sample agreement - operations and maintenance …
TRANSCRIPT
[SAMPLE AGREEMENT— 4/13/2015]
OPERATIONS AND MAINTENANCE AGREEMENT
SPA COGENERATION PROJECT
EFFECTIVE AS OF [DATE]
BY AND BETWEEN
SACRAMENTO POWER AUTHORITY
AND
[VICTORIOUS BIDDER]
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TABLE OF CONTENTS
Page
1. DEFINITIONS .................................................................................................... 3
1.1. Accessories ................................................................................................ 3
1.2. Administrative Procedures Manual ........................................................ 4
1.3. Affiliate ..................................................................................................... 4
1.4. Annual Budget.......................................................................................... 4
1.5. Annual Maintenance Schedule ................................................................ 4
1.6. Authority Participant ............................................................................... 4
1.7. Base Operating Fee .................................................................................. 5
1.8. Base Plant ................................................................................................. 5
1.9. Consumables ............................................................................................. 5
1.10. Direction Change ...................................................................................... 5
1.11. Effective Date ........................................................................................... 6
1.12. Equivalent Forced Outage Factor ........................................................... 6
1.13. Force Majeure Event ................................................................................ 7
1.14. General Facilities ..................................................................................... 7
1.15. Law............................................................................................................ 7
1.16. Major Repair ............................................................................................. 7
1.17. Maintenance Management Program ....................................................... 8
1.18. Maintenance Plan .................................................................................... 8
1.19. Members ................................................................................................... 8
1.20. Operation And Maintenance Period ........................................................ 8
1.21. Operations And Maintenance Procedures Manuals ............................... 9
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1.22. Operating Year ......................................................................................... 9
1.23. Operator Staffing Plan ............................................................................. 9
1.24. Parties ..................................................................................................... 10
1.25. Peak Months ........................................................................................... 10
1.26. Peaking Plant ......................................................................................... 10
1.27. Person ..................................................................................................... 10
1.28. Power Purchase Agreement ................................................................... 11
1.29. Price Adjustment .................................................................................... 11
1.30. Project ..................................................................................................... 11
1.31. Project Agreements ................................................................................ 11
1.32. Project Lender ........................................................................................ 11
1.33. Project Permit(s) ..................................................................................... 12
1.34. Project Work Documents ........................................................................ 12
1.35. Prudent Utility Practices ....................................................................... 12
1.36. Reference Interest Rate ......................................................................... 13
1.37. Reimbursable Expense(s) ....................................................................... 13
1.38. Scheduled Maintenance ......................................................................... 13
1.39. Scheduled Maintenance Hours .............................................................. 13
1.40. Services ................................................................................................... 14
1.41. SMAQMD................................................................................................ 14
1.42. SMUD’s Outage Coordination Process .................................................. 14
1.43. Subcontract ............................................................................................. 14
1.44. Subcontractor ......................................................................................... 14
1.45. Transition Period .................................................................................... 15
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1.46. Utility Operations Procedures Manual ................................................. 15
2. PROVISION OF OPERATION AND MAINTENANCE SERVICES
AND STANDARDS OF PERFORMANCE ....................................................... 15
3. PROJECT AGREEMENTS ............................................................................... 16
4. PROJECT MANUALS AND DOCUMENTS RESPECTING
OPERATION AND MAINTENANCE SERVICES .......................................... 17
4.1. Maintenance Plan .................................................................................. 18
4.2. Administrative Procedures Manual ...................................................... 18
4.3. Operation And Maintenance Procedures Manuals ............................... 19
4.4. Utility Operations Procedures Manual ................................................. 19
4.5. Security Procedures Plan ....................................................................... 20
4.6. Safety And Hazardous Materials Procedures Manual ......................... 20
4.7. Procurement Documents ........................................................................ 20
4.8. Maintenance Management Program ..................................................... 20
4.9. Operator Training And Qualification Program .................................... 21
4.10. Emergency Response Plan ..................................................................... 21
5. SCOPE OF TRANSITION PERIOD OPERATOR SERVICES ....................... 21
5.1. Familiarization With Project ................................................................. 21
5.2. Update Project Work Documents .......................................................... 22
5.3. Inventories .............................................................................................. 23
5.4. Annual Budget For First Operating Year ............................................. 23
5.5. Annual Maintenance Schedule For First Operating Year ................... 24
6. SCOPE OF OPERATION AND MAINTENANCE PERIOD
OPERATOR SERVICES ................................................................................... 24
6.1. Provision Of Personnel ........................................................................... 25
6.2. Delineation Of Some Specific Operator Furnished Services ................ 27
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6.2.1. Onsite Project Management .................................................... 27
6.2.2. Long Range Operation And Maintenance Plan ..................... 28
6.2.3. Preparation Of Annual Budgets ............................................. 28
6.2.4. Preparation Of Annual Maintenance Schedules .................... 28
6.2.5. Maintenance ............................................................................ 28
6.2.6. Maintenance Management Program ...................................... 29
6.2.7. Predictive Maintenance ........................................................... 29
6.2.8. Routine And Preventative Maintenance And Services .......... 29
6.2.9. Buildings And Grounds Maintenance .................................... 29
6.2.10. Security .................................................................................... 30
6.2.11. Insurance ................................................................................. 30
6.2.12. Calibration And Testing .......................................................... 30
6.2.13. Reporting ................................................................................. 31
6.2.14. Maintenance Of Operating Records And Project Work
Documents ............................................................................... 31
6.2.15. Accounting ............................................................................... 32
6.2.16. Data Reporting Re Other Project Agreements ....................... 32
6.2.17. Procurement ............................................................................ 33
6.2.18. Vendor Network ....................................................................... 33
6.2.19. Inventory Management ........................................................... 33
6.2.20. Administration Of Subcontracts ............................................. 34
6.2.21. Waste Disposal ........................................................................ 34
6.2.22. Sewage ..................................................................................... 35
6.2.23. Dispatching And Delivery Of Electrical Energy .................... 35
6.2.24. Maintenance Of Project Permits ............................................. 35
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6.2.25. Project Work Documents And Other Project Documents ...... 35
6.2.26. Warranty Administration ....................................................... 36
6.2.27. Insurance Claims And Other Claims ..................................... 36
6.2.28. Peaking Plant Operations ....................................................... 37
6.2.29. Operations Review ................................................................... 37
6.2.30. Audits ....................................................................................... 37
6.2.31. Safety ....................................................................................... 37
6.2.32. Training ................................................................................... 38
6.2.33. Monitor Changes In The Law ................................................. 39
6.2.34. Industry Affiliation .................................................................. 39
6.2.35. Water Usage ............................................................................ 39
6.2.36. Other ........................................................................................ 39
7. AUTHORITY PROJECT RESPONSIBILITY DURING THE
OPERATION AND MAINTENANCE PERIOD .............................................. 39
7.1. General Facilities ................................................................................... 40
7.2. Fuel Supply ............................................................................................. 40
7.3. Electricity ............................................................................................... 40
7.4. Water ...................................................................................................... 40
7.5. Effluent Water ........................................................................................ 40
7.6. Dispatching And Delivery Of Electrical Power From The Project ....... 41
7.7. Administration Of Project Agreements ................................................. 42
7.8. Project Permits ....................................................................................... 42
7.9. Procurement By Authority ..................................................................... 43
8. SPECIFIC CONTRACT ADMINISTRATION PROCEDURES AND
OPERATING REQUIREMENTS ..................................................................... 43
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8.1. Long Range Operation And Maintenance Plan .................................... 43
8.2. Annual Budgets ...................................................................................... 44
8.2.1. Expenditures Prior To Adoption Of Annual Budget .............. 47
8.3. Annual Maintenance Schedule .............................................................. 48
8.4. Major Repairs ......................................................................................... 52
8.5. Monthly Operating Reports And Annual Reports To Be
Submitted By Operator .......................................................................... 56
8.6. Reports And Records Re Billing Matters .............................................. 57
8.7. Annual Inventories ................................................................................. 57
8.8. Subcontracting........................................................................................ 58
8.9. Procurement ........................................................................................... 60
8.10. Emergencies ........................................................................................... 61
8.11. Party Representatives ............................................................................ 63
8.12. Peaking Plant Operation ....................................................................... 64
8.13. Site Access .............................................................................................. 65
8.14. No Liens, Encumbrances Or Claims ..................................................... 66
8.15. Prevailing Rate For Wages .................................................................... 66
8.16. Equal Employment Opportunity ........................................................... 66
9. WASTE MANAGEMENT AND DISPOSAL .................................................... 67
9.1. Hazardous Waste Management ............................................................. 68
10. SOME SPECIFIC OPERATOR ASSUMED POTENTIAL LIABILITIES ...... 70
10.1. Failure To Perform According To The Required Standards Of
Performance ............................................................................................ 71
10.2. Project Permit Violation Costs............................................................... 71
10.3. Waste Disposal ....................................................................................... 71
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10.4. Theft And Vandalism ............................................................................. 72
10.5. Loss Of Reliability Of The Bulk Electric System .................................. 72
10.6. Billing And Payment Re Specific Operator Assumed Liabilities ......... 73
11. REIMBURSABLE EXPENSES ........................................................................ 75
11.1 List Of Reimbursable Expenses ............................................................. 75
11.1.1. Accessories ............................................................................... 75
11.1.2. Consumables ............................................................................ 75
11.1.3. Equipment, Etc. ....................................................................... 76
11.1.4. Subcontractors Performing Major Repairs ............................. 76
11.1.5. Additional Insurance Not Listed On Appendix C .................. 77
11.1.6. Waste Disposal ........................................................................ 77
11.1.7. Taxes ........................................................................................ 77
11.1.8. Laboratory Analyses ................................................................ 78
11.1.9. Vibration Analyses .................................................................. 78
11.1.10. Infrared Surveys ...................................................................... 78
11.1.11. Landscaping Services .............................................................. 78
11.1.12. Other Subcontractor Services ................................................. 78
11.1.13. Specialty Schools ..................................................................... 79
11.1.14. Industry Association Meetings And Seminars ....................... 79
11.1.15. Authority Approval Of Additional Reimbursable
Expenses .................................................................................. 80
11.2. Costs And Expenses That Are Not Reimbursable Expenses ................ 80
11.2.1. Operator Staffing Plan Personnel ........................................... 80
11.2.2. Operator Liability Costs .......................................................... 81
11.2.3. Subcontractors That Are Not Approved ................................. 81
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11.2.4. Insurance ................................................................................. 81
11.2.5. Telephone Services .................................................................. 81
11.2.6. Other Unidentified Costs And Expenses ................................ 81
12. COMPENSATION AND PAYMENTS TO OPERATOR ................................. 82
12.1. Transition Period Compensation And Payments .................................. 82
12.1.1. Amount ..................................................................................... 82
12.1.2. Billing And Payment ............................................................... 83
12.2. Operation And Maintenance Period Compensation And
Payments ................................................................................................ 84
12.2.1. Base Operating Fee ................................................................. 84
12.2.1.1. Initial Base Operating Fee .................................. 85
12.2.2. Reimbursable Expenses .......................................................... 85
12.2.3. Performance Bonus For Peak Months .................................... 85
12.2.4. Peaking Plant Incentive Payment .......................................... 87
12.2.5. Price Adjustments To Certain Compensation Payments ...... 90
12.2.6. Billing And Payment ............................................................... 90
12.2.6.1. Withholding Of Franchise Tax ............................ 91
12.3. Interest On Late Payments ................................................................... 92
12.4. Disputed Bills ......................................................................................... 92
13. INSURANCE ..................................................................................................... 94
13.1. Authority Cure Rights For Failure To Obtain And/Or Maintain
Insurance ................................................................................................ 96
13.2. Waivers To Insurance Coverage ............................................................ 96
14. AUTHORITY DISCLAIMERS .......................................................................... 98
15. RECORDS, DOCUMENTS AND ACCESS TO INFORMATION ................... 99
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16. ACCOUNTING RECORDS AND AUDITS .................................................... 100
17. FORCE MAJEURE ......................................................................................... 102
17.1. Burden Of Proof .................................................................................... 103
17.2. Excused Performance ........................................................................... 103
17.3. Authority’s Right To Use Self-Help ..................................................... 104
18. CHANGE IN OPERATOR COMPENSATION .............................................. 104
19. INDEMNITIES ............................................................................................... 107
19.1. Indemnity For Performance Of Services ............................................. 108
19.2. Special Indemnity For Environmental And System Reliability
Liabilities .............................................................................................. 108
19.3. Indemnity For Certain Taxes .............................................................. 110
19.4. Indemnity For Patents And Copyrights .............................................. 110
19.5. Scope Of Indemnity Coverage .............................................................. 111
19.6. Indemnity Performance Procedures .................................................... 111
20. TERM OF PERFORMANCE OF SERVICES ................................................ 113
20.1. Termination By The Authority For Cause .......................................... 114
20.1.1. Violation Of Law Or Permit .................................................. 114
20.1.2. Failure Of Performance ......................................................... 115
20.1.3. Failure Of Availability .......................................................... 115
20.2. Consequences Of Termination Pursuant To Section 20.1 .................. 116
20.3. Termination In The Event Of Bankruptcy .......................................... 116
20.4. Termination By Authority Due To Change In Law ............................ 117
20.5. Condition Upon Termination Of Performance Of The Services ......... 117
21. REPRESENTATIONS .................................................................................... 117
21.1 Operator Representations .................................................................... 117
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21.1.1 Organization and Existence .................................................. 118
21.1.2 Power and Authority ................................................................ 118
21.1.3. Due Execution And Delivery ................................................. 118
21.1.4. No Violation Of Law, Etc. ..................................................... 118
21.1.5 No Litigation ............................................................................. 119
21.2 Authority Representations ................................................................... 119
21.2.1 Organization and Existence .................................................. 119
21.2.2 Power and Authority ............................................................. 119
21.2.3 Due Execution And Delivery ................................................. 120
21.2.4 No Violation Of Law, Etc. ..................................................... 120
21.2.5 No Litigation .......................................................................... 120
21.2.6 Limited Purpose Entity ......................................................... 120
22. NOTICES ........................................................................................................ 121
23. LETTER OF CREDIT ..................................................................................... 122
24. CERTAIN LIMITATIONS AND EXCLUSION OF LIMITATIONS ON
OPERATOR’S LIABILITY .............................................................................. 123
25. LIMITATIONS ON CERTAIN TYPES OF DAMAGES ................................ 124
26. INDEPENDENT CONTRACTOR STATUS AND RELATIONSHIP OF
THE PARTIES ................................................................................................ 125
27. DISPUTE RESOLUTION ............................................................................... 126
27.1. The Arbitration And The Arbitration Panel ....................................... 128
27.2. Initiation Of Arbitration ...................................................................... 128
27.3. Appointment And Qualification Of Arbitrators .................................. 129
27.4. Scope Of Issues To Be Arbitrated ........................................................ 131
27.5. Decisions By The Arbitration Panel .................................................... 132
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27.6. Specific Arbitration Procedures To Be Followed ................................. 133
27.6.1. Communications With Arbitrators ....................................... 133
27.6.2. Arbitration Pre-Hearing Conference .................................... 133
27.6.3. Permitted Discovery .............................................................. 135
27.6.4. Witness Lists, Exhibit Lists And Exhibits ........................... 136
27.6.5. Briefing .................................................................................. 138
27.6.6. Subpoenas And Protective Orders ........................................ 138
27.6.7. Continuances And Time Extensions ..................................... 139
27.6.8. Conduct Of The Arbitration Hearings .................................. 139
27.6.9. Issuance Of The Arbitration Award ..................................... 140
27.6.10. Other Procedures ................................................................... 141
27.7 Costs Of Arbitration ............................................................................. 141
28. ASSIGNMENT ................................................................................................ 142
29. FURTHER COOPERATION .......................................................................... 142
30. NO THIRD PARTY BENEFICIARIES .......................................................... 142
31. MEANING OF CERTAIN WORDS ................................................................ 143
32. CONSTRUCTION OF THIS AGREEMENT ................................................. 143
32.1 Joint Efforts .......................................................................................... 143
32.2 Severability ........................................................................................... 144
32.3 Captions ................................................................................................ 144
33. GOVERNING LAW ......................................................................................... 144
34. APPENDICES INCORPORATED AND SUPREMACY ................................ 144
35. ENTIRE AGREEMENT, MODIFICATION AND WAIVER ......................... 145
36. COUNTERPART EXECUTION ..................................................................... 145
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TABLE OF APPENDICES
Appendix A Staffing Plan – Operation And Maintenance Period
Appendix B Compensation Structure – Transition Period
Appendix C Insurance Requirement
Appendix D Property Description of Project Sites
Appendix E Power Purchase Agreement
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OPERATIONS AND MAINTENANCE AGREEMENT
SPA COGENERATION PROJECT
THIS OPERATIONS AND MAINTENANCE AGREEMENT
(“Agreement”) is entered into effective as of [date] by and between the
SACRAMENTO POWER AUTHORITY, an agency established pursuant to
Articles 6500 through 6599, inclusive, of the California Government Code (the
“Authority”), and [name of operator], a [description of type of organization]
(“Operator”).
R E C I T A L S
A. The Authority licensed, financed, constructed and owns the
cogeneration plant located at 3215 47th Avenue, Sacramento, California 95824 (the
“Base Plant”). The Base Plant sits on approximately six acres of land adjacent to
the Capital Commerce Center in Sacramento County. The Base Plant was
completed and placed in commercial operation on December 4, 1997. The Authority
subsequently acquired title to the McClellan Gas Turbine (the “Peaking Plant”)
facility from the Sacramento Municipal Utility District (SMUD) on May 1, 2007.
The Peaking Plant is a simple cycle GE frame 7E gas turbine facility located at
4536 Dudley Boulevard, McClellan Park, CA 95652. This facility, originally
designed to provide emergency power to the McClellan Air Force Base, was
completed and began commercial operation in 1986, then upgraded to its current
condition in 2001. Together, the Base Plant and Peaking Plant form “the Project”.
The Project is currently operated for the Authority by a contractor pursuant to an
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Operation and Maintenance Agreement under which the operation and
maintenance services provided by the contractor are expected to terminate on or
before December 31, 2016. .
B. The Project supplies electrical power to the SACRAMENTO
MUNICIPAL UTILITY DISTRICT (SMUD) pursuant to a Power Purchase and
Operating Agreement.
C. On [date], the Authority issued a Request for Proposal (RFP)
No. 150153.KN seeking contractors to provide operation and maintenance services
for the Project. Operator analyzed said RFP and independently evaluated the
Project in the manner described in Recital D, and developed and submitted a
responsive proposal to the Authority dated [date]. The Authority evaluated said
proposal of Operator and all other proposals submitted in response to RFP
No. 150153.KN, and determined that said proposal of Operator was a successful
response to that RFP for providing the operation and maintenance services for the
Project.
D. The Authority has furnished Operator with access to the Project
sites, and with access to the information in the Authority’s files relating to the
Project sites, the construction of the Project, the facilities and equipment comprising
the Project and the historical operation of the Project from the inception of its
commercial operation to the present (i.e., the time of signing of this Agreement by
Operator). Operator has conducted such inspections, investigations and analyses as
Operator deems appropriate, and has fully satisfied itself as to the existing
3
conditions with respect to the Project. Operator is familiar with the facilities and
equipment comprising the Project and has experience in operating and maintaining
these or similar types of facilities and equipment. Operator has also observed the
nature, scope and extent of the operation and maintenance services for the Project
being furnished by the contractor currently providing those services for the
Authority, and the managerial, professional, technical, and operating and
maintenance personnel directly or indirectly (i.e., through subcontract) being
utilized by that contractor in providing those services; Operator recognizes that
Operator will be providing the Authority with essentially the same general nature,
scope and extent of operation and maintenance services under this Agreement.
E. The Authority and Operator desire to enter into this Agreement
to set forth their specific understanding and agreement with respect to the
operation and maintenance services for the Project to be provided by Operator.
NOW, THEREFORE, the Authority and Operator agree as set forth
below.
1. DEFINITIONS. The following terms when used in this
Agreement or in the Appendices to this Agreement with initial capitalized letters or
all capitalized letters, as applicable, shall have the meanings set forth below in this
Section 1. The definitions are equally applicable to both the singular and plural
forms of the terms defined.
1.1. Accessories. “Accessories” shall mean all of the tools,
special tools, equipment, safety equipment, spare parts and materials, in each case
4
other than Consumables (defined in Paragraph 1.11), required for the normal
operation and maintenance of the Project (defined in Paragraph 1.31).
1.2. Administrative Procedures Manual. “Administrative
Procedures Manual” shall mean the manual described in Paragraph 4.2.
1.3. Affiliate. “Affiliate” shall mean, as to any specified
Person (defined in Paragraph 1.27), any other Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by or is under common
control with such specified Person. For purposes of this definition, “control,”
“controlled by,” and “under control with” with respect to any Person shall mean the
possession, directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities, or by contract, or otherwise.
1.4. Annual Budget. “Annual Budget” shall mean the budget
described in Paragraph 8.2 to be adopted for each Operating Year (defined in
Paragraph 1.22).
1.5. Annual Maintenance Schedule. “Annual Maintenance
Schedule” shall mean the annual maintenance schedule for all Scheduled
Maintenance (defined in Paragraph 1.38), to be adopted pursuant to Paragraph 8.3
for each Operating Year (defined in Paragraph 1.22).
1.6. Authority Participant. “Authority Participant” shall
mean the SMUD Financing Authority which, together with SMUD has formed the
5
Authority. The Authority presently has and always has had two Members (defined
in Paragraph 1.19).
1.7. Base Operating Fee. “Base Operating Fee” shall mean
the annual fee to be paid to Operator under this Agreement, to be prorated on a
daily basis, paid by the Authority to Operator on a monthly basis, and adjusted
upward annually, all as provided in Paragraph 12.2.
1.8. Base Plant. “Base Plant” shall mean the combined-cycle
power plant that exists at 3215 47th Avenue, Sacramento, CA 95824 as of the
Effective Date (defined in Paragraph 1.11), as the same may be repaired, modified,
altered and/or replaced from time to time during the period Operator is providing
the Services (defined in Paragraph 1.40) under this Agreement, the power block of
which includes one natural gas-fired combustion turbine generator and one steam
turbine generator arranged in a combined cycle configuration. The Base Plant
specifically excludes the Peaking Plant (defined in Paragraph 1.26).
1.9. Consumables. “Consumables” shall mean the lubricants,
chemicals, fluids, oils, filters, fittings, connectors, seals, gaskets, hardware, wires,
and such other materials that are needed, used, consumed over time and replaced
in the normal course of the operation and maintenance of the Project (defined in
Paragraph 1.30).
1.10. Direction Change. “Direction Change” shall mean a
request by the Authority or SMUD to change the electrical energy output of the
Project (defined in Paragraph 1.30), which request seeks to either (i) reduce such
6
output at any time when the most recent request had been to increase such output,
or (ii) increase such output at any time when the most recent request had been to
decrease such output. For purposes of this definition, (i) a request to start-up and
commence generating electrical energy from the Peaking Plant (defined in
Paragraph 1.27) shall not constitute a Direction Change, although a request to
change the electrical energy output from the Peaking Plant once it is already
generating electrical energy will be a Direction Change, and (ii) the “most recent
request” shall not include any requests by the Authority or SMUD to hold the
electrical energy output of the Project at a constant level.
1.11. Effective Date. “Effective Date” shall mean [date].
1.12. Equivalent Forced Outage Factor. “Equivalent Forced
Outage Factor” shall mean for any calendar month the fraction, expressed as a
percentage, the numerator of which is the number of hours (rounded to the nearest
1/10th of an hour) during that calendar month in which the Base Plant is
unavailable due to forced outages or deratings, and the denominator of which is the
total number of hours in that same calendar month. Forced outages are those
periods of time during which the Base Plant is removed from service. A derating is
an unplanned operating condition during which the Base Plant is not capable of
generating electrical power at its maximum capacity. Deratings are adjusted to
equivalent forced derated hours. The Equivalent Forced Outage Factor will be
calculated at the end of each calendar month in accordance with the IEEE Standard
7
Definitions for Use in reporting Electric Generating Unit Reliability, Availability
and Productivity “IEEE Std 762-2006”, issued 15 March 2007.
1.13. Force Majeure Event. “Force Majeure Event” shall have
the meaning provided in Section 17.
1.14. General Facilities. “General Facilities” shall mean the
permanent offices, file rooms and shop spaces, restrooms, lockers and showers at
the Project (defined in Paragraph 1.30) that are to be used by Operator’s personnel.
1.15. Law. “Law” shall mean any federal, state, local and other
governmental body’s constitution, charter, act, statute, law, ordinance, code, rule,
regulation, or order or other applicable legislative or administrative action of the
United States of America or the State of California, or any agency, department,
authority, political subdivision or other instrumentality of either thereof, or a final
decree, judgment or order of a court, all as may be applicable from time to time
during the term of performance of the Services (defined in Paragraph 1.40) under
this Agreement.
1.16. Major Repair. “Major Repair” shall mean any single work
assignment or series of directly related work assignments involving repair,
overhaul, maintenance procedures, equipment or parts replacement or other work
that is necessary to perform with respect to any part of the Project (defined in
Paragraph 1.30), whether scheduled or unscheduled, the total cost to the Authority
of which will exceed the sum of One Hundred Thousand Dollars ($100,000). In the
case of unscheduled work, and unless the Authority and Operator otherwise agree
8
in accordance with Paragraph 8.4, a Major Repair shall be that work, and only that
work, that becomes necessary to perform as a direct result of any single incident or
sequential series of related incidents causing the need for repair, overhaul,
maintenance procedures, equipment or parts replacement or other work with
respect to any part of the Project.
1.17. Maintenance Management Program. “Maintenance
Management Program” shall mean the program described in Paragraph 4.8.
1.18. Maintenance Plan. “Maintenance Plan” shall mean the
written plan described in Paragraph 4.1.
1.19. Members. “Members” shall mean the members of the
Authority, SMUD and the Authority Participant are and always have been the two
Members of the Authority.
1.20. Operation And Maintenance Period. “Operation and
Maintenance Period” shall mean the period during which Operator is responsible
under the terms of this Agreement for providing the operation and maintenance
services for the Project (defined in Paragraph 1.31) that are described in Section 6,
which period shall commence on 00:00 hours on [date] and immediately follows the
conclusion of the Transition Period (defined in Paragraph 1.45). The Operation and
Maintenance Period shall terminate at 00:00 hours on the day immediately
following the last day during which Operator is required to furnish the operation
and maintenance services for the Project under the terms of this Agreement, unless
sooner terminated pursuant to Section 20; provided, however, that the Authority
9
shall have the unilateral right, but not the obligation, at its sole option, to extend
the Operation and Maintenance Period for an additional five (5) years, by delivering
written notice of its election to do so to the Operator at least ninety (90) days prior
to the expiration of the Operation and Maintenance Period.
1.21. Operations And Maintenance Procedures Manuals.
“Operations and Maintenance Procedures Manuals” consist of two separate
manuals, one of which is the Operations Manual, and the other of which is the
Maintenance Procedures Manual, both of which are described in Paragraph 4.3.
1.22. Operating Year. “Operating Year” shall mean each
calendar year that occurs during the Operation and Maintenance Period, except
that the first Operating Year under this Agreement shall be the period of time
beginning with the commencement of the Operation and Maintenance Period and
ending at 00:00 hours of January 1 of the following year, and the last Operating
Year of which shall be the period of time commencing on 00:00 hours of January 1 of
the last calendar year during the Operation and Maintenance Period and ending on
00:00 hours of the day immediately following the last day of the Operation and
Maintenance Period.
1.23. Operator Staffing Plan. “Operator Staffing Plan” shall
mean the plan attached to this Agreement as Appendix A. The Operator Staffing
Plan sets forth the specific staffing level to be employed by Operator during the
Operation and Maintenance Period, the training and experience requirements
applicable to each job position reflected in such staffing, and other matters relating
10
to the hiring and use of personnel by Operator during the Operation and
Maintenance Period.
1.24. Parties. “Parties” shall mean the Authority and Operator,
and Party shall mean either the Authority or Operator, as the case may be.
1.25. Peak Months. “Peak Months” shall mean the calendar
months of any Operating Year as may be designated by the Authority upon written
notice to Operator given not later than thirty (30) days prior to the commencement
of the Operating Year in question, which calendar months need not necessarily be
consecutive. Unless and until the Authority makes a contrary designation of the
Peak Months as provided in the immediately preceding sentence, the Peak Months
shall be January, February, June, July, August, September, October and December
(i.e., eight calendar months); the summer Peak Months shall be June, July, August
and September, and the winter Peak Months shall be January, February, October
and December. At no time shall Authority designate fewer than eight Peak Months
in any Operating Year or fewer than four summer Peak Months in an Operating
Year
1.26. Peaking Plant. “Peaking Plant” shall mean the McClellan
Gas Turbine facility located at 4536 Dudley Boulevard, McClellan Park, CA. The
Peaking Plant is a simple-cycle peaking facility comprised of a General Electric
frame 7E gas turbine generator and related equipment.
1.27. Person. “Person” shall mean any individual, partnership,
limited partnership, corporation, limited liability company, association, business
11
trust, government, or any political subdivision of any government, governmental
agency, or any other entity.
1.28. Power Purchase Agreement. “Power Purchase
Agreement” shall mean the Power Purchase and Operating Agreement between
SMUD and the Authority. The existing Power Purchase Agreement is attached to
this Agreement as Appendix E.
1.29. Price Adjustment. “Price Adjustment” shall have the
meaning set forth in Subparagraph 12.2.5.
1.30. Project. “Project” shall have the meaning provided in
Recital A above; the legal description of each of the two Project sites is set forth in
Appendix D.
1.31. Project Agreements. “Project Agreements” shall mean
this Agreement and those other agreements relating to the Project in effect from
time to time during either the Transition Period (defined in Paragraph 1.45) or the
Operation and Maintenance Period (defined in Paragraph 1.20) that are described
in Section 3.
1.32. Project Lender. “Project Lender” shall mean the bank(s)
or other financial institution(s) from time to time issuing or participating in a letter
or letters of credit in support of any bonds issued by the Authority for the
construction or term financing of the Project or providing such other form of
financing obtained by the Authority with respect to the Project.
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1.33. Project Permit(s). “Project Permit(s)” shall mean any
action, approval, consent, waiver, exemption, variance, franchise, order, standard
(described in this Paragraph 1.33), permit, certificate, authorization, right, license
or other similar matter of or from a government or governmental authority that is
required or applicable at any time either during the Transition Period or the
Operation and Maintenance Period for the ownership, use, operation and/or
maintenance of all or any part or portion of the Project, or for the disposal or
remediation of any waste generated by or in connection with the Project, whether
issued pursuant to the California Energy Commission permitting process or
otherwise, and include any zoning, environmental protection, pollution, sanitation,
safety, siting or building permit and any permit issued by the SMAQMD (defined in
Paragraph 1.41) and any standard issued by the North American Electric
Reliability Corporation or the Western Electric Coordinating Council allowing for or
applicable to the operation of the Project.
1.34. Project Work Documents. “Project Work Documents”
shall mean all of those manuals and documents specifically identified in
Paragraphs 4.1 through 4.10, inclusive.
1.35. Prudent Utility Practices. “Prudent Utility Practices”
shall mean the practices, methods and acts that are commonly used by utilities
located in the State of California for gas-fired, combined-cycle, electric power
generation facilities for the safe design, construction, and operation and
13
maintenance of equipment with dependability and economy, and in accordance with
Law.
1.36. Reference Interest Rate. “Reference Interest Rate” shall
mean the “prime rate” as established and in effect by Bank of America N.A. from
time to time, plus two (2) percent, or the maximum interest rate permitted under
applicable law, whichever is less.
1.37. Reimbursable Expense(s). “Reimbursable Expense(s)”
shall mean all of those costs and expenses specifically identified and designated as
Reimbursable Expenses in Paragraph 11.1, and no other costs or expenses of any
kind, nature or character.
1.38. Scheduled Maintenance. “Scheduled Maintenance” shall
mean the removal from service of one or more of any of the combustion generating
units and/or the steam turbine generator comprising the Project from time to time,
including the Peaking Plant, as scheduled and approved pursuant to the applicable
adopted Annual Maintenance Schedule or SMUD’s Outage Coordination Process
(defined in Paragraph 1.42) for the purpose of performing work on specific
components of such unit(s) and/or related power trains.
1.39. Scheduled Maintenance Hours. “Scheduled Maintenance
Hours” shall mean the number of hours during the calendar month that the
generator in question was unable to operate solely as a result of Scheduled
Maintenance activities.
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1.40. Services. “Services” shall mean all of the services relating
to the Project that are to be performed by or under the direction of Operator
pursuant to this Agreement. The Services to be performed by Operator during the
Transition Period (defined in Paragraph 1.45) are described in Section 5, and the
Services to be performed by Operator during the Operation and Maintenance Period
are described in Section 6.
1.41. SMAQMD. “SMAQMD” means the Sacramento
Metropolitan Air Quality Management District, or its regulatory successor.
1.42. SMUD’s Outage Coordination Process. “SMUD’s Outage
Coordination Process” shall mean the process in effect as modified by SMUD from
time to time to schedule an outage for the purpose of conducting maintenance,
repairs and the like to a power plant or other equipment connected to SMUD’s
electrical system on shortened notice as the need may arise for the same.
1.43. Subcontract. “Subcontract” shall mean any contract or
purchase order under which a Subcontractor (defined in Paragraph 1.44) is or is to
be retained by Operator to perform work or provide any Service for or relating to
the Project. Operator shall only enter into Subcontracts as provided in
Paragraph 8.3, and/or Paragraph 8.8, and/or Paragraph 8.10.
1.44. Subcontractor. “Subcontractor” shall mean any Person
retained or to be retained by Operator to perform work or provide any Service for or
relating to the Project. Operator shall only retain Subcontractors as provided in
Paragraph 8.3, and/ or Paragraph 8.8, and/or Paragraph 8.10.
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1.45. Transition Period. “Transition Period” shall mean the
period of time commencing on 08:00 hours on [date] and ending at 00:00 hours on
[date] during which Operator will provide the services described in Section 5.
During the Transition Period, the contractor currently providing operation and
maintenance services for the Project will remain responsible to the Authority for
providing those operation and maintenance services.
1.46. Utility Operations Procedures Manual. “Utility
Operations Procedures Manual” shall mean the manual described in Paragraph 4.4.
2. PROVISION OF OPERATION AND MAINTENANCE
SERVICES AND STANDARDS OF PERFORMANCE. Operator shall, subject to
the provisions of this Agreement, perform all of the Services for and related to the
Project. The Authority shall, subject to the provisions of this Agreement,
compensate Operator for providing all of the Services as set forth in Section 12.
Operator shall perform all of the Services in strict accordance with the provisions of
this Agreement. Operator shall further perform all of the Services in all material
respects in a safe, clean, efficient and cost-effective manner in accordance with
Prudent Utility Practices, and in strict accordance with all Laws and Project
Permits. Operator shall also provide all of the Services in a manner that fully
complies with each of the other Project Agreements, and with all warranties
applicable to the facilities and equipment comprising the Project from time to time,
and the Project Work Documents. The personnel of Operator involved in furnishing
any of the Services shall be qualified and competent to perform the work assigned to
16
them by or for Operator, and the recommendations, guidance and performance of all
personnel of Operator providing Services shall reflect the best professional
knowledge and judgment of such personnel.
3. PROJECT AGREEMENTS. As of the Effective Date, the Project
Agreements are: this Agreement; the McClellan Power Plant Asset Purchase and
Sale Agreement; the SPA and MGT Power Purchase and Operating Agreements;
the SPA and MGT Water Services Agreements; the SPA and MGT Electrical
Interconnect Agreements; the SPA and MGT Natural Gas Interconnection and
Supply Agreements; and the SPA and MGT Ground Lease Agreements. Nothing in
this Agreement shall be deemed or construed to amend, alter or modify the rights or
obligations of any party to any other Project Agreement (i.e., other than this
Agreement) in any respect whatsoever, or at all. The Authority reserves the right to
amend or cause to be amended the Project Agreements other than this Agreement
without the consent or approval of Operator, together with the right to enter into
new agreements relating to the Project which will or may affect the manner in
which the Project will need to be operated and maintained. The Authority shall
notify Operator in writing of any amendment to any Project Agreement other than
this Agreement, and of any new agreement(s) that relate in any manner to the
operation and maintenance of the Project, and shall include a copy of such
amendment(s) and/or new agreement(s) with such written notice. Upon receipt of
such written notice by Operator, the Project Agreements shall automatically be
deemed to include such amendment(s) and/or new agreement(s) as the case may be;
17
provided, however, that if any such change in the Project Agreements caused by the
Authority results in a material change (i.e., either increase or decrease) in the scope
of Services to be furnished by Operator under this Agreement, either Party shall
have the right under the provisions of Section 18 to cause an adjustment to the
compensation to be paid to Operator for Services. No change of any kind in or with
respect to such Project Agreements caused by the Authority pursuant to this
Section 3 shall require Operator to perform any new Services that Operator was not
providing immediately prior to such change in those Project Agreements if
(i) Operator, in the exercise of its reasonable good-faith judgment, believes that
Operator is neither competent to itself perform such new Services nor competent to
supervise a qualified Subcontractor to perform such new Services, and (ii) Operator
provides the Authority with written notice of such belief within fifteen (15) days
after Operator has received notice of the change to the Project Agreements from the
Authority that requires the performance of such new Services. Any such written
notice to the Authority shall specifically identify the new Services in question that
Operator believes it is unable to undertake, and shall also set forth the particular
reason or reasons supporting any such belief by Operator. The Authority shall have
the right and obligation to provide or cause to be provided any new Services that
Operator is unable to undertake as set forth in Operator’s written notice to the
Authority.
4. PROJECT MANUALS AND DOCUMENTS RESPECTING
OPERATION AND MAINTENANCE SERVICES. The manuals and documents
18
described in Paragraphs 4.1 through 4.10, inclusive, collectively comprise the
Project Work Documents. As of the Effective Date, the Project Work Documents are
maintained by the contractor currently providing operation and maintenance
services for the Authority with respect to the Project, and Operator has been
provided with the opportunity to review the Project Work Documents prior to
entering into this Agreement. The Authority shall make and/or cause the current
contractor to make the then most recent version of all Project Work Documents fully
available to Operator throughout the Transition Period. Operator shall thoroughly
review and update as necessary all Project Work Documents during the Transition
Period as provided in Paragraph 5.2.
4.1. Maintenance Plan. The Maintenance Plan is a written
plan that sets forth the methodology to be employed for Scheduled Maintenance
including repairs, preventive and predictive maintenance activities.
4.2. Administrative Procedures Manual. This manual sets
forth the procedures and policies governing the long-term administration of Project
operations including preparation and adoption of Annual Budgets, accounting
procedures and bookkeeping, recordkeeping and recordkeeping procedures,
procedures for the receipt and implementation of directives and approvals issued by
the Authority pertaining to this Agreement, procurement and contracting
procedures, correspondence and review procedures, the organization of personnel
and their reporting requirements and responsibilities, limits of authority of
personnel, and key personnel lists. Although a number of these procedures and
19
policies would be applicable for any contractor providing operation and maintenance
services for the Project, other provisions of the Administrative Procedures Manual
must be tailored for each particular contractor providing such services, and will
need to be tailored to correspond to Operator’s organization and personnel that will
be providing the Services.
4.3. Operation And Maintenance Procedures Manuals. These
two separate manuals collectively provide detailed system descriptions for the
Project; start-up, shutdown, normal and abnormal operating procedures; operating
set points, limitations, and precautions; preventative maintenance programs;
equipment documentation, operating manuals and drawings; operations logs and
reporting requirements, including reporting to the Authority and SMUD with
respect to unscheduled outages, emergencies or unplanned repairs that would result
in a reduction of Project availability or a shutdown of the Project and related
ongoing communications to advise the Authority and SMUD of the status of
restoring normal operation.
4.4. Utility Operations Procedures Manual. This manual
includes the following: communications protocol between and among Project
operating personnel, SMUD personnel and the Authority, including the identity of
key operating personnel of Operator at the Project site and key SMUD personnel;
specific clearance and switching practices; the procedures for scheduling the
outages; and all other procedures necessary to ensure safe, reliable, and secure
electrical generation from the Project to SMUD.
20
4.5. Security Procedures Plan. This written plan sets forth
security procedures to be followed relative to the Project, including access to the
Project and securing Accessories and Consumables from theft and the like.
4.6. Safety And Hazardous Materials Procedures Manual.
Creating a safe environment for employees is a core value of SMUD and the
Authority. The Safety and Hazardous Materials Procedure Manual includes an
Illness and Injury Prevention Program (IIPP) suitable for High Hazard Employees,
a description of Operator’s participation in the Cal/OSHA Consultation Service’s
partnership programs for workplace safety and health management (i.e. Golden
Gate recognition, Cal/SHARP, and/or Voluntary Protection Program,) and a Risk
Management Plan (RMP) that meets the latest requirements of the California
Accidental Release Program (CalARP) regulations in accordance with California
Energy Commission requirements and all Laws.
4.7. Procurement Documents. The Procurement Documents
consist of lists of vendor-recommended Accessories, including spare parts, and tools,
supplies and Consumables to be used in operating and maintaining the facilities
and equipment that comprise the Project.
4.8. Maintenance Management Program. This computerized
program sets forth a specific program that identifies maintenance requirements for
the individual pieces of equipment comprising the Project, tracks and records
performed maintenance, including the identification of all equipment comprising
21
the Project that requires maintenance, and corresponding maintenance practices
and procedures.
4.9. Operator Training And Qualification Program. This is a
written program designed to ensure that all personnel involved in providing
Services have the required knowledge, training and experience for their respective
assigned duties, including special training required for handling hazardous
substances and materials.
4.10. Emergency Response Plan. This written plan identifies
the action to be taken by Project operating personnel in the event of various
emergencies affecting the safety or protection of Persons or endangering the Project,
the property located at the Project, or the environment.
5. SCOPE OF TRANSITION PERIOD OPERATOR SERVICES.
Operator shall provide the Services described in this Section 5 during the
Transition Period utilizing as reasonably necessary some or all of the personnel
identified in Appendix B for the provision of such Services during the Transition
Period.
5.1. Familiarization With Project. Operator shall perform all
work, functions and tasks as are reasonably required in order for Operator to be in
a position to assume full and complete responsibility for the entire scope of the
Services to be provided by Operator during the Operation and Maintenance Period.
Such work, functions and tasks will include a thorough review of Project design and
system operating procedures, and assisting the contractor responsible for
22
performing operations and maintenance services for the Project during the
Transition Period. It is understood that Operator’s personnel will be under the
supervision, direction and control of the contractor providing such operation and
maintenance services until, but only until, commencement of the Operation and
Maintenance Period.
5.2. Update Project Work Documents. Operator shall
thoroughly review and update as necessary all Project Work Documents in
accordance with Prudent Utility Practices. Without limiting the generality of the
foregoing, Operator shall update and tailor the Administrative Procedures Manual
as appropriate to reflect the personnel and organization of Operator, shall update
the Utility Operations Procedures Manual to similarly reflect the organization and
personnel of Operator, shall prepare a Security Procedures Plan setting forth the
Operator’s security procedures, and shall prepare the Operator Training and
Qualification Program to indicate the specific training and qualification programs
that Operator will utilize. Any changes or modifications to any of the
Administrative Procedures Manual and the Operations and Maintenance
Procedures Manuals, other than those specifically required to tailor those manuals
to the particular organization and personnel of Operator, shall require the prior
written consent of the Authority, which consent shall not be unreasonably withheld
or delayed. Similarly, Operator shall obtain written approval from the Authority
for Operator’s Security Procedures Plan before implementing it, which approval
likewise shall not be unreasonably withheld or delayed. The approval of Operator’s
23
Security Procedures Plan by the Authority shall not in any way alter or affect the
responsibility and obligation of Operator to devise and implement a plan for
security of the Project that is adequate to prevent theft and vandalism respecting
the Project in the absence of a Force Majeure Event as elsewhere provided in this
Agreement (i.e., approval shall not constitute or be construed an acknowledgement
by or admission on behalf of the Authority that Operator’s approved plan is
reasonably adequate to prevent theft and/or vandalism).
5.3. Inventories. Operator shall conduct a physical inventory
of Accessories, including spare parts, equipment, and Consumables, in each case
within ten (10) days of commencement of the Operation and Maintenance Period,
and provide a copy of the results of each of those inventories to the Authority. Upon
request from the Authority, Operator shall compare all or any of such inventories it
performed to like inventory lists furnished to Operator by the Authority, and
identify any deviations between those inventories.
5.4. Annual Budget For First Operating Year. Operator shall
prepare and submit to the Authority a proposed annual budget for the first
Operating Year on or before thirty (30) days prior to commencement of the
Operation and Maintenance Period, but otherwise in accordance with the provisions
of Paragraph 8.1. The Authority and Operator shall thereafter promptly proceed to
adopt the Annual Budget for the first Operating Year as provided in said
Paragraph 8.1 during the remainder of the Transition Period and thereafter, if
24
necessary, recognizing that circumstances may prevent the final adoption of that
Annual Budget prior to the conclusion of the Transition Period.
5.5. Annual Maintenance Schedule For First Operating Year.
Operator shall prepare and submit a proposed Annual Maintenance Schedule for
the first Operating Year on or before thirty (30) days prior to commencement of the
Operation and Maintenance Period, but otherwise in accordance with the provisions
of Paragraph 8.2. The Parties shall thereafter promptly proceed to adopt the
Annual Maintenance Schedule for the first Operating Year as provided in said
Paragraph 8.2 during the remainder of the Transition Period and thereafter, if
necessary, recognizing that circumstances may prevent the final adoption of that
Annual Maintenance Schedule prior to the conclusion of the Transition Period.
6. SCOPE OF OPERATION AND MAINTENANCE PERIOD
OPERATOR SERVICES. During the Operation and Maintenance Period, and
subject to those specific provisions of this Agreement under which the Authority
retains certain responsibility and control respecting operation and maintenance
matters for the Project, Operator shall be in complete charge of, and shall have full
responsibility for the care, custody and control of the Project, including full
responsibility for all operations and maintenance with respect to the Project,
together with the supply or procurement of all materials, equipment, supplies,
Accessories, including spare parts, Consumables, and other items necessary for the
operation and maintenance of the Project, and for the maintenance of all records
respecting the operation and maintenance of the Project. Prior to commencement of
25
the Operations and Maintenance Period, and in connection with the provision of
Services during that period, Operator shall obtain and maintain at all times until
all obligations of Operator have been discharged under this Agreement a letter of
credit as required by Section 23.
6.1. Provision Of Personnel. In providing the Services during
the Operation and Maintenance Period, Operator shall maintain as a full-time staff
and utilize the labor, professional, supervisory and managerial personnel reflected
on the Operator Staffing Plan. All costs and expenses for the personnel reflected on
the Operator Staffing Plan are included in the Base Operating Fee. All such
personnel shall devote full time to providing the Services (i.e., they shall be
full-time employees and shall work exclusively for or in connection with providing
the Services, unless and except to the extent the Operator Staffing Plan indicates a
particular job position will not be devoting full time to providing the Services, in
which case any such personnel shall devote at least that amount of time in
providing the Services as indicated in the Operator Staffing Plan). Operator shall
retain sole authority, control and responsibility with respect to all personnel
involved in providing Services and with respect to all labor matters in connection
with performance of the Services, except in the following limited respect: the
Authority shall have the right to approve the Project manager and other
management personnel Operator assigns to the Project, and any replacement(s) of
any such management personnel, which approval the Authority shall not
unreasonably withhold or delay. Any change to the staffing requirements set forth
26
in the Operator Staffing Plan for staffing during the Operation and Maintenance
Period shall constitute an amendment to this Agreement requiring the mutual
consent of the Authority and Operator, and may require a corresponding
adjustment to the Base Operating Fee under the provisions of Section 18. In that
regard, Operator has independently determined that with the exception of
performing Major Repairs and the specific matters for which Operator is authorized
to provide Services through the use of Subcontractors as set forth in
Paragraph 11.1, the staffing and personnel reflected on the Operator Staffing Plan
will generally be sufficient to enable Operator to provide all of the Services
Operator is required to furnish during the Operation and Maintenance Period on a
day-to-day basis consistent with the standards for performance set forth in
Section 2. Accordingly, in the event it is reasonably determined by the Authority at
any time after commencement of the Operation and Maintenance Period that
Operator cannot adequately perform all of said Services that Operator is expected to
perform on a day-to-day basis with Operator’s own personnel consistent with the
standards of performance required by Section 2 utilizing the staffing and personnel
reflected on the Operator Staffing Plan, Operator shall be obligated, at its sole cost
and expense, to increase the staffing as reasonably necessary to enable Operator to
so adequately provide the Services (i.e., the required increase in staffing will not be
a qualifying change in circumstances for purposes of Section 18, there will be no
increase in the Base Operating Fee, and the cost incurred by Operator for the
additional personnel shall not be a Reimbursable Expense), and the Operator
27
Staffing Plan will be modified to reflect the necessary increase in Operator’s
personnel. Operator will not unreasonably withhold or delay its consent to any such
necessary change to increase the personnel on the Operator Staffing Plan.
6.2. Delineation Of Some Specific Operator Furnished
Services. Without limiting the generality of the overall obligation of Operator to be
fully responsible for the care, custody, operation and maintenance of the Project,
and subject only to the control of the Authority specifically reserved under this
Agreement and the particular obligations of the Authority respecting the operation
and maintenance of the Project as set forth in Section 7, Operator shall be
responsible for performing all of the Services identified in this Paragraph 6.2 as
reasonably necessary for Operator to operate and maintain the Project consistent
with the standards of performance described in Section 2.
6.2.1. Onsite Project Management. Provide onsite project
management as required to support and direct the operations, maintenance and
administration of the Project. This task includes management to coordinate and
respond to the requirements of the Authority, SMUD, those governmental agencies
with jurisdiction over any activity relating in any way to the Project, including
environmental and other regulatory agencies, and the local community. Such
management of coordination and responses to others includes the development,
preparation and submittal of any required or reasonably necessary information or
reports.
28
6.2.2. Long Range Operation And Maintenance Plan.
Timely prepare and submit a long range operation and maintenance plan including
high level cost estimates in accordance with Paragraph 8.1. This long range plan is
to look ahead at least five years and once approved, used in the development and
approval of the Annual Budgets and Maintenance Schedules.
6.2.3 Preparation Of Annual Budgets. Timely prepare
and submit the proposed Annual Budget for each Operating Year in accordance
with Paragraph 8.1, and in conjunction with the Authority, adopt the Annual
Budget for that Operating Year.
6.2.4. Preparation Of Annual Maintenance Schedules.
Timely prepare and submit the proposed Annual Maintenance Schedule for each
Operating Year in accordance with Paragraph 8.2, and in conjunction with the
Authority, adopt the Annual Maintenance Schedule for that Operating Year.
6.2.5. Maintenance. Plan maintenance activities, such as
scheduled inspections, overhauls, and Project betterment in accordance with the
Annual Maintenance Schedule. Conduct all required maintenance, including
scheduled Major Repairs and unscheduled Major Repairs. Ensure that all
maintenance activities are conducted in accordance with the standards for
performance described in Section 2, and in particular with strict adherence to
Prudent Utility Practices and the applicable provisions of the Operations and
Maintenance Procedures Manuals. Such maintenance shall be performed in the
29
most cost-effective fashion possible that is consistent with such required standards
of performance.
6.2.6. Maintenance Management Program. Maintain on
a current basis Project and equipment data and maintenance information in the
computerized Maintenance Management Program. Generate routine maintenance
work orders at designated intervals utilizing the computerized Maintenance
Management Program. Perform, track and refine maintenance activities.
6.2.7. Predictive Maintenance. Institute and utilize a
predictive maintenance program consisting at a minimum of vibration analyses,
infrared surveys, transformer oil analyses, lube oil analyses, and motor circuit
analyses to monitor and trend equipment condition.
6.2.8. Routine And Preventative Maintenance And
Services. Perform routine and preventative maintenance and service in accordance
with the Operations and Maintenance Procedures Manuals and the Maintenance
Management Program including replacements, adjustments, inspections,
lubrications, cleaning, painting and testing based on manufacturer’s
recommendations. Document preventative maintenance activities and maintain a
maintenance history file.
6.2.9. Buildings And Grounds Maintenance. Maintain all
Project buildings, roads, landscape and the like in good condition. Manage and
supervise landscaping and garbage activities performed by Subcontractors.
30
6.2.10. Security. Provide for Project security. This
task includes taking all reasonable precautions to secure Operator’s own tools and
all Accessories, including spare parts, and Consumables and other equipment and
materials from theft, and protecting the Project against vandalism at all times. The
Authority does not assume any responsibility for loss or damage of the Operator’s
tools and equipment under any circumstances, or for loss or damage to Accessories,
including spare parts, or to Consumables or equipment, or for damage to any
facilities and equipment comprising the Project caused by vandalism unless and
except to the extent that the vandalism or theft constitutes a Force Majeure Event
(i.e., vandalism or theft that would not have been prevented by reasonable Project
security competently performed and administered). Operator shall be responsible
for replacing at Operator’s expense any Accessories, including spare parts, and
Consumables and equipment that are lost or damaged by or in connection with theft
or vandalism.
6.2.11. Insurance. Operator shall obtain all insurance
required by Section 13, and maintain the same throughout the period required by
said Section 13.
6.2.12. Calibration And Testing. Operator shall
evaluate the current recalibration program, modify that program as required, and
maintain that program in accordance with the equipment manufacturer’s
recommended operating specifications for the testing and recalibration of all
meters, gauges, and other instrumentation used in the operations and control of the
31
Project. Operator shall perform or arrange for testing and recalibration of steam
revenue meters, protective relays, scales, transmitters, meters, gauges, recording
devices and other instruments in accordance with the Operations and Maintenance
Procedures Manuals. All recalibrations shall be traceable to national standards
unless some other basis would be appropriate and consistent with Prudent Utility
Practices, in which case such other specific basis for recalibration shall be
documented. Operator shall provide reasonable advance notice to the Authority for
the recalibration of all billing meters so that the Authority may have a
representative or representatives present to witness the recalibration and testing.
6.2.13. Reporting. Perform all reporting requirements
that are reasonably specified by the Authority, including the calendar year annual
reports and monthly operating reports required by Paragraph 8.5, and provide the
Authority with operating data including hourly, daily and monthly reports or other
information as the Authority may need in order to perform the administrative
responsibilities retained by the Authority with respect to the Project Agreements
pursuant to Section 7.
6.2.14. Maintenance Of Operating Records And Project
Work Documents. Maintain operating logs, records and reports documenting the
operation and maintenance of the Project in accordance with the requirements of
the Project Agreements, and maintain current revisions of the Project Work
Documents and all other drawings, specifications, lists and other materials provided
to Operator by the Authority. Such records shall include documents recording the
32
volume and identification of any hazardous substances or hazardous materials used
in the operation and maintenance of the Project, the volume, identification and
ultimate disposal location of any wastes generated from the Project, and any
permits, waste manifests or haul records associated with the disposal of wastes
from the Project. Provide the Authority and such Persons as the Authority may
direct with access to all such documents and records during normal business hours
upon reasonable advance notice.
6.2.15. Accounting. Establish, keep and maintain true
and accurate books and records that conform with and support the accounting
procedures required by the Authority and otherwise consistent with generally
accepted accounting procedures and practices. Maintain records, receipts, invoices,
vouchers and documentation of Reimbursable Expenses on a calendar month basis,
and furnish the Authority with a statement of such expenses for each calendar
month.
6.2.16. Data Reporting Re Other Project Agreements.
Operator shall fully cooperate with the Authority and provide the Authority with
such data and other information as is reasonably required to enable the Authority
to comply with any reporting requirements set forth in any Project Agreement other
than this Agreement, including information regarding operating logs, meter and
gauge readings, maintenance records, fuel usage, power generation requirements,
California Energy Commission reporting requirements, North American Electric
Reliability Corporation reporting requirements, Western Electric Coordinating
33
Council reporting requirements and SMAQMD reporting requirements. Operator
shall prepare all meter readings in connection with the billing of delivered electrical
energy and delivered thermal energy generated by the Project pursuant to the
Power Purchase Agreement and the Steam Sales Agreement, respectively, and shall
deliver records of such readings to the Authority. Upon request by the Authority,
Operator shall prepare invoices in connection with such meter readings and the
appropriate Project Agreements.
6.2.17. Procurement. Subject to the obligation of the
Authority to furnish fuel, electricity and water and the right of the Authority to
itself undertake the procurement of any materials necessary for the operation and
maintenance of the Project, all as provided in Section 7, Operator shall procure all
tools, spare parts, materials, chemicals, supplies (i.e., all Accessories and
Consumables), Services and equipment necessary for the operation and
maintenance of the Project.
6.2.18. Vendor Network. Identify and establish
accounts with qualified local vendors for specialized parts and Services. To the
extent any specialized Services are a Reimbursable Expense, and with respect to all
specialized parts, Operator shall attempt to maximize and shall pass through all
cost savings realized by utilizing established accounts with such qualified local
vendors.
6.2.19. Inventory Management. Maintain a
computer-based inventory management system to ensure that optimal spare parts,
34
supplies, materials and the like are available for immediate response to operating
and maintenance requirements. Procure without delay replacements of equal
quality upon the use of spare parts from the Authority’s inventory. Whenever
possible, Operator shall order replacement spare parts ahead of time if the use of
spare parts from the Authority’s inventory is predetermined for scheduled
maintenance activities. For each Operating Year, Operator shall conduct a physical
inventory of equipment, Accessories, including spare parts, and Consumables, and
provide a written reconciliation with the computer-based inventory to the
Authority.
6.2.20. Administration Of Subcontracts. Enter into and
administer all Subcontracts, and supervise all Subcontractors assisting Operator in
providing the Services. Operator shall be responsible and liable for the performance
of all Services provided by any Subcontractor to the same extent as if such Services
had been provided by Operator’s own personnel (i.e., that the Services are
performed in full accord with the standards for performance described in Section 2),
regardless of whether the Subcontract and/or Subcontractor in question has been
approved or deemed approved by the Authority pursuant to Paragraph 8.3, and/or
Paragraph 8.8 and/or Paragraph 8.10.
6.2.21. Waste Disposal. Arrange for and document the
safe and lawful disposal of all waste, including hazardous waste, collected or
generated by or at the Project as required by Section 9.
35
6.2.22. Sewage. Discharge sewage from or associated
with the Project in accordance with the conditions and provisions of all applicable
Project Permits.
6.2.23. Dispatching And Delivery Of Electrical Energy.
Dispatch and deliver electrical energy from the Project to SMUD pursuant to the
Power Purchase Agreement to the extent required and as directed by either SMUD
or the Authority, including compliance with all Direction Changes. It is anticipated
that the dispatching and delivering of electrical energy from the Base Plant to
SMUD will largely be controlled directly by SMUD through the Automatic
Generator Control System described in Paragraph 7.6.
6.2.24. Maintenance Of Project Permits. Provide
assistance to the Authority in renewing any Project Permits, and in obtaining any
new Project Permits or other governmental approvals of any kind applicable to the
ownership, use, operation or maintenance of the Project. The Authority shall have
the primary responsibility for renewing Project Permits and obtaining new Project
Permits or other required governmental approvals, but Operator shall assist the
Authority as reasonably requested by the Authority with respect to the same,
including providing information or reports and attending meetings and hearings
that relate to such Project Permits or other governmental approvals.
6.2.25. Project Work Documents And Other Project
Documents. Maintain and update as required all Project Work Documents. All
Project Work Documents and other drawings shall be updated within forty-five (45)
36
days of completion of any modification to the Project for which Prudent Utility
Practices would require a change to any Project Work Documents or other drawings.
Operator shall maintain, organize and store all Project Work Documents and other
drawings in areas convenient to Project personnel, Subcontractors, the Authority
and SMUD.
6.2.26. Warranty Administration. Prepare and submit
warranty claims on behalf of the Authority whenever Operator determines that any
repair required to be made to any equipment or other materials at the Project may
be subject to any warranty claim against suppliers or vendors of parts, equipment,
materials, and services for the Project, and otherwise proceed to administer the
claim through resolution, all in accordance with the warranty administrative
procedures set forth in the Administrative Procedures Manual. Operator shall
provide the Authority with written notice of all warranty claims and potential
warranty claims and their disposition.
6.2.27. Insurance Claims And Other Claims. Assist the
Authority in processing and/or prosecuting any claims against any insurance carrier
for payment of claims, liabilities or losses relating in any way to the Project that are
covered by insurance. Assist the Authority in asserting and/or prosecuting any
claims against any Person other than Operator relating in any way to the Project
that are not covered by insurance. Assist the Authority in defending against any
claims brought by any Person other than Operator relating in any way to the
Project. Such assistance shall include gathering and submitting information and
37
reports, attending meetings and attending court hearings or other hearings as
reasonably necessary to assert, prosecute or defend against any and all such
insurance claims and other claims.
6.2.28. Peaking Plant Operations. Operator shall be
responsible for the operation and maintenance of the Peaking Plant to the same
degree, extent and manner as Operator is responsible for the operation and
maintenance of the remainder of the Project during the Operation and Maintenance
Period as described in this Section 6.
6.2.29. Operations Review. Conduct monthly operations
review meetings with the Authority. Review and evaluate Project safety, Project
performance, efficiency, budgetary performance, regulatory and environmental
compliance, Supplier Diversity Program contracting status, and the like, and
identify required action plans based on such review and evaluation.
6.2.30. Audits. Provide access to documents and
information and fully cooperate with the Authority and its authorized
representatives with respect to any audit or audits of financial information and
operations and maintenance performance that the Authority may elect to
undertake, and cooperate with the Authority and any governmental agencies in
audits respecting the operation and/or maintenance of the Project that any
governmental agency or other authority with jurisdiction elects to undertake.
6.2.31. Safety. Provide an ongoing high level safety
standard such that it is in the forefront of all Project activities, including the
38
storage, handling, disposal and any cleanup or remediation of hazardous wastes.
Continuously participate in one or more of Cal/OSHA Consultation Service’s
partnership programs for workplace safety and health management (i.e., Golden
Gate recognition, Cal/SHARP and/or the Voluntary Protection Program, or any
successor partnership program subsequently implemented to replace or expand the
scope of any of said currently existing partnership programs); Operator is strongly
encouraged to progress and expand its level of participation in those partnership
programs throughout the term of the Operation and Maintenance Period. Keep
Project personnel well-versed on Project safety requirements and emergency
procedures through regular training, safety meetings and drills. Conduct an annual
corporate audit of safety procedures and keep documentation and records of the site
safety program and training.
6.2.32. Training. Provide continuous training for
Project site personnel, especially in the area of safety and hazardous materials
storage handling and disposal procedures. Refresh and cross-train operators and
maintenance personnel. Send personnel to outside specialty schools, if reasonably
necessary, to develop and maintain skills required for proper job performance.
Operator shall from time to time upon written request from the Authority provide
gas turbine and/or combined cycle power plant training to SMUD personnel and/or
the Authority personnel. Upon written request from the Authority, Operator shall
also provide training in the operation and maintenance of the Project to any
39
contractor who will replace Operator upon termination of the Operation and
Maintenance Period.
6.2.33. Monitor Changes In The Law. Review new Laws
as they affect the operation and maintenance of the Project and revise applicable
procedures and Project Work Documents as necessary to perform the Services in
compliance with all such new Laws.
6.2.34. Industry Affiliation. Participate in
information-exchange networks with operators of similar facilities as the Project
and contribute to industry operations surveys.
6.2.35. Water Usage. Adopt and implement a plan for
the efficient usage of water required for the normal operation and maintenance of
the Project that is well within all water usage limitations imposed by Project
Permits. Efficiency of water usage by Operator will be subject to audit.
6.2.36. Other. Consistent with the entire scope of the
Services to be provided during the Operation and Maintenance Period and the
further requirements of this Agreement and the other Project Agreements, Operator
shall provide such other assistance, services and work reasonably requested by the
Authority in connection with the operation and maintenance of the Project.
7. AUTHORITY PROJECT RESPONSIBILITY DURING THE
OPERATION AND MAINTENANCE PERIOD. The Authority shall, at its sole cost
and expense, provide to Operator throughout the Operation and Maintenance
Period the information, services, materials and other items described below in this
40
Section 7 at such times, and in such a manner, as may be required for the
expeditious and orderly performance of the Services by Operator.
7.1. General Facilities. The Authority shall provide Operator
with General Facilities for the performance of the Services.
7.2. Fuel Supply. The Authority shall supply and deliver or
cause to be supplied and delivered to the Project all fuel required for the operation
of the Project, including the Peaking Plant at such time, and in such amounts, as
necessary to enable Operator to operate the Project as contemplated by this
Agreement.
7.3. Electricity. The Authority shall supply and deliver or
cause to be supplied and delivered to the Project all electricity not able to be
supplied directly from the Project and which is required to operate and maintain
the Project.
7.4. Water. The Authority shall supply and deliver or cause to
be supplied and delivered all water reasonably required for the operation and
maintenance of the Project.
7.5. Effluent Water. The Authority shall arrange for the
disposal of all effluent water used or created in connection with the operation and
maintenance of the Project in accordance with Law and all applicable conditions
and provisions of Project Permits. The Authority shall make arrangements for the
disposal of such effluent water at such times and in such a manner to interfere as
41
little as reasonably possible with the operation and maintenance of the Project by
Operator.
7.6. Dispatching And Delivery Of Electrical Power From The
Project. SMUD requires that its control systems for its power grid be connected by
a computer link-up commonly referred to as an Automatic Generator Control
System to the control system for each generator comprising a part of the Project.
Through the Automatic Generator Control System, SMUD should be able to control
adjustments upward or downward, subject to the manufacturer’s recommended
ramp rates, of the output of electrical energy from the Project. The control of the
electrical energy output through the use of the Automatic Generator Control
System will not require or involve the taking of any action by Operator’s personnel
at the Project. Accordingly, under most operating conditions, the dispatching and
delivery of electrical energy from the Project will be handled by SMUD, or by the
Authority. The Authority shall dispatch or cause SMUD to dispatch and deliver
electrical energy from the Project at levels that will not be less than the minimum
output of electrical energy or greater than the maximum output of electrical energy
consistent with the manufacturer’s equipment operating specifications and at which
emissions from the Project will be in compliance with all applicable Project Permits.
However, the Automatic Generator Control System will not control the start-up of
any generator or steam turbine generator comprising the Project as of the Effective
Date, and there may be other periods of time when it will not be possible to utilize
the Automatic Generator Control System to control, dispatch and deliver electrical
42
energy from the Project. The Authority, through SMUD, shall only be responsible
for the control of electrical energy output, dispatching and delivery of electrical
energy from the Project during such periods of time as electrical energy output is
being controlled, dispatched and delivered through the use of the Automatic
Generator Control System. All non-automatic or manual control of electrical energy
output, and the dispatching and delivery of electrical energy from the Project as
may be required from time to time shall be performed by Operator under the
direction of either SMUD or the Authority as described in Subparagraph 6.2.23.
7.7. Administration Of Project Agreements. The Authority
shall be responsible for the general administration of all Project Agreements other
than this Agreement, including the billing and collection of all accounts receivable
and all other amounts payable to the Authority, and the payment of all accounts
payable and other amounts payable by the Authority; provided, however, that upon
written request from the Authority, Operator shall prepare invoices in connection
with meter readings applicable to such other Project Agreements as provided in
Subparagraph 6.2.15.
7.8. Project Permits. The Authority shall, at its own cost and
expense, and in a timely manner, procure, maintain and/or renew all Project
Permits and pay for all fees associated in any way with any Project Permits;
provided, however, that the Authority shall not be responsible for any costs,
expenses, fees, fines or penalties directly or indirectly resulting from the failure of
Operator to operate and maintain the Project during the Operation and
43
Maintenance Period in a manner that complies with all Project Permits unless and
except to the extent that such failure by Operator is caused by a Force Majeure
Event.
7.9. Procurement By Authority. The Authority may elect, by
written notice to Operator, to (i) procure directly all or any Accessories,
Consumables and other materials and equipment and outside services, or
(ii) designate the supplier(s) from which any of the same shall be procured by
Operator. The Authority shall arrange for the delivery to the Project site of any
items procured directly by the Authority.
8. SPECIFIC CONTRACT ADMINISTRATION PROCEDURES
AND OPERATING REQUIREMENTS. The specific administrative procedures and
operating requirements set forth in this Section 8 shall apply to performance of the
Services during the Operation and Maintenance Period.
8.1. Long Range Operation And Maintenance Plan. On or
before the first day of April of each Operating Year, Operator shall prepare and
submit to the Authority a long range (i.e., a five-year look ahead) operation and
maintenance plan that describes the general condition of all plant equipment,
provides an outline of the major operations, maintenance and capital improvement
plans for the facility and includes a high level estimate of expected expenses
involved in implementing the proposed projects and activities. The Authority shall
promptly review the long range operation and maintenance plan as proposed by
Operator and provide written notice to Operator of any changes, additions, deletions
44
and modifications the Authority proposes to make in such long range operation and
maintenance plan within thirty (30) days after the date Operator delivered its
proposed long range operations and maintenance plan to the Authority, all of which
shall be done by the Authority in exercising its good faith and judgment consistent
with Prudent Utility Practices and the provisions of this Agreement. Once
approved, this rolling five year look ahead will then be used in development of the
proposed Annual Budget.
8.2. Annual Budgets. On or before the first day of August of
each Operating Year, Operator shall prepare and submit to the Authority a
proposed Annual Budget for the following Operating Year that is consistent with
Prudent Utility Practices and the provisions of this Agreement. The Annual Budget
shall show all proposed expenditures relating to the operation and maintenance of
the Project by Operator on a monthly basis, and shall include an operating budget,
a capital budget and an itemized estimate of all Reimbursable Expenses. The
Annual Budget shall also include costs relating to the operation and maintenance of
the Project that are anticipated to be paid directly by the Authority such as fuel and
electricity costs and property taxes. The Annual Budget shall identify the
anticipated costs for performing Major Repairs that are expected to be performed
pursuant to the Annual Maintenance Schedule.
The Authority shall promptly review the Annual Budget as
proposed by Operator and provide written notice to Operator of any changes,
additions, deletions and modifications the Authority proposes to make in such
45
Annual Budget within thirty (30) days after the date Operator delivered its
proposed Annual Budget to the Authority, all of which shall be done by the
Authority in exercising its good faith and judgment consistent with Prudent Utility
Practices and the provisions of this Agreement. If the Authority fails to deliver
written notice to Operator within said 30-day period of any such changes, additions,
deletions and modifications, the Annual Budget as proposed by Operator shall be
deemed adopted. Alternatively, if the Authority has timely delivered written notice
to Operator of any changes, additions, deletions or modifications to Operator’s
proposed Annual Budget, Operator shall promptly review the same and within ten
(10) days after receiving it deliver written notice to the Authority of any objections
of Operator to such changes, additions, deletions and modifications proposed by the
Authority. Such written objections of Operator shall specify the reason for making
each objection and shall describe in considerable detail any specific respects in
which Operator believes any particular change, addition, deletion or modification
will or may affect in any material respect any potential liabilities assumed by
Operator pursuant to Section 10, if any. Should Operator fail to deliver written
notice of any such objections to the Authority within said 10-day period, the Annual
Budget proposed by Operator, adjusted to reflect the changes, additions, deletions
and modifications proposed by the Authority, shall be deemed adopted.
Alternatively, if Operator timely delivers written notice of any
objections to the Authority, the Authority and Operator will promptly meet and
attempt to mutually agree upon the Annual Budget. If the Authority and Operator
46
thereafter agree upon an Approved Budget, that Approved Budget will be adopted
as the Annual Budget. If and to the extent the Authority and Operator are unable
to mutually agree upon the Annual Budget within fifteen (15) days prior to
commencement of the Operating Year for which the Annual Budget will be
applicable, then in such event the Annual Budget for that Operating Year with
respect to each disputed item that has not been mutually agreed upon shall be as
specified by the Authority, subject to the following exception.
With respect to any objections made by Operator to any budget
item or the failure to include any budget item where Operator has specified in detail
in its written notice that Operator believes the change, addition, deletion or
modification proposed by the Authority is reasonably likely to have a material
adverse effect on any potential liabilities assumed by Operator pursuant to
Section 10, the Authority shall either (i) adjust the Annual Budget as necessary to
fully accommodate Operator’s objection, or (ii) agree in writing to relieve Operator
from any liability Operator has specifically delineated in detail in its written notice
that directly results during the Operating Year for which the Annual Budget has
been adopted from the failure of the Authority to accommodate Operator’s objection
to the particular budget item in question, or (iii) submit the dispute over the
particular budget item in question to resolution by arbitration pursuant to the
dispute resolution procedures of Section 27, in which case the Annual Budget for
that budget item shall be determined by arbitration but Operator will retain full
responsibility for the potential liabilities assumed by Operator under Section 10
47
relative to that budget item. The Authority shall have the right and obligation to
separately elect among these three alternatives for each such budget item
(including the failure to include any budget item) as to which Operator has objected
and set forth in detail the respect(s) in which the budget item in question will or
may have a material adverse impact on the potential liabilities assumed by
Operator under Section 10, and provide Operator with written notice of each such
election made by the Authority, all within ten (10) days from and after
commencement of the Operating Year for which the Annual Budget is to be adopted.
The Annual Budget with the disputed items which the Parties have not mutually
agreed upon resolved as specified by the Authority shall be deemed adopted upon
delivery of written notice to Operator of the Authority’s election if Operator has
made any objections as to which the Authority is required to make an election,
except that as to any objections regarding specific budget item(s) that the Authority
elects to resolve by arbitration, the Annual Budget shall not be deemed adopted as
to those few specific budget items until the matter is decided by arbitration.
8.2.1. Expenditures Prior To Adoption Of Annual Budget.
Prior to the adoption or deemed adoption of the Annual Budget pursuant to this
Paragraph 8.2, Operator may only make expenditures, including capital
expenditures, during the Operating Year for which such Annual Budget is to be
adopted (i) pursuant to the proposed Annual Budget initially submitted by
Operator, as changed, added to, deleted from or modified by written notice from the
Authority delivered to Operator within thirty (30) days after Operator’s proposed
48
Annual Budget was delivered to the Authority, or as otherwise mutually agreed by
the Authority and Operator, and (ii) as required by Prudent Utility Practices to cope
with any emergency situation as provided in Paragraph 8.10.
8.3. Annual Maintenance Schedule. By the fifteenth day of
August of each Operating Year, Operator shall prepare and submit to the Authority
the proposed Annual Maintenance Schedule for the following Operating Year that is
consistent with Prudent Utility Practices and the provisions of this Agreement. The
proposed Annual Maintenance Schedule shall set forth Operator’s proposed
schedule for all scheduled maintenance outages, including all scheduled
maintenance repairs. To the extent reasonably possible, maintenance shall be
scheduled at times and in a manner that will minimize the impact on Project
availability to generate and deliver electrical energy, especially during Peak
Months, and cause the least amount of interference with the electrical energy
requirements of SMUD. Specifically, to the extent possible, the maintenance
schedule shall (i) schedule Scheduled Maintenance activities from March 1 through
May 15, (ii) avoid or minimize to the extent possible any Scheduled Maintenance
during the period from June 1 through September 30, and (iii) minimize the hours
used for all Scheduled Maintenance activities to the extent reasonably possible
consistent with Prudent Utility Practices. The Authority shall, within twenty-five
(25) days following its receipt of Operator’s proposed Annual Maintenance Schedule,
review the same and provide Operator with written notice of any objections the
Authority may have with respect to either the scheduling of Scheduled
49
Maintenance, the number of Scheduled Maintenance activities scheduled, or the
hours scheduled for any Scheduled Maintenance activities. To the extent the
Authority objects to the time of scheduling of any Scheduled Maintenance activities,
the Authority shall advise Operator of the time period nearest to the period
requested in the proposed Annual Maintenance Schedule when such Scheduled
Maintenance activities may occur. The Authority shall exercise good faith and
judgment consistent with Prudent Utility Practices and the provisions of this
Agreement in making any objections to the proposed Annual Maintenance
Schedule.
If the Authority fails to deliver any written objections to
Operator respecting the Annual Maintenance Schedule proposed by Operator
within said 25-day period, that Annual Maintenance Schedule shall be deemed
adopted and become the Annual Maintenance Schedule for the Operating Year in
question. Alternatively, if the Authority timely delivers written notice of objections
to Operator, the Authority and Operator shall promptly meet to resolve differences
and agree upon the Annual Maintenance Schedule. If the Authority and Operator
are unable to agree on the Annual Maintenance Schedule within forty (40) days
from and after the date upon which Operator delivered the proposed Annual
Maintenance Schedule to the Authority, then in such event any unresolved disputes
concerning the Annual Maintenance Schedule will be resolved as of that date as
follows, and upon resolution will be deemed the adopted Annual Maintenance
Schedule: (i) the time of scheduling of all Scheduled Maintenance that will
50
ultimately be included in the Annual Maintenance Schedule shall be as has been
designated by the Authority in a writing delivered to Operator on or before the
conclusion of said 40-day period, and (ii) disputes over the number of Scheduled
Maintenance activities to be included in the Annual Maintenance Schedule and
disputes over the hours scheduled for any such Scheduled Maintenance activities
shall be resolved by arbitration if Operator initiates arbitration pursuant to the
dispute resolution procedures set forth in Section 27 within fifty (50) days after
Operator delivered the proposed Annual Maintenance Schedule to the Authority;
otherwise, those disputes likewise shall be resolved as has been designated by the
Authority in a writing delivered to Operator on or before the conclusion of said
40-day period. Any arbitration that is allowed by the immediately preceding
sentence shall require that the arbitrators determine the dispute(s) in a manner
consistent with Prudent Utility Practices. All other disputes respecting the
proposed Annual Maintenance Schedule other than those identified in Parts (i) and
(ii) immediately above shall be resolved as reasonably determined by Operator in
the exercise of its good faith and judgment consistent with Prudent Utility Practices
and the provisions of this Agreement.
If Operator timely initiates arbitration, the Annual Maintenance
Schedule shall be as agreed upon by the Parties, subject to the right of the
Authority to schedule the timing for Scheduled Maintenance activities, and subject
to any final resolution by arbitration of any submitted disputes concerning the
number of Scheduled Maintenance activities and/or the duration of any Scheduled
51
Maintenance, and shall be deemed the adopted Annual Maintenance Schedule upon
delivery to the Parties of the final arbitration award. Alternatively, if Operator
does not timely initiate arbitration pursuant to Section 27, the Annual Maintenance
Schedule agreed upon by the Parties, modified as to any areas of dispute as
designated by the Authority in writing within said 40-day period after the date
Operator delivered the proposed Annual Maintenance Schedule to the Authority as
to those matters that the Authority has the right to designate and control, and as
designated by Operator with respect to the remainder of any disputes, shall be
deemed the adopted Annual Maintenance Schedule.
Once adopted, the Annual Maintenance Schedule shall remain
in effect and be utilized by Operator for conducting scheduled maintenance during
the Operating Year in question and for calculating the Equivalent Forced Outage
Factor, unless Operator and the Authority mutually agree to a written revision or
amendment to that adopted Annual Maintenance Schedule.
Notwithstanding the adopted Annual Maintenance Schedule,
Operator shall have the right at any time and from time to time to request the
Authority to authorize one or more additional Scheduled Maintenance activities
(including the timing and duration of such Scheduled Maintenance) that Operator
believes is reasonably necessary in accordance with the Operation and Maintenance
Procedures Manuals and Prudent Utility Practices to perform maintenance or
repairs to the Project. The Authority shall not unreasonably withhold or delay its
authorization if the requested additional Scheduled Maintenance activities can be
52
timely accommodated by SMUD in accordance with SMUD’s Outage Coordination
Process.
8.4. Major Repairs. All scheduled Major Repairs shall be
scheduled and performed in accordance with the Annual Maintenance Schedule.
All unscheduled Major Repairs shall be performed in accordance with this
Paragraph 8.3, except that in the case of any emergency situation described in
Paragraph 8.10 resulting in the need for a Major Repair, Operator shall have the
right and obligation to proceed with that Major Repair as set forth in
Paragraph 8.10. Operator shall notify the Authority within twenty-four (24) hours
of the occurrence of an event or events requiring an unscheduled Major Repair, and
within two (2) calendar days after the occurrence of such event(s) provide the
Authority with a written report containing the following information concerning
that Major Repair: (i) a brief written summary describing the facts or
circumstances giving rise to the need for the unscheduled Major Repair to the
extent known by Operator at the time the report is prepared; (ii) the details of the
work, services and/or replacement parts involved in undertaking and completing
the unscheduled Major Repair to the extent this information is known by Operator
at the time the report is prepared, all in a work order format; and (iii) a detailed
budget breakdown of all costs and expenses expected to be associated with the
unscheduled Major Repair, including the identity and fee structure for all
Subcontractors Operator proposes to utilize in undertaking the required work. The
report shall delineate as a scope of work only that work, service, repair or
53
replacement which is reasonably necessary as a direct result of the event or events
giving rise to the need for the unscheduled Major Repair, which scope shall not be
expanded to cover any additional work, repair or maintenance, whether scheduled
or unscheduled, without the prior approval of the Authority, even though such
additional work may be convenient and cost effective for Operator to perform in
conjunction with performing the required unscheduled Major Repair. The
Authority reserves the right to refuse to approve for any reason or reasons any
additional work, service, maintenance, repair or replacement beyond what is
reasonably required to service, repair or replace the facilities and equipment
requiring service, repair or replacement consistent with Prudent Utility Practices as
a direct result of the event or events giving rise to the need for that unscheduled
Major Repair. The Authority shall promptly review such written report submitted
by Operator, and Operator shall be deemed authorized to proceed in accordance
with the work order, budget and Subcontractors (i.e., such Subcontractors shall be
deemed approved by the Authority) set forth in that report unless the Authority
delivers written notice of objection to Operator within sixty (60) hours after the
Authority’s receipt of the written report submitted by Operator.
If the Authority has objected in writing to the scope of work and/or
budget for the scope of work for the unscheduled Major Repair as set forth in
Operator’s written report, or to the use of any particular Subcontractor Operator
proposes to use, the Authority and Operator shall promptly meet to resolve their
differences and agree upon the scope of work, and/or estimated budget, and/or the
54
use of particular Subcontractors. If the Authority and Operator are unable to agree
on the work order and budget for the unscheduled Major Repair and/or to the use of
any particular Subcontractor(s), all within ninety-six (96) hours after Operator has
delivered its written report respecting such unscheduled Major Repair to the
Authority, any matters of disagreement will be decided as follows. First, the
Authority will designate the scope of work as reasonably required by Prudent
Utility Practices to service, repair or replace the facilities and equipment requiring
service, repair or replacement as a direct result of the event or events giving rise to
the need for the unscheduled Major Repair. Second, the Authority shall also have
the right to control and disallow costs reflected in the budget to the limited extent of
any increases in costs resulting from performing any work associated with the
unscheduled Major Repair on an expedited basis (i.e., the payment of any
premiums, fees or extra service charges to Subcontractors for work performed on
other than a normally scheduled basis, overtime or premium wages for labor,
increased delivery charges of a material nature for delivering parts or equipment to
the Project site on an expedited basis, and the like). Third, the Authority shall
further have the right to disapprove the use of any particular Subcontractor(s) in
performing the unscheduled Major Repair, in which case Operator shall propose the
use of a substitute Subcontractor or Subcontractors in writing to the Authority for
its approval, which approval the Authority shall not unreasonably withhold or delay
under the circumstances (i.e., in light of Operator’s schedule for undertaking and
completing the unscheduled Major Repair). Except for these three specific and
55
limited areas of control reserved by the Authority, Operator shall have the right
and obligation to promptly proceed with, schedule, direct and control the
unscheduled Major Repair in question.
In addition, if Operator believes the Authority has improperly
designated the scope of work for the unscheduled Major Repair, Operator may
reserve its right to seek any damages suffered by Operator under this Agreement as
a direct result of such alleged improper designation of the scope of work by
delivering written notice of such a reservation of rights to the Authority within
thirty (30) days following the date upon which Operator delivered the written report
to the Authority respecting the unscheduled Major Repair; the failure of Operator to
deliver a written notice of reservation of rights within said 30-day period shall
automatically result in a waiver on the part of Operator to seek any damages from
the Authority with respect to the scope of work for the unscheduled Major Repair
designated by the Authority. Should Operator timely deliver notice of its
reservation of rights, Operator shall have the right to later assert a claim for the
damages, if any, Operator determines that it suffered during the Operating Year in
which the unscheduled Major Repair was completed by Operator as a direct result
of the alleged improper delineation of scope of work for that unscheduled Major
Repair by the Authority, which claim shall be resolved by arbitration following the
dispute resolution procedures of Section 27 if the Parties are unable to resolve
Operator’s claim between themselves.
56
8.5. Monthly Operating Reports And Annual Reports To Be
Submitted By Operator. Within ten (10) calendar days after the end of each
calendar month of each Operating Year, Operator shall provide to the Authority a
written report detailing all operation and maintenance activities performed during
that calendar month, including electric power generation, steam production and fuel
consumption, the nature and duration of any unscheduled generating unit outages
(including the Peaking Unit, if applicable), a listing of any significant operating
problems along with any remedial actions planned, and a brief summary of major
activities planned for the following two calendar months. Furthermore, within
thirty (30) days after the end of each Operating Year, Operator shall submit to the
Authority a statement setting forth all Reimbursable Expenses incurred during that
Operating Year, which statement shall itemize and include in reasonable detail a
summary of Reimbursable Expenses, Major Repair costs and such other information
reasonably needed by the Authority in connection with the preparation of the
Authority’s financial statements and tax returns. The monthly operating reports
and the annual report are the routine operating and financial results reports to be
prepared and submitted by Operator to the Authority. The Authority may
subsequently designate in writing other reports to be prepared and submitted by
Operator on a routine basis to the extent reasonably required by the Authority to
carry out its responsibilities under Section 7, to satisfy any requirements of the
Project Lender, to assist the Authority with respect to any government or
57
governmental agency in any matter relating to the Project, or otherwise as
appropriate in light of the Authority’s ownership of the Project.
8.6. Reports And Records Re Billing Matters. Operator shall
prepare all meter readings in connection with the billing of electrical energy under
the Power Purchase Agreement and deliver records of such readings to the
Authority at such time and in such manner as directed by the Authority in writing
in order to reasonably enable the Authority to timely prepare and submit bills to
SMUD (or its successor in interest) as required by the Power Purchase Agreement.
If requested by the Authority in writing, Operator shall prepare and timely deliver
to the Authority the invoices to be sent to SMUD (or its successor in interest) under
the Power Purchase Agreement based on such meter readings. Operator shall also
prepare and submit to the Authority in writing, in the time and in the manner
specified by the Authority, all other data and information reasonably required to
enable the Authority to timely comply with any reporting requirements set forth in
any Project Agreement other than this Agreement.
8.7. Annual Inventories. All inventories for the Project are
and shall be the property of the Authority, and shall be subject to audit at any time
by or on behalf of the Authority. Operator shall perform a complete physical
inventory of Project inventories each Operating Year, including all Accessories,
spare parts, Consumables and equipment, and provide a written report of the
results of that physical inventory to the Authority within fourteen (14) days after it
has been completed. The written report to the Authority shall include a
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reconciliation for the immediately-preceding written inventory report prepared in
accordance with generally accepted accounting principles and practices; for the first
Operating Year, the report will be a reconciliation to the report to the physical
inventory performed by Operator during the Transition Period.
8.8. Subcontracting. Operator shall enter into Subcontracts
and/or retain Subcontractors only as provided in this Paragraph 8.8. Operator shall
have the right and obligation, subject to the provisions of this Paragraph 8.8, to
enter into Subcontracts and/or retain Subcontractors to perform work and provide
services only when (i) such work or services are necessary in order for Operator to
perform the Services, and (ii) such work or services cannot reasonably be performed
by the personnel reflected on the Operator Staffing Plan. Whenever possible,
Operator shall require that the Authority, SMUD, the Authority Participant, the
Project Lender, and their respective directors, officers, representatives, agents,
employees, and lessors, together with any other Person for which the Authority,
SMUD and/or the Authority Participant has agreed in writing in any Project
Agreement or in any other written contract relating to the Project that its or their
contractors shall include such Person as an additional insured, each be included as
protected parties in any indemnity and insurance provisions Operator is requiring
of Subcontractors. Operator shall also devise and implement a competitive bidding
process in the selection of Subcontractors whenever possible to ensure that the
Services provided by Subcontractors are provided in the most cost-effective fashion
possible; Operator’s records of such competitive biddings and solicitations shall be
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subject to audit by the Authority upon reasonable notice. Operator shall be fully
responsible for the supervision and control of each Subcontractor retained by
Operator, whether by Subcontract, purchase order or otherwise, the same as though
the Services were provided by Operator’s own personnel instead of the personnel of
the Subcontractor, and no approval or authorization from the Authority to retain
any Subcontractor or enter into any Subcontract shall change, modify or alter this
responsibility of Operator in any respect whatsoever, or at all. Except (i) in the case
of an emergency situation as to which the Authority shall automatically be deemed
to have approved any Subcontractor that Operator reasonably determines is
necessary to retain to cope with such emergency situation, all as provided in
Paragraph 8.10, and (ii) in the case of any Subcontractor involved in any
unscheduled Major Repair which the Authority has approved or is deemed to have
approved as provided in Paragraph 8.4, Operator shall not retain any Subcontractor
to provide any Services unless and until Operator has obtained the informed
approval of the Authority for retaining that Subcontractor, which approval the
Authority shall not unreasonably withhold or delay.
To accomplish the approval process, Operator shall provide
written notice to the Authority of any Subcontractor Operator proposes to retain to
provide Services, whether by Subcontract or otherwise, which written notice shall
identify the Subcontractor, describe the specific Services Operator proposes to have
that Subcontractor provide, and the price, price schedule or rate at which the
Subcontractor would provide the described Services. If the Authority disapproves of
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the retention of any Subcontractor that Operator proposes to retain, the Authority
shall deliver written notice to Operator of such disapproval within seven (7) days
after the Authority’s receipt of written notice from Operator requesting to retain
such Subcontractor. If the Authority fails to deliver written notice of disapproval
for the retention of a Subcontractor as proposed by Operator in writing within said
7-day period, the Authority shall be deemed to have approved the retention of such
Subcontractor for the purpose of providing the Services described in Operator’s
written notice to the Authority.
8.9. Procurement. Operator shall be responsible for and shall
procure on a timely and cost-effective basis all Accessories, including spare parts,
Consumables and other materials, tools, equipment and parts required for the
operation and maintenance of the Project in accordance with Prudent Utility
Practices and the provisions of this Agreement, except as set forth in the
immediately following sentence. The Authority shall be responsible for
procurement of fuel, electricity and water as provided in Section 7, and the
Authority reserves the right to assume responsibility in whole or in part for
procurement or to direct Operator with respect to procurement matters pursuant to
Paragraph 7.9. All equipment, spare parts, tools, and other parts and materials
that are procured by Operator for incorporation into the Project shall be of a quality
at least equal to that which is currently installed or provided as a part of the
Project, and shall be warranted by the vendor or manufacturer in accordance with
standard industry practice. Operator shall maintain an inventory of Accessories,
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including spare parts, and Consumables in sufficient quantity to minimize
unscheduled outages. All Accessories, including spare parts, Consumables and
other materials and equipment procured by Operator shall be stored at the Project
site at the location(s) currently utilized for the storage of inventory or at such other
location(s) as may reasonably be designated by the Authority, and Operator shall be
responsible for maintaining safe, secure and segregated storage of all such
inventory. All Accessories, including spare parts, Consumables and other materials
and equipment procured by Operator for the Project shall be the property of the
Authority, and title to all of the same shall vest in the Authority upon delivery to
the Project site. Operator shall maintain appropriate and adequate systems of
records to identify each item of inventory and its cost, quantity and storage location
in accordance with Prudent Utility Practices. Issuance of items from inventory
shall be made under specific work orders pursuant to a work order system to be
established by Operator.
8.10. Emergencies. If an unexpected event or series of events
occur(s) that create(s) a situation which poses any one or more of an immediate and
serious risk of death or significant personal injury to any Persons, damage to
property of significant value, including the property of the Authority, or significant
damage to the environment, Operator shall immediately respond and take all action
that is reasonably necessary to eliminate or reduce the risk of harm associated with
that emergency situation to the maximum extent practicable under the
circumstances and consistent with Prudent Utility Practices. Such action or actions
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may include, at Operator’s discretion, the retention of Subcontractors without
obtaining the prior approval of the Authority, (i.e., Subcontractors retained by
Operator under such circumstances shall automatically be deemed approved by the
Authority as reasonably required to cope with the emergency situation), and
performing unscheduled Major Repairs as expeditiously as possible without
following the procedures to be utilized for unscheduled Major Repairs set forth in
Paragraph 8.3. Operator shall exercise Operator’s best professional judgment in
determining how to respond to any such emergency situation, but shall be obligated
to exercise its judgment in good faith and shall not attempt to utilize the occurrence
of an emergency situation to circumvent that control of the operation and
maintenance of the Project that is otherwise retained by and reserved to the
Authority under this Agreement.
Operator shall provide the Authority with notice of the
emergency situation by telephone as soon as practicable after it occurs, and shall
further advise the Authority of the action(s) Operator has taken and subsequently
intends to take to respond to the emergency situation. Operator shall provide the
Authority with a full written report describing the emergency situation and its
cause or causes to the extent known by Operator, all material actions taken by
Operator to respond to the emergency situation, the costs incurred or estimated to
have been incurred in responding to the emergency situation, any death or
significant injuries occurring as a result of the emergency situation, and any
property damage or significant damage to the environment occurring as a result of
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the emergency situation, including any damage caused to the Project or the Project
site, all within ten (10) days after the emergency situation has been concluded,
either by the actions of Operator or otherwise.
8.11. Party Representatives. The Authority and Operator shall
each select and designate by written notice to the other on or before the
commencement of the Transition Period a primary representative, and an alternate
representative, each of whom will be authorized to act on its behalf and whose
instructions, requests and decisions will be binding on the Party it represents as to
all matters pertaining to this Agreement and the performance of this Agreement.
Either Party may change its primary representative and/or its alternate
representative at any time, and from time to time, by delivering written notice of
the change to the other Party. Each Party shall be responsible for making one or
more of its primary representative or its alternate representative available to
consult with the other Party at all reasonable times in connection with matters
relating to this Agreement. Each Party shall consult with the primary
representative of the other Party unless that primary representative is not
reasonably available within the time frame required for handling the matter arising
under this Agreement, in which case the Party shall deal with the other Party’s
alternate representative. Except in the case of unusual circumstances requiring
immediate attention, each Party shall raise matters pertaining to this Agreement
with the appropriate designated representative of the other Party during normal
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business hours (i.e., 8:00 a.m. through 5:00 p.m., inclusive, on all days except
Saturdays, Sundays and Bank holidays).
8.12. Peaking Plant Operation. Operator shall operate and
maintain the Peaking Plant in a ready condition so that Operator can start up and
commence generating electrical energy from the Peaking Plant when called upon by
the Authority or SMUD to do so. The Authority or SMUD will request Operator to
start-up and commence producing electrical energy from the Peaking Plant
whenever SMUD determines that electrical energy from the Peaking Plant will be
necessary or useful to SMUD. Ready status for the Peaking Plant shall require that
Operator be able to start-up and commence generating electrical energy from the
Peaking Plant within ten (10) minutes after receiving a call from the Authority or
SMUD requesting electrical energy from the Peaking Plant. The call from the
Authority or SMUD requesting electrical energy from the Peaking Plant shall
specify either a ten (10) minute response or a sixty (60) minute response for the
start-up and commencement of generation of electrical energy from the Peaking
Plant. Other than the difference that the Peaking Plant will only be started up and
operated to generate electrical energy upon request to Operator from either the
Authority or SMUD, the Peaking Plant shall be operated and maintained by
Operator following the identical procedures and subject to the same requirements
and standards of performance as provided in this Agreement with respect to the
remainder of the Project.
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8.13. Site Access. At all times during the term of this
Agreement, the Authority and SMUD and its and their respective employees,
agents, representatives, contractors, subcontractors of their contractors and the like
shall have free and unrestricted access to the Project and to any documents,
materials, records and accounts relating to the Project for purposes of inspection
and review, subject to compliance with Operator’s reasonable security measures
required for Project security; provided, however, that reasonable prior notice to
Operator shall be required for access to documents, records and other written
materials, and all personnel shall be directed to comply with Operator’s written
safety procedures. Operator shall at all times have a non-exclusive right of access
to the Project during the Transition Period and during the Operation and
Maintenance Period. The Authority and Operator acknowledge that SMUD and/or
the Authority may have personnel, contractors and subcontractors working at the
Project site during the period Operator is providing Services. Operator shall
cooperate to the maximum extent feasible with all such personnel and contractors
who may be performing work at the Project site, and shall conduct operations to
minimize interference with the facilities and work of SMUD, the Authority and its
or their contractors. Operator shall coordinate activities with SMUD and the
Authority and its or their contractors working at the Project site to insure that all
work progresses in an orderly fashion, so that District personnel, Authority
personnel, and such contractors and their subcontractors will have safe access at all
times to all areas at the Project site where they are performing work.
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8.14. No Liens, Encumbrances Or Claims. Operator shall keep
and maintain the Project free and clear of all liens, encumbrances and claims. In
the event Operator at any time fails to satisfy this obligation, the Authority shall
have the right, in addition to all other rights and remedies under this Agreement or
at law or in equity, but not the obligation, to satisfy any claim as necessary to
remove the lien or encumbrance and deduct the amount so expended by the
Authority from any amounts due to Operator under this Agreement.
8.15. Prevailing Rate For Wages. Operator shall comply with
all applicable provisions of California Labor Code Articles 1770 through 1780,
inclusive, and shall, to the extent required by Law, not pay less than the general
prevailing rate of per diem wages, and the general prevailing rate for holiday and
overtime work, for the locality in which the Services are to be performed, for each
craft, classification or type of worker needed to perform the Services. Per diem
wages shall include employer payments for health and welfare, pension, vacation,
travel time, subsistence pay, apprenticeship and other training programs, and
similar payments. The prevailing rates of per diem wages shall be as determined
by the Director of the Department of Industrial Relations of the State of California.
Information relative to apprenticeship standards, wage schedules, and other
requirements may be obtained from the State Director of Industrial Relations, San
Francisco, California, or from the State Division of Apprenticeship Standards.
8.16. Equal Employment Opportunity. Operator shall not
discriminate against any employee or applicant for employment on account of race,
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religion, sex, color, national origin, handicap, or age. Operator shall ensure that
this requirement is applied to applicants and employees in its actions, including,
but not limited to, employment, upgrading, demotion or transfer, recruitment or
recruitment advertising, lay off or termination, rates of pay or other forms of
compensation and selection for training, including apprenticeships.
9. WASTE MANAGEMENT AND DISPOSAL. Operator shall
maintain all portions of the Project and Project site in a safe, clean, neat and
sanitary condition at all times. Operator shall make all necessary arrangements for
the safe and lawful disposal of all waste, including hazardous waste, collected at or
generated by or at or in connection with the operation and maintenance of the
Project. Operator shall be responsible for the payment of any and all fines,
penalties or damages directly resulting from the failure to properly dispose of all
waste, including hazardous waste, collected or generated by or in connection with
the operation and maintenance of the Project in the manner required by (i) all Law,
and (ii) by the conditions and provisions of all Project Permits. All non-hazardous
waste shall be appropriately stored, transported and disposed of or recycled at
facilities licensed or permitted for such disposal. All hazardous waste shall be
appropriately stored in accordance with Law, and shall be disposed of in accordance
with Law by a Person qualified, licensed and adequately insured with respect to the
disposal of hazardous waste. In addition, Operator shall fully comply with the
hazardous waste management requirements of Paragraph 9.1.
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9.1 Hazardous Waste Management. Operator shall perform
all Services or cause the Services to be performed in strict accordance with all Law
applicable to hazardous waste, including the Resources Conservation and Recovery
Act of 1976 (RCRA), 42 U.S.C. §§ 6901 et seq., Title 40 of the Code of Federal
Regulations, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 (CERCLA), 42 U.S.C. § 9601 et seq., Division 20 of the
California Health and Safety Code, Title 22 of the California Code of Regulations,
and Part 10 of the Labor Code. Operator shall promptly correct and remedy or
cause to be corrected and remedied any discharge or release or threatened discharge
or release of hazardous materials or hazardous wastes relating in any way to the
operation and maintenance of the Project under applicable governmental agency
oversight. Operator shall begin with the cleanup of any hazardous materials or
hazardous wastes within twenty-four (24) hours after Operator becomes aware that
a release or discharge has occurred, and shall complete the cleanup of all such
hazardous materials or hazardous wastes within ten (10) days after commencement
of the cleanup and remediation work. Such cleanup and remediation shall restore
the Project site to its condition immediately prior to the discharge or release
irrespective of any less stringent standards which might be approved by the
governmental agency providing oversight with respect to the cleanup and
remediation work. If the cleanup and remediation cannot be commenced within
said 24-hour period and completed within said 10-day period, Operator shall
promptly demonstrate to the reasonable satisfaction of the Authority the reason(s)
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why such cleanup and remediation could not be timely commenced and/or
completed.
If the Authority is not reasonably satisfied by the actions taken
by Operator to cleanup and remediate the discharge or release of hazardous
materials or hazardous wastes, the Authority shall have the right, by delivering
written notice to Operator, to itself take over the performance of all remaining
cleanup and remediation. If the release or threatened release of hazardous
materials or hazardous wastes has occurred in connection with the performance of
the Services and is not the result of a Force Majeure Event, Operator shall be solely
responsible for all costs, expenses, fines, penalties and damages associated with the
discharge or release, including the cleanup and remediation required to restore the
Project site to its condition prior to the occurrence of the discharge or release, and
for the proper transportation and disposal of the same in accordance with the
provisions of this Section 9, all without reimbursement from the Authority. If the
Authority has taken over the cleanup and remediation of any discharge or release of
hazardous materials or hazardous wastes for which Operator is financially
responsible pursuant to the immediately-preceding sentence, Operator shall
reimburse the Authority for all costs it incurs to perform the required cleanup and
remediation, including any transportation and disposal costs associated with the
disposal of wastes generated from the cleanup and remediation. Any such cleanup
and remediation, whether conducted by Operator or the Authority, shall be
conducted so as to interfere as little as possible with the operation of the Project.
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The Authority shall have the right to approve all transportation
and disposal arrangements for hazardous materials and hazardous wastes, which
approval the Authority shall not unreasonably withhold or delay. Any interim
storage of hazardous materials or hazardous wastes at the Project site prior to
promptly removing them shall take place only in areas approved by the Authority,
and they shall be removed as soon as reasonably possible unless the Authority gives
written approval allowing interim storage of the same for a longer period of time,
but in no event shall hazardous wastes be stored longer than is permitted by Law.
Surplus hazardous substances and empty containers shall be removed from the
Project site as soon as they are no longer needed in connection with providing
Services. The Project has an assigned Environmental Protection Agency Hazardous
Waste Generator’s Number which shall be used for all Project site-originated
hazardous waste shipments regardless of whether Operator or the Authority
arranges for the shipment.
10. SOME SPECIFIC OPERATOR ASSUMED POTENTIAL
LIABILITIES. Operator shall be responsible and liable for each of the specific
events or occurrences described in this Section 10, regardless of whether the same
results from a breach of Operator’s obligations under this Agreement, or otherwise;
provided, however, that Operator shall not be liable for any of these events or
occurrences that take place in any Operating Year to the extent, but only to the
extent that the Authority has assumed liability for the same in connection with the
adoption of the Annual Budget for that Operating Year pursuant to Paragraph 8.2.
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10.1. Failure To Perform According To The Required Standards
Of Performance. Upon receipt of written notification from the Authority, Operator
shall be required to promptly correct, at no cost or expense to the Authority, all
deficiencies in the performance of Services that directly result in any way from a
failure of Operator to perform in accordance with the standards for performance set
forth in Section 2, including all costs and expenses associated with the repair of any
physical damage to the Project, including Major Repairs, caused by Operator’s
failure to perform in accordance with said standards.
10.2. Project Permit Violation Costs. Operator shall be
responsible and liable for all fines, penalties, surcharges and other costs and
expenses directly associated with the violation of any condition, requirement or
provision of any Project Permits resulting from the performance of Services or the
failure to perform Services, unless and except to the extent that such violation is
caused by a Force Majeure Event, or is caused by the Authority or SMUD in
connection with controlling the electrical energy output from the Project through
the use of the Automatic Generator Control System as described in Paragraph 7.6.
10.3. Waste Disposal. Operator shall be responsible and liable
for all damages directly resulting from the failure of Operator to properly dispose of
wastes, including hazardous materials and hazardous wastes, as required by
Section 9. Operator shall also be responsible and liable as provided in Section 9 for
the cleanup and remediation of any discharge or release of hazardous materials or
hazardous wastes, including transportation and disposal costs, occasioned by the
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performance of Services or the failure to perform any required Services, unless and
except to the extent the same is caused by a Force Majeure Event.
10.4. Theft And Vandalism. Operator shall be responsible and
liable to the Authority for any loss or damage directly resulting from the theft of
any Accessories, including spare parts, Consumables and other equipment and
materials owned by the Authority and stored at the Project site, all of which shall
be under the supervision and control of Operator as provided in this Agreement,
and for any repairs, maintenance or other work required as a result of vandalism
with respect to the Project, unless and except to the extent the same is caused by a
Force Majeure Event (i.e., theft or vandalism that would not have been prevented
by proper security measures undertaken by competent security personnel present at
the Project site when the theft or vandalism occurred). In all events, Operator shall
be responsible and liable for any theft, loss or damage to Operator’s own tools,
equipment and/or materials, including tools and equipment owned by Operator’s
personnel or by any Subcontractor or the personnel of any Subcontractor.
10.5. Loss Of Reliability Of The Bulk Electric System.
Operator shall be fully responsible and liable for any and all liabilities imposed
upon the Authority, SMUD and/or the Authority Participant that result from any
loss in reliability of the bulk electric system administered by the North American
Electric Reliability Corporation (NERC) and/or the Western Electric Coordinating
Council (WECC) to the extent, but only to the extent the same directly results from
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Operator’s failure to adhere to and fully comply with any standard issued by NERC
or WECC that is applicable to the operation of the Project.
10.6. Billing And Payment Re Specific Operator Assumed
Liabilities. Upon the occurrence of any event identified in this Section 10 for which
Operator is liable and responsible, the Authority shall prepare and submit a bill to
Operator, together with a detailed written itemization of the costs and expenses for
which the Authority believes that Operator is liable. The Authority may render
partial billings with respect to such liability of Operator, and need not wait until all
costs and expenses associated with a particular event for which Operator is liable
under this Section 10 are fully known by the Authority. Operator shall pay each
bill submitted by the Authority respecting Operator’s liability under this Section 10
within twenty-one (21) days after Operator receives it. Late payments by Operator
shall bear interest at the Reference Interest Rate until paid.
In the event Operator disputes any portion of any bill rendered
by the Authority under this Section 10, Operator shall timely pay the part or
portion of the bill that is not in dispute, but may withhold payment of the
remainder. Should Operator dispute any part or portion of any such bill, Operator
shall provide written notice of its objections to the Authority within thirty (30) days
following its receipt of the bill, which written notice shall specify each particular
part or portion of the bill which Operator disputes and the reason or reasons why
Operator believes it is not liable to the Authority for each such item in dispute. The
failure of Operator to deliver such written notice of objections within said 30-day
74
period shall constitute a binding agreement on the part of Operator that Operator is
liable for payment of all items reflected on the bill, but not an admission as to the
correctness of the amount stated as due for that item; Operator shall retain the
right to audit and verify the accuracy of the amount reflected on the Authority’s bill
for each separate billing item without regard to whether Operator has timely
submitted to the Authority written notice of objections to the bill.
Upon receipt of any written notice of objections to a bill, the
Authority and Operator will promptly meet to resolve all disputes concerning the
bill. The Parties shall confirm in a writing signed by both Parties their resolution of
each disputed item set forth in Operator’s written notice of objections within sixty
(60) days after receipt of such written notice of objections to the bill in question by
the Authority. To the extent the Parties are unable to resolve any disputed item set
forth in Operator’s written notice of objections and confirm that resolution in a
signed writing within said 60-day period, the Authority shall have the right to have
the matter resolved by arbitration pursuant to the dispute resolution procedures of
Section 27 by initiating arbitration within one hundred twenty (120) days following
the Authority’s receipt of written notice of objections to the bill in question from
Operator. The failure of the Authority to initiate arbitration within said 120-day
period shall constitute a binding agreement on the part of the Authority that all of
the objections to the bill in question that were not timely resolved (and the
resolution confirmed in a signed writing within the above-described 60-day period)
are well taken, and that Operator is not liable to the Authority for those disputed
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items. Whenever it is determined by agreement or arbitration that Operator
improperly withheld payment as to any part or portion of the Authority’s bill,
Operator shall promptly pay the same to the Authority, together with interest at
the Reference Interest Rate running from the date payment of the bill was initially
due until fully paid by Operator.
11. REIMBURSABLE EXPENSES. Reimbursable Expenses shall
be those costs and expenses, and only those costs and expenses, specified in
Paragraph 11.1. For purposes of clarification, Paragraph 11.2 identifies some
specific costs and expenses that are not Reimbursable Expenses.
11.1. List Of Reimbursable Expenses. Reimbursable Expenses
consist solely of those costs and expenses identified in this Paragraph 11.1.
11.1.1 Accessories. The Authority shall reimburse
Operator for all costs incurred and paid by Operator in procuring Accessories,
including spare parts, for the Project; provided, however, that the Authority shall
not reimburse Operator for any costs and expenses for which Operator is
responsible and liable pursuant to Section 10.
11.1.2. Consumables. The Authority shall reimburse
Operator for all costs incurred and paid by Operator in procuring Consumables for
the Project, including chemical costs for process steam treatment for Campbell
Soup; provided, however, that the Authority shall not reimburse Operator for any
costs and expenses for which Operator is responsible and liable pursuant to Section
10.
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11.1.3. Equipment, Etc. The Authority shall reimburse
Operator for all costs and expenses incurred and paid by Operator in procuring
equipment to be incorporated into the Project, and other materials or supplies to be
incorporated into the Project or reasonably required exclusively for the operation
and maintenance of the Project; provided, however, that the Authority shall not
reimburse Operator for any costs and expenses for which Operator is responsible
and liable pursuant to Section 10. Nothing in this Paragraph 11.1.3 shall authorize
Operator to procure any equipment, materials or supplies as a part of any capital
improvement or capital replacement of or to the Project except as authorized in an
adopted Annual Budget or as an unscheduled Major Repair undertaken in
accordance with Paragraph 8.3, or in response to an emergency situation as
provided in Paragraph 8.10.
11.1.4. Subcontractors Performing Major Repairs. The
Authority shall reimburse Operator for all costs and expenses reasonably incurred
and paid by Operator for Subcontractors that have been approved or deemed
approved by the Authority that perform any Services with respect to scheduled
Major Repairs, and for Subcontractors that have been approved or deemed approved
by the Authority that perform any Services with respect to unscheduled Major
Repairs undertaken in accordance with Paragraph 8.3; provided, however, that the
Authority shall not reimburse Operator for any such costs and expenses for which
Operator is responsible and liable pursuant to either Paragraph 10.1, Paragraph
10.4 or Paragraph 10.5.
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11.1.5. Additional Insurance Not Listed On Appendix C.
If, and only if, the Authority delivers written notice to Operator requiring Operator
to obtain and maintain any insurance other than the insurance described and
specified in Appendix C, all as the Authority is authorized to do under the
provisions of Section 13, the premiums or increased premiums and other costs and
expenses incurred and paid by Operator for obtaining and maintaining such other
insurance specified in the Authority’s written notice shall be Reimbursable
Expenses.
11.1.6. Waste Disposal. The Authority shall reimburse
Operator for all costs and expenses reasonably incurred and paid by Operator,
whether to a Subcontractor or otherwise, to transport and dispose of any and all
wastes and garbage collected at or generated by or in connection with the Project,
including hazardous materials and hazardous wastes, in the manner required by
Section 9; provided, however, that the Authority shall not reimburse Operator for
any such costs and expenses for which Operator is responsible and liable pursuant
to any of Paragraph 10.1, Paragraph 10.2, Paragraph 10.3 or Paragraph 10.4.
11.1.7. Taxes. The Authority shall reimburse Operator
for all sales, use, excise, personal property, ad valorem, value added, stamp or other
taxes, levies, imposts, duties, charges or withholdings imposed upon Operator in
connection with performance of the Services and paid by Operator, excluding (i) all
payroll taxes paid by Operator for Operator’s employees, (ii) all taxes based on or
measured by net income or receipts of Operator, including federal income taxes and
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state franchise taxes, and (iii) all taxes imposed on, or with respect to, or measured
by the capital or net worth of Operator. All taxes described in Parts (i), (ii) and (iii)
in the immediately preceding sentence shall not be or constitute Reimbursable
Expenses.
11.1.8. Laboratory Analyses. The Authority shall
reimburse Operator for the costs and expenses reasonably incurred and paid by
Operator for all laboratory analyses required to be performed in order to properly
provide Services, including laboratory analyses of transformer oil and lube oil.
11.1.9. Vibration Analyses. The Authority shall
reimburse Operator for all costs and expenses reasonably incurred and paid by
Operator to Subcontractors to perform vibration analyses with respect to the Project
as reasonably required to properly provide Services.
11.1.10. Infrared Surveys. The Authority shall reimburse
Operator for all costs and expenses reasonably incurred and paid by Operator to
Subcontractors to perform infrared surveys with respect to the Project as
reasonably required to properly provide Services.
11.1.11. Landscaping Services. The Authority shall
reimburse Operator for the costs and expenses reasonably incurred and paid by
Operator to Subcontractors for providing landscaping and landscaping maintenance
services reasonably required for the Project.
11.1.12. Other Subcontractor Services. The Authority
shall reimburse Operator for the costs and expenses reasonably incurred and paid
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by Operator for Subcontractors providing Services at the direction of Operator in
response to an emergency situation as authorized by Paragraph 8.10, and for
Subcontractors providing Services that cannot reasonably be performed directly by
Operator utilizing the personnel of Operator reflected on the Operator Staffing Plan
if the Subcontractor in question and the Services to be provided by that
Subcontractor have been approved or deemed approved by the Authority in
accordance with Paragraph 8.4 or Paragraph 8.8.
11.1.13. Specialty Schools. The Authority shall
reimburse Operator for the costs and expenses reasonably incurred and paid by
Operator for (i) tuition and (ii) travel expenses, which travel expenses shall not
exceed United States General Services Administration per diem rates then in effect,
for any of Operator’s personnel reflected on the Operator Staffing Plan for attending
specialty schools and programs, if, and only if the same has been approved in
advance in writing by the Authority.
11.1.14. Industry Association Meetings And Seminars.
The Authority shall reimburse Operator for the costs and expenses reasonably
incurred and paid by Operator for registration fees, tuition, and travel expenses,
which travel expenses shall be subject to the same limitation as provided in
Subparagraph 11.1.13, for Operator’s personnel reflected on the Operator Staffing
Plan to attend industry meetings and/or industry seminars if, and only if the same
has been approved in advance in writing by the Authority.
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11.1.15. Authority Approval Of Additional Reimbursable
Expenses. Upon the written request of Operator to the Authority to include as a
Reimbursable Expense any cost or expense or category of costs and expenses that is
not specifically described in Subparagraphs 11.1.1 through 11.1.14, inclusive, the
Authority shall have the right and obligation to reasonably consider and thereafter
determine, in its sole discretion, whether such cost or expense or category of costs
and expenses should be a Reimbursable Expense. All such determinations by the
Authority shall be made on a case-by-case basis, and the final determination of the
Authority shall be binding and conclusive and not subject to resolution pursuant to
the dispute resolution procedures of Section 27. In the event the Authority
determines that a particular category of costs and expenses that will be recurring
should be considered Reimbursable Expenses, the Authority and Operator shall
enter into a written amendment of this Agreement as reasonably necessary to
provide for that result.
11.2. Costs And Expenses That Are Not Reimbursable
Expenses. For purposes of clarification, and not by way of limitation, the list of
expenses set forth below shall not be Reimbursable Expenses.
11.2.1. Operator Staffing Plan Personnel. All costs and
expenses for or associated with Operator’s personnel reflected on the Operator
Staffing Plan, including benefits, payroll taxes, overtime pay and the like, are
included within the Base Operating Fee; in no event shall any such costs and
expenses be Reimbursable Expenses.
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11.2.2. Operator Liability Costs. In no event shall any
costs and expenses for which Operator is responsible and liable under either
Section 10 or Section 19 be Reimbursable Expenses.
11.2.3. Subcontractors That Are Not Approved. If a
Subcontractor performing Services has not been approved by the Authority or
deemed approved by the Authority under either Paragraph 8.3, Paragraph 8.8 or
Paragraph 8.10, then the costs and expenses for such Subcontractor shall not be
Reimbursable Expenses.
11.2.4. Insurance. All insurance premiums and all other
costs and expenses incurred and paid by Operator to obtain and maintain the
insurance specifically identified, and described in Appendix C that Operator is
required to obtain and maintain under the provisions of Section 13 is included in
the Base Operating Fee; in no event shall any such costs and expenses be
Reimbursable Expenses.
11.2.5. Telephone Services. All costs and expenses
directly associated with telephone services that are necessary or convenient for
Operator to utilize in connection with the operation and maintenance of the Project
and providing Services shall not be Reimbursable Expenses.
11.2.6. Other Unidentified Costs And Expenses. Except
for those costs and expenses that are specifically enumerated and identified as
Reimbursable Expenses under the provisions of Paragraph 11.1, all costs and
expenses associated with the operation and maintenance of the Project and the
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provision of Services by Operator shall be deemed included within the Base
Operating Fee and shall not be or constitute Reimbursable Expenses.
12. COMPENSATION AND PAYMENTS TO OPERATOR. As full
compensation to Operator for all of the Services performed and to be performed
under this Agreement, the Authority shall pay Operator the amounts set forth in
this Section 12, and no more or less. The Authority shall pay Operator for the
Services performed during the Transition Period as set forth in Paragraph 12.1, and
shall pay Operator for the Services performed during the Operation and
Maintenance Period as set forth in Paragraph 12.2. Disputes concerning any bills
or statements Operator submits to the Authority shall be handled and resolved as
described in Paragraph 12.4. Interest shall be due on late payments as provided in
Paragraph 12.3.
12.1. Transition Period Compensation And Payments. The
amount to be paid to Operator for Services provided by Operator during the
Transition Period shall be calculated and paid by the Authority to Operator as
provided in this Paragraph 12.1.
12.1.1. Amount. Appendix B entitled “Compensation
Structure – Transition Period” sets forth the staffing levels, by job position, of all
personnel Operator will or may use to provide the Services that Operator is
required to provide during the Transition Period, including the hourly wages
associated with each such job position that will be charged to the Authority during
the Transition Period. Operator shall bill the Authority for Operator’s personnel
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authorized to provide Services during the Transition Period at the hourly billing
rates reflected for such personnel as shown on Appendix B for each hour of time
actually spent by any such personnel during each calendar month or partial
calendar month of the Transition Period. The hourly billing rates for such
personnel as shown on Appendix B include all costs for graphics, reproductions,
computer use and the like. The hourly rates set forth on Appendix B are all
inclusive; those hourly rates shall be the rates at which Operator’s personnel will be
billed to the Authority for all time actually spent by such personnel, regardless of
whether such personnel are paid at overtime rates by Operator for any work any of
them perform in connection with providing Services (i.e., the Authority will not
reimburse Operator for any extra charges paid by Operator to its personnel for
overtime, or for any other benefits, or for payroll taxes). Although it is anticipated
that Reimbursable Expenses during the Transition Period will be relatively
minimal, Operator shall also bill the Authority for Reimbursable Expenses incurred
by Operator following the same procedures for the billing of Reimbursable Expenses
during the Operation and Maintenance Period that are set forth in
Subparagraphs 12.2.2 and 12.2.8.
12.1.2. Billing And Payment. Operator shall prepare and
submit to the Authority an invoice for the amount due Operator for each calendar
month, computed as provided in Paragraph 12.1.1, within twenty-five (25) days
following the end of that calendar month. The invoice shall be accompanied with
supporting documentation that itemizes the computation of the amounts due
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Operator in respect of the actual hours spent by Operator’s personnel, together with
a detailed itemization of Reimbursable Expenses. The Authority shall pay the bill
within thirty (30) days after it has been received by the Authority, subject to the
Authority’s right to withhold payment as to any disputed items on the bill following
the procedures described in Paragraph 12.4.
12.2. Operation And Maintenance Period Compensation And
Payments. The amount due Operator for providing the Services each calendar
month or partial calendar month occurring during the Operation and Maintenance
Period shall be computed and paid as provided in this Paragraph 12.2. The amount
due to Operator for the Services provided by Operator each such calendar month or
partial calendar month shall be the sum of the payments required by each of
Subparagraphs 12.2.1, 12.2.2, 12.2.3, and 12.2.4, inclusive. The payments required
by Subparagraphs 12.2.1, 12.2.3, and 12.2.4, inclusive, will be adjusted upward
annually pursuant to Paragraph 12.2.5.
12.2.1. Base Operating Fee. The Base Operating Fee is
the annual fee to be paid to Operator for providing the Services during the
Operation and Maintenance Period. Although the Base Operating Fee is expressed
in terms of an amount to be paid annually, it shall be prorated on a daily basis and
paid monthly to Operator for each calendar month or a portion of a calendar month
occurring during the Operation and Maintenance Period predicated upon the
number of days in that calendar month during which Operator is required to
provide Services. The initial Base Operating Fee is the amount set forth in
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Part 12.2.1.1. The Base Operating Fee in effect at the end of each Operating Year
shall be adjusted upward annually to reflect the Price Adjustment pursuant to
Paragraph 12.2.5, and the Base Operating Fee as so adjusted shall become the Base
Operating Fee for the following Operating Year (i.e., the Price Adjustment to the
Base Operating Fee shall be effective as of the first day of the following Operating
Year).
12.2.1.1. Initial Base Operating Fee. The initial
Base Operating Fee shall be _________________________________________________
($___________).
12.2.2. Reimbursable Expenses. The Authority shall pay
Operator for Reimbursable Expenses. Operator shall identify and account for
Reimbursable Expenses on a calendar month basis. Operator shall determine the
Reimbursable Expenses pursuant to Section 11 following the close of each calendar
month, and shall bill the Authority for those Reimbursable Expenses as provided in
Subparagraph 12.2.6. All Reimbursable Expenses shall be directly passed through
Operator to the Authority without markup or surcharge of any kind (i.e., Operator
shall not charge the Authority for any overhead fee, administrative charge,
processing fee, or any other charge of any kind with respect to Reimbursable
Expenses).
12.2.3. Performance Bonus For Peak Months. The
Authority shall pay Operator a performance bonus for each Peak Month occurring
within the Operation and Maintenance Period during which the Equivalent Forced
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Outage Factor for the Base Plant is less than five percent (5%), with a supplemental
performance bonus available for summer Peak Months during which the Equivalent
Forced Outage Factor for the Base Plant is less than or equal to two percent (2%).
For each Peak Month, the performance bonus shall be Thirty-Five Thousand
Dollars ($35,000) multiplied by a fraction, the numerator of which shall be the
percentage by which the Equivalent Forced Outage Factor is less than 5%, rounded
to the nearest one hundredth of a percent, and the denominator of which shall be
five percent (5%) (i.e., the Equivalent Force Outage Factor can never be less than
zero, so that the maximum performance bonus for a Peak Month will be $35,000).
By way of example, if the Equivalent Forced Outage Factor for a particular Peak
Month was 0.77%, the performance bonus for that month would be $35,000 times
((5%-0.77%)/5% = 4.23%/5%) or $29,610. For each summer Peak Month, an
additional bonus of Thirty-Five Thousand Dollars ($35,000) shall be paid to
Operator if the Base Plant Equivalent Forced Outage Factor for that month was
less than or equal to 2% rounded to the nearest one hundredth of a percent (i.e., an
all-or-nothing bonus that will be paid to Operator if, and only if, said Equivalent
Forced Outage Factor is less than or equal to 2% for that summer Peak Month). By
way of example, if the Equivalent Forced Outage Factor for a particular summer
Peak Month was 0.77%, the performance bonus for that month would be $35,000
times ((5%-0.77%)/5% = 4.23%/5%) or $29,610, plus the supplemental summer Peak
Bonus of $35,000 for a total summer Peak Month bonus of $64,610 for that month.
Conversely, if the Equivalent Forced Outage Factor for a particular summer Peak
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Month was 3.77%, the performance bonus for that month would be $35,000 times
((5%-3.77%)/5% = 1.23%/5%)or $8,610, but there would be no supplemental summer
Peak Month bonus, so the total summer Peak Month bonus for that month would be
$8,610. In the event of a partial calendar month during the Operation and
Maintenance Period, the bonus amounts will be prorated on a daily basis and
reduced to reflect the number of days in that partial calendar month, and the
Equivalent Forced Outage Factor will be calculated for that partial calendar month
as though the number of days in that partial calendar month were all the days of
the month. The bonus amounts to be utilized in calculating monthly performance
bonuses identified in this Subparagraph 12.2.3 shall be adjusted upward at the end
of each Operating Year to reflect the Price Adjustment provided for in
Subparagraph 12.2.4, and the bonus amounts as so adjusted shall become the bonus
amounts for the following Operating Year (i.e., the Price Adjustment to the bonus
amounts shall be effective as of the first day of the following Operating Year).
12.2.4. Peaking Plant Incentive Payment. Operator shall
be entitled to earn an incentive payment respecting the operation and maintenance
of the Peaking Plant each calendar month during the Operation and Maintenance
Period, computed as provided in this Subparagraph 12.2.4. Either the Authority or
SMUD may call Operator and request that Operator start up the Peaking Plant and
commence producing electrical energy. Such call-up from the Authority or SMUD
shall specify whether electrical energy output is required within either ten (10)
minutes or sixty (60) minutes; the Authority and SMUD shall have the sole
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discretion in determining whether a 10-minute period or a 60-minute period is
reasonably required to satisfy SMUD’s electrical energy requirements. Operator
shall promptly respond to the call-up request and attempt to start up and
commence producing electrical energy from the Peaking Plant within the 10-minute
period or the 60-minute period, as the case may be, requested by the Authority or
SMUD. Operator shall be deemed to have successfully responded to a call-up if
Operator is able to start up and commence generating electrical energy from the
Peaking Plant at a level at least equal to the capacity being claimed for reserves
within either the 10-minute period or the 60-minute period specified by the
Authority or SMUD in its call-up request to Operator, whichever is applicable. A
“successful call-up ratio” will be computed at the end of each calendar month during
the Operation and Maintenance Period, which ratio shall be a fraction, the
numerator of which shall be the number of occasions during the calendar month
when Operator successfully responded to a call-up request from either the Authority
or SMUD by starting up and commencing the generation of electrical energy from
the Peaking Plant at or in excess of the required minimum capacity level within the
time period (i.e., either 10 minutes or 60 minutes) specified by the Authority or
SMUD in that call-up request, and the denominator of which shall be the total
number of occasions during the calendar month when either the Authority or
SMUD made a call-up request to Operator to start up and commence generating
electrical energy from the Peaking Plant. The Authority shall pay Operator a
peaking incentive amount for each Peak Month equal to Twelve Thousand Dollars
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($12,000) multiplied by the “successful call-up ratio” for that Peak Month. By way
of example, if SMUD made 22 call-up requests to Operator to start-up and
commence delivering electrical energy from the Peaking Plant during a Peak
Month, and if Operator successfully responded to such call-up requests on 19 of
those 22 occasions by starting the Peaking Plant and generating electrical energy
within the 10-minute period or 60-minute period specified by SMUD, as applicable,
the “successful call-up ratio” would be 19/22, and the peaking incentive amount for
that Peak Month would be (19/22) times $12,000 or $10,363.64. The Authority shall
pay Operator a Peaking Plant incentive payment for each non-Peak Month equal to
Eight Thousand Dollars ($6,000) multiplied by the “successful call-up ratio” for that
non-Peak Month. In the event of a partial calendar month during the Operation
and Maintenance Period, the $12,000 amount or the $6,000 amount, whichever is
applicable, will be prorated on a daily basis and reduced to reflect the number of
days in that calendar month occurring during the Operation and Maintenance
Period, and the “successful call-up ratio” for these same days will then be applied to
said reduced amount to determine Operator’s Peaking Plant incentive payment, if
any, for operating and maintaining the Peaking Plant during that partial calendar
month. If there are no call-up requests issued by either the Authority or SMUD
during any calendar month, the successful call-up ratio for the previous calendar
month will carry forward and be used for calculating Operator’s Peaking Plant
incentive payment for that calendar month in which no call-up requests were
issued, in each case applied to the amount determined by whether the month in
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question for which the successful call-up ratio for the previous calendar month is
being applied is a Peak Month or a non-Peak Month. Said $12,000 amount and
$6,000 amount shall be adjusted upward at the end of each Operating Year to
reflect the Price Adjustment pursuant to Paragraph 12.2.5, with the adjustment to
be effective as of the first day of the following Operating Year.
12.2.5. Price Adjustments To Certain Compensation
Payments. The dollar amounts specified in each of Subparagraphs 12.2.1, 12.2.3
and 12.2.4 shall be adjusted upward at the end of each Operating Year to reflect a
two and one-half percent (2.5%) increase over the preceding year. Each of the dollar
amounts specified in Subparagraphs 12.2.1, 12.2.3 and 12.2.4 shall be adjusted
upward at the end of each Operating Year by multiplying those specific amounts for
the Operating Year that has just then ended by the numerical factor 1.025 (the
“Price Adjustment”). The Price Adjustment so made to each of the dollar amounts
specified in Subparagraphs 12.2.1, 12.2.3 and 12.2.4 shall become effective as of the
first day of the Operating Year that has then just commenced, and those dollar
amounts, as adjusted, will be utilized for calculating the compensation to be paid to
Operator under Subparagraphs 12.2.1, 12.2.3 and 12.2.4 for that Operating Year.
12.2.6. Billing And Payment. For any calendar month
that occurs in whole or in part during the Operation and Maintenance Period,
Operator shall calculate and determine the amount due to Operator for all
payments and compensation required under each of Subparagraphs 12.2.1, 12.2.2,
12.2.3 and 12.2.4 following the conclusion of that calendar month, and shall
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thereafter prepare and deliver an invoice for such amount to the Authority. The
invoice shall be accompanied with supporting documentation showing the details for
all Reimbursable Expenses included on the invoice and the calculation of the
performance bonus pursuant to Subparagraph 12.2.3, including the calculation of
the Equivalent Forced Outage Factor, and the calculation of the Peaking Plant
incentive payment pursuant to Subparagraph 12.2.4, including the calculation of
the “successful call-up ratio.” Payment of the monthly invoice prepared and
submitted by Operator as provided in this Subparagraph 12.2.6 shall be due within
Thirty (30) days after the date the invoice is received by the Authority. The
Authority shall pay the full amount of each invoice submitted by Operator unless
the Authority disputes any one or more items included in the invoice, in which case
the Authority shall pay the amount of the invoice that is not in dispute and may
withhold the remainder until the dispute(s) are resolved as provided in
Paragraph 12.4. The payment in whole or in part of any invoice by the Authority
and/or the failure of the Authority to dispute any invoice and withhold payment as
allowed in Paragraph 12.4 shall not prejudice in any way the right of the Authority
to later conduct an audit and make a claim to recover any payments made by the
Authority on account of any invoice submitted by Operator, all as provided in
Section 16. The Authority may withhold amounts due as shown on Operator’s
invoices on account of certain franchise taxes as provided in Part 12.2.6.1.
12.2.6.1. Withholding Of Franchise Tax. The
Authority will withhold an amount equal to seven percent (7%) from payments to be
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made to Operator pursuant to this Paragraph 12.2 for Subcontractors who are not
residents of the State of California and who have not received an exemption from
this requirement from the California Franchise Tax Board, all as required by Law.
Moreover, if Operator is not a resident of the State of California and has not
received an exemption from this requirement from the California Franchise Tax
Board, this same requirement will be applied to Operator with respect to all
amounts to be paid to Operator under this Agreement.
12.3. Interest On Late Payments. If the Authority fails to
timely make any payments required by either Paragraph 12.1 or Paragraph 12.2, in
whole or in part, the Authority shall pay interest at the Reference Interest Rate on
the unpaid amount until paid, with interest commencing on the date payment
should have been made.
12.4. Disputed Bills. In the event the Authority disputes any
portion of any invoice submitted by Operator under Subparagraph 12.1.2 or
Subparagraph 12.2.6, the Authority shall timely pay the part or portion of the
invoice that is not in dispute, but may withhold payment of the remainder. The
Authority shall provide written notice of its objections to Operator within thirty (30)
days following its receipt of the invoice, which written notice shall specify each
particular part or portion of the invoice which the Authority disputes and the
reason or reasons why the Authority believes the invoice is improper for each item
in dispute. The failure of the Authority to deliver such written notice of objections
within said 30-day period shall result in a waiver of the right of the Authority to
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withhold payment (but not a waiver of the right of the Authority to assert a claim),
in which case late payments respecting such invoice shall begin to bear interest
until paid by the Authority at the Reference Interest Rate plus three percent (3%),
or the maximum interest rate allowed under applicable law, whichever is less,
commencing thirty (30) days after the date of delivery of the invoice to the
Authority. If the Authority timely delivers written notice of objections to any
invoice, the Authority and Operator will promptly meet to resolve all disputes
concerning the invoice. The Parties shall confirm in a writing signed by both
Parties their resolution of each dispute as set forth in the Authority’s written notice
of objections within sixty (60) days after receipt of such written notice of objections
by Operator. To the extent the Parties are unable to resolve the Authority’s
objections and confirm that resolution in a signed writing within said 60-day period,
Operator shall have the right to have the matter resolved by arbitration pursuant to
the dispute resolution procedures of Section 27 by initiating arbitration within one
hundred twenty (120) days following the Operator’s receipt of the written notice of
objections to the invoice in question from the Authority. The failure of Operator to
initiate arbitration within said 120-day period shall constitute a binding agreement
on the part of Operator that all of the Authority’s objections to the invoice in
question, except for those objections that were resolved between the Parties with
the resolution timely confirmed in a signed writing within the aforementioned
60-day period, were well taken and that no payment is due from the Authority to
Operator for the item(s) in dispute as set forth in the Authority’s written notice of
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objections. Whenever it is determined by agreement or arbitration that the
Authority improperly withheld payment as to any part or portion of Operator’s
invoice, the Authority shall promptly pay the same to Operator, together with
interest at the Reference Interest Rate running from the date the payment of the
invoice was initially due until fully paid by the Authority.
13. INSURANCE. On or before the Effective Date, Operator shall
obtain and shall thereafter maintain all of the insurance described in Appendix C at
all times from and after the commencement of the Transition Period until all
obligations of Operator under this Agreement have been fully discharged. For
purposes of this Section 13, all of the obligations of Operator shall not have been
fully discharged unless and until the Authority has provided written notice to
Operator or otherwise agreed in writing that all of Operator’s obligations under this
Agreement have been fully discharged. However, once all of Operator’s obligations
under this Agreement have been fully discharged, the Authority shall not withhold
or delay its written acknowledgement to or other written agreement with Operator
that the same have been fully discharged so that Operator no longer needs to
maintain said insurance in force and effect. Operator shall provide copies of all
required insurance policies upon written request by the Authority. On or before the
Effective Date, and on or before the anniversary of the Effective Date each year
thereafter, Operator shall provide insurance certificates and supporting
endorsements as specified in Appendix C to the Authority. The type and amounts of
insurance coverage specified in Appendix C are the minimum insurance coverages
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that Operator is required to obtain and maintain at all times, and shall in no way
operate as a limit on or otherwise affect recoveries available to either Party under
this Agreement. Operator shall immediately notify the Authority in writing in the
event any loss occurs that reasonably could be expected to reduce the coverage
remaining available under any insurance policy Operator is obligated to obtain and
maintain pursuant to this Section 13 by more than Five Million Dollars
($5,000,000), except that in the case of the environmental impairment liability
policy, Operator shall notify the Authority in writing of any reduction in coverage
remaining available by more than Two Million Dollars ($2,000,000). If the
Authority reasonably determines that Operator should obtain other insurance (i.e.,
as to risks coverage, minimum policy amounts, policy provisions or otherwise) at
any time, and from time to time, the Authority shall provide written notice to
Operator of such other insurance the Authority determines that Operator should
obtain and maintain. Upon the delivery of such written notice by the Authority to
Operator, the other insurance specified in such written notice shall automatically be
deemed to be insurance that Operator is obligated to obtain and maintain as
provided in this Section 13; provided, however, that the premiums or increased
premiums or other costs and expenses incurred and paid by Operator directly in
connection with obtaining and maintaining such other insurance shall be
Reimbursable Expenses as specified in Subparagraph 11.1.5. Within twenty (20)
days following the receipt by Operator of such written notice from the Authority
requiring other insurance, Operator shall obtain the same from insurance
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companies meeting the qualifications set forth in Appendix C, and shall maintain
the same throughout the remainder of the Operation and Maintenance Period and
thereafter until all obligations of Operator under this Agreement have been fully
discharged.
13.1. Authority Cure Rights For Failure To Obtain And/Or
Maintain Insurance. If at any time Operator fails to obtain and maintain all or any
part of the insurance required to be obtained and maintained by Operator pursuant
to this Section 13, then in such event, and without limiting any of the other rights
or remedies available to the Authority in respect of any default which arises as a
result of such failure by Operator, the Authority may at its option, but is not
obligated to, obtain and maintain the insurance that Operator failed to obtain
and/or maintain, and may deduct the cost of the insurance premiums and other
costs and expenses expended by the Authority for such insurance from any
payments due to Operator under this Agreement.
13.2. Waivers To Insurance Coverage. In the event any
insurance (including the limits or deductibles that are required to be obtained and
maintained by Operator pursuant to this Section 13), other than insurance required
by Law to be obtained and maintained, shall not be available and commercially
feasible to obtain and maintain in the commercial insurance market, the Authority
shall not unreasonably withhold or delay its approval to waive such insurance
requirement; provided, however, that: (i) Operator shall first request any such
waiver in writing, which request shall be accompanied by a written report prepared
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by an independent insurance advisor of recognized national standing and acceptable
to the Authority, certifying that such insurance is not reasonably available and
commercially feasible to obtain and maintain in the commercial insurance market
for electric generating plants of similar type and capacity or, in the case where any
required insurance amount is not so available, certifying as to the maximum
amount which is so available, and explaining in detail the basis for such
conclusions, all to the reasonable satisfaction of the Authority; (ii) at any time after
the granting of any such waiver, the Authority may request in writing, and
Operator shall furnish to the Authority within thirty (30) days after receipt of such
written request, supplemental reports reasonably acceptable to the Authority from
such insurance advisor updating its prior report and reaffirming such conclusions;
and (iii) any such waiver shall be effective only for so long as such insurance is not
reasonably available and commercially feasible to obtain and maintain in the
commercial insurance market. Although there are any number of different facts
which may establish that the conditions necessary for the waiver of any insurance
requirement under this Paragraph 13.2 no longer exist, the failure of Operator to
timely furnish any requested supplemental report as set forth in part (ii)
immediately above within said 30-day period shall automatically result in a
termination of the waiver of the insurance requirement in question. The
termination of any waiver of any insurance requirement under this Paragraph 13.2
shall not impair in any way or prevent Operator from subsequently obtaining a
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waiver of the same insurance requirement if the conditions required for such a
waiver subsequently reoccur.
14. AUTHORITY DISCLAIMERS. The Authority has provided
Operator with access to the files and records of the Authority concerning the Project
as described in Recital D, and will provide Operator with access to the files,
documents and information that the Authority is required to provide under this
Agreement. Although the Authority has not intentionally withheld Operator from
access to any of the documents described in Recital D and will not intentionally
withhold Operator from access to any documents the Authority is required to
furnish to Operator under this Agreement, the Authority has not made and will not
make any representations or warranties to Operator concerning the accuracy or
completeness of the information contained in any such documents. Operator
acknowledges that Operator has not relied upon any oral representations made by
any employees or agents of either the Authority or SMUD in entering into this
Agreement, and that any conclusions and judgments that have been or will be made
by Operator respecting such documents shall be based on Operator’s own
investigations, evaluations and analyses. Upon commencement of the Operation
and Maintenance Period, Operator shall assume responsibility for the operation and
maintenance of the Project as provided in this Agreement with all facilities and
equipment comprising the Project being in an “AS IS AND WHERE IS” condition.
The Authority disclaims any warranties, express or implied, with respect to the
nature, extent and quality of the facilities and equipment comprising the Project,
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and expressly disclaims any express or implied warranties that might be imposed
by Law under the circumstances, including warranties of merchantability or fitness
for a particular purpose.
15. RECORDS, DOCUMENTS AND ACCESS TO INFORMATION.
All documents and drawings prepared or developed by Operator or its
Subcontractors in connection with providing the Services, including all manuals,
data, designs, drawings, plans, specifications, reports and accounts, shall become
the property of the Authority when prepared. All of the same, together with any
documents or drawings furnished by the Authority to Operator or its
Subcontractors, shall be delivered to the Authority upon the termination of the
Operation and Maintenance Period. The Authority shall provide Operator with
reasonable access to all documents and files relating to the Project that are in the
care, custody or control of the Authority as may be reasonably requested by
Operator, including all technical, operational and other information relating to the
Project if, and to the extent, such documents and information are not otherwise
available to Operator. Conversely, Operator shall at all times provide the Authority
and its agents, SMUD, and the Project Lender with reasonable access to all
documents and information of Operator or in the care, custody or control of
Operator relating in any way to the project or this Agreement to the full and
complete extent the Authority has the right to review or receive any of the same
under any of the provisions of this Agreement.
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16. ACCOUNTING RECORDS AND AUDITS. Each of the
Authority and Operator shall keep records of any and all costs, expenses and
payments pertaining to the Services. Such records shall be kept as reasonably
directed by the Authority and otherwise in accordance with generally accepted
accounting principles and practices. Each of the Authority and Operator shall have
the right to audit and examine any cost, expense, payment or other information, as
necessary to verify any matter related to any billing or request for reimbursement,
and any other supporting documentation relating to any matter of billing,
reimbursement or other payment provided for in this Agreement. Any such audit
shall be performed at the expense of the Party conducting the audit and undertaken
by such Party or its representatives at reasonable times and in conformance with
generally accepted auditing standards. The right of any Party to audit any bill
and/or request for reimbursement submitted pursuant to this Agreement or to
verify matters pertaining to any other payment that was made or should have been
made shall continue for a period of three (3) years following (i) the receipt of the bill
or request for reimbursement, or (ii) the date when such other payment was made
or should have been made, whichever is applicable. The right to conduct an audit
shall be exercised by a Party by delivering written notice to the other of its
intention to promptly conduct such an audit on or before the close of said 3-year
period, which written notice shall describe the nature and extent of the audit that
will be conducted (i.e., the time period and general subject matters that will be
examined). All audits shall be performed as soon as reasonably possible after
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delivery of the written notice that an audit will be conducted. The failure of a Party
to timely deliver notice within said 3-year period that an audit will be conducted
shall result in a conclusive and irrebuttable presumption that the bill or request for
reimbursement in question was correct, or that the other Party correctly paid or
was under no obligation to pay the payment required by this Agreement for which
no bill or request for reimbursement was required or submitted, as applicable.
Each Party shall retain all records and documentation necessary for verification of
all bills and payments required by this Agreement for at least the 3-year period
allowed for the giving of notice that an audit will be conducted, and for so long
thereafter as necessary to complete the audit process and finally resolve any
disputes if a notice that an audit will be conducted has been timely given. Operator
shall ensure that all Subcontractors shall be subject to the requirements of this
Section 16 such that such Subcontractors shall have the same obligations to the
Authority as Operator does with respect to audits. If an audit is conducted, the
Party conducting the audit shall promptly prepare an audit report noting any
exceptions taken or claims made as a result of the audit (i.e., so-called “audit
exceptions”) and deliver the same to the Party whose books and records (or whose
Subcontractor’s books and records) have been audited. In the event of any audit
exceptions, the Parties shall meet and attempt to resolve any disputes concerning
them, which resolutions shall be confirmed in a writing signed by both Parties. To
the extent any audit exceptions set forth in any such audit report have not been
resolved and the resolution confirmed in a writing signed by both Parties within one
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(1) year from and after the report of audit exceptions was received by the Party who
was subjected to audit and/or the Party whose Subcontractor was subjected to audit,
whichever is applicable, those audit exceptions shall be deemed waived by the Party
conducting the audit unless the Party conducting the audit has initiated arbitration
respecting unresolved audit exceptions within said 1-year period in accordance with
Section 27, in which case the audit exceptions submitted to arbitration will be
decided by that arbitration.
17. FORCE MAJEURE. As used in this Agreement, a “Force
Majeure Event” shall mean any cause beyond the reasonable control and not
caused, in whole or in part, by the Party affected, and which could not have been
avoided by due diligence and use of best efforts, including drought, flood,
earthquake, storm, fire, lightning, epidemic, war, riot, civil disturbance, sabotage,
explosions, strikes or labor disputes, Project trips caused by transmission system
disturbance, dispatch operations or natural gas interruption, unknown preexisting
hazardous waste, unforeseen subsurface conditions, orders or judgments of any
governmental entity, and the absence, suspension, termination, interruption, denial
or failure of renewal of any Project Permit. Force Majeure Events include the
failure of any Subcontractor of Operator to furnish labor, services, materials or
equipment in accordance with its contractual obligations if, and only if, such failure
is itself due to a Force Majeure Event. Notwithstanding the foregoing, a Force
Majeure Event shall not include (i) equipment failure, even though such equipment
failure is the result of faulty or defective equipment or parts, unless such equipment
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failure is itself caused by an external Force Majeure Event, or (ii) any strike or labor
dispute involving the employees of Operator or the employees of any Subcontractor
of Operator employed at the Project site, if Operator has a “no strike” or similar
provision in its labor agreement applicable to such employees, unless such strike or
labor dispute is, in fact, a violation of such labor agreement.
17.1. Burden Of Proof. If the Parties are unable in good faith to
agree that a Force Majeure Event has occurred, the Parties shall submit the dispute
to arbitration pursuant to Section 27, and the Party claiming a Force Majeure
Event shall have the burden of proof as to whether such Force Majeure Event
(i) has occurred, (ii) was not a result, in whole or in part, of such Party’s or its
Subcontractor’s fault or negligence, and (iii) could not have been avoided by the use
of best efforts of such Party and/or its Subcontractor.
17.2. Excused Performance. Each Party shall be excused from
performance and shall not be considered to be in default with respect to any
obligation under this Agreement, except the obligation to pay money in a timely
manner for Services actually performed or other liabilities actually incurred, if and
to the extent that its failure of, or delay in, performance is due to a Force Majeure
Event; provided, that: (i) such Party gives the other Party written notice describing
the particulars of the Force Majeure Event, as soon as is reasonably practicable; (ii)
the suspension of performance is of no greater scope and of no longer duration than
is reasonably required by the Force Majeure Event; (iii) no obligations of the Party
which arose before the occurrence causing the suspension of performance are
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excused as a result of the occurrence; (iv) the Party uses best efforts to overcome or
mitigate the effects of such occurrence; and (v) when the Party is able to resume
performance of its obligations under this Agreement, such Party shall give the other
Party written notice to that effect and shall promptly resume performance under
this Agreement.
17.3. Authority’s Right To Use Self-Help. If within a
reasonable time after a Force Majeure Event has occurred that has caused Operator
to suspend or delay performance of Services, action to be undertaken at the expense
of the Authority has been identified and recommended to Operator, and Operator
has failed to take such action as Operator could lawfully and reasonably initiate to
remove or relieve either the Force Majeure Event or its direct or indirect effects, the
Authority may, in its sole discretion, and immediately after written notice delivered
to Operator, at the Authority’s expense, initiate such reasonable measures as will
be designed to remove or relieve such Force Majeure Event or its direct or indirect
effects, and thereafter, require Operator to resume full or partial performance of the
Services in accordance with the provisions of this Agreement.
18. CHANGE IN OPERATOR COMPENSATION. A qualifying
“change in circumstances” which requires modification of this Agreement to
increase, decrease or otherwise modify the compensation to be received by Operator
pursuant to Section 12 may result from any of the following: (i) the Authority’s
election, pursuant to this Agreement, to effect a material change in the scope of the
Services provided by Operator; (ii) material changes to this Agreement mutually
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agreed upon by the Parties; and (iii) changes in the Project Agreements which
materially affect Operator’s cost, schedule, or performance under this Agreement.
If either Party determines in good faith that a qualifying change in circumstances
has occurred for which the compensation to be paid to Operator should be changed,
that Party shall provide written notice of such determination to the other Party
within ten (10) days after that Party first becomes aware of the qualifying change in
circumstances. Such written notice must include the following: (i) a description of
the particular qualifying change(s) in circumstances, (ii) the basis for the
determination that the qualifying change(s) in circumstances require a change in
the compensation to be paid to Operator; and (iii) the recommended change to the
compensation to be paid to Operator as a result of said qualifying change(s) in
circumstances.
The Parties shall in good faith attempt to reach agreement as to
whether a qualifying change in circumstances has occurred, and if so, the change in
compensation be paid to Operator. Any change in the compensation to be paid to
Operator shall be designed to fairly compensate Operator in the same general
manner and to the same general extent that Operator was being compensated prior
to the occurrence of the qualifying change(s) in circumstances, modified as
reasonably necessary to reflect any material differences in the scope of the Services
being provided and the risks being undertaken by Operator as a direct result of the
qualifying change(s) in circumstances. If either Party delivers written notice to the
other Party requesting a change in compensation to be paid to Operator, the Party
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receiving such written notice may itself deliver a like written notice requesting a
change in compensation (i.e., one that includes the same information described
immediately above) within ten (10) days following its receipt of the first written
notice requesting the change in compensation from the other Party; the failure of
the Party receiving the first written notice requesting a change in compensation
shall constitute a waiver of the right of that receiving Party to request a change in
compensation as a direct result of the qualifying change(s) in circumstances or
alleged qualifying change(s) in circumstances described in the first written notice
that was delivered requesting the change.
Upon the delivery of the first written notice requesting a change in
compensation, the Parties shall meet and attempt to reach agreement on any
change in compensation to be paid to Operator. Any change in compensation to be
paid to Operator shall be retroactive to the date of delivery of the first written
notice requesting a change in compensation, unless otherwise mutually agreed. If
the Parties are unable to reach agreement on any change in compensation to be
paid to Operator within thirty (30) days from and after the date of delivery of the
first written notice requesting a change in compensation, then any Party who has
requested a change in compensation by timely delivering written notice of such
requested change to the other Party may have the matter decided by arbitration
initiated pursuant to Section 27 within sixty (60) days from and after the date the
first written notice requesting a change in compensation was delivered. Should
such arbitration result in a decision that the compensation to be paid to Operator
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will be changed, the change in compensation will be retroactive to the date of
delivery of the first written notice requesting the change in compensation. If both
Parties have timely delivered a written notice requesting a change in compensation
to be paid to Operator, any arbitration that is timely initiated by either Party shall
automatically encompass and include the written request for a change in the
compensation to be paid to Operator made by the other Party. If arbitration is not
initiated within aforementioned 60-day period, then any Party delivering written
notice of a request for a change in compensation to be paid to Operator shall be
deemed to have irrevocably waived its right to seek and obtain a change in the
compensation to be paid to Operator as a result of the qualifying change(s) in
circumstances or alleged qualifying change(s) in circumstances set forth in that
Party’s written notice.
19. INDEMNITIES. To the greatest extent permitted by Law,
Operator shall fully indemnify, defend, protect and hold unconditionally completely
free and harmless the Authority, SMUD, the Authority Participant and the Project
Lender, and each of them, from and against any and all claims, damages, liabilities,
losses, demands, judgments, penalties, fines, costs and expenses (including
reasonable attorney’s fees and expert fees unless Operator has assumed the
defense, in which case reimbursement for attorney’s fees and expert fees is limited
as provided below in Paragraph 19.6) and the like respecting matters asserted by or
on behalf of any Person not a Party, including claims asserted by any federal, state
or local government or any agency thereof and any claims asserted by any employee
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of any Party, and for any loss or damage to any property of the Authority and/or
SMUD, arising out of or in any way related to any of the matters described in any
one or more of Paragraphs 19.1, 19.2, 19.3 and 19.4, inclusive.
19.1. Indemnity For Performance Of Services. Operator shall
indemnify the Authority, SMUD, the Authority Participant and the Project Lender
as set forth in this Section 19 from and against any and all claims, damages, losses,
penalties, fines, costs and expenses (including reasonable attorney’s fees and expert
fees, limited as set forth in Paragraph 19.6) and liabilities directly arising from or in
any way associated with the performance of Services by or on behalf of Operator,
whether caused by active or passive negligence of or attributable to Operator
(including Subcontractors), or otherwise, unless and except to the extent the same
directly arise or result from a breach of this Agreement by the Authority, or from
the sole negligence or willful misconduct of or attributable to any one or more of the
Authority, SMUD, the Authority Participant, and the Project Lender. It is the
intent of the Parties that where negligence is determined to have been contributory,
principles of comparative negligence will be followed to the end that Operator shall
only bear and pay the proportionate cost of any loss, damage, expense and liability,
including applicable reasonable attorney’s fees and expert fees, associated with the
negligence or other causative actions and/or failures to act of or attributable to
Operator.
19.2. Special Indemnity For Environmental And System
Reliability Liabilities. Operator shall indemnify the Authority, SMUD, the
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Authority Participant and the Project Lender as set forth in this Section 19 from
and against any and all claims, damages, losses, penalties, fines, costs and expenses
(including reasonable attorney’s fees and expert fees, limited as set forth in
Paragraph 19.6) and liabilities directly arising from or in any way associated with
the performance of the Services by or on behalf of Operator (including
Subcontractors) in any manner that constitutes a violation of (i) the conditions,
requirements and provisions of any Project Permit, and/or any Law (including
common law) for or related to the protection of public health and safety or the
environment, including any failure of reliability of the bulk electric system arising
under Paragraph 10.5, in each case whether caused by the active or passive
negligence of or attributable to Operator (including Subcontractors), or otherwise,
unless and except to the extent that the same directly arise or result from a breach
of this Agreement by the Authority, or from the sole negligence or willful
misconduct of or attributable to any one or more of the Authority, SMUD, the
Authority Participant and the Project Lender. It is the intent of the Parties that
where negligence is determined to have been contributory, principles of comparative
negligence will be followed to the end that Operator shall only bear and pay the
proportionate cost of any loss, damage, expense and liability, including applicable
reasonable attorney’s fees and expert fees, associated with the negligence or other
causative actions and/or failures to act of or attributable to Operator. Without
limiting the generality of the foregoing, said indemnity shall include all costs and
expenses for or associated with the cleanup and remediation of any hazardous
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materials or hazardous wastes for which Operator is responsible under this
Paragraph 19.2, including costs incurred in connection with the investigation or
remediation of the same and the preparation of any feasibility studies or reports, or
the performance of any cleanup, remediation, removal, response, abatement,
containment, closure, governmental oversight costs, restoration or monitoring work
required by any governmental agency.
19.3. Indemnity For Certain Taxes. Operator shall indemnify
the Authority, SMUD, the Authority Participant and the Project Lender as set forth
in this Section 19 from and against any and all claims, damages, losses, penalties,
fines, costs and expenses (including reasonable attorney’s fees and expert fees,
limited as set forth in Paragraph 19.6) and liabilities directly arising from or in any
way associated with all claims by any governmental or taxing authority respecting
taxes based on gross receipts or on income of Operator, any Subcontractor of
Operator, or any of their respective agents or employees in connection with any
payment made to Operator under this Agreement.
19.4. Indemnity For Patents And Copyrights. Operator shall
indemnify the Authority, SMUD, the Authority Participant and the Project Lender
as set forth in this Section 19 from and against any and all claims, damages, losses,
penalties, fines, costs and expenses (including reasonable attorney’s fees and expert
fees, limited as set forth in Paragraph 19.6) and liabilities on account of
infringement or alleged infringement of any letters patent or patent rights or
copyright directly arising from or in any way associated with the performance of
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Services by or on behalf of Operator, whether caused by active or passive negligence
of or attributable to Operator (including Subcontractors), or otherwise, unless and
except to the extent the same directly arises or results from the sole negligence or
willful misconduct of or attributable to any one or more of the Authority, SMUD,
the Authority Participant and the Project Lender.
19.5. Scope Of Indemnity Coverage. The indemnities by
Operator in favor of each of the Authority, SMUD, the Authority Participant and
the Project Lender provided for in this Section 19 include the respective Affiliates,
shareholders, directors, officers, employees, agents, representatives and attorneys of
each of the Authority, SMUD, the Authority Participant and the Project Lender.
19.6. Indemnity Performance Procedures. Any Person claiming
a right to indemnity from Operator under this Section 19 shall provide written
notice to Operator giving full details, to the extent then known to that Person, as to
any such claim, damage, loss, penalty, fine, cost, expense or liability promptly after
learning of the existence of the same; provided, however, that the failure of such a
Person to reasonably and promptly provide such written notice shall not relieve
Operator from its indemnity obligations except to the extent of any increased
amount that Operator can show it suffered in respect of such indemnity obligations
as a direct result of the unreasonable delay in giving written notice by the Person
entitled to such indemnity from Operator. The Person(s) entitled to indemnity from
Operator and Operator shall reasonably cooperate with each other in an effort to
reduce, minimize or eliminate the amount incurred or to be incurred by Operator in
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respect of such indemnity. Operator shall have both the right and the obligation to
assume the defense of the Person(s) Operator is required to indemnify by counsel
reasonably acceptable to the Person(s) to be indemnified, so long as there is no
reservation of rights by Operator respecting the indemnity obligation or other
conflict between the interests of Operator and the Person(s) to be indemnified
relative to the subject matter of the indemnity. Operator shall pay all fees and
expenses of such counsel and any experts, and the Person(s) to be indemnified shall
not be entitled to recover any attorney’s fees or expert fees from and after the date
Operator has assumed, and for so long as Operator continues to provide, the defense
of the Person(s) to be indemnified. If there is a reservation of rights or other conflict
between the interest(s) of the Person(s) to be indemnified relative to the subject
matter of the indemnity, then in such event unless said Person(s) and Operator
nevertheless mutually agree in writing that Operator shall assume the defense of
such Person(s), the Person(s) to be indemnified shall assume responsibility for
directing and conducting the defense through counsel and expert(s) retained by
such Person(s) and bill Operator on a monthly basis for the costs and expenses
directly associated with the same. Operator shall pay the bill for such costs and
expenses within thirty (30) days after receipt of the same. Late payments by
Operator shall bear interest at the Reference Interest Rate until paid. If Operator
has the right to assume and has assumed the defense of the Person(s) to be
indemnified, the Person(s) shall nonetheless be entitled to retain separate counsel
at its or their own expense to advise it or them with respect to the matters subject
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to indemnity, but counsel retained by Operator shall be the counsel of record;
provided, however, that Operator shall not take any position on behalf of the
Authority or SMUD in any administrative or legal proceeding that the Authority or
SMUD, in sole exercise of its or their good-faith judgment, believes would be
materially adverse to the Authority and SMUD, or either of them, in any respect,
including a respect or respects unrelated to the subject matter of the defense being
provided by Operator. Operator shall not settle or compromise any claim that is
subject to indemnity under Section 19 unless such settlement results in the full and
complete release of the Person(s) entitled to indemnity, including the release of its
Affiliates, shareholders, directors, officers, employees, agents, representatives and
attorneys, unless the Person(s) entitled to be indemnified consent in writing to a
settlement that does not result in such a complete release; the Person(s) entitled to
indemnity shall not unreasonably delay or withhold its or their written consent to a
settlement that results in less than such a complete release. In no event shall
Operator conclude any settlement which requires any action or forbearance from
action by either the Authority, SMUD, the Authority Participant and the Project
Lender, or any of them, without the prior written consent of any such Person for
which the settlement requires any action or forbearance from action.
20. TERM OF PERFORMANCE OF SERVICES. The term of
performance of the Services under this Agreement shall commence upon
commencement of the Transition Period, and shall end at the conclusion of the
Operation and Maintenance Period; provided, however, that the Authority shall
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have the absolute right to terminate further performance of the Services by
Operator for any reason or reasons, and without recourse by Operator, at any time
following the third (3rd) anniversary of the commencement of the Operation and
Maintenance Period (i.e., after three years of performance of the Services by
Operator during the Operation and Maintenance Period) by delivery of written
notice of termination to Operator at least thirty (30) days in advance of the date of
termination of performance specified in the Authority’s written termination notice.
The term of performance of Services by Operator under this Agreement shall
further be subject to early termination as set forth in Paragraphs 20.1, 20.3 and
20.4.
20.1. Termination By The Authority For Cause. The Authority
may terminate this Agreement at any time upon thirty (30) days prior written
notice to Operator if any of the circumstances described in Subparagraphs 20.1.1,
20.1.2 and 20.1.3 occur.
20.1.1. Violation Of Law Or Permit. If Operator violates,
or consents to a violation of, any Law or the conditions or provisions of any Project
Permit, which violation has or may have a material adverse effect on the operation
and maintenance of the Project or the rights or obligations of either Party under
this Agreement, and Operator does not promptly cure such violation, the Authority
may terminate the further performance of Services by Operator by delivering the
required 30-day written notice of termination to Operator at any time prior to when
Operator fully cures such deficiency in performance.
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20.1.2. Failure Of Performance. If Operator materially
fails in the performance of any of its obligations under this Agreement, and
Operator does not cure such failure within thirty (30) days from the date of receipt
of written notice from the Authority demanding such cure, the Authority may
thereafter terminate the further performance of Services by Operator by delivering
the required 30-day written notice of termination to Operator at any time prior to
when Operator fully cures such deficiency in performance.
20.1.3. Failure Of Availability. Any time the average
Equivalent Forced Outage Factor for the Project is greater than ten percent (10%)
during any rolling six (6) calendar month period, the same shall be considered a
“Substandard Availability Period”. For the purpose of counting the number of
Substandard Availability Periods, if two or more Substandard Availability Periods
occur consecutively and directly relate to the same initiating event, they shall be
considered as part of the same Substandard Availability Period (i.e., the same shall
collectively constitute a single Substandard Availability Period despite its
duration). Once the second or any subsequent Substandard Availability Period has
occurred at any time during the Operations and Maintenance Period, the Authority
may terminate the further performance of Services by Operator by delivering the
required 30-day written notice of termination to Operator within ninety (90) days
following the occurrence of that second or subsequent Substandard Availability
Period. For avoidance of doubt, if the Authority fails to deliver the required 30-day
written notice of termination within said 90-day period following the second or any
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subsequent Substandard Availability Period, such failure shall preclude the
Authority from terminating the further performance of Services by Operator on
account of the occurrence of that particular Substandard Availability Period for
which the required 30-day written notice of termination was not given, but the
Authority retains the full right to terminate further performance of Services by
Operator by delivering the required 30-day written notice of termination within the
90-day period following the occurrence of each and any subsequent Substandard
Availability Period.
20.2. Consequences Of Termination Pursuant To Section 20.1.
In the event of a termination of Operator’s performance of Services by the Authority
pursuant to Paragraph 20.1, within sixty (60) days after the effective date of such
termination, Operator shall pay to the Authority all costs that result from any
breach or violation by Operator. Such costs shall include the cost of mobilizing and
training a successor contractor to provide the operation and maintenance services
for the Project. The Authority may offset these amounts against any amounts
otherwise due to Operator under this Agreement. In addition, the Authority shall
have the right and option, but not the obligation, to assume any benefits and
obligations arising or accruing after the date of such termination of performance of
the Services under any Subcontracts for specific items of equipment or services for
the Project.
20.3. Termination In The Event Of Bankruptcy. Either Party
may terminate this Agreement immediately in the event of the bankruptcy of the
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other Party. Bankruptcy shall be deemed to occur if either Party files a voluntary
petition in bankruptcy or a petition in bankruptcy is filed against either Party and
such petition is approved by a court of competent jurisdiction.
20.4. Termination By Authority Due To Change In Law. The
Authority shall have the right to terminate this Agreement upon sixty (60) days
prior written notice to Operator due to significant change in Federal, State, or local
law, which significant change will adversely affect the relationship of the Parties or
Operator’s ability to perform.
20.5. Condition Upon Termination Of Performance Of The
Services. Upon expiration or other termination of Operator’s performance of
Services, Operator shall remove its personnel from the Project site and shall return
the Project to the Authority in a safe and clean condition and in the condition the
Project was in upon commencement of the Operation and Maintenance Period,
excepting only normal wear and tear and any other degradation in the condition of
the Project for which Operator is not responsible. The Operator shall further
provide to the Authority an accurate accounting of Accessories, including spare
parts and tools, and Consumables, and equipment, and all other operating items
that were provided by the Authority to Operator.
21. REPRESENTATIONS.
21.1. Operator Representations. The Operator makes the
representations and warranties to the Authority that are set forth in this
Paragraph 21.1.
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21.1.1. Organization And Existence. Operator is a
corporation duly organized, validly existing, and in good standing under the Laws of
___________, is qualified to do business in, and is in good standing under the Laws
of California, and has the power and authority to own or lease its properties, and to
transact its business as now being conducted, and as presently proposed to be
conducted by it under this Agreement.
21.1.2. Power And Authority. Operator has full power,
authority and the legal right to execute, deliver and perform this Agreement. The
execution, delivery and performance by Operator of this Agreement has been duly
authorized by all necessary action and does not and will not require the further
approval of any Person.
21.1.3. Due Execution And Delivery. This Agreement
has been duly executed and delivered by Operator and constitutes the legal, valid
and binding obligation of Operator, enforceable against Operator in accordance with
its terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application affecting
the enforcement of creditors’ rights, and by general equitable principles.
21.1.4. No Violation Of Law, Etc. The execution,
delivery, and performance by Operator of this Agreement does not and will not (i)
contravene any provision of any applicable Law, or (ii) violate any provision of its
certificate of incorporation or bylaws.
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21.1.5. No Litigation. There is no action, suit,
investigation or proceeding by or before any court, arbitrator, administrative agency
or other governmental authority pending or, to the best knowledge of Operator after
reasonable inquiry, threatened against or affecting Operator or any of its respective
properties, which involves the Project or any of the transactions contemplated by
this Agreement or which could reasonably be expected to have a material adverse
effect on the Project or on Operator’s ability, financial or otherwise, to perform its
obligations under this Agreement.
21.2. Authority Representations. The Authority makes the
representations and warranties to Operator that are set forth in this
Paragraph 21.2.
21.2.1. Organization And Existence. The Authority is an
agency established pursuant to Articles 6500-6599, inclusive, of the California
Government Code, is qualified to do business in California, and has the power and
authority to own or lease its properties and to transact its business as now being
conducted and as presently proposed to be conducted by it under this Agreement.
21.2.2. Power And Authority. The Authority has full
power, authority, and the legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance by the Authority of this
Agreement has been duly authorized by all necessary action, and does not and will
not require the further approval of any Person.
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21.2.3. Due Execution And Delivery. This Agreement
has been duly executed and delivered by the Authority and constitutes the legal,
valid and binding obligation of the Authority, enforceable against the Authority in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws of general
application relating to or affecting the enforcement of creditors’ rights, and by
general equitable principles.
21.2.4. No Violation Of Law, Etc. The execution, delivery
and performance by the Authority of this Agreement does not and will not (i)
contravene any provision of any applicable Law, or (ii) violate any provision of its
organizational documents.
21.2.5. No Litigation. There is no action, suit,
investigation, or proceeding by or before any court, arbitrator, administrative
agency or other governmental authority pending or, to the best knowledge of the
Authority after reasonable inquiry, threatened against or affecting the Authority or
any of its respective properties, which involves the Project or any of the transactions
contemplated by this Agreement or which could reasonably be expected to have a
material adverse effect on the Project or on the Authority’s ability, financial or
otherwise, to perform its obligations under this Agreement.
21.2.6. Limited Purpose Entity. The Authority has been
formed solely to develop, construct, finance, operate, administer and own the
Project. The Authority neither has been, nor is otherwise obligated to perform any
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acts other than (i) the obligations contemplated by agreements relating to the
Project, and (ii) acts necessary to satisfy legal requirements imposed upon the
Authority in the ordinary course.
22. NOTICES. Any notice, demand, offer, or other written
instrument required or permitted to be given pursuant to this Agreement shall be
in writing signed by the Party giving such notice, unless expressly indicated to the
contrary in this Agreement with respect to any particular notice, and shall be
deemed to have been given upon receipt, and not otherwise, if such notices are
personally delivered or transmitted via facsimile, or by first class mail, postage
prepaid, registered or certified, return receipt requested, addressed as set forth in
this Section 22.
If delivered to the Authority:
Superintendent, Thermal Generation and Gas Pipeline Assets
c/o Sacramento Municipal Utility District
ATTN: Ross Gould
P.O. Box 15830, Mail Stop B355
Sacramento, CA 95852-1830
Telephone: (916) 732-6584
FAX: (916) 732-6563
If delivered to Operator:
Each Party may change its address for purposes of receiving notices under this
Agreement by giving the other written notice of the new address in the manner set
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forth in this Section 22. Each Party shall be obligated to promptly notify the other
of any change of address to the end that all notices required or permitted by this
Agreement may be given and received.
23. LETTER OF CREDIT. At least seven (7) days prior to the
commencement of the Operation and Maintenance Period, Operator shall obtain
and post and thereafter maintain at all times until all obligations of Operator under
this Agreement have been fully discharged, an irrevocable standby letter of credit
for the benefit of the Authority in an amount equal to the Base Operating Fee for
that Operating Year. The irrevocable standby letter of credit shall be in a form
approved by the Authority and be issued by a financial institution with letter of
credit operations physically located in the United States and an issuer credit rating
in the single “A” category or better by both Standard and Poors and Moody’s and be
otherwise acceptable to the Authority. The letter of credit will require the financial
institution to wire to the Authority’s bank account any amount up to the full
amount of the letter of credit upon receipt of a written request from the Authority.
The letter of credit will also allow the Authority to draw the full amount if the
Operator has not renewed or provided a new letter of credit in a form acceptable to
the Authority by thirty (30) calendar days before the current letter of credit
expiration date.
For purposes of this Section 23, all of the obligations of Operator shall
not have been fully discharged unless and until the Authority has provided written
notice to Operator or otherwise agreed in writing that all of Operator’s obligations
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under this Agreement have been fully discharged. However, once all of Operator’s
obligations under this Agreement have been fully discharged, the Authority shall
not withhold or delay its written acknowledgement to or other written agreement
with Operator that the same have been fully discharged so that Operator no longer
needs to maintain said irrevocable standby letter of credit in force and effect.
24. CERTAIN LIMITATIONS AND EXCLUSION OF
LIMITATIONS ON OPERATOR’S LIABILITY. There shall be no limitations or
exclusions of or with respect to the liability of Operator arising under or in
connection with the performance of this Agreement, regardless of the legal or
equitable theory or theories under which such liability may arise with respect to
any of the following: (1) losses, claims and liabilities that directly arise in whole or
in material part from the gross negligence or willful misconduct of or attributable to
Operator; (2) any and all liabilities arising under or from the indemnity provisions
of Section 19; (3) any and all losses, claims and liabilities specifically assumed by
Operator under any one or more of Paragraph 10.1, Paragraph 10.2,
Paragraph 10.3, Paragraph 10.4 and/or Paragraph 10.5; and (4) losses, claims or
liabilities covered by insurance obtained by or for Operator, including the insurance
identified on Appendix B that Operator is required to obtain and maintain under
the provisions of Section 13 and any other insurance Operator subsequently
becomes required to obtain and maintain pursuant to said Section 13, and any
insurance obtained by or for Operator under Operator’s own insurance program(s),
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including any self-insured retentions or insurance deductibles under Operator’s
insurance program(s).
Except for those exclusions to Operator’s liability specifically set forth
above in this Section 24, Operator’s total aggregate liability to the Authority arising
under or in connection with the performance of this Agreement during any
Operating Year shall be limited to the total Base Operating Fee for that Operator
Year.
25. LIMITATIONS ON CERTAIN TYPES OF DAMAGES. Unless
and except to the extent covered by (1) insurance obtained by or for the Authority
for its own account and protection against losses, claims and liabilities;
(2) insurance obtained by or for Operator in connection with Operator’s own
insurance program(s), including self-insured retentions or insurance deductibles
under Operator’s insurance program(s); and (3) insurance Operator is required to
obtain and maintain as provided in Section 13, and any liability arising under
Paragraph 10.5, in no event shall the Authority, SMUD, the Authority Participant
or the Project Lender be liable to Operator, nor shall Operator be liable to the
Authority, SMUD, the Authority Participant or the Project Lender, for any indirect,
special or consequential damages, whether based upon breach of contract, breach of
warranty, tort, or any other legal or equitable theory for relief, even if any such
Person against whom liability is sought to be imposed was advised of or otherwise
had knowledge of the possibility of such damages. Similarly, the Authority, SMUD,
the Authority Participant and/or the Project Lender shall not be liable to Operator,
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nor shall Operator be liable to the Authority, SMUD, the Authority Participant
and/or the Project Lender, for any punitive or exemplary damages; provided,
however, that the foregoing limitations on certain types of damages set forth above
in this Section 25 shall have no application to the extent the Person(s) against
whom liability is sought to be imposed arises from the gross negligence or willful
misconduct of or attributable to such Person(s).
26. INDEPENDENT CONTRACTOR STATUS AND
RELATIONSHIP OF THE PARTIES. Operator is and shall be considered at all
times to be in every respect an independent contractor relative to providing the
Services and performing under this Agreement. Neither Operator nor any of its
Subcontractors or employees shall be deemed to be the employees, representatives
or agents of the Authority. This Agreement establishes an ongoing commercial
relationship between the Authority and Operator, and each of the Authority and
Operator shall exercise good faith in performing all matters on its part to be
performed under this Agreement. However, the Authority and Operator expressly
acknowledge that this Agreement is not intended to create, nor shall it be construed
as creating any partnership, joint venture, trust, or other association of any kind
whatsoever between the Authority and Operator. Each of the Authority and
Operator shall be responsible and liable only for its own obligations under this
Agreement, and not for the obligations of the other; the liability of the Parties shall
be several and not joint or collective. Neither the Authority nor Operator shall have
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any fiduciary or quasi fiduciary duties or obligations to the other arising under or in
connection with this Agreement or the performance of this Agreement.
27. DISPUTE RESOLUTION. All disputes arising under or in any
way associated with this Agreement or the performance of this Agreement,
including alleged failures in performance or any dispute over the interpretation of
this Agreement, shall either be resolved by mutual agreement of the Parties or by
binding arbitration as set forth in this Section 27. THIS SECTION 27
MATERIALLY AFFECTS THE LEGAL RIGHTS OF EACH OF THE PARTIES BY
REQUIRING THAT DISPUTES THE PARTIES ARE UNABLE TO RESOLVE BY
MUTUAL AGREEMENT BE RESOLVED BY BINDING ARBITRATION RATHER
THAN BY A COURT ACTION OR PROCEEDING. There are several provisions of
this Agreement which expressly require the Parties to communicate with each other
in an effort to resolve disputes concerning certain specific matters. However, the
Parties contemplate that each of them will proceed in good faith in raising any
disputes relating to other matters under this Agreement, and that each of them will
respond responsibly to any such disputes raised by the other. To that end, if either
Party believes a dispute or disputes exist concerning any matter over which this
Agreement does not expressly require the Parties to communicate with each other
for the purpose of attempting to resolve the dispute(s), that Party shall not initiate
arbitration pursuant to Paragraph 27.2 unless and until that Party has first
delivered a written notice to the other Party respecting the dispute(s) and waited a
period of at least ten (10) days following the date of delivery of that written notice
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(i.e., arbitration shall not be initiated until after a 10-day waiting period). The
written notice respecting the dispute(s) shall set forth (i) a description of the
dispute(s), (ii) the resolution of the dispute(s) proposed by the Party giving written
notice, and (iii) the identity of a senior officer or other senior representative of the
Party giving written notice who is authorized to negotiate a resolution of the
dispute(s) and will be available to discuss the same with the other Party during the
10-day waiting period. The Party receiving a written notice of the existence of the
dispute(s) shall attempt to resolve those dispute(s) with the Party giving written
notice during the 10-day waiting period. If the Parties are unable to resolve the
dispute(s) by mutual agreement during the 10-day waiting period, then the Party
delivering the written notice concerning the dispute(s) may proceed at any time
thereafter to have the dispute(s) identified in the written notice resolved by
arbitration by initiating arbitration pursuant to Paragraph 27.2, subject always to
applicable statutes of limitation and any limitations on the time for initiating
arbitration as set forth in other Sections of this Agreement. For disputes
concerning matters over which this Agreement expressly requires the Parties to
communicate in an effort to resolve them, with arbitration reserved as the dispute
resolution mechanism in the event the Parties fail to mutually agree, the Parties
may initiate arbitration pursuant to Paragraph 27.2 without the necessity of
providing the aforementioned written notice concerning the dispute(s) and deferring
the initiation of arbitration for the 10-day waiting period. The arbitration of all
matters shall be initiated and conducted only as provided in this Section 27.
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27.1. The Arbitration And The Arbitration Panel. Any
arbitration conducted under this Agreement shall be conducted and enforced, and
the arbitration award confirmed or vacated, and judgment entered on any
arbitration award as set forth in Part 3 of Title 9 of the California Code of Civil
Procedure (i.e., Code of Civil Procedure sections 1280 through 1294.2), as the
sections comprising said Part 3 of Title 9 or any other sections that are
subsequently adopted to amend or replace any of the sections of said Part 3 of
Title 9 exist at the time of arbitration, all as amended and supplemented by the
provisions of this Section 27. Unless otherwise mutually agreed, all matters
submitted to arbitration shall be decided by a panel of three (3) arbitrators
consisting of a “neutral” arbitrator and two (2) “party” arbitrators. Each of the
Parties shall have the opportunity to appoint one of the two party arbitrators.
27.2. Initiation Of Arbitration. Any arbitration under this
Agreement shall be initiated by a Party upon the delivery of a written arbitration
demand containing all of the following information: (i) a description of the nature of
each dispute to be arbitrated; (ii) the amount of money involved, if applicable, and
the remedy sought with respect to each such identified dispute; and (iii) the identity
of the “party” arbitrator appointed by the Party delivering the written arbitration
demand for purposes of the arbitration that will be conducted to resolve all of the
identified disputes, including the telephone number and business address of that
party arbitrator. The arbitration shall be deemed initiated effective immediately
upon the delivery of such a written arbitration demand to the other Party; provided,
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however, that a written arbitration demand which fails to either describe the
disputes or to appoint a party arbitrator and provide a telephone number and
business address for that party arbitrator shall be a defective written arbitration
demand, the delivery to the other Party of which shall not be deemed to have
initiated arbitration.
27.3. Appointment And Qualification Of Arbitrators. All
arbitrators shall be natural Persons who are believed to be competent to adjudicate
and decide upon the matters to be arbitrated. The party arbitrators need not be
neutral in outlook with respect to the matters to be arbitrated. The party arbitrator
for the Party initiating arbitration shall be appointed as provided in
Paragraph 27.2. The Party receiving the written arbitration demand shall appoint
its party arbitrator in a writing delivered to the Party initiating the arbitration
within fifteen (15) days after receiving the written arbitration demand, which
written appointment shall include the telephone number and business address of
that party arbitrator. If the Party receiving the written arbitration demand fails to
deliver written notice of the appointment of its party arbitrator within said 15-day
period, the Party initiating the arbitration shall have the right to appoint any
retired judge who has served as a Superior Court judge or a Federal District Court
judge in the State of California as the party arbitrator for the Party receiving the
written arbitration demand, which appointment shall be made, if at all, within
thirty (30) days following the date the written arbitration demand was delivered.
The appointment of the party arbitrator for the Party receiving the arbitration
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demand shall be effective immediately upon the timely delivery of written notice of
the appointment of that party arbitrator by the Party receiving the arbitration
demand, or by the Party initiating the arbitration, whichever is applicable. The
Parties may agree in writing to extend the time for appointment of the party
arbitrator for the Party receiving the arbitration demand. However, in the absence
of a written agreement signed by both Parties extending the time for appointment
of the party arbitrator for the Party receiving the arbitration demand, the Party
initiating arbitration shall be deemed to have abandoned the arbitration if the party
arbitrator for the Party receiving the written arbitration demand has not been
appointed by one Party or the other as provided immediately above within said
30-day period following the date of delivery of the written arbitration demand. If
the arbitration is abandoned, it may be initiated again only by following the
procedures for initiating arbitration that are set forth in Paragraph 27.2; if a Party
who has abandoned the arbitration subsequently initiates arbitration with respect
to the matters described in the written arbitration demand for which the arbitration
was abandoned, the date of initiation of the arbitration shall be the date of delivery
of the subsequent written demand for arbitration, and shall not relate back to the
date of delivery of the first written arbitration demand for the arbitration that was
abandoned (i.e., the arbitration may be precluded by other provisions of this
Agreement which require that arbitration be initiated within a specified time
period, or by applicable statutes of limitation). If both party arbitrators are timely
appointed, the two party arbitrators shall appoint the third or “neutral” arbitrator
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within twenty (20) days following the date of appointment of the last of the two
party arbitrators. If the two party arbitrators are unable to mutually agree upon
and appoint the neutral arbitrator within said 20-day period, then either Party or
both Parties may apply to the presiding judge of the Superior Court of the State of
California in and for the County of Sacramento by noticed motion, and such neutral
arbitrator shall be appointed by the presiding judge. The neutral arbitrator shall
not have any prior or ongoing relationship with Operator, the Authority, SMUD, the
Authority Participant, or the Project Lender, or any Affiliate of any of those
specified Persons. Likewise, the neutral arbitrator shall not have any personal or
financial stake in the outcome of the resolution of the disputes to be arbitrated.
27.4. Scope Of Issues To Be Arbitrated. The issues to be
arbitrated shall be all issues relating to disputes described in the written
arbitration demand, including any legal theories for recovery or any equitable relief,
whether or not such legal theories are equitable theories as set forth in the written
arbitration demand, and any affirmative legal and equitable defenses and equitable
theories of relief that may be raised by the Party receiving the written arbitration
demand in connection with such disputes. In addition, the Party receiving the
written arbitration demand may raise matters of offset or counterclaim to the
extent such offsets or counterclaims relate to the dispute(s) identified in the written
arbitration demand. If the Parties are unable to agree that the arbitration include
any matters of offset or counterclaim that the Party receiving the written
arbitration demand wishes to include in the arbitration, then the Party receiving
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the written arbitration demand may make a motion upon reasonable notice to the
panel of arbitrators to resolve the question of whether such offset or counterclaim
matters shall be included within the arbitration. In resolving that question, the
arbitration panel shall be controlled by the following principles: (1) no offset or
counterclaim matter shall be added unless it must necessarily be resolved in order
to fairly determine all of the issues related to the dispute(s) identified in the written
arbitration demand; and (2) the inclusion of such offset or counterclaim matters will
not unduly delay the commencement of the arbitration hearing to be scheduled by
the arbitration panel at or immediately following the arbitration pre-hearing
conference required by Subparagraph 27.6.2. The failure of the Party receiving the
written arbitration demand to attempt to include any offset or counterclaim matter
within the arbitration, or the failure of such Party to successfully have such offset
or counterclaim matter included in the arbitration, shall not preclude that Party
from subsequently initiating a separate arbitration to resolve any dispute(s)
respecting any offset or counterclaim matter pursuant to Paragraph 27.2.
27.5. Decisions By The Arbitration Panel. The neutral
arbitrator shall be responsible for ruling on all procedural matters, including the
resolution of discovery disputes, and on the admissibility of evidence at the
arbitration hearings, and such ruling shall be binding upon the Parties. All other
decisions rendered or to be rendered by the arbitration panel shall be the decision of
any two or more of the arbitrators, or if no two arbitrators are able to agree upon a
particular decision to be made by the arbitration panel, including the final
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arbitration award, then the decision of the arbitration panel shall be the decision of
the neutral arbitrator. Although the arbitration panel shall have the full right,
authority and jurisdiction to interpret this Agreement as necessary in making any
decision within the scope of the matters to be arbitrated, in no event shall the
arbitration panel have the authority or jurisdiction to alter, change, amend, modify,
waive, add to or delete from any of the provisions of this Agreement unless and
except with respect to any particular provision that is determined by the arbitration
panel to be invalid and unenforceable as a matter of law.
27.6. Specific Arbitration Procedures To Be Followed. In
addition to the procedures described above in this Section 27 for the initiation of
arbitration, the appointment of arbitrators, the scope of the matters to be decided
by the arbitration and the manner for making decisions by the arbitration panel,
the Parties and the arbitration panel shall comply with the following specific
procedures respecting the arbitration.
27.6.1. Communications With Arbitrators. Each
Party may communicate freely with its party arbitrator throughout the arbitration
process. Neither Party shall have any ex parte contact or communication with the
neutral arbitrator or with the party arbitrator of the other Party, except with
respect to routine procedural matters and scheduling issues, and then only after the
other Party is advised that such an ex parte contact or communication will occur.
27.6.2. Arbitration Pre-Hearing Conference. Within
fifteen (15) days after the appointment of the neutral arbitrator, the arbitration
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panel shall convene an arbitration pre-hearing conference at a time and a location
within the City of Sacramento designated by the neutral arbitrator to determine
(i) the procedures for resolving discovery disputes, (ii) the procedures for the
arbitration hearings, including the evidence to be submitted, evidentiary objections
and the length of the arbitration hearings, and (iii) the date for commencement of
the arbitration hearings. The procedures for resolving discovery disputes to be
specified by the arbitration panel shall provide each Party with a reasonable
opportunity to present its position on such discovery disputes to the arbitration
panel. The arbitration panel shall schedule a date for commencement of the
arbitration hearings within no less than sixty (60) days and no more than one
hundred and eighty (180) days following the arbitration pre-hearing conference,
after taking into account the complexity of the matters to be determined by the
arbitration, the commercial timing needs for a final arbitration award within a
particular time frame, the discovery permitted by this Paragraph 27.6 that the
Parties wish to undertake, the amount of time that reasonably should be required
for experts to investigate and render opinions concerning the matters to be decided
by arbitration, and any other considerations the arbitration panel deem important
in order for the Parties to adequately prepare and present their evidence respecting
the matters submitted to arbitration. The arbitration hearings will be held as
scheduled by the arbitration panel at such place within the City of Sacramento as
may be mutually agreed upon by the Parties, or in the absence of their mutual
agreement, as designated by the neutral arbitrator. The arbitration panel shall
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issue a written arbitration pre-hearing conference order deciding the matters to be
determined at the arbitration pre-hearing conference within ten (10) days after the
pre-hearing conference.
27.6.3. Permitted Discovery. Either Party may
demand the production of documents or the right to inspect things or places
following the procedures and requirements set forth in California Code of Civil
Procedure section 2031 (and/or any other section or sections of the Code of Civil
Procedure that are subsequently adopted to replace or amend section 2031);
provided, however, that all requests are served within a time and in a manner that
requires the production/inspection to take place at least twenty (20) days or more
before the scheduled date for commencement of the arbitration hearings. Either
Party may serve interrogatories on the other for the sole and limited purpose of
discovering the identity and whereabouts of witnesses, which interrogatories shall
otherwise be served and responded to in accordance with California Code of Civil
Procedure section 2030 (and/or any other section or sections of the Code of Civil
Procedure that are subsequently adopted to replace or amend section 2030);
provided, however, that all requests are served in a time and in a manner that
requires the response to the interrogatories to be served at least thirty (30) days
before the scheduled date of commencement of the arbitration hearings. Each Party
may take the deposition of any witness or witnesses following the procedures and
requirements set forth in California Code of Civil Procedure section 2025 (and/or
any other section or sections of the Code of Civil Procedure that are subsequently
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adopted to replace or amend section 2025); provided, however, that no Party may
take any more than five (5) depositions of non-expert or percipient witnesses unless
leave to take a specific additional deposition of any one or more percipient witnesses
is granted by the arbitration panel upon a showing of good cause by motion made
upon reasonable notice. Each Party may take the deposition of any expert witness
designated by the other Party in its expert witness lists submitted as required by
Subparagraph 27.6.4. No other discovery shall be permitted. All discovery,
including expert depositions, shall be completed at least fourteen (14) days before
the scheduled commencement of the arbitration hearings, unless otherwise ordered
by the arbitration panel upon on a showing of good cause by motion made upon
reasonable notice. For purposes of this Subparagraph 27.6.3, subpoenas and
subpoenas duces tecum requiring the attendance of witnesses or the production of
documents at the arbitration hearings shall not constitute discovery.
27.6.4. Witness Lists, Exhibit Lists And Exhibits.
Each Party shall file with the arbitration panel and serve on the other Party a list
of the expert witnesses such Party intends to call for its case-in-chief, together with
a brief summary of the qualifications of each expert and narrative statement
specifically describing the subject or subjects upon which such expert will testify, at
least thirty-five (35) days before the scheduled date of commencement of the
arbitration hearings. Each Party shall file with the arbitration panel and serve
upon the other Party a list of rebuttal expert witnesses at least twenty-eight (28)
days before the scheduled date of commencement of the arbitration hearings, which
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list shall contain the same kind of information for the rebuttal expert witnesses as
required for the expert witnesses. Absent a compelling showing of good cause,
(i) neither Party shall be allowed to call as an expert witness any witness not listed
on its expert witness list or rebuttal expert witness list, (ii) the testimony of each
such expert on the rebuttal expert witness list shall be limited to rebuttal expert
testimony and to the subject matter(s) described on the rebuttal expert witness list,
and (iii) the testimony of each expert called in the case-in-chief shall be limited to
the subject matter(s) described on the expert witness list. Each Party shall
cooperate with the other in making each of the experts identified on its expert
witness list and its rebuttal expert witness list available for deposition in a manner
that will allow the deposition to be taken and completed within the time required
for the completion of discovery as set forth in Subparagraph 27.6.3. Each Party
shall file with the arbitration panel and serve on the other Party no later than
twenty (20) days before the scheduled date of commencement of the arbitration
hearings a list of witnesses other than expert witnesses (i.e., percipient witnesses)
which each Party intends to call at the arbitration hearings for its case-in-chief,
together with a brief subject matter description of the testimony of such witness;
absent a showing of good cause, neither Party shall have the right to call as a
percipient witness during its case-in-chief any witness not listed on that Party’s list
of percipient witnesses. Each Party shall file with the arbitration panel and serve
on the other Party no later than fifteen (15) days before the scheduled date of
commencement of the arbitration hearings a list of all exhibits such Party intends
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to offer at the arbitration hearings in its case-in-chief, which exhibit list shall be
accompanied with a copy of all such exhibits; absent a showing of good cause,
neither Party shall have the right to offer into evidence an exhibit during its
case-in-chief that has not been listed on the exhibit list and furnished to the other
Party on or before said 15-day period prior to the scheduled date of commencement
of the arbitration hearings.
27.6.5. Briefing. The Parties shall simultaneously
file with the arbitration panel a trial brief covering all of the issues raised by the
matters included within the arbitration five (5) days prior to the scheduled date of
commencement of the arbitration hearings. The trial brief shall not exceed forty
(40) typewritten, double-spaced pages in length. If, and only if requested by the
arbitration panel, each Party may submit a closing brief within seven (7) days after
the close of the arbitration hearings, the length of which shall be set by the
arbitration panel but which shall not exceed twenty-five (25) double-spaced pages in
any event. Briefing on any motions shall be as allowed by the arbitration panel.
27.6.6. Subpoenas And Protective Orders. At the
request of either Party, subpoenas for any discovery permitted by
Subparagraph 27.6.3, and subpoenas and subpoenas duces tecum to compel the
attendance of witnesses or the production of books, records, documents or other
evidence at the arbitration hearings, shall be issued by the neutral arbitrator (or
upon the agreement of the Parties, by any party arbitrator) as provided in
California Code of Civil Procedure section 1282.6 (and/or any other section or
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sections of the Code of Civil Procedure that are subsequently adopted to replace or
amend section 1282.6). Similarly, either Party may apply to the arbitration panel
for a protective order as reasonably necessary to protect information, documents
and/or testimony containing trade-sensitive information, commercially valuable
information, or other information of a proprietary nature that the Party desires to
maintain as confidential; the arbitration panel shall issue reasonable protective
orders upon a showing of good cause made by such Party by motion upon reasonable
notice.
27.6.7. Continuances And Time Extensions. The
arbitration panel may shorten or enlarge any time period specified in this
Paragraph 27.6 upon a showing of good cause by motion made upon reasonable
notice.
27.6.8. Conduct Of The Arbitration Hearings. All
arbitration hearings, including opening statements and closing arguments and the
presentation of evidence, shall be conducted over an essentially consecutive period
(excepting Saturdays, Sundays and Bank holidays, and as necessary to
accommodate unavoidable scheduling conflicts approved by the arbitration panel).
The order of proof and argument shall follow traditional civil trial rules, subject to
minor variations approved by the arbitration panel for the purpose of expediting the
presentation of evidence, or accommodating the schedule of witnesses. Formal rules
of evidence need not be applied, and the arbitration panel is free to accept as
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evidence any material or testimony it considers to be sufficiently reliable for
consideration.
27.6.9. Issuance Of The Arbitration Award. Within
twenty-one (21) days after the conclusion of the arbitration hearings, the arbitration
panel shall issue its decisions in the form of a written arbitration award. The
written arbitration award shall state the grounds for arriving at the decisions
reached by the arbitration panel, and shall be signed by each of the arbitrators
agreeing to the arbitration award. The arbitration award may direct specific
performance or any other equitable relief, and may award damages, including
pre-arbitration award interest computed at the rate specified in this Agreement. If
at any time prior to the issuance of the written arbitration award, the Parties
present the arbitration panel with a written settlement for some or all of the
matters before the arbitration panel, duly executed by the authorized
representatives of each Party, the arbitration panel shall adopt the settlement,
without change, as its award with respect to each settled matter. The arbitration
award shall be binding upon both Parties, subject to vacation only as expressly set
forth under the provisions of Part 3 of Title 9 of the California Code of Civil
Procedure (and/or any other section or sections of the California Code of Civil
Procedure that are subsequently adopted to replace or amend Part 3 of Title 9).
Similarly, the arbitration award may be confirmed and judgment entered in
accordance with the provisions of the Part 3 of Title 9 of the California Code of Civil
Procedure (and/or any other section or sections of the California Code of Civil
141
Procedure that are subsequently adopted to replace or amend Part 3 of Title 9).
Any judgment confirming the arbitration award may be enforced by any court of
competent jurisdiction in accordance with applicable law.
27.6.10. Other Procedures. All other matters relating
to the conduct, review and enforcement of any arbitration provided for in this
Section 27 that are not expressly addressed shall be governed by the provisions of
Part 3 of Title 9 (commencing at section 1280) of the California Code of Civil
Procedure, as the same exist at the time of the arbitration (including any other
sections that are adopted to amend or replace any of the sections of said Part 3 of
Title 9).
27.7 Costs Of Arbitration. Each Party shall be solely
responsible for all of the fees and costs its incurs for preparing its case and
presenting its evidence and arguments to the arbitration panel, including all fees
for its expert witnesses and all of its attorney’s fees. Each Party shall also pay the
fees and costs of its party arbitrator. The Parties shall equally split and share the
fees and costs of the neutral arbitrator. The arbitration hearings, but not the
arbitration pre-hearing conference or pre-hearing motions, shall be transcribed on a
daily basis by a certified shorthand reporter and the fees of such reporter shall be
split and shared equally by the Parties. Finally, the fees for renting a room or
rooms for the conduct of the arbitration hearings will be split and shared equally by
the Parties.
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28. ASSIGNMENT. This Agreement shall be binding upon, and
shall inure to the benefit of the successors and assigns of the Parties. However,
Operator shall not have the right to assign this Agreement without obtaining the
prior written consent of the Authority, which consent the Authority shall not
unreasonably withhold or delay. The Authority may withhold consent for any
successor to Operator that the Authority reasonably believes is not adequately
qualified to provide the Services, whether due to lack of ability or lack of financial
resources or otherwise, or if the Authority believes such a successor would not be
likely to perform the Services in an efficient and cost effective manner.
29. FURTHER COOPERATION. Each Party agrees to execute and
deliver all further instruments and documents, and take all further action that may
be reasonably necessary to complete performance of the Services and otherwise to
effectuate the purposes and intent of this Agreement.
30. NO THIRD PARTY BENEFICIARIES. This Agreement is for
the benefit of the Authority, SMUD, the Authority Participant and the Project
Lender, on the one hand, and Operator on the other hand. Nothing in this
Agreement, whether express or implied, is intended to confer any rights or remedies
under or by reason of this Agreement upon any person or entity other the
aforementioned entities and each of their respective permitted successors and
assigns. Nothing in this Agreement is intended to relieve or discharge any
obligation or liability owed to any of the Authority, SMUD, the Authority
Participant, the Project Lender, or to Operator by any other Person not a Party to
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this Agreement, nor shall any provision give any other Person not a Party to this
Agreement any right of subrogation or action against the Authority, SMUD, the
Authority Participant, the Project Lender or Operator.
31. MEANING OF CERTAIN WORDS. Unless otherwise stated,
any reference in this Agreement to a Section, Paragraph, Subparagraph, Part or
Appendix or similar term refers to the provisions of this Agreement.
Unless otherwise stated, a reference to a Section includes that Section
and all of its subsections, divisions and parts. For example, a reference to Section 5
includes each of Section 5, Paragraph 5.1, Paragraph 5.2, Paragraph 5.3,
Paragraph 5.4 and Paragraph 5.5.
The words “include,” “includes” and “including” when used in this
Agreement shall be deemed in each case to be followed by the words “without
limitation,” or “but is/are not limited to,” whichever is most grammatically correct in
context but in each case meaning that the phrase in question that follows any one of
those words is not to be construed in any respect as a phrase of limitation.
32. CONSTRUCTION OF THIS AGREEMENT. This Agreement
shall be construed and interpreted in accordance with the principles of construction
set forth in this Section 32.
32.1. Joint Efforts. The provisions of this Agreement are the
result of arm’s-length negotiations during the course of which the Authority and
Operator were each represented by their own counsel. Therefore, ambiguities or
uncertainties in the wording of this Agreement shall not be construed for or against
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the Authority or Operator on the basis that the language was drafted by any one of
them, but instead shall be construed in the manner that most accurately reflects
the mutual intent of the Parties as of the date they executed this Agreement.
32.2. Severability. The invalidity of one or more phrases,
clauses, sentences, Parts, Subparagraphs, Paragraphs or Sections contained in this
Agreement shall not affect the validity of the remaining portions of the Agreement,
so long as the material purposes of this Agreement can be determined and
effectuated.
32.3. Captions. The captions contained in this Agreement are
for convenience and reference only, and in no way define, describe, extend, or limit
the scope or intent of this Agreement, or the intent of any provision contained in
this Agreement.
33. GOVERNING LAW. The validity, interpretation and effect of
this Agreement shall be governed exclusively by the laws of the State of California,
without reference to any of its laws that would direct the application of the laws of a
different jurisdiction.
34. APPENDICES INCORPORATED AND SUPREMACY. The
Appendices attached to this Agreement are a part of this Agreement and are
incorporated into this Agreement by this reference. In the event of any conflicts or
apparent conflicts between the terms, provisions and conditions of this Agreement
and those of any of its Appendices, the terms, provisions and conditions of this
Agreement shall prevail.
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35. ENTIRE AGREEMENT, MODIFICATION AND WAIVER. This
Agreement constitutes the entire understanding and agreement between the
Authority and Operator with respect to the Services described in this Agreement,
and supersedes all negotiations, representations, warranties, commitments, offers,
contracts and writings prior to the date this Agreement is executed by the last of
the Parties to sign it, including RFP No. 150153.KN and Operator’s Proposal
submitted to that RFP dated _____. No waiver, supplement, modification, or
amendment of any provision of this Agreement shall be binding unless specifically
made in writing and duly executed by both the Authority and Operator.
36. COUNTERPART EXECUTION. This Agreement may be
executed in multiple counterparts, no one of which needs to be executed by all of the
Parties, and all of which, taken together, shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the Authority and Operator have caused
this Agreement to be signed by their duly authorized representatives on the date set
forth next to their respective signatures.
SACRAMENTO POWER AUTHORITY
Date: By:
Name:
Title:
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[OPERATOR]
Date: By:
Name:
Title:
and
Date: By:
Name:
Title: