Exhibit 10.15

PARTIAL REQUIREMENTS SERVICE AGREEMENT

BETWEEN

DUKE POWER COMPANY LLC

d/b/a DUKE ENERGY CAROLINAS, LLC

AND

PIEDMONT ELECTRIC MEMBERSHIP CORPORATION

DATED AS OF MAY 12, 2006

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TABLE OF CONTENTS

 

              Page Article 1 Definitions    2   1.1    Definitions.    2   1.2
   Interpretation.    20   1.3    Construction.    21 Article 2 Term    21   2.1
   Effectiveness.    21   2.2    Term.    22   2.3    Termination.    22   2.4
   Absolute Nature of Termination.    27 Article 3 Conditions Precedent to the
Commencement Date    28   3.1    Conditions Precedent to Duke’s Obligations.   
28   3.2    Conditions Precedent to EMC’s Obligations.    29   3.3    Notice of
Satisfaction of Conditions Precedent.    30   3.4    Waiver of Condition
Precedent.    30   3.5    Commencement of Service; Failure of Condition
Precedent.    30 Article 4 Sale of Electric Capacity and Energy    35   4.1   
Classification of Services Provided.    35   4.2    FFR Supplemental Service.   
35   4.3    Partial Requirements Service.    37   4.4    Excepted Load.    39  
4.5    Good Title.    39   4.6    Power Quality.    39 Article 5 EMC Resources
   40   5.1    EMC Contract Resources (Commencement Date - December 31, 2010).
   40   5.2    EMC Contract Resources (January 1, 2011 - Termination of
Agreement).    41   5.3    No Duke Obligation for Customer Resources.    44  
5.4    New Customer Resources.    44 Article 6 Priority of Service    45   6.1
   Interruption of FFR Supplemental Service and Partial Requirements Service.   
45

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6.2

  Curtailments of Load.    45  

6.3

  Emergency Load Curtailment Program.    45  

6.4

  Substitute Energy.    46  

6.5

  Substitute Energy Costs.    46

Article 7 Capacity and Energy Charges

   46  

7.1

  Charges During Commencement Date - December 31, 2006.    46  

7.2

  Charges During January 1, 2007 – December 31, 2010.    51  

7.3

  Charges Commencing January 1, 2011.    55  

7.4

  Monthly Reserve Capacity Charges.    57  

7.5

  Payment.    58  

7.6

  Determination of EMC Capacity and Energy Demands.    58

Article 8 Scheduling Agent Services

   59  

8.1

  Appointment of Duke as Scheduling Agent.    59  

8.2

  Scheduling Policies.    59  

8.3

  Protocols.    59  

8.4

  Scheduling Agent Services (Commencement Date through December 31, 2010).    59
 

8.5

  Scheduling Agent Services (January 1, 2011 through Termination).    60  

8.6

  New EMC Resources.    61  

8.7

  Errors in Schedules.    61  

8.8

  EMC Responsibilities.    61  

8.9

  Duke’s Liability.    62  

8.10

  Termination Assistance Service.    62

Article 9 Transmission and Ancillary Services

   62  

9.1

  Delivery Obligations.    62  

9.2

  Transmission Arrangements.    62  

9.3

  Ancillary Services.    62  

9.4

  Regional Transmission Organization.    63

Article 10 Operating Committee

   64  

10.1

  Operating Committee.    64  

10.2

  Duties of the Operating Committee.    64

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Article 11 Demand Side Management

   64  

11.1

  Availability of Demand Side Management Resource Programs.    64  

11.2

  Changes to Demand Side Management Resource Programs.    64  

11.3

  Credits.    64  

11.4

  Necessary Arrangements.    65  

11.5

  Start-Up Conditions.    65  

11.6

  Periodic Testing.    65  

11.7

  EMC Demand Side Management.    66

Article 12 Modification of This Agreement

   67  

12.1

  Unilateral Modification.    67  

12.2

  Mobile-Sierra Public Interest Standard.    67  

12.3

  Changes To Certain Charge Components.    67  

12.4

  Standard of Review for Permitted Changes.    68  

12.5

  Scope of Waiver.    68

Article 13 Billing and Payment

   68  

13.1

  Billing Period.    68  

13.2

  Billing Statements.    68  

13.3

  Timeliness of Payment.    69  

13.4

  Netting of Payments.    69  

13.5

  Disputes and Adjustments of Statements.    69  

13.6

  Records and Audits.    70 Article 14 Dispute Resolution    72  

14.1

  Arbitration.    72  

14.2

  Negotiation and Notice of Arbitration.    72  

14.3

  Individual, Joint or Consolidated Arbitration.    72  

14.4

  Selection of Arbitration Process.    73  

14.5

  Initiation of Arbitration.    74  

14.6

  Arbitration Processes.    74  

14.7

  Decision.    77  

14.8

  Expenses.    78  

14.9

  Effect of Dispute Resolution Procedures.    78  

14.10

  Confidentiality.    78

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Article 15 Credit and Collateral Requirements

   78  

15.1

  Posting of Collateral.    78  

15.2

  Material Adverse Changes.    78  

15.3

  Continuing Nature of Collateral Requirement.    79  

15.4

  Interest on Cash Used as Collateral.    79  

15.5

  Grant of Security Interest/Remedies.    79  

15.6

  Notice, Information.    80  

15.7

  Definitions.    80

Article 16 Additional Terms

   82  

16.1

  Representations Warranties and Covenants.    82  

16.2

  Assignment.    85  

16.3

  Liability and Indemnification.    86  

16.4

  Force Majeure.    87  

16.5

  Events of Default and Remedies.    88  

16.6

  Confidential Information.    90  

16.7

  Governmental Liabilities.    91  

16.8

  Choice of Law.    92  

16.9

  Survival of Obligations.    92  

16.10

  Entire Agreement.    92  

16.11

  Cost Projections.    92  

16.12

  Unique Agreement.    93  

16.13

  No Transfer of Rights.    93  

16.14

  No Partnership.    93  

16.15

  Third Parties.    93  

16.16

  Waiver.    93  

16.17

  Time of Essence.    93  

16.18

  Headings.    94  

16.19

  Severability.    94  

16.20

  Counterparts.    94  

16.21

  No Public Announcement.    94  

16.22

  Notices.    94

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16.23

   No Dedication of the System.    95  

16.24

   Stranded Costs.    95  

16.25

   Electric Peak Load and Energy Information to be provided by EMC.    96  

16.26

   Demand and Energy Charge and Rate Information to be Provided by Duke.    96  

16.27

   Further Assurances.    96  

16.28

   Applicable Laws and Regulations.    96  

16.29

   Equitable Relief    96  

16.30

   PURPA Assistance.    96  

16.31

   SERC and NERC Data Reporting and Compliance Assistance.    96

SCHEDULES

 

1

  

Annual Production Capacity and Energy Rates

ATTACHMENTS

 

3-1

   Calculation of the Excess Annual Capacity Charges in the Duke-Blue Ridge
Agreement, Duke-Piedmont Agreement and Duke-Rutherford Agreement

4-1

   EMC’s Base Obligation and Fixed Forward Resource

4-2

   Calculation of Reduction to EMC’s Base Obligation and EMC Group’s Base
Obligation During Light Load Periods

4-3

   Partial Requirements Resources

7-2

   Calculation of the Monthly Demand Charges in the Duke-Blue Ridge Agreement,
Duke-Piedmont Agreement and Duke-Rutherford Agreement

7-3

   Calculation of Piedmont Allocated Share of Duke Total Hourly Energy Charge,
EMC Group Total Hourly Energy Credit, Inter-EMC Energy Charge and Inter-EMC
Energy Credit

7-4

   Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Duke Total Hourly Energy Charge, EMC Group Total Hourly Energy Credit, Inter-EMC
Energy Charge and Inter-EMC Energy Credit

7-5

   Example showing Calculations of Piedmont Energy Purchase Amounts and Piedmont
Energy Credit Amount

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7-6

   Example showing Calculations of EMC Group Energy Purchase Amounts and EMC
Group Energy Credit Amount

7-7

   Example showing the calculation of Monthly Billing Demand under Section
7.2.6.3.2

7-8

   Examples showing the calculation of Monthly Billing Demand under Section
7.3.2.2

7-9

   Demand Rate Adjustment Percentage and Annual Percentage

7-10

   Example of Demand Rate Adjustment Percentage and Annual Percentage

8-1 I

   Terms and Conditions for the Scheduling of Power Supplied by North Carolina
Electric Membership Corporation to its Independent Members

8-1 II

   Terms and Conditions for Obtaining Transmission Services Adequate to Deliver
from the Interface Points Established under the Wholesale Power Supply Agreement
of NCEMC for Sales to its Independent Members

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PARTIAL REQUIREMENTS SERVICE AGREEMENT

BETWEEN

DUKE POWER COMPANY LLC

d/b/a DUKE ENERGY CAROLINAS, LLC

AND

PIEDMONT ELECTRIC MEMBERSHIP CORPORATION

THIS PARTIAL REQUIREMENTS SERVICE AGREEMENT, dated as of May 12, 2006, is
entered into by and between Piedmont Electric Membership Corporation, a
corporation organized and existing under Article 2 of Chapter 117 of the General
Statutes of North Carolina, together with any permitted successor or assignee
(“EMC” or “Piedmont”), and Duke Power Company LLC, d/b/a Duke Energy Carolinas,
LLC, a limited liability company organized and existing under the laws of North
Carolina, together with any permitted successor or assignee (“Duke”).
Hereinafter, Duke and EMC are sometimes also referred to individually as a
“Party” or collectively as the “Parties.”

W I T N E S S E T H

WHEREAS, Duke is engaged in the business of generating, transmitting, and
distributing electric capacity and energy in portions of the States of North
Carolina and South Carolina, and provides electric service to retail and
wholesale customers; and

WHEREAS, EMC is an electric membership corporation that provides retail electric
service to its members in the State of North Carolina, and is authorized to
purchase electric energy at wholesale for resale; and

WHEREAS, EMC is a member of North Carolina Electric Membership Corporation
(“NCEMC”) and is a party to the WPSA; and

WHEREAS, EMC is a party to the PPA; and

WHEREAS, EMC has elected to arrange independently from NCEMC for its future
requirements for electric capacity and energy in addition to those to which EMC
has entitlements under existing contractual arrangements; and

WHEREAS, EMC has reviewed its future needs for electric capacity and energy and
Scheduling Agent Services and has determined that in order for EMC to provide
for a portion of EMC’s Native Load, EMC is willing to purchase electric capacity
and energy from Duke and is also willing to purchase Scheduling Agent Services
from Duke for the duration of, and subject to the terms of, this Agreement; and

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WHEREAS, Duke is willing to plan and provide for the electric capacity and
energy requirements needed to meet a portion of EMC’s Native Load and to provide
Scheduling Agent Services for the duration of, and subject to the terms of, this
Agreement; and

WHEREAS, Duke and EMC have agreed to the terms and conditions upon which the
sale of electric capacity and energy and provision of Scheduling Agent Services
may be conducted between the Parties.

NOW THEREFORE, in consideration of the premises and the mutual representations,
warranties and covenants set forth in this Agreement, and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Parties, each intending to be legally bound, hereby agree as
follows:

Article 1

Definitions

 

1.1 Definitions.

Defined terms in this Agreement are capitalized. The defined terms used in this
Agreement have the following meanings:

“Accounting Requirements” shall have the meaning specified in Section 15.7.

“Administrator” shall mean the RUS Administrator.

“Adverse Ruling” shall have the meaning specified in Section 3.1(c).

“Affiliate” means, with respect to any person, any other person directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, such person. For purposes of this definition, “control” when used
with respect to any person means the power to direct the management and policies
of such person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.

“Agreement” means this Partial Requirements Service Agreement, together with
each Schedule and Attachment, each as amended from time to time.

“Ancillary Services” means any and all ancillary services provided by the
Transmission Provider in connection with any Transmission Service arranged by
EMC for the delivery of electric energy provided under this Agreement from the
Delivery Point.

“Annual Capacity Factor” shall have the meaning specified in Section 4.3.3.1.

“Annual Capacity Price” shall have the meaning specified in Section 3.5.2.3.1,
3.5.2.3.2, 3.5.2.3.3 or 7.2.2, as applicable.

 

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“Annual Capacity Quantity” shall have the meaning specified in Sections
3.5.2.3.1, 3.5.2.3.2, 3.5.2.3.3 or 7.2.2, as applicable.

“Annual Percentage” shall be calculated as shown on Attachment 7-9.

“Annual Planning Period” means, the period (as of the Commencement Date either
May through September or October through April) designated in the then most
recent Duke Annual Plan (or the successor thereto) that Duke files with the NCUC
as the period during which Duke’s annual peak load is projected to occur;
provided, that in the event that NCUC ceases to require Duke to file or filing
becomes voluntary and Duke ceases to file the Duke Annual Plan (or a successor
thereto) with the NCUC, “Annual Planning Period” shall mean the period (either
May through September or October through April) in which Duke’s annual peak load
is projected to occur under the generation planning criteria for Duke’s
Generation System used by Duke to meet Duke’s Native Load.

“Assignment for Security” shall have the meaning specified in Section 16.2.2.

“Bankrupt” means that the Defaulting Party or any guarantor of such Party:

(i) is dissolved (other than pursuant to a consolidation, amalgamation or
merger);

(ii) becomes insolvent or is unable to pay its debts or fails or admits in
writing its inability generally to pay its debts as they become due;

(iii) makes a general assignment, arrangement or composition with or for the
benefit of its creditors;

(iv) institutes or has instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief under any bankruptcy or insolvency
law or other similar law affecting creditor’s rights, or a petition is presented
for its winding-up or liquidation;

(v) has a resolution passed for its winding-up, official management or
liquidation (other than pursuant to a consolidation, amalgamation or merger);

(vi) seeks or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee, custodian or other
similar official for it or substantially all of its assets;

(vii) has a secured party take possession of all or substantially all of its
assets, or has a distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or substantially all of its
assets;

(viii) causes or is subject to any event with respect to it which, under the
applicable Laws of any jurisdiction, has an analogous effect to any of the
events specified in clauses (i) to (vii) inclusive; or

 

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(ix) takes any action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the foregoing acts.

“Bankruptcy Code” means Title 11 of the United States Code or any successor
thereto.

“Base Annual Capacity Charge” means the charge set forth in Section 3.5.2.3.4 or
7.2.2, as applicable.

“Baseload Resources” means the Partial Requirements Resources identified as
Baseload Resources in Attachment 4-3.

“Billing Dispute Notice” shall have the meaning specified in Section 13.5.

“Billing Period” means the period beginning on the Commencement Date and ending
on the last Day of the Month in which the Commencement Date occurred, and each
succeeding Month thereafter.

“Blue Ridge” means Blue Ridge Electric Membership Corporation.

“Blue Ridge Energy Credit Amount” means the Blue Ridge Energy Credit Amount as
determined in Section 7.1.5.9 of the Duke-Blue Ridge Agreement.

“Blue Ridge Energy Purchase Amount” means the Blue Ridge Energy Purchase Amount
as determined in Section 7.1.5.9 of the Duke-Blue Ridge Agreement.

“Business Day” means any Day other than Saturday, Sunday, or any Day on which
the Federal Reserve member banks are not open for business.

“Catawba Nuclear Station” means that certain nuclear power plant located near
Rock Hill in York County, South Carolina.

“CFC” shall have the meaning specified in Section 15.7.

“Claiming Party” shall have the meaning specified in Section 16.4.

“Claims” means all third party claims or actions, threatened or filed, and
whether groundless, false, or fraudulent, that directly or indirectly relate to
the subject matter of an indemnity, and the resulting losses, damages, expenses,
attorneys’ fees, and court costs, whether incurred by settlement or otherwise,
and whether such claims or actions are threatened or filed prior to or after the
termination of this Agreement.

“CoBank” shall have the meaning specified in Section 15.7.

“Combined Cycle Resources” means the Partial Requirements Resources identified
as Combined Cycle Resources in Attachment 4-3.

“Commencement Date” shall have the meaning specified in Section 2.1.1.

 

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“Commercially Reasonable Efforts” means efforts which are reasonably within the
contemplation of the Parties at the Effective Date; which require the performing
Party that is acting in good faith to take action or expend funds reasonably in
relation to the benefit to be obtained by the other Party; and that require a
level of effort which would be devoted by an independent entity reasonably in
the electric utility industry in light of all of the relevant circumstances.

“Confidential Information” means any documents, analyses, compilations, studies,
or other materials prepared by a Party or its Representatives that contain or
reflect either (a) any costs of Duke’s Generation System, including system
average costs, System Incremental Costs, Territorial Incremental Costs, and
Territorial Decremental Costs, or (b) written or oral data or information that
is privileged, confidential, or proprietary and is marked as “Confidential.”
“Confidential Information” shall also mean all subsequently prepared documents,
analyses, compilations, studies, or other materials by a Party or its
Representative that are derived from previously marked “Confidential” data or
information. Notwithstanding the foregoing, information shall not be deemed
Confidential Information if it:

(i) is a matter of public knowledge at the time of its disclosure or is
thereafter published in or otherwise ascertainable from any source available to
the public without breach of this Agreement,

(ii) constitutes information which is obtained from a third party (who or which
is not an Affiliate of one of the Parties) other than by or as a result of
unauthorized disclosure, or

(iii) prior to the time of disclosure had been independently developed by the
receiving Party or its Affiliates not utilizing improper means.

“Control Area” means an electric power system or combination of electric power
systems to which a common automatic generation control scheme is applied in
order to match the power output of the generators within the electric power
system and electric energy imported into the electric power system, with the
load located within the electric power system.

“Cover Costs” shall have the meaning specified in Section 6.4.

“CP&L” means Carolina Power & Light Company (d/b/a Progress Energy Carolinas,
Inc.).

“CPR” shall have the meaning specified in Section 14.1.

“Day” means a day, commencing at 00:00:00 Eastern Time of such calendar day and
ending 23:59:59 Eastern Time of the same calendar day.

“Debt Service Coverage Ratio” shall have the meaning specified in Section 15.7.

“Defaulting Party” shall have the meaning specified in Section 16.5.1.

 

5

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“Delivery Points” means any available points on the Transmission System where
electric energy is delivered for Transmission Service.

“Demand Rate Adjustment Percentage” shall be calculated as shown on Attachment
7-9.

“Demand Side Management Resource Programs” means the demand side management
resource programs that Duke makes available to Duke’s Native Load retail
customers within the State of North Carolina under riders approved and on file
with the NCUC, as such riders may be amended from time to time.

“Depreciation and Amortization Expense” shall have the meaning specified in
Section 15.7.

“Dispatched Baseload Resources” means the Baseload Resources that Duke
dispatches pursuant to Section 4.3.4.

“Dispatched Combined Cycle Resources” means the Combined Cycle Resources that
Duke dispatches pursuant to Section 4.3.3.

“Disputed Amount” shall have the meaning specified in Section 13.5.

“Duke” shall have the meaning specified in the first paragraph hereof, provided
that for purposes of this Agreement “Duke” shall not include Duke Transmission
and provided further, Duke intends to effectuate a name change to Duke Energy
Carolinas, LLC and upon the effectiveness of such name change, references to
“Duke” shall mean Duke Energy Carolinas, LLC.

“Duke Annual Plan” means the Annual Report Duke is required to file with the
NCUC in accordance with NCUC Rule R8-60 or successor thereto. In the event Duke
is no longer required to file the Annual Report with the NCUC or filing becomes
voluntary, “Duke Annual Plan” shall mean the generation planning criteria for
Duke’s Generation System used by Duke to meet Duke’s Native Load.

“Duke-Blue Ridge Agreement” means the Partial Requirements Service Agreement
between Duke and Blue Ridge Electric Membership Corporation, dated May 12, 2006.

“Duke Hourly Energy Charge” shall have the meaning specified in Section 7.1.5.1
or 7.2.5.2, as applicable.

“Duke Hourly Reconciliation Charge” shall have the meaning specified in
Section 7.1.5.11.

“Duke Monthly Energy Charge” means, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2006, the charge set forth
in Section 7.1.5.1; with respect to the period January 1, 2007, through
December 31, 2010, the charge set forth in Section 7.2.5.1 or 7.2.6.4, as
applicable; and with respect to the period beginning January 1, 2011, and
continuing through the termination of this Agreement, the charge set forth in
Section 7.3.3.

 

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“Duke Monthly Reconciliation Charge” shall have the meaning specified in
Section 7.1.5.11.

“Duke Native Load” or “Duke’s Native Load” means the electric capacity and
energy demands imposed on Duke by its retail customers located within Duke’s
Service Area, as such Service Area may be amended from time to time in
accordance with Laws or pursuant to the requisite approvals of the Governmental
Authorities that have jurisdiction to regulate retail electric service within
such Service Area, including by merger or acquisition, plus the demands of
Duke’s wholesale power sales customers served under contracts with a firmness of
supply equal to such retail customers.

“Duke-Piedmont Agreement” means this Agreement.

“Duke-Rutherford Agreement” means the Partial Requirements Service Agreement
between Duke and Rutherford Electric Membership Corporation, dated as of May 12,
2006.

“Duke Reconciliation Amount” shall have the meaning specified in
Section 7.1.5.11.

“Duke’s Generation Planning Practices” means the then-current generation
planning practices of Duke that are reflected in the Duke Annual Plan.

“Duke’s Generation System” means Duke’s owned or leased electric generating
facilities and purchased power resources the output of which are used to serve
Duke’s Native Load located within the State of North Carolina, as such system
may be amended from time to time by any means including by merger or
acquisition.

“Duke Schedule 1 Demands” shall have the meaning specified in Schedule 1,
Section I.B.

“Duke Total Hourly Energy Charge” shall have the meaning specified in
Section 7.1.5.2.

“Duke Transmission” means Duke Electric Transmission, a division of Duke, or any
successor thereto.

“Eastern Time” means the time in effect in Charlotte, North Carolina, whether
Eastern Standard Time or Eastern Daylight Saving Time.

“Effective Date” shall have the meaning specified in Section 2.1.1.

“EMC” or “Piedmont” shall have the meaning specified in the first paragraph of
this Agreement.

“EMC Call Signal”, with respect to the period beginning on the Commencement Date
and continuing through December 31, 2006, shall have the meaning specified in
Section 7.1.5.9; and with respect to the period beginning January 1, 2007,
through December 31, 2010, shall have the meaning specified in Section 7.2.5.5.

“EMC Coincident Peak Demand” shall have the meaning specified in
Section 3.5.2.3.5.1 or 7.2.3.2, as applicable.

 

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“EMC Contract Resources”, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2010, shall have the
meaning specified in Section 5.1.1, and with respect to the period beginning
January 1, 2011, and continuing through the termination of this Agreement, shall
have the meaning specified in Section 5.2.1.

“EMC Demand Side Management Resource Programs” means the demand side management
resource programs that EMC makes available to EMC’s Native Load customers.

“EMC Excess Annual Capacity Quantity” shall have the meaning specified in
Section 3.5.2.3.5.1 or 7.2.3.2, as applicable.

“EMC Group” means collectively Piedmont, Blue Ridge, and Rutherford.

“EMC Group Annual Capacity Quantity” means the sum of: (i) the Annual Capacity
Quantity set forth in Section 3.5.2.3 of this Agreement; (ii) the Annual
Capacity Quantity set forth in Section 3.5.2.3 of the Duke-Blue Ridge Agreement;
and (iii) the Annual Capacity Quantity set forth in Section 3.5.2.3 of the
Duke-Rutherford Agreement.

“EMC Group Call Signal” shall have the meaning specified in Section 7.1.5.10.

“EMC Group Coincident Peak Demand” shall have the meaning specified in
Section 3.5.2.3.5.3.

“EMC Group Combined Energy Credit Amount” means the sum of (i) the Blue Ridge
Energy Credit Amount, (ii) the Piedmont Energy Credit Amount, and (iii) the
Rutherford Energy Credit Amount.

“EMC Group Combined Energy Purchase Amount” means the sum of (i) the Blue Ridge
Energy Purchase Amount, (ii) the Piedmont Energy Purchase Amount, and (iii) the
Rutherford Energy Purchase Amount.

“EMC Group Combined Excess Annual Capacity Quantity” shall have the meaning
specified in Section 3.5.2.3.5.2.

“EMC Group Combined Monthly Demand Quantity” shall have the meaning specified in
Section 7.1.4.2.

“EMC Group Energy Credit Amount” shall have the meaning specified in
Section 7.1.5.10.

“EMC Group Energy Purchase Amount” shall have the meaning specified in
Section 7.1.5.10.

“EMC Group Excess Annual Capacity Quantity” shall have the meaning specified in
Section 3.5.2.3.5.3.

“EMC Group Monthly Demand Quantity” shall have the meaning specified in
Section 7.1.4.3.

 

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“EMC Group Native Load” means the sum of (i) the EMC Native Load under this
Agreement, (ii) the EMC Native Load under the Duke-Blue Ridge Agreement, and
(iii) the EMC Native Load under the Duke-Rutherford Agreement.

“EMC Group Put Signal” shall have the meaning specified in Section 7.1.5.10.

“EMC Group Reconciliation Amount” shall have the meaning specified in
Section 7.1.5.12.

“EMC Group Total Hourly Energy Credit” shall have the meaning specified in
Section 7.1.5.6.

“EMC Group’s Base Obligation” means the sum of (i) EMC’s Base Obligation under
Section 4.2.2 of this Agreement, (ii) EMC’s Base Obligation under Section 4.2.2
of the Duke-Blue Ridge Agreement, and (iii) EMC’s Base Obligation under
Section 4.2.2 of the Duke-Rutherford Agreement.

“EMC Hourly Demand” shall have the meaning specified in Section 3.5.2.3.5.1 or
7.2.3.2, as applicable.

“EMC Hourly Energy Credit”, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2006, shall have the
meaning specified in Section 7.1.5.5; and with respect to the period beginning
January 1, 2007, through December 31, 2010, shall have the meaning specified in
Section 7.2.5.4.

“EMC Monthly Demand Quantity”, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2006, shall have the
meaning specified in Section 7.1.4.1; and with respect to the period beginning
January 1, 2007, through December 31, 2010, shall have the meaning specified in
Section 7.2.4.1.

“EMC Monthly Energy Credit”, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2006, shall mean the
credit set forth in Section 7.1.5.5; and with respect to the period beginning
January 1, 2007, through December 31, 2010, shall mean the credit set forth in
Section 7.2.5.3.

“EMC Native Load” or “EMC’s Native Load” means the electric capacity and energy
demands imposed on EMC by its retail customers located within EMC’s Service
Area, excluding any such demands that constitute Non-Duke Control Area Load or
Excepted Load.

“EMC Peak Hour Billing Demand”, with respect to the period January 1, 2007
through December 31, 2010, shall have the meaning specified in
Section 7.2.6.3.2, and with respect to the period beginning January 1, 2011, and
continuing through the termination of this Agreement, shall have the meaning
specified in Section 7.3.2.2.

“EMC Put Signal”, with respect to the period beginning on the Commencement Date
and continuing through December 31, 2006, shall have the meaning specified in
Section 7.1.5.9; and with respect to the period beginning January 1, 2007,
through December 31, 2010, shall have the meaning specified in Section 7.2.5.5.

 

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“EMC Scheduled Amount” shall have the meaning specified in Section 4.2.3.

“EMC’s Base Obligation” shall have the meaning specified in Section 4.2.2.

“Energy Cost” shall have the meaning specified in Section 4.3.3.3.

“Energy Imbalance Service” means the service provided under Schedule 4 of the
Transmission Provider’s OATT.

“Equitable Defenses” means, with respect to a proceeding involving this
Agreement, the discretion of a Governmental Authority to make or enter an order
of bankruptcy, insolvency, reorganization, or other ruling affecting creditors’
rights generally, or exercising other discretion committed to the court’s or
agency’s equitable powers.

“Equity” shall have the meaning specified in Section 15.7.

“Event of Default” shall have the meaning specified in Section 16.5.1.

“Excepted Load” shall have the meaning specified in Section 4.4.

“Excess Annual Amount” means the quantity specified in Section 3.5.2.3.5.

“Excess Annual Capacity Charge” means the charge specified in Section 3.5.2.3.5
or 7.2.3, as applicable.

“Excess Annual Capacity Price” shall have the meaning specified in
Section 3.5.2.3.1, 3.5.2.3.2, 3.5.2.3.3 or 7.2.3.1, as applicable.

“Extension Term” shall have the meaning specified in Section 2.2.2.

“Federal Power Act” means the Federal Power Act, 16 U.S.C. §§791a-828c, as
amended from time to time.

“FERC” means the Federal Energy Regulatory Commission or any successor agency
that administers the Federal Power Act.

“FFR Supplemental Service” shall have the meaning specified in Sections 4.1 and
4.2.

“Firm Energy” means: electric energy which meets the Transmission Provider’s (or
successor Transmission Provider’s) standards related to character of service and
firmness of supply, including standards that may require the designation of
specific capacity sources, as such standards exist on the Effective Date or as
they may be amended from time-to-time, such that EMC may: (i) designate the PPA
as a Network Resource or successor service designation under its Network
Integration Transmission Service Agreement with Transmission Provider, or
successor Transmission Provider; and (ii) satisfy applicable requirements such
that the Network Integration Transmission Service or successor service
designation can be used to accept and deliver the electric energy pursuant to
the highest firm transmission priority of such Transmission Provider; or
(iii) satisfy the standards of any successor Transmission Provider that

 

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might have the right to determine the standards for character of service and
firmness of supply, including standards that may require the designation of
specific capacity sources, under which EMC may designate the PPA, such that the
requirements of the highest firm transmission priority are met under its Network
Integration Transmission Service Agreement (or as the nearest equivalent thereto
remains available to EMC under the successor Transmission Provider’s
requirements).

“Firm Sales” means wholesale electric sales other than Non-Firm Sales.

“Fitch Rating” means Fitch, Inc., a unit of Fimalac, S.A.

“Fixed Forward Resource” or “FFR Resource” means EMC’s contractual entitlements
to electric capacity and energy under the PPA.

“Force Majeure” shall have the meaning specified in Section 16.4.

“Fuel Rate”, with respect to the period January 1, 2007, through December 31,
2010, shall have the meaning specified in Section 7.2.6.4.1, and with respect to
the period beginning January 1, 2011, and continuing through the termination of
this Agreement, shall have the meaning specified in Section 7.3.3.1.

“Government” means the United States government.

“Governmental Authority” means any federal, state, local or other governmental,
regulatory or administrative agency, court, commission, department, board, or
other governmental subdivision, legislature, rulemaking board, court, tribunal,
arbitrating body, government-owned corporation or other governmental authority
or department thereof.

“Governmental Charges” means all taxes, fees, assessments and other charges
imposed by any Governmental Authority.

“Hour” means one of the twenty-four (24) clock hours in a Day.

“Hourly Fuel Charge”, with respect to the period January 1, 2007, through
December 31, 2010, shall have the meaning specified in Section 7.2.6.4.1, and
with respect to the period beginning January 1, 2011, and ending on the
termination of this Agreement, shall have the meaning specified in
Section 7.3.3.1.

“Hourly Inter-EMC Transfer Reconciliation Charge” shall have the meaning
specified in Section 7.1.5.13.

“Hourly Variable O&M Charge”, with respect to the period January 1, 2007,
through December 31, 2010, shall have the meaning specified in
Section 7.2.6.4.2, and with respect to the period beginning January 1, 2011, and
ending on the termination of this Agreement, shall have the meaning specified in
Section 7.3.3.2.

“Initial Term” shall have the meaning specified in Section 2.2.1.

 

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“Impasse Notice” shall have the meaning specified in Section 14.2.

“Interest Expense” shall have the meaning specified in Section 15.7.

“Interest Rate” means either (i) the Prime Rate plus two (2%) percent, or
(ii) the maximum lawful rate permitted by applicable Law, whichever is less.

“Interval”, with respect to the period beginning on the Commencement Date and
continuing through December 31, 2006, shall have the meaning specified in
Section 7.1.5.9 and 7.1.5.10, as applicable; and with respect to the period
beginning January 1, 2007, through December 31, 2010, shall have the meaning
specified in Section 7.2.5.5.

“ITC” means an independent transmission company.

“ISO” means an independent system operator.

“kWh” means kilowatt-hour, a unit of electric energy.

“kW” means kilowatt.

“Law” means any law, rule, regulation, order, writ, judgment, decree, or other
legal or regulatory determination by a court, regulatory agency, or other
Governmental Authority of competent jurisdiction.

“Legal Proceeding” means any suit, hearing, or proceeding by or before any court
or any Governmental Authority.

“Light Load Periods” means any Hour during which EMC’s Base Obligation is
reduced because certain of its entitlements to electric capacity and energy
under the WPSA are reduced as a result of NCEMC’s Native Load in either of the
CP&L east or west Control Areas or Duke Control Area being insufficient to
permit NCEMC to have access to its full contractual entitlement to electric
capacity and energy from certain generation or purchased power resources.

(i) For each Hour beginning with the Commencement Date and continuing through
December 31, 2010, or any portion thereof in which this Agreement is in effect,
Light Load Periods in the CP&L east and west Control Areas, only occur when
NCEMC’s Native Load in such CP&L east and west Control Area is less than the
contractual amount specified in the Service Obligation Resources (“SORs”). The
amount of any reduction in NCEMC’s entitlement to electric capacity and energy
under the SORs is allocated to EMC in accordance with the WPSA. In the Duke
Control Area, Light Load Periods only occur when a generating unit at either the
Catawba Nuclear Station or the McGuire Nuclear Station is off-line or de-rated
and NCEMC’s Native Load in the Duke Control Area is less than 623.5 MWs. The
amount of any reduction in NCEMC’s entitlement to electric capacity and energy
is allocated to EMC in accordance with the WPSA.

 

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(ii) For each Hour beginning January 1, 2011, and continuing through the
termination of this Agreement, Light Load Periods only occur when a generating
unit at either the Catawba Nuclear Station or the McGuire Nuclear Station is
off-line or de-rated and NCEMC’s Native Load in the Duke Control Area is less
than 623.5 MWs. The amount of any reduction in NCEMC’s entitlement to electric
capacity and energy is allocated to EMC in accordance with the WPSA.

“Material Adverse Change” or “MAC” shall have the meaning specified in
Section 15.2.

“Material Adverse Ruling” shall have the meaning specified in
Section 2.3.2.2(c).

“Material Adverse Ruling Termination Date” shall have the meaning specified in
Section 2.3.2.2.

“Maximum Demand Hour”, with respect to the period beginning on the Commencement
Date and continuing through December 31, 2006, shall have the meaning specified
in Section 7.1.4.3; and with respect to the period January 1, 2007 through
December 31, 2010, shall have the meaning specified in Section 7.2.4.1.

“McGuire Nuclear Station” means that certain nuclear plant located in
Huntersville, North Carolina.

“Month” means a calendar month, commencing at one (1) minute prior to 12:01 a.m.
Eastern Time on one of January 1, February 1, March 1, April 1, May 1, June 1,
July 1, August 1, September 1, October 1, November 1 or December 1 and ending at
one (1) minute after 11:59 p.m. Eastern Time of the succeeding January 31,
February 28 or 29 (during a leap year), March 31, April 30, May 31, June 30,
July 31, August 31, September 30, October 31, November 30 or December 31.

“Monthly” shall have a meaning correlative to that of Month.

“Monthly Billing Demand”, with respect to the period January 1, 2007, through
December 31, 2010, shall have the meaning specified in Section 7.2.6.3.2, and
with respect to the period beginning January 1, 2011, and continuing through the
termination of this Agreement, shall have the meaning specified in
Section 7.3.2.2.

“Monthly Demand Amount” means the quantity specified in Section 7.1.4.

“Monthly Demand Charge” means, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2006, the charge set forth
in Section 7.1.4; with respect to the period January 1, 2007, through
December 31, 2010, the charge set forth in Section 7.2.4 or 7.2.6.3, as
applicable; and with respect to the period beginning January 1, 2011, and
continuing through the termination of this Agreement, the charge set forth in
Section 7.3.2.

“Monthly Demand Rate”, with respect to the period beginning on the Commencement
Date and continuing through December 31, 2006, shall have the meaning specified
in Section 7.1.4; with respect to the period January 1, 2007 through August 31,
2008, shall have the

 

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meaning specified in Section 7.2.4 or 7.2.6.3.1, as applicable, except as
provided in Sections 3.5.2.3.1, 3.5.2.3.2 and 3.5.2.3.3; with respect to the
period September 1, 2008, through December 31, 2010, shall have the meaning
specified in Section 7.2.4 or 7.2.6.3.1, as applicable, and with respect to the
period beginning January 1, 2011, and continuing through the termination of this
Agreement, shall have the meaning specified in Section 7.3.2.1.

“Monthly Fuel Charge”, with respect to the period January 1, 2007, through
December 31, 2010, shall have the meaning specified in Section 7.2.6.4.1, and
with respect to the period beginning January 1, 2011, and continuing through the
termination of this Agreement, shall have the meaning specified in
Section 7.3.3.1.

“Monthly Inter-EMC Energy Transfer Reconciliation Charge” shall have the meaning
specified in Section 7.1.5.13.

“Monthly Replacement Energy Charge” shall have the meaning specified in
Section 4.2.4.

“Monthly Reserve Capacity Charge” shall have the meaning specified in
Section 7.4.

“Monthly Scheduling Agent Service Charge” shall have the meaning specified in
Section 7.1.6.

“Monthly Variable O&M Charge”, with respect to the period January 1, 2007,
through December 31, 2010, shall have the meaning specified in
Section 7.2.6.4.2, and with respect to the period beginning January 1, 2011, and
ending on the termination of this Agreement, shall have the meaning specified in
Section 7.3.3.2.

“Moody’s” means Moody’s Investors Services, Inc.

“MSCG” means Morgan Stanley Capital Group Inc.

“MWh” means megawatt-hour, a unit of electric energy.

“MW” means megawatt.

“NCEMC” shall have the meaning specified in the Recitals of this Agreement.

“NCEMC Native Load” means the electric and energy demands imposed on NCEMC by
its members for resale to such members’ retail customers, and shall include
wholesale sales of electric capacity and energy by Blue Ridge to New River
except wholesale sales of electric capacity and energy made in accordance with
Section 4.4.1 of the Duke-Blue Ridge Agreement.

“NCEMC Policies” shall have the meaning specified in Section 8.2.

“NCUC” means the North Carolina Utilities Commission or any successor agency
with jurisdiction to regulate retail electric service in the State of North
Carolina.

“Negotiation Period” shall have the meaning specified in Section 14.2.

 

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“NERC” means the North American Electric Reliability Council.

“Network Integration Transmission Service” means Network Integration
Transmission Service provided under the OATT.

“Network Integration Transmission Service Agreement” or “NITSA” means that
certain agreement for Network Integration Transmission Service, as amended from
time to time, executed by EMC and Transmission Provider.

“Network Operating Agreement” or “NOA” means that certain agreement, as amended
from time to time, executed by EMC and Transmission Provider in conjunction with
the Network Integration Transmission Service Agreement.

“Network Resource” shall have the meaning specified in the OATT.

“Neutral Auditors” shall have the meaning specified in Section 2.3.2.2.2.

“New River” means Appalachian State University d/b/a New River Light & Power
Company or any successor thereto.

“Nomination” means the notification provided by MSCG to the Scheduling Agent of
the sources and specific amounts of electric energy under the WPSA that MSCG
desires EMC to make available in accordance with the terms and conditions of the
PPA.

“Non-Claiming Party” shall have the meaning specified in Section 16.4.

“Non-Conforming Load” shall have the meaning specified in Section 4.4.

“Non-Defaulting Party” shall have the meaning specified in Section 16.5.1.

“Non-Duke Control Area Load” means load that is located in a Control Area other
than the Duke Control Area, including load that is physically located in the
Duke Control Area but telemetered for Control Area purposes to another Control
Area.

“Non-Firm Sales” means wholesale electric sales for which the delivery of
electric energy may be interrupted, curtailed or terminated for any reason
without any liability to Duke (other than charges imposed for changes to
schedules for the sale of electric energy).

“Notice of Termination” means a written notice to terminate this Agreement under
Sections 2.2 or 2.3 that conforms to the requirements set forth in
Section 2.3.3.

“OATT” means the Open Access Transmission Tariff of the Transmission Provider on
file with FERC, or the successor transmission tariff (including the Open Access
Transmission Tariff of an RTO, ITC or ISO that is applicable to the Transmission
System), as either may be amended from time to time.

“Operating Committee” shall have the meaning specified in Section 10.1.

“Option Notice” shall have the meaning specified in Section 3.5.2.3.

 

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“Option Period” shall have the meaning specified in Section 3.5.2.3.

“Original Notice” shall have the meaning specified in Section 14.2.

“Partial Requirements Agreements” means the Duke-Rutherford Agreement, the
Duke-Blue Ridge Agreement, and the Duke-Piedmont Agreement.

“Partial Requirements Resources” means EMC’s contractual entitlements to
electric capacity and energy used to serve EMC’s Native Load during the period
commencing January 1, 2011, and continuing through the termination of this
Agreement, as specified in Section 5.2.

“Partial Requirements Service” shall have the meaning specified in Section 4.3.

“Party” and “Parties” shall have the meanings specified in the preamble of this
Agreement.

“Patronage Capital or Margins” shall have the meaning specified in Section 15.7.

“Piedmont” shall have the meaning specified in the first paragraph of this
Agreement.

“Piedmont Allocated Share of Duke Total Hourly Energy Charge” shall be as
calculated in Attachment 7-3.

“Piedmont Allocated Share of EMC Group Total Hourly Energy Credit” shall be as
calculated in Attachment 7-3.

“Piedmont Allocated Share of Inter-EMC Energy Charge” shall be as calculated in
Attachment 7-3.

“Piedmont Allocated Share of Inter-EMC Energy Credit” shall be as calculated in
Attachment 7-3.

“Piedmont Energy Credit Amount”, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2006, shall have the
meaning specified in Section 7.1.5.9; and with respect to the period beginning
January 1, 2007, through December 31, 2010, shall have the meaning specified in
Section 7.2.5.5.

“Piedmont Energy Purchase Amount”, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2006, shall have the
meaning specified in Section 7.1.5.9; and with respect to the period beginning
January 1, 2007, through December 31, 2010, shall have the meaning specified in
Section 7.2.5.5.

“Piedmont Hourly Reconciliation Credit” shall have the meaning specified in
Section 7.1.5.12.

“Piedmont Monthly Reconciliation Credit” shall have the meaning specified in
Section 7.1.5.12.

 

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“Point of Interconnection” means the point of interconnection between the
Transmission Provider’s transmission and distribution facilities and EMC’s
system.

“PPA” means that certain Power Purchase Agreement by and between EMC and Morgan
Stanley Capital Group Inc. dated as of December 11, 2003, as amended from time
to time.

“Prime Rate” means, for any date, the per annum rate of interest announced from
time to time by Citibank, N.A. (or a suitable replacement agreed upon by the
Parties) as its “prime” rate for commercial loans, effective on the date payment
is due as established from time to time by such bank.

“Principal and Interest Expense” shall have the meaning specified in
Section 15.7.

“Prudent Utility Practice” means any of the practices, methods, and acts engaged
in or approved by a significant portion of the electric utility industry during
the relevant time period, or 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, could have been expected to accomplish the desired result at
a reasonable cost consistent with good business practices, reliability, safety,
and expedition. Prudent Utility Practice is not intended to be limited to the
optimum practice, method, or act to the exclusion of all others, but rather to
be acceptable practices, methods, or acts generally accepted in the electric
utility industry.

“PSCSC” means the Public Service Commission of South Carolina, or any successor
agency with jurisdiction to regulate retail electric service within the State of
South Carolina.

“Purchasing - Selling Entity” means that entity designated to the Transmission
Provider by EMC who, upon the effectiveness of such designation, is eligible to
purchase and sell energy and/or capacity and reserve transmission services on
behalf of EMC.

“PURPA” means the Public Utilities Regulatory Policies Act, 16 U.S.C. §2601 et
seq. (2005), as amended, including amendments included in the Energy Policy Act
of 2005.

“PURPA Resource” shall have the meaning specified in Section 5.4.1.

“Qualifying Facility” means a facility that meets the standards under 18 C.F.R.
Part 292, Subpart B, as amended from time to time.

“Reconciliation Allocation Factor” shall be equal to the Reconciliation
Allocation Number divided by the sum of the Reconciliation Allocation Numbers as
set forth in this Agreement and in the Duke-Blue Ridge Agreement, and
Duke-Rutherford Agreement.

“Reconciliation Allocation Number” shall be equal to 17.55.

“Replacement Energy” shall have the meaning specified in Section 4.2.4.

“Representatives” means, with respect to a Party, such Party’s officers,
directors, employees, advisors, and representatives and such Party’s Affiliates
and their respective officers, directors, employees, advisors, and
representatives.

 

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“Resolution Period” shall have the meaning specified in Section 2.3.2.2.2.

“Restricted Rentals” shall have the meaning specified in Section 15.7.

“RTO” means a regional transmission organization as that term is defined by
FERC.

“RUS” means the Rural Utilities Service of the United States Department of
Agriculture or any agency succeeding to the functions of RUS.

“Rutherford” means Rutherford Electric Membership Corporation.

“Rutherford Energy Credit Amount” means the Rutherford Energy Credit Amount as
determined in Section 7.1.5.9 of the Duke-Rutherford Agreement.

“Rutherford Energy Purchase Amount” means the Rutherford Energy Purchase Amount
as determined in Section 7.1.5.9 of the Duke-Rutherford Agreement.

“Scheduling Agent” means Duke acting as agent on behalf of EMC to perform
Scheduling Agent Services.

“Scheduling Agent Services” shall have the meaning specified in Article 8.

“Scheduling Services Agreement” means that certain Scheduling Services Agreement
by and between EMC and MSCG dated as of December 11, 2003, as amended.

“Scheduling Shortfall” shall have the meaning specified in Section 4.2.4.

“Scheduling Shortfall Amount” shall have the meaning specified in Section 4.2.4.

“Selection Date” shall have the meaning specified in Section 14.5.

“SERC” means the Southeastern Reliability Council.

“Service Area” means the area within a state or states within which an electric
utility provides retail electric service as determined under the applicable Laws
of such state or states.

“Service Obligation Resources” or “SORs” means those generation and purchased
capacity resources used by NCEMC to serve NCEMC’s members for resale to such
members’ retail customers, as such resources are specified in the Power Sales
Agreement Between Carolina Power & Light Company and North Carolina Electric
Membership Corporation dated as of November 2, 1998, as amended.

“Short Term Interest Expense” shall have the meaning specified in Section 15.7.

“S&P” or “Standard & Poor’s” means Standard & Poor’s Rating Group, a division of
McGraw Hill, Inc.

“Standard Arbitration Process” shall mean the arbitration process described in
Section 14.6.1.

 

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“Streamlined Arbitration Process” shall mean the arbitration process described
in Section 14.6.2.

“Submission” or “Submissions” shall have the meaning specified in
Section 14.6.1(5).

“Substitute Energy” shall have the meaning specified in Section 6.4.

“Substitute Energy Costs” shall have the meaning specified in Section 6.5.

“Summer Period” means the period (as of the Commencement Date May 1 –
September 30) designated as the summer period in the then most recent Duke
Annual Plan.

“System Average Pricing Option” shall have the meaning specified in
Section 7.2.6.1.

“System Average Pricing Option Notice” shall have the meaning specified in
Section 7.2.6.1.

“System Average Pricing Option Period” shall have the meaning specified in
Section 7.2.6.1.

“System Incremental Cost” means the incremental expense, measured in dollars per
megawatt hour ($/MWh), incurred by Duke to supply the next megawatt-hour (MWh)
of electric energy, after serving Duke’s Native Load customers’ requirements,
and all other opportunity sales, during any Hour in which electric energy is
purchased by EMC. System Incremental Cost shall include the replacement cost of
fuel, fuel handling expense, variable operating and maintenance expense,
emissions allowance replacement costs and other environmental compliance costs,
the cost of starting and operating any generating units (including costs
incurred due to minimum runtimes or loading levels), and other appropriate
electric energy-related costs, including electric energy purchases from others,
interchange power costs, and allocations of unit commitment costs, if any, all
as determined prior to the Hour.

“Term” means the term of this Agreement determined in accordance with
Section 2.2.3.

“Termination Assistance Service” shall have the meaning specified in
Section 8.10.

“Territorial Decremental Cost” means the decrease in Duke’s expenses, measured
in dollars per megawatt hour ($/MWh), in supplying Duke’s Native Load customers’
requirements due to Duke’s purchase of electric energy supplied by EMC.
Territorial Decremental Cost shall include the reduction in fuel expense, fuel
handling expense, variable operating and maintenance expense, emissions
allowance replacement costs and other environmental compliance costs, the cost
of starting and operating any generating units (including costs incurred due to
minimum runtimes or loading levels), and other appropriate energy-related costs,
including electric energy purchases from others, interchange power costs, and
allocations of unit commitment costs, if any, all as determined prior to the
Hour.

“Territorial Incremental Cost” means the incremental expense, measured in
dollars per megawatt hour ($/MWh), incurred by Duke to supply the next
megawatt-hour (MWh) of electric energy after serving Duke’s Native Load
customers’ requirements, during any Hour in which

 

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electric energy is purchased by EMC. Territorial Incremental Cost shall include
the replacement cost of fuel, fuel handling expense, variable operating and
maintenance expense, emissions allowance replacement costs and other
environmental compliance costs, the cost of starting and operating any
generating units (including costs incurred due to minimum runtimes or loading
levels), and other appropriate electric energy-related costs, including electric
energy purchases from others, interchange power costs, and allocations of unit
commitment costs, if any, all as determined prior to the Hour.

“Times Interest Earned Ratio” or “TIER” shall have the meaning specified in
Section 15.7.

“Transmission Provider” means any entity transmitting electric energy provided
by Duke under this Agreement to the EMC distribution system, and shall include
any ISO, RTO, ITC, or other future organization, agency or authority that has
been approved by FERC to serve as the Transmission Provider.

“Transmission Service” means the service provided by a Transmission Provider to
EMC pursuant to which electric energy provided under this Agreement is delivered
from the Delivery Point to EMC’s distribution system.

“Transmission System” means the electric transmission system owned or leased and
operated by Duke Transmission.

“Variable O&M Rate”, with respect to the period January 1, 2007, through
December 31, 2010, shall have the meaning specified in Section 7.2.6.4.2, and
with respect to the period beginning January 1, 2011, and continuing through the
termination of this Agreement, shall have the meaning specified in
Section 7.3.3.2.

“Weekday” means Monday, Tuesday, Wednesday, Thursday or Friday, excluding days
recognized as holidays by NERC.

“Weekend Day” means Saturday or Sunday, and all days recognized as holidays by
NERC.

“Winter Period” means the period (as of the Commencement Date October 1 –
April 30) designated as the winter period in the then most recent Duke Power
Annual Plan.

“WPSA” means the Wholesale Power Supply Agreement by and between North Carolina
Electric Membership Corporation and EMC dated as of January 1, 2004, as amended
from time to time. The Parties agree that, for the purposes of this Agreement,
the WPSA as in effect on the date hereof is attached to a letter from EMC to
Duke dated May 12, 2006.

“Year” means a calendar year.

1.2 Interpretation. In this Agreement, unless the context otherwise requires,
the singular shall include the plural and any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words “hereof,”
“herein,” “hereto” and “hereunder” and words of similar import when used in this
Agreement shall, unless otherwise expressly specified, refer to this

 

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Agreement as a whole and not to any particular provision of this Agreement.
Whenever the terms “include,” “includes,” or “including” are used herein in
connection with a listing of items included within a prior reference, such
listing shall be interpreted to be illustrative only, and shall not be
interpreted as a limitation on or exclusive listing of the items included within
the prior reference. Any reference in this Agreement to “Section,” “Article,”
“Schedule,” or “Attachment” shall be references to this Agreement unless
otherwise stated, and all such Sections, Articles, Schedules, and Attachments
shall be incorporated in this Agreement by reference. In the event that any
index or publication referenced in this Agreement ceases to be published, each
such reference shall be deemed a reference to a successor or alternate index or
publication reasonably agreed to by the Parties. Unless specified otherwise, a
reference to a given agreement or instrument, and all schedules and attachments
thereto, shall be a reference to that agreement or instrument as modified,
amended, supplemented and restated, and in effect from time to time. Unless
otherwise stated, any reference in this Agreement to any entity shall include
its permitted successors and assignees, and in the case of any Governmental
Authority, any person succeeding to its functions and capacities. All dollar
amounts referred to in this Agreement shall be in U.S. currency.

1.3 Construction. The Parties acknowledge that each was actively involved in the
negotiation and drafting of this Agreement and that no Law or rule of
construction shall be raised or used in which the provisions of this Agreement
shall be construed in favor of or against either Party because one is deemed to
be the author thereof.

Article 2

Term

 

2.1 Effectiveness.

2.1.1 Effectiveness of this Agreement. This Agreement shall become effective
upon execution and delivery by the Parties (“Effective Date”) provided that
obligations of the Parties to purchase and sell electric capacity and energy and
to provide Scheduling Agent Services shall commence, on the later to occur of
(a) September 1, 2006 or (b) the date upon which service commences in accordance
with Section 3.5.1.2 or Section 3.5.2.1 (the “Commencement Date”), provided that
the Commencement Date shall be the first Day of the Month.

2.1.2 Governmental Approval.

2.1.2.1 Duke shall take appropriate steps within five (5) Business Days from the
Effective Date to file this Agreement, together with supporting documents, with
FERC pursuant to the requirements of the Federal Power Act. Thereafter, Duke
shall diligently pursue acceptance of this Agreement as a rate schedule by FERC
and shall keep EMC informed of the progress in such regard. If requested by
Duke, EMC shall undertake Commercially Reasonable Efforts to cooperate with and
assist Duke in Duke’s efforts to make this Agreement effective and, upon Duke’s
request, shall make a timely submittal at FERC affirmatively supporting the
acceptance or approval of this Agreement by FERC without modification,
suspension, investigation, or other condition.

 

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2.1.2.2 EMC shall take appropriate steps within five (5) Business Days from the
Effective Date to submit this Agreement, together with supporting documents, to
the RUS. Thereafter, EMC shall diligently pursue approval of this Agreement by
the RUS and shall keep Duke informed of the progress in such regard. If
requested by EMC, Duke shall undertake Commercially Reasonable Efforts to
cooperate with and assist EMC in EMC’s efforts to obtain RUS approval of this
Agreement and, upon EMC’s request, shall make a timely submittal at RUS
affirmatively supporting the approval of this Agreement without modification or
condition.

 

2.2 Term.

2.2.1 Initial Term. The initial term of this Agreement shall commence on the
Effective Date and shall continue through 23:59:59, Eastern Time, on
December 31, 2021 (“Initial Term”) unless this Agreement is terminated prior to
December 31, 2021, in accordance with Sections 2.3.2, 3.5.2.2 or 3.5.3.

2.2.2 Extension. Unless terminated in accordance with Sections 2.3, 3.5.2.2 or
3.5.3, the Term of this Agreement shall automatically renew and extend for an
additional term of ten (10) Years (each such extension being an “Extension
Term”), so that unless either Party gives Notice of Termination in accordance
with Section 2.3, the Term of this Agreement shall extend through 23:59:59
Eastern Time on December 31, 2031. Likewise, unless either Party gives Notice of
Termination in accordance with Section 2.3, the Term of this Agreement shall
extend through 23:59:59 Eastern Time on December 31, 2041; and so forth
thereafter in ten (10) Year increments.

2.2.3 Term. The Initial Term of this Agreement together with each Extension
Term, if any, shall constitute the “Term” of this Agreement during which Duke
shall provide either FFR Supplemental Service or Partial Requirements Service,
as applicable, and Scheduling Agent Services to EMC.

 

2.3 Termination.

2.3.1 Termination of the Initial or an Extension Term. Either Party may
terminate this Agreement at the end of the Initial Term by giving Notice of
Termination to the other Party as specified in Section 2.3.3 at least three
(3) Years prior to the end of the Initial Term, so that such notice is given no
later than December 31, 2018. If the Term is extended beyond the Initial Term
pursuant to Section 2.2.2, either Party may terminate this Agreement at the end
of the then-current Extension Term by providing Notice of Termination to the
other Party as specified in Section 2.3.3 at least three (3) Years prior to the
end of such Extension Term, so that such notice is given no later than
December 31, 2028, for the Extension Term ending December 31, 2031, and so forth
thereafter.

2.3.2 Early Termination. Notwithstanding the provisions of Section 2.3.1, early
termination of this Agreement, including any Extension Term, shall only be
permitted in the six (6) circumstances set out in Sections 2.3.2.1, 2.3.2.2,
2.3.2.3, 2.3.2.4, 2.3.2.5 and 2.3.2.6.

2.3.2.1 Early Termination for an Event of Default. In the event that an Event of
Default occurs, and the Defaulting Party fails to cure such Event of Default
within the time

 

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period(s) specified in Section 16.5.3, the Non-Defaulting Party may terminate
this Agreement upon giving thirty (30) Days’ Notice of Termination, provided
that the termination date shall be the last Day of a Month.

2.3.2.2 Early Termination for a Material Adverse Ruling. In the event that a
Material Adverse Ruling occurs, the Party affected by such Material Adverse
Ruling may, within twenty (20) Days after such Material Adverse Ruling occurs,
give the other Party Notice of Termination, in accordance with Section 2.3.3, of
its intent to terminate this Agreement effective on 23:59:59 of the last Day of
the Month that is twenty-four (24) Months after the Month in which the Notice of
Termination is given. Such termination date shall be referred to herein as the
“Material Adverse Ruling Termination Date.” If a Party fails to give Notice of
Termination within twenty (20) Days after a Material Adverse Ruling occurs, it
shall have permanently waived its right to terminate this Agreement due to such
Material Adverse Ruling pursuant to this Section 2.3.2.2. Termination pursuant
to this Section 2.3.2.2 shall be subject to the following procedures:

(a) During the ninety (90) Days immediately following the giving of the Notice
of Termination, the Parties shall attempt to negotiate amendments to this
Agreement that would permit the Parties to restore the equivalent value of the
economic bargain contemplated by this Agreement absent the Material Adverse
Ruling. If the Parties reach agreement, such amendments will not become
effective unless, within one hundred eighty (180) Days of the date that the
Notice of Termination is given, the Parties have obtained the necessary
approvals of Governmental Authorities to enable the amendments to become
effective without change, condition or modification. In the event that the
Parties fail (i) to reach agreement on such amendments, or (ii) to obtain the
necessary approvals of Governmental Authorities, this Agreement shall terminate
on the Material Adverse Ruling Termination Date, subject to the provisions of
Section 2.3.2.2(b) and 2.3.2.2.2.

(b) In the event that the Parties are unable to reach agreement on the
amendments provided in Section 2.3.2.2(a), either Party may, no later than
ninety (90) Days after the date that the Notice of Termination is given (or, if
earlier, the date that the Parties mutually agree that they are unable to reach
agreement on such amendments), give notice to the other Party of its desire to
extend this Agreement for a period of up to twelve (12) Months beyond the
Material Adverse Ruling Termination Date. Such extension will be subject to the
Parties (i) having first reached agreement upon the rates, terms and conditions
of service for such twelve (12) Month period within one hundred twenty
(120) Days of the date that the Notice of Termination is given and executing
such agreement within such one hundred twenty (120) Day period, and (ii) having
received from Governmental Authorities the necessary approvals for such rates,
terms and conditions without change, condition or modification within one
hundred eighty (180) Days of the date that the Notice of Termination is given.

(c) A “Material Adverse Ruling” is an order or action by a Governmental
Authority or a change in Law that (i) either (A) modifies the rates, terms, or
conditions of this Agreement, (B) disallows the recovery from EMC of costs that
are included in this Agreement, (C) for retail ratemaking or regulatory
accounting and reporting purposes,

 

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disallows costs related to this Agreement, including any disallowance of Duke’s
costs related to investments in generating facilities or binding contracts to
purchase electric capacity and energy to provide service to EMC under this
Agreement, or (D) for retail ratemaking or regulatory accounting and reporting
purposes, assigns, allocates or makes pro forma adjustments with respect to the
revenues or costs related to this Agreement, and (ii) adversely affects the
relative economic position of either Party in a material way. For purposes of
this definition only,

(1) “material” for Duke means that the effect of the order or action by the
Governmental Authority or change in Law is reasonably projected to decrease
Duke’s net revenues under this Agreement, or, in the case of a disallowance,
assignment, allocation, or pro forma adjustment of revenues or costs for retail
ratemaking or regulatory accounting or reporting purposes, either (i) decrease
Duke’s net costs or increase Duke’s net revenues assigned or allocated to Duke’s
retail customer classes, or (ii) increase Duke’s net costs or decrease Duke’s
net revenues assigned or allocated to Duke’s wholesale customer class, by an
aggregate amount equal to five percent (5%) or more of the total revenues to be
paid by EMC to Duke under this Agreement over the then-remaining Term;

(2) “material” for EMC means that the effect of the order or action by the
Governmental Authority or change in Law is reasonably projected to increase
EMC’s net costs under this Agreement by an amount equal to five percent (5%) or
more of the total revenues to be paid by EMC to Duke under this Agreement over
the then-remaining Term;

(3) an increase in a Party’s net costs is the increase in the Party’s costs as a
result of the order or action by the Governmental Authority or change in Law,
less the increase (if any) in the Party’s revenues as a result of the Material
Adverse Ruling; and

(4) a decrease in a Party’s net revenues is the decrease in the Party’s revenues
as a result of the order or action by the Governmental Authority or change in
Law, less the decrease (if any) in the Party’s costs as a result of the Material
Adverse Ruling.

(d) The foregoing amounts shall be calculated on a nominal rather than an
inflation adjusted or present value basis. Without limitation of the foregoing,
EMC acknowledges that, for retail ratemaking and regulatory accounting and
reporting purposes, Duke shall calculate the costs of the electric capacity and
energy used to serve EMC under this Agreement on a system average cost basis
beginning January 1, 2011, or upon the commencement of the System Average
Pricing Option Period, if earlier. EMC agrees that if the amount of costs that
the NCUC or the PSCSC in effect assigns or allocates to, or requires Duke to
assign or allocate to, this Agreement for ratemaking or regulatory accounting
and reporting purposes exceeds Duke’s system average costs, such action shall
constitute a Material Adverse Ruling if the five percent (5%) materiality
standard set forth above is met.

 

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2.3.2.2.1 A change in Duke’s net revenues or EMC’s net costs that results from a
change in this Agreement that is permitted under Section 12.3, shall not
constitute a Material Adverse Ruling regardless of the impact of such change on
either Party’s net costs or net revenues.

2.3.2.2.2 In the event that either Party believes that a Material Adverse Ruling
has occurred, the Party affected by such Material Adverse Ruling shall provide
the other Party a good faith calculation together with information supporting
the calculation of the projected effect of the Material Adverse Ruling and
include such calculation and the cost information supporting the calculation
with the Notice of Termination. If the non-terminating Party notifies the other
Party, within twenty (20) Days following the date that such Notice of
Termination is given, of its good faith objection to the calculation or the cost
information supporting the calculation of the projected effect of the Material
Adverse Ruling, then the Parties shall, within thirty (30) Days following the
date that such Notice of Termination is given (the “Resolution Period”), attempt
to resolve their differences with respect to the calculation or the cost
information supporting such calculation. If, at the conclusion of the Resolution
Period, the Parties are not in agreement with respect to the calculation or cost
information supporting the calculation, then PriceWaterhouseCoopers, or such
other nationally recognized accounting firm that is not then the independent
auditor for either Party or any of its Affiliates or predecessors and is
selected by mutual agreement of the Parties (the “Neutral Auditors”), shall be
engaged within ten (10) Days after the expiration of the Resolution Period to
review the calculation and the cost information supporting the calculation and
to make an independent determination as to whether the Material Adverse Ruling
meets the materiality standard set forth in Section 2.3.2.2(c)(1) or (c)(2), as
applicable. If the Neutral Auditors require any additional information, records,
or internal analysis to make a determination as to whether the Material Adverse
Ruling meets the materiality standard set forth in Section 2.3.2.2(c)(1) or
(c)(2), as applicable, the Party in possession of such information, records or
internal analysis will provide it to the Neutral Auditors. Each Party agrees to
execute, if requested by the Neutral Auditors, a reasonable engagement letter,
including customary indemnities. All fees and expenses relating to the work to
be performed by the Neutral Auditors shall be borne one-half (1/2) by the
terminating Party and one-half (1/2) by the non-terminating Party. The Neutral
Auditors shall act as an arbitrator to determine, based upon its independent
review, whether the Material Adverse Ruling meets the materiality standard set
forth in Section 2.3.2.2(c)(1) or (c)(2), as applicable. The Neutral Auditors’
determination shall be made within thirty (30) Days of their selection, shall be
set forth in a written statement delivered to both Parties and shall be final,
binding and conclusive. If the Neutral Auditors’ determine the materiality
standard set forth in Section 2.3.2.2(c)(1) or (c)(2), as applicable, is not
met, the Notice of Termination shall be null and void. If the Neutral Auditors’
determine the materiality standard set forth in Section 2.3.2.2(c)(1) or (c)(2),
as applicable, is met, the Notice of Termination shall be effective in
accordance with its terms. The initiation of the dispute resolution process
described in this Section 2.3.2.2.2, shall not toll or otherwise delay running
of the twenty-four (24) Month time period set forth in the Notice of
Termination, unless the Neutral Auditors’ find that the materiality standard set
forth in Section 2.3.2.2(c)(1) or (c)(2), as applicable, is not met. The
procedure set forth in this Section 2.3.2.2.2 shall be the exclusive means for
the Parties to resolve any dispute as to whether a Material Adverse Ruling meets
the materiality standard set forth in Section 2.3.2.2(c)(1) or (c)(2). If a
Party gives a Notice of Termination based on its good faith

 

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contention of the occurrence of a Material Adverse Ruling that meets the
materiality standard set forth in Section 2.3.2.2(c)(1) or (c)(2), as
applicable, and the Neutral Auditors subsequently determine that such
materiality standard has not been met, such Party shall not be in default under
this Agreement solely because it gave such Notice of Termination.

2.3.2.3 Early Termination for Failure of Condition Precedent. This Agreement may
be terminated for failure of a condition precedent in accordance with
Section 3.5.2.2 or Section 3.5.3.

2.3.2.4 Early Termination Due to Implementation of Retail Competition. Upon the
date of enactment of a Law providing for implementation of retail electric
service competition on a comprehensive basis in the State of North Carolina, the
Parties shall enter into negotiations with the goal of reaching agreement on
amendments to this Agreement to provide for the continuation of the purchase and
sale of electric capacity and energy and the provision of Scheduling Agent
Services provided for in this Agreement after the commencement of such retail
electric service competition. If the Parties are not able to reach agreement by
the latter to occur of (i) the date that is ninety (90) Days after the date of
enactment of such Law or (ii) the date that is twenty-four (24) Months prior to
the commencement of such retail electric service competition in the State of
North Carolina, then this Agreement shall terminate automatically on the date
such retail electric service competition commences in the State of North
Carolina without the need for either Party to give notice.

2.3.2.5 Early Termination Due to Plant Calculation. In the event that the Annual
Percentage calculated in Attachment 7-9 is positive for two (2) consecutive
Years, and the absolute value of such percentage is greater than ten percent
(10%) then EMC may, within twenty (20) Days after the date in such second
(2nd) consecutive Year that Duke provides the calculation of the Annual
Percentage pursuant to Section 7.3.2.4, give Duke Notice of Termination to
terminate this Agreement effective on 23:59:59 of the last Day of Month that is
twenty-four (24) Months after the Month in which the Notice of Termination is
given. In the event that the Annual Percentage calculated in Attachment 7-9 is
negative for two (2) consecutive Years, and the absolute value of such
percentage is greater than ten percent (10%) for any two (2) consecutive Years,
then Duke may, within twenty (20) Days after the date in such second
(2nd) consecutive Year that Duke provides the calculation of the Annual
Percentage pursuant to Section 7.3.2.4, give EMC Notice of Termination to
terminate this Agreement effective on 23:59:59 of the last Day of Month that is
twenty-four (24) Months after the Month in which the Notice of Termination is
given. If a Party fails to give Notice of Termination within twenty (20) Days
after Duke provides the calculation of the Annual Percentage pursuant to
Section 7.3.2.4 for such second (2nd) consecutive Year, it shall have
permanently waived its right to terminate this Agreement under this
Section based on the Annual Percentage for such two (2) consecutive Years;
provided, that nothing in this Section 2.3.2.5 shall affect any Party’s
termination rights under Sections 2.3.2.1, 2.3.2.2, 2.3.2.3, 2.3.2.4 or 2.3.2.6.

2.3.2.6 Early Termination Due to Extended Force Majeure. If, as a result of an
event of Force Majeure, a Party is unable to meet a material obligation
hereunder for a period greater than ninety (90) Days, then the Non-Claiming
Party shall have the right to terminate this Agreement upon giving a Notice of
Termination within thirty (30) Days of the expiration of

 

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such ninety (90) Day period; provided, however, if the Claiming Party has used
and continues to use all Commercially Reasonable Efforts to remedy, cure or
mitigate the event of Force Majeure, then the Non-Claiming Party’s right to give
Notice of Termination shall be suspended for so long as the Claiming Party
continues to use Commercially Reasonable Efforts to remedy, cure or mitigate the
event of Force Majeure.

2.3.3 Form of Notice of Termination. Notice of Termination made pursuant to
Sections 2.2 or 2.3 shall be given in accordance with Section 16.22 and shall
state (i) the date of termination being effectuated, and (ii) the provision of
this Agreement under which termination is being effectuated and the basis for
the termination. Except as otherwise provided in this Section 2.3.3, the Notice
of Termination is effective when it is deemed given in accordance with
Section 16.22. Once the Notice of Termination is given to a Party, it shall not
be deemed amended, modified, or otherwise revoked for any reason (other than a
determination by the Neutral Auditors pursuant to Section 2.3.2.2.2 that the
materiality standard is not met) unless such amendment, modification, or
revocation is mutually agreed to by both Parties in writing or unless the
Parties reach agreement in accordance with Section 2.3.2.2(a). Upon receipt of
the Notice of Termination, the non-terminating Party shall acknowledge receipt
in writing sent in accordance with Section 16.22 within five (5) Business Days
of the receipt of the Notice of Termination. Acknowledgment of a Notice of
Termination is a courtesy and shall not influence the effectiveness of the
termination. Failure to utilize a method specified in Section 16.22 shall not
influence the effectiveness of the termination if the Notice of Termination is
actually received by the Chief Executive Officer of the non-terminating Party
within thirty (30) Days of the date of the Notice of Termination, in which case
the Notice of Termination shall be effective on the date that the Notice of
Termination is actually received by the Chief Executive Officer of the
non-terminating Party.

2.4 Absolute Nature of Termination. Both Parties hereby acknowledge, warrant,
and agree that TERMINATION OF THIS AGREEMENT FOR ANY REASON PROVIDED FOR AND
PERMITTED UNDER THIS AGREEMENT IS ABSOLUTE AND FOREVER EXTINGUISHES ANY AND ALL
OBLIGATIONS EXISTING UNDER THIS AGREEMENT FOR (A) DUKE TO PLAN OR PROCURE
RESOURCES TO SERVE EMC, OR TO PROVIDE ANY SERVICE OR PRODUCT TO EMC, (B) EMC TO
PURCHASE FROM AND PAY DUKE FOR ANY SERVICES OR PRODUCTS, (C) EMC TO PLAN OR
PROCURE RESOURCES TO SERVE DUKE, OR TO PROVIDE ANY SERVICE OR PRODUCT TO DUKE,
AND (D) DUKE TO PURCHASE FROM AND PAY EMC FOR ANY SERVICES OR PRODUCTS. Upon
termination of this Agreement in accordance with Section 2.2, 2.3, 3.5.2.2, or
3.5.3, each and every obligation of Duke to provide electric energy and capacity
and Scheduling Agent Services to EMC, and each and every right of EMC to
purchase electric energy and capacity and Scheduling Agent Services from Duke
shall cease as a matter of contract and neither Party shall claim or assert any
continuing right to continued performance, whether by “rollover,” as an
“evergreen” service, or in any other fashion based on this Agreement. By
entering into this Agreement, Duke does not commit, and shall not be deemed to
have committed, to plan its system to be able to provide any service to EMC
beyond the Term, and EMC agrees that it has no claim to any service beyond the
Term. EMC shall not at any time oppose any filing by Duke to cancel this
Agreement as a rate schedule under the Federal Power Act concurrently with, or
subsequently to, the termination of this Agreement as a contract in accordance
with Section 2.2, 2.3, 3.5.2.2, or 3.5.3. The Parties acknowledge, warrant, and
agree

 

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that it is the express intention of the Parties that no action by any
Governmental Authority may override the terms of this Section 2.4 of this
Agreement, and that should any Governmental Authority take any action purporting
to, or that might be claimed to, override the terms of this Section 2.4, either
directly or indirectly, EMC shall not make any claim or assert any right based
on or relying on such Governmental Authority action in any manner that conflicts
with or frustrates the terms of Section 2.4 of this Agreement.

Article 3

Conditions Precedent to the Commencement Date

3.1 Conditions Precedent to Duke’s Obligations. The obligation of Duke to
commence sales of electric energy and capacity and purchases of electric energy
and to provide Scheduling Agent Services under this Agreement is subject to the
satisfaction or waiver at least thirty (30) Days prior to the Commencement Date
(except that Duke may undertake certain preliminary activities in advance of the
Commencement Date) of the following conditions:

(a) The representations and warranties of EMC set forth in Sections 16.1.1 and
the covenants of EMC set forth in Section 16.1.2 shall be true and correct.

(b) FERC shall have issued an order accepting or approving this Agreement for
filing and permitting it to become effective as filed without modification,
suspension, investigation or other condition (including setting this Agreement,
or part thereof, for hearing) unacceptable to Duke.

(c) Neither the NCUC nor the PSCSC shall have issued an Adverse Ruling. For
purposes of this Section 3.1(c) only, “Adverse Ruling” means an order or ruling
issued by the NCUC or PSCSC (i) which disapproves or rejects this Agreement, or
(ii) generally applicable to electric utilities subject to the jurisdiction of
the NCUC or PSCSC, as applicable, in which the NCUC or PSCSC disapproves or
rejects the use of system average cost accounting for wholesale contracts.

(d) NCEMC shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent.

(e) EMC shall have given notice to MSCG terminating the Scheduling Services
Agreement.

(f) The systems and operational equipment required for Duke to provide and
receive service under this Agreement have been installed or otherwise put in
place, tested satisfactorily, and are fully functional.

(g) Transmission Provider shall have received notice and acknowledged EMC’s
designation of Duke as EMC’s Scheduling Agent and Purchasing - Selling Entity.

(h) MSCG shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent and Purchasing - Selling Entity.

 

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(i) The Parties shall have agreed upon procedures so that Duke may test whether
the EMC Demand Side Management Resource Programs meet the standards and
requirements specified for such programs under the rate schedule provisions or
riders for Duke’s Demand Side Resource Management Programs then-currently
approved and on file with the NCUC.

3.2 Conditions Precedent to EMC’s Obligations. The obligation of EMC to commence
purchases of electric energy and capacity and Scheduling Agent Services and
sales of electric energy under this Agreement is subject to the satisfaction or
waiver at least thirty (30) Days prior to the Commencement Date (except that EMC
may undertake certain preliminary activities in advance of the Commencement
Date) of the following conditions:

(a) The representations and warranties of Duke set forth in Section 16.1.1 and
the covenants of Duke set forth in Section 16.1.2 shall be true and correct.

(b) The RUS shall have approved this Agreement without modification, suspension,
investigation or other condition unacceptable to EMC.

(c) NCEMC shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent.

(d) The Transmission Provider shall have qualified this Agreement as a Network
Resource.

(e) The systems and operational equipment required for EMC to provide and
receive service under this Agreement have been installed or otherwise put in
place, tested satisfactorily, and are fully functional.

(f) Transmission Provider shall have received and acknowledged EMC’s designation
of Duke as Scheduling Agent and Purchasing - Selling Entity.

(g) MSCG shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent and Purchasing - Selling Entity.

(h) The Parties shall have agreed upon procedures so that Duke may test whether
the EMC Demand Side Management Resource Programs meet the standards and
requirements specified for such programs under the rate schedule provisions or
riders for Duke’s Demand Side Resource Management Programs then-currently
approved and on file with the NCUC.

(i) EMC and Carolina Power & Light Company d/b/a Progress Energy Carolinas, Inc.
(“CP&L”) shall have each executed and delivered an agreement under which CP&L is
obligated during the term to deliver electric capacity and energy and to provide
scheduling agent services to meet the demands imposed on EMC by its retail
customers that are located within EMC’s Service Area which constitute Non-Duke
Control Area Load and each of the conditions precedent contained in such an
agreement, whether applicable to EMC or CP&L, have either been satisfied or
waived by the respective party.

 

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3.3 Notice of Satisfaction of Conditions Precedent. Each Party shall use
Commercially Reasonable Efforts to satisfy its conditions precedent (as
described in Section 3.1 for Duke and Section 3.2 for EMC) on or before July 31,
2006, or as soon as reasonably practicable thereafter. EMC shall provide Duke
with written notice promptly following the satisfaction or waiver of all of the
conditions precedent to EMC’s obligations as described in Section 3.2. Duke
shall provide EMC with written notice promptly following the satisfaction or
waiver of all of the conditions precedent to Duke’s obligations as described in
Section 3.1, other than the condition precedent specified in Section 3.1(e). In
order for the condition precedent specified in Section 3.1(e) to be satisfied,
subsequent to the later of the date of EMC’s receipt of Duke’s notice or the
date of Duke’s receipt of EMC’s notice, EMC shall, no later than thirty
(30) Days prior to the Commencement Date, give notice to MSCG that the
Scheduling Services Agreement shall be terminated on the Commencement Date. A
condition precedent shall not be deemed to have been satisfied or waived prior
to the date that the notice provided for in this Section 3.3 is received by the
other Party.

3.4 Waiver of Condition Precedent.

3.4.1 Waiver by Duke. In the event that any of the foregoing conditions to the
obligations of Duke contained in Section 3.1 shall fail to be satisfied, Duke
may elect, in its sole discretion, to consummate this Agreement despite such
failure, in which event Duke shall be deemed to have waived any claim for
damages, losses or other relief arising from or in connection with such failure,
unless otherwise agreed in writing and executed by the Parties. Duke may not
waive the condition of approvals set forth in Section 3.1(b).

3.4.2 Waiver by EMC. In the event that any of the foregoing conditions to the
obligations of EMC contained in Section 3.2 shall fail to be satisfied, EMC may
elect, in its sole discretion, to consummate this Agreement despite such
failure, in which event EMC shall be deemed to have waived any claim for
damages, losses or other relief arising from or in connection with such failure,
unless otherwise agreed in writing and executed by the Parties. EMC may not
waive the condition of approvals set forth in Section 3.2(b).

3.4.3 Waiver by other Party. Any waiver by a Party of the other Party’s
conditions precedent shall be in writing, and shall identify the condition
precedent that such Party is waiving.

3.5 Commencement of Service; Failure of Condition Precedent.

3.5.1 Commencement of Service.

3.5.1.1 If all of the conditions precedent specified in Sections 3.1 and 3.2
have been satisfied or waived on or before July 31, 2006, then the Commencement
Date shall occur on September 1, 2006, without the need for either Party to
provide notice.

3.5.1.2 If all of the conditions precedent specified in Sections 3.1 and 3.2 are
satisfied or waived during the period between August 1, 2006, and November 30,
2006, and service under this Agreement has not commenced pursuant to
Section 3.5.2.1, then service under this Agreement shall commence upon the next
first Day of a Month which is at least thirty (30) Days after all such
conditions have been satisfied.

 

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3.5.2 EMC Options.

3.5.2.1 If all of the conditions precedent specified in Sections 3.1 and 3.2,
with the exception of the conditions precedent specified in Section 3.1(b)
and/or Section 3.2(b), have been satisfied or waived, then EMC may designate
September 1, 2006, October 1, 2006, or November 1, 2006 as the Commencement Date
by giving at least thirty (30) Days’ prior written notice to Duke.

3.5.2.2 If service has commenced pursuant to Section 3.5.2.1 prior to
November 30, 2006, and the condition precedent specified in Section 3.1(b)
and/or Section 3.2(b) has not been satisfied on or before November 30, 2006,
then except as provided in Section 3.5.2.3 this Agreement will terminate
automatically on December 31, 2006, without the need for either Party to give
Notice of Termination and neither Duke nor EMC shall have any obligation, duty
or liability to the other arising hereunder under any claim or theory
whatsoever.

3.5.2.3 If service has commenced pursuant to Section 3.5.2.1 prior to
November 30, 2006, and the condition precedent specified in Section 3.1(b)
and/or Section 3.2(b) has not been satisfied on or before November 30, 2006,
then EMC shall have the option of continuing to receive service hereunder beyond
December 31, 2006 until either August 31, 2007, February 28, 2008, or August 31,
2008. EMC may exercise such option by giving notice to Duke of its exercise of
such option no later than December 1, 2006. Such notice shall be referred to
herein as the “Option Notice”. EMC’s Option Notice shall specify whether EMC
elects to receive service hereunder until August 31, 2007, February 28, 2008, or
August 31, 2008. The period of such service that EMC elects pursuant to such
option (whether January 1, 2007 - August 31, 2007; January 1, 2007 –
February 28, 2008; or January 1, 2007 - August 31, 2008) shall be referred to
herein as the “Option Period”. In the event that EMC exercises its option under
this Section 3.5.2.3, then during the Option Period EMC shall be subject to the
charges and credits set forth in Sections 3.5.2.3.1, 3.5.2.3.2, 3.5.2.3.3,
3.5.2.3.4, and 3.5.2.3.5, as applicable, and in Section 7.1 in lieu of the
charges set forth in Section 7.2; provided, that during the Option Period the
demand charges set forth in Section 7.1.4 shall be modified as set forth in
Sections 3.5.2.3.1, 3.5.2.3.2, or 3.5.2.3.3, as applicable, depending upon the
Option Period selected by EMC. In the event that EMC exercises its option under
this Section 3.5.2.3, then notwithstanding the provisions of Section 3.5.2.2,
this Agreement will terminate automatically on the last day of the Option
Period, without the need for either Party to give Notice of Termination and
neither Duke nor EMC shall have any obligation, duty or liability to the other
arising hereunder under any claim or theory whatsoever for service beyond such
date. EMC’s exercise of such option shall not serve to modify any other
provision of the Agreement.

3.5.2.3.1 In the event that EMC exercises its option pursuant to
Section 3.5.2.3, and the Option Period is January 1, 2007 – August 31, 2007, EMC
shall pay to Duke, in addition to the other charges set forth in this Agreement,
the Base Annual Capacity Charge set forth in Section 3.5.2.3.4 and the Excess
Annual Capacity Charge set forth in Section 3.5.2.3.5. In such event, the Annual
Capacity Price under Section 3.5.2.3.4, Annual Capacity Quantity under
Section 3.5.2.3.4, and Excess Annual Capacity Price under Section 3.5.2.3.5
during the Option Period shall be as follows:

 

Annual Capacity Price

   $ 38.00/kW-Year

Annual Capacity Quantity

     23,000 kW

Excess Annual Capacity Price

   $ 45.60/kW-Year

 

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In addition, the Monthly Demand Rate under Section 7.1.4 during the Option
Period shall be $5.45/kW-Month, rather than the rate specified in Section 7.1.4,
and the Duke Monthly Energy Charge and EMC Monthly Energy Credit (and other
charges and credits under Sections 7.1.5.11, 7.1.5.12, and 7.1.5.13) during the
Option Period shall be as set forth in Section 7.1.5.

3.5.2.3.2 In the event that EMC exercises its option pursuant to
Section 3.5.2.3, and the Option Period is January 1, 2007 – February 28, 2008,
EMC shall pay to Duke, in addition to the other charges set forth in this
Agreement, the Base Annual Capacity Charge set forth in Section 3.5.2.3.4 and
the Excess Annual Capacity Charge set forth in Section 3.5.2.3.5. In such event,
the Annual Capacity Price under Section 3.5.2.3.4, Annual Capacity Quantity
under Section 3.5.2.3.4, and Excess Annual Capacity Price under
Section 3.5.2.3.5 during the Option Period shall be as follows:

 

January 1, 2007 - December 31, 2007:

  

Annual Capacity Price

   $ 38.00/kW-Year

Annual Capacity Quantity

     23,000 kW

Excess Annual Capacity Price

   $ 45.60/kW-Year

January 1, 2008 – February 28, 2008:

  

Annual Capacity Price

     0

Annual Capacity Quantity

     0

Excess Annual Capacity Price

     0

In addition, the Monthly Demand Rate under Section 7.1.4 during the Option
Period shall be $5.45/kW-Month during 2007 and $5.75/kW-Month during 2008,
rather than the rate specified in Section 7.1.4, and the Duke Monthly Energy
Charge and the EMC Monthly Energy Credit (and other charges and credits under
Sections 7.1.5.11, 7.1.5.12, and 7.1.5.13) during the Option Period shall be as
set forth in Section 7.1.5.

3.5.2.3.3 In the event that EMC exercises its option pursuant to
Section 3.5.2.3, and the Option Period is January 1, 2007 – August 31, 2008, EMC
shall pay to Duke, in addition to the other charges set forth in this Agreement,
the Base Annual Capacity Charge set forth in Section 3.5.2.3.4 and the Excess
Annual Capacity Charge set forth in Section 3.5.2.3.5. In such event, the Annual
Capacity Price under Section 3.5.2.3.4, Annual Capacity Quantity under
Section 3.5.2.3.4, and Excess Annual Capacity Price under 3.5.2.3.5 during the
Option Period shall be as follows:

 

January 1, 2007 - December 31, 2007:

  

Annual Capacity Price

   $ 38.00/kW-Year

Annual Capacity Quantity

     23,000 kW

Excess Annual Capacity Price

     $45.60/kW-Year

January 1, 2008 – August 31, 2008:

  

Annual Capacity Price

     $40.00/kW-Year

Annual Capacity Quantity

     24,000 kW

Excess Annual Capacity Price

   $ 48.00/kW-Year

 

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In addition, the Monthly Demand Rate under Section 7.1.4 during the Option
Period shall be $5.45/kW-Month during 2007 and $5.75/kW-Month during 2008,
rather than the rate specified in Section 7.1.4, and the Duke Monthly Energy
Charge and the EMC Monthly Energy Credit (and other charges and credits under
Sections 7.1.5.11, 7.1.5.12, and 7.1.5.13) during the Option Period shall be as
set forth in Section 7.1.5.

3.5.2.3.4 Base Annual Capacity Charge. The Base Annual Capacity Charge for a
Year shall be equal to the product of (i) the Annual Capacity Price for the Year
($/kW-Year) and (ii) the Annual Capacity Quantity for the Year (kW). The Base
Annual Capacity Charge for the Option Period shall be billed in accordance with
Article 13 in the July 2007 statement and the July 2008 statement, if
applicable.

3.5.2.3.5 Excess Annual Capacity Charge. The Excess Annual Capacity Charge for a
Year shall be equal to the product of (i) the Excess Annual Capacity Price for
the Year ($/kW-Year) and (ii) the Excess Annual Amount for the Year (kW). The
Excess Annual Amount for a Year shall be equal to the product of (i) the EMC
Excess Annual Capacity Quantity for the Year divided by the EMC Group Combined
Excess Annual Capacity Quantity for the Year and (ii) the EMC Group Excess
Annual Capacity Quantity for the Year. The Excess Annual Capacity Charge for the
Option Period shall be billed in accordance with Article 13 in the September
2007 and the September 2008 statements, if applicable, based on the actual Duke
billing data during July and August 2007 and July and August 2008, respectively.
A sample calculation is provided in Attachment 3-1.

3.5.2.3.5.1 EMC Excess Annual Capacity Quantity. The EMC Excess Annual Capacity
Quantity for a Year shall be equal to the EMC Coincident Peak Demand for the
Year minus EMC’s Base Obligation for the Hour in such Year in which the EMC
Coincident Peak Demand occurs, minus the Annual Capacity Quantity for the Year.
In no event shall the EMC Excess Annual Capacity Quantity be less than zero. The
EMC Coincident Peak Demand for a Year shall be equal to the EMC Hourly Demand
that is coincident with the maximum integrated sixty (60) minute Duke Schedule 1
Demands during July and August of the Year. The EMC Hourly Demand for an Hour
shall be equal to the integrated sixty (60) minute demand of EMC’s Native Load
during the Hour.

 

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3.5.2.3.5.2. EMC Group Combined Excess Annual Capacity Quantity. The EMC Group
Combined Excess Annual Capacity Quantity for a Year shall be equal to the sum of
(i) the EMC Excess Annual Capacity Quantity for the Year as determined in
Section 3.5.2.3.5.1 of this Agreement, (ii) the EMC Excess Annual Capacity
Quantity for the Year as determined in Section 3.5.2.3.5.1 of the Duke-Blue
Ridge Agreement, and (iii) the EMC Excess Annual Capacity Quantity for the Year
as determined in Section 3.5.2.3.5.1 of the Duke-Rutherford Agreement.

3.5.2.3.5.3 EMC Group Excess Annual Capacity Quantity. The EMC Group Excess
Annual Capacity Quantity for a Year shall be equal to the EMC Group Coincident
Peak Demand for the Year, minus the EMC Group’s Base Obligation for the Hour in
such Year in which the EMC Group Coincident Peak Demand occurs, minus the EMC
Group Annual Capacity Quantity; but in no event shall the EMC Group Excess
Annual Capacity Quantity be less than zero. The EMC Group Coincident Peak Demand
shall for a Year be equal to the sum of (i) the EMC Coincident Peak Demand for
the Year as determined in Section 3.5.2.3.5.1 of this Agreement, (ii) the EMC
Coincident Peak Demand for the Year as determined in Section 3.5.2.3.5.1 of the
Duke-Blue Ridge Agreement, and (iii) the EMC Coincident Peak Demand for the Year
as determined in Section 3.5.2.3.5.1 of the Duke-Rutherford Agreement.

3.5.2.4 Any Option Notice given by EMC pursuant to Section 3.5.2.3 shall be
given in accordance with Section 16.22 and shall state the Option Period
elected. The Option Notice is effective when it is deemed given in accordance
with Section 16.22. Once the Option Notice is given to Duke, it shall not be
deemed amended, modified, or otherwise revoked for any reason unless such
amendment, modification, or revocation is mutually agreed to by both Parties in
writing.

3.5.3 Termination for Failure of Condition Precedent.

3.5.3.1 Subject to the options granted to EMC under Section 3.5.2.1 and 3.5.2.3,
in the event that any of the conditions precedent set out in Sections 3.1(a)
through (i) and Sections 3.2(a) through (i) are not satisfied or waived on or
before November 30, 2006, then this Agreement will terminate automatically on
December 31, 2006, without the need for either Party to give Notice of
Termination and neither Duke nor EMC shall have any obligation, duty or
liability to the other arising hereunder under any claim or theory whatsoever.

 

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Article 4

Sale of Electric Capacity and Energy

4.1 Classification of Services Provided. During the period beginning on the
Commencement Date, and continuing through December 31, 2010, or any part thereof
in which this Agreement is in effect, Duke shall provide to EMC “FFR
Supplemental Service”, as described in Section 4.2. Beginning January 1, 2011,
throughout the remainder of the Term of this Agreement, Duke shall provide to
EMC “Partial Requirements Service”, as described in Section 4.3.

4.2 FFR Supplemental Service.

4.2.1 Character of FFR Supplemental Service. For each Hour during the period
beginning on the Commencement Date, and continuing through December 31, 2010, or
any part thereof in which this Agreement is in effect, Duke shall sell and
deliver, and EMC shall purchase and receive, all of the electric capacity and
energy that EMC requires to serve EMC’s Native Load in excess of EMC’s Base
Obligation for such Hour. For example, if EMC’s Native Load during an Hour is
800 MWs, and EMC’s Base Obligation for such Hour is 600 MWs, Duke shall supply
and deliver, and EMC shall purchase and receive, 200 MWs of FFR Supplemental
Service for such Hour. Duke shall supply and deliver FFR Supplemental Service in
a manner that is as firm as, and otherwise comparable with, the manner in which
Duke supplies Duke’s Native Load. Duke shall be responsible for maintaining the
generation reserves needed to meet its FFR Supplemental Service obligation.
Notwithstanding anything in this Agreement to the contrary, Duke shall have no
obligation to sell and deliver any electric capacity or energy to EMC that is
not required to serve EMC’s Native Load.

4.2.2 Amount of EMC’s Base Obligation. EMC’s Base Obligation for each Hour
beginning on the Commencement Date, and continuing through December 31, 2010, or
any part thereof in which this Agreement is in effect, shall be as set forth in
Attachment 4-1. Notwithstanding the preceding sentence, EMC’s Base Obligation
shall be subject to modification (a) during Light Load Periods in accordance
with the provisions of Attachment 4-2 or (b) in accordance with the provisions
of Section 5.1.4 and 5.1.5. The amounts set forth on Attachment 4-1 reflect MWs
delivered at a Delivery Point.

4.2.3 Scheduling To Meet EMC’s Base Obligation. In order to meet EMC’s Base
Obligation, (a) MSCG shall be responsible for scheduling to the Transmission
Provider electric energy under the PPA to serve EMC’s Native Load and (b) Duke,
acting as Scheduling Agent, shall be responsible for scheduling to the
Transmission Provider, in accordance with the provisions of Article 8, electric
energy to serve EMC’s Native Load from EMC’s entitlements to the resources
described in Section 5.1.3, 5.1.4 or 5.1.5. The total amount of electric energy
so scheduled to the Transmission Provider in any Hour to serve EMC’s Native Load
beginning on the Commencement Date, and continuing through December 31, 2010, or
any part thereof in which this Agreement is in effect, shall be the EMC
Scheduled Amount; provided that the EMC Scheduled Amount shall not exceed EMC’s
Base Obligation for any such Hour.

4.2.4 Scheduling Shortfall. For each Hour beginning on the Commencement Date,
and continuing through December 31, 2010, or any portion thereof in which this
Agreement is in

 

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effect, if, for any reason, including a Force Majeure as that term is defined
herein or a “force majeure”, “uncontrollable force”, or a similar term defined
in a third-party agreement, but not including Duke’s unexcused failure to comply
with the provisions of Article 8, the EMC Scheduled Amount is less than EMC’s
Base Obligation for any Hour, there shall be a “Scheduling Shortfall” in the
amount equal to the difference between EMC’s Base Obligation and the EMC
Scheduled Amount in such Hour (“Scheduling Shortfall Amount”). For any Hour that
Duke receives information or a notice pursuant to Section 8.4.8 that there will
be or has been a Scheduling Shortfall, Duke shall use Commercially Reasonable
Efforts to procure and supply electric energy in a quantity sufficient to supply
the Scheduling Shortfall Amount for such Hour (“Replacement Energy”). In the
event that, through the exercise of Commercially Reasonable Efforts, Duke
procures Replacement Energy from a third party for resale to EMC, EMC shall pay
Duke for the total cost incurred by Duke to purchase and deliver the Replacement
Energy. Duke’s curtailment of a Non-Firm Sale shall constitute a procurement of
Replacement Energy from a third party and the total cost incurred by Duke shall
be (i) the foregone sales price for the Non-Firm Sale curtailed and (ii) if
applicable, any charges imposed for changes to schedules for the sale of
electric energy. In the event that Duke supplies Replacement Energy from its own
resources, EMC shall pay Duke for such Replacement Energy an amount equal to one
hundred ten percent (110%) of Duke’s System Incremental Cost in supplying such
Replacement Energy. The total charges for Replacement Energy for a Month, as
determined by this Section 4.2.4, shall constitute the Monthly Replacement
Energy Charge.

4.2.4.1 It is expressly understood that Section 4.2.4 shall not be construed or
interpreted to (i) require Duke to curtail any Firm Sales in order to supply
Replacement Energy to EMC, (ii) to curtail any Non-Firm Sales except as set
forth in Section 4.2.6 in order to supply such Replacement Energy to EMC,
(iii) impose upon Duke any responsibility for providing Replacement Energy for a
Scheduling Shortfall that occurs after the Transmission Provider’s deadline for
scheduling transmission service required for the delivery of such Replacement
Energy, or (iv) affect in any way EMC’s rights and obligations under its Network
Integration Transmission Service Agreement.

4.2.4.2 In the event that there is or is expected to be a Scheduling Shortfall
in connection with (a) EMC or its Scheduling Agent having received notice (and
in the event EMC receives notice providing Duke with evidence of such notice)
of, or (b) pursuant to Section 8.4.8 Scheduling Agent having received notice of
either (i) the occurrence of a “force majeure” event under the PPA, as defined
in Section 4.2.4.3, or (ii) the temporary impairment of generating resources
underlying the WPSA or other resources to which EMC may have an entitlement
pursuant to Section 5.1.3, 5.1.4 or 5.1.5, such that all or a portion of EMC’s
entitlements to electric energy under such agreements are or will be temporarily
unavailable to EMC, then EMC may request Duke to sell electric capacity and
energy to EMC for the expected duration of such Scheduling Shortfall. In the
event that EMC makes such a request, Duke shall exercise Commercially Reasonable
Efforts to offer to supply electric capacity and energy to EMC under rates,
terms, and conditions that Duke determines to be commercially reasonable. If the
Parties reach agreement on such a sale, then Duke shall sell and deliver and EMC
shall purchase and receive the electric energy and such electric energy shall be
included in EMC Scheduled Amount.

 

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4.2.4.3 For purposes of Section 4.2.4.2, the term “force majeure” means an event
or circumstance that: (i) prevents the party claiming to be affected by it from
performing its obligations in whole or in part; (ii) is not within the
reasonable control of the claiming party, or the result of the negligence of the
claiming party, and (iii) by the exercise of due diligence, the claiming party
is unable to overcome in a commercially reasonable manner, and, without limiting
the scope of the definition, includes acts of God, or the public enemy, or
insurrection, riot, acts of terrorism, civil disturbance or disorder, strikes,
fire, earthquakes, floods, storms or other natural disasters, or actions or
restraints by court order or governmental authority or arbitration award (so
long as the claiming party has not sought or has opposed, to the extent
reasonable, such actions or restraints). It is expressly acknowledged that
transmission service interruptions or curtailments imposed by a transmission
provider in response to transmission capacity or availability shortages shall
not be “force majeure” events or circumstances for purposes of this
Section 4.2.4.3.

4.2.5 EMC PPA Obligation. EMC shall retain all of its rights and obligations
under the PPA, including the obligation to pay all costs incurred under the PPA.

4.2.6 EMC Obligation to Curtail Load. During any Hour in which there is a
Scheduling Shortfall, and either (i) Duke does not replace such electric energy
in accordance with Section 4.2.4 or (ii) EMC has not made, or does not have in
place, arrangements to replace such electric energy, EMC shall curtail an amount
of EMC’s Native Load equal to the Scheduling Shortfall Amount; provided,
however, Duke shall exercise Commercially Reasonable Efforts within the time
constraints that exist to first call upon any available EMC Demand Side
Management Resource Program that would not otherwise be called upon absent the
Scheduling Shortfall and then if necessary curtail Non-Firm Sales to the extent
of the Scheduling Shortfall before requiring EMC to curtail EMC’s Native Load
pursuant to this Section 4.2.6. Any such EMC Native Load that has been curtailed
shall be restored when the Scheduling Shortfall is no longer occurring or when
the Scheduling Shortfall has been replaced either by electric energy supplied
(a) by Duke in accordance with Section 4.2.4 or this Section 4.2.6 or (b) under
arrangements made by EMC with third parties.

4.3 Partial Requirements Service.

4.3.1 Character of Partial Requirements Service. For each Hour during the period
beginning on January 1, 2011, and continuing through the termination of this
Agreement, Duke shall sell and deliver, and EMC shall purchase and receive, all
of the electric capacity and energy that EMC requires to serve EMC’s Native Load
in excess of the EMC Contract Resources. Duke shall be responsible for
maintaining the generation reserves necessary to meet this obligation. Duke
shall supply Partial Requirements Service in a manner that is as firm as, and
otherwise comparable with, the manner in which Duke supplies Duke’s Native Load.
Notwithstanding anything in this Agreement to the contrary, Duke shall have no
obligation to sell and deliver any electric capacity or energy to EMC that is
not required to serve EMC’s Native Load.

4.3.2 Scheduling of EMC Contract Resources To Serve EMC Native Load. For each
Hour beginning on January 1, 2011, and continuing through the Term of this
Agreement, EMC’s contractual entitlement to electric energy from the Dispatched
Combined Cycle Resources and from the Baseload Resources shall be scheduled in
accordance with the provisions of Sections 4.3.3 and 4.3.4, respectively.

 

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4.3.3 Scheduling of the Combined Cycle Resources. Duke may schedule, in
accordance with Attachment 4-3 and Article 8, each of the Combined Cycle
Resources pursuant to Duke’s economic dispatch as necessary to serve Duke’s
total electric energy obligations. Duke shall make no adverse distinction
against the Combined Cycle Resources in determining the dispatch order of Duke’s
Generation System and the Combined Cycle Resources. The Combined Cycle Resources
that Duke schedules pursuant to economic dispatch shall be referred to as the
“Dispatched Combined Cycle Resources”. Except as provided in Section 4.3.3.1 and
Section 4.3.3.2, EMC shall be solely responsible for all costs associated with
the Combined Cycle Resources.

4.3.3.1 Duke shall not be obligated to pay for any costs that EMC incurs as a
result of Duke’s dispatch of the Combined Cycle Resources to the extent that
Duke’s dispatch of such Combined Cycle Resources is for the purpose of serving
Duke’s Native Load and, during any Year, Duke’s dispatch of a Combined Cycle
Resource for that purpose does not exceed an Annual Capacity Factor of twenty
percent (20%). In the event and at such time during a Year that Duke’s dispatch
of a Combined Cycle Resource to serve Duke’s Native Load exceeds an Annual
Capacity Factor of twenty percent (20%), Duke shall pay EMC, in the manner and
time provided for in Article 13, the additional Energy Cost that EMC incurs as a
result of Duke’s dispatch of such Combined Cycle Resource for the remainder of
the Year. For example, if a Dispatched Combined Cycle Resource has a generating
capacity of one hundred (100) MWs during a Year and, as of 11:59:59 p.m. on
November 30 of such Year, Duke has dispatched such resource for 175,200 MWhs for
the purpose of serving Duke’s Native Load, Duke shall reimburse EMC for the
Energy Costs that EMC incurs in December of such Year as a result of Duke’s
dispatch of such Dispatched Combined Cycle Resource. For the purpose of this
Section 4.3.3.1, “Annual Capacity Factor” means the total amount of electric
energy generated by a Dispatched Combined Cycle Resource for the purpose of
serving Duke’s Native Load during a Year divided by the product of (a) the total
generating capacity of such Dispatched Combined Cycle Resource and (b) 8,784
(during a leap year) or 8,760 (during a Year other than a leap year), multiplied
by one hundred percent (100%).

4.3.3.2 In the event that Duke’s dispatch of one or more of the Combined Cycle
Resources is for any purpose other than to serve Duke’s Native Load, Duke shall
pay EMC, in the manner and time provided for in Article 13, the additional
Energy Cost that EMC incurs as a result of Duke’s dispatch of such Combined
Cycle Resource(s).

4.3.3.3 For purposes of Sections 4.3.3.1 and 4.3.3.2, “Energy Cost” means, with
respect to any Dispatched Combined Cycle Resource, all variable costs incurred
by EMC that are associated with the production of electric energy under the
WPSA, including the cost of fuel, start charges, and any other variable charges
incurred by EMC under the WPSA in connection with the electric energy dispatched
by Duke from such Combined Cycle Resource regardless of NCEMC’s actual
generating cost or NCEMC’s contractual source of the electric energy.

 

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4.3.4 Scheduling of Baseload Resources. Duke shall schedule, in accordance with
Article 8, all of the Baseload Resources to the full extent that EMC’s
entitlement to such resources are available to EMC and such electric energy
shall be used to serve EMC’s Native Load. EMC shall be solely responsible for
all costs associated with the Baseload Resources. The Baseload Resources that
Duke schedules pursuant to this Section 4.3.4 shall be referred to as
“Dispatched Baseload Resources”.

4.4 Excepted Load. Notwithstanding anything to the contrary herein, Duke shall
have no obligation to supply electric capacity or energy required by EMC to
serve Excepted Load. Excepted Load shall consist of EMC load that is either
(a) Non-Conforming Load or (b) Non-Duke Control Area Load. Non-Conforming Load
shall consist of (i) EMC load resulting from the merger of EMC with another
electric membership corporation or other entity (except to the extent such load
was, at the time of the merger, already being served by Duke under an agreement
substantially similar to this Agreement), and (ii) EMC wholesale load.
Non-Conforming Load shall also consist of discrete EMC load (a) to which
electric service from EMC shall have commenced after the Effective Date,
(b) that has a projected peak demand in excess of twenty-five (25) MW for the
Year in which electric service from the EMC commences, and (c) which is
projected to change within a one-minute period by a significant quantity on a
recurring basis due to the nature of the retail customer’s operations (e.g.,
without limitation, an arc furnace).

4.5 Good Title. Electric energy that is delivered by Duke to EMC shall be free
and clear of all liens, Claims, and encumbrances at the Delivery Points, where
title to electric energy provided by Duke hereunder shall transfer to EMC.
Electric energy that is delivered by EMC to Duke shall be free and clear of all
liens, Claims, and encumbrances at the point where title to the electric energy
is transferred to Duke.

4.6 Power Quality. All electric energy provided hereunder at the point of
delivery shall be three (3) phase, sixty (60) hertz, and at system nominal
voltages.

 

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Article 5

EMC Resources

5.1 EMC Contract Resources (Commencement Date - December 31, 2010).

5.1.1 Identification of Resources. Except as provided in Section 5.4.1, EMC’s
Contract Resources during the period commencing on the Commencement Date, and
continuing through December 31, 2010, or any part thereof in which this
Agreement is in effect, shall consist of EMC’s entitlement to electric capacity
and energy under the PPA and such additional generation or purchased power
resources or entitlements as EMC may acquire pursuant to Sections 5.1.3, 5.1.4
and 5.1.5. The FFR Resource is listed in Attachment 4-1. Except as provided in
this Section 5.1.1, EMC shall not, without first obtaining Duke’s prior written
consent, enter into any other contracts for, or acquire any ownership interest
in or contractual entitlement to, any additional electric generating resources
or electric capacity or energy under which electric capacity and energy would be
used to serve EMC’s Native Load during the Term.

5.1.2 Changes to FFR Resources. During the period commencing on the Commencement
Date, and continuing through December 31, 2010, or any part thereof in which
this Agreement is in effect, EMC shall not: (a) take any action that would
materially affect the quantity or quality of MSCG’s service obligations under
the PPA without first obtaining Duke’s prior written consent, or (b) agree to
any modification to provisions of the PPA or the WPSA that would increase or
decrease EMC’s entitlement to electric capacity or energy under such agreements
and for which EMC’s consent is required (except as provided in Section 5.1.4)
without first obtaining Duke’s consent to such modification.

5.1.3 Resource Impairment. In the event that all or a portion of the FFR
Resource, or any other EMC Contract Resource, is terminated or becomes
permanently impaired, EMC shall acquire, at EMC’s expense, a substitute resource
(backed by reserves in an amount equal to that required under Duke’s Generation
Planning Practices) that is of substantially equivalent size and comparable
reliability to the EMC Contract Resource, or portion thereof, that such
substitute is replacing.

5.1.4 New Catawba Resource. In the event that NCEMC acquires all or part of
Saluda River Electric Cooperative’s existing ownership interest in the Catawba
Nuclear Station, and sells, allocates or transfers a percentage of that
entitlement with such entitlement being made available throughout the Year to
EMC (through a modification of the WPSA or pursuant to a new contract), EMC’s
Base Obligation shall be increased by an amount equal to the amount of the
entitlement so acquired by EMC. Upon Duke’s request, EMC shall provide evidence
reasonably satisfactory to Duke demonstrating that such entitlement in the
Catawba Nuclear Station is backed by sufficient and reliable electric system
generating reserves. Duke shall limit such requests to one (1) request per Year;
provided, that if Duke reasonably believes that the sufficiency or reliability
of the electric system generating reserves backing EMC’s entitlement in the
Catawba Nuclear Station may have changed since Duke’s last such request, this
limitation shall not apply. In the event that EMC fails to demonstrate that its
entitlement in the Catawba Nuclear Station is backed by sufficient and reliable
generating reserves, Duke shall supply, and EMC shall purchase, such reserves in
an amount equal to that required under Duke’s Generation

 

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Planning Practices. The Monthly charge for such reserves shall be equal to the
product of the amount of reserves (as determined under the prior sentence)
supplied by Duke to EMC at the then-applicable Monthly Demand Charge. Duke’s
provision and EMC’s purchase of such reserves shall not affect the determination
of EMC’s Base Obligation. This Monthly charge shall be billed by Duke in
accordance with the provisions of Article 13.

5.1.4.1 In the event that NCEMC purchases electric capacity and energy from Duke
in lieu of NCEMC’s acquisition of all or a part of Saluda River Electric
Cooperative’s existing ownership interest in the Catawba Nuclear Station as
provided in Section 5.1.4, and NCEMC sells, allocates or transfers a portion of
such electric capacity and energy to EMC (through a modification of the WPSA or
pursuant to a new contract), EMC’s Base Obligation shall be increased by an
amount equal to the amount of the electric capacity and energy so acquired by
EMC.

5.1.5 Non-Consent Modification of EMC’s Contract Resources. In the event that
EMC’s entitlements to electric capacity and energy are reduced in accordance
with Section 2.9(b) or Section 2.9(c) of the WPSA, the amount of the EMC’s Base
Obligation shall not be affected and the provisions of Section 4.2.4.2 shall
apply, except that if the Parties are unable to reach agreement as to the rates,
terms and conditions under which Duke would sell electric capacity and energy to
EMC, the provisions of Section 5.1.3 shall apply. EMC shall provide written
notice to Duke as soon as reasonably practicable after EMC becomes aware of any
modification to EMC’s entitlement to electric capacity and energy under the WPSA
pursuant to this Section 5.1.5. In the event that EMC’s entitlements to electric
capacity and energy are increased in accordance with Section 2.9(b) or
Section 2.9(c) of the WPSA, then, prior to the effective date of such increase,
EMC may elect either to (a) increase EMC’s Base Obligation by the same amount
and to the same extent as EMC’s entitlements to electric capacity and energy are
increased, or (b) make arrangements for the sale of EMC’s entitlements to such
electric capacity and energy to a third party or to Duke. If EMC fails to
complete the arrangements described in (b) of the preceding sentence by the
effective date of the increase in entitlements, then, as of the effective date
of the increase in entitlements, the EMC’s Base Obligation automatically will be
increased as described in (a) of the preceding sentence.

5.2 EMC Contract Resources (January 1, 2011 - Termination of Agreement).

5.2.1 Identification of Contract Resources. Except as provided in Section 5.4.1,
EMC’s Contract Resources during the period January 1, 2011, through the
termination of this Agreement shall consist of EMC’s entitlements to electric
capacity and energy under the contracts listed in Attachment 4-3 and such
additional generation or purchased power resources or entitlements as EMC may
acquire pursuant to Sections 5.2.3, 5.2.4, and 5.2.5. EMC’s entitlements under
the contracts that are listed in Attachment 4-3 shall be referred to as the
Partial Requirements Resources. Partial Requirements Resources consist of two
(2) categories of entitlements: Baseload Resources and Combined Cycle Resources.
The amount and the material cost and operational terms and conditions of the
Baseload Resources and Combined Cycle Resources shall be as set forth in
Attachment 4-3, subject to modification in accordance with Sections 5.2.3 and
5.2.4. Except as provided in this Section 5.2.1, EMC shall not, without first
obtaining

 

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Duke’s prior written consent, enter into any other contracts for, or acquire any
ownership interest in or contractual entitlement to, any additional electric
generating resources or electric capacity or energy under which electric
capacity and energy would be used to serve EMC’s Native Load during the Term.

5.2.1.1 Extension of WPSA. Consistent with the provisions of Section 5.2.2, EMC
shall have the right, without the prior consent of Duke, to extend the term of
the WPSA under substantially the same terms and conditions as exist at the time
that EMC seeks to extend the term of the WPSA. If EMC extends the term of the
WPSA in accordance with this Section 5.2.1.1, the EMC Contract Resources listed
in Attachment 4-3 shall be deemed to be changed accordingly.

5.2.2 Changes To Partial Requirements Resources. Commencing January 1, 2011,
through the termination of this Agreement, EMC shall not (a) take any action
that would materially affect the quantity or quality of EMC’s entitlement to
electric capacity and energy from the Partial Requirements Resources without
first obtaining Duke’s prior written consent, or (b) agree to any modification
to provisions of the WPSA that would increase or decrease EMC’s entitlement to
electric capacity or energy under such agreement and for which EMC’s consent is
required (except as provided in Section 5.2.4) without first obtaining Duke’s
consent to such modification.

5.2.2.1 Modifications Effective After Termination. Notwithstanding the
provisions of Section 5.2.2, EMC shall be permitted to agree to any resource
modification under the WPSA without obtaining Duke’s consent to the extent that
such resource modification will become effective after the Term; provided, that
if such resource modification will become effective prior to the end of the
Term, EMC’s Partial Requirements Resources and Duke’s obligation to provide
Partial Requirements Service shall not be modified prior to the date that this
Agreement is terminated unless Duke consents to such modification.

5.2.2.2 Sufficiency of Reserves. Upon Duke’s request, EMC shall provide evidence
reasonably satisfactory to Duke demonstrating that each of EMC’s Partial
Requirements Resources is backed by sufficient and reliable electric system
generating reserves. Duke shall limit such requests to one (1) request per Year
with respect to any Partial Requirements Resource; provided, that if Duke
reasonably believes that the sufficiency or reliability of the electric system
reserves backing any Partial Requirements Resource may have changed since Duke’s
last such request, this limitation shall not apply with respect to that Partial
Requirements Resource. In the event that EMC fails to demonstrate that its
entitlement in a Partial Requirements Resource is backed by sufficient and
reliable generating reserves, Duke shall supply, and EMC shall purchase, such
reserves in an amount equal to that required under Duke’s Generation Planning
Practices. The Monthly charge for such reserves shall be equal to the product of
the amount of reserves (as determined under the prior sentence) supplied by Duke
to EMC and the then applicable Monthly Demand Charge. This Monthly charge shall
be billed by Duke in accordance with the provisions of Article 13. Duke’s
provision and EMC’s purchase of such reserves shall not affect the determination
of the amount of Partial Requirements Resources, Baseload Resources or Combined
Cycle Resources. EMC shall provide written notice to Duke as soon as reasonably
practicable after EMC becomes aware of a material change to the seller’s service
obligations under the contracts listed in Attachment 4-3; provided, that such
notice shall be for information purposes only, and shall not affect any other
obligations of either Party under this Agreement.

 

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5.2.3 Non-Consent Partial Requirements Resource Modifications. In the event that
EMC’s entitlements are modified pursuant to Section 2.9(b) or Section 2.9(c) of
the WPSA, EMC’s Partial Requirements Resources shall be modified in the same
amount and to the same extent. To the extent that a Partial Requirements
Resource is modified pursuant to this Section 5.2.3, and the modification
changes EMC’s entitlement in a resource listed as a Baseload Resource in
Attachment 4-3, the amount of such Baseload Resource, as listed in Attachment
4-3, shall be deemed to be changed accordingly. EMC shall provide written notice
to Duke as soon as reasonably practicable after EMC becomes aware of any
modification to EMC’s entitlement to electric capacity and energy under the WPSA
pursuant to this Section 5.2.3. To the extent that a Partial Requirements
Resource is modified pursuant to this Section 5.2.3, and the modification
changes EMC’s entitlement in a resource listed as a Combined Cycle Resource in
Attachment 4-3, the amount of such Combined Cycle Resource, as listed in
Attachment 4-3, shall be deemed to be changed accordingly.

5.2.4 New Catawba Resource. In the event that NCEMC acquires all or part of
Saluda River Electric Cooperative’s existing ownership interest in the Catawba
Nuclear Station, and sells, allocates or transfers a percentage of that
entitlement with such entitlement being made available throughout the Year to
EMC (through modification of the WPSA or pursuant to a new contract), the
entitlement or resource so acquired by EMC shall constitute an additional
Partial Requirements Resource, and shall be deemed to be an additional Baseload
Resource. Upon Duke’s request, EMC shall provide evidence reasonably
satisfactory to Duke demonstrating that such entitlement in the Catawba Nuclear
Station is backed by sufficient and reliable electric system generating
reserves. Duke shall limit such requests to one (1) request per year; provided,
that if Duke reasonably believes that the sufficiency or reliability of the
electric system generating reserves backing EMC’s entitlement in the Catawba
Nuclear Station may have changed since Duke’s last such request, this limitation
shall not apply. In the event that EMC fails to demonstrate that its entitlement
in the Catawba Nuclear Station is backed by sufficient and reliable generating
reserves, Duke shall supply, and EMC shall purchase, such reserves in an amount
equal to that required under Duke’s Generation Planning Practices. The Monthly
charge for such reserves shall be equal to the product of the amount of reserves
(as determined under the prior sentence) supplied by Duke to EMC and the
then-applicable Monthly Demand Charge. This Monthly charge shall be billed by
Duke in accordance with the provisions of Article 13. Duke’s provision and EMC’s
purchase of such reserves shall not affect the determination of the amount of
Partial Requirements Resources, Baseload Resources or Combined Cycle Resources.

5.2.4.1 In the event that NCEMC purchases electric capacity and energy from Duke
in lieu of NCEMC’s acquisition of all or a part of Saluda River Electric
Cooperative’s existing ownership interest in the Catawba Nuclear Station as
provided in Section 5.2.4, and NCEMC sells, allocates or transfers a portion of
such capacity and energy to EMC (through a modification of the WPSA or pursuant
to a new contract), EMC’s Baseload Resources shall be increased by an amount
equal to the amount of the electric capacity and energy so acquired by EMC.

 

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5.2.5 Resource Impairment. In the event that all or a portion of an EMC Contract
Resource is terminated or becomes permanently impaired, EMC shall acquire, at
EMC’s cost, a substitute resource (backed by reserves in an amount equal to that
required under Duke’s Generation Planning Practices) that is of substantially
equivalent size and comparable reliability to the EMC Contract Resource, or
portion thereof, that such substitute resource is replacing, and that Duke
reasonably agrees is sufficiently reliable. EMC’s acquisition of such substitute
resource shall not affect the determination of the amount of Partial
Requirements Resources, Baseload Resources or Combined Cycle Resources.

5.3 No Duke Obligation for Customer Resources. Unless otherwise explicitly
provided in this Agreement, nothing herein shall be interpreted or construed as
imposing upon Duke any obligations or liabilities, or for transferring to Duke
any EMC obligations or liabilities, under or otherwise pertaining to any EMC
Contract Resource, nor shall anything in this Agreement be interpreted or
construed as creating or implying any contractual or other relationship between
Duke and any other party as to a EMC Contract Resource.

5.4 New Customer Resources. Except as provided in Section 5.4.1, Duke shall have
no obligation to amend this Agreement and EMC shall not make an application to
FERC requesting that FERC require that any amendment be made to this Agreement,
to accommodate any contractual entitlement to and/or ownership interest in or
pertaining to any new electric capacity and/or energy resource that EMC may
obtain after the Effective Date.

5.4.1 PURPA Resources. Nothing herein shall limit EMC’s right to purchase
electric capacity and energy from a Qualifying Facility or other renewable
resources pursuant to PURPA (“PURPA Resource”). If, during the Term, EMC
purchases electric capacity and energy from a PURPA Resource with a nameplate
capacity equal to or greater than one (1) MW, then, for each Month during the
period of such purchase: (i) the average hourly integrated electric energy
delivered to EMC by such PURPA Resource during the Hours used for determination
of the EMC Monthly Demand Quantity determined in accordance with Section 7.1.4.1
or 7.2.4.1 as applicable or used for determination of the Monthly Billing Demand
determined in accordance with Section 7.2.6.3.2 or Section 7.3.2.2 increased for
losses between the point of measurement of EMC’s Native Load and the Duke
generation level, shall be added to the EMC Monthly Demand Quantity determined
in accordance with Section 7.1.4.1 or 7.2.4.1 as applicable or to the Monthly
Billing Demand determined in accordance with Section 7.2.6.3.2 or
Section 7.3.2.2 for such Month, as applicable; (ii) for purposes of calculating
the electric energy charges under Sections 7.1.5, 7.2.5, 7.2.6.4 and 7.3.3, as
applicable, the amount of electric energy provided to EMC by such PURPA Resource
during an Hour, increased for losses between the point of measurement of EMC’s
Native Load and the Duke generation level, shall be added to EMC’s Native Load
and to the EMC Group Native Load for such Hour; and (iii) Duke shall credit EMC,
on a Monthly basis, an amount equal to the electric capacity and energy credits
to which EMC would be entitled as set forth in Duke’s retail electric tariff on
file with the NCUC, Schedule PP-H or Schedule PP-N (as applicable),
Interconnected to Distribution System or Transmission System (as applicable), or
its successor tariff, if the capacity and electric energy provided to EMC by
such PURPA Resource were provided to Duke pursuant to and in accordance with
such schedules. The interconnection to Duke’s (rather than the EMC’s)
Distribution System or Transmission System, as those terms are defined in the
schedules, will determine whether the Distribution System or Transmission System
rates apply. EMC will coordinate with Duke to

 

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determine the proper application of these schedules. If Schedule PP-H or
Schedule PP-N do not apply to the PURPA Resource, then Duke shall credit EMC, on
a Monthly basis, an amount equal to the electric capacity and energy credits to
which EMC would be entitled under PURPA if the electric capacity and electric
energy provided to EMC by such PURPA Resource were provided to Duke pursuant to
PURPA. EMC’s purchase of the electric capacity and energy from a PURPA Resource
shall not affect the determination of the Annual Capacity Quantity determined in
accordance with Sections 3.5.2.3.1, 3.5.2.3.2 or 3.5.2.3.3, as applicable.

Article 6

Priority of Service

6.1 Interruption of FFR Supplemental Service and Partial Requirements Service.
FFR Supplemental Service and Partial Requirements Service shall have an
interruption priority equivalent to Duke’s Native Load. It is expressly
understood and agreed that, except for Duke’s failure to comply with Section 6.2
or as provided in Section 6.4, Duke shall not be liable to EMC for damages
resulting from any such interruptions or impairment of FFR Supplemental Service
or Partial Requirements Service. Duke shall use Commercially Reasonable Efforts
to notify EMC by telephone of any scheduled interruption or scheduled impairment
of service hereunder and shall use Commercially Reasonable Efforts to confirm
such notice by facsimile, electronic mail, or letter on the same date such
notice was given. Duke shall notify EMC by telephone of any unscheduled
interruption or impairment of service hereunder as soon as reasonably
practicable under the circumstances resulting in such unscheduled interruption
or impairment of service. Duke shall use Commercially Reasonable Efforts to
remove all causes of such interrupted or impaired service hereunder.

6.2 Curtailments of Load. Except as provided in Section 4.2.6, EMC’s Native Load
shall be subject to curtailment only in accordance with this Section 6.2. In the
event that Duke curtails Duke Native Load for any reason, including Force
Majeure, EMC shall curtail its load as directed by Duke. Except as provided in
Section 4.2.6, Duke shall not adversely distinguish against EMC’s Native Load in
curtailing Duke’s Native Load and directing EMC to curtail EMC’s Native Load;
provided, however, that Duke has sole responsibility to design all curtailments,
and may order any manner of curtailment that Duke believes is appropriate so
long as EMC’s Native Load and Duke’s Native Load present in the electrical area
being curtailed are curtailed on a non-discriminatory basis. In permitting EMC
to restore EMC’s Native Load and restoring Duke’s Native Load that was
curtailed, Duke shall not adversely distinguish against EMC’s Native Load,
except as provided in Section 4.2.6. The load curtailment and restoration
provisions set forth in this Section 6.2 are in addition to, and without
limitation of, the load curtailment and restoration provisions set forth in
Section 4.2.6.

6.3 Emergency Load Curtailment Program. EMC agrees to implement an emergency
load curtailment program for the curtailment of EMC’s Native Load in the event a
load curtailment order is made by Duke. EMC shall comply with its obligation to
implement and maintain an emergency load curtailment program and to curtail
EMC’s Native Load in the manner specified by Section 6.2.

 

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6.4 Substitute Energy. In the event that Duke fails to deliver a sufficient
quantity of electric energy to meet its obligations to provide FFR Supplemental
Service or Partial Requirements Service, as the case may be, and Duke’s failure
to deliver such electric energy is not pursuant to a curtailment permitted under
Section 4.2.6 or 6.2 of this Agreement, or is otherwise excused under this
Agreement, Duke shall pay to EMC an amount equal to EMC’s Cover Costs, if any,
incurred for the electric energy that EMC obtained to replace such electric
energy (“Substitute Energy”) Duke failed to supply. EMC’s Cover Costs shall be
equal to Substitute Energy Costs incurred by EMC for the Substitute Energy minus
the costs that EMC would have incurred had Duke supplied the electric energy to
EMC. EMC shall bill its Cover Costs to Duke in accordance with the provisions of
Article 13. In the event that EMC incurs Cover Costs for Substitute Energy over
a period that extends past the Month in which Duke’s failure to deliver electric
energy occurs, then Duke shall pay the Cover Costs incurred in the following
Month(s) in accordance with the billing and payment provisions of Article 13.

6.5 Substitute Energy Costs. Substitute Energy Costs shall be equal to (i) in
the case in which EMC contracts with an energy supplier to provide Substitute
Energy to EMC, the cost that EMC, acting in a commercially reasonable manner,
incurs to purchase such Substitute Energy, or (ii) in the case in which
Substitute Energy is provided to EMC by the Control Area operator, system
operator, or similar entity providing such service on behalf of load (or load
serving entities), the cost to EMC imposed on EMC by such Control Area operator,
system operator, or other entity providing such Substitute Energy. In either
case, Substitute Energy Costs shall include ancillary services charges, if any,
reasonably incurred by EMC to the point where electric energy is delivered to
the Transmission System or imposed to the point where electric energy is
delivered to the Transmission System by the Control Area operator, system
operator, or other entity providing Substitute Energy, including congestion
charges, energy imbalance charges, backup capacity charges, replacement capacity
charges, deficient capacity charges, commitment fees, ratcheted demand and
similar charges incurred by EMC in obtaining such Substitute Energy.

Article 7

Capacity and Energy Charges

7.1 Charges During Commencement Date - December 31, 2006.

7.1.1 General. For FFR Supplemental Service provided during the period beginning
on the Commencement Date, and continuing through December 31, 2006, EMC shall
pay to Duke the Monthly Demand Charge set forth in Section 7.1.4, the Duke
Monthly Energy Charge set forth in Section 7.1.5.1, if applicable, the Monthly
Scheduling Agent Service Charge set forth in Section 7.1.6 and, if applicable,
the Monthly Reserve Capacity Charge set forth in Section 7.4, minus the EMC
Monthly Energy Credit set forth in Section 7.1.5.5. In addition, the Duke
Monthly Reconciliation Charge, Piedmont Monthly Reconciliation Credit, and the
Monthly Inter-EMC Energy Transfer Reconciliation Charge shall be billed or
credited as provided in Sections 7.1.5.11, 7.1.5.12, and 7.1.5.13. The charges
set forth in this Section 7.1 are in addition to the other charges set forth in
other sections of this Agreement.

7.1.2 [intentionally omitted].

 

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7.1.3 [intentionally omitted].

7.1.4 Monthly Demand Charge. The Monthly Demand Charge for a Month shall be
equal to the product of (i) the Monthly Demand Rate for the Year ($/kW-Month)
and (ii) the Monthly Demand Amount for the Month (kW). The Monthly Demand Rate
for 2006 shall be $0.75/kW-Month. The Monthly Demand Amount for a Month shall be
equal to the product of (i) the EMC Monthly Demand Quantity for the Month
divided by the EMC Group Combined Monthly Demand Quantity for the Month and
(ii) the EMC Group Monthly Demand Quantity for the Month. In no event shall the
Monthly Demand Quantity be less than zero. A sample calculation is provided in
Attachment 7-2.

7.1.4.1 EMC Monthly Demand Quantity. The EMC Monthly Demand Quantity for a Month
shall be equal to the EMC Hourly Demand at the time of the Maximum Demand Hour
for the Month minus EMC’s Base Obligation at the time of the Maximum Demand
Hour. In no event shall the EMC Monthly Demand Quantity be less than zero.

7.1.4.2 EMC Group Combined Monthly Demand Quantity. The EMC Group Combined
Monthly Demand Quantity for a Month shall be equal to the sum of (i) the EMC
Monthly Demand Quantity for the Month as determined in Section 7.1.4.1 of this
Agreement, (ii) the EMC Monthly Demand Quantity for the Month as determined in
Section 7.1.4.1 of the Duke-Blue Ridge Agreement, and (iii) the EMC Monthly
Demand Quantity for the Month as determined in Section 7.1.4.1 of the
Duke-Rutherford Agreement.

7.1.4.3 EMC Group Monthly Demand Quantity. The EMC Group Monthly Demand Quantity
for a Month shall be equal to the difference between the EMC Group Hourly Demand
and the EMC Group’s Base Obligation during the Maximum Demand Hour of the Month,
but in no event shall the EMC Group Monthly Demand Quantity for a Month be less
than zero. The EMC Group Hourly Demand for an Hour shall be equal to the
integrated sixty (60) minute demand of the EMC Group Native Load during the
Hour. The Maximum Demand Hour of a Month shall be the Hour in which the positive
difference between the EMC Group Native Load and the EMC Group’s Base Obligation
is the greatest (as determined by subtracting the EMC Group’s Base Obligation
from the EMC Group Native Load in every Hour of the Month, to determine the Hour
in which such maximum difference for the Month occurs).

7.1.5 Monthly Energy Charges.

7.1.5.1 Duke Monthly Energy Charge. The Duke Monthly Energy Charge for a Month
shall be equal to the sum of the Duke Hourly Energy Charges for the Month. The
Duke Hourly Energy Charge for an Hour shall be equal to the sum of the Piedmont
Allocated Share of the Duke Total Hourly Energy Charge for the Hour plus the
Piedmont Allocated Share of the Inter-EMC Energy Charge for the Hour.

7.1.5.2 Duke Total Hourly Energy Charge. The Duke Total Hourly Energy Charge for
an Hour shall be equal to the product of (i) one hundred thirteen percent
(113%) of Duke’s Territorial Incremental Cost for the Hour and (ii) the EMC
Group Energy Purchase Amount for the Hour. The amount of electric energy
delivered by Duke to the EMC Group during any Hour shall be calculated as set
forth in Section 7.1.5.10.

 

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7.1.5.3 Piedmont Allocated Share of Duke Total Hourly Energy Charge. The
Piedmont Allocated Share of the Duke Total Hourly Energy Charge for an Hour
shall be calculated as set forth in Attachment 7-3. An example showing the
calculation of the Piedmont Allocated Share of the Duke Total Hourly Energy
Charge for an Hour is shown in Attachment 7-4.

7.1.5.4 Piedmont Allocated Share of Inter-EMC Energy Charge. The Piedmont
Allocated Share of the Inter-EMC Energy Charge for an Hour shall be calculated
as set forth in Attachment 7-3. An example showing the calculation of the
Piedmont Allocated Share of the Inter-EMC Energy Charge for an Hour is shown in
Attachment 7-4.

7.1.5.5 EMC Monthly Energy Credit. The EMC Monthly Energy Credit for a Month
shall be equal to the sum of the EMC Hourly Energy Credits for the Month. The
EMC Hourly Energy Credit for an Hour shall be equal to the sum of the Piedmont
Allocated Share of the EMC Group Total Hourly Energy Credit for the Hour plus
the Piedmont Allocated Share of the Inter-EMC Energy Credit for the Hour.

7.1.5.6 EMC Group Total Hourly Energy Credit. The EMC Group Total Hourly Energy
Credit for an Hour shall be equal to the product of (i) ninety percent (90%) of
Duke’s Territorial Decremental Cost for the Hour and (ii) the EMC Group Energy
Credit Amount for the Hour. The amount of electric energy delivered by the EMC
Group to Duke during any Hour shall be calculated as set forth in
Section 7.1.5.10.

7.1.5.7 Piedmont Allocated Share of EMC Group Total Hourly Energy Credit. The
Piedmont Allocated Share of the EMC Group Total Hourly Energy Credit for an Hour
shall be calculated as set forth in Attachment 7-3. An example showing the
calculation of the Piedmont Allocated Share of the EMC Group Total Hourly Energy
Credit for an Hour is shown in Attachment 7-4.

7.1.5.8 Piedmont Allocated Share of Inter-EMC Energy Credit. The Piedmont
Allocated Share of the Inter-EMC Energy Credit for an Hour shall be calculated
as set forth in Attachment 7-3. An example showing the calculation of the
Piedmont Allocated Share of the Inter-EMC Energy Credit for an Hour is shown in
Attachment 7-4.

7.1.5.9 Calculation of Piedmont Hourly Energy Amounts. The amount of electric
energy delivered by Duke to Piedmont, and by Piedmont to Duke for an Hour, shall
be calculated as follows: electric energy scheduled under this Agreement shall
be scheduled using two (2) dynamic (instantaneous) signals representing the
difference between EMC’s Native Load and EMC’s Base Obligation. At the time of
this Agreement, these signals are sampled once every four (4) seconds; the time
period between each sample as defined herein shall be referred to as an
“Interval”. The time duration of the Intervals shall be subject to change based
on Duke’s standard operating practices. A signal during an Interval in which
EMC’s Native Load exceeds EMC’s Base Obligation shall be referred to herein as
an EMC Call Signal, indicating electric energy supplied by Duke to Piedmont. A
signal during an Interval in which EMC’s Base Obligation exceeds EMC’s Native
Load shall be referred to herein as an EMC Put Signal, indicating electric
energy being supplied by Piedmont to Duke. The integrated value of the EMC Call
Signals (separate from and not combined with the EMC Put Signals) summed

 

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across all Intervals during the Hour shall be used as the amount of electric
energy supplied by Duke to Piedmont for the Hour, and the integrated value of
the EMC Put Signals (separate from and not combined with the EMC Call Signals)
summed across all Intervals during the Hour shall be used as the amount of
electric energy supplied by Piedmont to Duke for the Hour. The amount of
electric energy supplied by Duke to Piedmont for the Hour, as calculated in this
Section 7.1.5.9, shall be referred to herein as the Piedmont Energy Purchase
Amount for the Hour. The amount of electric energy supplied by Piedmont to Duke
for the Hour, as determined in this Section 7.1.5.9, shall be referred to herein
as the Piedmont Energy Credit Amount for the Hour. An example showing the
calculation of such amounts is shown in Attachment 7-5.

7.1.5.10 Calculation of EMC Group Energy Amounts. The amount of electric energy
delivered by Duke to the EMC Group, and by the EMC Group to Duke, for the Hour
shall be calculated as follows: Electric energy scheduled under the Partial
Requirements Agreements shall be scheduled using two (2) dynamic (instantaneous)
signals representing the differences between the EMC Group Native Load and the
EMC Group’s Base Obligation. At the time of this Agreement, these signals are
sampled once every four (4) seconds; the time period between each sample as
defined herein shall be referred to as an “Interval”. The time duration of the
Intervals shall be subject to change based on Duke’s standard operating
practices. A signal during an Interval in which EMC Group’s Native Load exceeds
EMC Group’s Base Obligation shall be referred to herein as an EMC Group Call
Signal, indicating electric energy supplied by Duke to the EMC Group. A signal
during an Interval in which EMC Group’s Base Obligation exceeds EMC Group’s
Native Load shall be referred to herein as an EMC Group Put Signal, indicating
electric energy being supplied by EMC Group to Duke. The integrated value of the
EMC Group Call Signals (separate from and not combined with the EMC Group Put
Signals) summed across all Intervals during the Hour shall be used as the amount
of electric energy supplied by Duke to the EMC Group for the Hour, and the
integrated value of the EMC Group Put Signals (separate from and not combined
with the EMC Group Call Signals) summed across all Intervals during the Hour
shall be used as the amount of electric energy supplied by the EMC Group to Duke
for the Hour. The amount of electric energy supplied by Duke to EMC Group for
the Hour, as calculated in this Section 7.1.5.10, shall be referred to herein as
EMC Group Energy Purchase Amount for the Hour. The amount of electric energy
supplied by the EMC Group to Duke for the Hour, as determined in this
Section 7.1.5.10, shall be referred to herein as the EMC Group Energy Credit
Amount for the Hour. An example showing the calculation of such amounts is shown
in Attachment 7-6.

7.1.5.11 Duke Monthly Reconciliation Charge. The Duke Monthly Reconciliation
Charge for a Month shall be equal to the sum of the Duke Hourly Reconciliation
Charges for the Month. The Duke Hourly Reconciliation Charge for an Hour shall
be equal to the product of (a) the Duke Total Hourly Energy Charge for the Hour
minus the Duke Reconciliation Amount for the Hour and (b) the Reconciliation
Allocation Factor. The Duke Reconciliation Amount for an Hour shall be equal to
the sum of (i) the Piedmont Allocated Share of the Duke Total Hourly Energy
Charge for the Hour as set forth in Section 7.1.5.3 of this Agreement, (ii) the
Rutherford Allocated Share of the Duke Total Hourly Energy Charge for the Hour
as set forth in Section 7.1.5.3 of the Duke-Rutherford Agreement, and (iii) the
Blue Ridge Allocated Share of the Duke Total Hourly Energy Charge for the Hour
as set forth in Section 7.1.5.3 of the Duke-Blue Ridge Agreement. If the Duke
Monthly Reconciliation Charge is positive, EMC shall pay such amount to Duke; if
the Duke Monthly Reconciliation Charge is negative, such amount shall be
credited to EMC.

 

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7.1.5.12 Piedmont Monthly Reconciliation Credit. The Piedmont Monthly
Reconciliation Credit for a Month shall be equal to the sum of the Piedmont
Hourly Reconciliation Credits for the Month. The Piedmont Hourly Reconciliation
Credit for an Hour shall be equal to the product of (a) the EMC Group Total
Hourly Energy Credit for the Hour minus the EMC Group Reconciliation Amount for
the Hour and (b) the Reconciliation Allocation Factor. The EMC Group
Reconciliation Amount for an Hour shall be equal to the sum of (i) the Piedmont
Allocated Share of the EMC Group Total Hourly Energy Credit for the Hour as set
forth in Section 7.1.5.7 of this Agreement, (ii) the Rutherford Allocated Share
of the EMC Group Total Hourly Energy Credit for the Hour as set forth in
Section 7.1.5.7 of the Duke-Rutherford Agreement, and (iii) the Blue Ridge
Allocated Share of the EMC Group Total Hourly Energy Credit for the Hour as set
forth in Section 7.1.5.7 of the Duke-Blue Ridge Agreement. If the Piedmont
Monthly Reconciliation Credit is negative, EMC shall pay such amount to Duke; if
the Piedmont Monthly Reconciliation Credit is positive, such amount shall be
credited to EMC.

7.1.5.13 Inter-EMC Energy Transfer Reconciliation Charge. The Monthly Inter-EMC
Energy Transfer Reconciliation Charge for a Month shall be equal to the sum of
the Hourly Inter-EMC Transfer Reconciliation Charges for the Month. The Hourly
Inter-EMC Transfer Reconciliation Charge for an Hour shall be equal to the
product of (a) the Reconciliation Allocation Factor and (b) (i) the sum of the
Piedmont Allocated Share of the Inter-EMC Energy Charge for the Hour as set
forth in Section 7.1.5.4 of this Agreement, the Rutherford Allocated Share of
the Inter-EMC Energy Charge for the Hour as set forth in Section 7.1.5.4 of the
Duke-Rutherford Agreement, and the Blue Ridge Allocated Share of the Inter-EMC
Energy Charge for the Hour as set forth in Section 7.1.5.4 of the Duke-Blue
Ridge Agreement, minus (ii) the sum of the Piedmont Allocated Share of the
Inter-EMC Energy Credit for the Hour as set forth in Section 7.1.5.8 of this
Agreement, the Rutherford Allocated Share of the Inter-EMC Energy Credit for the
Hour as set forth in Section 7.1.5.8 of the Duke-Rutherford Agreement, and the
Blue Ridge Allocated Share of the Inter-EMC Energy Credit for the Hour as set
forth in Section 7.1.5.8 of the Duke-Blue Ridge Agreement. If the Monthly
Inter-EMC Energy Transfer Reconciliation Charge is negative, EMC shall pay such
amount to Duke. If the Monthly Inter-EMC Energy Transfer Reconciliation Charge
is positive, such amount shall be credited to EMC.

7.1.6 Scheduling Agent Service Charge. In the event that this Agreement is
terminated in accordance with the provisions of Section 3.5.2.2, EMC shall pay
to Duke the Monthly Scheduling Agent Service Charge commencing on the date that
Scheduling Agent Services commence. The Monthly Scheduling Agent Service Charge
for a Month shall be equal to one thousand dollars ($1,000) per Month.

7.1.7 References to Other Agreements. For purposes of calculating the charges
and credits under Sections 3.5.2.3 and 7.1 (including charges and credits
calculated pursuant to Section 7.1 in the event that EMC exercises its option
pursuant to Section 3.5.2.3), (i) all references in this Agreement to quantities
under or as determined or set forth in the Duke-Blue Ridge Agreement shall be
deemed to refer to such quantities during the period in which the

 

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Duke-Blue Ridge Agreement is in effect, before which time and after which time
such quantities shall be deemed to be equal to zero; and (ii) all references in
this Agreement to quantities under or as determined or set forth in the
Duke-Rutherford Agreement shall be deemed to refer to such quantities during the
period in which the Duke-Rutherford Agreement is in effect, before which time
and after which time such quantities shall be deemed to be equal to zero. For
example, if this Agreement and the Duke-Blue Ridge Agreement terminate
August 31, 2008, and the Duke-Rutherford Agreement terminates August 31, 2007,
then during the period through August 31, 2007, EMC Group Native Load shall mean
the sum of (i) the EMC Native Load under this Agreement, (ii) the EMC Native
Load under the Duke-Blue Ridge Agreement, and (iii) the EMC Native Load under
the Duke-Rutherford Agreement, and during the period September 1, 2007 through
August 31, 2008, EMC Group Native Load shall mean the sum of (i) the EMC Native
Load under this Agreement and (ii) the EMC Native Load under the Duke-Blue Ridge
Agreement. In addition, for purposes of calculating the charges under Sections
3.5.2.3 and 7.1 (including charges and credits calculated pursuant to
Section 7.1 in the event that EMC exercises its option pursuant to
Section 3.5.2.3), all references to “EMC Group” shall refer collectively to the
members of such group that are served under those of the above-referenced
Agreements that are then in effect (e.g., in the above example, “EMC Group”
would no longer include Rutherford effective September 1, 2007).

7.2 Charges During January 1, 2007 – December 31, 2010 .

7.2.1 For FFR Supplemental Service provided during the period beginning on
January 1, 2007, and continuing through December 31, 2010, EMC shall pay to Duke
the Base Annual Capacity Charge set forth in Section 7.2.2, the Excess Annual
Capacity Charge set forth in Section 7.2.3, the Monthly Demand Charge set forth
in Section 7.2.4, the Duke Monthly Energy Charge set forth in Section 7.2.5.1,
and, if applicable, the Monthly Reserve Capacity Charge set forth in
Section 7.4, minus the EMC Monthly Energy Credit set forth in Section 7.2.5.3.
The charges set forth in this Section 7.2 are in addition to the other charges
set forth in other sections of this Agreement.

7.2.2 Base Annual Capacity Charge. The Base Annual Capacity Charge for a Year
shall be equal to the product of (i) the Annual Capacity Price for the Year
($/kW-Year) and (ii) the Annual Capacity Quantity for the Year (kW). The Annual
Capacity Price for 2007 through 2010 shall be as follows:

2007 $38.00/kW-year

2008 $40.00 kW-year

2009 $57.00 kW-year

2010 $58.00 kW-year

and the Annual Capacity Quantity for 2007 through 2010 shall be as follows:

2007 23,000 kW

2008 24,000 kW

2009 23,000 kW

2010 24,000 kW

 

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Provided, that the Annual Capacity Quantity amounts set forth in this Secton
7.2.2 for 2009 and 2010 shall be decreased, on a kW for kW basis, for any
increase in EMC’s Base Obligation that occurs pursuant to Section 5.1.4. The
Base Annual Capacity Charge shall be billed in accordance with Article 13 in the
July statement each Year.

7.2.3 Excess Annual Capacity Charge. The Excess Annual Capacity Charge for a
Year shall be equal to the product of (i) the Excess Annual Capacity Price for
the Year ($/kW-Year) and (ii) the EMC Excess Annual Capacity Quantity for the
Year (kW). The Excess Annual Capacity Charge for the Year shall be billed in
accordance with Article 13 in the September statement based on the actual Duke
billing data during July and August of such Year.

7.2.3.1 Excess Annual Capacity Price. The Excess Annual Capacity Price for each
Year shall be equal to 120 percent of the Annual Capacity Price for that Year as
identified in Section 7.2.2.

7.2.3.2 EMC Excess Annual Capacity Quantity. The EMC Excess Annual Capacity
Quantity for a Year shall be equal to the EMC Coincident Peak Demand for the
Year minus EMC’s Base Obligation for the Hour in such Year in which the EMC
Coincident Peak Demand occurs, minus the Annual Capacity Quantity for the Year.
In no event shall the EMC Excess Annual Capacity Quantity be less than zero. The
EMC Coincident Peak Demand for a Year shall be equal to the EMC Hourly Demand
that is coincident with the maximum integrated sixty (60) minute Duke Schedule 1
Demands during July and August of the Year. The EMC Hourly Demand for an Hour
shall be equal to the integrated sixty (60) minute demand of EMC’s Native Load
during the Hour.

7.2.4 Monthly Demand Charge. The Monthly Demand Charge for a Month shall be
equal to the product of (i) the Monthly Demand Rate for the Year ($/kW-Month)
and (ii) the EMC Monthly Demand Quantity for the Month (kW). The Monthly Demand
Rate for 2007 through 2010 shall be as follows:

2007        $1.08/kW-month

2008        $1.25 kW-month

2009        $1.33 kW-month

2010        $1.42 kW-month

7.2.4.1 EMC Monthly Demand Quantity. The EMC Monthly Demand Quantity for a Month
shall be equal to the EMC Hourly Demand at the time of the Maximum Demand Hour
for the Month minus EMC’s Base Obligation at the time of the Maximum Demand
Hour. In no event shall the EMC Monthly Demand Quantity be less than zero. The
Maximum Demand Hour of a Month shall be the Hour in which the positive
difference between EMC’s Native Load and EMC’s Base Obligation is the greatest
(as determined by subtracting EMC’s Base Obligation from EMC’s Native Load in
every Hour of the Month, to determine the Hour in which such maximum difference
for the Month occurs).

 

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7.2.5 Monthly Energy Charges.

7.2.5.1 Duke Monthly Energy Charge. The Duke Monthly Energy Charge for a Month
shall be equal to the sum of the Duke Hourly Energy Charges for the Month.

7.2.5.2 Duke Hourly Energy Charge. The Duke Hourly Energy Charge for an Hour
shall be equal to the product of (i) one hundred thirteen percent (113%) of
Duke’s Territorial Incremental Cost for the Hour and (ii) the Piedmont Energy
Purchase Amount for the Hour. The amount of electric energy delivered by Duke to
EMC during any Hour shall be calculated as set forth in Section 7.2.5.5.

7.2.5.3 EMC Monthly Energy Credit. The EMC Monthly Energy Credit for a Month
shall be equal to the sum of the EMC Hourly Energy Credits for the Month.

7.2.5.4 EMC Hourly Energy Credit. The EMC Hourly Energy Credit for an Hour shall
be equal to the product of (i) ninety percent (90%) of Duke’s Territorial
Decremental Cost for the Hour and (ii) the Piedmont Energy Credit Amount for the
Hour. The amount of electric energy delivered by the EMC to Duke during any Hour
shall be calculated as set forth in Section 7.2.5.5.

7.2.5.5 Calculation of Piedmont Hourly Energy Amounts. The amount of electric
energy delivered by Duke to Piedmont, and by Piedmont to Duke for an Hour, shall
be calculated as follows: electric energy scheduled under this Agreement shall
be scheduled using two (2) dynamic (instantaneous) signals representing the
difference between EMC’s Native Load and EMC’s Base Obligation. At the time of
this Agreement, these signals are sampled once every four (4) seconds; the time
period between each sample as defined herein shall be referred to as an
“Interval”. The time duration of the Intervals shall be subject to change based
on Duke’s standard operating practices. A signal during an Interval in which
EMC’s Native Load exceeds EMC’s Base Obligation shall be referred to herein as
an EMC Call Signal, indicating electric energy supplied by Duke to Piedmont. A
signal during an Interval in which EMC’s Base Obligation exceeds EMC’s Native
Load shall be referred to herein as an EMC Put Signal, indicating electric
energy being supplied by Piedmont to Duke. The integrated value of the EMC Call
Signals (separate from and not combined with the EMC Put Signals) summed across
all Intervals during the Hour shall be used as the amount of energy supplied by
Duke to Piedmont for the Hour, and the integrated value of the EMC Put Signals
(separate from and not combined with the EMC Call Signals) summed across all
Intervals during the Hour shall be used as the amount of energy supplied by
Piedmont to Duke for the Hour. The amount of electric energy supplied by Duke to
Piedmont for the Hour, as calculated in this Section 7.2.5.5, shall be referred
to herein as the Piedmont Energy Purchase Amount for the Hour. The amount of
electric energy supplied by Piedmont to Duke for the Hour, as determined in this
Section 7.2.5.5, shall be referred to herein as the Piedmont Energy Credit
Amount for the Hour. An example showing the calculation of such amounts is shown
in Attachment 7-5.

 

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7.2.6 System Average Pricing Option

7.2.6.1 Exercise of Option. During the period January 1, 2007 through
December 31, 2010, EMC shall have the option of being subject to the pricing
provisions set forth in Sections 7.2.6.2, 7.2.6.3, and 7.2.6.4 in lieu of the
pricing provisions set forth in Sections 7.2.1, 7.2.2, 7.2.3, 7.2.4 and 7.2.5.
EMC may exercise such option (referred to herein as the “System Average Pricing
Option”) for the period beginning January 1, 2007, January 1, 2008, January 1,
2009, or January 1, 2010, and ending December 31, 2010. The period that EMC
selects pursuant to this option (i.e., January 1, 2007 - December 31,
2010, January 1, 2008 - December 31, 2010, January 1, 2009 - December 31, 2010,
or January 1, 2010 - December 31, 2010) shall be referred to herein as the
“System Average Pricing Option Period.” EMC may exercise such option by giving
notice (such notice referred to herein as the “System Average Pricing Option
Notice”) to Duke no later than September 30 of the Year prior to the Year in
which the System Average Pricing Option Period that EMC selects would commence.
For example, if EMC wishes to exercise its option under this Section 7.2.6
effective January 1, 2008, it must provide its System Average Pricing Option
Notice no later than September 30, 2007. The System Average Pricing Option
Notice is effective when it is deemed given in accordance with Section 16.22.
Once the System Average Pricing Option Notice is given to Duke, it shall not be
amended, modified or otherwise revoked for any reasons unless such amendment,
modification or revocation is mutually agreed to by both Parties in writing.

7.2.6.2 General. During the System Average Price Option Period, EMC shall pay to
Duke the Monthly Demand Charge set forth in Section 7.2.6.3 and the Duke Monthly
Energy Charge set forth in Section 7.2.6.4, in lieu of the charges set forth in
Sections 7.2.1, 7.2.2, 7.2.3, 7.2.4, and 7.2.5. The charges set forth in
Section 7.2.6 are in addition to the other charges set forth in other sections
of this Agreement (including, if applicable, the Monthly Reserve Capacity Charge
set forth in Section 7.4).

7.2.6.3 Monthly Demand Charge. The Monthly Demand Charge for a Month shall be
equal to the product of (i) the Monthly Billing Demand for the Month (kW) and
(ii) the Monthly Demand Rate for the Year ($/kW-Month).

7.2.6.3.1 Monthly Demand Rate. The Monthly Demand Rate for each Year shall be
calculated in accordance with the formula rate set forth in Schedule 1. The
Monthly Demand Rate initially shall be calculated based on estimated data, and
shall be subject to true-up after actual data become available. The true-up
shall be provided to EMC no later than June 30 following the Year in which
service was provided, and shall include interest on any refunds or surcharges
calculated in accordance with Section 35.19a of FERC’s regulations.

7.2.6.3.2 Monthly Billing Demand. The Monthly Billing Demand for each Month of
the Year shall be equal to the average of the twenty (20) EMC Peak Hour Billing
Demands coincident with the twenty (20) highest Hourly (integrated sixty-minute)
Duke Schedule 1 Demands during July and August of such Year. The EMC Peak Hour
Billing Demand for an Hour shall be equal to the integrated sixty (60) minute
EMC Native Load demand (kW) for the Hour minus EMC’s Base Obligation (kW) for
such Hour, but in no event shall the EMC Peak Hour billing Demand for an Hour
(or the Monthly Billing Demand) be less than zero. The Monthly Billing Demand
initially shall be calculated based on estimated data, and shall be

 

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subject to true-up after actual data become available. The true-up shall be
provided to EMC no later than June 30 following the Year in which service was
provided, and shall include interest on any refunds or surcharges calculated in
accordance with Section 35.19a of FERC’s regulations. An example showing the
calculation of this billing demand is shown in Attachment 7-7.

7.2.6.4. Monthly Energy Charge. The Duke Monthly Energy Charge for a Month shall
be equal to the sum of the Monthly Fuel Charge and Monthly Variable O&M Charge
for the Month. If the Duke Monthly Energy Charge is positive, EMC shall pay such
amount to Duke. If the Duke Monthly Energy Charge is negative, Duke shall credit
such amount to EMC.

7.2.6.4.1 Monthly Fuel Charge. The Monthly Fuel Charge for a Month shall be
equal to the sum of the Hourly Fuel Charges for the Month. The Hourly Fuel
Charge for an Hour shall be equal to the product (i) EMC’s Native Load demands
during the Hour (kW) minus EMC’s Base Obligation for the Hour (kW) and (ii) the
Fuel Rate for the Year ($/kWh). The Fuel Rate for each Year shall be calculated
in accordance with the formula rate set forth in Schedule 1. The Fuel Rate shall
initially be calculated based on estimated data, and shall be subject to true-up
after actual data become available. The true-up shall be provided to EMC no
later than June 30 following the Year in which service was provided, and shall
include interest on any refunds or surcharges calculated in accordance with
Section 35.19a of FERC’s regulations. Duke will keep EMC informed of the true-up
subtotal on a semi-annual basis during a Year.

7.2.6.4.2 Monthly Variable O&M Charge. The Monthly Variable O&M Charge for a
Month shall be equal to the sum of the Hourly Variable O&M Charges for the
Month. The Hourly Variable O&M Charge for an Hour shall be equal to the product
of (i) EMC’s Native Load demands during the Hour (kW) minus EMC’s Base
Obligation for the Hour (kW), and (ii) the Variable O&M Rate for the Year
($/kWh). The Variable O&M Rate for each Year shall be calculated in accordance
with the formula rate set forth in Schedule 1. The Variable O&M Rate initially
shall be calculated based on estimated data, and shall be subject to true-up
after actual data become available. The true-up shall be provided to EMC no
later than June 30 following the Year in which service was provided, and shall
include interest on any refunds or surcharges calculated in accordance with
Section 35.19a of FERC’s regulations.

7.3 Charges Commencing January 1, 2011.

7.3.1 General. For service provided commencing January 1, 2011 through the
termination of this Agreement, EMC shall pay to Duke the Monthly Demand Charge
set forth in Section 7.3.2 and the Duke Monthly Energy Charge set forth in
Section 7.3.3. The charges set forth in this Section 7.3 are in addition to the
other charges set forth in other sections of this Agreement.

7.3.2 Monthly Demand Charge. The Monthly Demand Charge for a Month shall be
equal to the product of (i) the Monthly Billing Demand for the Month (kW) and
(ii) the Monthly Demand Rate for the Year ($/kW-Month).

 

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7.3.2.1 Monthly Demand Rate. The Monthly Demand Rate for each Year shall be
calculated in accordance with the formula rate set forth in Schedule 1. The
Monthly Demand Rate shall initially be calculated based on estimated data, and
shall be subject to true-up after actual data become available. The true-up
shall be provided to EMC no later than June 30 following the Year in which
service was provided, and shall include interest on any refunds or surcharges
calculated in accordance with Section 35.19a of FERC’s regulations.

7.3.2.2 Monthly Billing Demand. The Monthly Billing Demand for each month of a
Year shall be equal to the average of the twenty (20) EMC Peak Hour Billing
Demands coincident with the twenty (20) highest Hourly (integrated sixty-minute)
Duke Schedule 1 Demands during the Annual Planning Period for such Year (as
determined in Section 7.3.2.3). The EMC Peak Hour Billing Demand for an Hour
shall be equal to the integrated sixty (60) minute EMC Native Load demand (kW)
for the Hour minus the Partial Requirements Resources (kW) for such Hour, but in
no event shall the EMC Peak Hour Billing Demand (or the Monthly Billing Demand)
be less than zero. The Monthly Billing Demand shall initially be calculated
based on estimated data, and shall be subject to true-up after actual data
become available. The true-up shall be provided to EMC no later than June 30
following the Year in which service was provided, and shall include interest on
any refunds or surcharges calculated in accordance with Section 35.19a of FERC’s
regulations. Examples showing the calculation of the Monthly Billing Demand are
shown in Attachment 7-8.

7.3.2.3 Determination of Annual Planning Period. If the then-effective Annual
Planning Period is the Summer Period, the Annual Planning Period for purposes of
determining the Monthly Billing Demand for the Year under Section 7.3.2.2 shall
be the Summer Period that occurs within such Year (for example, if the Annual
Planning Period in 2012 is the Summer Period, and the Summer Period is May -
September, the Annual Planning Period for purposes of determining the Monthly
Billing Demand for 2012 under Section 7.3.2.2 is May 2012 - September 2012). If
the then-effective Annual Planning Period is the Winter Period, the Annual
Planning Period for purposes of determining the Monthly Billing Demand for the
Year under Section 7.3.2.2 shall be the Winter Period that ends in such Year
(for example, if the Annual Planning Period in 2012 is the Winter Period, and
the Winter Period is October - April, the Annual Planning Period for purposes of
determining the Monthly Billing Demand for 2012 under Section 7.3.2.2 is October
2011 - April 2012).

7.3.2.4 Annual Percentage. No later than June 30, 2012, and each June 30
thereafter during the Term, Duke shall calculate the Annual Percentage for the
immediately preceding Year using the formula set forth in Attachment 7-9, and
shall provide such calculation to EMC, together with supporting information. The
Annual Percentage may be a positive or negative value. In the event that the
Annual Percentage for such Year is greater than positive four percent (4%), the
Monthly Demand Rate for such Year calculated pursuant to Section 7.3.2.1 shall
be reduced by the percentage equal to the Demand Rate Adjustment Percentage.
This reduction shall only apply to the Year for which it is calculated. This
reduction shall be reflected in the true-up provided to EMC pursuant to
Section 7.3.2.1. In the event that the Annual Percentage for such Year is a
positive four percent (4%) or less, or is negative, there shall be no
adjustments to the Monthly Demand Rate under this Section 7.3.2.4 for such Year.
Illustrative examples showing the calculation of the Annual Percentage and
Demand Rate Adjustment Percentage and the resulting reduction, if any, to the
Monthly Demand Rate are set forth in Attachment 7-10.

 

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7.3.3 Monthly Energy Charge. The Duke Monthly Energy Charge for a Month shall be
equal to the sum of the Monthly Fuel Charge and Monthly Variable O&M Charge for
the Month.

7.3.3.1 Monthly Fuel Charge. The Monthly Fuel Charge for a Month shall be equal
to the sum of the Hourly Fuel Charges for the Month. The Hourly Fuel Charge for
an Hour shall be equal to the product (i) EMC’s Native Load demand during the
Hour (kW) minus the sum of (a) EMC’s Dispatched Baseload Resources for the Hour
(kW) and (b) EMC’s Dispatched Combined Cycle Resources for the Hour for which
EMC bears the Energy Cost pursuant to Section 4.3.3.1 (kW), and (ii) the Fuel
Rate for the Year ($/kWh). The Fuel Rate for each Year shall be calculated in
accordance with the formula rate set forth in Schedule 1. The Fuel Rate shall
initially be calculated based on estimated data, and shall be subject to true-up
after actual data become available. The true-up shall be provided to EMC no
later than June 30 following the Year in which service was provided, and shall
include interest on any refunds or surcharges calculated in accordance with
Section 35.19a of FERC’s regulations. Duke will keep EMC informed of the true-up
subtotal on a semi-annual basis during a Year.

7.3.3.2 Monthly Variable O&M Charge. The Monthly Variable O&M Charge for a Month
shall be equal to the sum of the Hourly Variable O&M Charges for the Month. The
Hourly Variable O&M Charge for an Hour shall be equal to the product of
(i) EMC’s Native Load demands during the Hour (kW) minus the sum of (a) EMC’s
Dispatched Baseload Resources for the Hour (kW) and (b) EMC’s Dispatched
Combined Cycle Resources for the Hour for which EMC bears the Energy Cost
pursuant to Section 4.3.3.1 (kW) and (ii) the Variable O&M Rate for the Year
($/kWh). The Variable O&M Rate for each Year shall be calculated in accordance
with the formula rate set forth in Schedule 1. The Variable O&M Rate shall
initially be calculated based on estimated data, and shall be subject to true-up
after actual data become available. The true-up shall be provided to EMC no
later than June 30 following the Year in which service was provided, and shall
include interest on any refunds or surcharges calculated in accordance with
Section 35.19a of FERC’s regulations.

7.4 Monthly Reserve Capacity Charges. In the event that Duke provides
Replacement Energy to EMC pursuant to Section 4.2.4 in an amount of five
thousand (5,000) kW or greater during any Hour of a Year, EMC shall pay a
Monthly Reserve Capacity Charge equal to the product of (i) the Monthly Demand
Rate as calculated in Section 7.3.2.1 and (ii) the amount (in kW) of reserves
that would be required under Duke’s Generation Planning Practices for a
generating resource of a size equivalent to the amount of Replacement Energy
provided to EMC (the “Reserve Capacity Amount”). This charge shall commence on
the Day following the Day on which Duke provided Replacement Energy to EMC, and
shall terminate on December 31 of that Year. For example, if Duke provides a
maximum amount of 100,000 kWh of Replacement Energy to EMC in any given Hour on
July 15, 2007, and the reserves that would be required for a 100,000 kW
generating resource under Duke’s Generation Planning Practices is 17,000 kW, EMC
shall be responsible for a Monthly Reserve Capacity Charge for 17,000 kW from
July 16, 2007, through December 31, 2007, subject to increase as provided in the
next sentence. In the event that Duke provides Replacement Energy to EMC for any
additional Hours during such Year, and the amount of Replacement Energy provided
during any such Hours is greater than

 

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that previously provided during the Year, then the Reserve Capacity Amount shall
be increased to reflect such greater amount of Replacement Energy, effective the
Day after the Replacement Energy is provided. In the event that Duke provides
Replacement Energy to EMC in a subsequent Year, the foregoing provisions shall
apply, and EMC shall pay Monthly Reserve Capacity Charges with respect to such
Replacement Energy as provided above. Notwithstanding anything in this
Section 7.4 to the contrary, the Monthly Reserve Capacity Charges shall
terminate no later than December 31, 2010. Any Monthly Reserve Capacity Charge,
or increase in such charge, that begins on a Day other than the first Day of the
Month shall be adjusted pro rata for that Month to reflect the number of Days
during the Month in which the charge or charge increase was in effect.

7.4.1 Force Majeure Events. Notwithstanding the provisions of Section 7.4, in
the event that Duke provides Replacement Energy to EMC due to the occurrence of
a force majeure event, EMC shall not incur a Monthly Reserve Capacity Charge due
to Duke’s provision of Replacement Energy for the first twenty-four (24) Hours
following such occurrence. For purposes of this Section 7.4.1, the term “force
majeure” means an event or circumstance that: (i) prevents the party claiming to
be affected by it from performing its obligations in whole or in part; (ii) is
not within the reasonable control of the claiming party, or the result of the
negligence of the claiming party, and (iii) by the exercise of due diligence,
the claiming party is unable to overcome in a commercially reasonable manner,
and, without limiting the scope of the definition, includes acts of God, or the
public enemy, or insurrection, riot, acts of terrorism, civil disturbance or
disorder, strikes, fire, earthquakes, floods, storms or other natural disasters,
or actions or restraints by court order or governmental authority or arbitration
award (so long as the claiming party has not sought or has opposed, to the
extent reasonable, such actions or restraints). It is expressly acknowledged
that transmission service interruptions or curtailments imposed by a
transmission provider in response to transmission capacity or availability
shortages shall not be “force majeure” events or circumstances for purposes of
this Section 7.4.1.

7.5 Payment. All charges or payments contemplated by this Article 7 shall be
made in accordance with provisions of Article 13.

7.6 Determination of EMC Capacity and Energy Demands. For purposes of
determining the electric capacity and energy charges under this Agreement, EMC’s
Native Load demands shall be as determined under the NOA (which demands shall
include the adjustments under the NOA for losses between the point of delivery
under the NITSA and the point of measurement, and the corrections under the NOA
for any metering failures or inaccuracies), and shall be increased by (1 / (1 -
TLF ), in order to reflect such demands at the generation level (i.e., at the
point at which power is available for transmission). Metered receipts used in
billings and accounting hereunder will in all cases include adjustments for such
losses. TLF shall be equal to the transmission loss factor set forth in the
Transmission Provider’s OATT, and shall be expressed as a decimal. For example,
if the transmission loss factor in the Transmission Provider’s OATT is three
percent (3%), then ( 1 / (1 - TLF )) shall be equal to ( 1 / (1 -.03)), or ( 1 /
.97 ). In the event that the NOA is terminated, or the electric capacity and
energy demands measured under the NOA no longer include an adjustment for losses
between the point of delivery under the NITSA and the point of measurement or
provisions for correcting such demands for metering failures or inaccuracies,
then, for purposes of determining the capacity and energy charges under this
Agreement, EMC’s metered electric capacity and energy demands shall be adjusted
for losses

 

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between the point of delivery under the NITSA and point of measurement and
further increased by ( 1 / (1-TLF)), in order to reflect such demands at the
generation level (i.e., at the point at which power is available for
transmission), and suitable arrangements shall be made by the Parties for
correcting such demands due to metering failures or inaccuracies.

Article 8

Scheduling Agent Services

8.1 Appointment of Duke as Scheduling Agent. EMC hereby appoints Duke as
Scheduling Agent, effective on the Effective Date (or such earlier date as is
required so that Scheduling Agent may begin rendering Scheduling Agent Services
by the Commencement Date), as agent for EMC for the Term, for the limited
purposes set forth in this Agreement, with full power and authority to render
the Scheduling Agent Services, and Duke accepts such appointment.

8.1.1 Costs. The Parties acknowledge and agree that all costs and expenses
incurred by Duke to provide Scheduling Agent Services are included in the
charges set forth in Article 7 and, except as provided for in Section 7.1.6, EMC
shall not be charged any additional rates, charges or fees in connection with
Duke’s provision of Scheduling Agent Services.

8.2 Scheduling Policies. In providing Scheduling Agent Services hereunder, Duke
shall comply with (i) the NCEMC policies set forth in Attachment 8-1 (“NCEMC
Policies”) and (ii) the Transmission Provider’s OATT. To avoid uncertainty, for
purposes of Section 8 of Attachment 8-1 (Part I of II), Piedmont’s “SEPA
allocation” shall be zero.

8.3 Protocols. In advance of the Commencement Date, and from time to time
thereafter as the Operating Committee may determine appropriate, the Operating
Committee shall meet and make reasonable efforts to establish written protocols
and procedures to implement the Scheduling Agent Services provided for
hereunder, which shall be reviewed and agreed to by the Parties; provided
however, that the Operating Committee’s failure to agree upon such protocols and
procedures shall not affect in any way the Parties’ respective rights and
obligations under this Article 8.

8.4 Scheduling Agent Services (Commencement Date through December 31, 2010).
Beginning on the Commencement Date and continuing through December 31, 2010,
Duke shall provide the following Scheduling Agent Services:

8.4.1 Duke shall develop next-Day and multi-Day forecasts of EMC’s Native Load.

8.4.2 Duke shall provide NCEMC with seven-Day and next-Day forecasts of EMC’s
Native Load.

8.4.3 Duke shall receive each Day the Nominations from MSCG, and confirm such
Nominations with MSCG in writing, facsimile, e-mail, or any other agreed-upon
form of communication.

8.4.4 Duke shall provide to NCEMC the Nominations that Duke receives pursuant to
Section 8.4.3.

 

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8.4.5 Duke shall provide operational forecasts of EMC Native Load as may be
requested by the Transmission Provider from time to time.

8.4.6 [intentionally omitted]

8.4.7 [intentionally imitted]

8.4.8 Duke shall receive any information or notices from NCEMC or MSCG relating
to any changes in the schedules of electric energy to be delivered to serve
EMC’s Native Load.

8.4.9 Duke shall provide daily and Monthly reconciliation and checkout services
to EMC with respect to each of NCEMC, the Transmission Provider, and MSCG in
connection with services provided by such entities to serve EMC’s Native Load.

8.4.10 Duke shall reasonably cooperate with EMC to enable EMC to address issues
that may arise in connection with invoices or bills rendered to EMC by the
Transmission Provider in connection with the delivery of electric energy under
the PPA, the WPSA, or EMC Contract Resources described in Sections 5.1.3, 5.1.4
and 5.1.5 to serve EMC’s Native Load. Such cooperation shall include providing
EMC with data, records, and other information available to Duke and related to
the invoices or bills at issue.

8.4.11 If Duke has information that MSCG was not informed of any transmission
constraints or other impediments to deliveries under the PPA to the delivery
points designated by MSCG, Duke shall, as promptly as reasonably practical,
inform MSCG of any transmission constraints or other impediments to deliveries
under the PPA to the delivery points designated by MSCG.

8.4.12 Duke shall serve as EMC’s Purchasing – Selling Entity.

8.4.13 Duke shall schedule to the Transmission Provider electric energy to be
delivered from the EMC Contract Resources described in Sections 5.1.3, 5.1.4 and
5.1.5.

8.5 Scheduling Agent Services (January 1, 2011 through Termination). Beginning
on January 1, 2011, and continuing through the date of termination of this
Agreement, Duke shall provide the following Scheduling Agent Services:

8.5.1 Duke shall develop next-Day and multi-Day forecasts of EMC’s Native Load.

8.5.2 Duke shall provide NCEMC with seven-Day and next-Day forecasts of EMC’s
Native Load.

8.5.3 Duke shall provide to NCEMC with the daily schedule of electric energy to
be made available each Hour to serve EMC’s Native Load under the WPSA.

8.5.4 [intentionally omitted]

8.5.5 [intentionally omitted]

 

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8.5.6 Duke shall provide operational forecasts of EMC Native Load as may be
requested by the Transmission Provider from time to time.

8.5.7 Duke shall receive any information or notices from NCEMC relating to any
changes in the schedules of electric energy to be delivered to serve EMC’s
Native Load.

8.5.8 Duke shall provide daily and Monthly reconciliation and checkout services
to EMC with respect to NCEMC and the Transmission Provider in connection with
services provided by those entities to serve EMC’s Native Load.

8.5.9 Duke shall reasonably cooperate with EMC to enable EMC to address issues
that may arise in connection with invoices or bills rendered to EMC by the
Transmission Provider in connection with the delivery of electric energy under
the WPSA or EMC Contract Resources described in Section 5.2 to serve EMC’s
Native Load. Such cooperation shall include, but is not limited to, providing
EMC with data, records and other information available to Duke and related to
the invoices or bills at issue.

8.5.10 Duke shall serve as EMC’s Purchasing – Selling Entity.

8.5.11 Duke shall schedule to the Transmission Provider electric energy to be
delivered from the EMC Contract Resources described in Section 5.2.

8.6 New EMC Resources. If EMC obtains one or more new EMC Contract Resources in
accordance with the provisions of Article 5 of this Agreement, the Parties shall
negotiate appropriate revisions to this Agreement or the protocols and
procedures developed under Section 8.3 as necessary for Duke to provide
Scheduling Agent Services hereunder in connection with such new EMC Contract
Resources; provided however, the failure of the Parties to agree on revisions to
this Agreement or the protocols and procedures developed under Section 8.3 shall
not relieve Duke of its obligation to schedule such new EMC Contract Resources.

8.7 Errors in Schedules. If Duke is notified by the Transmission Provider, NCEMC
or a third party with respect to EMC Contract Resources described in Sections
5.1.3, 5.1.4, 5.1.5 or 5.2, that any schedule provided by Duke as Scheduling
Agent has been rejected, Duke shall provide to the Transmission Provider, NCEMC
or third party, as applicable, a substitute schedule for the Day in question
taking into account the information provided by the Transmission Provider, NCEMC
or third party, as applicable, in connection with such rejection.

8.8 EMC Responsibilities. In connection with Duke’s undertaking Scheduling Agent
Services, EMC shall have the following obligations:

8.8.1 EMC shall provide Duke, as Scheduling Agent, with: (a) meter data such
that Duke may calculate aggregate load in discrete locations or in aggregate
load areas as determined by Transmission Provider; (b) five (5) years of the
most recent historical load data; and (c) the Power Requirements Study (or such
successor document) that EMC submits annually to the RUS.

8.8.2 EMC shall make arrangements with NCEMC, the Transmission Provider, and any
third party responsible for providing for deliveries of new EMC Resources as
provided for in Section 8.6, as are necessary for those parties to communicate
with, and accept or receive schedules or other information submitted by or to
Duke as Scheduling Agent.

 

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8.8.3 During the period from the Commencement Date through December 31, 2010,
EMC shall direct MSCG to communicate with, and provide Nominations to Duke as
Scheduling Agent.

8.8.4 EMC shall reasonably cooperate with Duke as necessary for Duke to assist
EMC in addressing issues that may arise in connection with invoices or bills
rendered to EMC by the Transmission Provider, as provided for in Sections 8.4.10
and 8.5.9.

8.9 Duke’s Liability. Duke shall be liable for any damages arising from Duke’s
unexcused failure to comply with the provisions of this Article 8.

8.10 Termination Assistance Service. Commencing six (6) Months prior to the
scheduled termination of this Agreement and continuing through the termination
date of this Agreement (the “Termination Assistance Period”), Duke shall provide
to EMC, or at EMC’s request to EMC’s designee, such reasonable cooperation,
assistance and service to cause the orderly and timely transition and migration
of Scheduling Agent Services provided under this Agreement to EMC’s new energy
supplier and/or scheduling agent without interruption or adverse effect
(“Termination Assistance Service”). EMC may shorten or terminate the Termination
Assistance Period by providing written notice to Duke.

Article 9

Transmission and Ancillary Services

9.1 Delivery Obligations. Duke shall be responsible for making all arrangements
necessary and paying for all costs incurred under contractual arrangements
necessary to deliver the electric energy provided hereunder to the Delivery
Points. EMC shall be responsible for making and paying for all contractual
arrangements necessary for the delivery of the electric energy provided
hereunder from the Delivery Points.

9.2 Transmission Arrangements. This Agreement does not obligate Duke to provide
any Transmission Service or Ancillary Services, and does not confer upon EMC any
rights to service over the Transmission System. EMC shall be responsible for
making separate contractual arrangements with the Transmission Provider for all
Transmission Service and Ancillary Services to be provided to EMC.

9.3 Ancillary Services. Duke shall make Commercially Reasonable Efforts to
assist in any effort by EMC to have the Transmission Provider recognize that the
electric capacity and energy provided hereunder satisfies one or more of such
Transmission Provider’s Ancillary Services requirements; provided, however, that
nothing in this Section 9.3 shall in any way obligate Duke to provide, make
arrangements for, or pay for any Ancillary Services except as expressly provided
for in Section 9.3.1.

9.3.1 Energy Imbalance Responsibility. Duke shall reimburse EMC in accordance
with the provisions of Article 13 for any Hour in which, as a result of Duke’s
unexcused failure to

 

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comply with the provisions of Article 8, Energy Imbalance Service charges are
incurred by EMC in accordance with the Transmission Provider’s OATT. EMC shall
reimburse Duke in accordance with the provisions of Article 13 for any Hour in
which, as a result of Duke’s unexcused failure to comply with the provisions of
Article 8, Energy Imbalance Service compensation is provided to EMC in
accordance with the Transmission Provider’s OATT.

9.4 Regional Transmission Organization. If an ISO, RTO, ITC or other future
organization, agency or authority that has been approved by FERC to serve as the
Transmission Provider, then Duke and EMC will reasonably cooperate to make or
enter into arrangements with such entity to assist such entity with the
implementation of this Agreement. It is expressly understood that neither the
implementation of an ISO, RTO, ITC or other future organization, agency or
authority that has been approved by FERC to serve as the Transmission Provider
nor the failure of the Parties to enter into the arrangements contemplated under
this Section 9.4 shall relieve either Party of any obligations under this
Agreement.

9.4.1 Cost Responsibility. Except as provided in Section 9.3.1, it is expressly
understood that nothing herein shall be construed to in any way relieve EMC of,
or impose upon Duke, the responsibility for any fees, costs, or charges
(including but not limited to congestion costs, transmission losses, or the
costs or charges to secure financial transmission rights or the equivalent
thereof) that may be imposed on EMC by an ISO, RTO, ITC or other future
organization, agency or authority that has been approved by FERC to serve as the
Transmission Provider in connection with the provision of Transmission Service
or Ancillary Services. It is further expressly understood that Duke shall have
no right or interest in any financial transmission rights or the equivalent
thereof that are allocated, assigned, transferred or acquired by EMC.

9.4.2 Congestion Costs. In the event that the Transmission Provider implements a
pricing methodology that allocates congestion costs on a locational basis, in
determining the dispatch order of Duke’s Generation System, Duke shall make no
adverse distinction between Duke’s Native Load and Duke’s obligations to supply
FFR Supplemental Service or Partial Requirements Service, as applicable under
this Agreement. Duke further agrees that, in the event it designates Delivery
Points for Duke’s Generation System, Duke shall make no adverse distinction
between Duke’s Native Load and Duke’s obligations to supply FFR Supplemental
Service or Partial Requirements Service, as applicable under this Agreement. The
Parties shall reasonably cooperate with each other in an effort to develop and
implement congestion management strategies designed to minimize the incurrence
of congestions costs associated with the delivery of electric energy under this
Agreement. Duke will provide EMC with recommended strategies to manage such
congestion costs, under terms that would not subject Duke’s Native Load to any
costs that Duke would not otherwise incur, and if EMC agrees with such
recommendation, Duke will use Commercially Reasonable Efforts to implement the
recommended congestion management strategies. Duke shall also use Commercially
Reasonable Efforts to comply with the congestion management rules that may be
adopted by the Transmission Provider.

 

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Article 10

Operating Committee

10.1 Operating Committee. The Parties shall establish an Operating Committee
consisting of one (1) Representative each. The Operating Committee shall act
only by unanimous agreement or consent. Duke and EMC shall designate their
respective Representatives to the Operating Committee, plus any alternate, by
written notice delivered in accordance with Section 16.22 within thirty
(30) Days after the Effective Date. Each Party’s Representative on the Operating
Committee is authorized to act on behalf of such Party with respect to any
matter arising under this Agreement.

10.2 Duties of the Operating Committee. The Operating Committee shall facilitate
the coordination and interaction between the Parties with respect to the
performance of the duties and obligations imposed on the Parties hereunder,
including development or revision of appropriate protocols and procedures
therefor. The Operating Committee shall not, however, have any authority to
modify or otherwise alter the Parties’ rights and obligations under this
Agreement.

Article 11

Demand Side Management

11.1 Availability of Demand Side Management Resource Programs. EMC may make
available to EMC’s Native Load customers EMC Demand Side Management Resource
Programs to the same extent and under comparable terms and conditions as Duke’s
Demand Side Management Resource Programs; provided, however, that EMC may not
make available to EMC’s Native Load customers any demand side management
resource programs or similar programs other than such EMC Demand Side Management
Resource Programs unless EMC is otherwise required by RUS or by applicable Law
to make other demand management side resource programs available to EMC’s Native
Load customers or is otherwise permitted under Section 11.7. Except as set forth
in Section 4.2.6, the terms and conditions of EMC Demand Side Management
Resource Programs shall be applied to EMC’s Native Load customers and enforced
by Duke in the same or comparable manner as they are applied to Duke’s Native
Load retail customers and enforced by Duke. Except as set forth in
Section 4.2.6, in implementing and operating such EMC Demand Side Management
Resource Programs, Duke shall make no adverse distinction with respect to EMC’s
Native Load.

11.2 Changes to Demand Side Management Resource Programs. Upon ninety (90) Days
prior written notice, Duke shall advise EMC of any modifications, additions, or
deletions that have been or will be made to the Demand Side Management Resource
Programs, and the EMC Demand Side Management Resource Programs available
hereunder to EMC’s Native Load customers shall be deemed to have been revised to
reflect such modifications, additions, or deletions without any further action
required by either Party.

11.3 Credits. Except for any EMC Demand Side Management Resource Program
implemented pursuant to Section 11.7 of this Agreement, for each EMC Native Load
customer

 

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that implements an EMC Demand Side Management Resource Program, EMC shall be
entitled to a billing credit. Such billing credit shall be calculated in
accordance with the credit applicable for the Demand Side Management Resource
Program, as specified in the rider approved and on file with NCUC for such
Demand Side Management Resource Program. Each Month, Duke shall aggregate the
total billing credits to which EMC is entitled pursuant to this Section 11.3,
and provide EMC a credit on the Monthly statement delivered in accordance with
Section 13.2 equal to the total billing credits for such Month.

11.4 Necessary Arrangements. To the extent that an EMC Native Load customer
agrees to implement an EMC Demand Side Management Resource Program, the Parties
shall cooperate in preparing any detailed implementation procedures and
arrangements required to implement such program, provided that, except for any
EMC Demand Side Management Resource Program implemented pursuant to Section 11.7
of this Agreement, Duke shall retain sole operational control over such EMC
Demand Side Management Resource Program implemented. The failure of the Parties
to agree on detailed implementation procedures and obligations shall not affect
Duke’s obligation to provide EMC with credits as determined by Section 11.3.

11.4.1 Audits. For each EMC Demand Side Management Resource Program whose credit
depends upon the number of EMC Native Load customers, EMC shall be required to
provide Duke written notice, by no later than January 31 of each Year, of the
number of EMC Native Load customers with whom EMC has entered into arrangements
pursuant to this Section 11.4 for such EMC Demand Side Management Resource
Program. Duke shall have the right periodically to perform audits, in accordance
with the terms of Section 13.6, to verify the accuracy of the notices concerning
the number of EMC Native Load customers with whom EMC has entered into
arrangements for each EMC Demand Side Management Resource Program. Based on the
results of such audits, Duke shall be entitled, in accordance with the terms of
Section 13.2.2, to revise or adjust the level of credits that Duke previously
had provided EMC.

11.5 Start-Up Conditions. No later than sixty (60) Days after the Effective
Date, Duke shall conduct a system-wide test of each EMC Demand Side Management
Resource Program to determine its capability. Duke shall provide EMC with the
results of such test no later than five (5) Business Days after the completion
of the system-wide test. Duke shall not be required to provide credits for EMC
Demand Side Management Resource Programs unless the applicable standards and
requirements specified for Duke’s Demand Side Resource Management Programs under
the riders approved and on file with the NCUC shall have been met, and the
testing provided for in this Section 11.5 shall have been accomplished.

11.6 Periodic Testing. Duke shall have the right periodically, but no less than
once per Year, to conduct a system-wide test of each EMC Demand Side Management
Resource Program to determine whether the tested EMC Demand Side Management
Resource Program is capable of providing a level of demand reduction equal to
the level of the credit that EMC is, at the time of such system-wide test,
receiving for such EMC Demand Side Management Resource Program. Subject to
Section 11.6.1, if, at the time of such system-wide test, one or more EMC Demand
Side Management Resource Program(s) do not provide the level of demand reduction
equal to the level of the credit that EMC is receiving for such EMC Demand Side
Management Resource Program(s), Duke shall have the right to (i) reduce the
credit provided to EMC to the actual level of demand reduction provided at the
time of the system-wide test and, in accordance with the

 

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terms of Section 13.2.2, to revise or adjust the level of credits that Duke
previously had provided EMC, and (ii) provide written notice within ninety
(90) Days of the system-wide test, to cancel such EMC Demand Side Management
Resource Program(s).

11.6.1 Retesting. Within sixty (60) Days of any failure of a system-wide test
for an EMC Demand Side Management Resource Program, EMC shall have the right to
have Duke conduct a retest in order to demonstrate that such EMC Demand Side
Management Resource Program is capable of providing the level of demand
reduction equal to the level of the credit that EMC previously was receiving for
such EMC Demand Side Management Resource Program. To the extent that any such
system-wide retest demonstrates that the EMC Demand Side Management Resource
Program is capable of providing demand reduction, the credit provided to EMC
shall be restored to the prior level or such lesser level as demonstrated by the
result of such rescheduled test and, to the extent applicable, Duke shall, in
accordance with the terms of Section 13.2.2, revise or adjust the level of
credits that Duke previously had provided EMC and any notice to terminate
rendered by Duke pursuant to 11.6 shall be null and void.

11.7 EMC Demand Side Management. If Duke’s Annual Planning Period shifts from
the Summer Period to the Winter Period, then EMC shall have the authority to
implement and call upon EMC Demand Side Management Resource Programs to control
EMC’s Native Load demands coincident with the twenty (20) highest Hourly
(integrated sixty-minute) Duke Schedule 1 Demands during the Winter Period to
the level equal to but not below the average of (i) the average of EMC’s Native
Load demands coincident with the twenty (20) highest Hourly (integrated
sixty-minute) Duke Schedule 1 Demands during the immediately preceding Summer
Period and (ii) the average of EMC’s Native Load demands coincident with the
twenty (20) highest Hourly (integrated sixty-minute) Duke Schedule 1 Demands
during the second preceding Summer Period. For example, if (i) the Annual
Planning Period during May 2012 - April 2013 is the Summer Period (May 2012 -
September 2012), and the average of EMC’s integrated sixty (60) minute EMC
Native Load demands coincident with the twenty (20) highest Hourly Duke Schedule
1 Demands during such period is 100 MWs; and (ii) the Annual Planning Period
during May 2013 - April 2014 is the Winter Period (October 2013 - April 2014),
and the average of EMC’s integrated sixty (60) minute EMC Native Load demands
coincident with the twenty (20) highest Hourly Duke Schedule 1 Demands during
the Summer Period immediately preceding such Winter Period (i.e., May 2013 -
September 2013) is 102 MWs; then EMC may call upon EMC Demand Side Management
Resource Programs to control EMC’s integrated sixty (60) minute EMC Native Loads
demands coincident with the twenty (20) highest Hourly Duke Schedule 1 Demands
during October 2013 - April 2014 to the level equal to but not below 101 MWs. It
is expressly acknowledged that (a) Duke shall also have the right to call upon
any available EMC Demand Side Management Resource Program implemented pursuant
to this Section 11.7, and (b) EMC shall not be entitled to a billing credit
under Section 11.3 (or any other provision of this Agreement) in connection with
any EMC Demand Side Management Resource Program implemented pursuant to this
Section 11.7.

 

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Article 12

Modification of This Agreement

12.1 Unilateral Modification. Except as provided in Section 12.3:

No unilateral modification, amendment or other change to the terms of this
Agreement shall be permitted or deemed effective for any reason, and the rates,
terms and conditions specified herein shall not be subject to change through
application to FERC pursuant to the provisions of Sections 205 or 206 of the
Federal Power Act absent the written agreement of both Parties. Any amendment or
modification to this Agreement shall be deemed enforceable if and only if such
amendment or modification (a) has been reduced to writing, (b) has been agreed
to and duly executed by both Parties in writing, and (c) has received all
requisite approvals of Governmental Authorities necessary for the effectiveness
thereof. Each Party hereby irrevocably waives its rights, including any rights
under Sections 205 and/or 206 of the Federal Power Act, to file a complaint,
request an investigation, or make any unilateral rate-change request seeking:
(a) an order from FERC finding that any rate or provision in this Agreement is
unjust or unreasonable; (b) any refund with respect to this Agreement’s rates;
or (c) any other unilateral modification to this Agreement. Each Party agrees
not to make any such unilateral filing or request, and agrees and warrants that
these covenants and waivers shall be binding notwithstanding any regulatory,
market, or other change that may occur at any time during the Term.

12.2 Mobile-Sierra Public Interest Standard. Except as provided in Section 12.3,
to the extent this Agreement is challenged by any person or its terms are
subjected to review under the Federal Power Act or other Laws, the “just and
reasonable” standard shall not apply. Instead, absent the agreement of both
Parties to the proposed change, and except as provided in Section 12.3, the
standard of review for changes to this Agreement proposed by a Party, a
non-party, or FERC acting sua sponte shall be the “public interest” standard of
review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350
U.S. 332 (1956); Federal Power Commission v. Sierra Pacific Power Co., 350 U.S.
348 (1956).

12.3 Changes To Certain Charge Components. Notwithstanding anything else herein
to the contrary, nothing contained herein shall be construed as affecting in any
way the right of either Party to unilaterally make application to FERC under
Sections 205 or 206 of the Federal Power Act (i) to change the depreciation
rates and nuclear decommissioning accrual used in Schedule 1, (ii) to include
additional cost items that are incurred in providing FFR Supplemental Service or
Partial Requirements Service, as applicable, to EMC that are not included in
Schedule 1, (iii) to exclude from Schedule 1 cost items that are no longer
incurred in providing FFR Supplemental Service or Partial Requirements Service,
as applicable to EMC, or (iv) to change Schedule 1 to reflect changes in Duke’s
accounting consistent with the Accounting Requirements (including the addition
of new accounts and the removal of obsolete accounts). In addition, in the event
that (a) EMC implements new time-of-use rates or materially modifies its
existing time-of-use rates, for some or all of EMC’s Native Load customers,
(b) such rates result in a reduction of EMC’s Monthly Billing Demand under
Sections 7.2.6.3.2 or 7.3.2.2, and (c) such Monthly Billing Demand reduction
does not result in a commensurate reduction in the EMC demands that Duke
utilizes in Duke’s Generation Planning Practices, Duke may make unilateral
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FERC under Section 205 of the Federal Power Act to change the calculation of the
Monthly Billing Demand set forth in Sections 7.2.6.3.2 or 7.3.2.2 to more
appropriately reflect the costs that Duke incurs in providing service under this
Agreement. In the event that Duke makes such a filing with FERC, EMC may oppose
such filing, and, in addition, shall be free to propose any other method for
calculating the Monthly Billing Demands set forth in Sections 7.2.6.3.2 or
7.3.2.2 to more appropriately reflect the costs that Duke incurs in providing
service under this Agreement.

12.4 Standard of Review for Permitted Changes. The Parties acknowledge that, as
of the Effective Date, FERC has issued a proposed rule that, if adopted, would
specify the language for parties to include in future agreements where the
parties intend that the “just and reasonable” standard of review apply to
amendments to the agreements. Notwithstanding the language that ultimately may
be adopted by FERC, it is the intent of the Parties that the standard of review
that FERC shall apply when acting on proposed modifications to this Agreement
that are permitted under Section 12.3, either on FERC’s own motion or on behalf
of a signatory or non-signatory, shall be the “just and reasonable” standard of
review rather than the “public interest” standard of review.

12.5 Scope of Waiver. Nothing in this Article 12 shall be construed to modify or
limit any Party’s right to enforce the express terms of this Agreement as they
are written in this Agreement.

Article 13

Billing and Payment

13.1 Billing Period. Unless otherwise specifically agreed upon by the Parties in
the terms of this Agreement or otherwise in writing, the Month shall be the
standard period for determining all billings and payments under this Agreement.

13.2 Billing Statements.

13.2.1 Initial Statements. After the end of each Billing Period, Duke shall
deliver to EMC a statement setting forth for the Billing Period (i) the sum of
the electric energy delivered and/or received for all Hours during that Billing
Period, and (ii) Duke’s calculation of any amounts due from EMC under this
Agreement for the Billing Period. In addition, in the event that there are
amounts due from Duke to EMC under this Agreement for a Billing Period, EMC
shall deliver to Duke, after the end of such Billing Period, a statement setting
forth for the Billing Period EMC’s calculation of any amounts due from Duke
under this Agreement for the Billing Period. Notwithstanding the foregoing, a
Party’s failure to render a statement as set forth above shall not relieve the
other Party from its obligation to make payment to the billing Party when such
statement is rendered, provided such statement is rendered within one (1) year
after the end of the Billing Period.

13.2.2 Subsequent Payment Adjustments. The Parties understand that in certain
cases Monthly billings will need to be made on an estimated basis. In addition,
the Parties understand that after-the-fact adjustments to amounts owed or
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reflect correctly the amounts payable by one Party to the other under this
Agreement. Each Party shall cooperate in good faith with the other Party to
obtain the requisite information and perform the necessary computations so as to
true-up or otherwise adjust any estimated or adjusted billings promptly.

13.3 Timeliness of Payment. Unless otherwise agreed by the Parties, all
statements rendered under this Agreement, whether by Duke or EMC, shall be due
and payable in accordance with each Party’s statement instructions on or before
the later of the twentieth (20th) Day of each Month, or the tenth (10th) Day
after receipt of the statement or; if such Day is not a Business Day, then on
the next Business Day. Each Party shall make payments in immediately available
funds by electronic funds transfer, or by other mutually agreeable method, to
the account designated in writing by the other Party. Any non-disputed amounts
(other than amounts for which payment may be withheld pursuant to Section 13.5)
not paid by the due date shall be deemed delinquent and shall accrue interest at
the Interest Rate, such interest to be calculated from and including the due
date to but excluding the date the delinquent amount is paid in full.

13.4 Netting of Payments. The Parties hereby agree that they shall discharge
mutual debts and payment obligations due and owing to each other on the same
date through netting, in which case all amounts owed by each Party to the other
Party under this Agreement during the Billing Period, including any related
interest, payments, and credits, shall be netted so that only the excess amount
remaining shall be paid by the Party who owes it. If no mutual debts or payment
obligations exist and only one Party owes a debt or obligation to the other
Party during the Monthly Billing Period, including but not limited to any
interest, payments, or credits, that Party shall pay such sum in full when due.

13.5 Disputes and Adjustments of Statements. A Party may, in good faith, dispute
the correctness of any statement or any adjustment to a statement, rendered
under this Agreement or adjust any statement for any arithmetic or computational
error within twenty-four (24) Months of the date the statement, or adjustment to
a statement, was rendered. If a statement or portion thereof, or any other claim
or adjustment arising under this Agreement is disputed, the disputing Party
shall provide written notice to the other Party (the “Billing Dispute Notice”)
which (a) states the good faith basis for the dispute, (b) specifies the amount
in dispute (the “Disputed Amount”), if any, and (c) provides documentation
reasonably supporting the determination of the Disputed Amount. The disputing
Party shall, at its option, (a) make payment to the other Party of the Disputed
Amount under protest and thereafter shall be reimbursed by the other Party for
any amount determined to be refundable after the resolution of such dispute or
(b) withhold one half (1/2) of the Disputed Amount and make payment to the other
Party of the other one half (1/2) of the Disputed Amount. Payment to the other
Party of one half (1/2) of the Disputed Amount shall not relieve the disputing
Party of the obligation to pay interest accrued at the Interest Rate from and
including the date such payment was due to but excluding the date of such
payment of any portion of such Disputed Amount withheld and determined to be due
and payable after the resolution of such dispute. Likewise, the other Party
shall not be relieved of the obligation to pay interest accrued at the Interest
Rate from and including the date such payment was made to but excluding the date
of reimbursement of any portion of such Disputed Amount paid and determined to
be refundable after the resolution of such dispute.

 

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In the event that a Party, by timely notice to the other Party, disputes the
correctness of a statement or portion thereof or any other claim or adjustment
arising under this Agreement, the other Party shall promptly review the disputed
statement or adjustment and shall notify the disputing Party, within forty-five
(45) Days following receipt of the Billing Dispute Notice, of the amount of any
error or the amount of any payment or reimbursement that the disputing Party is
required to make or is entitled to receive. Payments determined to be due by the
disputing Party shall be included on the next Monthly statement, and shall
include interest accrued at the Interest Rate from and including the due date to
but excluding the date paid. Reimbursements determined to be due from the other
Party shall be included on the next Monthly statement, and shall include
interest accrued at the Interest Rate from and including the due date to but
excluding the date reimbursed. If the disputing Party disagrees with the other
Party’s resolution of any dispute, then the Parties shall submit the dispute for
resolution in accordance with Article 14.

Inadvertent overpayments shall be returned upon request or deducted by the Party
receiving such overpayment from subsequent payments, with interest accrued at
the Interest Rate from and including the date of such overpayment to but
excluding the date repaid or deducted by the Party receiving such overpayment.
Any dispute with respect to a statement is waived unless the other Party is
notified in accordance with this Section 13.5 within twenty-four (24) Months
after the statement is rendered or any adjustment to the statement is made.
Neither Party shall have the right to challenge any statement, to invoke
arbitration of the same or to bring any court or administrative action of any
kind questioning the propriety or any other aspect of such statement after a
period of twenty-four (24) Months from the date the statement was rendered;
provided, however, that in the case of a statement containing estimates, such
twenty-four (24) Month period shall run from the date the statement is adjusted
to reflect the actual amounts due.

13.6 Records and Audits. Each Party shall keep such records and documents as may
be needed to afford a clear and complete history of all transactions under this
Agreement, and the cost information used to calculate the charges for such
transactions, for twenty-four (24) Months following the Month in which such
transaction occurs. In addition, during such twenty-four (24) Month period, EMC
shall have the right to audit all records, including phone and computer records,
related to Duke’s performance of its obligation not to adversely distinguish
against EMC’s Native Load under Section 4.3.3, Section 6.2, and Section 9.4.2 of
this Agreement. If a Party initiates an audit through a notice to the other
Party within the time period provided herein, the records and documents related
to such audit are required to be maintained under this Section 13.6, then the
other Party will retain such records and documents until such audit is complete.
If a Party issues an Original Notice pursuant to Article 14, then the Parties
will retain the records and documents relating to such dispute until the
resolution of such dispute. In maintaining such records and documents, EMC and
Duke may rely upon the logs and other meter information routinely recorded by
Transmission Providers or utilities responsible for coordination of the
purchases and sales. During such twenty-four (24) Month period, either Party, or
any Representatives of such Party, shall have the right, at its sole expense and
during normal working Hours, to examine the records of the other Party,
including documents and records held by third parties, to the extent reasonably
necessary to verify the accuracy of any statement, charge, or computation made
pursuant to this Agreement. The Party requesting the audit shall pay the costs
associated with any independent auditor. Upon the request of the auditing Party,
the document custodian of the other Party shall certify to the auditing Party
that,

 

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to the best of such person’s knowledge after reasonable investigation, the
documents and records supplied are true and complete and, in the case of copies,
are true, complete and correct copies of the original documents requested by the
auditing Party.

13.6.1 Procedures. EMC may make a written request for Duke to provide access to
documents and records to verify the accuracy of any statement, charge or
computation made pursuant to this Agreement. Within ten (10) Business Days of
the receipt of a written request from EMC, Duke shall either provide EMC, or its
Representative, with access to the documents and records which are the subject
of the written request or provide EMC with copies of the original documents and
records. If Duke elects to provide EMC, or its Representative, with access to
the documents and records requested by EMC, EMC or its Representative shall be
permitted to make, at its own expense, copies of the documents and records to
which it or its Representative has been provided access. Any copies made by EMC
or its Representative shall be subject to the confidentiality provisions set
forth in Section 16.6. If Duke is unable to provide EMC with access or copies
within ten (10) Business Days of the receipt of EMC’s written request because it
is unable to locate or gain access to such documents and records after
reasonable investigation, Duke shall, within ten (10) Business Days of the
receipt of such written request, provide EMC with notice describing the reasons
for its failure to provide access to or copies of the documents and records, its
efforts to obtain such documents and records, and its best estimate of the time
in which EMC will be permitted access to or provided copies of such documents
and records. The twenty-four (24) Month period provided for in Section 13.5
shall be tolled from the date Duke gives notice describing the reasons for its
failure to provide access to or copies of the documents and records until Duke
shall have (i) provided EMC with copies or access to all documents and records
specified in EMC’s written request or (ii) Duke’s document custodian shall have
certified, that to the best of his knowledge after reasonable investigation that
such document does not exist or Duke cannot locate or produce such document or
records.

13.6.2 Adjustments Resulting from Audits. If any audit or examination under this
Section 13.6 reveals any inaccuracy in any statement, the necessary adjustments
in such statement and the payments thereof shall be made promptly and shall
accrue interest at the Interest Rate from the date the overpayment or
underpayment was made until paid; provided, however, that no adjustment for any
statement or payment shall be made unless objection to the accuracy thereof was
made prior to the lapse of twenty-four (24) Months from the rendition thereof,
and thereafter any objection shall be deemed waived.

13.6.3 Confidentiality. The auditing Party shall keep confidential any
information obtained in the audit. If requested, a Party shall provide to the
other Party statements evidencing the quantity of electric energy provided under
this Agreement for up to the prior twenty-four (24) Months. If an audit is
requested with respect to any records held by the a Party or a third party and
those records cannot be disclosed to the requesting Party as a result of a
confidentiality obligation, then to the extent legally permissible, the auditing
Party shall select an independent auditor to perform the audit consistent with
the Parties’ rights under this Agreement and with such confidentiality
arrangements as may be required by the confidentiality obligation in question.

 

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Article 14

Dispute Resolution

14.1 Arbitration. Except as otherwise provided below, any dispute arising out of
or in connection with this Agreement or its performance that cannot be resolved
after good faith discussions and negotiations between the Parties as set forth
in Section 14.2 shall be submitted to binding arbitration. A dispute with
respect to whether a Material Adverse Ruling meets the materiality standard
specified in Section 2.3.2.2(c)(1) or (c)(2) shall be subject to dispute
resolution pursuant to Section 2.3.2.2.2. A dispute with respect to an invoice
shall first be subject to the procedures set forth in Section 13.5, and if such
dispute is not resolved in accordance with such procedures, then such dispute
shall be submitted to binding arbitration in accordance with this Article 14.
Any arbitration commenced under this Article 14 shall be conducted in accordance
with the North Carolina Arbitration Act, N.C.G.S. Section 1-567 et seq., and the
non-administered arbitration rules and procedures of the CPR Institute for
Dispute Resolution (“CPR”) in effect at the time arbitration is commenced,
except where specifically modified by this Agreement.

14.2 Negotiation and Notice of Arbitration. Prior to initiating arbitration
hereunder, a Party shall provide the other Party with written notice of the
dispute, a proposed means for resolving the same, and support for the Party’s
position (“Original Notice”). Thereafter, Representatives of the Parties shall
meet in person to discuss the matter and attempt in good faith to reach a
negotiated resolution of the dispute. The Parties agree to provide and exchange
supporting facts, records and information regarding the dispute (including
calculation and bases) as part of the good faith negotiations. If the Parties
have not agreed upon a resolution of the dispute within thirty (30) Days after
the provision of the Original Notice or such other time period as the Parties
may agree in writing to allow for discussions and negotiation (“Negotiation
Period”), then at any time after the end of the Negotiation Period, a Party may
provide written notice to the other declaring an impasse (“Impasse Notice”) and
initiating binding arbitration in accordance with the further provisions of this
Article 14. A Party providing an Impasse Notice shall also contemporaneously
notify all entities within the EMC Group of the provision of its Impasse Notice.

14.3 Individual, Joint or Consolidated Arbitration. If, within thirty
(30) Business Days of EMC’s provision of an Impasse Notice, Blue Ridge and/or
Rutherford also provides an Impasse Notice relating to substantially the same
issue as raised by EMC’s Impasse Notice, or if Duke contemporaneously provides
each of EMC, Blue Ridge and/or Rutherford an Impasse Notice relating to
substantially the same issue, then each entity within the EMC Group shall have
ten (10) Business Days following the expiration of such thirty (30) Business Day
period to provide written notification to Duke stating whether or not such
entity will voluntarily proceed in a joint or combined arbitration.

If EMC and one or more of the entities within the EMC Group that have provided
or received Impasse Notices within the specified time period relating to
substantially the same issue elect to proceed individually or in more than one
arbitration proceeding, Duke shall have the right to file a motion to
consolidate such Impasse Notices with EMC’s Impasse Notice in a single
proceeding. The motion to consolidate such Impasse Notices shall be served
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Business Days of the date when each entity within the EMC Group has provided
notice as to whether or not it will voluntarily proceed in a consolidated
arbitration. Duke’s motion to consolidate shall be decided in the first
commenced arbitration by one arbitrator (if the Streamlined Arbitration Process
is used) or one (1) arbitration panel (if the Standard Arbitration Process is
used), provided that the arbitrator(s) shall satisfy the qualifications required
pursuant to the third sentence of Section 14.6.1(1) or Section 14.6.2(2), as
applicable, with respect to all entities in the arbitration proceedings that are
the subject of the motion to consolidate. If Impasse Notices are simultaneously
given by EMC and one or more other entities within the EMC Group, then Duke
shall have sole discretion to designate which of the Impasse Notices shall be
treated as the first given for purposes of determining which arbitrator(s) shall
decide the motion to consolidate, and shall provide written notice of such
designation in the motion to consolidate arbitrations. The procedures set forth
in Sections 14.6.1 and 14.6.2 for each arbitration proceeding in which the
motion to consolidate was not filed shall be held in abeyance pending the
decision on the motion to consolidate by the arbitrator(s) in the arbitration
proceeding in which the motion to consolidate was filed.

In determining whether consolidation of one or all is appropriate, the
arbitrator(s) shall consider whether the same or substantially similar issue or
issues will be subject to the arbitration(s); EMC’s reasons for opposing
consolidation and Duke’s reasons for seeking consolidation; and the fundamental
fairness and efficiency in proceeding individually, jointly or consolidated. The
arbitrator(s) decision on the motion to consolidate shall be binding on the
Parties and not subject to appeal.

In the event the motion to consolidate is denied (unless otherwise agreed by the
Parties and the other entities of the EMC Group that have provided or received
such Impasse Notices), the arbitrations shall each proceed, subject to
resolution of scheduling issues, with no arbitration being stayed as a result of
the denial of the motion. In the event the motion to consolidate is granted,
each entity within the EMC Group, other than the entity which is a party to the
proceeding in which the motion to consolidate was filed, shall move for
dismissal of the respective arbitration actions in which it is a party.

14.3.1 Individual Treatment of EMC in Joint or Consolidated Arbitration. For
purposes of joint or combined arbitration, all of the entities within the EMC
Group participating in the proceeding shall be treated as one (1) Party for
purposes of Article 14, with the following exceptions. First, EMC shall be
treated as a separate Party for purposes of Selection of Arbitration Process set
forth in Section 14.4. Second, EMC may reach its own independent, voluntary
resolution with Duke and may pursue its own strategy and prosecute its case with
its own legal counsel in the joint or combined arbitration. Third, EMC will be
treated as a separate Party for purposes of discovery in Section 14.6.1(4) or
14.6.2(4). Fourth, EMC will be treated as a separate Party for purposes of a
Submission and for the adoption of the resolution and the associated monetary
amount with respect to the ultimate decision of the arbitrator(s). Fifth, EMC
will be treated as a separate Party for purposes of the third sentence of
Section 14.6.1(1) and Section 14.6.2(2).

14.4 Selection of Arbitration Process. No later than thirty (30) Days following
receipt of the Impasse Notice, or any longer time period as agreed to by the
Parties, the Parties shall agree on which arbitration process specified herein
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Streamlined Arbitration Process. Should the Parties fail to agree on the
arbitration process within thirty (30) Days following receipt of the Impasse
Notice, then the Standard Arbitration Process shall be used; provided however,
that the Streamlined Arbitration Process shall be used for any dispute where the
damages in dispute or other monetary value at stake is alleged to be two hundred
fifty thousand dollars ($250,000) or less for EMC or Duke, or in a joint or
combined proceeding two hundred and fifty thousand dollars ($250,000) or less
for each entity within the EMC Group that is participating in the proceeding. If
the damages in dispute or other monetary value at stake in a combined proceeding
is alleged to be two hundred fifty thousand dollars ($250,000) or less for EMC
and at least one (1) other of the entities within the EMC Group participating in
a joint or combined proceeding, the Streamlined Arbitration Process shall be
used upon the request of either Party (or any of the other entities within the
EMC Group participating in the proceeding) made within thirty (30) Days
following the receipt of the Impasse Notices.

14.5 Initiation of Arbitration. Unless otherwise agreed by the Parties and
except as provided for in Section 14.3, arbitration shall be deemed to be
initiated when the arbitration process is agreed upon or otherwise determined
pursuant to Section 14.4 (“Selection Date”).

14.6 Arbitration Processes.

14.6.1 Standard Arbitration Process. The following shall be the process that is
used, in accordance with this Article 14, as the Standard Arbitration Process
under this Agreement. By mutual agreement, the Parties may in any given
arbitration and for the purposes of that arbitration alone modify or forego any
procedural requirement or rule specified hereunder as part of the Standard
Arbitration Process:

(1) Selection of Arbitrators. The Party initiating arbitration shall nominate
one (1) arbitrator no later than fifteen (15) Days following the Selection Date.
The other Party shall nominate one (1) arbitrator no later than thirty (30) Days
after the Selection Date. Each of the two Party-nominated arbitrators shall be
unaffiliated with any of the Parties or their predecessors or Affiliates; shall
not be current or former employees of the nominating Party or its predecessors
or Affiliates and shall be without material financial alliance with the
nominating Party or its predecessors or Affiliates such that said arbitrator is
able to participate in the arbitration without evident partiality or actual bias
in favor of the nominating Party; unless such pecuniary interest or affiliation
is expressly acknowledged and waived by all Parties. The two (2) arbitrators
shall jointly appoint a third (3rd), neutral arbitrator within thirty (30) Days
after the nomination of the second (2nd) arbitrator. The neutral arbitrator
shall be the chairperson of the tribunal. This thirty (30) Day period may be
extended to sixty (60) Days by agreement of both Parties. If the two
(2) arbitrators are unable to agree on a third (3rd) arbitrator within the
specified time period, then a third (3rd) arbitrator shall be selected by the
CPR with due regard given to the selection criteria herein and in the subsequent
subsections of Article 14 and input from the Parties and other arbitrators. The
Parties shall request CPR to complete selection of the third (3rd) arbitrator no
later than thirty (30) Days following their request for selection of the
arbitrator. Costs charged by CPR for this service shall be borne one-half
(1/2) by Duke and one-half (1/2) by EMC; provided that if the arbitration
proceeds as a consolidated proceeding pursuant to Section 14.3, the costs
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borne one-half (1/2) by Duke and one-half (1/2) by the entities within the EMC
Group that participate in such consolidated arbitration. In the event CPR should
fail to select the third (3rd) arbitrator within thirty (30) Days following the
Parties’ request for selection of the arbitrator, then any Party may petition a
court of competent jurisdiction in the State of North Carolina to select the
third (3rd) arbitrator. Due regard shall be given to the selection criteria and
input from the Parties and other arbitrators. Each of the arbitrators shall take
an oath of neutrality.

(2) Additional Qualifications of Arbitrators. Unless otherwise agreed to by the
Parties, each of the arbitrators shall be competent and experienced in matters
involving the electricity business in the United States. Such experience shall
be conclusively demonstrated by ten (10) years or more of electric industry
experience as a practicing attorney or other experience or expertise as agreed
to by the Parties.

(3) Replacement of Arbitrators. If prior to the conclusion of the arbitration
any arbitrator becomes incapacitated or otherwise unable to serve, then a
replacement arbitrator with the qualifications specified herein shall be
appointed in the manner and timeframe (such timeframe starting anew following
the unavailability of the arbitrator to be replaced) described in
Section 14.6.1(1) above.

(4) Discovery. Discovery and other pre-hearing procedures shall be conducted as
set forth herein, as otherwise agreed by the Parties, or if they cannot agree,
as determined by a majority of the arbitrators. Each Party shall have the right
to propound up to ten (10) interrogatories, the right to request relevant
documents and records, conduct depositions (including depositions of experts),
designate experts, and obtain the opinion of opposing experts.

(5) Hearing. Within fifteen (15) Days after completion of discovery, each Party
shall contemporaneously submit by overnight delivery and electronic mail to the
arbitrators a precise statement of the dispute, a proposed resolution of the
dispute, including a monetary amount and the supporting calculations if
applicable, and the factual and/or legal support therefor (the “Submission”).
The next Business Day the Parties shall exchange complete Submissions by
overnight delivery and electronic mail. Within fifteen (15) Days after receiving
the other Party’s Submission, each Party may submit by overnight delivery and
electronic mail to the other Party and the arbitrators a reply statement to the
other Party’s Submission. The Parties shall conduct a hearing in Charlotte,
North Carolina no later than the later of (i) sixty (60) Days following
selection of the third (3rd) arbitrator, (ii) forty-five (45) Days after all
pre-hearing discovery has been completed, or (iii) forty-five (45) Days after
the issuance of the arbitrators’ decision denying a motion to consolidate
pursuant to Section 14.3, at which the Parties shall present such evidence,
argument, and witnesses as they may choose. Prior to the beginning of the
hearing, the Parties may submit a joint statement of undisputed facts and/or
issues to be resolved, if the Parties so agree to submit such statement or if
the arbitrators order submission of the statement. If the Parties agree, or if
allowed by a majority of the arbitrators, the Parties each may submit a
post-hearing brief to the arbitrators within ten (10) Business Days of
completion of the hearing. No reply briefs shall be allowed unless otherwise
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14.6.2 Streamlined Arbitration Process. The following shall be the process that
is used, in accordance with this Article, as the Streamlined Arbitration Process
under this Agreement. By mutual agreement, the Parties may in any given
arbitration and for the purposes of that arbitration alone modify or forego any
procedural requirement or rule specified hereunder as part of the Streamlined
Arbitration Process:

(1) Selection of Arbitrator. No later than thirty (30) Days following the
Selection Date, the Parties shall agree upon a single arbitrator to conduct the
arbitration. If the Parties are unable to agree on an arbitrator, then the
arbitrator shall be selected by the CPR with due regard given to input from the
Parties and in conformity with the qualifications specified herein. The Parties
shall request CPR to complete selection of the arbitrator no later than thirty
(30) Days following their request for selection of an arbitrator. Costs charged
by CPR for this service shall be borne one-half (1/2) by Duke and one-half
(1/2) by EMC; provided that if the arbitration proceeds as a consolidated
proceeding pursuant to Section 14.3, the costs charged by CPR shall be borne
one-half (1/2) by Duke and one-half (1/2) by the entities within the EMC Group
that participate in such consolidated arbitration. In the event CPR should fail
to select the arbitrator within seventy-five (75) Days after the Selection Date,
then any Party may petition a court of competent jurisdiction in the State of
North Carolina to select the arbitrator. Due regard shall be given to the
selection criteria and input from the Parties. The arbitrator shall take an oath
of neutrality.

(2) Qualification of the Arbitrator. The arbitrator shall be unaffiliated with
any of the Parties or their predecessors or Affiliates, such that the
arbitrator:

(a) Shall not be a current or former employee, advisor, attorney or consultant;

(b) Shall be without material financial alliance, such that said arbitrator is
able to participate in the arbitration without evident partiality or bias,
unless such pecuniary interest or affiliation is expressly acknowledged and
waived by all Parties;

(c) Shall be competent in matters involving the electricity business in the
United States and shall have ten (10) years or more of electric industry
experience as a practicing attorney or such other experience or expertise as
agreed by the Parties; and

(d) Shall take an oath of neutrality.

(3) Replacement of Arbitrator. If prior to the conclusion of the arbitration the
arbitrator becomes incapacitated or otherwise unable to serve, then a
replacement arbitrator with the qualifications specified herein, shall be
appointed in the manner and timeframe (such timeframe starting anew following
the unavailability of the arbitrator to be replaced) described in
Section 14.6.2(1) above.

(4) Discovery. Discovery and other pre-hearing procedures shall be conducted as
set forth herein, as otherwise agreed by the Parties, or if they cannot agree,

 

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as determined by the arbitrator. Each Party shall have the right to propound up
to ten (10) interrogatories, the right to request relevant documents and
records, conduct at least three (3) depositions, in addition to obtaining
discovery of the opinions of any experts and the right to depose any experts
(which are not included in the three (3) depositions above). Additional
discovery may be conducted only as allowed by the arbitrator or agreed by the
Parties.

(5) Hearing. Within fifteen (15) Days after completion of discovery, each Party
shall contemporaneously submit a Submission by overnight delivery and electronic
mail to the arbitrator. The next Business Day, the Parties shall exchange
complete Submissions by overnight delivery and electronic mail. Within fifteen
(15) Days after receiving the other Party’s Submission, each Party may submit by
overnight delivery and electronic mail to the other Party and the arbitrator a
reply statement to the other Party’s Submission. The Parties shall conduct a
hearing in Charlotte, North Carolina no later than the later of (i) forty-five
(45) Days following selection of the arbitrator, (ii) forty-five (45) Days after
all pre-hearing discovery has been completed, or (iii) forty-five (45) days
after the issuance of the arbitrator(s)’ decision denying a motion to
consolidate pursuant to Section 14.3, at which the Parties shall present such
evidence, witnesses, and argument as they may choose. Unless otherwise ordered
by the arbitrator, at least two (2) Days prior to the beginning of the hearing,
the Parties may submit a joint statement of undisputed facts and/or issues to be
resolved if the Parties so agree to submit such statement or if the arbitrator
orders submission of the statement. If the Parties agree, or if allowed by the
arbitrator, the Parties may each submit a post-hearing brief to the arbitrator
within ten (10) Business Days of completion of the hearing. No reply briefs
shall be allowed unless otherwise permitted by the arbitrator.

14.7 Decision. The arbitrator (if the Streamlined Arbitration Process is used)
or a majority of the arbitrators (if the Standard Arbitration Process is used)
shall render his or their decision in favor of one Party or the other by
adopting the resolution and the associated monetary amount requested by the
prevailing Party in its Submission. The arbitrator(s) must determine the
prevailing Party by interpreting the meaning and intent of the language of this
Agreement, applying the applicable Law to the relevant facts and selecting the
arbitration ruling proposed by the Parties that most closely correlated to their
decision based upon this Agreement, the applicable Law and the relevant facts.
In rendering the decision, the arbitrator(s) shall interpret and apply the terms
and conditions of this Agreement, and consider any relevant evidence and
testimony, but shall not have the power to add to or modify any provision of
this Agreement or to recommend any additions or modifications or to render a
decision that does not adopt the resolution and the associated monetary amount
requested by the prevailing Party in its Submission. The arbitrator(s) shall
render a decision within thirty (30) Days following the later of the conclusion
of the hearing or the submission of post-hearing briefs. The decision shall be
rendered in writing and shall be final and binding upon the Parties. The
decision may be filed in a court of competent jurisdiction, confirmed and may be
enforced by any Party as a final judgment in such court, but shall have no
precedential effect on future arbitrations under or arising out of this
Agreement except for purposes of enforcement in a court of competent
jurisdiction or for the assertion of collateral estoppel/issue preclusion or res
judicata/claim preclusion in another proceeding. The Parties expressly
acknowledge that no appeal of the arbitrator’s (or arbitrators’) decision shall
be allowed. Except as provided in Section 16.6.4 of this Agreement, the
arbitrator(s) shall have no authority to award special, exemplary, punitive, or
consequential damages.

 

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14.8 Expenses. The compensation and expenses of the arbitrator(s) shall be
chargeable to and borne one-half (1/2) by Duke and one-half (1/2) by EMC;
provided, that if the arbitration proceeds as a consolidated proceeding pursuant
to Section 14.3, the costs charged by CPR shall be borne one-half (1/2) by Duke
and one-half (1/2) by the entities within the EMC Group that participate in such
consolidated arbitration; provided, however, that each Party shall bear the
compensation and expenses of its own counsel and any retained or expert
witnesses. Any costs incurred by a Party in seeking judicial enforcement of any
final decision rendered by arbitration conducted under this Article 14 shall be
chargeable to and borne exclusively by the Party against whom such court order
is obtained. It is expressly acknowledged that the failure of the entities
within the EMC Group that participate in a consolidated arbitration to reach
agreement on the allocation of costs among such entities shall not increase
Duke’s share of the costs incurred under this Section 14.8 or Sections 14.6.1(1)
or 14.6.2(1) above one-half (1/2) of the total costs at issue.

14.9 Effect of Dispute Resolution Procedures. The initiation of the dispute
resolution procedures under this Article 14 shall not affect the Parties’
respective obligations and rights under this Agreement during the pendency of
any such procedures.

14.10 Confidentiality. The existence, contents, or results of any arbitration
proceeding under this Article 14 shall be deemed to be Confidential Information
and shall be subject to the confidentiality provisions set forth in
Section 16.6.

Article 15

Credit and Collateral Requirements

15.1 Posting of Collateral. To protect either Party against potential default of
payment or performance, any Party that experiences a Material Adverse Change
(“MAC”) shall post as collateral an amount equal to the two (2) highest Months
of Duke’s billings to EMC for the previous twelve (12) Months. Such collateral
shall be provided by the Party experiencing the MAC in cash, depository
agreements, or letters of credit from a financial institution reasonably
acceptable to the Party not experiencing the MAC within three (3) Business Days
after the date on which the MAC occurs. Any such depository agreement or letter
of credit shall be in a form satisfactory to the Party not experiencing the MAC
in its reasonable discretion. A financing institution participating in a
depository agreement or providing a letter of credit entered into for purposes
of this Section 15.1 shall be deemed reasonably acceptable by the Party not
experiencing the MAC if it has and maintains a minimum long term credit rating
of A- or better from S&P, A3 or better from Moody’s or A- or better from Fitch
Ratings, or is with or from CFC and/or CoBank.

15.2 Material Adverse Change. Duke shall be deemed to have experienced a MAC if
its unsecured, senior long-term debt obligations not supported by third party
credit enhancements are rated below BBB- by S & P and below Baa3 by Moody’s. EMC
shall be deemed to have experienced a MAC (a) if it fails to meet the
then-current Debt Service Coverage Ratio required

 

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of EMC by RUS, as determined by averaging the two (2) highest annual ratios
during the most recent three (3) Years, and (b) the then-current Times Interest
Earned Ratio required of EMC by RUS, as determined by averaging the two
(2) highest annual ratios during the most recent three (3) Years. The failure by
either Party to timely fulfill a payment or reimbursement obligation, including,
in the case of Duke a failure to pay Cover Costs, under this Agreement also
shall constitute a MAC by that Party.

15.3 Continuing Nature of Collateral Requirement. The Party experiencing the MAC
must continue to post the collateral until the MAC is cured. The Party not
experiencing the MAC shall have the right to draw upon, use, and dispose of all
collateral that is posted under Section 15.1, if the Party experiencing the MAC
fails to fulfill any of its payment or reimbursement obligations, including, in
the case of Duke a failure to pay Cover Costs, under this Agreement, and such
failure constitutes an Event of Default. In the event any collateral is drawn
upon by the Party not experiencing the MAC in accordance with the provisions of
Section 15.5, the Party experiencing the MAC shall within three (3) Business
Days fully replenish the collateral to the monetary amount required by
Section 15.1.

15.4 Interest on Cash Used as Collateral. Any interest earned on collateral held
under a depository agreement with a financial institution shall be paid to the
Party posting the collateral in accordance with the terms of the depository
agreement. If cash collateral is posted, the Party holding the cash collateral
shall pay interest to the Party posting the cash collateral at the Federal Funds
Effective Rate. The Federal Funds Effective Rate is the rate for that Day
opposite the caption “Federal Funds (Effective)” as set forth in the weekly
statistical release designated as H.15(519), or any successor publication
published by the Board of Governors of the Federal Reserve System. The Party
posting the cash collateral shall invoice the Party holding the cash collateral
for interest accrued during the previous Month and the Party holding the cash
collateral shall pay such amount within ten (10) Days of receipt of such
invoice.

15.5 Grant of Security Interest/Remedies. To secure their obligations under this
Agreement, any Party posting collateral under Section 15.1 hereby grants to the
Party not experiencing the MAC a present and continuing security interest in,
and lien on (and right of setoff against), and assignment of, all cash
collateral, cash equivalents collateral and any and all proceeds resulting
therefrom or the liquidation thereof, whether now or hereafter held by, on
behalf of, or for the benefit of, that Party, and the posting Party agrees to
take such action as the non-posting Party reasonably requires in order to
perfect the non-posting Party’s first-priority security interest in, and lien on
(and right of setoff against), such collateral and any and all proceeds
resulting therefrom or from the liquidation thereof. Upon or any time after the
occurrence or deemed occurrence and during the continuation of an Event of
Default, the Non-Defaulting Party may do any one or more of the following:
(i) exercise any of the rights and remedies of a secured party with respect to
all collateral, including any such rights and remedies under Law then in effect;
(ii) exercise its rights of setoff against any and all property of the
Defaulting Party in the possession of the Non-Defaulting Party or its agent;
(iii) draw on any outstanding letter of credit issued for its benefit; and
(iv) liquidate all collateral then held by or for the benefit of the
Non-Defaulting Party free from any claim or right of any nature whatsoever of
the Defaulting Party, including any equity or right of purchase or redemption by
the Defaulting Party. The Party drawing upon the collateral shall apply the
collateral drawn upon or otherwise realized upon the exercise of any rights or
remedies granted under this Section 15.5, to reduce the obligations of

 

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the Party posting the collateral under this Agreement (the posting Party
remaining liable for any amounts owing after such application), and to return
any surplus collateral or proceeds remaining after the posting Party’s
obligations are satisfied in full.

15.6 Notice, Information. Each Party shall provide the other Party written
notice within two (2) Business Days of the occurrence of an MAC affecting the
notifying Party or of the occurrence of any event that may reasonably cause a
MAC. Duke shall provide EMC a copy of Duke’s annual report, and any amendments
thereto, within thirty (30) Days after the issuance/filing with the Securities
and Exchange Commission of such report or amendment. EMC shall provide Duke with
(a) a copy of EMC’s RUS Form 7 each Year, and any amendments to such Form 7,
within thirty (30) Days after the filing of such report or amendment with RUS,
and (b) the annual Debt Service Coverage Ratio and Times Interest Earned Ratio
required of EMC by RUS for the Year in which the Effective Date occurs and for
the two (2) immediately preceding Years.

 

15.7 Definitions.

“Accounting Requirements” means any system of accounts prescribed by a federal
regulatory authority having jurisdiction over the applicable Party or, in the
absence thereof, the requirements of generally accepted accounting principles
applicable to businesses similar to that of the applicable Party; and provided,
further, that EMC may use a uniform system of accounts prescribed from
time-to-time by the RUS.

“CFC” means the National Rural Utilities Cooperative Finance Corporation.

“CoBank” means CoBank, ACB.

“Depreciation and Amortization Expense” shall mean an amount constituting the
depreciation and amortization of EMC computed pursuant to Accounting
Requirements. As used in the calculation of the Debt Service Coverage Ratio,
Depreciation and Amortization Expense shall mean the amount reported on the RUS
Form 7, Part A, Line 12(b), its successor, or the equivalent.

“Debt Service Coverage Ratio” means the ratio determined as follows: for any
Year add (i) Patronage Capital or Margins (RUS Form 7, Part A, Line 28(b), or
its successor), plus (ii) Interest Expense (RUS Form 7, Part A, Lines 15(b) and
16(b), or its successor), plus (iii) Depreciation and Amortization Expense for
such year (RUS Form 7, Part A, Line 12 (b), or its successor), plus (iv) Short
Term Interest Expense; and divide such total by the sum of all payments of
Principal and Interest Expense during such year (RUS Form 7, Part N, Line 12(d),
or its successor) plus Short Term Interest Expense; provided however, that in
the event that any long-term debt has been refinanced during such Year the
payments of Principal and Interest Expense required to be made during such Year
on account of such long-term debt shall be based (in lieu of actual payments
required to be made on such refinanced long-term debt) upon the larger of (a) an
annualization of the payments required to be made with respect to the refinanced
debt during the portion of such Year such refinancing debt is outstanding or
(b) the payment of Principal and Interest Expense required to be made during the
following Year on account of such refinancing debt.

 

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“Equity” shall mean EMC’s equities (RUS Form 7, Part C, Line 35, its successor,
or the equivalent) computed pursuant to the Accounting Requirements.

“Interest Expense” as used in the calculation of the Debt Service Coverage
Ratio, Interest Expense shall mean the amount reported on the RUS Form 7, Part
A, Lines 15(b) and 16(b), its successor, or the equivalent.

“Material Adverse Change” or “MAC” shall have the meaning specified in
Section 15.2.

“Patronage Capital or Margins” as used in the calculation of the Debt Service
Coverage Ratio or TIER, shall mean the amount currently reported in the RUS Form
7, Part A, Line 28(b), its successor, or the equivalent.

“Principal and Interest Expense” shall mean that amount of principal billed on
account of total long-term debt of EMC as computed pursuant to the Accounting
Requirements. As used in the calculation of the Debt Service Coverage Ratio,
Principal and Interest Expense shall mean the amount currently reported on RUS
Form 7, Part N, Line 12(d), or its equivalent.

“Restricted Rentals” shall mean all rentals required to be paid under finance
leases and charged to income, exclusive of any amounts paid under such lease
(whether or not designated therein as rental or additional rental) for
maintenance or repairs, insurance, taxes, assessments, water rates or similar
charges. For the purpose of this definition the term “finance lease” shall mean
any lease having a rental term (including the term for which such lease may be
renewed or extended at the option of the lessee) in excess of three (3) years
and covering property having an initial cost in excess of two hundred fifty
thousand dollars ($250,000) other than automobiles, trucks, trailers, other
vehicles (including aircraft and ships), office, garage and warehouse space and
office equipment (including computers).

“Short Term Interest Expense” shall mean an amount constituting the interest
expense with respect to the total short-term debt of EMC, computed pursuant to
Accounting Requirements, provided that all short-term debt obtained from either
CFC or CoBank shall be excluded.

“Times Interest Earned Ratio” or “TIER” shall mean the ratio determined as
follows for each year: add (i) Patronage Capital or Margins of EMC and
(ii) Interest Expense of EMC, and divide the total so obtained by Interest
Expense of EMC.

 

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Article 16

Additional Terms

16.1 Representations Warranties and Covenants.

16.1.1 Representations and Warranties.

16.1.1.1 Mutual Representations and Warranties. Each Party represents and
warrants to the other Party on the Effective Date, the Commencement Date and the
first Day of any Extension Term that:

(1) There is not pending or, to its knowledge, threatened against it or any of
its Affiliates any Legal Proceeding that could materially adversely affect its
ability to perform its obligations under this Agreement;

(2) No event with respect to it has occurred or is continuing that would
constitute an Event of Default, and no such event would occur as a result of its
entering into or performing its obligations or circumstances under this
Agreement;

(3) It is acting as principal for its own account and has made its own
independent decision to enter into this Agreement;

(4) It has knowledge and experience in financial matters and in the electric
industry that enables it to evaluate the merits and risks of this Agreement, and
it is capable of assuming such risks. It is acting for its own account, has made
its own independent decision to enter into this Agreement and as to whether this
Agreement is appropriate and proper for it based on its own judgment, is not
relying upon the advice or recommendations of the other Party in doing so, and
is capable of assessing the merits of and understanding, and understands and
accepts, the terms, conditions, and risks of this Agreement;

(5) It has entered into this Agreement in connection with the conduct of its
business, and it has the capacity or ability to make or take delivery of all
products or services referred to in this Agreement;

(6) The other Party is not acting as a fiduciary or an advisor with respect to
this Agreement;

(7) It is not Bankrupt and there are no proceedings pending or being
contemplated by it or, to its knowledge, threatened against it that could result
in it being or becoming Bankrupt; and

(8) It is an entity subject to the procedures and substantive provisions of the
United States Bankruptcy Code applicable to U.S. corporations generally.

 

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16.1.1.2 Continuing Mutual Representations. Each Party represents, and warrants
that on each of the Effective Date, the Commencement Date and throughout the
Term, it will cause the following to be materially true and correct:

(1) It is duly organized, validly existing and in good standing under the Laws
of the state of its incorporation;

(2) It has all requisite corporate power to own, operate and lease its
properties and carry on its business as contemplated by this Agreement;

(3) Subject to the conditions provided for in Article 3, it has all lender
authorizations and authorizations from Governmental Authorities necessary for it
to legally perform its obligations under this Agreement;

(4) The execution, delivery and performance of this Agreement and any other
documentation it is required to deliver under this Agreement are within its
powers, have been duly authorized by all necessary action and do not violate any
of the terms or conditions in its governing documents, any contract or other
agreement to which it is a party or any Law applicable to it;

(5) The individual(s) executing and delivering this Agreement and any other
documentation required to be delivered under this Agreement are duly empowered
and authorized to do so at the time of such execution and delivery; and

(6) This Agreement has been duly and validly executed and delivered by such
Party and constitutes such Party’s legally valid and binding obligation
enforceable against it in accordance with the terms thereof, subject to any
Equitable Defenses.

16.1.1.3 Additional Representations and Warranties of Duke. Duke further
represents and warrants that:

(1) Subject to the conditions provided for in Article 3, Duke is fully
authorized to sell the electric capacity and energy and Scheduling Agent
Services it is obligated to provide under this Agreement at the rates and terms
contemplated by this Agreement;

(2) Nothing in Duke’s contracts with other parties prevents Duke from fully
performing its obligations under this Agreement; and

(3)(a) As of the Effective Date, Duke is a wholly owned direct subsidiary of
Duke Energy Corporation, a Delaware corporation; and

(b) The provisions of the NCUC Order dated March 24, 2006, issued in Docket No.
E-7, Sub. 795, the merger between Duke Energy Corporation, a North Carolina
corporation, and Cinergy Corp., which closed on April 3, 2006, and the
conversion of Duke Energy Corporation,

 

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a North Carolina corporation, to Duke on April 3, 2006, did not adversely affect
(1) the franchise granted to Duke by the NCUC to provide NCUC regulated electric
power generation, transmission, distribution, delivery, or sales and other
related services to the Duke Native Load customers located within the State of
North Carolina, (2) the assets constituting Duke’s Generation System, or
(3) Duke’s ability to perform its obligations under this Agreement.

16.1.1.4 Additional Representations and Warranties of EMC. EMC further
represents and warrants that:

(1) Subject to the conditions provided for in Article 3, EMC is fully authorized
to purchase the electric energy and capacity, and Scheduling Agent Services
provided under this Agreement at the rates and terms contemplated by this
Agreement; and

(2) Nothing in EMC’s contracts with other parties prevents EMC from fully
performing its obligations under this Agreement.

16.1.2 Covenants.

16.1.2.1 Duke. Duke covenants that: (i) neither Duke nor any of its Affiliates
or subsidiaries shall, during the Term, take any action that could reasonably be
anticipated to cause Duke to lose its authority to make wholesale sales of power
as contemplated under this Agreement; (ii) Duke shall not take any action during
the Term that could reasonably be anticipated to cause EMC to lose its authority
to purchase electric capacity and energy and Scheduling Agent Services, as
contemplated by this Agreement and, as a result, EMC loses its authority to
purchase electric capacity and energy and Scheduling Agent Services; and
(iii) Duke shall perform its obligations under this Agreement in accordance with
Prudent Utility Practice, including applicable NERC and SERC guidelines, and the
Transmission Provider’s OATT.

16.1.2.2 EMC. EMC covenants that: (i) it shall not, during the Term, take any
action that could reasonably be anticipated to cause it to lose its authority to
purchase, or Duke to lose its authority to provide, the electric capacity and
energy and Scheduling Agent Services as contemplated by this Agreement and, as a
result, EMC loses its authority to purchase or Duke loses its authority to
provide electric capacity and energy and Scheduling Agent Services; (ii) it
shall, in the event one of the sellers under a contract pursuant to which EMC
has acquired an EMC Contract Resource breaches the terms of the contract in a
manner that materially affects the quality or quantity of deliveries under such
contract, use Commercially Reasonable Efforts to pursue the enforcement of EMC’s
contract rights; (iii) electric energy delivered by MSCG under the PPA qualifies
as Firm Energy; and (iv) EMC shall perform its obligations under this Agreement
in accordance with Prudent Utility Practice, including applicable NERC and SERC
guidelines, and the Transmission Provider’s OATT.

 

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16.2 Assignment.

16.2.1 General.

16.2.1.1 Duke shall not assign this Agreement or its rights hereunder without
the prior written consent of EMC, which consent shall not be unreasonably
withheld; provided, however, that Duke may, without the consent of EMC,
(a) transfer, sell, pledge, encumber or assign this Agreement or the accounts,
revenues or proceeds hereof in connection with any financing or other financial
arrangements (without relieving itself from liability hereunder), or
(b) transfer or assign this Agreement to any person or entity succeeding to all
or substantially all of Duke’s Generation System, and whose unsecured, senior
long-term debt obligations not supported by third party credit enhancements are
rated BBB- or higher by S&P or Baa3 or higher by Moody’s (or, in the
alternative, whose obligations under this Agreement are guaranteed by a
guarantor that meets the foregoing credit standards, provided that the form of
the guaranty shall be reasonably satisfactory to EMC). Duke shall be relieved of
all liability under this Agreement arising on and after the effective date of an
assignment that satisfies the requirements of subpart (b) above.

16.2.1.2 EMC shall not assign this Agreement or its rights hereunder without the
prior written consent of Duke, which consent shall not be unreasonably withheld;
provided, however, that EMC may, without the consent of Duke, (a) transfer,
sell, pledge, encumber or assign this Agreement or the accounts, revenues or
proceeds hereof in connection with any financing or other financial arrangements
(without relieving itself from liability hereunder), or (b) transfer or assign
this Agreement to any person or entity (A) succeeding to substantially the same
Service Area and retail load as the EMC Native Load and to EMC’s rights under
the EMC Contract Resources, and (B):

(i) if the transferee or assignee is an electric membership corporation
organized under Article 2 Chapter 117 of the North Carolina General Statutes, it
meets both the then-current Debt Service Coverage Ratio required of EMC by RUS,
as determined by averaging the two (2) highest annual ratios during the most
recent three (3) years, and the then-current Times Interest Earned Ratio
required of EMC by RUS, as determined by averaging the two (2) highest annual
ratios during the most recent three (3) years, or

(ii) if the transferee or assignee is not an electric membership corporation
organized under Article 2 Chapter 117 of the North Carolina General Statutes,
then its unsecured, senior long-term debt obligations not supported by third
party credit enhancements are rated BBB- or higher by S&P or Baa3 or higher by
Moody’s (or, in the alternative, whose obligations under this Agreement are
guaranteed by a guarantor that meets the foregoing credit standards, provided
that the form of the guaranty shall be reasonably satisfactory to Duke). EMC
shall be relieved of all liability under this Agreement arising on and after the
effective date of an assignment that satisfies the requirements of this subpart
(B)(ii).

16.2.1.3 This Agreement shall be binding upon and inure to the benefit of the
permitted successors and permitted assigns of the Parties. Any assignment made
without a consent required hereunder shall be void and of no force or effect as
against the non-consenting Party. No sale, assignment, transfer, or other
disposition permitted by this Agreement shall affect, release, or discharge any
Party from its rights or obligations under this Agreement, except as may be
expressly provided by this Agreement or by written agreement of the Parties.

 

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16.2.2 Assignment For Security. Notwithstanding any other provision of this
Agreement, a Party, without the other Party’s consent but, if such assigning
Party is then a borrower of the RUS, only with the consent of the Administrator,
may assign, transfer, mortgage or pledge its interest in this Agreement as
security (an “Assignment for Security”) for any obligation secured by any
indenture, mortgage, or similar lien on its system assets without limitation on
the right of the secured party to further assign this Agreement, including the
assignment to create a security interest for the benefit of the Government,
acting through the Administrator, or for the benefit of any third party.

16.2.3 Assignment By Administrator. After any Assignment for Security to the
Administrator or other secured party (including any indenture trustee under any
indenture securing the obligations of the Party), the Administrator or other
secured party, without the approval of the other Party, may (i) cause the
interest in this Agreement of the Party who made the Assignment for Security to
be sold, assigned, transferred or otherwise disposed of to a third party
pursuant to the terms governing such Assignment for Security, or (ii) if the
Administrator or other secured party first acquires this Agreement, sell,
assign, transfer or otherwise dispose of this Agreement to a third party;
provided, however, that in either case the Party who made the Assignment for
Security is in default of its obligations to the Administrator or other secured
party that are secured by such security interest.

 

16.3 Liability and Indemnification.

16.3.1 Indemnity. Each Party shall indemnify, defend, and hold harmless the
other Party from and against:

(1) Any Claims arising from or out of any event, circumstance, act, or incident
first occurring or existing during the period when control and title to any
electric energy is vested in such Party as provided in Section 4.5, and

(2) Any Governmental Charges for which such Party is responsible under
Section 16.7.2.

Notwithstanding the foregoing, no Party will be required to indemnify, defend,
or hold harmless any other Party from any losses or Claims under this
Section 16.3.1 to the extent that such loss or Claim was caused by the other
Party’s gross negligence or willful misconduct.

16.3.2 Liability Limitations.

16.3.2.1 Limitation of Remedies. THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES
AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL
PURPOSES HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR
MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL
BE THE SOLE AND EXCLUSIVE REMEDY, THE RESPONSIBLE PARTY’S LIABILITY SHALL BE
LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR

 

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DAMAGES AT LAW OR IN EQUITY ARE WAIVED REGARDLESS OF THE FAULT, NEGLIGENCE, OR
STRICT LIABILITY OF THE PARTY WHOSE LIABILITY IS RELEASED OR LIMITED THEREBY.

IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY HEREIN PROVIDED, AND EXCEPT AS
OTHERWISE EXPLICITLY PROVIDED IN SECTION 16.6.4, THE RESPONSIBLE PARTY’S
LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES (INCLUDING INTEREST AS
PERMITTED BY APPLICABLE LAW) ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE
AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE
WAIVED (EXCEPT AS PROVIDED IN SECTION 16.29).

UNLESS EXPRESSLY HEREIN PROVIDED, (INCLUDING AS PROVIDED IN SECTION 16.6.4) NO
PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, MULTIPLE,
EXEMPLARY, OR INDIRECT DAMAGES, LOST PROFITS, OR OTHER BUSINESS INTERRUPTION
DAMAGES, BY STATUTE, IN TORT OR IN CONTRACT UNDER ANY INDEMNITY PROVISION OR
OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED
ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES
RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE
BE SOLE, JOINT, OR CONCURRENT, OR ACTIVE OR PASSIVE.

16.3.2.2 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, EACH
PARTY, WITH RESPECT TO THE SUPPLY OF ELECTRIC ENERGY AND CAPACITY TO THE OTHER,
EXPRESSLY NEGATES ANY OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS
OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY WITH
RESPECT TO CONFORMITY TO MODELS OR SAMPLES, MERCHANTABILITY, OR FITNESS FOR ANY
PARTICULAR PURPOSE.

16.3.2.3 Duty to Mitigate. Each Party agrees that is has a duty to mitigate
damages, and each covenants that it shall use commercially reasonable efforts to
minimize any damages it may incur as a result of the other Party’s performance
or nonperformance of this Agreement.

16.4 Force Majeure. Unless otherwise provided by this Agreement, the term “Force
Majeure” means an event or circumstance that: (i) prevents the Party claiming to
be affected by it (the “Claiming Party”) from performing its obligations in
whole or in part under this Agreement; (ii) is not within the reasonable control
of the Claiming Party, or the result of the negligence of the Claiming Party,
and (iii) by the exercise of due diligence, the Claiming Party is unable to
overcome in a commercially reasonable manner, and, without limiting the scope of
the definition, includes acts of God, or the public enemy, or insurrection,
riot, acts of terrorism, civil disturbance or disorder, strikes, fire,
earthquakes, floods, storms or other natural disasters, or actions or restraints
by court order or Governmental Authority or arbitration award (so long as the
Claiming Party has not sought or has opposed, to the extent reasonable, such
actions or restraints). To the extent that the Claiming Party is prevented by
Force Majeure from carrying

 

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out, in whole or part, its obligations hereunder and such Party gives notice and
details of the Force Majeure to the other Party (the “Non-Claiming Party”) as
soon as practicable, then the Claiming Party shall be excused from the
performance of its obligations other than the obligation to make payments then
due or becoming due in respect to performance prior to the Force Majeure, except
as otherwise explicitly provided in this Agreement. The Claiming Party shall
remedy the Force Majeure event with all reasonable dispatch. The Non-Claiming
Party shall not be required to perform or resume performance of its obligations
to the Claiming Party corresponding to the obligations of the Claiming Party
excused by Force Majeure during the period that such Force Majeure remains in
effect. Duke shall not adversely distinguish between EMC’s Native Load and
Duke’s Native Load in claiming an event of Force Majeure.

16.5 Events of Default and Remedies.

16.5.1 Events of Default. For the purposes of this Agreement, an “Event of
Default” means, with respect to a Party (a “Defaulting Party”), the occurrence
of any of the following:

(1) The failure to make, when due, any payment or reimbursement required by this
Agreement (including any amounts to be credited by one Party to the other Party)
or to post or maintain collateral required by this Agreement, if such failure is
not remedied within three (3) Business Days after receipt of written notice of
such failure is given to the Defaulting Party by the other Party
(“Non-Defaulting Party”). For the purposes of this Section 16.5.1(1),
withholding one half (1/2) of a Disputed Amount in accordance with Section 13.5
shall not constitute failure to make, when due, a payment;

(2) Any representation or warranty made by such Party herein is false or
misleading in any material respect when made or when deemed made or repeated;

(3) The failure to perform any material covenant or material obligation set
forth in this Agreement (except to the extent constituting a separate Event of
Default under this Section 16.5), if such failure is not remedied within three
(3) Business Days after receipt of written notice thereof to the Defaulting
Party, provided, that a Party’s failure to perform its obligations under
Section 16.1.2.1(iii) or Section 16.1.2.2(iv) shall not in and of itself
constitute a material failure to perform a material covenant or material
obligation unless such failure, in the case of Duke, results in a substantial
and continuing degradation in reliability of service hereunder or, in the case
of EMC, results in a substantial and continuing degradation in performance
hereunder;

(4) Such Party becomes Bankrupt;

(5) The loss of any authorization from Governmental Authorities necessary to
perform its obligations hereunder in accordance with the terms of this
Agreement;

(6) Such Party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all of its assets to, another entity and, at the

 

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time of such consolidation, amalgamation, merger, or transfer, the resulting,
surviving, or transferee entity fails to assume all of the obligations of such
Party under this Agreement to which it or its predecessor was a party by
operation of law or pursuant to an agreement reasonably satisfactory to the
other Party;

(7) The occurrence and continuation of a default, event of default, or other
similar condition or event that under one or more agreements or instruments,
individually or collectively, relating to indebtedness for borrowed money in an
aggregate amount of not less than nine million dollars ($9,000,000) in the case
of EMC or one hundred fifty million dollars ($150,000,000) in the case of Duke,
that results in the Party’s indebtedness under such agreements or instruments to
become immediately due and payable; and

(8) With respect to such Party’s guarantor, if any:

 

  (a) if any representation or warranty made by a guarantor in connection with
this Agreement is false or misleading in any material respect when made or when
deemed made or repeated;

 

  (b) the failure of a guarantor to make any payment required or to perform any
other material covenant or obligation in any guaranty made in connection with
this Agreement and such failure shall not be remedied within three (3) Business
Days after written notice;

 

  (c) a guarantor becomes Bankrupt;

 

  (d) the failure of a guarantor’s guaranty to be in full force and effect for
purposes of this Agreement (other than in accordance with its terms); or

 

  (e) a guarantor shall repudiate, disaffirm, disclaim, or reject, in whole or
in part, or challenge the validity of any guaranty.

16.5.2 Notice of Event of Default. In the event a Party becomes aware of any
event or circumstance that constitutes an Event of Default, such Party shall
promptly notify the other Party in writing and by telephone.

16.5.3 Effect of Event of Default. If at any time an Event of Default with
respect to a Defaulting Party has occurred and is continuing, the other Party
(the “Non-Defaulting Party”) may do one or more of the following:

(1) If an Event of Default under Section 16.5.1(1) persists for ten (10) Days or
longer, terminate this Agreement in accordance with the notification required
pursuant to Sections 2.3.2.1 and 2.3.3 of this Agreement; or

 

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(2) If an Event of Default (other than an Event of Default under
Section 16.5.1(1)) persists for sixty (60) Days or longer, terminate this
Agreement in accordance with Sections 2.3.2.1 and 2.3.3 of this Agreement,
provided, however, that if the Defaulting Party is diligently pursuing cure, but
such Event of Default is not capable of being cured within sixty (60) Days, then
the period for the Defaulting Party to cure such Event of Default shall be
extended from sixty (60) Days to one hundred eighty (180) Days before the
Non-Defaulting Party may exercise its right to terminate this Agreement pursuant
to this Section 16.5.3(2).

16.5.4 Enforcement of Remedies. The Non-Defaulting Party may exercise any rights
or remedies available at law or equity, subject to the provisions of Article 14
and Sections 15.5 and 16.3 of this Agreement. No delay or failure on the part of
a Non-Defaulting Party to exercise any right or remedy to which it may become
entitled on account of an Event of Default shall constitute an abandonment of
any such right, and the Non-Defaulting Party shall be entitled to exercise such
right or remedy at any time during the continuance of an Event of Default
notwithstanding any delay in enforcing such right. No waiver of any Event of
Default shall constitute a waiver of any later Event of Default; all such
waivers shall be in writing and shall in no circumstance be deemed effective
unless such waiver is made in writing. All of the remedies and other provisions
of this Section 16.5 shall be without prejudice and in addition to any right of
setoff, recoupment, combination of accounts, lien, or other right to which any
Party or any of its Affiliates is at any time otherwise entitled, whether by
operation of law or in equity, under contract, or otherwise.

 

16.6 Confidential Information.

16.6.1 Prior Confidentiality Agreements Unaffected. Any preexisting
confidentiality agreements entered into by the Parties pertaining to the
negotiation and development of this Agreement shall survive by their terms and
shall not be considered modified by this Agreement.

16.6.2 Authorized Disclosure. Each Party agrees to preserve, to the maximum
extent permitted by Law, the confidentiality of Confidential Information
supplied to it by the other Party either during the negotiations leading to this
Agreement or during the course of implementing, performing or winding up this
Agreement. A Party may disclose Confidential Information received from the other
Party to the receiving Party’s Affiliates, auditors, attorneys, consultants,
advisors, persons providing financing to the receiving Party, other entities in
the EMC Group that have entered into substantially similar agreements, and to
other third parties as may be necessary for the receiving Party to perform its
obligations under this Agreement, provided that any such persons agree in
writing to be bound by the confidentiality provisions of this Agreement.
Notwithstanding anything contained in this Section 16.6, Confidential
Information may be disclosed to any Governmental Authority requiring such
Confidential Information, provided that: (i) such Confidential Information is
submitted under applicable provisions, if any, for confidential treatment by
such Governmental Authority; (ii) prior to such disclosure, the Party who
supplied the information is given notice of the disclosure requirement (if time
permits and the other Party’s counsel determines that such notice is permitted
by Law) so that it may take at its own risk and expense whatever action it deems
appropriate, including intervention in any proceeding and the seeking of an
injunction to prohibit such disclosure; and (iii) the Party subject to the
Governmental Authority endeavors to protect the confidentiality of

 

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any Confidential Information to the extent reasonable under the circumstances
and to use its good faith efforts to prevent the further disclosure of any
Confidential Information provided to any Governmental Authority. The Parties
recognize that Duke is required to file periodic reports with FERC that disclose
certain price, quantity, and related data, and such filings shall not be deemed
a violation of this section.

16.6.3 Survival of Confidentiality Obligations. Confidential Information
received from the other Party shall be kept confidential in accordance with the
terms of this Agreement for at least five (5) Years after the termination of
this Agreement.

16.6.4 Right to Remedies. In the event of an unauthorized disclosure to a third
party, the limitations on remedies contained in Section 16.3.2.1 shall not
apply, and, in the event of a breach, Parties shall not have an adequate remedy
at law and accordingly shall, in addition to any other available legal or
equitable remedies, be entitled to an injunction against such breach without any
requirement to post a bond as a condition of such relief.

16.7 Governmental Liabilities.

16.7.1 Minimization of Tax Liability. Each Party shall use reasonable efforts to
implement the provisions of and to administer this Agreement in accordance with
the intent of the Parties to minimize all taxes, so long as neither Party is
materially adversely affected by such efforts.

16.7.2 Governmental Charges.

16.7.2.1 With respect to sales of electric energy made by Duke to EMC, Duke
shall pay or cause to be paid all Governmental Charges imposed by any Government
Authority on or with respect to such sales of electric energy to the extent such
Governmental Charges arise prior to the Delivery Point. EMC shall pay or cause
to be paid all Governmental Charges on or with respect to such sale of electric
energy to the extent such Governmental Charges arise after the Delivery Point
(other than ad valorem, franchise, or income taxes that are related to the sale
of such product and are, therefore, the responsibility of Duke).

16.7.2.2 With respect to sales of electric energy by EMC to Duke, EMC shall pay
or cause to be paid all Governmental Charges on or with respect to the sale of
the electric energy to Duke.

16.7.2.3 In the event a Party is required by Law to remit or pay Governmental
Charges that are the other Party’s responsibility hereunder, the Party
ultimately liable for the Governmental Charge shall promptly reimburse the
remitting Party for such Governmental Charges; provided further that tax
liabilities may be netted pursuant to Section 13.4 of this Agreement. Nothing
will obligate or cause a Party to pay or be liable to pay any Governmental
Charges for which it is exempt under the Law.

16.7.3 Records. If with respect to either Party, any purchase or sale of
electric energy is exempt from Governmental Charges it shall, upon written
request of the other Party, provide a certificate of exemption or other
reasonably satisfactory evidence of exemption, and shall use reasonable efforts
to obtain and cooperate with obtaining any exemption from or reduction of any
Governmental Charges.

 

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16.7.4 Cost of Obtaining FERC Approval. The Parties agree that all fees assessed
by FERC, or expenses incurred in obtaining the approval of FERC for this
Agreement, shall be the sole responsibility of Duke.

16.7.5 Cost of Obtaining RUS Approval. The Parties agree that all fees assessed
by the RUS, or expenses incurred in obtaining the approval of RUS for this
Agreement, shall be the sole responsibility of EMC.

16.8 Choice of Law. The validity, interpretation and performance of this
Agreement and the rights and duties of the Parties arising out of this Agreement
shall be governed by and construed, enforced, and performed in accordance with
the Laws of the State of North Carolina. No principle, doctrine, or rule of
conflicts of law shall modify or alter the applicability of the Laws of the
State of North Carolina to this Agreement.

16.9 Survival of Obligations. Upon the termination of the Parties’ delivery,
sale, purchase, and related service obligations under this Agreement, any
monies, penalties or other charges due and owing under this Agreement shall be
paid, any corrections or adjustments to payments previously made shall be
determined, and any refunds due shall be made, as soon as practicable but no
later than sixty (60) Days after such termination. All indemnity and
confidentiality obligations and audit rights shall survive the termination of
this Agreement in accordance with their respective terms. Upon the effective
date of any termination of this Agreement, each Party’s obligations provided for
in this Agreement will survive termination and remain in effect solely for the
purpose of complying with the provisions of this Section 16.9; OTHERWISE, AS
PROVIDED IN ARTICLE 2, TERMINATION OF THIS AGREEMENT IS ABSOLUTE, AND NO OTHER
OBLIGATIONS, DUTIES, OR RIGHTS WHATSOEVER ARISING UNDER THIS AGREEMENT SHALL
REMAIN IN EFFECT FOLLOWING THE TERMINATION OF THIS AGREEMENT.

16.10 Entire Agreement. This Agreement, and the Schedules and Attachments
attached hereto, constitute the entire and integrated agreement between the
Parties relating to the rates, terms, and conditions set out in this Agreement
as of the Effective Date. This Agreement supersedes all prior agreements (other
than the Confidentiality Agreement which became fully executed on November 22,
2004) whether oral or written, related to the subject matter of this Agreement.
The terms of this Agreement, including any Schedules and Attachments attached
hereto, are controlling, and no parol or extrinsic evidence, including but not
limited prior drafts or projections of future costs or rates, shall be used to
vary, contradict, or interpret the express rates, terms, and conditions of this
Agreement or as a basis for challenging the justness and reasonableness of any
rate, term, or condition of this Agreement.

16.11 Cost Projections.

16.11.1 Duke Cost Projections. Duke makes no warranties or representations
whatsoever concerning any cost or rate projections that it provided in
connection with the negotiations leading up to the execution of this Agreement
and any such projections provided by

 

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Duke under Section 16.26 of this Agreement. EMC assumes the risk of reliance on
any projected costs or rates provided by Duke in connection with the
negotiations leading up to the execution of this Agreement or any projections
provided by Duke under Section 16.26. Any differences between projected costs or
rates provided by Duke and actual costs or rates will not limit or in any way
affect the rates, terms, or conditions of this Agreement or any of the Parties’
rights and obligations hereunder.

16.11.2 EMC Cost Projections. EMC makes no warranties or representations
whatsoever concerning any cost or rate projections that it provided in
connection with the negotiations leading up to the execution of this Agreement
and any such projections provided by EMC during the Term. Duke assumes the risk
of reliance on any projected costs or rates provided by EMC in connection with
the negotiations leading up to the execution of this Agreement or any
projections provided by EMC during the Term. Any differences between projected
costs or rates provided by EMC and actual costs or rates will not limit or in
any way affect the rates, terms, or conditions of this Agreement or any of the
Parties’ rights and obligations hereunder.

16.12 Unique Agreement. This Agreement shall not establish any precedent for any
other services, or be relied upon by either Party for any purpose other than for
the services and payments provided herein.

16.13 No Transfer of Rights. Except as explicitly provided herein, nothing in
this Agreement shall be construed to transfer any rights or obligations that
either Party has under any other agreement to the other Party.

16.14 No Partnership. The Parties are independent contractors. Nothing in this
Agreement shall ever be deemed to create or constitute a partnership, joint
venture, or association between the Parties, or to impose a trust or partnership
duty, obligation, or liability on or with regard to either of the Parties.

16.15 Third Parties. The provisions of this Agreement shall not impart rights
enforceable by any person or entity not a Party or not a permitted successor or
assignee of a Party bound by this Agreement. This Agreement shall not be
construed to create any third party beneficiary rights of any sort.

16.16 Waiver. No waiver of all or any part of this Agreement shall be valid
unless it (a) is reduced to writing, (b) expressly states that the Parties agree
to such waiver, and (c) is signed by the Parties. Except as specifically set
forth herein, neither Duke’s nor EMC’s failure to enforce any provision or
provisions of this Agreement shall in any way be construed as a waiver of any
such provision or provisions as to any future violation thereof, nor prevent it
from enforcing each and every provision of this Agreement at such time or at any
time thereafter. The waiver by either Duke or EMC of any right or remedy shall
not constitute a waiver of its right to assert said right or remedy, at any time
thereafter, or any other rights or remedies available to it at the time of or
any time after such waiver.

16.17 Time of Essence. Time is of the essence for, in, and throughout this
Agreement.

 

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16.18 Headings. The descriptive headings of the various Articles and Sections of
this Agreement (or any Schedules and Attachments attached hereto) have been
inserted for convenience of reference only and in no way shall be deemed to
modify or restrict any of the terms or provisions hereof.

16.19 Severability. Wherever possible, each provision of this Agreement
(including any Schedules or Attachments attached hereto) shall be interpreted in
a manner as to be effective and valid under applicable Law, but if any provision
contained herein shall be found or ruled to be invalid, illegal, or
unenforceable in any respect and for any reason, such provision shall be
ineffective to the extent, but only to the extent, of such invalidity,
illegality, or unenforceable without invalidating the remainder of the provision
or any provision of this Agreement, and in such event, the Parties shall attempt
to negotiate amendments to this Agreement that would permit each Party to
realize the equivalent value of the economic bargain contemplated by this
Agreement absent such finding or ruling.

16.20 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.

16.21 No Public Announcement. The Parties agree that no press release or public
announcement concerning the transaction contemplated by this Agreement will be
made unless mutually agreed to by the Parties in writing; provided, however,
such mutual agreement will not be required if:

(a) The disclosing Party determines that disclosure is reasonably necessary to
(i) comply with applicable Laws of a Governmental Authority having jurisdiction;
or (ii) obtain financing for the transaction contemplated by this Agreement; or

(b) the disclosure is limited to the following information: (i) the names of the
Parties; (ii) the type of service being provided; (iii) the Term; and (iv) the
total load being served.

The disclosing Party shall provide the other Party with written notice of such
disclosure at least five (5) Business Days prior to such disclosure.

16.22 Notices. Unless otherwise provided in this Agreement, any notice, consent,
or other communication required to be made under this Agreement shall be in
writing and shall be delivered in person, by certified mail (postage prepaid,
return receipt requested), or by nationally recognized overnight courier
(charges prepaid), in each case properly addressed to such Party as shown below.
Any Party may from time to time change its address, designee or contact
information for the purposes of notices, consents, or other communications to
that Party by a similar notice specifying a new address, but no such change
shall become effective until it is actually received by the Party to be charged
with its contents. All notices, consents, or other communications required or
permitted under this Agreement that are addressed as provided in this
Section 16.22 shall be deemed to have been given upon delivery if delivered in
person, or upon deposit if delivered by overnight courier or certified mail.

 

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Duke:

Duke Power Company LLC

526 South Church Street

Charlotte, N.C. 28202

Attn: VP – Business Development and Origination

Phone: (704) 382-3114

Fax: (704) 382-4014

With a copy to:

Duke Power Company LLC

526 South Church Street

Charlotte, N.C. 28202

Attn: General Counsel

EMC:

Piedmont Electric Membership Corporation

2500 N.C. 86 South

Post Office Drawer 1179

Hillsborough, North Carolina 27278

Attn: R.G. Brecheisen, President and Chief Executive Officer

Phone: 919-732-2123

Fax: 919-644-1030

The Parties may agree on alternative methods of giving operational and
scheduling notices, consistent with the requirements of the applicable
Transmission Providers and/or generation scheduling providers.

16.23 No Dedication of the System. No undertaking by either Party to the other
Party under any provision of this Agreement shall constitute the dedication of
the system, or any portion thereof, of either Party to the public or to the
other Party, and it is understood and agreed that any such undertaking by either
of the Parties shall cease after the termination date of this Agreement. The
sale by Duke to EMC of electric capacity and energy under this Agreement does
not constitute a sale, lease, transfer, or conveyance of any kind of ownership
interest in or to any of Duke’s facilities of any kind.

16.24 Stranded Costs.

16.24.1 If a Party or any of its Affiliates becomes entitled to receive
compensation associated with stranded generation, transmission, distribution or
other assets or costs, the other Party shall have no claim or entitlement to any
such compensation.

16.24.2 Neither EMC nor Duke shall have the obligation or liability to the other
Party for the payment of any amounts authorized by statute or ordered or
approved by a Governmental Authority and that are attributable to or in any way
arising from stranded

 

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generation, transmission, distribution, or other assets or costs or any
liability associated therewith, whether such amounts are characterized as
competitive transition charges, wire charges, or other costs or charges,
provided that nothing herein shall limit the damages that may otherwise be
recovered for an Event of Default. An order on stranded costs shall not be
deemed a Material Adverse Ruling.

16.25 Electric Peak Load and Energy Information to be provided by EMC. Prior to
October 1, 2006, and each October 1 thereafter during the Term, EMC shall
provide Duke with forecast projections of (a) EMC’s Monthly electric peak load
and electric energy requirements for the following Year and (b) EMC’s annual
electric peak load and electric energy requirements for the following ten
(10) years, to the extent EMC has such information available, except that, after
a Notice of Termination has been given, EMC shall not be obligated to provide
such information for the period after the termination date. To the extent such
information is provided in a report to the RUS that is publicly available, EMC
may satisfy this requirement by providing a copy of such report to Duke.

16.26 Demand and Energy Charge and Rate Information to be Provided by Duke.
Prior to December 1, 2006, and each December 1 thereafter during the Term, Duke
shall provide EMC with forecast projections of (a) the annual electric capacity
and energy rates under Sections 7.2 or Section 7.3 (as applicable) for the
following year, (b) Monthly demand and electric energy charges under Section 7.2
or Section 7.3 (as applicable) for the following year, and (c) annual demand and
electric energy charges under Sections 7.2 or Section 7.3 (as applicable) for
the lesser of the remainder of the Term or the following ten (10) Years, except
that, after a Notice of Termination has been given, Duke shall not be obligated
to provide such information for the period after the termination date.

16.27 Further Assurances. If either Party determines in its reasonable
discretion that any further instruments, assurances, or other things are
necessary or desirable to carry out the terms of this Agreement, the other Party
shall execute and deliver all such instruments or assurances, and do all things
reasonably necessary or desirable to carry out the terms of this Agreement.

16.28 Applicable Laws and Regulations. This Agreement is made subject to all
existing and future applicable Laws and to all existing and future promulgated
orders or other duly authorized actions of Governmental Authorities having
jurisdiction over the matters set forth in this Agreement.

16.29 Equitable Relief. Nothing in this Agreement shall be construed to limit
the injunctive or equitable powers of a court of competent jurisdiction.

16.30 PURPA Assistance. Duke shall provide assistance to EMC, as EMC reasonably
requests, to support EMC’s compliance with the generation efficiency and fuel
diversity standards under PURPA.

16.31 SERC and NERC Data Reporting and Compliance Assistance. Duke shall report
EMC’s actual load, forecasted load (as provided by EMC to Duke), and resource
information to SERC and NERC and their successors, in a manner similar to the
manner in which Duke reports such information for other wholesale full or
partial requirements customers with service as firm as Duke’s Native Load. In
addition, Duke shall provide assistance and consultation to EMC, to the extent
agreed to by the Parties, to support EMC’s compliance with such organizations’
data reporting requirements.

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized officers and copies delivered to each Party.

PIEDMONT ELECTRIC MEMBERSHIP CORPORATION

 

By:  

 

Name:   Randolph G. Brecheisen Title:   President and Chief Executive Officer

DUKE POWER COMPANY LLC

d/b/a Duke Energy Carolinas, LLC

By:  

 

Name:   Ellen T. Ruff Title:   President

 

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Schedule 1

Annual Production Capacity and Energy Rates

Schedule 1 Methodology:

This formula sets forth the method that Duke will use to determine its annual
Demand Rates, Fuel Rates, and Variable O&M Rates (collectively, “Rates”) for use
during the System Average Pricing Option Period, if any, and during the period
January 1, 2011 through the termination of this Agreement. The Rates will be
annual formula rate calculations. The Rates shall initially be estimated for the
period January 1 - December 31 of the Year in which such Rates are first
applicable, and shall be estimated continuing thereafter for successive twelve
month periods. Beginning July 1 of the Year in which such Rates are first
applicable, and each July 1 thereafter, the Rates will be trued-up based on
actual costs and loads for the most recent calendar Year, using the formula
rates set forth below. The calculations will be based on Duke’s FERC Form 1 data
and Duke’s company records. The true-up will include interest on any refunds or
surcharges calculated in accordance with the methodology set forth in 18 C.F.R.
§ 35.19a or its successor. The formulas for the Rates were designed to include
all costs incurred by Duke to own, operate and maintain Duke’s Generation
System. The formulas for the Rates may only be amended by the mutual agreement
of the Parties or pursuant to Section 12.3 of the Agreement. Disallowance or any
other treatment of any such costs by the NCUC or any other Governmental
Authority other than FERC will not have any effect on the inclusion of such
costs in the formulas for the Rates as set forth below.

 

I. Definitions

Capitalized terms not otherwise defined in the Agreement and as used in this
formula have the following definitions:

 

  A. Allocation Factors

 

  1. Production Wages and Salaries Allocation Factor shall equal the ratio of
Duke’s production-related direct wages and salaries to Duke’s total direct wages
and salaries excluding administrative and general wages and salaries.

 

  2. Production Plant Allocation Factor shall equal the ratio of the sum of
Duke’s investments in Production Plant plus Production Related General Plant
plus Production Related Intangible Plant to investment in Total Plant in
Service.

 

  B. Terms

Accumulated Deferred Income Taxes shall equal the net of Duke’s electric
deferred tax balances as recorded in FERC Account Nos. 281-283 and Duke’s
electric deferred tax balance as recorded in FERC Account No. 190.

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Administrative and General Expense shall equal Duke’s expenses as recorded in
FERC Account Nos. 920-935 excluding FERC Account Nos. 924, 928 and 930.1, and
less EPRI dues as recorded in FERC Account No. 930.2.

Contra AFUDC shall equal the reduction in amount of AFUDC recorded in FERC
Account No. 107 due to recovery of construction period financing costs from
customers resulting from inclusion of construction work in progress in rate base
in any of Duke Power’s retail or wholesale rate jurisdictions.

Demand Rate means the Demand Rate calculated in Part II below.

Depreciation Expense for Production Plant shall equal Duke’s production expense
as recorded in FERC Account No. 403 plus an adjustment to increase depreciation
expense to eliminate any reduction in depreciable base for Contra AFUDC related
to production plant construction work in progress included in rate base.

Duke’s Average Peak Hour Load for a year, with respect to the System Average
Pricing Option Period, if any, shall equal the average of the twenty highest
hourly (integrated sixty minute) Duke Schedule 1 Demands during July and August
of the year; and with respect to the period beginning January 1, 2011, and
continuing through the termination of the Agreement, shall equal the average of
the twenty highest hourly (integrated sixty minute) Duke Schedule 1 Demands
during the Annual Planning Period of the year.

Duke Schedule 1 Demands means Duke’s Native Load demands: (i) compensated for
losses to the point at which power is available for transmission, (ii) excluding
(a) non-requirements wholesale sales, as listed in Duke’s FERC Form 1, and
(b) wholesale sales with a duration of one year or less, (iii) served by Duke’s
Generation System the cost of which is included in Schedule 1.

FAS 109 Regulatory Assets and Liabilities shall equal the net of Duke’s FAS 109
balance as recorded in FERC Account No. 182.3 and any Duke FAS 109 balance as
recorded in FERC Account No. 254.

FAS 106 Regulatory Assets and Liabilities shall equal the net of Duke’s FAS 106
balance as recorded in FERC Account No. 182.3 and any Duke FAS 106 balance as
recorded in FERC Account No. 254.

 

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General Plant shall equal Duke’s gross plant balance as recorded in FERC Balance
Sheet Account No. 101, FERC Electric Plant Account Nos. 389-399, and amounts in
FERC Balance Sheet Account Nos. 102 and 106 tentatively classified to FERC
Electric Plant Account Nos. 389-399, plus an adjustment to add Contra AFUDC
related to general plant construction work in progress included in rate base.

General Plant Depreciation Expense shall equal Duke’s general plant expenses as
recorded in FERC Account No. 403 plus an adjustment to increase depreciation
expense to eliminate any reduction in depreciable base for Contra AFUDC related
to general plant construction work in progress included in rate base.

General Plant Depreciation Reserve shall equal Duke’s general plant reserve
balance as recorded in FERC Account No. 108 plus an adjustment to increase the
reserve to equal accumulated depreciation for depreciable base without reduction
for Contra AFUDC related to production plant construction work in progress
included in rate base.

General Tax Expense shall equal Duke’s expenses as recorded in FERC Account
No. 408.1.

Intangible Plant shall equal Duke’s gross plant balance as recorded in FERC
Balance Sheet Account No.101, FERC Electric Plant Account Nos. 301-303, and
amounts in FERC Balance Sheet Account Nos. 102 and 106 tentatively classified to
FERC Electric Plant Account Nos. 301-303, plus an adjustment to add Contra AFUDC
related to intangible plant construction work in progress included in rate base.

Intangible Plant Amortization Expense shall equal Duke’s intangible plant
expenses as recorded in FERC Account No. 404 plus an adjustment to increase
depreciation expense to eliminate any reduction in depreciable base for Contra
AFUDC related to intangible plant construction work in progress included in rate
base.

Intangible Plant Amortization Reserve shall equal Duke’s intangible plant
reserve balance as recorded in FERC Account No. 111 plus an adjustment to
increase the reserve to equal accumulated depreciation for depreciable base
without reduction for Contra AFUDC related to intangible plant construction work
in progress in rate base.

 

3

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

Net Asset Retirement Cost shall equal Duke’s asset retirement costs recorded in
FERC Account No. 101, less the associated accumulated depreciation included in
FERC Account No. 108.

Other Amortization shall equal Duke’s amortization expense recorded in FERC
Account Nos. 406 and 407 that is related to production plant.

Other Regulatory Assets/Liabilities shall equal the net of Duke’s regulatory
assets and liabilities in FERC Account Nos. 182, 228 and 254, excluding FAS 109
Regulatory Assets and FAS 106 Regulatory Assets, that are production related.

Payroll Taxes shall equal those payroll tax expenses as recorded in Duke Power’s
FERC Account No. 408.1.

Plant Held for Future Use shall equal Duke’s balance in FERC Account No. 105.

Prepayments shall equal Duke’s prepayment balance as recorded in FERC Account
No. 165.

Property Insurance shall equal Duke’s expenses as recorded in FERC Account
No. 924.

Production Related Amortization of Investment Tax Credits shall equal Duke’s
credits as recorded in FERC Account No. 411.4 multiplied by the Production Plant
Allocation Factor.

Production Depreciation Reserve shall equal Duke’s production reserve balance as
recorded in FERC Account No. 108 plus an adjustment to increase the reserve to
equal accumulated depreciation for depreciable base without reduction for Contra
AFUDC related to production plant construction work in progress included in rate
base.

Production Operation and Maintenance (O&M) Expense shall equal Duke’s expenses
as recorded in FERC Account Nos. 500-557.

Production Plant shall equal Duke’s gross plant balance as recorded in FERC
Balance Sheet Account No. 101, FERC Electric Plant Account Nos. 310-347 and
Balance Sheet Account Nos. 102 and 106 tentatively classified to FERC Electric
Plant Account Nos. 310-347, plus an adjustment to add Contra AFUDC related to
production plant construction work in progress in included in rate base.

 

4

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

Production Plant Materials and Supplies shall equal Duke’s balance as assigned
to production as recorded in FERC Account No. 154.

Revenue Tax Rate shall equal 1.0 minus the applicable revenue or gross receipts
tax rate(s) to which Duke is subject for the revenues or gross receipts that
Duke receives under this Agreement

Tax Deduction for Manufacturing Activities shall equal Duke’s annual amount of
tax deduction under Section 102 of the American Jobs Creation Act of 2004.

Total Plant in Service shall equal Duke’s total gross plant balance as recorded
in FERC Balance Sheet Account No. 101, Electric Plant Account Nos. 301-399, and
amounts in FERC Balance Sheet Account Nos. 102 and 106, plus an adjustment to
add Contra AFUDC related to construction work in progress included in rate base.

Unamortized Loss on Reacquired Debt shall equal Duke’s expenses as recorded in
FERC Account No. 189.

Unamortized Gain on Reacquired Debt shall equal Duke’s amounts included in FERC
Account No. 257.

Variable Non-Fuel Production Operation and Maintenance Expense shall equal
Duke’s expenses as recorded in FERC Account Nos. 510, 512, 513, 528, 530, 531,
and 544.

 

II. Demand Rate

The Demand Rate shall be the Production Capacity Revenue Requirement as
determined in Part III below, divided by Duke’s Average Peak Hour Load, and
further divided by the Revenue Tax Rate. The Monthly Demand Rate shall be equal
to the Demand Rate divided by twelve (12).

 

III. Production Capacity Revenue Requirement

The Production Capacity Revenue Requirement shall equal the sum of Duke’s
(A) Return and Associated Income Taxes, (B) Production Depreciation Expense,
(C) Decommissioning Expense, (D) Production Related General Taxes, (E) Fixed
Production Operation and Maintenance Expense, (F) Purchased Power Capacity
Expenses, (G) Production Related Administrative and General Expense,
(H) Production Related Other Amortization Expense and (I) Capacity Credit for
Revenue from Non-Associated Utility Sales.

 

5

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

A. Return and Associated Income Taxes shall equal the product of the Production
Investment Base and the Cost of Capital Rate.

 

  1. Production Investment Base

The Production Investment Base shall equal the average of the beginning and
end-of-year balances of (a) Production Plant, plus (b) Production Related
General and Intangible Plant, plus (c) Production Plant Held for Future Use,
less (d) Production Related Depreciation Reserve, less (e) Production Related
Net Asset Retirement Costs, plus (f) Nuclear Fuel Inventory, plus (g) Fossil
Fuel Inventory, less (h) Production Related Accumulated Deferred Income Taxes,
plus (i) Production Related Loss on Reacquired Debt, (j) less Production Related
Gain on Reacquired Debt, plus (k) FAS 106 and FAS 109 Regulatory
Assets/Liabilities, plus (l) Other Regulatory Assets/Liabilities, plus
(m) Production Prepayments, plus (n) Production Materials and Supplies, plus
(o) Production Related Cash Working Capital.

 

  (a) Production Plant shall equal Production Plant as defined above.

 

  (b) Production Related General and Intangible Plant shall equal the sum of
General Plant plus Intangible Plant multiplied by the Production Wages and
Salaries Allocation Factor.

 

  (c) Production Plant Held for Future Use shall equal Plant Held for Future Use
multiplied by the Production Plant Allocation Factor.

 

  (d) Production Related Depreciation Reserve shall equal Production
Depreciation Reserve plus Production Related General and Intangible Plant
Depreciation Reserve; where Production Related General and Intangible Plant
Depreciation Reserve shall equal the sum of General Plant Depreciation Reserve
plus Intangible Plant Amortization Reserve, multiplied by the Production Wages
and Salaries Allocation Factor.

 

  (e) Production Related Net Asset Retirement Costs shall equal Duke’s asset
retirement cost balance as recorded in FERC Account No. 101 for Production Plant
less the associated accumulated depreciation balance as recorded in FERC Account
No. 108.

 

6

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

  (f) Nuclear Fuel Inventory shall equal Duke’s balance of investment in nuclear
fuel as recorded in FERC Account Nos. 120.1 – 120.6.

 

  (g) Fossil Fuel Inventory shall equal Duke’s balance of investment in fossil
fuel as recorded in FERC Account No. 151.

 

  (h) Production Related Accumulated Deferred Income Taxes shall equal Total
Accumulated Deferred Income Taxes multiplied by the Production Plant Allocation
Factor.

 

  (i) Production Related Loss on Reacquired Debt shall equal Unamortized Loss on
Reacquired Debt multiplied by the Production Plant Allocation Factor.

 

  (j) Production Related Gain on Reacquired Debt shall equal Unamortized Gain on
Reacquired Debt multiplied by the Production Plant Allocation Factor.

 

  (k) FAS 106 and FAS 109 Regulatory Assets/Liabilities shall equal Duke’s
balance of FAS 106 related costs as recorded in FERC Account Nos. 182.3 and 254
multiplied by the Production Wages and Salaries Allocation Factor, plus Duke’s
balance of FAS 109 related costs as recorded in FERC Account Nos. 182.3 and 254
multiplied by the Production Plant Allocation Factor.

 

  (l) Other Regulatory Assets/Liabilities shall equal Duke’s balance of Other
Regulatory Assets/Liabilities as appropriate; provided, that in order to include
any amounts in this item, Duke shall make a filing with FERC under Section 205
of the Federal Power Act.

 

  (m) Production Prepayments shall equal Duke’s Prepayments in FERC Account 165
multiplied by the Production Wages and Salaries Allocation Factor.

 

  (n) Production Materials and Supplies shall equal Production Plant Materials
and Supplies as defined above.

 

  (o) Production Related Cash Working Capital shall be a 12.5% allowance (45
days/360 days) of Fixed Production Operation and Maintenance Expense,

 

7

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

Variable Production Non-Fuel Operation and Maintenance Expenses and Production
Related Administrative and General Expense.

 

  2. Cost of Capital Rate

The Cost of Capital Rate will equal (a) Duke’s Weighted Cost of Capital, plus
(b) Federal Income Tax plus (c) State Income Tax.

(a) The Weighted Cost of Capital shall be calculated based upon a proxy capital
structure of 45% long term debt and 55% common equity and shall equal the sum
of:

 

  (i) the long term debt component, which shall equal the product of 45% and
Duke’s long term debt expenses recorded in FERC Account Nos. 427, 428, 428.1,
429, 429.1, and 430 divided by Duke’s long-term debt balance as recorded in FERC
Account Nos. 221 through 227, and

 

  (ii) the return on equity component, which shall equal the product of 55% and
Duke’s return on equity (ROE) of 11.0%.

 

  (b) Federal Income Tax shall equal

[A+(B+C+D)/E] x (FT) / (1-FT)

where FT is the Federal Income Tax Rate and A is the return on equity component,
as determined in Sections III.A.2.(a)(ii) above, B is Production Related
Amortization of Investment Tax Credits, , C is Duke’s annual amount of Tax
Deduction for Manufacturing Activities, D is the Equity AFUDC component of
Production Depreciation Expense as defined in Section III.B below, and E is
Production Investment Base as Determined in III.A.1 above.

 

  (c) State Income Tax shall equal

[A+(B+C+ D)/E + Federal Income Tax]x(ST)/ (l -ST)

where ST is the State Income Tax Rate. A is the return on equity component
determined in Sections lll.A.2.(a)(ii) above, B is the Amortization of
Investment Tax Credits, C is Duke’s

 

8

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

annual amount of Tax Deduction for Manufacturing Activities, D is the equity
AFUDC component of Production Depreciation Expense as defined in Section III.B.
below, E is the Production Investment Base as determined in III.A.l above and
Federal Income Tax is the rate determined in Section III.A.2.(b) above.

 

  B. Production Depreciation Expense shall equal the sum of Depreciation Expense
for Production Plant, plus an allocation of General and Intangible Plant
Deprecation Expense calculated by multiplying the sum of General Plant
Depreciation Expense and Intangible Plant Amortization Expense by the Production
Wages and Salaries Allocation Factor, less Decommissioning Expense as defined in
III.C. below.

 

  C. Decommissioning Expense shall equal $48,304,000 per year.

 

  D. Production Related General Taxes shall equal the sum of General Tax Expense
less revenue related taxes and Payroll Taxes, multiplied by the Production Plant
Allocation Factor, and Payroll Taxes multiplied by the Production Wages and
Salaries Allocation Factor.

 

  E. Fixed Production Operation and Maintenance Expense shall equal Duke’s
expenses as recorded in FERC Account Nos. 500, 502, 505-507, 511, 514, 517, 519,
520, 523-525, 529, 532, 535-543, 545, 546, 548-554, 556, and 557.

 

  F. Purchased Power Expenses shall equal Duke’s expenses for purchased power
recorded in FERC Account No. 555 less purchased power fuel costs included in the
Fuel Rate determined in Section IV below.

 

  G. Production Related Administrative and General Expenses shall equal the sum
of (1) Administrative and General Expense multiplied by the Production Wages and
Salaries Allocation Factor, (2) Property Insurance multiplied by the Production
Plant Allocation Factor, (3) Expenses included in FERC Account 928 related to
FERC Assessments multiplied by the Production Plant Allocation Factor, and
(4) any other Production related expenses or assessments in FERC Account Nos.
928 or 930.1.

 

  H. Production Related Other Amortization Expense shall equal Duke’s
amortization expense recorded in FERC Account Nos. 406 and 407 either directly
assigned to production or allocated to production using the Production Plant
Allocation Factor or the Production Wages and Salaries Allocation Factor.

 

9

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

  I. Credit for Revenue from Non-Associated Utility Sales shall equal Duke’s
revenues from inter-system sales from Duke’s Generation System recorded in FERC
Account 447 to the extent such sales are not included in the determination of
Duke’s Average Peak Hour Load, less fuel recovered from such sales as determined
in the Fuel Rate below, multiplied by 2/3.

 

  IV. Fuel Rate

The Fuel Rate shall equal F/S, and further divided by the Revenue Tax Rate,
where:

F is the expense of fossil and nuclear fuel and purchased economic power, as
defined in 18 C.F.R. § 35.14(a)(2) (2005), for the calendar year period;
provided that for purposes of this calculation described in 18 C.F.R. §
35.14(a)(2) (2005) the cost of fossil fuel shall include, in addition to those
items set forth in 18 C.F.R. § 35.14(a)(6), expenses recorded in Account No. 509
for the calendar year period.

S is all kWh sold (compensated for losses to the point at which power is
available for transmission ), excluding inter-system sales, for the calendar
year period.

 

  V. Variable O&M Rate

The Variable O&M rate shall equal Variable Non-Fuel Production Operation and
Maintenance Expense divided by S as determined in Section IV above, and further
divided by the Revenue Tax Rate.

 

10

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

Attachment 3-1

Example showing the calculation of the Excess Annual Capacity Charges in the

Duke-Blue Ridge Agreement, Duke-Piedmont Agreement

and Duke-Rutherford Agreement

The purpose of this attachment is to provide an example showing the calculation
of the Excess Annual Capacity Charges provided in Section 3.5.2.3.5 of the
above-identified agreements. Blue Ridge, Piedmont and Rutherford are referred to
individually as BR, P and R, respectively, and collectively as the EMC Group.

Assumptions:

Hour of maximum integrated sixty minute Duke Schedule 1 Demands during July and
August 2007: 4:00-5:00 pm, July 14, 2007.

 

    

BR

(kW)

  

P

(kW)

  

R

(kW)

EMC Coincident Peak Demand (7-14-07 4-5 pm)

   225,000    150,000    425,000

EMC Base Obligation (7-14-07 4-5pm)

   125,000    175,000    300,000

EMC Group Coincident Peak Demand (7-14-07, 4-5 pm): 800,000 kW

EMC Group Base Obligation (7-14-07, 4-5 pm): 600,000 kW

Annual Capacity Quantity = 148,000 kW

Step 1

Calculate EMC Group Excess Annual Capacity Quantity per Section 3.5.2.3.5.

 

EMC Group Coincident Peak Demand (7-14-07 4-5 pm)

   800,000 kW

minus EMC Group Base Obligation (7-14-07 4-5 pm)

   - 600,000 kW

minus Annual Capacity Quantity

   - 148,000 kW

EMC Group Excess Annual Capacity Quantity

   52,000 kW

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

Step 2

Calculate EMC Excess Annual Capacity Quantity per Section 3.5.2.3.5.1

 

    

A

EMC Coincident Peak
Demand (7-14-07 4-5pm)

(kW)

  

B

minus EMC Base Obligation

(7-14-07 4-5 pm)

(kW)

  

C

minus EMC Annual
Capacity Quantity

(kW)

  

D

EMC Excess Annual

Capacity Quantity1
(kW)

BR

   225,000    125,000    42,000    58,000

P

   150,000    175,000    23,000    0

R

   425,000    300,000    83,000    42,000

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

1 Cannot be less than zero.

Step 3

Calculate EMC Group Combined Excess Annual Capacity Quantity per
Section 3.5.2.3.5.2.

 

BR Excess Annual Capacity Quantity

   58,000 kW

P Excess Annual Capacity Quantity

   0 kW

R Excess Annual Capacity Quantity

   42,000 kW     

EMC Group Combined Excess Annual Capacity Quantity

   100,000 kW

 

2

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

Step 4

Calculate Excess Annual Amount per Section 3.5.2.3.5.

 

    

A

EMC Excess Annual
Capacity Quantity

(kW)

  

B

EMC Group Combined
Excess Annual Capacity
Quantity (kW)

  

C

EMC Group Excess
Capacity Quantity

(kW)

  

D

EMC Excess Annual
Amount

( ( A / B) * C) (kW)

BR

   58,000    100,000    52,000    30,160

P

   0    100,000    52,000    0

R

   42,000    100,000    52,000    21,840

Step 5

Calculate Excess Annual Capacity Charge per Section 3.5.2.3.5.

 

    

A

EMC Excess Annual

Amount

(kW)

  

B

Annual Capacity Price
($/kW-year)

  

C

Excess Annual Capacity
Charge

BR

   30,160    45.60    $ 1,375,296

P

   0    45.60    $ 0

R

   21,840    45.60    $ 995,904

 

3

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

Attachment 4-1

Piedmont

EMC’s Base Obligation (MW) (as defined in Section 4.2.2)

Fixed Forward Resource (MW) (as defined in Section 5.1.1)

 

 

      Weekday

Hour

   1    2    3    4    5    6    7    8    9    10    11    12    13    14    15
   16    17    18    19    20    21    22    23    24

Sep-06

   39    37    37    37    37    39    44    43    41    41    41    42    43   
44    45    46    48    50    51    51    52    50    46    41

Oct-06

   30    29    28    28    30    37    48    46    39    36    34    33    32   
32    33    34    37    43    48    52    51    48    41    35

Nov-06

   40    39    40    41    42    48    55    52    48    44    41    39    37   
37    36    37    40    48    52    52    52    50    46    42

Dec-06

   45    44    44    45    48    55    66    65    59    54    49    46    43   
41    40    41    47    59    66    66    66    63    58    51

Jan-07

   54    55    57    60    62    73    84    78    74    73    66    60    55   
52    51    52    58    69    78    78    78    76    73    68

Feb-07

   41    41    42    44    46    55    69    67    58    55    53    51    48   
48    49    54    63    74    78    80    80    73    65    56

Mar-07

   33    32    32    33    36    44    55    51    44    39    37    34    33   
32    30    31    34    39    47    52    51    48    42    37

Apr-07

   30    29    29    30    31    37    44    41    37    34    32    31    30   
30    29    29    31    34    36    39    41    41    37    32

May-07

   30    29    29    28    29    33    39    39    35    34    33    33    33   
33    33    34    36    39    40    40    42    43    39    34

Jun-07

   41    39    39    39    39    40    43    44    42    43    44    45    46   
46    47    48    49    51    53    52    51    52    48    45

Jul-07

   51    47    44    42    41    42    45    46    47    52    58    63    67   
67    69    73    74    80    83    81    78    74    66    58

Aug-07

   51    47    44    43    42    44    48    48    46    48    53    60    66   
68    69    73    74    77    84    79    76    74    66    60

Sep-07

   37    35    34    34    34    37    41    40    38    38    38    39    40   
41    42    43    45    46    47    48    48    46    43    39

Oct-07

   28    27    26    27    28    34    45    43    36    33    32    30    30   
30    30    32    34    40    45    48    48    44    39    33

Nov-07

   37    37    37    37    39    44    51    48    44    41    38    37    35   
34    33    34    37    44    48    49    48    46    43    39

Dec-07

   42    41    41    42    44    51    62    60    55    50    46    43    40   
38    37    38    44    55    61    62    61    59    54    48

Jan-08

   55    57    59    61    65    74    87    81    76    74    67    62    58   
54    53    54    60    71    80    81    80    79    75    70

Feb-08

   43    43    44    45    48    57    72    69    60    56    54    53    51   
49    51    55    66    76    80    81    83    75    67    59

Mar-08

   34    33    34    34    37    45    57    53    45    40    37    36    34   
32    32    32    35    41    48    53    53    50    44    38

Apr-08

   31    30    30    31    32    37    45    43    38    35    33    32    31   
30    30    30    32    34    37    39    43    42    38    34

May-08

   32    30    30    30    30    34    41    40    36    35    34    34    34   
34    34    35    37    39    41    41    44    44    40    35

Jun-08

   43    41    40    40    40    41    44    45    44    44    45    46    47   
48    48    50    51    53    54    54    53    53    50    46

Jul-08

   53    48    46    44    43    44    46    47    48    54    60    66    69   
69    72    75    76    83    86    83    81    77    68    59

Aug-08

   52    48    46    44    44    46    50    50    48    49    55    62    68   
70    73    75    77    80    87    81    79    76    68    61

Sep-08

   38    36    35    35    35    37    42    41    39    39    39    40    41   
42    44    44    46    48    48    49    50    48    44    40

Oct-08

   30    27    27    27    29    36    46    44    37    34    32    32    31   
31    32    32    36    41    46    50    49    46    40    34

Nov-08

   39    38    38    39    41    46    53    50    46    42    39    37    36   
35    34    35    39    46    50    51    50    48    44    40

Dec-08

   44    42    43    44    46    53    64    62    56    52    47    44    41   
39    38    39    45    57    63    64    63    61    55    49

Note: Hour 1 refers to 12:00 a.m. - 12:59:59 a.m. Eastern Time, Hour 2 refers to
1:00 a.m. - 1:59:59 a.m. Eastern Time, etc.

Attachment 4-1 to Duke-Piedmont Agreement

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

Piedmont

EMC’s Base Obligation (MW) (as defined in Section 4.2.2)

Fixed Forward Resource (MW) (as defined in Section 5.1.1)

 

     Weekday

Hour

   1    2    3    4    5    6    7    8    9    10    11    12    13    14    15
   16    17    18    19    20    21    22    23    24

Jan-09

   58    59    60    63    67    77    90    83    80    76    69    65    59   
55    55    55    62    73    83    83    83    81    77    73

Feb-09

   44    44    45    46    49    59    74    71    62    59    56    55    52   
51    53    58    67    79    83    84    86    78    69    60

Mar-09

   35    34    34    36    38    46    59    55    46    41    39    37    35   
34    32    33    37    42    50    55    55    51    45    39

Apr-09

   32    31    31    32    33    39    47    44    39    37    34    33    32   
32    31    31    33    36    39    41    44    44    39    34

May-09

   32    31    30    30    31    35    42    41    37    36    36    35    36   
36    36    37    39    41    42    43    45    46    41    36

Jun-09

   44    42    41    41    41    43    46    46    45    46    46    48    49   
49    50    51    53    55    56    55    55    55    52    48

Jul-09

   54    50    47    45    44    45    48    48    50    55    62    67    72   
72    74    77    80    86    88    87    83    80    71    61

Aug-09

   54    50    48    46    45    47    51    52    50    51    57    64    70   
73    74    78    80    82    90    84    81    79    71    63

Sep-09

   39    37    37    36    37    39    44    43    40    40    41    41    43   
44    45    46    48    49    51    51    51    49    46    41

Oct-09

   30    29    28    28    30    37    48    46    39    35    34    32    32   
32    32    34    37    42    48    52    51    48    41    35

Nov-09

   39    39    39    40    41    47    54    52    47    44    41    39    37   
36    35    37    40    47    51    52    51    50    46    41

Dec-09

   45    44    44    45    48    55    66    65    59    53    49    46    43   
41    39    41    46    59    66    66    66    62    58    51

Jan-10

   59    60    62    66    69    80    93    87    81    80    72    66    61   
58    56    58    63    76    86    86    86    83    80    75

Feb-10

   46    46    46    48    51    60    76    73    64    60    58    56    53   
53    54    59    69    81    86    87    88    80    71    62

Mar-10

   37    36    36    37    39    48    60    56    48    43    40    38    36   
34    34    34    37    44    52    57    56    53    47    40

Apr-10

   33    32    32    32    34    40    48    46    41    37    35    34    33   
32    32    32    34    37    39    42    46    45    41    36

May-10

   34    32    32    31    32    37    44    43    39    37    37    37    37   
37    37    37    39    42    44    44    46    47    43    37

Jun-10

   46    44    43    42    42    44    47    48    46    47    48    49    51   
51    52    53    54    56    58    58    57    57    53    49

Jul-10

   56    51    48    46    46    46    49    51    51    58    63    69    74   
74    76    80    82    88    91    89    86    82    73    63

Aug-10

   55    52    49    47    46    48    53    53    51    53    59    66    73   
75    76    80    82    85    93    87    84    81    73    66

Sep-10

   40    39    38    37    37    40    45    44    41    41    42    43    44   
45    46    47    49    51    52    53    53    51    47    43

Oct-10

   31    30    29    29    31    38    49    47    39    37    34    33    33   
33    33    34    38    44    49    53    53    49    43    36

Nov-10

   41    40    41    41    43    48    56    53    48    45    42    40    39   
37    37    37    41    49    53    54    53    51    47    43

Dec-10

   46    45    46    46    49    57    68    67    60    55    51    47    44   
41    41    42    48    60    67    68    67    65    59    52

Attachment 4-1 to Duke-Piedmont Agreement

 

2

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

Piedmont

EMC’s Base Obligation (MW) (as defined in Section 4.2.2)

Fixed Forward Resource (MW) (as defined in Section 5.1.1)

 

     Weekend

Hour

   1    2    3    4    5    6    7    8    9    10    11    12    13    14    15
   16    17    18    19    20    21    22    23    24

Sep-06

   40    38    37    37    37    37    37    39    42    44    44    46    47   
48    49    50    51    51    51    51    51    49    45    42

Oct-06

   30    27    26    25    26    27    30    34    40    43    43    42    43   
43    42    43    44    45    47    49    48    44    39    34

Nov-06

   35    34    34    34    34    35    37    41    45    46    44    42    41   
39    38    38    40    45    48    48    46    44    41    38

Dec-06

   49    48    47    48    49    51    55    62    69    67    63    58    55   
51    49    49    54    64    68    68    67    66    61    55

Jan-07

   73    73    73    74    75    77    80    83    88    87    81    73    67   
62    59    56    60    69    74    73    72    68    62    57

Feb-07

   48    48    49    51    54    58    61    68    73    69    60    53    45   
41    38    36    39    44    55    60    60    59    53    48

Mar-07

   32    30    30    30    32    34    37    43    48    48    46    43    41   
39    37    36    37    39    45    50    49    46    42    37

Apr-07

   30    28    26    27    27    29    31    34    37    39    38    37    36   
35    34    34    34    35    36    37    39    39    35    32

May-07

   31    30    29    29    30    30    32    34    38    39    39    39    39   
39    39    39    39    40    41    41    42    43    39    36

Jun-07

   42    40    39    39    38    39    39    41    44    46    47    48    49   
49    50    51    51    51    51    51    50    50    48    44

Jul-07

   46    42    39    38    37    37    37    41    48    55    60    64    69   
73    74    76    78    79    77    75    73    73    66    57

Aug-07

   59    54    54    50    48    48    47    50    58    66    71    76    81   
84    86    87    88    88    87    84    83    80    73    66

Sep-07

   37    36    34    34    34    34    35    37    39    41    41    43    44   
45    46    46    47    48    47    47    48    46    42    39

Oct-07

   28    25    24    24    24    25    27    32    37    40    40    39    39   
40    39    40    41    42    44    46    44    41    36    31

Nov-07

   32    32    31    31    32    33    35    39    42    43    41    39    38   
37    35    36    37    42    44    44    43    41    39    36

Dec-07

   46    44    44    44    46    48    51    58    64    62    59    54    51   
48    46    46    51    60    63    63    62    60    57    51

Jan-08

   74    75    76    76    78    80    82    87    91    89    83    76    69   
65    60    59    62    71    76    74    74    70    65    59

Feb-08

   50    49    51    53    55    59    63    70    75    71    62    54    47   
42    39    37    39    45    57    62    62    60    55    49

Mar-08

   33    32    31    32    32    35    38    44    49    50    47    44    42   
40    38    37    39    41    46    51    51    48    44    39

Apr-08

   30    29    27    28    29    30    32    34    39    39    39    38    37   
36    35    35    35    37    37    39    41    40    37    32

May-08

   32    31    30    30    30    31    33    36    39    41    41    40    40   
40    40    40    41    41    42    42    44    44    41    37

Jun-08

   44    41    41    40    39    39    40    42    45    48    48    50    51   
51    52    52    53    53    53    52    51    52    49    46

Jul-08

   48    44    41    39    38    38    39    42    49    56    62    66    71   
75    76    79    80    81    80    77    76    74    67    59

Aug-08

   60    56    55    52    50    49    48    51    59    67    74    79    83   
87    88    90    90    90    90    87    87    83    75    67

Sep-08

   38    37    36    35    35    35    37    38    41    42    43    44    45   
46    47    48    48    49    48    49    49    47    44    41

Oct-08

   29    26    25    25    25    26    28    32    39    41    41    41    41   
41    41    41    42    44    45    48    46    43    37    32

Nov-08

   34    32    32    32    33    34    37    40    44    44    43    41    39   
38    37    37    39    44    46    46    44    43    40    37

Dec-08

   48    46    46    46    47    49    53    59    66    65    61    55    53   
49    47    48    52    62    66    66    65    62    59    53

Attachment 4-1 to Duke-Piedmont Agreement

 

3

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

Piedmont

EMC’s Base Obligation (MW) (as defined in Section 4.2.2)

Fixed Forward Resource (MW) (as defined in Section 5.1.1)

 

     Weekend

Hour

   1    2    3    4    5    6    7    8    9    10    11    12    13    14    15
   16    17    18    19    20    21    22    23    24

Jan-09

   77    77    78    80    81    83    85    89    94    92    87    78    72   
67    62    60    64    74    80    76    76    73    67    61

Feb-09

   52    51    53    55    58    61    66    73    78    73    64    56    48   
44    40    39    41    46    59    64    65    62    56    51

Mar-09

   34    32    32    32    34    36    39    46    51    51    48    46    44   
41    39    39    39    42    48    53    53    49    44    39

Apr-09

   31    30    27    29    30    31    33    36    39    41    41    39    39   
37    37    36    37    37    39    39    42    41    37    33

May-09

   33    32    31    31    31    32    34    37    40    42    42    41    41   
41    41    41    42    43    44    43    45    46    42    38

Jun-09

   45    43    41    41    41    41    41    44    46    49    51    51    52   
53    53    54    55    55    55    54    53    53    51    47

Jul-09

   49    45    42    40    39    39    40    43    51    59    63    68    73   
78    80    81    83    83    83    80    78    76    69    61

Aug-09

   62    58    58    53    51    51    50    53    61    69    76    81    87   
90    91    93    94    94    93    90    89    86    78    69

Sep-09

   39    38    37    37    37    37    37    39    42    44    44    46    47   
48    48    50    51    51    51    51    51    48    45    42

Oct-09

   30    27    26    25    25    27    30    34    40    43    43    42    42   
42    42    43    44    45    46    49    48    44    39    33

Nov-09

   34    34    33    33    34    35    37    41    45    46    44    42    40   
39    38    38    40    45    48    47    46    44    41    38

Dec-09

   49    47    47    48    48    51    55    61    68    67    62    58    54   
51    48    49    54    64    67    67    67    65    60    55

Jan-10

   80    80    81    81    83    85    88    92    98    95    89    81    74   
69    65    62    66    76    81    80    79    75    69    62

Feb-10

   53    53    54    56    60    63    67    75    80    75    66    58    50   
45    41    39    42    48    60    66    67    64    59    52

Mar-10

   36    34    33    34    34    37    41    47    53    53    51    47    45   
43    41    40    41    44    50    55    54    51    46    41

Apr-10

   32    31    28    30    30    32    34    37    41    42    41    41    40   
39    37    37    38    39    39    41    44    42    39    34

May-10

   34    32    32    32    32    33    35    38    41    44    44    43    43   
43    43    43    44    44    45    44    46    47    44    39

Jun-10

   46    44    43    42    42    42    43    45    48    51    52    53    54   
55    55    55    56    57    57    55    55    55    52    48

Jul-10

   51    46    44    41    41    41    41    44    53    60    66    70    76   
80    81    84    86    87    85    83    81    80    72    62

Aug-10

   65    60    59    55    53    52    52    55    63    72    78    83    89   
94    95    95    97    97    96    93    92    88    80    72

Sep-10

   41    39    38    37    37    38    39    40    43    45    46    47    48   
49    51    51    52    53    52    52    53    50    46    43

Oct-10

   31    28    27    26    26    27    30    34    41    44    44    44    44   
44    44    44    45    46    48    51    49    46    39    34

Nov-10

   36    34    34    34    35    37    39    42    46    47    46    44    41   
40    39    39    41    46    49    48    47    46    42    39

Dec-10

   51    48    48    49    51    53    57    63    70    69    65    60    55   
53    50    51    55    66    69    69    69    67    62    57

Attachment 4-1 to Duke-Piedmont Agreement

 

4

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Attachment 4-2

Calculation of Reduction to EMC’s Base Obligation and EMC Group’s Base
Obligation During Light Load Periods

I. Definitions

1. The “Carolina Power & Light Service Obligation Resources” or “SORs” means
those generation and purchased capacity resources provided to NCEMC by CP&L and
used by NCEMC to serve NCEMC load pursuant to the Power Supply Agreement.

2. The “Power Supply Agreement” means the Power Supply Agreement Dated
November 2, 1998 Between North Carolina Electric Membership Corporation and
Carolina Power & Light Company, d/b/a Progress Energy Carolinas, Inc., as
amended, filed at FERC in Docket No. ER05-722-000 on June 30, 2005.

3. The “1996 SO” means the Service Obligation assumed by NCEMC on January 1,
1996 in the amount of 204.3 MW including losses.

4. “SOR A” means the 225 MW of electric capacity and energy that CP&L provides
to NCEMC pursuant through December 31, 2015 pursuant to Section 2.1(a)(1) of the
Power Supply Agreement.

5. “SOR E” means the 225 MW of electric capacity and energy that CP&L provides
to NCEMC pursuant through December 31, 2013 pursuant to Section 2.1(a)(4) of the
Power Supply Agreement.

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

6. “NCEMC Catawba Resource Entitlement” or “CRE” means NCEMC’s 623.5 MW
ownership interest in the Catawba Nuclear Station.

7. “NCEMC’s CP&L Native Load” or “NCNL” means the electric capacity and energy
demands (kW) imposed on NCEMC by its member cooperatives in CP&L’s existing
Control Areas, and which are served by CP&L under the Power Supply Agreement
(excluding the 1996 SO).

8. “NCEMC’s Duke Native Load” or “NDNL” means the electric capacity and energy
demands (kW) imposed on NCEMC by its member cooperatives in Duke’s Control Area.

 

2

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

II. Calculation of Reduction in EMC’s Base Obligation and EMC Group’s Base
Obligation During Light Load Periods (through December 31, 2008)

EMC’s Base Obligation and EMC Group’s Base Obligation during an Hour shall be
subject to reduction during the period commencing on the Commencement Date and
continuing through December 31, 2008 in accordance with the following:

A. NCEMC’s contractual right to SO 1996, SOR A and SOR E (654.3 MW rounded to
655 MW) is subject to reduction based on a comparison between 655 MW and NCEMC’s
CP&L Native Load (NCNL).

B. In the event that NCEMC’s CP&L Native Load during the Hour is less than 655
MW, EMC’s Base Obligation and EMC Group’s Base Obligation for the Hour shall be
reduced as follows:

C. If 655 MW minus NCNL is equal to or less than 225 MW, the reduction in EMC’s
Base Obligation shall be equal to the amount set forth in Equation 1 below:

Equation 1: ( ( 655 MW - NCNL ) / 225 ) * 5

D. If 655 MW minus NCNL is greater than 225 MW, the reduction in EMC’s Base
Obligation shall be equal to 5 MW plus the amount set forth in Equation 2 below:

Equation 2: ( ( 430 MW - NCNL ) / 225 ) * 5

 

3

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

E. If 655 MW minus NCNL is equal to or less than 225 MW, the reduction in EMC
Group’s Base Obligation shall be equal to the amount set forth in Equation 3
below:

Equation 3: ( ( 655 MW - NCNL ) / 225 ) * 33

F. If 655 MW minus NCNL is greater than 225 MW, the reduction in EMC Group’s
Base Obligation shall be equal to 33 MW plus the amount set forth in Equation 4
below:

Equation 4: ( ( 430 MW - NCNL ) / 225 ) * 33

G. Example: If NCNL is equal to 565 MW during an Hour, the reduction in EMC’s
Base Obligation for the Hour shall be equal to ( ( 655 MW – 565 MW ) / 225 ) * 5
or 2 MW, and the reduction in EMC Group’s Base Obligation for the Hour shall be
equal to ( (655 MW - 565 MW) / 225 ) * 33, or 13.2 MW.

III. Calculation of Reduction in EMC’s Base Obligation and EMC Group’s Base
Obligation During Light Load Periods (January 1, 2009 through December 31, 2010)

EMC’s Base Obligation and EMC Group’s Base Obligation during an Hour shall be
subject to reduction during the period commencing on January 1, 2009 and
continuing through December 31, 2010 in accordance with the following:

A. NCEMC’s contractual right to SO 1996 and SOR A (429.3 MW rounded to 430 MW)
is subject to reduction based on a comparison between 430 MW and NCEMC’s CP&L
Native Load (NCNL).

 

4

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

B. In the event that NCEMC’s CP&L Native Load during the Hour is less than 430
MW, EMC’s Base Obligation for the Hour shall be reduced as follows:

Equation 5: ( (430 MW - NCNL ) / 225 ) * 5

C. In the event that NCEMC’s CP&L Native Load during the Hour is less than 430
MW, EMC Group’s Base Obligation for the Hour shall be reduced as follows:

Equation 6: ( ( 430 MW - NCNL ) / 225 ) * 33

D. Example: If NCNL is equal to 340 MW during an Hour, the reduction in EMC’s
Base Obligation for the Hour shall be equal to ( ( 430 MW – 340 MW ) / 225 ) * 5
MW, or 2 MW, and the reduction in EMC Group’s Base Obligation for the Hour shall
be equal to ( ( 430 MW – 340 MW ) / 225 ) * 33, or 13.2 MW.

IV. Calculation of Reduction in EMC’s Base Obligation and EMC Group’s Base
Obligation During Light Load Periods for the Catawba Resource Entitlement

In addition to the reductions to EMC’s Base Obligation and EMC Group’s Base
Obligation set forth under Sections II and III above, EMC’s Base Obligation and
EMC Group’s Base Obligation shall be subject to reduction as set forth in this
Section IV.

 

5

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

A. In the event that NCEMC’s Duke Native Load during an Hour is less than 623.5
MW and a nuclear unit at Catawba Nuclear Station or McGuire Nuclear Station is
off-line or derated during the Hour, EMC’s Base Obligation for the Hour shall be
reduced as follows:

Equation 7: (1 - ( NDNL / 623.5 MW) ) * 16 MW

B. In the event that NCEMC’s Duke Native Load during an Hour is less than 623.5
MW and a nuclear unit at Catawba Nuclear Station or McGuire Nuclear Station is
off-line or derated during the Hour, EMC Group’s Base Obligation for the Hour
shall be reduced as follows:

Equation 8: (1 - ( NDNL / 623.5 MW ) ) * 95 MW

C. Example: If NDNL is equal to 561.15 MW during an Hour, and a nuclear unit at
Catawba Nuclear Station or McGuire Nuclear Station is off-line or derated during
the Hour, the reduction in EMC’s Base Obligation for the Hour shall be equal to
( 1 -(561.15 MW / 623.5 MW) ) * 16 MW, which equals ( .1 ) * ( 16 MW ), or 1.6
MW, and the reduction in EMC Group’s Base Obligation for the Hour shall be equal
to ( 1 - (561.15 MW / 623.5 MW ) ) * 95 MW, which equals ( .1 ) * ( 95 MW ), or
9.5 MW.

 

6

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

Attachment 4-3

Partial Requirements Resources

(Page 1 of 6)

Resource Name: AEP Baseload

Type of Resource: Baseload Resource

Delivery period: January 1, 2011 through December 31, 2012

Resource Capacity MW: 4

Must take resource: Yes, in the amount of MWs that NCEMC indicates is available
in each hour.

Scheduling: A schedule must be submitted for each hour by Duke in the amount of
MWs that NCEMC indicates is available.

Energy Pricing: NA

Force Majeure: “Force Majeure” means an event or circumstance which prevents one
Party from performing its obligations under one or more Transactions, which
event or circumstance was not anticipated as of the date the Transaction was
agreed to, which is not within the reasonable control of, or the result of the
negligence of, the Claiming Party, and which, by the exercise of due diligence,
the Claiming Party is unable to overcome or avoid or cause to be avoided. Force
Majeure shall not be based on (i) the loss of Buyer’s markets; (ii) Buyer’s
inability economically to use or resell the Product purchased hereunder;
(iii) the loss of failure of Seller’s supply; or (iv) Seller’s ability to sell
the Product at a price greater than the Contract Price. Neither Party may raise
a claim of Force Majeure based in whole or in part on curtailment by a
Transmission Provider unless (i) such Party has contracted for firm transmission
with a Transmission Provider for the Product to be delivered to or received at
the Delivery Point and (ii) such curtailment is due to “force majeure” or
“uncontrollable force” or a similar term as defined under the Transmission
Provider’s tariff, provided however, that existence of a Force Majeure absent a
showing of other facts and circumstances which in the aggregate with such
factors establish that a Force Majeure as defined in the first sentence hereof
has occurred.

Attachment 4-3 to Duke-Piedmont Agreement

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

Attachment 4-3

Partial Requirements Resources

(Page 2 of 6)

Resource Name: Catawba

Type of Resource: Baseload Resource

Delivery period: January 1, 2011 through December 31, 2021

Resource Capacity MW: 16

Must take resource: Yes, in the amount of MWs that NCEMC indicates is available
in each hour.

Scheduling: A schedule must be submitted for each hour by Duke in the amount of
MWs that NCEMC indicates is available.

Energy Pricing: NA

Force Majeure: The term “Force Majeure” as used herein shall mean any cause
beyond the control of the party affected and which by reasonable efforts the
party affected is unable to overcome, including without limitation the
following: Acts of God: fire, flood, landslide, lightning, earthquake,
hurricane, tornado, storm, freeze, or drought; blight, famine, epidemic, or
quarantine; strike, lockout or other labor difficulty; act or failure to act of
any party (and such party so acting or failing to act shall not used such act or
failure to act to excuse any other obligation which it has under this
Agreement); act or failure to act of any regulatory agency or other governmental
authority; changes in the work or delays caused by public bidding requirements;
theft; casualty; accident; equipment breakdown, failure or shortage of, or
inability to obtain from usual sources, goods, labor, equipment, information or
drawings, machinery, supplies, energy, fuel or materials; embargo; injunction;
litigation or arbitration with suppliers or vendors; shortage of rolling stock;
arrest; war; civil disturbance; explosion; acts of public enemies; sabotage; or
breach of contract by any supplier, contractor, sub-contractor, laborer or
materialman. Any party rendered unable to fulfill any obligation under this
Agreement by reason of Force Majeure shall make reasonable efforts to remove
such inability within a reasonable time.

Attachment 4-3 to Duke-Piedmont Agreement

 

2

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

Attachment 4-3

Partial Requirements Resources

(Page 3 of 6)

Resource Name: Dominion PPA

Type of Resource: Combined Cycle Resource

Delivery period: January 1, 2011 through December 31, 2014

Resource Capacity MW: 5

Must take resource: No

Resource Availability: Duke has the right but not the obligation to schedule the
amount of MWs that NCEMC has indicated is available from this resource.

Min run time (Hours): 8

Scheduling:

 

  •   Day ahead schedule to be submitted, with intraday changes allowed

 

  •   Nominations must be made in whole MWs

 

  •   Day ahead Schedules are those submitted before 8:00 a.m. EPT the day prior
to flow. Intraday Schedules are those that are requested after the 8:00 a.m. EPT
deadline above. All Schedule changes must occur at the top of the hour. Intraday
Schedule changes require 2 hours advance notice.

 

  •   Day ahead scheduling: Unlimited changes up to the allocation MWs

 

  •   Intraday scheduling: Limit of two changes to the hourly Schedule for the
remainder of the day. Each change to the hourly Schedule shall be no greater
than 5%, for a cumulative maximum of 10% each hour. Additional changes will be
accommodated on a best efforts basis.

Energy Pricing: For each month of the Delivery Period, the price for energy will
equal the sum of Day-Ahead Energy Charge, the Intra-day Energy Charge, the
Incremental Variable Charge and the Variable O&M Charge:

 

  •   Day-ahead Energy Charge = the sum of each day in the month’s Day-Ahead
Energy Price x energy scheduled Day-Ahead

 

  •   Day-Ahead Energy Price = (Day-Ahead Fuel Index + Fuel Adder) x Heat Rate

 

  •   Day-Ahead Fuel Index: Gas Daily: Daily Price Survey, Midpoint of the Daily
Ranges, Appalachia, Dominion South Point. Gas Index for each Sat. and Sun. shall
be the price specified for the Mon. immediately following such Sat. and Sun. In
the event that Gas Daily no longer publishes this index, NCEMC and Dominion will
agree upon a replacement index which will be passed through to the IM.

 

  •   Intra-Day Energy Charge = the sum of each day in the month’s Intra-Day
Energy Price x energy scheduled Intra-Day

 

  •   Intra-Day Energy Price = (Intra-Day Fuel Index + Fuel Adder) x Heat Rate

Attachment 4-3 to Duke-Piedmont Agreement

 

3

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

Attachment 4-3

Partial Requirements Resources

(Page 4 of 6)

 

  •   Intra-Day Fuel Index: The higher of the price in $/MMBtu for such calendar
day or the next calendar day of Gas Daily: Daily Price Survey, Absolute of the
Daily Ranges, Appalachia, Dominion South Point. Gas Index for each Sat and Sun
shall be the price specified for the higher of the Monday or Tuesday immediately
following such Saturday and Sunday.

 

  •   Fuel Adder: $0.25/MMBtu

 

  •   Heat Rate:

 

  •   2006 heat rate: 7.730 MMBtu/MWh

 

  •   Heat Rate Adjustment: The heat rate will be recalculated annually to
reflect the actual energy costs from the previous year. The new heat rate will
go into effect on February 1 of each year.

 

  •   Incremental Variable Charge: There may be additional charges due to making
Intra-day schedule changes.

 

  •   Variable O&M Charge:

2011 = $3.81/MWh

2012 = $3.91/MWh

2013 = $4.01/MWh

2014 = $4.11/MWh

Force Majeure: “Force Majeure” means an event or circumstance which prevents one
Party from performing its obligations under one or more Transactions, which
event or circumstance was not anticipated as of the date the Transaction was
agreed to, which is not within the reasonable control of, or the result of the
negligence of, the Claiming Party, and which, by the exercise of due diligence,
the Claiming Party is unable to overcome or avoid or cause to be avoided. Force
Majeure shall not be based on (i) the loss of Buyer’s markets; (ii) Buyer’s
inability economically to use or resell the Product purchased hereunder;
(iii) the loss or failure of Seller’s supply; or (iv) Seller’s ability to sell
the Product at a price greater than the Contract Price. Neither Party may raise
a claim of Force Majeure based in whole or in part on curtailment by a
Transmission Provider unless (i) such Party has contracted for firm transmission
with a Transmission Provider for the Product to be delivered to or received at
the Delivery Point and (ii) such curtailment is due to “force majeure” or
“uncontrollable force” or a similar term as defined under the Transmission
Provider’s tariff; provided, however, that existence of a Force Majeure absent a
showing of other facts and circumstances which in the aggregate with such
factors establish that a Force Majeure as defined in the first sentence hereof
has occurred.

Attachment 4-3 to Duke-Piedmont Agreement

 

4

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

Attachment 4-3

Partial Requirements Resources

(Page 5 of 6)

Resource Name: SCEG

Type of Resource: Combined Cycle Resource

Delivery period: January 1, 2011 through December 31, 2012

Resource Capacity MW: 7

Must take resource: No

Resource Availability: Duke has the right but not the obligation to schedule the
amount of MWs that NCEMC has indicated is available from this resource.

Min run time (Hours): 4

Firm Gas Transportation: Firm gas transportation has been procured for up to 16
hours a day. Therefore, operation of this resource is limited to no more than 16
hours a day.

Scheduling:

 

  •   Day ahead schedule to be submitted, with intraday changes allowed

 

  •   Nominations must be made in whole MWs

 

  •   Day ahead Schedules are those submitted before 8:00 a.m. EPT the day prior
to flow. Intraday Schedules are those that are requested after the 8:00 a.m. EPT
deadline above. All Schedule changes must occur at the top of the hour. Intraday
Schedule changes require 2 hours advance notice.

 

  •   Day ahead scheduling: Unlimited changes up to the allocation MWs

 

  •   Intraday scheduling: Limit of two changes to the hourly Schedule for the
remainder of the day. Each change to the hourly Schedule shall be no greater
than 5%, for a cumulative maximum of 10% each hour. Additional changes will be
accommodated on a best efforts basis.

Energy Pricing: For each month of the Delivery Period, the price for energy will
equal the sum of Day-Ahead Energy Charge, the Intra-day Energy Charge and the
Variable O&M Charge:

 

  •   Day-ahead Energy Charge = the sum of each day in the month’s Day-Ahead
Energy Price x energy scheduled Day-Ahead:

 

  •   Day-Ahead Energy Price = (Day-Ahead Fuel Index + Fuel Adder) x Heat Rate

 

  •   Day-Ahead Fuel Index: 102.6% of SONAT Mid-Point price as published in Gas
Daily for Louisiana-OnShore South for gas to flow on such day

 

  •   Intra-Day Energy Charge = the sum of each day in the month’s Intra-Day
Energy Price x energy scheduled Intra-Day

 

  •   Intra-Day Energy Price = (Intra-Day Fuel Index + Fuel Adder) x Heat Rate

Attachment 4-3 to Duke-Piedmont Agreement

 

5

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

Attachment 4-3

Partial Requirements Resources

(Page 6 of 6)

 

  •   Intra-Day Fuel Index: 102.6% of the higher of the Gas Daily daily
Mid-Point price for SONAT under the table for Louisiana-OnShore South for gas to
flow such day or the Gas Daily daily Mid-Point price for SONAT under the table
for Louisiana-OnShore South for gas to flow on the next trading day

 

  •   Fuel Adder: $0.1/MMBtu

 

  •   Heat Rate: 7.350 MMBtu/MWh

 

  •   Variable O&M Charge:

2011 = $2.70/MWh

2012 = $2.76/MWh

Force Majeure: “Force Majeure” means an event or circumstance which prevents one
Party from performing its obligations under one or more Transactions, which
event or circumstance was not anticipated as of the date the Transaction was
agreed to, which is not within the reasonable control of, or the result of the
negligence of, the Claiming Party, and which, by the exercise of due diligence,
the Claiming Party is unable to overcome or avoid or cause to be avoided. Force
Majeure shall not be based on (i) the loss of Buyer’s markets; (ii) Buyer’s
inability economically to use or resell the Product purchased hereunder;
(iii) the loss of failure of Seller’s supply; or (iv) Seller’s ability to sell
the Product at a price greater than the Contract Price. Neither Party may raise
a claim of Force Majeure based in whole or in part on curtailment by a
Transmission Provider unless (i) such Party has contracted for firm transmission
with a Transmission Provider for the Product to be delivered to or received at
the Delivery Point and (ii) such curtailment is due to “force majeure” or
“uncontrollable force” or a similar term as defined under the Transmission
Provider’s tariff; provided, however, that existence of a Force Majeure absent a
showing of other facts and circumstances which in the aggregate with such
factors establish that a Force Majeure as defined in the first sentence hereof
has occurred.

Attachment 4-3 to Duke-Piedmont Agreement

 

6

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

Attachment 7-2

Example showing the calculation of the Monthly Demand Charges in the

Duke-Blue Ridge Agreement, Duke-Piedmont Agreement

and Duke-Rutherford Agreement

The purpose of this attachment is to provide an example showing the calculation
of the Monthly Demand Charge provided in Section 7.1.4 of the above-identified
agreements. Blue Ridge, Piedmont and Rutherford are referred to individually as
BR, P and R, respectively, and collectively as the EMC Group.

Assumptions:

Hour in October in which the positive difference between the EMC Group Native
Load and EMC Group’s Base Obligation is the greatest: 4:00-5:00 pm, October 14,
2006.

 

    

BR

(kW)

  

P

(kW)

  

R

(kW)

EMC Hourly Demand (10-14-06 4-5 pm)

   75,000    275,000    375,000

EMC Base Obligation (10-14-06 4-5pm)

   100,000    200,000    250,000

EMC Group Hourly Demand (10-14-06, 4-5 pm):    725,000 kW

EMC Group Base Obligation (10-14-06, 4-5 pm):    550,000 kW

Step 1

Calculate EMC Group Monthly Demand Quantity per Section 7.1.4.3.

 

EMC Group Hourly Demand

   725,000kW

minus EMC Group Base Obligation

   -550,000kW     

EMC Group Monthly Demand Quantity

   175,000kW

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

Step 2

Calculate EMC Monthly Demand Quantity per Section 7.1.4.1.

 

    

A

EMC Hourly Demand

(10-14-06 4-5pm) (kW)

  

B

minus EMC Base Obligation

(10-14-06 4-5 pm)

(kW)

  

C

EMC Monthly Demand
Quantity2

(kW)

BR

   75,000    100,000    0

P

   275,000    200,000    75,000

R

   375,000    250,000    125,000

Step 3

Calculate EMC Group Combined Monthly Demand Quantity per Section 7.1.4.2.

 

BR Monthly Demand Quantity

   0 kW

P Monthly Demand Quantity

   75,000 kW

R Monthly Demand Quantity

   125,000 kW     

EMC Group Combined Monthly Demand Quantity

   200,000 kW

 

2

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

Step 4

Calculate Monthly Demand Amount per Section 7.1.4.

 

    

A

EMC Monthly Demand
Quantity

(kW)

  

B

EMC Group Combined
Monthly Demand Quantity
(kW)

  

C

EMC Group Monthly
Demand Quantity

(kW)

  

D

EMC Monthly

Demand Amount

( ( A /B) * C) (kW)

BR

   0    200,000    175,000    0

P

   75,000    200,000    175,000    65,625

R

   125,000    200,000    175,000    109,375

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

2 Cannot be less than zero.

Step 5

Calculate Monthly Demand Charge per Section 7.1.4.

 

    

A

EMC Monthly Demand
Amount (kW)

  

B

Monthly Demand Rate
($/kW-year)

  

C

Monthly Demand Charge

BR

   0    0.75    0

P

   65,625    0.75    $49,218.75

R

   109,375    0.75    $82,031.25

 

3

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

Attachment 7-3

Calculation of Piedmont Allocated Share of

Duke Total Hourly Energy Charge, EMC Group Total Hourly Energy Credit,

Inter-EMC Energy Charge and Inter-EMC Energy Credit

I. Definitions

1. The Inter-EMC Transfer Price for an Hour shall be equal to the simple average
of the Duke Territorial Incremental Cost for the Hour and the Duke Territorial
Decremental Cost for the Hour; provided, that for any Hour for which the EMC
Group Energy Credit Amount is zero, the Inter-EMC Transfer Price for the Hour
shall be equal to 101.5% of the Duke Territorial Incremental Cost for the Hour,
and that for any Hour for which the EMC Group Energy Purchase Amount is zero,
the EMC Transfer Price for the Hour shall be equal to 101.5% of the Duke
Territorial Decremental Cost for the Hour.

2. All other capitalized terms shall have the meaning set forth in Section 1.1
of this Agreement.

II. Piedmont Allocated Share of the Duke Total Hourly Energy Charge

The Piedmont Allocated Share of the Duke Total Hourly Energy Charge for an Hour
shall be equal to:

( C1 / A ) * D

Where:

A = EMC Group Combined Energy Purchase Amount

C1 = Piedmont Energy Purchase Amount

D = Duke Total Hourly Energy Charge

III. Piedmont Allocated Share of the Inter-EMC Energy Charge

The Piedmont Allocated Share of the Inter-EMC Energy Charge for an Hour shall be
equal to:

( C1 / A ) * ( A—B ) * P

Where:

A = EMC Group Combined Energy Purchase Amount

B = EMC Group Energy Purchase Amount

C1 = Piedmont Energy Purchase Amount

P = Inter-EMC Transfer Price

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

IV. Piedmont Allocated Share of the EMC Group Total Hourly Energy Credit

The Piedmont Allocated Share of the EMC Group Total Hourly Energy Credit for an
Hour shall be equal to:

( G1 / E ) * H

Where:

E = EMC Group Combined Energy Credit Amount

G1 = Piedmont Energy Credit Amount

H = EMC Group Total Hourly Energy Credit

V. Piedmont Allocated Share of the Inter-EMC Energy Credit

The Piedmont Allocated Share of the Inter-EMC Energy Credit for an Hour shall be
equal to:

( G1 / E ) * ( E – F ) * P

Where:

E = EMC Group Combined Energy Credit Amount

F = EMC Group Energy Credit Amount

G1 = Piedmont Energy Credit Amount

P = Inter-EMC Transfer Price

 

- 2 -

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

Attachment 7-4

Example 1

Showing the Calculation of Blue Ridge, Piedmont and

Rutherford Allocated Shares of the Duke Total Hourly Energy Charge,

EMC Group Total Hourly Energy Credit, Inter-EMC Energy Charge and Inter-EMC
Energy Credit

The purpose of this attachment is to provide an example showing the calculation
of the charges and credits identified above for one Hour. For purposes of this
example, Blue Ridge, Piedmont and Rutherford are referred to individually as BR,
P and R, respectively, and collectively as the EMC Group.

I. ASSUMPTIONS:

A. Call and Put Signals during the Hour

 

     BR    P    R    EMC
Group

Intervals 1-2251 - Call Signal during each Interval (kW):

   6,000    0    10,000    6,000

Intervals 1-225 - Put Signal during each Interval (kW)

   0    10,000    0    0

Intervals 226-450 - Call Signal during each Interval (kW)

   6,000    0    10,000    6,000

Intervals 226-450 - Put Signal during each Interval (kW)

   0    10,000    0    0

Intervals 451-675 - Call Signal during each Interval (kW)

   0    4,000    0    0

Intervals 451-675 - Put Signal during each Interval (kW)

   9,000    0    9,000    14,000

Intervals 676-900 - Call Signal during each Interval (kW)

   0    4,000    0    0

Intervals 676-900 - Put Signal during each Interval (kW)

   9,000    0    9,000    14,000

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

3 Interval numbers refer to the Intervals during the Hour (e.g., Interval 1 is
the first four seconds of the Hour, Interval 2 is the next four seconds, etc.).
The Call and Put Signals are shown as the same in each of the first 225
Intervals of the Hour, and then again as the same in the next 225 Intervals and
so on. This is a simplifying assumption, to make this example less cumbersome.
In actual operation, the Parties anticipate that these positions would change
frequently within the Hour.

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

B. Energy deliveries during the Hour4

 

     BR    P    R    EMC
Group

Hourly Energy Amount delivered from Duke - Intervals 1-225

   1,500    0    2,500    1,500

Hourly Energy Amount delivered to Duke - Intervals 1-225

   0    2,500    0    0

Hourly Energy Amount delivered from Duke - Intervals 226-450

   1,500    0    2,500    1,500

Hourly Energy Amount delivered to Duke - Intervals 226-450

   0    2,500    0    0

Hourly Energy Amount delivered from Duke - Intervals 451-675

   0    1,000    0    0

Hourly Energy Amount delivered to Duke - Intervals 451-675

   2,250    0    2,250    3,500

Hourly Energy Amount delivered from Duke - Intervals 676-900

   0    1,000    0    0

Hourly Energy Amount delivered to Duke - Intervals 676-900

   2,250    0    2,250    3,500

C. Incremental/Decremental Costs

 

Duke Territorial Incremental Cost: $0.10/kWh Duke Territorial Decremental Cost:
$0.10/kWh

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

4 These numbers sum the four-second Call and Put Signals from Part I.A. For
example, 6,000 kW delivered by Duke in each of the 225 four-second Intervals (15
minutes) equal 1,500 kWh (6,000 KW * 225 Intervals / 900 Intervals / Hour = 1500
kWh).

 

- 2 -

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

II. CALCULATIONS

A. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Duke Total Hourly Energy Charge

Step 1

Sum the energy deliveries by Duke to BR for all Intervals over the entire Hour
(column 1). Repeat calculation for P and R (columns 2-3). Sum columns 1-3
(column 4). Sum the energy deliveries by Duke to the EMC Group for all Intervals
over the entire Hour (column 5).

 

Column number

   1    2    3    4    5      BR5    P6    R7    Sum8    Aggregate
EMC
Group9

Energy delivered by Duke (kW)

   3,000    2,000    5,000    10,000    3,000

Step 2

Calculate the percentage that each Customer contributed to the energy deliveries
by Duke (Customer Buy / Sum of Customer Buys)

 

     BR10     P11     R12     Sum  

Energy delivered by Duke

   30.00 %   20.00 %   50.00 %   100.00 %

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

5 Blue Ridge Energy Purchase Amount

6 Piedmont Energy Purchase Amount

7 Rutherford Energy Purchase Amount

8 EMC Group Combined Energy Purchase Amount

9 EMC Group Energy Purchase Amount

10 Blue Ridge Energy Purchase Amount / EMC Group Combined Energy Purchase
Amount.

11 Piedmont Energy Purchase Amount / EMC Group Combined Energy Purchase Amount.

12 Rutherford Energy Purchase Amount / EMC Group Combined Energy Purchase
Amount.

 

- 3 -

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

Step 3

Calculate Duke Total Hourly Energy Charge = 113% of Duke Territorial Incremental
Cost for electric energy delivered by Duke to the EMC Group for the Hour (3,000
kW * $0.10/kWh * 113% = $339.00)

Step 4

Calculate the individual EMC’s Allocated Share of the Duke Total Hourly Energy
Charge.

Apply the percentages derived in Step 2 to the Duke Total Hourly Energy Charge.

 

     BR13    P14    R15    Sum16

$ for energy delivered by Duke

   $  101.70    $  67.80    $  169.50    $  339.00

These amounts are included in the Duke Hourly Energy Charge.

 

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

13 Blue Ridge Allocated Share of Duke Total Hourly Energy Charge.

14 Piedmont Allocated Share of Duke Total Hourly Energy Charge

15 Rutherford Allocated Share of Duke Total Hourly Energy Charge

16 Duke Total Hourly Energy Charge

 

- 4 -

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

B. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
EMC Group Total Hourly Energy Credit

Step 5

Sum the energy deliveries by BR to Duke for all Intervals over the entire Hour
(column 1). Repeat calculation for P and R (columns 2-3). Sum columns 1-3
(column 4). Sum the energy deliveries by EMC Group to Duke for all Intervals
over the entire Hour (column 5).

 

Column number

   1    2    3    4    5      BR17    P18    R19    Sum20    EMC
Group21

Energy delivered by Customer (kW)

   4,500    5,000    4,500    14,000    7,000

Step 6

Calculate the percentage that each Customer contributed to the energy deliveries
by Customers (Customer delivery / Sum of Customer deliveries)

 

     BR22     P23     R24     Sum  

Energy delivered by Customer

   32.14 %   35.71 %   32.14 %   100.00 %

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

17 Blue Ridge Energy Credit Amount

18 Piedmont Energy Credit Amount

19 Rutherford Energy Credit Amount

20 EMC Group Combined Energy Credit Amount

21 EMC Group Energy Credit Amount

22 Blue Ridge Energy Credit Amount / EMC Group Combined Energy Credit Amount.

23 Piedmont Energy Credit Amount / EMC Group Combined Energy Credit Amount.

24 Rutherford Energy Credit Amount / EMC Group Combined Energy Credit Amount.

 

- 5 -

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

Step 7

Calculate the EMC Group Total Hourly Energy Credit = 90% of Duke Territorial
Decremental Cost for electric energy delivered by the EMC Group to Duke for the
Hour (7,000 kW * $0.10/kWh * 90% = $630)

Step 8

Calculate the EMC Allocated Share of the EMC Group Total Hourly Energy Credit

Apply the percentages derived in Step 6 to the EMC Group Total Hourly Energy
Credit.

 

     BR25    P26    R27    Sum28

$ for energy delivered by Customers

   $ 202.50    $ 225.00    $ 202.50    $ 630.00

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

25 Blue Ridge Allocated Share of EMC Group Total Hourly Energy Credit.

26 Piedmont Allocated Share of EMC Group Total Hourly Energy Credit

27 Rutherford Allocated Share of EMC Group Total Hourly Energy Credit

28 EMC Group Total Hourly Energy Credit

 

- 6 -

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

C. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Inter-EMC Energy Charge

Step 9

Calculate the difference between the EMC Group Combined Energy Purchase Amount
(sum determined in Step 1, column 4) and the EMC Group Energy Purchase Amount
(aggregate calculated in Step 1, column 5).

 

Step 5, column 429

   10,000

Step 5, column 530

   -3,000     

Difference

   7,000

Step 10

Apply the percentages derived in Step 2 to the difference derived in Step 9.

 

     BR    P    R    Sum

Energy delivered by Duke

   2,100    1,400    3,500    7,000

Step 11

Calculate Inter-EMC Transfer Price: Average of 113% of Duke Territorial
Incremental Cost and 90% of Duke Territorial Decremental Cost, unless EMC Group
Energy Purchase Amount or EMC Group Energy Credit Amount is zero. If EMC Group
Energy Purchase Amount is zero, Inter-EMC Transfer Price is 101.50% of Duke
Territorial Decremental Cost. If EMC Group Energy Credit Amount is zero,
Inter-EMC Transfer Price is 101.50% of Duke Territorial Incremental Cost. In
this example, Inter-EMC Transfer Price is average of $0.113/kWh and $0.09/kWh,
or $0.1015/kWh.

 

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

29 EMC Group Combined Energy Purchase Amount

30 EMC Group Energy Purchase Amount

 

- 7 -

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

Step 12

Multiply the Inter-EMC Transfer Price times the amounts derived in Step 10.

 

     BR31    P32    R33    Sum

$ for Inter-EMC Charge

   $ 213.15    $ 142.10    $ 355.25    $ 710.50

These amounts are included in the Duke Hourly Energy Charge

D. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Inter-EMC Energy Credit

Step 13

Calculate the EMC Group Combined Energy Credit Amount (difference between the
sum determined in Step 5, column 4) and the EMC Group Credit Amount (aggregate
calculated in Step 5, column 5).

 

Step 5, column 434

   14,000

Step 5, column 535

   -7,000     

Difference

   7,000

 

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

31 Blue Ridge Allocated Share of Inter-EMC Energy Charge

32 Piedmont Allocated Share of Inter-EMC Energy Charge

33 Rutherford Allocated Share of Inter-EMC Energy Charge

34 EMC Group Combined Energy Credit Amount

35 EMC Group Energy Credit Amount

 

- 8 -

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

Step 14

Apply the percentages derived in Step 6 to the difference derived in Step 13.

 

     BR    P    R    Sum

Energy delivered by Customer

     2,250      2,500      2,250      7,000 Step 15             Muliply the
Inter-EMC Transfer Price times the amounts derived in Step 14                 
BR36    P37    R38    Sum

$ for Inter-EMC Credit

   $ 228.38    $ 253.75    $ 228.38    $ 710.50

 

III. CHARGE/CREDIT SUMMATION FOR THE HOUR

 

         BR     P     R    Total  

1.

  Allocated Share of Duke Total Hourly Energy Ch. (Step 4)    $ 101.70     $
67.80     $ 169.50    $ 339.00  

2.

  Allocated Share of Inter-EMC Energy Charge (Step 12)    $ 213.15     $ 142.10
    $ 355.25    $ 710.50                                    

3.

  Subtotal (row 1 + row 2)    $ 314.85     $ 209.90     $ 524.75    $ 1,049.50  
                                 

4.

  Allocated Share of EMC Group Ttl Hourly En. Cr. (Step 8)    $ 202.50     $
225.00     $ 202.50    $ 630.00  

5.

  Allocated Share of Inter-EMC Energy Credit (Step 15)    $ 228.38     $ 253.75
    $ 228.38    $ 710.50                                    

6.

  Subtotal (row 4 + row 5)    $ 430.88     $ 478.75     $ 430.88    $ 1,340.50  
                                 

7.

  Total charge (credit) (row 3 – row 6)    $ (116.03 )   $ (268.85 )   $ 93.88
   $ (291.00 )                                  

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

36 Blue Ridge Allocated Share of Inter-EMC Energy Credit

37 Piedmont Allocated Share of Inter-EMC Energy Credit

38 Rutherford Allocated Share of Inter-EMC Energy Credit

 

- 9 -

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

Attachment 7-4

Example 2

Showing the Calculation of Blue Ridge, Piedmont and

Rutherford Allocated Shares of the Duke Total Hourly Energy Charge,

EMC Group Total Hourly Energy Credit, Inter-EMC Energy Charge and Inter-EMC
Energy Credit

The purpose of this attachment is to provide an example showing the calculation
of the charges and credits identified above for one Hour. For purposes of this
example, Blue Ridge, Piedmont and Rutherford are referred to individually as BR,
P and R, respectively, and collectively as the EMC Group.

 

I. ASSUMPTIONS:

 

  A. Call and Put Signals during the Hour

 

     BR    P    R   

EMC

Group

Intervals 1-22539 - Call Signal during each Interval (kW):

   0    3,000    3,000    2,000

Intervals 1-225 - Put Signal during each Interval (kW)

   4,000    0    0    0

Intervals 226-450 - Call Signal during each Interval (kW)

   0    5,000    3,000    4,000

Intervals 226-450 - Put Signal during each Interval (kW)

   4,000    0    0    0

Intervals 451-675 - Call Signal during each Interval (kW)

   0    2,000    0    0

Intervals 451-675 - Put Signal during each Interval (kW)

   2,000    0    0    0

Intervals 676-900 - Call Signal during each Interval (kW)

   0    1,000    1,000    0

Intervals 676-900 - Put Signal during each Interval (kW)

   4,000    0    0    2,000

 

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

39 Interval numbers refer to the Intervals during the Hour (e.g., Interval 1 is
the first four seconds of the Hour, Interval 2 is the next four seconds, etc.).
The Call and Put Signals are shown as the same in each of the first 225
Intervals of the Hour, and then again as the same in the next 225 Intervals and
so on. This is a simplifying assumption, to make this example less cumbersome.
In actual operation, the Parties anticipate that these positions would change
frequently within the Hour.

 

- 10 -

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

  B. Energy deliveries during the Hour40

 

     BR    P    R    EMC
Group

Hourly Energy Amount delivered from Duke - Intervals 1-225

   0    750    750    500

Hourly Energy Amount delivered to Duke - Intervals 1-225

   1,000    0    0    0

Hourly Energy Amount delivered from Duke - Intervals 226-450

   0    1,250    750    1,000

Hourly Energy Amount delivered to Duke - Intervals 226-450

   1,000    0    0    0

Hourly Energy Amount delivered from Duke - Intervals 451-675

   0    500    0    0

Hourly Energy Amount delivered to Duke - Intervals 451-675

   500    0    0    0

Hourly Energy Amount delivered from Duke - Intervals 676-900

   0    250    250    0

Hourly Energy Amount delivered to Duke - Intervals 676-900

   1,000    0    0    500

 

  C. Incremental/Decremental Costs

Duke Territorial Incremental Cost: $0.10/kWh

Duke Territorial Decremental Cost: $0.10/kWh

 

  II. CALCULATIONS

 

  A. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Duke Total Hourly Energy Charge

Step 1

Sum the energy deliveries by Duke to BR for all Intervals over the entire Hour
(column 1). Repeat calculation for P and R (columns 2-3). Sum columns 1-3
(column 4). Sum the energy deliveries by Duke to the EMC Group for all Intervals
over the entire Hour (column 5).

 

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

40 These numbers sum the four-second Call and Put Signals from Part I.A. For
example, 3,000 kW delivered by Duke in each of the 225 four-second Intervals (15
minutes) equal 750 kWh (2,000 KW * 225 Intervals / 900 Intervals / Hour = 750
kWh).

 

- 11 -

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

Column number

   1    2    3    4    5      BR41    P42    R43    Sum44    Aggregate
EMC
Group45

Energy delivered by Duke (kW)

   0    2,750    1,750    4,500    1,500

Step 2

Calculate the percentage that each Customer contributed to the energy deliveries
by Duke (Customer Buy / Sum of Customer Buys)

 

     BR46     P47     R48     Sum  

Energy delivered by Duke

   0.00 %   61.11 %   38.89 %   100.00 %

 

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

41 Blue Ridge Energy Purchase Amount

42 Piedmont Energy Purchase Amount

43 Rutherford Energy Purchase Amount

44 EMC Group Combined Energy Purchase Amount

45 EMC Group Energy Purchase Amount

46 Blue Ridge Energy Purchase Amount / EMC Group Combined Energy Purchase
Amount.

47 Piedmont Energy Purchase Amount / EMC Group Combined Energy Purchase Amount.

48 Rutherford Energy Purchase Amount / EMC Group Combined Energy Purchase
Amount.

 

- 12 -

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

Step 3

Calculate Duke Total Hourly Energy Charge = 113% of Duke Territorial Incremental
Cost for electric energy delivered by Duke to the EMC Group for the Hour (1,500
kW * $0.10/kWh * 113% = $169.50)

Step 4

Calculate the individual EMC’s Allocated Share of the Duke Total Hourly Energy
Charge.

Apply the percentages derived in Step 2 to the Duke Total Hourly Energy Charge.

 

     BR49    P50    R51    Sum52

$ for energy delivered by Duke

   $0.00    $103.58    $65.92    $169.50

These amounts are included in the Duke Hourly Energy Charge.

 

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

49 Blue Ridge Allocated Share of Duke Total Hourly Energy Charge.

50 Piedmont Allocated Share of Duke Total Hourly Energy Charge

51 Rutherford Allocated Share of Duke Total Hourly Energy Charge

52 Duke Total Hourly Energy Charge

 

- 13 -

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

  B. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
EMC Group Total Hourly Energy Credit

Step 5

Sum the energy deliveries by BR to Duke for all Intervals over the entire Hour
(column 1). Repeat calculation for P and R (columns 2-3). Sum columns 1-3
(column 4). Sum the energy deliveries by EMC Group to Duke for all Intervals
over the entire Hour (column 5).

 

Column number

   1    3    4    5    6      BR53    P54    R55    Sum56    EMC
Group57

Energy delivered by Customer (kW)

   3,500    0    0    3,500    500

Step 6

Calculate the percentage that each Customer contributed to the energy deliveries
by Customers (Customer delivery / Sum of Customer deliveries)

 

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

53 Blue Ridge Energy Credit Amount

54 Piedmont Energy Credit Amount

55 Rutherford Energy Credit Amount

56 EMC Group Combined Energy Credit Amount

57 EMC Group Energy Credit Amount

 

- 14 -

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

     BR58     P59     R60     Sum  

Energy delivered by Customer

   100.00 %   0.00 %   0.00 %   100.00 %

Step 7

Calculate the EMC Group Total Hourly Energy Credit = 90% of Duke Territorial
Decremental Cost for electric energy delivered by the EMC Group to Duke for the
Hour (500 kW * $0.10/kWh * 90% = $45)

Step 8

Calculate the EMC Allocated Share of the EMC Group Total Hourly Energy Credit

Apply the percentages derived in Step 6 to the EMC Group Total Hourly Energy
Credit.

 

     BR61    P62    R63    Sum64

$ for energy delivered by Customers

   $45.00    $—    $—    $45.00

 

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

58 Blue Ridge Energy Credit Amount / EMC Group Combined Energy Credit Amount.

59 Piedmont Energy Credit Amount / EMC Group Combined Energy Credit Amount.

60 Rutherford Energy Credit Amount / EMC Group Combined Energy Credit Amount.

61 Blue Ridge Allocated Share of EMC Group Total Hourly Energy Credit.

62 Piedmont Allocated Share of EMC Group Total Hourly Energy Credit

63 Rutherford Allocated Share of EMC Group Total Hourly Energy Credit

64 EMC Group Total Hourly Energy Credit

 

- 15 -

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

  C. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Inter-EMC Energy Charge

Step 9

Calculate the difference between the EMC Group Combined Energy Purchase Amount
(sum determined in Step 1, column 4) and the EMC Group Energy Purchase Amount
(aggregate calculated in Step 1, column 5).

 

Step 1, column 465

   4,500

Step 1, column 566

   -1,500     

Difference

   3,000

Step 10

Apply the percentages derived in Step 2 to the difference derived in Step 9.

 

     BR    P    R    Sum

Energy delivered by Duke

   0    1,833    1,167    3,000

Step 11

Calculate Inter-EMC Transfer Price: Average of 113% of Duke Territorial
Incremental Cost and 90% of Duke Territorial Decremental Cost, unless EMC Group
Energy Purchase Amount or EMC Group Energy Credit Amount is zero. If EMC Group
Energy Purchase Amount is zero, Inter-EMC Transfer Price is 101.50% of Duke
Territorial Decremental Cost. If EMC Group Energy

 

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

65 EMC Group Combined Energy Purchase Amount

66 EMC Group Energy Purchase Amount

 

- 16 -

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

Credit Amount is zero, Inter-EMC Transfer Price is 101.50% of Duke Territorial
Incremental Cost. In this example, Inter-EMC Transfer Price is average of
$0.113/kWh and $0.09/kWh, or $0.1015/kWh.

Step 12

Multiply the Inter-EMC Transfer Price times the amounts derived in Step 10.

 

     BR67    P68    R69    Sum

$ for Inter-EMC Charge

   $0.00    $186.08    $118.42    $304.50

 

  D. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Inter-EMC Energy Credit

Step 13

Calculate the EMC Group Combined Energy Credit Amount (difference between the
sum determined in Step 5, column 4) and the EMC Group Credit Amount (aggregate
calculated in Step 5, column 5).

 

Step 5, column 470

   3,500

Step 5, column 571

   - 500     

Difference

   3,000

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

67 Blue Ridge Allocated Share of Inter-EMC Energy Charge

68 Piedmont Allocated Share of Inter-EMC Energy Charge

69 Rutherford Allocated Share of Inter-EMC Energy Charge

 

- 17 -

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

Step 14

Apply the percentages derived in Step 6 to the difference derived in Step 13.

 

     BR    P    R    Sum

Energy delivered by Customer

   3,000    0    0    3,000 Step 15            

Multiply the Inter-EMC Transfer Price times the amounts derived in Step 14

                 BR72    P73    R74    Sum

$ for Inter-EMC Credit

   $304.50    $0.00    $0.00    $304.50

 

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

70 EMC Group Combined Energy Credit Amount

71 EMC Group Energy Credit Amount

72 Blue Ridge Allocated Share of Inter-EMC Energy Credit

73 Piedmont Allocated Share of Inter-EMC Energy Credit

74 Rutherford Allocated Share of Inter-EMC Energy Credit

 

- 18

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

III. CHARGE/CREDIT SUMMATION FOR THE HOUR

 

          BR     P    R    Total

1.

  

Allocated Share of Duke Total Hourly Energy Ch. (Step 4)

   $ 0.00     $ 103.58    $ 65.92    $ 169.50

2.

  

Allocated Share of Inter-EMC Energy Charge (Step 12)

   $ 0.00     $ 186.08    $ 118.42    $ 304.50                                

3.

  

Subtotal (row 1 + row 2)

   $ 0.00     $ 289.67    $ 184.33    $ 474.00                                

4.

  

Allocated Share of EMC Group Ttl Hourly En. Cr. (Step 8)

   $ 45.00     $ 0.00    $ 0.00    $ 45.00

5.

  

Allocated Share of Inter-EMC Energy Credit (Step 15)

   $ 304.50     $ 0.00    $ 0.00    $ 304.50                                

6.

  

Subtotal (row 4 + row 5)

   $ 349.50     $ 0.00    $ 0.00    $ 349.50                                

7.

  

Total charge (credit) (row 3 – row 6)

   $ (349.50 )   $ 289.67    $ 184.33    $ 124.50                              
 

 

- 19 -

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

Attachment 7-5

Example showing Calculations of

Piedmont Energy Purchase Amounts

and Piedmont Energy Credit Amount

This attachment provides an example showing the calculation of the Piedmont
Energy Purchase Amount and Piedmont Energy Credit Amount for one Hour.

 

Four-second Interval Number*

  

A

EMC’s
Base
Obligation
(kW)

  

B

EMC’s
Native
Load
(kW)

  

C

Call
Signal
(B-A
where
B>A)
(kW)

  

D

Call
energy
(C/900)
(kWhs)

   

E

Put
Signal
(A-B
where
A>B)
(kW)

  

F

Put
energy
(E/900)
(kWhs)

 

1

   100,000    102,000    2,000    2.2     —      —    

2

   100,000    101,000    1,000    1.1     —      —    

3

   100,000    100,000    —      —       —      —    

4

   100,000    99,000    —      —       1,000    1.1  

5

   100,000    98,000    —      —       2,000    2.2  

6

   100,000    97,000    —      —       3,000    3.3  

7-89575

   100,000    100,000    —      —       —      —    

896

   100,000    98,000    —      —       2,000    2.2  

897

   100,000    99,000    —      —       1,000    1.1  

898

   100,000    100,000    —      —       —      —    

899

   100,000    101,000    1,000    1.1     —      —    

900

   100,000    102,000    2,000    2.2     —      —                             

Total

            6.6 76      9.9 77                         

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

* Interval numbers refer to the Intervals during the hour (e.g., Interval 1 is
the first four seconds of the hour, Interval 2 is the next four seconds, etc.)

75 To simplify this example, EMC’s Base Obligation and EMC’s Native Load are
assumed to be equal during Intervals 6-895. In actual operation, the parties
anticipate that these amounts will differ throughout the Hour.

76 Piedmont Energy Purchase Amount

77 Piedmont Energy Credit Amount

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

Attachment 7-6

Example showing Calculations of EMC Group Energy Purchase Amounts

and EMC Group Energy Credit Amount

This attachment provides an example showing the calculation of the EMC Group
Energy Purchase Amount and EMC Group Energy Credit Amount for one Hour.

 

Four-second Interval Number*

  

A

EMC
Group
Base
Obligation
(kW)

  

B

EMC
Group
Native
Load
(kW)

  

C

Call
Signal
(B-A
where
B>A)
(kW)

  

D

Call
energy
(C/900)
(kWhs)

   

E

Put
Signal
(A-B
where
A>B)
(kW)

  

F

Put
energy
(E/900)
(kWhs)

 

1

   400,000    408,000    8,000    8.8     —      —    

2

   400,000    404,000    4,000    4.4     —      —    

3

   400,000    400,000    —      —       —      —    

4

   400,000    396,000    —      —       4,000    4.4  

5

   400,000    392,000    —      —       8,000    8.8  

6

   400,000    388,000    —      —       12,000    13.2  

7-89578

   400,000    400,000    —      —       —      —    

896

   400,000    392,000    —      —       8,000    8.8  

897

   400,000    396,000    —      —       4,000    4.4  

898

   400,000    400,000    —      —       —      —    

899

   400,000    404,000    4,000    4.4     —      —    

900

   400,000    408,000    8,000    8.8     —      —                             

Total

            26.4 79      39.6 80                         

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

* Interval numbers refer to the Intervals during the hour (e.g., Interval 1 is
the first four seconds of the hour, Interval 2 is the next four seconds, etc.)

78 To simplify this example, the EMC Group’s Base Obligation and the EMC Group’s
Native Load are assumed to be equal during Intervals 6-895. In actual operation,
the Parties anticipate that these amounts will differ throughout the Hour.

79 EMC Group Energy Purchase Amount

80 EMC Group Energy Credit Amount

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

Attachment 7-7

Example showing the calculation of

Monthly Billing Demand under Section 7.2.6.3.2

The purpose of this attachment is to provide an example showing the calculation
of the Monthly Billing Demand under Section 7.2.6.3.2 of the Agreement.

I. Assumptions:

 

          Day   

Hour

  

Load

(MW)

1.   

Highest Hourly Duke Schedule 1 Demand during 2007

   7-25-07    5:00-6:00 p.m.    17,000 2.   

2nd highest Hourly Duke Schedule 1 Demand during 2007

   7-25-07    6:00-7:00 p.m.    16,975 3.   

3rd highest Hourly Duke Schedule 1 Demand during 2007

   7-25-07    4:00-5:00 p.m.    16,950 4.   

4th highest Hourly Duke Schedule 1 Demand during 2007

   7-25-07    3:00-4:00 p.m.    16,925 5.   

5th highest Hourly Duke Schedule 1 Demand during 2007

   7-24-07    5:00-6:00 p.m.    16,900 6.   

6th highest Hourly Duke Schedule 1 Demand during 2007

   7-24-07    6:00-7:00 p.m.    16,875 7.   

7th highest Hourly Duke Schedule 1 Demand during 2007

   7-24-07    4:00-5:00 p.m.    16,850 8.   

8th highest Hourly Duke Schedule 1 Demand during 2007

   7-24-07    3:00-4:00 p.m.    16,825 9.   

9th highest Hourly Duke Schedule 1 Demand during 2007

   8-1-07    5:00-6:00 p.m.    16,800 10.   

10th highest Hourly Duke Schedule 1 Demand during 2007

   8-1-07    6:00-7:00 p.m.    16,775 11.   

11th highest Hourly Duke Schedule 1 Demand during 2007

   8-1-07    4:00-5:00 p.m.    16,750 12.   

12th highest Hourly Duke Schedule 1 Demand during 2007

   8-1-07    3:00-4:00 p.m.    16,725 13.   

13th highest Hourly Duke Schedule 1 Demand during 2007

   7-26-07    5:00-6:00 p.m.    16,700 14.   

14th highest Hourly Duke Schedule 1 Demand during 2007

   7-26-07    6:00-7:00 p.m.    16,675 15.   

15th highest Hourly Duke Schedule 1 Demand during 2007

   6-26-07    4:00-5:00 p.m.    16,650 16.   

16th highest Hourly Duke Schedule 1 Demand during 2007

   7-26-07    4:00-5:00 p.m.    16,625 17.   

17th highest Hourly Duke Schedule 1 Demand during 2007

   7-24-07    3:00-4:00 p.m.    16,600 18.   

18th highest Hourly Duke Schedule 1 Demand during 2007

   1-18-07    9:00-10:00 a.m.    16,575 19.   

19th highest Hourly Duke Schedule 1 Demand during 2007

   1-18-07    10:00-11:00 a.m.    16,550 20.   

20th highest Hourly Duke Schedule 1 Demand during 2007

   8-2-07    4:00-5:00 p.m.    16,525

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

         

Day

  

Hour

  

Load

(MW)

21.

  

21st highest Hourly Duke Schedule 1 Demand during 2007

   8-2-07    3:00-4:00 p.m.    16,500

22.

  

22nd highest Hourly Duke Schedule 1 Demand during 2007

   8-2-07    5:00-6:00 p.m.    16,475

23.

  

23rd highest Hourly Duke Schedule 1 Demand during 2007

   8-2-07    6:00-7:00 p.m.    16,450

24.

  

24th highest Hourly Duke Schedule 1 Demand during 2007

   7-18-07    3:00-4:00 p.m.    16,425

25.

  

25th highest Hourly Duke Schedule 1 Demand during 2007

   7-18-07    4:00-5:00 p.m.    16,400

26.

  

26th highest Hourly Duke Schedule 1 Demand during 2007

   7-18-07    2:00-3:00 p.m.    16,375

27.

  

27th highest Hourly Duke Schedule 1 Demand during 2007

   7-18-07    1:00-2:00 p.m.    16,350

28.

  

28th highest Hourly Duke Schedule 1 Demand during 2007

   7-17-07    5:00-6:00 p.m.    16,325

29.

  

29th highest Hourly Duke Schedule 1 Demand during 2007

   7-17-07    6:00-7:00 p.m.    16,300

30.

  

30th highest Hourly Duke Schedule 1 Demand during 2007

   7-17-07    4:00-5:00 p.m.    16,325

 

II. Calculation of Monthly Billing Demand for 2007:

The twenty (20) highest load hours during July-August are hours 1-14, 16-17 and
20-23.

 

No. from Part I

 

Day

 

Hour

 

EMC Native Load

(kW)

 

EMC Base Obligation

(kW)

 

EMC Native Load
minus EMC Base

Obligation (kW)

1.

  7-25-07   5:00-6:00 p.m.   100,000   80,000   20,000

2.

  7-25-07   6:00-7:00 p.m.   102,000   80,000   22,000

3.

  7-25-07   4:00-5:00 p.m.   104,000   80,000   24,000

4.

  7-25-07   3:00-4:00 p.m.   106,000   80,000   26,000

5.

  7-24-07   5:00-6:00 p.m.   104,000   80,000   24,000

6.

  7-24-07   6:00-7:00 p.m.   102,000   79,000   23,000

7.

  7-24-07   4:00-5:00 p.m.   100,000   79,000   21,000

8.

  7-24-07   3:00-4:00 p.m.   100,000   79,000   21,000

9.

  8-1-07   5:00-6:00 p.m.   100,000   79,000   21,000

10.

  8-1-07   6:00-7:00 p.m.   100,000   78,000   22,000

11.

  8-1-07   4:00-5:00 p.m.   99,000   78,000   21,000

 

- 2 -

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

No. from Part I

 

Day

 

Hour

 

EMC Native Load

(kW)

 

EMC Base Obligation
(kW)

 

EMC Native Load
minus EMC Base
Obligation (kW)

12.

  8-1-07   3:00-4:00 p.m.   99,000   78,000   21,000

13.

  7-26-07   5:00-6:00 p.m.   99,000   100,000   0

14.

  7-26-07   6:00-7:00 p.m.   99,000   100,000   0

16.

  7-26-07   4:00-5:00 p.m.   98,000   100,000   0

17.

  7-24-07   3:00-4:00 p.m.   98,000   100,000   0

20.

  8-2-07   4:00-5:00 p.m.   98,000   100,000   0

21.

  8-2-07   3:00-4:00 p.m.   98,000   100,000   0

22.

  8-2-07   5:00-6:00 p.m.   98,000   100,000   0

23.

  8-2-07   6:00-7:00 p.m.   98,000   100,000   0               TOTAL        
266,000               AVERAGE         13,30081            

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

81 Monthly Billing Demand for each Month during 2007.

 

- 3 -

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

Attachment 7-8

Examples showing the calculation of

Monthly Billing Demand under Section 7.3.2.2

The purpose of this attachment is to provide examples showing the calculation of
the Monthly Billing Demand under Section 7.3.2.2 of the Agreement.

Example A

I. Assumptions:

 

         

Day

  

Hour

  

Load

(MW)

1.

  

Highest Hourly Duke Schedule 1 Demand during 2012

   7-25-12    5:00-6:00 p.m.    17,000

2.

  

2nd highest Hourly Duke Schedule 1 Demand during 2012

   7-25-12    6:00-7:00 p.m.    16,975

3.

  

3rd highest Hourly Duke Schedule 1 Demand during 2012

   7-25-12    4:00-5:00 p.m.    16,950

4.

  

4th highest Hourly Duke Schedule 1 Demand during 2012

   7-25-12    3:00-4:00 p.m.    16,925

5.

  

5th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    5:00-6:00 p.m.    16,900

6.

  

6th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    6:00-7:00 p.m.    16,875

7.

  

7th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    4:00-5:00 p.m.    16,850

8.

  

8th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    3:00-4:00 p.m.    16,825

9.

  

9th highest Hourly Duke Schedule 1 Demand during 2012

   8-1-12    5:00-6:00 p.m.    16,800

10.

  

10th highest Hourly Duke Schedule 1 Demand during 2012

   8-1-12    6:00-7:00 p.m.    16,775

11.

  

11th highest Hourly Duke Schedule 1 Demand during 2012

   8-1-12    4:00-5:00 p.m.    16,750

12.

  

12th highest Hourly Duke Schedule 1 Demand during 2012

   8-1-12    3:00-4:00 p.m.    16,725

13.

  

13th highest Hourly Duke Schedule 1 Demand during 2012

   7-26-12    5:00-6:00 p.m.    16,700

14.

  

14th highest Hourly Duke Schedule 1 Demand during 2012

   7-26-12    6:00-7:00 p.m.    16,675

15.

  

15th highest Hourly Duke Schedule 1 Demand during 2012

   6-26-12    4:00-5:00 p.m.    16,650

16.

  

16th highest Hourly Duke Schedule 1 Demand during 2012

   7-26-12    4:00-5:00 p.m.    16,625

17.

  

17th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    3:00-4:00 p.m.    16,600

18.

  

18th highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    9:00-10:00 a.m.    16,575

19.

  

19th highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    10:00-11:00 a.m.    16,550

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

         

Day

  

Hour

  

Load

(MW)

20.

  

20th highest Hourly Duke Schedule 1 Demand during 2012

   8-2-12    4:00-5:00 p.m.    16,525

21.

  

21st highest Hourly Duke Schedule 1 Demand during 2012

   8-2-12    3:00-4:00 p.m.    16,500

22.

  

22nd highest Hourly Duke Schedule 1 Demand during 2012

   8-2-12    5:00-6:00 p.m.    16,475

23.

  

23rd highest Hourly Duke Schedule 1 Demand during 2012

   8-2-12    6:00-7:00 p.m.    16,450

24.

  

24th highest Hourly Duke Schedule 1 Demand during 2012

   7-18-12    3:00-4:00 p.m.    16,425

25.

  

25th highest Hourly Duke Schedule 1 Demand during 2012

   7-18-12    4:00-5:00 p.m.    16,400

26.

  

26th highest Hourly Duke Schedule 1 Demand during 2012

   7-18-12    2:00-3:00 p.m.    16,375

27.

  

27th highest Hourly Duke Schedule 1 Demand during 2012

   7-18-12    1:00-2:00 p.m.    16,350

28.

  

28th highest Hourly Duke Schedule 1 Demand during 2012

   7-17-12    5:00-6:00 p.m.    16,325

29.

  

29th highest Hourly Duke Schedule 1 Demand during 2012

   7-17-12    6:00-7:00 p.m.    16,300

30.

  

30th highest Hourly Duke Schedule 1 Demand during 2012

   7-17-12    4:00-5:00 p.m.    16,325

Annual Planning Period is May through September

II. Calculation of Monthly Billing Demand for 2012:

The twenty (20) highest load hours during the Summer Period are hours 1-17 and
20-22

 

No. from Part I

 

Day

 

Hour

 

EMC Native Load

(kW)

 

EMC Partial

Requirements

Resources

(kW)

 

EMC Native Load

minus EMC Partial

Requirements

Resources

(kW)

1.

  7-25-12   5:00-6:00 p.m.   120,000   100,000   20,000

2.

  7-25-12   6:00-7:00 p.m.   120,000   100,000   20,000

3.

  7-25-12   4:00-5:00 p.m.   120,000   100,000   20,000

4.

  7-25-12   3:00-4:00 p.m.   120,000   100,000   20,000

5.

  7-24-12   5:00-6:00 p.m.   115,000   100,000   15,000

6.

  7-24-12   6:00-7:00 p.m.   115,000   100,000   15,000

7.

  7-24-12   4:00-5:00 p.m.   115,000   100,000   15,000

 

- 2 -

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

No. from Part I

 

Day

 

Hour

 

EMC Native Load

(kW)

 

EMC Partial
Requirements

Resources

(kW)

 

EMC Native Load
minus EMC Partial
Requirements

Resources

(kW)

8.

  7-24-12   3:00-4:00 p.m.   115,000   100,000   15,000

9.

  8-1-12   5:00-6:00 p.m.   110,000   100,000   10,000

10.

  8-1-12   6:00-7:00 p.m.   110,000   100,000   10,000

11.

  8-1-12   4:00-5:00 p.m.   110,000   100,000   10,000

12.

  8-1-12   3:00-4:00 p.m.   110,000   100,000   10,000

13.

  7-26-12   5:00-6:00 p.m.   105,000   100,000   5,000

14.

  7-26-12   6:00-7:00 p.m.   105,000   100,000   5,000

15.

  6-26-12   4:00-5:00 p.m.   105,000   100,000   5,000

16.

  7-26-12   4:00-5:00 p.m.   105,000   100,000   5,000

17.

  7-24-12   3:00-4:00 p.m.   100,000   100,000   0

20.

  8-2-12   4:00-5:00 p.m.   100,000   100,000   0

21.

  8-2-12   3:00-4:00 p.m.   95,000   100,000   0

22.

  8-2-12   5:00-6:00 p.m.   95,000   100,000   0               TOTAL        
200,000               AVERAGE         10,00082            

Example B

I. Assumptions:

 

          Day    Hour   

Load

(MW)

1.

   Highest Hourly Duke Schedule 1 Demand during 2012    1-25-12   
7:00-8:00 a.m.    17,000

2.

   2nd highest Hourly Duke Schedule 1 Demand during 2012    1-25-12    8:00-9:00
a.m.    16,975

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

82 Monthly Billing Demand for each Month during 2012.

 

- 3 -

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

          Day    Hour   

Load

(MW)

3.

   3rd highest Hourly Duke Schedule 1 Demand during 2012    1-25-12   
9:00-10:00 a.m.    16,950

4.

   4th highest Hourly Duke Schedule 1 Demand during 2012    1-25-12   
10:00-11:00 a.m.    16,925

5.

   5th highest Hourly Duke Schedule 1 Demand during 2012    1-24-12    7:00-8:00
a.m.    16,900

6.

   6th highest Hourly Duke Schedule 1 Demand during 2012    1-24-12    8:00-9:00
a.m.    16,875

7.

   7th highest Hourly Duke Schedule 1 Demand during 2012    1-24-12   
9:00-10:00 a.m.    16,850

8.

   8th highest Hourly Duke Schedule 1 Demand during 2012    1-24-12   
10:00-11:00 a.m.    16,825

9.

   9th highest Hourly Duke Schedule 1 Demand during 2012    2-1-12    7:00-8:00
a.m.    16,800

10.

   10th highest Hourly Duke Schedule 1 Demand during 2012    2-1-12    8:00-9:00
a.m.    16,775

11.

   11th highest Hourly Duke Schedule 1 Demand during 2012    2-1-12   
9:00-10:00 a.m.    16,750

12.

   12th highest Hourly Duke Schedule 1 Demand during 2012    2-1-12   
10:00-11:00 a.m.    16,725

13.

   13th highest Hourly Duke Schedule 1 Demand during 2012    12-21-12   
8:00-9:00 a.m.    16,700

14.

   14th highest Hourly Duke Schedule 1 Demand during 2012    12-21-12   
9:00-10:00 a.m.    16,675

15.

   15th highest Hourly Duke Schedule 1 Demand during 2012    12-21-12   
10:00-11:00 a.m.    16,650

16.

   16th highest Hourly Duke Schedule 1 Demand during 2012    7-26-12   
4:00-5:00 p.m.    16,625

17.

   17th highest Hourly Duke Schedule 1 Demand during 2012    7-24-12   
3:00-4:00 p.m.    16,600

18.

   18th highest Hourly Duke Schedule 1 Demand during 2012    2-2-12    7:00-8:00
a.m.    16,575

19.

   19th highest Hourly Duke Schedule 1 Demand during 2012    2-2-12    8:00-9:00
a.m.    16,550

20.

   20th highest Hourly Duke Schedule 1 Demand during 2012    2-2-12   
9:00-10:00 a.m.    16,525

21.

   21st highest Hourly Duke Schedule 1 Demand during 2012    2-2-12   
10:00-11:00 a.m.    16,500

22.

   22nd highest Hourly Duke Schedule 1 Demand during 2012    1-18-12   
9:00-10:00 a.m.    16,475

23.

   23rd highest Hourly Duke Schedule 1 Demand during 2012    1-18-12   
10:00-11:00 a.m.    16,450

24.

   24th highest Hourly Duke Schedule 1 Demand during 2012    1-18-12   
7:00-8:00 a.m.    16,425

25.

   25th highest Hourly Duke Schedule 1 Demand during 2012    1-18-12   
8:00-9:00 a.m.    16,400

26.

   26th highest Hourly Duke Schedule 1 Demand during 2012    1-18-12   
6:00-7:00 a.m.    16,375

27.

   27th highest Hourly Duke Schedule 1 Demand during 2012    1-18-12   
11:00 a.m.-12:00 p.m.    16,350

28.

   28th highest Hourly Duke Schedule 1 Demand during 2012    1-17-12   
8:00-9:00 a.m.    16,325

29.

   29th highest Hourly Duke Schedule 1 Demand during 2012    1-17-12   
9:00-10:00 a.m.    16,300

30.

   30th highest Hourly Duke Schedule 1 Demand during 2012    1-17-12   
10:00-11:00 a.m.    16,325

31.

   Highest Hourly Duke Schedule 1 Demand during 2011    1-23-11    7:00-8:00
a.m.    17,000

 

- 4 -

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

         

Day

  

Hour

  

Load

(MW)

32.

   2nd highest Hourly Duke Schedule 1 Demand during 2011    1-23-11   
8:00-9:00 a.m.    16,975

33.

   3rd highest Hourly Duke Schedule 1 Demand during 2011    1-23-11   
9:00-10:00 a.m.    16,950

34.

   4th highest Hourly Duke Schedule 1 Demand during 2011    1-23-11   
10:00-11:00 a.m.    16,925

35.

   5th highest Hourly Duke Schedule 1 Demand during 2011    1-18-11    7:00-8:00
a.m.    16,900

36.

   6th highest Hourly Duke Schedule 1 Demand during 2011    1-18-11    8:00-9:00
a.m.    16,875

37.

   7th highest Hourly Duke Schedule 1 Demand during 2011    1-18-11   
9:00-10:00 a.m.    16,850

38.

   8th highest Hourly Duke Schedule 1 Demand during 2011    1-18-11   
10:00-11:00 a.m.    16,825

39.

   9th highest Hourly Duke Schedule 1 Demand during 2011    2-4-11    7:00-8:00
a.m.    16,800

40.

   10th highest Hourly Duke Schedule 1 Demand during 2011    2-4-11    8:00-9:00
a.m.    16,775

41.

   11th highest Hourly Duke Schedule 1 Demand during 2011    2-4-11   
9:00-10:00 a.m.    16,750

42.

   12th highest Hourly Duke Schedule 1 Demand during 2011    2-4-11   
10:00-11:00 a.m.    16,725

43.

   13th highest Hourly Duke Schedule 1 Demand during 2011    1-28-11   
8:00-9:00 a.m.    16,700

44.

   14th highest Hourly Duke Schedule 1 Demand during 2011    1-28-11   
9:00-10:00 a.m.    16,675

45.

   15th highest Hourly Duke Schedule 1 Demand during 2011    12-15-11   
9:00-10:00 a.m.    16,650

46.

   16th highest Hourly Duke Schedule 1 Demand during 2011    12-16-11   
9:00-10:00 a.m.    16,625

47.

   17th highest Hourly Duke Schedule 1 Demand during 2011    12-15-11   
10:00-11:00 a.m.    16,600

48.

   18th highest Hourly Duke Schedule 1 Demand during 2011    7-18-11   
5:00-6:00 p.m.    16,575

49.

   19th highest Hourly Duke Schedule 1 Demand during 2011    7-18-11   
6:00-7:00 p.m.    16,550

50.

   20th highest Hourly Duke Schedule 1 Demand during 2011    7-18-11   
4:00-5:00 p.m.    16,525

51.

   21st highest Hourly Duke Schedule 1 Demand during 2011    7-18-11   
3:00-4:00 p.m.    16,500

52.

   22nd highest Hourly Duke Schedule 1 Demand during 2011    1-18-11   
11:00 a.m.-12:00 p.m.    16,475

53.

   23rd highest Hourly Duke Schedule 1 Demand during 2011    1-18-11   
6:00-7:00 a.m.    16,450

54.

   24th highest Hourly Duke Schedule 1 Demand during 2011    2-5-11    8:00-9:00
a.m.    16,425

55.

   25th highest Hourly Duke Schedule 1 Demand during 2011    2-5-11   
9:00-10:00 a.m.    16,400

56.

   26th highest Hourly Duke Schedule 1 Demand during 2011    1-20-11   
8:00-9:00 a.m.    16,375

57.

   27th highest Hourly Duke Schedule 1 Demand during 2011    1-20-11   
9:00-10:00 a.m.    16,350

58.

   28th highest Hourly Duke Schedule 1 Demand during 2011    1-21-11   
7:00-8:00 a.m.    16,325

59.

   29th highest Hourly Duke Schedule 1 Demand during 2011    1-21-11   
8:00-9:00 a.m.    16,300

60.

   30th highest Hourly Duke Schedule 1 Demand during 2011    1-21-11   
9:00-10:00 a.m.    16,325

 

- 5 -

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

Annual Planning Period is October through April

The twenty (20) highest load hours during the Winter Period are hours 1-12 and
18-22 in 2012 and hours 45-47 in 2011.

II. Calculation of Monthly Billing Demand for 2012:

 

No. from

Part I

 

Day

 

Hour

 

EMC Native Load

(kW)

 

EMC Partial
Requirements

Resources

(kW)

 

EMC Native Load
minus EMC Partial
Requirements

Resources

(kW)

1.

  1-25-12   7:00-8:00 a.m.   120,000   100,000   20,000

2.

  1-25-12   8:00-9:00 a.m.   120,000   100,000   20,000

3.

  1-25-12   9:00-10:00 a.m.   120,000   100,000   20,000

4.

  1-25-12   10:00-11:00 a.m.   120,000   100,000   20,000

5.

  1-24-12   7:00-8:00 a.m.   115,000   100,000   15,000

6.

  1-24-12   8:00-9:00 a.m.   115,000   100,000   15,000

7.

  1-24-12   9:00-10:00 a.m.   115,000   100,000   15,000

8.

  1-24-12   10:00-11:00 a.m.   115,000   100,000   15,000

9.

  2-1-12   7:00-8:00 a.m.   110,000   100,000   10,000

10.

  2-1-12   8:00-9:00 a.m.   110,000   100,000   10,000

11.

  2-1-12   9:00-10:00 a.m.   110,000   100,000   10,000

12.

  2-1-12   10:00-11:00 a.m.   110,000   100,000   10,000

45.

  12-15-11   9:00-10:00 a.m.   105,000   100,000   5,000

46.

  12-16-11   9:00-10:00 a.m.   105,000   100,000   5,000

47.

  12-15-11   9:00-10:00 a.m.   105,000   100,000   5,000

18.

  2-2-12   7:00-8:00 a.m.   105,000   100,000   5,000

19.

  2-2-12   8:00-9:00 a.m.   100,000   100,000   0

20.

  2-2-12   9:00-10:00 a.m.   100,000   100,000   0

21.

  2-2-12   10:00-11:00 a.m.   95,000   100,000   0

22.

  1-18-12   9:00-10:00 a.m.   95,000   100,000   0               TOTAL        
200,000               AVERAGE         10,00083            

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

83 Monthly Billing Demand for each Month during 2012.

 

- 6 -

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

ATTACHMENT 7-9

Demand Rate Adjustment Percentage and Annual Percentage

This attachment provides the formulas to be used for calculating the Demand Rate
Adjustment Percentage and Annual Percentage for each calendar year beginning
January 1, 2011.

The Demand Rate Adjustment Percentage shall equal the Production Capacity
Revenue Requirement Adjustment divided by the Original Production Capacity
Revenue Requirement, but not less than zero.

Where

Production Capacity Revenue Requirement Adjustment = (Annual Percentage – 4%) *
(Original Production Capacity Revenue Requirement + Original Energy Revenue
Requirement)

And

Annual Percentage shall equal the product of the System Gross Plant Difference
and the Fixed Charge Rate, divided by the sum of Original Production Capacity
Revenue Requirement and Original Energy Revenue Requirement. For purposes of
calculating the Production Capacity Revenue Requirement Adjustment, the Annual
Percentage shall be a maximum of 10%.

System Gross Plant Difference shall equal EMC Plant in Service less NC Retail
Plant in Service. (May be positive or negative.) System Gross Plant Difference
shall be decreased as necessary to eliminate differences between EMC Plant in
Service and NC Retail Plant in Service related to timing or method of recovery
of plant costs (e.g., plant differences due to recovery of construction period
financing costs through inclusion of construction work in progress in rate
base).

Fixed Charge Rate shall equal 10%.

EMC Plant in Service shall equal the average of the total ending balance of
Production Plant, General Plant and Intangible Plant according to Schedule 1 of
this Agreement, for the calendar year for which the Production Capacity Revenue
Requirement calculation is prepared and total ending balance of Production
Plant, General Plant and Intangible Plant according to Schedule 1 of this
Agreement for the previous calendar year calculation of the Production Capacity
Revenue Requirement.

NC Retail Plant in Service shall equal the sum of Duke Power Retail Plant in
Service and Nantahala Retail Plant in Service, which shall be determined from
Company records supporting the total Electric Plant in Service amount on
Schedule 3 of NCUC Form E.S.-1 for the 12 month calendar period corresponding to
the Production Capacity Revenue Requirement calculation used for calculating the
EMC Plant in Service.

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

Duke Power Retail Plant in Service shall equal the average of the two December
balances for the total of Production, General and Intangible plant amounts
included in the total Electric Plant in Service monthly amounts shown on
Schedule 3 of NCUC Form E.S.-1 for Duke Power.

Nantahala Retail Plant in Service shall equal the average of the two December
balances for the total of Production, General and Intangible plant amounts
included in the total Electric Plant in Service monthly amounts shown on
Schedule 3 of NCUC Form E.S.-1 for Nantahala Power & Light.

Original Production Capacity Revenue Requirement shall equal the Production
Capacity Revenue Requirement before consideration of any adjustments pursuant to
Section 7.3.2.3 of the Agreement.

Original Energy Revenue Requirement shall equal the sum of F for purposes of
calculating the Fuel Rate in Schedule 1 and Variable Non-Fuel Production
Operation and Maintenance Expense for purposes of calculating the Variable O&M
Rate in Schedule 1.

 

- 2 -

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

Attachment 7-10

Example of Demand Rate Adjustment Percentage and Annual Percentage

Note: EMC and NC Retail Plant in Service values are actuals for 2004.

CASE WITH NO ADJUSTMENT WARRANTED—

 

          NC Retail    EMC      

1

   Demand Rev Req Unadjusted       $ 1,774,603    

2

   Energy Rev Req       $ 1,235,341    

3

   Total Unadjusted Rev Req for EMC Rate Calcs       $ 3,009,944     (Line 1 +
Line 2)

4

   Actual Gross Plant (“timing” adjusted)    $ 11,509,514    $ 11,509,514     NC
Retail = Attachment 7-10, Page 4, Line 10

5

   System Gross Plant Difference       $ —       (EMC Line 4 - NC Line 4)

6

   Levelized FCR         0.100    

7

   Estimated Impact on Demand Rev Req       $ —       (Line 6 x Line 5)

8

   Annual Percentage         0.00 %  

(Line 7 / Line 3)

No adjustment occurs since below 4% impact

Note: EMC Plant in Service values are actuals for 2004, but NC Retail Plant in
Service values have been reduced for purpose of demonstration.

CASE WITH NO ADJUSTMENT WARRANTED—

 

          NC Retail    EMC      

1

   Demand Rev Req Unadjusted       $ 1,774,603    

2

   Energy Rev Req       $ 1,235,341    

3

   Total Unadjusted Rev Req for EMC Rate Calcs       $ 3,009,944     (Line 1 +
Line 2)

4

   Actual Gross Plant (“timing” adjusted)    $ 10,618,079    $ 11,509,514     NC
Retail = Attachment 7-10, Page 4, Line 10

5

   System Gross Plant Difference       $ 891,435     (EMC Line 4 - NC Line 4)

6

   Levelized FCR         0.100    

7

   Estimated Impact on Demand Rev Req       $ 89,143     (Line 6 x Line 5)

8

   Annual Percentage         2.96 %  

(Line 7 / Line 3)

No adjustment occurs since below 4% impact

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

ADJUSTMENT WARRANTED

 

          NC Retail    EMC      

1

   Demand Rev Req Unadjusted       $ 1,774,603    

2

   Energy Rev Req       $ 1,235,341    

3

   Total Unadjusted Rev Req for EMC Rate Calcs       $ 3,009,944     (Line 1 +
Line 2)

4

   Actual Gross Plant    $ 9,729,655    $ 11,509,514    

5

   System Gross Plant Difference       $ 1,779,859     (EMC Line 4 - NC Line 4)

6

   Levelized FCR         0.100    

7

   Estimated Impact on Demand Rev Req       $ 177,986     (Line 6 x Line 5)

8

   Annual Percentage         5.91 %  

(Line 7 / Line 3)

Since Annual Percentage is in excess of 4%,

adjustment to Demand Rate is needed.

9

   Demand Rate Adjustment Percentage         3.24 %   [(Line 8 - 4%) x Line 3] /
Line 1

10

   Demand Rate per Section 7.3.2.1       $ 117.53    

11

   Demand Rate as adjusted per Section 7.3.2.3       $ 113.72     Line 10 x
(100% - Line 9)

 

- 2 -

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

ADJUSTMENT WARRANTED (but limited)

 

          NC Retail    EMC      

1

   Demand Rev Req Unadjusted       $ 1,774,603    

2

   Energy Rev Req       $ 1,235,341    

3

   Total Unadjusted Rev Req for EMC Rate Calcs       $ 3,009,944     (Line 1 +
Line 2)

4

   Actual Gross Plant    $ 8,368,409    $ 11,509,514    

5

   System Gross Plant Difference       $ 3,141,105     (EMC Line 4 - NC Line 4)

6

   Levelized FCR         0.100    

7

   Estimated Impact on Demand Rev Req       $ 314,110     (Line 6 x Line 5)

8

   Annual Percentage         10.44 %  

(Line 7 / Line 3)

Since Annual Percentage is in excess of 4%,

adjustment to Demand Rate is needed, but is

limited to maximum of 6% of total unadjusted

revenue requirements.

9

   Demand Rate Adjustment Percentage         10.18 %   [(Line 8* - 4%) x Line 3]
/ Line 1

10

   Demand Rate per Section 7.3.2.1       $ 117.53    

11

   Demand Rate as adjusted per Section 7.3.2.3       $ 105.57     Line 10 x
(100% - Line 9)

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

* maximum of 10%

 

- 3 -

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

(Amounts from Quarterly NCUC Form E.S.-1, Schedule 3, for 12ME 2004)

 

    

(Dollars in thousands)

  System Gross Electric Plant in Service for Determination of NC Retail Plant in
Service          Duke Power   Nantahala   Total NC Retail          Beginning  
Ending   Beginning   Ending   Beginning   Ending   Average

1

   Plant in Service   18,980,402   19,683,592   324,710   334,880   19,305,112  
20,018,472   19,661,792    Components (data from Company records):              

2

   Production Plant   9,257,448   9,666,832   39,399   39,263   9,296,847  
9,706,095   9,501,471

3

   Nuclear Fuel (gross)   816,874   769,178       816,874   769,178   793,026

4

   Total Production Plant   10,074,322   10,436,010   39,399   39,263  
10,113,721   10,475,273   10,294,497

5

   Transmission Plant   1,745,408   1,819,243   92,489   91,335   1,837,897  
1,910,578   1,874,238

6

   Distribution Plant   5,978,416   6,312,889   168,040   181,129   6,146,456  
6,494,018   6,320,237

7

   General Plant   973,070   902,246   20,232   18,603   993,302   920,849  
957,076

8

   Intangible Plant   209,186   213,204   4,550   4,550   213,736   217,754  
215,745

9

   Total (ties to Line 1)   18,980,402   19,683,592   324,710   334,880  
19,305,112   20,018,472   19,661,792                       

10

  

Total of Production/General/Intangible Plant for use in Annual Percentage
calculation

          11,320,759   11,613,876   11,467,318                       

 

     

(Dollars in thousands)

  NC Retail
Plant in
Service   EMC Plant in Service - Amounts from
Schedule 1 for 2004   EMC Plant
in Service   System
Gross Plant
Difference   Adjustment
for Timing
Difference   Adjusted
System
Gross Plant
Difference              Beginning   Ending   Average                

1

   Plant in Service                   

Components (data from Company records):

               

2

   Production Plant   9,501,471   9,339,044   9,748,291   9,543,668   9,543,668
  42,197   42,197   —  

3

   Nuclear Fuel (gross)   793,026   816,874   769,178   793,026   793,026   —  
    —  

4

   Total Production Plant   10,294,497   10,155,918   10,517,469   10,336,694  
10,336,694   42,197   42,197   —  

5

   Transmission Plant                

6

   Distribution Plant                

7

   General Plant   957,076   993,303   920,849   957,076   957,076   —       —  

8

   Intangible Plant   215,745   213,736   217,753   215,745   215,745   —      
—  

9

   Total (ties to Line 1)                

10

  

Total of Production/General/Intangible Plant for use in Annual Percentage
calculation

  11,467,318   11,362,957   11,656,071   11,509,517   11,509,515   42,197  
42,197  

 

- 4 -

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

Attachment 8-1

(Part I of II)

TERMS AND CONDITIONS

FOR THE SCHEDULING OF POWER

SUPPLIED BY NORTH CAROLINA

ELECTRIC MEMBERSHIP CORPORATION

TO ITS INDEPENDENT MEMBERS

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

All NCEMC Committed Resources associated with the Wholesale Power Supply
Agreement between the Seller and the Buyer are governed by and subject to all of
the terms and conditions in this Exhibit, unless a specific Resource Summary
Attachment explicitly provides otherwise. Unless defined in this Exhibit, all
capitalized terms used herein shall have the respective meanings set forth as
Article One of the Wholesale Power Supply Agreement.

General Principles

 

1. Buyer is responsible for planning the way it chooses to use any Capacity or
Energy delivered pursuant to one of the Resource Summary Attachments governed by
this Exhibit. As a part of the Wholesale Power Supply Agreement, the Parties
have agreed to a set of Resource Summary Attachments that collectively are
intended to represent a financial approximation of an allocation of the NCEMC
Committed Resources on the Effective Date.

 

2. For any hour of delivery, Seller will optimize resources around final
dispatch for the combined load of all of Seller’s Participating Members, plus
the schedules of the Buyer and other Independent Members.

 

3. Buyer will pay Seller charges for Energy and the delivery of Energy to the
Interface Point under terms specified in Resource Summary Attachments and terms
specified elsewhere in this Agreement including but not limited to Sections 2.4,
2.12 and Article Five.

Delivery of Allocated Resources

 

4. Energy Scheduled from Buyer’s Independent Member Allocation is delivered to
the Interface Point. The cost and expense of all transmission services,
including ancillary services and losses, from the Interface Point are the sole
responsibility of Buyer.

 

5. Seller will be deemed the provider of the resources needed for the purposes
of tagging and for the designation of resources under the applicable tariffs of
the Transmission Provider(s) selected by Buyer.

Scheduling by Buyer

 

6. All Schedules from Buyer for each Independent Member Allocation will be in
whole MWs and may not exceed the IM Allocation MW detailed on the Resource
Summary Attachment.

 

7. Buyer will submit a separate Schedule in conformance with this Exhibit S by
System by resource up to the Maximum Scheduling Limit by System, as further
described in Paragraph 23 of this Exhibit S.

 

8. Buyer will be responsible for scheduling and arranging for the delivery of
its SEPA allocation.

 

- 2 -

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

9. For any Independent Member Allocation that is designated as producing
Must-Take Energy, Buyer is required to Schedule for every hour of every day of
the Delivery Period its full Must-Take Energy obligation from such a resource,
and may not amend or reduce its Schedule for that Energy: provided, however,
that to the extent that Seller’s obligation to purchase Must-Take Energy from a
resource designated as producing Must-Take Energy is reduced in any hour,
Buyer’s hourly Must-Take Energy obligation shall be adjusted by the ratio of
Seller’s hourly Must-Take Energy obligation to the Resource Capacity, rounded to
whole MWs. The Buyer shall not be entitled to Schedule Must-Take Energy in an
hour in amounts, which exceed the Buyer’s adjusted Must-Take Energy obligation
for that hour.

 

10. Buyer is obligated to Schedule resources in accordance with the terms and
conditions provided in the Resource Summary Attachments consistent with the
minimum run times in the contracts pertaining to Seller’s purchased and/or owned
resources, and Seller will use its good faith efforts to accommodate Buyer’s
Schedules that do not meet the minimum run time requirements, but only so long
as meeting such non-conforming Schedules would not likely result in additional
costs to Seller or any of its Participating Members.

 

11. Except with respect to Buyer’s Independent Member Allocations that supply
Must-Take Energy, Buyer is not obligated to Schedule its Independent Member
Allocations consistent with the minimum volumes in the power supply contracts of
Seller that are in force on the Independent Member Effective Date.

 

12. By 7:00 a.m. EPT each day Buyer must provide Seller with an hourly forecast
of its load by System for the following day.

 

13. The Buyer may Schedule its resources consistent with the table below.
Day-ahead Schedules are those submitted before 8:00 a.m. EPT the day prior to
flow. Intra-day Schedules are those that are requested after the 8:00 a.m. EPT
deadline above. All Schedule changes must occur at the top of the hour.
Intra-day Schedule changes require two (2) hours advance notice.

 

Scheduling Changes

Day Ahead

 

Intra-Day

Unlimited changes up to the IM Allocation MW identified in the Resource Summary
Attachment for each resource in whole MWs.   Up to two changes to the hourly
Schedule for the remainder of the day. Each change to the hourly Schedule shall
be no greater than 5%, for a cumulative maximum of 10% each hour. Additional
changes will be accommodated on a best efforts basis.

 

- 3 -

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

Scheduling by Seller

 

14. Seller is not obligated to meet Buyer’s final Schedule using the NCEMC
Committed Resources associated with the Independent Member Allocations Scheduled
by Buyer.

 

15. Seller will accept the risk and/or benefit resulting from differences in the
cost of resources used to provide Buyer Energy in accordance with its
Schedule(s), and the costs Seller would have incurred had it used NCEMC
Committed Resources to meet Buyer’s Schedule of the Scheduled resource(s).

 

16. Should Seller acquire an alternate resource, rather than use an NCEMC
Committed Resource to serve Buyer’s Schedule, and that alternate resource is
curtailed, Buyer’s Schedule will be maintained and any penalty, benefit or
curtailment will be borne by Seller.

 

17. Should all or any portion of NCEMC Committed Resources that have been
Scheduled by Seller and Buyer to meet Buyer’s Schedule in any given hour be
interrupted, then Seller shall try to identify available alternate resources
which Seller, in its sole discretion, determines are reasonably priced and
suitable to meet Seller’s needs. If Seller determines that such alternate
resources are available, Seller may maintain the Scheduled deliveries to Buyer
but at a price to be determined by Seller and communicated to Buyer. If no
alternate resources are available to Seller, Buyer’s Schedule will be curtailed.
All damages recovered by Seller from the Person responsible for the interruption
in service will be shared with Buyer and every other Member similarly affected
by such interruption in service.

Operations and Planning

 

18. Buyer will provide Seller with a real time telemetered signal of Buyer’s
load for Seller’s use, for purposes of determining when to start and stop the
dynamic schedule, and to Schedule certain Must-Take Energy requirements of NCEMC
Committed Resources.

 

19. Seller shall provide and inform the Buyer on each Thursday by 1:00 p.m. EPT
of the projected amount of Energy available hourly by Independent Member
Allocation by System for Scheduling by Buyer for the following Saturday through
Friday period, including the amount of Must-Take Energy that will be delivered
and must be taken hourly.

 

20. By 8:00 a.m. EPT each day, Buyer shall provide an hourly forecast of its
Native Load by System for the next seven (7) days. For purposes of this Exhibit
S, “Native Load” shall mean only the load of Buyer’s members. This load forecast
will be used by Seller to calculate the hourly Energy available from the
Independent Member Allocations that are available to be Scheduled for a given
interval of time.

 

21. Buyer shall provide Seller on each Thursday by 4:00 p.m. EPT, a projected
hourly Schedule of all the Independent Member Allocations governed by this
Agreement for the following Saturday through Friday period.

 

- 4 -

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

22. Seller and Buyer agree on the following checkout and verification process:

As soon as practical after midnight, confirm hourly Schedules, energy flows and
energy charges by resource and daily totals;

Provide a contact person each Business Day for the following:

Resolve issues that remain unresolved;

Perform month-to-date confirmations of hourly Schedules, energy flows and energy
charges by resource and daily totals;

Finalize monthly checkouts by the second Business Day of the following month;
and Coordinate any true-ups that may be required.

 

23. For Buyers having loads in more than one System, Buyer will provide at the
Independent Member Election Date and on July 1of each subsequent year, a
forecast of the percentage of its retail load in each System. (The sum of the
percentages must equal 100%). The Maximum Scheduling Limit by System for the
following calendar year will be calculated by multiplying the percentage of
Buyer’s retail load in each System times the total of Buyer’s Independent Member
Allocations for the following calendar year.

 

- 5 -

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Attachment 8-1

(Part II of II)

TERMS AND CONDITIONS

FOR OBTAINING TRANSMISSION

SERVICES ADEQUATE TO DELIVER

FROM THE INTERFACE POINTS

ESTABLISHED UNDER THE

WHOLESALE POWER SUPPLY AGREEMENT

OF NCEMC FOR SALES TO

ITS INDEPENDENT MEMBERS

 

- 6 -

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

General Principles and Responsibilities for Transmission: All Resource Summary
Attachments associated with the Wholesale Power Supply Agreement between Seller
and Buyer are governed by and subject to the terms and conditions in this
Exhibit unless a specific Resource Summary Attachment explicitly provides
otherwise. For purposes of this Exhibit, the Wholesale Power Supply Agreement
and each Resource Summary Attachment governed by this Exhibit, the term
“Acceptable Transmission Service” means the level of service available at any
point in time that is equal to or better than that level of service currently
defined as “Network Integration Transmission Service” under the Open Access
Transmission Tariff of the System to which Buyer’s distribution system is
physically interconnected, and if connected to more than one System, then Buyer
must have Acceptable Transmission Service for each Interface Point.

The following terms for transmission service apply to each Resource Summary
Attachment included as a part of this Agreement. All of these terms assume that
the current Open Access Transmission Tariff environment in force on the
Effective Date remains in force, without modification or amendment. The Parties
hereto agree that any amendment, modification or change to that tariff or the
regulatory environment for the wholesale electric industry, whether by
regulation, regulatory action, statute, judicial action, executive decision or
order, or otherwise, may require modification of this Exhibit to restore to
Buyer and Seller the benefits that each intended. Such amendments, modifications
or changes would include, without limitation, any changes or modifications of
the wholesale electric industry environment based on the Standard Market Design,
or the restructuring of the transmission systems or the regulatory oversight of
same. If the Parties fail to reach agreement on modifications of this Exhibit,
the dispute shall be subject to arbitration under the Wholesale Power Supply
Agreement.

Buyer is responsible for planning for and scheduling the receipt of capacity and
energy to be delivered to Buyer. Buyer will be responsible for negotiating,
making and keeping in force one or more transmission agreements with the
Transmission Provider(s) necessary to perform its obligations under the
Wholesale Power Supply Agreement. At a minimum, Buyer will negotiate, make and
keep in force its own Network Integration Service Agreement (“NITSA”) and its
own Network Operating Agreement (“NOA”).

Subject to and contingent upon the concurrence and agreement of each affected
Transmission Provider, the RUS, and the Federal Energy Regulatory Commission
(“FERC”), the Parties further agree:

 

1. Buyer is responsible for serving its own load. It will do so through
contracts with Seller, along with other resources Buyer will acquire.

 

2. Buyer will have its own transmission agreement(s) with each and any
Transmission Provider(s) whose services are needed to move capacity or energy
from any Interface Point of the System(s) to which Buyer’s distribution system
is physically interconnected.

 

3. Buyer will negotiate its own NITSA and NOA. Seller will provide assistance
with these negotiations as requested. The cost for this assistance will be
charged to Buyer separately from charges for Capacity and Energy billed under
Article 5.1 of this Agreement.

 

- 7 -

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

4. Seller will transfer the direct-assigned facilities used for that Buyer, if
any, to Buyer’s NITSA once the same has become effective.

 

5. Seller will provide Buyer with contractual rights that financially
approximate the hypothetical assignment of a total amount of Seller’s owned
and/or purchased resources, calculated in accordance with the NCEMC Member Power
Supply Resource Policy, for purposes of Buyer’s NITSA and NOA designations for
energy delivered to the System served by the Transmission Provider with which
Buyer has entered its NITSA and NOA.

 

6. If any need exists or arises to designate, in addition to the contracts with
Seller, any other network resources in order to meet Buyer’s load in accordance
with the tariffs or other requirements of the Transmission Provider(s), Buyer
has the responsibility to locate, identify and designate such other network
resources.

 

7. Buyer will have the obligation to satisfy the requirements of the applicable
OATT, and purchase or self-supply, as applicable, any ancillary or other
services needed or required to serve its load.

 

8. Buyer will coordinate with Seller or its scheduling agent under Exhibit S to
this Wholesale Power Supply Agreement to assure that the proper schedule is in
place each day for Buyer’s scheduled amount of Energy related to each of Buyer’s
Resource Summary Attachments that are governed by this Exhibit.

 

9. In addition to the other responsibilities arising under this Exhibit, Buyer
shall be solely liable for any energy imbalance settlement and any other
settlements or liabilities to which a Transmission Customer is exposed at and
from the Interface Point(s). If Buyer causes Seller to incur energy imbalance
charges, Buyer will reimburse Seller for any charges that Seller incurs.

 

- 8 -

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

PARTIAL REQUIREMENTS SERVICE AGREEMENT

BETWEEN

DUKE POWER COMPANY LLC

d/b/a DUKE ENERGY CAROLINAS, LLC

AND

RUTHERFORD ELECTRIC MEMBERSHIP CORPORATION

DATED AS OF MAY 12, 2006

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

TABLE OF CONTENTS

 

          Page

Article 1 Definitions

   2

      1.1

  

Definitions.

   2

  1.2

  

Interpretation.

   20

  1.3

  

Construction.

   20

Article 2 Term

   21

  2.1

  

Effectiveness.

   21

  2.2

  

Term.

   21

  2.3

  

Termination.

   22

  2.4

  

Absolute Nature of Termination.

   27

Article 3 Conditions Precedent to the Commencement Date

   27

  3.1

  

Conditions Precedent to Duke’s Obligations.

   27

  3.2

  

Conditions Precedent to EMC’s Obligations.

   28

  3.3

  

Notice of Satisfaction of Conditions Precedent.

   29

  3.4

  

Waiver of Condition Precedent.

   29

  3.5

  

Commencement of Service; Failure of Condition Precedent.

   30

Article 4 Sale of Electric Capacity and Energy

   34

  4.1

  

Classification of Services Provided.

   34

  4.2

  

FFR Supplemental Service.

   34

  4.3

  

Partial Requirements Service.

   37

  4.4

  

Excepted Load.

   38

  4.5

  

Good Title.

   38

  4.6

  

Power Quality.

   38

Article 5 EMC Resources

   39

  5.1

  

EMC Contract Resources (Commencement Date - December 31, 2010).

   39

  5.2

  

EMC Contract Resources (January 1, 2011 - Termination of Agreement).

   40

  5.3

  

No Duke Obligation for Customer Resources.

   43

  5.4

  

New Customer Resources.

   43

Article 6 Priority of Service

   44

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

      6.1

  

Interruption of FFR Supplemental Service and Partial Requirements Service.

   44

  6.2

  

Curtailments of Load.

   44

  6.3

  

Emergency Load Curtailment Program.

   44

  6.4

  

Substitute Energy.

   45

  6.5

  

Substitute Energy Costs.

   45

Article 7 Capacity and Energy Charges

   45

  7.1

  

Charges During Commencement Date - December 31, 2006.

   45

  7.2

  

Charges During January 1, 2007 – December 31, 2010.

   50

  7.3

  

Charges Commencing January 1, 2011.

   51

  7.4

  

Monthly Reserve Capacity Charges.

   53

  7.5

  

Payment.

   54

  7.6

  

Determination of EMC Capacity and Energy Demands.

   54

Article 8 Scheduling Agent Services

   55

  8.1

  

Appointment of Duke as Scheduling Agent.

   55

  8.2

  

Scheduling Policies.

   55

  8.3

  

Protocols.

   55

  8.4

  

Scheduling Agent Services (Commencement Date through December 31, 2010).

   55

  8.5

  

Scheduling Agent Services (January 1, 2011 through Termination).

   56

  8.6

  

New EMC Resources.

   57

  8.7

  

Errors in Schedules

   57

  8.8

  

EMC Responsibilities

   57

  8.9

  

Duke’s Liability

   58

  8.10

  

Termination Assistance Service

   58

Article 9 Transmission and Ancillary Services

   58

  9.1

  

Delivery Obligations

   58

  9.2

  

Transmission Arrangements

   58

  9.3

  

Ancillary Services

   58

  9.4

  

Regional Transmission Organization

   59

Article 10 Operating Committee

   60

  10.1

  

Operating Committee

   60

  10.2

  

Duties of the Operating Committee

   60

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

Article 11 Demand Side Management

   60

      11.1

  

Availability of Demand Side Management Resource Programs

   60

  11.2

  

Changes to Demand Side Management Resource Programs

   60

  11.3

  

Credits

   61

  11.4

  

Necessary Arrangements

   61

  11.5

  

Start-Up Conditions

   61

  11.6

  

Periodic Testing

   61

  11.7

  

EMC Demand Side Management

   62

Article 12 Modification of This Agreement

   63

  12.1

  

Unilateral Modification

   63

  12.2

  

Mobile-Sierra Public Interest Standard

   63

  12.3

  

Changes To Certain Charge Components

   63

  12.4

  

Standard of Review for Permitted Changes

   64

  12.5

  

Scope of Waiver

   64

Article 13 Billing and Payment

   64

  13.1

  

Billing Period

   64

  13.2

  

Billing Statements.

   64

  13.3

  

Timeliness of Payment

   65

  13.4

  

Netting of Payments

   65

  13.5

  

Disputes and Adjustments of Statements

   65

  13.6

  

Records and Audits

   66

Article 14 Dispute Resolution

   68

  14.1

  

Arbitration

   68

  14.2

  

Negotiation and Notice of Arbitration

   68

  14.3

  

Individual, Joint or Consolidated Arbitration

   68

  14.4

  

Selection of Arbitration Process

   69

  14.5

  

Initiation of Arbitration.

   70

  14.6

  

Arbitration Processes.

   70

  14.7

  

Decision

   73

    14.8

  

Expenses

   74

  14.9

  

Effect of Dispute Resolution Procedures

   74

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

      14.10

  

Confidentiality

   74

Article 15 Credit and Collateral Requirements

   74

  15.1

  

Posting of Collateral

   74

  15.2

  

Material Adverse Changes

   74

  15.3

  

Continuing Nature of Collateral Requirement.

   75

  15.4

  

Interest on Cash Used as Collateral

   75

  15.5

  

Grant of Security Interest/Remedies

   75

    15.6

  

Notice, Information

   76

  15.7

  

Definitions.

   76

Article 16 Additional Terms

   78

  16.1

  

Representations Warranties and Covenants.

   78

  16.2

  

Assignment.

   81

  16.3

  

Liability and Indemnification.

   82

  16.4

  

Force Majeure

   83

  16.5

  

Events of Default and Remedies.

   84

  16.6

  

Confidential Information.

   86

  16.7

  

Governmental Liabilities.

   87

  16.8

  

Choice of Law

   88

  16.9

  

Survival of Obligations

   88

  16.10

  

Entire Agreement

   88

  16.11

  

Cost Projections

   88

  16.12

  

Unique Agreement

   89

  16.13

  

No Transfer of Rights

   89

  16.14

  

No Partnership

   89

  16.15

  

Third Parties

   89

  16.16

  

Waiver

   89

  16.17

  

Time of Essence

   89

  16.18

  

Headings

   90

  16.19

  

Severability

   90

  16.20

  

Counterparts

   90

    16.21

  

No Public Announcement

   90

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

      16.22

  

Notices

   90

  16.23

  

No Dedication of the System

   91

  16.24

  

Stranded Costs

   91

  16.25

  

Electric Peak Load and Energy Information to be provided by EMC

   92

  16.26

  

Demand and Energy Charge and Rate Information to be Provided by Duke

   92

  16.27

  

Further Assurances

   92

  16.28

  

Applicable Laws and Regulations

   92

  16.29

  

Equitable Relief

   92

  16.30

  

PURPA Assistance

   92

  16.31

  

SERC and NERC Data Reporting and Compliance Assistance

   92

 

  

SCHEDULES

1       Annual Production Capacity and Energy Rates   

ATTACHMENTS

3-1    Calculation of the Excess Annual Capacity Charges in the Duke-Blue Ridge
Agreement, Duke-Piedmont Agreement and Duke-Rutherford Agreement 4-1    EMC’s
Base Obligation and Fixed Forward Resource 4-2    Calculation of Reduction to
EMC’s Base Obligation and EMC Group’s Base Obligation During Light Load Periods
4-3    Partial Reqirements Resources 7-2    Calculation of the Monthly Demand
Charges in the Duke-Blue Ridge Agreement, Duke-Piedmont Agreement and
Duke-Rutherford Agreement 7-3    Calculation of Rutherford Allocated Share of
Duke Total Hourly Energy Charge, EMC Group Total Hourly Energy Credit, Inter-EMC
Energy Charge and Inter-EMC Energy Credit 7-4    Calculation of Blue Ridge,
Piedmont and Rutherford Allocated Shares of the Duke Total Hourly Energy Charge,
EMC Group Total Hourly Energy Credit, Inter-EMC Energy Charge and Inter-EMC
Energy Credit 7-5    Example showing Calculations of Rutherford Energy Purchase
Amounts and Rutherford Energy Credit Amount

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

7-6    Example showing Calculations of EMC Group Energy Purchase Amounts and EMC
Group Energy Credit Amount 7-7    Example showing the calculation of Monthly
Billing Demand under Section 7.2.2.2 7-8    Examples showing the calculation of
Monthly Billing Demand under Section 7.3.2.2 7-9    Demand Rate Adjustment
Percentage and Annual Percentage 7-10    Example of Demand Rate Adjustment
Percentage and Annual Percentage 8-1I    Terms and Conditions for the Scheduling
of Power Supplied by North Carolina Electric Membership Corporation to its
Independent Members 8-1II    Terms and Conditions for Obtaining Transmission
Services Adequate to Deliver from the Interface Points Established under the
Wholesale Power Supply Agreement of NCEMC for Sales to its Independent Members
8-2    SEPA Policies

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

PARTIAL REQUIREMENTS SERVICE AGREEMENT

BETWEEN

DUKE POWER COMPANY LLC

d/b/a DUKE ENERGY CAROLINAS, LLC

AND

RUTHERFORD ELECTRIC MEMBERSHIP CORPORATION

THIS PARTIAL REQUIREMENTS SERVICE AGREEMENT, dated as of May 12, 2006, is
entered into by and between Rutherford Electric Membership Corporation, a
corporation organized and existing under Article 2 of Chapter 117 of the General
Statutes of North Carolina, together with any permitted successor or assignee
(“EMC” or “Rutherford”), and Duke Power Company LLC, d/b/a Duke Energy
Carolinas, LLC, a limited liability company organized and existing under the
laws of North Carolina, together with any permitted successor or assignee
(“Duke”). Hereinafter, Duke and EMC are sometimes also referred to individually
as a “Party” or collectively as the “Parties.”

W I T N E S S E T H

WHEREAS, Duke is engaged in the business of generating, transmitting, and
distributing electric capacity and energy in portions of the States of North
Carolina and South Carolina, and provides electric service to retail and
wholesale customers; and

WHEREAS, EMC is an electric membership corporation that provides retail electric
service to its members in the State of North Carolina, and is authorized to
purchase electric energy at wholesale for resale; and

WHEREAS, EMC is a member of North Carolina Electric Membership Corporation
(“NCEMC”) and is a party to the WPSA; and

WHEREAS, EMC is a party to the SEPA Contract; and

WHEREAS, EMC is a party to the PPA; and

WHEREAS, EMC has elected to arrange independently from NCEMC for its future
requirements for electric capacity and energy in addition to those to which EMC
has entitlements under existing contractual arrangements; and

WHEREAS, EMC has reviewed its future needs for electric capacity and energy and
Scheduling Agent Services and has determined that in order for EMC to provide
for a portion of EMC’s Native Load, EMC is willing to purchase electric capacity
and energy from Duke and is also willing to purchase Scheduling Agent Services
from Duke for the duration of, and subject to the terms of, this Agreement; and

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

WHEREAS, Duke is willing to plan and provide for the electric capacity and
energy requirements needed to meet a portion of EMC’s Native Load and to provide
Scheduling Agent Services for the duration of, and subject to the terms of, this
Agreement; and

WHEREAS, Duke and EMC have agreed to the terms and conditions upon which the
sale of electric capacity and energy and provision of Scheduling Agent Services
may be conducted between the Parties.

NOW THEREFORE, in consideration of the premises and the mutual representations,
warranties and covenants set forth in this Agreement, and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Parties, each intending to be legally bound, hereby agree as
follows:

Article 1

Definitions

1.1 Definitions.

Defined terms in this Agreement are capitalized. The defined terms used in this
Agreement have the following meanings:

“Accounting Requirements” shall have the meaning specified in Section 15.7.

“Administrator” shall mean the RUS Administrator.

“Adverse Ruling” shall have the meaning specified in Section 3.1(c).

“Affiliate” means, with respect to any person, any other person directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, such person. For purposes of this definition, “control” when used
with respect to any person means the power to direct the management and policies
of such person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.

“Agreement” means this Partial Requirements Service Agreement, together with
each Schedule and Attachment, each as amended from time to time.

“Ancillary Services” means any and all ancillary services provided by the
Transmission Provider in connection with any Transmission Service arranged by
EMC for the delivery of electric energy provided under this Agreement from the
Delivery Point.

“Annual Capacity Factor” shall have the meaning specified in Section 4.3.3.1.

“Annual Capacity Price” shall have the meaning specified in Section 3.5.2.3.1,
3.5.2.3.2 or 3.5.2.3.3, as applicable.

 

2

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

“Annual Capacity Quantity” shall have the meaning specified in Sections
3.5.2.3.1, 3.5.2.3.2 or 3.5.2.3.3, as applicable.

“Annual Percentage” shall be calculated as shown on Attachment 7-9.

“Annual Planning Period” means, the period (as of the Commencement Date either
May through September or October through April) designated in the then most
recent Duke Annual Plan (or the successor thereto) that Duke files with the NCUC
as the period during which Duke’s annual peak load is projected to occur;
provided, that in the event that NCUC ceases to require Duke to file or filing
becomes voluntary and Duke ceases to file the Duke Annual Plan (or a successor
thereto) with the NCUC, “Annual Planning Period” shall mean the period (either
May through September or October through April) in which Duke’s annual peak load
is projected to occur under the generation planning criteria for Duke’s
Generation System used by Duke to meet Duke’s Native Load.

“Assignment for Security” shall have the meaning specified in Section 16.2.2.

“Bankrupt” means that the Defaulting Party or any guarantor of such Party:

(i) is dissolved (other than pursuant to a consolidation, amalgamation or
merger);

(ii) becomes insolvent or is unable to pay its debts or fails or admits in
writing its inability generally to pay its debts as they become due;

(iii) makes a general assignment, arrangement or composition with or for the
benefit of its creditors;

(iv) institutes or has instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief under any bankruptcy or insolvency
law or other similar law affecting creditor’s rights, or a petition is presented
for its winding-up or liquidation;

(v) has a resolution passed for its winding-up, official management or
liquidation (other than pursuant to a consolidation, amalgamation or merger);

(vi) seeks or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee, custodian or other
similar official for it or substantially all of its assets;

(vii) has a secured party take possession of all or substantially all of its
assets, or has a distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or substantially all of its
assets;

(viii) causes or is subject to any event with respect to it which, under the
applicable Laws of any jurisdiction, has an analogous effect to any of the
events specified in clauses (i) to (vii) inclusive; or

 

3

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

(ix) takes any action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the foregoing acts.

“Bankruptcy Code” means Title 11 of the United States Code or any successor
thereto.

“Base Annual Capacity Charge” means the charge set forth in Section 3.5.2.3.4.

“Baseload Resources” means the Partial Requirements Resources identified as
Baseload Resources in Attachment 4-3.

“Billing Dispute Notice” shall have the meaning specified in Section 13.5.

“Billing Period” means the period beginning on the Commencement Date and ending
on the last Day of the Month in which the Commencement Date occurred, and each
succeeding Month thereafter.

“Blue Ridge” means Blue Ridge Electric Membership Corporation.

“Blue Ridge Energy Credit Amount” means the Blue Ridge Energy Credit Amount as
determined in Section 7.1.5.9 of the Duke-Blue Ridge Agreement.

“Blue Ridge Energy Purchase Amount” means the Blue Ridge Energy Purchase Amount
as determined in Section 7.1.5.9 of the Duke-Blue Ridge Agreement.

“Business Day” means any Day other than Saturday, Sunday, or any Day on which
the Federal Reserve member banks are not open for business.

“Catawba Nuclear Station” means that certain nuclear power plant located near
Rock Hill in York County, South Carolina.

“CFC” shall have the meaning specified in Section 15.7.

“Claiming Party” shall have the meaning specified in Section 16.4.

“Claims” means all third party claims or actions, threatened or filed, and
whether groundless, false, or fraudulent, that directly or indirectly relate to
the subject matter of an indemnity, and the resulting losses, damages, expenses,
attorneys’ fees, and court costs, whether incurred by settlement or otherwise,
and whether such claims or actions are threatened or filed prior to or after the
termination of this Agreement.

“CoBank” shall have the meaning specified in Section 15.7.

“Combined Cycle Resources” means the Partial Requirements Resources identified
as Combined Cycle Resources in Attachment 4-3.

“Commencement Date” shall have the meaning specified in Section 2.1.1.

“Commercially Reasonable Efforts” means efforts which are reasonably within the
contemplation of the Parties at the Effective Date; which require the performing
Party that is

 

4

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

acting in good faith to take action or expend funds reasonably in relation to
the benefit to be obtained by the other Party; and that require a level of
effort which would be devoted by an independent entity reasonably in the
electric utility industry in light of all of the relevant circumstances.

“Confidential Information” means any documents, analyses, compilations, studies,
or other materials prepared by a Party or its Representatives that contain or
reflect either (a) any costs of Duke’s Generation System, including system
average costs, System Incremental Costs, Territorial Incremental Costs, and
Territorial Decremental Costs, or (b) written or oral data or information that
is privileged, confidential, or proprietary and is marked as “Confidential.”
“Confidential Information” shall also mean all subsequently prepared documents,
analyses, compilations, studies, or other materials by a Party or its
Representative that are derived from previously marked “Confidential” data or
information. Notwithstanding the foregoing, information shall not be deemed
Confidential Information if it:

(i) is a matter of public knowledge at the time of its disclosure or is
thereafter published in or otherwise ascertainable from any source available to
the public without breach of this Agreement,

(ii) constitutes information which is obtained from a third party (who or which
is not an Affiliate of one of the Parties) other than by or as a result of
unauthorized disclosure, or

(iii) prior to the time of disclosure had been independently developed by the
receiving Party or its Affiliates not utilizing improper means.

“Control Area” means an electric power system or combination of electric power
systems to which a common automatic generation control scheme is applied in
order to match the power output of the generators within the electric power
system and electric energy imported into the electric power system, with the
load located within the electric power system.

“Cover Costs” shall have the meaning specified in Section 6.4.

“CP&L” means Carolina Power & Light Company (d/b/a Progress Energy Carolinas,
Inc.).

“CPR” shall have the meaning specified in Section 14.1.

“Day” means a day, commencing at 00:00:00 Eastern Time of such calendar day and
ending 23:59:59 Eastern Time of the same calendar day.

“Debt Service Coverage Ratio” shall have the meaning specified in Section 15.7.

“Defaulting Party” shall have the meaning specified in Section 16.5.1.

“Delivery Points” means any available points on the Transmission System where
electric energy is delivered for Transmission Service.

 

5

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

“Demand Rate Adjustment Percentage” shall be calculated as shown on Attachment
7-9.

“Demand Side Management Resource Programs” means the demand side management
resource programs that Duke makes available to Duke’s Native Load retail
customers within the State of North Carolina under riders approved and on file
with the NCUC, as such riders may be amended from time to time.

“Depreciation and Amortization Expense” shall have the meaning specified in
Section 15.7.

“Dispatched Baseload Resources” means the Baseload Resources that Duke
dispatches pursuant to Section 4.3.4.

“Dispatched Combined Cycle Resources” means the Combined Cycle Resources that
Duke dispatches pursuant to Section 4.3.3.

“Disputed Amount” shall have the meaning specified in Section 13.5.

“Duke” shall have the meaning specified in the first paragraph hereof, provided
that for purposes of this Agreement “Duke” shall not include Duke Transmission
and provided further, Duke intends to effectuate a name change to Duke Energy
Carolinas, LLC and upon the effectiveness of such name change, references to
“Duke” shall mean Duke Energy Carolinas, LLC.

“Duke Annual Plan” means the Annual Report Duke is required to file with the
NCUC in accordance with NCUC Rule R8-60 or successor thereto. In the event Duke
is no longer required to file the Annual Report with the NCUC or filing becomes
voluntary, “Duke Annual Plan” shall mean the generation planning criteria for
Duke’s Generation System used by Duke to meet Duke’s Native Load.

“Duke-Blue Ridge Agreement” means the Partial Requirements Service Agreement
between Duke and Blue Ridge Electric Membership Corporation, dated as of May 12,
2006.

“Duke Hourly Energy Charge” shall have the meaning specified in Section 7.1.5.1.

“Duke Hourly Reconciliation Charge” shall have the meaning specified in
Section 7.1.5.11.

“Duke Monthly Energy Charge” means, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2006, the charge set forth
in Section 7.1.5.1; with respect to the period January 1, 2007, through
December 31, 2010, the charge set forth in Section 7.2.3; and with respect to
the period beginning January 1, 2011, and continuing through the termination of
this Agreement, the charge set forth in Section 7.3.3.

“Duke Monthly Reconciliation Charge” shall have the meaning specified in
Section 7.1.5.11.

 

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“Duke Native Load” or “Duke’s Native Load” means the electric capacity and
energy demands imposed on Duke by its retail customers located within Duke’s
Service Area, as such Service Area may be amended from time to time in
accordance with Laws or pursuant to the requisite approvals of the Governmental
Authorities that have jurisdiction to regulate retail electric service within
such Service Area, including by merger or acquisition, plus the demands of
Duke’s wholesale power sales customers served under contracts with a firmness of
supply equal to such retail customers.

“Duke-Piedmont Agreement” means the Partial Requirements Service Agreement
between Duke and Piedmont Electric Membership Corporation, dated as of May 12,
2006.

“Duke-Rutherford Agreement” means this Agreement.

“Duke Reconciliation Amount” shall have the meaning specified in Section
7.1.5.11.

“Duke’s Generation Planning Practices” means the then-current generation
planning practices of Duke that are reflected in the Duke Annual Plan.

“Duke’s Generation System” means Duke’s owned or leased electric generating
facilities and purchased power resources the output of which are used to serve
Duke’s Native Load located within the State of North Carolina, as such system
may be amended from time to time by any means including by merger or
acquisition.

“Duke Schedule 1 Demands” shall have the meaning specified in Schedule 1,
Section I.B.

“Duke Total Hourly Energy Charge” shall have the meaning specified in
Section 7.1.5.2.

“Duke Transmission” means Duke Electric Transmission, a division of Duke, or any
successor thereto.

“Eastern Time” means the time in effect in Charlotte, North Carolina, whether
Eastern Standard Time or Eastern Daylight Saving Time.

“Effective Date” shall have the meaning specified in Section 2.1.1.

“EMC” or “Rutherford” shall have the meaning specified in the first paragraph of
this Agreement.

“EMC Call Signal” shall have the meaning specified in Section 7.1.5.9.

“EMC Coincident Peak Demand” shall have the meaning specified in
Section 3.5.2.3.5.1.

“EMC Contract Resources”, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2010, shall have the
meaning specified in Section 5.1.1, and with respect to the period beginning
January 1, 2011, and continuing through the termination of this Agreement, shall
have the meaning specified in Section 5.2.1.

 

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“EMC Demand Side Management Resource Programs” means the demand side management
resource programs that EMC makes available to EMC’s Native Load customers.

“EMC Excess Annual Capacity Quantity” shall have the meaning specified in
Section 3.5.2.3.5.1.

“EMC Group” means collectively Piedmont, Blue Ridge, and Rutherford.

“EMC Group Annual Capacity Quantity” means the sum of: (i) the Annual Capacity
Quantity set forth in Section 3.5.2.3 of this Agreement; (ii) the Annual
Capacity Quantity set forth in Section 3.5.2.3 of the Duke-Blue Ridge Agreement;
and (iii) the Annual Capacity Quantity set forth in Section 3.5.2.3 of the
Duke-Piedmont Agreement.

“EMC Group Call Signal” shall have the meaning specified in Section 7.1.5.10.

“EMC Group Coincident Peak Demand” shall have the meaning specified in
Section 3.5.2.3.5.3.

“EMC Group Combined Energy Credit Amount” means the sum of (i) the Blue Ridge
Energy Credit Amount, (ii) the Piedmont Energy Credit Amount, and (iii) the
Rutherford Energy Credit Amount.

“EMC Group Combined Energy Purchase Amount” means the sum of (i) the Blue Ridge
Energy Purchase Amount, (ii) the Piedmont Energy Purchase Amount, and (iii) the
Rutherford Energy Purchase Amount.

“EMC Group Combined Excess Annual Capacity Quantity” shall have the meaning
specified in Section 3.5.2.3.5.2.

“EMC Group Combined Monthly Demand Quantity” shall have the meaning specified in
Section 7.1.4.2.

“EMC Group Energy Credit Amount” shall have the meaning specified in
Section 7.1.5.10.

“EMC Group Energy Purchase Amount” shall have the meaning specified in
Section 7.1.5.10.

“EMC Group Excess Annual Capacity Quantity” shall have the meaning specified in
Section 3.5.2.3.5.3.

“EMC Group Monthly Demand Quantity” shall have the meaning specified in
Section 7.1.4.3.

“EMC Group Native Load” means the sum of (i) the EMC Native Load under this
Agreement, (ii) the EMC Native Load under the Duke-Blue Ridge Agreement, and
(iii) the EMC Native Load under the Duke-Piedmont Agreement.

 

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“EMC Group Put Signal” shall have the meaning specified in Section 7.1.5.10.

“EMC Group Reconciliation Amount” shall have the meaning specified in
Section 7.1.5.12.

“EMC Group Total Hourly Energy Credit” shall have the meaning specified in
Section 7.1.5.6.

“EMC Group’s Base Obligation” means the sum of (i) EMC’s Base Obligation under
Section 4.2.2 of this Agreement, (ii) EMC’s Base Obligation under Section 4.2.2
of the Duke-Blue Ridge Agreement, and (iii) EMC’s Base Obligation under
Section 4.2.2 of the Duke-Piedmont Agreement.

“EMC Hourly Demand” shall have the meaning specified in Section 3.5.2.3.5.1.

“EMC Hourly Energy Credit” shall have the meaning specified in Section 7.1.5.5.

“EMC Monthly Demand Quantity” shall have the meaning specified in
Section 7.1.4.1

“EMC Monthly Energy Credit” means, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2006, the credit set forth
in Section 7.1.5.5.

“EMC Native Load” or “EMC’s Native Load” means the electric capacity and energy
demands imposed on EMC by its retail customers located within EMC’s Service
Area, excluding any such demands that constitute Non-Duke Control Area Load or
Excepted Load.

“EMC Peak Hour Billing Demand”, with respect to the period January 1, 2007
through December 31, 2010, shall have the meaning specified in Section 7.2.2.2,
and with respect to the period beginning January 1, 2011, and continuing through
the termination of this Agreement, shall have the meaning specified in
Section 7.3.2.2.

“EMC Put Signal” shall have the meaning specified in Section 7.1.5.9.

“EMC Scheduled Amount” shall have the meaning specified in Section 4.2.3.

“EMC’s Base Obligation” shall have the meaning specified in Section 4.2.2.

“Energy Cost” shall have the meaning specified in Section 4.3.3.3.

“Energy Imbalance Service” means the service provided under Schedule 4 of the
Transmission Provider’s OATT.

“Equitable Defenses” means, with respect to a proceeding involving this
Agreement, the discretion of a Governmental Authority to make or enter an order
of bankruptcy, insolvency, reorganization, or other ruling affecting creditors’
rights generally, or exercising other discretion committed to the court’s or
agency’s equitable powers.

“Equity” shall have the meaning specified in Section 15.7.

 

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“Event of Default” shall have the meaning specified in Section 16.5.1.

“Excepted Load” shall have the meaning specified in Section 4.4.

“Excess Annual Amount” means the quantity specified in Section 3.5.2.3.5.

“Excess Annual Capacity Charge” means the charge specified in Section 3.5.2.3.5.

“Excess Annual Capacity Price” shall have the meaning specified in
Section 3.5.2.3.1, 3.5.2.3.2 or 3.5.2.3.3, as applicable.

“Extension Term” shall have the meaning specified in Section 2.2.2.

“Federal Power Act” means the Federal Power Act, 16 U.S.C. §§791a-828c, as
amended from time to time.

“FERC” means the Federal Energy Regulatory Commission or any successor agency
that administers the Federal Power Act.

“FFR Supplemental Service” shall have the meaning specified in Sections 4.1 and
4.2.

“Firm Energy” means: electric energy which meets the Transmission Provider’s (or
successor Transmission Provider’s) standards related to character of service and
firmness of supply, including standards that may require the designation of
specific capacity sources, as such standards exist on the Effective Date or as
they may be amended from time-to-time, such that EMC may: (i) designate the PPA
as a Network Resource or successor service designation under its Network
Integration Transmission Service Agreement with Transmission Provider, or
successor Transmission Provider; and (ii) satisfy applicable requirements such
that the Network Integration Transmission Service or successor service
designation can be used to accept and deliver the electric energy pursuant to
the highest firm transmission priority of such Transmission Provider; or
(iii) satisfy the standards of any successor Transmission Provider that might
have the right to determine the standards for character of service and firmness
of supply, including standards that may require the designation of specific
capacity sources, under which EMC may designate the PPA, such that the
requirements of the highest firm transmission priority are met under its Network
Integration Transmission Service Agreement (or as the nearest equivalent thereto
remains available to EMC under the successor Transmission Provider’s
requirements).

“Firm Sales” means wholesale electric sales other than Non-Firm Sales.

“Fitch Rating” means Fitch, Inc., a unit of Fimalac, S.A.

“Fixed Forward Resource” or “FFR Resource” means EMC’s contractual entitlements
to electric capacity and energy under the PPA.

“Force Majeure” shall have the meaning specified in Section 16.4.

 

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“Fuel Rate”, with respect to the period January 1, 2007, through December 31,
2010, shall have the meaning specified in Section 7.2.3.1, and with respect to
the period beginning January 1, 2011, and continuing through the termination of
this Agreement, shall have the meaning specified in Section 7.3.3.1.

“Government” means the United States government.

“Governmental Authority” means any federal, state, local or other governmental,
regulatory or administrative agency, court, commission, department, board, or
other governmental subdivision, legislature, rulemaking board, court, tribunal,
arbitrating body, government-owned corporation or other governmental authority
or department thereof.

“Governmental Charges” means all taxes, fees, assessments and other charges
imposed by any Governmental Authority.

“Hour” means one of the twenty-four (24) clock hours in a Day.

“Hourly Fuel Charge”, with respect to the period January 1, 2007, through
December 31, 2010, shall have the meaning specified in Section 7.2.3.1, and with
respect to the period beginning January 1, 2011, and ending on the termination
of this Agreement, shall have the meaning specified in Section 7.3.3.1.

“Hourly Inter-EMC Transfer Reconciliation Charge” shall have the meaning
specified in Section 7.1.5.13.

“Hourly Variable O&M Charge”, with respect to the period January 1, 2007,
through December 31, 2010, shall have the meaning specified in Section 7.2.3.2,
and with respect to the period beginning January 1, 2011, and ending on the
termination of this Agreement, shall have the meaning specified in
Section 7.3.3.2.

“Initial Term” shall have the meaning specified in Section 2.2.1.

“Impasse Notice” shall have the meaning specified in Section 14.2.

“Interest Expense” shall have the meaning specified in Section 15.7.

“Interest Rate” means either (i) the Prime Rate plus two (2%) percent, or
(ii) the maximum lawful rate permitted by applicable Law, whichever is less.

“Interval” shall have the meaning specified in Sections 7.1.5.9 and 7.1.5.10, as
applicable.

“ITC” means an independent transmission company.

“ISO” means an independent system operator.

“kWh” means kilowatt-hour, a unit of electric energy.

“kW” mean kilowatt.

 

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“Law” means any law, rule, regulation, order, writ, judgment, decree, or other
legal or regulatory determination by a court, regulatory agency, or other
Governmental Authority of competent jurisdiction.

“Legal Proceeding” means any suit, hearing, or proceeding by or before any court
or any Governmental Authority.

“Light Load Periods” means any Hour during which EMC’s Base Obligation is
reduced because certain of its entitlements to electric capacity and energy
under the WPSA are reduced as a result of NCEMC’s Native Load in either of the
CP&L east or west Control Areas or Duke Control Area being insufficient to
permit NCEMC to have access to its full contractual entitlement to electric
capacity and energy from certain generation or purchased power resources.

(i) For each Hour beginning with the Commencement Date and continuing through
December 31, 2010, or any portion thereof in which this Agreement is in effect,
Light Load Periods in the CP&L east and west Control Areas, only occur when
NCEMC’s Native Load in such CP&L east and west Control Area is less than the
contractual amount specified in the Service Obligation Resources (“SORs”). The
amount of any reduction in NCEMC’s entitlement to electric capacity and energy
under the SORs is allocated to EMC in accordance with the WPSA. In the Duke
Control Area, Light Load Periods only occur when a generating unit at either the
Catawba Nuclear Station or the McGuire Nuclear Station is off-line or de-rated
and NCEMC’s Native Load in the Duke Control Area is less than 623.5 MWs. The
amount of any reduction in NCEMC’s entitlement to electric capacity and energy
is allocated to EMC in accordance with the WPSA.

(ii) For each Hour beginning January 1, 2011, and continuing through the
termination of this Agreement, Light Load Periods only occur when a generating
unit at either the Catawba Nuclear Station or the McGuire Nuclear Station is
off-line or de-rated and NCEMC’s Native Load in the Duke Control Area is less
than 623.5 MWs. The amount of any reduction in NCEMC’s entitlement to electric
capacity and energy is allocated to EMC in accordance with the WPSA.

“Material Adverse Change” or “MAC” shall have the meaning specified in
Section 15.2.

“Material Adverse Ruling” shall have the meaning specified in
Section 2.3.2.2(c).

“Material Adverse Ruling Termination Date” shall have the meaning specified in
Section 2.3.2.2.

“Maximum Demand Hour” shall have the meaning specified in Section 7.1.4.3.

“McGuire Nuclear Station” means that certain nuclear plant located in
Huntersville, North Carolina.

“Month” means a calendar month, commencing at one (1) minute prior to 12:01 a.m.
Eastern Time on one of January 1, February 1, March 1, April 1, May 1, June 1,
July 1,

 

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August 1, September 1, October 1, November 1 or December 1 and ending at one
(1) minute after 11:59 p.m. Eastern Time of the succeeding January 31,
February 28 or 29 (during a leap year), March 31, April 30, May 31, June 30,
July 31, August 31, September 30, October 31, November 30 or December 31.

“Monthly” shall have a meaning correlative to that of Month.

“Monthly Billing Demand”, with respect to the period January 1, 2007, through
December 31, 2010, shall have the meaning specified in Section 7.2.2.2, and with
respect to the period beginning January 1, 2011, and continuing through the
termination of this Agreement, shall have the meaning specified in
Section 7.3.2.2.

“Monthly Demand Amount” means the quantity specified in Section 7.1.4.

“Monthly Demand Charge” means, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2006, the charge set forth
in Section 7.1.4; with respect to the period January 1, 2007, through
December 31, 2010, the charge set forth in Section 7.2.2; and with respect to
the period beginning January 1, 2011, and continuing through the termination of
this Agreement, the charge set forth in Section 7.3.2.

“Monthly Demand Rate”, with respect to the period beginning on the Commencement
Date and continuing through December 31, 2006, shall have the meaning specified
in Section 7.1.4; with respect to the period January 1, 2007 through August 31,
2008, shall have the meaning specified in Section 7.2.2.1, except as provided in
Sections 3.5.2.3.1, 3.5.2.3.2 and 3.5.2.3.3; with respect to the period
September 1, 2008, through December 31, 2010, shall have the meaning specified
in Section 7.2.2.1; and with respect to the period beginning January 1, 2011,
and continuing through the termination of this Agreement, shall have the meaning
specified in Section 7.3.2.1.

“Monthly Fuel Charge”, with respect to the period January 1, 2007, through
December 31, 2010, shall have the meaning specified in Section 7.2.3.1, and with
respect to the period beginning January 1, 2011, and continuing through the
termination of this Agreement, shall have the meaning specified in
Section 7.3.3.1.

“Monthly Inter-EMC Energy Transfer Reconciliation Charge” shall have the meaning
specified in Section 7.1.5.13.

“Monthly Replacement Energy Charge” shall have the meaning specified in
Section 4.2.4.

“Monthly Reserve Capacity Charge” shall have the meaning specified in
Section 7.4.

“Monthly Scheduling Agent Service Charge” shall have the meaning specified in
Section 7.1.6.

“Monthly Variable O&M Charge”, with respect to the period January 1, 2007,
through December 31, 2010, shall have the meaning specified in Section 7.2.3.2,
and with respect to the period beginning January 1, 2011, and ending on the
termination of this Agreement, shall have the meaning specified in
Section 7.3.3.2.

 

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“Moody’s” means Moody’s Investors Services, Inc.

“MSCG” means Morgan Stanley Capital Group Inc.

“MWh” means megawatt-hour, a unit of electric energy.

“MW” means megawatt.

“NCEMC” shall have the meaning specified in the Recitals of this Agreement.

“NCEMC Native Load” means the electric and energy demands imposed on NCEMC by
its members for resale to such members’ retail customers, and shall include
wholesale sales of electric capacity and energy by Blue Ridge to New River
except wholesale sales of electric capacity and energy made in accordance with
Section 4.4.1 of the Duke-Blue Ridge Agreement.

“NCEMC Policies” shall have the meaning specified in Section 8.2.

“NCUC” means the North Carolina Utilities Commission or any successor agency
with jurisdiction to regulate retail electric service in the State of North
Carolina.

“Negotiation Period” shall have the meaning specified in Section 14.2.

“NERC” means the North American Electric Reliability Council.

“Network Integration Transmission Service” means Network Integration
Transmission Service provided under the OATT.

“Network Integration Transmission Service Agreement” or “NITSA” means that
certain agreement for Network Integration Transmission Service, as amended from
time to time, executed by EMC and Transmission Provider.

“Network Operating Agreement” or “NOA” means that certain agreement, as amended
from time to time, executed by EMC and Transmission Provider in conjunction with
the Network Integration Transmission Service Agreement.

“Network Resource” shall have the meaning specified in the OATT.

“Neutral Auditors” shall have the meaning specified in Section 2.3.2.2.2.

“New River” means Appalachian State University d/b/a New River Light & Power
Company or any successor thereto.

“Nomination” means the notification provided by MSCG to the Scheduling Agent of
the sources and specific amounts of electric energy under the WPSA and SEPA
Contract that MSCG desires EMC to make available in accordance with the terms
and conditions of the PPA.

 

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“Non-Claiming Party” shall have the meaning specified in Section 16.4.

“Non-Conforming Load” shall have the meaning specified in Section 4.4.

“Non-Defaulting Party” shall have the meaning specified in Section 16.5.1.

“Non-Duke Control Area Load” means load that is located in a Control Area other
than the Duke Control Area, including load that is physically located in the
Duke Control Area but telemetered for Control Area purposes to another Control
Area.

“Non-Firm Sales” means wholesale electric sales for which the delivery of
electric energy may be interrupted, curtailed or terminated for any reason
without any liability to Duke (other than charges imposed for changes to
schedules for the sale of electric energy).

“Notice of Termination” means a written notice to terminate this Agreement under
Sections 2.2 or 2.3 that conforms to the requirements set forth in
Section 2.3.3.

“OATT” means the Open Access Transmission Tariff of the Transmission Provider on
file with FERC, or the successor transmission tariff (including the Open Access
Transmission Tariff of an RTO, ITC or ISO that is applicable to the Transmission
System), as either may be amended from time to time.

“Operating Committee” shall have the meaning specified in Section 10.1.

“Option Notice” shall have the meaning specified in Section 3.5.2.3.

“Option Period” shall have the meaning specified in Section 3.5.2.3.

“Original Notice” shall have the meaning specified in Section 14.2.

“Partial Requirements Agreements” means the Duke-Rutherford Agreement, the
Duke-Blue Ridge Agreement, and the Duke-Piedmont Agreement.

“Partial Requirements Resources” means EMC’s contractual entitlements to
electric capacity and energy used to serve EMC’s Native Load during the period
commencing January 1, 2011, and continuing through the termination of this
Agreement, as specified in Section 5.2.

“Partial Requirements Service” shall have the meaning specified in Section 4.3.

“Party” and “Parties” shall have the meanings specified in the preamble of this
Agreement.

“Patronage Capital or Margins” shall have the meaning specified in Section 15.7.

“Piedmont” means Piedmont Electric Membership Corporation.

“Piedmont Energy Credit Amount” means the Piedmont Energy Credit Amount as
determined in Section 7.1.5.9 of the Duke-Piedmont Agreement.

 

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“Piedmont Energy Purchase Amount” means the Piedmont Energy Purchase Amount as
determined in Section 7.1.5.9 of the Duke-Piedmont Agreement.

“Point of Interconnection” means the point of interconnection between the
Transmission Provider’s transmission and distribution facilities and EMC’s
system.

“PPA” means that certain Power Purchase Agreement by and between EMC and Morgan
Stanley Capital Group Inc. dated as of December 11, 2003, as amended from time
to time.

“Prime Rate” means, for any date, the per annum rate of interest announced from
time to time by Citibank, N.A. (or a suitable replacement agreed upon by the
Parties) as its “prime” rate for commercial loans, effective on the date payment
is due as established from time to time by such bank.

“Principal and Interest Expense” shall have the meaning specified in
Section 15.7.

“Prudent Utility Practice” means any of the practices, methods, and acts engaged
in or approved by a significant portion of the electric utility industry during
the relevant time period, or 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, could have been expected to accomplish the desired result at
a reasonable cost consistent with good business practices, reliability, safety,
and expedition. Prudent Utility Practice is not intended to be limited to the
optimum practice, method, or act to the exclusion of all others, but rather to
be acceptable practices, methods, or acts generally accepted in the electric
utility industry.

“PSCSC” means the Public Service Commission of South Carolina, or any successor
agency with jurisdiction to regulate retail electric service within the State of
South Carolina.

“Purchasing - Selling Entity” means that entity designated to the Transmission
Provider by EMC who, upon the effectiveness of such designation, is eligible to
purchase and sell energy and/or capacity and reserve transmission services on
behalf of EMC.

“PURPA” means the Public Utilities Regulatory Policies Act, 16 U.S.C. §2601 et
seq. (2005), as amended, including amendments included in the Energy Policy Act
of 2005.

“PURPA Resource” shall have the meaning specified in Section 5.4.1.

“Qualifying Facility” means a facility that meets the standards under 18 C.F.R.
Part 292, Subpart B, as amended from time to time.

“Reconciliation Allocation Factor” shall be equal to the Reconciliation
Allocation Number divided by the sum of the Reconciliation Allocation Numbers as
set forth in this Agreement and in the Duke-Blue Ridge Agreement, and
Duke-Piedmont Agreement.

“Reconciliation Allocation Number” shall be equal to 42.60.

“Replacement Energy” shall have the meaning specified in Section 4.2.4.

 

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“Representatives” means, with respect to a Party, such Party’s officers,
directors, employees, advisors, and representatives and such Party’s Affiliates
and their respective officers, directors, employees, advisors, and
representatives.

“Resolution Period” shall have the meaning specified in Section 2.3.2.2.2.

“Restricted Rentals” shall have the meaning specified in Section 15.7.

“RTO” means a regional transmission organization as that term is defined by
FERC.

“RUS” means the Rural Utilities Service of the United States Department of
Agriculture or any agency succeeding to the functions of RUS.

“Rutherford” shall have the meaning specified in the first paragraph of this
Agreement.

“Rutherford Allocated Share of Duke Total Hourly Energy Charge” shall be as
calculated in Attachment 7-3.

“Rutherford Allocated Share of EMC Group Total Hourly Energy Credit” shall be as
calculated in Attachment 7-3.

“Rutherford Allocated Share of Inter-EMC Energy Charge” shall be as calculated
in Attachment 7-3.

“Rutherford Allocated Share of Inter-EMC Energy Credit” shall be as calculated
in Attachment 7-3.

“Rutherford Energy Credit Amount” means the Rutherford Energy Credit Amount as
determined in Section 7.1.5.9.

“Rutherford Energy Purchase Amount” means the Rutherford Energy Purchase Amount
as determined in Section 7.1.5.9.

“Rutherford Hourly Reconciliation Credit” shall have the meaning specified in
Section 7.1.5.12.

“Rutherford Monthly Reconciliation Credit” shall have the meaning specified in
Section 7.1.5.12.

“Scheduling Agent” means Duke acting as agent on behalf of EMC to perform
Scheduling Agent Services.

“Scheduling Agent Services” shall have the meaning specified in Article 8.

“Scheduling Services Agreement” means that certain Scheduling Services Agreement
by and between EMC and MSCG dated as of December 11, 2003, as amended.

“Scheduling Shortfall” shall have the meaning specified in Section 4.2.4.

 

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“Scheduling Shortfall Amount” shall have the meaning specified in Section 4.2.4.

“Selection Date” shall have the meaning specified in Section 14.5.

“SEPA” means the Southeastern Power Administration.

“SEPA Contract” means the Contract Executed by Rutherford and the United States
of America acting by and through the Southeastern Power Administration dated as
of May 2, 1997, as amended from time to time. The Parties agree that, for the
purposes of this Agreement, the SEPA Contract as in effect on the date hereof is
attached to a letter from EMC to Duke dated May 12, 2006.

“SEPA Entitlement” shall mean EMC’s entitlement to electric capacity and energy
under the SEPA Contract.

“SEPA Policies” shall have the meaning specified in Section 8.2.

“SERC” means the Southeastern Reliability Council.

“Service Area” means the area within a state or states within which an electric
utility provides retail electric service as determined under the applicable Laws
of such state or states.

“Service Obligation Resources” or “SORs” means those generation and purchased
capacity resources used by NCEMC to serve NCEMC’s members for resale to such
members’ retail customers, as such resources are specified in the Power Sales
Agreement Between Carolina Power & Light Company and North Carolina Electric
Membership Corporation dated as of November 2, 1998, as amended.

“Short Term Interest Expense” shall have the meaning specified in Section 15.7.

“S&P” or “Standard & Poor’s” means Standard & Poor’s Rating Group, a division of
McGraw Hill, Inc.

“Standard Arbitration Process” shall mean the arbitration process described in
Section 14.6.1.

“Streamlined Arbitration Process” shall mean the arbitration process described
in Section 14.6.2.

“Submission” or “Submissions” shall have the meaning specified in
Section 14.6.1(5).

“Substitute Energy” shall have the meaning specified in Section 6.4.

“Substitute Energy Costs” shall have the meaning specified in Section 6.5.

“Summer Period” means the period (as of the Commencement Date May 1 –
September 30) designated as the summer period in the then most recent Duke
Annual Plan.

 

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“System Incremental Cost” means the incremental expense, measured in dollars per
megawatt hour ($/MWh), incurred by Duke to supply the next megawatt-hour (MWh)
of electric energy, after serving Duke’s Native Load customers’ requirements,
and all other opportunity sales, during any Hour in which electric energy is
purchased by EMC. System Incremental Cost shall include the replacement cost of
fuel, fuel handling expense, variable operating and maintenance expense,
emissions allowance replacement costs and other environmental compliance costs,
the cost of starting and operating any generating units (including costs
incurred due to minimum runtimes or loading levels), and other appropriate
electric energy-related costs, including electric energy purchases from others,
interchange power costs, and allocations of unit commitment costs, if any, all
as determined prior to the Hour.

“Term” means the term of this Agreement determined in accordance with
Section 2.2.3.

“Termination Assistance Service” shall have the meaning specified in
Section 8.10.

“Territorial Decremental Cost” means the decrease in Duke’s expenses, measured
in dollars per megawatt hour ($/MWh), in supplying Duke’s Native Load customers’
requirements due to Duke’s purchase of electric energy supplied by EMC.
Territorial Decremental Cost shall include the reduction in fuel expense, fuel
handling expense, variable operating and maintenance expense, emissions
allowance replacement costs and other environmental compliance costs, the cost
of starting and operating any generating units (including costs incurred due to
minimum runtimes or loading levels), and other appropriate energy-related costs,
including electric energy purchases from others, interchange power costs, and
allocations of unit commitment costs, if any, all as determined prior to the
Hour.

“Territorial Incremental Cost” means the incremental expense, measured in
dollars per megawatt hour ($/MWh), incurred by Duke to supply the next
megawatt-hour (MWh) of electric energy after serving Duke’s Native Load
customers’ requirements, during any Hour in which electric energy is purchased
by EMC. Territorial Incremental Cost shall include the replacement cost of fuel,
fuel handling expense, variable operating and maintenance expense, emissions
allowance replacement costs and other environmental compliance costs, the cost
of starting and operating any generating units (including costs incurred due to
minimum runtimes or loading levels), and other appropriate electric
energy-related costs, including electric energy purchases from others,
interchange power costs, and allocations of unit commitment costs, if any, all
as determined prior to the Hour.

“Times Interest Earned Ratio” or “TIER” shall have the meaning specified in
Section 15.7.

“Transmission Provider” means any entity transmitting electric energy provided
by Duke under this Agreement to the EMC distribution system, and shall include
any ISO, RTO, ITC, or other future organization, agency or authority that has
been approved by FERC to serve as the Transmission Provider.

“Transmission Service” means the service provided by a Transmission Provider to
EMC pursuant to which electric energy provided under this Agreement is delivered
from the Delivery Point to EMC’s distribution system.

 

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“Transmission System” means the electric transmission system owned or leased and
operated by Duke Transmission.

“Variable O&M Rate”, with respect to the period January 1, 2007, through
December 31, 2010, shall have the meaning specified in Section 7.2.3.2, and with
respect to the period beginning January 1, 2011, and continuing through the
termination of this Agreement, shall have the meaning specified in
Section 7.3.3.2.

“Weekday” means Monday, Tuesday, Wednesday, Thursday or Friday, excluding days
recognized as holidays by NERC.

“Weekend Day” means Saturday or Sunday, and all days recognized as holidays by
NERC.

“Winter Period” means the period (as of the Commencement Date October 1 –
April 30) designated as the winter period in the then most recent Duke Power
Annual Plan.

“WPSA” means the Wholesale Power Supply Agreement by and between North Carolina
Electric Membership Corporation and EMC dated as of January 1, 2004, as amended
from time to time. The Parties agree that, for the purposes of this Agreement,
the WPSA as in effect on the date hereof is attached to a letter from EMC to
Duke dated May 12, 2006.

“Year” means a calendar year.

1.2 Interpretation. In this Agreement, unless the context otherwise requires,
the singular shall include the plural and any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words “hereof,”
“herein,” “hereto” and “hereunder” and words of similar import when used in this
Agreement shall, unless otherwise expressly specified, refer to this Agreement
as a whole and not to any particular provision of this Agreement. Whenever the
terms “include,” “includes,” or “including” are used herein in connection with a
listing of items included within a prior reference, such listing shall be
interpreted to be illustrative only, and shall not be interpreted as a
limitation on or exclusive listing of the items included within the prior
reference. Any reference in this Agreement to “Section,” “Article,” “Schedule,”
or “Attachment” shall be references to this Agreement unless otherwise stated,
and all such Sections, Articles, Schedules, and Attachments shall be
incorporated in this Agreement by reference. In the event that any index or
publication referenced in this Agreement ceases to be published, each such
reference shall be deemed a reference to a successor or alternate index or
publication reasonably agreed to by the Parties. Unless specified otherwise, a
reference to a given agreement or instrument, and all schedules and attachments
thereto, shall be a reference to that agreement or instrument as modified,
amended, supplemented and restated, and in effect from time to time. Unless
otherwise stated, any reference in this Agreement to any entity shall include
its permitted successors and assignees, and in the case of any Governmental
Authority, any person succeeding to its functions and capacities. All dollar
amounts referred to in this Agreement shall be in U.S. currency.

1.3 Construction. The Parties acknowledge that each was actively involved in the
negotiation and drafting of this Agreement and that no Law or rule of
construction shall be raised or used in which the provisions of this Agreement
shall be construed in favor of or against either Party because one is deemed to
be the author thereof.

 

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Article 2

Term

2.1 Effectiveness.

2.1.1 Effectiveness of this Agreement. This Agreement shall become effective
upon execution and delivery by the Parties (“Effective Date”) provided that
obligations of the Parties to purchase and sell electric capacity and energy and
to provide Scheduling Agent Services shall commence, on the later to occur of
(a) September 1, 2006 or (b) the date upon which service commences in accordance
with Section 3.5.1.2 or Section 3.5.2.1 (the “Commencement Date”), provided that
the Commencement Date shall be the first Day of the Month.

2.1.2 Governmental Approval.

2.1.2.1 Duke shall take appropriate steps within five (5) Business Days from the
Effective Date to file this Agreement, together with supporting documents, with
FERC pursuant to the requirements of the Federal Power Act. Thereafter, Duke
shall diligently pursue acceptance of this Agreement as a rate schedule by FERC
and shall keep EMC informed of the progress in such regard. If requested by
Duke, EMC shall undertake Commercially Reasonable Efforts to cooperate with and
assist Duke in Duke’s efforts to make this Agreement effective and, upon Duke’s
request, shall make a timely submittal at FERC affirmatively supporting the
acceptance or approval of this Agreement by FERC without modification,
suspension, investigation, or other condition.

2.1.2.2 EMC shall take appropriate steps within five (5) Business Days from the
Effective Date to submit this Agreement, together with supporting documents, to
the RUS. Thereafter, EMC shall diligently pursue approval of this Agreement by
the RUS and shall keep Duke informed of the progress in such regard. If
requested by EMC, Duke shall undertake Commercially Reasonable Efforts to
cooperate with and assist EMC in EMC’s efforts to obtain RUS approval of this
Agreement and, upon EMC’s request, shall make a timely submittal at RUS
affirmatively supporting the approval of this Agreement without modification or
condition.

2.2 Term.

2.2.1 Initial Term. The initial term of this Agreement shall commence on the
Effective Date and shall continue through 23:59:59, Eastern Time, on
December 31, 2021 (“Initial Term”) unless this Agreement is terminated prior to
December 31, 2021, in accordance with Sections 2.3.2, 3.5.2.2 or 3.5.3.

2.2.2 Extension. Unless terminated in accordance with Sections 2.3, 3.5.2.2 or
3.5.3, the Term of this Agreement shall automatically renew and extend for an
additional term of ten (10) Years (each such extension being an “Extension
Term”), so that unless either Party gives Notice of Termination in accordance
with Section 2.3, the Term of this Agreement shall extend

 

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through 23:59:59 Eastern Time on December 31, 2031. Likewise, unless either
Party gives Notice of Termination in accordance with Section 2.3, the Term of
this Agreement shall extend through 23:59:59 Eastern Time on December 31, 2041;
and so forth thereafter in ten (10) Year increments.

2.2.3 Term. The Initial Term of this Agreement together with each Extension
Term, if any, shall constitute the “Term” of this Agreement during which Duke
shall provide either FFR Supplemental Service or Partial Requirements Service,
as applicable, and Scheduling Agent Services to EMC.

2.3 Termination.

2.3.1 Termination of the Initial or an Extension Term. Either Party may
terminate this Agreement at the end of the Initial Term by giving Notice of
Termination to the other Party as specified in Section 2.3.3 at least three
(3) Years prior to the end of the Initial Term, so that such notice is given no
later than December 31, 2018. If the Term is extended beyond the Initial Term
pursuant to Section 2.2.2, either Party may terminate this Agreement at the end
of the then-current Extension Term by providing Notice of Termination to the
other Party as specified in Section 2.3.3 at least three (3) Years prior to the
end of such Extension Term, so that such notice is given no later than
December 31, 2028, for the Extension Term ending December 31, 2031, and so forth
thereafter.

2.3.2 Early Termination. Notwithstanding the provisions of Section 2.3.1, early
termination of this Agreement, including any Extension Term, shall only be
permitted in the six (6) circumstances set out in Sections 2.3.2.1, 2.3.2.2,
2.3.2.3, 2.3.2.4, 2.3.2.5 and 2.3.2.6.

2.3.2.1 Early Termination for an Event of Default. In the event that an Event of
Default occurs, and the Defaulting Party fails to cure such Event of Default
within the time period(s) specified in Section 16.5.3, the Non-Defaulting Party
may terminate this Agreement upon giving thirty (30) Days’ Notice of
Termination, provided that the termination date shall be the last Day of a
Month.

2.3.2.2 Early Termination for a Material Adverse Ruling. In the event that a
Material Adverse Ruling occurs, the Party affected by such Material Adverse
Ruling may, within twenty (20) Days after such Material Adverse Ruling occurs,
give the other Party Notice of Termination, in accordance with Section 2.3.3, of
its intent to terminate this Agreement effective on 23:59:59 of the last Day of
the Month that is twenty-four (24) Months after the Month in which the Notice of
Termination is given. Such termination date shall be referred to herein as the
“Material Adverse Ruling Termination Date.” If a Party fails to give Notice of
Termination within twenty (20) Days after a Material Adverse Ruling occurs, it
shall have permanently waived its right to terminate this Agreement due to such
Material Adverse Ruling pursuant to this Section 2.3.2.2. Termination pursuant
to this Section 2.3.2.2 shall be subject to the following procedures:

(a) During the ninety (90) Days immediately following the giving of the Notice
of Termination, the Parties shall attempt to negotiate amendments to this
Agreement that would permit the Parties to restore the equivalent value of the
economic

 

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bargain contemplated by this Agreement absent the Material Adverse Ruling. If
the Parties reach agreement, such amendments will not become effective unless,
within one hundred eighty (180) Days of the date that the Notice of Termination
is given, the Parties have obtained the necessary approvals of Governmental
Authorities to enable the amendments to become effective without change,
condition or modification. In the event that the Parties fail (i) to reach
agreement on such amendments, or (ii) to obtain the necessary approvals of
Governmental Authorities, this Agreement shall terminate on the Material Adverse
Ruling Termination Date, subject to the provisions of Section 2.3.2.2(b) and
2.3.2.2.2.

(b) In the event that the Parties are unable to reach agreement on the
amendments provided in Section 2.3.2.2(a), either Party may, no later than
ninety (90) Days after the date that the Notice of Termination is given (or, if
earlier, the date that the Parties mutually agree that they are unable to reach
agreement on such amendments), give notice to the other Party of its desire to
extend this Agreement for a period of up to twelve (12) Months beyond the
Material Adverse Ruling Termination Date. Such extension will be subject to the
Parties (i) having first reached agreement upon the rates, terms and conditions
of service for such twelve (12) Month period within one hundred twenty
(120) Days of the date that the Notice of Termination is given and executing
such agreement within such one hundred twenty (120) Day period, and (ii) having
received from Governmental Authorities the necessary approvals for such rates,
terms and conditions without change, condition or modification within one
hundred eighty (180) Days of the date that the Notice of Termination is given.

(c) A “Material Adverse Ruling” is an order or action by a Governmental
Authority or a change in Law that (i) either (A) modifies the rates, terms, or
conditions of this Agreement, (B) disallows the recovery from EMC of costs that
are included in this Agreement, (C) for retail ratemaking or regulatory
accounting and reporting purposes, disallows costs related to this Agreement,
including any disallowance of Duke’s costs related to investments in generating
facilities or binding contracts to purchase electric capacity and energy to
provide service to EMC under this Agreement, or (D) for retail ratemaking or
regulatory accounting and reporting purposes, assigns, allocates or makes pro
forma adjustments with respect to the revenues or costs related to this
Agreement, and (ii) adversely affects the relative economic position of either
Party in a material way. For purposes of this definition only,

(1) “material” for Duke means that the effect of the order or action by the
Governmental Authority or change in Law is reasonably projected to decrease
Duke’s net revenues under this Agreement, or, in the case of a disallowance,
assignment, allocation, or pro forma adjustment of revenues or costs for retail
ratemaking or regulatory accounting or reporting purposes, either (i) decrease
Duke’s net costs or increase Duke’s net revenues assigned or allocated to Duke’s
retail customer classes, or (ii) increase Duke’s net costs or decrease Duke’s
net revenues assigned or allocated to Duke’s wholesale customer class, by an
aggregate amount equal to five percent (5%) or more of the total revenues to be
paid by EMC to Duke under this Agreement over the then-remaining Term;

 

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(2) “material” for EMC means that the effect of the order or action by the
Governmental Authority or change in Law is reasonably projected to increase
EMC’s net costs under this Agreement by an amount equal to five percent (5%) or
more of the total revenues to be paid by EMC to Duke under this Agreement over
the then-remaining Term;

(3) an increase in a Party’s net costs is the increase in the Party’s costs as a
result of the order or action by the Governmental Authority or change in Law,
less the increase (if any) in the Party’s revenues as a result of the Material
Adverse Ruling; and

(4) a decrease in a Party’s net revenues is the decrease in the Party’s revenues
as a result of the order or action by the Governmental Authority or change in
Law, less the decrease (if any) in the Party’s costs as a result of the Material
Adverse Ruling.

(d) The foregoing amounts shall be calculated on a nominal rather than an
inflation adjusted or present value basis. Without limitation of the foregoing,
EMC acknowledges that, for retail ratemaking and regulatory accounting and
reporting purposes, Duke shall calculate the costs of the electric capacity and
energy used to serve EMC under this Agreement on a system average cost basis
beginning January 1, 2007. EMC agrees that if the amount of costs that the NCUC
or the PSCSC in effect assigns or allocates to, or requires Duke to assign or
allocate to, this Agreement for ratemaking or regulatory accounting and
reporting purposes exceeds Duke’s system average costs, such action shall
constitute a Material Adverse Ruling if the five percent (5%) materiality
standard set forth above is met.

2.3.2.2.1 A change in Duke’s net revenues or EMC’s net costs that results from a
change in this Agreement that is permitted under Section 12.3, shall not
constitute a Material Adverse Ruling regardless of the impact of such change on
either Party’s net costs or net revenues.

2.3.2.2.2 In the event that either Party believes that a Material Adverse Ruling
has occurred, the Party affected by such Material Adverse Ruling shall provide
the other Party a good faith calculation together with information supporting
the calculation of the projected effect of the Material Adverse Ruling and
include such calculation and the cost information supporting the calculation
with the Notice of Termination. If the non-terminating Party notifies the other
Party, within twenty (20) Days following the date that such Notice of
Termination is given, of its good faith objection to the calculation or the cost
information supporting the calculation of the projected effect of the Material
Adverse Ruling, then the Parties shall, within thirty (30) Days following the
date that such Notice of Termination is given (the “Resolution Period”), attempt
to resolve their differences with respect to the calculation or the cost
information supporting such calculation. If, at the conclusion of the Resolution
Period, the Parties are not in agreement with respect to the calculation or cost
information supporting the calculation, then PriceWaterhouseCoopers, or such
other nationally recognized accounting firm that is not then the independent
auditor for either Party or any of its Affiliates or predecessors and is
selected by mutual agreement of the Parties (the “Neutral Auditors”), shall be
engaged

 

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within ten (10) Days after the expiration of the Resolution Period to review the
calculation and the cost information supporting the calculation and to make an
independent determination as to whether the Material Adverse Ruling meets the
materiality standard set forth in Section 2.3.2.2(c)(1) or (c)(2), as
applicable. If the Neutral Auditors require any additional information, records,
or internal analysis to make a determination as to whether the Material Adverse
Ruling meets the materiality standard set forth in Section 2.3.2.2(c)(1) or
(c)(2), as applicable, the Party in possession of such information, records or
internal analysis will provide it to the Neutral Auditors. Each Party agrees to
execute, if requested by the Neutral Auditors, a reasonable engagement letter,
including customary indemnities. All fees and expenses relating to the work to
be performed by the Neutral Auditors shall be borne one-half (1/2) by the
terminating Party and one-half (1/2) by the non-terminating Party. The Neutral
Auditors shall act as an arbitrator to determine, based upon its independent
review, whether the Material Adverse Ruling meets the materiality standard set
forth in Section 2.3.2.2(c)(1) or (c)(2), as applicable. The Neutral Auditors’
determination shall be made within thirty (30) Days of their selection, shall be
set forth in a written statement delivered to both Parties and shall be final,
binding and conclusive. If the Neutral Auditors’ determine the materiality
standard set forth in Section 2.3.2.2(c)(1) or (c)(2), as applicable, is not
met, the Notice of Termination shall be null and void. If the Neutral Auditors’
determine the materiality standard set forth in Section 2.3.2.2(c)(1) or (c)(2),
as applicable, is met, the Notice of Termination shall be effective in
accordance with its terms. The initiation of the dispute resolution process
described in this Section 2.3.2.2.2, shall not toll or otherwise delay running
of the twenty-four (24) Month time period set forth in the Notice of
Termination, unless the Neutral Auditors’ find that the materiality standard set
forth in Section 2.3.2.2(c)(1) or (c)(2), as applicable, is not met. The
procedure set forth in this Section 2.3.2.2.2 shall be the exclusive means for
the Parties to resolve any dispute as to whether a Material Adverse Ruling meets
the materiality standard set forth in Section 2.3.2.2(c)(1) or (c)(2). If a
Party gives a Notice of Termination based on its good faith contention of the
occurrence of a Material Adverse Ruling that meets the materiality standard set
forth in Section 2.3.2.2(c)(1) or (c)(2), as applicable, and the Neutral
Auditors subsequently determine that such materiality standard has not been met,
such Party shall not be in default under this Agreement solely because it gave
such Notice of Termination.

2.3.2.3 Early Termination for Failure of Condition Precedent. This Agreement may
be terminated for failure of a condition precedent in accordance with
Section 3.5.2.2 or Section 3.5.3.

2.3.2.4 Early Termination Due to Implementation of Retail Competition. Upon the
date of enactment of a Law providing for implementation of retail electric
service competition on a comprehensive basis in the State of North Carolina, the
Parties shall enter into negotiations with the goal of reaching agreement on
amendments to this Agreement to provide for the continuation of the purchase and
sale of electric capacity and energy and the provision of Scheduling Agent
Services provided for in this Agreement after the commencement of such retail
electric service competition. If the Parties are not able to reach agreement by
the latter to occur of (i) the date that is ninety (90) Days after the date of
enactment of such Law or (ii) the date that is twenty-four (24) Months prior to
the commencement of such retail electric service competition in the State of
North Carolina, then this Agreement shall terminate automatically on the date
such retail electric service competition commences in the State of North
Carolina without the need for either Party to give notice.

 

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2.3.2.5 Early Termination Due to Plant Calculation. In the event that the Annual
Percentage calculated in Attachment 7-9 is positive for two (2) consecutive
Years, and the absolute value of such percentage is greater than ten percent
(10%) then EMC may, within twenty (20) Days after the date in such second
(2nd) consecutive Year that Duke provides the calculation of the Annual
Percentage pursuant to Section 7.3.2.4, give Duke Notice of Termination to
terminate this Agreement effective on 23:59:59 of the last Day of Month that is
twenty-four (24) Months after the Month in which the Notice of Termination is
given. In the event that the Annual Percentage calculated in Attachment 7-9 is
negative for two (2) consecutive Years, and the absolute value of such
percentage is greater than ten percent (10%) for any two (2) consecutive Years,
then Duke may, within twenty (20) Days after the date in such second
(2nd) consecutive Year that Duke provides the calculation of the Annual
Percentage pursuant to Section 7.3.2.4, give EMC Notice of Termination to
terminate this Agreement effective on 23:59:59 of the last Day of Month that is
twenty-four (24) Months after the Month in which the Notice of Termination is
given. If a Party fails to give Notice of Termination within twenty (20) Days
after Duke provides the calculation of the Annual Percentage pursuant to
Section 7.3.2.4 for such second (2nd) consecutive Year, it shall have
permanently waived its right to terminate this Agreement under this
Section based on the Annual Percentage for such two (2) consecutive Years;
provided, that nothing in this Section 2.3.2.5 shall affect any Party’s
termination rights under Sections 2.3.2.1, 2.3.2.2, 2.3.2.3, 2.3.2.4 or 2.3.2.6.

2.3.2.6 Early Termination Due to Extended Force Majeure. If, as a result of an
event of Force Majeure, a Party is unable to meet a material obligation
hereunder for a period greater than ninety (90) Days, then the Non-Claiming
Party shall have the right to terminate this Agreement upon giving a Notice of
Termination within thirty (30) Days of the expiration of such ninety (90) Day
period; provided, however, if the Claiming Party has used and continues to use
all Commercially Reasonable Efforts to remedy, cure or mitigate the event of
Force Majeure, then the Non-Claiming Party’s right to give Notice of Termination
shall be suspended for so long as the Claiming Party continues to use
Commercially Reasonable Efforts to remedy, cure or mitigate the event of Force
Majeure.

2.3.3 Form of Notice of Termination. Notice of Termination made pursuant to
Sections 2.2 or 2.3 shall be given in accordance with Section 16.22 and shall
state (i) the date of termination being effectuated, and (ii) the provision of
this Agreement under which termination is being effectuated and the basis for
the termination. Except as otherwise provided in this Section 2.3.3, the Notice
of Termination is effective when it is deemed given in accordance with
Section 16.22. Once the Notice of Termination is given to a Party, it shall not
be deemed amended, modified, or otherwise revoked for any reason (other than a
determination by the Neutral Auditors pursuant to Section 2.3.2.2.2 that the
materiality standard is not met) unless such amendment, modification, or
revocation is mutually agreed to by both Parties in writing or unless the
Parties reach agreement in accordance with Section 2.3.2.2(a). Upon receipt of
the Notice of Termination, the non-terminating Party shall acknowledge receipt
in writing sent in accordance with Section 16.22 within five (5) Business Days
of the receipt of the Notice of Termination. Acknowledgment of a Notice of
Termination is a courtesy and shall not influence the effectiveness of the
termination. Failure to utilize a method specified in Section 16.22 shall not
influence the effectiveness of the termination if the Notice of Termination is
actually received by the General Manager of the non-terminating Party within
thirty (30) Days of the date

 

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of the Notice of Termination, in which case the Notice of Termination shall be
effective on the date that the Notice of Termination is actually received by the
General Manager of the non-terminating Party.

2.4 Absolute Nature of Termination. Both Parties hereby acknowledge, warrant,
and agree that TERMINATION OF THIS AGREEMENT FOR ANY REASON PROVIDED FOR AND
PERMITTED UNDER THIS AGREEMENT IS ABSOLUTE AND FOREVER EXTINGUISHES ANY AND ALL
OBLIGATIONS EXISTING UNDER THIS AGREEMENT FOR (A) DUKE TO PLAN OR PROCURE
RESOURCES TO SERVE EMC, OR TO PROVIDE ANY SERVICE OR PRODUCT TO EMC, (B) EMC TO
PURCHASE FROM AND PAY DUKE FOR ANY SERVICES OR PRODUCTS, (C) EMC TO PLAN OR
PROCURE RESOURCES TO SERVE DUKE, OR TO PROVIDE ANY SERVICE OR PRODUCT TO DUKE,
AND (D) DUKE TO PURCHASE FROM AND PAY EMC FOR ANY SERVICES OR PRODUCTS. Upon
termination of this Agreement in accordance with Section 2.2, 2.3, 3.5.2.2, or
3.5.3, each and every obligation of Duke to provide electric energy and capacity
and Scheduling Agent Services to EMC, and each and every right of EMC to
purchase electric energy and capacity and Scheduling Agent Services from Duke
shall cease as a matter of contract and neither Party shall claim or assert any
continuing right to continued performance, whether by “rollover,” as an
“evergreen” service, or in any other fashion based on this Agreement. By
entering into this Agreement, Duke does not commit, and shall not be deemed to
have committed, to plan its system to be able to provide any service to EMC
beyond the Term, and EMC agrees that it has no claim to any service beyond the
Term. EMC shall not at any time oppose any filing by Duke to cancel this
Agreement as a rate schedule under the Federal Power Act concurrently with, or
subsequently to, the termination of this Agreement as a contract in accordance
with Section 2.2, 2.3, 3.5.2.2, or 3.5.3. The Parties acknowledge, warrant, and
agree that it is the express intention of the Parties that no action by any
Governmental Authority may override the terms of this Section 2.4 of this
Agreement, and that should any Governmental Authority take any action purporting
to, or that might be claimed to, override the terms of this Section 2.4, either
directly or indirectly, EMC shall not make any claim or assert any right based
on or relying on such Governmental Authority action in any manner that conflicts
with or frustrates the terms of Section 2.4 of this Agreement.

Article 3

Conditions Precedent to the Commencement Date

3.1 Conditions Precedent to Duke’s Obligations. The obligation of Duke to
commence sales of electric energy and capacity and purchases of electric energy
and to provide Scheduling Agent Services under this Agreement is subject to the
satisfaction or waiver at least thirty (30) Days prior to the Commencement Date
(except that Duke may undertake certain preliminary activities in advance of the
Commencement Date) of the following conditions:

(a) The representations and warranties of EMC set forth in Sections 16.1.1 and
the covenants of EMC set forth in Section 16.1.2 shall be true and correct.

(b) FERC shall have issued an order accepting or approving this Agreement for
filing and permitting it to become effective as filed without modification,
suspension, investigation or other condition (including setting this Agreement,
or part thereof, for hearing) unacceptable to Duke.

 

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(c) Neither the NCUC nor the PSCSC shall have issued an Adverse Ruling. For
purposes of this Section 3.1(c) only, “Adverse Ruling” means an order or ruling
issued by the NCUC or PSCSC (i) which disapproves or rejects this Agreement, or
(ii) generally applicable to electric utilities subject to the jurisdiction of
the NCUC or PSCSC, as applicable, in which the NCUC or PSCSC disapproves or
rejects the use of system average cost accounting for wholesale contracts.

(d) SEPA shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent.

(e) NCEMC shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent.

(f) EMC shall have given notice to MSCG terminating the Scheduling Services
Agreement.

(g) The systems and operational equipment required for Duke to provide and
receive service under this Agreement have been installed or otherwise put in
place, tested satisfactorily, and are fully functional.

(h) Transmission Provider shall have received notice and acknowledged EMC’s
designation of Duke as EMC’s Scheduling Agent and Purchasing - Selling Entity.

(i) MSCG shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent and Purchasing - Selling Entity.

(j) The Parties shall have agreed upon procedures so that Duke may test whether
the EMC Demand Side Management Resource Programs meet the standards and
requirements specified for such programs under the rate schedule provisions or
riders for Duke’s Demand Side Resource Management Programs then-currently
approved and on file with the NCUC.

3.2 Conditions Precedent to EMC’s Obligations. The obligation of EMC to commence
purchases of electric energy and capacity and Scheduling Agent Services and
sales of electric energy under this Agreement is subject to the satisfaction or
waiver at least thirty (30) Days prior to the Commencement Date (except that EMC
may undertake certain preliminary activities in advance of the Commencement
Date) of the following conditions:

(a) The representations and warranties of Duke set forth in Section 16.1.1 and
the covenants of Duke set forth in Section 16.1.2 shall be true and correct.

(b) The RUS shall have approved this Agreement without modification, suspension,
investigation or other condition unacceptable to EMC.

 

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(c) SEPA shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent.

(d) NCEMC shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent.

(e) The Transmission Provider shall have qualified this Agreement as a Network
Resource.

(f) The systems and operational equipment required for EMC to provide and
receive service under this Agreement have been installed or otherwise put in
place, tested satisfactorily, and are fully functional.

(g) Transmission Provider shall have received and acknowledged EMC’s designation
of Duke as Scheduling Agent and Purchasing - Selling Entity.

(h) MSCG shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent and Purchasing - Selling Entity.

(i) The Parties shall have agreed upon procedures so that Duke may test whether
the EMC Demand Side Management Resource Programs meet the standards and
requirements specified for such programs under the rate schedule provisions or
riders for Duke’s Demand Side Resource Management Programs then-currently
approved and on file with the NCUC.

3.3 Notice of Satisfaction of Conditions Precedent. Each Party shall use
Commercially Reasonable Efforts to satisfy its conditions precedent (as
described in Section 3.1 for Duke and Section 3.2 for EMC) on or before July 31,
2006, or as soon as reasonably practicable thereafter. EMC shall provide Duke
with written notice promptly following the satisfaction or waiver of all of the
conditions precedent to EMC’s obligations as described in Section 3.2. Duke
shall provide EMC with written notice promptly following the satisfaction or
waiver of all of the conditions precedent to Duke’s obligations as described in
Section 3.1, other than the condition precedent specified in Section 3.1(f). In
order for the condition precedent specified in Section 3.1(f) to be satisfied,
subsequent to the later of the date of EMC’s receipt of Duke’s notice or the
date of Duke’s receipt of EMC’s notice, EMC shall, no later than thirty
(30) Days prior to the Commencement Date, give notice to MSCG that the
Scheduling Services Agreement shall be terminated on the Commencement Date. A
condition precedent shall not be deemed to have been satisfied or waived prior
to the date that the notice provided for in this Section 3.3 is received by the
other Party.

3.4 Waiver of Condition Precedent.

3.4.1 Waiver by Duke. In the event that any of the foregoing conditions to the
obligations of Duke contained in Section 3.1 shall fail to be satisfied, Duke
may elect, in its sole discretion, to consummate this Agreement despite such
failure, in which event Duke shall be deemed to have waived any claim for
damages, losses or other relief arising from or in connection with such failure,
unless otherwise agreed in writing and executed by the Parties. Duke may not
waive the condition of approvals set forth in Section 3.1(b).

 

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3.4.2 Waiver by EMC. In the event that any of the foregoing conditions to the
obligations of EMC contained in Section 3.2 shall fail to be satisfied, EMC may
elect, in its sole discretion, to consummate this Agreement despite such
failure, in which event EMC shall be deemed to have waived any claim for
damages, losses or other relief arising from or in connection with such failure,
unless otherwise agreed in writing and executed by the Parties. EMC may not
waive the condition of approvals set forth in Section 3.2(b).

3.4.3 Waiver by other Party. Any waiver by a Party of the other Party’s
conditions precedent shall be in writing, and shall identify the condition
precedent that such Party is waiving.

3.5 Commencement of Service; Failure of Condition Precedent.

3.5.1 Commencement of Service.

3.5.1.1 If all of the conditions precedent specified in Sections 3.1 and 3.2
have been satisfied or waived on or before July 31, 2006, then the Commencement
Date shall occur on September 1, 2006, without the need for either Party to
provide notice.

3.5.1.2 If all of the conditions precedent specified in Sections 3.1 and 3.2 are
satisfied or waived during the period between August 1, 2006, and November 30,
2006, and service under this Agreement has not commenced pursuant to
Section 3.5.2.1, then service under this Agreement shall commence upon the next
first Day of a Month which is at least thirty (30) Days after all such
conditions have been satisfied.

3.5.2 EMC Options.

3.5.2.1 If all of the conditions precedent specified in Sections 3.1 and 3.2,
with the exception of the conditions precedent specified in Section 3.1(b)
and/or Section 3.2(b), have been satisfied or waived, then EMC may designate
September 1, 2006, October 1, 2006, or November 1, 2006 as the Commencement Date
by giving at least thirty (30) Days’ prior written notice to Duke.

3.5.2.2 If service has commenced pursuant to Section 3.5.2.1 prior to
November 30, 2006, and the condition precedent specified in Section 3.1(b)
and/or Section 3.2(b) has not been satisfied on or before November 30, 2006,
then except as provided in Section 3.5.2.3 this Agreement will terminate
automatically on December 31, 2006, without the need for either Party to give
Notice of Termination and neither Duke nor EMC shall have any obligation, duty
or liability to the other arising hereunder under any claim or theory
whatsoever.

3.5.2.3 If service has commenced pursuant to Section 3.5.2.1 prior to
November 30, 2006, and the condition precedent specified in Section 3.1(b)
and/or Section 3.2(b) has not been satisfied on or before November 30, 2006,
then EMC shall have the option of continuing to receive service hereunder beyond
December 31, 2006 until either August 31, 2007, February 28, 2008, or August 31,
2008. EMC may exercise such option by giving notice to Duke of its exercise of
such option no later than December 1, 2006. Such notice shall be referred to
herein as the “Option Notice”. EMC’s Option Notice shall specify

 

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whether EMC elects to receive service hereunder until August 31,
2007, February 28, 2008, or August 31, 2008. The period of such service that EMC
elects pursuant to such option (whether January 1, 2007—August 31,
2007; January 1, 2007 – February 28, 2008; or January 1, 2007—August 31, 2008)
shall be referred to herein as the “Option Period”. In the event that EMC
exercises its option under this Section 3.5.2.3, then during the Option Period
EMC shall be subject to the charges and credits set forth in Sections 3.5.2.3.1,
3.5.2.3.2, 3.5.2.3.3, 3.5.2.3.4, and 3.5.2.3.5, as applicable, and in
Section 7.1 in lieu of the charges set forth in Section 7.2; provided, that
during the Option Period the demand charges set forth in Section 7.1.4 shall be
modified as set forth in Sections 3.5.2.3.1, 3.5.2.3.2, or 3.5.2.3.3, as
applicable, depending upon the Option Period selected by EMC. In the event that
EMC exercises its option under this Section 3.5.2.3, then notwithstanding the
provisions of Section 3.5.2.2, this Agreement will terminate automatically on
the last day of the Option Period, without the need for either Party to give
Notice of Termination and neither Duke nor EMC shall have any obligation, duty
or liability to the other arising hereunder under any claim or theory whatsoever
for service beyond such date. EMC’s exercise of such option shall not serve to
modify any other provision of the Agreement.

3.5.2.3.1 In the event that EMC exercises its option pursuant to
Section 3.5.2.3, and the Option Period is January 1, 2007 – August 31, 2007, EMC
shall pay to Duke, in addition to the other charges set forth in this Agreement,
the Base Annual Capacity Charge set forth in Section 3.5.2.3.4 and the Excess
Annual Capacity Charge set forth in Section 3.5.2.3.5. In such event, the Annual
Capacity Price under Section 3.5.2.3.4, Annual Capacity Quantity under
Section 3.5.2.3.4, and Excess Annual Capacity Price under Section 3.5.2.3.5
during the Option Period shall be as follows:

 

Annual Capacity Price

   $ 38.00/kW-Year

Annual Capacity Quantity

     83,000 kW

Excess Annual Capacity Price

   $ 45.60/kW-Year

In addition, the Monthly Demand Rate under Section 7.1.4 during the Option
Period shall be $5.45/kW-Month, rather than the rate specified in Section 7.1.4,
and the Duke Monthly Energy Charge and the EMC Monthly Energy Credit (and other
charges and credits under Sections 7.1.5.11, 7.1.5.12, and 7.1.5.13) during the
Option Period shall be as set forth in Section 7.1.5.

3.5.2.3.2 In the event that EMC exercises its option pursuant to
Section 3.5.2.3, and the Option Period is January 1, 2007 – February 28, 2008,
EMC shall pay to Duke, in addition to the other charges set forth in this
Agreement, the Base Annual Capacity Charge set forth in Section 3.5.2.3.4 and
the Excess Annual Capacity Charge set forth in Section 3.5.2.3.5. In such event,
the Annual Capacity Price under Section 3.5.2.3.4, Annual Capacity Quantity
under Section 3.5.2.3.4, and Excess Annual Capacity Price under
Section 3.5.2.3.5 during the Option Period shall be as follows:

 

January 1, 2007 - December 31, 2007:

  

Annual Capacity Price

   $ 38.00/kW-Year

Annual Capacity Quantity

     83,000 kW

Excess Annual Capacity Price

   $ 45.60/kW-Year

January 1, 2008 – February 28, 2008:

  

Annual Capacity Price

     0

Annual Capacity Quantity

     0

Excess Annual Capacity Price

     0

 

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In addition, the Monthly Demand Rate under Section 7.1.4 during the Option
Period shall be $5.45/kW-Month during 2007 and $5.75/kW-Month during 2008,
rather than the rate specified in Section 7.1.4, and the Duke Monthly Energy
Charge and the EMC Monthly Energy Credit (and other charges and credits under
Sections 7.1.5.11, 7.1.5.12, and 7.1.5.13) during the Option Period shall be as
set forth in Section 7.1.5.

3.5.2.3.3 In the event that EMC exercises its option pursuant to
Section 3.5.2.3, and the Option Period is January 1, 2007 – August 31, 2008, EMC
shall pay to Duke, in addition to the other charges set forth in this Agreement,
the Base Annual Capacity Charge set forth in Section 3.5.2.3.4 and the Excess
Annual Capacity Charge set forth in Section 3.5.2.3.5. In such event, the Annual
Capacity Price under Section 3.5.2.3.4, Annual Capacity Quantity under
Section 3.5.2.3.4, and Excess Annual Capacity Price under 3.5.2.3.5 during the
Option Period shall be as follows:

 

January 1, 2007 - December 31, 2007:

  

Annual Capacity Price

   $38.00/kW-Year

Annual Capacity Quantity

   83,000 kW

Excess Annual Capacity Price

   $45.60/kW-Year

January 1, 2008 – August 31, 2008:

  

Annual Capacity Price

   $40.00/kW-Year

Annual Capacity Quantity

   86,000 kW

Excess Annual Capacity Price

   $48.00/kW-Year

In addition, the Monthly Demand Rate under Section 7.1.4 during the Option
Period shall be $5.45/kW-Month during 2007 and $5.75/kW-Month during 2008,
rather than the rate specified in Section 7.1.4, and the Duke Monthly Energy
Charge and the EMC Monthly Energy Credit (and other charges and credits under
Sections 7.1.5.11, 7.1.5.12, and 7.1.5.13) during the Option Period shall be as
set forth in Section 7.1.5.

 

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3.5.2.3.4 Base Annual Capacity Charge. The Base Annual Capacity Charge for a
Year shall be equal to the product of (i) the Annual Capacity Price for the Year
($/kW-Year) and (ii) the Annual Capacity Quantity for the Year (kW). The Base
Annual Capacity Charge for the Option Period shall be billed in accordance with
Article 13 in the July 2007 statement and the July 2008 statement, if
applicable.

3.5.2.3.5 Excess Annual Capacity Charge. The Excess Annual Capacity Charge for a
Year shall be equal to the product of (i) the Excess Annual Capacity Price for
the Year ($/kW-Year) and (ii) the Excess Annual Amount for the Year (kW). The
Excess Annual Amount for a Year shall be equal to the product of (i) the EMC
Excess Annual Capacity Quantity for the Year divided by the EMC Group Combined
Excess Annual Capacity Quantity for the Year and (ii) the EMC Group Excess
Annual Capacity Quantity for the Year. The Excess Annual Capacity Charge for the
Option Period shall be billed in accordance with Article 13 in the September
2007 and the September 2008 statement, if applicable, based on the actual Duke
billing data during July and August 2007 and July and August 2008, respectively.
A sample calculation is provided in Attachment 3-1.

3.5.2.3.5.1 EMC Excess Annual Capacity Quantity. The EMC Excess Annual Capacity
Quantity for a Year shall be equal to the EMC Coincident Peak Demand for the
Year minus EMC’s Base Obligation for the Hour in such Year in which the EMC
Coincident Peak Demand occurs, minus the Annual Capacity Quantity for the Year.
In no event shall the EMC Excess Annual Capacity Quantity be less than zero. The
EMC Coincident Peak Demand for a Year shall be equal to the EMC Hourly Demand
that is coincident with the maximum integrated sixty (60) minute Duke Schedule 1
Demands during July and August of the Year. The EMC Hourly Demand for an Hour
shall be equal to the integrated sixty (60) minute demand of EMC’s Native Load
during the Hour.

3.5.2.3.5.2. EMC Group Combined Excess Annual Capacity Quantity. The EMC Group
Combined Excess Annual Capacity Quantity for a Year shall be equal to the sum of
(i) the EMC Excess Annual Capacity Quantity for the Year as determined in
Section 3.5.2.3.5.1 of this Agreement, (ii) the EMC Excess Annual Capacity
Quantity for the Year as determined in Section 3.5.2.3.5.1 of the Duke-Blue
Ridge Agreement, and (iii) the EMC Excess Annual Capacity Quantity for the Year
as determined in Section 3.5.2.3.5.1 of the Duke-Piedmont Agreement.

3.5.2.3.5.3 EMC Group Excess Annual Capacity Quantity. The EMC Group Excess
Annual Capacity Quantity for a Year shall be equal to the EMC Group Coincident
Peak Demand for the Year, minus the EMC Group’s Base Obligation for the Hour in
such Year in which the EMC Group Coincident Peak Demand occurs, minus the EMC
Group Annual Capacity Quantity; but in no event shall the EMC Group Excess
Annual Capacity Quantity be less than zero. The EMC Group Coincident Peak Demand
shall for a Year be equal to the sum of (i) the EMC Coincident Peak Demand for
the Year as determined in Section 3.5.2.3.5.1 of this Agreement, (ii) the EMC
Coincident Peak Demand for the Year as determined in Section 3.5.2.3.5.1 of the
Duke-Blue Ridge Agreement, and (iii) the EMC Coincident Peak Demand for the Year
as determined in Section 3.5.2.3.5.1 of the Duke-Piedmont Agreement.

 

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3.5.2.4 Any Option Notice given by EMC pursuant to Section 3.5.2.3 shall be
given in accordance with Section 16.22 and shall state the Option Period
elected. The Option Notice is effective when it is deemed given in accordance
with Section 16.22. Once the Option Notice is given to Duke, it shall not be
deemed amended, modified, or otherwise revoked for any reason unless such
amendment, modification, or revocation is mutually agreed to by both Parties in
writing.

3.5.3 Termination for Failure of Condition Precedent.

3.5.3.1 Subject to the options granted to EMC under Section 3.5.2.1 and 3.5.2.3,
in the event that any of the conditions precedent set out in Sections 3.1(a)
through (j) and Sections 3.2(a) through (i) are not satisfied or waived on or
before November 30, 2006, then this Agreement will terminate automatically on
December 31, 2006, without the need for either Party to give Notice of
Termination and neither Duke nor EMC shall have any obligation, duty or
liability to the other arising hereunder under any claim or theory whatsoever.

Article 4

Sale of Electric Capacity and Energy

4.1 Classification of Services Provided. During the period beginning on the
Commencement Date, and continuing through December 31, 2010, or any part thereof
in which this Agreement is in effect, Duke shall provide to EMC “FFR
Supplemental Service”, as described in Section 4.2. Beginning January 1, 2011,
throughout the remainder of the Term of this Agreement, Duke shall provide to
EMC “Partial Requirements Service”, as described in Section 4.3.

4.2 FFR Supplemental Service.

4.2.1 Character of FFR Supplemental Service. For each Hour during the period
beginning on the Commencement Date, and continuing through December 31, 2010, or
any part thereof in which this Agreement is in effect, Duke shall sell and
deliver, and EMC shall purchase and receive, all of the electric capacity and
energy that EMC requires to serve EMC’s Native Load in excess of EMC’s Base
Obligation for such Hour. For example, if EMC’s Native Load during an Hour is
800 MWs, and EMC’s Base Obligation for such Hour is 600 MWs, Duke shall supply
and deliver, and EMC shall purchase and receive, 200 MWs of FFR Supplemental
Service for such Hour. Duke shall supply and deliver FFR Supplemental Service in
a manner that is as firm as, and otherwise comparable with, the manner in which
Duke supplies Duke’s Native Load. Duke shall be responsible for maintaining the
generation reserves needed to meet its FFR Supplemental Service obligation.
Notwithstanding anything in this Agreement to the contrary, Duke shall have no
obligation to sell and deliver any electric capacity or energy to EMC that is
not required to serve EMC’s Native Load.

4.2.2 Amount of EMC’s Base Obligation. EMC’s Base Obligation for each Hour
beginning on the Commencement Date, and continuing through December 31, 2010, or
any part thereof in which this Agreement is in effect, shall be as set forth in
Attachment 4-1. Notwithstanding the preceding sentence, EMC’s Base Obligation
shall be subject to modification (a) during Light Load Periods in accordance
with the provisions of Attachment 4-2 or (b) in accordance with the provisions
of Section 5.1.4 and 5.1.5. The amounts set forth on Attachment 4-1 reflect MWs
delivered at a Delivery Point.

 

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4.2.3 Scheduling To Meet EMC’s Base Obligation. In order to meet EMC’s Base
Obligation, (a) MSCG shall be responsible for scheduling to the Transmission
Provider electric energy under the PPA to serve EMC’s Native Load and (b) Duke,
acting as Scheduling Agent, shall be responsible for scheduling to the
Transmission Provider, in accordance with the provisions of Article 8, electric
energy to serve EMC’s Native Load from EMC’s entitlements to the resources
described in Section 5.1.3, 5.1.4 or 5.1.5. The total amount of electric energy
so scheduled to the Transmission Provider in any Hour to serve EMC’s Native Load
beginning on the Commencement Date, and continuing through December 31, 2010, or
any part thereof in which this Agreement is in effect, shall be the EMC
Scheduled Amount; provided that the EMC Scheduled Amount shall not exceed EMC’s
Base Obligation for any such Hour.

4.2.4 Scheduling Shortfall. For each Hour beginning on the Commencement Date,
and continuing through December 31, 2010, or any portion thereof in which this
Agreement is in effect, if, for any reason, including a Force Majeure as that
term is defined herein or a “force majeure”, “uncontrollable force” or a similar
term defined in a third-party agreement, but not including Duke’s unexcused
failure to comply with the provisions of Article 8, the EMC Scheduled Amount is
less than EMC’s Base Obligation for any Hour, there shall be a “Scheduling
Shortfall” in the amount equal to the difference between EMC’s Base Obligation
and the EMC Scheduled Amount in such Hour (“Scheduling Shortfall Amount”). For
any Hour that Duke receives information or a notice pursuant to Section 8.4.8
that there will be or has been a Scheduling Shortfall, Duke shall use
Commercially Reasonable Efforts to procure and supply electric energy in a
quantity sufficient to supply the Scheduling Shortfall Amount for such Hour
(“Replacement Energy”). In the event that, through the exercise of Commercially
Reasonable Efforts, Duke procures Replacement Energy from a third party for
resale to EMC, EMC shall pay Duke for the total cost incurred by Duke to
purchase and deliver the Replacement Energy. Duke’s curtailment of a Non-Firm
Sale shall constitute a procurement of Replacement Energy from a third party and
the total cost incurred by Duke shall be (i) the foregone sales price for the
Non-Firm Sale curtailed and (ii) if applicable, any charges imposed for changes
to schedules for the sale of electric energy. In the event that Duke supplies
Replacement Energy from its own resources, EMC shall pay Duke for such
Replacement Energy an amount equal to one hundred ten percent (110%) of Duke’s
System Incremental Cost in supplying such Replacement Energy. The total charges
for Replacement Energy for a Month, as determined by this Section 4.2.4, shall
constitute the Monthly Replacement Energy Charge.

4.2.4.1 It is expressly understood that Section 4.2.4 shall not be construed or
interpreted to (i) require Duke to curtail any Firm Sales in order to supply
Replacement Energy to EMC, (ii) to curtail any Non-Firm Sales except as set
forth in Section 4.2.6 in order to supply such Replacement Energy to EMC,
(iii) impose upon Duke any responsibility for providing Replacement Energy for a
Scheduling Shortfall that occurs after the Transmission Provider’s deadline for
scheduling transmission service required for the delivery of such Replacement
Energy, or (iv) affect in any way EMC’s rights and obligations under its Network
Integration Transmission Service Agreement.

 

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4.2.4.2 In the event that there is or is expected to be a Scheduling Shortfall
in connection with (a) EMC or its Scheduling Agent having received notice (and
in the event EMC receives notice providing Duke with evidence of such notice)
of, or (b) pursuant to Section 8.4.8 Scheduling Agent having received notice of
either (i) the occurrence of a “force majeure” event under the PPA, as defined
in Section 4.2.4.3, or (ii) the temporary impairment of generating resources
underlying the WPSA, the SEPA Contract, or other resources to which EMC may have
an entitlement pursuant to Section 5.1.3, 5.1.4 or 5.1.5, such that all or a
portion of EMC’s entitlements to electric energy under such agreements are or
will be temporarily unavailable to EMC, then EMC may request Duke to sell
electric capacity and energy to EMC for the expected duration of such Scheduling
Shortfall. In the event that EMC makes such a request, Duke shall exercise
Commercially Reasonable Efforts to offer to supply electric capacity and energy
to EMC under rates, terms, and conditions that Duke determines to be
commercially reasonable. If the Parties reach agreement on such a sale, then
Duke shall sell and deliver and EMC shall purchase and receive the electric
energy and such electric energy shall be included in EMC Scheduled Amount.

4.2.4.3 For purposes of Section 4.2.4.2, the term “force majeure” means an event
or circumstance that: (i) prevents the party claiming to be affected by it from
performing its obligations in whole or in part; (ii) is not within the
reasonable control of the claiming party, or the result of the negligence of the
claiming party, and (iii) by the exercise of due diligence, the claiming party
is unable to overcome in a commercially reasonable manner, and, without limiting
the scope of the definition, includes acts of God, or the public enemy, or
insurrection, riot, acts of terrorism, civil disturbance or disorder, strikes,
fire, earthquakes, floods, storms or other natural disasters, or actions or
restraints by court order or governmental authority or arbitration award (so
long as the claiming party has not sought or has opposed, to the extent
reasonable, such actions or restraints). It is expressly acknowledged that
transmission service interruptions or curtailments imposed by a transmission
provider in response to transmission capacity or availability shortages shall
not be “force majeure” events or circumstances for purposes of this
Section 4.2.4.3.

4.2.5 EMC PPA Obligation. EMC shall retain all of its rights and obligations
under the PPA, including the obligation to pay all costs incurred under the PPA.

4.2.6 EMC Obligation to Curtail Load. During any Hour in which there is a
Scheduling Shortfall, and either (i) Duke does not replace such electric energy
in accordance with Section 4.2.4 or (ii) EMC has not made, or does not have in
place, arrangements to replace such electric energy, EMC shall curtail an amount
of EMC’s Native Load equal to the Scheduling Shortfall Amount; provided,
however, Duke shall exercise Commercially Reasonable Efforts within the time
constraints that exist to first call upon any available EMC Demand Side
Management Resource Program that would not otherwise be called upon absent the
Scheduling Shortfall and then if necessary curtail Non-Firm Sales to the extent
of the Scheduling Shortfall before requiring EMC to curtail EMC’s Native Load
pursuant to this Section 4.2.6. Any such EMC Native Load that has been curtailed
shall be restored when the Scheduling Shortfall is no longer occurring or when
the Scheduling Shortfall has been replaced either by electric energy supplied
(a) by Duke in accordance with Section 4.2.4 or this Section 4.2.6 or (b) under
arrangements made by EMC with third parties.

 

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4.3 Partial Requirements Service.

4.3.1 Character of Partial Requirements Service. For each Hour during the period
beginning on January 1, 2011, and continuing through the termination of this
Agreement, Duke shall sell and deliver, and EMC shall purchase and receive, all
of the electric capacity and energy that EMC requires to serve EMC’s Native Load
in excess of the EMC Contract Resources. Duke shall be responsible for
maintaining the generation reserves necessary to meet this obligation. Duke
shall supply Partial Requirements Service in a manner that is as firm as, and
otherwise comparable with, the manner in which Duke supplies Duke’s Native Load.
Notwithstanding anything in this Agreement to the contrary, Duke shall have no
obligation to sell and deliver any electric capacity or energy to EMC that is
not required to serve EMC’s Native Load.

4.3.2 Scheduling of EMC Contract Resources To Serve EMC Native Load. For each
Hour beginning on January 1, 2011, and continuing through the Term of this
Agreement, EMC’s contractual entitlement to electric energy from the Dispatched
Combined Cycle Resources and from the Baseload Resources shall be scheduled in
accordance with the provisions of Sections 4.3.3 and 4.3.4, respectively.

4.3.3 Scheduling of the Combined Cycle Resources. Duke may schedule, in
accordance with Attachment 4-3 and Article 8, each of the Combined Cycle
Resources pursuant to Duke’s economic dispatch as necessary to serve Duke’s
total electric energy obligations. Duke shall make no adverse distinction
against the Combined Cycle Resources in determining the dispatch order of Duke’s
Generation System and the Combined Cycle Resources. The Combined Cycle Resources
that Duke schedules pursuant to economic dispatch shall be referred to as the
“Dispatched Combined Cycle Resources”. Except as provided in Section 4.3.3.1 and
Section 4.3.3.2, EMC shall be solely responsible for all costs associated with
the Combined Cycle Resources.

4.3.3.1 Duke shall not be obligated to pay for any costs that EMC incurs as a
result of Duke’s dispatch of the Combined Cycle Resources to the extent that
Duke’s dispatch of such Combined Cycle Resources is for the purpose of serving
Duke’s Native Load and, during any Year, Duke’s dispatch of a Combined Cycle
Resource for that purpose does not exceed an Annual Capacity Factor of twenty
percent (20%). In the event and at such time during a Year that Duke’s dispatch
of a Combined Cycle Resource to serve Duke’s Native Load exceeds an Annual
Capacity Factor of twenty percent (20%), Duke shall pay EMC, in the manner and
time provided for in Article 13, the additional Energy Cost that EMC incurs as a
result of Duke’s dispatch of such Combined Cycle Resource for the remainder of
the Year. For example, if a Dispatched Combined Cycle Resource has a generating
capacity of one hundred (100) MWs during a Year and, as of 11:59:59 p.m. on
November 30 of such Year, Duke has dispatched such resource for 175,200 MWhs for
the purpose of serving Duke’s Native Load, Duke shall reimburse EMC for the
Energy Costs that EMC incurs in December of such Year as a result of Duke’s
dispatch of such Dispatched Combined Cycle Resource. For the purpose of this
Section 4.3.3.1, “Annual Capacity Factor” means the total amount of electric
energy generated by a Dispatched Combined Cycle Resource for the purpose of
serving Duke’s Native Load during a Year divided by the product of (a) the total
generating capacity of such Dispatched Combined Cycle Resource and (b) 8,784
(during a leap year) or 8,760 (during a Year other than a leap year), multiplied
by one hundred percent (100%).

 

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4.3.3.2 In the event that Duke’s dispatch of one or more of the Combined Cycle
Resources is for any purpose other than to serve Duke’s Native Load, Duke shall
pay EMC, in the manner and time provided for in Article 13, the additional
Energy Cost that EMC incurs as a result of Duke’s dispatch of such Combined
Cycle Resource(s).

4.3.3.3 For purposes of Sections 4.3.3.1 and 4.3.3.2, “Energy Cost” means, with
respect to any Dispatched Combined Cycle Resource, all variable costs incurred
by EMC that are associated with the production of electric energy under the
WPSA, including the cost of fuel, start charges, and any other variable charges
incurred by EMC under the WPSA in connection with the electric energy dispatched
by Duke from such Combined Cycle Resource regardless of NCEMC’s actual
generating cost or NCEMC’s contractual source of the electric energy.

4.3.4 Scheduling of Baseload Resources. Duke shall schedule, in accordance with
Article 8, all of the Baseload Resources to the full extent that EMC’s
entitlement to such resources are available to EMC and such electric energy
shall be used to serve EMC’s Native Load. EMC shall be solely responsible for
all costs associated with the Baseload Resources. The Baseload Resources that
Duke schedules pursuant to this Section 4.3.4 shall be referred to as
“Dispatched Baseload Resources”.

4.4 Excepted Load. Notwithstanding anything to the contrary herein, Duke shall
have no obligation to supply electric capacity or energy required by EMC to
serve Excepted Load. Excepted Load shall consist of EMC load that is either
(a) Non-Conforming Load or (b) Non-Duke Control Area Load. Non-Conforming Load
shall consist of (i) EMC load resulting from the merger of EMC with another
electric membership corporation or other entity (except to the extent such load
was, at the time of the merger, already being served by Duke under an agreement
substantially similar to this Agreement), and (ii) EMC wholesale load.
Non-Conforming Load shall also consist of discrete EMC load (a) to which
electric service from EMC shall have commenced after the Effective Date,
(b) that has a projected peak demand in excess of twenty-five (25) MW for the
Year in which electric service from the EMC commences, and (c) which is
projected to change within a one-minute period by a significant quantity on a
recurring basis due to the nature of the retail customer’s operations (e.g.,
without limitation, an arc furnace).

4.5 Good Title. Electric energy that is delivered by Duke to EMC shall be free
and clear of all liens, Claims, and encumbrances at the Delivery Points, where
title to electric energy provided by Duke hereunder shall transfer to EMC.
Electric energy that is delivered by EMC to Duke shall be free and clear of all
liens, Claims, and encumbrances at the point where title to the electric energy
is transferred to Duke.

4.6 Power Quality. All electric energy provided hereunder at the point of
delivery shall be three (3) phase, sixty (60) hertz, and at system nominal
voltages.

 

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Article 5

EMC Resources

5.1 EMC Contract Resources (Commencement Date - December 31, 2010).

5.1.1 Identification of Resources. Except as provided in Section 5.4.1, EMC’s
Contract Resources during the period commencing on the Commencement Date, and
continuing through December 31, 2010, or any part thereof in which this
Agreement is in effect, shall consist of EMC’s entitlement to electric capacity
and energy under the PPA and such additional generation or purchased power
resources or entitlements as EMC may acquire pursuant to Sections 5.1.3, 5.1.4
and 5.1.5. The FFR Resource is listed in Attachment 4-1. Except as provided in
this Section 5.1.1, EMC shall not, without first obtaining Duke’s prior written
consent, enter into any other contracts for, or acquire any ownership interest
in or contractual entitlement to, any additional electric generating resources
or electric capacity or energy under which electric capacity and energy would be
used to serve EMC’s Native Load during the Term.

5.1.2 Changes to FFR Resources. During the period commencing on the Commencement
Date, and continuing through December 31, 2010, or any part thereof in which
this Agreement is in effect, EMC shall not: (a) take any action that would
materially affect the quantity or quality of MSCG’s service obligations under
the PPA without first obtaining Duke’s prior written consent, or (b) agree to
any modification to provisions of the PPA, the WPSA, or the SEPA Contract that
would increase or decrease EMC’s entitlement to electric capacity or energy
under such agreements and for which EMC’s consent is required (except as
provided in Section 5.1.4) without first obtaining Duke’s consent to such
modification.

5.1.3 Resource Impairment. In the event that all or a portion of the FFR
Resource, or any other EMC Contract Resource, is terminated or becomes
permanently impaired, EMC shall acquire, at EMC’s expense, a substitute resource
(backed by reserves in an amount equal to that required under Duke’s Generation
Planning Practices) that is of substantially equivalent size and comparable
reliability to the EMC Contract Resource, or portion thereof, that such
substitute is replacing.

5.1.4 New Catawba Resource. In the event that NCEMC acquires all or part of
Saluda River Electric Cooperative’s existing ownership interest in the Catawba
Nuclear Station, and sells, allocates or transfers a percentage of that
entitlement with such entitlement being made available throughout the Year to
EMC (through a modification of the WPSA or pursuant to a new contract), EMC’s
Base Obligation shall be increased by an amount equal to the amount of the
entitlement so acquired by EMC. Upon Duke’s request, EMC shall provide evidence
reasonably satisfactory to Duke demonstrating that such entitlement in the
Catawba Nuclear Station is backed by sufficient and reliable electric system
generating reserves. Duke shall limit such requests to one (1) request per Year;
provided, that if Duke reasonably believes that the sufficiency or reliability
of the electric system generating reserves backing EMC’s entitlement in the
Catawba Nuclear Station may have changed since Duke’s last such request, this
limitation shall not apply. In the event that EMC fails to demonstrate that its
entitlement in the Catawba Nuclear Station is backed by sufficient and reliable
generating reserves, Duke shall supply, and EMC shall purchase, such reserves in
an amount equal to that required under Duke’s Generation

 

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Planning Practices. The Monthly charge for such reserves shall be equal to the
product of the amount of reserves (as determined under the prior sentence)
supplied by Duke to EMC at the then-applicable Monthly Demand Charge. Duke’s
provision and EMC’s purchase of such reserves shall not affect the determination
of EMC’s Base Obligation. This Monthly charge shall be billed by Duke in
accordance with the provisions of Article 13.

5.1.4.1 In the event that NCEMC purchases electric capacity and energy from Duke
in lieu of NCEMC’s acquisition of all or a part of Saluda River Electric
Cooperative’s existing ownership interest in the Catawba Nuclear Station as
provided in Section 5.1.4, and NCEMC sells, allocates or transfers a portion of
such electric capacity and energy to EMC (through a modification of the WPSA or
pursuant to a new contract), EMC’s Base Obligation shall be increased by an
amount equal to the amount of the electric capacity and energy so acquired by
EMC.

5.1.5 Non-Consent Modification of EMC’s Contract Resources. In the event that
EMC’s entitlements to electric capacity and energy are reduced in accordance
with Section 2.9(b) or Section 2.9(c) of the WPSA or Sections 2.2, 2.3 and 2.4
of the SEPA Contract, the amount of the EMC’s Base Obligation shall not be
affected and the provisions of Section 4.2.4.2 shall apply, except that if the
Parties are unable to reach agreement as to the rates, terms and conditions
under which Duke would sell electric capacity and energy to EMC, the provisions
of Section 5.1.3 shall apply. EMC shall provide written notice to Duke as soon
as reasonably practicable after EMC becomes aware of any modificaton to EMC’s
entitlement to electric capacity and energy under the WPSA or SEPA Contract
pursuant to this Section 5.1.5. In the event that EMC’s entitlements to electric
capacity and energy are increased in accordance with Section 2.9(b) or
Section 2.9(c) of the WPSA or Sections 2.2, 2.3, 2.4 and 2.8 of the SEPA
Contract, then, prior to the effective date of such increase, EMC may elect
either to (a) increase EMC’s Base Obligation by the same amount and to the same
extent as EMC’s entitlements to electric capacity and energy are increased, or
(b) make arrangements for the sale of EMC’s entitlements to such electric
capacity and energy to a third party or to Duke. If EMC fails to complete the
arrangements described in (b) of the preceding sentence by the effective date of
the increase in entitlements, then, as of the effective date of the increase in
entitlements, the EMC’s Base Obligation automatically will be increased as
described in (a) of the preceding sentence.

5.2 EMC Contract Resources (January 1, 2011 - Termination of Agreement).

5.2.1 Identification of Contract Resources. Except as provided in Section 5.4.1,
EMC’s Contract Resources during the period January 1, 2011, through the
termination of this Agreement shall consist of EMC’s entitlements to electric
capacity and energy under the contracts listed in Attachment 4-3 and such
additional generation or purchased power resources or entitlements as EMC may
acquire pursuant to Sections 5.2.3, 5.2.4, and 5.2.5. EMC’s entitlements under
the contracts that are listed in Attachment 4-3 shall be referred to as the
Partial Requirements Resources. Partial Requirements Resources consist of two
(2) categories of entitlements: Baseload Resources and Combined Cycle Resources.
The amount and the material cost and operational terms and conditions of the
Baseload Resources and Combined Cycle Resources shall be as set forth in
Attachment 4-3, subject to modification in accordance with Sections 5.2.3 and
5.2.4. Except as provided in this Section 5.2.1, EMC shall not, without first
obtaining Duke’s prior written consent, enter into any other contracts for, or
acquire any ownership interest

 

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in or contractual entitlement to, any additional electric generating resources
or electric capacity or energy under which electric capacity and energy would be
used to serve EMC’s Native Load during the Term.

5.2.1.1 Extension of WPSA and SEPA Contract. Consistent with the provisions of
Section 5.2.2, EMC shall have the right, without the prior consent of Duke, to
extend the term of the WPSA or the SEPA Contract under substantially the same
terms and conditions as exist at the time that EMC seeks to extend the term of
the WPSA or the SEPA Contract. If EMC extends the term of the WPSA or the SEPA
Contract in accordance with this Section 5.2.1.1, the EMC Contract Resources
listed in Attachment 4-3 shall be deemed to be changed accordingly.

5.2.2 Changes To Partial Requirements Resources. Commencing January 1, 2011,
through the termination of this Agreement, EMC shall not (a) take any action
that would materially affect the quantity or quality of EMC’s entitlement to
electric capacity and energy from the Partial Requirements Resources without
first obtaining Duke’s prior written consent, or (b) agree to any modification
to provisions of the WPSA or the SEPA Contract that would increase or decrease
EMC’s entitlement to electric capacity or energy under such agreements and for
which EMC’s consent is required (except as provided in Section 5.2.4) without
first obtaining Duke’s consent to such modification.

5.2.2.1 Modifications Effective After Termination. Notwithstanding the
provisions of Section 5.2.2, EMC shall be permitted to agree to any resource
modification under the WPSA or the SEPA Contract without obtaining Duke’s
consent to the extent that such resource modification will become effective
after the Term; provided, that if such resource modification will become
effective prior to the end of the Term, EMC’s Partial Requirements Resources and
Duke’s obligation to provide Partial Requirements Service shall not be modified
prior to the date that this Agreement is terminated unless Duke consents to such
modification.

5.2.2.2 Sufficiency of Reserves. Upon Duke’s request, EMC shall provide evidence
reasonably satisfactory to Duke demonstrating that each of EMC’s Partial
Requirements Resources is backed by sufficient and reliable electric system
generating reserves. Duke shall limit such requests to one (1) request per Year
with respect to any Partial Requirements Resource; provided, that if Duke
reasonably believes that the sufficiency or reliability of the electric system
reserves backing any Partial Requirements Resource may have changed since Duke’s
last such request, this limitation shall not apply with respect to that Partial
Requirements Resource. In the event that EMC fails to demonstrate that its
entitlement in a Partial Requirements Resource is backed by sufficient and
reliable generating reserves, Duke shall supply, and EMC shall purchase, such
reserves in an amount equal to that required under Duke’s Generation Planning
Practices. The Monthly charge for such reserves shall be equal to the product of
the amount of reserves (as determined under the prior sentence) supplied by Duke
to EMC and the then applicable Monthly Demand Charge. This Monthly charge shall
be billed by Duke in accordance with the provisions of Article 13. Duke’s
provision and EMC’s purchase of such reserves shall not affect the determination
of the amount of Partial Requirements Resources, Baseload Resources or Combined
Cycle Resources. EMC shall provide written notice to Duke as soon as reasonably
practicable after EMC becomes aware of a material change to the seller’s service
obligations under the contracts listed in Attachment 4-3; provided, that such
notice shall be for information purposes only, and shall not affect any other
obligations of either Party under this Agreement.

 

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5.2.3 Non-Consent Partial Requirements Resource Modifications. In the event that
EMC’s entitlements are modified pursuant to Section 2.9(b) or Section 2.9(c) of
the WPSA or Sections 2.2, 2.3, 2.4 and 2.8 of the SEPA Contract, EMC’s Partial
Requirements Resources shall be modified in the same amount and to the same
extent. To the extent that a Partial Requirements Resource is modified pursuant
to this Section 5.2.3, and the modification changes EMC’s entitlement in a
resource listed as a Baseload Resource in Attachment 4-3, the amount of such
Baseload Resource, as listed in Attachment 4-3, shall be deemed to be changed
accordingly. EMC shall provide written notice to Duke as soon as reasonably
practicable after EMC becomes aware of any modification to EMC’s entitlement to
electric capacity and energy under the WPSA or SEPA Contract pursuant to this
Section 5.2.3. To the extent that a Partial Requirements Resource is modified
pursuant to this Section 5.2.3, and the modification changes EMC’s entitlement
in a resource listed as a Combined Cycle Resource in Attachment 4-3, the amount
of such Combined Cycle Resource, as listed in Attachment 4-3, shall be deemed to
be changed accordingly.

5.2.4 New Catawba Resource. In the event that NCEMC acquires all or part of
Saluda River Electric Cooperative’s existing ownership interest in the Catawba
Nuclear Station, and sells, allocates or transfers a percentage of that
entitlement with such entitlement being made available throughout the Year to
EMC (through modification of the WPSA or pursuant to a new contract), the
entitlement or resource so acquired by EMC shall constitute an additional
Partial Requirements Resource, and shall be deemed to be an additional Baseload
Resource. Upon Duke’s request, EMC shall provide evidence reasonably
satisfactory to Duke demonstrating that such entitlement in the Catawba Nuclear
Station is backed by sufficient and reliable electric system generating
reserves. Duke shall limit such requests to one (1) request per year; provided,
that if Duke reasonably believes that the sufficiency or reliability of the
electric system generating reserves backing EMC’s entitlement in the Catawba
Nuclear Station may have changed since Duke’s last such request, this limitation
shall not apply. In the event that EMC fails to demonstrate that its entitlement
in the Catawba Nuclear Station is backed by sufficient and reliable generating
reserves, Duke shall supply, and EMC shall purchase, such reserves in an amount
equal to that required under Duke’s Generation Planning Practices. The Monthly
charge for such reserves shall be equal to the product of the amount of reserves
(as determined under the prior sentence) supplied by Duke to EMC and the
then-applicable Monthly Demand Charge. This Monthly charge shall be billed by
Duke in accordance with the provisions of Article 13. Duke’s provision and EMC’s
purchase of such reserves shall not affect the determination of the amount of
Partial Requirements Resources, Baseload Resources or Combined Cycle Resources.

5.2.4.1 In the event that NCEMC purchases electric capacity and energy from Duke
in lieu of NCEMC’s acquisition of all or a part of Saluda River Electric
Cooperative’s existing ownership interest in the Catawba Nuclear Station as
provided in Section 5.2.4, and NCEMC sells, allocates or transfers a portion of
such capacity and energy to EMC (through a modification of the WPSA or pursuant
to a new contract), EMC’s Baseload Resources shall be increased by an amount
equal to the amount of the electric capacity and energy so acquired by EMC.

 

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5.2.5 Resource Impairment. In the event that all or a portion of an EMC Contract
Resource is terminated or becomes permanently impaired, EMC shall acquire, at
EMC’s cost, a substitute resource (backed by reserves in an amount equal to that
required under Duke’s Generation Planning Practices) that is of substantially
equivalent size and comparable reliability to the EMC Contract Resource, or
portion thereof, that such substitute resource is replacing, and that Duke
reasonably agrees is sufficiently reliable. EMC’s acquisition of such substitute
resource shall not affect the determination of the amount of Partial
Requirements Resources, Baseload Resources or Combined Cycle Resources.

5.3 No Duke Obligation for Customer Resources. Unless otherwise explicitly
provided in this Agreement, nothing herein shall be interpreted or construed as
imposing upon Duke any obligations or liabilities, or for transferring to Duke
any EMC obligations or liabilities, under or otherwise pertaining to any EMC
Contract Resource, nor shall anything in this Agreement be interpreted or
construed as creating or implying any contractual or other relationship between
Duke and any other party as to a EMC Contract Resource.

5.4 New Customer Resources. Except as provided in Section 5.4.1, Duke shall have
no obligation to amend this Agreement and EMC shall not make an application to
FERC requesting that FERC require that any amendment be made to this Agreement,
to accommodate any contractual entitlement to and/or ownership interest in or
pertaining to any new electric capacity and/or energy resource that EMC may
obtain after the Effective Date.

5.4.1 PURPA Resources. Nothing herein shall limit EMC’s right to purchase
electric capacity and energy from a Qualifying Facility or other renewable
resources pursuant to PURPA (“PURPA Resource”). If, during the Term, EMC
purchases electric capacity and energy from a PURPA Resource with a nameplate
capacity equal to or greater than one (1) MW, then, for each Month during the
period of such purchase: (i) the average hourly integrated electric energy
delivered to EMC by such PURPA Resource during the Hours used for determination
of the EMC Monthly Demand Quantity determined in accordance with Section 7.1.4.1
or used for determination of the Monthly Billing Demand determined in accordance
with Section 7.2.2.2 or Section 7.3.2.2, increased for losses between the point
of measurement of EMC’s Native Load and the Duke generation level, shall be
added to the EMC Monthly Demand Quantity determined in accordance with
Section 7.1.4.1 or to the Monthly Billing Demand determined in accordance with
Section 7.2.2.2 or Section 7.3.2.2 for such Month, as applicable; (ii) for
purposes of calculating the electric energy charges under Sections 7.1.5, 7.2.3
and 7.3.3, as applicable, the amount of electric energy provided to EMC by such
PURPA Resource during an Hour, increased for losses between the point of
measurement of EMC’s Native Load and the Duke generation level, shall be added
to EMC’s Native Load and to the EMC Group Native Load for such Hour; and
(iii) Duke shall credit EMC, on a Monthly basis, an amount equal to the electric
capacity and energy credits to which EMC would be entitled as set forth in
Duke’s NCUC retail electric tariff Schedule PP-H or Schedule PP-N (as
applicable), Interconnected to Distribution System or Transmission System (as
applicable), or its successor tariff, if the electric capacity and electric
energy provided to EMC by such PURPA Resource were provided to Duke pursuant to
and in accordance with such schedules. The interconnection to Duke’s (rather
than the EMC’s) Distribution System or Transmission System, as those terms are
defined in the schedules, will determine whether the Distribution System or
Transmission System rates apply. EMC will coordinate with Duke to determine the
proper application of these schedules. If Schedule PP-H

 

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or Schedule PP-N do not apply to the PURPA Resource, then Duke shall credit EMC,
on a Monthly basis, an amount equal to the electric capacity and energy credits
to which EMC would be entitled under PURPA if the electric capacity and electric
energy provided to EMC by such PURPA Resource were provided to Duke pursuant to
PURPA. EMC’s purchase of the electric capacity and energy from a PURPA Resource
shall not affect the determination of the Annual Capacity Quantity determined in
accordance with Sections 3.5.2.3.1, 3.5.2.3.2 or 3.5.2.3.3, as applicable.

Article 6

Priority of Service

6.1 Interruption of FFR Supplemental Service and Partial Requirements Service.
FFR Supplemental Service and Partial Requirements Service shall have an
interruption priority equivalent to Duke’s Native Load. It is expressly
understood and agreed that, except for Duke’s failure to comply with Section 6.2
or as provided in Section 6.4, Duke shall not be liable to EMC for damages
resulting from any such interruptions or impairment of FFR Supplemental Service
or Partial Requirements Service. Duke shall use Commercially Reasonable Efforts
to notify EMC by telephone of any scheduled interruption or scheduled impairment
of service hereunder and shall use Commercially Reasonable Efforts to confirm
such notice by facsimile, electronic mail, or letter on the same date such
notice was given. Duke shall notify EMC by telephone of any unscheduled
interruption or impairment of service hereunder as soon as reasonably
practicable under the circumstances resulting in such unscheduled interruption
or impairment of service. Duke shall use Commercially Reasonable Efforts to
remove all causes of such interrupted or impaired service hereunder.

6.2 Curtailments of Load. Except as provided in Section 4.2.6, EMC’s Native Load
shall be subject to curtailment only in accordance with this Section 6.2. In the
event that Duke curtails Duke Native Load for any reason, including Force
Majeure, EMC shall curtail its load as directed by Duke. Except as provided in
Section 4.2.6, Duke shall not adversely distinguish against EMC’s Native Load in
curtailing Duke’s Native Load and directing EMC to curtail EMC’s Native Load;
provided, however, that Duke has sole responsibility to design all curtailments,
and may order any manner of curtailment that Duke believes is appropriate so
long as EMC’s Native Load and Duke’s Native Load present in the electrical area
being curtailed are curtailed on a non-discriminatory basis. In permitting EMC
to restore EMC’s Native Load and restoring Duke’s Native Load that was
curtailed, Duke shall not adversely distinguish against EMC’s Native Load,
except as provided in Section 4.2.6. The load curtailment and restoration
provisions set forth in this Section 6.2 are in addition to, and without
limitation of, the load curtailment and restoration provisions set forth in
Section 4.2.6.

6.3 Emergency Load Curtailment Program. EMC agrees to implement an emergency
load curtailment program for the curtailment of EMC’s Native Load in the event a
load curtailment order is made by Duke. EMC shall comply with its obligation to
implement and maintain an emergency load curtailment program and to curtail
EMC’s Native Load in the manner specified by Section 6.2.

 

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6.4 Substitute Energy. In the event that Duke fails to deliver a sufficient
quantity of electric energy to meet its obligations to provide FFR Supplemental
Service or Partial Requirements Service, as the case may be, and Duke’s failure
to deliver such electric energy is not pursuant to a curtailment permitted under
Section 4.2.6 or 6.2 of this Agreement, or is otherwise excused under this
Agreement, Duke shall pay to EMC an amount equal to EMC’s Cover Costs, if any,
incurred for the electric energy that EMC obtained to replace such electric
energy (“Substitute Energy”) Duke failed to supply. EMC’s Cover Costs shall be
equal to Substitute Energy Costs incurred by EMC for the Substitute Energy minus
the costs that EMC would have incurred had Duke supplied the electric energy to
EMC. EMC shall bill its Cover Costs to Duke in accordance with the provisions of
Article 13. In the event that EMC incurs Cover Costs for Substitute Energy over
a period that extends past the Month in which Duke’s failure to deliver electric
energy occurs, then Duke shall pay the Cover Costs incurred in the following
Month(s) in accordance with the billing and payment provisions of Article 13.

6.5 Substitute Energy Costs. Substitute Energy Costs shall be equal to (i) in
the case in which EMC contracts with an energy supplier to provide Substitute
Energy to EMC, the cost that EMC, acting in a commercially reasonable manner,
incurs to purchase such Substitute Energy, or (ii) in the case in which
Substitute Energy is provided to EMC by the Control Area operator, system
operator, or similar entity providing such service on behalf of load (or load
serving entities), the cost to EMC imposed on EMC by such Control Area operator,
system operator, or other entity providing such Substitute Energy. In either
case, Substitute Energy Costs shall include ancillary services charges, if any,
reasonably incurred by EMC to the point where electric energy is delivered to
the Transmission System or imposed to the point where electric energy is
delivered to the Transmission System by the Control Area operator, system
operator, or other entity providing Substitute Energy, including congestion
charges, energy imbalance charges, backup capacity charges, replacement capacity
charges, deficient capacity charges, commitment fees, ratcheted demand and
similar charges incurred by EMC in obtaining such Substitute Energy.

Article 7

Capacity and Energy Charges

7.1 Charges During Commencement Date - December 31, 2006.

7.1.1 General. For FFR Supplemental Service provided during the period beginning
on the Commencement Date, and continuing through December 31, 2006, EMC shall
pay to Duke the Monthly Demand Charge set forth in Section 7.1.4, the Duke
Monthly Energy Charge set forth in Section 7.1.5.1, if applicable, the Monthly
Scheduling Agent Service Charge set forth in Section 7.1.6 and, if applicable,
the Monthly Reserve Capacity Charge set forth in Section 7.4, minus the EMC
Monthly Energy Credit set forth in Section 7.1.5.5. In addition, the Duke
Monthly Reconciliation Charge, Rutherford Monthly Reconciliation Credit, and the
Monthly Inter-EMC Energy Transfer Reconciliation Charge shall be billed or
credited as provided in Sections 7.1.5.11, 7.1.5.12, and 7.1.5.13. The charges
set forth in this Section 7.1 are in addition to the other charges set forth in
other sections of this Agreement.

7.1.2 [intentionally omitted].

 

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7.1.3 [intentionally omitted].

7.1.4 Monthly Demand Charge. The Monthly Demand Charge for a Month shall be
equal to the product of (i) the Monthly Demand Rate for the Year ($/kW-Month)
and (ii) the Monthly Demand Amount for the Month (kW). The Monthly Demand Rate
for 2006 shall be $0.75/kW-Month. The Monthly Demand Amount for a Month shall be
equal to the product of (i) the EMC Monthly Demand Quantity for the Month
divided by the EMC Group Combined Monthly Demand Quantity for the Month and
(ii) the EMC Group Monthly Demand Quantity for the Month. In no event shall the
Monthly Demand Quantity be less than zero. A sample calculation is provided in
Attachment 7-2.

7.1.4.1 EMC Monthly Demand Quantity. The EMC Monthly Demand Quantity for a Month
shall be equal to the EMC Hourly Demand at the time of the Maximum Demand Hour
for the Month minus EMC’s Base Obligation at the time of the Maximum Demand
Hour. In no event shall the EMC Monthly Demand Quantity be less than zero.

7.1.4.2 EMC Group Combined Monthly Demand Quantity. The EMC Group Combined
Monthly Demand Quantity for a Month shall be equal to the sum of (i) the EMC
Monthly Demand Quantity for the Month as determined in Section 7.1.4.1 of this
Agreement, (ii) the EMC Monthly Demand Quantity for the Month as determined in
Section 7.1.4.1 of the Duke-Blue Ridge Agreement, and (iii) the EMC Monthly
Demand Quantity for the Month as determined in Section 7.1.4.1 of the
Duke-Piedmont Agreement.

7.1.4.3 EMC Group Monthly Demand Quantity. The EMC Group Monthly Demand Quantity
for a Month shall be equal to the difference between the EMC Group Hourly Demand
and the EMC Group’s Base Obligation during the Maximum Demand Hour of the Month,
but in no event shall the EMC Group Monthly Demand Quantity for a Month be less
than zero. The EMC Group Hourly Demand for an Hour shall be equal to the
integrated sixty (60) minute demand of the EMC Group Native Load during the
Hour. The Maximum Demand Hour of a Month shall be the Hour in which the positive
difference between the EMC Group Native Load and the EMC Group’s Base Obligation
is the greatest (as determined by subtracting the EMC Group’s Base Obligation
from the EMC Group Native Load in every Hour of the Month, to determine the Hour
in which such maximum difference for the Month occurs).

7.1.5 Monthly Energy Charges.

7.1.5.1 Duke Monthly Energy Charge. The Duke Monthly Energy Charge for a Month
shall be equal to the sum of the Duke Hourly Energy Charges for the Month. The
Duke Hourly Energy Charge for an Hour shall be equal to the sum of the
Rutherford Allocated Share of the Duke Total Hourly Energy Charge for the Hour
plus the Rutherford Allocated Share of the Inter-EMC Energy Charge for the Hour.

7.1.5.2 Duke Total Hourly Energy Charge. The Duke Total Hourly Energy Charge for
an Hour shall be equal to the product of (i) one hundred thirteen percent
(113%) of Duke’s Territorial Incremental Cost for the Hour and (ii) the EMC
Group Energy Purchase Amount for the Hour. The amount of electric energy
delivered by Duke to the EMC Group during any Hour shall be calculated as set
forth in Section 7.1.5.10.

 

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7.1.5.3 Rutherford Allocated Share of Duke Total Hourly Energy Charge. The
Rutherford Allocated Share of the Duke Total Hourly Energy Charge for an Hour
shall be calculated as set forth in Attachment 7-3. An example showing the
calculation of the Rutherford Allocated Share of the Duke Total Hourly Energy
Charge for an Hour is shown in Attachment 7-4.

7.1.5.4 Rutherford Allocated Share of Inter-EMC Energy Charge. The Rutherford
Allocated Share of the Inter-EMC Energy Charge for an Hour shall be calculated
as set forth in Attachment 7-3. An example showing the calculation of the
Rutherford Allocated Share of the Inter-EMC Energy Charge for an Hour is shown
in Attachment 7-4.

7.1.5.5 EMC Monthly Energy Credit. The EMC Monthly Energy Credit for a Month
shall be equal to the sum of the EMC Hourly Energy Credits for the Month. The
EMC Hourly Energy Credit for an Hour shall be equal to the sum of the Rutherford
Allocated Share of the EMC Group Total Hourly Energy Credit for the Hour plus
the Rutherford Allocated Share of the Inter-EMC Energy Credit for the Hour.

7.1.5.6 EMC Group Total Hourly Energy Credit. The EMC Group Total Hourly Energy
Credit for an Hour shall be equal to the product of (i) ninety percent (90%) of
Duke’s Territorial Decremental Cost for the Hour and (ii) the EMC Group Energy
Credit Amount for the Hour. The amount of electric energy delivered by the EMC
Group to Duke during any Hour shall be calculated as set forth in
Section 7.1.5.10.

7.1.5.7 Rutherford Allocated Share of EMC Group Total Hourly Energy Credit. The
Rutherford Allocated Share of the EMC Group Total Hourly Energy Credit for an
Hour shall be calculated as set forth in Attachment 7-3. An example showing the
calculation of the Rutherford Allocated Share of the EMC Group Total Hourly
Energy Credit for an Hour is shown in Attachment 7-4.

7.1.5.8 Rutherford Allocated Share of Inter-EMC Energy Credit. The Rutherford
Allocated Share of the Inter-EMC Energy Credit for an Hour shall be calculated
as set forth in Attachment 7-3. An example showing the calculation of the
Rutherford Allocated Share of the Inter-EMC Energy Credit for an Hour is shown
in Attachment 7-4.

7.1.5.9 Calculation of Rutherford Hourly Energy Amounts. The amount of electric
energy delivered by Duke to Rutherford, and by Rutherford to Duke for an Hour,
shall be calculated as follows: electric energy scheduled under this Agreement
shall be scheduled using two (2) dynamic (instantaneous) signals representing
the difference between EMC’s Native Load and EMC’s Base Obligation. At the time
of this Agreement, these signals are sampled once every four (4) seconds; the
time period between each sample as defined herein shall be referred to as an
“Interval”. The time duration of the Intervals shall be subject to change based
on Duke’s standard operating practices. A signal during an Interval in which
EMC’s Native Load exceeds EMC’s Base Obligation shall be referred to herein as
an EMC Call Signal, indicating electric energy supplied by Duke to Rutherford. A
signal during an Interval in which EMC’s Base Obligation exceeds EMC’s Native
Load shall be referred to herein as an EMC Put Signal, indicating electric
energy being supplied by Rutherford to Duke. The integrated value of the EMC
Call Signals (separate from and not combined with the EMC Put

 

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Signals) summed across all Intervals during the Hour shall be used as the amount
of electric energy supplied by Duke to Rutherford for the Hour, and the
integrated value of the EMC Put Signals (separate from and not combined with the
EMC Call Signals) summed across all Intervals during the Hour shall be used as
the amount of electric energy supplied by Rutherford to Duke for the Hour. The
amount of electric energy supplied by Duke to Rutherford for the Hour, as
calculated in this Section 7.1.5.9, shall be referred to herein as the
Rutherford Energy Purchase Amount for the Hour. The amount of electric energy
supplied by Rutherford to Duke for the Hour, as determined in this
Section 7.1.5.9, shall be referred to herein as the Rutherford Energy Credit
Amount for the Hour. An example showing the calculation of such amounts is shown
in Attachment 7-5.

7.1.5.10 Calculation of EMC Group Energy Amounts. The amount of electric energy
delivered by Duke to the EMC Group, and by the EMC Group to Duke, for the Hour
shall be calculated as follows: Electric energy scheduled under the Partial
Requirements Agreements shall be scheduled using two (2) dynamic (instantaneous)
signals representing the differences between the EMC Group Native Load and the
EMC Group’s Base Obligation. At the time of this Agreement, these signals are
sampled once every four (4) seconds; the time period between each sample as
defined herein shall be referred to as an “Interval”. The time duration of the
Intervals shall be subject to change based on Duke’s standard operating
practices. A signal during an Interval in which EMC Group’s Native Load exceeds
EMC Group’s Base Obligation shall be referred to herein as an EMC Group Call
Signal, indicating electric energy supplied by Duke to the EMC Group. A signal
during an Interval in which EMC Group’s Base Obligation exceeds EMC Group’s
Native Load shall be referred to herein as an EMC Group Put Signal, indicating
electric energy being supplied by EMC Group to Duke. The integrated value of the
EMC Group Call Signals (separate from and not combined with the EMC Group Put
Signals) summed across all Intervals during the Hour shall be used as the amount
of electric energy supplied by Duke to the EMC Group for the Hour, and the
integrated value of the EMC Group Put Signals (separate from and not combined
with the EMC Group Call Signals) summed across all Intervals during the Hour
shall be used as the amount of electric energy supplied by the EMC Group to Duke
for the Hour. The amount of electric energy supplied by Duke to EMC Group for
the Hour, as calculated in this Section 7.1.5.10, shall be referred to herein as
EMC Group Energy Purchase Amount for the Hour. The amount of electric energy
supplied by the EMC Group to Duke for the Hour, as determined in this
Section 7.1.5.10, shall be referred to herein as the EMC Group Energy Credit
Amount for the Hour. An example showing the calculation of such amounts is shown
in Attachment 7-6.

7.1.5.11 Duke Monthly Reconciliation Charge. The Duke Monthly Reconciliation
Charge for a Month shall be equal to the sum of the Duke Hourly Reconciliation
Charges for the Month. The Duke Hourly Reconciliation Charge for an Hour shall
be equal to the product of (a) the Duke Total Hourly Energy Charge for the Hour
minus the Duke Reconciliation Amount for the Hour and (b) the Reconciliation
Allocation Factor. The Duke Reconciliation Amount for an Hour shall be equal to
the sum of (i) the Rutherford Allocated Share of the Duke Total Hourly Energy
Charge for the Hour as set forth in Section 7.1.5.3 of this Agreement, (ii) the
Piedmont Allocated Share of the Duke Total Hourly Energy Charge for the Hour as
set forth in Section 7.1.5.3 of the Duke-Piedmont Agreement, and (iii) the Blue
Ridge Allocated Share of the Duke Total Hourly Energy Charge for the Hour as set
forth in Section 7.1.5.3 of the Duke-Blue Ridge Agreement. If the Duke Monthly
Reconciliation Charge is positive, EMC shall pay such amount to Duke; if the
Duke Monthly Reconciliation Charge is negative, such amount shall be credited to
EMC.

 

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7.1.5.12 Rutherford Monthly Reconciliation Credit. The Rutherford Monthly
Reconciliation Credit for a Month shall be equal to the sum of the Rutherford
Hourly Reconciliation Credits for the Month. The Rutherford Hourly
Reconciliation Credit for an Hour shall be equal to the product of (a) the EMC
Group Total Hourly Energy Credit for the Hour minus the EMC Group Reconciliation
Amount for the Hour and (b) the Reconciliation Allocation Factor. The EMC Group
Reconciliation Amount for an Hour shall be equal to the sum of (i) the
Rutherford Allocated Share of the EMC Group Total Hourly Energy Credit for the
Hour as set forth in Section 7.1.5.7 of this Agreement, (ii) the Piedmont
Allocated Share of the EMC Group Total Hourly Energy Credit for the Hour as set
forth in Section 7.1.5.7 of the Duke-Piedmont Agreement, and (iii) the Blue
Ridge Allocated Share of the EMC Group Total Hourly Energy Credit for the Hour
as set forth in Section 7.1.5.7 of the Duke-Blue Ridge Agreement. If the
Rutherford Monthly Reconciliation Credit is negative, EMC shall pay such amount
to Duke; if the Rutherford Monthly Reconciliation Credit is positive, such
amount shall be credited to EMC.

7.1.5.13 Inter-EMC Energy Transfer Reconciliation Charge. The Monthly Inter-EMC
Energy Transfer Reconciliation Charge for a Month shall be equal to the sum of
the Hourly Inter-EMC Transfer Reconciliation Charges for the Month. The Hourly
Inter-EMC Transfer Reconciliation Charge for an Hour shall be equal to the
product of (a) the Reconciliation Allocation Factor and (b) (i) the sum of the
Rutherford Allocated Share of the Inter-EMC Energy Charge for the Hour as set
forth in Section 7.1.5.4 of this Agreement, the Piedmont Allocated Share of the
Inter-EMC Energy Charge for the Hour as set forth in Section 7.1.5.4 of the
Duke-Piedmont Agreement, and the Blue Ridge Allocated Share of the Inter-EMC
Energy Charge for the Hour as set forth in Section 7.1.5.4 of the Duke-Blue
Ridge Agreement, minus (ii) the sum of the Rutherford Allocated Share of the
Inter-EMC Energy Credit for the Hour as set forth in Section 7.1.5.8 of this
Agreement, the Piedmont Allocated Share of the Inter-EMC Energy Credit for the
Hour as set forth in Section 7.1.5.8 of the Duke-Piedmont Agreement, and the
Blue Ridge Allocated Share of the Inter-EMC Energy Credit for the Hour as set
forth in Section 7.1.5.8 of the Duke-Blue Ridge Agreement. If the Monthly
Inter-EMC Energy Transfer Reconciliation Charge is negative, EMC shall pay such
amount to Duke. If the Monthly Inter-EMC Energy Transfer Reconciliation Charge
is positive, such amount shall be credited to EMC.

7.1.6 Scheduling Agent Service Charge. In the event that this Agreement is
terminated in accordance with the provisions of Section 3.5.2.2, EMC shall pay
to Duke the Monthly Scheduling Agent Service Charge commencing on the date that
Scheduling Agent Services commence. The Monthly Scheduling Agent Service Charge
for a Month shall be equal to two thousand five hundred dollars ($2,500) per
Month.

7.1.7 References to Other Agreements. For purposes of calculating the charges
and credits under Sections 3.5.2.3 and 7.1 (including charges and credits
calculated pursuant to Section 7.1 in the event that EMC exercises its option
pursuant to Section 3.5.2.3), (i) all references in this Agreement to quantities
under or as determined or set forth in the Duke-Blue Ridge Agreement shall be
deemed to refer to such quantities during the period in which the

 

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Duke-Blue Ridge Agreement is in effect, before which time and after which time
such quantities shall be deemed to be equal to zero; and (ii) all references in
this Agreement to quantities under or as determined or set forth in the
Duke-Piedmont Agreement shall be deemed to refer to such quantities during the
period in which the Duke-Piedmont Agreement is in effect, before which time and
after which time such quantities shall be deemed to be equal to zero. For
example, if this Agreement and the Duke-Blue Ridge Agreement terminate
August 31, 2008, and the Duke- Piedmont Agreement terminates August 31, 2007,
then during the period through August 31, 2007, EMC Group Native Load shall mean
the sum of (i) the EMC Native Load under this Agreement, (ii) the EMC Native
Load under the Duke-Blue Ridge Agreement, and (iii) the EMC Native Load under
the Duke-Piedmont Agreement, and during the period September 1, 2007 through
August 31, 2008, EMC Group Native Load shall mean the sum of (i) the EMC Native
Load under this Agreement and (ii) the EMC Native Load under the Duke-Blue Ridge
Agreement. In addition, for purposes of calculating the charges under Sections
3.5.2.3 and 7.1 (including charges and credits calculated pursuant to
Section 7.1 in the event that EMC exercises its option pursuant to
Section 3.5.2.3), all references to “EMC Group” shall refer collectively to the
members of such group that are served under those of the above-referenced
Agreements that are then in effect (e.g., in the above example, “EMC Group”
would no longer include Piedmont effective September 1, 2007).

7.2 Charges During January 1, 2007 – December 31, 2010.

7.2.1 General. For service provided during the period January 1, 2007 –
December 31, 2010, EMC shall pay to Duke the Monthly Demand Charge set forth in
Section 7.2.2, the Duke Monthly Energy Charge set forth in Section 7.2.3 and, if
applicable, the Monthly Reserve Capacity Charge set forth in Section 7.4. The
charges set forth in this Section 7.2 are in addition to the other charges set
forth in other sections of this Agreement.

7.2.2 Monthly Demand Charge. The Monthly Demand Charge for a Month shall be
equal to the product of (i) the Monthly Billing Demand for the Month (kW) and
(ii) the Monthly Demand Rate for the Year ($/kW-Month).

7.2.2.1 Monthly Demand Rate. The Monthly Demand Rate for each Year shall be
calculated in accordance with the formula rate set forth in Schedule 1. The
Monthly Demand Rate initially shall be calculated based on estimated data, and
shall be subject to true-up after actual data become available. The true-up
shall be provided to EMC no later than June 30 following the Year in which
service was provided, and shall include interest on any refunds or surcharges
calculated in accordance with Section 35.19a of FERC’s regulations.

7.2.2.2 Monthly Billing Demand. The Monthly Billing Demand for each Month of the
Year shall be equal to the average of the twenty (20) EMC Peak Hour Billing
Demands coincident with the twenty (20) highest Hourly (integrated sixty-minute)
Duke Schedule 1 Demands during July and August of such Year. The EMC Peak Hour
Billing Demand for an Hour shall be equal to the integrated sixty (60) minute
EMC Native Load demand (kW) for the Hour minus EMC’s Base Obligation (kW) for
such Hour, but in no event shall the EMC Peak Hour billing Demand for an Hour
(or the Monthly Billing Demand) be less than zero. The Monthly Billing Demand
initially shall be calculated based on estimated data, and shall be subject to
true-up after actual data become available. The true-up shall be provided

 

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to EMC no later than June 30 following the Year in which service was provided,
and shall include interest on any refunds or surcharges calculated in accordance
with Section 35.19a of FERC’s regulations. An example showing the calculation of
this billing demand is shown in Attachment 7-7.

7.2.3 Monthly Energy Charge. The Duke Monthly Energy Charge for a Month shall be
equal to the sum of the Monthly Fuel Charge and Monthly Variable O&M Charge for
the Month. If the Duke Monthly Energy Charge is positive, EMC shall pay such
amount to Duke. If the Duke Monthly Energy Charge is negative, Duke shall credit
such amount to EMC.

7.2.3.1 Monthly Fuel Charge. The Monthly Fuel Charge for a Month shall be equal
to the sum of the Hourly Fuel Charges for the Month. The Hourly Fuel Charge for
an Hour shall be equal to the product (i) EMC’s Native Load demands during the
Hour (kW) minus EMC’s Base Obligation for the Hour (kW) and (ii) the Fuel Rate
for the Year ($/kWh). The Fuel Rate for each Year shall be calculated in
accordance with the formula rate set forth in Schedule 1. The Fuel Rate shall
initially be calculated based on estimated data, and shall be subject to true-up
after actual data become available. The true-up shall be provided to EMC no
later than June 30 following the Year in which service was provided, and shall
include interest on any refunds or surcharges calculated in accordance with
Section 35.19a of FERC’s regulations. Duke will keep EMC informed of the true-up
subtotal on a semi-annual basis during a Year.

7.2.3.2 Monthly Variable O&M Charge. The Monthly Variable O&M Charge for a Month
shall be equal to the sum of the Hourly Variable O&M Charges for the Month. The
Hourly Variable O&M Charges for an Hour shall be equal to the product of
(i) EMC’s Native Load demands during the Hour (kW) minus EMC’s Base Obligation
for the Hour (kW), and (ii) the Variable O&M Rate for the Year ($/kWh). The
Variable O&M Rate for each Year shall be calculated in accordance with the
formula rate set forth in Schedule 1. The Variable O&M Rate initially shall be
calculated based on estimated data, and shall be subject to true-up after actual
data become available. The true-up shall be provided to EMC no later than
June 30 following the Year in which service was provided, and shall include
interest on any refunds or surcharges calculated in accordance with
Section 35.19a of FERC’s regulations.

7.3 Charges Commencing January 1, 2011.

7.3.1 General. For service provided commencing January 1, 2011 through the
termination of this Agreement, EMC shall pay to Duke the Monthly Demand Charge
set forth in Section 7.3.2 and the Duke Monthly Energy Charge set forth in
Section 7.3.3. The charges set forth in this Section 7.3 are in addition to the
other charges set forth in other sections of this Agreement.

7.3.2 Monthly Demand Charge. The Monthly Demand Charge for a Month shall be
equal to the product of (i) the Monthly Billing Demand for the Month (kW) and
(ii) the Monthly Demand Rate for the Year ($/kW-Month).

7.3.2.1 Monthly Demand Rate. The Monthly Demand Rate for each Year shall be
calculated in accordance with the formula rate set forth in Schedule 1. The
Monthly

 

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Demand Rate shall initially be calculated based on estimated data, and shall be
subject to true-up after actual data become available. The true-up shall be
provided to EMC no later than June 30 following the Year in which service was
provided, and shall include interest on any refunds or surcharges calculated in
accordance with Section 35.19a of FERC’s regulations.

7.3.2.2 Monthly Billing Demand. The Monthly Billing Demand for each month of a
Year shall be equal to the average of the twenty (20) EMC Peak Hour Billing
Demands coincident with the twenty (20) highest Hourly (integrated sixty-minute)
Duke Schedule 1 Demands during the Annual Planning Period for such Year (as
determined in Section 7.3.2.3). The EMC Peak Hour Billing Demand for an Hour
shall be equal to the integrated sixty (60) minute EMC Native Load demand (kW)
for the Hour minus the Partial Requirements Resources (kW) for such Hour, but in
no event shall the EMC Peak Hour Billing Demand (or the Monthly Billing Demand)
be less than zero. The Monthly Billing Demand shall initially be calculated
based on estimated data, and shall be subject to true-up after actual data
become available. The true-up shall be provided to EMC no later than June 30
following the Year in which service was provided, and shall include interest on
any refunds or surcharges calculated in accordance with Section 35.19a of FERC’s
regulations. Examples showing the calculation of the Monthly Billing Demand are
shown in Attachment 7-8.

7.3.2.3 Determination of Annual Planning Period. If the then-effective Annual
Planning Period is the Summer Period, the Annual Planning Period for purposes of
determining the Monthly Billing Demand for the Year under Section 7.3.2.2 shall
be the Summer Period that occurs within such Year (for example, if the Annual
Planning Period in 2012 is the Summer Period, and the Summer Period is May -
September, the Annual Planning Period for purposes of determining the Monthly
Billing Demand for 2012 under Section 7.3.2.2 is May 2012 - September 2012). If
the then-effective Annual Planning Period is the Winter Period, the Annual
Planning Period for purposes of determining the Monthly Billing Demand for the
Year under Section 7.3.2.2 shall be the Winter Period that ends in such Year
(for example, if the Annual Planning Period in 2012 is the Winter Period, and
the Winter Period is October - April, the Annual Planning Period for purposes of
determining the Monthly Billing Demand for 2012 under Section 7.3.2.2 is October
2011 - April 2012).

7.3.2.4 Annual Percentage. No later than June 30, 2012, and each June 30
thereafter during the Term, Duke shall calculate the Annual Percentage for the
immediately preceding Year using the formula set forth in Attachment 7-9, and
shall provide such calculation to EMC, together with supporting information. The
Annual Percentage may be a positive or negative value. In the event that the
Annual Percentage for such Year is greater than positive four percent (4%), the
Monthly Demand Rate for such Year calculated pursuant to Section 7.3.2.1 shall
be reduced by the percentage equal to the Demand Rate Adjustment Percentage.
This reduction shall only apply to the Year for which it is calculated. This
reduction shall be reflected in the true-up provided to EMC pursuant to
Section 7.3.2.1. In the event that the Annual Percentage for such Year is a
positive four percent (4%) or less, or is negative, there shall be no
adjustments to the Monthly Demand Rate under this Section 7.3.2.4 for such Year.
Illustrative examples showing the calculation of the Annual Percentage and
Demand Rate Adjustment Percentage and the resulting reduction, if any, to the
Monthly Demand Rate are set forth in Attachment 7-10.

 

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7.3.3 Monthly Energy Charge. The Duke Monthly Energy Charge for a Month shall be
equal to the sum of the Monthly Fuel Charge and Monthly Variable O&M Charge for
the Month.

7.3.3.1 Monthly Fuel Charge. The Monthly Fuel Charge for a Month shall be equal
to the sum of the Hourly Fuel Charges for the Month. The Hourly Fuel Charge for
an Hour shall be equal to the product (i) EMC’s Native Load demand during the
Hour (kW) minus the sum of (a) EMC’s Dispatched Baseload Resources for the Hour
(kW) and (b) EMC’s Dispatched Combined Cycle Resources for the Hour for which
EMC bears the Energy Cost pursuant to Section 4.3.3.1 (kW), and (ii) the Fuel
Rate for the Year ($/kWh). The Fuel Rate for each Year shall be calculated in
accordance with the formula rate set forth in Schedule 1. The Fuel Rate shall
initially be calculated based on estimated data, and shall be subject to true-up
after actual data become available. The true-up shall be provided to EMC no
later than June 30 following the Year in which service was provided, and shall
include interest on any refunds or surcharges calculated in accordance with
Section 35.19a of FERC’s regulations. Duke will keep EMC informed of the true-up
subtotal on a semi-annual basis during a Year.

7.3.3.2 Monthly Variable O&M Charge. The Monthly Variable O&M Charge for a Month
shall be equal to the sum of the Hourly Variable O&M Charges for the Month. The
Hourly Variable O&M Charge for an Hour shall be equal to the product of
(i) EMC’s Native Load demands during the Hour (kW) minus the sum of (a) EMC’s
Dispatched Baseload Resources for the Hour (kW) and (b) EMC’s Dispatched
Combined Cycle Resources for the Hour for which EMC bears the Energy Cost
pursuant to Section 4.3.3.1 (kW) and (ii) the Variable O&M Rate for the Year
($/kWh). The Variable O&M Rate for each Year shall be calculated in accordance
with the formula rate set forth in Schedule 1. The Variable O&M Rate shall
initially be calculated based on estimated data, and shall be subject to true-up
after actual data become available. The true-up shall be provided to EMC no
later than June 30 following the Year in which service was provided, and shall
include interest on any refunds or surcharges calculated in accordance with
Section 35.19a of FERC’s regulations.

7.4 Monthly Reserve Capacity Charges. In the event that Duke provides
Replacement Energy to EMC pursuant to Section 4.2.4 in an amount of five
thousand (5,000) kW or greater during any Hour of a Year, EMC shall pay a
Monthly Reserve Capacity Charge equal to the product of (i) the Monthly Demand
Rate as calculated in Section 7.3.2.1 and (ii) the amount (in kW) of reserves
that would be required under Duke’s Generation Planning Practices for a
generating resource of a size equivalent to the amount of Replacement Energy
provided to EMC (the “Reserve Capacity Amount”). This charge shall commence on
the Day following the Day on which Duke provided Replacement Energy to EMC, and
shall terminate on December 31 of that Year. For example, if Duke provides a
maximum amount of 100,000 kWh of Replacement Energy to EMC in any given Hour on
July 15, 2007, and the reserves that would be required for a 100,000 kW
generating resource under Duke’s Generation Planning Practices is 17,000 kW, EMC
shall be responsible for a Monthly Reserve Capacity Charge for 17,000 kW from
July 16, 2007, through December 31, 2007, subject to increase as provided in the
next sentence. In the event that Duke provides Replacement Energy to EMC for any
additional Hours during such Year, and the amount of Replacement Energy provided
during any such Hours is greater than that previously provided during the Year,
then the Reserve Capacity Amount shall be increased to reflect such greater
amount of Replacement Energy, effective the Day after the Replacement Energy is
provided. In the event that Duke provides Replacement Energy to EMC in a

 

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subsequent Year, the foregoing provisions shall apply, and EMC shall pay Monthly
Reserve Capacity Charges with respect to such Replacement Energy as provided
above. Notwithstanding anything in this Section 7.4 to the contrary, the Monthly
Reserve Capacity Charges shall terminate no later than December 31, 2010. Any
Monthly Reserve Capacity Charge, or increase in such charge, that begins on a
Day other than the first Day of the Month shall be adjusted pro rata for that
Month to reflect the number of Days during the Month in which the charge or
charge increase was in effect.

7.4.1 Force Majeure Events. Notwithstanding the provisions of Section 7.4, in
the event that Duke provides Replacement Energy to EMC due to the occurrence of
a force majeure event, EMC shall not incur a Monthly Reserve Capacity Charge due
to Duke’s provision of Replacement Energy for the first twenty-four (24) Hours
following such occurrence. For purposes of this Section 7.4.1, the term “force
majeure” means an event or circumstance that: (i) prevents the party claiming to
be affected by it from performing its obligations in whole or in part; (ii) is
not within the reasonable control of the claiming party, or the result of the
negligence of the claiming party, and (iii) by the exercise of due diligence,
the claiming party is unable to overcome in a commercially reasonable manner,
and, without limiting the scope of the definition, includes acts of God, or the
public enemy, or insurrection, riot, acts of terrorism, civil disturbance or
disorder, strikes, fire, earthquakes, floods, storms or other natural disasters,
or actions or restraints by court order or governmental authority or arbitration
award (so long as the claiming party has not sought or has opposed, to the
extent reasonable, such actions or restraints). It is expressly acknowledged
that transmission service interruptions or curtailments imposed by a
transmission provider in response to transmission capacity or availability
shortages shall not be “force majeure” events or circumstances for purposes of
this Section 7.4.1.

7.5 Payment. All charges or payments contemplated by this Article 7 shall be
made in accordance with provisions of Article 13.

7.6 Determination of EMC Capacity and Energy Demands. For purposes of
determining the electric capacity and energy charges under this Agreement, EMC’s
Native Load demands shall be as determined under the NOA (which demands shall
include the adjustments under the NOA for losses between the point of delivery
under the NITSA and the point of measurement, and the corrections under the NOA
for any metering failures or inaccuracies), and shall be increased by (1 / (1 -
TLF ), in order to reflect such demands at the generation level (i.e., at the
point at which power is available for transmission). Metered receipts used in
billings and accounting hereunder will in all cases include adjustments for such
losses. TLF shall be equal to the transmission loss factor set forth in the
Transmission Provider’s OATT, and shall be expressed as a decimal. For example,
if the transmission loss factor in the Transmission Provider’s OATT is three
percent (3%), then ( 1 / (1 - TLF )) shall be equal to ( 1 / (1 -.03)), or ( 1 /
.97 ). In the event that the NOA is terminated, or the electric capacity and
energy demands measured under the NOA no longer include an adjustment for losses
between the point of delivery under the NITSA and the point of measurement or
provisions for correcting such demands for metering failures or inaccuracies,
then, for purposes of determining the capacity and energy charges under this
Agreement, EMC’s metered electric capacity and energy demands shall be adjusted
for losses between the point of delivery under the NITSA and point of
measurement and further increased by ( 1 / (1-TLF)), in order to reflect such
demands at the generation level (i.e., at the point at which power is available
for transmission), and suitable arrangements shall be made by the Parties for
correcting such demands due to metering failures or inaccuracies.

 

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Article 8

Scheduling Agent Services

8.1 Appointment of Duke as Scheduling Agent. EMC hereby appoints Duke as
Scheduling Agent, effective on the Effective Date (or such earlier date as is
required so that Scheduling Agent may begin rendering Scheduling Agent Services
by the Commencement Date), as agent for EMC for the Term, for the limited
purposes set forth in this Agreement, with full power and authority to render
the Scheduling Agent Services, and Duke accepts such appointment.

8.1.1 Costs. The Parties acknowledge and agree that all costs and expenses
incurred by Duke to provide Scheduling Agent Services are included in the
charges set forth in Article 7 and, except as provided for in Section 7.1.6, EMC
shall not be charged any additional rates, charges or fees in connection with
Duke’s provision of Scheduling Agent Services.

8.2 Scheduling Policies. In providing Scheduling Agent Services hereunder, Duke
shall comply with (i) the NCEMC policies set forth in Attachment 8-1 (“NCEMC
Policies”), (ii) the SEPA policies set forth in Attachment 8-2 (“SEPA Policies”)
and (iii) the Transmission Provider’s OATT.

8.3 Protocols. In advance of the Commencement Date, and from time to time
thereafter as the Operating Committee may determine appropriate, the Operating
Committee shall meet and make reasonable efforts to establish written protocols
and procedures to implement the Scheduling Agent Services provided for
hereunder, which shall be reviewed and agreed to by the Parties; provided
however, that the Operating Committee’s failure to agree upon such protocols and
procedures shall not affect in any way the Parties’ respective rights and
obligations under this Article 8.

8.4 Scheduling Agent Services (Commencement Date through December 31, 2010).
Beginning on the Commencement Date and continuing through December 31, 2010,
Duke shall provide the following Scheduling Agent Services:

8.4.1 Duke shall develop next-Day and multi-Day forecasts of EMC’s Native Load.

8.4.2 Duke shall provide NCEMC with seven-Day and next-Day forecasts of EMC’s
Native Load.

8.4.3 Duke shall receive each Day the Nominations from MSCG, and confirm such
Nominations with MSCG in writing, facsimile, e-mail, or any other agreed-upon
form of communication.

8.4.4 Duke shall provide to NCEMC the Nominations that Duke receives pursuant to
Section 8.4.3.

 

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8.4.5 Duke shall provide operational forecasts of EMC Native Load as may be
requested by the Transmission Provider from time to time.

8.4.6 Duke shall receive weekly availability schedules from SEPA.

8.4.7 Duke shall provide to SEPA week-ahead schedules and real-time adjustments
to the week-ahead schedules of EMC’s SEPA Entitlement.

8.4.8 Duke shall receive any information or notices from NCEMC, MSCG, or SEPA
relating to any changes in the schedules of electric energy to be delivered to
serve EMC’s Native Load.

8.4.9 Duke shall provide daily and Monthly reconciliation and checkout services
to EMC with respect to each of NCEMC, SEPA, the Transmission Provider, and MSCG
in connection with services provided by such entities to serve EMC’s Native
Load.

8.4.10 Duke shall reasonably cooperate with EMC to enable EMC to address issues
that may arise in connection with invoices or bills rendered to EMC by the
Transmission Provider in connection with the delivery of electric energy under
the PPA, the WPSA, or EMC Contract Resources described in Sections 5.1.3, 5.1.4
and 5.1.5, the SEPA Contract to serve EMC’s Native Load. Such cooperation shall
include providing EMC with data, records, and other information available to
Duke and related to the invoices or bills at issue.

8.4.11 If Duke has information that MSCG was not informed of any transmission
constraints or other impediments to deliveries under the PPA to the delivery
points designated by MSCG, Duke shall, as promptly as reasonably practical,
inform MSCG of any transmission constraints or other impediments to deliveries
under the PPA to the delivery points designated by MSCG.

8.4.12 Duke shall serve as EMC’s Purchasing – Selling Entity.

8.4.13 Duke shall schedule to the Transmission Provider electric energy to be
delivered from the EMC Contract Resources described in Sections 5.1.3, 5.1.4 and
5.1.5.

8.5 Scheduling Agent Services (January 1, 2011 through Termination). Beginning
on January 1, 2011, and continuing through the date of termination of this
Agreement, Duke shall provide the following Scheduling Agent Services:

8.5.1 Duke shall develop next-Day and multi-Day forecasts of EMC’s Native Load.

8.5.2 Duke shall provide NCEMC with seven-Day and next-Day forecasts of EMC’s
Native Load.

8.5.3 Duke shall provide to NCEMC with the daily schedule of electric energy to
be made available each Hour to serve EMC’s Native Load under the WPSA.

8.5.4 Duke shall receive weekly availability schedules from SEPA.

 

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8.5.5 Duke shall provide to SEPA week-ahead schedules and real-time adjustments
to the week-ahead schedules of EMC’s SEPA Entitlement.

8.5.6 Duke shall provide operational forecasts of EMC Native Load as may be
requested by the Transmission Provider from time to time.

8.5.7 Duke shall receive any information or notices from NCEMC or SEPA relating
to any changes in the schedules of electric energy to be delivered to serve
EMC’s Native Load.

8.5.8 Duke shall provide daily and Monthly reconciliation and checkout services
to EMC with respect to NCEMC, SEPA, and the Transmission Provider in connection
with services provided by those entities to serve EMC’s Native Load.

8.5.9 Duke shall reasonably cooperate with EMC to enable EMC to address issues
that may arise in connection with invoices or bills rendered to EMC by the
Transmission Provider in connection with the delivery of electric energy under
the WPSA, EMC Contract Resources described in Section 5.2, or the SEPA Contract
to serve EMC’s Native Load. Such cooperation shall include, but is not limited
to, providing EMC with data, records and other information available to Duke and
related to the invoices or bills at issue.

8.5.10 Duke shall serve as EMC’s Purchasing – Selling Entity.

8.5.11 Duke shall schedule to the Transmission Provider electric energy to be
delivered from the EMC Contract Resources described in Section 5.2.

8.6 New EMC Resources. If EMC obtains one or more new EMC Contract Resources in
accordance with the provisions of Article 5 of this Agreement, the Parties shall
negotiate appropriate revisions to this Agreement or the protocols and
procedures developed under Section 8.3 as necessary for Duke to provide
Scheduling Agent Services hereunder in connection with such new EMC Contract
Resources; provided however, the failure of the Parties to agree on revisions to
this Agreement or the protocols and procedures developed under Section 8.3 shall
not relieve Duke of its obligation to schedule such new EMC Contract Resources.

8.7 Errors in Schedules. If Duke is notified by the Transmission Provider,
NCEMC, SEPA or a third party with respect to EMC Contract Resources described in
Sections 5.1.3, 5.1.4, 5.1.5 or 5.2, that any schedule provided by Duke as
Scheduling Agent has been rejected, Duke shall provide to the Transmission
Provider, NCEMC, SEPA or third party, as applicable, a substitute schedule for
the Day in question taking into account the information provided by the
Transmission Provider, NCEMC, SEPA or third party, as applicable, in connection
with such rejection.

8.8 EMC Responsibilities. In connection with Duke’s undertaking Scheduling Agent
Services, EMC shall have the following obligations:

8.8.1 EMC shall provide Duke, as Scheduling Agent, with: (a) meter data such
that Duke may calculate aggregate load in discrete locations or in aggregate
load areas as determined by Transmission Provider; (b) five (5) years of the
most recent historical load data; and (c) the Power Requirements Study (or such
successor document) that EMC submits annually to the RUS.

 

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8.8.2 EMC shall make arrangements with NCEMC, SEPA, the Transmission Provider,
and any third party responsible for providing for deliveries of new EMC
Resources as provided for in Section 8.6, as are necessary for those parties to
communicate with, and accept or receive schedules or other information submitted
by or to Duke as Scheduling Agent.

8.8.3 During the period from the Commencement Date through December 31, 2010,
EMC shall direct MSCG to communicate with, and provide Nominations to Duke as
Scheduling Agent.

8.8.4 EMC shall reasonably cooperate with Duke as necessary for Duke to assist
EMC in addressing issues that may arise in connection with invoices or bills
rendered to EMC by the Transmission Provider, as provided for in Sections 8.4.10
and 8.5.9.

8.9 Duke’s Liability. Duke shall be liable for any damages arising from Duke’s
unexcused failure to comply with the provisions of this Article 8.

8.10 Termination Assistance Service. Commencing six (6) Months prior to the
scheduled termination of this Agreement and continuing through the termination
date of this Agreement (the “Termination Assistance Period”), Duke shall provide
to EMC, or at EMC’s request to EMC’s designee, such reasonable cooperation,
assistance and service to cause the orderly and timely transition and migration
of Scheduling Agent Services provided under this Agreement to EMC’s new energy
supplier and/or scheduling agent without interruption or adverse effect
(“Termination Assistance Service”). EMC may shorten or terminate the Termination
Assistance Period by providing written notice to Duke.

Article 9

Transmission and Ancillary Services

9.1 Delivery Obligations. Duke shall be responsible for making all arrangements
necessary and paying for all costs incurred under contractual arrangements
necessary to deliver the electric energy provided hereunder to the Delivery
Points. EMC shall be responsible for making and paying for all contractual
arrangements necessary for the delivery of the electric energy provided
hereunder from the Delivery Points.

9.2 Transmission Arrangements. This Agreement does not obligate Duke to provide
any Transmission Service or Ancillary Services, and does not confer upon EMC any
rights to service over the Transmission System. EMC shall be responsible for
making separate contractual arrangements with the Transmission Provider for all
Transmission Service and Ancillary Services to be provided to EMC.

9.3 Ancillary Services. Duke shall make Commercially Reasonable Efforts to
assist in any effort by EMC to have the Transmission Provider recognize that the
electric capacity and energy provided hereunder satisfies one or more of such
Transmission Provider’s Ancillary Services requirements; provided, however, that
nothing in this Section 9.3 shall in any way obligate Duke to provide, make
arrangements for, or pay for any Ancillary Services except as expressly provided
for in Section 9.3.1.

 

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9.3.1 Energy Imbalance Responsibility. Duke shall reimburse EMC in accordance
with the provisions of Article 13 for any Hour in which, as a result of Duke’s
unexcused failure to comply with the provisions of Article 8, Energy Imbalance
Service charges are incurred by EMC in accordance with the Transmission
Provider’s OATT. EMC shall reimburse Duke in accordance with the provisions of
Article 13 for any Hour in which, as a result of Duke’s unexcused failure to
comply with the provisions of Article 8, Energy Imbalance Service compensation
is provided to EMC in accordance with the Transmission Provider’s OATT.

9.4 Regional Transmission Organization. If an ISO, RTO, ITC or other future
organization, agency or authority that has been approved by FERC to serve as the
Transmission Provider, then Duke and EMC will reasonably cooperate to make or
enter into arrangements with such entity to assist such entity with the
implementation of this Agreement. It is expressly understood that neither the
implementation of an ISO, RTO, ITC or other future organization, agency or
authority that has been approved by FERC to serve as the Transmission Provider
nor the failure of the Parties to enter into the arrangements contemplated under
this Section 9.4 shall relieve either Party of any obligations under this
Agreement.

9.4.1 Cost Responsibility. Except as provided in Section 9.3.1, it is expressly
understood that nothing herein shall be construed to in any way relieve EMC of,
or impose upon Duke, the responsibility for any fees, costs, or charges
(including but not limited to congestion costs, transmission losses, or the
costs or charges to secure financial transmission rights or the equivalent
thereof) that may be imposed on EMC by an ISO, RTO, ITC or other future
organization, agency or authority that has been approved by FERC to serve as the
Transmission Provider in connection with the provision of Transmission Service
or Ancillary Services. It is further expressly understood that Duke shall have
no right or interest in any financial transmission rights or the equivalent
thereof that are allocated, assigned, transferred or acquired by EMC.

9.4.2 Congestion Costs. In the event that the Transmission Provider implements a
pricing methodology that allocates congestion costs on a locational basis, in
determining the dispatch order of Duke’s Generation System, Duke shall make no
adverse distinction between Duke’s Native Load and Duke’s obligations to supply
FFR Supplemental Service or Partial Requirements Service, as applicable under
this Agreement. Duke further agrees that, in the event it designates Delivery
Points for Duke’s Generation System, Duke shall make no adverse distinction
between Duke’s Native Load and Duke’s obligations to supply FFR Supplemental
Service or Partial Requirements Service, as applicable under this Agreement. The
Parties shall reasonably cooperate with each other in an effort to develop and
implement congestion management strategies designed to minimize the incurrence
of congestions costs associated with the delivery of electric energy under this
Agreement. Duke will provide EMC with recommended strategies to manage such
congestion costs, under terms that would not subject Duke’s Native Load to any
costs that Duke would not otherwise incur, and if EMC agrees with such
recommendation, Duke will use Commercially Reasonable Efforts to implement the
recommended congestion management strategies. Duke shall also use Commercially
Reasonable Efforts to comply with the congestion management rules that may be
adopted by the Transmission Provider.

 

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Article 10

Operating Committee

10.1 Operating Committee. The Parties shall establish an Operating Committee
consisting of one (1) Representative each. The Operating Committee shall act
only by unanimous agreement or consent. Duke and EMC shall designate their
respective Representatives to the Operating Committee, plus any alternate, by
written notice delivered in accordance with Section 16.22 within thirty
(30) Days after the Effective Date. Each Party’s Representative on the Operating
Committee is authorized to act on behalf of such Party with respect to any
matter arising under this Agreement.

10.2 Duties of the Operating Committee. The Operating Committee shall facilitate
the coordination and interaction between the Parties with respect to the
performance of the duties and obligations imposed on the Parties hereunder,
including development or revision of appropriate protocols and procedures
therefor. The Operating Committee shall not, however, have any authority to
modify or otherwise alter the Parties’ rights and obligations under this
Agreement.

Article 11

Demand Side Management

11.1 Availability of Demand Side Management Resource Programs. EMC may make
available to EMC’s Native Load customers EMC Demand Side Management Resource
Programs to the same extent and under comparable terms and conditions as Duke’s
Demand Side Management Resource Programs; provided, however, that EMC may not
make available to EMC’s Native Load customers any demand side management
resource programs or similar programs other than such EMC Demand Side Management
Resource Programs unless EMC is otherwise required by RUS or by applicable Law
to make other demand management side resource programs available to EMC’s Native
Load customers or is otherwise permitted under Section 11.7. Except as set forth
in Section 4.2.6, the terms and conditions of EMC Demand Side Management
Resource Programs shall be applied to EMC’s Native Load customers and enforced
by Duke in the same or comparable manner as they are applied to Duke’s Native
Load retail customers and enforced by Duke. Except as set forth in
Section 4.2.6, in implementing and operating such EMC Demand Side Management
Resource Programs, Duke shall make no adverse distinction with respect to EMC’s
Native Load.

11.2 Changes to Demand Side Management Resource Programs. Upon ninety (90) Days
prior written notice, Duke shall advise EMC of any modifications, additions, or
deletions that have been or will be made to the Demand Side Management Resource
Programs, and the EMC Demand Side Management Resource Programs available
hereunder to EMC’s Native Load customers shall be deemed to have been revised to
reflect such modifications, additions, or deletions without any further action
required by either Party.

 

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11.3 Credits. Except for any EMC Demand Side Management Resource Program
implemented pursuant to Section 11.7 of this Agreement, for each EMC Native Load
customer that implements an EMC Demand Side Management Resource Program, EMC
shall be entitled to a billing credit. Such billing credit shall be calculated
in accordance with the credit applicable for the Demand Side Management Resource
Program, as specified in the rider approved and on file with NCUC for such
Demand Side Management Resource Program. Each Month, Duke shall aggregate the
total billing credits to which EMC is entitled pursuant to this Section 11.3,
and provide EMC a credit on the Monthly statement delivered in accordance with
Section 13.2 equal to the total billing credits for such Month.

11.4 Necessary Arrangements. To the extent that an EMC Native Load customer
agrees to implement an EMC Demand Side Management Resource Program, the Parties
shall cooperate in preparing any detailed implementation procedures and
arrangements required to implement such program, provided that, except for any
EMC Demand Side Management Resource Program implemented pursuant to Section 11.7
of this Agreement, Duke shall retain sole operational control over such EMC
Demand Side Management Resource Program implemented. The failure of the Parties
to agree on detailed implementation procedures and obligations shall not affect
Duke’s obligation to provide EMC with credits as determined by Section 11.3.

11.4.1 Audits. For each EMC Demand Side Management Resource Program whose credit
depends upon the number of EMC Native Load customers, EMC shall be required to
provide Duke written notice, by no later than January 31 of each Year, of the
number of EMC Native Load customers with whom EMC has entered into arrangements
pursuant to this Section 11.4 for such EMC Demand Side Management Resource
Program. Duke shall have the right periodically to perform audits, in accordance
with the terms of Section 13.6, to verify the accuracy of the notices concerning
the number of EMC Native Load customers with whom EMC has entered into
arrangements for each EMC Demand Side Management Resource Program. Based on the
results of such audits, Duke shall be entitled, in accordance with the terms of
Section 13.2.2, to revise or adjust the level of credits that Duke previously
had provided EMC.

11.5 Start-Up Conditions. No later than sixty (60) Days after the Effective
Date, Duke shall conduct a system-wide test of each EMC Demand Side Management
Resource Program to determine its capability. Duke shall provide EMC with the
results of such test no later than five (5) Business Days after the completion
of the system-wide test. Duke shall not be required to provide credits for EMC
Demand Side Management Resource Programs unless the applicable standards and
requirements specified for Duke’s Demand Side Resource Management Programs under
the riders approved and on file with the NCUC shall have been met, and the
testing provided for in this Section 11.5 shall have been accomplished.

11.6 Periodic Testing. Duke shall have the right periodically, but no less than
once per Year, to conduct a system-wide test of each EMC Demand Side Management
Resource Program to determine whether the tested EMC Demand Side Management
Resource Program is capable of providing a level of demand reduction equal to
the level of the credit that EMC is, at the time of such system-wide test,
receiving for such EMC Demand Side Management Resource Program. Subject to
Section 11.6.1, if, at the time of such system-wide test, one or more EMC Demand
Side Management Resource Program(s) do not provide the level of demand reduction
equal to the level of the credit that EMC is receiving for such EMC Demand Side
Management Resource

 

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Program(s), Duke shall have the right to (i) reduce the credit provided to EMC
to the actual level of demand reduction provided at the time of the system-wide
test and, in accordance with the terms of Section 13.2.2, to revise or adjust
the level of credits that Duke previously had provided EMC, and (ii) provide
written notice within ninety (90) Days of the system-wide test, to cancel such
EMC Demand Side Management Resource Program(s).

11.6.1 Retesting. Within sixty (60) Days of any failure of a system-wide test
for an EMC Demand Side Management Resource Program, EMC shall have the right to
have Duke conduct a retest in order to demonstrate that such EMC Demand Side
Management Resource Program is capable of providing the level of demand
reduction equal to the level of the credit that EMC previously was receiving for
such EMC Demand Side Management Resource Program. To the extent that any such
system-wide retest demonstrates that the EMC Demand Side Management Resource
Program is capable of providing demand reduction, the credit provided to EMC
shall be restored to the prior level or such lesser level as demonstrated by the
result of such rescheduled test and, to the extent applicable, Duke shall, in
accordance with the terms of Section 13.2.2, revise or adjust the level of
credits that Duke previously had provided EMC and any notice to terminate
rendered by Duke pursuant to 11.6 shall be null and void.

11.7 EMC Demand Side Management. If Duke’s Annual Planning Period shifts from
the Summer Period to the Winter Period, then EMC shall have the authority to
implement and call upon EMC Demand Side Management Resource Programs to control
EMC’s Native Load demands coincident with the twenty (20) highest Hourly
(integrated sixty-minute) Duke Schedule 1 Demands during the Winter Period to
the level equal to but not below the average of (i) the average of EMC’s Native
Load demands coincident with the twenty (20) highest Hourly (integrated
sixty-minute) Duke Schedule 1 Demands during the immediately preceding Summer
Period and (ii) the average of EMC’s Native Load demands coincident with the
twenty (20) highest Hourly (integrated sixty-minute) Duke Schedule 1 Demands
during the second preceding Summer Period. For example, if (i) the Annual
Planning Period during May 2012 - April 2013 is the Summer Period (May 2012 -
September 2012), and the average of EMC’s integrated sixty (60) minute EMC
Native Load demands coincident with the twenty (20) highest Hourly Duke Schedule
1 Demands during such period is 100 MWs; and (ii) the Annual Planning Period
during May 2013 - April 2014 is the Winter Period (October 2013 - April 2014),
and the average of EMC’s integrated sixty (60) minute EMC Native Load demands
coincident with the twenty (20) highest Hourly Duke Schedule 1 Demands during
the Summer Period immediately preceding such Winter Period (i.e., May 2013 -
September 2013) is 102 MWs; then EMC may call upon EMC Demand Side Management
Resource Programs to control EMC’s integrated sixty (60) minute EMC Native Loads
demands coincident with the twenty (20) highest Hourly Duke Schedule 1 Demands
during October 2013 - April 2014 to the level equal to but not below 101 MWs. It
is expressly acknowledged that (a) Duke shall also have the right to call upon
any available EMC Demand Side Management Resource Program implemented pursuant
to this Section 11.7, and (b) EMC shall not be entitled to a billing credit
under Section 11.3 (or any other provision of this Agreement) in connection with
any EMC Demand Side Management Resource Program implemented pursuant to this
Section 11.7.

 

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Article 12

Modification of This Agreement

12.1 Unilateral Modification. Except as provided in Section 12.3:

No unilateral modification, amendment or other change to the terms of this
Agreement shall be permitted or deemed effective for any reason, and the rates,
terms and conditions specified herein shall not be subject to change through
application to FERC pursuant to the provisions of Sections 205 or 206 of the
Federal Power Act absent the written agreement of both Parties. Any amendment or
modification to this Agreement shall be deemed enforceable if and only if such
amendment or modification (a) has been reduced to writing, (b) has been agreed
to and duly executed by both Parties in writing, and (c) has received all
requisite approvals of Governmental Authorities necessary for the effectiveness
thereof. Each Party hereby irrevocably waives its rights, including any rights
under Sections 205 and/or 206 of the Federal Power Act, to file a complaint,
request an investigation, or make any unilateral rate-change request seeking:
(a) an order from FERC finding that any rate or provision in this Agreement is
unjust or unreasonable; (b) any refund with respect to this Agreement’s rates;
or (c) any other unilateral modification to this Agreement. Each Party agrees
not to make any such unilateral filing or request, and agrees and warrants that
these covenants and waivers shall be binding notwithstanding any regulatory,
market, or other change that may occur at any time during the Term.

12.2 Mobile-Sierra Public Interest Standard. Except as provided in Section 12.3,
to the extent this Agreement is challenged by any person or its terms are
subjected to review under the Federal Power Act or other Laws, the “just and
reasonable” standard shall not apply. Instead, absent the agreement of both
Parties to the proposed change, and except as provided in Section 12.3, the
standard of review for changes to this Agreement proposed by a Party, a
non-party, or FERC acting sua sponte shall be the “public interest” standard of
review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350
U.S. 332 (1956); Federal Power Commission v. Sierra Pacific Power Co., 350 U.S.
348 (1956).

12.3 Changes To Certain Charge Components. Notwithstanding anything else herein
to the contrary, nothing contained herein shall be construed as affecting in any
way the right of either Party to unilaterally make application to FERC under
Sections 205 or 206 of the Federal Power Act (i) to change the depreciation
rates and nuclear decommissioning accrual used in Schedule 1, (ii) to include
additional cost items that are incurred in providing FFR Supplemental Service or
Partial Requirements Service, as applicable, to EMC that are not included in
Schedule 1, (iii) to exclude from Schedule 1 cost items that are no longer
incurred in providing FFR Supplemental Service or Partial Requirements Service,
as applicable to EMC, or (iv) to change Schedule 1 to reflect changes in Duke’s
accounting consistent with the Accounting Requirements (including the addition
of new accounts and the removal of obsolete accounts). In addition, in the event
that (a) EMC implements new time-of-use rates or materially modifies its
existing time-of-use rates, for some or all of EMC’s Native Load customers,
(b) such rates result in a reduction of EMC’s Monthly Billing Demand under
Sections 7.2.2.2 or 7.3.2.2, and (c) such Monthly Billing Demand reduction does
not result in a commensurate reduction in the EMC demands that Duke utilizes in
Duke’s Generation Planning Practices, Duke may make unilateral application to
FERC

 

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under Section 205 of the Federal Power Act to change the calculation of the
Monthly Billing Demand set forth in Sections 7.2.2.2 or 7.3.2.2 to more
appropriately reflect the costs that Duke incurs in providing service under this
Agreement. In the event that Duke makes such a filing with FERC, EMC may oppose
such filing, and, in addition, shall be free to propose any other method for
calculating the Monthly Billing Demands set forth in Sections 7.2.2.2 or 7.3.2.2
to more appropriately reflect the costs that Duke incurs in providing service
under this Agreement.

12.4 Standard of Review for Permitted Changes. The Parties acknowledge that, as
of the Effective Date, FERC has issued a proposed rule that, if adopted, would
specify the language for parties to include in future agreements where the
parties intend that the “just and reasonable” standard of review apply to
amendments to the agreements. Notwithstanding the language that ultimately may
be adopted by FERC, it is the intent of the Parties that the standard of review
that FERC shall apply when acting on proposed modifications to this Agreement
that are permitted under Section 12.3, either on FERC’s own motion or on behalf
of a signatory or non-signatory, shall be the “just and reasonable” standard of
review rather than the “public interest” standard of review.

12.5 Scope of Waiver. Nothing in this Article 12 shall be construed to modify or
limit any Party’s right to enforce the express terms of this Agreement as they
are written in this Agreement.

Article 13

Billing and Payment

13.1 Billing Period. Unless otherwise specifically agreed upon by the Parties in
the terms of this Agreement or otherwise in writing, the Month shall be the
standard period for determining all billings and payments under this Agreement.

13.2 Billing Statements.

13.2.1 Initial Statements. After the end of each Billing Period, Duke shall
deliver to EMC a statement setting forth for the Billing Period (i) the sum of
the electric energy delivered and/or received for all Hours during that Billing
Period, and (ii) Duke’s calculation of any amounts due from EMC under this
Agreement for the Billing Period. In addition, in the event that there are
amounts due from Duke to EMC under this Agreement for a Billing Period, EMC
shall deliver to Duke, after the end of such Billing Period, a statement setting
forth for the Billing Period EMC’s calculation of any amounts due from Duke
under this Agreement for the Billing Period. Notwithstanding the foregoing, a
Party’s failure to render a statement as set forth above shall not relieve the
other Party from its obligation to make payment to the billing Party when such
statement is rendered, provided such statement is rendered within one (1) year
after the end of the Billing Period.

13.2.2 Subsequent Payment Adjustments. The Parties understand that in certain
cases Monthly billings will need to be made on an estimated basis. In addition,
the Parties understand that after-the-fact adjustments to amounts owed or
revenues received may be made in order to reflect correctly the amounts payable
by one Party to the other under this Agreement. Each Party

 

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shall cooperate in good faith with the other Party to obtain the requisite
information and perform the necessary computations so as to true-up or otherwise
adjust any estimated or adjusted billings promptly.

13.3 Timeliness of Payment. Unless otherwise agreed by the Parties, all
statements rendered under this Agreement, whether by Duke or EMC, shall be due
and payable in accordance with each Party’s statement instructions on or before
the later of the twentieth (20th) Day of each Month, or the tenth (10th) Day
after receipt of the statement or; if such Day is not a Business Day, then on
the next Business Day. Each Party shall make payments in immediately available
funds by electronic funds transfer, or by other mutually agreeable method, to
the account designated in writing by the other Party. Any non-disputed amounts
(other than amounts for which payment may be withheld pursuant to Section 13.5)
not paid by the due date shall be deemed delinquent and shall accrue interest at
the Interest Rate, such interest to be calculated from and including the due
date to but excluding the date the delinquent amount is paid in full.

13.4 Netting of Payments. The Parties hereby agree that they shall discharge
mutual debts and payment obligations due and owing to each other on the same
date through netting, in which case all amounts owed by each Party to the other
Party under this Agreement during the Billing Period, including any related
interest, payments, and credits, shall be netted so that only the excess amount
remaining shall be paid by the Party who owes it. If no mutual debts or payment
obligations exist and only one Party owes a debt or obligation to the other
Party during the Monthly Billing Period, including but not limited to any
interest, payments, or credits, that Party shall pay such sum in full when due.

13.5 Disputes and Adjustments of Statements. A Party may, in good faith, dispute
the correctness of any statement or any adjustment to a statement, rendered
under this Agreement or adjust any statement for any arithmetic or computational
error within twenty-four (24) Months of the date the statement, or adjustment to
a statement, was rendered. If a statement or portion thereof, or any other claim
or adjustment arising under this Agreement is disputed, the disputing Party
shall provide written notice to the other Party (the “Billing Dispute Notice”)
which (a) states the good faith basis for the dispute, (b) specifies the amount
in dispute (the “Disputed Amount”), if any, and (c) provides documentation
reasonably supporting the determination of the Disputed Amount. The disputing
Party shall, at its option, (a) make payment to the other Party of the Disputed
Amount under protest and thereafter shall be reimbursed by the other Party for
any amount determined to be refundable after the resolution of such dispute or
(b) withhold one half (1/2) of the Disputed Amount and make payment to the other
Party of the other one half (1/2) of the Disputed Amount. Payment to the other
Party of one half (1/2) of the Disputed Amount shall not relieve the disputing
Party of the obligation to pay interest accrued at the Interest Rate from and
including the date such payment was due to but excluding the date of such
payment of any portion of such Disputed Amount withheld and determined to be due
and payable after the resolution of such dispute. Likewise, the other Party
shall not be relieved of the obligation to pay interest accrued at the Interest
Rate from and including the date such payment was made to but excluding the date
of reimbursement of any portion of such Disputed Amount paid and determined to
be refundable after the resolution of such dispute.

In the event that a Party, by timely notice to the other Party, disputes the
correctness of a statement or portion thereof or any other claim or adjustment
arising under this Agreement, the

 

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other Party shall promptly review the disputed statement or adjustment and shall
notify the disputing Party, within forty-five (45) Days following receipt of the
Billing Dispute Notice, of the amount of any error or the amount of any payment
or reimbursement that the disputing Party is required to make or is entitled to
receive. Payments determined to be due by the disputing Party shall be included
on the next Monthly statement, and shall include interest accrued at the
Interest Rate from and including the due date to but excluding the date paid.
Reimbursements determined to be due from the other Party shall be included on
the next Monthly statement, and shall include interest accrued at the Interest
Rate from and including the due date to but excluding the date reimbursed. If
the disputing Party disagrees with the other Party’s resolution of any dispute,
then the Parties shall submit the dispute for resolution in accordance with
Article 14.

Inadvertent overpayments shall be returned upon request or deducted by the Party
receiving such overpayment from subsequent payments, with interest accrued at
the Interest Rate from and including the date of such overpayment to but
excluding the date repaid or deducted by the Party receiving such overpayment.
Any dispute with respect to a statement is waived unless the other Party is
notified in accordance with this Section 13.5 within twenty-four (24) Months
after the statement is rendered or any adjustment to the statement is made.
Neither Party shall have the right to challenge any statement, to invoke
arbitration of the same or to bring any court or administrative action of any
kind questioning the propriety or any other aspect of such statement after a
period of twenty-four (24) Months from the date the statement was rendered;
provided, however, that in the case of a statement containing estimates, such
twenty-four (24) Month period shall run from the date the statement is adjusted
to reflect the actual amounts due.

13.6 Records and Audits. Each Party shall keep such records and documents as may
be needed to afford a clear and complete history of all transactions under this
Agreement, and the cost information used to calculate the charges for such
transactions, for twenty-four (24) Months following the Month in which such
transaction occurs. In addition, during such twenty-four (24) Month period, EMC
shall have the right to audit all records, including phone and computer records,
related to Duke’s performance of its obligation not to adversely distinguish
against EMC’s Native Load under Section 4.3.3, Section 6.2, and Section 9.4.2 of
this Agreement. If a Party initiates an audit through a notice to the other
Party within the time period provided herein, the records and documents related
to such audit are required to be maintained under this Section 13.6, then the
other Party will retain such records and documents until such audit is complete.
If a Party issues an Original Notice pursuant to Article 14, then the Parties
will retain the records and documents relating to such dispute until the
resolution of such dispute. In maintaining such records and documents, EMC and
Duke may rely upon the logs and other meter information routinely recorded by
Transmission Providers or utilities responsible for coordination of the
purchases and sales. During such twenty-four (24) Month period, either Party, or
any Representatives of such Party, shall have the right, at its sole expense and
during normal working Hours, to examine the records of the other Party,
including documents and records held by third parties, to the extent reasonably
necessary to verify the accuracy of any statement, charge, or computation made
pursuant to this Agreement. The Party requesting the audit shall pay the costs
associated with any independent auditor. Upon the request of the auditing Party,
the document custodian of the other Party shall certify to the auditing Party
that, to the best of such person’s knowledge after reasonable investigation, the
documents and records supplied are true and complete and, in the case of copies,
are true, complete and correct copies of the original documents requested by the
auditing Party.

 

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13.6.1 Procedures. EMC may make a written request for Duke to provide access to
documents and records to verify the accuracy of any statement, charge or
computation made pursuant to this Agreement. Within ten (10) Business Days of
the receipt of a written request from EMC, Duke shall either provide EMC, or its
Representative, with access to the documents and records which are the subject
of the written request or provide EMC with copies of the original documents and
records. If Duke elects to provide EMC, or its Representative, with access to
the documents and records requested by EMC, EMC or its Representative shall be
permitted to make, at its own expense, copies of the documents and records to
which it or its Representative has been provided access. Any copies made by EMC
or its Representative shall be subject to the confidentiality provisions set
forth in Section 16.6. If Duke is unable to provide EMC with access or copies
within ten (10) Business Days of the receipt of EMC’s written request because it
is unable to locate or gain access to such documents and records after
reasonable investigation, Duke shall, within ten (10) Business Days of the
receipt of such written request, provide EMC with notice describing the reasons
for its failure to provide access to or copies of the documents and records, its
efforts to obtain such documents and records, and its best estimate of the time
in which EMC will be permitted access to or provided copies of such documents
and records. The twenty-four (24) Month period provided for in Section 13.5
shall be tolled from the date Duke gives notice describing the reasons for its
failure to provide access to or copies of the documents and records until Duke
shall have (i) provided EMC with copies or access to all documents and records
specified in EMC’s written request or (ii) Duke’s document custodian shall have
certified, that to the best of his knowledge after reasonable investigation that
such document does not exist or Duke cannot locate or produce such document or
records.

13.6.2 Adjustments Resulting from Audits. If any audit or examination under this
Section 13.6 reveals any inaccuracy in any statement, the necessary adjustments
in such statement and the payments thereof shall be made promptly and shall
accrue interest at the Interest Rate from the date the overpayment or
underpayment was made until paid; provided, however, that no adjustment for any
statement or payment shall be made unless objection to the accuracy thereof was
made prior to the lapse of twenty-four (24) Months from the rendition thereof,
and thereafter any objection shall be deemed waived.

13.6.3 Confidentiality. The auditing Party shall keep confidential any
information obtained in the audit. If requested, a Party shall provide to the
other Party statements evidencing the quantity of electric energy provided under
this Agreement for up to the prior twenty-four (24) Months. If an audit is
requested with respect to any records held by the a Party or a third party and
those records cannot be disclosed to the requesting Party as a result of a
confidentiality obligation, then to the extent legally permissible, the auditing
Party shall select an independent auditor to perform the audit consistent with
the Parties’ rights under this Agreement and with such confidentiality
arrangements as may be required by the confidentiality obligation in question.

 

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Article 14

Dispute Resolution

14.1 Arbitration. Except as otherwise provided below, any dispute arising out of
or in connection with this Agreement or its performance that cannot be resolved
after good faith discussions and negotiations between the Parties as set forth
in Section 14.2 shall be submitted to binding arbitration. A dispute with
respect to whether a Material Adverse Ruling meets the materiality standard
specified in Section 2.3.2.2(c)(1) or (c)(2) shall be subject to dispute
resolution pursuant to Section 2.3.2.2.2. A dispute with respect to an invoice
shall first be subject to the procedures set forth in Section 13.5, and if such
dispute is not resolved in accordance with such procedures, then such dispute
shall be submitted to binding arbitration in accordance with this Article 14.
Any arbitration commenced under this Article 14 shall be conducted in accordance
with the North Carolina Arbitration Act, N.C.G.S. Section 1-567 et seq., and the
non-administered arbitration rules and procedures of the CPR Institute for
Dispute Resolution (“CPR”) in effect at the time arbitration is commenced,
except where specifically modified by this Agreement.

14.2 Negotiation and Notice of Arbitration. Prior to initiating arbitration
hereunder, a Party shall provide the other Party with written notice of the
dispute, a proposed means for resolving the same, and support for the Party’s
position (“Original Notice”). Thereafter, Representatives of the Parties shall
meet in person to discuss the matter and attempt in good faith to reach a
negotiated resolution of the dispute. The Parties agree to provide and exchange
supporting facts, records and information regarding the dispute (including
calculation and bases) as part of the good faith negotiations. If the Parties
have not agreed upon a resolution of the dispute within thirty (30) Days after
the provision of the Original Notice or such other time period as the Parties
may agree in writing to allow for discussions and negotiation (“Negotiation
Period”), then at any time after the end of the Negotiation Period, a Party may
provide written notice to the other declaring an impasse (“Impasse Notice”) and
initiating binding arbitration in accordance with the further provisions of this
Article 14. A Party providing an Impasse Notice shall also contemporaneously
notify all entities within the EMC Group of the provision of its Impasse Notice.

14.3 Individual, Joint or Consolidated Arbitration. If, within thirty
(30) Business Days of EMC’s provision of an Impasse Notice, Blue Ridge and/or
Piedmont also provides an Impasse Notice relating to substantially the same
issue as raised by EMC’s Impasse Notice, or if Duke contemporaneously provides
each of EMC, Blue Ridge and/or Piedmont an Impasse Notice relating to
substantially the same issue, then each entity within the EMC Group shall have
ten (10) Business Days following the expiration of such thirty (30) Business Day
period to provide written notification to Duke stating whether or not such
entity will voluntarily proceed in a joint or combined arbitration.

If EMC and one or more of the entities within the EMC Group that have provided
or received Impasse Notices within the specified time period relating to
substantially the same issue elect to proceed individually or in more than one
arbitration proceeding, Duke shall have the right to file a motion to
consolidate such Impasse Notices with EMC’s Impasse Notice in a single
proceeding. The motion to consolidate such Impasse Notices shall be served
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Business Days of the date when each entity within the EMC Group has provided
notice as to whether or not it will voluntarily proceed in a consolidated
arbitration. Duke’s motion to consolidate shall be decided in the first
commenced arbitration by one arbitrator (if the Streamlined Arbitration Process
is used) or one (1) arbitration panel (if the Standard Arbitration Process is
used), provided that the arbitrator(s) shall satisfy the qualifications required
pursuant to the third sentence of Section 14.6.1(1) or Section 14.6.2(2), as
applicable, with respect to all entities in the arbitration proceedings that are
the subject of the motion to consolidate. If Impasse Notices are simultaneously
given by EMC and one or more other entities within the EMC Group, then Duke
shall have sole discretion to designate which of the Impasse Notices shall be
treated as the first given for purposes of determining which arbitrator(s) shall
decide the motion to consolidate, and shall provide written notice of such
designation in the motion to consolidate arbitrations. The procedures set forth
in Sections 14.6.1 and 14.6.2 for each arbitration proceeding in which the
motion to consolidate was not filed shall be held in abeyance pending the
decision on the motion to consolidate by the arbitrator(s) in the arbitration
proceeding in which the motion to consolidate was filed.

In determining whether consolidation of one or all is appropriate, the
arbitrator(s) shall consider whether the same or substantially similar issue or
issues will be subject to the arbitration(s); EMC’s reasons for opposing
consolidation and Duke’s reasons for seeking consolidation; and the fundamental
fairness and efficiency in proceeding individually, jointly or consolidated. The
arbitrator(s) decision on the motion to consolidate shall be binding on the
Parties and not subject to appeal.

In the event the motion to consolidate is denied (unless otherwise agreed by the
Parties and the other entities of the EMC Group that have provided or received
such Impasse Notices), the arbitrations shall each proceed, subject to
resolution of scheduling issues, with no arbitration being stayed as a result of
the denial of the motion. In the event the motion to consolidate is granted,
each entity within the EMC Group, other than the entity which is a party to the
proceeding in which the motion to consolidate was filed, shall move for
dismissal of the respective arbitration actions in which it is a party.

14.3.1 Individual Treatment of EMC in Joint or Consolidated Arbitration. For
purposes of joint or combined arbitration, all of the entities within the EMC
Group participating in the proceeding shall be treated as one (1) Party for
purposes of Article 14, with the following exceptions. First, EMC shall be
treated as a separate Party for purposes of Selection of Arbitration Process set
forth in Section 14.4. Second, EMC may reach its own independent, voluntary
resolution with Duke and may pursue its own strategy and prosecute its case with
its own legal counsel in the joint or combined arbitration. Third, EMC will be
treated as a separate Party for purposes of discovery in Section 14.6.1(4) or
14.6.2(4). Fourth, EMC will be treated as a separate Party for purposes of a
Submission and for the adoption of the resolution and the associated monetary
amount with respect to the ultimate decision of the arbitrator(s). Fifth, EMC
will be treated as a separate Party for purposes of the third sentence of
Section 14.6.1(1) and Section 14.6.2(2).

14.4 Selection of Arbitration Process. No later than thirty (30) Days following
receipt of the Impasse Notice, or any longer time period as agreed to by the
Parties, the Parties shall agree on which arbitration process specified herein
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Streamlined Arbitration Process. Should the Parties fail to agree on the
arbitration process within thirty (30) Days following receipt of the Impasse
Notice, then the Standard Arbitration Process shall be used; provided however,
that the Streamlined Arbitration Process shall be used for any dispute where the
damages in dispute or other monetary value at stake is alleged to be two hundred
fifty thousand dollars ($250,000) or less for EMC or Duke, or in a joint or
combined proceeding two hundred and fifty thousand dollars ($250,000) or less
for each entity within the EMC Group that is participating in the proceeding. If
the damages in dispute or other monetary value at stake in a combined proceeding
is alleged to be two hundred fifty thousand dollars ($250,000) or less for EMC
and at least one (1) other of the entities within the EMC Group participating in
a joint or combined proceeding, the Streamlined Arbitration Process shall be
used upon the request of either Party (or any of the other entities within the
EMC Group participating in the proceeding) made within thirty (30) Days
following the receipt of the Impasse Notices.

14.5 Initiation of Arbitration. Unless otherwise agreed by the Parties and
except as provided for in Section 14.3, arbitration shall be deemed to be
initiated when the arbitration process is agreed upon or otherwise determined
pursuant to Section 14.4 (“Selection Date”).

14.6 Arbitration Processes.

14.6.1 Standard Arbitration Process. The following shall be the process that is
used, in accordance with this Article 14, as the Standard Arbitration Process
under this Agreement. By mutual agreement, the Parties may in any given
arbitration and for the purposes of that arbitration alone modify or forego any
procedural requirement or rule specified hereunder as part of the Standard
Arbitration Process:

(1) Selection of Arbitrators. The Party initiating arbitration shall nominate
one (1) arbitrator no later than fifteen (15) Days following the Selection Date.
The other Party shall nominate one (1) arbitrator no later than thirty (30) Days
after the Selection Date. Each of the two Party-nominated arbitrators shall be
unaffiliated with any of the Parties or their predecessors or Affiliates; shall
not be current or former employees of the nominating Party or its predecessors
or Affiliates and shall be without material financial alliance with the
nominating Party or its predecessors or Affiliates such that said arbitrator is
able to participate in the arbitration without evident partiality or actual bias
in favor of the nominating Party; unless such pecuniary interest or affiliation
is expressly acknowledged and waived by all Parties. The two (2) arbitrators
shall jointly appoint a third (3rd), neutral arbitrator within thirty (30) Days
after the nomination of the second (2nd) arbitrator. The neutral arbitrator
shall be the chairperson of the tribunal. This thirty (30) Day period may be
extended to sixty (60) Days by agreement of both Parties. If the two
(2) arbitrators are unable to agree on a third (3rd) arbitrator within the
specified time period, then a third (3rd) arbitrator shall be selected by the
CPR with due regard given to the selection criteria herein and in the subsequent
subsections of Article 14 and input from the Parties and other arbitrators. The
Parties shall request CPR to complete selection of the third (3rd) arbitrator no
later than thirty (30) Days following their request for selection of the
arbitrator. Costs charged by CPR for this service shall be borne one-half
(1/2) by Duke and one-half (1/2) by EMC; provided that if the arbitration
proceeds as a consolidated proceeding pursuant to Section 14.3, the costs
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borne one-half (1/2) by Duke and one-half (1/2) by the entities within the EMC
Group that participate in such consolidated arbitration. In the event CPR should
fail to select the third (3rd) arbitrator within thirty (30) Days following the
Parties’ request for selection of the arbitrator, then any Party may petition a
court of competent jurisdiction in the State of North Carolina to select the
third (3rd) arbitrator. Due regard shall be given to the selection criteria and
input from the Parties and other arbitrators. Each of the arbitrators shall take
an oath of neutrality.

(2) Additional Qualifications of Arbitrators. Unless otherwise agreed to by the
Parties, each of the arbitrators shall be competent and experienced in matters
involving the electricity business in the United States. Such experience shall
be conclusively demonstrated by ten (10) years or more of electric industry
experience as a practicing attorney or other experience or expertise as agreed
to by the Parties.

(3) Replacement of Arbitrators. If prior to the conclusion of the arbitration
any arbitrator becomes incapacitated or otherwise unable to serve, then a
replacement arbitrator with the qualifications specified herein shall be
appointed in the manner and timeframe (such timeframe starting anew following
the unavailability of the arbitrator to be replaced) described in
Section 14.6.1(1) above.

(4) Discovery. Discovery and other pre-hearing procedures shall be conducted as
set forth herein, as otherwise agreed by the Parties, or if they cannot agree,
as determined by a majority of the arbitrators. Each Party shall have the right
to propound up to ten (10) interrogatories, the right to request relevant
documents and records, conduct depositions (including depositions of experts),
designate experts, and obtain the opinion of opposing experts.

(5) Hearing. Within fifteen (15) Days after completion of discovery, each Party
shall contemporaneously submit by overnight delivery and electronic mail to the
arbitrators a precise statement of the dispute, a proposed resolution of the
dispute, including a monetary amount and the supporting calculations if
applicable, and the factual and/or legal support therefor (the “Submission”).
The next Business Day the Parties shall exchange complete Submissions by
overnight delivery and electronic mail. Within fifteen (15) Days after receiving
the other Party’s Submission, each Party may submit by overnight delivery and
electronic mail to the other Party and the arbitrators a reply statement to the
other Party’s Submission. The Parties shall conduct a hearing in Charlotte,
North Carolina no later than the later of (i) sixty (60) Days following
selection of the third (3rd) arbitrator, (ii) forty-five (45) Days after all
pre-hearing discovery has been completed, or (iii) forty-five (45) Days after
the issuance of the arbitrators’ decision denying a motion to consolidate
pursuant to Section 14.3, at which the Parties shall present such evidence,
argument, and witnesses as they may choose. Prior to the beginning of the
hearing, the Parties may submit a joint statement of undisputed facts and/or
issues to be resolved, if the Parties so agree to submit such statement or if
the arbitrators order submission of the statement. If the Parties agree, or if
allowed by a majority of the arbitrators, the Parties each may submit a
post-hearing brief to the arbitrators within ten (10) Business Days of
completion of the hearing. No reply briefs shall be allowed unless otherwise
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14.6.2 Streamlined Arbitration Process. The following shall be the process that
is used, in accordance with this Article, as the Streamlined Arbitration Process
under this Agreement. By mutual agreement, the Parties may in any given
arbitration and for the purposes of that arbitration alone modify or forego any
procedural requirement or rule specified hereunder as part of the Streamlined
Arbitration Process:

(1) Selection of Arbitrator. No later than thirty (30) Days following the
Selection Date, the Parties shall agree upon a single arbitrator to conduct the
arbitration. If the Parties are unable to agree on an arbitrator, then the
arbitrator shall be selected by the CPR with due regard given to input from the
Parties and in conformity with the qualifications specified herein. The Parties
shall request CPR to complete selection of the arbitrator no later than thirty
(30) Days following their request for selection of an arbitrator. Costs charged
by CPR for this service shall be borne one-half (1/2) by Duke and one-half
(1/2) by EMC; provided that if the arbitration proceeds as a consolidated
proceeding pursuant to Section 14.3, the costs charged by CPR shall be borne
one-half (1/2) by Duke and one-half (1/2) by the entities within the EMC Group
that participate in such consolidated arbitration. In the event CPR should fail
to select the arbitrator within seventy-five (75) Days after the Selection Date,
then any Party may petition a court of competent jurisdiction in the State of
North Carolina to select the arbitrator. Due regard shall be given to the
selection criteria and input from the Parties. The arbitrator shall take an oath
of neutrality.

(2) Qualification of the Arbitrator. The arbitrator shall be unaffiliated with
any of the Parties or their predecessors or Affiliates, such that the
arbitrator:

(a) Shall not be a current or former employee, advisor, attorney or consultant;

(b) Shall be without material financial alliance, such that said arbitrator is
able to participate in the arbitration without evident partiality or bias,
unless such pecuniary interest or affiliation is expressly acknowledged and
waived by all Parties;

(c) Shall be competent in matters involving the electricity business in the
United States and shall have ten (10) years or more of electric industry
experience as a practicing attorney or such other experience or expertise as
agreed by the Parties; and

(d) Shall take an oath of neutrality.

(3) Replacement of Arbitrator. If prior to the conclusion of the arbitration the
arbitrator becomes incapacitated or otherwise unable to serve, then a
replacement arbitrator with the qualifications specified herein, shall be
appointed in the manner and timeframe (such timeframe starting anew following
the unavailability of the arbitrator to be replaced) described in
Section 14.6.2(1) above.

(4) Discovery. Discovery and other pre-hearing procedures shall be conducted as
set forth herein, as otherwise agreed by the Parties, or if they cannot agree,

 

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as determined by the arbitrator. Each Party shall have the right to propound up
to ten (10) interrogatories, the right to request relevant documents and
records, conduct at least three (3) depositions, in addition to obtaining
discovery of the opinions of any experts and the right to depose any experts
(which are not included in the three (3) depositions above). Additional
discovery may be conducted only as allowed by the arbitrator or agreed by the
Parties.

(5) Hearing. Within fifteen (15) Days after completion of discovery, each Party
shall contemporaneously submit a Submission by overnight delivery and electronic
mail to the arbitrator. The next Business Day, the Parties shall exchange
complete Submissions by overnight delivery and electronic mail. Within fifteen
(15) Days after receiving the other Party’s Submission, each Party may submit by
overnight delivery and electronic mail to the other Party and the arbitrator a
reply statement to the other Party’s Submission. The Parties shall conduct a
hearing in Charlotte, North Carolina no later than the later of (i) forty-five
(45) Days following selection of the arbitrator, (ii) forty-five (45) Days after
all pre-hearing discovery has been completed, or (iii) forty-five (45) days
after the issuance of the arbitrator(s)’ decision denying a motion to
consolidate pursuant to Section 14.3, at which the Parties shall present such
evidence, witnesses, and argument as they may choose. Unless otherwise ordered
by the arbitrator, at least two (2) Days prior to the beginning of the hearing,
the Parties may submit a joint statement of undisputed facts and/or issues to be
resolved if the Parties so agree to submit such statement or if the arbitrator
orders submission of the statement. If the Parties agree, or if allowed by the
arbitrator, the Parties may each submit a post-hearing brief to the arbitrator
within ten (10) Business Days of completion of the hearing. No reply briefs
shall be allowed unless otherwise permitted by the arbitrator.

14.7 Decision. The arbitrator (if the Streamlined Arbitration Process is used)
or a majority of the arbitrators (if the Standard Arbitration Process is used)
shall render his or their decision in favor of one Party or the other by
adopting the resolution and the associated monetary amount requested by the
prevailing Party in its Submission. The arbitrator(s) must determine the
prevailing Party by interpreting the meaning and intent of the language of this
Agreement, applying the applicable Law to the relevant facts and selecting the
arbitration ruling proposed by the Parties that most closely correlated to their
decision based upon this Agreement, the applicable Law and the relevant facts.
In rendering the decision, the arbitrator(s) shall interpret and apply the terms
and conditions of this Agreement, and consider any relevant evidence and
testimony, but shall not have the power to add to or modify any provision of
this Agreement or to recommend any additions or modifications or to render a
decision that does not adopt the resolution and the associated monetary amount
requested by the prevailing Party in its Submission. The arbitrator(s) shall
render a decision within thirty (30) Days following the later of the conclusion
of the hearing or the submission of post-hearing briefs. The decision shall be
rendered in writing and shall be final and binding upon the Parties. The
decision may be filed in a court of competent jurisdiction, confirmed and may be
enforced by any Party as a final judgment in such court, but shall have no
precedential effect on future arbitrations under or arising out of this
Agreement except for purposes of enforcement in a court of competent
jurisdiction or for the assertion of collateral estoppel/issue preclusion or res
judicata/claim preclusion in another proceeding. The Parties expressly
acknowledge that no appeal of the arbitrator’s (or arbitrators’) decision shall
be allowed. Except as provided in Section 16.6.4 of this Agreement, the
arbitrator(s) shall have no authority to award special, exemplary, punitive, or
consequential damages.

 

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14.8 Expenses. The compensation and expenses of the arbitrator(s) shall be
chargeable to and borne one-half (1/2) by Duke and one-half (1/2) by EMC;
provided, that if the arbitration proceeds as a consolidated proceeding pursuant
to Section 14.3, the costs charged by CPR shall be borne one-half (1/2) by Duke
and one-half (1/2) by the entities within the EMC Group that participate in such
consolidated arbitration; provided, however, that each Party shall bear the
compensation and expenses of its own counsel and any retained or expert
witnesses. Any costs incurred by a Party in seeking judicial enforcement of any
final decision rendered by arbitration conducted under this Article 14 shall be
chargeable to and borne exclusively by the Party against whom such court order
is obtained. It is expressly acknowledged that the failure of the entities
within the EMC Group that participate in a consolidated arbitration to reach
agreement on the allocation of costs among such entities shall not increase
Duke’s share of the costs incurred under this Section 14.8 or Sections 14.6.1(1)
or 14.6.2(1) above one-half (1/2) of the total costs at issue.

14.9 Effect of Dispute Resolution Procedures. The initiation of the dispute
resolution procedures under this Article 14 shall not affect the Parties’
respective obligations and rights under this Agreement during the pendency of
any such procedures.

14.10 Confidentiality. The existence, contents, or results of any arbitration
proceeding under this Article 14 shall be deemed to be Confidential Information
and shall be subject to the confidentiality provisions set forth in
Section 16.6.

Article 15

Credit and Collateral Requirements

15.1 Posting of Collateral. To protect either Party against potential default of
payment or performance, any Party that experiences a Material Adverse Change
(“MAC”) shall post as collateral an amount equal to the two (2) highest Months
of Duke’s billings to EMC for the previous twelve (12) Months. Such collateral
shall be provided by the Party experiencing the MAC in cash, depository
agreements, or letters of credit from a financial institution reasonably
acceptable to the Party not experiencing the MAC within three (3) Business Days
after the date on which the MAC occurs. Any such depository agreement or letter
of credit shall be in a form satisfactory to the Party not experiencing the MAC
in its reasonable discretion. A financing institution participating in a
depository agreement or providing a letter of credit entered into for purposes
of this Section 15.1 shall be deemed reasonably acceptable by the Party not
experiencing the MAC if it has and maintains a minimum long term credit rating
of A- or better from S&P, A3 or better from Moody’s or A- or better from Fitch
Ratings, or is with or from CFC and/or CoBank.

15.2 Material Adverse Change. Duke shall be deemed to have experienced a MAC if
its unsecured, senior long-term debt obligations not supported by third party
credit enhancements are rated below BBB- by S & P and below Baa3 by Moody’s. EMC
shall be deemed to have experienced a MAC (a) if it fails to meet the
then-current Debt Service Coverage Ratio required

 

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of EMC by RUS, as determined by averaging the two (2) highest annual ratios
during the most recent three (3) Years, and (b) the then-current Times Interest
Earned Ratio required of EMC by RUS, as determined by averaging the two
(2) highest annual ratios during the most recent three (3) Years. The failure by
either Party to timely fulfill a payment or reimbursement obligation, including,
in the case of Duke a failure to pay Cover Costs, under this Agreement also
shall constitute a MAC by that Party.

15.3 Continuing Nature of Collateral Requirement. The Party experiencing the MAC
must continue to post the collateral until the MAC is cured. The Party not
experiencing the MAC shall have the right to draw upon, use, and dispose of all
collateral that is posted under Section 15.1, if the Party experiencing the MAC
fails to fulfill any of its payment or reimbursement obligations, including, in
the case of Duke a failure to pay Cover Costs, under this Agreement, and such
failure constitutes an Event of Default. In the event any collateral is drawn
upon by the Party not experiencing the MAC in accordance with the provisions of
Section 15.5, the Party experiencing the MAC shall within three (3) Business
Days fully replenish the collateral to the monetary amount required by
Section 15.1.

15.4 Interest on Cash Used as Collateral. Any interest earned on collateral held
under a depository agreement with a financial institution shall be paid to the
Party posting the collateral in accordance with the terms of the depository
agreement. If cash collateral is posted, the Party holding the cash collateral
shall pay interest to the Party posting the cash collateral at the Federal Funds
Effective Rate. The Federal Funds Effective Rate is the rate for that Day
opposite the caption “Federal Funds (Effective)” as set forth in the weekly
statistical release designated as H.15(519), or any successor publication
published by the Board of Governors of the Federal Reserve System. The Party
posting the cash collateral shall invoice the Party holding the cash collateral
for interest accrued during the previous Month and the Party holding the cash
collateral shall pay such amount within ten (10) Days of receipt of such
invoice.

15.5 Grant of Security Interest/Remedies. To secure their obligations under this
Agreement, any Party posting collateral under Section 15.1 hereby grants to the
Party not experiencing the MAC a present and continuing security interest in,
and lien on (and right of setoff against), and assignment of, all cash
collateral, cash equivalents collateral and any and all proceeds resulting
therefrom or the liquidation thereof, whether now or hereafter held by, on
behalf of, or for the benefit of, that Party, and the posting Party agrees to
take such action as the non-posting Party reasonably requires in order to
perfect the non-posting Party’s first-priority security interest in, and lien on
(and right of setoff against), such collateral and any and all proceeds
resulting therefrom or from the liquidation thereof. Upon or any time after the
occurrence or deemed occurrence and during the continuation of an Event of
Default, the Non-Defaulting Party may do any one or more of the following:
(i) exercise any of the rights and remedies of a secured party with respect to
all collateral, including any such rights and remedies under Law then in effect;
(ii) exercise its rights of setoff against any and all property of the
Defaulting Party in the possession of the Non-Defaulting Party or its agent;
(iii) draw on any outstanding letter of credit issued for its benefit; and
(iv) liquidate all collateral then held by or for the benefit of the
Non-Defaulting Party free from any claim or right of any nature whatsoever of
the Defaulting Party, including any equity or right of purchase or redemption by
the Defaulting Party. The Party drawing upon the collateral shall apply the
collateral drawn upon or otherwise realized upon the exercise of any rights or
remedies granted under this Section 15.5, to reduce the obligations of

 

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the Party posting the collateral under this Agreement (the posting Party
remaining liable for any amounts owing after such application), and to return
any surplus collateral or proceeds remaining after the posting Party’s
obligations are satisfied in full.

15.6 Notice, Information. Each Party shall provide the other Party written
notice within two (2) Business Days of the occurrence of an MAC affecting the
notifying Party or of the occurrence of any event that may reasonably cause a
MAC. Duke shall provide EMC a copy of Duke’s annual report, and any amendments
thereto, within thirty (30) Days after the issuance/filing with the Securities
and Exchange Commission of such report or amendment. EMC shall provide Duke with
(a) a copy of EMC’s RUS Form 7 each Year, and any amendments to such Form 7,
within thirty (30) Days after the filing of such report or amendment with RUS,
and (b) the annual Debt Service Coverage Ratio and Times Interest Earned Ratio
required of EMC by RUS for the Year in which the Effective Date occurs and for
the two (2) immediately preceding Years.

 

15.7 Definitions.

“Accounting Requirements” means any system of accounts prescribed by a federal
regulatory authority having jurisdiction over the applicable Party or, in the
absence thereof, the requirements of generally accepted accounting principles
applicable to businesses similar to that of the applicable Party; and provided,
further, that EMC may use a uniform system of accounts prescribed from
time-to-time by the RUS.

“CFC” means the National Rural Utilities Cooperative Finance Corporation.

“CoBank” means CoBank, ACB.

“Depreciation and Amortization Expense” shall mean an amount constituting the
depreciation and amortization of EMC computed pursuant to Accounting
Requirements. As used in the calculation of the Debt Service Coverage Ratio,
Depreciation and Amortization Expense shall mean the amount reported on the RUS
Form 7, Part A, Line 12(b), its successor, or the equivalent.

“Debt Service Coverage Ratio” means the ratio determined as follows: for any
Year add (i) Patronage Capital or Margins (RUS Form 7, Part A, Line 28(b), or
its successor), plus (ii) Interest Expense (RUS Form 7, Part A, Lines 15(b) and
16(b), or its successor), plus (iii) Depreciation and Amortization Expense for
such year (RUS Form 7, Part A, Line 12(b), or its successor), plus (iv) Short
Term Interest Expense; and divide such total by the sum of all payments of
Principal and Interest Expense during such year (RUS Form 7, Part N, Line 12(d),
or its successor) plus Short Term Interest Expense; provided however, that in
the event that any long-term debt has been refinanced during such Year the
payments of Principal and Interest Expense required to be made during such Year
on account of such long-term debt shall be based (in lieu of actual payments
required to be made on such refinanced long-term debt) upon the larger of (a) an
annualization of the payments required to be made with respect to the refinanced
debt during the portion of such Year such refinancing debt is outstanding or
(b) the payment of Principal and Interest Expense required to be made during the
following Year on account of such refinancing debt.

 

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“Equity” shall mean EMC’s equities (RUS Form 7, Part C, Line 35, its successor,
or the equivalent) computed pursuant to the Accounting Requirements.

“Interest Expense” as used in the calculation of the Debt Service Coverage
Ratio, Interest Expense shall mean the amount reported on the RUS Form 7, Part
A, Lines 15(b) and 16(b), its successor, or the equivalent.

“Material Adverse Change” or “MAC” shall have the meaning specified in
Section 15.2.

“Patronage Capital or Margins” as used in the calculation of the Debt Service
Coverage Ratio or TIER, shall mean the amount currently reported in the RUS Form
7, Part A, Line 28(b), its successor, or the equivalent.

“Principal and Interest Expense” shall mean that amount of principal billed on
account of total long-term debt of EMC as computed pursuant to the Accounting
Requirements. As used in the calculation of the Debt Service Coverage Ratio,
Principal and Interest Expense shall mean the amount currently reported on RUS
Form 7, Part N, Line 12(d), or its equivalent.

“Restricted Rentals” shall mean all rentals required to be paid under finance
leases and charged to income, exclusive of any amounts paid under such lease
(whether or not designated therein as rental or additional rental) for
maintenance or repairs, insurance, taxes, assessments, water rates or similar
charges. For the purpose of this definition the term “finance lease” shall mean
any lease having a rental term (including the term for which such lease may be
renewed or extended at the option of the lessee) in excess of three (3) years
and covering property having an initial cost in excess of two hundred fifty
thousand dollars ($250,000) other than automobiles, trucks, trailers, other
vehicles (including aircraft and ships), office, garage and warehouse space and
office equipment (including computers).

“Short Term Interest Expense” shall mean an amount constituting the interest
expense with respect to the total short-term debt of EMC, computed pursuant to
Accounting Requirements, provided that all short-term debt obtained from either
CFC or CoBank shall be excluded.

“Times Interest Earned Ratio” or “TIER” shall mean the ratio determined as
follows for each year: add (i) Patronage Capital or Margins of EMC and
(ii) Interest Expense of EMC, and divide the total so obtained by Interest
Expense of EMC.

 

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Article 16

Additional Terms

16.1 Representations Warranties and Covenants.

16.1.1 Representations and Warranties.

16.1.1.1 Mutual Representations and Warranties. Each Party represents and
warrants to the other Party on the Effective Date, the Commencement Date and the
first Day of any Extension Term that:

(1) There is not pending or, to its knowledge, threatened against it or any of
its Affiliates any Legal Proceeding that could materially adversely affect its
ability to perform its obligations under this Agreement;

(2) No event with respect to it has occurred or is continuing that would
constitute an Event of Default, and no such event would occur as a result of its
entering into or performing its obligations or circumstances under this
Agreement;

(3) It is acting as principal for its own account and has made its own
independent decision to enter into this Agreement;

(4) It has knowledge and experience in financial matters and in the electric
industry that enables it to evaluate the merits and risks of this Agreement, and
it is capable of assuming such risks. It is acting for its own account, has made
its own independent decision to enter into this Agreement and as to whether this
Agreement is appropriate and proper for it based on its own judgment, is not
relying upon the advice or recommendations of the other Party in doing so, and
is capable of assessing the merits of and understanding, and understands and
accepts, the terms, conditions, and risks of this Agreement;

(5) It has entered into this Agreement in connection with the conduct of its
business, and it has the capacity or ability to make or take delivery of all
products or services referred to in this Agreement;

(6) The other Party is not acting as a fiduciary or an advisor with respect to
this Agreement;

(7) It is not Bankrupt and there are no proceedings pending or being
contemplated by it or, to its knowledge, threatened against it that could result
in it being or becoming Bankrupt; and

(8) It is an entity subject to the procedures and substantive provisions of the
United States Bankruptcy Code applicable to U.S. corporations generally.

 

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16.1.1.2 Continuing Mutual Representations. Each Party represents, and warrants
that on each of the Effective Date, the Commencement Date and throughout the
Term, it will cause the following to be materially true and correct:

(1) It is duly organized, validly existing and in good standing under the Laws
of the state of its incorporation;

(2) It has all requisite corporate power to own, operate and lease its
properties and carry on its business as contemplated by this Agreement;

(3) Subject to the conditions provided for in Article 3, it has all lender
authorizations and authorizations from Governmental Authorities necessary for it
to legally perform its obligations under this Agreement;

(4) The execution, delivery and performance of this Agreement and any other
documentation it is required to deliver under this Agreement are within its
powers, have been duly authorized by all necessary action and do not violate any
of the terms or conditions in its governing documents, any contract or other
agreement to which it is a party or any Law applicable to it;

(5) The individual(s) executing and delivering this Agreement and any other
documentation required to be delivered under this Agreement are duly empowered
and authorized to do so at the time of such execution and delivery; and

(6) This Agreement has been duly and validly executed and delivered by such
Party and constitutes such Party’s legally valid and binding obligation
enforceable against it in accordance with the terms thereof, subject to any
Equitable Defenses.

16.1.1.3 Additional Representations and Warranties of Duke. Duke further
represents and warrants that:

(1) Subject to the conditions provided for in Article 3, Duke is fully
authorized to sell the electric capacity and energy and Scheduling Agent
Services it is obligated to provide under this Agreement at the rates and terms
contemplated by this Agreement;

(2) Nothing in Duke’s contracts with other parties prevents Duke from fully
performing its obligations under this Agreement; and

(3)(a) As of the Effective Date, Duke is a wholly owned direct subsidiary of
Duke Energy Corporation, a Delaware corporation; and

(b) The provisions of the NCUC Order dated March 24, 2006, issued in Docket No.
E-7, Sub. 795, the merger between Duke Energy Corporation, a North Carolina
corporation, and Cinergy Corp., which closed on April 3, 2006, and the
conversion of Duke Energy Corporation,

 

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a North Carolina corporation, to Duke on April 3, 2006, did not adversely affect
(1) the franchise granted to Duke by the NCUC to provide NCUC regulated electric
power generation, transmission, distribution, delivery, or sales and other
related services to the Duke Native Load customers located within the State of
North Carolina, (2) the assets constituting Duke’s Generation System, or
(3) Duke’s ability to perform its obligations under this Agreement.

16.1.1.4 Additional Representations and Warranties of EMC. EMC further
represents and warrants that:

(1) Subject to the conditions provided for in Article 3, EMC is fully authorized
to purchase the electric energy and capacity, and Scheduling Agent Services
provided under this Agreement at the rates and terms contemplated by this
Agreement; and

(2) Nothing in EMC’s contracts with other parties prevents EMC from fully
performing its obligations under this Agreement.

16.1.2 Covenants.

16.1.2.1 Duke. Duke covenants that: (i) neither Duke nor any of its Affiliates
or subsidiaries shall, during the Term, take any action that could reasonably be
anticipated to cause Duke to lose its authority to make wholesale sales of power
as contemplated under this Agreement; (ii) Duke shall not take any action during
the Term that could reasonably be anticipated to cause EMC to lose its authority
to purchase electric capacity and energy and Scheduling Agent Services, as
contemplated by this Agreement and, as a result, EMC loses its authority to
purchase electric capacity and energy and Scheduling Agent Services; and
(iii) Duke shall perform its obligations under this Agreement in accordance with
Prudent Utility Practice, including applicable NERC and SERC guidelines, and the
Transmission Provider’s OATT.

16.1.2.2 EMC. EMC covenants that: (i) it shall not, during the Term, take any
action that could reasonably be anticipated to cause it to lose its authority to
purchase, or Duke to lose its authority to provide, the electric capacity and
energy and Scheduling Agent Services as contemplated by this Agreement and, as a
result, EMC loses its authority to purchase or Duke loses its authority to
provide electric capacity and energy and Scheduling Agent Services; (ii) it
shall, in the event one of the sellers under a contract pursuant to which EMC
has acquired an EMC Contract Resource breaches the terms of the contract in a
manner that materially affects the quality or quantity of deliveries under such
contract, use Commercially Reasonable Efforts to pursue the enforcement of EMC’s
contract rights; (iii) electric energy delivered by MSCG under the PPA qualifies
as Firm Energy; and (iv) EMC shall perform its obligations under this Agreement
in accordance with Prudent Utility Practice, including applicable NERC and SERC
guidelines, and the Transmission Provider’s OATT.

 

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16.2 Assignment.

16.2.1 General.

16.2.1.1 Duke shall not assign this Agreement or its rights hereunder without
the prior written consent of EMC, which consent shall not be unreasonably
withheld; provided, however, that Duke may, without the consent of EMC,
(a) transfer, sell, pledge, encumber or assign this Agreement or the accounts,
revenues or proceeds hereof in connection with any financing or other financial
arrangements (without relieving itself from liability hereunder), or
(b) transfer or assign this Agreement to any person or entity succeeding to all
or substantially all of Duke’s Generation System, and whose unsecured, senior
long-term debt obligations not supported by third party credit enhancements are
rated BBB- or higher by S&P or Baa3 or higher by Moody’s (or, in the
alternative, whose obligations under this Agreement are guaranteed by a
guarantor that meets the foregoing credit standards, provided that the form of
the guaranty shall be reasonably satisfactory to EMC). Duke shall be relieved of
all liability under this Agreement arising on and after the effective date of an
assignment that satisfies the requirements of subpart (b) above.

16.2.1.2 EMC shall not assign this Agreement or its rights hereunder without the
prior written consent of Duke, which consent shall not be unreasonably withheld;
provided, however, that EMC may, without the consent of Duke, (a) transfer,
sell, pledge, encumber or assign this Agreement or the accounts, revenues or
proceeds hereof in connection with any financing or other financial arrangements
(without relieving itself from liability hereunder), or (b) transfer or assign
this Agreement to any person or entity (A) succeeding to substantially the same
Service Area and retail load as the EMC Native Load and to EMC’s rights under
the EMC Contract Resources, and (B):

(i) if the transferee or assignee is an electric membership corporation
organized under Article 2 Chapter 117 of the North Carolina General Statutes, it
meets both the then-current Debt Service Coverage Ratio required of EMC by RUS,
as determined by averaging the two (2) highest annual ratios during the most
recent three (3) years, and the then-current Times Interest Earned Ratio
required of EMC by RUS, as determined by averaging the two (2) highest annual
ratios during the most recent three (3) years, or

(ii) if the transferee or assignee is not an electric membership corporation
organized under Article 2 Chapter 117 of the North Carolina General Statutes,
then its unsecured, senior long-term debt obligations not supported by third
party credit enhancements are rated BBB- or higher by S&P or Baa3 or higher by
Moody’s (or, in the alternative, whose obligations under this Agreement are
guaranteed by a guarantor that meets the foregoing credit standards, provided
that the form of the guaranty shall be reasonably satisfactory to Duke). EMC
shall be relieved of all liability under this Agreement arising on and after the
effective date of an assignment that satisfies the requirements of this subpart
(B)(ii).

16.2.1.3 This Agreement shall be binding upon and inure to the benefit of the
permitted successors and permitted assigns of the Parties. Any assignment made
without a consent required hereunder shall be void and of no force or effect as
against the non-consenting Party. No sale, assignment, transfer, or other
disposition permitted by this Agreement shall affect, release, or discharge any
Party from its rights or obligations under this Agreement, except as may be
expressly provided by this Agreement or by written agreement of the Parties.

 

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16.2.2 Assignment For Security. Notwithstanding any other provision of this
Agreement, a Party, without the other Party’s consent but, if such assigning
Party is then a borrower of the RUS, only with the consent of the Administrator,
may assign, transfer, mortgage or pledge its interest in this Agreement as
security (an “Assignment for Security”) for any obligation secured by any
indenture, mortgage, or similar lien on its system assets without limitation on
the right of the secured party to further assign this Agreement, including the
assignment to create a security interest for the benefit of the Government,
acting through the Administrator, or for the benefit of any third party.

16.2.3 Assignment By Administrator. After any Assignment for Security to the
Administrator or other secured party (including any indenture trustee under any
indenture securing the obligations of the Party), the Administrator or other
secured party, without the approval of the other Party, may (i) cause the
interest in this Agreement of the Party who made the Assignment for Security to
be sold, assigned, transferred or otherwise disposed of to a third party
pursuant to the terms governing such Assignment for Security, or (ii) if the
Administrator or other secured party first acquires this Agreement, sell,
assign, transfer or otherwise dispose of this Agreement to a third party;
provided, however, that in either case the Party who made the Assignment for
Security is in default of its obligations to the Administrator or other secured
party that are secured by such security interest.

16.3 Liability and Indemnification.

16.3.1 Indemnity. Each Party shall indemnify, defend, and hold harmless the
other Party from and against:

(1) Any Claims arising from or out of any event, circumstance, act, or incident
first occurring or existing during the period when control and title to any
electric energy is vested in such Party as provided in Section 4.5, and

(2) Any Governmental Charges for which such Party is responsible under
Section 16.7.2.

Notwithstanding the foregoing, no Party will be required to indemnify, defend,
or hold harmless any other Party from any losses or Claims under this
Section 16.3.1 to the extent that such loss or Claim was caused by the other
Party’s gross negligence or willful misconduct.

16.3.2 Liability Limitations.

16.3.2.1 Limitation of Remedies. THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES
AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL
PURPOSES HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR
MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL
BE THE SOLE AND EXCLUSIVE REMEDY, THE RESPONSIBLE PARTY’S LIABILITY SHALL BE
LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR

 

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DAMAGES AT LAW OR IN EQUITY ARE WAIVED REGARDLESS OF THE FAULT, NEGLIGENCE, OR
STRICT LIABILITY OF THE PARTY WHOSE LIABILITY IS RELEASED OR LIMITED THEREBY.

IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY HEREIN PROVIDED, AND EXCEPT AS
OTHERWISE EXPLICITLY PROVIDED IN SECTION 16.6.4, THE RESPONSIBLE PARTY’S
LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES (INCLUDING INTEREST AS
PERMITTED BY APPLICABLE LAW) ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE
AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE
WAIVED (EXCEPT AS PROVIDED IN SECTION 16.29).

UNLESS EXPRESSLY HEREIN PROVIDED, (INCLUDING AS PROVIDED IN SECTION 16.6.4) NO
PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, MULTIPLE,
EXEMPLARY, OR INDIRECT DAMAGES, LOST PROFITS, OR OTHER BUSINESS INTERRUPTION
DAMAGES, BY STATUTE, IN TORT OR IN CONTRACT UNDER ANY INDEMNITY PROVISION OR
OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED
ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES
RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE
BE SOLE, JOINT, OR CONCURRENT, OR ACTIVE OR PASSIVE.

16.3.2.2 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, EACH
PARTY, WITH RESPECT TO THE SUPPLY OF ELECTRIC ENERGY AND CAPACITY TO THE OTHER,
EXPRESSLY NEGATES ANY OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS
OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY WITH
RESPECT TO CONFORMITY TO MODELS OR SAMPLES, MERCHANTABILITY, OR FITNESS FOR ANY
PARTICULAR PURPOSE.

16.3.2.3 Duty to Mitigate. Each Party agrees that is has a duty to mitigate
damages, and each covenants that it shall use commercially reasonable efforts to
minimize any damages it may incur as a result of the other Party’s performance
or nonperformance of this Agreement.

16.4 Force Majeure. Unless otherwise provided by this Agreement, the term “Force
Majeure” means an event or circumstance that: (i) prevents the Party claiming to
be affected by it (the “Claiming Party”) from performing its obligations in
whole or in part under this Agreement; (ii) is not within the reasonable control
of the Claiming Party, or the result of the negligence of the Claiming Party,
and (iii) by the exercise of due diligence, the Claiming Party is unable to
overcome in a commercially reasonable manner, and, without limiting the scope of
the definition, includes acts of God, or the public enemy, or insurrection,
riot, acts of terrorism, civil disturbance or disorder, strikes, fire,
earthquakes, floods, storms or other natural disasters, or actions or restraints
by court order or Governmental Authority or arbitration award (so long as the
Claiming Party has not sought or has opposed, to the extent reasonable, such
actions or restraints). To the extent that the Claiming Party is prevented by
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out, in whole or part, its obligations hereunder and such Party gives notice and
details of the Force Majeure to the other Party (the “Non-Claiming Party”) as
soon as practicable, then the Claiming Party shall be excused from the
performance of its obligations other than the obligation to make payments then
due or becoming due in respect to performance prior to the Force Majeure, except
as otherwise explicitly provided in this Agreement. The Claiming Party shall
remedy the Force Majeure event with all reasonable dispatch. The Non-Claiming
Party shall not be required to perform or resume performance of its obligations
to the Claiming Party corresponding to the obligations of the Claiming Party
excused by Force Majeure during the period that such Force Majeure remains in
effect. Duke shall not adversely distinguish between EMC’s Native Load and
Duke’s Native Load in claiming an event of Force Majeure.

16.5 Events of Default and Remedies.

16.5.1 Events of Default. For the purposes of this Agreement, an “Event of
Default” means, with respect to a Party (a “Defaulting Party”), the occurrence
of any of the following:

(1) The failure to make, when due, any payment or reimbursement required by this
Agreement (including any amounts to be credited by one Party to the other Party)
or to post or maintain collateral required by this Agreement, if such failure is
not remedied within three (3) Business Days after receipt of written notice of
such failure is given to the Defaulting Party by the other Party
(“Non-Defaulting Party”). For the purposes of this Section 16.5.1(1),
withholding one half (1/2) of a Disputed Amount in accordance with Section 13.5
shall not constitute failure to make, when due, a payment;

(2) Any representation or warranty made by such Party herein is false or
misleading in any material respect when made or when deemed made or repeated;

(3) The failure to perform any material covenant or material obligation set
forth in this Agreement (except to the extent constituting a separate Event of
Default under this Section 16.5), if such failure is not remedied within three
(3) Business Days after receipt of written notice thereof to the Defaulting
Party, provided, that a Party’s failure to perform its obligations under
Section 16.1.2.1(iii) or Section 16.1.2.2(iv) shall not in and of itself
constitute a material failure to perform a material covenant or material
obligation unless such failure, in the case of Duke, results in a substantial
and continuing degradation in reliability of service hereunder or, in the case
of EMC, results in a substantial and continuing degradation in performance
hereunder;

(4) Such Party becomes Bankrupt;

(5) The loss of any authorization from Governmental Authorities necessary to
perform its obligations hereunder in accordance with the terms of this
Agreement;

(6) Such Party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all of its assets to, another entity and, at the

 

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time of such consolidation, amalgamation, merger, or transfer, the resulting,
surviving, or transferee entity fails to assume all of the obligations of such
Party under this Agreement to which it or its predecessor was a party by
operation of law or pursuant to an agreement reasonably satisfactory to the
other Party;

(7) The occurrence and continuation of a default, event of default, or other
similar condition or event that under one or more agreements or instruments,
individually or collectively, relating to indebtedness for borrowed money in an
aggregate amount of not less than twelve million dollars ($12,000,000) in the
case of EMC or one hundred fifty million dollars ($150,000,000) in the case of
Duke, that results in the Party’s indebtedness under such agreements or
instruments to become immediately due and payable; and

(8) With respect to such Party’s guarantor, if any:

 

  (a) if any representation or warranty made by a guarantor in connection with
this Agreement is false or misleading in any material respect when made or when
deemed made or repeated;

 

  (b) the failure of a guarantor to make any payment required or to perform any
other material covenant or obligation in any guaranty made in connection with
this Agreement and such failure shall not be remedied within three (3) Business
Days after written notice;

 

  (c) a guarantor becomes Bankrupt;

 

  (d) the failure of a guarantor’s guaranty to be in full force and effect for
purposes of this Agreement (other than in accordance with its terms); or

 

  (e) a guarantor shall repudiate, disaffirm, disclaim, or reject, in whole or
in part, or challenge the validity of any guaranty.

16.5.2 Notice of Event of Default. In the event a Party becomes aware of any
event or circumstance that constitutes an Event of Default, such Party shall
promptly notify the other Party in writing and by telephone.

16.5.3 Effect of Event of Default. If at any time an Event of Default with
respect to a Defaulting Party has occurred and is continuing, the other Party
(the “Non-Defaulting Party”) may do one or more of the following:

(1) If an Event of Default under Section 16.5.1(1) persists for ten (10) Days or
longer, terminate this Agreement in accordance with the notification required
pursuant to Sections 2.3.2.1 and 2.3.3 of this Agreement; or

 

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(2) If an Event of Default (other than an Event of Default under
Section 16.5.1(1)) persists for sixty (60) Days or longer, terminate this
Agreement in accordance with Sections 2.3.2.1 and 2.3.3 of this Agreement,
provided, however, that if the Defaulting Party is diligently pursuing cure, but
such Event of Default is not capable of being cured within sixty (60) Days, then
the period for the Defaulting Party to cure such Event of Default shall be
extended from sixty (60) Days to one hundred eighty (180) Days before the
Non-Defaulting Party may exercise its right to terminate this Agreement pursuant
to this Section 16.5.3(2).

16.5.4 Enforcement of Remedies. The Non-Defaulting Party may exercise any rights
or remedies available at law or equity, subject to the provisions of Article 14
and Sections 15.5 and 16.3 of this Agreement. No delay or failure on the part of
a Non-Defaulting Party to exercise any right or remedy to which it may become
entitled on account of an Event of Default shall constitute an abandonment of
any such right, and the Non-Defaulting Party shall be entitled to exercise such
right or remedy at any time during the continuance of an Event of Default
notwithstanding any delay in enforcing such right. No waiver of any Event of
Default shall constitute a waiver of any later Event of Default; all such
waivers shall be in writing and shall in no circumstance be deemed effective
unless such waiver is made in writing. All of the remedies and other provisions
of this Section 16.5 shall be without prejudice and in addition to any right of
setoff, recoupment, combination of accounts, lien, or other right to which any
Party or any of its Affiliates is at any time otherwise entitled, whether by
operation of law or in equity, under contract, or otherwise.

16.6 Confidential Information.

16.6.1 Prior Confidentiality Agreements Unaffected. Any preexisting
confidentiality agreements entered into by the Parties pertaining to the
negotiation and development of this Agreement shall survive by their terms and
shall not be considered modified by this Agreement.

16.6.2 Authorized Disclosure. Each Party agrees to preserve, to the maximum
extent permitted by Law, the confidentiality of Confidential Information
supplied to it by the other Party either during the negotiations leading to this
Agreement or during the course of implementing, performing or winding up this
Agreement. A Party may disclose Confidential Information received from the other
Party to the receiving Party’s Affiliates, auditors, attorneys, consultants,
advisors, persons providing financing to the receiving Party, other entities in
the EMC Group that have entered into substantially similar agreements, and to
other third parties as may be necessary for the receiving Party to perform its
obligations under this Agreement, provided that any such persons agree in
writing to be bound by the confidentiality provisions of this Agreement.
Notwithstanding anything contained in this Section 16.6, Confidential
Information may be disclosed to any Governmental Authority requiring such
Confidential Information, provided that: (i) such Confidential Information is
submitted under applicable provisions, if any, for confidential treatment by
such Governmental Authority; (ii) prior to such disclosure, the Party who
supplied the information is given notice of the disclosure requirement (if time
permits and the other Party’s counsel determines that such notice is permitted
by Law) so that it may take at its own risk and expense whatever action it deems
appropriate, including intervention in any proceeding and the seeking of an
injunction to prohibit such disclosure; and (iii) the Party subject to the
Governmental Authority endeavors to protect the confidentiality of

 

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any Confidential Information to the extent reasonable under the circumstances
and to use its good faith efforts to prevent the further disclosure of any
Confidential Information provided to any Governmental Authority. The Parties
recognize that Duke is required to file periodic reports with FERC that disclose
certain price, quantity, and related data, and such filings shall not be deemed
a violation of this section.

16.6.3 Survival of Confidentiality Obligations. Confidential Information
received from the other Party shall be kept confidential in accordance with the
terms of this Agreement for at least five (5) Years after the termination of
this Agreement.

16.6.4 Right to Remedies. In the event of an unauthorized disclosure to a third
party, the limitations on remedies contained in Section 16.3.2.1 shall not
apply, and, in the event of a breach, Parties shall not have an adequate remedy
at law and accordingly shall, in addition to any other available legal or
equitable remedies, be entitled to an injunction against such breach without any
requirement to post a bond as a condition of such relief.

16.7 Governmental Liabilities.

16.7.1 Minimization of Tax Liability. Each Party shall use reasonable efforts to
implement the provisions of and to administer this Agreement in accordance with
the intent of the Parties to minimize all taxes, so long as neither Party is
materially adversely affected by such efforts.

16.7.2 Governmental Charges.

16.7.2.1 With respect to sales of electric energy made by Duke to EMC, Duke
shall pay or cause to be paid all Governmental Charges imposed by any Government
Authority on or with respect to such sales of electric energy to the extent such
Governmental Charges arise prior to the Delivery Point. EMC shall pay or cause
to be paid all Governmental Charges on or with respect to such sale of electric
energy to the extent such Governmental Charges arise after the Delivery Point
(other than ad valorem, franchise, or income taxes that are related to the sale
of such product and are, therefore, the responsibility of Duke).

16.7.2.2 With respect to sales of electric energy by EMC to Duke, EMC shall pay
or cause to be paid all Governmental Charges on or with respect to the sale of
the electric energy to Duke.

16.7.2.3 In the event a Party is required by Law to remit or pay Governmental
Charges that are the other Party’s responsibility hereunder, the Party
ultimately liable for the Governmental Charge shall promptly reimburse the
remitting Party for such Governmental Charges; provided further that tax
liabilities may be netted pursuant to Section 13.4 of this Agreement. Nothing
will obligate or cause a Party to pay or be liable to pay any Governmental
Charges for which it is exempt under the Law.

16.7.3 Records. If with respect to either Party, any purchase or sale of
electric energy is exempt from Governmental Charges it shall, upon written
request of the other Party, provide a certificate of exemption or other
reasonably satisfactory evidence of exemption, and shall use reasonable efforts
to obtain and cooperate with obtaining any exemption from or reduction of any
Governmental Charges.

 

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16.7.4 Cost of Obtaining FERC Approval. The Parties agree that all fees assessed
by FERC, or expenses incurred in obtaining the approval of FERC for this
Agreement, shall be the sole responsibility of Duke.

16.7.5 Cost of Obtaining RUS Approval. The Parties agree that all fees assessed
by the RUS, or expenses incurred in obtaining the approval of RUS for this
Agreement, shall be the sole responsibility of EMC.

16.8 Choice of Law. The validity, interpretation and performance of this
Agreement and the rights and duties of the Parties arising out of this Agreement
shall be governed by and construed, enforced, and performed in accordance with
the Laws of the State of North Carolina. No principle, doctrine, or rule of
conflicts of law shall modify or alter the applicability of the Laws of the
State of North Carolina to this Agreement.

16.9 Survival of Obligations. Upon the termination of the Parties’ delivery,
sale, purchase, and related service obligations under this Agreement, any
monies, penalties or other charges due and owing under this Agreement shall be
paid, any corrections or adjustments to payments previously made shall be
determined, and any refunds due shall be made, as soon as practicable but no
later than sixty (60) Days after such termination. All indemnity and
confidentiality obligations and audit rights shall survive the termination of
this Agreement in accordance with their respective terms. Upon the effective
date of any termination of this Agreement, each Party’s obligations provided for
in this Agreement will survive termination and remain in effect solely for the
purpose of complying with the provisions of this Section 16.9; OTHERWISE, AS
PROVIDED IN ARTICLE 2, TERMINATION OF THIS AGREEMENT IS ABSOLUTE, AND NO OTHER
OBLIGATIONS, DUTIES, OR RIGHTS WHATSOEVER ARISING UNDER THIS AGREEMENT SHALL
REMAIN IN EFFECT FOLLOWING THE TERMINATION OF THIS AGREEMENT.

16.10 Entire Agreement. This Agreement, and the Schedules and Attachments
attached hereto, constitute the entire and integrated agreement between the
Parties relating to the rates, terms, and conditions set out in this Agreement
as of the Effective Date. This Agreement supersedes all prior agreements (other
than the Confidentiality Agreement which became fully executed on November 22,
2004) whether oral or written, related to the subject matter of this Agreement.
The terms of this Agreement, including any Schedules and Attachments attached
hereto, are controlling, and no parol or extrinsic evidence, including but not
limited prior drafts or projections of future costs or rates, shall be used to
vary, contradict, or interpret the express rates, terms, and conditions of this
Agreement or as a basis for challenging the justness and reasonableness of any
rate, term, or condition of this Agreement.

16.11 Cost Projections.

16.11.1 Duke Cost Projections. Duke makes no warranties or representations
whatsoever concerning any cost or rate projections that it provided in
connection with the negotiations leading up to the execution of this Agreement
and any such projections provided by

 

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Duke under Section 16.26 of this Agreement. EMC assumes the risk of reliance on
any projected costs or rates provided by Duke in connection with the
negotiations leading up to the execution of this Agreement or any projections
provided by Duke under Section 16.26. Any differences between projected costs or
rates provided by Duke and actual costs or rates will not limit or in any way
affect the rates, terms, or conditions of this Agreement or any of the Parties’
rights and obligations hereunder.

16.11.2 EMC Cost Projections. EMC makes no warranties or representations
whatsoever concerning any cost or rate projections that it provided in
connection with the negotiations leading up to the execution of this Agreement
and any such projections provided by EMC during the Term. Duke assumes the risk
of reliance on any projected costs or rates provided by EMC in connection with
the negotiations leading up to the execution of this Agreement or any
projections provided by EMC during the Term. Any differences between projected
costs or rates provided by EMC and actual costs or rates will not limit or in
any way affect the rates, terms, or conditions of this Agreement or any of the
Parties’ rights and obligations hereunder.

16.12 Unique Agreement. This Agreement shall not establish any precedent for any
other services, or be relied upon by either Party for any purpose other than for
the services and payments provided herein.

16.13 No Transfer of Rights. Except as explicitly provided herein, nothing in
this Agreement shall be construed to transfer any rights or obligations that
either Party has under any other agreement to the other Party.

16.14 No Partnership. The Parties are independent contractors. Nothing in this
Agreement shall ever be deemed to create or constitute a partnership, joint
venture, or association between the Parties, or to impose a trust or partnership
duty, obligation, or liability on or with regard to either of the Parties.

16.15 Third Parties. The provisions of this Agreement shall not impart rights
enforceable by any person or entity not a Party or not a permitted successor or
assignee of a Party bound by this Agreement. This Agreement shall not be
construed to create any third party beneficiary rights of any sort.

16.16 Waiver. No waiver of all or any part of this Agreement shall be valid
unless it (a) is reduced to writing, (b) expressly states that the Parties agree
to such waiver, and (c) is signed by the Parties. Except as specifically set
forth herein, neither Duke’s nor EMC’s failure to enforce any provision or
provisions of this Agreement shall in any way be construed as a waiver of any
such provision or provisions as to any future violation thereof, nor prevent it
from enforcing each and every provision of this Agreement at such time or at any
time thereafter. The waiver by either Duke or EMC of any right or remedy shall
not constitute a waiver of its right to assert said right or remedy, at any time
thereafter, or any other rights or remedies available to it at the time of or
any time after such waiver.

16.17 Time of Essence. Time is of the essence for, in, and throughout this
Agreement.

 

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16.18 Headings. The descriptive headings of the various Articles and Sections of
this Agreement (or any Schedules and Attachments attached hereto) have been
inserted for convenience of reference only and in no way shall be deemed to
modify or restrict any of the terms or provisions hereof.

16.19 Severability. Wherever possible, each provision of this Agreement
(including any Schedules or Attachments attached hereto) shall be interpreted in
a manner as to be effective and valid under applicable Law, but if any provision
contained herein shall be found or ruled to be invalid, illegal, or
unenforceable in any respect and for any reason, such provision shall be
ineffective to the extent, but only to the extent, of such invalidity,
illegality, or unenforceable without invalidating the remainder of the provision
or any provision of this Agreement, and in such event, the Parties shall attempt
to negotiate amendments to this Agreement that would permit each Party to
realize the equivalent value of the economic bargain contemplated by this
Agreement absent such finding or ruling.

16.20 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.

16.21 No Public Announcement. The Parties agree that no press release or public
announcement concerning the transaction contemplated by this Agreement will be
made unless mutually agreed to by the Parties in writing; provided, however,
such mutual agreement will not be required if:

(a) The disclosing Party determines that disclosure is reasonably necessary to
(i) comply with applicable Laws of a Governmental Authority having jurisdiction;
or (ii) obtain financing for the transaction contemplated by this Agreement; or

(b) the disclosure is limited to the following information: (i) the names of the
Parties; (ii) the type of service being provided; (iii) the Term; and (iv) the
total load being served.

The disclosing Party shall provide the other Party with written notice of such
disclosure at least five (5) Business Days prior to such disclosure.

16.22 Notices. Unless otherwise provided in this Agreement, any notice, consent,
or other communication required to be made under this Agreement shall be in
writing and shall be delivered in person, by certified mail (postage prepaid,
return receipt requested), or by nationally recognized overnight courier
(charges prepaid), in each case properly addressed to such Party as shown below.
Any Party may from time to time change its address, designee or contact
information for the purposes of notices, consents, or other communications to
that Party by a similar notice specifying a new address, but no such change
shall become effective until it is actually received by the Party to be charged
with its contents. All notices, consents, or other communications required or
permitted under this Agreement that are addressed as provided in this
Section 16.22 shall be deemed to have been given upon delivery if delivered in
person, or upon deposit if delivered by overnight courier or certified mail.

 

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Duke:

Duke Power Company LLC

526 South Church Street

Charlotte, N.C. 28202

Attn: VP – Business Development and Origination

Phone: (704) 382-3114

Fax: (704) 382-4014

With a copy to:

Duke Power Company LLC

526 South Church Street

Charlotte, N.C. 28202

Attn: General Counsel

EMC:

Rutherford Electric Membership Corporation

Post Office Box 1569

186 Hudlow Road

Forest City, NC 28043

Attn: Joseph Joplin, General Manager

Phone: (828) 245-1621

Fax: (828) 248-2319

The Parties may agree on alternative methods of giving operational and
scheduling notices, consistent with the requirements of the applicable
Transmission Providers and/or generation scheduling providers.

16.23 No Dedication of the System. No undertaking by either Party to the other
Party under any provision of this Agreement shall constitute the dedication of
the system, or any portion thereof, of either Party to the public or to the
other Party, and it is understood and agreed that any such undertaking by either
of the Parties shall cease after the termination date of this Agreement. The
sale by Duke to EMC of electric capacity and energy under this Agreement does
not constitute a sale, lease, transfer, or conveyance of any kind of ownership
interest in or to any of Duke’s facilities of any kind.

16.24 Stranded Costs.

16.24.1 If a Party or any of its Affiliates becomes entitled to receive
compensation associated with stranded generation, transmission, distribution or
other assets or costs, the other Party shall have no claim or entitlement to any
such compensation.

16.24.2 Neither EMC nor Duke shall have the obligation or liability to the other
Party for the payment of any amounts authorized by statute or ordered or
approved by a Governmental Authority and that are attributable to or in any way
arising from stranded

 

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generation, transmission, distribution, or other assets or costs or any
liability associated therewith, whether such amounts are characterized as
competitive transition charges, wire charges, or other costs or charges,
provided that nothing herein shall limit the damages that may otherwise be
recovered for an Event of Default. An order on stranded costs shall not be
deemed a Material Adverse Ruling.

16.25 Electric Peak Load and Energy Information to be provided by EMC. Prior to
October 1, 2006, and each October 1 thereafter during the Term, EMC shall
provide Duke with forecast projections of (a) EMC’s Monthly electric peak load
and electric energy requirements for the following Year and (b) EMC’s annual
electric peak load and electric energy requirements for the following ten
(10) years, to the extent EMC has such information available, except that, after
a Notice of Termination has been given, EMC shall not be obligated to provide
such information for the period after the termination date. To the extent such
information is provided in a report to the RUS that is publicly available, EMC
may satisfy this requirement by providing a copy of such report to Duke.

16.26 Demand and Energy Charge and Rate Information to be Provided by Duke.
Prior to December 1, 2006, and each December 1 thereafter during the Term, Duke
shall provide EMC with forecast projections of (a) the annual electric capacity
and energy rates under Sections 7.2 or Section 7.3 (as applicable) for the
following year, (b) Monthly demand and electric energy charges under Section 7.2
or Section 7.3 (as applicable) for the following year, and (c) annual demand and
electric energy charges under Sections 7.2 or Section 7.3 (as applicable) for
the lesser of the remainder of the Term or the following ten (10) Years, except
that, after a Notice of Termination has been given, Duke shall not be obligated
to provide such information for the period after the termination date.

16.27 Further Assurances. If either Party determines in its reasonable
discretion that any further instruments, assurances, or other things are
necessary or desirable to carry out the terms of this Agreement, the other Party
shall execute and deliver all such instruments or assurances, and do all things
reasonably necessary or desirable to carry out the terms of this Agreement.

16.28 Applicable Laws and Regulations. This Agreement is made subject to all
existing and future applicable Laws and to all existing and future promulgated
orders or other duly authorized actions of Governmental Authorities having
jurisdiction over the matters set forth in this Agreement.

16.29 Equitable Relief. Nothing in this Agreement shall be construed to limit
the injunctive or equitable powers of a court of competent jurisdiction.

16.30 PURPA Assistance. Duke shall provide assistance to EMC, as EMC reasonably
requests, to support EMC’s compliance with the generation efficiency and fuel
diversity standards under PURPA.

16.31 SERC and NERC Data Reporting and Compliance Assistance. Duke shall report
EMC’s actual load, forecasted load (as provided by EMC to Duke), and resource
information to SERC and NERC and their successors, in a manner similar to the
manner in which Duke reports such information for other wholesale full or
partial requirements customers with service as firm as Duke’s Native Load. In
addition, Duke shall provide assistance and consultation to EMC, to the extent
agreed to by the Parties, to support EMC’s compliance with such organizations’
data reporting requirements.

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized officers and copies delivered to each Party.

RUTHERFORD ELECTRIC MEMBERSHIP CORPORATION

 

By:

 

 

Name:   Joseph Joplin Title:   General Manager

DUKE POWER COMPANY LLC

d/b/a Duke Energy Carolinas, LLC

By:  

 

Name:   Ellen T. Ruff Title:   President

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Schedule 1

Annual Production Capacity and Energy Rates

Schedule 1 Methodology:

This formula sets forth the method that Duke will use to determine its annual
Demand Rates, Fuel Rates, and Variable O&M Rates (collectively, “Rates”). The
Rates will be annual formula rate calculations. The Rates shall initially be
estimated for the period January 1, 2007 - December 31, 2007, and shall be
estimated continuing thereafter for successive twelve month periods (e.g.,
January 1, 2008 - December 31, 2008, etc.). Beginning July 1, 2008, and each
July 1 thereafter, the Rates will be trued-up based on actual costs and loads
for the most recent calendar year, using the formula rates set forth below. The
calculations will be based on Duke’s FERC Form 1 data and Duke’s company
records. The true-up will include interest on any refunds or surcharges
calculated in accordance with the methodology set forth in 18 C.F.R. § 35.19a or
its successor. The formulas for the Rates were designed to include all costs
incurred by Duke to own, operate and maintain Duke’s Generation System. The
formulas for the Rates may only be amended by the mutual agreement of the
Parties or pursuant to Section 12.3 of the Agreement. Disallowance or any other
treatment of any such costs by the NCUC or any other Governmental Authority
other than FERC will not have any effect on the inclusion of such costs in the
formulas for the Rates as set forth below.

 

I. Definitions

Capitalized terms not otherwise defined in the Agreement and as used in this
formula have the following definitions:

 

  A. Allocation Factors

 

  1. Production Wages and Salaries Allocation Factor shall equal the ratio of
Duke’s production-related direct wages and salaries to Duke’s total direct wages
and salaries excluding administrative and general wages and salaries.

 

  2. Production Plant Allocation Factor shall equal the ratio of the sum of
Duke’s investments in Production Plant plus Production Related General Plant
plus Production Related Intangible Plant to investment in Total Plant in
Service.

 

  B. Terms

Accumulated Deferred Income Taxes shall equal the net of Duke’s electric
deferred tax balances as recorded in FERC Account Nos. 281-283 and Duke’s
electric deferred tax balance as recorded in FERC Account No. 190.

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Administrative and General Expense shall equal Duke’s expenses as recorded in
FERC Account Nos. 920-935 excluding FERC Account Nos. 924, 928 and 930.1, and
less EPRI dues as recorded in FERC Account No. 930.2.

Contra AFUDC shall equal the reduction in amount of AFUDC recorded in FERC
Account No. 107 due to recovery of construction period financing costs from
customers resulting from inclusion of construction work in progress in rate base
in any of Duke Power’s retail or wholesale rate jurisdictions.

Demand Rate means the Demand Rate calculated in Part II below.

Depreciation Expense for Production Plant shall equal Duke’s production expense
as recorded in FERC Account No. 403 plus an adjustment to increase depreciation
expense to eliminate any reduction in depreciable base for Contra AFUDC related
to production plant construction work in progress included in rate base.

Duke’s Average Peak Hour Load for a year, with respect to the period January 1,
2007, through December 31, 2010, shall equal the average of the twenty highest
hourly (integrated sixty minute) Duke Schedule 1 Demands during July and August
of the year; and with respect to the period beginning January 1, 2011, and
continuing through the termination of the Agreement, shall equal the average of
the twenty highest hourly (integrated sixty minute) Duke Schedule 1 Demands
during the Annual Planning Period of the year.

Duke Schedule 1 Demands means Duke’s Native Load demands: (i) compensated for
losses to the point at which power is available for transmission, (ii) excluding
(a) non-requirements wholesale sales, as listed in Duke’s FERC Form 1, and
(b) wholesale sales with a duration of one year or less, (iii) served by Duke’s
Generation System the cost of which is included in Schedule 1.

FAS 109 Regulatory Assets and Liabilities shall equal the net of Duke’s FAS 109
balance as recorded in FERC Account No. 182.3 and any Duke FAS 109 balance as
recorded in FERC Account No. 254.

FAS 106 Regulatory Assets and Liabilities shall equal the net of Duke’s FAS 106
balance as recorded in FERC Account No. 182.3 and any Duke FAS 106 balance as
recorded in FERC Account No. 254.

 

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General Plant shall equal Duke’s gross plant balance as recorded in FERC Balance
Sheet Account No. 101, FERC Electric Plant Account Nos. 389-399, and amounts in
FERC Balance Sheet Account Nos. 102 and 106 tentatively classified to FERC
Electric Plant Account Nos. 389-399, plus an adjustment to add Contra AFUDC
related to general plant construction work in progress included in rate base.

General Plant Depreciation Expense shall equal Duke’s general plant expenses as
recorded in FERC Account No. 403 plus an adjustment to increase depreciation
expense to eliminate any reduction in depreciable base for Contra AFUDC related
to general plant construction work in progress included in rate base.

General Plant Depreciation Reserve shall equal Duke’s general plant reserve
balance as recorded in FERC Account No. 108 plus an adjustment to increase the
reserve to equal accumulated depreciation for depreciable base without reduction
for Contra AFUDC related to production plant construction work in progress
included in rate base.

General Tax Expense shall equal Duke’s expenses as recorded in FERC Account
No. 408.1.

Intangible Plant shall equal Duke’s gross plant balance as recorded in FERC
Balance Sheet Account No.101, FERC Electric Plant Account Nos. 301-303, and
amounts in FERC Balance Sheet Account Nos. 102 and 106 tentatively classified to
FERC Electric Plant Account Nos. 301-303, plus an adjustment to add Contra AFUDC
related to intangible plant construction work in progress included in rate base.

Intangible Plant Amortization Expense shall equal Duke’s intangible plant
expenses as recorded in FERC Account No. 404 plus an adjustment to increase
depreciation expense to eliminate any reduction in depreciable base for Contra
AFUDC related to intangible plant construction work in progress included in rate
base.

Intangible Plant Amortization Reserve shall equal Duke’s intangible plant
reserve balance as recorded in FERC Account No. 111 plus an adjustment to
increase the reserve to equal accumulated depreciation for depreciable base
without reduction for Contra AFUDC related to intangible plant construction work
in progress in rate base.

 

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Net Asset Retirement Cost shall equal Duke’s asset retirement costs recorded in
FERC Account No. 101, less the associated accumulated depreciation included in
FERC Account No. 108.

Other Amortization shall equal Duke’s amortization expense recorded in FERC
Account Nos. 406 and 407 that is related to production plant.

Other Regulatory Assets/Liabilities shall equal the net of Duke’s regulatory
assets and liabilities in FERC Account Nos. 182, 228 and 254, excluding FAS 109
Regulatory Assets and FAS 106 Regulatory Assets, that are production related.

Payroll Taxes shall equal those payroll tax expenses as recorded in Duke Power’s
FERC Account No. 408.1.

Plant Held for Future Use shall equal Duke’s balance in FERC Account No. 105.

Prepayments shall equal Duke’s prepayment balance as recorded in FERC Account
No. 165.

Property Insurance shall equal Duke’s expenses as recorded in FERC Account
No. 924.

Production Related Amortization of Investment Tax Credits shall equal Duke’s
credits as recorded in FERC Account No. 411.4 multiplied by the Production Plant
Allocation Factor.

Production Depreciation Reserve shall equal Duke’s production reserve balance as
recorded in FERC Account No. 108 plus an adjustment to increase the reserve to
equal accumulated depreciation for depreciable base without reduction for Contra
AFUDC related to production plant construction work in progress included in rate
base.

Production Operation and Maintenance (O&M) Expense shall equal Duke’s expenses
as recorded in FERC Account Nos. 500-557.

Production Plant shall equal Duke’s gross plant balance as recorded in FERC
Balance Sheet Account No. 101, FERC Electric Plant Account Nos. 310-347 and
Balance Sheet Account Nos. 102 and 106 tentatively classified to FERC Electric
Plant Account Nos. 310-347, plus an adjustment to add Contra AFUDC related to
production plant construction work in progress in included in rate base.

 

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Production Plant Materials and Supplies shall equal Duke’s balance as assigned
to production as recorded in FERC Account No. 154.

Revenue Tax Rate shall equal 1.0 minus the applicable revenue or gross receipts
tax rate(s) to which Duke is subject for the revenues or gross receipts that
Duke receives under this Agreement

Tax Deduction for Manufacturing Activities shall equal Duke’s annual amount of
tax deduction under Section 102 of the American Jobs Creation Act of 2004.

Total Plant in Service shall equal Duke’s total gross plant balance as recorded
in FERC Balance Sheet Account No. 101, Electric Plant Account Nos. 301-399, and
amounts in FERC Balance Sheet Account Nos. 102 and 106, plus an adjustment to
add Contra AFUDC related to construction work in progress included in rate base.

Unamortized Loss on Reacquired Debt shall equal Duke’s expenses as recorded in
FERC Account No. 189.

Unamortized Gain on Reacquired Debt shall equal Duke’s amounts included in FERC
Account No. 257.

Variable Non-Fuel Production Operation and Maintenance Expense shall equal
Duke’s expenses as recorded in FERC Account Nos. 510, 512, 513, 528, 530, 531,
and 544.

 

II. Demand Rate

The Demand Rate shall be the Production Capacity Revenue Requirement as
determined in Part III below, divided by Duke’s Average Peak Hour Load, and
further divided by the Revenue Tax Rate. The Monthly Demand Rate shall be equal
to the Demand Rate divided by twelve (12).

 

III. Production Capacity Revenue Requirement

The Production Capacity Revenue Requirement shall equal the sum of Duke’s
(A) Return and Associated Income Taxes, (B) Production Depreciation Expense,
(C) Decommissioning Expense, (D) Production Related General Taxes, (E) Fixed
Production Operation and Maintenance Expense, (F) Purchased Power Capacity
Expenses, (G) Production Related Administrative and General Expense,
(H) Production Related Other Amortization Expense and (I) Capacity Credit for
Revenue from Non-Associated Utility Sales.

5

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

A. Return and Associated Income Taxes shall equal the product of the Production
Investment Base and the Cost of Capital Rate.

 

  1. Production Investment Base

 

       The Production Investment Base shall equal the average of the beginning
and end-of-year balances of (a) Production Plant, plus (b) Production Related
General and Intangible Plant, plus (c) Production Plant Held for Future Use,
less (d) Production Related Depreciation Reserve, less (e) Production Related
Net Asset Retirement Costs, plus (f) Nuclear Fuel Inventory, plus (g) Fossil
Fuel Inventory, less (h) Production Related Accumulated Deferred Income Taxes,
plus (i) Production Related Loss on Reacquired Debt, (j) less Production Related
Gain on Reacquired Debt, plus (k) FAS 106 and FAS 109 Regulatory
Assets/Liabilities, plus (l) Other Regulatory Assets/Liabilities, plus
(m) Production Prepayments, plus (n) Production Materials and Supplies, plus
(o) Production Related Cash Working Capital.

 

  (a) Production Plant shall equal Production Plant as defined above.

 

  (b) Production Related General and Intangible Plant shall equal the sum of
General Plant plus Intangible Plant multiplied by the Production Wages and
Salaries Allocation Factor.

 

  (c) Production Plant Held for Future Use shall equal Plant Held for Future Use
multiplied by the Production Plant Allocation Factor.

 

  (d) Production Related Depreciation Reserve shall equal Production
Depreciation Reserve plus Production Related General and Intangible Plant
Depreciation Reserve; where Production Related General and Intangible Plant
Depreciation Reserve shall equal the sum of General Plant Depreciation Reserve
plus Intangible Plant Amortization Reserve, multiplied by the Production Wages
and Salaries Allocation Factor.

 

  (e) Production Related Net Asset Retirement Costs shall equal Duke’s asset
retirement cost balance as recorded in FERC Account No. 101 for Production Plant
less the associated accumulated depreciation balance as recorded in FERC Account
No. 108.

 

6

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

  (f) Nuclear Fuel Inventory shall equal Duke’s balance of investment in nuclear
fuel as recorded in FERC Account Nos. 120.1 – 120.6.

 

  (g) Fossil Fuel Inventory shall equal Duke’s balance of investment in fossil
fuel as recorded in FERC Account No. 151.

 

  (h) Production Related Accumulated Deferred Income Taxes shall equal Total
Accumulated Deferred Income Taxes multiplied by the Production Plant Allocation
Factor.

 

  (i) Production Related Loss on Reacquired Debt shall equal Unamortized Loss on
Reacquired Debt multiplied by the Production Plant Allocation Factor.

 

  (j) Production Related Gain on Reacquired Debt shall equal Unamortized Gain on
Reacquired Debt multiplied by the Production Plant Allocation Factor.

 

  (k) FAS 106 and FAS 109 Regulatory Assets/Liabilities shall equal Duke’s
balance of FAS 106 related costs as recorded in FERC Account Nos. 182.3 and 254
multiplied by the Production Wages and Salaries Allocation Factor, plus Duke’s
balance of FAS 109 related costs as recorded in FERC Account Nos. 182.3 and 254
multiplied by the Production Plant Allocation Factor.

 

  (l) Other Regulatory Assets/Liabilities shall equal Duke’s balance of Other
Regulatory Assets/Liabilities as appropriate; provided, that in order to include
any amounts in this item, Duke shall make a filing with FERC under Section 205
of the Federal Power Act.

 

  (m) Production Prepayments shall equal Duke’s Prepayments in FERC Account 165
multiplied by the Production Wages and Salaries Allocation Factor.

 

  (n) Production Materials and Supplies shall equal Production Plant Materials
and Supplies as defined above.

 

  (o) Production Related Cash Working Capital shall be a 12.5% allowance (45
days/360 days) of Fixed Production Operation and Maintenance Expense, Variable
Production Non-Fuel Operation and Maintenance Expenses and Production Related
Administrative and General Expense.

 

7

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

2. Cost of Capital Rate

The Cost of Capital Rate will equal (a) Duke’s Weighted Cost of Capital, plus
(b) Federal Income Tax plus (c) State Income Tax.

(a) The Weighted Cost of Capital shall be calculated based upon a proxy capital
structure of 45% long term debt and 55% common equity and shall equal the sum
of:

 

  (i) the long term debt component, which shall equal the product of 45% and
Duke’s long term debt expenses recorded in FERC Account Nos. 427, 428, 428.1,
429, 429.1, and 430 divided by Duke’s long-term debt balance as recorded in FERC
Account Nos. 221 through 227, and

 

  (ii) the return on equity component, which shall equal the product of 55% and
Duke’s return on equity (ROE) of 11.0%.

 

  (b) Federal Income Tax shall equal

[A+(B+C+D)/E] x (FT) / (1-FT)

 

    where FT is the Federal Income Tax Rate and A is the return on equity
component, as determined in Sections III.A.2.(a)(ii) above, B is Production
Related Amortization of Investment Tax Credits, , C is Duke’s annual amount of
Tax Deduction for Manufacturing Activities, D is the Equity AFUDC component of
Production Depreciation Expense as defined in Section III.B below, and E is
Production Investment Base as Determined in III.A.1 above.

 

  (c) State Income Tax shall equal

 

    [A+(B+C+ D)/E + Federal Income Tax]x(ST)/ (l -ST)

 

    where ST is the State Income Tax Rate. A is the return on equity component
determined in Sections lll.A.2.(a)(ii) above, B is the Amortization of
Investment Tax Credits, C is Duke’s

 

8

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

annual amount of Tax Deduction for Manufacturing Activities, D is the equity
AFUDC component of Production Depreciation Expense as defined in Section III.B.
below, E is the Production Investment Base as determined in III.A.l above and
Federal Income Tax is the rate determined in Section III.A.2.(b) above.

 

  B. Production Depreciation Expense shall equal the sum of Depreciation Expense
for Production Plant, plus an allocation of General and Intangible Plant
Deprecation Expense calculated by multiplying the sum of General Plant
Depreciation Expense and Intangible Plant Amortization Expense by the Production
Wages and Salaries Allocation Factor, less Decommissioning Expense as defined in
III.C. below.

 

  C. Decommissioning Expense shall equal $48,304,000 per year.

 

  D. Production Related General Taxes shall equal the sum of General Tax Expense
less revenue related taxes and Payroll Taxes, multiplied by the Production Plant
Allocation Factor, and Payroll Taxes multiplied by the Production Wages and
Salaries Allocation Factor.

 

  E. Fixed Production Operation and Maintenance Expense shall equal Duke’s
expenses as recorded in FERC Account Nos. 500, 502, 505-507, 511, 514, 517, 519,
520, 523-525, 529, 532, 535-543, 545, 546, 548-554, 556, and 557.

 

  F. Purchased Power Expenses shall equal Duke’s expenses for purchased power
recorded in FERC Account No. 555 less purchased power fuel costs included in the
Fuel Rate determined in Section IV below.

 

  G. Production Related Administrative and General Expenses shall equal the sum
of (1) Administrative and General Expense multiplied by the Production Wages and
Salaries Allocation Factor, (2) Property Insurance multiplied by the Production
Plant Allocation Factor, (3) Expenses included in FERC Account 928 related to
FERC Assessments multiplied by the Production Plant Allocation Factor, and
(4) any other Production related expenses or assessments in FERC Account Nos.
928 or 930.1.

 

  H. Production Related Other Amortization Expense shall equal Duke’s
amortization expense recorded in FERC Account Nos. 406 and 407 either directly
assigned to production or allocated to production using the Production Plant
Allocation Factor or the Production Wages and Salaries Allocation Factor.

 

9

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

  I. Credit for Revenue from Non-Associated Utility Sales shall equal Duke’s
revenues from inter-system sales from Duke’s Generation System recorded in FERC
Account 447 to the extent such sales are not included in the determination of
Duke’s Average Peak Hour Load, less fuel recovered from such sales as determined
in the Fuel Rate below, multiplied by 2/3.

 

  IV. Fuel Rate

The Fuel Rate shall equal F/S, and further divided by the Revenue Tax Rate,
where:

F is the expense of fossil and nuclear fuel and purchased economic power, as
defined in 18 C.F.R. § 35.14(a)(2) (2005), for the calendar year period;
provided that for purposes of this calculation described in 18 C.F.R. §
35.14(a)(2) (2005) the cost of fossil fuel shall include, in addition to those
items set forth in 18 C.F.R. § 35.14(a)(6), expenses recorded in Account No. 509
for the calendar year period.

S is all kWh sold (compensated for losses to the point at which power is
available for transmission ), excluding inter-system sales, for the calendar
year period.

 

  V. Variable O&M Rate

The Variable O&M rate shall equal Variable Non-Fuel Production Operation and
Maintenance Expense divided by S as determined in Section IV above, and further
divided by the Revenue Tax Rate.

 

10

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

Attachment 3-1

Example showing the calculation of the Excess Annual Capacity Charges in the

Duke-Blue Ridge Agreement, Duke-Piedmont Agreement

and Duke-Rutherford Agreement

The purpose of this attachment is to provide an example showing the calculation
of the Excess Annual Capacity Charges provided in Section 3.5.2.3.5 of the
above-identified agreements. Blue Ridge, Piedmont and Rutherford are referred to
individually as BR, P and R, respectively, and collectively as the EMC Group.

Assumptions:

Hour of maximum integrated sixty minute Duke Schedule 1 Demands during July and
August 2007: 4:00-5:00 pm, July 14, 2007.

 

    

BR

(kW)

  

P

(kW)

  

R

(kW)

EMC Coincident Peak Demand (7-14-07 4-5 pm)

   225,000    150,000    425,000

EMC Base Obligation (7-14-07 4-5pm)

   125,000    175,000    300,000

EMC Group Coincident Peak Demand (7-14-07, 4-5 pm): 800,000 kW

EMC Group Base Obligation (7-14-07, 4-5 pm): 600,000 kW

Annual Capacity Quantity = 148,000 kW

Step 1

Calculate EMC Group Excess Annual Capacity Quantity per Section 3.5.2.3.5.

 

EMC Group Coincident Peak Demand (7-14-07 4-5 pm)

   800,000 kW   

minus EMC Group Base Obligation (7-14-07 4-5 pm)

   - 600,000 kW   

minus Annual Capacity Quantity

   - 148,000 kW   

EMC Group Excess Annual Capacity Quantity

   52,000 kW   

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

Step 2

Calculate EMC Excess Annual Capacity Quantity per Section 3.5.2.3.5.1

 

   

A

EMC Coincident Peak

Demand (7-14-07 4-5pm)

(kW)

 

B

minus EMC Base Obligation

(7-14-07 4-5 pm)

(kW)

 

C

minus EMC Annual

Capacity Quantity

(kW)

 

D

EMC Excess Annual
Capacity Quantity1

(kW)

BR

  225,000   125,000   42,000   58,000

P

  150,000   175,000   23,000   0

R

  425,000   300,000   83,000   42,000

Step 3

Calculate EMC Group Combined Excess Annual Capacity Quantity per
Section 3.5.2.3.5.2.

 

BR Excess Annual Capacity Quantity

   58,000 kW   

P Excess Annual Capacity Quantity

   0 kW   

R Excess Annual Capacity Quantity

   42,000 kW   

EMC Group Combined Excess Annual Capacity Quantity

   100,000 kW   

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

1 Cannot be less than zero.

 

2

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

Step 4

Calculate Excess Annual Amount per Section 3.5.2.3.5.

 

   

A

EMC Excess Annual
Capacity Quantity

(kW)

 

B

EMC Group Combined
Excess Annual Capacity
Quantity (kW)

 

C

EMC Group Excess Capacity
Quantity

(kW)

 

D

EMC Excess Annual

Amount

( ( A / B) * C)

(kW)

BR

  58,000   100,000   52,000   30,160

P

  0   100,000   52,000   0

R

  42,000   100,000   52,000   21,840

Step 5

Calculate Excess Annual Capacity Charge per Section 3.5.2.3.5.

 

    

A

EMC Excess Annual

Amount

(kW)

  

B

Annual Capacity Price

($/kW-year)

  

C

Excess Annual Capacity

Charge

BR

   30,160    45.60    $ 1,375,296

P

   0    45.60    $ 0

R

   21,840    45.60    $ 995,904

 

3

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

Attachment 4-1

Rutherford

EMC’s Base Obligation (MW) (as defined in Section 4.2.2)

Fixed Forward Resource (MW) (as defined in Section 5.1.1)

 

     Weekday

Hour

   1    2    3    4    5    6    7    8    9    10    11    12    13    14    15
   16    17    18    19    20    21    22    23    24

Sep-06

   87    77    70    68    72    93    126    124    114    116    124    135   
144    154    160    168    182    191    189    184    190    172    140    108

Oct-06

   72    65    63    65    78    116    166    162    137    124    115    111
   107    108    108    113    127    142    153    171    171    154    124   
92

Nov-06

   106    103    103    108    122    157    197    187    165    148    131   
119    107    102    97    101    119    154    178    179    177    166    144
   122

Dec-06

   131    127    128    133    146    177    213    212    196    178    158   
142    128    120    114    117    136    176    199    201    202    194    174
   151

Jan-07

   143    137    137    140    147    160    175    197    222    217    191   
165    140    120    109    110    131    170    191    189    186    179    166
   148

Feb-07

   128    127    129    133    146    175    206    199    177    155    137   
123    112    105    98    101    117    143    174    183    182    172    151
   131

Mar-07

   85    83    85    89    101    132    166    154    129    115    105    97
   90    86    82    83    94    108    126    144    144    136    116    96

Apr-07

   62    57    56    58    67    93    124    121    104    96    91    88    85
   84    82    84    94    103    108    111    126    124    102    77

May-07

   58    48    43    42    48    71    101    103    90    89    94    100   
104    110    113    121    133    144    144    138    142    144    115    83

Jun-07

   80    69    62    59    61    73    86    93    96    105    117    130   
139    146    150    155    163    168    168    160    152    154    133    104

Jul-07

   94    82    75    70    71    81    91    99    106    120    138    157   
170    175    181    189    197    207    214    206    191    188    161    130

Aug-07

   96    84    77    73    74    87    108    106    103    112    129    146   
161    175    182    189    202    211    213    199    194    183    151    119

Sep-07

   69    61    56    54    57    74    100    98    90    93    99    108    115
   122    127    134    144    151    151    147    151    137    111    86

Oct-07

   57    51    50    51    62    92    132    129    109    98    91    88    85
   87    86    90    101    113    122    136    137    122    98    73

Nov-07

   84    82    83    86    97    125    157    148    131    117    104    94   
85    81    77    80    94    122    141    142    140    133    115    97

Dec-07

   104    101    102    106    116    140    169    168    155    141    126   
113    102    95    90    93    108    140    158    160    161    154    138   
120

Jan-08

   146    140    140    143    150    163    179    201    225    222    195   
168    144    122    112    112    133    173    195    193    190    183    170
   151

Feb-08

   130    129    131    136    148    179    210    204    181    158    140   
126    114    108    101    104    119    146    178    186    186    176    154
   134

Mar-08

   87    85    87    90    103    135    169    157    132    118    107    99
   91    87    83    85    96    111    129    147    147    138    118    98

Apr-08

   63    58    57    59    69    94    126    123    106    98    93    90    87
   86    83    86    95    105    110    113    128    126    105    79

May-08

   59    48    44    43    48    72    104    105    92    91    95    101   
106    112    115    123    136    147    147    141    144    147    118    84

Jun-08

   82    70    63    60    62    75    87    94    98    107    119    133   
141    148    153    158    166    172    172    163    155    157    135    106

Jul-08

   95    83    76    72    73    83    94    101    108    122    141    160   
173    179    184    193    201    211    218    211    195    192    165    133

Aug-08

   98    86    79    74    75    88    110    108    105    115    131    149   
165    178    186    193    206    215    218    203    198    186    154    122

Sep-08

   71    62    57    55    59    76    102    101    93    94    101    110   
116    125    129    137    147    154    154    150    154    140    113    87

Oct-08

   59    52    51    53    63    94    134    132    112    101    93    90   
87    88    87    91    103    115    125    139    139    126    101    75

Nov-08

   86    83    84    87    99    127    160    151    134    119    106    96   
87    83    79    82    96    125    144    145    144    135    117    99

Dec-08

   106    103    104    108    119    144    172    172    158    144    128   
115    104    98    93    95    111    143    161    163    164    157    141   
122

Note: Hour 1 refers to 12:00 a.m. - 12:59:59 a.m. Eastern Time, Hour 2 refers to
1:00 a.m. - 1:59:59 a.m. Eastern Time, etc.

Attachment 4-1 to Duke-Rutherford Agreement

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

Rutherford

EMC’s Base Obligation (MW) (as defined in Section 4.2.2)

Fixed Forward Resource (MW) (as defined in Section 5.1.1)

 

     Weekday

Hour

   1    2    3    4    5    6    7    8    9    10    11    12    13    14    15
   16    17    18    19    20    21    22    23    24

Jan-09

   148    143    143    145    153    166    182    206    230    225    199   
171    147    125    114    114    137    176    199    197    193    186    173
   154

Feb-09

   133    132    133    139    151    182    214    207    184    161    142   
128    116    110    102    106    122    149    181    190    190    179    158
   137

Mar-09

   88    87    88    93    105    137    172    160    135    120    108    101
   93    90    85    87    98    113    131    149    151    141    120    100

Apr-09

   65    59    58    60    69    97    129    126    108    100    95    92   
88    87    86    88    98    108    112    115    130    129    106    80

May-09

   60    49    44    44    49    73    105    107    94    93    98    104   
108    115    118    126    139    149    150    144    147    150    120    86

Jun-09

   83    72    65    62    63    76    89    97    100    109    122    135   
144    151    156    161    169    176    176    166    158    160    138    108

Jul-09

   97    85    78    73    74    85    95    103    111    125    144    164   
177    182    188    197    205    215    222    215    199    196    168    135

Aug-09

   100    87    80    76    76    90    112    110    107    117    133    152
   168    182    190    197    210    218    222    207    202    190    156   
124

Sep-09

   73    63    59    56    59    77    104    102    94    96    103    112   
119    127    132    140    151    158    157    153    158    142    115    89

Oct-09

   59    53    51    54    64    96    137    134    113    102    95    91   
88    90    89    94    105    118    127    141    142    128    102    76

Nov-09

   87    85    86    90    101    129    163    154    137    122    108    98
   89    84    80    83    98    127    147    148    146    138    119    101

Dec-09

   108    105    106    110    121    147    176    176    161    147    131   
118    106    99    94    97    112    146    165    166    167    160    144   
125

Jan-10

   151    146    146    148    156    170    186    210    235    230    203   
174    149    128    116    116    139    180    203    200    197    190    176
   158

Feb-10

   136    135    137    142    154    186    218    211    188    165    145   
131    119    112    105    108    125    151    185    193    193    183    161
   140

Mar-10

   90    88    90    94    108    140    176    163    137    122    111    103
   95    91    87    89    100    115    134    152    153    144    123    102

Apr-10

   66    60    59    62    71    98    132    129    111    102    97    94   
90    89    87    90    99    109    114    118    133    132    108    82

May-10

   61    51    45    44    51    75    108    109    96    94    99    105   
110    117    120    128    141    152    153    147    151    153    123    87

Jun-10

   85    73    66    62    65    78    90    98    102    111    125    138   
147    154    159    165    172    179    179    170    161    163    140    110

Jul-10

   99    87    80    75    76    87    97    105    113    127    147    167   
180    186    192    200    209    219    227    219    203    200    172    138

Aug-10

   102    90    82    77    78    92    114    112    109    119    137    155
   171    186    193    200    215    223    226    211    206    194    159   
126

Sep-10

   74    65    59    58    61    78    106    105    96    98    105    114   
121    129    135    142    154    161    160    156    161    145    118    91

Oct-10

   61    55    53    55    66    98    140    137    115    105    97    94   
90    91    90    95    107    120    129    144    144    130    105    78

Nov-10

   89    87    87    91    103    133    166    158    140    125    110    100
   90    86    82    85    100    129    151    151    149    140    122    103

Dec-10

   111    107    108    112    123    149    179    179    165    150    133   
120    108    101    96    99    115    149    168    169    170    163    147
   127

Attachment 4-1 to Duke-Rutherford Agreement

 

2

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

Rutherford

EMC’s Base Obligation (MW) (as defined in Section 4.2.2)

Fixed Forward Resource (MW) (as defined in Section 5.1.1)

 

      Weekend

Hour

   1    2    3    4    5    6    7    8    9    10    11    12    13    14    15
   16    17    18    19    20    21    22    23    24

Sep-06

   81    68    61    57    57    61    68    81    108    123    129    137   
149    158    163    168    174    177    171    165    169    153    127    101

Oct-06

   69    58    54    54    58    69    86    111    143    146    130    120   
117    113    109    109    116    123    128    147    148    134    111    87

Nov-06

   96    92    91    92    98    109    126    152    171    161    138    124
   117    109    101    100    109    134    151    151    149    141    124   
107

Dec-06

   138    132    131    133    139    150    166    190    214    204    176   
153    140    127    117    116    128    159    178    181    184    180    166
   148

Jan-07

   133    126    124    126    130    139    152    175    205    197    162   
139    128    111    98    94    108    145    163    160    154    144    135
   127

Feb-07

   122    120    122    127    134    144    159    183    200    182    150   
129    119    106    91    84    89    103    134    154    161    155    140   
126

Mar-07

   78    74    74    77    83    93    106    125    137    130    114    102   
96    88    80    77    82    89    103    119    121    114    100    85

Apr-07

   58    50    47    47    50    58    68    83    101    105    97    91    90
   87    83    83    87    91    92    95    110    108    91    71

May-07

   59    46    39    37    37    43    50    68    90    101    103    107   
112    115    117    121    126    129    126    119    121    124    102    76

Jun-07

   79    66    58    53    51    53    55    69    91    109    119    130   
141    147    151    154    159    160    155    145    138    139    122    97

Jul-07

   98    84    75    69    66    67    69    77    96    116    135    151   
162    169    176    181    186    189    184    172    161    158    140    117

Aug-07

   94    81    73    68    66    67    71    78    98    119    139    156   
170    180    186    191    194    193    183    165    161    155    136    113

Sep-07

   65    55    48    45    45    48    55    65    86    98    102    109    119
   126    129    133    139    140    136    132    135    122    101    81

Oct-07

   55    46    43    43    46    55    68    88    114    116    104    96    94
   90    87    87    92    98    102    117    118    107    88    69

Nov-07

   76    73    73    73    78    87    101    121    137    128    110    98   
93    87    80    80    87    106    120    121    119    112    99    85

Dec-07

   110    105    104    106    111    119    133    151    170    162    140   
122    112    101    93    92    101    127    141    144    147    144    132
   118

Jan-08

   136    128    126    128    133    142    155    179    209    200    165   
141    130    113    100    97    111    148    166    163    157    147    137
   130

Feb-08

   125    122    125    130    137    147    162    186    204    186    153   
132    122    108    94    86    90    105    137    157    165    158    143   
128

Mar-08

   80    76    76    79    84    94    108    127    140    133    116    105   
98    90    82    79    83    90    105    122    123    116    102    87

Apr-08

   59    51    48    48    51    59    69    85    104    107    98    93    93
   89    85    85    88    93    94    98    112    111    93    73

May-08

   59    47    40    37    38    44    51    69    92    104    105    109   
115    118    119    123    129    131    129    121    123    126    105    77

Jun-08

   80    67    59    55    52    55    56    70    94    112    122    133   
144    151    154    158    162    163    158    148    141    142    124    99

Jul-08

   101    86    76    70    68    69    70    79    98    119    137    154   
165    173    179    185    190    193    188    176    164    161    144    119

Aug-08

   96    83    74    69    67    69    72    80    99    121    142    159   
173    183    190    195    198    197    186    168    165    158    138    115

Sep-08

   66    55    49    46    46    49    55    66    87    100    105    112   
121    128    132    137    141    144    138    134    137    124    103    83

Oct-08

   56    47    44    44    48    56    69    90    116    119    106    98    95
   92    88    88    94    100    104    119    120    109    90    70

Nov-08

   78    74    74    74    79    89    103    123    139    130    112    101   
94    88    82    81    88    108    122    123    121    114    101    87

Dec-08

   112    107    106    108    113    122    135    154    174    165    143   
124    114    103    95    94    104    129    144    147    150    146    135
   120

Attachment 4-1 to Duke-Rutherford Agreement

 

3

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

Rutherford

EMC’s Base Obligation (MW) (as defined in Section 4.2.2)

Fixed Forward Resource (MW) (as defined in Section 5.1.1)

 

     Weekend

Hour

   1    2    3    4    5    6    7    8    9    10    11    12    13    14    15
   16    17    18    19    20    21    22    23    24

Jan-09

   138    131    129    130    136    144    158    182    214    204    168   
144    133    115    101    98    113    151    170    166    160    150    140
   133

Feb-09

   127    125    127    133    140    150    165    190    208    190    155   
134    124    110    95    87    92    107    140    160    168    161    146   
130

Mar-09

   81    77    77    80    86    97    110    130    143    136    119    107   
100    91    83    80    85    93    107    124    126    119    104    89

Apr-09

   60    51    49    48    51    60    70    87    106    109    101    95    94
   90    87    87    90    94    96    99    114    113    95    73

May-09

   61    48    41    38    39    44    52    71    94    105    108    111   
117    120    122    126    131    134    131    123    126    129    106    79

Jun-09

   82    69    60    55    54    55    58    72    95    113    124    135   
147    154    157    161    165    167    161    151    144    145    126    101

Jul-09

   102    87    78    72    69    70    72    80    100    121    140    157   
168    176    183    188    194    197    192    179    167    165    146    122

Aug-09

   98    84    76    70    69    69    73    81    101    123    144    162   
176    187    194    199    202    200    190    172    168    161    141    118

Sep-09

   67    56    51    48    47    50    56    67    90    102    107    114   
123    130    135    139    144    147    141    137    140    126    105    84

Oct-09

   57    48    44    44    48    57    71    92    119    121    108    100   
97    94    90    90    96    102    106    122    122    111    92    72

Nov-09

   80    76    75    76    81    90    105    126    142    133    115    102   
97    90    83    83    90    111    126    126    123    116    103    88

Dec-09

   114    109    108    110    115    124    137    158    177    168    145   
126    116    105    97    96    105    132    147    150    152    149    137
   122

Jan-10

   141    133    132    133    138    147    161    186    218    208    172   
147    136    117    104    100    115    154    173    170    163    153    143
   135

Feb-10

   130    127    129    135    143    153    168    194    213    193    158   
137    126    112    97    89    94    109    143    163    171    165    149   
133

Mar-10

   83    79    79    82    88    98    112    133    146    138    121    108   
102    94    85    83    87    94    109    127    128    121    106    90

Apr-10

   61    53    50    49    52    61    72    88    108    111    102    97    96
   93    89    88    92    97    98    101    116    115    97    75

May-10

   62    48    41    39    40    45    53    72    96    108    109    113   
119    122    124    128    134    137    133    126    128    131    108    80

Jun-10

   83    69    62    56    55    56    59    73    97    115    126    138   
150    157    160    165    169    170    165    154    147    147    129    103

Jul-10

   105    89    80    73    70    71    73    82    102    123    144    160   
172    180    186    192    198    200    196    183    170    168    149    124

Aug-10

   100    86    77    72    69    71    75    83    103    126    147    165   
180    191    198    203    206    204    193    175    172    165    144    120

Sep-10

   69    58    51    48    48    51    58    69    91    105    108    116   
126    133    137    142    147    149    144    140    143    129    108    86

Oct-10

   58    49    45    45    49    59    73    94    121    123    110    101   
99    95    91    92    98    104    108    124    125    113    94    73

Nov-10

   81    77    76    77    83    92    107    128    144    136    117    105   
98    91    86    84    92    112    128    128    126    119    105    90

Dec-10

   116    111    110    112    118    126    140    161    181    172    148   
129    119    108    99    98    108    134    151    153    155    152    140
   125

Attachment 4-1 to Duke-Rutherford Agreement

 

4

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Attachment 4-2

Calculation of Reduction to EMC’s Base Obligation and EMC Group’s Base
Obligation During Light Load Periods

I. Definitions

1. The “Carolina Power & Light Service Obligation Resources” or “SORs” means
those generation and purchased capacity resources provided to NCEMC by CP&L and
used by NCEMC to serve NCEMC load pursuant to the Power Supply Agreement.

2. The “Power Supply Agreement” means the Power Supply Agreement Dated
November 2, 1998 Between North Carolina Electric Membership Corporation and
Carolina Power & Light Company, d/b/a Progress Energy Carolinas, Inc., as
amended, filed at FERC in Docket No. ER05-722-000 on June 30, 2005.

3. The “1996 SO” means the Service Obligation assumed by NCEMC on January 1,
1996 in the amount of 204.3 MW including losses.

4. “SOR A” means the 225 MW of electric capacity and energy that CP&L provides
to NCEMC pursuant through December 31, 2015 pursuant to Section 2.1(a)(1) of the
Power Supply Agreement.

5. “SOR E” means the 225 MW of electric capacity and energy that CP&L provides
to NCEMC pursuant through December 31, 2013 pursuant to Section 2.1(a)(4) of the
Power Supply Agreement.

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

6. “NCEMC Catawba Resource Entitlement” or “CRE” means NCEMC’s 623.5 MW
ownership interest in the Catawba Nuclear Station.

7. “NCEMC’s CP&L Native Load” or “NCNL” means the electric capacity and energy
demands (kW) imposed on NCEMC by its member cooperatives in CP&L’s existing
Control Areas, and which are served by CP&L under the Power Supply Agreement
(excluding the 1996 SO).

8. “NCEMC’s Duke Native Load” or “NDNL” means the electric capacity and energy
demands (kW) imposed on NCEMC by its member cooperatives in Duke’s Control Area.

 

2

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

II. Calculation of Reduction in EMC’s Base Obligation and EMC Group’s Base
Obligation During Light Load Periods (through December 31, 2008)

EMC’s Base Obligation and EMC Group’s Base Obligation during an Hour shall be
subject to reduction during the period commencing on the Commencement Date and
continuing through December 31, 2008 in accordance with the following:

A. NCEMC’s contractual right to SO 1996, SOR A and SOR E (654.3 MW rounded to
655 MW) is subject to reduction based on a comparison between 655 MW and NCEMC’s
CP&L Native Load (NCNL).

B. In the event that NCEMC’s CP&L Native Load during the Hour is less than 655
MW, EMC’s Base Obligation and EMC Group’s Base Obligation for the Hour shall be
reduced as follows:

C. If 655 MW minus NCNL is equal to or less than 225 MW, the reduction in EMC’s
Base Obligation shall be equal to the amount set forth in Equation 1 below:

Equation 1: ( ( 655 MW - NCNL ) / 225 ) * 17

D. If 655 MW minus NCNL is greater than 225 MW, the reduction in EMC’s Base
Obligation shall be equal to 17 MW plus the amount set forth in Equation 2
below:

Equation 2: ( ( 430 MW - NCNL ) / 225 ) * 17

 

3

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

E. If 655 MW minus NCNL is equal to or less than 225 MW, the reduction in EMC
Group’s Base Obligation shall be equal to the amount set forth in Equation 3
below:

Equation 3: ( ( 655 MW - NCNL ) / 225 ) * 33

F. If 655 MW minus NCNL is greater than 225 MW, the reduction in EMC Group’s
Base Obligation shall be equal to 33 MW plus the amount set forth in Equation 4
below:

Equation 4: ( ( 430 MW - NCNL ) / 225 ) * 33

G. Example: If NCNL is equal to 565 MW during an Hour, the reduction in EMC’s
Base Obligation for the Hour shall be equal to ( ( 655 MW – 565 MW ) / 225 ) *
17 or 6.8 MW, and the reduction in EMC Group’s Base Obligation for the Hour
shall be equal to ( (655 MW - 565 MW) / 225 ) * 33, or 13.2 MW.

III. Calculation of Reduction in EMC’s Base Obligation and EMC Group’s Base
Obligation During Light Load Periods (January 1, 2009 through December 31, 2010)

EMC’s Base Obligation and EMC Group’s Base Obligation during an Hour shall be
subject to reduction during the period commencing on January 1, 2009 and
continuing through December 31, 2010 in accordance with the following:

 

4

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

A. NCEMC’s contractual right to SO 1996 and SOR A (429.3 MW rounded to 430 MW)
is subject to reduction based on a comparison between 430 MW and NCEMC’s CP&L
Native Load (NCNL).

B. In the event that NCEMC’s CP&L Native Load during the Hour is less than 430
MW, EMC’s Base Obligation for the Hour shall be reduced as follows:

Equation 5: ( (430 MW - NCNL ) / 225 ) * 17

C. In the event that NCEMC’s CP&L Native Load during the Hour is less than 430
MW, EMC Group’s Base Obligation for the Hour shall be reduced as follows:

Equation 6: ( ( 430 MW - NCNL ) / 225 ) * 33

D. Example: If NCNL is equal to 340 MW during an Hour, the reduction in EMC’s
Base Obligation for the Hour shall be equal to ( ( 430 MW – 340 MW ) / 225 ) *
17 MW, or 6.8 MW, and the reduction in EMC Group’s Base Obligation for the Hour
shall be equal to ( ( 430 MW – 340 MW ) / 225 ) * 33, or 13.2 MW.

IV. Calculation of Reduction in EMC’s Base Obligation and EMC Group’s Base
Obligation During Light Load Periods for the Catawba Resource Entitlement

In addition to the reductions to EMC’s Base Obligation and EMC Group’s Base
Obligation set forth under Sections II and III above, EMC’s Base Obligation and
EMC Group’s Base Obligation shall be subject to reduction as set forth in this
Section IV.

 

5

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

A. In the event that NCEMC’s Duke Native Load during an Hour is less than 623.5
MW and a nuclear unit at Catawba Nuclear Station or McGuire Nuclear Station is
off-line or derated during the Hour, EMC’s Base Obligation for the Hour shall be
reduced as follows:

Equation 7: (1 - ( NDNL / 623.5 MW) ) * 47 MW

B. In the event that NCEMC’s Duke Native Load during an Hour is less than 623.5
MW and a nuclear unit at Catawba Nuclear Station or McGuire Nuclear Station is
off-line or derated during the Hour, EMC Group’s Base Obligation for the Hour
shall be reduced as follows:

Equation 8: (1 - ( NDNL / 623.5 MW ) ) * 95 MW

C. Example: If NDNL is equal to 561.15 MW during an Hour, and a nuclear unit at
Catawba Nuclear Station or McGuire Nuclear Station is off-line or derated during
the Hour, the reduction in EMC’s Base Obligation for the Hour shall be equal to
( 1 - ( 561.15 MW / 623.5 MW) ) * 47 MW, which equals ( .1 ) * ( 47 MW ), or 4.7
MW, and the reduction in EMC Group’s Base Obligation for the Hour shall be equal
to ( 1 - ( 561.15 MW / 623.5 MW ) ) * 95 MW, which equals ( .1 ) * ( 95 MW ), or
9.5 MW.

 

6

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

Attachment 4-3

Partial Requirements Resources

Resource Name: AEP Baseload

Type of Resources: Baseload Resource

Delivery period: January 1, 2011 through December 31, 2012

Resource Capacity MW: 10

Must take resource: Yes, in the amount of MWs that NCEMC indicates is available
in each hour.

Scheduling: A schedule must be submitted for each hour by Duke in the amount of
MWs that NCEMC indicates is available.

Energy Pricing: NA

Force Majeure: “Force Majeure” means an event or circumstance which prevents one
Party from performing its obligations under one or more Transactions, which
event or circumstance was not anticipated as of the date the Transaction was
agreed to, which is not within the reasonable control of, or the result of the
negligence of, the Claiming Party, and which, by the exercise of due diligence,
the Claiming Party is unable to overcome or avoid or cause to be avoided. Force
Majeure shall not be based on (i) the loss of Buyer’s markets; (ii) Buyer’s
inability economically to use or resell the Product purchased hereunder;
(iii) the loss of failure of Seller’s supply; or (iv) Seller’s ability to sell
the Product at a price greater than the Contract Price. Neither Party may raise
a claim of Force Majeure based in whole or in part on curtailment by a
Transmission Provider unless (i) such Party has contracted for firm transmission
with a Transmission Provider for the Product to be delivered to or received at
the Delivery Point and (ii) such curtailment is due to “force majeure” or
“uncontrollable force” or a similar term as defined under the Transmission
Provider’s tariff, provided however, that existence of a Force Majeure absent a
showing of other facts and circumstances which in the aggregate with such
factors establish that a Force Majeure as defined in the first sentence hereof
has occurred.

Attachment 4-3 to Duke-Rutherford Agreement

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

Attachment 4-3

Partial Requirements Resources

(Page 2 of 7)

Resource Name: Catawba

Type of Resource: Baseload Resource

Delivery period: January 1, 2011 through December 31, 2021

Resource Capacity MW: 47

Must take resource: Yes, in the amount of MWs that NCEMC indicates is available
in each hour.

Scheduling: A schedule must be submitted for each hour by Duke in the amount of
MWs that NCEMC indicates is available.

Energy Pricing: NA

Force Majeure: The term “Force Majeure” as used herein shall mean any cause
beyond the control of the party affected and which by reasonable efforts the
party affected is unable to overcome, including without limitation the
following: Acts of God: fire, flood, landslide, lightning, earthquake,
hurricane, tornado, storm, freeze, or drought; blight, famine, epidemic, or
quarantine; strike, lockout or other labor difficulty; act or failure to act of
any party (and such party so acting or failing to act shall not used such act or
failure to act to excuse any other obligation which it has under this
Agreement); act or failure to act of any regulatory agency or other governmental
authority; changes in the work or delays caused by public bidding requirements;
theft; casualty; accident; equipment breakdown, failure or shortage of, or
inability to obtain from usual sources, goods, labor, equipment, information or
drawings, machinery, supplies, energy, fuel or materials; embargo; injunction;
litigation or arbitration with suppliers or vendors; shortage of rolling stock;
arrest; war; civil disturbance; explosion; acts of public enemies; sabotage; or
breach of contract by any supplier, contractor, sub-contractor, laborer or
materialman. Any party rendered unable to fulfill any obligation under this
Agreement by reason of Force Majeure shall make reasonable efforts to remove
such inability within a reasonable time.

Attachment 4-3 to Duke-Rutherford Agreement

 

2

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

Attachment 4-3

Partial Requirements Resources

(Page 3 of 7)

Resource Name: Dominion PPA

Type of Resource: Combined Cycle Resource

Delivery period: January 1, 2011 through December 31, 2014

Resource Capacity MW: 10

Must take resource: No

Resource Availability: Duke has the right but not the obligation to schedule the
amount of MWs that NCEMC has indicated is available from this resource.

Min run time (Hours): 8

Scheduling:

  •   Day ahead schedule to be submitted, with intraday changes allowed

 

  •   Nominations must be made in whole MWs

 

  •   Day ahead Schedules are those submitted before 8:00 a.m. EPT the day prior
to flow. Intraday Schedules are those that are requested after the 8:00 a.m. EPT
deadline above. All Schedule changes must occur at the top of the hour. Intraday
Schedule changes require 2 hours advance notice.

 

  •   Day ahead scheduling: Unlimited changes up to the allocation MWs

 

  •   Intraday scheduling: Limit of two changes to the hourly Schedule for the
remainder of the day. Each change to the hourly Schedule shall be no greater
than 5%, for a cumulative maximum of 10% each hour. Additional changes will be
accommodated on a best efforts basis.

Energy Pricing: For each month of the Delivery Period, the price for energy will
equal the sum of Day-Ahead Energy Charge, the Intra-day Energy Charge, the
Incremental Variable Charge and the Variable O&M Charge:

 

  •   Day-ahead Energy Charge = the sum of each day in the month’s Day-Ahead
Energy Price x energy scheduled Day-Ahead

 

  •   Day-Ahead Energy Price = (Day-Ahead Fuel Index + Fuel Adder) x Heat Rate

 

  •   Day-Ahead Fuel Index: Gas Daily: Daily Price Survey, Midpoint of the Daily
Ranges, Appalachia, Dominion South Point. Gas Index for each Sat. and Sun. shall
be the price specified for the Mon. immediately following such Sat. and Sun. In
the event that Gas Daily no longer publishes this index, NCEMC and Dominion will
agree upon a replacement index which will be passed through to the IM.

 

  •   Intra-Day Energy Charge = the sum of each day in the month’s Intra-Day
Energy Price x energy scheduled Intra-Day

 

  •   Intra-Day Energy Price = (Intra-Day Fuel Index + Fuel Adder) x Heat Rate

Attachment 4-3 to Duke-Rutherford Agreement

 

3

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

Attachment 4-3

Partial Requirements Resources

(Page 4 of 7)

 

  •   Intra-Day Fuel Index: The higher of the price in $/MMBtu for such calendar
day or the next calendar day of Gas Daily: Daily Price Survey, Absolute of the
Daily Ranges, Appalachia, Dominion South Point. Gas Index for each Sat and Sun
shall be the price specified for the higher of the Monday or Tuesday immediately
following such Saturday and Sunday.

 

  •   Fuel Adder: $0.25/MMBtu

 

  •   Heat Rate:

 

  •   2006 heat rate: 7.730 MMBtu/MWh

 

  •   Heat Rate Adjustment: The heat rate will be recalculated annually to
reflect the actual energy costs from the previous year. The new heat rate will
go into effect on February 1 of each year.

 

  •   Incremental Variable Charge: There may be additional charges due to making
Intra-day schedule changes.

 

  •   Variable O&M Charge:

 

2011 = $3.81/MWh

2012 = $3.91/MWh

2013 = $4.01/MWh

2014 = $4.11/MWh

Force Majeure: “Force Majeure” means an event or circumstance which prevents one
Party from performing its obligations under one or more Transactions, which
event or circumstance was not anticipated as of the date the Transaction was
agreed to, which is not within the reasonable control of, or the result of the
negligence of, the Claiming Party, and which, by the exercise of due diligence,
the Claiming Party is unable to overcome or avoid or cause to be avoided. Force
Majeure shall not be based on (i) the loss of Buyer’s markets; (ii) Buyer’s
inability economically to use or resell the Product purchased hereunder;
(iii) the loss or failure of Seller’s supply; or (iv) Seller’s ability to sell
the Product at a price greater than the Contract Price. Neither Party may raise
a claim of Force Majeure based in whole or in part on curtailment by a
Transmission Provider unless (i) such Party has contracted for firm transmission
with a Transmission Provider for the Product to be delivered to or received at
the Delivery Point and (ii) such curtailment is due to “force majeure” or
“uncontrollable force” or a similar term as defined under the Transmission
Provider’s tariff; provided, however, that existence of a Force Majeure absent a
showing of other facts and circumstances which in the aggregate with such
factors establish that a Force Majeure as defined in the first sentence hereof
has occurred.

Attachment 4-3 to Duke-Rutherford Agreement

 

4

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

Attachment 4-3

Partial Requirements Resources

(Page 5 of 7)

Resource Name: SCEG

Type of Resource: Combined Cycle Resource

Delivery period: January 1, 2011 through December 31, 2012

Resource Capacity MW: 17

Must take resource: No

Resource Availability: Duke has the right but not the obligation to schedule the
amount of MWs that NCEMC has indicated is available from this resource.

Min run time (Hours): 4

Firm Gas Transportation: Firm gas transportation has been procured for up to 16
hours a day. Therefore, operation of this resource is limited to no more than 16
hours a day.

Scheduling:

 

  •   Day ahead schedule to be submitted, with intraday changes allowed

 

  •   Nominations must be made in whole MWs

 

  •   Day ahead Schedules are those submitted before 8:00 a.m. EPT the day prior
to flow. Intraday Schedules are those that are requested after the 8:00 a.m. EPT
deadline above. All Schedule changes must occur at the top of the hour. Intraday
Schedule changes require 2 hours advance notice.

 

  •   Day ahead scheduling: Unlimited changes up to the allocation MWs

 

  •   Intraday scheduling: Limit of two changes to the hourly Schedule for the
remainder of the day. Each change to the hourly Schedule shall be no greater
than 5%, for a cumulative maximum of 10% each hour. Additional changes will be
accommodated on a best efforts basis.

Energy Pricing: For each month of the Delivery Period, the price for energy will
equal the sum of Day-Ahead Energy Charge, the Intra-day Energy Charge and the
Variable O&M Charge:

 

  •   Day-ahead Energy Charge = the sum of each day in the month’s Day-Ahead
Energy Price x energy scheduled Day-Ahead:

 

  •   Day-Ahead Energy Price = (Day-Ahead Fuel Index + Fuel Adder) x Heat Rate

 

  •   Day-Ahead Fuel Index: 102.6% of SONAT Mid-Point price as published in Gas
Daily for Louisiana-OnShore South for gas to flow on such day

 

  •   Intra-Day Energy Charge = the sum of each day in the month’s Intra-Day
Energy Price x energy scheduled Intra-Day

 

  •   Intra-Day Energy Price = (Intra-Day Fuel Index + Fuel Adder) x Heat Rate

Attachment 4-3 to Duke-Rutherford Agreement

 

5

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

Attachment 4-3

Partial Requirements Resources

(Page 6 of 7)

 

  •   Intra-Day Fuel Index: 102.6% of the higher of the Gas Daily daily
Mid-Point price for SONAT under the table for Louisiana-OnShore South for gas to
flow such day or the Gas Daily daily Mid-Point price for SONAT under the table
for Louisiana-OnShore South for gas to flow on the next trading day

 

  •   Fuel Adder: $0.1/MMBtu

 

  •   Heat Rate: 7.350 MMBtu/MWh

 

  •   Variable O&M Charge:

 

2011 = $2.70/MWh

2012 = $2.76/MWh

Force Majeure: “Force Majeure” means an event or circumstance which prevents one
Party from performing its obligations under one or more Transactions, which
event or circumstance was not anticipated as of the date the Transaction was
agreed to, which is not within the reasonable control of, or the result of the
negligence of, the Claiming Party, and which, by the exercise of due diligence,
the Claiming Party is unable to overcome or avoid or cause to be avoided. Force
Majeure shall not be based on (i) the loss of Buyer’s markets; (ii) Buyer’s
inability economically to use or resell the Product purchased hereunder;
(iii) the loss of failure of Seller’s supply; or (iv) Seller’s ability to sell
the Product at a price greater than the Contract Price. Neither Party may raise
a claim of Force Majeure based in whole or in part on curtailment by a
Transmission Provider unless (i) such Party has contracted for firm transmission
with a Transmission Provider for the Product to be delivered to or received at
the Delivery Point and (ii) such curtailment is due to “force majeure” or
“uncontrollable force” or a similar term as defined under the Transmission
Provider’s tariff; provided, however, that existence of a Force Majeure absent a
showing of other facts and circumstances which in the aggregate with such
factors establish that a Force Majeure as defined in the first sentence hereof
has occurred.

Attachment 4-3 to Duke-Rutherford Agreement

 

6

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

Attachment 4-3

Partial Requirements Resources

(Page 7 of 7)

Resource Name: SEPA

Type of Resource: Baseload Resource

Delivery period: January 1, 2011 through December 31, 2021

Resource Capacity MW: 24

Must take resource: Duke must schedule the amount of energy that SEPA indicates
is available.

Resource Availability: SEPA will send the “Energy for Scheduling” declaration to
Duke on Thursday of each week. The declaration shows the minimum energy and
excess energy available for scheduling.

Scheduling:

 

  •   Duke to schedule with SEPA.

 

  •   All scheduling nominations must be made in whole megawatts (MW) only.

 

  •   If the SEPA declaration shows excess energy is available, that energy must
be scheduled – it is not optional.

 

  •   After receiving the energy declaration from SEPA, Duke is to fax or email
back their proposed schedule for the coming week (7 days). The seven day week
shall commence at the beginning of Saturday and extend to the end of Friday.

 

  •   Schedules may be revised on a day-ahead basis only if received by 8 AM.

Energy Pricing: NA

Force Majeure: Neither the Government nor Purchaser shall be considered to be in
default in respect of any obligation hereunder, if prevented from fulfilling
such obligation by reason of uncontrollable forces, including but not limited to
failure of facilities, flood, earthquake, storm, lightning, fire, epidemic, war,
riot, civil disturbance, labor disturbance, materials or equipment shortages, or
restraint by court or public authority, which by exercise of reasonable
diligence and foresight could not have been avoided, but excluding drought.
Either party rendered unable to fulfill any obligation by reason of an
uncontrollable force shall remove such inability with all reasonable dispatch.

Attachment 4-3 to Duke-Rutherford Agreement

 

7

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

Attachment 7-2

Example showing the calculation of the Monthly Demand Charges in the

Duke-Blue Ridge Agreement, Duke-Piedmont Agreement

and Duke-Rutherford Agreement

The purpose of this attachment is to provide an example showing the calculation
of the Monthly Demand Charge provided in Section 7.1.4 of the above-identified
agreements. Blue Ridge, Piedmont and Rutherford are referred to individually as
BR, P and R, respectively, and collectively as the EMC Group.

Assumptions:

Hour in October in which the positive difference between the EMC Group Native
Load and EMC Group’s Base Obligation is the greatest: 4:00-5:00 pm, October 14,
2006.

 

    

BR

(kW)

  

P

(kW)

  

R

(kW)

EMC Hourly Demand (10-14-06 4-5 pm)

   75,000    275,000    375,000

EMC Base Obligation (10-14-06 4-5pm)

   100,000    200,000    250,000

 

EMC Group Hourly Demand (10-14-06, 4-5 pm): 725,000 kW

EMC Group Base Obligation (10-14-06, 4-5 pm): 550,000 kW

Step 1

Calculate EMC Group Monthly Demand Quantity per Section 7.1.4.3.

 

 

EMC Group Hourly Demand    725,000 kW minus EMC Group Base Obligation   
- 550,000 kW      EMC Group Monthly Demand Quantity    175,000 kW

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

Step 2

Calculate EMC Monthly Demand Quantity per Section 7.1.4.1.

 

    

A

EMC Hourly Demand

(10-14-06 4-5pm) (kW)

  

B

minus EMC Base Obligation

(10-14-06 4-5 pm)

(kW)

  

C

EMC Monthly Demand
Quantity2

(kW)

BR

   75,000    100,000    0

P

   275,000    200,000    75,000

R

   375,000    250,000    125,000

Step 3

Calculate EMC Group Combined Monthly Demand Quantity per Section 7.1.4.2.

 

BR Monthly Demand Quantity

   0 kW

P Monthly Demand Quantity

   75,000 kW

R Monthly Demand Quantity

   125,000 kW

EMC Group Combined Monthly Demand Quantity

   200,000 kW     

Step 4

Calculate Monthly Demand Amount per Section 7.1.4.

 

    

A

EMC Monthly Demand
Quantity

(kW)

  

B

EMC Group Combined
Monthly Demand Quantity
(kW)

  

C

EMC Group Monthly
Demand Quantity

(kW)

  

D

EMC Monthly
Demand Amount

( ( A /B) * C) (kW)

BR

   0    200,000    175,000    0

P

   75,000    200,000    175,000    65,625

R

   125,000    200,000    175,000    109,375

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

2 Cannot be less than zero.

 

2

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

Step 5

Calculate Monthly Demand Charge per Section 7.1.4.

 

    

A

EMC Monthly Demand
Amount (kW)

  

B

Monthly Demand
Rate ($/kW-year)

  

C

Monthly Demand Charge

BR

   0    0.75      0

P

   65,625    0.75    $ 49,218.75

R

   109,375    0.75    $ 82,031.25

 

3

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

Attachment 7-3

Calculation of Rutherford Allocated Share of

Duke Total Hourly Energy Charge, EMC Group Total Hourly Energy Credit,

Inter-EMC Energy Charge and Inter-EMC Energy Credit

I. Definitions

1. The Inter-EMC Transfer Price for an Hour shall be equal to the simple average
of the Duke Territorial Incremental Cost for the Hour and the Duke Territorial
Decremental Cost for the Hour; provided, that for any Hour for which the EMC
Group Energy Credit Amount is zero, the Inter-EMC Transfer Price for the Hour
shall be equal to 101.5% of the Duke Territorial Incremental Cost for the Hour,
and that for any Hour for which the EMC Group Energy Purchase Amount is zero,
the EMC Transfer Price for the Hour shall be equal to 101.5% of the Duke
Territorial Decremental Cost for the Hour.

2. All other capitalized terms shall have the meaning set forth in Section 1.1
of this Agreement.

II. Rutherford Allocated Share of the Duke Total Hourly Energy Charge

The Rutherford Allocated Share of the Duke Total Hourly Energy Charge for an
Hour shall be equal to:

( C2 / A ) * D

Where:

A = EMC Group Combined Energy Purchase Amount

C2 = Rutherford Energy Purchase Amount

D = Duke Total Hourly Energy Charge

 

III. Rutherford Allocated Share of the Inter-EMC Energy Charge

The Rutherford Allocated Share of the Inter-EMC Energy Charge for an Hour shall
be equal to:

( C2 / A ) * ( A—B ) * P

Where:

A = EMC Group Combined Energy Purchase Amount

B = EMC Group Energy Purchase Amount

C2 = Rutherford Energy Purchase Amount

P = Inter-EMC Transfer Price

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

IV. Rutherford Allocated Share of the EMC Group Total Hourly Energy Credit

The Rutherford Allocated Share of the EMC Group Total Hourly Energy Credit for
an Hour shall be equal to:

( G2 / E ) * H

Where:

E = EMC Group Combined Energy Credit Amount

G2 = Rutherford Energy Credit Amount

H = EMC Group Total Hourly Energy Credit

 

V. Rutherford Allocated Share of the Inter-EMC Energy Credit

The Rutherford Allocated Share of the Inter-EMC Energy Credit for an Hour shall
be equal to:

( G2 / E ) * ( E – F ) * P

Where:

E = EMC Group Combined Energy Credit Amount

F = EMC Group Energy Credit Amount

G2 = Rutherford Energy Credit Amount

P = Inter-EMC Transfer Price

 

- 2 -

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

Attachment 7-4

Example 1

Showing the Calculation of Blue Ridge, Piedmont and

Rutherford Allocated Shares of the Duke Total Hourly Energy Charge,

EMC Group Total Hourly Energy Credit, Inter-EMC Energy Charge and Inter-EMC
Energy Credit

The purpose of this attachment is to provide an example showing the calculation
of the charges and credits identified above for one Hour. For purposes of this
example, Blue Ridge, Piedmont and Rutherford are referred to individually as BR,
P and R, respectively, and collectively as the EMC Group.

I. ASSUMPTIONS:

A. Call and Put Signals during the Hour

 

     BR    P    R    EMC
Group

Intervals 1-2253 - Call Signal during each Interval (kW):

   6,000    0    10,000    6,000

Intervals 1-225 - Put Signal during each Interval (kW)

   0    10,000    0    0

Intervals 226-450 - Call Signal during each Interval (kW)

   6,000    0    10,000    6,000

Intervals 226-450 - Put Signal during each Interval (kW)

   0    10,000    0    0

Intervals 451-675 - Call Signal during each Interval (kW)

   0    4,000    0    0

Intervals 451-675 - Put Signal during each Interval (kW)

   9,000    0    9,000    14,000

Intervals 676-900 - Call Signal during each Interval (kW)

   0    4,000    0    0

Intervals 676-900 - Put Signal during each Interval (kW)

   9,000    0    9,000    14,000

 

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

3 Interval numbers refer to the Intervals during the Hour (e.g., Interval 1 is
the first four seconds of the Hour, Interval 2 is the next four seconds, etc.).
The Call and Put Signals are shown as the same in each of the first 225
Intervals of the Hour, and then again as the same in the next 225 Intervals and
so on. This is a simplifying assumption, to make this example less cumbersome.
In actual operation, the Parties anticipate that these positions would change
frequently within the Hour.

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

B. Energy deliveries during the Hour4

 

     BR    P    R    EMC
Group

Hourly Energy Amount delivered from Duke - Intervals 1-225

   1,500    0    2,500    1,500

Hourly Energy Amount delivered to Duke - Intervals 1-225

   0    2,500    0    0

Hourly Energy Amount delivered from Duke - Intervals 226-450

   1,500    0    2,500    1,500

Hourly Energy Amount delivered to Duke - Intervals 226-450

   0    2,500    0    0

Hourly Energy Amount delivered from Duke - Intervals 451-675

   0    1,000    0    0

Hourly Energy Amount delivered to Duke - Intervals 451-675

   2,250    0    2,250    3,500

Hourly Energy Amount delivered from Duke - Intervals 676-900

   0    1,000    0    0

Hourly Energy Amount delivered to Duke - Intervals 676-900

   2,250    0    2,250    3,500

C. Incremental/Decremental Costs

 

Duke Territorial Incremental Cost: $0.10/kWh

Duke Territorial Decremental Cost: $0.10/kWh

 

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

4 These numbers sum the four-second Call and Put Signals from Part I.A. For
example, 6,000 kW delivered by Duke in each of the 225 four-second Intervals (15
minutes) equal 1,500 kWh (6,000 KW * 225 Intervals / 900 Intervals / Hour = 1500
kWh).

 

- 2 -

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

II. CALCULATIONS

A. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Duke Total Hourly Energy Charge

Step 1

Sum the energy deliveries by Duke to BR for all Intervals over the entire Hour
(column 1). Repeat calculation for P and R (columns 2-3). Sum columns 1-3
(column 4). Sum the energy deliveries by Duke to the EMC Group for all Intervals
over the entire Hour (column 5).

 

Column number

   1    2    3    4    5      BR5    P6    R7    Sum8    Aggregate
EMC
Group9

Energy delivered by Duke (kW)

   3,000    2,000    5,000    10,000    3,000

Step 2

Calculate the percentage that each Customer contributed to the energy deliveries
by Duke (Customer Buy / Sum of Customer Buys)

 

     BR10     P11     R12     Sum  

Energy delivered by Duke

   30.00 %   20.00 %   50.00 %   100.00 %

 

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

5 Blue Ridge Energy Purchase Amount

6 Piedmont Energy Purchase Amount

7 Rutherford Energy Purchase Amount

8 EMC Group Combined Energy Purchase Amount

9 EMC Group Energy Purchase Amount

10 Blue Ridge Energy Purchase Amount / EMC Group Combined Energy Purchase
Amount.

11 Piedmont Energy Purchase Amount / EMC Group Combined Energy Purchase Amount.

12 Rutherford Energy Purchase Amount / EMC Group Combined Energy Purchase
Amount.

 

- 3 -

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

Step 3

Calculate Duke Total Hourly Energy Charge = 113% of Duke Territorial Incremental
Cost for electric energy delivered by Duke to the EMC Group for the Hour (3,000
kW * $0.10/kWh * 113% = $339.00)

Step 4

Calculate the individual EMC’s Allocated Share of the Duke Total Hourly Energy
Charge.

Apply the percentages derived in Step 2 to the Duke Total Hourly Energy Charge.

 

     BR13    P14    R15    Sum16

$ for energy delivered by Duke

   $ 101.70    $ 67.80    $ 169.50    $ 339.00

These amounts are included in the Duke Hourly Energy Charge.

 

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

13 Blue Ridge Allocated Share of Duke Total Hourly Energy Charge.

14 Piedmont Allocated Share of Duke Total Hourly Energy Charge

15 Rutherford Allocated Share of Duke Total Hourly Energy Charge

16 Duke Total Hourly Energy Charge

 

- 4 -

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

B. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
EMC Group Total Hourly Energy Credit

Step 5

Sum the energy deliveries by BR to Duke for all Intervals over the entire Hour
(column 1). Repeat calculation for P and R (columns 2-3). Sum columns 1-3
(column 4). Sum the energy deliveries by EMC Group to Duke for all Intervals
over the entire Hour (column 5).

 

Column number

   1    2    3    4    5      BR17    P18    R19    Sum20    EMC
Group21

Energy delivered by Customer (kW)

   4,500    5,000    4,500    14,000    7,000

Step 6

Calculate the percentage that each Customer contributed to the energy deliveries
by Customers (Customer delivery / Sum of Customer deliveries)

 

     BR22     P23     R24     Sum  

Energy delivered by Customer

   32.14 %   35.71 %   32.14 %   100.00 %

 

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

17 Blue Ridge Energy Credit Amount

18 Piedmont Energy Credit Amount

19 Rutherford Energy Credit Amount

20 EMC Group Combined Energy Credit Amount

21 EMC Group Energy Credit Amount

22 Blue Ridge Energy Credit Amount / EMC Group Combined Energy Credit Amount.

23 Piedmont Energy Credit Amount / EMC Group Combined Energy Credit Amount.

24 Rutherford Energy Credit Amount / EMC Group Combined Energy Credit Amount.

 

- 5 -

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

Step 7

Calculate the EMC Group Total Hourly Energy Credit = 90% of Duke Territorial
Decremental Cost for electric energy delivered by the EMC Group to Duke for the
Hour (7,000 kW * $0.10/kWh * 90% = $630)

Step 8

Calculate the EMC Allocated Share of the EMC Group Total Hourly Energy Credit

Apply the percentages derived in Step 6 to the EMC Group Total Hourly Energy
Credit.

 

     BR25    P26    R27    Sum28

$ for energy delivered by Customers

   $ 202.50    $ 225.00    $ 202.50    $ 630.00

 

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

25 Blue Ridge Allocated Share of EMC Group Total Hourly Energy Credit.

26 Piedmont Allocated Share of EMC Group Total Hourly Energy Credit

27 Rutherford Allocated Share of EMC Group Total Hourly Energy Credit

28 EMC Group Total Hourly Energy Credit

 

- 6 -

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

C. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Inter-EMC Energy Charge

Step 9

Calculate the difference between the EMC Group Combined Energy Purchase Amount
(sum determined in Step 1, column 4) and the EMC Group Energy Purchase Amount
(aggregate calculated in Step 1, column 5).

 

Step 5, column 429    10,000    Step 5, column 530    -3,000    Difference   
7,000   

Step 10

Apply the percentages derived in Step 2 to the difference derived in Step 9.

 

     BR    P    R    Sum

Energy delivered by Duke

   2,100    1,400    3,500    7,000

Step 11

Calculate Inter-EMC Transfer Price: Average of 113% of Duke Territorial
Incremental Cost and 90% of Duke Territorial Decremental Cost, unless EMC Group
Energy Purchase Amount or EMC Group Energy Credit Amount is zero. If EMC Group
Energy Purchase Amount is zero, Inter-EMC Transfer Price is 101.50% of Duke
Territorial Decremental Cost. If EMC Group Energy Credit Amount is zero,
Inter-EMC Transfer Price is 101.50% of Duke Territorial Incremental Cost. In
this example, Inter-EMC Transfer Price is average of $0.113/kWh and $0.09/kWh,
or $0.1015/kWh.

 

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

29 EMC Group Combined Energy Purchase Amount

30 EMC Group Energy Purchase Amount

 

- 7 -

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

Step 12

Multiply the Inter-EMC Transfer Price times the amounts derived in Step 10.

 

     BR31    P32    R33    Sum

$ for Inter-EMC Charge

   $ 213.15    $ 142.10    $ 355.25    $ 710.50

These amounts are included in the Duke Hourly Energy Charge

D. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Inter-EMC Energy Credit

Step 13

Calculate the EMC Group Combined Energy Credit Amount (difference between the
sum determined in Step 5, column 4) and the EMC Group Credit Amount (aggregate
calculated in Step 5, column 5).

 

Step 5, column 434

   14,000   

Step 5, column 535

   -7,000           

Difference

   7,000   

 

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

31 Blue Ridge Allocated Share of Inter-EMC Energy Charge

32 Piedmont Allocated Share of Inter-EMC Energy Charge

33 Rutherford Allocated Share of Inter-EMC Energy Charge

34 EMC Group Combined Energy Credit Amount

35 EMC Group Energy Credit Amount

 

- 8 -

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

Step 14

Apply the percentages derived in Step 6 to the difference derived in Step 13.

 

     BR    P    R    Sum

Energy delivered by Customer

   2,250    2,500    2,250    7,000

Step 15

Muliply the Inter-EMC Transfer Price times the amounts derived in Step 14

 

     BR36    P37    R38    Sum

$ for Inter-EMC Credit

   $ 228.38    $ 253.75    $ 228.38    $ 710.50

III. CHARGE/CREDIT SUMMATION FOR THE HOUR

 

          BR     P     R    Total  

1.

   Allocated Share of Duke Total Hourly Energy Ch. (Step 4)    $ 101.70     $
67.80     $ 169.50    $ 339.00  

2.

   Allocated Share of Inter-EMC Energy Charge (Step 12)    $ 213.15     $ 142.10
    $ 355.25    $ 710.50                                     

3.

   Subtotal (row 1 + row 2)    $ 314.85     $ 209.90     $ 524.75    $ 1,049.50
                                    

4.

   Allocated Share of EMC Group Ttl Hourly En. Cr. (Step 8)    $ 202.50     $
225.00     $ 202.50    $ 630.00  

5.

   Allocated Share of Inter-EMC Energy Credit (Step 15)    $ 228.38     $ 253.75
    $ 228.38    $ 710.50                                     

6.

   Subtotal (row 4 + row 5)    $ 430.88     $ 478.75     $ 430.88    $ 1,340.50
                                    

7.

   Total charge (credit) (row 3 – row 6)    $ (116.03 )   $ (268.85 )   $ 93.88
   $ (291.00 )                                   

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

36 Blue Ridge Allocated Share of Inter-EMC Energy Credit

37 Piedmont Allocated Share of Inter-EMC Energy Credit

38 Rutherford Allocated Share of Inter-EMC Energy Credit

 

- 9 -

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

Attachment 7-4

Example 2

Showing the Calculation of Blue Ridge, Piedmont and

Rutherford Allocated Shares of the Duke Total Hourly Energy Charge,

EMC Group Total Hourly Energy Credit, Inter-EMC Energy Charge and Inter-EMC
Energy Credit

The purpose of this attachment is to provide an example showing the calculation
of the charges and credits identified above for one Hour. For purposes of this
example, Blue Ridge, Piedmont and Rutherford are referred to individually as BR,
P and R, respectively, and collectively as the EMC Group.

I. ASSUMPTIONS:

A. Call and Put Signals during the Hour

 

     BR    P    R    EMC
Group

Intervals 1-22539 - Call Signal during each Interval (kW):

   0    3,000    3,000    2,000

Intervals 1-225 - Put Signal during each Interval (kW)

   4,000    0    0    0

Intervals 226-450 - Call Signal during each Interval (kW)

   0    5,000    3,000    4,000

Intervals 226-450 - Put Signal during each Interval (kW)

   4,000    0    0    0

Intervals 451-675 - Call Signal during each Interval (kW)

   0    2,000    0    0

Intervals 451-675 - Put Signal during each Interval (kW)

   2,000    0    0    0

Intervals 676-900 - Call Signal during each Interval (kW)

   0    1,000    1,000    0

Intervals 676-900 - Put Signal during each Interval (kW)

   4,000    0    0    2,000

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

39 Interval numbers refer to the Intervals during the Hour (e.g., Interval 1 is
the first four seconds of the Hour, Interval 2 is the next four seconds, etc.).
The Call and Put Signals are shown as the same in each of the first 225
Intervals of the Hour, and then again as the same in the next 225 Intervals and
so on. This is a simplifying assumption, to make this example less cumbersome.
In actual operation, the Parties anticipate that these positions would change
frequently within the Hour.

 

- 10 -

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

B. Energy deliveries during the Hour40

 

     BR    P    R    EMC
Group

Hourly Energy Amount delivered from Duke - Intervals 1-225

   0    750    750    500

Hourly Energy Amount delivered to Duke - Intervals 1-225

   1,000    0    0    0

Hourly Energy Amount delivered from Duke - Intervals 226-450

   0    1,250    750    1,000

Hourly Energy Amount delivered to Duke - Intervals 226-450

   1,000    0    0    0

Hourly Energy Amount delivered from Duke - Intervals 451-675

   0    500    0    0

Hourly Energy Amount delivered to Duke - Intervals 451-675

   500    0    0    0

Hourly Energy Amount delivered from Duke - Intervals 676-900

   0    250    250    0

Hourly Energy Amount delivered to Duke - Intervals 676-900

   1,000    0    0    500

C. Incremental/Decremental Costs

Duke Territorial Incremental Cost: $0.10/kWh

Duke Territorial Decremental Cost: $0.10/kWh

II. CALCULATIONS

A. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Duke Total Hourly Energy Charge

Step 1

Sum the energy deliveries by Duke to BR for all Intervals over the entire Hour
(column 1). Repeat calculation for P and R (columns 2-3). Sum columns 1-3
(column 4). Sum the energy deliveries by Duke to the EMC Group for all Intervals
over the entire Hour (column 5).

 

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

40 These numbers sum the four-second Call and Put Signals from Part I.A. For
example, 3,000 kW delivered by Duke in each of the 225 four-second Intervals (15
minutes) equal 750 kWh (2,000 KW * 225 Intervals / 900 Intervals / Hour = 750
kWh).

 

- 11 -

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

Column number

   1    2    3    4    5      BR41    P42    R43    Sum44    Aggregate
EMC
Group45

Energy delivered by Duke (kW)

   0    2,750    1,750    4,500    1,500

Step 2

Calculate the percentage that each Customer contributed to the energy deliveries
by Duke (Customer Buy / Sum of Customer Buys)

 

     BR46     P47     R48     Sum  

Energy delivered by Duke

   0.00 %   61.11 %   38.89 %   100.00 %

 

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

41 Blue Ridge Energy Purchase Amount

42 Piedmont Energy Purchase Amount

43 Rutherford Energy Purchase Amount

44 EMC Group Combined Energy Purchase Amount

45 EMC Group Energy Purchase Amount

46 Blue Ridge Energy Purchase Amount / EMC Group Combined Energy Purchase
Amount.

47 Piedmont Energy Purchase Amount / EMC Group Combined Energy Purchase Amount.

48 Rutherford Energy Purchase Amount / EMC Group Combined Energy Purchase
Amount.

 

- 12 -

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

Step 3

Calculate Duke Total Hourly Energy Charge = 113% of Duke Territorial Incremental
Cost for electric energy delivered by Duke to the EMC Group for the Hour (1,500
kW * $0.10/kWh * 113% = $169.50)

Step 4

Calculate the individual EMC’s Allocated Share of the Duke Total Hourly Energy
Charge.

Apply the percentages derived in Step 2 to the Duke Total Hourly Energy Charge.

 

     BR49    P50    R51    Sum52

$ for energy delivered by Duke

   $ 0.00    $ 103.58    $ 65.92    $ 169.50

These amounts are included in the Duke Hourly Energy Charge.

B. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
EMC Group Total Hourly Energy Credit

 

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

49 Blue Ridge Allocated Share of Duke Total Hourly Energy Charge.

50 Piedmont Allocated Share of Duke Total Hourly Energy Charge

51 Rutherford Allocated Share of Duke Total Hourly Energy Charge

52 Duke Total Hourly Energy Charge

 

- 13 -

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

Step 5

Sum the energy deliveries by BR to Duke for all Intervals over the entire Hour
(column 1). Repeat calculation for P and R (columns 2-3). Sum columns 1-3
(column 4). Sum the energy deliveries by EMC Group to Duke for all Intervals
over the entire Hour (column 5).

 

Column number

   1    3    4    5    6      BR53    P54    R55    Sum56    EMC
Group57

Energy delivered by Customer (kW)

   3,500    0    0    3,500    500

Step 6

Calculate the percentage that each Customer contributed to the energy deliveries
by Customers (Customer delivery / Sum of Customer deliveries)

 

     BR58     P59     R60     Sum  

Energy delivered by Customer

   100.00 %   0.00 %   0.00 %   100.00 %

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

53 Blue Ridge Energy Credit Amount

54 Piedmont Energy Credit Amount

55 Rutherford Energy Credit Amount

56 EMC Group Combined Energy Credit Amount

57 EMC Group Energy Credit Amount

58 Blue Ridge Energy Credit Amount / EMC Group Combined Energy Credit Amount.

59 Piedmont Energy Credit Amount / EMC Group Combined Energy Credit Amount.

60 Rutherford Energy Credit Amount / EMC Group Combined Energy Credit Amount.

 

- 14 -

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

Step 7

Calculate the EMC Group Total Hourly Energy Credit = 90% of Duke Territorial
Decremental Cost for electric energy delivered by the EMC Group to Duke for the
Hour (500 kW * $0.10/kWh * 90% = $45)

Step 8

Calculate the EMC Allocated Share of the EMC Group Total Hourly Energy Credit

Apply the percentages derived in Step 6 to the EMC Group Total Hourly Energy
Credit.

 

     BR61    P62    R63    Sum64

$ for energy delivered by Customers

   $ 45.00    $ –      $ –      $ 45.00

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

61 Blue Ridge Allocated Share of EMC Group Total Hourly Energy Credit.

62 Piedmont Allocated Share of EMC Group Total Hourly Energy Credit

63 Rutherford Allocated Share of EMC Group Total Hourly Energy Credit

64 EMC Group Total Hourly Energy Credit

 

- 15 -

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

C. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Inter-EMC Energy Charge

Step 9

Calculate the difference between the EMC Group Combined Energy Purchase Amount
(sum determined in Step 1, column 4) and the EMC Group Energy Purchase Amount
(aggregate calculated in Step 1, column 5).

 

Step 1, column 465

   4,500   

Step 1, column 566

   -1,500           

Difference

   3,000   

Step 10

Apply the percentages derived in Step 2 to the difference derived in Step 9.

 

     BR    P    R    Sum

Energy delivered by Duke

   0    1,833    1,167    3,000

Step 11

Calculate Inter-EMC Transfer Price: Average of 113% of Duke Territorial
Incremental Cost and 90% of Duke Territorial Decremental Cost, unless EMC Group
Energy Purchase Amount or EMC Group Energy Credit Amount is zero. If EMC Group
Energy Purchase Amount is zero, Inter-EMC Transfer Price is 101.50% of Duke
Territorial Decremental Cost. If EMC Group Energy

 

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

65 EMC Group Combined Energy Purchase Amount

66 EMC Group Energy Purchase Amount

 

- 16 -

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

Credit Amount is zero, Inter-EMC Transfer Price is 101.50% of Duke Territorial
Incremental Cost. In this example, Inter-EMC Transfer Price is average of
$0.113/kWh and $0.09/kWh, or $0.1015/kWh.

Step 12

Multiply the Inter-EMC Transfer Price times the amounts derived in Step 10.

 

     BR67    P68    R69    Sum

$ for Inter-EMC Charge

   $ 0.00    $ 186.08    $ 118.42    $ 304.50

D. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Inter-EMC Energy Credit

Step 13

Calculate the EMC Group Combined Energy Credit Amount (difference between the
sum determined in Step 5, column 4) and the EMC Group Credit Amount (aggregate
calculated in Step 5, column 5).

 

Step 5, column 470

   3,500   

Step 5, column 571

   - 500   

Difference

   3,000   

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

67 Blue Ridge Allocated Share of Inter-EMC Energy Charge

68 Piedmont Allocated Share of Inter-EMC Energy Charge

69 Rutherford Allocated Share of Inter-EMC Energy Charge

70 EMC Group Combined Credit Amount

71 EMC Group Energy credit Amount

 

- 17 -

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

Step 14

Apply the percentages derived in Step 6 to the difference derived in Step 13.

 

     BR    P    R    Sum

Energy delivered by Customer

   3,000    0    0    3,000

Step 15

Multiply the Inter-EMC Transfer Price times the amounts derived in Step 14

 

     BR72    P73    R74    Sum

$ for Inter-EMC Credit

   $ 304.50    $ 0.00    $ 0.00    $ 304.50

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

72 Blue Ridge Allocated Share of Inter-EMC Energy Credit

73 Piedmont Allocated Share of Inter-EMC Energy Credit

74 Rutherford Allocated Share of Inter-EMC Energy Credit

 

- 18 -

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

III. CHARGE/CREDIT SUMMATION FOR THE HOUR

 

          BR     P    R    Total

1.

   Allocated Share of Duke Total Hourly Energy Ch. (Step 4)    $ 0.00     $
103.58    $ 65.92    $ 169.50

2.

   Allocated Share of Inter-EMC Energy Charge (Step 12)    $ 0.00     $ 186.08
   $ 118.42    $ 304.50

3.

   Subtotal (row 1 + row 2)    $ 0.00     $ 289.67    $ 184.33    $ 474.00

4.

   Allocated Share of EMC Group Ttl Hourly En. Cr. (Step 8)    $ 45.00     $
0.00    $ 0.00    $ 45.00

5.

   Allocated Share of Inter-EMC Energy Credit (Step 15)    $ 304.50     $ 0.00
   $ 0.00    $ 304.50

6.

   Subtotal (row 4 + row 5)    $ 349.50     $ 0.00    $ 0.00    $ 349.50

7.

   Total charge (credit) (row 3 – row 6)    $ (349.50 )   $ 289.67    $ 184.33
   $ 124.50

 

- 19 -

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

Attachment 7-5

Example showing Calculations of

Rutherford Energy Purchase Amounts

and Rutherford Energy Credit Amount

This attachment provides an example showing the calculation of the Rutherford
Energy Purchase Amount and Rutherford Energy Credit Amount for one Hour.

 

Four-

second

Interval

Number*

 

A

EMC’s

Base

Obligation

(kW)

 

B

EMC’s

Native

Load

(kW)

 

C

Call

Signal

(B-A

where

B>A)

(kW)

 

D

Call

energy

(C/900)

(kWhs)

 

E

Put

Signal

(A-B

where

A>B)

(kW)

 

F

Put

energy

(E/900)

(kWhs)

1

  100,000   102,000   2,000   2.2   —     —  

2

  100,000   101,000   1,000   1.1   —     —  

3

  100,000   100,000   —     —     —     —  

4

  100,000   99,000   —     —     1,000   1.1

5

  100,000   98,000   —     —     2,000   2.2

6

  100,000   97,000   —     —     3,000   3.3

7-89575

  100,000   100,000   —     —     —     —  

896

  100,000   98,000   —     —     2,000   2.2

897

  100,000   99,000   —     —     1,000   1.1

898

  100,000   100,000   —     —     —     —  

899

  100,000   101,000   1,000   1.1   —     —  

900

  100,000   102,000   2,000   2.2   —     —                  

Total

        6.676     9.977                

 

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

* Interval numbers refer to the Intervals during the hour (e.g., Interval 1 is
the first four seconds of the hour, Interval 2 is the next four seconds, etc.)

75 To simplify this example, EMC’s Base Obligation and EMC’s Native Load are
assumed to be equal during Intervals 6-895. In actual operation, the parties
anticipate that these amounts will differ throughout the Hour.

76 Rutherford Energy Purchase Amount

77 Rutherford Energy Credit Amount

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

Attachment 7-6

Example showing Calculations of EMC Group Energy Purchase Amounts

and EMC Group Energy Credit Amount

This attachment provides an example showing the calculation of the EMC Group
Energy Purchase Amount and EMC Group Energy Credit Amount for one Hour.

 

Four-

second

Interval

Number*

 

A

EMC

Group

Base

Obligation

(kW)

 

B

EMC

Group

Native

Load

(kW)

 

C

Call

Signal

(B-A

where

B>A)

(kW)

 

D

Call

energy

(C/900)

(kWhs)

 

E

Put

Signal

(A-B

where

A>B)

(kW)

 

F

Put

energy

(E/900)

(kWhs)

1

  400,000   408,000   8,000   8.8   —     —  

2

  400,000   404,000   4,000   4.4   —     —  

3

  400,000   400,000   —     —     —     —  

4

  400,000   396,000   —     —     4,000   4.4

5

  400,000   392,000   —     —     8,000   8.8

6

  400,000   388,000   —     —     12,000   13.2

7-89578

  400,000   400,000   —     —     —     —  

896

  400,000   392,000   —     —     8,000   8.8

897

  400,000   396,000   —     —     4,000   4.4

898

  400,000   400,000   —     —     —     —  

899

  400,000   404,000   4,000   4.4   —     —  

900

  400,000   408,000   8,000   8.8   —     —                  

Total

        26.479     39.680                

 

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

* Interval numbers refer to the Intervals during the hour (e.g., Interval 1 is
the first four seconds of the hour, Interval 2 is the next four seconds, etc.)

78 To simplify this example, the EMC Group’s Base Obligation and the EMC Group’s
Native Load are assumed to be equal during Intervals 6-895. In actual operation,
the Parties anticipate that these amounts will differ throughout the Hour.

79 EMC Group Energy Purchase Amount

80 EMC Group Energy Credit Amount

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

Attachment 7-7

Example showing the calculation of

Monthly Billing Demand under Section 7.2.2.2

The purpose of this attachment is to provide an example showing the calculation
of the Monthly Billing Demand under Section 7.2.2.2 of the Agreement.

 

  I. Assumptions:

 

          Day    Hour   

Load

(MW)

1.

  

Highest Hourly Duke Schedule 1 Demand during 2007

   7-25-07    5:00-6:00 p.m.    17,000

2.

  

2nd highest Hourly Duke Schedule 1 Demand during 2007

   7-25-07    6:00-7:00 p.m.    16,975

3.

  

3rd highest Hourly Duke Schedule 1 Demand during 2007

   7-25-07    4:00-5:00 p.m.    16,950

4.

  

4th highest Hourly Duke Schedule 1 Demand during 2007

   7-25-07    3:00-4:00 p.m.    16,925

5.

  

5th highest Hourly Duke Schedule 1 Demand during 2007

   7-24-07    5:00-6:00 p.m.    16,900

6.

  

6th highest Hourly Duke Schedule 1 Demand during 2007

   7-24-07    6:00-7:00 p.m.    16,875

7.

  

7th highest Hourly Duke Schedule 1 Demand during 2007

   7-24-07    4:00-5:00 p.m.    16,850

8.

  

8th highest Hourly Duke Schedule 1 Demand during 2007

   7-24-07    3:00-4:00 p.m.    16,825

9.

  

9th highest Hourly Duke Schedule 1 Demand during 2007

   8-1-07    5:00-6:00 p.m.    16,800

10.

  

10th highest Hourly Duke Schedule 1 Demand during 2007

   8-1-07    6:00-7:00 p.m.    16,775

11.

  

11th highest Hourly Duke Schedule 1 Demand during 2007

   8-1-07    4:00-5:00 p.m.    16,750

12.

  

12th highest Hourly Duke Schedule 1 Demand during 2007

   8-1-07    3:00-4:00 p.m.    16,725

13.

  

13th highest Hourly Duke Schedule 1 Demand during 2007

   7-26-07    5:00-6:00 p.m.    16,700

14.

  

14th highest Hourly Duke Schedule 1 Demand during 2007

   7-26-07    6:00-7:00 p.m.    16,675

15.

  

15th highest Hourly Duke Schedule 1 Demand during 2007

   6-26-07    4:00-5:00 p.m.    16,650

16.

  

16th highest Hourly Duke Schedule 1 Demand during 2007

   7-26-07    4:00-5:00 p.m.    16,625

17.

  

17th highest Hourly Duke Schedule 1 Demand during 2007

   7-24-07    3:00-4:00 p.m.    16,600

18.

  

18th highest Hourly Duke Schedule 1 Demand during 2007

   1-18-07    9:00-10:00 a.m.    16,575

19.

  

19th highest Hourly Duke Schedule 1 Demand during 2007

   1-18-07    10:00-11:00 a.m.    16,550

20.

  

20th highest Hourly Duke Schedule 1 Demand during 2007

   8-2-07    4:00-5:00 p.m.    16,525

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

          Day    Hour   

Load

(MW)

21.

  

21st highest Hourly Duke Schedule 1 Demand during 2007

   8-2-07    3:00-4:00 p.m.    16,500

22.

  

22nd highest Hourly Duke Schedule 1 Demand during 2007

   8-2-07    5:00-6:00 p.m.    16,475

23.

  

23rd highest Hourly Duke Schedule 1 Demand during 2007

   8-2-07    6:00-7:00 p.m.    16,450

24.

  

24th highest Hourly Duke Schedule 1 Demand during 2007

   7-18-07    3:00-4:00 p.m.    16,425

25.

  

25th highest Hourly Duke Schedule 1 Demand during 2007

   7-18-07    4:00-5:00 p.m.    16,400

26.

  

26th highest Hourly Duke Schedule 1 Demand during 2007

   7-18-07    2:00-3:00 p.m.    16,375

27.

  

27th highest Hourly Duke Schedule 1 Demand during 2007

   7-18-07    1:00-2:00 p.m.    16,350

28.

  

28th highest Hourly Duke Schedule 1 Demand during 2007

   7-17-07    5:00-6:00 p.m.    16,325

29.

  

29th highest Hourly Duke Schedule 1 Demand during 2007

   7-17-07    6:00-7:00 p.m.    16,300

30.

  

30th highest Hourly Duke Schedule 1 Demand during 2007

   7-17-07    4:00-5:00 p.m.    16,325

 

  II. Calculation of Monthly Billing Demand for 2007:

The twenty (20) highest load hours during July-August are hours 1-14, 16-17 and
20-23.

 

No. from Part I

  

Day

  

Hour

  

EMC Native Load

(kW)

  

EMC Base Obligation
(kW)

  

EMC Native Load
minus EMC Base
Obligation (kW)

1.

   7-25-07    5:00-6:00 p.m.    100,000    80,000    20,000

2.

   7-25-07    6:00-7:00 p.m.    102,000    80,000    22,000

3.

   7-25-07    4:00-5:00 p.m.    104,000    80,000    24,000

4.

   7-25-07    3:00-4:00 p.m.    106,000    80,000    26,000

5.

   7-24-07    5:00-6:00 p.m.    104,000    80,000    24,000

6.

   7-24-07    6:00-7:00 p.m.    102,000    79,000    23,000

7.

   7-24-07    4:00-5:00 p.m.    100,000    79,000    21,000

8.

   7-24-07    3:00-4:00 p.m.    100,000    79,000    21,000

9.

   8-1-07    5:00-6:00 p.m.    100,000    79,000    21,000

10.

   8-1-07    6:00-7:00 p.m.    100,000    78,000    22,000

11.

   8-1-07    4:00-5:00 p.m.    99,000    78,000    21,000

 

-2-

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

No.

from

Part I

 

Day

 

Hour

 

EMC Native Load

(kW)

 

EMC Base Obligation
(kW)

 

EMC Native Load
minus EMC Base
Obligation (kW)

12.

  8-1-07   3:00-4:00 p.m.   99,000   78,000   21,000

13.

  7-26-07   5:00-6:00 p.m.   99,000   100,000   0

14.

  7-26-07   6:00-7:00 p.m.   99,000   100,000   0

16.

  7-26-07   4:00-5:00 p.m.   98,000   100,000   0

17.

  7-24-07   3:00-4:00 p.m.   98,000   100,000   0

20.

  8-2-07   4:00-5:00 p.m.   98,000   100,000   0

21.

  8-2-07   3:00-4:00 p.m.   98,000   100,000   0

22.

  8-2-07   5:00-6:00 p.m.   98,000   100,000   0

23.

  8-2-07   6:00-7:00 p.m.   98,000   100,000   0              

TOTAL

        266,000              

AVERAGE

        13,30081            

 

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

81 Monthly Billing Demand for each Month during 2007.

 

-3-

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

Attachment 7-8

Examples showing the calculation of

Monthly Billing Demand under Section 7.3.2.2

The purpose of this attachment is to provide examples showing the calculation of
the Monthly Billing Demand under Section 7.3.2.2 of the Agreement.

Example A

 

  I. Assumptions:

 

          Day    Hour   

Load

(MW)

1.

  

Highest Hourly Duke Schedule 1 Demand during 2012

   7-25-12    5:00-6:00 p.m.    17,000

2.

  

2nd highest Hourly Duke Schedule 1 Demand during 2012

   7-25-12    6:00-7:00 p.m.    16,975

3.

  

3rd highest Hourly Duke Schedule 1 Demand during 2012

   7-25-12    4:00-5:00 p.m.    16,950

4.

  

4th highest Hourly Duke Schedule 1 Demand during 2012

   7-25-12    3:00-4:00 p.m.    16,925

5.

  

5th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    5:00-6:00 p.m.    16,900

6.

  

6th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    6:00-7:00 p.m.    16,875

7.

  

7th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    4:00-5:00 p.m.    16,850

8.

  

8th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    3:00-4:00 p.m.    16,825

9.

  

9th highest Hourly Duke Schedule 1 Demand during 2012

   8-1-12    5:00-6:00 p.m.    16,800

10.

  

10th highest Hourly Duke Schedule 1 Demand during 2012

   8-1-12    6:00-7:00 p.m.    16,775

11.

  

11th highest Hourly Duke Schedule 1 Demand during 2012

   8-1-12    4:00-5:00 p.m.    16,750

12.

  

12th highest Hourly Duke Schedule 1 Demand during 2012

   8-1-12    3:00-4:00 p.m.    16,725

13.

  

13th highest Hourly Duke Schedule 1 Demand during 2012

   7-26-12    5:00-6:00 p.m.    16,700

14.

  

14th highest Hourly Duke Schedule 1 Demand during 2012

   7-26-12    6:00-7:00 p.m.    16,675

15.

  

15th highest Hourly Duke Schedule 1 Demand during 2012

   6-26-12    4:00-5:00 p.m.    16,650

16.

  

16th highest Hourly Duke Schedule 1 Demand during 2012

   7-26-12    4:00-5:00 p.m.    16,625

17.

  

17th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    3:00-4:00 p.m.    16,600

18.

  

18th highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    9:00-10:00 a.m.    16,575

19.

  

19th highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    10:00-11:00 a.m.    16,550

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

          Day    Hour   

Load

(MW)

20.

  

20th highest Hourly Duke Schedule 1 Demand during 2012

   8-2-12    4:00-5:00 p.m.    16,525

21.

  

21st highest Hourly Duke Schedule 1 Demand during 2012

   8-2-12    3:00-4:00 p.m.    16,500

22.

  

22nd highest Hourly Duke Schedule 1 Demand during 2012

   8-2-12    5:00-6:00 p.m.    16,475

23.

  

23rd highest Hourly Duke Schedule 1 Demand during 2012

   8-2-12    6:00-7:00 p.m.    16,450

24.

  

24th highest Hourly Duke Schedule 1 Demand during 2012

   7-18-12    3:00-4:00 p.m.    16,425

25.

  

25th highest Hourly Duke Schedule 1 Demand during 2012

   7-18-12    4:00-5:00 p.m.    16,400

26.

  

26th highest Hourly Duke Schedule 1 Demand during 2012

   7-18-12    2:00-3:00 p.m.    16,375

27.

  

27th highest Hourly Duke Schedule 1 Demand during 2012

   7-18-12    1:00-2:00 p.m.    16,350

28.

  

28th highest Hourly Duke Schedule 1 Demand during 2012

   7-17-12    5:00-6:00 p.m.    16,325

29.

  

29th highest Hourly Duke Schedule 1 Demand during 2012

   7-17-12    6:00-7:00 p.m.    16,300

30.

  

30th highest Hourly Duke Schedule 1 Demand during 2012

   7-17-12    4:00-5:00 p.m.    16,325

Annual Planning Period is May through September

 

  II. Calculation of Monthly Billing Demand for 2012:

The twenty (20) highest load hours during the Summer Period are hours 1-17 and
20-22

 

No. from Part I

 

Day

 

Hour

 

EMC Native Load

(kW)

 

EMC Partial
Requirements

Resources

(kW)

 

EMC Native Load
minus EMC Partial
Requirements

Resources

(kW)

1.

  7-25-12   5:00-6:00 p.m.   120,000   100,000   20,000

2.

  7-25-12   6:00-7:00 p.m.   120,000   100,000   20,000

3.

  7-25-12   4:00-5:00 p.m.   120,000   100,000   20,000

4.

  7-25-12   3:00-4:00 p.m.   120,000   100,000   20,000

5.

  7-24-12   5:00-6:00 p.m.   115,000   100,000   15,000

6.

  7-24-12   6:00-7:00 p.m.   115,000   100,000   15,000

7.

  7-24-12   4:00-5:00 p.m.   115,000   100,000   15,000

 

-2-

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

No. from Part I

 

Day

 

Hour

 

EMC Native Load

(kW)

 

EMC Partial
Requirements Resources

(kW)

 

EMC Native Load
minus EMC Partial
Requirements Resources

(kW)

8.

  7-24-12   3:00-4:00 p.m.   115,000   100,000   15,000

9.

  8-1-12   5:00-6:00 p.m.   110,000   100,000   10,000

10.

  8-1-12   6:00-7:00 p.m.   110,000   100,000   10,000

11.

  8-1-12   4:00-5:00 p.m.   110,000   100,000   10,000

12.

  8-1-12   3:00-4:00 p.m.   110,000   100,000   10,000

13.

  7-26-12   5:00-6:00 p.m.   105,000   100,000   5,000

14.

  7-26-12   6:00-7:00 p.m.   105,000   100,000   5,000

15.

  6-26-12   4:00-5:00 p.m.   105,000   100,000   5,000

16.

  7-26-12   4:00-5:00 p.m.   105,000   100,000   5,000

17.

  7-24-12   3:00-4:00 p.m.   100,000   100,000   0

20.

  8-2-12   4:00-5:00 p.m.   100,000   100,000   0

21.

  8-2-12   3:00-4:00 p.m.   95,000   100,000   0

22.

  8-2-12   5:00-6:00 p.m.   95,000   100,000   0              

TOTAL

        200,000              

AVERAGE

        10,00082            

Example B

 

  I. Assumptions:

 

          Day    Hour   

Load

(MW)

1.

  

Highest Hourly Duke Schedule 1 Demand during 2012

   1-25-12    7:00-8:00 a.m.    17,000

2.

  

2nd highest Hourly Duke Schedule 1 Demand during 2012

   1-25-12    8:00-9:00 a.m.    16,975

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

82 Monthly Billing Demand for each Month during 2012.

 

-3-

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

          Day    Hour   

Load

(MW)

3.

  

3rd highest Hourly Duke Schedule 1 Demand during 2012

   1-25-12    9:00-10:00 a.m.    16,950

4.

  

4th highest Hourly Duke Schedule 1 Demand during 2012

   1-25-12    10:00-11:00 a.m.    16,925

5.

  

5th highest Hourly Duke Schedule 1 Demand during 2012

   1-24-12    7:00-8:00 a.m.    16,900

6.

  

6th highest Hourly Duke Schedule 1 Demand during 2012

   1-24-12    8:00-9:00 a.m.    16,875

7.

  

7th highest Hourly Duke Schedule 1 Demand during 2012

   1-24-12    9:00-10:00 a.m.    16,850

8.

  

8th highest Hourly Duke Schedule 1 Demand during 2012

   1-24-12    10:00-11:00 a.m.    16,825

9.

  

9th highest Hourly Duke Schedule 1 Demand during 2012

   2-1-12    7:00-8:00 a.m.    16,800

10.

  

10th highest Hourly Duke Schedule 1 Demand during 2012

   2-1-12    8:00-9:00 a.m.    16,775

11.

  

11th highest Hourly Duke Schedule 1 Demand during 2012

   2-1-12    9:00-10:00 a.m.    16,750

12.

  

12th highest Hourly Duke Schedule 1 Demand during 2012

   2-1-12    10:00-11:00 a.m.    16,725

13.

  

13th highest Hourly Duke Schedule 1 Demand during 2012

   12-21-12    8:00-9:00 a.m.    16,700

14.

  

14th highest Hourly Duke Schedule 1 Demand during 2012

   12-21-12    9:00-10:00 a.m.    16,675

15.

  

15th highest Hourly Duke Schedule 1 Demand during 2012

   12-21-12    10:00-11:00 a.m.    16,650

16.

  

16th highest Hourly Duke Schedule 1 Demand during 2012

   7-26-12    4:00-5:00 p.m.    16,625

17.

  

17th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    3:00-4:00 p.m.    16,600

18.

  

18th highest Hourly Duke Schedule 1 Demand during 2012

   2-2-12    7:00-8:00 a.m.    16,575

19.

  

19th highest Hourly Duke Schedule 1 Demand during 2012

   2-2-12    8:00-9:00 a.m.    16,550

20.

  

20th highest Hourly Duke Schedule 1 Demand during 2012

   2-2-12    9:00-10:00 a.m.    16,525

21.

  

21st highest Hourly Duke Schedule 1 Demand during 2012

   2-2-12    10:00-11:00 a.m.    16,500

22.

  

22nd highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    9:00-10:00 a.m.    16,475

23.

  

23rd highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    10:00-11:00 a.m.    16,450

24.

  

24th highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    7:00-8:00 a.m.    16,425

25.

  

25th highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    8:00-9:00 a.m.    16,400

26.

  

26th highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    6:00-7:00 a.m.    16,375

27.

  

27th highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    11:00 a.m.-12:00 p.m.    16,350

28.

  

28th highest Hourly Duke Schedule 1 Demand during 2012

   1-17-12    8:00-9:00 a.m.    16,325

29.

  

29th highest Hourly Duke Schedule 1 Demand during 2012

   1-17-12    9:00-10:00 a.m.    16,300

30.

  

30th highest Hourly Duke Schedule 1 Demand during 2012

   1-17-12    10:00-11:00 a.m.    16,325

31.

  

Highest Hourly Duke Schedule 1 Demand during 2011

   1-23-11    7:00-8:00 a.m.    17,000

 

-4-

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

          Day    Hour   

Load

(MW)

32.

  

2nd highest Hourly Duke Schedule 1 Demand during 2011

   1-23-11    8:00-9:00 a.m.    16,975

33.

  

3rd highest Hourly Duke Schedule 1 Demand during 2011

   1-23-11    9:00-10:00 a.m.    16,950

34.

  

4th highest Hourly Duke Schedule 1 Demand during 2011

   1-23-11    10:00-11:00 a.m.    16,925

35.

  

5th highest Hourly Duke Schedule 1 Demand during 2011

   1-18-11    7:00-8:00 a.m.    16,900

36.

  

6th highest Hourly Duke Schedule 1 Demand during 2011

   1-18-11    8:00-9:00 a.m.    16,875

37.

  

7th highest Hourly Duke Schedule 1 Demand during 2011

   1-18-11    9:00-10:00 a.m.    16,850

38.

  

8th highest Hourly Duke Schedule 1 Demand during 2011

   1-18-11    10:00-11:00 a.m.    16,825

39.

  

9th highest Hourly Duke Schedule 1 Demand during 2011

   2-4-11    7:00-8:00 a.m.    16,800

40.

  

10th highest Hourly Duke Schedule 1 Demand during 2011

   2-4-11    8:00-9:00 a.m.    16,775

41.

  

11th highest Hourly Duke Schedule 1 Demand during 2011

   2-4-11    9:00-10:00 a.m.    16,750

42.

  

12th highest Hourly Duke Schedule 1 Demand during 2011

   2-4-11    10:00-11:00 a.m.    16,725

43.

  

13th highest Hourly Duke Schedule 1 Demand during 2011

   1-28-11    8:00-9:00 a.m.    16,700

44.

  

14th highest Hourly Duke Schedule 1 Demand during 2011

   1-28-11    9:00-10:00 a.m.    16,675

45.

  

15th highest Hourly Duke Schedule 1 Demand during 2011

   12-15-11    9:00-10:00 a.m.    16,650

46.

  

16th highest Hourly Duke Schedule 1 Demand during 2011

   12-16-11    9:00-10:00 a.m.    16,625

47.

  

17th highest Hourly Duke Schedule 1 Demand during 2011

   12-15-11    10:00-11:00 a.m.    16,600

48.

  

18th highest Hourly Duke Schedule 1 Demand during 2011

   7-18-11    5:00-6:00 p.m.    16,575

49.

  

19th highest Hourly Duke Schedule 1 Demand during 2011

   7-18-11    6:00-7:00 p.m.    16,550

50.

  

20th highest Hourly Duke Schedule 1 Demand during 2011

   7-18-11    4:00-5:00 p.m.    16,525

51.

  

21st highest Hourly Duke Schedule 1 Demand during 2011

   7-18-11    3:00-4:00 p.m.    16,500

52.

  

22nd highest Hourly Duke Schedule 1 Demand during 2011

   1-18-11    11:00 a.m.-12:00 p.m.    16,475

53.

  

23rd highest Hourly Duke Schedule 1 Demand during 2011

   1-18-11    6:00-7:00 a.m.    16,450

54.

  

24th highest Hourly Duke Schedule 1 Demand during 2011

   2-5-11    8:00-9:00 a.m.    16,425

55.

  

25th highest Hourly Duke Schedule 1 Demand during 2011

   2-5-11    9:00-10:00 a.m.    16,400

56.

  

26th highest Hourly Duke Schedule 1 Demand during 2011

   1-20-11    8:00-9:00 a.m.    16,375

57.

  

27th highest Hourly Duke Schedule 1 Demand during 2011

   1-20-11    9:00-10:00 a.m.    16,350

58.

  

28th highest Hourly Duke Schedule 1 Demand during 2011

   1-21-11    7:00-8:00 a.m.    16,325

59.

  

29th highest Hourly Duke Schedule 1 Demand during 2011

   1-21-11    8:00-9:00 a.m.    16,300

60.

  

30th highest Hourly Duke Schedule 1 Demand during 2011

   1-21-11    9:00-10:00 a.m.    16,325

 

-5-

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

Annual Planning Period is October through April

The twenty (20) highest load hours during the Winter Period are hours 1-12 and
18-22 in 2012 and hours 45-47 in 2011.

 

  II. Calculation of Monthly Billing Demand for 2012:

 

No. from Part I

 

Day

 

Hour

 

EMC Native Load

(kW)

 

EMC Partial
Requirements

Resources

(kW)

 

EMC Native Load
minus EMC Partial
Requirements

Resources

(kW)

1.

  1-25-12   7:00-8:00 a.m.   120,000   100,000   20,000

2.

  1-25-12   8:00-9:00 a.m.   120,000   100,000   20,000

3.

  1-25-12   9:00-10:00 a.m.   120,000   100,000   20,000

4.

  1-25-12   10:00-11:00 a.m.   120,000   100,000   20,000

5.

  1-24-12   7:00-8:00 a.m.   115,000   100,000   15,000

6.

  1-24-12   8:00-9:00 a.m.   115,000   100,000   15,000

7.

  1-24-12   9:00-10:00 a.m.   115,000   100,000   15,000

8.

  1-24-12   10:00-11:00 a.m.   115,000   100,000   15,000

9.

  2-1-12   7:00-8:00 a.m.   110,000   100,000   10,000

10.

  2-1-12   8:00-9:00 a.m.   110,000   100,000   10,000

11.

  2-1-12   9:00-10:00 a.m.   110,000   100,000   10,000

12.

  2-1-12   10:00-11:00 a.m.   110,000   100,000   10,000

45.

  12-15-11   9:00-10:00 a.m.   105,000   100,000   5,000

46.

  12-16-11   9:00-10:00 a.m.   105,000   100,000   5,000

47.

  12-15-11   9:00-10:00 a.m.   105,000   100,000   5,000

18.

  2-2-12   7:00-8:00 a.m.   105,000   100,000   5,000

19.

  2-2-12   8:00-9:00 a.m.   100,000   100,000   0

20.

  2-2-12   9:00-10:00 a.m.   100,000   100,000   0

21.

  2-2-12   10:00-11:00 a.m.   95,000   100,000   0

22.

  1-18-12   9:00-10:00 a.m.   95,000   100,000   0              

TOTAL

        200,000              

AVERAGE

        10,00083            

 

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

83 Monthly Billing Demand for each Month during 2012.

 

-6-

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

ATTACHMENT 7-9

Demand Rate Adjustment Percentage and Annual Percentage

This attachment provides the formulas to be used for calculating the Demand Rate
Adjustment Percentage and Annual Percentage for each calendar year beginning
January 1, 2011.

The Demand Rate Adjustment Percentage shall equal the Production Capacity
Revenue Requirement Adjustment divided by the Original Production Capacity
Revenue Requirement, but not less than zero.

Where

Production Capacity Revenue Requirement Adjustment = (Annual Percentage – 4%) *
(Original Production Capacity Revenue Requirement + Original Energy Revenue
Requirement)

And

Annual Percentage shall equal the product of the System Gross Plant Difference
and the Fixed Charge Rate, divided by the sum of Original Production Capacity
Revenue Requirement and Original Energy Revenue Requirement. For purposes of
calculating the Production Capacity Revenue Requirement Adjustment, the Annual
Percentage shall be a maximum of 10%.

System Gross Plant Difference shall equal EMC Plant in Service less NC Retail
Plant in Service. (May be positive or negative.) System Gross Plant Difference
shall be decreased as necessary to eliminate differences between EMC Plant in
Service and NC Retail Plant in Service related to timing or method of recovery
of plant costs (e.g., plant differences due to recovery of construction period
financing costs through inclusion of construction work in progress in rate
base).

Fixed Charge Rate shall equal 10%.

EMC Plant in Service shall equal the average of the total ending balance of
Production Plant, General Plant and Intangible Plant according to Schedule 1 of
this Agreement, for the calendar year for which the Production Capacity Revenue
Requirement calculation is prepared and total ending balance of Production
Plant, General Plant and Intangible Plant according to Schedule 1 of this
Agreement for the previous calendar year calculation of the Production Capacity
Revenue Requirement.

NC Retail Plant in Service shall equal the sum of Duke Power Retail Plant in
Service and Nantahala Retail Plant in Service, which shall be determined from
Company records supporting the total Electric Plant in Service amount on
Schedule 3 of NCUC Form E.S.-1 for the 12 month calendar period corresponding to
the Production Capacity Revenue Requirement calculation used for calculating the
EMC Plant in Service.

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

Duke Power Retail Plant in Service shall equal the average of the two December
balances for the total of Production, General and Intangible plant amounts
included in the total Electric Plant in Service monthly amounts shown on
Schedule 3 of NCUC Form E.S.-1 for Duke Power.

Nantahala Retail Plant in Service shall equal the average of the two December
balances for the total of Production, General and Intangible plant amounts
included in the total Electric Plant in Service monthly amounts shown on
Schedule 3 of NCUC Form E.S.-1 for Nantahala Power & Light.

Original Production Capacity Revenue Requirement shall equal the Production
Capacity Revenue Requirement before consideration of any adjustments pursuant to
Section 7.3.2.3 of the Agreement.

Original Energy Revenue Requirement shall equal the sum of F for purposes of
calculating the Fuel Rate in Schedule 1 and Variable Non-Fuel Production
Operation and Maintenance Expense for purposes of calculating the Variable O&M
Rate in Schedule 1.

 

- 2 -

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

Attachment 7-10

Example of Demand Rate Adjustment Percentage and Annual Percentage

Note: EMC and NC Retail Plant in Service values are actuals for 2004.

CASE WITH NO ADJUSTMENT WARRANTED––

 

          NC Retail    EMC      

1

   Demand Rev Req Unadjusted       $ 1,774,603    

2

   Energy Rev Req       $ 1,235,341    

3

   Total Unadjusted Rev Req for EMC Rate Calcs       $ 3,009,944     (Line 1 +
Line 2)

4

   Actual Gross Plant (“timing” adjusted)    $ 11,509,514    $ 11,509,514     NC
Retail = Attachment 7-10, Page 4, Line 10

5

   System Gross Plant Difference       $ —       (EMC Line 4 - NC Line 4)

6

   Levelized FCR         0.100    

7

   Estimated Impact on Demand Rev Req       $ —       (Line 6 x Line 5)

8

   Annual Percentage         0.00 %  

(Line 7 / Line 3)

No adjustment occurs since below 4% impact

Note: EMC Plant in Service values are actuals for 2004, but NC Retail Plant in
Service values have been reduced for purpose of demonstration.

CASE WITH NO ADJUSTMENT WARRANTED—

 

          NC Retail    EMC      

1

   Demand Rev Req Unadjusted       $ 1,774,603    

2

   Energy Rev Req       $ 1,235,341    

3

   Total Unadjusted Rev Req for EMC Rate Calcs       $ 3,009,944     (Line 1 +
Line 2)

4

   Actual Gross Plant (“timing” adjusted)    $ 10,618,079    $ 11,509,514     NC
Retail = Attachment 7-10, Page 4, Line 10

5

   System Gross Plant Difference       $ 891,435     (EMC Line 4 - NC Line 4)

6

   Levelized FCR         0.100    

7

   Estimated Impact on Demand Rev Req       $ 89,143     (Line 6 x Line 5)

8

   Annual Percentage         2.96 %  

(Line 7 / Line 3)

No adjustment occurs since below 4% impact

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

ADJUSTMENT WARRANTED

 

          NC Retail    EMC      

1

   Demand Rev Req Unadjusted       $ 1,774,603    

2

   Energy Rev Req       $ 1,235,341    

3

   Total Unadjusted Rev Req for EMC Rate Calcs       $ 3,009,944     (Line 1 +
Line 2)

4

   Actual Gross Plant    $ 9,729,655    $ 11,509,514    

5

   System Gross Plant Difference       $ 1,779,859     (EMC Line 4 - NC Line 4)

6

   Levelized FCR         0.100    

7

   Estimated Impact on Demand Rev Req       $ 177,986     (Line 6 x Line 5)

8

   Annual Percentage         5.91 %  

(Line 7 / Line 3)

Since Annual Percentage is in excess of 4%,

adjustment to Demand Rate is needed.

9

   Demand Rate Adjustment Percentage         3.24 %   [(Line 8 - 4%) x Line 3] /
Line 1

10

   Demand Rate per Section 7.3.2.1       $ 117.53    

11

   Demand Rate as adjusted per Section 7.3.2.3       $ 113.72     Line 10 x
(100% - Line 9)

 

- 2 -

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

ADJUSTMENT WARRANTED (but limited)

 

          NC Retail    EMC      

1

   Demand Rev Req Unadjusted       $ 1,774,603    

2

   Energy Rev Req       $ 1,235,341    

3

   Total Unadjusted Rev Req for EMC Rate Calcs       $ 3,009,944     (Line 1 +
Line 2)

4

   Actual Gross Plant    $ 8,368,409    $ 11,509,514    

5

   System Gross Plant Difference       $ 3,141,105     (EMC Line 4 - NC Line 4)

6

   Levelized FCR         0.100    

7

   Estimated Impact on Demand Rev Req       $ 314,110     (Line 6 x Line 5)

8

   Annual Percentage         10.44 %  

(Line 7 / Line 3)

Since Annual Percentage is in excess of 4%,

adjustment to Demand Rate is needed, but is

limited to maximum of 6% of total unadjusted

revenue requirements.

9

   Demand Rate Adjustment Percentage         10.18 %   [(Line 8* - 4%) x Line 3]
/ Line 1

10

   Demand Rate per Section 7.3.2.1       $ 117.53    

11

   Demand Rate as adjusted per Section 7.3.2.3       $ 105.57     Line 10 x
(100% - Line 9)

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

* maximum of 10%

 

- 3 -

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

(Amounts from Quarterly NCUC Form E.S.-1, Schedule 3, for 12ME 2004)

 

    

(Dollars in thousands)

   System Gross Electric Plant in Service for Determination of NC Retail Plant
in Service           Duke Power    Nantahala    Total NC Retail          
Beginning    Ending    Beginning    Ending    Beginning    Ending    Average

1

  

Plant in Service

   18,980,402    19,683,592    324,710    334,880    19,305,112    20,018,472   
19,661,792   

Components (data from Company records):

                    

2

  

Production Plant

   9,257,448    9,666,832    39,399    39,263    9,296,847    9,706,095   
9,501,471

3

  

Nuclear Fuel (gross)

   816,874    769,178          816,874    769,178    793,026

4

  

Total Production Plant

   10,074,322    10,436,010    39,399    39,263    10,113,721    10,475,273   
10,294,497

5

  

Transmission Plant

   1,745,408    1,819,243    92,489    91,335    1,837,897    1,910,578   
1,874,238

6

  

Distribution Plant

   5,978,416    6,312,889    168,040    181,129    6,146,456    6,494,018   
6,320,237

7

  

General Plant

   973,070    902,246    20,232    18,603    993,302    920,849    957,076

8

  

Intangible Plant

   209,186    213,204    4,550    4,550    213,736    217,754    215,745

9

  

Total (ties to Line 1)

   18,980,402    19,683,592    324,710    334,880    19,305,112    20,018,472   
19,661,792

10

  

Total of Production/General/Intangible Plant for use in Annual Percentage
calculation

               11,320,759    11,613,876    11,467,318

 

    

(Dollars in thousands)

   NC Retail
Plant in
Service   

EMC Plant in Service - Amounts from

Schedule 1 for 2004

   EMC Plant
in Service    System
Gross Plant
Difference    Adjustment
for Timing
Difference    Adjusted
System
Gross Plant
Difference                Beginning    Ending    Average                    

1

  

Plant in Service

                          

Components (data from Company records):

                       

2

  

Production Plant

   9,501,471    9,339,044    9,748,291    9,543,668    9,543,668    42,197   
42,197    —  

3

  

Nuclear Fuel (gross)

   793,026    816,874    769,178    793,026    793,026    —         —  

4

  

Total Production Plant

   10,294,497    10,155,918    10,517,469    10,336,694    10,336,694    42,197
   42,197    —  

5

  

Transmission Plant

                       

6

  

Distribution Plant

                       

7

  

General Plant

   957,076    993,303    920,849    957,076    957,076    —         —  

8

  

Intangible Plant

   215,745    213,736    217,753    215,745    215,745    —         —  

9

  

Total (ties to Line 1)

                                                                

10

  

Total of Production/General/Intangible Plant for use in Annual Percentage
calculation

   11,467,318    11,362,957    11,656,071    11,509,517    11,509,515    42,197
   42,197                                            

 

- 4 -

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

Attachment 8-1

(Part I of II)

TERMS AND CONDITIONS

FOR THE SCHEDULING OF POWER

SUPPLIED BY NORTH CAROLINA

ELECTRIC MEMBERSHIP CORPORATION

TO ITS INDEPENDENT MEMBERS

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

All NCEMC Committed Resources associated with the Wholesale Power Supply
Agreement between the Seller and the Buyer are governed by and subject to all of
the terms and conditions in this Exhibit, unless a specific Resource Summary
Attachment explicitly provides otherwise. Unless defined in this Exhibit, all
capitalized terms used herein shall have the respective meanings set forth as
Article One of the Wholesale Power Supply Agreement.

General Principles

 

1. Buyer is responsible for planning the way it chooses to use any Capacity or
Energy delivered pursuant to one of the Resource Summary Attachments governed by
this Exhibit. As a part of the Wholesale Power Supply Agreement, the Parties
have agreed to a set of Resource Summary Attachments that collectively are
intended to represent a financial approximation of an allocation of the NCEMC
Committed Resources on the Effective Date.

 

2. For any hour of delivery, Seller will optimize resources around final
dispatch for the combined load of all of Seller’s Participating Members, plus
the schedules of the Buyer and other Independent Members.

 

3. Buyer will pay Seller charges for Energy and the delivery of Energy to the
Interface Point under terms specified in Resource Summary Attachments and terms
specified elsewhere in this Agreement including but not limited to Sections 2.4,
2.12 and Article Five.

Delivery of Allocated Resources

 

4. Energy Scheduled from Buyer’s Independent Member Allocation is delivered to
the Interface Point. The cost and expense of all transmission services,
including ancillary services and losses, from the Interface Point are the sole
responsibility of Buyer.

 

5. Seller will be deemed the provider of the resources needed for the purposes
of tagging and for the designation of resources under the applicable tariffs of
the Transmission Provider(s) selected by Buyer.

Scheduling by Buyer

 

6. All Schedules from Buyer for each Independent Member Allocation will be in
whole MWs and may not exceed the IM Allocation MW detailed on the Resource
Summary Attachment.

 

7. Buyer will submit a separate Schedule in conformance with this Exhibit S by
System by resource up to the Maximum Scheduling Limit by System, as further
described in Paragraph 23 of this Exhibit S.

 

8. Buyer will be responsible for scheduling and arranging for the delivery of
its SEPA allocation.

 

-2-

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

9. For any Independent Member Allocation that is designated as producing
Must-Take Energy, Buyer is required to Schedule for every hour of every day of
the Delivery Period its full Must-Take Energy obligation from such a resource,
and may not amend or reduce its Schedule for that Energy: provided, however,
that to the extent that Seller’s obligation to purchase Must-Take Energy from a
resource designated as producing Must-Take Energy is reduced in any hour,
Buyer’s hourly Must-Take Energy obligation shall be adjusted by the ratio of
Seller’s hourly Must-Take Energy obligation to the Resource Capacity, rounded to
whole MWs. The Buyer shall not be entitled to Schedule Must-Take Energy in an
hour in amounts, which exceed the Buyer’s adjusted Must-Take Energy obligation
for that hour.

 

10. Buyer is obligated to Schedule resources in accordance with the terms and
conditions provided in the Resource Summary Attachments consistent with the
minimum run times in the contracts pertaining to Seller’s purchased and/or owned
resources, and Seller will use its good faith efforts to accommodate Buyer’s
Schedules that do not meet the minimum run time requirements, but only so long
as meeting such non-conforming Schedules would not likely result in additional
costs to Seller or any of its Participating Members.

 

11. Except with respect to Buyer’s Independent Member Allocations that supply
Must-Take Energy, Buyer is not obligated to Schedule its Independent Member
Allocations consistent with the minimum volumes in the power supply contracts of
Seller that are in force on the Independent Member Effective Date.

 

12. By 7:00 a.m. EPT each day Buyer must provide Seller with an hourly forecast
of its load by System for the following day.

 

13. The Buyer may Schedule its resources consistent with the table below.
Day-ahead Schedules are those submitted before 8:00 a.m. EPT the day prior to
flow. Intra-day Schedules are those that are requested after the 8:00 a.m. EPT
deadline above. All Schedule changes must occur at the top of the hour.
Intra-day Schedule changes require two (2) hours advance notice.

 

Scheduling Changes

Day Ahead

 

Intra-Day

Unlimited changes up to the IM Allocation MW identified in the Resource Summary
Attachment for each resource in whole MWs.   Up to two changes to the hourly
Schedule for the remainder of the day. Each change to the hourly Schedule shall
be no greater than 5%, for a cumulative maximum of 10% each hour. Additional
changes will be accommodated on a best efforts basis.

 

-3-

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

Scheduling by Seller

 

14. Seller is not obligated to meet Buyer’s final Schedule using the NCEMC
Committed Resources associated with the Independent Member Allocations Scheduled
by Buyer.

 

15. Seller will accept the risk and/or benefit resulting from differences in the
cost of resources used to provide Buyer Energy in accordance with its
Schedule(s), and the costs Seller would have incurred had it used NCEMC
Committed Resources to meet Buyer’s Schedule of the Scheduled resource(s).

 

16. Should Seller acquire an alternate resource, rather than use an NCEMC
Committed Resource to serve Buyer’s Schedule, and that alternate resource is
curtailed, Buyer’s Schedule will be maintained and any penalty, benefit or
curtailment will be borne by Seller.

 

17. Should all or any portion of NCEMC Committed Resources that have been
Scheduled by Seller and Buyer to meet Buyer’s Schedule in any given hour be
interrupted, then Seller shall try to identify available alternate resources
which Seller, in its sole discretion, determines are reasonably priced and
suitable to meet Seller’s needs. If Seller determines that such alternate
resources are available, Seller may maintain the Scheduled deliveries to Buyer
but at a price to be determined by Seller and communicated to Buyer. If no
alternate resources are available to Seller, Buyer’s Schedule will be curtailed.
All damages recovered by Seller from the Person responsible for the interruption
in service will be shared with Buyer and every other Member similarly affected
by such interruption in service.

Operations and Planning

 

18. Buyer will provide Seller with a real time telemetered signal of Buyer’s
load for Seller’s use, for purposes of determining when to start and stop the
dynamic schedule, and to Schedule certain Must-Take Energy requirements of NCEMC
Committed Resources.

 

19. Seller shall provide and inform the Buyer on each Thursday by 1:00 p.m. EPT
of the projected amount of Energy available hourly by Independent Member
Allocation by System for Scheduling by Buyer for the following Saturday through
Friday period, including the amount of Must-Take Energy that will be delivered
and must be taken hourly.

 

20. By 8:00 a.m. EPT each day, Buyer shall provide an hourly forecast of its
Native Load by System for the next seven (7) days. For purposes of this Exhibit
S, “Native Load” shall mean only the load of Buyer’s members. This load forecast
will be used by Seller to calculate the hourly Energy available from the
Independent Member Allocations that are available to be Scheduled for a given
interval of time.

 

21. Buyer shall provide Seller on each Thursday by 4:00 p.m. EPT, a projected
hourly Schedule of all the Independent Member Allocations governed by this
Agreement for the following Saturday through Friday period.

 

-4-

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

22. Seller and Buyer agree on the following checkout and verification process:

 

     As soon as practical after midnight, confirm hourly Schedules, energy flows
and energy charges by resource and daily totals;

 

     Provide a contact person each Business Day for the following:

 

     Resolve issues that remain unresolved;

 

     Perform month-to-date confirmations of hourly Schedules, energy flows and
energy charges by resource and daily totals;

 

     Finalize monthly checkouts by the second Business Day of the following
month; and Coordinate any true-ups that may be required.

 

23. For Buyers having loads in more than one System, Buyer will provide at the
Independent Member Election Date and on July 1 of each subsequent year, a
forecast of the percentage of its retail load in each System. (The sum of the
percentages must equal 100%). The Maximum Scheduling Limit by System for the
following calendar year will be calculated by multiplying the percentage of
Buyer’s retail load in each System times the total of Buyer’s Independent Member
Allocations for the following calendar year.

 

-5-

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Attachment 8-1

(Part II of II)

TERMS AND CONDITIONS

FOR OBTAINING TRANSMISSION

SERVICES ADEQUATE TO DELIVER

FROM THE INTERFACE POINTS

ESTABLISHED UNDER THE

WHOLESALE POWER SUPPLY AGREEMENT

OF NCEMC FOR SALES TO

ITS INDEPENDENT MEMBERS

 

-6-

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

General Principles and Responsibilities for Transmission: All Resource Summary
Attachments associated with the Wholesale Power Supply Agreement between Seller
and Buyer are governed by and subject to the terms and conditions in this
Exhibit unless a specific Resource Summary Attachment explicitly provides
otherwise. For purposes of this Exhibit, the Wholesale Power Supply Agreement
and each Resource Summary Attachment governed by this Exhibit, the term
“Acceptable Transmission Service” means the level of service available at any
point in time that is equal to or better than that level of service currently
defined as “Network Integration Transmission Service” under the Open Access
Transmission Tariff of the System to which Buyer’s distribution system is
physically interconnected, and if connected to more than one System, then Buyer
must have Acceptable Transmission Service for each Interface Point.

The following terms for transmission service apply to each Resource Summary
Attachment included as a part of this Agreement. All of these terms assume that
the current Open Access Transmission Tariff environment in force on the
Effective Date remains in force, without modification or amendment. The Parties
hereto agree that any amendment, modification or change to that tariff or the
regulatory environment for the wholesale electric industry, whether by
regulation, regulatory action, statute, judicial action, executive decision or
order, or otherwise, may require modification of this Exhibit to restore to
Buyer and Seller the benefits that each intended. Such amendments, modifications
or changes would include, without limitation, any changes or modifications of
the wholesale electric industry environment based on the Standard Market Design,
or the restructuring of the transmission systems or the regulatory oversight of
same. If the Parties fail to reach agreement on modifications of this Exhibit,
the dispute shall be subject to arbitration under the Wholesale Power Supply
Agreement.

Buyer is responsible for planning for and scheduling the receipt of capacity and
energy to be delivered to Buyer. Buyer will be responsible for negotiating,
making and keeping in force one or more transmission agreements with the
Transmission Provider(s) necessary to perform its obligations under the
Wholesale Power Supply Agreement. At a minimum, Buyer will negotiate, make and
keep in force its own Network Integration Service Agreement (“NITSA”) and its
own Network Operating Agreement (“NOA”).

Subject to and contingent upon the concurrence and agreement of each affected
Transmission Provider, the RUS, and the Federal Energy Regulatory Commission
(“FERC”), the Parties further agree:

 

1. Buyer is responsible for serving its own load. It will do so through
contracts with Seller, along with other resources Buyer will acquire.

 

2. Buyer will have its own transmission agreement(s) with each and any
Transmission Provider(s) whose services are needed to move capacity or energy
from any Interface Point of the System(s) to which Buyer’s distribution system
is physically interconnected.

 

3. Buyer will negotiate its own NITSA and NOA. Seller will provide assistance
with these negotiations as requested. The cost for this assistance will be
charged to Buyer separately from charges for Capacity and Energy billed under
Article 5.1 of this Agreement.

 

-7-

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

4. Seller will transfer the direct-assigned facilities used for that Buyer, if
any, to Buyer’s NITSA once the same has become effective.

 

5. Seller will provide Buyer with contractual rights that financially
approximate the hypothetical assignment of a total amount of Seller’s owned
and/or purchased resources, calculated in accordance with the NCEMC Member Power
Supply Resource Policy, for purposes of Buyer’s NITSA and NOA designations for
energy delivered to the System served by the Transmission Provider with which
Buyer has entered its NITSA and NOA.

 

6. If any need exists or arises to designate, in addition to the contracts with
Seller, any other network resources in order to meet Buyer’s load in accordance
with the tariffs or other requirements of the Transmission Provider(s), Buyer
has the responsibility to locate, identify and designate such other network
resources.

 

7. Buyer will have the obligation to satisfy the requirements of the applicable
OATT, and purchase or self-supply, as applicable, any ancillary or other
services needed or required to serve its load.

 

8. Buyer will coordinate with Seller or its scheduling agent under Exhibit S to
this Wholesale Power Supply Agreement to assure that the proper schedule is in
place each day for Buyer’s scheduled amount of Energy related to each of Buyer’s
Resource Summary Attachments that are governed by this Exhibit.

 

9. In addition to the other responsibilities arising under this Exhibit, Buyer
shall be solely liable for any energy imbalance settlement and any other
settlements or liabilities to which a Transmission Customer is exposed at and
from the Interface Point(s). If Buyer causes Seller to incur energy imbalance
charges, Buyer will reimburse Seller for any charges that Seller incurs.

 

-8-

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

Attachment 8-2

SEPA Policies

Duke Control Area

 

  •   SEPA will send the “Energy for Scheduling” declaration to Duke on Thursday
of each week. The declaration shows the minimum energy and excess energy
available for scheduling.

 

  •   A single declaration will be sent for the Duke Control Area allocation for
all EMCs under a Partial Requirements Service Agreement with Duke.

Commencement Date through December 31, 2010

 

  •   After receiving the energy declaration from SEPA, Duke will fax or e-mail
the declaration directly to Morgan Stanley Capital Group (MSCG).

 

  •   MSCG will then fax or e-mail their proposed schedule for the coming week
(7 days) to Duke. The seven day week shall commence at the beginning of Saturday
and extend to the end of Friday.

 

  •   All scheduling nominations must be made in whole megawatts (MW) only.

 

  •   Schedules may be revised on a day-ahead basis only if received by 8 AM.

 

  •   If the SEPA declaration shows Excess Energy is available, that energy must
be scheduled also – it is not optional. SEPA will notify Duke (as Scheduling
Agent) and Duke will in turn notify MSCG of such available energy.

 

  •   After receiving the nominations from MSCG via Duke, SEPA will tag the
energy. Both MSCG and Duke should be on the tag. MSCG will appear as the owner
of the power and Duke will be identified as the PSE for the load (sink).

 

  •   Duke shall receive any information or notices from SEPA relating to any
changes in the schedules to serve EMC’s Native Load. Duke shall ensure that MSCG
is aware of such notices.

 

  •   If Duke is notified by the Transmission Provider that a SEPA schedule has
been rejected, Duke shall work with SEPA to have a substitute schedule generated
for the Day in question taking into account the information provided by the
Transmission Provider in connection with such rejection.

 

  •   Duke will provide daily and Monthly reconciliation and checkout services
to EMC with respect to SEPA in connection with services and schedules of energy
provided by SEPA and MSCG to serve EMC’s Native Load.

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

January 1, 2011 through December 31, 2021

 

  •   Duke is to schedule directly with SEPA on the portion of EMC’s SEPA
allocation that lies within the Duke Control Area.

 

  •   Duke will receive the energy declaration from SEPA.

 

  •   Duke will then fax or e-mail their proposed schedule for the coming week
(7 days) to SEPA. The seven day week shall commence at the beginning of Saturday
and extend to the end of Friday.

 

  •   All scheduling nominations must be made in whole megawatts (MW) only.

 

  •   Schedules may be revised on a day-ahead basis only if received by 8 AM.

 

  •   If the SEPA declaration shows Excess Energy is available, that energy must
be scheduled also – it is not optional. SEPA will notify Duke (as Scheduling
Agent) of such available energy.

 

  •   After receiving the nominations from Duke, SEPA will tag the energy. Duke
will be on the tag and will be identified as the PSE for the load (sink).

 

  •   Duke shall receive any information or notices from SEPA relating to any
changes in the schedules to serve EMC’s Native Load.

 

  •   If Duke is notified by the Transmission Provider that a SEPA schedule has
been rejected, Duke shall work with SEPA to have a substitute schedule generated
for the Day in question taking into account the information provided by the
Transmission Provider in connection with such rejection.

Duke will provide daily and Monthly reconciliation and checkout services to EMC
with respect to SEPA in connection with services and schedules of energy
provided by SEPA to serve EMC’s Native Load.

 

-2-

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

PARTIAL REQUIREMENTS SERVICE AGREEMENT

BETWEEN

DUKE POWER COMPANY LLC

d/b/a DUKE ENERGY CAROLINAS, LLC

AND

BLUE RIDGE ELECTRIC MEMBERSHIP CORPORATION

DATED AS OF MAY 12, 2006

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

TABLE OF CONTENTS

 

          Page

Article 1 Definitions

   2

  1.1

  

Definitions.

   2

  1.2

  

Interpretation

   20

  1.3

  

Construction

   20

Article 2 Term

   21

  2.1

  

Effectiveness.

   21

  2.2

  

Term.

   21

  2.3

  

Termination.

   22

  2.4

  

Absolute Nature of Termination

   27

Article 3 Conditions Precedent to the Commencement Date

   27

  3.1

  

Conditions Precedent to Duke’s Obligations

   27

  3.2

  

Conditions Precedent to EMC’s Obligations

   28

  3.3

  

Notice of Satisfaction of Conditions Precedent

   29

  3.4

  

Waiver of Condition Precedent

   29

  3.5

  

Commencement of Service; Failure of Condition Precedent.

   30

Article 4 Sale of Electric Capacity and Energy

   34

  4.1

  

Classification of Services Provided

   34

  4.2

  

FFR Supplemental Service

   34

  4.3

  

Partial Requirements Service

   37

  4.4

  

Excepted Load

   38

    4.5

  

Good Title

   38

  4.6

  

Power Quality

   39

Article 5 EMC Resources

   39

  5.1

  

EMC Contract Resources (Commencement Date - December 31, 2010).

   39

  5.2

  

EMC Contract Resources (January 1, 2011 - Termination of Agreement).

   40

  5.3

  

No Duke Obligation for Customer Resources

   43

  5.4

  

New Customer Resources

   43

Article 6 Priority of Service

   44

  6.1

  

Interruption of FFR Supplemental Service and Partial Requirements Service

   44

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

  6.2

  

Curtailments of Load

   44

  6.3

  

Emergency Load Curtailment Program

   45

  6.4

  

Substitute Energy

   45

  6.5

  

Substitute Energy Costs

   45

Article 7 Capacity and Energy Charges

   45

  7.1

  

Charges During Commencement Date - December 31, 2006.

   45

  7.2

  

Charges During January 1, 2007 – December 31, 2010.

   50

  7.3

  

Charges Commencing January 1, 2011.

   51

  7.4

  

Monthly Reserve Capacity Charges

   53

  7.5

  

Payment

   54

  7.6

  

Determination of EMC Capacity and Energy Demands

   54

Article 8 Scheduling Agent Services

   55

  8.1

  

Appointment of Duke as Scheduling Agent

   55

  8.2

  

Scheduling Policies

   55

  8.3

  

Protocols

   55

  8.4

  

Scheduling Agent Services (Commencement Date through December 31, 2010)

   55

  8.5

  

Scheduling Agent Services (January 1, 2011 through Termination)

   56

  8.6

  

New EMC Resources

   57

  8.7

  

Errors in Schedules

   57

  8.8

  

EMC Responsibilities

   57

  8.9

  

Duke’s Liability.

   58

  8.10

  

Termination Assistance Service

   58

Article 9 Transmission and Ancillary Services

   58

  9.1

  

Delivery Obligations

   58

  9.2

  

Transmission Arrangements

   58

  9.3

  

Ancillary Services

   58

  9.4

  

Regional Transmission Organization

   59

Article 10 Operating Committee

   60

  10.1

  

Operating Committee

   60

  10.2

  

Duties of the Operating Committee

   60

Article 11 Demand Side Management

   60

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

  11.1

  

Availability of Demand Side Management Resource Programs

   60

  11.2

  

Changes to Demand Side Management Resource Programs

   60

  11.3

  

Credits

   61

  11.4

  

Necessary Arrangements

   61

  11.5

  

Start-Up Conditions

   61

  11.6

  

Periodic Testing

   61

  11.7

  

EMC Demand Side Management

   62

Article 12 Modification of This Agreement

   63

  12.1

  

Unilateral Modification

   63

  12.2

  

Mobile-Sierra Public Interest Standard

   63

  12.3

  

Changes To Certain Charge Components

   63

  12.4

  

Standard of Review for Permitted Changes

   64

  12.5

  

Scope of Waiver

   64

Article 13 Billing and Payment

   64

  13.1

  

Billing Period

   64

  13.2

  

Billing Statements.

   64

  13.3

  

Timeliness of Payment

   65

  13.4

  

Netting of Payments

   65

  13.5

  

Disputes and Adjustments of Statements

   65

  13.6

  

Records and Audits

   66

Article 14 Dispute Resolution

   68

  14.1

  

Arbitration

   68

  14.2

  

Negotiation and Notice of Arbitration

   68

  14.3

  

Individual, Joint or Consolidated Arbitration

   68

  14.4

  

Selection of Arbitration Process

   69

  14.5

  

Initiation of Arbitration

   70

  14.6

  

Arbitration Processes.

   70

  14.7

  

Decision

   73

  14.8

  

Expenses

   74

  14.9

  

Effect of Dispute Resolution Procedures

   74

  14.10

  

Confidentiality

   74

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

Article 15 Credit and Collateral Requirements

   74

  15.1

  

Posting of Collateral

   74

  15.2

  

Material Adverse Changes

   74

  15.3

  

Continuing Nature of Collateral Requirement

   75

  15.4

  

Interest on Cash Used as Collateral

   75

  15.5

  

Grant of Security Interest/Remedies

   75

  15.6

  

Notice, Information

   76

  15.7

  

Definitions.

   76

Article 16 Additional Terms

   78

  16.1

  

Representations Warranties and Covenants.

   78

  16.2

  

Assignment.

   81

  16.3

  

Liability and Indemnification.

   82

  16.4

  

Force Majeure

   83

  16.5

  

Events of Default and Remedies.

   84

  16.6

  

Confidential Information.

   86

  16.7

  

Governmental Liabilities.

   87

  16.8

  

Choice of Law

   88

  16.9

  

Survival of Obligations

   88

  16.10

  

Entire Agreement

   88

  16.11

  

Cost Projections

   88

  16.12

  

Unique Agreement

   89

  16.13

  

No Transfer of Rights

   89

  16.14

  

No Partnership

   89

  16.15

  

Third Parties

   89

  16.16

  

Waiver

   89

  16.17

  

Time of Essence

   89

  16.18

  

Headings

   90

  16.19

  

Severability

   90

  16.20

  

Counterparts

   90

  16.21

  

No Public Announcement

   90

  16.22

  

Notices

   90

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

  16.23

  

No Dedication of the System

   91

  16.24

  

Stranded Costs.

   91

  16.25

  

Electric Peak Load and Energy Information to be provided by EMC

   92

  16.26

  

Demand and Energy Charge and Rate Information to be Provided by Duke

   92

  16.27

  

Further Assurances

   92

  16.28

  

Applicable Laws and Regulations

   92

    16.29

  

Equitable Relief

   92

  16.30

  

PURPA Assistance

   92

  16.31

  

SERC and NERC Data Reporting and Compliance Assistance

   92

 

   SCHEDULES 1    Annual Production Capacity and Energy Rates    ATTACHMENTS 3-1
   Calculation of the Excess Annual Capacity Charges in the Duke-Blue Ridge
Agreement, Duke-Piedmont Agreement and Duke-Rutherford Agreement 4-1    EMC’s
Base Obligation and Fixed Forward Resource 4-2    Calculation of Reduction to
EMC’s Base Obligation and EMC Group’s Base Obligation During Light Load Periods
4-3    Partial Requirements Resources 7-2    Calculation of the Monthly Demand
Charges in the Duke-Blue Ridge Agreement, Duke-Piedmont Agreement and
Duke-Rutherford Agreement 7-3    Calculation of Blue Ridge Allocated Share of
Duke Total Hourly Energy Charge, EMC Group Total Hourly Energy Credit, Inter-EMC
Energy Charge and Inter-EMC Energy Credit 7-4    Calculation of Blue Ridge,
Piedmont and Rutherford Allocated Shares of the Duke Total Hourly Energy Charge,
EMC Group Total Hourly Energy Credit, Inter-EMC Energy Charge and Inter-EMC
Energy Credit 7-5    Example showing Calculations of Blue Ridge Energy Purchase
Amounts and Blue Ridge Energy Credit Amount

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

7-6    Example showing Calculations of EMC Group Energy Purchase Amounts and EMC
Group Energy Credit Amount 7-7    Example showing the calculation of Monthly
Billing Demand under Section 7.2.2.2 7-8    Examples showing the calculation of
Monthly Billing Demand under Section 7.3.2.2 7-9    Demand Rate Adjustment
Percentage and Annual Percentage 7-10    Example of Demand Rate Adjustment
Percentage and Annual Percentage 8-1 I    Terms and Conditions for the
Scheduling of Power Supplied by North Carolina Electric Membership Corporation
to its Independent Members 8-1 II    Terms and Conditions for Obtaining
Transmission Services Adequate to Deliver from the Interface Points Established
under the Wholesale Power Supply Agreement of NCEMC for Sales to its Independent
Members 8-2    SEPA Policies

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

PARTIAL REQUIREMENTS SERVICE AGREEMENT

BETWEEN

DUKE POWER COMPANY LLC

d/b/a DUKE ENERGY CAROLINAS, LLC

AND

BLUE RIDGE ELECTRIC MEMBERSHIP CORPORATION

THIS PARTIAL REQUIREMENTS SERVICE AGREEMENT, dated as of May 12, 2006, is
entered into by and between Blue Ridge Electric Membership Corporation, a
corporation organized and existing under Article 2 of Chapter 117 of the General
Statutes of North Carolina, together with any permitted successor or assignee
(“EMC” or “Blue Ridge”), and Duke Power Company LLC, d/b/a Duke Energy
Carolinas, LLC, a limited liability company organized and existing under the
laws of North Carolina, together with any permitted successor or assignee
(“Duke”). Hereinafter, Duke and EMC are sometimes also referred to individually
as a “Party” or collectively as the “Parties.”

W  I  T  N  E  S  S  E  T  H

WHEREAS, Duke is engaged in the business of generating, transmitting, and
distributing electric capacity and energy in portions of the States of North
Carolina and South Carolina, and provides electric service to retail and
wholesale customers; and

WHEREAS, EMC is an electric membership corporation that provides retail electric
service to its members in the State of North Carolina, and is authorized to
purchase electric energy at wholesale for resale; and

WHEREAS, EMC is a member of North Carolina Electric Membership Corporation
(“NCEMC”) and is a party to the WPSA; and

WHEREAS, EMC is a party to the SEPA Contract; and

WHEREAS, EMC is a party to the PPA; and

WHEREAS, EMC has elected to arrange independently from NCEMC for its future
requirements for electric capacity and energy in addition to those to which EMC
has entitlements under existing contractual arrangements; and

WHEREAS, EMC has reviewed its future needs for electric capacity and energy and
Scheduling Agent Services and has determined that in order for EMC to provide
for a portion of EMC’s Native Load, EMC is willing to purchase electric capacity
and energy from Duke and is also willing to purchase Scheduling Agent Services
from Duke for the duration of, and subject to the terms of, this Agreement; and

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

WHEREAS, Duke is willing to plan and provide for the electric capacity and
energy requirements needed to meet a portion of EMC’s Native Load and to provide
Scheduling Agent Services for the duration of, and subject to the terms of, this
Agreement; and

WHEREAS, Duke and EMC have agreed to the terms and conditions upon which the
sale of electric capacity and energy and provision of Scheduling Agent Services
may be conducted between the Parties.

NOW THEREFORE, in consideration of the premises and the mutual representations,
warranties and covenants set forth in this Agreement, and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Parties, each intending to be legally bound, hereby agree as
follows:

Article 1

Definitions

1.1 Definitions.

Defined terms in this Agreement are capitalized. The defined terms used in this
Agreement have the following meanings:

“Accounting Requirements” shall have the meaning specified in Section 15.7.

“Administrator” shall mean the RUS Administrator.

“Adverse Ruling” shall have the meaning specified in Section 3.1(c).

“Affiliate” means, with respect to any person, any other person directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, such person. For purposes of this definition, “control” when used
with respect to any person means the power to direct the management and policies
of such person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.

“Agreement” means this Partial Requirements Service Agreement, together with
each Schedule and Attachment, each as amended from time to time.

“Ancillary Services” means any and all ancillary services provided by the
Transmission Provider in connection with any Transmission Service arranged by
EMC for the delivery of electric energy provided under this Agreement from the
Delivery Point.

“Annual Capacity Factor” shall have the meaning specified in Section 4.3.3.1.

“Annual Capacity Price” shall have the meaning specified in Section 3.5.2.3.1,
3.5.2.3.2 or 3.5.2.3.3, as applicable.

 

2

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

“Annual Capacity Quantity” shall have the meaning specified in Sections
3.5.2.3.1, 3.5.2.3.2 or 3.5.2.3.3, as applicable.

“Annual Percentage” shall be calculated as shown on Attachment 7-9.

“Annual Planning Period” means, the period (as of the Commencement Date either
May through September or October through April) designated in the then most
recent Duke Annual Plan (or the successor thereto) that Duke files with the NCUC
as the period during which Duke’s annual peak load is projected to occur;
provided, that in the event that NCUC ceases to require Duke to file or filing
becomes voluntary and Duke ceases to file the Duke Annual Plan (or a successor
thereto) with the NCUC, “Annual Planning Period” shall mean the period (either
May through September or October through April) in which Duke’s annual peak load
is projected to occur under the generation planning criteria for Duke’s
Generation System used by Duke to meet Duke’s Native Load.

“Assignment for Security” shall have the meaning specified in Section 16.2.2.

“Bankrupt” means that the Defaulting Party or any guarantor of such Party:

(i) is dissolved (other than pursuant to a consolidation, amalgamation or
merger);

(ii) becomes insolvent or is unable to pay its debts or fails or admits in
writing its inability generally to pay its debts as they become due;

(iii) makes a general assignment, arrangement or composition with or for the
benefit of its creditors;

(iv) institutes or has instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief under any bankruptcy or insolvency
law or other similar law affecting creditor’s rights, or a petition is presented
for its winding-up or liquidation;

(v) has a resolution passed for its winding-up, official management or
liquidation (other than pursuant to a consolidation, amalgamation or merger);

(vi) seeks or becomes subject to the appointment of an administrator,
provisional liquidator, conservator, receiver, trustee, custodian or other
similar official for it or substantially all of its assets;

(vii) has a secured party take possession of all or substantially all of its
assets, or has a distress, execution, attachment, sequestration or other legal
process levied, enforced or sued on or against all or substantially all of its
assets;

(viii) causes or is subject to any event with respect to it which, under the
applicable Laws of any jurisdiction, has an analogous effect to any of the
events specified in clauses (i) to (vii) inclusive; or

 

3

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

(ix) takes any action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the foregoing acts.

“Bankruptcy Code” means Title 11 of the United States Code or any successor
thereto.

“Base Annual Capacity Charge” means the charge set forth in Section 3.5.2.3.4.

“Baseload Resources” means the Partial Requirements Resources identified as
Baseload Resources in Attachment 4-3.

“Billing Dispute Notice” shall have the meaning specified in Section 13.5.

“Billing Period” means the period beginning on the Commencement Date and ending
on the last Day of the Month in which the Commencement Date occurred, and each
succeeding Month thereafter.

“Blue Ridge” shall have the meaning specified in the first paragraph of this
Agreement.

“Blue Ridge Allocated Share of Duke Total Hourly Energy Charge” shall be as
calculated in Attachment 7-3.

“Blue Ridge Allocated Share of EMC Group Total Hourly Energy Credit” shall be as
calculated in Attachment 7-3.

“Blue Ridge Allocated Share of Inter-EMC Energy Charge” shall be as calculated
in Attachment 7-3.

“Blue Ridge Allocated Share of Inter-EMC Energy Credit” shall be as calculated
in Attachment 7-3.

“Blue Ridge Energy Credit Amount” means the Blue Ridge Energy Credit Amount as
determined in Section 7.1.5.9.

“Blue Ridge Energy Purchase Amount” means the Blue Ridge Energy Purchase Amount
as determined in Section 7.1.5.9.

“Blue Ridge Hourly Reconciliation Credit” shall have the meaning specified in
Section 7.1.5.12.

“Blue Ridge Monthly Reconciliation Credit” shall have the meaning specified in
Section 7.1.5.12.

“Business Day” means any Day other than Saturday, Sunday, or any Day on which
the Federal Reserve member banks are not open for business.

“Catawba Nuclear Station” means that certain nuclear power plant located near
Rock Hill in York County, South Carolina.

“CFC” shall have the meaning specified in Section 15.7.

 

4

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

“Claiming Party” shall have the meaning specified in Section 16.4.

“Claims” means all third party claims or actions, threatened or filed, and
whether groundless, false, or fraudulent, that directly or indirectly relate to
the subject matter of an indemnity, and the resulting losses, damages, expenses,
attorneys’ fees, and court costs, whether incurred by settlement or otherwise,
and whether such claims or actions are threatened or filed prior to or after the
termination of this Agreement.

“CoBank” shall have the meaning specified in Section 15.7.

“Combined Cycle Resources” means the Partial Requirements Resources identified
as Combined Cycle Resources in Attachment 4-3.

“Commencement Date” shall have the meaning specified in Section 2.1.1.

“Commercially Reasonable Efforts” means efforts which are reasonably within the
contemplation of the Parties at the Effective Date; which require the performing
Party that is acting in good faith to take action or expend funds reasonably in
relation to the benefit to be obtained by the other Party; and that require a
level of effort which would be devoted by an independent entity reasonably in
the electric utility industry in light of all of the relevant circumstances.

“Confidential Information” means any documents, analyses, compilations, studies,
or other materials prepared by a Party or its Representatives that contain or
reflect either (a) any costs of Duke’s Generation System, including system
average costs, System Incremental Costs, Territorial Incremental Costs, and
Territorial Decremental Costs, or (b) written or oral data or information that
is privileged, confidential, or proprietary and is marked as “Confidential.”
“Confidential Information” shall also mean all subsequently prepared documents,
analyses, compilations, studies, or other materials by a Party or its
Representative that are derived from previously marked “Confidential” data or
information. Notwithstanding the foregoing, information shall not be deemed
Confidential Information if it:

(i) is a matter of public knowledge at the time of its disclosure or is
thereafter published in or otherwise ascertainable from any source available to
the public without breach of this Agreement,

(ii) constitutes information which is obtained from a third party (who or which
is not an Affiliate of one of the Parties) other than by or as a result of
unauthorized disclosure, or

(iii) prior to the time of disclosure had been independently developed by the
receiving Party or its Affiliates not utilizing improper means.

“Control Area” means an electric power system or combination of electric power
systems to which a common automatic generation control scheme is applied in
order to match the power output of the generators within the electric power
system and electric energy imported into the electric power system, with the
load located within the electric power system.

 

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“Cover Costs” shall have the meaning specified in Section 6.4.

“CP&L” means Carolina Power & Light Company (d/b/a Progress Energy Carolinas,
Inc.).

“CPR” shall have the meaning specified in Section 14.1.

“Day” means a day, commencing at 00:00:00 Eastern Time of such calendar day and
ending 23:59:59 Eastern Time of the same calendar day.

“Debt Service Coverage Ratio” shall have the meaning specified in Section 15.7.

“Defaulting Party” shall have the meaning specified in Section 16.5.1.

“Delivery Points” means any available points on the Transmission System where
electric energy is delivered for Transmission Service.

“Demand Rate Adjustment Percentage” shall be calculated as shown on Attachment
7-9.

“Demand Side Management Resource Programs” means the demand side management
resource programs that Duke makes available to Duke’s Native Load retail
customers within the State of North Carolina under riders approved and on file
with the NCUC, as such riders may be amended from time to time.

“Depreciation and Amortization Expense” shall have the meaning specified in
Section 15.7.

“Dispatched Baseload Resources” means the Baseload Resources that Duke
dispatches pursuant to Section 4.3.4.

“Dispatched Combined Cycle Resources” means the Combined Cycle Resources that
Duke dispatches pursuant to Section 4.3.3.

“Disputed Amount” shall have the meaning specified in Section 13.5.

“Duke” shall have the meaning specified in the first paragraph hereof, provided
that for purposes of this Agreement “Duke” shall not include Duke Transmission
and provided further, Duke intends to effectuate a name change to Duke Energy
Carolinas, LLC and upon the effectiveness of such name change, references to
“Duke” shall mean Duke Energy Carolinas, LLC.

“Duke Annual Plan” means the Annual Report Duke is required to file with the
NCUC in accordance with NCUC Rule R8-60 or successor thereto. In the event Duke
is no longer required to file the Annual Report with the NCUC or filing becomes
voluntary, “Duke Annual Plan” shall mean the generation planning criteria for
Duke’s Generation System used by Duke to meet Duke’s Native Load.

“Duke-Blue Ridge Agreement” means this Agreement.

 

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“Duke Hourly Energy Charge” shall have the meaning specified in Section 7.1.5.1.

“Duke Hourly Reconciliation Charge” shall have the meaning specified in
Section 7.1.5.11.

“Duke Monthly Energy Charge” means, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2006, the charge set forth
in Section 7.1.5.1; with respect to the period January 1, 2007, through
December 31, 2010, the charge set forth in Section 7.2.3; and with respect to
the period beginning January 1, 2011, and continuing through the termination of
this Agreement, the charge set forth in Section 7.3.3.

“Duke Monthly Reconciliation Charge” shall have the meaning specified in
Section 7.1.5.11.

“Duke Native Load” or “Duke’s Native Load” means the electric capacity and
energy demands imposed on Duke by its retail customers located within Duke’s
Service Area, as such Service Area may be amended from time to time in
accordance with Laws or pursuant to the requisite approvals of the Governmental
Authorities that have jurisdiction to regulate retail electric service within
such Service Area, including by merger or acquisition, plus the demands of
Duke’s wholesale power sales customers served under contracts with a firmness of
supply equal to such retail customers.

“Duke-Piedmont Agreement” means the Partial Requirements Service Agreement
between Duke and Piedmont Electric Membership Corporation dated as of May 12,
2006.

“Duke-Rutherford Agreement” means the Partial Requirements Service Agreement
between Duke and Rutherford Electric Membership Corporation, dated as of May 12,
2006.

“Duke Reconciliation Amount” shall have the meaning specified in
Section 7.1.5.11.

“Duke’s Generation Planning Practices” means the then-current generation
planning practices of Duke that are reflected in the Duke Annual Plan.

“Duke’s Generation System” means Duke’s owned or leased electric generating
facilities and purchased power resources the output of which are used to serve
Duke’s Native Load located within the State of North Carolina, as such system
may be amended from time to time by any means including by merger or
acquisition.

“Duke Schedule 1 Demands” shall have the meaning specified in Schedule 1,
Section I.B.

“Duke Total Hourly Energy Charge” shall have the meaning specified in
Section 7.1.5.2.

“Duke Transmission” means Duke Electric Transmission, a division of Duke, or any
successor thereto.

“Eastern Time” means the time in effect in Charlotte, North Carolina, whether
Eastern Standard Time or Eastern Daylight Saving Time.

 

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“Effective Date” shall have the meaning specified in Section 2.1.1.

“EMC” or “Blue Ridge” shall have the meaning specified in the first paragraph of
this Agreement.

“EMC Call Signal” shall have the meaning specified in Section 7.1.5.9.

“EMC Coincident Peak Demand” shall have the meaning specified in
Section 3.5.2.3.5.1.

“EMC Contract Resources”, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2010, shall have the
meaning specified in Section 5.1.1, and with respect to the period beginning
January 1, 2011, and continuing through the termination of this Agreement, shall
have the meaning specified in Section 5.2.1.

“EMC Demand Side Management Resource Programs” means the demand side management
resource programs that EMC makes available to EMC’s Native Load customers.

“EMC Excess Annual Capacity Quantity” shall have the meaning specified in
Section 3.5.2.3.5.1.

“EMC Group” means collectively Piedmont, Blue Ridge, and Rutherford.

“EMC Group Annual Capacity Quantity” means the sum of: (i) the Annual Capacity
Quantity set forth in Section 3.5.2.3 of this Agreement; (ii) the Annual
Capacity Quantity set forth in Section 3.5.2.3 of the Duke-Piedmont Agreement;
and (iii) the Annual Capacity Quantity set forth in Section 3.5.2.3 of the
Duke-Rutherford Agreement.

“EMC Group Call Signal” shall have the meaning specified in Section 7.1.5.10.

“EMC Group Coincident Peak Demand” shall have the meaning specified in
Section 3.5.2.3.5.3.

“EMC Group Combined Energy Credit Amount” means the sum of (i) the Blue Ridge
Energy Credit Amount, (ii) the Piedmont Energy Credit Amount, and (iii) the
Rutherford Energy Credit Amount.

“EMC Group Combined Energy Purchase Amount” means the sum of (i) the Blue Ridge
Energy Purchase Amount, (ii) the Piedmont Energy Purchase Amount, and (iii) the
Rutherford Energy Purchase Amount.

“EMC Group Combined Excess Annual Capacity Quantity” shall have the meaning
specified in Section 3.5.2.3.5.2.

“EMC Group Combined Monthly Demand Quantity” shall have the meaning specified in
Section 7.1.4.2.

“EMC Group Energy Credit Amount” shall have the meaning specified in
Section 7.1.5.10.

 

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“EMC Group Energy Purchase Amount” shall have the meaning specified in
Section 7.1.5.10.

“EMC Group Excess Annual Capacity Quantity” shall have the meaning specified in
Section 3.5.2.3.5.3.

“EMC Group Monthly Demand Quantity” shall have the meaning specified in
Section 7.1.4.3.

“EMC Group Native Load” means the sum of (i) the EMC Native Load under this
Agreement, (ii) the EMC Native Load under the Duke-Piedmont Agreement, and
(iii) the EMC Native Load under the Duke-Rutherford Agreement.

“EMC Group Put Signal” shall have the meaning specified in Section 7.1.5.10.

“EMC Group Reconciliation Amount” shall have the meaning specified in
Section 7.1.5.12.

“EMC Group Total Hourly Energy Credit” shall have the meaning specified in
Section 7.1.5.6.

“EMC Group’s Base Obligation” means the sum of (i) EMC’s Base Obligation under
Section 4.2.2 of this Agreement, (ii) EMC’s Base Obligation under Section 4.2.2
of the Duke-Piedmont Agreement, and (iii) EMC’s Base Obligation under
Section 4.2.2 of the Duke-Rutherford Agreement.

“EMC Hourly Demand” shall have the meaning specified in Section 3.5.2.3.5.1.

“EMC Hourly Energy Credit” shall have the meaning specified in Section 7.1.5.5.

“EMC Monthly Demand Quantity” shall have the meaning specified in
Section 7.1.4.1

“EMC Monthly Energy Credit” means, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2006, the credit set forth
in Section 7.1.5.5.

“EMC Native Load” or “EMC’s Native Load” means the electric capacity and energy
demands imposed on EMC by its retail customers located within EMC’s Service
Area, excluding any such demands that constitute Non-Duke Control Area Load or
Excepted Load, plus the electric capacity and energy demands, if any, included
as EMC Native Load in accordance with Section 4.4.1.

“EMC Peak Hour Billing Demand”, with respect to the period January 1, 2007
through December 31, 2010, shall have the meaning specified in Section 7.2.2.2,
and with respect to the period beginning January 1, 2011, and continuing through
the termination of this Agreement, shall have the meaning specified in
Section 7.3.2.2.

“EMC Put Signal” shall have the meaning specified in Section 7.1.5.9.

 

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“EMC Scheduled Amount” shall have the meaning specified in Section 4.2.3.

“EMC’s Base Obligation” shall have the meaning specified in Section 4.2.2.

“Energy Cost” shall have the meaning specified in Section 4.3.3.3.

“Energy Imbalance Service” means the service provided under Schedule 4 of the
Transmission Provider’s OATT.

“Equitable Defenses” means, with respect to a proceeding involving this
Agreement, the discretion of a Governmental Authority to make or enter an order
of bankruptcy, insolvency, reorganization, or other ruling affecting creditors’
rights generally, or exercising other discretion committed to the court’s or
agency’s equitable powers.

“Equity” shall have the meaning specified in Section 15.7.

“Event of Default” shall have the meaning specified in Section 16.5.1.

“Excepted Load” shall have the meaning specified in Section 4.4.

“Excess Annual Amount” means the quantity specified in Section 3.5.2.3.5.

“Excess Annual Capacity Charge” means the charge specified in Section 3.5.2.3.5.

“Excess Annual Capacity Price” shall have the meaning specified in
Section 3.5.2.3.1, 3.5.2.3.2 or 3.5.2.3.3, as applicable.

“Extension Term” shall have the meaning specified in Section 2.2.2.

“Federal Power Act” means the Federal Power Act, 16 U.S.C. §§791a-828c, as
amended from time to time.

“FERC” means the Federal Energy Regulatory Commission or any successor agency
that administers the Federal Power Act.

“FFR Supplemental Service” shall have the meaning specified in Sections 4.1 and
4.2.

“Firm Energy” means: electric energy which meets the Transmission Provider’s (or
successor Transmission Provider’s) standards related to character of service and
firmness of supply, including standards that may require the designation of
specific capacity sources, as such standards exist on the Effective Date or as
they may be amended from time-to-time, such that EMC may: (i) designate the PPA
as a Network Resource or successor service designation under its Network
Integration Transmission Service Agreement with Transmission Provider, or
successor Transmission Provider; and (ii) satisfy applicable requirements such
that the Network Integration Transmission Service or successor service
designation can be used to accept and deliver the electric energy pursuant to
the highest firm transmission priority of such Transmission Provider; or
(iii) satisfy the standards of any successor Transmission Provider that might
have the right to determine the standards for character of service and firmness
of supply,

 

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including standards that may require the designation of specific capacity
sources, under which EMC may designate the PPA, such that the requirements of
the highest firm transmission priority are met under its Network Integration
Transmission Service Agreement (or as the nearest equivalent thereto remains
available to EMC under the successor Transmission Provider’s requirements).

“Firm Sales” means wholesale electric sales other than Non-Firm Sales.

“Fitch Rating” means Fitch, Inc., a unit of Fimalac, S.A.

“Fixed Forward Resource” or “FFR Resource” means EMC’s contractual entitlements
to electric capacity and energy under the PPA.

“Force Majeure” shall have the meaning specified in Section 16.4.

“Fuel Rate”, with respect to the period January 1, 2007, through December 31,
2010, shall have the meaning specified in Section 7.2.3.1, and with respect to
the period beginning January 1, 2011, and continuing through the termination of
this Agreement, shall have the meaning specified in Section 7.3.3.1.

“Government” means the United States government.

“Governmental Authority” means any federal, state, local or other governmental,
regulatory or administrative agency, court, commission, department, board, or
other governmental subdivision, legislature, rulemaking board, court, tribunal,
arbitrating body, government-owned corporation or other governmental authority
or department thereof.

“Governmental Charges” means all taxes, fees, assessments and other charges
imposed by any Governmental Authority.

“Hour” means one of the twenty-four (24) clock hours in a Day.

“Hourly Fuel Charge”, with respect to the period January 1, 2007, through
December 31, 2010, shall have the meaning specified in Section 7.2.3.1, and with
respect to the period beginning January 1, 2011, and ending on the termination
of this Agreement, shall have the meaning specified in Section 7.3.3.1.

“Hourly Inter-EMC Transfer Reconciliation Charge” shall have the meaning
specified in Section 7.1.5.13.

“Hourly Variable O&M Charge”, with respect to the period January 1, 2007,
through December 31, 2010, shall have the meaning specified in Section 7.2.3.2,
and with respect to the period beginning January 1, 2011, and ending on the
termination of this Agreement, shall have the meaning specified in
Section 7.3.3.2.

“Initial Term” shall have the meaning specified in Section 2.2.1.

“Impasse Notice” shall have the meaning specified in Section 14.2.

 

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“Interest Expense” shall have the meaning specified in Section 15.7.

“Interest Rate” means either (i) the Prime Rate plus two (2%) percent, or
(ii) the maximum lawful rate permitted by applicable Law, whichever is less.

“Interval” shall have the meaning specified in Sections 7.1.5.9 and 7.1.5.10, as
applicable.

“ITC” means an independent transmission company.

“ISO” means an independent system operator.

“kWh” means kilowatt-hour, a unit of electric energy.

“kW” means kilowatt.

“Law” means any law, rule, regulation, order, writ, judgment, decree, or other
legal or regulatory determination by a court, regulatory agency, or other
Governmental Authority of competent jurisdiction.

“Legal Proceeding” means any suit, hearing, or proceeding by or before any court
or any Governmental Authority.

“Light Load Periods” means any Hour during which EMC’s Base Obligation is
reduced because certain of its entitlements to electric capacity and energy
under the WPSA are reduced as a result of NCEMC’s Native Load in either of the
CP&L east or west Control Areas or Duke Control Area being insufficient to
permit NCEMC to have access to its full contractual entitlement to electric
capacity and energy from certain generation or purchased power resources.

(i) For each Hour beginning with the Commencement Date and continuing through
December 31, 2010, or any portion thereof in which this Agreement is in effect,
Light Load Periods in the CP&L east and west Control Areas, only occur when
NCEMC’s Native Load in such CP&L east and west Control Area is less than the
contractual amount specified in the Service Obligation Resources (“SORs”). The
amount of any reduction in NCEMC’s entitlement to electric capacity and energy
under the SORs is allocated to EMC in accordance with the WPSA. In the Duke
Control Area, Light Load Periods only occur when a generating unit at either the
Catawba Nuclear Station or the McGuire Nuclear Station is off-line or de-rated
and NCEMC’s Native Load in the Duke Control Area is less than 623.5 MWs. The
amount of any reduction in NCEMC’s entitlement to electric capacity and energy
is allocated to EMC in accordance with the WPSA.

(ii) For each Hour beginning January 1, 2011, and continuing through the
termination of this Agreement, Light Load Periods only occur when a generating
unit at either the Catawba Nuclear Station or the McGuire Nuclear Station is
off-line or de-rated and NCEMC’s Native Load in the Duke Control Area is less
than 623.5 MWs. The amount of any reduction in NCEMC’s entitlement to electric
capacity and energy is allocated to EMC in accordance with the WPSA.

 

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“Material Adverse Change” or “MAC” shall have the meaning specified in
Section 15.2.

“Material Adverse Ruling” shall have the meaning specified in
Section 2.3.2.2(c).

“Material Adverse Ruling Termination Date” shall have the meaning specified in
Section 2.3.2.2.

“Maximum Demand Hour” shall have the meaning specified in Section 7.1.4.3.

“McGuire Nuclear Station” means that certain nuclear plant located in
Huntersville, North Carolina.

“Month” means a calendar month, commencing at one (1) minute prior to 12:01 a.m.
Eastern Time on one of January 1, February 1, March 1, April 1, May 1, June 1,
July 1, August 1, September 1, October 1, November 1 or December 1 and ending at
one (1) minute after 11:59 Eastern Time of the succeeding January 31,
February 28 or 29 (during a leap year), March 31, April 30, May 31, June 30,
July 31, August 31, September 30, October 31, November 30 or December 31.

“Monthly” shall have a meaning correlative to that of Month.

“Monthly Billing Demand”, with respect to the period January 1, 2007, through
December 31, 2010, shall have the meaning specified in Section 7.2.2.2, and with
respect to the period beginning January 1, 2011, and continuing through the
termination of this Agreement, shall have the meaning specified in
Section 7.3.2.2.

“Monthly Demand Amount” means the quantity specified in Section 7.1.4.

“Monthly Demand Charge” means, with respect to the period beginning on the
Commencement Date and continuing through December 31, 2006, the charge set forth
in Section 7.1.4; with respect to the period January 1, 2007, through
December 31, 2010, the charge set forth in Section 7.2.2; and with respect to
the period beginning January 1, 2011, and continuing through the termination of
this Agreement, the charge set forth in Section 7.3.2.

“Monthly Demand Rate”, with respect to the period beginning on the Commencement
Date and continuing through December 31, 2006, shall have the meaning specified
in Section 7.1.4; with respect to the period January 1, 2007 through August 31,
2008, shall have the meaning specified in Section 7.2.2.1, except as provided in
Sections 3.5.2.3.1, 3.5.2.3.2 and 3.5.2.3.3; with respect to the period
September 1, 2008, through December 31, 2010, shall have the meaning specified
in Section 7.2.2.1; and with respect to the period beginning January 1, 2011,
and continuing through the termination of this Agreement, shall have the meaning
specified in Section 7.3.2.1.

“Monthly Fuel Charge”, with respect to the period January 1, 2007, through
December 31, 2010, shall have the meaning specified in Section 7.2.3.1, and with
respect to the period beginning January 1, 2011, and continuing through the
termination of this Agreement, shall have the meaning specified in
Section 7.3.3.1.

 

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“Monthly Inter-EMC Energy Transfer Reconciliation Charge” shall have the meaning
specified in Section 7.1.5.13.

“Monthly Replacement Energy Charge” shall have the meaning specified in
Section 4.2.4.

“Monthly Reserve Capacity Charge” shall have the meaning specified in
Section 7.4.

“Monthly Scheduling Agent Service Charge” shall have the meaning specified in
Section 7.1.6.

“Monthly Variable O&M Charge”, with respect to the period January 1, 2007,
through December 31, 2010, shall have the meaning specified in Section 7.2.3.2,
and with respect to the period beginning January 1, 2011, and ending on the
termination of this Agreement, shall have the meaning specified in
Section 7.3.3.2.

“Moody’s” means Moody’s Investors Services, Inc.

“MSCG” means Morgan Stanley Capital Group Inc.

“MWh” means megawatt-hour, a unit of electric energy.

“MW” means megawatt.

“NCEMC” shall have the meaning specified in the Recitals of this Agreement.

“NCEMC Native Load” means the electric and energy demands imposed on NCEMC by
its members for resale to such members’ retail customers, and shall include
wholesale sales of electric capacity and energy by Blue Ridge to New River
except wholesale sales of electric capacity and energy made in accordance with
Section 4.4.1 of this Agreement.

“NCEMC Policies” shall have the meaning specified in Section 8.2.

“NCUC” means the North Carolina Utilities Commission or any successor agency
with jurisdiction to regulate retail electric service in the State of North
Carolina.

“Negotiation Period” shall have the meaning specified in Section 14.2.

“NERC” means the North American Electric Reliability Council.

“Network Integration Transmission Service” means Network Integration
Transmission Service provided under the OATT.

“Network Integration Transmission Service Agreement” or “NITSA” means that
certain agreement for Network Integration Transmission Service, as amended from
time to time, executed by EMC and Transmission Provider.

 

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“Network Operating Agreement” or “NOA” means that certain agreement, as amended
from time to time, executed by EMC and Transmission Provider in conjunction with
the Network Integration Transmission Service Agreement.

“Network Resource” shall have the meaning specified in the OATT.

“Neutral Auditors” shall have the meaning specified in Section 2.3.2.2.2.

“New River” means Appalachian State University d/b/a New River Light & Power
Company or any successor thereto.

“Nomination” means the notification provided by MSCG to the Scheduling Agent of
the sources and specific amounts of electric energy under the WPSA and SEPA
Contract that MSCG desires EMC to make available in accordance with the terms
and conditions of the PPA.

“Non-Claiming Party” shall have the meaning specified in Section 16.4.

“Non-Conforming Load” shall have the meaning specified in Section 4.4.

“Non-Defaulting Party” shall have the meaning specified in Section 16.5.1.

“Non-Duke Control Area Load” means load that is located in a Control Area other
than the Duke Control Area, including load that is physically located in the
Duke Control Area but telemetered for Control Area purposes to another Control
Area.

“Non-Firm Sales” means wholesale electric sales for which the delivery of
electric energy may be interrupted, curtailed or terminated for any reason
without any liability to Duke (other than charges imposed for changes to
schedules for the sale of electric energy).

“Notice of Termination” means a written notice to terminate this Agreement under
Sections 2.2 or 2.3 that conforms to the requirements set forth in
Section 2.3.3.

“OATT” means the Open Access Transmission Tariff of the Transmission Provider on
file with FERC, or the successor transmission tariff (including the Open Access
Transmission Tariff of an RTO, ITC or ISO that is applicable to the Transmission
System), as either may be amended from time to time.

“Operating Committee” shall have the meaning specified in Section 10.1.

“Option Notice” shall have the meaning specified in Section 3.5.2.3.

“Option Period” shall have the meaning specified in Section 3.5.2.3.

“Original Notice” shall have the meaning specified in Section 14.2.

“Partial Requirements Agreements” means the Duke-Rutherford Agreement, the
Duke-Blue Ridge Agreement, and the Duke-Piedmont Agreement.

 

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“Partial Requirements Resources” means EMC’s contractual entitlements to
electric capacity and energy used to serve EMC’s Native Load during the period
commencing January 1, 2011, and continuing through the termination of this
Agreement, as specified in Section 5.2.

“Partial Requirements Service” shall have the meaning specified in Section 4.3.

“Party” and “Parties” shall have the meanings specified in the preamble of this
Agreement.

“Patronage Capital or Margins” shall have the meaning specified in Section 15.7.

“Piedmont” means Piedmont Electric Membership Corporation.

“Piedmont Energy Credit Amount” means the Piedmont Energy Credit Amount as
determined in Section 7.1.5.9 of the Duke-Piedmont Agreement.

“Piedmont Energy Purchase Amount” means the Piedmont Energy Purchase Amount as
determined in Section 7.1.5.9 of the Duke-Piedmont Agreement.

“Point of Interconnection” means the point of interconnection between the
Transmission Provider’s transmission and distribution facilities and EMC’s
system.

“PPA” means that certain Power Purchase Agreement by and between EMC and Morgan
Stanley Capital Group Inc. dated as of December 11, 2003, as amended from time
to time.

“Prime Rate” means, for any date, the per annum rate of interest announced from
time to time by Citibank, N.A. (or a suitable replacement agreed upon by the
Parties) as its “prime” rate for commercial loans, effective on the date payment
is due as established from time to time by such bank.

“Principal and Interest Expense” shall have the meaning specified in
Section 15.7.

“Prudent Utility Practice” means any of the practices, methods, and acts engaged
in or approved by a significant portion of the electric utility industry during
the relevant time period, or 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, could have been expected to accomplish the desired result at
a reasonable cost consistent with good business practices, reliability, safety,
and expedition. Prudent Utility Practice is not intended to be limited to the
optimum practice, method, or act to the exclusion of all others, but rather to
be acceptable practices, methods, or acts generally accepted in the electric
utility industry.

“PSCSC” means the Public Service Commission of South Carolina, or any successor
agency with jurisdiction to regulate retail electric service within the State of
South Carolina.

“Purchasing - Selling Entity” means that entity designated to the Transmission
Provider by EMC who, upon the effectiveness of such designation, is eligible to
purchase and sell energy and/or capacity and reserve transmission services on
behalf of EMC.

 

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“PURPA” means the Public Utilities Regulatory Policies Act, 16 U.S.C. §2601 et
seq. (2005), as amended, including amendments included in the Energy Policy Act
of 2005.

“PURPA Resource” shall have the meaning specified in Section 5.4.1.

“Qualifying Facility” means a facility that meets the standards under 18 C.F.R.
Part 292, Subpart B, as amended from time to time.

“Reconciliation Allocation Factor” shall be equal to the Reconciliation
Allocation Number divided by the sum of the Reconciliation Allocation Numbers as
set forth in this Agreement and in the Duke-Piedmont Agreement, and
Duke-Rutherford Agreement.

“Reconciliation Allocation Number” shall be equal to 39.85.

“Replacement Energy” shall have the meaning specified in Section 4.2.4.

“Representatives” means, with respect to a Party, such Party’s officers,
directors, employees, advisors, and representatives and such Party’s Affiliates
and their respective officers, directors, employees, advisors, and
representatives.

“Resolution Period” shall have the meaning specified in Section 2.3.2.2.2.

“Restricted Rentals” shall have the meaning specified in Section 15.7.

“RTO” means a regional transmission organization as that term is defined by
FERC.

“RUS” means the Rural Utilities Service of the United States Department of
Agriculture or any agency succeeding to the functions of RUS.

“Rutherford” means Rutherford Electric Membership Corporation.

“Rutherford Energy Credit Amount” means the Rutherford Energy Credit Amount as
determined in Section 7.1.5.9 of the Duke-Rutherford Agreement.

“Rutherford Energy Purchase Amount” means the Rutherford Energy Purchase Amount
as determined in Section 7.1.5.9 of the Duke-Rutherford Agreement.

“Scheduling Agent” means Duke acting as agent on behalf of EMC to perform
Scheduling Agent Services.

“Scheduling Agent Services” shall have the meaning specified in Article 8.

“Scheduling Services Agreement” means that certain Scheduling Services Agreement
by and between EMC and MSCG dated as of December 11, 2003, as amended.

“Scheduling Shortfall” shall have the meaning specified in Section 4.2.4.

“Scheduling Shortfall Amount” shall have the meaning specified in Section 4.2.4.

 

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“Selection Date” shall have the meaning specified in Section 14.5.

“SEPA” means the Southeastern Power Administration.

“SEPA Contract” means the Contract Executed by Blue Ridge and the United States
of America acting by and through the Southeastern Power Administration dated as
of May 2, 1997, as amended from time to time. The Parties agree that, for the
purposes of this Agreement, the SEPA Contract as in effect on the date hereof is
attached to a letter from EMC to Duke dated May 12, 2006.

“SEPA Entitlement” shall mean EMC’s entitlement to electric capacity and energy
under the SEPA Contract.

“SEPA Policies” shall have the meaning specified in Section 8.2.

“SERC” means the Southeastern Reliability Council.

“Service Area” means the area within a state or states within which an electric
utility provides retail electric service as determined under the applicable Laws
of such state or states.

“Service Obligation Resources” or “SORs” means those generation and purchased
capacity resources used by NCEMC to serve NCEMC’s members for resale to such
members’ retail customers, as such resources are specified in the Power Sales
Agreement Between Carolina Power & Light Company and North Carolina Electric
Membership Corporation dated as of November 2, 1998, as amended.

“Short Term Interest Expense” shall have the meaning specified in Section 15.7.

“S&P” or “Standard & Poor’s” means Standard & Poor’s Rating Group, a division of
McGraw Hill, Inc.

“Standard Arbitration Process” shall mean the arbitration process described in
Section 14.6.1.

“Streamlined Arbitration Process” shall mean the arbitration process described
in Section 14.6.2.

“Submission” or “Submissions” shall have the meaning specified in
Section 14.6.1(5).

“Substitute Energy” shall have the meaning specified in Section 6.4.

“Substitute Energy Costs” shall have the meaning specified in Section 6.5.

“Summer Period” means the period (as of the Commencement Date May 1 –
September 30) designated as the summer period in the then most recent Duke
Annual Plan.

“System Incremental Cost” means the incremental expense, measured in dollars per
megawatt hour ($/MWh), incurred by Duke to supply the next megawatt-hour (MWh)
of electric energy, after serving Duke’s Native Load customers’ requirements,
and all other opportunity

 

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sales, during any Hour in which electric energy is purchased by EMC. System
Incremental Cost shall include the replacement cost of fuel, fuel handling
expense, variable operating and maintenance expense, emissions allowance
replacement costs and other environmental compliance costs, the cost of starting
and operating any generating units (including costs incurred due to minimum
runtimes or loading levels), and other appropriate electric energy-related
costs, including electric energy purchases from others, interchange power costs,
and allocations of unit commitment costs, if any, all as determined prior to the
Hour.

“Term” means the term of this Agreement determined in accordance with
Section 2.2.3.

“Termination Assistance Service” shall have the meaning specified in
Section 8.10.

“Territorial Decremental Cost” means the decrease in Duke’s expenses, measured
in dollars per megawatt hour ($/MWh), in supplying Duke’s Native Load customers’
requirements due to Duke’s purchase of electric energy supplied by EMC.
Territorial Decremental Cost shall include the reduction in fuel expense, fuel
handling expense, variable operating and maintenance expense, emissions
allowance replacement costs and other environmental compliance costs, the cost
of starting and operating any generating units (including costs incurred due to
minimum runtimes or loading levels), and other appropriate energy-related costs,
including electric energy purchases from others, interchange power costs, and
allocations of unit commitment costs, if any, all as determined prior to the
Hour.

“Territorial Incremental Cost” means the incremental expense, measured in
dollars per megawatt hour ($/MWh), incurred by Duke to supply the next
megawatt-hour (MWh) of electric energy after serving Duke’s Native Load
customers’ requirements, during any Hour in which electric energy is purchased
by EMC. Territorial Incremental Cost shall include the replacement cost of fuel,
fuel handling expense, variable operating and maintenance expense, emissions
allowance replacement costs and other environmental compliance costs, the cost
of starting and operating any generating units (including costs incurred due to
minimum runtimes or loading levels), and other appropriate electric
energy-related costs, including electric energy purchases from others,
interchange power costs, and allocations of unit commitment costs, if any, all
as determined prior to the Hour.

“Times Interest Earned Ratio” or “TIER” shall have the meaning specified in
Section 15.7.

“Transmission Provider” means any entity transmitting electric energy provided
by Duke under this Agreement to the EMC distribution system, and shall include
any ISO, RTO, ITC, or other future organization, agency or authority that has
been approved by FERC to serve as the Transmission Provider.

“Transmission Service” means the service provided by a Transmission Provider to
EMC pursuant to which electric energy provided under this Agreement is delivered
from the Delivery Point to EMC’s distribution system.

“Transmission System” means the electric transmission system owned or leased and
operated by Duke Transmission.

 

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“Variable O&M Rate”, with respect to the period January 1, 2007, through
December 31, 2010, shall have the meaning specified in Section 7.2.3.2, and with
respect to the period beginning January 1, 2011, and continuing through the
termination of this Agreement, shall have the meaning specified in
Section 7.3.3.2.

“Weekday” means Monday, Tuesday, Wednesday, Thursday or Friday, excluding days
recognized as holidays by NERC.

“Weekend Day” means Saturday or Sunday, and all days recognized as holidays by
NERC.

“Winter Period” means the period (as of the Commencement Date October 1 –
April 30) designated as the winter period in the then most recent Duke Power
Annual Plan.

“WPSA” means the Wholesale Power Supply Agreement by and between North Carolina
Electric Membership Corporation and EMC dated as of January 1, 2004, as amended
from time to time. The Parties agree that, for the purposes of this Agreement,
the WPSA as in effect on the date hereof is attached to a letter from EMC to
Duke dated May 12, 2006.

“Year” means a calendar year.

1.2 Interpretation. In this Agreement, unless the context otherwise requires,
the singular shall include the plural and any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words “hereof,”
“herein,” “hereto” and “hereunder” and words of similar import when used in this
Agreement shall, unless otherwise expressly specified, refer to this Agreement
as a whole and not to any particular provision of this Agreement. Whenever the
terms “include,” “includes,” or “including” are used herein in connection with a
listing of items included within a prior reference, such listing shall be
interpreted to be illustrative only, and shall not be interpreted as a
limitation on or exclusive listing of the items included within the prior
reference. Any reference in this Agreement to “Section,” “Article,” “Schedule,”
or “Attachment” shall be references to this Agreement unless otherwise stated,
and all such Sections, Articles, Schedules, and Attachments shall be
incorporated in this Agreement by reference. In the event that any index or
publication referenced in this Agreement ceases to be published, each such
reference shall be deemed a reference to a successor or alternate index or
publication reasonably agreed to by the Parties. Unless specified otherwise, a
reference to a given agreement or instrument, and all schedules and attachments
thereto, shall be a reference to that agreement or instrument as modified,
amended, supplemented and restated, and in effect from time to time. Unless
otherwise stated, any reference in this Agreement to any entity shall include
its permitted successors and assignees, and in the case of any Governmental
Authority, any person succeeding to its functions and capacities. All dollar
amounts referred to in this Agreement shall be in U.S. currency.

1.3 Construction. The Parties acknowledge that each was actively involved in the
negotiation and drafting of this Agreement and that no Law or rule of
construction shall be raised or used in which the provisions of this Agreement
shall be construed in favor of or against either Party because one is deemed to
be the author thereof.

 

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Article 2

Term

 

2.1 Effectiveness.

2.1.1 Effectiveness of this Agreement. This Agreement shall become effective
upon execution and delivery by the Parties (“Effective Date”) provided that
obligations of the Parties to purchase and sell electric capacity and energy and
to provide Scheduling Agent Services shall commence, on the later to occur of
(a) September 1, 2006 or (b) the date upon which service commences in accordance
with Section 3.5.1.2 or Section 3.5.2.1 (the “Commencement Date”), provided that
the Commencement Date shall be the first Day of the Month.

2.1.2 Governmental Approval.

2.1.2.1 Duke shall take appropriate steps within five (5) Business Days from the
Effective Date to file this Agreement, together with supporting documents, with
FERC pursuant to the requirements of the Federal Power Act. Thereafter, Duke
shall diligently pursue acceptance of this Agreement as a rate schedule by FERC
and shall keep EMC informed of the progress in such regard. If requested by
Duke, EMC shall undertake Commercially Reasonable Efforts to cooperate with and
assist Duke in Duke’s efforts to make this Agreement effective and, upon Duke’s
request, shall make a timely submittal at FERC affirmatively supporting the
acceptance or approval of this Agreement by FERC without modification,
suspension, investigation, or other condition.

2.1.2.2 EMC shall take appropriate steps within five (5) Business Days from the
Effective Date to submit this Agreement, together with supporting documents, to
the RUS. Thereafter, EMC shall diligently pursue approval of this Agreement by
the RUS and shall keep Duke informed of the progress in such regard. If
requested by EMC, Duke shall undertake Commercially Reasonable Efforts to
cooperate with and assist EMC in EMC’s efforts to obtain RUS approval of this
Agreement and, upon EMC’s request, shall make a timely submittal at RUS
affirmatively supporting the approval of this Agreement without modification or
condition.

 

2.2 Term.

2.2.1 Initial Term. The initial term of this Agreement shall commence on the
Effective Date and shall continue through 23:59:59, Eastern Time, on
December 31, 2021 (“Initial Term”) unless this Agreement is terminated prior to
December 31, 2021, in accordance with Sections 2.3.2, 3.5.2.2 or 3.5.3.

2.2.2 Extension. Unless terminated in accordance with Sections 2.3, 3.5.2.2 or
3.5.3, the Term of this Agreement shall automatically renew and extend for an
additional term of ten (10) Years (each such extension being an “Extension
Term”), so that unless either Party gives Notice of Termination in accordance
with Section 2.3, the Term of this Agreement shall extend through 23:59:59,
Eastern Time, on December 31, 2031. Likewise, unless either Party gives Notice
of Termination in accordance with Section 2.3, the Term of this Agreement shall
extend through 23:59:59 Eastern Time on December 31, 2041; and so forth
thereafter in ten (10) Year increments.

 

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2.2.3 Term. The Initial Term of this Agreement together with each Extension
Term, if any, shall constitute the “Term” of this Agreement during which Duke
shall provide either FFR Supplemental Service or Partial Requirements Service,
as applicable, and Scheduling Agent Services to EMC.

 

2.3 Termination.

2.3.1 Termination of the Initial or an Extension Term. Either Party may
terminate this Agreement at the end of the Initial Term by giving Notice of
Termination to the other Party as specified in Section 2.3.3 at least three
(3) Years prior to the end of the Initial Term, so that such notice is given no
later than December 31, 2018. If the Term is extended beyond the Initial Term
pursuant to Section 2.2.2, either Party may terminate this Agreement at the end
of the then-current Extension Term by providing Notice of Termination to the
other Party as specified in Section 2.3.3 at least three (3) Years prior to the
end of such Extension Term, so that such notice is given no later than
December 31, 2028, for the Extension Term ending December 31, 2031, and so forth
thereafter.

2.3.2 Early Termination. Notwithstanding the provisions of Section 2.3.1, early
termination of this Agreement, including any Extension Term, shall only be
permitted in the six (6) circumstances set out in Sections 2.3.2.1, 2.3.2.2,
2.3.2.3, 2.3.2.4, 2.3.2.5 and 2.3.2.6.

2.3.2.1 Early Termination for an Event of Default. In the event that an Event of
Default occurs, and the Defaulting Party fails to cure such Event of Default
within the time period(s) specified in Section 16.5.3, the Non-Defaulting Party
may terminate this Agreement upon giving thirty (30) Days’ Notice of
Termination, provided that the termination date shall be the last Day of a
Month.

2.3.2.2 Early Termination for a Material Adverse Ruling. In the event that a
Material Adverse Ruling occurs, the Party affected by such Material Adverse
Ruling may, within twenty (20) Days after such Material Adverse Ruling occurs,
give the other Party Notice of Termination, in accordance with Section 2.3.3, of
its intent to terminate this Agreement effective on 23:59:59 of the last Day of
the Month that is twenty-four (24) Months after the Month in which the Notice of
Termination is given. Such termination date shall be referred to herein as the
“Material Adverse Ruling Termination Date.” If a Party fails to give Notice of
Termination within twenty (20) Days after a Material Adverse Ruling occurs, it
shall have permanently waived its right to terminate this Agreement due to such
Material Adverse Ruling pursuant to this Section 2.3.2.2. Termination pursuant
to this Section 2.3.2.2 shall be subject to the following procedures:

(a) During the ninety (90) Days immediately following the giving of the Notice
of Termination, the Parties shall attempt to negotiate amendments to this
Agreement that would permit the Parties to restore the equivalent value of the
economic bargain contemplated by this Agreement absent the Material Adverse
Ruling. If the Parties reach agreement, such amendments will not become
effective unless, within one

 

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hundred eighty (180) Days of the date that the Notice of Termination is given,
the Parties have obtained the necessary approvals of Governmental Authorities to
enable the amendments to become effective without change, condition or
modification. In the event that the Parties fail (i) to reach agreement on such
amendments, or (ii) to obtain the necessary approvals of Governmental
Authorities, this Agreement shall terminate on the Material Adverse Ruling
Termination Date, subject to the provisions of Section 2.3.2.2(b) and 2.3.2.2.2.

(b) In the event that the Parties are unable to reach agreement on the
amendments provided in Section 2.3.2.2(a), either Party may, no later than
ninety (90) Days after the date that the Notice of Termination is given (or, if
earlier, the date that the Parties mutually agree that they are unable to reach
agreement on such amendments), give notice to the other Party of its desire to
extend this Agreement for a period of up to twelve (12) Months beyond the
Material Adverse Ruling Termination Date. Such extension will be subject to the
Parties (i) having first reached agreement upon the rates, terms and conditions
of service for such twelve (12) Month period within one hundred twenty
(120) Days of the date that the Notice of Termination is given and executing
such agreement within such one hundred twenty (120) Day period, and (ii) having
received from Governmental Authorities the necessary approvals for such rates,
terms and conditions without change, condition or modification within one
hundred eighty (180) Days of the date that the Notice of Termination is given.

(c) A “Material Adverse Ruling” is an order or action by a Governmental
Authority or a change in Law that (i) either (A) modifies the rates, terms, or
conditions of this Agreement, (B) disallows the recovery from EMC of costs that
are included in this Agreement, (C) for retail ratemaking or regulatory
accounting and reporting purposes, disallows costs related to this Agreement,
including any disallowance of Duke’s costs related to investments in generating
facilities or binding contracts to purchase electric capacity and energy to
provide service to EMC under this Agreement, or (D) for retail ratemaking or
regulatory accounting and reporting purposes, assigns, allocates or makes pro
forma adjustments with respect to the revenues or costs related to this
Agreement, and (ii) adversely affects the relative economic position of either
Party in a material way. For purposes of this definition only,

(1) “material” for Duke means that the effect of the order or action by the
Governmental Authority or change in Law is reasonably projected to decrease
Duke’s net revenues under this Agreement, or, in the case of a disallowance,
assignment, allocation, or pro forma adjustment of revenues or costs for retail
ratemaking or regulatory accounting or reporting purposes, either (i) decrease
Duke’s net costs or increase Duke’s net revenues assigned or allocated to Duke’s
retail customer classes, or (ii) increase Duke’s net costs or decrease Duke’s
net revenues assigned or allocated to Duke’s wholesale customer class, by an
aggregate amount equal to five percent (5%) or more of the total revenues to be
paid by EMC to Duke under this Agreement over the then-remaining Term;

(2) “material” for EMC means that the effect of the order or action by the
Governmental Authority or change in Law is reasonably projected to increase

 

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EMC’s net costs under this Agreement by an amount equal to five percent (5%) or
more of the total revenues to be paid by EMC to Duke under this Agreement over
the then-remaining Term;

(3) an increase in a Party’s net costs is the increase in the Party’s costs as a
result of the order or action by the Governmental Authority or change in Law,
less the increase (if any) in the Party’s revenues as a result of the Material
Adverse Ruling; and

(4) a decrease in a Party’s net revenues is the decrease in the Party’s revenues
as a result of the order or action by the Governmental Authority or change in
Law, less the decrease (if any) in the Party’s costs as a result of the Material
Adverse Ruling.

(d) The foregoing amounts shall be calculated on a nominal rather than an
inflation adjusted or present value basis. Without limitation of the foregoing,
EMC acknowledges that, for retail ratemaking and regulatory accounting and
reporting purposes, Duke shall calculate the costs of the electric capacity and
energy used to serve EMC under this Agreement on a system average cost basis
beginning January 1, 2007. EMC agrees that if the amount of costs that the NCUC
or the PSCSC in effect assigns or allocates to, or requires Duke to assign or
allocate to, this Agreement for ratemaking or regulatory accounting and
reporting purposes exceeds Duke’s system average costs, such action shall
constitute a Material Adverse Ruling if the five percent (5%) materiality
standard set forth above is met.

2.3.2.2.1 A change in Duke’s net revenues or EMC’s net costs that results from a
change in this Agreement that is permitted under Section 12.3, shall not
constitute a Material Adverse Ruling regardless of the impact of such change on
either Party’s net costs or net revenues.

2.3.2.2.2 In the event that either Party believes that a Material Adverse Ruling
has occurred, the Party affected by such Material Adverse Ruling shall provide
the other Party a good faith calculation together with information supporting
the calculation of the projected effect of the Material Adverse Ruling and
include such calculation and the cost information supporting the calculation
with the Notice of Termination. If the non-terminating Party notifies the other
Party, within twenty (20) Days following the date that such Notice of
Termination is given, of its good faith objection to the calculation or the cost
information supporting the calculation of the projected effect of the Material
Adverse Ruling, then the Parties shall, within thirty (30) Days following the
date that such Notice of Termination is given (the “Resolution Period”), attempt
to resolve their differences with respect to the calculation or the cost
information supporting such calculation. If, at the conclusion of the Resolution
Period, the Parties are not in agreement with respect to the calculation or cost
information supporting the calculation, then PriceWaterhouseCoopers, or such
other nationally recognized accounting firm that is not then the independent
auditor for either Party or any of its Affiliates or predecessors and is
selected by mutual agreement of the Parties (the “Neutral Auditors”), shall be
engaged within ten (10) Days after the expiration of the Resolution Period to
review the calculation and the cost information supporting the calculation and
to make an independent determination as to

 

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whether the Material Adverse Ruling meets the materiality standard set forth in
Section 2.3.2.2(c)(1) or (c)(2), as applicable. If the Neutral Auditors require
any additional information, records, or internal analysis to make a
determination as to whether the Material Adverse Ruling meets the materiality
standard set forth in Section 2.3.2.2(c)(1) or (c)(2), as applicable, the Party
in possession of such information, records or internal analysis will provide it
to the Neutral Auditors. Each Party agrees to execute, if requested by the
Neutral Auditors, a reasonable engagement letter, including customary
indemnities. All fees and expenses relating to the work to be performed by the
Neutral Auditors shall be borne one-half (1/2) by the terminating Party and
one-half (1/2) by the non-terminating Party. The Neutral Auditors shall act as
an arbitrator to determine, based upon its independent review, whether the
Material Adverse Ruling meets the materiality standard set forth in
Section 2.3.2.2(c)(1) or (c)(2), as applicable. The Neutral Auditors’
determination shall be made within thirty (30) Days of their selection, shall be
set forth in a written statement delivered to both Parties and shall be final,
binding and conclusive. If the Neutral Auditors’ determine the materiality
standard set forth in Section 2.3.2.2(c)(1) or (c)(2), as applicable, is not
met, the Notice of Termination shall be null and void. If the Neutral Auditors’
determine the materiality standard set forth in Section 2.3.2.2(c)(1) or (c)(2),
as applicable, is met, the Notice of Termination shall be effective in
accordance with its terms. The initiation of the dispute resolution process
described in this Section 2.3.2.2.2, shall not toll or otherwise delay running
of the twenty-four (24) Month time period set forth in the Notice of
Termination, unless the Neutral Auditors’ find that the materiality standard set
forth in Section 2.3.2.2(c)(1) or (c)(2), as applicable, is not met. The
procedure set forth in this Section 2.3.2.2.2 shall be the exclusive means for
the Parties to resolve any dispute as to whether a Material Adverse Ruling meets
the materiality standard set forth in Section 2.3.2.2(c)(1) or (c)(2). If a
Party gives a Notice of Termination based on its good faith contention of the
occurrence of a Material Adverse Ruling that meets the materiality standard set
forth in Section 2.3.2.2(c)(1) or (c)(2), as applicable, and the Neutral
Auditors subsequently determine that such materiality standard has not been met,
such Party shall not be in default under this Agreement solely because it gave
such Notice of Termination.

2.3.2.3 Early Termination for Failure of Condition Precedent. This Agreement may
be terminated for failure of a condition precedent in accordance with
Section 3.5.2.2 or Section 3.5.3.

2.3.2.4 Early Termination Due to Implementation of Retail Competition. Upon the
date of enactment of a Law providing for implementation of retail electric
service competition on a comprehensive basis in the State of North Carolina, the
Parties shall enter into negotiations with the goal of reaching agreement on
amendments to this Agreement to provide for the continuation of the purchase and
sale of electric capacity and energy and the provision of Scheduling Agent
Services provided for in this Agreement after the commencement of such retail
electric service competition. If the Parties are not able to reach agreement by
the latter to occur of (i) the date that is ninety (90) Days after the date of
enactment of such Law or (ii) the date that is twenty-four (24) Months prior to
the commencement of such retail electric service competition in the State of
North Carolina, then this Agreement shall terminate automatically on the date
such retail electric service competition commences in the State of North
Carolina without the need for either Party to give notice.

 

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2.3.2.5 Early Termination Due to Plant Calculation. In the event that the Annual
Percentage calculated in Attachment 7-9 is positive for two (2) consecutive
Years, and the absolute value of such percentage is greater than ten percent
(10%) then EMC may, within twenty (20) Days after the date in such second
(2nd) consecutive Year that Duke provides the calculation of the Annual
Percentage pursuant to Section 7.3.2.4, give Duke Notice of Termination to
terminate this Agreement effective on 23:59:59 of the last Day of Month that is
twenty-four (24) Months after the Month in which the Notice of Termination is
given. In the event that the Annual Percentage calculated in Attachment 7-9 is
negative for two (2) consecutive Years, and the absolute value of such
percentage is greater than ten percent (10%) for any two (2) consecutive Years,
then Duke may, within twenty (20) Days after the date in such second
(2nd) consecutive Year that Duke provides the calculation of the Annual
Percentage pursuant to Section 7.3.2.4, give EMC Notice of Termination to
terminate this Agreement effective on 23:59:59 of the last Day of Month that is
twenty-four (24) Months after the Month in which the Notice of Termination is
given. If a Party fails to give Notice of Termination within twenty (20) Days
after Duke provides the calculation of the Annual Percentage pursuant to
Section 7.3.2.4 for such second (2nd) consecutive Year, it shall have
permanently waived its right to terminate this Agreement under this
Section based on the Annual Percentage for such two (2) consecutive Years;
provided, that nothing in this Section 2.3.2.5 shall affect any Party’s
termination rights under Sections 2.3.2.1, 2.3.2.2, 2.3.2.3, 2.3.2.4 or 2.3.2.6.

2.3.2.6 Early Termination Due to Extended Force Majeure. If, as a result of an
event of Force Majeure, a Party is unable to meet a material obligation
hereunder for a period greater than ninety (90) Days, then the Non-Claiming
Party shall have the right to terminate this Agreement upon giving a Notice of
Termination within thirty (30) Days of the expiration of such ninety (90) Day
period; provided, however, if the Claiming Party has used and continues to use
all Commercially Reasonable Efforts to remedy, cure or mitigate the event of
Force Majeure, then the Non-Claiming Party’s right to give Notice of Termination
shall be suspended for so long as the Claiming Party continues to use
Commercially Reasonable Efforts to remedy, cure or mitigate the event of Force
Majeure.

2.3.3 Form of Notice of Termination. Notice of Termination made pursuant to
Sections 2.2 or 2.3 shall be given in accordance with Section 16.22 and shall
state (i) the date of termination being effectuated, and (ii) the provision of
this Agreement under which termination is being effectuated and the basis for
the termination. Except as otherwise provided in this Section 2.3.3, the Notice
of Termination is effective when it is deemed given in accordance with
Section 16.22. Once the Notice of Termination is given to a Party, it shall not
be deemed amended, modified, or otherwise revoked for any reason (other than a
determination by the Neutral Auditors pursuant to Section 2.3.2.2.2 that the
materiality standard is not met) unless such amendment, modification, or
revocation is mutually agreed to by both Parties in writing or unless the
Parties reach agreement in accordance with Section 2.3.2.2(a). Upon receipt of
the Notice of Termination, the non-terminating Party shall acknowledge receipt
in writing sent in accordance with Section 16.22 within five (5) Business Days
of the receipt of the Notice of Termination. Acknowledgment of a Notice of
Termination is a courtesy and shall not influence the effectiveness of the
termination. Failure to utilize a method specified in Section 16.22 shall not
influence the effectiveness of the termination if the Notice of Termination is
actually received by the Chief Executive Officer of the non-terminating Party
within thirty (30) Days of

 

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the date of the Notice of Termination, in which case the Notice of Termination
shall be effective on the date that the Notice of Termination is actually
received by the Chief Executive Officer of the non-terminating Party.

2.4 Absolute Nature of Termination. Both Parties hereby acknowledge, warrant,
and agree that TERMINATION OF THIS AGREEMENT FOR ANY REASON PROVIDED FOR AND
PERMITTED UNDER THIS AGREEMENT IS ABSOLUTE AND FOREVER EXTINGUISHES ANY AND ALL
OBLIGATIONS EXISTING UNDER THIS AGREEMENT FOR (A) DUKE TO PLAN OR PROCURE
RESOURCES TO SERVE EMC, OR TO PROVIDE ANY SERVICE OR PRODUCT TO EMC, (B) EMC TO
PURCHASE FROM AND PAY DUKE FOR ANY SERVICES OR PRODUCTS, (C) EMC TO PLAN OR
PROCURE RESOURCES TO SERVE DUKE, OR TO PROVIDE ANY SERVICE OR PRODUCT TO DUKE,
AND (D) DUKE TO PURCHASE FROM AND PAY EMC FOR ANY SERVICES OR PRODUCTS. Upon
termination of this Agreement in accordance with Section 2.2, 2.3, 3.5.2.2, or
3.5.3, each and every obligation of Duke to provide electric energy and capacity
and Scheduling Agent Services to EMC, and each and every right of EMC to
purchase electric energy and capacity and Scheduling Agent Services from Duke
shall cease as a matter of contract and neither Party shall claim or assert any
continuing right to continued performance, whether by “rollover,” as an
“evergreen” service, or in any other fashion based on this Agreement. By
entering into this Agreement, Duke does not commit, and shall not be deemed to
have committed, to plan its system to be able to provide any service to EMC
beyond the Term, and EMC agrees that it has no claim to any service beyond the
Term. EMC shall not at any time oppose any filing by Duke to cancel this
Agreement as a rate schedule under the Federal Power Act concurrently with, or
subsequently to, the termination of this Agreement as a contract in accordance
with Section 2.2, 2.3, 3.5.2.2, or 3.5.3. The Parties acknowledge, warrant, and
agree that it is the express intention of the Parties that no action by any
Governmental Authority may override the terms of this Section 2.4 of this
Agreement, and that should any Governmental Authority take any action purporting
to, or that might be claimed to, override the terms of this Section 2.4, either
directly or indirectly, EMC shall not make any claim or assert any right based
on or relying on such Governmental Authority action in any manner that conflicts
with or frustrates the terms of Section 2.4 of this Agreement.

Article 3

Conditions Precedent to the Commencement Date

3.1 Conditions Precedent to Duke’s Obligations. The obligation of Duke to
commence sales of electric energy and capacity and purchases of electric energy
and to provide Scheduling Agent Services under this Agreement is subject to the
satisfaction or waiver at least thirty (30) Days prior to the Commencement Date
(except that Duke may undertake certain preliminary activities in advance of the
Commencement Date) of the following conditions:

(a) The representations and warranties of EMC set forth in Sections 16.1.1 and
the covenants of EMC set forth in Section 16.1.2 shall be true and correct.

(b) FERC shall have issued an order accepting or approving this Agreement for
filing and permitting it to become effective as filed without modification,
suspension, investigation or other condition (including setting this Agreement,
or part thereof, for hearing) unacceptable to Duke.

 

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(c) Neither the NCUC nor the PSCSC shall have issued an Adverse Ruling. For
purposes of this Section 3.1(c) only, “Adverse Ruling” means an order or ruling
issued by the NCUC or PSCSC (i) which disapproves or rejects this Agreement, or
(ii) generally applicable to electric utilities subject to the jurisdiction of
the NCUC or PSCSC, as applicable, in which the NCUC or PSCSC disapproves or
rejects the use of system average cost accounting for wholesale contracts.

(d) SEPA shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent.

(e) NCEMC shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent.

(f) EMC shall have given notice to MSCG terminating the Scheduling Services
Agreement.

(g) The systems and operational equipment required for Duke to provide and
receive service under this Agreement have been installed or otherwise put in
place, tested satisfactorily, and are fully functional.

(h) Transmission Provider shall have received notice and acknowledged EMC’s
designation of Duke as EMC’s Scheduling Agent and Purchasing - Selling Entity.

(i) MSCG shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent and Purchasing - Selling Entity.

(j) The Parties shall have agreed upon procedures so that Duke may test whether
the EMC Demand Side Management Resource Programs meet the standards and
requirements specified for such programs under the rate schedule provisions or
riders for Duke’s Demand Side Resource Management Programs then-currently
approved and on file with the NCUC.

3.2 Conditions Precedent to EMC’s Obligations. The obligation of EMC to commence
purchases of electric energy and capacity and Scheduling Agent Services and
sales of electric energy under this Agreement is subject to the satisfaction or
waiver at least thirty (30) Days prior to the Commencement Date (except that EMC
may undertake certain preliminary activities in advance of the Commencement
Date) of the following conditions:

(a) The representations and warranties of Duke set forth in Section 16.1.1 and
the covenants of Duke set forth in Section 16.1.2 shall be true and correct.

(b) The RUS shall have approved this Agreement without modification, suspension,
investigation or other condition unacceptable to EMC.

 

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(c) SEPA shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent.

(d) NCEMC shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent.

(e) The Transmission Provider shall have qualified this Agreement as a Network
Resource.

(f) The systems and operational equipment required for EMC to provide and
receive service under this Agreement have been installed or otherwise put in
place, tested satisfactorily, and are fully functional.

(g) Transmission Provider shall have received and acknowledged EMC’s designation
of Duke as Scheduling Agent and Purchasing - Selling Entity.

(h) MSCG shall have received notice and acknowledged EMC’s designation of Duke
as EMC’s Scheduling Agent and Purchasing - Selling Entity.

(i) The Parties shall have agreed upon procedures so that Duke may test whether
the EMC Demand Side Management Resource Programs meet the standards and
requirements specified for such programs under the rate schedule provisions or
riders for Duke’s Demand Side Resource Management Programs then-currently
approved and on file with the NCUC.

3.3 Notice of Satisfaction of Conditions Precedent. Each Party shall use
Commercially Reasonable Efforts to satisfy its conditions precedent (as
described in Section 3.1 for Duke and Section 3.2 for EMC) on or before July 31,
2006, or as soon as reasonably practicable thereafter. EMC shall provide Duke
with written notice promptly following the satisfaction or waiver of all of the
conditions precedent to EMC’s obligations as described in Section 3.2. Duke
shall provide EMC with written notice promptly following the satisfaction or
waiver of all of the conditions precedent to Duke’s obligations as described in
Section 3.1, other than the condition precedent specified in Section 3.1(f). In
order for the condition precedent specified in Section 3.1(f) to be satisfied,
subsequent to the later of the date of EMC’s receipt of Duke’s notice or the
date of Duke’s receipt of EMC’s notice, EMC shall, no later than thirty
(30) Days prior to the Commencement Date, give notice to MSCG that the
Scheduling Services Agreement shall be terminated on the Commencement Date. A
condition precedent shall not be deemed to have been satisfied or waived prior
to the date that the notice provided for in this Section 3.3 is received by the
other Party.

 

3.4 Waiver of Condition Precedent.

3.4.1 Waiver by Duke. In the event that any of the foregoing conditions to the
obligations of Duke contained in Section 3.1 shall fail to be satisfied, Duke
may elect, in its sole discretion, to consummate this Agreement despite such
failure, in which event Duke shall be deemed to have waived any claim for
damages, losses or other relief arising from or in connection with such failure,
unless otherwise agreed in writing and executed by the Parties. Duke may not
waive the condition of approvals set forth in Section 3.1(b).

 

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3.4.2 Waiver by EMC. In the event that any of the foregoing conditions to the
obligations of EMC contained in Section 3.2 shall fail to be satisfied, EMC may
elect, in its sole discretion, to consummate this Agreement despite such
failure, in which event EMC shall be deemed to have waived any claim for
damages, losses or other relief arising from or in connection with such failure,
unless otherwise agreed in writing and executed by the Parties. EMC may not
waive the condition of approvals set forth in Section 3.2(b).

3.4.3 Waiver by other Party. Any waiver by a Party of the other Party’s
conditions precedent shall be in writing, and shall identify the condition
precedent that such Party is waiving.

3.5 Commencement of Service; Failure of Condition Precedent.

3.5.1 Commencement of Service.

3.5.1.1 If all of the conditions precedent specified in Sections 3.1 and 3.2
have been satisfied or waived on or before July 31, 2006, then the Commencement
Date shall occur on September 1, 2006, without the need for either Party to
provide notice.

3.5.1.2 If all of the conditions precedent specified in Sections 3.1 and 3.2 are
satisfied or waived during the period between August 1, 2006, and November 30,
2006, and service under this Agreement has not commenced pursuant to
Section 3.5.2.1, then service under this Agreement shall commence upon the next
first Day of a Month which is at least thirty (30) Days after all such
conditions have been satisfied.

3.5.2 EMC Options.

3.5.2.1 If all of the conditions precedent specified in Sections 3.1 and 3.2,
with the exception of the conditions precedent specified in Section 3.1(b)
and/or Section 3.2(b), have been satisfied or waived, then EMC may designate
September 1, 2006, October 1, 2006, or November 1, 2006 as the Commencement Date
by giving at least thirty (30) Days’ prior written notice to Duke.

3.5.2.2 If service has commenced pursuant to Section 3.5.2.1 prior to
November 30, 2006, and the condition precedent specified in Section 3.1(b)
and/or Section 3.2(b) has not been satisfied on or before November 30, 2006,
then except as provided in Section 3.5.2.3 this Agreement will terminate
automatically on December 31, 2006, without the need for either Party to give
Notice of Termination and neither Duke nor EMC shall have any obligation, duty
or liability to the other arising hereunder under any claim or theory
whatsoever.

3.5.2.3 If service has commenced pursuant to Section 3.5.2.1 prior to
November 30, 2006, and the condition precedent specified in Section 3.1(b)
and/or Section 3.2(b) has not been satisfied on or before November 30, 2006,
then EMC shall have the option of continuing to receive service hereunder beyond
December 31, 2006 until either August 31, 2007, February 28, 2008, or August 31,
2008. EMC may exercise such option by giving notice to Duke of its exercise of
such option no later than December 1, 2006. Such notice shall be referred to
herein as the “Option Notice”. EMC’s Option Notice shall specify

 

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whether EMC elects to receive service hereunder until August 31,
2007, February 28, 2008, or August 31, 2008. The period of such service that EMC
elects pursuant to such option (whether January 1, 2007—August 31,
2007; January 1, 2007 – February 28, 2008; or January 1, 2007—August 31, 2008)
shall be referred to herein as the “Option Period”. In the event that EMC
exercises its option under this Section 3.5.2.3, then during the Option Period
EMC shall be subject to the charges and credits set forth in Sections 3.5.2.3.1,
3.5.2.3.2, 3.5.2.3.3, 3.5.2.3.4, and 3.5.2.3.5, as applicable, and in
Section 7.1 in lieu of the charges set forth in Section 7.2; provided, that
during the Option Period the demand charges set forth in Section 7.1.4 shall be
modified as set forth in Sections 3.5.2.3.1, 3.5.2.3.2, or 3.5.2.3.3, as
applicable, depending upon the Option Period selected by EMC. In the event that
EMC exercises its option under this Section 3.5.2.3, then notwithstanding the
provisions of Section 3.5.2.2, this Agreement will terminate automatically on
the last day of the Option Period, without the need for either Party to give
Notice of Termination and neither Duke nor EMC shall have any obligation, duty
or liability to the other arising hereunder under any claim or theory whatsoever
for service beyond such date. EMC’s exercise of such option shall not serve to
modify any other provision of the Agreement.

3.5.2.3.1 In the event that EMC exercises its option pursuant to
Section 3.5.2.3, and the Option Period is January 1, 2007 – August 31, 2007, EMC
shall pay to Duke, in addition to the other charges set forth in this Agreement,
the Base Annual Capacity Charge set forth in Section 3.5.2.3.4 and the Excess
Annual Capacity Charge set forth in Section 3.5.2.3.5. In such event, the Annual
Capacity Price under Section 3.5.2.3.4, Annual Capacity Quantity under
Section 3.5.2.3.4, and Excess Annual Capacity Price under Section 3.5.2.3.5
during the Option Period shall be as follows:

 

Annual Capacity Price

   $ 38.00/kW-Year

Annual Capacity Quantity

     42,000 kW

Excess Annual Capacity Price

   $ 45.60/kW-Year

In addition, the Monthly Demand Rate under Section 7.1.4 during the Option
Period shall be $5.45/kW-Month, rather than the rate specified in Section 7.1.4,
and the Duke Monthly Energy Charge and the EMC Monthly Energy Credit (and other
charges and credits under Section 7.1.5.11, 7.1.5.12, and 7.1.5.13) during the
Option Period shall be as set forth in Section 7.1.5.

3.5.2.3.2 In the event that EMC exercises its option pursuant to
Section 3.5.2.3, and the Option Period is January 1, 2007 – February 28, 2008,
EMC shall pay to Duke, in addition to the other charges set forth in this
Agreement, the Base Annual Capacity Charge set forth in Section 3.5.2.3.4 and
the Excess Annual Capacity Charge set forth in Section 3.5.2.3.5. In such event,
the Annual Capacity Price under Section 3.5.2.3.4, Annual Capacity Quantity
under Section 3.5.2.3.4, and Excess Annual Capacity Price under
Section 3.5.2.3.5 during the Option Period shall be as follows:

 

January 1, 2007 - December 31, 2007:

  

Annual Capacity Price

   $ 38.00/kW-Year

Annual Capacity Quantity

     42,000 kW

Excess Annual Capacity Price

   $ 45.60/kW-Year

January 1, 2008 – February 28, 2008:

  

Annual Capacity Price

     0

Annual Capacity Quantity

     0

Excess Annual Capacity Price

     0

 

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In addition, the Monthly Demand Rate under Section 7.1.4 during the Option
Period shall be $5.45/kW-Month during 2007 and $5.75/kW-Month during 2008,
rather than the rate specified in Section 7.1.4, and the Duke Monthly Energy
Charge and the EMC Monthly Energy Credit (and other charges and credits under
Section 7.1.5.11, 7.1.5.12, and 7.1.5.13) during the Option Period shall be as
set forth in Section 7.1.5.

3.5.2.3.3 In the event that EMC exercises its option pursuant to
Section 3.5.2.3, and the Option Period is January 1, 2007 – August 31, 2008, EMC
shall pay to Duke, in addition to the other charges set forth in this Agreement,
the Base Annual Capacity Charge set forth in Section 3.5.2.3.4 and the Excess
Annual Capacity Charge set forth in Section 3.5.2.3.5. In such event, the Annual
Capacity Price under Section 3.5.2.3.4, Annual Capacity Quantity under
Section 3.5.2.3.4, and Excess Annual Capacity Price under 3.5.2.3.5 during the
Option Period shall be as follows:

 

January 1, 2007 - December 31, 2007:

  

Annual Capacity Price

   $38.00/kW-Year

Annual Capacity Quantity

   42,000 kW

Excess Annual Capacity Price

   $45.60/kW-Year

January 1, 2008 – August 31, 2008:

  

Annual Capacity Price

   $40.00/kW-Year

Annual Capacity Quantity

   43,000 kW

Excess Annual Capacity Price

   $48.00/kW-Year

In addition, the Monthly Demand Rate under Section 7.1.4 during the Option
Period shall be $5.45/kW-Month during 2007 and $5.75/kW-Month during 2008,
rather than the rate specified in Section 7.1.4, and the Duke Monthly Energy
Charge and the EMC Monthly Energy Credit (and other charges and credits under
Section 7.1.5.11, 7.1.5.12, and 7.1.5.13) during the Option Period shall be as
set forth in Section 7.1.5.

 

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3.5.2.3.4 Base Annual Capacity Charge. The Base Annual Capacity Charge for a
Year shall be equal to the product of (i) the Annual Capacity Price for the Year
($/kW-Year) and (ii) the Annual Capacity Quantity for the Year (kW). The Base
Annual Capacity Charge for the Option Period shall be billed in accordance with
Article 13 in the July 2007 statement and the July 2008 statement, if
applicable.

3.5.2.3.5 Excess Annual Capacity Charge. The Excess Annual Capacity Charge for a
Year shall be equal to the product of (i) the Excess Annual Capacity Price for
the Year ($/kW-Year) and (ii) the Excess Annual Amount for the Year (kW). The
Excess Annual Amount for a Year shall be equal to the product of (i) the EMC
Excess Annual Capacity Quantity for the Year divided by the EMC Group Combined
Excess Annual Capacity Quantity for the Year and (ii) the EMC Group Excess
Annual Capacity Quantity for the Year. The Excess Annual Capacity Charge for the
Option Period shall be billed in accordance with Article 13 in the September
2007 and the September 2008 statement, if applicable, based on the actual Duke
billing data during July and August 2007 and July and August 2008, respectively.
A sample calculation is provided in Attachment 3-1.

3.5.2.3.5.1 EMC Excess Annual Capacity Quantity. The EMC Excess Annual Capacity
Quantity for a Year shall be equal to the EMC Coincident Peak Demand for the
Year minus EMC’s Base Obligation for the Hour in such Year in which the EMC
Coincident Peak Demand occurs, minus the Annual Capacity Quantity for the Year.
In no event shall the EMC Excess Annual Capacity Quantity be less than zero. The
EMC Coincident Peak Demand for a Year shall be equal to the EMC Hourly Demand
that is coincident with the maximum integrated sixty (60) minute Duke Schedule 1
Demands during July and August of the Year. The EMC Hourly Demand for an Hour
shall be equal to the integrated sixty (60) minute demand of EMC’s Native Load
during the Hour.

3.5.2.3.5.2. EMC Group Combined Excess Annual Capacity Quantity. The EMC Group
Combined Excess Annual Capacity Quantity for a Year shall be equal to the sum of
(i) the EMC Excess Annual Capacity Quantity for the Year as determined in
Section 3.5.2.3.5.1 of this Agreement, (ii) the EMC Excess Annual Capacity
Quantity for the Year as determined in Section 3.5.2.3.5.1 of the Duke-Piedmont
Agreement, and (iii) the EMC Excess Annual Capacity Quantity for the Year as
determined in Section 3.5.2.3.5.1 of the Duke-Rutherford Agreement.

3.5.2.3.5.3 EMC Group Excess Annual Capacity Quantity. The EMC Group Excess
Annual Capacity Quantity for a Year shall be equal to the EMC Group Coincident
Peak Demand for the Year, minus the EMC Group’s Base Obligation for the Hour in
such Year in which the EMC Group Coincident Peak Demand occurs, minus the EMC
Group Annual Capacity Quantity; but in no event shall the EMC Group Excess
Annual Capacity Quantity be less than zero. The EMC Group Coincident Peak Demand
shall for a Year be equal to the sum of (i) the EMC Coincident Peak Demand for
the Year as determined in Section 3.5.2.3.5.1 of this Agreement, (ii) the EMC
Coincident Peak Demand for the Year as determined in Section 3.5.2.3.5.1 of the
Duke-Piedmont Agreement, and (iii) the EMC Coincident Peak Demand for the Year
as determined in Section 3.5.2.3.5.1 of the Duke-Rutherford Agreement.

 

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3.5.2.4 Any Option Notice given by EMC pursuant to Section 3.5.2.3 shall be
given in accordance with Section 16.22 and shall state the Option Period
elected. The Option Notice is effective when it is deemed given in accordance
with Section 16.22. Once the Option Notice is given to Duke, it shall not be
deemed amended, modified, or otherwise revoked for any reason unless such
amendment, modification, or revocation is mutually agreed to by both Parties in
writing.

3.5.3 Termination for Failure of Condition Precedent.

3.5.3.1 Subject to the options granted to EMC under Section 3.5.2.1 and 3.5.2.3,
in the event that any of the conditions precedent set out in Sections 3.1(a)
through (j) and Sections 3.2(a) through (i) are not satisfied or waived on or
before November 30, 2006, then this Agreement will terminate automatically on
December 31, 2006, without the need for either Party to give Notice of
Termination and neither Duke nor EMC shall have any obligation, duty or
liability to the other arising hereunder under any claim or theory whatsoever.

Article 4

Sale of Electric Capacity and Energy

4.1 Classification of Services Provided. During the period beginning on the
Commencement Date, and continuing through December 31, 2010, or any part thereof
in which this Agreement is in effect, Duke shall provide to EMC “FFR
Supplemental Service”, as described in Section 4.2. Beginning January 1, 2011,
throughout the remainder of the Term of this Agreement, Duke shall provide to
EMC “Partial Requirements Service”, as described in Section 4.3.

 

4.2 FFR Supplemental Service.

4.2.1 Character of FFR Supplemental Service. For each Hour during the period
beginning on the Commencement Date, and continuing through December 31, 2010, or
any part thereof in which this Agreement is in effect, Duke shall sell and
deliver, and EMC shall purchase and receive, all of the electric capacity and
energy that EMC requires to serve EMC’s Native Load in excess of EMC’s Base
Obligation for such Hour. For example, if EMC’s Native Load during an Hour is
800 MWs, and EMC’s Base Obligation for such Hour is 600 MWs, Duke shall supply
and deliver, and EMC shall purchase and receive, 200 MWs of FFR Supplemental
Service for such Hour. Duke shall supply and deliver FFR Supplemental Service in
a manner that is as firm as, and otherwise comparable with, the manner in which
Duke supplies Duke’s Native Load. Duke shall be responsible for maintaining the
generation reserves needed to meet its FFR Supplemental Service obligation.
Notwithstanding anything in this Agreement to the contrary, Duke shall have no
obligation to sell and deliver any electric capacity or energy to EMC that is
not required to serve EMC’s Native Load.

4.2.2 Amount of EMC’s Base Obligation. EMC’s Base Obligation for each Hour
beginning on the Commencement Date, and continuing through December 31, 2010, or
any part thereof in which this Agreement is in effect, shall be as set forth in
Attachment 4-1.

 

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Notwithstanding the preceding sentence, EMC’s Base Obligation shall be subject
to modification (a) during Light Load Periods in accordance with the provisions
of Attachment 4-2 or (b) in accordance with the provisions of Section 5.1.4 and
5.1.5. The amounts set forth on Attachment 4-1 reflect MWs delivered at a
Delivery Point.

4.2.3 Scheduling To Meet EMC’s Base Obligation. In order to meet EMC’s Base
Obligation, (a) MSCG shall be responsible for scheduling to the Transmission
Provider electric energy under the PPA to serve EMC’s Native Load and (b) Duke,
acting as Scheduling Agent, shall be responsible for scheduling to the
Transmission Provider, in accordance with the provisions of Article 8, electric
energy to serve EMC’s Native Load from EMC’s entitlements to the resources
described in Section 5.1.3, 5.1.4 or 5.1.5. The total amount of electric energy
so scheduled to the Transmission Provider in any Hour to serve EMC’s Native Load
beginning on the Commencement Date, and continuing through December 31, 2010, or
any part thereof in which this Agreement is in effect, shall be the EMC
Scheduled Amount; provided that the EMC Scheduled Amount shall not exceed EMC’s
Base Obligation for any such Hour.

4.2.4 Scheduling Shortfall. For each Hour beginning on the Commencement Date,
and continuing through December 31, 2010, or any portion thereof in which this
Agreement is in effect, if, for any reason, including a Force Majeure as that
term is defined herein or a “force majeure”, “uncontrollable force” or a similar
term defined in a third-party agreement, but not including Duke’s unexcused
failure to comply with the provisions of Article 8, the EMC Scheduled Amount is
less than EMC’s Base Obligation for any Hour, there shall be a “Scheduling
Shortfall” in the amount equal to the difference between EMC’s Base Obligation
and the EMC Scheduled Amount in such Hour (“Scheduling Shortfall Amount”). For
any Hour that Duke receives information or a notice pursuant to Section 8.4.8
that there will be or has been a Scheduling Shortfall, Duke shall use
Commercially Reasonable Efforts to procure and supply electric energy in a
quantity sufficient to supply the Scheduling Shortfall Amount for such Hour
(“Replacement Energy”). In the event that, through the exercise of Commercially
Reasonable Efforts, Duke procures Replacement Energy from a third party for
resale to EMC, EMC shall pay Duke for the total cost incurred by Duke to
purchase and deliver the Replacement Energy. Duke’s curtailment of a Non-Firm
Sale shall constitute a procurement of Replacement Energy from a third party and
the total cost incurred by Duke shall be (i) the foregone sales price for the
Non-Firm Sale curtailed and (ii) if applicable, any charges imposed for changes
to schedules for the sale of electric energy. In the event that Duke supplies
Replacement Energy from its own resources, EMC shall pay Duke for such
Replacement Energy an amount equal to one hundred ten percent (110%) of Duke’s
System Incremental Cost in supplying such Replacement Energy. The total charges
for Replacement Energy for a Month, as determined by this Section 4.2.4, shall
constitute the Monthly Replacement Energy Charge.

4.2.4.1 It is expressly understood that Section 4.2.4 shall not be construed or
interpreted to (i) require Duke to curtail any Firm Sales in order to supply
Replacement Energy to EMC, (ii) to curtail any Non-Firm Sales except as set
forth in Section 4.2.6 in order to supply such Replacement Energy to EMC,
(iii) impose upon Duke any responsibility for providing Replacement Energy for a
Scheduling Shortfall that occurs after the Transmission Provider’s deadline for
scheduling transmission service required for the delivery of such Replacement
Energy, or (iv) affect in any way EMC’s rights and obligations under its Network
Integration Transmission Service Agreement.

 

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4.2.4.2 In the event that there is or is expected to be a Scheduling Shortfall
in connection with (a) EMC or its Scheduling Agent having received notice (and
in the event EMC receives notice providing Duke with evidence of such notice)
of, or (b) pursuant to Section 8.4.8 Scheduling Agent having received notice of
either (i) the occurrence of a “force majeure” event under the PPA, as defined
in Section 4.2.4.3, or (ii) the temporary impairment of generating resources
underlying the WPSA, the SEPA Contract, or other resources to which EMC may have
an entitlement pursuant to Section 5.1.3, 5.1.4 or 5.1.5, such that all or a
portion of EMC’s entitlements to electric energy under such agreements are or
will be temporarily unavailable to EMC, then EMC may request Duke to sell
electric capacity and energy to EMC for the expected duration of such Scheduling
Shortfall. In the event that EMC makes such a request, Duke shall exercise
Commercially Reasonable Efforts to offer to supply electric capacity and energy
to EMC under rates, terms, and conditions that Duke determines to be
commercially reasonable. If the Parties reach agreement on such a sale, then
Duke shall sell and deliver and EMC shall purchase and receive the electric
energy and such electric energy shall be included in EMC Scheduled Amount.

4.2.4.3 For purposes of Section 4.2.4.2, the term “force majeure” means an event
or circumstance that: (i) prevents the party claiming to be affected by it from
performing its obligations in whole or in part; (ii) is not within the
reasonable control of the claiming party, or the result of the negligence of the
claiming party, and (iii) by the exercise of due diligence, the claiming party
is unable to overcome in a commercially reasonable manner, and, without limiting
the scope of the definition, includes acts of God, or the public enemy, or
insurrection, riot, acts of terrorism, civil disturbance or disorder, strikes,
fire, earthquakes, floods, storms or other natural disasters, or actions or
restraints by court order or governmental authority or arbitration award (so
long as the claiming party has not sought or has opposed, to the extent
reasonable, such actions or restraints). It is expressly acknowledged that
transmission service interruptions or curtailments imposed by a transmission
provider in response to transmission capacity or availability shortages shall
not be “force majeure” events or circumstances for purposes of this
Section 4.2.4.3.

4.2.5 EMC PPA Obligation. EMC shall retain all of its rights and obligations
under the PPA, including the obligation to pay all costs incurred under the PPA.

4.2.6 EMC Obligation to Curtail Load. During any Hour in which there is a
Scheduling Shortfall, and either (i) Duke does not replace such electric energy
in accordance with Section 4.2.4 or (ii) EMC has not made, or does not have in
place, arrangements to replace such electric energy, EMC shall curtail an amount
of EMC’s Native Load equal to the Scheduling Shortfall Amount; provided,
however, Duke shall exercise Commercially Reasonable Efforts within the time
constraints that exist to first call upon any available EMC Demand Side
Management Resource Program that would not otherwise be called upon absent the
Scheduling Shortfall and then if necessary curtail Non-Firm Sales to the extent
of the Scheduling Shortfall before requiring EMC to curtail EMC’s Native Load
pursuant to this Section 4.2.6. Any such EMC Native Load that has been curtailed
shall be restored when the Scheduling Shortfall is no longer occurring or when
the Scheduling Shortfall has been replaced either by electric energy supplied
(a) by Duke in accordance with Section 4.2.4 or this Section 4.2.6 or (b) under
arrangements made by EMC with third parties.

 

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4.3 Partial Requirements Service.

4.3.1 Character of Partial Requirements Service. For each Hour during the period
beginning on January 1, 2011, and continuing through the termination of this
Agreement, Duke shall sell and deliver, and EMC shall purchase and receive, all
of the electric capacity and energy that EMC requires to serve EMC’s Native Load
in excess of the EMC Contract Resources. Duke shall be responsible for
maintaining the generation reserves necessary to meet this obligation. Duke
shall supply Partial Requirements Service in a manner that is as firm as, and
otherwise comparable with, the manner in which Duke supplies Duke’s Native Load.
Notwithstanding anything in this Agreement to the contrary, Duke shall have no
obligation to sell and deliver any electric capacity or energy to EMC that is
not required to serve EMC’s Native Load.

4.3.2 Scheduling of EMC Contract Resources To Serve EMC Native Load. For each
Hour beginning on January 1, 2011, and continuing through the Term of this
Agreement, EMC’s contractual entitlement to electric energy from the Dispatched
Combined Cycle Resources and from the Baseload Resources shall be scheduled in
accordance with the provisions of Sections 4.3.3 and 4.3.4, respectively.

4.3.3 Scheduling of the Combined Cycle Resources. Duke may schedule, in
accordance with Attachment 4-3 and Article 8, each of the Combined Cycle
Resources pursuant to Duke’s economic dispatch as necessary to serve Duke’s
total electric energy obligations. Duke shall make no adverse distinction
against the Combined Cycle Resources in determining the dispatch order of Duke’s
Generation System and the Combined Cycle Resources. The Combined Cycle Resources
that Duke schedules pursuant to economic dispatch shall be referred to as the
“Dispatched Combined Cycle Resources”. Except as provided in Section 4.3.3.1 and
Section 4.3.3.2, EMC shall be solely responsible for all costs associated with
the Combined Cycle Resources.

4.3.3.1 Duke shall not be obligated to pay for any costs that EMC incurs as a
result of Duke’s dispatch of the Combined Cycle Resources to the extent that
Duke’s dispatch of such Combined Cycle Resources is for the purpose of serving
Duke’s Native Load and, during any Year, Duke’s dispatch of a Combined Cycle
Resource for that purpose does not exceed an Annual Capacity Factor of twenty
percent (20%). In the event and at such time during a Year that Duke’s dispatch
of a Combined Cycle Resource to serve Duke’s Native Load exceeds an Annual
Capacity Factor of twenty percent (20%), Duke shall pay EMC, in the manner and
time provided for in Article 13, the additional Energy Cost that EMC incurs as a
result of Duke’s dispatch of such Combined Cycle Resource for the remainder of
the Year. For example, if a Dispatched Combined Cycle Resource has a generating
capacity of one hundred (100) MWs during a Year and, as of 11:59:59 on
November 30 of such Year, Duke has dispatched such resource for 175,200 MWhs for
the purpose of serving Duke’s Native Load, Duke shall reimburse EMC for the
Energy Costs that EMC incurs in December of such Year as a result of Duke’s
dispatch of such Dispatched Combined Cycle Resource. For the purpose of this
Section 4.3.3.1, “Annual Capacity Factor” means the total amount of electric
energy generated by a Dispatched Combined Cycle Resource for the purpose of
serving Duke’s Native Load during a Year divided by the product of (a) the total
generating capacity of such Dispatched Combined Cycle Resource and (b) 8,784
(during a leap year) or 8,760 (during a Year other than a leap year), multiplied
by one hundred percent (100%).

 

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4.3.3.2 In the event that Duke’s dispatch of one or more of the Combined Cycle
Resources is for any purpose other than to serve Duke’s Native Load, Duke shall
pay EMC, in the manner and time provided for in Article 13, the additional
Energy Cost that EMC incurs as a result of Duke’s dispatch of such Combined
Cycle Resource(s).

4.3.3.3 For purposes of Sections 4.3.3.1 and 4.3.3.2, “Energy Cost” means, with
respect to any Dispatched Combined Cycle Resource, all variable costs incurred
by EMC that are associated with the production of electric energy under the
WPSA, including the cost of fuel, start charges, and any other variable charges
incurred by EMC under the WPSA in connection with the electric energy dispatched
by Duke from such Combined Cycle Resource regardless of NCEMC’s actual
generating cost or NCEMC’s contractual source of the electric energy.

4.3.4 Scheduling of Baseload Resources. Duke shall schedule, in accordance with
Article 8, all of the Baseload Resources to the full extent that EMC’s
entitlement to such resources are available to EMC and such electric energy
shall be used to serve EMC’s Native Load. EMC shall be solely responsible for
all costs associated with the Baseload Resources. The Baseload Resources that
Duke schedules pursuant to this Section 4.3.4 shall be referred to as
“Dispatched Baseload Resources”.

4.4 Excepted Load. Notwithstanding anything to the contrary herein, Duke shall
have no obligation to supply electric capacity or energy required by EMC to
serve Excepted Load. Excepted Load shall consist of EMC load that is either
(a) Non-Conforming Load or (b) Non-Duke Control Area Load. Non-Conforming Load
shall consist of (i) EMC load resulting from the merger of EMC with another
electric membership corporation or other entity (except to the extent such load
was, at the time of the merger, already being served by Duke under an agreement
substantially similar to this Agreement), and (ii) EMC wholesale load (except as
provided in Section 4.4.1). Non-Conforming Load shall also consist of discrete
EMC load (a) to which electric service from EMC shall have commenced after the
Effective Date, (b) that has a projected peak demand in excess of twenty-five
(25) MW for the Year in which electric service from the EMC commences, and
(c) which is projected to change within a one-minute period by a significant
quantity on a recurring basis due to the nature of the retail customer’s
operations (e.g., without limitation, an arc furnace).

4.4.1 New River Load. If, on or before December 31, 2010, EMC notifies Duke that
it desires to include New River as a part of EMC’s Native Load under this
Agreement, the New River load shall not be a Non-Conforming Load and shall be
EMC’s Native Load for purposes of this Agreement; provided that New River’s load
shall be included as EMC’s Native Load for a period of not less than five
(5) Years. It is expressly understood that New River shall not be included as a
part of EMC’s Native Load beyond the Term. It is further expressly understood
that nothing contained in this Section 4.4.1 shall restrict Duke’s right or
ability to make an offer to meet New River’s electric energy requirements under
separate arrangements that may be agreed to by Duke and New River.

4.5 Good Title. Electric energy that is delivered by Duke to EMC shall be free
and clear of all liens, Claims, and encumbrances at the Delivery Points, where
title to electric energy provided by Duke hereunder shall transfer to EMC.
Electric energy that is delivered by EMC to Duke shall be free and clear of all
liens, Claims, and encumbrances at the point where title to the electric energy
is transferred to Duke.

 

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4.6 Power Quality. All electric energy provided hereunder at the point of
delivery shall be three (3) phase, sixty (60) hertz, and at system nominal
voltages.

Article 5

EMC Resources

5.1 EMC Contract Resources (Commencement Date—December 31, 2010).

5.1.1 Identification of Resources. Except as provided in Section 5.4.1, EMC’s
Contract Resources during the period commencing on the Commencement Date, and
continuing through December 31, 2010, or any part thereof in which this
Agreement is in effect, shall consist of EMC’s entitlement to electric capacity
and energy under the PPA and such additional generation or purchased power
resources or entitlements as EMC may acquire pursuant to Sections 5.1.3, 5.1.4
and 5.1.5. The FFR Resource is listed in Attachment 4-1. Except as provided in
this Section 5.1.1, EMC shall not, without first obtaining Duke’s prior written
consent, enter into any other contracts for, or acquire any ownership interest
in or contractual entitlement to, any additional electric generating resources
or electric capacity or energy under which electric capacity and energy would be
used to serve EMC’s Native Load during the Term.

5.1.2 Changes to FFR Resources. During the period commencing on the Commencement
Date, and continuing through December 31, 2010, or any part thereof in which
this Agreement is in effect, EMC shall not: (a) take any action that would
materially affect the quantity or quality of MSCG’s service obligations under
the PPA without first obtaining Duke’s prior written consent, or (b) agree to
any modification to provisions of the PPA, the WPSA, or the SEPA Contract that
would increase or decrease EMC’s entitlement to electric capacity or energy
under such agreements and for which EMC’s consent is required (except as
provided in Section 5.1.4) without first obtaining Duke’s consent to such
modification.

5.1.3 Resource Impairment. In the event that all or a portion of the FFR
Resource, or any other EMC Contract Resource, is terminated or becomes
permanently impaired, EMC shall acquire, at EMC’s expense, a substitute resource
(backed by reserves in an amount equal to that required under Duke’s Generation
Planning Practices) that is of substantially equivalent size and comparable
reliability to the EMC Contract Resource, or portion thereof, that such
substitute is replacing.

5.1.4 New Catawba Resource. In the event that NCEMC acquires all or part of
Saluda River Electric Cooperative’s existing ownership interest in the Catawba
Nuclear Station, and sells, allocates or transfers a percentage of that
entitlement with such entitlement being made available throughout the Year to
EMC (through a modification of the WPSA or pursuant to a new contract), EMC’s
Base Obligation shall be increased by an amount equal to the amount of the
entitlement so acquired by EMC. Upon Duke’s request, EMC shall provide evidence
reasonably satisfactory to Duke demonstrating that such entitlement in the
Catawba Nuclear Station is backed by sufficient and reliable electric system
generating reserves. Duke shall limit

 

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such requests to one (1) request per Year; provided, that if Duke reasonably
believes that the sufficiency or reliability of the electric system generating
reserves backing EMC’s entitlement in the Catawba Nuclear Station may have
changed since Duke’s last such request, this limitation shall not apply. In the
event that EMC fails to demonstrate that its entitlement in the Catawba Nuclear
Station is backed by sufficient and reliable generating reserves, Duke shall
supply, and EMC shall purchase, such reserves in an amount equal to that
required under Duke’s Generation Planning Practices. The Monthly charge for such
reserves shall be equal to the product of the amount of reserves (as determined
under the prior sentence) supplied by Duke to EMC at the then-applicable Monthly
Demand Charge. Duke’s provision and EMC’s purchase of such reserves shall not
affect the determination of EMC’s Base Obligation. This Monthly charge shall be
billed by Duke in accordance with the provisions of Article 13.

5.1.4.1 In the event that NCEMC purchases electric capacity and energy from Duke
in lieu of NCEMC’s acquisition of all or a part of Saluda River Electric
Cooperative’s existing ownership interest in the Catawba Nuclear Station as
provided in Section 5.1.4, and NCEMC sells, allocates or transfers a portion of
such electric capacity and energy to EMC (through a modification of the WPSA or
pursuant to a new contract), EMC’s Base Obligation shall be increased by an
amount equal to the amount of the electric capacity and energy so acquired by
EMC.

5.1.5 Non-Consent Modification of EMC’s Contract Resources. In the event that
EMC’s entitlements to electric capacity and energy are reduced in accordance
with Section 2.9(b) or Section 2.9(c) of the WPSA or Sections 2.2, 2.3, and 2.4
of the SEPA Contract, the amount of the EMC’s Base Obligation shall not be
affected and the provisions of Section 4.2.4.2 shall apply, except that if the
Parties are unable to reach agreement as to the rates, terms and conditions
under which Duke would sell electric capacity and energy to EMC, the provisions
of Section 5.1.3 shall apply. EMC shall provide written notice to Duke as soon
as reasonably practicable after EMC becomes aware of any modification to EMC’s
entitlement to electric capacity and energy under the WPSA or SEPA Contract
pursuant to this Section 5.1.5. In the event that EMC’s entitlements to electric
capacity and energy are increased in accordance with Section 2.9(b) or
Section 2.9(c) of the WPSA or Sections 2.2, 2.3, 2.4 and 2.8 of the SEPA
Contract, then, prior to the effective date of such increase, EMC may elect
either to (a) increase EMC’s Base Obligation by the same amount and to the same
extent as EMC’s entitlements to electric capacity and energy are increased, or
(b) make arrangements for the sale of EMC’s entitlements to such electric
capacity and energy to a third party or to Duke. If EMC fails to complete the
arrangements described in (b) of the preceding sentence by the effective date of
the increase in entitlements, then, as of the effective date of the increase in
entitlements, the EMC’s Base Obligation automatically will be increased as
described in (a) of the preceding sentence.

5.2 EMC Contract Resources (January 1, 2011 - Termination of Agreement).

5.2.1 Identification of Contract Resources. Except as provided in Section 5.4.1,
EMC’s Contract Resources during the period January 1, 2011, through the
termination of this Agreement shall consist of EMC’s entitlements to electric
capacity and energy under the contracts listed in Attachment 4-3 and such
additional generation or purchased power resources or entitlements as EMC may
acquire pursuant to Sections 5.2.3, 5.2.4, and 5.2.5. EMC’s entitlements under
the contracts that are listed in Attachment 4-3 shall be referred to as the
Partial Requirements

 

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Resources. Partial Requirements Resources consist of two (2) categories of
entitlements: Baseload Resources and Combined Cycle Resources. The amount and
the material cost and operational terms and conditions of the Baseload Resources
and Combined Cycle Resources shall be as set forth in Attachment 4-3, subject to
modification in accordance with Sections 5.2.3 and 5.2.4. Except as provided in
this Section 5.2.1, EMC shall not, without first obtaining Duke’s prior written
consent, enter into any other contracts for, or acquire any ownership interest
in or contractual entitlement to, any additional electric generating resources
or electric capacity or energy under which electric capacity and energy would be
used to serve EMC’s Native Load during the Term.

5.2.1.1 Extension of WPSA and SEPA Contract. Consistent with the provisions of
Section 5.2.2, EMC shall have the right, without the prior consent of Duke, to
extend the term of the WPSA or the SEPA Contract under substantially the same
terms and conditions as exist at the time that EMC seeks to extend the term of
the WPSA or the SEPA Contract. If EMC extends the term of the WPSA or the SEPA
Contract in accordance with this Section 5.2.1.1, the EMC Contract Resources
listed in Attachment 4-3 shall be deemed to be changed accordingly.

5.2.2 Changes To Partial Requirements Resources. Commencing January 1, 2011,
through the termination of this Agreement, EMC shall not (a) take any action
that would materially affect the quantity or quality of EMC’s entitlement to
electric capacity and energy from the Partial Requirements Resources without
first obtaining Duke’s prior written consent, or (b) agree to any modification
to provisions of the WPSA or the SEPA Contract that would increase or decrease
EMC’s entitlement to electric capacity or energy under such agreements and for
which EMC’s consent is required (except as provided in Section 5.2.4) without
first obtaining Duke’s consent to such modification.

5.2.2.1 Modifications Effective After Termination. Notwithstanding the
provisions of Section 5.2.2, EMC shall be permitted to agree to any resource
modification under the WPSA or the SEPA Contract without obtaining Duke’s
consent to the extent that such resource modification will become effective
after the Term; provided, that if such resource modification will become
effective prior to the end of the Term, EMC’s Partial Requirements Resources and
Duke’s obligation to provide Partial Requirements Service shall not be modified
prior to the date that this Agreement is terminated unless Duke consents to such
modification.

5.2.2.2 Sufficiency of Reserves. Upon Duke’s request, EMC shall provide evidence
reasonably satisfactory to Duke demonstrating that each of EMC’s Partial
Requirements Resources is backed by sufficient and reliable electric system
generating reserves. Duke shall limit such requests to one (1) request per Year
with respect to any Partial Requirements Resource; provided, that if Duke
reasonably believes that the sufficiency or reliability of the electric system
reserves backing any Partial Requirements Resource may have changed since Duke’s
last such request, this limitation shall not apply with respect to that Partial
Requirements Resource. In the event that EMC fails to demonstrate that its
entitlement in a Partial Requirements Resource is backed by sufficient and
reliable generating reserves, Duke shall supply, and EMC shall purchase, such
reserves in an amount equal to that required under Duke’s Generation Planning
Practices. The Monthly charge for such reserves shall be equal to the product of
the amount of reserves (as determined under the prior sentence) supplied by

 

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Duke to EMC and the then applicable Monthly Demand Charge. This Monthly charge
shall be billed by Duke in accordance with the provisions of Article 13. Duke’s
provision and EMC’s purchase of such reserves shall not affect the determination
of the amount of Partial Requirements Resources, Baseload Resources or Combined
Cycle Resources. EMC shall provide written notice to Duke as soon as reasonably
practicable after EMC becomes aware of a material change to the seller’s service
obligations under the contracts listed in Attachment 4-3; provided, that such
notice shall be for information purposes only, and shall not affect any other
obligations of either Party under this Agreement.

5.2.3 Non-Consent Partial Requirements Resource Modifications. In the event that
EMC’s entitlements are modified pursuant to Section 2.9(b) or Section 2.9(c) of
the WPSA or Sections 2.2, 2.3, 2.4 and 2.8 of the SEPA Contract, EMC’s Partial
Requirements Resources shall be modified in the same amount and to the same
extent. To the extent that a Partial Requirements Resource is modified pursuant
to this Section 5.2.3, and the modification changes EMC’s entitlement in a
resource listed as a Baseload Resource in Attachment 4-3, the amount of such
Baseload Resource, as listed in Attachment 4-3, shall be deemed to be changed
accordingly. EMC shall provide written notice to Duke as soon as reasonably
practicable after EMC becomes aware of any modification to EMC’s entitlement to
electric capacity and energy under the WPSA or SEPA Contract pursuant to this
Section 5.2.3. To the extent that a Partial Requirements Resource is modified
pursuant to this Section 5.2.3, and the modification changes EMC’s entitlement
in a resource listed as a Combined Cycle Resource in Attachment 4-3, the amount
of such Combined Cycle Resource, as listed in Attachment 4-3, shall be deemed to
be changed accordingly.

5.2.4 New Catawba Resource. In the event that NCEMC acquires all or part of
Saluda River Electric Cooperative’s existing ownership interest in the Catawba
Nuclear Station, and sells, allocates or transfers a percentage of that
entitlement with such entitlement being made available throughout the Year to
EMC (through modification of the WPSA or pursuant to a new contract), the
entitlement or resource so acquired by EMC shall constitute an additional
Partial Requirements Resource, and shall be deemed to be an additional Baseload
Resource. Upon Duke’s request, EMC shall provide evidence reasonably
satisfactory to Duke demonstrating that such entitlement in the Catawba Nuclear
Station is backed by sufficient and reliable electric system generating
reserves. Duke shall limit such requests to one (1) request per year; provided,
that if Duke reasonably believes that the sufficiency or reliability of the
electric system generating reserves backing EMC’s entitlement in the Catawba
Nuclear Station may have changed since Duke’s last such request, this limitation
shall not apply. In the event that EMC fails to demonstrate that its entitlement
in the Catawba Nuclear Station is backed by sufficient and reliable generating
reserves, Duke shall supply, and EMC shall purchase, such reserves in an amount
equal to that required under Duke’s Generation Planning Practices. The Monthly
charge for such reserves shall be equal to the product of the amount of reserves
(as determined under the prior sentence) supplied by Duke to EMC and the
then-applicable Monthly Demand Charge. This Monthly charge shall be billed by
Duke in accordance with the provisions of Article 13. Duke’s provision and EMC’s
purchase of such reserves shall not affect the determination of the amount of
Partial Requirements Resources, Baseload Resources or Combined Cycle Resources.

5.2.4.1 In the event that NCEMC purchases electric capacity and energy from Duke
in lieu of NCEMC’s acquisition of all or a part of Saluda River Electric
Cooperative’s

 

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existing ownership interest in the Catawba Nuclear Station as provided in
Section 5.2.4, and NCEMC sells, allocates or transfers a portion of such
capacity and energy to EMC (through a modification of the WPSA or pursuant to a
new contract), EMC’s Baseload Resources shall be increased by an amount equal to
the amount of the electric capacity and energy so acquired by EMC.

5.2.5 Resource Impairment. In the event that all or a portion of an EMC Contract
Resource is terminated or becomes permanently impaired, EMC shall acquire, at
EMC’s cost, a substitute resource (backed by reserves in an amount equal to that
required under Duke’s Generation Planning Practices) that is of substantially
equivalent size and comparable reliability to the EMC Contract Resource, or
portion thereof, that such substitute resource is replacing, and that Duke
reasonably agrees is sufficiently reliable. EMC’s acquisition of such substitute
resource shall not affect the determination of the amount of Partial
Requirements Resources, Baseload Resources or Combined Cycle Resources.

5.3 No Duke Obligation for Customer Resources. Unless otherwise explicitly
provided in this Agreement, nothing herein shall be interpreted or construed as
imposing upon Duke any obligations or liabilities, or for transferring to Duke
any EMC obligations or liabilities, under or otherwise pertaining to any EMC
Contract Resource, nor shall anything in this Agreement be interpreted or
construed as creating or implying any contractual or other relationship between
Duke and any other party as to a EMC Contract Resource.

5.4 New Customer Resources. Except as provided in Section 5.4.1, Duke shall have
no obligation to amend this Agreement and EMC shall not make an application to
FERC requesting that FERC require that any amendment be made to this Agreement,
to accommodate any contractual entitlement to and/or ownership interest in or
pertaining to any new electric capacity and/or energy resource that EMC may
obtain after the Effective Date.

5.4.1 PURPA Resources. Nothing herein shall limit EMC’s right to purchase
electric capacity and energy from a Qualifying Facility or other renewable
resources pursuant to PURPA (“PURPA Resource”). If, during the Term, EMC
purchases electric capacity and energy from a PURPA Resource with a nameplate
capacity equal to or greater than one (1) MW, then, for each Month during the
period of such purchase: (i) the average hourly integrated electric energy
delivered to EMC by such PURPA Resource during the Hours used for determination
of the EMC Monthly Demand Quantity determined in accordance with Section 7.1.4.1
or used for determination of the Monthly Billing Demand determined in accordance
with Section 7.2.2.2 or Section 7.3.2.2, increased for losses between the point
of measurement of EMC’s Native Load and the Duke generation level, shall be
added to the EMC Monthly Demand Quantity determined in accordance with
Section 7.1.4.1 or to the Monthly Billing Demand determined in accordance with
Section 7.2.2.2 or Section 7.3.2.2 for such Month, as applicable; (ii) for
purposes of calculating the electric energy charges under Sections 7.1.5, 7.2.3
and 7.3.3, as applicable, the amount of electric energy provided to EMC by such
PURPA Resource during an Hour, increased for losses between the point of
measurement of EMC’s Native Load and the Duke generation level, shall be added
to EMC’s Native Load and to the EMC Group Native Load for such Hour; and
(iii) Duke shall credit EMC, on a Monthly basis, an amount equal to the electric
capacity and energy credits to which EMC would be entitled as set forth in
Duke’s NCUC retail electric tariff Schedule PP-H or Schedule PP-N (as
applicable), Interconnected to Distribution System or

 

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Transmission System (as applicable), or its successor tariff, if the electric
capacity and electric energy provided to EMC by such PURPA Resource were
provided to Duke pursuant to and in accordance with such schedules. The
interconnection to Duke’s (rather than the EMC’s) Distribution System or
Transmission System, as those terms are defined in the schedules, will determine
whether the Distribution System or Transmission System rates apply. EMC will
coordinate with Duke to determine the proper application of these schedules. If
Schedule PP-H or Schedule PP-N do not apply to the PURPA Resource, then Duke
shall credit EMC, on a Monthly basis, an amount equal to the electric capacity
and energy credits to which EMC would be entitled under PURPA if the electric
capacity and electric energy provided to EMC by such PURPA Resource were
provided to Duke pursuant to PURPA. EMC’s purchase of the electric capacity and
energy from a PURPA Resource shall not affect the determination of the Annual
Capacity Quantity determined in accordance with Sections 3.5.2.3.1, 3.5.2.3.2 or
3.5.2.3.3, as applicable.

Article 6

Priority of Service

6.1 Interruption of FFR Supplemental Service and Partial Requirements Service.
FFR Supplemental Service and Partial Requirements Service shall have an
interruption priority equivalent to Duke’s Native Load. It is expressly
understood and agreed that, except for Duke’s failure to comply with Section 6.2
or as provided in Section 6.4, Duke shall not be liable to EMC for damages
resulting from any such interruptions or impairment of FFR Supplemental Service
or Partial Requirements Service. Duke shall use Commercially Reasonable Efforts
to notify EMC by telephone of any scheduled interruption or scheduled impairment
of service hereunder and shall use Commercially Reasonable Efforts to confirm
such notice by facsimile, electronic mail, or letter on the same date such
notice was given. Duke shall notify EMC by telephone of any unscheduled
interruption or impairment of service hereunder as soon as reasonably
practicable under the circumstances resulting in such unscheduled interruption
or impairment of service. Duke shall use Commercially Reasonable Efforts to
remove all causes of such interrupted or impaired service hereunder.

6.2 Curtailments of Load. Except as provided in Section 4.2.6, EMC’s Native Load
shall be subject to curtailment only in accordance with this Section 6.2. In the
event that Duke curtails Duke Native Load for any reason, including Force
Majeure, EMC shall curtail its load as directed by Duke. Except as provided in
Section 4.2.6, Duke shall not adversely distinguish against EMC’s Native Load in
curtailing Duke’s Native Load and directing EMC to curtail EMC’s Native Load;
provided, however, that Duke has sole responsibility to design all curtailments,
and may order any manner of curtailment that Duke believes is appropriate so
long as EMC’s Native Load and Duke’s Native Load present in the electrical area
being curtailed are curtailed on a non-discriminatory basis. In permitting EMC
to restore EMC’s Native Load and restoring Duke’s Native Load that was
curtailed, Duke shall not adversely distinguish against EMC’s Native Load,
except as provided in Section 4.2.6. The load curtailment and restoration
provisions set forth in this Section 6.2 are in addition to, and without
limitation of, the load curtailment and restoration provisions set forth in
Section 4.2.6.

 

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6.3 Emergency Load Curtailment Program. EMC agrees to implement an emergency
load curtailment program for the curtailment of EMC’s Native Load in the event a
load curtailment order is made by Duke. EMC shall comply with its obligation to
implement and maintain an emergency load curtailment program and to curtail
EMC’s Native Load in the manner specified by Section 6.2.

6.4 Substitute Energy. In the event that Duke fails to deliver a sufficient
quantity of electric energy to meet its obligations to provide FFR Supplemental
Service or Partial Requirements Service, as the case may be, and Duke’s failure
to deliver such electric energy is not pursuant to a curtailment permitted under
Section 4.2.6 or 6.2 of this Agreement, or is otherwise excused under this
Agreement, Duke shall pay to EMC an amount equal to EMC’s Cover Costs, if any,
incurred for the electric energy that EMC obtained to replace such electric
energy (“Substitute Energy”) Duke failed to supply. EMC’s Cover Costs shall be
equal to Substitute Energy Costs incurred by EMC for the Substitute Energy minus
the costs that EMC would have incurred had Duke supplied the electric energy to
EMC. EMC shall bill its Cover Costs to Duke in accordance with the provisions of
Article 13. In the event that EMC incurs Cover Costs for Substitute Energy over
a period that extends past the Month in which Duke’s failure to deliver electric
energy occurs, then Duke shall pay the Cover Costs incurred in the following
Month(s) in accordance with the billing and payment provisions of Article 13.

6.5 Substitute Energy Costs. Substitute Energy Costs shall be equal to (i) in
the case in which EMC contracts with an energy supplier to provide Substitute
Energy to EMC, the cost that EMC, acting in a commercially reasonable manner,
incurs to purchase such Substitute Energy, or (ii) in the case in which
Substitute Energy is provided to EMC by the Control Area operator, system
operator, or similar entity providing such service on behalf of load (or load
serving entities), the cost to EMC imposed on EMC by such Control Area operator,
system operator, or other entity providing such Substitute Energy. In either
case, Substitute Energy Costs shall include ancillary services charges, if any,
reasonably incurred by EMC to the point where electric energy is delivered to
the Transmission System or imposed to the point where electric energy is
delivered to the Transmission System by the Control Area operator, system
operator, or other entity providing Substitute Energy, including congestion
charges, energy imbalance charges, backup capacity charges, replacement capacity
charges, deficient capacity charges, commitment fees, ratcheted demand and
similar charges incurred by EMC in obtaining such Substitute Energy.

Article 7

Capacity and Energy Charges

7.1 Charges During Commencement Date - December 31, 2006.

7.1.1 General. For FFR Supplemental Service provided during the period beginning
on the Commencement Date, and continuing through December 31, 2006, EMC shall
pay to Duke the Monthly Demand Charge set forth in Section 7.1.4, the Duke
Monthly Energy Charge set forth in Section 7.1.5.1, if applicable, the Monthly
Scheduling Agent Service Charge set forth in Section 7.1.6 and, if applicable,
the Monthly Reserve Capacity Charge set forth in Section 7.4, minus the EMC
Monthly Energy Credit set forth in Section 7.1.5.5. In addition, the Duke

 

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Monthly Reconciliation Charge, Blue Ridge Monthly Reconciliation Credit, and the
Monthly Inter-EMC Energy Transfer Reconciliation Charge shall be billed or
credited as provided in Sections 7.1.5.11, 7.1.5.12, and 7.1.5.13. The charges
set forth in this Section 7.1 are in addition to the other charges set forth in
other sections of this Agreement.

7.1.2 [intentionally omitted].

7.1.3 [intentionally omitted].

7.1.4 Monthly Demand Charge. The Monthly Demand Charge for a Month shall be
equal to the product of (i) the Monthly Demand Rate for the Year ($/kW-Month)
and (ii) the Monthly Demand Amount for the Month (kW). The Monthly Demand Rate
for 2006 shall be $0.75/kW-Month. The Monthly Demand Amount for a Month shall be
equal to the product of (i) the EMC Monthly Demand Quantity for the Month
divided by the EMC Group Combined Monthly Demand Quantity for the Month and
(ii) the EMC Group Monthly Demand Quantity for the Month. In no event shall the
Monthly Demand Quantity be less than zero. A sample calculation is provided in
Attachment 7-2.

7.1.4.1 EMC Monthly Demand Quantity. The EMC Monthly Demand Quantity for a Month
shall be equal to the EMC Hourly Demand at the time of the Maximum Demand Hour
for the Month minus EMC’s Base Obligation at the time of the Maximum Demand
Hour. In no event shall the EMC Monthly Demand Quantity be less than zero.

7.1.4.2 EMC Group Combined Monthly Demand Quantity. The EMC Group Combined
Monthly Demand Quantity for a Month shall be equal to the sum of (i) the EMC
Monthly Demand Quantity for the Month as determined in Section 7.1.4.1 of this
Agreement, (ii) the EMC Monthly Demand Quantity for the Month as determined in
Section 7.1.4.1 of the Duke-Piedmont Agreement, and (iii) the EMC Monthly Demand
Quantity for the Month as determined in Section 7.1.4.1 of the Duke-Rutherford
Agreement.

7.1.4.3 EMC Group Monthly Demand Quantity. The EMC Group Monthly Demand Quantity
for a Month shall be equal to the difference between the EMC Group Hourly Demand
and the EMC Group’s Base Obligation during the Maximum Demand Hour of the Month,
but in no event shall the EMC Group Monthly Demand Quantity for a Month be less
than zero. The EMC Group Hourly Demand for an Hour shall be equal to the
integrated sixty (60) minute demand of the EMC Group Native Load during the
Hour. The Maximum Demand Hour of a Month shall be the Hour in which the positive
difference between the EMC Group Native Load and the EMC Group’s Base Obligation
is the greatest (as determined by subtracting the EMC Group’s Base Obligation
from the EMC Group Native Load in every Hour of the Month, to determine the Hour
in which such maximum difference for the Month occurs).

7.1.5 Monthly Energy Charges.

7.1.5.1 Duke Monthly Energy Charge. The Duke Monthly Energy Charge for a Month
shall be equal to the sum of the Duke Hourly Energy Charges for the Month. The
Duke Hourly Energy Charge for an Hour shall be equal to the sum of the Blue
Ridge Allocated Share of the Duke Total Hourly Energy Charge for the Hour plus
the Blue Ridge Allocated Share of the Inter-EMC Energy Charge for the Hour.

 

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7.1.5.2 Duke Total Hourly Energy Charge. The Duke Total Hourly Energy Charge for
an Hour shall be equal to the product of (i) one hundred thirteen percent
(113%) of Duke’s Territorial Incremental Cost for the Hour and (ii) the EMC
Group Energy Purchase Amount for the Hour. The amount of electric energy
delivered by Duke to the EMC Group during any Hour shall be calculated as set
forth in Section 7.1.5.10.

7.1.5.3 Blue Ridge Allocated Share of Duke Total Hourly Energy Charge. The Blue
Ridge Allocated Share of the Duke Total Hourly Energy Charge for an Hour shall
be calculated as set forth in Attachment 7-3. An example showing the calculation
of the Blue Ridge Allocated Share of the Duke Total Hourly Energy Charge for an
Hour is shown in Attachment 7-4.

7.1.5.4 Blue Ridge Allocated Share of Inter-EMC Energy Charge. The Blue Ridge
Allocated Share of the Inter-EMC Energy Charge for an Hour shall be calculated
as set forth in Attachment 7-3. An example showing the calculation of the Blue
Ridge Allocated Share of the Inter-EMC Energy Charge for an Hour is shown in
Attachment 7-4.

7.1.5.5 EMC Monthly Energy Credit. The EMC Monthly Energy Credit for a Month
shall be equal to the sum of the EMC Hourly Energy Credits for the Month. The
EMC Hourly Energy Credit for an Hour shall be equal to the sum of the Blue Ridge
Allocated Share of the EMC Group Total Hourly Energy Credit for the Hour plus
the Blue Ridge Allocated Share of the Inter-EMC Energy Credit for the Hour.

7.1.5.6 EMC Group Total Hourly Energy Credit. The EMC Group Total Hourly Energy
Credit for an Hour shall be equal to the product of (i) ninety percent (90%) of
Duke’s Territorial Decremental Cost for the Hour and (ii) the EMC Group Energy
Credit Amount for the Hour. The amount of electric energy delivered by the EMC
Group to Duke during any Hour shall be calculated as set forth in
Section 7.1.5.10.

7.1.5.7 Blue Ridge Allocated Share of EMC Group Total Hourly Energy Credit. The
Blue Ridge Allocated Share of the EMC Group Total Hourly Energy Credit for an
Hour shall be calculated as set forth in Attachment 7-3. An example showing the
calculation of the Blue Ridge Allocated Share of the EMC Group Total Hourly
Energy Credit for an Hour is shown in Attachment 7-4.

7.1.5.8 Blue Ridge Allocated Share of Inter-EMC Energy Credit. The Blue Ridge
Allocated Share of the Inter-EMC Energy Credit for an Hour shall be calculated
as set forth in Attachment 7-3. An example showing the calculation of the Blue
Ridge Allocated Share of the Inter-EMC Energy Credit for an Hour is shown in
Attachment 7-4.

7.1.5.9 Calculation of Blue Ridge Hourly Energy Amounts. The amount of electric
energy delivered by Duke to Blue Ridge, and by Blue Ridge to Duke for an Hour,
shall be calculated as follows: electric energy scheduled under this Agreement
shall be scheduled using two (2) dynamic (instantaneous) signals representing
the difference between EMC’s Native Load and EMC’s Base Obligation. At the time
of this Agreement, these signals are sampled once every four (4) seconds; the
time period between each sample as defined herein shall be referred to as an
“Interval”. The time duration of the Intervals shall be subject to

 

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change based on Duke’s standard operating practices. A signal during an Interval
in which EMC’s Native Load exceeds EMC’s Base Obligation shall be referred to
herein as an EMC Call Signal, indicating electric energy supplied by Duke to
Blue Ridge. A signal during an Interval in which EMC’s Base Obligation exceeds
EMC’s Native Load shall be referred to herein as an EMC Put Signal, indicating
electric energy being supplied by Blue Ridge to Duke. The integrated value of
the EMC Call Signals (separate from and not combined with the EMC Put Signals)
summed across all Intervals during the Hour shall be used as the amount of
electric energy supplied by Duke to Blue Ridge for the Hour, and the integrated
value of the EMC Put Signals (separate from and not combined with the EMC Call
Signals) summed across all Intervals during the Hour shall be used as the amount
of electric energy supplied by Blue Ridge to Duke for the Hour. The amount of
electric energy supplied by Duke to Blue Ridge for the Hour, as calculated in
this Section 7.1.5.9, shall be referred to herein as the Blue Ridge Energy
Purchase Amount for the Hour. The amount of electric energy supplied by Blue
Ridge to Duke for the Hour, as determined in this Section 7.1.5.9, shall be
referred to herein as the Blue Ridge Energy Credit Amount for the Hour. An
example showing the calculation of such amounts is shown in Attachment 7-5.

7.1.5.10 Calculation of EMC Group Energy Amounts. The amount of electric energy
delivered by Duke to the EMC Group, and by the EMC Group to Duke, for the Hour
shall be calculated as follows: Electric energy scheduled under the Partial
Requirements Agreements shall be scheduled using two (2) dynamic (instantaneous)
signals representing the differences between the EMC Group Native Load and the
EMC Group’s Base Obligation. At the time of this Agreement, these signals are
sampled once every four (4) seconds; the time period between each sample as
defined herein shall be referred to as an “Interval”. The time duration of the
Intervals shall be subject to change based on Duke’s standard operating
practices. A signal during an Interval in which EMC Group’s Native Load exceeds
EMC Group’s Base Obligation shall be referred to herein as an EMC Group Call
Signal, indicating electric energy supplied by Duke to the EMC Group. A signal
during an Interval in which EMC Group’s Base Obligation exceeds EMC Group’s
Native Load shall be referred to herein as an EMC Group Put Signal, indicating
electric energy being supplied by EMC Group to Duke. The integrated value of the
EMC Group Call Signals (separate from and not combined with the EMC Group Put
Signals) summed across all Intervals during the Hour shall be used as the amount
of electric energy supplied by Duke to the EMC Group for the Hour, and the
integrated value of the EMC Group Put Signals (separate from and not combined
with the EMC Group Call Signals) summed across all Intervals during the Hour
shall be used as the amount of electric energy supplied by the EMC Group to Duke
for the Hour. The amount of electric energy supplied by Duke to EMC Group for
the Hour, as calculated in this Section 7.1.5.10, shall be referred to herein as
EMC Group Energy Purchase Amount for the Hour. The amount of electric energy
supplied by the EMC Group to Duke for the Hour, as determined in this
Section 7.1.5.10, shall be referred to herein as the EMC Group Energy Credit
Amount for the Hour. An example showing the calculation of such amounts is shown
in Attachment 7-6.

7.1.5.11 Duke Monthly Reconciliation Charge. The Duke Monthly Reconciliation
Charge for a Month shall be equal to the sum of the Duke Hourly Reconciliation
Charges for the Month. The Duke Hourly Reconciliation Charge for an Hour shall
be equal to the product of (a) the Duke Total Hourly Energy Charge for the Hour
minus the Duke Reconciliation Amount for the Hour and (b) the Reconciliation
Allocation Factor. The Duke

 

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Reconciliation Amount for an Hour shall be equal to the sum of (i) the Blue
Ridge Allocated Share of the Duke Total Hourly Energy Charge for the Hour as set
forth in Section 7.1.5.3 of this Agreement, (ii) the Rutherford Allocated Share
of the Duke Total Hourly Energy Charge for the Hour as set forth in
Section 7.1.5.3 of the Duke-Rutherford Agreement, and (iii) the Piedmont
Allocated Share of the Duke Total Hourly Energy Charge for the Hour as set forth
in Section 7.1.5.3 of the Duke-Piedmont Agreement. If the Duke Monthly
Reconciliation Charge is positive, EMC shall pay such amount to Duke. If the
Duke Monthly Reconciliation Charge is negative, such amount shall be credited to
EMC.

7.1.5.12 Blue Ridge Monthly Reconciliation Credit. The Blue Ridge Monthly
Reconciliation Credit for a Month shall be equal to the sum of the Blue Ridge
Hourly Reconciliation Credits for the Month. The Blue Ridge Hourly
Reconciliation Credit for an Hour shall be equal to the product of (a) the EMC
Group Total Hourly Energy Credit for the Hour minus the EMC Group Reconciliation
Amount for the Hour and (b) the Reconciliation Allocation Factor. The EMC Group
Reconciliation Amount for an Hour shall be equal to the sum of (i) the Blue
Ridge Allocated Share of the EMC Group Total Hourly Energy Credit for the Hour
as set forth in Section 7.1.5.7 of this Agreement, (ii) the Rutherford Allocated
Share of the EMC Group Total Hourly Energy Credit for the Hour as set forth in
Section 7.1.5.7 of the Duke-Rutherford Agreement, and (iii) the Piedmont
Allocated Share of the EMC Group Total Hourly Energy Credit for the Hour as set
forth in Section 7.1.5.7 of the Duke-Piedmont Agreement. If the Blue Ridge
Monthly Reconciliation Credit is negative, EMC shall pay such amount to Duke; if
the Blue Ridge Monthly Reconciliation Credit is positive, such amount shall be
credited to EMC.

7.1.5.13 Inter-EMC Energy Transfer Reconciliation Charge. The Monthly Inter-EMC
Energy Transfer Reconciliation Charge for a Month shall be equal to the sum of
the Hourly Inter-EMC Transfer Reconciliation Charges for the Month. The Hourly
Inter-EMC Transfer Reconciliation Charge for an Hour shall be equal to the
product of (a) the Reconciliation Allocation Factor and (b) (i) the sum of the
Blue Ridge Allocated Share of the Inter-EMC Energy Charge for the Hour as set
forth in Section 7.1.5.4 of this Agreement, the Rutherford Allocated Share of
the Inter-EMC Energy Charge for the Hour as set forth in Section 7.1.5.4 of the
Duke-Rutherford Agreement, and the Piedmont Allocated Share of the Inter-EMC
Energy Charge for the Hour as set forth in Section 7.1.5.4 of the Duke-Piedmont
Agreement, minus (ii) the sum of the Blue Ridge Allocated Share of the Inter-EMC
Energy Credit for the Hour as set forth in Section 7.1.5.8 of this Agreement,
the Rutherford Allocated Share of the Inter-EMC Energy Credit for the Hour as
set forth in Section 7.1.5.8 of the Duke-Rutherford Agreement, and the Piedmont
Allocated Share of the Inter-EMC Energy Credit for the Hour as set forth in
Section 7.1.5.8 of the Duke-Piedmont Agreement. If the Monthly Inter-EMC Energy
Transfer Reconciliation Charge is negative, EMC shall pay such amount to Duke.
If the Monthly Inter-EMC Energy Transfer Reconciliation Charge is positive, such
amount shall be credited to EMC.

7.1.6 Scheduling Agent Service Charge. In the event that this Agreement is
terminated in accordance with the provisions of Section 3.5.2.2, EMC shall pay
to Duke the Monthly Scheduling Agent Service Charge commencing on the date that
Scheduling Agent Services commence. The Monthly Scheduling Agent Service Charge
for a Month shall be equal to two thousand five hundred dollars ($2,500) per
Month.

 

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7.1.7 References to Other Agreements. For purposes of calculating the charges
and credits under Sections 3.5.2.3 and 7.1 (including charges and credits
calculated pursuant to Section 7.1 in the event that EMC exercises its option
pursuant to Section 3.5.2.3), (i) all references in this Agreement to quantities
under or as determined or set forth in the Duke-Piedmont Agreement shall be
deemed to refer to such quantities during the period in which the Duke-Piedmont
Agreement is in effect, before which time and after which time such quantities
shall be deemed to be equal to zero; and (ii) all references in this Agreement
to quantities under or as determined or set forth in the Duke-Rutherford
Agreement shall be deemed to refer to such quantities during the period in which
the Duke-Rutherford Agreement is in effect, before which time and after which
time such quantities shall be deemed to be equal to zero. For example, if this
Agreement and the Duke-Piedmont Agreement terminate August 31, 2008, and the
Duke-Rutherford Agreement terminates August 31, 2007, then during the period
through August 31, 2007, EMC Group Native Load shall mean the sum of (i) the EMC
Native Load under this Agreement, (ii) the EMC Native Load under the
Duke-Piedmont Agreement, and (iii) the EMC Native Load under the Duke-Rutherford
Agreement, and during the period September 1, 2007 through August 31, 2008, EMC
Group Native Load shall mean the sum of (i) the EMC Native Load under this
Agreement and (ii) the EMC Native Load under the Duke-Piedmont Agreement. In
addition, for purposes of calculating the charges under Sections 3.5.2.3 and 7.1
(including charges and credits calculated pursuant to Section 7.1 in the event
that EMC exercises its option pursuant to Section 3.5.2.3), all references to
“EMC Group” shall refer collectively to the members of such group that are
served under those of the above-referenced Agreements that are then in effect
(e.g., in the above example, “EMC Group” would no longer include Rutherford
effective September 1, 2007).

 

7.2 Charges During January 1, 2007 – December 31, 2010.

7.2.1 General. For service provided during the period January 1, 2007 –
December 31, 2010, EMC shall pay to Duke the Monthly Demand Charge set forth in
Section 7.2.2, the Duke Monthly Energy Charge set forth in Section 7.2.3 and, if
applicable, the Monthly Reserve Capacity Charge set forth in Section 7.4. The
charges set forth in this Section 7.2 are in addition to the other charges set
forth in other sections of this Agreement.

7.2.2 Monthly Demand Charge. The Monthly Demand Charge for a Month shall be
equal to the product of (i) the Monthly Billing Demand for the Month (kW) and
(ii) the Monthly Demand Rate for the Year ($/kW-Month).

7.2.2.1 Monthly Demand Rate. The Monthly Demand Rate for each Year shall be
calculated in accordance with the formula rate set forth in Schedule 1. The
Monthly Demand Rate initially shall be calculated based on estimated data, and
shall be subject to true-up after actual data become available. The true-up
shall be provided to EMC no later than June 30 following the Year in which
service was provided, and shall include interest on any refunds or surcharges
calculated in accordance with Section 35.19a of FERC’s regulations.

7.2.2.2 Monthly Billing Demand. The Monthly Billing Demand for each Month of the
Year shall be equal to the average of the twenty (20) EMC Peak Hour Billing
Demands coincident with the twenty (20) highest Hourly (integrated sixty-minute)
Duke Schedule 1 Demands during July and August of such Year. The EMC Peak Hour
Billing

 

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Demand for an Hour shall be equal to the integrated sixty (60) minute EMC Native
Load demand (kW) for the Hour minus EMC’s Base Obligation (kW) for such Hour,
but in no event shall the EMC Peak Hour billing Demand for an Hour (or the
Monthly Billing Demand) be less than zero. The Monthly Billing Demand initially
shall be calculated based on estimated data, and shall be subject to true-up
after actual data become available. The true-up shall be provided to EMC no
later than June 30 following the Year in which service was provided, and shall
include interest on any refunds or surcharges calculated in accordance with
Section 35.19a of FERC’s regulations. An example showing the calculation of this
billing demand is shown in Attachment 7-7.

7.2.3 Monthly Energy Charge. The Duke Monthly Energy Charge for a Month shall be
equal to the sum of the Monthly Fuel Charge and Monthly Variable O&M Charge for
the Month. If the Duke Monthly Energy Charge is positive, EMC shall pay such
amount to Duke. If the Duke Monthly Energy Charge is negative, Duke shall credit
such amount to EMC.

7.2.3.1 Monthly Fuel Charge. The Monthly Fuel Charge for a Month shall be equal
to the sum of the Hourly Fuel Charges for the Month. The Hourly Fuel Charge for
an Hour shall be equal to the product (i) EMC’s Native Load demands during the
Hour (kW) minus EMC’s Base Obligation for the Hour (kW) and (ii) the Fuel Rate
for the Year ($/kWh). The Fuel Rate for each Year shall be calculated in
accordance with the formula rate set forth in Schedule 1. The Fuel Rate shall
initially be calculated based on estimated data, and shall be subject to true-up
after actual data become available. The true-up shall be provided to EMC no
later than June 30 following the Year in which service was provided, and shall
include interest on any refunds or surcharges calculated in accordance with
Section 35.19a of FERC’s regulations. Duke will keep EMC informed of the true-up
subtotal on a semi-annual basis during a Year.

7.2.3.2 Monthly Variable O&M Charge. The Monthly Variable O&M Charge for a Month
shall be equal to the sum of the Hourly Variable O&M Charges for the Month. The
Hourly Variable O&M Charges for an Hour shall be equal to the product of
(i) EMC’s Native Load demands during the Hour (kW) minus EMC’s Base Obligation
for the Hour (kW), and (ii) the Variable O&M Rate for the Year ($/kWh). The
Variable O&M Rate for each Year shall be calculated in accordance with the
formula rate set forth in Schedule 1. The Variable O&M Rate initially shall be
calculated based on estimated data, and shall be subject to true-up after actual
data become available. The true-up shall be provided to EMC no later than
June 30 following the Year in which service was provided, and shall include
interest on any refunds or surcharges calculated in accordance with
Section 35.19a of FERC’s regulations.

 

7.3 Charges Commencing January 1, 2011.

7.3.1 General. For service provided commencing January 1, 2011 through the
termination of this Agreement, EMC shall pay to Duke the Monthly Demand Charge
set forth in Section 7.3.2 and the Duke Monthly Energy Charge set forth in
Section 7.3.3. The charges set forth in this Section 7.3 are in addition to the
other charges set forth in other sections of this Agreement.

 

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7.3.2 Monthly Demand Charge. The Monthly Demand Charge for a Month shall be
equal to the product of (i) the Monthly Billing Demand for the Month (kW) and
(ii) the Monthly Demand Rate for the Year ($/kW-Month).

7.3.2.1 Monthly Demand Rate. The Monthly Demand Rate for each Year shall be
calculated in accordance with the formula rate set forth in Schedule 1. The
Monthly Demand Rate shall initially be calculated based on estimated data, and
shall be subject to true-up after actual data become available. The true-up
shall be provided to EMC no later than June 30 following the Year in which
service was provided, and shall include interest on any refunds or surcharges
calculated in accordance with Section 35.19a of FERC’s regulations.

7.3.2.2 Monthly Billing Demand. The Monthly Billing Demand for each month of a
Year shall be equal to the average of the twenty (20) EMC Peak Hour Billing
Demands coincident with the twenty (20) highest Hourly (integrated sixty-minute)
Duke Schedule 1 Demands during the Annual Planning Period for such Year (as
determined in Section 7.3.2.3). The EMC Peak Hour Billing Demand for an Hour
shall be equal to the integrated sixty (60) minute EMC Native Load demand (kW)
for the Hour minus the Partial Requirements Resources (kW) for such Hour, but in
no event shall the EMC Peak Hour Billing Demand (or the Monthly Billing Demand)
be less than zero. The Monthly Billing Demand shall initially be calculated
based on estimated data, and shall be subject to true-up after actual data
become available. The true-up shall be provided to EMC no later than June 30
following the Year in which service was provided, and shall include interest on
any refunds or surcharges calculated in accordance with Section 35.19a of FERC’s
regulations. Examples showing the calculation of the Monthly Billing Demand are
shown in Attachment 7-8.

7.3.2.3 Determination of Annual Planning Period. If the then-effective Annual
Planning Period is the Summer Period, the Annual Planning Period for purposes of
determining the Monthly Billing Demand for the Year under Section 7.3.2.2 shall
be the Summer Period that occurs within such Year (for example, if the Annual
Planning Period in 2012 is the Summer Period, and the Summer Period is May -
September, the Annual Planning Period for purposes of determining the Monthly
Billing Demand for 2012 under Section 7.3.2.2 is May 2012 - September 2012). If
the then-effective Annual Planning Period is the Winter Period, the Annual
Planning Period for purposes of determining the Monthly Billing Demand for the
Year under Section 7.3.2.2 shall be the Winter Period that ends in such Year
(for example, if the Annual Planning Period in 2012 is the Winter Period, and
the Winter Period is October - April, the Annual Planning Period for purposes of
determining the Monthly Billing Demand for 2012 under Section 7.3.2.2 is October
2011 - April 2012).

7.3.2.4 Annual Percentage. No later than June 30, 2012, and each June 30
thereafter during the Term, Duke shall calculate the Annual Percentage for the
immediately preceding Year using the formula set forth in Attachment 7-9, and
shall provide such calculation to EMC, together with supporting information. The
Annual Percentage may be a positive or negative value. In the event that the
Annual Percentage for such Year is greater than positive four percent (4%), the
Monthly Demand Rate for such Year calculated pursuant to Section 7.3.2.1 shall
be reduced by the percentage equal to the Demand Rate Adjustment Percentage.
This reduction shall only apply to the Year for which it is calculated. This
reduction shall be reflected in the true-up provided to EMC pursuant to
Section 7.3.2.1. In the

 

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event that the Annual Percentage for such Year is a positive four percent
(4%) or less, or is negative, there shall be no adjustments to the Monthly
Demand Rate under this Section 7.3.2.4 for such Year. Illustrative examples
showing the calculation of the Annual Percentage and Demand Rate Adjustment
Percentage and the resulting reduction, if any, to the Monthly Demand Rate are
set forth in Attachment 7-10.

7.3.3 Monthly Energy Charge. The Duke Monthly Energy Charge for a Month shall be
equal to the sum of the Monthly Fuel Charge and Monthly Variable O&M Charge for
the Month.

7.3.3.1 Monthly Fuel Charge. The Monthly Fuel Charge for a Month shall be equal
to the sum of the Hourly Fuel Charges for the Month. The Hourly Fuel Charge for
an Hour shall be equal to the product (i) EMC’s Native Load demand during the
Hour (kW) minus the sum of (a) EMC’s Dispatched Baseload Resources for the Hour
(kW) and (b) EMC’s Dispatched Combined Cycle Resources for the Hour for which
EMC bears the Energy Cost pursuant to Section 4.3.3.1 (kW), and (ii) the Fuel
Rate for the Year ($/kWh). The Fuel Rate for each Year shall be calculated in
accordance with the formula rate set forth in Schedule 1. The Fuel Rate shall
initially be calculated based on estimated data, and shall be subject to true-up
after actual data become available. The true-up shall be provided to EMC no
later than June 30 following the Year in which service was provided, and shall
include interest on any refunds or surcharges calculated in accordance with
Section 35.19a of FERC’s regulations. Duke will keep EMC informed of the true-up
subtotal on a semi-annual basis during a Year.

7.3.3.2 Monthly Variable O&M Charge. The Monthly Variable O&M Charge for a Month
shall be equal to the sum of the Hourly Variable O&M Charges for the Month. The
Hourly Variable O&M Charge for an Hour shall be equal to the product of
(i) EMC’s Native Load demands during the Hour (kW) minus the sum of (a) EMC’s
Dispatched Baseload Resources for the Hour (kW) and (b) EMC’s Dispatched
Combined Cycle Resources for the Hour for which EMC bears the Energy Cost
pursuant to Section 4.3.3.1 (kW) and (ii) the Variable O&M Rate for the Year
($/kWh). The Variable O&M Rate for each Year shall be calculated in accordance
with the formula rate set forth in Schedule 1. The Variable O&M Rate shall
initially be calculated based on estimated data, and shall be subject to true-up
after actual data become available. The true-up shall be provided to EMC no
later than June 30 following the Year in which service was provided, and shall
include interest on any refunds or surcharges calculated in accordance with
Section 35.19a of FERC’s regulations.

7.4 Monthly Reserve Capacity Charges. In the event that Duke provides
Replacement Energy to EMC pursuant to Section 4.2.4 in an amount of five
thousand (5,000) kW or greater during any Hour of a Year, EMC shall pay a
Monthly Reserve Capacity Charge equal to the product of (i) the Monthly Demand
Rate as calculated in Section 7.3.2.1 and (ii) the amount (in kW) of reserves
that would be required under Duke’s Generation Planning Practices for a
generating resource of a size equivalent to the amount of Replacement Energy
provided to EMC (the “Reserve Capacity Amount”). This charge shall commence on
the Day following the Day on which Duke provided Replacement Energy to EMC, and
shall terminate on December 31 of that Year. For example, if Duke provides a
maximum amount of 100,000 kWh of Replacement Energy to EMC in any given Hour on
July 15, 2007, and the reserves that would be required for a 100,000 kW
generating resource under Duke’s Generation Planning Practices is 17,000 kW, EMC
shall be responsible for a Monthly Reserve Capacity Charge for 17,000 kW from
July 16,

 

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2007, through December 31, 2007, subject to increase as provided in the next
sentence. In the event that Duke provides Replacement Energy to EMC for any
additional Hours during such Year, and the amount of Replacement Energy provided
during any such Hours is greater than that previously provided during the Year,
then the Reserve Capacity Amount shall be increased to reflect such greater
amount of Replacement Energy, effective the Day after the Replacement Energy is
provided. In the event that Duke provides Replacement Energy to EMC in a
subsequent Year, the foregoing provisions shall apply, and EMC shall pay Monthly
Reserve Capacity Charges with respect to such Replacement Energy as provided
above. Notwithstanding anything in this Section 7.4 to the contrary, the Monthly
Reserve Capacity Charges shall terminate no later than December 31, 2010. Any
Monthly Reserve Capacity Charge, or increase in such charge, that begins on a
Day other than the first Day of the Month shall be adjusted pro rata for that
Month to reflect the number of Days during the Month in which the charge or
charge increase was in effect.

7.4.1 Force Majeure Events. Notwithstanding the provisions of Section 7.4, in
the event that Duke provides Replacement Energy to EMC due to the occurrence of
a force majeure event, EMC shall not incur a Monthly Reserve Capacity Charge due
to Duke’s provision of Replacement Energy for the first twenty-four (24) Hours
following such occurrence. For purposes of this Section 7.4.1, the term “force
majeure” means an event or circumstance that: (i) prevents the party claiming to
be affected by it from performing its obligations in whole or in part; (ii) is
not within the reasonable control of the claiming party, or the result of the
negligence of the claiming party, and (iii) by the exercise of due diligence,
the claiming party is unable to overcome in a commercially reasonable manner,
and, without limiting the scope of the definition, includes acts of God, or the
public enemy, or insurrection, riot, acts of terrorism, civil disturbance or
disorder, strikes, fire, earthquakes, floods, storms or other natural disasters,
or actions or restraints by court order or governmental authority or arbitration
award (so long as the claiming party has not sought or has opposed, to the
extent reasonable, such actions or restraints). It is expressly acknowledged
that transmission service interruptions or curtailments imposed by a
transmission provider in response to transmission capacity or availability
shortages shall not be “force majeure” events or circumstances for purposes of
this Section 7.4.1.

7.5 Payment. All charges or payments contemplated by this Article 7 shall be
made in accordance with provisions of Article 13.

7.6 Determination of EMC Capacity and Energy Demands. For purposes of
determining the electric capacity and energy charges under this Agreement, EMC’s
Native Load demands shall be as determined under the NOA (which demands shall
include the adjustments under the NOA for losses between the point of delivery
under the NITSA and the point of measurement, and the corrections under the NOA
for any metering failures or inaccuracies), and shall be increased by ( 1 / (1 -
TLF ), in order to reflect such demands at the generation level (i.e., at the
point at which power is available for transmission). Metered receipts used in
billings and accounting hereunder will in all cases include adjustments for such
losses. TLF shall be equal to the transmission loss factor set forth in the
Transmission Provider’s OATT, and shall be expressed as a decimal. For example,
if the transmission loss factor in the Transmission Provider’s OATT is three
percent (3%), then ( 1 / (1 - TLF )) shall be equal to ( 1 / (1 -.03)), or ( 1 /
.97 ). In the event that the NOA is terminated, or the electric capacity and
energy demands measured under the NOA no longer include an adjustment for losses
between the point of delivery under the NITSA and the

 

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point of measurement or provisions for correcting such demands for metering
failures or inaccuracies, then, for purposes of determining the capacity and
energy charges under this Agreement, EMC’s metered electric capacity and energy
demands shall be adjusted for losses between the point of delivery under the
NITSA and point of measurement and further increased by ( 1 / (1-TLF)), in order
to reflect such demands at the generation level (i.e., at the point at which
power is available for transmission), and suitable arrangements shall be made by
the Parties for correcting such demands due to metering failures or
inaccuracies.

Article 8

Scheduling Agent Services

8.1 Appointment of Duke as Scheduling Agent. EMC hereby appoints Duke as
Scheduling Agent, effective on the Effective Date (or such earlier date as is
required so that Scheduling Agent may begin rendering Scheduling Agent Services
by the Commencement Date), as agent for EMC for the Term, for the limited
purposes set forth in this Agreement, with full power and authority to render
the Scheduling Agent Services, and Duke accepts such appointment.

8.1.1 Costs. The Parties acknowledge and agree that all costs and expenses
incurred by Duke to provide Scheduling Agent Services are included in the
charges set forth in Article 7 and, except as provided for in Section 7.1.6, EMC
shall not be charged any additional rates, charges or fees in connection with
Duke’s provision of Scheduling Agent Services.

8.2 Scheduling Policies. In providing Scheduling Agent Services hereunder, Duke
shall comply with (i) the NCEMC policies set forth in Attachment 8-1 (“NCEMC
Policies”), (ii) the SEPA policies set forth in Attachment 8-2 (“SEPA Policies”)
and (iii) the Transmission Provider’s OATT.

8.3 Protocols. In advance of the Commencement Date, and from time to time
thereafter as the Operating Committee may determine appropriate, the Operating
Committee shall meet and make reasonable efforts to establish written protocols
and procedures to implement the Scheduling Agent Services provided for
hereunder, which shall be reviewed and agreed to by the Parties; provided
however, that the Operating Committee’s failure to agree upon such protocols and
procedures shall not affect in any way the Parties’ respective rights and
obligations under this Article 8.

8.4 Scheduling Agent Services (Commencement Date through December 31, 2010).
Beginning on the Commencement Date and continuing through December 31, 2010,
Duke shall provide the following Scheduling Agent Services:

8.4.1 Duke shall develop next-Day and multi-Day forecasts of EMC’s Native Load.

8.4.2 Duke shall provide NCEMC with seven-Day and next-Day forecasts of EMC’s
Native Load.

8.4.3 Duke shall receive each Day the Nominations from MSCG, and confirm such
Nominations with MSCG in writing, facsimile, e-mail, or any other agreed-upon
form of communication.

 

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8.4.4 Duke shall provide to NCEMC the Nominations that Duke receives pursuant to
Section 8.4.3.

8.4.5 Duke shall provide operational forecasts of EMC Native Load as may be
requested by the Transmission Provider from time to time.

8.4.6 Duke shall receive weekly availability schedules from SEPA.

8.4.7 Duke shall provide to SEPA week-ahead schedules and real-time adjustments
to the week-ahead schedules of EMC’s SEPA Entitlement.

8.4.8 Duke shall receive any information or notices from NCEMC, MSCG, or SEPA
relating to any changes in the schedules of electric energy to be delivered to
serve EMC’s Native Load.

8.4.9 Duke shall provide daily and Monthly reconciliation and checkout services
to EMC with respect to each of NCEMC, SEPA, the Transmission Provider, and MSCG
in connection with services provided by such entities to serve EMC’s Native
Load.

8.4.10 Duke shall reasonably cooperate with EMC to enable EMC to address issues
that may arise in connection with invoices or bills rendered to EMC by the
Transmission Provider in connection with the delivery of electric energy under
the PPA, the WPSA, or EMC Contract Resources described in Sections 5.1.3, 5.1.4
and 5.1.5, the SEPA Contract to serve EMC’s Native Load. Such cooperation shall
include providing EMC with data, records, and other information available to
Duke and related to the invoices or bills at issue.

8.4.11 If Duke has information that MSCG was not informed of any transmission
constraints or other impediments to deliveries under the PPA to the delivery
points designated by MSCG, Duke shall, as promptly as reasonably practical,
inform MSCG of any transmission constraints or other impediments to deliveries
under the PPA to the delivery points designated by MSCG.

8.4.12 Duke shall serve as EMC’s Purchasing – Selling Entity.

8.4.13 Duke shall schedule to the Transmission Provider electric energy to be
delivered from the EMC Contract Resources described in Sections 5.1.3, 5.1.4 and
5.1.5.

8.5 Scheduling Agent Services (January 1, 2011 through Termination). Beginning
on January 1, 2011, and continuing through the date of termination of this
Agreement, Duke shall provide the following Scheduling Agent Services:

8.5.1 Duke shall develop next-Day and multi-Day forecasts of EMC’s Native Load.

8.5.2 Duke shall provide NCEMC with seven-Day and next-Day forecasts of EMC’s
Native Load.

8.5.3 Duke shall provide to NCEMC with the daily schedule of electric energy to
be made available each Hour to serve EMC’s Native Load under the WPSA.

 

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8.5.4 Duke shall receive weekly availability schedules from SEPA.

8.5.5 Duke shall provide to SEPA week-ahead schedules and real-time adjustments
to the week-ahead schedules of EMC’s SEPA Entitlement.

8.5.6 Duke shall provide operational forecasts of EMC Native Load as may be
requested by the Transmission Provider from time to time.

8.5.7 Duke shall receive any information or notices from NCEMC or SEPA relating
to any changes in the schedules of electric energy to be delivered to serve
EMC’s Native Load.

8.5.8 Duke shall provide daily and Monthly reconciliation and checkout services
to EMC with respect to NCEMC, SEPA, and the Transmission Provider in connection
with services provided by those entities to serve EMC’s Native Load.

8.5.9 Duke shall reasonably cooperate with EMC to enable EMC to address issues
that may arise in connection with invoices or bills rendered to EMC by the
Transmission Provider in connection with the delivery of electric energy under
the WPSA, EMC Contract Resources described in Section 5.2, or the SEPA Contract
to serve EMC’s Native Load. Such cooperation shall include, but is not limited
to, providing EMC with data, records and other information available to Duke and
related to the invoices or bills at issue.

8.5.10 Duke shall serve as EMC’s Purchasing – Selling Entity.

8.5.11 Duke shall schedule to the Transmission Provider electric energy to be
delivered from the EMC Contract Resources described in Section 5.2.

8.6 New EMC Resources. If EMC obtains one or more new EMC Contract Resources in
accordance with the provisions of Article 5 of this Agreement, the Parties shall
negotiate appropriate revisions to this Agreement or the protocols and
procedures developed under Section 8.3 as necessary for Duke to provide
Scheduling Agent Services hereunder in connection with such new EMC Contract
Resources; provided however, the failure of the Parties to agree on revisions to
this Agreement or the protocols and procedures developed under Section 8.3 shall
not relieve Duke of its obligation to schedule such new EMC Contract Resources.

8.7 Errors in Schedules. If Duke is notified by the Transmission Provider,
NCEMC, SEPA or a third party with respect to EMC Contract Resources described in
Sections 5.1.3, 5.1.4, 5.1.5 or 5.2, that any schedule provided by Duke as
Scheduling Agent has been rejected, Duke shall provide to the Transmission
Provider, NCEMC, SEPA or third party, as applicable, a substitute schedule for
the Day in question taking into account the information provided by the
Transmission Provider, NCEMC, SEPA or third party, as applicable, in connection
with such rejection.

8.8 EMC Responsibilities. In connection with Duke’s undertaking Scheduling Agent
Services, EMC shall have the following obligations:

8.8.1 EMC shall provide Duke, as Scheduling Agent, with: (a) meter data such
that Duke may calculate aggregate load in discrete locations or in aggregate
load areas as determined

 

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by Transmission Provider; (b) five (5) years of the most recent historical load
data; and (c) the Power Requirements Study (or such successor document) that EMC
submits annually to the RUS.

8.8.2 EMC shall make arrangements with NCEMC, SEPA, the Transmission Provider,
and any third party responsible for providing for deliveries of new EMC
Resources as provided for in Section 8.6, as are necessary for those parties to
communicate with, and accept or receive schedules or other information submitted
by or to Duke as Scheduling Agent.

8.8.3 During the period from the Commencement Date through December 31, 2010,
EMC shall direct MSCG to communicate with, and provide Nominations to Duke as
Scheduling Agent.

8.8.4 EMC shall reasonably cooperate with Duke as necessary for Duke to assist
EMC in addressing issues that may arise in connection with invoices or bills
rendered to EMC by the Transmission Provider, as provided for in Sections 8.4.10
and 8.5.9.

8.9 Duke’s Liability. Duke shall be liable for any damages arising from Duke’s
unexcused failure to comply with the provisions of this Article 8.

8.10 Termination Assistance Service. Commencing six (6) Months prior to the
scheduled termination of this Agreement and continuing through the termination
date of this Agreement (the “Termination Assistance Period”), Duke shall provide
to EMC, or at EMC’s request to EMC’s designee, such reasonable cooperation,
assistance and service to cause the orderly and timely transition and migration
of Scheduling Agent Services provided under this Agreement to EMC’s new energy
supplier and/or scheduling agent without interruption or adverse effect
(“Termination Assistance Service”). EMC may shorten or terminate the Termination
Assistance Period by providing written notice to Duke.

Article 9

Transmission and Ancillary Services

9.1 Delivery Obligations. Duke shall be responsible for making all arrangements
necessary and paying for all costs incurred under contractual arrangements
necessary to deliver the electric energy provided hereunder to the Delivery
Points. EMC shall be responsible for making and paying for all contractual
arrangements necessary for the delivery of the electric energy provided
hereunder from the Delivery Points.

9.2 Transmission Arrangements. This Agreement does not obligate Duke to provide
any Transmission Service or Ancillary Services, and does not confer upon EMC any
rights to service over the Transmission System. EMC shall be responsible for
making separate contractual arrangements with the Transmission Provider for all
Transmission Service and Ancillary Services to be provided to EMC.

9.3 Ancillary Services. Duke shall make Commercially Reasonable Efforts to
assist in any effort by EMC to have the Transmission Provider recognize that the
electric capacity and energy provided hereunder satisfies one or more of such
Transmission Provider’s Ancillary Services

 

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requirements; provided, however, that nothing in this Section 9.3 shall in any
way obligate Duke to provide, make arrangements for, or pay for any Ancillary
Services except as expressly provided for in Section 9.3.1.

9.3.1 Energy Imbalance Responsibility. Duke shall reimburse EMC in accordance
with the provisions of Article 13 for any Hour in which, as a result of Duke’s
unexcused failure to comply with the provisions of Article 8, Energy Imbalance
Service charges are incurred by EMC in accordance with the Transmission
Provider’s OATT. EMC shall reimburse Duke in accordance with the provisions of
Article 13 for any Hour in which, as a result of Duke’s unexcused failure to
comply with the provisions of Article 8, Energy Imbalance Service compensation
is provided to EMC in accordance with the Transmission Provider’s OATT.

9.4 Regional Transmission Organization. If an ISO, RTO, ITC or other future
organization, agency or authority that has been approved by FERC to serve as the
Transmission Provider, then Duke and EMC will reasonably cooperate to make or
enter into arrangements with such entity to assist such entity with the
implementation of this Agreement. It is expressly understood that neither the
implementation of an ISO, RTO, ITC or other future organization, agency or
authority that has been approved by FERC to serve as the Transmission Provider
nor the failure of the Parties to enter into the arrangements contemplated under
this Section 9.4 shall relieve either Party of any obligations under this
Agreement.

9.4.1 Cost Responsibility. Except as provided in Section 9.3.1, it is expressly
understood that nothing herein shall be construed to in any way relieve EMC of,
or impose upon Duke, the responsibility for any fees, costs, or charges
(including but not limited to congestion costs, transmission losses, or the
costs or charges to secure financial transmission rights or the equivalent
thereof) that may be imposed on EMC by an ISO, RTO, ITC or other future
organization, agency or authority that has been approved by FERC to serve as the
Transmission Provider in connection with the provision of Transmission Service
or Ancillary Services. It is further expressly understood that Duke shall have
no right or interest in any financial transmission rights or the equivalent
thereof that are allocated, assigned, transferred or acquired by EMC.

9.4.2 Congestion Costs. In the event that the Transmission Provider implements a
pricing methodology that allocates congestion costs on a locational basis, in
determining the dispatch order of Duke’s Generation System, Duke shall make no
adverse distinction between Duke’s Native Load and Duke’s obligations to supply
FFR Supplemental Service or Partial Requirements Service, as applicable under
this Agreement. Duke further agrees that, in the event it designates Delivery
Points for Duke’s Generation System, Duke shall make no adverse distinction
between Duke’s Native Load and Duke’s obligations to supply FFR Supplemental
Service or Partial Requirements Service, as applicable under this Agreement. The
Parties shall reasonably cooperate with each other in an effort to develop and
implement congestion management strategies designed to minimize the incurrence
of congestions costs associated with the delivery of electric energy under this
Agreement. Duke will provide EMC with recommended strategies to manage such
congestion costs, under terms that would not subject Duke’s Native Load to any
costs that Duke would not otherwise incur, and if EMC agrees with such
recommendation, Duke will use Commercially Reasonable Efforts to implement the
recommended congestion management strategies. Duke shall also use Commercially
Reasonable Efforts to comply with the congestion management rules that may be
adopted by the Transmission Provider.

 

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Article 10

Operating Committee

10.1 Operating Committee. The Parties shall establish an Operating Committee
consisting of one (1) Representative each. The Operating Committee shall act
only by unanimous agreement or consent. Duke and EMC shall designate their
respective Representatives to the Operating Committee, plus any alternate, by
written notice delivered in accordance with Section 16.22 within thirty
(30) Days after the Effective Date. Each Party’s Representative on the Operating
Committee is authorized to act on behalf of such Party with respect to any
matter arising under this Agreement.

10.2 Duties of the Operating Committee. The Operating Committee shall facilitate
the coordination and interaction between the Parties with respect to the
performance of the duties and obligations imposed on the Parties hereunder,
including development or revision of appropriate protocols and procedures
therefor. The Operating Committee shall not, however, have any authority to
modify or otherwise alter the Parties’ rights and obligations under this
Agreement.

Article 11

Demand Side Management

11.1 Availability of Demand Side Management Resource Programs. EMC may make
available to EMC’s Native Load customers EMC Demand Side Management Resource
Programs to the same extent and under comparable terms and conditions as Duke’s
Demand Side Management Resource Programs; provided, however, that EMC may not
make available to EMC’s Native Load customers any demand side management
resource programs or similar programs other than such EMC Demand Side Management
Resource Programs unless EMC is otherwise required by RUS or by applicable Law
to make other demand management side resource programs available to EMC’s Native
Load customers or is otherwise permitted under Section 11.7. Except as set forth
in Section 4.2.6, the terms and conditions of EMC Demand Side Management
Resource Programs shall be applied to EMC’s Native Load customers and enforced
by Duke in the same or comparable manner as they are applied to Duke’s Native
Load retail customers and enforced by Duke. Except as set forth in
Section 4.2.6, in implementing and operating such EMC Demand Side Management
Resource Programs, Duke shall make no adverse distinction with respect to EMC’s
Native Load.

11.2 Changes to Demand Side Management Resource Programs. Upon ninety (90) Days
prior written notice, Duke shall advise EMC of any modifications, additions, or
deletions that have been or will be made to the Demand Side Management Resource
Programs, and the EMC Demand Side Management Resource Programs available
hereunder to EMC’s Native Load customers shall be deemed to have been revised to
reflect such modifications, additions, or deletions without any further action
required by either Party.

 

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11.3 Credits. Except for any EMC Demand Side Management Resource Program
implemented pursuant to Section 11.7 of this Agreement, for each EMC Native Load
customer that implements an EMC Demand Side Management Resource Program, EMC
shall be entitled to a billing credit. Such billing credit shall be calculated
in accordance with the credit applicable for the Demand Side Management Resource
Program, as specified in the rider approved and on file with NCUC for such
Demand Side Management Resource Program. Each Month, Duke shall aggregate the
total billing credits to which EMC is entitled pursuant to this Section 11.3,
and provide EMC a credit on the Monthly statement delivered in accordance with
Section 13.2 equal to the total billing credits for such Month.

11.4 Necessary Arrangements. To the extent that an EMC Native Load customer
agrees to implement an EMC Demand Side Management Resource Program, the Parties
shall cooperate in preparing any detailed implementation procedures and
arrangements required to implement such program, provided that, except for any
EMC Demand Side Management Resource Program implemented pursuant to Section 11.7
of this Agreement, Duke shall retain sole operational control over such EMC
Demand Side Management Resource Program implemented. The failure of the Parties
to agree on detailed implementation procedures and obligations shall not affect
Duke’s obligation to provide EMC with credits as determined by Section 11.3.

11.4.1 Audits. For each EMC Demand Side Management Resource Program whose credit
depends upon the number of EMC Native Load customers, EMC shall be required to
provide Duke written notice, by no later than January 31 of each Year, of the
number of EMC Native Load customers with whom EMC has entered into arrangements
pursuant to this Section 11.4 for such EMC Demand Side Management Resource
Program. Duke shall have the right periodically to perform audits, in accordance
with the terms of Section 13.6 to verify the accuracy of the notices concerning
the number of EMC Native Load customers with whom EMC has entered into
arrangements for each EMC Demand Side Management Resource Program. Based on the
results of such audits, Duke shall be entitled, in accordance with the terms of
Section 13.2.2 to revise or adjust the level of credits that Duke previously had
provided EMC.

11.5 Start-Up Conditions. No later than sixty (60) Days after the Effective
Date, Duke shall conduct a system-wide test of each EMC Demand Side Management
Resource Program to determine its capability. Duke shall provide EMC with the
results of such test no later than five (5) Business Days after the completion
of the system-wide test. Duke shall not be required to provide credits for EMC
Demand Side Management Resource Programs unless the applicable standards and
requirements specified for Duke’s Demand Side Resource Management Programs under
the riders approved and on file with the NCUC shall have been met, and the
testing provided for in this Section 11.5 shall have been accomplished.

11.6 Periodic Testing. Duke shall have the right periodically, but no less than
once per Year, to conduct a system-wide test of each EMC Demand Side Management
Resource Program to determine whether the tested EMC Demand Side Management
Resource Program is capable of providing a level of demand reduction equal to
the level of the credit that EMC is, at the time of such system-wide test,
receiving for such EMC Demand Side Management Resource Program. Subject to
Section 11.6.1, if, at the time of such system-wide test, one or more EMC Demand
Side Management Resource Program(s) do not provide the level of demand reduction
equal to the level of the credit that EMC is receiving for such EMC Demand Side
Management Resource

 

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Program(s), Duke shall have the right to (i) reduce the credit provided to EMC
to the actual level of demand reduction provided at the time of the system-wide
test and, in accordance with the terms of Section 13.2.2, to revise or adjust
the level of credits that Duke previously had provided EMC, and (ii) provide
written notice within ninety (90) Days of the system-wide test, to cancel such
EMC Demand Side Management Resource Program(s).

11.6.1 Retesting. Within sixty (60) Days of any failure of a system-wide test
for an EMC Demand Side Management Resource Program, EMC shall have the right to
have Duke conduct a retest in order to demonstrate that such EMC Demand Side
Management Resource Program is capable of providing the level of demand
reduction equal to the level of the credit that EMC previously was receiving for
such EMC Demand Side Management Resource Program. To the extent that any such
system-wide retest demonstrates that the EMC Demand Side Management Resource
Program is capable of providing demand reduction, the credit provided to EMC
shall be restored to the prior level or such lesser level as demonstrated by the
result of such rescheduled test and, to the extent applicable, Duke shall, in
accordance with the terms of Section 13.2.2, revise or adjust the level of
credits that Duke previously had provided EMC and any notice to terminate
rendered by Duke pursuant to 11.6 shall be null and void.

11.7 EMC Demand Side Management. If Duke’s Annual Planning Period shifts from
the Summer Period to the Winter Period, then EMC shall have the authority to
implement and call upon EMC Demand Side Management Resource Programs to control
EMC’s Native Load demands coincident with the twenty (20) highest Hourly
(integrated sixty-minute) Duke Schedule 1 Demands during the Winter Period to
the level equal to but not below the average of (i) the average of EMC’s Native
Load demands coincident with the twenty (20) highest Hourly (integrated
sixty-minute) Duke Schedule 1 Demands during the immediately preceding Summer
Period and (ii) the average of EMC’s Native Load demands coincident with the
twenty (20) highest Hourly (integrated sixty-minute) Duke Schedule 1 Demands
during the second preceding Summer Period. For example, if (i) the Annual
Planning Period during May 2012 - April 2013 is the Summer Period (May 2012 -
September 2012), and the average of EMC’s integrated sixty (60) minute EMC
Native Load demands coincident with the twenty (20) highest Hourly Duke Schedule
1 Demands during such period is 100 MWs; and (ii) the Annual Planning Period
during May 2013 - April 2014 is the Winter Period (October 2013 - April 2014),
and the average of EMC’s integrated sixty (60) minute EMC Native Load demands
coincident with the twenty (20) highest Hourly Duke Schedule 1 Demands during
the Summer Period immediately preceding such Winter Period (i.e., May 2013 -
September 2013) is 102 MWs; then EMC may call upon EMC Demand Side Management
Resource Programs to control EMC’s integrated sixty (60) minute EMC Native Loads
demands coincident with the twenty (20) highest Hourly Duke Schedule 1 Demands
during October 2013 - April 2014 to the level equal to but not below 101 MWs. It
is expressly acknowledged that (a) Duke shall also have the right to call upon
any available EMC Demand Side Management Resource Program implemented pursuant
to this Section 11.7, and (b) EMC shall not be entitled to a billing credit
under Section 11.3 (or any other provision of this Agreement) in connection with
any EMC Demand Side Management Resource Program implemented pursuant to this
Section 11.7.

 

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Article 12

Modification of This Agreement

12.1 Unilateral Modification. Except as provided in Section 12.3:

No unilateral modification, amendment or other change to the terms of this
Agreement shall be permitted or deemed effective for any reason, and the rates,
terms and conditions specified herein shall not be subject to change through
application to FERC pursuant to the provisions of Sections 205 or 206 of the
Federal Power Act absent the written agreement of both Parties. Any amendment or
modification to this Agreement shall be deemed enforceable if and only if such
amendment or modification (a) has been reduced to writing, (b) has been agreed
to and duly executed by both Parties in writing, and (c) has received all
requisite approvals of Governmental Authorities necessary for the effectiveness
thereof. Each Party hereby irrevocably waives its rights, including any rights
under Sections 205 and/or 206 of the Federal Power Act, to file a complaint,
request an investigation, or make any unilateral rate-change request seeking:
(a) an order from FERC finding that any rate or provision in this Agreement is
unjust or unreasonable; (b) any refund with respect to this Agreement’s rates;
or (c) any other unilateral modification to this Agreement. Each Party agrees
not to make any such unilateral filing or request, and agrees and warrants that
these covenants and waivers shall be binding notwithstanding any regulatory,
market, or other change that may occur at any time during the Term.

12.2 Mobile-Sierra Public Interest Standard. Except as provided in Section 12.3,
to the extent this Agreement is challenged by any person or its terms are
subjected to review under the Federal Power Act or other Laws, the “just and
reasonable” standard shall not apply. Instead, absent the agreement of both
Parties to the proposed change, and except as provided in Section 12.3, the
standard of review for changes to this Agreement proposed by a Party, a
non-party, or FERC acting sua sponte shall be the “public interest” standard of
review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350
U.S. 332 (1956); Federal Power Commission v. Sierra Pacific Power Co., 350 U.S.
348 (1956).

12.3 Changes To Certain Charge Components. Notwithstanding anything else herein
to the contrary, nothing contained herein shall be construed as affecting in any
way the right of either Party to unilaterally make application to FERC under
Sections 205 or 206 of the Federal Power Act (i) to change the depreciation
rates and nuclear decommissioning accrual used in Schedule 1, (ii) to include
additional cost items that are incurred in providing FFR Supplemental Service or
Partial Requirements Service, as applicable, to EMC that are not included in
Schedule 1, (iii) to exclude from Schedule 1 cost items that are no longer
incurred in providing FFR Supplemental Service or Partial Requirements Service,
as applicable to EMC, or (iv) to change Schedule 1 to reflect changes in Duke’s
accounting consistent with the Accounting Requirements (including the addition
of new accounts and the removal of obsolete accounts). In addition, in the event
that (a) EMC implements new time-of-use rates or materially modifies its
existing time-of-use rates, for some or all of EMC’s Native Load customers,
(b) such rates result in a reduction of EMC’s Monthly Billing Demand under
Sections 7.2.2.2 or 7.3.2.2, and (c) such Monthly Billing Demand reduction does
not result in a commensurate reduction in the EMC demands that Duke utilizes in
Duke’s Generation Planning Practices, Duke may make unilateral application to
FERC

 

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under Section 205 of the Federal Power Act to change the calculation of the
Monthly Billing Demand set forth in Sections 7.2.2.2 or 7.3.2.2 to more
appropriately reflect the costs that Duke incurs in providing service under this
Agreement. In the event that Duke makes such a filing with FERC, EMC may oppose
such filing, and, in addition, shall be free to propose any other method for
calculating the Monthly Billing Demands set forth in Sections 7.2.2.2 or 7.3.2.2
to more appropriately reflect the costs that Duke incurs in providing service
under this Agreement.

12.4 Standard of Review for Permitted Changes. The Parties acknowledge that, as
of the Effective Date, FERC has issued a proposed rule that, if adopted, would
specify the language for parties to include in future agreements where the
parties intend that the “just and reasonable” standard of review apply to
amendments to the agreements. Notwithstanding the language that ultimately may
be adopted by FERC, it is the intent of the Parties that the standard of review
that FERC shall apply when acting on proposed modifications to this Agreement
that are permitted under Section 12.3, either on FERC’s own motion or on behalf
of a signatory or non-signatory, shall be the “just and reasonable” standard of
review rather than the “public interest” standard of review.

12.5 Scope of Waiver. Nothing in this Article 12 shall be construed to modify or
limit any Party’s right to enforce the express terms of this Agreement as they
are written in this Agreement.

Article 13

Billing and Payment

13.1 Billing Period. Unless otherwise specifically agreed upon by the Parties in
the terms of this Agreement or otherwise in writing, the Month shall be the
standard period for determining all billings and payments under this Agreement.

 

13.2 Billing Statements.

13.2.1 Initial Statements. After the end of each Billing Period, Duke shall
deliver to EMC a statement setting forth for the Billing Period (i) the sum of
the electric energy delivered and/or received for all Hours during that Billing
Period, and (ii) Duke’s calculation of any amounts due from EMC under this
Agreement for the Billing Period. In addition, in the event that there are
amounts due from Duke to EMC under this Agreement for a Billing Period, EMC
shall deliver to Duke, after the end of such Billing Period, a statement setting
forth for the Billing Period EMC’s calculation of any amounts due from Duke
under this Agreement for the Billing Period. Notwithstanding the foregoing, a
Party’s failure to render a statement as set forth above shall not relieve the
other Party from its obligation to make payment to the billing Party when such
statement is rendered, provided such statement is rendered within one (1) year
after the end of the Billing Period.

13.2.2 Subsequent Payment Adjustments. The Parties understand that in certain
cases Monthly billings will need to be made on an estimated basis. In addition,
the Parties understand that after-the-fact adjustments to amounts owed or
revenues received may be made in order to reflect correctly the amounts payable
by one Party to the other under this Agreement. Each Party

 

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shall cooperate in good faith with the other Party to obtain the requisite
information and perform the necessary computations so as to true-up or otherwise
adjust any estimated or adjusted billings promptly.

13.3 Timeliness of Payment. Unless otherwise agreed by the Parties, all
statements rendered under this Agreement, whether by Duke or EMC, shall be due
and payable in accordance with each Party’s statement instructions on or before
the later of the twentieth (20th) Day of each Month, or the tenth (10th) Day
after receipt of the statement or; if such Day is not a Business Day, then on
the next Business Day. Each Party shall make payments in immediately available
funds by electronic funds transfer, or by other mutually agreeable method, to
the account designated in writing by the other Party. Any non-disputed amounts
(other than amounts for which payment may be withheld pursuant to Section 13.5)
not paid by the due date shall be deemed delinquent and shall accrue interest at
the Interest Rate, such interest to be calculated from and including the due
date to but excluding the date the delinquent amount is paid in full.

13.4 Netting of Payments. The Parties hereby agree that they shall discharge
mutual debts and payment obligations due and owing to each other on the same
date through netting, in which case all amounts owed by each Party to the other
Party under this Agreement during the Billing Period, including any related
interest, payments, and credits, shall be netted so that only the excess amount
remaining shall be paid by the Party who owes it. If no mutual debts or payment
obligations exist and only one Party owes a debt or obligation to the other
Party during the Monthly Billing Period, including but not limited to any
interest, payments, or credits, that Party shall pay such sum in full when due.

13.5 Disputes and Adjustments of Statements. A Party may, in good faith, dispute
the correctness of any statement or any adjustment to a statement, rendered
under this Agreement or adjust any statement for any arithmetic or computational
error within twenty-four (24) Months of the date the statement, or adjustment to
a statement, was rendered. If a statement or portion thereof, or any other claim
or adjustment arising under this Agreement is disputed, the disputing Party
shall provide written notice to the other Party (the “Billing Dispute Notice”)
which (a) states the good faith basis for the dispute, (b) specifies the amount
in dispute (the “Disputed Amount”), if any, and (c) provides documentation
reasonably supporting the determination of the Disputed Amount. The disputing
Party shall, at its option, (a) make payment to the other Party of the Disputed
Amount under protest and thereafter shall be reimbursed by the other Party for
any amount determined to be refundable after the resolution of such dispute or
(b) withhold one half (1/2) of the Disputed Amount and make payment to the other
Party of the other one half (1/2) of the Disputed Amount. Payment to the other
Party of one half (1/2) of the Disputed Amount shall not relieve the disputing
Party of the obligation to pay interest accrued at the Interest Rate from and
including the date such payment was due to but excluding the date of such
payment of any portion of such Disputed Amount withheld and determined to be due
and payable after the resolution of such dispute. Likewise, the other Party
shall not be relieved of the obligation to pay interest accrued at the Interest
Rate from and including the date such payment was made to but excluding the date
of reimbursement of any portion of such Disputed Amount paid and determined to
be refundable after the resolution of such dispute.

In the event that a Party, by timely notice to the other Party, disputes the
correctness of a statement or portion thereof or any other claim or adjustment
arising under this Agreement, the

 

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other Party shall promptly review the disputed statement or adjustment and shall
notify the disputing Party, within forty-five (45) Days following receipt of the
Billing Dispute Notice, of the amount of any error or the amount of any payment
or reimbursement that the disputing Party is required to make or is entitled to
receive. Payments determined to be due by the disputing Party shall be included
on the next Monthly statement, and shall include interest accrued at the
Interest Rate from and including the due date to but excluding the date paid.
Reimbursements determined to be due from the other Party shall be included on
the next Monthly statement, and shall include interest accrued at the Interest
Rate from and including the due date to but excluding the date reimbursed. If
the disputing Party disagrees with the other Party’s resolution of any dispute,
then the Parties shall submit the dispute for resolution in accordance with
Article 14.

Inadvertent overpayments shall be returned upon request or deducted by the Party
receiving such overpayment from subsequent payments, with interest accrued at
the Interest Rate from and including the date of such overpayment to but
excluding the date repaid or deducted by the Party receiving such overpayment.
Any dispute with respect to a statement is waived unless the other Party is
notified in accordance with this Section 13.5 within twenty-four (24) Months
after the statement is rendered or any adjustment to the statement is made.
Neither Party shall have the right to challenge any statement, to invoke
arbitration of the same or to bring any court or administrative action of any
kind questioning the propriety or any other aspect of such statement after a
period of twenty-four (24) Months from the date the statement was rendered;
provided, however, that in the case of a statement containing estimates, such
twenty-four (24) Month period shall run from the date the statement is adjusted
to reflect the actual amounts due.

13.6 Records and Audits. Each Party shall keep such records and documents as may
be needed to afford a clear and complete history of all transactions under this
Agreement, and the cost information used to calculate the charges for such
transactions, for twenty-four (24) Months following the Month in which such
transaction occurs. In addition, during such twenty-four (24) Month period, EMC
shall have the right to audit all records, including phone and computer records,
related to Duke’s performance of its obligation not to adversely distinguish
against EMC’s Native Load under Section 4.3.3, Section 6.2, and Section 9.4.2 of
this Agreement. If a Party initiates an audit through a notice to the other
Party within the time period provided herein, the records and documents related
to such audit are required to be maintained under this Section 13.6, then the
other Party will retain such records and documents until such audit is complete.
If a Party issues an Original Notice pursuant to Article 14, then the Parties
will retain the records and documents relating to such dispute until the
resolution of such dispute. In maintaining such records and documents, EMC and
Duke may rely upon the logs and other meter information routinely recorded by
Transmission Providers or utilities responsible for coordination of the
purchases and sales. During such twenty-four (24) Month period, either Party, or
any third party Representatives of such Party, shall have the right, at its sole
expense and during normal working Hours, to examine the records of the other
Party, including documents and records held by third parties, to the extent
reasonably necessary to verify the accuracy of any statement, charge, or
computation made pursuant to this Agreement. The Party requesting the audit
shall pay the costs associated with any independent auditor. Upon the request of
the auditing Party, the document custodian of the other Party shall certify to
the auditing Party that, to the best of such person’s knowledge after reasonable
investigation, the documents and records supplied are true and complete and, in
the case of copies, are true, complete and correct copies of the original
documents requested by the auditing Party.

 

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13.6.1 Procedures. EMC may make a written request for Duke to provide access to
documents and records to verify the accuracy of any statement, charge or
computation made pursuant to this Agreement. Within ten (10) Business Days of
the receipt of a written request from EMC, Duke shall either provide EMC, or its
Representative, with access to the documents and records which are the subject
of the written request or provide EMC with copies of the original documents and
records. If Duke elects to provide EMC, or its Representative, with access to
the documents and records requested by EMC, EMC or its Representative shall be
permitted to make, at its own expense, copies of the documents and records to
which it or its’ Representative has been provided access. Any copies made by EMC
or its Representative shall be subject to the confidentiality provisions set
forth in Section 16.6. If Duke is unable to provide EMC with access or copies
within ten (10) Business Days of the receipt of EMC’s written request because it
is unable to locate or gain access to such documents and records after
reasonable investigation, Duke shall, within ten (10) Business Days of the
receipt of such written request, provide EMC with notice describing the reasons
for its failure to provide access to or copies of the documents and records, its
efforts to obtain such documents and records, and its best estimate of the time
in which EMC will be permitted access to or provided copies of such documents
and records. The twenty-four (24) Month period provided for in Section 13.5
shall be tolled from the date Duke gives notice describing the reasons for its
failure to provide access to or copies of the documents and records until Duke
shall have (i) provided EMC with copies or access to all documents and records
specified in EMC’s written request or (ii) Duke’s document custodian shall have
certified, that to the best of his knowledge after reasonable investigation that
such document does not exist or Duke cannot locate or produce such document or
records.

13.6.2 Adjustments Resulting from Audits. If any audit or examination under this
Section 13.6 reveals any inaccuracy in any statement, the necessary adjustments
in such statement and the payments thereof shall be made promptly and shall
accrue interest at the Interest Rate from the date the overpayment or
underpayment was made until paid; provided, however, that no adjustment for any
statement or payment shall be made unless objection to the accuracy thereof was
made prior to the lapse of twenty-four (24) Months from the rendition thereof,
and thereafter any objection shall be deemed waived.

13.6.3 Confidentiality. The auditing Party shall keep confidential any
information obtained in the audit. If requested, a Party shall provide to the
other Party statements evidencing the quantity of electric energy provided under
this Agreement for up to the prior twenty-four (24) Months. If an audit is
requested with respect to any records held by the a Party or a third party and
those records cannot be disclosed to the requesting Party as a result of a
confidentiality obligation, then to the extent legally permissible, the auditing
Party shall select an independent auditor to perform the audit consistent with
the Parties’ rights under this Agreement and with such confidentiality
arrangements as may be required by the confidentiality obligation in question.

 

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Article 14

Dispute Resolution

14.1 Arbitration. Except as otherwise provided below, any dispute arising out of
or in connection with this Agreement or its performance that cannot be resolved
after good faith discussions and negotiations between the Parties as set forth
in Section 14.2 shall be submitted to binding arbitration. A dispute with
respect to whether a Material Adverse Ruling meets the materiality standard
specified in Section 2.3.2.2(c)(1) or (c)(2) shall be subject to dispute
resolution pursuant to Section 2.3.2.2.2. A dispute with respect to an invoice
shall first be subject to the procedures set forth in Section 13.5, and if such
dispute is not resolved in accordance with such procedures, then such dispute
shall be submitted to binding arbitration in accordance with this Article 14.
Any arbitration commenced under this Article 14 shall be conducted in accordance
with the North Carolina Arbitration Act, N.C.G.S. Section 1-567 et seq., and the
non-administered arbitration rules and procedures of the CPR Institute for
Dispute Resolution (“CPR”) in effect at the time arbitration is commenced,
except where specifically modified by this Agreement.

14.2 Negotiation and Notice of Arbitration. Prior to initiating arbitration
hereunder, a Party shall provide the other Party with written notice of the
dispute, a proposed means for resolving the same, and support for the Party’s
position (“Original Notice”). Thereafter, Representatives of the Parties shall
meet in person to discuss the matter and attempt in good faith to reach a
negotiated resolution of the dispute. The Parties agree to provide and exchange
supporting facts, records and information regarding the dispute (including
calculation and bases) as part of the good faith negotiations. If the Parties
have not agreed upon a resolution of the dispute within thirty (30) Days after
the provision of the Original Notice or such other time period as the Parties
may agree in writing to allow for discussions and negotiation (“Negotiation
Period”), then at any time after the end of the Negotiation Period, a Party may
provide written notice to the other declaring an impasse (“Impasse Notice”) and
initiating binding arbitration in accordance with the further provisions of this
Article 14. A Party providing an Impasse Notice shall also contemporaneously
notify all entities within the EMC Group of the provision of its Impasse Notice.

14.3 Individual, Joint or Consolidated Arbitration. If, within thirty
(30) Business Days of EMC’s provision of an Impasse Notice, Piedmont and/or
Rutherford also provides an Impasse Notice relating to substantially the same
issue as raised by EMC’s Impasse Notice, or if Duke contemporaneously provides
each of EMC, Piedmont and/or Rutherford an Impasse Notice relating to
substantially the same issue, then each entity within the EMC Group shall have
ten (10) Business Days following the expiration of such thirty (30) Business Day
period to provide written notification to Duke stating whether or not such
entity will voluntarily proceed in a joint or combined arbitration.

If EMC and one or more of the entities within the EMC Group that have provided
or received Impasse Notices within the specified time period relating to
substantially the same issue elect to proceed individually or in more than one
arbitration proceeding, Duke shall have the right to file a motion to
consolidate such Impasse Notices with EMC’s Impasse Notice in a single
proceeding. The motion to consolidate such Impasse Notices shall be served
within ten (10)

 

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Business Days of the date when each entity within the EMC Group has provided
notice as to whether or not it will voluntarily proceed in a consolidated
arbitration. Duke’s motion to consolidate shall be decided in the first
commenced arbitration by one arbitrator (if the Streamlined Arbitration Process
is used) or one (1) arbitration panel (if the Standard Arbitration Process is
used), provided that the arbitrator(s) shall satisfy the qualifications required
pursuant to the third sentence of Section 14.6.1(1) or Section 14.6.2(2), as
applicable, with respect to all entities in the arbitration proceedings that are
the subject of the motion to consolidate. If Impasse Notices are simultaneously
given by EMC and one or more other entities within the EMC Group, then Duke
shall have sole discretion to designate which of the Impasse Notices shall be
treated as the first given for purposes of determining which arbitrator(s) shall
decide the motion to consolidate, and shall provide written notice of such
designation in the motion to consolidate arbitrations. The procedures set forth
in Sections 14.6.1 and 14.6.2 for each arbitration proceeding in which the
motion to consolidate was not filed shall be held in abeyance pending the
decision on the motion to consolidate by the arbitrator(s) in the arbitration
proceeding in which the motion to consolidate was filed.

In determining whether consolidation of one or all is appropriate, the
arbitrator(s) shall consider whether the same or substantially similar issue or
issues will be subject to the arbitration(s); EMC’s reasons for opposing
consolidation and Duke’s reasons for seeking consolidation; and the fundamental
fairness and efficiency in proceeding individually, jointly or consolidated. The
arbitrator(s) decision on the motion to consolidate shall be binding on the
Parties and not subject to appeal.

In the event the motion to consolidate is denied (unless otherwise agreed by the
Parties and the other entities of the EMC Group that have provided or received
such Impasse Notices), the arbitrations shall each proceed, subject to
resolution of scheduling issues, with no arbitration being stayed as a result of
the denial of the motion. In the event the motion to consolidate is granted,
each entity within the EMC Group, other than the entity which is a party to the
proceeding in which the motion to consolidate was filed, shall move for
dismissal of the respective arbitration actions in which it is a party.

14.3.1 Individual Treatment of EMC in Joint or Consolidated Arbitration. For
purposes of joint or combined arbitration, all of the entities within the EMC
Group participating in the proceeding shall be treated as one (1) Party for
purposes of Article 14, with the following exceptions. First, EMC shall be
treated as a separate Party for purposes of Selection of Arbitration Process set
forth in Section 14.4. Second, EMC may reach its own independent, voluntary
resolution with Duke and may pursue its own strategy and prosecute its case with
its own legal counsel in the joint or combined arbitration. Third, EMC will be
treated as a separate Party for purposes of discovery in Section 14.6.1(4) or
14.6.2(4). Fourth, EMC will be treated as a separate Party for purposes of a
Submission and for the adoption of the resolution and the associated monetary
amount with respect to the ultimate decision of the arbitrator(s). Fifth, EMC
will be treated as a separate Party for purposes of the third sentence of
Section 14.6.1(1) and Section 14.6.2(2).

14.4 Selection of Arbitration Process. No later than thirty (30) Days following
receipt of the Impasse Notice, or any longer time period as agreed to by the
Parties, the Parties shall agree on which arbitration process specified herein
to use: either the Standard Arbitration Process or the

 

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Streamlined Arbitration Process. Should the Parties fail to agree on the
arbitration process within thirty (30) Days following receipt of the Impasse
Notice, then the Standard Arbitration Process shall be used; provided however,
that the Streamlined Arbitration Process shall be used for any dispute where the
damages in dispute or other monetary value at stake is alleged to be two hundred
fifty thousand dollars ($250,000) or less for EMC or Duke, or in a joint or
combined proceeding two hundred and fifty thousand dollars ($250,000) or less
for each entity within the EMC Group that is participating in the proceeding. If
the damages in dispute or other monetary value at stake in a combined proceeding
is alleged to be two hundred fifty thousand dollars ($250,000) or less for EMC
and at least one (1) other of the entities within the EMC Group participating in
a joint or combined proceeding, the Streamlined Arbitration Process shall be
used upon the request of either Party (or any of the other entities within the
EMC Group participating in the proceeding) made within thirty (30) Days
following the receipt of the Impasse Notices.

14.5 Initiation of Arbitration. Unless otherwise agreed by the Parties and
except as provided for in Section 14.3, arbitration shall be deemed to be
initiated when the arbitration process is agreed upon or otherwise determined
pursuant to Section 14.4 (“Selection Date”).

 

14.6 Arbitration Processes.

14.6.1 Standard Arbitration Process. The following shall be the process that is
used, in accordance with this Article 14, as the Standard Arbitration Process
under this Agreement. By mutual agreement, the Parties may in any given
arbitration and for the purposes of that arbitration alone modify or forego any
procedural requirement or rule specified hereunder as part of the Standard
Arbitration Process:

(1) Selection of Arbitrators. The Party initiating arbitration shall nominate
one (1) arbitrator no later than fifteen (15) Days following the Selection Date.
The other Party shall nominate one (1) arbitrator no later than thirty (30) Days
after the Selection Date. Each of the two Party-nominated arbitrators shall be
unaffiliated with any of the Parties or their predecessors or Affiliates; shall
not be current or former employees of the nominating Party or its predecessors
or Affiliates and shall be without material financial alliance with the
nominating Party or its predecessors or Affiliates such that said arbitrator is
able to participate in the arbitration without evident partiality or actual bias
in favor of the nominating Party; unless such pecuniary interest or affiliation
is expressly acknowledged and waived by all Parties. The two (2) arbitrators
shall jointly appoint a third (3rd), neutral arbitrator within thirty (30) Days
after the nomination of the second (2nd) arbitrator. The neutral arbitrator
shall be the chairperson of the tribunal. This thirty (30) Day period may be
extended to sixty (60) Days by agreement of both Parties. If the two
(2) arbitrators are unable to agree on a third (3rd) arbitrator within the
specified time period, then a third (3rd) arbitrator shall be selected by the
CPR with due regard given to the selection criteria herein and in the subsequent
subsections of Article 14 and input from the Parties and other arbitrators. The
Parties shall request CPR to complete selection of the third (3rd) arbitrator no
later than thirty (30) Days following their request for selection of the
arbitrator. Costs charged by CPR for this service shall be borne one-half
(1/2) by Duke and one-half (1/2) by EMC; provided that if the arbitration
proceeds as a consolidated proceeding pursuant to Section 14.3, the costs
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borne one-half (1/2) by Duke and one-half (1/2) by the entities within the EMC
Group that participate in such consolidated arbitration. In the event CPR should
fail to select the third (3rd) arbitrator within thirty (30) Days following the
Parties’ request for selection of the arbitrator, then any Party may petition a
court of competent jurisdiction in the State of North Carolina to select the
third (3rd) arbitrator. Due regard shall be given to the selection criteria and
input from the Parties and other arbitrators. Each of the arbitrators shall take
an oath of neutrality.

(2) Additional Qualifications of Arbitrators. Unless otherwise agreed to by the
Parties, each of the arbitrators shall be competent and experienced in matters
involving the electricity business in the United States. Such experience shall
be conclusively demonstrated by ten (10) years or more of electric industry
experience as a practicing attorney or other experience or expertise as agreed
to by the Parties.

(3) Replacement of Arbitrators. If prior to the conclusion of the arbitration
any arbitrator becomes incapacitated or otherwise unable to serve, then a
replacement arbitrator with the qualifications specified herein shall be
appointed in the manner and timeframe (such timeframe starting anew following
the unavailability of the arbitrator to be replaced) described in
Section 14.6.1(1) above.

(4) Discovery. Discovery and other pre-hearing procedures shall be conducted as
set forth herein, as otherwise agreed by the Parties, or if they cannot agree,
as determined by a majority of the arbitrators. Each Party shall have the right
to propound up to ten (10) interrogatories, the right to request relevant
documents and records, conduct depositions (including depositions of experts),
designate experts, and obtain the opinion of opposing experts.

(5) Hearing. Within fifteen (15) Days after completion of discovery, each Party
shall contemporaneously submit by overnight delivery and electronic mail to the
arbitrators a precise statement of the dispute, a proposed resolution of the
dispute, including a monetary amount and the supporting calculations if
applicable, and the factual and/or legal support therefor (the “Submission”).
The next Business Day the Parties shall exchange complete Submissions by
overnight delivery and electronic mail. Within fifteen (15) Days after receiving
the other Party’s Submission, each Party may submit by overnight delivery and
electronic mail to the other Party and the arbitrators a reply statement to the
other Party’s Submission. The Parties shall conduct a hearing in Charlotte,
North Carolina no later than the later of (i) sixty (60) Days following
selection of the third (3rd) arbitrator, (ii) forty-five (45) Days after all pre
hearing discovery has been completed, or (iii) forty-five (45) Days after the
issuance of the arbitrators’ decision denying a motion to consolidate pursuant
to Section 14.3, at which the Parties shall present such evidence, argument, and
witnesses as they may choose. Prior to the beginning of the hearing, the Parties
may submit a joint statement of undisputed facts and/or issues to be resolved,
if the Parties so agree to submit such statement or if the arbitrators order
submission of the statement. If the Parties agree, or if allowed by a majority
of the arbitrators, the Parties each may submit a post-hearing brief to the
arbitrators within ten (10) Business Days of completion of the hearing. No reply
briefs shall be allowed unless otherwise permitted by a majority of the
arbitrators.

 

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14.6.2 Streamlined Arbitration Process. The following shall be the process that
is used, in accordance with this Article, as the Streamlined Arbitration Process
under this Agreement. By mutual agreement, the Parties may in any given
arbitration and for the purposes of that arbitration alone modify or forego any
procedural requirement or rule specified hereunder as part of the Streamlined
Arbitration Process:

(1) Selection of Arbitrator. No later than thirty (30) Days following the
Selection Date, the Parties shall agree upon a single arbitrator to conduct the
arbitration. If the Parties are unable to agree on an arbitrator, then the
arbitrator shall be selected by the CPR with due regard given to input from the
Parties and in conformity with the qualifications specified herein. The Parties
shall request CPR to complete selection of the arbitrator no later than thirty
(30) Days following their request for selection of an arbitrator. Costs charged
by CPR for this service shall be borne one-half (1/2) by Duke and one-half
(1/2) by EMC; provided that if the arbitration proceeds as a consolidated
proceeding pursuant to Section 14.3, the costs charged by CPR shall be borne
one-half (1/2) by Duke and one-half (1/2) by the entities within the EMC Group
that participate in such consolidated arbitration. In the event CPR should fail
to select the arbitrator within seventy-five (75) Days after the Selection Date,
then any Party may petition a court of competent jurisdiction in the State of
North Carolina to select the arbitrator. Due regard shall be given to the
selection criteria and input from the Parties. The arbitrator shall take an oath
of neutrality.

(2) Qualification of the Arbitrator. The arbitrator shall be unaffiliated with
any of the Parties or their predecessors or Affiliates, such that the
arbitrator:

(a) Shall not be a current or former employee, advisor, attorney or consultant;

(b) Shall be without material financial alliance, such that said arbitrator is
able to participate in the arbitration without evident partiality or bias,
unless such pecuniary interest or affiliation is expressly acknowledged and
waived by all Parties;

(c) Shall be competent in matters involving the electricity business in the
United States and shall have ten (10) years or more of electric industry
experience as a practicing attorney or such other experience or expertise as
agreed by the Parties; and

(d) Shall take an oath of neutrality.

(3) Replacement of Arbitrator. If prior to the conclusion of the arbitration the
arbitrator becomes incapacitated or otherwise unable to serve, then a
replacement arbitrator with the qualifications specified herein, shall be
appointed in the manner and timeframe (such timeframe starting anew following
the unavailability of the arbitrator to be replaced) described in
Section 14.6.2(1) above.

(4) Discovery. Discovery and other pre-hearing procedures shall be conducted as
set forth herein, as otherwise agreed by the Parties, or if they cannot agree,

 

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as determined by the arbitrator. Each Party shall have the right to propound up
to ten (10) interrogatories, the right to request relevant documents and
records, conduct at least three (3) depositions, in addition to obtaining
discovery of the opinions of any experts and the right to depose any experts
(which are not included in the three (3) depositions above). Additional
discovery may be conducted only as allowed by the arbitrator or agreed by the
Parties.

(5) Hearing. Within fifteen (15) Days after completion of discovery, each Party
shall contemporaneously submit a Submission by overnight delivery and electronic
mail to the arbitrator. The next Business Day, the Parties shall exchange
complete Submissions by overnight delivery and electronic mail. Within fifteen
(15) Days after receiving the other Party’s Submission, each Party may submit by
overnight delivery and electronic mail to the other Party and the arbitrator a
reply statement to the other Party’s Submission. The Parties shall conduct a
hearing in Charlotte, North Carolina no later than the later of (i) forty-five
(45) Days following selection of the arbitrator, (ii) forty-five (45) Days after
all pre-hearing discovery has been completed, or (iii) forty-five (45) days
after the issuance of the arbitrator(s)’ decision denying a motion to
consolidate pursuant to Section 14.3, at which the Parties shall present such
evidence, witnesses, and argument as they may choose. Unless otherwise ordered
by the arbitrator, at least two (2) Days prior to the beginning of the hearing,
the Parties may submit a joint statement of undisputed facts and/or issues to be
resolved if the Parties so agree to submit such statement or if the arbitrator
orders submission of the statement. If the Parties agree, or if allowed by the
arbitrator, the Parties may each submit a post-hearing brief to the arbitrator
within ten (10) Business Days of completion of the hearing. No reply briefs
shall be allowed unless otherwise permitted by the arbitrator.

14.7 Decision. The arbitrator (if the Streamlined Arbitration Process is used)
or a majority of the arbitrators (if the Standard Arbitration Process is used)
shall render his or their decision in favor of one Party or the other by
adopting the resolution and the associated monetary amount requested by the
prevailing Party in its Submission. The arbitrator(s) must determine the
prevailing Party by interpreting the meaning and intent of the language of this
Agreement, applying the applicable Law to the relevant facts and selecting the
arbitration ruling proposed by the Parties that most closely correlated to their
decision based upon this Agreement, the applicable Law and the relevant facts.
In rendering the decision, the arbitrator(s) shall interpret and apply the terms
and conditions of this Agreement, and consider any relevant evidence and
testimony, but shall not have the power to add to or modify any provision of
this Agreement or to recommend any additions or modifications or to render a
decision that does not adopt the resolution and the associated monetary amount
requested by the prevailing Party in its Submission. The arbitrator(s) shall
render a decision within thirty (30) Days following the later of the conclusion
of the hearing or the submission of post-hearing briefs. The decision shall be
rendered in writing and shall be final and binding upon the Parties. The
decision may be filed in a court of competent jurisdiction, confirmed and may be
enforced by any Party as a final judgment in such court, but shall have no
precedential effect on future arbitrations under or arising out of this
Agreement except for purposes of enforcement in a court of competent
jurisdiction or for the assertion of collateral estoppel/issue preclusion or res
judicata/claim preclusion in another proceeding. The Parties expressly
acknowledge that no appeal of the arbitrator’s (or arbitrators’) decision shall
be allowed. Except as provided in Section 16.6.4 of this Agreement, the
arbitrator(s) shall have no authority to award special, exemplary, punitive, or
consequential damages.

 

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14.8 Expenses. The compensation and expenses of the arbitrator(s) shall be
chargeable to and borne one-half (1/2) by Duke and one-half (1/2) by EMC;
provided, that if the arbitration proceeds as a consolidated proceeding pursuant
to Section 14.3, the costs charged by CPR shall be borne one-half (1/2) by Duke
and one-half (1/2) by the entities within the EMC Group that participate in such
consolidated arbitration; provided, however, that each Party shall bear the
compensation and expenses of its own counsel and any retained or expert
witnesses. Any costs incurred by a Party in seeking judicial enforcement of any
final decision rendered by arbitration conducted under this Article 14 shall be
chargeable to and borne exclusively by the Party against whom such court order
is obtained. It is expressly acknowledged that the failure of the entities
within the EMC Group that participate in a consolidated arbitration to reach
agreement on the allocation of costs among such entities shall not increase
Duke’s share of the costs incurred under this Section 14.8 or Sections 14.6.1(1)
or 14.6.2(1) above one-half (1/2) of the total costs at issue.

14.9 Effect of Dispute Resolution Procedures. The initiation of the dispute
resolution procedures under this Article 14 shall not affect the Parties’
respective obligations and rights under this Agreement during the pendency of
any such procedures.

14.10 Confidentiality. The existence, contents, or results of any arbitration
proceeding under this Article 14 shall be deemed to be Confidential Information
and shall be subject to the confidentiality provisions set forth in
Section 16.6.

Article 15

Credit and Collateral Requirements

15.1 Posting of Collateral. To protect either Party against potential default of
payment or performance, any Party that experiences a Material Adverse Change
(“MAC”) shall post as collateral an amount equal to the two (2) highest Months
of Duke’s billings to EMC for the previous twelve (12) Months. Such collateral
shall be provided by the Party experiencing the MAC in cash, depository
agreements, or letters of credit from a financial institution reasonably
acceptable to the Party not experiencing the MAC within three (3) Business Days
after the date on which the MAC occurs. Any such depository agreement or letter
of credit shall be in a form satisfactory to the Party not experiencing the MAC
in its reasonable discretion. A financing institution participating in a
depository agreement or providing a letter of credit entered into for purposes
of this Section 15.1 shall be deemed reasonably acceptable by the Party not
experiencing the MAC if it has and maintains a minimum long term credit rating
of A- or better from S&P, A3 or better from Moody’s or A- or better from Fitch
Ratings, or is with or from CFC and/or CoBank.

15.2 Material Adverse Change. Duke shall be deemed to have experienced a MAC if
its unsecured, senior long-term debt obligations not supported by third party
credit enhancements are rated below BBB- by S & P and below Baa3 by Moody’s. EMC
shall be deemed to have experienced a MAC (a) if it fails to meet the
then-current Debt Service Coverage Ratio required

 

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of EMC by RUS, as determined by averaging the two (2) highest annual ratios
during the most recent three (3) Years, and (b) the then-current Times Interest
Earned Ratio required of EMC by RUS, as determined by averaging the two
(2) highest annual ratios during the most recent three (3) Years. The failure by
either Party to timely fulfill a payment or reimbursement obligation, including,
in the case of Duke a failure to pay Cover Costs, under this Agreement also
shall constitute a MAC by that Party.

15.3 Continuing Nature of Collateral Requirement. The Party experiencing the MAC
must continue to post the collateral until the MAC is cured. The Party not
experiencing the MAC shall have the right to draw upon, use, and dispose of all
collateral that is posted under Section 15.1, if the Party experiencing the MAC
fails to fulfill any of its payment or reimbursement obligations, including, in
the case of Duke a failure to pay Cover Costs, under this Agreement, and such
failure constitutes an Event of Default. In the event any collateral is drawn
upon by the Party not experiencing the MAC in accordance with the provisions of
Section 15.5, the Party experiencing the MAC shall within three (3) Business
Days fully replenish the collateral to the monetary amount required by
Section 15.1.

15.4 Interest on Cash Used as Collateral. Any interest earned on collateral held
under a depository agreement with a financial institution shall be paid to the
Party posting the collateral in accordance with the terms of the depository
agreement. If cash collateral is posted, the Party holding the cash collateral
shall pay interest to the Party posting the cash collateral at the Federal Funds
Effective Rate. The Federal Funds Effective Rate is the rate for that Day
opposite the caption “Federal Funds (Effective)” as set forth in the weekly
statistical release designated as H.15(519), or any successor publication
published by the Board of Governors of the Federal Reserve System. The Party
posting the cash collateral shall invoice the Party holding the cash collateral
for interest accrued during the previous Month and the Party holding the cash
collateral shall pay such amount within ten (10) Days of receipt of such
invoice.

15.5 Grant of Security Interest/Remedies. To secure their obligations under this
Agreement, any Party posting collateral under Section 15.1 hereby grants to the
Party not experiencing the MAC a present and continuing security interest in,
and lien on (and right of setoff against), and assignment of, all cash
collateral, cash equivalents collateral and any and all proceeds resulting
therefrom or the liquidation thereof, whether now or hereafter held by, on
behalf of, or for the benefit of, that Party, and the posting Party agrees to
take such action as the non-posting Party reasonably requires in order to
perfect the non-posting Party’s first-priority security interest in, and lien on
(and right of setoff against), such collateral and any and all proceeds
resulting therefrom or from the liquidation thereof. Upon or any time after the
occurrence or deemed occurrence and during the continuation of an Event of
Default, the Non-Defaulting Party may do any one or more of the following:
(i) exercise any of the rights and remedies of a secured party with respect to
all collateral, including any such rights and remedies under Law then in effect;
(ii) exercise its rights of setoff against any and all property of the
Defaulting Party in the possession of the Non-Defaulting Party or its agent;
(iii) draw on any outstanding letter of credit issued for its benefit; and
(iv) liquidate all collateral then held by or for the benefit of the
Non-Defaulting Party free from any claim or right of any nature whatsoever of
the Defaulting Party, including any equity or right of purchase or redemption by
the Defaulting Party. The Party drawing upon the collateral shall apply the
collateral drawn upon or otherwise realized upon the exercise of any rights or
remedies granted under this Section 15.5, to reduce the obligations of

 

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the Party posting the collateral under this Agreement (the posting Party
remaining liable for any amounts owing after such application), and to return
any surplus collateral or proceeds remaining after the posting Party’s
obligations are satisfied in full.

15.6 Notice, Information. Each Party shall provide the other Party written
notice within two (2) Business Days of the occurrence of an MAC affecting the
notifying Party or of the occurrence of any event that may reasonably cause a
MAC. Duke shall provide EMC a copy of Duke’s annual report, and any amendments
thereto, within thirty (30) Days after the issuance/filing with the Securities
and Exchange Commission of such report or amendment. EMC shall provide Duke with
(a) a copy of EMC’s RUS Form 7 each Year, and any amendments to such Form 7,
within thirty (30) Days after the filing of such report or amendment with RUS,
and (b) the annual Debt Service Coverage Ratio and Times Interest Earned Ratio
required of EMC by RUS for the Year in which the Effective Date occurs and for
the two (2) immediately preceding Years.

 

15.7 Definitions.

“Accounting Requirements” means any system of accounts prescribed by a federal
regulatory authority having jurisdiction over the applicable Party or, in the
absence thereof, the requirements of generally accepted accounting principles
applicable to businesses similar to that of the applicable Party; and provided,
further, that EMC may use a uniform system of accounts prescribed from
time-to-time by the RUS.

“CFC” means the National Rural Utilities Cooperative Finance Corporation.

“CoBank” means CoBank, ACB.

“Depreciation and Amortization Expense” shall mean an amount constituting the
depreciation and amortization of EMC computed pursuant to Accounting
Requirements. As used in the calculation of the Debt Service Coverage Ratio,
Depreciation and Amortization Expense shall mean the amount reported on the RUS
Form 7, Part A, Line 12(b), its successor, or the equivalent.

“Debt Service Coverage Ratio” means the ratio determined as follows: for any
Year add (i) Patronage Capital or Margins (RUS Form 7, Part A, Line 28(b), or
its successor), plus (ii) Interest Expense (RUS Form 7, Part A, Lines 15(b) and
16(b), or its successor), plus (iii) Depreciation and Amortization Expense for
such year (RUS Form 7, Part A, Line 12(b), or its successor), plus (iv) Short
Term Interest Expense; and divide such total by the sum of all payments of
Principal and Interest Expense during such year (RUS Form 7, Part N, Line 12(d),
or its successor) plus Short Term Interest Expense; provided however, that in
the event that any long-term debt has been refinanced during such Year the
payments of Principal and Interest Expense required to be made during such Year
on account of such long-term debt shall be based (in lieu of actual payments
required to be made on such refinanced long-term debt) upon the larger of (a) an
annualization of the payments required to be made with respect to the refinanced
debt during the portion of such Year such refinancing debt is outstanding or
(b) the payment of Principal and Interest Expense required to be made during the
following Year on account of such refinancing debt.

 

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“Equity” shall mean EMC’s equities (RUS Form 7, Part C, Line 35, its successor,
or the equivalent) computed pursuant to the Accounting Requirements.

“Interest Expense” as used in the calculation of the Debt Service Coverage
Ratio, Interest Expense shall mean the amount reported on the RUS Form 7, Part
A, Lines 15(b) and 16(b), its successor, or the equivalent.

“Material Adverse Change” or “MAC” shall have the meaning specified in
Section 15.2.

“Patronage Capital or Margins” as used in the calculation of the Debt Service
Coverage Ratio or TIER, shall mean the amount currently reported in the RUS Form
7, Part A, Line 28(b), its successor, or the equivalent.

“Principal and Interest Expense” shall mean that amount of principal billed on
account of total long-term debt of EMC as computed pursuant to the Accounting
Requirements. As used in the calculation of the Debt Service Coverage Ratio,
Principal and Interest Expense shall mean the amount currently reported on RUS
Form 7, Part N, Line 12(d), or its equivalent.

“Restricted Rentals” shall mean all rentals required to be paid under finance
leases and charged to income, exclusive of any amounts paid under such lease
(whether or not designated therein as rental or additional rental) for
maintenance or repairs, insurance, taxes, assessments, water rates or similar
charges. For the purpose of this definition the term “finance lease” shall mean
any lease having a rental term (including the term for which such lease may be
renewed or extended at the option of the lessee) in excess of three (3) years
and covering property having an initial cost in excess of two hundred fifty
thousand dollars ($250,000) other than automobiles, trucks, trailers, other
vehicles (including aircraft and ships), office, garage and warehouse space and
office equipment (including computers).

“Short Term Interest Expense” shall mean an amount constituting the interest
expense with respect to the total short-term debt of EMC, computed pursuant to
Accounting Requirements, provided that all short-term debt obtained from either
CFC or CoBank shall be excluded.

“Times Interest Earned Ratio” or “TIER” shall mean the ratio determined as
follows for each year: add (i) Patronage Capital or Margins of EMC and
(ii) Interest Expense of EMC, and divide the total so obtained by Interest
Expense of EMC.

 

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Article 16

Additional Terms

16.1 Representations Warranties and Covenants.

16.1.1 Representations and Warranties.

16.1.1.1 Mutual Representations and Warranties. Each Party represents and
warrants to the other Party on the Effective Date, the Commencement Date and the
first Day of any Extension Term that:

(1) There is not pending or, to its knowledge, threatened against it or any of
its Affiliates any Legal Proceeding that could materially adversely affect its
ability to perform its obligations under this Agreement;

(2) No event with respect to it has occurred or is continuing that would
constitute an Event of Default, and no such event would occur as a result of its
entering into or performing its obligations or circumstances under this
Agreement;

(3) It is acting as principal for its own account and has made its own
independent decision to enter into this Agreement;

(4) It has knowledge and experience in financial matters and in the electric
industry that enables it to evaluate the merits and risks of this Agreement, and
it is capable of assuming such risks. It is acting for its own account, has made
its own independent decision to enter into this Agreement and as to whether this
Agreement is appropriate and proper for it based on its own judgment, is not
relying upon the advice or recommendations of the other Party in doing so, and
is capable of assessing the merits of and understanding, and understands and
accepts, the terms, conditions, and risks of this Agreement;

(5) It has entered into this Agreement in connection with the conduct of its
business, and it has the capacity or ability to make or take delivery of all
products or services referred to in this Agreement;

(6) The other Party is not acting as a fiduciary or an advisor with respect to
this Agreement;

(7) It is not Bankrupt and there are no proceedings pending or being
contemplated by it or, to its knowledge, threatened against it that could result
in it being or becoming Bankrupt; and

(8) It is an entity subject to the procedures and substantive provisions of the
United States Bankruptcy Code applicable to U.S. corporations generally.

 

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16.1.1.2 Continuing Mutual Representations. Each Party represents, and warrants
that on each of the Effective Date, the Commencement Date and throughout the
Term, it will cause the following to be materially true and correct:

(1) It is duly organized, validly existing and in good standing under the Laws
of the state of its incorporation;

(2) It has all requisite corporate power to own, operate and lease its
properties and carry on its business as contemplated by this Agreement;

(3) Subject to the conditions provided for in Article 3, it has all lender
authorizations and authorizations from Governmental Authorities necessary for it
to legally perform its obligations under this Agreement;

(4) The execution, delivery and performance of this Agreement and any other
documentation it is required to deliver under this Agreement are within its
powers, have been duly authorized by all necessary action and do not violate any
of the terms or conditions in its governing documents, any contract or other
agreement to which it is a party or any Law applicable to it;

(5) The individual(s) executing and delivering this Agreement and any other
documentation required to be delivered under this Agreement are duly empowered
and authorized to do so at the time of such execution and delivery; and

(6) This Agreement has been duly and validly executed and delivered by such
Party and constitutes such Party’s legally valid and binding obligation
enforceable against it in accordance with the terms thereof, subject to any
Equitable Defenses.

16.1.1.3 Additional Representations and Warranties of Duke. Duke further
represents and warrants that:

(1) Subject to the conditions provided for in Article 3, Duke is fully
authorized to sell the electric capacity and energy and Scheduling Agent
Services it is obligated to provide under this Agreement at the rates and terms
contemplated by this Agreement;

(2) Nothing in Duke’s contracts with other parties prevents Duke from fully
performing its obligations under this Agreement; and

(3)(a) As of the Effective Date, Duke is a wholly owned direct subsidiary of
Duke Energy Corporation, a Delaware corporation; and

(b) The provisions of the NCUC Order dated March 24, 2006, issued in Docket No.
E-7, Sub. 795, the merger between Duke Energy Corporation, a North Carolina
corporation, and Cinergy Corp., which closed on April 3, 2006, and the
conversion of Duke Energy Corporation,

 

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a North Carolina corporation, to Duke on April 3, 2006, did not adversely affect
(1) the franchise granted to Duke by the NCUC to provide NCUC regulated electric
power generation, transmission, distribution, delivery, or sales and other
related services to the Duke Native Load customers located within the State of
North Carolina, (2) the assets constituting Duke’s Generation System, or
(3) Duke’s ability to perform its obligations under this Agreement.

16.1.1.4 Additional Representations and Warranties of EMC. EMC further
represents and warrants that:

(1) Subject to the conditions provided for in Article 3, EMC is fully authorized
to purchase the electric energy and capacity, and Scheduling Agent Services
provided under this Agreement at the rates and terms contemplated by this
Agreement; and

(2) Nothing in EMC’s contracts with other parties prevents EMC from fully
performing its obligations under this Agreement.

16.1.2 Covenants.

16.1.2.1 Duke. Duke covenants that: (i) neither Duke nor any of its Affiliates
or subsidiaries shall, during the Term, take any action that could reasonably be
anticipated to cause Duke to lose its authority to make wholesale sales of power
as contemplated under this Agreement; (ii) Duke shall not take any action during
the Term that could reasonably be anticipated to cause EMC to lose its authority
to purchase electric capacity and energy and Scheduling Agent Services, as
contemplated by this Agreement and, as a result, EMC loses its authority to
purchase electric capacity and energy and Scheduling Agent Services; and
(iii) Duke shall perform its obligations under this Agreement in accordance with
Prudent Utility Practice, including applicable NERC and SERC guidelines, and the
Transmission Provider’s OATT.

16.1.2.2 EMC. EMC covenants that: (i) it shall not, during the Term, take any
action that could reasonably be anticipated to cause it to lose its authority to
purchase, or Duke to lose its authority to provide, the electric capacity and
energy and Scheduling Agent Services as contemplated by this Agreement and, as a
result, EMC loses its authority to purchase or Duke loses its authority to
provide electric capacity and energy and Scheduling Agent Services; (ii) it
shall, in the event one of the sellers under a contract pursuant to which EMC
has acquired an EMC Contract Resource breaches the terms of the contract in a
manner that materially affects the quality or quantity of deliveries under such
contract, use Commercially Reasonable Efforts to pursue the enforcement of EMC’s
contract rights; (iii) electric energy delivered by MSCG under the PPA qualifies
as Firm Energy; and (iv) EMC shall perform its obligations under this Agreement
in accordance with Prudent Utility Practice, including applicable NERC and SERC
guidelines, and the Transmission Provider’s OATT.

 

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16.2 Assignment.

16.2.1 General.

16.2.1.1 Duke shall not assign this Agreement or its rights hereunder without
the prior written consent of EMC, which consent shall not be unreasonably
withheld; provided, however, that Duke may, without the consent of EMC,
(a) transfer, sell, pledge, encumber or assign this Agreement or the accounts,
revenues or proceeds hereof in connection with any financing or other financial
arrangements (without relieving itself from liability hereunder), or
(b) transfer or assign this Agreement to any person or entity succeeding to all
or substantially all of Duke’s Generation System, and whose unsecured, senior
long-term debt obligations not supported by third party credit enhancements are
rated BBB- or higher by S&P or Baa3 or higher by Moody’s (or, in the
alternative, whose obligations under this Agreement are guaranteed by a
guarantor that meets the foregoing credit standards, provided that the form of
the guaranty shall be reasonably satisfactory to EMC). Duke shall be relieved of
all liability under this Agreement arising on and after the effective date of an
assignment that satisfies the requirements of subpart (b) above.

16.2.1.2 EMC shall not assign this Agreement or its rights hereunder without the
prior written consent of Duke, which consent shall not be unreasonably withheld;
provided, however, that EMC may, without the consent of Duke, (a) transfer,
sell, pledge, encumber or assign this Agreement or the accounts, revenues or
proceeds hereof in connection with any financing or other financial arrangements
(without relieving itself from liability hereunder), or (b) transfer or assign
this Agreement to any person or entity (A) succeeding to substantially the same
Service Area and retail load as the EMC Native Load and to EMC’s rights under
the EMC Contract Resources, and (B):

(i) if the transferee or assignee is an electric membership corporation
organized under Article 2 Chapter 117 of the North Carolina General Statutes, it
meets both the then-current Debt Service Coverage Ratio required of EMC by RUS,
as determined by averaging the two (2) highest annual ratios during the most
recent three (3) years, and the then-current Times Interest Earned Ratio
required of EMC by RUS, as determined by averaging the two (2) highest annual
ratios during the most recent three (3) years, or

(ii) if the transferee or assignee is not an electric membership corporation
organized under Article 2 Chapter 117 of the North Carolina General Statutes,
then its unsecured, senior long-term debt obligations not supported by third
party credit enhancements are rated BBB- or higher by S&P or Baa3 or higher by
Moody’s (or, in the alternative, whose obligations under this Agreement are
guaranteed by a guarantor that meets the foregoing credit standards, provided
that the form of the guaranty shall be reasonably satisfactory to Duke). EMC
shall be relieved of all liability under this Agreement arising on and after the
effective date of an assignment that satisfies the requirements of this subpart
(B)(ii).

16.2.1.3 This Agreement shall be binding upon and inure to the benefit of the
permitted successors and permitted assigns of the Parties. Any assignment made
without a consent required hereunder shall be void and of no force or effect as
against the non-consenting Party. No sale, assignment, transfer, or other
disposition permitted by this Agreement shall affect, release, or discharge any
Party from its rights or obligations under this Agreement, except as may be
expressly provided by this Agreement or by written agreement of the Parties.

 

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16.2.2 Assignment For Security. Notwithstanding any other provision of this
Agreement, a Party, without the other Party’s consent but, if such assigning
Party is then a borrower of the RUS, only with the consent of the Administrator,
may assign, transfer, mortgage or pledge its interest in this Agreement as
security (an “Assignment for Security”) for any obligation secured by any
indenture, mortgage, or similar lien on its system assets without limitation on
the right of the secured party to further assign this Agreement, including the
assignment to create a security interest for the benefit of the Government,
acting through the Administrator, or for the benefit of any third party.

16.2.3 Assignment By Administrator. After any Assignment for Security to the
Administrator or other secured party (including any indenture trustee under any
indenture securing the obligations of the Party), the Administrator or other
secured party, without the approval of the other Party, may (i) cause the
interest in this Agreement of the Party who made the Assignment for Security to
be sold, assigned, transferred or otherwise disposed of to a third party
pursuant to the terms governing such Assignment for Security, or (ii) if the
Administrator or other secured party first acquires this Agreement, sell,
assign, transfer or otherwise dispose of this Agreement to a third party;
provided, however, that in either case the Party who made the Assignment for
Security is in default of its obligations to the Administrator or other secured
party that are secured by such security interest.

16.3 Liability and Indemnification.

16.3.1 Indemnity. Each Party shall indemnify, defend, and hold harmless the
other Party from and against:

(1) Any Claims arising from or out of any event, circumstance, act, or incident
first occurring or existing during the period when control and title to any
electric energy is vested in such Party as provided in Section 4.5, and

(2) Any Governmental Charges for which such Party is responsible under
Section 16.7.2.

Notwithstanding the foregoing, no Party will be required to indemnify, defend,
or hold harmless any other Party from any losses or Claims under this
Section 16.3.1 to the extent that such loss or Claim was caused by the other
Party’s gross negligence or willful misconduct.

16.3.2 Liability Limitations.

16.3.2.1 Limitation of Remedies. THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES
AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL
PURPOSES HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR
MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL
BE THE SOLE AND EXCLUSIVE REMEDY, THE RESPONSIBLE PARTY’S LIABILITY SHALL BE
LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR

 

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DAMAGES AT LAW OR IN EQUITY ARE WAIVED REGARDLESS OF THE FAULT, NEGLIGENCE, OR
STRICT LIABILITY OF THE PARTY WHOSE LIABILITY IS RELEASED OR LIMITED THEREBY.

IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY HEREIN PROVIDED, AND EXCEPT AS
OTHERWISE EXPLICITLY PROVIDED IN SECTION 16.6.4, THE RESPONSIBLE PARTY’S
LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES (INCLUDING INTEREST AS
PERMITTED BY APPLICABLE LAW) ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE
AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE
WAIVED (EXCEPT AS PROVIDED IN SECTION 16.29).

UNLESS EXPRESSLY HEREIN PROVIDED, (INCLUDING AS PROVIDED IN SECTION 16.6.4) NO
PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, MULTIPLE,
EXEMPLARY, OR INDIRECT DAMAGES, LOST PROFITS, OR OTHER BUSINESS INTERRUPTION
DAMAGES, BY STATUTE, IN TORT OR IN CONTRACT UNDER ANY INDEMNITY PROVISION OR
OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED
ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES
RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE
BE SOLE, JOINT, OR CONCURRENT, OR ACTIVE OR PASSIVE.

16.3.2.2 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, EACH
PARTY, WITH RESPECT TO THE SUPPLY OF ELECTRIC ENERGY AND CAPACITY TO THE OTHER,
EXPRESSLY NEGATES ANY OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS
OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY WITH
RESPECT TO CONFORMITY TO MODELS OR SAMPLES, MERCHANTABILITY, OR FITNESS FOR ANY
PARTICULAR PURPOSE.

16.3.2.3 Duty to Mitigate. Each Party agrees that is has a duty to mitigate
damages, and each covenants that it shall use commercially reasonable efforts to
minimize any damages it may incur as a result of the other Party’s performance
or nonperformance of this Agreement.

16.4 Force Majeure. Unless otherwise provided by this Agreement, the term “Force
Majeure” means an event or circumstance that: (i) prevents the Party claiming to
be affected by it (the “Claiming Party”) from performing its obligations in
whole or in part under this Agreement; (ii) is not within the reasonable control
of the Claiming Party, or the result of the negligence of the Claiming Party,
and (iii) by the exercise of due diligence, the Claiming Party is unable to
overcome in a commercially reasonable manner, and, without limiting the scope of
the definition, includes acts of God, or the public enemy, or insurrection,
riot, acts of terrorism, civil disturbance or disorder, strikes, fire,
earthquakes, floods, storms or other natural disasters, or actions or restraints
by court order or Governmental Authority or arbitration award (so long as the
Claiming Party has not sought or has opposed, to the extent reasonable, such
actions or restraints). To the extent that the Claiming Party is prevented by
Force Majeure from carrying

 

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out, in whole or part, its obligations hereunder and such Party gives notice and
details of the Force Majeure to the other Party (the “Non-Claiming Party”) as
soon as practicable, then the Claiming Party shall be excused from the
performance of its obligations other than the obligation to make payments then
due or becoming due in respect to performance prior to the Force Majeure, except
as otherwise explicitly provided in this Agreement. The Claiming Party shall
remedy the Force Majeure event with all reasonable dispatch. The Non-Claiming
Party shall not be required to perform or resume performance of its obligations
to the Claiming Party corresponding to the obligations of the Claiming Party
excused by Force Majeure during the period that such Force Majeure remains in
effect. Duke shall not adversely distinguish between EMC’s Native Load and
Duke’s Native Load in claiming an event of Force Majeure.

16.5 Events of Default and Remedies.

16.5.1 Events of Default. For the purposes of this Agreement, an “Event of
Default” means, with respect to a Party (a “Defaulting Party”), the occurrence
of any of the following:

(1) The failure to make, when due, any payment or reimbursement required by this
Agreement (including any amounts to be credited by one Party to the other Party)
or to post or maintain collateral required by this Agreement, if such failure is
not remedied within three (3) Business Days after receipt of written notice of
such failure is given to the Defaulting Party by the other Party
(“Non-Defaulting Party”). For the purposes of this Section 16.5.1(1),
withholding one half (1/2) of a Disputed Amount in accordance with Section 13.5
shall not constitute failure to make, when due, a payment;

(2) Any representation or warranty made by such Party herein is false or
misleading in any material respect when made or when deemed made or repeated;

(3) The failure to perform any material covenant or material obligation set
forth in this Agreement (except to the extent constituting a separate Event of
Default under this Section 16.5), if such failure is not remedied within three
(3) Business Days after receipt of written notice thereof to the Defaulting
Party, provided, that a Party’s failure to perform its obligations under
Section 16.1.2.1(iii) or Section 16.1.2.2(iv) shall not in and of itself
constitute a material failure to perform a material covenant or material
obligation unless such failure, in the case of Duke, results in a substantial
and continuing degradation in reliability of service hereunder or, in the case
of EMC, results in a substantial and continuing degradation in performance
hereunder;

(4) Such Party becomes Bankrupt;

(5) The loss of any authorization from Governmental Authorities necessary to
perform its obligations hereunder in accordance with the terms of this
Agreement;

(6) Such Party consolidates or amalgamates with, or merges with or into, or
transfers all or substantially all of its assets to, another entity and, at the

 

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time of such consolidation, amalgamation, merger, or transfer, the resulting,
surviving, or transferee entity fails to assume all of the obligations of such
Party under this Agreement to which it or its predecessor was a party by
operation of law or pursuant to an agreement reasonably satisfactory to the
other Party;

(7) The occurrence and continuation of a default, event of default, or other
similar condition or event that under one or more agreements or instruments,
individually or collectively, relating to indebtedness for borrowed money in an
aggregate amount of not less than twelve million dollars ($12,000,000) in the
case of EMC or one hundred fifty million dollars ($150,000,000) in the case of
Duke, that results in the Party’s indebtedness under such agreements or
instruments to become immediately due and payable; and

(8) With respect to such Party’s guarantor, if any:

 

  (a) if any representation or warranty made by a guarantor in connection with
this Agreement is false or misleading in any material respect when made or when
deemed made or repeated;

 

  (b) the failure of a guarantor to make any payment required or to perform any
other material covenant or obligation in any guaranty made in connection with
this Agreement and such failure shall not be remedied within three (3) Business
Days after written notice;

 

  (c) a guarantor becomes Bankrupt;

 

  (d) the failure of a guarantor’s guaranty to be in full force and effect for
purposes of this Agreement (other than in accordance with its terms); or

 

  (e) a guarantor shall repudiate, disaffirm, disclaim, or reject, in whole or
in part, or challenge the validity of any guaranty.

16.5.2 Notice of Event of Default. In the event a Party becomes aware of any
event or circumstance that constitutes an Event of Default, such Party shall
promptly notify the other Party in writing and by telephone.

16.5.3 Effect of Event of Default. If at any time an Event of Default with
respect to a Defaulting Party has occurred and is continuing, the other Party
(the “Non-Defaulting Party”) may do one or more of the following:

(1) If an Event of Default under Section 16.5.1(1) persists for ten (10) Days or
longer, terminate this Agreement in accordance with the notification required
pursuant to Sections 2.3.2.1 and 2.3.3 of this Agreement; or

 

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(2) If an Event of Default (other than an Event of Default under
Section 16.5.1(1)) persists for sixty (60) Days or longer, terminate this
Agreement in accordance with Sections 2.3.2.1 and 2.3.3 of this Agreement,
provided, however, that if the Defaulting Party is diligently pursuing cure, but
such Event of Default is not capable of being cured within sixty (60) Days, then
the period for the Defaulting Party to cure such Event of Default shall be
extended from sixty (60) Days to one hundred eighty (180) Days before the
Non-Defaulting Party may exercise its right to terminate this Agreement pursuant
to this Section 16.5.3(2).

16.5.4 Enforcement of Remedies. The Non-Defaulting Party may exercise any rights
or remedies available at law or equity, subject to the provisions of Article 14
and Sections 15.5 and 16.3 of this Agreement. No delay or failure on the part of
a Non-Defaulting Party to exercise any right or remedy to which it may become
entitled on account of an Event of Default shall constitute an abandonment of
any such right, and the Non-Defaulting Party shall be entitled to exercise such
right or remedy at any time during the continuance of an Event of Default
notwithstanding any delay in enforcing such right. No waiver of any Event of
Default shall constitute a waiver of any later Event of Default; all such
waivers shall be in writing and shall in no circumstance be deemed effective
unless such waiver is made in writing. All of the remedies and other provisions
of this Section 16.5 shall be without prejudice and in addition to any right of
setoff, recoupment, combination of accounts, lien, or other right to which any
Party or any of its Affiliates is at any time otherwise entitled, whether by
operation of law or in equity, under contract, or otherwise.

16.6 Confidential Information.

16.6.1 Prior Confidentiality Agreements Unaffected. Any preexisting
confidentiality agreements entered into by the Parties pertaining to the
negotiation and development of this Agreement shall survive by their terms and
shall not be considered modified by this Agreement.

16.6.2 Authorized Disclosure. Each Party agrees to preserve, to the maximum
extent permitted by Law, the confidentiality of Confidential Information
supplied to it by the other Party either during the negotiations leading to this
Agreement or during the course of implementing, performing or winding up this
Agreement. A Party may disclose Confidential Information received from the other
Party to the receiving Party’s Affiliates, auditors, attorneys, consultants,
advisors, persons providing financing to the receiving Party, other entities in
the EMC Group that have entered into substantially similar agreements, and to
other third parties as may be necessary for the receiving Party to perform its
obligations under this Agreement, provided that any such persons agree in
writing to be bound by the confidentiality provisions of this Agreement.
Notwithstanding anything contained in this Section 16.6, Confidential
Information may be disclosed to any Governmental Authority requiring such
Confidential Information, provided that: (i) such Confidential Information is
submitted under applicable provisions, if any, for confidential treatment by
such Governmental Authority; (ii) prior to such disclosure, the Party who
supplied the information is given notice of the disclosure requirement (if time
permits and the other Party’s counsel determines that such notice is permitted
by Law) so that it may take at its own risk and expense whatever action it deems
appropriate, including intervention in any proceeding and the seeking of an
injunction to prohibit such disclosure; and (iii) the Party subject to the
Governmental Authority endeavors to protect the confidentiality of

 

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any Confidential Information to the extent reasonable under the circumstances
and to use its good faith efforts to prevent the further disclosure of any
Confidential Information provided to any Governmental Authority. The Parties
recognize that Duke is required to file periodic reports with FERC that disclose
certain price, quantity, and related data, and such filings shall not be deemed
a violation of this section.

16.6.3 Survival of Confidentiality Obligations. Confidential Information
received from the other Party shall be kept confidential in accordance with the
terms of this Agreement for at least five (5) Years after the termination of
this Agreement.

16.6.4 Right to Remedies. In the event of an unauthorized disclosure to a third
party, the limitations on remedies contained in Section 16.3.2.1 shall not
apply, and, in the event of a breach, Parties shall not have an adequate remedy
at law and accordingly shall, in addition to any other available legal or
equitable remedies, be entitled to an injunction against such breach without any
requirement to post a bond as a condition of such relief.

16.7 Governmental Liabilities.

16.7.1 Minimization of Tax Liability. Each Party shall use reasonable efforts to
implement the provisions of and to administer this Agreement in accordance with
the intent of the Parties to minimize all taxes, so long as neither Party is
materially adversely affected by such efforts.

16.7.2 Governmental Charges.

16.7.2.1 With respect to sales of electric energy made by Duke to EMC, Duke
shall pay or cause to be paid all Governmental Charges imposed by any Government
Authority on or with respect to such sales of electric energy to the extent such
Governmental Charges arise prior to the Delivery Point. EMC shall pay or cause
to be paid all Governmental Charges on or with respect to such sale of electric
energy to the extent such Governmental Charges arise after the Delivery Point
(other than ad valorem, franchise, or income taxes that are related to the sale
of such product and are, therefore, the responsibility of Duke).

16.7.2.2 With respect to sales of electric energy by EMC to Duke, EMC shall pay
or cause to be paid all Governmental Charges on or with respect to the sale of
the electric energy to Duke.

16.7.2.3 In the event a Party is required by Law to remit or pay Governmental
Charges that are the other Party’s responsibility hereunder, the Party
ultimately liable for the Governmental Charge shall promptly reimburse the
remitting Party for such Governmental Charges; provided further that tax
liabilities may be netted pursuant to Section 13.4 of this Agreement. Nothing
will obligate or cause a Party to pay or be liable to pay any Governmental
Charges for which it is exempt under the Law.

16.7.3 Records. If with respect to either Party, any purchase or sale of
electric energy is exempt from Governmental Charges it shall, upon written
request of the other Party, provide a certificate of exemption or other
reasonably satisfactory evidence of exemption, and shall use reasonable efforts
to obtain and cooperate with obtaining any exemption from or reduction of any
Governmental Charges.

 

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16.7.4 Cost of Obtaining FERC Approval. The Parties agree that all fees assessed
by FERC, or expenses incurred in obtaining the approval of FERC for this
Agreement, shall be the sole responsibility of Duke.

16.7.5 Cost of Obtaining RUS Approval. The Parties agree that all fees assessed
by the RUS, or expenses incurred in obtaining the approval of RUS for this
Agreement, shall be the sole responsibility of EMC.

16.8 Choice of Law. The validity, interpretation and performance of this
Agreement and the rights and duties of the Parties arising out of this Agreement
shall be governed by and construed, enforced, and performed in accordance with
the Laws of the State of North Carolina. No principle, doctrine, or rule of
conflicts of law shall modify or alter the applicability of the Laws of the
State of North Carolina to this Agreement.

16.9 Survival of Obligations. Upon the termination of the Parties’ delivery,
sale, purchase, and related service obligations under this Agreement, any
monies, penalties or other charges due and owing under this Agreement shall be
paid, any corrections or adjustments to payments previously made shall be
determined, and any refunds due shall be made, as soon as practicable but no
later than sixty (60) Days after such termination. All indemnity and
confidentiality obligations and audit rights shall survive the termination of
this Agreement in accordance with their respective terms. Upon the effective
date of any termination of this Agreement, each Party’s obligations provided for
in this Agreement will survive termination and remain in effect solely for the
purpose of complying with the provisions of this Section 16.9; OTHERWISE, AS
PROVIDED IN ARTICLE 2, TERMINATION OF THIS AGREEMENT IS ABSOLUTE, AND NO OTHER
OBLIGATIONS, DUTIES, OR RIGHTS WHATSOEVER ARISING UNDER THIS AGREEMENT SHALL
REMAIN IN EFFECT FOLLOWING THE TERMINATION OF THIS AGREEMENT.

16.10 Entire Agreement. This Agreement, and the Schedules and Attachments
attached hereto, constitute the entire and integrated agreement between the
Parties relating to the rates, terms, and conditions set out in this Agreement
as of the Effective Date. This Agreement supersedes all prior agreements (other
than the Confidentiality Agreement which became fully executed on November 22,
2004) whether oral or written, related to the subject matter of this Agreement.
The terms of this Agreement, including any Schedules and Attachments attached
hereto, are controlling, and no parol or extrinsic evidence, including but not
limited prior drafts or projections of future costs or rates, shall be used to
vary, contradict, or interpret the express rates, terms, and conditions of this
Agreement or as a basis for challenging the justness and reasonableness of any
rate, term, or condition of this Agreement.

 

16.11 Cost Projections.

16.11.1 Duke Cost Projections. Duke makes no warranties or representations
whatsoever concerning any cost or rate projections that it provided in
connection with the negotiations leading up to the execution of this Agreement
and any such projections provided by

 

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Duke under Section 16.26 of this Agreement. EMC assumes the risk of reliance on
any projected costs or rates provided by Duke in connection with the
negotiations leading up to the execution of this Agreement or any projections
provided by Duke under Section 16.26. Any differences between projected costs or
rates provided by Duke and actual costs or rates will not limit or in any way
affect the rates, terms, or conditions of this Agreement or any of the Parties’
rights and obligations hereunder.

16.11.2 EMC Cost Projections. EMC makes no warranties or representations
whatsoever concerning any cost or rate projections that it provided in
connection with the negotiations leading up to the execution of this Agreement
and any such projections provided by EMC during the Term. Duke assumes the risk
of reliance on any projected costs or rates provided by EMC in connection with
the negotiations leading up to the execution of this Agreement or any
projections provided by EMC during the Term. Any differences between projected
costs or rates provided by EMC and actual costs or rates will not limit or in
any way affect the rates, terms, or conditions of this Agreement or any of the
Parties’ rights and obligations hereunder.

16.12 Unique Agreement. This Agreement shall not establish any precedent for any
other services, or be relied upon by either Party for any purpose other than for
the services and payments provided herein.

16.13 No Transfer of Rights. Except as explicitly provided herein, nothing in
this Agreement shall be construed to transfer any rights or obligations that
either Party has under any other agreement to the other Party.

16.14 No Partnership. The Parties are independent contractors. Nothing in this
Agreement shall ever be deemed to create or constitute a partnership, joint
venture, or association between the Parties, or to impose a trust or partnership
duty, obligation, or liability on or with regard to either of the Parties.

16.15 Third Parties. The provisions of this Agreement shall not impart rights
enforceable by any person or entity not a Party or not a permitted successor or
assignee of a Party bound by this Agreement. This Agreement shall not be
construed to create any third party beneficiary rights of any sort.

16.16 Waiver. No waiver of all or any part of this Agreement shall be valid
unless it (a) is reduced to writing, (b) expressly states that the Parties agree
to such waiver, and (c) is signed by the Parties. Except as specifically set
forth herein, neither Duke’s nor EMC’s failure to enforce any provision or
provisions of this Agreement shall in any way be construed as a waiver of any
such provision or provisions as to any future violation thereof, nor prevent it
from enforcing each and every provision of this Agreement at such time or at any
time thereafter. The waiver by either Duke or EMC of any right or remedy shall
not constitute a waiver of its right to assert said right or remedy, at any time
thereafter, or any other rights or remedies available to it at the time of or
any time after such waiver.

 

16.17 Time of Essence. Time is of the essence for, in, and throughout this
Agreement.

 

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16.18 Headings. The descriptive headings of the various Articles and Sections of
this Agreement (or any Schedules and Attachments attached hereto) have been
inserted for convenience of reference only and in no way shall be deemed to
modify or restrict any of the terms or provisions hereof.

16.19 Severability. Wherever possible, each provision of this Agreement
(including any Schedules or Attachments attached hereto) shall be interpreted in
a manner as to be effective and valid under applicable Law, but if any provision
contained herein shall be found or ruled to be invalid, illegal, or
unenforceable in any respect and for any reason, such provision shall be
ineffective to the extent, but only to the extent, of such invalidity,
illegality, or unenforceable without invalidating the remainder of the provision
or any provision of this Agreement, and in such event, the Parties shall attempt
to negotiate amendments to this Agreement that would permit each Party to
realize the equivalent value of the economic bargain contemplated by this
Agreement absent such finding or ruling.

16.20 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument.

16.21 No Public Announcement. The Parties agree that no press release or public
announcement concerning the transaction contemplated by this Agreement will be
made unless mutually agreed to by the Parties in writing; provided, however,
such mutual agreement will not be required if:

(a) The disclosing Party determines that disclosure is reasonably necessary to
(i) comply with applicable Laws of a Governmental Authority having jurisdiction;
or (ii) obtain financing for the transaction contemplated by this Agreement; or

(b) the disclosure is limited to the following information: (i) the names of the
Parties; (ii) the type of service being provided; (iii) the Term; and (iv) the
total load being served.

The disclosing Party shall provide the other Party with written notice of such
disclosure at least five (5) Business Days prior to such disclosure.

16.22 Notices. Unless otherwise provided in this Agreement, any notice, consent,
or other communication required to be made under this Agreement shall be in
writing and shall be delivered in person, by certified mail (postage prepaid,
return receipt requested), or by nationally recognized overnight courier
(charges prepaid), in each case properly addressed to such Party as shown below.
Any Party may from time to time change its address, designee or contact
information for the purposes of notices, consents, or other communications to
that Party by a similar notice specifying a new address, but no such change
shall become effective until it is actually received by the Party to be charged
with its contents. All notices, consents, or other communications required or
permitted under this Agreement that are addressed as provided in this
Section 16.22 shall be deemed to have been given upon delivery if delivered in
person, or upon deposit if delivered by overnight courier or certified mail.

 

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Duke:

Duke Power Company LLC

526 South Church Street

Charlotte, N.C. 28202

Attn: VP – Business Development and Origination

Phone: (704) 382-3114

Fax: (704) 382-4014

With a copy to:

Duke Power Company LLC

526 South Church Street

Charlotte, N.C. 28202

Attn: General Counsel

EMC:

Blue Ridge Electric Membership Corporation

1216 Blowing Rock Blvd., NE

P.O. Box 112

Lenoir, NC 28645-0112

Attn: Douglas W. Johnson, Executive Vice President and Chief Executive Officer

Phone: (828) 758-2383

Fax: (828) 754-9671

The Parties may agree on alternative methods of giving operational and
scheduling notices, consistent with the requirements of the applicable
Transmission Providers and/or generation scheduling providers.

16.23 No Dedication of the System. No undertaking by either Party to the other
Party under any provision of this Agreement shall constitute the dedication of
the system, or any portion thereof, of either Party to the public or to the
other Party, and it is understood and agreed that any such undertaking by either
of the Parties shall cease after the termination date of this Agreement. The
sale by Duke to EMC of electric capacity and energy under this Agreement does
not constitute a sale, lease, transfer, or conveyance of any kind of ownership
interest in or to any of Duke’s facilities of any kind.

16.24 Stranded Costs.

16.24.1 If a Party or any of its Affiliates becomes entitled to receive
compensation associated with stranded generation, transmission, distribution or
other assets or costs, the other Party shall have no claim or entitlement to any
such compensation.

16.24.2 Neither EMC nor Duke shall have the obligation or liability to the other
Party for the payment of any amounts authorized by statute or ordered or
approved by a Governmental Authority and that are attributable to or in any way
arising from stranded

 

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generation, transmission, distribution, or other assets or costs or any
liability associated therewith, whether such amounts are characterized as
competitive transition charges, wire charges, or other costs or charges,
provided that nothing herein shall limit the damages that may otherwise be
recovered for an Event of Default. An order on stranded costs shall not be
deemed a Material Adverse Ruling.

16.25 Electric Peak Load and Energy Information to be provided by EMC. Prior to
October 1, 2006, and each October 1 thereafter during the Term, EMC shall
provide Duke with forecast projections of (a) EMC’s Monthly electric peak load
and electric energy requirements for the following Year and (b) EMC’s annual
electric peak load and electric energy requirements for the following ten
(10) years, to the extent EMC has such information available, except that, after
a Notice of Termination has been given, EMC shall not be obligated to provide
such information for the period after the termination date. To the extent such
information is provided in a report to the RUS that is publicly available, EMC
may satisfy this requirement by providing a copy of such report to Duke.

16.26 Demand and Energy Charge and Rate Information to be Provided by Duke.
Prior to December 1, 2006, and each December 1 thereafter during the Term, Duke
shall provide EMC with forecast projections of (a) the annual electric capacity
and energy rates under Sections 7.2 or Section 7.3 (as applicable) for the
following year, (b) Monthly demand and electric energy charges under Section 7.2
or Section 7.3 (as applicable) for the following year, and (c) annual demand and
electric energy charges under Sections 7.2 or Section 7.3 (as applicable) for
the lesser of the remainder of the Term or the following ten (10) Years, except
that, after a Notice of Termination has been given, Duke shall not be obligated
to provide such information for the period after the termination date.

16.27 Further Assurances. If either Party determines in its reasonable
discretion that any further instruments, assurances, or other things are
necessary or desirable to carry out the terms of this Agreement, the other Party
shall execute and deliver all such instruments or assurances, and do all things
reasonably necessary or desirable to carry out the terms of this Agreement.

16.28 Applicable Laws and Regulations. This Agreement is made subject to all
existing and future applicable Laws and to all existing and future promulgated
orders or other duly authorized actions of Governmental Authorities having
jurisdiction over the matters set forth in this Agreement.

16.29 Equitable Relief. Nothing in this Agreement shall be construed to limit
the injunctive or equitable powers of a court of competent jurisdiction.

16.30 PURPA Assistance. Duke shall provide assistance to EMC, as EMC reasonably
requests, to support EMC’s compliance with the generation efficiency and fuel
diversity standards under PURPA.

16.31 SERC and NERC Data Reporting and Compliance Assistance. Duke shall report
EMC’s actual load, forecasted load (as provided by EMC to Duke), and resource
information to SERC and NERC and their successors, in a manner similar to the
manner in which Duke reports such information for other wholesale full or
partial requirements customers with service as firm as Duke’s Native Load. In
addition, Duke shall provide assistance and consultation to EMC, to the extent
agreed to by the Parties, to support EMC’s compliance with such organizations’
data reporting requirements.

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized officers and copies delivered to each Party.

 

BLUE RIDGE ELECTRIC MEMBERSHIP CORPORATION By:  

 

Name:   Douglas W. Johnson Title:   Executive Vice President and Chief Executive
Officer

DUKE POWER COMPANY LL

Cd/b/a Duke Energy Carolinas, LLC

By:  

 

Name:   Ellen T. Ruff Title:   President

 

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Schedule 1

Annual Production Capacity and Energy Rates

Schedule 1 Methodology:

This formula sets forth the method that Duke will use to determine its annual
Demand Rates, Fuel Rates, and Variable O&M Rates (collectively, “Rates”). The
Rates will be annual formula rate calculations. The Rates shall initially be
estimated for the period January 1, 2007 - December 31, 2007, and shall be
estimated continuing thereafter for successive twelve month periods (e.g.,
January 1, 2008 - December 31, 2008, etc.). Beginning July 1, 2008, and each
July 1 thereafter, the Rates will be trued-up based on actual costs and loads
for the most recent calendar year, using the formula rates set forth below. The
calculations will be based on Duke’s FERC Form 1 data and Duke’s company
records. The true-up will include interest on any refunds or surcharges
calculated in accordance with the methodology set forth in 18 C.F.R. § 35.19a or
its successor. The formulas for the Rates were designed to include all costs
incurred by Duke to own, operate and maintain Duke’s Generation System. The
formulas for the Rates may only be amended by the mutual agreement of the
Parties or pursuant to Section 12.3 of the Agreement. Disallowance or any other
treatment of any such costs by the NCUC or any other Governmental Authority
other than FERC will not have any effect on the inclusion of such costs in the
formulas for the Rates as set forth below.

 

I. Definitions

Capitalized terms not otherwise defined in the Agreement and as used in this
formula have the following definitions:

 

  A. Allocation Factors

 

  1. Production Wages and Salaries Allocation Factor shall equal the ratio of
Duke’s production-related direct wages and salaries to Duke’s total direct wages
and salaries excluding administrative and general wages and salaries.

 

  2. Production Plant Allocation Factor shall equal the ratio of the sum of
Duke’s investments in Production Plant plus Production Related General Plant
plus Production Related Intangible Plant to investment in Total Plant in
Service.

 

  B. Terms

Accumulated Deferred Income Taxes shall equal the net of Duke’s electric
deferred tax balances as recorded in FERC Account Nos. 281-283 and Duke’s
electric deferred tax balance as recorded in FERC Account No. 190.

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Administrative and General Expense shall equal Duke’s expenses as recorded in
FERC Account Nos. 920-935 excluding FERC Account Nos. 924, 928 and 930.1, and
less EPRI dues as recorded in FERC Account No. 930.2.

Contra AFUDC shall equal the reduction in amount of AFUDC recorded in FERC
Account No. 107 due to recovery of construction period financing costs from
customers resulting from inclusion of construction work in progress in rate base
in any of Duke Power’s retail or wholesale rate jurisdictions.

Demand Rate means the Demand Rate calculated in Part II below.

Depreciation Expense for Production Plant shall equal Duke’s production expense
as recorded in FERC Account No. 403 plus an adjustment to increase depreciation
expense to eliminate any reduction in depreciable base for Contra AFUDC related
to production plant construction work in progress included in rate base.

Duke’s Average Peak Hour Load for a year, with respect to the period January 1,
2007, through December 31, 2010, shall equal the average of the twenty highest
hourly (integrated sixty minute) Duke Schedule 1 Demands during July and August
of the year; and with respect to the period beginning January 1, 2011, and
continuing through the termination of the Agreement, shall equal the average of
the twenty highest hourly (integrated sixty minute) Duke Schedule 1 Demands
during the Annual Planning Period of the year.

Duke Schedule 1 Demands means Duke’s Native Load demands: (i) compensated for
losses to the point at which power is available for transmission, (ii) excluding
(a) non-requirements wholesale sales, as listed in Duke’s FERC Form 1, and
(b) wholesale sales with a duration of one year or less, (iii) served by Duke’s
Generation System the cost of which is included in Schedule 1.

FAS 109 Regulatory Assets and Liabilities shall equal the net of Duke’s FAS 109
balance as recorded in FERC Account No. 182.3 and any Duke FAS 109 balance as
recorded in FERC Account No. 254.

FAS 106 Regulatory Assets and Liabilities shall equal the net of Duke’s FAS 106
balance as recorded in FERC Account No. 182.3 and any Duke FAS 106 balance as
recorded in FERC Account No. 254.

 

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General Plant shall equal Duke’s gross plant balance as recorded in FERC Balance
Sheet Account No. 101, FERC Electric Plant Account Nos. 389-399, and amounts in
FERC Balance Sheet Account Nos. 102 and 106 tentatively classified to FERC
Electric Plant Account Nos. 389-399, plus an adjustment to add Contra AFUDC
related to general plant construction work in progress included in rate base.

General Plant Depreciation Expense shall equal Duke’s general plant expenses as
recorded in FERC Account No. 403 plus an adjustment to increase depreciation
expense to eliminate any reduction in depreciable base for Contra AFUDC related
to general plant construction work in progress included in rate base.

General Plant Depreciation Reserve shall equal Duke’s general plant reserve
balance as recorded in FERC Account No. 108 plus an adjustment to increase the
reserve to equal accumulated depreciation for depreciable base without reduction
for Contra AFUDC related to production plant construction work in progress
included in rate base.

General Tax Expense shall equal Duke’s expenses as recorded in FERC Account
No. 408.1.

Intangible Plant shall equal Duke’s gross plant balance as recorded in FERC
Balance Sheet Account No.101, FERC Electric Plant Account Nos. 301-303, and
amounts in FERC Balance Sheet Account Nos. 102 and 106 tentatively classified to
FERC Electric Plant Account Nos. 301-303, plus an adjustment to add Contra AFUDC
related to intangible plant construction work in progress included in rate base.

Intangible Plant Amortization Expense shall equal Duke’s intangible plant
expenses as recorded in FERC Account No. 404 plus an adjustment to increase
depreciation expense to eliminate any reduction in depreciable base for Contra
AFUDC related to intangible plant construction work in progress included in rate
base.

Intangible Plant Amortization Reserve shall equal Duke’s intangible plant
reserve balance as recorded in FERC Account No. 111 plus an adjustment to
increase the reserve to equal accumulated depreciation for depreciable base
without reduction for Contra AFUDC related to intangible plant construction work
in progress in rate base.

 

3

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

Net Asset Retirement Cost shall equal Duke’s asset retirement costs recorded in
FERC Account No. 101, less the associated accumulated depreciation included in
FERC Account No. 108.

Other Amortization shall equal Duke’s amortization expense recorded in FERC
Account Nos. 406 and 407 that is related to production plant.

Other Regulatory Assets/Liabilities shall equal the net of Duke’s regulatory
assets and liabilities in FERC Account Nos. 182, 228 and 254, excluding FAS 109
Regulatory Assets and FAS 106 Regulatory Assets, that are production related.

Payroll Taxes shall equal those payroll tax expenses as recorded in Duke Power’s
FERC Account No. 408.1.

Plant Held for Future Use shall equal Duke’s balance in FERC Account No. 105.

Prepayments shall equal Duke’s prepayment balance as recorded in FERC Account
No. 165.

Property Insurance shall equal Duke’s expenses as recorded in FERC Account
No. 924.

Production Related Amortization of Investment Tax Credits shall equal Duke’s
credits as recorded in FERC Account No. 411.4 multiplied by the Production Plant
Allocation Factor.

Production Depreciation Reserve shall equal Duke’s production reserve balance as
recorded in FERC Account No. 108 plus an adjustment to increase the reserve to
equal accumulated depreciation for depreciable base without reduction for Contra
AFUDC related to production plant construction work in progress included in rate
base.

Production Operation and Maintenance (O&M) Expense shall equal Duke’s expenses
as recorded in FERC Account Nos. 500-557.

Production Plant shall equal Duke’s gross plant balance as recorded in FERC
Balance Sheet Account No. 101, FERC Electric Plant Account Nos. 310-347 and
Balance Sheet Account Nos. 102 and 106 tentatively classified to FERC Electric
Plant Account Nos. 310-347, plus an adjustment to add Contra AFUDC related to
production plant construction work in progress in included in rate base.

 

4

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

Production Plant Materials and Supplies shall equal Duke’s balance as assigned
to production as recorded in FERC Account No. 154.

Revenue Tax Rate shall equal 1.0 minus the applicable revenue or gross receipts
tax rate(s) to which Duke is subject for the revenues or gross receipts that
Duke receives under this Agreement

Tax Deduction for Manufacturing Activities shall equal Duke’s annual amount of
tax deduction under Section 102 of the American Jobs Creation Act of 2004.

Total Plant in Service shall equal Duke’s total gross plant balance as recorded
in FERC Balance Sheet Account No. 101, Electric Plant Account Nos. 301-399, and
amounts in FERC Balance Sheet Account Nos. 102 and 106, plus an adjustment to
add Contra AFUDC related to construction work in progress included in rate base.

Unamortized Loss on Reacquired Debt shall equal Duke’s expenses as recorded in
FERC Account No. 189.

Unamortized Gain on Reacquired Debt shall equal Duke’s amounts included in FERC
Account No. 257.

Variable Non-Fuel Production Operation and Maintenance Expense shall equal
Duke’s expenses as recorded in FERC Account Nos. 510, 512, 513, 528, 530, 531,
and 544.

 

II. Demand Rate

The Demand Rate shall be the Production Capacity Revenue Requirement as
determined in Part III below, divided by Duke’s Average Peak Hour Load, and
further divided by the Revenue Tax Rate. The Monthly Demand Rate shall be equal
to the Demand Rate divided by twelve (12).

 

III. Production Capacity Revenue Requirement

The Production Capacity Revenue Requirement shall equal the sum of Duke’s
(A) Return and Associated Income Taxes, (B) Production Depreciation Expense,
(C) Decommissioning Expense, (D) Production Related General Taxes, (E) Fixed
Production Operation and Maintenance Expense, (F) Purchased Power Capacity
Expenses, (G) Production Related Administrative and General Expense,
(H) Production Related Other Amortization Expense and (I) Capacity Credit for
Revenue from Non-Associated Utility Sales.

 

5

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

A. Return and Associated Income Taxes shall equal the product of the Production
Investment Base and the Cost of Capital Rate.

 

  1. Production Investment Base

The Production Investment Base shall equal the average of the beginning and
end-of-year balances of (a) Production Plant, plus (b) Production Related
General and Intangible Plant, plus (c) Production Plant Held for Future Use,
less (d) Production Related Depreciation Reserve, less (e) Production Related
Net Asset Retirement Costs, plus (f) Nuclear Fuel Inventory, plus (g) Fossil
Fuel Inventory, less (h) Production Related Accumulated Deferred Income Taxes,
plus (i) Production Related Loss on Reacquired Debt, (j) less Production Related
Gain on Reacquired Debt, plus (k) FAS 106 and FAS 109 Regulatory
Assets/Liabilities, plus (l) Other Regulatory Assets/Liabilities, plus
(m) Production Prepayments, plus (n) Production Materials and Supplies, plus
(o) Production Related Cash Working Capital.

 

  (a) Production Plant shall equal Production Plant as defined above.

 

  (b) Production Related General and Intangible Plant shall equal the sum of
General Plant plus Intangible Plant multiplied by the Production Wages and
Salaries Allocation Factor.

 

  (c) Production Plant Held for Future Use shall equal Plant Held for Future Use
multiplied by the Production Plant Allocation Factor.

 

  (d) Production Related Depreciation Reserve shall equal Production
Depreciation Reserve plus Production Related General and Intangible Plant
Depreciation Reserve; where Production Related General and Intangible Plant
Depreciation Reserve shall equal the sum of General Plant Depreciation Reserve
plus Intangible Plant Amortization Reserve, multiplied by the Production Wages
and Salaries Allocation Factor.

 

  (e) Production Related Net Asset Retirement Costs shall equal Duke’s asset
retirement cost balance as recorded in FERC Account No. 101 for Production Plant
less the associated accumulated depreciation balance as recorded in FERC Account
No. 108.

 

6

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

  (f) Nuclear Fuel Inventory shall equal Duke’s balance of investment in nuclear
fuel as recorded in FERC Account Nos. 120.1 – 120.6.

 

  (g) Fossil Fuel Inventory shall equal Duke’s balance of investment in fossil
fuel as recorded in FERC Account No. 151.

 

  (h) Production Related Accumulated Deferred Income Taxes shall equal Total
Accumulated Deferred Income Taxes multiplied by the Production Plant Allocation
Factor.

 

  (i) Production Related Loss on Reacquired Debt shall equal Unamortized Loss on
Reacquired Debt multiplied by the Production Plant Allocation Factor.

 

  (j) Production Related Gain on Reacquired Debt shall equal Unamortized Gain on
Reacquired Debt multiplied by the Production Plant Allocation Factor.

 

  (k) FAS 106 and FAS 109 Regulatory Assets/Liabilities shall equal Duke’s
balance of FAS 106 related costs as recorded in FERC Account Nos. 182.3 and 254
multiplied by the Production Wages and Salaries Allocation Factor, plus Duke’s
balance of FAS 109 related costs as recorded in FERC Account Nos. 182.3 and 254
multiplied by the Production Plant Allocation Factor.

 

  (l) Other Regulatory Assets/Liabilities shall equal Duke’s balance of Other
Regulatory Assets/Liabilities as appropriate; provided, that in order to include
any amounts in this item, Duke shall make a filing with FERC under Section 205
of the Federal Power Act.

 

  (m) Production Prepayments shall equal Duke’s Prepayments in FERC Account 165
multiplied by the Production Wages and Salaries Allocation Factor.

 

  (n) Production Materials and Supplies shall equal Production Plant Materials
and Supplies as defined above.

 

  (o) Production Related Cash Working Capital shall be a 12.5% allowance (45
days/360 days) of Fixed Production Operation and Maintenance Expense,

 

7

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

Variable Production Non-Fuel Operation and Maintenance Expenses and Production
Related Administrative and General Expense.

 

  2. Cost of Capital Rate

The Cost of Capital Rate will equal (a) Duke’s Weighted Cost of Capital, plus
(b) Federal Income Tax plus (c) State Income Tax.

(a) The Weighted Cost of Capital shall be calculated based upon a proxy capital
structure of 45% long term debt and 55% common equity and shall equal the sum
of:

 

  (i) the long term debt component, which shall equal the product of 45% and
Duke’s long term debt expenses recorded in FERC Account Nos. 427, 428, 428.1,
429, 429.1, and 430 divided by Duke’s long-term debt balance as recorded in FERC
Account Nos. 221 through 227, and

 

  (ii) the return on equity component, which shall equal the product of 55% and
Duke’s return on equity (ROE) of 11.0%.

 

  (b) Federal Income Tax shall equal

[A+(B+C+D)/E] x (FT) / (1-FT)

where FT is the Federal Income Tax Rate and A is the return on equity component,
as determined in Sections III.A.2.(a)(ii) above, B is Production Related
Amortization of Investment Tax Credits, , C is Duke’s annual amount of Tax
Deduction for Manufacturing Activities, D is the Equity AFUDC component of
Production Depreciation Expense as defined in Section III.B below, and E is
Production Investment Base as Determined in III.A.1 above.

 

  (c) State Income Tax shall equal

[A+(B+C+ D)/E + Federal Income Tax]x(ST)/ (l -ST)

where ST is the State Income Tax Rate. A is the return on equity component
determined in Sections lll.A.2.(a)(ii) above, B is the Amortization of
Investment Tax Credits, C is Duke’s

 

8

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

annual amount of Tax Deduction for Manufacturing Activities, D is the equity
AFUDC component of Production Depreciation Expense as defined in Section III.B.
below, E is the Production Investment Base as determined in III.A.l above and
Federal Income Tax is the rate determined in Section III.A.2.(b) above.

 

  B. Production Depreciation Expense shall equal the sum of Depreciation Expense
for Production Plant, plus an allocation of General and Intangible Plant
Deprecation Expense calculated by multiplying the sum of General Plant
Depreciation Expense and Intangible Plant Amortization Expense by the Production
Wages and Salaries Allocation Factor, less Decommissioning Expense as defined in
III.C. below.

 

  C. Decommissioning Expense shall equal $48,304,000 per year.

 

  D. Production Related General Taxes shall equal the sum of General Tax Expense
less revenue related taxes and Payroll Taxes, multiplied by the Production Plant
Allocation Factor, and Payroll Taxes multiplied by the Production Wages and
Salaries Allocation Factor.

 

  E. Fixed Production Operation and Maintenance Expense shall equal Duke’s
expenses as recorded in FERC Account Nos. 500, 502, 505-507, 511, 514, 517, 519,
520, 523-525, 529, 532, 535-543, 545, 546, 548-554, 556, and 557.

 

  F. Purchased Power Expenses shall equal Duke’s expenses for purchased power
recorded in FERC Account No. 555 less purchased power fuel costs included in the
Fuel Rate determined in Section IV below.

 

  G. Production Related Administrative and General Expenses shall equal the sum
of (1) Administrative and General Expense multiplied by the Production Wages and
Salaries Allocation Factor, (2) Property Insurance multiplied by the Production
Plant Allocation Factor, (3) Expenses included in FERC Account 928 related to
FERC Assessments multiplied by the Production Plant Allocation Factor, and
(4) any other Production related expenses or assessments in FERC Account Nos.
928 or 930.1.

 

  H. Production Related Other Amortization Expense shall equal Duke’s
amortization expense recorded in FERC Account Nos. 406 and 407 either directly
assigned to production or allocated to production using the Production Plant
Allocation Factor or the Production Wages and Salaries Allocation Factor.

 

9

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

  I. Credit for Revenue from Non-Associated Utility Sales shall equal Duke’s
revenues from inter-system sales from Duke’s Generation System recorded in FERC
Account 447 to the extent such sales are not included in the determination of
Duke’s Average Peak Hour Load, less fuel recovered from such sales as determined
in the Fuel Rate below, multiplied by 2/3.

 

  IV. Fuel Rate

The Fuel Rate shall equal F/S, and further divided by the Revenue Tax Rate,
where:

F is the expense of fossil and nuclear fuel and purchased economic power, as
defined in 18 C.F.R. § 35.14(a)(2) (2005), for the calendar year period;
provided that for purposes of this calculation described in 18 C.F.R. §
35.14(a)(2) (2005) the cost of fossil fuel shall include, in addition to those
items set forth in 18 C.F.R. § 35.14(a)(6), expenses recorded in Account No. 509
for the calendar year period.

S is all kWh sold (compensated for losses to the point at which power is
available for transmission ), excluding inter-system sales, for the calendar
year period.

 

  V. Variable O&M Rate

The Variable O&M rate shall equal Variable Non-Fuel Production Operation and
Maintenance Expense divided by S as determined in Section IV above, and further
divided by the Revenue Tax Rate.

 

10

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

Attachment 3-1

Example showing the calculation of the Excess Annual Capacity Charges in the

Duke-Blue Ridge Agreement, Duke-Piedmont Agreement

and Duke-Rutherford Agreement

The purpose of this attachment is to provide an example showing the calculation
of the Excess Annual Capacity Charges provided in Section 3.5.2.3.5 of the
above-identified agreements. Blue Ridge, Piedmont and Rutherford are referred to
individually as BR, P and R, respectively, and collectively as the EMC Group.

Assumptions:

Hour of maximum integrated sixty minute Duke Schedule 1 Demands during July and
August 2007: 4:00-5:00 pm, July 14, 2007.

 

    

BR

(kW)

  

P

(kW)

  

R

(kW)

EMC Coincident Peak Demand (7-14-07 4-5 pm)

   225,000    150,000    425,000

EMC Base Obligation (7-14-07 4-5pm)

   125,000    175,000    300,000

EMC Group Coincident Peak Demand (7-14-07, 4-5 pm): 800,000 kW

EMC Group Base Obligation (7-14-07, 4-5 pm): 600,000 kW

Annual Capacity Quantity = 148,000 kW

Step 1

Calculate EMC Group Excess Annual Capacity Quantity per Section 3.5.2.3.5.

 

EMC Group Coincident Peak Demand (7-14-07 4-5 pm)

   800,000 kW

minus EMC Group Base Obligation (7-14-07 4-5 pm)

   -600,000 kW

minus Annual Capacity Quantity

   -148,000 kW     

EMC Group Excess Annual Capacity Quantity

   52,000 kW

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

Step 2

Calculate EMC Excess Annual Capacity Quantity per Section 3.5.2.3.5.1

 

   

A

EMC Coincident Peak
Demand (7-14-07 4-5pm)

(kW)

 

B

minus EMC Base Obligation

(7-14-07 4-5 pm)

(kW)

 

C

minus EMC Annual

Capacity Quantity

(kW)

 

D

EMC Excess Annual
Capacity Quantity1

(kW)

BR

  225,000   125,000   42,000   58,000

P   

  150,000   175,000   23,000   0

R   

  425,000   300,000   83,000   42,000

Step 3

Calculate EMC Group Combined Excess Annual Capacity Quantity per
Section 3.5.2.3.5.2.

 

BR Excess Annual Capacity Quantity

   58,000 kW

P Excess Annual Capacity Quantity

   0 kW

R Excess Annual Capacity Quantity

   42,000 kW     

EMC Group Combined Excess Annual Capacity Quantity

   100,000kW

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

1 Cannot be less than zero.

 

2

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

Step 4

Calculate Excess Annual Amount per Section 3.5.2.3.5.

 

   

A

EMC Excess Annual
Capacity Quantity

(kW)

 

B

EMC Group Combined
Excess Annual Capacity
Quantity (kW)

 

C

EMC Group Excess

Capacity Quantity

(kW)

 

D

EMC Excess Annual

Amount

( ( A / B) * C) (kW)

BR

  58,000   100,000   52,000   30,160

P   

  0   100,000   52,000   0

R   

  42,000   100,000   52,000   21,840

Step 5

Calculate Excess Annual Capacity Charge per Section 3.5.2.3.5.

 

   

A

EMC Excess Annual

Amount

(kW)

 

B

Annual Capacity Price

($/kW-year)

 

C

Excess Annual Capacity

Charge

BR

  30,160   45.60   $1,375,296

P   

  0   45.60   $0

R   

  21,840   45.60   $995,904

 

3

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

Attachment 4-1

Blue Ridge

EMC’s Base Obligation (MW) (as defined in Section 4.2.2)

Fixed Forward Resource (MW) (as defined in Section 5.1.1)

 

     Weekday

Hour

   1    2    3    4    5    6    7    8    9    10    11    12    13    14    15
   16    17    18    19    20    21    22    23    24

Sep-06

   96    89    85    84    86    95    115    130    132    133    134    134   
134    134    133    133    134    137    139    140    145    140    126    109

Oct-06

   87    79    77    77    83    99    131    155    156    151    145    138   
130    126    122    120    121    125    135    147    151    142    124    103

Nov-06

   100    93    92    93    101    120    154    171    173    167    157    148
   139    132    128    126    131    149    169    173    168    157    139   
119

Dec-06

   128    120    119    120    126    143    172    190    192    182    173   
163    152    144    139    139    148    170    188    191    189    183    166
   146

Jan-07

   117    114    113    113    115    122    129    141    156    165    166   
161    153    151    148    149    157    172    180    179    177    171    164
   153

Feb-07

   102    97    96    98    101    115    129    146    151    148    143    151
   147    138    133    131    137    98    159    163    158    149    136   
122

Mar-07

   79    74    73    75    81    96    122    134    131    125    119    112   
106    101    97    94    95    101    112    122    125    118    105    89

Apr-07

   64    57    55    54    57    68    90    105    107    104    101    99   
96    93    90    89    90    93    97    99    105    107    96    79

May-07

   64    57    55    54    56    65    82    95    96    94    94    94    94   
93    92    92    94    96    96    95    98    100    91    76

Jun-07

   73    66    62    61    62    68    80    92    98    102    105    108   
108    108    109    109    111    112    113    111    109    111    103    88

Jul-07

   73    66    63    62    62    68    78    103    112    119    124    128   
129    128    129    129    133    135    121    124    118    119    111    94

Aug-07

   80    73    69    66    67    72    81    91    101    130    137    141   
140    144    147    138    117    116    117    114    112    113    109    94

Sep-07

   69    64    62    60    62    69    84    97    98    98    100    100    99
   99    99    98    100    102    104    104    108    105    93    80

Oct-07

   64    58    56    56    60    73    99    118    118    114    109    104   
98    95    92    90    90    94    101    111    115    107    93    76

Nov-07

   74    69    68    69    75    90    117    130    133    127    119    112   
105    100    96    94    99    113    129    132    129    120    105    89

Dec-07

   97    91    90    90    96    109    132    146    147    140    133    124
   116    110    106    105    112    129    144    147    145    140    126   
111

Jan-08

   119    116    115    115    118    124    133    144    160    168    169   
164    157    154    151    152    160    176    184    183    181    174    167
   156

Feb-08

   104    99    98    99    104    117    132    149    155    151    146    154
   150    141    137    133    140    99    162    166    162    152    138   
124

Mar-08

   80    76    75    76    83    98    124    137    133    128    122    115   
108    104    99    96    98    104    114    126    128    121    107    90

Apr-08

   66    59    55    55    58    69    92    108    109    106    104    101   
98    95    93    90    92    95    99    101    108    109    98    80

May-08

   65    59    55    55    57    66    83    97    98    97    97    96    95   
95    94    94    95    98    98    98    100    102    93    78

Jun-08

   75    68    64    62    63    69    82    94    101    104    108    110   
111    111    111    112    113    115    115    113    112    113    105    90

Jul-08

   76    68    64    62    63    69    80    105    115    121    127    130   
131    131    132    133    136    138    123    126    120    121    113    97

Aug-08

   81    74    70    68    68    73    83    94    102    133    140    144   
142    147    150    141    119    119    119    116    115    115    112    96

Sep-08

   71    66    62    62    63    70    87    98    101    101    101    102   
101    101    101    101    102    105    105    106    110    107    95    82

Oct-08

   65    59    57    57    62    75    101    120    120    116    112    106   
101    97    94    91    93    96    104    113    117    109    95    78

Nov-08

   76    70    69    70    76    92    119    133    135    129    122    115   
107    102    98    97    101    115    132    135    131    122    108    91

Dec-08

   99    93    92    93    98    112    134    149    151    143    135    127
   119    112    108    108    115    133    147    150    148    143    129   
113

Note: Hour 1 refers to 12:00 a.m. - 12:59:59 a.m. Eastern Time, Hour 2 refers to
1:00 a.m. - 1:59:59 a.m. Eastern Time, etc.

Attachment 4-1 to Duke-Blue Ridge Agreement

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

Blue Ridge

EMC’s Base Obligation (MW) (as defined in Section 4.2.2)

Fixed Forward Resource (MW) (as defined in Section 5.1.1)

 

     Weekday

Hour

   1    2    3    4    5    6    7    8    9    10    11    12    13    14    15
   16    17    18    19    20    21    22    23    24

Jan-09

   122    119    118    118    120    126    136    147    163    172    173   
168    160    158    155    155    163    179    188    187    184    178    171
   159

Feb-09

   106    101    100    101    106    119    134    152    158    154    149   
158    153    144    139    137    143    101    166    170    165    156    141
   127

Mar-09

   82    77    76    78    84    101    127    140    137    130    124    117
   111    106    101    98    99    105    116    128    130    123    108    93

Apr-09

   67    59    57    56    59    71    94    110    112    108    105    104   
100    98    94    93    94    98    101    104    110    112    100    82

May-09

   66    60    57    56    59    67    86    99    100    98    98    98    98
   97    96    96    98    100    100    99    102    105    95    80

Jun-09

   77    69    65    63    64    71    83    96    103    106    110    112   
113    113    114    114    115    117    118    115    114    115    107    92

Jul-09

   77    69    66    64    65    71    81    108    117    124    129    133   
134    133    134    136    139    141    126    129    122    124    115    98

Aug-09

   83    76    72    69    69    75    85    95    105    136    143    147   
145    150    153    144    122    121    122    119    118    118    114    98

Sep-09

   73    67    64    63    65    72    88    101    102    103    104    105   
104    104    103    103    105    107    108    108    112    109    97    83

Oct-09

   66    60    59    59    62    76    103    122    122    119    114    108   
102    99    96    94    94    98    106    115    119    112    97    80

Nov-09

   77    72    70    72    78    94    122    136    138    133    125    117   
109    104    101    99    103    118    134    137    134    125    110    93

Dec-09

   101    95    94    94    100    114    137    152    154    146    138    129
   121    115    111    110    117    135    151    153    151    146    132   
115

Jan-10

   125    121    120    120    122    129    138    151    167    176    177   
171    163    161    158    158    167    183    192    191    189    182    174
   162

Feb-10

   108    104    102    104    108    122    137    156    161    158    152   
161    156    147    142    140    146    104    169    174    169    159    144
   129

Mar-10

   83    79    79    80    87    103    129    144    140    133    126    120
   113    108    103    100    101    108    119    131    133    126    111   
94

Apr-10

   69    61    58    57    61    73    96    112    114    111    108    105   
102    99    97    94    96    99    103    106    112    114    102    83

May-10

   68    61    58    58    60    69    87    101    102    101    101    101   
99    99    98    98    99    102    102    101    105    107    97    82

Jun-10

   79    70    66    65    66    73    85    98    105    108    112    115   
115    116    116    116    119    120    120    118    116    118    109    94

Jul-10

   79    71    67    66    66    73    83    110    120    126    133    136   
137    137    137    138    142    144    129    132    126    126    118    101

Aug-10

   84    77    73    71    71    76    87    98    107    138    146    151   
148    154    156    147    125    124    125    122    120    120    116    101

Sep-10

   74    68    66    65    66    73    90    103    105    105    106    107   
106    106    105    105    106    109    110    111    115    112    99    85

Oct-10

   68    62    59    60    64    78    105    125    126    122    116    110   
105    101    98    95    97    100    108    119    122    114    99    82

Nov-10

   80    73    72    73    80    96    125    139    141    136    127    119   
112    106    102    101    105    120    137    140    137    128    112    95

Dec-10

   103    97    96    97    101    116    140    155    158    149    141    133
   123    117    113    112    119    138    154    157    154    149    135   
118

Attachment 4-1 to Duke-Blue Ridge Agreement

 

2

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

Blue Ridge

EMC’s Base Obligation (MW) (as defined in Section 4.2.2)

Fixed Forward Resource (MW) (as defined in Section 5.1.1)

 

     Weekend

Hour

   1    2    3    4    5    6    7    8    9    10    11    12    13    14    15
   16    17    18    19    20    21    22    23    24

Sep-06

   97    90    85    83    83    85    92    103    119    129    130    128   
127    126    124    124    126    129    129    131    136    133    121    108

Oct-06

   93    83    79    78    80    85    95    114    140    153    149    139   
130    123    118    115    117    122    128    141    146    138    123    106

Nov-06

   97    93    90    84    87    94    107    129    152    160    152    140   
131    125    118    115    121    136    151    153    149    139    124    107

Dec-06

   128    119    115    115    117    123    134    153    175    182    174   
159    148    138    131    129    136    156    172    175    175    169    157
   140

Jan-07

   101    97    96    96    97    98    103    113    128    134    127    118
   112    107    99    96    98    104    112    115    115    110    103    93

Feb-07

   119    113    112    112    114    119    126    139    157    162    151   
135    125    117    108    103    104    108    122    132    135    131    122
   110

Mar-07

   73    66    65    66    68    73    82    98    114    119    114    105   
99    94    87    84    86    91    100    108    111    105    95    83

Apr-07

   64    55    51    51    51    55    62    74    88    98    97    91    88   
84    80    79    80    83    85    87    95    98    89    74

May-07

   66    59    55    54    55    57    62    72    84    91    91    89    87   
86    85    84    86    87    89    87    90    94    87    75

Jun-07

   75    66    62    59    59    60    64    73    86    96    99    99    100
   101    100    100    101    104    104    102    101    104    98    85

Jul-07

   81    73    69    66    66    67    72    80    91    102    110    112   
112    108    106    105    105    105    105    101    100    101    96    85

Aug-07

   81    73    69    66    66    67    70    77    87    98    105    109    111
   112    112    111    113    115    114    108    107    107    100    90

Sep-07

   70    64    61    60    59    62    66    75    87    96    97    94    94   
93    92    92    94    95    96    97    101    98    90    79

Oct-07

   69    61    58    57    58    62    70    85    105    115    112    104   
98    93    89    86    87    92    97    106    110    104    93    80

Nov-07

   72    69    66    62    63    69    80    98    115    122    115    106   
99    94    89    87    90    102    115    116    113    105    94    80

Dec-07

   98    90    87    87    89    94    102    117    134    140    133    121   
112    105    100    98    104    119    131    134    133    129    119    107

Jan-08

   104    99    98    98    99    101    105    115    130    137    130    120
   115    109    101    98    100    106    114    117    117    112    105    9
5

Feb-08

   121    115    114    115    116    121    128    142    160    165    154   
138    127    119    111    105    106    111    125    135    138    134    125
   112

Mar-08

   74    68    66    67    69    74    83    99    116    122    116    108   
101    95    89    86    87    93    101    111    113    108    98    86

Apr-08

   65    57    53    51    52    56    64    76    90    99    98    93    90   
87    83    80    82    85    87    88    97    100    90    76

May-08

   68    60    57    55    55    58    63    73    86    93    93    91    90   
88    87    87    87    90    90    90    93    95    88    76

Jun-08

   76    68    63    61    60    62    65    74    87    98    101    101    102
   102    102    102    104    106    106    105    104    106    100    87

Jul-08

   83    75    70    68    67    69    73    81    94    104    112    115   
114    111    108    107    108    108    107    103    102    104    98    87

Aug-08

   83    74    70    68    66    68    72    79    90    100    107    112   
113    114    115    114    116    118    116    111    109    109    102    91

Sep-08

   72    66    62    61    61    63    68    76    89    98    98    97    96   
95    94    94    95    98    98    99    103    101    91    80

Oct-08

   70    62    59    58    59    63    72    87    108    118    115    106   
100    95    90    88    90    94    99    108    112    106    94    81

Nov-08

   73    69    67    62    65    71    82    100    118    125    118    108   
101    96    90    88    93    105    117    119    115    108    95    81

Dec-08

   99    92    89    89    90    96    105    119    137    143    136    124   
115    108    102    100    106    122    134    137    137    132    122    109

Attachment 4-1 to Duke-Blue Ridge Agreement

 

3

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

Blue Ridge

EMC’s Base Obligation (MW) (as defined in Section 4.2.2)

Fixed Forward Resource (MW) (as defined in Section 5.1.1)

 

    

Weekend

Hour

   1    2    3    4    5    6    7    8    9    10    11    12    13    14    15
   16    17    18    19    20    21    22    23    24

Jan-09

   105    101    101    101    101    103    108    118    133    140    133   
122    117    112    104    100    101    108    116    119    119    115    107
   98

Feb-09

   123    118    116    117    119    123    131    145    163    169    157   
141    130    122    113    107    108    113    127    137    141    137    128
   115

Mar-09

   76    69    68    69    71    76    85    101    119    125    119    110   
103    98    91    88    90    95    104    113    115    110    100    87

Apr-09

   66    58    54    53    54    58    65    77    92    101    101    95    92
   88    84    82    83    87    88    90    99    102    93    77

May-09

   69    62    58    56    57    59    65    75    88    95    95    93    91   
90    88    88    90    91    93    91    94    98    90    78

Jun-09

   78    69    65    62    61    62    66    76    90    100    103    104   
105    105    105    105    106    108    108    106    106    108    102    89

Jul-09

   85    76    72    69    69    70    75    83    95    106    115    117   
117    113    111    109    110    110    109    105    105    106    100    89

Aug-09

   84    76    72    69    68    69    73    80    91    102    109    114   
115    116    117    116    119    120    119    113    112    112    105    94

Sep-09

   73    67    64    62    62    64    69    78    91    100    101    98    98
   97    96    96    98    100    100    101    105    103    94    82

Oct-09

   72    63    60    59    60    65    73    89    110    121    117    108   
102    97    92    90    91    96    101    111    115    108    97    83

Nov-09

   75    71    69    64    66    73    83    101    121    127    120    110   
104    98    93    90    94    107    119    122    118    110    98    83

Dec-09

   101    94    91    90    93    98    106    122    140    146    139    126
   117    110    105    102    108    124    137    140    139    135    125   
112

Jan-10

   108    103    102    102    103    105    110    120    136    143    136   
126    119    114    106    102    104    111    119    122    122    117    109
   99

Feb-10

   126    121    119    119    122    126    134    148    167    172    160   
144    133    125    115    109    111    116    130    140    144    140    130
   117

Mar-10

   77    71    69    69    73    78    87    104    121    127    121    112   
105    100    93    90    91    97    106    115    118    112    101    89

Apr-10

   68    59    55    54    55    59    66    79    94    104    103    98    94
   90    86    83    85    88    90    92    101    104    94    80

May-10

   71    63    59    58    58    61    66    76    90    97    98    95    94   
92    90    90    91    93    94    94    97    100    92    80

Jun-10

   80    71    66    63    62    64    68    77    91    102    105    106   
106    107    106    106    108    111    111    108    108    111    105    90

Jul-10

   87    78    73    71    70    72    76    85    98    108    117    119   
119    115    113    112    112    112    112    108    107    108    102    90

Aug-10

   86    77    73    70    69    71    75    82    94    105    112    116   
118    119    119    119    121    123    121    115    114    114    107    95

Sep-10

   75    69    65    64    63    66    70    80    93    101    103    101   
100    99    98    98    99    101    102    103    108    105    95    83

Oct-10

   73    65    61    60    62    66    75    90    112    123    119    111   
105    99    94    92    94    98    103    113    117    111    99    84

Nov-10

   76    73    70    66    68    74    85    104    123    130    123    112   
105    100    94    92    97    109    122    124    120    112    100    85

Dec-10

   104    96    93    93    94    100    108    124    143    149    142    129
   119    112    106    105    111    127    140    143    142    137    127   
114

Attachment 4-1 to Duke-Blue Ridge Agreement

 

4

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

Attachment 4-2

Calculation of Reduction to EMC’s Base Obligation and EMC Group’s Base
Obligation During Light Load Periods

 

  I. Definitions

1. The “Carolina Power & Light Service Obligation Resources” or “SORs” means
those generation and purchased capacity resources provided to NCEMC by CP&L and
used by NCEMC to serve NCEMC load pursuant to the Power Supply Agreement.

2. The “Power Supply Agreement” means the Power Supply Agreement Dated
November 2, 1998 Between North Carolina Electric Membership Corporation and
Carolina Power & Light Company, d/b/a Progress Energy Carolinas, Inc., as
amended, filed at FERC in Docket No. ER05-722-000 on June 30, 2005.

3. The “1996 SO” means the Service Obligation assumed by NCEMC on January 1,
1996 in the amount of 204.3 MW including losses.

4. “SOR A” means the 225 MW of electric capacity and energy that CP&L provides
to NCEMC pursuant through December 31, 2015 pursuant to Section 2.1(a)(1) of the
Power Supply Agreement.

5. “SOR E” means the 225 MW of electric capacity and energy that CP&L provides
to NCEMC pursuant through December 31, 2013 pursuant to Section 2.1(a)(4) of the
Power Supply Agreement.

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

6. “NCEMC Catawba Resource Entitlement” or “CRE” means NCEMC’s 623.5 MW
ownership interest in the Catawba Nuclear Station.

7. “NCEMC’s CP&L Native Load” or “NCNL” means the electric capacity and energy
demands (kW) imposed on NCEMC by its member cooperatives in CP&L’s existing
Control Areas, and which are served by CP&L under the Power Supply Agreement
(excluding the 1996 SO).

8. “NCEMC’s Duke Native Load” or “NDNL” means the electric capacity and energy
demands (kW) imposed on NCEMC by its member cooperatives in Duke’s Control Area.

 

2

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

II. Calculation of Reduction in EMC’s Base Obligation and EMC Group’s Base
Obligation During Light Load Periods (through December 31, 2008)

EMC’s Base Obligation and EMC Group’s Base Obligation during an Hour shall be
subject to reduction during the period commencing on the Commencement Date and
continuing through December 31, 2008 in accordance with the following:

A. NCEMC’s contractual right to SO 1996, SOR A and SOR E (654.3 MW rounded to
655 MW) is subject to reduction based on a comparison between 655 MW and NCEMC’s
CP&L Native Load (NCNL).

B. In the event that NCEMC’s CP&L Native Load during the Hour is less than 655
MW, EMC’s Base Obligation and EMC Group’s Base Obligation for the Hour shall be
reduced as follows:

C. If 655 MW minus NCNL is equal to or less than 225 MW, the reduction in EMC’s
Base Obligation shall be equal to the amount set forth in Equation 1 below:

Equation 1: ( ( 655 MW - NCNL ) / 225 ) * 11

D. If 655 MW minus NCNL is greater than 225 MW, the reduction in EMC’s Base
Obligation shall be equal to 11 MW plus the amount set forth in Equation 2
below:

Equation 2: ( ( 430 MW - NCNL ) / 225 ) * 11

 

3

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

E. If 655 MW minus NCNL is equal to or less than 225 MW, the reduction in EMC
Group’s Base Obligation shall be equal to the amount set forth in Equation 3
below:

Equation 3: ( ( 655 MW - NCNL ) / 225 ) * 33

F. If 655 MW minus NCNL is greater than 225 MW, the reduction in EMC Group’s
Base Obligation shall be equal to 33 MW plus the amount set forth in Equation 4
below:

Equation 4: ( ( 430 MW - NCNL ) / 225 ) * 33

G. Example: If NCNL is equal to 565 MW during an Hour, the reduction in EMC’s
Base Obligation for the Hour shall be equal to ( ( 655 MW – 565 MW ) / 225 ) *
11 or 4.4 MW, and the reduction in EMC Group’s Base Obligation for the Hour
shall be equal to ( (655 MW - 565 MW) / 225 ) * 33, or 13.2 MW.

III. Calculation of Reduction in EMC’s Base Obligation and EMC Group’s Base
Obligation During Light Load Periods (January 1, 2009 through December 31, 2010)

EMC’s Base Obligation and EMC Group’s Base Obligation during an Hour shall be
subject to reduction during the period commencing on January 1, 2009 and
continuing through December 31, 2010 in accordance with the following:

 

4

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

A. NCEMC’s contractual right to SO 1996 and SOR A (429.3 MW rounded to 430 MW)
is subject to reduction based on a comparison between 430 MW and NCEMC’s CP&L
Native Load (NCNL).

B. In the event that NCEMC’s CP&L Native Load during the Hour is less than 430
MW, EMC’s Base Obligation for the Hour shall be reduced as follows:

Equation 5: ( (430 MW - NCNL ) / 225 ) * 11

C. In the event that NCEMC’s CP&L Native Load during the Hour is less than 430
MW, EMC Group’s Base Obligation for the Hour shall be reduced as follows:

Equation 6: ( ( 430 MW - NCNL ) / 225 ) * 33

D. Example: If NCNL is equal to 340 MW during an Hour, the reduction in EMC’s
Base Obligation for the Hour shall be equal to ( ( 430 MW – 340 MW ) / 225 ) *
11 MW, or 4.4 MW, and the reduction in EMC Group’s Base Obligation for the Hour
shall be equal to ( ( 430 MW – 340 MW ) / 225 ) * 33, or 13.2 MW.

IV. Calculation of Reduction in EMC’s Base Obligation and EMC Group’s Base
Obligation During Light Load Periods for the Catawba Resource Entitlement

In addition to the reductions to EMC’s Base Obligation and EMC Group’s Base
Obligation set forth under Sections II and III above, EMC’s Base Obligation and
EMC Group’s Base Obligation shall be subject to reduction as set forth in this
Section IV.

 

5

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

A. In the event that NCEMC’s Duke Native Load during an Hour is less than 623.5
MW and a nuclear unit at Catawba Nuclear Station or McGuire Nuclear Station is
off-line or derated during the Hour, EMC’s Base Obligation for the Hour shall be
reduced as follows:

Equation 7: (1 - ( NDNL / 623.5 MW) ) * 32 MW

B. In the event that NCEMC’s Duke Native Load during an Hour is less than 623.5
MW and a nuclear unit at Catawba Nuclear Station or McGuire Nuclear Station is
off-line or derated during the Hour, EMC Group’s Base Obligation for the Hour
shall be reduced as follows:

Equation 8: (1 - ( NDNL / 623.5 MW ) ) * 95 MW

C. Example: If NDNL is equal to 561.15 MW during an Hour, and a nuclear unit at
Catawba Nuclear Station or McGuire Nuclear Station is off-line or derated during
the Hour, the reduction in EMC’s Base Obligation for the Hour shall be equal to
( 1 - (561.15 MW / 623.5 MW) ) * 32 MW, which equals ( .1 ) * ( 32 MW ), or 3.2
MW, and the reduction in EMC Group’s Base Obligation for the Hour shall be equal
to ( 1 - (561.15 MW / 623.5 MW ) ) * 95 MW, which equals ( .1 ) * ( 95 MW ), or
9.5 MW.

 

6

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

Attachment 4-3

EMC Partial Requirements Resources

(Page 1 of 7)

Resource Name: AEP Baseload

Type of Resource: Baseload Resource

Delivery period: January 1, 2011 through December 31, 2012

Resource Capacity MW: 7

Must take resource: Yes, in the amount of MWs that NCEMC indicates is available
in each hour.

Scheduling: A schedule must be submitted for each hour by Duke in the amount of
MWs that NCEMC indicates is available.

Energy Pricing: NA

Force Majeure: “Force Majeure” means an event or circumstance which prevents one
Party from performing its obligations under one or more Transactions, which
event or circumstance was not anticipated as of the date the Transaction was
agreed to, which is not within the reasonable control of, or the result of the
negligence of, the Claiming Party, and which, by the exercise of due diligence,
the Claiming Party is unable to overcome or avoid or cause to be avoided. Force
Majeure shall not be based on (i) the loss of Buyer’s markets; (ii) Buyer’s
inability economically to use or resell the Product purchased hereunder;
(iii) the loss of failure of Seller’s supply; or (iv) Seller’s ability to sell
the Product at a price greater than the Contract Price. Neither Party may raise
a claim of Force Majeure based in whole or in part on curtailment by a
Transmission Provider unless (i) such Party has contracted for firm transmission
with a Transmission Provider for the Product to be delivered to or received at
the Delivery Point and (ii) such curtailment is due to “force majeure” or
“uncontrollable force” or a similar term as defined under the Transmission
Provider’s tariff, provided however, that existence of a Force Majeure absent a
showing of other facts and circumstances which in the aggregate with such
factors establish that a Force Majeure as defined in the first sentence hereof
has occurred.

Attachment 4-3 to Duke-Blue Ridge Agreement

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

Attachment 4-3

EMC Partial Requirements Resources

(Page 2 of 7)

Resource Name: Catawba

Type of Resource: Baseload Resource

Delivery period: January 1, 2011 through December 31, 2021

Resource Capacity MW: 32

Must take resource: Yes, in the amount of MWs that NCEMC indicates is available
in each hour.

Scheduling: A schedule must be submitted for each hour by Duke in the amount of
MWs that NCEMC indicates is available.

Energy Pricing: NA

Force Majeure: The term “Force Majeure” as used herein shall mean any cause
beyond the control of the party affected and which by reasonable efforts the
party affected is unable to overcome, including without limitation the
following: Acts of God: fire, flood, landslide, lightning, earthquake,
hurricane, tornado, storm, freeze, or drought; blight, famine, epidemic, or
quarantine; strike, lockout or other labor difficulty; act or failure to act of
any party (and such party so acting or failing to act shall not used such act or
failure to act to excuse any other obligation which it has under this
Agreement); act or failure to act of any regulatory agency or other governmental
authority; changes in the work or delays caused by public bidding requirements;
theft; casualty; accident; equipment breakdown, failure or shortage of, or
inability to obtain from usual sources, goods, labor, equipment, information or
drawings, machinery, supplies, energy, fuel or materials; embargo; injunction;
litigation or arbitration with suppliers or vendors; shortage of rolling stock;
arrest; war; civil disturbance; explosion; acts of public enemies; sabotage; or
breach of contract by any supplier, contractor, sub-contractor, laborer or
materialman. Any party rendered unable to fulfill any obligation under this
Agreement by reason of Force Majeure shall make reasonable efforts to remove
such inability within a reasonable time.

Attachment 4-3 to Duke-Blue Ridge Agreement

 

2

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

Attachment 4-3

EMC Partial Requirements Resources

(Page 3 of 7)

Resource Name: Dominion PPA

Type of Resource: Combined Cycle Resource

Delivery period: January 1, 2011 through December 31, 2014

Resource Capacity MW: 7

Must take resource: No

Resource Availability: Duke has the right but not the obligation to schedule the
amount of MWs that NCEMC has indicated is available from this resource.

Min run time (Hours): 8

Scheduling:

 

  •   Day ahead schedule to be submitted, with intraday changes allowed

 

  •   Nominations must be made in whole MWs

 

  •   Day ahead Schedules are those submitted before 8:00 a.m. EPT the day prior
to flow. Intraday Schedules are those that are requested after the 8:00 a.m. EPT
deadline above. All Schedule changes must occur at the top of the hour. Intraday
Schedule changes require 2 hours advance notice.

 

  •   Day ahead scheduling: Unlimited changes up to the allocation MWs

 

  •   Intraday scheduling: Limit of two changes to the hourly Schedule for the
remainder of the day. Each change to the hourly Schedule shall be no greater
than 5%, for a cumulative maximum of 10% each hour. Additional changes will be
accommodated on a best efforts basis.

Energy Pricing: For each month of the Delivery Period, the price for energy will
equal the sum of Day-Ahead Energy Charge, the Intra-day Energy Charge, the
Incremental Variable Charge and the Variable O&M Charge:

 

  •   Day-ahead Energy Charge = the sum of each day in the month’s Day-Ahead
Energy Price x energy scheduled Day-Ahead

 

  •   Day-Ahead Energy Price = (Day-Ahead Fuel Index + Fuel Adder) x Heat Rate

 

  •   Day-Ahead Fuel Index: Gas Daily: Daily Price Survey, Midpoint of the Daily
Ranges, Appalachia, Dominion South Point. Gas Index for each Sat. and Sun. shall
be the price specified for the Mon. immediately following such Sat. and Sun. In
the event that Gas Daily no longer publishes this index, NCEMC and Dominion will
agree upon a replacement index which will be passed through to the IM.

 

  •   Intra-Day Energy Charge = the sum of each day in the month’s Intra-Day
Energy Price x energy scheduled Intra-Day

 

  •   Intra-Day Energy Price = (Intra-Day Fuel Index + Fuel Adder) x Heat Rate

Attachment 4-3 to Duke-Blue Ridge Agreement

 

3

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

Attachment 4-3

EMC Partial Requirements Resources

(Page 4 of 7)

 

  •   Intra-Day Fuel Index: The higher of the price in $/MMBtu for such calendar
day or the next calendar day of Gas Daily: Daily Price Survey, Absolute of the
Daily Ranges, Appalachia, Dominion South Point. Gas Index for each Sat and Sun
shall be the price specified for the higher of the Monday or Tuesday immediately
following such Saturday and Sunday.

 

  •   Fuel Adder: $0.25/MMBtu

 

  •   Heat Rate:

 

  •   2006 heat rate: 7.730 MMBtu/MWh

 

  •   Heat Rate Adjustment: The heat rate will be recalculated annually to
reflect the actual energy costs from the previous year. The new heat rate will
go into effect on February 1 of each year.

 

  •   Incremental Variable Charge: There may be additional charges due to making
Intra-day schedule changes.

 

  •   Variable O&M Charge:

2011 = $3.81/MWh

2012 = $3.91/MWh

2013 = $4.01/MWh

2014 = $4.11/MWh

Force Majeure: “Force Majeure” means an event or circumstance which prevents one
Party from performing its obligations under one or more Transactions, which
event or circumstance was not anticipated as of the date the Transaction was
agreed to, which is not within the reasonable control of, or the result of the
negligence of, the Claiming Party, and which, by the exercise of due diligence,
the Claiming Party is unable to overcome or avoid or cause to be avoided. Force
Majeure shall not be based on (i) the loss of Buyer’s markets; (ii) Buyer’s
inability economically to use or resell the Product purchased hereunder;
(iii) the loss or failure of Seller’s supply; or (iv) Seller’s ability to sell
the Product at a price greater than the Contract Price. Neither Party may raise
a claim of Force Majeure based in whole or in part on curtailment by a
Transmission Provider unless (i) such Party has contracted for firm transmission
with a Transmission Provider for the Product to be delivered to or received at
the Delivery Point and (ii) such curtailment is due to “force majeure” or
“uncontrollable force” or a similar term as defined under the Transmission
Provider’s tariff; provided, however, that existence of a Force Majeure absent a
showing of other facts and circumstances which in the aggregate with such
factors establish that a Force Majeure as defined in the first sentence hereof
has occurred.

Attachment 4-3 to Duke-Blue Ridge Agreement

 

4

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

Attachment 4-3

EMC Partial Requirements Resources

(Page 5 of 7)

Resource Name: SCEG

Type of Resource: Combined Cycle Resource

Delivery period: January 1, 2011 through December 31, 2012

Resource Capacity MW: 12

Must take resource: No

Resource Availability: Duke has the right but not the obligation to schedule the
amount of MWs that NCEMC has indicated is available from this resource.

Min run time (Hours): 4

Firm Gas Transportation: Firm gas transportation has been procured for up to 16
hours a day. Therefore, operation of this resource is limited to no more than 16
hours a day.

Scheduling:

 

  •   Day ahead schedule to be submitted, with intraday changes allowed

 

  •   Nominations must be made in whole MWs

 

  •   Day ahead Schedules are those submitted before 8:00 a.m. EPT the day prior
to flow. Intraday Schedules are those that are requested after the 8:00 a.m. EPT
deadline above. All Schedule changes must occur at the top of the hour. Intraday
Schedule changes require 2 hours advance notice.

 

  •   Day ahead scheduling: Unlimited changes up to the allocation MWs

 

  •   Intraday scheduling: Limit of two changes to the hourly Schedule for the
remainder of the day. Each change to the hourly Schedule shall be no greater
than 5%, for a cumulative maximum of 10% each hour. Additional changes will be
accommodated on a best efforts basis.

Energy Pricing: For each month of the Delivery Period, the price for energy will
equal the sum of Day-Ahead Energy Charge, the Intra-day Energy Charge and the
Variable O&M Charge:

 

  •   Day-ahead Energy Charge = the sum of each day in the month’s Day-Ahead
Energy Price x energy scheduled Day-Ahead:

 

  •   Day-Ahead Energy Price = (Day-Ahead Fuel Index + Fuel Adder) x Heat Rate

 

  •   Day-Ahead Fuel Index: 102.6% of SONAT Mid-Point price as published in Gas
Daily for Louisiana-OnShore South for gas to flow on such day

 

  •   Intra-Day Energy Charge = the sum of each day in the month’s Intra-Day
Energy Price x energy scheduled Intra-Day

 

  •   Intra-Day Energy Price = (Intra-Day Fuel Index + Fuel Adder) x Heat Rate

Attachment 4-3 to Duke-Blue Ridge Agreement

 

5

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

Attachment 4-3

EMC Partial Requirements Resources

(Page 6 of 7)

 

  •   Intra-Day Fuel Index: 102.6% of the higher of the Gas Daily daily
Mid-Point price for SONAT under the table for Louisiana-OnShore South for gas to
flow such day or the Gas Daily daily Mid-Point price for SONAT under the table
for Louisiana-OnShore South for gas to flow on the next trading day

 

  •   Fuel Adder: $0.1/MMBtu

 

  •   Heat Rate: 7.350 MMBtu/MWh

 

  •   Variable O&M Charge:

2011 = $2.70/MWh

2012 = $2.76/MWh

Force Majeure: “Force Majeure” means an event or circumstance which prevents one
Party from performing its obligations under one or more Transactions, which
event or circumstance was not anticipated as of the date the Transaction was
agreed to, which is not within the reasonable control of, or the result of the
negligence of, the Claiming Party, and which, by the exercise of due diligence,
the Claiming Party is unable to overcome or avoid or cause to be avoided. Force
Majeure shall not be based on (i) the loss of Buyer’s markets; (ii) Buyer’s
inability economically to use or resell the Product purchased hereunder;
(iii) the loss of failure of Seller’s supply; or (iv) Seller’s ability to sell
the Product at a price greater than the Contract Price. Neither Party may raise
a claim of Force Majeure based in whole or in part on curtailment by a
Transmission Provider unless (i) such Party has contracted for firm transmission
with a Transmission Provider for the Product to be delivered to or received at
the Delivery Point and (ii) such curtailment is due to “force majeure” or
“uncontrollable force” or a similar term as defined under the Transmission
Provider’s tariff; provided, however, that existence of a Force Majeure absent a
showing of other facts and circumstances which in the aggregate with such
factors establish that a Force Majeure as defined in the first sentence hereof
has occurred.

Attachment 4-3 to Duke-Blue Ridge Agreement

 

6

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

Attachment 4-3

EMC Partial Requirements Resources

(Page 7 of 7)

Resource Name: SEPA

Type of Resource: Baseload Resource

Delivery period: January 1, 2011 through December 31, 2021

Resource Capacity MW: 7

Must take resource: Duke must schedule the amount of energy that SEPA indicates
is available.

Resource Availability: SEPA will send the “Energy for Scheduling” declaration to
Duke on Thursday of each week. The declaration shows the minimum energy and
excess energy available for scheduling.

Scheduling:

 

  •   Duke to schedule with SEPA.

 

  •   All scheduling nominations must be made in whole megawatts (MW) only.

 

  •   If the SEPA declaration shows excess energy is available, that energy must
be scheduled – it is not optional.

 

  •   After receiving the energy declaration from SEPA, Duke is to fax or email
back their proposed schedule for the coming week (7 days). The seven day week
shall commence at the beginning of Saturday and extend to the end of Friday.

 

  •   Schedules may be revised on a day-ahead basis only if received by 8 AM.

Energy Pricing: NA

Force Majeure: Neither the Government nor Purchaser shall be considered to be in
default in respect of any obligation hereunder, if prevented from fulfilling
such obligation by reason of uncontrollable forces, including but not limited to
failure of facilities, flood, earthquake, storm, lightning, fire, epidemic, war,
riot, civil disturbance, labor disturbance, materials or equipment shortages, or
restraint by court or public authority, which by exercise of reasonable
diligence and foresight could not have been avoided, but excluding drought.
Either party rendered unable to fulfill any obligation by reason of an
uncontrollable force shall remove such inability with all reasonable dispatch.

Attachment 4-3 to Duke-Blue Ridge Agreement

 

7

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

Attachment 7-2

Example showing the calculation of the Monthly Demand Charges in the

Duke-Blue Ridge Agreement, Duke-Piedmont Agreement

and Duke-Rutherford Agreement

The purpose of this attachment is to provide an example showing the calculation
of the Monthly Demand Charge provided in Section 7.1.4 of the above-identified
agreements. Blue Ridge, Piedmont and Rutherford are referred to individually as
BR, P and R, respectively, and collectively as the EMC Group.

Assumptions:

Hour in October in which the positive difference between the EMC Group Native
Load and EMC Group’s Base Obligation is the greatest: 4:00-5:00 pm, October 14,
2006.

 

    

BR

(kW)

  

P

(kW)

  

R

(kW)

EMC Hourly Demand (10-14-06 4-5 pm)

   75,000    275,000    375,000

EMC Base Obligation (10-14-06 4-5pm)

   100,000    200,000    250,000

EMC Group Hourly Demand (10-14-06, 4-5 pm): 725,000 kW

EMC Group Base Obligation (10-14-06, 4-5 pm): 550,000 kW

Step 1

Calculate EMC Group Monthly Demand Quantity per Section 7.1.4.3.

 

EMC Group Hourly Demand

   725,000 kW

minus EMC Group Base Obligation

   -550,000 kW     

EMC Group Monthly Demand Quantity

   175,000 kW

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

Step 2

Calculate EMC Monthly Demand Quantity per Section 7.1.4.1.

 

   

A

EMC Hourly Demand

(10-14-06 4-5pm) (kW)

 

B

minus EMC Base Obligation

(10-14-06 4-5 pm)

(kW)

 

C

EMC Monthly Demand

Quantity2

(kW)

BR

  75,000   100,000   0

P

  275,000   200,000   75,000

R

  375,000   250,000   125,000

Step 3

Calculate EMC Group Combined Monthly Demand Quantity per Section 7.1.4.2.

 

BR Monthly Demand Quantity

   0 kW

P Monthly Demand Quantity

   75,000 kW

R Monthly Demand Quantity

   125,000 kW     

EMC Group Combined Monthly Demand Quantity

   200,000 kW

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

2 Cannot be less than zero.

 

2

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

Step 4

Calculate Monthly Demand Amount per Section 7.1.4.

 

   

A

EMC Monthly Demand
Quantity

(kW)

 

B

EMC Group Combined
Monthly Demand Quantity
(kW)

 

C

EMC Group Monthly
Demand Quantity

(kW)

 

D

EMC Monthly

Demand Amount

( ( A / B) * C) (kW)

BR

  0   200,000   175,000   0

P

  75,000   200,000   175,000   65,625

R

  125,000   200,000   175,000   109,375

Step 5

Calculate Monthly Demand Charge per Section 7.1.4.

 

   

A

EMC Monthly Demand

Amount (kW)

 

B

Monthly Demand Rate ($/kW-year)

 

C

Monthly Demand Charge

BR

  0   0.75   0

P

  65,625   0.75   $49,218.75

R

  109,375   0.75   $82,031.25

 

3

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

Attachment 7-3

Calculation of Blue Ridge Allocated Share of

Duke Total Hourly Energy Charge, EMC Group Total Hourly Energy Credit,

Inter-EMC Energy Charge and Inter-EMC Energy Credit

I. Definitions

1. The Inter-EMC Transfer Price for an Hour shall be equal to the simple average
of the Duke Territorial Incremental Cost for the Hour and the Duke Territorial
Decremental Cost for the Hour; provided, that for any Hour for which the EMC
Group Energy Credit Amount is zero, the Inter-EMC Transfer Price for the Hour
shall be equal to 101.5% of the Duke Territorial Incremental Cost for the Hour,
and that for any Hour for which the EMC Group Energy Purchase Amount is zero,
the EMC Transfer Price for the Hour shall be equal to 101.5% of the Duke
Territorial Decremental Cost for the Hour.

2. All other capitalized terms shall have the meaning set forth in Section 1.1
of this Agreement.

II. Blue Ridge Allocated Share of the Duke Total Hourly Energy Charge

The Blue Ridge Allocated Share of the Duke Total Hourly Energy Charge for an
Hour shall be equal to:

( C3 / A ) * D

Where:

A = EMC Group Combined Energy Purchase Amount

C3 = Blue Ridge Energy Purchase Amount

D = Duke Total Hourly Energy Charge

III. Blue Ridge Allocated Share of the Inter-EMC Energy Charge

The Blue Ridge Allocated Share of the Inter-EMC Energy Charge for an Hour shall
be equal to:

( C3 / A ) * ( A - B ) * P

Where:

A = EMC Group Combined Energy Purchase Amount

B = EMC Group Energy Purchase Amount

C3 = Blue Ridge Energy Purchase Amount

P = Inter-EMC Transfer Price

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

IV. Blue Ridge Allocated Share of the EMC Group Total Hourly Energy Credit

The Blue Ridge Allocated Share of the EMC Group Total Hourly Energy Credit for
an Hour shall be equal to:

( G3 / E ) * H

Where:

E = EMC Group Combined Energy Credit Amount

G3 = Blue Ridge Energy Credit Amount

H = EMC Group Total Hourly Energy Credit

 

V. Blue Ridge Allocated Share of the Inter-EMC Energy Credit

The Blue Ridge Allocated Share of the Inter-EMC Energy Credit for an Hour shall
be equal to:

( G3 / E ) * ( E – F ) * P

Where:

E = EMC Group Combined Energy Credit Amount

F = EMC Group Energy Credit Amount

G3 = Blue Ridge Energy Credit Amount

P = Inter-EMC Transfer Price

 

-2-

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

Attachment 7-4

Example 1

Showing the Calculation of Blue Ridge, Piedmont and

Rutherford Allocated Shares of the Duke Total Hourly Energy Charge,

EMC Group Total Hourly Energy Credit, Inter-EMC Energy Charge and Inter-EMC
Energy Credit

The purpose of this attachment is to provide an example showing the calculation
of the charges and credits identified above for one Hour. For purposes of this
example, Blue Ridge, Piedmont and Rutherford are referred to individually as BR,
P and R, respectively, and collectively as the EMC Group.

I. ASSUMPTIONS:

A. Call and Put Signals during the Hour

 

     BR    P    R    EMC
Group

Intervals 1-2253 - Call Signal during each Interval (kW):

   6,000    0    10,000    6,000

Intervals 1-225 - Put Signal during each Interval (kW)

   0    10,000    0    0

Intervals 226-450 - Call Signal during each Interval (kW)

   6,000    0    10,000    6,000

Intervals 226-450 - Put Signal during each Interval (kW)

   0    10,000    0    0

Intervals 451-675 - Call Signal during each Interval (kW)

   0    4,000    0    0

Intervals 451-675 - Put Signal during each Interval (kW)

   9,000    0    9,000    14,000

Intervals 676-900 - Call Signal during each Interval (kW)

   0    4,000    0    0

Intervals 676-900 - Put Signal during each Interval (kW)

   9,000    0    9,000    14,000

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

3 Interval numbers refer to the Intervals during the Hour (e.g., Interval 1 is
the first four seconds of the Hour, Interval 2 is the next four seconds, etc.).
The Call and Put Signals are shown as the same in each of the first 225
Intervals of the Hour, and then again as the same in the next 225 Intervals and
so on. This is a simplifying assumption, to make this example less cumbersome.
In actual operation, the Parties anticipate that these positions would change
frequently within the Hour.

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

B. Energy deliveries during the Hour4

 

     BR    P    R    EMC
Group

Hourly Energy Amount delivered from Duke - Intervals 1-225

   1,500    0    2,500    1,500

Hourly Energy Amount delivered to Duke - Intervals 1-225

   0    2,500    0    0

Hourly Energy Amount delivered from Duke - Intervals 226-450

   1,500    0    2,500    1,500

Hourly Energy Amount delivered to Duke - Intervals 226-450

   0    2,500    0    0

Hourly Energy Amount delivered from Duke - Intervals 451-675

   0    1,000    0    0

Hourly Energy Amount delivered to Duke - Intervals 451-675

   2,250    0    2,250    3,500

Hourly Energy Amount delivered from Duke - Intervals 676-900

   0    1,000    0    0

Hourly Energy Amount delivered to Duke - Intervals 676-900

   2,250    0    2,250    3,500

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

4 These numbers sum the four-second Call and Put Signals from Part I.A. For
example, 6,000 kW delivered by Duke in each of the 225 four-second Intervals (15
minutes) equal 1,500 kWh (6,000 KW * 225 Intervals / 900 Intervals / Hour = 1500
kWh).

 

- 2 -

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

C. Incremental/Decremental Costs

Duke Territorial Incremental Cost: $0.10/kWh

Duke Territorial Decremental Cost: $0.10/kWh

II. CALCULATIONS

A. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Duke Total Hourly Energy Charge

Step 1

Sum the energy deliveries by Duke to BR for all Intervals over the entire Hour
(column 1). Repeat calculation for P and R (columns 2-3). Sum columns 1-3
(column 4). Sum the energy deliveries by Duke to the EMC Group for all Intervals
over the entire Hour (column 5).

 

Column number

   1    2    3    4    5      BR5    P6    R7    Sum8    Aggregate
EMC
Group9

Energy delivered by Duke (kW)

   3,000    2,000    5,000    10,000    3,000

Step 2

Calculate the percentage that each Customer contributed to the energy deliveries
by Duke (Customer Buy / Sum of Customer Buys)

 

     BR10     P11     R12     Sum  

Energy delivered by Duke

   30.00 %   20.00 %   50.00 %   100.00 %

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

5 Blue Ridge Energy Purchase Amount

6 Piedmont Energy Purchase Amount

7 Rutherford Energy Purchase Amount

8 EMC Group Combined Energy Purchase Amount

9 EMC Group Energy Purchase Amount

10 Blue Ridge Energy Purchase Amount / EMC Group Combined Energy Purchase
Amount.

11 Piedmont Energy Purchase Amount / EMC Group Combined Energy Purchase Amount.

12 Rutherford Energy Purchase Amount / EMC Group Combined Energy Purchase
Amount.

 

- 3 -

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

Step 3

Calculate Duke Total Hourly Energy Charge = 113% of Duke Territorial Incremental
Cost for electric energy delivered by Duke to the EMC Group for the Hour (3,000
kW * $0.10/kWh * 113% = $339.00)

Step 4

Calculate the individual EMC’s Allocated Share of the Duke Total Hourly Energy
Charge.

Apply the percentages derived in Step 2 to the Duke Total Hourly Energy Charge.

 

     BR13    P14    R15    Sum16

$ for energy delivered by Duke

   $ 101.70    $ 67.80    $ 169.50    $ 339.00

These amounts are included in the Duke Hourly Energy Charge.

 

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

13 Blue Ridge Allocated Share of Duke Total Hourly Energy Charge.

14 Piedmont Allocated Share of Duke Total Hourly Energy Charge

15 Rutherford Allocated Share of Duke Total Hourly Energy Charge

16 Duke Total Hourly Energy Charge

 

- 4 -

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

B. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
EMC Group Total Hourly Energy Credit

Step 5

Sum the energy deliveries by BR to Duke for all Intervals over the entire Hour
(column 1). Repeat calculation for P and R (columns 2-3). Sum columns 1-3
(column 4). Sum the energy deliveries by EMC Group to Duke for all Intervals
over the entire Hour (column 5).

 

Column number

   1    2    3    4    5      BR17    P18    R19    Sum20    EMC
Group21

Energy delivered by Customer (kW)

   4,500    5,000    4,500    14,000    7,000

Step 6

Calculate the percentage that each Customer contributed to the energy deliveries
by Customers (Customer delivery / Sum of Customer deliveries)

 

     BR22     P23     R24     Sum  

Energy delivered by Customer

   32.14 %   35.71 %   32.14 %   100.00 %

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

17 Blue Ridge Energy Credit Amount

18 Piedmont Energy Credit Amount

19 Rutherford Energy Credit Amount

20 EMC Group Combined Energy Credit Amount

21 EMC Group Energy Credit Amount

22 Blue Ridge Energy Credit Amount / EMC Group Combined Energy Credit Amount.

23 Piedmont Energy Credit Amount / EMC Group Combined Energy Credit Amount.

24 Rutherford Energy Credit Amount / EMC Group Combined Energy Credit Amount.

 

- 5 -

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

Step 7

Calculate the EMC Group Total Hourly Energy Credit = 90% of Duke Territorial
Decremental Cost for electric energy delivered by the EMC Group to Duke for the
Hour (7,000 kW * $0.10/kWh * 90% = $630)

Step 8

Calculate the EMC Allocated Share of the EMC Group Total Hourly Energy Credit

Apply the percentages derived in Step 6 to the EMC Group Total Hourly Energy
Credit.

 

     BR25    P26    R27    Sum28

$ for energy delivered by Customers

   $ 202.50    $ 225.00    $ 202.50    $ 630.00

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

25 Blue Ridge Allocated Share of EMC Group Total Hourly Energy Credit.

26 Piedmont Allocated Share of EMC Group Total Hourly Energy Credit

27 Rutherford Allocated Share of EMC Group Total Hourly Energy Credit

28 EMC Group Total Hourly Energy Credit

 

- 6 -

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

C. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Inter-EMC Energy Charge

Step 9

Calculate the difference between the EMC Group Combined Energy Purchase Amount
(sum determined in Step 1, column 4) and the EMC Group Energy Purchase Amount
(aggregate calculated in Step 1, column 5).

 

Step 5, column 429

   10,000   

Step 5, column 530

   -3,000           

Difference

   7,000   

Step 10

Apply the percentages derived in Step 2 to the difference derived in Step 9.

 

     BR    P    R    Sum

Energy delivered by Duke

   2,100    1,400    3,500    7,000

Step 11

Calculate Inter-EMC Transfer Price: Average of 113% of Duke Territorial
Incremental Cost and 90% of Duke Territorial Decremental Cost, unless EMC Group
Energy Purchase Amount or EMC Group Energy Credit Amount is zero. If EMC Group
Energy Purchase Amount is zero, Inter-EMC Transfer Price is 101.50% of Duke
Territorial Decremental Cost. If EMC Group Energy Credit Amount is zero,
Inter-EMC Transfer Price is 101.50% of Duke Territorial Incremental Cost. In
this example, Inter-EMC Transfer Price is average of $0.113/kWh and $0.09/kWh,
or $0.1015/kWh.

 

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

29 EMC Group Combined Energy Purchase Amount

30 EMS Group Energy Purchase Amount

 

- 7 -

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

Step 12

Multiply the Inter-EMC Transfer Price times the amounts derived in Step 10.

 

     BR31    P32    R33    Sum

$ for Inter-EMC Charge

   $ 213.15    $ 142.10    $ 355.25    $ 710.50

These amounts are included in the Duke Hourly Energy Charge

D. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Inter-EMC Energy Credit

Step 13

Calculate the EMC Group Combined Energy Credit Amount (difference between the
sum determined in Step 5, column 4) and the EMC Group Credit Amount (aggregate
calculated in Step 5, column 5).

 

Step 5, column 434

   14,000   

Step 5, column 535

   -7,000           

Difference

   7,000   

 

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

31 Blue Ridge Allocated Share of Inter-EMC Energy Charge

32 Piedmont Allocated Share of Inter-EMC Energy Charge

33 Rutherford Allocated Share of Inter-EMC Energy Charge

34 EMC Group Combined Energy Credit Amount

35 EMC Group Energy Credit Amount

 

- 8 -

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

Step 14

Apply the percentages derived in Step 6 to the difference derived in Step 13.

 

     BR    P    R    Sum

Energy delivered by Customer

   2,250    2,500    2,250    7,000

Step 15

Muliply the Inter-EMC Transfer Price times the amounts derived in Step 14

 

     BR36    P37    R38    Sum

$ for Inter-EMC Credit

   $ 228.38    $ 253.75    $ 228.38    $ 710.50

III. CHARGE/CREDIT SUMMATION FOR THE HOUR

 

          BR     P     R    Total  

1.

   Allocated Share of Duke Total Hourly Energy Ch. (Step 4)    $ 101.70     $
67.80     $ 169.50    $ 339.00  

2.

   Allocated Share of Inter-EMC Energy Charge (Step 12)    $ 213.15     $ 142.10
    $ 355.25    $ 710.50  

3.

   Subtotal (row 1 + row 2)    $ 314.85     $ 209.90     $ 524.75    $ 1,049.50
 

4.

   Allocated Share of EMC Group Ttl Hourly En. Cr. (Step 8)    $ 202.50     $
225.00     $ 202.50    $ 630.00  

5.

   Allocated Share of Inter-EMC Energy Credit (Step 15)    $ 228.38     $ 253.75
    $ 228.38    $ 710.50  

6.

   Subtotal (row 4 + row 5)    $ 430.88     $ 478.75     $ 430.88    $ 1,340.50
 

7.

   Total charge (credit) (row 3 – row 6)    $ (116.03 )   $ (268.85 )   $ 93.88
   $ (291.00 )

 

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

36 Blue Ridge Allocated Share of Inter-EMC Energy Credit

37 Piedmont Allocated Share of Inter-EMC Energy Credit

38 Rutherford Allocated Share of Inter-EMC Energy Credit

 

- 9 -

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

Attachment 7-4

Example 2

Showing the Calculation of Blue Ridge, Piedmont and

Rutherford Allocated Shares of the Duke Total Hourly Energy Charge,

EMC Group Total Hourly Energy Credit, Inter-EMC Energy Charge and Inter-EMC
Energy Credit

The purpose of this attachment is to provide an example showing the calculation
of the charges and credits identified above for one Hour. For purposes of this
example, Blue Ridge, Piedmont and Rutherford are referred to individually as BR,
P and R, respectively, and collectively as the EMC Group.

I. ASSUMPTIONS:

A. Call and Put Signals during the Hour

 

     BR    P    R    EMC
Group

Intervals 1-22539 - Call Signal during each Interval (kW):

   0    3,000    3,000    2,000

Intervals 1-225 - Put Signal during each Interval (kW)

   4,000    0    0    0

Intervals 226-450 - Call Signal during each Interval (kW)

   0    5,000    3,000    4,000

Intervals 226-450 - Put Signal during each Interval (kW)

   4,000    0    0    0

Intervals 451-675 - Call Signal during each Interval (kW)

   0    2,000    0    0

Intervals 451-675 - Put Signal during each Interval (kW)

   2,000    0    0    0

Intervals 676-900 - Call Signal during each Interval (kW)

   0    1,000    1,000    0

Intervals 676-900 - Put Signal during each Interval (kW)

   4,000    0    0    2,000

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

39 Interval numbers refer to the Intervals during the Hour (e.g., Interval 1 is
the first four seconds of the Hour, Interval 2 is the next four seconds, etc.).
The Call and Put Signals are shown as the same in each of the first 225
Intervals of the Hour, and then again as the same in the next 225 Intervals and
so on. This is a simplifying assumption, to make this example less cumbersome.
In actual operation, the Parties anticipate that these positions would change
frequently within the Hour.

 

- 10 -

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

B. Energy deliveries during the Hour40

 

     BR    P    R    EMC
Group

Hourly Energy Amount delivered from Duke - Intervals 1-225

   0    750    750    500

Hourly Energy Amount delivered to Duke - Intervals 1-225

   1,000    0    0    0

Hourly Energy Amount delivered from Duke - Intervals 226-450

   0    1,250    750    1,000

Hourly Energy Amount delivered to Duke - Intervals 226-450

   1,000    0    0    0

Hourly Energy Amount delivered from Duke - Intervals 451-675

   0    500    0    0

Hourly Energy Amount delivered to Duke - Intervals 451-675

   500    0    0    0

Hourly Energy Amount delivered from Duke - Intervals 676-900

   0    250    250    0

Hourly Energy Amount delivered to Duke - Intervals 676-900

   1,000    0    0    500

C. Incremental/Decremental Costs

 

Duke Territorial Incremental Cost: $0.10/kWh

Duke Territorial Decremental Cost: $0.10/kWh

II. CALCULATIONS

A. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Duke Total Hourly Energy Charge

Step 1

Sum the energy deliveries by Duke to BR for all Intervals over the entire Hour
(column 1). Repeat calculation for P and R (columns 2-3). Sum columns 1-3
(column 4). Sum the energy deliveries by Duke to the EMC Group for all Intervals
over the entire Hour (column 5).

 

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

40 These numbers sum the four-second Call and Put Signals from Part I.A. For
example, 3,000 kW delivered by Duke in each of the 225 four-second Intervals (15
minutes) equal 750 kWh (2,000 KW * 225 Intervals / 900 Intervals / Hour = 750
kWh).

 

- 11 -

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

Column number

   1    2    3    4    5      BR41    P42    R43    Sum44    Aggregate
EMC
Group45

Energy delivered by Duke (kW)

   0    2,750    1,750    4,500    1,500

Step 2

Calculate the percentage that each Customer contributed to the energy deliveries
by Duke (Customer Buy / Sum of Customer Buys)

 

     BR46     P47     R48     Sum  

Energy delivered by Duke

   0.00 %   61.11 %   38.89 %   100.00 %

 

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

41 Blue Ridge Energy Purchase Amount

42 Piedmont Energy Purchase Amount

43 Rutherford Energy Purchase Amount

44 EMC Group Combined Energy Purchase Amount

45 EMC Group Energy Purchase Amount

46 Blue Ridge Energy Purchase Amount / EMC Group Combined Energy Purchase
Amount.

47 Piedmont Energy Purchase Amount / EMC Group Combined Energy Purchase Amount.

48 Rutherford Energy Purchase Amount / EMC Group Combined Energy Purchase
Amount.

 

- 12 -

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

Step 3

Calculate Duke Total Hourly Energy Charge = 113% of Duke Territorial Incremental
Cost for electric energy delivered by Duke to the EMC Group for the Hour (1,500
kW * $0.10/kWh * 113% = $169.50)

Step 4

Calculate the individual EMC’s Allocated Share of the Duke Total Hourly Energy
Charge.

Apply the percentages derived in Step 2 to the Duke Total Hourly Energy Charge.

 

     BR49    P50    R51    Sum52

$ for energy delivered by Duke

   $ 0.00    $ 103.58    $ 65.92    $ 169.50

These amounts are included in the Duke Hourly Energy Charge.

 

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

49 Blue Ridge Allocated Share of Duke Total Hourly Energy Charge.

50 Piedmont Allocated Share of Duke Total Hourly Energy Charge

51 Rutherford Allocated Share of Duke Total Hourly Energy Charge

52 Duke Total Hourly Energy Charge

 

- 13 -

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

B. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
EMC Group Total Hourly Energy Credit

Step 5

Sum the energy deliveries by BR to Duke for all Intervals over the entire Hour
(column 1). Repeat calculation for P and R (columns 2-3). Sum columns 1-3
(column 4). Sum the energy deliveries by EMC Group to Duke for all Intervals
over the entire Hour (column 5).

 

Column number

   1    3    4    5    6       BR53    P54    R55    Sum56    EMC
Group57

Energy delivered by Customer (kW)

   3,500    0    0    3,500    500

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

53 Blue Ridge Energy Credit Amount

54 Piedmont Energy Credit Amount

55 Rutherford Energy Credit Amount

56 EMC Group Combined Energy Credit Amount

57 EMC Group Energy Credit Amount

 

-14-

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

Step 6

Calculate the percentage that each Customer contributed to the energy deliveries
by Customers (Customer delivery / Sum of Customer deliveries)

 

     BR58     P59     R60     Sum  

Energy delivered by Customer

   100.00 %   0.00 %   0.00 %   100.00 %

Step 7

Calculate the EMC Group Total Hourly Energy Credit = 90% of Duke Territorial
Decremental Cost for electric energy delivered by the EMC Group to Duke for the
Hour (500 kW * $0.10/kWh * 90% = $45)

Step 8

Calculate the EMC Allocated Share of the EMC Group Total Hourly Energy Credit

Apply the percentages derived in Step 6 to the EMC Group Total Hourly Energy
Credit.

 

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

58 Blue Ridge Energy Credit Amount / EMC Group Combined Energy Credit Amount.

59 Piedmont Energy Credit Amount / EMC Group Combined Energy Credit Amount.

60 Rutherford Energy Credit Amount / EMC Group Combined Energy Credit Amount.

 

- 15 -

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

     BR61    P62    R63    Sum64

$ for energy delivered by Customers

   $ 45.00    $ —      $ —      $ 45.00

C. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Inter-EMC Energy Charge

Step 9

Calculate the difference between the EMC Group Combined Energy Purchase Amount
(sum determined in Step 1, column 4) and the EMC Group Energy Purchase Amount
(aggregate calculated in Step 1, column 5).

 

Step 1, column 465

   4,500   

Step 1, column 566

   -1,500           

Difference

   3,000   

 

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

61 Blue Ridge Allocated Share of EMC Group Total Hourly Energy Credit.

62 Piedmont Allocated Share of EMC Group Total Hourly Energy Credit

63 Rutherford Allocated Share of EMC Group Total Hourly Energy Credit

64 EMC Group Total Hourly Energy Credit

65 EMC Group Combined Energy Purchase Amount

66 EMC Group Energy Purchase Amount

 

- 16 -

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

Step 10

Apply the percentages derived in Step 2 to the difference derived in Step 9.

 

     BR    P    R    Sum

Energy delivered by Duke

   0    1,833    1,167    3,000

Step 11

Calculate Inter-EMC Transfer Price: Average of 113% of Duke Territorial
Incremental Cost and 90% of Duke Territorial Decremental Cost, unless EMC Group
Energy Purchase Amount or EMC Group Energy Credit Amount is zero. If EMC Group
Energy Purchase Amount is zero, Inter-EMC Transfer Price is 101.50% of Duke
Territorial Decremental Cost. If EMC Group Energy Credit Amount is zero,
Inter-EMC Transfer Price is 101.50% of Duke Territorial Incremental Cost. In
this example, Inter-EMC Transfer Price is average of $0.113/kWh and $0.09/kWh,
or $0.1015/kWh.

Step 12

Multiply the Inter-EMC Transfer Price times the amounts derived in Step 10.

 

     BR67    P68    R69    Sum

$ for Inter-EMC Charge

   $ 0.00    $ 186.08    $ 118.42    $ 304.50

D. Calculation of Blue Ridge, Piedmont and Rutherford Allocated Shares of the
Inter-EMC Energy Credit

 

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

67 Blue Ridge Allocated Share of Inter-EMC Energy Charge

68 Piedmont Allocated Share of Inter-EMC Energy Charge

69 Rutherford Allocated Share of Inter-EMC Energy Charge

 

-17-

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

Step 13

Calculate the EMC Group Combined Energy Credit Amount (difference between the
sum determined in Step 5, column 4) and the EMC Group Credit Amount (aggregate
calculated in Step 5, column 5).

 

Step 5, column 470

   3,500   

Step 5, column 571

   - 500           

Difference

   3,000   

Step 14

Apply the percentages derived in Step 6 to the difference derived in Step 13.

 

     BR    P    R    Sum

Energy delivered by Customer

   3,000    0    0    3,000

Step 15

Multiply the Inter-EMC Transfer Price times the amounts derived in Step 14

 

     BR72    P73    R74    Sum

$ for Inter-EMC Credit

   $ 304.50    $ 0.00    $ 0.00    $ 304.50

 

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

70 EMC Group Combined Energy Credit Amount

71 EMC Group Energy Credit Amount

72 Blue Ridge Allocated Share of Inter-EMC Energy Credit

73 Piedmont Allocated Share of Inter-EMC Energy Credit

74 Rutherford Allocated Share of Inter-EMC Energy Credit

 

- 18 -

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

III. CHARGE/CREDIT SUMMATION FOR THE HOUR

 

          BR     P    R    Total

1.

   Allocated Share of Duke Total Hourly Energy Ch. (Step 4)    $ 0.00     $
103.58    $ 65.92    $ 169.50

2.

   Allocated Share of Inter-EMC Energy Charge (Step 12)    $ 0.00     $ 186.08
   $ 118.42    $ 304.50

3.

   Subtotal (row 1 + row 2)    $ 0.00     $ 289.67    $ 184.33    $ 474.00

4.

   Allocated Share of EMC Group Ttl Hourly En. Cr. (Step 8)    $ 45.00     $
0.00    $ 0.00    $ 45.00

5.

   Allocated Share of Inter-EMC Energy Credit (Step 15)    $ 304.50     $ 0.00
   $ 0.00    $ 304.50

6.

   Subtotal (row 4 + row 5)    $ 349.50     $ 0.00    $ 0.00    $ 349.50

7.

   Total charge (credit) (row 3 – row 6)    $ (349.50 )   $ 289.67    $ 184.33
   $ 124.50

 

- 19 -

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

Attachment 7-5

Example showing Calculations of

Blue Ridge Energy Purchase Amounts

and Blue Ridge Energy Credit Amount

This attachment provides an example showing the calculation of the Blue Ridge
Energy Purchase Amount and Blue Ridge Energy Credit Amount for one Hour.

 

Four- second Interval Number*

  

A

EMC’s

Base

Obligation
(kW)

  

B

EMC’s

Native

Load

(kW)

  

C

Call

Signal

(B-A

where

B>A)

(kW)

  

D

Call

energy

(C/900)

(kWhs)

 

E

Put

Signal

(A-B

where

A>B)

(kW)

  

F

Put

energy

(E/900)

(kWhs)

1

   100,000    102,000    2,000    2.2   —      —  

2

   100,000    101,000    1,000    1.1   —      —  

3

   100,000    100,000    —      —     —      —  

4

   100,000    99,000    —      —     1,000    1.1

5

   100,000    98,000    —      —     2,000    2.2

6

   100,000    97,000    —      —     3,000    3.3

7-89575

   100,000    100,000    —      —     —      —  

896

   100,000    98,000    —      —     2,000    2.2

897

   100,000    99,000    —      —     1,000    1.1

898

   100,000    100,000    —      —     —      —  

899

   100,000    101,000    1,000    1.1   —      —  

900

   100,000    102,000    2,000    2.2   —      —                         

Total

            6.676      9.977                       

 

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

* Interval numbers refer to the Intervals during the hour (e.g., Interval 1 is
the first four seconds of the hour, Interval 2 is the next four seconds, etc.)

75 To simplify this example, EMC’s Base Obligation and EMC’s Native Load are
assumed to be equal during Intervals 6-895. In actual operation, the parties
anticipate that these amounts will differ throughout the Hour.

76 Blue Ridge Energy Purchase Amount

77 Blue Ridge Energy Credit Amount

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

Attachment 7-6

Example showing Calculations of EMC Group Energy Purchase Amounts

and EMC Group Energy Credit Amount

This attachment provides an example showing the calculation of the EMC Group
Energy Purchase Amount and EMC Group Energy Credit Amount for one Hour.

 

Four-second Interval Number*

  

A

EMC

Group

Base

Obligation
(kW)

  

B

EMC

Group

Native

Load

(kW)

  

C

Call

Signal

(B-A

where

B>A)

(kW)

  

D

Call

energy

(C/900)

(kWhs)

 

E

Put

Signal

(A-B

where

A>B)

(kW)

  

F

Put

energy

(E/900)

(kWhs)

1

   400,000    408,000    8,000    8.8   —      —  

2

   400,000    404,000    4,000    4.4   —      —  

3

   400,000    400,000    —      —     —      —  

4

   400,000    396,000    —      —     4,000    4.4

5

   400,000    392,000    —      —     8,000    8.8

6

   400,000    388,000    —      —     12,000    13.2

7-89578

   400,000    400,000    —      —     —      —  

896

   400,000    392,000    —      —     8,000    8.8

897

   400,000    396,000    —      —     4,000    4.4

898

   400,000    400,000    —      —     —      —  

899

   400,000    404,000    4,000    4.4   —      —  

900

   400,000    408,000    8,000    8.8   —      —                       

Total

            26.479      39.680                     

 

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

* Interval numbers refer to the Intervals during the hour (e.g., Interval 1 is
the first four seconds of the hour, Interval 2 is the next four seconds, etc.)

78 To simplify this example, the EMC Group’s Base Obligation and the EMC Group’s
Native Load are assumed to be equal during Intervals 6-895. In actual operation,
the Parties anticipate that these amounts will differ throughout the Hour.

79 EMC Group Energy Purchase Amount

80 EMC Group Energy Credit Amount

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

Attachment 7-7

Example showing the calculation of

Monthly Billing Demand under Section 7.2.2.2

The purpose of this attachment is to provide an example showing the calculation
of the Monthly Billing Demand under Section 7.2.2.2 of the Agreement.

 

  I. Assumptions:

 

          Day    Hour   

Load

(MW)

1.

  

Highest Hourly Duke Schedule 1 Demand during 2007

   7-25-07    5:00-6:00 p.m.    17,000

2.

  

2nd highest Hourly Duke Schedule 1 Demand during 2007

   7-25-07    6:00-7:00 p.m.    16,975

3.

  

3rd highest Hourly Duke Schedule 1 Demand during 2007

   7-25-07    4:00-5:00 p.m.    16,950

4.

  

4th highest Hourly Duke Schedule 1 Demand during 2007

   7-25-07    3:00-4:00 p.m.    16,925

5.

  

5th highest Hourly Duke Schedule 1 Demand during 2007

   7-24-07    5:00-6:00 p.m.    16,900

6.

  

6th highest Hourly Duke Schedule 1 Demand during 2007

   7-24-07    6:00-7:00 p.m.    16,875

7.

  

7th highest Hourly Duke Schedule 1 Demand during 2007

   7-24-07    4:00-5:00 p.m.    16,850

8.

  

8th highest Hourly Duke Schedule 1 Demand during 2007

   7-24-07    3:00-4:00 p.m.    16,825

9.

  

9th highest Hourly Duke Schedule 1 Demand during 2007

   8-1-07    5:00-6:00 p.m.    16,800

10.

  

10th highest Hourly Duke Schedule 1 Demand during 2007

   8-1-07    6:00-7:00 p.m.    16,775

11.

  

11th highest Hourly Duke Schedule 1 Demand during 2007

   8-1-07    4:00-5:00 p.m.    16,750

12.

  

12th highest Hourly Duke Schedule 1 Demand during 2007

   8-1-07    3:00-4:00 p.m.    16,725

13.

  

13th highest Hourly Duke Schedule 1 Demand during 2007

   7-26-07    5:00-6:00 p.m.    16,700

14.

  

14th highest Hourly Duke Schedule 1 Demand during 2007

   7-26-07    6:00-7:00 p.m.    16,675

15.

  

15th highest Hourly Duke Schedule 1 Demand during 2007

   6-26-07    4:00-5:00 p.m.    16,650

16.

  

16th highest Hourly Duke Schedule 1 Demand during 2007

   7-26-07    4:00-5:00 p.m.    16,625

17.

  

17th highest Hourly Duke Schedule 1 Demand during 2007

   7-24-07    3:00-4:00 p.m.    16,600

18.

  

18th highest Hourly Duke Schedule 1 Demand during 2007

   1-18-07    9:00-10:00 a.m.    16,575

19.

  

19th highest Hourly Duke Schedule 1 Demand during 2007

   1-18-07    10:00-11:00 a.m.    16,550

20.

  

20th highest Hourly Duke Schedule 1 Demand during 2007

   8-2-07    4:00-5:00 p.m.    16,525

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

          Day    Hour   

Load

(MW)

21.

  

21st highest Hourly Duke Schedule 1 Demand during 2007

   8-2-07    3:00-4:00 p.m.    16,500

22.

  

22nd highest Hourly Duke Schedule 1 Demand during 2007

   8-2-07    5:00-6:00 p.m.    16,475

23.

  

23rd highest Hourly Duke Schedule 1 Demand during 2007

   8-2-07    6:00-7:00 p.m.    16,450

24.

  

24th highest Hourly Duke Schedule 1 Demand during 2007

   7-18-07    3:00-4:00 p.m.    16,425

25.

  

25th highest Hourly Duke Schedule 1 Demand during 2007

   7-18-07    4:00-5:00 p.m.    16,400

26.

  

26th highest Hourly Duke Schedule 1 Demand during 2007

   7-18-07    2:00-3:00 p.m.    16,375

27.

  

27th highest Hourly Duke Schedule 1 Demand during 2007

   7-18-07    1:00-2:00 p.m.    16,350

28.

  

28th highest Hourly Duke Schedule 1 Demand during 2007

   7-17-07    5:00-6:00 p.m.    16,325

29.

  

29th highest Hourly Duke Schedule 1 Demand during 2007

   7-17-07    6:00-7:00 p.m.    16,300

30.

  

30th highest Hourly Duke Schedule 1 Demand during 2007

   7-17-07    4:00-5:00 p.m.    16,325

 

  II. Calculation of Monthly Billing Demand for 2007:

The twenty (20) highest load hours during July-August are hours 1-14, 16-17 and
20-23.

 

No.

from

Part I

 

Day

 

Hour

 

EMC Native Load

(kW)

 

EMC Base Obligation
(kW)

 

EMC Native Load
minus EMC Base
Obligation (kW)

1.

  7-25-07   5:00-6:00 p.m.   100,000   80,000   20,000

2.

  7-25-07   6:00-7:00 p.m.   102,000   80,000   22,000

3.

  7-25-07   4:00-5:00 p.m.   104,000   80,000   24,000

4.

  7-25-07   3:00-4:00 p.m.   106,000   80,000   26,000

5.

  7-24-07   5:00-6:00 p.m.   104,000   80,000   24,000

6.

  7-24-07   6:00-7:00 p.m.   102,000   79,000   23,000

7.

  7-24-07   4:00-5:00 p.m.   100,000   79,000   21,000

8.

  7-24-07   3:00-4:00 p.m.   100,000   79,000   21,000

9.

  8-1-07   5:00-6:00 p.m.   100,000   79,000   21,000

10.

  8-1-07   6:00-7:00 p.m.   100,000   78,000   22,000

11.

  8-1-07   4:00-5:00 p.m.   99,000   78,000   21,000

 

- 2 -

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

No.

from

Part I

 

Day

 

Hour

 

EMC Native Load

(kW)

 

EMC Base Obligation
(kW)

 

EMC Native Load
minus EMC Base
Obligation (kW)

12.

  8-1-07   3:00-4:00 p.m.   99,000   78,000   21,000

13.

  7-26-07   5:00-6:00 p.m.   99,000   100,000   0

14.

  7-26-07   6:00-7:00 p.m.   99,000   100,000   0

16.

  7-26-07   4:00-5:00 p.m.   98,000   100,000   0

17.

  7-24-07   3:00-4:00 p.m.   98,000   100,000   0

20.

  8-2-07   4:00-5:00 p.m.   98,000   100,000   0

21.

  8-2-07   3:00-4:00 p.m.   98,000   100,000   0

22.

  8-2-07   5:00-6:00 p.m.   98,000   100,000   0

23.

  8-2-07   6:00-7:00 p.m.   98,000   100,000   0              

TOTAL

        266,000              

AVERAGE

        13,30081            

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

81 Monthly Billing Demand for each Month during 2007.

 

- 3 -

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

Attachment 7-8

Examples showing the calculation of

Monthly Billing Demand under Section 7.3.2.2

The purpose of this attachment is to provide examples showing the calculation of
the Monthly Billing Demand under Section 7.3.2.2 of the Agreement.

Example A

 

  I. Assumptions:

 

          Day    Hour   

Load

(MW)

1.

  

Highest Hourly Duke Schedule 1 Demand during 2012

   7-25-12    5:00-6:00 p.m.    17,000

2.

  

2nd highest Hourly Duke Schedule 1 Demand during 2012

   7-25-12    6:00-7:00 p.m.    16,975

3.

  

3rd highest Hourly Duke Schedule 1 Demand during 2012

   7-25-12    4:00-5:00 p.m.    16,950

4.

  

4th highest Hourly Duke Schedule 1 Demand during 2012

   7-25-12    3:00-4:00 p.m.    16,925

5.

  

5th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    5:00-6:00 p.m.    16,900

6.

  

6th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    6:00-7:00 p.m.    16,875

7.

  

7th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    4:00-5:00 p.m.    16,850

8.

  

8th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    3:00-4:00 p.m.    16,825

9.

  

9th highest Hourly Duke Schedule 1 Demand during 2012

   8-1-12    5:00-6:00 p.m.    16,800

10.

  

10th highest Hourly Duke Schedule 1 Demand during 2012

   8-1-12    6:00-7:00 p.m.    16,775

11.

  

11th highest Hourly Duke Schedule 1 Demand during 2012

   8-1-12    4:00-5:00 p.m.    16,750

12.

  

12th highest Hourly Duke Schedule 1 Demand during 2012

   8-1-12    3:00-4:00 p.m.    16,725

13.

  

13th highest Hourly Duke Schedule 1 Demand during 2012

   7-26-12    5:00-6:00 p.m.    16,700

14.

  

14th highest Hourly Duke Schedule 1 Demand during 2012

   7-26-12    6:00-7:00 p.m.    16,675

15.

  

15th highest Hourly Duke Schedule 1 Demand during 2012

   6-26-12    4:00-5:00 p.m.    16,650

16.

  

16th highest Hourly Duke Schedule 1 Demand during 2012

   7-26-12    4:00-5:00 p.m.    16,625

17.

  

17th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    3:00-4:00 p.m.    16,600

18.

  

18th highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    9:00-10:00 a.m.    16,575

19.

  

19th highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    10:00-11:00 a.m.    16,550

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

          Day    Hour   

Load

(MW)

20.

  

20th highest Hourly Duke Schedule 1 Demand during 2012

   8-2-12    4:00-5:00 p.m.    16,525

21.

  

21st highest Hourly Duke Schedule 1 Demand during 2012

   8-2-12    3:00-4:00 p.m.    16,500

22.

  

22nd highest Hourly Duke Schedule 1 Demand during 2012

   8-2-12    5:00-6:00 p.m.    16,475

23.

  

23rd highest Hourly Duke Schedule 1 Demand during 2012

   8-2-12    6:00-7:00 p.m.    16,450

24.

  

24th highest Hourly Duke Schedule 1 Demand during 2012

   7-18-12    3:00-4:00 p.m.    16,425

25.

  

25th highest Hourly Duke Schedule 1 Demand during 2012

   7-18-12    4:00-5:00 p.m.    16,400

26.

  

26th highest Hourly Duke Schedule 1 Demand during 2012

   7-18-12    2:00-3:00 p.m.    16,375

27.

  

27th highest Hourly Duke Schedule 1 Demand during 2012

   7-18-12    1:00-2:00 p.m.    16,350

28.

  

28th highest Hourly Duke Schedule 1 Demand during 2012

   7-17-12    5:00-6:00 p.m.    16,325

29.

  

29th highest Hourly Duke Schedule 1 Demand during 2012

   7-17-12    6:00-7:00 p.m.    16,300

30.

  

30th highest Hourly Duke Schedule 1 Demand during 2012

   7-17-12    4:00-5:00 p.m.    16,325

Annual Planning Period is May through September

 

  II. Calculation of Monthly Billing Demand for 2012:

The twenty (20) highest load hours during the Summer Period are hours 1-17 and
20-22

 

No.

from

Part I

 

Day

 

Hour

 

EMC Native Load

(kW)

 

EMC Partial
Requirements

Resources

(kW)

 

EMC Native Load
minus EMC Partial
Requirements

Resources

(kW)

1.

  7-25-12   5:00-6:00 p.m.   120,000   100,000   20,000

2.

  7-25-12   6:00-7:00 p.m.   120,000   100,000   20,000

3.

  7-25-12   4:00-5:00 p.m.   120,000   100,000   20,000

4.

  7-25-12   3:00-4:00 p.m.   120,000   100,000   20,000

5.

  7-24-12   5:00-6:00 p.m.   115,000   100,000   15,000

6.

  7-24-12   6:00-7:00 p.m.   115,000   100,000   15,000

7.

  7-24-12   4:00-5:00 p.m.   115,000   100,000   15,000

 

- 2 -

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

No.

from

Part I

 

Day

 

Hour

 

EMC Native Load

(kW)

 

EMC Partial
Requirements

Resources

(kW)

 

EMC Native Load
minus EMC Partial
Requirements

Resources

(kW)

8.

  7-24-12   3:00-4:00 p.m.   115,000   100,000   15,000

9.

  8-1-12   5:00-6:00 p.m.   110,000   100,000   10,000

10.

  8-1-12   6:00-7:00 p.m.   110,000   100,000   10,000

11.

  8-1-12   4:00-5:00 p.m.   110,000   100,000   10,000

12.

  8-1-12   3:00-4:00 p.m.   110,000   100,000   10,000

13.

  7-26-12   5:00-6:00 p.m.   105,000   100,000   5,000

14.

  7-26-12   6:00-7:00 p.m.   105,000   100,000   5,000

15.

  6-26-12   4:00-5:00 p.m.   105,000   100,000   5,000

16.

  7-26-12   4:00-5:00 p.m.   105,000   100,000   5,000

17.

  7-24-12   3:00-4:00 p.m.   100,000   100,000   0

20.

  8-2-12   4:00-5:00 p.m.   100,000   100,000   0

21.

  8-2-12   3:00-4:00 p.m.   95,000   100,000   0

22.

  8-2-12   5:00-6:00 p.m.   95,000   100,000   0  

TOTAL

        200,000              

AVERAGE

        10,00082            

Example B

 

  I. Assumptions:

 

          Day    Hour   

Load

(MW)

1.

  

Highest Hourly Duke Schedule 1 Demand during 2012

   1-25-12    7:00-8:00 a.m.    17,000

2.

  

2nd highest Hourly Duke Schedule 1 Demand during 2012

   1-25-12    8:00-9:00 a.m.    16,975

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

82 Monthly Billing Demand for each Month during 2012.

 

- 3 -

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

          Day    Hour   

Load

(MW)

3.

  

3rd highest Hourly Duke Schedule 1 Demand during 2012

   1-25-12    9:00-10:00 a.m.    16,950

4.

  

4th highest Hourly Duke Schedule 1 Demand during 2012

   1-25-12    10:00-11:00 a.m.    16,925

5.

  

5th highest Hourly Duke Schedule 1 Demand during 2012

   1-24-12    7:00-8:00 a.m.    16,900

6.

  

6th highest Hourly Duke Schedule 1 Demand during 2012

   1-24-12    8:00-9:00 a.m.    16,875

7.

  

7th highest Hourly Duke Schedule 1 Demand during 2012

   1-24-12    9:00-10:00 a.m.    16,850

8.

  

8th highest Hourly Duke Schedule 1 Demand during 2012

   1-24-12    10:00-11:00 a.m.    16,825

9.

  

9th highest Hourly Duke Schedule 1 Demand during 2012

   2-1-12    7:00-8:00 a.m.    16,800

10.

  

10th highest Hourly Duke Schedule 1 Demand during 2012

   2-1-12    8:00-9:00 a.m.    16,775

11.

  

11th highest Hourly Duke Schedule 1 Demand during 2012

   2-1-12    9:00-10:00 a.m.    16,750

12.

  

12th highest Hourly Duke Schedule 1 Demand during 2012

   2-1-12    10:00-11:00 a.m.    16,725

13.

  

13th highest Hourly Duke Schedule 1 Demand during 2012

   12-21-12    8:00-9:00 a.m.    16,700

14.

  

14th highest Hourly Duke Schedule 1 Demand during 2012

   12-21-12    9:00-10:00 a.m.    16,675

15.

  

15th highest Hourly Duke Schedule 1 Demand during 2012

   12-21-12    10:00-11:00 a.m.    16,650

16.

  

16th highest Hourly Duke Schedule 1 Demand during 2012

   7-26-12    4:00-5:00 p.m.    16,625

17.

  

17th highest Hourly Duke Schedule 1 Demand during 2012

   7-24-12    3:00-4:00 p.m.    16,600

18.

  

18th highest Hourly Duke Schedule 1 Demand during 2012

   2-2-12    7:00-8:00 a.m.    16,575

19.

  

19th highest Hourly Duke Schedule 1 Demand during 2012

   2-2-12    8:00-9:00 a.m.    16,550

20.

  

20th highest Hourly Duke Schedule 1 Demand during 2012

   2-2-12    9:00-10:00 a.m.    16,525

21.

  

21st highest Hourly Duke Schedule 1 Demand during 2012

   2-2-12    10:00-11:00 a.m.    16,500

22.

  

22nd highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    9:00-10:00 a.m.    16,475

23.

  

23rd highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    10:00-11:00 a.m.    16,450

24.

  

24th highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    7:00-8:00 a.m.    16,425

25.

  

25th highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    8:00-9:00 a.m.    16,400

26.

  

26th highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    6:00-7:00 a.m.    16,375

27.

  

27th highest Hourly Duke Schedule 1 Demand during 2012

   1-18-12    11:00 a.m.-12:00 p.m.    16,350

28.

  

28th highest Hourly Duke Schedule 1 Demand during 2012

   1-17-12    8:00-9:00 a.m.    16,325

29.

  

29th highest Hourly Duke Schedule 1 Demand during 2012

   1-17-12    9:00-10:00 a.m.    16,300

30.

  

30th highest Hourly Duke Schedule 1 Demand during 2012

   1-17-12    10:00-11:00 a.m.    16,325

31.

  

Highest Hourly Duke Schedule 1 Demand during 2011

   1-23-11    7:00-8:00 a.m.    17,000

 

- 4 -

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

          Day    Hour   

Load

(MW)

32.

  

2nd highest Hourly Duke Schedule 1 Demand during 2011

   1-23-11    8:00-9:00 a.m.    16,975

33.

  

3rd highest Hourly Duke Schedule 1 Demand during 2011

   1-23-11    9:00-10:00 a.m.    16,950

34.

  

4th highest Hourly Duke Schedule 1 Demand during 2011

   1-23-11    10:00-11:00 a.m.    16,925

35.

  

5th highest Hourly Duke Schedule 1 Demand during 2011

   1-18-11    7:00-8:00 a.m.    16,900

36.

  

6th highest Hourly Duke Schedule 1 Demand during 2011

   1-18-11    8:00-9:00 a.m.    16,875

37.

  

7th highest Hourly Duke Schedule 1 Demand during 2011

   1-18-11    9:00-10:00 a.m.    16,850

38.

  

8th highest Hourly Duke Schedule 1 Demand during 2011

   1-18-11    10:00-11:00 a.m.    16,825

39.

  

9th highest Hourly Duke Schedule 1 Demand during 2011

   2-4-11    7:00-8:00 a.m.    16,800

40.

  

10th highest Hourly Duke Schedule 1 Demand during 2011

   2-4-11    8:00-9:00 a.m.    16,775

41.

  

11th highest Hourly Duke Schedule 1 Demand during 2011

   2-4-11    9:00-10:00 a.m.    16,750

42.

  

12th highest Hourly Duke Schedule 1 Demand during 2011

   2-4-11    10:00-11:00 a.m.    16,725

43.

  

13th highest Hourly Duke Schedule 1 Demand during 2011

   1-28-11    8:00-9:00 a.m.    16,700

44.

  

14th highest Hourly Duke Schedule 1 Demand during 2011

   1-28-11    9:00-10:00 a.m.    16,675

45.

  

15th highest Hourly Duke Schedule 1 Demand during 2011

   12-15-11    9:00-10:00 a.m.    16,650

46.

  

16th highest Hourly Duke Schedule 1 Demand during 2011

   12-16-11    9:00-10:00 a.m.    16,625

47.

  

17th highest Hourly Duke Schedule 1 Demand during 2011

   12-15-11    10:00-11:00 a.m.    16,600

48.

  

18th highest Hourly Duke Schedule 1 Demand during 2011

   7-18-11    5:00-6:00 p.m.    16,575

49.

  

19th highest Hourly Duke Schedule 1 Demand during 2011

   7-18-11    6:00-7:00 p.m.    16,550

50.

  

20th highest Hourly Duke Schedule 1 Demand during 2011

   7-18-11    4:00-5:00 p.m.    16,525

51.

  

21st highest Hourly Duke Schedule 1 Demand during 2011

   7-18-11    3:00-4:00 p.m.    16,500

52.

  

22nd highest Hourly Duke Schedule 1 Demand during 2011

   1-18-11    11:00 a.m.-12:00 p.m.    16,475

53.

  

23rd highest Hourly Duke Schedule 1 Demand during 2011

   1-18-11    6:00-7:00 a.m.    16,450

54.

  

24th highest Hourly Duke Schedule 1 Demand during 2011

   2-5-11    8:00-9:00 a.m.    16,425

55.

  

25th highest Hourly Duke Schedule 1 Demand during 2011

   2-5-11    9:00-10:00 a.m.    16,400

56.

  

26th highest Hourly Duke Schedule 1 Demand during 2011

   1-20-11    8:00-9:00 a.m.    16,375

57.

  

27th highest Hourly Duke Schedule 1 Demand during 2011

   1-20-11    9:00-10:00 a.m.    16,350

58.

  

28th highest Hourly Duke Schedule 1 Demand during 2011

   1-21-11    7:00-8:00 a.m.    16,325

59.

  

29th highest Hourly Duke Schedule 1 Demand during 2011

   1-21-11    8:00-9:00 a.m.    16,300

60.

  

30th highest Hourly Duke Schedule 1 Demand during 2011

   1-21-11    9:00-10:00 a.m.    16,325

 

- 5 -

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

Annual Planning Period is October through April

The twenty (20) highest load hours during the Winter Period are hours 1-12 and
18-22 in 2012 and hours 45-47 in 2011.

 

  II. Calculation of Monthly Billing Demand for 2012:

 

No. from

Part I

 

Day

 

Hour

 

EMC Native Load

(kW)

 

EMC Partial
Requirements Resources

(kW)

 

EMC Native Load
minus EMC Partial
Requirements Resources

(kW)

1.

  1-25-12   7:00-8:00 a.m.   120,000   100,000   20,000

2.

  1-25-12   8:00-9:00 a.m.   120,000   100,000   20,000

3.

  1-25-12   9:00-10:00 a.m.   120,000   100,000   20,000

4.

  1-25-12   10:00-11:00 a.m.   120,000   100,000   20,000

5.

  1-24-12   7:00-8:00 a.m.   115,000   100,000   15,000

6.

  1-24-12   8:00-9:00 a.m.   115,000   100,000   15,000

7.

  1-24-12   9:00-10:00 a.m.   115,000   100,000   15,000

8.

  1-24-12   10:00-11:00 a.m.   115,000   100,000   15,000

9.

  2-1-12   7:00-8:00 a.m.   110,000   100,000   10,000

10.

  2-1-12   8:00-9:00 a.m.   110,000   100,000   10,000

11.

  2-1-12   9:00-10:00 a.m.   110,000   100,000   10,000

12.

  2-1-12   10:00-11:00 a.m.   110,000   100,000   10,000

45.

  12-15-11   9:00-10:00 a.m.   105,000   100,000   5,000

46.

  12-16-11   9:00-10:00 a.m.   105,000   100,000   5,000

47.

  12-15-11   9:00-10:00 a.m.   105,000   100,000   5,000

18.

  2-2-12   7:00-8:00 a.m.   105,000   100,000   5,000

19.

  2-2-12   8:00-9:00 a.m.   100,000   100,000   0

20.

  2-2-12   9:00-10:00 a.m.   100,000   100,000   0

21.

  2-2-12   10:00-11:00 a.m.   95,000   100,000   0

22.

  1-18-12   9:00-10:00 a.m.   95,000   100,000   0              

TOTAL

        200,000              

AVERAGE

        10,00083            

 

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

83 Monthly Billing Demand for each Month during 2012.

 

- 6 -

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

ATTACHMENT 7-9

Demand Rate Adjustment Percentage and Annual Percentage

This attachment provides the formulas to be used for calculating the Demand Rate
Adjustment Percentage and Annual Percentage for each calendar year beginning
January 1, 2011.

The Demand Rate Adjustment Percentage shall equal the Production Capacity
Revenue Requirement Adjustment divided by the Original Production Capacity
Revenue Requirement, but not less than zero.

Where

Production Capacity Revenue Requirement Adjustment = (Annual Percentage – 4%) *
(Original Production Capacity Revenue Requirement + Original Energy Revenue
Requirement)

And

Annual Percentage shall equal the product of the System Gross Plant Difference
and the Fixed Charge Rate, divided by the sum of Original Production Capacity
Revenue Requirement and Original Energy Revenue Requirement. For purposes of
calculating the Production Capacity Revenue Requirement Adjustment, the Annual
Percentage shall be a maximum of 10%.

System Gross Plant Difference shall equal EMC Plant in Service less NC Retail
Plant in Service. (May be positive or negative.) System Gross Plant Difference
shall be decreased as necessary to eliminate differences between EMC Plant in
Service and NC Retail Plant in Service related to timing or method of recovery
of plant costs (e.g., plant differences due to recovery of construction period
financing costs through inclusion of construction work in progress in rate
base).

Fixed Charge Rate shall equal 10%.

EMC Plant in Service shall equal the average of the total ending balance of
Production Plant, General Plant and Intangible Plant according to Schedule 1 of
this Agreement, for the calendar year for which the Production Capacity Revenue
Requirement calculation is prepared and total ending balance of Production
Plant, General Plant and Intangible Plant according to Schedule 1 of this
Agreement for the previous calendar year calculation of the Production Capacity
Revenue Requirement.

NC Retail Plant in Service shall equal the sum of Duke Power Retail Plant in
Service and Nantahala Retail Plant in Service, which shall be determined from
Company records supporting the total Electric Plant in Service amount on
Schedule 3 of NCUC Form E.S.-1 for the 12 month calendar period corresponding to
the Production Capacity Revenue Requirement calculation used for calculating the
EMC Plant in Service.

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

Duke Power Retail Plant in Service shall equal the average of the two December
balances for the total of Production, General and Intangible plant amounts
included in the total Electric Plant in Service monthly amounts shown on
Schedule 3 of NCUC Form E.S.-1 for Duke Power.

Nantahala Retail Plant in Service shall equal the average of the two December
balances for the total of Production, General and Intangible plant amounts
included in the total Electric Plant in Service monthly amounts shown on
Schedule 3 of NCUC Form E.S.-1 for Nantahala Power & Light.

Original Production Capacity Revenue Requirement shall equal the Production
Capacity Revenue Requirement before consideration of any adjustments pursuant to
Section 7.3.2.3 of the Agreement.

Original Energy Revenue Requirement shall equal the sum of F for purposes of
calculating the Fuel Rate in Schedule 1 and Variable Non-Fuel Production
Operation and Maintenance Expense for purposes of calculating the Variable O&M
Rate in Schedule 1.

 

- 2 -

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

Attachment 7-10

Example of Demand Rate Adjustment Percentage and Annual Percentage

Note: EMC and NC Retail Plant in Service values are actuals for 2004.

CASE WITH NO ADJUSTMENT WARRANTED––

 

          NC Retail    EMC      

1

  

Demand Rev Req Unadjusted

      $ 1,774,603    

2

  

Energy Rev Req

      $ 1,235,341    

3

  

Total Unadjusted Rev Req for EMC Rate Calcs

      $ 3,009,944     (Line 1 + Line 2)

4

  

Actual Gross Plant (“timing” adjusted)

   $ 11,509,514    $ 11,509,514     NC Retail = Attachment 7-10, Page 4, Line 10

5

  

System Gross Plant Difference

      $ —       (EMC Line 4 - NC Line 4)

6

  

Levelized FCR

        0.100    

7

  

Estimated Impact on Demand Rev Req

      $ —       (Line 6 x Line 5)

8

  

Annual Percentage

        0.00 %   (Line 7 / Line 3) No adjustment occurs since below 4% impact

Note: EMC Plant in Service values are actuals for 2004, but NC Retail Plant in
Service values have been reduced for purpose of demonstration.

CASE WITH NO ADJUSTMENT WARRANTED––

 

          NC Retail    EMC      

1

  

Demand Rev Req Unadjusted

      $ 1,774,603    

2

  

Energy Rev Req

      $ 1,235,341    

3

  

Total Unadjusted Rev Req for EMC Rate Calcs

      $ 3,009,944     (Line 1 + Line 2)

4

  

Actual Gross Plant (“timing” adjusted)

   $ 10,618,079    $ 11,509,514     NC Retail = Attachment 7-10, Page 4, Line 10

5

  

System Gross Plant Difference

      $ 891,435     (EMC Line 4 - NC Line 4)

6

  

Levelized FCR

        0.100    

7

  

Estimated Impact on Demand Rev Req

      $ 89,143     (Line 6 x Line 5)

8

  

Annual Percentage

        2.96 %   (Line 7 /Line 3) No adjustment occurs since below 4% impact

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

ADJUSTMENT WARRANTED

 

          NC Retail    EMC      

1

   Demand Rev Req Unadjusted       $ 1,774,603    

2

   Energy Rev Req       $ 1,235,341    

3

   Total Unadjusted Rev Req for EMC Rate Calcs       $ 3,009,944     (Line 1 +
Line 2)

4

   Actual Gross Plant    $ 9,729,655    $ 11,509,514    

5

   System Gross Plant Difference       $ 1,779,859     (EMC Line 4 - NC Line 4)

6

   Levelized FCR         0.100    

7

   Estimated Impact on Demand Rev Req       $ 177,986     (Line 6 x Line 5)

8

   Annual Percentage         5.91 %  

(Line 7 / Line 3)

Since Annual Percentage is in excess of 4%, adjustment to Demand Rate is needed.

9

   Demand Rate Adjustment Percentage         3.24 %   [(Line 8 - 4%) x Line 3] /
Line 1

10

   Demand Rate per Section 7.3.2.1       $ 117.53    

11

   Demand Rate as adjusted per Section 7.3.2.3       $ 113.72     Line 10 x
(100% - Line 9)

 

- 2 -

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

ADJUSTMENT WARRANTED (but limited)

 

          NC Retail    EMC      

1

  

Demand Rev Req Unadjusted

      $ 1,774,603    

2

  

Energy Rev Req

      $ 1,235,341    

3

  

Total Unadjusted Rev Req for EMC Rate Calcs

      $ 3,009,944     (Line 1 + Line 2)

4

  

Actual Gross Plant

   $ 8,368,409    $ 11,509,514    

5

  

System Gross Plant Difference

      $ 3,141,105     (EMC Line 4 -NC Line 4)

6

  

Levelized FCR

        0.100    

7

  

Estimated Impact on Demand Rev Req

      $ 314,110     (Line 6 x Line 5)

8

  

Annual Percentage

        10.44 %  

(Line 7 /Line 3)

Since Annual Percentage is in excess of 4%, adjustment to Demand Rate is needed,
but is limited to maximum of 6% of total unadjusted revenue requirements.

9

  

Demand Rate Adjustment Percentage

        10.18 %   [(Line 8* - 4%) x Line 3] / Line 1

10

  

Demand Rate per Section 7.3.2.1

      $ 117.53    

11

  

Demand Rate as adjusted per Section 7.3.2.3

   $ 105.57     Line 10 x (100% - Line 9)

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

* maximum of 10%

 

- 3 -

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

(Amounts from Quarterly NCUC Form E.S.-1, Schedule 3, for 12ME 2004)

 

     

(Dollars in thousands)

   System Gross Electric Plant in Service for Determination of NC Retail Plant
in Service           Duke Power    Nantahala    Total NC Retail          
Beginning    Ending    Beginning    Ending    Beginning    Ending   

Average

1

  

Plant in Service

   18,980,402    19,683,592    324,710    334,880    19,305,112    20,018,472   
19,661,792   

Components (data from Company records):

                    

2

  

Production Plant

   9,257,448    9,666,832    39,399    39,263    9,296,847    9,706,095   
9,501,471

3

  

Nuclear Fuel (gross)

   816,874    769,178          816,874    769,178    793,026

4

  

Total Production Plant

   10,074,322    10,436,010    39,399    39,263    10,113,721    10,475,273   
10,294,497

5

  

Transmission Plant

   1,745,408    1,819,243    92,489    91,335    1,837,897    1,910,578   
1,874,238

6

  

Distribution Plant

   5,978,416    6,312,889    168,040    181,129    6,146,456    6,494,018   
6,320,237

7

  

General Plant

   973,070    902,246    20,232    18,603    993,302    920,849    957,076

8

  

Intangible Plant

   209,186    213,204    4,550    4,550    213,736    217,754    215,745

9

  

Total (ties to Line 1)

   18,980,402    19,683,592    324,710    334,880    19,305,112    20,018,472   
19,661,792                              

10

  

Total of Production/General/Intangible Plant for use in Annual Percentage
calculation

               11,320,759    11,613,876    11,467,318                         
    

 

     

(Dollars in thousands)

  

NC Retail

Plant in
Service

  

EMC Plant in Service - Amounts
from

Schedule 1 for 2004

   EMC
Plant in
Service    System
Gross Plant
Difference    Adjustment
for Timing
Difference    Adjusted
System
Gross Plant
Difference                                                              
Beginning    Ending    Average                    

1

  

Plant in Service

                          

Components (data from Company records):

                       

2

  

Production Plant

   9,501,471    9,339,044    9,748,291    9,543,668    9,543,668    42,197   
42,197    —  

3

  

Nuclear Fuel (gross)

   793,026    816,874    769,178    793,026    793,026    —         —  

4

  

Total Production Plant

   10,294,497    10,155,918    10,517,469    10,336,694    10,336,694    42,197
   42,197    —  

5

  

Transmission Plant

                       

6

  

Distribution Plant

                       

7

  

General Plant

   957,076    993,303    920,849    957,076    957,076    —         —  

8

  

Intangible Plant

   215,745    213,736    217,753    215,745    215,745    —         —  

9

  

Total (ties to Line 1)

                                                                

10

  

Total of Production/General/Intangible Plant for use in Annual Percentage
calculation

   11,467,318    11,362,957    11,656,071    11,509,517    11,509,515    42,197
   42,197                                            

 

- 4 -

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

Attachment 8-1

(Part I of II)

TERMS AND CONDITIONS

FOR THE SCHEDULING OF POWER

SUPPLIED BY NORTH CAROLINA

ELECTRIC MEMBERSHIP CORPORATION

TO ITS INDEPENDENT MEMBERS

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

All NCEMC Committed Resources associated with the Wholesale Power Supply
Agreement between the Seller and the Buyer are governed by and subject to all of
the terms and conditions in this Exhibit, unless a specific Resource Summary
Attachment explicitly provides otherwise. Unless defined in this Exhibit, all
capitalized terms used herein shall have the respective meanings set forth as
Article One of the Wholesale Power Supply Agreement.

General Principles

 

1. Buyer is responsible for planning the way it chooses to use any Capacity or
Energy delivered pursuant to one of the Resource Summary Attachments governed by
this Exhibit. As a part of the Wholesale Power Supply Agreement, the Parties
have agreed to a set of Resource Summary Attachments that collectively are
intended to represent a financial approximation of an allocation of the NCEMC
Committed Resources on the Effective Date.

 

2. For any hour of delivery, Seller will optimize resources around final
dispatch for the combined load of all of Seller’s Participating Members, plus
the schedules of the Buyer and other Independent Members.

 

3. Buyer will pay Seller charges for Energy and the delivery of Energy to the
Interface Point under terms specified in Resource Summary Attachments and terms
specified elsewhere in this Agreement including but not limited to Sections 2.4,
2.12 and Article Five.

Delivery of Allocated Resources

 

4. Energy Scheduled from Buyer’s Independent Member Allocation is delivered to
the Interface Point. The cost and expense of all transmission services,
including ancillary services and losses, from the Interface Point are the sole
responsibility of Buyer.

 

5. Seller will be deemed the provider of the resources needed for the purposes
of tagging and for the designation of resources under the applicable tariffs of
the Transmission Provider(s) selected by Buyer.

Scheduling by Buyer

 

6. All Schedules from Buyer for each Independent Member Allocation will be in
whole MWs and may not exceed the IM Allocation MW detailed on the Resource
Summary Attachment.

 

7. Buyer will submit a separate Schedule in conformance with this Exhibit S by
System by resource up to the Maximum Scheduling Limit by System, as further
described in Paragraph 23 of this Exhibit S.

 

8. Buyer will be responsible for scheduling and arranging for the delivery of
its SEPA allocation.

 

- 2 -

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

9. For any Independent Member Allocation that is designated as producing
Must-Take Energy, Buyer is required to Schedule for every hour of every day of
the Delivery Period its full Must-Take Energy obligation from such a resource,
and may not amend or reduce its Schedule for that Energy: provided, however,
that to the extent that Seller’s obligation to purchase Must-Take Energy from a
resource designated as producing Must-Take Energy is reduced in any hour,
Buyer’s hourly Must-Take Energy obligation shall be adjusted by the ratio of
Seller’s hourly Must-Take Energy obligation to the Resource Capacity, rounded to
whole MWs. The Buyer shall not be entitled to Schedule Must-Take Energy in an
hour in amounts, which exceed the Buyer’s adjusted Must-Take Energy obligation
for that hour.

 

10. Buyer is obligated to Schedule resources in accordance with the terms and
conditions provided in the Resource Summary Attachments consistent with the
minimum run times in the contracts pertaining to Seller’s purchased and/or owned
resources, and Seller will use its good faith efforts to accommodate Buyer’s
Schedules that do not meet the minimum run time requirements, but only so long
as meeting such non-conforming Schedules would not likely result in additional
costs to Seller or any of its Participating Members.

 

11. Except with respect to Buyer’s Independent Member Allocations that supply
Must-Take Energy, Buyer is not obligated to Schedule its Independent Member
Allocations consistent with the minimum volumes in the power supply contracts of
Seller that are in force on the Independent Member Effective Date.

 

12. By 7:00 a.m. EPT each day Buyer must provide Seller with an hourly forecast
of its load by System for the following day.

 

13. The Buyer may Schedule its resources consistent with the table below.
Day-ahead Schedules are those submitted before 8:00 a.m. EPT the day prior to
flow. Intra-day Schedules are those that are requested after the 8:00 a.m. EPT
deadline above. All Schedule changes must occur at the top of the hour.
Intra-day Schedule changes require two (2) hours advance notice.

 

Scheduling Changes

Day Ahead

 

Intra-Day

Unlimited changes up to the IM Allocation MW identified in the Resource Summary
Attachment for each resource in whole MWs.   Up to two changes to the hourly
Schedule for the remainder of the day. Each change to the hourly Schedule shall
be no greater than 5%, for a cumulative maximum of 10% each hour. Additional
changes will be accommodated on a best efforts basis.

Scheduling by Seller

 

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14. Seller is not obligated to meet Buyer’s final Schedule using the NCEMC
Committed Resources associated with the Independent Member Allocations Scheduled
by Buyer.

 

15. Seller will accept the risk and/or benefit resulting from differences in the
cost of resources used to provide Buyer Energy in accordance with its
Schedule(s), and the costs Seller would have incurred had it used NCEMC
Committed Resources to meet Buyer’s Schedule of the Scheduled resource(s).

 

16. Should Seller acquire an alternate resource, rather than use an NCEMC
Committed Resource to serve Buyer’s Schedule, and that alternate resource is
curtailed, Buyer’s Schedule will be maintained and any penalty, benefit or
curtailment will be borne by Seller.

 

17. Should all or any portion of NCEMC Committed Resources that have been
Scheduled by Seller and Buyer to meet Buyer’s Schedule in any given hour be
interrupted, then Seller shall try to identify available alternate resources
which Seller, in its sole discretion, determines are reasonably priced and
suitable to meet Seller’s needs. If Seller determines that such alternate
resources are available, Seller may maintain the Scheduled deliveries to Buyer
but at a price to be determined by Seller and communicated to Buyer. If no
alternate resources are available to Seller, Buyer’s Schedule will be curtailed.
All damages recovered by Seller from the Person responsible for the interruption
in service will be shared with Buyer and every other Member similarly affected
by such interruption in service.

Operations and Planning

 

18. Buyer will provide Seller with a real time telemetered signal of Buyer’s
load for Seller’s use, for purposes of determining when to start and stop the
dynamic schedule, and to Schedule certain Must-Take Energy requirements of NCEMC
Committed Resources.

 

19. Seller shall provide and inform the Buyer on each Thursday by 1:00 p.m. EPT
of the projected amount of Energy available hourly by Independent Member
Allocation by System for Scheduling by Buyer for the following Saturday through
Friday period, including the amount of Must-Take Energy that will be delivered
and must be taken hourly.

 

20. By 8:00 a.m. EPT each day, Buyer shall provide an hourly forecast of its
Native Load by System for the next seven (7) days. For purposes of this Exhibit
S, “Native Load” shall mean only the load of Buyer’s members. This load forecast
will be used by Seller to calculate the hourly Energy available from the
Independent Member Allocations that are available to be Scheduled for a given
interval of time.

 

21. Buyer shall provide Seller on each Thursday by 4:00 p.m. EPT, a projected
hourly Schedule of all the Independent Member Allocations governed by this
Agreement for the following Saturday through Friday period.

 

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22. Seller and Buyer agree on the following checkout and verification process:

As soon as practical after midnight, confirm hourly Schedules, energy flows and
energy charges by resource and daily totals;

Provide a contact person each Business Day for the following:

Resolve issues that remain unresolved;

Perform month-to-date confirmations of hourly Schedules, energy flows and energy
charges by resource and daily totals;

Finalize monthly checkouts by the second Business Day of the following month;
and

Coordinate any true-ups that may be required.

 

23. For Buyers having loads in more than one System, Buyer will provide at the
Independent Member Election Date and on July 1of each subsequent year, a
forecast of the percentage of its retail load in each System. (The sum of the
percentages must equal 100%). The Maximum Scheduling Limit by System for the
following calendar year will be calculated by multiplying the percentage of
Buyer’s retail load in each System times the total of Buyer’s Independent Member
Allocations for the following calendar year.

 

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Attachment 8-1

(Part II of II)

TERMS AND CONDITIONS

FOR OBTAINING TRANSMISSION

SERVICES ADEQUATE TO DELIVER

FROM THE INTERFACE POINTS

ESTABLISHED UNDER THE

WHOLESALE POWER SUPPLY AGREEMENT

OF NCEMC FOR SALES TO

ITS INDEPENDENT MEMBERS

 

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General Principles and Responsibilities for Transmission: All Resource Summary
Attachments associated with the Wholesale Power Supply Agreement between Seller
and Buyer are governed by and subject to the terms and conditions in this
Exhibit unless a specific Resource Summary Attachment explicitly provides
otherwise. For purposes of this Exhibit, the Wholesale Power Supply Agreement
and each Resource Summary Attachment governed by this Exhibit, the term
“Acceptable Transmission Service” means the level of service available at any
point in time that is equal to or better than that level of service currently
defined as “Network Integration Transmission Service” under the Open Access
Transmission Tariff of the System to which Buyer’s distribution system is
physically interconnected, and if connected to more than one System, then Buyer
must have Acceptable Transmission Service for each Interface Point.

The following terms for transmission service apply to each Resource Summary
Attachment included as a part of this Agreement. All of these terms assume that
the current Open Access Transmission Tariff environment in force on the
Effective Date remains in force, without modification or amendment. The Parties
hereto agree that any amendment, modification or change to that tariff or the
regulatory environment for the wholesale electric industry, whether by
regulation, regulatory action, statute, judicial action, executive decision or
order, or otherwise, may require modification of this Exhibit to restore to
Buyer and Seller the benefits that each intended. Such amendments, modifications
or changes would include, without limitation, any changes or modifications of
the wholesale electric industry environment based on the Standard Market Design,
or the restructuring of the transmission systems or the regulatory oversight of
same. If the Parties fail to reach agreement on modifications of this Exhibit,
the dispute shall be subject to arbitration under the Wholesale Power Supply
Agreement.

Buyer is responsible for planning for and scheduling the receipt of capacity and
energy to be delivered to Buyer. Buyer will be responsible for negotiating,
making and keeping in force one or more transmission agreements with the
Transmission Provider(s) necessary to perform its obligations under the
Wholesale Power Supply Agreement. At a minimum, Buyer will negotiate, make and
keep in force its own Network Integration Service Agreement (“NITSA”) and its
own Network Operating Agreement (“NOA”).

Subject to and contingent upon the concurrence and agreement of each affected
Transmission Provider, the RUS, and the Federal Energy Regulatory Commission
(“FERC”), the Parties further agree:

 

1. Buyer is responsible for serving its own load. It will do so through
contracts with Seller, along with other resources Buyer will acquire.

 

2. Buyer will have its own transmission agreement(s) with each and any
Transmission Provider(s) whose services are needed to move capacity or energy
from any Interface Point of the System(s) to which Buyer’s distribution system
is physically interconnected.

 

3. Buyer will negotiate its own NITSA and NOA. Seller will provide assistance
with these negotiations as requested. The cost for this assistance will be
charged to Buyer separately from charges for Capacity and Energy billed under
Article 5.1 of this Agreement.

 

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4. Seller will transfer the direct-assigned facilities used for that Buyer, if
any, to Buyer’s NITSA once the same has become effective.

 

5. Seller will provide Buyer with contractual rights that financially
approximate the hypothetical assignment of a total amount of Seller’s owned
and/or purchased resources, calculated in accordance with the NCEMC Member Power
Supply Resource Policy, for purposes of Buyer’s NITSA and NOA designations for
energy delivered to the System served by the Transmission Provider with which
Buyer has entered its NITSA and NOA.

 

6. If any need exists or arises to designate, in addition to the contracts with
Seller, any other network resources in order to meet Buyer’s load in accordance
with the tariffs or other requirements of the Transmission Provider(s), Buyer
has the responsibility to locate, identify and designate such other network
resources.

 

7. Buyer will have the obligation to satisfy the requirements of the applicable
OATT, and purchase or self-supply, as applicable, any ancillary or other
services needed or required to serve its load.

 

8. Buyer will coordinate with Seller or its scheduling agent under Exhibit S to
this Wholesale Power Supply Agreement to assure that the proper schedule is in
place each day for Buyer’s scheduled amount of Energy related to each of Buyer’s
Resource Summary Attachments that are governed by this Exhibit.

 

9. In addition to the other responsibilities arising under this Exhibit, Buyer
shall be solely liable for any energy imbalance settlement and any other
settlements or liabilities to which a Transmission Customer is exposed at and
from the Interface Point(s). If Buyer causes Seller to incur energy imbalance
charges, Buyer will reimburse Seller for any charges that Seller incurs.

 

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Attachment 8-2

SEPA Policies

Duke Control Area

 

  •   SEPA will send the “Energy for Scheduling” declaration to Duke on Thursday
of each week. The declaration shows the minimum energy and excess energy
available for scheduling.

 

  •   A single declaration will be sent for the Duke Control Area allocation for
all EMCs under a Partial Requirements Service Agreement with Duke.

Commencement Date through December 31, 2010

 

  •   After receiving the energy declaration from SEPA, Duke will fax or e-mail
the declaration directly to Morgan Stanley Capital Group (MSCG).

 

  •   MSCG will then fax or e-mail their proposed schedule for the coming week
(7 days) to Duke. The seven day week shall commence at the beginning of Saturday
and extend to the end of Friday.

 

  •   All scheduling nominations must be made in whole megawatts (MW) only.

 

  •   Schedules may be revised on a day-ahead basis only if received by 8 AM.

 

  •   If the SEPA declaration shows Excess Energy is available, that energy must
be scheduled also – it is not optional. SEPA will notify Duke (as Scheduling
Agent) and Duke will in turn notify MSCG of such available energy.

 

  •   After receiving the nominations from MSCG via Duke, SEPA will tag the
energy. Both MSCG and Duke should be on the tag. MSCG will appear as the owner
of the power and Duke will be identified as the PSE for the load (sink).

 

  •   Duke shall receive any information or notices from SEPA relating to any
changes in the schedules to serve EMC’s Native Load. Duke shall ensure that MSCG
is aware of such notices.

 

  •   If Duke is notified by the Transmission Provider that a SEPA schedule has
been rejected, Duke shall work with SEPA to have a substitute schedule generated
for the Day in question taking into account the information provided by the
Transmission Provider in connection with such rejection.

 

  •   Duke will provide daily and Monthly reconciliation and checkout services
to EMC with respect to SEPA in connection with services and schedules of energy
provided by SEPA and MSCG to serve EMC’s Native Load.

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January 1, 2011 through December 31, 2021

 

  •   Duke is to schedule directly with SEPA on the portion of EMC’s SEPA
allocation that lies within the Duke Control Area.

 

  •   Duke will receive the energy declaration from SEPA.

 

  •   Duke will then fax or e-mail their proposed schedule for the coming week
(7 days) to SEPA. The seven day week shall commence at the beginning of Saturday
and extend to the end of Friday.

 

  •   All scheduling nominations must be made in whole megawatts (MW) only.

 

  •   Schedules may be revised on a day-ahead basis only if received by 8 AM.

 

  •   If the SEPA declaration shows Excess Energy is available, that energy must
be scheduled also – it is not optional. SEPA will notify Duke (as Scheduling
Agent) of such available energy.

 

  •   After receiving the nominations from Duke, SEPA will tag the energy. Duke
will be on the tag and will be identified as the PSE for the load (sink).

 

  •   Duke shall receive any information or notices from SEPA relating to any
changes in the schedules to serve EMC’s Native Load.

 

  •   If Duke is notified by the Transmission Provider that a SEPA schedule has
been rejected, Duke shall work with SEPA to have a substitute schedule generated
for the Day in question taking into account the information provided by the
Transmission Provider in connection with such rejection.

Duke will provide daily and Monthly reconciliation and checkout services to EMC
with respect to SEPA in connection with services and schedules of energy
provided by SEPA to serve EMC’s Native Load.

 

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