Document:

EX-10.3

 Exhibit 10.3 
 RESTRICTED STOCK UNIT AWARD AGREEMENT 
 (2013 Performance-Based
Award – Investment Results) 
 This Agreement (“Agreement”) is made this <Grant Date> by and between
<Participant Name> (“Participant”) and The Progressive Corporation (the “Company”). 
 1.
Definitions. Unless otherwise defined in this Agreement, each capitalized term in this Agreement shall have the meaning given to it in The Progressive Corporation 2010 Equity Incentive Plan, as amended (collectively, the “Plan”).
References herein to performance results of the Company mean the applicable results achieved by the Subsidiaries and Affiliate of the Company. 
 2. Award of Restricted Stock Units. The Company grants to Participant an award (the “Award”) of performance-based restricted stock units (“Restricted Stock Units” or
“Units”), pursuant and subject to the Plan. The Award is based on an initial award value of <# of Units> Units (the “Initial Award Value”). The number of Restricted Stock Units that are ultimately earned pursuant to the
Award (if any) will be determined based on the Initial Award Value and the procedures and calculations set forth in this Agreement. The maximum potential Award is a number of Units equal to two (2) times the Initial Award Value (the
“Maximum Award Value”). 
 3. Condition to Participant’s Rights under this Agreement. This Agreement shall
not become effective, and Participant shall have no rights with respect to the Award or any Restricted Stock Units, unless and until Participant has fully executed this Agreement and delivered it to the Company. In the Company’s sole
discretion, such execution and delivery may be accomplished through electronic means. 
 4. Restrictions; Vesting.
Subject to the terms and conditions of the Plan and this Agreement, Participant’s rights in and to Restricted Stock Units shall vest, if at all, as follows: 

a. Evaluation Period. The “Evaluation Period” shall be the three-year period comprised of the calendar
years 2013, 2014 and 2015. 
 b. Certification. The Award shall vest (if at all) only if, to the extent,
and when the Compensation Committee of the Board of Directors (the “Committee”) certifies: 
 i. the
Performance Ranking of, and Performance Factor for, the Company’s Fixed-Income Portfolio (as each of those terms are defined in Subparagraph c. below); and 
 ii. the corresponding number of Restricted Stock Units (if any) that have vested as a result of such performance. 
 If the Committee certifies the vesting of a number of Units that is less than the Maximum Award Value, then with respect to all other Units that could have been earned under this Agreement, the Award will
terminate and be forfeited automatically. 
 c. Number of Units Vesting. The number of Restricted Stock
Units (if any) that vest in connection with the Award will be determined by application of the following formula: 

  
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 Number of Units Vesting = Initial Award Value x Performance Factor

 i. The Performance Factor will be determined after the expiration of the Evaluation Period based on the fully
taxable equivalent total return of the Company’s fixed-income investment portfolio (the “Fixed-Income Portfolio” or “Portfolio”), in comparison to the total returns of the group of comparable investment firms identified by
Rogers Casey (the “Investment Benchmark”), each calculated for the three calendar years comprising the Evaluation Period. After the end of the Evaluation Period, Rogers Casey will determine the firms that are included in the Investment
Benchmark in accordance with the criteria specified on Exhibit I hereto. Rogers Casey will also supply to the Company the monthly total return data for each of the Investment Benchmark firms for the three-year period ending on the last day of
the Evaluation Period. 
 Investment results for the Fixed-Income Portfolio will be marked to market, including the benefit of
any state premium tax abatements for municipal securities held in the Portfolio that are realized by the Company during the Evaluation Period, in order to calculate the Portfolio’s fully taxable equivalent total return, compounded on a monthly
basis, for the Evaluation Period. The investment performance achieved by the Fixed-Income Portfolio for the Evaluation Period will then be compared against the total returns of the firms included in the Investment Benchmark for the same period, also
compounded on a monthly basis, as determined by the Company from the monthly performance data supplied by Rogers Casey for each firm in the Investment Benchmark, to determine where the Fixed-Income Portfolio’s performance falls on a percentile
basis when compared to the firms in the Investment Benchmark, as further described in Exhibit II hereto (“Performance Ranking”). 
 The Portfolio’s Performance Ranking will be used to determine a performance score of between 0.00 and 2.00 for the Evaluation Period, based on the following schedule: 

 

					
	 Score = 0.00
	 	 Score = 1.00
	 	 Score = 2.00

	 Rank at or below
	 	 Rank equal to
	 	 Rank at or above

			
	25th Percentile	 	50th Percentile	 	75th Percentile

 A Performance Ranking between the values identified in the schedule will be interpolated on a
straight-line basis to generate the Performance Factor, as further described on Exhibit II. 
 ii. The Company will work with Rogers Casey to ensure, to the extent practicable, that the list of firms comprising the Investment Benchmark and all data necessary to calculate the Performance Ranking and
the Performance Factor are received by March 1st of
the year immediately following the Evaluation Period. In all events, distributions under this Agreement must be made on or before March 15th of the year immediately following the Evaluation Period. 

iii. In the event that Rogers Casey (or its successors or assigns) ceases to provide or publish the information required
to calculate the Performance Factor, or modifies the information in such a way as to render the comparisons required by this Agreement to be not meaningful, in the Committee’s sole judgment, the determinations required above shall be made using
such comparable Company and other investment data 

  
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as may be available from another recognized provider of investment industry data as the Committee may approve in its sole discretion. 

d. Committee Discretion. Notwithstanding anything to the contrary contained in this Agreement, at or prior to the
time of vesting, the Committee, in its sole discretion, may reduce the number of Restricted Stock Units that otherwise would vest according to this Agreement, or eliminate the Award in full. The Committee, in its sole discretion, may treat
individual participants differently for these purposes. Any such determination by the Committee shall be final and binding on the Participant. Under no circumstances shall the Committee have discretion to increase the award to any Participant in
excess of the number of Units that would have been awarded at vesting based on this Paragraph 4 (excluding adjustments required by Section 3(c) of the Plan). 
 The Award shall vest in accordance with and subject to the foregoing except to the extent that, prior to the Committee’s certification of the Award, the Award has been forfeited under the terms and
conditions of the Plan or this Agreement. 
 5. Dividend Equivalents. Subject to this Paragraph 5, Participant shall be
credited with Dividend Equivalents with respect to the outstanding Award prior to the applicable vesting date. All Dividend Equivalents so credited will be deemed to be reinvested in Restricted Stock Units on the date that the applicable dividend or
distribution is made to the Company’s shareholders, based on the Initial Award Value and any Units resulting from prior reinvestments of Dividend Equivalents, in the number of Units determined by dividing the value of the Dividend Equivalents
by the Fair Market Value of the Company’s Stock on such date (rounded to the nearest thousandth of a whole Unit or as otherwise reasonably determined by the Company); provided, however, that if Dividend Equivalents cannot be reinvested in Units
due to the operation of Section 3(a) of the Plan, such Dividend Equivalents will be credited to Participant as a cash value based on the Initial Award Value and any Units resulting from prior reinvestments of Dividend Equivalents, which cash
value shall be held by the Company (without interest) subject to this Agreement. The Units and, if applicable, cash value resulting from the reinvestment of such Dividend Equivalents shall be subject to the same terms and conditions, and shall vest
or be forfeited (if applicable) at the same time, upon the same conditions, and in the same proportion, as the Initial Award Value set forth in this Award. 
 6. Units Non-Transferable. No Restricted Stock Units (and no Dividend Equivalents credited hereunder) shall be transferable by Participant other than by will or by the laws of descent and
distribution, and then only in accordance with the Plan. In the event any Award is transferred or assigned pursuant to a court order, such transfer or assignment shall be without liability to the Company, and the Company shall have the right to
offset against such Award any expenses (including attorneys’ fees) incurred by the Company in connection with such transfer or assignment. 
 7. Deferral of Award. If Participant is eligible, and has made the appropriate election, to defer the Award into The Progressive Corporation Executive Deferred Compensation Plan (the “Deferral
Plan”), at the time of vesting, the Restricted Stock Units that would otherwise vest under this Agreement shall be considered to be deferred pursuant to the Deferral Plan, subject to and in accordance with the terms and conditions of the
Deferral Plan and any related deferral agreement. 
 8. Termination of Employment. Except as otherwise provided in the
Plan or in this Paragraph 8, or as determined by the Committee, if Participant’s employment with the Company is terminated for any reason other than death or Qualified Retirement, the Award and all Restricted Stock Units held by Participant
that are unvested or subject to restriction at the time of such termination shall be forfeited automatically. In the event that any such termination of employment occurs, for any reason 

  
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other than for Cause, after the end of the Evaluation Period but prior to the Committee’s certification of results for the Evaluation Period, the Award shall not be forfeited at the time of
Participant’s termination, and Participant shall be eligible to participate in the vesting of Restricted Stock Units under this Agreement only to the extent certified by the Committee, subject to the provisions of the Plan; provided, however,
that if the Committee determines that Participant is engaging in, or has engaged in, a Disqualifying Activity and that such Disqualifying Activity occurred before the vesting of the Award, the Award and all applicable Restricted Stock Units that are
then unvested or subject to restriction shall be forfeited or deemed to be forfeited automatically as of the Disqualification Date determined by the Committee and, if the vesting has already occurred, the provisions of Section 10(d)(ii) of the
Plan will apply (without regard to whether a Qualified Retirement has occurred). Any determination by the Committee that the Participant is engaging in, or has engaged in, any Disqualifying Activity, and of the Disqualification Date, shall be final
and conclusive on Participant. 
 9. Distribution at Vesting. Subject to the provisions of the Plan and this Agreement,
upon vesting of all or part of the Award, the Company shall distribute to Participant one share of the Company’s Stock in exchange for each such vested Restricted Stock Unit, and the remaining Restricted Stock Units (if any) shall be cancelled.
Unless determined otherwise by the Company at any time prior to the applicable distribution, each fractional Restricted Stock Unit shall vest and be settled in an equal fraction of a share of the Company’s Stock. 

10. Taxes. No later than the date as of which an amount relating to the Award first becomes taxable, Participant shall pay to the
Company, or make arrangements satisfactory to the Committee regarding the payment of, any federal, state and local taxes and other items of any kind required by law to be withheld with respect to such amount. The obligations of the Company under the
Plan shall be conditional on such payment or arrangements and the Company and its Subsidiaries and Affiliate, to the extent permitted by law, shall have the right to deduct any such taxes from any payment of any kind otherwise due to Participant. At
vesting, Restricted Stock Units awarded under this Agreement will be valued at the Fair Market Value of the Company’s Stock on such date. 
 Participant must satisfy the minimum statutory tax withholding obligations resulting from the vesting of Restricted Stock Units (“Minimum Withholding Obligations”) either (a) by
surrendering to the Company Restricted Stock Units that are then vesting with a value sufficient to satisfy the Minimum Withholding Obligations, or (b) by paying to the Company the appropriate amount in cash or, if acceptable to the Company, by
check or other instrument. Unless Participant advises the Company of his or her election to use an alternative payment method, Participant shall be deemed to have elected to surrender to the Company Restricted Stock Units that are then vesting with
a value sufficient to satisfy the Minimum Withholding Obligations. If Participant requests that the Company withhold taxes in addition to the Minimum Withholding Obligations, such additional withholding must be satisfied by Participant either
(x) by paying to the Company the appropriate amount in cash or, if acceptable to the Company, by check or other instrument, or (y) provided that Participant has obtained the approval of either the Company or the Committee (as required
under rules adopted by the Committee) prior to the date of vesting, by surrendering unrestricted shares of the Company’s Stock that are not being distributed to Participant as a result of the vesting event and that have then been owned by
Participant in unrestricted form for more than six (6) months. 
 Under no circumstances will Participant be entitled to
satisfy any such additional withholding by surrendering Restricted Stock Units, shares of the Company’s Stock that are being distributed to Participant as a result of the vesting event, or other shares of Stock that have then been owned by
Participant in unrestricted form for six (6) months or less. In addition, under no circumstances will Participant be entitled to satisfy any Minimum Withholding Obligations or additional withholding by surrendering Restricted Stock Units that
are not then vesting or any Restricted Stock Units that Participant 

  
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has elected to defer under Paragraph 7 above. All payments, surrenders of Units or shares, elections or requests for approval must be made by Participant in accordance with such procedures as may
be adopted by the Company in connection therewith, and subject to such rules as have been or may be adopted by the Committee. 

11. Non-Solicitation. In consideration of the Award made to Participant under this Agreement, for a period of twelve
(12) months immediately following Participant’s Separation Date (defined below), Participant shall not directly or indirectly recruit or solicit for hire, or hire, or assist in any manner in the recruitment, solicitation for hire or
hiring, of any employee or officer of the Company or any of its Subsidiaries, or in any way induce any such employee or officer to terminate his or her employment with the Company or any of its Subsidiaries. For purposes of this Paragraph,
“Separation Date” means the date on which Participant’s employment with the Company or its Subsidiaries is terminated for any reason. 
 12. Recoupment. If the Securities and Exchange Commission adopts final rules under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that require, as a condition to
the Company’s continued listing on a national securities exchange, that the Company develop and implement a policy requiring the recovery of erroneously awarded compensation, and such regulations are applicable to Participant and the Award
granted pursuant to this Agreement, then the following shall apply: 
 In the event that the Company is required to prepare a
restatement of one or more of its financial statements due to the material noncompliance of the Company with any financial reporting requirement under the federal securities laws, the Company will be entitled to recover from Participant, and
Participant will promptly upon written demand return to the Company (whether or not Participant remains an employee of the Company at the time of such restatement or thereafter), the amount of any Award granted hereunder that (i) was paid or
distributed to Participant (or any assignee or transferee permitted under Paragraph 6 above) during the three year period preceding the date on which the Company is required to prepare such restatement, and (ii) is in excess of what would have
been paid or distributed to Participant (or any such assignee or transferee) under the restatement, or such other amount as may be required by the rules of the Securities and Exchange Commission or, if applicable, the New York Stock Exchange.

 The provisions of this Paragraph 12 are in addition to the rights of the Company as set forth in Section 14(h) of the Plan. 

13. Entire Agreement. This Agreement constitutes the entire agreement between the parties and supersedes and cancels any other
agreement, representation or communication, whether oral or in writing, between the parties relating to the Award, provided that the Agreement shall be at all times subject to the Plan. 

14. Amendment. The Committee, in its sole discretion, may amend the terms of this Award, but no such amendment shall be made that
would impair the rights of Participant, without Participant’s consent. 
 15. Acknowledgments. Participant:
(a) acknowledges receiving a copy of the Plan Description relating to the Plan, and represents that he or she is familiar with all of the material provisions of the Plan, as set forth in such Plan Description; (b) accepts this Agreement
and the Award subject to all provisions of the Plan and this Agreement; and (c) agrees to accept as binding, conclusive and final all decisions and interpretations of the Committee relating to the Plan, this Agreement or the Award. 

  
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 Participant evidences his or her agreement with the terms and conditions of this Agreement,
and his or her intention to be bound by this Agreement, by electronically accepting the Award pursuant to the procedures adopted by the Company. Upon such acceptance by Participant, this Agreement will be immediately binding and enforceable
against Participant and the Company. 
  

			
	THE PROGRESSIVE CORPORATION
		
	By:	 	 /s/ Charles E. Jarrett

		 	Vice President & Secretary

  
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 EXHIBIT I 

INVESTMENT BENCHMARK CRITERIA 
 After the end of the Evaluation Period, Rogers Casey will determine the firms comprising the Investment Benchmark for the Plan year from its records and will supply to the Company the monthly total
returns and any other relevant data for each of those firms for the Evaluation Period. 
 A firm will be included in the Investment Benchmark if
Rogers Casey is able to determine from its records that: 
  

	1.	The firm has provided monthly data regarding its holdings and investment return, as necessary to determine or calculate such firm’s monthly total return, and to
evaluate such firm’s compliance with each of the criteria set forth below, for the entire Evaluation Period; and 

  

	2.	At all times during the Evaluation Period, the information provided by the firm shows, or Rogers Casey is able to calculate, that such firm’s investment portfolio
satisfies each of the following criteria: 

  

			
	 Duration:
	  	Effective Duration between 1.5 years and 5.0 years
	 Credit Quality Average
	  	= A, or = AA, or = AAA, or = AAA+
	 Convexity (%)
	  	>= -1
	 Sector Allocation:
	  	U.S. High-Yield Corporate Debt <= 10%
	 Sector Allocation:
	  	Mortgages <= 60%
	 Sector Allocation:
	  	U.S. Investment-Grade Corporate Debt <= 60%
	 Sector Allocation:
	  	CMBS <= 60%
	 Sector Allocation:
	  	ABS <= 60%
	 Sector Allocation:
	  	Emerging Markets Debt <= 5%

  

	3.	The Company will have no discretion to alter the Investment Benchmark list after it is finalized by Rogers Casey. 

  
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 EXHIBIT II 

DETERMINATION OF PERFORMANCE RANKING 
 AND PERFORMANCE FACTOR 
 Once all the total returns are calculated, the data is sorted in
descending order from highest to lowest total return. From here, the process to compute the Performance Factor is as follows: 
 INTERPOLATED
VALUES FOR SETTING TOP AND BOTTOM 25% LEVELS 
 The top 25% and bottom 25% total return rankings are computed based on the total number of firms
in the Investment Benchmark, excluding the PCM Fixed-Income Portfolio return. For example, if there were 279 participants, the return required to earn a 2.00 portfolio performance factor would be determined by interpolating between the sixty-ninth
and seventieth firm’s returns, since 25% of 279 = 69.75. The same procedure would be used to determine the 0.00 portfolio performance factor. 
 The total returns, computed by Investment Accounting, for the interpolated positions are calculated as follows (continuing to use an example of 279 survey firms): 

Interpolated Value = Firm 69 return – ((Firm 69 Return - Firm 70 Return)*0.75) 
 Firm 69 = 18.35% 
 Firm 70 = 18.23% 
 Firm 69.75 (Interpolated Value) = 18.35% - ((18.35%-18.23%)*0.75) = 18.26%. 
 In this case, the
PCM Performance Factor will equal 2.00 if its total return equals the interpolated value for Firm 69.75 or 18.26%. A similar calculation is then used to determine the bottom 25% group and interpolated value for a 0.00 performance score. 

Once the two groups are computed, top and bottom 25%, the remainder of the performance scores are calculated as follows: 

Performance score variance = (2.00) / Number of positions from first participant after the top 25% ranking to the 1st participant in the bottom 25% ranking. In the case of 279
participants, the number of positions to divide the 2.00 performance factors by would be 142. 
 The calculation for the performance score
variance from 2.00 – 0.00 would be: 
 2.00 / 142 = .014085 per position for 279 firms 

In the case of a tie in total returns between firms, each firm will have the same performance score, one step under the next higher position. The next
lowest position would then be stepped down by a factor based on the number of participants who tie. In the case of a tie between two firms, the step down will be twice the performance score variance to maintain the proper stepping to the 0.00
performance score level. 
 Example: If firms 70 and 71 each had the same total return in the 279 firm example, then firms 70 and 71 would each
have a Performance Factor of 1.985915, which is 2.00 - .014085. The number 72 position in this example would have a performance score of 1.957746, which is the required step down from 70 to 72. 

  
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 In addition, if the returns are tied between the interpolated value set for the 2.00 performance score and
any position below the 2.00 level, those lower positions will also be set to a 2.00 performance score. The step down factor in the performance score will work similarly as noted in the example above. For the last 25% group, all firms with total
returns equaling the last interpolated total return value would have the same performance score as the last interpolated value (.014085), and all others in the last 25% group would have a 0.00 Portfolio Performance Factor. 

Once all the performance scores have been created, from 2.00 to 0.00, PCM’s return is compared to the rankings to determine its Performance Factor.
If the PCM return is not in the top or bottom 25% and does not match the return of any participant, then PCM’s Performance Factor is an interpolated value between the firms with the next highest and next lowest returns. 

The interpolation computation for the Performance Factor based on PCM’s return is as follows: 

Performance score of firm below PCM return + (PCM’s Return – Return below PCM) / (Return above PCM – Return below PCM) * (Performance
score of firm above PCM – Performance score of firm below PCM) 
 Assuming the following data, using the 279 firm example: 

 

									
	 Firm
	  	Performance
score	 	  	Total
return	 
	 Firm above PCM
	  	 	.90	  	  	 	13.61	  
	 PCM
	  				  	 	13.39	  
	 Firm below PCM
	  	 	.89	  	  	 	13.34	  

 The calculation of PCM’s Performance Factor is: 
 0.89 + (13.39-13.34) / (13.61-13.34) * (0.90-0.89) = 0.89 
 The final performance score is rounded
to the nearest one-hundredth, if necessary. 

  
 9EX-10.6.3

 Exhibit 10.6.3 

 

							
	

	  	 STATE OF ALASKA
 DEPARTMENT
OF
 COMMERCE
 COMMUNITY AND

ECONOMIC DEVELOPMENT
	  		  	 Sarah Palin, Governer

Emil Notti, Commissioner
 Robert M. Pickett, Chairman

	  	  

	  	Regulatory Commission of Alaska

 October 20, 2008 

 

					
	In reply refer to:	 	Engineering
		 	File:	 	TA365-18
		 	LO#:	 	L0800511

 Wayne Carmony 
 General Manager 
 Matanuska Electric Association, Inc. 

P.O. Box 2929 
 Palmer, AK 99645-2929 

Dear Mr. Carmony: 
 On September 30 2008,
the Commission concurred with Staff’s recommendation to approve TA365-18, the request for approval of the Second Amendment to Modified Agreement for the Sale and Purchase of Electric Power and Energy (the Amendment), filed on July 28, 2008,
between Chugach Electric Association, Inc. (Chugach), Matanuska Electric Association, Inc. (MEA), and Alaska Electric Generation and Transmission Cooperative, Inc. (AEG&T). The effective date of the Amendment is September 30, 2008.

 Enclosed is a validated copy of the Amendment, filed on July 28, 2008, and a copy of Staffs memorandum. Please note that the tariff
advice number “TA365-18” and the effective date of September 30, 2008 have been added to the bottom of the pages of the Amendment. 
 BY DIRECTION OF THE COMMISSION (Commissioner Kate Giard Not Participating) 
  

			
	Sincerely,
	
	REGULATORY COMMISSION OF ALASKA
		
		 	/s/ Robert Picket
		 	Robert Picket
		 	Chair

 701 W. 8th Avenue, Suite 300, Anchorage, Alaska 99501-3469 

Telephone: (907) 276-6222    Fax: (907) 276-0160    Text Telephone: (907) 276-4533

 Website: http://rca.alaska.gov/RCAWeb/home.aspx 

 Enclosures 
  

			
	CC:	  	Brad Evans, Chief Executive Officer, Chugach Electric Association, Inc.
		  	560 E. 34th Avenue Suite 200
		  	Anchorage, Alaska 99503-4196
		
		  	Earl Osmond, Polarconsult Alaska, Inc.
		  	1503 W. 33rd Avenue
		  	Anchorage, Alaska 99503

 SECOND AMENDMENT TO MODIFIED AGREEMENT FOR THE SALE AND 

PURCHASE OF ELECTRIC POWER AND ENERGY 
 dated April 5, 1989 by and among Chugach Electric Association, Inc., Matanuska Electric 
 Association, Inc. and 
 Alaska Electric Generation and Transmission Cooperative,
Inc. 
 WHEREAS, Chugach Electric Association, Inc. (Chugach), Matanuska Electric Association, Inc. (MEA) and Alaska
Electric Generation and Transmission Cooperative, Inc. (AEG&T) are parties (hereinafter jointly referred to as the “Parties”) to the Modified Agreement For The Sale And Purchase Of Electric Power And Energy dated April 5, 1989 by
and among Chugach Electric Association, Inc., Matanuska Electric Association, Inc. and Alaska Electric Generation and Transmission Cooperative, Inc. (hereinafter “Agreement”; MEA and AEG&T acting collectively with respect to the
Agreement are referred to herein as “AEG&T/MEA”); 
 WHEREAS, the Parties desire to amend the Agreement to
facilitate MEA purchasing the electrical output of two hydroelectric facilities planned by South Fork Hydro, LLC and Fishhook Renewable Energy, LLC for location on the South Fork of Eagle River and on Fishook Creek in the Hatcher Pass area,
respectively, of Southcentral Alaska (hereinafter “South Fork/Fishhook Hydro Projects”); 
 WHEREAS, the intent of the
Parties in this Second Amendment to the Agreement is to allow MEA to purchase the entire electrical output of the South Fork/Fishhook Hydro Projects, on terms that are financially neutral to both Chugach and AEG&T/MEA for wholesale power service
provided to AEG&T/MEA, without changing AEG&T/MEA’s status under the Agreement as an “All Requirements” customer of Chugach; 
 WHEREAS, the Parties intend that except as specifically stated herein, this Second Amendment to the Agreement shall not in any way change or diminish the Parties’ respective rights and
responsibilities under the Agreement, and shall not be considered as agreement to or precedent for future changes in the Parties’ rights and responsibilities under the Agreement; and 

WHEREAS, the impact of the South Fork/Fishook Hydro Projects on Chugach’s annual G&T transmission loss factor, when the energy
deliveries from the Projects are included and calculated in accordance with the Stipulation on G&T Line Loss Issues that was accepted by the Commission in Order No. 12 of Docket U-99-106, is expected to be immaterial, both individually and
collectively; 
 NOW, THEREFORE, consistent with the above, the Parties agree to the following Second Amendment to the Agreement

 A. New Section 7 (e) 
 The Parties agree to add a new Section 7(e) to the Agreement as follows: 
 7
(e). Treatment of South Fork/Fishhook Hydro Projects. Provided the installed capacity of two hydroelectric facilities planned by South Fork Hydro, LLC and Fishhook 

  

					
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	TA365-18	 		 	Effective September 30, 2008

 Renewable Energy, LLC for location on the South Fork of Eagle River and on Fishook Creek in the Hatcher Pass
area, respectively, of Southcentral Alaska (South Fork/Fishhook Hydro Projects) in the aggregate does not exceed 4 MW: 
 (1)
Purchase by MEA of Electric Power from one or both of the South Fork/Fishhook Hydro Projects shall not be considered an AEG&T/MEA Resource for purposes of this Agreement. 
 (2) AEG&T/MEA shall not be obligated to use reasonable best efforts to persuade the developers of the South Fork/Fishhook Hydro Projects to deal directly with Chugach, as otherwise provided for in
7(b). 
 (3) Chugach’s monthly invoice to AEG&T/MEA shall be reduced by an amount equal to the kWh received by MEA from
the South Fork/Fishhook Hydro Projects multiplied by Chugach’s tariffed rate for non-firm power purchases for that billing month. Specifically, unless and until an alternative avoided cost calculation is developed, the “Non­ firm power
rate” on the approved Chugach Tariff Sheet No. 97 (Purchase and Sales Rates for Qualified Cogeneration and Small Power Production Facilities) for each month shall be used to determine the amount by which Chugach’s invoice shall be
reduced based upon MEA’s purchases from the South Fork/Fishook Hydro Projects. At any time prior to the end of this agreement Chugach may propose to the Commission an alternative avoided cost calculation to apply to MEA’s purchases from
the South Fork/Fishhook Hydro Projects. Prior to filing any such proposal, Chugach shall meet with AEG&T/MEA to discuss how the proposed change, if approved, would affect AEG&T/MEA’s monthly invoice. Any changes in the calculation of
the avoided cost rate(s) are subject to the standard review and adjudicatory processes of the Regulatory Commission of Alaska. AEG&T/MEA reserves the right to oppose any such proposal before the Commission. 

(4) Payments made by MEA for purchases from the South Fork/Fishook Hydro Projects shall be not be less than the reduction to MEA’s
billings from Chugach for the kWh received by MEA from the South Fork/Fishhook Hydro Projects described in Section 7(e)(3), above. 
 (5) Except for the reduction in Chugach’s monthly invoice to AEG&T/MEA computed pursuant to Section 7(e)(3), all rates and resulting invoices charged by Chugach to MEA shall be computed as
if the Electric Power received from the South Fork/Fishhook Hydro Projects were received from Chugach. The wholesale billing rates charged by Chugach to AEG&T/MEA shall not be reduced to reflect any contribution of capacity from the South
Fork/Fishhook Hydro Projects. Energy-related costs other than fuel and purchased power that are presently included in the rates charged by Chugach to AEG&T/MEA shall not be reduced to reflect Electric Power received by MEA from the South
Fork/Fishhook Hydro Projects. For the remainder of the term of the Agreement, Chugach’s rates for AEG&T/MEA’s purchases of energy and capacity (including both monthly Billing Demand and determination of Coincident Peak for ratemaking
purposes) shall be computed as if the amounts of capacity and energy taken from the South Fork/Fishhook Hydro Projects by AEG&T/MEA were actually taken from Chugach. 

  

					
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	TA365-18	 		 	Effective September 30, 2008

 For purposes of Chugach’s quarterly Fuel and Purchased Power Cost Adjustment Factor
updates (Chugach Tariff Sheets No. 94 et al), the amounts credited AEG&T/ MEA pursuant to Section 7(e)(3) for MEA’s purchases of Electric Power from the South Fork/Fishhook Hydro Projects will be considered part of Chugach’s
system costs. Those costs shall be apportioned to all classes of service, including AEG&T/MEA, consistent with established cost assignment methodologies. 
 (6) All of Chugach’s remaining obligations under the AEG&T/MEA Agreement, including the obligation to maintain reserves sufficient to support AEG&T/MEA’s entire load, remain unchanged.

 (7) Before allowing the South Fork/Fishhook Hydro Projects to interconnect with AEG&T/MEA’s facilities or equipment,
or accepting any Electric Power from the South Fork/Fishhook Projects, MEA shall confirm, to Chugach’s satisfaction, its ability to provide Chugach with interval pulse data that are compliant with and subject to all metering requirements of the
AEG&T/MEA Agreement. AEG&T/MEA shall ensure that telephone access is installed to Chugach’s specifications at the metering point. The metering installed by Chugach, and the pulse output provided by MEA, shall be: 

 

	 	(A)	revenue class capable of measuring the amount of kWh delivered to AEG&T/MEA by the South Fork/Fishhook Hydro Projects 

 

	 	(B)	capable of measuring with a frequency of not less than every 15 minutes; 

  

	 	(C)	accessible by and compatible with Chugach’s MV90 system; and 

  

	 	(D)	accepting of telephonic interrogation. 

 MEA shall assure by contract with the South Fork/Fishhook Hydro Projects that Chugach-owned meters on the premises of the South Fork/Fishhook Hydro Projects are fully accessible to Chugach, without
charge, and that Chugach is afforded all of the same rights as it has with respect to other meters under the Agreement. Chugach shall bear the full cost of installing its meters and collecting metered data from those Chugach-owned and maintained
meters. 
 (8) Once the South Fork/Fishhook Hydro Projects have commenced energy deliveries, they shall be counted as Points of
Delivery for which a monthly Customer Charge is payable by AEG&T/MEA, pursuant to Chugach Tariff Sheet No. 99. 
 (B) The
Parties acknowledge that no part of this Second Amendment shall be interpreted to have amended the Agreement, until this Second Amendment has been approved by the Regulatory Commission of Alaska. The Parties agree to use their best efforts to get
prompt approval of this Second Amendment by the Regulatory Commission of Alaska. 

  

					
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	TA365-18	 		 	Effective September 30, 2008

 (C) Notwithstanding Part B of this Second Amendment, Chugach agrees that MEA can begin negotiations
with the owners of the South Fork/Fishhook Hydro Projects for agreements to purchase the electrical output of those projects immediately upon the Parties having signed this Second Amendment, and that such negotiations will not be considered a
violation of Section 7(b) of the Agreement. 
 (D) The Parties agree that this Second Amendment does not preclude Chugach from
negotiating directly with the South Fork/Fishhook Hydro Projects or with any other power supplier to purchase the electrical output. 
  

			
	Dated this 25th day of June, 2008
	
	    CHUGACH ELECTRIC ASSOCIATION, INC.
		
	    By:	 	 /s/ Rebecca Logan

		
	    Its:	 	 Chairman

	
	    MATANUSKA ELECTRIC ASSOCIATION, INC.
		
	    By:	 	 /s/ Elsie E. Lester

		
	    Its:	 	 President

	
	     ALASKA ELECTRIC GENERATION &
     TRANSMISSION COOPERATIVE, INC.

		
	    By:	 	 /s/ Wayne Carmony

		
	    Its:	 	 General Manager / Director

  

					
		 	4 of 4	 	
	TA365-18	 		 	Effective September 30, 2008

 TARIFF ACTION MEMORANDUM 

 

					
		 		  	September 2, 2008
		 		  	   Date

		
	File No.: TA365-18	  	Date Filed: July 28. 2008
		
	Name of Utility:	 	 Matanuska Electric Association, Inc.

 Tariff Recommendation: 
 Staff recommends the commission approve the Second Amendment to the Agreement for the Sale and Purchase of Electric Power and Energy, dated April 5, 1989 by and among Chugach, MEA, and AEG&T.

 Reason(s) for the above-indicated recommendation: 
 See attached memorandum. 
  

									
	Signed:	 	 /s/ James Keen
	 		 	Title:	 	 Utility Engineering Analyst

		 	 James Keen
	 		 		 	

  
  

Commission decision regarding this recommendation: 
  

									
	 	  	 Date (if Different from
September 30, 2008)
	  	 I CONCUR
	  	 I DO NOT CONCUR
	  	 I WILL WRITE A
DISSENTING
STATEMENT *

					
	 Pickett
	  	  
	  	 /s/ RMP
	  	  
	  	  

					
	 Giard
	  	  
	  	 /s/ KG
	  	  
	  	  

					
	 Johnson
	  	  
	  	 /s/ MJ
	  	  
	  	  

					
	 Price
	  	  
	  	 /s/ AP
	  	  
	  	  

					
	 Wilson
	  	  
	  	 /s/ JWW
	  	  
	  	  

  

	•	If this column is initialed, Staff will contact the Commissioner for the statement; otherwise, the dissent will simply be noted at the close of the By Direction letter
or order. 

  
 TA Memo-MEA,
TA365-18 
 9/30/2008 
 Page 1 of 4 

 STATE OF ALASKA 
 The Regulatory Commission of Alaska 
 701 West 8th Ave., Suite 300 

Anchorage, Alaska 99501-3469 
 MEMORANDUM 
  

					
	TO:	  	Commissioners:	  	DATE: September 2, 2008
		  	    Bob Pickett, Chairman	  	
		  	    Kate Giard	  	
		  	    Mark K. Johnson	  	
		  	    Anthony A. Price	  	
		  	    Janis W. Wilson	  	

  

			
	FROM:	  	James Keen, Utility Engineering Analyst
		
	Subject:	  	TA365-18, 2nd Amendment to Modified Agreement for the Sale and Purchase of Electric Power and Energy dated April 5, 1989 by and among Chugach, MEA, and
AEG&T.

 Statement of Case 
 Whether the commission should approve the Second Amendment to Modified Agreement for the Sale and Purchase of Electric Power and Energy dated April 5, 1989 by and among Chugach Electric Association,
Inc., Matanuska Electric Association, Inc. and Alaska Electric Generation and Transmission Cooperative, Inc. (Second Amendment). 

Recommendation 
 Staff
recommends the commission approve the Second Amendment. 
 Background 

MEA filed the Second Amendment on behalf of itself, Chugach Electric Association, Inc. (Chugach), and Alaska Electric Generation and Transmission
Cooperative, Inc. (AEG&T) on July 28, 2008. The TA was noticed to the public with a comment period closing date of August 29, 2008. 
 Comments were filed electronically. Two of the comments filed anonymously stated concern about MEA increasing its rates.1 The third comment was filed by a representative of the Water 

 

	1 	TA365-18, filed August 14, 2008; also Public Comment, filed August 15, 2008. 

  
 TA Memo-MEA,
TA365-18 
 9/9/2008 
 Page 2 of 4 

 
Resource Section of the Department of Natural Resources (Water Resources Section).2 The Water Resources Section stated that it has no objection to MEA’s petition for the adoption of the Second
Amendment and supplied information regarding its processing of applications by South Fork Hydro, LLC, and Fishhook Renewable Energy, LLC3 
 Discussion 
 The Second Amendment to the Purchase and Sale Agreement between Chugach, MEA,
and AEG&T seeks to allow MEA to purchase power directly from South Fork Hydro, LLC (South Fork) and Fishhook Renewable Energy, LLC (Fishhook). Both hydroelectric projects are located within MEA’s certificated service area, South Fork in
Eagle River and Fishhook in Hatcher’s Pass. The planned combined capacity of both projects is 4 MW. Construction of the South Fork project is planned for 2008 and construction of Fishhook is planned for 2009. 

As an all-requirements customer under the existing purchase and sale agreement, MEA would normally not be allowed to purchase power directly from South
Fork and Fishhook. South Fork and Fishhook would have to sell power to Chugach and also pay wheeling charges to use MEA’s transmission system. Under the proposed Second Amendment, MEA will be able to purchase power directly from South Fork and
Fishhook. 
 The Second Amendment is designed to be financially neutral for both MEA and Chugach. MEA is permitted to negotiate a contract with
both South Fork and Fishhook for purchase of electricity for at least the approved non-firm purchase power cost rate in Chugach’s tariff. Chugach has agreed to deduct from its monthly invoice to AEG&T/MEA, an amount equal to the kWh MEA
receives from South Fork and Fishhook, multiplied by Chugach’s tariffed rate for non-firm 
 power purchases for that month. All other
Chugach charges, including charges for capacity and demand will remain the same, as if the South Fork and Fishhoak projects were part of the Chugach system. 
 MEA is also required to ensure that the South Fork and Fishhook systems will meet with Chugach technical specifications to ensure problem-free interconnection with the Railbelt grid. 

The Second Amendment does not provide MEA with authority to purchase power from any other sources except South Fork and Fishhook, or beyond the planned 4
MW combined capacity of both facilities. The Second Amendment states that its ratification is subject to RCA approval. 
 Chugach’s Board
of Directors approved the Second Amendment at its June 25, 2008 meeting. MEA’s Board of Directors approved the Second Amendment at its July 8, 2008 meeting. AEG&T’s Class B Membership Board of Directors approved the Second
Amendment at its July 8, 2008 meeting. 
  

	2 	Public Comment for TA365-18 by Natural Resource Manager Patricia Bettis, filed August 20, 2008. 

	3 	The Department of Natural Resources, Water Resources Section issued on August 20, 2007 a permit to appropriate water to South Fork Hydro, LLC for the appropriation
of 54.45 cubic-feet of water per second from the South Fork Eagle River for the purpose of hydroelectric power generation. Finally, the Water Resources Section has received an application for water rights in association with the proposed Fishhook
Creek hydroelectric project. This case file is currently being processed. 

  
 TA Memo-MEA,
TA365-18 
 9/9/2008 
 Page 3 of 4 

 Staff reviewed the Second Amendment and found it to be reasonable. The amendment will not raise rates for
customers and will not disrupt the relationship between MEA, Chugach, and AEG&T. There is a net benefit to providing local power generation in MEA’s service area as the line loss will not be as great. Additionally, the production of the up
to 4 MW of power will offset the production of power using fossil fuels. The Second Amendment will terminate with the full purchase and sale contract on December 31, 2014 pursuant to approved terms in the master agreement. Staff recommends the
commission approve the Second Amendment. 

  
 TA Memo-MEA,
TA365-18 
 9/30/2008 
 Page 4 of 4 

 
preclude MEA from using power supplied hereunder to meet its retail electric loads while engaging in contemporaneous off-system sales of capacity or energy available to MEA from other sources.

 SECTION 7. NON-EXCLUSIVITY AND PURPA RESOURCES 

7(a). Power Purchase Rights And Power Payment Obligations. Nothing in this Agreement shall be construed to prevent
AEG&T/MEA from purchasing or acquiring power from any other source or facility, including without limitation the Eklutna and Bradley Lake Hydroelectric Projects, the Soldotna #1 unit, or any purchase or acquisition under the Public Utility
Regulatory Policies Act of 1978 (“PURPA”) or other similar statutes, but no such purchase or acquisition, including under PURPA, shall excuse or reduce performance of this Agreement by the parties. In particular, both AEG&T and MEA
shall at all times continue performing the purchase and payment obligations set forth in Section 6 and (if applicable) in Exhibit E of this Agreement notwithstanding any other such purchase or acquisition. Any and all purchases or acquisitions
under PURPA by MEA, or for or on behalf of MEA by AEG&T, shall be treated as AEG&T/MEA Resources for purposes of this Agreement, with the exception of (1) those potential PURPA purchases and acquisitions listed in Exhibit G attached
hereto and resold to Chugach under the provisions of Section 7(c) of this Agreement, and (2) any other PURPA resource whose entire output is sold by MEA to Chugach, AEG&T or any other utility and where no part of such output is used to
serve MEA’s retail loads. 
 7(b). Treatment Of PURPA Resources Generally. Unless and until
AEG&T/MEA has exercised the option described in Section 6(b) or the option described in Section 6(f), AEG&T and MEA shall use their reasonable best efforts to persuade developers of potential PURPA resources to deal directly with
Chugach rather than attempting to sell the output of such resources to MEA or to AEG&T for service to MEA. AEG&T and/or MEA consents and agrees to the sale of such output from PURPA resources directly to Chugach and agrees to make its
facilities available, to the extent available, as necessary to accomplish such sales, in accordance with the terms and provisions of interconnection and wheeling agreements (which shall be subject to Commission approval) among Chugach,
AEG&T/MEA, and such developers. Chugach agrees to deal with all such developers in good faith and to purchase energy and capacity from such developers in accordance with the requirements of PURPA, including at Chugach’s avoided cost (or, if
then-applicable PURPA regulations no longer require payment at full avoided cost, at such payment level as such regulations may then require) unless Chugach is able to reach agreement with such developers for purchases at lower payment levels. The
sale to Chugach of the output from PURPA facilities may be accomplished, as appropriate, by delivering the energy and power from the PURPA 

  

			
	 Effective: January 30, 1989

Pursuant to Order No. 12 in Docket U-87-43
	 	
		
	 MODIFIED TRIPARTITE
 POWER
SALES AGREEMENT (CEA/AEG&T/MEA)
	 	Page 13

 Page 18 of 98 
  

 
resource directly to AEG&T/MEA for service to MEA, and the determination of avoided cost shall recognize such method of delivery. 

7(c). Treatment Of Exhibit G Potential PURPA Resources. With respect to the four specific resources listed in
Exhibit G (for which PURPA treatment may or may not be appropriate), with whose potential developers MEA had begun engaging in discussions prior to the drafting of this Agreement, the parties agree as follows: 

(1) The parties will attempt to persuade such developers to deal directly with Chugach rather than with MEA. If such
developers decline to do so, and if MEA subsequently enters into a PURPA contract for one or more of the specific resources so listed, MEA may at its option elect to resell to Chugach, in which event Chugach will buy from MEA the capacity (if any)
and energy produced by such resource and for which MEA is obligated to pay under such contract, but only if the following conditions are met and only upon the following terms: 

 

	 	(A)	Conditions: 

(i) MEA’s contract with the developer is executed by both parties no later than June 30, 1989 (or, if earlier,
the date on which Chugach reasonably expects to refinance its existing REA or Federal Financing Bank indebtedness, such date to be specified in a written notice from Chugach to AEG&T/MEA delivered not less than 120 days prior to such date);

 (ii) MEA has included Chugach in all formal and informal discussions and negotiations with such developer
that take place on or after December 1, 1986; 
 (iii) Chugach elects not to contest the applicability of
PURPA to the specific resource, or PURPA is found to apply to such resource notwithstanding any challenge by Chugach or others and 
 (iv) MEA’s contract with the developer does not include — 
  

	 	•	 	 Rates of payment for capacity and/or energy in excess of Chugach’s avoided cost for the capacity (if any) and/or energy produced by that resource,
as such avoided cost is determined by Chugach or as it may lawfully be determined by the Commission; 

  

			
	 Effective: January 30, 1989

Pursuant to Order No. 12 in Docket U-87-43
	 	
		
	 MODIFIED TRIPARTITE
 POWER
SALES AGREEMENT (CEA/AEG&T/MEA)
	 	Page 14

 Page 19 of 98 
  

	 	•	 	 Financial or other incentives to which Chugach does not specifically consent, including, for example, “levelized” payments or any payment for
the alleged capacity of “stochastic” resources of the type described in paragraph B(2) of this Section (unless the Commission, prior to June 30, 1989 (or, if earlier, the date on which Chugach reasonably expects to refinance its
existing REA or Federal Financing Bank indebtedness, such date to be specified in a written notice from Chugach to AEG&T/MEA delivered not less than 120 days prior to such date), lawfully orders that such incentives be included in MEA’s
contract for that resource); or 

  

	 	•	 	 Any provision that would interfere with Chugach’s ability to make effective use of power from the resource in a manner consistent with
Chugach’s system operations and Chugach’s treatment of other PURPA resources. 

  

	 	(B)	Terms: 

 (i)
Chugach will pay MEA, for capacity and energy produced by any such resource and delivered to Chugach, at Chugach’s avoided cost for that specific resource (as determined by Chugach or as lawfully determined by the Commission}. 

(ii) For wind generators and run-of-the-river or small hydroelectic generators and other forms of “stochastic”
generation, Chugach has determined and hereby announces that at the present time and for the foreseeable future the output of such generators will not permit Chugach to avoid any capacity costs, and that such resources have actual economic value to
Chugach only insofar as their energy output permits Chugach to avoid that portion of the costs included in the energy charge in Chugach’s rates that represents Chugach’s truly variable costs of energy production; provided, however, that
notwithstanding the foregoing, the determination of the capacity value of wind generators and run-of-the-river or small hydroelectric generators and other forms of “stochastic” generation remains with the Commission. 

  

			
	 Effective: January 30, 1989

Pursuant to Order No. 12 in Docket U-87-43
	 	
		
	 MODIFIED TRIPARTITE
 POWER
SALES AGREEMENT (CEA/AEG&T/MEA)
	 	Page 15

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