation and maintenance of the Wells
Project and not covered by insurance shall be paid solely from the revenues of
the Wells Project, and any payments made by Douglas to satisfy such liability
shall become part of the Annual Power Costs.
 
Section 24.   Waiver of Default.  Any waiver at any time by either party to this
contract of its rights with respect to any default of the other party hereto, or
with respect to any other matter arising in connection with such contract, shall
not be considered a waiver with respect to any subsequent default, right or
matter.
 
Section 25.   Notices and Computation of Time.  Any notice or demand, except
those provided for in Section 7 hereof, by the Purchaser under this contract to
Douglas shall be deemed properly given if mailed postage prepaid and addressed
to Public Utility District No. 1 of Douglas County, Washington, at East
Wenatchee, Washington; any notice or demand by Douglas to the Purchaser under
this contract shall be deemed properly given if mailed postage prepaid and
addressed to Puget Sound Power & Light Company, Attention Ralph M. Davis,
President, P.O. Box 535, Bellevue, Washington; and computing any period of time
from such notice, such period shall commence at 12:00 P.M. (midnight) on the
date mailed.  The designations of the name and address to which any such notice
or demand is directed may be changed at any time and from time to time by either
party giving notice as above provided.
 
Section 26.   Modification of Contract Terms.  It is recognized by the parties
hereto that, by virtue of the Bond Resolution, this contract cannot be amended,
modified or otherwise altered by agreement of the parties in any manner that
will impair or adversely affect the security afforded by the provisions of this
contract for the purchase and sale of a portion of Wells Project Output for the
payment of the principal, interest and premium, if any, on Revenue Bonds as they
respectively become payable, as long as any of the 1963 Bonds and Completion
Bonds as defined in the First Bond Resolution are outstanding and unpaid or
until provision is irrevocably made for the payment thereof.
 
Section 27.   Douglas’ Bond Resolution and License.  It is recognized by the
parties hereto that Douglas in its operation of the Wells Project and in the
delivery of a portion of Wells Project Output hereunder to the Purchaser, must
comply with the requirements of the Bond Resolution and with the License, and it
is, therefore, accordingly agreed that this Power Sales Contract is made, and
arbitration hereunder shall be, subject to the terms and provisions of the Bond
Resolution and the License.  Douglas shall not, without the written consent of
the Purchaser, amend, modify or otherwise change the Bond Resolution if such
amendment, modification or change would be to the disadvantage of the
Purchaser.  Except to the extent modification, amendment or change is permitted
by this Section 27, said Bond Resolution shall continue to be binding upon
Douglas so long as the Purchaser is purchasing power and energy during the term
of this contract and irrespective of whether the Bonds have been
redeemed.  Douglas shall not, over the objection of the Purchaser, voluntarily
accept or apply for an amendment or modification of the License.
 
Section 28.   Conflict of Laws.  The parties hereto agree that this contract
shall be governed by the laws of the State of Washington.
 
Section 29.   Assignment of Contract.  This contract shall inure to the benefit
of, and shall be binding upon the respective successors and assigns of the
parties to this contract.  No assignment or transfer of this contract shall
relieve the parties hereto of any obligation incurred hereunder.
 
Section 30.   Uniformity of Power Sales Contracts.  The Purchaser is one of
several Purchasers as follows:
 
Puget Sound Power & Light Company
Portland General Electric Company
Pacific Power & Light Company
The Washington Water Power Company

It is understood and agreed that all of said contracts for the sale and purchase
of power shall be uniform in all material respects in their terms, conditions
and provisions with the exception of the power allocation for each of the
Purchasers.  If any of said contracts are amended or replaced, then this
contract shall, at the option of the Purchaser, be amended or replaced to
conform to the changed or substituted contract; provided, however, that Douglas
shall have the right to sell power and energy reserved by it pursuant to
Section 4 hereof on such terms and conditions as it shall elect and nothing
herein shall be construed to require Douglas to offer equal terms and conditions
to the purchasers of such reserved power and energy.
 
In Witness Whereof, the parties hereto have caused this agreement to be executed
by their proper officers respectively, being thereunto duly authorized, and
their respective corporate seals to be hereto affixed, the day and year first
above written.
 

   
Public Utility District No. 1 of
Douglas County, Washington
     
 
(Seal)
 
By           /s/ Lloyd McLean
President
         
By           /s/ Howard Prey
Vice President
     
Attest:
         
/s/ Ross A. Heminger
   
Secretary
             
Puget Sound Power & Light Company
(Seal)
       
By           /s/ L. E. Karrer
Vice President
     
Attest:
         
/s/  C. B. Schoeggl
Secretary
   

EXHIBIT “A”
 
Distribution of Wells Project Output
 

 
 
Purchasers
   
 
Original Percentage Allocation
Puget Sound Power & Light Company
 
31.3%
Portland General Electric Company
 
20.3%
Pacific Power & Light Company
 
6.9%
The Washington Water Power Company
 
3.5%
   
62%