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Resolution No. 9212
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 RESOLUTION NO 9212 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON AUTHORIZING THE DIRECTOR OF LIGHT & POWER TO EXECUTE THE MEAD -PHOENIX PROJECT MANAGEMENT COMMITTEE RESOLUTION REGARDING AUTHORIZATION OF THE CONTRACT FOR INTERCONNECTION AND OPERATION AGREEMENT WITH NEVADA POWER COMPANY AND APPROVING AND AUTHORIZING THE EXECUTION OF THE MEAD -PHOENIX PROJECT INTERCONNECTION AND OPERATION AGREEMENT (WESTERN AGREEMENT NO. 06-DSR-11729) AT MEAD 500- KV SUBSTATION AMONG THE MEAD -PHOENIX PROJECT OWNERS, THE WESTERN AREA POWER ADMINISTRATION AND THE NEVADA POWER COMPANY WHEREAS, the City of Vernon ("City") is a chartered municipal corporation of the State of California that owns and operates a system for the generation, purchase, transmission, distribution and sale of electric capacity and energy; and WHEREAS, the City is a joint owner in the Mead -Phoenix Project ("MPP") a 500-kV alternating current transmission system between the Westwing Switchyard, near Sun.City, Arizona and the Marketplace Substation, located near Boulder City, Nevada, pursuant to the Joint Ownership Agreement. The City's ownership interest in MPP is 28 MW or 2.1538% bidirectional from the Westwing Switchyard to Mead, 47 MW or 3.7934% bidirectional Mead Substation, and 75 MW or 4.0497% bidirectional Mead to Marketplace; and WHEREAS, the City is a Management Committee Member of the MPP; and WHEREAS, Nevada Power Company ("Nevada") has requested interconnections of a 500-kV Transmission Line and a 500/230-kV transformer to the MPP at Mead Substation as part of their construction lof a line from Nevada 's Harry Allen 500-kV Substation to MPP's Mead 1 2 3 4 5 6 7 8 9 10 11 12 13 0m 15 16 17 18 19 20 21 22 23 24 25 26 27 11500-kV Substation; and WHEREAS, on September 15, 2004, the MPP Engineering and Operation Committee approved the results of technical studies performed relating to Nevada's planned interconnections to the Mead 500-kV Substation; and WHEREAS, Nevada will mitigate any impacts on the MPP as a result of their interconnections at the Mead 500-kV Substation; and WHEREAS, Nevada will be financially responsible for any system impacts as a result of the interconnections; and WHEREAS, the City has reviewed the Mead -Phoenix Project Interconnection and Operation Agreement with Nevada Power Company at Mead 500-kV Substation ("Agreement"), and based upon that review, the City finds that the Agreement is in the City's best interest; and WHEREAS, the MPP Management Committee is required to secure the signature of all Management Committee Members on the Mead -Phoenix Project Management Committee Resolution Regarding Authorization Of The Contract For Interconnection and Operation Agreement (Resolution No. MPP 06 03) in order to enter the Agreement. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNON AS FOLLOWS: SECTION 1: The City Council of the City of Vernon hereby finds and determines that the recitals contained hereinabove are true and correct. SECTION 2: The City Council of the City of Vernon hereby approves and authorizes the Director of Light and Power to execute the Mead -Phoenix Project Management Committee Resolution Regarding Authorization Of The Contract For Interconnection and Operation Agreement (Western Agreement No. 06-DSR-11729) at Mead 500-kV - 2 - 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 Substation (the "Resolution") among the Mead -Phoenix Project Owners, the Western Area Power Administration and the Nevada Power Company, in substantially the same form as the copy which is attached hereto as Exhibit A and incorporated by reference. SECTION 3: The City Council of the City of Vernon hereby approves and authorizes the Mayor to execute the Mead -Phoenix Project Interconnection And Operation Agreement (Western Agreement No. 06-Dsr- 11729) (the "Agreement") At Mead 500- kV Substation Among The Mead - Phoenix Project Owners, The Western Area Power Administration And The Nevada Power Company, in substantially the same form as the copy which is attached hereto as Exhibit B and incorporated by reference, for and on behalf of the City of Vernon and the Acting City Clerk is hereby lau�thorized to attest thereto. SECTION 4: The City Council of the City of Vernon hereby authorizes the Acting City Clerk, or his designee, to make whatever nonsubstantive, administrative and/or text changes, upon advice of counsel, to the Resolution and the Agreement. SECTION 5: The City Council of the City of Vernon hereby directs the Acting City Clerk, or his designee, to send the original and seven executed signature pages of the Agreement to: Western Area Power Administration Desert Southwest Regional Office ATTN: G6211 P.O. 6457 Phoenix, AZ 85005-6457 /// - 3 - 1 SECTION 6: The Acting City Clerk of the City of Vernon 2 shall certify to the passage of this resolution, and thereupon and 3 thereafter the same shall be in full force and effect. 4 APPROVED AND ADOPTED this 17th day of January, 2007. 5 6 1-4 EONIS C. MALBU __,_ Mayor 7 ATTEST: ;l 8 9 Bruce V. Malkenhorst, Jr. 10 Acting City 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 4 - 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 I STATE OF CALIFORNIA ) ss COUNTY OF LOS ANGELES ) I, BRUCE V. MALKENHORST, JR., Acting City Clerk of the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. 9212, was duly adopted by the City Council of the City of Vernon at a regular meeting of the City Council duly held on Wednesday, January 17, 2007, and thereafter was duly signed by the Mayor of the City of Vernon. (SEAL) N � BRUCE V. MALKENHORST, JR. Acting City Clerk - 5 - fi EXHIBIT A RESOLUTION NO. MPP 06-03 MEAD -PHOENIX PROJECT (MPP) MANAGEMENT COMMITTEE RESOLUTION REGARDING AUTHORIZATION OF THE CONTRACT FOR INTERCONNECTION AND OPERATION AGREEMENT WITH NEVADA POWER COMPANY WITH MPP WHEREAS, Nevada Power Company has requested interconnections of a 500-kV Transmission Line and a 500/230-kV transformer to the MPP at Mead Substation as a part of their Centennial Project; WHEREAS, Nevada Power Company has made their $10,000 non-refundable request for 500-kV interconnections at the MPP's Mead 500-kV Substation facilities as required by the Procedures for Requesting an Interconnection with the MPP (Interconnection Procedures); WHEREAS, Nevada Power Company has made their $75,000 non-refundable request for the technical study as required by the Interconnection Procedures; WHEREAS, Nevada Power Company received the Centennial Project Interconnection with MPP technical report, as approved by the MPP Engineering and Operations Committee; WHEREAS, The final Facility Study Report, which was reviewed at the September 15, 2004, Engineering and Operations Committee meeting in Pasadena, California and approved with minor changes and sent to Nevada Power Company under Western's Letter Agreement No. 03-DSR-11437; WHEREAS, The final Facility Study Report provided Nevada Power Company with options and Nevada Power Company chose to accept operational limitations rather than providing new facilities at Perkins Substation; WHEREAS, The Management Committee approved and the parties executed a contract for Construction of Interconnections to the Mead 500-kV Substation with Nevada Power Company (Western's Contract No. 05-DSR-11594) which construction is close to completion; WHEREAS, The Legal and Negotiating Committee recommended the Interconnection and Operation Agreement, including the Metering, Operating, and Scheduling Instructions, to the Engineering and Operations Committee to enter into this agreement with Nevada Power Company; WHEREAS, The Engineering and Operations Committee approved the Metering; Operating, and Scheduling Instructions, and recommends the Interconnection and Operation Agreement to the Management Committee for their approval to enter into this agreement with Nevada Power Company; and NOW THEREFORE, BE IT RESOLVED that the Interconnection and Operation Agreement between the MPP and Nevada Power Company is hereby approved and that Western Area Power Administration, as Operation Manager of the Mead 500-kV Substation, is authorized to mail the Interconnection and Operation Agreement for execution by the Parties. MP Mgmt Resolution No. 06-03 Pagel of 2 RESOLUTION NO. MPP 06-03 MEAD -PHOENIX PROJECT (MPP) MANAGEMENT COMMITTEE RESOLUTION REGARDING AUTHORIZATION OF THE CONTRACT FOR INTERCONNECTION AND OPERATION AGREEMENT WITH NEVADA POWER COMPANY WITH MPP THE FOREGOING RESOLUTION is hereby approved and adopted by the MPP Management Committee on this day of CITY OF ANAHEIM By Management Committee Member CITY OF AZUSA By Management Committee Member CITY OF BURBANK Lo Management Committee Member CITY OF GLENDALE LM Management Committee Member CITY OF PASADENA By Management Committee Member SALT RIVER PROJECT LM Management Committee Member CITY OF VERNON Lo 20,06. ARIZONA PUBLIC SERVICE By Management Committee Member CITY OF BANNING By Management Committee Member CITY OF COLTON By Management Committee Member DEPARTMENT OF WATER AND POWER OF THE CITY OF LOS ANGELES By Management Committee Member M-S-R PUBLIC POWER AGENCY By Management Committee Member CITY OF RIVERSIDE By Management Committee Member WESTERN AREA POWER ADMINISTRATION Management Committee Member By Management Committee Member MP Mgmt Resolution No. 06-03 Page 2 of 2 EXHIBIT B MEAD -PHOENIX PROJECT INTERCONNECTION AND OPERATION AGREEMENT AT MEAD 500-KV SUBSTATION AMONG ARIZONA PUBLIC SERVICE COMPANY M-S-R PUBLIC POWER AGENCY SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY CITY OF VERNON WESTERN AREA POWER ADMINISTRATION NEVADA POWER COMPANY . Western Agreement No. 06-DSR-11729 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 MEAD -PHOENIX PROJECT INTERCONNECTION AND OPERATION AGREEMENT WITH NEVADA POWER COMPANY AT MEAD 500-KV SUBSTATION TABLE OF CONTENTS SECTION TITLE PAGE 1. PREAMBLE........................................................................................ 1 2. EXPLANATORY RECITALS............................................................. 1 3. AGREEMENT...................................................................................... 4 4. EFFECTIVE DATE AND TERMINATION ...................................... 4 4.1 Effective Date................................................................................ 4 4.2 FERC Acceptance Without Conditions or Modifications .............. 4 4.3 FERC Acceptance With Conditions or Modifications .................. 4 4.4 Parties' Acceptance....................................................................... 4 4.5 Non -Acceptance By A Party ......................................................... 5 4.6 Termination................................................................................... 5 5. DEFINITIONS.................................................................................... 5 5.1 Agreement..................................................................................... 6 5.2 Applicable Requirements............................................................... 6 5.3 Capital Improvement..................................................................... 6 5.4 Common Facilities......................................................................... 6 5.5 Connection..................................................................................... 7 5.6 Cost Responsibility Ratio (CRR).................................................. 7 5.7 Date of Interconnection Completion ............................................. 7 5.8 Energy .......................................................... .......................... 7 5.9 E&O Committee ........................................................................ 7 5.10 FERC............................................................................................. 7 5.11 Fiscal Agent.................................................................................... 7 5.12 Flow Management System............................................................ 7 5.13 Harry Allen Line............................................................................ 7 5.14 Interconnection Facilities.............................................................. 7 5.15 Joint Ownership Agreement.......................................................... 8 5.16 Management Committee ............................................................ 8 5.17 Mead 500-kV. Substation........................................................ 8 5.18 Mead -Phoenix Project (MPP) ........................................................ 8 5.19 Metering, Operating, and Scheduling Instructions (MOSI) .......... 8 5.20 MPP Owners.................................................................................. 8 5.21 MPP Participants ......................................................... .............. 9 5.22 MPP Transformer Bank.................................................................. 9 5.23 Nevada Transformer Bank.............................................................. 9 5.24 Operating Emergency ............................................ .................... 9 5.25 Operating Work............................................................................. 9 5.26 Operation Agreement.................................................................... 9 5.27 Operation Manager........................................................................ 10 5.28 Operational Mitigation Procedure ................................................. 10 5.29 Perkins Phase -Shifting Transformers (Perkins PSTs) ................... 10 5.30 Power............................................................................................. 10 5.31 Prudent Utility Practice................................................................. 10 5.32 Western Electricity Coordinating Council (WECC) ..................... 11 i Western Agreement No. 06-DSR-11729 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. TABLE OF CONTENTS - CONTINUED SECTION TITLE 5.33 Willful Action................................................................................ 5.34 Work Liability ........................................................................... 6. RIGHTS GRANTED AND RESERVED..........................7................ 6.1 Right. to Interconnect.................:................................................... 6.2 Transformer Bank Rights.............................................................. 6.3 Transaction Rights.................................................................. 6.4 MPP Participants' Rights............................................................... 6.5 Reservation of Existing Rights ...................................................... 6.6 Reservation of Rights.................................................................... 6.7 Modification of the MPP to a DC Configuration .......................... 7. PAYMENT FOR RIGHT TO USE COMMON FACILITIES ........... 7.1 Payment for Right to Use ............................................. ...................................... .. ............ . ... 7.2 Distribution of Payment Received for Common Facilities ........... 7.3 Distribution of Funds Received from New Interconnectors........... 7.4 Interconnection Charge at Mead 230-kV Substation .................... 8. OWNERSHIP...................................................................................... 8.1 Interconnection Facilities.............................................................. 8.2 Nevada Transformer Bank............................................................. 8.3 Mead 500-kV Substation............................................................... 8.4 Capital Improvements.................................................................... 9. OPERATION ................... ................................................................... 9.1 Duties of Operation Manager........................................................ 9.2 Nevada Transformer Bank............................................................. 9.3 Curtailment ................ .............................................................. 9.4 De-energization ......................................................................... 9.5 Operating Emergencies.................................................................. 9.6 Capital Improvements.................................................................... 9.7 Nevada System.............................................................................. 10. MOSI ADMINISTRATION ......................................................... . 10.1 Changes in Conditions................................................................... 10.2 MOSI Compliance......................................................................... 11. OPERATION MITIGATION PROCEDURE ..................................... 12. COST RESPONSIBILITY ....................................... ............................ 12.1 Method of Calculation of the Cost Responsibility Ratio ............... 12.2 Costs of Operating Work............................................................... 12.2.1 Mead 500-kV Substation......................................................... 12.2.2 Nevada Transformer Bank ....................................................... 12.2.3 Perkins PSTs............................................................................ PAGE 11 12 13 13 13 13 13 13 14 14 15 15 15 15 15 15 15 15 16 16 16 16 16 16 16 17 17 18 18 18 18 19 19 19 19 19 19 20 ii Western Agreement No. 06-DSR-11729 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 SECTION 13. 13.1 13.2 13.3 13.4 13.5 13.6 13.7 13.8 II 14 TABLE OF CONTENTS - CONTINUED TITLE BUDGET AND PAYMENT OF INVOICES SUBMITTED BY FISCALAGENT..............................................:............................ Operating Work Budget ...................................................... ....... Submission of Invoices.................................................................. Payment of Invoices ................... ...... ................ .... ..... ................... Payment of Capital Improvement Costs ........................................ Due Date of Payments................................................................... LatePayment Charge..................................................................... DisputedCharges ..................................... :..................................... Use of Operation Manager's Funds ............................................... CREDITWORTHINESS..................................................................... PAGE 20 20 20 20 21 21 21 21 22 22 15. TAXES ......... .......................................................................... 22 15.1 Property and Other Taxes.............................................................. 22 15.2 Income Taxes................................................................................. 23 16. 1 17 DISPOSITION OF FACILITIES........................................................ 24 LIABILITY; COVENANT NOT TO EXECUTE ............................... 25 17.1 Covenant Not to Execute............................................................... 25 17.2 Collection of Insurance Proceeds .................................................. 25 17.3 Obligation for Work Liability Costs .............................................. 26 17.4 Responsibility of a Party for its Own Willful Action .................... 26 17.5 Limitation of Recovery on Judgment Debt ................................... 26 17.6 Indemnification for Claims of Customers ............ 17.7 No Relief of Insurer from Liability ............................................... 27 17.8 Western Subject to Tort Claims Act .............................................. 28 18. AUDITS............................................................................................... 18.1 Right to Audit ........................... ..................................................... 18.2 Retention of Records and Audits ................................................... 18.3 Costs of Audits.............................................................................. 18.4 Notice of Audit Results and Adjustments ..................................... 18.5 Audit Reports................................................................................. 19. DEFAULTS......................................................................................... 19.1 Performance Default...................................................................... 19.2 Payment Default ........................................................................ 19.3 Default Remedies.......................................................................... 19.4 Temporary Use of Rights of the Interconnection Facilities and Nevada Transformer Bank for Payment Default ...................... 19.5 Cure of Default.............................................................................. 19.6 Right to Legal Action.................................................................... 20. UNCONTROLLABLE FORCES........................................................ 21. RELATIONSHIP OF THE PARTIES ................................................. 22. GOVERNING LAW AND VENUE ................................................... 28 28 28 28 28 29 29 29 29 29 30 30 31 31 31 32 iii Western Agreement No. 06-DSR-11729 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 TABLE OF CONTENTS - CONTINUED SECTION TITLE 23. SUCCESSORS AND ASSIGNS......................................................... 23.1 Conditions to Assignment............................................................. 23.2 Binding upon Successors............................................................... 23.3 Conditions of Release from Further Obligations ........................... 24. NONDEDICATION OF FACILITIES .................................. ............. 25. REGULATORY APPROVALS.......................................................... 25.1 Approvals....................................................................................... 25.2 Fees................................................................................................ 26. NOTICES ...... ............................................................................ 26.1 Recipients of Notices ................................................................ 26.2 Routine Communications .............. ..........................I................. 26.3 Exhibits .. ... ...................................................... 26.4 Change of Designations of Recipients .:.................................. 27. DAMAGE OR DESTRUCTION........................................................ 27.1 Mead 500-kV Substation............................................................... 27.2 Interconnection Facilities.............................................................. 28. GENERAL PROVISIONS.................................................................. 28.1 Entire Agreement............................................:.............................. 28.2 Nonpartitionment........................................................................... 28.3 No Implied Obligations.................................................................. 28.4 Exhibits Made a Part of the Agreement ......................................... 28.5 Amendments and Revision of Exhibits ......................................... 28.6 Severability.................................................................................... 28.7 No Third Party Rights Other Than Specified ................................ 28.8 No Precedence of Waiver.........I................................................. 28.9 Section Headings Not Binding ...................................................... 28.10 Authorized Representative............................................................ 28.11 E&O Committee Meetings............................................................ 28.12 Western's Contingent Upon Authorization ................................... 29. SURVIVAL OF OBLIGATIONS AND LIABILITIES ..................... 30. EXECUTION BY COUNTERPARTS ............................................... 31. SIGNATURE CLAUSE...................................................................... PAGE 32 32 32 33 33 33 33 33 33 33 34 34 34 34 34 34 35 35 35 35 35 36 36 36 36 36 36 37 37 37 37 38 iv Western Agreement No. 06-DSR-11729 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 EXHIBITS EXHIBIT TITLE PAGE A Interconnection Facilities and Single Line Drawing of the Mead 500-kV Substation .......... ....................................... A-1 B Mead 500-kV Substation Common Facilities Cost .............................. B-1 C Cost Responsibility Ratio (CRR) ................ .. ....................... C-1 D Calculation of Payment for Use of Common Facilities for Termination of the Interconnections ................................................... D-1 E Estimated Income Tax Cost Component (ITCC) CompositeRate.................................................................................. E-1 F Interconnection Charge for Nevada Transformer Bank at Mead 230-kV Substation................................................................... F=1 G Facilities Use Charge for Operation of Perkins Phase -Shifting Transformers.................................................. G-1 H Recipients of Notices.............................................................................. H-1 ATTACHMENTS Metering, Operating, and Scheduling Instructions (MOSI) v Western Agreement No. 06-DSR-11729 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 In PREAMBLE: The Parties entering into this Agreement as of , 2006, are: ARIZONA PUBLIC SERVICE COMPANY, hereinafter referred to as "Arizona," an Arizona corporation; SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, hereinafter referred to as "Salt River Project," an agricultural improvement district organized and existing under the laws of the State of Arizona; M-S-R PUBLIC POWER AGENCY, hereinafter referred to as "M-S-R," a public entity organized and existing under and by virtue of the laws of the State of California; SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, hereinafter referred to as "SCPPA," a public entity organized and existing under and by virtue of the laws of the State of California, doing business in the State of Arizona as Southern California Public Power Authority Association, holding two separate ownerships as "Authority Interest (Members)" and "Authority Interest (Western)"; the CITY OF VERNON, hereinafter referred to as "Vernon," a municipal corporation of the State of California; collectively referred to as the "MPP Owners"; the United States Department of Energy, WESTERN AREA POWER ADMINISTRATION, established pursuant to Federal law, hereinafter referred to as "Western"; and NEVADA POWER COMPANY, hereinafter referred to as "Nevada," a Nevada corporation; each individually referred to as "Party" and collectively as "Parties." 2. EXPLANATORY RECITALS: 2.1 The Mead -Phoenix Project (MPP) is a 500-kV alternating current (AC) transmission system between the Westwing Switchyard, near Sun City, Arizona, and the Marketplace Substation, in Boulder City, Nevada, with an interconnection to the Mead 500-kV Substation, located near Boulder City, Nevada. The agreements between the MPP Owners provide for and the MPP was designed and constructed with the explicit reservation that the project could be converted to a I . Western Agreement No. 06-DSR-11729 I direct current (DC) configuration in the future. Conversion to DC operation in the 2 future will require construction of converter stations and certain modifications to 3 the 500-kV transmission lines. 4 2.2 The MPP Owners have certain ownership interests in, rights to, and 5 responsibilities at the Mead 500-kV Substation pursuant to the Joint Ownership 6 Agreement and Operation Agreement. Copies of the Joint Ownership Agreement 7 and Operation Agreement have been provided to Nevada. 8 2.3 Nevada intends to construct and operate a forty-eight (48) mile 500-kV 9 transmission line between its Harry Allen 500-kV Substation and MPP's Mead 10 500-kV Substation (Harry Allen Line). 11 2.4 Nevada has requested interconnections of (i) a 500-kV transmission line to the 12 Mead 500-kV Substation and (ii) a 500/230-kV transformer bank, consisting of 13 three (3) single-phase transformers and one (1) spare transformer, to the Mead 14 500-kV Substation. 15 2.5 Nevada has requested interconnection of a 500/230-kV transformer bank, 16 consisting of three (3) single-phase transformers and one (1) spare transformer, to 17 Western's Mead 230-kV Substation. 18 2.6 Nevada and Western, acting as an Operation Manager of MPP and with 19 Management Committee approval, have entered into the Contract for 20 Construction of Interconnections to the Mead 500-kV Substation, Contract 21 No. 03-DSR-11594, dated February 3, 2005, as such may be amended or 22 supplemented from time to time, for the construction of the Interconnection 23 Facilities and the installation of a new 500/230-kV transformer bank (Nevada 24 Transformer Bank) at MPP's Mead 500-kV Substation. 25,, 2.7 Nevada and Western, acting as an Operation Manager of MPP, have entered into 26 the following agreements in association with Nevada's interconnections at the - 27 Mead 500-kV Substation: 28 2 Western Agreement No. 06-DSR-11729 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 2.7.1 Centennial Project Advancement of Funds for Associated Agreements with the MPP, Contract No. 02-DSR-11343, dated June 18, 2002. 2.7.2 National Environmental Policy Act Compliance for the Harry Allen -Mead 500-kV Transmission Line, Contract No. .03-DSR-11413, dated June 19, 2003. 2.7.3 500-kV Facilities Study Agreement, Letter Agreement No. 03-DSR-11437, dated October 10, 2003, as amended. 2.7.4 Advance of Funds for Flow Management System, Letter Agreement No. 06-DSR-11680, dated May 25, 2006. 2.8 On September 15, 2004, the MPP Engineering and Operation Committee approved the results of technical studies performed by the Parties relating to Nevada's planned interconnections to the Mead 500-kV Substation, as identified in subsection 2.4 herein. 2.9 MPP has authorized Western, as Operation Manager of the Mead 500-kV Substation, to act on their behalf for these interconnections. 2.10 . The Parties recognize that Nevada must mitigate any impacts on the MPP as a result of their interconnections at the Mead 500-kV Substation under this Agreement and maintain: (i) system reliability; and (ii) transfer capability among interconnected systems. 2.11 MPP will not be financially responsible for any system impacts as a result of the interconnections under this Agreement. 2.12 Nevada must enter into this Agreement with the MPP Owners before there is any injection or exchange of Power by Nevada at the Mead 500-kV Substation. 2.13 The MPP Owners, each in accordance with its respective interests, are willing to permit Nevada's termination of the Harry Allen Line and the installation of the Nevada Transformer Bank in the Mead 500-kV Substation, pursuant to the terms and conditions of this Agreement. 3 Western Agreement No. 06-DSR-11729 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 ii© 10 AGREEMENT: In consideration of these premises and of the mutual covenants contained herein, the Parties agree as follows. EFFECTIVE DATE AND TERMINATION: 4.1 Effective Date: This Agreement shall become effective upon the date this Agreement has been duly executed by all the Parties hereto, subject to final acceptance of this Agreement pursuant to Section 4.2 or 4.4 herein. 4.2 FERC Acceptance Without Conditions or Modifications: Arizona shall promptly file this Agreement with FERC as soon after the effective date of this Agreement as practicable. Any information reasonably required from any Party by Arizona in preparing such FERC filing shall be supplied by such Party. If accepted by FERC, Arizona shall promptly give notice of such acceptance to the Operation Manager, who shall promptly provide notice of such acceptance to the other Parties. 4.3 FERC Acceptance With Conditions or Modifications: If FERC orders a hearing to determine whether this Agreement is just and reasonable and, after such hearing, requires modifications of, or conditions to, any of the terms, conditions, rates, or charges agreed to herein, or if FERC accepts the Agreement for filing but requires modifications of, or conditions to, any of the terms, conditions, rates, or charges agreed to herein, Arizona shall promptly provide notice of such hearing, modifications, or conditions, to the Operation Manager, who shall promptly provide notice of such action by FERC to the other Parties. 4.4 Parties' Acceptance: If no Party takes exception to FERC's action within fourteen (14) calendar days after the postmark date of the notice provided by the Operation Manager pursuant to Section 4.3 herein, this Agreement shall continue to be effective and the FERC-ordered modifications and conditions shall become a part of this Agreement. The Operation Manager shall set forth such FERC ordered modifications and conditions as accepted by the Parties in Appendix A to be attached hereto and by this reference made a part of this Agreement. Such 4 Western Agreement No. 06-DSR-11729 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 15. appendix shall constitute an amendment to this Agreement which amendment shall not require signature by the Parties. 4.5 Non -Acceptance by a Party: Any Party(ies) which takes exception to FERC's conditions or modifications shall, within fourteen (14) calendar days after the postmark date of the notice provided by the Operation Manager pursuant to Section 4.3 herein, give notice to all other Parties of such exception. In such event, the Parties shall promptly commence good faith negotiations to amend this Agreement in a manner acceptable to FERC and to provide similar benefits to the Parties; provided, however, that if no such amendment is executed by all Parties within sixty (60) calendar days after the postmark date of the written notice of exception or such other reasonable time period as may be agreed to by the representatives of all the Parties, this Agreement shall terminate and become null and void, except with respect to Section 25.2 herein which shall survive the termination of this Agreement until satisfied. 4.6 Termination: This Agreement shall terminate operationally upon the first of the following events to occur: (i) the termination of this Agreement for default as provided in subsection 19.3.2 herein; (ii) the termination of the Joint Ownership Agreement; (iii) the permanent removal from service of the termination facilities associated with the Nevada Transformer Bank and the Harry Allen Line at the Mead 500-kV Substation; or (iv) Nevada's notice of termination pursuant to subsection 6.7. If required by FERC, Nevada's notice of termination shall be promptly filed by Arizona and be effective as of the date authorized by FERC. This Agreement shall remain in effect until completion of all outstanding financial obligations provided for herein. DEFINITIONS: The following terms, whether in the singular or in the plural, when initially capitalized in this Agreement, or any amendments hereto, shall have these meanings. 5 Western Agreement No. 06-DSR-11729 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 5.1 Agreement: This Mead -Phoenix Project Interconnection and Operation Agreement with Nevada Power Company at Mead 500-kV Substation, as such may be amended, supplemented, or revised from time to time. 5.2 Applicable Requirements: Any law; any standard, procedure, or requirement of (i) WECC, (ii) any other entity that has the authority to control the operation of the Mead 500-kV Substation, or (iii) any other entity that is binding on the Operation Manager or the MPP; any standards, procedures, or other requirements established by the Operation Manager and approved by the E&O Committee in conformance with Prudent Utility Practice; in each case as amended from time to time and whether now existing or hereafter imposed or arising. 5.3 Capital Improvement: Any unit of property, after the Date of Interconnection Completion, which is an addition to, enlargement of, or betterment of the Mead 500-kV Substation or the removal or replacement of any other unit of property constituting a part of the Mead 500-kV Substation, irrespective of whether such replacement constitutes an enlargement or betterment of that which it replaces, which additions, betterments, enlargements, removals and replacements, in accordance with accounting practice, would be capitalized. For purposes of this definition, accounting practice shall mean the generally accepted accounting principles applicable to the electric utility industry. 5.4 Common Facilities: All or part of those certain structures, improvements, and facilities of the Mead 500-kV Substation which include, but are not limited to: dikes, roadways, control building, communications building, ancillary buildings, trenches, conduits, control and power cables, control equipment, station communication equipment, protection equipment, batteries, auxiliary equipment, station grounding grid, fencing, lighting and yard improvements at the Mead 500-kV Substation. Common Facilities do not include the Interconnection Facilities, the MPP Transformer Bank, the Nevada Transformer Bank, or any component of a Connection. 6 Western Agreement No. 06-DSR-11729 J 1 5.5 Connection: Each termination as shown in Exhibit A through and including 2 power circuit breakers, associated switching equipment, controls and protection, 3 and other appurtenant equipment for electrical facilities such as, but not limited 4 to, transmission lines or power transformers. 5 5.6 Cost Responsibility Ratio (CRR): Nevada's ratio of cost responsibility for the 6 Mead 500-kV Substation shall be as determined and described in Exhibit C. 7 5.7 Date of Interconnection Completion: The date when the Interconnection 8 Facilities can reasonably be expected to operate reliably, as determined by the 9 Operation Manager and the E&O Committee pursuant to the Joint Ownership 10 Agreement. 11 5.8 Enerfy: The integrated value of Power over time expressed in kilowatt-hours 12 (kWh) or megawatt -hours (MWh). 13 5.9 E&O Committee: The transmission engineering and operations committee 14 established pursuant to the Joint Ownership Agreement. 15 5.10 FERC: The Federal Energy Regulatory Commission or any successor agency. 16 5.11 Fiscal Agent: Salt River Project, or its successor, appointed pursuant to the MPP 17 Fiscal Agency Agreement, as such may be amended, supplemented, or revised 18 from time to time. 19 5.12 Flow Management System: A software tool used to (i) determine the 20 incremental impact of the interconnection of the Harry Allen Line at the Mead 21 500=kV Substation and (ii) assess overload conditions that are in violation of 22 WECC and/or NERC criteria on any of the facilities connected to the Mead 23 500-kV Substation. 24 5.13 Harry Allen Line: Nevada's 500-kV transmission line from the Harry Allen 25 500-kV Substation to the Mead 500-kV Substation. 26 5.14 Interconnection Facilities: The facilities necessary to interconnect the Harry 27 Allen Line and the Nevada Transformer Bank to the Mead 500-kV Substation, as 28 identified in Exhibit A. 7 Western Agreement No. 06-DSR-11729 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 5.15 Joint Ownership Agreement: The Mead -Phoenix Project Joint Ownership Agreement among the MPP Owners, dated as of August 4, 1992, as such may be amended, supplemented, or revised from time to time, which provides for, among other things, the ownership, construction, and operation of the MPP. 5.16 Management Committee: The management committee established pursuant to the Joint Ownership Agreement. 5.17 Mead 500-kV Substation: A high -voltage electrical substation located near Boulder City, Nevada, consisting of Common Facilities, Interconnection Facilities, the MPP Transformer Bank, the Nevada Transformer Bank, and any component of a Connection, including, but not limited to, communication equipment, protective systems, control house space, relaying equipment, control cabling, bus work, bus structures, fencing, and metering equipment. The Mead 500-kV Substation is owned by the MPP Owners, all in -accordance with the Joint Ownership Agreement. 5.18 Mead -Phoenix Project (MPP): A 500-kV alternating current (AC) transmission system between the Westwing Switchyard, near Sun City, Arizona, and the Marketplace Substation, in Boulder City, Nevada, with an interconnection into the Mead 500-kV Substation, located near Boulder` City, Nevada. MPP is capable of being converted to a direct current (DC) transmission system at a future date. 5.19 Metering, Operating, and Scheduling Instructions (MOSI): The written instructions developed to implement the metering, operating, scheduling, billing, and power accounting requirements for Nevada's interconnections of the Harry Allen Line and the Nevada Transformer Bank to the Mead 500-kV Substation as attached hereto. 5.20 MPP Owners: The MPP Owners, as identified in the Joint Ownership Agreement, are Arizona, M-S-R, Salt River Project, SCPPA holding two separate ownerships as Authority Interest (Members) and Authority Interest (Western), and Vernon. 8 Western Agreement No. 06-DSR-11729 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 5.21 MPP Participants: The MPP Participants, as identified in the Joint Ownership Agreement, are the California Cities of Anaheim, Azusa, Banning, Burbank, Colton, Glendale, Los Angeles, Pasadena, Riverside, and Vernon; Arizona; M-S-R; Salt River Project; and Western. 5.22 MPP Transformer Bank: The 500/230-kV transformer bank consisting of four (4) single-phase 500/230-kV 433.33 MVA transformers and installed in the Mead 500-kV Substation by the MPP, which is operated and maintained in accordance with the Operation Agreement. 5.23 Nevada Transformer Bank: The 500/230-kV transformer bank consisting of . four (4) single-phase 500/230-kV 500 MVA transformers installed in the Mead 500-kV Substation, pursuant to the Contract for Construction of Interconnections to the Mead 500-kV Substation, Contract No. 03-DSR-11594, which will be operated and maintained in accordance with this Agreement. 5.24 Operating Emergency: An unplanned event or circumstance, which reduces or may reduce the capability to transmit Power and Energy at the Mead 500-kV Substation, which capability under normal operating conditions would otherwise be available. 5.25 Operating Work: All work performed by, or caused to be performed by, the Operation Manager that is necessary for the operation and maintenance of the Mead 500-kV Substation which work includes, but is not limited to, the work as listed in the Operation Agreement: engineering, agreement preparation, purchasing, repair, supervision, training, expediting, inspection, testing, protection, operation, retirement, maintenance, use, management, and making Capital Improvements. Operating Work shall include any work necessitated by an Operating Emergency. 5.26 Operation Agreement: The MPP Operation Agreement among the MPP Owners and the Operation Manager, as such may be amended, supplemented, or revised from time to time. 9 Western Agreement No. 06-DSR-11729 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 5.27 Operation Manager: Western, or its successor, appointed pursuant to the Operation Agreement. 5.28 Operational Mitigation Procedure: The procedure contained in Section 7 of the MOSI to mitigate operating restrictions on the MPP caused by the interconnections of the Harry Allen Line and the Nevada Transformer Bank at the Mead 500-kV Substation. 5.29 Perkins Phase -Shifting Transformers (Perkins PSTs): The two (2) 650 MVA 500-kV phase -shifting transformers installed in parallel and located at MPP's Perkins Switchyard. 5.30 Power: Electrical power expressed in kilowatts (kW) or megawatts (MW). 5.31 Prudent Utility Practice: Any of the practices, methods, and acts, including but not limited to the practices, methods, and acts engaged in or approved by a significant portion of the electrical utility industry within the operating area of the Western Electricity Coordinating Council (WECC), or its successor agency, which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, would have been expected to accomplish the desired result at the lowest reasonable cost consistent with good business practices, reliability criteria, safety considerations and expediency, taking into account the design and operational characteristics of the Mead 500-kV Substation. Prudent Utility Practice is not intended to be limited to the optimum practices, methods, or acts to the exclusion of all others, but rather is a spectrum of possible practices, methods, or acts which would have been expected to accomplish the desired result. Prudent Utility Practice includes due regard for manufacturers' warranties and requirements of governmental agencies of competent jurisdiction, and shall apply not only to functional parts of the Mead 500-kV Substation, but also to appropriate structures, landscaping, painting, signage, lighting, other facilities, and public relations programs reasonably designed to promote public understanding and acceptance of the Mead 500-kV Substation. 10 Western Agreement No. 06-DSR-11729 1 5.32 Western Electricity Coordinating Council (WECQ: WECC, or its successor 2 agency, is a consortium of generation and transmission providers throughout the 3 western part of North America organized for the purpose of electric system 4 reliability and standards of operation, including protocols and procedures of 5 exchanging real-time operating data between electric system control centers. 6 5.33 Willful Action: 7 5.33.1 Willful Action means any action, as described below, which is taken or 8 not taken by a Party at the direction of its directors, members of its 9 governing bodies, officers, or employees having management or 10 administrative responsibility affecting its performance under this 11 Agreement: . 12 (i) Action which is knowingly or intentionally taken or not taken with 13 conscious indifference to the consequences thereof or with intent 14 that injury or damage would result or would probably result 15 therefrom; 16 (ii) Action which is taken or not taken by a Party which action has 17 been determined by final arbitration award or final judgment or 18 judicial decree to be a material default under this Agreement and 19 which action occurs or continues beyond the time specified in such 20 arbitration award or judgment or judicial decree for curing such 21 default or, if no time to cure is specified therein, occurs or 22 continues beyond a reasonable time to cure such default; 23 (iii) Action which is taken by the Operation Manager, while acting in 24 such capacity, for its exclusive financial benefit and to the 25 financial detriment of the MPP Owners and/or Nevada; as used 26 herein, "for its exclusive financial benefit" shall mean for the sole 27 financial benefit of the Operation Manager or for the financial 28 11 Western Agreement No. 06-DSR-11729 1 benefit of the Operation Manager and one or more entities other 2 than the MPP Owners and/or Nevada; 3 (iv) Action which is knowingly or intentionally taken or not taken with 4 the knowledge that such action taken or not taken is a material 5 default under this Agreement. 6 5.33.2 Willful Action shall include any act or failure to act which would 7 constitute gross negligence but shall not include any act or failure to act 8 which is merely involuntary, accidental, or negligent. 9 5.33.3 The phrase "employees having management or administrative 10 responsibility" as used in subsection 5.33.1 herein means employees of a 11 Party who are responsible for one or more of the executive functions of 12 planning, organizing, coordinating, directing, controlling, and supervising 13 such Party's performance under this Agreement; provided, however, that 14 with respect to employees of the Operation Manager, acting in its capacity 15 as -such, such phrase shall refer only to (i) the senior employee of the 16 Operation Manager who is on duty at the time of the Willful Action and 17 who is responsible at such time for the operation of the Interconnection 18 Facilities and the Nevada Transformer Bank, and (ii) anyone in the 19 organizational structure of the Operation Manager between such senior 20 employee and up to and including an officer. 21 5.34 Work Liability: The liability of one or more Parties for damages suffered by 22 anyone other than a Party, whether or not resulting from the negligence of any 23 Party, its directors, members of its governing bodies, officers, employees, or any 24 other person or entity whose negligence could be imputed to such Party, resulting 25 from: (i) the design, construction, use, or ownership of the Interconnection 26 Facilities and the Nevada Transformer Bank; or (ii) the performance or 27 nonperformance of Operating Work directly related to the Interconnection 28 Facilities and the Nevada Transformer Bank. 12 Western Agreement No. 06-DSR-11729 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 6. RIGHTS GRANTED AND RESERVED: 6.1 Right to Interconnect: Each MPP Owner, to the extent of its interest in the Mead 500-kV Substation pursuant to the Joint Ownership Agreement, hereby grants to Nevada, subject to the terms and conditions of this Agreement: (i) the right to interconnect the Harry Allen Line; (ii) the right to interconnect the Nevada Transformer Bank; (iii) the exclusive use of and benefit of the Nevada Transformer Bank; and (iv) the nonexclusive use of and benefit from Common Facilities. 6.2 Transformer Bank Rights: Nevada shall have the exclusive use of and benefit of the Nevada Transformer Bank and MPP shall have the exclusive use of and benefit of the MPP Transformer Bank. 6.3 Transaction Rights: Subject to the terms and conditions of this Agreement, Nevada shall have the right to schedule, deliver, receive, sell, and purchase Power and Energy at the Mead 500-kV Substation. Such transactions may be conducted between Nevada and the MPP Participants or any party, at the time and to the extent that the transacting parties possess transaction rights into or out of the Mead 500-kV Substation. 6.4 MPP Participants' Rights: The exercise of rights granted pursuant to subsection -6.3 herein shall not interfere with or impair the respective rights or abilities of each MPP Participant to schedule, deliver, receive, sell, and purchase Power and Energy at or through the Mead 500-kV Substation. 6.5 Reservation of Existing Rights: Except as expressly provided herein, the rights granted herein shall not be construed in any way to interfere with or impair the respective existing rights of the MPP Owners, in their sole discretion, to remove all or part of the MPP from the Mead 500-kV Substation, to interconnect with, operate, maintain, expand, sell, or otherwise dispose of the Mead 500-kV Substation as the MPP Owners may deem necessary or appropriate; provided, that 13 Western Agreement No. 06-DSR-11729 1 2 3 4 5 6 7 8'i 9I 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the disposition or removal of the Interconnection Facilities and the Nevada Transformer Bank shall be subject to the terms and conditions of this Agreement. 6.6 Reservation of Rights: 6.6.1 The Interconnection Facilities may be modified or relocated as necessary by the MPP in accordance with Prudent Utility Practice. The need for such modifications or relocation shall be determined solely by the Management Committee. 6.6.2 Except as provided for in subsection 6.6.3, Nevada shall have the right to participate in discussions of, but shall have no right of approval for, any addition to or modification of the Mead 500-kV Substation. 6.6.3 Nevada shall only have the right of approval for any addition to or modification of, but not relocation of, the Nevada Transformer Bank. 6.7 Modification of the MPP to a DC Configuration: 6.7.1 In the event that the MPP Participants approve conversion of the MPP to DC, a written notice shall be promptly sent to Nevada by the Operation Manager. Such notice shall include a proposed design for the DC configuration that shows the new location of the Harry Allen Line termination, an estimate of the termination relocation costs to be assigned to Nevada, and a proposed schedule for the DC conversion. Any costs for modifications to the Harry Allen Line due to a relocation of the termination of such line at the Mead 500-kV Substation will be the responsibility of Nevada. 6.7.2 Nevada shall respond in writing within ninety (90) days of receipt of the written notice from the Operation Manager provided in accordance with subsection 6.7.1 on whether Nevada agrees to pay for the relocation of the termination of the Harry Allen Line at the Mead 500-kV Substation or elects to terminate this Agreement. 14 Western Agreement No. 06-DSR-11729 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 7. PAYMENT FOR RIGHT TO USE COMMON FACILITIES: 7.1 Payment for Right to Use:. In consideration for the rights granted pursuant to Section 6 herein, Nevada shall pay or cause to be paid, as provided herein, to the Fiscal Agent a one-time payment for use of Common Facilities calculated pursuant to Exhibit D. Within thirty (30) days after this Agreement has been accepted for filing by FERC, the Fiscal Agent shall submit an invoice for such one-time payment to Nevada. Such invoice shall be paid within ninety (90) days after receipt. 7.2 Distribution of Payment Received for Common Facilities: The payment received pursuant'to subsection 7.1 herein shall be made to the Fiscal Agent for the benefit of the MPP Owners. The Fiscal Agent shall credit a portion of such payment to the account of each MPP Owner in proportion to each MPP Owner's interest in Common Facilities. 7.3 Distribution of Funds Received from New Interconnectors: Nevada shall be entitled to receive a pro rata share in accordance with the effective CRR of any payments for the right to use Common Facilities received by the Fiscal Agent from future interconnectors. 7.4 Interconnection Charge at Mead 230-kV Substation: Nevada shall pay an interconnection charge for the 230-kV interconnection of the Nevada Transformer Bank to Western's Mead 230-kV Substation in accordance with Exhibit F. 8. OWNERSHIP: 8.1 Interconnection Facilities: The Interconnection Facilities shall be owned by the MPP Owners to the extent of their ownership interest in the Mead 500-kV Substation, pursuant to the Joint Ownership Agreement. 8.2 Nevada Transformer Bank: The Nevada Transformer Bank shall be owned by the MPP Owners to the extent of their ownership interest in the MPP Transformer Bank, pursuant to the Joint Ownership Agreement. 15 Western Agreement No. 06-DSR-11729 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 IV1 8.3 Mead 500-kV Substation: The Mead 500-kV Substation shall continue to be owned by and remain the property of each of the MPP Owners to the extent of their ownership interest in the Mead 500-kV Substation pursuant to the Joint Ownership Agreement. 8.4 Capital Improvements: Any Capital Improvement to the Mead 500-kV Substation shall be owned by the MPP Owners. OPERATION: 9.1 Duties of Operation Manager: The Operation Manager shall perform Operating Work in accordance with Prudent Utility Practice and pursuant to the terms and conditions of this Agreement and the Operation Agreement. 9.2 Nevada Transformer Bank: The Operation Manager shall operate the Nevada Transformer Bank in accordance with this Agreement and the MOST. 9.3 Curtailment: If, at any time, the Mead 500-kV Substation cannot accommodate the aggregate Power and Energy schedules due to such conditions as loop flows on parallel transmission paths, Operating Emergencies, or abnormal operating conditions, the Operation Manager, in its sole discretion, shall take whatever action at the Mead 500-kV Substation it deems appropriate and necessary to relieve any overload, in accordance with Applicable Requirements and Prudent Utility Practice, including the MOSI. 9.4 De-energization: The Parties acknowledge that it may be necessary from time to time for the Operation Manager to de -energize the Interconnection Facilities and/or other Connections at the Mead 500-kV Substation which now exist or may exist in the future in order to, among other things: (i) perform Operating Work, and (ii) install or remove other Connections at the Mead 500-kV Substation. The Operation Manager shall coordinate any scheduled outage of facilities with Nevada and any MPP Participant that may be affected by such outage. 16 Western Agreement No. 06-DSR-11729 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 9.5 Operating Emergencies: 9.5.1 In the event of an Operating Emergency, the Operation Manager, in accordance with applicable operating procedures and Prudent Utility Practice, shall act in good faith and take any and all steps reasonably necessary at the Mead 500-kV Substation to terminate the Operating Emergency. 9.5.2 As soon as practicable following the occurrence of an Operating Emergency, the Operation Manager shall advise the affected parties' scheduling representatives, or their designees, of the nature and expected duration of the Operating Emergency, the steps taken or planned to be taken for the termination of such Operating Emergency, and the estimated cost thereof. 9.5.3 In the event the Operation Manager is required to make Capital Improvements to terminate the Operating Emergency and restore the Interconnection Facilities to service, such Capital Improvements shall be made as soon as practicable pursuant to subsection 9.6 herein and in accordance with Prudent Utility Practice, except that no such Capital Improvement costing in excess of $1,000,000 shall be made without the prior approval of the Management Committee. 9.6 Capital Improvements: 9.6.1 The Operation Manager shall be responsible for and shall perform all design, acquisition, construction, installation, and placing in service of all Capital Improvements. Except as provided pursuant to subsections 9.5 and 9.6.2 herein, Capital Improvements shall be recommended and budgeted by the Operation Manager and shall be subject to the prior approval of the MPP Participants in accordance with the Joint Ownership Agreement. 17 Western Agreement No. 06-DSR-11729 1 9.6.2 The Operation Manager shall be responsible for and shall perform all 2 design, acquisition, construction, installation, and placing in service of all 3 Capital Improvements for the Nevada Transformer Bank. Except as 4 provided pursuant to subsection 9.5 herein, the Nevada Transformer Bank 5 Capital Improvements shall be recommended and budgeted by the 6 Operation Manager in accordance with the Joint Ownership Agreement 7 and shall be subject to the prior approval of Nevada. 8 9.7 Nevada System: Nevada shall operate, or cause to be operated, its system in 9 accordance with the requirements of WECC and Prudent Utility Practice. 10 10. MOSI ADMINISTRATION: 11 10.1 Chances in Conditions: If operational and/or system conditions change, a 12 revised MOSI may be temporarily implemented by the Operation Manager 13 pending concurrence with Nevada and approval by the E&O Committee. The . 14 Operation Manager shall provide notification to Nevada and the E&O Committee 15 upon implementation of the revised MOSI. The revised MOSI shall be 16 coordinated with Nevada and submitted to the E&O Committee by the Operation 17 Manager at the next available E&O Committee meeting for approval. If the 18 revised MOSI is not approved by the E&O Committee, Nevada and the Operation 19 Manager shall have thirty (30) days to modify the revised MOST and resubmit the 20 modified MOSI to the E&O Committee for approval. If the modified MOSI is 21 not approved by the E&O Committee within ninety (90) days, the modified MOSI 22 shall no longer be effective and the original MOST shall be re -implemented, 23 subject to the Operation Manager taking such steps as are needed to ensure 24 reliability. 25 10.2 MOSI Compliance: Nevada shall submit, or make arrangements to submit, 26 hourly schedules and any changes thereto to the Operation Manager's schedulers 27 and/or dispatchers in accordance with the MOSI. Notwithstanding the notice 28 requirements of subsection 19.1 herein, if Nevada does not comply with the 18 Western Agreement No. 06-DSR-11729 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 1111. 1112 MOSI, the Operation Manager shall inform Nevada of such noncompliance, and shall not be obligated to accept Nevada's schedule(s) until the MOSI has been complied with and all requirements have been met. OPERATIONAL MITIGATION PROCEDURE: The Operation Manager shall implement a Flow Management System to monitor the Mead 500-kV Substation in accordance with Section 7 of the MOSI. COST RESPONSIBILITY: Nevada's share of all costs and expenses incurred by the Operation Manager, in the performance of Operating Work, shall be calculated and allocated by the Operation Manager as set forth below. 12.1 Method of Calculation of the Cost Responsibility Ratio: The Operation Manager shall initially compute the Cost Responsibility Ratio in the manner set forth in Exhibit C. For each Connection installed or removed, the CRR shall be recomputed promptly and shall be effective upon completion of such installation or removal. Upon completion of such recomputation, the Operation Manager shall revise Exhibit C, in accordance with subsection 28.4 herein. 12.2 Costs of Operating Work: The following portions of Operating Work shall be allocated to Nevada and shall be paid in advance in accordance with Section 13: 12.2.1 Mead 500-kV Substation: The CRR share of all Operating Work expenses associated with the Mead 500-kV Substation, including but not limited to overhead expenses, applicable labor loading charges, and administrative and general expenses for the purposes of this subsection. Operating Work expenses associated with the Mead 500-kV Substation shall exclude the MPP Transformer Bank and the Nevada Transformer Bank. 12.2.2 Nevada Transformer Bank: All Operating Work expenses associated with the Nevada Transformer Bank, including but not limited to overhead 19 Western Agreement No. 06-DSR-11729 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 13. expenses, applicable labor loading charges, and administrative and general expenses. 12.2.3 Perkins PSTs: Charges for the use of the Perkins PSTs will be invoiced by the Fiscal Agent in accordance with Exhibit G. BUDGET AND PAYMENT OF INVOICES SUBMITTED BY FISCAL AGENT: 13.1 Operating Work Budget: The Fiscal Agent shall furnish Nevada with a copy of the budget for Operating Work at the same time such budget is submitted to the E&O Committee. The budget for the estimated expenses of Operating Work shall be subject to the sole approval of the E&O Committee, excluding Capital Improvements to the Nevada Transformer Bank which shall be subject to the sole approval of Nevada. 13.2 Submission of Invoices: As soon as practical, the Fiscal Agent shall submit or cause to be submitted to Nevada an invoice for the total monthly budgeted costs allocated to Nevada pursuant to this Agreement from the Date of Interconnection Completion to the end of the calendar month in which the Date of Interconnection Completion is scheduled to occur and invoices for the next two (2) calendar months immediately following such month. Each calendar month thereafter during the term of this Agreement, the Fiscal Agent shall submit or cause to be submitted to Nevada an invoice for the monthly budgeted costs for the third succeeding calendar month. Each invoice shall indicate the month for which the .budgeted costs are being billed. 13.3 Payment of Invoices: Nevada shall pay or cause to be paid the invoiced amounts. The Fiscal Agent shall determine the actual monthly costs as soon as practicable. To the extent that the monthly payments made, as projected in the budget, are either less than or greater than the amount of actual monthly costs incurred, the deficiency or excess shall be debited or credited as appropriate by the Fiscal Agent, without interest, against the next succeeding monthly invoice(s) after determination of the deficiency or excess; provided, however, that if such 20 Western Agreement No. 06-DSR-11729 I adjustment would occur after the termination of this Agreement, the adjustment 2 shall be made by payment to, or from, the Fiscal Agent, as appropriate. 3 13.4 Payment of Capital Improvement Costs: The Fiscal Agent shall bill Capital 4 Improvement costs to each MPP Owner, Nevada, and other third parties, as 5 applicable, that may have a cost responsibility at the Mead 500-kV Substation. 6 Nevada shall pay or cause to be paid its proportionate share of such costs pursuant 7 to this Agreement. 8 13.5 Due Date of Payments: Amounts invoiced under this Agreement shall be paid to 9 the Fiscal Agent at the address shown on such invoice. Invoices shall be paid 10 thirty (30) days prior to the first day of the month covered by such invoice, except 11 for the invoices covering the first three months which will be due within thirty 12 (30) days after the invoice is received by Nevada. Payment shall be considered 13 made on the date payment is received by the Fiscal Agent. 14 13.6 Late Payment Charge: Invoiced amounts not received from Nevada by the 15 Fiscal Agent on or before the due date specified herein shall accrue interest in 16 accordance with the provisions of 18 CFR Section 35.19a(a)(2)(iii), prorated on a 17 daily basis from the due date to the day such unpaid amount is paid in full. 18 13.7 Disputed Charges: In the event Nevada disputes any portion of any amount 19 specified in a monthly invoice, Nevada shall give written notice of such dispute to 20 the Fiscal Agent. Notwithstanding such dispute, Nevada shall pay, or cause to be 21 paid, the total amount specified in the invoice. Such notice shall include the 22 reasons for disputing the invoiced amount. Upon receipt of such notice, the Fiscal 23 Agent shall provide notice to all Parties of such dispute. The Fiscal Agent and 24 Nevada shall review the disputed amounts within a reasonable time and if it is 25 determined that the invoice was incorrect, the amount determined to be the 26 difference between the correct amount and the amount paid shall be either 27 credited or debited, as the case may be, to the affected Party(ies) by the Fiscal 28 Agent in the next succeeding monthly invoice; provided, however, that if such 21 Western Agreement No. 06-DSR-11729 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 14. 115 adjustment occurs after the termination of this Agreement, the adjustment shall be made by prompt payment to, or from, the Fiscal Agent, as appropriate. 13.8 Use of Operation Manager's Funds: The Operation Manager shall not be required to advance any of its own funds on behalf of Nevada. CREDITWORTHINESS: For purposes of determining Nevada's ability to meet its obligations hereunder at any time during the term of this Agreement, in the event that the senior, long-term unsecured debt rating of Nevada is downgraded below BBB by S&P or Baa2'by Moody's, the MPP Owners may require Nevada to provide and maintain in effect a letter of credit or an alternative form of security that is acceptable to the MPP Owners and protects the MPP Owners against non-payment. In the event that the MPP Owners elect to require a letter of credit or other alternative form of security, the MPP Owners shall notify Nevada in writing of the election. and such security shall be provided within thirty (30) business days after receipt of the notice. Such security shall be either (i) an irrevocable, standby letter of credit in a form and substance satisfactory to the MPP Owners, issued by a financial institution organized under the laws of the United States or any State (or that is a domestic branch of a foreign bank), which at the time of such issuance (1) has either (a) a long-term unsecured debt rating of A or better by S&P or A2 or better by Moody's or (b) a certificate of deposit rating of A-1+ or better by S&P and P- 1 or better by Moody's or (2) is otherwise satisfactory to the MPP Owners, or (ii) other acceptable guaranty of payment satisfactory to the MPP Owners. TAXES: 15.1 Property and Other Taxes: 15.1.1 Nevada shall be solely responsible for any property taxes imposed upon the MPP Participants with respect to the Interconnection Facilities, the Nevada Transformer Bank, and Nevada's CRR of any Capital Improvements, regardless of MPP's ownership of such facilities. Nevada shall use reasonable efforts to have any taxing authority impose any property taxes, in lieu payments, or other taxes or assessments, excluding 22 Western Agreement No. 06-DSR-11729 1 any sales, use, income, franchise, or gross receipt taxes, directly upon 2 Nevada on the basis of its beneficial use of the Interconnection Facilities 3 and the Nevada Transformer Bank. In the event such tax authorities hold 4 the MPP Participants liable for property taxes, voluntary payments in lieu 5 thereof in accordance with any MPP Participant's normal practices (in lieu 6 payments) or other taxes, such property taxes, or in lieu payments, or other 7 taxes, excluding any sales, use, income, franchise, or gross receipts taxes, 8 will be billed to and paid byNevada. 9 15.1.2 Subject to Section 15.1.1 herein, all taxes and assessments, or 10 contributions in lieu thereof, levied against the property interest of any 11 Party shall be the sole responsibility of the Party upon whom said taxes 12 and assessments are levied, unless such taxes and assessments are levied 13 directly upon an individual Party on behalf of any or all of the other 14 Parties, in which case such taxes and assessments shall be the 15 responsibility of such Parties. 16 15.1.3 Any Party exempted from any taxes assessed against any or all of the 17 other Parties shall be given credit for such exemption. 18 15.1.4 If any taxing authority assesses a transaction privilege tax, use tax, sales 19 tax, gross receipts tax, compensating tax, excise tax, or other tax, 20 including applicable interest and penalties, but excluding any income or 21 franchise tax, against any monies paid by Nevada to the Operation 22 Manager on behalf of the MPP Participants, Nevada shall reimburse the 23 MPP Participants upon receipt of written notice from the Operation 24 Manager on the assessment of any such tax or shall pay such tax in 25 advance if included in any regular invoice. 26 15.2 Income Taxes: 27 15.2.1 Nevada shall be solely responsible for any income taxes imposed upon 28 any or all the MPP Participants with respect to (i) the Interconnection 23 Western Agreement No. 06-DSR-11729 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 Facilities and the Nevada Transformer Bank and (ii) any payment or transfer of assets made by Nevada for Capital Improvements, based on such MPP Participant's Income Tax Cost Component (ITCC), an estimate of which is shown in Exhibit E. 15.2.2 The ITCC, if incurred by a MPP Participant, shall be billed to and paid by Nevada in accordance with Section 13 herein. 15.2.3 The Fiscal Agent shall distribute any ITCC received from Nevada to the applicable MPP Participants in accordance with Exhibit E. 16. DISPOSITION OF FACILITIES: Upon termination of this Agreement, the Operation Manager shall have the option either to: (i) retain the Interconnection Facilities and/or the Nevada Transformer Bank and pay to Nevada the Net Salvage Value thereof, or (ii) remove or cause to be removed the Interconnection Facilities and/or the Nevada Transformer Bank, deliver or cause to be delivered the salvageable material and equipment of such facilities to Nevada, repair or cause to be repaired any damage to the Mead 500-kV Substation caused by such removal, and restore or cause to be restored the site to a clean and neat condition. For purposes of the foregoing, the term "Net Salvage Value" shall mean the fair market value of any salvageable material and equipment that would have been delivered to Nevada if the Operation Manager had elected to remove the Interconnection Facilities and/or the Nevada Transformer Bank, minus all costs and expenses that would have been incurred in removing such facilities, repairing -any damage to the Mead 500-kV Substation, and restoring the site to a clean and neat condition. In the event the Operation Manager elects to remove the Interconnection Facilities and/or the Nevada Transformer Bank, pursuant to this Section 16, the Operation Manager shall provide in writing to Nevada an itemized cost estimate for the costs of such removal, disposal, repair, and restoration. Upon agreement of such costs, not to be unreasonably withheld, such payment shall be paid to the Fiscal Agent on the basis of invoices submitted by the Fiscal Agent to Nevada pursuant to Section 13 herein, and the 24 Western Agreement No. 06-DSR-11729 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 Fiscal Agent may require security for such costs in accordance with Section 14 herein before the commencement of any work. 17. LIABILITY; COVENANT NOT TO EXECUTE: 17.1 Covenant Not to Execute: Except for any judgment debt for damage resulting from Willful Action and except to the extent any judgment debt is collectible from valid insurance, and subject to the provisions of subsections 17.2, 17.3, 17.4, 17.5, and 17.6 herein, each Parry hereby extends to all other Parties, their directors, members of their governing bodies, officers, and employees, its covenant not to execute, levy or otherwise enforce a judgment obtained against any of them, including recording or effecting a judgment lien, for any direct, indirect, or consequential loss, damage, claim, cost, charge, or expense, whether or not resulting from the negligence of such Party, its directors, members of its governing bodies, officers, employees, or any other person or entity whose negligence would be imputed to such Party, from (i) the performance or non-performance of the obligations of any Party under this Agreement, other than the obligation to pay any monies which have become due under the terms of this Agreement; (ii) Operating Work directly related to the Interconnection Facilities or the Nevada Transformer Bank; (iii) the design, construction, use, or ownership of the Interconnection Facilities or the Nevada Transformer Bank. Subject to subsections 17.2, 17.3, 17.4, 17.5, and 17.6 herein, this covenant not to execute shall apply to judgments obtained in any type of claim or action, including but not limited to, claims or actions based upon contract, tort, patent, and trademark. 17.2 Collection of Insurance Proceeds: In the event any insurer providing insurance refuses to pay any judgment obtained by a Party against another Party, its directors, members of its governing bodies, officers, or employees, on account of liability referred to in subsection 17.1 herein, the Party, its directors, members of its governing bodies, officers, or employees, against whom the judgment is obtained, shall execute, at the request of the prevailing Party and in consideration 25 Western Agreement No. 06-DSR-11729 I 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 covenant given in subsection 17.1 herein, such documents as may be necessary to effect an assignment of its contractual rights against the nonpaying insurer and thereby give the prevailing Party the opportunity to enforce its judgment directly against such insurer. In no event when a judgment debt is collectible from valid insurance shall the prevailing Party execute, levy, or otherwise enforce the judgment, including recording or effecting a judgment lien, against the Party, its directors, members of its governing bodies, officers, or employees against whom the judgment was obtained. 17.3 Obligation for Work Liability Costs: Except as provided in subsections 17.4, 17.5, and 17.6 herein, Nevada shall pay its proportionate share of the cost and expenses of discharging all Work Liability imposed upon one or more of the Parties for which payment is not made by the insurer providing insurance hereunder. 17.4 Responsibility of a Party for Its Own Willful Action: Each Party shall be responsible for any damage, loss, claim, cost, charge, or expense that is not covered by insurance and that results from its own Willful Action as defined in subsection 5.3.1.1 herein. Each Party, except Western, shall indemnify and hold harmless the other Parties, their directors, members of their governing bodies, officers, and employees from any such damage, loss, claim, cost, charge, or expense. 17.5 Limitation of Recovery on Judgment Debt: Except as provided in subsection 17.4 herein, the aggregate liability of any Party to all other Parties for its own Willful Action not covered by insurance shall be determined as follows: 17.5.1 All such liability for damages, losses, claims, costs, charges or expenses of such Parry shall not exceed $500,000 per occurrence. Each Party extends to each other Party, its directors, members of its governing body, officers, and employees, its covenant not to execute, levy or otherwise enforce a 26 Western Agreement No. 06-DSR-11729 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 judgment against any of them for any such aggregate liability in excess of $500,000 per occurrence. 17.5.2 A claim based on Willful Action must be perfected by filing suit in a court of competent jurisdiction within three years after the Willful Action occurs. All claims made thereafter relating to the same Willful Action shall be barred by this subsection 17.5.2. The award to each non -willfully acting Party from each Party determined to have committed Willful Action shall be determined as follows: Each Party who successfully files suit for remuneration shall receive the lesser of (i) its final judgment awarded or settlement made; or (ii) its pro-rata share of the $500,000 maximum recovery established in subsection 17.5.1 herein, based upon the ratio of the unsatisfied portion of such Party's judgment or settlement to the total unsatisfied portion of all such judgments and settlements. 17.6 Indemnification for Claims of Customers: Except for liability resulting from Willful Action, which shall be the responsibility of the willfully acting Party and subject to subsection 17.5 herein, any Party, except Western, whose electric customer shall have a claim or bring an action against any other Party for any death, injury, loss or damage arising out of or in connection with electric service to such customer and caused by the operation or failure of operation of the Mead 500-kV Substation, any interconnection facilities connected thereto or any portion thereof, shall indemnify and hold harmless such other Party, its directors, members of its governing bodies, officers, and employees, from and against any liability for such claim for death, injury, loss or damage. 17.7 No Relief of Insurer from Liability: The provisions of this Section 17 shall not be construed so as to relieve any insurer of its obligation to pay any insurance proceeds in accordance with the terms and conditions of valid and collectible policies of insurance. 27 Western Agreement No. 06-DSR- 11729 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 17.8 Western Subject to Tort Claims Act: The provisions of this Section shall not be construed as enlarging, diminishing, or changing in any way the rights, duties, and obligations of Western under Federal law, including but not limited to the Federal Tort Claims Act of 1946, 60 Stat. 842, as amended. 118. AUDITS: 15.1 Right to Audit: Nevada shall be entitled to conduct an annual audit pursuant to the provisions of this Agreement. Any audit undertaken by Nevada or by its representatives shall: (i) be conducted only during the Operation Manager's normal business hours; (ii) be performed in conformance with generally accepted auditing standards; and (iii) be limited to the three (3) year period following the end of the calendar year in which the costs being audited were invoiced. 18.2 Retention of Records and Audits: The Operation Manager shall maintain adequate financial records and documentation to support all costs invoiced to Nevada. The Operation Manager shall maintain such financial records and documentation for a period of at least three (3) years following the end of the fiscal year in which the costs were invoiced. Such financial records and documentation and other pertinent information shall be made available upon request to the auditors or audit representatives of Nevada. Such information shall be made available during normal business hours of the Operation Manager's staff, which maintains such records and documentation. The auditors shall perform such audits in conformance with generally accepted auditing standards. 18.3 Costs of Audits: All costs and expenses of an audit, including the costs incurred by the Operation Manager to accommodate such audit, shall be the responsibility of Nevada. 18.4 Notice of Audit Results and Adjustments: Upon completion of each audit conducted pursuant to this Agreement, the audit results shall promptly be made available by Nevada to the Operation Manager, and the Operation Manager shall be notified in writing of any exception taken as a result of the audit to the costs 28 Western Agreement No. 06-DSR-11729 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 charged. The Operation Manager shall promptly review all exceptions. If such exception reflects an error in the billing, the Fiscal Agent shall credit or bill Nevada, as appropriate, for the amount of such exception, without any interest. 18.5 Audit Reports: The results of audits shall promptly be made available to all Parties. 19. DEFAULTS; Each Party shall perform all of its duties, obligations, and cost responsibilities pursuant to this Agreement. Any payment not made when due, or any failure to perform the duties and obligations agreed to herein shall constitute a default under this Agreement. The Fiscal Agent shall give written notice of any payment default and cure to each of the Parties. 19.1 Performance Default: Upon a default by Nevada, other than a failure to pay any obligation(s) due under this Agreement, the Operation Manager shall, as soon as practicable, give written notice of such default to each of the Parties. Upon a default by the Operation Manager, any other Party not in default, as soon as practicable, shall give written notice of such default to the Operation Manager and to each of the Parties. 19.2 Payment Default: Failure by Nevada to pay or cause to be paid any obligation(s) due under this Agreement shall constitute a default. The Fiscal Agent shall, as soon as practicable, give written notice of such default to each of the Parties. Upon cure of such default by Nevada, the Fiscal Agent shall notify each of the Parties of such cure. The Fiscal Agent shall also give written notice of both default and cure to each MPP Participant. 19.3 Default Remedies: 19.3.1 If the default is not cured within thirty (30) calendar days after the giving of notice of default pursuant to subsection 19.1 or 19.2 herein, the Operation Manager, unless otherwise directed by the E&O Committee, shall: (i) discontinue any of the services provided or made available hereunder; (ii) suspend any right granted pursuant to Section 6 herein; and 29 Western Agreement No. 06-DSR-11729 I (iii) refuse to resume any such discontinued service and to restore any 2 such suspended right until such default is cured. Such discontinuance of 3 service or suspension of rights by the Operation Manager shall not act to 4 relieve Nevada of any of its duties or obligations under this Agreement. 5 19.3.2 Except as expressly limited by this Agreement, in the event Nevada is in 6 default, the Operation Manager may without further notice exercise any 7 rights and remedies provided herein or otherwise available at law or in 8 equity, including the right to terminate this Agreement upon giving notice 9 to Nevada of intent to terminate and the filing at FERC of a notice of 10 termination for the. Agreement, which notice of termination must be 11 accepted for filing by FERC. 12 19.4 Temporary Use of RiAts of Interconnection Facilities and Nevada 13 Transformer Bank for Payment Default: In the event of a payment default by 14 Nevada, pursuant to subsection 19.2 herein, and the discontinuance of the use of 15 the Interconnection Facilities and the Nevada Transformer Bank, pursuant to 16 subsection 19.2 herein, Nevada's rights and interests under this Contract, 17 including without limitation the right to schedule Power and Energy with respect 18 to the Interconnection Facilities and the Nevada Transformer Bank, may be 19 temporarily used by the MPP Participants as set forth in this subsection 19.4. 20 Subject to the sale, transfer, disposal, or cure of the default, the MPP Participants 21 shall be entitled to use a pro-rata share, based upon their ownership in the Joint 22 Ownership Agreement, of Nevada's rights and interests under this Agreement for 23 the period beginning from the date of such discontinuance of use by Nevada and 24 continuing for the duration of the default. 25 19.5 Cure of Default: In the event of a default by a Party in any of the terms and 26 conditions of this Agreement and the giving of notice of default as provided in 27 subsection 19.1 or 19.2 herein, the defaulting Party shall take all steps necessary 28 to cure such default as promptly and completely as possible. 30 Western Agreement No. 06-DSR-11729 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 19.6 Right to Legal Action: Any Party may bring any suit, action, or proceeding at law or in equity as may be necessary or appropriate to enforce any covenant, agreement, or obligation under this Agreement. 20. UNCONTROLLABLE FORCES: No Party shall be considered to be in default in the performance of its obligations hereunder, other than obligations of Nevada to make payment of invoices rendered hereunder, when a failure of performance shall be due to an Uncontrollable Force. The term "Uncontrollable Force" shall mean any cause beyond the control of the Party affected, including but not restricted to flood, earthquake, storm, volcanic eruption, geohydrologic subsidence, fire, lightning or other acts of God, radioactive contamination, failure of or threat of failure of facilities, epidemic, war, riot, civil disturbance or disobedience, labor dispute, labor or material shortage, sabotage, subversion, governmental priorities, change in applicable law or regulations, restraint by court order or public authority, and action or non -action by, or inability to obtain the necessary authorizations or approvals from, any governmental agency or authority, 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. Nothing' contained herein shall be construed so as to require a Party to settle any strike or labor dispute in which it may be involved. Any Party rendered unable to fulfill any of its obligations hereunder by reason of an Uncontrollable Force shall give prompt written notice of such fact to the other Parties and shall exercise due diligence to remove such inability with all reasonable dispatch. 21. RELATIONSHIP OF THE PARTIES: The covenants, obligations, and liabilities of the Parties are intended to be several and not joint or collective and nothing herein contained shall ever be construed to create an association, joint venture, trust, or partnership or to impose a trust or partnership covenant, obligation, or liability on or with regard to any one or more of the Parties. Each Party shall be individually responsible for its own covenants, obligations, and liabilities as herein provided. No Party or group of Parties shall be under the control of nor shall be deemed to control any other Party or the 31 Western Agreement No. 06-DSR-11729 J 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 Parties'as a group. No Party shall be the agent of nor have a right or power to bind any other Party without its express written consent, except as expressly provided in this Agreement. The relationship among the MPP Owners, their respective rights, including property rights, and obligations, including payment obligations, hereunder, shall be as provided pursuant to the MPP agreements. 22. GOVERNING LAW AND VENUE: This Agreement shall be interpreted, governed by, and construed under the laws of the State of Arizona as if executed and to be performed wholly within the State of Arizona. Notwithstanding the foregoing, insofar as the rights or obligations of Western are concerned, applicable Federal law shall be controlling. 23. SUCCESSORS AND ASSIGNS: 23.1 Conditions to Assignment: This Agreement may be assigned by Nevada only with the written consent of the other Parties; provided, that Nevada may assign this Agreement without the consent of the other Parties to any affiliate of Nevada with an equal or greater credit rating and with the legal authority and operational ability to satisfy the obligations of Nevada under this Agreement. In addition and subject to any other agreement between the MPP Participants, each MPP Participant may assign their own rights and obligations under this Agreement without the consent of Nevada; provided, that such assignment shall not result in any changes in the rights, obligations, responsibilities, or benefits enjoyed by Nevada under this Agreement. Any attempted assignment that violates this subsection 23.1 is void and ineffective. Any assignment under this Agreement shall not relieve a. Party of its obligations, unless and until the requirements of subsection 23.3 are satisfied, nor shall a Party's obligations be enlarged, in whole or in part, by reason thereof. Where required, consent to assignment will not be unreasonably withheld, conditioned, or delayed. 23.2 Binding Upon Successors: This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. 32 Western Agreement No. 06-DSR-11729 1 23.3 Conditions of Release from Further Obligations: No assignment or transfer of 2 this Agreement or any interest hereunder shall relieve the assigning or transferring 3 Party from full liability or financial responsibility for performance under this 4 Agreement, unless and until: (i) all other Parties shall consent in writing thereto, 5 which consent shall not be unreasonably withheld or delayed; and (ii) the assignee 6 or transferee shall agree in writing to assume all such obligations and duties of the 7 assigning or transferring Party hereunder and shall take or acquire such interest 8 subject to the terms and conditions of this Agreement. 9 24. NONDEDICATION OF FACILITIES: Except as expressly provided herein, each 10 Party does not intend to dedicate its properties or facilities, or any part thereof, to any 11 other Party, to the customers of any Party, or to the public and nothing in this Agreement 12 shall be construed as constituting a dedication. 13 25. REGULATORY APPROVALS: 14 25.1 Approvals: The Parties agree to cooperate to obtain any state or federal 15 regulatory approvals necessary for the full participation of any Party in the rights 16 and obligations of this Agreement. Each Party hereto covenants that if shall 17 support the terms and conditions of this Agreement in any hearings before FERC 18 or any other competent regulatory body to which this Agreement may be subject. 19 25.2 Fees: Any MPP Participant required to file this Agreement with FERC, or with 20 any other regulatory body having jurisdiction, shall submit a written invoice of 21 any filing fee incurred as a result of the initial filing of this Agreement to the 22 Fiscal Agent. The Fiscal Agent shall add such fee to the next succeeding invoice 23 in accordance with subsection 13.2 herein. Within. twenty (20) calendar days after 24 receipt of funds therefore, the Fiscal Agent shall credit such filing fee(s) to the 25 appropriate MPP Participant. 26 26. NOTICES: 27 26.1 Recipients of Notices: Except as set forth in subsection 26.2 herein, any legal 28 notice, demand, or communication provided for in this Agreement shall be in 33 Western Agreement No. 06-DSR-11729 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 28 127 writing and shall be served, given, delivered in person, or sent by registered or certified mail, postage prepaid, to the persons specified in Exhibit H. 26.2 Routine Communications: Communications of a routine nature related to matters herein shall be given in such manner as the representatives of the Parties shall arrange. 26.3 Exhibits: Revised exhibits shall be distributed by the Operation Manager to the Parties in writing or electronically, as agreed to by the Parties. 26.4 Change of Designations of Recipients: Any Party may, at any time, by written notice to all other Parties, designate different or additional persons or different addresses for the giving of notices hereunder. DAMAGE OR DESTRUCTION: 27.1 Mead 500-kV Substation: In the event any facilities of the Mead 500-kV Substation are damaged or destroyed and the MPP Owners do not repair or reconstruct such facilities, the MPP Owners agree to negotiate in good faith with Nevada in regard to the repair, reconstruction, or replacement of all or part of such facilities. 27.2 Interconnection Facilities: Subject to subsection 27.1 herein, if the Interconnection Facilities and/or the Nevada Transformer Bank are damaged or destroyed, the Operation Manager shall: (i) to the extent necessary apply the proceeds of any insurance paid on account thereof to the cost of repair, replacement, renovation, and placing in service of such Interconnection Facilities and/or the Nevada Transformer Bank; (ii) repair or reconstruct such Interconnection Facilities and/or the -Nevada Transformer Bank; and (iii) credit or pay to Nevada its applicable share of any excess insurance proceeds for the Interconnection Facilities and/or the Nevada Transformer Bank. To the extent that the proceeds of any insurance or any self-insurance funds applied to the repair, replacement, renovation, and placing in service thereof are insufficient for such purpose, Nevada shall pay its applicable share of such deficiency; provided, 34 Western Agreement No. 06-DSR-11729 1 2 3 4 5 6 7 8 9 10 11 12 13 j 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 however, if the Mead 500-kV Substation has also been materially damaged or destroyed, a decision of the MPP Owners to repair or reconstruct the Interconnection Facilities and/or the Nevada Transformer Bank shall be subject to a decision of the MPP Participants to repair or reconstruct the Mead 500-kV Substation. 28. GENERAL PROVISIONS: 28.1 Entire Agreement: This Agreement shall constitute the entire agreement between the Parties and shall supersede all prior proposals, representations, negotiations, or letters, whether written or oral. In the event any conflict affecting the Parties arises between the terms and conditions of this Agreement and the terms and conditions of the Operation Agreement, the terms and conditions of the Operation Agreement shall govern. 28.2 Nonuartitionment: Each Party hereto waives any rights which it may have to partition any component of the Interconnection Facilities or this Agreement, whether by partition in kind or by sale and division of the proceeds, and shall not resort to any action in law or in equity to partition the same. Each Party waives the benefits of all laws that may now or hereafter authorize such partition for the term of this Agreement or for such lesser period as may be required under applicable law. 28.3 No Implied Obligations: The Parties shall not be bound by or be liable for any statement, representation, promise, inducement, or understanding of any kind relating to the subject matter herein not set forth in this Agreement. 28.4 Exhibits Made a Part of the Agreement: Exhibits A, B, C, D, E, F, G, and H attached hereto are by this reference made a part of this Agreement. The initial exhibits to this Agreement, as they may be amended or revised from time to time, are attached to this Agreement and are incorporated by reference as if herein fully set forth. New exhibits may be added in the future, as required, and shall be made part of this Agreement by mutual written agreement of the Parties. 35 Western Agreement No. 06-DSR-11729 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 28.5 Amendments and Revision of Exhibits: This Agreement may only be modified by an amendment signed by all Parties, except that revisions to Exhibits C, E, F, and H will not require signature by the Parties. Any required and necessary, revisions of the exhibits shall be made by the Operation Manager, and such revised exhibits shall be subject to the approval of the E&O Committee and/or the Management Committee, as applicable, and Nevada. Such revised exhibits shall be sent to each Party in accordance with subsection 26.3 herein. 28.6 Severability: In the event that any of the terms, covenants or conditions of this Agreement, or the application of any such term, covenant or condition, shall be held invalid as to any person or circumstance by any court having jurisdiction in the premises, all other terms, covenants or conditions of this Agreement and their application shall not be affected thereby, but shall remain in force and effect. 28.7 No Third Party Rights Other Than Specified: Except as otherwise specifically provided in this Agreement, the Parties do not intend to create rights in or to grant. remedies to any third party as a beneficiary of this Agreement or of any duty, covenant, obligation or undertaking established herein. 28.8 No Precedence of Waiver: Any waiver at any time by any Party of its rights with respect to a default or any other matter arising in connection with this Agreement shall not be deemed a waiver with respect to any subsequent default or matter whether of a similar or different nature. 28.9 Section Headings Not Binding: Other than definitions, section headings and subsection headings in this Agreement are for convenience only and are not to be construed to define, limit, expand, interpret, or amplify the provisions of this Agreement. 28.10 Authorized Representative: Each Party by written notice to each other Party shall designate one or more Authorized Representatives authorized to act on its behalf with respect to technical and operational matters related to this Agreement. 36 Western Agreement No. 06-DSR-11729 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 Each Parry may change the designation of its Authorized Representative(s) by oral notice confirmed by written notice. 28.11 E&O Committee Meetings: As a means of permitting Nevada to participate in the coordination and exchange of information on a prompt and orderly basis in connection with matters under this Agreement, Nevada shall be entitled to have a non -voting representative attend any meeting of the E&O Committee. If the E&O Committee, acting in good faith, elects to go into executive session for any reason during. any meeting of the E&O Committee, Nevada shall not be allowed to attend such executive session. The E&O Committee secretary shall provide timely notification of the E&O Committee meetings to Nevada's Authorized Representative(s). 28.12 Western's Contingent Upon Authorization: In order to receive and expend funds advanced from any Party necessary for the continued performance of the obligations of Western under this Agreement, additional authorization may be required. In case such authorization is not received, the Parties hereby release Western from those contractual obligations and from all liability due to the lack of such authorization. 29. SURVIVAL OF OBLIGATIONS AND LIABILITIES: The termination of this Agreement shall not relieve any Party of its obligations or duties under this Agreement incurred prior to termination of this Agreement or which must be fulfilled after the date of termination of this Agreement. 30. EXECUTION BY COUNTERPARTS: This Agreement may be executed in any number of counterparts and, upon execution and delivery by each Party, the executed and delivered counterparts together shall have the same force and effect as an original instrument as if all Parties had signed the same instrument. Any signature page of this Agreement may be detached from any counterpart of this Agreement without impairing the legal effect of any signatures thereon, and may be attached to another counterpart of 37 Western Agreement No. 06-DSR-11729 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 this Agreement identical in form hereto, but having attached to it one or more signature pages. 31. SIGNATURE CLAUSE: The signatories hereto represent that they have been appropriately authorized to enter into this Mead -Phoenix Project Interconnection and Operation Agreement with Nevada Power Company at Mead 500-kV Substation on behalf of the Party for whom each signs. ARIZONA PUBLIC SERVICE COMPANY SIGNATURE _ NAME TITLE DATE SIGNED M-S-R PUBLIC POWER AGENCY SIGNATURE TITLE ATTEST: NAME TITLE DATE SIGNED SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT SIGNATURE _ NAME TITLE DATE SIGNED 38 Western Agreement No. 06-DSR-11729 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 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST - MEMBERS) SIGNATURE TITLE ATTEST:. NAME TITLE DATE SIGNED SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST -WESTERN) SIGNATURE TITLE ATTEST: NAME TITLE DATE SIGNED CITY OF VERNON SIGNATURE TITLE ATTEST: NAME TITLE DATE SIGNED 39 Western Agreement No. 06-DSR-11729 1 2 3 4 5 6 7 8 9 10r 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NEVADA POWER COMPANY SIGNATURE NAME TITLE DATE SIGNED WESTERN AREA POWER ADMINISTRATION, as MPP Operation Manager SIGNATURE _ NAME. TITLE DATE SIGNED 40 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit A Agreement No. 06-DSR-11729 Nevada Power Company INTERCONNECTION FACILITIES AND SINGLE LINE DRAWING OF THE MEAD 500-KV SUBSTATION 1. This Exhibit A, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, and shall remain in effect until superseded by another Exhibit A; provided, this Exhibit A or any superseding Exhibit A shall terminate by the expiration of the Agreement. The Interconnection Facilities shall include, but not be limited to, the items described below: 2.1 Transmission line span from the dead-end structure for the Harry Allen Line outside the fence of the Mead 500-kV Substation to the connection at the 500-kV bus; 2.2 Two 500-kV bays, including bus work, five (5) circuit breakers, nine (9) disconnect switches, one (1) disconnect switch with ground blade, and other associated equipment; 2.3 Cable from the 500-kV bus to the connection to the high side of the Nevada Transformer Bank in the Mead 500-kV Substation; 2.4 Cable from the low side of the Nevada Transformer Bank to the connection to the turning structure before the 230-kV bus in the Mead 230-kV Substation; 2.5 Insulators, equipment bus interconnections, conductor, and associated hardware; 2.6 1 Protective equipment, metering, and control, monitoring, and communication equipment; and 2.7 Site preparation, which consists of foundations, conduit, and grounding. 3. A single line drawing of the Mead 500-kV Substation is shown on Page 2 of this Exhibit A. 4. This Exhibit A to Agreement No. 06-DSR-11729 may be modified in accordance with subsection 28.5 of this Agreement. A-1 Western Agreement No. 06-DSR-11729 aH 0 x _ t ,N. Mead -Phoenix Project Exhibit A Agreement No. 06-DSR-11729 Nevada Power Company 4J, A-2 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit B Agreement No. 06-DSR-11729 Nevada Power Company MEAD 500-KV SUBSTATION COMMON A I IT ST 1. This Exhibit B, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, and shall remain in effect until superseded by another Exhibit B; provided, this Exhibit B or any superseding Exhibit B shall terminate by the expiration of the Agreement. 2. Common Facilities and their associated costs at the Mead 500-kV Substation are identified as follows: Common Facilities 1 Cost as of December 2006 Land & Land Rights $890,000 Structures and Improvements $1,770,000 Roads 20,000 Overhead Conductor 180,000 Station Service 334,000 Meter/ Relay / Control 140,000 Digital Fault Recorder 53,000 DC System 14,000 Communications 178,000 Subtotal $2,689,000 Administrative and General Expenses 43,024 ($2,689,000 X 1.6%) Mead 500-kV Substation $3,622,024 3. This Exhibit B to Agreement No. 06-DSR-11729 may be modified in accordance with subsection 28.5 of this Agreement. 1 These are for the Mead 500-kV Substation, excluding the MPP Transformer Bank, installed as of April 1996. B-1 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit C Agreement No. 06-DSR-11729 Nevada Power Company COST RESPONSIBILITY RATIO (CRR) 1= This Exhibit C, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, and shall remain in effect until superseded by another Exhibit C; provided, this Exhibit C or any superseding Exhibit C shall terminate by the expiration of the Agreement. 2, Computation of the CRR for the Mead 500-kV Substation after Nevada's interconnections: CRR = B = 2 = 2 = 0.40 A+B+Z 3+2+0 5 Where: A = Connections used by MPP 3.0 B = Connections used by Nevada 2.0 Z = Connections used by Others 0.0 Total Number of Substation Connections 5.0 3. Connections at the Mead 500-kV Substation: MPP Nevada Others Harry Allen -Mead 500-kV 0.0 1.0 0.0 Mead -Marketplace 500-kV 1.0 0.0 0.0 Westwing-Mead 500-kV 1.0 0.0 0.0 MPP Transformer Bank 1.0 0.0 0.0 Nevada Transformer Bank 0.0 1.0 0.0 Total Connections by Entity 3.0 2.0 0.0 Total Connections 5.0 4. The CRR shall be applied to the one-time payment pursuant to Exhibit D. 5. The CRR shall be applied to the costs of Operating Work after the Date of Interconnection Completion of the Harry Allen Line. 6. This Exhibit C to Agreement No. 06-DSR-11729 may be modified in accordance with subsection 28.5 of this Agreement. C-1 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit D Agreement No. 06-DSR-11729 Nevada Power Company CALCULATION OF PAYMENT FOR USE OF COMMON FACILITIES FOR TERMINATION OF THE INTERCONNECTIONS 1. This Exhibit D, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, and shall remain in effect until superseded by another Exhibit D; provided, this Exhibit D or any superseding Exhibit D shall terminate by the expiration of the Agreement. 2. The one-time payment to be made by Nevada for use of Common Facilities is calculated as follows: P = OIC x CRR = ($3,622,024) x (0.4) = $1,448,810 Where: P = Payment by Nevada for use of Common Facilities OIC = Original installed cost of Common Facilities prior to Nevada's two (2) interconnections, as shown in Exhibit B. CRR = Nevada's CRR calculated pursuant to Exhibit C. 3. This Exhibit D to Agreement No. 06-DSR-11729 may be modified in accordance with subsection 28.5 of this Agreement. D-1 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit E Agreement No. 06-DSR-11729 Nevada Power Company ESTIMATED INCOME TAX COST COMPONENT aTCC) COMPOSITE RATE 1. This Exhibit E, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, N 3. and shall remain in effect until superseded by another Exhibit E; provided, this Exhibit E or any superseding Exhibit E shall terminate by the expiration of the Agreement. The composite percentage is calculated by multiplying the MPP Participant's ownership percentage for the MPP Transformer Bank, in accordance with the Joint Ownership Agreement, times such MPP Participant's ITCC percentage. MPP Participant Ownership % ITCC % Composite % Arizona 19.0476 31 6.10 This Exhibit E to Agreement No. 06-DSR-11729 may be modified in accordance with subsection 28.5 of this Agreement. E-1 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit F Agreement No. 06-DSR-11729 Nevada Power Company INTERCONNECTION CHARGE FOR NEVADA TRANSFORMER BANK AT MEAD 230-KV SUBSTATION 1. This Exhibit F, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, and shall remain in effect until superseded by another Exhibit F; provided, this Exhibit F or any superseding Exhibit F shall terminate by the expiration of the Agreement. 2. The cost computed in this Exhibit F and the resulting monthly charge is subject to periodic revision by Western. Contributions in aid of construction for the Mead 230-kV Substation interconnection facilities shall not be used as a part of the capitalized costs for calculating the interconnection charge. The charge is computed as follows: 2.1 ESTIMATED ANNUAL AMORTIZATION AND INTEREST COSTS FOR MEAD 230-KV SUBSTATION 2.1.1 Amortization and Interest 1 $1,646,972.18 2.1.2 Annual Replacement 1,841,141.05 2.1.3 Capital Improvement 2 0.00 2.1.4 Total Estimated Annual Amortization and Replacement Costs $3,488,113.23 (sum of Sections 2.1.1, 2.1.2, and 2.1.3) 2.2 ESTIMATED OPERATION AND MAINTENANCE (O&M) COSTS FOR MEAD 230-KV SUBSTATION 2.2.1 O&M Costs $1,201,411.85 2.2.2 Total Estimated Annual Costs at Mead 230-kV Substation (sum of Sections 2.1.4 and 2.2.1) $4.689.525.08. ' Fixed interest rates established by Treasury. 2 Not in use at this time. F-1 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit F Agreement No. 06-DSR-11729 Nevada Power Company 2.3 TOTAL ESTIMATED ANNUAL MEAD 230-KV SUBSTATION COSTS 2.3.1 Number of Designated Functions 2.3.2 Annual Cost per Function ($4,689,525.08 - 32) 32 $146,547.66 3. ANNUAL FUNCTION CHARGE ALLOCATED TO NEVADA FOR THE NEVADA TRANSFORMER BANK 3.1 Number of Functions Used 1 1/3 3.2 Annual Function Charge for Nevada (product of Section 3.1 x2Section 2.3.2) (1 1/3 Functions x $146,547.66 per Function) $195.392.00 3.3 Monthly Function Charge is 11 Months at $16,282.67 12th Month at $16,282.63 4. ACTUAL COST ADJUSTMENT 3 4.1 Underbilled / (Overbilled) by Western in previous Fiscal Year $0 4.2 Total Actual Cost Adjustment $Q 4.3 Monthly Adjustment for July 1, 2006 to June 30, 2007 ($0 / 12 Months) $0 5. This Exhibit F to Agreement No. 06-DSR-11729 may be modified in accordance with subsection 28.5 of this Agreement. "Mead 230-kV Substation now has 32 designated functions based on interconnected transmission lines and transformers. Page F-3 contains a listing of the 32 designated functions. 2 The number of functions is rounded to four (4) decimals, i.e. 1,3333. 3 Actual Cost Adjustment for Nevada prepared in accordance with the MPP budgeting process. F-2 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit F Agreement No. 06-DSR-11729 Nevada Power Company NUMBER OF DESIGNATED FUNCTIONS FOR MEAD SUBSTATION'S 230-KV SWITCHYARD As of December 31, 2006 Equipment Nos. Contractor Function Number of j 9082 & 9186 LADWP McCullough -Mead No. 1 _Function 1 9282 & 9186 Western Hoover -Mead No. 6 1 8682 & 8786 LADWP McCullough -Mead No. 2 1 8882 & 8786 Western Hoover -Mead No. 7 1 8282 & 8386 Western Hoover -Mead No. 8 1 8482 & 8386 LADWP Mead-Victorville 287-kV 1 8182 Bus Tie 0 7882 & 7986 NPC 60% & CBC 40% Mead 69-kV, Transformer KW17B 1 1/3 7482 & 7586 SCE Eldorado -Mead No. 1 1 7682 & 7586 Western (Leased Hoover -Mead No. 2 1 7082 & 7186 Western (Leased Hoover -Mead No. 3 1 7282 & 7186 SCE Eldorado -Mead No. 2 1 6682 & 6786 VEA Mead-Pahrump 1 1/3 6282 & 6386 Western Hoover -Mead No. 4 1 6482 & 6386 MWD East Canino -Mead 1 5882 & 5986 MWD Mead -West Camino 1 6082 & 5986 Western Hoover -Mead No. 5 1 5682 & 5586 NPC Equestrian -Mead No. 1 1 1/3 5082 & 5186 NPC 82% & CRC 18% Mead 69-kV, Transformer KW 17A 1 5282 & 5186 NPC Greenway-Mead 1 4282 & 4386 NPC Decatur -Mead 1 4482 & 4386 Western Henderson -Mead No. 2 1 4182 Bus Tie 0 3482 & 3586 CRC/SNWA Eastside-Mead 1 1/3 3082 & 3186 NPC Equestrian -Mead No. 2 1 3282 & 3186 CRC/SNWA Mead -Newport 1 2682 & 2786 MPP Mead 500-kV, Transformer KT1A 1 1/3 2282 & 2386 NPC-MPP Mead 500-kV, Transformer KT2A 1 1/3 1882 & 1986 Western Liberty -Mead 345-kV 1 2082 & 1986 Western Henderson -Mead No. 1 1 1482 & 1586 Western Hoover -'Mead No. 1 1 1682 & 1586 Western Davis -Mead 1 TOTAL NUMBER OF FUNCTIONS 32 Legend: CBC City of Boulder City, Nevada CRC State of Nevada's Colorado River Commission of Nevada LADWP City of Los Angeles, Department of Water and Power MPP Mead -Phoenix Project MWD Metropolitan Water District of Southern California NPC Nevada Power Company SCE Southern California Edison SNWA Southern Nevada Water Association VEA Valley Electric Association Western Western Area Power Administration, Desert Southwest Region F-3 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit G Agreement No. 06-DSR-11729 Nevada Power Company FACILITIES USE CHARGE FOR OPERATION OF PERKINS PHASE -SHIFTING TRANSFORMERS l . This Exhibit G, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, and shall remain in effect until superseded by another Exhibit G; provided, this Exhibit G or any superseding Exhibit G shall terminate by the expiration of the Agreement. 2. The costs in this Exhibit G are subject to periodic revision by the Fiscal Agent, as appropriate. 3. Expenses related to the use of the Perkins PSTs, with any such use to be determined by the Operation Manager, to resolve specific reliability issues under the Operational Mitigation Procedure set forth in Section 7 of the MOSI, will be allocated between Nevada and the MPP Participants. Each deployment of the Perkins PSTs pursuant to subsections 7.3.1 and/or 7.3.3 of the MOSI shall be billed at a charge of $5,000, plus $300 per hour. Charges to Nevada and the MPP Participants for the use of the Perkins PSTs under such subsections 7.3.1 and 7.3.3 shall be based on their proportional contributions to the reliability issue and curtailments made. 4. This Exhibit G to Agreement No. 06-DSR-11729 may be modified in accordance with subsection 28.5 of this Agreement. G-1 Western Agreement No. 06-DSR- 11729 Mead -Phoenix Project Exhibit H Agreement No. 06-DSR-11729 Nevada Power Company RECIPIENTS OF NOTICES 1. This Exhibit H, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, and shall remain in effect until superseded by another Exhibit H;provided, this Exhibit H or any superseding Exhibit H shall terminate by the expiration of the Agreement. 2. The addresses for notices are as follows. Arizona Public Service Company c/o Interconnection Development Manager If by mail: P.O. Box 53999, M.S. 2259 Phoenix, Arizona 85072-3999 If by person: 400 North Fifth Street Phoenix, Arizona 85004 Nevada Power Company c/o Assistant General Counsel If by mail: P.O. Box 10100-M/S S4A35 Reno, Nevada 89520-0024 If by person: 6100 Neil Road-M/S S4A35 Reno, Nevada 89511 Salt River Project Agricultural Improvement and Power District c/o Secretary If by mail: P.O. Box 52025 Phoenix, Arizona 85072-2025 If by person: 1521 North Project Drive Tempe, Arizona 85281 Southern California Public Power Authority c/o Executive Director If by mail: 225 South Lake Avenue, Suite 1250 Pasadena, California 91101 If by person: 225 South Lake Avenue, Suite 1250 Pasadena, California 91101 H-1 Western Agreement No. 06-DSR- 11729 Mead -Phoenix Project Exhibit H Agreement No. 06-DSR-11729 Nevada Power Company M-S-R Public Power Agency c/o General Manager If by mail: P.O. Box 4060 Modesto, California 95352 If by person: 1231 Eleventh Street Modesto, California 95354 City of Vernon c/o Director of Light and Power If by mail: 4305 Santa Fe Avenue Vernon, California 90058 If by person: 4305 Santa Fe Avenue Vernon, California 90058 Department of Energy Western Area Power Administration c/o Regional Manager If by mail: P.O. Box 6457 Phoenix, Arizona 85005-6457 If by person: 615 South 43rd Avenue Phoenix, Arizona 85009 3, This Exhibit H to Agreement No. 06-DSR-11729 may be modified in accordance with subsection 28.5 of this Agreement. H-2 Western Agreement No. 06-DSR-11729 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 MEAD -PHOENIX PROJECT INTERCONNECTION AND OPERATION AGREEMENT WITH NEVADA POWER COMPANY AT MEAD 500-KV SUBSTATION METERING, OPERATING, AND SCHEDULING INSTRUCTIONS 1. PURPOSE These Metering, Operating, and Scheduling Instructions (MOSI) are written to implement the requirement for scheduling, billing, metering, loss recovery, and power accounting instruction relating to the interconnections of Nevada Power Company's (Nevada) 500-kV transmission line from Nevada's Harry Allen Substation to the Mead - Phoenix Project's (MPP) Mead 500-kV Substation (Harry Allen Line) and a 500/230-kV transformer bank (Nevada Transformer Bank) at the Mead 500-kV Substation, as described in the Mead -Phoenix Project Interconnection and Operation Agreement with Nevada Power Company at Mead 500-kV Substation, Western Area Power Administration (Western) Agreement No. 06-DSR-11729 (Agreement). 2. TERM This MOSI will remain in effect through the life of the Agreement or until superseded by a revised MOSI in accordance with Section 10 of the Agreement. 3. DEFINITIONS The following terms, in singular or plural form, will be used to identify the roles, entities, personnel, interchange schedules, power dispatching, scheduling, billing, metering, loss recovery, and accounting processes associated with the Agreement as applied in this MOSI. 3.1 Authorized Representative - The person or singular entity responsible for providing and modifying a Nevada or MPP Participant's Preschedule and/or Real Time Schedule. 3.2 Automatic Generation Control (AGC) - Equipment that automatically adjusts a balancing authority's generation to maintain its interchange schedule. 3.3 Balancina Authority - A balancing authority is an electric system or systems, bound by interconnection metering and telemetry, to which a common AGC scheme is applied in order to: (i) match, at all times, the power output of the generators within the balancing authority and energy and capacity imported from resources outside the balancing authority with the load within the balancing authority and exports from the balancing authority; (ii) maintain scheduled interchange of energy and capacity with other balancing authorities, in accordance with Western Electricity Coordinating Council (WECC) control performance criteria and scheduling guidelines; (iii) maintain the frequency of the WECC interconnection within reasonable limits in accordance with WECC guidelines; and (iv) provide sufficient generating capacity to maintain operating reserves in Page 1 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 accordance with WECC requirements. For the purposes of this MOSI, WALC and Nevada are the only Balancing Authorities. 3.4 Balancing Authority Net Schedule or Net(s) - The algebraic sum of all scheduled transactions across a given transmission path or between balancing authorities for a given period of time. 3.5 Curtailment - A reduction in the scheduled capacity or energy delivery. 3.6 Dispatcher(s) - The person responsible for monitoring and control of a power system through power scheduling, transmission, and generation control as defined by WECC operating guidelines. 3.7 Emergency — As defined in the effective WECC EMERGENCY OPERATING RELIABILITY CRITERIA (SECTION III of the WECC MINIMUM OPERATING RELIABILITY CRITERIA) document or successor document. 3.8 E-Tags - As used in this MOSI, an electronic request for the movement of energy over a prescribed physical path for a given duration and for a given energy profile(s). The physical path consists of one generation entity, one load entity, and one or more transmission entities. E-Tag(s) are transmitted via a computer - to -computer, point-to-point method using protocols defined in the latest North American Electric Reliability Council (NERC) Electronic Tagging Functional Specification document or successor document. 3.9 FERC - The Federal Energy Regulatory Commission or any successor agency. 3.10 Flow Management System (FMS) — A software SCADA based application that monitors and provides the WALC Dispatcher a tool to manage and control the performance of the Mead 500-kV Substation. 3.11 Harry Allen Line - Nevada's 500-kV transmission line from Nevada's Harry Allen 500-kV Substation to MPP's Mead 500-kV Substation. 3.12 Interchange Confirmation — The process of verifying the accuracy of an Interchange Schedule between all the entities to the transaction prior to its implementation. In this MOSI an Interchange Confirmation is referred to as a Confirmed Schedule. 3.13 Interchange Implementation — The physical initiation of the Interchange Schedule by entering the details of the negotiated schedule into an associated balancing authority energy management system(s). In this MOSI an Interchange Implementation is referred to as an Implemented Schedule(s). 3.14 Interchange Schedule - A plan or arrangement for an interchange transaction. In this MOSI Interchange Schedules represent hourly power and associated Page 2 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 energy schedules exchanged between Balancing Authority boundaries associated with Nevada and the MPP Participants. Interchange Schedules consist of two primary types as defined in subsections 3.14.1 and 3.14.2. 3.14.1 Standard 3-Party Schedule - Represents an Interchange Schedule via E-Tag(s) involving a receiving and delivering balancing authority. A Standard 3-Party Schedule is referred to as a Standard Schedule in this MOSL 3.14.2 Project Nodal Transaction Schedules) (PNT) — The practice used to schedule Nevada and MPP Participant's rights of access into and out of an electrical node internal to the Operation Manager's Balancing Authority. A Project Nodal Transaction Schedule is a component of a Standard Schedule. A node refers to a MPP scheduling point of exchange involving specific MPP Participants and may include Nevada or a third party who has transmission rights at the Mead 500-kV Substation bus. 3.15 Joint Ownership Agreement - The MPP Joint Ownership Agreement, Western's Agreement No. 92-PAO- 1043 9, among the MPP Owners, as such term is defined in the Agreement, dated as of August 4, 1992, as such may be amended, supplemented, or revised from time to time, which provides for, among other things, the ownership, construction, and operation of the MPP. 3.16 Mead 500-kV Substation - A high -voltage electrical substation as defined in the Agreement. The Mead 500-kV Substation is owned by the MPP Owners in accordance with the Joint Ownership Agreement. 3.17 Mead 500-kV System - Those transmission facilities connected to the Mead 500-kV Substation bus as shown below: Marketplace Substation MPP Transformer Bank No. KT1A Harry Allen Line Mead 500-kV Substation Page 3 of 16 Perkins Switchyard Nevada Transformer Bank No. KT2A MPP-NEVADA MOST Interconnection and Operation Agreement Agreement No. 06-DSR-11729 3.17.1 Mead —Perkins 500-kV Transmission Line (owned by MPP), continuous rating of 1300 MW'. 3.17.2 Mead —Marketplace 500-kV Transmission Line (owned by MPP), continuous rating of 2600 MWI. 3.17.3 MPP Transformer Bank, 500/230-kV, No. KT1A (owned by MPP), continuous rating of 1300 MVAI. 3.17.4 Nevada Transformer Bank, 500/230-kV, No. KT2A (owned by MPP) continuous rating of 1500 MVA1. 3.17.5 Harry Allen -Mead 500-kV Transmission Line (owned by Nevada) continuous rating of2873 MWI. 3.18 MPP Balancing Authority Operator — WALC, acting as a MPP Operation Manager, who has contractual rights to confirm and implement Interchange Schedules with balancing authorities at MPP's Mead 500-kV Substation. 3.19 MPP Participants — The California Cities of Anaheim, Azusa, Banning, Burbank, Colton, Glendale, Los Angeles (DWP), Pasadena, Riverside, and Vernon; Arizona Public Service Company (APS); M-S-R Public Power Agency (M-S-R); Salt River Project (SRP); and Western Area Power Administration (Western). A MPP Participant or their Authorized Representative may establish Interchange Schedules through the MPP Balancing Authority Operator. 3.20 MPP Transformer Bank - The 500/230-kV transformer bank, No. KT1A, consisting of four (4) single-phase 500/230-kV, 433.33 MVA transformers and installed in the Mead 500-kV Substation by the MPP, which is operated and maintained in accordance with the Operation Agreement. 3.21 Net Schedule or Net(s) - The algebraic sum of all scheduled transactions across a given transmission path or between balancing authorities for a given period of time. 3.22 Nevada Balancing Authority Operator — Nevada, acting as the Harry Allen Line operator, who has contractual rights to confirm and implement Interchange Schedules for the Harry Allen Line and the Nevada Transformer Bank, or its Authorized Representative. 3.23 Nevada Transformer Bank - The 500/230-kV transformer bank, No. KT2A, consisting of four (4) single-phase 500/230-kV, 500 MVA transformers installed The continuous ratings reflect component capability and are not reflective of the scheduling capability pursuant to subsection 9.1 of this MOSI. Page 4 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 in the Mead 500-kV Substation, pursuant to the Contract for Construction of Interconnections to the Mead 500-kV Substation, Western's Contract No. 03-DSR-11594, which will be operated and maintained in accordance with the Agreement. 3.24 NERC The North American Electric Reliability Council or any successor(s). 3.25 Operation Agreement The MPP Operation Agreement, Western's Agreement No. 92-PAO-10493, among the MPP Owners and the Operation Manager, as such may be amended, supplemented, or revised from time to time. 3.26 Operation Manager - Western, or its successor, appointed pursuant to the Operation Agreement. 3.27 Point(s) of Delivery (POD) — The tie point where WALC delivers an Interchange Schedule(s) to the receiver of that energy or to another wheeling entity on behalf of Nevada or the MPP Participants. 3.28 Point(s) of Receipt (POR) — The tie point where WALC receives an Interchange Schedule(s) from the deliverer of that energy or from another wheeling entity on behalf of Nevada or the MPP Participants. 3.29 Point of Interconnection or Tie(s) — The physical tie -points where adjacent balancing authorities to the MPP are interconnected to the balancing authority of the MPP Balancing Authority Operator. 3.30 Postschedule(s) — Hourly Interchange Schedules which have been implemented by the Dispatcher that may be verified between the affected parties (i.e., Nevada, MPP Participants, and/or WALC). 3.31 Preschedule(s) — Static hourly Interchange Schedules arranged a day or more in advance for execution by the Dispatcher. 3.32 Real Time — The actual time at which a Dispatcher takes action to execute Interchange Schedules. 3.33 Real Time Schedule(s) — Interchange Implementation of hourly Interchange Schedules as performed by the Dispatcher after the Preschedule window has closed. 3.34 Scheduler(s) — The person responsible for, and authorized by, a Nevada or MPP Participant to establish and communicate Preschedules and verify Postschedules. 3.35 Transmission Provider (TP) - A Party which owns, controls, or operates the facilities used for the transmission of electric energy in interstate commerce and provides transmission service. Page 5 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 3.36 WALC - The Western Area Lower Colorado Balancing Authority, which is the balancing authority operated by Western's Desert Southwest Region. 3.37 WECC - The Western Electricity Coordinating Council or any successor organization(s). 4. SCHEDULE CONFIGURATION 4.1 Nevada Interchange Schedules may be arranged as indicated in Table 4.1. TABLE 4.1 # Points of Receipt (POR) Points of Delivery OD 1 Harry Allen Line 500-kV Mead 500-kV Substation 2 Mead 500-kV Substation Harry Allen Line 500-kV 3 Mead 500-kV Substation Mead 230-kV Substation 4 Mead 230-kV Substation Mead 500-kV Substation 4.2 PNT Configuration — PNT Schedules may be established by the MPP Participants at the Mead 500-kV Substation using MPP Participants rights for receipt and delivery sides of an electric node, in compliance with MPP component entitlements, as indicated in Tables 4.2 and 4.3. TABLE 4.2 MPP Transformer Bank, No. KT1A Entity Mead 230-kV Mead 230-kV Mead 500-kV Mead 500-kV Receipt Delivery Receipt Delive MPP Authorized Authorized Authorized Authorized Participants Nevada No Entitlement I No Entitlement No Entitlement No Entitlement TABLE 4.3 Nevada Transformer Bank, No. KT2A Mead 230-kV Mead 230-kV Mead 500-kV Mead 500-kV Entity Receipt Delivery Receipt Delivery Nevada Authorized Authorized Authorized Authorized MPP No Entitlement No Entitlement No Entitlement No Entitlement Participants 5. INTERCHANGE SCHEDULES Each Nevada Interchange Schedule must be uniquely identified to permit loss accounting and power accounting execution. All Interchange Schedules associated with the Harry Allen Line will be communicated between affected balancing authorities, MPP . Participants, and WALC as follows: Page 6 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 5.1 Nevada Schedule Obligation — Nevada desiring to establish Interchange Schedules on the Harry Allen Line shall submit E-Tag(s) detailing the POR and POD (including voltage) and shall identify all parties involved in the transaction. The WALC Scheduler and Dispatcher will accept Interchange Schedules or schedules for losses associated with the Harry Allen Line. The information to be included in the arrangement of Harry Allen Line Interchange Schedules with the WALC Scheduler and Dispatcher are as follows: 5.1.1 Interchange Scheduling on the Mead 500-kV Substation Bus - Interchange Scheduling between Nevada and any MPP Participant at the Mead 500-kV Substation bus must be arranged by such MPP Participant through its OASIS, as applicable. 5.1.2 Interchange Scheduling Between Nevada and MPP Participants - Interchange Scheduling with a MPP Participant will only be approved following identification of the MPP Participant's Transmission Provider on the associated E-Tag. Interchange Schedules not in conformance with the Agreement and the MPP Participant's component entitlements, asset forth in the Joint Ownership Agreement, will not be approved by the Operation Manager. 5.1.3 Interchange Schedule Communications - On a Preschedule or Real Time basis, the establishment or modification of Interchange Schedules will occur after a MPP Participant identifies the Point of Receipt and Point of Delivery, including voltage, and identifies all parties involved in the transaction by submitting E-Tag(s) within the NERC specified timing requirement. 5.1.4 MPP Participant and Nevada Nodal Transactions Communications - Each MPP Participant desiring to establish a PNT schedule with Nevada at the Mead 500-kV Substation shall submit Prescheduled or Real Time Schedule E-Tag(s) detailing the following information: • Balancing Authority Point of Receipt or node receipt and the Mead 500-kV node voltage; • Balancing Authority Point of Delivery or node delivery and the Mead 500-kV node voltage; • Balancing Authority Point of Receipt and Point of Delivery will be aggregated for WALC at the Mead 500-kV Substation; and • PNT Point of Delivery and Point of Receipt between the MPP Participants will be aggregated for WALC at the Mead 500-kV Substation. 5.1.5 Nevada and MPP Participant Nodal Transactions Communications Each MPP Participant desiring to establish a PNT schedule with Nevada Page 7 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 on the 500-kV side of the Nevada Transformer Bank (node) shall submit Prescheduled or Real Time Schedule E-Tag(s) detailing the following information: • Balancing Authority Point of Receipt or node receipt and the Mead 500-kV node voltage; • Balancing Authority Point of Delivery or node delivery and the Mead 230-kV node voltage; • Balancing Authority Point of Receipt and Point of Delivery will be aggregated for WALC at the Mead 500-kV Substation; and • PNT Point of Delivery and Point of Receipt between the MPP Participants will be aggregated for WALC at the Mead 500-kV Substation. 5.1.6 Identity and Use of Net Scheduled Interchange Between Nevada and WALC - The net scheduled interchange (NSI) calculations to be used between Nevada and WALC in Preschedule, Real Time, and Postschedule time periods are for confirmation or trouble shooting purposes as identified below: 5.1.6.1 NSI is the algebraic sum of interchange receipts and interchange deliveries between the Balancing Authorities. 5.1.6.2 Harry Allen Line Net is the algebraic sum of the interchange receipts and interchange deliveries between the Balancing Authorities at the Mead 500-kV Substation, the Nevada-WALC operational point of interconnection. 5.1.6.3 Mead 230/69-kV Net is the algebraic sum of the interchange receipts and interchange deliveries between the Balancing Authorities aggregating the Mead 230-kV and Mead 69-kV points of interconnection. 5.1.6.4 Nevada Transformer Bank Net is the algebraic sum of the interchange receipts and interchange deliveries transmitted through the Nevada Transformer Bank. 5.1.7 Nevada and the Operation Manager agree to adhere to all current and future NERC and WECC E-Tagging requirements for Interchange Schedules. Such Interchange Schedules shall be consistent with NERC Interchange Standards and WECC minimum operating reliability criteria, or their replacements, and NERC E-Tagging timing requirements, as may be modified from time to time. 5.2 Preschedule Exchange — Nevada and MPP Participant Interchange Schedules will be issued via E-Tags, or WECC approved backup method, by Nevada or a Page 8 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 MPP Participant to the WALC Scheduler, by 1100 hours Mountain Standard Time (MST) for the next calendar day(s), as allowed by industry protocols. Prescheduling protocol may change as dictated by industry changes through deregulation, FERC Orders, or through WECC. The industry protocols may require flexibility to utilize electronic means to Preschedule. 5.3 Preschedule Schedule Check Out Nevada and MPP Participant Interchange Schedules and Balancing Authority Net Schedules will be confirmed between the balancing authorities associated with the Nevada and MPP Participant Interchange Schedules for the next calendar day(s), as allowed by industry protocols through deregulation, FERC Orders, or through WECC. The industry protocols may require flexibility to utilize electronic means to Preschedule. 5.4 Real Time Schedule Check Out — Nevada and MPP Participant Interchange Schedules and Balancing Authority Net Schedules will be confirmed before each hour between the balancing authorities associated with the Nevada and MPP Participant Interchange Schedules as specified in current WECC operating guidelines. Any modifications to Nevada and MPP Participant Interchange .Schedules shall be done by modifying existing E-Tags or submitting new E-Tags. 5.5 Postschedule Check Out — Nevada and MPP Participant Interchange Schedules and associated Net Schedules will be verified between each affected balancing authority within seven (7) business days following execution by the Dispatchers. 5.6 Nevada and MPP Balancing Authority Operator Contacts — The WALC Dispatcher will notify Nevada and the MPP Participants of Interchange Schedules on a Real Time basis in response to declared Emergencies. 5.7 Use of Transmission - As the MPP Balancing Authority Operator, WALC will accept Nevada and MPP Participant Interchange Schedules only from Nevada and the MPP Participants. Nevada and the MPP Participants, in conformance with FERC directives, will post on their respective OASIS, if applicable, their unscheduled transmission entitlements. 6. NEVADA TRANSFORMER BANK LOSSES: The basis for transformer losses2 consists of a no-load loss and a load loss component. 6.1 No Load Loss Component Assessment - This transformer loss component shall equal the number of in-service hours in each calendar month multiplied by 230-kW, as identified in the manufacturer's no-load loss test report. 2 Losses on the Nevada Transformer Bank will be calculated using the loss factor information for the Nevada Transformer Bank unless and until 500-kV side revenue quality metering is installed on both the MPP Transformer Bank and the Nevada Transformer Bank, which will then allow for direct measurement of actual losses. Page 9 of 16 MPP-NEVADA MOST Interconnection and Operation Agreement Agreement No. 06-DSR-11729 6.2 No -Load Loss Recovery - Transformer losses will be returned to WALC in similar on -peak and off-peak periods or paid for in accordance with subsection 6.8. 6.3 Load Loss Component Assessment - Transformer load loss is deemed to be the product of a loss factor (0.083%), the total load losses at 75 degrees C on units one, two and three is 0.00083 or 745,280 watts divided by the total VA of 900,000,000, multiplied by the hourly actual power flow across the Nevada Transformer Bank. 6.4 Load Loss Recovery - WALC shall recover such losses equal to 0.083% of actual power flow across the Nevada Transformer Bank. The loss energy will be returned to WALC in similar on -peak and off-peak periods or paid for in accordance with subsection 6.8. 6.5 Loss Accounts - WALC shall establish and maintain a loss account for Nevada that will show the losses incurred, losses scheduled back, and any loss balances carried over from one calendar month to another. 6.6 Loss Reimbursement — Nevada Transformer Bank losses will be returned in similar on -peak and off-peak periods the month after, in the same month of the following year, or paid for in accordance with subsection 6.8. The type of payment, similar on -peak and off-peak or cash payment, will be in effect for a minimum six (6) month fixed period. The two (2) six (6) month fixed payment periods are from April 1 through September 30 and from October 1 through March 31 each calendar year. Selection of the payment type will be made no later than thirty (30) days prior to the commencement of the next fixed payment period. Nevada will electronically mail (via e-mail) its loss recovery preference to Western's representative. The Western representative will confirm by replying to the e-mail request. 6.7 In-K.ind Loss Return — Nevada Transformer Bank losses accumulated in the previous month will be returned, through a static schedule, in -kind through averaged hourly values applying summer season WECC on -peak and off-peak periods 365 days per year or returned through cash payment in accordance with subsection 6.8. 6.8 Loss Recovery - All Nevada Transformer Bank losses returned to Western must be returned in -kind via a similar on -peak period schedule and off-peak period schedule or submitted based on the average between the volume weighted firm and non -firm on -peak monthly average and the volume weighted firm and non - firm off-peak monthly average as derived from the publication in the Palo Verde Pricing Index. Western will determine the pricing reference for loss return. Western will present to Nevada the proposed pricing reference modifications at least a minimum of one (1) year in advance of implementation. Western will Page 10 of 16 MPP-NEVADA MOST Interconnection and Operation Agreement Agreement No. 06-DSR-11729 apply such changes with the April and October loss recovery. preferences chosen by Nevada. Western will modify this subsection indicating the current Nevada loss pricing reference. The equation applied to on -peak or off-peak average monthly pricing is indicated below: Average Price Derivation Example: Volume Weighted = Monthly SUM ($MWh)/Monthly SUM (MWh) ($MWh = daily on -peak or off-peak market value multiplied by daily MWh) 7. FLOW MANAGEMENT SYSTEM PROCEDURE The Flow Management System (FMS) monitors the Mead 500-kV System for the following: (1) actual flow; (2) scheduled flow; (3) Perkins phase -shifting transformers (Perkins PSTs) tap/phase angle; and (4) the impacts of the inability of the Perkins PSTs' to achieve scheduled flow. The FMS will continuously compare actual flows with Interchange Schedules and provide a signal representing a suggested change in actual power flow on a Mead 500-kV System facility pursuant to the following subsections. Where flow reduction is necessary, the flows can be reduced by various means including, but not limited to, schedule curtailment, generation redispatch, bus sectionalizing, and phase shifting transformer tap adjustments. If mitigation is required, such mitigation shall be implemented within thirty (30) minutes of notification from the Operation Manager and may be implemented immediately if urgent response to system conditions is necessary to relieve an overload. In all cases, the Operation Manager shall have the operational discretion to resolve an overload, including using the Perkins PSTs. 7.1 If the Perkins PSTs are in the regulating mode and are not able to maintain actual Mead -Perkins 500-kV line flow equal to the scheduled flow within a two (2) tap margin, then the Operation Manager shall direct Nevada to take such steps as Nevada elects to reduce its actual power flows as needed to resolve the issue. If, at the end of the time frame for response provided in this Section 7, the actions taken prove to be insufficient, the Operation Manager, in accordance with Prudent Utility Practice, as such term is defined in the Agreement, may take any steps necessary. 7.2 If actual flow on a particular facility connected to the Mead 500-kV System, except for the Mead -Marketplace line, exceeds the total line rating established in Section 3.17, resulting in overload(s) and requiring mitigation, and if the Perkins PSTs are deployed in regulating mode and are not able to mitigate the overload(s) by controlling the actual Mead -Perkins 500-kV line flow equal to the scheduled flow within a two (2) tap margin, the Operation Manager shall direct Nevada to take such steps as Nevada elects to reduce its actual power flows as needed to resolve the overload(s). 7.3 The following shall apply to any reliability issue that specifically arises from excess inadvertent power flows which result in an overload on the Mead - Marketplace Line. The four (4) operational mitigation procedures -in the Page I 1 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 following subsections will be used as appropriate based on current schedules, actual power flows, and amounts of inadvertent energy. As schedules, actual power flows, amounts of inadvertent energy, and system conditions change, it is possible that a sequence of two (2) or more of these four (4) operational mitigation procedures may be used until reliability is restored. 7.3.1 If Nevada has actual flows into the Mead 500-kV Substation which are not exceeding Nevada's current schedule and at least one (1) MPP Participant has a current schedule into the Mead 500-kV Substation and the aggregate actual power flows for the MPP Participant(s) do not exceed the aggregate scheduled energy from such MPP Participant(s), then the Operation Manager shall direct both Nevada and the applicable MPP Participant(s) to take such steps as each respective entity elects to reduce its actual power flows as needed, proportionally to its schedule, to resolve the overload(s). If, at the end of the time frame for response provided in Section 7, Nevada's and such MPP Participants' actions taken prove to be insufficient, then the Operation Manager, in accordance with Prudent Utility Practice, may deploy the Perkins PSTs at any time to mitigate the remaining overload. Exhibit G of the Agreement sets forth the charges that may result for all entities, proportional to their respective schedules, if the Perkins PSTs are used. 7.3.2 If Nevada is scheduling into the Mead 500-kV Substation and its actual flows exceed its schedule and the aggregate actual power flows from any one or more MPP Participant(s) currently scheduling do not exceed the aggregate schedules from any such MPP Participants, then the Operation Manager shall direct Nevada to take such steps as Nevada elects to reduce its actual power flows as needed to resolve the overload. If, before the end of the time frame for response provided in this Section 7 has elapsed, and Nevada's actions prove insufficient for resolving the overload, or if Nevada has reduced its schedules to zero and the overload is not resolved, Nevada may request that the Operation Manager open Mead 500-kV Substation circuit breaker numbers 1196, 1692, and 1892 to isolate the Harry Allen Line with the Nevada Transformer Bank. 7.3.3 When both the Nevada and the MPP Participant(s) actual flows exceed their respective schedules into the Mead 500-kV Substation, the Operation Manager shall direct Nevada and the MPP Participant(s) to take such steps as they elect, proportionally to their respective schedules, to reduce their actual power flows as needed to resolve the overload. If, at the end of the time frame for response provided in this Section 7, the overload has not been resolved, the Operation Manager, in accordance with Prudent Utility Practice, may deploy the Perkins PSTs. Nevada and the MPP Participants shall be charged proportionally for any such usage of the Perkins PSTs based on their proportional contributions to the overload and curtailments made. Page 12 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 7.3.4 When Nevada's actual power flows do not exceed its schedule and one or more MPP Participants' actual power flows exceed their schedules, the Operation Manager shall direct those MPP Participants to take such steps as they elect to reduce actual power flows as needed to resolve the overload, including requesting use of the Perkins PSTs. If, at the end of the time frame for response provided in this Section 7, such MPP Participants have not or cannot take sufficient action to reduce their actual power flows, or if they have reduced all schedules to zero and the overload is not resolved, and the Perkins PSTs have not been deployed, the Operation Manager, in accordance with Prudent Utility Practice, may deploy the Perkins PSTs, at the MPP Participants' expense. If the overload is not thereby resolved, Nevada may be directed to curtail its schedules as well. 7.4 If the Perkins PSTs are called on by the applicable reliability coordinator or path operator, due to system Emergency conditions, to be used to match the actual Mead -Perkins 500-kV line flow to the scheduled flow, and this cannot be achieved within two (2) taps, then the Harry Allen Line flow is to be reduced to the extent that the Perkins PSTs can match flow to schedule within two (2) taps. 7.5 The Flow Management System will be implemented after Western's new scheduling program is placed in service in 2007. Until then the Mead 500-kV System will be monitored manually. 8. SCHEDULED INTERRUPTIONS TO SERVICE The WALC clearance coordinator will communicate and confirm by telephone, fax, or electronically to Nevada, the MPP Participants, and associated balancing authorities any scheduled interruptions to service. The outage notification will include the duration, time of commencement, work to be accomplished, and will be made as much in advance of the interruption as possible. WALC minimum preferred notice is 72 hours. All Interchange Schedules will be reduced to zero prior to the start of the service interruption. All Interchange Schedules may commence following a declared return to service communication from the WALC Dispatcher to Nevada and the MPP Participants. 9. INTERCHANGE SCHEDULING PARAMETERS 'Nevada and MPP Participant transmission service will be maintained under normal and emergency conditions but may be affected by interconnected system generation, load, or transmission disturbances. Interruptions to service under declared Emergency conditions will be implemented as follows: 9.1 Nevada's Mead 500-kV Substation Scheduhna Cauacity Limitations The following metered (actual) and schedule capacity limitations are to be maintained by all parties associated with the transmission operation of the Harry Allen Line. A Flow Management System load reduction signal will be sent to Nevada for Harry Allen Line power flow curtailments applying actual limitations. Page 13 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 9.1.1 1720 MW is the simultaneous transfer limit of the Harry Allen Line under the condition of high East of River flows and the Mead -Perkins Line at 1300 MW flow, observing the Mead -Marketplace Line rating of 3000A or 2600 MW with the Nevada Transformer Bank in service. However, a higher transfer rating may be achieved under lower East of River flow conditions. The maximum non -simultaneous transfer limit of the Harry Allen Line during either lower East of River or Mead -Perkins Line flow conditions is 2200 MW. See Attachment No. 1. 9.1.2 1606 MW is the simultaneous transfer limit of the Harry Allen Line under the condition of high East of River flows and the Mead -Perkins Line at 1300 MW flow, observing the Mead -Marketplace Line rating of 3000A or 2600 MW with the Nevada Transformer Bank out of service. However, a higher transfer rating may be achieved under lower East of River flow conditions. The non -simultaneous transfer limit of the Harry Allen Line during either lower East of River or Mead -Perkins Line flow conditions is 2200 MW. See Attachment No. 2. 9.1.3. 1500 MW of metered and Interchange Schedule limitation on the Nevada Transformer Bank. 9.1.4 Total Interchange Schedules through the Harry Allen Line above the 1500 MW limit on the Nevada Transformer Bank will only be accomplished by transactions agreed upon between Nevada and a MPP Participant or any other entity who has obtained rights at the Mead 500-kV bus. 9.2 Emergency Interruptions — The WALC Dispatcher will respond as soon as possible to restore Nevada and MPP Participant transmission service following an unplanned outage. Personnel safety will be assessed. Following an outage, WALC will communicate the outage time to Nevada and the MPP Participants with active Interchange Schedules. The outage start and stop time will be the time used for schedule integration for all Nevada and MPP Participant Interchange Schedules interrupted by the Emergency. Following 'a declared return to service time, WALC will communicate to Nevada and all MPP balancing authority representatives that Interchange Schedules may commence. 10. CURTAILMENTS The communication and order of schedule reduction resulting from a curtailment will be implemented as follows: 10.1 Harry Allen Line Constraints — Interchange Schedules on the Harry Allen Line are curtailed in accordance with WECC and NERC for the following: 10.1.1 Loss of the Nevada Transformer Bank requires curtailment of all associated Interchange Schedules across the Nevada Transformer Bank. Page 14 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 10.1.2 Loss of the Harry Allen Line requires curtailment of all associated Interchange Schedules. 10.1.3 Interchange Schedules not in conformance with this MOSI, Nevada's scheduling capacity limitation at the Mead 500-kV Substation, and each MPP Participant's contracted capacities will be curtailed by the MPP Balancing Authority Operator. 10.1.4 If Mead 500-kV PCB No. 1892 or 1996 are open, the Harry Allen Line continuous rating, as defined in subsection 3.17.5, must be reduced to the breaker rating of 2598 MW (3000 Amps). 10.2 Method of Schedule Reduction — If reductions in Interchange Schedules become necessary, WALC will direct Nevada and/or the MPP Participants to reduce their respective active schedules at the time of curtailment. 10.3 Curtailment Communication —The curtailment commencement time and time of return to normal service will be communicated by WALC to Nevada and the MPP Participants via E-Tags. 10.4 Interchange Schedule Integration — The hourly Real Time Interchange Schedules will be integrated by WALC based on the beginning and ending time following each curtailment or reduction. 11. METERING The metering associated with the Harry Allen Line and the Nevada Transformer Bank is described in Table 11. TABLE 11— Nevada Metering Configuration # Line Label Tie or Meter , Balancing Meter Point Authority Reference 1 Harry Allen Line MED 500-kV Nevada MED715 500-kV Substation 2 Nevada Transformer MED 230-kV Bank I Substation WALC MED716 NOTE: The Balancing Authorities in Table 11 are responsible for providing telemetering for dispatching purposes and revenue quality metering to facilitate accounting or data requests associated with the MPP. Each meter (in and out) is as viewed by the MPP. 12. MONTHLY WECC AND NERC INADVERTENT INTERCHANGE REPORTING The Harry Allen Line metering and telemetering will be included in the monthly inadvertent interchange reporting between the interconnected Balancing Authorities through the existing telemeter to meter adjustment process or may be accomplished through existing interchange accounting processes. Page 15 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 Harry Allen Line Reporting - The monthly on -peak and off-peak Balancing Authority inadvertent accumulation reported to WECC will be accomplished through the addition of the Harry Allen Line to the existing WALC and Nevada interchange accounting process. Recommended to the E&O Committee by Nevada and the Operation Manager this 5th ' day of December , 2006. Presented to the E&O Committee by Nevada and the Operation Manager this 11t' day of December , 2006. Accepted and agreed to by the E&O Committee this I I'h day of. December 2006. Page 16 of 16 f Attachment No.1 to MPP-NEVADA MOSI Agreement No. 06-DSR-11729 L tM O E O' Z. C 0 CD N Q L L ._ x .E 0 O i a ca a� ._.. 0 0 0 0 0 0 0 N O 00 CO �h CV BMW) Moll Gull n)1009 SUPPad-PBOW O C7 LO N O O N O LO O O W 1 2 Attachment No. 2 to MPP-NEVADA MOSI Agreement No. 06-DSR 11729 O O LO N q . CD CD IM 7S a 3 o o ,c .� Lw, , 0 W W , •Q LM O CD cc Z L y a 0 IL 0 0 0 0 0 0 0 mot' N O CO 0 v N (MW) Moll Gull M 009 SuPlJGd-peaty i A �... LEONIS C. MALBURG Mayor THOMAS A. YBARRA Mayor Pro—Tem �f m WM. "BILL" DAVIS ' ,� ✓.� j Councilman H. "LARRY" GONZALES Councilman W. MICHAEL McCORMICK 4305 Santa Fe Avenue, Vernon, California 90058 Councilman Telephone (323) 583-8811 January 23, 2007 Western Area Power Administration Desert Southwest Regional Office Attn: G6211 P.O. Box 6457 Phoenix, AZ 85005-6457 MARK C. WHITWORTH Fire Chief LEWIS J. POZZEBON Director of Environmental Health S. KEVIN WILSON Director of Community Services SHARON L. DUCKWORTH City Treasurer DONAL O'CALLAGHAN Director of Light & Power Re: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON AUTHORIZING THE DIRECTOR OF LIGHT & POWER TO EXECUTE THE MEAD - PHOENIX PROJECT MANAGEMENT COMMITTEE RESOLUTION REGARDING AUTHORIZATION OF THE CONTRACT FOR INTERCONNECTION AND OPERATION AGREEMENT WITH NEVADA POWER COMPANY AND APPROVING AND AUTHORIZING THE EXECUTION OF THE MEAD -PHOENIX PROJECT INTERCONNECTION AND OPERATION AGREEMENT (WESTERN AGREEMENT NO. 06-DSR-11729) AT MEAD 500-KV SUBSTATION AMONG THE MEAD -PHOENIX PROJECT OWNERS, THE WESTERN AREA POWER ADMINISTRATION AND THE NEVADA POWER COMPANY Dear Sir or Madam: Transmitted herewith are the original and seven (7) counterpart signature pages of the above -referenced agreement, approved by City Council on January 17, 2007, through Resolution No. 9212. If you have any questions regarding this matter, please call Mr. Abraham Alemu, at (323) 583-8811 Ext. 250. V r truly yours, M/ w ellG'o / Acting Citr Clerk NG:dr c: Donal O'Callaghan Resolution No. 9212 °S y� Agreement No. 07-006 'Exclugivelj WOUAtLialr 1 2 3 4 5 6 7 8 9' 10 11 12 13 14 15. 16 17 18 IRE 20 21 22 23 24 25 26 27 28 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST - MEMBERS) SIGNATURE _ TITLE ATTEST: NAME TITLE DATE SIGNED SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST -WESTERN) SIGNATURE _ TITLE ATTEST: NAME TITLE DATE SIGNED CITY OF VERNON SIGNATURE C. 4,. TITLE Mayor ATTEST: NAME TITLE l DATE SIGNED APPROVED TO FORM: Q44.� - II Je�'t A. H'.rison, Acting City Attorney 9 �!! Western Agreement No. 06-DSR-11729 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 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST - MEMBERS) 5 SIGNATURE TITLE ATTEST: NAME TITLE DATE SIGNED SOUTHERN CALIFORNIA PUBLIC .POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST -WESTERN) SIGNATURE TITLE ATTEST: NAME TITLE DATE SIGNED CITY OF VERNON SIGNA TITLE ATTEST: X444'� NAME TITLE 1114 DATE SIGNED APPROVED ff TO FORM: Q4A �.-=-- Jei A. H Irison, Acting City Attorney �J139 Western Agreement No. 06-DSR-11729 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15. 16 17 18 IRE 20 21 22 23 24 25 26 27 28 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST - MEMBERS) SIGNATURE _ TITLE ATTEST: NAME TITLE DATE SIGNED SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public_ Power Authority Association (AUTHORITY INTEREST -WESTERN) SIGNATURE TITLE ATTEST: NAME TITLE DATE SIGNED CITY OF VERNON. SIGNATU. TITLE Mayor ATTEST: ~ NAME TITLE 11� DATE SIGNED APPROVED A)SJO FORM: Jf f f /A. FiAa rison, Acting City Attorney 39 Western Agreement No. 06-DSR-11729 I 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 04I 28 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST MEMBERS) SIGNATURE _ TITLE ATTEST: NAME TITLE DATE SIGNED SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST -WESTERN) SIGNATURE _ TITLE ATTEST: NAME TITLE DATE SIGNED CITY OF VERNON SIGNATURE '' u. /zli_ TITLE Mayor ATTEST: NAME TITLE A l 14 DATE SIGNED AP ROVED TO FORM: LI J A.'iVrison, Acting City Attorney 39 Western Agreement No. 06-DSR-11729 1 2 3 4 5 6 7 8 i'l 10 12 13 14 15, 16 17 18 19 20 21 22 23 24 25 26 27 28 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST - MEMBERS) SIGNATURE _ TITLE ATTEST: NAME. TITLE DATE SIGNED SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST -WESTERN) SIGNATURE TITLE ATTEST: NAME TITLE DATE SIGNED CITY OF VERNON TITLE Mayor ATTEST. a NAME . TITLE DATE SIGNED APPROVED TO FORM: Je A. rrisonI Acting City Attorney 9 Western Agreement No. 06-DSR-11729 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 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST - MEMBERS) SIGNATURE TITLE ATTEST: NAME TITLE DATE SIGNED SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST -WESTERN) SIGNATURE _ TITLE ATTEST: NAME TITLE DATE SIGNED CITY OF VERNON SIGNATURE all TITLE C_Mayor ATTEST: NAME TITLE DATE SIGNED APPROVED A TO FORM: (1 I A C J�[JA. Hali son, Acting City Attorney 9 Western Agreement No. 06-DSR-11729 1 2 3 4 5 6 7 8 9 10 1 11 12 13 14 15, 16 17 18 19 20 21 22 23 24 25 26 27 41.1 SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST - MEMBERS) SIGNATURE _ TITLE ATTEST: NAME TITLE DATE SIGNED SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST -WESTERN) SIGNATURE _ TITLE ATTEST: NAME TITLE DATE SIGNED CITY OF VERNON SIGNATs'�<'LL C z TITLE 7IMayor ATTEST: NAME TITLE DATE SIGNED APPROVED q, TO FORM: IT. Hgrison, Acting City Attorney Western Agreement No. 06-DSR-11729 Romero, Debbie From: Brenda Mckissack [MCKISSAC@wapa.gov] Sent: Wednesday, January 10, 2007 12:14 PM To: Linda Henrickson; Alemu, Abraham; Alan Hockenson; Sharon Gifford; Steve Homer; Margaret Rostker Subject: IOA Return Address Please send back your original IOA with 7 signature pages to: If Overnight Mail: Western Area Power Administration Attn: Brenda McKissack 615 South 43rd Avenue Phoenix, Arizona 85009 Phone number: 602-605-2525 (Switchboard) or Mine 602-605-2638 If Regular Mail: Western Area Power Administration Attn: Brenda McKissack P.O. Box 6457 Phoenix, Arizona 85005 Drop me an email when you mail and how you mailed so I can keep my eye out for it. Thanks Brenda A. McKissack Phone: (602) 605-2638 Fax: (602) 605-2490 mckissac@wapa.gov 1 MEAD -PHOENIX PROJECT INTERCONNECTION AND OPERATION AGREEMENT AT MEAD 500-KV SUBSTATION AMONG ARIZONA PUBLIC SERVICE COMPANY M-S-R PUBLIC POWER AGENCY SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY CITY OF VERNON WESTERN AREA POWER ADMINISTRATION AND NEVADA POWER COMPANY Western Agreement No. 06-DSR-11729 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 SECTION 1. MEAD -PHOENIX PROJECT INTERCONNECTION AND OPERATION AGREEMENT WITH NEVADA POWER COMPANY AT MEAD 500-ITV SUBSTATION TABLE OF CONTENTS TITLE PREAMBLE........................................................................................ 2. EXPLANATORY RECITALS............................................................. 3. AGREEMENT...................................................................................... 4. EFFECTIVE DATE AND TERMINATION ...................................... 4.1 Effective Date................................................................................ 4.2 FERC Acceptance Without Conditions or Modifications .............. 4.3 FERC Acceptance With Conditions or Modifications .................. 4.4 Parties' Acceptance....................................................................... 4.5 Non -Acceptance By A Party......................................................... 4.6 Termination...................................................................'................. 5. DEFINITIONS.................................................................................... 5.1 Agreement..................................................................................... 5.2 Applicable Requirements............................................................... 5.3 Capital Improvement..................................................................... 5.4 Common Facilities......................................................................... 5.5 Connection.....................................................................I................ 5.6 Cost Responsibility Ratio (CRR) ................... ................................ 5.7 Date of Interconnection Completion ............................................. 5.8 Energy............................................................................................ 5.9 E&O Committee............................................................................ 5.10 FERC............................................................................................. 5.11 Fiscal Agent.................................................................................... 5.1� Flow Management System............................................................ 5.13 Harry Allen Line............................................................................ 5.14 Interconnection Facilities.............................................................. 5.15 Joint Ownership Agreement.......................................................... 5.16 Management Committee................................................................ 5.17 Mead 500-kV. Substation............................................................... 5.18 Mead -Phoenix Project (MPP)........................................................ 5.19 Metering, Operating, and Scheduling Instructions (MOSI) .......... 5.20 MPP Owners.................................................................................. 5.21 MPP Participants........................................................................... 5.22 MPP Transformer Bank.................................................................. 5.23 Nevada Transformer Bank.............................................................. 5.24 Operating Emergency.................................................................... 5.25 Operating Work............................................................................. 5.26 Operation Agreement............................................................ I....... 5.27 Operation Manager ....... :................................................................. 5.28 Operational Mitigation Procedure ................................................. 5.29 Perkins Phase -Shifting Transformers (Perkins PSTs) ................... 5.30 Power....................................................................................I........ 5.31 Prudent Utility Practice................................................................. 5.32 Western Electricity Coordinating Council (WECC) ..................... PAGE 1 1 4 4 4 4 4 4 5 5 i Western Agreement No. 06-DSR-11729 1 2 3 4 5 6 7 8 9 10 11 12 13 I" 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS - CONTINUED SECTION TITLE 5.33 Willful Action................................................................................ 5.34 Work Liability............................................................................... 6. RIGHTS GRANTED AND RESERVED ........................................... 6.1 Right to Interconnect..................................................................... 6.2 Transformer Bank Rights.............................................................. 6.3 Transaction Rights......................................................................... 6.4 MPP Participants' Rights............................................................... 6.5 Reservation of Existing Rights ...................................................... 6.6 Reservation of Rights.................................................................... 6.7 Modification of the MPP to a DC Configuration .......................... 7. PAYMENT FOR RIGHT TO USE COMMON FACILITIES ........... 7.1 Payment for Right to Use.............................................................. 7.2 Distribution of Payment Received for Common Facilities ........... 7.3 Distribution of Funds Received from New Interconnectors........... 7.4 Interconnection Charge at Mead 230-kV Substation .................... 8. OWNERSHIP...................................................................................... 8.1 Interconnection Facilities.............................................................. . 8.2 Nevada Transformer Bank............................................................. 8.3 Mead 500-kV Substation................................................................ 8.4 Capital Improvements.................................................................... 9. OPERATION....................................................................................... 9.1 Duties of Operation Manager........................................................ 9.2 Nevada Transformer Bank............................................................. 9.3 Curtailment.................................................................................... 9.4 De-energization............................................................................. 9.5 Operating Emergencies.................................................................. 9.6 Capital Improvements.................................................................... 9.7 Nevada System.............................................................................. 10. MOSI ADMINISTRATION................................................................ 10.1 Changes in Conditions................................................................ 10.2 MOSI Compliance......................................................................... 11. OPERATION MITIGATION PROCEDURE .................... ................. 12. COST RESPONSIBILITY................................................................... 12.1 Method of Calculation of the Cost Responsibility Ratio ............... 12.2 Costs of Operating Work............................................................... 12.2.1 Mead 500-kV Substation......................................................... 12.2.2 Nevada Transformer Bank ....................................................... 12.2.3 Perkins PSTs............................................................................ PAGE 11 12 13 13 13 13 13 13 14 14 15 15 15 15 15 15 15 15 16 16 16 16 16 16 16 17 17 18 18 18 18 19 19 19 19 19 19 20 I ii Western Agreement No. 06-DSR-11729 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 TABLE OF CONTENTS - CONTINUED SECTION TITLE PAGE 13. BUDGET AND PAYMENT OF INVOICES SUBMITTED BY FISCAL AGENT........................................................................... 20 13.1 Operating Work Budget................................................................. 20 13.2 Submission of Invoices.................................................................. 20 13.3 Payment of Invoices...................................................................... 20 13.4 Payment of Capital Improvement Costs ........................................ 21 13.5 Due Date of Payments................................................................... 21 13.6 Late Payment Charge..................................................................... 21 13.7 Disputed Charges........................................................................... 21 13.8 Use of Operation Manager's Funds ............................................... 22 14. CREDITWORTHINESS..................................................................... 22 15. TAXES................................................................................................ . 22 15.1 Property and Other Taxes.............................................................. 22 15.2 Income Taxes................................................................................. 23 16. DISPOSITION OF FACILITIES........................................................ 24 17. LIABILITY; COVENANT NOT TO EXECUTE ............................... 25 17.1 Covenant Not to Execute............................................................... 25 17.2 Collection of Insurance Proceeds .................................................. 25 17.3 Obligation for Work Liability Costs .............................................. 26 17.4 Responsibility of a Party for its Own Willful Action .................... 26 17.5 Limitation of Recovery on Judgment Debt ................................... 26 17.6 Indemnification for Claims of Customers ..................................... 27 17.7 No Relief of Insurer from Liability .............................................. 27 17.8 Western Subject to Tort Claims Act .............................................. 28 18. AUDITS..........................................................................................I.... 28 18.1 Right to Audit................................................................................ 28 18.2 Retention of Records and Audits ................................................... 28 18.3 Costs of Audits.............................................................................. 28 18.4 Notice of Audit Results and Adjustments ..................................... 28 18.5 Audit Reports................................................................................. 29 19. DEFAULTS......................................................................................... 29 19.1 Performance Default...................................................................... 29 19.2 Payment Default............................................................................ 29 19.3 Default Remedies.......................................................................... 29 19.4 Temporary Use of Rights of the Interconnection Facilities and Nevada Transformer Bank for Payment Default ...................... 30 19.5 Cure of Default.............................................................................. 30 19.6 Right to Legal Action.................................................................... 31 20. UNCONTROLLABLE FORCES........................................................ 31 21, RELATIONSHIP OF THE PARTIES ................................................. 31 22. GOVERNING LAW AND VENUE ................................................... 32 iii Western Agreement No. 06-DSR-11729 91 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS - CONTINUED SECTION TITLE 23. SUCCESSORS AND ASSIGNS......................................................... 23.1 Conditions to Assignment............................................................. 23.2 Binding upon Successors............................................................... 23.3 Conditions of Release from Further Obligations ........................... 24. NONDEDICATION OF FACILITIES ............................................... 25. REGULATORY APPROVALS.......................................................... 25.1 Approvals....................................................................................... 25.2 Fees................................................................................................ 26. NOTICES............................................................................................ 26.1 Recipients of Notices..................................................................... 26.2 Routine Communications.............................................................. 26.3 Exhibits ..................................................................................... 26.4 Change of Designations of Recipients ........................................... 27. DAMAGE OR DESTRUCTION........................................................ 27.1 Mead 500-kV Substation............................................................... 27.2 Interconnection Facilities.............................................................. 28. GENERAL PROVISIONS.................................................................. 28.1 Entire Agreement........................................................................... 28.2 Nonpartitionment........................................................................... 28.3 No Implied Obligations.................................................................. 28.4 Exhibits Made a Part of the Agreement ......................................... 28.5 Amendments and Revision of Exhibits ......................................... 28.6 Severability.................................................................................... 28.7 No Third Party Rights Other Than Specified ................................ 28.8 No Precedence of Waiver.............................................................. 28.9 Section Headings Not Binding ...................................................... 28.10 Authorized Representative............................................................ 28.11 E&O Committee Meetings............................................................ 28.12 Western's Contingent Upon Authorization ................................... 29. SURVIVAL OF OBLIGATIONS AND LIABILITIES ..................... 30. EXECUTION BY COUNTERPARTS ............................................... 31. SIGNATURE CLAUSE...................................................................... PAGE 32 32 32 33 33 33 33 33 33 33 34 34 34 34 34 34 35 35 35 35 35 36 36 36 36 36 36 37 37 37 37 38 iv Western Agreement No. 06-DSR- 1. 1729 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 EXHIBIT A' B D E F G H EXHIBITS TITLE Interconnection Facilities and Single Line Drawing of the Mead 500-kV Substation.................................................................... Mead 500-kV Substation Common Facilities Cost ................................. Cost Responsibility Ratio (CRR)........................................................... Calculation of Payment for Use of Common Facilities for Termination of the Interconnections................................................... Estimated Income Tax Cost Component (ITCC) CompositeRate.................................................................................. Interconnection Charge for Nevada Transformer Bank at Mead 230-kV Substation................................................................... Facilities Use Charge for Operation of Perkins Phase -Shifting Transformers ................................................. Recipientsof Notices.............................................................................. ATTACHMENTS Metering, Operating, and Scheduling Instructions (MOSI) PAGE A-1 B-1 C-1 D-1 E-1 F4 G-1 H-1 v Western Agreement No. 06-DSR- 11729 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 1. PREAMBLE: The Parties entering into this Agreement as of , 2006, are: ARIZONA PUBLIC SERVICE COMPANY, hereinafter referred to as "Arizona," an Arizona corporation; SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, hereinafter, referred to as "Salt River Project," an agricultural improvement district organized and existing under the laws of the State of Arizona;, M-S-R PUBLIC POWER AGENCY, hereinafter referred to as "M-S-R," a public entity organized and existing under and by virtue of the laws of the State of California; SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, hereinafter referred to as "SCPPA," a public entity organized and existing under and by virtue of the laws of the State of California, doing business in the State of Arizona as Southern California Public Power Authority Association, holding two separate ownerships as "Authority Interest (Members)" and "Authority Interest (Western)"; the CITY OF VERNON, hereinafter referred to as "Vernon," a municipal corporation of the State of California; collectively referred to as the "MPP Owners"; the United States Department of Energy, WESTERN AREA POWER ADMINISTRATION, established pursuant to Federal law, hereinafter referred to as "Western"; and NEVADA POWER COMPANY, hereinafter referred to as "Nevada," a Nevada corporation; each individually referred to as "Party" and collectively as "Parties." 2. EXPLANATORY RECITALS: 2.1 The Mead -Phoenix Project (MPP) is a 500-kV alternating current (AC) transmission system between the Westwing Switchyard, near Sun City, Arizona, and the Marketplace Substation, in Boulder City, Nevada, with an interconnection to the Mead 500-kV Substation, located near Boulder City, Nevada. The agreements between the MPP Owners provide for and the MPP was designed and constructed with the explicit reservation that the project could be converted to a 1 Western Agreement No. 06-DSR-11729 I 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 direct current (DC) configuration in the future. Conversion to DC operation in the future will require construction of converter stations and certain modifications to the 500-kV transmission lines. 2.2 The MPP Owners have certain ownership interests in, rights to, and responsibilities at the Mead 500-kV Substation pursuant to the Joint Ownership Agreement and Operation Agreement. Copies of the Joint Ownership Agreement and Operation Agreement have been provided to Nevada. 2.3 Nevada intends to construct and operate a forty-eight (48) mile 500-kV transmission line between its Harry Allen 500-kV Substation and MPP's Mead 500-kV Substation (Harry Allen Line). 2.4 Nevada has requested interconnections of (i) a 500-kV transmission line to the Mead 500-kV Substation and (ii) a 500/230-kV transformer bank, consisting of three (3) single-phase transformers and one (1) spare transformer, to the Mead 500-kV Substation. 2.5 Nevada has requested interconnection of a 500/230-kV transformer bank, consisting of three (3) single-phase transformers and one (1) spare transformer, to Western's Mead 230-kV Substation. 2.6 Nevada and Western, acting as an Operation Manager of MPP and with Management Committee approval, have entered into the Contract for Construction of Interconnections to the Mead 500-kV Substation, Contract No. 03-DSR-11594, dated February 3, 2005, as such may be amended or supplemented from time to time, for the construction of the Interconnection Facilities and the installation of a new 500/230-kV transformer bank (Nevada Transformer Bank) at MPP's Mead 500-kV Substation. 2.7 Nevada and Western, acting as an Operation Manager of MPP, have entered into the following agreements in association with Nevada's interconnections at the Mead 500-kV Substation: 2 Western Agreement No. 06-DSR-11729 1 2.7.1 Centennial Project Advancement of Funds for Associated Agreements 2 with the MPP, Contract No. 02-DSR-11343, dated June 18, 2002. 3 2.7.2 National Environmental Policy Act Compliance for the Harry Allen -Mead 4 500-kV Transmission Line, Contract No. 03-DSR-11413, dated June 19, 5 2003. 6 2.7.3 500-kV Facilities Study Agreement, Letter Agreement 7 No. 03-DSR-11437, dated October 10, 2003, as amended. 8 2.7.4 Advance of Funds for Flow Management System, Letter Agreement 9 No. 06-DSR-11680, dated May 25, 2006. 10 2.8 On September 15, 2004, the MPP Engineering and Operation Committee 11 approved the results of technical studies performed by the Parties relating to 12 Nevada's planned interconnections to the Mead 500-kV Substation, as identified 13 in subsection 2.4 herein. 14 2.9 MPP has authorized Western, as Operation Manager of the Mead 500-kV 15 Substation, to act on their behalf for these interconnections. 16 2.10 The Parties recognize that Nevada must mitigate any impacts on the MPP as a 17 result of their interconnections at the Mead 500-kV Substation under this 18 Agreement and maintain: (i) system reliability; and (ii) transfer capability among 19 interconnected systems. 20 2.11 MPP will not be financially responsible for any system impacts as a result of the 21 interconnections under this Agreement. 22 . 2.12 Nevada must enter into this Agreement with the MPP Owners before there is any 23 injection or exchange of Power by Nevada at the Mead 500-kV Substation. 24 2.13 The MPP Owners, each in accordance with its respective interests, are willing to 25 permit Nevada's termination of the Harry Allen Line and the installation of the 26 Nevada Transformer Bank in the Mead 500-kV Substation, pursuant to the terms 27 and conditions of this Agreement. 28 3 Western Agreement No. 06-DSR-11729 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 13 IEl AGREEMENT: In consideration of these premises and of the mutual covenants contained herein, the Parties agree as follows. EFFECTIVE DATE AND TERMINATION: 4.1 Effective Date: This Agreement shall become effective upon the date this Agreement has been duly executed by all the Parties hereto, subject to final acceptance of this Agreement pursuant to Section 4.2 or 4.4 herein. 4.2 FERC Acceptance Without Conditions or Modifications: Arizona shall promptly file this Agreement with FERC as soon after the effective date of this Agreement as practicable. Any information reasonably required from any Party by Arizona in preparing such FERC filing shall be supplied by such Party. If accepted by FERC, Arizona shall promptly give notice of such acceptance to the Operation Manager, who shall promptly provide notice of such acceptance to the other Parties. 4.3 FERC Acceptance With Conditions or Modifications: If FERC-orders a hearing to determine whether this Agreement is just and reasonable and, after such hearing, requires modifications of, or conditions to, any of the terms, conditions, rates, or charges agreed to herein, or if FERC accepts the Agreement for filing but requires modifications of, or conditions to, any of the terms, conditions, rates, or charges agreed to herein, Arizona shall promptly provide notice of such hearing, modifications, or conditions, to the Operation Manager, who shall promptly provide notice of such action by FERC to the other Parties. 4.4 Parties' Acceptance: If no Party takes exception to FERC's action within fourteen (14) calendar days after the postmark date of the notice provided by the Operation Manager pursuant to Section 4.3 herein, this Agreement shall continue to be effective and the FERC-ordered modifications and conditions shall become a part of this Agreement. The Operation Manager shall set forth such FERC ordered modifications and conditions as accepted by the Parties in Appendix A to be attached hereto and by this reference made a part of this Agreement. Such 4 Western Agreement No. 06-DSR-11729 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 IFS appendix shall constitute an amendment to this Agreement which amendment shall not require signature by the Parties. 4.5 Non -Acceptance by a Party: Any Party(ies) which takes exception to FERC's conditions or modifications shall, within fourteen (14) calendar days after the postmark date of the notice provided by the Operation Manager pursuant to Section 4.3 herein, give notice to all other Parties of such exception. In such event, the Parties shall promptly commence good faith negotiations to amend this Agreement in a manner acceptable to FERC and to provide similar benefits to the Parties; provided, however, that if no such amendment is executed by all Parties within sixty (60) calendar days after the postmark date of the written notice of exception or such other reasonable time period as may be agreed to by the representatives of all the Parties, this Agreement shall terminate and become null and void, except with respect to Section 25.2 herein which: shall survive the termination of this Agreement until satisfied. 4.6 Termination: This Agreement shall terminate operationally upon the first of the following events to occur: (i) the termination of this Agreement for default as provided in subsection 19.3.2 herein; (ii) the termination of the Joint Ownership Agreement; (iii) the permanent removal from service of the termination facilities associated with the Nevada Transformer Bank and the Harry Allen Line at the Mead 500-kV Substation; or (iv) Nevada's notice of termination pursuant to subsection 6.7. If required by FERC, Nevada's notice of termination shall be promptly filed by Arizona and be effective as of the date authorized by FERC. This Agreement shall remain in effect until completion of all outstanding financial obligations provided for herein. DEFINITIONS: The following terms, whether in the singular or in the plural, when initially capitalized in this Agreement, or any amendments hereto, shall have these meanings. 5 Western Agreement No. 06-DSR-11729 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 5.1 Agreement: This Mead -Phoenix Project Interconnection and Operation Agreement with Nevada Power Company at Mead 500-kV Substation, as such may be amended, supplemented, or revised from time to time. 5.2 Applicable Requirements: Any law; any standard, procedure, or requirement of (i) WECC, (ii) any other entity that has the authority to control the operation of the Mead 500-kV Substation, or (iii) any other entity that is binding on the Operation Manager or the MPP; any standards, procedures, or other requirements established by the Operation Manager and approved by the E&O Committee in conformance with Prudent Utility Practice; in each case as amended from time to time and whether now existing or hereafter imposed or arising. 5.3 Capital Improvement: Any unit of property, after the Date of Interconnection Completion, which is an addition to, enlargement of, or betterment of the Mead 500-kV Substation or the removal or replacement of any other unit of property constituting a part of the Mead 500-kV Substation, irrespective of whether such replacement constitutes an enlargement or betterment of that which it replaces, which additions, betterments, enlargements, removals and replacements, in accordance with accounting practice, would be capitalized. For purposes of this definition, accounting practice shall mean the generally accepted accounting principles applicable to the electric utility industry. 5.4 Common Facilities: All or part of those certain structures, improvements, and facilities of the Mead 500-kV Substation which include, but are not limited to: dikes, roadways, control building, communications building, ancillary buildings, trenches, conduits, control and power cables, control equipment, station . communication equipment, protection equipment, batteries, auxiliary equipment, station grounding grid, fencing, lighting and yard improvements at the Mead 500-kV Substation. Common Facilities do not include the Interconnection Facilities, the MPP Transformer Bank, the Nevada Transformer Bank, or any component of a Connection. 6 Western Agreement No. 06-DSR-11729 1 5.5 Connection: Each termination as shown in Exhibit A through and including 2 power circuit breakers, associated switching equipment, controls and protection, 3 and other appurtenant equipment for electrical facilities such as, but not limited 4 to, transmission lines or power transformers. 5 5.6 Cost Responsibility Ratio (CM: Nevada's ratio of cost responsibility for the 6 Mead 500-kV Substation shall be as determined and described in Exhibit C. 7 5.7 Date of Interconnection Completion: The date when the Interconnection 8 Facilities can reasonably be expected to operate reliably, as determined by the 9 Operation Manager and the E&O Committee pursuant to the Joint Ownership 10 Agreement. 11 5.8 Energy: The integrated value of Power over time expressed in kilowatt-hours 12 (kWh) or megawatt -hours (MWh). 13 5.9 E&O Committee: The transmission engineering and operations committee 14 established pursuant to the Joint Ownership Agreement. 15 5.10 FERC: The Federal Energy Regulatory Commission or any successor agency. 16 5.11 Fiscal Agent: Salt River Project, or its successor, appointed pursuant to the MPP 17 Fiscal Agency Agreement, as such may be amended, supplemented, or revised 18 from time to time. 19 5.12 Flow Management System: A software tool used to (i) determine the 20 incremental impact of the interconnection of the Harry Allen Line at the Mead 21 500-kV Substation and (ii) assess overload conditions that are in violation of 22 WECC and/or NERC criteria on any of the facilities connected to the Mead 23 500-kV Substation. 24 5.13 Harry Allen Line: Nevada's 500-kV transmission line from the Harry Allen 25 500-kV Substation to the Mead 500-kV Substation. 26 5.14 Interconnection Facilities: The facilities necessary to interconnect the Harry 27 Allen Line and the Nevada Transformer Bank to the Mead 500-kV Substation, as 28 identified in Exhibit A. 7 Western Agreement No. 06-DSR-11729 I 2 3 41 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5.15 Joint Ownership Agreement: The Mead -Phoenix Project Joint Ownership Agreement among the MPP Owners, dated as of August 4, 1992, as such may be amended, supplemented, or revised from time to time, which provides for, among other things, the ownership, construction, and operation of the MPP. 5.16 Management Committee: The management committee established pursuant to the Joint Ownership Agreement. 5.17 Mead 500-kV Substation: A high -voltage electrical substation located near Boulder City, Nevada, consisting of Common Facilities, Interconnection Facilities, the MPP Transformer Bank, the Nevada Transformer Bank, and any component of a Connection, including, but not limited to, communication equipment, protective systems, control house space, relaying equipment, control cabling, bus work, bus structures, fencing, and metering equipment. The Mead 500-kV Substation is owned by the MPP Owners, all in accordance with the Joint Ownership Agreement. 5.18 Mead -Phoenix Project (MPP): A 500-kV alternating current (AC) transmission system between the Westwing Switchyard, near Sun City, Arizona, and the Marketplace Substation, in Boulder City, Nevada, with an interconnection into the Mead 500-kV Substation, located near Boulder City, Nevada. MPP is capable of being converted to a direct current (DC) transmission system at a future date. 5.19 Metering, Operating, and Scheduling Instructions (MOSI): The written instructions developed to implement the metering, operating, scheduling, billing, and power accounting requirements for Nevada's interconnections of the Harry Allen Line and the Nevada Transformer Bank to the Mead 500-kV Substation as attached hereto. 5.20 MPP Owners: The MPP Owners, as identified in the Joint Ownership Agreement, are Arizona, M-S-R, Salt River Project, SCPPA holding two separate ownerships as Authority Interest (Members) and Authority Interest (Western), and Vernon. 8 Western Agreement No. 06-DSR711729 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 5.21 MPP Participants: The MPP Participants, as identified in the Joint Ownership Agreement, are the California Cities of Anaheim, Azusa, Banning, Burbank, Colton, Glendale, Los Angeles, Pasadena, Riverside, and Vernon; Arizona; M-S-R; Salt River Project; and Western. 5.22 MPP Transformer Bank: The 500/230-kV transformer bank consisting of four (4) single-phase 500/230-kV 433.33 MVA transformers and installed in the Mead 500-kV Substation by the MPP, which is operated and maintained in accordance with the Operation Agreement. 5.23 Nevada Transformer Bank: The 500/230-kV transformer bank consisting of four (4) single-phase 500/230-kV 500 MVA transformers installed in the Mead 500-kV Substation, pursuant to the Contract for Construction of Interconnections to the Mead 500-kV Substation, Contract No. 03-DSR-11594, which will be operated and maintained in accordance with this Agreement. 5.24 Operating Emergency: An unplanned event or circumstance, which reduces or may reduce the capability to transmit Power and Energy at the Mead 500-kV Substation, which capability under normal operating conditions would otherwise be available. 5.25 Operating Work: All work performed by, or caused to be performed by, the Operation Manager that is necessary for the operation and maintenance of the Mead 500-kV Substation which work includes, but is not limited to, the work as listed in the Operation Agreement: engineering, agreement preparation, purchasing, repair, supervision, training, expediting, inspection, testing, protection, operation, retirement, maintenance, use, management, and making Capital Improvements. Operating Work shall include any work necessitated by an Operating Emergency. 5.26 Operation Agreement: The MPP Operation Agreement among the MPP Owners and the Operation Manager, as such may be amended, supplemented, or revised from time to time. 9 Western Agreement No. 06-DSR-11729 1 5.27 Operation Manager: Western, or its successor, appointed pursuant to the 2 Operation Agreement. , 3 5.28 Operational Mitigation Procedure: The procedure contained in Section 7 of the 4 MOSI to mitigate operating restrictions on the MPP caused by the 5 interconnections of the Harry Allen Line and the Nevada Transformer Bank at the 6 Mead 500-kV Substation. 7 5.29 Perkins Phase -Shifting Transformers (Perkins PSTs): The two (2) 650 WA 8 500-kV phase -shifting transformers installed in parallel and located at MPP's 9 Perkins Switchyard. 10 5.30 Power: Electrical power expressed in kilowatts (kW) or megawatts (MW). 11 5.31 Prudent Utility Practice: Any of the practices, methods, and acts, including but 12 not -limited to the practices, methods, and acts engaged in or approved by a 13 significant portion of the electrical utility industry within the operating area of the 14 Western Electricity Coordinating Council (WECC), or its successor agency, 15 which, in the exercise of reasonable judgment in light of the facts known at the 16 time the decision was made, would have been expected to accomplish the desired 17 result at the lowest reasonable cost consistent with good business practices, 18 reliability criteria, safety considerations and expediency, taking into account the 19 - design and operational characteristics of the Mead 500-kV Substation. Prudent 20 Utility Practice is not intended to be limited to the optimum practices, methods, or 21 acts to the exclusion of all others, but rather is a spectrum of possible practices, 22 methods, or acts which would have been expected to accomplish the desired 23 result. Prudent Utility Practice includes due regard for manufacturers' warranties 24 and requirements of governmental agencies of competent jurisdiction, and shall 25 apply not only to functional parts of the Mead 500-kV Substation, but also to 26 appropriate structures, landscaping, painting, signage, lighting, other facilities, 27 and public relations programs reasonably designed to promote public 28 understanding and acceptance of the Mead 500-kV Substation. 10 Western Agreement No. 06-DSR-11729 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 5.32 Western Electricity Coordinating Council (WECC): WECC, or its successor agency, is a consortium of generation and transmission providers throughout the western part of North America organized for the purpose of electric system reliability and standards of operation, including protocols and procedures of exchanging real-time operating data between electric system control centers. 5.33 Willful Action: 5.33.1 Willful Action means any action, as described below, which is taken or not taken by a Party at the direction of its directors, members of its governing bodies, officers, or employees having management or administrative responsibility affecting its performance under this Agreement: (i) Action which is knowingly or intentionally taken or not taken with conscious indifference to the consequences thereof or with intent that injury or damage would result or would probably result therefrom; (ii) Action which is taken or not taken by a Party which action has been determined by final arbitration award or final judgment or judicial decree to be a material default under this Agreement and which action occurs or continues beyond the time specified in such arbitration award or judgment or judicial decree for curing such default or, if no time to cure is specified therein, occurs or continues beyond a reasonable time to cure such default; (iii) Action which is taken by the Operation Manager, while acting in such capacity, for its exclusive financial benefit and to the financial detriment of the MPP Owners and/or Nevada; as used herein, "for its exclusive financial benefit" shall mean for the sole financial benefit of the Operation Manager or for the financial 11 Western Agreement No. 06-DSR-11.729 I benefit of the Operation Manager and one or more entities other 2 than the MPP Owners and/or Nevada; 3 (iv) Action which is knowingly or intentionally taken or not taken with 4 the knowledge that such action taken or not taken is a material 5 default under this Agreement. 6 5.33.2 Willful Action shall include any act or failure to act which would 7 constitute gross negligence but shall not include any act or failure to act 8 which is merely involuntary, accidental, or negligent. 9 5.33.3 The phrase "employees having management or administrative 10 responsibility" as used in subsection 5.33.1 herein means employees of a 11 Parry who are responsible for one or more of the executive functions of 12 planning, organizing, coordinating, directing, controlling, and supervising 13 such Party's performance under this Agreement; provided, however, that 14 with respect to employees of the Operation Manager, acting in its capacity 15 as such, such phrase shall refer only to (i) the senior employee of the 16 Operation Manager who is on duty at the time of the Willful Action and 17 who is responsible at such time for the operation of the Interconnection 18 Facilities and the Nevada Transformer Bank, and (ii) anyone in the 19 organizational structure of the Operation Manager between such senior 20 employee and up to and including an officer. 21 5.34 Work Liability: The liability of one or more Parties for damages suffered by 22 anyone other than a Party, whether or not resulting from the negligence of any 23 Party, its directors, members of its governing bodies, officers, employees, or any 24 other person or entity whose negligence could be imputed to such Party, resulting 25 from: (i) the design, construction, use, or ownership of the Interconnection 26 Facilities and the Nevada Transformer Bank; or (ii) the performance or 27 nonperformance of Operating Work directly related to the Interconnection 28 Facilities and the Nevada Transformer Bank. 12 Western Agreement No. 06-DSR-11729 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 6. RIGHTS GRANTED AND RESERVED: 6.1 Right to Interconnect: Each MPP Owner, to the extent of its interest in the Mead 500-kV Substation pursuant to the Joint Ownership Agreement, hereby grants to Nevada, subject to the terms and conditions of this Agreement: (i) the right to interconnect the Harry Allen Line; (ii) the right to interconnect the Nevada Transformer Bank; (iii) the exclusive use of and benefit of the Nevada Transformer Bank; and (iv) the nonexclusive use of and benefit from Common Facilities. 6.2 Transformer Bank Rights: Nevada shall have the exclusive use of and benefit of the Nevada Transformer Bank and MPP shall have the exclusive use of and benefit of the MPP Transformer Bank. 6.3 Transaction Rights: Subject to the terms and conditions of this Agreement, Nevada shall have the right to schedule, deliver, receive, sell, and purchase Power and Energy at the Mead 500-kV Substation. Such transactions may be conducted between Nevada and the MPP Participants or any party, at the time and to the extent that the transacting parties possess transaction rights into or out of the Mead 500-kV Substation. 6.4 MPP Participants' Rights: The exercise of rights granted pursuant to subsection -6.3 herein shall not interfere with or impair the respective rights or abilities of each, MPP Participant to schedule, deliver, receive, sell, and purchase Power and Energy at or through the Mead 500-kV Substation. 6.5 Reservation of Existing Rights: Except as expressly provided herein, the rights granted herein shall not be construed in any way to interfere with or impair the respective existing rights of the MPP Owners, in their sole discretion, to remove all or part of the MPP from the Mead 500-kV Substation, to interconnect with, operate, maintain, expand, sell, or otherwise dispose of the Mead 500-kV Substation as the MPP Owners may deem necessary or appropriate; provided, that 13 Western Agreement No. 06-DSR-11729 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 the disposition or removal of the Interconnection Facilities and the Nevada Transformer Bank shall be subject to the terms and conditions of this Agreement. 6.6 Reservation of Rights: 6.6.1 The Interconnection Facilities may be modified or relocated as necessary by the MPP in accordance with Prudent Utility Practice. The need for such modifications or relocation shall be determined solely by the Management Committee. 6.6.2 Except as provided for in subsection 6.6.3, Nevada shall have the right to participate in discussions of, but shall have no right of approval for, any addition to or modification of the Mead 500-kV Substation. 6.6.3 Nevada shall only have the right of approval for any addition to or modification of, but not. relocation of, the Nevada Transformer Bank. 6.7 Modification of the MPP to a DC Confieuration: 6.7.1 In the event that the MPP Participants approve conversion of the MPP to DC, a written notice shall be promptly sent to Nevada by the Operation Manager. Such notice shall include a proposed design for the DC configuration that shows the new location of the Harry Allen Line termination, an estimate of the termination relocation costs to be assigned to Nevada, and a proposed schedule for the DC conversion. Any costs for modifications to the Harry Allen Line due to a relocation of the termination of such line at the Mead 500-kV Substation will be the responsibility of Nevada. 6.7.2 Nevada shall respond in writing within ninety (90) days of receipt of the written notice from the Operation Manager provided in accordance with subsection 6.7.1 on whether Nevada agrees to pay for the relocation of the termination of the Harry Allen Line at the Mead 500-kV Substation or elects to terminate this Agreement. 14 Western Agreement No. 06-DSR-11729 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 7. PAYMENT FOR RIGHT TO USE COMMON FACILITIES: 7.1 Payment for Right to Use: In consideration for the rights granted pursuant to Section 6 herein, Nevada shall pay or cause to be paid, as provided herein, to the Fiscal Agent a one-time payment for use of Common Facilities calculated pursuant to Exhibit D. Within thirty (30) days after this Agreement has been accepted for filing by FERC, the Fiscal Agent shall submit an invoice for such one-time payment to Nevada. Such invoice shall be paid within ninety (90) days after receipt. 7.2 Distribution of Payment Received for Common Facilities: The payment received pursuant to subsection 7.1 herein shall be made to the Fiscal Agent for the benefit of the MPP Owners. The Fiscal Agent shall credit a portion of such payment to the account of each MPP Owner in proportion to each MPP Owner's interest in Common Facilities. 7.3 Distribution of Funds Received from New Interconnectors: Nevada shall be entitled to receive a pro rata share in accordance with the effective CRR of any payments for the right to use Common Facilities received by the Fiscal Agent from future interconnectors. 7.4 Interconnection Charge at Mead 230-kV Substation: Nevada shall pay an interconnection charge for the 230-kV interconnection of the Nevada Transformer Bank to Western's Mead 230-kV Substation in accordance with Exhibit F. OWNERSHIP: 8.1 Interconnection Facilities: The Interconnection Facilities shall be owned by the MPP Owners to the extent of their ownership interest in the Mead 500-kV Substation, pursuant to the Joint Ownership Agreement. 8.2 Nevada Transformer Bank: The Nevada Transformer Bank shall be owned by the MPP Owners to the extent of their ownership interest in the MPP Transformer Bank, pursuant to the Joint Ownership Agreement. 15 Western Agreement No. 06-DSR-11729 I 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 8.3 Mead 500-kV Substation: The Mead 500-kV Substation shall continue to be owned by and remain the property of each of the MPP Owners to the extent of their ownership interest in the Mead 500-kV Substation pursuant to the Joint Ownership Agreement. 8.4 Capital Improvements: Any Capital Improvement to the Mead 500-kV Substation shall be owned by the MPP Owners. 9. OPERATION: 9.1 Duties of Operation Manager: The Operation Manager shall perform Operating Work in accordance with Prudent Utility Practice and pursuant to the terms and conditions of this Agreement and the Operation Agreement. 9.2 Nevada Transformer Bank: The Operation Manager shall operate the Nevada Transformer Bank in accordance with this Agreement and the MOSI. 9.3 Curtailment: If, at any time, the Mead 500-kV Substation cannot accommodate the aggregate Power and Energy schedules due to such conditions as loop flows on parallel transmission paths, Operating Emergencies, or abnormal operating conditions, the Operation Manager, in its sole discretion, shall take whatever action at the Mead 500-kV Substation it deems appropriate and necessary to relieve any overload, in accordance with Applicable Requirements and Prudent Utility Practice, including the MOSI. 9.4 De-energization: The Parties acknowledge that it may be necessary from time to time for the Operation Manager to de -energize the Interconnection Facilities and/or other Connections at the Mead 500-kV Substation which now exist or may exist in the future in order to, among other things: (i) perform Operating Work, and (ii) install or remove other Connections at the Mead 500-kV Substation. The Operation Manager shall coordinate any scheduled outage of facilities with Nevada and any MPP Participant that may be affected by such outage. 16 Western Agreement No. 06-DSR-11729 1 9.5 Operatini Emergencies: 2 9.5.1 In the event of an Operating Emergency, the Operation Manager, in 3 accordance with applicable operating procedures and Prudent Utility 4 Practice, shall act in good faith and take any and all steps reasonably 5 necessary at the Mead 500-kV Substation to terminate the Operating 6 Emergency. 7 9.5.2 As soon as practicable following the occurrence of an Operating g Emergency, the Operation Manager shall advise the affected parties' 9 scheduling representatives, or their designees, of the nature and expected 10 duration of the Operating Emergency, the steps taken or planned to be 11 taken for the termination of such Operating Emergency, and the estimated 12 cost thereof. 13 9.5.3 In the event the Operation Manager is required to make Capital 14 Improvements to terminate the Operating Emergency and restore the 15 Interconnection Facilities to service, such Capital Improvements shall be 16 made as soon as practicable pursuant to subsection 9.6 herein and in 17 accordance with Prudent Utility Practice, except that no such Capital 18 Improvement costing in excess of $1,000,000 shall be made without the 19 prior approval of the Management Committee. 20 9.6 Capital Improvements: 21 9.6.1 The Operation Manager shall be responsible for and shall perform all 22 design, acquisition, construction, installation, and placing in service of all 23 Capital Improvements. Except as provided pursuant to subsections.9.5 24 and 9.6.2 herein, Capital Improvements shall be recommended and 25 budgeted by the Operation Manager and shall be subject to the prior 26 approval of the MPP Participants in accordance with the Joint Ownership 27 Agreement. 28 17 Western Agreement No. 06-DSR-11729 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 28 110. 9.6.2 The Operation Manager shall be responsible for and shall perform all design, acquisition, construction, installation, and placing in service of all Capital Improvements for the Nevada Transformer Bank. Except as provided pursuant to subsection 9.5 herein, the Nevada Transformer Bank Capital Improvements shall be recommended and budgeted by the Operation Manager in accordance with the Joint Ownership Agreement and shall be subject to the prior approval of Nevada. 9.7 Nevada System: Nevada shall operate, or cause to be operated, its system in accordance with the requirements of WECC and Prudent Utility Practice. MOSI ADMINISTRATION: 10.1 Changes in Conditions: If operational and/or system conditions change, a revised MOSI may be temporarily implemented by the Operation Manager pending concurrence with Nevada and approval by the E&O Committee. The Operation Manager shall provide notification to Nevada and the E&O Committee upon implementation of the revised MOSI. The revised MOSI shall be coordinated with Nevada and submitted to the E&O Committee by the Operation Manager at the next available E&O Committee meeting for approval. If the revised MOSI is not approved by the E&O Committee, Nevada and the Operation Manager shall have thirty (30) days to modify the revised MOSI and resubmit the modified MOSI to the E&O Committee for approval. If the modified MOSI is not approved by the E&O Committee within ninety (90) days, the modified MOSI shall no longer be effective and the original MOSI shall be re -implemented, subject to the Operation Manager taking such steps as are needed to ensure reliability. 10.2 MOSI Compliance: Nevada shall submit, or make arrangements to submit, hourly schedules and any changes thereto to the Operation Manager's schedulers and/or dispatchers in accordance with the MOSI. Notwithstanding the notice requirements of subsection 19.1 herein, if Nevada does not comply with the 18 Western Agreement No. 06-DSR-11729 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 MOSI, the Operation Manager shall inform Nevada of such noncompliance, and shall not be obligated to accept Nevada's schedule(s) until the MOSI has been complied with and all requirements have been met. 11. OPERATIONAL MITIGATION PROCEDURE: The Operation Manager shall implement a Flow Management System to monitor the Mead 500-kV Substation in accordance with Section 7 of the MOSI. 12. COST RESPONSIBILITY: Nevada's share of all costs and expenses incurred by the Operation Manager, in the performance of Operating Work, shall be calculated and allocated by the Operation Manager as set forth below. 12.1 Method of Calculation of the Cost Responsibility Ratio: The Operation Manager shall initially compute the Cost Responsibility Ratio in the manner set forth in Exhibit C. For each Connection installed or removed, the CRR shall be recomputed promptly and shall be effective upon completion of such installation or removal. Upon completion of such recomputation, the Operation Manager shall revise Exhibit C, in accordance with subsection 28.4 herein. 12.2 Costs of Operating Work: The following portions of Operating Work shall be allocated to Nevada and shall be paid in advance in accordance with Section 13: 12.2.1 Mead 500-kV Substation: The CRR share of all Operating Work expenses associated with the Mead 500-kV Substation, including but not limited to overhead expenses, applicable labor loading charges, and administrative and general expenses for the purposes of this subsection. Operating Work expenses associated with the Mead 500-kV Substation shall exclude the MPP Transformer Bank and the Nevada Transformer I: . 12.2.2 Nevada Transformer Bank: All Operating Work expenses associated with the Nevada Transformer Bank, including but not limited to overhead 19 Western Agreement No. 06-DSR-11729 I expenses, applicable labor loading charges, and administrative and general 2 expenses. 3 12.2.3 Perkins PSTs: Charges for the use of the Perkins PSTs will be -,invoiced 4 by the Fiscal Agent in accordance with Exhibit G. 5 13. BUDGET AND PAYMENT OF INVOICES SUBMITTED BY FISCAL AGENT: 6 13.1 Operating Work Budeet: The Fiscal Agent shall furnish Nevada with a copy of 7 the budget for Operating Work at the same time such budget is submitted to the 8 E&O Committee. The budget for the estimated expenses of Operating Work shall 9 be subject to the sole approval of the E&O Committee, excluding Capital 10 Improvements to the Nevada Transformer Bank which shall be subject to the sole 11 approval of Nevada. 12 13.2 Submission of Invoices: As soon as practical, the Fiscal Agent shall submit or 13 cause to be submitted to Nevada an invoice for the total monthly budgeted costs 14 allocated to Nevada pursuant to this Agreement from the Date of Interconnection 15 Completion to the end of the calendar month in which the Date of Interconnection 16 Completion is scheduled to occur and invoices for the next two (2) calendar 17 months immediately following such month. Each calendar month thereafter 18 during the term of this Agreement, the Fiscal Agent shall submit or cause to be 19 submitted to Nevada an invoice for the monthly budgeted costs for the third 20 succeeding calendar month. Each invoice shall indicate the month for which the 21 budgeted costs are being billed. 22 13.3 Payment of Invoices: Nevada shall pay or cause to be paid the invoiced 23 amounts. The Fiscal Agent shall determine the actual monthly costs as soon as 24 practicable. To the extent that the monthly payments made, as projected in the 25 budget, are either less than or greater than the amount of actual monthly costs 26 incurred, the deficiency or excess shall be debited or credited as appropriate by 27 the Fiscal Agent, without interest, against the next succeeding monthly invoice(s) 28 after determination of the deficiency or excess; provided, however, that if such 20 Western Agreement No. 06-DSR-11729 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 J adjustment would occur after the termination of this Agreement, the adjustment shall be made by payment to, or from, the Fiscal Agent, as appropriate. 13.4 Payment of Capital Improvement Costs: The Fiscal Agent shall bill Capital Improvement costs to each MPP Owner, Nevada, and other third parties, as applicable, that may have a cost responsibility at the Mead 500-kV Substation. Nevada shall pay or cause to be paid its proportionate share of such costs pursuant to this Agreement. 13.5 Due Date. of Payments: Amounts invoiced under this Agreement shall be paid to the Fiscal Agent at the address shown on such invoice. Invoices shall be paid thirty (30) days prior to the first day of the month covered by such invoice, except for the invoices covering the first three months which will be due within thirty (30) days after the invoice is received by Nevada. Payment shall be considered made on the date payment is received by the Fiscal Agent. , 13.6 Late Payment Charge: Invoiced amounts not received from Nevada by the Fiscal Agent on or before the due date specified herein shall accrue interest in accordance with the provisions of 18 CFR Section 35.19a(a)(2)(iii), prorated on a daily basis from the due date to the day such unpaid amount is paid in full. 13.7 Disputed Charges: In the event Nevada disputes any portion of any amount specified in a monthly invoice, Nevada shall give written notice of such dispute to the Fiscal Agent. Notwithstanding such dispute, Nevada shall pay, or cause to be paid, the total amount specified in the invoice. Such notice shall include the reasons for disputing the invoiced amount. Upon receipt of such notice, the Fiscal Agent shall provide notice to all Parties of such dispute. The Fiscal Agent and Nevada shall review the disputed amounts within a reasonable time and if it is determined that the invoice was incorrect, the amount determined to be the difference between the correct amount and the amount paid shall be either credited or debited, as the case may be, to the affected Party(ies) by the Fiscal Agent in the next succeeding monthly invoice; provided, however, that if such 21 Western Agreement No. 06-DSR-11729 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 28 114. II 15 adjustment occurs after the termination of this Agreement, the adjustment shall be made by prompt payment to, or from, the Fiscal Agent, as appropriate. 13.8 Use of Operation Manner's Funds: The Operation Manager shall not be required to advance any of its own funds on behalf of Nevada. CREDITWORTHINESS: For purposes of determining Nevada's ability to meet its obligations hereunder at any time during the term of this Agreement, in the event that the senior, long-term unsecured debt rating of Nevada is downgraded below BBB by S&P or Baa2 by Moody's, the MPP Owners may require Nevada to provide and maintain in effect a letter of credit or an alternative form of security that is acceptable to the MPP Owners and protects the MPP Owners against non-payment. In the event that the MPP Owners elect to require a letter of credit or other alternative form of security, the MPP Owners shall notify Nevada in writing of the election and such security shall be provided within thirty (30) business days after receipt of the notice. Such security shall be either (i) an irrevocable, standby letter of credit in a form and substance satisfactory to the MPP Owners, issued by a financial institution organized under the laws of the United States or any State (or that is a domestic branch of a foreign bank),. which at the time of such issuance (1) has either (a) a long-term unsecured debt rating of A or better by S&P or A2 or better by Moody's or (b) a certificate of deposit rating of A-1+ or better by S&P and P- 1 or better by Moody's or (2) is otherwise satisfactory to the MPP Owners, or (ii) other acceptable guaranty of payment satisfactory to the MPP Owners. TAXES: 15.1 Property and Other Taxes: 15.1.1, Nevada shall be solely responsible for any property taxes imposed upon the MPP Participants with respect to the Interconnection Facilities, the Nevada Transformer Bank, and Nevada's CRR of any Capital Improvements, regardless of MPP's ownership of such facilities. Nevada shall use reasonable efforts to have any taxing authority impose any property taxes, in lieu payments, or other taxes or assessments, excluding 22 Western Agreement No. 06-DSR-11729 I any sales, use, income, franchise, or gross receipt taxes, directly upon 2 Nevada on the basis of its beneficial use of the Interconnection Facilities 3 and the Nevada Transformer Bank. In the event such tax authorities hold 4 the MPP Participants liable for property taxes, voluntary payments in lieu 5 thereof in accordance with any MPP Participant's normal practices (in lieu 6 payments) or other taxes, such property taxes, or in lieu payments, or other 7 taxes, excluding any sales, use, income, franchise, or gross receipts taxes, 8 will be billed to and paid by Nevada. 9 15.1.2 Subject to Section 15.1.1 herein, all taxes and assessments, or 10 contributions in lieu thereof, levied against the property interest of any 11 Party shall be the sole responsibility of the Party upon whom said taxes 12 and assessments are levied, unless such taxes and assessments are levied 13 directly upon an individual Party on behalf of any or all of the other 14 Parties, in which case such taxes and assessments shall be the 15 responsibility of such Parties. 16 15.1.3 Any Party exempted from any taxes assessed against any or all of the 17 other Parties shall be given credit for such exemption. 18 15.1.4 If any taxing authority assesses a transaction privilege tax, use tax, sales 19 tax, gross receipts tax, compensating tax, excise tax, or other tax, 20 including applicable interest and penalties, but excluding any income or 21 franchise tax, against any monies paid by Nevada to the Operation 22 Manager on behalf of the MPP Participants, Nevada shall reimburse the. 23 MPP Participants upon receipt of written notice from the Operation 24 Manager on the assessment of any such tax or shall pay such tax in 25 advance if included in any regular invoice. 26 15.2 Income Taxes: 27 15.2.1 Nevada shall be solely responsible for any income taxes imposed upon 28 any or all the MPP Participants with respect to (i) the Interconnection 23 Western Agreement No. 06-DSR-11729 1 2 3 4 5 6 7 8 71 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 16 Facilities and the Nevada Transformer Bank and (ii) any payment or transfer of assets made by Nevada for Capital Improvements, based on such MPP Participant's Income Tax Cost Component (ITCC), an estimate of which is shown in Exhibit E. 15.2.2 The ITCC, if incurred by a MPP Participant, shall be billed to and paid by Nevada in accordance with Section 13 herein. 15.2.3 The Fiscal Agent shall distribute any ITCC received from Nevada to the applicable MPP Participants in accordance with Exhibit E. DISPOSITION OF FACILITIES: Upon termination of this Agreement, the Operation Manager shall have the option either to: (i) retain the Interconnection Facilities and/or the Nevada Transformer Bank and pay to Nevada the Net Salvage Value thereof; or (ii) remove or cause to be removed the Interconnection Facilities and/or the Nevada Transformer Bank, deliver or cause to be delivered the salvageable material and equipment of such facilities to Nevada, repair or cause to be repaired any damage to the Mead 500-kV Substation caused by such removal, and restore or cause to be restored the site to a clean and neat condition. For purposes of the foregoing, the term "Net Salvage Value" shall mean the fair market value of any salvageable material and equipment that would have been delivered to Nevada if the Operation Manager had elected to remove the Interconnection Facilities and/or the Nevada Transformer Bank, minus all costs and expenses that would have been incurred in removing such facilities, repairing any damage to the Mead 500-kV Substation, and restoring the site to a clean and neat condition. In the event the Operation Manager elects to remove the Interconnection Facilities and/or the Nevada Transformer Bank, pursuant to this Section 16, the Operation Manager shall provide in writing to Nevada an itemized cost estimate for the costs of such removal, disposal, repair, and restoration. Upon agreement of such costs, not to be unreasonably withheld, such payment shall be paid to the Fiscal Agent on the basis of invoices submitted by the Fiscal Agent to Nevada pursuant to Section 13 herein, and the 24 Western Agreement No. 06-DSR-11729 I Fiscal Agent may require security for such costs in accordance with Section 14 herein 2 before the commencement of any work. 3 17. LIABILITY; COVENANT NOT TO EXECUTE: 4 17.1 Covenant Not to Execute: Except for any judgment debt for damage resulting 5 from Willful Action and except to the extent any judgment debt is collectible 6 from valid insurance, and subject to the provisions of subsections 17.2, 17.3, 17.4, 7 17.5, and 17.6 herein, each Party hereby extends to all other Parties, their 8 directors, members of their governing bodies, officers, and employees, its 9 covenant not to execute, levy or otherwise enforce a judgment obtained against 10 any of them, including recording or effecting a judgment lien, for any direct, 11 indirect, or consequential loss, damage, claim, cost, charge, or expense, whether 12 or not resulting from the negligence of such Party, its directors, members of its 13 governing bodies, officers, employees, or any other person or entity whose 14 negligence would be imputed to such Party, from (i) the performance or 15 non-performance of the obligations of any Party under this Agreement, other than 16 the obligation to pay any monies which have become due under the terms of this 17 Agreement; (ii) Operating Work directly related to the Interconnection Facilities 18 or the Nevada Transformer Bank; (iii) the design, construction, use; or ownership 19 of the Interconnection Facilities or the Nevada Transformer Bank. Subject to 20 subsections 17.2, 17.3, 17.4, 17.5, and 17.6 herein, this covenant not to execute 21 shall apply to judgments obtained in any type of claim or action, including but .not 22 limited to, claims or actions based upon contract, tort, patent, and trademark. 23 17.2 Collection of Insurance Proceeds: In the event any insurer providing insurance 24 refuses to pay any judgment obtained by a Party against another Party, its 25 directors, members of its governing bodies, officers, or employees, on account of 26 liability referred to in subsection 17.1 herein, the Party, its directors, members of 27 its governing bodies, officers, or employees, against whom the judgment is 28 obtained, shall execute, at the request of the prevailing Party and in consideration 25 Western Agreement No. 06-DSR-11729 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 covenant given in subsection 17.1 herein, such documents as may be necessary to effect an assignment of its contractual rights against the nonpaying insurer and thereby give the prevailing Party the opportunity to enforce its judgment directly against such insurer. In no event when a judgment debt is collectible from valid insurance shall the prevailing Party execute, levy, or otherwise enforce the judgment, including recording or effecting a judgment lien, against the Party, its directors, members of its governing bodies, officers, or employees against whom the judgment was obtained. 17.3 Obligation for Work Liability Costs: Except as provided in subsections 17.4, 17.5, and 17.6 herein, Nevada shall pay its proportionate share of the cost and expenses of discharging all Work Liability imposed upon one or more of the Parties for which payment is not made by the insurer providing insurance hereunder. 17.4 Responsibility of a Party for Its Own Willful Action: Each Party shall be responsible for any damage, loss, claim, cost, charge, or expense that is not covered by insurance and that results from its own Willful Action as defined in subsection 5.31.1 herein. Each Party, except Western, shall indemnify and hold harmless the other Parties, their directors, members of their governing bodies, officers, and employees from any such damage, loss, claim, cost, charge, or expense. 17.5 Limitation of Recovery on Judgment Debt: Except as provided in subsection 17.4 herein, the aggregate liability of any Party to all other Parties for its own Willful Action not covered by insurance shall be determined as follows: 17.5.1 All such liability for damages, losses, claims, costs, charges or expenses of such Party shall not exceed $500,000 per occurrence. Each Party extends to each other Party, its directors, members of its governing body, officers, and employees, its covenant not to execute, levy or otherwise enforce a 26 Western Agreement No. 06-DSR-11729 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 judgment against any of them for any such aggregate liability in excess of $500,000 per occurrence. 17.5.2 A claim based on Willful Action must be perfected by filing suit in a court of competent jurisdiction within three years after the Willful Action occurs. All claims made thereafter relating to the same Willful Action shall be barred by this subsection 17.5.2. The award to each non -willfully acting Party from each Party determined to have committed Willful Action shall be determined as follows: Each Party who successfully files suit for remuneration shall receive the lesser of (i) its final judgment awarded or settlement made; or (ii) its pro-rata share of the $500,000 maximum recovery established in subsection 17.5.1 herein, based upon the ratio of the unsatisfied portion of such Party's judgment or settlement to the total unsatisfied portion of all such judgments and settlements. 17.6 Indemnification for Claims of Customers: Except for liability resulting from Willful Action, which shall be the responsibility of the willfully acting Party and subject to subsection 17.5 herein, any Party, except Western, whose electric customer shall have a claim or bring an action against any other Party for any death, injury, loss or damage arising out of or in connection with electric service to such customer and caused by the operation or failure of operation of the Mead 500-kV Substation, any interconnection facilities connected thereto or any portion thereof, shall indemnify and hold harmless such other Party, its directors, members of its governing bodies, officers, and employees, from and against any liability for such claim for death, injury, loss or damage. 17.7 No Relief of Insurer from Liability: The provisions of this Section 17 shall not be construed so as to relieve any insurer of its obligation to pay any insurance proceeds in accordance with the terms and conditions of valid and collectible policies of insurance. 27 , Western Agreement No. 06-DSR-11729 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 17.8 Western Subiect to Tort Claims Act: The provisions of this Section shall not be construed as enlarging, diminishing, or changing in any way the rights, duties, and obligations of Western under Federal law, including but not limited to the Federal Tort Claims Act of 1946, 60 Stat. 842, as amended. 18. AUDITS: 18.1 Right to Audit: Nevada shall be entitled to conduct an annual audit pursuant to the provisions of this Agreement. Any audit undertaken by Nevada or by its representatives shall: (i) be conducted only during the Operation Manager's normal business hours; (ii) be performed in conformance with generally accepted auditing standards; and (iii) be limited to the three (3) year period following the end of the calendar year in which the costs being audited were invoiced. 18.2 Retention of Records and Audits: The Operation Manager shall maintain adequate financial records and documentation to support all costs invoiced to Nevada. The Operation Manager shall maintain such financial records and documentation for a period of at least three (3) years following the end of the fiscal year in which the costs were invoiced. Such financial records and documentation and other pertinent information shall be made available upon request to the auditors or audit representatives of Nevada. Such information shall be made available during normal business hours of the Operation Manager's staff, which maintains such records and documentation. The auditors shall perform such audits in conformance with generally accepted auditing standards. 18.3 Costs of Audits: All costs and expenses of an audit, including the costs incurred by the Operation Manager to accommodate such audit, shall be the responsibility of Nevada. 18.4 Notice of Audit Results and Adjustments: Upon completion of each audit conducted pursuant to this Agreement, the audit results shall promptly be made available by Nevada to the Operation Manager, and the Operation Manager shall be notified in writing of any exception taken as a result of the audit to the costs 28 Western Agreement No. 06-DSR-11729 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 charged. The Operation Manager shall promptly review all exceptions. If such exception reflects an error in the billing, the Fiscal Agent shall credit or bill Nevada, as appropriate, for the amount of such exception, without any interest. 18.5 Audit Reports: The results of audits shall promptly be made available to all Parties. 19. DEFAULTS: Each Party shall perform all of its duties, obligations, and cost responsibilities pursuant to this Agreement. Any payment not made when due, or any failure to perform the duties and obligations agreed to herein shall constitute a default under this Agreement. The Fiscal Agent shall give written notice of any payment default and cure to each of the Parties. 19.1 Performance Default: Upon a default by Nevada, other than a failure to pay any obligation(s) due under this Agreement, the Operation Manager shall, as soon as practicable, give written notice of such default to each of the Parties. Upon a default by the Operation Manager, any other Party not in default, as soon as practicable, shall give written notice of such default to the Operation Manager and to each of the Parties. 19.2 Payment Default: Failure by Nevada to pay or cause to be paid any obligation(s) due under this Agreement shall constitute a default. The Fiscal Agent shall, as soon as practicable, give written notice of such default to each of the Parties. Upon cure of such default by Nevada, the Fiscal Agent shall notify each of the Parties of such cure. The Fiscal Agent shall also give written notice of both default and cure to each MPP Participant. 19.3 Default Remedies: 19.3.1 If the default is not cured within thirty (30) calendar days after the giving of notice of default pursuant to subsection 19.1 or 19.2 herein, the Operation Manager, unless otherwise directed by the E&O Committee, shall: (i) discontinue any of the services provided or made available hereunder; (ii) suspend any right granted pursuant to Section 6 herein; and 29 Western Agreement No. 06-DSR- 11729 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 (iii) refuse to resume any such discontinued service and to restore any such suspended right until such default is cured. Such discontinuance of service or suspension of rights by the Operation Manager shall not act to relieve Nevada of any of its duties or obligations under this Agreement. 19.3.2 Except as expressly limited by this Agreement, in the event Nevada is in default, the Operation Manager may without further notice exercise any rights and remedies provided herein or otherwise available at law or in equity, including the right to terminate this Agreement upon giving notice to Nevada of intent to terminate and the filing at FERC of a notice of termination for the Agreement, which notice of termination must be accepted for filing by FERC. 19.4 Temporary Use of Rights of Interconnection Facilities and Nevada Transformer Bank for Payment Default: In the event of a payment default by Nevada, pursuant to subsection 19.2 herein, and the discontinuance of the use of the Interconnection Facilities and the Nevada Transformer Bank, pursuant to subsection 19.3 herein, Nevada's rights and interests under this Contract, including without limitation the right to schedule Power and Energy with respect to the Interconnection Facilities and the Nevada Transformer Bank, may be temporarily used by the MPP Participants as set forth in this subsection 19.4. Subject to the sale, transfer, disposal, or cure of the default, the MPP Participants shall be entitled to use a pro-rata share, based upon their ownership in the Joint Ownership Agreement, of Nevada's rights and interests under this Agreement for the period beginning from the date of such discontinuance of use by Nevada and continuing for the duration of the default. 19.5 Cure of Default: In the event of a default by a Party in any of the terms and conditions of this Agreement and the giving of notice of default as provided in subsection 19.1 or 19.2 herein, the defaulting Party shall take all steps necessary to cure such default as promptly and completely as possible. 30 Western Agreement No. 06-DSR-11729 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 19.6 Right to Legal Action: Any Party may bring any suit, action, or proceeding at law or in equity as may be necessary or appropriate to enforce any covenant, agreement, or obligation under this Agreement. 20. UNCONTROLLABLE FORCES: No Party shall be considered to be in default in the performance of its obligations hereunder, other than obligations of Nevada to make payment of invoices rendered hereunder, when a failure of performance shall be due to an Uncontrollable Force. The term "Uncontrollable Force" shall mean any cause beyond the control of the Party affected, including but not restricted to flood, earthquake, storm, volcanic eruption, geohydrologic subsidence, fire, lightning or other acts of God, radioactive contamination, failure of or threat of failure of facilities, epidemic, war, riot, civil disturbance or disobedience, labor dispute, labor or material shortage, sabotage, subversion, governmental priorities, change in applicable law or regulations, restraint by court order or public authority, and action or non -action by, or inability to obtain the necessary authorizations or approvals from, any governmental agency or authority, 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. Nothing contained herein shall be construed so as to require a Party to settle any strike or labor dispute in which it may be involved. Any Party rendered unable to fulfill any of its obligations hereunder by reason of an Uncontrollable Force shall give prompt written notice of such fact to the other Parties and shall exercise due diligence to remove such inability with all reasonable dispatch. 21. RELATIONSHIP OF THE PARTIES: The covenants, obligations, and liabilities of the Parties are intended to be several and not joint or collective and nothing herein contained shall ever be construed to create an association, joint venture, trust, or partnership or to impose a trust or partnership covenant, obligation, or liability on or with regard to any one or more of the Parties. Each Party shall be individually responsible for its own covenants, obligations, and liabilities as herein provided. No Party or group of Parties shall be under the control of nor shall be deemed to control any other Party or the 31 Western Agreement No. 06-DSR-11729 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 Parties as a group. No Party shall be the agent of nor have a right or power to bind any other Party without its express written consent, except as expressly provided in this Agreement. The relationship among the MPP Owners, their respective rights, including property rights, and obligations, including payment obligations, hereunder, shall be as provided pursuant to the MPP agreements. 22. GOVERNING LAW AND VENUE: This Agreement shall be interpreted, governed by, and construed under the laws of the State of Arizona as if executed and to be performed wholly within the State of Arizona. Notwithstanding the foregoing, insofar as the rights or obligations of Western are concerned, applicable Federal law shall be controlling. 23. SUCCESSORS AND ASSIGNS: 23.1 Conditions to Assignment: This Agreement may be assigned by Nevada only with the written consent of the other Parties; provided, that Nevada may assign this Agreement without the consent of the other Parties to any affiliate of Nevada with an equal or greater credit rating and with the legal authority and operational ability to satisfy the obligations of Nevada under this Agreement. In addition and subject to any other agreement between the MPP Participants, each MPP Participant may assign their own rights and obligations under this Agreement without the consent of Nevada; provided, that such assignment shall not result in any changes in the rights, obligations, responsibilities, or benefits enjoyed by Nevada under this Agreement. Any attempted assignment that violates this subsection 23.1 is void and ineffective. Any assignment under this Agreement shall not relieve a Party of its obligations, unless and until the requirements of subsection 23.3 are satisfied, nor shall a Party's obligations be enlarged, in whole or in part, by reason thereof Where required, consent to assignment will not be unreasonably withheld, conditioned, or delayed. 23.2 Binding Upon Successors: This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. 32 Western Agreement No. 06-DSR-11729 1 23.3 Conditions of Release from Further Oblizations: No assignment or transfer of 2 this Agreement or any interest hereunder shall relieve the assigning or transferring 3 Party from full liability or financial responsibility for performance under this 4 Agreement, unless and until: (i) all other Parties shall consent in writing thereto, 5 which consent shall not be unreasonably withheld or delayed; and (ii) the assignee 6 or transferee shall agree in writing to assume all such obligations and duties of the 7 assigning or transferring Parry hereunder and shall take or acquire such interest 8 subject to the terms and conditions of this Agreement. 9 24. NONDEDICATION OF FACILITIES: Except as expressly provided herein, each 10 Parry does not intend to dedicate its properties or facilities, or any part thereof, to any 11 other Party, to the customers of any Party, or to the public and nothing in this Agreement 12 shall be construed as constituting a dedication. 13 25. REGULATORY APPROVALS: 14 25.1 Approvals: The Parties agree to cooperate to obtain any state or federal 15 regulatory approvals necessary for the full participation of any Party in the rights 16 and obligations of this Agreement. Each Party hereto covenants that it shall 17 support the terms and conditions of this Agreement in any hearings before FERC 18 or any other competent regulatory body to which this Agreement may be subject. 19 25.2 Fees: Any MPP Participant required to file this Agreement with FERC, or with 20 any other regulatory body having jurisdiction, shall submit a written invoice of 21 any filing fee incurred as a result of the initial filing of this Agreement to the 22 Fiscal Agent. The Fiscal Agent shall add,such fee to the next succeeding invoice 23 in accordance with subsection 13.2 herein. Within twenty (20) calendar days after 24 receipt of funds therefore, the Fiscal Agent shall credit such filing fee(s) to the 25 appropriate MPP Participant. 26 26. NOTICES: 27 26.1 Recipients of Notices: Except as set forth in subsection 26.2 herein, any legal 28 notice, demand, or communication provided for in this Agreement shall be in 33 Western Agreement No. 06-DSR-11729 1 writing and shall be served, given, delivered in person, or sent by registered or 2 certified mail, postage prepaid, to the persons specified in Exhibit H. 3 26.2 Routine Communications: Communications of a routine nature related to 4 matters herein shall be given in such manner as the representatives of the Parties 5 shall arrange. 6 26.3 Exhibits: Revised exhibits shall be distributed by the Operation Manager to the 7 Parties in writing or electronically, as agreed to by the Parties. 8 26.4 Change of Designations of Recipients: Any Parry may, at any time, by written 9 notice to all other Parties, designate different or additional persons or different 10 addresses for the giving of notices hereunder. 11 27. DAMAGE OR DESTRUCTION: 12 27.1 Mead 500-kV Substation: In the event any facilities of the Mead 500-kV 13 Substation are damaged or destroyed and the MPP Owners do not repair or 14 reconstruct such facilities, the MPP Owners agree to negotiate in good faith with 15 Nevada in regard to the repair, reconstruction, or replacement of all or part of 16 such facilities. 17 27.2 Interconnection Facilities: Subject to subsection 27.1 herein, if the 18 Interconnection Facilities and/or the Nevada Transformer Bank are damaged or 19 destroyed, the'Operation Manager shall: (i) to the extent necessary apply the 20 proceeds of any insurance paid on account thereof to the cost of repair, 21 replacement, renovation, and placing in service of such Interconnection Facilities 22 and/or the Nevada Transformer Bank; (ii) repair or reconstruct such 23 Interconnection Facilities and/or the -Nevada Transformer Bank; and (iii) credit or 24 pay to Nevada its applicable share of any excess insurance proceeds for the 25 Interconnection Facilities and/or the Nevada Transformer Bank. To the extent 26 that the proceeds of any insurance or any self-insurance funds applied to the 27 repair, replacement, renovation, and placing in service thereof are insufficient for 28 such purpose, Nevada shall pay its applicable share of such deficiency; provided, 34 Western Agreement No. 06-DSR-11729 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 however, if the Mead 500-kV Substation has also been materially damaged or destroyed, a decision of the MPP Owners to repair or reconstruct the Interconnection Facilities and/or the Nevada Transformer Bank shall be subject to a decision of the MPP Participants to repair or reconstruct the Mead 500-kV Substation. 28. GENERAL PROVISIONS: 28.1 Entire Agreement: This Agreement shall constitute the entire agreement between the Parties and shall supersede all prior proposals, representations, negotiations, or letters, whether written or oral. In the event any conflict affecting the Parties arises between the terms and conditions of this Agreement and the terms and conditions of the Operation Agreement, the terms and conditions of the Operation Agreement shall govern. 28.2 Nonpartitionment: Each Party hereto waives any rights which it may have to partition any component of the Interconnection Facilities or this Agreement, whether by partition in kind or by sale and division of the proceeds, and shall not resort to any action in law or in equity to partition the same. Each Party waives the benefits of all laws that may now or hereafter authorize such partition for the term of this Agreement or for such lesser period as may be required under applicable law. 28.3 No Implied Obligations: The Parties shall not be bound by or be liable for any statement,representation, promise, inducement, or understanding of any kind relating to the subject matter herein not set forth in this Agreement. 28.4 Exhibits Made a Part of the Agreement: Exhibits A, B, C, D, E, F, G, and H attached hereto are by this reference made a part of this Agreement. The initial exhibits to this Agreement, as they may be amended or revised from time to time, are attached to this Agreement and are incorporated by reference as if herein fully set forth. New exhibits may be added in the future, as required, and shall be made part of this Agreement by mutual written agreement of the Parties. 35 Western Agreement No. 06-DSR-11729 1 28.5 Amendments and Revision of Exhibits: This Agreement may only be modified 2 by an amendment signed by all Parties, except that revisions to Exhibits C, E, F, 3 and H will not require signature by the Parties. Any required and necessary, 4 revisions of the exhibits shall be made by the Operation Manager, and such 5 revised exhibits shall be subject to the approval of the E&O Committee and/or the 6 Management Committee, as applicable, and Nevada. Such revised exhibits shall 7 be sent to each Party in accordance with subsection 26.3 herein. 8 28.6 Severability: In the event that any of the terms, covenants or conditions of this 9 Agreement, or the application of any such term, covenant or condition, shall be 10 held invalid as to any person or circumstance by any court having jurisdiction in 11 the premises, all other terms, covenants or conditions of this Agreement and their 12 application shall not be affected thereby, but shall remain in force and effect. 13 28.7 No Third Party Rights Other Than Specified: Except as otherwise specifically 14 provided in this Agreement, the Parties do not intend to create rights in or to grant 15 remedies to any third party as a beneficiary of this Agreement or of any duty, 16 covenant, obligation or undertaking established herein. 17 28.8 No Precedence of Waiver: Any waiver at anytime by any Party of its rights 18 with respect to a default or any other matter arising in connection with this 19 Agreement shall not be deemed a waiver with respect to any subsequent default or 20 matter whether of a similar or different nature. 21 28.9 Section Headings Not Binding: Other than definitions, section headings and 22 subsection headings in this Agreement are for convenience only and are not to be 23 construed to define, limit, expand, interpret, or amplify the provisions of this 24 Agreement. 25 28.110 Authorized Representative: Each Party by written notice to each other Party 26 shall designate one or more Authorized Representatives authorized to act on its 27 behalf with respect to technical and operational matters related to this Agreement. 28 36 Western Agreement No. 06-DSR-11729 I Each Party may change the designation of its Authorized Representative(s) by 2 oral notice confirmed by written notice. 3 28.11 Ec&O Committee Meetings: As a means of permitting Nevada to participate in 4 the coordination and exchange of information on a prompt and orderly basis in 5 connection with matters under this Agreement, Nevada shall be entitled to have a 6 non -voting representative attend any meeting of the E&O Committee. If the E&O 7 Committee, acting in good faith, elects to go into executive session for any reason 8 during any meeting of the E&O Committee, Nevada shall not be allowed to attend 9 such executive session. The E&O Committee secretary shall provide timely 10 notification of the E&O Committee meetings to Nevada's Authorized 11 Representative(s). 12 28.12 Western's Contingent Upon Authorization: In order to receive and expend 13 funds advanced from any Party necessary for the continued performance of the 14 obligations of Western under this Agreement, additional authorization may be 15 required. In case such authorization is not received, the Parties hereby release 16 Western from those contractual obligations and from all liability due to the lack of 17 such authorization. 18 29. SURVIVAL OF OBLIGATIONS AND LIABILITIES: The termination of this 19 Agreement shall not relieve any Party of its obligations or duties under this Agreement 20 incurred prior to termination of this Agreement or which must be fulfilled after the date 21 of termination of this Agreement. 22 30. EXECUTION BY COUNTERPARTS: This Agreement may be executed in any 23 number of counterparts and, upon execution and delivery by each Party, the executed and 24 delivered counterparts together shall have the same force and effect as an original 25 instrument as if all Parties had signed the same instrument. Any signature page of this 26 Agreement may be detached from any counterpart of this Agreement without impairing 27 the legal effect of any signatures thereon, and may be attached to another counterpart of 28 37 Western Agreement No. 06-DSR- 11729 1 2 3 31. 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 this Agreement identical in form hereto, but having attached to it one or more signature pages. SIGNATURE CLAUSE: The signatories hereto represent that they have been appropriately authorized to enter into this Mead -Phoenix Project Interconnection and Operation Agreement with Nevada Power Company at Mead 500-kV Substation on behalf of the Party for whom each signs. ARIZONA PUBLIC SERVICE COMPANY SIGNATURE _ NAME TITLE DATE SIGNED M-S-R PUBLIC POWER AGENCY SIGNATURE _ TITLE ATTEST: NAME TITLE DATE SIGNED SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT SIGNATURE _ NAME TITLE DATE SIGNED 38 Western Agreement No. 06-DSR- 11729 I SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State 2 of Arizona as Southern California Public Power Authority Association 3 (AUTHORITY INTEREST - MEMBERS) El 5 6 7 8 9 10 11 12 13 14 15. 16 17 18 19 20 21 22 23 24 25 26 27 28 SIGNATURE _ TITLE ATTEST: NAME TITLE DATE SIGNED SOUTHERN CALIFORNIA PUBLIC POWER AUTHORITY, doing business in the State of Arizona as Southern California Public Power Authority Association (AUTHORITY INTEREST -WESTERN) SIGNATURE — TITLE ATTEST: NAME TITLE DATE SIGNED CITY OF VERNON SIGNATURL9�'� TITLE Mayor ATTEST: NAME TITLE A&14 , &M/ DATE SIGNED WED S TO FORM: A. a rison, Acting City Attorney 39 Western Agreement No. 06-DSR-11729 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 NEVADA POWER COMPANY SIGNATURE _ NAME TITLE DATE SIGNED WESTERN AREA POWER ADMINISTRATION, as MPP Operation Manager SIGNATURE NAME TITLE DATE SIGNED 40 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit A Agreement No. 06-DSR-11729 Nevada Power Company 11\ 1 e• Xl_-Ii I o-FxTi-v u r iTdv WD AWFNC nTi THE, MVATI S00-KV SUBSTA 1. This Exhibit A, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, and shall remain in effect until superseded by another Exhibit A; provided, this Exhibit A or any superseding Exhibit A shall terminate by the expiration of the Agreement. 2. The Interconnection Facilities shall include, but not be limited to, the items described below: 2.1 Transmission line span from the dead-end structure for the Harry Allen Line outside the fence of the Mead 500-kV Substation to the connection at the 500-kV bus; 1 2.2 Two 500-kV bays, including bus work, five (5) circuit breakers, nine (9) disconnect switches, one (1) disconnect switch with ground blade, and other associated equipment;. 2.3 Cable from the 500-kV bus to the connection to the high side of the Nevada Transformer Bank in the Mead 500-kV Substation; 2.4 Cable from the low side of the Nevada Transformer Bank to the connection to the turning structure before the 230-kV bus in the Mead 230-kV Substation; 2.5 Insulators, equipment bus interconnections, conductor, and associated hardware; 2.6 Protective equipment, metering, and control, monitoring, and communication equipment; and 2.7 Site preparation, which consists of foundations, conduit, and grounding. 3. A single line drawing of the Mead 500-kV Substation is shown on Page 2 of this Exhibit A. 4. This Exhibit A to Agreement No. 06-DSR-11729 may be modified in accordance with subsection 28.5 of this Agreement. A-1 Western Agreement No. 06-DSR-11729 ƒ { ] F s | - e Mead -Phoenix Project Exhibit A Agreement No. 06 DSR- 1729 Nevada Power Company G @ ( i z :{ . . m I «\ \ j « A- Western Agreement No. 06 DSR 11729 2 Mead -Phoenix Project Exhibit B Agreement No. 06-DSR-11729 Nevada Power Company MEAD 500-ITV SUBSTATION COMMON FACILITIES COST This Exhibit B, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, and shall remain in effect until superseded by another Exhibit B; provided, this Exhibit B or any superseding Exhibit B shall terminate by the expiration of the Agreement. Common Facilities and their associated costs at the Mead 500-kV Substation are identified as follows: 'Common Facilities i Land & Land Rights Structures and Improvements Roads Overhead Conductor Station Service Meter / Relay / Control Digital Fault Recorder DC System Communications Subtotal Cost as of December 2006 $890,000 $1,770,000 20,000 180,000 334,000 140,000 53,000 14,000 178,000 $2,689,000 Administrative and General Expenses 43,024 ($2,689,000 X 1.6%) Mead 500-kV Substation $3,622.024 3. This Exhibit B to Agreement No. 06-DSR-11729 may be modified in accordance with subsection 28.5 of this Agreement. I These are for the Meadr500-kV Substation, excluding the MPP Transformer Bank, installed as of April 1996. B-1 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit C Agreement No. 06-DSR-11729 Nevada Power Company COST RESPONSIBILITY RATIO (CM 1. This Exhibit C, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, and shall remain in effect until superseded by another Exhibit C; provided, this Exhibit C or any superseding Exhibit C shall terminate by the expiration of the Agreement. 2. Computation of the CRR for the Mead 500-kV Substation after Nevada's interconnections: CRR = B = 2 = 2 = 0.40 A+B+Z 3+2+0 5 Where: A = Connections used by MPP 3.0 B = Connections used by Nevada 2.0 Z = Connections used by Others 0_0 Total Number of Substation Connections 5.0 3. Connections at the Mead 500-kV Substation: MPP Nevada Others Harry Allen -Mead 500-kV 0.0 1.0 0.0 Mead -Marketplace 500-kV 10 0.0 0.0 Westwing-Mead 500-kV 1.0 0.0 0.0 MPP Transformer Bank 1.0 0.0 0.0 Nevada Transformer Bank 0_0 1_0 0_0 Total Connections by Entity 3.0 2.0 0.0 Total Connections 5.0 4. The CRR shall be applied to the one-time payment pursuant to Exhibit D. 5. The CRR shall be applied to the costs of Operating Work after the Date of Interconnection Completion of the Harry Allen Line. 6. This Exhibit C to Agreement No. 06-DSR-11729 may be modified in accordance with subsection 28.5 of this Agreement. C-1 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit ID Agreement No. 06-IDSR-11729 Nevada Power Company CALCULATION OF PAYMENT FOR USE OF COMMON FACILITIES 1. This Exhibit D, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, and shall remain in effect until superseded by another Exhibit D; provided, this Exhibit D or any superseding Exhibit D shall terminate by the expiration of the Agreement. 2. The one-time payment to be made by Nevada for use of Common Facilities is calculated as follows: P = OIC x CRR = ($3,622,024) x (0.4) = $1,448,810 Where: P = Payment by Nevada for use of Common Facilities OIC = Original installed cost of Common Facilities prior to Nevada's two (2) interconnections, as shown in Exhibit B. CRR = Nevada's CRR calculated pursuant to Exhibit C. 3. This Exhibit D to Agreement No. 06-DSR-11729 may be modified in accordance with subsection 28.5 of this Agreement. D-1 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit E Agreement No. 06-DSR-11729 Nevada Power Company ESTIMATED INCOME TAX COST COMPONENT (ITCC) COMPOSITE RATE l . This Exhibit E, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, and shall remain in effect until superseded by another Exhibit E; provided, this Exhibit E or any superseding Exhibit E shall terminate by the expiration of the Agreement. 2. The composite percentage is calculated by multiplying the MPP Participant's ownership percentage for the MPP Transformer Bank, in accordance with the Joint Ownership Agreement, times such MPP Participant's ITCC percentage. MPP Participant Ownership % ITCC % Composite % Arizona 19.0476 31 6.10 3. This Exhibit E to Agreement No. 06-DSR-11729 may be modified in accordance with subsection 28.5 of this Agreement. E-1 Western Agreement No. 06-DSR-11729 2. Mead -Phoenix Project Exhibit F Agreement No. 06-DSR-11729 Nevada Power Company N CHARGE FOR NEV This Exhibit F, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, and shall remain in effect until superseded by another Exhibit F; provided, this Exhibit F or any superseding Exhibit F shall terminate by the expiration of the Agreement. The cost computed in this Exhibit F and the resulting monthly charge is subject to periodic revision by Western. Contributions in aid of construction for the Mead 230-kV Substation interconnection facilities shall not be used as a part of the capitalized costs for calculating the interconnection charge. The charge is computed as follows: 2.1 ESTIMATED ANNUAL AMORTIZATION AND INTEREST COSTS FOR MEAD 230-KV SUBSTATION 2.1.1 Amortization and Interest $1,646,972.18 2.1.2 Annual Replacement 1,841,141.05 2.1.3 Capital Improvement a 0.00 2.1.4 Total Estimated Annual Amortization $3,488,113.23 and Replacement Costs (sum of Sections 2.1.1, 2.1.2, and 2.1.3) 2.2 ESTIMATED OPERATION AND MAINTENANCE (O&M) COSTS FOR MEAD 230-KV SUBSTATION 2.2.1 O&M Costs $1 201,411.85 2.2.2 Total Estimated Annual Costs at Mead 230-kV Substation $4;689,525.08 (sum of Sections 2.1.4 and 2.2.1) 1 Fixed interest rates established by Treasury Z Not in use at this time. F-1 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit F Agreement No. 06-DSR-11729 Nevada Power Company 2.3 TOTAL ESTIMATED ANNUAL MEAD 230-KV SUBSTATION COSTS 2.3.1 Number of Designated Functions 2.3.2 Annual Cost per Function ($4,689,525.08 _ 32) 32 $146,547.66 3. ANNUAL FUNCTION CHARGE ALLOCATED TO NEVADA FOR THE NEVADA TRANSFORMER BANK 3.1 Number of Functions Used 1 1/3 3.2 Annual Function Charge for Nevada (product of Section 3.1 x Section 2.3.2) (1 1/3 Functions 2 x $146,547.66 per Function) 1$ 95,392.00 3.3 Monthly Function Charge is 11 Months at $16,282.67 12th Month at $16,282.63 4. ACTUAL COST ADJUSTMENT 3 4.1 Underbilled / (Overbilled) by Western in previous Fiscal Year $0 4.2 Total Actual Cost Adjustment 4.3 Monthly Adjustment for July 1, 2006 to June 30, 2007 ($0 / 12 Months) $0 5. This Exhibit F to Agreement No. 06-DSR-11729 may be modified in accordance with subsection 28.5 of this Agreement. ' Mead 230-kV Substation now has 32 designated functions based on interconnected transmission lines and transformers. Page F-3 contains a listing of the 32 designated functions. 2 The number of functions is rounded to four (4) decimals, i.e. 1.3333. s Actual Cost Adjustment for Nevada prepared in accordance with the MPP budgeting process. F-2 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit F Agreement No. 06-DSR-11729 Nevada Power Company NUMBER OF DESIGNATED FUNCTIONS FOR MEAD SUBSTATION'S 230-KV SWITCHYARD As of December 31, 2006 Equipment Nos. Contractor Function Number of Functions 9082 & 9186 LADWP McCullough -Mead No. 1 1 9282 & 9186 Western Hoover -Mead No. 6 1 8682 & 8786 LADWP McCullough -Mead No. 2 1 8882 & 8786 Western Hoover -Mead No. 7 1 8282 & 8386 Western Hoover -Mead No. 8 1 8482 & 8386 LADWP Mead-Victorville 287-kV 1 8182 7882 & 7996 NPC 60% & CBC 40% Bus Tie Mead 69-kV, Transformer KW17B 0 1 1/3 7482 & 7586 SCE Eldorado -Mead No. 1 1 7682 & 7586 Western (Leased) Hoover -Mead No. 2 1 7082 & 7186 Western (Leased) Hoover -Mead No. 3 1 7282 & 7186 SCE Eldorado -Mead No. 2 1 6682 & 6786 VEA Mead-Pahrump 1 1/3 6282 & 6386 Western Hoover -Mead No. 4 1 6482 & 6386 MWD East Camino -Mead 1 5882 & 5986 MWD Mead -West Camino 1 6082 & 5986 Western Hoover -Mead No. 5 1 1 1/3 5682 & 5586 NPC Equestrian -Mead No. 1 5082 & 5186 NPC 82% & CRC 18% Mead 69-kV, Transformer KW17A 1 5282 & 5186 NPC Greenway-Mead 1 4282 & 4386 NPC Decatur -Mead 1 1 4482 & 4386 Western Henderson -Mead No. 2 ,4182 3482 & 3586 CRC/SNWA Bus Tie Eastside-Mead 0 1 1/3 3082 & 3186 NPC Equestrian -Mead No. 2 1 3282 & 3186 2682 & 2786 CRC/SNWA MPP Mead -Newport Mead 500-kV, Transformer KTlA 1 1 1/3 2282 & 2386 NPC-MPP Mead 500-kV, Transformer KT2A 1 1/3 1882 & 1986 Western Liberty -Mead 345-kV 1 2082 & 1986 Western Henderson -Mead No. 1 1 1482 & 1586 Western Hoover -Mead No. 1 1 1682 & 1586 Western Davis -Mead TOTAL NUMBER OF FUNCTIONS 32 Leizend: CBC City of Boulder City, Nevada CRC State of Nevada's Colorado River Commission of Nevada LADWP City of Los Angeles, Department of Water and Power MPP Mead -Phoenix Project MWD Metropolitan Water District of Southern California NPC Nevada Power Company SCE Southern California Edison SNWA Southern Nevada Water Association VEA Valley Electric Association Western Western Area Power Administration, Desert Southwest Region F-3 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit G Agreement No. 06-DSR-11729 Nevada Power Company FACILITIES USE CHARGE FOR OPERATION OF PERKINS PHASE -SHIFTING TRANSFORMERS 1. This Exhibit G, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, and shall remain in effect until superseded by another Exhibit G; provided, this Exhibit G or any superseding Exhibit G shall terminate by the expiration of the Agreement. 2. The costs in this Exhibit G are subject to periodic revision by the Fiscal Agent, as appropriate. 3. Expenses related to the use of the Perkins PSTs, with any such use to be determined by the Operation Manager, to resolve specific reliability, issues under the Operational Mitigation Procedure set forth in Section 7 of the MOSI, will be allocated between Nevada and the MPP Participants. Each deployment of the Perkins PSTs pursuant to subsections 7.3.1 and/or 7.3.3 of the MOSI shall be billed at a charge of $5,000, plus $300 per hour. Charges to Nevada and the MPP Participants for the use of the Perkins PSTs under such subsections 7.3.1 and 7.3.3 shall be based on their proportional contributions to the reliability issue and curtailments made. 4., This Exhibit G to Agreement No. 06-DSR- 11729 may be modified in accordance with subsection 28.5 of this Agreement. G-1 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit H Agreement No. 06-DSR-11729 Nevada Power Company RECIPIENTS OF NOTICES This Exhibit H, effective under and as a part of Agreement No. 06-DSR-11729, hereinafter called Agreement, shall become effective upon execution of this Agreement, and shall remain in effect until superseded by another Exhibit H; provided, this Exhibit H or any superseding Exhibit H shall terminate by the expiration of the Agreement. 2. The addresses for notices are as follows. Arizona Public Service Company c/o Interconnection Development Manager If by mail: P.O. Box 53999, M.S. 2259 Phoenix, Arizona 85072-3999 If by person: 400 North Fifth Street Phoenix, Arizona 85004 Nevada Power Company c/o Assistant General Counsel If by mail: P.O. Box 10100-M/S S4A35 Reno, Nevada 89520-0024 If by person: 6100 Neil Road-M/S S4A35 Reno, Nevada 89511 Salt River Project Agricultural Improvement and Power District c/o Secretary If by mail: P.O. Box 52025 Phoenix, Arizona 85072-2025 If by person: 1521 North Project Drive Tempe, Arizona 85281 Southern California Public Power Authority c/o Executive Director If by mail: 225 South Lake Avenue, Suite 1250 Pasadena, California 91101 If by person: 225 South Lake Avenue, Suite 1250 Pasadena, California 91101 H-1 Western Agreement No. 06-DSR-11729 Mead -Phoenix Project Exhibit H Agreement No. 06-DSR-11729 Nevada Power Company M-S-R Public Power Agency c/o General Manager If by mail: P.O. Box 4060 Modesto, California 95352 If by person: 1231 Eleventh Street Modesto, California 95354 City of Vernon c/o Director of Light and Power If by mail: 4305 Santa Fe Avenue Vernon, California 90058 If by person: 4305 Santa Fe Avenue Vernon, California 90058 Department of Energy Western Area Power Administration c/o Regional Manager If by mail: P.O. Box 6457 Phoenix, Arizona 85005-6457 If by person: 615 South 43`d Avenue Phoenix, Arizona 85009 3. This Exhibit H to Agreement No. 06-DSR-11729 may be modified in accordance with subsection 28.5 of this Agreement. H-2 Western Agreement No. 06-DSR-11729 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 MEAD -PHOENIX PROJECT INTERCONNECTION AND OPERATION AGREEMENT WITH NEVADA POWER COMPANY AT MEAD 500-KV SUBSTATION METERING, OPERATING, AND SCHEDULING INSTRUCTIONS PURPOSE These Metering, Operating, and Scheduling Instructions (MOSI) are written to implement the requirement for scheduling, billing, metering, loss recovery, and power accounting instruction relating to the interconnections of Nevada Power Company's (Nevada) 500-kV transmission line from Nevada's Harry Allen Substation to the Mead - Phoenix Project's (MPP) Mead 500-kV Substation (Harry Allen Line) and a 500/230-kV transformer bank (Nevada Transformer Bank) at the Mead 500-kV Substation, as described in the Mead -Phoenix Project Interconnection and Operation Agreement with Nevada Power Company at Mead 500-kV Substation, Western Area Power Administration (Western) Agreement No. 06-DSR-11729 (Agreement). 2. TERM, This MOSI will remain in effect through the life of the Agreement or until superseded by a revised MOSI in accordance with Section 10 of the Agreement. 3. DEFINITIONS The following terms, in singular or plural form, will be used to identify the roles, entities, personnel, interchange schedules, power dispatching, scheduling, billing, metering, loss recovery, and accounting processes associated with the Agreement as applied in this MOSL 3.1 Authorized Representative - The person or singular entity responsible for providing and modifying a Nevada or MPP Participant's Preschedule and/or Real Time Schedule. 3.2 Automatic Generation Control (AGC) - Equipment that automatically adjusts a balancing authority's generation to maintain its interchange schedule. 3.3 Balancing Authority - A balancing authority is an electric system or systems, bound'' by interconnection metering and telemetry, to which a common AGC scheme is applied in order to: (i) match, at all times, the power output of the generators within the balancing authority and energy and capacity imported from resources outside the balancing authority with the load within the balancing authority and exports from the balancing authority; (ii) maintain scheduled interchange of energy and capacity with other balancing authorities, in accordance with Western Electricity Coordinating Council (WECC) control performance criteria and scheduling guidelines; (iii) maintain the frequency of the WECC interconnection within reasonable limits in accordance with WECC guidelines; and (iv) provide sufficient generating capacity to maintain operating reserves in Page 1 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 accordance with WECC requirements. For the purposes of this MOSI, WALC and Nevada are the only Balancing Authorities. 3.4 Balancing Authority Net Schedule or Nets) - The algebraic sum of all scheduled transactions across a given transmission path or between balancing authorities for a given period of time. 3.5 Curtailment - A reduction in the scheduled capacity or energy delivery. 3.6 Dispatcher(s) - The person responsible for monitoring and control of a power system through power scheduling, transmission, and generation control as defined by WECC operating guidelines. 3.7 Emergency — As defined in the effective WECC EMERGENCY OPERATING RELIABILITY CRITERIA (SECTION III of the WECC MINIMUM OPERATING RELIABILITY CRITERIA) document or successor document. 3.8 E-Tags - As used in this MOSI, an electronic request for the movement of energy over a prescribed physical path for a given duration and for a given energy profile(s)., The physical path consists of one generation entity, one load entity, and one or more transmission entities. E-Tag(s) are transmitted via a computer - to -computer, point-to-point method using protocols defined in the latest North American Electric Reliability Council (NERC) Electronic Tagging Functional Specification document or successor document. 3.9 FERC - The Federal Energy Regulatory Commission or any successor agency. 3.10 Flow Management System (FMS) — A software SCADA based application that monitors and provides the WALC Dispatcher a tool to manage and control the performance of the Mead 500-kV Substation. 3.11 Harry Allen Line - Nevada's 500-kV transmission line from Nevada's Harry Allen 500-kV Substation to MPP's Mead 500-kV Substation. 3.12 Interchange Confirmation — The process of verifying the accuracy of an Interchange Schedule between all the entities to the transaction prior to its implementation. In this MOSI an Interchange Confirmation is referred to as a Confirmed Schedule. 3.13 Interchange Implementation — The physical initiation of the Interchange Schedule by entering the details of the negotiated schedule into an associated balancing authority energy management system(s)'. In this MOSI an Interchange Implementation is referred to as an Implemented Schedule(s). 3.14 Interchange Schedule — A plan or arrangement for an interchange transaction. In this MOSI Interchange Schedules represent hourly power and associated Page 2of16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 energy schedules exchanged between Balancing Authority boundaries associated with Nevada and the MPP Participants. Interchange Schedules consist of two primary types as defined in subsections 3.14.1 and 3.14.2. 3.14.1 Standard 3-Party Schedule — Represents an Interchange Schedule via E-Tag(s) involving a receiving and delivering balancing authority. A Standard 3-Party Schedule is referred to as a Standard Schedule in this MOSI. 3.14.2 Project Nodal Transaction Schedule(s) (PNT) — The practice used to schedule Nevada and MPP Participant's rights of access into and out of an electrical node internal to the Operation Manager's Balancing Authority. A Project Nodal Transaction Schedule is a component of a Standard Schedule. A node refers to a MPP scheduling point of exchange involving specific MPP Participants and may include Nevada or a third party who has transmission rights at the Mead 500-kV Substation bus. 3.15 Joint Ownership Agreement - The MPP Joint Ownership Agreement, Western's Agreement No. 92-PAO- 1043 9, among the MPP Owners, as such term is defined in the Agreement, dated as of August 4, 1992, as such may be amended, supplemented, or revised from time to time, which provides for, among other things, the ownership, construction, and operation of the MPP. 3.16 Mead 500-kV Substation - A high -voltage electrical substation as defined in the Agreement. The Mead 500-kV Substation is owned by the MPP Owners in accordance with the Joint Ownership Agreement. 3.17 Mead 500-kV System - Those transmission facilities connected to the Mead 500-kV Substation bus as shown below: Marketplace Substation MPP Transformer Bank No. KT1A Harry Allen Line Mead 500-kV Substation Perkins Switchyard Nevada Transformer Bank No. KT2A Page 3 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 3.17.1 Mead —Perkins 500-kV Transmission Line (owned by MPP), continuous rating of 1300 MWI. 3.17.2 Mead —Marketplace 500-kV Transmission Line (owned by MPP), continuous rating of 2600 MWI. 3.17.3 MPP Transformer Bank, 500/230-kV, No. KT1A (owned by MPP), continuous rating of 1300 MVAI. 3.17.4 Nevada Transformer Bank, 500/230-kV, No. KT2A (owned by MPP) continuous rating of 1500 MVAl. 3.17.5 Harry Allen -Mead 500-kV Transmission Line (owned by Nevada) continuous rating of 2873 MWI. 3.18 MPP Balancing Authority Operator — WALC, acting as a MPP Operation, Manager, who has contractual rights to confirm and implement Interchange Schedules with balancing authorities at MPP's Mead 500-kV Substation. 3.19 MPP Participants - The California Cities of Anaheim, Azusa, Banning, Burbank, Colton, Glendale, Los Angeles (DWP), Pasadena, Riverside, and Vernon; Arizona Public Service Company (APS); M-S-R Public Power Agency (M-S-R); Salt River Project (SRP); and Western Area Power Administration (Western). A MPP Participant or their Authorized Representative may establish Interchange Schedules through the MPP Balancing Authority Operator. 3.20 MPP Transformer Bank -The 500/230-kV transformer bank, No. KT1A, consisting of four (4) single-phase 500/230-kV, 433.33 MVA transformers and installed in the Mead 500-kV Substation by the MPP, which is operated and maintained in accordance with the Operation Agreement. 3.21 Net Schedule or Net(s) — The algebraic sum of all scheduled transactions across a given transmission path or between balancing authorities for a given period of time. 3.22 Nevada Balancing Authority Operator — Nevada, acting as the Harry Allen Line operator, who has contractual rights to confirm and implement Interchange Schedules for the Harry Allen Line and the Nevada Transformer Bank, or its Authorized Representative. 3.23 Nevada Transformer Bank - The 500/230-kV transformer bank, No. KT2A, consisting of four (4) single-phase 500/230-kV, 500 MVA transformers installed I The continuous ratings reflect component capability and are not reflective of the scheduling capability pursuant to subsection 9.1 of this MOSI. Page 4 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 in the Mead 500-kV Substation, pursuant to the Contract for Construction of Interconnections to the Mead 500-kV Substation, Western's Contract No. 03-DSR-11594, which will be operated and maintained in accordance with the Agreement. 3.24 NERC - The North American Electric Reliability Council or any successor(s). 3.25 Operation Agreement - The MPP Operation Agreement, Western's Agreement No. 92-PAO-10493, among the MPP Owners and the Operation Manager, as such may be amended, supplemented, or revised from time to time. 3.26 Operation Manager - Western, or its successor, appointed pursuant to the Operation Agreement. 3.27 Point(s) of Delivery (POD) — The tie point where WALC delivers an Interchange Schedule(s) to the receiver of that energy or to another wheeling entity on behalf of Nevada or the MPP Participants. 3.28 Point(s) of Receipt (POR) — The tie point where WALC receives an Interchange Schedule(s) from the deliverer of that energy or from another wheeling entity on behalf of Nevada or the MPP Participants. 3.29 Point of Interconnection or Tie(s) — The physical tie -points where adjacent balancing authorities to the MPP are interconnected to the balancing authority of the MPP Balancing Authority Operator. 3.30 Postschedule(s) — Hourly Interchange Schedules which have been implemented by the Dispatcher that may be verified between the affected parties (i.e., Nevada, MPP Participants, and/or WALC). 3.31 Preschedule(s) — Static hourly Interchange Schedules arranged a day or more in advance for execution by the Dispatcher. 3.32 Real Time — The actual time at which a Dispatcher takes action to execute Interchange Schedules. 3.33 Real Time Schedule(s) — Interchange Implementation of hourly Interchange Schedules as performed by the Dispatcher after the Preschedule window has closed. 3.34 Scheduler(s) — The person responsible for, and authorized by, a Nevada or MPP Participant to establish and communicate Preschedules and verify Postschedules. 3.35 Transmission Provider (TP) - A Party which owns, controls, or operates the facilities used for the transmission of electric energy in interstate commerce and provides transmission service. Page 5 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 3.36 WALC - The Western Area Lower Colorado Balancing Authority, which is the balancing authority operated by Western's Desert Southwest Region. 3.37 WECC - The Western Electricity Coordinating Council or any successor organization(s). 4. SCHEDULE CONFIGURATION 4.1 Nevada Interchange Schedules may be arranged as indicated in Table 4.1. TABLE 4.1 # Points of Receipt (POR) Points of Delivery POD 1 2 Harry Allen Line 500-kV Mead 500-kV Substation Mead 500-kV Substation Harry Allen Line 500-kV 3 Mead 500-kV Substation Mead 230-kV Substation 4 Mead 230-kV Substation Mead 500-kV Substation 4.2 PNT Configuration — PNT Schedules may be established by the MPP Participants at the Mead 500-kV Substation using MPP Participants rights for receipt and delivery sides of an electric node, in compliance with MPP component entitlements, as indicated in Tables 4.2 and 4.3. TABLE 4.2 MPP Transformer Bank, No. KT1A Entity Mead 230-kV Mead 230-kV Mead 500-kV Mead 500-kV Receipt Delivery Receipt Delivery MPP Authorized Authorized Authorized Authorized Partici ants Nevada No Entitlement No Entitlement No Entitlement No Entitlement TABLE 4.3 Nevada Transformer Bank, No. KT2A Mead 230-kV Mead 230-kV Mead 500-kV Mead 500-kV Entity Recei t Delive Receipt_ Delive Nevada Authorized Authorized Authorized Authorized MPP No Entitlement No Entitlement No Entitlement No Entitlement Participants 5. INTERCHANGE SCHEDULES Each Nevada Interchange Schedule must be uniquely identified to permit loss accounting and power accounting execution. All Interchange Schedules associated with the Harry Allen Line will be communicated between affected balancing authorities, MPP Participants, and WALC as follows: Page 6 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 5.1 Nevada Schedule Obligation — Nevada desiring to establish Interchange Schedules on the Harry Allen Line shall submit E-Tag(s) detailing the POR and POD (including voltage) and shall identify all parties involved in the transaction. The WALC Scheduler and Dispatcher will accept Interchange Schedules or schedules for losses associated with the Harry Allen Line. The information to be included in the arrangerhent of Harry Allen Line Interchange Schedules with the WALC Scheduler -and Dispatcher are as follows: 5.1.1 Interchange Scheduling on the Mead 500-kV Substation Bus - ,Interchange Scheduling between Nevada and any MPP Participant at the Mead 500-kV Substation bus must be arranged by such MPP Participant through its OASIS, as applicable. 5.1.2 Interchange Scheduling Between Nevada and MPP Participants - Interchange Scheduling with a MPP Participant will only be approved following identification of the MPP Participant's Transmission Provider on the associated E-Tag. Interchange Schedules not in conformance with the Agreement and the MPP Participant's component entitlements, as set forth in the Joint Ownership Agreement, will not be approved by the Operation Manager. ' 5.1.3 Interchange Schedule Communications - On a Preschedule or Real Time basis, the establishment or modification of Interchange Schedules will occur after a MPP Participant identifies the Point of Receipt and Point of Delivery, including voltage, and identifies all parties involved in the transaction by submitting E-Tag(s) within the NERC specified timing requirement. 51.4 MPP Participant and Nevada Nodal Transactions Communications - Each MPP Participant desiring to establish a PNT schedule with Nevada at the Mead 500-kV Substation shall submit Prescheduled or Real Time Schedule E-Tag(s) detailing the following information: • Balancing Authority Point of Receipt or node receipt and the Mead 500-kV node voltage; • Balancing Authority Point of Delivery or node delivery and the Mead 500-kV node voltage; • Balancing Authority Point of Receipt and Point of Delivery will be aggregated for WALC at the Mead 500-kV Substation; and • PNT Point of Delivery and Point of Receipt between the MPP Participants will be aggregated for WALC at the Mead 500-kV Substation. 5.1.5 Nevada and MPP Participant Nodal Transactions Communications Each MPP Participant desiring to establish a PNT schedule with Nevada Page 7 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 on the 500-kV side of the Nevada Transformer Bank (node) shall submit Prescheduled or Real Time Schedule E-Tag(s) detailing the following information: • Balancing Authority Point of Receipt or node receipt and the Mead 500-kV node voltage; • Balancing Authority Point of Delivery or node delivery and the Mead 230-kV node voltage; • Balancing Authority Point of Receipt and Point of Delivery will be aggregated for WALC at the Mead 500-kV Substation; and • PNT Point of Delivery and Point of Receipt between the MPP Participants will be aggregated for WALC at the Mead 500-kV Substation. 5.1.6 Identity and Use of Net Scheduled Interchange Between Nevada and WALC - The net scheduled interchange (NSI) calculations to be used between Nevada and WALC in Preschedule, Real Time, and Postschedule time periods are for confirmation or trouble shooting purposes as identified below: 5.1.6.1 NSI is the algebraic sum of interchange receipts and interchange deliveries between the Balancing Authorities. 5.1.6.2 Harry Allen Line Net is the algebraic sum of the interchange receipts and interchange deliveries between the Balancing Authorities at the Mead 500-kV Substation, the Nevada-WALC operational point of interconnection. 5.1.6.3 Mead 230/69-kV Net is the algebraic sum of the interchange receipts and interchange deliveries between the Balancing Authorities aggregating the Mead 230-kV and Mead 69-kV points of interconnection. 5.1.6.4 Nevada Transformer Bank Net is the algebraic sum of the interchange receipts and interchange deliveries transmitted through the Nevada Transformer Bank. 5.1.7 Nevada and the Operation Manager agree to adhere to all current and future NERC and WECC E-Tagging requirements for Interchange Schedules, Such Interchange Schedules shall be consistent with NERC Interchange Standards and WECC minimum operating reliability criteria, or their replacements, and NERC E-Tagging timing requirements, as may be modified from time to time. 5.2 Preschedule Exchange — Nevada and MPP Participant Interchange Schedules will be issued via E-Tags, or WECC approved backup method, by Nevada or a Page 8 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 MPP Participant to the WALC Scheduler, by 1100 hours Mountain Standard Time (MST) for the next calendar day(s), as allowed by industry protocols. Prescheduling protocol may change as dictated by industry changes through deregulation, FERC Orders, or through WECC. The industry protocols may require flexibility to utilize electronic means to Preschedule. 5.3 Preschedule Schedule Check Out - Nevada and MPP Participant Interchange Schedules and Balancing Authority Net Schedules will be confirmed between the balancing authorities associated with the Nevada and MPP Participant Interchange Schedules for the next calendar day(s), as allowed by industry protocols through deregulation; FERC Orders, or through WECC. The industry protocols may require flexibility to utilize electronic means to Preschedule. 5.4 Real Time Schedule Check Out — Nevada and MPP Participant Interchange Schedules and, Balancing Authority Net Schedules will be confirmed before each hour between the balancing authorities associated with the Nevada and MPP Participant Interchange Schedules as specified in current WECC operating guidelines. Any modifications to Nevada and MPP Participant Interchange .Schedules shall be done by modifying existing E-Tags or submitting new E-Tags. 5.5 Postschedule Check Out — Nevada and MPP Participant Interchange Schedules and associated Net Schedules will be verified between each affected balancing authority within seven (7) business days following execution by the Dispatchers. 5.6 Nevada and MPP Balancing Authority Operator Contacts — The WALC Dispatcher will notify Nevada and the MPP Participants of Interchange Schedules on a Real Time basis in response to declared Emergencies. 5.7 Use of Transmission - As the MPP Balancing Authority Operator, WALC will accept Nevada and MPP Participant Interchange Schedules only from Nevada and the MPP Participants. Nevada and the MPP Participants, in conformance with FERC directives, will post on their respective OASIS, if applicable, their unscheduled transmission entitlements. 6. NEVADA TRANSFORMER BANK LOSSES: The basis for transformer losses consists of a no-load loss and a load loss component. 6.1 No Load Loss Component Assessment - This transformer loss component shall equal the number of in-service hours in each calendar month multiplied by 230-kW, as identified in the manufacturer's no-load loss test report. 2 Losses on the Nevada Transformer Bank will be calculated using the loss factor information for the Nevada Transformer Bank unless and until 500-kV side revenue quality metering is installed on both the MPP Transformer Bank and the Nevada Transformer Bank, which will then allow for direct measurement of actual losses. Page 9 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 6.2 No -Load Loss Recovery - Transformer losses will be returned to WALC in similar on -peak and off-peak periods or paid for in accordance with subsection 6.8. 6.3 Load Loss Component Assessment - Transformer load loss is deemed to be the product of a loss factor (0.083%), the total load losses at 75 degrees C on units one, two and three is 0.00083 or 745,280 watts divided by the total VA of 900,000,000, multiplied by the hourly actual power flow across the Nevada Transformer Bank. 6.4 Load Loss Recovery - WALC shall recover such losses equal to 0.083% of actual power flow across the Nevada Transformer Bank. The loss energy will be returned to WALC in similar on -peak and off-peak periods or paid for in accordance with subsection 6.8. 6.5 Loss Accounts -'WALC shall establish and maintain a loss account for Nevada that will show the losses incurred, losses scheduled back, and any loss balances carried over from one calendar month to another. 6.6 Loss Reimbursement — Nevada Transformer Bank losses will be returned in similar on -peak and off-peak periods the month after, in the same month of the following year, or paid for in accordance with subsection 6.8. The type of payment, similar on -peak and off-peak or cash payment, will be in effect for a minimum six (6) month fixed period. The two (2) six (6) month fixed payment periods are from April 1 through September 30 and from October 1 through March 31 each calendar year. Selection of the payment type will be made no later than thirty (30) days prior to the commencement of the next fixed payment period. Nevada will electronically mail (via e-mail) its loss recovery preference to Western's representative. The Western representative will confirm by replying to the e-mail request._ 6.7 In -Kind Loss Return — Nevada Transformer Bank losses accumulated in the previous month will be returned, through a static schedule, in -kind through averaged hourly values applying summer season WECC on -peak and off-peak periods 365 days per year or returned through cash payment in accordance with subsection 6.8. 6.8 Loss Recovery - All Nevada Transformer Bank losses returned to Western must be returned in -kind via a similar on -peak period schedule and off-peak period schedule or submitted based on the average between the volume weighted firm and non -firm on -peak monthly average and the volume weighted firm and non - firm off-peak monthly average as derived from the publication in the Palo Verde Pricing Index. Western will determine the pricing reference for loss return. Western will present to Nevada the proposed pricing reference modifications at least a minimum of one (1) year in advance of implementation. Western will Page 10 of 16 Interconnection and Operation Agreement Agreement No. 06-DSR-11729 apply such changes with the April and October loss recovery preferences chosen by Nevada. Western will modify this subsection indicating the current Nevada loss pricing reference. The equation applied to on -peak or off-peak average monthly pricing is indicated below: Average Price Derivation Example: Volume Weighted = Monthly SUM ($MWh)/Monthly SUM (MWh) ($MWh = daily on -peak or off-peak market value multiplied by daily MWh) 7. FLOW MANAGEMENT, SYSTEM PROCEDURE The Flow Management System (FMS) monitors the Mead 500-kV System for the following: (1) actual flow; (2) scheduled flow; (3) Perkins phase -shifting transformers (Perkins PSTs) tap/phase angle and (4) the impacts of the inability of the Perkins PSTs' to achieve scheduled flow. The FMS will continuously compare actual flows with Interchange Schedules and provide a signal representing a suggested change in actual power flow on a Mead 500-kV System facility pursuant to the following subsections. Where flow reduction is necessary, the flows can be reduced by various means including, but not limited to, schedule curtailment, generation redispatch, bus sectionalizing, and phase shifting transformer tap adjustments. If mitigation is required, such mitigation shall be implemented within thirty (30) minutes of notification from the Operation Manager and may be implemented immediately if urgent response to system conditions is necessary to relieve an overload. In all cases, the Operation Manager shall have the operational discretion to resolve an overload, including using the Perkins PSTs. 7.1 If the Perkins PSTs are in the regulating mode and are not able to maintain actual Mead -Perkins 500-kV line flow equal to the scheduled flow within a two (2) tap margin, then the Operation Manager shall direct Nevada to take such steps as Nevada elects to reduce its actual power flows as needed to resolve the issue. If, at the end of the time frame for response provided in this Section 7, the actions taken prove to be insufficient, the Operation Manager, in accordance with Prudent Utility Practice, as such term is defined in the Agreement, may take any steps necessary. 7.2 If actual flow on a particular facility connected to the Mead 500-kV System, except for the Mead -Marketplace line, exceeds the total line rating established in Section 3.17, resulting in overload(s) and requiring mitigation, and if the Perkins PSTs are deployed in regulating mode and are not able to mitigate the, overload(s) by controlling the actual Mead -Perkins 500-kV line flow equal to the scheduled flow within a two (2) tap margin, the Operation Manager shall direct Nevada to take such steps as Nevada elects to reduce its actual power flows as needed to resolve the overload(s). 7.3 The following shall apply to any reliability issue that specifically arises from excess inadvertent power flows which result in an overload on the Mead - Marketplace Line. The four (4) operational mitigation procedures in the Page 11 of 16 MPP-NEVADA MOST , Interconnection and Operation Agreement Agreement No. 06-DSR-11729 following subsections will be used as appropriate based on current schedules, actual power flows, and amounts of inadvertent energy. As schedules, actual power flows, amounts of inadvertent energy, and system conditions change, it is possible that a sequence of two (2) or more of these four (4) operational mitigation procedures may be used until reliability is restored. 7.3.1 If Nevada has actual flows into the Mead 500-kV Substation which are not exceeding Nevada's current schedule and at least one (1) MPP Participant has a current schedule into the Mead 500-kV Substation and the aggregate actual power flows for the MPP Participant(s) do not exceed the aggregate scheduled energy from such MPP Participant(s), then the Operation Manager shall direct both Nevada and the applicable MPP Participant(s) to take such steps as each respective entity elects to reduce its actual power flows as needed, proportionally to its schedule, to resolve the overload(s). If, at the end of the time frame for response provided in Section 7, Nevada's and such MPP Participants' actions taken prove to be insufficient, then the Operation Manager, in accordance with Prudent Utility Practice, may deploy the Perkins PSTs at any time to mitigate the remaining overload. Exhibit G of the Agreement sets forth the charges that may result for all entities, proportional to their respective schedules, if the Perkins PSTs are used. 7.3.2 If Nevada is scheduling into the Mead 500-kV Substation and its actual flows exceed its schedule and the aggregate actual power flows from any one or more MPP Participant(s) currently scheduling do not exceed the aggregate schedules from any such MPP Participants, then the Operation Manager shall direct Nevada to take such steps as Nevada elects to reduce its actual power flows as needed to resolve the overload. If, before the end of the time frame for response provided in this Section 7 has elapsed, and Nevada's actions prove insufficient for resolving the overload, or if Nevada has reduced its schedules to zero and the overload is not resolved, Nevada may request that the Operation Manager open Mead 500-kV Substation circuit breaker numbers 1196, 1692, and 1892 to isolate the Harry Allen Line with the Nevada Transformer Bank. 7.3.3 When both the Nevada and the MPP Participant(s) actual flows exceed their respective schedules into the Mead 500-kV Substation, the Operation Manager shall direct Nevada and the MPP Participant(s) to take such steps as they elect, proportionally to their respective schedules, to reduce their actual power flows as needed to resolve the overload. If, at the end of the time frame for response provided in this Section 7, the overload has not been resolved, the Operation Manager, in accordance with Prudent Utility Practice, may deploy the Perkins PSTs. Nevada and the MPP Participants shall be charged proportionally for any such usage of the Perkins PSTs based on their proportional contributions to the overload and curtailments made. Page 12 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 7.3.4 When Nevada's actual power flows do not exceed its schedule and one or more MPP Participants' actual power flows exceed their schedules, the Operation Manager shall direct those MPP Participants to take such steps as they elect to reduce actual power flows as needed to resolve the overload, including requesting use of the Perkins PSTs. If, at the end of the time frame for response provided in this Section 7, such MPP Participants have not or cannot take sufficient action to reduce their actual power flows, or if they have reduced all schedules to zero and the overload is not resolved, and the Perkins PSTs have not been deployed, the Operation Manager, in accordance with Prudent Utility Practice, may deploy the Perkins PSTs, at the MPP Participants' expense. If the overload is not thereby resolved, Nevada may be directed to curtail its schedules as well. 7.4 If the Perkins PSTs are called on by the applicable reliability coordinator or path operator, due to system Emergency conditions, to be used to match the actual Mead -Perkins 500-kV line flow to the scheduled flow, and this cannot be achieved within two (2) taps, then the Harry Allen Line flow is to be reduced to the extent that the Perkins PSTs can match flow to schedule within two (2) taps. 7.5 The Flow Management System will be implemented after Western's new scheduling program is placed in service in 2007. Until then the Mead 500-kV System will be monitored manually. 8. SCHEDULED INTERRUPTIONS TO SERVICE The WALC clearance coordinator will communicate and confirm by telephone, fax, or electronically to Nevada, the MPP Participants, and associated balancing authorities any scheduled interruptions to service. The outage notification will include the duration, time of commencement, work to be accomplished, and will be made as much in advance of the interruption as possible. WALC minimum preferred notice is 72 hours. All Interchange Schedules will be reduced to zero prior to the start of the service interruption. All following a declared return to service Interchange Schedules may commence communication from the WALC Dispatcher to Nevada and the MPP Participants. 9. INTERCHANGE SCHEDULING PARAMETERS Nevada and MPP Participant transmission service will be maintained under normal and emergency conditions but may be affected by interconnected system generation, load, or transmission disturbances. Interruptions to service under declared Emergency conditions will be implemented as follows: 9.1 Nevada's Mead 500-kV Substation Scheduling Capacity Limitations The following metered (actual) and schedule capacity limitations are to be maintained by all parties associated with the transmission operation of the Harry Allen Line. A Flow Management System load reduction signal will be sent to Nevada for Harry Allen Line power flow curtailments applying actual limitations. Page 13 of 16 MPP-NEVADA M®SI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 9.1.1 1720 MW is the simultaneous transfer limit of the Harry Allen Line under the condition of high East of River flows and the Mead -Perkins Line at 1300 MW flow, observing the Mead -Marketplace Line rating of 3000A or 2600 MW with the Nevada Transformer Bank in service. However, a higher transfer rating may be achieved under lower East of River flow conditions. The maximum non -simultaneous transfer limit of the Harry Allen Line during either lower East of River or Mead -Perkins Line flow conditions is 2200 MW. See Attachment No. 1. 9.1.2 1606 MW is the simultaneous transfer limit of the Harry Allen Line under the condition of high East of River flows and the Mead -Perkins Line at 1300 MW flow, observing the Mead -Marketplace Line rating of 3000A or 2600 MW with the Nevada Transformer Bank out of service. However, a higher transfer rating may be achieved under lower East of River flow conditions. The non -simultaneous transfer limit of the Harry Allen Line during either lower East of River or Mead -Perkins Line flow conditions is 2200 MW. See Attachment No. 2. 9.1.3. 1500 MW of metered and Interchange Schedule limitation on the Nevada Transformer. Bank. 9.1.4 Total Interchange Schedules through the Harry Allen Line above the 1500 MW limit on the Nevada Transformer Bank will only be accomplished by transactions agreed upon between Nevada and a MPP Participant or any other entity who has obtained rights at the Mead 500-kV bus. 9.2 Emergency Interruptions — The WALC Dispatcher will respond as soon as possible to restore Nevada and MPP Participant transmission service following an unplanned outage. Personnel safety will be assessed. Following an outage, WALC will communicate the outage time to Nevada and the MPP Participants with active Interchange Schedules. The outage start and stop time will be the time used for schedule integration for all Nevada and MPP Participant Interchange Schedules interrupted by the Emergency. Following a declared return to service time, WALC will communicate to Nevada and all MPP balancing authority representatives that Interchange Schedules may commence. 10. CURTAILMENTS The communication and order of schedule reduction resulting from a curtailment will be implemented as follows: 10.1 Harry Allen Line Constraints — Interchange Schedules on the Harry Allen Line are curtailed in accordance with WECC and NERC for the following: 10.1.1 Loss of the Nevada Transformer Bank requires curtailment of all associated Interchange Schedules across the Nevada Transformer Bank. Page 14 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 10.1.2 Loss of the Harry Allen Line requires curtailment of all associated Interchange Schedules. 10.1.3 Interchange Schedules not in conformance with this MOSI, Nevada's scheduling capacity limitation at the Mead 500-kV Substation, and each MPP Participant's contracted capacities will be curtailed by the MPP Balancing Authority Operator. 10.1.4 If Mead 500-kV PCB No. 1892 or 1996 are open, the Harry Allen Line continuous rating, as defined in subsection 3.17.5, must be reduced to the breaker rating of 2598 MW (3000 Amps). 10.2 Method of Schedule Reduction — If reductions in Interchange Schedules become necessary, WALC will direct Nevada and/or the MPP Participants to reduce their respective active schedules at the time of curtailment. 10.3 Curtailment Communication — The curtailment commencement time and time of return to normal service will be communicated by WALC to Nevada and the MPP Participants via E-Tags. 10.4 Interchange Schedule Integration — The hourly Real Time Interchange Schedules will be integrated by WALC based on the beginning and ending time following each curtailment or reduction. 11. METERING The metering associated with the Harry Allen Line and the Nevada Transformer Bank is described in Table 11. TABLE 11— Nevada Metering Configuration Tie or Meter Balancing Meter # Line Label Point Authority Reference I Harry Allen Line MED 500-kV Nevada MED715 500-kV Substation 2 Nevada Transformer MED 230-kV I WALC MED716 Bank Substation NOTE: The Balancing Authorities in Table 11 are responsible for providing telemetering for dispatching purposes and revenue quality metering to facilitate accounting or data requests associated with the MPP. Each meter (in and out) is as viewed by the MPP. 12. MONTHLY WECC AND NERC INADVERTENT INTERCHANGE REPORTING The Harry Allen Line metering and telemetering will be included in the monthly inadvertent interchange reporting between the interconnected Balancing Authorities through the existing telemeter to meter adjustment process or may be accomplished through existing interchange accounting processes. Page 15 of 16 MPP-NEVADA MOSI Interconnection and Operation Agreement Agreement No. 06-DSR-11729 Harry Allen Line Reporting - The monthly on -peak and off-peak Balancing Authority inadvertent accumulation reported to WECC will be accomplished through the addition of the Harry Allen Line to the existing WALC and Nevada interchange accounting process. Recommended to the E&O Committee by Nevada and the Operation Manager this th day of December , 2006. Presented to the E&O Committee by Nevada and the Operation Manager this 11t' day of December , 2006. Accepted and agreed to by the E&O Committee this 11t' day of December , 2006. Page 16 of 16 Attachment No. 1 to MPP-IEVADA MOSI Agreement No. 06-DSR-11729 .=. O ® ® ® ® O ® 00 (D Iq 04 (Mw ) moll Gull A)i 009 suPPad- Ba I O O LO r— r- I• U 0 C Q V i L g Attachment No. 2 to Mpp-NEVADA NISI Agreement No. 06-DSR-11729 LO N ® .� N CM Z L. O .� LO .o 0 W W �r ... Q CD WE , _ -• -CD LO CL ® O ® C) ® ® p N ® OON (Mw) moll Gull Ali 009 suPIJGd-pGGW CALIFORNIA INDEPENDENT SYSTEM; OPERATOR CORPORATION FERC ELECTRIC TARIFF NO. 7 Fourth Revised Sheet No. 64 SECOND REPLACEMENT TRANSMISSION CONTROL AGREEMENT Superseding 3`d Revised Sheet No. 64 27. SIGNATURE PAGE CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION California Independent System Operator Corporation has caused this Transmission Control Agreement to be executed by its duly authorized representative on this "ay of , 2006 and thereby incorporates the following Appendices in this Agreement: Appendices A Appendices B Appendix C Appendix D Appendices E Appendix F CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION 151 Blue Ravine Road Folsom, California 95630 Jim Detm/e(rs Vice Proident, Operations Issued by: Charles F. Robinson, Vice President and General Counsel Issued on: August 11, 2006 Effective: October 10, 2006 CALIFORNIA INDEPENDENT SYSTEM;OPERATOR CORPORATION FERC ELECTRIC TARIFF NO. 7 Fourth Revised Sheet No. 65 SECOND REPLACEMENT TRANSMISSION CONTROL AGREEMENT Superseding 3rd Revised Sheet No. 65 25. SIGNATURE PAGE PACIFIC GAS AND ELECTRIC COMPANY Pacific Gas and Electric Company has caused this Transmission Control Agreement to be executed by its duly authorized representative on this 7th day of August, 2006 and thereby incorporates the following Appendices in this Agreement: Appendix A (PG&E) Appendix B (PG&E) Appendix C Appendix D Appendix E (Diablo Canyon) Appendix F PACIFIC GAS AND ELECTRIC COMPANY 77 Beale Street San Francisco, California 94105 by: I f1l ,r i Stewart M. Ramsay Vice President, Asset Management & Electric Transmission Issued by: Charles F. Robinson, Vice President and General Counsel Issued on: August 11, 2006 Effective: October 10, 2006 CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION FERC ELECTRIC TARIFF NO. 7 Third Revised Sheet No. 66 SECOND REPLACEMENT TRANSMISSION CONTROL AGREEMENT Superseding 2"d Revised Sheet No. 66 29. SIGNATURE PAGE SAN DIEGO GAS & ELECTRIC COMPANY San Diego Gas & Electric Company has caused this Transmission Control Agreement to be executed by its duly authorized representative on this day of , 2006 and thereby incorporates the following Appendices in this Agreement: Appendix A (SDG&E) Appendix B (SDG&E) Appendix C Appendix D Appendix E (SONGS) Appendix F SAN DIEGO GAS & ELECTRIC COMPANY 8330 Century Park Court San Diego, California 92123 by: 21CA - James Avery Senior Vice President of San Diego Gas & Electric Issued by: Charles F. Robinson, Vice President and General Counsel Issued on: August 11, 2006 Effective: October 10, 2006 CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION FERC ELECTRIC TARIFF NO. 7 Third Revised Sheet No. 67 SECOND REPLACEMENT TRANSMISSION CONTROL AGREEMENT Superseding 2"d Revised Sheet No. 67 30. SIGNATURE PAGE SOUTHERN CALIFORNIA EDISON COMPANY Southern California Edison Company has caused this Transmission Control Agreement to be executed by its duly authorized representative on this 24th day of July, 2006 and thereby incorporates the following Appendices in this Agreement: Appendix A (Edison) Appendix B (Edison) Appendix C Appendix D Appendix E (SONGS) Appendix F SOUTHERN CALIFORNIA EDISON COMPANY 2244 Walnut Grove Avenue Rosemead, California 91770 by. /hq Ronald L. Litzinger Senior Vice President, Transmission & Distribution Issued by: Charles F. Robinson, Vice President and General Counsel iEffective: October 10, 2006 issued on: August 11, 2006 CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION FERC ELECTRIC TARIFF NO. 7 First Revised Sheet No. 68 SECOND REPLACEMENT TRANSMISSION CONTROL AGREEMENT Superseding Original Sheet No. 68 31. SIGNATURE PAGE CITY OF VERNON CITY OF VERNON has caused this Transmission Control Agreement to be executed by its duly authorized representative on this 8th day of August, 2006 and thereby incorporates the following Appendices in this Agreement: Appendix A (Vernon) Appendix B (Vernon) Appendix C Appendix D Appendix E Appendix F CITY,OF VERNON L ONIS C. MAL URG, Mayor ATTEST: /�i-- BRUCE V. MALKENHORST, JR. Acting City Clerk APPROVED AS TO FORM: n, Chief Assistant City Attorney Issued by: Charles F. Robinson, Vice President and General Counsel Issued on: August 11, 2006 Effective: October 10, 2006 CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION FERC ELECTRIC TARIFF NO. 7 First Revised Sheet No. 69 SECOND REPLACEMENT TRANSMISSION CONTROL AGREEMENT Superseding Original Sheet No. 69 32. SIGNATURE PAGE CITY OF ANAHEIM CITY OF ANAHEIM has caused this Transmission Control Agreement to be executed by its duly authorized representative on this 16�'t*day of / , 2006 and thereby incorporates the following Appendices in this Agreement: Appendix A (Anaheim) Appendix B (Anaheim) Appendix C Appendix D Appendix F ATTEST: CITY OF ANAHEIM By: Y arcie L. Edwards Public Utilities General Manager APPROVED AS TO FORM: APPROVED AS TO FORM: JACK WI�CITY ATTORNEY. ®li y Issued by: Charles F. Robinson, Vice President and General Counsel Issued on: August 11, 2006 Effective: October 10, 2006 CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION FERC ELECTRIC TARIFF NO. 7 First Revised Sheet No. 70 SECOND REPLACEMENT TRANSMISSION CONTROL AGREEMENT Superseding Original Sheet No. 70 33. SIGNATURE PAGE CITY OF AZUSA CITY OF AZUSA has caused this Transmission Control Agreement to be executed by its duly authorized representative on this Jday of 2006 and thereby incorporates the following Appendices in this Agreement: Appendix A (Azusa) Appendix B (Azusa) Appendix C Appendix D Appendix F CITY OF AZUSA By: G� Diane Chagnon Mayor Issued by: Charles F. Robinson, Vice President and General Counsel Issued on: August 11, 2006 Effective: October 10, 2006 CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION ,FERC ELECTRIC TARIFF NO. 7 First Revised Sheet No. 71 SECOND REPLACEMENT TRANSMISSION CONTROL AGREEMENT Superseding Original Sheet No. 71 34. SIGNATURE PAGE CITY OF BANNING CITY OF BANNING has caused this Transmission Control Agreement to be executed by its duly authorized representative on this 9,,441 day of a+ , 2006 and thereby incorporates the following Appendices in this Agreement: Appendix A (Banning) Appendix C Appendix D Appendix F ATTEST: CITY OF BANNING Randy Ans ne City Manager , q?ai 1�/ I Marie Calderon, City Clerk APPROVED AS TO FORM: s, ity Attorney Issued by: Charles F. Robinson, Vice President and General Counsel Issued on: August 11, 2006 Effective: October 10, 2006 CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION FERC ELECTRIC TARIFF NO. 7 First Revised Sheet No. 72 SECOND REPLACEMENT TRANSMISSION CONTROL AGREEMENT Superseding Original Sheet No. 72 35. SIGNATURE PAGE CITY OF RIVERSIDE has caused this Transmission Control Agreement to be executed by its duly authorized representative on this 17thday of October 2006 and thereby incorporates the following Appendices in this Agreement: Appendix A (Riverside) Appendix B (Riverside) Appendix C Appendix D Appendix F CITY OF RIVERSIDE 3900 Main Street, .4t" Floor Riverside, California 92522 BY: 11 WIe e--; Bradley YHudson, City Manager ATTEST: Ity Cl APPROVED AS TO FORM: SuVervi"Deputy City Attorney Issued by: Charles F. Robinson, Vice President and General Counsel Issued on: August 11, 2006 Effective: October 10, 2006 CALIFORNIA INDEPENDENT SYSTEM ,OPERATOR CORPORATION FERC ELECTRIC TARIFF NO. 7 Third Revised Sheet No. 72A SECOND REPLACEMENT TRANSMISSION CONTROL AGREEMENT Superseding 2"d Revised Sheet No. 72A 36. SIGNATURE PAGE TRANS -ELECT NTD PATH 15, LLC TRANS -ELECT NTD PATH 15, LLC has caused this Transmission Control Agreement to be executed by its duly authorized representative on this 28t" day of July, 2006 and thereby incorporates the following Appendices in this Agreement: Appendix A (Trans -Elect) Appendix C Appendix D Appendix F Trans -Elect NTD Path 15, LLC 1850 Centennial Park Drive Suite 480 Reston, VA 20191 By: l Robert D. Dickerson Executive Vice President Issued by: Charles F. Robinson, Vice President and General Counsel Issued on: August 11, 2006 Effective: October 10, 2006 CALIFORNIA INDEPENDENT. SYSTEM. OPERATOR CORPORATION FERC ELECTRIC TARIFF NO. 7 Second Revised Sheet No. 72B SECOND REPLACEMENT TRANSMISSION CONTROL AGREEMENT Superseding 1" Revised Sheet No. 72B 37. SIGNATURE PAGE WESTERN AREA POWER ADMINISTRATION, SIERRA NEVADA REGION WESTERN AREA POWER ADMINISTRATION, SIERRA NEVADA REGION has caused this Transmission Control Agreement to be executed by its duly authorized representative on this -?A""-day of , 2006 and thereby incorporates the following Appendices in this Agreement: Appendix A (Western) Appendix C Appendix D Appendix F Western Area Power Administration, Sierra Nevada Region Sierra Nevada Re i 114 Parksh rive Folso , A 956304710 Keselb ional Issued by: Charles F. Robinson, Vice President and General Counsel Issued on: August 11, 2006 Effective: October 10, 2006 CALIFORNIA INDEPENDENT SYSTEM OPERATOR CORPORATION FERC ELECTRIC TARIFF NO.7 First Revised Sheet No. 72C SECOND REPLACEMENT TRANSMISSION CONTROL AGREEMENT Superseding Original Sheet No. 72C 37. SIGNATURE PAGE CITY OF PASADENA CITY OF PASADENA has caused this Transmission Control Agreement to be executed by its duly authorized representative on this `-c/-- day of 2006 and thereby incorporates the following Appendices in this Agreement: Appendix A (Pasadena) Appendix B (Pasadena) Appendix C Appendix D Appendix F City of Pasadena Water and Power Department 150 S. Los Robles, Suite 200 Pasadena. CA 91101 APPROVED AS TO FARM: LL Thisday oi., � f1� Ey Assistant City Attorney ATTEST. \i I RODRIGUEZ ERK Issued by: Charles F. Robinson, Vice President and General Counsel Issued on: August 11, 2006 Effective: October 10, 2006 CALIFORNIA.INDEPENDENT SYSTEM.OPERATOR CORPORATION FERC ELECTRIC TARIFF NO. 7 SECOND REPLACEMENT TRANSMISSION CONTROL AGREEMENT Original Sheet No. 72D 39. SIGNATURE PAGE TRANS BAY CABLE LLC TRANS BAY CABLE LLC has caused this Transmission Control Agreement to be executed by its duly authorized representative on this 2nd day of August, 2006 and thereby incorporates the following Appendices in this Agreement: Appendix A (Trans Bay Cable LLC) Appendix C Appendix D Appendix F Trans Bay Cable LLC c/o Babcock & Brown LP 2 Harrison Street, 6t" Floor San Francisco, CA 94105 Tel: (415) 512-1515 Fax: (415) -1500 By: David Parquet Vice President Trans Bay Cable LLC Issued by: Charles F. Robinson, Vice President and General Counsel Issued on: August 11, 2006 Effective: Upon notice after October 10, 2006