Document:

Exhibit 10.57

UNITED
STATES OF AMERICA

BEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

 

	
  Michigan Electric Transmission Company, LLC

  	
  )

  	
   

  	
   

  	
   

  
	
      and

  	
  )

  	
   

  	
  Docket Nos.

  	
  ER06-56-002

  
	
  Midwest Independent Transmission System

  	
  )

  	
   

  	
   

  	
  ER06-56-000

  
	
      Operator, Inc.

  	
  )

  	
   

  	
   

  	
   

  

 

SETTLEMENT
AGREEMENT

(JANUARY 19, 2007)

This Settlement Agreement, together with the
Attachments and enclosed Explanatory Statement, is submitted by Michigan
Electric Transmission Company, LLC (“METC”), on behalf of itself and the
Midwest Independent Transmission System Operator, Inc. (“Midwest ISO”),
Consumers Energy Company (“Consumers”), the Michigan Public Power Agency (“MPPA”)
and Michigan South Central Power Agency (“MSCPA”)   (collectively, “Michigan Agencies”),
Wolverine Power Supply Cooperative, Inc. (“Wolverine”), and the International
Transmission Company (“ITCTransmission”)
(collectively, “Settling Parties”) and constitutes an Offer of Settlement in
this proceeding pursuant to Rule 602 of the Federal Energy Regulatory Commission’s
(“Commission” or “FERC”) Rules of Practice and Procedure, 18 C.F.R. § 385.602.(9)

 

 

 

(9)                                  The
Settling Parties are authorized to state that the Commission Trial Staff
(“Staff”) and the Michigan Public Service Commission (“MPSC”) do not oppose the
Settlement Agreement.

 

ARTICLE I

DEFINITIONS

1.1           ADIT Deferral: The amount of
$68,101,413 shown on Attachment A to this Settlement Agreement, which METC will
reflect in rates pursuant to Article III of this Settlement Agreement.

1.2           Agency Agreements: The agreements
entered into between METC and Consumers to establish METC’s responsibilities
under certain transmission interconnection and facilities agreements that
Consumers did not assign to METC when METC purchased Consumers’ transmission
system.

1.3           Commission or FERC: Federal Energy
Regulatory Commission.

1.4           Consumers: Consumers Energy Company.

1.5           Effective Date: This term shall have
the meaning set forth in Article 10.1 of this Settlement Agreement.

1.6           Final Order: For purposes of this Settlement
Agreement, an order issued by the Commission becomes a Final Order on the day
after the last day permitted for filing a request for rehearing of the order,
when no such request has been filed; or if a request(s) for rehearing is filed,
on the day after the Commission issues a substantive order on rehearing.

1.7           ITCTransmission:
International Transmission Company.

1.8           Kilovar Service Revenues: The annual
megavar charges paid to METC pursuant to the Settlement Agreement and Service
Agreements accepted by the Commission in Docket No. ER03-901 or any successor
agreements providing for the payment of megavar charges to METC.

1.9           METC: Michigan Electric Transmission
Company, LLC.

 

 2
 

 

1.10         METC Attachment O: The formula rate
approved for METC under Attachment O to the TEMT.

1.11         Michigan Agencies: The Michigan Public
Power Agency and Michigan South Central Power Agency.

1.12         Michigan Joint Zone: A single, joint
pricing zone within the Midwest ISO that includes METC, MPPA and Wolverine as
approved in Docket No. ER02-2458.

1.13         MidAmerican: MidAmerican Energy
Company.

1.14         MPPA: Michigan Public Power Agency, its
members, and its or their successors. For purposes of this Settlement
Agreement, MPPA is acting for and on behalf of all of its members.

1.15         MPSC: The Michigan Public Service
Commission.

1.16         MSCPA: Michigan South Central Power
Agency, its members, and its or their successors. For purposes of this
Settlement Agreement, MSCPA is acting for and on behalf of all of its members.

1.17         Midwest ISO: The Midwest Independent
Transmission System Operator, Inc.

1.18         Participant: Has the meaning set forth
in 18 C.F.R. § 385.102(b).

1.19         Party(ies): Has the meaning set forth
in 18 C.F.R. § 385.102(c) and includes the Settling Parties, MidAmerican, and
MPSC.

1.20         Regulatory Deferral: The amount of
$55,000,000 shown on Attachment A to this Settlement Agreement which METC will
reflect in rates pursuant to Article III of this Settlement Agreement.

1.21         Settling Parties: The Parties to this
Settlement Agreement: Consumers, Michigan Agencies, Wolverine, METC, ITCTransmission, and Midwest ISO.

1.22         Staff: Commission Trial Staff.

 

 3
 

 

1.23         TEMT: Midwest ISO Open Access
Transmission and Energy Markets Tariff

1.24         TOOAs: Transmission Ownership and
Operating Agreements.

1.25         Wolverine: Wolverine Power Supply
Cooperative, Inc.

ARTICLE II

BACKGROUND AND SCOPE OF AGREEMENT

On October 20, 2005, METC and the Midwest ISO filed
for (i) approval of METC’s adoption of the formula rate in Attachment O of the
TEMT to establish rates for the METC pricing zone in the Midwest ISO, effective
January 1, 2006 (“October 20 Filing”) and (ii) approval of METC’s adoption of
the Midwest ISO Schedule 1 Service formula rate in the TEMT.

On December 30, 2005, the Commission conditionally
accepted the October 20 Filing and established hearing and settlement judge
procedures.(10)   In doing so, the Commission set for
hearing certain issues raised by the protests relating to the calculation of
both METC’s deferrals and Attachment O formula rate. Consequently, the
Commission established formal hearing procedures.

Commission approval of this Settlement Agreement in
accordance with Article IX will constitute a full and final resolution of all
issues in this proceeding that the 

 

(10)                            See Mich. Elec. Transmission Co., LLC and Midwest
Indep. Transmission Sys. Operator, Inc., 113 FERC ¶ 61,343 (2005)
(“December 30 Order”).    On January 30,
2006, METC, Consumers and the MPSC filed requests for rehearing of the December 30 Order. On August 22,
2006, the Commission issued its order on rehearing, affirming its decision to
authorize a 13.38 percent ROE under METC’s Attachment O and to allow METC the
recovery of its deferrals in its rates beginning on January 1, 2006. See Mich. Elec. Transmission Co., LLC, 116
FERC ¶ 61,164 (2006). The Commission also granted rehearing and required METC
to maintain detailed accounting records associated with its push-down accounting.

 

 4
 

 

Commission ordered be addressed through hearing in the
December 30 Order, including all issues that were raised or could have been
raised through the hearing process.

ARTICLE III

DEFERRALS

The Regulatory Deferral and the ADIT Deferral shall be
amortized and reflected in rates over twenty (20) years as shown in Attachment
A to this Settlement Agreement. The Regulatory Deferral and ADIT Deferral
balance specified for each Test Year shall be included in rates as a net
positive adjustment to rate base for that Test Year. The Regulatory Deferral
and ADIT Deferral amortization expense specified for each Test Year shall be
included in rates as an addition to expense for the Test Year. If the
Commission issues a Final Order approving METC’s request in Docket No. ER07-95,
then the respective Projected Test Period deferral balance amounts and the
deferral amortization amounts specified in Attachment A will be included for
ratemaking purposes as provided in this Article III. If the Commission issues a
Final Order rejecting METC’s request in Docket No. ER07-95, then the respective
Historic Test Period deferral balance amounts and the deferral amortization
amounts specified in Attachment A will be included for ratemaking purposes as
provided in this Article III. The Commission’s order approving this Settlement
Agreement shall provide all authorization necessary for METC to include the
appropriate Test Year deferral balance amounts and deferral amortization
amounts shown in Attachment A for ratemaking purposes.

 

 5
 

 

ARTICLE IV

METC’S ATTACHMENT O AND FERC FORM 1

4.1           METC’s Attachment O.

4.1.1                        Wages
and Salary (“W&S”) Allocator. METC will only reflect the “Percentage of
Transmission Plant included in ISO Rates” (also known as the “TP Allocator”)
for “Transmission” (page 4, line 13) and “Other” (page 4, line 15) expenses in
its Attachment O W&S Allocator calculation.

4.1.2                        Revenue
Credits and Transmission Ownership and Operating Agreement (“TOOA”) Expense
Offsets.

4.1.2.1               METC will include the annual revenues
received for transmission service under the Antrim Firm Point-to-Point
grandfathered agreement, annual revenues under the Agency Agreements and the
Kilovar Service Revenues in its Attachment O Revenue Credits calculation.

4.1.2.2               METC will include the amounts received
under the TOOAs between METC and MSCPA and MPPA as an offset to expenses.

4.1.3                        Effectiveness.
Each of the items in this Article 4.1 will be implemented in the next annual
update to the METC Attachment O formula rate, which will be effective either on
January 1, 2008 (in the event of Commission acceptance of the revised METC
Attachment O implementation in Docket No. ER07-95), or on June 1, 2007 (in the
event of Commission rejection of the revised METC Attachment O implementation
in Docket No. ER07-95).

 

 6
 

 

4.2           METC’s Form 1.

4.2.1                        Treatment
of Fines, Penalties and Payments for Non-Performance Under  a Contract. METC will record all payments
for fines, penalties, and payments for non-performance under transmission
service contracts to the appropriate FERC account pursuant to the Uniform
System of Accounts such that non-recoverable fines, penalties, and payments
under transmission service contracts are not included for ratemaking purposes.(11)

4.2.2                      Treatment
of Depreciation Expense for General and Transmission Plant. METC will
continue to provide the depreciation expense for general and intangible plant accumulated
depreciation and depreciation expense separate from the accumulated
depreciation and depreciation expense in its FERC Form 1 and in its Attachment
O formula rate calculation.

4.2.3                        Reporting
of Revenue. METC will report its revenue by Midwest ISO rate schedule. METC
will also utilize the FERC Form 1 footnotes as needed to provide additional
information about its revenue.

4.2.4                        Effectiveness.
Each of the items in this Article 4.2 will be effective for purposes of the
first METC FERC Form 1 filing following a Final Order approving this Settlement
Agreement without modification or condition.

 

 

(11)                            This
provision does not include payments where ordinary FERC ratemaking practice
would allow recovery. For example, when the Midwest ISO is passing through
costs that should be borne by ratepayers for the use of METC's transmission
facilities. See Ex. No. S-14 at
10:8-13.

 7
 

 

ARTICLE V

SETTLEMENT RATES

The currently effective METC rate of $1.5235/kW/month
in the Michigan Joint Zone will remain in effect and be updated in accordance
with the implementation of METC Attachment O consistent with Article IV of this
Settlement Agreement. Specifically, if the Commission, in Docket No. ER07-95,
approves METC’s request to keep the currently effective rate of $1.5235/kW-month
in effect through December 31, 2007, the rate will be updated effective January
1, 2008. If, however, the Commission, in Docket No. ER07-95, denies METC’s
request to keep the currently effective rate in effect through December 31,
2007, the rate will be updated effective June 1, 2007.

ARTICLE VI

SETTLEMENT PAYMENTS

METC will pay to the customers under the TEMT
identified in Attachment B to this Settlement Agreement the amounts shown in
Attachment B. These amounts, which in the aggregate shall equal $20 million,
will be paid by METC within thirty (30) days of a Final Order approving this
Settlement Agreement, including approval of the aggregate and allocated amounts
shown in Attachment B without modification or condition. Absent the customers
identified in Attachment B providing METC with specific payment information
within fifteen (15) days of such Final Order, METC will send such payments to
the customers’ last known billing address.

METC’s payment pursuant to this Article VI shall be in
lieu of any and all refund and/or refund with interest requirement(s) in this
proceeding in connection with METC’s rates in the Michigan Joint Zone under the
TEMT in effect on and after January 1, 2006. METC shall have no other refund
obligation or liability in Docket No. ER06-56, beyond 

 

 8
 

 

payment of the amounts specified in this Article VI
and Attachment B to this Settlement Agreement.

ARTICLE VII

OTHER PROCEEDINGS

7.1                                 Section 204.         The Parties understand that METC filed
an application in Docket No. ES07-15 for Commission approval pursuant to
section 204 of the Federal Power Act to issue additional debt in order to
effectuate this Settlement Agreement. The Parties will not oppose approval of
the application filed by METC in Docket No. ES07-15.

7.2                                 Information Sharing. Nothing in
this Settlement Agreement restricts the rights of any Party to take any
position in any other proceeding or forum with respect to the adequacy of
information that METC (or any other Midwest ISO Transmission Owner) makes
available to customers, regulators and/or other stakeholders in connection with
use of Attachment O to the TEMT. In particular, this settlement does not
affect, and is without prejudice to, such issues pending in FERC Docket No.
ER07-95.

ARTICLE VIII

RESERVATIONS

8.1                                 Confidentiality.    The discussions among the Settling Parties
that have produced this Settlement Agreement have been conducted in accordance
with Rule 602(e) of the Commission’s Rules of Practice and Procedure, 18 C.F.R.
§ 385.602(e). The applicable confidentiality and privilege protections
prescribed by Rule 602(e) shall control this Settlement Agreement and all
discussions related thereto. In the event that this Settlement Agreement is not
approved by a Final 

 

 9
 

 

Order of the Commission,
the Offer of Settlement and this Settlement Agreement shall not be admissible
against any Settling Party in any proceeding for any purpose.

8.2                                 No Precedent. Except with
respect to the rights and obligations specifically set forth herein, this
Settlement Agreement shall not constitute any precedent or admission that may
be applied against any Party for any purpose, and no Party shall be deemed to
have approved, accepted, agreed, or consented to any fact, concept, theory,
principle, or method related to the justness or reasonableness of any matter,
premise, or issue in this proceeding.

ARTICLE IX

COMMISSION REVIEW AND ACCEPTANCE

9.1                                 Commission Acceptance Without Modification or
Condition. Except as provided for in Article VII, this
Settlement Agreement represents a resolution of all issues that were raised or
could have been raised in this proceeding and shall become effective only upon
Commission acceptance of all provisions of the Settlement Agreement without
modification or condition, including the amounts in Attachment A and the aggregate
and allocated amounts shown in Attachment B. In the event that the Commission
does not accept the Settlement Agreement in its entirety or imposes
modifications or conditions that materially alter its negotiated terms,
including the amounts in Attachment A and the aggregate and allocated amounts
shown in Attachment B, then the Settlement Agreement shall be deemed withdrawn.

 10
 

 

 

ARTICLE
X

EFFECTIVE
DATE, WAIVER, HEADINGS, EXECUTION, SUCCESSORS AND ASSIGNS, STANDARD OF REVIEW

10.1                           Effective Date. This Settlement
Agreement shall become effective upon the date an order approving the
Settlement Agreement without modification or condition as provided in Article
IX hereof becomes a Final Order. In the event that this Settlement Agreement is
not so approved, no Party shall be bound by the provisions of this Settlement
Agreement, and no Party shall be deemed to have waived any rights or positions
with respect thereto.

10.2                           Nonseverability. The individual
components of this Settlement Agreement are not severable. This Settlement
Agreement is expressly conditioned on the Commission’s acceptance of all
provisions herein without material modification or condition, as set forth in
Article IX hereof. If this Settlement Agreement is not accepted in its
entirety, without material modification or condition, it shall be deemed
withdrawn unless all Settling Parties agree to all of the required changes or
conditions. If the Settlement Agreement is deemed withdrawn, it shall not
constitute any part of the record in the captioned proceeding and shall not be
used for any other purpose.

10.3                           Waiver. Approval of this Settlement
Agreement shall constitute a waiver of any and all      Commission rules and regulations that may be necessary to
effectuate the Settlement Agreement in accordance with its terms.

10.4                         Descriptive Headings. The descriptive
headings of Articles and other provisions of this    Settlement Agreement have been inserted for convenience or
reference only and will not define, modify, restrict, construe or otherwise
affect 

 

 

 11
 

the construction
or interpretation of any of the provisions of this Settlement Agreement.

10.5                           Execution in Counterparts.  This Settlement Agreement may be executed in
two or more counterparts, all of which will be considered one and the same
Settlement Agreement and each of which will be deemed an original.

10.6                           Successors and Assigns.  This Settlement Agreement shall be binding
upon, and inure to the benefit of, the Settling Parties and their respective
successors and assigns.

10.7                           Amendments and Modifications.  This Settlement Agreement may only be amended
by the agreement in writing of all the Settling Parties hereto.  The standard of review for any modifications
not agreed to by all the Settling Parties, including any modifications
resulting from Commission action sua sponte,
shall be the “public interest” standard under the Mobile-Sierra
doctrine. The “just and reasonable” standard shall apply to all changes to the
Settlement Agreement that are agreed to by all of the Settling Parties.

IN WITNESS THEREOF, the Settling Parties, by their
duly authorized agents, have hereunder executed this Settlement Agreement.

	
  

  	
  MIDWEST INDEPENDENT TRANSMISSION

  
	
   

  	
      SYSTEM OPERATOR, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Lori A. Spence

  
	
   

  	
   

  	
   

  	
  Lori A. Spence, Deputy General Counsel

  
	
   

  	
   

  	
   

  	
  Midwest Independent Transmission System

  
	
   

  	
   

  	
   

  	
  Operator, Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MICHIGAN ELECTRIC TRANSMISSION

  
	
   

  	
      COMPANY, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Daniel J. Oginsky

  
	
   

  	
   

  	
   

  	
  Daniel J. Oginsky, Secretary

  
	
   

  	
   

  	
   

  	
  Michigan Electric Transmission Company, LLC

  

 

 12

 

	
  

  	
   

  	
  CONSUMERS ENERGY COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ W.E. Garrity

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WOLVERINE POWER SUPPLY COOPERATIVE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ A. Hewitt Rose, III

  
	
   

  	
   

  	
   

  	
   

  	
  A. Hewitt Rose, III

  
	
   

  	
   

  	
   

  	
   

  	
  Counsel for Wolverine Power Supply Cooperative, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MICHIGAN PUBLIC POWER AGENCY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Alan I. Robbins

  
	
   

  	
   

  	
   

  	
   

  	
  Alan I. Robbins

  
	
   

  	
   

  	
   

  	
   

  	
  Counsel for Michigan Public Power Agency

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MICHIGAN SOUTH CENTRAL POWER AGENCY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Alan I. Robbins

  
	
   

  	
   

  	
   

  	
   

  	
  Alan I. Robbins

  
	
   

  	
   

  	
   

  	
   

  	
  Counsel for Michigan South Central Power Agency

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  INTERNATIONAL TRANSMISSION COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Daniel J. Oginsky

  
	
   

  	
   

  	
   

  	
   

  	
  Daniel J. Oginsky

  
	
   

  	
   

  	
   

  	
   

  	
  Vice President and General Counsel

  
	
   

  	
   

  	
   

  	
   

  	
  ITCTransmission

  
									

 

 13

ATTACHMENT A

Regulatory
Deferral

	
   

  	
   

  	
  Historic Test Period

  	
   

  	
  Projected Test Period

  	
   

  
	
  Test Year

  	
   

  	
   

  	
   

  	
  Balance

  	
   

  	
  Amortization

  	
   

  	
  Balance

  	
   

  	
  Amortization

  	
   

  
	
  2006

  	
   

  	
  $

  	
  55,000,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  2007

  	
   

  	
  $

  	
  52,250,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  55,000,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2008

  	
   

  	
  $

  	
  49,500,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  52,250,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2009

  	
   

  	
  $

  	
  46,750,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  49,500,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2010

  	
   

  	
  $

  	
  44,000,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  46,750,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2011

  	
   

  	
  $

  	
  41,250,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  44,000,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2012

  	
   

  	
  $

  	
  38,500,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  41,250,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2013

  	
   

  	
  $

  	
  35,750,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  38,500,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2014

  	
   

  	
  $

  	
  33,000,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  35,750,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2015

  	
   

  	
  $

  	
  30,250,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  33,000,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2016

  	
   

  	
  $

  	
  27,500,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  30,250,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2017

  	
   

  	
  $

  	
  24,750,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  27,500,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2018

  	
   

  	
  $

  	
  22,000,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  24,750,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2019

  	
   

  	
  $

  	
  19,250,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  22,000,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2020

  	
   

  	
  $

  	
  16,500,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  19,250,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2021

  	
   

  	
  $

  	
  13,750,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  16,500,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2022

  	
   

  	
  $

  	
  11,000,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  13,750,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2023

  	
   

  	
  $

  	
  8,250,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  11,000,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2024

  	
   

  	
  $

  	
  5,500,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  8,250,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2025

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  5,500,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
  2026

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  $

  	
  2,750,000

  	
   

  	
  $

  	
  2,750,000

  	
   

  
																

 

ADIT Deferral

	
   

  	
   

  	
  Historic Test Period

  	
   

  	
  Projected Test Period

  	
   

  
	
  Test Year

  	
   

  	
   

  	
   

  	
  Balance 

  	
   

  	
  Amortization

  	
   

  	
  Balance

  	
   

  	
  Amortization

  	
   

  
	
  2004

  	
   

  	
  $

  	
  68,101,413

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  2005

  	
   

  	
  $

  	
  64,696,342

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  2006

  	
   

  	
  $

  	
  61,291,272

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  2007

  	
   

  	
  $

  	
  57,886,201

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  61,291,272

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2008

  	
   

  	
  $

  	
  54,481,130

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  57,886,201

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2009

  	
   

  	
  $

  	
  51,076,060

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  54,481,130

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2010

  	
   

  	
  $

  	
  47,670,989

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  51,076,060

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2011

  	
   

  	
  $

  	
  44,265,918

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  47,670,989

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2012

  	
   

  	
  $

  	
  40,860,848

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  44,265,918

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2013

  	
   

  	
  $

  	
  37,455,777

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  40,860,848

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2014

  	
   

  	
  $

  	
  34,050,707

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  37,455,777

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2015

  	
   

  	
  $

  	
  30,645,636

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  34,050,707

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2016

  	
   

  	
  $

  	
  27,240,565

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  30,645,636

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2017

  	
   

  	
  $

  	
  23,835,495

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  27,240,565

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2018

  	
   

  	
  $

  	
  20,430,424

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  23,835,495

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2019

  	
   

  	
  $

  	
  17,025,353

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  20,430,424

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2020

  	
   

  	
  $

  	
  13,620,283

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  17,025,353

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2021

  	
   

  	
  $

  	
  10,215,212

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  13,620,283

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2022

  	
   

  	
  $

  	
  6,810,141

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  10,215,212

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2023

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  6,810,141

  	
   

  	
  $

  	
  3,405,071

  	
   

  
	
  2024

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  $

  	
  3,405,071

  	
   

  	
  $

  	
  3,405,071

  	
   

  
																

 

ATTACHMENT B

Allocation of Payments Pursuant to Article VI of 

Settlement Agreement (January 19, 2007) 

Docket Nos. ER06-56-000 and -002

	
  Consumers

  	
   

  	
  $

  	
  18,191,534.86

  	
   

  
	
  MPPA

  	
   

  	
  $

  	
  27,848.58

  	
  (12)

  
	
  MSCPA(13)

  	
   

  	
  $

  	
  0.00

  	
   

  
	
  Wolverine

  	
   

  	
  $

  	
  679,606.39

  	
   

  
	
  Holland

  	
   

  	
  $

  	
  231,568.05

  	
   

  
	
  MidAmerican Energy Co.

  	
   

  	
  $

  	
  858.44

  	
   

  
	
  City of Bay City

  	
   

  	
  $

  	
  113,392.04

  	
   

  
	
  City of Eaton Rapids

  	
   

  	
  $

  	
  40,200.11

  	
   

  
	
  City of St. Louis

  	
   

  	
  $

  	
  17,142.39

  	
   

  
	
  City of Portland

  	
   

  	
  $

  	
  8,572.52

  	
   

  
	
  City of Chelsea

  	
   

  	
  $

  	
  22,395.86

  	
   

  
	
  City of Hart

  	
   

  	
  $

  	
  4,869.82

  	
   

  
	
  Wabash Valley Power
  Assoc.

  	
   

  	
  $

  	
  40,544.02

  	
   

  
	
  Quest Energy

  	
   

  	
  $

  	
  90,109.12

  	
   

  
	
  Wolverine Power Mktg,
  Inc.

  	
   

  	
  $

  	
  276,174.58

  	
   

  
	
  Constellation NewEnergy

  	
   

  	
  $

  	
  149,182.02

  	
   

  

(12)       Except as
otherwise noted in this Attachment B, this payment amount includes MPPA and all
its members: Bay City, Charlevoix, Chelsea, Grand Haven, Harbor Springs, Hart,
Holland, Lansing, Lowell, Petoskey, Portland, Traverse City, and Zeeland.

(13)       This includes MSCPA and all
of its members: Clinton, Coldwater, Hillsdale, Marshall and Union City.

 

	
  CMS Energy
  Resource Mgmt.

  	
   

  	
  $

  	
  3,193,47

  	
   

  
	
  Strategic
  Energy, LLC

  	
   

  	
  $

  	
  27,853.34

  	
   

  
	
  Sempra Energy
  Solutions

  	
   

  	
  $

  	
  74,067.07

  	
   

  
	
  WPS Energy
  Services, Inc.

  	
   

  	
  $

  	
  887.32

  	
   

  
	
  Total:

  	
   

  	
  $

  	
  20,000,000

  	
   

  

 

 2Exhibit
4.1

AMENDMENT
NO. 1 TO RIGHTS AGREEMENT

This AMENDMENT NO. 1 TO
RIGHTS AGREEMENT (this “Amendment”) is entered into as of January 23,
2007, by and between Affordable Residential Communities Inc., a Maryland
corporation (the “Company”), and American Stock Transfer & Trust Company, a
New York corporation (the “Rights Agent”).

WHEREAS, the Company and
the Rights Agent are parties to that certain Rights Agreement, dated as of July
11, 2006 (the “Rights Agreement”); and

WHEREAS, pursuant to
Section 27 of the Rights Agreement and a resolution duly adopted by the Company’s
Board of Directors on January 22, 2007, the Company has elected to exercise its
discretion to amend, and has directed the Rights Agent to amend, the Rights
Agreement as contemplated by this Amendment, to provide, among other things,
for the expiration on January 24, 2007, of the Rights issued under the Rights
Agreement; and

WHEREAS, in connection
with such amendment, the Rights Agent has received from the Company the
certificates and instructions contemplated by Section 27 of the Rights
Agreement.

Accordingly, the parties
agree as follows:

1.  AMENDMENT. 
Section 7(a) of the Rights Agreement is hereby amended by deleting
clause (i) thereof and replacing it in its entirety with the following:

“(i) the close of business on January 24, 2007 (the “Final
Expiration Date”),”

2.  EXPIRATION OF RIGHTS AND OBLIGATIONS.  The Rights and all rights and obligations of
the holders thereunder or with respect thereto shall expire and terminate on
the Final Expiration Date.  The Rights
Agreement and all rights and obligations of the Company and the Rights Agent
thereunder or with respect thereto shall expire and terminate on the Final
Expiration Date.

3.  EFFECTIVENESS.  This Amendment shall be deemed effective as
of the date hereof.  Except as amended
hereby, the Rights Agreement shall remain in full force and effect and shall be
otherwise unaffected by this Amendment.

4.  SEVERABILITY. 
If any provision, covenant or restriction of this Amendment is held by a
court of competent jurisdiction or other authority to be invalid, illegal or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment shall remain in full force and effect and shall
in no way be effected, impaired or invalidated.

 1
 

 

5.  GOVERNING LAW.  This Amendment shall be deemed to be a
contract made under the laws of the State of Maryland and for all purposes
shall be governed by, and construed in accordance with, the laws of such state
applicable to contracts to be made and performed entirely within such state.

6.  COUNTERPARTS. 
This Amendment may be executed in any number of counterparts, each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.

7.  MISCELLANEOUS.  All capitalized terms in this Amendment,
unless otherwise defined herein, shall have the meanings ascribed to them in
the Rights Agreement.

 2
 

 

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

	
  

  	
  AFFORDABLE RESIDENTIAL COMMUNITIES INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Scott L. Gesell

  
	
   

  	
   

  	
  Name: Scott L. Gesell

  
	
   

  	
   

  	
  Title: Executive Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AMERICAN STOCK TRANSFER & TRUST COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barry Rosenthal

  
	
   

  	
   

  	
  Name: Barry Rosenthal

  
	
   

  	
   

  	
  Title: Vice President

  

 

[Signature Page to Amendment No. 1 to Rights
Agreement]

 3

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