Ordinance No. 918
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
ORDINANCE NO. 918
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF VERNON APPROVING THE TERMS AND CONDITIONS
OF A POWER SALES CONTRACT BETWEEN SOUTHERN
CALIFORNIA PUBLIC POWER AUTHORITY AND THE
CITY OF VERNON AND AUTHORIZING THE EXECUTION
OF AND DELIVERY OF SAID AGREEMENT BY OFFICERS
OF THE CITY OF VERNON
WHEREAS, pursuant to the provisions of Chapter 5,
Division 7, Title 1 of the Government Code of the State of
California, as amended (the "Joint Powers Act"), the City of
Vernon and certain other public agencies created pursuant to
the laws of the State of California (collectively, the "Members"),
have entered into a Joint Powers Agreement (the "Agreement")
creating the Southern California Public Power Authority (the
"Authority"), a public entity separate and apart from the
Hembers; and
WHEREAS, in accordance with the Agreement and the Joint
Powers Act, the Authority has entered or will enter into
agreements to acquire an interest in a project for the generation
of electric energy, which project (the "Project") is to consist
of an ownership interest as tenant in common in the Palo Verde
Nuclear Generating Station, a nuclear steam electric generating
station under construction in the State of Arizona, and capital
improvements thereto that may be constructed from time to time,
and interests in certain other properties and rights relating
thereto; and
~'lJHEREAS, the City of Vernon has need for an economical,
reliable source of electric power and energy to meet the demands
of the customers of its electric system, and, as such, has
1 determined that it is desirable to enter into a Power Sales
2 Contract (the "Power Sales Contract") in the form submitted to
3 this City Council and dated for convenience as of July 1, 1981,
4 to purchase electric capacity and energy of the Project from
5 the Authority; and
6 WHEREAS, this City Council finds and determines that it
7 is in the best interests of the customers of the electric system
8 of the City of Vernon for the City of Vernon to purchase electric
9 capacity and energy of the Project from the Authority.
10 NOW, THEREFORE, BElT ORDAINED BY THE CITY COUNCIL OF
11 THE CITY OF VERNON AS FOLLOWS:
12 SECTION 1: The City Council hereby finds and
13 determines that the terms and conditions of the Power Sales
14 Contract, a copy of which is attached hereto and made a part
15 hereof as Exhibit "A", including the Project Entitlement Share
16 of the City of Vernon of 4.500% be, and the same are hereby,
17 approved.
18 SECTION 2: The Project Entitlement Share of the City
19 of Vernon as set forth in Appendix A to said Power Sales Contract
20 may be increased to such percentage, not to exceed 9%, as shall
21 be determined by the Chief Executive Officer as contemplated by
22 Section 19.3 of said Power Sales Contract in the event that,
23 prior to December 15, 1981, one or more Project Participants
24 fail to meet the requirements of Section 19.1 (i) and (ii) of
25 their separate Power Sales Contract.
26 SECTION 3: The City Council of the City of Vernon
27 hereby authorizes the Mayor and the City Clerk of the City of
28 Vernon to execute said Power Sales Contract for, and on behalf
-2-
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
of, the City of Vernon and the City Clerk is hereby authorized
to deliver said Power Sales Contract and a copy of this
Ordinance for, and on behalf of, the City of Vernon, to the
Authority.
SECTION 4: Pursuant to ~54241 of the Government Code
of the State of California, this Ordinance is subject to the
provisions for referendum applicable to the City of Vernon.
SECTION 5: The City Clerk shall certify to the
enactment of this Ordinance and shall cause this Ordinance to
be published in accordance with ~54242 of the Government Code
of the State of California.
SECTION 6: Thirty (30) days from and after its
enactment, this Ordinance shall take effect and be in full force,
in the manner provided by law.
THE FOREGOING ORDINANCE is approved, enacted and
adopted by the City Council of the City of Vernon on this 10th
day of
November
, 1981.
ATTEST:
. ~~','"
///;/~--~
~/
4""\
p"--
BRUCE V. MALKENHORST, City Clerk
-3-
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
I
.(
1 STATE OF CALIFORNIA )
) ss.
2 COUNTY OF LOS ANGELES )
3
4 I, BRUCE V. MALKENHORST, City Clerk of the City of
5 Vernon, do hereby certify that the foregoing Ordinance, being
6
Ordinance No. 918
, was duly and regularly introduced
7 at a regular meeting of the City Council of the City of Vernon,
8 held on November 3, 1981 , and thereafter finally adopted
adjourned
9 at a regular/meeting of said City Council held on
November 10, 1981
, by the following vote:
AYES : Councilmen: Halburg, Ybarra, McCo:rrnick, Gonzales
NOES: Councilmen: None
ABSENT: Councilmen: None
..
ABSTAINED Cmmcil.men: Davis
/ <;'.,. /// 'Y2../>':~/?" ~ I,
----. .?' ".,/ c.;,I!:;/?......c~ ~V-.:o>
Bruce V. Malkenhorst, City Clerk I
(SEAL)
-4-
25
26
27
28
1
AFFIDAVIT OF POSTING
2 STATE OF CALIFORNIA" )
)
3 COUNTY OF LOS ANGELES) SS
)
4 CITY OF VERNON )
5
'/
I
6
I, BRUCE V. MALKENHORST, City Clerk of the City
of Vernon, do hereby certify that I did, on the 17th day of
t-~ovember , 19 81 , post three (3) copies of ORDINANCE 1'10.918
Anproving The Tenns And ConOi'ElonS Of A Power Sales Cantract~Lw~~u gtJuLlll~.l.h Cal f.
Public Power Authority And The City Of Vernon And Authorizinp: The Execution Of An
Delivery Of Said Agreement .l:Sy U1:flcers or 'The C1cy Of V~LllUll. '
one in each of the following places, to wit: At the northwest
7
8
9
10
corner of 38th Street and Santa Fe Av~nue, at the northeast cor-
ner of Leonis Boulevard and Pacific Boulevard, and on the bulletin
11
12 board in the lobby of the City Hall of the City of Vernon, locat-
13 ed at 4305 Santa Fe Avenue, all in said City, there being no
~4 newspaper of general circulation printed and published in the City
15 of Vernon.
16
Signed this 17th day of
:November
, 1981 .
17
v.~::2Ii4;!rk
18
/!5
BRUCE
19
20
Subscribed and sworn to before me
this 17th day ofNoverriber , 19~.
21
22
x~ L./~~~
Notary Pub ic in an or the County 0
Los Angeles, State of California.
23
24
..
SUPPORTING
DOCUMENTS
"'. .
,..
[Execution Copy]
PALO VERDE NUCLEAR GENERATING STATION
POWER SALES CONTRACT
between
SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY
and
CITY OF VERNON
Dated as of July 1, 1981
[SRP]
"
TABLE OF CONTENTS *
SECTION TITLE PAGE
1. PARTIES .1
2. RECITALS . . .1
3. AGREEMENT . . . . . . .2
4. DEFINITIONS . . . . . . . . . .2
4.1. Act . . . . . . .2
4.2. Agency Agreement . . . . . . .2
4.3. Agency Costs . . . . . . .2
4.4. Agent . .. . . . . . . . . .2
4.5. Aggregate Debt Service . .2
4.6. Annual Budget . . . . . . .3
4.7. Assignment Agreement . . . .3
4.8. Authority Expenses . . . . . . . .3
4.9. Authority Percentage . . .3
4.10. Available Generating Capability . . .3
4.11. Base Load Period . . .3
4.12. Billing statement . . . .4
4.13. Board of Directors .4
4.14. Bonds . . .4
4.15. Bond Anticipation Notes . .4
4.16. Bond Counsel .4
-i-
*This Table of Contents appears for convenience only and shall not be
considered a part of this Power Sales Contract.
._,
t
SECTION
TABLE OF CONTENTS, Continued
TITLE
PAGE
4.17. Bond Indenture ............ .4
4.18. Capital Improvements ..............4
4.19. Construction Costs ...............4
4.20. Construction Fund .... . . . . . . . . . . . .4
4.21. Construction Permit ... . . . . . . . . . . . .4
4.22. Cost of Acquisition and Construction ......4
4.23. Date of Firm Operation .............6
4.24. Debt Service ..................6
4.25. Federal Tax Exemption . . . . . . . . . . . . . .7
4.26. Fiscal Year ... . . . . . . . . . . . . . .7
4.27. Fuel Expense ... .......... .7
4.28. Generation Station .......... ...7
4.29. Los Angeles . . . . . . . . . . . . . . . . . . .7
4.30. Minimum Generating Capability .... . . . . . .7
4.31. Month ...... . . . . . . . . . . . . . . . .7
4.32. Monthly Power Costs ...............7
4.33. Operating Agent . . . . . . . . . . . . . . . . 10
4.34. Operating Emergencies ............. 10
4.35. Operating Work ....... ....... 10
4.36. Operation and Maintenance Costs ........ 10
4.37. Outstanding ... . . . . . . . . . . . . . . . 10
4.38. Participation Agreement . . . . .. .... 10
-ii-
(.
SECTION
TABLE OF CONTENTS, Continued
TITLE
PAGE
4.39. Plant .. . . . . . . . . . . . . . . . . . . . 10
4.40. Plant Agreements ............... 10
4.41. Points of Delivery .............. 10
4.42. Power Sales Contract ............. 10
4.43. Power Supply Year .......... ... 11
4.44. Principal Installment ........ . . . . . 11
4.45. Project . . . . . . . . . . . . . . . . . . . . 11
4.46. Project Agreements . . . . . . . . . . . . 11
4.47. Project Entitlement Share . . . . . . . . . 11
4.48. project Manager . . . . . . . . . . . . . . 11
4.49. Project Participants . . . . . . . . . . . . . 11
4.50. Prudent Utility Practice . . . . . . . . . . . 11
4.51. PVUV Agreement . . . . . . . . . . . . 12
4.52. Series ..... ..... . . . . . . . . 12
4.53. SRP ... . . .. ..... 12
4.54. Start-Up Period . .. .. .... . . . 12
4.55. Supplemental Indenture ............ 12
4.56. Transmission Agreements . . . . . . . . . . . . 12
4.57. Trustee ... . . . . .. . . . . . . . . . 12
4.58. Uncontrollable Forces .... . . .. ... 13
4.59. Uniform System of Accounts .......... 13
4.60. Zero Net Load .... . . . . . . . . . . . . . 13
-iii-
. .
SECTION
5.
TABLE OF CONTENTS, Continued
TITLE
PAGE
OBLIGATIONS OF THE AUTHORITY AND VERNON
. . . .
. 13
5.1. Obligation to Supply'and Take Capacity
and Energy; Authority to Cause
Acquisition, Construction and
Operation. .................. 13
5.2.
5.3.
5.4.
5.5.
Adoption of Annual Budget.
. . .
. 13
. . . . . .
Reports.
. . . . . . . . .
. . 14
. . 14
. 15
. . . .
. .
Records and Accounts.
. .
. . . . . . . . .
Adjustment of Billing.
. . . . . .
. . . . .
5.6. Disputed Monthly Billing Statement.
5.7.
5.8.
. 16
Source of Payments.
. . . . . .
. . . 16
. . . . .
Project Participant to Supply
Information. ......
. . . .
. . . 16
5.11. Rate Covenant.
. . .
. 17
. . . .
. . . .
6. DUTIES AND RESPONSIBILITIES OF THE AUTHORITY
AND BOARD OF DIRECTORS ............... 17
6.1. Authority Duties and Responsibilities;
Board of Directors. .............. 17
6.2.
7.
Audits of Project Manager, Operating
Agent and Contractors. ......
. . .
. 18
7.1.
CHARGES AND BILLINGS
. . . . . . . . . . . .
. . 19
. 19
. . 19
7.2.
7.3.
Allocation of Monthly Power Costs.
. . .
Computation of Monthly Payments.
. . . . .
Basis and Billing of Minimum and
Variable Cost Component. ...
. . .
. . . . . 19
7.4. Time of Billings and Payment Thereof;
Billing Statement. .............. 19
-iv-
TABLE OF CONTENTS, Continued
SECTION
TITLE
PAGE
7.5. Interest on Unpaid Bills.
. . . . . . . .
. 20
7.6. Cost, Billing and Payment for Energy
Delivered Prior to Date of Firm .
Operation. .................. 20
8. COMMENCEMENT OF PAYMENT OBLIGATION;
OBLIGATION UNCONDITIONAL .............. 20
9.
GENERATION STATION CAPACITY AND ENERGY
ENTITLEMENTS ............
. . . .
. . . . 20
9.1. Obligation to Take Energy During Start-
Up Periods and Base Load Periods. ....... 20
9.2.
Participants Entitled to Schedule
During Other Times. .......
. . .
. . .
. 21
9.3.
Other Scheduling Matters.
. . . . . . . . . .
. 21
9.4. Operation Subject to Outages and
Curtailments. ................. 21
9.5. Scheduling Pursuant to Board of
Directors Procedures. .... ....... 21
9.6. Generation Station Control Not to
Diminish Participant I s Rights. .. '. . . . . . 22
9.7. Participant Obligated for Start-Up and
Shut-Down Energy. ............... 22
9.8.
Points of Delivery and Changes;
Transmission From Point of Delivery.
. . . .
. 22
. 22
. 22
9.9.
Sale of Energy by Participants.
. . . . . . .
10.
SWITCHYARD ENTITLEMENTS
. . .
. . .
. . .
. .
. . .
11.
PLEDGE OF PAYMENTS
. . . . .
. . . . . . . . .
. 23
12.
ISSUANCE OF BONDS
. . . . . . .
. . .
. . .
. 23
-v-
SECTION
13.
14.
15.
16.
TABLE OF CONTENTS, Continued
TITLE
PAGE
12.1. Bonds for Cost of Acquisition and
Construction and Payment of Notes.
. . . . .
. 23
12.2. Additional Bonds.
. . . . . . . . . . . .
. . . 23
12.3. Obligation of Authority to Issue Bonds. .... 23
12.4. Rights to Enforce Authority
Obligations; Expenses of Defense.
. . . .
. . . 23
12.5. Refunding Bonds.
. . .
. . . . 24
. . .
. . . . .
12.6. Certain Provisions Regarding Bonds. ...... 24
12.7~ Participants to Furnish Information.
. . .
. . 25
. . 25
ADJUSTMENT OF MONTHLY POWER COSTS
. . . . . .
. .
DEFAULT
. . . . . . . . . . .
. . . . 25
. . . .
14.1. Remedies.
. . . . . . . . . . . .
. . . 25
14.2. Transfer of Rights of Defaulting
Project Participants. ............. 26
CHARACTER, CONTINUITY OF SERVICE AND
INTERCONNECTIONS .........
. . . . .
. . . . 26
15.1. Curtailment for Emergencies or Repairs. .... 26
15.2. Uncontrollable Forces.
. . . . . . . .
. . . . 27
15.3. Electric Interconnections Not to Cause
Jeopardy. ................... 27
SEVERAL LIABILITY; LIABILITY; EXCULPATION;
INDEMNIFICATION .... . . . . . . . . .
. .
. . 27
27
. .
16.1. Participants' Obligation Several.
. . .
16.2. No Liability of Authority, Directors,
Officers, Etc. ................ 28
-vi-
SECTION
17.
18.
19.
20.
TABLE OF CONTENTS, Continued
TITLE
PAGE
16.3. Extent of Exculpation; Enforcement of
Rights in Equity. ...........
28
16.4. No Relief from Insurer's Obligations.
. .
. . . 28
16.5. Limitation of Liability of Authority,
Employees, Etc. ............
28
RESTRICTIONS ON DISPOSITION
. . . . . . . . .
. . . . 29
17.1. Restrictions on Disposition of
Participant's Entire System.
. . . .
. . . . . 29
17.2. Restriction on Disposition of Project
Entitlement Share. .......
. 29
ASSIGNMENT OF CONTRACT
. . . . . . . . . . . .
. . . 30
EFFECTIVE DATE AND TERM
. . . . . . . . . . .
. . 30
19.1. Effective Date of Power Sales
Contracts. .........
. .
. . 30
. . . . .
19.2. Forfeiture of Project Participation. . . . 30
19.3. Procedure for Disposal of Forfeited
Amounts. ................... 31
19.4. Ownership by Authority; Disposition of
Capacity after Power Sales Contracts
Expire. ......... '. . . . . . . . . . . 33
SALE OF ENTIRE PROJECT OUTPUT; RELATIONSHIP
TO AND COfolPLIANCE WITH OTHER INSTRUMENTS
. 33
. 33
20.1. Authority to Sell Entire Output.
. . .
. . .
20.2. Construction and Operation Subject to
Bond Indenture, Licenses, Etc. ........ 34
20.3. Authority to Comply with Bond
Indenture, Licenses, Etc.; Expenses of
Enforcement. ................. 34
-vii-
SECTION
21.
22.
23.
24.
25.
26.
TABLE OF CONTENTS, Continued
TITLE
PAGE
SEVERABILITY
. . . . . . . . . . . . . . . . .
. . . 34
TERMINATION OR AMENDMENT
. . . . . . . . . . . . .
. 34
22.1. Limitation on Amendment Affecting Bond
Security. . . . . . . . . . . . . . . . . . . . 34
22.2. Limitation on Amendments Affecting
Participants. . . . . . . . . . . . . . . . . . 35
22.3. Amendment of Power Sales Contract With
Respect to Transmission Agreements. ...... 35
22.4. Limitation on Amendments to Bond
Indenture. ..........
. . . . . . 35
22.5. Termination of Power Sales Contract
Under Certain Circumstances. ......... 36
GOVERNING LAW
. . . . . . . . . . . . . . . . .
. . . 36
ARBITRATION
. . . . . . . . . . . . .
. . . . 36
NOTICES
. . .
. . . 36
. .
. .
. . . . . . .
. .
25.1.
. .
. 36
. . .
. .
. . . . .
. . . . . . . . .
. .
25.2.
. . .
. . . 37
. . . . . .
. . . . .
.......
BEADINGS NOT BINDING
. . . . . . . . . . . . .
. . . 38
TESTIMONIUM
SIGNATURES AND SEALS
APPENDIX A - Participants, Participations,
Entitlements and Cost Shares
APPENDIX B - Form of Opinion of Counsel
-viii-
POWER SALES CONTRACT
1. PARTIES: This Contract, made and entered into as of July 1,
1981, by and between SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY,
established pursuant to the laws of the State of California
(hereinafter referred to as the .Authority.), and City of
Vernon, a municipal corporation of the State of California
( "Vernon") .
2. RECITALS: This contract is made with reference to the following
facts among others:
2.1.
2.2.
2.3.
2.4.
2 . 5 .
2 . 6 .
The Authority, together with Vernon and certain suppli-
ers of electric energy in California, have discussed the
desirability of the Authority financing, pursuant to the
California Joint Exercise of Powers Act, all or a portion
of the costs of acquisition and constructing the
Project.
The Authority has heretofore entered into an Agency
Agreement with Los Angeles which provides for Los Angeles
to undertake on behalf of the Authority certain work
related to the Project, including studies and estimates
and such other activities as are necessary to the secur-
ing of regulatory approvals and the meeting of environ-
mental requirements to acquire the Project and to deter-
mine the cost of the Project and other activities relat-
ing to the acquisition, construction, operation and main-
tenance of the Project.
The Project Participants listed on Appendix A hereto
have each elected to take the percentage of the output of
the Project listed next to their respective names on
Appendix A hereto as their Project Entitlement Shares.
The Authority has, in accordance with the terms of the
Agency Agreement, completed for execution this contract,
the Assignment Agreement, the Transmission Agreement, and
the Bond Indenture.
Vernon is interested in participating in the Project in
order to meet the future power needs of its customers and
to realize the savings in capital and operating costs and
economies of scale of large electric generating units and
to lessen its dependence on oil-fired generation.
The Authority will, to the extent not already done,
cause to be undertaken all steps necessary to secure such
governmental permits, licenses~ and approvals as are
necessary for the Project, and will proceed as
appropriate to undertake or cause to be undertaken the
financing, acquisition, construction, equipping and
operation of the Project. The Authority will sell the
output attributable to the Project to Vernon and to the
other entities contracting with the Authority therefor
pursuant to the Power Sales Contracts.
2.7. The Authority intends to issue Bonds under the Act suf-
ficient to pay the costs of acquiring, constructing and
equipping the Project. The Authority may also issue Bond
Anticipation Notes to provide temporary financing for
such costs. In order to enable the Authority to issue
such Bonds or Bond Anticipation Notes, or both, it is
necessary for the Authority to have binding contracts
with Project Participants, and all payments required to
be made in accordan~e with the provisions of such con-
tracts, including payments required to be made under this
contract, are to be pledged by the Authority as security
for the payment of such Bonds, and the interest thereon,
and the interest on any such Bond Anticipation Notes
subject to the application thereof to such purposes and
on such terms as provided in the Bond Indenture herein
defined.
3. AGREEMENT: For and in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, and in
order to pay the Authority for its costs of Vernon's share of
the capacity and energy from the Project furnished under this
contract, it is agreed by and between the parties hereto as
follows:
4. DEFINITIONS:
4.1.
Act: The Joint Exercise of Powers Act, being Sections
6500 through 6579.5, inclusive, of the Government Code of
the state of California, as amended and supplemented.
4.2.
Agency Agreement: That certain Palo Verde Nuclear
Generating Station Agency Agreement dated as of July 1,
1981 between the Authority and the Agent.
Agency Costs: The term Agency Costs shall have the
meaning ascribed thereto in the Agency Agreement.
4.4. Agent: Los Angeles, as Agent under the Agency
Agreement.
4.3.
4.5. Aggregate Debt Service: The term Aggregate Debt
Service shall have the meaning ascribed thereto in the
Bond Indenture.
-2-
4.6. Annual Budget: The budget adopted by the Board of
Directors pursuant to Section 5.2 hereof not less than 30
nor more than 45 days prior to the beginning of each
Power Supply Year, including any amendments thereto,
which shall show a detailed estimate of the items for
such Year upon which Monthly Power Costs for such Year
are computed and all revenues, income, or other funds to
be applied to such costs, for and applicable to such
Power Supply Year.
4.7. Assignment Agreement: The Assignment Agreement between
the Authority and SRP providing for the acquisition by
the Authority from SRP of a portion of the interest of
SRP in the Plant and the Plant Agreements, as such
Agreement may be amended from time to time.
4.8. , Authori ty Expenses: The co s t s, ex pe n s e san d fee s
incurred by the Authority in carrying out its duties,
responsibilities and obligations, and exercising its
rights, under the Act and the Project Agreements. These
costs, expenses and fees shall include the following:
4.8.1.
Fees and expenses of the Authority's legal
counsel.
4.8.2.
Agency Costs incurred or paid under the
Agency Agreement.
4.8.3.
All reasonable costs and expenses incurred by
the Authority pursuant to Section 20.3 of the
Power Sales Contracts.
4.8.4.
All reasonable costs and expenses (including
those of the Authority's legal counsel) pay-
able in accordance with Section 12.4 of the
Power Sales Contracts.
4.9. Authority Percentage: A percentage, equal to the per-
centage of the Authority's Generation Entitlement Share
under the Assignment Agreement and the Participation
Agreement.
4.10. Available Generating Capability: The term Available
Generating Capability shall have the meaning ascribed
thereto in the Participation Agreement.
4.11. Base Load Period: The term Base Load Period shall have
the meaning ascribed thereto in the Participation
Agreement.
-3-
4.12. Billing Statement: The written statement prepared (or
caused to be prepared) each Month by the Authority
pursuant to Section 7.4 which shall be based upon the
Annual Budget and which shall show for such Month the
amount to be paid to the Trustee by Vernon in accordance
with the provisions of Sections 8 and 11 hereof.
4.13. Board of Directors: The Board of Directors of the
Authority, as constituted from time to time.
4.14. Bonds: The parity bonds issued by the Authority and
outstanding pursuant to the provisions of the Bond
Indenture to finance or refinance the Cost of Acquisition
and Construction. Bonds shall include additional parity
Bonds issued pursuant to the provisions of Section 12.2
hereof, and refunding Bonds issued pursuant to the provi-
sions of Section 12.5 hereof.
4.15. Bond Anticipation Notes: The term Bond Anticipation
Notes shall have the meaning ascribed thereto in the Bond
Indenture.
4.16. Bond Counsel: An attorney or firm of attorneys of rec-
ognized national standing in the field of law relating to
municipal bonds.
4.17. Bond Indenture: The Indenture of Trust dated as of
July 1, 1981 between the Trustee and the Authority, as
from time to time amended and supplemented in conformity
with its provisions and the provisions of the Power Sales
Contracts.
4.18. Capital Improvements: The term Capital Improvements
shall have the meaning ascribed thereto in the
Participation Agreement.
4.19. Construction Costs: The term Construction Costs shall
have the meaning ascribed thereto in the Participation
Agreement.
4.20. Construction Fund: The term Construction Fund shall
have the meaning ascribed thereto in the Bond Indenture.
4.21. Construction Permit: The amendments to the construction
permit (heretofore obtained under the Participation
Agreement from the Nuclear Regulatory Commission) neces-
sary to effectuate the acquisition of the Project by the
Authority.
4.22. Cost of Acquisition and Construction: All costs and
expenses of planning, engineering, designing, acquiring,
-4-
constructing, installing, equipping and financing the
Project, placing in operation or retiring, decommission-
ing or disposing of the Project, and obtaining governmen-
tal approvals, certificates, permits and licenses with
respect thereto heretofore or hereafter paid or incurred
by or on behalf of the Authority and not otherwise (i)
previously paid as Agency Costs, (ii) paid from the pro-
ceeds of insurance, or (iii) included in Monthly Power
Costs under the Power Sales Contracts. Such costs shall
include amounts required to be paid under the
Participation Agreement and the Assignment Agreement
which are applied or are to be applied thereunder to the
payment of the cost of acquiring or constructing the
Project. There shall be applied, as a credit against the
Cost of Acquisition and Construction, all receipts, reve-
nues and other moneys received from the sale of surplus
equipment, materials and supplies and interest earned on
investment~ all if and to the extent held or paid into
the Construction Fund. Subject to the foregoing restric-
tions, the Cost of Acquisition and Construction shall
include, but shall not be limited to, funds required for
the following:
4.22.1.
4.22.2.
4.22.3.
4.22.4.
Costs of preliminary investigation and devel-
opment, the performance or acquisition of
feasibility and planning studies, the secur-
ing of regulatory approvals, costs for ini-
tial fuel and reload fuel for the Project,
land and land rights, engineering,
contractors' fees, labor, materials, equip-
ment, utility services and supplies, legal
fees and working capital and reserves in such
amounts as shall be required during construc-
tion of the Project and for placing the
Project in operation;
The purchase price or prices payable by the
Authority pursuant to the Assignment
Agreement;
Construction Costs of the Project;
Costs of acquisition of, and working capital
and reserves for the acquisition of,
resources, facilities and supplies for ini-
tial fuel and reload fuel for the Project,
including, but not limited to, the cost of
processing, fabrication, transportation,
delivery, storage and disposal of such fuel,
and working capital and reserves therefor;
-5-
4.22.5. All costs incurred or associated with the
salvage, discontinuance, decommissioning and
disposition or sale of properties required to
be paid by the Authority in accordance with
the Participation Agreement;
4.22.6. To the extent not provided for as an operat-
ing expense of the Project, the Authority
Expenses;
4.22.7. Financial and legal costs and expenses and
such amounts of working capital and reserves
as are required by the Bond Indenture;
4.22.8. Subject to the requirements of the Act,
interest accruing in w~ole or in part on
Bonds prior to and during construction and
for such additional period, consistent with
the Act, as the Authority may reasonably
determine to be necessary for the placing of
the Project or any facility thereof in opera-
tion in accordance with the provisions of the
Bond Indenture;
4 .22.9 . Am 0 un t s, if any, r e qui red by the Bon d
Indenture to be paid from the proceeds of
Bonds issued to finance the Cost of
Acquisition and Construction into the Debt
Service Reserve Account in the Debt Service
Fund or the Reserve and Contingency Fund or
into any other funds or accounts established
pursuant to the Bond Indenture;
4.22.10. The payment of principal, premium, if any,
and interest due (whether at the maturity of
principal or at the due date of interest or
upon redemption) of any note or evidence of
indebtedness issued in anticipation of Bonds
for the purpose of financing Cost of
Acquisition and Construction of the Project;
and
4.22.11. All other costs properly allocable to the
acquisition and construction of the Project.
4.23. Date of Firm Operation: The t e r m D ate 0 f Fir m
Operation shall have the meaning ascribed thereto in the
Participation Agreement.
4.24. Debt Service: With respect to any period, the aggregate
of the amounts required by the Bond Indenture to be paid
-6-
during said period into any fund or account created by
the Bond Indenture for the sole purpose of paying the
principal (including sinking fund installments) of and
premium, if any, and interest (net of any interest sub-
sidy with respect to Bonds paid to or for the account of
the Authority by any governmental body or agency) on all
the Bonds from time to time outstanding as the same shall
become due; provided, however, that Debt Service shall
not include any acceleration of the maturity of the
Bonds.
4.25. Federal Tax Exemption: The exemption from Federal
income taxation of interest paid or to be paid on the
Bonds or notes or other obligations issued by the
Authority in respect of the Project.
4.26. Fiscal Year: The twelve-month period commencing at
12:01 a.m. on July 1 of each year and ending at immedi-
ately prior to such time on the following July l.
4.27. Fuel Expense: Fuel Expense shall have the meaning
ascribed thereto in the Participation Agreement.
4.28. Generation Station: The generation station for the
Project.
4.29. Los Angeles: The Department of Water and Power of The
City of Los Angeles, a department organized and existing
under the Charter of The City of Los Angeles, a municipal
corporation of the State of California, and the succes-
sors of such department.
4.30. Minimum Generating Capability: The term Minimum
Generating Capability shall have the meaning ascribed
thereto in the Participation Agreement.
4.31. Month: A calendar month.
4.32. Monthly Power Costs: All of the Authority's costs to
the extent not paid from the proceeds of Bonds, notes, or
other evidence of indebtedness issued in anticipation of
Bonds, resulting from the ownership, operation and main-
tenance of, and renewals and replacements to, the
Project. There shall be applied, as a credit against
Monthly Power Costs, all receipts, revenues and other
moneys received from the sale of surplus equipment, mate-
rials and supplies and energy sold prior to the Date of
Firm Operation, and interest earned on investments if and
to the extent not credited against the Cost of
Acquisition and Construction. Monthly Power Costs shall
consist of a minimum cost component and a variable cost
-7-
component attributable to the Project, and shall include,
but not be limited to, the items of cost and expense
referred to in this Section 4.32 that are attributable to
the Project and are accrued or paid during each Month of
each Power Supply Year. In the event any Power Supply
Year shall embrace fewer than 12 Months, the fraction
expressed in the following Sections 4.32.1.3, 4.32.1.4
and 4.32.1.5 shall be adjusted accordingly, and, in the
event of any revision of the Annual Budget after the com-
mencement of any Power Supply Year, the amount determined
pursuant to the following Sections 4.32.1.3, 4.32.1.4 and
4.32.1.5 shall be appropriately adjusted so that any
increase or decrease in the portion of the Annual Budget
applicable to said Sections shall be evenly apportioned
over the remaining Months of such Power Supply Year.
4.32.1.
The minimum cost component of the Monthly
Power Costs shall consist of:
4.32.1.1. The amount which is required under
the 'Bond Indenture to be paid or
deposited during such Month into any
funds or accounts established by the
Bond Indenture for Debt Service and
for any reserve requirements for
Bonds.
4.32.1.2. The amount which is required to be
paid or deposited during such month
into any fund or account established
by the Bond Indenture or otherwise
for the payment of interest (net of
any interest subsidy with respect to
Bonds paid to or for the account of
the Authority by any governmental
body or agency) on notes or on other
evidences of indebtedness issued in
anticipation of the issuance of
Bonds.
4.32.1.3. One-twelfth of the amount (not other-
wise included under any item in this
Section 4.32.1 or in Section 4.32.2)
which is required under the Bona
Indenture to ~e paid or deposited
during such Power Supply Year into
any other fund or account established
by the Bond Indenture, 'and shall
include, without limitation, any
amounts required to make up a
deficiency in any fund required or
-8-
4.32.2.
permit,ted by the Bond Indenture
whether or not resulting from a
default in payments by any Project
Participant of amounts due under any
Power Sales Contract.
4.32.1.4. One-twelfth of the costs of producing
and delivering capacity and energy
during such Power Supply Year,
including, but not limited to, (i)
Operation and Maintenance Costs and
costs of Operating Work incurred pur-
suant to the Participation Agreement,
administrative and general costs,
insurance costs (including amounts to
fund any self-insurance program),
overhead costs and any other costs
payable in connection with the output
of the Project and (ii) Authority
Expenses and all other costs related
to the conducting of the business of
the Authority with respect to the
Project including salaries, fees for
legal, engineering, financial and
other services, insurance costs
incurred pursuant to the Agency
Agreement and all other expenses
properly related to the conduct of
such business; provided, however,
that minimum costs included under
this Section 4.32.1.4 shall with
respect to fuel costs include only
the fixed costs of fuel incurred
under Appendix F to the Participation
Agreement.
4.32.1.5. One-twelfth of the amount necessary
during such Power Supply Year to pay
or provide reserves for all taxes
required to be paid by the Authority
with respect to its ownership inter-
ests in the Plant to the extent not
included in costs of Operating Work
or Construction Costs.
The variable cost component of the Monthly
Power Costs with respect to any Month shall
include:
4.32.2.1. The Authority's share of any payments
of fuel costs under the Participation
-9-
Agreement not covered by Section
4.32.1.4.
4.32.2.2. The Authority's cost of transmission
under the Transmission Agreements.
4.33. Operating Agent: The term Operating Agent shall have
the meaning ascribed thereto in the Participation
Agreement and shall include the operating agent under
Section I.3.1 of Appendix I to such Agreement or the man-
aging member under the PVUV Agreement, as appropriate.
4.34. Operating Emergencies: The term Operating Emergencies
shall have the meaning ascribed thereto in the
Participation Agreement.
4.35. Operating Work: The term Operating Work shall have the
meaning ascribed thereto in the Participation Agreement.
4.36. Operation and Maintenance Costs: The operation and
maintenance costs described in Section 11 of the
Participation Agreement.
4.37. Outstanding: The term Outstanding shall have the mean-
ing ascribed thereto in the Bond Indenture.
4.38. Participation Agreement: The Arizona Nuclear Power
Project Participation Agreement, dated August 23, 1973,
as heretofore amended by Amendment Nos. 1 through 5 and
as hereafter amended from time to time.
4.39. Plant: The Palo Verde Nuclear Generating Station, the
ANPP High Voltage Switchyard and the ANPP Transmission
System and certain facilities related thereto, as more
fully described in Appendix A or Appendix I, as the case
may be, to the Participation Agreement, as such
Appendices may be revised from time to time.
4.40. Plant Agreements: The term Plant Agreements shall have
the meaning ascribed to the term Project Agreements in
the Participation Agreement.
4.41. Points of Delivery: The points of delivery to Project
Participants of output of the Project pursuant to
Section 9.8 hereof.
4.42. Power Sales Contract: This contract or any contract
with terms which shall be similar in substance to the
terms of this contract and which may contain such varia-
tions or differences from the terms of this contract as
shall be approved by the Authority as not deviating from
-10-
the substance of this contract, together with amendments
thereto, entered into by the Authority and a Project
Participant.
4.43. Power Supply Year: The Fiscal Year, e~cept that the
first Power Supply Year shall begin on the first to occur
of (i) the date to which all interest is capitalized with
respect to all Bonos and Bond Anticipation Notes, or (ii)
the date which is one year prior to the first principal
installment date for any Bonds, or (iii) the Date of Firm
Operation of the first generating unit of the Project to
be placed in service.
4.44. Principal Installment: The term Principal Installment
shall have the meaning ascribed thereto in the Bond
Indenture.
4.45. Project: The interest of the Authority in the Plant and
the Plant Agreements acquired by the Authority pursuant
to the Assignment Agreement.
4.46. Project Agreements: Prior to the respective termination
dates thereof, the Bond Indenture, the Power Sales
Contracts, the Assignment Agreement, the Transmission
Agreements, the Agency Agreement, the Plant Agreements,
the Construction Permit and any other contract designated
a Project Agreement by the Board of Directors.
4.47. Project Entitlement Share: The percentage entitlement
of each Project Participant in any Power Supply Year in
the Project as set forth in Appendix A, as such Share may
be revised in accordance with this contract.
4.48. Project Manager: The term Project Manager shall have
the meaning ascribed thereto in the Participation
Agreement and shall include the project manager under
Section I.3.1 of Appendix I to such Agreement or the
Managing Member under the PVUV Agreement, as
appropriate.
4.49. Project Participants: The Project Participants named
in Appendix A, excluding any Project Participant who
withdraws entirely from participation in the Project in
accordance with this contract.
4.50. Prudent utility Practice: Any 0 f the p r act ice s ,
methods and acts, which, in the exercise of reasonable
judgment in the light of the facts (including but not
limited to the practices, methods and acts engaged in or
approved by a significant portion of the electrical
utility industry prior thereto) known at the time the
-11-
decision was made, would have been expected to accomplish
the desired result at the lowest reasonable cost consis-
tent with good business practices, reliability, safety
and expedition, taking into account the fact that Prudent
Utility Practice is not intended to be limited to the
optimum practice, methods or acts to the exclusion of all
others, but rather to be a spectrum of possible prac-
tices, methods or acts which could have been expected to
accomplish the desired result at the lowest reasonable
cost consistent with reliability, safety and expedition.
Prudent Utility Practice includes due regard for
manufacturers' warranties and requirements of governmen-
tal agencies of competent jurisdiction and shall apply
not only to functional parts of the Project, but also to
appropriate structures, landscaping, painting, signs,
lighting, other facilities and public relations programs
reasonably designed to promote public enjoyment, under-
standing and acceptance of the Project.
4.51. PVUV Agreement: The term PVUV Agreement shall mean the
Palo Verde Uranium Venture Agreement dated as of
January 7, 1977, as heretofore or hereafter amended from
time to time.
4.52. Series: The term Series shall have the meaning ascribed
thereto in the Bond Indenture.
4.53. SRP: Salt River Project Agricultural Improvement and
Power District, an agricultural improvement district
organized and existing under and by virtue of the laws of
the State of Arizona.
4.54. Start-up Period: The term Start-Up Period shall have
the meaning ascribed thereto in the Participation
Agreement.
4 .55 . Supplemental Indenture: The t e r m Sup pIe men tal
Indenture shall have the meaning ascribed thereto in the
Bond Indenture.
4.56. Transmission Agreements: The Transmission Agreement
between the Authority and SRP, entered into pursuant to
Section 9 of the Assignment Agreement, together with any
memoranda of agreement, letters of intent or definitive
agreements providing for the transmission of output from
the Generation Station to the Project Participants, as
any such Agreement may be amended and supplemented from
time to time.
4.57. Trustee: The Trustee, from time to time, under the Bond
Indenture.
-l2-
4.58. Uncontrol1able Forces: Any cause beyond the control of
the party affected, including but not restricted to
inability of the Authority to sell Bonds, failure of or
threat of failure of facilities, flood, earthquake, tor-
nado, storm, fire, lightning, epidemic, war, riot, civil
disturbance or disobedience, labor dispute, labor or
material shortage, sabotage, restraint by court order or
public authority, and action or non-action by or failure
to obtain the necessary authorizations or approvals from
any governmental agency or authority, any of which by
exercise of due diligence such party could not reasonably
have been expected to avoid and which by exercise of due
diligence it shall be unable to overcome.
4.59. Uniform System of Accounts: The "Uniform Systems of
Accounts prescribed for Class A and B Public Utilities
and Licensees" as prescribed and, from time to time, as
amended or modified or substitution therefor made by the
Federal Energy Regulatory Commission or its successor,
whether or not the Authority is subject to Federal Energy
Regulatory Commission jurisdiction.
4.60. Zero Net Load: The term Zero Net Load shall have the
meaning ascribed thereto in the Participation Agreement.
5. OBLIGATIONS OF THE AUTHORITY AND VERNON:
5.1.
5.2.
Obligation to Supply and Take Capacity and Energy;
Authority to Cause Acquisition, Construction and
Operation. The Authority has received elections from
each Project Participant for its Project Entitlement
Share. The Authority shall provide or cause to be pro-
vided and Vernon shall take its entire share of capacity
and energy from the Project pursuant to the terms of this
contract. The Authority will cause to be undertaken the
planning, negotiating, designing, acquiring, construct-
ing, insuring, contracting for, administering, operating,
and maintaining the Project pursuant to the Project
Agreements to effectuate the delivery and sale of such
share of capacity and energy to Vernon.
Adoption of Annual Budget. In each case reflecting
the most recent available budgeting and other information
provided to the Authority pursuant to the Participation
Agreement (including Section 12 thereof) and the
Transmission Agreements, the Authority will prepare or
cause to be prepared, and submit to Vernon and the other
Project Participants, at least 90 days prior to the
beginning of each Power Supply Year, a proposed Annual
Budget for such Power Supply Year. Vernon and the other
-13-
Project Participants may submit to the Authority, at any
time until the Annual Budget is adopted, any matters or
suggestions relating to the Annual Budget. The Board of
Directors shall adopt the Annual BUdget not less than 30
nor more than 45 days prior to the beginning of such
Power Supply Year and shall cause copies of such adopted
Annual BUdget to be delivered to Vernon, the Trustee and
other Project Participants; provided, however, the Annual
Budget for the first Power Supply Year shall be prepared,
considered, adopted and delivered in the most practicable
manner available prior to the date upon which such first
Power Supply Year begins. Each adopted Annual Budget for
a particular Power Supply Year shall incorporate therein
all items comprising a part of Monthly Power Costs for
such Power Supply Year and other items required by
Section 709 of the Bond Indenture. As required from time
to time during any Power Supply Year after 30 days notice
to Vernon and all other Project Participants, the Board
of Directors may, pursuant to the foregoing provisions
for adopting the Annual Budget, adopt an amended Annual
Budget for and applicable to such Power Supply Year for
the remainder of such Power Supply Year. In addition,
the Authority shall comply with Section 709 of the Bond
Indenture regarding quarterly review and amendments to
the Annual Budgets. The Annual Budget shall establish
the basis for the billing of the minimum cost components
of Monthly Power Costs and shall establish the rate of
billing for the variable cost component, all as hereinaf-
ter provided.
5.3. Reports. Subj ect to the provisions of the Plant
Agreements, the Authority will prepare or cause to the
prepared and issue to Vernon and the other Project
Participants the following reports each Power Supply
Year:
5.3.1.
Financial and operating statement relating to
the Project.
5.3.2.
5.3.3.
Status of Annual Budget.
Status of construction budget of the Project
during construction.
5.3.4.
Analysis of operations relating to the
Project.
5.4. Records and Accounts. The Authority will keep or
cause to be kept accurate records and accounts with
respect to the Project as well as of the operations of
the Project in a manner similar to the Uniform System of
-14-
Accounts. Said accounts shall be audited annually by an
independent firm of certified public accountants
experienced in electric utility accounting and selected
by the Authority. Such audit shall be completed and sub-
mitted to the Authority within 120 days after the close
of each Fiscal Year. Subject to the provisions of the
Plant Agreements, all transactions of the Authority and
the Project Manager and the Operating Agent relating to
the Project with respect to each Fiscal Year shall be
subject to such an audit. There shall be promptly fur-
nished to Vernon and the other Project participants
copies of annual and other audits. Subject to the provi-
sions of the Plant Agreements, Vernon shall have the
right at its own expense to examine and copy the records
and accounts referred to above on reasonable notice
during regular business hours.
5.5. Adjustment of Billing. On or before 120 days after
the end of each Power Supply Year, the Authority will
submit (or cause to be submitted) to Vernon and the other
Project Participants a detailed statement of the actual
aggregate Monthly Power Costs and other amounts payable
hereunder, including credits thereto, for all of the
Months of such Power Supply Year, and the adjustments of
the aggregate Monthly Power Costs and other amounts pay-'
able hereunder, if any, for any prior Power Supply Year,
based on the annual audit of accounts provided for in
Section 5.4. If, on the basis of the statement submitted
as provided in this Section 5.5, the actual aggregate
Monthly Power Costs and other amounts payable for any
Power Supply Year exceed the amount thereof which Vernon
and the other Project Participants have been billed,
Vernon shall promptly pay to the Trustee its share of
such excess. If, on the basis of the statement submitted
pursuant to this Section 5.5, the actual aggregate
Monthly Power Costs or other amounts payable for any
Power Supply Year are less than the amount therefor which
Vernon and the other Project Participants have been
billed, the Authority shall credit such excess against
Vernon's and the other Project participants' next monthly
payment. In the event that the failure of Vernon to make
its payments in accordance with this contract shall have
resulted in the application of amounts in any reserve or
working fund under the Bond Indenture to the payment of
costs payable from such reserve or working fund and the
other Project Participants shall have made up the defi-
ciency created by such application or paid additional
amounts into such reserve or working fund, amounts there-
after paid to the Trustee by Vernon for application to
such past due payments including interest shall be
credited on the Billing Statements of such other Project
-15-
5.6.
5.7.
5.8.
Participants in the next Month or Months as shall be
appropriate.
Disputed Monthly Billing Statement. I n cas e any
portion of any Billing Statement received by Vernon pur-
suant to this Contract shall be in bona fide dispute,
Vernon shall pay the Trustee the full amount of such
Billing Statement, and, upon determination of the correct
amount, the difference between such correct amount and
such full amount, if any, including interest at one per-
cent per Month on any overpayment, will be credited to
Vernon by the Authority after such determination; pro-
vided, however that such interest shall not accrue on any
overpayment that is acknowledged by or on behalf of the
Authority and returned to Vernon by the fifth day follow-
ing the receipt by the Authority of the disputed
overpayment. In the event such Billing Statement is in
dispute, the Authority will give consideration to such
dispute and will advise Vernon with regard to the posi-
tion of the Authority relative thereto within 30 days
following written notification by Vernon of such
dispute.
Source of Payments. The obligations of Vernon to
make the payments under this contract shall constitute a
cost of purchased electric capacity and energy and an
operating expense of the electric utility system of
Vernon payable solely from its electric revenue funds.
Vernon shall not be required to make any such payment
from tax revenues or its general or other funds (except
the aforesaid electric revenue funds). Vernon will annu-
ally in each and every fiscal year of Vernon during the
term of this contract include in its power system budget,
whether or not any other items are included, an appropri-
ation from the revenues of its electric system sufficient
to satisfy all the payments required to be made in such
year under this contract until all payments required
under this contract have been paid in full.
Project Participant to Supply Information. Vernon
agrees to supply the Authority, upon request, with such
information and documentation as the Authority shall rea-
sonably determine to be requisite to and necessary for
the acquisition, construction, operation and maintenance
of the Project including information reasonably available
to allow the Authority to respond to requests for such
information from the Project Manager, the Operating Agent
or any federal, state, or local regulatory or other
authority.
-16-
5.11. Rate Covenant. Vernon will establish, maintain ahd
collect rates and charges for the electric service of its
electric system so as to provide revenues sufficient,
together with available electric system reserves, to
enable Vernon to pay all amounts payable when due under
this contract and to pay all other amounts payable from,
and all lawful charges against or liens on, the revenues
of its electric system.
6. DUTIES AND RESPONSIBILITIES OF THE AUTHORITY AND BOARD OF
DIRECTORS:
6.1. Authority Duties and Responsibilities; Board of
Directors. The rights and obligations of the
Authority under the Project Agreements shall be sUbject
to the control at all times of the Board of Directors.
The Project Participants shall be entitled to participate
in the decisions of the Board of Directors with respect
to the Project in accordance with voting rights given to
them, as members, under the Joint Powers Agreement creat-
ing the Authority. The Authority, through its Board of
Directors, shall have the following duties and responsi-
bilities, among others:
6.1.1.
6.1.2.
6.1.3.
6.1.4.
6.1.5.
6.1.6.
Provide liaison among the Project
Participants at the management level with
respect to the construction and operation of
the Project.
Review, discuss' and attempt to resolve any
disputes among the Authority, the Project
Participants, the Agent, and the Project
Manager or the Operating Agent relating to
the Project.
Review, modify and approve, the practices and
procedures to be followed by the Project
Participants for the scheduling and control-
ling of capacity and energy from the
Project.
Review, modify and approve all amendments and
supplements to the Project Agreements.
Review, modify and approve all Capital
Improvements and the budgets or other provi-
sions for the payment or financing thereof.
Approve all consultants or advisors on
financial and legal matters, including but
-17-
6.1.7.
6.1.8.
6.1.9.
6.1.10.
not limited to financial advisors and legal
counsel.
Approve (i) each issuance of Bonds, (ii) each
supplement to the Bond Indenture, (iii) the
contract of purchase or notice of sale under
which each series of Bonds is to be sold,
(iv) the selection of managing underwriters
for each series of Bonds (if such Bonds are
to be sold upon a negotiated basis) and (v)
the manner and timing of marketing (including
the manner of sale), amount, interest rates
and other terms of each series of Bonds.
Approve (i) each issuance of Bond
Anticipation Notes, (ii) the proceedings
authorizing such Bond Anticipation Notes,
(iii) the contract of purchase or notice of
sale and other documents under which such
Notes are to be sold or issued, (iv) the
selection of the managing underwriter (if
such Notes are to be sold on a negotiated
basis) or placement agent, if any, (v) the
manner and time of marketing, amount, inter-
est rates and other terms of such Notes.
Review, modify and approve the Project's
insurance program, including, without limita-
tion, the establishment of a self-insurance
program; provided that, at all times, such
insurance program shall comply with the
requirements of the Bond Indenture and the
other Project Agreements.
Perform such other functions and duties as
may be provided for under this contract, and
the other Project Agreements or as may other-
wise be appropriate.
6.2. Audits of Project Manager, Operating Agent and
Contractors. Subject to the provisions of the Plant
Agreements, the Assignment Agreement and the Transmission
Agreement, the Authority shall arrange for periodic (at
least annually) audits of the books and cost records of
the Project Manager, the Operating Agent, SRP and any
cost reimbursable consultant or contractor relevant to
the acquisition, construction or operation of the
Project, except the Authority is not required to dupli-
cate the audits conducted under Section 5.4. The
Authority shall promptly furnish Vernon and the other
Project Participants copies of such audits.
-18-
7. CHARGES AND BILLINGS:
7.1. Allocation of Monthly Power Costs. For the purpose
of determining the payments to be made by Vernon pursuant
to Section 7.2 and by each of the other Project
Participants, the total amount of Monthly Power Costs
attributable to the Project shall be allocated by the
Authority as follows:
7.1.1.
7.1.2.
Minimum cost component as determined in
Section 4.32.1.
Variable cost component as determined in
Section 4.32.2.
7.2. Computation of Monthly Payments. The amount of the
Monthly Power Costs to be paid by Vernon for any Month
shall be the sum of the following:
7.3.
7.4.
7.2.1.
7.2.2.
The Vernon Project Entitlement Share times
the minimum cost component for such Month.
The variable cost component for such Month as
determined in Section 4.32.2 times a fraction
the numerator of which is the kilowatt hwrs
scheduled from the Generating Station bus to
Vernon during such Month and the denominator
of which is the kilowatt hours scheduled from
the Generating Station bus to all Project
Participants under the Power Sales Contracts
during such Month.
Basis and Billing of Minimum and Variable COst Component.
For billing purposes, the amount of the minimum cost com-
ponent of the Monthly Power Costs to be paid by Vernon
each Month pursuant to Sections 7.2.1 shall be billed in
advance and shall be based on the then current Annual
Budget. The amount of the variable cost component of the
Monthly Power Costs to be paid by Vernon each Month pur-
suant to Section 7.2.2 shall be billed the Month follow-
ing the Month such variable cost was incurred and shall
be based on the cost under Section 4.32.2 during such
Month.
Time of Billings and Payment Thereof; Billing Statement.
By the fifth calendar day of each Month during each Power
Supply Year, the Authority shall bill Vernon for the
amount of the minimum cost component of the Monthly Power
Costs to be paid by Vernon for the current Month and for
the amount of the variable cost component of the Monthly
Power Costs to be paid by Vernon for the preceding Month
-19-
by prov101ng to (or causing to be provided to) Vernon a
Billing Statement in accordance with the charges estab-
lished pursuant to the provisions of this contract. Such
Billing Statement shall detail the matters covered in
Section 4.32, and shall set forth, among other things,
the amounts due for such Months by Vernon with respect to
the items of Monthly Power Costs set forth in
Section 7.2. Such Billing Statement shall be paid by
Vernon on or before 20 days after receipt of such Billing
Statement.
7.5. Interest on Unpaid Bills. If Vernon fails to pay any
bill when due, interest shall accrue on the unpaid amount
of the bill at the highest fixed legal rate (if one
exists) or, if one does not exist, one and one-half per-
cent per month.
7.6. Cost, Billing and Payment for Energy Delivered Prior to
Date of Firm Operation. Energy delivered to Vernon
and the other Project Participants from a generating unit
of the Project prior to its Date of Firm Operation shall
be paid for within 30 days after billing by the Authority
at a rate per kilowatt-hour as determined by the
Operating Agent in accordance with the Participation
Agreement.
8. COMMENCEMENT OF PAYMENT OBLIGATION; OBLIGATION UNCONDITIONAL:
Beginning with the first to occur of (i) the date to which all
interest is capitalized with respect to all Bonds and Bond
Anticipation Notes, or (ii) the date which is one year prior to
the first principal installment date for any Bonds, or (iii) the
Date of Firm Operation of the first generating unit of the
Project to be placed in service, Vernon shall pay directly to
the Trustee the amounts of Monthly Power Costs set forth in the
Billing Statements submitted to Vernon in accordance with the
provisions of Section 7 hereof, whether or not the Project or
any part thereof is operating or operable or its output is sus-
pended, interfered with, reduced or curtailed or terminated in
whole or in part, and such payments shall not be subject to
reduction whether by offset or otherwise and shall not be condi-
tional upon the performance or nonperformance by any party of
any agreement for any cause whatever.
9. GENERATION STATION CAPACITY AND ENERGY ENTITLEMENTS:
9.1. Obligation to Take Energy During Start-Up Periods and
Base Load Periods. During the Start-up Period and any
Base Load Period of any generating unit of the Project,
-20-
Vernon shall schedule and be obligated to take delivery
of its Project Entitlement Share of the product of (i)
the Authority Percentage and (ii) the Net Energy
Generation of such generating unit.
9.2. Participants Entitled to Schedule During Other Times.
At all times after the Date of Firm Operation of each
generating unit of the Project, other than those referred
to in Section 9.1, Vernon shall be entitled to schedule
for its account capacity and energy from such generating
unit up to the amount obtained by multiplying its Project
Entitlement Share by (i) the Authority Percentage and
(ii) the Available Generating Capability of such gener-
ating unit. The provisions of this Section 9.2 shall not
reduce the obligations of Vernon pursuant to
Section 9.1.
9.3. Other Scheduling Matters. The delivery of capa~ity
and energy from the Generating Station will be scheduled
by (or on behalf of) the Authority and the other
Pa~ticipants in advance with the Operating Agent and
accounted for on the basis of such advance schedules.
The Authority will cause the Operating Agent to deliver
capacity and energy from each generating unit of the
Project at the high side of its main generator step-up
transformer in accordance with the schedule submitted by
or on behalf of the Authority to the Operating Agent or
in accordance with any revisions thereto. Whenever any
Project Participant schedules for its account capacity
and energy from a generating unit of the Project, the
Agent, acting on behalf of the Authority, unless other-
wise established under the Participation Agreement, shall
additionally schedule for each Project Participant a per-
centage of the Zero Net Load as effective during the
period that such generating unit is operated to meet such
schedule, equal to the product of (i) the Project
Participant's Project Entitlement Share and (ii) the
Authority Percentage.
9.4. Operation Subject to Outages and Curtailments.
Operation of any generating unit by the Operating Agent
shall be subject to scheduled outages or curtailments,
restrictions imposed by any regulatory authority or by
Operating Emergencies. In the event of an Operating
Emergency, the Project Participants shall, if necessary,
revise their schedules to reflect the actual capacity and
energy available from the Generating Station during the
period of the Operating Emergency.
9.5. Scheduling Pursuant to Board of Directors Procedures.
The capacity and energy of the Project shall be scheduled
-21-
9.6.
9.7.
9.8.
9.9.
or controlled by the Project Participants under practices
and procedures approved by the Board of Directors,
subject to the provisions of the Participation
Agreement.
Generation Station Control Not to Diminish Participant1s
Rights. Subject to the provisions of the Plant
Agreements, the capacity and energy of the Project shall
be controlled in a manner which shall not diminish the
rights of Vernon to receive its entitlement of capacity
and energy.
Participant Obligated for Start-Up and Shut-Down Energy.
Vernon shall be obligated, in proportion to its Project
Entitlement Share of the Authority Percentage, to provide
for capacity and energy requirements during shutdowns and
for starting up and shutting down each generating unit in
compliance with procedures established under the
Participation Agreement.
Points of Delivery and Changes; Transmission From Point
of Delivery. In accordance with the Transmission
Agreements, the Points of Delivery by Authority of
Vernon's capacity and energy are the 500kV bus of the
Navajo Switchyard, the 500kV bus of the Mohave Generating
Station, the 500kV bus of the Eldorado Substation and the
230kV bus of the Mead Substation. The Points of Delivery
may be changed from time to time in conformity with the
Transmission Agreements then in effect, provided that in
no event will any such change reduce the payment obliga-
tions of Vernon hereunder. It is the obligation of
Vernon to arrange for transmission of its capacity and
energy from the Points of Delivery to its system.
Notwithstanding anything to the contrary herein, each
Project Participant's entitlement to capacity and energy
associated with its Project Entitlement Share shall be
reduced by any line losses resulting from the delivery of
such capacity and energy to the Points of Delivery.
Sale of Energy by Participants. Nothing herein shall
prevent Vernon from disposing of its energy under this
contract; provided, however, that such disposal shall not
affect any of the obligations of Vernon under this
contract.
10. SWITCBYARD ENTITLEMENTS: V ern 0 n and e a c hot her Pro j e c t
Participant shall have the right to use the switchyard facili-
ties of the Generation Station for its Project Entitlement Share
of the Authority Percentage of the available capacity of the
-22-
switchyard in accordance with Appendix I of the participation
Agreement.
11. PLEDGE OF PAYMENTS: All payments required to be made by Vernon
in accordance with or pursuant to any provision of this con-
tract, are pledged by the Authority to secure the payment of the
Bonds, and interest thereon, and interest on any Bond
Anticipation Notes, subject to the application thereof to such
purposes and on such terms as provided in the Bond Indenture and
as required by the Act. The Authority hereby assigns its rights
to receive the payments mentioned in Section 8 of this contract
to the Trustee and directs Vernon to pay such amounts directly
to the Trustee.
12. ISSUANCE OF BONDS:
12.1. Bonds for Cost of Acquisition and Construction and
Payment of Notes. Bonds will be issued by the
Authority in accordance with this contract and the provi-
sions of the Bond Indenture for the purpose of financing
the Cost of Acquisition and Construction of the Project
including, to the extent not otherwise provided for, pay-
ment of Bond Anticipation Notes.
12.2. Additional Bonds. Additional Bonds shall be issued by
the Authority in accordance with this contract and the
provisions of the Bond Indenture at any time and from
time to time in the event funds are required for the pur-
pose of financing the Project and the Authority
Percentage of Capital Improvements.
12.3. Obligation of Authority to Issue Bonds. The
Authority hereby agrees that, upon the Assignment
Agreement and all Power Sales Contracts having been exe-
cuted and delivered or adopted, as the case may be, by
the respective parties thereto, it will, subject to the
provisionp hereof and of the Bond Indenture, issue Bonds
or Bond Anticipation Notes, or both, in accordance with
the Act and the Bond Indenture, in such amounts and at
such times as shall be necessary to timely finance the
costs of the Project, the costs of any improvements to
the Project which are necessary to meet the requirements
of any governm~ntal authority and the costs of any
replacements in the Project occasioned by damage to, or
the destruction or taking of, all or any part of the
Project.
12.4. Rights to Enforce Authority Obligations; Expenses of
Defense. Each Project Participant shall be entitled
-23-
as of right to the enforcement of the obligations of the
Authority set forth in Section 12.3 of the Power Sales
Contracts by mandamus or other suit, action or proceed-
ing, including, without limitation, specific performance,
at law or in equity to compel the Authority, its Board of
Directors or other appropriate officer to perform such
obligations. All reasonable costs and expenses of the
Authority incurred in defending any action brought pursu-
ant to this Section 12.4 shall be part of Authority
Expenses.
12.5. Refunding Bonds. In the event the Monthly Power Costs
may be reduced by the refunding of any of the Bonos or in
the event it shall otherwise be advantageous, in the
opinion of the Board of Directors, to refund any Bonds,
the Authority shall issue and sell refunding Bonds.
12.6. Certain Provisions Regarding Bonds. Each Supplemental
Indenture authorizing a Series of Bonds shall establish
Principal Installments for such Series which comply with
the provisions of this Section 12.6 and such requirement
may not, except as provided herein, be changed by the
Authority. Such Principal Installments shall commence
not later than the later of (i) the first day of the
eighth Fiscal Year following the end of the Fiscal Year
of authentication and delivery of such Series or (ii) the
first day of the fifth Fiscal Year following the end of
the Fiscal Year in which the Project Manager under the
Participation Agreement estimates that the last generat-
ing unit of the Project will first reach its Date of Firm
Operation and shall terminate not later than the date on
which the Power Sales Contracts terminate. Such
Principal Installments shall result in either (A) Debt
Service for the Bonds of such Series for the 12-month
period immediately preceding the due date of the first
such Principal Installment, and for each 12-month period
thereafter to and including the final maturity date of
such Series, such that the greatest Debt Service for the
Bonds of such Series for any such 12-month period is not
in excess of 110% of the smallest Debt Service for the
Bonds of such Series for any such 12-month period, or
(B) Aggregate Debt Service for all Outstanding Bonds,
including such Series being issued, for the first Fiscal
Year in which a Principal Installment becomes due on each
Series of Bonds then Outstanding, including such Series
being issued, and for each Fiscal Year thereafter to and
including the Fiscal Year immediately preceding the
latest maturity of any Series of Bonds Outstanding imme-
diately prior to the issuance of such Series being issued
or the Fiscal Year immediately preceding the latest
maturity of such Series being issued, whichever is
-24-
earlier, such that the greatest Aggregate Debt Service
for any such Fiscal Year is not in excess of 110% of the
Aggregate Debt Service for any such preceding Fiscal Year
(using in the case of any Series of Bonds sold by compet-
itive bidding an average interest rate for the Bonds of
such Series as estimated by the Authority); provided,
that, if the first Principal Installment for any Series
of Bonds shall be less than 12 months after the date of
issuance thereof, it shall be assumed, for purposes of
this calculation, that interest accrued on such Series
for the entire 12-month period preceding the first
Principal Installment at the same rate as interest
accrued for the actual portion of such period during
which such Series of Bonds was Outstanding.
Notwithstanding anything herein to the contrary, the pro-
visions of this Section 12.6 may be modified or waived
with respect to anyone or more Series of Bonds upon the
prior written consent of Vernon, executed by the chief
executive of its electric utility system.
12.7. Participants to Furnish Information. Vernon agrees
to supply the Authority, upon request, with such addi-
tional information and documentation, including opinions
of counsel for Vernon, as the Authority, its financial
advisor or Bond Counsel shall reasonably determine to be
necessary to facilitate the issuance of Bonds, Bond
Anticipation Notes, additional Bonds, or refunding Bonds
for the purposes described in this Section 12.
13. ADJUSTMENT OF MONTHLY POWER COSTS: In the event the proceeds
derived from the sale of any Bonds exceeds the aggregate
required for the purposes for which such Bonds were issued, the
amount of such excess shall be used to make up any deficiency
existing in any funds or accounts under the Bond Indenture in
the manner therein provided, and any balance shall be used to
retire, by purchase or redemption, Bonds in advance of maturity,
and in such event Monthly Power Costs shall be reduced as are
necessary and appropriate.
14. DEFAULT:
14.1. Remedies. If Vernon shall be unable to perform or
shall default in the performance of any of its obliga-
tions under this contract, then the Authority shall (i)
in the event any payment due under this contract remains
unpaid subsequent to the due date thereof, upon 120 days
written notice to Vernon, discontinue the delivery of
capacity and energy and the use of all other Project
facilities to Vernon under this contract during the
-25-
period of such default, without reduction of the
obligation of Vernon to make payments under this contract
except to the extent provided in Section 14.2, (ii) bring
any suit, action or proceeding at law or in equity as may
be necessary or appropriate to enforce any covenant,
agreement or obligation against Vernon, or (iii) take any
action permitted by law to enforce its rights under this
contract or recover damages for breach thereof.
14.2. Transfer of Rights of Defaulting Project Participants.
In the event of a default by a Project Participant and
the discontinuance, pursuant to Section 14.1(i), of the
delivery of capacity and energy and of the use of all
other Project facilities, the Authority shall transfer on
a pro rata basis to all requesting Project Participants
which are not in default, the defaulting Project
Participant's rights to the delivery of capacity and
energy and the use of all other Project facilities which
shall have been discontinued by reason of such default,
and such requesting Project Participants shall assume the
defaulting Project Participant's obligations with respect
to such rights so transferred, and if any of the default-
ing Project Participant's rights with respect to the
Project is not so transferred, the Authority shall, to
the extent possible, dispose of such remaining portion on
the best terms readily available; provided, however, that
the Authority may not transfer or dispose of such
defaulting Project Participant's rights and obligations
in such a manner as shall, in the opinion of Bond
Counsel, adversely affect the Federal Tax Exemption, and
provided, further, that the obligation of the defaulting
Project Participant to make payments under its Power
Sales Contract including the costs to the Authority
related to such default, transfer and sale, shall be
reduced to the extent that payments are received as pro-
vided herein for that portion of the defaulting Project
Participant's rights with respect to the Project which
are so transferred or disposed.
15. CHARACTER, CONTINUITY OF SERVICE AND INTERCONNECTIONS:
15.1. Curtailment for Emergencies or Repairs. The deliv-
eries of capacity and energy to Vernon and the other
Project Participants may be temporarily interrupted or
curtailed in proportion to their respective Project
Entitlement Shares of the Authority Percentage if the
Operating Agent determines that such interruption or cur-
tailment is necessary in case of emergencies or in order
to install equipment in or make repairs to or
replacements, investigations, and inspections of or to
-26-
perform other maintenance work on the Project
facilities. After informing Vernon and the other Project
Participants regarding any such planned interruption or
curtailment, giving the reason therefor, and stating the
probable duration thereof, the Authority will, to the
best of its ability, cause the Operating Agent to sched-
ule such interruption or curtailment at a time which will
cause the least interference with the operations of
Vernon and the other Project Participants.
15.2. Uncontrollable Forces. The Authority shall not be
required to provide, and neither the Authority nor the
Agent shall be liable for failure to provide, service
under this contract when such failure or the cessation or
curtailment of or interference with the service is caused
by Uncontrollable Forces or by the inability of the
Authority or the Agent to obtain any required governmen-
tal approvals to enable the Authority to acquire, con-
struct or operate any facilities; provided, however, that
Vernon and the other Project participants shall not
thereby be relieved of their obligations to make payments
under the Power Sales Contracts.
15.3. Electric Interconnections Not to Cause Jeopardy.
Where there is to be an electrical interconnection of the
Project with the electric system of Vernon, the design
and construction with respect to such interconnection and
the operating procedures adopted for the Project will not
be such so as to jeopardize the electrical operation of
the electric system of Vernon; provided, however, that
this provision shall have no application after the inter-
connection has been established where the jeopardy with
respect to the electric system of Vernon shall be the
result of changes made or to be made by Vernon in its
system operation or facilities. The parties hereto shall
use their best efforts to cooperate and coordinate their
planning and actions so that such interconnection is
operated in accordance with Prudent Utility Practice and
the operations of the Project and those of the electric
system of Vernon shall continue to be compatible.
16. SEVERAL LIABILITY; LIABILITY; EXCULPATION; INDEMNIFICATION:
16.1. Participants' Obligation Several. Vernon and each of
the other Project Participants shall be solely responsi-
ble and liable for performance under their respective
Power Sales Contracts and for the maintenance and opera-
tion of their respective properties not included as part
of the Project. The obligation of Vernon to make
payments under this Power Sales Contract is a several
-27-
obligation and not a joint obligation with those of the
other Project Participants under the other Power Sales
Contracts.
16.2. No Liability of Authority, Directors, Officers, Etc.
Vernon agrees that neither the Authority nor any of its
directors, officers, employees and agents shall be liable
to Vernon for direct or consequential loss or damage suf-
fered by Vernon as a result of (i) the performance or
nonperformance by the Project Manager or the Operating
Agent under any Plant Agreement (whether negligent or
otherwise) or (ii) the performance or nonperformance
(whether negligent or otherwise) of the Authority under
this contract. Vernon releases the Authority and its
directors, officers, employees and agents from any claim
or liability (whether negligent or otherwise) as a result
of any actions or inactions of the Authority under this
contract or the performance or nonperformance by the
Project Manager or the Operating Agent under any Plant
Agreement. The provisions of this Section 16.2 shall not
be construed so as to relieve the Project Manager or
Operating Agent from any obligations under any Plant
Agreement.
16.3. Extent of Exculpation; Enforcement of Rights in Equity.
The exculpation provision set forth in Section 16.2 shall
apply to all types of claims or actions including, but
not limited to, claims or actions based on contract,
tort, patent or trademark. Notwithstanding the forego-
ing, Vernon may protect and enforce its rights under this
contract by a suit or suits in equity for specific per-
formance of any obligation or duty of the Authority and
Vernon shall at all times retain the right to recover, by
'appropriate legal proceedings, the amount determined to
have been an overpayment by Vernon in accordance with
Section 5.6.
16.4. No Relief from Insurer' s Obligations. The pro vi-
sions of this Section 16 shall not be construed so as to
relieve any insurer of its obligation to pay any insur-
ance claims in accordance with insurance policies appli-
cable to the Project.
16.5. Limitation of Liability of Authority, Employees, Etc.
The obligations of the Authority under this contract as
well as any costs or expenses of the Authority incurred
in respect of its obligations and duties hereunder shall
never constitute a debt or indebtedness of the Authority
within the meaning of any provision or limitation of the
Constitution or statutes of the State of California,
shall not constitute or give rise to a pecuniary
-28-
liability of the Authority or a charge against its
general credit and shall be payable solely from the funds
provided therefor pursuant to this contract. It is
hereby recognized and agreed that neither the members of
the Board of Directors nor any officer, employee or agent
of the Authority shall be individually liable in respect
of any undertakings by the Authority under this
contract.
17. RESTRICTIONS ON DISPOSITION:
17.1. Restrictions on Disposition of Participant's Entire
System. Vernon shall not sell, lease or otherwise
dispose of all or substantially all of its electric util-
ity system except on 90 days prior written notice to the
Authority and, in any event, shall not so sell, lease or
otherwise dispose of the same unless the following condi-
tions shall be met: (i) Vernon shall assign this con-
tract and its rights and interest hereunder to such pur-
chaser or lessee of said electric system, and such pur-
chaser or lessee shall assume all obligations of Vernon
under this contract; (ii) the senior debt of such pur-
chaser or lessee is rated in one of the two highest
rating categories by at least one nationally-recognized
bond rating agency; (iii) an independent engineer or
engineering firm of national reputation generally recog-
nized to be well qualified in matters relating to elec-
tric power and energy systems, selected by the Authority,
shall deliver an opinion, which may be based on assump-
tions deemed reasonable by such engineer or engineering
firm, that such purchaser or lessee is reasonably able to
charge and collect rates and charges in the then current
and each future year for the electric service of its
electric system as shall be required to meet its obliga-
tions under this contract; (iv) the Board of Directors
shall determine (which determination shall not be unrea-
sonably withheld) tha~ such sale, lease or other disposi-
tion will not adversely affect the value of this contract
as security for the payment of the Bonds and the interest
thereon; and (v) Bond Counsel shall render an opinion
that such sale, lease or other disposition will not
adversely affect the Federal Tax Exemption.
17.2. Restriction on Disposition of Project Entitlement Share.
Notwithstanding anything in this contract to the con-
trary, Vernon shall not sell, assign or otherwise dispose
of any portion of its Project Entitlement Share except on
90 days prior written notice to the Authority and, in any
event, shall not sell, assign or otherwise dispose of the
same unless, in the opinion of Bond Counsel, such sale,
-29-
assignment or other disposition will not adversely affect
the Federal Tax Exemption. No such, sale, assignment or
other disposition shall release Vernon from its obliga-
tions under this contract.
18. ASSIGNMENT OF CONTRACT:
This contract shall inure to the benefit of and shall be binding
upon the respective successors and assigns of the parties to
this contract; provided, however, that except as provided in
Sections 14 and 17, neither this contract nor any right or
interest herein shall be transferred or assigned by either party
hereto so long as any of the Bonds are outstanding or until ade-
quate provision fpr the payment thereof have been made in accor-
dance with the provisions of the Bond Indenture except that the
payments by Vernon under this contract shall be assigned by the
Authority to the Trustee to secure Bonds.
19. EFFECTIVE DATE AND TERM:
19.1. Effective Date of Power Sales Contracts. This con-
tract shall become effective only when (i) it has been
duly executed and delivered on behalf of the Authority
and Vernon, (ii) Vernon shall have delivered to the
Authority an opinion of an attorney or firm of attorneys
in substantially the form attached hereto as Appendix B,
(iii) Power Sales Contracts betw'een the Authority and
Project Participants covering the entire output of the
Project shal1 have been duly executed and delivered by
the parties hereto and approved by all necessary regula-
tory agencies, (iv) the Assignment Agreement shall have
been duly executed and delivered by the parties thereto
and approved by all necessary regulatory agencies,
(v) the Construction Permit shall have been received and
(vi) the first series of Bonds or Bond Anticipation Notes
shall have been issued. The term of this contract shall
begin and this contract shall constitute a binding obli-
gation of the parties hereto from and after the effective
date and the term of this contract shall end on
October 31, 2030 or such later date as all Bonds and the
interest thereon shall have been paid in full or adequate
provision for such payment shall have been made.
19.2. Forfeiture of Project Participation.
Notwithstanding any provision of Section 19.1 to the con-
trary, if on December 15, 1981 Vernon shall not have com-
pleted and delivered, as the case may be, the matters to
be completed and delivered by it as described in clauses
-30-
(i) and (ii) of Section 19.1, the rights of Vernon under
this contract shall terminate and the Project Entitlement
Share of Vernon shall be deemed a Forfeited Amount and
shall be disposed of by the Authority in accordance with
Section 19.3.
19.3. Procedure for Disposal of Forfeited Amounts. The
Project Entitlement Shares originally set forth in
Appendix A snaIl constitute the Initial Project
Entitlement Shares. In the event that a Forfeited Amount
becomes available, then such Forfeited Amount shall be
disposed of by the Authority as follows:
19.3.1.
The Authority shall give written notification
to each Project Participant (other than a
forfeiting Participant) that it may request
to increase its Initial Project Entitlement
Share by an amount of output of the Project,
which amount shall not exceed such Forfeited
Amount. All such Project Participants who
request a Requested Amount shall become
Requesting Project Participants. If the
aggregate of the Requested Amounts of such
Requesting Project Participants does not
exceed such Forfeited Amount, then each such
Requesting Project Participant shall have its
Initial Project Entitlement Share increased
by its Requested Amount and such increased
amounts shall become such Participant's
Project Entitlement Share. If the aggregate
of such Requested Amounts shall exceed such
Forfeited Amount, then the following proce-
dures shall be used to determine the amounts
of such Forfeited Amount to be assigned to
each such Requesting Project Participant.
19.3.1.1. Each such Requesting Project
Participant requesting a Requested
Amount equal to or less than such
Participant's Proportionate Share
shall be awarded its Requested Amount
and shall have, as its Project
Entitlement Share, the sum of its
Initial Project Entitlement Share and
its Requested Amount.
19.3.1.2. Each such Requesting Project
Participant requesting a Requested
Amount in excess of its Proportionate
Share, but equal to or less than its
-31-
19.3.1.3.
Proportionate Share of the Remainder,
shall be awarded its Requested Amount
and shall have, as its Project
Entitlement Share, the sum of its
Initial Project Entitlement Share and
its Requested Amount. Each such
Requesting Project Participant
requesting a Requested Amount in
excess of its Proportionate Share and
greater than its Proportionate Share
of the Remainder shall be awarded an
amount of the Forfeited Amount equal
to the product obtained by mUltiply-
ing the difference between the
Forfeited Amount and all amounts
thereof awarded pursuant to Section
19.3.1.1 hereof and the preceding
provisions of this Section 19.3.1.2
by the ratio which its Initial
Project Entitlement Share bears to
the Initial Project Entitlement
Shares of all Requesting Project
Participants so requesting amounts in
excess of their Proportionate Share
of the Remainder and shall have, as
its Project Entitlement Share, the
sum of its Initial Project
Entitlement Share and the amount so
awarded.
.~
As used in this Section 19.3.1,
Proportionate Share shall mean, as to
any Requesting Project Participant
and as to any Forfeited Amount, the
product obtained by multiplying such
Forfeited Amount by the ratio which
such Participant's Initial Project
Entitlement Share bears to the aggre-
gate Initial Project Entitlement
Shares of all Requesting Project
Participants. As used in this
Section 19.3.1, Proportionate Share
of the Remainder shall mean, as to
any Requesting Project Participant
requesting a Requested Amount in
excess of its Proportionate Share and
as to any Forfeited Amount remaining
after the awarding of the Requested
Amounts pursuant to Section 19.3.1.1
hereof, the product obtained by
-32-
19.3.2.
multiplying such remalnlng Forfeited
Amount by the ratio which such
Participant's Initial Project
Entitlement Share bears to the aggre-
gate of the Initial Project
Entitlement Shares of all Requesting
Project Participants requesting in
excess of their Proportionate
Shares.
An election to take any Forfeited Amount
shall be communicated to the Authority within
30 days (or such longer period as shall be
authorized by the Board of Directors) after
notice has been sent by the Authority of the
availability of such election~ Any such
election shall be accompanied by an opinion
of an attorney or firm of attorneys in sub-
stantially the form attached hereto as
Appendix B, modified to reflect the increased
Project Entitlement Share of such Project
Participant (assuming it is awarded its full
Requested Amount) and all action required to
appropriately amend such Project
Participant's Power Sales Contract in that
regard. Failure to elect or to notify in the
manner provided in this Section shall be con-
clusively deemed for all purposes an irrevo-
cable determination not to exercise a right
of election under this Section.
19.4. Ownership by Authority; Disposition of Capacity after
Power Sales Contracts Expire. It is hereby recog-
nized that ownership of the Project shall be, and remain,
in the Authority during the term of the Power Sales
Contracts. ' Upon the termination of the Power Sales
Contracts the Authority shall be free to deal with its
interest in the Project in whatever manner it chooses
consistent with the requirements of law, including the
provisions of law relating to the Federal Tax Exemption.
20. SALE OF ENTIRE PROJECT OUTPUT; RELATIONSHIP TO AND COMPLIANCE
WITH OTHER INSTRUMENTS:
20.1. Authority to Sell Entire Output. The Authority shall
use its best efforts to enter into Power Sales Contracts
for 100 percent of the output of the Project and, if it
has not already done so, to enter into the Assignment
Agreement.
-33-
20.2. Construction and Operation Subject to Bond Indenture,
Licenses, Etc. It is recognized by the parties hereto
that the Authority, in undertaking the planning, financ-
ing, construction, acquisition, operation and maintenance
of the Project, must comply in all respects with the
requirements of the Bond Indenture and the other Project
Agreements and all licenses, permits and regulatory
approvals necessary for such planning, financing, con-
struction, acquisition, operation and maintenance and it
is therefore agreed that this contract is made subject to
the provisions of the Bond Indenture and the other
Project Agreements and all such licenses, permits and
regulatory approvals.
20.3. Authority to Comply with Bond Indenture, Licenses, Etc.;
Expenses of Enforcement. ,The Authority covenants and
agrees for the benefit of Vernon to comply in all mate-
rial respects with all terms, conditions and covenants of
the Bond Indenture and the other Project Agreements and
all licenses, permits and regulatory approvals relating
to the Project, provided that the Authority shall not be
prevented from contesting the validity or applicability
of any thereof in good faith by appropriate proceedings.
Except as otherwise provided herein, all reasonable costs
and expenses of the Authority incurred in respect of
enforcing or complying with any Project Agreement or in
defending any action brought against the Authority under
any Project Agreement shall be Authority Expenses and
shall be paid or reimbursed to the Authority.
21. SEVERABILITY:
In case anyone or more of the prov~s~ons of this contract shall
for any reason be held to be illegal or invalid by a court of
competent jurisdiction, it is the intention of each of the par-
ties hereto that such illegality or invalidity shall not affect
any other provision hereof, but this contract shall be construed
and enforced as if such illegal or invalid provision had not
been contained herein unless a court holds that the provisions
are not separable from all other provisions of this contract.
22. TERMINATION OR AMENDMENT:
22.1. Limitation on Amendment Affecting Bond Security. So
long as any Bonds are outstanding or until adequate pro-
vision for the payment thereof have been made in accor-
dance with the provisions of the Bond Indenture, this
contract, except as specifically provided for herein,
-34-
shall not be terminated, amended, modified, or otherwise
altered in any manner which will reduce the payments
pledged as security for the Bonds or extend the time of
such payments provided herein or which will in any manner
impair or adversely affect the rights of the holders from
time to time of the Bonds.
22.2. Limitation on Amendments Affecting Participants.
Subject to Section 19.2, none of the Power Sales
Contracts may be terminated as to anyone or more of the
Project Participants or be amended as to anyone or more
of the Project Participants so as to provide terms and
conditions materially different from those herein con-
tained except, subject to the provisions of Section 19.1
and consistent with the Bond Indenture, upon written
notice to and written consent or waiver by each of the
other Project Participants and upon similar amendment
being made to the Power Sales Contract of any other
Project Participant requesting such amendment after
receipt by such Project Participant of notice of such
amendment.
22.3. Amendment of Power Sales Contract With Respect to
Transmission Agreements. Notwithstanding anything in
this contract to the contrary, any of the Power Sales
Contracts may be amended to change any Project
Participant's Points, of Delivery in accordance with
Section 9.8 hereof without notice to, consent or waiver
by, or similar amendment being made to the Power Sales
Contract of, any other Project Participant. Nothing in
this contract or in the Bond Indenture shall be construed
to prohibit such amendment or to require the giving of
notice to or consent by the Trustee or any other person
with respect to any such amendment.
22.4. Limitation on Amendments to Bond Indenture. The
Authority shall not, without the written consent of
Vernon and each of the other Project Participants, amend,
modify, supplement or otherwise change the Bond Indenture
if such amendment, modification, supplement or change
would affect the rights or obligations of Vernon or the
other Project Participants under this contract or would
be to the disadvantage of Vernon or the other Project
Participa~ts or would result in increased Monthly Power
Costs to Vernon or the other Project Participants; pro-
vided that this Section 22.4 shall not limit the power or
authority of the Authority to supplement the Bond
Indenture to provide for the issuance of Bonds for any of
the purposes permitted under Section 12.
-35-
22.5. Termination of Power Sales Contract Under certain
Circumstances. Notwithstanding anything in this con-
tract to the contrary, this contract may be terminated by
either party upon written notice to the other if, prior
to the date one year after the initial filing for the
Construction Permit, (i) the Authority has been unable to
enter into the Assignment Agreement and Power Sales
Contracts for the purchase of 100 percent of the output
of the Project, which Power Sales Contracts and
Assignment Agreement shall have been duly executed and
shall be in full force and effect and for which each
Project Participant under such Power Sales Contracts
sha~l have obtained all requisite governmental approvals
and authorizations for its participation in the Project
and (ii) the Authority has been unable to issue the first
series of Bonds or Bond Anticipation Notes to finance the
Project. In the event of such termination, the Authority
shall not be obligated to Vernon.
23. GOVERNING LAW:
This contract shall be interpreted, governed by and construed
under the laws of the State of California.
24. ARBITRATION:
If a dispute arises between the parties under this contract
which is not resolved by the Board of Directors, the parties to
such dispute may submit the dispute to arbitration.
25. NOTICES: Any notice, demand, or request provided for in this
contract shall be in writing and shall be deemed properly
served, given, or made if delivered in person or sent by regis-
tered or certified mail, postage prepaid, to the persons speci-
fied below:
25.1.
Southern California Public Power Authority
c/o Executive Director
Room 1149
Department of Water and Power of The City of Los
Angeles
111 North Hope Street
Los Angeles, California 90012
-36-
. .
25.2.
City of Vernon
4305 Santa Fe Avenue
Vernon, California 90058
Attention: City Administrator/City Clerk
-37-
~
26. HEADINGS NOT BINDING: The headings and captions in this con-
tract are for convenience only and in no way define, limit or
describe the scope or intent of any provisions or sections of
this contract.
IN WITNESS WHEREOF, the parties hereto have duly caused this
contract to be executed on their respective behalfs.
[Authority Seal]
SOUTHERN CALIFORNIA PUBLIC
POWER AUTHORITY
Attest:
By:
President
Secretary
[Seal]
CITY OF VERNON
Attest:
City Administrator/City Clerk
By:
Mayor
-38-
, '.
~
APPENDIX A
PARTICIPANTS AND PROJECT ENTITLEMENT SHARES
Project
Participant
Project
Entitlement
Share
City of Anaheim
City of Azusa
City of Banning
City of Burbank
City of Colton
City of Glendale
Imperial Irrigation
District
Department of Water
and Power of The
City of Los
Angeles
City of Pasadena
City of Riverside
City of Vernon
Total
7.500%
1.000
1.000
4.000
1.000
4.000
6.000
62.000
4.000
5.000
4.500
100.000%
A-I
... '
~ ~
. "
APPENDIX B
FORM OF OPINION OF COUNSEL
[Da t e]
Dear Sirs:
I am acting as counsel to City of Vernon, as purchaser (the
.project Participant") under a Power Sales Contract dated as of
July 1, 1981 (the .Power Sales Contract") between the Project
Participant and Southern California Public Power Authority (the
"Authority"), and I have acted as counsel to the Project Participant
in connection with the matters referred to herein. The Power Sales
Contract provides for the sale to Project Participant of a 4.500%
Project Entitlement Share (as defined therein). As such counsel I
have examined and am familiar with (i) those documents relating to
the existence, organization and operation of the Project Participant,
(ii) all necessary documentation of the Project Participant relating
to the authorization, execution and delivery of the Power Sales
Contract and (iii) an executed counterpart of the Power Sales
Contract.
Based upon the foregoing and an examination of such other
information, papers and documents as I deem necessary or advisable to
enable me to render this opinion, I am of the opinion that:
1. The Project Participant is a municipal corporation
of the State of California, duly created, organized and
existing under the laws of the State of California and duly
qualified to furnish electric service within said State.
2. The Project Participant has full legal right,
power and authority to enter into the Power Sales Contract
and to carry out and consummate all transactions contem-
plated thereby, and the Project Participant has complied
with the provisions of-applicable law in all matters relat-
ing to such transactions.
3. The Power Sales Contract has been duly authorized,
executed and delivered by the Project Participant, is in
full force and effect and, assuming that the Authority has
all the requisite power and authority, and has taken all
B-1
# I
necessary action, to execute and deliver such Power Sales
Contract, constitutes the legal, valid and binding obliga-
tion of the Project Participant enforceable in accordance
with its terms, except that the rights and remedies set
forth therein may be limited by or resulting from bankrupt-
cy, insolvency, reorganization or other laws affecting
creditors' rights generally.
4. No approval, consent or authorization of any gov-
ernmental or public agency, authority or person is required
for the execution and delivery by the Project Participant
of the Power Sales Contract, or the performance by the
Project Participant of its obligations thereunder or if any
such approval, consent or authorization is required, it has
been duly given or obtained and is in full force and
effect.
5. The authorization, execution and delivery of the
Power Sales Contract and compliance with the provisions
thereof will not conflict with or constitute a breach of,
or default under, any instrument relating to the organi-
zation, existence or operation of the Project Participant,
any commitment, agreement or other instrument to which the
Project Participant is a party or by which it or its prop-
erty is bound or affected, or any ruling, regulation, ordi-
nance, judgment, order or decree to which the Project
Participant (or any of its officers in their respective
capacities as such) is subject or any provision of the laws
of any state in which the Project Participant operates.
6. There is no action, suit, proceeding, inquiry or
investigation at law or in equity, or before any court,
public board or body, pending or, to my knowledge, threat-
ened against or affecting the Project Participant or any
entity affiliated with the Project Participant or any of
its officers in their respective capacities as such (nor to
the best of my knowledge is there any basis therefor),
which questions the powers of the Project Participant
referred to in paragraph 2 above or the validity of the
proceeding taken by the Project Participant in connection
with the authorization, execution or delivery of the Power
Sales Contract, or wherein any unfavorable decision, ruling
or finding would materially adversely affect the transac-
tions contemplated by the Power Sales Contract, or which,
in any way, would adversely affect the validity or enforce-
ability of the Power Sales Contract.
7. The obligations of the Project Participant to make
payments under the Power Sales Contract constitute a cost
of purchased electric capacity and energy and an operating
B-2
,
expense of the Project Participant payable solely from its
electric revenue funds.
Very truly yours,
B-3
COpy
OFFICE OF THE CITY ATTORNEY
Jeff A. Harrison, City Attorney
4305 Santa Fe Avenue, Vernon, California 90058
Telephone (323) 583-8811 Fax (323) 826-1438
August 19, 2008
Via Federal Express
Ms. Ericka Curls Bartling
Curls Bartling P.C.
Lake Merritt Plaza
1999 Harrison St., Suite 700
Oakland, CA 94612
Re: SCPPA Palo Verde Revenue Bonds, Series A and B
Dear Ericka:
In accordance with your request, enclosed please find seven
originally signed copies of the Private Use Certificate and
Opinion of Counsel 'for the City of Vernon regarding the above-
referenced matter.
If you have any questions, please contact me.
Very t ly yours,
~ A~~~~~~~
JH: jl
Enclosures
cc:
Manuela Giron, City Clerk
Of'/),9/f
flli(c[usivefy I ndustria[
M-l
CERTIFICATE OF THE CITY OF VERNON
The undersigned does hereby certify that on and as of the date hereof the
ordinances of the €ity Council of the City of Vernon (the "Project Participant") described
in Exhibit A hereto:
(i) are in full force and effect;
(ii) have not been amended, rescinded, supplemented or modified; and
(iii) are not the subject of any known or, after due inquiry, threatened,
legal or administrative action by or before any court, commission,
regulatory agency, arbitrator, mediator, negotiator, governmental
entity (federal, state, municipal or other) or any other tribunal or
body established to resolve disputes or enforce applicable
constitutions, laws, ordinances, regulations, rules, customs or
practices.
The Project Participant reconfirms its agreement, set forth in Section 17.1
of the Power Sales Contract, dated as of July 1, 1981, between it and Southern California
Public Power Authority ("SCPP A"), not to sell, lease or otherwise dispose of all or
substantially all of its electric system, except in compliance with said Section 17.1. The
Project Participant also reconfirms its agreement, set forth in Section 17.2 of such Power
Sales Contract, not to sell, assign or otherwise dispose of any portion of its Project
Entitlement Share, except in compliance with said Section 17.2 of the Power Sales
Contract. The Project Participant consents to SCPPA's sale of its Power Project Revenue
Bonds, 2008 Subordinate Refunding Series A and 2008 Subordinate Refunding Series B
(Palo Verde Project) and consents to the actions taken in connection therewith.
The Project Participant is not now a party to, nor does it currently expect
to enter into, any contract (or other binding arrangement) for the sale of capacity or
energy to, or, the exchange of capacity or energy with, any nongovernmental person
(including the United States or any agency or instrumentality thereof), that is allocable in
whole or in part to the Project, and that (A) is either:
(i) for a term in excess of three years (including all renewal options); or
, (ii) for a term of three years or less (including all renewal options), but is not
either a negotiated, arms-length arrangement that provides for
compensation at fair market value, or an arrangement based on generally
applicable and uniformly applied rates offered to all similarly situated
capacity or energy purchasers;
and (B) is either:
1
(i) a take or pay contract;
(ii) a take contract;
(iii) a full or partial wholesale requirements contract; or
(iv) a full or partial retail requirements contract that (a) provides for any
payments that are not contingent upon the retail purchaser having output
requirements (other than for payments of reasonable and customary
damages, including liquidated damages, in the event of a default, or for the
payment of a specified amount to terminate the contract while the
purchaser has requirements, in either case if the amount of the payment is
reasonably related to the purchaser's obligation,to buy requirements that is
discharged by the payment) or (b) taking into account any and aU other
arrangements with the purchaser, requires the purchaser to have output
requirements.
For purposes of the preceding paragraph, the Project -Participant has
treated any contract as allocable to the Project unless that contract is specifically
allocable to other assets because (i) it is physically impossible that the capacity or energy
could be provided from the Project, (ii) the terms of the contract specify that delivery of
the capacity or energy is to be provided from such other assets, (iii) the contract is
entered into as part of a common plan of financing for such other assets, or (iv) the
method of pricing under the contract is at other than market rates and designed to pay
debt service on the financing for such other assets. For purposes of the foregoing, the
Project Participant also has disregarded any contract that provides for swapping or
pooling of output with one or more nongovernmental persons to the extent that (i) the
swapped output is reasonably expected to be approximately equal in value (determined
over periods of three years or less) and (ii) the purpose of the agreement)is to enable each
of the parties to satisfy different peak load demands, to accommodate temporary outages,
to diversify supply, or to enhance reliability in accordance with prudent reliability
standards.
Further, except as provided in the two immediately preceding paragraphs,
the Project Participant is not now, and has no current expectation that it will be, a party to
a management contract, arrangement tantamount to a lease of the Project Participant's
interest in the Project to a nongovernmental person, or an arrangement under which any
nongovernmental person is to provide services with respect to any use or function of the
Project, which arrangement has a term in excess of 50 days (including all renewal
options). For purposes of the foregoing, the Project Participant has disregarded any
2
contract that provides for no compensation other than reimbursement of actual and direct costs of
the nongovernmental person and reasonable administrative overhead of that person or is an
arrangement satisfying the criteria set forth in Revenue Procedure 97-13, as modified by
Revenue Procedure 2001-39, of the Internal Revenue Service.
Dated: August 28, 2008
CITY OF VERNON
By:
3
EXHIBIT A
ORDINANCES OF CITY COUNCIL OF
THE CITY OF VERNON
1. Ordinance No. 918 adopted on November 10, 1981 authorizing officers of
the City of Vernon to execute and deliver the Power Sales Contract.
2. Ordinance No. 934, adopted on May 3, 1983 authorizing the issuance of
refunding bonds by the Southern California Public Power Authority.
4
OFFICE OF THE CITY ATTORNEY
Jeff A. Harrison, City Attorney
4305 Santa Fe Avenue, Vernon, California 90058
Telephone (323) 583-8811 Fax (323) 826-1438
August 28, 2008
Board of Directors
Southern California Public
Power Authority
225 South Lake Avenue
Suite 1250
Pasadena, California 91101
Citigroup Global Markets Inc.
San Francisco, California
As Underwriter
JPMorgan Chase Bank, National Association
As 2008 Series A Bonds Credit Provider
Dexia Credit Local, acting through its New York Branch
As 2008 Series B Bonds Credit Provider
Re: Southern California Public Power Authority
"
Power Project Revenue Bonds, 2008 Subordinate Refunding Series
A (Palo Verde Project)
Power Project Revenue Bonds, 2008 Subordinate Refunding Series
B (Palo Verde Project)
Ladies and Gentlemen:
I am acting as counsel to the City of Vernon, California, as
purchaser (the "Project Participant") under a Power Sales Contract,
dated as of July 1, 1981 (the "Power Sales Contract"), between the
Project Participant and Southern California Public Power Authority
(the "Authority"). The Power Sales Contract provides for the sale
to Project Participant of a 4.9% Project Entitlement Share (as
defined in the Power Sales Contract). As such counsel, I have
examined (i) those documents relating to the existence, organization
and operation of the Project Participant, (ii) all necessary
documentation of the Project Participant relating to the
authorization, execution and delivery of the Power Sales Contract
and (iii) an executed counterpart of the Power Sales Contract.
flli(c[usivefy I ndustria[
SCPPA Board of Directors
Citigroup Global Markets Inc.
JPMorgan Chase Bank
Dexia Credit Local
August 28, 2008
Page 2
Based upon the foregoing and an examination of such other
information, papers and documents as I deem necessary or advisable
to enable me to render this opinion, I am of the opinion that:
1. The Project Participant is a municipal corporation of the
State of California, duly created, organized and existing under the
laws of the State of California and qualified to furnish electric
services within said State.
2. The Project Participant has full legal right, power and
authority to carry out and consummate all transactions contemplated
by the Power Sales Contract, and the Project Participant has
complied with the provisions of applicable law in all matters
relating to such transactions.
3. The Power Sales Contract has been duly authorized,
executed and delivered by the Project Participant, is in full force
and effect and, assuming/that the Authority has all the requisite
power and authority, and has taken all necessary action to execute
and deliver such Power Sales Contract, constitutes the legal, valid
and binding obligation of the Project Participant enforceable in
accordance with its terms, except that the rights and remedies set
forth therein may be limited by or resulting from bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights
generally.
4. No approval, consent or authorization of any governmental
or public agency, authority or person is required for the
performance by the Project Participant of its obligations under the
Power Sales Contract or if any such approval, consent or
authorization is required, it has been duly given or obtained and is
in full force and effect.
5. The compliance with the provisions of the Power Sales
Contract will not conflict with or constitute a breach of, or
default under, any instrument relating to the organization,
existence or operation of the Project Participant, any material
commitment, agreement or other instrument to which the Project
Participant is a party or by which it or its property is bound or
affected, or any ruling, regulation, ordinance, judgment, order or
decree to which the Project Participant (or any of its officers in
their respective capacities as such) is subject or any provision of
the laws of any state in which the Project Participant operates.
6. There is no action, suit, proceeding, inquiry or
investigation at law or in equity, or before any court, public board
SCPPA Board of Directors
Citigroup Global Markets Inc.
JPMorgan Chase Bank
Dexia Credit Local
August 28, 2008
Page 3
or body, pending or, to my knowledge, threatened against or
affecting the Project Participant or any entity affiliated with the
Project Participant or any of its officers in their respective
capacities as such (nor to the best of my knowledge is there any
basis therefor), which questions the powers of the Project
Participant referred to in paragraph 2 above or the validity of the
proceeding taken by the Project Participant in connection with the
authorization, execution or delivery of the Powers Sales Contract,
or wherein any unfavorable decision, ruling or finding would
materially adversely affect the transactions contemplated by the
Power Sales Contract, or which, in any way, would adversely affect
the validity or enforceability of the Power Sales Contract.
7. The obligations of the Project Participant to make
payments under the Power Sales Contract constitute a cost of
purchased electric capacity and energy and an operating expense of
the Project Participant payable solely from its electric revenue
funds.
The opinions expressed herein are based upon the law and other
matters in effect on the date hereof. The opinions expressed are
matters of professional judgment and are not a guarantee of result.
I assume no obligation to revise or supplement this opinion should
such law or other matters be changed by legislative action, judicial
decision, or otherwise, or should any facts or other matters upon
which I have relied be changed.
The opinions which are set forth or which are expressed herein
are limited to the laws of the State of California and the federal
laws of the United States of America.
This opinion is furnished exclusively for the benefit of the
recipients to which it is addressed. This opinion may not be
provided to, made available to, or relied upon any other party
without prior written consent, except that this opinion may be
included in the closing binder memorializing the transaction.
~:
~tt Att
~
Respectf~
I
submitted,
JH:jl