Exhibit 10.15.1

AMENDED AND RESTATED

ALASKA INTERTIE AGREEMENT

Among

ALASKA ENERGY AUTHORITY;

MUNICIPALITY OF ANCHORAGE, ALASKA

d.b.a. MUNICIPAL LIGHT AND POWER;

CHUGACH ELECTRIC ASSOCIATION, INC.;

GOLDEN VALLEY ELECTRIC ASSOCIATION, INC.;

ALASKA ELECTRIC GENERATION and

TRANSMISSION COOPERATIVE, INC.

November 18, 2011

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TABLE OF CONTENTS

 

Table of Contents

     1-8    Incorporated Exhibits List      9    Recitals      10    Article 1.
Definitions      12    Article 2. Term and Effective Date      12   
    Section 2.1  

Effective Date

     12        Section 2.2  

Termination

     12            2.2.1  

Mutual Consent

     12            2.2.2  

Participant and AEA

     12            2.2.3  

AEA Financial Obligations

     12            2.2.4  

Limitation for Financing

     12    Article 3. Operating and Reliability Standards and Enforcement     
13        Section 3.1  

Adoption of Operating Policies and Procedures, and Reliability Standards

     13            3.1.1  

AEA Responsibilities

     13            3.1.2  

Notice Required

     13        Section 3.2  

Compliance with Standards

     13        Section 3.3  

Implementation – Participants and Users

     14        Section 3.4  

Replacement of Reliability Standards

     14        Section 3.5  

Operating Committee

     14        Section 3.6  

Required Data Submissions

     14        Section 3.7  

AEA Power Project Compliance

     14    Article 4. Participant      15        Section 4.1  

Participant Defined

     15        Section 4.2  

New Participant

     15        Section 4.3  

Membership in IMC

     15    Article 5. Withdrawal of AEG&T and Other Participant and User Status
     15        Section 5.1  

Withdrawal of AEG&T

     15        Section 5.2  

Substitution of HEA and MEA, and Admission of City of Seward and the United
States Army

     16    Article 6. Minimum Rights of the Participants and Users to Use
Intertie Facilities      16        Section 6.1  

Minimum Intertie Transfer Capability Rights (“MITCR”)

     16   

 

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        6.1.1  

Right of First Refusal

     16            6.1.2  

Allocation of Transfer Capability

     16            6.1.3  

Emergency Operations

     16        Section 6.2  

Determination of MITCR

     17            6.2.1  

Methodology

     17            6.2.2  

Unused MITCR

     17            6.2.3  

Right to Contractually Transfer MITCR

     17            6.2.4  

IMC Authority to Change Capacity Allocation Methodology

     18            6.2.5  

New State Power Projects

     18        Section 6.3  

Maximum Intertie Transfer Capability

     18        Section 6.4  

Improvements to the Intertie

     19            6.4.1  

Development of Improvements

     19            6.4.2  

Requests for Improvements

     19            6.4.3  

Responsibility for Cost of Improvements

     20            6.4.4  

Right to Make Improvements – Required Work

     20            6.4.5  

Notice

     20        Section 6.5  

Additional Project Taps

     20    Article 7. Costs for Intertie Transfer Rights      21        Section
7.1  

Intertie Costs

     21            7.1.1  

Costs to Be Shared by Participants and Users

     21            7.1.2  

Annual Budget and Fiscal Year

     22        Section 7.2  

Calculation of Intertie Costs and Rates

     22            7.2.1  

Participant and User Estimates, Participant Historical Data

     22            7.2.2  

IMC Estimates

     22            7.2.3  

Comments

     23            7.2.4  

IMC Determination of Estimated Intertie Usage

     23            7.2.5  

Energy Rate

     23            7.2.6  

Capacity Rate

     23        Section 7.3  

Allocation of Intertie Costs

     23            7.3.1  

Participant and User Payments

     23            7.3.2  

Annual Payment of Intertie Costs

     24   

 

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        7.3.3   

Monthly Use

     24            7.3.4   

Excess Revenues

     24            7.3.5   

Revenue Deficiencies

     24    Article 8. Intertie Management Committee      24        Section 8.1
  

Establishment of the Intertie Management Committee, Right to Vote

     24            8.1.1   

Eligibility to Vote

     25            8.1.2   

Minutes

     25        Section 8.2   

Adoption of Procedural Rules or Bylaws

     25        Section 8.3   

Effect of Abstention

     25        Section 8.4   

Meetings by Electronic Communication

     25        Section 8.5   

IMC Responsibilities

     25            8.5.1   

IMC Responsibilities and AEA Duties

     25            8.5.2   

IMC Approvals

     26        Section 8.6   

IMC Actions

     26            8.6.1   

Intertie Operation

     26            8.6.2   

Intertie User Agreements

     26            8.6.3   

Non-Compliance Appeals

     26            8.6.4   

O&M and Scheduling

     27            8.6.5   

Budget

     27            8.6.6   

Cost Allocation and Payment Schedule

     27            8.6.7   

Maximum Capability and Capacity Allocation

     27            8.6.8   

Determination of Actual Payment Obligation

     27            8.6.9   

Funding Methods

     28            8.6.10   

Improvements

     28            8.6.11   

Maintenance

     28            8.6.12   

Creation of Reserve Fund

     28            8.6.13   

Procurement of Services

     28            8.6.14   

Miscellaneous

     28        Section 8.7   

Payment Obligation Unimpaired

     28        Section 8.8   

AEA’s Ability to Perform Required Work

     28        Section 8.9   

Payment Obligation and Rights of Review

     29   

 

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    Section 8.10  

AEA Authority to Collect Payments and Disburse Funds

     29    Article 9. Operating Committee      29        Section 9.1  

Establishment of the Operating Committee

     29            9.1.1  

Establishment

     29            9.1.2  

Representatives

     29        Section 9.2  

Meetings of the Operating Committee

     30            9.2.1  

Meetings

     30            9.2.2  

Voting

     30            9.2.3  

Minutes

     30            9.2.4  

Expenses

     30            9.2.5  

Meetings by Electronic Communication

     30        Section 9.3  

Operating Procedures

     30    Article 10. Operation of the Intertie      31        Section 10.1  

Responsibility for Operation of the Intertie

     31            10.1.1  

Responsible Participants

     31            10.1.2  

AML&P and MEA Responsibilities

     31            10.1.3  

GVEA Responsibilities

     31            10.1.4  

Joint Responsibilities

     32            10.1.5  

Contracting

     33            10.1.6  

Load Balancing

     33        Section 10.2  

Suspension of Work in Performance of Operational Duties

     33        Section 10.3  

Budget for Operation of the Intertie

     33            10.3.1  

Budget Process

     33            10.3.2  

Participant Comments

     33            10.3.3  

IMC Establishes Budget

     34            10.3.4  

IMC Determinations and Payment of AML&P and GVEA

     34            10.3.5  

Payment if IMC Unable to Determine Fixed Cost Fee

     34        Section 10.4  

Accounting and Records

     34        Section 10.5  

Audits

     34            10.5.1  

Request for Audit

     34            10.5.2  

State Audit

     35   

 

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    Section 10.6  

Payment of Operators

     35        Section 10.7  

Change in Ownership or Control

     35        Section 10.8  

Critical Repairs and Maintenance

     35    Article 11. Scheduling of Capacity and Energy on the Intertie      35
       Section 11.1  

Scheduling Responsibility

     35            11.1.1  

Southern Group

     35            11.1.2  

Northern Group

     36            11.1.3  

Coordination

     36        Section 11.2  

Capacity and Energy Schedules

     36            11.2.1  

Participant Hourly Schedules

     36            11.2.2  

Advanced Scheduling

     36            11.2.3  

Procedure

     36            11.2.4  

Short-term Scheduling

     36            11.2.5  

Modification of Scheduling Procedures

     36        Section 11.3  

Intertie Schedule Limitations

     36        Section 11.4  

Transmission Service to Access the Intertie

     37    Article 12. Maintenance of the Intertie Facilities      37   
    Section 12.1  

Maintenance Responsibility

     37            12.1.1  

Responsibility for Maintenance Practices

     37            12.1.2  

Availability

     37        Section 12.2  

Maintenance Budget and Costs

     37            12.2.1  

Development of Budget

     37            12.2.2  

Cost Records

     37    Article 13. Measurement of Electric Power and Energy      38   
    Section 13.1  

Required Metering Facilities

     38        Section 13.2  

Access to Metering Facilities and Data

     38        Section 13.3  

Installation and Maintenance

     38    Article 14.  

Transmission Losses

     38        Section 14.1  

Intertie Transmission and Transmission Service Losses

     38            14.1.1  

Method of Determination of Losses

     38            14.1.2  

Compensation for Losses

     39   

 

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        14.1.3  

Schedules

     39        Section 14.2  

Intertie Transmission Loss Compensation

     39    Article 15. Rights of Users      39    Article 16. Open Access
Principles      39        Section 16.1  

Definition

     39        Section 16.2  

Purpose

     39        Section 16.3  

Implementation of Capacity Allocation Methodology

     40            16.3.1  

New Methodology

     40            16.3.2  

Statutory Conditions

     40            16.3.3  

Priority for AEA Contracts

     40            16.3.4  

Alternative Allocation of Intertie Capacity

     40            16.3.5  

Federal Acquisition Regulations

     41        Section 16.4  

Public Process

     41        Section 16.5  

Availability of Information

     41        Section 16.6  

Review of Methodology

     41    Article 17. Billing and Payments      42        Section 17.1  

Billing

     42        Section 17.2  

Billing Disputes

     42        Section 17.3  

Payment of Sanctions

     42    Article 18. Insurance and Liability      42        Section 18.1  

Insurance

     42        Section 18.2  

Types of Insurance

     43            18.2.1  

Workers’ Compensation Insurance

     43            18.2.2  

Comprehensive General Liability Insurance

     43        Section 18.3  

Other Insurance Coverage Requirements

     43            18.3.1  

Participants’ Cost Responsibility

     43            18.3.2  

Users’ Insurance Requirements

     43            18.3.3  

Coverage and Certificates

     43    Article 19. Review of Decision      44        Section 19.1  

Review of IMC Decision

     44        Section 19.2  

Initiation of Review

     44   

 

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    Section 19.3  

Review Process

     44            19.3.1  

Settlement Conference

     44            19.3.2  

Disposition of Dispute

     44    Article 20. Indemnity      45        Section 20.1  

Responsibility; Cost of Indemnity

     45            20.1.1  

Costs of Indemnity

     45            20.1.2  

Participant Indemnity

     45            20.1.3  

IMC Indemnity

     45            20.1.4  

User Agreements

     45        Section 20.2  

Comparative Negligence

     45    Article 21. Warranty Denial and Exclusivity of Contract      46   
    Section 21.1  

AEA Denial of Warranty

     46        Section 21.2  

Exclusivity of Contract

     46    Article 22. Uncontrollable Forces      46        Section 22.1  

Limited Excuse of Performance

     46        Section 22.2  

Suspension of Performance

     46    Article 23. Waivers      46    Article 24. Successors and Assigns; No
Third Party Beneficiaries      47        Section 24.1  

Successors and Assigns

     47        Section 24.2  

No Third-Party Beneficiaries

     47    Article 25. Governing Law      47    Article 26. Captions, Merger of
Addenda and Exhibits      47        Section 26.1  

Captions

     47        Section 26.2  

Merger

     47    Article 27. Notices      48        Section 27.1  

Notices

     48            27.1.1  

Address

     48            27.1.2  

Means of Notice

     49    Article 28. Amendments      49    Article 29. Mutual Right of Entry
     49    Article 30. Agents      49   

 

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Article 31. Agreement Approval and Transmittal   50 Article 32. Construction of
Agreement   51 Exhibit A – Former AS 44.83.380   Exhibit B – Definitions  
Exhibit C – Form of New Participant Addendum   Exhibit D – Former AS
44.83.398(f)   Exhibit E – Intertie Facilities Diagram   Exhibit F – Form of
User Agreement   Exhibit G – Sample MITCR Calculation   Exhibit H – Reserve
Capacity and Operating Reserve Responsibility Agreement  

 

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Incorporated Exhibits

Exhibit A – Former AS 44.83.380

Exhibit B – Definitions

Exhibit C – Form of New Participant Addendum

Exhibit D – Former AS 44.83.398(f)

Exhibit E – Intertie Facilities Diagram

Exhibit F – Form of User Agreement

Exhibit G – Sample MITCR Calculation

Exhibit H – Reserve Capacity and Operating Reserve Responsibility Agreement

 

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AMENDED AND RESTATED

ALASKA INTERTIE AGREEMENT

Among

ALASKA ENERGY AUTHORITY;

MUNICIPALITY OF ANCHORAGE, ALASKA

d.b.a. MUNICIPAL LIGHT AND POWER;

CHUGACH ELECTRIC ASSOCIATION, INC.;

GOLDEN VALLEY ELECTRIC ASSOCIATION, INC.;

ALASKA ELECTRIC GENERATION and

TRANSMISSION COOPERATIVE, INC.

This agreement (“Agreement”), is made and entered into this 18th day of
November, 2011 (“Effective Date”), between ALASKA ENERGY AUTHORITY, a public
corporation of the State of Alaska (“AEA”); MUNICIPAL LIGHT AND POWER, a
department of THE MUNICIPALITY OF ANCHORAGE, ALASKA, (“AML&P”); CHUGACH ELECTRIC
ASSOCIATION, INC., a not-for-profit electric cooperative membership corporation
of the State of Alaska (“CEA”); GOLDEN VALLEY ELECTRIC ASSOCIATION, INC., a
not-for-profit electric cooperative membership corporation of the State of
Alaska (“GVEA”); ALASKA ELECTRIC GENERATION and TRANSMISSION COOPERATIVE, INC.,
a not-for-profit electric cooperative membership corporation of the State of
Alaska (“AEG&T”). These entities, other than AEA, and subsequent qualifying
signatories to this Agreement shall be referred to individually as “Participant”
or collectively as “Participants.”

WITNESSETH

WHEREAS, AML&P, CEA, GVEA, and AEG&T each own and operate electric utility
facilities and/or are engaged in the business of providing Capacity and Energy
to customers; and

WHEREAS, it is expected that entities other than the Participants will also use
the Intertie; and

WHEREAS, the State of Alaska funded and AEA constructed the Intertie and made
these electrical transmission facilities available to the Utility Participants
under the Original Agreement for Capacity and Energy transactions to benefit
Railbelt customers, ensure delivery of energy from State-owned projects, and
improve reliability and economical Capacity and Energy deliveries to the Utility
Participants’ customers under the former Alaska Energy Program established by
former AS 44.83.380 (attached as Exhibit A); and

WHEREAS, the Participants entered into the Original Agreement to improve the
reliability of their interconnected electrical systems and engage in
transactions for electrical Capacity and Energy with each other under individual
contractual arrangements between the Participants using the Intertie; and

 

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WHEREAS, the Intertie interconnected the Railbelt electric utility systems so
that they operate in electrical synchronism; and

WHEREAS, AEA and the Participants desire to establish the Intertie Management
Committee (“IMC”) and provide it with primary responsibility for the governance,
control, operation, maintenance, repair, and improvement of the Intertie; and

WHEREAS, AEA and the Participants desire to set forth the responsibilities and
rights of all users of the Intertie (“Users”); and

WHEREAS, it is desirable to maintain the reliable operation of the Alaska
Intertie for all Users; and

WHEREAS, it is desirable to have uniformly applicable standards for maintaining
and enforcing reliability on the Intertie; and

WHEREAS, the Utility Participant Parties to the Original Agreement are also
Parties to the Reserve Capacity and Operating Reserve Responsibility Agreement,
a separate and independent contract that was made Addendum No. 1 to the Original
Agreement in order to provide for the reliable operation of the Intertie and the
interconnected Railbelt electrical system; and

WHEREAS, it is desirable for all Users to execute an Intertie User Agreement
(“User Agreement”) under the same terms and conditions and to be subject to the
same operating policies and procedures, Reliability Standards, and compliance
measures in keeping with Open Access principles; and

WHEREAS, the IMC is the appropriate organization to transition Intertie
operations and policies to Open Access principles; and

WHEREAS, the management of the Intertie will be most effective if the IMC
membership is made up of representatives of AEA and electric utilities who are
qualifying Participants; and

WHEREAS, AEG&T shall be allowed to terminate its Participant status immediately
upon its execution of this Agreement; and

WHEREAS, the members of AEG&T, Homer Electric Association, Inc. a not-for-profit
electric cooperative membership corporation of the State of Alaska (“HEA”) and,
Matanuska Electric Association, Inc. a not-for-profit electric cooperative
membership corporation of the State of Alaska (“MEA”) individually shall have
the one-time opportunity to become Participants immediately upon their timely
execution of a New Participant Addendum; and

WHEREAS, the United States Army and the City of Seward individually shall be
allowed to become a Participant immediately upon their timely execution of a New
Participant Addendum;

 

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THEREFORE, in consideration of the mutual covenants in this Agreement, AEA and
the Participants agree as follows:

Article 1.

DEFINITIONS

Definitions are as specified in Exhibit B, attached hereto and incorporated
herein by this reference. Exhibit B shall remain in effect during the term of
this Agreement, but may be amended from time to time in the manner provided in
Article 27, AMENDMENTS.

Article 2.

TERM AND EFFECTIVE DATE

 

Section 2.1 Effective Date

This Agreement supersedes the Original Agreement, and shall become effective
immediately upon its execution by AEA and the Participants. This Agreement shall
remain in full force and effect unless otherwise terminated as provided herein.

 

Section 2.2 Termination

 

  2.2.1 Mutual Consent. This Agreement may be terminated at any time by the
mutual consent of all Participants.

 

  2.2.2 Participant and AEA. Any Participant may terminate its participation in
this Agreement by giving at least thirty-six (36) months advanced written notice
and paying or settling all of its outstanding obligations for Intertie Costs
existing before the effective date of its termination, and including any other
obligations related to Intertie financing or other funding or sanctions for
non-compliance with Reliability Standards. AEA may terminate this Agreement by
giving at least thirty-six (36) months advance written notice, and, if
applicable, paying any amounts it is obligated to pay that were due and owing
before the effective date of its termination. Termination of this Agreement is
conditional upon AEA making a determination that such action is required to
improve power systems serving utilities in the Railbelt. Unless it is otherwise
agreed in writing, any Participant that terminates its participation shall be
liable only for those Intertie Costs and other obligations that existed before
the effective date of its termination, as set out above.

 

  2.2.3 AEA Financial Obligations. In the event AEA incurs, or intends to incur,
financial obligations that are recoverable from the Participants pursuant to
Article 7, COSTS FOR INTERTIE TRANSFER RIGHTS, the Participants’ requirement to
provide advanced written notice of termination shall be thirty (30) calendar
days. Termination under this Section shall not be effective until the
terminating Participant has satisfied the requirements of Section 2.2.2,
Participant and AEA.

 

  2.2.4 Limitation for Financing. The Participants and AEA may agree to limit
their respective rights under Sections 2.2.1, 2.2.2, and 2.2.3 to terminate this

 

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  Agreement in conjunction with bond or debt financing for repairs or
improvements to the Intertie. To be effective, any such limitation agreed to
pursuant to this Section 2.2.4 shall require the affirmative vote of a minimum
of 75 percent of the members of the IMC constituting greater than 66 percent of
the total Annual System Demand of all members of the IMC, including the
affirmative vote of AEA.

Article 3.

OPERATING AND RELIABILITY STANDARDS AND ENFORCEMENT

 

Section 3.1 Adoption of Operating Policies and Procedures, and Reliability
Standards

The IMC shall determine the operating policies and procedures for handling the
obligations and responsibilities for providing Reserve Capacity and Operating
Reserves for the Intertie. The IMC shall have the authority to adopt and
implement operating policies and procedures, Reliability Standards for the
Intertie, and enforcement processes, including sanctions and other remedies. All
Participants and Users shall be obligated to comply with all operating policies
and procedures and Reliability Standards adopted by the IMC. All operating
policies and procedures and Reliability Standards shall be adopted, applied and
enforced by the IMC in a uniform, non-preferential, just and reasonable manner
that is not unjustly discriminatory. The adoption, amendment, or modification of
operating policies and procedures shall require the affirmative vote of a
minimum of 75 percent of the members of the IMC constituting greater than 66
percent of the total Annual System Demand of all members of the IMC. The
adoption, amendment, or modification of Reliability Standards and enforcement
processes, including sanctions and other remedies shall require the affirmative
vote of a minimum of 75 percent of the members of the IMC constituting greater
than 66 percent of the total Annual System Demand of all members of the IMC,
including the affirmative vote of AEA.

 

  3.1.1 AEA Responsibilities. AEA shall have the authority to void any operating
policies and procedures or Reliability Standards that AEA reasonably believes
would adversely affect the safe operation of the Intertie, breach AEA’s
statutory mandates, or directly jeopardize AEA-owned Intertie assets in a manner
that would be inconsistent with Prudent Utility Practices.

 

  3.1.2 Notice Required. Except in the case of an emergency, AEA shall provide
the IMC at least ten (10) business days prior written notice of its decision to
void any operating policy and procedure or Reliability Standard.

 

Section 3.2 Compliance with Standards

In the event a User fails to comply with the Intertie operating policies and
procedures or Reliability Standards, the User may be subject to any sanctions or
other enforcement policies adopted by the IMC applicable to such non-compliance.
Compliance with Intertie operating policies and procedures and Reliability
Standards is a material obligation of this Agreement and the User Agreement.

 

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Section 3.3 Implementation – Participants and Users

All Users shall execute any necessary agreements and take such reasonable
actions as may be requested by the IMC in order to implement operating policies
and procedures or Reliability Standards and any sanctions for non-compliance
approved by the IMC. Each Participant or User shall require or be responsible
for all non-residential customers or generation projects on the Participant’s or
User’s system to comply with all applicable operating policies and procedures or
Reliability Standards approved by the IMC as a condition of connection to the
Participant’s or User’s system. The IMC, excluding AEA, shall assist in the
enforcement of this provision.

 

Section 3.4 Replacement of Reliability Standards

In the event Reliability Standards adopted by the IMC are replaced or superseded
in whole or in part by the order of a state or federal regulatory agency or by
the terms of a state or federal regulation or statute, the IMC shall make
amendments to or terminate the Reliability Standards to the extent the IMC deems
prudent or necessary upon such change in accordance with Section 3.1, Adoption
of Operating Policies and Procedures, and Reliability Standards.

 

Section 3.5 Operating Committee

The Operating Committee, established under Article 9, OPERATING COMMITTEE, shall
advise the IMC on setting operating policies and procedures for the Intertie.
The members of the Operating Committee shall have experience and expertise in
the operation of electric utility transmission and distribution systems and the
Railbelt’s transmission system. The IMC shall give consideration to the group’s
proposals and take action to adopt, modify or reject any such proposal within
one-hundred-twenty (120) calendar days.

 

Section 3.6 Required Data Submissions.

Each Participant and User (or their designated agent or Designated Contractor)
shall submit to the IMC all data as reasonably requested by the IMC, whether
related to any operating policies and procedures, Reliability Standards, or
otherwise. A Participant or User shall notify the IMC of its designation of an
agent or Designated Contractor prior to having that agent submit any data on
behalf of the Participant or User.

 

Section 3.7 AEA Power Project Compliance

AEA anticipates that Users engaging in Intertie Transactions for transporting
power from state projects (such as AEA’s Bradley Lake Hydroelectric Project or
future state-owned projects) will contractually assume responsibility for
compliance with all applicable Intertie operating policies and procedures or
Reliability Standards, and accept responsibility for any sanctions or other
duties required of such Users by any operating policies and procedures or
Reliability Standards. If Users transporting power from state projects assume
those responsibilities, AEA or the state agency owning a power project shall not
be directly or indirectly responsible for such compliance or sanctions absent
their written agreement to assume such responsibility.

 

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Article 4.

PARTICIPANT

 

Section 4.1 Participant Defined

Participants will be responsible for the governance of the Intertie through
participation in the IMC in accordance with Section 4.3 Membership In IMC. For
purposes of this Agreement, a Participant is: an electric public utility with at
least an Annual System Demand of 5MW of retail load, holding a Certificate of
Public Convenience and Necessity from the Regulatory Commission of Alaska, or
having other equivalent authority; and, having a certificated service territory,
or other equivalent authority, with physical or contractual access to the Alaska
Intertie for the transport of electric power. A Participant must also meet all
of the requirements of and agree to comply with the terms of this Agreement.
Participants shall execute a User Agreement to have the right to transport power
on the Intertie.

 

Section 4.2 New Participant

An entity seeking Participant status shall execute a New Participant Addendum to
this Agreement in the form attached as Exhibit C, and such other agreements as
may be required by the IMC from time to time. The entity shall also be required
to execute a User Agreement to have the right to transport power on the
Intertie. The entity shall then give twenty-four (24) months written notice to
AEA and the Participants of its intention to become a Participant. The entity
shall become a Participant upon expiration of the twenty-four (24) month notice
period required in this section and the IMC’s determination that all of the
requirements of this Agreement have been completely satisfied. The IMC’s
determination under this section shall require the affirmative vote of a minimum
of 75 percent of the members of the IMC constituting greater than 66 percent of
the total Annual System Demand of all members of the IMC, including the
affirmative vote of AEA.

 

Section 4.3 Membership in IMC

An entity with Participant status shall be allowed, but not required, to appoint
one member to the IMC. IMC members’ voting rights shall be as provided in
Article 8, INTERTIE MANAGEMENT COMMITTEE.

Article 5.

WITHDRAWAL OF AEG&T AND OTHER PARTICIPANT AND USER STATUS

 

Section 5.1 Withdrawal of AEG&T

Notwithstanding the provisions of Section 2.2, Termination, AEG&T shall effect
the termination of its Participant status under this Agreement immediately upon
its execution of this Agreement.

 

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Section 5.2 Substitution of HEA and MEA, and Admission of City of Seward and the
United States Army

Notwithstanding the provisions of Section 4.2, New Participant, HEA and MEA
individually shall have the right to obtain Participant status immediately upon
their execution of a New Participant Addendum in the form attached as Exhibit C,
provided, however, that this right shall terminate twenty-four (24) hours after
the termination by AEG&T pursuant to Section 5.1, Withdrawal of AEG&T. The City
of Seward and the United States Army shall also have the right to obtain
Participant status immediately upon execution of a New Participant Addendum in
the form attached as Exhibit C if such execution occurs within twenty-four
(24) hours of the execution of this Agreement by AEA and the Participants. In
the event that United States Army has not obtained Participant status, then
after July 2013, the United States Army shall have the right to become a User by
executing a User Agreement and providing three (3) months written notice to the
IMC, so long as the available Intertie Capacity is not fully subscribed.

Article 6.

MINIMUM RIGHTS OF THE PARTICIPANTS AND USERS TO USE INTERTIE FACILITIES

 

Section 6.1 Minimum Intertie Transfer Capability Rights (“MITCR”)

The established MITCR rights as well as the MITCR methodology for allocation of
Capacity on the Intertie from the Original Agreement are temporarily retained in
this Agreement and shall be administered by the IMC during the period from the
Effective Date until July 1, 2013. The MITCR methodology is set forth in this
Article 6. The IMC shall implement a new methodology for allocation of Capacity
before July 1, 2013, which shall comply with the provisions of Article 16, OPEN
ACCESS PRINCIPLES.

 

  6.1.1 Right of First Refusal. For so long as the IMC has not amended or
replaced the MITCR methodology, Participants shall have the right of first
refusal to an allocated portion of the maximum Intertie transfer capability, as
determined pursuant to Section 6.2, Determination of MITCR. Intertie Capacity
not scheduled or used by the Participants for the purpose of transmitting or
receiving Energy over the Intertie shall be allotted to the Participants in the
manner provided in Section 6.2.2, Unused MITCR.

 

  6.1.2 Allocation of Transfer Capability. The Intertie transfer capability
shall be shared by the Participants in the Northern and Southern Groups in the
manner described in Section 6.2, Determination of MITCR. If a Participant is not
using part of its MITCR in either direction, other Participants shall have the
right to use that unused part to make transfers across the Intertie, either as a
purchase or a sale of Capacity and/or Energy, pursuant to a procedure adopted by
the IMC.

 

  6.1.3 Emergency Operations. During emergencies when it is necessary to use the
Intertie to transfer Energy to maintain system integrity, a Participant’s MITCR

 

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  will be adjusted by the IMC as required pursuant to Intertie operating
policies and procedures and Prudent Utility Practices. To the extent practical,
such adjustments shall be shared proportionally among all Participants in the
affected Group(s).

 

Section 6.2 Determination of MITCR

 

  6.2.1 Methodology. For so long as the IMC has not amended or replaced the
MITCR methodology, the IMC shall determine the MITCR of each Participant each
year prior to the final approval of the fiscal year budget, or when a new
Participant becomes a Party to this Agreement. The MITCR of each Participant
shall be calculated as follows:

MITCR shall be determined each year based on the average of the three most
recent Annual System Demands submitted by each of the Participants under
Section 7.2.1, Participant and User Estimates, Participant Historical Data.
Temporary reductions of the maximum Intertie transfer capability may be required
for periods due to maintenance, safety, or equipment failure. MITCR shall be
determined separately for the Participants of the Northern Group and of the
Southern Group. A Participant’s MITCR shall be the ratio of its average Annual
System Demand to the sum of the average Annual System Demands of its respective
group (Northern or Southern) multiplied by the maximum Intertie transfer
capability set forth in Section 6.3, Maximum Intertie Transfer Capability.

 

  6.2.2 Unused MITCR. MITCR not used by a Participant shall be available to the
other Participants in the same group (i.e., Northern Group or Southern Group) in
the same proportion as remaining Participants’ MITCR is to the total MITCR of
the remaining Participants in the group that are allocating the unused MITCR. If
no Participant chooses to use the unused MITCR, the IMC may make it available to
any User subject to the requirements set forth in Section 8.6.7, Maximum
Capability and Capacity Allocation. Unless otherwise agreed upon, a Participant
whose unused MITCR is being used by other Participant(s) or User(s) shall have
the right to its full entitlement immediately upon notification to the
Participant(s) or User(s) using its MITCR.

 

  6.2.3 Right to Contractually Transfer MITCR. A Participant has the right to
transfer on a contractual basis all or part of its MITCR to other Participants
or Users with reasonable written notice to all Participants. A Participant whose
unused MITCR is being used by another Participant or User under this
Section 6.2.3 shall be paid by the using Participant or User a prorated amount
of the Intertie Capacity Rate determined by the following formula:

P = ICR/12 x CP x HR/THR where:

P – is the monthly payment due to the Participant whose MITCR, or portion
thereof, is being used by another Participant or User;

 

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ICR/12 – is the relevant monthly Intertie Capacity Rate as defined in
Section 7.2.6, Capacity Rate, of this Agreement;

CP – is the average amount of Capacity in kilowatts which is used by another
Participant;

HR – is the number of hours in the month during which the unused MITCR was
scheduled by another Participant or User; and

THR – is the total number of hours in the relevant month.

 

  6.2.4 IMC Authority to Change Capacity Allocation Methodology. The IMC shall
have the authority to amend or replace the Intertie Capacity allocation
methodology with a different methodology. Any amendment or replacement of the
Intertie Capacity allocation methodology shall require the affirmative vote of a
minimum of 75 percent of the members of the IMC constituting greater than 66
percent of the total Annual System Demand of all members of the IMC, including
the affirmative vote of AEA. In amending or replacing the Intertie allocation
methodology, the IMC shall employ Open Access principles to the extent
practicable.

 

  6.2.5 New State Power Projects. The IMC shall amend or replace the Intertie
Capacity allocation methodology if requested by AEA to facilitate the transfer
of power from a new state-owned generation project, provided, that the
then-existing rights of Participants and Users for firm service shall be
preserved.

 

Section 6.3 Maximum Intertie Transfer Capability

The maximum transfer capability of the Intertie is 78 MW, net of losses, unless
and until it is changed pursuant to this section. No provision of this Agreement
shall prohibit the IMC from temporarily reducing the maximum Intertie transfer
capability for maintenance, equipment failure, safety considerations, or other
reasonable causes in compliance with Prudent Utility Practices. Such temporary
reductions of maximum Intertie transfer capability shall proportionally reduce
the rights of each Participant and User, for that temporary period. The IMC,
upon the affirmative vote of a minimum of 75 percent of the members of the IMC
constituting greater than 66 percent of the total Annual System Demand of all
members of the IMC, including the affirmative vote of AEA, shall have the
authority to change the maximum Intertie transfer capability.

 

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Section 6.4 Improvements to the Intertie

 

  6.4.1 Development of Improvements. Modifications, additions, deletions and
changes to the Intertie (“Improvements”) shall be designed and constructed so as
not to reduce the Intertie’s reliability. All Improvements shall be implemented
in accordance with Prudent Utility Practice and, with commercially reasonable
consideration of the costs and benefits of such improvements.

6.4.1.1 Except as provided in Section 6.4.1.2, the affirmative vote of a minimum
of 75 percent of the members of the IMC constituting greater than 66 percent of
the total Annual System Demand of all members of the IMC, including the
affirmative vote of AEA, shall be required to approve any Improvements. The
design and specifications, including engineering studies for proposed
Improvements to the Intertie shall be submitted to the IMC for review and
approval. The IMC may require additional studies. Approval of the design and
specifications of Improvements shall require the affirmative vote of a minimum
of 75 percent of the members of the IMC constituting greater than 66 percent of
the total Annual System Demand of all members of the IMC, including the
affirmative vote of AEA.

6.4.1.2 AEA shall have the right to make Improvements to the Intertie, including
taps to provide electrical services at locations that AEA deems beneficial and
reasonable. Costs related to Improvements covered by this Section 6.4.1.2 will
not be deemed to be Intertie Costs unless such Improvements are of direct
benefit to the Participants and/or Users as determined in advance by the IMC
under Section 6.4.3, Responsibility for Cost of Improvements. The design for
such Improvements shall be submitted to the IMC for review and comment. The
comments of the IMC shall be incorporated into the design of the Improvements as
they relate to maintaining the Intertie’s reliability.

6.4.1.3 The IMC shall not unreasonably delay the implementation of any
Improvements provided for under Section 6.4, Improvements to the Intertie.

 

  6.4.2 Requests for Improvements. Participants and Users, individually or
otherwise, shall have the right to request the IMC to make Improvements.

 

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Each request shall include a detailed written explanation of the requested
Improvement and demonstrate its compliance with the requirements of
Section 6.4.1, Development of Improvements.

 

  6.4.3 Responsibility for Cost of Improvements. The cost of Improvements may be
apportioned among the requesting Participants and Users pursuant to a written
agreement and may be adjusted to include other sources of funding. If there is
no such written agreement, an Improvement shall be made at the expense of the
requesting Participant(s), User(s), and/or AEA (AEA only if the Improvement is
undertaken pursuant to Section 6.4.1.2) unless the IMC determines prior to
performing the Improvement that the Improvement directly benefits other
Participants or Users, or may provide direct benefit to other Participants or
Users in the future, in which case the cost of the requested Improvements shall
be deemed Intertie Costs. The IMC may also, but shall not be required to,
determine that the cost of an Improvement shall be born only by the group of
directly benefitted Participant(s) or User(s) if some will not be directly
benefitted. The IMC shall have the right to consider the cause or need for any
Improvements when making its determination of cost responsibility. The IMC shall
also determine prior to performing the Improvement whether the cost of such
Improvements shall be recovered in the Intertie Energy Rate or in the Intertie
Capacity Rate. AEA shall be the owner of all Improvements without regard to the
sources of funding. The determination and setting of the responsibility for
payment of costs associated with an Improvement and any allocation of recovery
between the Intertie Energy Rate and the Intertie Capacity Rate shall require
the affirmative vote of a minimum of 75 percent of the members of the IMC
constituting greater than 66 percent of the total Annual System Demand of all
members of the IMC, including the affirmative vote of AEA.

 

  6.4.4 Right to Make Improvements – Required Work. AEA shall have the right to
require Improvements to the Intertie as provided in Section 8.8, AEA’s Ability
to Perform Required Work.

 

  6.4.5 Notice. The IMC shall give reasonable advanced notice to all
Participants before approving any Improvements as provided in this Article 6.

 

Section 6.5 Additional Project Taps

Terms and conditions applicable to new taps and interconnections for new
projects shall be subject to, and shall be handled in accordance with, the
rules, Reliability Standards, and procedures in effect at the time the tap or
interconnection is constructed and as they may be amended from time to time.
This Section shall also apply to proposed temporary taps or interconnections.

 

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Article 7.

COSTS FOR INTERTIE TRANSFER RIGHTS

 

Section 7.1 Intertie Costs

 

  7.1.1 Costs to Be Shared by Participants and Users. Costs incurred in
operating and maintaining the Intertie and the annual debt service on any bonds
or other debt issued by AEA or contractual obligations incurred by AEA or the
IMC for the Intertie facilities, including those incurred for renewals,
replacements, repairs, Required Work, and Improvements, (“Intertie Costs”) shall
be shared by the Participants and Users. Intertie Costs shall be identified in
accordance with the provisions of former Alaska Statute 44.83.398(f) (attached
as Exhibit D) and this Agreement. Participants and Users shall also contribute
to the recovery of Intertie Costs through rates and charges approved by the IMC.
At a minimum, the following costs shall be included in Intertie Costs:

7.1.1.1 “Operation and Maintenance Costs” are all operation costs as provided
for in Article 10, OPERATION OF THE INTERTIE, and all maintenance costs as
provided for in Article 12, MAINTENANCE OF THE INTERTIE FACILITIES, and
including any replacements in the ordinary course of operations, plus any
applicable taxes, but excluding uninsured losses or liability resulting from
deductible or self-insured retention provisions of property or liability
insurance policies, respectively.

7.1.1.2 “Extraordinary Maintenance and Replacement Costs” are uninsured losses
or liabilities resulting from deductible or self-insured retention provisions of
property or liability insurance policies, costs of facility maintenance,
renewals, and replacements.

7.1.1.3 “Annual Debt Service Cost” is interest on, and amortization sufficient
to retire over their term, any bonds or other debt issued by AEA for
construction, renewals, replacement, repairs or Improvements of the Intertie
facilities, plus the debt service coverage or other financial performance
factors determined by AEA to be necessary for the marketability of bonds issued
by it and as provided in any bond covenants, resolutions or similar obligations.

7.1.1.4 “Reserve Fund” is the amount necessary, as determined by the IMC, to
provide a prudent level of reserves to fund the operation and maintenance of the
Intertie and the Intertie Costs specified in this Section 7.1, Intertie Costs.
The Reserve Fund shall be maintained as a separate and distinct fund to be held,
managed, invested, disbursed and administered by AEA in accordance with criteria
approved by the affirmative vote of a

 

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minimum of 75 percent of the members of the IMC constituting greater than 66
percent of the total Annual System Demand of all members of the IMC, including
the affirmative vote of AEA. All money deposited in the Fund shall be used
solely for the purposes set forth in this Agreement. AEA shall keep and maintain
records pertaining to the Reserve Fund, and all disbursements therefrom, in
accordance with its general practices and procedures in effect from time to time
and in compliance with GAAP.

7.1.1.5 Station service costs.

7.1.1.6 “Cost of Improvements” those costs determined in accordance with
Section 6.4.3, Responsibility for Cost of Improvements.

 

  7.1.2 Annual Budget and Fiscal Year. The IMC will estimate and budget Intertie
Costs annually for the ensuing fiscal year, July 1 to June 30, subject to AEA’s
review and approval. The IMC shall develop annually a preliminary operating
budget from: the Intertie maintenance budget; the Intertie operating budget; the
Annual Debt Service costs; and, AEA’s administrative expense associated with the
Intertie. Unless otherwise agreed in writing by the Participants, the
preliminary Intertie budget shall be provided to the Participants and made
available to the public for their review at least thirty (30) days before the
IMC meeting where the budget will be approved. Written comments shall be
submitted to AEA and the IMC by the date established by the IMC. The
Participants shall be provided no less than thirty (30) days to comment. Based
on the preliminary Intertie budget and the comments from the Participants, the
IMC shall annually establish the Intertie operating budget and submit it to the
AEA for review and approval.

 

Section 7.2 Calculation of Intertie Costs and Rates

 

  7.2.1 Participant and User Estimates, Participant Historical Data. The IMC
shall establish a schedule and format that the Participants and Users with valid
contracts for service on the Intertie shall use to submit their projected usage
of the Intertie for the upcoming fiscal year. Unless directed to do otherwise by
the IMC, Participants and Users shall also submit, at the same time, their three
most recent Annual System Demands for the calculation of MITCR under
Section 6.2, Determination of MITCR, or as required by the IMC for the
allocation of Intertie Capacity.

 

  7.2.2 IMC Estimates. The IMC shall prepare a preliminary Intertie annual usage
estimate in kilowatt hours (“kWh”) and provide the same to the Participants and
Users no later than the date the preliminary Intertie budget is submitted to the
Participants for comment. The preliminary Intertie annual usage estimate
provided under this Section with the use of projected or other relevant

 

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  information shall in no event be less than the amount equal to 30 percent of
the kWhs that could be transferred by continuous operation of the Intertie at
the maximum rated fiscal-year transfer Capacity (as currently established under
Section 6.3, Maximum Intertie Transfer Capability). The projected usage shall
not exceed the total projected usage of the Participants and Users so long as
their combined usage is in excess of the 30 percent as provided in this
Section 7.2.2.

 

  7.2.3 Comments. Participants and Users may provide comments to the IMC on the
preliminary Intertie annual usage estimate, which shall be considered by the IMC
in making its final estimate for the following fiscal year.

 

  7.2.4 IMC Determination of Estimated Intertie Usage. Based upon the
Participants’ and Users’ preliminary Intertie annual usage estimates and
comments received, the IMC shall establish the estimated annual Intertie usage
in kWhs for the following fiscal year.

 

  7.2.5 Energy Rate. The “Intertie Energy Rate” for the following fiscal year,
expressed in dollars per kWh, shall be calculated by dividing 83.5 percent of
the total budgeted Intertie Costs as determined in the Intertie budget under
Section 7.1, Intertie Costs, by the annual Intertie usage as established under
Section 7.2.4, IMC Determination of Estimated Intertie Usage.

 

  7.2.6 Capacity Rate. The “Intertie Capacity Rate” for the following fiscal
year. expressed in dollars per kW, shall be calculated by dividing 16.5 percent
of the total budgeted Intertie Costs as determined in the Intertie budget
established under Section 7.1, Intertie Costs, by the sum of the Participant’s
or User’s Intertie Capacity rights allocations.

 

Section 7.3 Allocation of Intertie Costs

 

  7.3.1 Participant and User Payments. Each Participant and User shall be
obligated to pay to AEA, for the account of the IMC, monthly the sum of the
following:

7.3.1.1 The Participant’s or User’s scheduled use of the Intertie for the month
multiplied by the Intertie Energy Rate in effect for the fiscal year; plus,

7.3.1.2 The Participant’s Intertie Capacity rights allocation, determined in
accordance with this Agreement, multiplied by one-twelfth of the Intertie
Capacity Rate in effect for the fiscal year or the Participant’s obligation as
calculated pursuant to Section 6.2.3, Right to Contractually Transfer MITCR, if
applicable; plus,

 

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7.3.1.3 Each User’s Intertie Capacity rights allocation, determined in
accordance with this Agreement, multiplied by the monthly Intertie Capacity Rate
in effect for that period multiplied by the number of months of the fiscal year
that the User has a contract for the use of Intertie Capacity or as determined
pursuant to Section 7.3.1.2.

 

  7.3.2 Annual Payment of Intertie Costs. The IMC shall have the authority to
convert the Participants’ and Users’ payment obligation, or any portion thereof,
to one annual payment, which shall be due and payable at the beginning of the
fiscal year. Any such annual payment shall be based on each Participant’s or
User’s projected use of the Intertie to the extent usage has not been scheduled.

 

  7.3.3 Monthly Use. For billing purposes only, the scheduled use of the
Intertie in any month shall be the greater of the actual energy transferred or
the product of the scheduled Intertie transfer at the Intertie Point of
Interconnection and the number of hours each schedule was in effect during that
calendar month.

 

  7.3.4 Excess Revenues. Should the annual revenues received from all sources
under Section 7.3.1, Participant and User Payments, exceed actual annual
Intertie Costs, the revenues in excess of the Intertie Costs shall be allocated
to the contributing Participants and Users in proportion to the total dollar
amount paid by all parties for use of the Intertie in the fiscal year, or
portion thereof, in which the revenues were accrued. The IMC shall authorize AEA
to refund the Participants and Users their proportionate share of this excess.

 

  7.3.5 Revenue Deficiencies. Should the revenues received under Section 7.3.1,
Participant and User Payments, be less than the actual Intertie Costs, the
revenue deficiency shall be allocated between the Participants and Users in the
same proportional manner as revenues are re-allocated between the Participants
and Users under Section 7.3.4, Excess Revenues, of this Section. The IMC shall
authorize AEA to bill the Participants and Users their proportionate share of
this deficiency.

Article 8.

INTERTIE MANAGEMENT COMMITTEE

 

Section 8.1 Establishment of the Intertie Management Committee, Right to Vote

AEA and the Participants hereby establish an Intertie Management Committee. The
IMC shall be the governing body with the authority to control, operate,
maintain, repair, and perform Improvements of the Intertie in accordance with
the terms of this Agreement. The IMC shall consist of the representative
appointed by AEA and the representatives appointed by each of the Participants,
which shall be either their Chief Executive Officer, General Manager, or
Executive Director. Each Participant shall be entitled to only one
representative, appointed pursuant to

 

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Section 4.3, Membership in IMC, and one vote on the IMC. AEA shall also be
entitled to only one representative and one vote on the IMC. Under no
circumstances shall AEA or a Participant have, or have the right to control,
more than one vote on the IMC or have more than one voting representative,
directly or indirectly, through another organization with which it is an
affiliate or has an agency relationship. Each IMC member entitled to vote may
name one representative to serve on the IMC and one designated alternate for
that representative. A representative or designated alternate may be an employee
of a Designated Contractor of the IMC Member. Each IMC member shall notify all
other IMC members in writing of the names, addresses, and telephone numbers of
its representative and designated alternate. After it is established, the IMC
shall meet at least twice each year. Meetings of the IMC and any committees of
the IMC shall, to the extent practicable, be open to the public.

 

  8.1.1 Eligibility to Vote. Participants that are not current on their
financial obligations for Intertie Costs or any other costs or assessments
approved by the IMC shall not be eligible to vote on matters before the IMC and
shall not be considered a member of the IMC for purposes of voting, or for
calculating the Annual System Demand of Participants or Users for purposes of
allocating Intertie Capacity.

 

  8.1.2 Minutes. Written minutes shall be kept for all meetings of the IMC, and
all decisions or agreements made by the IMC shall be reduced to writing,
including all matters voted upon and each member’s vote on those matters.

 

Section 8.2 Adoption of Procedural Rules or Bylaws

The IMC shall adopt and maintain rules and procedures governing the operation of
the IMC (“IMC Bylaws”). The IMC Bylaws shall require the affirmative vote of a
minimum of 75 percent of the members of the IMC constituting greater than 66
percent of the total Annual System Demand of all members of the IMC, including
the affirmative vote of AEA, to be effective. The IMC Bylaws shall address,
among other matters, procedures for the selection of IMC officers, the conduct
of IMC meetings, the approval or possible pre-approval of consultants, the
modification of the IMC’s procedural rules, and to the extent not otherwise
specified in this Agreement, the specific voting requirements for approval of
matters to be decided by the IMC.

Section 8.3 Effect of Abstention. For purposes of voting on any matter before
the IMC, each abstaining Participant or AEA Representative shall not be counted
towards any voting requirement. The minimum percentage required to transact
business shall be determined from the total number of IMC Members not
abstaining.

Section 8.4 Meetings by Electronic Communication. The IMC may elect to meet by
electronic communication so long as all members can be heard and hear all of the
proceedings.

 

Section 8.5 IMC Responsibilities

 

  8.5.1

IMC Responsibilities and AEA Duties. AEA, as the legal owner of the Intertie, a
potential issuer of debt related to the Intertie, and the agency

 

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  charged by statute with various duties affecting or affected by the Intertie,
has or may have assigned to it, certain rights, duties, and responsibilities
with respect to the Intertie. For example, AS 44.83.396(e) imposes on AEA the
duty to (a) review and approve the annual budget for the operation and
maintenance of the project, and (b) assure that the project is being operated
efficiently and in a manner that is consistent with national standards for the
industry and agreements with any bondholders. (See also, Section 8.8, AEA’s
Ability to Perform Required Work.) Subject only to such AEA rights, duties, and
responsibilities, the IMC shall be responsible for the management, operation,
maintenance, and improvement of the Intertie. The IMC members, Participants, and
Users are the beneficiaries of the prudent management of the Intertie and shall
bear their respective share of Intertie Costs in accordance with the terms of
this Agreement. All Users have a shared and substantial long-term financial
interest in the Intertie facilities. The IMC shall undertake responsibility for
the prudent management and reliable operation of the Intertie on behalf of AEA,
for the benefit of the Participants and Users.

 

  8.5.2 IMC Approvals. IMC approval of the sufficiency of the annual budget,
rates, and the allocation of Intertie Capacity, shall require the affirmative
vote of a minimum of 75 percent of the members of the IMC constituting greater
than 66 percent of the total Annual System Demand of all members of the IMC,
including the affirmative vote of AEA.

 

Section 8.6 IMC Actions

The IMC shall have the authority to take the actions set forth in this section,
subject only to the provisions of any applicable bond resolutions, federal and
state law, the requirements of licensing and regulatory agencies, and the rights
of AEA, the Participants, and Users under other provisions of this Agreement.

 

  8.6.1 Intertie Operation. Develop, adopt, and enforce operating policies and
procedures and Reliability Standards applicable to the Intertie. See
Section 3.1, Adoption of Operating Policies and Procedures, and Reliability
Standards.

 

  8.6.2 Intertie User Agreements. Adopt standard terms and conditions for User
Agreements for Intertie Transactions in accordance with this Agreement and
incorporating Open Access principles. Adopt a three (3) month termination
provision in certain User Agreements in accordance with Section 5.2,
Substitution of HEA and MEA, and Admission of City of Seward and the United
States Army, and Section 16.3.5, Federal Acquisition Regulations.

 

  8.6.3 Non-Compliance Appeals. Provide procedures for Users to appeal:
(i) Operating policies and procedures; ii) Reliability Standards non-compliance
determinations; or iii) sanctions imposed for non-compliance with Reliability
Standards.

 

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  8.6.4 O&M and Scheduling. Arrange for the operation and maintenance of the
Intertie and the scheduling of power transfers on the Intertie.

 

  8.6.5 Budget. Adopt, and revise if prudent to do so, each fiscal year a budget
of Intertie Costs for that fiscal year. The adopted or revised budget shall be
reasonably estimated by the IMC to be sufficient to pay all Intertie Costs and
shall be made available to the public at the time it is distributed to
Participants. The IMC shall establish the fiscal year budget in accordance with
Article 7, COSTS FOR INTERTIE TRANSFER RIGHTS, and a schedule established by the
IMC.

 

  8.6.6 Cost Allocation and Payment Schedule. Establish for each fiscal year the
estimated annual allocation of Intertie Costs for each Participant and User
together with a schedule for each Participant’s and Users’ required monthly
payments during that fiscal year, pursuant to Sections 7.2, Calculation of
Intertie Costs and Rates, and 7.3, Allocation of Intertie Costs. The payment
schedule shall be designed to recover the Participant’s or User’s share of the
estimated annual Intertie Costs during the fiscal year and as revised during
such Year to reflect any approved changes to the budget of annual Intertie Costs
for that fiscal year. The IMC also shall determine the costs to be collected
from Users for Intertie Transactions. Such costs shall be determined and applied
based upon just, fair, reasonable, and not unduly discriminatory principles and
in compliance with Article 16, OPEN ACCESS PRINCIPLES. The approval of the
allocation of Intertie Costs, payment schedule, and the costs to be collected
for Intertie Transactions shall require the affirmative vote of a minimum of 75
percent of the members of the IMC constituting greater than 66 percent of the
total Annual System Demand of all members of the IMC, including the affirmative
vote of AEA.

 

  8.6.7 Maximum Capability and Capacity Allocation. Establish the maximum
Intertie transfer capability in accordance with Section 6.3, Maximum Intertie
Transfer Capability. Determine each Participant’s and User’s rights to Intertie
Capacity pursuant to any methodology adopted under Article 6, MINIMUM RIGHTS OF
THE PARTICIPANTS AND USERS TO USE INTERTIE FACILITIES. The IMC shall consider
the Participant’s or User’s reserve obligations and equitably preserve any
Participant’s and User’s Intertie operational rights existing as of the
Effective Date that are valid and effective at the time of the IMC’s
determination. The IMC shall have the right to consider the cause or need for
such operational rights when making its determination.

 

  8.6.8

Determination of Actual Payment Obligation. Determine after the conclusion of
each fiscal year the actual annual Intertie Costs for that fiscal year, the
actual annual Payment Obligation of each Participant or User for that fiscal
year, and the amount of any additional payment required from or the amount

 

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  of any refund to each Participant or User to ensure that the total of all
payments received from each Participant or User for each fiscal year is equal to
that Participant’s or User’s actual annual Payment Obligation for the fiscal
year, pursuant to Sections 7.3.3, Excess Revenues, and 7.3.4, Revenue
Deficiencies.

 

  8.6.9 Funding Methods. Evaluate and select methods of carrying out and funding
Improvements, whether by recommending AEA’s issuance of bonds or otherwise.

 

  8.6.10 Improvements. Evaluate and approve Improvements and determine the
required level of funding for approved Improvements under Sections 6.4.2,
Requests for Improvements, 6.4.3, Responsibility for Cost of Improvements,
6.4.4, Right to Make Improvements – Required Work, or as otherwise provided in
this Agreement.

 

  8.6.11 Maintenance. Adopt maintenance schedules for the Intertie that do not
unreasonably interfere with the operations of the Participants.

 

  8.6.12 Creation of Reserve Fund. Establish and maintain a Reserve Fund, which
meets the requirements set forth in Section 7.1.1.4.

 

  8.6.13 Procurement of Services. Procure services the IMC requires so long as
sufficient budgeted funds are available for those services and the procedures
for such procurements are in compliance with the IMC’s Bylaws and any applicable
Alaska law or regulation.

 

  8.6.14 Miscellaneous. Provide for all things necessary to carry out the
responsibilities and obligations set forth in this Agreement and in the IMC
Bylaws.

 

Section 8.7 Payment Obligation Unimpaired

Notwithstanding any action or inaction by AEA or the IMC under this Agreement,
each Participant’s or User’s obligation to make payments necessary to pay their
allocated percentage share of Intertie Costs under Section 7.3, Allocation of
Intertie Costs, of this Agreement and all other amounts to be paid under this
Agreement (“Payment Obligation”) shall be absolute and unimpaired. Each
Participant and User shall make all payments as required as a result of action
taken by the IMC under this Agreement or an action taken by AEA pursuant to
Section 6.4.4, Right to Make Improvements – Required Work, or Section 8.8, AEA’s
Ability to Perform Required Work.

 

Section 8.8 AEA’s Ability to Perform Required Work

In the event the IMC fails to take any of the actions set forth in this
Agreement in a timely fashion or fails to take any other action which the AEA
believes to be a required action with

 

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respect to the management, operation, maintenance or improvement of the
Intertie, and as a result the AEA determines that it will be unable to meet any
of its obligations imposed by bond resolutions, by this Agreement, by any
licensing or regulatory agency, or by statute, or as otherwise is necessary to
keep the Intertie in good and efficient operating condition, consistent with
(1) prudent economics for the Intertie and the Participants and Users, and
(2) national standards for the industry (“Required Work”) then the AEA may:
(a) adopt a budget of Annual Intertie Costs; (b) estimate the Payment Obligation
of each Participant in accordance with the methodology set forth in this
Agreement; (c) require each Participant to make payments on the basis of such
estimated Payment Obligation; or (d) cause the Required Work to be performed;
and (e) take such other action as the AEA deems reasonably necessary to meet
such obligations. All actions and determinations under this Section 8.8 shall be
taken in accordance with Prudent Utility Practice. The comments of the IMC
regarding Required Work related to Improvements shall be given great weight and
incorporated into the design of the Improvements as they relate to the operation
and reliability of the Intertie.

 

Section 8.9 Payment Obligation and Rights of Review

Making a payment as required under this Agreement shall not constitute a waiver
of any of the Participant’s or User’s rights under this Agreement. Any
Participant or User may seek review of actions by the IMC by means of the
procedures in Article 19, REVIEW OF DECISION.

 

Section 8.10 AEA Authority to Collect Payments and Disburse Funds

The IMC hereby delegates to AEA the authority to invoice and collect from
Participants or Users any Payment Obligations due and owing under this Agreement
and to make payments on behalf of the IMC for Intertie operations, maintenance
or other Intertie related expenses arising under this Agreement. AEA shall hold
funds collected in one or more separate accounts designated for Alaska Intertie
purposes until such funds are obligated for Intertie operations or maintenance
and used to pay Intertie Costs. Interest and/or investment income earned on
invested funds shall be credited to the IMC. The IMC shall have the right to
audit all funds held by AEA on behalf of the IMC as well as the transactions
associated therewith.

Article 9.

OPERATING COMMITTEE

 

Section 9.1 Establishment of the Operating Committee

 

  9.1.1 Establishment. The IMC shall establish a committee for the purpose of
recommending operating policies and procedures under the direction of the IMC
and assisting in the implementation of any policies and procedures approved by
the IMC (the “Operating Committee”).

 

  9.1.2

Representatives. Each Participant may, but is not required to, designate a
representative to act on its behalf, which shall be done in writing
(“Representative”). Such Representatives shall meet the requirements of
Section 3.5, Operating Committee. Each Participant may also designate an

 

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  alternate who may act in the stead of its Representative at the option of that
Participant. A Participant may at any time change, remove or designate its
representative or alternate, and shall promptly notify in writing the other
Participants of any change in such designation. The members of The Operating
Committee shall designate a member to be Chairman. Recommendations and decisions
of the Operating Committee shall be adopted if approved by at least a majority
of the Representatives appointed under this Section, unless otherwise provided
in the bylaws of the committee. The AEA may designate a Representative to the
committee who may vote on any matters.

 

Section 9.2 Meetings of the Operating Committee

 

  9.2.1 Meetings. The Operating Committee shall meet at least once each year and
at such other times as deemed necessary by its Chairman or the IMC and shall to
the extent practicable, be open to the public.

 

  9.2.2 Voting. The Operating Committee may determine the manner of voting on
matters that come before it. All decisions of the Operating Committee affecting
the Participants, the Intertie, or its Users shall be subject to the review and
approval of the IMC.

 

  9.2.3 Minutes. Written minutes shall be kept for all meetings of the Operating
Committee, and all decisions or agreements made by the Operating Committee shall
be reduced to writing including all matters voted upon and each member’s vote on
those matters.

 

  9.2.4 Expenses. The Operating Committee shall prepare and submit an expense
budget to the IMC under Section 10.3, Budget for Operation of the Intertie,
annually to provide for Operating Committee expenses other than the expenses of
each Operating Committee Representative, which shall be borne by the Operating
Committee Representative.

 

  9.2.5 Meetings by Electronic Communication. The Operating Committee may elect
to meet by electronic communication so long as all members can be heard and hear
all of the proceedings.

 

Section 9.3 Operating Procedures

The Operating Committee shall recommend operating policies and procedures and
standard practices to the IMC for the guidance of dispatchers and other
employees and shall recommend arrangements for metering, communications, and
other services and facilities. All such operating policies and procedures and
standard practices shall be subject to the approval of the IMC pursuant to
Section 3.1, Adoption of Operating Policies and Procedures, and Reliability
Standards, and shall conform with any Reliability Standards adopted by the IMC.
The Operating Committee has no authority to modify any of the provisions of this
Agreement or to modify or set rates for Intertie services.

 

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Article 10.

OPERATION OF THE INTERTIE

 

Section 10.1 Responsibility for Operation of the Intertie

 

  10.1.1 Responsible Participants. AML&P and GVEA are hereby delegated the
responsibility for the operation of the Intertie on behalf of the IMC. The
operation of the Intertie shall be in compliance with the guidelines of this
Agreement, the operating policies and procedures established by the IMC, and in
compliance with any applicable Reliability Standards. The IMC may at any time
designate another Participant to assume such responsibility from GVEA or AML&P
with the affirmative vote of a minimum of 75 percent of the members of the IMC
constituting greater than 66 percent of the total Annual System Demand of all
members of the IMC, including the affirmative vote of AEA. Upon such designation
by the IMC, the name of the new operator(s) shall be deemed substituted for the
name of the old operator(s) in this Article 10, OPERATION OF THE INTERTIE, as
appropriate.

 

  10.1.2 AML&P and MEA Responsibilities. AML&P shall be responsible for the
operation of the southern assets of the Intertie including, but not limited to,
coordination with other utilities, the terminal facilities, communication
facilities, the Intertie transmission line, and other facilities south of the
Douglas Substation (more specifically illustrated and defined in the Intertie
Facilities Diagram in Exhibit E of this Agreement). The Douglas Substation
Intertie facilities shall be managed by AML&P and shall be deemed to be the
point of demarcation between the Intertie Operators.

10.1.2.1 AEA has contracted with MEA under the 1984 Joint Use Agreement for use
of approximately five and one-half (5.5) miles of MEA’s right-of-way and
constructed transmission facilities that are a part of the Intertie to the
Teeland Substation. This being presently a part of the Intertie, the IMC
delegates to AML&P, and AML&P assumes the responsibility for operation of this
portion of the transmission facilities. AEA delegates to MEA and MEA assumes
responsibility for maintenance of this portion of the transmission facilities.
Nothing contained in this Agreement shall be deemed to modify any portion of the
1984 Joint Use Agreement.

 

  10.1.3

GVEA Responsibilities. GVEA shall be responsible for the operation of the
northern assets of the Intertie, including but not limited to, coordination with
other utilities, the terminal facilities, communication facilities, the Intertie
transmission line, and other facilities north of the Douglas Substation (as more

 

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  specifically illustrated and defined in the Intertie Facilities Diagram in
Exhibit E of this Agreement). The Douglas Substation Intertie facilities shall
be managed by AML&P and deemed to be the point of demarcation between Operators.

 

  10.1.4 Joint Responsibilities. AML&P and GVEA acting in concert shall:

10.1.4.1 Coordinate all the activities and transactions involving the Intertie
operation;

10.1.4.2 Coordinate Intertie Transactions to ensure that at all times, to the
extent possible, the Intertie System is operated to: provide reliable and
economical service; optimize the availability of the Intertie within practical
operational and cost constraints; and; ensure the Intertie is fully subscribed;

10.1.4.3 Comply with, monitor compliance with, and enforce the operating
policies and procedures and Reliability Standards;

10.1.4.4 Coordinate the scheduling of all Intertie Transactions by the
Participants in the Northern and Southern Groups in accordance with the
provisions of this Agreement, and inform all Participants of the scheduled
transactions;

10.1.4.5 Develop procedures for restoration of service on the Intertie for
interruptions due to either Scheduled or Forced Outages, and have personnel
trained to carry out such operational procedures to ensure Intertie reliability;

10.1.4.6 Maintain communications with each other and the other Participants
using prudent methods of data acquisition sufficient for reliable system control
of the operation of the Intertie;

10.1.4.7 Maintain complete and accurate hourly records of all operations,
Intertie Transactions, and activities involving the Intertie, and promptly
publish and distribute such records to all Participants at regular intervals as
established by the Operating Committee (any Participants who desire it shall be
provided, at their own expense, direct access to all telemetry gathered from the
Intertie);

10.1.4.8 Coordinate the responsibilities delegated to them in this Agreement to
minimize duplication and ensure efficient operation of the Intertie;

 

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10.1.4.9 Abide by the terms and conditions of other contracts or agreements
involving the operation of the Intertie, so long as they do not conflict with
this Agreement;

10.1.4.10 Operate the Intertie in a safe, reliable, and responsible manner
consistent with Prudent Utility Practices, the directives and instructions of
the Operating Committee, and any applicable Reliability Standards.

 

  10.1.5 Contracting. The IMC may, to the extent permitted by law, contract with
other Participants and qualified contractors to maintain transmission facilities
under IMC control.

 

  10.1.6 Load Balancing. The Operating Committee shall recommend operating
policies and procedures and standard practices to the IMC to guide load
balancing responsibilities performed by the Intertie Operators and any Control
Area operators interconnected with the Intertie.

 

Section 10.2 Suspension of Work in Performance of Operational Duties

The AEA or IMC may order AML&P and/or GVEA, or any other entity responsible for
operation of the Intertie, in writing to suspend, delay, or interrupt all or any
part of the work involved in operation of the Intertie for such period of time
as AEA or the IMC determines to be appropriate for the convenience of, and in
the best interest of, the operation of the Intertie.

 

Section 10.3 Budget for Operation of the Intertie

 

  10.3.1 Budget Process. For purposes of calculation of unit Intertie Costs
pursuant to Section 7.2, Calculation of Intertie Costs and Rates, of this
Agreement, AML&P and GVEA may develop and submit to the IMC a suggested scope of
operations and a budget for operation of the Intertie upon thirty (30) days
written notice to the IMC. The budget developed by the Intertie Operators may
include all direct expenses and an allocated portion of such other expenses as
interest, depreciation and margin requirements, among others. All costs
allocated to the Intertie Operator budget shall be consistent with AML&P’s and
GVEA’s respective utility system operations and generally accepted utility
accounting principles. Unless otherwise agreed upon, the IMC shall provide AML&P
and GVEA submittals to the Participants for their review and comments prior to
the inclusion of such costs in Intertie Costs. The Participants shall be
provided no less than thirty (30) days to comment.

 

  10.3.2 Participant Comments. Participants may provide written comments on the
preliminary scope of operations and related budget requirements to the IMC
pursuant to a schedule adopted by the IMC. The Participants shall be provided no
less than thirty (30) days to comment.

 

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  10.3.3 IMC Establishes Budget. Based on the preliminary scope of operations
and budget and the comments received, the IMC shall establish the final Intertie
operating budget under the schedule established in Section 8.6.5, Budget.

 

  10.3.4 IMC Determinations and Payment of AML&P and GVEA. If AML&P and GVEA
submit a budget under Section 10.3.1, Budget Process, the IMC shall determine
the final scope of operations and related budget requirements that will be
deemed to be the fixed cost fee for operation of the Intertie for the ensuing
fiscal year. Unless otherwise agreed, the IMC shall pay each of AML&P and GVEA
pursuant to Section 10.6, Payment of Operators.

 

  10.3.5 Payment if IMC Unable to Determine Fixed Cost Fee. If the IMC is unable
to determine the fixed cost fee for operation of the Intertie, then AML&P and
GVEA may each determine, using records and accounts maintained under
Section 10.4, Accounting and Records, the cost to their respective systems to
provide operation of the Intertie in accordance with this Agreement and shall
bill the IMC monthly for these services. The IMC will then reimburse AML&P and
GVEA under Section 10.6, Payment of Operators.

 

Section 10.4 Accounting and Records

In maintaining accounts for operation of the Intertie, AML&P and GVEA will
follow the system of accounts prescribed for public utilities and licensees by
the Federal Energy Regulatory Commission, conform to Section 12.2.2, Cost
Records, and GAAP. AML&P and GVEA will furnish the IMC such operating and
financial statements relating to operation of the Intertie as may be reasonably
requested by AEA or the IMC. If receipt of such operating and financial
statements is unduly delayed, the IMC may, with its own staff, perform all work
necessary to collect such data as reasonably necessary. Such work shall be
performed at a time and in a manner to prevent unreasonable interference with
AML&P and GVEA operations.

 

Section 10.5 Audits

 

  10.5.1 Request for Audit. At the discretion of AEA or the IMC or by request of
a majority of the Participants, an audit shall be conducted with respect to the
matters provided for in this Agreement by independent auditors according to such
programs and procedures as agreed to by the Participants, and all Participants
shall be furnished copies of the report. The cost of performing such audits
shall be shared by the Participants in the same proportion as their MITCR or
share of Intertie Capacity share during the period covered by the audit or as
determined by the IMC. The Participants, their agents, and any other party
involved with the operation of the Intertie, shall provide and/or make available
the information and records required for the audit. The cost of any audit
required by a Participant that is beyond the above scope deemed necessary by the
IMC shall be borne by such Participant.

 

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  10.5.2 State Audit. AML&P and GVEA shall allow their books of accounts to be
audited with respect to matters provided for in this Agreement by such state
officials or agencies as may be authorized and directed by law to make those
audits. To the extent permitted by law, Participants shall have the same
authority to audit the books of accounts of the IMC and AEA with respect to the
operation of the Intertie.

 

Section 10.6 Payment of Operators

If a fixed cost fee for operation of the Intertie is established under
Section 10.3.4 of this Article, then within thirty (30) days of the end of each
month the IMC shall pay to AML&P and GVEA one-twelfth of their respective yearly
fixed cost fees for operation of the Intertie. If the Participants have not
agreed upon a fixed cost fee for operation of the Intertie under Section 10.3.4
of this Article, then the IMC shall reimburse AML&P and GVEA within thirty
(30) days of the receipt of their invoices. At all times, however, such
reimbursement is subject to adjustment in the event of errors, the resolution of
disputes, or as the result of audit findings.

 

Section 10.7 Change in Ownership or Control

If there is any change in the ownership, ownership structure, control of, or
right to control an entity delegated responsibility for the operation of the
Intertie on behalf of the IMC, or any such change regarding an entity delegated
any other responsibility related to the operation or maintenance of any portion
of the Intertie facilities, then the IMC may designate another Participant, or
such other entity as it deems appropriate, to assume those responsibilities. The
IMC’s designation shall be accomplished in the same manner as set forth in
Section 10.1.1, Responsible Participants.

 

Section 10.8 Critical Repairs and Maintenance

In the event that immediate action is required to preserve the reliability or
safe operation of the Intertie, the operators shall have the right to engage
qualified contractors or qualified members of their own staff to effect such
repairs as are reasonably necessary pursuant to Prudent Utility Practices. The
costs for such repairs shall be Intertie Costs. In the event an Operator has not
performed, or cannot perform, repairs or maintenance on Intertie facilities for
which it is responsible, and such delay or failure jeopardizes the immediate
safety, reliability, or operation of the Intertie pursuant to Prudent Utility
Practices, the affected Participants shall have the same right to effect such
repairs or maintenance. The costs for such repairs or maintenance shall be
Intertie Costs.

Article 11.

SCHEDULING OF CAPACITY AND ENERGY ON THE INTERTIE

 

Section 11.1 Scheduling Responsibility

 

  11.1.1

Southern Group. AML&P shall have the responsibility for scheduling transfers on
the Intertie for the Participants and Users of the Southern Group

 

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  and coordinating them with GVEA under: (i) the provisions of this Agreement;
(ii) any operating policies and procedures or Reliability Standards; and
(iii) the procedures adopted by the IMC.

 

  11.1.2 Northern Group. GVEA shall have the responsibility for scheduling
transfers on the Intertie for the Participants and Users of the Northern Group
and coordinating them with AML&P under: (i) the provisions of this Agreement;
(ii) any operating policies and procedures or Reliability Standards; and
(iii) the procedures adopted by the IMC.

 

  11.1.3 Coordination. AML&P and GVEA shall each have the responsibility for
coordinating schedules within their respective Groups.

 

Section 11.2 Capacity and Energy Schedules

 

  11.2.1 Participant Hourly Schedules. The amount of electric Capacity used and
Energy to be transferred on the Intertie under this Agreement will be based upon
hourly schedules provided by the Participants and Users.

 

  11.2.2 Advanced Scheduling. Capacity and Energy shall be scheduled on an
hourly basis and the schedules may be made for the next hour(s), day(s),
week(s), or month(s) in advance if allowed by the operating policies and
procedures.

 

  11.2.3 Procedure. Schedules for all transfers on the Intertie shall be
furnished to the respective Intertie Operators before 3:00 P.M. prevailing local
time each day for Capacity used and Energy to be delivered across the Intertie
for each clock hour of the following 24-hour period. If the IMC determines that
it is prudent to do so, this schedule shall be updated each day and an
additional six-day schedule will be furnished to provide a continuing seven-day
schedule.

 

  11.2.4 Short-term Scheduling. Short-term schedules of transfers on the
Intertie may not be made or changed on an hour-by-hour basis unless coordinated
in advance with the Intertie Operators. Operators will use their best efforts to
accommodate changes.

 

  11.2.5 Modification of Scheduling Procedures. Modifications to scheduling
procedures shall be required to be adopted by the IMC before implementation to
be effective.

 

Section 11.3 Intertie Schedule Limitations

The maximum schedule of Capacity and Energy of any Participant or User on the
Intertie shall be limited to their individual Intertie Capacity rights as
allocated under this Agreement, either by the MITCR methodology or the
methodology adopted by the IMC under Section 6.2.4, IMC Authority to Change
Capacity Allocation Methodology.

 

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Section 11.4 Transmission Service to Access the Intertie

Each Participant and User shall have the sole responsibility for scheduling any
service(s) required, on the intervening transmission systems for transfers of
Energy or Capacity to and from the Alaska Intertie, in compliance with the
applicable tariff schedules of the Participants or utilities involved.

Article 12.

MAINTENANCE OF THE INTERTIE FACILITIES

 

Section 12.1 Maintenance Responsibility

 

  12.1.1 Responsibility for Maintenance Practices. The IMC shall maintain the
Intertie facilities that AEA owns or for which AEA has contracted use
arrangements. The IMC shall provide for the maintenance of the Intertie
facilities by contracting with qualified parties to perform maintenance on its
behalf. Maintenance shall be scheduled, coordinated, and accomplished in
accordance with Prudent Utility Practices so as to minimize disturbances on the
Intertie that would impair service on the Participants’ systems.

 

  12.1.2 Availability. The Intertie shall be maintained in good working
condition, optimizing the availability of the Intertie within practical
operational and cost constraints. After a failure on the Intertie, the Intertie
shall be returned to service in the shortest possible time within the
constraints of practical maintenance procedures and Prudent Utility Practices.

 

Section 12.2 Maintenance Budget and Costs

 

  12.2.1 Development of Budget. The IMC shall develop an annual maintenance
budget and a schedule for the maintenance on the Intertie each year based on the
budgets developed by the contractors providing Intertie maintenance. This budget
will be reviewed with the Participants and Users sufficiently in advance of the
commencement of the fiscal year covered so that each Participant or User will be
able to submit its comments for consideration prior to finalization of the
budget. Budgets for more than one year will be required for the Participants’
and Users’ long range fiscal planning requirements. The IMC will prepare and
furnish the Participants and Users a copy of the long range fiscal requirements
for the Intertie, or a forecast of such requirements.

 

  12.2.2 Cost Records. AEA, in cooperation with the IMC, shall maintain complete
and accurate records of costs associated with maintenance of the Intertie. Costs
associated with maintenance of the Intertie will be recorded using the system of
accounts prescribed for public utilities and licensees by the Federal Energy
Regulatory Commission.

 

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Article 13.

MEASUREMENT OF ELECTRIC POWER AND ENERGY

 

Section 13.1 Required Metering Facilities

The electric power delivered through interconnection facilities of the Intertie
shall be measured by nonreversible watt-hour meters and 15-minute interval
demand meters.

 

Section 13.2 Access to Metering Facilities and Data

The IMC is responsible for the operation and maintenance of the facilities
necessary to interface with points of interconnection. The equipment at these
points of interconnection is necessary to provide for Intertie operation only.
The IMC shall provide for the use of available metered Intertie data output for
Participants or Users for the purpose of providing data necessary for their
operations.

 

Section 13.3 Installation and Maintenance

The IMC shall agree upon the specifications for Intertie-related metering
equipment before its installation. Each Participant hereby grants to all other
Participants the right to install and maintain at the installing Participants’
cost, Intertie-related equipment in other Participants’ substations. Each
Participant has the right to install and maintain, at its cost, equipment in
another Participant’s substation only if the equipment is necessary to perform
Intertie functions under this Agreement. The installation and maintenance shall
be coordinated with staff of the Participant owning and operating the facilities
on which the meters are to be installed. Ingress and egress shall be granted to
the other Participants to install, remove, or maintain such equipment.
Participants shall coordinate such activities.

 

Section 13.4. Testing of Metering Equipment.

Participants, Users, and AEA, shall each, at its cost, have the right to require
testing of metering equipment for accurate registration by a qualified third
party. Such testing shall be coordinated with the Participant owning and
operating the facilities on which the meters are installed. The IMC shall be
responsible for taking appropriate action to resolve any inaccurate
registration, plus or minus, that is not within tolerances approved by the IMC
pursuant to Section 9.3, Operating Procedures.

Article 14.

TRANSMISSION LOSSES

 

Section 14.1 Intertie Transmission and Transmission Service Losses

 

  14.1.1 Method of Determination of Losses. Losses in the Intertie System
created by Intertie transfers shall be determined by the Intertie Operators
through engineering studies, calculation, and power flow programs, and
procedures as established by the Operating Committee.

 

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  14.1.2 Compensation for Losses. The Participant or User supplying Capacity and
Energy shall also provide power to compensate for losses which occur from the
transfer. Such compensating power shall be provided at the time of the transfer
unless otherwise agreed by the affected Participants or Users.

 

  14.1.3 Schedules. Transfer schedules shall include losses associated with such
transfers. When transfers reduce losses in a Participant’s system which is not a
part of the Intertie, the losses in that system caused by the transfer shall be
considered zero.

 

Section 14.2 Intertie Transmission Loss Compensation

Losses occurring due to Energy transfers shall be made up by in-kind deliveries
of Energy and scheduled accordingly. All Energy usage that occurs in Intertie
facilities within a Control Area will be allocated and charged to the operation
of the Intertie in that Control Area. In each month, entities utilizing the
Intertie will be allocated losses based on their percentage share of the Energy
transferred in their respective Control Area. If no Energy is transferred,
losses will be allocated according to MITCR shares.

Article 15.

RIGHTS OF USERS

The rights and responsibilities of a User shall be set out in a User Agreement
adopted by the IMC pursuant to Section 8.6.2, Intertie User Agreements.
Non-Participant Users shall not be directly responsible for the management,
operation, maintenance or improvement of the Intertie, but shall have the same
rights, obligations, and responsibilities as a Participant with respect to
compliance with operating policies and procedures, any applicable Reliability
Standards and the provisions of Section 8.7, Payment Obligation Unimpaired and
Article 20, INDEMNITY.

Article 16.

OPEN ACCESS PRINCIPLES

 

Section 16.1 Definition

“Open Access” means that all potential Users of the Alaska Intertie shall be
provided access to transmission service on the Alaska Intertie under common
terms and conditions that are just and reasonable and not unjustly
discriminatory, subject to a priority reservation of Capacity for power supply
contracts with AEA projects, and equal access to Intertie system information the
IMC has deemed critical for all potential Users.

 

Section 16.2 Purpose

The policies and procedures for the operation of the Intertie shall make use of
Open Access principles where practicable.

 

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Section 16.3 Implementation of Capacity Allocation Methodology

The IMC shall use the process and principles in this Section 16.3 as guidance
when developing a proposed allocation methodology for Intertie Capacity.

 

  16.3.1 New Methodology. The IMC shall develop and implement a methodology for
the allocation of Intertie Capacity, approved by AEA pursuant to Sections 6.2.4
IMC Authority to Change Capacity Allocation Methodology, and 8.6.7 Maximum
Capability and Capacity Allocation, before July 1, 2013. The methodology shall
use and incorporate Open Access and other principles set forth in this Article.

 

  16.3.2 Statutory Conditions. The allocation of Intertie Capacity shall comply
with statutory conditions, including that the allocation provide a method by
which municipal electric, rural electric, cooperative electric, or private
electric and regional electric authorities, or other persons authorized by law
to engage in the distribution of electricity may secure a reasonable share of
available Intertie Capacity (i.e., United States Army).

 

  16.3.3 Priority for AEA Contracts. Participants or Users with contracts for
power from a facility owned by AEA shall have a priority capacity reservation on
the Intertie sufficient to accommodate the transfer of that contracted power
throughout the term of the power supply contract with AEA. This priority shall
be subject to rights of Participants and Users with firm contracts so long as
the Participant or User materially satisfies its related obligations. Continued
service under firm contracts will be guaranteed irrespective of whether another
AEA-owned project is developed or additional transmission capacity is made
available by AEA or another entity. In the event that additional transmission
capacity is made available, however, the IMC shall have the right to supply
transmission service to those Participants or Users by means of transmission
paths other than the currently-existing Intertie so long as there is no
degradation in the quality or amount of transmission capacity provided.

 

  16.3.4 Alternative Allocation of Intertie Capacity. If the IMC has not
developed and implemented a new methodology for the allocation of Intertie
Capacity, approved by AEA, on or before July 1, 2013, then the MITCR allocation
processes under Article 6 shall continue but in an expanded format. Absent an
approved new methodology, after July 1, 2013, and notwithstanding the
requirements of Section 4.2, New Participant, any User or potential User shall
be entitled to become a “Participant” under and for purposes of Article 6 by
(a) giving twenty-four (24) months written notice to AEA and the Participants of
its intention to become a Participant under Article 6, and (b) executing a User
Agreement, if one has not already been executed. Upon becoming a Participant
under this section (referred to as a “Section 16.3.4 Participant) the entity
shall obtain full rights to MITCR allocations under Article 6, MINIMUM RIGHTS OF
THE PARTICIPANTS AND USERS TO USE INTERTIE FACILITIES.

 

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16.3.4.1 For purposes of calculating MITCR allocations under Section 16.3.4 and
Article 6 for a User eligible to become a Participant only under Section 16.3.4
and that sells wholesale power to an electric utility, the number of
“kilowatts-hours in any clock hour, attributable to Energy required during such
hour for supply of Energy to a system’s consumers,” as that phrase is used in
the definition of “System Demand,” shall include wholesale power sold to an
electric utility, unless otherwise agreed in writing by the “Section 16.3.4
Participant.” Wholesale power sold to a Participant and included in the
calculation of a “Section 16.3.4 Participant’s” MITCR may not be included in the
calculation of the receiving Participant’s MITCR.

 

  16.3.5 Federal Acquisition Regulations. A User Agreement with an organization
that is required to follow the Federal Acquisition Regulations (FAR), may differ
from the standard User Agreement in order to accommodate obligations to follow
the FAR so long as the entity required to follow the FAR has provided the IMC
with reasonable assurance that its financial obligations have been or will be
satisfied.

 

Section 16.4 Public Process

The IMC shall publish its initial proposed allocation methodology for Intertie
Capacity and request public comment no later than eighteen (18) months after the
Effective Date of this Agreement. The IMC shall consider the public comments
before finalizing an Intertie Capacity allocation methodology.

 

Section 16.5 Availability of Information

The IMC shall use a transparent approach to: (i) making Intertie system
information available to all Users; (ii) allocating Capacity on the Intertie;
(iii) planning for Improvements, planned outages, or increases in Intertie
Capacity; (iv) developing the types of transmission service and the setting of
the appropriate rate for each type (including ancillary services should it deem
the provision of ancillary services appropriate); and (v) budgeting.

 

Section 16.6 Review of Methodology

The IMC shall request comments on the Capacity allocation methodology in effect
once every three years following implementation of the new allocation
methodology developed pursuant to Section 16.3, Implementation of Capacity
Allocation Methodology.

 

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Article 17.

BILLING AND PAYMENTS

 

Section 17.1 Billing

Participants and User shall be invoiced monthly for their respective share of
Intertie Costs, normally not later than fifteen (15) days after the end of the
calendar month to which the bills apply. Bills shall be due and payable within
fifteen (15) days from the date the bills are postmarked or hand-delivered.
Interest on any unpaid amount from the date due until the date payment is
received shall accrue at the annual legal rate under Alaska law for
post-judgment interest, or pro rata fraction thereof. Interest collected
pursuant to this section shall be credited to the IMC.

 

Section 17.2 Billing Disputes

If a Participant or User disputes the charges on an invoice, the Participant or
User shall nevertheless pay the full amount when due and payable and give
notification in writing, within ninety (90) days of the date the bill is
rendered, to the AEA and IMC stating the grounds on which charges are disputed
and the amount in dispute. If settlement of the dispute results in a refund, the
refund shall include interest at the annual legal rate under Alaska law for
post-judgment interest, or pro rata fraction thereof, from the date of
overpayment to the date of refund.

 

Section 17.3 Payment of Sanctions

Any payments related to sanctions shall be administered as provided in any
Reliability Standards adopted by the IMC.

Article 18.

INSURANCE AND LIABILITY

 

Section 18.1 Insurance

During the term of this Agreement, each Participant shall purchase and maintain
liability insurance with a carrier or carriers satisfactory to AEA and the IMC
covering injury to persons or property suffered by any Participant or a third
party as a result of errors, omissions, or operations which arise both out of
and during the course of this Agreement by the Participant or by any of its
subcontractors, including injuries to all employees of the Participant and the
employees of any of its subcontractors engaged in work under this Agreement. If
approved by the IMC and AEA, a Participant that is legally eligible to do so may
self-insure for the Workers’ Compensation Insurance and other types of insurance
required by this Article. An insurance certificate in a reasonably satisfactory
form or a copy of the insurance policies along with any undertaking to
self-insure, shall be furnished to the Operating Committee, AEA and the IMC
before beginning operations under this Agreement.

 

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Section 18.2 Types of Insurance

The Intertie insurance coverage and limits shall be reviewed by the IMC yearly
and may be adjusted with the affirmative vote of a minimum of 75 percent of the
members of the IMC constituting greater than 66 percent of the total Annual
System Demand of all members of the IMC, including the affirmative vote of AEA.
The agreed coverage must be provided by each Participant to cover those
operations of the Participant performed under this Agreement. The Alaska State
Risk Management department may also review the coverage and limits, and any
required changes to established coverage and limits shall be adopted.

 

  18.2.1 Workers’ Compensation Insurance. Each Participant shall provide and
maintain, for all employees of the Participant engaged in work under this
Agreement, workers’ compensation insurance as required by AS 23.30.045, as it
may be amended or replaced, or other Alaska or federal statue or regulation. The
Participant is responsible for ensuring that any of its subcontractors who
directly or indirectly provide services under this Agreement maintain workers’
compensation insurance to the extent required by law. The workers’ compensation
insurance policy shall contain a waiver of subrogation in favor of the other
Participants. Any Participant who is self-insured hereby waives subrogation in
favor of the other Participants.

 

  18.2.2 Comprehensive General Liability Insurance. Each Participant shall
purchase and maintain comprehensive general liability insurance in an amount not
less than the limits approved by the IMC. The other Participants shall be
included as additional insureds on insurance required in this Agreement and
shall not by their inclusion be responsible to the insurance carrier for payment
of premiums therefor. These insurance policies must also contain a cross
liability or severability of interest endorsement.

 

Section 18.3 Other Insurance Coverage Requirements

 

  18.3.1 Participants’ Cost Responsibility. Each Participant will bear the cost
of the required insurance. Insurance required to be maintained under this
Agreement may be maintained as part of any other policy or policies of the
Participant so long as the coverage of such policy or policies is substantially
the same as if such coverage were maintained under a separate policy.

 

  18.3.2 Users’ Insurance Requirements. The IMC may set minimum requirements for
Users to be included in any User Agreement for Intertie service.

 

  18.3.3 Coverage and Certificates. These policies must provide that any
cancellation, non-renewal, or material change be upon not less than thirty
(30) days notice to all named insureds. Each Participant must provide the AEA
and IMC with evidence of insurance. Insurance companies or self-insurers shown
on the certificate of insurance must have financial ratings acceptable to the
AEA. Failure to furnish satisfactory evidence of insurance or lapse of the
policy is a material breach of this Agreement.

 

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Article 19.

REVIEW OF DECISION

 

Section 19.1 Review of IMC Decision

Participants and Users may seek review of an IMC decision in the manner provided
in this Article if they are directly affected by such decision. For review of
IMC determinations of compliance or non-compliance with any operating policies
and procedures or other IMC adopted standards, a Participant or User first must
complete any review process specifically provided for in such policies,
procedures, or standards. This Article shall not apply to AEA without AEA’s
written consent.

 

Section 19.2 Initiation of Review

Any review process under this Article 19 must be initiated within fifteen
(15) days after receipt of written notification of the disputed decision.

 

Section 19.3 Review Process

 

  19.3.1 Settlement Conference. Within twenty (20) calendar days after the
written request of any disputing party, or such longer time as mutually agreed
upon, representatives of the IMC and the disputing parties’ senior management
with direct authority to enter into a settlement agreement shall meet and make a
good faith effort to resolve any dispute. In the event the representatives are
unable to achieve a resolution, then the dispute shall be subject to mediation
pursuant to this Section 19.3. Completion of the settlement conference procedure
set out in this paragraph shall be a condition precedent to mediation under this
Section unless one or more of the disputing parties refuses to attend the
settlement conference as requested.

 

  19.3.2

Disposition of Dispute. Any dispute(s) not resolved by the settlement conference
convened pursuant to Section 19.3.1 above, shall be subject to mediation unless
otherwise mutually agreed upon in writing. Within twenty (20) calendar days
after receipt of a written notice of demand for mediation, or such longer time
as mutually agreed upon, the IMC and disputing parties shall jointly select a
single, neutral mediator and thereafter shall participate in the mediation in a
good faith effort to resolve the dispute(s). If the parties are unable to
mutually agree upon a mediator within 20 calendar days after receipt of the
written demand for mediation, the mediator shall be selected by the presiding
judge of the Superior Court for the Third Judicial District at Anchorage,
Alaska, unless mutually agreed otherwise. Any mediator selected must have
experience in the subject matter of the dispute. If the IMC and the disputing
parties have not reached a settlement of the dispute(s) within an

 

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  additional thirty (30) days after appointment of the mediator, or such longer
period as they may agree, then they may file an action in a court of competent
jurisdiction or pursue such other remedies as they may have.

Article 20.

INDEMNITY

 

Section 20.1 Responsibility; Cost of Indemnity

 

  20.1.1 Costs of Indemnity. Each Participant shall be responsible for the costs
and liability arising out of, or in any way connected with, the acts or
omissions of the Participant, its agents (excluding other Participants),
employees, or officers taken pursuant to or under color of this Agreement.

 

  20.1.2 Participant Indemnity. Each Participant shall defend and indemnify the
other Participants from and against any claim or liability, including any
related loss or cost, caused by or resulting from the design, construction,
installation, operation, or maintenance of any of the electric facilities owned,
operated, or maintained by the indemnifying Participant or by reason of the acts
or omissions of its agents, contractors, servants, or employees in connection
therewith.

 

  20.1.3 IMC Indemnity. To the fullest extent permitted by law, the IMC shall
indemnify and hold its members, authorized agents, and officers harmless against
all claims and liabilities which they or any of them incur as a party defendant
to any proceeding, except one filed by or in the right of the IMC, based on any
authorized action of any such person as a member of the IMC, an authorized agent
of the IMC, or as an officer of the IMC within the scope of the member’s office.

 

  20.1.4 User Agreements. The IMC shall include provisions in any agreements
with Users that provide equivalent indemnity rights and responsibilities for
such Users as those provided for and required of Participants in this Article
provided, however, that this Section may not apply to AEA or other state
entities.

 

Section 20.2 Comparative Negligence

Any liability, including costs of defense and attorney fees, for claims arising
from the concurrent negligence of two or more Participants and/or Users will be
apportioned according to the respective percentage of fault attributable to each
Participant and/or User as determined by agreement or by the trier of fact.

 

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Article 21.

WARRANTY DENIAL AND EXCLUSIVITY OF CONTRACT

 

Section 21.1 AEA Denial of Warranty

AEA does not warrant the Intertie facilities it owns as fit for their intended
use or the reliability or availability of the Intertie for intended operations
covered by this Agreement.

 

Section 21.2 Exclusivity of Contract

The terms of this Agreement and any provisions adopted by reference or otherwise
incorporated into this Agreement set forth the full intent and agreement of AEA
and the Participants regarding the matters covered by this Agreement. However,
this Agreement does not supersede related written agreements, such as the
Intertie maintenance agreements between AEA and GVEA or AML&P, but is to be
interpreted consistently with them.

Article 22.

UNCONTROLLABLE FORCES

 

Section 22.1 Limited Excuse of Performance.

A Participant will not be in default in performance of any obligation hereunder,
other than the obligation to make payments as provided in this Agreement, if
failure of performance is due to uncontrollable forces and without the fault or
negligence of that Participant. Strikes, lockouts, and other labor disturbances
are considered uncontrollable forces and nothing in this Agreement will require
a Participant to settle a labor dispute against its better judgment.

 

Section 22.2 Suspension of Performance.

If a Participant, 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 that Participant giving notice and the
particulars of the uncontrollable force, its obligation to perform will be
suspended during the continuance of, but only to the extent of, any inability so
caused, but for no longer period thereof, and the effects of such cause shall,
so far as possible, be remedied with all reasonable dispatch; provided, however,
that the settlement of labor disputes shall be considered wholly within the
discretion of the Participant involved. The affected Participant will not be
responsible for its delay in performance under this Agreement to the extent
caused by an uncontrollable force, nor will such uncontrollable force give rise
to claim for damages or constitute default.

Article 23.

WAIVERS

Any waiver at any time by a Participant or the IMC of its rights with respect to
a default under this Agreement, or with respect to any other matter arising in
connection with this Agreement, shall not be deemed a waiver with respect to any
subsequent default or matter. Any delay short of the statutory period of
limitations in asserting or enforcing any right shall not be deemed a waiver of
such right.

 

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Article 24.

SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFICIARIES

 

Section 24.1 Successors and Assigns

This Agreement shall be binding upon and inure to the benefit of the successors,
legal representatives, or assigns of the respective Participants. However, no
Participant shall assign this Agreement nor any part hereof without the express
written consent of the IMC, which consent shall not be unreasonably withheld or
delayed. Nor shall a Participant be relieved of its obligations hereunder by an
assignment of less than all of the benefits and burdens hereunder or impose
additional obligations or burdens on the other Participants by an assignment of
this Agreement or any part hereof. The consent of the IMC under this section
shall require at least the affirmative vote of a minimum of 75 percent of the
members of the IMC constituting greater than 66 percent of the total Annual
System Demand of all members of the IMC, including the affirmative vote of AEA

 

Section 24.2 No Third-Party Beneficiaries

The provisions of this Agreement shall not create any rights in favor of any
person, corporation, or association not a Participant in this Agreement, except
as provided herein for Users, and the obligations herein assumed are solely for
the use and benefit of the Participants to this Agreement.

Article 25.

GOVERNING LAW

This Agreement is made subject to, and shall be governed by and construed in
accordance with, the laws of the State of Alaska and the authority granted to
the individual Participants thereunder.

Article 26.

CAPTIONS, MERGER OF ADDENDA AND EXHIBITS

 

Section 26.1 Captions

Captions of the various articles herein are intended for convenience of
reference only and shall not define or limit any terms or provisions.

 

Section 26.2 Merger

The following addendum and exhibits as attached hereto are hereby merged into
this Agreement:

Exhibit A – Former AS 44.83.380

Exhibit B – Definitions

 

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Exhibit C – Form of New Participant Addendum

Exhibit D – Former AS 44.83.398(f) Exhibit E – Intertie Facilities Diagram

Exhibit E – Intertie Facilities Diagram

Exhibit F – Form of User Agreement

Exhibit G – Sample MITCR Calculation

Exhibit H – Reserve Capacity and Operating Reserve Responsibility Agreement

Subsequent Entering Participant addenda also shall be merged into this Agreement
upon their execution by AEA and the Participants.

Article 27.

NOTICES

 

Section 27.1 Notices

 

  27.1.1 Address. Any notice or demand under this Agreement is properly given if
sent by registered or certified mail and addressed to the following:

General Manager

Municipality of Anchorage, Alaska

Municipal Light and Power

1200 East First Avenue

Anchorage, Alaska 99501

Executive Director

Alaska Energy Authority

813 West Northern Lights Blvd.

Anchorage, Alaska 99503

President

Alaska Electric Generation

and Transmission Cooperative, Inc.

3977 Lake Street

Homer, Alaska 99603

Chief Executive Officer

Chugach Electric Association, Inc.

Pouch 6300

Anchorage, Alaska 99503 or

5601 Electron Drive

Anchorage, Alaska 99502

President and CEO

Golden Valley Electric Association, Inc.

P.O. Box 71249

Fairbanks, Alaska 99707 or

758 Illinois Street

Fairbanks, Alaska 99701

 

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with a copy to:

Kirk H. Gibson

McDowell Rackner & Gibson PC

419 SW 11th Ave., Suite 400

Portland, Oregon 97205

The foregoing designations of the name or address to which notices or demands
are to be directed may be changed at any time by written notice given by any
Participant to all others.

 

  27.1.2 Means of Notice. Any notice or request of a routine character in
connection with the use of Capacity or delivery of Energy, or in connection with
the operation of facilities, shall be given in the manner so designated by the
Operating Committee, or the IMC.

Article 28.

AMENDMENTS

Except as expressly provided for in this Agreement, neither this Agreement nor
any part hereof may be terminated, amended, supplemented, waived, or modified
except by a written instrument signed by a minimum of 75 percent of the members
of the IMC constituting greater than 66 percent of the total Annual System
Demand of all members of the IMC, including the affirmative vote of AEA.

Article 29.

MUTUAL RIGHT OF ENTRY

Each Participant and AEA hereby grants a license and permit to the operators of
the Intertie, including the operators’ employees or contractors, to enter upon
its rights-of-way and to make use of its easements (or similar right to use or
enter upon property) to perform work related to the repair, operation or
maintenance of Intertie facilities located thereon. Any such entry shall comply
with the requirements and restrictions of the right-of-way or easement. Notice
of entry and the purpose(s) for it shall be provided to the owner or holder in
as timely a manner as is practicable under the then-existing circumstances.

Article 30.

AGENTS

Each Participant shall provide notice to the IMC and the operators of the
Intertie of that Participant’s appointment of an agent, or Designated
Contractor. The Participant shall remain fully responsible under this Agreement
for all acts or failures to act of its agents or Designated

 

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Contractors. Appointment of an agent or Designated Contractor shall not relieve
a Participant of any of its responsibilities or obligations under this
Agreement. The appointment of an agent or Designated Contractor shall not be
used to have, or have the right to control more than one vote or have more than
one voting representative on the IMC. See Section 8.1, Establishment of the
Intertie Management Committee, Right to Vote. An agent or Designated Contractor
must meet the requirements of this Agreement to become a Participant.

Article 31.

AGREEMENT APPROVAL AND TRANSMITTAL

By signing this Agreement, a Participant does not subject itself to rate
regulation by the Regulatory Commission of Alaska (RCA). AEA will transmit this
Agreement to the RCA for informational purposes only.

[The remainder of this page intentionally left blank]

 

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Article 32.

CONSTRUCTION OF AGREEMENT

Each Participant agrees that it has participated as fully as it deemed prudent
in the drafting and negotiation of this Agreement. Accordingly, the Agreement
will not be construed against any particular Participant, or Participants, as
the drafter.

IN WITNESS WHEREOF, the Participants have caused this Agreement to be executed
by their duly authorized officers or representatives as of the day and year
first above written. This Agreement may be executed in counterparts each of
which shall be an original, and all of which shall be merged into this
Agreement.

 

ALASKA ENERGY AUTHORITY By:  

/s/ Sara Fisher-Goad

Title:  

Executive Director

SUBSCRIBED AND SWORN TO before me on the 18 day of November, 2011.

 

/s/ Teri Webster

Notary Public, State of Alaska My Commission Expires:  

w/office

MUNICIPALITY OF ANCHORAGE, ALASKA d.b.a. MUNICIPAL LIGHT AND POWER

 

By:  

/s/ George Vakalis

Title:  

Municipal Manager

SUBSCRIBED AND SWORN TO before me on the 18 day of November, 2011.

 

/s/ Teri Webster

Notary Public, State of Alaska My Commission Expires:  

w/office

 

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CHUGACH ELECTRIC ASSOCIATION, INC. By:  

/s/ Bradley W. Evans

Title:  

CEO

SUBSCRIBED AND SWORN TO before me on the 18 day of November, 2011.

 

/s/ Teri Webster

Notary Public, State of Alaska My Commission Expires:  

w/office

 

GOLDEN VALLEY ELECTRIC ASSOCIATION, INC. By:  

/s/ Brian Newton

Title:  

President/CEO

SUBSCRIBED AND SWORN TO before me on the 18 day of November, 2011.

 

/s/ Teri Webster

Notary Public, State of Alaska My Commission Expires:  

w/office

 

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ALASKA ELECTRIC GENERATION AND TRANSMISSION COOPERATIVE, INC.

 

By:  

/s/ Evan J. Griffith

Title:  

General Manager

SUBSCRIBED AND SWORN TO before me on the 18 day of November, 2011.

 

/s/ Teri Webster

Notary Public, State of Alaska My Commission Expires:  

w/office

 

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EXHIBIT A

TO

AMENDED AND RESTATED

ALASKA INTERTIE AGREEMENT

TEXT OF FORMER AS 44.83.380

 

--------------------------------------------------------------------------------

EXHIBIT A

TO

AMENDED AND RESTATED

ALASKA INTERTIE AGREEMENT

TEXT OF FORMER AS 44.83.380

c. 44. 83. 380. Program established

(a) The energy program for Alaska is established. The program shall be
administered by the Alaska Power Authority.

(b) The energy program for Alaska is a program by which the authority may
acquire or construct power projects with money appropriated by the legislature
to the power development fund established in AS 44.83.382. A power project may
be acquired or constructed as part of the energy program for Alaska only if the
project is submitted to and approved by the legislature in accordance with
procedures set out in AS 44.83.177 – 44.83.187.

(c) The provisions of AS 36.10.010 – 36.10.125 apply to power projects
constructed by the authority under AS 44.83.380 – 44.83.425.

(Section 1, chapter 118 SLA, 1981)

 

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EXHIBIT B

TO

AMENDED AND RESTATED

ALASKA INTERTIE AGREEMENT

DEFINITIONS

 

--------------------------------------------------------------------------------

EXHIBIT B

TO

AMENDED AND RESTATED

ALASKA INTERTIE AGREEMENT

DEFINITIONS

ABBREVIATIONS

 

1.    AML&P    Municipal Light and Power, a department of the Municipality of
Anchorage, Alaska. 2.    AEA    Alaska Energy Authority. 3.    AEG&T    Alaska
Electric Generation and Transmission Cooperative, Inc., of which Homer Electric
Association, Inc. and Matanuska Electric Association, Inc. are members. 4.   
APA    Alaska Power Authority (predecessor agency to AEA). 5.    CEA    Chugach
Electric Association, Inc. 6.    GVEA    Golden Valley Electric Association,
Inc. 7.    HEA    Homer Electric Association, Inc. 8.    MEA    Matanuska
Electric Association, Inc.

DEFINITIONS

1. Accredited Capability of a Participant – shall mean: (a) the net generating
capability of a Participant; plus (b) the value in kilowatts assigned to that
Participant’s purchases and/or firm commitments for power from electric
suppliers under contracts now existing and hereafter created; minus (c) the
value in kilowatts assigned to any commitment of that Participant to deliver
power to any electric supplier or suppliers pursuant to any valid order or under
separate contract or contracts now existing or hereafter created. The Accredited
Capability of a Participant may be determined and assigned by the Operating
Committee in accordance with the provisions of the Agreement.

2. Affiliate(s) – shall mean any subsidiary or other entity which is associated
with or has a legal relationship with a Party to the Agreement, or a successor
agreement, or any related agreements. Such associated shall be considered the
ownership of a controlling interest or other right to control, either directly
or indirectly, the affairs of the affiliated entity.

 

Page 1 of 7 – Exhibit B to Amended and Restated Alaska Intertie Agreement

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3. Agreement – shall have the meaning as provided in the preamble of the
Agreement.

4. Annual Debt Service Cost – shall have the meaning provided in Section 7.1.1.3

5. Annual System Demand – shall mean the highest hourly System Demand occurring
during the 12-month period ending with the current month and that is used in the
MITCR calculation.

6. Available Accredited Capability of a Participant. – shall mean the Accredited
Capability adjusted for generating capacity out of service for maintenance or
repair.

7. Capacity – shall mean the time rate of generating, transferring or using
electric Energy, usually expressed in kilowatts.

8. Capacity Rate (or Intertie Capacity Rate) – shall have the meaning provided
in Section 7.2.6, Capacity Rate.

9. Control Area – shall mean an interconnected system of one or more utilities
which manually or automatically controls all generation to meet the total load,
plus or minus the power it is delivering or receiving from neighboring systems
by exercising operating control of the resources necessary to meet the loads
within the Control Area on an instantaneous and continuous basis. The
Participant exercising operating control for a Control Area provides the
following services:

a. regulate generating facilities and other power resources to effect
instantaneous and continuous supply of the power requirements of the loads
within the Control Area;

b. regulate generating facilities to assist in the control of frequency and time
correction; and

c. monitor continuously the power flows between the Control Area and the Control
Area(s) with which it is interconnected.

10. Cost of Improvements – shall have the meaning provided in Section 7.1.1.6

11. Declared Capability – shall mean the current capability of a generating unit
which is not greater than the published capability of the unit.

12. Decremental Cost – shall mean the cost of fuel, operating labor and
maintenance which would have been incurred to provide the Operating Reserves at
any time and which are avoided by the other Participant, including the cost of
avoiding the starting and operating of a generating unit or units and a
proportional amount of the annual debt service on the capital investment of the
highest cost (per kw) generating unit

 

Page 2 of 7 – Exhibit B to Amended and Restated Alaska Intertie Agreement

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on the receiving Participant’s system. The decremental cost of Operating
Reserves shall be the total of such avoided costs to the receiving Participant.
In situations where a Participant would have incurred replacement fuel costs
which are higher than the cost of existing fuel supply, replacement costs shall
be utilized.

13. Designated Contractor – shall mean the contractor designated by the United
States Army from time to time as provided in Article 30, AGENTS, to operate
utility systems on the United States Army’s bases.

14. Effective Date – shall the meaning provided in the preamble of the
Agreement.

15. Emergency Outage (Forced Outage) – shall mean any unanticipated, unscheduled
outage of generating or transmission facilities for other reasons than planned
maintenance. Such outage classification shall not exceed a period of four hours.

16. Energy – shall mean as commonly used in the electric utility industry,
electric energy means kilowatt hours (kWh).

17. Energy Rate – shall have the meaning provided in Section 7.2.5, Energy Rate.

18. Extraordinary Maintenance and Replacement Costs – shall have the meaning
provided in Section 7.1.1.2.

19. GVEA Control Area – shall have the meaning as provided in Sections 10.1.3,
GVEA Responsibilities.

20. Improvement – shall have the meaning provided in Section 6.4.1, Development
of Improvements.

21. IMC – shall mean the Intertie Management Committee. The criteria for
membership in the IMC is provided in Section 4.3, Membership In IMC, and its
establishment, authority and duties are set out in Article 8, INTERTIE
MANAGEMENT COMMITTEE.

22. IMC Bylaws – shall have the meaning provided in Section 8.2, Adoption of
Procedural Rules or Bylaws.

23. Incremental Cost – shall mean the cost of fuel, operating labor, maintenance
and a proportional amount of the annual debt service on the capital investment
of the next generating unit that would be used to provide the required
capability and Energy. It shall include the cost of starting and operating any
generating unit required to provide such Energy. The incremental cost of
supplying Operating Reserve shall be the total of such costs for the period of
time involved. In situations where a Participant will incur replacement fuel
costs which are higher than the cost of the existing fuel supply, replacement
costs shall be used.

24. Incremental Energy Cost – shall mean the cost of fuel, operating labor and
maintenance to generate the next unit of Energy required at any time, including
the cost of starting and operating any generating unit which must be started as
a result of

 

Page 3 of 7 – Exhibit B to Amended and Restated Alaska Intertie Agreement

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supplying such Energy. The incremental cost per kilowatt hour for any particular
transaction shall be the total of such costs divided by the kilowatt hours
scheduled for delivery to the receiving Participant. In situations where a
Participant will incur replacement fuel costs which are higher than the cost of
existing fuel supply, replacement costs shall be used.

25. Interruptible Transmission Service – shall mean a service providing for
transmission of electric Energy in bulk from one utility system through the
utility’s transmission system providing the transmission service to another
utility. This service is made available with the understanding that it can be
curtailed or interrupted at any time with little or no notice at the discretion
of the supplier.

26. Intertie – shall mean the electrical transmission facilities constructed by
APA or AEA to interconnect the Participants in North-Central Alaska with the
Participants in South-Central Alaska and facilities under contract to AEA that
are part of the interconnected Intertie system.

27. Intertie Costs – shall have the meaning provided in Section 7.1, Intertie
Cots.

28. Intertie Point of Interruption – shall mean the AEA-owned facilities in the
Douglas Substation, which is also the point of interconnection between AML&P’s
and GVEA’s Control Areas.

29. Intertie Operators – shall mean the operators at the control centers of
AML&P and GVEA, the utilities that have operational responsibility for the
Intertie under Article 10, OPERATION OF THE INTERTIE.

30. Intertie System – shall mean the Participants of the Alaska Intertie
Agreement functioning as an interconnected electrical system.

31. Intertie Transaction – shall mean transfer of electric energy on the
Intertie or a commitment to provide reserve capacity between Participants and/or
Users.

32. Intertie User Agreement or User Agreement – shall mean an agreement adopted
by the IMC pursuant to the requirements of Section 8.6.2, Intertie User
Agreements, which provides common terms and conditions for Capacity and Energy
transactions on the Intertie by Participants and Users. The initial form of the
User Agreement is Exhibit F to the Agreement.

33. Maximum Intertie Transfer Capability – shall mean, for purposes of this
Agreement, the maximum Intertie transfer capability is 78 MW, net of losses, as
provided in Section 6.3, Maximum Intertie Transfer Capability, unless changed by
the IMC pursuant to Section 6.2.4, IMC Authority to Change Capacity Allocation
Methodology.

34. MITCR – shall mean the Minimum Intertie Transfer Capability Rights as
discussed in Article 6, MINIMUM RIGHTS OF THE PARTICIPANTS AND USERS TO USE
INTERTIE FACILITIES. A sample MITCR calculation is included in Exhibit G.

 

Page 4 of 7 – Exhibit B to Amended and Restated Alaska Intertie Agreement

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35. New Participant Addendum – shall mean the agreement required by Section 4.2,
New Participant, as part of the requirements for the addition of a new
Participant.

36. Non-Spinning Reserve – shall mean all unloaded generating capability not
meeting the Spinning Reserve criteria that can be made fully effective in 45
minutes.

37. Northern Group – Shall initially mean GVEA.

38. Open Access – shall have the meaning provided in Section 16.1, Definition.

39. Operating Committee – shall mean the committee established by Section 9.1,
Establishment of the Operating Committee.

40. Operating Reserve – shall mean the sum of Spinning and Non-Spinning
Reserves.

41. Operating Reserve Obligation – shall mean that amount of Spinning Reserve
and Non-Spinning Reserve which a Participant is obligated under the terms of
this Agreement to provide for the purpose of maintaining continuity of service.

42. Operation and Maintenance Costs – shall have the meaning provided in
Section 7.1.1.1.

43. Original Agreement – shall mean the Alaska Intertie Agreement dated
December 23, 1985.

44. Participant – shall have the meaning provided in the preamble to the
Agreement and Article 4, PARTICIPANT.

45. Payment Obligation – shall have the meaning provided in Section 8.7, Payment
Obligation Unimpaired.

46. Prudent Utility Practices – shall mean Prudent Utility Practices at a
particular time means any of the practices, methods and acts which, in the
exercise of reasonable judgment in light of the facts known at the time the
decision was made, would have been expected to accomplish the desired result at
the lowest reasonable cost Consistent with reliability, safety and expedition,
including but not limited to the practices, methods and acts engaged in or
approved by a significant portion of the electrical utility industry prior
thereto. In applying the standard of Prudent Utility Practices to any matter
under the Agreement, equitable consideration should be given to the
circumstances, requirements and obligations of each of the Participants, and the
fact that the Participants are cooperatives, public corporations, or political
subdivisions of the State of Alaska with prescribed statutory powers, duties and
responsibilities. It is recognized that Prudent Utility Practice are not
intended to be limited to the optimum practices, methods or acts to the
exclusion of all others, but rather is 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 Practices include due regard for manufacturers’ warranties and
the replacement of governmental authorities having jurisdiction.

 

Page 5 of 7 – Exhibit B to Amended and Restated Alaska Intertie Agreement

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47. Railbelt – shall mean, in reference to a utility or Participant, those
electrically connected electric utilities situated along the Alaska Railroad
from Fairbanks to Seward, Alaska.

48. Reliability Standards – shall mean those standards having to do with
promoting the reliable operation of the Intertie developed, adopted and enforced
by the IMC in compliance with the requirements of Article 3, OPERATING AND
RELIABILITY STANDARDS AND ENFORCEMENT. The Reserve Capacity and Operating
Reserve Responsibility agreement, which is Exhibit H to the Agreement, will
constitute the Reliability Standards until such time as the IMC adopts and
implements additional standards.

49. Reliability Standards Implementation Agreement – shall man that contractual
agreement between the IMC and the Participants and Users for the implementation
of IMC-approved reliability standards.

50. Representative – shall have the meaning provided in Section 9.1.2,
Representatives.

51. Required Work – shall have the meaning provided in Section 8.8, AEA’s
Ability to Perform Required Work, and Section 6.4.4, Right to Make Improvements
– Required Work.

52. Reserve Capacity – shall mean the excess in kilowatts of a system’s Net
Generating Capacity over its maximum System Demand for any period.

53. Reserve Capacity Obligation – shall mean the capacity which a Participant is
obligated to reserve and use for the purpose of maintaining continuity of
service.

54. Reserve Fund – shall mean the fund established to provide for repairs to and
replacements of Intertie Facilities pursuant to Section 7.1.1.4, and
Section 8.6.12, Creation of Reserve Fund, consistent with Prudent Utility
Practice and in compliance with applicable law and regulations, or as required
by any bond or other borrowing covenants

55. Scheduled Outage – shall mean any outage of generating or transmission
facilities which is scheduled in advance to be out of service.

56. Southern Group – shall initially mean AML&P, CEA, AEG&T, MEA, and HEA.

57. Spinning Reserve – shall mean the amount of unloaded generating capability
of a Participant connected to and synchronized with the interconnected system of
the Participants and ready to take load. Spinning Reserve allocation to any
generator shall not exceed the amount of generation increase that can be
realized immediately from normal governor control.

 

Page 6 of 7 – Exhibit B to Amended and Restated Alaska Intertie Agreement

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58. System Demand – shall mean that number of kilowatts which is equal to the
kilowatt-hours required in any clock hour, attributable to Energy required
during such hour for supply of Energy to a system’s consumers, including system
losses, and also including any wheeling losses occurring on other systems and
supplied for transmission of such Energy, but excluding generating station uses
and excluding wheeling losses supplied by another system.

59. Total Operating Reserve Obligation – shall mean that amount of Spinning
Reserve and Non-Spinning Reserve of the Participants collectively required to
maintain continuity of service.

60. Transmission Service – shall mean service provided by the use of the
transmission system of a Participant directly connected to the Intertie for
wheeling of power and energy through its system for another Participant.

61. Transmission Service Facilities – shall mean the integrated transmission
facilities of the transmitting utility, excluding power plant step-up
transformation and radial lines to loads or generators.

62. User – shall mean any entity actually using the Intertie that has executed a
User Agreement, including a Participant that has executed a User Agreement.

63. User Agreement or Intertie User Agreement – shall mean an agreement adopted
by the IMC pursuant to the requirements of Section 8.6.2, Intertie User
Agreement, that provides common terms and conditions for Capacity and Energy
transaction on the intertie by Participants and Users. The initial form of the
User Agreement is Exhibit F to the Agreement.

*  *  *  *  *

 

Page 7 of 7 – Exhibit B to Amended and Restated Alaska Intertie Agreement

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EXHIBIT C

TO

AMENDED AND RESTATED

ALASKA INTERTIE AGREEMENT

NEW PARTICIPANT ADDENDUM

--------------------------------------------------------------------------------

NEW PARTICIPANT ADDENDUM

TO THE

AMENDED AND RESTATED

ALASKA INTERTIE AGREEMENT

This New Participant Addendum to the Amended and Restated Alaska Intertie
Agreement (“Addendum”) is made by and between                      (“New
Participant”), and the Intertie Management Committee (“IMC”) on             ,
20     in order to comply with the terms and conditions for the admission of new
Participants as set forth in the Amended and Restated Intertie Agreement dated
November     , 2011, (“Intertie Agreement”).

THEREFORE, in consideration of the mutual covenants in this Addendum, the New
Participant and the IMC agree as follows:

Article 1.

DEFINITIONS

Except as specifically set forth in this Addendum, definitions for capitalized
terms are as specified in Exhibit B to the Intertie Agreement and are
incorporated herein by this reference. Exhibit B to the Intertie Agreement may
be amended from time to time in the manner provided in Article 28, AMENDMENTS,
of the Intertie Agreement.

Article 2.

TERM AND EFFECTIVE DATE

 

Section 2.1 Effective Date of the Addendum

This Addendum shall be effective and the New Participant shall be a Participant
with the same rights and obligations as the other Participants under the
Intertie Agreement upon the date of last to occur of: a) the execution of this
Addendum by the IMC; b) the IMC’s determination pursuant to Section 4.2, New
Participant of the Intertie Agreement, if required, or, if applicable, the New
Participant’s compliance with Article 5, WITHDRAWAL OF AEG&T AND OTHER
PARTICIPANT AND USER STATUS of the Intertie Agreement (“Effective Date”).

Article 3.

COMPLIANCE WITH INTERTIE AGREEMENT AND STANDARDS

 

Section 3.1 Compliance with Intertie Agreement, Operating and Reliability
Standards

 

  3.1.1 Compliance With Intertie Agreement. The New Participant agrees to comply
with the provisions of the Intertie Agreement and to fully and faithfully
perform the duties and responsibilities of a Participant as provided in the
Intertie Agreement in the same manner and effect as if New Participant was a
signatory to the Intertie Agreement. New Participant hereby acknowledges that it
has received a current copy of the Intertie Agreement and that it is aware that
the Intertie Agreement may be amended from time to time.

 

Page 1 of 4 – Exhibit C to Amended and Restated Alaska Intertie Agreement

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  3.1.2 Compliance With Standards. Upon and after the Effective Date of this
Addendum, the New Participant agrees to execute any necessary agreements and
take such reasonable actions as may be required by the IMC in order to implement
any operating standards or Reliability Standards approved by the Reliability
Standards in force on the effective date of this Addendum or subsequently
adopted by the IMC and, in the event of failure to comply, agrees to be subject
to any sanctions applicable to such failure, all as provided in the Intertie
Agreement.

 

  3.1.3 Required Data Submissions. Upon and after the Effective Date of this
Addendum, the New Participant or its designated agent or Designated Contractor
shall submit all data as reasonably requested by the IMC, whether related to any
operating standards, Reliability Standards, or otherwise. The New Participant
shall notify the IMC of its designation of an agent or Designated Contractor
prior to having that agent or Designated Contractor submit any data on behalf of
the New Participant.

Article 4.

NOTICES

Any notice or demand under this Agreement is properly given if sent by
registered or certified mail and addressed to the following:

 

  New Participant:    

 

   

 

   

 

   

 

   

 

    with a copy to:    

 

   

 

   

 

   

 

 

 

Page 2 of 4 – Exhibit C to Amended and Restated Alaska Intertie Agreement

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  IMC:    

 

   

 

   

 

   

 

   

 

    with a copy to:     Kirk H. Gibson     McDowell Rackner & Gibson PC     419
SW 11th Avenue, Suite 400     Portland, OR 97205  

Article 5.

WAIVERS

Any waiver at any time by the New Participant or the IMC of its rights with
respect to a default under this Addendum, or with respect to any other matter
arising in connection with this Addendum, shall not be deemed a waiver with
respect to any subsequent default or matter. Any delay short of the statutory
period of limitations in asserting or enforcing any right shall not be deemed a
waiver of such right.

Article 6.

SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFICIARIES

The provisions of this Addendum shall not create any rights in favor of any
person, corporation, or association not a signatory to this Addendum or the
Intertie Agreement, and the obligations herein assumed are solely for the use
and benefit of the signatories to this Addendum and the Agreement.

Article 7.

GOVERNING LAW

This Addendum is made subject to, and shall be governed by and construed in
accordance with the laws of the State of Alaska and the authority granted to the
individual Participants thereunder.

 

Page 3 of 4 – Exhibit C to Amended and Restated Alaska Intertie Agreement

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Article 8.

CAPTIONS

Captions of the various articles herein are intended for convenience of
references only and shall not define or limit any terms or provisions.

Article 9.

AMENDMENTS

Neither this Addendum nor any part hereof may be terminated, amended,
supplemented, waived, or modified except by an instrument in writing signed by
the IMC, and the New Participant.

Article 10.

CONSTRUCTION OF AGREEMENT

Each signatory to this Addendum agrees that it has had its legal advisers review
this Addendum. Accordingly, the Addendum will not be construed against any
particular party as the drafter.

IN WITNESS WHEREOF, the IMC, and New Participant have caused this Addendum to be
executed by their duly authorized officers or representatives as of the day and
year first above written.

 

NEW PARTICIPANT By:  

 

Title:  

 

SUBSCRIBED AND SWORN TO before me on the              day of     , 2011.

 

 

Notary Public, State of Alaska My Commission Expires:  

 

 

INTERTIE MANAGEMENT COMMITTEE By:  

 

Title:  

 

SUBSCRIBED AND SWORN TO before me on the              day of     , 2011.

 

 

Notary Public, State of Alaska My Commission Expires:  

 

 

Page 4 of 4 – Exhibit C to Amended and Restated Alaska Intertie Agreement

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EXHIBIT D

TO

AMENDED AND RESTATED

ALASKA INTERTIE AGREEMENT

TEXT OF FORMER AS 44.83.398(f)

 

--------------------------------------------------------------------------------

EXHIBIT D

TO

AMENDED AND RESTATED

ALASKA INTERTIE AGREEMENT

TEXT OF FORMER AS 44.83.398(f)

(f) The provisions of (b) of this section do not apply to an intertie that is
authorized as a separate project under former AS 44.83.380. The authority shall
establish and maintain separate power rate schedules applicable to each intertie
that has acquired or constructed as a separate power project under the energy
program for Alaska. The power rate schedules shall produce sufficient revenue
from utilities connected by the intertie to pay (1) operation, maintenance, and
equipment replacement costs of the intertie; (2) debt service of the intertie;
and (3) safety inspections investigations of the intertie by the authority.

If the authority determines that intertie has ceased to function as a separate
project and has become a part of one or more other power projects as a
transmission line, the power rate schedules established under this subsection
shall be terminated and a wholesale power rate applicable to the former intertie
shall be calculated under (b) of this section for the project or projects of
which it has become a part.

 

Page 1 of 1 – Exhibit D to Amended and Restated Alaska Intertie Agreement

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EXHIBIT E

TO

AMENDED AND RESTATED

ALASKA INTERTIE AGREEMENT

INTERTIE FACILITIES DIAGRAM

--------------------------------------------------------------------------------

 

LOGO [g317480ex10_151.jpg]

--------------------------------------------------------------------------------

EXHIBIT F

TO

AMENDED AND RESTATED

ALASKA INTERTIE AGREEMENT

FORM OF USER AGREEMENT

--------------------------------------------------------------------------------

EXHIBIT F

TO

AMENDED AND RESTATED

ALASKA INTERTIE AGREEMENT

FORM OF USER AGREEMENT

This Intertie User Agreement (“User Agreement”), is made and entered into this
             day of     , 20    , between the Intertie Management Committee,
(“IMC”); and,                      (“User”) to set forth the basic terms and
conditions of User’s right to use the Alaska Intertie (“Intertie”). The rights
and responsibilities of all Intertie users, as well as the manner and means of
operating the Intertie, are as set forth in the Amended and Restated Alaska
Intertie Agreement (“Intertie Agreement”) which is attached as Exhibit 1. The
IMC and User shall be referred to individually as “Party” and collectively as
“Parties.”

The Parties hereby agree:

1. TERM, TERMINATION, AND CONSTRUCTION.

 

1.1 Term.

This User Agreement shall become effective upon its execution by the Parties and
shall expire on the earlier of: (a) its termination as set forth in Section 1.2,
Termination, of this User Agreement; (b) the expiration of the power supply
contract User has with an AEA project; or (c) at 24:00 hours Alaska Standard
Time on             .

 

1.2 Termination.

This User Agreement may be terminated by:

 

  a. The mutual agreement of both Parties for termination evidenced by a writing
executed by the authorized representatives of both Parties.

 

  b. Either Party, upon thirty (30) days written notice.

 

  c. The IMC for cause, in the event of User’s material breach of this User
Agreement.

 

  d. The IMC for Cause, if User’s non-compliance with the Intertie operating
policies and procedures or Reliability Standards results in or contributes to
sanctions against another party, and User has not reimbursed such other party.
for the full cost of any such non-compliance or sanctions within thirty
(30) days of notice from the IMC.

 

Page 1 of 9 – Exhibit F to Amended and Restated Alaska Intertie Agreement

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  e. The IMC For Cause, upon User’s failure to timely pay any Intertie related
charge, cost, or sanction that is due and owing within thirty (30) days notice
of such failure from the IMC.

 

1.3 Construction

Unless specifically provided otherwise in this User Agreement, all capitalized
terms shall have the meanings set out in Exhibit B of the Intertie Agreement.

2. COMPLIANCE WITH IMC REQUIREMENTS.

The User shall comply with the requirements of all scheduling and other
operating policies and procedures and any Reliability Standards established by
the IMC and the Agreement. The User may be required to supply reserves and/or
execute an agreement evidencing the User’s obligation to supply reserves. In the
event of failure to comply with any requirements of the IMC, User agrees to be
subject to any sanctions applicable to such failure. User shall be entitled to
all of the rights and privileges and be subject to all of the obligations of a
Participant or User, as applicable, under the Intertie Agreement. The failure of
the User to comply with the requirements of this section shall provide the IMC
the right to terminate this User Agreement under Section 1.2(c), Termination.

3. RATES AND CHARGES

The rates and charges for use of the Intertie, including for any ancillary
services, shall be as established by the IMC from time to time pursuant to the
requirements of the Intertie Agreement.

4. ANCILLARY SERVICES AND RESERVES.

The User shall accept, and pay the IMC-approved charges for, any ancillary
services required by the IMC related to User’s use of the Intertie. The IMC at
any time during the term of this agreement may require the User to execute an
agreement to provide reserves to support its use of the Intertie. The failure of
the User to comply with the requirements of this section shall provide the IMC
with the right to terminate this User Agreement under Section 1.2(c),
Termination.

5. PATH AND CAPACITY ALLOCATION.

The User shall have the right to use the Intertie at the points of receipt and
delivery specified in Exhibit B to this User Agreement. Any additional, or
required, facilities shall be as specified in the Intertie operating policies
and procedures, Reliability Standards, or other requirements adopted by the IMC
pursuant to the Intertie Agreement. Exhibit B shall also set out the amount of
User’s Intertie capacity allocation.

 

Page 2 of 9 – Exhibit F to Amended and Restated Alaska Intertie Agreement

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6. INTERTIE OPERATORS RIGHTS.

Nothing in this User Agreement shall affect the rights and obligations of the
Intertie Operators to maintain the reliability of the Intertie, including
disconnection or curtailment of service to the User. User shall cooperate with
the Intertie Operators at all times.

7. CREDIT SUPPORT.

The User shall be subject to any credit support requirements adopted by the IMC
to secure User’s obligations under this User Agreement. Such credit support
requirements may include providing a letter of credit, posting a bond, or other
reasonable credit review procedures in accordance with standard commercial
practices. The IMC may periodically review User’s creditworthiness and increase,
reduce, or eliminate the required support or payment security. User shall have
the right to request such a review no more than twice each calendar year.

8. PROHIBITION ON ASSIGNMENT

This User Agreement may not be assigned by either Party without the consent of
the other Party, which consent shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, each Party shall have the right to assign its
rights under this User Agreement for security purposes to a lender or guarantor
in connection with loans to that Party. This right of assignment is subject to
the following: (a) neither a secured lender nor guarantor exercising any rights,
power or privileges with respect to this User Agreement under any mortgage, deed
of trust or other security instrument shall be entitled to exercise the rights
of the Party under this User Agreement unless the obligations of such Party
hereunder shall have been performed; (b) an assignment shall not in any way
relieve such Party of any obligations hereunder; and, (c) an assignment shall
not be permitted hereunder if such assignment would adversely affect the tax
exemption of interest on any Intertie bonds or financing that was issued on a
tax-exempt basis.

9. TRANSFER OF CONTROL OR SALE OF GENERATION FACILITIES.

In any sale or transfer of control of any generation facilities owned or
controlled by User for any Intertie Transactions subject to this User Agreement,
User shall as a condition of such sale or transfer require the acquiring party
or transferee, with respect to the transferred facilities, either to assume the
obligations of the User with respect to this User Agreement or to enter into an
agreement with the IMC imposing on the acquiring party or transferee the same
obligations applicable to User pursuant to this User Agreement.

10. AMENDMENT

No amendment to this User Agreement shall be valid unless it is in writing and
signed by both Parties hereto. The terms and conditions to this User Agreement
shall remain in effect throughout the term and shall not be subject to change
through application to a regulatory or other governmental body or authority by
one Party absent the written agreement of the other Party.

 

Page 3 of 9 – Exhibit F to Amended and Restated Alaska Intertie Agreement

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11. NOTICES

Any notice, demand or request required or authorized by this User Agreement to
be given in writing to a Party shall be delivered by hand, courier or overnight
delivery service, mailed by certified mail (return receipt requested) postage
prepaid, faxed, or delivered by mutually agreed electronic means and followed in
writing to such Party at the following address:

 

  User:    

 

   

 

   

 

   

 

    Email:     Fax:     IMC:    

 

   

 

   

 

   

 

    Email:     Fax:  

The designation of such person and/or address may be changed at any time by
either Party upon written notice to the other. Notice served by mail shall be
effective upon receipt. Notice transmitted by electronic means (such as
facsimile or, email) shall be effective upon receipt if received prior to 5:00
p.m. on any week day, and if not received prior to 5:00 p.m. on a week day,
receipt shall be effective on the next week day, or as otherwise agree in
writing by the Parties, so long as the notice transmitted by electronic means is
followed in writing as set forth in this Article 11.

12. WAIVERS

Any waiver at any time by a Participant or the IMC with respect to a default
under this Agreement, or with respect to any other matter arising in connection
with this Agreement, shall not be deemed a waiver with respect to any subsequent
default or matter. Any delay short of the statutory period of limitations in
asserting or enforcing any right shall not be deemed a waiver of such right.

13. INTERPRETATION

Interpretation and performance of this User Agreement shall be in accordance
with, and shall be controlled by, the laws of the State of Alaska. Article and
section headings are for

 

Page 4 of 9 – Exhibit F to Amended and Restated Alaska Intertie Agreement

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convenience only and shall not affect the interpretation of this User Agreement.
References to articles, sections and appendices are, unless the context
otherwise requires, references to articles, sections and appendices of this User
Agreement.

14. INDEMNITY

 

14.1 Responsibility for Indemnity

 

  a. Costs of Indemnity. Each Party shall be responsible for the costs and
liability arising out of, or in any way connected with, the acts or omissions of
the Party, its agents, employees, or officers taken pursuant to or under color
of this User Agreement.

 

  b. Indemnity. Each Party shall defend and indemnify the other from and against
any claim or liability, including any related loss or cost, caused by or
resulting from the design, construction, installation, operation, or maintenance
of any of the electric facilities owned, operated, or maintained by the
indemnifying party or by reason of the acts or omission of its agents,
contractors, servants, or employees in connection therewith.

 

14.2 Comparative Negligence

Any liability, including costs of defense and attorney fees, for claims arising
from the concurrent negligence of the Parties will be apportioned according to
the respective percentage of fault attributable to each as determined by
agreement or by the trier of fact.

 

Page 5 of 9 – Exhibit F to Amended and Restated Alaska Intertie Agreement

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15. SEVERABILITY

If one or more provisions herein shall be determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, it shall be
given effect to the extent permitted by applicable law, and such invalidity,
illegality or unenforceability shall not affect the validity of the other
provisions of this User Agreement.

16. COUNTERPARTS

This User Agreement may be executed in counterparts and each shall be merged and
have the same force and effect as an original.

IN WITNESS WHEREOF, the IMC and the User have each caused this Intertie User
Agreement to be executed by their duly authorized representatives as of the date
first above written.

 

USER   By:  

 

Its:  

 

INTERTIE MANAGEMENT COMMITTEE By:  

 

Its:  

 

 

Page 6 of 9 – Exhibit F to Amended and Restated Alaska Intertie Agreement

--------------------------------------------------------------------------------

EXHIBIT A

TO

FORM OF USER AGREEMENT

Copy of

AMENDED AND RESTATED ALASKA INTERTIE AGREEMENT

 

Page 7 of 9 – Exhibit F to Amended and Restated Alaska Intertie Agreement

--------------------------------------------------------------------------------

EXHIBIT B

TO

FORM OF USER AGREEMENT

DELIVERY/RECEIPT POINTS AND CAPACITY ALLOCATION

 

Page 8 of 9 – Exhibit F to Amended and Restated Alaska Intertie Agreement

--------------------------------------------------------------------------------

EXHIBIT B

TO

INTERTIE USER AGREEMENT

DELIVERY/RECEIPT POINTS:

CAPACITY ALLOCATION:

 

Page 9 of 9 – Exhibit F to Amended and Restated Alaska Intertie Agreement

--------------------------------------------------------------------------------

EXHIBIT G

TO

AMENDED AND RESTATED

ALASKA INTERTIE AGREEMENT

SAMPLE MITCR CALCULATION

 

--------------------------------------------------------------------------------

MINIMUM INTERTIE TRANSFER CAPABILITY RIGHTS

(MITCR DETERMINATION)

FOR FISCAL YEAR 2012

Annual System Demand

 

     08 09      09 10      10 11      3 YR AVG

SOUTHERN PARTICIPANTS (MW)

             

AML&P

     186.0         175.0         177.0         179.3      MW

CEA

     258.4         233.3         242.2         244.6      MW

MEA

     144.2         132.0         137.2         137.8      MW

ARMY S

     0.0         0.0         10.0         3.3      MW            

 

 

TOTAL

              565.0      MW

NOUTHERN PARTICIPANTS (MW)

             

ARMY N

     0.0         0.0         22.0         7.3      MW

GVEA

     223.1         220.5         211.5         218.4      MW            

 

 

TOTAL

              225.7      MW

 

            FY 12

MITCR DETERMINATION

      

MEA

     24.39 %      19.02      MW

ML&P

     31.73 %      24.75      MW

CEA

     43.29 %      33.77      MW

ARMY S

     0.58 %      0.45      MW

ARMY N

     3.20 %      2.50      MW

GVEA

     96.80 %      75.50      MW     

 

 

       155.99      MW

Intertie Capability N

       78.00     

Intertie Capability S

       78.00     

 

Page 1 of 1 – Exhibit G to Amended and Restated Alaska Intertie Agreement

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EXHIBIT H

TO

AMENDED AND RESTATED

ALASKA INTERTIE AGREEMENT

RESERVE CAPACITY

AND

OPERATING RESERVE RESPONSIBILITY AGREEMENT

--------------------------------------------------------------------------------

See Addendum No. 1 to the Alaska Intertie Agreement-Reserve Capacity and
Operating Reserve Responsibility dated December 23, 1985. Previously filed as
Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1 dated
September 19, 1991, SEC File No. 33-42125.