the parties to this eldorado substation additional ... june 17, 1998 letter agreement and the...

Title Page

Southern California Edison Company FERC FPA Electric Tariff Tariff Title: Transmission Owner Tariff Tariff Record Title: First Revised Service Agreement No. 27

EL DORADO SUBSTATION

ADDITIONAL FACILITIES

AND INTERCONNECTION AGREEMENT

BETWEEN

El DORADO ENERGY, LLC

AND

SOUTHERN CALIFORNIA EDISON COMPANY

Contract Effective Date: 02/01/1999 Tariff Record Proposed Effective Date: 041/01/2016 906.27.32 Version Number: 0.0.0

Page No. 1

TOT003 Option Code: A

Page No. 2

ELDORADO SUBSTATION ADDITIONAL FACILITIES


TABLE OF CONTENTS

1. Parties: ........................................................................................................................................... 3 2. Recitals: ......................................................................................................................................... 3 3. Agreement: .................................................................................................................................... 6 4. Term: ............................................................................................................................................. 6 5. Definitions: ................................................................................................................................... 8 6. Additional Facilities Arrangements: ........................................................................................... 14 7. Arrangements With Other Parties: .............................................................................................. 15 8. Interconnected Operation: ........................................................................................................... 16 9. Charges: ...................................................................................................................................... 16 10. Modifications Or Replacement Of Additional Facilities: ........................................................... 18 11. Billing And Payment: ................................................................................................................. 19 12. Audits: ......................................................................................................................................... 24 13. Authorized Representatives: ....................................................................................................... 24 14. Uncontrollable Force: ................................................................................................................. 25 15. Regulatory Authority: ................................................................................................................. 25 16. No Dedication Of Facilities: ....................................................................................................... 26 17. No Third Party Rights: ................................................................................................................ 26 18. Indemnification: .......................................................................................................................... 26 19. Assignments: ............................................................................................................................... 27 20. Relationship Of Parties: .............................................................................................................. 28 21. Waivers: ...................................................................................................................................... 28 22. Governing Law: .......................................................................................................................... 28 23. Notices: ....................................................................................................................................... 28 24. Severability: ................................................................................................................................ 29 25. Entire Agreement: ....................................................................................................................... 30 26. Ambiguities:................................................................................................................................ 30 27. Signature Clause: ........................................................................................................................ 31 Exhibit A ............................................................................................................................................ 32 Exhibit B ............................................................................................................................................ 34 Exhibit C ............................................................................................................................................ 36 Exhibit D ............................................................................................ Error! Bookmark not defined. Exhibit E ............................................................................................. Error! Bookmark not defined. Exhibit F ............................................................................................................................................. 39 Exhibit G ............................................................................................................................................ 40

Page No. 3



1. Parties:

The Parties to this Eldorado Substation Additional Facilities and Interconnection Agreement are

Southern California Edison Company (SCE or Participating TO), a California corporation, and El

Dorado Energy, LLC (EDE), a Delaware limited liability company, hereinafter sometimes referred

to individually as "Party" and collectively as "Parties."

2. Recitals:

This Agreement is made with reference to the following facts, among others:

2.1 SCE is a California public utility engaged in the business of generating and transmitting

electric energy in the States of Arizona, California, Nevada, and New Mexico. SCE is

further engaged in the business of distributing such energy in the State of California.

2.2 EDE is a Delaware limited liability company certified by the FERC as an exempt wholesale

generator.

2.3 EDE plans to develop, design, construct, and operate an electric power generation facility in

Boulder City in southern Clark County, Nevada (the Plant). The Plant will be a 492

megawatt facility generating electricity for sale to EDE customers. EDE also plans to

develop, design, construct, and operate a 230kV transmission substation (Merchant

Substation) and a transmission line between Merchant Substation and Eldorado Substation.

2.4 SCE jointly owns Eldorado Substation with the Department of Water and Power of the City

of Los Angeles, Nevada Power Company and the Salt River Project Agricultural

Improvement and Power District (together, the Eldorado Substation Participants).

Page No. 4

2.5 On November 10, 1997, EDE applied to SCE to interconnect at Eldorado Substation

pursuant to SCE's Transmission Owner Tariff. At EDE's request, SCE performed a System

Impact Study. The Study determined that the interconnection of the Merchant 230kV line at

Eldorado Substation would cause the short circuit duty of the ten existing 230kV circuit

breakers at Eldorado Substation to be exceeded. Accordingly, the existing circuit breakers

must be replaced with circuit breakers having a higher short circuit duty rating.

2.6 The interconnection at Eldorado Substation will also require the construction of a new

switchrack position, including the installation of circuit breakers, disconnects, conductor and

other equipment as shown on Exhibits D and E.

2.7 EDE has requested that SCE develop, design, construct and operate facilities required for the

interconnection as described below. SCE desires to develop, design, construct and operate

such facilities, subject to the approval of the Eldorado Substation Participants and the

California Independent System Operator (CAISO). SCE is negotiating with the Eldorado

Substation Participants on the terms and conditions for SCE to develop, design, construct

and operate the Additional Facilities. If agreement is reached, such terms and conditions are

intended to be reflected in three contracts, one titled "Agreement for Additional Southern

California Edison Company Connection to Eldorado Substation 230kV Switchyard," the

second titled "Amendment No. 2 to the Eldorado System Operating Agreement," and the

third titled "Amendment No.1 to the Eldorado System Conveyance and Co-Tenancy

Agreement."

2.8 SCE and EDE executed a letter agreement dated June 17, 1998 and signed by EDE on July 7,

1998, which provides for SCE to engineer, design, and prepare material specifications

Page No. 5

necessary for the interconnection, and for the replacement of the ten circuit breakers. Under

the terms of the letter agreement, EDE agreed to pay all of SCE's charges and expenses

incurred for performing such work, estimated to be $400,000. EDE, using SCE specifications,

commenced procurement of equipment for the Additional Facilities.

2.9 SCE and EDE executed a letter agreement dated November 13, 1998 which provides for

SCE to construct the Additional Facilities. Under the terms of the agreement, EDE agreed to

pay SCE's charges and expenses incurred for performing such work, estimated to be

$3,950,800.

2.10 As a result of recent California legislation, SCE has relinquished operational control of its

transmission grid to a newly created institution, the CAISO. FERC has approved the

operations of the CAISO and related tariffs in Dockets Nos. EC96-19-000 and ER96-1663-

000.

2.11 The CAISO Operating Agreement and Tariff ("CAISO Tariff") provides in Section 3.2.4 that

the CAISO will perform an operational review of all facilities that are to be connected to, or

made part of, the ISO Controlled Grid to ensure that the facilities being proposed provide for

acceptable operating flexibility and meet all its requirements for proper integration with the

ISO Controlled Grid. If the ISO finds that the Additional Facilities do not provide for

acceptable operating flexibility or do not adequately integrate with the ISO Controlled Grid,

SCE would need to reassess the Additional Facilities required to be constructed for the

interconnection.

Page No. 6

2.12 The 230kV Switchrack Additional Facilities and the Transmission Line Additional Facilities

will be in the Nevada Power Company control area. The control area tie between the CAISO's

and Nevada Power Company's control areas will be at the points shown in Exhibit E.

3. Agreement:

The Parties agree as follows:

4. Term:

4.1 Except for Sections 7.1, 7.2, 7.3 and 8.1, which shall become effective as of the date of

execution hereof, this Agreement shall become effective on the date of acceptance of this

Agreement for filing by FERC without the addition of any material condition that is

unacceptable to either Party in the exercise of its sole discretion. In the event that FERC

orders a hearing to determine if this Agreement is just and reasonable, this Agreement shall

become effective on the date when an order acceptable to both Parties becomes final and

nonappealable. In the event FERC (i) fails to accept this Agreement without suspension or

(ii) finds that this Agreement is not just and reasonable or imposes conditions that are not

acceptable to either Party, the Parties will use commercially reasonable efforts to agree upon

amendments or modifications of this Agreement that would eliminate any such conditions or

result in a just and reasonable finding.

4.2 This Agreement shall remain in effect for a period of forty-five (45) years from the

Additional Facilities In-Service Date.

4.3 EDE may terminate this Agreement upon one hundred eighty (180) days' written notice to

SCE. Within 90 days following termination, EDE shall pay SCE the installed cost of the

Additional Facilities less depreciation, plus actual removal costs, less salvage. In addition,

Page No. 7

EDE shall pay SCE an amount equal to the difference between (i) the present value (as of the

date of termination under this paragraph) of the sum of the Additional Facilities Charge

payments which would have been made or come due as of the date of termination, if such

Charge had been calculated pursuant to a traditional depreciated rate base methodology, and

(ii) the present value (as of the date of termination under this paragraph) of the sum of the

Additional Facilities Charge payments actually made, or which had become due, under this

Agreement as of the date of termination. SCE shall file all charges under this Section 4.2

with the FERC prior to termination. Following termination, SCE shall remove the

Additional Facilities from service to EDE. Any payment obligations that accrued prior to the

termination of this Agreement shall survive such termination.

4.4 If EDE has given notice of termination and a filing with FERC is required to terminate this

Agreement pursuant to Section 4.2, EDE shall support such filing if requested by SCE.

4.5 If the Eldorado System Conveyance and Co-Tenancy Agreement terminates prior to the

termination of this Agreement, SCE and EDE shall negotiate in good faith to develop an

amendment to this Agreement which provides similar benefits to the Parties under

substantially the same terms and conditions as this Agreement.

4.6 Nothing in this Agreement shall require SCE to take, or to fail to take, any action in

violation of any applicable law or regulation or the CAISO Tariff, or to take any action as to

which SCE does not have necessary rights pursuant to the agreements specified in Section

2.7 hereof, including any amendments thereof. In the event that this Agreement would

require SCE to take such actions or fail to take such action but for this Section 4.6, then the

Parties shall negotiate in good faith to develop any necessary amendments to this Agreement

Page No. 8

so as, to the maximum extent practicable, to eliminate such conflict and provide similar

benefits to the Parties under substantially the same terms and conditions as stated in

Agreement.

5. Definitions:

The following terms, when used herein with initial capitalization, whether in the singular or the

plural, shall have the meanings specified:

5.1 230 kV Switchrack Additional Facilities: Facilities constructed and installed in the 230kV

Switchyard to connect the Transmission Line Additional Facilities to Eldorado

Substation pursuant to the diagrams in Exhibits D and E and as specified in Exhibit A and

any modifications thereto.

5.2 230 kV Switchrack Additional Facilities Cost: All reasonable costs incurred by SCE

associated with the design, engineering, procurement, construction, and installation, of the

230kV Switchrack Additional Facilities, an estimate of which is provided in Exhibit A. Such

costs shall include, without limitation, all applicable costs incurred by SCE in accordance with

the June 17, 1998 letter agreement and the November 13, 1998 letter agreement.

5.3 230kV Switchyard - The 230 kV switchyard of the Eldorado Substation, a basic breaker-

and-a-half scheme, comprising: (i) the 230 kV busses and the structures therefor; (ii) the

termination facilities for two 500/230 kV transformer banks, the No. 1 and No. 2

Eldorado-Mead 230 kV transmission lines, and the No. I and No. 2 Eldorado-Pisgah 230 kV

transmission lines including, but not limited to, power circuit breakers, disconnect switches,

and the structures therefor; (iii) relays; and (iv) the 230kV Switchrack Additional Facilities.

Page No. 9

The 230kV Switchyard shall not include: (i) any General Facilities; or (ii) any 500/230 kV

transformer banks located at the Eldorado Substation.

5.4 230kV Switchyard Cost Responsibility Ratio: The ratio of EDE's cost responsibility for

maintenance of the 230kV Switchyard as specified in Exhibit F.

5.5 230kV Switchyard Maintenance Charge: The monthly charge to EDE for a portion of the

cost to maintain the 230kV Switchyard as determined by multiplying the 230kV Switchyard

Cost Responsibility Ratio times the 230kV Switchyard Maintenance Cost.

5.6 230kV Switchyard Maintenance Cost: The cost of the 230kV Switchyard maintenance

portion of the expense of operating work as specified in the Eldorado System Operating

Agreement.

5.7 Accounting Practice: Generally accepted accounting principles and practices, in accordance

with FERC Accounts, applicable to electric utility operations.

5.8 Additional Facilities: The 230kV Switchrack Additional Facilities, the Breaker Replacement

Additional Facilities and the Transmission Line Additional Facilities.

5.9 Additional Facilities Charge: The monthly charge to EDE to recover the revenue

requirements for Additional Facilities, calculated as the sum of (i) the applicable SCE-

Financed Monthly Rate multiplied by the Breaker Replacement Additional Facilities Cost,

(ii) the applicable SCE-Financed Monthly Rate for ISO-Controlled Facilities multiplied by

the 230kV Switchrack Additional Facilities Cost, and (iii) the applicable SCE-Financed

Monthly Rate for ISO-Controlled Facilities multiplied by the Transmission Line Additional

Facilities Cost.

Page No. 10

5.10 Additional Facilities In-Service Date: The date upon which the construction of the

Additional Facilities is complete, successfully tested and ready for service, as referenced in

Section 6. 1.

5.11 Agreement: This Eldorado Substation Additional Facilities and Interconnection Agreement.

5.12 Authorized Representative: The representative of a Party designated in accordance with

Section 13.

5.13 Breaker Replacement Additional Facilities: Facilities required to replace ten existing 230 kV

circuit breakers at Eldorado Substation pursuant to the diagram in Exhibit E and as specified

in Exhibit C and any modifications.

5.14 Breaker Replacement Additional Facilities Cost: All reasonable costs incurred by SCE,

except the One-Time Cost, associated with the design, engineering, procurement,

construction, installation, of the Breaker Replacement Additional Facilities, an estimate of

which is provided in Exhibit C. Such costs shall include, without limitation, all applicable

costs incurred by SCE in accordance with the June 17, 1998 letter agreement and the

November 13, 1998 letter agreement.

5.15 CAISO: The California Independent System Operator.

5.16 Capital Additions: Any Units of Property which are added after the In-Service Date to the

230kV Switchyard, General Facilities or Transmission Line Additional Facilities, the

enlargement or betterment after the In-Service Date of any Units of Property constituting a

part of the 230kV Switchyard, General Facilities, or the Transmission Line Additional

Facilities and the replacement after the In-Service Date of any Units of Property constituting

Page No. 11

a part of the 230kV Switchyard, General Facilities or the Transmission Line Additional

Facilities, irrespective of whether such replacement constitutes an enlargement or betterment

of that which it replaces, which additions, betterments, enlargements, and replacements in

accordance with Accounting Practice would be capitalized and are neither included in

Operating Cost nor the SCE-Financed Monthly Rate for ISO-Controlled Facilities.

5.17 Eldorado Substation: - An electrical substation located in Clark County, State of Nevada,

consisting of the General Facilities, the 230kV Switchyard, a 500kV switchyard, 500/230 kV

transformer banks, and all appurtenant facilities thereto.

5.18 Eldorado System Co-Owners: Department of Water and Power of the City of Los Angeles,

Nevada Power Company, Salt River Project Agricultural Improvement and Power District

and Southern California Edison Company.

5.19 Eldorado System Operating Agreement: The Eldorado System Operating Agreement

Between Department of Water and Power of the City of Los Angeles, Nevada Power

Company, Salt River Project Agricultural Improvement and Power District and Southern

California Edison Company dated September 1, 1972.

5.20 FERC: Federal Energy Regulatory Commission, or its regulatory successor.

5.21 FERC Accounts: The FERC's "Uniform System of Accounts Prescribed for Public Utilities

and Licensees," subject to the provisions of the Federal Power Act in effect as of the date of

this Agreement, and as such system of accounts may be in effect from time to time.

Reference in this Agreement to any specific FERC Account number shall mean the FERC

Account number in effect as of the effective date of this Agreement or any corresponding

successor FERC Account.

Page No. 12

5.22 General Facilities: Structures, improvements and facilities of the Eldorado Substation which

include: dikes, roadways, control house, communications building, ancillary buildings,

trenches, conduits, control and power cables, control equipment, station communication

equipment, batteries, auxiliary equipment, station grounding grid, fencing, lighting and yard

improvements and any other facilities that provide support for the Eldorado Substation and

do not include the 230kV Switchyard, 500kV switchyard, 500/230 kV transformer banks,

and all appurtenant facilities thereto. General Facilities shall not include: (i) the real property

on which the Eldorado Substation is located; (ii) any termination facilities associated with

any line or transformer termination at the Eldorado Substation; (iii) any termination facilities

associated with a Third Party interconnection; or (iv) any 500/230 kV transformer banks

located at the Eldorado Substation.

5.23 General Facilities Cost Responsibility Ratio: The ratio of EDE's cost responsibility for

maintenance of the General Facilities as specified in Exhibit G.

5.24 General Facilities Use Charge: A one time payment of up to $479,123.18 by EDE to SCE as

reimbursement for l/13 of the past capital cost of up to $6,228,601.40 incurred for General

Facilities.

5.25 General Facilities Maintenance Charge: The monthly charge to EDE for a portion of the cost

to maintain General Facilities as determined by multiplying the General Facilities Cost

Responsibility Ratio times the General Facilities Maintenance Cost.

5.26 General Facilities Maintenance Cost: The cost of the General Facilities maintenance portion

of the expense of operating work as specified in the Eldorado System Operating Agreement.

5.27 One-Time Costs: Costs to remove the ten existing 230 kV circuit breakers, modify the

Page No. 13

circuit breaker foundations and install new circuit breaker leads. 5.28 Operating Cost: The cost of the operating portion of the expense of operating work as

specified in the Eldorado System Operating Agreement.

5.29 Operating Cost Charge: The monthly charge to EDE for a portion of the cost to operate

Eldorado Substation as determined by multiplying the Operating Cost Responsibility Ratio

times the Operating Cost.

5.30 Operating Cost Responsibility Ratio: The ratio of EDE's cost responsibility for Operating

Cost as specified in Exhibit G.

5.31 SCE-Financed Monthly-Rate for ISO-Controlled Facilities: For the Transmission Line

Additional Facilities, the SCE financed monthly rate most recently adopted accepted by the

California Public Utilities CommissionFERC for Participating TO-financed facilities under

the operational control of the CAISO for application to SCE's retail electric customers

which does not compensate SCE for replacement of added facilities. The currently

effective SCE-Financed Monthly Rate for Non-ISO-Controlled Facilities is as provided in

Appendix X of the Transmission Owner Tariff. Currently, this rate is 1.35%. . For the

Breaker Replacement Additional Facilities and the 230kV Switchrack Additional Facilities,

the foregoing rate less the operation and maintenance component of such rate. Currently,

this rate is 1.19%.

5.32 Transmission Line Additional Facilities: The transmission line, poles and related equipment

constructed and installed to connect the 230kV Switchrack Additional Facilities to EDE's

transmission line pursuant to the diagrams in Exhibits D and E and as specified in Exhibit B

and any modifications thereto.

Page No. 14

5.33 Transmission Line Additional Facilities Cost: All reasonable costs incurred by SCE


Transmission Line Additional Facilities, an estimate of which is provided in Exhibit B. Such

costs shall include, without limitation, all applicable costs incurred by SCE in accordance

with the June 17, 1998 letter agreement and the November 13, 1998 letter agreement.

5.34 Transmission Owner Tariff: The Participating TO’s Tariff designated as FERC Electric

Tariff, Volume No. 6, as such tariff may be amended or superseded. 5.354 Units of Property: - As described in FERC's "List of Units of Property for Use in Connection

with Uniform System of Accounts Prescribed for Public Utilities and Licensees" in effect as

of the date of this Agreement, and as such list may be amended from time to time.

6. Additional Facilities Arrangements:

6.1 SCE shall design, engineer, procure, construct, install, own, operate, and maintain the

Additional Facilities. SCE shall use commercially reasonable efforts to install the 230kV

Switchrack Additional Facilities and the Transmission Line Additional Facilities on or before

February 1, 1999. SCE shall use commercially reasonable efforts to install the Breaker

Replacement Additional Facilities on or before June 1, 1999. The date upon which all such

facilities have been completed, successfully tested and are ready for service shall be the


6.2 The June 17, 1998 letter agreement and the November 13, 1998 letter agreement shall

terminate upon the effective date of this Agreement pursuant to Section 4. 1. All of SCE's

charges and expenses incurred for performing the work specified in the letter agreements shall

be included in the 230kV Switchrack Additional Facilities Cost, Breaker Replacement

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Additional Facilities Cost or Transmission Line Additional Facilities Cost, as provided in

Sections 5.2, 5.14 and 5.33, respectively.

7. Arrangements With Other Parties:

7.1 No later than fifteen (15) days following execution of this Agreement, SCE shall request an

operational review for the Additional Facilities by the CAISO. EDE will provide such support

for the operational review as may be requested by SCE and will reimburse SCE for any costs

incurred by SCE in connection with the operational review of the Additional Facilities. If, as a

result of such review, the CAISO does not approve the Additional Facilities, SCE shall modify

the Additional Facilities to the extent required to receive approval by the CAISO; provided

however that any such modification must be agreed to by the Authorized Representatives in

writing, and by the Eldorado System Co-Owners. Any such revision shall not require an

amendment to this Agreement.

7.2 EDE shall be solely responsible for making arrangements or causing arrangements to be made

to establish the connection between the CAISO and Nevada Power Company control areas as

shown in Exhibit E.

7.3 If EDE desires to obtain transmission service from the CAISO, or to schedule delivery of

energy to or from the CAISO grid, EDE shall have the responsibility to make the necessary

arrangements with the CAISO.

7.4 SCE shall use commercially reasonable efforts to complete negotiation of the contracts with

the El Dorado Substation Participants referenced in Section 2.7 on terms consistent

Page No. 16

with the terms of this Agreement and shall use commercially reasonable efforts to obtain

execution, delivery and FERC acceptance of such contracts prior to the Additional Facilities

In-Service Date.

7.5 SCE shall use commercially reasonable efforts in negotiating any amendments to the contracts

referenced in section 2.7 to assure that such amendments do not adversely affect SCE's ability

to perform its obligations hereunder.

8. Interconnected Operation:

8.1 SCE shall provide reasonable assistance to EDE in order for EDE to perform studies or

others to perform studies to determine the capacity of the Eldorado-Merchant transmission line.

8.2 EDE shall be entitled to use the total capacity of the 230kV Switchrack Additional Facilities

and the Transmission Line Additional Facilities.

8.3 SCE shall operate the Additional Facilities in accordance with the CAISO Tariff, Western

System Coordinating Council (WSCC) reliability criteria and the Eldorado System

Operating Agreement.

9. Charges:

9.1 EDE shall pay to SCE in accordance with Section 11 the following charges: (1) Additional

Facilities Charges; (2) One-Time Costs; (3) costs of operational review; (4) one-time costs

pursuant to Section 10. 1; (5) reimbursable FERC fees; (6) Operating Cost Charge; (7) 230kV

Switchyard Maintenance Charge; (8) General Facilities Maintenance Charge; (9) General

Facilities Use Charge; and (10) any termination charges pursuant to Section 4.3.

9.2 SCE's actual recorded book cost for the Breaker Replacement Additional Facilities Cost,

230kV Switchrack Additional Facilities Cost, Transmission Line Additional Facilities Cost

Page No. 17

and One-Time Costs shall be compiled in accordance with FERC Accounts, as supplemented

by SCE's established accounting practice where no FERC provision is prescribed.

9.3 The 230kV Switchyard Cost Responsibility Ratio shall be determined in accordance with the

methodology shown in Exhibit F. For each additional termination to the 230kV Switchrack,

SCE shall promptly calculate an amended 230kV Switchyard Cost Responsibility Ratio and

such amended ratio shall be effective upon the date of firm operation of such additional

termination.

9.4 The General Facilities Cost Responsibility Ratio shall be determined in accordance with the

methodology shown in Exhibit G. For each additional termination to the 230kV Switchrack or

500kV switchrack, SCE shall promptly calculate an amended General Facilities Cost

Responsibility Ratio and such amended ratio shall be effective upon the date of firm operation

of such additional termination.

9.5 The Operating Cost Responsibility Ratio shall be determined in accordance with the

methodology shown in Exhibit G. For each additional termination to the 230kV Switchrack

or 500kV switchrack, SCE shall promptly calculate an amended Operating Cost Responsibility

Ratio and such amended ratio shall be effective upon the date of firm operation of such

additional termination.

9.6 For each additional termination to the 230kV Switchrack or 500kV switchrack, EDE shall

have the right to receive a portion of any general facility use charge paid to the Eldorado

Substation Participants by the entity for which the additional termination is installed. EDE's

share of any general facility use charge shall be equal to the General Facilities Cost

Responsibility Ratio multiplied by the general facility use charge.

Page No. 18

9.7 EDE shall be responsible for a share of the cost of Capital Additions as follows:

9.7.1 EDE shall be responsible for all costs for Capital Additions to the Transmission Line

Additional Facilities;

9.7.2 EDE shall be responsible for Capital Additions to General Facilities in the amount of

the cost of such Capital Additions multiplied by the General Facilities Cost

Responsibility Ratio;

9.7.3 EDE shall be responsible for Capital Additions to the 230kV Switchyard in the

amount of the cost of such Additions multiplied by the 230kV Switchyard Cost

Responsibility Ratio.

10. Modifications Or Replacement Of Additional Facilities:

10.1 Whenever 230kV Switchrack Additional Facilities and/or Transmission Line Additional

Facilities are modified or replaced due to damage, equipment failure or betterment, the work

will be completed at SCE's expense. Except as otherwise provided in Section 10.2, if such

modification or replacement results in a change in the 230kV Switchrack Additional

Facilities and/or Transmission Line Additional Facilities investment, the 230kV Switchrack

Additional Facilities and/or Transmission Line Additional Facilities Cost shall be adjusted on

the basis of the revised net investment effective as of the operation date of such modification

or replacement. EDE shall pay SCE for any additional one-time costs (costs not includible in

the 230kV Switchrack Additional Facilities and/or the Transmission Line Additional Facilities

Cost) associated with such modification or replacement.

10.2 In the event that any modification or replacement of the 230kV Switchrack Additional

Facilities and/or the Transmission Line Additional Facilities is performed in order to

Page No. 19

accommodate SCE's needs and not to maintain or to improve service to EDE, or because of

damage caused by gross negligence or willful misconduct of SCE, no increase will be made to


Charge and no costs shall be charged to EDE for such modification or replacement.

10.3 Whenever Breaker Replacement Additional Facilities are modified or replaced due to

damage, equipment failure or betterment, the work will be completed at SCE's expense. The

Breaker Replacement Additional Facilities Cost shall not be adjusted on the basis of the

revised net investment and no costs shall be charged to EDE for such modification or

replacement.

10.4 In the event that any modification or replacement of the Breaker Replacement Additional

Facilities is performed in order to accommodate SCE's needs and not to maintain or to

improve service to EDE, or because of damage caused by gross negligence or willful

misconduct of SCE, no increase will be made to the Breaker Replacement Additional

Facilities Charge and no costs shall be charged to EDE for such modification or

replacement.

11. Billing And Payment:

11.1 On the later of. (i) January 2, 1999 or (ii) the date of acceptance by FERC of this Agreement

without suspension, EDE shall submit an invoice to SCE for its estimated cost of equipment

purchased and required for the interconnection and given to SCE for construction of the

interconnection, pursuant to the June 17, 1998 letter agreement and the November 13, 1998

letter agreement. EDE shall determine its actual recorded book cost for such equipment and

provide SCE an itemized accounting of all such equipment. If the actual cost is less than the

Page No. 20

amount previously paid by SCE, EDE shall credit SCE for amounts previously paid and

reimburse SCE the difference between the amount previously paid by SCE and the actual

costs, without interest within 20 calendar days of such determination of actual costs.

Conversely, if the actual cost is greater than the amount previously paid by SCE, EDE shall

present an invoice to SCE for the additional amount owed to EDE and SCE shall pay the

difference between the amount previously paid by SCE and the actual recorded book cost,

without interest, within 20 calendar days of receipt of such invoice.

11.2 Within 20 calendar days after the date of acceptance by FERC of this Agreement without

suspension, SCE shall submit an invoice to EDE for the estimated One-Time Costs and

General Facilities Use Charge. Within 20 calendar days after receipt of the invoice submitted

under this Section 11.2, EDE shall pay SCE the estimated One-Time Costs and General

Facility Use Charge. The payment for the One-Time costs shall be subject to later

adjustment pursuant to Section 11.5.

11.3 Commencing on the Additional Facilities In Service Date, SCE shall render bills to EDE, on

or before the first day of each month, for the estimated Additional Facilities Charge,

Operating Cost Charge, 230kV Switchyard Maintenance Charge, and General Facilities

Maintenance Charge. EDE shall pay such bills by the 20th day of said month.

11.3.1 The Additional Facilities Charge monthly invoices shall be calculated by multiplying

the applicable SCE-Financed Monthly Rate for ISO-Controlled Facilities by the

estimated 230kV Switchrack Additional Facilities Cost, the Transmission Line

Additional Facilities Cost and Breaker Replacement Additional Facilities Cost.

Payments shall be subject to later adjustment pursuant to Section 11. 5.

Page No. 21

11.3.2 The Operating Cost Charge, 230kV Switchyard Maintenance Charge, and General

Facilities Maintenance Charge shall be billed on an estimated basis. Adjustments for

actual costs incurred for each month shall be reflected in the bill for the month which

follows the date of determination of actual costs.

11.4 Commencing on the effective date of this agreement, SCE shall render bills to EDE for any

reimbursable FERC fees in accordance with Section 15.3, operational review costs in

accordance with Section 7.1 and one-time costs associated with modifications or replacements

in accordance with Section 10. 1. Such bills shall be for any fees incurred preceding the dates

of such bills. EDE shall pay such bills within 20 calendar days after receipt thereof.

11.5 After the Additional Facilities In Service Date, SCE shall determine its actual recorded book

cost for the 230kV Switchrack Additional Facilities, Breaker Replacement Additional

Facilities and Transmission Line Additional Facilities Costs and actual recorded book

One-Time Costs, and provide EDE an itemized accounting of all such Additional Facilities

Costs and One-Time Costs.

11.5.1 If the total amount previously paid for the estimated Additional Facilities Charges in

accordance with Section 11.3 is less than the total amount due for the Additional

Facilities Charges as determined from actual recorded book cost, SCE shall present

an invoice to EDE for the additional amount owed to SCE and EDE shall pay the

difference between the amount previously paid by EDE and the actual recorded book

cost, without interest, within 20 calendar days of receipt of such invoice. Conversely,

if the total amount previously paid for the estimated Additional Facilities Charges in

accordance with Section 11.3 is greater than the total amount due for the Additional

Page No. 22

Facilities Charge as determined from actual recorded book cost, SCE shall credit

EDE for amounts previously paid and reimburse EDE the difference between the

amount previously paid by EDE and the actual recorded book costs, without interest,

within 20 calendar days of such determination of actual costs.

11.5.2 If the amount paid for the estimated One-Time Costs in accordance with Section 11.

2 is less than the amount due for the One-Time Costs as determined from actual

recorded book cost, SCE shall present an invoice to EDE for the additional amount

owed to SCE and EDE shall pay the difference between the amount previously paid

by EDE and the actual recorded book cost, without interest, within 20 calendar days

of receipt of such invoice. Conversely, if the amount paid for the estimated

One-Time Costs in accordance with Section 11.2 is greater than the amount due for

the One-Time Costs as determined from actual recorded book cost, SCE shall credit




11.6 Payments which are not made in full by EDE by the due dates specified in Sections 11.2,

11.3, or 11.4 shall thereafter accrue interest at 10 percent per annum, or the maximum

amount which is otherwise legally authorized, whichever is less, of the unpaid balance

prorated by days until payment is received by SCE.

11.7 In the event EDE desires to dispute all or any part of any bill submitted by SCE, EDE shall

nevertheless pay the full amount of the bill when due and give written notification to SCE's

Authorized Representative within one hundred eighty (180) days from the date of the billing

Page No. 23

stating the grounds for the dispute and the amount in dispute. EDE shall not be entitled to an

adjustment on any bill which is not brought to the attention of SCE within the time and in the

manner herein specified. For any payments to EDE resulting from dispute resolutions, interest

at 10 percent per annum, or the maximum amount which is otherwise legally authorized,

whichever is less, shall be added to the amount of any overpayment and the entire amount

refunded to EDE.

11.8 All payments to be made by EDE to SCE shall be sent to:

Southern California Edison Company Accounts Receivable P.O. Box 800 Rosemead, California 91770

SCE may, at any time, by written notice to EDE pursuant to Section 24, change the address to

which payments shall be sent.

11.9 All payments to be made by SCE to EDE shall be sent to:

El Dorado Energy, LLC 1111 Louisiana Houston, Texas 77002

EDE may, at any time, by written notice to SCE pursuant to Section 24, change the address

to which payments shall be sent.

11.10 All billings to be presented by SCE to EDE shall be sent to:



to which billings shall be sent.

Page No. 24

12. Audits:

For two years following the Additional Facilities In-Service Date, or with respect to any

modifications or replacements to the Additional Facilities, for two years following the in-service

date of such modifications or replacements, SCE shall maintain records and accounts of all costs

incurred in sufficient detail to allow verification of all costs incurred, including, but not limited to,

labor and associated labor burden costs, material and supplies, outside services, and administrative

and general expenses. EDE shall have the right, upon reasonable notice, at a reasonable time and

place, and at its own expense, to audit SCE's records as necessary and as appropriate in order to

verify costs incurred by SCE.

13. Authorized Representatives:

13.1 In order to provide for the exchange of information and preparation of any necessary

operating procedures or revisions to operating procedures regarding the activities required

under this Agreement, each Party shall, within 30 calendar days following the effective date

of this Agreement, appoint an Authorized Representative and shall designate such

Authorized Representative by written notice to the other Party.

13.2 The Authorized Representatives are authorized to act on behalf of the Party they represent in

the implementation of this Agreement. Any action taken or determination made by the

Authorized Representatives in the implementation of this Agreement shall be in writing.

13.3 The Authorized Representatives shall have no authority or power to modify, add, waive or

eliminate any terms or conditions of this Agreement.

13.4 Either Party may at any time change the designation of its Authorized Representative by

written notice to the other Party pursuant to Section 23.

Page No. 25

14. Uncontrollable Force:

Neither Party shall be considered to be in default in the performance of any of its obligations under

this Agreement (other than obligations to make payments pursuant to this Agreement) when failure

of performance shall be due to an uncontrollable force. The term "uncontrollable force" means any

cause beyond the control of the Party failing to perform including, but not restricted to, failure of

facilities, flood, earthquake, storm, lightning, fire, epidemic, war, riot, civil disturbance or

disobedience, labor dispute, labor or material shortage, sabotage, restraint by court order or public

authority, and action or non-action by, or inability to obtain the necessary authorizations or

approvals from, any governmental agency or authority, which by exercise of due diligence such

Party could not reasonably have been expected to avoid and which by exercise of due diligence it

has not overcome. Either Party rendered unable to fulfill any of its obligations under this Agreement

by reason of an uncontrollable force shall give prompt written notice of such fact to the other Party

and an estimate of the duration of the Uncontrollable Force and shall exercise due diligence to

remove such liability. Nothing contained herein shall be construed to require a Party to settle any

strike or labor dispute in which it may be involved.

15. Regulatory Authority:

15.1 Unless otherwise agreed by the Authorized Representatives, no later than thirty (30) days

following the execution of this Agreement, SCE shall tender this Agreement for filing with

FERC with a request that it be made effective upon acceptance without suspension, and EDE

shall support SCE in obtaining all necessary authorizations and approvals for this

Agreement.

Page No. 26

15.2 Nothing contained herein shall be construed as affecting in any way: (i) the right of SCE to

unilaterally make application to the FERC for a change in rates, charges, classification, or

service, or any rule, regulation, or contract relating thereto, under Section 205 of the Federal

Power Act and pursuant to the Rules and Regulations promulgated by FERC thereunder; (ii)

the right of EDE to oppose such changes under Section 205 of the Federal Power Act; (iii)

the right of EDE to file a complaint requesting a change in rates or rate methodology or

design relating to services provided hereunder, under Section 206 of the Federal Power Act

and pursuant to the rules and regulations promulgated by the FERC thereunder; or (iv) the

right of SCE to oppose such complaint by EDE under Section 206 of the Federal Power Act.

Any change shall become effective pursuant to Section 205 of the Federal Power Act.

15.3 EDE shall reimburse SCE for all fees and charges imposed on SCE by the FERC attributable

to the service provided under this Agreement, or any amendments thereto.

16. No Dedication Of Facilities:

Any undertaking by one Party to the other Party under this Agreement shall not constitute the

dedication of the electrical system or any portion thereof of the undertaking Party to the public or to

the other Party, and it is understood and agreed that any such undertaking by a Party shall cease

upon the termination of its obligations hereunder.

17. No Third Party Rights:

Unless otherwise specifically provided in this Agreement, the Parties do not intend to create rights

in or grant remedies to any third party as a beneficiary of this Agreement or of any duty, covenant,

obligation, or undertaking established hereunder.

18. Indemnification:

Page No. 27

Each Party (for purposes of this paragraph, the "First Party") shall at all times indemnify, defend,

and save the other Party (for purposes of this paragraph the "Second Party") harmless from, any and

all damages, losses, claims, (including claims and actions relating to injury to or death of any person

or damage to property), demands, suits, recoveries, costs and expenses, court costs, attorney fees,

and all other obligations by or to third parties, arising out of or resulting from the Second Party's

performance of its obligations under this Agreement on behalf of the First Party, except in cases of

gross negligence or intentional wrongdoing by the Second Party.

19. Assignments:

19.1 Any assignment by a Party of its interest in this Agreement which is made without the

written consent of the other Party shall not relieve such assigning Party from primary

liability for any of its duties and obligations under this Agreement, and in the event of any

such assignment, the assigning Party shall continue to remain primarily liable for payment of

any and all money due the other Party as provided under this Agreement, and for the

performance and observance of all other covenants, duties, and obligations to be performed

and observed under this Agreement by the assigning Party to the same extent as though no

assignment has been made.

19.2 Except as otherwise provided by written agreement of the non-assigning Party, whenever an

assignment of a Party's interest in this Agreement is made with the written consent of the

other Party, the assigning Party's assignee shall expressly assume in writing the duties and

obligations hereunder of the assigning Party and, within 30 calendar days after any such

assignment and assumption of duties and obligations, the assigning Party shall furnish or

Page No. 28

cause to be furnished to the other Party a true and correct copy of such assignment and

assumption of duties and obligations.

20. Relationship Of Parties:

The covenants, obligations, and liabilities of the Parties are intended to be several and not joint or

collective, and nothing contained in this Agreement shall ever be construed to create an association,

joint venture, trust, or partnership, or to impose a trust or partnership covenant, obligation, or

liability on or with regard to either Party. Each Party shall be individually responsible for its own

covenants, obligations, and liabilities as provided in this Agreement. Neither Party shall be under

the control of or shall be deemed to control the other Party. Neither Party shall be the agent of or

have a right or power to bind the other Party without such other Party's express written consent.

21. Waivers:

Any waiver at any time by either Party of its rights with respect to a default under this Agreement,

or with respect to any other matter arising in connection with this Agreement, shall not be deemed a

waiver with respect to any other or subsequent default or other matter arising in connection

therewith. Any delay, short of any statutory period of limitation, in asserting or enforcing any right,

shall not be deemed a waiver of such right.

22. Governing Law:

This Agreement shall be interpreted, governed by, and construed under the laws of the State of

Nevada or the laws of the United States, as applicable, as if executed and to be performed wholly

within the State of Nevada.

23. Notices:

Page No. 29

Any notice, demand, or request provided in this Agreement, or served, given, or made in connection

with it, shall be in writing and deemed properly served, given, or made if delivered in

person, transmitted by facsimile (followed by written confirmation) or sent by United States mail,

postage prepaid, to the persons specified herein unless otherwise provided in this Agreement:

Southern California Edison Company Manager of Grid Contracts and Business Management P.O. Box 800 Rosemead, California 91770 Fax (626) 302-9292 El Dorado Energy, LLC c/o Chris Allen 1111 Louisiana, 16th Floor Houston, TX 77002 Fax (713) 207-0840 Either Party may at any time, by notice to the other Party, change the designation or address of the

person so specified as the one to receive notices pursuant to this Agreement.

24. Severability:

In the event that any term, provision, covenant, or condition of this Agreement or the application of

any such term, covenant, or condition shall be held invalid as to any person, entity, or circumstance

by any court, arbitration, or regulatory authority having jurisdiction, the invalidity of such term,

covenant or condition shall not affect the validity of any other term, provision, condition or

covenant and such term, provision, covenant or condition shall remain in force and effect as applied

to this Agreement to the maximum extent permitted by law. The Parties hereto further agree to

negotiate in good faith to establish new and valid terms, conditions and

covenants to replace any found invalid so as to place each Party as nearly as possible in the position

contemplated by this Agreement.

Page No. 30

25. Entire Agreement:

This Agreement constitutes the complete and final expression of the agreement between the parties

and is intended as a complete and exclusive statement of the terms of their agreement which

supersedes all prior and contemporaneous offers, promises, representations, negotiations,

discussions, communications, and other agreements which may have been made in connection with

the subject matter of this Agreement.

26. Ambiguities:

Ambiguities or uncertainties in the wording of this Agreement shall not be construed for or against

any Party, but shall be construed in the manner that most accurately reflects the Parties' intent as of

the date they executed this Agreement.

Page No. 31

27. Signature Clause:

The signatories hereto represent that they are authorized to enter into this Agreement on behalf of

the Party for whom they sign. This Agreement is hereby executed

as of the 12th day of December , 1998.


By: /s/ Richard M. Rosenblum Name: Richard M. Rosenblum Title: Senior Vice President EL DORADO ENERGY, L.L.C. By: /s/ Marc Kilbride Name: Marc Kilbride Title: Treasurer

Page No. 32

Exhibit A

Scope of Work for 230kV Switchrack Additional Facilities

SCOPE: Extend the 220KV South Bus to the east and equip the Switchrack Position No. 1 to terminate the new Merchant 220KV T/L. Install three RTV CCVT's on each one of the 220K-V Buses. DETAILS: The South Bus will be extended to cover Positions 3, 2 and 1 by installing the following equipment: • One 40Ft. high bus dead end structure • Six dead end insulators assemblies • +/- 170Ft. of 3-2156 KCMIL ACSR conductors per phase The Line Position will be equipped as a breaker and-a-half position by installing the following equipment: • One 94Ft. high line dead end structure • Two circuit breakers • Four disconnect switches and associated support structures • Six CCVT's (three 0.003MFD for relay pot. & three RTV 0.0125MFD) at line tie-downs • Three revenue metering units (if required) and associated support pedestals • Fourteen post insulators and associated support pedestals The 220KV Line protection relays will be as follows: • One LPS/RFL9745 • One LCB • Two BE1-81 The installation of additional RTV CCVT's will be as follows: • Three 0.0125MFD units underneath existing 220KV South Bus Dead End at Pos. 4 • Three 0.0125MFD units underneath existing 220KV North Bus Dead End at Pos. 4

Page No. 33

Exhibit A (continued)

Estimated Cost for 230kV Switchrack Additional Facilities Element Home Office (includes Engineering & Design) $136,500 Materials $798,000 Construction $784,000 Contingency $86,500 Sub-Total $1,805,000 Power Systems control 70,000 ISO Metering 52,000 Overheads $276,000 Line Position Total $2,203,000

Actual Cost for 230kV Switchrack Additional Facilities

Element El Dorado Substation: Engineer and install a new 220kV position to terminate the Merchant 220kV transmission line. $2,346,830.34 El Dorado Substation: Install fiber optic equipment, cable, circuits, and protection $202,720.32 Total Cost $2,549,550.66

Formatted: Centered

Formatted: Underline

Page No. 34

Exhibit B

Scope of Work for Transmission Line Additional Facilities SCOPE: Install +/-2000Ft. of 220KV T/L inside the substation DETAILS: The installation of the 220KV T/L will be as follows: • The 220KV T/L will be constructed with steel poles. • The line will receive the conductors from the customer owned transmission line and bring them

into the 220KV Dead End Structure. The line will run inside the station paralleling the east fence and then the north fence up to a

point in which the line will turn south into the 220KV Rack.

Estimated Cost for Transmission Line Additional Facilities Element Transmission Home Office (includes Engineering & Design $36,000 Materials $310,000 Construction $200,000 Contingency $54,000 Sub-Total $600,000 Overheads $120,000 Total $720,000

Actual Cost for Transmission Line Additional Facilities

Element El Dorado Merchant 220kV Transmission Line: Construct 2,000 circuit feet of 220kV transmission line using 954 54/7 x2 (bundled) ACSR conductor on tublar steel poles from the 220 kV rack at El Dorado Substation to the customer’s interfacing structure located outside of El Dorado Substation. $588,346.31 El Dorado-McCullach fiber optic line: Install 3,958 feet of 24 single mode fiber optic cable. $36,064.68

Formatted: Heading 1, Centered, Tab stops:Not at 3.84"

Formatted: Centered

Formatted: No underline

Page No. 35

Total Cost $624,410.99



Page No. 36

Exhibit C

Scope of Work for Breaker Replacement Additional Facilities SCOPE: Replace the ten existing 220KV 15GVA rated circuit breakers with 20GVA units and install twenty-four RTV CCVT's (0.0125MFD) as required for GVA rating. DETAILS: Pos.7: Replace CB's 66 & 68 and install three CCVT's at tie down Pos.8: Install three CCVT's at each Bus Dead End Structure Pos.9: Replace CB's 72, 73 & 74 and install three additional CCVT's at each tie down Pos. 10: Replace CB's 75, 76 & 77 and install three additional CCVT's at each tie down Pos. 11: Replace CB's 78 & 80 and install three CCVT's at tie down

Estimated Cost for Breaker Replacement Additional Facilities Breaker Replacement Additional One Time Element Facilities Cost Home Office (includes Engineering & Design) $100,600 Materials $1,671,700 Construction $1,285,500 Contingency $153,200 Sub-Total $3,211,000 Overheads $109,000 Breaker Replacement Total $3,320,000 $520,000* *Removal of ten-230 kV circuit breakers, modification of circuit breaker foundations and installation of new circuit breaker leads.

Actual Cost for Breaker Replacement Additional Facilities

Element Breaker Replacement One Time Additional Facilities Cost El Dorado Substation: Engineer and replace ten 220kV, 15 GVA circuit breakers with 20 GVA rated units $2,394,369.53 Breaker Replacement Total $2,394,369.53 $373,194.40

Formatted: Font: Bold

Formatted: Font: Bold

Formatted: Centered






Page No. 37

Page No. 38

Page No. 39

Exhibit F

DEVELOPMENT OF EDE'S 230KV SWITCHYARD MAINTENANCE

COST RESPONSIBILITY RATIO

RESPONSIBILITY FOR COSTS (%) Eldorado Substation DESCRIPTION OF Participants EDE TERMINATION Transformer No. 3AA - 230 kV 100.000 0.000 Transformer No. 4AA - 230 kV 100.000 0.000 Eldorado-Mead No. 1 100.000 0.000 Eldorado-Mead No. 2 100.000 0.000 Eldorado-Pisgah No. 1 100.000 0.000 Eldorado-Pisgah No. 2 100.000 0.000 Eldorado-Merchant 0.000 100.000 TOTAL 600.000 100.000

Sum of Cost Responsibility Percentages: Others + EDE = 600.000 + 100.000 = 700.000 Others = (600.000/700.000) x 100% = 85.714% EDE = (100.000/700.000) x 100% = 14.286%

Page No. 40

Exhibit G

DEVELOPMENT OF EDE'S OPERATING

AND GENERAL FACILITIES MAINTENANCE COST RESPONSIBILITY RATIO

RESPONSIBILITY FOR COSTS (%) Eldorado

DESCRIPTION OF Substation TERMINATION Participants EDE Transformer No. 3AA – 230 kV 100.000 0.000 Transformer No. 4AA - 230 kV 100.000 0.000 Eldorado-Mead No. 1 100.000 0.000 Eldorado-Mead No. 2 100.000 0.000 Eldorado-Pisgah No. 1 100.000 0.000 Eldorado-Pisgah No. 2 100.000 0.000 Eldorado-Merchant 0.000 100.000 Subtotal = 700.000 600.000 100.000 Transformer No. 3AA - 500 kV 100.000 0.000 Transformer No. 4AA - 500 kV 100.000 0.000 Mohave-Eldorado 100.000 0.000 McCullough-Eldorado 100.000 0.000 Eldorado-Lugo 100.000 0.000 Moenkopi-Eldorado 100.000 0.000 Subtotal = 600.000 600.000 0.000 TOTAL 1200.000 100.000


Title Page

Southern California Edison Company FERC FPA Electric Tariff Tariff Title: Transmission Owner Tariff Tariff Record Title: First Revised Service Agreement No. 27

EL DORADO SUBSTATION

ADDITIONAL FACILITIES


BETWEEN

El DORADO ENERGY, LLC

AND


Contract Effective Date: 02/01/1999 Tariff Record Proposed Effective Date: 04/01/2016 906.27.3 Version Number: 0.0.0 TOT003 Option Code: A

Page No. 1



TABLE OF CONTENTS

1. Parties: ........................................................................................................................................... 2 2. Recitals: ......................................................................................................................................... 2 3. Agreement: .................................................................................................................................... 5 4. Term: ............................................................................................................................................. 5 5. Definitions: ................................................................................................................................... 7 6. Additional Facilities Arrangements: ........................................................................................... 13 7. Arrangements With Other Parties: .............................................................................................. 14 8. Interconnected Operation: ........................................................................................................... 15 9. Charges: ...................................................................................................................................... 15 10. Modifications Or Replacement Of Additional Facilities: ........................................................... 17 11. Billing And Payment: ................................................................................................................. 18 12. Audits: ......................................................................................................................................... 23 13. Authorized Representatives: ....................................................................................................... 23 14. Uncontrollable Force: ................................................................................................................. 24 15. Regulatory Authority: ................................................................................................................. 24 16. No Dedication Of Facilities: ....................................................................................................... 25 17. No Third Party Rights: ................................................................................................................ 25 18. Indemnification: .......................................................................................................................... 25 19. Assignments: ............................................................................................................................... 26 20. Relationship Of Parties: .............................................................................................................. 27 21. Waivers: ...................................................................................................................................... 27 22. Governing Law: .......................................................................................................................... 27 23. Notices: ....................................................................................................................................... 27 24. Severability: ................................................................................................................................ 28 25. Entire Agreement: ....................................................................................................................... 29 26. Ambiguities:................................................................................................................................ 29 27. Signature Clause: ........................................................................................................................ 30 Exhibit A ............................................................................................................................................ 31 Exhibit B ............................................................................................................................................ 33 Exhibit C ............................................................................................................................................ 34 Exhibit D ............................................................................................ Error! Bookmark not defined. Exhibit E ............................................................................................. Error! Bookmark not defined. Exhibit F ............................................................................................................................................. 37 Exhibit G ............................................................................................................................................ 38

Page No. 2



1. Parties:

The Parties to this Eldorado Substation Additional Facilities and Interconnection Agreement are

Southern California Edison Company (SCE or Participating TO), a California corporation, and El

Dorado Energy, LLC (EDE), a Delaware limited liability company, hereinafter sometimes referred

to individually as "Party" and collectively as "Parties."

2. Recitals:

This Agreement is made with reference to the following facts, among others:

2.1 SCE is a California public utility engaged in the business of generating and transmitting

electric energy in the States of Arizona, California, Nevada, and New Mexico. SCE is

further engaged in the business of distributing such energy in the State of California.

2.2 EDE is a Delaware limited liability company certified by the FERC as an exempt wholesale

generator.

2.3 EDE plans to develop, design, construct, and operate an electric power generation facility in

Boulder City in southern Clark County, Nevada (the Plant). The Plant will be a 492

megawatt facility generating electricity for sale to EDE customers. EDE also plans to

develop, design, construct, and operate a 230kV transmission substation (Merchant

Substation) and a transmission line between Merchant Substation and Eldorado Substation.

2.4 SCE jointly owns Eldorado Substation with the Department of Water and Power of the City

of Los Angeles, Nevada Power Company and the Salt River Project Agricultural

Improvement and Power District (together, the Eldorado Substation Participants).

Page No. 3

2.5 On November 10, 1997, EDE applied to SCE to interconnect at Eldorado Substation

pursuant to SCE's Transmission Owner Tariff. At EDE's request, SCE performed a System

Impact Study. The Study determined that the interconnection of the Merchant 230kV line at

Eldorado Substation would cause the short circuit duty of the ten existing 230kV circuit

breakers at Eldorado Substation to be exceeded. Accordingly, the existing circuit breakers

must be replaced with circuit breakers having a higher short circuit duty rating.

2.6 The interconnection at Eldorado Substation will also require the construction of a new

switchrack position, including the installation of circuit breakers, disconnects, conductor and

other equipment as shown on Exhibits D and E.

2.7 EDE has requested that SCE develop, design, construct and operate facilities required for the

interconnection as described below. SCE desires to develop, design, construct and operate

such facilities, subject to the approval of the Eldorado Substation Participants and the

California Independent System Operator (CAISO). SCE is negotiating with the Eldorado

Substation Participants on the terms and conditions for SCE to develop, design, construct

and operate the Additional Facilities. If agreement is reached, such terms and conditions are

intended to be reflected in three contracts, one titled "Agreement for Additional Southern

California Edison Company Connection to Eldorado Substation 230kV Switchyard," the

second titled "Amendment No. 2 to the Eldorado System Operating Agreement," and the

third titled "Amendment No.1 to the Eldorado System Conveyance and Co-Tenancy

Agreement."

2.8 SCE and EDE executed a letter agreement dated June 17, 1998 and signed by EDE on July 7,

1998, which provides for SCE to engineer, design, and prepare material specifications

Page No. 4

necessary for the interconnection, and for the replacement of the ten circuit breakers. Under

the terms of the letter agreement, EDE agreed to pay all of SCE's charges and expenses

incurred for performing such work, estimated to be $400,000. EDE, using SCE specifications,

commenced procurement of equipment for the Additional Facilities.

2.9 SCE and EDE executed a letter agreement dated November 13, 1998 which provides for

SCE to construct the Additional Facilities. Under the terms of the agreement, EDE agreed to

pay SCE's charges and expenses incurred for performing such work, estimated to be

$3,950,800.

2.10 As a result of recent California legislation, SCE has relinquished operational control of its

transmission grid to a newly created institution, the CAISO. FERC has approved the

operations of the CAISO and related tariffs in Dockets Nos. EC96-19-000 and ER96-1663-

000.

2.11 The CAISO Operating Agreement and Tariff ("CAISO Tariff") provides in Section 3.2.4 that

the CAISO will perform an operational review of all facilities that are to be connected to, or

made part of, the ISO Controlled Grid to ensure that the facilities being proposed provide for

acceptable operating flexibility and meet all its requirements for proper integration with the

ISO Controlled Grid. If the ISO finds that the Additional Facilities do not provide for

acceptable operating flexibility or do not adequately integrate with the ISO Controlled Grid,

SCE would need to reassess the Additional Facilities required to be constructed for the

interconnection.

Page No. 5

2.12 The 230kV Switchrack Additional Facilities and the Transmission Line Additional Facilities

will be in the Nevada Power Company control area. The control area tie between the CAISO's

and Nevada Power Company's control areas will be at the points shown in Exhibit E.

3. Agreement:

The Parties agree as follows:

4. Term:

4.1 Except for Sections 7.1, 7.2, 7.3 and 8.1, which shall become effective as of the date of

execution hereof, this Agreement shall become effective on the date of acceptance of this

Agreement for filing by FERC without the addition of any material condition that is

unacceptable to either Party in the exercise of its sole discretion. In the event that FERC

orders a hearing to determine if this Agreement is just and reasonable, this Agreement shall

become effective on the date when an order acceptable to both Parties becomes final and

nonappealable. In the event FERC (i) fails to accept this Agreement without suspension or

(ii) finds that this Agreement is not just and reasonable or imposes conditions that are not

acceptable to either Party, the Parties will use commercially reasonable efforts to agree upon

amendments or modifications of this Agreement that would eliminate any such conditions or

result in a just and reasonable finding.

4.2 This Agreement shall remain in effect for a period of forty-five (45) years from the


4.3 EDE may terminate this Agreement upon one hundred eighty (180) days' written notice to

SCE. Within 90 days following termination, EDE shall pay SCE the installed cost of the

Additional Facilities less depreciation, plus actual removal costs, less salvage. In addition,

Page No. 6

EDE shall pay SCE an amount equal to the difference between (i) the present value (as of the

date of termination under this paragraph) of the sum of the Additional Facilities Charge

payments which would have been made or come due as of the date of termination, if such

Charge had been calculated pursuant to a traditional depreciated rate base methodology, and

(ii) the present value (as of the date of termination under this paragraph) of the sum of the

Additional Facilities Charge payments actually made, or which had become due, under this

Agreement as of the date of termination. SCE shall file all charges under this Section 4.2

with the FERC prior to termination. Following termination, SCE shall remove the

Additional Facilities from service to EDE. Any payment obligations that accrued prior to the

termination of this Agreement shall survive such termination.

4.4 If EDE has given notice of termination and a filing with FERC is required to terminate this

Agreement pursuant to Section 4.2, EDE shall support such filing if requested by SCE.

4.5 If the Eldorado System Conveyance and Co-Tenancy Agreement terminates prior to the

termination of this Agreement, SCE and EDE shall negotiate in good faith to develop an

amendment to this Agreement which provides similar benefits to the Parties under

substantially the same terms and conditions as this Agreement.

4.6 Nothing in this Agreement shall require SCE to take, or to fail to take, any action in

violation of any applicable law or regulation or the CAISO Tariff, or to take any action as to

which SCE does not have necessary rights pursuant to the agreements specified in Section

2.7 hereof, including any amendments thereof. In the event that this Agreement would

require SCE to take such actions or fail to take such action but for this Section 4.6, then the

Parties shall negotiate in good faith to develop any necessary amendments to this Agreement

Page No. 7

so as, to the maximum extent practicable, to eliminate such conflict and provide similar

benefits to the Parties under substantially the same terms and conditions as stated in

Agreement.

5. Definitions:

The following terms, when used herein with initial capitalization, whether in the singular or the

plural, shall have the meanings specified:

5.1 230 kV Switchrack Additional Facilities: Facilities constructed and installed in the 230kV

Switchyard to connect the Transmission Line Additional Facilities to Eldorado

Substation pursuant to the diagrams in Exhibits D and E and as specified in Exhibit A and

any modifications thereto.

5.2 230 kV Switchrack Additional Facilities Cost: All reasonable costs incurred by SCE


230kV Switchrack Additional Facilities, an estimate of which is provided in Exhibit A. Such

costs shall include, without limitation, all applicable costs incurred by SCE in accordance with

the June 17, 1998 letter agreement and the November 13, 1998 letter agreement.

5.3 230kV Switchyard - The 230 kV switchyard of the Eldorado Substation, a basic breaker-

and-a-half scheme, comprising: (i) the 230 kV busses and the structures therefor; (ii) the

termination facilities for two 500/230 kV transformer banks, the No. 1 and No. 2

Eldorado-Mead 230 kV transmission lines, and the No. I and No. 2 Eldorado-Pisgah 230 kV

transmission lines including, but not limited to, power circuit breakers, disconnect switches,

and the structures therefor; (iii) relays; and (iv) the 230kV Switchrack Additional Facilities.

Page No. 8

The 230kV Switchyard shall not include: (i) any General Facilities; or (ii) any 500/230 kV

transformer banks located at the Eldorado Substation.

5.4 230kV Switchyard Cost Responsibility Ratio: The ratio of EDE's cost responsibility for

maintenance of the 230kV Switchyard as specified in Exhibit F.

5.5 230kV Switchyard Maintenance Charge: The monthly charge to EDE for a portion of the

cost to maintain the 230kV Switchyard as determined by multiplying the 230kV Switchyard

Cost Responsibility Ratio times the 230kV Switchyard Maintenance Cost.

5.6 230kV Switchyard Maintenance Cost: The cost of the 230kV Switchyard maintenance

portion of the expense of operating work as specified in the Eldorado System Operating

Agreement.

5.7 Accounting Practice: Generally accepted accounting principles and practices, in accordance

with FERC Accounts, applicable to electric utility operations.

5.8 Additional Facilities: The 230kV Switchrack Additional Facilities, the Breaker Replacement

Additional Facilities and the Transmission Line Additional Facilities.

5.9 Additional Facilities Charge: The monthly charge to EDE to recover the revenue

requirements for Additional Facilities, calculated as the sum of (i) the applicable SCE-

Financed Monthly Rate multiplied by the Breaker Replacement Additional Facilities Cost,

(ii) the applicable SCE-Financed Monthly Rate for ISO-Controlled Facilities multiplied by

the 230kV Switchrack Additional Facilities Cost, and (iii) the applicable SCE-Financed

Monthly Rate for ISO-Controlled Facilities multiplied by the Transmission Line Additional

Facilities Cost.

Page No. 9

5.10 Additional Facilities In-Service Date: The date upon which the construction of the

Additional Facilities is complete, successfully tested and ready for service, as referenced in

Section 6. 1.

5.11 Agreement: This Eldorado Substation Additional Facilities and Interconnection Agreement.

5.12 Authorized Representative: The representative of a Party designated in accordance with

Section 13.

5.13 Breaker Replacement Additional Facilities: Facilities required to replace ten existing 230 kV

circuit breakers at Eldorado Substation pursuant to the diagram in Exhibit E and as specified

in Exhibit C and any modifications.

5.14 Breaker Replacement Additional Facilities Cost: All reasonable costs incurred by SCE,

except the One-Time Cost, associated with the design, engineering, procurement,

construction, installation, of the Breaker Replacement Additional Facilities, which is

provided in Exhibit C. Such costs shall include, without limitation, all applicable costs

incurred by SCE in accordance with the June 17, 1998 letter agreement and the November

13, 1998 letter agreement.

5.15 CAISO: The California Independent System Operator.

5.16 Capital Additions: Any Units of Property which are added after the In-Service Date to the

230kV Switchyard, General Facilities or Transmission Line Additional Facilities, the

enlargement or betterment after the In-Service Date of any Units of Property constituting a

part of the 230kV Switchyard, General Facilities, or the Transmission Line Additional

Facilities and the replacement after the In-Service Date of any Units of Property constituting

Page No. 10

a part of the 230kV Switchyard, General Facilities or the Transmission Line Additional

Facilities, irrespective of whether such replacement constitutes an enlargement or betterment

of that which it replaces, which additions, betterments, enlargements, and replacements in

accordance with Accounting Practice would be capitalized and are neither included in

Operating Cost nor the SCE-Financed Monthly Rate for ISO-Controlled Facilities.

5.17 Eldorado Substation: - An electrical substation located in Clark County, State of Nevada,

consisting of the General Facilities, the 230kV Switchyard, a 500kV switchyard, 500/230 kV

transformer banks, and all appurtenant facilities thereto.

5.18 Eldorado System Co-Owners: Department of Water and Power of the City of Los Angeles,

Nevada Power Company, Salt River Project Agricultural Improvement and Power District

and Southern California Edison Company.

5.19 Eldorado System Operating Agreement: The Eldorado System Operating Agreement

Between Department of Water and Power of the City of Los Angeles, Nevada Power

Company, Salt River Project Agricultural Improvement and Power District and Southern

California Edison Company dated September 1, 1972.

5.20 FERC: Federal Energy Regulatory Commission, or its regulatory successor.

5.21 FERC Accounts: The FERC's "Uniform System of Accounts Prescribed for Public Utilities

and Licensees," subject to the provisions of the Federal Power Act in effect as of the date of

this Agreement, and as such system of accounts may be in effect from time to time.

Reference in this Agreement to any specific FERC Account number shall mean the FERC

Account number in effect as of the effective date of this Agreement or any corresponding

successor FERC Account.

Page No. 11

5.22 General Facilities: Structures, improvements and facilities of the Eldorado Substation which

include: dikes, roadways, control house, communications building, ancillary buildings,

trenches, conduits, control and power cables, control equipment, station communication

equipment, batteries, auxiliary equipment, station grounding grid, fencing, lighting and yard

improvements and any other facilities that provide support for the Eldorado Substation and

do not include the 230kV Switchyard, 500kV switchyard, 500/230 kV transformer banks,

and all appurtenant facilities thereto. General Facilities shall not include: (i) the real property

on which the Eldorado Substation is located; (ii) any termination facilities associated with

any line or transformer termination at the Eldorado Substation; (iii) any termination facilities

associated with a Third Party interconnection; or (iv) any 500/230 kV transformer banks

located at the Eldorado Substation.

5.23 General Facilities Cost Responsibility Ratio: The ratio of EDE's cost responsibility for

maintenance of the General Facilities as specified in Exhibit G.

5.24 General Facilities Use Charge: A one time payment of up to $479,123.18 by EDE to SCE as

reimbursement for l/13 of the past capital cost of up to $6,228,601.40 incurred for General

Facilities.

5.25 General Facilities Maintenance Charge: The monthly charge to EDE for a portion of the cost

to maintain General Facilities as determined by multiplying the General Facilities Cost

Responsibility Ratio times the General Facilities Maintenance Cost.

5.26 General Facilities Maintenance Cost: The cost of the General Facilities maintenance portion

of the expense of operating work as specified in the Eldorado System Operating Agreement.

5.27 One-Time Costs: Costs to remove the ten existing 230 kV circuit breakers, modify the

Page No. 12

circuit breaker foundations and install new circuit breaker leads. 5.28 Operating Cost: The cost of the operating portion of the expense of operating work as

specified in the Eldorado System Operating Agreement.

5.29 Operating Cost Charge: The monthly charge to EDE for a portion of the cost to operate

Eldorado Substation as determined by multiplying the Operating Cost Responsibility Ratio

times the Operating Cost.

5.30 Operating Cost Responsibility Ratio: The ratio of EDE's cost responsibility for Operating

Cost as specified in Exhibit G.

5.31 SCE-Financed Monthly-Rate for ISO-Controlled Facilities: For the Transmission Line

Additional Facilities, the rate most recently accepted by the FERC for Participating TO-

financed facilities under the operational control of the CAISO for application to SCE's retail

electric customers which does not compensate SCE for replacement of added facilities. The

currently effective SCE-Financed Monthly Rate for Non-ISO-Controlled Facilities is as

provided in Appendix X of the Transmission Owner Tariff. . For the Breaker Replacement

Additional Facilities and the 230kV Switchrack Additional Facilities, the foregoing rate less

the operation and maintenance component of such rate.

5.32 Transmission Line Additional Facilities: The transmission line, poles and related equipment

constructed and installed to connect the 230kV Switchrack Additional Facilities to EDE's

transmission line pursuant to the diagrams in Exhibits D and E and as specified in Exhibit B

and any modifications thereto.

5.33 Transmission Line Additional Facilities Cost: All reasonable costs incurred by SCE


Page No. 13

Transmission Line Additional Facilities, an estimate of which is provided in Exhibit B. Such

costs shall include, without limitation, all applicable costs incurred by SCE in accordance

with the June 17, 1998 letter agreement and the November 13, 1998 letter agreement.

5.34 Transmission Owner Tariff: The Participating TO’s Tariff designated as FERC Electric

Tariff, Volume No. 6, as such tariff may be amended or superseded. 5.35 Units of Property: - As described in FERC's "List of Units of Property for Use in Connection

with Uniform System of Accounts Prescribed for Public Utilities and Licensees" in effect as

of the date of this Agreement, and as such list may be amended from time to time.

6. Additional Facilities Arrangements:

6.1 SCE shall design, engineer, procure, construct, install, own, operate, and maintain the

Additional Facilities. SCE shall use commercially reasonable efforts to install the 230kV

Switchrack Additional Facilities and the Transmission Line Additional Facilities on or before

February 1, 1999. SCE shall use commercially reasonable efforts to install the Breaker

Replacement Additional Facilities on or before June 1, 1999. The date upon which all such

facilities have been completed, successfully tested and are ready for service shall be the


6.2 The June 17, 1998 letter agreement and the November 13, 1998 letter agreement shall

terminate upon the effective date of this Agreement pursuant to Section 4. 1. All of SCE's

charges and expenses incurred for performing the work specified in the letter agreements shall

be included in the 230kV Switchrack Additional Facilities Cost, Breaker Replacement

Additional Facilities Cost or Transmission Line Additional Facilities Cost, as provided in

Sections 5.2, 5.14 and 5.33, respectively.

Page No. 14

7. Arrangements With Other Parties:

7.1 No later than fifteen (15) days following execution of this Agreement, SCE shall request an

operational review for the Additional Facilities by the CAISO. EDE will provide such support

for the operational review as may be requested by SCE and will reimburse SCE for any costs

incurred by SCE in connection with the operational review of the Additional Facilities. If, as a

result of such review, the CAISO does not approve the Additional Facilities, SCE shall modify

the Additional Facilities to the extent required to receive approval by the CAISO; provided

however that any such modification must be agreed to by the Authorized Representatives in

writing, and by the Eldorado System Co-Owners. Any such revision shall not require an

amendment to this Agreement.

7.2 EDE shall be solely responsible for making arrangements or causing arrangements to be made

to establish the connection between the CAISO and Nevada Power Company control areas as

shown in Exhibit E.

7.3 If EDE desires to obtain transmission service from the CAISO, or to schedule delivery of

energy to or from the CAISO grid, EDE shall have the responsibility to make the necessary

arrangements with the CAISO.

7.4 SCE shall use commercially reasonable efforts to complete negotiation of the contracts with

the El Dorado Substation Participants referenced in Section 2.7 on terms consistent

with the terms of this Agreement and shall use commercially reasonable efforts to obtain

execution, delivery and FERC acceptance of such contracts prior to the Additional Facilities

In-Service Date.

Page No. 15

7.5 SCE shall use commercially reasonable efforts in negotiating any amendments to the contracts

referenced in section 2.7 to assure that such amendments do not adversely affect SCE's ability

to perform its obligations hereunder.

8. Interconnected Operation:

8.1 SCE shall provide reasonable assistance to EDE in order for EDE to perform studies or

others to perform studies to determine the capacity of the Eldorado-Merchant transmission line.

8.2 EDE shall be entitled to use the total capacity of the 230kV Switchrack Additional Facilities

and the Transmission Line Additional Facilities.

8.3 SCE shall operate the Additional Facilities in accordance with the CAISO Tariff, Western

System Coordinating Council (WSCC) reliability criteria and the Eldorado System

Operating Agreement.

9. Charges:

9.1 EDE shall pay to SCE in accordance with Section 11 the following charges: (1) Additional

Facilities Charges; (2) One-Time Costs; (3) costs of operational review; (4) one-time costs

pursuant to Section 10. 1; (5) reimbursable FERC fees; (6) Operating Cost Charge; (7) 230kV

Switchyard Maintenance Charge; (8) General Facilities Maintenance Charge; (9) General

Facilities Use Charge; and (10) any termination charges pursuant to Section 4.3.

9.2 SCE's actual recorded book cost for the Breaker Replacement Additional Facilities Cost,

230kV Switchrack Additional Facilities Cost, Transmission Line Additional Facilities Cost

and One-Time Costs shall be compiled in accordance with FERC Accounts, as supplemented

by SCE's established accounting practice where no FERC provision is prescribed.

Page No. 16

9.3 The 230kV Switchyard Cost Responsibility Ratio shall be determined in accordance with the

methodology shown in Exhibit F. For each additional termination to the 230kV Switchrack,

SCE shall promptly calculate an amended 230kV Switchyard Cost Responsibility Ratio and

such amended ratio shall be effective upon the date of firm operation of such additional

termination.

9.4 The General Facilities Cost Responsibility Ratio shall be determined in accordance with the

methodology shown in Exhibit G. For each additional termination to the 230kV Switchrack or

500kV switchrack, SCE shall promptly calculate an amended General Facilities Cost

Responsibility Ratio and such amended ratio shall be effective upon the date of firm operation

of such additional termination.

9.5 The Operating Cost Responsibility Ratio shall be determined in accordance with the

methodology shown in Exhibit G. For each additional termination to the 230kV Switchrack

or 500kV switchrack, SCE shall promptly calculate an amended Operating Cost Responsibility

Ratio and such amended ratio shall be effective upon the date of firm operation of such

additional termination.

9.6 For each additional termination to the 230kV Switchrack or 500kV switchrack, EDE shall

have the right to receive a portion of any general facility use charge paid to the Eldorado

Substation Participants by the entity for which the additional termination is installed. EDE's

share of any general facility use charge shall be equal to the General Facilities Cost

Responsibility Ratio multiplied by the general facility use charge.

9.7 EDE shall be responsible for a share of the cost of Capital Additions as follows:

Page No. 17

9.7.1 EDE shall be responsible for all costs for Capital Additions to the Transmission Line

Additional Facilities;

9.7.2 EDE shall be responsible for Capital Additions to General Facilities in the amount of

the cost of such Capital Additions multiplied by the General Facilities Cost

Responsibility Ratio;

9.7.3 EDE shall be responsible for Capital Additions to the 230kV Switchyard in the

amount of the cost of such Additions multiplied by the 230kV Switchyard Cost

Responsibility Ratio.

10. Modifications Or Replacement Of Additional Facilities:

10.1 Whenever 230kV Switchrack Additional Facilities and/or Transmission Line Additional

Facilities are modified or replaced due to damage, equipment failure or betterment, the work

will be completed at SCE's expense. Except as otherwise provided in Section 10.2, if such

modification or replacement results in a change in the 230kV Switchrack Additional

Facilities and/or Transmission Line Additional Facilities investment, the 230kV Switchrack

Additional Facilities and/or Transmission Line Additional Facilities Cost shall be adjusted on

the basis of the revised net investment effective as of the operation date of such modification

or replacement. EDE shall pay SCE for any additional one-time costs (costs not includible in


Cost) associated with such modification or replacement.

10.2 In the event that any modification or replacement of the 230kV Switchrack Additional

Facilities and/or the Transmission Line Additional Facilities is performed in order to

accommodate SCE's needs and not to maintain or to improve service to EDE, or because of

Page No. 18

damage caused by gross negligence or willful misconduct of SCE, no increase will be made to


Charge and no costs shall be charged to EDE for such modification or replacement.

10.3 Whenever Breaker Replacement Additional Facilities are modified or replaced due to

damage, equipment failure or betterment, the work will be completed at SCE's expense. The

Breaker Replacement Additional Facilities Cost shall not be adjusted on the basis of the

revised net investment and no costs shall be charged to EDE for such modification or

replacement.

10.4 In the event that any modification or replacement of the Breaker Replacement Additional

Facilities is performed in order to accommodate SCE's needs and not to maintain or to

improve service to EDE, or because of damage caused by gross negligence or willful

misconduct of SCE, no increase will be made to the Breaker Replacement Additional

Facilities Charge and no costs shall be charged to EDE for such modification or

replacement.

11. Billing And Payment:

11.1 On the later of. (i) January 2, 1999 or (ii) the date of acceptance by FERC of this Agreement

without suspension, EDE shall submit an invoice to SCE for its estimated cost of equipment

purchased and required for the interconnection and given to SCE for construction of the

interconnection, pursuant to the June 17, 1998 letter agreement and the November 13, 1998

letter agreement. EDE shall determine its actual recorded book cost for such equipment and

provide SCE an itemized accounting of all such equipment. If the actual cost is less than the

amount previously paid by SCE, EDE shall credit SCE for amounts previously paid and

Page No. 19

reimburse SCE the difference between the amount previously paid by SCE and the actual

costs, without interest within 20 calendar days of such determination of actual costs.

Conversely, if the actual cost is greater than the amount previously paid by SCE, EDE shall

present an invoice to SCE for the additional amount owed to EDE and SCE shall pay the

difference between the amount previously paid by SCE and the actual recorded book cost,

without interest, within 20 calendar days of receipt of such invoice.

11.2 Within 20 calendar days after the date of acceptance by FERC of this Agreement without

suspension, SCE shall submit an invoice to EDE for the estimated One-Time Costs and

General Facilities Use Charge. Within 20 calendar days after receipt of the invoice submitted

under this Section 11.2, EDE shall pay SCE the estimated One-Time Costs and General

Facility Use Charge. The payment for the One-Time costs shall be subject to later

adjustment pursuant to Section 11.5.

11.3 Commencing on the Additional Facilities In Service Date, SCE shall render bills to EDE, on

or before the first day of each month, for the estimated Additional Facilities Charge,

Operating Cost Charge, 230kV Switchyard Maintenance Charge, and General Facilities

Maintenance Charge. EDE shall pay such bills by the 20th day of said month.

11.3.1 The Additional Facilities Charge monthly invoices shall be calculated by multiplying

the applicable SCE-Financed Monthly Rate for ISO-Controlled Facilities by the

estimated 230kV Switchrack Additional Facilities Cost, the Transmission Line

Additional Facilities Cost and Breaker Replacement Additional Facilities Cost.

Payments shall be subject to later adjustment pursuant to Section 11. 5.

Page No. 20

11.3.2 The Operating Cost Charge, 230kV Switchyard Maintenance Charge, and General

Facilities Maintenance Charge shall be billed on an estimated basis. Adjustments for

actual costs incurred for each month shall be reflected in the bill for the month which

follows the date of determination of actual costs.

11.4 Commencing on the effective date of this agreement, SCE shall render bills to EDE for any

reimbursable FERC fees in accordance with Section 15.3, operational review costs in

accordance with Section 7.1 and one-time costs associated with modifications or replacements

in accordance with Section 10. 1. Such bills shall be for any fees incurred preceding the dates

of such bills. EDE shall pay such bills within 20 calendar days after receipt thereof.

11.5 After the Additional Facilities In Service Date, SCE shall determine its actual recorded book

cost for the 230kV Switchrack Additional Facilities, Breaker Replacement Additional

Facilities and Transmission Line Additional Facilities Costs and actual recorded book

One-Time Costs, and provide EDE an itemized accounting of all such Additional Facilities

Costs and One-Time Costs.

11.5.1 If the total amount previously paid for the estimated Additional Facilities Charges in

accordance with Section 11.3 is less than the total amount due for the Additional

Facilities Charges as determined from actual recorded book cost, SCE shall present

an invoice to EDE for the additional amount owed to SCE and EDE shall pay the

difference between the amount previously paid by EDE and the actual recorded book

cost, without interest, within 20 calendar days of receipt of such invoice. Conversely,

if the total amount previously paid for the estimated Additional Facilities Charges in

accordance with Section 11.3 is greater than the total amount due for the Additional

Page No. 21

Facilities Charge as determined from actual recorded book cost, SCE shall credit




11.5.2 If the amount paid for the estimated One-Time Costs in accordance with Section 11.

2 is less than the amount due for the One-Time Costs as determined from actual

recorded book cost, SCE shall present an invoice to EDE for the additional amount

owed to SCE and EDE shall pay the difference between the amount previously paid

by EDE and the actual recorded book cost, without interest, within 20 calendar days

of receipt of such invoice. Conversely, if the amount paid for the estimated

One-Time Costs in accordance with Section 11.2 is greater than the amount due for

the One-Time Costs as determined from actual recorded book cost, SCE shall credit




11.6 Payments which are not made in full by EDE by the due dates specified in Sections 11.2,

11.3, or 11.4 shall thereafter accrue interest at 10 percent per annum, or the maximum

amount which is otherwise legally authorized, whichever is less, of the unpaid balance

prorated by days until payment is received by SCE.

11.7 In the event EDE desires to dispute all or any part of any bill submitted by SCE, EDE shall

nevertheless pay the full amount of the bill when due and give written notification to SCE's

Authorized Representative within one hundred eighty (180) days from the date of the billing

Page No. 22

stating the grounds for the dispute and the amount in dispute. EDE shall not be entitled to an

adjustment on any bill which is not brought to the attention of SCE within the time and in the

manner herein specified. For any payments to EDE resulting from dispute resolutions, interest

at 10 percent per annum, or the maximum amount which is otherwise legally authorized,

whichever is less, shall be added to the amount of any overpayment and the entire amount

refunded to EDE.

11.8 All payments to be made by EDE to SCE shall be sent to:

Southern California Edison Company Accounts Receivable P.O. Box 800 Rosemead, California 91770

SCE may, at any time, by written notice to EDE pursuant to Section 24, change the address to

which payments shall be sent.

11.9 All payments to be made by SCE to EDE shall be sent to:



to which payments shall be sent.

11.10 All billings to be presented by SCE to EDE shall be sent to:



to which billings shall be sent.

Page No. 23

12. Audits:

For two years following the Additional Facilities In-Service Date, or with respect to any

modifications or replacements to the Additional Facilities, for two years following the in-service

date of such modifications or replacements, SCE shall maintain records and accounts of all costs

incurred in sufficient detail to allow verification of all costs incurred, including, but not limited to,

labor and associated labor burden costs, material and supplies, outside services, and administrative

and general expenses. EDE shall have the right, upon reasonable notice, at a reasonable time and

place, and at its own expense, to audit SCE's records as necessary and as appropriate in order to

verify costs incurred by SCE.

13. Authorized Representatives:

13.1 In order to provide for the exchange of information and preparation of any necessary

operating procedures or revisions to operating procedures regarding the activities required

under this Agreement, each Party shall, within 30 calendar days following the effective date

of this Agreement, appoint an Authorized Representative and shall designate such

Authorized Representative by written notice to the other Party.

13.2 The Authorized Representatives are authorized to act on behalf of the Party they represent in

the implementation of this Agreement. Any action taken or determination made by the

Authorized Representatives in the implementation of this Agreement shall be in writing.

13.3 The Authorized Representatives shall have no authority or power to modify, add, waive or

eliminate any terms or conditions of this Agreement.

13.4 Either Party may at any time change the designation of its Authorized Representative by

written notice to the other Party pursuant to Section 23.

Page No. 24

14. Uncontrollable Force:

Neither Party shall be considered to be in default in the performance of any of its obligations under

this Agreement (other than obligations to make payments pursuant to this Agreement) when failure

of performance shall be due to an uncontrollable force. The term "uncontrollable force" means any

cause beyond the control of the Party failing to perform including, but not restricted to, failure of

facilities, flood, earthquake, storm, lightning, fire, epidemic, war, riot, civil disturbance or

disobedience, labor dispute, labor or material shortage, sabotage, restraint by court order or public

authority, and action or non-action by, or inability to obtain the necessary authorizations or

approvals from, any governmental agency or authority, which by exercise of due diligence such

Party could not reasonably have been expected to avoid and which by exercise of due diligence it

has not overcome. Either Party rendered unable to fulfill any of its obligations under this Agreement

by reason of an uncontrollable force shall give prompt written notice of such fact to the other Party

and an estimate of the duration of the Uncontrollable Force and shall exercise due diligence to

remove such liability. Nothing contained herein shall be construed to require a Party to settle any

strike or labor dispute in which it may be involved.

15. Regulatory Authority:

15.1 Unless otherwise agreed by the Authorized Representatives, no later than thirty (30) days

following the execution of this Agreement, SCE shall tender this Agreement for filing with

FERC with a request that it be made effective upon acceptance without suspension, and EDE

shall support SCE in obtaining all necessary authorizations and approvals for this

Agreement.

Page No. 25

15.2 Nothing contained herein shall be construed as affecting in any way: (i) the right of SCE to

unilaterally make application to the FERC for a change in rates, charges, classification, or

service, or any rule, regulation, or contract relating thereto, under Section 205 of the Federal

Power Act and pursuant to the Rules and Regulations promulgated by FERC thereunder; (ii)

the right of EDE to oppose such changes under Section 205 of the Federal Power Act; (iii)

the right of EDE to file a complaint requesting a change in rates or rate methodology or

design relating to services provided hereunder, under Section 206 of the Federal Power Act

and pursuant to the rules and regulations promulgated by the FERC thereunder; or (iv) the

right of SCE to oppose such complaint by EDE under Section 206 of the Federal Power Act.

Any change shall become effective pursuant to Section 205 of the Federal Power Act.

15.3 EDE shall reimburse SCE for all fees and charges imposed on SCE by the FERC attributable

to the service provided under this Agreement, or any amendments thereto.

16. No Dedication Of Facilities:

Any undertaking by one Party to the other Party under this Agreement shall not constitute the

dedication of the electrical system or any portion thereof of the undertaking Party to the public or to

the other Party, and it is understood and agreed that any such undertaking by a Party shall cease

upon the termination of its obligations hereunder.

17. No Third Party Rights:

Unless otherwise specifically provided in this Agreement, the Parties do not intend to create rights

in or grant remedies to any third party as a beneficiary of this Agreement or of any duty, covenant,

obligation, or undertaking established hereunder.

18. Indemnification:

Page No. 26

Each Party (for purposes of this paragraph, the "First Party") shall at all times indemnify, defend,

and save the other Party (for purposes of this paragraph the "Second Party") harmless from, any and

all damages, losses, claims, (including claims and actions relating to injury to or death of any person

or damage to property), demands, suits, recoveries, costs and expenses, court costs, attorney fees,

and all other obligations by or to third parties, arising out of or resulting from the Second Party's

performance of its obligations under this Agreement on behalf of the First Party, except in cases of

gross negligence or intentional wrongdoing by the Second Party.

19. Assignments:

19.1 Any assignment by a Party of its interest in this Agreement which is made without the

written consent of the other Party shall not relieve such assigning Party from primary

liability for any of its duties and obligations under this Agreement, and in the event of any

such assignment, the assigning Party shall continue to remain primarily liable for payment of

any and all money due the other Party as provided under this Agreement, and for the

performance and observance of all other covenants, duties, and obligations to be performed

and observed under this Agreement by the assigning Party to the same extent as though no

assignment has been made.

19.2 Except as otherwise provided by written agreement of the non-assigning Party, whenever an

assignment of a Party's interest in this Agreement is made with the written consent of the

other Party, the assigning Party's assignee shall expressly assume in writing the duties and

obligations hereunder of the assigning Party and, within 30 calendar days after any such

assignment and assumption of duties and obligations, the assigning Party shall furnish or

Page No. 27

cause to be furnished to the other Party a true and correct copy of such assignment and

assumption of duties and obligations.

20. Relationship Of Parties:

The covenants, obligations, and liabilities of the Parties are intended to be several and not joint or

collective, and nothing contained in this Agreement shall ever be construed to create an association,

joint venture, trust, or partnership, or to impose a trust or partnership covenant, obligation, or

liability on or with regard to either Party. Each Party shall be individually responsible for its own

covenants, obligations, and liabilities as provided in this Agreement. Neither Party shall be under

the control of or shall be deemed to control the other Party. Neither Party shall be the agent of or

have a right or power to bind the other Party without such other Party's express written consent.

21. Waivers:

Any waiver at any time by either Party of its rights with respect to a default under this Agreement,

or with respect to any other matter arising in connection with this Agreement, shall not be deemed a

waiver with respect to any other or subsequent default or other matter arising in connection

therewith. Any delay, short of any statutory period of limitation, in asserting or enforcing any right,

shall not be deemed a waiver of such right.

22. Governing Law:

This Agreement shall be interpreted, governed by, and construed under the laws of the State of

Nevada or the laws of the United States, as applicable, as if executed and to be performed wholly

within the State of Nevada.

23. Notices:

Page No. 28

Any notice, demand, or request provided in this Agreement, or served, given, or made in connection

with it, shall be in writing and deemed properly served, given, or made if delivered in

person, transmitted by facsimile (followed by written confirmation) or sent by United States mail,

postage prepaid, to the persons specified herein unless otherwise provided in this Agreement:

Southern California Edison Company Manager of Grid Contracts and Business Management P.O. Box 800 Rosemead, California 91770 Fax (626) 302-9292 El Dorado Energy, LLC c/o Chris Allen 1111 Louisiana, 16th Floor Houston, TX 77002 Fax (713) 207-0840 Either Party may at any time, by notice to the other Party, change the designation or address of the

person so specified as the one to receive notices pursuant to this Agreement.

24. Severability:

In the event that any term, provision, covenant, or condition of this Agreement or the application of

any such term, covenant, or condition shall be held invalid as to any person, entity, or circumstance

by any court, arbitration, or regulatory authority having jurisdiction, the invalidity of such term,

covenant or condition shall not affect the validity of any other term, provision, condition or

covenant and such term, provision, covenant or condition shall remain in force and effect as applied

to this Agreement to the maximum extent permitted by law. The Parties hereto further agree to

negotiate in good faith to establish new and valid terms, conditions and

covenants to replace any found invalid so as to place each Party as nearly as possible in the position

contemplated by this Agreement.

Page No. 29

25. Entire Agreement:

This Agreement constitutes the complete and final expression of the agreement between the parties

and is intended as a complete and exclusive statement of the terms of their agreement which

supersedes all prior and contemporaneous offers, promises, representations, negotiations,

discussions, communications, and other agreements which may have been made in connection with

the subject matter of this Agreement.

26. Ambiguities:

Ambiguities or uncertainties in the wording of this Agreement shall not be construed for or against

any Party, but shall be construed in the manner that most accurately reflects the Parties' intent as of

the date they executed this Agreement.

Page No. 30

27. Signature Clause:

The signatories hereto represent that they are authorized to enter into this Agreement on behalf of

the Party for whom they sign. This Agreement is hereby executed

as of the 12th day of December , 1998.


By: /s/ Richard M. Rosenblum Name: Richard M. Rosenblum Title: Senior Vice President EL DORADO ENERGY, L.L.C. By: /s/ Marc Kilbride Name: Marc Kilbride Title: Treasurer

Page No. 31

Exhibit A

Scope of Work for 230kV Switchrack Additional Facilities

SCOPE: Extend the 220KV South Bus to the east and equip the Switchrack Position No. 1 to terminate the new Merchant 220KV T/L. Install three RTV CCVT's on each one of the 220K-V Buses. DETAILS: The South Bus will be extended to cover Positions 3, 2 and 1 by installing the following equipment: • One 40Ft. high bus dead end structure • Six dead end insulators assemblies • +/- 170Ft. of 3-2156 KCMIL ACSR conductors per phase The Line Position will be equipped as a breaker and-a-half position by installing the following equipment: • One 94Ft. high line dead end structure • Two circuit breakers • Four disconnect switches and associated support structures • Six CCVT's (three 0.003MFD for relay pot. & three RTV 0.0125MFD) at line tie-downs • Three revenue metering units (if required) and associated support pedestals • Fourteen post insulators and associated support pedestals The 220KV Line protection relays will be as follows: • One LPS/RFL9745 • One LCB • Two BE1-81 The installation of additional RTV CCVT's will be as follows: • Three 0.0125MFD units underneath existing 220KV South Bus Dead End at Pos. 4 • Three 0.0125MFD units underneath existing 220KV North Bus Dead End at Pos. 4

Page No. 32

Exhibit A (continued)

Estimated Cost for 230kV Switchrack Additional Facilities Element Home Office (includes Engineering & Design) $136,500 Materials $798,000 Construction $784,000 Contingency $86,500 Sub-Total $1,805,000 Power Systems control 70,000 ISO Metering 52,000 Overheads $276,000 Line Position Total $2,203,000

Actual Cost for 230kV Switchrack Additional Facilities

Element El Dorado Substation: Engineer and install a new 220kV position to terminate the Merchant 220kV transmission line. $2,346,830.34 El Dorado Substation: Install fiber optic equipment, cable, circuits, and protection $202,720.32 Total Cost $2,549,550.66

Page No. 33

Exhibit B

Scope of Work for Transmission Line Additional Facilities SCOPE: Install +/-2000Ft. of 220KV T/L inside the substation DETAILS: The installation of the 220KV T/L will be as follows: • The 220KV T/L will be constructed with steel poles. • The line will receive the conductors from the customer owned transmission line and bring them

into the 220KV Dead End Structure. The line will run inside the station paralleling the east fence and then the north fence up to a

point in which the line will turn south into the 220KV Rack.

Estimated Cost for Transmission Line Additional Facilities Element Transmission Home Office (includes Engineering & Design $36,000 Materials $310,000 Construction $200,000 Contingency $54,000 Sub-Total $600,000 Overheads $120,000 Total $720,000

Actual Cost for Transmission Line Additional Facilities

Element El Dorado Merchant 220kV Transmission Line: Construct 2,000 circuit feet of 220kV transmission line using 954 54/7 x2 (bundled) ACSR conductor on tublar steel poles from the 220 kV rack at El Dorado Substation to the customer’s interfacing structure located outside of El Dorado Substation. $588,346.31 El Dorado-McCullach fiber optic line: Install 3,958 feet of 24 single mode fiber optic cable. $36,064.68 Total Cost $624,410.99

Page No. 34

Exhibit C

Scope of Work for Breaker Replacement Additional Facilities SCOPE: Replace the ten existing 220KV 15GVA rated circuit breakers with 20GVA units and install twenty-four RTV CCVT's (0.0125MFD) as required for GVA rating. DETAILS: Pos.7: Replace CB's 66 & 68 and install three CCVT's at tie down Pos.8: Install three CCVT's at each Bus Dead End Structure Pos.9: Replace CB's 72, 73 & 74 and install three additional CCVT's at each tie down Pos. 10: Replace CB's 75, 76 & 77 and install three additional CCVT's at each tie down Pos. 11: Replace CB's 78 & 80 and install three CCVT's at tie down

Estimated Cost for Breaker Replacement Additional Facilities Breaker Replacement Additional One Time Element Facilities Cost Home Office (includes Engineering & Design) $100,600 Materials $1,671,700 Construction $1,285,500 Contingency $153,200 Sub-Total $3,211,000 Overheads $109,000 Breaker Replacement Total $3,320,000 $520,000* *Removal of ten-230 kV circuit breakers, modification of circuit breaker foundations and installation of new circuit breaker leads.

Actual Cost for Breaker Replacement Additional Facilities

Element Breaker Replacement One Time Additional Facilities Cost El Dorado Substation: Engineer and replace ten 220kV, 15 GVA circuit breakers with 20 GVA rated units $2,394,369.53 Breaker Replacement Total $2,394,369.53 $373,194.40

Page No. 35

Page No. 36

Page No. 37

Exhibit F

DEVELOPMENT OF EDE'S 230KV SWITCHYARD MAINTENANCE

COST RESPONSIBILITY RATIO

RESPONSIBILITY FOR COSTS (%) Eldorado Substation DESCRIPTION OF Participants EDE TERMINATION Transformer No. 3AA - 230 kV 100.000 0.000 Transformer No. 4AA - 230 kV 100.000 0.000 Eldorado-Mead No. 1 100.000 0.000 Eldorado-Mead No. 2 100.000 0.000 Eldorado-Pisgah No. 1 100.000 0.000 Eldorado-Pisgah No. 2 100.000 0.000 Eldorado-Merchant 0.000 100.000 TOTAL 600.000 100.000


Page No. 38

Exhibit G

DEVELOPMENT OF EDE'S OPERATING

AND GENERAL FACILITIES MAINTENANCE COST RESPONSIBILITY RATIO

RESPONSIBILITY FOR COSTS (%) Eldorado

DESCRIPTION OF Substation TERMINATION Participants EDE Transformer No. 3AA – 230 kV 100.000 0.000 Transformer No. 4AA - 230 kV 100.000 0.000 Eldorado-Mead No. 1 100.000 0.000 Eldorado-Mead No. 2 100.000 0.000 Eldorado-Pisgah No. 1 100.000 0.000 Eldorado-Pisgah No. 2 100.000 0.000 Eldorado-Merchant 0.000 100.000 Subtotal = 700.000 600.000 100.000 Transformer No. 3AA - 500 kV 100.000 0.000 Transformer No. 4AA - 500 kV 100.000 0.000 Mohave-Eldorado 100.000 0.000 McCullough-Eldorado 100.000 0.000 Eldorado-Lugo 100.000 0.000 Moenkopi-Eldorado 100.000 0.000 Subtotal = 600.000 600.000 0.000 TOTAL 1200.000 100.000


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