Exhibit 10.05

 

RATE AGREEMENT

 

THIS RATE AGREEMENT (this “Agreement”) is entered into by and between the City
of El Paso (the “City”) and El Paso Electric Company, a Texas corporation (the
“Company”) effective for all purposes as of July 1, 2005 (the “Effective Date”).

 

RECITALS:

 

WHEREAS, on July 27, 1995, the Company, the City and others entered into a
Stipulation and Settlement Agreement (the “1995 Stipulation”) in Docket No.
12700, Application of El Paso Electric Company for Authority to Change Rates and
for Approval of Reacquisition of Palo Verde Leased Assets;

 

WHEREAS, on August 30, 1995, the Public Utility Commission of Texas (“the
Commission”) issued an Agreed Order approving the terms of the 1995 Stipulation;

 

WHEREAS, the 1995 Rate Freeze:

 

  •   gave the Company and its customers ten (10) years of rate stability and
predictability;

 

  •   allowed the Company to reduce the cost of fuel to its customers by over
Eighty Eight Million Dollars ($88,000,000) due to the sharing of profits from
off-system sales;

 

  •   led to the voluntary reduction of the Company’s base rates by about
Fifteen Million Four Hundred Thousand Dollars ($15,400,000) per year, for a
total reduction of approximately One Hundred Million Dollars ($100,000,000) in
rates paid by its customers since 1999;

 

  •   restored the financial health of the Company, as evidenced by its
investment-grade credit rating;

 

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  •   enhanced the Company’s ability to support local civic and charitable
programs;

 

  •   allowed the Company to invest over Four Hundred Sixty Million Dollars
($460,000,000) in infrastructure, resulting in a high level of reliability and
customer service; and

 

  •   substantially reduced the need for long and costly regulatory proceedings;

 

WHEREAS, on March 22, 1999, the Company, the City and others entered into a
“Stipulation Resolving All Issues Related to Fuel Reconciliation and Certain
Voluntary Base Rate Reductions and Refunds” (“1999 Stipulation”) in Docket No.
20450, Application of El Paso Electric Company to Reconcile Fuel and
Fuel-related Revenues and Implement Certain Voluntary Base Rate Reductions and
Refunds, which led to the previously noted Fifteen Million Four Hundred Thousand
Dollars ($15,400,000) base rate reduction;

 

WHEREAS, the Commission approved the 1999 Stipulation on June 8, 1999;

 

WHEREAS, on June 22, 2004, the El Paso City Council approved a resolution
supporting a delay of retail competition for the Company;

 

WHEREAS, on July 27, 2004, the El Paso City Council decided not to exercise the
option to purchase contained in Section 13 of the Company’s Franchise Ordinance
No. 012539;

 

WHEREAS, by order dated October 18, 2004 in Project No. 28971, PUC Evaluation of
the Readiness of the El Paso Area for Retail Competition in Electricity, the
Commission determined that the power region in which the Company is located is
unable at this time to offer fair competition and reliable service to all its
Texas retail customer classes;

 

WHEREAS, the Signatories recognize the desirability of continuing the mutual
benefits of the 1995 and 1999 Stipulations, including:

 

  •   future rate stability;

 

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  •   fair cost-based rates;

 

  •   reduced fuel costs with the sharing of profits from off-system sales;

 

  •   continued improvement in the Company’s financial health;

 

  •   expanded participation by the Company in local civic and charitable
activities;

 

  •   additional investment by the Company in its delivery systems so that it
can maintain a high quality of service;

 

  •   replacement of old local generation with new, more efficient facilities;

 

  •   the opportunity to work together for the betterment of the community;

 

  •   recognition of the inevitable interdependence that exists between the
economic health of the community and one of its largest companies; and

 

  •   coordination with El Paso Water Utilities to improve water conservation
efforts in the City;

 

WHEREAS, it is in the public interest to provide for cost-based rates which
permit the Company a reasonable opportunity to earn a reasonable return on the
Company’s invested capital used and useful in providing service to the public in
excess of the Company’s reasonable and necessary operating expenses; and

 

WHEREAS, resolution on a stipulated basis of the matters set forth herein would
conserve resources, avoid the uncertainties inherent in future litigation, and
reduce rate case expenses now and in the future.

 

AGREEMENT:

 

NOW, THEREFORE, in consideration of the mutual agreements and covenants herein
contained, the parties (the “Signatories”) to this Agreement, through their
undersigned authorized representatives, stipulate and agree as follows:

 

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1.      (a)      Subject to the terms of this Agreement, and notwithstanding any
language to the contrary in the present or any future franchise agreement
between the Company and the City, the Company’s existing Texas base rates will
remain in effect for five (5) years (the “New Rate Freeze”) starting July 1,
2005 and ending June 30, 2010 (the “New Freeze Period”) except for customers
taking service under the following tariffs: rate classes 15, 26, 27, 29, 30, 31
and 38 (the “Exempt Classes”) as to which this New Rate Freeze does not apply
and for whom rates may be decreased or increased in accordance with applicable
contracts and law during the New Freeze Period. Ninety (90) days prior to June
30, 2010 or ninety (90) days prior to the expiration of a subsequently agreed
upon freeze period, the Company, if it desires to extend this Agreement, shall
give notice of its intent to extend for an additional five (5)-year period.
Unless approved in writing by the City on or before the expiration date, this
Agreement shall expire automatically without further action by the Company or
City. Except for the Exempt Classes, the Company agrees during the New Freeze
Period not to increase base rates for any reason save and except for an event of
Force Majeure (as defined in Paragraph 1(c) hereof) or as provided in Paragraphs
1(d)(i),(ii) and (iii). If it has not otherwise expired, the New Freeze Period
will end upon the commencement of retail competition in the Company’s Texas
service area for all rate classes subject to the New Rate Freeze.      (b)   
During the New Freeze Period, and to the extent consistent with the freeze
level, the Company may make filings that: (i) modify tariffs, riders and terms
and conditions while not increasing Texas retail base rate revenues for any
customer class subject to the rate freeze; provided, however, for any customer
class subject to the rate freeze

 

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         such modifications may neither exclude customers currently on the rate
schedule nor force a customer to be moved to another rate class, (ii) add or
modify tariffs, riders, and terms and conditions to address competitive
conditions or secure additional load or (iii) change fixed fuel factors or
otherwise provide for the recovery of fuel costs and the disposition of fuel
over-recoveries and under-recoveries. Miscellaneous tariff filings, such as for
incentive and load retention rates or special services, are not subject to the
rate freeze, so long as there is no increase to the Texas retail tariffs charged
any rate class subject to the rate freeze. Nothing in this Paragraph shall be
construed as a predetermination of the appropriate ratemaking treatment of any
such changes.     (c)    Except as otherwise provided in Paragraphs 1(d)(i),
(ii) and (iii), neither the Company nor any successor in interest or assignee
may request from its Texas regulatory authorities an increase in base rates
above the freeze level with an effective date prior to the expiration of the New
Freeze Period, except to address an event of Force Majeure. The term “Force
Majeure” as used in this Agreement shall be limited to the effect of a natural
disaster, act of war or act of God. The Company agrees to bind its successors or
assignees to the terms of this Agreement.     (d)    (i) Subject to the
provisions of Paragraph 1(f), the Signatories agree that if, during the New
Freeze Period, the fuel factor or fuel reconciliation process should be changed
or eliminated in Texas, they will implement the fuel cost recovery mechanism as
authorized by law or rule. In the absence of such a law or rule, the Signatories
will devise a mechanism to allow the Company to recover reasonable

 

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          and necessary fuel costs that it would otherwise have been allowed to
recover through the fuel factor or fuel reconciliation process.           (ii)
The Signatories recognize that the Federal Energy Regulatory Commission
(“FERC”), or other regulatory authority with jurisdiction may require the
unbundling of utility services by utilities subject to its jurisdiction,
including the Company. The components of the rates to the Company’s customers
covered by this Agreement will be set at levels which will collect neither more
nor less than the base rates established pursuant to this Agreement
notwithstanding the unbundling.           (iii) If, for any year during the New
Freeze Period, the Company’s return on equity (defined as the Company’s net
income before discontinued operations, extraordinary items, and cumulative
effects of a change in accounting principle, divided by average common stock
equity adjusted in that year for discontinued operations, extraordinary items
and cumulative effects of a change in accounting principle, as reported in the
Company’s Form 10-K Annual Report filed with the Securities and Exchange
Commission (“SEC”)) shall fall within the agreed Deadband defined herein, then
no Signatory to this Agreement may request a change in base rates. Average
common stock equity shall mean the beginning and ending balance divided by two.
Adjustments for discontinued operations, extraordinary items and cumulative
effects of a change in accounting principles shall not be carried over into the
following year’s common equity balance, but rather the beginning balance will
reflect the Generally Accepted Accounting Principles value as reflected on the
balance sheet. If, during the New Freeze Period, the Company’s return on equity
falls outside the agreed Deadband, the Signatories’ sole remedies

 

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          are those set out in the remainder of this subsection. If during the
New Freeze Period, the Company’s return on equity shall fall below the floor of
the Deadband, and is calculated to remain below the floor, the Company may file
for a rate increase. If, during the New Freeze Period, the Company’s annual
return on equity shall exceed the ceiling of the Deadband, the Company shall
return to the City or ratepayers as directed by the City Council fifty percent
(50%) of the City-jurisdictional (calculated by taking the ratio of the
Company’s gross revenues within the City of El Paso to the Company’s total gross
revenues) pre-tax return above the ceiling in the form of an additional
franchise fee payment for that year (the “Supplemental Franchise Fee”). The
Supplemental Franchise Fee payment shall be made no later than forty-five (45)
days after the filing of the Company’s SEC Form 10-K Annual Report with the SEC.
The Company shall continue to calculate and pay a Supplemental Franchise Fee for
each year of the New Freeze Period that the Company’s return on equity exceeds
the Deadband ceiling. Payments that accrue from New Freeze Period years of less
than twelve (12) months shall be prorated. Any change to the Supplemental
Franchise Fee resulting from amendments to the SEC Form 10-K will be passed
through or collected from the City, as appropriate.           (iv) The
“Deadband” referred to above shall be calculated annually at the time of filing
of the Company’s SEC Form 10-K. The midpoint of the Deadband shall be defined as
four hundred (400) basis points above the 12-month Moody’s Public Utility Bond
Yield average for utilities of comparable credit quality during the Supplemental
Franchise Fee payment period. The ceiling of the Deadband will then

 

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          be calculated as two hundred (200) basis points above the midpoint and
the floor as two hundred (200) basis points below the midpoint.      (e)    (i)
Subject to Paragraphs 1(e)(iii) and 1(f), the Signatories agree not to seek to
institute or institute on their own motion during the New Freeze Period an
inquiry into the reasonableness of the Company’s rates. If a complaint is filed
with the Commission or any other Texas regulatory authority requesting an
inquiry into the reasonableness of the Company’s rates, and the Commission or
any other regulatory authority institutes such an inquiry, the Signatories
commit to support the provisions of this Agreement. In the course of any such
proceeding, the Company shall be entitled to defend against a rate reduction in
any manner it deems appropriate and recovery of its rate case expenses shall not
be a violation of this Agreement. Without limiting the right of any Signatory to
enforce this Agreement, including the right to seek extraordinary relief, the
City agrees to forego the recovery of its rate case expenses if it initiates a
proceeding to reduce the Company’s base rates. If the Company’s response to a
request to reduce rates is to maintain the frozen rates under this Agreement,
the City agrees to support the Company in maintaining the existing rate level.
In such case, the Company shall reimburse the City its reasonable expenses. If
in such a proceeding the Company seeks to raise the rate level, then the City
may support a rate reduction and the Company shall reimburse the City for its
reasonable expenses.           (ii) All Signatories understand and agree that
the current level of base rates reflected in the Company’s approved tariffs and
adopted in this Agreement is designed to fully recover the Company’s cost of
service during the New Freeze

 

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          Period, and that during the New Freeze Period the Company’s base rates
for rate classes subject to the freeze will not be changed except as provided by
the terms of this Agreement. The Company has given valuable consideration, and
assumed substantial business risks, in exchange for the expectation hereunder
that its base rates for rate classes subject to the freeze will not be reduced
during the New Freeze Period.           (iii) During the first twelve (12)
months of this Agreement, the City may select one of the “Big Four” Accounting
Firms not being used by the Company to determine whether the Company’s operating
expenses are within a reasonable range as compared to the utility industry. If
said operating expenses are deemed reasonable, then this Agreement shall
continue in full force and effect. If said operating expenses are deemed
unreasonable, then the Company and the City will agree on a remedy, or this
Agreement will expire at the end of the twelve (12) month period. The Company
agrees to reimburse all expenses incurred by the City in connection with this
evaluation. If this Agreement terminates pursuant to this paragraph, either
party is free to exercise its rights under the Public Utility Regulatory Act.
During any proceeding, the parties agree that the rates and fuel treatment will
remain in effect until changed pursuant to a PUCT order.      (f)    During the
New Freeze Period the Company and its customers in Texas will be protected from
the effects of transactions that shift costs between base rates and fuel or to
other rates not subject to the freeze. During the New Freeze Period, the only
costs that may be recovered from Texas ratepayers other than through base rates
are those costs recovered as reconcilable fuel costs according to the
Commission’s

 

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          substantive rules in effect on July 1, 1995 (as applied to the
Company) and in this Agreement. The recovery of any other costs through the fuel
factor, any other special factor, or surcharge shall be considered a shift in
costs between base rates and fuel. If any Signatory believes that the Company
has engaged in a transaction that is inconsistent with the foregoing intent,
such Signatory shall provide notice to the Company of the alleged violation of
this Paragraph. If the Company does not cure the alleged violation within thirty
(30) days of the receipt of such notice, a Signatory may initiate a complaint
with the appropriate regulatory authority to recover any and all additional
costs charged or to be charged to customers on account of the violation. The
Signatories agree that the Company’s regulatory authorities have primary
jurisdiction over such matters and that the appropriate forum for such a
determination is a proceeding at the appropriate regulatory authority, subject
to appeal, including as allowed by law de novo appeal to the Commission, for the
limited purpose of adjusting the fuel factor, fuel balance and/or reducing base
rates by the amount so shifted. If the regulatory authority does not have
jurisdiction, the parties agree that venue lies in the state district court in
El Paso County, Texas.      (g)    In the event the Company sells, transfers,
leases or assigns any Texas jurisdictional operating asset for a value of Thirty
Million Dollars ($30,000,000) or more during the New Freeze Period, unless the
City and Company otherwise agree, the Texas jurisdictional share of the net
after-tax gain on such sale shall be paid to ratepayers as a credit to the base
rates over what would have been the remaining life of the asset. Ratepayers will
be credited with a “return” on the unamortized portion of

 

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such gain based on the Company’s last calculated midpoint of the Deadband. This
provision does not apply to a sale, transfer, lease or assignment to a
wholly-owned subsidiary of the Company or any of its subsidiaries or to a
governmental entity, so long as the asset remains dedicated to public service in
the El Paso service area. It also does not apply to any sale, transfer, lease or
assignment required by statute or regulatory authority order, so long as the
asset remains dedicated to public service.

 

2. The Signatories hereby establish a refrigerated air conditioning rate rider
to be effective upon satisfaction of Paragraph 6 below for the purpose of water
conservation (Attachment A).

 

3. The Company agrees to review rate schedules 2 (small commercial service) and
24 (general service) as they apply to small commercial customers and develop, by
October 31, 2005, a rate rider that, through rate design, more effectively
transitions small commercial customers from the two rate classes.

 

4. The Company agrees, subject to any and all required governmental approvals,
to build or have built its next generation facility within the city limits of El
Paso. The Signatories agree to file a letter or brief supporting the requests
for such approvals and agree that such new generation will be used and useful in
serving the Company’s customers and will be included in the Company’s rate base
at its original cost. The City’s reasonable expenses in filing such letter or
brief will be reimbursed by the Company. Any additional support or participation
by any Signatory will be the result of mutual agreement. No post-commercial
operation date costs will be deferred during Rate Freeze Period.

 

5. The performance standards currently in effect for the Company with respect to
Palo Verde will be used as the mechanism for any future assessments of Palo
Verde Unit 1, 2 and 3

 

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operations and performance. Any penalties or rewards accruing under the
performance standards will be incorporated in the Company’s fuel reconciliation
proceedings during the New Freeze Period. Further, during the New Freeze Period,
the Company’s base rates will not be reduced below the freeze level on account
of Palo Verde performance or operations, unless the capacity factor, as measured
on a station basis for any consecutive twenty-four (24) month period, shall fall
below thirty-five percent (35%). In the event that the foregoing should occur,
the Signatories shall be free to urge whatever rate base adjustment they believe
is appropriate.

 

6. The revenues from the Company’s providing wheeling service and from margins
on off-system sales (other than those off-system sales allocated a full slice of
system costs) made by the Company, its affiliates or subsidiaries, will be
divided as follows during the New Freeze Period: The Company shall retain
seventy-five percent (75%) of the margins and wheeling revenues and the
ratepayers shall be credited with the remaining twenty-five percent (25%) of the
margins and wheeling revenues. Margins shall mean revenues from any capacity,
demand or non-fuel energy charge included in an off-system sale of electricity
net of any charges such as wheeling charges or capacity purchases incurred by
the Company in connection with making the off-system sale.

 

The mechanism for sharing margins and wheeling revenues will be in the fuel
factor and fuel reconciliation process. If, during the course of the New Freeze
Period or any time prior to a reconciliation of margins through the end of the
New Freeze Period, the fuel factor or fuel reconciliation process should be
eliminated, the Company agrees to devise a mechanism to reduce rates by the
appropriate customer share of such margins.

 

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The Signatories agree to use their best efforts to obtain Commission approval of
the margin sharing mechanism. If the Commission fails to approve the margin
sharing percentage or mechanism, the Signatories agree to negotiate in good
faith to achieve a resolution similar in economic impact on all Signatories.

 

7. The Signatories agree that the amounts of decommissioning expense in the
Company’s cost of service are described in a schedule attached hereto as
Attachment B. Such amounts shall be adjusted in any future rate proceeding or
earnings monitoring report as necessary to reflect the cost estimate of the most
recent official decommissioning study prepared for the Palo Verde participants
and to enable the Company to secure an exemption pursuant to § 468A of the
Internal Revenue Code of 1986, as amended, from federal income tax liability in
connection with its nuclear decommissioning trust. The Company agrees to fund
such amounts pursuant to its contractual obligations under the Arizona Nuclear
Power Project Participation Agreement. Such decommissioning expense shall be
recognized as a reasonable and necessary expense in any rate proceeding or
earnings monitoring report initiated during the New Freeze Period and, during
such period, no Signatory shall contest the inclusion of such amounts in the
Company’s cost of service. During the New Freeze Period, the Signatories’ intent
is to fully support the Company’s decommissioning expense and decommissioning
funds such that the required contributions are tax deductible to the full extent
allowed by law and the decommissioning funds are as adequately funded as they
would have been had rates not been frozen. However, the Company agrees that as a
result of this New Rate Freeze, the ratepayers shall be in no worse position
than they would have been had rates not been frozen. At the conclusion of the
New Freeze Period, any remaining costs associated with nuclear decommissioning
obligations continue to be subject to cost of

 

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   service rate regulation and shall be included either as an allowable expense
in cost of service, or, in the event of retail competition, as a nonbypassable
charge to retail customers.

 

8. During the New Freeze Period, the Company commits to spend an annual amount
equal to at least three tenths percent (0.3%) of the Company’s
City-jurisdictional gross revenues for charitable, civic or economic development
purposes within the City.

 

9. The Company will make filings during and after the New Freeze Period to
reconcile its fuel and purchased power costs incurred during the New Freeze
Period in accordance with the Public Utility Regulatory Act (“PURA”) and
Commission rules and procedures, subject to Paragraph 6 above.

 

10. In consideration of the rate freeze and other conditions of this Agreement,
the Company agrees that it is not entitled to recover, and further agrees that
it will not request recovery of, any expenditures for transmission
infrastructure improvements or changes in wholesale transmission charges
incurred during the term of this Agreement or any extension thereof to which
Texas Utilities Code Sec. 36.209 (HB 989 signed June 18, 2005) would apply. Any
costs to which Section 36.209 would apply are deemed recovered by other portions
of this Agreement.

 

11. If the City Council does not grant the Company a franchise in substantially
the same form as the draft Franchise Ordinance attached hereto as Attachment C
within forty-five (45) days of the Effective Date, or if the Company shall not
accept the franchise then the Company and the City may declare this Agreement
null and void. If a new franchise is granted, it will become effective upon the
expiration of the current franchise.

 

12. This Agreement is the result of an extended and highly complex course of
negotiations among the Signatories. The entire Agreement should be viewed as a
unitary, whole

 

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agreement, and not separate agreements on discrete issues. The resolution of
each issue is interrelated to the resolution of all other issues. The
Signatories understand and agree that each term of this Agreement is in
consideration and support of every other term. As a result, the Agreement is
indivisible because of the comprehensive nature of the compromises made.

 

13. This Agreement represents a fair, just and reasonable solution to the issues
being resolved. Moreover, this Agreement will serve the purpose of moderating
the rates of the Company in the Texas jurisdiction during the New Freeze Period
and ensuring that the rates are designed to recover the Company’s Texas
jurisdictional revenue requirements over the entirety of the New Freeze Period.
By entering into this Agreement, none of the Signatories shall be deemed to have
approved or acquiesced in any ratemaking principle, valuation methodology,
method of cost-of-service determination, method of revenue calculation, or cost
allocation or rate design principle underlying any of the provisions and
agreements contained herein. It is the result of a unique fact situation, and
its resolution is specific to the circumstances presented. This Agreement shall
not prejudice, bind, or affect any Signatory, or be viewed as an admission,
except to the extent necessary to give effect to or enforce the terms of this
Agreement or unless otherwise specifically stated herein.

 

14. The Signatories agree that they will use their best efforts to obtain
expeditious implementation of this Agreement. This Agreement assumes the
legality of the treatments and methodologies set out herein. Should any such
treatment or methodology be rejected or declared illegal by either the
Commission or a court, any Signatory shall have the right to withdraw from this
Agreement; however, the Signatories agree to negotiate in good faith to

 

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   substitute a treatment or methodology with the same economic effect as that
rejected or declared illegal.

 

15. The Signatories recognize that the Company will be free to engage in a
merger or other business combination with a third party. In the event of a
merger, the Signatories retain all the rights provided in this Agreement, as
well as their rights as a party in a proceeding pursuant to PURA § 14.101, and
their right to pursue a reduction in rates below the freeze level; provided
however, that the right to pursue a reduction in rates shall be limited to
urging rate reductions based on post-merger synergy savings. Nothing in this
Paragraph shall be construed as a pre-determination of the appropriate
ratemaking treatment of any such synergy-based reductions in cost.

 

16. Where this Stipulation requires a Signatory to “participate,” “support” or
“urge” regulatory or judicial action, and where the Signatory is not a
governmental body or agency, then such obligation shall be limited to no more
than reasonable efforts involving minimal expense.

 

17. Unless the context otherwise indicates, references to ratemaking items
including, but not limited to, rate base, expense, margin and gain, shall mean
the Texas jurisdictional share of such items.

 

18. Each person executing this Agreement represents that (s)he is authorized to
sign this Agreement on behalf of the party represented. Facsimile copies of
signatures are valid for purposes of evidencing this Agreement. This Agreement
may be executed in multiple counterparts.

 

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EXECUTED this 12th day of July, 2005.

 

CITY OF EL PASO   EL PASO ELECTRIC COMPANY By:  

/s/ John F. Cook

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  By:  

/s/ Gary R. Hedrick

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Name:   John F. Cook   Name:   Gary R. Hedrick Title:   Mayor   Title:  
President and Chief Executive Officer APPROVED AS TO CONTENT:         By:  

/s/ William F. Studer, Jr.

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        Name:   William F. Studer, Jr.         Title:   Deputy City Manager
Financial Services         APPROVED AS TO FORM:         By:  

/s/ Jorge Villegas

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        Name:   Jorge Villegas         Title:   Assistant City Attorney        

 

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ATTACHMENT “A” TO THE

RATE AGREEMENT

 

(Air Cooling Rider)

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EL PASO ELECTRIC COMPANY

 

SCHEDULE NO. 01

RESIDENTIAL SERVICE RATE

 

APPLICABILITY

 

This rate is applicable for all domestic purposes in single family residences or
individually metered apartments. Service will be 120/240 volt, single phase,
except that three-phase service may be provided for motors over 5 horsepower
(HP) if economically feasible. Single or three-phase motors shall not exceed 10
HP individual capacity without the written approval of the Company.

 

TERRITORY

 

Texas Service Area

 

MONTHLY RATE

 

$4.50 Customer Charge plus

 

SUMMER BASE ENERGY RATE

 

$0.08027 per kilowatt-hour for all kilowatt-hours during the billing months of
June through September.

 

NON-SUMMER BASE ENERGY RATE

 

$0.07527 per kilowatt-hour for all kilowatt-hours during the billing months of
October through May.

 

ALTERNATE TIME-OF-USE RATE

 

This voluntary billing alternative will only be made available to residential
customers. The residential customer must contract for this provision for a
minimum of eighteen (18) months. The on-peak hours are 10:00 a.m. through 8:00
p.m., Mountain Standard Time, for weekdays of Monday through Friday. Off-peak
hours are all other hours of the week not covered in the on-peak period plus
weekends. This alternative is available only to the first 250 customers who sign
up to take service under this alternative.

 

MONTHLY RATE

 

$6.00 Customer Charge plus

 

ON-PEAK BASE ENERGY RATE

 

$0.12517 for all on-peak KWH.

 

OFF-PEAK BASE ENERGY RATE

 

$0.04746 for all off-peak KWH.

 

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EL PASO ELECTRIC COMPANY

 

SCHEDULE NO. 01

RESIDENTIAL SERVICE RATE

 

MONTHLY MINIMUM

 

Customer Charge

 

OFF-PEAK WATER HEATING RIDER

 

For domestic electric water heating service (swimming pool water heating and
water heating utilized for space heating excluded). The service shall be metered
on a circuit which shall include only water heating elements and excluded all
other service.

 

Periods of electric supply service may be scheduled to conform to off-peak
conditions of the Company’s system, the Company reserving the right to change
the off-peak periods of supply to meet the changing off-peak conditions of its
system. The Company, at it options, will furnish and connect to the customer’s
wiring and retain ownership of a time switch or suitable device to regulate the
hours of use.

 

Service under this schedule shall be limited to water heaters of thirty (30)
gallons or more capacity. All water heaters will be controlled by a thermostat
and if two or more heating elements are used, the water heater will be wired so
that only one element will operate at one time. The minimum wattage of all
heating elements shall total not less than 3,000 watts. Service may be limited
where customer has an abnormally large connected load, and is only available as
a secondary service in conjunction with a main service.

 

MONTHLY RATE FOR OFF-PEAK WATER HEATING

 

$1.00 Customer Charge plus

 

$0.04401 per kilowatt-hour for all kilowatt-hours.

 

MONTHLY MINIMUM FOR OFF-PEAK WATER HEATING

 

Customer Charge

 

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EL PASO ELECTRIC COMPANY

 

SCHEDULE NO. 01

RESIDENTIAL SERVICE RATE

 

LOW INCOME RIDER

 

Upon qualification under the below defined criteria, the Customer Charge will
not be applicable. All other charges (credits) and/or provisions of Schedule No.
01 will remain unchanged.

 

The Low Income Rider (“LIR”) is available to qualified residential customers who
are identified by the Texas Department of Human Services (“TDHS”) client
database as eligible to receive food stamps under the Federal Food Stamp
Program. On a monthly basis, EPE will compare the names in its Texas customer
database with those in TDHS’s client database. All matching customers will
automatically be certified to receive the LIR. Once enrolled, customers will
continue to receive the LIR until the date on which TDHS annually purges its
client database. At that time, all customers who remain eligible to receive food
stamps under the Federal Food Stamp Program will automatically be re-enrolled to
receive the LIR for another year.

 

QUALIFIED WATER CONSERVATION AIR COOLING RIDER

 

Service under this Rider shall be available only to residential customers taking
electric service within the City limits of El Paso. Residential customers
qualify for service under this Rider by meeting either of the following
requirements: 1) the customer has previously installed a refrigerative air
cooling system meeting the requirements of the El Paso Water Utilities and El
Paso Electric Company Joint Water Conservation Initiative Refrigerated Air
Conditioning Program or 2), the customer has installed a refrigerative air
cooling system after January 1, 2001 meeting or exceeding a Department of Energy
(DOE) Seasonal Energy Efficiency Rating (SEER) factor of 12.

 

This Rate Rider is applicable only during the Company’s summer billing months of
June through September.

 

WATER CONSERVATION AIR COOLING RIDER RATE

 

Kilowatt-hour consumption up to 1,000 kilowatt-hours will be billed at the
SUMMER BASE ENERGY RATE OF $0.08027 per kilowatt-hour. All kilowatt-hours above
1,000 kilowatt-hours will be billed at $0.07527 per kilowatt-hour during the
billing months of June through September.

 

FIXED FUEL FACTOR

 

The above rates are subject to the provisions of Company’s Tariff Schedule No.
98 entitled Fixed Fuel Factor.

 

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EL PASO ELECTRIC COMPANY

 

SCHEDULE NO. 01

RESIDENTIAL SERVICE RATE

 

TERMS OF PAYMENT

 

The due date of the bill for utility service shall not be less than sixteen (16)
days after issuance. A bill becomes delinquent if not received at the Company by
the due date.

 

TERMS AND CONDITIONS

 

The Company’s Rules and Regulations apply to service under this schedule.

 

APPLICATION OF RESIDENTIAL SERVICE RATE

 

This rate is available only under the following conditions:

 

1. For a single household or single family for domestic purposes in individual
private residences or individually metered apartments.

 

2. For separately metered living quarters recognized as single-family living
quarters for domestic home use.

 

3. Service under this rate shall include home lighting and residential power for
operation of household appliances.

 

4. Single-phase motors for domestic use may not exceed 10 HP without the written
approval of the Company. The use of all single-phase motors over 5 HP must be
approved by the Company concerning the motor’s lock rotor amperes.

 

5. If the three-phase service is supplied, sizes of motors and other loads will
be subject to Company approval. Three-phase service is only available if it is
existing at the location or economically feasible to bring to the location.

 

6. Wiring may be extended from the residence circuit to private garages, barns
and similar structures and/or wells which are located on the same property as
the residence and used exclusively for domestic purposes in connection with the
residence.

 

7 For residences where rooms are rented or meals served to boarders if this is
incidental to the maintenance of a private residence.

 

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EL PASO ELECTRIC COMPANY

 

SCHEDULE NO. 01

RESIDENTIAL SERVICE RATE

 

This rate is not available under the following conditions:

 

1. If a separate meter and service are provided to garages, barns and similar
structures and/or wells even though their use may be in connection with the
residence.

 

2. When it is evident, both visually and/or electrically, that activity of a
business or professional character is being conducted in the residence. Service
to a combination residential and commercial establishment will be supplied under
the appropriate commercial service rate, but the portion used as living quarters
may be wired and metered separately and served on the Residential Service Rate.

 

3. When service in the primary residence is resold or shared with one or more
other family residences, i.e., a garage apartment or a separate living quarters
connected to the main residence electric service, or a duplex with one meter.
The additional residence or separate living quarters may be placed on the
residential rate if local zoning ordinances permit such use and the additional
residence is served and metered separately.

 

4. When the customer operates devices which cause undue fluctuation of voltage.
Service may be limited where the customer has an abnormally large connected load
or kilowatt demand.

 

5. For a recognized or accepted boarding or rooming house.

 

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ATTACHMENT “B” TO THE

 

RATE AGREEMENT

 

(Decommissioning Schedule)

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

Attachment B

 

El Paso Electric Company

Annual Decommissioning Funding Plan

Total Company Basis

Total Station

 

Year

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

   Estimated
Deposits

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

   Estimated
Income

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

  

Estimated

Net
Accumulation

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

  

Cash

Outlays

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

   

Estimated

Costs

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

2004

             113,253,148          392,150,437

2005

   6,168,907    8,703,932    128,125,986          412,904,943

2006

   6,685,850    9,838,873    144,650,709          434,757,880

2007

   6,950,651    11,091,325    162,692,684          457,767,381

2008

   7,225,938    12,458,391    182,377,013          481,994,655

2009

   7,893,456    13,960,036    204,230,505          507,504,154

2010

   8,206,085    15,615,332    228,051,921          534,363,741

2011

   8,531,094    17,419,253    254,002,268          562,644,867

2012

   9,419,278    19,399,135    282,820,682          592,422,767

2013

   9,792,338    21,580,908    314,193,929          623,776,660

2014

   10,180,174    23,955,595    348,329,698          656,789,952

2015

   11,415,973    26,561,846    386,307,516          691,550,468

2016

   11,868,114    29,435,965    427,611,595          728,150,680

2017

   12,338,162    32,561,214    472,510,970          766,687,953

2018

   14,190,816    35,995,531    522,697,318          807,264,806

2019

   14,752,857    39,792,601    577,242,775          849,989,182

2020

   15,337,159    43,918,743    636,498,677          894,974,741

2021

   18,577,418    48,473,130    703,549,226          942,341,154

2022

   19,313,196    53,545,717    776,408,139          992,214,428

2023

   20,078,114    59,056,770    855,543,023          1,044,727,237

2024

   24,714,858    65,083,721    944,493,973    (847,629 )   1,099,126,791

2025

   17,567,078    71,519,641    1,031,813,818    (1,766,874 )   1,155,437,538

2026

   8,761,103    76,232,061    1,093,486,237    (23,320,745 )   1,192,033,916

2027

   2,243,965    76,662,413    1,094,652,568    (77,740,047 )   1,173,267,717

2028

   —      74,301,726    1,060,386,003    (108,568,291 )   1,121,048,494

2029

   —      67,314,645    960,670,936    (167,029,712 )   1,004,510,090

2030

   —      57,327,366    818,138,967    (199,859,335 )   847,236,783

2031

   —      44,118,104    629,624,941    (232,632,130 )   647,132,518

2032

   —      30,008,390    428,260,267    (196,895,997 )   437,763,466

2033

   —      19,795,448    282,507,777    (165,547,938 )   286,622,496

2034

   —      10,463,311    149,325,578    (109,975,814 )   150,544,024

2035

   —      4,310,701    61,519,522    (92,116,757 )   61,519,522

 

Assumptions:

 

Date of Cost Study:

   1992 TLG  

Rate of Cost Escalation:

   5.2925 %

Rate of Earnings:

   7.3310 %

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ATTACHMENT “C” TO THE

RATE AGREEMENT

 

(Proposed Franchise)

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ORDINANCE NO.                 

 

AN ORDINANCE GRANTING A FRANCHISE

TO EL PASO ELECTRIC COMPANY

AND WAIVING APPLICATION PROCEDURES

 

BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF EL PASO:

 

Section 1. Grant. There is hereby granted by the City of El Paso, Texas (the
“City”) to El Paso Electric Company, a Texas corporation (the “Company”), its
successors and assigns, for the term commencing August 2, 2005 and extending
through July 31, 2030 (the “Franchise Term”), a franchise to construct,
reconstruct, repair, maintain, use and operate in, over, or under the present
and future streets, alleys, public ways, parks, and public places of the City of
El Paso, facilities for the transmission and distribution of electrical energy
and broadband over power line communications services (“BPL”) for the use of the
City and the inhabitants thereof and properties therein, with all usual and
customary appurtenances for such transmission and distribution (this
“Franchise”). Provided, this Franchise does not include places where the City’s
authority to permit such installations is or hereafter may be withdrawn by the
State, or where the Texas Department of Transportation or other State agency
constructs or maintains such public facility or place and lawfully excludes the
authority of the City to permit such public utility and BPL installations
therein.

 

Section 2. Required Construction. Prior to July 31, 2012, the Company will
initiate physical construction of its next generation plant, a base load or
intermediate load generation plant within the city limits of the City of El Paso
and shall complete said construction by July 31, 2017. If the Company does not
initiate or complete the required construction by the dates set

 

1

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forth above, this Franchise shall terminate two (2) years after the unmet
deadline. The generation plant shall not be powered from uranium fuel.

 

Section 3. Police Power. Work done in connection with the construction, repair,
maintenance and operation of such facilities is subject to the continuing police
power of the City; and the Company shall comply with all present and future
laws, ordinances and regulations, including the Texas Accessibility Standards as
adopted by the Texas Department of Licensing and Regulation, except such as
conflict with any provision hereof lawfully surrendering the City’s authority.

 

The City shall have power at any time to require the Company to remove and
abate, at the Company’s expense, any installation or structure that is dangerous
to life or property, and in case the Company, after notice, fails or refuses to
act, the City shall have the power to remove or abate the same at the expense of
the Company, all without compensation or liability for damages to the Company.

 

The City shall have the power at any time to require the Company to change the
route and position of its poles, lines, conduits or other construction at the
Company’s expense when the El Paso City Council (the “City Council”) shall find,
by resolution, that such change is necessary in the closing, opening or
relocating of streets or alleys, or water or sewer lines, the changing of grade
of streets or alleys, the construction and maintenance of parks and public
improvements, the construction of private buildings, the construction or use of
driveways, and under other conditions which the City Council shall find
necessary under the lawful exercise of its police power. Provided, however, the
Company shall be entitled to be paid for its costs and expense of any
relocation, raising or lowering of its wires or cables required by the City if
such expenses or costs are reimbursable or payable to the Company or to the City
by the State of Texas, the United States, or any agency or subdivision of either
whether directly or indirectly. The City shall not

 

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be liable to the Company for any damages to poles, lines, conduits or other
construction occurring in the change of the grade of streets, alleys or public
places after notice to the Company has been provided. The City shall use its
best reasonable efforts to consult and confer with the Company before requiring
any such relocation or raising or lowering of its lines or cables, with a view
to accomplishing the result reasonably and economically.

 

The Company shall promptly restore to as good condition as before working
thereon, and to the reasonable satisfaction of the City, all streets excavated
by it. The Company shall never tear up, bore nor excavate any pavement or street
at any time without first obtaining permission of the City, but such permission
shall be given if such action is necessary, reasonable and in accordance with
this Franchise.

 

Section 4. Underground Conduits. The Company may be required by the City Council
to place its wires and cables in underground conduits within the fire limits
herein described and such fire limits as may hereafter be established. No poles,
except distribution poles for drop or distribution wires, shall be set for
carrying wires or cables within the present fire limits, except by express
consent of the City Council or by consent of the City Manager which he may give
to facilitate rendition of service immediately upon unforeseen damage to the
system, or upon other emergency. The present fire limits for the purposes of
this Franchise are bounded by the south side of Main Drive, the west side of
Campbell Street, the north side of Overland Avenue, and the east side of Santa
Fe Street.

 

Section 5. Interference with Public or Private Property. All poles placed within
the City and all excavations or other construction in the streets, alleys or
public places shall be so done as to interfere as little as possible with the
use of streets, alleys and public places and with the use of private property,
in accordance with any direction given by or under the authority of the City
Council under the police and regulatory power of the City. Future installations
by the

 

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Company shall not conflict with then existing gas pipes, water pipes, telephone
lines or conduits, or sewers. Nothing herein shall be construed in any way to
restrict or limit the Company’s right of eminent domain as to private property.

 

Section 6. Trimming Trees. The Company may trim trees upon and overhanging the
streets, alleys, sidewalks and public places of the City so as to prevent the
branches of such trees from coming in contact with the wires or cables of the
Company. When so ordered by the City, such trimming shall be done under the
supervision and direction of any City official to whom such duty may be
delegated. The City Council may require pole lines that border on public parks
to be relocated or removed to adjacent alleys. The City agrees to use its best
efforts, while both designing and planting public areas, to coordinate with the
Company to minimize the need for subsequent tree trimming and relocation and
removal of lines.

 

Section 7. Wire Changes to Permit Moving of Structures. The Company on request
of any person shall remove or raise or lower its wires temporarily to permit the
moving of houses or other bulky structures. The expense of such temporary
removal, raising or lowering of wires, shall be paid by the benefited party or
parties, and the Company may require such payment in advance. The Company shall
be given not less than ninety-six (96) hours advance notice to arrange for such
temporary wire changes.

 

Section 8. Furnishing Service. The Company shall furnish service under fair
rules and regulations (which rules and regulations shall be subject to
supervision and control of the City Council) to any person, firm or corporation
which shall demand service within the City, upon such terms and conditions as
may be required by the City, and shall make connections therefor on demand
without unreasonable delay; provided that the extension of service demanded is
not prohibited by State or Federal law.

 

4

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The Company shall have the right to operate and control all meters, wires,
appliances and appurtenances owned by the Company. In case of refusal or failure
on the part of any customer to pay the Company proper charges for electricity
consumed, or to observe reasonable rules and regulations established by the
Company, the Company shall have the right to disconnect its service and wires to
the premises of such customer and to remove all facilities furnished and owned
by the Company.

 

Section 9. Other Utility Installations. The City reserves the right to install
and permit to be installed, gas, water and other utility lines, and do and
permit to be done, any work that may be deemed necessary or proper by the City
Council in, across, over or under any street, alley, or public place occupied by
the Company, and to change any curb or sidewalk or the grade of any street. In
doing or permitting such work, the City shall not be liable to the Company for
any damage so occasioned. Provided, however, the City shall not require the
Company (except as provided in Section 3 herein) to move its lines entirely from
any street, alley, or public place. If the City shall require the Company to
adapt or conform its lines or in any way or manner to alter, relocate or change
its property to enable any other corporation or person except the City to use
with greater convenience such street, alley, or public place, the Company shall
not be bound to make any such changes until such other corporation or person
shall have undertaken with solvent bond to reimburse the Company for any loss
and expense which will be caused by or arise out of such alteration, relocation
or change of the Company property; provided, however, that the City shall never
be liable for such reimbursement.

 

Section 10. Indemnification. The Company shall indemnify and save the City
harmless from all claims, demands or causes of action against the City for
injury to persons or property occasioned by or arising out of the construction,
reconstruction, maintenance, repair or operation of its system or by the conduct
of its business in the City.

 

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Section 11. Quality of System and Service. The Company shall construct, install
and maintain its system with economical and up-to-date apparatus and equipment,
in reasonable operating condition at all normal times. The service shall be
sufficient to meet all reasonable demands without undue interruption or
fluctuation, except when interrupted, prevented, or impaired by fires, strikes,
riots, war, storms, floods, State or Federal restrictions, or other occurrences
beyond the control of the Company, in any of which events the Company shall do
all things reasonably within its power to restore normal, efficient and
economical service.

 

Section 12. Reports; Rate Regulation. The City shall have the right to keep
informed as to the construction, reconstruction, maintenance, repair and
operation of the properties of the Company, and its accounting in connection
therewith, as affect the rates charged and service rendered within the City, and
to keep informed of the reasonableness of the Company’s rates. The Company will
furnish such pertinent information as may from time to time be reasonably
required by the City; and the original records of the Company shall be open to
inspection by the City at any reasonable time.

 

Annually and no later than March 31 the Company will file with the City Clerk a
detailed operating statement for the previous calendar year, showing income,
expenditures, profit or loss, and rate of return, and the basis therefor.

 

The City shall have power to fix and regulate the electric rates and charges of
the Company so far as not prohibited by law or the City Charter. The City shall
have the power to enter into settlement agreements with the Company which may
expand or limit the City’s rights under this Franchise.

 

If the Company applies to the City for an increase in its rates or charges, it
shall furnish the City Council with all proof necessary for the Council to act
advisedly and shall provide all facts, data and information demanded by the
Council. When said application to increase rates or

 

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charges is made, the City Council may employ such engineers, accountants,
attorneys and other special representatives (the “Consultants”) as the Council
may deem necessary and appropriate to determine the reasonableness of the
proposed rates and charges. The reasonable compensation paid to and expenses
incurred by the Consultants related to the review of the proposed rates and
charges shall be paid by the Company.

 

The Company will not resort to any court action with reference to the
establishment or regulation of its rates, charges or service without first
making application to the City Council and allowing reasonable time for full
investigation and hearing.

 

If the City shall order a reduction in rates, and the courts shall sustain such
rates as set by the City or shall approve any rate lower than the rate contended
for by the Company, the rate sustained by the courts shall be retroactive to the
date when the rate contended for by the City was first ordered by the City to go
into effect, and any excess collected by the Company shall be refunded to the
persons paying the same; and the Company shall pay all costs and expenses
incurred by the City in preparing for and conducting any litigation relating to
a reduction in rates, provided that such costs and expenses are determined to be
reasonable by the courts in which said litigation is tried.

 

Section 13. Compensation. As full compensation to the City for the rights herein
granted to the Company, the Company shall pay the following consideration:

 

(a) At or before the acceptance of this Franchise, the Company will pay the City
Fifty Thousand Dollars ($50,000) and the cost of advertising this Ordinance (the
“Acceptance Fee”).

 

(b) The Company will pay to the City on a quarterly basis during the life of
this Franchise a street rental charge of three and one-quarter percent (3.25 %)
of the gross revenues the Company receives for the generation, transmission and
distribution of electrical energy and other services within the City and four
percent (4%) of BPL-related gross revenues within the

 

7

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City of El Paso (the “Street Rental Charge”). The Company shall pay the Street
Rental Charge to the City by electronic funds transfer or by other means of
immediately available funds within forty-five (45) days of the end of each
calendar quarter (the “Payment Date”) with the first payment due November 14,
2005 for the sixty (60) days ending September 30, 2005. If the Street Rental
Charge or any portion thereof is not paid on or before the Payment Date, the
unpaid balance shall bear interest at a daily rate equivalent to the prime rate
of interest as published by the Wall Street Journal for that date, plus one
percent (1%) per annum from the Payment Date until the date such payment is
made. If any payment shall be more than thirty (30) days late, the interest
shall be paid at such prime rate plus three percent (3%) per annum.

 

(c) The Company will pay to the City, as a Supplemental Franchise Fee, those
amounts calculated under Paragraph 1(d)(iii) of that certain Rate Agreement
entered into by and between the Company and the City which was passed and
approved by the City Council on July 12, 2005 and amounts to which the Company
and the City agree from time to time.

 

The consideration set forth in paragraphs (a), (b) and (c) of this Section shall
be in lieu of any other tax or charge, by whatever name called, for the
privileges granted in this Franchise. The City will not assess against the
Company any additional street rental charge, pole tax, inspection tax, charge
for the occupancy of the places to which this Franchise relates under Section 1,
or tax on this Franchise as property. This does not bar the City from assessing
against the Company or its property ad valorem taxes levied on property, fees
charged for the services of the Departments of Public Inspection or Engineering,
excise taxes levied, or other taxes, fees and charges which are general and not
compensation for the privileges herein granted. This does not relieve the
Company of its obligation to pay any amount legally charged under state law or
under Section 12 or other provisions of this Franchise or City ordinances now
codified as Sections 15.04.070 through 15.04.110 of the El Paso Municipal Code.

 

8

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Should the City not have the legal power to agree that payment of the foregoing
consideration shall be in lieu of any of the additional taxes or charges as
above set forth, the City will apply so much of such payment as may be necessary
to the satisfaction of the Company’s obligation to pay the additional tax or
charge herein agreed to be waived.

 

The payment or rendition of the consideration provided in this Franchise shall
not, except as otherwise provided herein, in any way limit any of the privileges
or rights of the City which it may now or hereafter have under the Constitution
and laws of Texas and the Charter of the City.

 

Section 14. Assignment.

 

(a) If the Company shall assign this Franchise to any other person or
corporation (the “Assignee”) acquiring and duly authorized to acquire, own and
operate the Company’s property and to carry on the Company’s business as then
conducted, the Assignee shall execute and deliver to the City an agreement in
writing to be bound by all of the Company’s obligations, liabilities and
undertakings under this Franchise, the Assignee shall thereupon be deemed to be
substituted for the Company, and the Company shall stand released from all
obligations under this Franchise except such as have already accrued. If the
Assignee fails to file such agreement within thirty (30) days after said
assignment, this Franchise shall terminate.

 

(b) This grant shall not be assignable without the express consent of the
governing body of the City. Said consent shall be evidenced by an ordinance that
fully recites the terms and conditions, if any, upon which such consent is
given. If the governing body does not grant said consent then this Agreement
shall terminate. In the context of this Agreement, consent is required in the
event of any merger or acquisition of the Company, sale of substantially all of
the assets of the Company or change in control of the Company. A formal
assignment of the Franchise is required subsequent to merger or acquisition.
“Change in Control” is defined to mean the occurrence of any of the following :
(i) the sale, lease, transfer, conveyance or other

 

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disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole, (ii) the adoption of a plan
relating to the liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any “person” or “group” (as such
terms are defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) becomes
the “beneficial owner” (as such term is defined in Rule 13d-3 and Rule 13d-5
under the Exchange Act), directly or indirectly, or more than 50% of the voting
stock of the Company, or (iv) the first day on which a majority of the members
of the Board of Directors of the Company are not Continuing Directors. For
purposes of this definition, any transfer of an equity interest of an entity
that was formed for the purpose of acquiring voting stock of the Company shall
be deemed to be a transfer of such portion of such voting stock as corresponds
to the portion of the equity of such entity that has been so transferred.

 

Section 15. Forfeiture. After reasonable notice and opportunity to be heard, and
a reasonable time for correcting any violation of this Franchise, the City
Council may forfeit this Franchise if the Company fails to perform its
obligations under this Franchise, maintain its property in good order or to
furnish efficient public utility service at reasonable rates. If court
proceedings are instituted to determine the legality of such forfeiture and the
Company does not prevail, the Company will pay the reasonable expenses incurred
by the City in connection with such litigation. If the Company does prevail, the
City will pay the reasonable expenses incurred by the Company in connection with
such litigation. In the absence of agreement between the City and the Company,
the reasonableness of any litigation expenses pursuant to this Section will be
determined by an appropriate court of law.

 

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The right to forfeit this Franchise shall be in addition to the penalties
provided in Section 3.18 of the City Charter, and other penalties provided by
law.

 

Section 16. Acceptance. This Franchise shall take effect if and only if: (a) It
is passed and approved by the City Council; and (b) within thirty (30) days
after this Franchise has been passed and approved by the City Council, the
Company files with the City Clerk the receipt received from the City Cashier for
its payment of the Acceptance Fee and the Company’s written acceptance of this
Franchise. This Franchise shall then become effective August 2, 2005 whereupon
the prior franchise granted September 12, 1995 and all rights and obligations
created thereby shall terminate.

 

Section 17. Waiver of Application Process. The City Council finds that all
relevant facts about the Company are known to the City Council and waives the
application process required by Section 15.08.012 H. of the El Paso Municipal
Code.

 

PASSED AND APPROVED this 12th day of July, 2005.

 

     CITY OF EL PASO: ATTEST:   

/s/ John F. Cook

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     John F. Cook, Mayor

/s/ Richarda Duffy Momsen

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     Richarda Duffy Momsen, City Clerk      APPROVED AS TO FORM:    APPROVED AS
TO CONTENT:

/s/ Jorge Villegas

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/s/ William F. Studer Jr.

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Jorge Villegas    William F. Studer, Jr. Assistant City Attorney    Deputy City
Manager      Financial Services

 

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ACCEPTANCE

 

The Franchise granted by the City of El Paso on July 12, 2005 is hereby accepted
this 21 day of July, 2005.

 

EL PASO ELECTRIC COMPANY, GRANTEE BY  

    /s/  Gary R. Hedrick

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ITS  

    CEO and President

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STATE OF TEXAS

COUNTY OF EL PASO

 

This instrument was acknowledged before me on this 21st day of July, 2005 by
J.J. Jimenez.

 

[seal]

 

/s/ J.J. Jimenez

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Notary Public, State of Texas

 

My commission expires: July 3, 2006

 

Received for filing this              day of                         , 2005.

 

 

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Richarda Duffy Momsen, City Clerk

 

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