Document:

EXHIBIT 10.4
                                                                    ------------

                                    AGREEMENT

            THIS AGREEMENT is dated as of December 22, 2004 (the "Effective
Date"), by and between Able Laboratories, Inc., a Delaware corporation (the
"Company"), and Shashikant C. Shah (the "Employee").

            The Company and the Employee entered into an Amended and Restated
Employment Agreement dated as of March 1, 2004 (the "March 2004 Agreement"); and
the Company and the Employee desire to enter into this Agreement to change the
terms and conditions of the Employee's employment. Therefore, in consideration
of the mutual promises and agreements in this Agreement, the parties agree as
follows:

1. Employment; Duties. The Employee will be employed as Quality Control
Consultant. The Employee hereby agrees to continue his employment in such
capacity and to perform all such duties and services for the Company as are
consistent with that position and as are reasonably assigned to the Employee
from time to time by the Company. The Employee may perform such duties at the
Company's offices or from an office away from the Company's offices, provided
that the Employee shall not be required to travel outside the United States.

2. Term. The term of this Agreement (the "Term") will begin on the Effective
Date and will end on June 30, 2006 unless earlier terminated under paragraph 4
below.

3. Compensation. The Company will pay the Employee a base salary ("Base
Compensation") at the rate of $150,000 per year. The Company will provide health
insurance coverage under the Company's group plan for the Employee and his
family, including a long-term care plan, if adopted, and may also provide such
other employee benefit plans and/or fringe benefits as the Company makes
available, but in each case only if and to the extent that the Employee's
participation in the plan is permitted by Company policy, the eligibility or
other conditions of the plan or by applicable law.

4. Termination. The Company may terminate the Employee's employment for "Cause,"
meaning any unlawful or dishonest conduct of the Employee constituting a felony
or involving moral turpitude, or willful, reckless or grossly negligent
misconduct or insubordination that the board determines is or might be injurious
to the Corporation. Otherwise, the Employee's employment hereunder will end at
the end of the Term or, if earlier, upon the Employee's death or disability. If
the Employee's employment is terminated because of death or disability then the
Company will pay the Employee's Base Compensation through the remainder of the
Term in accordance with the provisions hereof. In the event of termination as a
result of the Employee's death, the Base Compensation will be payable to the
Employee's surviving spouse and, in the event of termination as a result of the
Employee's death or disability, then if and to the extent permitted by Company
policy, the terms of the Company's health care plan and applicable law, the
Employee or the Employee's surviving spouse, as the case may be, may elect to
continue coverage under the Company's group health plan. If permitted by the
Company's option plans and applicable law, the Employee may upon termination
effect a cashless exercise of his options that are vested as of that date. The
Company's obligations to make severance payments in

<PAGE>

accordance with this paragraph 4 will be binding on any successor to the Company
as provided in paragraph 6 below.

5. Employee Release. In consideration of the Company's entering into this
Agreement and the agreements set forth herein, the Employee, on behalf of
himself, his or her successors, heirs, administrators, executors, assigns,
agents, representatives, and all those in privity with him, hereby releases and
forever discharges the Company, all of its present and former officers,
directors, employees, representatives, successors and assigns (collectively, the
"Company Releasees"), of and from any and all claims, demands, obligations,
liabilities, damages, fees, expenses, and costs of any kind which Employee now
has or ever had arising out of, based on, or connected with this Agreement or
his employment by the Company, including but not limited to claims arising under
or based on any law, regulation, executive order or public policy affecting or
relating to the claims or rights of employees, any rights or obligations under
any employee benefit plan or insurance program, and any and all actions and
claims of whatever nature in tort or contract, and any claims or suits relating
to the breach of an oral or written contract, misrepresentation, defamation,
interference with prospective economic advantage, interference with contract,
intentional and negligent infliction of emotional distress, negligence, breach
of the covenant of good faith, which the Employee had or has, or claimed or
claims to have, known or unknown, against the Company Releasees, with sole
exception of claims arising in the future relating to obligations of the Company
to pay the Base Compensation in accordance with the terms hereof (collectively,
"Released Claims"). The Employee agrees to indemnify and hold the Company
harmless from and against any cost, liability and expense, including any
attorneys fees, incurred by the Company in connection with any Released Claim.
The Employee further agrees to execute a written reaffirmation of this paragraph
5 as of the last day of his employment and agrees that his failure for any
reason to execute such reaffirmation shall constitute a termination for Cause.

6. Agreement Binding on Successors, etc. The rights, benefits, duties and
obligations under this Agreement, including without limitation the Company's
obligations to pay severance compensation in accordance with the terms of this
Agreement, shall inure to and be binding upon the Company, its successors and
assigns, and upon the Employee and his legal representatives. No amendment or
waiver of any provision hereof shall be made unless made in writing and signed
by the parties.

            Any notice or other communication under this Agreement shall be in
writing and shall be deemed to have been given upon receipt by the other party.
This Agreement contains the parties' entire agreement as to its subject matter,
and supersedes any prior agreement relating to the Employee's employment with
the Company; except that that the "Proprietary Information, Confidentiality and
Inventions Agreement" dated as of July 21, 1999 by and between the Employee and
the Company is incorporated herein and remains in full force and effect. This
Agreement shall be governed by and interpreted in accordance with the laws of
New Jersey without regard to principles of conflict of laws, and the parties
mutually and irrevocably waive the right to a jury trial in any matter arising
hereunder.

                                      * * *

                                        2
<PAGE>

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first above written.

                                    ABLE LABORATORIES, INC.

                                    By: /s/ Robert J. Mauro
                                        -------------------------
                                    Title: President and Chief Operating Officer

Shashikant C. Shah

Agreed and Accepted

/s/ Shashikant C. Shah
-----------------------------

                                        3Exhibit
10.39

 

SETTLEMENT
AND RELEASE OF CLAIMS AGREEMENT

 

This Settlement and Release of Claims Agreement (“Agreement”) is
entered into as of January 13, 2005 by and among each of the Mirant
Parties, each of the California Parties and OMOI. Each of the Mirant Parties,
the California Parties and OMOI is a “Party,” and collectively are “Parties”
to this Agreement. Except as otherwise specified herein, all references in this
Agreement to a “Section,” “Article” or “Exhibit” shall
mean a Section, Article or Exhibit of this Agreement. Unless the context
otherwise requires, capitalized terms used in this Agreement shall have the
meanings specified in Article I.

 

RECITALS

 

A.                                   WHEREAS, various of the Parties are engaged
in complex and disputed regulatory proceedings, appellate proceedings,
litigation and investigations regarding numerous issues and allegations arising
from events in the California and western energy markets during the years 2000
and 2001;

 

B.                                     WHEREAS, in addition to being engaged in the
matters referenced above, the Mirant Parties and PG&E also are engaged in
additional complex and disputed regulatory proceedings regarding certain rates
and potential refunds associated with services and payment obligations provided
for in the RMR Agreements;

 

C.                                     WHEREAS, the Mirant Parties are debtors in
possession in the Bankruptcy Proceedings, and (with their affiliated Debtors)
are contemplating the Mirant Plans;

 

D.                                    WHEREAS, a number of the Settling
Participants, as well as FERC, the PX and the CAISO, have filed proofs of
claims and alleged claims against the Mirant Parties in the Bankruptcy
Proceedings;

 

E.                                      WHEREAS, the Parties and the Additional
Settling Participants have determined that it is preferable to settle the
disputes addressed herein, rather than continue to litigate; and

 

F.                                      WHEREAS, this Agreement and the Implementing
Agreements contemplate a comprehensive resolution of all disputes and other
matters addressed herein (i) through the settlement of the regulatory
proceedings, appellate proceedings, litigation, proofs of claims and claims
identified herein, and (ii) by effectuating the transactions, granting of
rights and benefits, and assumption of obligations specified and provided for
herein (such comprehensive resolution and such transactions are referred to herein
collectively as the “Settlement”).

 

NOW, THEREFORE, in consideration of the mutual covenants and
agreements, and other good and valuable consideration, provided for herein, and
subject to and upon the terms and conditions hereof, the Parties agree as
follows.

 

 

ARTICLE I

DEFINITIONS
AND INTERPRETATION

 

1.1                                 Defined Terms. The following capitalized terms, when used
in this Agreement, including the Exhibits, shall have the meanings specified in
this Section 1.1.

 

1.1.1                        “2005 RMR FERC Settlement” has the
meaning set forth in Section 8.3.

 

1.1.2                        “Additional Settling Participant”
means (i) the entities defined in Article XI who may become bound by the
terms of the Settlement and this Agreement and receive benefits hereunder, and
(ii) the SWP, which has agreed to become bound by the terms of the Settlement
and this Agreement pursuant to the SWP Side Letter.

 

1.1.3                        “Aggregate Allowed Claim” has the
meaning set forth in Section 5.1.1.

 

1.1.4                        “Aggregate Allowed Claim Benefits” has
the meaning set forth in Section 5.1.1.

 

1.1.5                        “Agreement” means this Settlement and
Release of Claims Agreement, including all Exhibits, as the same may be
amended, modified, supplemented or replaced from time to time.

 

1.1.6                        “Allocation Matrix” means the matrix
attached as Exhibit F that sets forth the various allocation percentages with
respect to certain portions of the MAEM Receivables that are applicable to each
Settling Participant pursuant to this Agreement.

 

1.1.7                        “Bankruptcy Code” means title 11 of
the United States Code, as the same may be amended from time to time.

 

1.1.8                        “Bankruptcy Proceedings” means,
collectively, the Mirant Parties’ respective Chapter 11 cases, together with
the other Chapter 11 cases of the Mirant Parties’ affiliated Debtors pending in
the Mirant Bankruptcy Court or, to the extent of the reference thereto being
withdrawn, in the Mirant District Court.

 

1.1.9                        “Bankruptcy Rules” means the Federal
Rules of Bankruptcy Procedure, as the same may be amended from time to time.

 

1.1.10                  “Bankruptcy Rule 9019 Motion” has the
meaning set forth in Section 3.2.1.

 

1.1.11                  “Business Day” has the same meaning as
provided in California Civil Code Section 9.

 

1.1.12                  “CAISO” means the California
Independent System Operator Corporation, a California public benefit corporation.

 

2

 

1.1.13                  “California Attorney General” means
the People of the State of California, ex
rel. Bill Lockyer, Attorney General of the State of California.

 

1.1.14                  “California Litigation Escrow” means
the escrow identified in and established pursuant to Section 6.1.

 

1.1.15                  “California Parties” means,
collectively, the California State Parties and the California Utilities.

 

1.1.16                  “California State Parties” means,
collectively, the California Attorney General, the CPUC, CERS and the CEOB.

 

1.1.17                  “California Utilities” means,
collectively, PG&E, SCE, and SDG&E.

 

1.1.18                  “CC8 Alternative Consideration” has
the meaning set forth in Section 8.9.

 

1.1.19                  “CC8 Application” has the meaning set
forth in Section 1.1.32(iv).

 

1.1.20                  “CC8 Assets” has the meaning set forth
in Section 8.7.3.

 

1.1.21                  “CC8 Asset Transfer Agreement” means
the asset transfer agreement described in Section 8.7.3 that will be
executed by Delta, Mirant Special Procurement, Inc. and PG&E, if at all, by
April 30, 2005 (or such later date as may be agreed to pursuant to Section 8.8.1),
and shall include for all purposes of this Agreement all ancillary documents
and agreements that are provided for in such asset transfer agreement.

 

1.1.22                  “CC8 Claim” has the meaning set forth in Section 8.9.1.

 

1.1.23                  “CC8 Claim Plan Securities” has the
meaning set forth in Section 8.9.2.

 

1.1.24                  “CC8 Claim Shortfall” has the meaning
set forth in Section 8.9.3.

 

1.1.25                  “CC8 Claim Shortfall Notice” has the
meaning set forth in Section 8.9.3.

 

1.1.26                  “CC8 Closing Date” means the date of
closing of the transfer of the CC8 Assets from Delta and Mirant Special
Procurement, Inc. to PG&E in accordance with the terms of the CC8 Asset
Transfer Agreement and subject to Section 1.1.32.

 

1.1.27                  “CC8 Escrow” means the escrow to be
established jointly by Delta and PG&E pursuant to the CC8 Escrow Agreement.

 

3

 

1.1.28                  “CC8 Escrow Agreement” means an escrow
agreement to be executed as provided for in Section 8.7.1 by and among
Delta, PG&E and the escrow agent thereunder substantially in the form
attached hereto as Exhibit C, but with such modifications as may be required by
such escrow agent that are not inconsistent with the allocation to Delta and
PG&E of the benefits and burdens reflected in Exhibit C.

 

1.1.29                  “CC8 Execution Triggering Event” has
the meaning set forth in Section 8.8.

 

1.1.30                  “CC8 Petition for Modification” has
the meaning set forth in Section 1.1.32(iv).

 

1.1.31                  “CC8 Project” has the meaning set
forth in Section 8.7.3.

 

1.1.32                  “CC8 Transfer Approval Date” means, if
Delta, Mirant Special Procurement, Inc. and PG&E execute the CC8 Asset
Transfer Agreement, the first day on which all of the following approvals have
been issued or otherwise obtained and are in effect with respect to the CC8
Asset Transfer Agreement and the transactions included therein:

 

(i)                                     if
approval from the Mirant Bankruptcy Court is required that is separate from the
Mirant Bankruptcy Court Approval that is obtained as set forth in Section 2.4,
the Mirant Bankruptcy Court has issued an unstayed order authorizing Delta and
Mirant Special Procurement, Inc. to transfer and assign the CC8 Assets, and
otherwise to perform their obligations under the CC8 Asset Transfer Agreement
on the terms and conditions specified therein without material change,
modification or condition thereto, or with one or more material changes,
modifications or conditions to such approval that are acceptable in its or
their sole discretion to the party or parties adversely affected by any such
change, modification or condition;

 

(ii)                                  if
PG&E Bankruptcy Court approval is required, the PG&E Bankruptcy Court
has issued an unstayed order authorizing PG&E to take assignment, ownership
and possession of the CC8 Assets, and otherwise to perform its obligations
under the CC8 Asset Transfer Agreement on the terms and conditions specified
therein without material change, modification or condition thereto, or with one
or more material changes, modifications or conditions to such approval that are
acceptable in its or their sole discretion to the party or parties adversely
affected by any such change, modification or condition;

 

(iii)                               if
FERC approval is required, FERC has issued an unstayed order authorizing Delta
and PG&E to perform their respective obligations under the CC8 Asset
Transfer Agreement on the terms and conditions specified therein without
material change, modification or condition thereto, or with one or more
material changes, modifications or conditions to such approval that are
acceptable in its or their sole discretion to the party or parties adversely
affected by any such change, modification or condition;

 

4

 

(iv)                              the
CPUC has issued an unstayed decision on PG&E’s separate application (the “CC8
Application”) authorizing PG&E to take assignment, ownership and
possession of the CC8 Assets, and otherwise perform its obligations under the
CC8 Asset Transfer Agreement on the terms and conditions specified therein and
in the CC8 Application without material change, modification or condition
thereto, or with one or more material changes, modifications or conditions to
such approval that are acceptable in its or their sole discretion to the party
or parties to the CC8 Asset Transfer Agreement adversely affected by any such
change, modification or condition. PG&E, Delta and Mirant Special
Procurement, Inc. shall each advise the CPUC in comments filed on the proposed
decision on the CC8 Application (the “Proposed CPUC CC8 Decision”), or,
to the extent any change, modification or condition appears in the CPUC’s
decision on the CC8 Application (the “Original CPUC CC8 Decision”) but
not in the Proposed CPUC CC8 Decision, in a petition for modification of the
Original CPUC CC8 Decision that is filed within thirty (30) days of its
issuance (“CC8 Petition for Modification”), of any change, modification
or condition to such approval contained in the Proposed CPUC CC8 Decision or in
the Original CPUC CC8 Decision that PG&E, Delta or Mirant Special
Procurement, Inc. considers to be material. Any such change, modification or
condition contained in the Proposed CPUC CC8 Decision or in the Original CPUC
CC8 Decision which is not so identified to the CPUC as material shall be deemed
not to be material. Consent or lack of consent to material changes,
modifications or conditions, if any, shall be communicated to the parties to
the CC8 Asset Transfer Agreement and the CPUC by the later of (a) ten (10)
Business Days after the date of issuance of the Original CPUC CC8 Decision, or
(b) ten (10) Business Days after the issuance of the CPUC’s decision on any CC8
Petition for Modification. The failure of an affected party to provide notice
in accordance with the foregoing sentence shall be deemed to constitute
acceptance by such party of the material change or condition.

 

In
addition, if any of the approvals listed in subparts (i)-(iii) above includes a
material change, modification or condition that adversely affects any party to
the CC8 Asset Transfer Agreement, each party so affected shall communicate its
consent or lack of consent to such change or condition to the other parties to
the CC8 Asset Transfer Agreement within ten (10) Business days after the
effective date of the approval. The failure of an affected party to provide
notice in accordance with the foregoing sentence shall be deemed to constitute
acceptance by such party of the material change or condition.

 

Notwithstanding
anything to the contrary herein, the CC8 Transfer Approval Date shall not take
place if one or more of the approving authorities listed in subparts (i)-(iv)
above condition its or their approvals on changes, modifications or conditions
that are inconsistent with the terms and conditions of the approvals granted by
one or more other approving authorities, but shall occur at such time, if any,
when, by further action of the approving authorities, any such inconsistencies
are eliminated.

 

1.1.33                  “CC8 Triggering Event” has the meaning
set forth in Section 8.8.

 

1.1.34                  “CEOB” means the California
Electricity Oversight Board.

 

5

 

1.1.35                  “CERS” means the California Department
of Water Resources acting solely under the authority and powers created by California
Assembly Bill 1 from the First Extraordinary Session of 2000-2001, codified in
Sections 80000 through 80270 of the California Water Code.

 

1.1.36                  “CERS Allowed Claim” has the meaning
set forth in Section 5.2.

 

1.1.37                  “CERS Escrow” has the meaning set
forth in Section 6.5.8.

 

1.1.38                  “CPUC” means the California Public
Utilities Commission.

 

1.1.39                  “Debtors” means, collectively, the
Mirant Parties and the other affiliated entities in the Bankruptcy Proceedings
that are listed in Exhibit E.

 

1.1.40                  “Deemed Distribution” has the meaning
set forth in Section 6.5.5.

 

1.1.41                  “Deemed Distribution Recipients” has
the meaning set forth in Section 6.5.5.

 

1.1.42                  “Delta” means Mirant Delta, LLC, a
Delaware limited liability company.

 

1.1.43                  “Delta Plan” means the Mirant Plan
that governs the disposition of Delta’s estate.

 

1.1.44                  “Delta Plant Option Agreement” means
the agreement under which PG&E would have (i) an option to acquire all
existing units of Delta’s Pittsburg Power Plant, and (ii) an option to acquire
all existing units of Delta’s Contra Costa Power Plant, and that will be
executed by Delta and PG&E, if at all, at the same time as the CC8 Asset
Transfer Agreement.

 

1.1.45                  “Delta Plant Option Application” has
the meaning set forth in Section 8.7.4.2(iv).

 

1.1.46                  “Delta Plant Option Petition for
Modification” has the meaning set forth in Section 8.7.4.2(iv).

 

1.1.47                  “Estimated Receivables” has the
meaning set forth in Section 5.3.1.

 

1.1.48                  “Execution Date” means the date this
Agreement has been executed by all Parties.

 

1.1.49                  “FERC” means the Federal Energy
Regulatory Commission.

 

1.1.50                  “FERC Allowances Determination” means
the FERC order directing the payment of Fuel Cost Allowances in the FERC Refund
Proceeding,

 

6

 

regardless
of whether such order is subject to requests for stay, rehearing or appeal,
provided that such order has not been stayed.

 

1.1.51                  “FERC Gaming Proceeding” means FERC
Docket Nos. EL03-158 and EL03-180, and any related appeals.

 

1.1.52                  “FERC Investigations” means the
investigations conducted by FERC in FERC Docket Nos. PA02-2, PA03-08, IN03-10
and the Physical Withholding Investigation, and any related appeals.

 

1.1.53                  “FERC Interest Determination” has the
meaning set forth in Section 6.5.7.

 

1.1.54                  “FERC Interest Rate” means the
interest rate calculated using FERC’s requirements under 18 C.F.R. § 35.19a(a)(2).

 

1.1.55                  “FERC Long-Term Contract Proceeding”
means FERC Docket Nos. EL02-60 and EL02-62, and any related appeals.

 

1.1.56                  “FERC MBR Proceedings” means FERC
Docket Nos. ER97-4166, ER99-1841, ER99-1842, ER99-1833, ER01-1265, ER0l-1267,
ER0l-1270, ER01-1278 and EL02-71, and any related appeals.

 

1.1.57                  “FERC Proceedings” means,
collectively, the FERC Refund Proceeding, the FERC Long-Term Contract
Proceeding, the FERC Gaming Proceeding, the FERC RMR Proceedings, the FERC MBR
Proceedings, and proceedings conducted before FERC in FERC Docket No. EL01-10,
and any related appeals.

 

1.1.58                  “FERC Receivables Determination” means
the FERC order issued in the FERC Refund Proceeding following the Preparatory
Rerun establishing the unpaid MAEM Receivables, regardless of whether such
order is subject to requests for stay, rehearing or appeal, provided that such
order has not been stayed.

 

1.1.59                  “FERC Refund Determination” means the
FERC order establishing the amount of refunds owed by the Mirant Parties to
Non-Settling Participants, regardless of whether such order is subject to
requests for stay, rehearing or appeal, provided that such order has not been
stayed.

 

1.1.60                  “FERC Refund Proceeding” means the
FERC refund proceeding conducted before FERC in FERC Docket Nos. EL00-95 et al., EL00-98 et al., ER01-889, ER01-1455, ER01-3013 and ER03-746, and any
related appeals.

 

1.1.61                  “FERC RMR Proceedings” means the
proceedings conducted before FERC in FERC Docket Nos. ER98-495, ER04-227 and
ER03-215, and any related appeals.

 

1.1.62                  “FERC Settlement Order” means the FERC
order granting the Required Approval with respect to FERC, in accordance with Section 2.4.1.

 

7

 

1.1.63                  “First Wraparound Agreement” means the
agreement between PG&E and Delta attached hereto as part of Exhibit B that
has a term of up to one year ending no later than December 31, 2005 (except
as it may be extended pursuant to Section 2.2.1), the effectiveness of
which is not subject to approval by the CPUC.

 

1.1.64                  “Follow-Up Implementing Agreements”
means the additional definitive agreements, if any, that implement and set
forth certain terms and conditions associated with transactions involving the
CC8 Assets and the granting of options with respect to assets associated with
the existing Contra Costa Power Plant and the existing Pittsburg Power Plant,
and that will be executed, if at all, after the Execution Date, including the
CC8 Asset Transfer Agreement and all agreements and documents included therein,
and the Delta Plant Option Agreement.

 

1.1.65                  “Fuel Cost Allowance” means the claim
for recovery of fuel costs incurred by generating units during the Refund
Period made pursuant to FERC orders in the FERC Refund Proceeding.

 

1.1.66                  “Governmental Authority” means any “governmental
unit” as defined in Section 101 of the Bankruptcy Code.

 

1.1.67                  “Implementing Agreements” means,
collectively, the Initial Implementing Agreements and, to the extent that they
have been executed by all required parties, the Follow-Up Implementing
Agreements.

 

1.1.68                  “Initial Implementing Agreements”
means the Wraparound Agreements and the CC8 Escrow Agreement, which are
additional definitive agreements that implement and set forth certain terms and
conditions of the Settlement and this Agreement in greater detail, and that
will be executed by the parties thereto as provided in Section 8.7.1 and Section 8.7.2.

 

1.1.69                  “January PX Transactions” has the
meaning set forth in Section 6.6.5.1.

 

1.1.70                  “Liquidating Trust” has the meaning
set forth in Section 3.7.

 

1.1.71                  “Lockyer Decision” has the meaning set
forth in Section 9.10.

 

1.1.72                “Lockyer v. FERC” means the proceeding described in Section 9.10.

 

1.1.73                  “Lockyer v. FERC Remand” means proceedings conducted by FERC pursuant to the remand resulting
from the Lockyer Decision, and any related appeals.

 

1.1.74                  “MAEM” means Mirant Americas Energy
Marketing, LP, a Delaware limited partnership.

 

8

 

1.1.75                  “MAEM Plan” means the Mirant Plan that
governs the disposition of MAEM’s estate.

 

1.1.76                  “MAEM Receivables” means all of MAEM’s
rights and claims to payment, whether direct or indirect, by, from or through
the PX and/or the CAISO for sales of energy and ancillary services into the
California power markets administered by the PX and/or the CAISO during the
period January 1, 2000 through June 20, 2001, including the amount of
interest on unpaid amounts of MAEM Receivables, the right to which attaches to
the MAEM Receivables, and before adjustment by FERC in the FERC Refund
Proceeding, but excluding receivables owed to or amounts owed by, the Mirant Parties
or other Debtors which are accounted for separately under the RMR Agreements.

 

1.1.77                  “MAG” means Mirant Americas
Generation, LLC, a Delaware limited liability company.

 

1.1.78                  “Market Participants” means those
entities that were CAISO Scheduling Coordinators or otherwise directly sold
energy to or purchased energy from the CAISO and/or the PX markets during part
or all of the Settlement Period, including the SWP. For purposes of clarity,
the term Market Participants as used herein does not include the CAISO or the
PX.

 

1.1.79                  “Mirant Bankruptcy Court” means the
United States Bankruptcy Court for the Northern District of Texas, Fort Worth
Division.

 

1.1.80                  “Mirant Bankruptcy Court Approval” has
the meaning set forth in Section 2.4.2.

 

1.1.81                  “Mirant-CERS Agreement” means that
certain Western Systems Power Pool Agreement effective as of February 1,
2001 (“WSPP Agreement”), the Letter Agreement for Transactions under the
WSPP Agreement dated April 24, 2001, and the Confirmation Agreement and
Additional Terms and Conditions dated May 22, 2001 (together with any exhibits,
schedules, confirmation letters and any written supplements thereto) in each
case between MAEM and CERS.

 

1.1.82                  “Mirant District Court” means the
United States District Court for the Northern District of Texas, Fort Worth
Division, including where such Court acts on matters as to which it has
withdrawn the reference from the Mirant Bankruptcy Court.

 

1.1.83                  “Mirant Parties” means, collectively,
Mirant Corporation, a Delaware corporation, Mirant Americas, Inc., a Delaware corporation,
MAEM, Mirant Americas Energy Marketing Investments, Inc., a Georgia
corporation, MAG, Mirant California Investments, Inc., a Delaware corporation,
Mirant California, LLC, a Delaware limited liability company, Delta, Potrero,
Mirant Special Procurement, Inc., a Delaware corporation, Mirant Services, LLC,
a Delaware limited liability company, and Mirant Americas Development, Inc., a
Georgia corporation.

 

1.1.84                  “Mirant Plans” means, collectively,
Debtors’ plans of reorganization under the Bankruptcy Code.

 

9

 

1.1.85                  “Mirant Refund Escrow” has the meaning
set forth in Section 6.1.

 

1.1.86                  “Mitigation” means the obligation to
pay or account for refunds, adjustments, allowances or charges, as determined
in the FERC Refund Proceeding.

 

1.1.87                  “Net Payers” has the meaning set forth
in Section 6.4.1.

 

1.1.88                  “Net Refund Recipient” has the meaning
set forth in Section 6.5.2.

 

1. 1.89               “Non-Settling Participants” means
Market Participants that are not Parties, and that do not elect to become bound
by this Agreement in order to participate in the Settlement pursuant to Article XI.

 

1.1.90                  “Official Committees” means the
official committees appointed in the Bankruptcy Proceedings by the United
States trustee pursuant to Section 1102 of the Bankruptcy Code.

 

1.1.91                  “OMOI” means FERC’s Office of Market
Oversight and Investigations.

 

1.1.92                  “Original CPUC CC8 Decision” has the
meaning set forth in Section 1.1.32(iv).

 

1.1.93                  “Original CPUC Delta Plant Option Decision”
has the meaning set forth in Section 8.7.4.2(iv).

 

1.1.94                  “Original Purchase and Sale Agreement”
has the meaning set forth in Section 4.2.1.

 

1.1.95                  “Party” and “Parties” have the
meanings set forth in the preamble to this Agreement.

 

1.1.96                  “PG&E” means Pacific Gas and
Electric Company, a California corporation.

 

1.1.97                  “PG&E Bankruptcy Court” means the
United States District Bankruptcy Court for the Northern District of
California.

 

1.1.98                  “PG&E Plan Escrow” means the
escrow established by PG&E pursuant to PG&E’s plan of reorganization
and other ancillary agreements for payment of its outstanding debts to the PX
and to the CAISO.

 

1.1.99                  “Physical Withholding Investigation”
means FERC’s undocketed fact-finding investigation regarding alleged
withholding by entities that controlled generation selling into the California
wholesale energy and ancillary services markets.

 

10

 

1.1.100            “Plan” means a plan of reorganization
under the Bankruptcy Code.

 

1.1.101            “Plan Settlement Solution” has the
meaning set forth in Section 2.8.2.

 

1.1.102            “Post-January 17 Period” means
the period January 18, 2001 through June 20, 2001.

 

1.1.103            “Potrero” means Mirant Potrero, LLC,
Delaware limited liability company.

 

1.1.104            “Potrero Plan” means the Mirant Plan
that governs the disposition of Potrero’s estate.

 

1.1.105            “Pre-January 18 Period” means the
period October 2, 2000 through January 17, 2001.

 

1.1.106          “Pre-October Period” means the period January 1, 2000
through October 1, 2000.

 

1.1.107            “Preparatory Rerun” means the CAISO
and PX settlements rerun process for the period October 2, 2000 through June 20,
2001, conducted pursuant to FERC Docket No. ER03-746, before and without regard
to the calculation of any refunds or mitigation.

 

1.1.108            “Proposed CPUC CC8 Decision” has the
meaning set forth in Section 1.1.32(iv).

 

1.1.109            “Proposed CPUC Delta Plant Option Decision”
has the meaning set forth in Section 8.7.4.2(iv).

 

1.1.110            “PX” means the California Power
Exchange Corporation, a California public benefits corporation.

 

1.1.111            “PX Settlement
Clearing Account” means the account maintained and held by the PX
containing funds relating to the PX and CAISO markets that have not yet been
distributed.

 

1.1.112            “Receivables Excess”
has the meaning set forth in Section 6.6.1.

 

1.1.113            “Receivables
Shortfall” has the meaning set forth in Section 6.6.1.

 

1.1.114            “Refund Excess”
has the meaning set forth in Section 6.6.2.

 

1.1.115            “Refund Period”
means the period October 2, 2000 through June 20, 2001.

 

11

 

1.1.116            “Refund Shortfall”
has the meaning set forth in Section 6.6.2.

 

1.1.117            “Related Parties”
means, collectively, as to any Party entitled to receive a release of claims or
other rights in accordance with this Agreement, such Party’s present and former
managers (to the extent that such managers are individuals), directors,
officers, employees, and agents, and as further specified in Section 9.1.
Each Debtor is a Related Party as to any Mirant Party.

 

1.1.118            “Required Approvals”
has the meaning set forth in Section 2.4.1.

 

1.1.119            “RMR Agreements”
means, collectively (i) that certain Must-Run Service Agreement dated as of June 1,
1999, between Southern Energy Potrero, L.L.C. (now known as Mirant Potrero,
LLC) and the CAISO pertaining to the facility commonly known as the
Potrero Power Plant, as amended from time to time, (ii) that certain Must-Run
Service Agreement dated as of June 1, 1999, between Southern Energy Delta,
L.L.C. (now known as Mirant Delta, LLC) and the CAISO pertaining to the facility
commonly known as the Contra Costa Power Plant, as amended from time to time,
and (iii) that certain Must-Run Service Agreement dated June 1, 1999,
between Southern Energy Delta, L.L.C. (now known as Mirant Delta, LLC) and the
CAISO pertaining to the facility commonly known as the Pittsburg Power Plant,
as amended from time to time. Each of the foregoing agreements also may be
referred to individually herein as an “RMR Agreement.”

 

1.1.120            “RMR Claim” has
the meaning set forth in Section 8.5.

 

1.1.121            “RMR Claim Plan
Securities” has the meaning set forth in Section 8.5.

 

1.1.122            “RMR Claim
Shortfall” has the meaning set forth in Section 8.5.

 

1.1.123            “RMR Claim
Shortfall Notice” has the meaning set forth in Section 8.5.

 

1.1.124            “RMR Order” has
the meaning set forth in Section 8.1.

 

1.1.125            “RSBA” has the
meaning set forth in Section 8.2.

 

1.1.126            “Rule 9019
Supplemental Solution” has the meaning set forth in Section 2.4.2.

 

1.1.127            “SCE” means
Southern California Edison Company, a California corporation.

 

1.1.128            “SDG&E”
means San Diego Gas & Electric Company, a California corporation.

 

12

 

1.1.129            “Second Wraparound
Agreement” means the agreement between PG&E and Delta attached hereto
as part of Exhibit B that has a term beginning on January 1, 2006 (or, if
the First Wraparound Agreement is extended pursuant to Section 2.2.1,
beginning on January 1, 2007) and continuing through December 31,
2012, and that shall not be effective until the CPUC has provided the Required
Approval in accordance with Sections 2.4.1 and 2.5.

 

1.1.130            “Settlement”
has the meaning set forth in Recital F to this Agreement.

 

1.1.131            “Settlement
Effective Date” has the meaning set forth in Section 2.3.

 

1.1.132            “Settling
Participants” means the California Parties and the Additional Settling
Participants.

 

1.1.133            “Settlement Period”
means the period January 1, 1998 through July 14, 2003. This
Settlement Period reflects the unique circumstances presented by the Mirant
Parties’ Bankruptcy Proceedings.

 

1.1.134            “SO2 Claim” has
the meaning set forth in Section 8.6.

 

1.1.135            “SO2 Claim Plan
Securities” has the meaning set forth in Section 8.6.

 

1.1.136            “SO2 Claim
Shortfall” has the meaning set forth in Section 8.6.

 

1.1.137            “SO2 Claim
Shortfall Notice” has the meaning set forth in Section 8.6.

 

1.1.138            “Stay Period”
has the meaning set forth in Section 10.1.

 

1.1.139            “SWP” means the
California Department of Water Resources, acting in its capacity as the State
Water Resources Development System and the State Water Project.

 

1.1.140            “SWP Side Letter”
has the meaning set forth in Section 2.2.2.

 

1.1.141            “Termination Event”
has the meaning set forth in Section 2.8.1.

 

1.1.142            “Unsatisfied Bankruptcy
Condition” has the meaning set forth in Section 8.9.l(i).

 

1.1.143            “Unsettled Mirant
Refund Amounts” has the meaning set forth in Section 6.9.4

 

1.1.144            “Unsettled
Participant Refund Amount” has the meaning set forth in Section 6.9.4.1.

 

13

 

1.1.145            “Voting Support
Requirements” has the meaning set forth in Section 3.3.3.2.

 

1.1.146            “Wraparound
Agreements” means, collectively, the First Wraparound Agreement and the
Second Wraparound Agreement.

 

1.1.147            “WSPP Agreement”
has the meaning set forth in Section 1.1.81.

 

1.2                                 Rules of Interpretation. The following rules of interpretation shall
apply to this Agreement, including all Exhibits.

 

1.2.1                        Singular;
Plural. Unless the context otherwise requires, words used in this Agreement
shall include in the singular number the plural and in the plural number the
singular.

 

1.2.2                        Self
Reference; Incorporation by Reference; Cross Reference. The words “hereof,”
“herein,” and “hereunder” and words of similar import when used in this
Agreement, including the Exhibits, shall, unless otherwise specified, refer to
this Agreement as a whole and not to any particular Article, Section, Exhibit
or provision of this Agreement, and all references to Articles, Sections or
Exhibits shall be to all subparts of such Articles, Sections or Exhibits. All
Exhibits shall be deemed to be incorporated by reference and made a part of
this Agreement.

 

1.2.3                        Inclusive
of Permitted Successors. Unless otherwise stated, any reference in this
Agreement to any person shall include its permitted successors and assigns and,
in the case of any Governmental Authority, any entity succeeding to its functions
and capabilities.

 

1.2.4                        Gender.
Whenever the context may require, any pronoun used herein shall include the
corresponding masculine, feminine and neuter forms.

 

1.2.5                        Inclusive
References. When used herein, the words “include,” “includes” and “including”
shall not be limiting and shall be deemed in all instances to be followed by
the phrase “without limitation.”

 

1.2.6                        Conflicts.
In the event of any conflict between the terms of this Agreement and any
Implementing Agreement, the terms of such Implementing Agreement shall, as
among the parties to such Implementing Agreement only, control over the
corresponding provisions of this Agreement; provided, however, that the provisions
of Section 1.1.32, Section 2.5, Section 2.6, Section 2.8.4
and Article VIII of this Agreement shall control over any conflicting
provisions contained in any Implementing Agreement, and further provided that
nothing in any Implementing Agreement may effect an amendment to this Agreement.

 

14

 

ARTICLE II

BINDING
OBLIGATIONS; CONDITIONS TO EFFECTIVENESS;

TERMINATION

 

2.1                                 Binding Obligations.

 

2.1.1                        Parties.
 Except (i) as provided in Section 2.2,
under which various of the Parties’ rights and obligations hereunder are
subject to the occurrence of the Settlement Effective Date, and (ii) as to
OMOI, whose obligations under this Agreement shall not be effective until the
issuance of the FERC Settlement Oder, this Agreement shall be a binding
obligation of all Parties immediately upon the Execution Date; provided,
however, that prior to approval of this Agreement by the Mirant Bankruptcy
Court and the PG&E Bankruptcy Court, or the granting by the Mirant Bankruptcy
Court and the PG&E Bankruptcy Court of authorization for the Mirant Parties
and PG&E, respectively, to enter into this Agreement, (a) the obligations
of the Mirant Parties and PG&E hereunder shall be limited to those matters
for which no prior approval of the Mirant Bankruptcy Court and the PG&E
Bankruptcy Court, respectively, is required, and (b) the other Parties shall be
bound to this Agreement only to the extent that all of the Mirant Parties and
PG&E are bound to this Agreement.

 

2.1.2                        Additional
Settling Participants. For purposes of clarity, each Additional Settling
Participant shall be bound to the terms of the Settlement and this Agreement as
a Settling Participant as of the time set forth in Article XI, but shall
not be a party to this
Agreement.

 

2.1.3                        Cooperation.
Until such time as (i) the CAISO and the PX have been directed by FERC to take
and have taken the actions specified in this Agreement as being applicable to
them through the effect of the FERC Settlement Order, whether by effect of the
FERC Settlement Order or otherwise, and (ii) FERC has approved the Settlement
and this Agreement by issuing the FERC Settlement Order, the Parties shall use
reasonable efforts to persuade the CAISO and the PX each (a) to cooperate with
the Parties to facilitate the occurrence of the Settlement Effective Date at
the earliest feasible time, including by joining in any stay or extension
thereof that may be requested by the Parties., and in any actions taken by the
Parties to enable the Mirant Bankruptcy Court to approve the Bankruptcy Rule
9019 Motion, any Rule 9019 Supplemental Solution, or any Plan Settlement
Solution, in each case in accordance with the terms hereof, and (b) to refrain
from any action that would be inconsistent with this Agreement.

 

2.2                                 Conditions Precedent Certain Obligations.

 

2.2.1                        Occurrence
of the Settlement Effective Date. The obligation of any Party to assign
receivables, agree to the designation of allowed claims (other than for voting
and feasibility purposes as provided in Section 5.1.1.2 and Section 8.12),
transfer assets or take any actions in connection with the planned transfer of
assets, make payments or deposit or transfer funds, perform any of its
obligations under any Implementing Agreement other than the First Wraparound
Agreement, assume liabilities or release or withdraw liabilities, defenses,
claims or proofs of claim hereunder, or waive

 

15

 

rights to file claims, appeals, or rehearing requests, and all
releases, waivers, and withdrawals of claims and defenses specified herein, as
well as any other undertakings under Article IX, shall not be effective
until the occurrence of the Settlement Effective Date. For clarity, this Section 2.2.1
shall not delay the effectiveness of the Parties’ obligations to take the
actions specified in Sections 3.2 and 3.3 to facilitate the Mirant Bankruptcy
Court’s approval of the Bankruptcy Rule 9019 Motion, any Rule 9019 Supplemental
Solution or any Plan Settlement Solution, all of which shall be effective as of
the Execution Date. Notwithstanding anything to the contrary in this Agreement,
if the Settlement Effective Date has not occurred on or before December 31,
2005, and no Termination Event has occurred, then (i) the First Wraparound
Agreement shall be extended through December 31, 2006, (ii) the parties to
the First Wraparound Agreement shall seek any necessary FERC authorization to
extend the 2005 RMR FERC Settlement through December 31, 2006, and (iii)
the Second Wraparound Agreement shall not become effective until January 1,
2007, provided that the CAISO has agreed to such extension of the 2005 RMR FERC
Settlement and provided further that this Section 2.2.1 shall not cause
any extension of the First Wraparound Agreement if the First Wraparound
Agreement has terminated pursuant to its terms prior to December 31, 2005
or if FERC does not authorize the extension of the 2005 RMR FERC Settlement
through December 31, 2006. For the avoidance of doubt, if a Termination
Event occurs after December 31, 2005, and the First Wraparound Agreement
has been extended in accordance with the preceding sentence, then the First
Wraparound Agreement shall remain in effect through December 31, 2006, but
the Second Wraparound Agreement shall not become effective.

 

2.2.2                        SWP
Side Letter. In addition to the condition precedent specified in Section 2.2.1,
the obligations of the Mirant Parties as specified in Section 2.2.1 shall
be effective only if the SWP has executed and delivered a letter agreement in
the form attached as Exhibit I in which the SWP has committed to be bound by
the terms of the Settlement and this Agreement as an Additional Settling
Participant (the “SWP Side Letter”). CERS shall use reasonable efforts
to obtain a supplemental letter agreement executed by SWP that (i) requires SWP’s
prompt opt-in to this Agreement as an Additional Settling Participant, (ii)
provides for a stay of litigation while SWP’s opt-in is pending that is consistent
with the stays to which CERS has agreed, and (iii) limits SWP’s claims for
voting and feasibility purposes in the Bankruptcy Proceedings to SWP’s share
under the Allocation Matrix.

 

2.3                                 Settlement Effective Date. The “Settlement Effective Date”
shall occur on the first day on which all of the Required Approvals with
respect to this Agreement and the Initial Implementing Agreements have been
entered, issued or otherwise obtained and are in full force and effect and not
then stayed, notwithstanding that a request for stay, rehearing or appeal may
then be pending as to one or more of the Required Approvals; provided, however,
that the First Wraparound Agreement shall be effective upon its execution to
the maximum extent permitted by applicable law.

 

16

 

2.4                                 Required Approvals.

 

2.4.1                        List.
The Settlement made pursuant to this Agreement shall be subject to approval by
the Mirant Bankruptcy Court, the PG&E Bankruptcy Court as to PG&E, FERC
in the FERC Settlement Order, and the CPUC (except with respect to the First
Wraparound Agreement), of all terms and conditions of this Agreement and the Initial
Implementing Agreements in their entirety without material change or condition unacceptable
to any adversely affected Party (collectively, the “Required Approvals”
and each a “Required Approval”). If any Required Approval (including the
Required Approval from the Mirant Bankruptcy Court), or, if the Settlement
Effective Date has not then occurred, any order resulting from a request for
rehearing or an appeal of any of the Required Approvals, includes a material
change or condition that adversely affects any Party, then each Party so
affected shall communicate its consent or lack of consent to such change or
condition in writing to the other Parties within five (5) Business Days after
the date on which the decision, order, or ruling constituting the Required
Approval, or any order resulting from a request for rehearing or appeal of any
Required Approval, was issued. The failure of an affected Party to provide
written notice in accordance with the foregoing sentence shall constitute
acceptance by such Party of the material change or condition.

 

2.4.2                        For the
avoidance of doubt, the Mirant Bankruptcy Court shall be deemed to have given
the Required Approval (the “Mirant Bankruptcy Court Approval”) upon the
earliest to occur of: (i) the date on which an order is entered by it approving
the Bankruptcy Rule 9019 Motion in a manner that meets the specifications set
forth in Section 2.4.1; (ii) if a Rule 9019 Supplemental Solution is
initiated, the date on which such Rule 9019 Supplemental Solution results in an
approval that meets the specifications set forth in Section 2.4.1; or
(iii) the confirmation date of Mirant Plans that fully incorporate the
Settlement and this Agreement in accordance with Section 3.3 if the Settlement
or any portion of the Settlement is approved as a result of a Plan Settlement Solution.
As used herein, the term “Rule 9019 Supplemental Solution” means any action,
motion or combination thereof that the Parties agree should be taken or filed
in addition to the Bankruptcy Rule 9019 Motion for purposes of seeking the
Required Approval from the Mirant Bankruptcy Court, and to address any
deficiencies identified by the Mirant Bankruptcy Court in its order or decision
on the Bankruptcy Rule 9019 Motion or any concerns of the Mirant Bankruptcy
Court regarding the Bankruptcy Rule 9019 Motion that are perceived by the
Parties, and includes any supplemental, renewed or amended motion, the form of
any pleadings to be filed, and the process to be followed. For the avoidance of
doubt, the Mirant Bankruptcy Court Approval may be achieved in whole or in part
by an order of the Mirant District Court. The Parties agree to negotiate in
good faith to agree upon a Rule 9019 Supplemental Solution, if necessary, and
to pursue any Rule 9019 Supplemental Solution that may be agreed upon.

 

2.4.3                        Division
of Responsibilities. The following Parties shall be responsible for
preparing and filing the filings, applications and other documentation necessary
to obtain the Required Approvals, which filings, applications and other documentation
shall be in form and substance satisfactory, in the reasonable exercise of their
judgment, to all affected Parties: (i) the Mirant Parties as to the Mirant
Bankruptcy

 

17

 

Court
Approval, as further specified in Sections 3.2 and 3.3; (ii) PG&E as to the
Required Approval from the PG&E Bankruptcy Court; and (iii) the Mirant
Parties and the California Parties as to the Required Approval from FERC. All
Parties shall cooperate in good faith expeditiously to prepare, approve and
file all such filings, applications and other documentation as soon as
reasonably practicable following the Execution Date. Immediately after the
Execution Date, the Parties shall, at their own cost and expense, expeditiously
seek the Required Approvals and shall take all other actions as reasonably
necessary to achieve the Settlement Effective Date, except that nothing in this
Agreement shall obligate any Party to appeal an order that fails to approve
this Agreement.

 

2.5                                 CPUC Required Approval. The CPUC’s execution of this Agreement as a
Party (i) shall constitute the Required Approval from the CPUC for all purposes
of this Agreement and the Initial Implementing Agreements, (ii) shall
constitute authorization and permission for SCE to consummate the Settlement
and perform its obligations under this Agreement, (iii) shall constitute
authorization for PG&E either to (a) acquire and take ownership of the CC8
Assets and to effectuate the other ancillary transactions included or intended
to be addressed in the CC8 Asset Transfer Agreement, whether or not the Delta
Plant Option Agreement is executed, upon the occurrence of the CC8 Transfer
Approval Date if such date should occur, or (b) receive the CC8 Alternative
Consideration in lieu of the CC8 Assets and the other ancillary transactions
included or intended to be addressed in the CC8 Asset Transfer Agreement as
reasonable consideration in full payment and satisfaction of the claims and
liabilities that were intended to be satisfied by the transfer of the CC8
Assets and the other ancillary transactions included or intended to be
addressed in the CC8 Asset Transfer Agreement, consistent with Section 8.10,
(iv) shall not in any way affect or limit the CPUC’s review of, or
determination with respect to, the consummation of the transactions included in
the CC8 Asset Transfer Agreement or the Delta Plant Option Agreement, and
nothing herein shall be viewed as a pre-judgment or predetermination by the CPUC
of such transactions, and (v) shall constitute both authorization for PG&E
to enter into the Second Wraparound Agreement and approval of the reasonableness
of PG&E entering into the Second Wraparound Agreement. If the CPUC subsequently
determines, for any reason, not to approve PG&E’s acquisition of the CC8
Assets, or not to authorize PG&E to consummate any of the ancillary
transactions included or intended to be addressed in the CC8 Asset Transfer
Agreement, or otherwise fails to grant such approval and authorization, then
the Settlement, this Agreement and the Initial Implementing Agreements shall be
preserved in full force and effect as to all aspects hereof and thereof and a
CC8 Triggering Event shall be deemed to have occurred. Notwithstanding anything
to the contrary in this Agreement, (1) the Settlement, this Agreement and the
Initial Implementing Agreements shall be preserved in full force and effect as
to all aspects hereof and thereof regardless of whether the CPUC approves the
Delta Plant Option Agreement or PG&E exercises the options that are
intended to be provided for therein, (2) if the CPUC approves the CC8 Asset
Transfer Agreement but not the Delta Plant Option Agreement, no CC8 Triggering
Event will be deemed to have occurred and the Delta Plant Option Agreement
shall be terminated without further obligation or liability of any party
thereto, and (3) in no event shall PG&E be entitled (A) to both acquire the
CC8 Assets and receive the CC8 Alternative Consideration, or (B) to both
acquire the CC8 Alternative Consideration and receive the options intended to
be provided for in the Delta Plant Option Agreement,

 

18

 

including
in the event that the CC8 Asset Transfer Agreement is not executed or is
rejected but the Delta Plant Option Agreement is executed and approved. For the
avoidance of doubt, the Parties agree that (x) the consideration received by
the Parties under this Agreement is adequate and reasonable even if the Delta
Plant Option Agreement is not executed or never becomes effective, or if the
options granted thereunder are not exercised, and (y) neither the failure of
the applicable Parties to execute the Delta Plant Option Agreement, nor
termination of the Delta Plant Option Agreement after it is executed, in each
case for any reason, will result in any failure of consideration for purposes
of the Settlement or this Agreement.

 

2.6                                 CC8 Transfer Approval Date. The occurrence of the CC8 Transfer Approval
Date shall be a condition precedent to the respective obligations of Delta, Mirant
Special Procurement, Inc. and PG&E to effectuate the actual transfer and assignment
of the CC8 Assets under and in accordance with, and to consummate the other
ancillary transactions included or intended to be addressed in, the CC8 Asset Transfer
Agreement, but shall not otherwise be a condition to the effectiveness of this Agreement
or any Initial Implementing Agreement, or otherwise affect the rights or obligations
of any Party, including any Mirant Party or PG&E, hereunder or thereunder. If
PG&E receives the CC8 Alternative Consideration pursuant to the terms of
this Agreement, such CC8 Alternative Consideration shall be in lieu of any and
all rights to the CC8 Assets and the consummation of all other ancillary
transactions included or intended to be addressed in the CC8 Asset Transfer
Agreement.

 

2.7                                 FERC Settlement Order.

 

2.7.1                        Effect.
FERC’s approval of the Settlement and this Agreement through the issuance of
the FERC Settlement Order shall constitute FERC’s direction:

 

(i)                                     to
each of the CAISO and the PX, as of the Settlement Effective Date, to (a)
implement this Agreement in accordance with its terms, and to refrain from
taking any actions that are inconsistent herewith, (b) conform their books and
records to reflect the terms of this Agreement, as specified in Section 6.9,
(c) waive, release and withdraw with prejudice all claims and proofs of claim
filed by them as to any Debtor in the Bankruptcy Proceedings that seek to
recover amounts or otherwise obtain relief on behalf of or for the benefit of
any Settling Participant with respect to any claim that is duplicative of the
claims released in this Agreement or that, with respect to any Settling
Participant, otherwise pertains to conduct, acts or omissions that are
encompassed within the releases set forth in this Agreement, and (d) release
and return all collateral provided by any Mirant Party, and forego or otherwise
withdraw all requests for additional collateral from any Mirant Party, in each
case to the extent that such collateral or request for collateral applies to
liabilities that are released by this Agreement, or involves an amount of
collateral that is calculated taking into account such liabilities;

 

(ii)                                  without
limiting the generality of subpart (i)(c) above, to the CAISO, as of the
Settlement Effective Date, to waive, release and withdraw

 

19

 

with prejudice Proof of Claim Nos. 7203, 7205, 7801 and 7836 in the
Bankruptcy Proceedings, and all other claims arising out of or relating to the
RMR Agreements with respect to all periods prior to and including September 30,
2004, whether known or unknown, contingent, fixed or inchoate, whether
liquidated or unliquidated and however and whenever arising;

 

(iii)                               to
the PX (a) that the PX shall, effective as of the Settlement Effective Date,
(1) assign to each Non-Settling Participant any and all rights and claims that
the PX holds with respect to claims asserted in the Bankruptcy Proceedings on
behalf of such Non-Settling Participant, with the effect that such assignee
Non-Settling Participants shall be entitled to assume the positions established
by the PX in the Bankruptcy Proceedings, subject to all of the rights, defenses
and offsets that the Mirant Parties and other Debtors may have against the PX
and directly as to such Non-Settling Participants, (2) be relieved of any
further obligation to prosecute claims in the Bankruptcy Proceedings on behalf
of Non-Settling Participants, (3) file notices of assignment in the Bankruptcy
Proceedings in compliance with Bankruptcy Rule 3001 (e) and otherwise
effectuate the transfer of the rights and claims that are required to be
assigned pursuant to this subpart (a), and (4) cease all activities and actions
associated with prosecuting or litigating claims on behalf of any Non-Settling
Participant in the Bankruptcy Proceedings unless and until the PX has received
an executed agreement from such Non-Settling Participant confirming that the
Non-Settling Participant will assume and reimburse the PX for all costs and
expenses (including attorneys’ fees) associated with such activities and
actions by the PX, and (b) that after the entry of the FERC Settlement Order no
Market Participants (including any Mirant Party) other than the Non-Settling
Participants shall be liable for any costs or expenses (including attorneys’
fees) of the PX incurred thereafter that are associated with prosecuting or
litigating claims on behalf of the Non-Settling Participants in the Bankruptcy
Proceedings, or otherwise with participating in the Bankruptcy Proceedings, and
among the Non-Settling Participants, the only Non-Settling Participants that
shall be liable for such PX costs and expenses (including attorneys’ fees) are
those Non-Settling Participants that notify the PX in writing of their
agreement to pay such PX costs and expenses (including attorneys’ fees);

 

(iv)                              that
all claims and proofs of claim filed by FERC as to any Debtor in the Bankruptcy
Proceedings that seek to recover payments, impose penalties, or otherwise
obtain relief based on or arising out of conduct, acts or omissions that are
the subject of the releases set forth in this Agreement, or that otherwise
would be waived, released and/or withdrawn under this Agreement if asserted by
a Settling Participant, shall be deemed to be waived, released and withdrawn
with prejudice effective as of the Settlement Effective Date; and

 

(v)                                 that
all FERC Investigations insofar as they relate to alleged conduct, acts or
omissions by any Mirant Party shall be terminated and extinguished as of the
Settlement Effective Date without any penalty or

 

20

 

consequence to, or other obligation or liability of, any Mirant Party
or its Related Parties that is not provided for in this Agreement.

 

2.7.2                        Duplicative
Claims. The Parties agree that all claims asserted in proofs of claim filed
by the CAISO and the PX as of the Settlement Effective Date against any Mirant
Party or other Debtor in the Bankruptcy Proceedings shall be deemed to be
duplicative of the claims released in this Agreement except (i) as such claims
relate specifically to services (including the PX wind-up activities such as
those at issue in FERC Docket No. ER02-2234) provided by the CAISO or the PX to
a Mirant Party for which the CAISO or the PX is entitled to receive a payment
for its own account and to cover its own costs and expenses, as specified in
the FERC-approved tariff of the CAISO or the PX, and which remain unpaid, (ii)
as specified in Exhibit A, or (iii) to the extent that such claim is found to
be for the benefit of a Non-Settling Participant.

 

2.8                                 Termination and Effect.

 

2.8.1                        Termination
Events. If the Settlement Effective Date has not yet occurred, and unless
otherwise agreed to by the Parties in writing, the Settlement and this
Agreement shall terminate (each of the events specified in subparts (i)-(vii)
below shall be a “Termination Event”):

 

(i)                                     at
the option of any Party, if FERC issues an order denying approval of the
Settlement or this Agreement in whole or in part;

 

(ii)                                  at
the option of any Party, if, except under the circumstances specified in Section 2.8.2,
the Mirant Bankruptcy Court enters an order denying the Bankruptcy Rule 9019
Motion in whole or in part;

 

(iii)                               at
the option of any Party, if the Mirant Bankruptcy Court enters an order denying
confirmation of Mirant Plans that incorporate a Plan Settlement Solution;

 

(iv)                              at
the option of any Party, if the Settlement Effective Date has not occurred by March 31,
2006;

 

(v)                                 at
the option of the California Parties, if the Mirant Parties at any time become
proponents of, or advocate in any court of competent jurisdiction the confirmation
of, Mirant Plans that do not fully incorporate the terms of the Settlement and
this Agreement, including the requirements of Section 3.3.3, in accordance
with the terms hereof;

 

(vi)                              at
the option of the Mirant Parties, if any California Party becomes a proponent
of, or advocates in any court of competent jurisdiction the confirmation of,
Mirant Plans that do not fully incorporate the terms of the Settlement and this
Agreement in accordance with the terms hereof, or (provided that the Mirant Parties
are in compliance with their obligations under Sections 3.3.3.2(i) and (ii)) if
any California Party opposes or objects to Mirant Plans in violation of the
Voting Support Requirements; or

 

21

 

(vii)                           at the
option of the California Party against whom an action referenced in subparts
(a)-(d) below is filed if, at any time prior to the later to occur of the
Settlement Effective Date or the effective date of the Mirant Plan(s)
applicable to any Mirant Parties in which any aspect of the Settlement or this
Agreement is approved or implemented, and provided that another Termination
Event has not then occurred, any party has commenced any action or proceeding
in the Bankruptcy Proceedings against a California Party (a) under any of
sections 542, 544, 545, 547, 548, 549, or 553 of the Bankruptcy Code to avoid
any alleged transfer to or seek turnover from such California Party, (b) under section 550
of the Bankruptcy Code to recover any such alleged transfer, (c) under section 510(c)
of the Bankruptcy Code to subordinate any claim of such California Party, or
(d) under section 502(d) of the Bankruptcy Code to disallow any claim of
any California Party based upon any alleged avoidable transfer and, if
commenced by a party other than one of the Debtors, such action is not
dismissed within 90 days. Any statute of limitations, defense of laches or
other deadline for the filing of any actions or proceedings referenced in
subparts (a) through (d) above shall be extended and tolled until sixty (60)
days after the occurrence of any Termination Event, and the Mirant Parties
agree that they will not seek a further or other extension or tolling of their
affected rights with respect to the California Parties beyond or in addition to
that provided for in this sentence. If any action or proceeding referenced in
subparts (a) through (d) above is commenced by a party other than a Debtor, or
if any party other than a Debtor seeks authority to commence such an action or
proceeding, the Mirant Parties agree to oppose any such action, proceeding or
request, provided that a Termination Event has not occurred. Alternatively, if
the Settlement Effective Date does not occur or any Termination Event occurs,
the Parties intend that no Mirant Party or any other Debtor shall be prejudiced
as to any such claims by reason of such delay by the Mirant Parties in the
enforcement of any such claims in the Bankruptcy Proceedings. Notwithstanding
the foregoing, nothing herein shall be deemed to release, waive or adversely
affect any right or defense by any Mirant Party as to any right of setoff or
recoupment claimed by any California Party (or any other person or entity),
including without limitation under Section 553, that is not released
hereunder.

 

Any
Party declaring a Termination Event under this Section 2.8.1 shall provide
written notice to all other Parties. Any Termination Event so declared shall
not be effective until five (5) Business Days after all Parties have received
such notice.

 

2.8.2                        Rule
9019 Supplemental Solution; Plan Settlement Solution. Notwithstanding
anything to the contrary in this Agreement, if the Mirant Bankruptcy Court
denies or does not approve the Bankruptcy Rule 9019 Motion in whole or in part,
then a Termination Event shall not be deemed to have occurred as long as the
Mirant Bankruptcy Court’s oral or written order or associated decision does not
deny the Settlement in whole or in part on grounds that the Settlement is not
fair and equitable and in the best interests of the Mirant Parties’ respective
estates under applicable Fifth Circuit precedent governing approval of
compromises under Bankruptcy Rule 9019; and either: (i) the Parties agree to
seek a Rule 9019 Supplemental Solution; or (ii) the Mirant Parties (a) file
disclosure statements with respect to Mirant Plans or amendments to Mirant
Plans within a reasonable time under the circumstances (including, when

 

22

 

appropriate,
in light of the Mirant Parties’ independent negotiations with the Official
Committees and other key creditors in the Bankruptcy Proceedings) after the
later to occur of the entry of the Mirant Bankruptcy Court’s order on the
Bankruptcy Rule 9019 Motion, or its order on any motion seeking a Rule 9019
Supplemental Solution, but in no event later than June 1, 2005, that seek
Mirant Bankruptcy Court Approval of the Settlement, or any portion of the
Settlement for which approval was not obtained through the Bankruptcy Rule 9019
Motion or any motion seeking the Rule 9019 Supplemental Solution, and (b)
thereafter at all times pursue approval of such Mirant Plans in a reasonable
manner under the circumstances, considering the various other constituencies in
the Bankruptcy Proceedings and the need to obtain approval and implementation
of Mirant Plans for all of the Debtors (a “Plan Settlement Solution”).

 

2.8.3                        Effect
of Termination. Upon the occurrence of a Termination Event, (i) this
Agreement, except for the provisions set forth in this Section 2.8.3, in Section 2.8.1(vii)
(but only with respect to the extension and tolling of the statute of limitations,
defense of laches or other deadline for filing any action or proceeding referenced
in subparts(a)-(d) thereof, as such extension and tolling is provided for therein),
and in Sections 2.8.4, 4.4, 8.3 and 8.4 (including the 2005 RMR FERC Settlement
as to calendar year 2005, and as to calendar year 2006 if the 2005 RMR FERC Settlement
is extended pursuant to Section 2.2.1), and all Implementing Agreements (except
the First Wraparound Agreement), shall be null and void and of no further force
or effect, with all rights, claims, defenses, duties and obligations of the
Parties thereafter restored as if the Agreement and such Implementing
Agreements had never been executed, and (ii) no Party shall have any further
obligation hereunder with respect to any Initial Implementing Agreements or
Follow-Up Implementing Agreements that have not yet been executed.

 

2.8.4                        First
Wraparound Agreement and 2005 RMR FERC Settlement. Notwithstanding anything
to the contrary herein, the provisions of Sections 8.3 and 8.4, including the
2005 RMR FERC Settlement as to calendar year 2005, and as to calendar year 2006
if the 2005 RMR FERC Settlement is extended pursuant to Section 2.2.1, and
the First Wraparound Agreement shall not be affected by a termination of this
Agreement or any other Implementing Agreement, and the rights, obligations,
covenants and agreements of each of the Mirant Parties, PG&E and the CAISO
as set forth in Sections 8.3 and 8.4, including the 2005 RMR FERC Settlement as
to calendar year 2005, and as to calendar year 2006 if the 2005 RMR FERC
Settlement is extended pursuant to Section 2.2.1, and under the First
Wraparound Agreement shall continue in full force and effect in accordance with
the terms thereof.

 

23

 

ARTICLE III

IMPLEMENTATION

 

3.1                                 Implementing Agreements. Certain terms of the Settlement and this Agreement
shall be further memorialized in, and implemented in accordance with, the Implementing
Agreements; provided, however, that the relevant Parties’ failure to execute
the Follow-Up Implementing Agreements shall not have any effect on the effectiveness
of the Settlement, this Agreement or any Initial Implementing Agreement.

 

3.2                                 Mirant Bankruptcy Court Approval.

 

3.2.1                        Bankruptcy
Rule 9019 Motion. The Mirant Parties shall prepare and file a motion with
the Mirant Bankruptcy Court pursuant to Bankruptcy Rule 9019, which motion and
related pleadings shall be in form and substance satisfactory to each of the
Parties in the reasonable exercise of its judgment, seeking: (i) approval of
the Settlement, as embodied in this Agreement and the Initial Implementing
Agreements, or in the alternative, if such approval is not obtained, confirmation
of the Mirant Parties’ authority to execute this Agreement and be bound to the
terms hereof, except to the extent provided in Section 2.2; (ii) a good
faith finding under Section 363(m) of the Bankruptcy Code with respect to
the asset transfers provided for herein, including in Article V, Article VIII
and Section 9.3.6; and (iii) an order granting the foregoing approvals and
findings that becomes effective immediately upon entry notwithstanding the ten
(10) day stay provided for in Bankruptcy Rule 6004(g) (such motion is referred
to herein as the “Bankruptcy Rule 9019 Motion”). To expedite approval of
all Implementing Agreements, the Parties shall seek authorization in the
Bankruptcy Rule 9019 Motion for all Mirant Parties that are parties to the Follow-Up
Implementing Agreements to execute and perform their obligations under such
Follow-Up Implementing Agreements without further order of the Mirant
Bankruptcy Court, as long as the terms of such Follow-Up Implementing
Agreements are consistent with the terms of this Agreement and any other
documentation that is submitted to the Mirant Bankruptcy Court in connection
with this Agreement. The Mirant Parties shall file, together with the
Bankruptcy Rule 9019 Motion, a form of order approving the Bankruptcy Rule 9019
Motion that also shall be in form and substance satisfactory to each of the
Parties in the reasonable exercise of its judgment. As soon as practicable
after the Execution Date, but in no event later than thirty (30) days after the
Execution Date, the Mirant Parties shall: (a) prepare and circulate the
Bankruptcy Rule 9019 Motion and related pleadings and form of order to the
other Parties to ensure that all Parties have adequate time to review in
advance of filing the form and substance of the Bankruptcy Rule 9019 Motion and
form of order and resolve disagreements, if any, regarding the same; (b) file
the Bankruptcy Rule 9019 Motion and form of order; and (c) seek support for the
Bankruptcy Rule 9019 Motion and form of order from the Official Committees and
other key creditors of the Debtors. The Bankruptcy Rule 9019 Motion shall not
be part of the withdrawn reference proceedings. The Parties shall not seek to
withdraw from the Mirant Bankruptcy Court the reference for the Bankruptcy Rule
9019 Motion and shall jointly oppose any effort by a third party to withdraw
the reference as to the Bankruptcy Rule 9019 Motion.

 

24

 

3.2.2                        Cooperation.

 

3.2.2.1               In allowing this Agreement and the
Implementing Agreements to become effective before the effective date of the
applicable Mirant Plans, the Parties each agree to cooperate reasonably (and
shall seek to persuade each of the CAISO, the PX and FERC to cooperate
reasonably) in connection with obtaining approval and confirmation of Mirant
Plans that are consistent with and in compliance with this Agreement and the
Implementing Agreements. Notwithstanding the foregoing, nothing in this Section 3.2.2.1
shall in any way limit any Party’s exercise of its fiduciary or other duties
by, among other things, voting for, preferring, cooperating in connection with
or otherwise supporting any competing or alternative plan or plans of
reorganization, provided that (i) the Party is in compliance with the
requirements of Section 3.3.3, and (ii) such competing or alternative
plans fully incorporate and effectuate the entire Settlement and all provisions
of this Agreement and the Implementing Agreements in all respects. If the
Mirant Bankruptcy Court approves part, but not all, of the Settlement in the
Bankruptcy Rule 9019 Motion and the Mirant Parties pursue a Rule 9019
Supplemental Solution or a Plan Settlement Solution, then any portion of the
Settlement, this Agreement or the Implementing Agreements that may have been
approved as part of the Bankruptcy Rule 9019 Motion and that is specified in Section 2.2.1
as becoming effective only upon the occurrence of the Settlement Effective Date
is, notwithstanding any other provision of this Agreement, not effective until
the Settlement Effective Date.

 

3.2.2.2               If,
as a condition to granting the Mirant Bankruptcy Court Approval or making such
approval effective, the Mirant Bankruptcy Court requires some further action or
accomplishment by the Parties, then the Parties agree to cooperate with each
other, and the Parties agree to use reasonable efforts to seek to persuade the
CAISO, PX and FERC to cooperate with the Parties, to arrive at a mutually
satisfactory Rule 9019 Supplemental Solution; provided, however, that if the
Mirant Bankruptcy Court requires that any proceedings pending before the Mirant
District Court identified in Exhibit D, and/or any pending motion to withdraw
the reference filed in the Bankruptcy Proceedings that concerns any of the
matters identified in Exhibit D, be referred or restored in whole or part to
the Mirant Bankruptcy Court, the Parties’ obligation to cooperate does not
require the California Parties to dismiss or withdraw such proceedings or motions.

 

3.3                                 Mirant Plans.

 

3.3.1                        Incorporation.
If the Mirant Bankruptcy Court enters an order approving the Bankruptcy Rule
9019 Motion or any Rule 9019 Supplemental Solution, then the Mirant Plans shall
incorporate fully the provisions of this Agreement, unless a Termination Event
has occurred or later occurs, it being understood that the Mirant Plans
themselves shall not be considered part of this Agreement or the Implementing
Agreements. As long as a Termination Event has not occurred, if the Mirant
Bankruptcy Court denies or does not approve the Bankruptcy Rule 9019 Motion in
its entirety,

 

25

 

including
as a result of any Rule 9019 Supplemental Solution, then (i) the Parties shall
remain bound by the Settlement and this Agreement, and (ii) the Mirant Parties
shall seek through confirmation of the Mirant Plans to obtain Mirant Bankruptcy
Court approval of those portions of this Agreement, the Implementing
Agreements, and the Settlement for which approval has not yet been granted, and
shall request approval of such unapproved portions of the Settlement, this
Agreement and the Implementing Agreements as part of the Mirant Plans, provided
that the effectiveness of any portion of the Settlement, this Agreement or the
Implementing Agreements that may have been approved as part of the Bankruptcy
Rule 9019 Motion or through any Rule 9019 Supplemental Solution, and that is
specified in Section 2.2.1 as becoming effective only upon the occurrence
of the Settlement Effective Date, shall not become effective until the
Settlement Effective Date. If all or a portion of the Settlement must be
approved in a Plan Settlement Solution, then the Mirant Plans shall incorporate
fully the provisions of this Agreement and the Implementing Agreements and
shall authorize and require the applicable Debtors’ performance hereof and
thereof, it being understood that the Mirant Plans themselves shall not be
considered part of this Agreement or the Implementing Agreements.

 

3.3.2                        Limitation
of Debtor Obligations. The payment obligations associated with the Aggregate
Allowed Claim and the CERS Allowed Claim are limited to MAEM, and the
obligations associated with the consideration exchanged in Article VIII
are limited to Delta, Potrero and Mirant Special Procurement, Inc.
Notwithstanding anything to the contrary in this Agreement, this Agreement is
not intended to affect obligations between or among any of the Debtors. The
provisions of the Mirant Plans that are not covered by this Agreement or the
Implementing Agreements are the subject of separate negotiations with the
Official Committees. Neither this Agreement nor any Implementing Agreement
shall affect the rights of the Debtors to negotiate and propose the terms and
structure of the Mirant Plans, provided that, in the event that all or a
portion of this Agreement and the Implementing Agreements are incorporated into
the Mirant Plans, the Mirant Plans shall incorporate fully this Agreement
(including Section 3.3.3.2) and the Implementing Agreements, and shall
authorize and require the Parties’ execution, delivery, implementation and
performance hereof and thereof as conditions precedent to the effectiveness of
the Mirant Plans.

 

3.3.3                        Classification
and Plan Objections.

 

3.3.3.1               Because
the Mirant Parties may make compromises now if the Bankruptcy Rule 9019 Motion
or any Rule 9019 Supplemental Solution is approved before the Mirant Plans are
confirmed, the Settling Participants acknowledge that it would be inequitable
if a Settling Participant (or FERC, the CAISO or the PX) were subsequently to
use its rights and entitlements under the Settlement, this Agreement or any
Implementing Agreement and other rights to obtain additional benefits under the
Mirant Plans in exchange for not defeating or obstructing the confirmation of
the Mirant Plans, and, in consequence, the Settling Participants agree not to
do so.

 

3.3.3.2               For
purposes of this Agreement, the “Voting Support Requirements” shall mean
the requirements of this Section 3.3.3.2. The Parties

 

26

 

agree that:

 

(i)                                     for all Plans of any Debtor affecting the
claims and rights granted to PG&E under this Agreement in the Bankruptcy
Proceedings, (a) such Plans shall fully and completely include and incorporate
the terms of the Settlement and this Agreement applicable to PG&E and shall
not contain any provisions which condition, limit or restrict PG&E’s
ability to receive the full benefits of the Settlement with respect to the RMR
Claim, the SO2 Claim and either the CC8 Asset Transfer Agreement, or, if
applicable, the CC8 Alternative Consideration, (b) the claims and rights
comprising the RMR Claim, the SO2 Claim and the CC8 Claim shall each be
classified in a separate class under the Delta Plans, the Potrero Plans, and
any Plan that governs or purports to affect the disposition of the estate of
any other Mirant Party that is a party to the CC8 Asset Transfer Agreement or
that purports to dispose of or resolve the RMR Claim, the SO2 Claim or the CC8
Claim, (c) PG&E shall be provided the benefits of such claims in accordance
with the terms of this Agreement, which treatment PG&E hereby acknowledges
to be the equivalent of payment in full of the RMR Claim, the SQ2 Claim and,
subject to the occurrence of a CC8 Triggering Event, the CC8 Claim, and (d) so
long as subparts (a) through (c) above are satisfied, and following such review
by PG&E of approved disclosure statements and solicitation packages
pertaining to such Plans as may be required by applicable law for such purpose,
and considering the existing knowledge and information already possessed by
PG&E, PG&E shall vote the RMR Claim, the SO2 Claim and the CC8 Claim to
accept such Plans; provided, however, that, subject to Section 3.3.3.1,
PG&E shall retain its right to object to such Plans on grounds not related
to the treatment of the RMR Claim, the SO2 Claim or the CC8 Claim;

 

(ii)                                  for any Plan of any Debtor affecting the
secured claim of the California Parties with respect to the MAEM Receivables
set out in Section 5.1.1.2, (a) such Plan shall fully and completely
include and incorporate the terms of the Settlement and this Agreement between
and among the California Parties and MAEM and shall not contain any provisions
which condition, limit or restrict the California Parties’ ability to receive
the full benefits of the Settlement with respect to the MAEM Receivables, (b)
the claim and rights comprising the MAEM Receivables shall be classified in a
separate class under such Plan, (c) the California Parties shall be provided
the benefits of such claim in accordance with the terms of this Agreement,
which treatment the California Parties hereby acknowledge to be the equivalent
of payment in full of the MAEM Receivables, and (d) so long as subparts (a)
through (c) above are satisfied, and following such review by the California Parties
of approved disclosure statements and solicitation packages pertaining to such
Plan as may be required by applicable law for such purpose, and considering the
existing knowledge and information already possessed by the California Parties,
the California Parties shall vote their secured claim in respect of the MAEM
Receivables to accept such Plan; provided, however, that, subject to
Section 3.3.3.1, the California Parties shall retain their right to object
to such Plan on grounds not related to the treatment of the secured

 

27

 

claim in respect of the MAEM Receivables; and

 

(iii)                               Nothing in this Section 3.3.3.2 or
elsewhere in this Agreement shall prevent or otherwise limit the California
Parties from raising good faith objections to the Mirant Plans as they relate
to the Aggregate Allowed Claim or the CERS Allowed Claim, or voting the
Aggregate Allowed Claim and the CERS Allowed Claim, as decided by the
California Parties and CERS in their sole discretion.

 

3.3.3.3               Notwithstanding
anything to the contrary in Section 3.3.3.2, to the extent required by
applicable law, including Section 1125 of the Bankruptcy Code, an
additional component of the Voting Support Requirements applicable to each
California Party shall be that such California Party must have been provided
with a disclosure statement approved by the Mirant Bankruptcy Court for the
Mirant Plans that contains information that is materially consistent with, and
that is not materially inconsistent with, the information that was provided or
otherwise available to such California Party prior to the issuance of such
disclosure statement, including in connection with the knowledge acquired by
the California Parties in connection with the process of negotiating and
documenting the Settlement.

 

3.3.3.4               The
Settling Participants agree to meet and confer with the Mirant Parties
regarding any objections they may have to the Mirant Plans, and to attempt to
resolve their objections with the Mirant Parties prior to filing such
objections with the Mirant Bankruptcy Court.

 

3.4                                 PG&E Bankruptcy Court Approval. Within fifteen (15) Business Days after the
Execution Date, PG&E shall file with the PG&E Bankruptcy Court a motion
under Bankruptcy Rule 9019 seeking approval of whatever part of the Settlement
is still required to be approved by the PG&E Bankruptcy Court, and PG&E
shall diligently prosecute that motion.

 

3.5                                 Timetable. The Parties shall use their reasonable efforts to accomplish the
following results by the following dates, provided that a failure to achieve
such results by the dates specified below shall not entitle any Party to
terminate or modify this Agreement or any Implementing Agreement, or otherwise
affect any Party’s rights or obligations hereunder or thereunder in any
respect:

 

3.5.1                        Obtaining approval of this Agreement and the
Implementing Agreements by the Mirant Bankruptcy Court through the Bankruptcy
Rule 9019 Motion or through any Rule 9019 Supplemental Solution to the extent
possible, and subject to the provisions of Sections 2.8.2, 3.2 and 3.3, by
April 30, 2005;

 

3.5.2                        Obtaining approval of this Agreement and the
Implementing Agreements, to the extent required, by the PG&E Bankruptcy
Court by February 28, 2005;

 

28

 

3.5.3                        Filing the Agreement with FERC for approval
within fifteen (15) days after the Execution Date and obtaining the FERC
Settlement Order within ninety (90) days after the filing of this Agreement for
approval by FERC; and

 

3.5.4                        If the Settlement is implemented, in whole or
in part, through any Mirant Plans as provided for in Section 3.3, then
filing of the applicable Mirant Plans and accompanying disclosure statement(s)
that fully incorporate this Agreement and the Implementing Agreements by
June 1, 2005, approval of such disclosure statement(s) by December 1,
2005, and confirmation of the applicable Mirant Plans by February 1, 2006.

 

3.6                                 Plan Rights Preserved. Except with respect to the Mirant Parties’
obligation to incorporate fully the terms of this Agreement and the
Implementing Agreements into the Mirant Plan(s) to the extent specified in
Section 3.3.1, and their obligation not to include anything in the Mirant
Plans that would deprive the Settling Participants of the rights and entitlements
of the Settlement, nothing in this Agreement shall directly or indirectly
control, dictate, limit or otherwise adversely affect the rights of the Debtors
to propose and negotiate one or more Mirant Plans with the Official Committees,
including the right to place unsecured claims in different classes in
accordance with the requirements of the Bankruptcy Code, provided that the
treatment of the Aggregate Allowed Claim and the CERS Allowed Claim shall be
the same as the treatment generally accorded other allowed general unsecured
claims against MAEM and any other Debtors consolidated with MAEM for purposes
of the MAEM Plan (in the event MAEM and one or more other Debtors are
substantively consolidated) (as distinguished from “administrative convenience
classes” permitted higher recoveries under Section 1122(b) of the
Bankruptcy Code or other priority or special claims entitled to unique
treatment pursuant to Section 1122 of the Bankruptcy Code).

 

3.7                                 Conventional Liquidating Trust. Without restricting the Debtors’ ability or
right to reorganize by converting debt into equity in reorganized Debtors, the
Mirant Parties shall cooperate with the California Parties, upon their request,
to create a conventional liquidating trust in the Mirant Plans to hold any
equity securities distributable on account of the Aggregate Allowed Claim and
the CERS Allowed Claim that is in form and substance reasonably satisfactory to
the California Parties (the “Liquidating Trust”).

 

3.8                                 Exclusion. Nothing in this Agreement shall be deemed to revive any claim of any
Party or other person or entity that is barred by any bar date order of the
Mirant Bankruptcy Court, whether now or in the future and whether applicable to
prepetition or postpetition claims. Debtors reserve all of their rights and
defenses under all such bar date orders, as well as under any Mirant Plan or
confirmation order discharging any claims under Section 1141 of the
Bankruptcy Code or otherwise. The foregoing exclusions and reservation of
rights and defenses (i) shall not prevent any person or entity from becoming an
Additional Settling Participant in accordance with the process specified in
Article XI, and (ii) shall not impair, diminish or otherwise affect the
rights and entitlements of SDG&E or any other Settling Participant pursuant
to this Agreement and the Settlement with respect to the Aggregate Allowed
Claim, the CERS

 

29

 

Allowed Claim, the MAEM
Receivables or otherwise, in each case as applicable under this Agreement.

 

ARTICLE IV

SETTLEMENT AND ACKNOWLEDGEMENT

 

4.1                                 Settlement.

 

4.1.1                        Settlement
of All Claims. As described with more particularity in Article IX, and
subject to the limitations set forth therein and in Section 4.2.1 (ii),
all claims against the Mirant Parties and their Related Parties by the Settling
Participants, and all claims against the Settling Participants and their
Related Parties by the Mirant Parties, for damages, refunds, disgorgement of
profits, revocation of market-based rate authority, or other monetary or
non-monetary remedies, in the FERC Refund Proceeding, the FERC Long-Term
Contract Proceeding, the FERC Gaming Proceeding, the FERC RMR Proceedings, the
FERC MBR Proceedings, FERC Docket No. EL01-10, Lockyer
v. FERC, the Lockyer v. FERC Remand,
the litigation matters addressed in Article IX and Exhibit D, and the
Bankruptcy Proceedings (excepting only those claims identified in Exhibit A and
those claims asserted by Additional Settling Participants that are not released
in Section 8.2, Section 11.2 or Article IX) shall be deemed
settled and resolved upon the occurrence of the Settlement Effective Date,
provided that none of the FERC Refund Proceeding, the FERC Gaming Proceeding,
FERC Docket No. EL01-10, Lockyer v. FERC, the
Lockyer v.
FERC Remand, or other claims
shall be deemed settled as to Non-Settling Participants. The Settlement and
this Agreement also fully resolve and satisfy completely each of the following:
(i) any and all claims that the Mirant Parties have or may have against
PG&E with respect to the power purchase agreement between MAEM and PG&E
made under the Western Systems Power Pool Master Agreement and the “Master
Netting, Close-out Netting and Margin Agreement” dated October 25, 2000,
and the Mirant Parties hereby waive and release PG&E and its Related
Parties from any such claim; (ii) any and all claims that the Mirant Parties
have or may have against PG&E as a result of PG&E’s June 15, 2003
draw on the Letter of Credit issued by Wachovia Bank, N.A. on behalf of MAEM (Number
LC870-131459), and the Mirant Parties hereby waive and release PG&E and its
Related Parties from any such claim; and (iii) any and all claims that PG&E
may have against MAEM or any Mirant Party or any of their Related Parties for
the early termination of or otherwise with respect to the power purchase
agreement between MAEM and PG&E made under the Western Systems Power Pool
Master Agreement and the “Master Netting, Close-Out Netting and Margin
Agreement” dated October 25,
2000, and PG&E hereby waives and releases the Mirant Parties and their
Related Parties from any such claim.

 

4.1.2                        Exclusions.
No provision of this Agreement shall affect any rights, claims, counterclaims,
offsets or defenses of any kind that the Mirant Parties or the Settling Participants have or may
claim to have against Non-Settling Participants and other third parties, or
with respect to the claims identified in Exhibit A.

 

30

 

4.2                                 Withdrawal and Dismissal of Claims and
Actions.

 

4.2.1                        California Party Claims. Effective as of the Settlement Effective
Date, except as to (i) claims identified in Exhibit A, and (ii) claims and
proofs of claim related to indemnity obligations filed by PG&E in the
Bankruptcy Proceedings or by any Debtor in PG&E’s bankruptcy proceedings,
in each case arising under the Purchase and Sale Agreements between Delta and
PG&E and between Potrero and PG&E dated November 24, 1998 pursuant
to which Delta and Potrero acquired their existing generating facilities from
PG&E (collectively, the “Original Purchase and Sale Agreement”), it
being understood that all claims identified in subparts (i)-(ii) above are not
affected by this Agreement; (a) all proofs of claim filed by any California
Party against the Mirant Parties or other Debtors in the Bankruptcy
Proceedings, and all other claims asserted by the California Parties against
any Mirant Party or other Debtor that are within the scope of the releases
provided in Article IX, shall be withdrawn with prejudice and deemed
satisfied in their entirety by the consideration provided for in this
Agreement; and (b) all proofs of claim filed by the Mirant Parties against
PG&E in PG&E’s bankruptcy proceedings, and all other claims asserted by
the Mirant Parties against PG&E within the scope of the releases provided
in this Agreement, shall be withdrawn with prejudice and deemed satisfied in
their entirety by the consideration provided for in this Agreement.
Notwithstanding anything to the contrary herein, nothing in this Agreement or
any Implementing Agreement shall (1) release PG&E or any Debtor from the
terms of the Original Purchase and Sale Agreement, or (2) obligate any Debtor
to assume the Original Purchase and Sale Agreement as part of the Bankruptcy
Proceedings. The Parties agree to cooperate with each other to the extent
necessary to effectuate the intent of this Section 4.2.1, including by
supporting an order of the Mirant Bankruptcy Court directing the clerk of the
Mirant Bankruptcy Court or any authorized claims agent to expunge from the
record all such claims that are so withdrawn and actually accomplishing such
withdrawal.

 

4.2.2                        Additional Settling Participant Claims. Effective as of the Settlement Effective
Date, except as to claims and proofs of claim by Additional Settling
Participants against the Mirant Parties that are not within the scope of the
releases provided in this Agreement, it being understood that such claims are
not affected by this Agreement, all proofs of claim filed by any Additional
Settling Participant against the Mirant Parties or other Debtors in the
Bankruptcy Proceedings, and all other claims asserted by any Additional
Settling Participant against any Mirant Party or other Debtor, in each case
that are within the scope of the releases provided in Article IX or Section 11.2
of this Agreement, shall be withdrawn with prejudice and deemed satisfied in
their entirety by the consideration provided for in this Agreement. The
Additional Settling Participants agree to cooperate with the Mirant Parties to
the extent reasonably necessary to effectuate the intent of this Section 4.2.2,
including by supporting an order of the Mirant Bankruptcy Court directing the
clerk of the Mirant Bankruptcy Court or any authorized claims agent to expunge
from the record all such claims that are so withdrawn and actually
accomplishing such withdrawal.

 

4.2.3                        CAISO, PX and FERC Claims. Effective as of the Settlement Effective
Date, the Parties shall use reasonable efforts to seek the prompt dismissal or

 

31

 

withdrawal
with prejudice of (i) all proofs of claim filed by the CAISO and the PX against
the Mirant Parties or other Debtors in the Bankruptcy Proceedings that seek to
recover amounts or otherwise obtain relief on behalf of or for the benefit of
any Settling Participant with respect to any claim that is duplicative of the
claims released in this Agreement or that otherwise pertains to conduct, acts
or omissions by the Mirant Parties that are the subject of the releases set
forth in this Agreement, and (ii) all claims and proofs of claim filed by FERC
as to any Debtor in the Bankruptcy Proceedings that seek to recover payments,
impose penalties, or otherwise obtain relief based on or arising out of
conduct, acts or omissions that are the subject of the releases set forth in
this Agreement, or that otherwise would be waived, released and/or withdrawn
under this Agreement if asserted by a Settling Participant, in each case in
accordance with the FERC Settlement Order and this Agreement. Each Settling
Participant hereby agrees to join the Mirant Parties in any argument before the
Mirant Bankruptcy Court that all claims released in this Agreement actually
belong to the Settling Participants as the beneficiaries, real parties in
interest and/or responsible parties, and not to the CAISO or the PX.

 

4.2.4                        Settling Participant Covenants and
Responsibilities. For the
purpose of avoiding a duplicative recovery by any Settling Participant, and
subject to the occurrence of the Settlement Effective Date, each Settling
Participant hereby: (i) assigns to the Mirant Parties all of its rights to
recover from the CAISO and/or the PX any amounts recovered by the CAISO and/or
the PX on claims filed in the Bankruptcy Proceedings that fall within the scope
of the waiver, release, and withdrawal provided in Section 2.7.1(i)(c);
and (ii) agrees to pay and transfer to the Mirant Parties any such duplicative
amounts that may be received by such Settling Participant from the CAISO and/or
the PX immediately upon receipt of such payment.

 

4.2.5                        PG&E Additional Covenants and
Responsibilities. Without
limiting the generality of Section 4.2.4, PG&E also agrees that (i) to
the extent that the CAISO recovers any amounts in the Bankruptcy Proceedings in
connection with Proof of Claim Nos. 7203, 7205, 7801 and 7836 in the Bankruptcy
Proceedings, or any other proofs of claim filed by the CAISO against any Debtor
that arise out of or relate to the RMR Agreements with respect to any period
prior to and including September 30, 2004, PG&E assigns to the Mirant
Parties all of its rights to recover from the CAISO all such amounts, and
agrees to pay and transfer to the Mirant Parties all such amounts that may be
received by PG&E from the CAISO immediately upon PG&E’s receipt
thereof, and (ii) PG&E will support the Mirant Parties in any argument
before the Mirant Bankruptcy Court that all claims referred to in subpart (i)
above that have been or may be filed or otherwise asserted by the CAISO in the
Bankruptcy Proceedings actually belong to PG&E as the beneficiary, real
party in interest and/or responsible party under the RMR Agreements.

 

4.2.6                        Dismissal of Certain Actions. Within five (5) Business Days after the
Settlement Effective Date, (i) the Mirant Parties shall withdraw or seek to
dismiss, to the extent not already done pursuant to Section 3.2.2.2, in
each case with prejudice, the adversary proceedings and contested matters
identified in Exhibit D as to the Settling Participants, and any other
objections to, or motions to estimate, the claims of

 

32

 

the
Settling Participants filed in the Bankruptcy Proceedings that are the subject
of the releases provided by the Mirant Parties in this Agreement, and any other
pleadings initiated by any of the Debtors against any of the Settling
Participants that are contrary to the terms of the Settlement and this
Agreement, except to the extent that such claims have been previously dismissed
or finally disposed of by the orders of FERC or the Mirant Bankruptcy Court,
and (ii) the Settling Participants shall withdraw or seek to dismiss, in each
case with prejudice, all pending claims asserted by them against the Mirant
Parties or their Related Parties that are the subject of the releases granted
in this Agreement, except to the extent that such claims have been previously
dismissed or finally disposed of by the orders of FERC or the Mirant Bankruptcy
Court. Notwithstanding the foregoing, the Mirant Parties shall not be required
to withdraw or dismiss any adversary proceeding or contested matter with
respect to the CAISO and the PX (a) until such time as each of the CAISO and
the PX has effectuated the full and complete waiver, release, withdrawal and
dismissal of all claims against all Mirant Parties and their Related Parties
that, if asserted by a Settling Participant, would be waived, released,
withdrawn and dismissed under the Settlement and this Agreement, or a FERC
Settlement Order has been issued and become effective that accomplishes the
same result to the Mirant Parties’ reasonable satisfaction, or (b) that
addresses a claim that is not the subject of the releases provided by the
Mirant Parties in this Agreement.

 

4.3                                 Acknowledgement of Compromise. The Parties acknowledge and agree that the
consideration and other covenants and obligations set forth in this Agreement
and the Implementing Agreements settle and compromise the claims of the
Settling Participants as set forth in the releases contained in this Agreement.

 

4.4                                 No Admission of Liability. In executing this Agreement and, if
applicable, the Implementing Agreements, no Party is admitting any liability or
culpability with respect to any of the claims against it released in this Agreement,
or any other matter addressed herein or in any Implementing Agreement. Each
Party expressly denies any wrongdoing or culpability with respect to the claims
against it released in this Agreement, or any other matter addressed in this
Agreement or any Implementing Agreement, and does not, by execution of this
Agreement or any Implementing Agreement, admit or concede any actual or
potential fault, wrongdoing or liability in connection with any facts or claims
that have been or could have been alleged against it with respect thereto.
Neither this Agreement nor any Implementing Agreement, nor any act performed or
document executed pursuant to or in furtherance of this Agreement or any
Implementing Agreement: (i) is or may be deemed to be, or may be used by a
Settling Participant or a Mirant Party as, an admission of, or evidence of, the
validity of any released claim, or of any wrongdoing or liability of any of the
Parties; (ii) is or may be deemed to be, or may be used by a Settling
Participant or a Mirant Party as, an admission of, or evidence of, any fault or
omission of any of the Parties in any civil, criminal, regulatory or
administrative proceeding in any court, administrative agency, regulatory
authority, or other tribunal; or (iii) shall be offered in evidence or alleged
in any pleading by any Settling Participant or any Mirant Party, except to
obtain approval of the Bankruptcy Rule 9019 Motion or any Rule 9019
Supplemental Solution, to confirm the Mirant Plans, to obtain other Required
Approvals, or to enforce the terms of and obtain the benefits of this Agreement
or any Implementing Agreement. In no event shall

 

33

 

this
Agreement or any Implementing Agreement, any of their provisions or any
negotiations, statements or court proceedings relating to them or the
Settlement in any way be construed as, offered as, received as, used as or
deemed to be evidence of any kind in any action, or in any judicial,
administrative, regulatory or other proceeding, except in a proceeding to
enforce the terms or obtain the benefits of this Agreement, any Implementing
Agreement or any Mirant Plan or to obtain the Required Approvals.

 

ARTICLE V

ALLOWED CLAIMS; ASSIGNMENT OF MAEM RECEIVABLES

 

5.1                                 Aggregate Allowed Claim.

 

5.1.1                        Aggregate Allowed Claim. As of the Settlement Effective Date, the
California Parties collectively shall have an allowed, prepetition,
non-priority general unsecured claim against MAEM in its Bankruptcy Proceeding
in the aggregate, fixed, liquidated amount of $175,000,000 (the “Aggregate
Allowed Claim”). The Mirant Parties and all Settling Participants hereby
irrevocably waive any rights they may otherwise have under Section 502(j)
of the Bankruptcy Code with respect to the Aggregate Allowed Claim. MAEM shall
be entitled under any applicable Mirant Plan to pay and distribute all benefits
to be paid on the Aggregate Allowed Claim (the “Aggregate Allowed Claim
Benefits”) that are not distributed to the Liquidating Trust, to the Mirant
Refund Escrow established pursuant to Section 6.1, or to such other escrow
account as the California Parties may designate. The holders of the Aggregate
Allowed Claim shall be impaired and entitled to vote on the MAEM Plan. The
allocation of the Aggregate Allowed Claim Benefits among the California Parties
shall also be subject to the satisfaction of the following conditions:

 

5.1.1.1               The allocation shall be without prejudice to
the rights of the Mirant Parties and other Debtors to challenge claims asserted
by Non-Settling Participants or other parties that do not accept the
obligations of the Settlement by becoming Additional Settling Participants in
accordance with Article XI, or by the CAISO or the PX, including on the
grounds that the claims of such parties are duplicative of the claims settled
hereunder; and

 

5.1.1.2               Upon request of the Mirant Parties, and
provided that the Settlement is approved as part of the Bankruptcy Rule 9019
Motion or pursuant to any Rule 9019 Supplemental Solution filed in accordance
with Section 3.2, the California Parties shall promptly, so as not to
delay the Bankruptcy Proceedings (and, in any event, prior to the conclusion of
the hearing on the MAEM disclosure statement), allocate the Aggregate Allowed
Claim Benefits on an interim basis for purposes of voting on the MAEM Plan and
for purposes of evaluating the feasibility of the MAEM Plan, and shall provide
advance notice of such allocation to the Mirant Parties at least ten (10)
Business Days before the voting period with respect to the MAEM Plan begins. If
the Settlement is not approved as part of a Bankruptcy Rule 9019 Motion or a
Rule 9019 Supplemental Solution filed in accordance with Section 3.2, or
if the Bankruptcy Rule 9019 Motion or a Rule 9019 Supplemental Solution has
been approved but the Settlement Effective

 

34

 

Date has not occurred, and so long as a Termination Event has not
occurred, then the Parties agree that the California Parties shall have (i) on
account of their asserted offset rights pursuant to Section 553 of the
Bankruptcy Code, and pursuant to Section 506 of the Bankruptcy Code, an
allowed secured claim equal to the amount of $283,231,269 and (ii) an allowed
unsecured claim of $175,000,000, each against MAEM solely for voting and
feasibility purposes (and shall have no other allowed claim for such purposes,
except in connection with the CERS Allowed Claim as to CERS, the allowed
administrative expense claim provided for in Section 5.3.6, and, if
allowed, the claims listed in Exhibit A, if any), and the California Parties
shall promptly, so as not to delay the Bankruptcy Proceedings (and, in any
event, prior to the conclusion of the hearing on the MAEM disclosure
statement), allocate such secured claim and such unsecured claim on an interim
basis solely for purposes of voting on the MAEM Plan and for purposes of
evaluating feasibility, and shall provide advance notice of such allocation to
the Mirant Parties at least ten (10) Business Days before the voting period
with respect to the MAEM Plan begins. So long as a Termination Event has not
occurred, the California Parties shall make no other voting or feasibility
objections as to any Mirant Plan with respect to the claims released or
withdrawn in this Agreement, including with respect to the duplicate claims of
the CAISO and the PX, provided that this Section 5.1.1.2 shall not affect
the California Parties’ rights with respect to claims not released or withdrawn
under this Agreement. Notwithstanding the foregoing, nothing in this Section 5.1.1.2
shall alter or limit the scope or amount of the MAEM Receivables to be assigned
to the California Parties pursuant to Section 5.3.2.

 

5.1.2                        Gaming Settlement Consideration Excluded. The Aggregate Allowed Claim does not
include, and is in addition to, the proposed $332,411 payment and the
$3,665,811.59 prepetition claim against MAEM provided for in the proposed
settlement reached by certain of the Mirant Parties with FERC trial staff in
the FERC Gaming Proceeding, which is pending before FERC for its approval.
Notwithstanding the foregoing, the Parties agree that any and all claims of the
Settling Participants against the Mirant Parties based upon acts or omissions
that are the subject of the FERC Gaming Proceeding shall, upon the Settlement Effective
Date, be deemed to be settled in accordance with Article IX, provided that
nothing in this Agreement shall limit or otherwise affect the rights of any
Settling Participant to seek a portion of the amounts received by FERC in
connection with the settlement reached by certain of the Mirant Parties with
FERC trial staff in the FERC Gaming Proceeding. Within five (5) Business Days
after the Execution Date, the Mirant Parties and the California Parties will
jointly request that FERC stay and take no further action in the FERC Gaming
Proceeding pending the issuance of the Required Approvals and the occurrence of
the other conditions precedent to the Settlement Effective Date. Within ten
(10) Business Days after the Settlement Effective Date, the California Parties
will withdraw their objections to the settlement between certain of the Mirant
Parties and FERC trial staff in the FERC Gaming Proceeding, and will request
approval of that settlement as proposed by certain of the Mirant Parties and
FERC trial staff without change or modification thereto. Nothing in this
Agreement or FERC’s approval thereof shall be deemed to affect the allocation
of the payments made by certain of the Mirant Parties pursuant to FERC’s

 

35

 

orders
in the FERC Gaming Proceeding or to prejudice the right of any Settling
Participant to advocate any particular method for allocating such payments
among potential recipients.

 

5.1.3                        Satisfaction of Aggregate Allowed Claim and
CERS Allowed Claim. Unless
the Parties agree otherwise, and subject to Section 3.6, the Aggregate
Allowed Claim and the CERS Allowed Claim shall be satisfied in the same manner,
at the same time, and to the same extent as, and not less favorably than, the
allowed claims of other general unsecured MAEM creditors and any other Debtors
consolidated with MAEM for purposes of the MAEM Plan (in the event that one or
more other Debtors are substantively consolidated with MAEM).

 

5.1.4                        Distributions. The Mirant Parties shall ensure that the
Aggregate Allowed Claim Benefits are distributed to the Liquidating Trust, the
Mirant Refund Escrow or such other escrow fund as the California Parties may
designate pursuant to this Agreement, but shall otherwise have no
responsibility for ensuring that the California Parties obtain their allocated
shares of any distributions on account of the Aggregate Allowed Claim Benefits.
Distributions under the MAEM Plan for or on account of the Aggregate Allowed
Claim and the CERS Allowed Claim shall be without offset, defense or reduction
on account of any claim or counterclaim of the Mirant Parties against any of
the California Parties.

 

5.2                                 CERS Allowed Claim. As of the Settlement Effective Date, CERS
shall have, in addition to its allocated share of the Aggregate Allowed Claim,
an allowed, prepetition, non-priority general unsecured claim against MAEM in
its Bankruptcy Proceeding in the aggregate, fixed, liquidated amount of
$2,250,000 (the “CERS Allowed Claim”). CERS and the Mirant Parties
acknowledge and agree that Proof of Claim Nos. 7,549 through 7,555 filed by
CERS in the Bankruptcy Proceedings shall be deemed satisfied in their entirety
by the CERS Allowed Claim insofar as they assert claims for “overcharges on
short term purchases due to billing or accounting errors” or otherwise relate
to reconciliation of payments reflected on invoices for transactions conducted
during 2000 and 2001, and the remaining portions of such proofs of claim shall
be released pursuant to Article IX, subject to the terms and conditions
specified therein.

 

5.2.1                        If the CERS Allowed Claim is not approved as
part of a Bankruptcy Rule 9019 Motion or any Rule 9019 Supplemental Solution
filed in accordance with Section 3.2, and a Termination Event has not
occurred and does not occur, then the Parties agree that CERS shall have an
allowed unsecured claim of $2,250,000 against MAEM solely for voting and
feasibility purposes (and shall have no other allowed claim for such purposes,
except in connection with the Aggregate Allowed Claim and the allowed
administrative expense claim provided for in Section 5.3.6). CERS shall be
impaired and entitled to vote on the MAEM Plan as the holder of the CERS
Allowed Claim.

 

5.2.2                        Each of the Mirant Parties and CERS hereby
irrevocably waives any rights they may otherwise have under Section 502(j)
of the Bankruptcy Code with respect to the CERS Allowed Claim.

 

36

 

5.2.3                        Distributions under the MAEM Plan for or on
account of the CERS Allowed Claim shall be made to the Liquidating Trust or
such other trust, account or person as may be directed by CERS.

 

5.3                                 Assignment of Receivables To California
Parties.

 

5.3.1                        Estimated Receivables. The Parties acknowledge that, as of the
Execution Date, the PX holds in the PX Settlement Clearing Account certain
undistributed funds relating to transactions in the markets of the PX and the
CAISO. As of the Execution Date, MAEM has a claim to unpaid receivables due
from the CAISO and PX markets, before interest and potential subsequent
adjustments by FERC in the FERC Refund Proceeding, in the PX Settlement
Clearing Account for transactions in or through the PX and the CAISO during the
period January 1, 2000 through June 20, 2001 equal to $283,231,269,
which reflects a reversal of offsets of $815,238 in estimated PX wind-up
expenses and application of the soft cap (as calculated in accordance with
FERC’s order of April 26, 2001 in the FERC Refund Proceeding), plus
$36,691,563, which reflects a reversal of the soft cap, thereby increasing the
$283,231,269 to $319,922,833 (“Estimated Receivables”).

 

5.3.2                        Assignment of MAEM Receivables. Effective as of the Settlement Effective
Date and notwithstanding anything to the contrary in Section 5.1.1.2, (i)
the Mirant Parties shall, and do hereby, assign, sell, transfer, convey and
deliver to the California Parties and (ii) the California Parties shall, and do
hereby, assume, purchase, acquire and accept all of the Mirant Parties’ right,
title and interest in and to the MAEM Receivables and all claims, rights of
action and defenses otherwise available to the Mirant Parties or the other
Debtors arising from or relating to the MAEM Receivables, whether in the
Preparatory Rerun process, in the FERC Refund Proceeding, or through any other
CAISO or PX settlements adjustment permitted under the applicable CAISO or PX
tariffs, provided that nothing in this Article V shall affect any rights,
obligations, claims or defenses, to the extent they exist, between or among any
of the Mirant Parties or the other Debtors related to the MAEM Receivables, and
provided further that the rights, obligations, claims and defenses retained
under the preceding proviso shall not include any rights, obligations, claims
or defenses that could result in any claim against the California Parties
related to the MAEM Receivables or diminish the value of the MAEM Receivables
to the California Parties. The Mirant Parties’ transfer of all their rights,
title and interest in and to the MAEM Receivables is “as is” and without recourse,
and is free and clear of all liens, claims, encumbrances and interests of any
kind whatsoever in accordance with Section 363(f) of the Bankruptcy Code,
and the California Parties’ interest in the MAEM Receivables shall be
automatically perfected by the order of the Mirant Bankruptcy Court granting
the Required Approval. The term “without recourse” in the foregoing sentence
shall not limit or be construed as limiting in any way any rights the
California Parties have with respect to the Mirant Parties pursuant to the
express written provisions, representations and warranties of this Agreement.
The Mirant Parties and the other Debtors shall have no obligation to take any
action to collect any MAEM Receivables after the MAEM Receivables are assigned
to the California Parties apart from cooperating in the release of data and
providing any releases or waivers that are reasonably necessary to implement
the FERC Settlement Order. The Parties

 

37

 

acknowledge
and agree that the assignment of the MAEM Receivables includes the right to
interest on such MAEM Receivables pursuant to the FERC Interest Determination.
The Mirant Parties, including MAEM, shall have no liability or obligation for
paying or otherwise ensuring the payment of any interest amount to any Settling
Participant with respect to the MAEM Receivables.

 

5.3.3                        Scope of Assigned Receivables. Except as otherwise expressly provided
herein, the MAEM Receivables shall include any and all positive or negative allocations
of charges or credits that may be made by the CAISO or the PX that cause an
adjustment positive or negative to the MAEM Receivables as a result of or on
account of the CAISO and PX transactions by or with respect to MAEM during the
period January 1, 2000 through June 20, 2001. Other than in the
circumstances described in Section 6.6.3, to the extent that the CAISO or
the PX is determined in any future proceeding or for any reason to owe any
additional amounts to MAEM or be owed any additional amounts by MAEM for such
period, such amounts are, subject to the provisions of Section 6.6.6,
assigned to or become the responsibility of the California Parties, provided
that nothing in this sentence shall be construed as relieving MAEM of its
responsibility for PX wind-up expenses for the period specified below. Charges
or credits that pertain to transactions by the Mirant Parties or their
affiliates in the CAISO or the PX during periods outside the period January 1,
2000 through June 20, 2001 are not MAEM Receivables assigned to the
California Parties, and shall not in any way affect the MAEM Receivables. MAEM
will remain obligated for any PX wind-up expenses associated with PX work
performed prior to the Settlement Effective Date, as may be determined in FERC
Docket Nos. ER02-2234, et al., and
such amounts shall not constitute a part of the MAEM Receivables or be
deductible from the MAEM Receivables, and shall be entitled to treatment in the
Bankruptcy Proceedings as an allowed administrative expense claim under Section 503(b)
of the Bankruptcy Code without the need to file a request for payment under Section 503(a)
of the Bankruptcy Code. The California Parties will assume MAEM’s share, as may
be determined by FERC, of all PX wind-up expenses associated with PX work
performed after the Settlement Effective Date. FERC’s approval of this
Agreement in the FERC Settlement Order shall constitute its direction (i) to
the CAISO and the PX to recognize and implement the assignment of the MAEM
Receivables and the treatment of PX wind-up expenses in accordance with this
Agreement, and (ii) to the PX to reverse any offsets previously made to the
MAEM Receivables to reflect PX wind-up expenses payable by MAEM under this
Agreement.

 

5.3.4                        Representations and Warranties. The Mirant Parties represent and warrant
that the full amount of the Estimated Receivables was reflected on the CAISO
and PX accounts as they stood before and without regard to the Preparatory
Rerun and Mitigation, and without regard to any interest owing to or by the
Mirant Parties. The Mirant Parties further represent and warrant that (i) as of
the Execution Date, the Mirant Parties are not aware of any material issue that
is likely to arise that is unique to one or more of the Mirant Parties, as
opposed to issues that are likely to be common to Market Participants
generally, and that is expected to have a material adverse effect on the amount
of the Estimated Receivables, and (ii) as of the Settlement Effective Date,
none of the MAEM Receivables will have been pledged, hypothecated,

 

38

 

encumbered,
sold, transferred or otherwise assigned, whether voluntarily or involuntarily
or by way of setoff or offset, in whole or in part.

 

5.3.5                        Definitions. For purposes of the representation in subpart (i) of Section 5.3.4,
(i) a material issue is an issue (or collection of issues) with a cumulative
likely adverse impact of $3,000,000 or more on the actual amount of the
Estimated Receivables, and (ii) issues that are likely to be common to Market
Participants generally include any market, penalty or charge type adjustment
that is administered across (a) the CAISO market or the PX market as a whole,
even if the Mirant Parties are the only Market Participants affected for a
particular time interval, or (b) all resources, including reliability must-run
generating units, regarding energy or ancillary service deviation or other type
of correction, even if a Mirant Party’s resource may be the only adjustment
during a particular time interval.

 

5.3.6                        Authorized Disclosures: Interim Distributions. The Mirant Parties authorize the CAISO and
the PX to disclose to the California Parties, subject to customary and
appropriate confidentiality requirements limiting disclosure to third parties
that are reasonably satisfactory to the Mirant Parties, data necessary to
verify the amount of the MAEM Receivables, and the existence and amount of all
liens or encumbrances thereon. After the Execution Date, the Mirant Parties
shall advise the California Parties of any further receipts or payments, or
obligations or charges, received from or due to the CAISO or the PX before
final distributions under this Agreement. If any part of the Estimated
Receivables is paid to the Mirant Parties after the Execution Date, then the
Mirant Parties receiving such Estimated Receivables shall pay an equal amount,
plus associated interest at the FERC Interest Rate, into the Mirant Refund
Escrow, or such other escrow fund as the California Parties may designate, within
two (2) Business Days after the Settlement Effective Date. The obligation of
the Mirant Parties under the preceding sentence shall be entitled to treatment
in the Bankruptcy Proceedings as an allowed administrative expense claim under Section 503(b)
of the Bankruptcy Code without the need to file a request for payment under Section 503(a)
of the Bankruptcy Code.

 

5.4                                 Allocation Matrix. No Mirant Party has any obligation to
ensure that the consideration provided for under this Agreement is actually
allocated in the manner specified in the Allocation Matrix, including on
account of distributions through the PX, the CAISO or the PG&E Plan Escrow,
provided that, in addition to fulfilling their duty of cooperation pursuant to Section 6.9.8,
the Mirant Parties will provide data and releases and waivers to the extent
necessary to implement this Agreement, in each case under reasonable terms and
conditions and subject to confidentiality protections that are reasonably
acceptable to the Mirant Parties.

 

ARTICLE VI

ALLOCATION AND DISPOSITION OF MAEM RECEIVABLES AND 

AGGREGATE ALLOWED CLAIM BENEFITS

 

6.1                                 Escrow Accounts. No later than ten (10) Business Days after
the Settlement Effective Date, the California Parties shall establish an escrow
account (the

 

39

 

“Mirant
Refund Escrow”) for the purpose of receiving, holding and transferring the
MAEM Receivables and other funds, including any funds received from the Liquidating Trust, to the
extent provided for herein. The California Parties shall also establish a
separate escrow account (the “California Litigation Escrow”) for the
purpose of receiving, holding and transferring such portion of the MAEM
Receivables and other funds, including any funds received from the Liquidating
Trust, required or permitted herein to be transferred to the California
Litigation Escrow as they may agree upon among themselves. The costs of
creating and maintaining the Mirant Refund Escrow, the California Litigation
Escrow, and any other escrow accounts created in connection with this Agreement
shall be the responsibility of the California Parties. In the event that both
the Mirant Refund Escrow and the California Litigation Escrow are not available
to begin receiving funds ten (10) Business Days after the Settlement Effective
Date, then all time periods provided in this Agreement for the payment of funds
that include payments to or from the Mirant Refund Escrow or the California
Litigation Escrow shall be extended by the number of days between the tenth (10th)
Business Day after the Settlement Effective Date and the date on which both the
Mirant Refund Escrow and the California Litigation Escrow are available to
begin receiving funds.

 

6.2                                 Transfer and Disposition of MAEM Receivables.

 

6.2.1                        Notice to the CAISO and the PX. No later than six (6) Business Days after
the Settlement Effective Date, the California Parties shall advise the CAISO
and the PX that the full amount of the MAEM Receivables that have been assigned
to the California Parties pursuant to Section 5.3, as well as the
associated interest on such amount, shall be applied to the funding of the
consideration provided for in this Agreement, including Deemed Distributions,
as provided for in Section 6.3.

 

6.2.2                        Transfer to Mirant Refund Escrow. No later than ten (10) Business Days after
the Settlement Effective Date, the PX shall transfer a cash payment from the PX
Settlement Clearing Account to the Mirant Refund Escrow, equal to the Estimated
Receivables, excluding interest thereon, (i) less an amount equal to the total
of all Deemed Distributions pursuant to Section 6.5.5, (ii) less an amount
equal to all distributions of funds relating to the period January 1, 2000
through June 20, 2001 (including interest thereon) that have been paid by
the CAISO or the PX to the Mirant Parties after the Execution Date but prior to
such cash transfer, (iii) less the amount set forth in Section 6.2.3, (iv)
plus the amounts owed by Market Participants with negative allocations shown on
the Allocation Matrix. The Mirant Parties will comply with their obligations as
specified in other provisions of this Agreement, but shall have no additional
obligations with respect to the amount referenced in this Section 6.2.2,
including with respect to whether such amount is actually transferred or
deposited into the Mirant Refund Escrow.

 

6.2.3                        Transfer to California Litigation Escrow. Concurrently with the transfer of funds to
the Mirant Refund Escrow that is required under Section 6.2.2, the PX
shall transfer a cash payment in the amount of $112,036,394 from the PX
Settlement Clearing Account to the California Litigation Escrow, which payment
shall comprise the following amounts: (i) $35,836,394 to be allocated as the
California Parties may agree

 

40

 

among
themselves, with such amount not to be considered to be a refund attributable
to the Refund Period for purposes of the allocation of shortfalls and excesses
among the California Parties; plus (ii) $76,200,000 for bilateral claims made
by CERS against MAEM, to be allocated to CERS. Upon a final determination of
the amount of the MAEM Receivables, the PX shall transfer and deposit into the
California Litigation Escrow the amount, if any, by which the MAEM Receivables
exceed the amounts transferred pursuant to Section 6.2.2 and this Section 6.2.3.
The Mirant Parties will comply with their obligations as specified in other
provisions of this Agreement, but shall have no additional obligations with
respect to the amount referenced in this Section 6.2.3, including with
respect to whether such amount is actually transferred or deposited into the
California Litigation Escrow.

 

6.2.4                        Stay of Distribution. The FERC Settlement Order shall constitute
FERC’s direction that, notwithstanding any orders issued by FERC requiring or
authorizing distributions by the CAISO or the PX, or directing the payment of
refunds, the CAISO and the PX shall make no distribution or transfer of all or
any portion of the MAEM Receivables, and no refunds associated with sales by
the Mirant Parties in the CAISO and the PX markets shall be effectuated with
respect to any Settling Participant, whether by payment or accounting
adjustment, prior to the earlier of (i) the termination of this Agreement
pursuant to Section 2.8, or (ii) the Settlement Effective Date.

 

6.3                                 Attribution of Receivables to Time Periods. The California Parties will agree among
themselves which portions of the Estimated Receivables relate to the Pre-October Period,
to the Refund Period, and, within the Refund Period, to the Pre- January 18
Period and the Post-January 17 Period for the purpose of adjusting their
recoveries in the event of any shortfall or excess referenced in Section 6.6.
The Allocation Matrix contains an allocation to these three time periods of
refunds available for Settling Participants. The amounts shown in the
Allocation Matrix reflect, among other things, an allowance of 50 percent of
the Fuel Cost Allowance claims previously submitted by the Mirant Parties in
the FERC Refund Proceeding.

 

6.4                                 Fuel Cost Allowance Claim.

 

6.4.1                        Fuel Cost Allowances. The Mirant Parties shall not seek any
additional Fuel Cost Allowance as against the Settling Participants for the
period beginning January 1, 2000 through June 20, 2001. The Fuel Cost
Allowance provided for herein shall, as to the total amounts applicable to the
market as a whole, remain fixed as to the Parties and Additional Settling
Participants. The proposed allocation of charges for such allowance to
individual Market Participants, which is currently based on gross load, shall
be subject to adjustment and “true up” to comply with the FERC Allowances
Determination. Because the charges for Fuel Cost Allowances can exceed the
refunds due to a Market Participant, some Market Participants may be shown as
owing money in the allocation. Such Market Participants that become Settling
Participants (“Net Payers”) will not receive or be liable for payment
until the date that FERC requires Market Participants to pay such allowances in
the FERC Refund Proceeding, at which time the payments owed to or owing from
such Net Payers will be adjusted based on FERC’s determinations concerning
allocation of the Fuel Cost Allowances.

 

41

 

6.4.2                        Non-Settling Participants. The Settling Participants agree that they
will not challenge or oppose any Mirant Party’s defense of its Fuel Cost
Allowance claim as against Non-Settling Participants, will not seek discovery
or other relief against any Mirant Party’s claims against Non-Settling
Participants and will not assist any other party’s claim or defense against any
Mirant Party with respect to a Mirant Party’s Fuel Cost Allowance claims.
Nothing in this Section 6.4.2 shall affect the Settling Participants’
rights to advocate any particular method for allocating a Mirant Party’s Fuel
Cost Allowance among Market Participants.

 

6.4.3                        FERC Filing. The California Parties agree to support a joint filing, if the Mirant
Parties elect to make one, requesting that FERC waive application of FERC’s December 20,
2004 order in the Refund Proceeding, 109 FERC ¶61,297, with respect to any
Mirant Party’s obligation to file an audited Fuel Cost Allowance claim until
after FERC issues the FERC Settlement Order, and to not require the Mirant Parties
to submit an audited Fuel Cost Allowance claim if FERC approves this Agreement
in the FERC Settlement Order. All Additional Settling Participants that opt
into the Settlement and this Agreement pursuant to Article XI agree to
comply with the provisions of this Section 6.4 to the same extent as is
required of the California Parties.

 

6.4.4                        Continued Defense of Fuel Cost Allowance
Claim. If and to the extent
that FERC does not grant either motion made pursuant to Section 6.4.3, the
Mirant Parties shall continue to defend their Fuel Cost Allowance claims as to
Non-Settling Participants, notwithstanding any other provision of this
Agreement, and the Mirant Parties shall, at their own expense, submit their
fuel cost data and claim to the auditor. Subject to the occurrence of the
Settlement Effective Date, the California Parties shall reimburse the Mirant
Parties for the auditor costs (including amounts invoiced by the auditor in
connection with the collecting and receiving of the Mirant Parties’ fuel cost data
and claims as directed by the auditor), and any other reasonable third-party
costs that the Mirant Parties incur in defense of their Fuel Cost Allowance
claims following the Execution Date. Reimbursements required of the California
Parties under this Section 6.4.4 shall be made on an ongoing basis upon
the later to occur of five (5) Business Days after the Settlement Effective
Date, or fifteen (15) Business Days after the California Parties’ receipt from
the Mirant Parties of invoices and supporting documentation showing the amount
of such reimbursable costs that have been incurred by the Mirant Parties
following the Execution Date. After the submittal of the initial invoice or
series of invoices, the Mirant Parties shall submit invoices for reimbursement under
this Section 6.4.4 on a monthly basis. The California Parties may, at
their sole discretion, determine the level of expenses that they are willing to
bear under this provision, in which case (i) the California Parties shall
deliver notice to the Mirant Parties that they no longer intend to pursue the
defense of the Fuel Cost Allowance claim, and shall bear all reasonable costs
and expenses incurred or accrued through the date on which the Mirant Parties
receive such notice, and (ii) the Mirant Parties shall not be obligated to
continue the defense of the Fuel Cost Allowance claim after the date of their
receipt of such notice from the California Parties, and shall not be obligated
to incur or pay any costs or expenses associated with the Fuel Cost Allowance
claim that are not paid or reimbursed by the California Parties. By providing
the notice referenced in subpart (i) of the preceding sentence, the California
Parties may, subject to the terms of 

 

42

 

the
preceding sentence, discontinue funding of the defense of Fuel Cost Allowance
claims relating to specific time periods, in which case the Mirant Parties will
be obligated to continue to defend their Fuel Cost Allowance claims only as to
time periods for which the California Parties are providing continued funding.

 

6.4.5                        Assignment of Recoveries. In addition to the transfer of the MAEM
Receivables to the California Parties, as provided in this Agreement, the
Mirant Parties hereby assign, sell, transfer, convey and deliver to the
California Parties, free and clear of all liens, claims, encumbrances, or
interests of any kind or nature whatsoever, pursuant to Section 363(f) of
the Bankruptcy Code, and effective on the Settlement Effective Date, any
recoveries of their Fuel Cost Allowance claims from Non-Settling Participants.
Such recoveries shall be attributed to, and divided between, the Pre-January 18
Period and the Post-January 17 Period by the California Parties. Nothing
in this Section 6.4 shall restrict the ability of the California Parties
to continue to participate in any existing proceeding, or to initiate or
participate in any future proceeding, insofar as such proceeding concerns a
Fuel Cost Allowance claim made by a supplier other than any Mirant Party.

 

6.5                                 Allocation to Refund Recipients.

 

6.5.1                        Refunds. Subject to the adjustments set forth herein, each Settling
Participant shall be allocated the net refund amounts shown for that Settling
Participant on the Allocation Matrix.

 

6.5.2                        Net Refund Recipients. Except as provided for Deemed Distribution
Recipients, the net refunds to be paid to each Settling Participant that is
owed net refunds after consideration of amounts that the particular Settling
Participant may itself owe to the market in the form of refunds as calculated
in exhibits CPX 51 and CAISO 30 in the FERC Refund Proceeding (such Settling
Participants are referred to herein as “Net Refund Recipients”) shall be
paid from the Mirant Refund Escrow in the form of cash.

 

6.5.3                        Allocation of Aggregate Allowed Claim
Benefits. The Aggregate
Allowed Claim Benefits shall be allocated by separate agreement among the
California Parties. The share of the Aggregate Allowed Claim Benefits allocated
to each California Party, shall be paid (i) to the California Party, (ii) to an
escrow fund designated by the California Party, or (iii) to the Liquidating
Trust in accordance with the election of that California Party, notice of which
shall be provided in writing to the Mirant Parties no later than five (5) Business
Days after receiving written notice from the Mirant Parties that the Aggregate
Allowed Claim Benefits are available for distribution as provided in Section 5.1.4.

 

6.5.4                        Anomalous Bidding Investigation. Within five (5) Business Days after the
transfer provided for in Section 6.2.2, a portion of the cash payments
transferred pursuant to Section 6.2.2 equal to the total of all
Non-Settling Participants’ allocable shares of the $24,000,000 in refunds for
the Pre-October Period as shown on the Allocation Matrix shall be
transferred to an account specified by OMOI

 

43

 

contemporaneously
with the distributions required in Section 6.2.2. Such consideration shall
be allocated by FERC as part of its resolution of the anomalous bidding
investigation in Docket No. IN03-10. Nothing herein shall preclude any Party
from advocating any particular refund allocation or methodology with respect to
this amount.

 

6.5.5                        Deemed Distributions. PG&E and other Settling Participants
(if any) having an outstanding payable to the PX, or owing net refunds as
calculated in exhibits CPX 51 and CAISO 30 in the evidentiary hearing in Docket
Nos. EL00-95, et al. (“Deemed
Distribution Recipients”), shall not receive a cash payment from the Mirant
Refund Escrow but shall instead receive their refund share as shown in the
Allocation Matrix through an offset to their outstanding payable to the PX or
net refund obligation (a “Deemed Distribution”). The Parties agree, and
the FERC Settlement Order shall constitute FERC’s determination, that the
PG&E Plan Escrow may be reduced in an amount equal to PG&E’s Deemed
Distributions under this Agreement. Other Settling Participants who do not
qualify as Net Refund Recipients shall also receive their allocable refunds in
the form of an offset against their outstanding market obligations. Exhibit H
contains a list of parties in addition to PG&E that will be Deemed
Distribution Recipients if they become Additional Settling Participants in
accordance with Article XL.

 

6.5.6                        Timing. Except as provided in Sections 6.5.5, 6.5.6 and 6.5.7, principal
payments on refunds reflecting the amount shown in the Allocation Matrix,
either in the form of cash from the transferred Estimated Receivables or
through the offset of payables provided for in the case of Deemed
Distributions, shall be effectuated for Settling Participants, including
Additional Settling Participants, no later than twenty (20) Business Days after
the Settlement Effective Date. Distributions of the Aggregate Allowed Claim
Benefits shall be effectuated no later than twenty (20) Business Days after the
distribution from the MAEM Plan to the California Litigation Escrow or
Liquidating Trust as designated by the California Parties pursuant to Section 5.1.4.

 

6.5.7                        Interest. The PX shall pay to the Mirant Refund Escrow interest payable with
respect to the MAEM Receivables within ten (10) Business Days after the later
of (i) the Settlement Effective Date, and (ii) the date on which FERC issues an
order finally determining interest and shortfalls associated with the CAISO and
PX settlement reruns and refund calculations regardless of whether such order
is subject to requests for stay, rehearing or appeals provided that such order
has not been stayed (“FERC Interest Determination”), and interest
amounts will be paid from the Mirant Refund Escrow to the Settling Participants
within ten (10) Business Days after such distribution to the Mirant Refund
Escrow. The amount of interest to be paid to Settling Participants associated
with the refunds provided pursuant to this Agreement shall be determined in the
FERC Interest Determination, provided that, to the extent amounts are held in
the Mirant Refund Escrow, Settling Participants shall be paid interest on such
amounts at the interest rate earned by that escrow account. Funds held in the
California Litigation Escrow shall earn the rate of interest applicable to that
escrow account. Funds held in the Liquidating Trust shall earn the rate of
interest applicable thereto. To the extent that the Settling Participants are
entitled to payment from the Liquidating Trust, the Mirant Refund Escrow, or
the California Litigation Escrow, each will be entitled to a proportionate
share of interest at the escrow or trust interest rate to the extent interest
has been earned on such

 

44

 

funds
while in the escrow account or Liquidating Trust and, in the case of the funds
held in the Liquidating Trust, the terms of the Liquidating Trust so provide.
The refunds for the Pre-October Period shall not bear any interest except
for any pro rata share of interest that is earned on those amounts in the
Mirant Refund Escrow itself. Nothing in this Agreement requires any Mirant
Party to pay any interest to any Settling Participant at any time on the
Aggregate Allowed Claim or the CERS Allowed Claim.

 

6.5.8                        CERS Amount. From the amount of refunds that otherwise are due to CERS pursuant to
Sections 6.5.1 or 6.5.3 (excluding any refunds allocated to short term bilateral
sales made to CERS by MAEM), an amount determined solely by CERS shall be
withheld in the Mirant Refund Escrow, or other escrow specified by CERS, in
order to pay any claims against CERS arising under Section 6.6.5.2 and any
of Sections 6.8.1 through 6.8.5 (amounts held in escrow pursuant to this Section 6.5.8
are denoted as the “CERS Escrow”). CERS may withdraw funds from the CERS
Escrow (i) from time to time with the prior written consent of the California
Utilities if CERS can demonstrate to the reasonable satisfaction of the
California Utilities that, after giving effect to such withdrawal, the CERS
Escrow shall have sufficient funds on deposit to satisfy in full the
aforementioned obligations, and (ii) in whole or in part following the later to
occur of the following, provided that all claims of CERS arising under Section 6.6.5.2
or any of Sections 6.8.1 through 6.8.5 have been paid in full: (a) issuance by
FERC of the FERC Receivables Determination and the final resolution of any
requests for rehearing or any appeals thereof, or, if no such requests for
rehearing or appeals are filed, the lapse of any period within which such
requests or appeals must be filed; (b) issuance by FERC of the FERC Refund
Determination and the final resolution of any requests for rehearing or any
appeals thereof, or, if no such requests for rehearing or appeals are filed,
the lapse of any period within which such requests or appeals must be filed;
(c) issuance by FERC of the FERC Interest Determination and the final resolution
of any requests for rehearing or any appeals therefrom or, if no such requests
for rehearing or appeals are filed, the lapse of any period within with such
requests for rehearing or appeals must be filed; or (d) issuance by FERC of the
FERC Allowances Determination and the final resolution of any requests for
rehearing or appeals therefrom or, if no such requests for rehearing or appeals
are filed, the lapse of any period within which such requests for rehearing or
appeals must be filed.

 

6.5.9                        Funds in the California Litigation Escrow. All funds in the California Litigation
Escrow shall be distributed in accordance with a separate agreement among the
California Parties. Distributions from the California Litigation Escrow will
accrue interest only from the date the California Litigation Escrow is funded
and at the rate of interest earned on the funds held therein.

 

6.5.10                  Non-Settling Participants. Subject to Section 6.6.6, the
California Parties shall pay to the CAISO and/or the PX, from the Mirant Refund
Escrow, the California Litigation Escrow or otherwise, any refunds due to
Non-Settling Participants by the Mirant Parties in connection with transactions
in the CAISO or the PX markets during the Refund Period, as determined by FERC
in the FERC Refund Proceeding. Notwithstanding the foregoing, Non-Settling
Participants shall not receive any accelerated payment of the Mirant Parties’
refunds under the Settlement or this

 

45

 

Agreement
and shall not be guaranteed any specific level of refunds. Debtors reserve all
of their rights, defenses and offsets with respect to each Non-Settling Party.

 

6.5.11                  Mirant Parties. None of the Mirant Parties or other Debtors
shall be a claimant for any of the funds to be allocated to the Settling
Participants pursuant to the terms of this Agreement or the Implementing
Agreements, except as specified in Article VIII and/or the CC8 Escrow
Agreement.

 

6.6                                 Shortfalls and Excesses. Subject to the limitations and allocations
of responsibility set forth in this Section 6.6, the California Parties
shall be at risk for adjusting their own recoveries under this Agreement in
light of shortfalls arising from the Mirant Parties’ transactions in the CAISO
or the PX markets for the Refund Period, as determined in the FERC Refund
Proceeding, and shall be entitled to the benefit of any additional amounts,
including as a result of the FERC Refund Determination, that are found to be
owing to the Mirant Parties for such transactions in the Refund Period.

 

6.6.1                        Receivables Shortfall and Receivables Excess. The amount, if any, by which the MAEM
Receivables for any time period is less than the appropriate portion of the
Estimated Receivables allocated to that period shall be referred to herein as a
“Receivables Shortfall.” The amount if any, by which the MAEM
Receivables for any time period exceeds the appropriate portion of the
Estimated Receivables allocated to that period shall be referred to herein as a
“Receivables Excess.”

 

6.6.2                        Refund Shortfall and Refund Excess. The amount, if any, by which the total of
the amounts allocated in the Allocation Matrix to Non-Settling Participants for
a particular time period is insufficient to satisfy refund obligations payable
by the Mirant Parties to Non-Settling Participants, as determined in the FERC
Refund Determination, for the same time period shall be referred to herein as a
“Refund Shortfall.” The amount, if any, by which the total of the
amounts allocated in the Allocation Matrix to Non-Settling Participants for a
particular time period exceed the amounts needed to satisfy refund obligations
payable by the Mirant Parties to Non-Settling Participants, as determined in
the FERC Refund Determination, for the same time period shall be referred to
herein as a “Refund Excess.”

 

6.6.3                        MAEM Responsibility. MAEM is solely responsible to Non-Settling
Participants for Refund Shortfalls relating to the Pre-October Period, and
shall solely be entitled to Refund Excesses relating to the Pre-October Period.
None of the Mirant Parties, including MAEM, shall be responsible to Settling
Participants or to Non-Settling Participants for a Receivables Shortfall or a
Refund Shortfall relating to the Pre-January 18 Period or Post-January 17
Period, and the Mirant Parties shall not be entitled to claim any interest or
right to a Receivables Excess or a Refund Excess relating to the Pre-January 18
Period or Post-January 17 Period. Additionally, none of the Mirant
Parties, including MAEM, shall be responsible to Settling Participants or to
Non-Settling Participants for a Receivables Shortfall relating to the Pre-October Period,
and shall not be entitled to claim any interest or right to a Receivables
Excess relating to the Pre-October Period.

 

46

 

 

6.6.4                        Distributions to Non-Settling Participants. As set forth in more detail in Section
6.6.5, and subject to the limitations of Section 6.6.6, the California Parties
shall pay to the CAISO and/or the PX, from the Mirant Refund Escrow, the
California Litigation Escrow or otherwise, the Refund Shortfall for each
Non-Settling Participant for the Pre-January 18 Period and the Post-January 17
Period. Such payment shall be made within the time period FERC establishes for
the payment of refunds in the FERC Refund Proceeding. The CAISO and/or PX shall
distribute the Refund Shortfall to each Non-Settling Participant in the manner
provided in the FERC Refund Determination.

 

6.6.5                        Responsibility for Shortfalls and Excesses. Subject to the provisions of Section 6.6.6,
Refund Shortfalls and Receivables Shortfalls associated with the Pre-January 18
Period and Post-January 17 Period will be paid by the California Parties as
provided in Section 6.6.5.1 and 6.6.5.2. To the extent there is a Receivables
Excess or Refund Excess for the Pre-January 18 Period and Post-January 17
Period, such Receivables Excess or Refund Excess shall be transferred to the
California Litigation Escrow and shall be allocated as provided in Sections
6.6.5.1 and 6.6.5.2. Receivables Shortfalls associated with the Pre-October
Period will be paid by the California Parties as provided in Section 6.6.5.3.
To the extent there is a Receivables Excess for the Pre-October Period, such
Receivables Excess shall be transferred to the California Litigation Escrow and
shall be allocated as provided in Sections 6.6.5.3.

 

6.6.5.1               Pre-January 18 Period. Each of the California Utilities shall be
responsible for its share of any Refund Shortfall or Receivables Shortfall
allocated to the Pre-January 18 Period, as well as for its share of any Refund
Shortfall or Receivables Shortfall attributable to transactions in the PX
during the period beginning on January 18, 2001 and ending on January 31, 2001
(such transactions, the “January PX Transactions”). Any such
responsibility shall be deemed to be a reversal of amounts allocated to the
California Utilities under this Agreement and shall be paid to the CAISO and/or
the PX from the amounts allocated to the California Utilities, on a pro rata
basis determined with reference to the principal amount of the refunds
(including Deemed Distributions) allocated to each of the California Utilities
under this Agreement for that period. The California Utilities shall be
entitled to payment of any Refund Excess or Receivables Excess allocated to the
Pre-January 18 Period and January PX Transactions. Said amount shall be paid on
a pro rata basis determined with reference to the total principal amount of the
refunds (including Deemed Distributions) allocated to each of the California
Utilities under this Agreement for that period.

 

6.6.5.2               Post-January 17 Period. Except with respect to the January PX
Transactions, which shall be governed by Section 6.6.5.1, CERS shall be
responsible for any Refund Shortfall or Receivables Shortfall allocated to the
Post-January 17 Period, and shall be entitled to payment of any Refund Excess
or Receivables Excess allocated to the Post-January 17 Period.

 

47

 

6.6.5.3               Pre-October Period. Each of the California Utilities shall be
responsible for its share of any Receivables Shortfall allocated to the
Pre-October Period. Any such responsibility shall be deemed to be a reversal of
amounts allocated to the California Utilities under this Agreement and shall be
paid to the CAISO and/or the PX from the amounts allocated to the California
Utilities, on a pro rata basis determined with reference to the principal
amount of the refunds (including Deemed Distributions) allocated to each of the
California Utilities under this Agreement for that period. The California
Utilities shall be entitled to payment of any Receivables Excess allocated to
the Pre-October Period. Said amount shall be paid on a pro rata basis
determined with reference to the total principal amount of the refunds
(including Deemed Distributions) allocated to each of the California Utilities
under this Agreement for that period.

 

6.6.6                        Limitations on California Parties’
Obligations.

 

6.6.6.1               Limitation as to Amounts Owed. Notwithstanding any other provision of this
Agreement, (i) the obligation of any California Party to pay money to
Non-Settling Participants shall be limited to payment of claims in the FERC
Refund Proceeding and the Lockyer v. FERC Remand
arising from the Mirant Parties’ transactions in the CAISO or the PX markets
during the Refund Period, and shall not encompass payment of claims arising
from other transactions or in any other proceeding, and (ii) the obligation of
any California Party to pay money under this Agreement (excluding Article VIII)
shall not, in any event exceed the total amount of MAEM Receivables and/or
Deemed Distributions allocated to that California Party pursuant to this
Agreement for the applicable period.

 

6.6.6.2               Settlement with Non-Settling Participants. The Mirant Parties retain the right to
negotiate with and enter into settlements of claims with Non-Settling
Participants, and such settlements may, subject to any necessary approvals,
establish the amount of refunds payable to such Non-Settling Participants by
the Mirant Parties, but, absent written consent of each of the California
Parties, acting in their sole discretion, the amount of any such settlement
that will be paid from the Mirant Refund Escrow, the California Litigation
Escrow, or otherwise by the California Parties may not exceed the amount that
would have been allocated to that Non-Settling Participant if it had become an
Additional Settling Participant.

 

6.7                                 Sales Addressed. Without limiting the foregoing provisions
of Section 6.6, nothing in this Agreement shall require the California Parties
to bear any liability to any party relating to the Mirant Parties’ sales
outside of the CAISO and the PX markets.

 

6.8                                 Effect of Subsequent FERC Orders and Appeals.

 

6.8.1                        If, as a result of a FERC order on rehearing,
reconsideration, or remand, or an order by a court of appeals (in each case
that is a final order that is no

 

48

 

longer subject to appeal),
the FERC Interest Determination is changed in a way that changes the amount of
interest owed to Market Participants in the CAISO and/or the PX markets with
respect to the MAEM Receivables, then the amount of interest paid on such
receivables shall be trued-up among the CAISO, the PX and the California
Parties, by way of refund or surcharge, with interest at the FERC Interest Rate
or such other rate as FERC may determine to be applicable, to give full effect
to the change from the FERC Interest Determination.

 

6.8.2                        If, as a result of a FERC order on rehearing,
reconsideration, or remand, or an order by a court of appeals (in each case
that is a final order that is no longer subject to appeal), the FERC Interest
Determination is changed in a way that changes the interest amount paid to
Settling Participants associated with refunds and other distributions pursuant
to this Agreement, then the amount of such interest paid to Settling
Participants shall be trued-up among the Settling Participants or between the
Settling Participants and the Mirant Refund Escrow, by way of refund or
surcharge, with interest at the FERC Interest Rate or such
other rate as FERC may determine to be applicable, to give full effect to the
change from the FERC Interest Determination.

 

6.8.3                        If, as a result of a FERC order on rehearing,
reconsideration, or remand, or an order by a court of appeals (in each case
that is a final order that is no longer subject to appeal), the FERC Allowances
Determination is changed in a way that changes the allocation of Fuel Cost
Allowances among the Settling Participants, then the amount of Fuel Cost
Allowances paid to or by each Settling Participant pursuant to this Agreement
shall be trued-up among such Settling Participants, by way of refund or
surcharge, with interest at the FERC Interest Rate or such other rate as FERC
may determine to be applicable, to give full effect to the change from the FERC
Allowances Determination.

 

6.8.4                        If, as a result of a FERC order on rehearing,
reconsideration, or remand, or an order by a court of appeals (in each case
that is a final order that is no longer subject to appeal), the FERC
Receivables Determination is changed in a way that changes the amount of the
MAEM Receivables, then the amount of MAEM Receivables paid by the CAISO and the
PX to the California Parties pursuant to this Agreement shall be trued-up among
the CAISO, the PX and the California Parties, by way of refund or surcharge,
with interest at the FERC Interest Rate or such other rate as FERC may
determine to be applicable, to give full effect to the change from the FERC
Receivables Determination.

 

6.8.5                        If, as a result of a FERC order on rehearing,
reconsideration, or remand, or an order by a court of appeals (in each case
that is a final order that is no longer subject to appeal), the FERC Refund
Determination is changed in a way that increases or decreases the amount of
refunds owed by MAEM to any particular Non-Settling Participant for the
Pre-January 18 Period or the Post-January 17 Period, then the amount paid to or
received from such Non-Settling Participant for the Pre-January 18 Period and
the Post-January 17 Period shall be trued-up among the California Parties and
such Non-Settling Participant, by way of refund or surcharge, with

 

49

 

interest at the FERC Interest
Rate or such other rate as FERC may determine to be applicable, to give full
effect to the change to the FERC Refund Determination.

 

6.8.6                        All payments pursuant to this Section 6.8
shall be made at the time and in the manner specified by FERC or the court or
appeals. If neither FERC nor the court of appeals specifies the time and manner
for such payments, then such payments shall be made by wire transfer within
twenty (20) Business Days after the issuance of the FERC or court of appeals
order (in each case that is a final order no longer subject to appeal) changing
the FERC Interest Determination, the FERC Allowances Determination, the FERC
Receivables Determination, or the FERC Refund Determination, as applicable.

 

6.8.7                        None of the true-ups in this Section 6.8
shall affect or apply to the Mirant Parties.

 

6.9                                 FERC-Directed Compliance. The FERC’s approval of this Agreement in
the FERC Settlement Order shall constitute its direction to each of the CAISO
and the PX to do all of the following:

 

6.9.1                        General Accounting Treatment. The CAISO and the PX shall conform their
books and records to reflect the distributions, transfers and status of
accounts as provided for in this Agreement.

 

6.9.2                        Accounting Treatment of Assigned MAEM
Receivables. The CAISO and
the PX shall reflect on their books and records all distributions from the PX
Settlement Clearing Account to the Mirant Refund Escrow and to the California
Litigation Escrow that represent payments of amounts owed by the CAISO for the
MAEM Receivables. The CAISO shall recognize, as a reduction in the amounts
payable to it by the PX, all distributions from the PX Settlement Clearing
Account under this Agreement that represent payments of amounts owed by the
CAISO for the MAEM Receivables.

 

6.9.3                        Calculation of MAEM Receivables. The CAISO and PX shall calculate the amount
of the MAEM Receivables, and submit those calculations for approval to FERC at
the same time that they submit their calculations of receivables for other
Market Participants. Within ten (10) Business Days after the FERC Receivables
Determination, the CAISO and the PX shall divide the unpaid MAEM Receivables as
determined in the FERC Receivables Determination between the Pre-October
Period, the Pre-January 18 Period and the Post-January 17 Period, to the extent
such division between time periods is not provided in the FERC Receivables
Determination.

 

6.9.4                        Calculation and Accounting Treatment of
Distributions To Settling Participants and Non-Settling Participants. The CAISO and the PX shall calculate the
amount, if any, that the Mirant Parties would owe in refunds pursuant to FERC’s
orders in the FERC Refund Proceeding for each of three time periods, the Pre-October
Period, the Pre-January 18 Period and the Post-January 17 Period (“Unsettled

 

50

 

Mirant
Refund Amounts”), and
shall submit those calculations for approval to FERC at the same time that they
submit their calculations of refunds for other Market Participants.

 

6.9.4.1               Calculation of Refund Amounts For Individual
Market Participants. Following
the date of the FERC Refund Determination, but prior to the date on which
refunds are to be paid pursuant to the FERC Refund Determination, the CAISO and
the PX shall determine the portion of the Unsettled Mirant Refund Amounts that,
absent this Agreement, would be deemed to be owed to each Settling Participant
and Non-Settling Participant that is entitled to receive refunds (“Unsettled
Participant Refund Amount”). The CAISO and the PX shall determine the
Unsettled Participant Refund Amount for each Settling Participant and
Non-Settling Participant by multiplying the Unsettled Mirant Refund Amounts for
each respective time period by each such Participant’s percentage share of
total refunds in the combined CAISO and PX markets for that time period.

 

6.9.4.2               Accounting Treatment of Distributions to
Settling Participants. The
CAISO and the PX shall reflect on their books and records that Settling
Participants have, through this Agreement, been paid in full their share of all
refunds allocated to them under this Agreement and shall not be entitled to
receive the Unsettled Participant Refund Amount if different from the amount of
refunds allocated to each respective Settling Participant under this Agreement.

 

6.9.4.3               Accounting Treatment of Deemed Distributions. The CAISO and the PX shall reflect Deemed
Distributions on the books and records of the CAISO and the PX as reductions in
the amounts owed to the CAISO or the PX by any Settling Participant that
receives a Deemed Distribution.

 

6.9.5                        Adjustments. Any adjustments to the amounts shown in the Allocation Matrix
pursuant to Section 6.4.1 or Section 6.8 will be reflected on the books and
records of the CAISO and the PX when these amounts become known. Any such
changes will be implemented through a compliance filing with, or order by,
FERC.

 

6.9.6                        Interest Accrual. The CAISO and the PX shall reflect in their
books and records, with respect to Settling Participants, that the accrual of
interest at the FERC-established rate on principal amounts subject to the FERC
Interest Determination as provided for in Section 6.5.5 ceases upon the
distribution of funds from the PX or the CAISO to the Mirant Refund Escrow or
to the California Litigation Escrow pursuant to this Agreement, or as may be
accomplished through the implementation of Deemed Distributions, and, for
purposes of the accounts of the PX and the CAISO, no interest on such funds
shall accrue after distribution or crediting as a Deemed Distribution.

 

6.9.7                        Mirant Parties’ Collateral. The California Parties acknowledge and
agree that (i) upon the Settlement Effective Date, all of the Mirant Parties’
liabilities in the PX with respect to the Settling Participants will be deemed
billed and settled for purposes of the PX tariff, and (ii) within fifteen (15)
Business Days of the Settlement Effective Date, the Mirant Parties shall be
entitled to a release by the PX of any and all

 

51

 

collateral posted by any of
the Mirant Parties. FERC’s approval of this Agreement in the FERC Settlement
Order shall constitute its direction to the PX to release and return all
collateral provided by any Mirant Party, and to forego or otherwise withdraw
all requests for additional collateral from any Mirant Party, in each case to
the extent that such collateral or request for collateral applies to
liabilities that are released by this Agreement, or involves an amount of
collateral that is calculated taking into account such liabilities.

 

6.9.8                        Duty of Cooperation. Each Party shall reasonably and in good
faith cooperate and take all reasonable steps to secure (i) the release of
funds from the PX Settlement Clearing Account to the Mirant Refund Escrow or
the California Litigation Escrow, as contemplated by this Agreement, (ii) the
accounting treatment contemplated under this Article VI, and (iii) any other
acts of the PX or the CAISO necessary to effectuate the terms of this
Agreement. This duty of cooperation shall include making individual or joint
requests to the PX or the CAISO, executing appropriate waivers, providing data,
and providing other assistance to the PX and the CAISO as necessary to
implement this Agreement.

 

6.9.9                        Tariff Waivers. FERC approval of this Agreement in the FERC
Settlement Order shall constitute a grant of such waivers of the CAISO and the
PX tariffs as may be necessary for the CAISO and the PX to disburse such funds
as required by this Agreement, to account for transfers, allocations and
distributions of funds as required by this Agreement, and to otherwise
implement this Agreement.

 

6.10                           Mirant Refund Escrow Balance. Any amounts not distributed to Settling
Participants pursuant to this Agreement that remain in the Mirant Refund Escrow
after all refunds and associated interest have been paid to Settling
Participants and Non-Settling Participants, as provided in this Agreement,
shall be transferred to the California Litigation Escrow.

 

ARTICLE VII

MIRANT PARTIES’ COOPERATION AND PROSPECTIVE COMMITMENTS

 

7.1                                 FERC Market Behavior Rules. The Mirant Parties will comply with FERC’s
market behavior rules as established in FERC Docket No. EL01-118, as those rules may be applicable and
amended from time to time. The Mirant Parties agree that, as of the Settlement
Effective Date, they will not pursue a challenge, by means of objection,
rehearing, appeal or otherwise, of market behavior rules adopted or implemented
pursuant to FERC’s Order of November 17, 2003 in Docket No. EL01-118, 105 FERC ¶
61,218 (2003) and the May 19, 2004 order on rehearing, 107 FERC ¶ 61,175 (2004).
This undertaking shall not preclude the Mirant Parties from (i) opposing any
party’s challenges or objections that seek to modify the above-referenced
orders, (ii) defending its behavior in specific enforcement actions or other
FERC proceedings, or (iii) intervening in future proceedings to comment on how
the market behavior rules should be interpreted or applied.

 

52

 

7.2                                 CAISO Tariff Provisions. The Mirant Parties shall comply with
applicable CAISO tariff provisions concerning must-offer obligations unless and
until such time that FERC approves the termination of such obligation(s), as
applicable, provided that all Parties are free to advocate changes in or
interpretations of those tariff provisions.

 

7.3                                 Cooperation with the California Parties. The Mirant Parties shall cooperate with the
California Parties in pursuing claims against suppliers other than the Mirant
Parties and their Related Parties in the FERC Refund Proceeding relating to the
period January 1, 2000 through June 20, 2001, by making available to the
California Parties within a reasonable time, at the reasonable expense of the
California Parties, who shall be obligated to pay the Mirant Parties’
reasonable out-of-pocket expenses associated with their cooperation under this
Section 7.3, other than attorneys’ fees, and without obligating any Mirant
Party to bear any expense under this Section 7.3, such information and
documents as they may reasonably specify that are (i) relevant to such claims,
(ii) in the Mirant Parties’ possession or control, and (iii) not privileged;
provided that, if any such information or document contains proprietary and
sensitive commercial material, such material will be provided under an
agreement requiring that such information or document not be disclosed by the
California Parties to any market participant’s “competitive duty personnel” (as
that term is generally defined for purposes of protective orders entered in
proceedings before FERC). As part of their ongoing cooperation obligations, the
Mirant Parties shall make witnesses available for interviews and depositions by
the California Parties at mutually convenient times and locations. The
California Parties will seek information in a focused manner, and will work
with the Mirant Parties to streamline information and requests as appropriate.
The witness interviews, depositions and all documents disclosed will be subject
to the existing or future confidentiality agreements and protective orders
between the Mirant Parties and the California Parties and the confidentiality
provisions of California Government Code Section 11180, et seq. OMOI shall be permitted to attend
and ask questions at any such interview or deposition, and, at its request,
shall be provided with copies of any written information provided through such
cooperative efforts.

 

7.4                                 Cooperation with the California Attorney
General. The Mirant Parties
shall continue to cooperate with the California Attorney General’s investigations
and litigation related to the California energy crisis, provided that (i) such
cooperation shall not obligate the Mirant Parties to waive any privileges, and
(ii) wherever possible, the California Attorney General shall ensure that the
Mirant Parties’ obligations under this Section 7.4 are not duplicative of their
obligations under Section 7.3. As part of their ongoing cooperation
obligations, the Mirant Parties shall make witnesses available for interviews
and depositions by the California Attorney General at mutually convenient times
and locations and to produce documents as requested. The California Attorney
General will seek information in a focused manner, and will work with the
Mirant Parties to streamline information requests as appropriate. The witness
interviews, depositions, and all documents disclosed pursuant to this Section
7.4 will be subject to the existing or future confidentiality agreements and
protective orders between the California Attorney General and the Mirant
Parties and the confidentiality provisions of California Government Code
Section 11180, et seq. The
documents produced by the Mirant Parties

 

53

 

to the California Attorney
General under this Section 7.4 or pursuant to subpoenas can be used by the
California Attorney General in litigation against third parties (not including
any Debtor) pursuant to a court approved protective order. The California
Attorney General shall give reasonable notice to the Mirant Parties of its intent
to use such documents in litigation which notice shall specify the terms of the
protective order under which they may be used.

 

ARTICLE VIII

RELIABILITY MUST-RUN CONSIDERATION

 

8.1                                 Issuance of RMR Order. PG&E and the Mirant Parties agree to
cooperate to request, promptly after the Settlement Effective Date, that FERC
issue an order in FERC Docket Nos. ER98-495, ER98-1614, ER98-2145 and ER99-3603
regarding the initial decision of the Administrative Law Judge in those
proceedings, 91 FERC ¶ 63,008 (2000) (“RMR Order”) at the earliest
possible date thereafter. PG&E and the Mirant Parties further agree that
the RMR Order shall have no effect upon any charges, including refunds, under
the RMR Agreements incurred before January 1, 2005. PG&E and the Mirant
Parties agree that each shall have the right to seek rehearing and appeal or
modification of the RMR Order to the extent that it has any effect upon any
such Party.

 

8.2                                 Settlement and Release. As of the Settlement Effective Date,
PG&E and the Mirant Parties hereby waive and release all rights to any
refunds or other claims of any kind (except for those specifically allowed
herein) under or in connection with any RMR Agreement, arising from any
circumstances existing prior to and including September 30, 2004, whether then
owing or accrued and whether fixed, inchoate, contingent, liquidated or
unliquidated, known or unknown, including those alleged in or arising from the
FERC RMR Proceedings; provided, however, that neither this release of claims
for refunds, nor any other provision of this Agreement, shall affect the rates
set under the 2005 RMR FERC Settlement. The waiver set forth in Section 9.14
shall apply equally to the release provided for in this Section 8.2 as to the
release of unknown claims. FERC’s issuance of the FERC Settlement Order shall
constitute authority for PG&E to account for and dispose of all claims to
any refunds or any other claims of any kind 
(besides those specifically allowed herein) under or in connection with
any RMR Agreement through the Reliability Services Balancing Account under
PG&E’s Transmission Owner Tariff on file with FERC (the “RSBA”), as
the RSBA or its application may be modified or superseded with authorization of
the FERC, arising from any circumstances existing prior to the effective date
of the FERC Settlement Order, whether then owing or accrued and whether fixed,
inchoate, contingent, liquidated or unliquidated, including those alleged in or
arising from the FERC RMR Proceedings.

 

8.3                                 Prospective RMR Rates. Nothing in this Agreement shall bar the
Mirant Parties from seeking to change the RMR rate methodology in the future or
arguing that a different methodology should be used in other proceedings
involving similar rate issues. Notwithstanding any other provision of this
Agreement, the Annual Fixed Revenue Requirement and other rate components in
Schedule F of each RMR Agreement shall be established and fixed for the period
January 1, 2005 through December 31, 2005 in accordance with the settlement
among PG&E, the CAISO and certain Mirant Parties, as

 

54

 

set forth in Exhibit G (the “2005
RMR FERC Settlement”), provided that (i) the 2005 RMR FERC Settlement shall
be extended to include the period January 1, 2006 through December 31, 2008 if and when the CPUC has provided
the Required Approval by entering into this Agreement as a Party in accordance
with Sections 2.4.1 and 2.5 and the Settlement Effective Date has occurred, and
(ii) the 2005 RMR FERC Settlement shall be extended by one year under the
circumstances provided for in Section 2.2.1. The Mirant Parties and PG&E
acknowledge and agree that, and the FERC Settlement Order shall constitute FERC’s
direction that, during the period January 1, 2005 through December 31, 2008, subject
to the condition in the preceding sentence as to the last three years of that
period, the 2005 RMR FERC Settlement shall supercede and replace in its
entirety the filing that certain Mirant Parties are required to file with FERC
pursuant to Schedule F of the RMR Agreements.

 

8.4                                 Filing of the 2005 RMR FERC Settlement. PG&E and certain Mirant Parties shall,
no later than January 31, 2005, jointly with the CAISO (i) file the 2005 RMR
FERC Settlement with FERC, and (ii) request that FERC approve the 2005 RMR FERC
Settlement in lieu of the filing that certain Mirant Parties are required to
submit to FERC pursuant to Schedule F of the RMR Agreements. All Parties agree
that they shall not oppose the 2005 RMR FERC Settlement. Subject to approval by
the Mirant Bankruptcy Court, the 2005 RMR FERC Settlement (as applied only to
calendar year 2005 and, subject to Section 2.2.1, to calendar year 2006) shall
become effective and shall remain in effect regardless of whether or not the
Settlement Effective Date ever occurs.

 

8.5                                 RMR Claim. PG&E shall receive an allowed, prepetition, non-priority general
unsecured claim against Delta in its Bankruptcy Proceedings in an amount that
will result in a total aggregate distribution to PG&E of $43,000,000 in
cash and/or securities under the Delta Plan (the “RMR Claim”). The RMR
Claim shall be free of offset, defense, reduction, claim or counterclaim of any
kind whatsoever. Upon the effective date of the Delta Plan, and in accordance
with the plan of distribution under the Delta Plan, Delta shall promptly
deliver to PG&E cash and/or securities that are in proportions and have
characteristics at least equal to the most favorable combination of cash and/or
securities that are delivered under the relevant Mirant Plan to any holder of
the MAG senior notes due in 2006 (“RMR Claim Plan Securities”)
(provided, however, that if such notes are reinstated, Delta shall promptly
deliver to PG&E cash and/or securities that are in proportions and have
characteristics at least equal to the most favorable combination of cash and/or
securities that are delivered to any holder of the highest quality MAG senior
notes not reinstated) having an aggregate then-current value of $43,000,000,
which value shall be determined using the Mirant Bankruptcy Court’s valuation
of the RMR Claim Plan Securities in its confirmation order for the Delta Plan
or other applicable Mirant Plan. As soon as practicable after its receipt of
the RMR Claim Plan Securities from Delta, and subject to any limitations that
may be specified in the Mirant Bankruptcy Court’s confirmation order for the
Delta Plan or other applicable Mirant Plan, PG&E shall sell or cause the
sale of the RMR Claim Plan Securities for cash. PG&E shall use commercially
reasonable efforts to liquidate the RMR Claim Plan Securities in a manner that
will maximize their liquidated value and minimize the effect on the market
value of the RMR Claim Plan Securities. To the extent that the aggregate

 

55

 

value of the cash proceeds,
net of third-party transaction costs, from PG&E’s sale of the RMR Claim
Plan Securities, as determined on the date on which PG&E has sold all of
the RMR Claim Plan Securities, plus the cash received by PG&E in payment of
the RMR Claim (if any), is less than $43,000,000, such shortfall (“RMR Claim
Shortfall”) shall be recovered by PG&E in the manner specified below.
PG&E shall notify Delta in writing of the amount of the RMR Claim
Shortfall, and shall simultaneously provide Delta with documentation that
demonstrates the value of the cash proceeds, net of third-party transaction
costs, realized by PG&E from the sale of the RMR Claim Plan Securities (“RMR
Claim Shortfall Notice”). PG&E thereafter shall be entitled to recoup
the RMR Claim Shortfall by applying a monthly credit in each month after Delta’s
receipt of the RMR Claim Shortfall Notice against amounts otherwise owing by
PG&E to Delta during such month under the Wraparound Agreement in effect at
the time an installment is credited, and such right of offset shall be secured
by Delta’s right to receive payments under the Wraparound Agreements. Delta
shall be entitled to accelerate the payment of any RMR Claim Shortfall at any
time in its sole discretion by paying in cash whatever amounts have not been
recovered through the crediting mechanism described in the preceding sentence,
provided that if the RMR Claim Shortfall is not recovered in its entirety
through such crediting mechanism within three (3) months after Delta’s receipt
of the RMR Claim Shortfall Notice, PG&E shall notify Delta and MAG in
writing of the outstanding amount of the RMR Claim Shortfall and MAG shall be
obligated to make a cash payment to PG&E within two (2) Business Days
following MAG’s receipt of such notice in the full amount of the remaining RMR
Claim Shortfall. Delta or MAG, if applicable, shall pay PG&E interest on
the outstanding amount of the RMR Claim Shortfall that remains unpaid within 30
days after Delta’s receipt of the RMR Claim Shortfall Notice, with such interest
to be calculated at the FERC Interest Rate. All cash received by PG&E
pursuant to this Section 8.5 shall be credited by PG&E to the RSBA
contemporaneously with its receipt by PG&E and shall benefit PG&E’s
ratepayers through a prospective reduction in reliability must-run costs.

 

8.6                                 SO2 Claim. PG&E shall receive an allowed, prepetition, non-priority general
unsecured claim against Delta in its Bankruptcy Proceedings in an amount that
will result in a total aggregate distribution to PG&E of $20,000,000 in
cash and/or securities under the Delta Plan (the “SO2 Claim”). The SO2
Claim shall be free of offset, defense, reduction, claim or counterclaim of any
kind whatsoever. The SO2 Claim shall be in full and complete satisfaction of
Proof of Claim No. 6504 in the Bankruptcy Proceedings and PG&E shall
release, withdraw and dismiss with prejudice Proof of Claim No. 6504 in
accordance with Section 4.2.1. Upon the effective date of the Delta Plan, and
in accordance with the plan of distribution under the Delta Plan, Delta shall
promptly deliver to PG&E cash and/or securities that are in proportions and
have characteristics at least equal to the most favorable combination of cash
and/or securities that are delivered under the relevant Mirant Plan to any
holder of the MAG senior notes due in 2006 (“SO2 Claim Plan Securities”)
(provided, however, that if such notes are reinstated, Delta shall promptly
deliver to PG&E cash and/or securities that are in proportions and have
characteristics at least equal to the most favorable combination of cash and/or
securities that are delivered to any holder of the highest quality MAG senior
notes not reinstated) having an aggregate then-current value of $20,000,000,
which value shall be determined using the Mirant Bankruptcy Court’s valuation
of the SO2 Claim

 

56

 

Plan Securities in its confirmation
order for the Delta Plan or other applicable Mirant Plan. As soon as
practicable after its receipt of the SO2 Claim Plan Securities from Delta, and
subject to any limitations that may be specified in the Mirant Bankruptcy Court’s
confirmation order for the Delta Plan or other applicable Mirant Plan, PG&E
shall sell or cause the sale of the SO2 Claim Plan Securities for cash.
PG&E shall use commercially reasonable efforts to liquidate the SO2 Claim
Plan Securities in a manner that will maximize their liquidated value and
minimize the effect on the market value of the SO2 Claim Plan Securities. To
the extent that the aggregate value of the cash proceeds, net of third-party
transaction costs, from PG&E’s sale of the SO2 Claim Plan Securities, as
determined on the date on which PG&E has sold all of the SO2 Claim Plan
Securities, plus the cash received by PG&E in payment of the SO2 Claim (if
any), is less than $20,000,000, such shortfall (“SO2 Claim Shortfall”)
shall be recovered by PG&E in the manner specified below. PG&E shall
notify Delta in writing of the amount of the SO2 Claim Shortfall, and shall
simultaneously provide Delta with documentation that demonstrates the value of
the cash proceeds, net of third-party transaction costs, realized by PG&E
from the sale of the SO2 Claim Plan Securities (“SO2 Claim Shortfall Notice”).
PG&E thereafter shall be entitled to recoup the SO2 Claim Shortfall by applying
a monthly credit in each month after Delta’s receipt of the SO2 Claim Shortfall
Notice against amounts otherwise owing by PG&E to Delta in each such month
under the Wraparound Agreement in effect at the time an installment is
credited, as such amounts are determined after the credit for the RMR Claim
Shortfall, if any, is applied, and such right of offset shall be secured by
Delta’s right to receive payments under the Wraparound Agreements. Delta shall
be entitled to accelerate the payment of any SO2 Claim Shortfall at any time in
its sole discretion by paying in cash whatever amounts have not been recovered
through the crediting mechanism described in the preceding sentence, provided
that if the SO2 Claim Shortfall is not recovered in its entirety through such
crediting mechanism within three (3) months after Delta’s receipt of the SO2
Claim Shortfall Notice, PG&E shall notify Delta and MAG in writing of the
outstanding amount of the SO2 Claim Shortfall and MAG shall be obligated to
make a cash payment to PG&E within two (2) Business Days following MAG’s
receipt of such notice in the full amount of the remaining SO2 Claim Shortfall.
Delta or MAG, if applicable, shall pay PG&E interest on the outstanding
amount of the SO2 Claim Shortfall that remains unpaid within 30 days after
Delta’s receipt of the SO2 Claim Shortfall Notice, with such interest to be
calculated at the FERC Interest Rate. All cash received by PG&E pursuant to
this Section 8.6 shall be treated consistently with section 11.7.3 of CPUC Decision
No. 97-11-074, subject to any subsequent CPUC ratemaking determination.

 

8.7                                 Implementing Agreements.

 

8.7.1                        CC8 Escrow Agreement. Prior to the effective date of the Delta
Plan, Delta, PG&E and the escrow agent thereunder shall execute the CC8
Escrow Agreement.

 

8.7.2                        Wraparound Agreements. As of the Execution Date, Delta and
PG&E shall have executed, or shall execute, the Wraparound Agreements.

 

57

 

8.7.3                        CC8 Transfer Agreement. PG&E, Delta and Mirant Special
Procurement, Inc. shall use good faith, commercially reasonable efforts to
negotiate and execute the CC8 Asset Transfer Agreement (including all
agreements and documents included therein) on or before April 30, 2005. Subject
to the terms and conditions of the CC8 Asset Transfer Agreement, as they may be
modified pursuant to Section 1.1.32, and if the conditions precedent
thereunder, as they may be modified pursuant to Section 1.1.32, to a transfer
of the CC8 Assets are satisfied, Delta and Mirant Special Procurement, Inc.
shall transfer and assign the CC8 Assets to PG&E or its designee, and
PG&E or its designee shall receive and take assignment of the CC8 Assets,
in each case in accordance with the terms and conditions to be specified in the
CC8 Asset Transfer Agreement, as they may be modified pursuant to Section
1.1.32; provided that the transfer of the CC8 Assets to any such designee of
PG&E shall be subject to the approval of the CPUC and the CPUC’s failure to
approve the transfer of the CC8 Assets to such designee shall not be deemed to
be a material change to the terms of the CC8 Asset Transfer Agreement for
purposes of Section 1.1.32. The “CC8 Assets” shall include certain
permits, facilities, contracts, equipment and real property owned or held by
Delta, Mirant Special Procurement, Inc., or other subsidiaries of Mirant
Corporation in connection with Delta’s planned development and construction of
the nominally rated 530 megawatt Contra Costa Unit 8 Power Project (“CC8
Project”). As more specifically identified in the CC8 Asset Transfer
Agreement, the CC8 Assets will consist of (i) two natural gas-fired combustion
turbines and generators, one steam turbine and generator, associated heat
recovery steam generator equipment, main step-up and auxiliary transformers,
steam turbine condenser, certain permit and engineering work performed to date,
the existing engineering, procurement and construction contract, the existing
long-term service agreement, and queue assignments for electric and natural gas
transmission interconnections, and (ii) real property rights or interests that
are sufficient for the reliable and economic construction, ownership, operation
and maintenance of the CC8 Project, as agreed by Delta, Mirant Special
Procurement, Inc., and PG&E in the CC8 Asset Transfer Agreement.
Notwithstanding anything to the contrary herein, the CC8 Assets shall not
include (a) the existing generating units at the existing Pittsburg Power Plant
or the existing generating units at the existing Contra Costa Power Plant, (b)
other property and assets specified in the CC8 Asset Transfer Agreement,
consistent with this Agreement, or (c) land that will be reserved for Delta and
not transferred or leased, as specified in the CC8 Asset Transfer Agreement.

 

8.7.4                        Delta Plant Option Agreement. PG&E and Delta shall use good faith,
commercially reasonable efforts to negotiate and execute the Delta Plant Option
Agreement on or before April 30, 2005. The Delta Plant Option Agreement and the
respective obligations of Delta and PG&E thereunder shall be subject to the
following conditions and requirements.

 

8.7.4.1               If the Delta Plant Option Agreement is not
executed by April 30, 2005, no CC8 Triggering Event shall be deemed to have
occurred and neither Delta nor PG&E shall have any further liability or
obligation with respect to Section 8.7.4 or the Delta Plant Option Agreement.

 

58

 

8.7.4.2               If the Delta Plant Option Agreement is
executed by April 30, 2005, neither the Delta Plant Option Agreement nor the
respective obligations of Delta and PG&E thereunder shall be effective
until the first day on which all of the following approvals have been issued or
otherwise obtained and are in effect with respect thereto:

 

(i)                                     if approval from the Mirant Bankruptcy Court
is required that is separate from the Mirant Bankruptcy Court Approval that is
obtained as set forth in Section 2.4, the Mirant Bankruptcy Court has issued an
unstayed order authorizing Delta to perform its obligations under the Delta
Plant Option Agreement on the terms and conditions specified therein without
material change, modification or condition thereto, or with one or more
material changes, modifications or conditions to such approval that are
acceptable in its or their sole discretion to the party or parties adversely
affected by any such change, modification or condition;

 

(ii)                                  if PG&E Bankruptcy Court approval is
required, the PG&E Bankruptcy Court has issued an unstayed order
authorizing PG&E to perform its obligations under the Delta Plant Option
Agreement on the terms and conditions specified therein without material
change, modification or condition thereto, or with one or more material
changes, modifications or conditions to such approval that are acceptable in its
or their sole discretion to the party or parties adversely affected by any such
change, modification or condition;

 

(iii)                               if FERC approval is required, FERC has issued
an unstayed order authorizing Delta and PG&E to perform their respective
obligations under the Delta Plant Option Agreement on the terms and conditions
specified therein without material change, modification or condition thereto,
or with one or more material changes, modifications or conditions to such
approval that are acceptable in its or their sole discretion to the party or
parties adversely affected by any such change, modification or condition; and

 

(iv)                              the CPUC has issued an unstayed decision on
PG&E’s separate application (“Delta Plant Option Application”) authorizing
PG&E to perform its obligations under the Delta Plant Option Agreement on
the terms and conditions specified therein and in the Delta Plant Option
Application without material change, modification or condition thereto, or with
one or more material changes, modifications or conditions to such approval that
are acceptable in its or their sole discretion to the party or parties to the
Delta Plant Option Agreement adversely affected by any such change,
modification or condition. PG&E and Delta shall each advise the CPUC in comments
filed on the proposed decision on the Delta Plant Option Application (the “Proposed
CPUC Delta Plant Option Decision”), or, to the extent any change,
modification or condition appears in the CPUC’s decision on the Delta Plant
Option Application (the “Original CPUC Delta Plant Option Decision”) but
not in the Proposed CPUC Delta Plant Option Decision, in a petition for
modification of the Original CPUC Delta Plant

 

59

 

Option
Decision that is filed within thirty (30) days after its issuance (“Delta
Plant Option Petition for Modification”), of any change, modification or
condition to such approval contained in the Proposed CPUC Delta Plant Option
Decision or in the Original CPUC Delta Plant Option Decision that PG&E or
Delta considers to be material. Any such change, modification or condition
contained in the Proposed CPUC Delta Plant Option Decision or in the Original
CPUC Delta Plant Option Decision which is not so identified to the CPUC as
material shall be deemed not to be material. Consent or lack of consent to
material changes, modifications or conditions, if any, shall be communicated to
the parties to the Delta Plant Option Agreement and the CPUC by the later of
(a) ten (10) Business Days after the date of issuance of the Original CPUC
Delta Plant Option Decision, or (b) ten (10) Business Days after the issuance
of the CPUC’s decision on any Delta Plant Option Petition for Modification. The
failure of an affected party to provide notice in accordance with the foregoing
sentence shall be deemed to constitute acceptance by such party of the material
change or condition.

 

In
addition, if any of the approvals listed in subparts (i)-(iii) above includes a
material change, modification or condition that adversely affects any party to
the Delta Plant Option Agreement, each party so affected shall communicate its
consent or lack of consent to such change or condition to the other parties to
the Delta Plant Option Agreement within ten (10) Business days after the
effective date of the approval. The failure of an affected party to provide
notice in accordance with the foregoing sentence shall be deemed to constitute
acceptance by such party of the material change or condition.

 

Notwithstanding
anything to the contrary herein, neither the Delta Plant Option Agreement nor
the respective obligations of Delta or PG&E thereunder shall become
effective if one or more of the approving authorities listed in subparts
(i)-(iv) above condition its or their approvals on changes, modifications or
conditions that are inconsistent with the terms and conditions of the approvals
granted by one or more other approving authorities, but shall occur at such
time, if any, when, by further action of the approving authorities, any such inconsistencies
are eliminated.

 

8.7.4.3               If (i) any of the approvals required under
Section 8.7.4.2 are not granted in accordance with the terms of Section
8.7.4.2, or (ii) a CC8 Triggering Event occurs, then the Delta Plant Option
Agreement shall terminate automatically, and neither Delta nor PG&E shall
have any further liability or obligation under Section 8.7.4 or with respect to
the Delta Plant Option Agreement.

 

8.8                                 CC8 Triggering Events. A “CC8 Triggering Event” shall be
deemed to have occurred upon the occurrence of any of the events specified in
Sections 8.8.1 through 8.8.7 below, provided that the occurrence of the CC8
Triggering Event specified in Section 8.8.1 or the occurrence of the CC8
Triggering Event specified in Section 8.8.2 each additionally shall be referred
to herein as a “CC8 Execution Triggering Event”:

 

60

 

8.8.1                        Delta, Mirant Special Procurement, Inc.,
PG&E, or any Mirant Party or any affiliate of a Mirant Party that is a
necessary party to the CC8 Asset Transfer Agreement in order to effectuate the
transfer of the CC8 Assets has not executed the CC8 Asset Transfer Agreement
for any reason regardless of fault on the part of any party by April 30,
2005 (provided that this date may be extended by the mutual written agreement of
Delta, Mirant Special Procurement, Inc. and PG&E);

 

8.8.2                        the CC8 Asset Transfer Agreement has been
executed by April 30, 2005 (or such later date as may be agreed to
pursuant to Section 8.8.1) by Delta, Mirant Special Procurement, Inc.,
PG&E, and each Mirant Party and each affiliate of a Mirant Party that is a
necessary party to the CC8 Asset Transfer Agreement in order to effectuate the
transfer of the CC8 Assets, and the Settlement Effective Date has occurred, but
some additional approval of the Mirant Bankruptcy Court is required to make the
CC8 Asset Transfer Agreement binding and effective as to Delta, Mirant Special
Procurement, Inc. or any such Mirant Party or affiliate of a Mirant Party in
accordance with the terms of the CC8 Asset Transfer Agreement, as they may be
modified pursuant to Section 1.1.32, and the Mirant Bankruptcy Court has
failed or refused to provide such additional approval by the confirmation date
of the Delta Plan (“Unsatisfied Bankruptcy Condition”);

 

8.8.3                        PG&E has given Delta notice by January 31,
2006 that it is not satisfied, for any reason in its sole discretion, with the
condition of the equipment, facilities, property or contracts to be assumed as
part of the CC8 Assets under the CC8 Asset Transfer Agreement, provided that if
PG&E fails to give Mirant such notice by January 31, 2006, PG&E’s
satisfaction or dissatisfaction with the condition of the equipment,
facilities, property or contracts to be assumed as part of the CC8 Assets shall
not be an excuse for any failure to close on the transfer of the CC8 Assets,
provided that Mirant has met its obligations under the CC8 Asset Transfer
Agreement;

 

8.8.4                        the CPUC has issued an order that has become
final either (i) rejecting the CC8 Asset Transfer Agreement or the transactions
contemplated therein in whole or in material part, or (ii) approving the CC8
Asset Transfer Agreement and the transactions contemplated therein on
conditions that do not satisfy the requirements of Section 1.1.32;

 

8.8.5                        the CPUC has not approved the CC8 Asset
Transfer Agreement and the transactions contemplated therein on terms and conditions
that satisfy the requirements of Section 1.1.32 by December 31, 2006;

 

8.8.6                        the CC8 Closing Date has not occurred for any
reason, regardless of fault on the part of any party, by June 30, 2008; or

 

8.8.7                        such other events as may be specified in the CC8
Asset Transfer Agreement.

 

61

 

8.9                                 CC8 Alternative Consideration. PG&E’s right to receive distribution of
the CC8 Claim in accordance with this Section 8.9 and the CC8 Escrow
Agreement shall be referred to herein as the “CC8 Alternative Consideration.”

 

8.9.1                        PG&E shall receive an allowed,
prepetition, non-priority general unsecured claim (the “CC8 Claim”)
against Delta in its Bankruptcy Proceedings in an amount that will result in a
total aggregate distribution to PG&E of either:

 

(i)                                     $70,000,000 in cash and/or securities under
the Delta Plan if (a) PG&E, Delta, Mirant Special Procurement, Inc., and
each Mirant Party and each affiliate of a Mirant Party that is a necessary
party to the CC8 Asset Transfer Agreement in order to effectuate the transfer
of the CC8 Assets have executed the CC8 Asset Transfer Agreement by April 30,
2005 (or such later date as may be agreed to pursuant to Section 8.8.1),
and (b) no Unsatisfied Bankruptcy Condition exists or could exist with the
passage of time, such that a CC8 Execution Triggering Event no longer could
occur; or

 

(ii)                                  $85,000,000 in cash and/or securities under
the Delta Plan if (a) a CC8 Execution Triggering Event has occurred, (b)
PG&E, Delta, Mirant Special Procurement, Inc., and each Mirant Party and
each affiliate of a Mirant Party that is a necessary party to the CC8 Asset
Transfer Agreement in order to effectuate the transfer of the CC8 Assets have
not yet executed the CC8 Asset Transfer Agreement and April 30, 2005 (or
such later date as may be agreed to pursuant to Section 8.8.1) has not yet
passed, or (c) an Unsatisfied Bankruptcy Condition exists or could exist with
the passage of time, such that a CC8 Execution Triggering Event still could
occur,

 

which
CC8 Claim shall be payable to PG&E in accordance with the provisions of
this Agreement and the CC8 Escrow Agreement.

 

8.9.2                        Upon the effective date of the Delta Plan,
and in accordance with the plan of distribution under the Delta Plan, Delta
shall promptly deliver to PG&E cash and/or securities that are in
proportions and have characteristics at least equal to the most favorable
combination of cash and/or securities that are delivered under the relevant Mirant
Plan to any holder of the MAG senior notes due in 2006 (“CC8 Claim Plan Securities”)
(provided, however, that if such notes are reinstated, Delta shall promptly deliver
to PG&E cash and/or securities that are in proportions and have
characteristics at least equal to the most favorable combination of cash and/or
securities that arc delivered to any holder of the highest quality MAG senior
notes not reinstated) having an aggregate then-current value of $70,000,000 if
the provisions of subpart (i) of Section 8.9.1 are applicable, or having
an aggregate then-current value of $85,000,000 if the provisions of subpart
(ii) of Section 8.9.1 are applicable, which value shall be determined in
either case using the Mirant Bankruptcy Court’s valuation of the CC8 Claim Plan
Securities in its confirmation order for the Delta Plan or other applicable
Mirant Plan. PG&E shall deposit all cash received from Delta in respect of
the CC8 Claim (if any) into the CC8 Escrow within two (2) Business Days after
PG&E’s receipt of such cash. As soon as practicable after its receipt of
the CC8 Claim Plan Securities from Delta, and subject to any limitations that
may be specified in the Mirant Bankruptcy Court’s confirmation order for the
Delta Plan or other applicable Mirant Plan, PG&E shall sell or cause the
sale

 

62

 

of
the CC8 Claim Plan Securities for cash and shall deposit all proceeds from such
sale, net of third-party transaction costs and net of any income taxes that may
be due on any gain on the sale of the CC8 Claim Plan Securities (it being
understood that any such gain will be determined by any difference between the
value of the CC8 Claim Plan Securities when received by PG&E and the value
when sold by PG&E, and that the netting of income taxes for deposit into the
CC8 Escrow shall be without prejudice to subsequent CPUC retail ratemaking
determinations of tax treatment), into the CC8 Escrow in accordance with the
provisions of the CC8 Escrow Agreement. PG&E shall use commercially
reasonable efforts to liquidate the CC8 Claim Plan Securities in a manner that
will maximize their liquidated value and minimize the effect on the market
value of the CC8 Claim Plan Securities.

 

8.9.3                        To the extent that the aggregate value of the
cash proceeds, net of third party transaction costs and net of any income taxes
that may be due on any gain on the sale of the CC8 Claim Plan Securities (it
being understood that any such gain will be determined by any difference
between the value of the CC8 Claim Plan Securities when received by PG&E
and the value when sold by PG&E, and that the netting of income taxes for
deposit into the CC8 Escrow shall be without prejudice to subsequent CPUC
retail ratemaking determinations of tax treatment) from PG&E’s sale of the
CC8 Claim Plan Securities, as determined on the date on which PG&E has sold
all of the CC8 Claim Plan Securities, plus the cash received by PG&E in
payment of the CC8 Claim (if any), is less than the value of the CC8 Claim, as
determined according to subpart (i) or subpart (ii) of Section 8.9.1, as
applicable, such shortfall (“CC8 Claim Shortfall”) shall be recovered by
PG&E in the manner specified below. PG&E shall notify Delta in writing
of the amount of the CC8 Claim Shortfall, and shall simultaneously provide
Delta with documentation that demonstrates the value of the cash proceeds, net
of third party transaction costs and net of any income taxes that may be due on
any gain on the sale of the CC8 Claim Plan Securities (it being understood that
any such gain will be determined by any difference between the value of the CC8
Claim Plan Securities when received by PG&E and the value when sold by
PG&E, and that the netting of income taxes for deposit into the CC8 Escrow
shall be without prejudice to subsequent CPUC retail ratemaking determinations
of tax treatment), realized by PG&E from the sale of the CC8 Claim Plan
Securities (“CC8 Claim Shortfall Notice”). After its receipt of the CC8
Claim Shortfall Notice, Delta shall provide for recovery of the CC8 Claim
Shortfall by either (i) depositing additional cash in the amount of the CC8
Claim Shortfall into the CC8 Escrow, to the extent that Delta determines such
additional cash to be available for such deposit, or (ii) crediting the
outstanding CC8 Claim Shortfall against any amounts otherwise owing in each
month following Delta’s receipt of the CC8 Claim Shortfall Notice under the
Wraparound Agreement in effect at the time an installment is credited, as such
amounts are determined after the credits for the RMR Claim Shortfall, if any,
and the SO2 Claim Shortfall, if any, are applied, with such right of offset to
be secured by Delta’s and Potrero’s rights to receive payments under the
Wraparound Agreements. After PG&E’s receipt of an invoice from Delta
showing the amount of any such credit, PG&E shall deposit into the CC8
Escrow cash equivalent to the full amount of such credit in lieu of making the
corresponding payment in such amount and on the date such amount would have
been due under the applicable Wraparound Agreement. Delta shall be entitled to accelerate
the payment of the CC8 Claim Shortfall at any time in its sole

 

63

 

discretion
by depositing cash into the CC8 Escrow in an amount equal to whatever amounts
have not been recovered through Delta’s prior payment of cash, or through the
crediting mechanism described in the preceding sentence, provided that if the
CC8 Claim Shortfall is not recovered in its entirety through such crediting
mechanism within three (3) months after Delta’s receipt of the CC8 Claim
Shortfall Notice, PG&E shall notify Delta and MAG in writing of the
outstanding amount of the CC8 Claim Shortfall and (a) MAG shall make a cash
payment to PG&E within two (2) Business Days following MAG’s receipt of
such notice in the full amount of the remaining CC8 Claim Shortfall plus any
interest due under the next sentence, and (b) PG&E shall deposit the full
amount of such cash payment into the CC8 Escrow within two (2) Business Days
after PG&E receipt of such cash payment from MAG. Delta or MAG, as
applicable, shall pay to PG&E interest on the outstanding amount of the CC8
Claim Shortfall that remains unpaid thirty (30) days after Delta’s receipt of
the CC8 Claim Shortfall Notice, with such interest to be calculated at the FERC
interest rate.

 

8.9.4                        All cash deposited into the CC8 Escrow
pursuant to this Section 8.9 shall remain in the CC8 Escrow until such
time as it is subject to disbursement to PG&E or Delta, as the case may be,
in accordance with this Agreement and the CC8 Escrow Agreement.

 

8.10                           Occurrence of a CC8 Triggering Event. Upon the occurrence of any CC8 Triggering
Event: (i) except as to those CC8 Triggering Events that only a specified party
is entitled to declare upon the giving of notice to the other party (as such
CC8 Triggering Events are designated in Section 8.8 or in the CC8 Asset
Transfer Agreement), Delta and Mirant Special Procurement, Inc. on the one
hand, and PG&E on the other hand, may give notice to the other party or parties
that a CC8 Triggering Event has occurred; (ii) to the extent that they have
been executed, the CC8 Asset Transfer Agreement, the Delta Plant Option
Agreement, and all transactions contemplated thereby shall be terminated and
abandoned, without further action by Delta, Mirant Special Procurement, Inc. or
PG&E, and no party shall have any further obligations or liabilities with
respect thereto; (iii) the obligations of Delta, Mirant Special Procurement,
Inc. and any other subsidiary of Mirant Corporation under the CC8 Asset
Transfer Agreement shall be replaced in their entirety with Delta’s obligation
to transfer and pay to PG&E the CC8 Alternate Consideration; (iv) Delta
shall be obligated to pay, transfer, convey and deliver to PG&E the CC8
Alternative Consideration in the manner and subject to the procedures, terms
and conditions specified herein and in the CC8 Escrow Agreement; and (v)
PG&E shall receive, acquire and accept from Delta the CC8 Alternative Consideration
in accordance with the terms and conditions of this Agreement and the CC8 Escrow
Agreement. All cash received by PG&E pursuant to this Section 8.10
shall be credited by PG&E to the RSBA contemporaneously with its receipt by
PG&E and shall benefit PG&E’s ratepayers through a prospective reduction
in reliability must-run costs.

 

8.11                           Acknowledgement. Each of PG&E and the Mirant Parties
acknowledge and agree that the payment and receipt of the CC8 Alternative
Consideration: (i) fully satisfies and discharges the respective rights and
obligations they would otherwise have under the CC8 Asset Transfer Agreement;
(ii) provides full and adequate consideration

 

64

 

that
is equivalent for all purposes of this Agreement to the transactions
contemplated by the CC8 Asset Transfer Agreement; and (iii) satisfies all
claims, including any portions thereof, that were intended to be satisfied by
the transactions contemplated in the CC8 Asset Transfer Agreement. The payment
of the CC8 Alternative Consideration, and the termination of the CC8 Asset Transfer
Agreement and the Delta Plant Option Agreement shall have no consequence or
impact on this Agreement, its effectiveness, or the Parties’ respective rights
and obligations hereunder. For the avoidance of doubt, the Parties agree that
(x) the consideration received by the Parties under this Agreement is adequate
and reasonable even if the Delta Plan Option Agreement is not executed or never
becomes effective, or if the options granted thereunder are not exercised, and
(y) neither the failure of the applicable Parties to execute the Delta Plan
Option Agreement, nor termination of the Delta Plan Option Agreement after it
is executed, in each case for any reason, will result in any failure of
consideration for purposes of the Settlement or this Agreement.

 

8.12                           Voting Rights. If the Settlement is not approved as part
of the Bankruptcy Rule 9019 Motion or a Rule 9019 Supplemental Solution filed
in accordance with Section 3.2, or if a Bankruptcy Rule 9019 Motion or a
Rule 9019 Supplemental Solution has been approved but the Settlement Effective
Date has not occurred, and provided that a Termination Event has not occurred
and does not occur, then the Parties agree that PG&E shall have (i) an
allowed unsecured claim of $43,000,000, (ii) an allowed unsecured claim of
$20,000,000, and (iii) an allowed unsecured claim of $70,000,000 if the
provisions of subpart (i) of Section 8.9.1 are then applicable, or
$85,000,000 if the provisions of subpart (ii) of Section 8.9.1 are then
applicable, each against Delta solely for voting and feasibility purposes (and
PG&E shall have no other allowed claim for such purposes). So long as a
Termination Event has not occurred, PG&E shall make no other voting or
feasibility objections as to any Mirant Plan with respect to the claims released
or withdrawn in this Article VIII, including with respect to the duplicate
claims of the CAISO or the PX, provided that this Section 8.12 shall not
affect PG&E’s rights with respect to claims not released or withdrawn under
this Article VIII.

 

8.13                           Retention of Certain Claims. Notwithstanding anything to the contrary herein,
the Mirant Parties shall retain all claims, defenses and rights to appeal with respect
to any entity or party that is not a Settling Participant and with respect to
all matters not covered by the releases and waivers set forth in this Article VIII
and Article IX.

 

8.14                           Effect on Other Parties. Except as provided in Section 8.4,
nothing in this Article VIII shall create any rights, obligations or
duties as to Parties other than PG&E, the CPUC and the Mirant Parties,
provided that this Section 8.14 shall not diminish, expand, or otherwise
have any effect on the releases that are provided in Article IX.

 

ARTICLE IX

RELEASES AND WAIVERS

 

In exchange for the consideration specified herein, on the Settlement
Effective Date, the Parties shall effectuate the following.

 

65

 

9.1                                 Applicability. The releases set forth in this Article IX
shall run to, benefit and be enforceable by each Party and each Additional
Settling Participant. In addition, with respect to each Party, each release
given in this Article IX to such Party shall extend to, benefit and be
enforceable by the Related Parties of such Party, regardless of whether such
release, by its express terms, refers to such Related Parties. Notwithstanding
the foregoing, Vastar Resources, Inc. and any present or former subsidiary of
Vastar Resources, Inc. that directly or indirectly held an ownership interest
in Southern Company Energy Marketing L.P. (the predecessor to MAEM) is a
Related Party as to MAEM, but only with respect to claims arising out of the
acts or omissions of MAEM or its present or former managers (to the extent that
such managers are individuals), directors, officers, employees, or agents
relating to periods prior to and including September 2000. The release and
discharge of individuals effectuated by this Section 9.1 is not intended
to expand the number or identity of corporate or organizational entities released
or discharged by the releases set forth in this Article IX, except as
specified above. No persons or entities that are not Parties, Related Parties
or Settling Participants shall be entitled to the benefits of, or entitled to
enforce, the releases set forth in this Article IX.

 

9.2                                 Effectiveness. The releases, waivers, and undertakings in
this Article IX shall become effective upon the Settlement Effective Date.

 

9.3                                 Proceedings and Issues Settled as Between
Mirant Parties and the Settling Participants.

 

9.3.1                        In return for the consideration specified
elsewhere in this Agreement, all claims of any Settling Participant against the
Mirant Parties for damages, refunds, disgorgement of profits, revocation of
market-based rate authority, or other monetary or non-monetary remedies, whether
arising in law or equity, in the FERC Refund Proceeding, the FERC RMR
Proceedings, the FERC Long-Term Contract Proceedings, the FERC MBR Proceedings,
the FERC Gaming Proceeding, FERC Docket No. EL01-10, Lockyer v. FERC, the Lockyer
v. FERC Remand, and the litigation matters referenced in this Article IX,
or as they otherwise relate to sales by the Mirant Parties in the CAISO and PX
markets, sales by Mirant to CERS, or bilateral contracts with any California
Party, in each case during the Settlement Period (and, (i) with respect to the
FERC RMR Proceedings, during all periods prior to and including September 30,
2004, and (ii) with respect to each of the other proceedings identified above,
for such additional periods as are, as of the Execution Date, covered by the
allegations made in such proceedings) shall be deemed settled and released,
provided that none of the proceedings identified above in this Section 9.3.1
shall be deemed settled by this Agreement as to Non-Settling Participants.
Nothing in this Section 9.3.1 shall restrict in any other way the ability
of (a) the Settling Participants to prosecute and pursue the aforementioned
proceedings as against parties other than the Mirant Parties and their Related
Parties, or (b) the Mirant Parties to litigate and assert defenses in the
aforementioned proceedings as against parties other than the Parties or the
Additional Settling Participants. For the avoidance of doubt, the Settlement
and this Agreement are intended to resolve all claims of any Settling
Participant against the Mirant Parties for damages, refunds, disgorgement of
profits, revocation of market-based rate authority, or other monetary or
non-monetary

 

66

 

remedies,
whether arising in law or equity, that have been asserted or alleged in the
proceedings listed in Exhibit D, and all such claims are released.

 

9.3.2                        Each Settling Participant releases, acquits
and forever discharges the Mirant Parties from any and all claims, obligations,
losses, causes of action, allegations, demands and liabilities, for refunds,
forfeiture or disgorgement of profits, payments, penalties, credits, or other
monetary or non-monetary remedies, relief, compensation or consideration of any
kind, asserted in or arising from the proofs of claims and claims filed or
otherwise asserted in the Bankruptcy Proceedings that are required to be
withdrawn pursuant to Article IV. Each Mirant Party releases, acquits and
forever discharges the Settling Participants from any and all claims,
obligations, losses, causes of action, allegations, demands and liabilities,
for refunds, forfeiture or disgorgement of profits, payments, penalties,
credits, or other monetary or non-monetary remedies, relief, compensation or
consideration of any kind, asserted in or arising from (i) the adversary
proceedings and contested matters identified in Exhibit D, and (ii) the claims
that are required to be withdrawn pursuant to Article IV; provided,
however, that the foregoing release by the Mirant Parties shall not release or
otherwise adversely affect any of the claims, rights or defenses asserted by
the Mirant Parties therein against or with respect to any person or entity that
is not a Settling Participant.

 

9.3.3                        The Mirant Parties and the Settling Participants
will not contest the amount of refund liability or offsets attributable to the
Mirant Parties in the FERC Refund Proceeding, except as may be specifically
provided in this Agreement.

 

9.3.4                        The Settling Participants will not dispute,
challenge, seek rehearing, or pursue appeal of the outcome of the FERC
Investigations or FERC’s investigations in Docket No. EL01-10, as they relate
to the Mirant Parties, and will, within five (5) Business Days after the
Settlement Effective Date, withdraw their challenges and not submit any new
challenges to the outcome of the FERC Investigations or FERC’s investigations
in Docket No. EL01-10 as they relate to the Mirant Parties. Without limiting
the foregoing, the California Parties shall withdraw with prejudice as to the
Mirant Parties their petition for rehearing of their motion for clarification
and request for additional procedures in FERC’s Anomalous Bidding Investigation
in San Diego Gas & Elec. Co. v.  Sellers, et al., Docket
Nos. EL00-95-000 et al., (Aug.
18, 2004).

 

9.3.5                        The Settling Participants will not dispute,
challenge, object to, seek rehearing of, or pursue appeal of the settlement
between FERC trial staff and the Mirant Parties in the FERC Gaming Proceeding,
and the Settling Participants will, within five (5) Business Days after the
Settlement Effective Date, withdraw any claim that the amount of that
settlement should have been increased based on the treatment of replacement
reserves, an issue that was addressed in comments on such settlement in the FERC
Gaming Proceeding. The amounts that the Mirant Parties agreed to pay as part of
the settlement of the FERC Gaming Proceeding between certain Mirant Parties and
FERC trial staff shall not be part of the Aggregate Allowed Claim, as specified
in Section 5.1.2.

 

67

 

9.3.6                        The Mirant Parties forgo any claim for
refunds resulting from any mitigation of CERS’ sales of electricity into the
CAISO or the PX markets, as well as surcharges associated with such sales, that
may be required pursuant to FERC’s May 12, 2004 Order on Requests for Rehearing
and Clarification in Docket Nos. EL00-95-087 and EL00-98-074, or its order
dated November 23, 2004 in the same dockets, or subsequent orders. To
implement the terms of this Section 9.3.6, the Mirant Parties hereby
assign, sell, transfer, convey and deliver to CERS, effective as of the
Settlement Effective Date, all of their right, title and interest in and to any
such refunds and surcharges, whether now existing or hereafter arising, free
and clear of all liens, encumbrances and interests of any kind whatsoever in
accordance with Section 363(f) of the Bankruptcy Code, as automatically
perfected by order of the Mirant Bankruptcy Court.

 

9.3.7                        The Mirant Parties shall, within five (5)
Business Days after the Settlement Effective Date, withdraw all outstanding
challenges to the orders in the FERC Refund Proceeding and the FERC Gaming
Proceeding, provided that (i) the Mirant Parties and other Debtors may continue
to challenge any matter involving prospective mitigation for periods after the
Settlement Period, and may pursue any claims or defenses or assert any position
with respect to Non-Settling Participants or other Market Participants or
entities that are not bound by this Agreement, and (ii) the Settling Participants
may, subject to the releases contained in this Agreement, continue to assert their
respective positions on the issue of prospective mitigation for periods after
the Settlement Period, and may continue to assert any position on refunds as
related to suppliers other than the Mirant Parties and their Related Parties.

 

9.3.8                        Each Settling Participant releases, acquits
and forever discharges the Mirant Parties from any and all claims for refunds,
forfeiture of profits, payments, penalties, credits, or other monetary or
non-monetary remedies, relief, penalties, compensation or consideration of any
kind, based on, or arising out of, in whole or in part, the RMR Agreements and
all transactions conducted thereunder prior to and including September 30,
2004, including all claims that were or could have been asserted in the FERC
RMR Proceedings, provided that any rates determined in the 2005 RMR FERC
Settlement to apply on a going forward basis shall not be released by this Agreement.

 

9.3.9                        Each Settling Participant releases, acquits
and forever discharges the Mirant Parties, and each Mirant Party releases,
acquits and forever discharges the Settling Participants, from any and all
claims for refunds, forfeiture of profits, payments, penalties, credits, or
other monetary or non-monetary remedies, relief, penalties, compensation or
consideration of any kind, based on, or arising out of the Mirant-CERS Agreement.
Nothing in this section shall restrict in any way the ability of the California
Parties to prosecute the FERC Long-Term Contract Proceeding as to parties other
than the Mirant Parties and their Related Parties.

 

9.3.10                  This Settlement is not settling any claims of
Non-Settling Participants, or of other Market Participants and entities who are
not Parties or Additional Settling Participants. The Mirant Parties and other
Debtors shall not be deemed to have

 

68

 

waived
their right or ability to assert any and all claims and defenses they may have
against Non-Settling Participants, and the Mirant Parties and other Debtors
shall not be deemed to have waived their right or ability to make any claims,
defenses, arguments or take any positions in any proceedings, including the
FERC Proceedings, the FERC Investigations, and any other proceeding before
FERC, and to resist claims by or pursue claims against such Non-Settling
Participants or other entities who are not Parties or Additional Settling
Participants. Nothing in the Settlement or this Agreement shall preclude or in
any way limit the Mirant Parties’ and other Debtors’ defenses against any
claims by any parties that the Mirant Parties owe obligations to the CAISO, the
PX or any Market Participant or any other entity who is not a Party or an
Additional Settling Participant, outside of the obligations arising under this
Agreement, with respect to the California and western wholesale electricity
markets during the Settlement Period.

 

9.3.11                  Nothing herein shall affect the rights of the
Mirant Parties to assert any and all defenses to claims of FERC, the SWP, the
CAISO and the PX to the extent that such claims are not released and withdrawn
with prejudice as a result of this Agreement.

 

9.3.12                  The FERC Settlement Order shall constitute
confirmation that the Mirant Parties’ obligations to make any payment to any
entity under the FERC Proceedings, the FERC Investigations, or under other
proceedings before FERC with respect to any claim released under the terms of
this Article IX, are hereby settled in their entirety, as provided in this
Agreement.

 

9.3.13                  The FERC Settlement Order shall constitute
authorization for the allocation of any payments provided for in this
Agreement, in the manner specified herein, to the California Utilities and CERS
in their respective capacities as Scheduling Coordinators of record in the
CAISO and/or as participants in the PX.

 

9.3.14                  No Party may seek rehearing of, or appeal,
the FERC Settlement Order.

 

9.4                                 Release of Receivables Disputes. Effective upon the Settlement Effective Date,
the Mirant Parties hereby waive and release any disputes regarding existing
CAISO and PX settlements for the Settlement Period. As assignee of the MAEM
Receivables, the California Parties may pursue, at their expense, any disputes
regarding any future CAISO or PX settlement or invoicing adjustments affecting
the consideration that they receive under this Agreement.

 

9.5                                 FERC, Federal Power Act and Natural Gas Act
Releases. Subject to Section 9.11,
the Mirant Parties on the one hand, and the Settling Participants on the other
hand, hereby, as of the Settlement Effective Date, mutually release and
discharge one another from any and all past, existing and future claims,
obligations, losses, causes of action, allegations, demands and liabilities
arising at FERC and/or under the Federal Power Act or the Natural Gas Act,
whether known or unknown, whether asserted or unasserted, for refunds,
forfeiture or disgorgement of profits, payments, penalties, or

 

69

 

other
monetary or non-monetary remedies, to the extent that any of the foregoing
concern, pertain to, or arise from allegations that:

 

9.5.1                        Any of the Mirant Parties or the Settling
Participants directly or indirectly charged or collected unjust, unreasonable
or otherwise unlawful rates, prices, terms or conditions for electric energy,
ancillary services, transmission congestion or natural gas in the western
electricity markets or in western natural gas markets during the Settlement
Period;

 

9.5.2                        Any of the Mirant Parties or the Settling
Participants directly or indirectly manipulated the western electricity or
western natural gas markets in any fashion (including, but not limited to,
claims of economic or physical withholding, gaming, forms of market
manipulation discussed in the Final FERC Staff Report in Docket PA02-2, the
misreporting of information to trade publications that publish price indices,
or any other forms of market manipulation), or otherwise engaged in any unjust or
illegal trading practices, or otherwise violated any applicable tariff,
regulation, law, rule or order relating to the western electricity or western
natural gas markets during the Settlement Period; or

 

9.5.3                        Any of the California Parties are liable for
payments to the Mirant Parties for congestion charges or for sales of energy or
ancillary services during the Settlement Period.

 

9.5.4                        The releases set forth in Sections 9.5.1
through 9.5.3 do not affect any of the Parties’ rights and obligations in FERC
proceedings pertaining to the Mirant Parties’ market-based rate authority
insofar as and to the extent that those proceedings may relate to transactions
undertaken, any Mirant Party’s behavior, or requests for relief, during or
concerning a period outside the Settlement Period.

 

9.6                                 Civil Claims Releases. Subject to Section 9.11, the Mirant
Parties on the one hand, and the Settling Participants on the other hand,
mutually release and discharge one another from any and all past, existing and
future claims for civil damages and/or equitable relief, whether known or
unknown, whether asserted or unasserted, concerning, pertaining to, or arising
from allegations that:

 

9.6.1                        Any of the Mirant Parties or the Settling
Participants directly or indirectly charged or collected unjust, unreasonable
or otherwise unlawful rates, prices, terms or conditions for electric power,
natural gas, ancillary services, or transmission congestion in the western
electricity markets or in western natural gas markets during the Settlement
Period;

 

9.6.2                        During the Settlement Period, any of the
Mirant Parties or the Settling Participants directly or indirectly manipulated
the western electricity or western natural gas markets or prices paid therein,
including any published or unpublished price indices, in any fashion
(including, but not limited to, claims of economic or physical withholding,
gaming, misreporting of prices, forms of market manipulation discussed in the
Final FERC Staff Report in Docket PA02-2, or any other forms of market

 

70

 

manipulation),
or otherwise engaged in any unjust or illegal trading practices, or otherwise
violated any applicable tariff, regulation, law, rule or order relating to the
western electricity or western natural gas markets during the Settlement
Period;

 

9.6.3                        Any of the Mirant Parties or the Settling
Participants was unjustly enriched by any conduct giving rise to the claims
released in this Agreement;

 

9.6.4                        Any of the California Parties are liable for
payments to the Mirant Parties for congestion charges or for sales of energy or
ancillary services during the Settlement Period;

 

9.6.5                        Any of the Mirant Parties or the Settling
Participants during the Settlement Period engaged in illegal acquisitions
and/or holdings and/or control of assets, benefits, services or rights related
to such assets, under section 7 of the Clayton Act, 15 U.S.C. § 18;

 

9.6.6                        Any of the Mirant Parties or the Settling
Participants engaged in conduct that forms the basis for the claims alleged in
the proceedings listed on Exhibit D during any period alleged in such claims;
and

 

9.6.7                        Any of the Mirant Parties engaged in conduct
that forms the basis for the claims alleged by the California Attorney General
in the following proceedings, in each case with respect to all time periods
alleged therein: (i) the proceedings that were originally filed by the
California Attorney General in California Superior Court in the County of San
Francisco, and which was subsequently removed to the United States District Court
for the Northern District of California, California ex rel. Lockyer v. Mirant
Corp., et al., Northern District
of California Docket No. 02-1914, et al.; (ii) the proceedings originally filed by the California
Attorney General in the California Superior Court in the County of San
Francisco, and which was subsequently removed to the United States District
Court for the Northern District of California, California ex rel. Lockyer v.
Mirant Corp., et al., Northern
District of California Docket No. 02-2207, et
al.; (iii) the proceedings originally filed by the California
Attorney General in the California Superior Court in the County of San
Francisco, and which was subsequently removed to the United States District
Court for the Northern District of California, California ex rel.  Lockyer v. Mirant Corp., et al., Northern District of California
Docket No. 04-3924 VRW, et al.; and
(iv) the proceedings originally filed by the California Attorney General in the
United States District Court for the Northern District of California,
California ex rel. Lockyer v. Mirant Corp., et
al., Northern District of California Docket No. 02-1787 VRW;
provided that the releases provided in the foregoing provisions of this Section 9.6.7
are provided only by the California Attorney General. For the avoidance of
doubt, all Parties agree that all of the foregoing proceedings shall be
dismissed with prejudice, and that the limitation at the end of the foregoing
sentence does not diminish, restrict or otherwise affect the releases provided
in other provisions of this Article IX.

 

9.7                                 CERS Invoice Disputes. Effective upon the Settlement Effective
Date, CERS hereby releases, acquits and forever discharges the Mirant Parties,
and the Mirant

 

71

 

Parties
hereby release, acquit and forever discharge CERS, from any and all claims for
refunds, payments, penalties, credits, or other monetary or non-monetary
remedies, compensation or consideration of any kind, whether known or unknown,
whether asserted or unasserted, and whether contingent, fixed or inchoate,
based on, or arising out of, in whole or in part, the reconciliation of
payments as reflected on invoices from MAEM to CERS for bilateral sales
conducted during 2000 and 2001, including claims asserted in Proof of Claim
Nos. 7,549 through 7,555.

 

9.8                                 Scope of FERC, Federal Power Act and Civil
Claim Releases. The scope of
releases provided in Sections 9.5 and 9.6 shall include releases, subject to Section 9.11,
of the following with respect to the Settlement Period;

 

9.8.1                        All claims against the Mirant Parties for
refunds or other price adjustments arising from sales of electricity and
natural gas by the Mirant Parties into the western electricity or natural gas
markets;

 

9.8.2                        To the extent not encompassed in Section 9.6,
all claims against the Mirant Parties for damages and other relief based on
federal and/or state antitrust statutes, Section 17200 of the California
Business and Professions Code and any similar statutes of any other state,
common law torts, and any and all similar civil statutes and causes of action
at law or in equity for damages or restitution as such claims or damages would
concern any Mirant Party’s sales of electricity or natural gas in the western markets;

 

9.8.3                        Claims against the Mirant Parties for any
transactions in the western electricity or natural gas markets not currently
being litigated at FERC but included in rehearing applications pending at FERC,
or included in petitions for review, filed by one or more of the Settling
Participants; and

 

9.8.4                        Claims against the Mirant Parties seeking
refunds, damages, restitution and/or penalties associated with any allegations
that the Mirant Parties manipulated published natural gas or electricity price
indices directly (including through misreporting to price index publishers) or
indirectly (including through alleged wash trades).

 

9.9                                 Cooperation with Investigations and
Withdrawal from Proceedings.
The Settling Participants shall continue to cooperate with all state and
federal investigations and to participate in all matters before FERC; provided
that, as of the Settlement Effective Date, the Settling Participants shall
withdraw from and shall not prosecute any litigation, administrative
proceedings or investigations with respect to the Mirant Parties insofar as
such prosecution would be inconsistent with the release of claims to be
effectuated by this Agreement.

 

9.10                           Lockyer v. FERC. The releases set forth in this Article IX
include any claims, causes of action, demands or defenses of the Settling
Participants against the Mirant Parties at FERC that are premised on the
factual and legal contentions forming the basis for the appeal to the United
States Court of Appeals for the Ninth Circuit in Lockyer

 

72

 

v. FERC, Case
No. 02-73093, 383 F.3d 1006 (9th Cir. 2004) (“Lockyer Decision”).
 The California Attorney General and the
other Settling Participants agree that, within ten (10) days of the Settlement
Effective Date, they will file at FERC to withdraw all claims against the
Mirant Parties in Lockyer v. FERC, and
the Lockyer v. FERC Remand. FERC’s
grant of the relief requested in such filing shall not be a condition precedent
to any of the Parties’ obligations under this Agreement. The Mirant Parties
expressly reserve the right to seek rehearing of or appeal the Lockyer
Decision, and nothing in this Agreement shall constitute a waiver of, or
otherwise preclude, foreclose or prejudice such rights in any manner. The
California Parties retain all of their rights to oppose any such request for
rehearing or appeal.

 

9.11                           Limitations on Releases.

 

9.11.1                  The releases set forth in this Article IX
do not constitute a waiver or release by the California Attorney General of (i)
the right to proceed under California criminal laws against any of the Mirant
Parties for any actions of or omissions by the Mirant Parties both before or
subsequent to the Settlement Effective Date, except as to criminal statue
violations that serve as a predicate for civil claims, including under Section 17200
of California Business and Professions Code, all of which are waived and released,
or (ii) for any actions or omissions which were willfully fraudulent; provided,
however, that this limitation on the scope of the releases set forth in this Article IX
does not apply to any claim that is based solely upon any act or omission of
the Mirant Parties that occurred prior to the Settlement Effective Date and
either (a) is currently known as of the date of execution of this Agreement by
the California Attorney General’s office, or (b) has previously been remediated
by the Settlement, this Agreement or otherwise. This Section 9.11.1 is
without prejudice to the rights of the Mirant Parties to seek a discharge under
any Mirant Plans of the claims preserved by the California Attorney General in
this Section 9.11.1, and to the rights of the California Attorney General
to object to confirmation of any Mirant Plans because the Mirant Parties seek
such discharge.

 

9.11.2                  All Parties to this Agreement shall remain
free to participate in any existing proceeding, or to initiate or participate
in any future proceeding, addressing matters not settled in this Agreement,
such as generic issues concerning market structure, scheduling rules, generally
applicable market rules, and generally applicable price mitigation.

 

9.12                           No Assistance to Remaining Litigants. No Settling Participant shall subsidize or
assist the litigation, discovery, 

investigation
or analysis of any other party or Market Participant pertaining to the claims,
or the subject matter of the claims, released as to the Mirant Parties pursuant
to this Agreement, provided that nothing herein shall preclude any Settling
Participant from continuing litigation on the same or similar grounds, or
related investigatory activities, against suppliers other than the Mirant
Parties, their Related Parties, and the other entities released herein in
accordance with this Article IX. The Mirant Parties shall not provide
assistance to any other litigants in their efforts relating to litigation
against the California Parties concerning the matters that are the subject of
the releases provided in this Article IX, provided that nothing herein
shall preclude the Mirant Parties from participating in proceedings or
submitting filings or

 

73

 

pleadings
jointly with other parties in connection with the Mirant Parties’ defense of
claims by Non-Settling Participants. Nothing in this Section 9.12 shall
preclude Parties from providing information to others as required by law.

 

9.13                           Waiver of Appeals and Requests for Rehearing.

 

9.13.1                  Each of the Settling Participants shall (i)
forego any rights to seek rehearing of, appeal, or seek reconsideration
pursuant to section 502(j) of the Bankruptcy Code with respect to any and
all of the claims released and matters settled herein by each of them with
respect to any of the Mirant Parties, and (ii) take appropriate steps to
withdraw any pending requests for rehearing or appeals (including interventions
in appeals) with respect to such released claims as against any Mirant Parties.

 

9.13.2                  Each of the Mirant Parties shall (i) forego
any rights to seek rehearing of, appeal, or seek reconsideration pursuant to section 502(j)
of the Bankruptcy Code with respect to, any and all of the claims released and
matters settled herein by them with respect to any of the Settling Participants
and (ii) take appropriate steps to withdraw any pending requests for rehearing
or appeals (including interventions in appeals) with respect to such released
claims as against any Settling Participants.

 

9.13.3                  Nothing in this Settlement shall preclude any
of the Settling Participants from participating fully in any request for
rehearing or appellate proceeding to the extent those proceedings relate to
claims by the Settling Participants against Market Participants other than the
Mirant Parties or their Related Parties. Nothing in this Settlement shall
preclude any of the Mirant Parties from participating fully in any request for
rehearing or appellate proceeding to the extent those proceedings relate to
claims by the Mirant Parties against Market Participants other than the
Settling Participants or their Related Parties.

 

9.14                           Effectiveness of Releases; Waiver of Unknown
Claims. The Mirant Parties
and the Settling Participants 

acknowledge
and agree that, except as expressly reserved in Section 9.11, it is their
intention that the releases granted pursuant to this Article IX and
pursuant to Section 8.2 and Section 11.2 shall be effective as a bar
to all causes of action and demands for monetary relief, including costs,
expenses, attorneys’ fees, damages, losses and liabilities of every kind, known
or unknown, suspected or unsuspected, specified in this Article IX and in Section 8.2
and Section 11.2. In furtherance of this intention, the Mirant Parties, on
the one hand, and the Settling Participants, on the other hand, with respect to
the specific matters released herein, each knowingly, voluntarily,
intentionally and expressly waive, as against each other, any and all rights
and benefits conferred by California Civil Code Section 1542 and any law
of any state or territory of the United States or principle of common law that
is similar to Section 1542. Section 1542 provides:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN

 

74

 

BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

 

In connection with such waiver and relinquishment, the Mirant Parties
and the Settling Participants each acknowledge that they are aware that they
may hereafter discover facts in addition to or different from those which they
know or believe to be true and with respect to the subject matter of this
Agreement, but that it is their intention hereby, except as expressly reserved
in Section 9.11, to fully, finally and forever settle and release all
matters, disputes, differences, known or unknown, suspected or unsuspected,
that are set forth in this Article IX and in Section 8.2 and Section 11.2.
This Agreement is intended to include in its effect, without limitation, other
than the limitations set forth in Section 9.11, all claims encompassed
within the settlement and releases set forth in this Article IX and in Section 8.2
and Section 11.2, including those which the Mirant Parties and the
Settling Participants may not know or suspect to exist at the time of execution
of this Agreement, and this Agreement contemplates the extinguishment of all
such claims, except as expressly reserved in Section 9.11. The releases
set forth in this Article IX and in Section 8.2 and Section 11.2
shall be, and remain in effect as, full and complete releases, notwithstanding
the discovery or existence of any such additional or different facts relating
to the subject matter of this Agreement. Notwithstanding the waiver of
California Civil Code Section 1542, the Mirant Parties and the Settling Participants
acknowledge and agree that the releases provided for in this Agreement are
specific to the matters set forth in this Article IX and in Section 8.2
and Section 11.2 and are not intended to create general releases as to all
claims, or potential claims, between the Settling Participants or any of them
and the Mirant Parties. Each Party continues to have its rights and defenses
under this Agreement and the Implementing Agreements, none of which are
released or impaired.

 

9.15                           Good Faith Settlement. The Parties agree that the Settlement as
set forth in this Agreement is a “good faith settlement” within the meaning of
California Code of Civil Procedure section 877.6 (and any similar law of
any other applicable jurisdiction) for purposes of eliminating third-party
indemnity contribution and arbitration claims against the Debtors. All Parties
shall support a finding by the Mirant Bankruptcy Court to that effect as well
as in the Required Approvals for this Agreement and the Implementing
Agreements.

 

9.16                           Release By Mirant Parties of Avoiding Power
Claims. Effective on the
Settlement Effective Date, each of the Mirant Parties, acting on behalf of
itself and on behalf of any party (or parties) purporting to act on behalf of
the estate of such Mirant Party, releases the California Parties from any and
all claims, obligations, causes of action and liabilities (i) under any of
sections 542, 544, 545, 547, 548, 549, or 553 of the Bankruptcy Code to avoid
any alleged transfer to or seek turnover from a California Party, (ii) under section 550
of the Bankruptcy Code to recover any such alleged transfer, (iii) under section 510(c)
to subordinate any claim of a California Party, or (iv) under section 502(d)
to disallow any claim of a California Party based upon any alleged avoidable
transfer so released. The Mirant Parties shall cause the other Debtors to
provide comparable releases to the releases set out in this Section 9.16
to the California Parties in conjunction with obtaining the Mirant Bankruptcy
Court’s approval of the

 

75

 

Settlement
and this Agreement. Notwithstanding the foregoing, nothing herein shall be
deemed to release, waive or adversely affect any right or defense by any Mirant
Party as to any right of setoff or recoupment claimed by any California Party
(or any other person or entity), including without limitation under Section 553,
that is not released hereunder.

 

ARTICLE X

STAY OF PROCEEDINGS

 

10.1                           Requests for Stay. As promptly as possible after the Execution
Date, but in no event later than January 31, 2005, the Parties shall seek
an immediate stay, or an extension of any stay then in effect, of the
proceedings set forth on Exhibit D, which stay shall apply with equal force to
any Official Committee or other party in interest in the Bankruptcy Proceedings
and shall remain in full force and effect until the earlier of (i) termination
of this Agreement pursuant to the terms of Section 2.8, or (ii) the
Settlement Effective Date (the “Stay Period”). No collateral estoppel or
other prejudice to any Party’s rights, claims or defenses shall arise during or
on account of the Stay Period. Such stays shall not prejudice any existing
stays in effect at such time.

 

10.2                           No Further Action. Commencing on the Execution Date and
continuing throughout the Stay Period, the Parties shall not file any motion or
other pleading requesting relief from the Mirant Bankruptcy Court, the Mirant
District Court, the other courts before which the stayed actions are pending,
or FERC in respect of the stayed actions or proceedings, except as may be
necessary to continue the stay or to effectuate the Mirant Plan(s), in a manner
consistent with the Settlement and this Agreement.

 

10.3                           Cooperation. The Parties shall cooperate, at their own expense, to the extent
necessary to effectuate and implement all of the terms and conditions of this Article X
and shall exercise their reasonable efforts to obtain the stays and deferrals herein
described.

 

10.4                           Rights Reserved. Nothing in this Article X shall
preclude any Party from taking such actions in or with respect to the
proceedings identified in Exhibit D as may be necessary to preserve or advance
its rights or defenses with respect to parties to such proceedings other than
the Parties, the Debtors, or Additionally Settling Participants during the Stay
Period.

 

ARTICLE XI

ADDITIONAL SETTLING PARTICIPANTS

 

11.1                           Election to Participate in Settlement. The Parties acknowledge and agree that upon
the filing of this Agreement at FERC, any Market Participant that elects to be
bound by this Agreement may become an Additional Settling Participant and shall
be bound by the terms hereof by notifying FERC that the Market Participant
wishes to become a Settling Participant. Copies of such notice shall be served on
the service lists to the FERC Refund Proceeding in accordance with FERC’s
rules. Any Market Participant that has not provided such notice on or before
the date that is five (5) Business Days following the issuance by FERC of the
FERC Settlement Order shall have no right

 

76

 

to
participate in the Settlement contemplated in this Agreement, absent the
agreement of the California Parties and the Mirant Parties, and shall be deemed
to be a Non-Settling Participant for purposes of this Agreement. For purposes
of clarity, any Additional Settling Participant shall have the same rights and
obligations under this Agreement that apply to other Settling Participants,
even though such Additional Settling Participants shall not be Parties hereto.

 

11.2                           Releases. Each Market Participant electing to be an Additional Settling
Participant bound by this Agreement pursuant to Section 11.1 shall be
deemed to have provided all of the waivers and releases of claims against the
Mirant Parties and their Related Parties that are set forth in Article IX,
and the Mirant Parties shall be deemed to have provided or received the
releases set forth in Article IX as they relate to such Additional
Settling Participant. Non-Settling Participants shall not be deemed to have
provided or received any of the releases set forth in this Agreement.

 

ARTICLE XII

REPRESENTATIONS AND WARRANTIES

 

12.1                           Representations and Warranties of the
Settling Participants. Each
Settling Participant hereby represents and warrants that, except for any
approvals or authorizations required by the Bankruptcy Code, approval of FERC
under the Federal Power Act, and the expiration of the applicable waiting
period in connection with any Hart-Scott-Rodino filing required to effectuate
the transfer of the CC8 Assets, (i) the execution, delivery and performance by
such Settling Participant of this Agreement has been duly authorized and all
necessary action has been taken by such Settling Participant in connection with
such authorization; (ii) this Agreement does not and will not require any
consent or approval of, notice to or action by, any person or entity in order
to be effective and enforceable; (iii) it is the sole owner, actual
beneficiary, real party in interest and/or responsible party of the claims
which are being resolved and compromised by it pursuant to this Agreement, and
there has been no sale, assignment, transfer, pledge, hypothecation or
attempted sale, assignment, transfer, pledge or hypothecation, by it of any such
actual or beneficial rights or claims, whether directly or indirectly, by
operation of law or otherwise; and (iv) when executed and delivered by such
Settling Participant, this Agreement and the Initial Implementing Agreements
will constitute a legal, valid and binding obligation of such Settling
Participant that is enforceable against it in accordance with the terms hereof
and thereof. The representations and warranties set forth in this Section 12.1
shall be effective (a) as to all Settling Participants other than Additional Settling
Participants, as of the Execution Date, and (b) as to Additional Settling Participants,
as of the date of opt-in in accordance with Article XI.

 

12.2                           Representations and Warranties of the Mirant
Parties. Each Mirant Party hereby
represents and warrants that, except for any approvals or authorizations
required by the Bankruptcy Code, approval of FERC under the Federal Power Act,
and the expiration of the applicable waiting period in connection with any
Hart-Scott-Rodino filing required to effectuate the transfer of the CC8 Assets,
(i) the execution, delivery and performance by such Mirant Party of this
Agreement has been duly authorized and all necessary action has been taken by
such Mirant Party in connection with such

 

77

 

authorization;
(ii) this Agreement does not and will not require any consent or approval of,
notice to or action by, any person or entity in order to be effective and
enforceable; (iii) it is the sole owner, actual beneficiary, real party in
interest and/or responsible party of the claims which are being resolved and
compromised by it pursuant to this Agreement; and (iv) when executed and
delivered by such Mirant Party, this Agreement and the Implementing Agreements
will constitute a legal, valid and binding obligation of such Mirant Party that
is enforceable against it in accordance with the terms hereof and thereof.

 

ARTICLE XIII

RESOLUTION OF DISPUTES

 

13.1                           Dispute Resolution. After the effective date of the Mirant
Plans, disputes arising under this Agreement or the Implementing Agreements
shall be resolved through the following process; provided however, that any
dispute or disagreement relating to the requirements or interpretation of any
Mirant Plan shall be subject to the jurisdiction of, and shall be brought in
the first instance before, the Mirant Bankruptcy Court.

 

13.2                           Notice. Notice of any dispute arising under this Agreement that is subject to
the dispute resolution process provided for in this Article XIII shall be
provided to all Parties. Each Party receiving such notice shall, within ten
(10) Business Days after such receipt, provide a written response to the Party
giving the notice, which response shall indicate the responding Party’s
position with respect to the dispute and whether it considers itself to be an
affected Party that is entitled to participate in the dispute resolution
process.

 

13.3                           In-Person Meeting. The Parties affected by the dispute shall
first participate in an in-person meeting to attempt to resolve the dispute.

 

13.4                           Mediation. If the dispute remains unresolved after the Parties have participated
in an in-person meeting or no meeting has occurred within thirty (30) days after
one Party has given the other Parties notice of the dispute, the Parties then
shall participate in a non-binding mediation before a neutral mediator mutually
agreed upon by the Parties.

 

13.5                           Binding Arbitration. If the Parties cannot agree upon a mediator
or the dispute has not been resolved by non-binding mediation within ninety
(90) days after one Party has given the other Parties notice of the dispute,
the Parties shall participate in binding arbitration before a single, neutral
arbitrator selected from the national panel maintained by the CPR Institute for
Dispute Resolution and utilizing the CPR Rules for Non-Administered Arbitration
in effect as of the Execution Date. Any arbitration hearing conducted under
this Section 13.5 shall commence no later than 180 days after one Party has
given the other Parties notice of the dispute, provided that the arbitrator may
extend the hearing date at the request of a Party to the dispute upon a showing
of good cause.

 

78

 

ARTICLE XIV

MISCELLANEOUS

 

14.1                           Notices. All notices, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given: (i) when personally delivered;
(ii) upon actual receipt (as established by confirmation of receipt or
otherwise) during normal business hours, otherwise on the first (lst)
Business Day thereafter, if transmitted by facsimile or telecopier with
confirmation of receipt; (iii) on the date of receipt when mailed by certified
mail, return receipt requested, postage prepaid; or (iv) on the date of receipt
when sent by overnight courier; in each case, to the addresses set forth in Section 14.2,
or to such other addresses as a Party may from time to time specify by notice
to the other Parties given pursuant to this Section 14.1.

 

14.2                           Parties’ Addresses. Notices required under this Agreement shall
be delivered to:

 

	
  If to the Mirant Parties:

  
	
   

  
	
  Douglas
  L. Miller

  
	
  General
  Counsel

  
	
  Mirant
  Corporation

  
	
  1155
  Perimeter Center West

  
	
  Atlanta,
  Georgia 30338

  
	
  Telephone:

  	
  678-579-7924

  
	
  Facsimile:

  	
  678-579-6767

  
	
  Email:

  	
  douglas.miller@mirant.com

  
	
   

  
	
  With a copy to:

  
	
   

  
	
  Debra
  Raggio Bolton

  
	
  Associate
  General Counsel

  
	
  Mirant
  Corporation

  
	
  601
  Thirteenth St., NW Suite 580

  
	
  Washington,
  DC 20005

  
	
  Telephone:

  	
  202-585-3809

  
	
  Facsimile:

  	
  202-678-5942

  
	
  E-Mail:

  	
  debra.bolton@mirant.com

  
	
   

  
	
  If to PG&E:

  
	
   

  
	
  Joshua
  Bar-Lev

  
	
   

  
	
  Physical
  address:

  
	
  PG&E
  Legal Department

  
	
  77
  Beale Street

  
	
  San
  Francisco, CA 94120

  

 

79

 

	
  Mailing address:

  
	
   

  
	
  Mail
  Code B30A

  
	
  P.O.
  Box 7442

  
	
  San
  Francisco, CA 94120-7442

  
	
  Telephone:

  	
  (415)
  973-4507

  
	
  Facsimile:

  	
  (415)
  973-5520

  
	
  E-Mail:

  	
  jxb7@pge.com

  
	
   

  
	
  With a copy to:

  
	
   

  
	
  Stan
  Berman

  
	
  Heller,
  Ehrman, White & McAuliffe

  
	
  701
  Fifth Avenue, Suite 6100

  
	
  Seattle,
  WA 98104-7098

  
	
  Telephone:

  	
  (206)
  389-4276

  
	
  Facsimile:

  	
  (206)
  515-8927

  
	
  E-Mail:

  	
  sberman@hewm.com

  
	
   

  
	
  If to SCE:

  
	
   

  
	
  Russell
  Swartz

  
	
  Southern
  California Edison Company

  
	
  2244
  Walnut Grove Avenue

  
	
  Rosemead,
  CA 91770

  
	
  Telephone:
  

  	
  (626)
  302-3925

  
	
  Facsimile:

  	
  (626)
  302-1904

  
	
  E-Mail:

  	
  russell.swartz@sce.com

  
	
   

  
	
  With a copy to:

  
	
   

  
	
  Richard
  Roberts

  
	
  Steptoe
  & Johnson LLC

  
	
  1330
  Connecticut Avenue, N.W.

  
	
  Washington,
  D.C. 20036-1795

  
	
  Telephone:

  	
  (202)
  429-6756

  
	
  Facsimile:

  	
  (202)
  429-3902

  
	
  E-Mail:

  	
  RRoberts@Steptoe.com

  
	
   

  
	
  If to SDG&E:

  
	
   

  
	
  Don
  Garber

  
	
  San
  Diego Gas & Electric Company

  
	
  101
  Ash Street

  
	
  San
  Diego, CA 92101-3017

  
	
  Telephone:

  	
  (619)
  696-4539

  
	
  Facsimile:

  	
  (619)
  699-5027

  
	
  E-Mail:
  dgarber@sempra.com

  

 

80

 

	
  With a copy to:

  
	
   

  
	
  Nicholas
  W. Fels

  
	
  Covington
  & Burling

  
	
  1201
  Pennsylvania Avenue, N.W.

  
	
  Washington,
  D.C. 20004

  
	
  Telephone:

  	
  (202)
  662-5648

  
	
  Facsimile:

  	
  (202)
  662-6291

  
	
  E-Mail:
  nfels@cov.com

  
	
   

  
	
  If to OMOI:

  
	
   

  
	
  Robert
  Pease

  
	
  Office
  of Market Oversight and Investigations

  
	
  Federal
  Energy Regulatory Commission

  
	
  888
  1st Street, NE

  
	
  Washington,
  D.C 20426

  
	
  Telephone:

  	
  (202)
  502-8131

  
	
  Facsimile:

  	
  (202)
  208-0057

  
	
  E-Mail:
  Robert.Pease@ferc.gov

  
	
   

  
	
  With a copy to:

  
	
   

  
	
  Lee
  Ann Watson

  
	
  Office
  of Market Oversight and Investigations

  
	
  Federal
  Energy Regulatory Commission

  
	
  888
  1st Street, NE

  
	
  Washington,
  D.C. 20426

  
	
  Telephone:

  	
  (202)
  502-6317

  
	
  Facsimile:

  	
  (202)
  208-0057

  
	
  E-Mail:
  LeeAnn.Watson@ferc.gov

  
	
   

  
	
  If to CERS:

  
	
   

  
	
  Peter
  S. Garris

  
	
  Deputy
  Director

  
	
  California
  Department of Water Resources

  
	
  3310
  El Camino Avenue, Suite 120

  
	
  Sacramento,
  CA 95821

  
	
  Telephone:

  	
  (916)
  574-2733

  
	
  Facsimile:

  	
  (916)
  574-0301

  
	
  E-Mail:
  pgarris@water.ca.gov

  

 

81

 

	
  With a copy to:

  
	
   

  
	
  Office
  of the Chief Counsel

  
	
  1416
  Ninth Street, Room 1118

  
	
  Sacramento,
  CA 95814

  
	
  Telephone:

  	
  (916)
  653-7084

  
	
  Facsimile:

  	
  (916)
  654-9822

  
	
  E-Mail:
  nsaracin@water.ca.gov

  
	
   

  
	
  If to CEOB:

  
	
   

  
	
  Erik
  Saltmarsh

  
	
  California
  Electricity Oversight Board 

  
	
  770
  L Street, Suite 1250

  
	
  Sacramento,
  CA 95814

  
	
  Telephone:

  	
  (916)
  322-8601

  
	
  Facsimile:

  	
  (916)
  322-8591

  
	
  E-Mail:
  esaltmarsh@eob.ca.gov

  
	
   

  
	
  If to CPUC:

  
	
   

  
	
  Sean
  Gallagher

  
	
  California
  Public Utilities Commission

  
	
  Legal
  Division, Room 5124

  
	
  505
  Van Ness Avenue

  
	
  San
  Francisco 94102

  
	
  Telephone:

  	
  (415)
  703-2059

  
	
  Facsimile:

  	
  (415)
  703-2262

  
	
  E-Mail:
  shg@cpuc.ca.gov

  
	
   

  
	
  If to California Attorney General:

  
	
   

  
	
  Ken
  Alex

  
	
  Supervising
  Deputy Attorney General

  
	
  P.O.
  Box 70550

  
	
  1515
  Clay St., 20th Fl.

  
	
  Oakland,
  CA 94612-0550

  
	
  Telephone:

  	
  (510)
  622-2137

  
	
  Facsimile:

  	
  (510)
  622-2270

  
	
  E-Mail:
  ken.alex@doj.ca.gov

  

 

14.3                           Non-Severability. The benefits and burdens of this Agreement
are intended to balance the interests of the Mirant Parties, the Settling
Participants and OMOI.  Therefore, if it
should be determined by a court of competent jurisdiction that any material
provision herein is invalid, illegal or unenforceable, this entire Agreement
shall be invalid, illegal and unenforceable unless the Parties agree otherwise,
and all of the Mirant Parties, the Settling Participants and OMOI shall, to the
extent possible, be returned to the same position that they were in prior to
the execution of this Agreement as

 

82

 

if
this Agreement had never been executed, provided that Section 2.8.3 shall
continue to apply.

 

14.4                           Governing Law. To the extent not governed by federal law,
this Agreement shall be governed by and construed in accordance with the laws
of the State of California, without regard to the conflict of laws principles
thereof.

 

14.5                           Entire Agreement. This Agreement and the Implementing
Agreements contain the entire agreement among the Parties with respect to the
subject matter hereof and there are no agreements, understandings,
representations or warranties between the Parties other than those set forth or
referred to herein. Each of the Parties expressly disclaims any reliance upon
any representations or warranties not stated herein.

 

14.6                           Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective permitted
successors and assigns.

 

14.7                           No Third-Party Beneficiaries; No Admissions. This Agreement is not intended to confer
upon any person or entity that is not a Party, a Related Party or a Settling
Participant any rights or remedies hereunder, and no one, other than a Party, a
Related Party or a Settling Participant, is entitled to rely on any
representation, warranty, covenant, release, waiver or agreement contained
herein. Moreover, except for the purpose of enforcing the terms and conditions
of this Agreement as between and among the Parties, the Related Parties and the
Settling Participants, nothing herein shall establish any precedents as between
the Parties, the Related Parties, the Settling Participants and any third
parties as to the resolution of any dispute that is not resolved in this
Agreement.

 

14.8                           Costs. Except as provided in this Agreement and the Implementing Agreements,
each of the Parties shall pay its own costs and expenses, including attorneys’
fees, incurred in connection with the disputes that are settled herein and the negotiation,
preparation and implementation of this Agreement and the Implementing Agreements,
including costs and expenses incurred in preparing stipulations, making motions
and seeking and obtaining the Required Approvals.

 

14.9                           Execution. This Agreement may be executed in any number of counterparts, each of
which, when executed, will be deemed to be an original and all of which taken
together will be deemed to be one and the same instrument. This Agreement may
be executed by signature via facsimile transmission, which shall be deemed to be
the same as an original signature.

 

14.10                     Modifications. This Agreement may be modified only if in
writing and signed by each of the Parties affected by the proposed
modification. No waiver of any provision of this Agreement or departure from
any term of this Agreement shall be effective unless in writing and signed by
the Party granting the waiver. No modification will be effective unless any
approval of the FERC or the Mirant Bankruptcy Court required with respect to
such modification, if any, has been received.

 

14.11                     Assignments. No Party shall assign or transfer this Agreement or its rights or
obligations hereunder without the prior written consent of the other affected
Parties;

 

83

 

provided,
however, that any Party may, without the consent of the other Parties (and
without relieving itself from liability hereunder), transfer or assign this
Agreement to any person or entity succeeding to all or substantially all of the
assets of such Party, provided that the assignee agrees in writing to be bound
by the terms and conditions hereof.

 

14.12                     Headings. The headings or titles of Articles or Sections used in this Agreement
are for convenience only and shall be disregarded in interpreting this Agreement.

 

14.13                     Parties Represented by Counsel. The Parties acknowledge that they have sought
the advice of, and have been advised by, legal counsel of their choice in connection
with the negotiation of this Agreement, and that the Parties have willingly entered
into this Agreement with a full understanding of the legal and financial consequences
of this Agreement.

 

14.14                     Drafting of Agreement. The Parties acknowledge that (i) this
Agreement and each Implementing Agreement is the result of negotiations among,
and has been reviewed by, each Party and its respective counsel, and (ii) all
Parties contributed to the drafting of this Agreement and each Implementing
Agreement. Accordingly, this Agreement and each Implementing Agreement shall be
deemed to be the product of each Party, and no ambiguity shall be construed in
favor of or against any Party on the basis that it was the drafter.

 

14.15                     Consents; Acceptance. Unless otherwise expressly provided herein,
any consent, acceptance, satisfaction, cooperation or approval required of a
Party under this Agreement shall not be unreasonably withheld or delayed.

 

14.16                     Joint and Several Liability. Nothing in this Agreement or the Implementing
Agreements shall be deemed to create any joint and several liability among the
California Parties or among the Mirant Parties.

 

[SIGNATURES APPEAR ON NEXT PAGE]

 

84

 

Settlement and release of claims agreement

 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers or representatives. This Agreement
may be executed in any number of counterparts, each of which, when executed,
will be deemed to be an original and all of which taken together will be deemed
to be one and the same instrument. This Agreement may be executed by signature
via facsimile transmission, which shall be deemed to be the same as an original
signature.

 

	
  MIRANT CORPORATION

  	
  MIRANT AMERICAS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Curtis A. Morgan

  	
   

  	
  By:

  	
  /s/
  Curtis A. Morgan

  	
   

  
	
   

  	
  Name:

  	
  Curtis
  A. Morgan

  	
   

  	
  Name:

  	
  Curtis A. Morgan

  
	
   

  	
  Title:

  	
  Executive
  Vice President and

  	
   

  	
  Title:

  	
  President
  and Chief

  
	
   

  	
   

  	
  Chief
  Operating Officer

  	
   

  	
   

  	
  Executive
  Officer

  
	
   

  	
  Date:

  	
  January 14,
  2005

  	
   

  	
  Date:

  	
  January 14,
  2005

  
	
   

  	
   

  
	
   

  	
   

  
	
  MIRANT AMERICAS ENERGY

  MARKETING, LP

  	
  MIRANT AMERICAS ENERGY

  MARKETING INVESTMENTS,
  INC.

  
	
   

  	
   

  
	
  By:
  Mirant Americas Development, Inc.

  	
   

  
	
  Its:
  General Partner

  	
   

  
	
   

  	
  By:

  	
  /s/
  J. William Holden III

  	
   

  
	
   

  	
   

  	
  Name:

  	
  J.
  William Holden III

  
	
  By:

  	
  /s/ Curtis A. Morgan

  	
   

  	
   

  	
  Title:

  	
  Sr.
  Vice President

  
	
   

  	
  Name:

  	
  Curtis
  A. Morgan

  	
   

  	
  Date:

  	
  January 14,
  2005

  
	
   

  	
  Title:

  	
  President
  and

  	
   

  
	
   

  	
   

  	
  Chief
  Executive Officer

  	
   

  
	
   

  	
  Date:

  	
  January 14,
  2005

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  MIRANT AMERICAS

  GENERATION, LLC

  	
  MIRANT CALIFORNIA

  INVESTMENTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Curtis A. Morgan

  	
   

  	
  By:

  	
  /s/ Curtis A. Morgan

  	
   

  
	
   

  	
  Name:

  	
  Curtis
  A. Morgan

  	
   

  	
  Name:

  	
  Curtis
  A. Morgan

  
	
   

  	
  Title:

  	
  President
  and

  	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
  Chief
  Executive Officer

  	
   

  	
  Date:

  	
  January 14,
  2005

  
	
   

  	
  Date:

  	
  January 14,
  2005

  	
   

  	
   

  
									

 

1

 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers or representatives. This Agreement
may be executed in any number of counterparts, each of which, when executed,
will be deemed to be an original and all of which taken together will be deemed
to be one and the same instrument. This Agreement may be executed by signature
via facsimile transmission, which shall be deemed to be the same as an original
signature.

 

	
  MIRANT CALIFORNIA, LLC

  	
  MIRANT DELTA, LLC

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Curtis A. Morgan

  	
   

  	
  By:

  	
  /s/ Curtis A. Morgan

  	
   

  
	
   

  	
  Name:

  	
  Curtis
  A. Morgan

  	
   

  	
  Name:

  	
  Curtis A. Morgan

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
	
   

  	
  Date:

  	
  January 14,
  2005

  	
   

  	
  Date:

  	
  January 14,
  2005

  
	
   

  	
   

  
	
   

  	
   

  
	
  MIRANT POTRERO, LLC

  	
  MIRANT SPECIAL PROCUREMENT,

  
	
   

  	
  INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Curtis A. Morgan

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Curtis A. Morgan

  	
  By:

  	
  /s/
  J. William Holden III

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  	
  Name:

  	
  J.
  William Holden III

  
	
   

  	
  Date:

  	
  January 14,
  2005

  	
   

  	
  Title:

  	
  Sr.
  Vice President

  
	
   

  	
   

  	
  Date:

  	
  January 14,
  2005

  
	
   

  	
   

  
	
   

  	
   

  
	
  MIRANT SERVICES, LLC

  	
  MIRANT AMERICAS DEVELOPMENT,

  
	
   

  	
  INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Curtis A. Morgan

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Curtis A. Morgan

  	
  By:

  	
  /s/ Curtis A. Morgan

  	
   

  
	
   

  	
  Title:

  	
  Executive
  Vice President

  	
   

  	
  Name:

  	
  Curtis
  A. Morgan

  
	
   

  	
  Date:

  	
  January 14,
  2005

  	
   

  	
  Title:

  	
  President
  and

  
	
   

  	
   

  	
   

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
  Date:

  	
  January 14,
  2005

  
								

 

2

 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers or representatives. This Agreement
may be executed in any number of counterparts, each of which, when executed,
will be deemed to be an original and all of which taken together will be deemed
to be one and the same instrument. This Agreement may be executed by signature
via facsimile transmission, which shall be deemed to be the same as an original
signature.

 

	
  THE PEOPLE OF THE STATE OF

  CALIFORNIA, EX REL. BILL
  LOCKYER,

  ATTORNEY GENERAL OF THE STATE

  OF CALIFORNIA

  	
  CALIFORNIA DEPARTMENT OF

  WATER RESOURCES, ACTING SOLELY

  UNDER THE AUTHORITY AND POWERS

  CREATED IN CALIFORNIA ASSEMBLY

  BILL 1 FROM THE FIRST

  EXTRAORDINARY SESSION OF 2000-

  2001, CODIFIED IN SECTIONS 80000

  
	
  By:

  	
  /s/ Ken Alex

  	
   

  	
  THROUGH 80270 OF THE CALIFORNIA

  
	
   

  	
  Name:

  	
   

  	
  WATER CODE

  
	
   

  	
  Title:

  	
  ASAAG

  	
   

  
	
   

  	
  Date:

  	
  January 13, 2005

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter S. Garris

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Peter S. Garris

  
	
   

  	
   

  	
  Title:

  	
  Deputy Director

  
	
   

  	
   

  	
  Date:

  	
  January 14,
  2005

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  CALIFORNIA ELECTRICITY

  OVERSIGHT BOARD

  	
  CALIFORNIA PUBLIC UTILITIES

  COMMISSION

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ [ILLEGIBLE]

  	
   

  	
  By:

  	
  /s/ Randolph Wu

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
  Name:

  	
  Randolph Wu

  
	
   

  	
  Title:

  	
   

  	
   

  	
  Title:

  	
  General
  Counsel

  
	
   

  	
  Date:

  	
  January 14,
  2005

  	
   

  	
  Date:

  	
  January 14,
  2005

  
								

 

3

 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized officers or representatives. This Agreement
may be executed in any number of counterparts, each of which, when executed,
will be deemed to be an original and all of which taken together will be deemed
to be one and the same instrument. This Agreement may be executed by signature
via facsimile transmission, which shall be deemed to be the same as an original
signature.

 

	
  PACIFIC GAS AND ELECTRIC

  COMPANY

  	
  SOUTHERN CALIFORNIA EDISON

  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Roger J. Peters

  	
   

  	
  By:

  	
  /s/ Stephen E. Pickett

  	
   

  
	
   

  	
  Name:

  	
  Roger
  J. Peters

  	
   

  	
  Name:

  	
  Stephen
  E. Pickett

  
	
   

  	
  Title:

  	
  SVP
  - General Counsel

  	
   

  	
  Title:

  	
  Sr.
  VP & General Counsel

  
	
   

  	
  Date:

  	
  January 13,
  2005

  	
   

  	
  Date:

  	
  January 14,
  2005

  
	
   

  	
   

  
	
  SAN DIEGO GAS & ELECTRIC

  	
  THE FEDERAL ENERGY REGULATORY

  
	
  COMPANY

  	
  COMMISSION OFFICE OF MARKET

  
	
   

  	
  OVERSIGHT AND INVESTIGATIONS

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ James P. Avery

  	
   

  	
   

  
	
   

  	
  Name:

  	
  James
  P. Avery

  	
  By:

  	
  /s/ Robert Pease

  	
   

  
	
   

  	
  Title:

  	
  Senior
  Vice President

  	
   

  	
  Name:

  	
  ROBERT PEASE

  
	
   

  	
  Date:

  	
  January 13,
  2005

  	
   

  	
  Title:

  	
  Deputy
  Director OMOI/FERC

  
	
   

  	
   

  	
  Date:

  	
  January 13,
  2005

  
								

 

4

 

Table of
Exhibits

 

	
  Exhibit A

  	
  Proofs Of Claims Not
  Affected By The Settlement

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit B

  	
  Wraparound Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit C

  	
  CC8 Escrow Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit
  D

  	
  Stayed
  Litigation And Contested Matters

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit
  E

  	
  List
  Of Debtors

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit
  F

  	
  Allocation
  Matrix

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit
  G

  	
  2005
  RMR FERC Settlement

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit
  H

  	
  Deemed
  Distribution Recipients

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit
  I

  	
  Form
  of SWP Side Letter

  	
   

  

 

i

 

Exhibit A

 

Proofs Of
Claims Not Affected By The Settlement

 

1.               Claim No. 7522 on behalf of the California
Department of Toxic Substances Control (“CDTSC”) against Delta in the amount of
$979.50 for “HWCL Fees.” (hazardous waste generator fees)

 

2.               Claim No. 7523 on behalf of CDTSC against
Delta in the amount of $398,837 for penalties under the Hazardous Waste Control
Law for non-compliance with state hazardous waste laws and regulations

 

3.               Claim No. 7524 on behalf of CDTSC against
Potrero in the amount of $107.00 for “HWCL fees.” (hazardous waste generator
fees)

 

4.               Claim No. 7525 on behalf of CDTSC against
Potrero in the amount of $110.90 for “consultive services” based on Consulting
Services Agreement under California Health and Safety Code section 25201.9

 

5.              Claim No. 7630 on behalf of CDTSC against
Delta in an unliquidated amount for potential future environmental liability

 

6.               Claim No 7631 on behalf of CDTSC against
Potrero in an unliquidated amount for potential future environmental liability

 

7.               Claim No. 2081 on behalf of the California
Department of Health Services against Mirant Potrero, LLC in the amount of
$1,602.32

 

8.               Claim No. 7586 on behalf the Regional Water
Quality Control Board for the San Francisco Bay Region against Potrero in an
estimated amount of $7,500,000.00 for groundwater contamination at the Potrero
Power Plant Site

 

9.               Claim No. 7587 on behalf the Regional Water
Quality Control Board for the San Francisco Bay Region against Delta in an
unliquidated amount for potential contamination at the Pittsburg Power Plant
and its four class I ponds

 

10.         Claim No. 7588 on behalf the Regional Water Quality Control Board for
the San Francisco Bay Region against Mirant in an estimated amount of
$7,500,000.00 for groundwater contamination at Potrero Power Plant and
Pittsburg Power Plant.

 

A-1

 

Exhibit B

 

Wraparound
Agreements

 

Attached

 

B-1

 

Exhibit C

 

[FORM OF]

 

CC8 ESCROW AGREEMENT

 

This CC8 Escrow Agreement (“Escrow Agreement”) is entered into
as of [                       ]
[      ], 200[   ], by and among
Mirant Delta, LLC (“Delta”), a Delaware limited liability company,
Pacific Gas and Electric Company, a California corporation (“PG&E”),
and [Deutsche Bank Trust Company Americas, a New York banking corporation, a
wholly-owned subsidiary of Deutsche Bank AG], as escrow agent (the “Escrow
Agent”).

 

RECITALS

 

A.                                   The Mirant Parties (as defined below),
PG&E, and others are parties to the Settlement and Release of Claims
Agreement (as defined below), pursuant to which, and subject to its terms and
conditions, the Mirant Parties, PG&E and the other parties thereto enter
into a settlement with respect to certain disputes among them.

 

B.                                     In accordance with the terms of the
Settlement and Release of Claims Agreement, the Mirant Parties and PG&E are
negotiating the CC8 Asset Transfer Agreement (as defined in the Settlement and
Release of Claims Agreement), including the agreements and other documents that
are included therein, by which the Mirant Parties will, subject to the
conditions in the CC8 Asset Transfer Agreement being satisfied, transfer and
assign to PG&E the CC8 Assets (as such term is defined in the Settlement
and Release of Claims Agreement), provide certain services and rights to
PG&E in connection with the CC8 Assets and otherwise consummate the transactions
provided for in the CC8 Asset Transfer Agreement.

 

C.                                     In accordance with the terms of the
Settlement and Release of Claims Agreement and this Escrow Agreement, if a CC8
Triggering Event (as defined in the Settlement and Release of Claims Agreement)
occurs, then PG&E shall be entitled to the CC8 Alternative Consideration
(as defined in the Settlement and Release of Claims Agreement) as provided for
in the Settlement and Release of Claims Agreement, and as implemented through
this Escrow Agreement.

 

D.                                    Delta and PG&E desire to establish the
terms and conditions pursuant to which the Escrow Fund (as defined below) will
be established, maintained and disbursed.

 

NOW, THEREFORE, in consideration of the mutual covenants and
agreements, and other good and valuable consideration, provided for herein, and
subject to and upon the terms and conditions hereof, the parties hereto agree
as follows.

 

AGREEMENT

 

1.                                      Defined Terms. As used in this Escrow Agreement, the
following terms shall have the meanings set forth below. Capitalized terms used
in this Escrow Agreement and not

 

C-1

 

otherwise
defined shall have the meanings given them in the Settlement and Release of
Claims Agreement.

 

“Agreement Dispute” has the meaning set forth in Section 7
of this Escrow Agreement.

 

“Bankruptcy Proceedings” means, collectively, the Mirant Parties’
respective Chapter 11 cases, together with the other Chapter 11 cases of Mirant
Parties’ affiliated debtors pending in the Mirant Bankruptcy Court or, to the
extent of the reference thereto being withdrawn, in the United States District
Court for the Northern District of Texas, Fort Worth Division.

 

“Cash Proceeds” has the meaning set forth in Section 2(a)
of this Escrow Agreement.

 

“Cash Proceeds Notice” has the meaning set forth in Section 2(a)
of this Escrow Agreement.

 

“CC8 Alternative Consideration” has the meaning set forth in the
Settlement and Release of Claims Agreement.

 

“CC8 Assets” has the meaning set forth in the Settlement and
Release of Claims Agreement.

 

“CC8 Asset Transfer Agreement” has the meaning set forth in the
Settlement and Release of Claims Agreement.

 

“CC8 Claim” has the meaning set forth in the Settlement and
Release of Claims Agreement.

 

“CC8 Claim Plan Securities” has the meaning set forth in the
Settlement and Release of Claims Agreement.

 

“CC8 Claim Shortfall” has the meaning set forth in the
Settlement and Release of Claims Agreement.

 

“CC8 Claim Value” means the aggregate value of the cash and/or
CC8 Claim Plan Securities required to be distributed to PG&E by the CC8
Claim pursuant to Section 8.9 of the Settlement and Release of Claims
Agreement, which shall be either $70,000,000 or $85,000,000, as determined in
accordance with subpart (i) or subpart (ii) of Section 8.9.1 of the
Settlement and Release of Claims Agreement.

 

“CC8 Execution Triggering Event” has the meaning set forth in
the Settlement and Release of Claims Agreement.

 

“CC8 Triggering Event” has the meaning set forth in the
Settlement and Release of Claims Agreement.

 

C-2

 

“Closing” means the date of closing of the transfer of the CC8
Assets to PG&E and the other transactions provided for in the CC8 Asset
Transfer Agreement, in accordance with the terms thereof.

 

“CPUC” has the meaning set forth in Section 7 of this
Escrow Agreement.

 

“Debtor” has the meaning set forth in the Settlement and Release
of Claims Agreement.

 

“Delta” has the meaning set forth in the introductory paragraph
of this Escrow Agreement.

 

“Delta Plan” has the meaning set forth in the Settlement and
Release of Claims Agreement.

 

“Effective Date” has the meaning set forth in Section 2 of
this Escrow Agreement.

 

“Escrow Account” has the meaning set forth in Section 2(a)
of this Escrow Agreement.

 

“Escrow Agent” has the meaning set forth in the introductory
paragraph of this Escrow Agreement.

 

“Escrow Fund” has the meaning set forth in Section 2(a) of
this Escrow Agreement.

 

“Mirant Bankruptcy Court” means the United States Bankruptcy
Court for the Northern District of Texas, Fort Worth Division.

 

“Mirant Parties” has the meaning set forth in the Settlement and
Release of Claims Agreement.

 

“PG&E” has the meaning set forth in the introductory
paragraph of this Escrow Agreement.

 

“Settlement and Release of Claims Agreement” means the
Settlement and Release of Claims Agreement executed January 13, 2005 among
the Mirant Parties, PG&E and the other parties thereto.

 

2.                                      Effective Date; Appointment
of Escrow Agent. This
Escrow Agreement and the parties’ obligations hereunder shall not become
effective until the effective date of the Delta Plan (“Effective Date”).  Effective as of the Effective Date, Delta and
PG&E hereby appoint the Escrow Agent to act in accordance with the terms and
conditions of this Escrow Agreement, and the Escrow Agent hereby accepts such
appointment.

 

a)              Deposit of Cash Proceeds. PG&E shall deposit all cash received from
Delta as part of the CC8 Claim, if any, into the escrow established jointly by
PG&E and Delta pursuant to this Escrow Agreement (“Escrow Account”)
within two (2) Business Days

 

C-3

 

following PG&E’s receipt of any such cash. As soon as practicable
after PG&E’s sale of the CC8 Claim Plan Securities that are delivered to it
by Delta as part of the CC8 Claim pursuant to Section 8.9.2 of the
Settlement and Release of Claims Agreement, PG&E shall deposit in the
Escrow Account all cash proceeds from such sale, net of third party transaction
costs and net of any income taxes that may be due on any gain on the sale of
the CC8 Claim Plan Securities (it being understood that any such gain will be
determined by any difference between the value of the CC8 Claim Plan Securities
when received by PG&E and the value when sold by PG&E, and that the
netting of income taxes for deposit into the CC8 Escrow shall be without
prejudice to subsequent CPUC retail ratemaking determinations of tax
treatment). The Escrow Agent shall promptly thereafter advise Delta and PG&E
in writing in the manner specified in Section 11(f) of this Escrow
Agreement (“Cash Proceeds Notice”) of the total amount of cash in the
Escrow Account, including any cash received from Delta as part of the CC8 Claim
and the net proceeds realized by PG&E from its sale of the CC8 Claim Plan
Securities (collectively, the “Cash Proceeds”). The Cash Proceeds and
any additional monies that are deposited into the Escrow Account in accordance
with this Escrow Agreement shall constitute part of the “Escrow Fund”.

 

b)              Treatment of Cash Proceeds.

 

i.                 CC8 Claim Shortfall. In the event of a CC8 Claim Shortfall,
Delta and PG&E shall deposit the payments required under Section 8.9.3
of the Settlement and Release of Claims Agreement into the Escrow Account.

 

ii.             Cash Proceeds in Excess of the
CC8 Claim Value. If the
total of the Cash Proceeds in the Escrow Account as of the date of the Cash
Proceeds Notice exceeds the CC8 Claim Value, the Escrow Agent shall transfer to
Delta in the manner directed by Delta all Cash Proceeds constituting the Escrow
Fund that are in excess of the CC8 Claim Value.

 

c)              Interest on Escrow Fund. Any interest earned on the Escrow Fund,
when invested as provided in Section 4 of this Escrow Agreement shall be
applied FIRST, to pay all fees and expenses of the Escrow Agent and to any
amounts already claimed by the Escrow Agent under Section 6 of this Escrow
Agreement, and SECOND, to be added to the Escrow Fund held by the Escrow Agent
under this Escrow Agreement. Notwithstanding anything to the contrary in this
Escrow Agreement, to the extent that Delta pays any expenses, disbursements,
advances, legal or other fees, taxes, penalties, losses, damages, or any other
charge, cost or expenditure provided for under Section 6 or Section 8
of this Escrow Agreement, to or on behalf of the Escrow Agent, any interest earned
on the Escrow Fund, including interest already accrued as of the date that
Delta incurs such expenditures and any future interest, shall be paid, when
interest becomes available to do so, to Delta in an amount sufficient to
reimburse Delta in full for all of the foregoing expenditures.

 

3.                                      Disbursement of the Escrow Fund. The Escrow Agent shall disburse the Escrow
Fund as provided below, as instructed in a writing executed by Delta and
PG&E and

 

C-4

 

delivered
to the Escrow Agent, or as otherwise authorized by the terms of this Escrow
Agreement.

 

a)              Termination. If the Settlement and Release of Claims Agreement is terminated for any
reason as provided for therein, this Escrow Agreement also shall be immediately
terminated, without further liability or obligation of any party. Upon
termination of this Escrow Agreement, either Delta or PG&E may deliver a
certificate signed by an officer thereof to the other party and to the Escrow
Agent. Upon receipt of such certificate, the Escrow Agent shall distribute the
Escrow Fund, including all Cash Proceeds, interest and all other money and
property in the Escrow Account, to Delta in the manner directed by Delta.

 

b)              CC8 Triggering Event. Upon the occurrence of a CC8 Triggering
Event, PG&E shall notify Delta in writing that PG&E is declaring a CC8
Triggering Event, and also shall deliver a certificate signed by PG&E’s
general counsel or a person designated by such counsel to that effect to the
Escrow Agent and Delta.  If the CC8
Triggering Event is one that a Mirant Party is authorized to declare pursuant
to the terms of the Settlement and Release of Claims Agreement or the CC8 Asset
Transfer Agreement, Delta shall have the right to deliver an equivalent notice
and certificate to PG&E and the Escrow Agent, and such notice and
certificate shall have the same force and effect as if it had been delivered by
PG&E.

 

i.                 If a CC8 Triggering Event that is a CC8
Execution Triggering Event has occurred before the Effective Date, then, as of
the Effective Date, (a) Delta and PG&E shall comply with the applicable
requirements of Section 8.9 of the Settlement and Release of Claims
Agreement, and (b) Delta, PG&E and the Escrow Agent shall comply with the
provisions of Section 2 of this Escrow Agreement. As soon as practicable
after the total amount of the Escrow Fund is equal to $85,000,000 (calculated
after deduction of the Escrow Agent’s fees and expenses in accordance with Section 4
and Section 6 of this Escrow Agreement), the Escrow Agent shall distribute
$85,000,000 in cash to PG&E, plus any interest that has accrued on the
$85,000,000 and that remains in the Escrow Account after deduction of the
Escrow Agent’s fees and expenses in accordance with Section 4 of this
Escrow Agreement, and after deduction of any amount required to be paid
pursuant to Section 6 of this Escrow Agreement. All Cash Proceeds and
other monies thereafter remaining in the Escrow Account shall be paid to Delta.

 

ii.             If a CC8 Triggering Event that is not a CC8
Execution Triggering Event has occurred before the Effective Date, then, as of
the Effective Date, (a) Delta and PG&E shall comply with the applicable
requirements of Section 8.9 of the Settlement and Release of Claims
Agreement, and (b) Delta, PG&E and the Escrow Agent shall comply with the
provisions of Section 2 of this Escrow Agreement.  As soon as practicable after the total amount
of the Escrow Fund is equal to $70,000,000 (calculated after deduction of the
Escrow Agent’s fees and expenses in accordance with Section 4 and Section 6
of this Escrow Agreement), the Escrow Agent shall distribute $70,000,000 in
cash to PG&E,

 

C-5

 

plus any interest that has accrued on the
$70,000,000 and that remains in the Escrow Account after deduction of the
Escrow Agent’s fees and expenses in accordance with Section 4 of this
Escrow Agreement, and after deduction of any amount required to be paid
pursuant to Section 6 of this Escrow Agreement. All Cash Proceeds in
excess of $70,000,000, all interest that has accrued on such Cash Proceeds in
excess of $70,000,000, and all other monies thereafter remaining in the Escrow
Account shall be paid to Delta.

 

iii.         If a CC8 Triggering Event that is a CC8 Execution Triggering Event
occurs after the Effective Date but before PG&E has liquidated the CC8
Claim Plan Securities, then, (a) PG&E shall promptly liquidate the CC8
Claim Plan Securities in accordance with Section 8.9.2 of the Settlement
and Release of Claims Agreement, (b) Delta and PG&E shall comply with the
applicable requirements of Section 8.9 of the Settlement and Release of
Claims Agreement, and (c) Delta, PG&E and the Escrow Agent shall comply
with the provisions of Section 2 of this Escrow Agreement As soon as
practicable after the total amount of the Escrow Fund is equal to $85,000,000
(calculated after deduction of the Escrow Agent’s fees and expenses in
accordance with Section 4 and Section 6 of this Escrow Agreement), the
Escrow Agent shall distribute $85,000,000 in cash to PG&E, plus any
interest that has accrued on the $85,000,000 and that remains in the Escrow
Account after deduction of the Escrow Agent’s fees and expenses in accordance
with Section 4 of this Escrow Agreement, and after deduction of any amount
required to be paid pursuant to Section 6 of this Escrow Agreement. All
Cash Proceeds and other monies thereafter remaining in the Escrow Account shall
be paid to Delta.

 

iv.            If a CC8 Triggering Event that is not a CC8
Execution Triggering Event occurs after the Effective Date but before PG&E
has liquidated the CC8 Claim Plan Securities, then, (a) PG&E shall promptly
liquidate the CC8 Claim Plan Securities in accordance with Section 8.9.2
of the Settlement and Release of Claims Agreement, (b) Delta and PG&E shall
comply with the applicable requirements of Section 8.9 of the Settlement
and Release of Claims Agreement, and (c) Delta, PG&E and the Escrow Agent
shall comply with the provisions of Section 2 of this Escrow Agreement.  As soon as practicable after the total amount
of the Escrow Fund is equal to $70,000,000 (calculated after deduction of the
Escrow Agent’s fees and expenses in accordance with Section 4 of this
Escrow Agreement and Section 6 of this Escrow Agreement), the Escrow Agent
shall distribute $70,000,000 in cash to PG&E, plus any interest that has
accrued on the $70,000,000 and that remains in the Escrow Account after
deduction of the Escrow Agent’s fees and expenses in accordance with Section 4
of this Escrow Agreement, and after deduction of any amount required to be paid
pursuant to Section 6 of this Escrow Agreement. All Cash Proceeds in
excess of $70,000,000, all interest that has accrued on such Cash Proceeds in
excess of $70,000,000, and all other monies thereafter remaining in the Escrow
Account shall be paid to Delta.

 

C-6

 

v.                If a CC8 Triggering Event that is a CC8
Execution Triggering Event occurs after the Effective Date and after PG&E
has liquidated the CC8 Claim Plan Securities in accordance with Section 8.9.2
of the Settlement and Release of Claims Agreement, then (a) Delta and PG&E
shall comply with the applicable requirements of Section 8.9 of the
Settlement and Release of Claims Agreement, and (b) Delta, PG&E and the
Escrow Agent shall comply with the provisions of Section 2 of this Escrow
Agreement. As soon as practicable after the total amount of the Escrow Fund is
equal to $85,000,000 (calculated after deduction of the Escrow Agent’s fees and
expenses in accordance with Section 4 and Section 6 of this Escrow
Agreement), the Escrow Agent shall distribute $85,000,000 in cash to PG&E,
plus any interest that has accrued on the $85,000,000 and that remains in the
Escrow Account after deduction of the Escrow Agent’s fees and expenses in
accordance with Section 4 of this Escrow Agreement, and after deduction of
any amount required to be paid pursuant to Section 6 of this Escrow
Agreement. All Cash Proceeds and other monies thereafter remaining in the
Escrow Account shall be paid to Delta.

 

vi.            If a CC8 Triggering Event that is not a CC8
Execution Triggering Event occurs after the Effective Date and after PG&E
has liquidated the CC8 Claim Plan Securities in accordance with Section 8.9.2
of the Settlement and Release of Claims Agreement, then (a) Delta and PG&E
shall comply with the applicable requirements of Section 8.9 of the
Settlement and Release of Claims Agreement, and (b) Delta, PG&E and the
Escrow Agent shall comply with the provisions of Section 2 of this Escrow
Agreement. As soon as practicable after the total amount of the Escrow Fund is
equal to $70,000,000 (calculated after deduction of the Escrow Agent’s fees and
expenses in accordance with Section 4 and Section 6 of this Escrow
Agreement), the Escrow Agent shall distribute $70,000,000 in cash to PG&E,
plus any interest that has accrued on the $70,000,000 and that remains in the
Escrow Account after deduction of the Escrow Agent’s fees and expenses in
accordance with Section 4 of this Escrow Agreement, and after deduction of
any amount required to be paid pursuant to Section 6 of this Escrow
Agreement. All Cash Proceeds in excess of $70,000,000, all interest that has
accrued on such Cash Proceeds in excess of $70,000,000, and all other monies
thereafter remaining in the Escrow Account shall be paid to Delta.

 

c)              The Date of Closing. Following the occurrence of the Closing,
PG&E will deliver a certificate signed by PG&E’s general counsel or a
person designated by such counsel to that effect to the Escrow Agent and Delta.
If PG&E has not delivered the foregoing certificate within two (2) Business
Days after the Closing, Delta shall have the right to deliver an equivalent
notice and certificate to PG&E and the Escrow Agent, and such notice and certificate
shall have the same force and effect as if it had been delivered by PG&E.
Upon receipt of any such certificate from PG&E or Delta, the Escrow Agent
shall promptly disburse the Escrow Fund, including all Cash Proceeds and all
other money and assets held in the Escrow Account, after deduction of the
Escrow Agent’s fees and expenses in accordance with Section 4 of this
Escrow Agreement, and after

 

C-7

 

deduction of any amount required to be paid pursuant
to Section 6 of this Escrow Agreement, to Delta in accordance with Delta’s
instructions.

 

This Escrow Agreement shall terminate upon the distribution of the
Escrow Fund, including all Cash Proceeds and all other money and assets held in
the Escrow Account. The provisions of Sections 6, 8 and 9 of this Escrow
Agreement shall survive the termination of this Escrow Agreement and the
earlier resignation or removal of the Escrow Agent.

 

4.                                      Investment of Escrow Cash. The Escrow Agent shall invest or reinvest the
Cash Proceeds as directed in writing by Delta in any of the following:

 

a)              direct obligations of, or obligations fully
guaranteed as to principal and interest by, the United States or any agency or
instrumentality thereof, provided that such obligations are backed by the full
faith and credit of the United States and have an original maturity of no more
than 180 days;

 

b)              certificates
of deposit of or interest bearing accounts with national banks or corporations
endowed with trust powers, having capital and surplus in excess of $100,000,000,
provided that such certificates or accounts have an original maturity of no more
than 90 days;

 

c)              commercial paper (having original maturities
of no more than 90 days) that at the time of investment is rated A-1 by Standard
and Poor’s Corporation or P-1 by Moody’s Investor Service;

 

d)              repurchase agreements with any bank or
corporation described in subpart (b), above, fully secured by obligations
described in subpart (a), above, collateralized by 102 percent, and having a
term of no more than 90 days; or

 

e)              any money market fund registered under the
Investment Company Act of 1940, as amended.

 

The Escrow Agent shall have no obligation to invest or reinvest the
Escrow Fund if deposited with the Escrow Agent after 11:00 a.m. (E.S.T.) on
such day of deposit. Instructions received after 11:00 a.m. (E.S.T.) will be
treated as if received on the following business day. The Escrow Agent shall
have no responsibility for any investment losses resulting from the investment,
reinvestment or liquidation of the Escrow Fund. Any interest or other income
received on such investment and reinvestment of the Escrow Fund shall become
part of the Escrow Fund and any losses incurred on such investment and
reinvestment of the Escrow Fund shall be debited against the Escrow Fund. If a
selection is not made and a written direction not given to the Escrow Agent,
the Escrow Fund shall remain uninvested with no liability for interest therein.
It is agreed and understood that the entity serving as Escrow Agent may earn
fees associated with the investments outlined above in accordance with the
terms of such investments. Notwithstanding the foregoing, the Escrow Agent
shall have the power to sell or liquidate the foregoing investments whenever
the Escrow Agent shall be required to release all or any portion of the Escrow
Fund pursuant to Section 3 of this Escrow Agreement. In no event shall the
Escrow Agent be deemed an investment manager or adviser in respect of any
selection of investments hereunder.

 

C-8

 

5.                                      Access to Escrow Documents. During the term of this Escrow Agreement,
Delta and PG&E shall have access to the documents delivered to or by the
Escrow Agent.

 

6.                                      Fees and Expenses of Escrow
Agent; Indemnification.

 

a)              The
Escrow Agent shall be entitled to payment as provided in this Section 6
for customary fees and expenses for all services rendered by it hereunder in
accordance with the fee schedule attached as Exhibit A hereto (as
such fees may be adjusted from time to time, with such adjustments to be
effective 60 days after receipt of notice by Delta and PG&E). It is
understood by all parties that the annual fee will be deducted when it becomes
due from amounts constituting interest or earnings on the Escrow Fund then on deposit
with the Escrow Agent under this Escrow Agreement, and all such interest and earnings
shall be applied first to pay the Escrow Agent’s fees and expenses before being
allocated to any other purpose. To the extent such interest is insufficient to
pay such fees in full, and upon written notice providing a reasonable
accounting from the Escrow Agent, Delta shall pay the Escrow Agent fees, and
any out-of-pocket expenses, fees and expenses of counsel, or other charges by
the Escrow Agent incurred in connection with its obligations under this Escrow
Agreement. Delta shall reimburse the Escrow Agent on demand for all loss,
liability, damage, disbursements, advances or expenses paid or incurred by it
in the administration of its duties hereunder, including, but not limited to, all
reasonable counsel, advisors’ and agents’ fees and disbursements and all taxes
or other governmental charges. At all times, the Escrow Agent will have a right
of set off and first lien on the funds in the Escrow Fund for payment of
customary fees and expenses and all such loss, liability, damage or expenses.
Such fees and expenses shall be paid from the Escrow Fund to the extent not
otherwise paid hereunder. The obligations contained in this Section 6
shall be the obligation of Delta, and shall survive the termination of this
Escrow Agreement and the resignation or removal of the Escrow Agent.

 

b)              Delta
shall indemnify, defend and hold harmless the Escrow Agent and its officers,
directors, employees, representatives and agents, from and against and
reimburse the Escrow Agent for any and all claims, expenses, obligations,
liabilities, losses, damages, injuries (to person, property, or natural
resources), penalties, stamp or other similar taxes, actions, suits, judgments,
reasonable costs and expenses (including reasonable attorney’s fees and
expenses) of whatever kind or nature regardless of their merit, demanded,
asserted or claimed against the Escrow Agent by any third party directly or
indirectly relating to, or arising from, claims against the Escrow Agent by reason
of its participation in the transactions contemplated hereby, including without
limitation all reasonable costs required to be associated with claims for
damages to persons or property, and reasonable attorneys’ and consultants’ fees
and expenses and court costs except to the extent caused by the Escrow Agent’s
gross negligence or willful misconduct. The provisions of this Section 6(b)
shall survive the termination of this Agreement or the earlier resignation or
removal of the Escrow Agent.

 

7.                                      Resolution of Conflicts. After the Effective Date, except as otherwise
limited by law, resolution of any and all controversies, disputes and claims
arising out of, relating to, in connection with or resulting from this Escrow
Agreement (or any transaction contemplated

 

C-9

 

hereby),
including as to the interpretation, performance, non-performance, validity,
breach or termination of this Escrow Agreement, whether the claim is based on
contract, tort, regulation, rule, statute or constitution and any claims
raising questions of law, whether arising before or after termination of this
Escrow Agreement (each an “Agreement Dispute”), shall be exclusively
governed by and settled in accordance with the provisions of this Section 7.
Unless otherwise agreed in writing, the Parties shall continue to perform their
obligations under the provisions of this Escrow Agreement during the course of
dispute resolution pursuant to the provisions of this Section 7. Notice of
an Agreement Dispute shall be provided to the parties to this Escrow Agreement
and to the California Public Utilities Commission (“CPUC”). The CPUC may
participate in the resolution of an Agreement Dispute by participating in the
dispute resolution process provided for below as a party.

 

a)              Negotiation and Mediation.

 

i.                 Negotiation. The parties shall make a good faith attempt
to resolve any Agreement Dispute through negotiation. Within 30 days after
notice of an Agreement Dispute is given by a party to another party or parties,
each such party shall select one or more representatives who are vice
presidents of such party or, in the case of the CPUC, an employee with
authority to bind the CPUC, which representatives shall meet and make a good
faith attempt to resolve such Agreement Dispute and shall continue to negotiate
in good faith in an effort to resolve the Agreement Dispute.

 

ii.             Mediation. If such representatives fail to resolve an
Agreement Dispute within 30 days after the first meeting of the representatives
or fail to meet within 30 days after the date of the applicable notice of an
Agreement Dispute (such date, the “Mediation Trigger Date”), the
affected parties shall seek resolution of the Agreement Dispute through
mediation, with a mediator mutually acceptable to the affected parties. The
representatives of the affected parties selected pursuant to Section 7(a)(i)
of this Escrow Agreement shall be in attendance at the mediation.

 

iii.         Settlement. If a settlement is mutually agreed upon as
a result of the negotiation or mediation, then such settlement shall be
recorded in writing, signed by the affected parties, and shall be binding on
them.

 

b)              Arbitration.

 

i.                 Selection of Arbitrator. In the event that (1) the affected parties
fail to mutually agree upon a mediator pursuant to Section 7(a)(ii) of
this Escrow Agreement within 30 days after the Mediation Trigger Date or (2)
any Agreement Dispute is not settled by the affected parties within sixty (60)
days after the Mediation Trigger Date, a party may initiate arbitration by
sending written notice to the other party or parties requesting arbitration and
describing the Agreement Dispute and any proposed remedy. Within ten (10)
Business Days after receipt of such notice, the affected parties shall meet to
select a single arbitrator. If the affected parties cannot agree on the
selection

 

C-10

 

of an arbitrator or such parties fail to meet within
ten (10) Business Days, the arbitrator shall be selected by the American
Arbitration Association in accordance with its Commercial Arbitration Rules.
The arbitrator selected under these procedures shall be a lawyer or retired
judge with at least ten years’ experience arbitrating complex commercial
disputes.

 

ii.             Location. The arbitration shall be conducted in the
City and County of San Francisco, California and shall be governed by the
Commercial Arbitration Rules of the American Arbitration Association, except as
modified herein or as agreed by the affected Parties in writing.

 

iii.         Discovery. The affected parties shall have the right to
conduct discovery in accordance with California Code of Civil Procedure Section 1283.05,
including the right to two depositions of each opposing party, 20
interrogatories, 25 requests for admissions, and requests for the production of
documents and other items. If additional discovery is necessary because of the
complexity or importance of the issues, the parties shall negotiate in good
faith regarding additional discovery and, if such negotiations fail, the
arbitrator upon a showing of good cause may allow for additional reasonable
discovery, giving due consideration to the complexity and importance of the
issues, efficiency lost and prevention of undue intrusiveness and harassment.

 

iv.            Hearing. After giving the affected parties due notice
of hearing, the arbitrator shall hear the Agreement Dispute submitted for
arbitration and shall provide a reasoned, written decision within 90 days after
the completion of the hearing or such other date selected by agreement of the
affected parties. The decision shall conform to applicable law. The procedural
and substantive law applied in the arbitration shall be the law of the State of
California without regard to its conflict of law principles, unless the claims
or defenses raise issues of federal law in which case federal substantive law
shall apply to those particular claims or defenses. The arbitrator shall be
bound to apply the law, including the rules of evidence, and shall be empowered
to hear and determine dispositive motions, including motions to dismiss and
motions for summary judgment. The arbitrator shall have no authority to alter
the terms of this Escrow Agreement or the Settlement and Release of Claims
Agreement.

 

v.                “Baseball Style” Arbitration. The arbitration shall be a “baseball style”
arbitration. Each party shall submit a proposed resolution of the Agreement
Dispute.  The arbitrator shall choose one
of the proposed resolutions without modification, provided that the arbitrator
shall not choose any resolution that is inconsistent with the terms of this
Escrow Agreement or the Settlement and Release of Claims Agreement. The
decision of the arbitrator shall be final and binding upon the parties, and a
party may petition a court to correct or vacate the decision only upon grounds
that an award contained therein was procured by corruption, fraud or other
undue means and may not petition a court to correct or vacate the decision for
failure of the arbitrator to apply the law or

 

C-11

 

any other grounds or reasons. Judgment may be
entered on the decision in any court of competent jurisdiction upon the
application of any affected party.

 

vi.            Injunctions. The arbitrator shall have the right to issue
temporary restraining orders, preliminary injunctions and final injunctions.

 

vii.        Fees and Costs. The arbitrator may award costs and
reasonable attorneys’ fees to the prevailing party. If more than one party
prevails in part, such fees may be allocated among the parties in such amounts
as may be determined by the arbitrator based on the relative merits and amounts
of each party’s claims.

 

c)              Specific Performance. Notwithstanding Sections 7, 7(a) and 7(b) of
this Escrow Agreement, the parties agree that irreparable damage may occur in
the event that the provisions of this Escrow Agreement are not performed in all
material respects in accordance with their specific terms or are otherwise
breached in any material respect.  It is
accordingly agreed that a party shall be entitled to seek a temporary
restraining order or preliminary injunction from any court of competent
jurisdiction to maintain the status quo or otherwise to prevent a material
breach of this Escrow Agreement and to enforce specifically the terms and
provisions hereof until an arbitration proceeding can be commenced or an
injunction hearing held.

 

8.                                      The Escrow Agent.

 

[Provisions
will be added to address the duties and responsibilities of the Escrow Agent based
on discussions with the Escrow Agent. PG&E and Delta agree that Delta will
be responsible for fees, expenses and indemnification obligations imposed by
the Escrow Agent, subject to the reimbursement provision in Section 2(c)
of this Escrow Agreement.]

 

9.                                      Resignation and Removal of
Escrow Agent. The Escrow Agent may resign and be
discharged from its duties hereunder at any time by giving thirty (30) calendar
days’ prior written notice of such resignation to Delta and PG&E. Delta and
PG&E may remove the Escrow Agent at any time by giving thirty (30) calendar
days’ prior written notice to the Escrow Agent. Upon such notice, a successor
escrow agent shall be appointed by Delta and PG&E, who shall provide
written notice of such to the resigning or removed Escrow Agent. Such successor
escrow agent shall become the escrow agent hereunder upon the resignation or
removal date specified in such notice and upon its receipt of the Escrow Fund.
If Delta and PG&E are unable to agree upon a successor escrow agent within
thirty (30) days after such notice, the Escrow Agent may, in its sole
discretion, apply to a court of competent jurisdiction for the appointment of a
successor escrow agent or for other appropriate relief. The costs and expenses
(including its reasonable attorneys’ fees and expenses) incurred by the Escrow
Agent in connection with such proceeding shall be paid by Delta. Upon receipt
of the identity of the successor escrow agent, the Escrow Agent shall either
deliver the Escrow Fund then held hereunder to the successor Escrow Agent, less
the Escrow Agent’s fees, costs and expenses or other obligations owed to the Escrow
Agent to be paid from any interest earned in respect of the Escrow Fund, or
hold any interest earned in respect of the Escrow Fund (or any portion
thereof), pending distribution, until all such fees, costs and expenses or
other obligations are paid. Upon its resignation and delivery

 

C-12

 

of
the Escrow Fund as set forth in this Section 9, the Escrow Agent shall be
discharged of and from any and all further obligations arising in connection
with the Escrow Fund or this Escrow Agreement.

 

10.                               Taxes. Taxes incurred with respect to the earnings
of the Escrow Fund and payments made hereunder shall be borne by the party to
whom such earnings are distributed (or to be distributed) or to whom such
payment is made.

 

11.                               Miscellaneous.

 

a)              Amendments and Waivers. Any term of this Escrow Agreement may be amended
or waived with the written consent of the parties hereto or their respective successors
and assigns. Any amendment or waiver effected in accordance with this Section 11(a)
shall be binding upon the parties and their respective successors and assigns.

 

b)              Successors and Assigns. The terms and conditions of this Escrow
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto. Nothing in this Escrow Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Escrow Agreement, except
as expressly provided in this Escrow Agreement.

 

c)              Governing Law; Jurisdiction. This Escrow Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of California,
without giving effect to principles of conflicts of law. Except as specified in
Section 7 of this Escrow Agreement, each of the parties to this Escrow
Agreement consents to the exclusive jurisdiction and venue of the courts of the
state and federal courts of San Francisco County, California.

 

d)              Counterparts. This Escrow Agreement may be executed in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one instrument.

 

e)              Titles and Subtitles. The titles and subtitles used in this
Escrow Agreement are used for convenience only and are not to be considered in
construing or interpreting this Escrow Agreement.

 

f)                Notices. Any notice required or permitted by this
Escrow Agreement shall be in writing and shall be deemed to have been duly
given: (i) when personally delivered; (ii) upon actual receipt (as established
by confirmation of receipt or otherwise), during normal business hours,
otherwise on the first (1st) Business Day thereafter, if transmitted by
facsimile or telecopier with confirmation of receipt; (iii) on the date of
receipt when mailed by certified mail, return receipt requested, postage
prepaid; or (iv) on the first (1st) Business Day thereafter when sent by
overnight courier; in each case to the addresses set forth below, or to such
other addresses as Delta, PG&E or the Escrow

 

C-13

 

Agent may from time to time specify by notice to the other parties to
this Escrow Agreement in accordance with this Section 11(f).

 

	
  If
  to Delta:

  
	
   

  
	
  Mirant
  Delta, LLC

  
	
  1155
  Perimeter Center West

  
	
  Atlanta,
  Georgia 30338

  
	
  Telephone:
  678-579-5000

  
	
  Attention:
  General Counsel

  
	
  Facsimile:
  678-579-5001

  
	
   

  
	
  If
  to PG&E:

  
	
   

  
	
  Pacific
  Gas and Electric Company

  
	
  77
  Beale Street, Suite 3200

  
	
  San
  Francisco, California 94105

  
	
  Attention:
  General Counsel

  
	
  Facsimile:
  (415) 973-0200

  
	
   

  
	
  If
  to the Escrow Agent:

  
	
   

  
	
  Deutsche
  Bank Trust Company Americas

  
	
  60
  Wall Street, 27th Floor

  
	
  Mail
  Stop: NYC60-2710

  
	
  New
  York, New York 10005

  
	
  Facsimile:
  (212) 797-8623

  
	
  Attention:
  Manager, Escrow Team

  
	
   

  
	
  If
  to the CPUC:

  
	
   

  
	
  Sean
  Gallagher

  
	
  California
  Public Utilities Commission

  
	
  Legal
  Division, Room 5124

  
	
  505
  Van Ness Avenue

  
	
  San
  Francisco 94102

  
	
  Telephone:

  	
  (415)
  703-2059

  
	
  Facsimile:

  	
  (415)
  703-2262

  

 

g)             Severability. If one or more provisions of this Escrow Agreement are held to be
unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith, in order to maintain the economic position enjoyed by
each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall
be excluded from this Escrow Agreement, (ii) the balance of this Escrow
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of this Escrow Agreement shall be enforceable in accordance with
its terms.

 

C-14

 

h)             Entire Agreement. This Escrow Agreement is the product of all
of the parties hereto, and constitutes the entire agreement between such
parties pertaining to the subject matter hereof, and merges all prior
negotiations and drafts of the parties with regard to the transactions
contemplated herein. Any and all other written or oral agreements existing
between the parties hereto regarding such transactions are expressly canceled.
In the event of any conflict between the terms of this Escrow Agreement and the
terms of the Settlement and Release of Claims Agreement, this Escrow Agreement
shall govern.

 

i)                Advice of Legal Counsel. Each party acknowledges and represents that,
in executing this Escrow Agreement, it has had the opportunity to seek advice
as to its legal rights from legal counsel and that the person signing on its
behalf has read and understood all of the terms and provisions of this Escrow
Agreement. This Escrow Agreement shall not be construed against any party by
reason of the drafting or preparation thereof.

 

IN WITNESS WHEREOF, the Parties have caused this Escrow Agreement to be
executed as of the day and year first written above.

 

 

	
   

  	
  MIRANT
  DELTA LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PACIFIC
  GAS AND ELECTRIC COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ESCROW
  AGENT: [INSERT NAME OF

  ESCROW AGENT]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

C-15

 

CC8
Escrow Agreement Exhibit A

 

FEE
SCHEDULE

 

[To be added based on discussions with the
Escrow Agent]

 

C-A-1

 

Exhibit D

 

Stayed
Litigation And Contested Matters

 

1.            Mirant Americas Energy Marketing, LP vs.
Pacific Gas & Electric Company, Adv. Proc.No. 04-04240, pending in the
Mirant Bankruptcy Court;

 

2.            Mirant Corp., et al vs. Southern California
Edison, Inc., Ad. Proc. No. 04-04241, pending in the Mirant Bankruptcy Court;

 

3.            Mirant Corp. et al vs. California Department
of Water Resources, Adv. Proc. No. 04-04243, pending in the Mirant Bankruptcy
Court;

 

4.            Mirant Americas Energy Marketing, LP v.
California Power Exchange Corporation, Adv. No. 04-04242, pending in the Mirant
Bankruptcy Court;

 

5.            Mirant Americas Energy Marketing, LP v.
California Independent System Operator Corporation, Adv. No. 04-04244, pending
in the Mirant Bankruptcy Court;

 

6.            Mirant Americas Energy Marketing, L.P. et al.
v. Pacific Gas & Electric Company, et al., 4:04-CV-557-A (Consolidated with
Nos. 4:04-CV-558-A, 4:04-CV-559-A, 4:04-CV-560-A, & 4:04-CV-561-A), pending in the Mirant District Court;

 

7.            Initial Objection to Proofs of Claim Filed by
California Public Utilities Commission pending in the Mirant Bankruptcy Court;

 

8.            Debtors’ Second Objection to Proofs of Claim
Filed by the California Public Utilities Commission (Claim Nos. 7529, 7530,
7531, 7532, 7533, 7534 and 7535) pending in the Mirant Bankruptcy Court;

 

9.            Debtors’ Objection to Proofs of Claim Filed
by the California Independent System Operator Corporation (Claim Nos. 7203,
7204, 7205, 7801, 7806, 7836) pending in the Mirant Bankruptcy Court;

 

10.          Debtors’ Objection to Proofs of Claim Filed
by Southern California Edison Company (Claim Nos. 5944, 5945, 5946 and 5947) pending
in the Mirant Bankruptcy Court;

 

11.          Debtors’ Objection to Proofs of Claim Filed
by the Federal Energy Regulatory Commission (Claim Nos. 7563, 7564, 7565, 7566
and 7567) pending in the Mirant Bankruptcy Court;

 

12.          Debtors’ Objection to Proofs of Claim Filed
by the California Power Exchange Corporation (Claim Nos. 6531 and 6540) pending
in the Mirant Bankruptcy Court;

 

13.          Debtors’ Objection to Proofs of Claim Filed
by Pacific Gas & Electric Company (Claim Nos. 6515, 6516, 6518, 6724 and
6725) pending in the Mirant Bankruptcy Court;

 

D-1

 

14.          Consolidated Omnibus Objection to Proofs of
Claim Filed by the People of the State of California, ex rel. Bill Lockyer,
Attorney General of the State of California (Claim Nos. 7536, 7537, 7538, 7539,
7540, 7541 and 7542) pending in the Mirant Bankruptcy Court;

 

15.          Debtors’ Consolidated Omnibus Objection to
Proofs of Claim Filed by the California Department of Water Resources and the
State of California (Claim Nos. 7543, 7544, 7545, 7546, 7547, 7548, 7549, 7550,
7551, 7552, 7553, 7554, 7555, 7556, 7557, 7558, 7559, 7560, 7561, 7562) pending
in the Mirant Bankruptcy Court;

 

16.           FERC Proceeding No. ER98-495-000, pending at
FERC;

 

17.           FERC Proceeding No. EL03-158, pending at
FERC;

 

18.          Proceedings originally filed by the
California Attorney General in the United States District Court for the
Northern District of California, California ex rel. Lockyer v. Mirant Corp., et
al., Northern District of California, Docket No. 02-1787 VRW, alleging that certain
Mirant Parties engaged in illegal acquisitions and/or holdings and/or control
of assets, benefits, services or rights related to such assets, under section 7
of the Clayton Act, 15 U.S.C. § 18 and any pending appeals therefrom;

 

19.          Proceedings originally filed by the
California Attorney General in the California State Court in San Francisco
County, California ex rel. Lockyer v. Mirant Corp., et al., Northern District
of California, Docket No. 04-3924 VRW, et al., alleging that certain Mirant
Parties engaged in unjust and illegal trading practices during the California
energy crisis and any appeals therefrom;

 

20.          Motion for an Order Granting San Diego Gas
& Electric Leave to File Proofs of Claim pending in the Mirant Bankruptcy
Court;

 

21.          Debtors’ Objection to Motion of San Diego Gas
& Electric for Leave to File Proofs of Claim and Objection to Claim Numbers
8076, 8077, 8078 and 8079 pending in the Mirant Bankruptcy Court; and

 

22.          PG&E’s Omnibus Objection To ISO And Generator
Claims For Reliability Must-Run Service Agreement Charges, with respect to the
claims of Mirant Delta LLC (Claim No. 8875) and Mirant Potrero LLC (Claim No.
8876) (hearing currently scheduled for February 9, 2005 at 9:30 a.m.).

 

D-2

 

Exhibit E

 

List of
Debtors

 

	
  Bankruptcy
  Proceedings

  Case No.

  	
   

  	
  Debtor Entity

  
	
  03-46590

  	
   

  	
  Mirant Corporation

  
	
   

  	
   

  	
   

  
	
  03-46591

  	
   

  	
  Mirant Americas Energy Marketing, LP

  
	
   

  	
   

  	
   

  
	
  03-46592

  	
   

  	
  Mirant Americas Generation, LLC

  
	
   

  	
   

  	
   

  
	
  03-46593

  	
   

  	
  Mirant Mid-Atlantic, LLC

  
	
   

  	
   

  	
   

  
	
  03-46594

  	
   

  	
  Mirant Americas, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46595

  	
   

  	
  Hudson Valley Gas Corporation

  
	
   

  	
   

  	
   

  
	
  03-46596

  	
   

  	
  Mint Farm Generation, LLC

  
	
   

  	
   

  	
   

  
	
  03-46597

  	
   

  	
  Mirant Americas Development Capital, LLC

  
	
   

  	
   

  	
   

  
	
  03-46598

  	
   

  	
  Mirant Americas Development, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46599

  	
   

  	
  Mirant Americas Energy Marketing Investments, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46600

  	
   

  	
  Mirant Americas Gas Marketing I, LLC

  
	
   

  	
   

  	
   

  
	
  03-46601

  	
   

  	
  Mirant Americas Gas Marketing II, LLC

  
	
   

  	
   

  	
   

  
	
  03-46602

  	
   

  	
  Mirant Americas Gas Marketing III, LLC

  
	
   

  	
   

  	
   

  
	
  03-46603

  	
   

  	
  Mirant Americas Gas Marketing IV, LLC

  
	
   

  	
   

  	
   

  
	
  03-46604

  	
   

  	
  Mirant Americas Gas Marketing V, LLC

  
	
   

  	
   

  	
   

  
	
  03-46605

  	
   

  	
  Mirant Americas Gas Marketing VI, LLC

  
	
   

  	
   

  	
   

  
	
  03-46606

  	
   

  	
  Mirant Americas Gas Marketing VII, LLC

  
	
   

  	
   

  	
   

  
	
  03-46607

  	
   

  	
  Mirant Americas Gas Marketing VIII, LLC

  
	
   

  	
   

  	
   

  
	
  03-46608

  	
   

  	
  Mirant Americas Gas Marketing IX, LLC

  
	
   

  	
   

  	
   

  
	
  03-46609

  	
   

  	
  Mirant Americas Gas Marketing X, LLC

  
	
   

  	
   

  	
   

  
	
  03-46610

  	
   

  	
  Mirant Americas Gas Marketing XI, LLC

  
	
   

  	
   

  	
   

  
	
  03-46611

  	
   

  	
  Mirant Americas Gas Marketing XII, LLC

  
	
   

  	
   

  	
   

  
	
  03-46612

  	
   

  	
  Mirant Americas Gas Marketing XIII, LLC

  
	
   

  	
   

  	
   

  
	
  03-46613

  	
   

  	
  Mirant Americas Gas Marketing XIV, LLC

  
	
   

  	
   

  	
   

  
	
  03-46614

  	
   

  	
  Mirant Americas Gas Marketing XV, LLC

  
	
   

  	
   

  	
   

  
	
  03-46615

  	
   

  	
  Mirant Americas Procurement, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46616

  	
   

  	
  Mirant Americas Production Company

  

 

E-1

 

	
  Bankruptcy
  Proceedings

  Case No.

  	
   

  	
  Debtor Entity

  
	
  03-46617

  	
   

  	
  Mirant Americas Retail Energy Marketing, LP

  
	
   

  	
   

  	
   

  
	
  03-46618

  	
   

  	
  Mirant Bowline, LLC

  
	
   

  	
   

  	
   

  
	
  03-46619

  	
   

  	
  Mirant California Investments, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46620

  	
   

  	
  Mirant California, LLC

  
	
   

  	
   

  	
   

  
	
  03-46621

  	
   

  	
  Mirant Canal, LLC

  
	
   

  	
   

  	
   

  
	
  03-46622

  	
   

  	
  Mirant Capital Management, LLC

  
	
   

  	
   

  	
   

  
	
  03-46623

  	
   

  	
  Mirant Capital, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46624

  	
   

  	
  Mirant Central Texas, LP

  
	
   

  	
   

  	
   

  
	
  03-46625

  	
   

  	
  Mirant Chalk Point Development, LLC

  
	
   

  	
   

  	
   

  
	
  03-46626

  	
   

  	
  Mirant Chalk Point, LLC

  
	
   

  	
   

  	
   

  
	
  03-46627

  	
   

  	
  Mirant D.C. O&M, LLC

  
	
   

  	
   

  	
   

  
	
  03-46628

  	
   

  	
  Mirant Danville, LLC

  
	
   

  	
   

  	
   

  
	
  03-46629

  	
   

  	
  Mirant Delta, LLC

  
	
   

  	
   

  	
   

  
	
  03-46630

  	
   

  	
  Mirant Dickerson Development, LLC

  
	
   

  	
   

  	
   

  
	
  03-46631

  	
   

  	
  Mirant Fund 2001, LLC

  
	
   

  	
   

  	
   

  
	
  03-46632

  	
   

  	
  Mirant Gastonia, LLC

  
	
   

  	
   

  	
   

  
	
  03-46633

  	
   

  	
  Mirant Intellectual Asset Management and
  Marketing

  
	
   

  	
   

  	
   

  
	
  03-46634

  	
   

  	
  Mirant Kendall, LLC

  
	
   

  	
   

  	
   

  
	
  03-46635

  	
   

  	
  Mirant Las Vegas, LLC

  
	
   

  	
   

  	
   

  
	
  03-46636

  	
   

  	
  Mirant Lovett, LLC

  
	
   

  	
   

  	
   

  
	
  03-46637

  	
   

  	
  Mirant MD Ash Management, LLC

  
	
   

  	
   

  	
   

  
	
  03-46638

  	
   

  	
  Mirant Michigan Investments, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46639

  	
   

  	
  Mirant Mid-Atlantic Services, LLC

  
	
   

  	
   

  	
   

  
	
  03-46640

  	
   

  	
  Mirant New England, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46641

  	
   

  	
  Mirant New York, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46642

  	
   

  	
  Mirant NY-Gen, LLC

  
	
   

  	
   

  	
   

  
	
  03-46643

  	
   

  	
  Mirant Parker, LLC

  
	
   

  	
   

  	
   

  
	
  03-46644

  	
   

  	
  Mirant Peaker, LLC

  
	
   

  	
   

  	
   

  
	
  03-46645

  	
   

  	
  Mirant Piney Point, LLC

  
	
   

  	
   

  	
   

  
	
  03-46646

  	
   

  	
  Mirant Portage County, LLC

  
	
   

  	
   

  	
   

  
	
  03-46647

  	
   

  	
  Mirant Potomac River, LLC

  

 

E-2

 

	
  Bankruptcy
  Proceedings

  Case No.

  	
   

  	
  Debtor Entity

  
	
  03-46648

  	
   

  	
  Mirant Potrero, LLC

  
	
   

  	
   

  	
   

  
	
  03-46649

  	
   

  	
  Mirant Services, LLC

  
	
   

  	
   

  	
   

  
	
  03-46650

  	
   

  	
  Mirant Special Procurement, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46651

  	
   

  	
  Mirant Sugar Creek Holdings, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46652

  	
   

  	
  Mirant Sugar Creek Ventures, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46653

  	
   

  	
  Mirant Sugar Creek, LLC

  
	
   

  	
   

  	
   

  
	
  03-46654

  	
   

  	
  Mirant Texas Investments, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46655

  	
   

  	
  Mirant Texas Management, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46656

  	
   

  	
  Mirant Texas, LP

  
	
   

  	
   

  	
   

  
	
  03-46657

  	
   

  	
  Mirant Wichita Falls Investments, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46658

  	
   

  	
  Mirant Wichita Falls Management, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46659

  	
   

  	
  Mirant Wichita Falls, LP

  
	
   

  	
   

  	
   

  
	
  03-46660

  	
   

  	
  Mirant Wyandotte, LLC

  
	
   

  	
   

  	
   

  
	
  03-46661

  	
   

  	
  Mirant Zeeland, LLC

  
	
   

  	
   

  	
   

  
	
  03-46662

  	
   

  	
  Shady Hills Power Company, LLC

  
	
   

  	
   

  	
   

  
	
  03-46663

  	
   

  	
  West Georgia Generating Company, LLC

  
	
   

  	
   

  	
   

  
	
  03-47927

  	
   

  	
  Mirant EcoElectrica Investments I, Ltd.

  
	
   

  	
   

  	
   

  
	
  03-47929

  	
   

  	
  Puerto Rico Power Investments, Ltd.

  
	
   

  	
   

  	
   

  
	
  03-49548

  	
   

  	
  Mirant Wrightsville Investments, Inc.

  
	
   

  	
   

  	
   

  
	
  03-49556

  	
   

  	
  Mirant Wrightsville Management, Inc.

  
	
   

  	
   

  	
   

  
	
  03-46588

  	
   

  	
  MLW Development, LLC

  
	
   

  	
   

  	
   

  
	
  03-49553

  	
   

  	
  Wrightsville Power Facility, LLC

  
	
   

  	
   

  	
   

  
	
  03-91079

  	
   

  	
  Mirant Americas Energy Capital, LP

  
	
   

  	
   

  	
   

  
	
  03-91081

  	
   

  	
  Mirant Americas Energy Capital Assets, LLC

  
	
   

  	
   

  	
   

  
	
  03-49555

  	
   

  	
  Wrightsville Development Funding, L.L.C

  

 

E-3

 

Exhibit F

 

Allocation
Matrix

 

Attached

 

F-1

 

Allocation
of Refunds from Mirant

Effective
date distribution

 

	
   

  	
   

  	
   

  	
   

  	
  REFUND

  	
   

  	
   

  	
   

  	
  PI Sell Cap

  Adjustment

  	
   

  	
   

  	
   

  	
  Adjustment

  [ILLEGIBLE]

  Call Parties

  	
   

  	
   

  	
   

  	
  Total

  Refund

  	
   

  	
   

  	
   

  	
  Gas

  [ILLEGIBLE]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Oct 2 - Jan 17

  	
   

  	
   

  	
   

  	
  Oct 2 - Jan 17

  	
   

  	
   

  	
   

  	
  Oct 2 - Jan 17

  	
   

  	
   

  	
   

  	
  Oct 2 - Jan 17

  	
   

  	
   

  	
   

  	
  Oct 2 - Jan 17

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Pacific Gas and
  Electric Company

  	
   

  	
  0.5000

  	
   

  	
  126,742,275

  	
   

  	
  0.5000

  	
   

  	
  21,355,507

  	
   

  	
  0.6118

  	
   

  	
  (26,674,460

  	
  )

  	
  —

  	
   

  	
  121,423,302

  	
   

  	
  0.4074

  	
   

  	
  (13,687,274)

  	
   

  
	
  Southern
  California Edison Company

  	
   

  	
  0.2572

  	
   

  	
  54,509,508

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  52,503,154

  	
   

  	
  0.3367

  	
   

  	
  (11,310,840)

  	
   

  
	
  San Diego Gas
  & Electric

  	
   

  	
  ?

  	
   

  	
  25,496,614

  	
   

  	
  0.1171

  	
   

  	
  4,296,069

  	
   

  	
  0.1234

  	
   

  	
  (5,362,160)

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0701

  	
   

  	
  (2,354,430)

  	
   

  
	
  California
  Department of Water Resources -CERS

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Salt River
  Project

  	
   

  	
  0.0136

  	
   

  	
  4,058,207

  	
   

  	
  0.0126

  	
   

  	
  683,759

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  4,741,991

  	
   

  	
  0.0181

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Aquia Power
  Corporation

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  1,659,453

  	
   

  	
  0.0076

  	
   

  	
  279,510

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  1,939,063

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Arizona Public
  Service Company

  	
   

  	
  0.0058

  	
   

  	
  1,252,5?5

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  211,057

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  1,463,722

  	
   

  	
  0.0038

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Automated Power Exchange

  	
   

  	
  0.0058

  	
   

  	
  716,150

  	
   

  	
  0.0030

  	
   

  	
  120,689

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  836,620

  	
   

  	
  0.0050

  	
   

  	
  (199,907

  	
  )

  
	
  New Energy Inc.

  	
   

  	
  0.0021

  	
   

  	
  507,584

  	
   

  	
  0.0023

  	
   

  	
  85,536

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  583,109

  	
   

  	
  0.0051

  	
   

  	
  (183,005

  	
  )

  
	
  American Electric
  Power Service Corporation

  	
   

  	
  0.0029

  	
   

  	
  532,053

  	
   

  	
  0.0029

  	
   

  	
  106,501

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  738,559

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  California
  [ILLEGIBLE] Power Bankers LLC

  	
   

  	
  0.0019

  	
   

  	
  419,230

  	
   

  	
  0.0019

  	
   

  	
  10,638

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0007

  	
   

  	
  (24,224

  	
  )

  
	
  COTP / COTB

  	
   

  	
  0.0036

  	
   

  	
  412,569

  	
   

  	
  0.0009

  	
   

  	
  142,032

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  [ILLEGIBLE]
  Energy Partners, Inc

  	
   

  	
  0.0050

  	
   

  	
  223,529

  	
   

  	
  0.0010

  	
   

  	
  37,684

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  261,193

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  (8,325

  	
  )

  
	
  City of
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Strategic Energy,
  LLC

  	
   

  	
  0.0007

  	
   

  	
  146,135

  	
   

  	
  0.0007

  	
   

  	
  24,623

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  170,758

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  (24,704

  	
  )

  
	
  City of Riverside

  	
   

  	
  0.0004

  	
   

  	
  83,984

  	
   

  	
  0.0004

  	
   

  	
  14,153

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  38,146

  	
   

  	
  0.0054

  	
   

  	
  (181,379

  	
  )

  
	
  City of Pasadena

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  (14,475

  	
  )

  
	
  Pacific Gas and
  Electric Energy Services Company

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  0.0002

  	
   

  	
  40,814

  	
   

  	
  0.0002

  	
   

  	
  6,877

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  47,691

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Sempra Energy
  Trading Corporation

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  City of
  [ILLEGIBLE]

  	
   

  	
  0.0001

  	
   

  	
  22,523

  	
   

  	
  0.0001

  	
   

  	
  3,812

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  26,435

  	
   

  	
  0.0004

  	
   

  	
  (13,379

  	
  )

  
	
  El Paso Power
  Services Company

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Sacramento
  Municipal Utility District

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Western Area
  Power Admin Reding

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Transita Energy Marketing
  Inc.

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Louisville Gas
  and Electric Company

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  [ILLEGIBLE]
  Energy Services Inc.

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0000

  	
   

  	
  (2

  	
  )

  
	
  Puget Sound
  Energy

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  PECO Energy
  Company

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  [ILLEGIBLE] on Power
  Source Inc.

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  City of
  [ILLEGIBLE], Public Service Department

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Public Service
  Company of Colorado

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Public Service
  Company of New Mexico

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Arizona Electric
  Power

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Energy-Kach
  Energy Trading, Inc.

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Calpina Energy
  Services, LP

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  [ILLEGIBLE]
  Energy Marketing and Trading

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0000

  	
   

  	
  (709

  	
  )

  
	
  City of Seattle,
  City [ILLEGIBLE] Department

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0004

  	
   

  	
  (14,636

  	
  )

  
	
  City of Azusa

  	
   

  	
  0.0000

  	
   

  	
  5,6??

  	
   

  	
  0.0000

  	
   

  	
  ?

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  6,845

  	
   

  	
  0.0010

  	
   

  	
  (34,535

  	
  )

  
	
  Idaho Power
  Company

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0009

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0010

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Coral Power, LLC

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0009

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Northern
  California Power Agency

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0014

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  [ILLEGIBLE] Power
  Marketing Inc

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0016

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  British Columbia
  Power Exchange Corporation

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0057

  	
   

  	
  (190,721

  	
  )

  
	
  City of [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0052

  	
   

  	
  (174,841

  	
  )

  
	
  Western Area
  Power Administration [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0051

  	
   

  	
  (172,364

  	
  )

  
	
  Eron Power
  Marketing Inc.

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0351

  	
   

  	
  (1,177,945

  	
  )

  
	
  California
  Department of Water Resources (SWP)

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0391

  	
   

  	
  (1,312,939

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SUM OF REFUND

  	
   

  	
   

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
   

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
   

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
   

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
   

  	
   

  	
  [ILLEGIBLE]

  	
   

  

 

	
   

  	
   

  	
  TOTAL

  [ILLEGIBLE]

  	
   

  	
   

  	
   

  	
  REFUNDS

  	
   

  	
   

  	
   

  	
  Gas [ILLEGIBLE]

  	
   

  	
  TOTAL [ILLEGIBLE]

  	
   

  	
   

  	
   

  	
  ??? October

  	
   

  	
  TOTAL [ILLEGIBLE]

  	
   

  
	
   

  	
   

  	
  Oct 2 - Jan 17

  	
   

  	
   

  	
   

  	
  Jan 18 -

  	
   

  	
   

  	
   

  	
  Jan 18 -

  	
   

  	
  Jan 18 -

  	
   

  	
   

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  A+B+C

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Pacific Gas and
  Electric Company

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.3767

  	
   

  	
  9,089,043

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Southern
  California Edison Company

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  8,311,465

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  San Diego Gas
  & Electric

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  1,594,242

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  California
  Department of Water Resources -CERS

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.9694

  	
   

  	
  9,553,558

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Salt River
  Project

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0001

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Aquia Power
  Corporation

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0007

  	
   

  	
  8,547

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Arizona Public
  Service Company

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0003

  	
   

  	
  (1,138

  	
  )

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  119,3?3

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Automated Power Exchange

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0036

  	
   

  	
  (12,033

  	
  )

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  New Energy Inc.

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0015

  	
   

  	
  (5,132

  	
  )

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  394,067

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  American Electric
  Power Service Corporation

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0013

  	
   

  	
  13,108

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  California
  [ILLEGIBLE] Power Bankers LLC

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0000

  	
   

  	
  (110

  	
  )

  	
  [ILLEGIBLE]

  	
   

  	
  0.0001

  	
   

  	
  18,238

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  COTP / COTB

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0847

  	
   

  	
  (115,787

  	
  )

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  [ILLEGIBLE]
  Energy Partners, Inc

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  238

  	
   

  	
  0.0000

  	
   

  	
  (1

  	
  )

  	
  [ILLEGIBLE]

  	
   

  	
  0.0004

  	
   

  	
  8,949

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  City of
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0.0057

  	
   

  	
  (18,917

  	
  )

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  222,115

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Strategic Energy,
  LLC

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  242

  	
   

  	
  0.0019

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  951

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  City of Riverside

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0079

  	
   

  	
  (26,382

  	
  )

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  205,168

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  City of Pasadena

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0024

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0043

  	
   

  	
  102,445

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Pacific Gas and
  Electric Energy Services Company

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0025

  	
   

  	
  59,714

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Sempra Energy
  Trading Corporation

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0015

  	
   

  	
  35,345

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  City of
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  (7,026

  	
  )

  	
  [ILLEGIBLE]

  	
   

  	
  0.0006

  	
   

  	
  15,073

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  El Paso Power
  Services Company

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0021

  	
   

  	
  21,062

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Sacramento
  Municipal Utility District

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0000

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0020

  	
   

  	
  47,265

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Western Area
  Power Admin Reding

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0004

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0031

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Transita Energy
  Marketing Inc.

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0001

  	
   

  	
  771

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Louisville Gas
  and Electric Company

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  688

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  [ILLEGIBLE]
  Energy Services Inc.

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  (1

  	
  )

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  526

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Puget Sound
  Energy

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  136

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  PECO Energy
  Company

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  75

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  [ILLEGIBLE] on Power
  Source Inc.

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  45

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  City of
  [ILLEGIBLE], Public Service Department

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  12

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  7

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  2

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Public Service
  Company of Colorado

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  2

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Public Service
  Company of New Mexico

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  1

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Arizona Electric
  Power

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  1

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Energy-Kach
  Energy Trading, Inc.

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  1

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Calpina Energy
  Services, LP

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0000

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  [ILLEGIBLE]
  Energy Marketing and Trading

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0000

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0000

  	
   

  	
  254

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  City of Seattle,
  City [ILLEGIBLE] Department

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0001

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0001

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0004

  	
   

  	
  10,515

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  City of Azusa

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0011

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0011

  	
   

  	
  26,574

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Idaho Power
  Company

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0006

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0004

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.00025

  	
   

  	
  12,153

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0002

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0009

  	
   

  	
  21,353

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Coral Power, LLC

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0014

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0009

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Northern California
  Power Agency

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0015

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0013

  	
   

  	
  31,158

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  [ILLEGIBLE] Power
  Marketing Inc

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0009

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0015

  	
   

  	
  36,031

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  British Columbia
  Power Exchange Corporation

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0033

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0001

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0051

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  City of
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0066

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0050

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Western Area
  Power Administration [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0060

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0040

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  Eron Power
  Marketing Inc.

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0213

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0141

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0308

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
  California
  Department of Water Resources (SWP)

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  0.0131

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  0.0311

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SUM OF REFUND

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
   

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
   

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
   

  	
   

  	
  [ILLEGIBLE]

  	
   

  	
  [ILLEGIBLE]

  	
   

  

 

*       Additional Relief of $175 million [ILLEGIBLE] share will be affected to [ILLEGIBLE] and is not [ILLEGIBLE] in this [ILLEGIBLE].

*       Oct 3 - Jan 17 Refunds includes [ILLEGIBLE] Refunds through January 31, 2001.

*       A [ILLEGIBLE] who aware is the market refunds or payable according to Exhibits ISO-30
and [ILLEGIBLE] in the ELDO-9? [ILLEGIBLE] proceeding shall [ILLEGIBLE] a deemed distributions [ILLEGIBLE]

*       The allocation of gas and emission address [ILLEGIBLE]
will be subject to true us based
on a fine [ILLEGIBLE] including [ILLEGIBLE] affective of such costs. Participants who own gas or emissions [ILLEGIBLE]
their refunds will not be required is pay such access until the date FERC
requires participants to pay gas and emissions in the Refund Proceeding.

*       SCE and SOG&E shares in the refund period
(October 2, 2000 to January 17, 2001) requires the adjustment for
SOG&E’s 20% [ILLEGIBLE] (2.36% increase in SCE’s share and 2.35% increase
in [ILLEGIBLE] shares) through the [ILLEGIBLE] Parties Refund [ILLEGIBLE]
instructions. This results is an adjustment of $[ILLEGIBLE] by which SCE’s
share is increased to [ILLEGIBLE] and SOG&E’s share is increased to [ILLEGIBLE].

*       Allocation percentages [ILLEGIBLE] to fees
decimal for display payments only).

 

F-2

 

Exhibit
G

 

2005 RMR FERC Settlement

 

Attached

 

G-1

 

Exhibit H

 

Deemed
Distribution Recipients

 

PARTICIPANTS
THAT WOULD QUALIFY AS

DEEMED DISTRIBUTION PARTICIPANTS

 

Pacific Gas and Electric
Company

British Columbia Power
Exchange Corporation

Sempra Energy Trading
Corporation

Enron Power Marketing, Inc.

Puget Sound Energy

El Paso Power Services
Company

Idaho Power Company

City of Pasadena

Transalta Energy Marketing
Inc.

Constellation Power Source
Inc.

Automated Power Exchange

PECO Energy Company

Western Area Power Admin.-Redding

 

H-1

 

Exhibit I

 

Form of SWP Side Letter

 

Attached

 

I-1

 

POWER
PURCHASE AND SALE AGREEMENT

(FIRST
WRAPAROUND AGREEMENT)

 

by and among

 

MIRANT
DELTA, LLC

 

and

 

MIRANT
POTRERO, LLC

 

and

 

PACIFIC
GAS AND ELECTRIC COMPANY

 

 

December 28, 2004

 

1

 

TABLE OF
CONTENTS

 

	
  1.

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  TERM; CONDITIONS PRECEDENT; SURVIVAL

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  RMR
  AGREEMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  OPERATION OF THE FACILITY

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  CAPACITY; ENERGY; AND ANCILLARY SERVICES

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
  AVAILABILITY

  	
   

  
	
   

  	
   

  	
   

  
	
  7.

  	
  SCHEDULING AND DISPATCH

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  NOX LIMITATIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  9.

  	
  DELTA
  DISPATCH

  	
   

  
	
   

  	
   

  	
   

  
	
  10.

  	
  MUST OFFER/RUN

  	
   

  
	
   

  	
   

  	
   

  
	
  11.

  	
  GAS

  	
   

  
	
   

  	
   

  	
   

  
	
  12.

  	
  CHARGES

  	
   

  
	
   

  	
   

  	
   

  
	
  13.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  14.

  	
  EVENT OF DEFAULT AND
  REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  15.

  	
  BILLING AND PAYMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  16.

  	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  
	
  17.

  	
  LIMITATION OF LIABILITY

  	
   

  
	
   

  	
   

  	
   

  
	
  18.

  	
  ASSIGNMENT; BINDING EFFECT

  	
   

  
	
   

  	
   

  	
   

  
	
  19.

  	
  CONFIDENTIALITY

  	
   

  
	
   

  	
   

  	
   

  
	
  20.

  	
  NOTICES

  	
   

  
	
   

  	
   

  	
   

  
	
  21.

  	
  SECURITY

  	
   

  
	
   

  	
   

  	
   

  
	
  22.

  	
  FORCE
  MAJEURE

  	
   

  
	
   

  	
   

  	
   

  
	
  23.

  	
  DISPUTE RESOLUTION

  	
   

  
	
   

  	
   

  	
   

  
	
  24.

  	
  INSURANCE

  	
   

  
	
   

  	
   

  	
   

  
	
  25.

  	
  MATERIAL CHANGE(S)

  	
   

  
	
   

  	
   

  	
   

  
	
  26.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  EXHIBIT A:  2005 RMR FERC Settlement

  	
   

  
	
   

  	
   

  
	
  EXHIBIT B:  Examples of Applicability of Schedule G
  vs. Modified Schedule G

  	
   

  

 

2

 

	
  EXHIBIT C:  OFO Penalties

  	
   

  
	
   

  	
   

  
	
  EXHIBIT D:  Notices

  	
   

  
	
   

  	
   

  
	
  EXHIBIT E:  Form of Letter of Credit

  	
   

  
	
   

  	
   

  
	
  EXHIBIT F:  Payment and Invoicing Estimated Timeline for
  RMR and Market Payments

  	
   

  
	
   

  	
   

  
	
  EXHIBIT G:  Estimated Net Exposure

  	
   

  

 

3

 

POWER
PURCHASE AND SALE AGREEMENT

 

THIS POWER
PURCHASE AND SALE AGREEMENT (the “Agreement”) is entered into as of the 28th Day of December, 2004,
(the “Agreement Date”), by and among Mirant Delta, LLC, a Delaware limited
liability company (“Mirant Delta”), Mirant Potrero, LLC, a Delaware limited
liability company (“Mirant Potrero”, together with Mirant Delta, “Mirant” or “Seller”),
and Pacific Gas and Electric Corporation, a California corporation (“PG&E”
or “Buyer”). Seller and Buyer may be individually referred to herein as a “Party”
and, collectively, as the “Parties.”

 

NOW,
THEREFORE, the
Parties hereby agree as follows:

 

1.             DEFINITIONS

 

All capitalized terms used
but not otherwise defined herein
shall have the meanings ascribed in the RMR Agreements and the Tariff. The
following terms shall have the meanings set forth below.

 

“Affiliate” means any
Person that directly or indirectly controls, is controlled by or is under
common control with the Person in question.

 

“Amendment 60” has
the meaning set forth in Section 10.1.

 

“Ancillary Services”
has the meaning given in the RMR Agreements.

 

“Availability Notice”
has the meaning set forth in Section 7.2.

 

“Bankruptcy” means
with respect to a Person that such Person (i) ceases doing business as a going
concern, files a voluntary petition in bankruptcy or is adjudicated bankrupt or
insolvent, or files any petition or answer seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the present or any future federal bankruptcy code or any other
present or future applicable federal, state or other Governmental Rule, or
seeks or consents to or acquiesces in the appointment of any trustee, receiver,
custodian or liquidator of said Person or of all or any substantial part of its
properties, or makes an assignment for the benefit of creditors; or (ii) a
proceeding is initiated against the Person seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the present or any future federal bankruptcy code or any other
Governmental Rule and, such proceeding, as described in this Section l.l(4)(ii),
is not dismissed within ninety (90) Days after the commencement, or any
trustee, receiver, custodian or liquidator of said Person or of all or any
substantial part of its properties is appointed without the consent or
acquiescence of said Person, and such appointment is not vacated or stayed on
appeal or otherwise within ninety

 

4

 

(90) Days after the
appointment, or, within ninety (90) Days after the expiration of any such stay,
has not been vacated.

 

“Bankruptcy Court”
has the meaning set forth in Section 14.1 (2).

 

“Btu” means British
Thermal Unit which is the standard Unit for measuring the quantity of heat
energy, such as the heat content of Fuel.

 

“Bubble” has the
meaning given in Section 8(2).

 

“Business Day” means
a Day other than Saturday, Sunday, a NERC holiday or a Day that is authorized
as a holiday by banks in New York, New York.

 

“Buyer’s Monthly Charges”
has the meaning given in Section 12.1(1).

 

“Buyer’s Monthly Credits”
has the meaning set forth in Section 12.4.

 

“Buyer’s PG&E
Citygate Pool” has the meaning given in Section 11.1(2) and applies
only to Seller’s provision of Gas to the Non-RMR Delta Units.

 

“Calculation Date”
means any Business Day on or before the fifteenth (15th) Day of a month during the “Condition 1” Term on which Seller makes
the determinations referred to in Article 21 of this Agreement.

 

“Claims” means all
claims or actions filed by a Person, including fines or penalties, whether
groundless, false or fraudulent, that relate to the subject matter of an
indemnity, and the resulting losses, damages, expenses, attorney’s fees and
court costs, whether incurred by settlement or otherwise, and whether such
claims or actions are filed prior to or after the expiration or termination of
this Agreement.

 

“Collateral Requirement”
has the meaning set forth in Section 21.2.

 

“Commercial Interest Rate”
means a rate equal to the per annum rate of interest equal to the “Monthly”
Federal Funds Rate (as reset on a monthly basis and based on the latest month
for which such rate is available) as reported in Federal Reserve Bank
Publication H.15-519, or any successor publication, published by the Board of
Governors of the Federal Reserve System.

 

“Condition 1’ Term”
means the period commencing pursuant to Section 2.1 through and including
hour ending 2400 PPT on the Termination Date.

 

“Contract Term” means
the term of this Agreement beginning on the Agreement Date and ending on the
Termination Date.

 

5

 

“Contra Costa Facility”
means the natural gas fueled electric generating facility owned by Seller in
Contra Costa County, California, including all equipment used to produce the
Maximum Net Dependable Capacity, Energy and Ancillary Services, buildings and
facilities, facility control systems, fire protection systems, potable,
process, and sanitary water supply, treatment, storage, disposal, and transfer
systems, the Electrical Interconnection Facilities, the Gas Interconnection
Facilities and all related equipment necessary to accept Fuel at the Gas
Delivery Point including storage and transfer systems, and ingress and egress
to the Facility Site.

 

“CPUC” means the
California Public Utilities Commission or any successor agency.

 

“Credit Rating” means
with respect to a Party or any entity, on any date of determination, the
respective ratings then assigned to such Party’s or entity’s unsecured, senior
long-term debt (not supported by third party credit enhancement). In the event
of any inconsistency in ratings by Moody’s and S&P (a “split rating”), the
lower assigned rating shall control. If such entity does not have an unsecured,
senior long-term debt rating by either S&P or Moody’s, then “Credit Rating”
shall mean the general corporate credit rating or long-term issuer rating, as
applicable, assigned by such rating agency to such entity.

 

“Damages” has the
meaning set forth in Section 16.1 (1).

 

“Day” means the
24-hour period beginning and ending at 12:00 midnight PPT.

 

“Defaulting Party”
has the meaning set forth in Section 14.1(1).

 

“Delivery Point”
means the ‘Delivery Point’ specified for each RMR Unit in the applicable Schedule A,
part 4, of the RMR Agreements.

 

“Delta Units” or “Delta
RMR Units” means the electric generating Units owned by Mirant Delta and
located in Pittsburg, California, known as Pittsburg 5 and Pittsburg 6 and the
electric generating Unit owned by Mirant Delta and located in Antioch,
California, known as Contra Costa 7; provided that a Delta Unit shall be a
Delta RMR Unit only as long as it remains subject to the applicable RMR
Agreement.

 

“Dispatch Notice” has
the meaning set forth in RMR Agreements.

 

“EFO” has the meaning
given in the Gas Transporter’s tariff.

 

“Electrical
Interconnection Agreements” mean the interconnection agreement(s) between
Seller and the System Operator providing for the maintenance and operation of
the Electrical Interconnection Facilities.

 

6

 

“Electrical
Interconnection Facilities” means the equipment necessary to connect the
Units to the System Operator’s 115kV and 230 kV transmission system.

 

“Energy” has the
meaning given in the RMR Agreements.

 

“Energy Meters” means
the System Operator’s revenue meters identified in Section 5 of Schedules
A of the RMR Agreements.

 

“Event of Default”
has the meaning set forth in Section 14.1(1).

 

“Exhibit” means any
exhibit attached to this Agreement, which is hereby incorporated into this
Agreement by reference.

 

“Facility(ies)” means
the Contra Costa Facility, the Pittsburg Facility or the Potrero Facility, as
applicable.

 

“Facility Site” means
the parcel of land on which the applicable Facility is located.

 

“FERC” means the
Federal Energy Regulatory Commission, or its successor.

 

“Filing” has the
meaning set forth in Section 14.1(2).

 

“Force Majeure Event”  has the meaning given in the applicable RMR
Agreement(s).

 

“Forced Outage” has
the meaning ascribed in the RMR Agreements.

 

“Fuel” means Gas and
Distillate Fuel and RMR Fuel and Non-RMR Fuel, as applicable.

 

“GAAP” means
Generally Accepted Accounting Principles.

 

“Gas” means natural
gas or any mixture of hydrocarbon gases or hydrocarbon gases and
non-combustible gases consisting predominantly of methane.

 

“Gas Delivery Point”
means the point of interconnection between the Gas Transporter’s pipeline and
the applicable Facility.

 

“Gas Exposure” has
the meaning set forth in Section 21.3.

 

“Gas Imbalance Charges”
means any pipeline scheduling, imbalance, cashout, operational flow order or
other similar pipeline penalties or charges assessed by Gas Transporter
resulting from failure to communicate to the pipeline,

 

7

 

nominations, nomination
changes or failure to adjust nominations to comply with Gas Transporter’s
tariffs and imbalance tolerance limits.

 

“Gas Index” means,
for a given Trading Day the two (2) Day rolling average simple average of the
Gas Daily, PG&E Citygate Index (midpoint) and the NGI Daily Gas Price
Index, PG&E Citygate (average) as shown in Table C1-8 of Schedules C of the
RMR Agreements.

 

“Gas Interconnection
Facilities” means the meter owned and operated by the Gas Transporter,
which is located at the applicable Facility, and other equipment necessary to
connect the Facility with the Gas Transporter’s transportation system.

 

“Gas Meter” means the
Gas the meter owned by the Gas Transporter and located at the applicable Gas
Delivery Point.

 

“Gas Tariff’ has the
meaning given in Section 11.3.

 

“Gas Transmission Service
Agreement” or “GTSA” means the interconnection agreement between
Seller and the Gas Transporter providing for the operation and maintenance of
the Gas Interconnection Facilities.

 

“Gas Transporter”
means Pacific Gas & Electric Company or its successor.

 

“GSM” has the meaning
given in Section 11.5(1).

 

“Generator Imbalance Fees”
means any imbalance fees, penalties or other similar fees, costs or penalties
imposed by any System Operator other than Uninstructed Deviation Penalties.

 

“Good Industry Practice”
has the meaning given in the RMR Agreements.

 

“Governmental Authority”
means any federal, state or local governmental body, any governmental,
military, regulatory or administrative agency, commission, body or other
authority exercising or entitled to exercise any administrative, executive,
judicial, legislative, policy, regulatory or taxing authority, jurisdiction or
power, any court or governmental tribunal, or any applicable independent system
operator, regional transmission organization, regional power pool, reliability
council or other regional entity performing similar functions.

 

“Governmental Rule”
means any law, rule, regulation, ordinance, order, code, permit,
interpretation, judgment, decree, directive, guideline, policy or similar form
of decision of any Governmental Authority having the effect and force of law.

 

8

 

“Guarantee” means the
instrument or agreement pursuant to which a Guarantor provides credit support
for the obligations of a Party; provided, however, that such instrument or
agreement shall be in a form reasonably acceptable to the Person receiving such
guarantee and extending credit as a result thereof.

 

“Guarantor” means a
Person that has a Credit Rating by S&P and Moody’s of at least BBB- by
S&P and Baa3 by Moody’s and that is acceptable, as determined in a
commercially reasonable manner, to the Party who would be protected by the
Guarantee issued from such Person.

 

“ISO” means the
California Independent System Operator Corporation or its successor.

 

“kW” means kilowatt.

 

“kWh” means
kilowatt-hour.

 

“Letter of Credit”
means an unconditional, irrevocable, non-transferable, standby letter of credit
naming a Party as the sole beneficiary, issued by a United States commercial
bank, a United States financial institution, or the United States branch of a
foreign commercial bank, with a minimum of one billion U. S. dollars capital
and surplus, in each case with a Credit Rating of at least A by S&P and A2
by Moody’s, in the form attached hereto as Exhibit E. The Secured Party shall
value the Letter of Credit at its Stated Amount (as defined in the Letter of
Credit) for purposes of securing the Posting Party’s Collateral Requirement as
long as the Issuing Bank (as defined in the Letter of Credit) maintains a
Credit Rating of at least A by S&P and A2 by Moody’s.  If at any time the Issuing Bank does not have
a Credit Rating of at least A by S&P and A2 by Moody’s, the Secured Party
shall value the Letter of Credit issued by such entity at zero ($ 0).

 

“Long-term Planned Outage”
has the meaning ascribed in the RMR Agreements.

 

“MMBtu” means one
million British Thermal Units.

 

“Market Exposure” has
the meaning set forth in Section 21.3.

 

“Market Payment” has
the meaning set for in Section 15.1(1).

 

“Maximum Net Dependable
Capacity” has the meaning ascribed in the RMR Agreements.

 

“Moody’s” means Moody’s
Investor Services, Inc., or its successor.

 

“Must Run Dispatch”
has the meaning given in Section 10.1.

 

9

 

“MW” means a
megawatt. One MW is equal to 1,000 kW.

 

“MWh” means a
megawatt-hour. One MWh is equal to 1, 000 kWh.

 

“NBAA” has the
meaning given in Section 11.1(3).

 

“Natural Gas Service
Agreement” or “NGSA” means the gas service agreement between Seller
and the Gas Transporter for the applicable Facility.

 

“Net Exposure” has
the meaning set forth in Section 21.3.

 

“Non-Conforming Gas”
has the meaning set forth in Section 11.3(2).

 

“Non-Defaulting Party”
has the meaning set forth in Section 11.l(l)(a).

 

“Non-RMR Gas” has the
meaning given in Section 11.1(2).

 

“Non-RMR Unit Gas Meters”
has the meaning set forth in Section 11.l(4).

 

‘‘Non-RMR Unit MDO”
has the meaning set forth in Section 11.5(1).

 

“Non-RMR Units” has
the meaning given in Section 7.1.

 

“Notification Time”
means 10:00 am PPT on any Calculation Date.

 

“OFO” has the meaning
given in the Gas Transporter’s tariff.

 

“Operational Limitations”
means the limitations described in Sections 3 and 6 through 11 of Schedule A
of the RMR Agreements.

 

“Pacific Prevailing Time”
or “PPT” means the prevailing time (i.e., Standard
Time or Daylight Savings Time) on any given Day in the Pacific time zone.

 

“Person” means an
individual, partnership, corporation, limited liability company, association,
trust, joint venture, unincorporated organization, Governmental Authority, or
other type of entity.

 

“Permit” has the
meaning given in Section 9.

 

“Pittsburg Facility”
means the natural gas fueled electric generating facility owned by Seller in
Contra Costa County, California, including all equipment used to produce the
Maximum Net Dependable Capacity, Energy and Ancillary Services, buildings and
facilities, facility control systems, fire protection systems, potable,
process, and sanitary water supply, treatment, storage, disposal, and transfer

 

10

 

systems, the Electrical
Interconnection Facilities, the Gas Interconnection Facilities and all related
equipment necessary to accept Fuel at the Gas Delivery Point including storage
and transfer systems, and ingress and egress to the Facility Site.

 

“Planned Maintenance
Outage” means Long-term Planned Outages and any other planned curtailment
or outage at one or more RMR Units at the Facility for purpose of performing
maintenance on the RMR Units, as further described in Section 4.3.

 

“Posting Party” has
the meaning set forth in Section 21.1.

 

“Potrero Facility”
means the natural gas and distillate fueled electric generating facility owned
by Seller in San Francisco, California, including all equipment used to produce
the Maximum Net Dependable Capacity, Energy and Ancillary Services, buildings
and facilities, facility control systems, fire protection systems, potable,
process, and sanitary water supply, treatment, storage, disposal, and transfer
systems, the Electrical Interconnection Facilities, the Gas Interconnection
Facilities and all related equipment necessary to accept Fuel at the Fuel
Delivery Point including storage and transfer systems, and ingress and egress
to the Facility Site.

 

“Potrero Units” or “Potrero
RMR Units” means the electric generating Units owned by Mirant Potrero and
located in San Francisco, California, known as Potrero 3, Potrero 4, Potrero 5
and Potrero 6; provided that a Potrero Unit shall be a Potrero RMR Unit only as
long as it remains subject to the applicable RMR Agreement.

 

“RMR Agreements” are
(i) that certain Must-Run Service Agreement, dated June 1, 1999, between
MIRANT DELTA, LLC and CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION, as
may be in effect from time to time, pertaining to the facility commonly known
as the Pittsburg Power Plant (the “Pittsburg RMR Agreement”); (ii) that certain
Must-Run Service Agreement, dated June 1, 1999, between MIRANT DELTA, LLC
and CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION, as may be in effect
from time to time, pertaining to the facility commonly known as the Contra Costa
Power Plant (the “Contra Costa RMR Agreement”); and (iii) that certain Must-Run
Service Agreement, dated June 1, 1999, between MIRANT POTRERO, LLC and
CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION, as may be in effect from
time to time, pertaining to the facility commonly known as the Potrero Power
Plant (the “Potrero RMR Agreement”, together with the Pittsburg RMR Agreement
and the Contra Costa RMR Agreement, the “RMR Agreements”).

 

“RMR Exposure” has
the meaning set forth in Section 21.3.

 

11

 

“RMR Gas” has the
meaning given in Section 11.1(1).

 

“RMR Payment” has the
meaning set for in Section 15.1(1).

 

“RMR Interest Rate”
means ‘Interest Rate’ as defined in the RMR Agreement.

 

“RMR Units” means the
Delta Units and Potrero Units, which have been designated as Reliability
Must-Run units pursuant to RMR Agreements between the ISO and Mirant Delta,
with respect to the Delta Units, and between Mirant Potrero and the ISO, with
respect to the Potrero Units; provided that such units remain, at all times
during (the Contract Term, subject to the RMR Agreements.

 

“SC” or “Scheduling
Coordinator” has the meaning set forth in the Tariff.

 

“S&P” means the
Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies,
or its successor.

 

“Secured Party” has
the meaning set forth in Section 21.1.

 

“Security” means a
Letter of Credit or cash in the form of dollars of the United States of
America.

 

“Seller Balancing Account”
has the meaning set forth in Section 11.5(2)(A).

 

“Seller Monthly Imbalance”
has the meaning set forth in Section 11.5(2)(B).

 

“Settlement Amount”
means the net losses and costs, if any, expressed in U.S. dollars, which such
Non-Defaulting Party incurs as a result of the termination of this Agreement
including, at the Non-Defaulting Party’s option, all (i) net losses and costs
incurred by the Non-Defaulting Party to (a) purchase or sell, as applicable,
capacity, energy and ancillary services equally useful as the Maximum Net
Dependable Capacity, Energy and Ancillary Services purchased and sold under
this Agreement and (b) maintain, terminate, obtain or re-establish any trading
positions entered into by a Party to hedge its obligations under this
Agreement, and (ii) reasonable attorney’s fees incurred by the Non-Defaulting
Party in connection with the termination of this Agreement.  If Seller is the Non-Defaulting Party, (i)
above shall include, but not be limited to, all costs incurred such as the
difference between what Seller would have received under Condition 2” versus “Condition
1” as more fully described in Article 12 until such time as the ISO allows
Seller to switch to “Condition 2”. If the calculation of the Settlement Amount
results in a positive number, that positive number, the Settlement Amount,
shall be due to the Non-Defaulting Party from the Defaulting Party. If the
Non-Defaulting Party does not incur any net losses and costs as a result of the
termination of this Agreement, or if the calculation results in a

 

12

 

negative number, the
Settlement Amount shall be deemed to be zero (0). In calculating a Settlement
Amount, the Non-Defaulting Party shall discount to present value (in a
commercially reasonable manner based on the Commercial Interest Rate for the
applicable period) any amount that would otherwise have been due at a later
date.

 

“Station Load” means
the power required by the auxiliary equipment necessary for the operation of
the Facility including, but not limited to, pumps, fans, etc.

 

“System Operator”
means California Independent System Operator Corporation or any successor
thereto that provides electric transmission services to support the
transmission of Energy or Ancillary Services from the Delivery Point.

 

“System Operator’s
Protocols” means the documents adopted by the System Operator, as amended
from time to time, that contain the scheduling, operating, planning,
reliability and settlement policies, rules, guidelines, procedures, standards
and criteria of the control area.

 

“Tariff” means the
ISO Conformed Tariff, as may be amended from time to time.

 

“Termination Date”
has the meaning set forth in Section 2.1.

 

“Terminated RMR Unit”
has the meaning given in Section 2.1.

 

“Transmission Ancillary
Services” means those ancillary services that Buyer must purchase from the
System Operator as necessary to support the transmission of Energy or Ancillary
Services from the Delivery Point.

 

“UDPs” or “Uninstructed
Deviation Penalty(ies)” has the meaning set forth in the Tariff.

 

“Unit(s)” has the
meaning given in Section 7.1.

 

“2005 RMR FERC Settlement”
is the settlement to be filed by the Parties with FERC in a form substantially
similar to that attached hereto as Exhibit A.

 

2.             TERM;
CONDITIONS PRECEDENT; SURVIVAL

 

2.1          Term.

 

(1)           The Contract Term with respect to each of the
RMR Units shall commence on the Agreement Date and shall continue through December 31,
2005, unless terminated prior to such date pursuant to this Agreement (the “Termination
Date”); provided, however, that if the RMR Agreement for any RMR Unit is
terminated or

 

13

 

expires before December 31, 2005 (the “Terminated
RMR Unit”), then this Agreement shall also terminate automatically with respect
to that Terminated RMR Unit subject only to the obligation and liability
described in Section 3(4) of this Agreement; and provided further that if
such Terminated RMR Unit is subsequently re-designated as a Reliability Must
Run Unit while the Contract Term is still in effect, the Terminated RMR Unit
shall not be subject to this Agreement. If an RMR Unit becomes a Terminated RMR
Unit, Seller shall, within thirty (30) Days of such termination, file to remove
the tariff sheets associated with such Terminated RMR Unit.

 

(2)           The “Condition 1” Term shall commence on the
Day the ISO allows Seller to switch to “Condition 1”. Consistent with Section 3.2(d)
of the RMR Agreements, the change from “Condition 2” to “Condition 1” shall
take place on the first Day of a month. At the request of Buyer, which request
Buyer may make prior to the satisfaction of the conditions set forth in section 2.2,
Seller shall request from the ISO a change of status of the RMR Units to “Condition
1” and request a waiver of (i) the ninety (90) Day notice requirement for
changing the status of the RMR Units to “Condition 1” and (ii) the requirement
that an RMR Unit remain in its existing Condition for at least twelve (12)
months.

 

2.2          Conditions Precedent to the Parties’ Performance.

 

Notwithstanding any other provision
of this Agreement, performance under this Agreement of any obligation to
provide or pay for the power purchase and sale arrangement shall arise only
upon the satisfaction of the following conditions:

 

(1)           Seller shall obtain approval by the Bankruptcy
Court. The approval of the Bankruptcy Court shall include a court order that
confers rights to the Buyer under this Agreement that are acceptable to the
Buyer. In the event that such approval has not been obtained by January 31,
2005, either Party may terminate this Agreement upon written notice to the
other Party with no obligation or liability to either Party as a result of such
termination, except, if Seller is unable to obtain this approval and either
Party exercises its termination right, Seller agrees to make a limited 205
filing with FERC, based on the formulas set forth in Schedule F of the RMR
Agreements, within sixty (60) days of the notice of termination. Seller agrees
to pay Buyer a termination fee equal to the difference, for the period from January 1,
2005, until the effective date of the limited 205 filing, between the payments
made to Seller under the RMR Agreements and the payments that would have been
made to Seller if the rates under the limited 205 filing as finally accepted or
approved by FERC, no longer subject to rehearing or appeal, had been in effect
as of January 1, 2005.  If Seller
has switched to “Condition 1” per Section 2.1(1) prior to receipt of
Bankruptcy Court approval, Seller shall operate as if it were under “Condition
2” until the earlier of (a) receipt of Bankruptcy Court approval or (b) the
first Day that Seller operates under “Condition 2” pursuant to the ISO’s
approval, following a termination under this Section. Furthermore, if Seller
has already switched to “Condition 1” and a termination as described in this Section occurs,
Buyer agrees to pay Seller the difference between what Seller would have
received under “Condition 2” versus

 

14

 

“Condition 1”, as more fully described in Article 12,
for the period from the date of the termination through and until the first Day
that Seller operates under “Condition 2” pursuant to the ISO’s approval,
provided that Seller requests such a change with fifteen (15) Days of the
termination.

 

(2)           The
Parties have filed the 2005 RMR FERC Settlement.

 

2.3          Survival.

 

As of the
Termination Date, the Parties shall no longer be bound by the terms and
conditions hereof, except (i) to the extent necessary to enforce any rights and
the obligations of the Parties, including, but not limited to, payment
obligations, arising under this Agreement prior to such Termination Date; (ii)
the obligations of the Parties hereunder with respect to confidentiality, audit
and indemnification shall survive any termination of this Agreement and shall
continue for a period of two (2) years following such Termination Date; and
(iii) the rights and obligations as stated in Section 2.2(1).

 

3.             RMR AGREEMENTS

 

(1)           Buyer
acknowledges and agrees that (a) its rights under this Agreement are subject to
the RMR Agreements, including rights and obligations of Seller and the ISO thereunder,
(b) Schedules A, B, C, and D of the RMR Agreements are subject to change annually
through Seller’s limited 205 filing with FERC, as provided for in the RMR Agreements,
and (c) Seller shall continue to operate the Non-RMR Units and neither such operation
nor such Non-RMR Units are subject to this Agreement, except as expressly provided
herein.

 

(2)           The
Parties shall file the 2005 RMR FERC Settlement on or before January 7,
2005.

 

(3)           Seller
shall retain all rights and responsibilities under the RMR Agreements relating
to Capital Items and Repair, including, but not limited to, submission of
Capital Item reports showing proposed Capital Items, installation of Capital
Items, submission of Unplanned Repair Notices, making Repairs, and application for
recovery of Capital Item and Repair costs through Surcharge Payments or ISO’s Repair
Share.

 

(4)           In
the event that an RMR Unit is Closed within six (6) months after the RMR Unit
ceases to be subject to the RMR Agreement as a result of termination, pursuant
to Sections 2.2 (b) (ii), (iii), (iv) or (v) of the RMR Agreement, or because
ISO does not extend the term of the RMR Agreement under Section 2.1 (b) of
the RMR Agreements (the “RMR Termination”) and so long as Seller is entitled to
receive a Termination Fee, Buyer shall pay Seller, in accordance with the
payment schedule in the RMR Agreements, the difference between (a) the
Termination Fee calculated pursuant to

 

15

 

Section 2.5 (b) of the RMR Agreement as if the
Unit were “Condition 2” at the time of the RMR Termination and (b) any
Termination Fee for a “Condition 1” Unit received from the ISO as a result of
the RMR Termination.

 

(5)           All rights available to Seller, pursuant to
the RMR Agreements, that are not specifically addressed herein are expressly
reserved by Seller and shall not be affected hereby; provided that, Seller
shall not have the right to sell any portion of the Maximum Net Dependable
Capacity, Energy, or Ancillary Services from any RMR Unit to any third party,
other than as provided in Section 5.2.

 

4.             OPERATION OF THE FACILITY

 

4.1          Permits.

 

Seller shall, at its
expense, acquire and maintain in effect during the Contract Term, from any and
all Governmental Authorities with jurisdiction over Seller or the Facilities,
all permits and approvals, in each case necessary for the ownership, operation
and maintenance of the Facilities in accordance with this Agreement, the RMR
Agreements, and all Governmental Rules. Seller shall be responsible for, and
bear all costs of, compliance with all of its permits. Notwithstanding the
foregoing, Buyer shall be responsible for all costs associated with emissions
credits that may be required for the operation of the Facilities as dispatched
by Buyer in excess of dispatches by the ISO.

 

4.2          Good Industry Practice.

 

Seller shall cause the
Facilities to be operated and maintained in accordance with Good Industry Practice
and in accordance with the terms and conditions of this Agreement and the RMR
Agreements.

 

4.3          Maintenance Outages.

 

Seller shall be responsible for proper maintenance
of all Units. Buyer and Seller shall make commercially reasonable efforts, in
cooperation with the ISO, to coordinate planned outages such that Seller’s
Planned Maintenance Outages do not overlap with Buyer’s refueling outages at
Diablo Canyon Nuclear Power Plant.

 

(1)           Schedule of Planned Maintenance Outages.

 

(a)           Planned Maintenance Outages for RMR Units
shall be scheduled and performed in accordance with Section 7.2 of the RMR
Agreements. Seller shall not be obligated to deliver Energy or Ancillary
Services from an RMR Unit pursuant to this Agreement during Planned Maintenance
Outages affecting such RMR Unit.

 

16

 

(b)           Buyer agrees that Seller must perform Planned
Maintenance Outages at the RMR Units in an effort to reduce and prevent Forced Outages
and to maintain the efficiency of the RMR Units. Such Planned Maintenance
Outages include, but are not limited to, the RMR Unit manufacturer’s
recommended and required maintenance and any preventive maintenance that
maintains or improves the reliability of the RMR Unit.  The Planned Maintenance Outage schedule shall
be based on (i) the RMR Unit manufacturer’s equivalent start and runtime
guidelines, (ii) Good Industry Practice, (iii) the long-term service agreement
for the RMR Units, (iv) the actual dispatch of the RMR Units and (v) the RMR Unit’s
point in the maintenance cycle and the potential impacts to the Unit and costs
if the maintenance schedule is changed. On or before December 31, 2004, Seller
shall provide to Buyer, in writing, its proposed schedule of Planned
Maintenance Outages for the “Condition 1” Term and the reason for such Planned
Maintenance Outages.

 

(c)           In the event that the RMR Unit manufacturer
issues a new technical bulletin, which requires immediate maintenance to be
performed, Seller shall notify Buyer of the circumstances surrounding such maintenance
and Seller will work together with Buyer to schedule the maintenance outage
notwithstanding the short notice involved.

 

(2)           Duration of Planned Maintenance Outages. 
Seller shall use its commercially reasonable efforts to complete any
Planned Maintenance Outage affecting an RMR Unit in a timely manner, with the
express goal of minimizing any adverse effect on Buyer’s ability to schedule
power from such Unit. During each Planned Maintenance Outage, Seller shall keep
Buyer apprised of the status and the expected duration of the Planned
Maintenance Outage.

 

(3)           Maintenance-related Charges. If Seller is required to Start-up and
operate an RMR Unit for maintenance purposes, Seller and Buyer shall work
together such that the maintenance related start and operation can be completed
when the Energy or Ancillary Services from the RMR Unit is being dispatched by
the Buyer or the ISO.  If the Seller and
Buyer are unable to complete the maintenance related Start-up and operation
during a time when the Buyer or the ISO has dispatched the RMR Unit, Seller shall
notify Buyer of the date of the maintenance related start and operation at
least two (2) Business Days in advance. Buyer shall provide, at its expense,
all Gas required for the start and operation of the applicable RMR Unit and
schedule the quantity of Energy or Ancillary Services produced during such
operation in a commercially reasonable manner. Buyer shall receive all revenues
associated with the sale of Energy or Ancillary Services from the RMR Unit
during the period of time the RMR Unit is being operated for maintenance
purposes.

 

17

 

4.4          Station Load.

 

Seller
shall be responsible for Station Load at all times including during all Planned
Maintenance Outages and Forced Outages and during Start-up and Shutdown of an
RMR Unit, and any periods when an RMR Unit has not been dispatched.

 

4.5          Testing.

 

Seller
shall be entitled to conduct all tests described in Section 4.9 of the RMR
Agreements.

 

4.6          Operating Procedures.

 

As
soon as practicable following the Agreement Date, the Parties shall provide for
a method, or protocol, by which communication and data exchange takes place.
This protocol shall include the delivery of Gas to the Facility, notices
regarding the availability of the Facility, exchanges of schedules, and
identification of and contact information for key personnel.

 

5.             CAPACITY; ENERGY; AND
ANCILLARY SERVICES

 

5.1          Maximum Net Dependable
Capacity; Energy; Ancillary Services.

 

(1)           Subject to the terms and conditions of this
Agreement, Seller agrees to make available to Buyer, during the “Condition 1”
Term the Maximum Net Dependable Capacity, Energy and Ancillary Services from
the RMR Units at the Delivery Point. In consideration, Buyer agrees to pay
Buyer’s Monthly Charges.

 

(2)           With respect to Ancillary Services, the
Parties acknowledge and agree that certain of such Ancillary Services would
require that a portion of the Maximum Net Dependable Capacity of the Facility
be held in reserve for such Ancillary Services to be sold or provided (or as
may be used by Buyer for its own account) from the RMR Unit and that the
combination of Energy and Ancillary Services to be sold from the RMR Unit by
Buyer shall not exceed the Maximum Net Dependable Capacity of the RMR Unit.  Any Ancillary Services which Seller may be required
to provide to the System Operator(s) under the terms of the RMR Agreements or
the Electrical Interconnection Agreement, or under the System Operator’s
Protocols, shall not be deducted from the Maximum Net Dependable Capacity made
available to the Buyer under this Agreement.

 

(3)           Should the CPUC, during the term of this
Agreement, put in place a resource adequacy requirement utilizing capacity
tagging, Seller shall provide Buyer with the capacity tags for that period for
the full capacity of the RMR
Units.  Such a process will likely
include specifying that the RMR Units be bid into the ISO Day-Ahead market if
not scheduled by Buyer, and if not selected Day-Ahead, be subject to residual
unit commitment.  Any incremental
expenses associated with providing or facilitating resource adequacy, capacity
tagging, residual unit commitment services or other similar

 

18

 

obligation incurred by
Seller in its performance of same shall be paid to Seller by Buyer, as applicable,
in accordance with Section 25.1.

 

5.2          Exclusive Rights Subject to
the RMR Agreements.

 

Seller
and Buyer desire to enter into this power purchase and sale arrangement whereby
(i) Seller shall elect “Condition 1” under the RMR Agreements but be paid by
Buyer as if it had elected “Condition 2” with respect to all provisions under
such RMR Agreements and credit to Buyer the “Condition 1” payments it receives
from the ISO; (ii) Buyer shall deliver Gas to the Delta RMR Units; and (iii)
Seller shall convert such Gas into Energy and Ancillary Services when directed
by Buyer; provided, however, that Buyer’s rights described in (i) through (iii)
above shall be limited by the following: (a) if a Termination Date has been
declared by Seller as a result of an Event of Default, which has occurred with
respect to Buyer and is continuing after the applicable cure period, Seller, in
its exercise of commercially reasonable efforts to mitigate its losses
resulting from such Event of Default, may sell any or all of the Maximum Net
Dependable Capacity, Energy and Ancillary Services to third parties during any
period of suspension of Seller’s performance obligations hereunder pursuant to
Section 14.2(1); (b) Seller may sell Energy or Ancillary Services to a party
other than Buyer or the ISO, pursuant to “contract path” transactions made in
accordance with the RMR Agreements; and (c) the ISO shall continue to possess
all rights available to it under the RMR Agreements.  For purposes of clarity, Seller shall not have
the right to sell any Maximum Net Dependable Capacity, Energy and Ancillary
Services from an RMR Unit to any party other than Buyer or the ISO during the “Condition
1” Term without the prior written consent of Buyer except as may be required
pursuant to any Electrical Interconnection Agreement between Seller and any
System Operator(s), as may be required by any Governmental Authority or as specifically provided for in (a),
(b) and (c) above.

 

5.3          Energy Delivery Point.

 

All
deliveries and receipts of Energy shall be made and measured at the Delivery
Point.

 

5.4          Title and Risk of Loss.

 

(1)           As between the Parties, Seller shall be
deemed to be in exclusive possession and control (and responsible for any
damages or injury caused thereby) of the Energy and Ancillary Services prior to
the Delivery Point, and Buyer shall be deemed to be in exclusive possession and
control (and responsible for any damages or injury caused thereby) of the
Energy and Ancillary Services at and from the Delivery Point.  Title to the Energy, Ancillary Services and
the Maximum Net Dependable Capacity of the RMR Units, subject to the RMR
Agreements and the ISO’s rights thereunder, shall remain at all times with
Buyer. Each of Seller and Buyer shall and hereby does indemnify, defend and
hold harmless the other Party from any Claims arising from any act, failure to
act or

 

19

 

incident relating to Energy
and Ancillary Services occurring when the Energy or Ancillary Services is under
its possession and control.

 

(2)           Seller warrants that the Energy delivered by
Seller and the Ancillary Services available from the RMR Units shall be free
and clear of all liens, Claims and encumbrances arising prior to the Delivery
Point, except as provided for in the RMR Agreements, and warrants that the
Maximum Net Dependable Capacity of such Units is free and clear of any liens,
Claims and encumbrances, except as provided for in the RMR Agreements.

 

5.5          Transmission Services.

 

Buyer
shall arrange, either directly or indirectly through a third party, for all
transmission service and Transmission Ancillary Services from the Delivery
Point and shall pay all costs for the same pursuant to the Tariff and the
System Operator’s Protocols including, without limitation, all costs associated
with line losses, necessary to transmit the Energy and Ancillary Services
delivered under this Agreement from the Delivery Point to any point at which
Buyer redelivers the Energy and Ancillary Services to its customer(s).

 

5.6          Electrical Interconnection
Agreement.

 

Seller
has entered into an Electrical Interconnection Agreement with the System
Operator and shall maintain such Electrical Interconnection Agreement in full
force and effect throughout the “Condition 1” Term.

 

5.7          Energy Meters.

 

Energy
and Ancillary Services delivered by Seller shall be measured by the Energy
Meters at the Delivery Point. Seller shall own, operate, maintain and test the
Energy Meters at the Delivery Point. Seller shall coordinate with the System
Operator and Buyer with respect to the maintenance and testing of Energy Meters
consistent with the Electrical Interconnection Agreement and Good Industry
Practice.

 

6.             AVAILABILITY

 

Availability
for each RMR Unit will be determined in accordance with the existing terms of
the RMR Agreements as of the Agreement Date, including, but not limited to, the
calculation of Target Availability Hours in Section 6, Schedules B of the RMR
Agreements; provided, however, that the Monthly Availability Payment shall not
be decreased as a result of any unavailability due to a Force Majeure Event or
a Forced Outage arising from Buyer’s construction or operation of Contra Costa
Unit 8 or Buyer’s connection and synchronization to the ISO Controlled Grid or
the Distribution Grid.

 

20

 

7.             SCHEDULING AND DISPATCH 

 

7.1          Dispatch.

 

(1)           Seller or an Affiliate of Seller shall be the
SC for the RMR Units and the non-RMR Units (the “Non-RMR Units”, together with
the RMR Units, the “Units”). As of the Agreement Date, Mirant Americas Energy
Marketing, LP is the SC for the RMR Units and the Non-RMR Units. Seller may
change the SC in its sole discretion and will promptly notify Buyer of any such
change.

 

(2)           Buyer shall have full dispatch flexibility
consistent with Operational Limitations on the RMR Units as provided for in
each Schedule A of the applicable RMR Agreement; provided, however, that Seller
has the right to override any dispatch request by Buyer that would, in Seller’s
reasonable opinion, create health or safety issues, violate any
legally-required operating restrictions, applicable laws or regulations, or
would, if honored, result in Seller’s non-compliance with any Schedule A of the
RMR Agreements.

 

(3)           Consistent with ISO timelines and scheduling
protocols, Buyer may elect Day-Ahead, Hour-Ahead and Supplemental Energy bids
for delivery of Energy and Ancillary Services (as defined in the respective RMR
Agreement); provided that, Buyer shall schedule at least all Energy to the
extent dispatched by the ISO under the RMR Agreements for Day-Ahead and
Hour-Ahead if Buyer has directed Seller to select “market path”. Buyer reserves
the right to select “market path” or “contract path” for any RMR Agreement
dispatch order by ISO.  Unless otherwise
directed by Buyer for each Day-Ahead and Hour-Ahead dispatch instruction by ISO
for the Delta RMR Units, by default Seller shall notify the ISO of its election
of “market path” for all Energy quantities from the Delta RMR Units, with the
exception of ISO dispatches after the close of the Hour-Ahead Market.  ISO dispatch orders in real-time under the RMR
Agreements shall be responded to directly by Seller as “contract path” and
Seller shall notify Buyer of such orders in a timely manner. Potrero dispatches
are more fully addressed in Section 7.5.

 

(4)           Buyer shall provide Seller with all dispatch
schedules and intra-Day adjustments reasonably in advance of the ISO scheduling
deadlines. The Parties shall cooperate to ensure that all changes in the
dispatch schedule are properly, appropriately and promptly (considering the
particular circumstances involved) communicated to all entities requiring
notification of any increase or decrease in the scheduled dispatch of the Facility.  The Parties shall be further obligated to
coordinate their scheduling activities and notices to one another to allow each
Party sufficient time to meet deadlines and requirements of any System
Operator(s) and Gas transportation providers to assist the other Party in
minimizing or eliminating Uninstructed Deviation Penalties, Generator Imbalance
Fees and Gas Imbalance Charges that may be associated with such deadlines and
requirements.

 

(5)           Seller has no residual dispatch rights on the
RMR Units if not called upon by the ISO or the Buyer, except as set forth in
Sections 5.2 and 7.6 herein.

 

21

 

(6)            Seller may fulfill any Dispatch Notice from
the ISO or, if agreed to, dispatch schedule from the Buyer from a Substitute
Unit as provided for in Section 5.1 of the RMR Agreements.

 

7.2          Scheduling and Dispatch
Protocols.

 

Scheduling
and dispatch shall occur as follows:

 

(1)           Day-Ahead Scheduling:

 

	
  0515 PPT:

  	
   

  	
  Seller will notify Buyer
  of the Availability of each RMR Unit and the Day-Ahead dispatch for each RMR
  Unit for each hour that for which a Dispatch Notice is submitted to the
  Seller by ISO under the RMR Agreements (“Availability Notice”).

  
	
   

  	
   

  	
   

  
	
  0545 PPT:

  	
   

  	
  Buyer shall notify Seller
  of its selection of “contract path”, if applicable, for the dispatches by ISO
  under the RMR Agreements.

  
	
   

  	
   

  	
   

  
	
  0600 PPT:

  	
   

  	
  Seller will notify ISO of its election of
  “market path” or “contract path” for the dispatches by ISO under the RMR
  Agreements.

  
	
   

  	
   

  	
   

  
	
  0615 PPT:

  	
   

  	
  Buyer will notify Seller
  of the Day-Ahead dispatch requirements of Buyer including:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)           Energy and Ancillary Service schedules for
  each RMR Unit, for each hour (inclusive of ISO dispatches as provided by
  Seller to Buyer above); and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)           Confirmation of total SC Trade quantities
  by hour.

  
	
   

  	
   

  	
   

  
	
  1000 PPT: 

  	
   

  	
  Buyer and Seller submit
  balanced schedules, including all inter-SC Trades, to ISO.

  

 

(2)           Day-Of Scheduling:

 

The scheduling timeline in this “Day-Of-Scheduling” section is based on
current ISO Tariff protocols, but Buyer and Seller acknowledge that the ISO is
not currently following such timeline for Hour-Ahead dispatches. If the ISO
revises the timeline through a Tariff amendment, Buyer and Seller shall revise
the timeline below accordingly, maintaining the “x + 45 minutes” and “x + 60
minutes” provision for election of “market path” or “contract path” for Hour-

 

22

 

Ahead
scheduling, where x is defined
as follows and the number of minutes indicate the time after the ISO
notification at time x:

 

In conformance to the Hour-Ahead RMR scheduling blocks outlined in
Table 1.1 of the ISO Operation Procedure G-203, x = 1400 PPT Day Before, 0400
PPT Operating Day or 1000 PPT Operating Day, as applicable.

 

	
  1400 PPT

  	
   

  
	
  Day Before:

  	
  Seller will forward to
  Buyer the Hour-Ahead dispatch for each RMR Unit, for each hour for which a
  Dispatch Notice is submitted to Seller by ISO under the RMR Agreements (Hours
  Ending (“HE”) 0100-1000).

  
	
   

  	
   

  
	
  0400 PPT:

  	
  Seller will forward to
  Buyer the Hour-Ahead dispatch for each RMR Unit for each hour for which a Dispatch
  Notice is submitted to Seller by ISO under the RMR Agreements (HE 1100-1600).

  
	
   

  	
   

  
	
  1000PPT:

  	
  Seller will forward to
  Buyer the Hour-Ahead dispatch for each RMR Unit for each hour for which a
  Dispatch Notice is submitted to Seller by ISO under the RMR Agreements (HE
  1700-2400).

  
	
   

  	
   

  
	
  x + 45 min:

  	
  Buyer will notify Seller
  of Buyer’s election of “contract path”, if applicable

  
	
   

  	
   

  
	
  x + 60 min:

  	
  Seller will notify ISO as
  to its election of “market path” or ‘‘contract path” for the Energy
  quantities from the RMR Units dispatched by ISO and for those hours for which
  no previous selection has already been made.

  

 

If
the ISO continues to not follow Operating Procedure G-203, Buyer shall notify
Seller of Buyer’s election of “contract path”, if applicable, 30 minutes prior
to Seller’s deadline to notify the ISO of such election.

 

Hour-Ahead
timelines based on schedule “t-xxx” where “xxx” are the minutes prior to the
start of the hour of delivery:

 

(a)      t-165 minutes:  Buyer will notify Seller of the “Day Of”
dispatch requirements of Buyer, including SC Trade quantities by hourly Energy
and Ancillary Service schedules for each RMR Unit (inclusive of quantities
dispatched by the ISO under the RMR Agreements); and

 

23

 

(b)      t-135 minutes: Confirm totals. Buyer and
Seller submit balanced schedules including all Inter-SC Trades to ISO.

 

(3)           Supplemental Energy Market:

 

Thirty
(30) minutes prior to the closure of bidding into the Supplemental Energy
market, Buyer will notify Seller of bid curves for submission to ISO for
Supplemental Energy, both incremental and decremental, for each RMR Unit. In
the event that Buyer fails to notify Seller of such bid curves, Seller may
develop and submit bid curves to the ISO on behalf of Buyer. In such event,
Seller shall subsequently send Buyer any submission made on its behalf. Seller
shall notify Buyer in a timely manner of any dispatches of the RMR Units by ISO
in the Supplemental Energy market. Buyer and Seller acknowledge the sensitive
nature of the information in Buyer’s bid curves and Seller agrees to use such
information only for the purposes described herein.

 

(4)           Ancillary Services Market:

 

Subject
to the timelines described above in (1) and (2), Buyer will notify Seller of
bid curves for submission to ISO for Ancillary Services capacity for each RMR
Unit. Seller shall notify Buyer in a timely manner of any dispatches of the RMR
Units by ISO in the Ancillary Services market. Buyer and Seller acknowledge the
sensitive nature of the information in Buyer’s bid curves and Seller agrees to
use such information only for the purposes described herein.

 

7.3          Dispatch Notice;
Restrictions.

 

(1)           To cancel a dispatch schedule and avoid
incurring a Start-up Payment obligation, Buyer must notify Seller of such
cancellation prior to the RMR Unit operator initiating the start sequence. If
Buyer fails to provide a dispatch notice to Seller to cancel dispatch of the
RMR Unit before the RMR Unit Starts-up, Buyer will be responsible for the
Start-up Payment for the applicable

Unit(s) and such Start-up shall count against Buyer as provided for in Section
5.3(a) of the RMR Agreements for “Condition 2”.

 

(2)           Any dispatch schedules and intra-Day
adjustments submitted by Buyer must be consistent with the limitations on the
RMR Units as defined in each Schedule A of the RMR Agreements.  Seller shall not be obligated to deliver
Energy or Ancillary Services that violates these limitations. Buyer may request
dispatch of the RMR Units in excess of the Contract Service Limits consistent
with each Section 4.7 of the RMR Agreements.

 

7.4          Uninstructed Deviation Penalty;
Generator Imbalance Fees.

 

(1)           Subject to the terms of this Agreement and
consistent with Good Industry Practice and the Operational Limitations, Seller
agrees to operate the Facility to comply promptly with the dispatch by Buyer or
the ISO and to minimize Uninstructed Deviation Penalty(ies).  Seller and Buyer shall be equally responsible
for any Uninstructed

 

24

 

Deviation Penalty(ies)
incurred with respect to Buyer’s or the ISO’s dispatch of the RMR Units.

 

(2)           Buyer shall be responsible for any Generator
Imbalance Fees incurred by Buyer’s or the ISO’s dispatch of the RMR Units under
“Condition 1”; provided, however, that Seller would not have otherwise incurred
such fees when operating under “Condition 2”.

 

7.5          Potrero Units.

 

(1)           Notwithstanding anything to the contrary
herein, neither Seller nor Buyer shall have the right to dispatch the Potrero
Units beyond the ISO’s dispatch. Subject to a commitment from the ISO and the
CPUC as to certain resource adequacy (“RA”) rights for the Potrero Units, Buyer
will request Seller to designate such Units as RMR Units under “Condition 1”
for the “Condition 1” Term so that the full RA rights can be credited to Buyer,
and Seller shall request from the ISO a change of status of the Potrero RMR Units
to “Condition 1” and request a waiver of the ninety (90) Day notice requirement
for changing the status of the Potrero RMR Units to “Condition 1” so that the
Potrero RMR Units will be able to perform under “Condition 1” as soon as
possible.

 

(2)           All Energy and capacity from the Potrero RMR
Units shall be scheduled as “contract path”. 
Seller shall provide all the Fuel required for ISO dispatch of the
Potrero Units.

 

7.6          Seller’s Residual Dispatch
Rights.

 

(1)           If neither the ISO nor the Buyer has
dispatched Pittsburg Unit 5 or 6, Seller may dispatch one of such RMR Units at
a cost to Seller as described in Section 7.6(2) in order to generate sufficient
steam to dispatch Pittsburg Unit 7, a Non-RMR Unit.  Any Start-up by Seller pursuant to this
Section 7.6 (1) shall not be a Counted Start-up even if, after Seller has
started an RMR Unit and has not yet stopped it, Buyer or the ISO dispatches that
RMR Unit.  Any Service Hours and MWh
produced pursuant to Seller’s dispatch under this section shall not count
against the Contract Service Limits; provided, however, that if the Buyer or
the ISO dispatches the affected RMR Unit, the applicable Service Hours and MWh
produced pursuant to such dispatch shall count against the Contract Service
Limits. If Pittsburg Unit 5 or 6 becomes a Terminated RMR Unit, Seller shall
utilize such Terminated RMR Unit, if available, to supply steam for Pittsburg
Unit 7 as described herein.

 

(2)           Buyer shall supply Gas and Seller shall
compensate Buyer for the quantity of Gas required to run Pittsburg 5 or 6 in
order to generate enough steam necessary to operate Pittsburg 7 pursuant to
part (1) of this Section 7.6.  Seller shall
pay Buyer the following: (123.5 MMBtu/hour) * (Number of hours in which Seller
is taking steam) * Gas Index. To avoid the double payment of Gas by Seller in
any given month, Seller will reduce the monthly total metered Gas amount in the
fuel reimbursement calculation as

 

25

 

described in Section 11.8 by
the same amount of Gas used by Seller pursuant to this Section 7.6 in the same
month.

 

(3)           Prior to exercising its rights under this
Section 7.6, Seller shall notify Buyer in accordance with Section 11.5 (1).

 

8.             NOX LIMITATIONS

 

(1)           The Units are subject to operating under NOX
limits, as may be modified from time to time, imposed by the Bay Area Air
Quality Management District (“BAAQMD”). 
These limits are applied to the combined NOX emissions of Sellers’ Contra
Costa, Pittsburg and Potrero facilities. Dispatch schedules shall be consistent
with these limits, and Seller shall retain the right to alter dispatch
schedules to the extent necessary to ensure compliance therewith.  Seller shall use commercially reasonable efforts
to minimize any adverse impact these limits may have on dispatch schedules submitted
by Buyer to Seller; provided that, in no instance shall Seller’s market transactions
using the Non-RMR Units in any way or to any extent take precedence over or
otherwise impede Buyer’s dispatch.

 

(2)           RMR Units shall have priority over Non-RMR
Units in using the Seller’s “Bay Area Bubble” (the “Bubble”), as defined by
Regulation 9, Rule 11 of the BAAQMD. If, after all generation from any Non-RMR
Unit is curtailed to the point of compliance with the BAAQMD limits, the ISO’s
or Buyer’s dispatch of an RMR Unit would cause a violation of the Bubble limit,
then the ISO or Buyer, as applicable and in consultation with Seller, may be
required to either dispatch additional Energy from an RMR Unit with a Selective
Catalytic Reduction system or curtail load from the responsible RMR Unit(s),
which would facilitate the reduction of NOX emissions to a level within the Bubble
limit, to continue such dispatch. Seller’s ability to use otherwise unutilized
Bubble space shall be subject at all times to the ISO’s and Buyer’s dispatch of
RMR Units. Any violations of the Bubble limit shall be the sole responsibility
of Seller.

 

9.             DELTA DISPATCH

 

(1)           Consistent with the National Pollutant
Discharge Elimination System permit in effect at the time (the “Permit”) for
the Contra Costa and Pittsburg Facilities, and subject to the exceptions set
forth in Section 7(a) of the Permit, preferential operation of Pittsburg Unit 7
and the minimization of circulating water flow through Pittsburg Units 5 &
6 and Contra Costa Units 6 & 7 are required during the “Delta Dispatch
period” (from May 1 through July 15).  The dispatch procedures currently in effect,
including the exceptions set forth in Section 7(a) of the Permit, are
referenced in Schedules A of the Contra Costa and Pittsburg RMR Agreements.
Dispatch schedules submitted by Buyer shall be consistent with the Permit
referenced in each Schedule A of the RMR Agreements. In the event that Seller
incurs any mitigation fees pursuant to the Permit as the result of Buyer’s
dispatch of the RMR Units during the Delta Dispatch period, Buyer

 

26

 

shall be solely liable for
same, notwithstanding Seller’s ability to avoid such penalties through its
dispatch of any Non-RMR Unit(s).

 

(2)           At Buyer’s request, Seller shall use its
commercially reasonable efforts to obtain revisions to the Permit that would
eliminate the preferential operation of Pittsburg Unit 7, a Non-RMR Unit, or
otherwise ease or eliminate restrictions on Buyer’s dispatch of the Delta
Units. Failure to achieve any such revisions, however, shall not result in any
additional liability or obligations on Seller under this Agreement with respect
to the Permit or Seller’s obligation to comply with the Permit and nothing will
require Seller to dispatch Pittsburg Unit 7 if it is not in Seller’s economic
interest to do so.

 

10.          MUST OFFER/RUN

 

10.1         Delta RMR Units. In the event that a Delta RMR Unit is
dispatched by the ISO pursuant to the Must-Offer Obligation (the “Must-Offer
Dispatch”), Seller shall credit Buyer the Minimum Load Cost Compensation
received from the ISO, and Buyer shall pay Seller Schedule G rates, in
accordance with Tariff Amendment 60, as approved by FERC in California Independent System Operator Corp, 108
FERC (CCH) ¶ 61,022 (2004) and 109 FERC (CCH) ¶ (“Amendment 60”), for the associated Start-ups and the Energy
and Ancillary Services delivered pursuant to an ISO Must Offer Dispatch. However,
due to Buyer’s provision of Gas for the Must-Offer Dispatch, the Schedule G rates
shall exclude the associated Schedule C charges. Buyer shall provide all Gas
needed to fulfill any such dispatch of the Delta RMR Units, with the
notification requirements by Seller for Gas supply by Buyer pursuant to Section
11.5(1). Start-ups shall not be double-counted. Must-Offer Dispatch MWh,
Service Hours and Start-ups are not counted for purposes of Sections 12.2 and
12.3.

 

10.2         Potrero RMR Units. In the event that a Potrero RMR Unit is
dispatched by the ISO pursuant to a Must-Offer Dispatch, Seller shall credit
Buyer the Minimum Load Cost Compensation received from the ISO, and Buyer shall
pay Seller Schedule G rates, in accordance with Amendment 60 for the associated
Start-ups and the Energy and Ancillary Services delivered pursuant to an ISO
Must Offer Dispatch. For purpose of clarity, due to Seller’s provision of Fuel
for the Must-Offer Dispatch, the Schedule G rates shall include the associated
Schedule C charges.  Start-ups shall not
be double-counted.  Must offer MWh,
Service Hours and Start-ups are not counted for purposes of Sections 12.2 and 12.3.

 

11.          GAS

 

11.1        Gas and Gas Metering.

 

(1)           RMR Gas. During the “Condition 1” Term, Buyer, at its sole cost and expense,
shall arrange, nominate, balance, transport and deliver to the Gas Delivery
Point such quantities of Gas as are required by Seller to generate from the
Delta RMR Units the quantity of Energy and Ancillary Services scheduled by
Buyer including, without

 

27

 

limitation, Gas required for
Start-up and Shutdown of such RMR Units and pipeline shrinkage, as applicable (“RMR
Gas”).

 

(2)           Non-RMR Gas. Seller, at its sole cost and expense, shall provide all Fuel required
for any dispatch of Non-RMR Units and pipeline shrinkage, as applicable (“Non-RMR
Gas”).  Seller shall deliver Gas for the
Non-RMR Units to Buyer’s PG&E Citygate Pool.  Buyer shall be responsible for nominating Gas
received from Seller at Buyer’s PG&E Citygate Pool to the Gas Delivery
Point(s).

 

(3)           Facility Balancing; Transport Costs. On or before the commencement of the “Condition
1” Term, Seller shall (a) amend Seller’s Noncore Balancing Aggregation Agreement
(“NBAA”) to designate Buyer as the NBAA holder and the balancing agent; (b)
revise each applicable NGSA to provide that Buyer receives the invoices for all
services thereunder; and (c) designate Buyer as the Nominating Marketer under
each applicable NGSA,  Buyer shall pay
Gas Transporter for all services provided under the NGSA for the RMR and
Non-RMR Units.  With respect to the NGSA
invoiced amounts, Seller shall reimburse Buyer for all invoiced costs for
delivery of Non-RMR Gas from Buyer’s PG&E Citygate Pool to the Gas Delivery
Point.  Should Gas Transporter’s invoice
include fixed charges such fixed charges shall be allocated between the Parties
based on the ratio of the aggregate MDQ for the RMR Units covered by the NGSA
for a particular Facility and the aggregate MDQ for the Non-RMR Units for the
same Facility. When an RMR Unit at a Facility becomes a Terminated RMR Unit and
there are no other surviving RMR Units at the same Facility, the Parties shall
cooperate as soon as practicable to (a) amend Seller’s NBAA to designate Seller
as the NBAA holder and the balancing agent for such Facility; (b) revise the
NGSA to provide that Seller receives the invoices for all services thereunder;
and (c) designate Seller as the Nominating Marketer under the applicable NGSA.

 

(4)           Gas Metering.

 

(a)           Gas delivered by Buyer to the Gas Delivery Point shall be measured by
the Gas Meter at the Gas Delivery Point. The Gas Transporter shall own,
operate, maintain and test the Gas Meter located at the Gas Delivery Point. Seller
shall coordinate with the Gas Transporter and Buyer with respect to maintenance
and testing of the Gas Meter consistent with the Gas Transmission Service
Agreement and Good Industry Practice. The Gas Meter located at the Gas Delivery
Point will measure the Gas consumed by the entire Facility rather than individual
Units.

 

(b)           Notwithstanding the foregoing, Seller may, at its sole cost and expense,
cause Gas meters to be installed at each Non-RMR Unit that satisfy the requirements
outlined in Schedule C, Part 1, A(2)(a), of the RMR Agreements (“Non-RMR Unit
Gas Meters”),  In such event, Seller
shall coordinate with the Gas Transporter and Buyer with respect to maintenance
and testing of the Non-RMR Unit Gas Meters consistent with the Gas Transmission
Service Agreement

 

28

 

and
Good Industry Practice, and the Non-RMR Unit Gas Meters will measure the Gas
consumed by the Non-RMR Units.

 

11.2        Gas Transmission Service
Agreement.

 

Seller
has entered into the GTSA and the NGSA for each RMR Facility with the Gas
Transporter and shall maintain each of such GTSA and NGSA in full force and
effect throughout the “Condition 1” Term.

 

11.3        Gas Specifications.

 

(1)           All Gas tendered by Buyer for delivery to the
Gas Delivery Point shall meet the then current natural Gas quality
specifications as set forth in the Gas Transporter’s tariff (“Gas Tariff”), as
such specifications may change from time to time.

 

(2)           If Gas tendered for delivery under this
Agreement at the Gas Delivery Point materially fails for any reason to conform
to the applicable specification set forth in Section 11.3(l) (“Non-Conforming
Gas”), Seller will consider whether it is able to accept such Non-Conforming
Gas and may refuse to take possession of all or any part of such Gas, giving
Buyer the reasons for such refusal as soon as practicable. If Seller chooses to
accept the Non-Conforming Gas, it will advise Buyer of same in writing, and
each Party shall be responsible for the disposition of its own Gas, as
applicable.

 

(3)           If the Facility is damaged as a direct result
of the delivery of Non-Conforming Gas that Seller has not approved for receipt
and use at the Facility, Seller shall be entitled to the remedies available to
it pursuant to its agreement with the Gas Transporter. Seller shall use
commercially reasonable efforts to mitigate any damages resulting from the
delivery of any Non-Conforming Gas at the Gas Delivery Point and the use of
such Gas in a Unit.

 

(4)           The unavailability of the Facility due to
Buyer’s delivery of Non-Conforming Gas that was not approved by the Seller
shall not be considered a Forced Outage, and the Facility shall be considered
available for the purpose of calculating the Monthly Availability Payment.

 

11.4        Title and Risk of Loss.

 

(1)           As between the Parties, Buyer shall be deemed
to be in exclusive possession and control (and responsible for any damages or
injury caused thereby) of the RMR Gas prior to the Gas Delivery Point, and
Seller shall be deemed to be in exclusive possession and control (and
responsible for any damages or injury caused thereby) of the RMR Gas at and
from the Gas Delivery Point. Notwithstanding delivery to the Gas Delivery
Point, title to the RMR Gas shall remain with Buyer or Buyer’s third party
supplier. As between the Parties with respect to Non-RMR Gas, Seller shall be
deemed to be in exclusive possession and control (and responsible for any
damages or injury caused

 

29

 

thereby) prior to Buyer’s
PG&E Citygate Pool and at and from the Gas Delivery Point, and Buyer shall
be deemed to be in exclusive possession and control (and responsible for any
damages or injury caused thereby) at and from Buyer’s PG&E Citygate Pool to
the Gas Delivery Point. Notwithstanding delivery to the Gas Delivery Point,
title to the RMR Gas shall remain with Buyer or Buyer’s third party supplier.
Each of Seller and Buyer shall and hereby does indemnify, defend and hold
harmless the other Party from any Claims arising from any act, failure to act
or incident related to RMR Gas or Non-RMR Gas occurring when the indemnifying
Party is in possession of such RMR Gas or Non-RMR Gas.

 

(2)           Buyer warrants that the Gas delivered by
Buyer shall be free and clear of all liens, Claims and encumbrances arising
prior to the Gas Delivery Point. Seller warrants that the Non-RMR Gas delivered
to Buyer at Buyer’s PG&E Citygate Pool shall be free and clear of all
liens, Claims and encumbrances arising prior to the Buyer’s PG&E Citygate
Pool.

 

11.5        Gas Scheduling Manager.

 

(1)           For those Facilities for which Buyer is
designated as the NBAA holder, Buyer shall act as the Gas scheduling manager (“GSM”).
The GSM shall cooperate with Seller to provide for scheduling changes as
allowed under the Gas Tariff for day-ahead and intra-Day Gas nominations to
deliver Non-RMR Gas to the Gas Delivery Point. Seller shall provide a final
day-ahead Gas schedule to Buyer by 8:30 a.m. PPT. Intra-Day nominations shall
be submitted by Seller to Buyer thirty (30) minutes prior to the applicable
nomination cycle deadline as defined by the Gas Tariff.  Seller’s ability to nominate per each Non-RMR
Unit shall be limited to the Unit Maximum Daily Quantity as defined
herein.  Seller shall be allowed to
deliver in excess of the Non-RMR Unit MDQ with Buyer’s consent in order to make
up past imbalances. The “Non-RMR Unit MDQ” is defined for each Non-RMR Unit as
the ‘Unit MDQ’ as defined by the Facility NGSA. Buyer and Seller shall
cooperate to update the Unit MDQs in each applicable Facility NGSA from time to
time in order to reflect Unit operations, as allowed under the Gas Transporter’s
tariff.

 

(2)           With respect to Non-RMR Gas, Buyer shall
provide to Seller the benefit of equivalent balancing rights and related
services that are available under the Gas Transporter’s tariff to a single
premises entity with an MDQ equal to the aggregate of all Non-RMR Unit MDQs as
defined in Section 11.5(1). Capitalized terms used but otherwise not defined in
this Section 11.5(2) shall have the meanings ascribed in the Gas Transporter’s
tariff.

 

(A)          Notwithstanding any aggregation by the GSM of individual Balancing
Service accounts maintained by the GSM into a single Balancing Service account
under the G-Bal Schedule, the GSM shall maintain on its books a separate
balancing account on behalf of Seller with respect to the Non-RMR Gas delivered
in accordance with this Agreement (“Seller Balancing Account”). The

 

30

 

GSM
shall calculate the Seller’s daily Gas imbalances for purposes of administering
the Seller Balancing Account as the difference between (i) the aggregate of the
Non-RMR Gas delivered and (ii) the aggregate amount of Gas allocated by the GSM
to the Non-RMR Units in accordance with Section 11.5(3). Seller’s monthly
imbalance shall be the sum of (the daily Gas imbalances in a given calendar
month.

 

(B)           Within one (1) Business Day after the end of any “gas day” (as defined
in the Gas Transporter’s tariff), the GSM shall deliver to Seller a copy of the
Seller Balancing Account balance for the preceding gas day, which shall specify
(i) Seller’s daily Gas imbalances for each day of the current month, in
accordance with the allocation methodology set forth in Section 11.5(3), (ii)
the aggregate of such imbalances for the current month, and (iii) any carryover
of imbalances from prior months to such current month ((i), (ii), and (iii),
collectively, the “Seller Monthly Imbalance”). Within five (5) Business Days
after the end of any calendar month, representatives of Buyer and Seller shall
meet via conference call to reconcile any differences in the Seller Balancing
Account balance communicated by the GSM.

 

(C)           If the Seller Monthly Imbalance is within the Tolerance Band for such
month (i.e. if the fraction (expressed as a percentage) equal to the Seller
Monthly Imbalance divided by the aggregate amount allocated by GSM to Non-RMR
Units, in accordance with Section 11.5(3) for such month, is equal to or less
than the percentage specified for the Tolerance Band in the Gas Transporter’s
tariff), such Seller Monthly Imbalance shall be carried forward solely for the
account of Seller, at Seller’s discretion. Buyer shall provide Gas associated
with any positive imbalance for use under this Agreement. Buyer shall be
responsible for any negative imbalance carried forward to the appropriate
subsequent month.

 

(D)          To the extent permitted under the Gas Transporter’s tariff, Seller may
trade any Seller Monthly Imbalance between Buyer and third parties identified
by Seller, including the transfer of all or part of such Seller Monthly Imbalance
to Gas storage; provided, however, that Seller shall be solely responsible for
any credit requirements of such third party transferees or storage facilities
and any non-performance by such third party transferees or storage facilities
in connection with such transactions.

 

(E)           For any Seller Monthly Imbalance not traded or carried forward, Seller
agrees to pay or receive the applicable Gas Transporter’s tariff cash out rate.

 

(3)           Seller shall provide Buyer with all the
necessary Gas Meter and Energy Meter data in order to calculate the daily Gas
allocation between the Non-RMR and RMR Units. For purposes of daily nominations
only, Gas shall be allocated by the GSM daily to each Non-RMR and RMR Unit in
an equitable manner, utilizing the methodology set

 

31

 

forth in the ISO’s RMR
invoice template. Notwithstanding the foregoing, if Seller installs Non-RMR
Unit Gas Meters, then the quantity of Non-RMR Gas shall be determined using the
information from such meters. The Parties shall work together to reconcile
summation of the daily nominated amounts as described in this Section 11.5(3)
with the monthly amounts calculated pursuant to Section 11.8.

 

11.6        Gas Imbalance Charges.

 

(1)           Buyer shall be responsible for all Gas
Imbalance Charges associated with Gas deliveries under this Agreement to the
extent such charges are caused by Buyer’s actions or inactions. Seller shall be
responsible for all Gas Imbalance Charges associated with Gas deliveries under
this Agreement to the extent such charges are caused by Seller’s actions or
inactions.  Both Parties shall use
commercially reasonable efforts to avoid imbalances and to correct any
imbalances, which may occur.

 

(2)           The Parties shall keep themselves informed of
system wide operation flow order or “OFO” and emergency flow order or “EFO”
notices. Accordingly, Buyer and Seller acknowledge that under certain OFO
conditions that either Party’s action may provide benefit to the other through
the NBAA pool. See Exhibit C.

 

 

	
  OFO Penalty Causes

  	
   

  	
  Responsible Party

  
	
   

  	
   

  	
   

  
	
  Unit schedule deviation

  	
   

  	
  Seller

  
	
  Schedule change

  	
   

  	
  Party making change

  
	
  Over/Under Delivery of Gas

  	
   

  	
  Party making change

  

 

The GSM shall notify Seller
of any customer specific OFOs and EFOs (as defined in the Gas Transporter’s
tariff) affecting the Facilities for which Buyer is designated as the NBAA
holder, advising Seller of the terms of such customer specific OFO within
fifteen (15) minutes of its receipt of written notice of a customer specific
OFO and as promptly as is reasonably possible after its receipt of written
notice of a customer specific EFO.

 

(3)           In any calendar month that the ISO Monthly
Fuel Imbalance Charge exceeds the limit as specified in Schedules C of the RMR
Agreements, Buyer shall provide all necessary information in order for Seller
to act on Buyer’s behalf in seeking reimbursement of penalties from the ISO.
Seller shall pay to Buyer any reimbursement received therefrom.

 

(4)           The GSM shall estimate OFO and EFO charges or
penalties it reasonably expects Buyer to incur in any calendar month under this
Agreement.  Such estimated OFO and EFO
charges or penalties shall be invoiced by Buyer to Seller as provided in Section
12.5; provided, however, that such invoiced amounts shall be reconciled against
the actual, final invoices from the Gas Transporter and any difference thereto
shall be settled by the Parties in the next monthly billing cycle.

 

32

 

11.7        Uninstructed Deviation Penalty(ies)
(UDPs).

 

Per
Section 7.4(1) of this Agreement, Seller and Buyer shall be equally responsible
for Uninstructed Deviations Penalties. Buyer shall compensate Seller for Gas
that would have been needed to provide Energy associated with negative
Uninstructed Deviation Penalties. Compensation for negative UDPs will be
calculated by multiplying (i) the sum of (a) the Gas Index and (b) the
applicable Gas Transporter’s tariff rate in effect at the time the UDP is incurred
to deliver Gas from Buyer’s PG&E Citygate Pool to the Gas Delivery Point by
(ii) the estimated Gas required to deliver the MWhs that Seller procured in the
market to meet Buyer’s schedule due to the negative deviation during the period
in which the UDP is incurred.  The Gas
for negative UDPs will be estimated by using Equation C1-7a in the RMR
Agreements, replacing the 1.02 factor with 1.0, and calculating the difference
in the resulting MMBTUs at the scheduled MWh and the metered MWh for the
periods in which UDPs were incurred.

 

11.8        Fuel Reimbursement.

 

Seller
will financially reimburse Buyer for the allocated quantity of Gas for each RMR
Unit, as calculated in the ISO’s RMR invoice template (“RMR Allocated Quantity”),
to the extent such RMR Allocated Quantity exceeds the quantity that results
from the Unit Hourly Cap Heat Input calculation set forth in the ISO’s RMR
invoice template. Such reimbursement amount shall also be calculated in
accordance with the ISO’s RMR invoice template using the Gas Index and the
excess quantity.

 

12.          RMR, MARKET AND NON-RMR GAS
CHARGES

 

For
the avoidance of doubt, the intent of the parties is for Seller to be
compensated for the RMR Units by Buyer, subject to the rates discussed herein,
as if Seller had elected “Condition 2” under the RMR Agreements for all
purposes. For purposes of this Agreement, all amounts due to Seller by Buyer
shall be paid to Seller’s SC.

 

12.1        Buyer’s Monthly Charges.

 

(1)           In consideration for the rights provided
Buyer in this Agreement, Buyer shall pay to Seller for each month during the “Condition
1” Term:

 

(a)      all “Condition 2” rates described in
Schedules B of the RMR Agreements;

(b)      any other payments required in Sections 2.5,
8.2, 8.6 and 9 of the RMR Agreements and Buyer’s share of payments in Section 8.7
of the RMR Agreements whether or not specifically captured in Sections 12.1,
12.2 and 12.3;

 

33

 

(c)      payments resulting from Energy dispatched by
the ISO pursuant to Seller’s provision, at Buyer’s direction, of Regulation
Down Ancillary Service;

(d)      payments resulting from Energy dispatched by
the ISO pursuant to Supplemental Energy “decremental” bids submitted by Seller;
and

(e)      the charges provided for in Sections 7.4, 9,
10, 11.7, 12.2, 12.3 and 25.1 of this Agreement, when applicable (all of which
together shall be the “Buyer’s Monthly Charges”).

 

(2)           For purposes of calculating Buyer’s Monthly
Charges,

(a)      the Annual Fixed Revenue Requirement (“AFRR”)
Table B-6 in Section 7 of Schedules B of the RMR Agreements shall apply, as modified
by the 2005 RMR FERC Settlement;

(b)      the Monthly Option Payment shall equal the
sum of the Monthly Availability Payment and the Monthly Surcharge Payment minus
the total Non-Performance Penalty for the applicable month that is incurred by
Seller under the RMR Agreements attributable to the ISO dispatch;

(c)      in no event shall the Monthly Option Payment
for any month be less than zero;

(d)      only Sections E (table C1-18), F, and C of
Schedule C of the RMR Agreements shall apply for the Variable O&M Costs for
each Delta RMR Unit, and Potrero RMR Units shall not be included; and

(e)      any Dispatch Notice submitted by the ISO or
dispatch schedule submitted by Buyer hereunder will count as if the RMR Unit
was dispatched under “Condition 2”.

 

Schedule C charges related
to Monthly Billed Fuel Cost, Monthly Fuel Imbalance Charge, and Monthly Other
Fuel Related Cost are specifically excluded due to Buyer acting as Gas supplier
for the Delta RMR Units.

 

(3)           If Buyer claims a Force Majeure Event for any
reason, Buyer shall not be relieved of the obligation to pay Buyer’s Monthly
Charges to Seller.

 

12.2        Schedule G Charges.

 

(1)           In the event that the ISO dispatches any RMR
Unit in excess of the then prevailing Contract Service Limits, Buyer shall pay
Seller all applicable Schedule G rates for the excess Counted MWh, Counted
Service Hours, and Counted Start-ups resulting therefrom as if all dispatches
by the ISO were under “Condition 2”. For purposes of clarity, in equation G-l
of Schedules G the “Variable Cost Payment for the Billing Month” shall not
exclude charges related to Monthly Billed Fuel Cost, Monthly Fuel Imbalance
Charge and Monthly Other Fuel Related Cost.

 

(2)           Exhibit B illustrates settlements that relate
to Schedule G Charges.

 

34

 

12.3        Modified Schedule G Charges.

 

(1)           In the event that the combined Start-ups of
Buyer and the ISO for any RMR Unit are greater than the Maximum Annual
Start-ups for 2005, each excess Counted Start-up by the Buyer shall be paid at
the applicable Prepaid Start-up Charge multiplied by three (3). A requested
Start-up by Buyer cannot be double counted in the sense that if the Buyer
requests a Start-up and the RMR Unit subsequently trips during Start-up or
operation and has to be restarted, this sequencing will represent only a single
Start-up for purposes of determining when Modified Schedule G Charges take
effect.  For clarity, the entire period
of operation for an RMR Unit beginning with Buyer’s request for a Start-up and
continuing until Buyer’s request that such Unit Shutdown shall constitute a single
Start-up for purposes of the Modified Schedule G Charges.

 

(2)           In the event that the combined dispatches of
Buyer and the ISO for any RMR Unit are greater than the 2005 Contract Service
Limits for the Maximum Annual MWh or the Maximum Annual Service Hours, Buyer
shall pay Seller for all resulting excess Counted MWh and Counted Service Hours
as if all dispatches were under “Condition 2”; provided, however, that in such
instance equation G-1 of Schedules G of the RMR Agreements shall be modified so
that the “Variable Cost Payment for the Billing Month” equals the product of
the Monthly Variable O&M Cost and four (4).

 

(3)           For the purposes of clarity, Buyer shall pay
for each excess Start-up and each excess MWh only once, at either the Schedule
G or Modified Schedule G rate.

 

(4)           To the extent that Seller receives any
Schedule G revenues from the ISO, such amounts shall be credited to Buyer
against the total amounts due as described
hereunder pursuant to the Schedule G rates and the Modified Schedule G Rates.

 

(5)           Exhibit B illustrates settlements that relate
to Modified Schedule G Charges.

 

12.4        Credit of “Condition 1”
Payments and Other Offsets.

 

Seller
shall credit Buyer, or cause its SC to credit Buyer, all amounts (“Buyer’s
Monthly Credits”) received from the ISO that are based on performance of the
RMR Units during the “Condition 1” Term and result from the following:

 

1.    The “Condition 1” Monthly Option Payment paid
by the ISO for each month under the RMR Agreements;

 

2.    Capacity awarded by the ISO pursuant to
Seller’s provision of Spinning Reserves, Non-spinning Reserves, Regulation Up,
Regulation Down Ancillary Service(s) or any other Ancillary Service(s) bids, as
directed by Buyer;

 

3.    Energy dispatched by the ISO pursuant to
Seller’s provision of Spinning Reserves, Non-spinning Reserves, Regulation Up
Ancillary Service(s) or any other Ancillary Service(s) bids, as directed by
Buyer;

 

35

 

4.    Energy dispatched by the ISO pursuant to
Seller’s provision of Supplemental Energy “incremental” bids, as directed by
Buyer;

 

5.    For Delta RMR Units only, payments received
from the ISO related to Seller’s election of “contract path”, as directed by
Buyer, for transactions including, but not limited to, RMR dispatches after the
close of the Hour-Ahead Market;

 

6.    For Delta RMR Units only, payments received
from the ISO related to Buyer’s election of “contract path” for RMR dispatches
of Day-ahead and intra-Day transactions;

 

7.    For Delta RMR Units only, Gas reimbursements,
as further described in Section 11.8 of this Agreement;

 

8.    For Delta RMR Units only, Start-up Fuel Costs
for Start-ups under the RMR Agreements; provided, however, at the end of each
calendar year, if the actual number of Start-ups is less than the number of
Prepaid Start-ups for which Seller has reimbursed Buyer, then the parties shall
split the remaining difference on a 50/50 basis;

 

9.    Minimum Load Cost Compensation for any
Must-Offer Dispatch pursuant to Section 10;

 

10.  Any interest due Buyer, pursuant to Section 9
of the RMR Agreements; and

 

11.  Any amounts due Buyer from Seller, although
not received from the ISO, for provision of steam as further described in
Section 7.6(2) of this Agreement.

 

12.5        Gas Charges.

 

Buyer
shall invoice Seller for (a) imbalances pursuant to Sections 11.5(2)(E) and
11.6(1); (b) the transport costs for Non-RMR Gas as described in Section
11.1(3); (c) any OFO or EFO charges pursuant to section 11.6(4); (d) any other
applicable charges to Seller relating to the Non-RMR Gas; and (e) any credits
due to Seller, including, but not limited to, those described in Sections 11.5
and 11.6, providing supporting documentation acceptable in industry practice to
support the amount charged.  If the
actual quantity delivered is not known by the billing date, billing will be
prepared based on the quantity of Non-RMR Gas scheduled by Seller in the
applicable calendar month. The invoiced quantity will then be adjusted to the
actual quantity on the following calendar month’s billing or as soon thereafter
as actual delivery information is available.

 

36

 

13.          REPRESENTATIONS AND
WARRANTIES

 

13.1        Representations and
Warranties.

 

(1)           As a material inducement to entering into
this Agreement, each Party with respect to itself, hereby represents and
warrants to the other Party as of the Agreement Date and throughout the
Contract Term as follows:

 

(a)          it is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its formation and is
qualified to conduct its business in those jurisdictions necessary for it to
perform its obligations under this Agreement;

 

(b)          it has all authorizations from any
Governmental Authority necessary for it to legally perform its obligations
under this Agreement or will obtain such authorizations in a timely manner prior
to when any performance by it requiring such authorization becomes due;

 

(c)          the execution, delivery and performance of
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 or any contract to which it is a party or any Governmental Rule
applicable to it;

 

(d)          this Agreement constitutes a legal, valid and
binding obligation of such Party enforceable against it in accordance with its
terms, and each Party has all rights such that it can and will perform its obligations
to the other Party in conformance with the terms and conditions of this
Agreement, subject to bankruptcy, insolvency, reorganization and other laws
affecting creditor’s rights generally and general principles of equity;

 

(e)          except as provided in Section 14.1(2), no
Bankruptcy is pending against it or to its knowledge threatened against it; and

 

(f)           the audited financial statements provided by
Seller and Buyer pursuant to Section 15.4(2) are true and accurate based on the
respective Party’s knowledge, information and belief;

 

(g)          it has negotiated and entered into this
Agreement in the ordinary course of its respective business, in good faith, for
fair consideration and on an arm’s length basis.

 

(2)           Seller hereby represents and warrants that
the terms and conditions of this Agreement are fair and reasonable and reflect
its exercise of prudent business judgment consistent with its fiduciary duties
as a debtor-in-possession and are supported by fair consideration and
reasonably equivalent value in money or money’s worth.

 

37

 

(3)           Each of Buyer and Seller represent and
warrant to the other that it is a “forward contract merchant” within the
meaning of the United States Bankruptcy Code.

 

13.2        No Other Representations and
Warranties.

 

Each
Party acknowledges that it has entered into this Agreement based solely upon
the express representations and warranties set forth in this Agreement.

 

14.          EVENT OF DEFAULT AND
REMEDIES 

 

14.1        Event of Default.

 

(1)           An “Event of Default” shall mean with
respect to a Party (the “Defaulting Party”) any of the actions set forth
below in this Section 14.1(1):

 

(a)           the failure of the Defaulting Party to make,
when due, any payment required under this Agreement if such failure is not
remedied within five (5) Business Days after written notice of such failure is
given to the Defaulting Party by the other Party (the “Non-Defaulting Party”);

 

(b)           except as permitted by Section 5.2, the sale
by Seller of any portion of the Maximum Net Dependable Capacity, Energy or
Ancillary Services from any of the RMR Units to any third party during the “Condition
1” Term;

 

(c)           any representation or warranty (including,
but not limited to, the representation and warranty set forth in Section
13.l(l)(f)) made by the Defaulting Party in this Agreement shall prove to have
been false or misleading in any material respect when made; provided that, if
such representation or warranty is capable of being corrected, no Event of Default
shall have occurred if the Defaulting Party is diligently pursuing such
correction and such representation or warranty is corrected within thirty (30)
Days from the date upon which the Non-Defaulting Party gives written notice to
the Defaulting Party of the false and misleading nature of the representation
or warranty;

 

(d)           the failure by the Defaulting Party to
perform any material covenant set forth in this Agreement (other than the
events that are otherwise specifically covered in this Section 14.1(1) as a
separate Event of Default and other than any covenant for which an exclusive
remedy is set out elsewhere in this Agreement), and such failure is not excused
by a Force Majeure Event or cured within thirty (30) Days after written notice thereof
to the Defaulting Party or, if such failure cannot reasonably be cured in such
period and the Defaulting Party within such period commences, and thereafter
proceeds with reasonable due diligence, to cure

 

38

 

such
failure, such period shall be extended for such further period as shall be
necessary for the Party to cure such failure with reasonable due diligence,
provided that the total cure period shall not exceed ninety (90) Days;

 

(e)           except as provided in Section 14.1(2), the
Bankruptcy of the Defaulting Party; and

 

(f)            the failure by the Defaulting Party to meet
its obligation to provide Security as required by Article 21 if such failure is
not remedied within three (3) Business Days after written notice of such
failure is given to the Defaulting Party by the other Non-Defaulting Party.

 

(2)           Notwithstanding anything herein to the
contrary, Buyer acknowledges that Seller filed a voluntary petition for relief
under Chapter 11 of the United States Bankruptcy code on July 14, 2003 (the “Filing”)
and such case remains pending in the United States Bankruptcy Court, Northern
District of Texas (the “Bankruptcy Court”). Until such time as Seller emerges
from Chapter 11 Bankruptcy through the confirmation of a plan or
reorganization, the Filing shall not constitute an Event of Default under
Sections 14.1(l)(c) or (e) of this Agreement; provided, however, that in the
event that (A) Seller files a motion which contemplates the sale of
substantially all of its assets; (B) Seller files a Chapter 11 plan which
contemplates the sale of substantially all of its assets; (C) Seller files a
motion or request to convert its Chapter 11 case to a Chapter 7 proceeding; or
(D) the Bankruptcy Court enters an order converting Seller’s case from a
Chapter 11 proceeding to a Chapter 7 proceeding, any such event (A) through (D)
shall constitute an Event of Default under Sections 14.l(c) or (e) of this
Agreement.

 

14.2        Remedies Upon an Event of
Default.

 

(1)           Upon the occurrence of an Event of Default
and, with the exception of the Bankruptcy of a Party, for so long as such Event
of Default is continuing, after the applicable cure period, the Non-Defaulting
Party may, upon written notice to the Defaulting Party, establish a date, no
earlier than the Day such notice is effective and no later than twenty (20)
Days after such notice is effective, on which this Agreement will terminate (“Early
Termination Date”) and suspend its performance hereunder as of the declaration
of such Early Termination Date; if the Event of Default is the Bankruptcy of a
Party, the Non-Defaulting Party may exercise the remedy of immediate
termination. Moreover, the Non-Defaulting Party will have the right to exercise
all rights and remedies available to it under this Agreement, at law, and in
equity including, but not limited to, the right: (a) to retain, draw on,
liquidate, or apply any Security for any amounts due and owing; (b) to require
the Defaulting Party to pay damages as set forth in Section 14.2(2); (c) to
commence dispute resolution procedures as provided for in Article 23; (d) to
file suit to compel the Defaulting Party to perform or pay any damages awarded
the Non-Defaulting Party pursuant to Article 23; and (e) to file suit to enjoin
any acts that are unlawful or violate the rights of the Non-Defaulting Party
under this Agreement.

 

39

 

(2)           Except as otherwise expressly
provided herein, any Event of Default shall subject the Defaulting Party to the
payment only of actual, direct damages to the Non-Defaulting Party.  The Non-Defaulting Party may take any actions
it deems necessary or appropriate to protect, preserve or enforce its rights or
to reduce any risk of loss resulting from an early termination of this
Agreement. The Non-Defaulting Party shall calculate a Settlement Amount, if
any, resulting from an Early Termination Date in a commercially reasonably
manner.  The Settlement Amount is
intended to compensate the Non-Defaulting Party for the loss of bargain, the
costs of mitigation, and the loss of protection against risks arising from the
early termination of this Agreement.  Upon
determination of the Settlement Amount by the Non-Defaulting Party, the
Non-Defaulting Party shall provide the Defaulting Party with a written
statement showing the calculation of the Settlement Amount in sufficient detail
to allow the Defaulting Party to compare such amount to its own estimate of the
Settlement Amount, and such Settlement Amount shall be due and owing upon
notice of the calculation statement to the Defaulting Party. No later than the
third (3rd) Business day after notice of the Settlement Amount is
provided to the Defaulting Party by the Non-Defaulting Party, the Party owing
such Settlement Amount shall pay same by wire transfer of immediately available
funds. In the event that the Defaulting Party disputes the Non-Defaulting
Party’s calculation of the Settlement Amount, the dispute shall be resolved
pursuant to the terms of Article 23. Nothing in this Section 14.2(2) shall be
construed to restrict or preclude the Non-Defaulting Party from realizing on
any Security held by the Non-Defaulting Party at any time upon the occurrence
of an Event of Default with respect to the Defaulting Party notwithstanding
(and without awaiting the outcome of) any dispute as to the Settlement Amount
payable.  Consistent with Section 26.1,
the Parties have an obligation to mitigate damages in an Event of Default in
order to minimize the Settlement Amount.

 

(3)           Any assertion by the Non-Defaulting
Party of its entitlement to enforce any of the remedies described in Section
14.2(1) must be initiated by the Non-Defaulting Party, through written notice
to the Defaulting Party, no later than the expiration of twelve (12) months
after the termination of this Agreement. The Party, who fails to act in a
timely manner as provided in this Section 14.2, shall be deemed to have waived
its right to enforce such remedies.

 

15.          BILLING AND PAYMENT

 

15.1        Billing and Payment for RMR and Market Payments.

 

(1)           The timing of payments and invoices
received by Seller and the invoicing of Buyer by Seller shall be as provided
for in the RMR Agreements or the Tariff, as applicable. Following each month
during the “Condition 1” Term and within five (5) Business Days of Seller’s
issuance of a Revised Estimated RMR invoice to the ISO and within five (5)
Business Days of Seller’s receipt of the Tariff Monthly Preliminary GMC and
Market Invoice, Seller shall render to Buyer (by regular mail, facsimile or
other acceptable means pursuant to Section 20) a statement setting forth
Buyer’s Monthly

 

40

 

Charges and Buyer’s Monthly Credits for such month for
the charges set forth in the applicable RMR invoice and any other amounts due
to either Party.  Within five (5)
Business Days of Seller’s issuance of the Revised Adjusted RMR Invoice to the
ISO, Seller shall render to Buyer (by regular mail, facsimile or other
acceptable means pursuant to Section 20) a statement setting forth the net
credit or debit (based on the difference between Buyer’s Monthly Charges and
Buyer’s Monthly Credits assessed in conjunction with the Revised Estimated RMR
Invoice and the same assessed in conjunction with the Revised Adjusted RMR
Invoice) for such month for the charges set forth in the applicable RMR invoice
and any other amounts due to either Party. Within five (5) Business Days of
Seller’s receipt of the Monthly Final GMC and Market Invoice from the ISO,
Seller shall render to Buyer (by regular mail, facsimile or other acceptable
means pursuant to Section 20) a statement setting forth the net credit or debit
(based on the difference between Buyer’s Monthly Charges and Buyer’s Monthly
Credits assessed in conjunction with the Monthly Preliminary GMC and the same
assessed in conjunction with the Monthly Final GMC) for such month for the
charges set forth in the applicable ISO invoice and any other amounts due to
either Party. Within five (5) Business Days after receipt of Seller’s statement
Buyer or Seller, as applicable, shall render, by wire transfer, the amount set
forth on such statement for payments due under the RMR Agreements (“RMR
Payment”) or payments due under the Tariff (“Market Payment”), or payments due
under Buyer’s Monthly Charges and Buyer’s Monthly Credits that are not
otherwise included in the RMR Payment or Market Payment to the payment address
provided in Exhibit D hereto. For purposes of clarity, “payments due under the
Tariff” shall include all transactions with the ISO, including transactions
made pursuant to the RMR Agreements in which Buyer does not elect “contract
path”. All “contract path” volumes will be settled in accordance with the RMR
Agreements.

 

(2)           To the extent relevant, each payment
under this Agreement for a given time period shall be based on the same data
which form the basis for the corresponding payment by the ISO to Seller with
respect to the RMR Agreements or otherwise and any payments pursuant to the
Tariff for that same time period. Seller shall make available to Buyer,
simultaneously with their delivery to or receipt from ISO, the following
documents to the extent they relate to the “Condition 1” Term: (i) all invoices
under the RMR Agreements (e.g., Estimated
RMR Invoices, Revised Estimated RMR Invoices, Adjusted RMR Invoices and Revised
Adjusted RMR Invoices), (ii) all documents reflecting changes to such invoices (e.g., Prior Period Change Worksheets),
(iii) all invoices (e.g. Monthly Preliminary GMC and Market Invoice and Monthly
Final GMC and Market Invoice) and Daily Settlement Statements between Seller
and ISO under the Tariff relating to Market Payments that result from
transactions from Delta RMR Units, and (iv) all documents reflecting changes to
such invoices. Any adjustment pursuant to Adjusted Final RMR Invoice and
Monthly Final GMC and Market Invoice and any prior period adjustments (e.g.
Prior Period Change Worksheets) shall be settled between Buyer and Seller in
the following settlement cycle.

 

(3)           Disputes concerning billing and
payment shall be handled as follows:

 

41

 

(a)                                  A Party may, in good faith, dispute the
correctness of any invoice issued by Seller under this Article 15 or any
adjustment to such an invoice or adjust any invoice for any arithmetic or
computational error within twelve (12) months of the date the invoice, or
adjustment to an invoice, was rendered. Any such disputes shall be resolved in
accordance with Article 23.

 

(b)                                 Disputes concerning billing and payment
related only to the RMR ISO invoices shall be subject to the timeline for such
disputes as provided in the RMR Agreements and shall be resolved in accordance
with Article 23.

 

(c)                                  Buyer, may, in good faith, dispute any
ISO settlement data related only to “market” transactions by notifying Seller
of such dispute using the ISO Settlement dispute form and providing all
supporting documentation no later than four (4) Business Days prior to the
deadline by which Seller must file a dispute with the ISO, where such deadline
is determined using the ISO payment calendar. 
The timeline for resolution of “market” disputes shall be as provided in
the Tariff, and the decision rendered by the ISO with respect to any “market”
dispute shall be final and binding on the Parties. Seller shall only be
obligated to credit Buyer any disputed amount to the extent that the ISO
credits Seller same.

 

(d)                                 In the event a Party disputes an invoice
or a portion thereof, or any other claim or adjustment arising with respect to
this Agreement, the disputing Party shall pay the disputed invoiced amounts in
full on the applicable payment due date, subject to later return together with
interest accrued at the Commercial Interest Rate for “market” transactions and
at the RMR Interest Rate for RMR transactions, in either case from the date the
disputed amount is paid until the date it is returned.

 

(4)           If the owing Party fails to remit the
full amount payable when due, interest on the unpaid portion shall accrue from
the date due until the date of payment at the Commercial Interest Rate.
Inadvertent overpayments shall be returned upon request or deducted by Seller
from subsequent payments. Overdue payments shall accrue interest from the due
date to the date of payment at the Commercial Interest Rate.  Errors with respect to invoices or payments
shall be resolved as if section 9.8 of the RMR Agreements were a part of this
Agreement. Any adjustments subsequently made by the ISO shall be paid to or
received from Buyer in a timely manner.

 

(5)           Notwithstanding anything to the contrary
herein, the Parties acknowledge and agree that calculation of the payments
described herein are unique, complicated and dependent on information received
from the ISO and each other.  Attached
Exhibit F contains an estimated timeline for settlement of RMR Payment and
Market Payment amounts as specified in Sections 12.1, 12.2, 12.3, and 12.4 of
this Agreement.  The Parties shall use an
estimation procedure for settlement of the first three (3) months of the
“Condition 1” Term (the “Estimation Period”) until such time as the Parties can
more fully develop a settlement process for this Agreement.  Following conclusion of the Estimation
Period, the Parties shall work together to true-up in a timely manner the

 

42

 

amounts invoiced during such period. During the
Estimation Period, the parties shall use commercially reasonable efforts to use
as much information as practicable from invoicing between Seller and ISO
related to the RMR Agreements and the Tariff, and other information, if
practicable, related to Article 12 of this Agreement.  However, at a minimum, the invoices during
the Estimation Period shall contain the following:

 

(a)                                  The estimated invoice for the first month
of the “Condition 1” Term shall be rendered to Buyer by the end of the second
month of the “Condition 1” Term, with payment due within five (5) Business Days
of its receipt, and contain the sum of following amounts: (a) (i) the sum of
AFRRs for the RMR Units in Table B-6 shall be divided by twelve (12) and (ii)
the resulting quotient shall be multiplied by the difference of one (1) minus
the Fixed Option Payment Factor; (b) (i) the total of Annual Capital Recovery
amounts for the RMR Units divided by twelve (12) and (ii) the resulting
quotient shall be multiplied by the difference of one (1) minus the Surcharge
Payment Factor, (c) (i) the sum of ISO Variable O&M Cost plus ISO
Scheduling Coordinator Charge plus ISO ACA Charge multiplied by (ii) the
metered MWh for the Delta RMR Units for the first month, and (d) credit of
estimated Schedule C reimbursement received from ISO for any “contract path”
designated Energy for the first month for the Delta RMR Units;

 

(b)                                 The estimated invoice for the second
month of the “Condition 1” Term shall be rendered to Buyer by the end of the
third month of the “Condition 1” Term, with payment due within five (5)
Business Days of its receipt, and contain the sum of following amounts: (a) (i)
the sum of AFRRs for the RMR Units in Table B-6 shall be divided by twelve (12)
and (ii) the resulting quotient shall be multiplied by the difference of one
(1) minus the Fixed Option Payment Factor; (b) (i) the total of Annual Capital
Recovery amounts for the RMR Units divided by twelve (12) and (ii) the
resulting quotient shall be multiplied by the difference of one (1) minus the
Surcharge Payment Factor, (c) (i) the sum of ISO Variable O&M Cost plus ISO
Scheduling Coordinator Charge plus ISO ACA Charge multiplied by (ii) the
metered MWh for the Delta RMR Units for the second month, (d) credit of
estimated Schedule C reimbursement received from ISO for any “contract path”
designated Energy for the second month for the Delta RMR Units, and (e) credit
of revenues received from the ISO pursuant to the Monthly Preliminary GMC and
Market Invoice between Seller and ISO under the Tariff relating to Market
Payments that result from transactions from the Delta RMR Units during the
first month;

 

(c)                                  The estimated invoice for the third month
of the “Condition 1” Term shall be rendered to Buyer by the end of the fourth
month of the “Condition 1” Term, with payment due within five (5) Business Days
of its receipt, and contain the sum of following amounts: (a) (i) the sum of
AFRRs for the RMR Units in Table B-6 shall be divided by twelve (12) and (ii)
the resulting quotient shall be multiplied by the difference of one (1) minus

 

43

 

the Fixed Option Payment
Factor; (b) (i) the total of Annual Capital Recovery amounts for the RMR Units
divided by twelve (12) and (ii) the resulting quotient shall be multiplied by
the difference of one (1) minus the Surcharge Payment Factor, (c) (i) the sum
of ISO Variable O&M Cost plus ISO Scheduling Coordinator Charge plus ISO
ACA Charge multiplied by (ii) the metered MWh for the Delta RMR Units for the
third month, (d) credit of estimated Schedule C reimbursement received from ISO
for any “contract path” designated Energy for the third month for the Delta RMR
Units, and (e) credit of revenues received from the ISO pursuant to the Monthly
Preliminary GMC and Market Invoice between Seller and ISO under the Tariff
relating to Market Payments that result from transactions from the Delta RMR
Units during the second month;

 

(d)                                 The invoice for the fourth month of the
“Condition 1” Term shall be rendered to Buyer by the end of the fifth month of
the “Condition 1 “ Term, with payment due within five (5) Business Days of its
receipt, and contain Buyer’s Monthly Charges and Buyer’s Monthly Credits
pursuant to Section 12, and the Sections referenced therein, of this Agreement.
 This invoice shall contain true-ups for
the first month of settlements, including, but not limited to, adjustments
resulting from Revised Adjusted RMR Invoices and Monthly Final GMC and Market
Invoice; and

 

(e)                                  The invoices for the fifth and future
months of the “Condition 1” Term shall be rendered to Buyer pursuant to Section
15.1 (1); provided, however, that the invoice for the fifth month shall contain
true-ups for the second month of settlements, including, but not limited to,
adjustments resulting from Revised Adjusted RMR Invoices and Monthly Final GMC
and Market Invoice, and the invoice for the sixth month shall contain true-ups
for the third month of settlements, including, but not limited to, adjustments
resulting from Revised Adjusted RMR Invoices and Monthly Final GMC and Market
Invoice.

 

15.2        Billing and Payment for Gas Charges.

 

(1)           Seller shall remit the amount due
under Section 12.5, by wire transfer, in immediately available funds, on or
before the later of the 25th Day of the calendar month following the
month of delivery or ten (10) Days after receipt of the invoice by Seller;
provided that if such payment date is not a Business Day, payment shall be due
on the next Business Day following that date. In the event that any payments
are due Seller hereunder, payment to Seller shall be made in accordance with
this Section 15.2.

 

(2)           A Party may, in good faith, dispute
the correctness of any invoice or any adjustment to such an invoice or adjust
any invoice for any arithmetic or computational error within twelve (12) months
of the date the invoice, or adjustment to an invoice, was rendered. Disputes
concerning billing and payment shall be resolved in accordance with Article
23.  In the event a Party disputes an
invoice or a portion thereof, or any other claim or adjustment arising with
respect to this Agreement, the disputing Party shall pay

 

44

 

the disputed invoiced amounts in full on the
applicable payment due date, subject to later return together with interest
accrued at the Commercial Interest Rate until the date paid.  If the invoiced Party fails to remit the full
amount payable when due, interest on the unpaid portion shall accrue from the
date due until the date of payment at the Commercial Interest Rate. Inadvertent
overpayments shall be returned upon request or deducted by Seller from
subsequent payments. Overdue payments shall accrue interest from the due date
to the date of payment at the Commercial Interest Rate.

 

15.3        Netting.

 

In each month there are
amounts owed to and by each Party, the Parties shall to the extent reasonably
possible aggregate and discharge their obligations to pay or credit through
netting, in which case the Party, if any, owing the greater aggregate amount
may pay to the other Party the difference between the amounts owed. For
purposes of clarity, the Parties shall not “net” (a) RMR Payments or Market
Payments against (b) Gas charges as described in Section 12.5. Seller shall not
be obligated to credit Buyer any revenues related thereto until such time as
Seller receives same from the ISO. Such netting shall not result in any waiver
of, and each Party reserves to itself, any rights, counterclaims, remedies or
defenses (to the extent not expressly herein waived or denied) which such Party
has or may be entitled to arising from or out of this Agreement.

 

15.4        Audit and Financial Information.

 

(1)           Each Party (and its representatives)
has the right, on five (5) Business Days’ prior written notice, at its sole
expense and during normal working hours, to examine the records of the other
Party to the extent reasonably necessary to verify the accuracy of any
statement, charge or computation made pursuant to this Agreement, including ISO
settlements, Energy, Ancillary services, capacity schedules, and Fuel
consumption.  If requested, Seller shall
provide to Buyer statements evidencing the quantities of Energy and Ancillary
Services delivered at the Delivery Point, metering records of Fuel delivered to
the Fuel Delivery Point and Fuel consumed at the Facility and any tests or
records of any non-conforming Gas delivered at the Gas Delivery Point.  If any such examination reveals any
inaccuracy in any statement, the necessary adjustments in such statement and
the payments thereof will be promptly made and shall bear interest calculated
at the Commercial Interest Rate from the
date the overpayment or underpayment was made until such adjustment is paid or
refunded; provided, however, that
no adjustment for any statement or payment will be made unless objection to the
accuracy thereof was made prior to the lapse of twelve (12) months from the
receipt thereof.

 

(2)           If requested by a Party (“Party A”),
the other Party (“Party B”) shall deliver (i) within 120 Days following the end
of each fiscal year, a copy of Party B’s annual report containing audited
consolidated financial statements for such fiscal year and

 

45

 

(ii) within 60 Days after the end of each of its first
three fiscal quarters of each fiscal year, a copy of Party B’s quarterly report
containing unaudited consolidated financial statements for such fiscal quarter.
In all cases the statements shall be for the most recent accounting period and
prepared in accordance with GAAP; provided, however, that should any such
statements not be available on a timely basis due to a delay in preparation or
certification, such delay shall not be an Event of Default under Section
14.1(1) so long as Party B diligently pursues the preparation, certification
and delivery of the statements. If Party B’s financial statements are publicly
available from the website of the Securities and Exchange Commission, Party B
shall not be required to deliver copies of such statements to Party A.
Notwithstanding this Section 15.4(2), with respect to Seller, all financial
statements shall be for Mirant Corporation.

 

(3)           In order to facilitate verification
of invoice data, the Parties shall use commercially reasonable efforts to allow
Buyer to have access to Seller’s portion of the ISO RMR website regarding
information on the Delta RMR Units.

 

16.          INDEMNIFICATION

 

The Parties hereby incorporate the indemnity provision
from the RMR Agreements as follows. Subject to the limitations in Section 17,
each Party shall indemnify, defend and hold harmless the other Party and its
officers, directors, employees, agents, contractors and sub-contractors, from
and against all third party claims, judgments, losses, liabilities, costs,
expenses (including reasonable attorneys’ fees) and damages for personal
injury, death or property damage, caused by the negligence or willful
misconduct related to this Agreement or breach of this Agreement of the
indemnifying Party, its officers, directors, agents, employees, contractors or
sub-contractors, provided that this indemnification shall be only to the extent
such personal injury, death or property damage is not attributable to the
negligence or willful misconduct related to this Agreement or breach of this
Agreement of the Party seeking indemnification, its officers, directors,
agents, employees, contractors or sub-contractors. This indemnification shall
not include or cover any claim covered by any workers’ compensation law. This
indemnification shall be for an amount not exceeding the deductible of the
indemnifying Party’s commercial general liability insurance. The indemnified
Party shall give the other Party prompt notice of any such claim. The
indemnifying Party shall have the right to choose competent counsel, control
the conduct of any litigation or other proceeding, and settle any claim. The
indemnified Party shall provide all documents and assistance reasonably
requested by the indemnifying Party.

 

17.          LIMITATION
OF LIABILITY

 

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 HEREIN PROVIDED, SUCH EXPRESS REMEDY OR MEASURE
OF DAMAGES SHALL BE

 

46

 

THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR’S LIABILITY
SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR
DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS
EXPRESSLY HEREIN PROVIDED, THE OBLIGOR’S LIABILITY SHALL BE LIMITED TO DIRECT
ACTUAL DAMAGES 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.  NEITHER PARTY SHALL BE LIABLE FOR
CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST
OPPORTUNITY COSTS OR LOST PROFITS, BY STATUTE, IN TORT OR CONTRACT, AT LAW OR
IN EQUITY, 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 IS WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING,
WITHOUT LIMITATION, THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE IS
SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES
REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE
DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OTHERWISE OBTAINING AN
ADEQUATE REMEDY IS INCONVENIENT AND THE LIQUIDATED DAMAGES CONSTITUTE A
REASONABLE APPROXIMATION OF THE HARM OR LOSS.

 

18.          ASSIGNMENT; BINDING EFFECT

 

18.1        Assignment.

 

Neither Party shall
assign this Agreement or any of its rights or obligations hereunder without the
prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed, and any such assignee shall agree in writing
to be bound by the terms and conditions hereof and shall meet the non-assigning
Party’s creditworthiness criteria which shall include, but shall not be limited
to, providing adequate assurance to the non-assigning Patty in an amount and
form determined by the non-assigning Party in a commercially reasonable manner.
 The Parties acknowledge that the form
and amount of any adequate assurance which the non-assigning Party may require
from an assignee, as described in the preceding sentence, may not be the same
as the form and amount of Security which Seller or Buyer, as applicable, is
required to provide pursuant to Article 21. Notwithstanding the foregoing,
either Party may, without the need for consent from the other Party, (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; (b) transfer or assign this Agreement to an Affiliate of such
Party; or (c) transfer or assign this Agreement to any Person succeeding to all
or substantially all of the assets of such Party; provided, that in the case of
clauses (b) and (c) any such assignee shall agree in writing to be bound by the
terms and conditions hereof and shall (i) meet the non-assigning Party’s
creditworthiness criteria

 

47

 

which shall include, but shall not be limited to,
providing adequate assurance to the non-assigning Party in an amount and form
determined by the non-assigning Party in a commercially reasonable manner and
(ii) demonstrate to the non-assigning Party that it has internal or external
resources with reasonable proficiency in generation operations and that it is
able to operate the Facility consistent with Good Industry Practice and in
accordance with all the obligations under this Agreement.  Upon any assignment consented to by the other
Party or permitted under clauses (b) or (c) of the preceding sentence, the
assigning Party shall be relieved of liability for all obligations arising
hereunder after the date such assignment becomes effective. The Parties agree
that it shall be a condition precedent to any proposed assignment of this
Agreement that the assignor and assignee shall fulfill the obligations of this
Section 18.1 before the assignment of this Agreement shall be allowed to occur.

 

18.2        Binding Effect.

 

This Agreement shall
inure to the benefit of and be binding upon the Parties and their respective
successors and permitted assigns.

 

19.          CONFIDENTIALITY

 

Each Party shall keep
confidential, and shall not disseminate to any third party (other than such
Party’s Affiliates) or use for any other purpose (except with written
authorization), any information received from the other that is confidential or
proprietary unless legally compelled (by deposition, inquiry, request for
production of documents, subpoena, civil investigative demand or similar
process, or by order of a court or tribunal of competent jurisdiction, or in
order to comply with applicable rules or requirements of any stock exchange,
government department or agency or other Governmental Authority, or by
requirements of any securities law or regulation or other Governmental Rule) or
as necessary to enforce the terms of this Agreement. Either Party may disclose
the terms of this Agreement to (i) its Affiliates, and to its and their
officers, directors, employees, attorneys and accountants, (ii) credit
reporting agencies, upon request and who are bound to hold, treat and protect
such information on a confidential basis and (iii) its lenders, prospective
lenders, financing participants and their respective consultants and agents who
(in the case of Persons identified in clause (iii)) are bound to hold, treat
and protect such information on a confidential basis. If any Party is compelled
to disclose any confidential information of the other Party, such Party shall
request that such disclosure be protected and maintained in confidence to the
extent reasonable under the circumstances and use reasonable efforts to protect
or limit disclosure with respect to commercially sensitive terms. In addition,
such Party shall provide the other Party with prompt notice of the requirement
to disclose confidential information in order to enable the other Party to seek
an appropriate protective order or other remedy, and such Party shall consult
with the other Party with respect to the other Party taking steps to resist or
narrow the scope of any required disclosure.

 

48

 

20.          NOTICES

 

All
notices, requests, statements or payments shall be made to the addresses and
persons specified in Exhibit D hereto. All notices or requests shall be made in
writing except where this Agreement expressly provides that notice may be made
orally. Notices required to be in writing shall be delivered by letter,
facsimile or other documentary form. Notice by facsimile shall be deemed to
have been received on the Day on which it was transmitted (where confirmation
of successful transmission is received) (unless transmitted after 5:00 p.m. at
the place of receipt or on a Day that is not a Business Day in which case it
shall be deemed received on the next Business Day); provided that dispatch
notifications and notifications of changes in availability of the Facility sent
by facsimile shall be treated as received when confirmation of successful
transmission is received. Notice by hand delivery, overnight mail, or courier
shall be deemed to have been received when delivered. Notice by telephone shall
be deemed to have been received at the time the call is received. A Party may
change its address by providing notice of same in accordance herewith.

 

21.          SECURITY

 

21.1         Encumbrance; Grant of Security Interest. As security
for the prompt and complete payment of all amounts now due or that may
hereafter become due from a Party to the other Party and performance by a Party
of all of its obligations, each Party hereby pledges, assigns, conveys and
transfers to the other Party, and hereby grants to the other Party a present
and continuing security interest in and to, and a general first lien upon and
right of set off against, all of such Party’s right, title and interest in, to
and under any Security (except Letters of Credit) which has been or may in the
future be transferred to, or received by, the other Party, and all dividends,
interest, and other proceeds from time to time received, receivable, or
otherwise distributed in respect of, or in exchange for, any or all of the
foregoing.

 

21.2         Collateral Requirement. The amount of Security to be
posted by a Party (the “Posting Party”) to the other Party (the “Secured
Party”) shall be equal to the amount that the Net Exposure “owed” by the
Posting Party to the Secured Party for any month exceeds the Credit Threshold
for the Posting Party, subject to the provisions of this Article 21 (the
“Collateral Requirement”).  If the Net
Exposure is a negative number, Seller shall post Security, as calculated
herein, to Buyer. If the Net Exposure is a positive number, Buyer shall post
Security, as calculated herein, to Seller.  Notwithstanding the foregoing, for Seller, the
Security required hereunder shall at no time be greater than $7.5 million.

 

21.3         Calculation of Net Exposure. “Net Exposure” equals
the RMR Exposure plus the Market Exposure plus the Gas Exposure. The
calculation of Net Exposure shall be made in accordance with the following
terms. It is the intent of the Parties that the Calculation Date coincide, to
the extent possible, with the submission by Seller to the ISO of an Estimated
RMR Invoice for the previous trade month. If for any reason Seller does not

 

49

 

submit such an invoice to
the ISO, with a copy concurrently to Buyer, or estimate to Buyer on or before
the fifteenth (15th) calendar day of a month, Buyer may, at its
election, estimate the amounts described below as needed for the calculation of
Net Exposure and demand any resulting Collateral Requirement. Attached Exhibit
G contains a method for calculating an estimated Net Exposure for the first
four (4) Calculation Dates, the period during which sufficient settlement data
may not be available to do a more accurate calculation; provided, however, that
if actual amounts become available for any of the estimated amounts in Exhibit
G, the applicable Party shall use such actual amounts in calculating the Net
Exposure in accordance with the methodology described in Exhibit G.

 

(1)
“RMR Exposure” shall be the sum of: (a) for the previous month, Buyer’s
“Condition 2” obligation to Seller less the “Condition 1” revenues in the
Estimated RMR Invoice; (b) for the current month and the subsequent month,
Buyer’s expected “Condition 2” obligation to Seller for Monthly Availability
Payment plus the Monthly Surcharge Payment less the expected “Condition 1”
credits for the same period from Seller to Buyer; and (c) for the current month
and the subsequent month, an estimate of Seller’s credits to Buyer resulting
from the sale of “contract path” Energy pursuant to the RMR Agreements.  An estimate of “contract path” Energy may be
calculated as MW available at the Delta RMR Units, multiplied by the hours in
the current month, multiplied by a capacity factor (equal to the prior month’s
percentage of actual “contract path” Energy), multiplied by a fixed heat rate
of 11MMBtu/MWh, multiplied by the last published Natural Gas Intelligence Bidweek Spot Gas Prices,
California, PG&E Citygate Average, multiplied by two (2) (for two (2)
months). For example, only, 966 MW * 720 hours/mo * 5% (or prior month’s actual
percentage) * 11 MMBtu/MWh * S6.50/MMBtu * 2 = approximately $5.0 million;

 

(2)
“Market Exposure” shall be based on the last settled Market Payment between
Seller and Buyer. The amount of that last settled Market Payment shall be
multiplied by three (3) (for three (3) months). For clarity, for purposes of
the Market Exposure calculation, a payment from Seller to Buyer is a negative
number, and a payment from Buyer to Seller is a positive number; and

 

(3)
“Gas Exposure” shall be an estimate of potential Gas imbalances, calculated as
(-1) * 5% * MDQ (as set forth in each of Seller’s NGSAs, which are subject to
change from time to time) * 61 days * the last published Natural Gas Intelligence Bidweek Spot Gas
Prices, California, PG&E Citygate Average. 
For clarity, for purposes of the Gas Exposure calculation, a potential
exposure by Buyer to Seller, implying potential payment from Seller to Buyer,
is a negative number.

 

21.4         Transfer of Security.

 

(1)
If the Secured Party demands Security, pursuant to the Collateral Requirement,
from the Posting Party on or before the Notification Time on a Business Day,
such Security shall be transferred by 5:00 p.m., New York City time, on the
second Business Day after the Business Day such demand is made. Security
demanded of a

 

50

 

Posting Party after the
Notification Time on a Business Day shall be transferred by 5:00 p.m., New York
City time, on the third Business Day after the Business Day such demand is
made. If the Posting Party demands the return of Security, pursuant to the
Collateral Requirement, from the Secured Party on or before the Notification
Time on a Business Day, such Security shall be transferred by 5:00 p.m., New
York City time, on the second Business Day after the Business Day such demand
is made. Return of Security demanded by a Posting Party after the Notification
Time on a Business Day shall be transferred by 5:00 p.m., New York City time,
on the third Business Day after the Business Day such demand is made.

 

(2)           A Posting Party may substitute new
Security for other existing Security of equal value on the Business Day
following the Secured Party’s receipt of written notice thereof. Upon the
transfer to the Secured Party of the substitute Security, the Secured Party
shall transfer the relevant replaced Security to the Posting Party no later
than the second Business Day after such transfer has been effected.

 

21.5         Credit Thresholds.

 

(1)           The applicable Credit Threshold for
each Party is as follows:

 

To qualify for a Credit
Threshold Amount at BBB-/Baa3 Credit Rating, Seller’s or its Guarantor’s Credit
Rating outlook from each of S&P and Moody’s, respectively, shall be
“Stable” or better. Credit Threshold for Seller (or its Guarantor):

 

	
  Amount

  	
   

  	
  S&P
  Credit Rating

  	
   

  	
  Moody’s
  Credit Rating

  	
   

  
	
  $15 million

  	
   

  	
  AA- and above

  	
   

  	
  Aa3 and above

  	
   

  
	
  $10 million

  	
   

  	
  BBB+ to A+

  	
   

  	
  Baal to Al

  	
   

  
	
  $5 million

  	
   

  	
  BBB- to BBB

  	
   

  	
  Baa3 to Baa2

  	
   

  
	
  $ Zero

  	
   

  	
  Below BBB-

  	
   

  	
  Below Baa3

  	
   

  

 

To qualify for a Credit Threshold Amount at BBB-/Baa3 Credit Rating,
Buyer’s Credit Rating outlook from each of S&P and Moody’s, respectively,
shall be “Stable” or better. Credit Threshold for Buyer:

 

	
  Amount

  	
   

  	
  S&P
  Credit Rating

  	
   

  	
  Moody’s
  Credit Rating

  	
   

  
	
  $22 million

  	
   

  	
  AA- and above

  	
   

  	
  Aa3 and above

  	
   

  
	
  $17 million

  	
   

  	
  BBB+ to A+

  	
   

  	
  Baal to A1

  	
   

  
	
  $12 million

  	
   

  	
  BBB- to BBB

  	
   

  	
  Baa3 to Baa2

  	
   

  
	
  $ Zero

  	
   

  	
  Below BBB-

  	
   

  	
  Below Baa3

  	
   

  

 

(2)           If
Seller’s Guarantor issues a Guarantee, the Credit Threshold for Seller or its
Guarantor shall be the lesser of (a) the amount denoted in the applicable
Credit Threshold matrix and (b) the amount of the Guarantee.

 

51

 

21.6         Interest on Cash Collateral.  Any cash posted as Security hereunder shall
accrue interest for the benefit of the Posting Party in accordance with the
Commercial Interest Rate.

 

21.7         Letter of Credit.

 

If
(i) the Posting Party has provided a Letter of Credit under Article 21, (ii)
the Posting Party fails to cause any Letter of Credit to be renewed or replaced
at least twenty (20) Days before its expiration, and (iii) the Posting Party has
not provided substitute Security if permitted under Article 21, then the
Secured Party shall have the right to draw all or any part of the available
balance of such Letter of Credit, in an amount not exceeding the Collateral
Requirement. The Posting Party’s failure to renew the Letter of Credit shall
not, in and of itself, result in an Event of Default under Section 14.1(1)(f).
The cash proceeds received by the Secured Party from drawing on a Letter of
Credit under this provision shall be held as cash Security and shall be subject
to Section 21.6. If the bank issuing the Letter of Credit fails to honor the
Secured Party’s properly documented request to draw on the outstanding Letter
of Credit and the Posting Party fails to provide a replacement Letter of Credit
from a financial institution reasonably acceptable to the Secured Party or cash
as a replacement for that dishonored Letter of Credit, an Event of Default with
respect to the Posting Party shall be deemed to have occurred under Section
14.1(1)(f).

 

21.8         Exercise of Rights Against
Security.

 

If
(i) an Event of Default with respect to the Posting Party has occurred and is
continuing, or (ii) an Early Termination Date has occurred or has been
designated as the result of an Event of Default with respect to the Posting
Party, then, unless the Posting Party has paid in full all of its obligations
that are due to the Secured Party under this Agreement, the Secured Party may
exercise one or more of the following rights and remedies:

 

(1)           Letter of Credit. If the
Security posted by the Posting Party is one or more Letters of Credit, the
Secured Party may draw on the entire, undrawn portion of all outstanding
Letters of Credit; provided that, such drawing shall not exceed the Settlement
Amount as calculated by the Secured Party. Notwithstanding the Secured Party’s
receipt of cash proceeds from a drawing under a Letter of Credit, the Posting
Party shall remain liable (i) for any failure to provide any additional
Security as required by Article 21 and (ii) for any amounts owing to the
Secured Party and remaining unpaid after the application of the amounts so
drawn by the Secured Party.

 

52

 

(2)           Cash. If the Security posted
by the Posting Party is cash, the Secured Party shall have the right to apply
such cash against and in satisfaction of any amount due and payable by the
Posting Party in respect of its obligations under this Agreement.

 

22.          FORCE MAJEURE

 

The
Parties hereby incorporate the Force Majeure provision from the RMR Agreements
as follows. If either Party is unable to perform its obligations under this
Agreement due to a Force Majeure Event, the Party unable to perform shall
notify the other Party of the Force Majeure Event promptly after the occurrence
thereof. The Party’s notice may be given orally but shall promptly be confirmed
in writing or electronically.  If a Force
Majeure Event prevents a Party from performing, in whole or in part, its
obligations under this Agreement, such Party’s obligations, other than
obligations to pay money (unless the means of transferring funds is affected),
shall be suspended and such Party shall have no liability with respect to such
obligations; provided, that the suspension of the Party’s obligations is of no
greater scope and of no longer duration than is required by the Force Majeure
Event. If a Force Majeure Event reduces the Availability of an RMR Unit, the
Availability shall be determined as if the RMR Unit were available up to the
Unit Availability Limit in effect prior to the Force Majeure Event through the
earlier of the 12th Day following the Force Majeure Event or until the RMR
Unit’s Availability is restored, whichever occurs first. The Party that is
unable to perform by reason of a Force Majeure Event shall use commercially
reasonable efforts to remedy its inability to perform and mitigate the
consequences of the Force Majeure Event as soon as reasonably practicable;
provided, that no Party shall be required to obtain replacement power or to
settle any strike or other labor dispute on terms which, in the Party’s sole
discretion, are contrary to its interest and, except to the extent that the RMR
Unit’s primary Fuel is distillate fuel oil or Schedule H of the RMR Agreements
expressly requires Seller to maintain fuel oil capability for the RMR Unit,
Seller shall not be required to obtain or use fuel oil to operate an RMR Unit.  The Party unable to perform shall advise the
other Party of its efforts to remedy its inability to perform and to mitigate
the consequences of the Force Majeure Event, and shall advise the other Party
of when it believes it will be able to resume performance of its obligations
under this Agreement.

 

23.          DISPUTE RESOLUTION

 

Section 11.1 of the RMR Agreements is incorporated
herein by reference and shall apply to any disputes that may arise between the
Parties under this Agreement provided that only Buyer and Seller shall be
parties to the dispute resolution process.

 

24.          INSURANCE

 

During the Contract Term, Seller shall carry and
maintain, or cause to be carried and maintained, no less than the insurance
coverages required in the RMR Agreements.

 

53

 

25.          MATERIAL CHANGE(S)

 

25.1        RMR; RMR Agreements.

 

If
the present RMR regulatory regime in existence as of the Effective Date of this
Agreement is modified or superseded by some other regime, system or market
design (e.g., Market Redesign and
Technology Upgrade) and such modification or superseding regime does not result
in the termination or expiration of any RMR Agreement but nonetheless results
in either (1) a reduction in what would have been the amount of payments to
Seller under “Condition 2,” or (2) imposition of additional costs or charges on
Seller, and such Regime Change results in a cumulative negative financial
impact to Seller of $50,000 or more on earnings before interest, taxes, and
depreciation, Buyer shall increase its payments hereunder to ensure that Seller
receives the same payments-to-costs benefit as the Parties have agreed to as
part of this Agreement. In such event, Seller shall invoice Buyer in accordance
with the billing provisions set forth in this Agreement each time the
cumulative negative financial impact on Seller’s earnings as defined herein
reaches at least $50,000. Buyer’s obligation to pay any such invoices shall
continue for the remaining term of this Agreement.

 

25.2        Air Permit.

 

If
the air permit for the Facility, as originally issued, is amended such that the
maximum number of Run Hours or the minimum load, as determined by environmental
restrictions contained in the air permit, materially reduces the availability
of the Facility, Seller shall provide Buyer with prompt written notice of such
amendment, and Buyer shall have the right to terminate this Agreement by
providing written notice to Seller within ninety (90) Days of Buyer’s receipt
of notice of any such amendment, with any such termination to be effective
ninety (90) Days after delivery of such termination notice. Seller and Buyer
shall not be liable for any damages resulting from an early termination of this
Agreement pursuant to this Section 25.2. If the Facility’s air permit is
amended by any Governmental Authority, Seller shall promptly notify Buyer of
any modifications to the Operational Limitations as may be necessary to comply
with the amended air permit. Notwithstanding the above, Seller shall have the
duty to use its commercially reasonable efforts to oppose any amendment that
may adversely affect the dispatch rights provided for herein.

 

26.          MISCELLANEOUS

 

26.1        Duty to Mitigate.

 

Each
Party agrees that it has a duty to mitigate damages and covenants that it will
use commercially reasonable efforts to minimize any damages it may incur as a
result of the other Party’s performance or non-performance of this Agreement.

 

54

 

26.2        Entire Agreement and
Amendments.

 

This
Agreement constitutes the entire agreement between the Parties with respect to
the subject matter hereof. There are no prior or contemporaneous agreements or
representations affecting the subject matter of this Agreement other than those
herein expressed. No amendment, modification or change to this Agreement shall
be enforceable unless reduced to writing and executed by both Parties.

 

26.3        Governing Law.

 

This
Agreement and the rights and duties of the Parties hereunder shall be governed
by and construed, enforced and performed in accordance with the laws of the
State of California, without giving effect to principles of conflicts of laws
that would require the application of the law of any other state.

 

26.4        Waivers.

 

The
failure of either Party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
a Party thereafter to enforce each and every such provision. A waiver under
this Agreement must be in writing and state that it is a waiver. No waiver of
any breach of this Agreement shall be held to constitute a waiver of any other
or subsequent breach.

 

26.5        Fines.

 

Except
as otherwise provided in this Agreement, each Party shall be responsible for
and shall pay the fines that are levied upon it by a Governmental Authority or
regulatory body as a result of such Party’s own actions or inactions except to
the extent one Party is obligated to indemnify the other Party under this
Agreement.

 

26.6        Severability.

 

Except
as otherwise stated herein, any provision or section declared or rendered
unlawful by a Governmental Authority, or deemed unlawful because of a statutory
change, will not otherwise affect the lawful obligations that arise under this
Agreement.

 

26.7        Headings; Exhibits.

 

The
headings used for the sections and articles herein are for convenience and
reference purposes only and shall in no way affect the meaning or
interpretation of the provisions of this Agreement. Any and all Exhibits
referred to in this Agreement are, by such reference, incorporated herein and
made a part hereof for all purposes.

 

55

 

26.8        No Third Party
Beneficiaries.

 

Nothing
in this Agreement shall provide any benefit to any third party or entitle any
third party to any claim, cause of action, remedy or right of any kind, it
being the intent of the Parties that this Agreement shall not be construed as a
third party beneficiary contract.

 

26.9        Counterparts.

 

This
Agreement may be executed in several counterparts, each of which is an original
and all of which constitute one and the same instrument. Execution pages may be
delivered by facsimile, and each such facsimile copy of an execution page shall
have the same legal force and effect as would an original.

 

26.10      No Partnership.

 

Nothing
contained in this Agreement shall be construed to create a partnership, joint
venture, agency or other relationship that may invoke fiduciary obligations
between the Parties hereto.

 

26.11      Press Releases.

 

The
Parties shall not issue a press release or make any public statement with
respect to this Agreement or the substance hereof without the prior written
agreement of the other Party with respect to the form, substance and timing
thereof, except that either Party may make any such press release or public
statement when the releasing Party is advised by its legal counsel that such a
press release or public statement is required by law, regulation, stock
exchange rules or in connection with the financing of the Facility, but in such
event the Parties shall use their reasonably good faith efforts to agree as to the
form, substance and timing of such release or statement.

 

26.12      Rights under the Federal
Power Act.

 

(1)           This Agreement shall not be subject
to change through any unilateral application by either Party to any
Governmental Authority including, but not limited to, the FERC pursuant to the
provisions of Sections 205 or 206 of the Federal Power Act, without the prior
mutual written agreement of both Parties.  
Each of the Parties hereby irrevocably waives any right it may or can
have to unilaterally seek any change, or to support any application, complaint,
or action by any other party or Governmental Authority seeking such change.

 

(2)           Absent agreement by the Parties to
the proposed change, the standard of review for changes to any Section of this
Agreement proposed by a Party, a non-party or the 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) and Federal

 

56

 

Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956) (the “Mobile-Sierra”
doctrine).

 

[Signature page follows this page]

 

57

 

IN WITNESS WHEREOF, each of Seller and Buyer has
caused this Agreement to be executed on its behalf by its duly authorized
representative to be effective as of the date first above written.

 

	
   

  	
  Mirant Delta, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Curtis A. Morgan

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
  Curtis A. Morgan

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title: 

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date: 

  	
  12/28/04

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Mirant Potrero, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Curtis A. Morgan

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
  Curtis A. Morgan

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title: 

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date: 

  	
  12/28/04

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Pacific Gas and Electric Corporation

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
							

 

58

 

IN WITNESS WHEREOF, each of Seller and Buyer has
caused this Agreement to be executed on its behalf by its duly authorized
representative to be effective as of the date first above written.

 

	
   

  	
  Mirant Delta, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Mirant Potrero, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Pacific Gas and Electric Corporation

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Gordon R.
  Smith

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Gordon R. Smith

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  President and CEO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  December 28, 2004

  	
   

  
							

 

59

 

Exhibit
A

 

2005 RMR FERC Settlement

 

McDermott
Will & Emery

 

	
  Boston   Brussels   Chicago 
   Düsseldorf   London   Los Angeles   Miami   
  Milan

  	
   

  	
  Michael A. Yuffee

  
	
  Munich   New
  York   Orange County   Rome   San Diego 
   Silicon Valley   Washington, D. C.

  	
   

  	
  Attorney at Law

  
	
   

  	
   

  	
  myuffee@mwe.com

  
	
   

  	
   

  	
  202.756.8066

  

 

December    , 2004

 

	
  BY HAND DELIVERY

  	
   

  	
  PRIVILEGED
  AND CONFIDENTIAL

  	
   

  
	
   

  	
   

  	
  ATTORNEY
  WORK PRODUCT

  	
   

  
	
  Hon. Magalie R. Salas

  	
   

  	
  ATTORNEY-CLIENT

  	
   

  
	
  COMMUNICATION

  	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  
	
  Federal Energy Regulatory
  Commission

  	
   

  	
  DRAFT

  
	
  888 First Street, N.E.

  	
   

  	
   

  
	
  Washington, D. C. 20426

  	
   

  	
   

  

 

 

Re:          Mirant
Delta, LLC and Mirant Potrero, LLC, Docket No. ER05-    
-000

 

Dear Secretary Salas:

 

Pursuant
to Rule 602 of the Federal Energy Regulatory Commission’s Rules of Practice and
Procedure, 18 C.F.R. § 385.602 (2004), Mirant Delta, LLC (“Mirant Delta”) and
Mirant Potrero, LLC (“Mirant Potrero”) (collectively, “Mirant”),(A) hereby
submit an original and 14 copies of an Offer of Partial Settlement
(“Settlement”) among the following parties (collectively, the “Supporting
Parties”): Mirant, the California Independent System Operator Corporation (“ISO”),
and Pacific Gas and Electric Company (“PG&E”).  This Settlement represents an integrated and
complete resolution of all issues in this proceeding relating to: (i) Owner’s
Repair Cost Obligations; (ii) Annual Fixed Revenue Requirements (“AFRRs”); and
(iii) Variable O&M Rates (“VOM Rates”). In addition, this Settlement
conditionally extends the settlement of these issues through 2008.

 

(A)          Beginning on July 14, 2003, Mirant Corporation and certain
of its affiliated entities (collectively, “Mirant”) commenced proceedings under
Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 101, et seq., in
the United States Bankruptcy Court for the Northern District of Texas, Fort
Worth Division (the “Bankruptcy Court”). In filing this Explanatory Statement
and related Settlement, Mirant does not intend to waive any protections which
might be afforded to it under the Bankruptcy Code, including but not limited to
those protections provided by Section 362 thereof.

 

60

 

The
Supporting Parties are authorized to represent that although the California
Public Utilities Commission (“CPUC”) and the California Electricity Oversight
Board (“EOB”) are not signatories to the Settlement, the CPUC and EOB do not
oppose the Settlement.

 

The
Settlement consists of:

 

(i)
this transmittal letter;

 

(ii)
an Explanatory Statement concerning the Settlement;

 

(iii)
the Offer of Partial Settlement by and between the Supporting Parties;

 

(iv)
a proposed order approving the Settlement; and

 

(v)
a draft notice of filing.

 

Mirant
respectfully requests that the Secretary transfer the Settlement to the
Commission pursuant to Rule 602(b)(2)(ii). Mirant submits that this Settlement
is in the public interest and should be accepted by the Commission as it is the
result of in-depth negotiations among the Supporting Parties and resolves all
issues in this proceeding relating to: (i) Owner’s Repair Cost Obligations;
(ii) AFRRs; and (iii) VOM Rates. Accordingly, Mirant requests that the
Commission approve the Settlement.

 

	
   

  	
  Respectfully submitted,

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Michael A. Yuffee

  
	
   

  	
  Bruce A. Bedwell

  
	
   

  	
  McDERMOTT WILL & EMERY
  LLP

  
	
   

  	
   

  
	
   

  	
  Debra Raggio Bolton

  Mirant Corporation

  
	
   

  	
   

  
	
   

  	
  Attorneys for

  
	
   

  	
  Mirant Delta, LLC and
  Mirant Potrero, LLC

  

 

Attachments

 

61

 

CERTIFICATE
OF SERVICE

 

I
hereby certify that I have this day served copies of the foregoing document
upon each person designated on the official service list as compiled by the
Secretary in this proceeding in accordance with the requirements of Rule 2010
of the Rules of Practice and Procedure, 18 C.F.R. 385.2010 (2004).

 

In addition, copies of this
filing have been served on the following persons:

 

Deborah A. Le Vine

Director of Contracts and
Compliance

California ISO Corporation

151 Blue Ravine Road

Folsom, CA 95630

 

Robert Kott

Manager of Reliability
Contracts

California ISO Corporation

151 Blue Ravine Road

Folsom, CA 95630

 

Laura Douglass

Team Lead, Reliability
Strategy

Pacific Gas and Electric
Company

Mail Code N12E

P.O. Box 770000

San Francisco, CA 94177-0001

 

Charles F. Robinson

Vice President and General
Counsel

California ISO Corporation

151 Blue Ravine Road

Folsom, CA 95630

 

Stuart K. Gardiner

Law Department, B30A

Pacific Gas and Electric Co.

P.O. Box 7442

San Francisco, CA 94120

 

DATED at Washington, D.C., this    th
day of December, 2004.

 

	
   

  	
   

  	
   

  
	
   

  	
  Bruce A. Bedwell

  

 

62

 

EXPLANATORY
STATEMENT

 

63

 

EXPLANATORY STATEMENT(B)

 

I.              PROCEDURAL HISTORY

 

1.                                                                       Mirant Delta is
the owner of the Contra Costa Power Plant located in Antioch, California, and
the Pittsburg Power Plant located in Pittsburg, California. Mirant Potrero is
the owner of the Potrero Power Plant located in San Francisco, California.

 

2.                                                                       Mirant Delta and
Mirant Potrero operate generating units at their respective power plants
subject to Must-Run Service Agreements (“RMR Agreements”) with the ISO, the
Schedules to which contain certain generation unit-specific terms and
conditions. The units subject to such obligations under these RMR Agreements
are referred to herein as RMR Units.(C)

 

3.                                                                       By their express
terms, the RMR Agreements provide for annual revisions to, among other things,
the AFRRs and VOM Rates for each RMR Unit. Pursuant to Schedule B, Section 7 of
the RMR Agreements, the AFRRs are determined by the Formula Rate set forth in
Schedule F to the RMR Agreements, unless Mirant files a superseding rate
schedule under Section 205 of the Federal Power Act.  The VOM Rates also are determined by a formula
set forth in Schedule F. Schedule F requires that Mirant provide annually to
the ISO an “Information Package detailing and supporting all calculations” used
to determine the AFRRs and VOM Rates under the respective formulas for the
upcoming calendar year (“Schedule F Filing Requirements”). Mirant is required
to provide a copy of this Information Package to the Commission “in an
informational filing.”

 

4.                                                                       On October 9,
2001, Mirant submitted, in Docket No. ER02-64-000, an information package in
the form of an informational filing (“2002 Information Package”) in accordance
with Schedule F of its RMR Agreements. The 2002 Information Package contained
data and workpapers detailing Mirant’s calculation of its proposed AFRRs and
VOM Rates for calendar year 2002. PG&E, the
ISO, the EOB, and the CPUC (collectively, the “Joint Parties”)(D) filed
protests to the 2002 Information Package, raising a variety of issues.

 

5.                                                                       On December 19,
2001, the Commission issued an
order conditionally accepting for filing the revised tariff sheets submitted in
Docket No. ER02-198-000, subject to

 

(B)           This Explanatory Statement
is not intended to alter any of the specific provisions of the Settlement,
including its exhibits and attachments, and is provided solely to comply with
the Commission’s rules.

 

(C)           Specifically, the following
units owned by Mirant will be subject to RMR Agreements during calendar year
2005: Contra Costa Units 4, 5 and 7; Pittsburg Units 5 and 6; and Potrero Units
3, 4, 5 and 6.

 

(D)          The only other party to
respond to this filing was the City and County of San Francisco, whose Motion
to Intervene raised no substantive issues.

 

64

 

refund
and the outcome of the ongoing proceedings in Docket No. ER02-64-000.  Mirant
Delta, LLC, 97 FERC ¶ 61,284 (2001).

 

6.                                                                       On November 20, 2002,
the Supporting Parties entered into a stipulation and agreement (the “2002-2004
Settlement”), which fully resolved all issues in Docket Nos. ER02-64-000 and
ER02-198-000. No party objected to the 2002-2004 Settlement and the Commission
approved the settlement on February 5, 2003.(E) The 2002-2004 Settlement set
forth Mirant’s AFRRs and VOM Rates for the period January 1, 2002 through December
31, 2004, thereby eliminating the need for Mirant to make Schedule F filings
for those calendar years. The 2002-2004 Settlement also set forth Mirant’s
Owner’s Repair Cost Obligations for the same period.

 

7.                                                                       On December 16,
2004, Mirant filed with the Commission various proposed rate and rate schedule
changes (referred to as the “Limited 205 Filing”). The Limited 205 Filing,
among other things, contains the proposed: (i) Owner’s Repair Cost Obligations;
(ii) AFRRs; and (iii) VOM Rates for each RMR Unit, to be effective January 1, 2005.

 

II.            DESCRIPTION OF SETTLEMENT

 

1.                                                                       In anticipation
of the Schedule F Filing Requirements and the Limited 205 Filing, the
Supporting Parties initiated informal settlement discussions to resolve any
potential issues relating to the AFRRs and VOM Rates for calendar year 2005. As
a result of these informal settlement discussions, the Supporting Parties
submit the attached Settlement, pursuant to which the Supporting Parties
consent to the: (i) Owner’s Repair Cost Obligations; (ii) AFRRs; and (iii) VOM
Rates as set forth in Mirant’s Limited 205 Filing for 2005.

 

2.                                                                       Pursuant to the
Settlement, the rates in Mirant’s Limited 205 Filing for the following items
will be effective for the period January 1, 2005 through December 31, 2005: (a)
Owner’s Repair Cost Obligations as contained in Schedule A, Section 13 of the
RMR Agreements; (b) AFRRs, as contained in Table B-6 of the RMR Agreements; and
(c) VOM Rates, as contained in Table C1-18 of the RMR Agreements.

 

3.                                                                                                                                       Specifically,
the Supporting Parties consent to the following, as reflected in Mirant’s
Limited 205 Filing for 2005:

 

a.                             New AFRRs for
Contra Costa Unit 7, Pittsburg Units 5-6, and Potrero Units 3-6;

 

(E)           Mirant
Delta, LLC and Mirant Potrero, LLC, 102 FERC ¶ 61,130 (2003).

 

65

 

 

b.                             For
Contra Costa Units 4-5, the continuation of the AFRRs contained in the
2002-2004 Settlement;

 

c.                             For all RMR Units,
the continuation of the VOM Rates contained in the 2002-2004 Settlement;

 

d.                             For all RMR Units,
new Owner’s Repair Cost Obligations; and

 

e.                             Revised Rate
Schedule Sheets to be effective January 1, 2005 through December 31, 2005.

 

4.                                                    Upon agreement by the Supporting
Parties, this Settlement may be extended, without modification, for the period
January 1, 2006 through December 31, 2008, by providing joint notice of such
extension to the Commission.

 

5.                                                                       The Settlement,
in conjunction with Mirant’s Limited 205 Filing, completely satisfies Mirant’s
Schedule F Filing Requirements for 2005 and, if the Settlement is extended, for
2006 through 2008.

 

6.                                                                       Through this
Settlement, the Supporting Parties consent only to those changes in Mirant’s
Limited 205 Filing for 2005 discussed herein, and take no position on the other
changes set forth in Mirant’s Limited 205 Filing.

 

III.           EFFECTIVE DATE

 

The Settlement shall be effective on the later of: (1) the date the
Settlement is approved by the United States Bankruptcy Court for the Northern
District of Texas, Fort Worth Division, which approval will be sought promptly
by Mirant after the Commission issues an order approving the Settlement without
modification or condition or, if modified or conditioned by the Commission,
after acceptance of the modification or conditions contained in such order by
all of the Supporting Parties; or (2) if modified or conditioned by the
Bankruptcy Court, upon the date of acceptance of the modifications or
conditions contained in such order by all of the Supporting Parties (“Effective
Date”).

 

IV.           REFUNDS

 

Refunds
will be paid pursuant to the terms and conditions of the Settlement.

 

V.            COMMENTS

 

The Supporting Parties seek expedited treatment and request waiver of
Rules 602(d)(2) and 602(f) so that initial comments on the Settlement are due
on January   , 2005, and reply comments are due on January
   , 2005.

 

66

 

VI.           POLICY ISSUES AND OTHER ISSUES
ARISING UNDER THE SETTLEMENT

 

In
accordance with the Chief Judge’s October 15, 2003 Notice to the Public
concerning Information to be Provided with Settlement Agreements, the Parties
provide the following information:

 

1.             Underlying Issues and Major
Implications

 

The
Parties wish to resolve all outstanding issues with respect to the: (i) Owner’s
Repair Cost Obligations; (ii) AFRRs; and (iii) VOM Rates set forth in Mirant’s
Limited 205 Filing for 2005. Through this Settlement, the Parties agree that
the data contained in Mirant’s Limited 205 Filing for 2005 concerning: (i)
Owner’s Repair Cost Obligations; (ii) AFRRs; and (iii) VOM Rates are to be
accepted as filed, to be effective from January 1, 2005, through December 31,
2005 and thereafter until changed by Commission order.

 

2.             Policy Implications

 

The
unopposed changes to Mirant’s RMR Agreements do not raise any policy implications.

 

3.             Pending Cases That May Be Affected

 

The
Settlement will not affect any cases currently pending before the Commission.

 

4.             Issues of First Impression and
Reversals on Commission Position

 

The
Settlement does not raise any issues of first impression and does not propose
to reverse any previous Commission decisions involving similar issues.

 

5.             Standard of Review

 

The
Parties intend that the standard of review for changes to any section of the
Settlement proposed by a Party, a non-party or the Commission 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) and Federal Power Commission
v.  Sierra
Pacific Power Co., 350 U.S. 348 (1956) (the “Mobile-Sierra” doctrine).

 

67

 

OFFER OF
SETTLEMENT

 

68

 

OFFER OF SETTLEMENT

 

This
Offer of Partial Settlement (the “Settlement”) is dated as of December
   , 2004, by and among Mirant Delta, LLC (“Mirant Delta”) and
Mirant Potrero, LLC (“Mirant Potrero”) (collectively, “Mirant”),(F) the
California Independent System Operator Corporation (“ISO”), and Pacific Gas and
Electric Company (“PG&E”). These parties are referred to herein
individually as a “Party” and collectively as the “Parties” or “Supporting
Parties.” The Parties are authorized to represent that although the California
Public Utilities Commission (“CPUC”) and the California Electricity Oversight
Board (“EOB”) are not signatories to the Settlement, the CPUC and BOB do not
oppose the Settlement.

 

RECITALS

 

A.            Mirant Delta is the owner of the
Contra Costa Power Plant located in Antioch, California, and the Pittsburg
Power Plant located in Pittsburg, California. Mirant Potrero is the owner of
the Potrero Power Plant located in San Francisco, California.

 

B.            Mirant Delta and Mirant Potrero
operate generating units at their respective power plants subject to Must-Run
Service Agreements (“RMR Agreements”) with the ISO, the Schedules to which
contain certain generation unit-specific terms and conditions. The units
subject to such obligations under these RMR Agreements are referred to herein
as RMR Units.(G)

 

C.            By their express terms, the RMR
Agreements provide for annual revisions to, among other things, the Annual
Fixed Revenue Requirements (“AFRRs”) and Variable O&M Rates (“VOM Rates”)
for each unit subject to the agreements. Pursuant to Schedule B, Section 7 of
the RMR Agreements, the AFRRs are determined by the Formula Rate set forth in
Schedule F to the RMR Agreements, unless Mirant files a superseding rate
schedule filed under Section 205 of the Federal Power Act.  The VOM Rates also are determined by a formula
set forth in Schedule F. Schedule F requires that Mirant provide annually to
the ISO an “Information Package detailing and supporting all calculations” used
to determine the AFRRs and VOM Rates under the respective formulas for the
upcoming calendar year (“Schedule F Filing Requirements”). Mirant is required to
provide a copy of this Information Package to the Commission “in an
informational filing.”

 

(F)           Beginning on July 14, 2003, Mirant Corporation and certain
of its affiliated entities (collectively, “Mirant”) commenced proceedings under
Chapter 11 of the Bankruptcy Code, 11 U.S.C, §§ 101, et seq., in the United
States Bankruptcy Court for the Northern District of Texas, Fort Worth Division
(the “Bankruptcy Court”). In filing this Settlement, Mirant does not intend to
waive any protections which might be afforded to it under the Bankruptcy Code,
including but not limited to those protections provided by Section 362 thereof.

 

(G)           Specifically, the following units owned by Mirant will be
subject to RMR Agreements during calendar year 2005: Contra Costa Units 4, 5
and 7; Pittsburg Units 5 and 6; and Potrero Units 3, 4, 5 and 6.

 

69

 

D.            On
October 9, 2001, Mirant submitted, in Docket No. ER02-64-000, an information
package in the form of an informational filing (“2002 Information Package”) in
accordance with Schedule F of its RMR Agreements. The 2002 Information Package
contained data and workpapers detailing Mirant’s calculation of its proposed
AFRRs and VOM Rates for calendar year 2002. PG&E, the ISO, the EOB, and the
CPUC filed protests to the 2002 Information Package, raising a variety of
issues.(H)

 

E.             On
December 19, 2001, the Commission issued an order conditionally accepting for
filing the revised tariff sheets submitted in Docket No. ER02-198-000, subject
to refund and the outcome of the ongoing proceedings in Docket No. ER02-64-000.
Mirant Delta, LLC, 97 FERC ¶
61,284 (2001).

 

F.             On
November 20, 2002, the Parties entered into a stipulation and agreement (the “2002-2004
Settlement”), which fully resolved all issues in Docket Nos. ER02-64-000 and
ER02-198-000. No party objected to the 2002-2004 Settlement and the Commission
approved the settlement on February 5, 2003.(1) The 2002-2004 Settlement set
forth Mirant’s AFRRs and VOM Rates for the period January 1, 2002 through
December 31, 2004, thereby eliminating the need for Mirant to make Schedule F
filings for those calendar years. The 2002-2004 Settlement also set forth the
Owner’s Repair Cost Obligations for the same period.

 

G.            On
December 16, 2004, Mirant filed with the Commission various proposed rate and
rate schedule changes (referred to as the “Limited 205 Filing”). The Limited
205 Filing, among other things, contains the proposed: (i) Owner’s Repair Cost
Obligations; (ii) AFRRs; and (iii) VOM Rates for each RMR Unit, to be effective
January 1, 2005.

 

H.            The
Parties wish to resolve all outstanding issues with respect to the: (i) Owner’s
Repair Cost Obligations; (ii) AFRRs; and (iii) VOM Rates set forth in Mirant’s
Limited 205 Filing for 2005.

 

NOW, THEREFORE, in consideration of the recitals and
the mutual covenants and agreements hereinafter set forth, the Parties mutually
covenant and agree as follows:

 

1.         IMPLEMENTATION

 

1.1       The Parties agree
that the data contained in Mirant’s Limited 205 Filing for 2005 concerning: (i)
Owner’s Repair Cost Obligations; (ii) AFRRs; and (iii) VOM Rates are to be
accepted as filed, to be effective from January 1, 2005,

 

(H)        The
only other party to respond to this filing was the City and County of San
Francisco, whose Motion to Intervene raised no substantive issues.

 

(I)          Mirant
Delta, LLC and Mirant Potrero, LLC, 102 FERC ¶ 61,130 (2003).

 

70

 

through December 31, 2005 and thereafter
until changed by Commission order. Specifically, the Parties consent to the
following:

 

(a)          The
AFRRs for Mirant’s electric generating facilities shall be as follows:

 

 

	
  Facility

  	
   

  	
  AFRR

  	
   

  
	
  Contra Costa

  	
   

  	
  $

  	
   23,149,445

  	
   

  
	
  Pittsburg

  	
   

  	
  $

  	
   30,314,380

  	
   

  
	
  Potrero

  	
   

  	
  $

  	
   19,159,168

  	
   

  

 

(b)          The
above facility-specific AFRRs shall be allocated to the various RMR Units as
follows:

 

 

	
  Facility and Unit

  	
   

  	
  AFRR

  	
   

  
	
  Contra Costa 4

  	
   

  	
  $

  	
  456,209

  	
   

  
	
  Contra Costa 5

  	
   

  	
  $

  	
  456,209

  	
   

  
	
  Contra Costa 7

  	
   

  	
  $

  	
  22,237,027

  	
   

  
	
  Pittsburg 5

  	
   

  	
  $

  	
  15,157,190

  	
   

  
	
  Pittsburg 6

  	
   

  	
  $

  	
  15,157,190

  	
   

  
	
  Potrero 3

  	
   

  	
  $

  	
  17,908,424

  	
   

  
	
  Potrero 4

  	
   

  	
  $

  	
  338,285

  	
   

  
	
  Potrero 5

  	
   

  	
  $

  	
  451,175

  	
   

  
	
  Potrero 6

  	
   

  	
  $

  	
  461,284

  	
   

  

 

(c)           The
VOM Rates for the RMR Units at the Contra Costa, Pittsburg, and Potrero
Facilities shall be as follows:

 

71

 

	
  Facility and Unit

  	
   

  	
  VOM Rate

  ($/MWh)

  	
   

  
	
  Contra Costa 4

  	
   

  	
  $

  	
  0

  	
   

  
	
  Contra Costa 5

  	
   

  	
  $

  	
  0

  	
   

  
	
  Contra Costa 7

  	
   

  	
  $

  	
  0.99

  	
   

  
	
  Pittsburg 5

  	
   

  	
  $

  	
  0.76

  	
   

  
	
  Pittsburg 6

  	
   

  	
  $

  	
  0.76

  	
   

  
	
  Potrero 3

  	
   

  	
  $

  	
  3.16

  	
   

  
	
  Potrero 4

  	
   

  	
  $

  	
  0

  	
   

  
	
  Potrero 5

  	
   

  	
  $

  	
  0

  	
   

  
	
  Potrero 6

  	
   

  	
  $

  	
  0

  	
   

  

 

(d)         The
Owner’s Repair Cost Obligations for the Contra Costa, Pittsburg, and Potrero
Facilities shall be as follows:

 

 

	
  Facility

  	
   

  	
  Owner’s Repair

  Cost Obligation

  	
   

  
	
  Contra Costa

  	
   

  	
  $

  	
  423,152

  	
   

  
	
  Pittsburg

  	
   

  	
  $

  	
  552,707

  	
   

  
	
  Potrero

  	
   

  	
  $

  	
  406,885

  	
   

  

 

1.2       The Supporting Parties hereby incorporate
into this Settlement those Revised Rate Schedule Sheets attached to Mirant’s Limited
205 Filing for 2005 (“Revised Rate Schedule Sheets”) showing the agreed-upon
changes identified in Section 1.1, supra, to
be effective January 1, 2005.

 

72

 

1.3       Upon their effectiveness, the Revised Rate
Schedule Sheets shall supersede and revise the corresponding currently
effective rate schedule sheets that comprise the RMR Agreements previously
filed by Mirant.

 

1.4       The Supporting Parties consent only to those
changes in Mirant’s Limited 205 Filing for 2005 specified herein, and take no
position on the other changes set forth in Mirant’s Limited 205 Filing.

 

1.5       If approved by the Commission, this
Settlement fully resolves all issues in this proceeding relating to: (i) Owner’s
Repair Cost Obligations; (ii) AFRRs; and (iii) VOM Rates. The Settlement, in
conjunction with Mirant’s Limited 205 Filing, completely satisfies Mirant’s
Schedule F Filing Requirements for 2005, and if the Settlement is extended, for
2006 through 2008.

 

1.6       Upon agreement by the Supporting Parties,
this Settlement may be extended, without modification, for the period January
1, 2006 through December 31, 2008, by providing joint notice of such extension
to the Commission.

 

2.         EFFECTIVE DATE

 

2.1       The Settlement shall be effective on the
later of: (1) the date the Settlement is approved by the United States
Bankruptcy Court for the Northern District of Texas, Fort Worth Division, which
approval will be sought promptly by Mirant after the Commission issues an order
approving the Settlement without modification or condition or, if modified or
conditioned by the Commission, after acceptance of the modifications or
conditions contained in such order by all the Supporting Parties; or (2) if
modified or conditioned by the Bankruptcy Court, upon the date of acceptance of
the modifications or conditions contained in such order by all of the Parties (“Effective
Date”).

 

2.2       Within ten (10) business days following
either Commission approval without modification or condition, or if modified or
conditioned by the Commission, within ten (10) business days of acceptance of
the modifications or conditions contained in such order by all of the
Supporting Parties, Mirant will file and thereafter diligently prosecute in the
Bankruptcy Court, a request for approval of the Settlement, thereafter taking
all actions necessary to obtain such approval.

 

3.         ACTION BY PARTIES

 

3.1       Except for the Bankruptcy Court Approval
provided in Section 2, the Parties hereby waive any and all rights to seek
rehearing or judicial review of the Commission’s order(s) approving this
Settlement, and shall be bound by and

 

73

 

entitled to the benefits of the provisions of
this Settlement; provided, however, that
if the Commission approves this Settlement with modification or condition, a
Party may seek rehearing or judicial review of the Commission’s order(s)
approving this Settlement solely to challenge the Commission’s imposition of
modifications or conditions in order to preserve the terms and conditions of
this Settlement as filed.

 

3.2       The rates and other values in Mirant’s
Limited 205 Filing for the following items settled herein will be effective for
the period January 1, 2005 through December 31, 2005, unless extended under
Section 1.6: (a) Owner’s Repair Cost Obligations as contained in Schedule A,
Section 13 of the RMR Agreements; (b) AFRRs, as contained in Table B-6 of the
RMR Agreements; and (c) VOM Rates, as contained
in Table Cl-18 of the RMR Agreements.

 

3.3       Nothing in this Settlement is intended to
affect any obligation of Mirant under the RMR Agreements other than those
expressly provided herein, and specifically, Mirant shall continue to submit
proposed annual changes to the RMR Agreements in accordance with Section
4.1l(a), Schedule B, and Schedule D of the RMR Agreements and consistent with
this Settlement.

 

4.         RESERVATIONS

 

4.1       Agreement to or acquiescence in this
Settlement shall not be deemed in any
respect to constitute an admission by any Party hereto that any allegation or
contention made by any other Party in these proceedings is true or valid. In
reaching this Settlement, the Parties specifically agree that this Settlement
represents a negotiated agreement for the sole purpose of settling certain
issues, as described herein. No Party or affiliate of any of the Parties shall
be deemed to have approved, accepted, agreed to, or consented to any fact,
concept, theory, rate methodology, principle, or method relating to
jurisdiction, prudence, reasonable cost of service, cost classification, cost
allocation, rate design, rate schedule provisions, or other matters underlying
or purported to underlie any of the resolutions of the issues provided herein.
The Commission’s approval of the Settlement shall not constitute approval of,
or precedent regarding, any principle or issue in this proceeding.

 

4.2       The Parties agree that the resolution of any
matter in this Settlement shall not be deemed to be a “settled practice” as
that term was interpreted and applied in Public
Service Commission of the State of New York v. FERC, 642 F.2d 1335 (D.C. Cir. 1980).

 

74

 

4.3       (a) Each Party
irrevocably waives its rights, including its rights under §§ 205-206 of the
Federal Power Act, unilaterally to seek or support a change in the rate(s),
charges, classifications, terms or conditions of this Settlement. By this
provision, each Party expressly waives its right to seek or support: (i) an
order from the Commission finding that the rate(s), charges, classifications,
terms or conditions agreed to by the Parties in the Settlement are unjust and
unreasonable; or (ii) any refund with respect thereto. Each Party agrees not to
make or support such a filing or request, and that these covenants and waivers
shall be binding notwithstanding any regulatory or market changes that may
occur hereafter.

 

(b)        Absent the agreement of all Parties to the proposed change,
the standard of review for changes to any section of the Settlement proposed by
a Party (to the extent that any waiver in Section (a) above is unenforceable or
ineffective as to such Party), a non-party or the Commission 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) and Federal Power Commission v. Sierra Pacific Power Co., 350
U.S. 348 (1956) (the “Mobile-Sierra” doctrine).

 

4.4       This Settlement
does not resolve any issues related to Mirant’s Limited 205 Filing for 2005 not
discussed herein nor does this Settlement restrict in any way the positions
that the Parties may take with respect to such issues. The Parties specifically
reserve their rights and positions therein. Further, except as provided in
Sections 4.3 of this Settlement, this Settlement is not intended to limit or
affect the rights and remedies of the Parties with respect to any other
particular dispute not resolved by this Settlement.

 

4.5       Notwithstanding any
provision of this Settlement, nothing included in this Settlement is intended
to limit or affect the rights and remedies of the Parties with respect to any
claim that the amounts invoiced under the RMR Agreements are incorrect,
including any dispute involving the interpretation or application of the RMR
Agreements.

 

5.         MISCELLANEOUS PROVISIONS

 

5.1       The titles and
headings of the various Articles and Sections in this Settlement are for
reference purposes only. They are not to be construed or taken into account in
interpreting this Settlement, and do not qualify, modify, or explain the
effects of this Settlement.

 

5.2       The rights conferred
and obligations imposed on any Party by this Settlement shall inure to the
benefit of and be binding on that Party’s successors in interest or assignees
as if such successor or assignee was itself a Party hereto.

 

75

 

5.3       This Settlement may
be executed in counterparts by each Party, each of which shall be deemed to be
an original, but which together shall constitute one and the same instrument.

 

5.4       The discussions
among the Parties that have resulted in this Settlement have been conducted on
the explicit understanding that they were undertaken subject to Rule 602(e) of
the Commission’s Rules of Practice and Procedure, 18 C.F.R. § 385.602(e)(2004),
and the rights of the Parties with respect thereto shall not be impaired by
this Settlement.

 

76

 

6.         CONCLUSION

 

The Parties respectfully request that the
Commission approve the instant Settlement without modification or condition.

 

Signed and Dated this
       th day of December, 2004.

 

	
  The California Independent System Operator

  Corporation

  	
   

  	
  Mirant Delta, LLC and Mirant Potrero, LLC

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Pacific Gas and Electric Company

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:  Stuart K. Gardiner

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title: Attorney

  	
   

  	
   

  
											

 

77

 

DRAFT ORDER

 

78

 

FEDERAL ENERGY REGULATORY
COMMISSION

WASHINGTON, D.C. 20426

 

[Date]

 

	
   

  	
   

  	
  In Reply refer to:

  
	
   

  	
   

  	
  Docket No. ER05-    -000

  
	
   

  	
   

  	
   

  
	
  McDermott Will & Emery LLP

  	
   

  	
   

  
	
  ATTN: Michael A. Yuffee

  	
   

  	
   

  
	
  Attorney for Mirant Delta, LLC

  	
   

  	
   

  
	
  and Mirant Potrero, LLC

  	
   

  	
   

  
	
  600 13th Street, N.W.

  	
   

  	
   

  
	
  Washington, D.C. 20005

  	
   

  	
   

  

 

Dear Mr. Yuffee:

 

On
December        , 2004, you filed an offer of settlement
among Mirant Delta, LLC, Mirant Potrero, LLC (collectively, “Mirant”), the
California Independent System Operator Corporation (“ISO”) and Pacific Gas and
Electric Company (“PG&E”) in the above-referenced dockets.

 

The subject settlement is in the public
interest and is hereby approved. The Commission’s approval of this settlement
does not constitute approval of, or precedent regarding, any principle or issue
in this proceeding. The parties agree that the settlement is subject to the public
interest standard of review.

 

	
   

  	
  By direction of the Commission,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Magalie R. Salas,

  
	
   

  	
  Secretary

  

 

cc:
All Parties

 

79

 

DRAFT NOTICE

 

80

 

UNITED STATES OF AMERICA

BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

 

	
  Mirant
  Delta, LLC

  	
  )

  	
  Docket
  No. ER05-      -000

  
	
  Mirant
  Potrero, LLC

  	
  )

  	
   

  

 

NOTICE OF FILING

(December     , 2004)

 

Take notice that, on December
     , 2004, the following parties submitted an Offer
of Settlement in the above-referenced dockets: Mirant Delta, LLC, Mirant
Potrero, LLC, the California Independent System Operator Corporation and
Pacific Gas and Electric Company.

 

Any person desiring to intervene or to protest this
filing must file in accordance with Rules 211 and 214 of the Commission’s Rules
of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be
considered by the Commission in determining the appropriate action to be taken,
but will not serve to make protestants parties to the proceeding. Any person
wishing to become a party must file a notice of intervention or motion to
intervene, as appropriate. Such notices, motions, or protests must be filed on
or before the comment date. Anyone filing a motion to intervene or protest must
serve a copy of that document on the Applicant and all the parties in this
proceeding.

 

The Commission encourages electronic submission of
protests and interventions in lieu of paper using the “eFiling” link at
http://www.ferc.gov. Persons unable to file electronically should submit an
original and 14 copies of the protest or intervention to the Federal Energy
Regulatory Commission, 888 First Street, N.E., Washington, D.C. 20426.

 

This filing is accessible on-line at
http://www.ferc.gov, using the “eLibrary” link and is available for review in
the Commission’s Public Reference Room in Washington, D.C.  There is an “eSubscription” link on the web
site that enables subscribers to receive email notification when a document is
added to a subscribed docket(s). For assistance with any FERC Online service,
please email FERCOnlineSupport@ferc.gov, or call (866) 208-3676 (toll free).
For TTY, call (202) 502-8659.

 

Comment Date: 5:00 pm Eastern Time on January
     , 2005. Reply Comment Date: 5:00 pm Eastern Time
on January      , 2005.

 

	
   

  	
  Magalie R. Salas 

  
	
   

  	
   

  
	
   

  	
  Secretary

  

 

81

 

Exhibit B

 

Examples of Applicability of
Schedule G vs. Modified Schedule G

 

Calculation is done by Unit, by
year

Application for 2005-2012

In this example, using volume
(MWh), but logic also applies to contract service limit hours in the same
manner

(Schedule G rates apply for
CAISO calls beyond these volumes)

 

Assume:

Pittsburg 5 # of allowed
startups in 20, per actual 2005 RMR contract

Pittsburg 5 volumetric limit is
400,000 MWh (frozen # to be used to determine applicability of Modified
Schedule G rates)

in 2007, the RMR contract for
Pittsburg 5 allows for 280,000 MWh under base rates

 

	
  Sample #1.
  2007 Operation

  	
   

  	
  2007 Costs

  
	
  CAISO calls
  (combined DA, HA and RT) = 310,000 MWh

  	
   

  	
  CAISO energy
  at Schedule C rates for 200,000 MWh

  
	
  PG&E
  calls = 140,000 MWh

  	
   

  	
  CAISO energy
  at Schedule G rates for 30,000 MWh

  
	
  CAISO
  startups = 15

  	
   

  	
  PG&E
  energy at Schedule C rates for 120,000 MWh

  
	
  PG&E
  startups = 5

  	
   

  	
  PG&E energy
  at Modified Schedule G rates for 20,000 MWh

  
	
   

  	
   

  	
  Schedule B
  rates for 20 startups

  
	
   

  	
   

  	
  Modified
  Schedule G rates for 3 startups

  
	
   

  	
   

  	
   

  
	
  Sample #2.
  2007 Operation

  	
   

  	
  2007 Costs

  
	
  CAISO calls
  (combined DA, HA and RT) = 220,000 MWh

  	
   

  	
  CAISO energy
  at Schedule C rates for 220,000 MWh

  
	
  PG&E
  calls = 210,000 MWh

  	
   

  	
  CAISO energy
  at Schedule G rates for 0 MWh

  
	
  CAISO
  startups = 10

  	
   

  	
  PG&E
  energy at Schedule C rates for 180,000 MWh

  
	
  PG&E
  startups = 8

  	
   

  	
  PG&E
  energy at Modified Schedule G rates for 30,000 MWh

  
	
   

  	
   

  	
  Schedule B
  rates for 18 startups

  
	
   

  	
   

  	
  Modified
  Schedule G rates for 0 startups

  
	
   

  	
   

  	
   

  
	
  Sample #3.
  2007 Operation

  	
   

  	
  2007 Costs

  
	
  CAISO calls
  (combined DA, HA and RT) = 20,000 MWh

  	
   

  	
  CAISO energy
  at Schedule C rates for 28,000 MWh

  
	
  PG&E
  calls = 360,000 MWh

  	
   

  	
  CAISO energy
  at Schedule G rates for 0 MWh

  
	
  CAISO
  startups = 25

  	
   

  	
  PG&E
  energy at Schedule C rates for 350,000 MWh

  
	
  PG&E
  startups = 2

  	
   

  	
  PG&E
  energy at Modified Schedule G rates for 0 MWh

  
	
   

  	
   

  	
  Schedule B
  rates for 20 startups

  
	
   

  	
   

  	
  Schedule G
  rates for 5 startups

  
	
   

  	
   

  	
  Modified
  Schedule G rates for 2 startups

  
	
   

  	
   

  	
   

  
	
  Sample #4.
  2007 Operation

  	
   

  	
  2007 Costs

  
	
  CAISO calls
  (combined DA, HA and RT) = 310,000 MWh

  	
   

  	
  CAISO energy
  at Schedule C rates for 280,000 MWh

  
	
  PG&E
  calls = 50,000 MWh

  	
   

  	
  CAISO energy
  at Schedule G rates for 30,000 MWh

  
	
  CAISO
  startups = 17

  	
   

  	
  PG&E
  energy at Schedule C rates for 80,000 MWh

  
	
  PG&E
  startups = 4

  	
   

  	
  PG&E
  energy at Modified Schedule G rates for 0 MWh

  
	
   

  	
   

  	
  Schedule B
  rates for 20 startups

  
	
   

  	
   

  	
  Modified
  Schedule G rates for 1 startups

  

 

82

 

Exhibit C
– OFO Penalties

 

Low-Inventory OFO Allocation
Examples:

 

Situation 1: Both parties
deliver volumes short of the tolerance band.

The aggregated shortfall of
both parties is short of the 5% tolerance band set by the Gas Transporter for
the OFO.  Calculate the volume subject to
penalty for each party by calculating that party’s shortfall percentage,
deducting the 5% allowance (tolerance band) from that shortfall, and applying
the remaining percentage to that party’s usage. 
This result is that party’s volume subject to penalty.

 

Situation 2: One party delivers
volumes short of the tolerance band and both parties deliver short of their
usage.

The aggregated shortfall of
both parties is short of the 5% tolerance band set by the Gas Transporter for
the OFO.  Calculate the shortfall
attributed to each party.  Since PG&E
is within the 5% tolerance band and Mirant is not, the entire shortfall is
allocated to Mirant.  OFO penalties for
this instance are allocated to Mirant. 
Note that the volume subject to penalty was reduced because PG&E did
not fully use its 5% allocation.

 

High-Inventory OFO Allocation
Example:

 

Situation 3: One party delivers
volumes in excess of the tolerance band and the other party delivers short of
its usage.

The aggregated shortfall of both
parties is in excess of the 5% tolerance band set by the Gas Transporter for
the OFO.  Calculate the excess attributed
to each party.  Since Mirant delivered
volumes short of its usage and PG&E delivered volumes in excess of the
tolerance band, the entire excess is allocated to PG&E.  OFO penalties for this instance are allocated
to PG&E.  Note that the volume
subject to penalty was reduced because Mirant did not use any of its 5%
allocation and in fact, delivered short of its usage.

 

OFO Example

 

	
   

  	
   

  	
  Gas Delivery

  	
   

  	
  Gas
  Usage

  	
   

  
	
  Situations

  	
   

  	
  Mirant

  	
   

  	
  PG&E

  	
   

  	
  Total

  	
   

  	
  Mirant

  	
   

  	
  PG&E

  	
   

  	
  Total

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Both over
  tolerance band

  	
   

  	
  50000

  	
   

  	
  75000

  	
   

  	
  125000

  	
   

  	
  60000

  	
   

  	
  63000

  	
   

  	
  143000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
  One party over

  	
   

  	
  50000

  	
   

  	
  81000

  	
   

  	
  131000

  	
   

  	
  60000

  	
   

  	
  63000

  	
   

  	
  143000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
  Parties in opposite
  positions

  	
   

  	
  40000

  	
   

  	
  80000

  	
   

  	
  120000

  	
   

  	
  50000

  	
   

  	
  60000

  	
   

  	
  110000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  

 

	
  Situations

  	
   

  	
  Volume

  Difference

  	
   

  	
  %

  Difference

  	
   

  	
  Utility

  Tolerance

  Band

  	
   

  	
  Allowed

  Volume

  	
   

  	
  Mirant

  	
   

  	
  PG&E

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Gas Volume
  subject to Penalty

  
	
  Mirant

  	
   

  	
  PG&E

  	
   

  	
  Total

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Both over
  tolerance band

  	
   

  	
  -16000

  	
   

  	
  -12.59

  	
  %

  	
  -5

  	
  %

  	
  -71.50

  	
   

  	
  16.67

  	
  %

  	
  -9.64

  	
  %

  	
  -7000

  	
   

  	
  -3850

  	
   

  	
  -10650

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  One party over

  	
   

  	
  -12000

  	
   

  	
  -8.39

  	
  %

  	
  -5

  	
  %

  	
  -71.50

  	
   

  	
  -16.67

  	
  %

  	
  -2.41

  	
  %

  	
  -4850

  	
   

  	
  0

  	
   

  	
  -4850

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
   

  	
   

  
	
  Parties in opposite
  positions

  	
   

  	
  10000

  	
   

  	
  9.09

  	
  %

  	
  5

  	
  %

  	
  5500

  	
   

  	
  -20.00

  	
  %

  	
  33.33

  	
  %

  	
  0

  	
   

  	
  4500

  	
   

  	
  4500

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  

 

83

 

EXHIBIT D

NOTICES

 

	
  Mirant

  	
   

  	
  PG&E

  
	
   

  	
   

  	
   

  
	
  NOTICES:

  	
   

  	
  NOTICES:

  
	
  1155
  Perimeter Center W

  	
   

  	
  P.O. Box
  770000, MCN12E

  
	
  Atlanta, GA
  30338-5416

  	
   

  	
  San
  Francisco, CA 94177

  
	
  Attention:
  Legal

  	
   

  	
  Attention:
  Director, Power Contracts

  
	
  Phone:
  678.579.6900

  	
   

  	
  Phone:
  415.973.0070

  
	
  Facsimile:
  678.579.5988

  	
   

  	
  Facsimile:
  415.973.9176

  
	
   

  	
   

  	
   

  
	
  PAYMENT:

  	
   

  	
  PAYMENT:

  
	
  Bank of
  America, N.A.

  	
   

  	
  By Wire
  Transfer:

  
	
  ABA #
  11000012

  	
   

  	
  Mellon Trust
  of New England, N.A.

  
	
  Account
  Number 3751003269

  	
   

  	
  Account
  Title: PG&E

  
	
   

  	
   

  	
  Account
  Number: 059994

  
	
   

  	
   

  	
  ABA Number:
  011001234

  
	
   

  	
   

  	
   

  
	
  CREDIT:

  	
   

  	
  CREDIT:

  
	
  Attention:
  Credit Department

  	
   

  	
  Attention:
  Credit Department

  
	
  Phone:
  678.579.3061

  	
   

  	
  Phone:
  415.972.5244

  
	
  Facsimile:
  678.579.5823

  	
   

  	
  Facsimile:
  415.973.7301

  
	
   

  	
   

  	
   

  
	
  SCHEDULING:

  	
   

  	
  SCHEDULING:

  
	
  24 Hour
  Desk: 678.579.3100

  	
   

  	
  Day Ahead Desk:
  415.973.6222

  
	
  24 Hour Desk
  Fax: 678.579.5541

  	
   

  	
  24 Hour
  Desk: 415.973.7900

  
	
   

  	
   

  	
  24 Hour Fax:
  415.972.5340

  

 

84

 

EXHIBIT E

FORM OF LETTER OF CREDIT

ISSUING BANK LETTERHEAD

ADDRESS

 

	
  Issuing
  Bank:

  	
  [insert
  name

  
	
   

  	
    Insert address]

  
	
   

  	
   

  
	
  Date:

  	
  [insert
  date]

  
	
   

  
	
  Irrevocable
  Standby Letter of Credit Number: [insert number]

  	
   

  
	
   

  	
   

  
	
  Beneficiary:

  	
   

  
	
   

  
	
  Applicant:
  [insert name

  	
   

  
	
   

  	
  insert
  address]

  
	
  Advising
  Bank:

  	
  [insert
  name

  
	
   

  	
  insert
  address

  	
  (if
  applicable)]

  
	
   

  	
   

  
	
  Confirming
  Bank:

  	
  [insert
  name

  
	
   

  	
  Insert
  address 

  
	
   

  	
  (if
  applicable)]

  
						

 

At
the request of [insert name of Applicant] and for the account of [insert name
of account party which may be the same as Applicant] (the “Account Party”), We,
[insert name of Issuing Bank], hereby issue our irrevocable standby letter of
credit (“Letter of Credit”), Number [insert number] in your favor available for
draw in the amount of United States Dollars [spell out the amount followed by
(US$xxxxxxxx.xx)] (hereinafter, as may be reduced from time to time in
accordance with the provisions hereof, the (“Stated Amount”)), effective
immediately and expiring at our office at the address indicated above with our
close of business at 5:00 PM [insert City] time on [insert date] (“Expiration
Date”) unless terminated earlier in accordance with the provisions hereof.

 

Funds
under this Letter of Credit will be made available to you by payment against
presentation of the following documents:

 

1.                    Your drawing request marked “drawn under
[insert name of Issuing Bank], Letter of Credit Number [insert number], dated [insert
date]”;

 

AND

 

2.              A Beneficiary Certificate purportedly signed by an
authorized representative of the [insert name of Beneficiary] stating either:

 

85

 

(i)  “This
Letter of Credit will expire in twenty (20) calendar days or less and [insert
name of Account Party] has not provided alternate security acceptable to
[insert name of Beneficiary] and the amount being drawn of United States
Dollars [spell out the amount followed by (US$xxxxxxxx.xx)] does not exceed the
amount of security that [insert name of Account Party] is required to post to
[insert name of Beneficiary] under the terms of that certain Power Purchase and
Sale Agreement (First Wraparound Agreement) by and among Mirant Delta, LLC and
Mirant Potrero, LLC and Pacific Gas and Electric Company, dated December     ,
2004”;

 

OR

 

(ii)  “The
amount of the accompanying drawing request represents the amount owed by
[insert name of Applicant] to [insert name of Beneficiary] in accordance with
the terms of that certain Power Purchase and Sale Agreement (First Wraparound
Agreement) by and among Mirant Delta, LLC and Mirant Potrero, LLC and Pacific
Gas and Electric Company, dated December      ,
2004, which amount was not paid when due, and such failure to pay was not
remedied within the applicable cure period and the amount owed remains unpaid.”

 

Special
Conditions:

 

1.   Partial
drawing(s) are permitted.

 

2.   This
Letter of Credit shall terminate upon the earlier of:

 

(i)  THE
MAKING BY YOU OF THE FINAL DRAWING AVAILABLE TO BE MADE
HEREUNDER;

 

(ii) THE SURRENDER OF THIS ORIGINAL LETTER OF CREDIT
ACCOMPANIED BY YOUR LETTER

ACKNOWLEDGING TERMINATION
OF THIS LETTER OF CREDIT; AND

 

(iii)THE EXPIRATION DATE.

 

3.              All banking charges
associated with this Letter of Credit are for the account of the Applicant.

 

4.              This Letter of
Credit is not transferable.

 

5.              Each drawing
request honored by us shall reduce the Stated Amount by the amount honored.

 

We
hereby engage with you that drawing requests drawn under and in compliance with
the terms of this Letter of Credit will be duly honored if drawn and presented
for payment at any time before the close of business [Time], Eastern Prevailing
Time at our counters located at [address] on or before the Expiration Date or
in the event of Force Majeure, as defined under Article 17 of the Uniform
Customs and Practice for Documentary Credits (1993 Revision) International
Chamber of Commerce Publication No. 500 (“UCP”), that interrupts our business,
within fifteen (15) days after resumption of our business, whichever is later.

 

86

 

Except as otherwise stated herein, this credit is subject to the UCP
and, with respect to matters not so covered, this Letter of Credit is subject
to and governed by the laws of the State of New York.

 

If
you have any questions regarding this Letter of Credit, please call [Telephone
No.] or write to the attention of [Insert Department name and address] citing
the Letter of Credit number quoted above.

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized
  Signature 

  	
   

  
	
  Name:
  

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized
  Signature

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
						

 

87

 

Exhibit F - Payment and Invoicing Estimated Timeline for RMR and Market
Payments

 

Trade Month: T to  T+30

 

	
  T - T+30

  	
   

  	
  January

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  T+30 - T+60

  	
   

  	
  February

  	
   

  	
  T+40

  Est RMR
  Invoice

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  T+60

  Revised EST
  RMR Invoice

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  T+60 - T+90

  	
   

  	
  March

  	
   

  	
  T+65

  RMR
  Settlement for Trade Month T to T+30 

  PG&E
  pays Mirant:

  Monthly Option Payment (Condition 2 Rates), Sect 12.1(1) (a) &
  (b)

  Variable Costs (Schedule C) for ‘market path’

  and fuel charges, Sect 12.1 (2) (d) & (e)

  Schedule G Sect 12.2 & Modified Schedule G Sect 12.3

  Make Whole RMR, Sect 25.1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Mirant
  credits PG&E:

  Monthly Option Payment (Condition 1 Rates), Sect 12.4(1)

  Variable Costs (Schedule C) for ‘contract path’

  Incl ISO fuel charges, Sect 12.4 (5) & (6)

  Gas Reimbursement, Sect 12.4(7)

  Schedule D charges for Startups, Sect 12.4(8)

  Payment for fuel burned to create steam for Pittsburg 7, Sect
  12.4(11)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  T+70

  Est RMR
  Invoice for trade month T+30 to T+60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  T+90

  Revised Est
  RMR Invoice for trade month T+30 to T+40

  Preliminary
  GMC and Market Invoice [Mirant to PG&E]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  T+90 - T+120

  	
   

  	
  April

  	
   

  	
  T+95

  RMR
  Settlement for Trade Month T+30 to T+60 

  PG&E
  pays Mirant:

  Monthly Option Payment (Condition 2 Rates) Sect 12.1(1) (a) & (b)

  Variable Costs (Schedule C) for ‘market path’ excl fuel charges, Sect
  12.1(2) (d) & (e)

  Schedule G (Sect 12.2) & Modified Schedule G Sect 12.3 Make Whole
  RMR, Sect. 25.1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Mirant
  credits PG&E:

  Monthly Option Payment (Condition 2 Rates), Sect 12.4(1)

  Variable Costs (Schedule C) for ‘contract path’ and ISO fuel charges,
  Sect 12.4(5) & (6)

  Gas Reimbursement, Sect 12.4(7)

  Schedule D charges for Startups, Sect 12.4(8)

  Payment for fuel burned to create steam for Pittsburg 7, Sect
  12.4(11)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Market
  Settlement for Trade Month T to T+30 (Preliminary) 

  PG&E pays Mirant:

  Energy dispatch for Reg down Ancillary Service, Sect 12.1 (1) (c)

  Energy dispatch for Supplemental Energy Dec Bids, Sect 12.1 (1) (d)

  UDP Sect 7.4

  Delta Dispatch Mitigation Fees, Sect 8

  Schedule G for Must Offer, Sect 10

  Gas for UDP Sect 11.7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Mirant credits PG&E:

  Ancillary Services capacity amended by the ISO, Sect 12.4 (2)

  Ancillary Services Energy, Sect 12.4 (3)

  Energy from Supplemental Energy Inc. [ILLEGIBLE] Sect 12.4(4)

  Minimum Load Cost Compensation Sect 12.4 (9)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  T+105

  Market Settlement for T to T+30 [Final]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  T+120 - T+150

  	
   

  	
  May

  	
   

  	
  T+125

  Same as T+95, based on actuals

  RMR Settlement for T+60 to T+90

  Market Settlement for T+30 to T+60

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  T+135

  Revised Adj Invoice
  for T to T+30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  T+140

  Revised Adj
  Settlement for T to T+30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  T+150 &
  above

  	
   

  	
  June

  	
   

  	
  T+155

  RMR Settlement for T+90 to T+120

  Market Settlement for T+60 to T+90

  True ups for T to T+30

  

 

88

 

EXHIBIT G - ESTIMATED NET EXPOSURE

 

Assuming Condition 1 Term (energy
delivery) starts on February 1, 2005

Calculation of Net Exposure
based on definition in PPA and does not necessarily reflect expected settlement
amounts

For example, Gas Exposure may
have $0 being settled, as it is only a potential exposure, whereas gas
transportation will get settled but is not included in the Net Exposure calculation.

 

	
  Estimated
  Net Exposure on February 10, 2005

  
	
  1. RMR
  Exposure

  	
   

  	
  $

  	
   

  	
   

  	
  1a - no past
  exposure

  
	
   

  	
   

  	
  $

  	
  3,500,000

  	
   

  	
  1b - Current
  month - PG&E will owe Mirant - based on 50% Fixed Option Payment Factor and
  Surcharge Payment Factor, but subject to change

  
	
   

  	
   

  	
  $

  	
  3,500,000

  	
   

  	
  1b - Prompt
  month - PG&E will owe Mirant - based on 50% Fixed Option Payment Factor
  and Surcharge Payment Factor, but subject to change

  
	
   

  	
   

  	
  $

  	
  (2,320,718)

  	
   

  	
  1c -
  Estimated as 966 MW * 28 days in Feb * 24 h/day * 5%* 11 MMBtu/MWh * $6.50/MMBtu
  - Mirant will owe PG&E

  
	
   

  	
   

  	
  $

  	
  (2,569,367)

  	
   

  	
  1c -
  Estimated as 966 MW * 31 days in March * 24 h/day * 5%* 11 MMBtu/MWh * $6.50/MMBtu
  - Mirant will owe PG&E

  
	
   

  	
   

  	
   

  	
   

  	
  use last published NGI Bidweek Spot Gas Prices, California, PG&E Citygate
  Average; assume 5% capacity factor until actual data available

  
	
  2. Market
  Exposure

  	
   

  	
  $

  	
  (3,750,000)

  	
   

  	
  estimate of
  $1.875 million per month for current and prompt month due to no data and no
  past exposure - Mirant will owe PG&E

  
	
  3. Gas
  Exposure

  	
   

  	
  $

  	
  (3,173,923)

  	
   

  	
  Estimated as
  (-1) * 160,097 MDQ * 5% * 61 days * $6.50/MMBtu, but will use updated MDQs if/when
  available - Mirant potentially owes PG&E 

  
	
   

  	
   

  	
   

  	
   

  	
  MDQ based on Pittsburg 7 and Contra Costa 6; use last published NGI
  monthly index for PG&E Citygate just like in 1c

  
	
  NET
  EXPOSURE

  	
   

  	
  $

  	
  (4,814,008)

  	
   

  	
  PG&E
  exposed to Mirant

  

 

	
  Estimated
  Net Exposure on March 10, 2005

  
	
  1. RMR
  Exposure

  	
   

  	
  $

  	
  1,179,282

  	
   

  	
  1a - to be
  based on Est RMR invoice - number here based on assumption of 5% contract
  path in February - PG&E owes Mirant

  
	
   

  	
   

  	
  $

  	
  3,500,000

  	
   

  	
  1b - Current
  month - PG&E will owe Mirant - based on 50% Fixed Option Payment Factor
  and Surcharge Payment Factor, but subject to change

  
	
   

  	
   

  	
  $

  	
  3,500,000

  	
   

  	
  1b - Prompt
  month - PG&E will owe Mirant - based on 50% Fixed Option Payment Factor
  and Surcharge Payment Factor, but subject to change

  
	
   

  	
   

  	
  $

  	
  (2,569,367)

  	
   

  	
  1c -
  Estimated as 966 MW * 31 days in March * 24 h/day * 5% * 11 MMBtu/MWh * $6.50/MMBtu
  - Mirant will owe PG&E

  
	
   

  	
   

  	
  $

  	
  (2,486,484)

  	
   

  	
  1c -
  Estimated as 966 MW * 30 days in April * 24 h/day * 5% * 11 MMBtu/MWh * $6.50/MMBtu
  - Mirant will owe PG&E

  
	
   

  	
   

  	
   

  	
   

  	
  use last published NGI Bidweek Spot Gas Prices, California, PG&E Citygate
  Average; assume 5% capacity factor until actual data available 

  
	
   

  	
   

  	
   

  	
   

  	
  for 1a and 1c, if Mirant has information on % contract path in
  February and PG&E validates, use that % instead of 5%

  
	
  2. Market
  Exposure

  	
   

  	
  $

  	
  (5,625,000)

  	
   

  	
  estimate of
  $1.875 million per month * 3 for previous, current, and prompt month due to
  no data and no past exposure - Mirant will owe PG&E

  
	
   

  	
   

  	
   

  	
   

  	
  if Mirant and/or PG&E are able to roughly estimate a market
  payment for February and agree, could multiply that by 3 instead

  
	
  3. Gas
  Exposure

  	
   

  	
  $

  	
  (3,173,923)

  	
   

  	
  Estimated as
  (-1) * 160,097 MDQ * 5% * 61 days * $6.50/MMBtu, but will use updated MDQs if/when
  available - Mirant potentially owes PG&E 

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  MDQ based on Pittsburg 7 and Contra Costa 6; use last published NGI
  monthly index to PG&E Citygate just like in 1c

  
	
  NET
  EXPOSURE

  	
   

  	
  $

  	
  (5,576,492)

  	
   

  	
  PG&E
  exposed to Mirant

  

 

	
  Estimated
  Net Exposure on April 10, 2005

  
	
  1. RMR
  Exposure

  	
   

  	
  $

  	
  930,633

  	
   

  	
  1a - to be
  based on Est RMR invoice - number here based on assumption of 5% contract
  path in March - PG&E owes Mirant

  
	
   

  	
   

  	
  $

  	
  3,500,000

  	
   

  	
  1b - Current
  month - PG&E will owe Mirant - based on 50% Fixed Option Payment Factor
  and Surcharge Payment Factor, but subject to change

  
	
   

  	
   

  	
  $

  	
  3,500,000

  	
   

  	
  1b - Prompt
  month - PG&E will owe Mirant - based on 50% Fixed Option Payment Factor
  and Surcharge Payment Factor, but subject to change

  
	
   

  	
   

  	
  $

  	
  (2,486,484)

  	
   

  	
  1c -
  Estimated as 966 MW * 30 days in April * 24 h/day* 5% * 11 MMBtu/MWh * $6.50/MMBtu
  - Mirant will owe PG&E

  
	
   

  	
   

  	
  $

  	
  (2,569,367)

  	
   

  	
  1c -
  Estimated as 966 MW * 31 days in May * 24 h/day * 5% * 11 MMBtu/MWh * $6.50/MMBtu
  Mirant will owe PG&E

  
	
   

  	
   

  	
   

  	
   

  	
  use last published NGI Bidweek Spot Gas Prices, California, PG&E Citygate
  Average

  
	
   

  	
   

  	
   

  	
   

  	
  for 1a and 1c, use latest available % contract path, based on either
  Feb or March, instead of 5%

  
	
  2. Market
  Exposure

  	
   

  	
  $

  	
  (5,625,000)

  	
   

  	
  estimate of
  $1.875 million per month * 3 for previous, current, and prompt month due to
  no data and no past exposure - Mirant will owe PG&E

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  if Mirant and/or PG&E are able to roughly estimate a market
  payment for February or March and agree, could multiply that by 3

  
	
  3. Gas
  Exposure

  	
   

  	
  $

  	
  (3,173,923)

  	
   

  	
  Estimated as
  (-1) * 160,097 MDQ * 5% * 61 days * $6.50/MMBtu, but will use updated MDQs if/when
  available - Mirant potentially owes PG&E 

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  MDQ based on Pittsburg 7 and Contra Costa 6; use last published NGI
  monthly index for PG&E Citygate just like in 1c

  
	
  NET
  EXPOSURE

  	
   

  	
  $

  	
  (5,924,141)

  	
   

  	
  PG&E
  exposed to Mirant

  

 

	
  Estimated
  Net Exposure on May 10, 2005

  
	
  1. RMR
  Exposure

  	
   

  	
  $

  	
  1,013,516

  	
   

  	
  1a - to be
  based on Est RMR invoice - number here based on assumption of 5% contract
  path in April - PG&E owes Mirant

  
	
   

  	
   

  	
  $

  	
  3,500,000

  	
   

  	
  1b - Current
  month - PG&E will owe Mirant - based on 50% Fixed Option Payment Factor
  and Surcharge Payment Factor, but subject to change

  
	
   

  	
   

  	
  $

  	
  3,500,000

  	
   

  	
  1b - Prompt
  month - PG&E will owe Mirant - based on 50% Fixed Option Payment Factor
  and Surcharge Payment Factor, but subject to change

  
	
   

  	
   

  	
  $

  	
  (2,569,367)

  	
   

  	
  1c -
  Estimated as 966 MW * 31 days in May * 24 h/day * 5% * 11 MMBtu/MWh * $6.50/MMBtu
  - Mirant will owe PG&E

  
	
   

  	
   

  	
  $

  	
  (2,486,484)

  	
   

  	
  1c -
  Estimated as 966 MW * 30 days in June * 24 h/day * 5% * 11 MMBtu/MWh * $6.50/MMBtu
  - Mirant will owe PG&E

  
	
   

  	
   

  	
   

  	
   

  	
  use last published NGI Bidweek Spot Gas Prices, California, PG&E Citygate
  Average

  
	
   

  	
   

  	
   

  	
   

  	
  for 1a and 1c, use latest available % contract path, based on either
  March or April, instead of 5%

  
	
  2. Market
  Exposure

  	
   

  	
  $

  	
  (5,625,000)

  	
   

  	
  based on Preliminary
  GMC and Market invoice for February (assumed here as $1.875 million),
  multiplied by 3

  
	
  3. Gas
  Exposure

  	
   

  	
  $

  	
  (3,173,923)

  	
   

  	
  Estimated as
  (-1) * 160,097 MDQ * 5% * 61 days * $6.50/MMBtu, but will use updated MDQs if/when
  available - Mirant potentially owes PG&E 

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  MDQ based on Pittsburg 7 and Contra Costa 6; use last published NGI
  monthly index for PG&E Citygate just like in 1c

  
	
  NET
  EXPOSURE

  	
   

  	
  $

  	
  (5,841,258)

  	
   

  	
  PG&E
  exposed to Mirant

  

 

89

POWER
PURCHASE AND SALE AGREEMENT

(SECOND WRAPAROUND
AGREEMENT)

 

by and among

 

MIRANT
DELTA, LLC

 

and

 

MIRANT
POTRERO, LLC

 

and

 

PACIFIC
GAS AND ELECTRIC COMPANY

 

 

January 13, 2005

 

 

TABLE
OF CONTENTS

 

	
  1.

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  TERM;
  CONDITIONS PRECEDENT; SURVIVAL

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  RMR
  AGREEMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  OPERATION
  OF THE FACILITY

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  CAPACITY;
  ENERGY; AND ANCILLARY SERVICES

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
  AVAILABILITY

  	
   

  
	
   

  	
   

  	
   

  
	
  7.

  	
  SCHEDULING
  AND DISPATCH

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  NOX
  LIMITATIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  9.

  	
  DELTA
  DISPATCH

  	
   

  
	
   

  	
   

  	
   

  
	
  10.

  	
  MUST
  OFFER/RUN

  	
   

  
	
   

  	
   

  	
   

  
	
  11.

  	
  GAS

  	
   

  
	
   

  	
   

  	
   

  
	
  12.

  	
  CHARGES

  	
   

  
	
   

  	
   

  	
   

  
	
  13.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  14.

  	
  EVENT OF DEFAULT AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  15.

  	
  BILLING AND PAYMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  16.

  	
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  
	
  17.

  	
  LIMITATION OF LIABILITY

  	
   

  
	
   

  	
   

  	
   

  
	
  18.

  	
  ASSIGNMENT; BINDING EFFECT

  	
   

  
	
   

  	
   

  	
   

  
	
  19.

  	
  CONFIDENTIALITY

  	
   

  
	
   

  	
   

  	
   

  
	
  20.

  	
  NOTICES

  	
   

  
	
   

  	
   

  	
   

  
	
  21.

  	
  SECURITY

  	
   

  
	
   

  	
   

  	
   

  
	
  22.

  	
  FORCE MAJEURE

  	
   

  
	
   

  	
   

  	
   

  
	
  23.

  	
  DISPUTE RESOLUTION

  	
   

  
	
   

  	
   

  	
   

  
	
  24. 

  	
  INSURANCE

  	
   

  
	
   

  	
   

  	
   

  
	
  25.

  	
  MATERIAL CHANGE(S)

  	
   

  
	
   

  	
   

  	
   

  
	
  26.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A: 2005 RMR FERC Settlement 

  	
   

  
	
   

  	
   

  
	
  EXHIBIT
  B: Examples of Applicability of
  Schedule G vs. Modified Schedule
  G

  	
   

  

 

2

 

	
  EXHIBIT C: OFO Penalties

  	
   

  
	
   

  	
   

  
	
  EXHIBIT D: Notices

  	
   

  
	
   

  	
   

  
	
  EXHIBIT E:
  Form of Letter of Credit

  	
   

  
	
   

  	
   

  
	
  EXHIBIT
  F: Payment and Invoicing Estimated Timeline for RMR and Market Payments

  	
   

  
	
   

  	
   

  
	
  EXHIBIT G: Estimated
  Net Exposure

  	
   

  

 

3

 

POWER
PURCHASE AND SALE AGREEMENT

 

THIS
POWER PURCHASE AND SALE AGREEMENT (the “Agreement”) is
entered into as of the 13th Day of January, 2005, (the “Agreement Date”), by
and among Mirant Delta, LLC, a Delaware limited liability company (“Mirant
Delta”), Mirant Potrero, LLC, a Delaware limited liability company (“Mirant
Potrero”, together with Mirant Delta, “Mirant” or “Seller”), and Pacific Gas
and Electric Corporation, a California corporation (“PG&E” or “Buyer”).
Seller and Buyer may be individually referred to herein as a “Party” and,
collectively, as the “Parties.”

 

NOW,
THEREFORE, the Parties hereby agree as follows:

 

1.             DEFINITIONS

 

All capitalized
terms used but not otherwise defined herein shall have the meanings ascribed in
the RMR Agreements and the Tariff. The following terms shall have the meanings
set forth below.

 

“Affiliate”
means any Person that directly or indirectly controls, is controlled by or is
under common control with the Person in question.

 

“Amendment 60”
has the meaning set forth in Section 10.1. 

 

“Ancillary
Services” has the meaning given in the RMR Agreements. 

 

“ Availability
Notice” has the meaning set forth in Section 7.2.

 

“Bankruptcy”
means with respect to a Person that such Person (i) ceases doing business as a
going concern, files a voluntary petition in bankruptcy or is adjudicated bankrupt
or insolvent, or files any petition or answer seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the present or any future federal bankruptcy code or any other
present or future applicable federal, state or other Governmental Rule, or
seeks or consents to or acquiesces in the appointment of any trustee, receiver,
custodian or liquidator of said Person or of all or any substantial part of its
properties, or makes an assignment for the benefit of creditors; or (ii) a
proceeding is initiated against the Person seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the present or any future federal bankruptcy code or any other Governmental
Rule and, such proceeding, as described in this Section 1.1(4)(ii), is not
dismissed within ninety (90) Days after the commencement, or any trustee,
receiver, custodian or liquidator of said Person or of all or any substantial
part of its properties is appointed without the consent or acquiescence of said
Person, and such appointment is not vacated or stayed on appeal or otherwise
within ninety

 

4

 

 (90) Days after the appointment, or, within
ninety (90) Days after the expiration of any such stay, has not been vacated.

 

“Bankruptcy Court”
has the meaning set forth in Section 14.1 (2).

 

“Btu” means
British Thermal Unit which is the standard Unit for measuring the quantity of
heat energy, such as the heat content of Fuel.

 

“Bubble”
has the meaning given in Section 8(2).

 

“Business Day”
means a Day other than Saturday, Sunday, a NERC holiday or a Day that is
authorized as a holiday by banks in New York, New York.

 

“Buyer’s
Monthly Charges” has the meaning given in Section 12.1(1). 

 

“Buyer’s
Monthly Credits” has the meaning set forth in Section 12.4.

 

“Buyer’s
PG&E Citygate Pool” has the meaning given in Section 11.1(2) and
applies only to Seller’s provision of Gas to the Non-RMR Delta Units.

 

“Calculation
Date” means any Business Day on or before the fifteenth (15th)
Day of a month during the “Condition 1” Term on which Seller makes the
determinations referred to in Article 21 of this Agreement.

 

“Claims”
means all claims or actions filed by a Person, including fines or penalties,
whether groundless, false or fraudulent, that, relate to the subject matter of
an indemnity, and the resulting losses, damages, expenses, attorney’s fees and
court costs, whether incurred by settlement or otherwise, and whether such
claims or actions are filed prior to or after the expiration or termination of
this Agreement.

 

“Collateral
Requirement” has the meaning set forth in Section 21.2.

 

“Commercial
Interest Rate” means a rate equal to the per annum rate of interest equal
to the “Monthly” Federal Funds Rate (as reset on a monthly basis and based on
the latest month for which such rate is available) as reported in Federal
Reserve Bank Publication H.15-519, or any successor publication, published by
the Board of Governors of the Federal Reserve System.

 

“Condition 1’ Term”
means the period commencing pursuant to Section 2.1 through and including hour
ending 2400 PPT on the Termination Date.

 

“Contract Term”
means the term of this Agreement beginning on the Agreement Date and ending on
the Termination Date.

 

5

 

“Contra Costa
Facility” means the natural gas fueled electric generating facility owned
by Seller in Contra Costa County, California, including all equipment used to
produce the Maximum Net Dependable Capacity, Energy and Ancillary Services,
buildings and facilities, facility control systems, fire protection systems,
potable, process, and sanitary water supply, treatment, storage, disposal, and
transfer systems, the Electrical Interconnection Facilities, the Gas
Interconnection Facilities and all related equipment necessary to accept Fuel
at the Gas Delivery Point including storage and transfer systems, and ingress
and egress to the Facility Site.

 

“CPUC”
means the California Public Utilities Commission or any successor agency.

 

“Credit Rating”
means with respect to a Party or any entity, on any date of determination, the
respective ratings then assigned to such Party’s or entity’s unsecured, senior
long-term debt (not supported by third party credit enhancement). In the event
of any inconsistency in ratings by Moody’s and S&P (a “split rating”), the
lower assigned rating shall control. If such entity does not have an unsecured,
senior long-term debt rating by either S&P or Moody’s, then “Credit Rating”
shall mean the general corporate credit rating or long-term issuer rating, as
applicable, assigned by such rating agency to such entity.

 

“Damages”
has the meaning set forth in Section 14.2 (2).

 

“Day” means
the 24-hour period beginning and ending at 12:00 midnight PPT.

 

“Defaulting
Party” has the meaning set forth in Section 14.1(1).

 

“Delivery Point”
means the ‘Delivery Point’ specified for each RMR Unit in the applicable
Schedule A, part 4, of the RMR Agreements.

 

“Delta Units”
or “Delta RMR Units” means the electric generating Units owned by Mirant
Delta and located in Pittsburg, California, known as Pittsburg 5 and Pittsburg
6 and the electric generating Unit owned by Mirant Delta and located in
Antioch, California, known as Contra Costa 7; provided that a Delta Unit shall
be a Delta RMR Unit only as long as it remains subject to the applicable RMR
Agreement.

 

“Dispatch
Notice” has the meaning set forth in RMR Agreements.

 

“EFO” has
the meaning given in the Gas Transporter’s tariff.

 

“Electrical
Interconnection Agreements” mean the interconnection agreement(s) between
Seller and the System Operator providing for the maintenance and operation of
the Electrical Interconnection Facilities.

 

6

 

“Electrical
Interconnection Facilities’’ means the equipment necessary to connect the
Units to the System Operator’s 115kV and 230 kV transmission system.

 

“Energy”
has the meaning given in the RMR Agreements.

 

“Energy Meters”
means the System Operator’s revenue meters identified in Section 5 of Schedules
A of the RMR Agreements.

 

“Event of
Default” has the meaning set forth in Section 14.1(1).

 

“Exhibit”
means any exhibit attached to this Agreement, which is hereby incorporated into
this Agreement by reference.

 

“Facility(ies)”
means the Contra Costa Facility, the Pittsburg Facility or the Potrero
Facility, as applicable.

 

“Facility Site”
means the parcel of land on which the applicable Facility is located.

 

“FERC”
means the Federal Energy Regulatory Commission, or its successor.

 

 “Filing” has the meaning set forth in
Section 14.1(2).

 

“Force Majeure
Event” has the meaning given in the applicable RMR Agreement(s).

 

“Forced Outage”
has the meaning ascribed in the RMR Agreements.

 

“Fuel”
means Gas and Distillate Fuel and RMR Fuel and Non-RMR Fuel, as applicable.

 

“GAAP”
means Generally Accepted Accounting Principles.

 

“Gas” means
natural gas or any mixture of hydrocarbon gases or hydrocarbon gases and
non-combustible gases consisting predominantly of methane.

 

“Gas Delivery
Point” means the point of interconnection between the Gas Transporter’s
pipeline and the applicable Facility.

 

“Gas Exposure”
has the meaning set forth in Section 21.3.

 

“Gas Imbalance
Charges” means any pipeline scheduling, imbalance, cashout, operational
flow order or other similar pipeline penalties or charges assessed by Gas
Transporter resulting from failure to communicate to the pipeline,

 

7

 

nominations, nomination
changes or failure to adjust nominations to comply with Gas Transporter’s
tariffs and imbalance tolerance limits.

 

“Gas Index”  means, for a given Trading Day the two (2)
Day rolling average simple average of the Gas Daily, PG&E Citygate Index
(midpoint) and the NGl Daily Gas Price Index, PG&E Citygate (average) as
shown in Table C1-8 of Schedules C of the RMR Agreements.

 

“Gas Interconnection Facilities’’
means the meter owned and operated by the Gas Transporter, which is located at
the applicable Facility, and other equipment necessary to connect the Facility
with the Gas Transporter’s transportation system.

 

“Gas Meter” means
the Gas the meter owned by the Gas Transporter and located at the applicable
Gas Delivery Point.

 

‘‘Gas Tariff” has
the meaning given in Section 11.3.

 

“Gas Transmission
Service Agreement” or “GTSA” means the interconnection agreement
between Seller and the Gas Transporter providing for the operation and
maintenance of the Gas Interconnection Facilities.

 

“Gas Transporter”
means Pacific Gas & Electric Company or its successor.

 

 “GSM” has the meaning given in Section
11.5(1).

 

“Generator Imbalance
Fees” means any imbalance fees, penalties or other similar fees, costs or
penalties imposed by any System Operator other than Uninstructed Deviation Penalties.

 

“Global Settlement”
shall mean the Settlement and Release of Claims Agreement by and among certain
entities, including Seller and Buyer, dated January 13, 2005, to which this
Agreement is attached and made a part thereof as Exhibit B.

 

“Good Industry
Practice” has the meaning given in the RMR Agreements.

 

“Governmental
Authority” means any federal, state or local governmental body, any
governmental, military, regulatory or administrative agency, commission, body
or other authority exercising or entitled to exercise any administrative,
executive, judicial, legislative, policy, regulatory or taxing authority,
jurisdiction or power, any court or governmental tribunal, or any applicable
independent system operator, regional transmission organization, regional power
pool, reliability council or other regional entity performing similar
functions.

 

“Governmental Rule”
means any law, rule, regulation, ordinance, order, code, permit,
interpretation, judgment, decree, directive, guideline, policy or similar

 

8

 

form of decision
of any Governmental Authority having the effect and force of law.

 

“Guarantee”
means the instrument or agreement pursuant to which a Guarantor provides credit
support for the obligations of a Party; provided, however, that such instrument
or agreement shall be in a form reasonably acceptable to the Person receiving
such guarantee and extending credit as a result thereof.

 

“Guarantor”
means a Person that has a Credit Rating by S&P and Moody’s of at least BBB-
by S&P and Baa3 by Moody’s and that is acceptable, as determined in a
commercially reasonable manner, to the Party who would be protected by the
Guarantee issued from such Person.

 

“ISO” means
the California Independent System Operator Corporation or its successor.

 

“kW” means
kilowatt.

 

“kWh” means
kilowatt-hour.

 

“Letter of
Credit” means an unconditional, irrevocable, non-transferable, standby
letter of credit naming a Party as the sole beneficiary, issued by a United
States commercial bank, a United States financial institution, or the United States
branch of a foreign commercial bank, with a minimum of one billion U. S.
dollars capital and surplus, in each case with a Credit Rating of at least A by
S&P and A2 by Moody’s, in the form attached hereto as Exhibit E. The
Secured Party shall value the Letter of Credit at its Stated Amount (as defined
in the Letter of Credit) for purposes of securing the Posting Party’s
Collateral Requirement as long as the Issuing Bank (as defined in the Letter of
Credit) maintains a Credit Rating of at least A by S&P and A2 by Moody’s.
If at any time the Issuing Bank does not have a Credit Rating of at least A by
S&P and A2 by Moody’s, the Secured Party shall value the Letter of Credit
issued by such entity at zero ($ 0).

 

“Long-term Planned
Outage” has the meaning ascribed in the RMR Agreements.

 

“MMBtu”
means one million British Thermal Units. 

 

“Market
Exposure” has the meaning set forth in Section 21.3.

 

“Market Payment”
has the meaning set for in Section 15.1(1).

 

“Maximum Net
Dependable Capacity” has the meaning ascribed in the RMR Agreements.

 

9

 

“Moody’s”
means Moody’s Investor Services, Inc., or its successor. 

 

“Must Run
Dispatch” has the meaning given in Section 10.1 . 

 

“MW” means
a megawatt. One MW is equal to 1,000 kW. 

 

“MWh” means
a megawatt-hour. One MWh is equal to 1,000 kWh. 

 

“NBAA” has
the meaning given in Section 11.1(3).

 

“Natural Gas
Service Agreement” or “NGSA” means the gas service agreement between
Seller and the Gas Transporter for the applicable Facility.

 

“Net Exposure”
has the meaning set forth in Section 21.3.

 

“Non-Conforming
Gas” has the meaning set forth in Section 11.3(2).

 

“Non-Defaulting
Party” has the meaning set forth in Section 11.1(l)(a). 

 

“Non-RMR Gas”
has the meaning given in Section 11.1(2).

 

“Non-RMR Unit
Gas Meters” has the meaning set forth in Section 11.1(4).

 

“Non-RMR Unit
MDO” has the meaning set forth in Section 11.5(1).

 

“Non-RMR Units”
has the meaning given in Section 7.1.

 

“Notification Time”
means 10:00 am PPT on any Calculation Date.

 

“OFO” has
the meaning given in the Gas Transporter’s tariff.

 

“Operational
Limitations ” means the limitations described in Sections 3 and 6 through
11 of Schedule A of the RMR Agreements.

 

“Pacific
Prevailing Time” or “PPT” means the prevailing time (i.e., Standard Time or Daylight Savings
Time) on any given Day in the Pacific time zone.

 

“Person”
means an individual, partnership, corporation, limited liability company,
association, trust, joint venture, unincorporated organization, Governmental
Authority, or other type of entity.

 

“Permit”
has the meaning given in Section 9.

 

“Pittsburg
Facility” means the natural gas fueled electric generating facility owned
by Seller in Contra Costa County, California, including all equipment used to

 

10

 

produce the
Maximum Net Dependable Capacity, Energy and Ancillary Services, buildings and
facilities, facility control systems, fire protection systems, potable,
process, and sanitary water supply, treatment, storage, disposal, and transfer
systems, the Electrical Interconnection Facilities, the Gas Interconnection
Facilities and all related equipment necessary to accept Fuel at the Gas
Delivery Point including storage and transfer systems, and ingress and egress
to the Facility Site.

 

“Planned
Maintenance Outage” means Long-term Planned Outages and any other planned
curtailment or outage at one or more RMR Units at the Facility for purpose of
performing maintenance on the RMR Units, as further described in Section 4.3.

 

“Posting Party”
has the meaning set forth in Section 21.1.

 

“Potrero
Facility” means the natural gas and distillate fueled electric generating
facility owned by Seller in San Francisco, California, including all equipment
used to produce the Maximum Net Dependable Capacity, Energy and Ancillary
Services, buildings and facilities, facility control systems, fire protection
systems, potable, process, and sanitary water supply, treatment, storage,
disposal, and transfer systems, the Electrical Interconnection Facilities, the
Gas Interconnection Facilities and all related equipment necessary to accept
Fuel at the Fuel Delivery Point including storage and transfer systems, and
ingress and egress to the Facility Site.

 

“Potrero Units”
or “Potrero RMR Units” means the electric generating Units owned by
Mirant Potrero and located in San Francisco, California, known as Potrero 3,
Potrero 4, Potrero 5 and Potrero 6; provided that a Potrero Unit shall be a
Potrero RMR Unit only as long as it remains subject to the applicable RMR
Agreement.

 

“RMR Agreements”
are (i) that certain Must-Run Service Agreement, dated June 1, 1999, between
MIRANT DELTA, LLC and CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION, as
may be in effect from time to time, pertaining to the facility commonly known
as the Pittsburg Power Plant (the “Pittsburg RMR Agreement”); (ii) that certain
Must-Run Service Agreement, dated June 1, 1999, between MIRANT DELTA, LLC and
CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION, as may be in effect from
time to time, pertaining to the facility commonly known as the Contra Costa
Power Plant (the “Contra Costa RMR Agreement”); and (iii) that certain Must-Run
Service Agreement, dated June 1, 1999, between MIRANT POTRERO, LLC and
CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION, as may be in effect from
time to time, pertaining to the facility commonly known as the Potrero Power
Plant (the “Potrero RMR Agreement”, together with the

 

11

 

Pittsburg RMR
Agreement and the Contra Costa RMR Agreement, the “RMR Agreements”).

 

“RMR Exposure”
has the meaning set forth in Section 21.3.

 

“RMR Gas”
has the meaning given in Section 11.1(1).

 

“RMR Payment”
has the meaning set for in Section 15.1(1).

 

“RMR Interest
Rate” means ‘Interest Rate’ as defined in the RMR Agreement.

 

“RMR Units”
means the Delta Units and Potrero Units, which have been designated as
Reliability Must-Run units pursuant to RMR Agreements between the ISO and
Mirant Delta, with respect to the Delta Units, and between Mirant Potrero and
the ISO, with respect to the Potrero Units; provided that such units remain, at
all times during the Contract Term, subject to the RMR Agreements.

 

“SC” or “Scheduling
Coordinator” has the meaning set forth in the Tariff.

 

“S&P” means
the Standard & Poor’s Ratings Group, a division of The McGraw-Hill
Companies, or its successor.

 

“Secured Party”
has the meaning set forth in Section 21.1.

 

“Security”
means a Letter of Credit or cash in the form of dollars of the United States of
America.

 

“Seller
Balancing Account” has the meaning set forth in Section 11.5(2)(A).

 

“Seller Monthly
Imbalance” has the meaning set forth in Section 11.5(2)(B).

 

“Settlement
Amount” means the net losses and costs, if any, expressed in U.S. dollars,
which such Non-Defaulting Party incurs as a result of the termination of this
Agreement including, at the Non-Defaulting Party’s option, all (i) net losses
and costs incurred by the Non-Defaulting Party to (a) purchase or sell, as
applicable, capacity, energy and ancillary services equally useful as the
Maximum Net Dependable Capacity, Energy and Ancillary Services purchased and
sold under this Agreement and (b) maintain, terminate, obtain or re-establish
any trading positions entered into by a Party to hedge its obligations under
this Agreement, and (ii) reasonable attorney’s fees incurred by the
Non-Defaulting Party in connection with the termination of this Agreement. If
Seller is the Non-Defaulting Party, (i) above shall include, but not be limited
to, all costs incurred such as the difference between what Seller would have
received under Condition 2” versus “Condition 1” as more fully described in
Article 12 until such time as the ISO allows Seller to switch to “Condition 2”.
If the calculation of the

 

12

 

Settlement Amount
results in a positive number, that positive number, the Settlement Amount,
shall he due to the Non-Defaulting Party from the Defaulting Party. If the
Non-Defaulting Party does not incur any net losses and costs as a result of the
termination of this Agreement, or if the calculation results in a negative
number, the Settlement Amount shall be deemed to be zero (0). In calculating a
Settlement Amount, the Non-Defaulting Party shall discount to present value (in
a commercially reasonable manner based on the Commercial Interest Rate for the
applicable period) any amount that would otherwise have been due at a later
date.

 

“Station Load”
means the power required by the auxiliary equipment necessary for the operation
of the Facility including, but not limited to, pumps, fans, etc.

 

“System
Operator” means California Independent System Operator Corporation or any
successor thereto that provides electric transmission services to support the
transmission of Energy or Ancillary Services from the Delivery Point.

 

“System
Operator’s Protocols” means the documents adopted by the System Operator,
as amended from time to time, that contain the scheduling, operating, planning,
reliability and settlement policies, rules, guidelines, procedures, standards
and criteria of the control area.

 

“Tariff” means
the ISO Conformed Tariff, as may be amended from time to time.

 

“Termination
Date” has the meaning set forth in Section 2.1. 

 

“Terminated RMR
Unit” has the meaning given in Section 2.1.

 

“Transmission
Ancillary Services” means those ancillary services that Buyer must purchase
from the System Operator as necessary to support the transmission of Energy or
Ancillary Services from the Delivery Point.

 

“UDPs” or “Uninstructed
Deviation Penalty(ies)” has the meaning set forth in the Tariff.

 

“Unit(s)”
has the meaning given in Section 7.1.

 

“2005 RMR FERC
Settlement” is the settlement that was filed by the Parties with FERC on
January 7, 2005, and is attached hereto as Exhibit A.

 

“2006-2008 RMR
FERC Settlement” is the settlement to be filed by the Parties with FERC in
a form substantially similar to Exhibit A, provided
that such settlement and its filing with FERC alternatively may
consist of the Parties taking alternative action, such as (i) filing a notice
with FERC, under the 2005 RMR

 

13

 

FERC Settlement
that extends the terms of the 2005 RMR FERC Settlement for the period from
January 1, 2006, through December 31, 2008, or (ii), if the Agreement does not
become effective until January 1, 2007, pursuant to Section 2.2.1 of the Global
Settlement, seeking authorization from FERC to extend the terms of the 2005 RMR
FERC Settlement from January 1, 2007, through December 31, 2008.

 

2.             TERM; CONDITIONS PRECEDENT; SURVIVAL

 

2.1          Term.

 

(1)           The
Contract Term with respect to each of the RMR Units shall commence on the
Agreement Date and shall continue through December 31, 2012; provided that if
the RMR Agreement for any RMR Unit is terminated or expires before December 31,
2012 (the “Terminated RMR Unit”), then this Agreement shall also terminate
automatically with respect to that Terminated RMR Unit subject only to the obligation
and liability described in Section 3(4) of this Agreement; and provided further
that if such Terminated RMR Unit is subsequently re-designated as a Reliability
Must Run Unit while the Contract Term is still in effect, the Terminated RMR
Unit shall not be subject to this Agreement. If an RMR Unit becomes a
Terminated RMR Unit, Seller shall, within thirty (30) Days of such termination,
file to remove the tariff sheets associated with such Terminated RMR Unit.  For each RMR Unit, the “Termination Date”
shall be the earlier of (a) midnight on December 31, 2012, (b) the date such
Unit becomes a Terminated RMR Unit as provided herein, or (c) the Termination
Date specified by the Non-Defaulting Party if there is an Event of
Default.  Upon the occurrence of a
Termination Date as a result of an Event of Default during the term of the 2006-2008
RMR FERC Settlement, Seller shall, within sixty (60) Days of such date, make a
new rate schedule filing with FERC as required by the RMR Agreements.

 

(2)           The
“Condition 1” Term shall commence on January 1, 2006. If the RMR Units are on “Condition
2” immediately prior to the “Condition 1” Term, then at the request of Buyer,
Seller shall request from the ISO, no later than December 1, 2005, a change of
status of the RMR Units to “Condition 1” effective on January 1, 2006. Seller shall
not change the designation of the RMR Units to “Condition 2” for the duration
of the Contract Term.

 

2.2          Conditions Precedent
to the Parties’ Performance.

 

Notwithstanding
any other provision of this Agreement, performance under this Agreement of any
obligation to provide or pay for the power purchase and sale arrangement shall
arise only upon the satisfaction of the following conditions:

 

(1)           Attainment
of the required approvals set forth in Section 2.4 of the Global Settlement and
no Termination Event shall have occurred as described in Section 2.8 of the
Global Settlement.

 

14

 

(2)           Seller
shall obtain on or before January 1, 2006, a waiver from the ISO through
December 31, 2012, with respect to (i) the ninety (90) Day notice requirement
for changing the status of the RMR Units back to “Condition 2” so that, upon
termination of this Agreement, the RMR Units will be able to perform under “Condition
2” on the first Day of the month following thirty (30) Days’ notice to the ISO
and (ii) the requirement that an RMR Unit must remain in its existing Condition
for at least twelve (12) months.

 

(3)           Buyer
shall obtain approval of this Agreement as set forth in Section 2.5 of the
Global Settlement. In the event such approval has not been obtained by November
1, 2005, either Party may terminate this Agreement upon written notice to the
other Party with no obligation or liability under this Agreement to the other
Party resulting from such termination.

 

(4)           The
Parties shall file the 2006-2008 RMR FERC Settlement on or before November 1, 2005.

 

2.3          Survival.

 

As of the
Termination Date, the Parties shall no longer be bound by the terms and
conditions hereof, except (i) to the extent necessary to enforce any rights and
the obligations of the Parties, including, but not limited to, payment
obligations, arising under this Agreement prior to such Termination Date; and
(ii) the obligations of the Parties hereunder with respect to confidentiality,
audit and indemnification shall survive any termination of this Agreement and
shall continue for a period of two (2) years following such Termination Date.

 

3.             RMR AGREEMENTS

 

(1)           Buyer
acknowledges and agrees that (a) its rights under this Agreement are subject to
the RMR Agreements, including rights and obligations of Seller and the ISO thereunder,
(b) Schedules A, B, C, and D of the RMR Agreements are subject to change annually
through Seller’s annual rate schedule revision filing with FERC required by the
RMR Agreements, and (c) Seller shall continue to operate the Non-RMR Units and neither
such operation nor such Non-RMR Units are subject to this Agreement, except as expressly
provided herein.

 

(2)           The
Parties shall file the 2006-2008 RMR FERC Settlement on or before November 1, 2005.

 

(3)           Seller
shall retain all rights and responsibilities under the RMR Agreements relating
to Capital Items and Repair, including, but not limited to, submission of
Capital Item reports showing proposed Capital Items, installation of Capital
Items, submission of Unplanned Repair Notices, making Repairs, and application

 

15

 

for recovery of Capital
Item and Repair costs through Surcharge Payments or ISO’s Repair Share.

 

(4)           If
an RMR Unit is Closed within six (6) months after the KMR Unit ceases to be
subject to the RMR Agreement as a result of termination, pursuant to Sections 2.2
(b) (ii), (iii), (iv) or (v) of the RMR Agreement, or because ISO does not
extend the term of the RMR Agreement under Section 2.1 (b) of the RMR
Agreements (the “RMR Termination”) and so long as Seller is entitled to receive
a Termination Fee, Buyer shall pay Seller, in accordance with the payment
schedule in the RMR Agreements, the difference between (a) the Termination Fee
calculated pursuant to Section 2.5 (b) of the RMR Agreement as if the Unit were
“Condition 2” at the time of the RMR Termination
and (b) any Termination Fee for a “Condition 1” Unit received from the ISO as a
result of the RMR Termination.

 

(5)           All
rights available to Seller, pursuant to the RMR Agreements, that are not
specifically addressed herein are expressly reserved by Seller and shall not be
affected hereby; provided that, Seller shall not have the right to sell any
portion of the Maximum Net Dependable Capacity, Energy, or Ancillary Services
from any RMR Unit to any third party, other than as provided in Section 5.2.

 

4.             OPERATION OF THE FACILITY

 

4.1          Permits.

 

Seller shall, at
its expense, acquire and maintain in effect during the Contract Term, from any
and all Governmental Authorities with jurisdiction over Seller or the
Facilities, all permits and approvals, in each case necessary for the
ownership, operation and maintenance of the Facilities in accordance with this
Agreement, the RMR Agreements, and all Governmental Rules. Seller shall be
responsible for, and bear all costs of, compliance with all of its permits.
Notwithstanding the foregoing, Buyer shall be responsible for all costs
associated with emissions credits that may be required for the operation of the
Facilities as dispatched by Buyer in excess of dispatches by the ISO.

 

4.2          Good Industry Practice.

 

Seller shall cause
the Facilities to be operated and maintained in accordance with Good Industry
Practice and in accordance with the terms and conditions of this Agreement and
the RMR Agreements.

 

4.3          Maintenance Outages.

 

Seller shall be
responsible for proper maintenance of all Units. Buyer and Seller shall make
commercially reasonable efforts, in cooperation with the ISO, to coordinate
planned outages such that Seller’s Planned Maintenance Outages do not overlap
with Buyer’s refueling outages at Diablo Canyon Nuclear Power Plant.

 

16

 

(1)           Schedule
of Planned Maintenance Outages.

 

(a)           Planned
Maintenance Outages for RMR Units shall be scheduled and performed in
accordance with Section 7.2 of the RMR Agreements. Seller shall not be
obligated to deliver Energy or Ancillary Services from an RMR Unit pursuant to
this Agreement during Planned Maintenance Outages affecting such RMR Unit.

 

(b)           Buyer
agrees that Seller must perform Planned Maintenance Outages at the RMR Units in
an effort to reduce and prevent Forced Outages and to maintain the efficiency
of the RMR Units. Such Planned Maintenance Outages include, but are not limited
to, the RMR Unit manufacturer’s recommended and required maintenance and any preventive
maintenance that maintains or improves the reliability of the RMR Unit. The
Planned Maintenance Outage schedule shall be based on (i) the RMR Unit
manufacturer’s equivalent start and runtime guidelines, (ii) Good Industry
Practice, (iii) the long-term service agreement for the RMR Units, (iv) the
actual dispatch of the RMR Units and (v) the RMR Unit’s point in the
maintenance cycle and the potential impacts to the Unit and costs if the
maintenance schedule is changed. On or before October 1 of each year of the
Contract Term, Seller shall provide to Buyer, in writing, its proposed schedule
of Planned Maintenance Outages for the following year in the Contract Term and
the reason for such Planned Maintenance Outages.

 

(c)           In
the event that the RMR Unit manufacturer issues a new technical bulletin, which
requires immediate maintenance to be performed, Seller shall notify Buyer of
the circumstances surrounding such maintenance and Seller will work together
with Buyer to schedule the maintenance outage notwithstanding the short notice
involved.

 

(2)           Duration
of Planned Maintenance Outages.  Seller
shall use its commercially reasonable efforts to complete any Planned
Maintenance Outage affecting an RMR Unit in a timely manner, with the express
goal of minimizing any adverse effect on Buyer’s ability to schedule power from
such Unit. During each Planned Maintenance Outage, Seller shall keep Buyer
apprised of the status and the expected duration of the Planned Maintenance
Outage.

 

(3)           Maintenance-related
Charges. If Seller is required to Start-up and operate an RMR Unit for
maintenance purposes, Seller and Buyer shall work together such that the
maintenance related start and operation can be completed when the Energy or Ancillary
Services from the RMR Unit is being dispatched by the Buyer or the ISO.  If the Seller and Buyer are unable to
complete the maintenance related Start-up and operation during a time when the
Buyer or the ISO has dispatched the RMR Unit, Seller

 

17

 

shall notify Buyer of the
date of the maintenance related start and operation at least two (2) Business
Days in advance. Buyer shall provide, at its expense, all Gas required for the
start and operation of the applicable RMR Unit and schedule the quantity of
Energy or Ancillary Services produced during such operation in a commercially
reasonable manner. Buyer shall receive all revenues associated with the sale of
Energy or Ancillary Services from the RMR Unit during the period of time the
RMR Unit is being operated for maintenance purposes.

 

4.4          Station
Load.

 

Seller shall be
responsible for Station Load at all times including during all Planned
Maintenance Outages and Forced Outages and during Start-up and Shutdown of an
RMR Unit, and any periods when an RMR Unit has not been dispatched.

 

4.5          Testing.

 

Seller shall be
entitled to conduct all tests described in Section 4.9 of the RMR Agreements.

 

4.6          Operating
Procedures.

 

As soon us
practicable following the Agreement Date, the Parties shall provide for a
method, or protocol, by which communication and data exchange takes place. This
protocol shall include the delivery of Gas to the Facility, notices regarding
the availability of the Facility, exchanges of schedules, and identification of
and contact information for key personnel.

 

5.             CAPACITY; ENERGY; AND ANCILLARY SERVICES

 

5.1          Maximum
Net Dependable Capacity; Energy; Ancillary Services.

 

(1)           Subject
to the terms and conditions of this Agreement, Seller agrees to make available
to Buyer, during the “Condition 1” Term the Maximum Net Dependable Capacity,
Energy and Ancillary Services from the RMR Units at the Delivery Point. In consideration,
Buyer agrees to pay Buyer’s Monthly Charges, less Buyer’s Monthly Credits.

 

(2)           With
respect to Ancillary Services, the Parties acknowledge and agree that, (a) in
order for the RMR Units to provide certain of such Ancillary Services a portion
of the Maximum Net Dependable Capacity of an RMR Unit must be held in reserve
whether such Ancillary Services to be sold or used by Buyer for its own account
and (b) the combination of Energy and Ancillary Services dispatched or held in
reserve for dispatch by Buyer from any RMR Unit shall not exceed the Maximum
Net Dependable Capacity

 

18

 

of that RMR Unit. Any
Ancillary Services which Seller may be required to provide to the System
Operator(s) under the terms of the RMR Agreements or the Electrical
Interconnection Agreement, or under the System Operator’s Protocols, shall
count as part of the Maximum Not Dependable Capacity made available to the
Buyer for purposes of this Agreement.

 

(3)           Should
the CPUC, during the term of this Agreement, put in place a resource adequacy
requirement utilizing capacity tagging, Seller shall provide Buyer with the
capacity tags for that period for the full capacity of the RMR Units. Such a process
will likely include specifying that the RMR Units be bid into the ISO Day-Ahead
market if not scheduled by Buyer, and if not selected Day-Ahead, be subject to
residual unit commitment. Any incremental expenses associated with providing or
facilitating resource adequacy, capacity tagging, residual unit commitment
services or other similar obligation incurred by Seller in its performance of
same shall be paid to Seller by Buyer, as applicable, in accordance with
Section 25.1.

 

5.2          Exclusive Rights Subject to the RMH
Agreements.

 

Seller and Buyer
desire to enter into this power purchase and sale arrangement whereby (i)
Seller shall elect “Condition 1” under the RMR Agreements but be paid by Buyer
as if it had elected “Condition 2” with respect to all provisions under such
RMR Agreements and credit to Buyer the “Condition 1” payments it receives from
the ISO; (ii) Buyer shall deliver Gas to the Delta RMR Units; and (iii) Seller
shall convert such Gas into Energy and Ancillary Services when directed by
Buyer; provided, however, that Buyer’s rights described in (i) through (iii)
above shall be limited by the following: (a) if a Termination Date has been
declared by Seller as a result of an Event of Default, which has occurred with
respect to Buyer and is continuing after the applicable cure period, Seller, in
its exercise of commercially reasonable efforts to mitigate its losses
resulting from such Event of Default, may sell any or all of the Maximum Net
Dependable Capacity, Energy and Ancillary Services to third parties during any
period of suspension of Seller’s performance obligations hereunder pursuant to
Section 14.2(1); (b) Seller may sell Energy or Ancillary Services to a party
other than Buyer or the ISO, pursuant to “contract path” transactions made in accordance
with the RMR Agreements; and (c) the ISO shall continue to possess all rights
available to it under the RMR Agreements. For purposes of clarity, Seller shall
not have the right to sell any Maximum Net Dependable Capacity, Energy and
Ancillary Services from an RMR Unit to any party other than Buyer or the ISO
during the “Condition 1” Term without the prior written consent of Buyer except
as may be required pursuant to any Electrical Interconnection Agreement between
Seller and any System Operator(s), as may be required by any Governmental
Authority or as specifically provided for in (a), (b) and (c) above.

 

5.3          Energy Delivery Point.

 

All deliveries and
receipts of Energy shall be made and measured at the Delivery Point.

 

19

 

5.4          Title and Risk of Loss.

 

(1)           As
between the Parties,  Seller shall be
deemed to be in exclusive possession and control (and responsible for any
damages or injury caused thereby) of the Energy and Ancillary Services prior to
the Delivery Point, and Buyer shall be deemed to be in exclusive possession and
control (and responsible for any damages or injury caused thereby) of the
Energy and Ancillary Services at and from the Delivery Point. Title to the Energy,
Ancillary Services and the Maximum Net Dependable Capacity of the RMR Units,
subject to the RMR Agreements and the ISO’s rights thereunder, shall remain at
all times with Buyer. Each of Seller and Buyer shall and hereby does indemnify,
defend and hold harmless the other Party from any Claims arising from any act,
failure to act or incident relating to Energy and Ancillary Services occurring
when the Energy or Ancillary Services is under its possession and control.

 

(2)           Seller
warrants that the Energy delivered by Seller and the Ancillary Services
available from the RMR Units shall be free and clear of all liens, Claims and encumbrances
arising prior to the Delivery Point, except as provided for in the RMR Agreements,
and warrants that the Maximum Net Dependable Capacity of such Units is free and
clear of any liens, Claims and encumbrances, except as provided for in the RMR Agreements.

 

5.5          Transmission
Services.

 

Buyer shall
arrange, either directly or indirectly through a third party, for all
transmission service and Transmission Ancillary Services from the Delivery
Point and shall pay all costs for the same pursuant to the Tariff and the
System Operator’s Protocols including, without limitation, all costs associated
with line losses, necessary to transmit the Energy and Ancillary Services
delivered under this Agreement from the Delivery Point to any point at which
Buyer redelivers the Energy and Ancillary Services to its customer(s).

 

5.6          Electrical Interconnection Agreement.

 

Seller has entered
into an Electrical Interconnection Agreement with the System Operator and shall
maintain such Electrical Interconnection Agreement in full force and effect
throughout the “Condition 1” Term.

 

5.7          Energy
Meters.

 

Energy and
Ancillary Services delivered by Seller shall be measured by the Energy Meters
at the Delivery Point. Seller shall own, operate, maintain and test the Energy
Meters at the Delivery Point. Seller shall coordinate with the System Operator
and Buyer with respect to the maintenance and testing of Energy Meters
consistent with the Electrical Interconnection Agreement and Good Industry
Practice.

 

20

 

6.             AVAILABILITY

 

Availability for
each RMR Unit will be determined in accordance with the existing terms of the
RMR Agreements as of the Agreement Date, including, but not limited to, the
calculation of Target Availability Hours in Section 6, Schedules B of the RMR
Agreements; provided, however, that the Monthly Availability Payment shall not
be decreased as a result of any unavailability due to a Force Majeure Event or
a Forced Outage arising from Buyer’s construction or operation of Contra Costa
Unit 8 or Buyer’s connection and synchronization to the ISO Controlled Grid or
the Distribution Grid.

 

7.             SCHEDULING AND DISPATCH

 

7.1          Dispatch.

 

(1)           Seller
or an Affiliate of Seller shall be the SC for the RMR Units and the non-RMR
Units (the “Non-RMR Units”, together with the RMR Units, the “Units”). As of
the Agreement Date, Mirant Americas Energy Marketing, LP is the SC for the RMR Units
and the Non-RMR Units.  Seller may change
the SC in its sole discretion and will promptly notify Buyer of any such change.

 

(2)           Buyer
shall have full dispatch flexibility consistent with Operational Limitations on
the RMR Units as provided for in each Schedule A of the applicable RMR Agreement;
provided, however, that Seller has the right to override any dispatch request by
Buyer that would, in Seller’s reasonable opinion, create health or safety
issues, violate any legally-required operating restrictions, applicable laws or
regulations, or would, if honored, result in Seller’s non-compliance with any
Schedule A of the RMR Agreements.

 

(3)           Consistent
with ISO timelines and scheduling protocols, Buyer may elect Day-Ahead,
Hour-Ahead and Supplemental Energy bids for delivery of Energy and Ancillary
Services (as defined in the respective RMR Agreement); provided that, Buyer shall
schedule at least all Energy to the extent dispatched by the ISO under the RMR Agreements
for Day-Ahead and Hour-Ahead if Buyer has directed Seller to select “market
path”. Buyer reserves the right to select “market path” or “contract path” for
any RMR Agreement dispatch order by ISO. Unless otherwise directed by Buyer for
each Day-Ahead and Hour-Ahead dispatch instruction by ISO for the Delta RMR
Units, by default Seller shall notify the ISO of its election of “market path”
for all Energy quantities from the Delta RMR Units, with the exception of ISO
dispatches after the close of the Hour-Ahead Market.  ISO dispatch orders in real-time under the
RMR Agreements shall be responded to directly by Seller as “contract path” and
Seller shall notify Buyer of such orders in a timely manner. Potrero dispatches
are more fully addressed in Section 7.5.

 

(4)           Buyer
shall provide Seller with all dispatch schedules and intra-Day adjustments
reasonably in advance of the ISO scheduling deadlines. The Parties shall cooperate
to ensure that all changes in the dispatch schedule are properly, appropriately

 

21

 

and promptly (considering
the particular circumstances involved) communicated to all entities requiring
notification of any increase or decrease in the scheduled dispatch of the
Facility. The Parties shall be further obligated to coordinate their scheduling
activities and notices to one another to allow each Party sufficient time to
meet deadlines and requirements of any System Operator(s) and Gas
transportation providers to assist the other Party in minimizing or eliminating
Uninstructed Deviation Penalties, Generator Imbalance Fees and Gas Imbalance
Charges that may be associated with such deadlines and requirements.

 

(5)           Seller
has no residual dispatch rights on the RMR Units if not called upon by the ISO
or the Buyer, except as explicitly set forth in Sections 5.2 and 7.6 herein.

 

(6)           Seller
may fulfill any Dispatch Notice from the ISO or, if agreed to by Buyer,
dispatch schedule from Buyer, from a Substitute Unit as provided for in Section
5.1 of the RMR Agreements.

 

7.2          Scheduling
and Dispatch Protocols.

 

Scheduling and
dispatch shall occur as follows:

 

(1)           Day-Ahead
Scheduling:

 

0515
PPT:               Seller will notify
Buyer of the Availability of each RMR Unit and the Day-Ahead dispatch for each
RMR Unit for each hour that for which a Dispatch Notice is submitted to the
Seller by ISO under the RMR Agreements (“Availability Notice”).

 

0545
PPT:               Buyer shall notify
Seller of its selection of “contract path”, if applicable, for the dispatches
by ISO under the RMR Agreements.

 

0600
PPT:               Seller will notify
ISO of its election of “market path” or “contract path” for the dispatches by
ISO under the RMR Agreements.

 

0615
PPT:               Buyer will notify
Seller of the Day-Ahead dispatch requirements of Buyer including:

 

(a)           Energy
and Ancillary Service schedules for each RMR Unit, for each hour (inclusive of
ISO dispatches as provided by Seller to Buyer above); and

 

(b)           Confirmation
of total SC Trade quantities by hour.

 

22

 

1000
PPT:               Buyer and Seller submit
balanced schedules, including all inter-SC Trades, to ISO.

 

(2)           Day-Of
Scheduling:

 

The scheduling
timeline in this “Day-Of-Scheduling” section is based on current ISO Tariff
protocols, but Buyer and Seller acknowledge that the ISO is not currently
following such timeline for Hour-Ahead dispatches. If the ISO revises the
timeline through a Tariff amendment, Buyer and Seller shall revise the timeline
below accordingly, maintaining the “x + 45 minutes” and “x + 60 minutes”
provision for election of “market path” or “contract path” for Hour-Ahead
scheduling, where x is defined as follows and the number of minutes indicate
the time after the ISO notification at time x:

 

In conformance to
the Hour-Ahead RMR scheduling blocks outlined in Table 1.1 of the ISO Operation
Procedure G-203, x = 1400 PPT Day Before, 0400 PPT Operating Day or 1000 PPT
Operating Day, as applicable.

 

1400 PPT

Day
Before:           Seller will forward to
Buyer the Hour-Ahead dispatch for each RMR Unit, for each hour for which a
Dispatch Notice is submitted to Seller by ISO under the RMR Agreements (Hours
Ending (“HE”) 0100-1000).

 

0400
PPT:               Seller will forward
to Buyer the Hour-Ahead dispatch for each RMR Unit for each hour for which a
Dispatch Notice is submitted to Seller by ISO under the RMR Agreements (HE
1100-1600).

 

1000PPT:                Seller
will forward to Buyer the Hour-Ahead dispatch for each RMR Unit for each hour
for which a Dispatch Notice is submitted to Seller by ISO under the RMR
Agreements (HE 1700-2400).

 

x
+ 45 min:              Buyer will notify
Seller of Buyer’s election of “contract path”, if applicable

 

x
+ 60 min:              Seller will notify
ISO as to its election of “market path” or “contract path” for the Energy
quantities from the RMR Units dispatched by ISO and for those hours for which
no previous selection has already been made.

 

If the ISO continues to
not follow Operating Procedure G-203, Buyer shall notify Seller of Buyer’s
election of “contract path”, if applicable, 30 minutes prior to Seller’s
deadline to notify the ISO of such election.

 

23

 

Hour-Ahead
timelines based on schedule “t-xxx” where “xxx” are the minutes prior to the
start of the hour of delivery:

 

(a)           t-165
minutes:   Buyer will notify Seller of
the “Day Of” dispatch requirements of Buyer, including SC Trade quantities by
hourly Energy and Ancillary Service schedules for each RMR Unit (inclusive of
quantities dispatched by the ISO under the RMR Agreements); and

 

(b)           t-135
minutes:  Confirm totals.  Buyer and Seller submit balanced schedules
including all Inter-SC Trades to ISO.

 

(3)           Supplemental
Energy Market:

 

Thirty (30)
minutes prior to the closure of bidding into the Supplemental Energy market,
Buyer will notify Seller of bid curves for submission to ISO for Supplemental
Energy, both incremental and decremental, for each RMR Unit. In the event that
Buyer fails to notify Seller of such bid curves, Seller may develop and submit
bid curves to the ISO on behalf of Buyer. In such event, Seller shall
subsequently send Buyer any submission made on its behalf. Seller shall notify
Buyer in a timely manner of any dispatches of the RMR Units by ISO in the
Supplemental Energy market. Buyer and Seller acknowledge the sensitive nature
of the information in Buyer’s bid curves and Seller agrees to use such
information only for the purposes described herein.

 

(4)           Ancillary
Services Market:

 

Subject to the
timelines described above in (1) and (2), Buyer will notify Seller of bid
curves for submission to ISO for Ancillary Services capacity for each RMR Unit.
Seller shall notify Buyer in a timely manner of any dispatches of the RMR Units
by ISO in the Ancillary Services market. Buyer and Seller acknowledge the
sensitive nature of the information in Buyer’s bid curves and Seller agrees to
use such information only for the purposes described herein.

 

7.3          Dispatch Notice;
Restrictions.

 

(1)           To
cancel a dispatch schedule and avoid incurring a Start-up Payment obligation,
Buyer must notify Seller of such cancellation prior to the RMR Unit operator initiating
the start sequence. If Buyer fails to provide a dispatch notice to Seller to
cancel dispatch of the RMR Unit before the RMR Unit Starts-up, Buyer will be
responsible for the Start-up Payment for the applicable Unit(s) and such
Start-up shall count against Buyer as provided for in Section 5.3(a) of the RMR
Agreements for “Condition 2”.

 

(2)           Any
dispatch schedules and intra-Day adjustments submitted by Buyer must be
consistent with the limitations on the RMR Units as defined in each Schedule A of
the RMR Agreements.  Seller shall not be
obligated to deliver Energy or Ancillary

 

24

 

Services that violates
these limitations. Buyer may request dispatch of the RMR Units in excess of the
Contract Service Limits consistent with each Section 4.7 of the RMR Agreements.

 

7.4          Uninstructed Deviation Penalty; Generator
Imbalance Fees.

 

(1)           Subject
to the terms of this Agreement and consistent with Good Industry Practice and
the Operational Limitations, Seller agrees to operate the Facility to comply promptly
with the dispatch by Buyer or the ISO and to minimize Uninstructed Deviation Penalty(ies).  Seller and Buyer shall he equally responsible
for any Uninstructed Deviation Penalty(ies) incurred with respect to Buyer’s or
the ISO’s dispatch of the RMR Units.

 

(2)           Buyer
shall be responsible for any Generator Imbalance Fees incurred by Buyer’s or
the ISO’s dispatch of the RMR Units under “Condition 1”, but only to the extent
that Seller would not have otherwise incurred such fees when operating under “Condition
2”.

 

7.5          Potrero Units.

 

(1)           Notwithstanding
anything to the contrary herein, neither Seller nor Buyer shall have the right
to dispatch the Potrero Units beyond the ISO’s dispatch. Subject to a commitment
from the ISO and the CPUC as to certain resource adequacy (“RA”) rights for the
Potrero Units, Buyer may request Seller to designate such Units as RMR Units under
“Condition 1” for the “Condition 1” Term so that the full RA rights can be
credited to Buyer, and Seller shall request from the ISO a change
of status of the Potrero RMR Units to “Condition 1” and request a waiver of the
ninety (90) Day notice requirement for changing the status of the Potrero RMR
Units to “Condition 1” so that the Potrero RMR Units will be able to perform
under “Condition 1” as soon as possible.

 

(2)           All
Energy and capacity from the Potrero RMR Units shall be scheduled as “contract
path”.  Seller shall provide all the Fuel
required for ISO dispatch of the Potrero Units.

 

7.6          Seller’s Residual Dispatch Rights.

 

(1)            If
neither the ISO nor the Buyer has dispatched Pittsburg Unit 5 or 6, Seller
may dispatch one of such RMR Units at Seller’s sole cost and as described in
Section 7.6(2) for the limited purpose of generating sufficient steam to
dispatch Pittsburg Unit 7, a Non-RMR Unit. Any Start-up by Seller pursuant to
this Section 7.6 (1) shall not be a Counted Start-up even if, after Seller has
started an RMR Unit for this purpose and has not yet stopped it, Buyer or the
ISO dispatches that RMR Unit. Any Service Hours and MWh produced pursuant to Seller’s
dispatch under this section shall not count against the Contract Service
Limits; provided, however, that if the Buyer or the ISO dispatches the affected
RMR Unit, the applicable Service Hours and MWh produced

 

25

 

pursuant to such dispatch
shall count against the Contract Service Limits. If Pittsburg Unit 5 or 6
becomes a Terminated RMR Unit, Seller shall utilize such Terminated RMR Unit,
if available, to supply steam for Pittsburg Unit 7 as described herein.

 

(2)           Buyer
shall supply Gas and Seller shall compensate Buyer for the quantity of Gas
required to run Pittsburg 5 or 6 in order to generate enough steam necessary to
operate Pittsburg 7 pursuant to part (1) of this Section 7.6.  Seller shall pay Buyer the following: (123.5
MMBm/hour) * (Number of hours in which Seller is taking steam) * Gas Index. To
avoid the double payment of Gas by Seller in any given month, Seller will reduce
the monthly total metered Gas amount in the fuel reimbursement calculation as described
in Section 11.8 by the same amount of Gas used by Seller pursuant to this Section
7.6 in the same month.

 

(3)           Prior
to exercising its rights under this Section 7.6, Seller shall notify Buyer in
accordance with Section 11.5 (1).

 

8.             NOX LIMITATIONS

 

(1)           The
Units are subject to operating under NOX limits, as may be modified from time
to time, imposed by the Bay Area Air Quality Management District (“BAAQMD”).  These limits are applied to the combined NOX
emissions of Sellers’ Contra Costa, Pittsburg and Potrero facilities. Dispatch
schedules shall be consistent with these limits, and Seller shall retain the
right to alter dispatch schedules to the extent necessary to ensure compliance
therewith.  Seller shall use commercially
reasonable efforts to minimize any adverse impact these limits may have on
dispatch schedules submitted by Buyer to Seller; provided that, in no instance
shall Seller’s market transactions using the Non-RMR Units in any way or to any
extent take precedence over or otherwise impede Buyer’s dispatch.

 

(2)           RMR
Units shall have priority over Non-RMR Units in using the Seller’s “Bay Area
Bubble” (the “Bubble”), as defined by Regulation 9, Rule 11 of the BAAQMD.  If, after all generation from any Non-RMR
Unit is curtailed to the point of compliance with the BAAQMD limits, the ISO’s
or Buyer’s dispatch of an RMR Unit would cause a violation of the Bubble limit,
then the ISO or Buyer, as applicable and in consultation with Seller, may be
required to either dispatch additional Energy from an RMR Unit with a Selective
Catalytic Reduction system or curtail load from the responsible RMR Unit(s),
which would facilitate the reduction of NOX emissions to a level within the
Bubble limit, to continue such dispatch. Seller’s ability to use otherwise unutilized
Bubble space shall be subject at all times to the ISO’s and Buyer’s dispatch of
RMR Units. Any violations of the Bubble limit shall be the sole responsibility
of Seller.

 

9.             DELTA DISPATCH

 

(1)           Consistent
with the National Pollutant Discharge Elimination System permit in effect at
the time (the “Permit”) for the Contra Costa and Pittsburg Facilities,

 

26

 

and subject to the
exceptions set forth in Section 7(a) of the Permit, preferential operation of
Pittsburg Unit 7 and the minimization of circulating water flow through
Pittsburg Units 5 & 6 and Contra Costa Units 6 & 7 are required during
the “Delta Dispatch period” (from May 1 through July 15). The dispatch
procedures currently in effect, including the exceptions set forth in Section
7(a) of the Permit, are referenced in Schedules A of the Contra Costa and
Pittsburg RMR Agreements. Dispatch schedules submitted by Buyer shall be
consistent with the Permit referenced in each Schedule A of the RMR Agreements.
To the extent that Seller incurs any mitigation fees pursuant to the Permit as
the result of Buyer’s dispatch of the RMR Units during the Delta Dispatch
period, Buyer shall be solely liable for same, notwithstanding Seller’s ability
to avoid such penalties through its dispatch of any Non-RMR Unit(s).

 

(2)           At
Buyer’s request, Seller shall use its commercially reasonable efforts to obtain
revisions to the Permit that would eliminate the preferential operation of
Pittsburg Unit 7, a Non-RMR Unit, or otherwise ease or eliminate restrictions
on Buyer’s dispatch of the Delta Units. Failure to achieve any such revisions,
however, shall not result in any additional liability or obligations on Seller
under this Agreement with respect to the Permit or Seller’s obligation to
comply with the Permit and nothing will require Seller to dispatch Pittsburg
Unit 7 if it is not in Seller’s economic interest to do so.

 

10.          MUST
OFFER/RUN

 

10.1         Delta
RMR Units.  If a Delta RMR Unit is
dispatched by the ISO pursuant to the Must-Offer Obligation (the “Must-Offer
Dispatch”),  Seller shall credit Buyer
the Minimum Load Cost Compensation received from the ISO, and Buyer shall pay
Seller Schedule G rates, in accordance with Tariff Amendment 60, as approved by
FERC in California Independent System
Operator Corp, 108 FERC (CCH) ¶ 61,022 (2004) and 109 FERC (CCH) ¶ (“Amendment
60”), for the associated Start-ups and the Energy and Ancillary Services
delivered pursuant to an ISO Must Offer Dispatch. However, because Buyer is providing
Gas for the Must-Offer Dispatch, the Schedule G rates shall exclude the
associated Schedule C charges. Buyer shall provide all Gas needed to fulfill
any such dispatch of the Delta RMR Units, with the notification requirements by
Seller for Gas supply by Buyer pursuant to Section 11.5(1). Start-ups shall not
be double-counted. Must-Offer Dispatch MWh, Service Hours and Start-ups are not
counted for purposes of Sections 12.2 and 12.3.

 

10.2         Potrero
RMR Units.  In the event that a
Potrero RMR Unit is dispatched by the ISO pursuant to a Must-Offer Dispatch,
Seller shall credit Buyer the Minimum Load Cost Compensation received from the
ISO, and Buyer shall pay Seller Schedule G rates, in accordance with Amendment
60 for the associated Start-ups and the Energy and Ancillary Services delivered
pursuant to an ISO Must Offer Dispatch. For purpose of clarity, due to Seller’s
provision of Fuel for the Must-Offer Dispatch, the Schedule G rates shall
include the associated Schedule C charges. 
Start-ups shall not be double-counted. 
Must offer MWh, Service Hours and Start-ups are not counted for purposes
of Sections 12.2 and 12.3.

 

27

 

11.          GAS

 

11.1        Gas
and Gas Metering.

 

(1)           RMR Gas. During the “Condition
1” Term, Buyer, at its sole cost and expense, shall arrange, nominate, balance,
transport and deliver to the Gas Delivery Point such quantities of Gas as are
required by Seller to generate from the Delta RMR Units the quantity of Energy
and Ancillary Services scheduled by Buyer including, without limitation, Gas
required for Start-up and Shutdown of such RMR Units and pipeline shrinkage, as
applicable (“RMR Gas”).

 

(2)           Non-RMR
Gas. Seller, at its sole cost and expense, shall provide all Fuel required
for any dispatch of Non-RMR Units and pipeline shrinkage, as applicable (“Non-RMR
Gas”).  Seller shall deliver Gas for the
Non-RMR Units to Buyer’s PG&E Citygate Pool. Buyer shall be responsible for
nominating Gas received from Seller at Buyer’s PG&E Citygate Pool to the Gas
Delivery Point(s).

 

(3)           Facility
Balancing; Transport Costs.  On or
before the commencement of the “Condition 1” Term, Seller shall (a) amend
Seller’s Noncore Balancing Aggregation Agreement (“NBAA”) to designate Buyer as
the NBAA holder and the balancing agent; (b) revise each applicable NGSA to
provide that Buyer receives the invoices for all services thereunder; and (c)
designate Buyer as the Nominating Marketer under each applicable NGSA.  Buyer shall pay Gas Transporter for all
services provided under the NGSA for the RMR and Non-RMR Units. With respect to
the NGSA invoiced amounts, Seller shall reimburse Buyer for all invoiced costs
for delivery of Non-RMR Gas from Buyer’s PG&E Citygate Pool to the Gas
Delivery Point.  Should Gas Transporter’s
invoice include fixed charges such fixed charges shall be allocated between the
Parties based on the ratio of the aggregate MDQ for the RMR Units covered by
the NGSA for a particular Facility and the aggregate MDQ for the Non-RMR Units
for the same Facility. When an RMR Unit at a Facility becomes a Terminated RMR
Unit and there are no other surviving RMR Units at the same Facility, the
Parties shall cooperate as soon as practicable to (a) amend Seller’s NBAA to
designate Seller as the NBAA holder and the balancing agent for such Facility;
(b) revise the NGSA to provide that Seller receives the invoices for all
services thereunder; and (c) designate Seller as the Nominating Marketer under
the applicable NGSA.

 

(4)           Gas
Metering.

 

(a)           Gas
delivered by Buyer to the Gas Delivery Point shall be measured by the Gas Meter
at the Gas Delivery Point. The Gas Transporter shall own, operate, maintain and
test the Gas Meter located at the Gas Delivery Point. Seller shall coordinate
with the Gas Transporter and Buyer with respect to maintenance and testing of
the Gas Meter consistent with the Gas Transmission Service Agreement and Good
Industry Practice. The Gas Meter located at the Gas

 

28

 

Delivery Point
will measure the Gas consumed by the entire Facility rather than individual
Units.

 

(b)           Notwithstanding
the foregoing, Seller may, at its sole cost and expense, cause Gas meters to be
installed at each Non-RMR Unit that satisfy the requirements outlined in
Schedule C, Part 1, A(2)(a), of the RMR Agreements (“Non-RMR Unit Gas Meters”),
In such event, Seller shall coordinate with the Gas Transporter and Buyer with
respect to maintenance and testing of the Non-RMR Unit Gas Meters consistent
with the Gas Transmission Service Agreement and Good Industry Practice, and the
Non-RMR Unit Gas Meters will measure the Gas consumed by the Non-RMR Units.

 

11.2        Gas Transmission Service Agreement.

 

Seller has entered
into the GTSA and the NGSA for each RMR Facility with the Gas Transporter and
shall maintain each of such GTSA and NGSA in full force and effect throughout
the “Condition 1” Term.

 

11.3        Gas Specifications.

 

(1)           All
Gas tendered by Buyer for delivery to the Gas Delivery Point shall meet the
then current natural Gas quality specifications as set forth in the Gas Transporter’s
tariffs as filed with the CPUC (“Gas Tariff), as such specifications may change
from time to time.

 

(2)           If
Gas tendered for delivery under this Agreement at the Gas Delivery Point
materially fails for any reason to conform to the applicable specification set
forth in Section 11.3(1) (“Non-Conforming Gas”), Seller will consider whether
it is able to accept such Non-Conforming Gas and may refuse to take possession
of all or any part of such Gas, giving Buyer the reasons for such refusal as
soon as practicable. If Seller chooses to accept the Non-Conforming Gas, it
will advise Buyer of the same in writing, and each Party shall be responsible
for the disposition of its own Gas, as applicable.

 

(3)           If
the Facility is damaged as a direct result of the delivery of Non-Conforming
Gas that Seller has not approved for receipt and use at the Facility, Seller shall
be entitled to the remedies available to it pursuant to its agreement with the
Gas Transporter. Seller shall use commercially reasonable efforts to mitigate
any damages resulting from the delivery of any Non-Conforming Gas at the Gas
Delivery Point and the use of such Gas in a Unit.

 

(4)           The
unavailability of the Facility due to Buyer’s delivery of Non-Conforming Gas
that was not approved by the Seller shall not be considered a Forced Outage,
and the Facility shall be considered available for the purpose of calculating
the Monthly Availability Payment.

 

29

11.4                        Title
and Risk of Loss.

 

(1)                                  As
between the Parties, Buyer shall be deemed to be in exclusive possession and
control (and responsible for any damages or injury caused thereby) of the RMR
Gas prior to the Gas Delivery Point, and Seller shall be deemed to be in
exclusive possession and control (and responsible for any damages or injury
caused thereby) of the RMR Gas at and from the Gas Delivery Point.  Notwithstanding delivery to the Gas Delivery
Point, title to the RMR Gas shall remain with Buyer or Buyer’s third party supplier.
As between the Parties with respect to Non-RMR Gas, Seller shall be deemed to be
in exclusive possession and control (and responsible for any damages or injury
caused thereby) prior to Buyer’s PG&E Citygate Pool and at and from the Gas
Delivery Point, and Buyer shall be deemed to be in exclusive possession and
control (and responsible for any damages or injury caused thereby) at and from
Buyer’s PG&E Citygate Pool to the Gas Delivery Point.  Notwithstanding delivery to the Gas Delivery
Point, title to the RMR Gas shall remain with Buyer or Buyer’s third party
supplier. Each of Seller and Buyer shall and hereby does indemnify, defend and
hold harmless the other Party from any Claims arising from any act, failure to
act or incident related to RMR Gas or Non-RMR Gas occurring when the
indemnifying Party is in possession of such RMR Gas or Non-RMR Gas.

 

(2)                                  Buyer
warrants that the Gas delivered by Buyer shall be free and clear of all liens,
Claims and encumbrances arising prior to the Gas Delivery Point. Seller warrants
that the Non-RMR Gas delivered to Buyer at Buyer’s PG&E Citygate Pool shall
be free and clear of all Liens, Claims and encumbrances arising prior to the
Buyer’s PG&E Citygate Pool.

 

11.5                        Gas
Scheduling Manager.

 

(1)                                  For
those Facilities for which Buyer is designated as the NBAA holder, Buyer shall
act as the Gas scheduling manager (“GSM”). The GSM shall cooperate with Seller
to provide for scheduling changes as allowed under the Gas Tariff for day-ahead
and intra-Day Gas nominations to deliver Non-RMR Gas to the Gas Delivery Point.
Seller shall provide a final day-ahead Gas schedule to Buyer by 8:30 a.m. PPT.
Intra-Day nominations shall be submitted by Seller to Buyer thirty (30) minutes
prior to the applicable nomination cycle deadline as defined by the Gas Tariff.
Seller’s ability to nominate per each Non-RMR Unit shall be limited to the Unit
Maximum Daily Quantity as defined herein. Seller shall be allowed to deliver in
excess of the Non-RMR Unit MDQ with Buyer’s consent in order to make up past
imbalances. The “Non-RMR Unit MDQ” is defined for each Non-RMR Unit as the ‘Unit
MDQ’ as defined by the Facility NGSA. Buyer and Seller shall cooperate to
update the Unit MDQs in each applicable Facility NGSA from time to time in order
to reflect Unit operations, as allowed under the Gas Transporter’s tariff.

 

(2)                                  With
respect to Non-RMR Gas, Buyer shall provide to Seller the benefit of equivalent
balancing rights and related services that are available under the Gas

 

30

 

Transporter’s tariff to a
single premises entity with an MDQ equal to the aggregate of all Non-RMR Unit
MDQs as defined in Section 11.5(1). Capitalized terms used but otherwise not
defined in this Section 11.5(2) shall have the meanings ascribed in the Gas
Transporter’s tariff.

 

(A)                              Notwithstanding
any aggregation by the GSM of individual Balancing Service accounts maintained
by the GSM into a single Balancing Service account under the G-Bal Schedule,
the GSM shall maintain on its books a separate balancing account on behalf of
Seller with respect to the Non-RMR Gas delivered in accordance with this
Agreement (“Seller Balancing Account”). The GSM shall calculate the Seller’s
daily Gas imbalances for purposes of administering the Seller Balancing Account
as the difference between (i) the aggregate of the Non-RMR Gas delivered and
(ii) the aggregate amount of Gas allocated by the GSM to the Non-RMR Units in
accordance with Section 11.5(3). Seller’s monthly imbalance shall be the sum of
the daily Gas imbalances in a given calendar month.

 

(B)                                Within
one (1) Business Day after the end of any “gas day” (as defined in the Gas
Transporter’s tariff), the GSM shall deliver to Seller a copy of the Seller
Balancing Account balance for the preceding gas day, which shall specify (i)
Seller’s daily Gas imbalances for each day of the current month, in accordance
with the allocation methodology set forth in Section 11.5(3), (ii) the aggregate
of such imbalances for the current month, and (iii) any carryover of imbalances
from prior months to such current month ((i), (ii), and (iii), collectively,
the “Seller Monthly Imbalance”). Within five (5) Business Days after the end of
any calendar month, representatives of Buyer and Seller shall meet via conference
call to reconcile any differences in the Seller Balancing Account balance
communicated by the GSM.

 

(C)                                If
the Seller Monthly Imbalance is within the Tolerance Band for such month (i.e.
if the fraction (expressed as a percentage) equal to the Seller Monthly
Imbalance divided by the aggregate amount allocated by GSM to Non-RMR Units, in
accordance with Section 11.5(3) for such month, is equal to or less than the
percentage specified for the Tolerance Band in the Gas Transporter’s tariff),
such Seller Monthly Imbalance shall be carried forward solely for the account
of Seller, at Seller’s discretion. Buyer shall provide Gas associated with any
positive imbalance for use under this Agreement. Buyer shall be responsible for
any negative imbalance carried forward to the appropriate subsequent month.

 

(D)                               To
the extent permitted under the Gas Transporter’s tariff, Seller may trade any
Seller Monthly Imbalance between Buyer and third parties identified by Seller,
including the transfer of all or part of such Seller Monthly Imbalance to Gas
storage;  provided, however, that Seller
shall be solely responsible for any credit requirements of such third party
transferees or storage

 

31

 

facilities and any
non-performance by such third party transferees or storage facilities in
connection with such transactions.

 

(E)                                 For
any Seller Monthly Imbalance not traded or carried forward, Seller agrees to
pay or receive the applicable Gas Transporter’s tariff cash out rate.

 

(3)                                  Seller
shall provide Buyer with all the necessary Gas Meter and Energy Meter data in
order to calculate the daily Gas allocation between the Non-RMR and RMR Unite.
For purposes of daily nominations only, Gas shall be allocated by the GSM daily
to each Mon-RMR and RMR Unit in an equitable manner, utilizing the methodology
set forth in the ISO’s RMR invoice template. Notwithstanding the foregoing, if
Seller installs Non-RMR Unit Gas Meters, then the quantity of Non-RMR Gas shall
be determined using the information from such meters. The Parties shall work
together to reconcile summation of the daily nominated amounts as described in
this Section 11.5(3) with the monthly amounts calculated pursuant to Section
11.8.

 

11.6                        Gas Imbalance
Charges.

 

(1)                                  Buyer
shall be responsible for all Gas Imbalance Charges associated with Gas
deliveries under this Agreement to the extent such charges are caused by Buyer’s
actions or inactions. Seller shall be responsible for all Gas Imbalance Charges
associated with Gas deliveries under this Agreement to the extent such charges
are caused by Seller’s actions or inactions.  
Both Parties shall use commercially reasonable efforts to avoid
imbalances and to correct any imbalances, which may occur.

 

(2)                                  The
Parties shall keep themselves informed of system wide operation flow order or “OFO”
and emergency flow order or “EFO” notices, Accordingly, Buyer and Seller
acknowledge that under certain OFO conditions that either Party’s action may provide
benefit to the other through the NBAA pool. See Exhibit C.

 

 

	
  OFO
  Penalty Causes

  	
   

  	
  Responsible
  Party

  
	
   

  	
   

  	
   

  
	
  Unit schedule deviation

  	
   

  	
  Seller

  
	
  Schedule change

  	
   

  	
  Party making change

  
	
  Over/Under Delivery of
  Gas

  	
   

  	
  Party making change

  

 

The GSM shall notify
Seller of any customer specific OFOs and EFOs (as defined in the Gas
Transporter’s tariff) affecting the Facilities for which Buyer is designated as
the KBAA holder, advising Seller of the terms of such customer specific OFO
within fifteen (15) minutes of its receipt of written notice of a customer
specific OFO and as promptly as is reasonably possible after its receipt of
written notice of a customer specific EFO.

 

(3)                                  In
any calendar month that the ISO Monthly Fuel Imbalance Charge exceeds the limit
as specified in Schedules C of the RMR Agreements, Buyer shall

 

32

 

provide all necessary
information in order for Seller to act on Buyer’s behalf in seeking
reimbursement of penalties from the ISO. Seller shall pay to Buyer any
reimbursement received therefrom.

 

(4)                                  The
GSM shall estimate OFO and EFO charges or penalties it reasonably expects Buyer
to incur in any calendar month under this Agreement. Such estimated OFO and EFO
charges or penalties shall be invoiced by Buyer to Seller as provided in Section
12.5; provided, however, that such invoiced amounts shall be reconciled against
the actual, final invoices from the Gas Transporter and any difference thereto
shall be settled by the Parties in the next monthly billing cycle.

 

11.7                        Uninstructed
Deviation Penalty(ies) (UDPs).

 

Per Section 7.4(1)
of this Agreement, Seller and Buyer shall be equally responsible for
Uninstructed Deviations Penalties. Buyer shall compensate Seller for Gas that
would have been needed to provide Energy associated with negative Uninstructed
Deviation Penalties. Compensation for negative UDPs will be calculated by
multiplying (i) the sum of (a) the Gas Index and (b) the applicable Gas
Transporter’s tariff rate in effect at the time the UDP is incurred to deliver
Gas from Buyer’s PG&E Citygate Pool to the Gas Delivery Point by (ii) the
estimated Gas required to deliver the MWhs that Seller procured in the market
to meet Buyer’s schedule due to the negative deviation during the period in
which the UDP is incurred. The amount of Gas used during a negative UDP will be
estimated by using Equation Cl-7a in the RMR Agreements, replacing the 1.02
factor with 1.0, and calculating the difference in the resulting MMBTUs at the
scheduled MWh and the metered MWh for the periods in which UDPs were incurred.

 

11.8                        Fuel
Reimbursement.

 

Seller will
financially reimburse Buyer for the allocated quantity of Gas for each RMR
Unit, as calculated in the ISO’s RMR invoice template (“RMR Allocated Quantity”),
to the extent such RMR Allocated Quantity exceeds the quantity that results
from the Unit Hourly Cap Heat Input calculation set forth in the ISO’s RMR
invoice template. Such reimbursement amount shall also be calculated in
accordance with the ISO’s RMR invoice template using the Gas Index and the excess
quantity.

 

12.                               RMR, MARKET AND NON-RMR GAS CHARGES

 

For the avoidance
of doubt, the intent of the Parties is that Seller be compensated for the RMR
Units by Buyer, subject to the rates discussed herein, as if Seller had elected
“Condition 2” under the RMR Agreements for all purposes. For purposes of this
Agreement, all amounts due to Seller by Buyer shall be paid to Seller’s SC.

 

33

 

12.1                        Buyer’s
Monthly Charges.

 

(1)                                  In
consideration for the rights provided Buyer in this Agreement, Buyer shall pay
to Seller for each month during the “Condition 1” Term:

 

(a)                                  all
“Condition 2” rates described in Schedules B of the RMR Agreements;

(b)                                 any
other payments required in Sections 2.5, 8.2, 8.6 and 9 of the RMR Agreements
and Buyer’s share of payments in Section 8.7 of the RMR Agreements whether or
not specifically captured in Sections 12.1, 12.2 and 12.3;

(c)                                  payments
resulting from Energy dispatched by the ISO pursuant to Seller’s provision, at
Buyer’s direction, of Regulation Down Ancillary Service;

(d)                                 payments
resulting from Energy dispatched by the ISO pursuant to Supplemental Energy “decremental”
bids submitted by Seller; and

(e)                                  the
charges provided for in Sections 7.4, 9, 10, 11.7, 12.2, 12.3 and 25.1 of this Agreement,
when applicable (all of which together shall be the “Buyer’s Monthly Charges”).

 

(2)                                  For
purposes of calculating Buyer’s Monthly Charges,

(a)                                  the
Annual Fixed Revenue Requirement (“AFRR”) Table B-6 in Section 7 of Schedules B
of the RMR Agreements shall apply, as set by the 2006-2008 RMR FERC Settlement,
and as may be further modified for 2009, 2010, 2011 and 2012 in Seller’s annual
rate schedule revision filing required by the RMR Agreements as finally accepted
or approved by FERC and no longer subject to rehearing or appeal;

(b)                                 the
Monthly Option Payment shall equal the sum of the Monthly Availability Payment
and the Monthly Surcharge Payment minus the total Non-Performance Penalty for
the applicable month that is incurred by Seller under the RMR Agreements
attributable to the ISO dispatch;

(c)                                  in
no event shall the Monthly Option Payment for any month be less than zero;

(d)                                 only
Sections E (table Cl-18), F, and G of Schedule C of me RMR Agreements shall
apply for the Variable O&M Costs for each Delta RMR Unit, and Potrero RMR
Units shall not be included; and

(e)                                  any
Dispatch Notice submitted by the ISO or dispatch schedule submitted by Buyer
hereunder will count as if the RMR Unit was dispatched under “Condition 2”.

 

Schedule C charges
related to Monthly Billed Fuel Cost, Monthly Fuel Imbalance Charge, and Monthly
Other Fuel Related Cost are specifically excluded due to Buyer acting as Gas
supplier for the Delta RMR Units.

 

34

 

(3)                                  If
Buyer claims a Force Majeure Event for any reason, Buyer shall not be relieved
of the obligation to pay Buyer’s Monthly Charges to Seller.

 

12.2                        Schedule
G Charges.

 

(1)                                  In
the event that the ISO dispatches any RMR Unit in excess of the then prevailing
Contract Service Limits, Buyer shall pay Seller all applicable Schedule G rates
for the excess Counted MWh, Counted Service Hours, and Counted Start-ups
resulting therefrom as if all dispatches by the ISO were under “Condition 2”.
For purposes of clarity, in equation G-1 of Schedules G the “Variable Cost
Payment for the Billing Month” shall not exclude charges related to Monthly
Billed Fuel Cost, Monthly Fuel Imbalance Charge and Monthly Other Fuel Related
Cost.

 

(2)                                  Exhibit
B illustrates settlements that relate lo Schedule G Charges.

 

12.3                        Modified
Schedule G Charges.

 

(1)                                  If
the combined Start-ups of Buyer and the ISO for any RMR Unit are in excess of
the greater of the Contract Service Limits for (a) the Maximum Annual Start-ups
for 2005 and (b) the then prevailing Maximum Annual Startups, each excess
Counted Start-up by the Buyer shall be paid at the applicable Prepaid Start-up
Charge multiplied by three (3). A requested Start-up by Buyer cannot be double
counted in the sense that if the Buyer requests a Start-up and the RMR Unit
subsequently trips during Start-up or operation and has to be restarted, this
sequencing will represent only a single Start-up for purposes of determining
when Modified Schedule G Charges take effect. For clarity, the entire period of
operation for an RMR Unit beginning with Buyer’s request for a Start-up and
continuing until Buyer’s request that such Unit Shutdown shall constitute a
single Start-up for purposes of the Modified Schedule G Charges.

 

(2)                                  If
the combined dispatches of Buyer and the ISO for any RMR Unit are in excess of
the greater of the Contract Service Limits for (a) the Maximum Annual MWh or
the Maximum Annual Service Hours for 2005 and (b), the then prevailing Maximum Annual
MWh or the Maximum Annual Service Hours, Buyer shall pay Seller for all resulting
excess Counted MWh and Counted Service Hours as if all dispatches were under “Condition
2”; provided, however, that in such instance equation G-1 of Schedules G of the
RMR Agreements shall be modified so that the “Variable Cost Payment for the Billing
Month” equals the product of the Monthly Variable O&M Cost and four (4).

 

(3)                                  For
the purposes of clarity, Buyer shall pay for each excess Start-up and each
excess MWh only once, at either the Schedule G or Modified Schedule G rate.

 

(4)                                  To
the extent that Seller receives any Schedule G revenues from the ISO, such
amounts shall be credited to Buyer against the total amounts due as described hereunder
pursuant to the Schedule G rates and the Modified Schedule G Rates.

 

(5)                                  Exhibit
B illustrates settlements that relate to Modified Schedule G Charges.

 

35

 

12.4                        Credit
of “Condition 1” Payments and Other
Offsets.

 

Seller shall
credit Buyer, or cause its SC to credit Buyer, all amounts (“Buyer’s Monthly
Credits”) received from the ISO that are based on performance of the RMR Units
during the “Condition 1” Term and result from the following:

 

1.               The “Condition 1”
Monthly Option Payment paid by the ISO for each month under the RMR Agreements;

 

2.               Capacity awarded by
the ISO pursuant to Seller’s provision of Spinning Reserves, Non-spinning
Reserves, Regulation Up, Regulation Down Ancillary Service(s) or any other
Ancillary Service(s) bids, as directed by Buyer;

 

3.               Energy dispatched
by the ISO pursuant to Seller’s provision of Spinning Reserves, Non-spinning
Reserves, Regulation Up Ancillary Service(s) or any other Ancillary Service(s)
bids, as directed by Buyer;

 

4.               Energy dispatched
by the ISO pursuant to Seller’s provision of Supplemental Energy “incremental”
bids, as directed by Buyer;

 

5.               For Delta RMR Units
only, payments received from the ISO related to Seller’s election of “contract
path”, as directed by Buyer, for transactions including, but not limited to,
RMR dispatches after the close of the Hour-Ahead Market;

 

6.               For Delta RMR Units
only, payments received from the ISO related to Buyer’s election of “contract
path” for RMR dispatches of Day-ahead and intra-Day transactions;

 

7.               For Delta RMR Units
only, Gas reimbursements, as further described in Section 11.8 of this
Agreement;

 

8.               For Delta RMR Units
only, Start-up Fuel Costs for Start-ups under the RMR Agreements; provided,
however, at the end of each calendar year, if the actual number of Start-ups is
less than the number of Prepaid Start-ups for which Seller has reimbursed
Buyer, then the parties shall split the remaining difference on a 50/50 basis;

 

9.               Minimum Load Cost
Compensation for any Must-Offer Dispatch pursuant to Section 10;

 

10.         Any interest due Buyer,
pursuant to Section 9 of the RMR Agreements; and

 

11.         Any amounts due Buyer
from Seller, although not received from the ISO, for provision of steam as
further described in Section 7.6(2) of this Agreement.

 

36

 

12.5                        Gas Charges.

 

Buyer shall
invoice Seller for (a) imbalances pursuant to Sections 11.5(2)(E) and 11.6(1);
(b) the transport costs for Non-RMR Gas as described in Section 11.1(3); (c)
any OFO or EFO charges pursuant to section 11.6(4); (d) any other applicable
charges to Seller relating to the Non-RMR Gas; and (e) any credits due to
Seller, including, but not limited to, those described in Sections 11.5 and
11.6, providing supporting documentation acceptable in industry practice to
support the amount charged. If the actual quantity delivered is not known by
the billing date, billing will be prepared based on the quantity of Non-RMR Gas
scheduled by Seller in the applicable calendar month. The invoiced quantity
will then be adjusted to the actual quantity on the following calendar month’s
billing or as soon thereafter as actual delivery information is available.

 

13.                               REPRESENTATIONS AND WARRANTIES

 

13.1                        Representations
and Warranties.

 

(1)                                  As
a material inducement to entering into this Agreement, each Party with respect
to itself, hereby represents and warrants to the other Party as of the
Agreement Date and throughout the Contract Term as follows:

 

(a)                                  it
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its formation and is qualified to conduct its business in those
jurisdictions necessary for it to perform its obligations under this Agreement;

 

(b)                                 it
has all authorizations from any Governmental Authority necessary for it to
legally perform its obligations under this Agreement or will obtain such
authorizations in a timely manner prior to when any performance by it requiring
such authorization becomes due;

 

(c)                                  the
execution, delivery and performance of 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 or any contract to which it is a
party or any Governmental Rule applicable to it;

 

(d)                                 this
Agreement constitutes a legal, valid and binding obligation of such Party
enforceable against it in accordance with its terms, and each Party has all
rights such that it can and will perform its obligations to the other Party in
conformance with the terms and conditions of this Agreement, subject to
bankruptcy, insolvency,

 

37

 

reorganization and
other laws affecting creditor’s rights generally and general principles of
equity;

 

(e)                                  except
as provided in Section 14.1(2), no Bankruptcy is pending against it or to its
knowledge threatened against it; and

 

(f)                                    the
audited financial statements provided by Seller and Buyer pursuant to Section
15.4(2) are true and accurate based on the respective Party’s knowledge,
information and belief;

 

(g)                                 it
has negotiated and entered into this Agreement in the ordinary course of its
respective business, in good faith, for fair consideration and on an arm’s
length basis.

 

(2)                                  Seller
hereby represents and warrants that the terms and conditions of this Agreement
are fair and reasonable and reflect its exercise of prudent business judgment consistent
with its fiduciary duties as a debtor-in-possession and are supported by fair consideration
and reasonably equivalent value in money or money’s worth.

 

(3)                                  Each
of Buyer and Seller represent and warrant to the other that it is a “forward
contract merchant” within the meaning of the United States Bankruptcy Code.

 

13.2                        No
Other Representations and Warranties.

 

Each Party
acknowledges that it has entered into this Agreement based solely upon the
express representations and warranties set forth in this Agreement.

 

14.                               EVENT OF DEFAULT AND REMEDIES

 

14.1                        Event
of Default.

 

(1)                                  An
“Event of Default” shall mean with respect to a Party (the “Defaulting
Party”) any of the actions set forth below in this Section 14.1(1):

 

(a)                                  the
failure of the Defaulting Party to make, when due, any payment required under
this Agreement if such failure is not remedied within five (5) Business Days
after written notice of such failure is given to the Defaulting Party by the
other Party (the “Non-Defaulting Party”);

 

(b)                                 except
as permitted by Section 5.2, the sale by Seller of any portion of the Maximum
Net Dependable Capacity, Energy or Ancillary Services from any of the RMR Units
to any third party during the “Condition 1” Term;

 

38

 

(c)                                  any
representation or warranty (including, but not limited to, the representation
and warranty set forth in Section 13.l(l)(f)) made by the Defaulting Party in
this Agreement shall prove to have been false or misleading in any material respect
when made; provided that, if such representation or warranty is capable of
being corrected, no Event of Default shall have occurred if the Defaulting
Party is diligently pursuing such correction and such representation or warranty
is corrected within thirty (30) Days from the date upon which the
Non-Defaulting Party gives written notice to the Defaulting Party of the false
and misleading nature of the representation or warranty;

 

(d)                                 the
failure by the Defaulting Party to perform any material covenant set forth in
this Agreement (other than the events that are otherwise specifically covered
in this Section 14.1(1) as a separate Event of Default and other than any
covenant for which an exclusive remedy is set out elsewhere in this Agreement),
and such failure is not excused by a Force Majeure Event or cured within thirty
(30) Days after written notice thereof to the Defaulting Party or, if such
failure cannot reasonably be cured in such period and the Defaulting Party
within such period commences, and thereafter proceeds with reasonable due
diligence, to cure such failure, such period shall be extended for such further
period as shall be necessary for the Party to cure such failure with reasonable
due diligence, provided that the total cure period shall not exceed ninety (90)
Days;

 

(e)                                  except
as provided in Section 14.1(2), the Bankruptcy of the Defaulting Party; and

 

(f)                                    the
failure by the Defaulting Party to meet its obligation to provide Security as
required by Article 21 if such failure is not remedied within three (3)
Business Days after written notice of such failure is given to the Defaulting
Party by the other Non-Defaulting Party.

 

(2)                                  Notwithstanding
anything herein to the contrary, Buyer acknowledges that Seller filed a voluntary
petition for relief under Chapter 11 of the United States Bankruptcy code on
July 14, 2003 (the “Filing”) and such case remains pending in the United States
Bankruptcy Court, Northern District of Texas (the “Bankruptcy Court”). Until
such time as Seller emerges from Chapter 11 Bankruptcy through the confirmation
of a plan or reorganization, the Filing shall not constitute an Event of
Default under Sections l4.l(l)(c) or (e) of this Agreement; provided, however,
that in the event that (A) Seller files a motion which contemplates the sale of
substantially all of its assets; (B) Seller files a Chapter 11 plan which
contemplates the sale of substantially all of its assets; (C) Seller files a
motion or request to convert its Chapter 11 case to a Chapter 7 proceeding; or
(D) the Bankruptcy Court enters an order converting Seller’s case from a

 

39

 

Chapter 11 proceeding to
a Chapter 7 proceeding, any such event (A) through (D) shall constitute an
Event of Default under Sections 14.1(l)(c) or (c) of this Agreement.

 

14.2                        Remedies
Upon an Event of Default.

 

(1)                                  Upon
the occurrence of an Event of Default and, with the exception of the Bankruptcy
of a Party, for so long as such Event of Default is continuing, after the applicable
cure period, the Non-Defaulting Party may, upon written notice to the Defaulting
Party, establish a date, no earlier than the Day such notice is effective and
no later than twenty (20) Days after such notice is effective, on which this
Agreement will terminate (“Early Termination Date”) and suspend its performance
hereunder as of the declaration of such Early Termination Date; if the Event of
Default is the Bankruptcy of a Party, the Non-Defaulting Party may exercise the
remedy of immediate termination. Moreover, the Non-Defaulting Party will have
the right to exercise all rights and remedies available to it under this
Agreement, at law, and in equity including, but not limited to, the right: (a)
to retain, draw on, liquidate, or apply any Security for any amounts due and owing;
(b) to require the Defaulting Party to pay damages as set forth in Section
14.2(2); (c) to commence dispute resolution procedures as provided for in
Article 23; (d) to file suit to compel the Defaulting Party to perform or pay
any damages awarded the Non-Defaulting Party pursuant to Article 23; and (e) to
file suit to enjoin any acts that are unlawful or violate the rights of the
Non-Defaulting Party under this Agreement.

 

2)                                      Except
as otherwise expressly provided herein, any declaration, of an Early Termination
Date as a result of an Event of Default shall subject the Defaulting Party to the
payment only of actual, direct damages (“Damages”), which are described herein
but not limited hereby, to the Non-Defaulting Party. The Non-Defaulting Party
may take any actions it deems necessary or appropriate to protect, preserve or
enforce its rights or to reduce any risk of loss resulting from an early
termination of this Agreement. The Non- Defaulting Party shall calculate a Settlement
Amount, if any, resulting from an Early Termination Date in a commercially
reasonably manner.  The Settlement Amount
is intended to compensate the Non-Defaulting Party for the loss of the benefits
of the bargain, the costs of mitigation, and the loss of protection against
risks arising from the early termination of this Agreement.  Upon determination of the Settlement Amount
by the Non-Defaulting Party, the Non-Defaulting Party shall provide the
Defaulting Party with a written statement showing the calculation of the
Settlement Amount in sufficient detail to allow the Defaulting Party to compare
such amount to its own estimate of the Settlement Amount, and such Settlement
Amount shall be due and owing upon receipt (as determined in accordance with Section
20 of this Agreement) of this written statement by the Defaulting Party. No
later than the third (3rd) Business day after notice of the Settlement
Amount is provided to the Defaulting Party by the Non-Defaulting Party, the Party
owing such Settlement Amount shall pay same by wire transfer of immediately available
funds. If the Defaulting Party disputes the Non-Defaulting Party’s calculation
of the Settlement Amount, the dispute shall be resolved pursuant to the terms
of Article 23. Nothing in this Section 14.2(2) shall be construed to restrict
or preclude the Non-Defaulting Party from realizing on any Security held by the
Non-Defaulting Party at any

 

40

 

time upon the occurrence
of an Event of Default with respect to the Defaulting Party notwithstanding
(and without awaiting the outcome of) any dispute as to the Settlement Amount
payable. Consistent with Section 26.1, the Parties have an obligation to
mitigate damages in an Event of Default in order to minimize the Settlement
Amount.

 

(3)                                  Any
assertion by the Non-Defaulting Party of its entitlement to enforce any of the
remedies described in Section 14.2(1) must be initiated by the Non-Defaulting
Party, through written notice to the Defaulting Party, no later than the
expiration of twelve (12) months after the termination of this Agreement. The
Party, who fails to act in a timely manner as provided in this Section 14.2,
shall be deemed to have waived its right to enforce such remedies.

 

15.                               BILLING AND PAYMENT

 

15.1                        Billing
and Payment for RMR and Market Payments.

 

(1)                                  The
timing of payments and invoices received by Seller and the invoicing of Buyer
by Seller shall be as provided for in the RMR Agreements or the Tariff, as
applicable. Following each month during the “Condition 1” Term and within five
(5) Business Days of Seller’s issuance of a Revised Estimated RMR invoice to
the ISO and within five (5) Business Days of Seller’s receipt of the Tariff
Monthly Preliminary GMC and Market Invoice, Seller shall render to Buyer (by
regular mail, facsimile or other acceptable means pursuant to Section 20) a
statement setting forth Buyer’s Monthly Charges and Buyer’s Monthly Credits for
such month for the charges set forth in the applicable RMR invoice and any
other amounts due to either Party. Within five (5) Business Days of Seller’s
issuance of the Revised Adjusted RMR Invoice to the ISO, Seller shall render to
Buyer (by regular mail, facsimile or other acceptable means pursuant to Section
20) a statement setting forth the net credit or debit (based on the difference
between Buyer’s Monthly Charges and Buyer’s Monthly Credits assessed in
conjunction with the Revised Estimated RMR Invoice and the same assessed in
conjunction with the Revised Adjusted RMR Invoice) for such month for the
charges set forth in the applicable RMR invoice and any other amounts due to
either Party. Within five (5) Business Days of Seller’s receipt of the Monthly
Final GMC and Market Invoice from the ISO, Seller shall render to Buyer (by
regular mail, facsimile or other acceptable means pursuant to Section 20) a
statement setting forth the net credit or debit (based on the difference
between Buyer’s Monthly Charges and Buyer’s Monthly Credits assessed in
conjunction with the Monthly Preliminary GMC and the same assessed in
conjunction with the Monthly Final GMC) for such month for the charges set
forth in the applicable ISO invoice and any other amounts due to either Party.
Within five (5) Business Days after receipt of Seller’s statement Buyer or
Seller, as applicable, shall render, by wire transfer, the amount set forth on
such statement for payments due under the RMR Agreements (“RMR Payment”) or
payments due under the Tariff (“Market Payment”), or payments due under Buyer’s
Monthly Charges and Buyer’s Monthly Credits that are not otherwise included in
the RMR Payment or Market Payment to the payment address provided in Exhibit D
hereto. For purposes of clarity, “payments due under the Tariff’

 

41

 

shall include all
transactions with the ISO, including transactions made pursuant to the RMR
Agreements in which Buyer does not elect “contract path”. All “contract path”
volumes will be settled in accordance with the RMR Agreements.

 

(2)                                  To
the extent relevant, each payment under this Agreement for a given time period
shall be based on the same data which form the basis for the corresponding payment
by the ISO to Seller with respect to the RMR Agreements or otherwise and any payments
pursuant to the Tariff for that same time period.  Seller shall make available to Buyer,
simultaneously with their delivery to or receipt from ISO, the following documents
to the extent they relate to the “Condition 1” Term: (i) all invoices under the
RMR Agreements (e.g., Estimated
RMR Invoices, Revised Estimated RMR Invoices, Adjusted RMR Invoices and Revised
Adjusted RMR Invoices), (ii) all documents reflecting changes to such invoices (e.g., Prior Period Change Worksheets),
(iii) all invoices (e.g. Monthly Preliminary GMC and Market Invoice and Monthly
Final GMC and Market Invoice) and Daily Settlement Statements between Seller
and ISO under the Tariff relating to Market Payments that result from
transactions from Delta RMR Units, and (iv) all documents reflecting changes to
such invoices.  Any adjustment pursuant
to Adjusted Final RMR Invoice and Monthly Final GMC and Market Invoice and any
prior period adjustments (e.g. Prior Period Change Worksheets) shall be settled
between Buyer and Seller in the following settlement cycle.

 

(3)                                  Disputes
concerning billing and payment shall be handled as follows:

 

(a)                                  A
Party may, in good faith, dispute the correctness of any invoice issued by
Seller under this Article 15 or any adjustment to such an invoice or adjust any
invoice for any arithmetic or computational error within twelve (12) months of
the date the invoice, or adjustment to an invoice, was rendered.  Any such disputes shall be resolved in
accordance with Article 23.

(b)                                 Disputes
concerning billing and payment related only to the RMR ISO invoices shall be
subject to the timeline for such disputes as provided in the RMR Agreements and
shall be resolved in accordance with Article 23.

(c)                                  Buyer,
may, in good faith, dispute any ISO settlement data related only to “market”
transactions by notifying Seller of such dispute using the ISO Settlement
dispute form and providing all supporting documentation no later than four (4)
Business Days prior to the deadline by which Seller must file a dispute with
the ISO, where such deadline is determined using the ISO payment calendar.  The timeline for resolution of “market” disputes
shall be as provided in the Tariff, and the decision rendered by the ISO with
respect to any “market” dispute shall be final and binding on the Parties.
Seller shall only be obligated to credit Buyer any disputed amount to the
extent that the ISO credits Seller same.

(d)                                 In
the event a Party disputes an invoice or a portion thereof, or any other claim
or adjustment arising with respect to this Agreement, the disputing Party shall
pay the disputed invoiced amounts in full on the applicable payment due date,
subject to later refund together with interest accrued at

 

42

 

the Commercial
Interest Rate for “market” transactions and at the RMR Interest Rate for RMR
transactions, in either case from the date the disputed amount is paid until
the date it is returned.

 

(4)                                  If
the owing Party fails to remit the full amount payable when due, interest on
the unpaid portion shall accrue from the date due until the date of payment at
the Commercial Interest Rate. Any overpayments that are agreed upon by the
Parties shall be returned upon request or deducted by Seller or Buyer from
subsequent payments. Overdue payments or refunds shall accrue interest from the
due date to the date of payment at the Commercial Interest Rate.  Errors with respect to invoices or payments
shall be resolved as if section 9.8 of the RMR Agreements were a part of this
Agreement.  Any adjustments subsequently
made by the ISO shall be paid to or received from Buyer in a timely manner.

 

(5)                                  Notwithstanding
anything to the contrary herein, the Parties acknowledge and agree that
calculation of the payments described herein are unique, complicated and dependent
on information received from the ISO and each other.  Attached Exhibit F contains an estimated
timeline for settlement of RMR Payment and Market Payment amounts as specified
in Sections 12.1, 12.2, 12.3, and 12.4 of this Agreement.  If the Parties have not yet developed a
settlement process for this Agreement, the Parties shall use an estimation
procedure for settlement of the first three (3) months of the “Condition 1”
Term (the “Estimation Period”). 
Following conclusion of the Estimation Period, the Parties shall work
together to true-up in a timely manner the amounts invoiced during such period.
During the Estimation Period, the parties shall use commercially reasonable efforts
to use as much information as practicable from invoicing between Seller and ISO
related to the RMR Agreements and the Tariff, and other information, if
practicable, related to Article 12 of this Agreement. However, at a minimum,
the invoices during the Estimation Period shall contain the following:

 

(a)                                  The
estimated invoice for the first month of the “Condition 1” Term shall be
rendered to Buyer by the end of the second month of the “Condition 1” Term,
with payment due within five (5) Business Days of its receipt, and contain the
sum of following amounts: (a) (i) the sum of AFRRs for the RMR Units in Table
B-6 shall be divided by twelve (12) and (ii) the resulting quotient shall be
multiplied by the difference of one (1) minus the Fixed Option Payment Factor;
(b) (i) the total of Annual Capital Recovery amounts for the RMR Units divided
by twelve (12) and (ii) the resulting quotient shall be multiplied by the
difference of one (1) minus the Surcharge Payment Factor, (c) (i) the sum of
ISO Variable O&M Cost plus ISO Scheduling Coordinator Charge plus ISO ACA
Charge multiplied by (ii) the metered MWh for the Delta RMR Units for the first
month, and (d) credit of estimated Schedule C reimbursement received from ISO
for any “contract path” designated Energy for the first month for the Delta RMR
Units;

(b)                                 The
estimated invoice for the second month of the “Condition 1” Term shall be
rendered to Buyer by the end of the third month of the “Condition

 

43

 

1” Term, with
payment due within five (5) Business Days of its receipt, and contain the sum
of following amounts: (a) (i) the sum of AFRRs for the RMR Units in Table B-6
shall be divided by twelve (12) and (ii) the resulting quotient shall be
multiplied by the difference of one (1) minus the Fixed Option Payment Factor;
(b) (i) the total of Annual Capital Recovery amounts for the RMR Units divided
by twelve (12) and (ii) the resulting quotient shall be multiplied by the
difference of one (1) minus the Surcharge Payment Factor, (c) (i) the sum of
ISO Variable O&M Cost plus ISO Scheduling Coordinator Charge plus ISO ACA
Charge multiplied by (ii) the metered MWh for the Delta RMR Units for the
second month, (d) credit of estimated Schedule C reimbursement received from
ISO for any “contract path” designated Energy for the second month for the
Delta RMR Units, and (e) credit of revenues received from the ISO pursuant to
the Monthly Preliminary GMC and Market Invoice between Seller and ISO under the
Tariff relating to Market Payments that result from transactions from the Delta
RMR Units during the first month;

(c)                                  The
estimated invoice for the third month of the “Condition 1” Term shall be
rendered to Buyer by the end of the fourth month of the “Condition 1” Term,
with payment due within five (5) Business Days of its receipt, and contain the
sum of following amounts: (a) (i) the sum of AFRRs for the RMR Units in Table
B-6 shall be divided by twelve (12) and (ii) the resulting quotient shall be
multiplied by the difference of one (1) minus the Fixed Option Payment Factor;
(b) (i) the total of Annual Capital Recovery amounts for the RMR Units divided
by twelve (12) and (ii) the resulting quotient shall be multiplied by the
difference of one (1) minus the Surcharge Payment Factor, (c) (i) the sum of
ISO Variable O&M Cost plus ISO Scheduling Coordinator Charge plus ISO ACA
Charge multiplied by (ii) the metered MWh for the Delta RMR Units for the third
month, (d) credit of estimated Schedule C reimbursement received from ISO for
any “contract path” designated Energy for the third month for the Delta RMR
Units, and (e) credit of revenues received from the ISO pursuant to the Monthly
Preliminary GMC and Market Invoice between Seller and ISO under the Tariff
relating to Market Payments that result from transactions from the Delta RMR
Units during the second month;

(d)                                 The
invoice for the fourth month of the “Condition 1” Term shall be rendered to
Buyer by the end of the fifth month of the “Condition 1” Term, with payment due
within five (5) Business Days of its receipt, and contain Buyer’s Monthly
Charges and Buyer’s Monthly Credits pursuant to Section 12, and the Sections
referenced therein, of this Agreement. 
This invoice shall contain true-ups for the first month of settlements,
including, but not limited to, adjustments resulting from Revised Adjusted RMR Invoices
and Monthly Final GMC and Market Invoice; and

(e)                                  The
invoices for the fifth and future months of the “Condition 1” Term shall be
rendered to Buyer pursuant to Section 15.1 (1); provided, however, that the
invoice for the fifth month shall contain true-ups for the

 

44

 

second month of
settlements, including, but not limited to, adjustments resulting from Revised
Adjusted RMR Invoices and Monthly Final GMC and Market Invoice, and the invoice
for the sixth month shall contain true-ups for the third month of settlements,
including, but not limited to, adjustments resulting from Revised Adjusted RMR
Invoices and Monthly Final GMC and Market Invoice.

 

15.2                        Billing
and Payment for Gas Charges.

 

(1)                                  Seller
shall remit the amount due under Section 12.5, by wire transfer, in immediately
available funds, on or before the later of the 25th Day of the calendar month
following the month of delivery or ten (10) Days after receipt of the invoice
by Seller; provided that if such payment date is not a Business Day, payment
shall be due on the next Business Day following that date. In the event that
any payments are due Seller hereunder, payment to Seller shall be made in
accordance with this Section 15.2.

 

(2)                                  A
Party may, in good faith, dispute the correctness of any invoice or any
adjustment to such an invoice or adjust any invoice for any arithmetic or
computational error within twelve (12) months of the date the invoice, or
adjustment to an invoice, was rendered. Disputes concerning billing and payment
shall be resolved in accordance with Article 23. In the event a Party disputes
an invoice or a portion thereof, or any other claim or adjustment arising with
respect to this Agreement, the disputing Party shall pay the disputed invoiced
amounts in full on the applicable payment due date, subject to later return
together with interest accrued at the Commercial Interest Rate until the date
paid.  If the invoiced Party fails to
remit the full amount payable when due, interest on the unpaid portion shall
accrue from the date due until the date of payment at the Commercial Interest
Rate. Inadvertent overpayments shall be returned upon request or deducted by
Seller from subsequent payments. Overdue payments shall accrue interest from
the due date to the date of payment at the Commercial Interest Rate.

 

15.3                        Netting.

 

In each month for which
there are amounts owed to and by each Party, the Parties shall to the extent
reasonably possible aggregate and discharge their obligations to pay or credit through
netting, in which case the Party owing the greater aggregate amount may pay to
the other Party the difference between the amounts owed; provided that, for
purposes of clarity, the Parties shall not “net” (a) RMR Payments or Market
Payments against (b) Gas charges as described in Section 12.5; and provided
further that, Seller shall not be obligated to credit Buyer with, and Buyer may
not net, any Condition 1 revenues until such time as Seller receives same from
the ISO. Such netting shall not result in any waiver of, and each Party
reserves to itself, any rights, counterclaims, remedies or defenses (to the
extent not expressly herein waived or denied) which such Party has or may be
entitled to arising from or out of this Agreement.

 

45

 

15.4                        Right
of Audit and Obligation to Provide Financial Information.

 

(1)                                  Each
Party (and its representatives) has the right, on five (5) Business Days’ prior
written notice, at its sole expense and during normal working hours, to examine
the records of the other Party to the extent reasonably necessary to verify the
accuracy of any statement, charge or computation made pursuant to this
Agreement, including ISO settlements, Energy, Ancillary services, capacity
schedules, and Fuel consumption.  If
requested, Seller shall provide to Buyer statements evidencing the quantities
of Energy and Ancillary Services delivered at the Delivery Point, metering records
of Fuel delivered to the Fuel Delivery Point and Fuel consumed at the Facility
and any tests or records of any non-conforming Gas delivered at the Gas
Delivery Point.  If any such examination
reveals any inaccuracy in any statement, the necessary adjustments in such
statement and the payments thereof will be promptly made and shall bear
interest calculated at the Commercial Interest Rate from the date the
overpayment or underpayment was made until such adjustment is paid or refunded;
provided, however, that no
adjustment for any statement or payment will be made unless objection to the accuracy
thereof was made prior to the lapse of twelve (12) months from the receipt thereof.

 

(2)                                  If
requested by a Party (“Party A”), the other Party (“Party B”) shall deliver (i)
within 120 Days following the end of each fiscal year, a copy of Party B’s annual
report containing audited consolidated financial statements for such fiscal
year and (ii) within 60 Days after the end of each of its first three fiscal
quarters of each fiscal year, a copy of Party B’s quarterly report containing
unaudited consolidated financial statements for such fiscal quarter.  In all cases the statements shall be for the
most recent accounting period and prepared in accordance with GAAP; provided,
however, that should any such statements not be available on a timely basis due
to a delay in preparation or certification, such delay shall not be an Event of
Default under Section 14.1(1) so long as Party B diligently pursues the
preparation, certification and delivery of the statements.  If Party B’s financial statements are
publicly available from the website of the Securities and Exchange Commission,
Party B shall not be required to deliver copies of such statements to Party A.
Notwithstanding this Section 15.4(2), with respect to Seller, all financial
statements shall be for Mirant Corporation.

 

(3)                                  To
facilitate verification of invoice data, the Parties shall use commercially reasonable
efforts to allow Buyer to have access to Seller’s portion of the ISO RMR website
regarding information on the Delta RMR Units.

 

16.                               INDEMNIFICATION

 

The Parties hereby
incorporate the indemnity provision from the RMR Agreements as follows. Subject
to the limitations in Section 17, each Party shall indemnify, defend and hold
harmless the other Party and its officers, directors, employees, agents,
contractors and sub-contractors, from and against all third party claims,
judgments, losses, liabilities, costs, expenses (including reasonable attorneys’
fees) and damages for personal injury,

 

46

 

death or property damage,
caused by the negligence or willful misconduct related to this Agreement or
breach of this Agreement of the indemnifying Party, its officers, directors,
agents, employees, contractors or sub-contractors, provided that this indemnification
shall be only to the extent such personal injury, death or property damage is
not attributable to the negligence or willful misconduct related to this
Agreement or breach of this Agreement of the Party seeking indemnification, its
officers, directors, agents, employees, contractors or sub-contractors. This
indemnification shall not include or cover any claim covered by any workers’
compensation law. This indemnification shall be for an amount not exceeding the
deductible of the indemnifying Party’s commercial general liability insurance.
The indemnified Party shall give the other Party prompt notice of any such
claim. The indemnifying Party shall have the right to choose competent counsel,
control the conduct of any litigation or other proceeding, and settle any
claim. The indemnified Party shall provide all documents and assistance
reasonably requested by the indemnifying Party.

 

17.                               LIMITATION OF LIABILITY

 

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 HEREIN PROVIDED, SUCH EXPRESS
REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE
OBLIGOR’S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL
OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR
MEASURE OF DAMAGES IS EXPRESSLY HEREIN PROVIDED, THE OBLIGOR’S LIABILITY SHALL
BE LIMITED TO DIRECT ACTUAL DAMAGES 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. NEITHER PARTY SHALL BE
LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES,
LOST OPPORTUNITY COSTS OR LOST PROFITS, BY STATUTE, IN TORT OR CONTRACT, AT LAW
OR IN EQUITY, 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 IS WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING,
WITHOUT LIMITATION, THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE IS
SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES
REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE
DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OTHERWISE OBTAINING AN
ADEQUATE REMEDY IS INCONVENIENT AND THE LIQUIDATED DAMAGES CONSTITUTE A
REASONABLE APPROXIMATION OF THE HARM OR LOSS.

 

47

 

18.                               ASSIGNMENT; BINDING
EFFECT

 

18.1                        Assignment.

 

Neither Party
shall assign this Agreement or any of its rights or obligations hereunder
without the prior written consent of the other Party, which consent shall not
be unreasonably withheld or delayed, and any such assignee shall agree in
writing to be bound by the terms and conditions hereof and shall meet the
non-assigning Party’s creditworthiness criteria which shall include, but shall
not be limited to, providing adequate assurance to the non-assigning Party in
an amount and form determined by the non-assigning Party in a commercially
reasonable manner. The Parties acknowledge that the form and amount of any
adequate assurance which the non-assigning Party may require from an assignee,
as described in the preceding sentence, may not be the same as the form and
amount of Security which Seller or Buyer, as applicable, is required to provide
pursuant to Article 21. Notwithstanding the foregoing, either Party may,
without the need for consent from the other Party, (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; (b) transfer
or assign this Agreement to an Affiliate of such Party; or (c) transfer or assign
this Agreement to any Person succeeding to all or substantially all of the
assets of such Party; provided, that in the case of clauses (b) and (c) any
such assignee shall agree in writing to be bound by the terms and conditions
hereof and has (i) met the non-assigning Party’s creditworthiness criteria
which shall include, but shall not be limited to, providing adequate security
to the non-assigning Party in an amount and form determined by the
non-assigning Party in a commercially reasonable manner and (ii) demonstrated
to the non-assigning Party that it has internal or external resources with
reasonable proficiency in generation operations and that it is able to operate
the Facility consistent with Good Industry Practice and in accordance with all
the obligations under this Agreement. Upon any assignment consented to by the other
Party or permitted under clauses (b) or (c) of the preceding sentence, the
assigning Party shall be relieved of liability for all obligations arising
hereunder after the date such assignment becomes effective. The Parties agree
that it shall be a condition precedent to any proposed assignment of this
Agreement that the assignor and assignee shall fulfill the obligations of this
Section 18.1 before the assignment of this Agreement shall be allowed to occur.

 

18.2                        Binding
Effect.

 

This Agreement
shall inure to the benefit of and be binding upon the Parties and their
respective successors and permitted assigns.

 

19.                               CONFIDENTIALITY

 

Each Party shall
keep confidential, and shall not disseminate to any third party (other than
such Party’s Affiliates) or use for any other purpose (except with written
authorization), any information received from the other that is confidential or
proprietary

 

48

 

unless legally compelled
(by deposition, inquiry, request for production of documents, subpoena, civil
investigative demand or similar process, or by order of a court or tribunal of
competent jurisdiction, or in order to comply with applicable rules or requirements
of any stock exchange, government department or agency or other Governmental
Authority, or by requirements of any securities law or regulation or other
Governmental Rule) or as necessary to enforce the terms of this Agreement.
Either Party may disclose the terms of this Agreement to (i) its Affiliates,
and to its and their officers, directors, employees, attorneys and accountants,
(ii) credit reporting agencies, upon request and who are bound to hold, treat
and protect such information on a confidential basis and (iii) its lenders,
prospective lenders, financing participants and their respective consultants
and agents who (in the case of Persons identified in clause (iii)) are bound to
hold, treat and protect such information on a confidential basis. If any Party
is compelled to disclose any confidential information of the other Party, such
Party shall request that such disclosure be protected and maintained in
confidence to the extent reasonable under the circumstances and use reasonable
efforts to protect or limit disclosure with respect to commercially sensitive
terms. In addition, such Party shall provide the other Party with prompt notice
of the requirement to disclose confidential information in order to enable the
other Party to seek an appropriate protective order or other remedy, and such
Party shall consult with the other Party with respect to the other Party taking
steps to resist or narrow the scope of any required disclosure.

 

20.                               NOTICES

 

All notices,
requests, statements or payments shall be made to the addresses and persons
specified in Exhibit D hereto. All notices or requests shall be made in writing
except where this Agreement expressly provides that notice may be made orally.
Notices required to be in writing shall be delivered by letter, facsimile or
other documentary form. Notice by facsimile shall be deemed to have been
received on the Day on which it was transmitted (where confirmation of
successful transmission is received) (unless transmitted after 5:00 p.m. at the
place of receipt or on a Day that is not a Business Day in which case it shall
be deemed received on the next Business Day); provided that dispatch
notifications and notifications of changes in availability of the Facility sent
by facsimile shall be treated as received when confirmation of successful
transmission is received. Notice by hand delivery, overnight mail, or courier
shall be deemed to have been received when delivered. Notice by telephone shall
be deemed to have been received at the time the call is received. A Party may
change its address by providing notice of same in accordance herewith.

 

21.                               SECURITY

 

21.1                           Encumbrance;
Grant of Security Interest. As security for the prompt and complete payment
of all amounts now due or that may hereafter become due from a Party to the
other Party and performance by a Party of all of its obligations, each Party
hereby pledges, assigns, conveys and transfers to the other Party, and hereby
grants to the other Party a present and continuing security interest in and to,
and a general first lien upon and

 

49

 

right of set off against,
all of such Party’s right, title and interest in, to and under any Security
(except Letters of Credit) which has been or may in the future be transferred
to, or received by, the other Party, and all dividends, interest, and other
proceeds from time to time received, receivable, or otherwise distributed in
respect of, or in exchange for, any or all of the foregoing.

 

21.2                           Collateral
Requirement. The amount of Security to be posted by a Party (the “Posting
Party”) to the other Party (the “Secured Party”) shall be equal to the amount
that the Net Exposure “owed” by the Posting Party to the Secured Party for any
month exceeds the Credit Threshold for the Posting Party, subject to the
provisions of this Article 21 (the “Collateral Requirement”).  If the Net Exposure is a negative number, Seller
shall post Security, as calculated herein, to Buyer. If the Net Exposure is a
positive number, Buyer shall post Security, as calculated herein, to Seller.
Notwithstanding the foregoing, for Seller, the Security required hereunder
shall at no time be greater than $7.5 million.

 

21.3                           Calculation
of Net Exposure. “Net Exposure” equals the RMR Exposure plus the Market Exposure
plus the Gas Exposure. The calculation of Net Exposure shall be made in
accordance with the following terms. It is the intent of the Parties that the
Calculation Date coincide, to the extent possible, with the submission by
Seller to the ISO of an Estimated RMR Invoice for the previous trade
month.  If for any reason Seller does not
submit such an invoice to the ISO, with a copy concurrently to Buyer, or
estimate to Buyer on or before the fifteenth (15th) calendar day of
a month, Buyer may, at its election, estimate the amounts described below as
needed for the calculation of Net Exposure and demand any resulting Collateral
Requirement. Attached Exhibit G contains a method for calculating an estimated
Net Exposure for the first four (4) Calculation Dates, the period during which
sufficient settlement data may not be available to do a more accurate calculation;
provided, however, that if actual amounts become available for any of the estimated
amounts in Exhibit G, the applicable Party shall use such actual amounts in calculating
the Net Exposure in accordance with the methodology described in Exhibit G.

 

(1) “RMR Exposure”
shall be the sum of: (a) for the previous month, Buyer’s “Condition 2”
obligation to Seller less the “Condition 1” revenues in the Estimated RMR
Invoice; (b) for the current month and the subsequent month, Buyer’s expected “Condition
2” obligation to Seller for Monthly Availability Payment plus the Monthly
Surcharge Payment less the expected “Condition 1” credits for the same period
from Seller to Buyer; and (c) for the current month and the subsequent month,
an estimate of Seller’s credits to Buyer resulting from the sale of “contract
path” Energy pursuant to the RMR Agreements. An estimate of “contract path”
Energy may be calculated as MW available at the Delta RMR Units, multiplied by
the hours in the current month, multiplied by a capacity factor (equal to the
prior month’s percentage of actual “contract path” Energy), multiplied by a
fixed heat rate of 11MMBtu/MWh, multiplied by the last published Natural Gas Intelligence Bidweek Spot Gas
Prices, California, PG&E Citygate Average, multiplied by two (2) (for two
(2) months). For example, only, 966 MW * 720

 

50

 

hours/mo * 5% (or prior
month’s actual percentage) * 11 MMBtu/MWh * $6.50/MMBtu * 2 = approximately
$5.0 million;

 

(2)                                  “Market
Exposure” shall be based on the last settled Market Payment between Seller and
Buyer. The amount of that last settled Market Payment shall be multiplied by three
(3) (for three (3) months). For clarity, for purposes of the Market Exposure calculation,
a payment from Seller to Buyer is a negative number, and a payment from Buyer
to Seller is a positive number; and

 

(3)                                  “Gas
Exposure” shall be an estimate of potential Gas imbalances, calculated as (-1)
* 5% * MDQ (as set forth in each of Seller’s NGSAs, which are subject to change
from time to time) * 61 days * the last published Natural Gas Intelligence Bidweek Spot Gas Prices,
California, PG&E Citygate Average. 
For clarity, for purposes of the Gas Exposure calculation, a potential
exposure by Buyer to Seller, implying potential payment from Seller to Buyer,
is a negative number.

 

21.4                           Transfer
of Security.

 

(1)                                  If
the Secured Party demands Security, pursuant to the Collateral Requirement,
from the Posting Party on or before the Notification Time on a Business Day,
such Security shall be transferred by 5:00 p.m., New York City time, on the
second Business Day after the Business Day such demand is made.  Security demanded of a Posting Party after
the Notification Time on a Business Day shall be transferred by 5:00 p.m., New
York City time, on the third Business Day after the Business Day such demand is
made. If the Posting Party demands the return of Security, pursuant to the
Collateral Requirement, from the Secured Party on or before the Notification
Time on a Business Day, such Security shall be transferred by 5:00 p.m., New
York City time, on the second Business Day after the Business Day such demand
is made. Return of Security demanded by a Posting Party after the Notification
Time on a Business Day shall be transferred by 5:00 p.m., New York City time,
on the third Business Day after the Business Day such demand is made.

 

(2)                                  A
Posting Party may substitute new Security for other existing Security of equal
value on the Business Day following the Secured Party’s receipt of written
notice thereof.  Upon the transfer to the
Secured Party of the substitute Security, the Secured Party shall transfer the
relevant replaced Security to the Posting Party no later than the second
Business Day after such transfer has been effected.

 

21.5                           Credit
Thresholds.

 

(1)                                  The
applicable Credit Threshold for each Party is as follows:

 

To qualify for a Credit
Threshold Amount at BBB-/Baa3 Credit Rating, Seller’s or its Guarantor’s Credit
Rating outlook from each of S&P and Moody’s, respectively, shall be “Stable”
or better. Credit Threshold for Seller (or its Guarantor):

 

51

 

	
  Amount

  	
   

  	
  S&P
  Credit Rating

  	
   

  	
  Moody’s
  Credit Rating

  
	
  $15 million

  	
   

  	
  AA- and above

  	
   

  	
  Aa3 and above

  
	
  $10 million

  	
   

  	
  BBB+ to A+

  	
   

  	
  Baa1 to A1

  
	
  $5 million

  	
   

  	
  BBB- to BBB

  	
   

  	
  Baa3 to Baa2

  
	
  $ Zero

  	
   

  	
  Below BBB-

  	
   

  	
  Below Baa3

  

 

To qualify for a Credit Threshold Amount at BBB-/Baa3
Credit Rating, Buyer’s Credit Rating outlook from each of S&P and Moody’s,
respectively, shall be “Stable” or better. Credit Threshold for Buyer:

 

 

	
  Amount

  	
   

  	
  S&P
  Credit Rating

  	
   

  	
  Moody’s
  Credit Rating

  
	
  $22 million

  	
   

  	
  AA- and above

  	
   

  	
  Aa3 and above

  
	
  $17 million

  	
   

  	
  BBB+ to A+

  	
   

  	
  Baa1 to A1

  
	
  $12 million

  	
   

  	
  BBB- to BBB

  	
   

  	
  Baa3 to Baa2

  
	
  $ Zero

  	
   

  	
  Below BBB-

  	
   

  	
  Below Baa3

  

 

(2) If Seller’s
Guarantor issues a Guarantee, the Credit Threshold for Seller or its Guarantor
shall be the lesser of (a) the amount denoted in the applicable Credit
Threshold matrix and (b) the amount of the Guarantee.

 

21.6                           Interest
on Cash Collateral.  Any cash posted
as Security hereunder shall accrue interest for the benefit of the Posting
Party in accordance with the Commercial Interest Rate.

 

21.7                           Letter
of Credit.

 

If (i) the Posting
Party has provided a Letter of Credit under Article 21, (ii) the Posting Party
fails to cause any Letter of Credit to be renewed or replaced at least twenty
(20) Days before its expiration, and (iii) the Posting Party has not provided
substitute Security if permitted under Article 21, then the Secured Party shall
have the right to draw all or any part of the available balance of such Letter
of Credit, in an amount not exceeding the Collateral Requirement. The Posting
Party’s failure to renew the Letter of Credit shall not, in and of itself,
result in an Event of Default under Section 14.1(l)(f). The cash proceeds
received by the Secured Party from drawing on a Letter of Credit under this
provision shall be held as cash Security and shall be subject to Section 21.6.
If the bank issuing the Letter of Credit fails to honor the Secured Party’s
properly documented request to draw on the outstanding Letter of Credit and the
Posting Party fails to provide a replacement Letter of Credit from a financial
institution reasonably acceptable to the Secured Party or cash as a replacement
for that dishonored Letter of Credit, an Event of Default with respect to the
Posting Party shall be deemed to have occurred under Section 14.1(l)(f).

 

52

 

21.8                           Exercise
of Rights Against Security.

 

If (i) an Event of
Default with respect to the Posting Party has occurred and is continuing, or
(ii) an Early Termination Date has occurred or has been designated as the
result of an Event of Default with respect to the Posting Party, then, unless
the Posting Party has paid in full all of its obligations that are due to the
Secured Party under this Agreement, the Secured Party may exercise one or more
of the following rights and remedies:

 

(1)                                  Letter
of Credit. If the Security posted by the Posting Party is one or more Letters
of Credit, the Secured Party may draw on the entire, undrawn portion of all outstanding
Letters of Credit; provided that, such drawing shall not exceed the Settlement Amount
as calculated by the Secured Party. Notwithstanding the Secured Party’s receipt
of cash proceeds from a drawing under a Letter of Credit, the Posting Party
shall remain liable (i) for any failure to provide any additional Security as
required by Article 21 and (ii) for any amounts owing to the Secured Party and
remaining unpaid after the application of the amounts so drawn by the Secured
Party.

 

(2)                                  Cash.
If the Security posted by the Posting Party is cash, the Secured Party shall
have the right to apply such cash against and in satisfaction of any amount due
and payable by the Posting Party in respect of its obligations under this
Agreement.

 

22.                               FORCE MAJEURE

 

The Parties hereby
incorporate the Force Majeure provision from the RMR Agreements as follows. If
either Party is unable to perform its obligations under this Agreement due to a
Force Majeure Event, the Party unable to perform shall notify the other Party
of the Force Majeure Event promptly after the occurrence thereof. The Party’s
notice may be given orally but shall promptly be confirmed in writing or
electronically. If a Force Majeure Event prevents a Party from performing, in
whole or in part, its obligations under this Agreement, such Party’s
obligations, other than obligations to pay money (unless the means of
transferring funds is affected), shall be suspended and such Party shall have
no liability with respect to such obligations; provided, that the suspension of
the Party’s obligations is of no greater scope and of no longer duration than
is required by the Force Majeure Event. If a Force Majeure Event reduces the
Availability of an RMR Unit, the Availability shall be determined as if the RMR
Unit were available up to the Unit Availability Limit in effect prior to the
Force Majeure Event through the earlier of the 12th Day following the Force
Majeure Event or until the RMR Unit’s Availability is restored, whichever
occurs first. The Party that is unable to perform by reason of a Force Majeure
Event shall use commercially reasonable efforts to remedy its inability to
perform and mitigate the consequences of the Force Majeure Event as soon as
reasonably practicable; provided, that no Party shall be required to obtain
replacement power or to settle any strike or other labor dispute on terms
which, in the Party’s sole discretion, arc contrary to its interest and, except
to the extent that the RMR Unit’s primary Fuel is distillate fuel oil or
Schedule H of the RMR Agreements expressly requires Seller to maintain fuel oil
capability for the RMR Unit, Seller shall not be required to obtain or use fuel
oil to operate an RMR Unit. The Party unable to perform

 

53

 

shall advise the other
Party of its efforts to remedy its inability to perform and to mitigate the
consequences of the Force Majeure Event, and shall advise the other Party of
when it believes it will he able to resume performance of its obligations under
this Agreement.

 

23.                               DISPUTE RESOLUTION

 

Section 11.1 of
the RMR Agreements is incorporated herein by reference and shall apply to any
disputes that may arise between the Parties under this Agreement provided that
only Buyer and Seller shall be parties to the dispute resolution process.

 

24.                               INSURANCE

 

During the
Contract Term, Seller shall carry and maintain, or cause to be carried and
maintained, no less than the insurance coverages required in the RMR
Agreements.

 

25.                               MATERIAL CHANGE(S)

 

25.1                        RMR;
RMR Agreements.

 

If the present RMR
regulatory regime in existence as of the Effective Date of this Agreement is
modified or superseded by some other regime, system or market design (e.g., Market Redesign and Technology
Upgrade) and such modification or superseding regime does not result in the
termination or expiration of any RMR Agreement but nonetheless results in
either (1) a reduction in what would have been the amount of payments to Seller
under “Condition 2,” or (2) imposition of additional costs or charges on
Seller, and such Regime Change results in a cumulative negative financial
impact to Seller of $50,000 or more on earnings before interest, taxes, and
depreciation, Buyer shall increase its payments hereunder to ensure that Seller
receives the same payments-to-costs benefit as the Parties have agreed to as
part of this Agreement. In such event, Seller shall invoice Buyer in accordance
with the billing provisions set forth in this Agreement each time the
cumulative negative financial impact on Seller’s earnings as defined herein
reaches at least $50,000. Buyer’s obligation to pay any such invoices shall
continue for the remaining term of this Agreement; provided, however, as of
January 1, 2009, Buyer shall have the unconditional right to terminate this
Agreement on a Unit by Unit basis at any time; provided that, (a) such
termination shall become effective on the date the ISO permits Seller to switch
each affected RMR Unit from “Condition 1” status to “Condition 2” status and
(b) Buyer pays Seller, subject to the payment and netting provisions set forth
herein, the total amount of Seller’s outstanding negative financial impact on
earnings as defined herein at the time of termination.

 

54

 

25.2                        Air
Permit.

 

If the air permit
for the Facility, as originally issued, is amended such that the maximum number
of Run Hours or the minimum load, as determined by environmental restrictions
contained in the air permit, materially reduces the availability of the
Facility, Seller shall provide Buyer with prompt written notice of such
amendment, and Buyer shall have the right to terminate this Agreement by
providing written notice to Seller within ninety (90) Days of Buyer’s receipt
of notice of any such amendment, with any such termination to be effective
ninety (90) Days after delivery of such termination notice. Seller and Buyer
shall not be liable for any damages resulting from an early termination of this
Agreement pursuant to this Section 25.2. If the Facility’s air permit is
amended by any Governmental Authority, Seller shall promptly notify Buyer of
any modifications to the Operational Limitations as may be necessary to comply
with the amended air permit. Notwithstanding the above, Seller shall have the
duty to use its commercially reasonable efforts to oppose any amendment that
may adversely affect the dispatch rights provided for herein.

 

26.                               MISCELLANEOUS

 

26.1                        Duty to
Mitigate.

 

Each Party agrees
that it has a duty to mitigate damages and covenants that it will use
commercially reasonable efforts to minimize any damages it may incur as a
result of the other Party’s performance or non-performance of this Agreement.

 

26.2                        Entire
Agreement and Amendments.

 

This Agreement
constitutes the entire agreement between the Parties with respect to the
subject matter hereof. There are no prior or contemporaneous agreements or
representations affecting the subject matter of this Agreement other than those
herein expressed. No amendment, modification or change to this Agreement shall
be enforceable unless reduced to writing and executed by both Parties.

 

26.3                        Governing
Law.

 

This Agreement and
the rights and duties of the Parties hereunder shall be governed by and
construed, enforced and performed in accordance with the laws of the State of
California, without giving effect to principles of conflicts of laws that would
require the application of the law of any other state.

 

26.4                        Waivers.

 

55

 

The failure of
either Party hereto to enforce at any time any provision of this Agreement
shall not be construed to be a waiver of such provision, nor in any way to
affect the validity of this Agreement or any part hereof or the right of a
Party thereafter to enforce each and every such provision. A waiver under this
Agreement must be in writing and state that it is a waiver. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.

 

26.5                        Fines.

 

Except as
otherwise provided in this Agreement, each Party shall be responsible for and
shall pay the fines that are levied upon it by a Governmental Authority or
regulatory body as a result of such Party’s own actions or inactions except to
the extent one Party is obligated to indemnify the other Party under this
Agreement.

 

26.6                        Severability.

 

Except as
otherwise stated herein, any provision or section declared or rendered unlawful
by a Governmental Authority, or deemed unlawful because of a statutory change,
will not otherwise affect the lawful obligations that arise under this
Agreement.

 

26.7                        Headings;
Exhibits.

 

The headings used
for the sections and articles herein are for convenience and reference purposes
only and shall in no way affect the meaning or interpretation of the provisions
of this Agreement. Any and all Exhibits referred to in this Agreement are, by
such reference, incorporated herein and made a part hereof for all purposes.

 

26.8                        No
Third Party Beneficiaries.

 

Nothing in this
Agreement shall provide any benefit to any third party or entitle any third
party to any claim, cause of action, remedy or right of any kind, it being the
intent of the Parties that this Agreement shall not he construed as a third
party beneficiary contract.

 

26.9                        Counterparts.

 

This Agreement may
be executed in several counterparts, each of which is an original and all of
which constitute one and the same instrument. Execution pages may be delivered
by facsimile, and each such facsimile copy of an execution page shall have the
same legal force and effect as would an original.

 

26.10                 No
Partnership.

 

56

 

Nothing contained
in this Agreement shall be construed to create a partnership, joint venture,
agency or other relationship that may invoke fiduciary obligations between the
Parties hereto.

 

26.11                 Press
Releases.

 

Neither Party may
issue a press release or make any public statement with respect to this
Agreement or the substance hereof without the prior written agreement of the
other Party with respect to the form, substance and timing thereof, except that
either Party may make any such press release or public statement when the
releasing Party is advised by its legal counsel that such a press release or
public statement is required by law, regulation, stock exchange rules or in
connection with the financing of the Facility, but in such event the Parties
shall use their reasonably good faith efforts to agree as to the form,
substance and timing of such release or statement.

 

26.12                 Rights under the Federal Power Act.

 

(1)                                  This
Agreement shall not be subject to change through any unilateral application by
either Party to any Governmental Authority including, but not limited to, the
FERC pursuant to the provisions of Sections 205 or 206 of the Federal Power
Act, without the prior mutual written agreement of both Parties.  Each of the Parties hereby irrevocably waives
any right it may or can have to unilaterally seek any change, or to support any
application, complaint, or action by any other party or Governmental Authority
seeking such change.

 

(2)                                  Absent
agreement by the Parties to the proposed change, the standard of review for
changes to any Section of this Agreement proposed by a Party, a non-party or the
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) and Federal Power Commission v. Sierra Pacific Power Co.,
350 U.S. 348 (1956) (the “Mobile-Sierra” doctrine).

 

[Signature page
follows this page]

 

57

 

IN WITNESS WHEREOF, each of Seller and Buyer
has caused this Agreement to be executed on its behalf by its duly authorized
representative to be effective as of the date first above written.

 

	
   

  	
   

  	
  Mirant Delta, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Curtis A. Morgan

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Curtis A. Morgan

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
  1/13/05

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Mirant Potrero, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Curtis A. Morgan

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Curtis A. Morgan

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
  1/13/05

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Pacific Gas and Electric Company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Gordon R. Smith

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Gordon R. Smith

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title: 

  	
  President and C.E.O.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
  January 14, 2005

  	
   

  
									

 

58

 

Exhibit A

 

McDermott                                   

Will & Emery                         

 

	
  Boston
  Brussels Chicago Dissaldorf London los Angeles Miami Milan

  

  munich new york Orange County Rome San Diego
  Silicon Valley Washington, D.C.

  	
  FILED 

  OFFICE OF THE

  SECRETARY

  	
  Michael A. Yuffee

  Attorney at Law

  myuffee@mwe.com

  202.756.8086

  
	
   

  	
  2005 JAN - 7 P 3:55

  
	
   

  	
  FEDERAL ENERGY

  
	
   

  	
  REGULATORY
  COMMISSION

  

 

January 7, 2005

 

BY HAND DELIVERY

 

Hon. Magalie R. Salas

Secretary

Federal Energy Regulatory Commission

888 First Street, N.E.

Washington, D.C. 20426

 

Re:                               Mirant Delta, LLC and
Mirant Potrero, LLC, Docket
No. ERO5-343-000

 

Dear Secretary Salas:

 

Pursuant to Rule 602 of the Federal Energy
Regulatory Commission’s Rules of Practice and Procedure, 18 C.F.R. § 385.602
(2004), Mirant Delta, LLC (“Mirant Delta”) and Mirant Potrero, LLC (“Mirant
Potrero”) (collectively, “Mirant”),(1) 
hereby submit an original and 14 copies of an Offer of Partial
Settlement (“Settlement”) among the following parties (collectively, the “Supporting
Parties”): Mirant, the California Independent System Operator Corporation (“ISO”),
the California Electricity Oversight Board (“EOB”) and Pacific Gas and Electric
Company (“PG&E”). This Settlement represents an integrated and complete
resolution of all issues in this proceeding relating to: (i) Owner’s Repair
Cost Obligations; (ii) Annual Fixed Revenue Requirements (“AFRRs”); and (iii)
Variable O&M Rates (“VOM Rates”) for Contra Costa Units 4, 5 and 7, Pittsburg
Units 5 and 6, and Potrero Units 3, 4, 5 and 6. In addition, this Settlement
conditionally extends the settlement of these issues through 2008.

 

The Supporting Parties are authorized to
represent that although the California Public Utilities Commission (“CPUC”) is
not a signatory to the Settlement, the CPUC does not oppose the Settlement.

 

(1)                                  Beginning on July 14, 2003, Mirant Corporation
and certain of its affiliated entities (collectively,  “Mirant”) commenced proceedings under Chapter
11 of the Bankruptcy Code, 11 U.S.C. §§ 101, et
seq., in the United States Bankruptcy Court for the Northern
District of Texas, Fort Worth Division (the “Bankruptcy Court”). In filing this
Explanatory Statement and related Settlement, Mirant does not intend to waive
any protections which might be afforded to it under the Bankruptcy Code,
including but not limited to those protections provided by Section 362 thereof.

 

 

 

The Settlement consists of:

 

(i) this transmittal letter;

 

(ii) an Explanatory Statement concerning the
Settlement;

 

(iii) the Offer of Partial Settlement by and
between the Supporting Parties;

 

(iv) a proposed order approving the Settlement;
and

 

(v) a draft notice of filing.

 

Mirant respectfully requests that the
Secretary transfer the Settlement to the Commission pursuant to Rule 602(b)(2)(ii).
Mirant submits that this Settlement is in the public interest and should be
accepted by the Commission as it is the result of in-depth negotiations among
Mirant, PG&E, CPUC and EOB and resolves all issues in this proceeding
relating to: (i) Owner’s Repair Cost Obligations; (ii) AFRRs; and (iii) VOM
Rates. Accordingly, Mirant requests that the Commission approve the Settlement.

 

	
   

  	
  Respectfully
  submitted,

  
	
   

  	
   

  
	
   

  	
  /s/
  Michael A. Yuffee

  	
   

  
	
   

  	
  Michael
  A. Yuffee

  
	
   

  	
  Bruce
  A. Bedwell

  
	
   

  	
  McDERMOTT
  will & emery LLP

  
	
   

  	
   

  
	
   

  	
  Debra
  Raggio Bolton

  
	
   

  	
  Mirant
  Corporation

  
	
   

  	
   

  
	
   

  	
  Attorneys
  for

  
	
   

  	
  Mirant
  Delta, LLC and Mirant Potrero, LLC

  

 

 

Attachments

 

 

CERTIFICATE
OF SERVICE

 

I hereby certify that I have this day served
copies of the foregoing document upon each person designated on the official
service list as compiled by the Secretary in this proceeding in accordance with
the requirements of Rule 2010 of the Rules of Practice and Procedure, 18 C.F.R.
385.2010 (2004).

 

In addition, copies of this filing have been served on the following
persons:

 

	
  Deborah
  A. Le Vine

  	
   

  	
  Charles
  F. Robinson

  
	
  Director
  of Contracts

  	
   

  	
  Vice
  President and General Counsel

  
	
  California
  ISO Corporation

  	
   

  	
  California
  ISO Corporation

  
	
  151
  Blue Ravine Road

  	
   

  	
  151
  Blue Ravine Road

  
	
  Folsom,
  CA 95630

  	
   

  	
  Folsom,
  CA 95630

  
	
   

  	
   

  	
   

  
	
  Robert
  C. Kott

  	
   

  	
  Mary
  Anne Sullivan

  
	
  Manager
  of Reliability Contracts

  	
   

  	
  Hogan
  & Hartson

  
	
  California
  ISO Corporation

  	
   

  	
  555
  Thirteenth Street, NW

  
	
  151
  Blue Ravine Road

  	
   

  	
  Washington,
  DC 20004

  
	
  Folsom,
  CA 95630

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Laura
  Douglass

  	
   

  	
  Stuart
  K. Gardiner

  
	
  Team
  Lead, Reliability Strategy

  	
   

  	
  Law
  Department, B30A

  
	
  Pacific
  Gas and Electric Company

  	
   

  	
  Pacific
  Gas and Electric Company

  
	
  Mail
  Code N12E

  	
   

  	
  P.O.
  Box 7442

  
	
  P.O.
  Box 770000

  	
   

  	
  San
  Francisco, CA 94120

  
	
  San
  Francisco, CA 94177-0001

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Kenneth
  L. Glick

  	
   

  	
  Laurence
  G. Chaset

  
	
  Staff
  Counsel

  	
   

  	
  Legal
  Division

  
	
  California
  Electricity Oversight Board

  	
   

  	
  California
  Public Utilities Commission

  
	
  770
  L. Street

  	
   

  	
  505
  Van Ness Avenue

  
	
  Suite
  1250

  	
   

  	
  San
  Francisco, CA 94102

  
	
  Sacramento,
  CA 95814

  	
   

  	
   

  

 

	
  DATED at Washington, D.C., this 7th day of January, 2005.

  
	
   

  
	
   

  
	
   

  	
   

  	
  /s/
  Bruce A. Bedwell

  	
   

  
	
   

  	
   

  	
  Bruce
  A. Bedwell

  	
   

  

 

 

EXPLANATORY
STATEMENT

 

 

EXPLANATORY
STATEMENT (1)

 

I.                                         PROCEDURAL HISTORY

 

1.                                       Mirant Delta is the owner of the Contra Costa
Power Plant located in Antioch, California, and the Pittsburg Power Plant
located in Pittsburg, California. Mirant Potrero is the owner of the Potrero
Power Plant located in San Francisco, California.

 

2.                                       Mirant Delta and Mirant Potrero operate
generating units at their respective power plants subject to Must-Run Service
Agreements (“RMR Agreements”) with the ISO, the Schedules to which contain
certain generation unit-specific terms and conditions. The units subject to
such obligations under these RMR Agreements are referred to herein as RMR
Units.(2)

 

3.                                       By their express terms, the RMR Agreements
provide for annual revisions to, among other things, the AFRR and the Variable
O&M Rate (“VOM Rate”) for each RMR Unit. Pursuant to Schedule B, Section 7
of the RMR Agreements, the AFRR values are determined by the Formula Rate set
forth in Schedule F to the RMR Agreements, unless Mirant files a superseding
rate schedule under Section 205 of the Federal Power Act. The VOM Rates also
are determined by a formula set forth in Schedule F. Schedule F requires that
Mirant provide annually to the ISO an “Information Package detailing and
supporting all calculations” used to determine the AFRRs and VOM Rates under
the respective formulas for the upcoming calendar year (“Schedule F Filing
Requirements”). Mirant is required to provide a copy of this Information
Package to the ISO “in printed form and a suitable electronic format” and to
the Commission “in an informational filing.”

 

4.                                       On October 9, 2001, Mirant submitted, in
Docket No. ER02-64-000, an information package in the form of an informational
filing (“2002 Information Package”) in accordance with Schedule F of its RMR
Agreements. The 2002 Information Package contained data and workpapers
detailing Mirant’s calculation of its proposed AFRRs and VOM Rates for calendar
year 2002. PG&E, the ISO, the EOB, and the CPUC (collectively, the “Joint
Parties”)(3) filed protests to the 2002 Information Package, raising a variety
of issues.

 

5.                                       On December 19, 2001, the Commission issued
an order conditionally accepting for filing the revised tariff sheets submitted
in Docket No. ER02-198-000, subject to refund and

 

(1)                                  This Explanatory Statement is not intended to
alter any of the specific provisions of the Settlement, including its exhibits
and attachments, and is provided solely to comply with the Commission’s rules.

 

(2)                                  Specifically, the following units owned by
Mirant will be subject to RMR Agreements during calendar year 2005: Contra
Costa Units 4, 5 and 7; Pittsburg Units 5 and 6; and Potrero Units 3, 4, 5 and 6.

 

(3)                                  The only other party to respond to this
filing was the City and County of San Francisco, whose Motion to Intervene raised
no substantive issues.

 

 

the outcome of the ongoing proceedings in Docket No. ER02-64-000. Mirant Delta, LLC, 97 FERC ¶ 61,284
(2001).

 

6.                                       On November 20, 2002, the Supporting Parties
entered into a stipulation and agreement (the “2002-2004 Settlement”), which
fully resolved all issues in Docket Nos. ER02-64-000 and ER02-198-000. No party
objected to the 2002-2004 Settlement and the Commission approved the settlement
on February 5, 2003.(4) The 2002-2004 Settlement set forth Mirant’s AFRRs and
VOM Rates for the period January 1, 2002 through December 31, 2004,
thereby eliminating the need for Mirant to make Schedule F filings for those
calendar years. The 2002-2004 Settlement also set forth Mirant’s Owner’s Repair
Cost Obligations for the same period.

 

7.                                       On December 16, 2004, Mirant filed with the
Commission various proposed rate and rate schedule changes (referred to as the “Limited
205 Filing”). The Limited 205 Filing, among other things, contains the
proposed: (i) Owner’s Repair Cost Obligations; (ii) AFRRs; and (iii) VOM Rates
for each RMR Unit, to be effective January 1, 2005.

 

II.                                     DESCRIPTION OF SETTLEMENT

 

1.                                       In anticipation of the Schedule F Filing
Requirements and the Limited 205 Filing, Mirant, PG&E, CPUC and BOB
initiated informal settlement discussions to resolve any potential issues
relating to the AFRRs and VOM Rates for calendar year 2005. As a result of
these informal settlement discussions, the Supporting Parties submit the
attached Settlement, pursuant to which the Supporting Parties consent to the:
(i) Owner’s Repair Cost Obligations; (ii) AFRRs; and (iii) VOM Rates as set
forth in Mirant’s Limited 205 Filing for 2005.(5)

 

2.                                       Pursuant to the Settlement, the AFRR, VOM
Rate and Owner’s Repair Cost Obligation values in Mirant’s Limited 205 Filing
will be effective for the period January 1, 2005, through December 31, 2005 as
follows: (a) Owner’s Repair Cost Obligations as contained in Schedule A,
Section 13 of the RMR Agreements; (b) AFRRs, as contained in Table B-6 of the RMR
Agreements; and (c) VOM Rates, as contained in Table Cl-18 of the RMR
Agreements.

 

3.                                       Specifically, the Supporting Parties consent
to the following, as reflected in Mirant’s Limited 205 Filing for 2005:

 

a.                                       New AFRRs for Contra Costa Unit 7, Pittsburg
Units 5-6, and Potrero Units 3-6;

 

b.                                      For Contra Costa Units 4-5, the continuation
of the AFRRs contained in the 2002-2004 Settlement;

 

(4)                                  Mirant Delta, LLC and
Mirant Potrero, LLC, 102
FERC ¶ 61,130 (2003).

 

(5)                                  The ISO has not had the opportunity to
independently investigate or evaluate the basis for the rates in the Settlement.
It nevertheless supports the Settlement based on the recognition that it is the
product of extensive negotiation among Mirant, the CPUC, the EOB and PG&E,
which is the Responsible Utility with respect to these RMR Units, and based on
the fact that the Commission will review and approve the Settlement only upon a
determination that it is fair and reasonable and in the public interest.

 

2

 

c.                                       For all RMR Units, the continuation of the
VOM Rates contained in the 2002-2004 Settlement;

 

d.                                      For all RMR Units, new Owner’s Repair Cost
Obligations; and

 

e.                                       Revised Rate Schedule Sheets to be effective
January 1, 2005 through December 31, 2005.

 

4.                                       Upon agreement by the Supporting Parties,
this Settlement may be extended, without modification, for the period January
1, 2006 through December 31, 2008, by providing joint notice of such extension
to the Commission.

 

5.                                       The Supporting Parties have agreed that the
Settlement will be deemed to satisfy Mirant’s Schedule F Filing Requirements
for 2005 and, if the Settlement is extended, for 2006 through 2008.

 

6.                                       Through this Settlement, the Supporting
Parties consent only to those changes in Mirant’s Limited 205 Filing for 2005
discussed herein, and take no position in this Settlement on the other changes
set forth in Mirant’s Limited 205 Filing.

 

III.                                 EFFECTIVE DATE

 

The Settlement shall be effective on the
later of: (1) the date the Settlement is approved by the United States
Bankruptcy Court for the Northern District of Texas, Fort Worth Division, which
approval will be sought promptly by Mirant after the Commission issues an order
approving the Settlement without modification or condition or, if modified or
conditioned by the Commission, after acceptance of the modification or
conditions contained in such order by all of the Supporting Parties; or (2) if
modified or conditioned by the Bankruptcy Court, upon the date of acceptance of
the modifications or conditions contained in such order by all of the
Supporting Parties (“Effective Date”).

 

IV.                                REFUNDS

 

Refunds will be paid pursuant to the terms
and conditions of the Settlement.

 

V.                                    COMMENTS

 

The Supporting Parties seek expedited
treatment and request waiver of Rules 602(d)(2) and 602(f) so that initial
comments on the Settlement are due on January 14, 2005, and reply comments are
due on January 21, 2005.

 

VI.                                POLICY ISSUES AND OTHER ISSUES ARISING
UNDER THE SETTLEMENT

 

In accordance with the Chief Judge’s October 15,
2003 Notice to the Public concerning Information to be Provided with Settlement
Agreements, the Parties provide the following information:

 

3

 

1.                                      Underlying Issues and Major
Implications

 

The Parties wish to resolve all outstanding
issues with respect to the: (i) Owner’s Repair Cost Obligations; (ii) AFRRs;
and (iii) VOM Rates set forth in Mirant’s Limited 205 Filing for 2005. Through
this Settlement, the Parties agree that the data contained in Mirant’s Limited
205 Filing for 2005 concerning: (i) Owner’s Repair Cost Obligations; (ii)
AFRRs; and (iii) VOM Rates are to be accepted as filed, to be effective from
January 1, 2005, through December 31, 2005 and thereafter until changed by
Commission order or extended by the Parties pursuant to Section 1.6 of the
Settlement. This Settlement does not change any obligation Mirant has under the
RMR Agreements to make future filings to change these rates.

 

2.                                      Policy Implications

 

The unopposed changes to Mirant’s RMR
Agreements do not raise any policy implications.

 

3.                                      Pending Cases That May Be
Affected

 

The Settlement will not affect any cases
currently pending before the Commission.

 

4.                                      Issues of First Impression
and Reversals on Commission Position

 

The Settlement does not raise any issues of
first impression and does not propose to reverse any previous Commission
decisions involving similar issues.

 

5.                                      Standard of Review

 

The Parties intend that the standard of
review for changes to any section of the Settlement proposed by a Party, a
non-party or the Commission 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) and Federal Power Commission v. Sierra Pacific Power
Co., 350 U.S. 348 (1956) (the “Mobile-Sierra”
doctrine).

 

4

 

OFFER OF
SETTLEMENT

 

 

OFFER OF
SETTLEMENT

 

This Offer of Partial Settlement (the “Settlement”)
is dated as of January 7, 2005, by and among Mirant Delta, LLC (“Mirant Delta”)
and Mirant Potrero, LLC (“Mirant Potrero”) (collectively, “Mirant”),(1) the
California Independent System Operator Corporation (“ISO”), the California
Electricity Oversight Board (“EOB”) and Pacific Gas and Electric Company (“PG&E”).
These parties are referred to herein individually as a “Party” and collectively
as the “Parties” or “Supporting Parties.” The Parties are authorized to
represent that although the California Public Utilities Commission (“CPUC”) is
not a signatory to the Settlement, the CPUC does not oppose the Settlement.

 

RECITALS

 

A.                                   Mirant Delta is the owner of the Contra Costa
Power Plant located in Antioch, California, and the Pittsburg Power Plant
located in Pittsburg, California. Mirant Potrero is the owner of the Potrero
Power Plant located in San Francisco, California.

 

B.                                     Mirant Delta and Mirant Potrero operate
generating units at their respective power plants subject to Must-Run Service
Agreements (“RMR Agreements”) with the ISO, the Schedules to which contain
certain generation unit-specific terms and conditions. The units subject to
such obligations under these RMR Agreements are referred to herein as RMR
Units.(2)

 

C.                                     By their express terms, the RMR Agreements
provide for annual revisions to, among other things, the Annual Fixed Revenue
Requirement (“AFRR”) and Variable O&M Rate (“VOM Rate”) for each RMR Unit.
Pursuant to Schedule B, Section 7 of the RMR Agreements, the AFRR values are
determined by the Formula Rate set forth in Schedule F to the RMR Agreements,
unless Mirant files a superseding rate schedule filed under Section 205 of the
Federal Power Act. The VOM Rate values also are determined by a formula set
forth in Schedule F. Schedule F requires that Mirant provide annually to the
ISO an “Information Package detailing and supporting all calculations” used to
determine the AFRRs and VOM Rates under the respective formulas for the
upcoming calendar year (“Schedule F Filing Requirements”). Mirant is required
to provide a copy of this Information Package to the Commission “in an
informational filing.”

 

(1)                                  Beginning on July 14, 2003, Mirant
Corporation and certain of its affiliated entities (collectively, “Mirant”)
commenced proceedings under Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§
101, et seq., in the United States Bankruptcy Court for the Northern District
of Texas, Fort Worth Division (the “Bankruptcy Court”). In filing this
Settlement, Mirant does not intend to waive any protections which might be
afforded to it under the Bankruptcy Code, including but not limited to those
protections provided by Section 362 thereof.

 

(2)                                  Specifically, the following units owned by
Mirant will be subject to RMR Agreements during calendar year 2005: Contra
Costa Units 4, 5 and 7; Pittsburg Units 5 and 6; and Potrero Units 3, 4, 5 and
6.

 

 

D.                                    On October 9, 2001, Mirant submitted, in
Docket No. ER02-64-000, an information package in the form of an informational
filing (“2002 Information Package”) in accordance with Schedule F of its RMR
Agreements. The 2002 Information Package contained data and workpapers
detailing Mirant’s calculation of its proposed AFRRs and VOM Rates for calendar
year 2002. PG&E, the ISO, the EOB, and the CPUC filed protests to the 2002
Information Package, raising a variety of issues.(3)

 

E.                                      On December 19, 2001, the Commission issued
an order conditionally accepting for filing the revised tariff sheets submitted
in Docket No. ER02-198-000, subject to refund and the outcome of the ongoing
proceedings in Docket No. ER02-64-000. Mirant
Delta, LLC, 97 FERC ¶ 61,284 (2001).

 

F.                                      On November 20, 2002, the Parties entered
into a stipulation and agreement (the “2002-2004 Settlement”), which fully
resolved all issues in Docket Nos. ER02-64-000 and ER02-198-000. No party
objected to the 2002-2004 Settlement and the Commission approved the settlement
on February 5, 2003.(4) The 2002-2004 Settlement set forth Mirant’s AFRRs and VOM
Rates for the period January 1, 2002 through December 31, 2004, thereby
eliminating the need for Mirant to make Schedule F filings for those calendar
years. The 2002-2004 Settlement also set forth the Owner’s Repair Cost
Obligations for the same period.

 

G.                                     On December 16, 2004, Mirant filed with the
Commission various proposed rate and rate schedule changes (referred to as the “Limited
205 Filing”). The Limited 205 Filing, among other things, contains the
proposed: (i) Owner’s Repair Cost Obligation; (ii) AFRR; and (iii) VOM Rate for
each RMR Unit, to be effective January 1, 2005.

 

H.                                    The Parties wish to resolve all outstanding
issues with respect to the: (i) Owner’s Repair Cost Obligations; (ii) AFRRs;
and (iii) VOM Rates set forth in Mirant’s Limited 205 Filing for 2005.(5)

 

NOW, THEREFORE, in consideration of the
recitals and the mutual covenants and agreements hereinafter set forth, the
Parties mutually covenant and agree as follows:

 

(3)                                  The only other party to respond to this
filing was the City and County of San Francisco, whose Motion to Intervene
raised no substantive issues.

 

(4)                                  Mirant Delta, LLC and
Mirant Potrero, LLC, 102
FERC ¶ 61,130 (2003).

 

(5)                                  The ISO has not had the opportunity to
independently investigate or evaluate the basis for the rates in the
Settlement. It nevertheless supports the Settlement based on the recognition
that it is the product of extensive negotiation among Mirant, the CPUC, the EOB
and PG&E, which is the Responsible Utility with respect to these RMR Units,
and based on the fact that the Commission will review and approve the
Settlement only upon a determination that it is fair and reasonable and in the
public interest.

 

2

 

1.                                      IMPLEMENTATION

 

1.1                                 The Parties agree that the data contained in
Mirant’s Limited 205 Filing for 2005 concerning: (i) Owner’s Repair Cost
Obligations; (ii) AFRRs; and (iii) VOM Rates are to be accepted as filed, to be
effective from January 1, 2005, through December 31, 2005 and thereafter until
changed by Commission order or extended by the Parties pursuant to Section 1.6
of the Settlement. This Settlement does not change any obligation Mirant has
under the RMR Agreements to make future filings to change these rates.
Specifically, the Parties consent to the following:

 

(a)                                  The AFRR values for the various RMR Units
shall be as follows:

 

	
  RMR
  Unit

  	
   

  	
  AFRR

  	
   

  
	
  Contra Costa 4

  	
   

  	
  $

  	
  456,209

  	
   

  
	
  Contra Costa 5

  	
   

  	
  $

  	
  456,209

  	
   

  
	
  Contra Costa 7

  	
   

  	
  $

  	
  22,237,027

  	
   

  
	
  Pittsburg 5

  	
   

  	
  $

  	
  15,157,190

  	
   

  
	
  Pittsburg 6

  	
   

  	
  $

  	
  15,157,190

  	
   

  
	
  Potrero 3

  	
   

  	
  $

  	
  17,908,424

  	
   

  
	
  Potrero 4

  	
   

  	
  $

  	
  338,285

  	
   

  
	
  Potrero 5

  	
   

  	
  $

  	
  451,175

  	
   

  
	
  Potrero 6

  	
   

  	
  $

  	
  461,284

  	
   

  

 

(b)                                 The VOM Rates for the RMR Units at the Contra
Costa, Pittsburg, and Potrero Facilities shall be as follows:

 

	
  RMR
  Unit

  	
   

  	
  VOM Rate ($/MWh)

  	
   

  
	
  Contra Costa 4

  	
   

  	
  $

  	
  0

  	
   

  
	
  Contra Costa 5

  	
   

  	
  $

  	
  0

  	
   

  
	
  Contra Costa 7

  	
   

  	
  $

  	
  0.99

  	
   

  
	
  Pittsburg
  5

  	
   

  	
  $

  	
  0.76

  	
   

  
	
  Pittsburg
  6

  	
   

  	
  $

  	
  0.76

  	
   

  
	
  Potrero
  3

  	
   

  	
  $

  	
  3.16

  	
   

  
	
  Potrero
  4

  	
   

  	
  $

  	
  0

  	
   

  
	
  Potrero
  5

  	
   

  	
  $

  	
  0

  	
   

  
	
  Potrero
  6

  	
   

  	
  $

  	
  0

  	
   

  

 

3

 

(c)                                  The Owner’s Repair Cost Obligations for the
Contra Costa, Pittsburg, and Potrero Facilities shall be as follows:

 

	
  Facility

  	
   

  	
  Owner’s Repair

  Cost Obligation

  	
   

  
	
  Contra Costa

  	
   

  	
  $

  	
  423,152

  	
   

  
	
  Pittsburg

  	
   

  	
  $

  	
  552,707

  	
   

  
	
  Potrero

  	
   

  	
  $

  	
  406,885

  	
   

  

 

1.2                                 The Supporting Parties hereby incorporate
into this Settlement the portions of the Revised Rate Schedule Sheets attached
to Mirant’s Limited 205 Filing for 2005 (“Revised Rate Schedule Sheets”)
showing the agreed-upon changes identified in Section 1.1, supra, to be effective January 1, 2005.

 

1.3                                 Upon their effectiveness, the Revised Rate
Schedule Sheets shall supersede and revise the corresponding currently effective
rate schedule sheets that comprise the RMR Agreements previously filed by
Mirant.

 

1.4                                 The Supporting Parties consent only to those
changes in Mirant’s Limited 205 Filing for 2005 specified herein, and take no
position in this Settlement on the other changes set forth in Mirant’s Limited
205 Filing.

 

1.5                                 If approved by the Commission, this
Settlement fully resolves all issues in this proceeding relating to: (i) Owner’s
Repair Cost Obligations; (ii) AFRRs; and (iii) VOM Rates. The Supporting
Parties have agreed that the Settlement will be deemed to satisfy any Schedule
F Filing Requirements applicable to Mirant for 2005 and, if the Settlement is
extended, for 2006 through 2008.

 

4

 

1.6                                 Upon agreement by the Supporting Parties,
this Settlement may be extended, without modification, for the period January
1, 2006 through December 31, 2008, by providing joint notice of such extension
to the Commission.

 

2.                                      EFFECTIVE DATE

 

2.1                                 The Settlement shall be effective on the
later of: (1) the date the Settlement is approved by the United States
Bankruptcy Court for the Northern District of Texas, Fort Worth Division, which
approval will be sought promptly by Mirant after the Commission issues an order
approving the Settlement without modification or condition or, if modified or
conditioned by the Commission, after acceptance of the modifications or
conditions contained in such order by all the Supporting Parties; or (2) if
modified or conditioned by the Bankruptcy Court, upon the date of acceptance of
the modifications or conditions contained in such order by all of the Parties (“Effective
Date”).

 

2.2                                 Within ten (10) business days following
either Commission approval without modification or condition, or if modified or
conditioned by the Commission, within ten (10) business days of acceptance of
the modifications or conditions contained in such order by all of the
Supporting Parties, Mirant will file and thereafter diligently prosecute in the
Bankruptcy Court, a request for approval of the Settlement, thereafter taking
all actions necessary to obtain such approval.

 

3.                                      ACTION BY PARTIES

 

3.1                                 Except for the Bankruptcy Court Approval
provided in Section 2, the Parties hereby waive any and all rights to seek
rehearing or judicial review of the Commission’s order(s) approving this
Settlement, and shall be bound by and entitled to the benefits of the
provisions of this Settlement; provided,
however, that if the Commission approves this Settlement with modification
or condition, a Party may seek rehearing or judicial review of the Commission’s
order(s) approving this Settlement solely to challenge the Commission’s
imposition of modifications or conditions in order to preserve the terms and
conditions of this Settlement as filed.

 

3.2                                 The AFRR, VOM Rate and Owner’s Repair Cost
Obligation values in Mirant’s Limited 205 Filing will be effective for the
period January 1, 2005 through December 31, 2005, and may be extended under
Section 1.6 as follows: (a) Owner’s Repair Cost Obligations as contained in
Schedule A, Section 13 of the RMR Agreements; (b) AFRRs, as contained in Table B-6
of the RMR Agreements; and (c) VOM Rates, as contained in Table C1-18 of the
RMR Agreements.

 

3.3                                 Nothing in this Settlement is intended to
affect any obligation of Mirant under the RMR Agreements other than those
expressly provided herein, and specifically, Mirant shall continue to submit
proposed annual changes to the RMR Agreements in accordance with Section 4.11(a),
Schedule B, and Schedule D of the RMR Agreements and consistent with this Settlement.

 

5

 

4.                                      RESERVATIONS

 

4.1                                 Agreement to or acquiescence in this
Settlement shall not be deemed in any respect to constitute an admission by any
Party hereto that any allegation or contention made by any other Party in these
proceedings is true or valid. In reaching this Settlement, the Parties specifically
agree that this Settlement represents a negotiated agreement for the sole
purpose of settling certain issues, as described herein. No Party or affiliate
of any of the Parties shall be deemed to have approved, accepted, agreed to, or
consented to any fact, concept, theory, rate methodology, principle, or method
relating to jurisdiction, prudence, reasonable cost of service, cost
classification, cost allocation, rate design, rate schedule provisions, or
other matters underlying or purported to underlie any of the resolutions of the
issues provided herein. The Commission’s approval of the Settlement shall not
constitute approval of, or precedent regarding, any principle or issue in this
proceeding.

 

4.2                                 The Parties agree that the resolution of any
matter in this Settlement shall not be deemed to be a “settled practice” as
that term was interpreted and applied in Public
Service Commission of the State of New York v. FERC, 642 F.2d 1335
(D.C. Cir. 1980).

 

4.3                                 (a)                                  Each Party irrevocably waives its rights,
including its rights under §§ 205-206 of the Federal Power Act, unilaterally to
seek or support a change in the rate(s), charges, classifications, terms or
conditions of this Settlement. By this provision, each Party expressly waives,
solely with respect to this Settlement, its right to seek or support: (i) an
order from the Commission finding that the rate(s), charges, classifications,
terms or conditions agreed to by the Parties in the Settlement are unjust and
unreasonable; or (ii) any refund with respect thereto. Each Party agrees not to
make or support such a filing or request, and that these covenants and waivers
shall be binding notwithstanding any regulatory or market changes that may
occur hereafter.

 

(b)                                 Absent the agreement of all Parties to the
proposed change, the standard of review for changes to any section of the
Settlement proposed by a Party (to the extent that any waiver in Section (a)
above is unenforceable or ineffective as to such Party), a non-party or the
Commission 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) and Federal
Power Commission v. Sierra Pacific Power Co.,
350 U.S. 348 (1956) (the “Mobile-Sierra” doctrine).

 

4.4                                 This Settlement does not resolve any issues
related to Mirant’s Limited 205 Filing for 2005 not discussed herein nor does
this Settlement restrict in any way the positions that the Parties may take
with respect to such issues. The Parties specifically reserve their rights and positions
therein. Further, this Settlement is not intended to limit or affect the rights
and remedies of the Parties with respect to any other particular dispute not
resolved by this Settlement. Nothing in this Section 4.4 is intended to
conflict with Section 4.3.

 

4.5                                 Notwithstanding any provision of this
Settlement, nothing included in this Settlement is intended to limit or affect
the rights and remedies of the Parties with respect to any claim that the
amounts invoiced under the RMR Agreements are incorrect, including any dispute involving
the interpretation or application of the RMR Agreements.

 

6

 

5.                                      MISCELLANEOUS PROVISIONS

 

5.1                                 The titles and headings of the various
Articles and Sections in this Settlement arc for reference purposes only. They
are not to be construed or taken into account in interpreting this Settlement,
and do not qualify, modify, or explain the effects of this Settlement.

 

5.2                                 The rights conferred and obligations imposed
on any Party by this Settlement shall inure to the benefit of and be binding on
that Party’s successors in interest or assignees as if such successor or
assignee was itself a Party hereto.

 

5.3                                 This Settlement may be executed in
counterparts by each Party, each of which shall be deemed to be an original,
but which together shall constitute one and the same instrument.

 

5.4                                 The discussions among the Parties that have
resulted in this Settlement have been conducted on the explicit understanding
that they were undertaken subject to Rule 602(e) of the Commission’s Rules of
Practice and Procedure, 18 C.F.R. § 385.602(e)(2004), and the rights of the
Parties with respect thereto shall not be impaired by this Settlement.

 

6.                                      CONCLUSION

 

The Parties respectfully request that the
Commission approve the instant Settlement without modification or condition.

 

Signed and dated this 7th day of January,
2005.

 

	
  The
  California Independent System Operator 

  	
  Mirant Delta, LLC and Mirant Potrero, LLC

  
	
  Corporation

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Mary Anne Sullivan

  	
   

  	
  By:

  	
  /s/
  Debra Raggio Bolton 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:
  

  	
  Mary
  Anne Sullivan

  	
   

  	
  Name:
  

  	
  Debra
  Raggio Bolton 

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Associate
  General Counsel 

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Pacific
  Gas and Electric Company

  	
  California
  Electricity Oversight Board

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Stuart K. Gardiner

  	
   

  	
  By:

  	
  /s/
  Erik N. Saltmarsh

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:
  

  	
  Stuart
  K. Gardiner 

  	
   

  	
  Name:
  

  	
  Erik
  N. Saltmarsh

  
	
   

  	
   

  	
   

  	
   

  	
  Kenneth
  L. Glick

  
	
  Title:

  	
  Attorney

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  General
  Counsel

  
												

 

7

 

DRAFT ORDER

 

 

FEDERAL ENERGY REGULATORY COMMISSION

WASHINGTON, D.C. 20426

 

[Date]

 

	
   

  	
   

  	
  In
  Reply refer to:

  
	
   

  	
   

  	
  Docket
  No. ER05-343-000

  

 

McDermott Will & Emery LLP

ATTN: Michael A. Yuffee 

Attorney for Mirant Delta,
LLC

and Mirant Potrero, LLC

600 13th Street, N.W.

Washington, D.C. 20005

 

Dear Mr. Yuffee:

 

On January 7, 2005, you filed an offer of
settlement among Mirant Delta, LLC, Mirant Potrero, LLC (collectively, “Mirant”),
the California Independent System Operator Corporation (“ISO”), the California
Electricity Oversight Board (“EOB”) and Pacific Gas and Electric Company (“PG&E”)
in the above-referenced dockets.

 

The subject settlement is in the public interest
and is hereby approved. The Commission’s approval of this settlement does not
constitute approval of, or precedent regarding, any principle or issue in this
proceeding. The parties agree that the settlement is subject to the public
interest standard of review.

 

	
   

  	
  By
  direction of the Commission,

  
	
   

  	
   

  
	
   

  	
  Magalie
  R. Salas,

  
	
   

  	
  Secretary

  

 

cc: All Parties

 

 

DRAFT
NOTICE

 

 

UNITED
STATES OF AMERICA

BEFORE THE

FEDERAL
ENERGY REGULATORY COMMISSION

 

	
  Mirant
  Delta, LLC

  	
  )

  	
  Docket No. ER05-343-000

  
	
  Mirant
  Potrero, LLC

  	
  )

  	
   

  

 

NOTICE OF FILING

(January  , 2005)

 

Take notice that, on January 7, 2005, the
following parties submitted an Offer of Settlement in the above-referenced
dockets: Mirant Delta, LLC, Mirant Potrero, LLC, the California Independent
System Operator Corporation, the California Electricity Oversight Board and
Pacific Gas and Electric Company.

 

Any person desiring to intervene or to
protest this filing must file in accordance with Rules 211 and 214 of the
Commission’s Rules of Practice and Procedure (18 CFR 385.211, 385.214).
Protests will be considered by the Commission in determining the appropriate
action to be taken, but will not serve to make protestants parties to the
proceeding. Any person wishing to become a party must file a notice of
intervention or motion to intervene, as appropriate. Such notices, motions, or
protests must be filed on or before the comment date. Anyone filing a motion to
intervene or protest must serve a copy of that document on the Applicant and
all the parties in this proceeding.

 

The Commission encourages electronic
submission of protests and interventions in lieu of paper using the “eFiling”
link at http://www.ferc.gov. Persons unable to file electronically should
submit an original and 14 copies of the protest or intervention to the Federal
Energy Regulatory Commission, 888 First Street, N.E., Washington, D.C. 20426.

 

This filing is accessible on-line at
http://www.ferc.gov, using the “eLibrary” link and is available for review in
the Commission’s Public Reference Room in Washington, D.C.   There is an “eSubscription” link on the web
site that enables subscribers to receive email notification when a document is
added to a subscribed docket(s). For assistance with any FERC Online service,
please email FERCOnlineSupport@ferc.gov, or call (866) 208-3676 (toll free).
For TTY, call (202) 502-8659.

 

Comment Date: 5:00 pm Eastern Time on January
14, 2005. Reply Comment Date: 5:00 pm Eastern Time on January 21, 2005.

 

	
   

  	
  Magalie
  R. Salas

  
	
   

  	
   

  
	
   

  	
  Secretary

  

 

 

Exhibit B

 

Examples of Applicability of Schedule G vs. Modified Schedule G

 

Calculation is done by unit, by year

Applicable for 2005-2012

In this example, using volume (MWh), but logic also applies to contract
service limit hours in the same manner

(Schedule G rates apply for CAlSO calls beyond these volumes)

 

Assume:

Pittsburg 5 # of allowed startups is 20, per actual 2005 RMR contract

Pittsburg 5 volumetric limit is 400,000 MWh (frozen # to be used to
determine applicability of Modified Schedule G rates)

In 2007, the RMR contract for Pittsburg 5 allows for 280,000 MWh under
base rates

 

	
  Sample #1,
  2007 Operation

  	
  2007 Costs

  
	
  CAISO calls
  (combined DA, HA and RT) = 310,000 MWh

  	
  CAISO energy
  at Schedule C rates for 280,000 MWh

  
	
  PG&E
  calls = 140,000 MWh

  	
  CAISO energy
  at Schedule G rates for 30,000 MWh

  
	
  CAISO
  startups = 15

  	
  PG&E
  energy at Schedule C rates for 120,000 MWh

  
	
  PG&E
  startups = 8

  	
  PG&E
  energy at Modified Schedule G rates for 20,000 MWh

  
	
   

  	
  Schedule B
  rates for 20 startups

  
	
   

  	
  Modified
  Schedule G rates for 3 startups

  
	
   

  	
   

  
	
  Sample #2,
  2007 Operation

  	
  2007 Costs

  
	
  CAISO calls
  (combined DA, HA and RT) = 220,000 MWh

  	
  CAISO energy
  at Schedule C rates for 220,000 MWh

  
	
  PG&E
  calls = 210,000 MWh

  	
  CAISO energy
  at Schedule G rates for 0 MWh

  
	
  CAISO
  startups = 10

  	
  PG&E
  energy at Schedule C rates for 180,000 MWh

  
	
  PG&E
  startups = 8

  	
  PG&E
  energy at Modified Schedule G rates for 30,000 MWh

  
	
   

  	
  Schedule B
  rates for 18 startups

  
	
   

  	
  Modified
  Schedule G rates for 0 startups

  
	
   

  	
   

  
	
  Sample #3,
  2007 Operation

  	
  2007 Costs

  
	
  CAISO calls
  (combined DA, HA and RT) = 20,000 MWh

  	
  CAISO energy
  at Schedule C rates for 20,000 MWh

  
	
  PG&E
  calls = 350,000 MWh

  	
  CAISO energy
  at Schedule G rates for 0 MWh

  
	
  CAISO
  startups = 25

  	
  PG&E
  energy at Schedule C rates for 350,000 MWh

  
	
  PG&E
  startups = 2

  	
  PG&E
  energy at Modified Schedule G rates for 0 MWh

  
	
   

  	
  Schedule B rates
  for 20 startups

  
	
   

  	
  Schedule G
  rates for 5 startups

  
	
   

  	
  Modified
  Schedule G rates for 2 startups

  
	
   

  	
   

  
	
  Sample #4,
  2007 Operation

  	
  2007 Costs

  
	
  CAISO calls
  (combined DA, HA and RT) = 310,000 MWh

  	
  CAISO energy
  at Schedule C rates for 280,000 MWh

  
	
  PG&E
  calls = 80,000 MWh

  	
  CAISO energy
  at Schedule G rates for 30,000 MWh

  
	
  CAISO
  startups = 17

  	
  PG&E
  energy at Schedule C rates for 80,000 MWh

  
	
  PG&E
  startups = 4

  	
  PG&E
  energy at Modified Schedule G rates for 0 MWh

  
	
   

  	
  Schedule B
  rates for 20 startups

  
	
   

  	
  Modified
  Schedule G rates for 1 startups

  

 

 

Exhibit C – OFO Penalties

 

Low-Inventory OFO Allocation
Examples:

 

Situation 1: Both parties
deliver volumes short of the tolerance band.

 

The aggregated shortfall of
both parties is short of the 5% tolerance band set by the Gas Transporter for
the OFO.  Calculate the volume subject to
penalty for each party by calculating that party’s shortfall percentage,
deducting the 5% allowance (tolerance band) from that shortfall, and applying
the remaining percentage to that party’s usage. 
This result is that party’s volume subject to penalty.

 

Situation 2: One party delivers
volumes short of the tolerance band and both parties deliver short of their
usage.

 

The aggregated shortfall of
both parties is short of the 5% tolerance band set by the Gas Transporter for
the OFO.  Calculate the shortfall
attributed to each party.  Since PG&E
is within the 5% tolerance band and Mirant is not, the entire shortfall is
allocated to Mirant.  OFO penalties for
this instance are allocated to Mirant. 
Note that the volume subject to penalty was reduced because PG&E did
not fully use its 5% allocation.

 

High inventory OFO Allocation
Example:

 

Situation 3: One party delivers
volumes in excess of the tolerance band and the other party delivers short of
its usage.

 

The aggregated shortfall of
both parties is in excess of the 5% tolerance band set by the Gas Transporter
for the OFO.  Calculate the excess
attributed to each party.  Since Mirant
delivered volumes short of its usage and PG&E delivered volumes in excess
of the tolerance band, the entire excess is allocated to PG&E.  OFO penalties for this instance are allocated
to PG&E.  Note that the volume
subject to penalty was reduced because Mirant did not use any of its 5%
allocation and in fact, delivered short of its usage.

 

OFO Example

 

	
   

  	
   

  	
  Gas
  Delivery

  	
   

  	
  Gas
  Usage

  	
   

  	
  Volume

  	
   

  	
  %

  	
   

  	
  Utility

  Tolerance

  	
   

  	
  Allowed

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Gas
  Volume Subject to Penalty

  	
   

  
	
  Situations

  	
   

  	
  Mirant

  	
   

  	
  PG&E

  	
   

  	
  Total

  	
   

  	
  Mirant

  	
   

  	
  PG&E

  	
   

  	
  Total

  	
   

  	
  Difference

  	
   

  	
  Difference

  	
   

  	
  Band

  	
   

  	
  Volume

  	
   

  	
  Mirant

  	
   

  	
  PG&E

  	
   

  	
  Mirant

  	
   

  	
  PG&E

  	
   

  	
  Total

  	
   

  
	
  Both over
  tolerance band

  	
   

  	
  50000

  	
   

  	
  75000

  	
   

  	
  125000

  	
   

  	
  60000

  	
   

  	
  63000

  	
   

  	
  143000

  	
   

  	
  -16000

  	
   

  	
  -12.59

  	
  %

  	
  -5

  	
  %

  	
  -71.50

  	
   

  	
  16.67

  	
  %

  	
  -9.64

  	
  %

  	
  -7000

  	
   

  	
  -3850

  	
   

  	
  -10650

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
  0

  	
   

  
	
  One Party over

  	
   

  	
  50000

  	
   

  	
  81000

  	
   

  	
  131000

  	
   

  	
  60000

  	
   

  	
  63000

  	
   

  	
  143000

  	
   

  	
  -12000

  	
   

  	
  -8.39

  	
  %

  	
  -5

  	
  %

  	
  -71.50

  	
   

  	
  -16.67

  	
  %

  	
  -2.41

  	
  %

  	
  -4850

  	
   

  	
  0

  	
   

  	
  -4850

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  0

  	
   

  	
  0

  	
   

  	
   

  	
   

  

 

 

EXHIBIT D

NOTICES

 

	
  Mirant

  	
  PG&E

  
	
   

  	
   

  
	
  NOTICES:

  	
  NOTICES:

  
	
  1155
  Perimeter Center W

  Atlanta,
  GA 30338-5416

  Attention:
  Legal

  Phone: 678.579.6900

  Facsimile: 678.579.5988

  	
  P.O.
  Box 770000, MCN12E

  San Francisco, CA 94177

  Attention: Director,
  Power Contracts

  Phone: 415.973.0070

  Facsimile: 415.973.9176

  
	
   

  	
   

  
	
  PAYMENT:

  	
  PAYMENT:

  
	
  Bank
  of America, N.A.

  ABA
  # 11000012

  Account
  Number 3751003269

  	
  By
  Wire Transfer:

  Mellon
  Trust of New England, N.A.

  Account
  Title: PG&E

  Account
  Number: 059994

  ABA Number: 011001234

  
	
   

  	
   

  
	
  CREDIT:

  	
  CREDIT:

  
	
  Attention: Credit
  Department

  Phone: 678.579.3061

  Facsimile: 678.579.5823

  	
  Attention: Credit
  Department

  Phone: 415.972.5244

  Facsimile: 415.973.7301

  
	
   

  	
   

  
	
  SCHEDULING:

  	
  SCHEDULING:

  
	
  24
  Hour Desk: 678.579.3100

  24
  Hour Desk Fax: 678.579.5541

  	
  Day
  Ahead Desk: 415.973.6222

  24
  Hour Desk: 415.973.7900

  24 Hour Fax: 415.972.5340

  

 

 

EXHIBIT E

FORM OF LETTER OF CREDIT

ISSUING BANK LETTERHEAD

ADDRESS

 

	
  Issuing
  Bank;

  	
  [insert
  name

  	
   

  
	
   

  	
  Insert address]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  [insert
  date]

  	
   

  
	
   

  	
   

  	
   

  
	
  Irrevocable
  Standby Letter of Credit Number: [insert number]

  	
   

  
	
   

  	
   

  	
   

  
	
  Beneficiary:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Applicant: [insert name

  	
   

  	
   

  
	
   

  	
  insert
  address] 

  	
   

  
	
  Advising
  Bank:

  	
  [insert
  name

  	
   

  
	
   

  	
  insert
  address

  	
  (if
  applicable)]

  
	
   

  	
   

  	
   

  
	
  Confirming
  Bank:

  	
  [insert
  name

  	
   

  
	
   

  	
  Insert
  address

  	
   

  
	
   

  	
  (if
  applicable)]

  	
   

  

 

At the
request of [insert name of Applicant] and for the account of [insert name of
account party which may be the same as Applicant] (the “Account Party”), We,
[insert name of Issuing Bank], hereby issue our irrevocable standby letter of
credit (“Letter of Credit”), Number [insert number] in your favor available for
draw in the amount of United States Dollars [spell out the amount followed by (US$xxxxxxxx.xx)]
(hereinafter, as may be reduced from time to time in accordance with the provisions
hereof, the (“Stated Amount”)), effective immediately and expiring at our
office at the address indicated above with our close of business at 5:00 PM
[insert City] time on [insert date] (“Expiration Date”) unless terminated
earlier in accordance with the provisions hereof.

 

Funds under this Letter of Credit will be
made available to you by payment against presentation of the following documents:

 

1.               Your drawing request
marked “drawn under [insert name of Issuing Bank], Letter of Credit Number [insert
number], dated [insert date]”;

 

AND

 

2.               A Beneficiary Certificate
purportedly signed by an authorized representative of the [insert name of
Beneficiary] stating either:

 

 

(i) “This Letter of Credit will expire in twenty
(20) calendar days or less and [insert name
of Account Party] has not provided alternate security acceptable to [insert
name of Beneficiary] and the amount being drawn of United States Dollars [spell
out the amount followed by (US$xxxxxxxx.xx)]
does not exceed the amount of security that [insert name of Account Party] is required to post to
[insert name of Beneficiary] under the terms of that certain Power Purchase and Sale Agreement (First
Wraparound Agreement) by and among Mirant Delta, LLC and Mirant Potrero, LLC
and Pacific Gas and Electric Company, dated December   , 2004.”;

 

OR

 

(ii) “The amount of the accompanying drawing request
represents the amount owed by [insert name of Applicant] to [insert name of
Beneficiary] in accordance with the terms of that certain Power Purchase and Sale Agreement
(First Wraparound Agreement) by and among Mirant Delta, LLC and Mirant Potrero, LLC and
Pacific Gas and Electric Company, dated December    , 2004, which
amount was not paid when due, and such failure to pay was not remedied within the
applicable cure period and the amount owed remains unpaid.”

 

Special
Conditions:

 

1.                   Partial drawing(s) are
permitted.

2.                 This Letter of Credit
shall terminate upon the earlier of:

 

(i)                       THE MAKING
BY YOU OF THE FINAL DRAWING AVAILABLE TO BE MADE HEREUNDER;

(ii)                    THE SURRENDER
OF THIS ORIGINAL LETTER OF CREDIT ACCOMPANIED BY YOUR LETTER ACKNOWLEDGING
TERMINATION OF THIS LETTER OF CREDIT; AND

(iii)                 THE EXPIRATION
DATE.

 

3.         All banking charges associated with this Letter
of Credit are for the account of the Applicant.

4.         This Letter of Credit is not transferable.

5.         Each drawing request honored by us shall reduce
the Stated Amount by the amount honored.

 

We
hereby engage with you that drawing requests drawn under and in compliance with
the
terms of this Letter of Credit will be duly honored if drawn and presented for
payment at any time before the close of business [Time], Eastern Prevailing
Time at our counters located at [address] on or before the Expiration Date or
in the event of Force Majeure, as defined under Article 17 of the Uniform
Customs and Practice for Documentary Credits (1993 Revision) International
Chamber of Commerce Publication No. 500 (“UCP”), that interrupts our business,
within fifteen (15) days after resumption of our business, whichever is later.

 

 

Except
as otherwise stated herein, this credit is subject to the UCP and, with respect
to matters
not so covered, this Letter of Credit is subject to and governed by the laws of
the State
of New York.

 

If you have any questions
regarding this Letter of Credit, please call [Telephone No.] or write to the
attention of [Insert Department name and address] citing the Letter of Credit
number quoted above.

 

	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized
  Signature

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized
  Signature

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
						

 

Exhibit F - Payment and Invoicing Estimated Timeline for RMR and Market
Payments

Trade Month: T
to T + 30

	
  T - T+30

  	
  January

  	
   

  
	
   

  	
   

  	
   

  
	
  T+30 - T+60

  	
  February

  	
  T+40

  Est RMR Invoice

  
	
   

  	
   

  	
   

  
	
  T+60 - T+90

  	
  March

  	
  T+60

  Revised Est RMR Invoice

   

  T+65

  RMR Settlement for Trade Month T to T+30

  PG&E pays Mirant:

  Monthly Option Payment (Condition 2 Rates),
  Sect 12.1(1) (a) & (b)

  Variable Costs (Schedule C) for ‘market
  path’

  and fuel charges, Sect 12.1 (2) (d) & (e)

  Schedule G Sect 12.2 & Modified
  Schedule G Sect 12.3

  Make Whole RMR, Sect 25.1

   

  Mirant credits PG&E:

  Monthly Option Payment (Condition 1 Rates),
  Sect 12.4(1)

  Variable Costs (Schedule C) for ‘contract
  path’

  incl ISO fuel charges, Sect 12.4(5) &(6)

  Gas Reimbursement, Sect 12.4(7)

  Schedule D charges for Startups, Sect
  12.4(8)

  Payment for fuel burned to create steam for
  Pittsburg 7, Sect 12.4(11)

   

  T+70

  Est RMR Invoice for trade month T+30 to T+60

   

  
	
   

  	
   

  	
   

  
	
  T+90 - T+120

  	
  April

  	
  T+90

  Revised Est RMR Invoice for trade month T+30 to T+40

  Preliminary GMC and Market Invoice [Mirant to PG&E]

   

  T+95

  RMR Settlement for Trade Month T+30 to T+60

  PG&E pays Mirant:

  Monthly Option Payment (Condition 2 Rates),
  Sect 12.1(1) (a) & (b)

  Variable Costs (Schedule C) for ‘market path’ excl fuel charges, Sect 12.1(2)
  (d) & (e) Schedule G (Sect 12.2) & Modified Schedule G Sect 12.3

  Make Whole RMR, Sect 25.1

   

  Mirant credits PG&E:

  Monthly Option Payment (Condition 1 Rates),
  Sect 12.4(1)

  Variable Costs (Schedule C) for ‘contract path’ and ISO fuel charges, Sect
  12.4(5) & (6)

  Gas Reimbursement, Sect 12.4(7)

  Schedule D charges for Startups, Sect 12.4(8)

  Payment for fuel burned to create steam for Pittsburg 7, Sect 12.4(11)

   

  Market Settlement for Trade Month T to T+30 (Preliminary)

  PG&E pays Mirant:

  Energy dispatch for Reg down Ancillary Service, Sect 12.1 (1) (c)

  Energy dispatch for Supplemental Energy Dec Bids, Sect 12.1 (1) (d)

  UDP Sect 7.4

  Delta Dispatch Mitigation Fees, Sect 8

  Schedule G for Must Offer, Sect 10

  Gas for UDP Sect 11.7

   

  Mirant credits PG&E:

  Ancillary Services capacity amended by the
  ISO, Sect 12.4 (2)

  Ancillary Services Energy, Sect 12.4 (3)

  Energy from Supplemental Energy Inc. [ILLEGIBLE], Sect 12.4 (4)

  Minimum Load Cost Compensation Sect 12.4 (9)

   

  T+105

  Market Settlement for T to T+30 [Final]

  
	
   

  	
   

  	
   

  
	
  T+120 - T+150

  	
  May

  	
  T+125

  Same as T+95, based on actuals

  RMR Settlement for T+60 to T+90

  Market Settlement for T+30 to T+60

   

  T+135

  Revised Adj Invoice for T to T+30

   

  T+140

  Revised Adj Settlement for T to T+30

  
	
   

  	
   

  	
   

  
	
  T+150 & above

  	
  June

  	
  T+155

  RMR Settlement for T+90 to T+120

  Market Settlement for T+60 to T+90

  True ops for T to T+30

  

 

 

EXHIBIT
G - ESTIMATED NET EXPOSURE

 

Assuming Condition 1 Term
(energy delivery) starts on January 1, 2006

Calculation of Net Exposure
based on definition in PPA and does not necessarily reflect expected settlement
amounts

For example, Gas Exposure may
have $0 being settled, as it is only a potential exposure, whereas gas
transportation will get settled but is not included in the Net Exposure
calculation.

 

Estimated Net Exposure on January 15, 2006

	
  1. RMR
  Exposure

  	
   

  	
  $

  	
  930,633

  	
   

  	
  1a - to be based on Est RMR invoice -
  number here based on assumption of 5% contract path in December 2005 -
  PG&E owes Mirant

  
	
   

  	
   

  	
  $

  	
  3,500,000

  	
   

  	
  1b - Current month - PG&E will owe
  Mirant - based on 50% Fixed Option Payment Factor and Surcharge Payment
  Factor, but subject to change

  
	
   

  	
   

  	
  $

  	
  3,500,000

  	
   

  	
  1b - Prompt month - PG&E will owe
  Mirant - based on 50% Fixed Option Payment Factor and Surcharge Payment
  Factor, but subject to change

  
	
   

  	
   

  	
  $

  	
  (2,569,367)

  	
   

  	
  1c - Estimated as 966 MW * 31 days in Jan *
  24 h/day * 5%* 11 MMBtu/MWh * $6.50/MMBtu - Mirant will owe PG&E

  
	
   

  	
   

  	
  $

  	
  (2,320,718)

  	
   

  	
  1c - Estimated as 966 MW * 28 days in Feb *
  24 h/day * 5%* 11 MMBtu/MWh * $6.50/MMBtu - Mirant will owe PG&E

  use last published NGI Bidweek Spot Gas Prices, California, PG&E Citygate
  Average; assume 5% capacity factor until actual data available

  
	
  2. Market
  Exposure

  	
   

  	
  $

  	
  (5,625,000)

  	
   

  	
  estimate of $1.875 million per month * 3
  for previous, current and prompt month due to no data and no past exposure -
  Mirant will owe PG&E if Mirant and/or PG&E are able to roughly
  estimate a market payment for February and agree, could multiply that by 3 instead

  
	
  3. Gas
  Exposure

  	
   

  	
  $

  	
  (3,173,923)

  	
   

  	
  Estimated as (-1) *160,097 MDQ * 5% * 61
  days * $6.50/MMBtu, but will use updated MDQs when available - Mirant potentially
  owes PG&E MDQ based on Pittsburg 7 and Contra Costa 6; use last published
  NGI monthly index for PG&E Citygate just like in 1c

  
	
  NET
  EXPOSURE

  	
   

  	
  $

  	
  (5,758,376)

  	
   

  	
  PG&E
  exposed to Mirant

  

 

Estimated Net Exposure on February 15, 2006

	
  1. RMR
  Exposure

  	
   

  	
  $

  	
  930,633

  	
   

  	
  1a - to be based on Est RMR invoice -
  number here based on assumption of 5% contract path in January - PG&E
  owes Mirant

  
	
   

  	
   

  	
  $

  	
  3,500,000

  	
   

  	
  1b - Current month - PG&E will owe
  Mirant - based on 50% Fixed Option Payment Factor and Surcharge Payment
  Factor, but subject to change

  
	
   

  	
   

  	
  $

  	
  3,500,000

  	
   

  	
  1b - Prompt month - PG&E will owe
  Mirant - based on 50% Fixed Option Payment Factor and Surcharge Payment
  Factor, but subject to change

  
	
   

  	
   

  	
  $

  	
  (2,320,718)

  	
   

  	
  1c - Estimated as 966 MW * 28 days in Feb *
  24 h/day * 5% * 11 MMBtu/MWh * $6.50/MMBtu - Mirant will owe PG&E

  
	
   

  	
   

  	
  $

  	
  (2,569,367)

  	
   

  	
  1c - Estimated as 966 MW * 31 days in March
  * 24 h/day * 5% * 11 MMBtu/MWh * $6.50/MMBtu - Mirant will owe PG&E

  use last published NGI Bidweek Spot Gas Prices, California, PG&E Citygate
  Average; assume 5% capacity factor until actual data available

  
	
  2. Market
  Exposure

  	
   

  	
  $

  	
  (5,625,000)

  	
   

  	
  estimate of $1.875 million per month * 3
  for previous, current, and prompt month due to no data and no past exposure -
  Mirant will owe PG&E if Mirant and/or PG&E are able to roughly
  estimate a market payment for February and agree, could multiply that by 3 instead

  
	
  3. Gas
  Exposure

  	
   

  	
  $

  	
  (3,173,923)

  	
   

  	
  Estimated as (-1) *160,097 MDQ * 5% * 61
  days * $6.50/MMBtu, but will use updated MDQs when available - Mirant potentially
  owes PG&E MDQ based on Pittsburg 7 and Contra Costa 5; use last published
  NGI monthly index to PG&E Citygate just like in 1c

  
	
  NET
  EXPOSURE

  	
   

  	
  $

  	
  (5,758,375)

  	
   

  	
  PG&E
  exposed to Mirant

  

 

Estimated Net Exposure on March 15, 2006

	
  1. RMR
  Exposure

  	
   

  	
  $

  	
  1,179,282

  	
   

  	
  1a - to be based on Est RMR invoice -
  number here based on assumption of 5% contract path in February - PG&E
  owes Mirant

  
	
   

  	
   

  	
  $

  	
  3,500,000

  	
   

  	
  1b - Current month - PG&E will owe
  Mirant - based on 50% Fixed Option Payment Factor and Surcharge Payment
  Factor, but subject to change

  
	
   

  	
   

  	
  $

  	
  3,500,000

  	
   

  	
  1b - Prompt month - PG&E will owe
  Mirant - based on 50% Fixed Option Payment Factor and Surcharge Payment
  Factor, but subject to change

  
	
   

  	
   

  	
  $

  	
  (2,569,367)

  	
   

  	
  1c - Estimated as 966 MW * 31 days in March
  * 24 h/day * 5% * 11 MMBtu/MWh * $6.50/MMBtu - Mirant will owe PG&E

  
	
   

  	
   

  	
  $

  	
  (2,486,484)

  	
   

  	
  1c - Estimated as 966 MW * 30 days in April
  * 5% * 11 MMBtu/MWh * $6.50/MMBtu - Mirant will owe PG&E

  use last published NGI Bidweek Spot Gas Prices, California, PG&E Citygate
  Average; assume 5% capacity factor until actual data available

  
	
  2. Market
  Exposure

  	
   

  	
  $

  	
  (5,625,000)

  	
   

  	
  estimate of $1.875 million per month * 3
  for previous, current, and prompt month due to no data and no past exposure -
  Mirant will owe PG&E if Mirant and/or PG&E are able to roughly estimate
  a market payment for February or March and agree, could multiply that by 3

  
	
  3. Gas
  Exposure

  	
   

  	
  $

  	
  (3,173,923)

  	
   

  	
  Estimated as (-1)*160,097 MDQ * 5% * 61
  days * $6.50/MMBtu, but will use updated MDQs when available - Mirant potentially
  owes PG&E MDQ based on Pittsburg 7 and Contra Costa 6; use last published
  NGI monthly index for PG&E Citygate just like in 1c

  
	
  NET
  EXPOSURE

  	
   

  	
  $

  	
  (5,675,492)

  	
   

  	
  PG&E
  exposed to Mirant

  

 

Estimated Net Exposure on April
15, 2006

 

 

 

	
  Boston
  Brussels Chicago Düsseldorf London los Angeles Miami Milan munich new
  york Orange County Rome San Diego Silicon Valley Washington, D.C.

  	
  FILED

  OFFICE OF THE

  SECRETARY

  

  2005 JAN – 7 P 3:55

  

  FEDERAL ENERGY

  REGULATORY COMMISSION

  	
  Michael A. Yuffee

  Attorney at Law
myuffee@mwe.com

  202.756.8066

  
	
   

  

 

January
7, 2005

 

BY HAND DELIVERY

 

Hon. Magalie R. Salas

Secretary

Federal Energy Regulatory
Commission

888
First Street, N.E.

Washington, D.C. 20426

 

Re:                               Mirant Delta, LLC and
Mirant Potrero, LLC, Docket No. ER05-343-000

 

Dear
Secretary Salas:

 

Pursuant
to Rule 602 of the Federal Energy Regulatory Commission’s Rules of Practice and
Procedure, 18 C.F.R. § 385.602 (2004), Mirant Delta, LLC (“Mirant Delta”) and
Mirant Potrero, LLC (“Mirant Potrero”) (collectively, “Mirant”),(1) hereby submit an original and 14 copies
of an Offer of Partial Settlement (“Settlement”) among the following parties
(collectively, the “Supporting Parties”): Mirant, the California
Independent System Operator Corporation (“ISO”), the California Electricity
Oversight Board (“EOB”) and Pacific Gas and Electric Company (“PG&E”). This
Settlement represents an integrated and complete resolution of all issues in this proceeding relating to: (i) Owner’s
Repair Cost Obligations; (ii) Annual Fixed Revenue Requirements
(“AFRRs”); and (iii) Variable O&M Rates (“VOM Rates”) for Contra Costa
Units 4, 5 and 7, Pittsburg Units 5 and 6, and Potrero Units 3, 4, 5 and 6. In
addition, this Settlement conditionally
extends the settlement of these issues through 2008.

 

The
Supporting Parties are authorized to represent that although the California
Public Utilities Commission (“CPUC”) is not
a signatory to the Settlement, the CPUC does not oppose the Settlement.

 

(1)                                        Beginning on July 14,
2003, Mirant Corporation and certain of its affiliated entities (collectively, “Mirant”) commenced proceedings under Chapter
11 of the Bankruptcy Code, 11 U.S.C. §§101, et
seq., in the United States Bankruptcy
Court for the Northern District of Texas, Fort Worth Division (the “Bankruptcy
Court”). In filing this Explanatory Statement and related Settlement, Mirant
does not intend to waive any protections which might be afforded to it under
the Bankruptcy Code, including but not limited to those protections provided by
Section 362 thereof.

 

 

The Settlement consists of:

 

(i) this transmittal letter;

 

(ii) an Explanatory Statement concerning the
Settlement;

 

(iii) the Offer of Partial Settlement by and
between the Supporting Parties;

 

(iv) a proposed order approving the
Settlement; and

 

(v) a draft notice of filing.

 

Mirant respectfully requests that the
Secretary transfer the Settlement to the Commission pursuant to Rule 602(b)(2)(ii). Mirant submits
that this Settlement is in the public interest and should be accepted by the
Commission as it is the result of in-depth negotiations among Mirant, PG&E,
CPUC and EOB and resolves all issues in this proceeding relating to: (i)
Owner’s Repair Cost Obligations;
(ii) AFRRs; and (iii) VOM Rates. Accordingly, Mirant requests that the Commission approve the Settlement.

 

	
   

  	
  Respectfully submitted,

  
	
   

  	
   

  
	
   

  	
  /s/ Michael
  A. Yuffee

  	
   

  
	
   

  	
  Michael A.
  Yuffee

  
	
   

  	
  Bruce A. Bedwell

  
	
   

  	
  MCDERMOTT
  WILL & EMERY LLP

  
	
   

  	
   

  
	
   

  	
  Debra Raggio Bolton

  
	
   

  	
  Mirant Corporation

  
	
   

  	
   

  
	
   

  	
  Attorneys for

  
	
   

  	
  Mirant Delta, LLC and Mirant Potrero, LLC

  

 

Attachments

 

 

CERTIFICATE OF SERVICE

 

I hereby certify that I have this day served
copies of the foregoing document upon each person designated on the official
service list as compiled by the Secretary in this proceeding in accordance with the requirements of Rule 2010 of
the Rules of Practice and Procedure, 18 C.F.R. 385.2010 (2004).

 

In addition, copies of this filing have been served on the following
persons:

 

	
  Deborah A. Le Vine

  	
  Charles F. Robinson

  
	
  Director of Contracts

  	
  Vice
  President and General Counsel

  
	
  California ISO Corporation

  	
  California ISO Corporation

  
	
  151 Blue Ravine Road

  	
  151 Blue Ravine Road

  
	
  Folsom, CA 95630

  	
  Folsom, CA 95630

  
	
   

  	
   

  
	
  Robert C. Kott

  	
  Mary Anne Sullivan

  
	
  Manager of Reliability Contracts

  	
  Hogan & Hartson

  
	
  California ISO Corporation

  	
  555 Thirteenth Street, NW

  
	
  151 Blue Ravine Road

  	
  Washington, DC 20004

  
	
  Folsom, CA 95630

  	
   

  
	
   

  	
   

  
	
  Laura
  Douglass

  	
  Stuart K. Gardiner

  
	
  Team Lead, Reliability Strategy

  	
  Law Department, B30A

  
	
  Pacific Gas and Electric Company

  	
  Pacific Gas and Electric Company

  
	
  Mail Code N12E

  	
  P.O. Box 7442

  
	
  P.O. Box 770000

  	
  San Francisco, CA 94120

  
	
  San Francisco, CA 94177-0001

  	
   

  
	
   

  	
   

  
	
  Kenneth L. Glick

  	
  Laurence G. Chaset

  
	
  Staff Counsel

  	
  Legal Division

  
	
  California Electricity Oversight Board

  	
  California Public Utilities Commission

  
	
  770 L. Street

  	
  505 Van Ness Avenue

  
	
  Suite 1250

  	
  San Francisco, CA 94102

  
	
  Sacramento, CA 95814

  	
   

  

 

DATED at Washington, D.C., this 7th day of
January, 2005.

 

	
   

  	
  /s/ Bruce A.
  Bedwell

  	
   

  
	
   

  	
  Bruce A.
  Bedwell

  

 

 

EXPLANATORY STATEMENT

 

 

EXPLANATORY STATEMENT(1)

 

I.                                         PROCEDURAL
HISTORY

 

1.                   Mirant Delta is the owner of the Contra Costa
Power Plant located in Antioch, California,
and the Pittsburg Power Plant located in Pittsburg, California.  Mirant Potrero is the owner of the Potrero
Power Plant located in San Francisco, California.

 

2.                   Mirant Delta and Mirant Potrero operate
generating units at their respective power plants subject to Must-Run Service Agreements (“RMR Agreements”) with
the ISO, the Schedules to which contain certain generation unit-specific terms
and conditions. The units subject to
such obligations under these RMR Agreements are referred to herein as RMR
Units.(2)

 

3.                   By their express terms, the RMR Agreements
provide for annual revisions to, among other things, the AFRR and the Variable
O&M Rate (“VOM Rate”) for each RMR Unit. Pursuant to Schedule B, Section 7
of the RMR Agreements, the AFRR values are determined by the Formula Rate set forth in Schedule F to the
RMR Agreements, unless Mirant files a superseding
rate schedule under Section 205 of the Federal Power Act. The VOM Rates also
are determined by a formula set forth
in Schedule F. Schedule F requires that Mirant provide annually to the ISO an
“Information Package detailing and supporting all calculations” used to determine the AFRRs and VOM Rates under the
respective formulas for the upcoming calendar year (“Schedule F Filing Requirements”).  Mirant is required to provide a copy of this Information
Package to the ISO “in printed form and a suitable electronic format” and to
the Commission “in an informational filing.”

 

4.                   On October 9, 2001, Mirant submitted, in Docket
No. ER02-64-000, an information
package in the form of an informational filing (“2002 Information Package”) in accordance with Schedule F of its RMR Agreements.
The 2002 Information Package contained data
and workpapers detailing Mirant’s calculation of its proposed AFRRs and VOM
Rates for calendar year 2002.
PG&E, the ISO, the EOB, and the CPUC (collectively, the “Joint Parties”)(3)
filed protests to the 2002
Information Package, raising a variety of issues.

 

5.                   On December 19, 2001, the Commission issued an
order conditionally accepting for
filing the revised tariff sheets submitted in Docket No. ER02-198-000, subject
to refund and

 

(1)                                  This Explanatory
Statement is not intended to alter any of the specific provisions of the Settlement, including
its exhibits and attachments, and is provided solely to comply with the Commission’s rules.

 

(2)                                  Specifically, the
following units owned by Mirant will be subject to RMR Agreements during calendar year 2005:
Contra Costa Units 4, 5 and 7; Pittsburg Units 5 and 6; and Potrero Units 3, 4,
5 and 6.

 

(3)                                  The only other party to
respond to this filing was the City and County of San Francisco, whose Motion to Intervene
raised no substantive issues.

 

 

the
outcome of the ongoing proceedings in Docket No. ER02-64-000. Mirant Delta, LLC, 97 FERC ¶ 61,284 (2001).

 

6.                   On November 20, 2002, the Supporting Parties
entered into a stipulation and agreement (the “2002-2004 Settlement”), which
fully resolved all issues in Docket Nos. ER02-64-000
and ER02-198-000. No party objected to the 2002-2004 Settlement and the
Commission approved the settlement on
February 5, 2003.(4) The 2002-2004 Settlement set forth Mirant’s AFRRs
and VOM Rates for the period January 1, 2002 through December 31, 2004, thereby
eliminating the need for Mirant to make Schedule F filings for those calendar
years. The 2002-2004 Settlement also set forth Mirant’s Owner’s Repair Cost
Obligations for the same period.

 

7.                   On December 16, 2004,
Mirant filed with the Commission various proposed rate and rate schedule
changes (referred to as the “Limited 205 Filing”).  The Limited 205 Filing, among other things,
contains the proposed: (i) Owner’s Repair Cost Obligations; (ii) AFRRs; and (iii) VOM Rates for
each RMR Unit, to be effective January 1, 2005.

 

II.                                     DESCRIPTION
OF SETTLEMENT

 

1.                                       In anticipation of the
Schedule F Filing Requirements and the Limited 205 Filing, Mirant, PG&E,
CPUC and EOB initiated informal settlement discussions to resolve any potential
issues relating to the AFRRs and
VOM Rates for calendar year 2005. As a result of these informal settlement
discussions, the Supporting Parties submit the attached Settlement, pursuant to which the Supporting Parties consent to the:
(i) Owner’s Repair Cost Obligations; (ii) AFRRs; and (iii) VOM Rates as
set forth in Mirant’s Limited 205 Filing for 2005.(5)

 

2.                    Pursuant to the Settlement, the AFRR, VOM
Rate and Owner’s Repair Cost Obligation
values in Mirant’s Limited 205 Filing will be effective for the period January
1, 2005, through December 31, 2005 as
follows: (a) Owner’s Repair Cost Obligations as contained in Schedule A, Section 13 of the RMR Agreements; (b)
AFRRs, as contained in Table B-6 of the RMR Agreements; and (c) VOM Rates, as contained in Table C1-18 of the
RMR Agreements.

 

3.                                     Specifically, the
Supporting Parties consent to the following, as reflected in Mirant’s Limited 205 Filing for 2005:

 

a.                                       New AFRRs for Contra Costa Unit 7, Pittsburg
Units 5-6, and Potrero Units 3-6;

 

b.                                      For Contra Costa Units
4-5, the continuation of the AFRRs contained in the 2002-2004 Settlement;

 

(4)                                   Mirant
Delta, LLC and Mirant Potrero, LLC, 102 FERC ¶ 61,130 (2003).

 

(5)                                   The ISO has not had the opportunity to
independently investigate or evaluate the basis for the rates in the Settlement. It nevertheless supports the Settlement based
on the recognition that it is the product
of extensive negotiation among Mirant, the CPUC, the EOB and PG&E, which is
the Responsible Utility with respect to these RMR Units, and based on
the fact that the Commission will review and approve the Settlement only upon a
determination that it is fair and reasonable and in the public interest.

 

2

 

c.                   For
all RMR Units, the continuation of the VOM Rates contained in the 2002-2004
Settlement;

 

d.                   For
all RMR Units, new Owner’s Repair Cost Obligations; and

 

e.                   Revised
Rate Schedule Sheets to be effective January 1, 2005 through December 31, 2005.

 

4.                    Upon agreement by the Supporting Parties, this
Settlement may be extended, without
modification, for the period January 1, 2006 through December 31, 2008, by
providing joint notice of such
extension to the Commission.

 

5.                    The Supporting Parties have agreed that the
Settlement will be deemed to satisfy Mirant’s
Schedule F Filing Requirements for 2005 and, if the Settlement is extended, for
2006 through 2008.

 

6.                    Through
this Settlement, the Supporting Parties consent only to those changes in Mirant’s Limited 205 Filing for 2005 discussed
herein, and take no position in this Settlement on the other changes set forth in Mirant’s Limited
205 Filing.

 

III.                                  EFFECTIVE
DATE

 

The Settlement
shall be effective on the later of: (1) the date the Settlement is approved by the United States Bankruptcy Court for the
Northern District of Texas, Fort Worth Division, which approval will be sought
promptly by Mirant after the Commission issues an order approving the Settlement without modification or
condition or, if modified or conditioned by the Commission, after acceptance of
the modification or conditions contained in such order by all of the Supporting
Parties; or (2) if modified or conditioned by the Bankruptcy Court, upon the
date of acceptance of the modifications or conditions contained in such order
by all of the Supporting Parties
(“Effective Date”).

 

IV.                                 REFUNDS

 

Refunds will be paid pursuant to the terms
and conditions of the Settlement.

 

V.                                       COMMENTS

 

The Supporting Parties seek expedited
treatment and request waiver of Rules 602(d)(2) and 602(f) so that initial comments on the
Settlement are due on January 14, 2005, and reply comments are due on January 21, 2005.

 

VI.                                 POLICY
ISSUES
AND OTHER ISSUES ARISING UNDER THE SETTLEMENT

 

In accordance with the Chief Judge’s October
15, 2003 Notice to the Public concerning Information to be Provided with Settlement Agreements, the Parties
provide the following information:

 

3

 

1.                                            Underlying
Issues and Major Implications

 

The Parties wish to resolve all outstanding
issues with respect to the: (i) Owner’s Repair Cost Obligations; (ii) AFRRs;
and (iii) VOM Rates set forth in Mirant’s Limited 205 Filing for 2005. Through
this Settlement, the Parties agree that the data contained in Mirant’s Limited
205 Filing for 2005
concerning: (i) Owner’s Repair Cost Obligations; (ii) AFRRs; and (iii) VOM Rates are to be accepted as filed, to be effective
from January 1, 2005, through December 31, 2005 and thereafter until changed by
Commission order or extended by the Parties pursuant to Section 1.6 of the Settlement. This Settlement
does not change any obligation Mirant has under the RMR Agreements to make
future filings to change these rates.

 

2.                                    Policy Implications

 

The unopposed changes to Mirant’s RMR
Agreements do not raise any policy implications.

 

3.                                    Pending
Cases That May Be Affected

 

The Settlement will not affect any cases
currently pending before the Commission.

 

4.                                  Issues
of First Impression and Reversals on Commission Position

 

The Settlement does not raise any issues of
first impression and does not propose to reverse any previous Commission
decisions involving similar issues.

 

5.                                    Standard
of Review

 

The Parties intend that the standard of
review for changes to any section of the Settlement proposed by a Party, a non-party or the Commission
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) and Federal Power Commission v. Sierra Pacific Power Co., 350
U.S. 348 (1956) (the “Mobile-Sierra” doctrine).

 

4

 

OFFER OF SETTLEMENT

 

 

OFFER OF SETTLEMENT

 

This Offer of Partial Settlement (the
“Settlement”) is dated as of January 7, 2005, by and among Mirant Delta, LLC
(“Mirant Delta”) and Mirant Potrero, LLC (“Mirant Potrero”) (collectively,
“Mirant”),(1) the California Independent System Operator Corporation (“ISO”),
the California Electricity Oversight Board (“EOB”) and Pacific Gas and Electric
Company (“PG&E”). These
parties arc referred to herein individually as a “Party” and collectively as
the “Parties” or “Supporting Parties.” The Parties are authorized to represent
that although the California Public
Utilities Commission (“CPUC”) is not a signatory to the Settlement, the CPUC
does not oppose the Settlement.

 

RECITALS

 

A.                                   Mirant Delta is the owner of the Contra Costa
Power Plant located in Antioch, California, and the Pittsburg Power Plant
located in Pittsburg, California. Mirant Potrero is the owner of the Potrero
Power Plant located in San Francisco, California.

 

B.                                     Mirant Delta and Mirant Potrero operate
generating units at their respective power plants subject to Must-Run Service Agreements (“RMR Agreements”) with
the ISO, the Schedules to which contain certain generation unit-specific terms
and conditions. The units subject to
such obligations under these RMR Agreements are referred to herein as RMR
Units.(2)

 

C.                                     By their express terms, the RMR Agreements provide
for annual revisions to, among other
things, the Annual Fixed Revenue Requirement (“AFRR”) and Variable O&M Rate
(“VOM Rate”) for each RMR Unit.
Pursuant to Schedule B, Section 7 of the RMR Agreements, the AFRR values are determined by the Formula Rate
set forth in Schedule F to the RMR Agreements, unless Mirant files a
superseding rate schedule filed under Section 205 of the Federal Power Act. The
VOM Rate values also are determined by a formula set forth in Schedule F. Schedule F requires that Mirant
provide annually to the ISO an “Information Package detailing and supporting all calculations” used to determine
the AFRRs and VOM Rates under the
respective formulas for the upcoming calendar year (“Schedule F Filing Requirements”). Mirant is required to provide a
copy of this Information Package to the Commission “in an informational
filing.”

 

(1)                                  Beginning on July 14,
2003, Mirant Corporation and certain of its affiliated entities (collectively, “Mirant”)
commenced proceedings under Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§
101, et seq., in the United States Bankruptcy Court for the Northern District of
Texas, Fort Worth Division (the “Bankruptcy Court”). In filing this Settlement, Mirant
does not intend to waive any protections which might be afforded to it under the Bankruptcy Code,
including but not limited to those protections provided by Section 362 thereof.

 

(2)                                  Specifically, the
following units owned by Mirant will be subject to RMR Agreements during calendar
year 2005: Contra Costa Units 4, 5 and 7; Pittsburg Units 5 and 6; and Potrero
Units 3, 4, 5 and 6.

 

 

D.                                  On October 9, 2001, Mirant submitted, in Docket
No. ER02-64-000, an information package
in the form of an informational filing (“2002 Information Package”) in
accordance with Schedule F of its RMR
Agreements. The 2002 Information Package contained data and workpapers
detailing Mirant’s calculation of its proposed AFRRs and VOM Rates for calendar
year 2002. PG&E, the ISO, the EOB, and the CPUC filed protests to the 2002
Information Package, raising a
variety of issues.(3)

 

E.                                     On December 19, 2001, the Commission issued an
order conditionally accepting for
filing the revised tariff sheets submitted in Docket No. ER02-198-000, subject
to refund and the outcome of the
ongoing proceedings in Docket No. ER02-64-000. Mirant
Delta, LLC, 97 FERC ¶ 61,284
(2001).

 

F.                                     On November 20, 2002, the Parties entered into a
stipulation and agreement (the “2002-2004 Settlement”), which fully resolved
all issues in Docket Nos. ER02-64-000 and ER02-198-000. No party objected to the 2002-2004 Settlement and the
Commission approved the settlement on
February 5, 2003.(4) The 2002-2004 Settlement set forth Mirant’s AFRRs and VOM Rates for the period January 1, 2002 through
December 31, 2004, thereby eliminating the need for Mirant to make Schedule F
filings for those calendar years. The 2002-2004 Settlement also set forth the Owner’s Repair Cost Obligations
for the same period.

 

G.                                    On December 16, 2004, Mirant filed with the
Commission various proposed rate and
rate schedule changes (referred to as the “Limited 205 Filing”). The Limited
205 Filing, among other things, contains the proposed: (i) Owner’s Repair Cost
Obligation; (ii) AFRR; and (iii) VOM Rate for each RMR Unit, to be effective
January 1, 2005.

 

H.                                    The Parties wish to resolve all outstanding issues
with respect to the: (i) Owner’s Repair Cost Obligations; (ii) AFRRs; and (iii)
VOM Rates set forth in Mirant’s Limited 205 Filing for 2005.(5)

 

NOW, THEREFORE, in consideration of the
recitals and the mutual covenants and agreements hereinafter set forth, the Parties mutually covenant and
agree as follows:

 

(3)                                   The only other party to
respond to this filing was the City and County of San Francisco, whose Motion
to Intervene raised no substantive issues.

 

(4)                                    Mirant
Delta, LLC and Mirant Potrero, LLC, 102 FERC ¶ 61,130
(2003).

 

(5)                                    The ISO has not had the
opportunity to independently investigate or evaluate the basis for the rates in the Settlement.
It nevertheless supports the Settlement based on the recognition that it is the
product of
extensive negotiation among Mirant, the CPUC, the EOB and PG&E, which is
the Responsible Utility with respect to these RMR Units, and based on the fact that the
Commission will review and approve the Settlement only upon a determination
that it is fair and reasonable and in the public interest.

 

2

 

1.             IMPLEMENTATION

 

1.1           The
Parties agree that the data contained in Mirant’s Limited 205 Filing for 2005
concerning: (i) Owner’s Repair Cost Obligations; (ii) AFRRs; and (iii) VOM
Rates are to be accepted as filed, to be effective from January 1, 2005,
through December 31, 2005 and thereafter until changed by Commission order or
extended by the Parties pursuant to Section 1.6 of the Settlement. This
Settlement does not change any obligation Mirant has under the RMR Agreements
to make future filings to change these rates. Specifically, the Parties consent
to the following:

 

(a)           The
AFRR values for the various RMR Units shall be as follows:

 

	
  RMR Unit

  	
   

  	
  AFRR

  	
   

  
	
  Contra Costa 4

  	
   

  	
  $

  	
  456,209

  	
   

  
	
  Contra Costa 5

  	
   

  	
  $

  	
  456,209

  	
   

  
	
  Contra Costa 7

  	
   

  	
  $

  	
  22,237,027

  	
   

  
	
  Pittsburg 5

  	
   

  	
  $

  	
  15,157,190

  	
   

  
	
  Pittsburg 6

  	
   

  	
  $

  	
  15,157,190

  	
   

  
	
  Potrero 3

  	
   

  	
  $

  	
  17,908,424

  	
   

  
	
  Potrero 4

  	
   

  	
  $

  	
  338,285

  	
   

  
	
  Potrero 5

  	
   

  	
  $

  	
  451,175

  	
   

  
	
  Potrero 6

  	
   

  	
  $

  	
  461,284

  	
   

  

 

(b)           The
VOM Rates for the RMR Units at the Contra Costa, Pittsburg, and Potrero
Facilities shall be as follows:

 

	
  RMR Unit

  	
   

  	
  VOM Rate

  ($/MWh)

  	
   

  
	
  Contra Costa 4

  	
   

  	
  $

  	
  0

  	
   

  
	
  Contra Costa 5

  	
   

  	
  $

  	
  0

  	
   

  
	
  Contra Costa 7

  	
   

  	
  $

  	
  0.99

  	
   

  
	
  Pittsburg 5

  	
   

  	
  $

  	
  0.76

  	
   

  
	
  Pittsburg 6

  	
   

  	
  $

  	
  0.76

  	
   

  
	
  Potrero 3

  	
   

  	
  $

  	
  3.16

  	
   

  
	
  Potrero 4

  	
   

  	
  $

  	
  0

  	
   

  
	
  Potrero 5

  	
   

  	
  $

  	
  0

  	
   

  
	
  Potrero 6

  	
   

  	
  $

  	
  0

  	
   

  
								

 

3

 

 

(c)           The
Owner’s Repair Cost Obligations for the Contra Costa, Pittsburg, and Potrero
Facilities shall be as follows:

 

	
  Facility

  	
   

  	
  Owner’s Repair

  Cost Obligation

  	
   

  
	
  Contra Costa

  	
   

  	
  $

  	
  423,152

  	
   

  
	
  Pittsburg

  	
   

  	
  $

  	
  552,707

  	
   

  
	
  Potrero

  	
   

  	
  $

  	
  406,885

  	
   

  

 

1.2           The Supporting Parties hereby
incorporate into this Settlement the portions of the Revised Rate Schedule
Sheets attached to Mirant’s Limited 205 Filing for 2005 (“Revised Rate Schedule
Sheets”) showing the agreed-upon changes identified in Section 1.1, supra, to be effective January 1, 2005.

 

1.3           Upon their effectiveness, the Revised
Rate Schedule Sheets shall supersede and revise the corresponding currently
effective rate schedule sheets that comprise the RMR Agreements previously
filed by Mirant.

 

1.4           The Supporting Parties consent only
to those changes in Mirant’s Limited 205 Filing for 2005 specified herein, and
take no position in this Settlement on the other changes set forth in Mirant’s
Limited 205 Filing.

 

1.5           If approved by the Commission, this Settlement fully
resolves all issues in this proceeding relating to: (i) Owner’s Repair Cost
Obligations; (ii) AFRRs; and (iii) VOM Rates. The Supporting Parties have
agreed that the Settlement will be deemed to satisfy any Schedule F Filing
Requirements applicable to Mirant for 2005 and, if the Settlement is extended,
for 2006 through 2008.

 

4

 

 

1.6           Upon agreement by
the Supporting Parties, this Settlement may be extended, without modification,
for the period January 1, 2006 through December 31, 2008, by providing joint
notice of such extension to the Commission.

 

2.             EFFECTIVE DATE

 

2.1           The Settlement shall be effective on
the later of: (1) the date the Settlement is approved by the United States
Bankruptcy Court for the Northern District of Texas, Fort Worth Division, which
approval will be sought promptly by Mirant after the Commission issues an order
approving the Settlement without modification or condition or, if modified or
conditioned by the Commission, after acceptance of the modifications or
conditions contained in such order by all the Supporting Parties; or (2) if
modified or conditioned by the Bankruptcy Court, upon the date of acceptance of
the modifications or conditions contained in such order by all of the Parties (“Effective
Date”).

 

2.2           Within ten (10) business days
following either Commission approval without modification or condition, or if
modified or conditioned by the Commission, within ten (10) business days of
acceptance of the modifications or conditions contained in such order by all of
the Supporting Parties, Mirant will file and thereafter diligently prosecute in
the Bankruptcy Court, a request for approval of the Settlement, thereafter
taking all actions necessary to obtain such approval.

 

3.             ACTION
BY PARTIES

 

3.1           Except for the Bankruptcy Court
Approval provided in Section 2, the Parties hereby waive any and all rights to
seek rehearing or judicial review of the Commission’s order(s) approving this
Settlement, and shall be bound by and entitled to the benefits of the
provisions of this Settlement; provided,
however, that if the Commission approves this Settlement with modification
or condition, a Party may seek rehearing or judicial review of the Commission’s
order(s) approving this Settlement solely to challenge the Commission’s
imposition of modifications or conditions in order to preserve the terms and
conditions of this Settlement as filed.

 

3.2           The AFRR, VOM Rate and Owner’s Repair
Cost Obligation values in Mirant’s Limited 205 Filing will be effective for the
period January 1, 2005 through December 31, 2005, and may be extended under
Section 1.6 as follows: (a) Owner’s Repair Cost Obligations as contained in
Schedule A, Section 13 of the RMR Agreements; (b) AFRRs, as contained in Table B-6
of the RMR Agreements; and (c) VOM Rates, as contained in Table C1-18 of the
RMR Agreements.

 

3.3           Nothing in this Settlement is
intended to affect any obligation of Mirant under the RMR Agreements other than
those expressly provided herein, and specifically, Mirant shall continue to
submit proposed annual changes to the RMR Agreements in accordance with Section
4.11(a), Schedule B, and Schedule D of the RMR Agreements and consistent with
this Settlement.

 

5

 

4.             RESERVATIONS

 

4.1           Agreement to or acquiescence in this
Settlement shall not be deemed in any respect to constitute an admission by any
Party hereto that any allegation or contention made by any other Party in these
proceedings is true or valid. In reaching this Settlement, the Parties specifically
agree that this Settlement represents a negotiated agreement for the sole
purpose of settling certain issues, as described herein. No Party or affiliate
of any of the Parties shall be deemed to have approved, accepted, agreed to, or
consented to any fact, concept, theory, rate methodology, principle, or method
relating to jurisdiction, prudence, reasonable cost of service, cost classification,
cost allocation, rate design, rate schedule provisions, or other matters underlying
or purported to underlie any of the resolutions of the issues provided herein.
The Commission’s approval of the Settlement shall not constitute approval of,
or precedent regarding, any principle or issue in this proceeding.

 

4.2           The Parties agree that the resolution
of any matter in this Settlement shall not be deemed to be a “settled practice”
as that term was interpreted and applied in Public
Service Commission of the State of New York v. FERC, 642 F.2d 1335
(D.C. Cir. 1980).

 

4.3           (a)           Each
Party irrevocably waives its rights, including its rights under §§ 205-206 of
the Federal Power Act, unilaterally to seek or support a change in the rate(s),
charges, classifications, terms or conditions of this Settlement. By this
provision, each Party expressly waives, solely with respect to this Settlement,
its right to seek or support: (i) an order from the Commission finding that the
rate(s), charges, classifications, terms or conditions agreed to by the Parties
in the Settlement are unjust and unreasonable; or (ii) any refund with respect
thereto. Each Party agrees not to make or support such a filing or request, and
that these covenants and waivers shall be binding notwithstanding any
regulatory or market changes that may occur hereafter.

 

(b)           Absent the agreement
of all Parties to the proposed change, the standard of review for changes to
any section of the Settlement proposed by a Party (to the extent that any
waiver in Section (a) above is unenforceable or ineffective as to such Party),
a non-party or the Commission 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) and Federal Power Commission v. Sierra Pacific Power
Co., 350 U.S. 348 (1956) (the “Mobile-Sierra” doctrine).

 

4.4           This Settlement does not resolve any
issues related to Mirant’s Limited 205 Filing for 2005 not discussed herein nor
does this Settlement restrict in any way the positions that the Parties may
take with respect to such issues. The Parties specifically reserve their rights
and positions therein. Further, this Settlement is not intended to limit or
affect the rights and remedies of the Parties with respect to any other
particular dispute not resolved by this Settlement. Nothing in this Section 4.4
is intended to conflict with Section 4.3.

 

4.5           Notwithstanding any provision of this
Settlement, nothing included in this Settlement is intended to limit or affect
the rights and remedies of the Parties with respect to any claim that the
amounts invoiced under the RMR Agreements are incorrect, including any dispute involving
the interpretation or application of the RMR Agreements.

 

6

 

5.             MISCELLANEOUS
PROVISIONS

 

5.1           The titles and
headings of the various Articles and Sections in this Settlement are for
reference purposes only. They are not to be construed or taken into account in
interpreting this Settlement, and do not qualify, modify, or explain the
effects of this Settlement.

 

5.2           The rights conferred
and obligations imposed on any Party by this Settlement shall inure to the
benefit of and be binding on that Parry’s successors in interest or assignees
as if such successor or assignee was itself a Party hereto.

 

5.3           This Settlement may
be executed in counterparts by each Party, each of which shall be deemed to be
an original, but which together shall constitute one and the same instrument.

 

5.4           The discussions among
the Parties that have resulted in this Settlement have been conducted on the
explicit understanding that they were undertaken subject to Rule 602(e) of the
Commission’s Rules of Practice and Procedure, 18 C.F.R. § 385.602(e)(2004),
and the rights of the Parties with respect thereto shall not be impaired by
this Settlement.

 

6.             CONCLUSION

 

The Parties
respectfully request that the Commission approve the instant Settlement without
modification or condition.

 

Signed and
dated this 7th day of January, 2005.

 

 

	
  The
  California Independent System Operator

  Corporation

  	
  Mirant
  Delta, LLC and Mirant Potrero, LLC

  
	
   

  	
   

  
	
  By:

  	
  /s/ Mary
  Anne Sullivan

  	
   

  	
  By:

  	
  /s/ Debra
  Raggio Bolton

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:  Mary Anne Sullivan

  	
  Name:  Debra Raggio Bolton

  
	
   

  	
   

  
	
   

  	
  Title:    Associate General Counsel

  
	
   

  	
   

  
	
  Pacific Gas and Electric Company

  	
  California Electricity Oversight Board

  
	
   

  	
   

  
	
  By:

  	
  /s/ Stuart
  K. Gardiner

  	
   

  	
  By:

  	
  /s/ Erik N.
  Saltmarsh

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:  Stuart K. Gardiner

  	
  Name: 
  Erik N. Saltmarsh

  Kenneth L. Glick

  
	
   

  	
   

  
	
  Title:   Attorney

  	
  Title:   General Counsel

  

 

7

 

DRAFT ORDER

 

 

FEDERAL ENERGY REGULATORY COMMISSION

WASHINGTON, D.C. 20426

 

[Date]

 

	
   

  	
   

  	
  In Reply refer to:

  
	
   

  	
   

  	
  Docket No. ER05-343-000

  

 

McDermott
Will & Emery LLP

ATTN: Michael A. Yuffee

Attorney for Mirant Delta, LLC
  and Mirant Potrero, LLC

600 13th Street, N.W.

Washington, D.C. 20005

 

Dear Mr. Yuffee:

 

On January 7, 2005, you filed an offer of settlement among Mirant
Delta, LLC, Mirant Potrero, LLC (collectively, “Mirant”), the California Independent
System Operator Corporation (“ISO”), the California Electricity Oversight Board
(“EOB”) and Pacific Gas and Electric Company (“PG&E”) in the
above-referenced dockets.

 

The subject settlement is in the public interest and is hereby
approved. The Commission’s approval of this settlement does not constitute
approval of, or precedent regarding, any principle or issue in this proceeding.
The parties agree that the settlement is subject to the public interest
standard of review.

 

 

	
   

  	
  By direction of the Commission,

  
	
   

  	
   

  
	
   

  	
  Magalie R. Salas,

  Secretary

  

 

 

cc: All Parties

 

 

DRAFT
NOTICE

 

 

UNITED
STATES OF AMERICA

BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

 

	
  Mirant Delta, LLC

  	
  )

  	
  Docket No. ER05-343-000

  
	
  Mirant Potrero, LLC

  	
  )

  	
   

  

 

NOTICE OF FILING

(January    , 2005)

 

Take notice that, on January 7, 2005, the
following parties submitted an Offer of Settlement in the above-referenced
dockets: Mirant Delta, LLC, Mirant Potrero, LLC, the California Independent
System Operator Corporation, the California Electricity Oversight Board and
Pacific Gas and Electric Company.

 

Any person desiring to intervene or to
protest this filing must file in accordance with Rules 211 and 214 of the
Commission’s Rules of Practice and Procedure (18 CFR 385.211, 385.214).
Protests will be considered by the Commission in determining the appropriate
action to be taken, but will not serve to make protestants parties to the
proceeding. Any person wishing to become a party must file a notice of
intervention or motion to intervene, as appropriate. Such notices, motions, or
protests must be filed on or before the comment date. Anyone filing a motion to
intervene or protest must serve a copy of that document on the Applicant and
all the parties in this proceeding.

 

The Commission encourages electronic
submission of protests and interventions in lieu of paper using the “eFiling”
link at http://www.ferc.gov. Persons unable to file electronically should
submit an original and 14 copies of the protest or intervention to the Federal
Energy Regulatory Commission, 888 First Street, N.E., Washington, D.C. 20426.

 

This filing is accessible on-line at
http://www.ferc.gov, using the “eLibrary” link and is available for review in
the Commission’s Public Reference Room in Washington, D.C.   There is an “eSubscription” link on the web
site that enables subscribers to receive email notification when a document is
added to a subscribed docket(s). For assistance with any FERC Online service,
please email FERCOnlineSupport@ferc.gov, or call (866) 208-3676 (toll free). For
TTY, call (202) 502-8659.

 

Comment Date: 5:00 pm Eastern Time on January
14, 2005. Reply Comment Date: 5:00 pm Eastern Time on January 21, 2005.

 

	
   

  	
  Magalie R. Salas

  

  Secretary

  

 

 

	
  STATE OF CALIFORNIA – THE RESOURCES AGENCY

  	
  ARNOLD SCHWARZENEGGER, Governor

  
	
  DEPARTMENT OF WATER RESOURCES

  1416 NINTH STREET,
  P.O. BOX 942836

  SACRAMENTO, CA 94236-0001
(916) 653 5791

  	
  

  

 

January 12, 2005

 

 

Via Overnight Mail

 

Mr. Douglas L. Miller

General Counsel

Mirant Corporation

1155 Perimeter Center West
Atlanta, Georgia
30338

 

Re:          Settlement and
Release of Claims Agreement Opt-In

 

Dear Mr. Miller:

 

The purpose of this letter is to advise you that the California
Department of Water Resources, acting in its capacity as the State Water
Resources Development System and the State Water Project, hereby commits to the
Mirant Parties, as such term is defined in the Settlement and Release of Claims
Agreement attached hereto and made a part hereof (the “Settlement Agreement”),
to opt in to the settlement described therein as an Additional Settling
Participant in accordance with the terms of Article XI of said Settlement
Agreement on or before the opt in deadline set forth therein, and to be bound
by the terms of the Settlement Agreement as an Additional Settling Participant
in accordance with said Settlement Agreement’s terms.

 

	
  Sincerely,

  
	
   

  
	
  /s/ Tom Glover

  	
   

  
	
  Tom Glover

  
	
  Deputy Director

  

 

 

cc:                                 Hugh Davenport, Esq.
(Via Facsimile)

Debra Bolton, Esq. (Via Facsimile)

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